SHRI VIVEK SETHIA, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

ITA 189/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2001 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 08-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Capital asset; Gift; Income from undisclosed sources; Search and seizure; Salary income; Loose papers; Document seized; Opportunity of being heard; Principle of natural justice; Cost of acquisition; Reasonable cause; Block assessment; Documents seized; Set aside
• Section: 69; 6; 132; 271(1)(c); 11; 139; 143(3); 153A; 69B; 250; 292BB; 274; 139(1); 43; 13; 158BFA; 22; 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 189/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2015-16 SHRI VIVEK SETHIA 801, WESTERN HEIGHTS, S-21, SHYAM NAGAR, JAIPUR. CUKE VS. THE ACIT, CENTRAL CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ASPPS 7131 R VIHYKFKHZ@ APPEL LANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI ANIL GOYAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI A.S. NEHRA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/05/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 17/06/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04.12.2017 OF THE LD. CIT(A), JAIPUR ARISING FROM T HE PENALTY ORDER PASSED U/S 271AAB OF THE I.T. ACT FOR THE ASSESSMEN T YEAR 2015-16. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE ORDERS OF LEARNED AO AND CIT(A) ARE BAD IN LAW AND AGAINST FACTS OF THE CASE. ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 2 2. THE LEARNED AO HAS ERRED IN IMPOSING HUGE PENALT Y OF RS. 61,95,020/- U/S 271AAB OF INCOME TAX ACT AND LEARNE D CIT(A) HAS ERRED IN CONFIRMING THE SAME. 3. ALTERNATIVELY LEARNED AO HAS ERRED IN IMPOSING P ENALTY @ 10% ON RESIDUAL SURRENDER OF INCOME OF RS. 50 LACS MADE DURING RECORDING OF STATEMENTS OF THE ASSESSEE U/S 132(4) OF INCOME TAX ACT. 4. THE ASSESSEE CRAVE HIS RIGHT TO ADD, AMEND OR AL TER ANY GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. THE ASSESSEE HAS RAISED ADDITIONAL GROUND WHICH READS AS UNDER:- 5. THE LEARNED AO HAS ERRED IN IMPOSING PENALTY OF RS. 61,95,020/- ON THE ASSESSEE UNDER SECTION 271AAB OF INCOME TAX ACT WITHOUT MAKING OUT A CASE THAT THE ASSESSEE HAD ANY UNDISCLOSED INCOME WITHIN THE MEANING OF PROVISIONS OF EXPLANATION (C) TO THAT SECTION. 6. THE LEARNED AO HAS ERRED IN IMPOSING PENALTY ON THE ASSESSE WITHOUT SERVING PROPER NOTICE UNDER SECTION 274 REA D WITH SECTION 271AAB OF THE INCOME TAX ACT SPECIFYING THE EXACT C LAUSE OF SEC. 271AAB UNDER WHICH PENALTY WAS TO BE LEVIED. 