Sh. Sandeep Bansal, Chandigarh V. ACIT, CC-II, Chandigarh

ITA 1679/CHANDI/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9462 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 20-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Unexplained expenditure; Search and seizure; Loose papers; Document seized; Opportunity of being heard; Principle of natural justice; Transactions in derivatives; Valuation report; Right to appeal; Documents seized; Set aside
• Section: 143(3); 153A; 14A; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' #$ % & ' ($ , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1679/CHD/2017 / ASSESSMENT YEAR : 2014-15 SANDEEP BANSAL, H.NO. 749, SECTOR 8, CHANDIGARH. THE A.C.I.T., CENTRAL CIRCLE-II, CHANDIGARH. ./PAN NO: ABEPB7982M /APPELLANT /RESPONDENT ! /ASSESSEE BY: SHRI SUDHIR SEHGAL, ADV. ' ! / REVENUE BY : SHRI MANJIT SINGH, CIT DR # $ % /DATE OF HEARING : 09.05.2019 &'() % /DATE OF PRONOUNCEMENT: 01.07.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, GURGAON [(IN SHORT CIT(A)] DATED 30. 11.2017 CONFIRMING THE LEVY OF PENALTY U/S 271AAB OF THE IN COME TAX ITA NO.1679/CHD/2017 A.Y.2014-15 2 ACT, 1961 (HEREINAFTER REFERRED TO AS ACT), RELAT ING TO ASSESSMENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN CONFIR MING THE PENALTY AMOUNTING TO RS. 56,50,000/- U/S 271AAB OF THE IT. ACT. 2. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN CONFIRM ING THE PENALTY U/S 271AAB OF THE IT. ACT IN A CASE WHERE THE REASONS MENTIONED IN THE NOTICE U/S 271AAB ARE NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 271AAB. 3. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN CONFIRM ING THE PENALTY U/S 271AAB OF THE IT. ACT IN A CASE WHERE THE REASONS MENTIONED IN THE NOTICE U/S 271AAB ARE DIFFERENT THAN THE REASONS MENTIONED IN THE PENALTY ORDER U/S 271AAB. 4. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN CONFIRM ING THE PENALTY U/S 271AAB OF THE IT. ACT IN THE ABSENCE OF UNDISCLOSED INCOME. 5. THAT WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEA LS; THE APPELLANT DISPUTES THE QUANTUM OF PENALTY LEVIED. 6. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITI ON OR AMENDMENT IN THE GROUNDS OF APPEAL TILL THE DISPOSAL OF THE SAME. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT SEARCH & SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL/BUSINESS PREMISES OF THE ASSESSEE ON 17.11.2013. AFTER SEARCH THE ASSESS EE SURRENDERED ADDITIONAL INCOME OF RS.5.65 CRORES TO ITA NO.1679/CHD/2017 A.Y.2014-15 3 COVER ALL POSSIBLE DISCREPANCIES AS PER SEIZED DOCUMENTS OR OTHER POSSIBLE MISTAKES/DISCREPANCIES IN THE RETURN TO BE FILED. PENALTY PROCEEDINGS U/S 271AAB OF THE ACT WERE INITIATED THEREON AND SUBSEQUENTLY AFTER SEEKING REPLY OF THE ASSESSEE PENALTY @ 10% OF THE INCOME SURRENDERED WAS LEVIED ON THE ASSESSEE AMOUNTING TO RS.56,50,000/- BY THE A.O. STATING THAT THE ASSESSEE HAD SUO MOTO MADE TH E SURRENDER OF THE IMPUGNED AMOUNT GIVING DETAILS OF THE NATURE OF THE SURRENDER MADE AS BEING BROKERAGE AND COMMISSION INCOME EARNED BY IT, HAD HONOURED THE SURRENDER ALSO PAYING TAXES ON THE SAME AND, THEREFORE, WAS COVERED WITHIN FOUR CORNERS OF SECTI ON 271AAB OF THE ACT SUB CLAUSE 1(A). 4. THE LD.CIT(A) UPHELD THE SAME. 5. BEFORE US THE LD.COUNSEL FOR THE ASSSESSEE MADE ARGUMENTS AGAINST THE LEVY OF PENALTY RAISING THE S OLE CONTENTION THAT THE INCOME SURRENDERED BY IT WAS NO T IN THE NATURE OF UNDISCLOSED INCOME WHICH WAS ESSENTIAL PRE-REQUISITE FOR THE LEVY OF PENALTY U/S 271AAB OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE IN ESSENCE , RAISED ARGUMENTS VIS--VIS GROUND NO.4 ON LY ITA NO.1679/CHD/2017 A.Y.2014-15 4 BEFORE US. WITH RESPECT TO THE SAME, THE LD.COUNSEL FOR THE ASSSESSEE POINTED OUT THAT PENALTY U/S 271A AB OF THE ACT WAS LEVIABLE ONLY ON THE UNDISCLOSED INC OME OF THE ASSESSEE AS PER THE SECTION ITSELF AND THE T ERM UNDISCLOSED INCOME HAD BEEN DEFINED IN EXPLANATIO N- (C) TO THE SAID SECTION AS UNDER: 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UND ER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 [BUT BEFO RE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT OF THE PRESIDENT], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED INCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, I N RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIE D PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT O F THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE ITA NO.1679/CHD/2017 A.Y.2014-15 5 (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB- SECTION (4) OF SECTION 132, DOES NOT ADMIT THE UNDI SCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FU RNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, I N RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM [COMPUTED AT THE RATE OF SIXTY PER CENT] OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). . (2) EXPLANATION -------- (A) (B) ( C) UNDISCLOSED INCOME MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEW ELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR ; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMMI SSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH ; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPE CIFIED ITA NO.1679/CHD/2017 A.Y.2014-15 6 PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED. 6. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT FOR THE PURPOSE OF LEVY OF PENALTY, THEREFORE, THE INCOME SURRENDERED DURING SEARCH HAD TO QUALIFY AS UNDISCLOSED INCOME AS DEFINED ABOVE, WHICH MEANT THAT IT SHOULD BE REPRESENTED EITHER BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR DOCUMENTS OR TRANSACTION FOUND DURING THE COURSE OF SEARCH, WHIC H HAVE NOT BEEN RECORDED BEFORE THE DATE OF SEARCH OR NOT DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER O F INCOME TAX OR CHIEF COMMISSIONER OF INCOME TAX BEFORE THE DATE OF SEARCH. REFERRING TO THE FACTS O F THE CASE THE LD.COUNSEL FOR THE ASSSESSEE CONTENDED THA T THE SURRENDER MADE BY THE ASSESSEE WAS TO COVER ANY POSSIBLE DISCREPANCIES IN THE DOCUMENTS FOUND DURING SEARCH WHICH IS EVIDENT FROM THE STATEMENT RECORDED OF SHRI SATPAL BANSAL, WHO HAD MADE THE SURRENDER AND REPRODUCED IN THE ORDER OF THE CIT(A) ALSO AT PAGE 6 AS UNDER: I) IN THE STATEMENT OF SH. SATPAL BANSAL RECORDED U/S 132 (4) DURING THE COURSE OF REVOCATION OF REST RAINT ITA NO.1679/CHD/2017 A.Y.2014-15 7 ORDER DATED 25.11.2013 THIS QUESTION ASKED AND ITS REPLY IS RELEVANT.:- 'QUES DO YOU WANT TO SAY ANYTHING.? ANS. DURING THE COURSE OF SEARCH AND SEIZURE VARIOU S DOCUMENTS/LOOSE PAPERS/REGISTERS SEIZED AND IMPOUND ED BY YOUR DEPARTMENT AND DURING THE COURSE OF POST SEARC H ENQUIRIES, CERTAIN DISCREPANCIES ARE POINTED OUT BY THE SEARCH TEAM. AT THIS JUNCTURE, I AM NOT IN A POSITION TO C OMMENT ON THESE DISCREPANCIES. HOWEVER, TO BUY PEACE AND AVOI D ANY LITIGATION, I HEREBY OFFER TO SURRENDER ADDITIONAL INCOME OF RS. 30 CR OVER AND ABOVE THE RETURNED INCOME IN THE HANDS OF GROUP CONCERNS / DIRECTORS / PARTNERS/FIRM S / PROPRIETARY AND OTHER SISTER CONCERNS AND RELATIVES .' 7. THE LD.COUNSEL FOR THE ASSSESSEE FURTHER POINTED OUT THAT EVEN THE LETTER GIVING POSSIBLE BIFURCATIO N OF THE SURRENDER DATED 3.2.2014 AND PLACED AT PAPER BOOK PAGE NOS.18 TO 20, CLEARLY MENTIONED THE FACT THAT THE ASSESSEE HAD NOT BEEN ABLE TO INSPECT FULL Y THE VOLUMINOUS RECORD IMPOUNDED FROM ITS PREMISES AND HAD THUS BEEN UNABLE TO COMPLY AND CORRELATE TH E NECESSARY INFORMATION IN THE DOCUMENTS AND WAS MAKING A TENTATIVE SURRENDER WHICH IN THE CASE OF T HE ASSESSEE WAS TO COVER ALL POSSIBLE DISCREPANCIES AS PER THE SEIZED DOCUMENTS OR OTHER POSSIBLE MISTAKES OR DISCREPANCIES IN THE RETURN FILED. OUR ATTENTION WA S DRAWN TO THIS RELEVANT FACT MENTIONED IN THE SURREN DER LETTER AS UNDER: ITA NO.1679/CHD/2017 A.Y.2014-15 8 DESPITE BEST EFFORTS, IT HAS BEEN VERY DIFFICULT, RATHER IMPOSSIBLE TO WORK OUT THE EXACT BIFURCATION OF RS.30.00 CRORES AS MENTIONED IN OUR LETTER DATED 29-11-2013 BECAUSE TILL DATE WE HAVE NOT BEEN ABLE TO INSPECT FULLY THE VOLUMINOUS RECORDS SEIZED/IMPOUNDED FROM VARIOUS PREMISES OF THE GROUP AND IN THE ABSENCE OF THAT WE HAVE NOT BEEN ABLE TO COMPLY & COLLATE THE NECESSARY INFORMATION WE HAVE WORKED OUT TENTATIVE BIFURCATION OF THE TOTAL ADDITIONAL INCOME AT RS.30.00 CRORES WHICH IS BEING DETAILED HEREUNDER: SH.SANDEEP BANSAL INDIVIDUAL 5,65,00,000 A YS 2014-15 (TO COVER ALL POSSIBLE DISCREPANCIES AS PER SEIZED DOCUMENTS OR OTHER POSSIBLE MISTAKES/DISCREPANCIES IN THE RETURN TO BE FILED) 8. THE LD.COUNSEL FOR THE ASSSESSEE CONTENDED THAT IT IS CLEAR THAT THE DOCUMENTS IMPOUNDED WERE NOT FOUND TO CONTAIN ANY ENTRY OR TRANSACTION WHICH REMAINED UNRECORDED IN THE BOOKS OF THE ASSESSEE AN D SURRENDER WAS MADE MERELY TO BUY PEACE OF MIND. THEREFORE, NO UNDISCLOSED INCOME AS SUCH WAS FOUND DURING THE COURSE OF SEARCH BELONGING TO THE ASSESS EE. THE LD.COUNSEL FOR THE ASSSESSEE POINTED OUT THAT IDENTICAL ISSUE HAD BEEN DEALT WITH BY THE I.T.A.T. IN THE CASE OF M/S SEL TEXTILES LIMITED VS. DCIT IN IT A NO.695/CHD/2018 DATED 18.4.2019 WHEREIN AN IDENTICAL SURRENDER MADE WAS TREATED AS NOT BEING I N ITA NO.1679/CHD/2017 A.Y.2014-15 9 THE NATURE OF UNDISCLOSED INCOME OF THE ASSESSEE. O UR ATTENTION WAS DRAWN TO THE RELEVANT FINDINGS OF THE I.T.A.T. AT PARA NOS.8 TO 14 OF THE ORDER AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD. COUNSEL FOR THE PARTIES AND GONE THROUGH THE RECORD, ALSO E XAMINED THE RELEVANT PROVISIONS OF THE ACT AND CASE LAWS ON THE ISSUE. FOR THE SAKE OF READY REFERENCE, THE RELEVANT PROVI SIONS OF SECTION 271AAB AND SECTION 274 OF THE INCOME TAX AC T ARE REPRODUCED AS UNDER: PENALTY WHERE SEARCH HAS BEEN INITIATED 271AAB: (1) THE ASSESSING OFFICER MAY, NOTWITHSTAND ING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIA TED UNDER SECTION 132 ON OR AFTER THE 1STDAY OF JULY, 2 012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITI ON TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED INCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, I N RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIE D PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THE REIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT O F THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE ITA NO.1679/CHD/2017 A.Y.2014-15 10 (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUBSECTION (4) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, I N RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER C ENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDIS CLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB- SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON TH E ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFER RED TO IN SUB-SECTION (1). (3) THE PROVISIONS OF SECTION 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED T O IN THIS SECTION. EXPLANATION:--- FOR THE PURPOSE OF THIS SECTION,__ (A) (B). (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEW ELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; O R ITA NO.1679/CHD/2017 A.Y.2014-15 11 (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL C HIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCO UNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FO UND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED. SECTION 274 PROCEDURE 274 (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHA PTER SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD, O R HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD. (2) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE MADE- (A) BY THE INCOME- TAX OFFICER, WHERE THE PENALTY E XCEEDS TEN THOUSAND RUPEES; (B) BY THE ASSISTANT COMMISSIONER, WHERE THE PENALT Y EXCEEDS TWENTY THOUSAND RUPEES, EXCEPT WITH THE PRI OR APPROVAL OF THE DEPUTY COMMISSIONER.] (3) AN INCOME- TAX AUTHORITY ON MAKING AN ORDER UN DER THIS CHAPTER IMPOSING A PENALTY, UNLESS HE IS HIMSE LF THE ASSESSING OFFICER, SHALL FORTHWITH SEND A COPY OF S UCH ORDER TO THE ASSESSING OFFICER. 