3. THE ASSESSEE IS AN INDIVIDUAL AND PARTNER IN THE FIRMS M/S SETHIA REAL ESTATES AND M/S MANGLAM VARDHMAN DEVELOPERS LL P. THE ASSESSEE IS ALSO DIRECTOR IN M/S RICHWELL ENTERPRISES PVT. L TD. THESE FIRMS AND COMPANIES ARE IN THE BUSINESS OF CONSTRUCTION OF RE SIDENTIAL COMPLEXES AND OTHER RELATED ACTIVITIES. THE ASSESSEE IS EARNI NG INCOME FROM HOUSE PROPERTY, RENT, REMUNERATION AND INTEREST FROM PART NERSHIP FIRMS. THERE WAS A SEARCH SEIZURE ACTION U/S 132(1) OF THE ACT O N 17.12.2014 AT ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 3 VARIOUS PREMISES OF VARDHMAN GROUP. THE ASSESSEE WA S ALSO COVERED BY THE SAID SEARCH AND SEIZURE ACTION AND THE STATE MENT OF THE ASSESSEE WERE RECORDED U/S 132(4) OF THE ACT IN WHICH THE AS SESSEE HAS SURRENDERED A TOTAL SUM OF RS. 9,92,49,633/- IN HIS INDIVIDUAL HANDS OUT OF WHICH RS. 6,19,50,193/- WAS SURRENDERED FOR THE YEAR UNDER CONSIDERATION WHICH COMPRISES OF RS. 5,17,32,630/- ON ACCOUNT OF EXPENDITURE ON VARIOUS REAL ESTATE PROJECTS, RS. 52 ,17,563/- ON ACCOUNT OF JEWELLERY AND SILVER ITEMS AND RS. 50,00,000/- TOWARDS ANY OTHER DISCREPANCY OR IRREGULARITY. THE ASSESSEE FILED HIS RETURN OF INCOME ON 29.09.2015 DECLARING TOTAL INCOME OF RS. 6,34,53,36 0/- WHICH INCLUDED THE AMOUNT QUASH AND SURRENDERED DURING THE COURSE OF SEARCH OF RS. 6,19,50,193/-. THE ASSESSING OFFICER PASSED THE ASS ESSMENT ORDER U/S 143(3) R.W.S. 153B(1)(B) OF THE ACT ON 29.11.2016 A CCEPTING THE RETURN OF INCOME WITHOUT MAKING ANY ADDITIONS OR DISALLOWA NCE. THE PENALTY PROCEEDINGS U/S 271AAB OF THE ACT WERE INITIATED VI DE SHOW CAUSE NOTICE DATED 29.11.2016. THE ASSESSEE FILED HIS REP LY TO SHOW CAUSE NOTICE VIDE LETTER DATED 30.12.2016. THE AO WAS NOT IMPRESSED WITH THE REPLY FILED BY THE ASSESSEE AND LEVIED THE PENALTY @ 10% OF THE SURRENDERED INCOME AMOUNTING TO RS. 61,95,020/- VID E ORDER DATED ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 4 23.05.2017 PASSED U/S 271AAB OF THE ACT. THE ASSESS EE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NO T SUCCEED. 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE LD. CIT(A) HAS CONFIRMED THE LEVY OF PENALTY BY HOLDING THAT THE PENALTY U/S 271AAB OF THE ACT IS MANDATORY WHICH IS AGAINST THE PROPOSITION OF LAW AND VIEW TAKEN BY THIS TRIBUNAL IN A SERIES OF DECISIONS. HE HAS REFERRED TO THE PROVISIONS OF SECTION 271AAB OF THE ACT AND SUBMITTED THAT SECTION BEGINS WITH TERM THE AO MAY AND FURT HER THE AO IS REQUIRED TO COMPLY WITH PROVISIONS OF SECTIONS 274 & 275 OF THE IT ACT WHICH MEANS THE AO HAS TO FIRST ISSUE A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE REPLY AND EXPLANATION OF THE ASSESS EE HAS TO TAKE A DECISION. THE LD. AR HAS THUS CONTENDED THAT THE PR OVISIONS OF SECTION 271AAB OF THE ACT GIVES AN OPTION TO THE ASSESSING OFFICER THAT HE MAY OR MAY NOT IMPOSED PENALTY EVEN IF ALL THE CONDITIO NS SPECIFIED IN SECTION 271AAB(1)(A) ARE FULFILLED. THE IMPOSITION OF THIS PENALTY IS NOT MANDATORY AND DEPENDS ON THE CONDUCT OF THE ASSESSE E. THE LEGISLATURE HAS INTENTIONALLY USED THE WORD MAY IN THE SECTIO N SO AS GIVE DISCRETIONARY POWERS TO THE ASSESSING OFFICER. THE