9. IT IS PERTINENT TO MENTION HERE THAT CO-ORDINATE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF M/S. RASHMI METALIKS LTD. (SUPRA) HAS EXTENSIVELY ANALYZED THE AFORESAI D PROVISIONS OF SECTION 217AAB WHILE FURTHER RELYING UPON THE DECISION OF THE VISAKHAPATNAM BENCH OF THE ITAT IN THE CASE OF ACIT VS. MARVEL ASSOCIATES(SUPRA) AND OTHER CA SE LAWS. THE RELEVANT PART OF THE SAID ORDER OF KOLKATA BENC H IS REPRODUCED AS UNDER: AT THE OUTSET WE NOTE THAT IT HAS BEEN THE SUBMIS SION OF THE AO AS WELL AS THE LD. DR THAT THE LEVY OF PE NALTY UNDER SECTION 271AAB IS MANDATORY AND AUTOMATIC AND THEREFORE IN THE MATTER OF LEVY OF PENALTY THE AO HAD NO DISCRETION ONCE THE ASSESSEE ADMITS OF ANY ITA NO.1679/CHD/2017 A.Y.2014-15 12 UNDISCLOSED INCOME IN HIS STATEMENT U/S 132(4) OF T HE ACT. SUCH A VIEW GOES AGAINST THE WORDS USED IN SECTION 271AAB AND SECTION 274 OF THE ACT. FOR SAYI NG SO WE NOTE THAT IF THE INTENTION OF THE LEGISLATURE TO LEVY THE PENALTY WAS MANDATORY AND AUTOMATIC THEN THE RIGHT OF APPEAL U/S 246A WOULD NOT HAVE BEEN PROVID ED FOR BY THE LEGISLATURE AGAINST THE ORDER OF PENALTY PASSED U/S 271AAB OF THE ACT. WE ALSO NOTE THAT WHI LE ENACTING SECTION 271AAB THE LEGISLATURE HAS CONSCIOUSLY USED THE WORD MAY IN CONTRADISTINCTIO N TO THE WORD SHALL IN THE OPENING WORDS OF SECTION 271AAB OF THE ACT. THE CHOICE OF THE EXPRESSION MA Y AND NOT SHALL IN THE OPENING SECTION OF 271AAB SH OWS THAT THE LEGISLATURE DID NOT INTEND TO MAKE THE LEV Y OF PENALTY STATUTORY, AUTOMATIC AND BINDING ON THE AO BUT THE AO WAS GIVEN DISCRETION IN THE MATTER OF LEVY O F PENALTY. OUR FOREGOING VIEW FINDS SUPPORT IN THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AT VISHAKHAPATNAM IN THE CASE OF ACIT VS MARVEL ASSOCIATES (170 ITD 353) WHICH INTURN RELIED ON HON BLE ANDHRA PRADESH HIGH COURT RATIO IN RADHA KRISHNA VIHAR (INFRA). THE FOLLOWING OBSERVATIONS OF THE TR IBUNAL IN THE SAID DECISION ARE RELEVANT IN THIS REGARD: 6. CAREFUL READING OF SECTION 271AAB OF THE ACT, THE WORDS USED ARE 'AO MAY DIRECT' AND 'THE ASSESSEE SHALL PAY BY WAY OF PENALTY'. SIMILAR WORDS ARE USED SECTION 158BFA(2) OF THE ACT. THE WORD MAY DIRECT INDICATES THE DISCRETION TO THE AO. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VIEW. . . .7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF SECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CLEAR INTENTION TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOSED UNLESS THE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE PENALTY CANNOT BE ITA NO.1679/CHD/2017 A.Y.2014-15 13 MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNAVIHAR IN ITTA NO.740/2011 WHILE DEALING WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO BE MANDATORY, THE WORDS MAY DIRECT IN SUB SECTION 2 THERE OF INTENDED TO DIRECTORY'. IN OTHER WORDS, WHILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS TRITE POSITION OF L AW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF THE ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. ACCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON MERITS OF THE EACH CASE. 9. AS FAR AS TO THE JUDGMENT OF THE HONBLE ALLAHAB AD HIGH COURT IN THE CASE OF PR. CIT VS SANDEEP CHANDAK (SU PRA) IS CONCERNED, WE NOTE THAT THE FACTS OF THE PRESENT CA SE ARE DISTINGUISHABLE FROM THE FACTS INVOLVED IN THAT JUD GMENT. IN SANDEEP CHANDAK (SUPRA) THE ASSESSEE HAD NOT ONLY M ADE THE DISCLOSURE/SURRENDER OF THE AMOUNT BUT ALSO HAD SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED I. E. FROM THE TRADING OF F&O AND DERIVATIVES AND WAS ADVANCED FOR PURCHASE OF LAND. THAT IS NOT THE CASE IN THE PRES ENT APPEAL; THERE IS NO EXPLANATION BY THE ASSESSEE THE MANNER OF DERIVING THE SURRENDER MADE DURING SEARCH. AS DISCU SSED IN THE FOREGOING, IT IS A MATTER OF RECORD THAT IN THE COURSE OF SEARCH NO UNDISCLOSED ASSET OR THING WAS FOUND NOR ANY INCRIMINATING MATERIAL WAS FOUND FROM WHICH ANY UND ISCLOSED INCOME OR UNEXPLAINED EXPENDITURE COULD BE INFERRED . IN THE CIRCUMSTANCES THE BALD OFFER MADE BY THE ASSESSEE T O PAY TAX ON ADDITIONAL INCOME IN THE STATEMENT U/S 132(4) CA NNOT BE CONSIDERED TO BE UNDISCLOSED INCOME WITHIN THE ME ANING OF ITA NO.1679/CHD/2017 A.Y.2014-15 14 SEC. 271AAB OF THE ACT. SO THE RIGORS OF SECTION 2 71AAB OF THE ACT IS NOT ATTRACTED. HAVING REGARD TO THESE MA TERIAL FACTS THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT RELIED UPON BY THE LD. DR, HAS NO APPLICATION IN THE FACTS OF THE INSTANT CASE. .. .. 11. SO FOR THE REASONS AS AFORERSTATED AND RE LYING ON THE HONBLE ANDHRA PRADESH HIGH COURT RATIO IN RADH A KRISHNA VIHAR (SUPRA), WE CANNOT AGREE WITH THE REV ENUE THAT THE LEVY OF PENALTY UNDER SECTION 271AAB WAS MANDAT ORY AND AUTOMATIC. WE FURTHER NOTE THAT THE PENALTY LEV IABLE UNDER SECTION 271AAB MUST HAVE NECESSARY AND PROXIM ATE NEXUS WITH DISCOVERY OF UNDISCLOSED INCOME IN THE COURSE OR AS A RESULT OF SEARCH. THE EXPRESSION UNDISCLOSED INCOME FOR THE PURPOSES OF LEVY OF PENALTY U/S 271AAB HAS A DE FINITE AND SPECIFIC MEANING AND THE SAID WORD OR EXPRESSIO N DOES NOT HAVE ANY LOOSE OR COLLOQUIAL MEANING. UNLESS AN D UNTIL INCOME OFFERED TO TAX BY AN ASSESSEE COMES WITHIN T HE MISCHIEF OF UNDISCLOSED INCOME AND THAT TOO OF THE SPECIFIED PREVIOUS YEAR IT IS NOT OPEN FOR THE AO TO INVOKE P ROVISIONS OF SECTION 271AAB OF THE ACT. . . 12. FROM THE FOREGOING DEFINITION OF UNDISCLOS ED INCOME WE FIND THAT THIS EXPRESSION IS GIVEN A DEFINITE AN D SPECIFIC MEANING AND THE WORD HAS NOT BEEN DESCRIBED IN AN I NCLUSIVE MANNER SO AS TO ENABLE THE TAX AUTHORITIES TO GIVE WIDER OR ELASTIC MEANING WHICH ENABLES THEM TO BRING WITHIN ITS AMBIT THE SPECIES OF INCOME NOT SPECIFICALLY COVERED BY T HE DEFINITION. FROM BARE PERUSAL OF THE DEFINITION OF THE WORD UNDISCLOSED INCOME WE FIND THAT IN ORDER TO BRING A RECEIPT OR SPECIE OF INCOME WITHIN THE MEANING OF THE SAID EXPRESSION, IT IS OBLIGATORY FOR THE AO TO DEMONSTRATE AND PROV E THAT THE INCOME IS REPRESENTED EITHER WHOLLY OR PARTLY BY AN Y MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG FOUND IN THE COURSE OF SEARCH U/S 132 AND WHICH WAS NOT RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR OR OTHERWISE NOT DISCLOSED TO THE COM MISSIONER BEFORE THE DATE OF SEARCH 13. THE SECOND LIMB OF SUB-CLAUSE (I) PROVIDES THAT UNDISCLOSED INCOME SHALL MEAN ANY INCOME REPRESEN TED EITHER WHOLLY OR PARTLY BY ANY ENTRY IN THE BOOKS O F ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COU RSE OF SEARCH UNDER SECTION 132 BUT WHICH WERE NOT RECORDE D ON ORBEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT S OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH ITA NO.1679/CHD/2017 A.Y.2014-15 15 PREVIOUS YEAR OR OTHERWISE NOT BEEN DISCLOSED TO TH E COMMISSIONER BEFORE THE DATE OF SEARCH. WE FIND THA T EVEN IN RESPECT OF THE SECOND LIMB NO MATERIAL OR EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO WHICH SHOWED THAT THE I NCOME OF RS.69 CRORES WAS REPRESENTED BY ANY ENTRY IN THE BO OKS OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS FOUND I N THE COURSE OF SEARCH. .. ..14. FROM THE FOREGOING FINDINGS RECORDED BY THE AO IN PARA 7 OF THE ASSESSMENT ORDER, WE FIND THAT SAVE & EXCEPT MAKING REFERENCE TO THE VOLUNTARY OFFER MAD E THROUGH JOINT DECLARATION PETITION DATED 18.04.2013, THE AO HAD NOT BROUGHT ON RECORD ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH FROM WHICH ONE COULD INFER THAT TH E INCOME OF RS.69 CRORES WAS REPRESENTED IN PART OR WHOLE BY AN Y ENTRY MADE IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF SEARCH. . 15. FROM THE FOREGOING FINDINGS OF THE AO, WE N OTE THAT IN THE ASSESSMENT ORDER U/S 143(3), THE AO HAD ADMI TTED THAT THE ASSESSEE HAD SATISFACTORILY EXPLAINED THE CONTE NTS OF THE DOCUMENTS IDENTIFIED AS RASHMI/1 TO RASHMI/5 AND RCPL/1 TO RCPL/7 AND THERE WAS NO FINDING IN THE SA ID ASSESSMENT ORDER WHICH IN ANY MANNER EVEN SUGGESTED LET ALONE PROVED THAT THE INCOME OF RS.69 CRORES OFFERE D BY THE ASSESSEE IN ITS RETURN OF INCOME WAS RELATABLE TO O R REPRESENTED BY THE ENTRIES MADE IN DOCUMENTS IDENTI FIED AS RASHMI/1 TO RASHMI/5 AND RCPL/1 TO RCPL/7. IN THE COURSE OF APPELLATE HEARING THE FOREGOING SUBMISSIO N OF THE LD. AR WENT UN-REBUTTED FROM THE LD. DR WHO COULD N OT BRING TO OUR ATTENTION ANY SPECIFIC NOTING IN THE SAID DO CUMENTS FROM WHICH IT COULD BE CONSTRUED THAT THE INCOME DI SCLOSED WAS RELATABLE TO DOCUMENTS SEIZED IN THE COURSE OF SEARCH. .. ..16. FROM THE FOREGOING DISCUSSION AND MATERIAL ON RECORD, WE FIND THAT APPLYING BOTH THE LIMBS CONTAI NED IN CLAUSE (C) OF EXPLANATION TO SECTION 271AAB, THE AD DITIONAL INCOME OF RS.69 CRORES OFFERED BY THE ASSESSEE THRO UGH ITS JOINT DECLARATION WAS NEITHER REPRESENTED BY ANY AS SETS FOUND IN THE COURSE OF SEARCH NOR REPRESENTED BY ANY ENTR Y MADE IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSAC TIONS FOUND IN THE COURSE OF SEARCH. WE THEREFORE FIND TH AT THE INCOME VOLUNTARILY OFFERED BY THE ASSESSEE DID NOT COME WITHIN THE AMBIT AND SCOPE OF THE EXPRESSION UNDIS CLOSED INCOME AS DEFINED FOR THE PURPOSES OF SECTION 271A AB OF THE ACT. ITA NO.1679/CHD/2017 A.Y.2014-15 16 17. FROM THE PLAIN READING OF SECTION 271AAB WE FIN D THAT THE LEVY OF PENALTY IS PERMISSIBLE IF AND ONLY IF T HERE EXISTS UNDISCLOSED INCOME. FINDING OR UNEARTHING OF UNDI SCLOSED INCOME IN THE COURSE OR AS A RESULT OF SEARCH CONDU CTED U/S 132 OF THE ACT IS SINE QUA NON FOR INVOKING PENAL P ROVISIONS OF SECTION 271AAB OF THE ACT. DISCOVERY AND CONSEQUENT ASSESSMENT OF UNDISCLOSED INCOME IS A CONDITION PRE CEDENT FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. IT HAS TO BE BORNE IN MIND THAT EVERY OFFER OF THE ASSESSEE TO P AY TAX ON HIS OR HER INCOME IN THE COURSE OF RECORDING OF STA TEMENT U/S 132 DOES NOT AMOUNT TO FINDING OF UNDISCLOSED INCO ME. A MERE OFFER OR DISCLOSURE BY AN ASSESSEE TO PAY TAX ON SOME ADDITIONAL AMOUNT WITH A VIEW TO AVOID PROTRACTED L ITIGATION CANNOT AND DOES NOT AMOUNT TO DISCOVERY OF UNDISCLO SED INCOME FOR THE PURPOSES OF LEVY PENALTY U/S 271AAB OF THE ACT. THE LEGISLATURE HAS ALL ALONG BEEN CONSCIOUS I N PROVIDING FOR LEVY OF PENALTY ONLY IN RESPECT OF UNDISCLOSED INCOME. WE FIND THAT IN ALL PENAL PROVISIONS SUCH AS EXPLANATI ON 5A OF SECTION 271(1)(C), SECTION 271AAA & SECTION 271AAB, THE LEGISLATURE HAS RESTRICTED THE SCOPE OF PENAL PROVI SION ONLY TO UNDISCLOSED INCOME AND NOT ASSESSED TOTAL INCOME. MOREOVER THE TERM/EXPRESSION UNDISCLOSED INCOME H AS BEEN DEFINED BY THE LEGISLATURE IN ALL SUCH PENAL PROVIS IONS IN A SPECIFIC AND RESTRICTED MANNER AND NOT IN AN INCLUS IVE MANNER. FOR THAT REASON THE DEFINITION OF UNDISCLOS ED INCOME NOWHERE PROVIDES THAT THE SAID EXPRESSION SHALL IN CLUDE ALL AND EVERY SPECIES OF INCOME BUT THE WORD USED IS UN DISCLOSED INCOME MEANS. THE CONSCIOUS USE OF THE EXPRESSION MEANS IN CONTRADISTINCTION TO THE USE OF WORD INCLUDES INDICATE THAT THE LEGISLATURE INTENDED TO RESTRICT THE SCOPE OF P ENAL PROVISIONS ONLY TO INCOME WHICH CAME WITHIN THE KEN OF THE SAID EXPRESSION AND NOT BEYOND. APPLYING THE DEFINI TION OF UNDISCLOSED INCOME TO THE INCOME OF RS.69 CRORES, W E FIND THAT SUCH INCOME WAS OFFERED IN THE STATEMENT RECOR DED U/S 132(4) OF THE ACT AT THE TIME OF SEARCH. HOWEVER ON LY FOR THE SAID REASON, IT COULD NOT BE BROUGHT WITHIN THE AMB IT OF UNDISCLOSED INCOME PARTICULARLY WHEN SUCH INCOME WA S NOT REPRESENTED BY ANY VALUABLE ASSET OR ENTRY IN BOOKS OF ACCOUNTS OR WHICH WAS NOT FOUND AS A RESULT OF SEAR CH NOT RECORDED IN THE BOOKS. WE THEREFORE FIND MUCH FORCE IN THE LD. ARS ARGUMENTS THAT SINCE THE SUM OF RS.69 CRORES V OLUNTARILY OFFERED TO TAX WAS NOT IN THE NATURE OF UNDISCLOSED INCOME, THE LEVY OF PENALTY U/S 271AAB WAS UNSUSTAINABLE. 18. IN THIS REGARD WE RELY ON THE DECISION OF THE C OORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS KANWAR SAIN ITA NO.1679/CHD/2017 A.Y.2014-15 17 GUPTA IN ITA NO.538/KOL/2017 DATED 29.06.2018 INVOL VING SIMILAR SET OF FACTS AND CIRCUMSTANCES. IN THE INST ANT CASE ALSO THE ASSESSEE HAD VOLUNTARILY OFFERED SUM OF RS.1,00,00,000/- TO TAX IN HIS STATEMENT U/S 132(4) WITHOUT ANY PROOF OF CONCEALMENT. THE AO ASSESSED SUCH SUM TO TAX SOLELY BASED ON THE ASSESSEES DISCLOSURE PETITION AND THERE WAS NO MATERIAL BROUGHT ON RECORD TO INDICATE THAT IT WAS REPRESENTED BY ANY VALUABLE ASSET OR ANY ENTRY FOUN D IN ANY BOOKS OR OTHER DOCUMENTS SEIZED IN THE COURSE OF SE ARCH. THE AO THEREAFTER ALSO LEVIED PENALTY U/S 271AAB @ 10% WHICH WAS DELETED BY LD. CIT(A). ON APPEAL THIS TRIBUNAL UPHELD THE ORDER OF LD. CIT(A) BY OBSERVING AS UNDER: 4. LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE ASSESSING OFFICER HAD RIGHTLY IMPOSED THE IMPUG NED PENALTY IN ASSESSEES CASE @10% OF HIS UNDISCLOSED INCOME OF RS.1 CRORE COMING RS.10,00,000 IN QUESTIO N. WE FIND NO SUBSTANCE IN REVENUES INSTANT ARGUMENTS . WE FIRST OF ALL MAKE IT CLEAR THAT SECTION 271AAB O F THE ACT APPLIES IN RELATION TO THE IMPUGNED PENALTY @10 % OF THE UNDISCLOSED INCOME AS STOOD DEFINED IN EXPLANAT ION (C) THERETO. THERE IS NO MATERIAL IN THE CASE FILE TO INDICATE THAT THE ASSESSEES UNDISCLOSED INCOME REPRESENTS ANY MONEY, BULLION, JEWELLERY OR VALUABL E ARTICLE OR ANY ENTRY IN THE BOOKS OR OTHER DOCUMENT S THEREIN. WE MAKE IT CLEAR THAT WE ARE DEALING WITH A PENALTY PROVISION IN TAX STATUTE WHICH IS TO BE STR ICTLY INTERPRETED. WE THEREFORE ARE OF THE OPINION THAT T HE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED PENALTY AS THE ASSESEES SEARCH STATEMENT NOWHERE INDICATED THE CORRESPONDING UNDISCLOSED INCOME AS PER SPECIFIC REQUIREMENT IN THE ACT. THE CIT(A)S FINDINGS UNDER CHALLENGE DELETING PENALTY IN QUESTION ARE ACCORDIN GLY CONFIRMED. 