LD AR HAS SUBMITTED THAT THE AO HAS LEVIED THE PENALTY AND THE LD. CIT( A) HAS CONFIRMED THE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 5 SAME UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INCOME U/S 132(4) IS MANDATORY. THE PE NALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARI MATERIA WITH THAT OF SECT ION 158BFA RELATING TO BLOCK ASSESSMENT. SINCE PENALTY U/S 158BFA WAS N EVER MANDATORY, THEREFORE, THE LEVY OF PENALTY U/S 271AAB IS ALSO N OT MANDATORY BUT DISCRETIONARY. WHEN THERE IS REASONABLE CAUSE, THE PENALTY IS NOT ELIGIBLE. IT WAS SUBMITTED THAT THE WORDS USED IN S ECTION 271AAB AND THE WORDS USED IN SECTION 158BFA(2) ARE IDENTICAL. HENCE, THE PENALTY SECTION 271AAB IS NOT AUTOMATIC AND IT IS ON THE ME RITS OF EACH CASE. IT IS PERTINENT TO NOTE THAT IN SECTION 271AAB OF THE ACT, THE WORDS USED ARE ASSESSING OFFICER MAY DIRECT AND THE ASSESSE E SHALL PAY BY WAY OF PENALTY. SIMILAR WORDS ARE USED SECTION 158BFA(2). THE WORD MAY INDICATES THE DISCRETION TO THE ASSESSING OFFICER. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF COOR DINATE BENCH OF THIS TRIBUNAL DATED 05.04.2019 IN CASE OF SHRI PADAM CHAND PUNGLIYA VS ACIT IN ITA NO. 112/JP/2018 AS WELL AS DECISION DATED 1 1.01.2019 IN CASE OF M/S RAMBHOJOS VS. ACIT IN ITA NO. 991/JP/2017. THE LD. AR HAS ALSO RELIED UPON THE VARIOUS OTHER DECISIONS ON THIS POINT AND SUBMITTED THAT THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE LEVY OF ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 6 PENALTY U/S 271AAB OF THE ACT IS NOT AUTOMATIC BUT THE AO HAS TO TAKE A DECISION TO IMPOSE THE PENALTY AFTER GIVING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. 4.1 FURTHER, THE LD. AR HAS SUBMITTED THAT THE ASS ESSEE IS NOT DOING ANY BUSINESS ACTIVITIES OF REAL ESTATE BUT HE IS ON LY A PARTNER IN PARTNERSHIP FIRMS AND DIRECTOR IN A COMPANY WHICH W ERE ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL COMPLEXES. THEREFORE, THE AMOUNT DECLARED BY THE ASSESSEE DURING THE STATEMEN T RECORDED U/S 132(4) OF THE ACT DOES NOT FALL IN THE DEFINITION O F UNDISCLOSED INCOME AS PER EXPLANATION TO SECTION 271AAB OF THE ACT. THE L D. AR OF THE ASSESSEE HAS SUBMITTED THAT A SURRENDER OF INCOME W AS OBTAINED FROM THE ASSESSSEE UNDER PRESSURE THROUGH STATEMENTS REC ORDED U/S 132(4), EVEN THOUGH, THERE WAS NO NECESSITY FOR THE SAME. H E DRAWS OUR ATTENTION TO THE BOARD'S CIRCULAR DATED 10TH MARCH, 2003 IN WHICH BOARD HAS EXPRESSED ITS CONCERN ABOUT THE PRACTICE OF CON FESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE PROC EEDINGS AND, THEREFORE, CLARIFIED THAT THE CONFESSION DURING THE COURSE OF SEARCH AND SURVEY OPERATION DO NOT SERVE ANY USEFUL PURPOSE. T HERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE O F INCOME WHICH LEADS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 7 TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPARTMENT. THE BOA RD HAS AGAIN ISSUED A CIRCULAR DATED 18TH DECEMBER, 2014 (WHICH WAS IMMEDIATELY FOLLOWING THE DAY OF SEARCH ON THE ASSESSEE) AND AD VISED THE TAXING AUTHORITIES TO AVOID OBTAINING ADMISSION OF UNDISCL OSED INCOME UNDER COERCION/UNDUE INFLUENCE. IN THIS MANNER, EXCEPT TH E STATEMENT UNDER SECTION 132(4), THERE IS NO UNDISCLOSED INCOME IN T HE CASE OF THE ASSESSEE. THE ASSESSEE WAS FORCED TO ADMIT AND SURR ENDER THE INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4). THE PROVISIONS OF SECTION 271AAB CLEARLY REQUIRES THAT SUCH UNDISCLOS ED INCOME TO BE SUBSTANTIATED AND, THEREFORE, THE AO IS REQUIRED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FURTHER S UBSTANTIATE THE SAME WITH THE MATERIAL AVAILABLE WITH HIM. IN THE A BSENCE OF ANY RECORD OR MATERIAL TO SHOW ANY UNDISCLOSED SOURCE O F INCOME, THE ENTIRE DISCLOSURE ON PAPERS IS TO AVOID UNDUE HARAS SMENT AND UNWANTED LITIGATION. IN THE STATEMENTS RECORDED U/S 132(4) OF THE ACT, THE ASSESSEE HAD MADE SURRENDER OF INCOME ONLY TO B UY PEACE OF MIND AND WITH A VIEW TO COOPERATE WITH THE INCOME TAX DE PARTMENT AND WITH THE CONDITION THAT NO PENALTY WOULD BE IMPOSED ON H IM FOR THE INCOME SO SURRENDERED. DURING THE ASSESSMENT PROCEEDINGS A LSO THE ASSESSEE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 8 HAS FULLY COOPERATED WITH THE DEPARTMENT TO COMPLET E THE ASSESSMENT SMOOTHLY. THE DEPARTMENT SHOULD NOT HAVE IMPOSED PE NALTY UPON HIM AFTER ACCEPTING THE CONDITIONAL SURRENDER OF INCOME . THE LD. AR FURTHER SUBMITTED THAT VARIOUS INCOME SURRENDERED B Y THE ASSESSEE DURING THE COURSE OF SEARCH IN STATEMENTS RECORDED UNDER SECTION 132(4) WAS ON ACCOUNT OF EXPENDITURE INCURRED BY VA RIOUS PARTNERSHIP FIRMS/COMPANIES IN WHICH THE ASSESSEE WAS PARTNER/D IRECTOR FOR THE DEVELOPMENT OF PROJECTS OR FOR PURCHASE OF LAND ETC . THE ACCOUNTING YEAR OF THE ASSESSEE WAS NOT COMPLETED AS ON THE DA TE OF THE SEARCH. FURTHER, THE PROFIT CAN BE DECLARED ONLY AFTER END OF THE YEAR. AFTER THE END OF THE YEAR, FINAL ACCOUNTS ARE PREPARED AND ON LY AFTER THAT PROFIT CAN BE ASCERTAINED. THESE FIRMS/COMPANIES WOULD HAV E EVEN OTHERWISE RECORDED THESE EXPENDITURE/INVESTMENTS IN THE BOOKS OF ACCOUNTS. BUT DURING THE COURSE OF SEARCH PROCEEDINGS, THE RAIDIN G PARTY, IN THEIR ZEAL TO OBTAIN MAXIMUM SURRENDER FROM THE ASSESSEE, OBTA INED SURRENDER OF THESE AMOUNTS IN THE HANDS OF THE ASSESSEE. ASSESSM ENT HAS ALSO BEEN COMPLETED ON THE SURRENDERED AMOUNT WITHOUT GOING I NTO THE MERITS OF THE ASSESSEE. THUS, THE LD. AR HAS SUBMITTED THAT T HE INCRIMINATING MATERIAL RECORDING THE EXPENDITURE INCURRED IN CASH ON VARIOUS PROJECTS ARE THE BUSINESS ACTIVITIES OF PARTNERSHIP FIRM AND THE COMPANY AND ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 9 THEREFORE, THOSE ENTRIES FOUND IN THE LOOSE PAPERS DO