19. WE ALSO RELY ON THE DECISION OF THIS COORDINATE BENCH OF TRIBUNAL IN THE CASE OF DCIT VS LILADHAR AGARWAL IN ITA NO. 1605/KOL/2017 DATED 26.12.2018 WHEREIN IDENTICAL IS SUE HAD COME UP FOR CONSIDERATION AND THE TRIBUNAL UPHE LD THE CIT(A)S ORDER DELETING THE LEVY OF PENALTY SINCE T HERE WAS NO MATERIAL TO SUGGEST THAT THE INCOME OFFERED TO TAX WAS A CONSEQUENCE OF ANY VALUABLE ASSET OR ANY ENTRY FOU ND IN ANY BOOKS OR OTHER DOCUMENTS SEIZED IN THE COURSE OF SE ARCH. . 20. WE MAY ALSO REFER TO THE DECISION OF THE COORDI NATE BENCH OF THE TRIBUNAL AT VISHAKHAPATNAM IN THE CASE OF AC IT VS MARVEL ASSOCIATES (SUPRA) WHEREIN IT WAS HELD AS F OLLOWS: ITA NO.1679/CHD/2017 A.Y.2014-15 18 9. PENALTY U/S 271AAB ATTRACTS ON UNDISCLOSED INCO ME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4 ). THE AO MUST ESTABLISH THAT THERE IS UNDISCLOSED INC OME ON THE BASIS OF INCRIMINATING MATERIAL. IN THE INST ANT CASE A LOOSE SHEET WAS FOUND ACCORDING TO THE A.O., IT WAS INCRIMINATING MATERIAL EVIDENCING THE UNDISCLOS ED INCOME. IN THE PENALTY ORDER THE AO OBSERVED THAT L OOSE SHEET SHOWS THE COST PER SQUARE FEET IS RS.3571/- P ER SFT. AND ASSESSEE STATED TO HAVE SUBMITTED IN SWORN STATEMENT COST PER SQ. FEET AT RS.2200/- TO RS.2300 /- PER SQ. FEET. HOWEVER NEITHER THE AO NOR THE LD.CIT (A) HAS VERIFIED THE COST OF CONSTRUCTION WITH THE BOOK S AND PROJECTIONS FOUND AT THE TIME OF SEARCH. THE COUNSE L ARGUED THAT IT WAS MERE PROJECTION BUT NOT THE ACTU ALS. THE WRITE UP HEADING ALSO MENTIONED THAT SUMMARY OF THE PROJECTED PROFITABILITY STATEMENT. THERE IS NO EVIDENCE TO ESTABLISH THAT PROJECTIONS REFLECTED IN THE LOOSE SHEET IS REAL. NO OTHER MATERIAL WAS FOUND DU RING THE COURSE OF SEARCH INDICATING THE UNDISCLOSED INC OME. THERE WAS NO MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE OR THING OR ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUMENTS TRANSACTIONS WERE FOUND DURING THE COURSE OF SEARCH INDICATING THE ASSETS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, WHOLLY OR PARTLY. THE REVENUE DID NO T FIND ANY UNDISCLOSED ASSET, ANY OTHER UNDISCLOSED INCOME OR THE INFLATION OF EXPENDITURE DURING THE SEARCH/ ASSESSMENT PROCEEDINGS. THOUGH A LOOSE SHEE T OF PAGE NO.107 OF ANNEXURE A/GS/MA/1 WAS FOUND THAT DOES NOT INDICATE ANY SUPPRESSION OF INCOME BU T IT IS ONLY PROJECTION OF PROFIT STATEMENT. THE AMOUNT OF RS.3571/- MENTIONED IN THE PROJECTIONS REFERS TO CO ST AND PROFIT WHICH IS APPROXIMATE SALE PRICE BUT NOT THE COST AS STATED BY THE AO IN THE PENALTY ORDER. THE COST OF CONSTRUCTION IN THE PROJECTIONS PROJECTED AT RS. 2177/- WHICH IS IN SYNCH WITH THE STATEMENT GIVEN BY THE ASSESSEE. THE AO WAS HAPPY WITH THE DISCLOSURE GIVE N BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSI TION WITH THE BOOKS OF ACCOUNTS AND PROJECTIONS AND BRIN G THE EVIDENCE TO UNEARTH THE UNDISCLOSED INCOME. NEI THER THE A.O. NOR THE INVESTIGATION WING LINKED THE COST OF PROFIT OR COST OF ASSET TO THE ENTRIES IN THE BOOKS OF ACCOUNTS OR TO THE SALES CONDUCTED BY THE ASSESSEE TO THE SALE DEEDS. THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE LOOSE SHEET FOUN D ITA NO.1679/CHD/2017 A.Y.2014-15 19 DURING THE COURSE OF SEARCH INDICATES ANY UNDISCLOS ED INCOME OR ASSET OR INFLATION OF EXPENDITURE. THE HO N'BLE ITAT DELHI BENCH IN THE CASE OF AJAY SHARMA V. DY. CIT [2013] 30 TAXMANN.COM 109 HELD THAT WITH RESPECT TO THE ADDITION ON ACCOUNT OF ALLEGED RECEIVABLES AS P ER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEA DS AND ESTABLISHES THAT ANY INCOME RECEIVED BY THE ASSESSEE HAS NOT BEEN DECLARED BYTHE ASSESSEE. AN ADDITION HAS BEEN MADE ON THE BASIS OF LOOSE DOCUMENT, WHICH DID NOT CLOSELY PROVE ANY CONCEALME NT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSE SSEE. HENCE PENALTY U/S 158BFA (2) OF THE ACT IS NOT LEVI ABLE. THE FACTS OF THE ASSESSEE'S CASE SHOWS THAT THERE W AS NO UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND NO INCRIMINATING MATERIAL WAS FOUND, HEN CE WE HOLD THAT THERE IS NO CASE FOR IMPOSING PENALTY U/S 271AAB OF THE ACT, ACCORDINGLY, WE SET ASIDE THE OR DER OF THE LOWER AUTHORITIES AND CANCEL THE PENALTY U/S 271AAB OF THE ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 21. USEFUL REFERENCE IN THIS REGARD MAY ALSO BE MAD E TO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL A T JAIPUR IN THE CASE OF SHRI DINESH KUMAR AGARWAL VS. ACIT IN I TA NO. 855 & 856/JP/2017 DATED 24/07/2018 WHEREIN IT WAS H ELD AS FOLLOWS: 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE N OTE THAT THE SURRENDER OF RS. 1,65,38,920/- WAS MADE BY THE ASSESSEE DURING THE COURSE OF SEARCH AND SEIZUR E PROCEEDINGS AND OFFERED TO TAX FOR THE YEAR UNDER CONSIDERATION. THE DETAILS OF THE SURRENDERED INCOM E PERTAINS TO THE YEAR UNDER CONSIDERATION ARE AS UND ER:- ON ACCOUNT OF DEBTORS (ADVANCES GIVEN) RS. 80,00,00 0/- UNEXPLAINED CASH FOUND RS. 10,00,000/- ACCRUED INTEREST ON DEBTORS RS. 20,00,000/ - EXCESS STOCK FOUND DURING SEARCH RS. 55,38,9 20/- TOTAL RS. 1,65,38,920/- ITA NO.1679/CHD/2017 A.Y.2014-15 20 WE FIND THAT OUT OF THESE FOUR ITEMS OF SURRENDERS ONLY ADVANCES OF RS. 80,00,000/- IS BASED ON THE INCRIMINATING MATERIAL AND ALL OTHER ITEMS ARE NOT BASED ON THE SEIZED MATERIAL. THE INTEREST ON ADVANCES/ DEBTORS IS ONLY AN ESTIMATED AMOUNT DISCLOSED DURIN G THE YEAR BUT NO RECORD OR ANY DOCUMENT WAS FOUND DURING THE SEARCH AND SEIZURE ACTION. AS REGARDS TH E EXCESS STOCK WE FIND FROM THE RECORD AS PRODUCED BEFORE US BY THE LD. DR THAT THE VALUATION REPORT I S BASED ON THE MARKET PRICE OF THE GOLD JEWELLERY PREVAILING ON THE DATE OF SEARCH AS AGAINST THE COS T OR REALIZATION WHEREVER IS LESS. THEREFORE, THE COMPUT ATION OF EXCESS STOCK BASED ON THE MARKET PRICE OF THE ST OCK CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE AS IT IS THE SUBJECT MATTER OF REGULAR ASSESSMENT AND CANNOT BE REGARDED AS UNDISCLOSED INCOME BASED ON INCRIMINATING MATERIAL. THERE IS NO SUCH FACT EITHER RECORDED DURING THE SEARCH AND SEI ZURE PROCEEDING OR IN THE ASSESSMENT ORDER OR IN THE PEN ALTY PROCEEDING TO SHOW THAT THERE WAS DISCREPANCY IN TH E STOCK AS RECORDED IN THE BOOKS OF ACCOUNT AND FOUND AT THE TIME OF SEARCH. IN THE ABSENCE OF ANY DISCREPAN CY IN THE QUANTITY OF STOCK THE VALUATION OF THE STOCK IS PURELY A QUESTION OF ASSESSMENT AND CANNOT BE HELD AS UNDISCLOSED INCOME DETECTED DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDING. THEREFORE, TO THE EX TENT OF EXCESS STOCK BASED ON THE VALUATION REPORT THE DISCLOSURE OF THE INCOME BY THE ASSESSEE WOULD NOT FALL IN THE CATEGORY OF UNDISCLOSED INCOME AS PER EXPLANATION TO SECTION 271AAB OF THE ACT. IT IS NOT THE CASE OF THE REVENUE THAT ANY STOCK OF JEWELLERY WAS FOUND WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT BUT THE VALUE OF STOCK IS COMPUTED BASED ON THE VALUATI ON REPORT OF THE DEPARTMENTAL VALUER. ONCE THE DIFFERE NCE IN THE VALUE OF STOCK IS ONLY DUE TO MARKET PRICE A S AGAINST THE COST OF THE SAID STOCK, THE SAME WILL N OT FALL IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED UNDER CLAUSE-(C) OF EXPLANATION -1 OF SECTION 271AAB OF T HE ACT. 19. SIMILARLY THE ACCRUED INTEREST OF RS. 20,00,000 /- IS ALSO ONLY ESTIMATED AND NOT BASED ON ANY INCRIMINAT ING DOCUMENTS. THIS AMOUNT WAS ESTIMATED AS THERE WERE ADVANCES AS PER THE ENTRIES OF THE SEIZED MATERIAL. EVEN OTHERWISE ACCRUED INTEREST IS DEPENDENT ON THE OUTCOME OF THE LEVY OF PENALTY IN RESPECT OF ADVANC ES ITA NO.1679/CHD/2017 A.Y.2014-15 21 GIVEN BY THE ASSESSEE. WE HAVE CONSIDERED THE ISSUE OF ADVANCES FOR THE ASSESSMENT YEAR 2013-14 AND ACCORDINGLY IN VIEW OF OUR FINDING ON THE SAID ISSU E THE PENALTY U/S 271AAB OF THE ACT IS NOT SUSTAINABLE IN RESPECT OF THE SURRENDER AMOUNT OF RS. 1,65,38,920/ -. 22. WE ALSO RELY ON THE DECISION OF THE COORDINATE BENCH AT RANCHI IN THE CASE OF RINKU AGARWAL IN ITA NO. 262/RAN/2017 DATED 30.11.2018. IN THE INSTANT CASE AS WELL IN THE COURSE OF SEARCH OPERATIONS CONDUCTED A T THE MICA MOD GROUP ON 21.11.2012, THE ASSESSEE HAD ADMITTED ADDITIONAL INCOME OF RS.5,00,000/- U/S 132 (4) WHICH SHE HAD OFFERED TO TAX IN HER RETURN OF INCOM E. THE AO LEVIED PENALTY U/S 271AAB ON SUCH ADDITIONAL INCOME OFFERED TO TAX. THE TRIBUNAL NOTED THAT NEIT HER THE INVESTIGATION WING IN THE POST SEARCH NOR DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER FOUND ANY INCRIMINATING EVIDENCE OF UNDISCLOSED INC OME OTHERWISE THE DECLARATION OF THE ASSESSEE FOR MAKIN G THE ADDITION. FOLLOWING THE DECISION RENDERED IN THE CA SE OF ACIT VS KANWAR SAIN GUPTA (SUPRA), THE TRIBUNAL DELETED THE PENALTY LEVIED U/S 271AAB OF THE ACT. 23. RESPECTFULLY FOLLOWING THE DECISIONS IN THE FOR EGOING AND HAVING REGARD TO OUR FINDING THAT THE INCOME OF RS.69 CRORES VOLUNTARILY OFFERED TO TAX WAS NOT IN THE NATURE OF UNDISCLOSED INCOME DEFINED IN CLAUSE (C ) OF EXPLANATION TO SECTION 271AAB, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN CANCELLING THE PENALTY LEVI ED U/S 271AAB OF THE ACT. ACCORDINGLY THE ORDER OF THE LD. CIT(A) IS UPHELD FOR THE REASONS DISCUSSED ABOVE AN D THE REVENUES APPEAL STANDS REJECTED. 10. NOW COMING TO THE FACTS OF THE CASE BEFORE US, THE ASSESSEE IN THIS CASE HAS SURRENDERED AS TOTAL INC OME OF 14,39,99,158/- DURING THE SEARCH ACTION CARRIED OUT AT HIS PREMISES U/S 132 OF THE ACT, OUT OF WHICH 14 CRORES WAS SURRENDERED TO COVER ANY DISALLOWANCE OF EXPENSES/ADDITIONS, WHEREAS, THE REMAINING AMOUNT O F 39,99,158/- WAS SURRENDERED REPRESENTING PROFIT EAR NED ONSTOCK FOUND SHORT. THEREAFTER THE ASSESSEE FILED ITS RETURN OF INCOME AND DULY INCLUDED THE SURRENDERED AMOUNT IN ITS INCOME FOR THE PURPOSE OF TAXATION. THE ASSESSING O FFICER CARRIED OUT THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT AND INDEPENDENTLY SCRUTINIZED AND VERIFIED THE DIFF ERENT HEADS OF INCOME AND EXPENDITURE AND COMPUTED THE ITA NO.1679/CHD/2017 A.Y.2014-15 22 ADDITIONAL INCOME OF 33,13,304/- ON ACCOUNT OF STOCK FOUND SHORT DURINGSEARCH ACTION, HOWEVER, GIVING THE ASSE SSEE SET OFF OF AMOUNT OF 39,99,158/- SURRENDERED UNDER THE HEAD PROFIT ONSTOCK FOUND SHORT ADDED THE BALANCE AMOU NT OF 2,58,20,577/- INTO THE INCOME OF THE ASSESSEE ON AC COUNT OF STOCK FOUND SHORT DURING THE SEARCH ACTION. APARTFR OM THAT, THE ASSESSING OFFICER HAD MADE THE ADDITIONAL DISAL LOWANCE OF 2,83,98,545/- UNDER SECTION 14A OF THE ACT WHICH WA S IN ADDITION TO THE SUOMOTU DISALLOWANCE OF 3,45,49,868/- RETURNED BY THE ASSESSEE IN THIS REPECT IN HIS INCO ME TAX RETURN.THE ASSESSING OFFICER ALSO MADE AN ADDITION OF 2,25,54,011/- U/S 36 (1)(III) OF THE ACT. THOUGH TH E ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SUBMITTED THAT TH E SET OFF OF 14 CRORES DECLARED ON ACCOUNT OF DISALLOWANCE BY TH E ASSESSEE OF EXPENSES/ADDITIONS BE GIVEN TO THE ASSE SSEE, HOWEVER, THE ASSESSING OFFICER REJECTED THE ABOVE C ONTENTION OF THE ASSESSEE SINCE THE ASSESSEE HAD NOT GIVEN AN Y BIFURCATION OF ANY SURRENDERED INCOME OF 14 CRORES. APART FROM THAT, THE ASSESSING OFFICER HAS MADE AN ADDITI ON OF 9,23,231/- U/S 36(1) (V) OF THE INCOME TAX ACT AND ASSESSED THE TOTAL INCOME AT A LOSS OF 33,73,75,950/- AS AGAINST THE LOSS DECLARED / RETURNED BY THE ASSESSEEAT 41,50,72,313/-. 11. THE RELEVANT FACT IN THIS CASE IS THAT THOUGH T HE ASSESSING OFFICER EXAMINED INDIVIDUALLY EACH AND EVERY ITEM O F INCOME AND EXPENDITURE AND MADE SEPARATE DISALLOWANCES, HO WEVER, THE ASSESSING OFFICER DIDNOT POINT OUT ANY EXCESS O R WRONG EXPENDITURE CLAIMED SO FAR AS THE SURRENDER OF 14 CRORES ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE / ADDITION W AS CONCERNED. EVEN THE ASSESSING OFFICER DID NOT ALLOW THE TELESCOPIC BENEFIT / SET OFF OF THE AMOUNT SURRENDE RED AS AGAINST THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER UNDER THE PROVISIONS OF SECTION 40A, 36 (1)(III) AND 36 ( 1)(V) OF THE ACT. THERE IS NO MENTION IN THE ASSESSMENT ORDER TH AT THE ASSESSEE HAD CLAIMED ANY EXTRA OR INADMISSIBLE EXPE NDITURE IN RESPECT OF ANY OTHER ITEM. IT ALSO APPARENT FROM THE FACTS ON THE FILE THAT EVEN DURING THE SEARCH ACTION, NO INC RIMINATING MATERIAL IN RESPECT OF EXCESSIVE OR INADMISSIBLE EX PENDITURE WAS FOUND DURING THE SEARCH ACTION.THE ASSESSEE SIM PLY SURRENDERED THE AMOUNT OF 14,39,99,158/- AND IN THE BIFURCATION OFFERED 39.99 LACS TOWARDSPROFITS OF STOCK FOUND SHORT AND REMAINING AMOUNT OR 14 CRORES WASSURRENDERED ON ACCOUNT OF DISALLOWANCE OF EXPENSES/ADDITION. HO WEVER, NEITHERDURING THE SEARCH ACTIONNOR DURING THE ASSES SMENT PROCEEDINGS, NO SUCH DISALLOWANCE OF EXPENDITURE AN D ITA NO.1679/CHD/2017 A.Y.2014-15 23 CONSEQUENT ADDITION HAS BEEN MADE EXCEPTAS DISCUSSE D ABOVE. HOWEVER, THE ASSESSING OFFICER HAS ADDED THE AFORESAID DISALLOWANCE MADE BY HIM SEPARATELY INTO THE INCOME