NOT REPRESENT ANY UNDISCLOSED INCOME OF THE ASSESSEE WHEN NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT OF THE ASSESSEE IN RESPECT OF REAL ESTA TE BUSINESS. THUS, FIRSTLY THESE ARE ONLY EXPENSES RECORDED IN THE LOO SE SHEET WITHOUT ANY SUPPORTING BILLS AND VOUCHERS OR OTHER DOCUMENTARY EVIDENCE. SECONDLY NO INQUIRY WAS CONDUCTED BY THE DEPARTMENT TO ASCER TAIN WHETHER ANY ACTUAL ASSETS WERE ACQUIRED BY THE ASSESSEE ON ACCO UNT OF THESE EXPENDITURE. HE HAS FURTHER CONTENDED THAT ANY CASH WAS PAID BY THE ASSESSEE AND EVEN THE NATURE OF TRANSACTIONS WERE R ECORDED IN THE LOOSE PAPERS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE ACTION PERTAINS TO THE BUSINESS ACTIVITY OF THE FIR M AND COMPANY AND NOT TO THE ASSESSEE. ACCORDINGLY, THE SURRENDER MADE BY THE ASSESSEE DOES NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME PR OVIDED IN EXPLANATION TO SECTION 271AAB OF THE ACT WHEN THESE TRANSACTION S PERTAIN TO THE RESPECTIVE FIRM/COMPANIES AND OTHERWISE RECORDED IN THE BOOKS OF THE RESPECTIVE FIRM AND COMPANY THEN THE SURRENDER MADE BY THE ASSESSEE WILL NOT ATTRACT THE PENALTY PROCEEDINGS U/S 271AAB OF THE ACT. THE LD. AR HAS FURTHER SUBMITTED THAT IN THIS CASE, THE AO HAS NOT DONE ANY ENQUIRY OR EXAMINED THE FACTS OF THE CASE AS WELL A S THE BASIS OF SURRENDER AS PER STATEMENTS RECORDED UNDER SECTION 132(4) DURING THE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 10 PROCEEDINGS U/S 271AAB. THERE IS NO MENTION OF ANY ENQUIRY OR ANY APPLICATION OF MIND BY THE AO IN THE ASSESSMENT ORD ER AS WELL. IT IS SUBMITTED THAT THE DISCLOSURE OF ADDITIONAL INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF IS NOT SUFFICI ENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT UNTIL AND UNLESS TH E INCOME SO DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION O F UNDISCLOSED INCOME DEFINED IN THE EXPLANATION TO SECTION 271AAB(1) OF THE ACT. JUST THE MERE STATEMENTS RECORDED UNDER SECTION 132(4) WOULD NOT EITHER CONSTITUTE AN INCRIMINATING MATERIAL OR UNDISCLOSED INCOME IN THE ABSENCE OF ANY CORRESPONDING ASSET OR ENTRY IN THE SEIZED DOCUMENT REPRESENTING THE UNDISCLOSED INCOME. IT WAS FURTHER SUBMITTED THAT THE DEPARTMENT HAS NOT DONE ANY ENQUIRY ON THESE ENTRIE S AS PER LOOSE PAPERS, THAT WHETHER THE SAME ARE REAL ASSETS WITH THE ASSESSEE OR NOT. THEY HAVE MERELY RELIED ON THE SURRENDER BY THE ASS ESSEE AS PER STATEMENTS U/S 132(4). IT WAS INCUMBENT UPON THE DE PARTMENT TO FIND OUT AND ESTABLISH THE EXISTENCE OF THESE ASSETS IN THE POSSESSION OF THE ASSESSEE AND WHETHER THESE ARE REAL ASSETS OR JUST SHAM ENTRIES. THEREFORE, IT WAS SUBMITTED THAT THESE VAGUE ENTRIE S ITSELF DO NOT REPRESENT THE REAL TRANSACTION AND CONSEQUENTLY THE UNDISCLOSED INCOME OF THE ASSESSEE. THE LD. AR THUS SUBMITTED THAT AS PER PROVISIONS OF ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 