OF THE ASSESSEE. SO FAR AS THE DISALLOWANCE U/S 14A IS CONCERNED, THE ASSESSEE HAD TAKEN A PLEA BEFORE THE ASSESSING OFFICER THAT IT DID NOT EARN ANY TAX-EXEM PT INCOME DURING THE YEAR. FURTHERMORE, THAT INVESTMENTS WERE MADE OUT OF ITS OWN / INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEEAND THAT NO DISALLOWANCE U/S 14A OF THE ACT WASWARRANTED. SIMILAR PLEA WAS ALSO TAKEN BY THE AS SESSEE IN RESPECT OF DISALLOWANCE MADE U/S 36(1)(III) OF T HE ACT THAT THE ADVANCES/INVESTMENTSWERE MADE BY THE ASSESSEE O UT OF ITS OWN/INTEREST FREE FUNDS AVAILABLE WITH IT. A PL EA WAS ALSO TAKEN THAT THE ADVANCES WERE GIVEN OUT OF COMMERCIA L EXPEDIENCY. SO FAR AS THE DISALLOWANCE U/S 36(1)(V) WAS CONCERNED, A PLEA WAS TAKEN THAT THE CONTRIBUTION T O EMPLOYEES PROVIDENTFUND WAS MADE WITHIN THE STIPULATEDPERIOD AND THAT NO DISALLOWANCE WAS ATTRA CTED. 12. CONSIDERING THE NATURE OF DISALLOWANCE MADE BY THE ASSESSING OFFICER AND THE PLEA OF THE ASSESSEE, IT IS QUITE APPARENT THAT THE ISSUE OF DISALLOWANCE OF EXPENDIT URE ON THE AFORESAID THREE ISSUES WAS A DEBATABLE ONE AND IN F ACT IN THE LIGHT OF THE VARIOUS DECISIONS OF THE HON'BLE HIGH COURTS, THE ASSESSEE HAS A FAIR CASE ON MERITS AND THAT IT CAN NOT BE SAID THAT THERE WAS ANY INTENTIONAL ACT ON THE PART OF T HE ASSESSEE TO CLAIM ANY INADMISSIBLE EXPENDITURE, RATHER, TH E ASSESSEE HAD PUT A BONAFIDE CLAIM OF THE ALLOWANCE/EXPENDITU RE ON THESE ISSUES. WHAT WE WISH TO CONVEY THROUGH THE AF ORESAID DISCUSSION IS THAT EVEN DESPITE CERTAIN DISALLOWANC ES MADE BY THE ASSESSING OFFICER, AS DISCUSSED ABOVE, IT CA NNOT BE SAID THAT ASSESSEE HAD CLAIMED ANY INADMISSIBLE EXP ENDITURE WHICH WOULD FALL WITHIN THE DEFINITION OF UNDISCLO SED INCOME AS DEFINED UNDER THE PROVISIONS OF SECTION271AAB OF THE ACT. EXCEPT THE AFORESAID DISALLOWANCE MADE BY THE ASSES SING OFFICER ON DEBATABLE ISSUES, THERE IS NO CASE OF TH E DEPARTMENT IN RESPECT OF ANY INADMISSIBLE EXPENDITURE CLAIMED BY THE ASSESSEE WHICH WOULD COVER THE SURRENDERED INCOME O F 14 CORES. FROM THE FACTS ON THE FILE, IT ISESTABLISHED THAT THE AFORESAID SURRENDER OF 14 CRORES WAS BASED ON THE MERE STATEMENT OF THE ASSESSEE AND NOTHING INCRIMINATING MATERIAL WHICH WOULD CONSTITUTE UNDISCLOSED INCOME AS PER THE PROVISIONS OF SECTION 271AAB OF THE ACT WAS DETECTE D OR FOUND DURING THE SEARCH ACTION. IN VIEW OF THE VARIOUS CA SE LAWS AS DISCUSSED ABOVE, THE AFORESAID AMOUNT FOR 14 CORES WOULD NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME AS DEFINED ITA NO.1679/CHD/2017 A.Y.2014-15 24 UNDER SECTION 271AAB OF THE ACT AND, HENCE, THE PEN ALTY IS NOT LEVIABLE ON THE SAID AMOUNT UNDER THE PROVISIO NS OF SECTION 271AAB OF THE ACT. 13. SO FAR AS THE RELIANCE OF THE LD. DR ON THE DEC ISION IN THE CASE OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. SHRI SANDEEP CHANDAK AND ORS. (SUPRA) IS CONCERNED, AS DISCUSSED IN THE AFORESAID DECISION O F THE COORDINATE BENCH OF THE TRIBUNAL IN DCIT VS. RASHM I CEMENT LTD, (SUPRA) THE FACTS IN THE CASE OF PRINCIPAL CI T VS. SHRI SANDEEP CHANDAK AND ORS (SUPRA) ARE DISTINGUISHAB LE AND DO NOT APPLY TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND IN THE LIGHT OF THE DISCUSSION MADE IN THE ABO VE REFERRED TO DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL. 14. HOWEVER, SO FAR AS THE SURRENDERED AMOUNT OF 39.99 LACS IS CONCERNED, SAME WAS OFFERED ON ACCOUNT OF P ROFITS ON STOCK FOUND SHORT DURING THE SEARCH ACTION. ADMITTE DLY, THE STOCK WAS FOUND SHORT DURING THE SEARCH ACTION. IN FACT, THE ASSESSING OFFICER APART FROM THE ABOVE SURRENDER OF 39.99 LACS HAS MADE FURTHER ADDITION OF 2.58 CORES ON THIS ISSUE. IT IS APPARENT THAT THE AFORESAID PROFIT ON SHORT STOC K WERE NOT ACCOUNTED FOR BY THE ASSESSEE BUT WAS ONLY DETECTED DURING THE SEARCH ACTION. HOWEVER, THE ASSESSEE HAS SUBSTA NTIATED THE MANNER OF EARNING OF THE SAID INCOME WHICH INCL UDE THE SURRENDER INCOME OF 39.99 LACS, HENCE, PENALTY @ 10% IS LEVIABLE ON THE AFORESAID AMOUNT AS PER THE PROVISI ONS OF SECTION 271AAB (1)(A) OF THE I.T. ACT. 14. IN VIEW OF THIS, THE PENALTY IN THIS CASE IS RE STRICTED TO 10% OF THE SURRENDERED INCOME OF 39,99,158/- ON ACCOUNT OF STOCK FOUND SHORT AS PER THE PROVISIONS OF SECTION 271AAB (1)(A) OF THE ACT. HOWEVER, THE REMAINING PART OF T HE PENALTY IS ORDERED TO BE DELETED. 9. THE LD.COUNSEL FOR THE ASSSESSEE, THEREFORE, CONTENDED THAT THERE WAS NO CASE FOR LEVY OF PENALT Y U/S 271AAB AND THE SAME OUGHT TO BE DELETED. 10. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. DRAWING OUR ATTENT ION ITA NO.1679/CHD/2017 A.Y.2014-15 25 TO THE FINDINGS OF THE LD.CIT(A) AT PARA 4 OF HIS O RDER AS UNDER: 4. DECISION:- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS FILED BY THE APPELLANT. CONTENTION OF THE APPELLANT ARE SUMMARIZED AS HEREUNDER: I) THE REASONS MENTIONED IN THE NOTICE U/S 271AA A RE REASONS FOR LEVY OF PENALTY U/S 271AAB IN THE PENAL TY ORDER ARE DIFFERENT. II) THE REASONS MENTIONED IN THE NOTICE ARE NOT IN ACCORDANCE WITH THE PREREQUISITE OF SECTION 271AAB. III) THE AMOUNT OF ADDITIONAL INCOME OFFERED DO NO T REPRESENT THE UNDISCLOSED OF THE APPELLANT. IV) THE ADDITIONAL INCOME HAS NOT BEEN OFFERED IN T HE STATEMENT RECORDED U/S 132(4) OF THE ACT. THE CONTENTIONS OF THE APPELLANT CANNOT BE ACCEPTED BECAUSE:- IN THE ASSESSMENT ORDER U/S 153A PASSED BY THE AO I N THIS CASE, IT WAS SPECIFICALLY STATED BY THE AO THAT THE APPELLANT FAILED TO SPECIFY AND SUBSTANTIATE THE MANNER IN WH ICH THE UNDISCLOSED INCOME WAS DERIVED AND THEREAFTER PENAL TY PROCEEDINGS U/S 271AAB OF THE ACT ARE INITIATED SEP ARATELY. THUS, THE REASONS MENTIONED IN THE ASSESSMENT ORDER ARE RELATED TO THE INITIATION OF PENALTY U/S 271AAB AND HENCE THE CONTENTIONS OF THE APPELLANT WITH REGARD TO NOTICE U/S 271AAB OF THE ACT ARE INADVERTENT AND HENCE THE PLE A OF THE APPELLANT WITH REGARD TO PENALTY NOTICE ISSUED ARE NOT ACCEPTED. B) THE PLEA OF THE APPELLANT THAT AMOUNT OF INCOME OFFERED DOES NOT REPRESENT THE UNDISCLOSED INCOME OF THE APPELLANT CANNOT BE ACCEPTED BECAUSE OF THE FOLLOWING REASONS:- ITA NO.1679/CHD/2017 A.Y.2014-15 26 I) IN THE STATEMENT OF SH. SATPAL BANSAL RECORDED U/S 132 (4) DURING THE COURSE OF REVOCATION OF RESTRAINT ORDER DATED 25.11.2013 THIS QUESTION ASKED AND ITS REPLY IS RELEVANT .:- 'QUES DO YOU WANT TO SAY ANYTHING.? ANS. DURING THE COURSE OF SEARCH AND SEIZURE VARIOUS DOCUMENTS/LOOSE PAPERS/REGISTERS SEIZED AND IMPOUNDED BY YOUR DEPARTMENT AND DURING THE COURSE OF POST SEARCH ENQUIRIES, CERTAIN DISCREPANCIES ARE POINTED OUT BY THE SEARCH TEAM. AT THIS JUNCTURE, I AM NOT IN A POSITION TO COMMENT ON THESE DISCREPANCIES. HOWEVER, TO BUY PEACE AND AVOID ANY LITIGATION, I HEREBY OFFER TO SURRENDER ADDITIONAL INCOME OF RS. 30 CR OVER AND ABOVE THE RETURNED INCOME IN THE HANDS OF GROUP CONCERNS / DIRECTORS / PARTNERS/FIRMS / PROPRIETARY AND OTHER SISTER CONCERNS AND RELATIVES.' II) FURTHER, A LETTER DATED 03.02.2014 ADDRESSED TO DDIT(INV), PANCHKULA AND SIGNED BY ALL ENTITIES / INDIVIDUALS WHO HAD SURRENDERED, BIFURCATION OF RS. 30 CR WAS GIVEN WHICH INCLUDED RS. 5,65,00,000 IN THE HANDS OF APPELLANT TO COVER ALL POSSIBLE DISCREPANCIES AS PER SEIZED DOCUMENTS OR OTHER POSSIBLE MISTAKES/ DISCREPANCIES IN THE RETURN TO BE FILED. III) IT WAS FURTHER STATED IN THE AFORESAID LETTER THAT THE DISCLOSURE IN THE HANDS OF DIFFERENT CONCERNS LIKE PARTNERSHIP CONCERNS OR INDIVIDUALS AS STATED ABOVE IS BEING MADE SINCE THE Y ARE ALL GROUP CONCERNS AND THIS OFFER IS BEING MADE AS PER PROVISIONS OF INCOME TAX ACT AND SUBJECT TO NO PENALTY AND PROSECUTION. THUS, IT IS APPARENT THAT THE ADDITIONAL INCOME OFFERED REPRESENTS THE UNDISCLOSED INCOME OF THE APPELLANT, AS THE VERY BASIS OF THE SURRENDER WAS THE DISCREPANCIES POINTED OUT BY THE SEARCH TEAM AS STATED BY SH. SATPAL BANSAL IN HIS STATEMENT. ITA NO.1679/CHD/2017 A.Y.2014-15 27 C) THE CONTENTION OF THE APPELLANT THAT ADDITIONAL INCOME HAS NOT BEEN OFFERED IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT IS ALSO NOT FACTUALL Y CORRECT, AS THE STATEMENT WAS RECORDED DURING THE COURSE OF SEARCH WHILE REVOKING THE RESTRAINT ORDER DATED 29.11.2013 , WHICH IMPLIES THAT THE SEARCH HAD NOT CONCLUDED. HOWEVER, IF THE PLEA OF THE APPELLANT REGARDING ADDITIONAL INCOME HAS NOT BEEN OFFERED IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT IS ACCEPTE D, THEN THE APPELLANT WILL BE LIABLE TO A PENALTY @ 20 % U/S 271AAB OF THE ACT AND NOT 10% AS IMPOSED BY THE AO. THIS IS NOT DONE AS THE CONTENTION OF THE APPELLANT REGARDING THE SAME ITSELF IS NEITHER AS PER THE FAC TS OF THE CASE NOR THE PROVISION OF LAW. THE LD.DR CONTENDED THAT IN VIEW OF THE ADMISSION MADE BY THE ASSESSEE ITSELF DURING SEARCH , THE ADDITIONAL INCOME OFFERED REPRESENTED THE UNDISCLOSED INCOME OF THE ASSESSEE AS THE VERY BASI S OF THE SURRENDER WAS THE DISCREPANCY POINTED OUT BY THE SEARCH TEAM. THE LD. DR, THEREFORE, CONTENDED THAT THE PENALTY HAD BEEN RIGHTLY UPHELD. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAV E ALSO GONE THROUGH THE DECISION OF THE ITAT CHANDIGA RH BENCH IN THE CASE OF M/S SEL TEXTILES LIMITED (SUPR A). WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD.COUNSEL FOR THE ASSSESSEE THAT THE INCOME SURRENDERED IN THE PRESENT CASE OF RS.15.36 CRORES DID ITA NO.1679/CHD/2017 A.Y.2014-15 28 NOT REPRESENT UNDISCLOSED INCOME AS DEFINED IN SECTION 271AAB OF THE ACT FOR THE PURPOSE OF LEVY O F PENALTY THEREON. AS IS EVIDENT FROM THE STATEMENT O F SHRI SATPAL BANSAL RECORDED DURING SEARCH THE ASSESSEE WAS UNABLE TO OFFER ANY EXPLANATION AT THA T POINT OF TIME REGARDING THE DISCREPANCY FOUND AND H AD MADE THE SURRENDER ONLY TO BUY PEACE OF MIND. EVEN IN THE SURRENDER LETTER FILED THEREAFTER GIVING BIFURC ATION OF THE SURRENDER MADE IN THE HANDS OF DIFFERENT ASSESSEES, THE ASSESSEE HAD ADMITTED THAT IT HAD BE EN UNABLE TO GO THOUGH THE VOLUMINOUS DOCUMENTS IMPOUNDED DURING SEARCH AND WAS, THEREFORE, TENTATIVELY SURRENDERING THE AMOUNTS IN DIFFERENT HANDS, WHICH IN THE HANDS OF THE ASSESSEE AMOUNTED TO RS.5.65 CRORES TO COVER UP ANY POSSIBLE DISCREPANCY. CLEARLY, THERE WAS NOTHING CONCRETE REPRESENTING ANY TRANSACTION NOT RECORDED IN THE BOOKS OF THE ASSESSEE, WHICH THE DEPARTMENT HAD FOUND IN THE DOCUMENTS IMPOUNDED AND ON ACCOUNT OF WHICH, THEREFORE, THE SURRENDER WAS MADE. EVEN THE REVENUE HAS NOT POINTED OUT WHAT DISCREPANCIES WERE NOTED IN THE DOCUMENTS IMPOUNDED, TO WHICH THE SURRENDER COULD BE ATTRIBUTED. THEREFORE, CLEARLY F OR ITA NO.1679/CHD/2017 A.Y.2014-15 29 ALL PURPOSES THE SURRENDER WAS A GENERAL SURRENDER TO BUY PEACE OF MIND ONLY AND WAS NOT BACKED BY ANY DOCUMENTARY EVIDENCE OR OTHERWISE REPRESENTING ANY ASSET OR ANY TRANSACTION NOT RECORDED IN THE BOOKS OF THE ASSESSEE. THEREFORE, BY ANY STRETCH OF LOGIC, T HE SURRENDER MADE BY THE ASSESSEE COULD NOT BE SAID TO BE UNDISCLOSED INCOME OF THE ASSESSEE. WE FIND THAT THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S SEL TEXTILES LIMITED (SUPRA) HAD DELETED IDENTICAL PENA LTY LEVIED AFTER FINDINGS THAT THE INCOME SURRENDERED D ID NOT REPRESENT ANY UNDISCLOSED INCOME OF THE ASSESSE E. THE I.T.A.T. DISCUSSED VARIOUS DECISIONS OF THE COORDINATE BENCHES IN THIS REGARD, WHEREIN IT WAS HELD THAT THE PENALTY U/S 271AB OF THE ACT WAS NOT AUTOMATIC AND BINDING ON THE A.O. AND WAS LEVIABLE ONLY IF UNDISCLOSED INCOME REPRESENTED BY ANY ASSET OR ENTRY OR TRANSACTION IN ANY DOCUMENT WHICH WAS NOT REFLECTED IN THE BOOKS OF THE ASSESSEE, WAS FOUND DURING THE COURSE OF SEARCH. IT WAS CATEGORICALLY H ELD IN THE SAID DECISION THAT BALD OFFER MADE BY THE ASSESSEE TO PAY TAX ON ADDITIONAL INCOME IN THE STATEMENT U/S 132(4) OF THE ACT, COULD NOT BE ITA NO.1679/CHD/2017 A.Y.2014-15 30 CONSIDERED AS UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT. 12. IN VIEW OF THE FACTS AS DISCUSSED ABOVE BY US T HAT EXCEPT FOR GENERAL SURRENDER MADE BY THE ASSESSEE THERE WAS NO INCRIMINATING MATERIAL REPRESENTING UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARC H AND, THEREFORE, WE HOLD THAT THIS WAS NOT A FIT CAS E FOR LEVY OF PENALTY U/S 271AAB OF THE ACT. WE, THEREFOR E, SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT DEL ETION OF PENALTY LEVIED IN THE PRESENT CASE AMOUNTING TO RS.5.65 CRORES. GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS ALLOWED. 13. NO ARGUMENTS WERE MADE VIS--VIS THE OTHER GROUNDS RAISED BY THE ASSESSEE AND THE SAME ARE, THEREFORE, DISMISSED. 14. IN EFFECT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- % & ' ($ (SANJAY GARG) (ANNAPURNA GUPTA) /JUDICIAL MEMBER )* /ACCOUNTANT MEMBER ITA NO.1679/CHD/2017 A.Y.2014-15 31 ,% /DATED: 01 ST JULY, 2019 * $ * '* +,-, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # . / CIT 4. # . ( )/ THE CIT(A) 5. ,/0 1 , %1 , 23405 / DR, ITAT, CHANDIGARH 6. 046$ / GUARD FILE '* # / BY ORDER, / ASSISTANT REGISTRAR