11 SEC. 271AAB, A PENALTY IS IMPOSED ONLY ON UNDISCLOS ED INCOME AND NOT ON INVESTMENT MADE BY THE ASSESSEE. THE ABOVE EXPENDITURE/INVESTMENT PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSESSEE. THESE CAPITAL INVESTMENTS AND EXPENDITURE S IN THE PROJECTS OF THE FIRMS/COMPANIES AND OTHER CAPITAL ASSETS CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE IN THE CONTEXT O F SECTION 271AAB READ WITH THE EXPLANATION THERETO. AS PER THE DEFIN ITION OF UNDISCLOSED INCOME U/S 271AAB, THE UNDISCLOSED INVESTMENT IN SO CALLED PURCHASE OR EXPENDITURE CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. 4.2 ALTERNATIVELY, THE LD. AR OF THE ASSESSEE HAS S UBMITTED THAT THE ASSESSE WAS NOT REQUIRED BY LAW TO MAINTAIN ANY BOO KS OF ACCOUNTS IN HIS INDIVIDUAL CAPACITY. THE ASSESSEE IS NOT MAINTA INING ANY BOOKS OF ACCOUNTS IN HIS INDIVIDUAL CAPACITY. THE RETURNED I NCOME WAS ACCEPTED BY THE AO WHILE FRAMING THE ASSESSMENT U/S 143(3) A ND HENCE ASSESSEES CASE DOES NOT FALL IN THE CATEGORY WHERE THE REGULAR BOOKS OF ACCOUNTS ARE MANDATORY. THERE WAS NO WAY HE COULD H AVE RECORDED ABOVE TRANSACTIONS IN HIS BOOKS OF ACCOUNTS. THE EN TRIES IN THE LOOSE PAPERS ETC. SHOULD TO BE CONSIDERED AS RECORDED IN THE DOCUMENTS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 12 MAINTAINED IN THE NORMAL COURSE. THEREFORE, THE REC ORDS MAINTAINED BY HIM ON LOOSE SHEETS AND OTHER DOCUMENTS WILL BE DEE MED TO BE FULL COMPLIANCE TO PROVISIONS OF EXPLANATION (C). 4.3 APART FROM THE SURRENDER ON ACCOUNT OF CASH EXP ENDITURE ON THE VARIOUS REAL ESTATE PROJECTS OF RS. 5,17,32,630/-, THE ASSESSEE HAS ALSO SURRENDERED OF RS. 52,17,563/- ON ACCOUNT OF PURCHA SE OF JEWELLERY AND SILVER ITEMS. THE LD. AR HAS SUBMITTED THAT THE ADD ITION HAS BEEN MADE IN THE INCOME OF THE ASSESSEE ONLY ON THE BASIS OF SURRENDER MADE BY HIM IN STATEMENTS U/S 132(4) OF THE ACT. NO CROSS V ERIFICATION OF FACTS WAS DONE BY THE AO. THE ASSESSEE WAS NOT REQUIRED T O MAINTAIN ANY BOOKS OF ACCOUNTS BY LAW THEREFORE, THERE WAS NO WA Y HE COULD HAVE RECORDED THESE INVESTMENTS. THEREFORE, WHATEVER DOC UMENTS WERE AVAILABLE WITH HIM WILL CONSTITUTE HIS DOCUMENTS MA INTAINED IN NORMAL COURSE. THE LD. AR THUS CONTENDED THAT THE DEPARTME NT HAS NOT MADE ANY EFFORTS TO APPLY THE RATES AS PREVAILING IN THE YEAR OF ACQUISITION AND SOME OF THE JEWELLERY EVEN NOT ACQUIRED BY THE ASSE SSEE OR THE FAMILY MEMBERS BUT IS INHERITED. THEY HAVE RELIED ON SOME ROUGH ESTIMATES. THE DEPARTMENT ALSO DID NOT MAKE ANY VERIFICATION F ROM ANY SELLER. THEREFORE, THE MANNER IN WHICH THE DISCLOSURE IS OB TAINED ON ACCOUNT OF ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 13 THE SILVER/JEWELLERY WOULD NOT REPRESENT THE UNDISC LOSED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. THUS, THE LD. AR HAS CONTENDED THAT THE SURRENDER IS BASED ON THE VALUATION CARRIED OUT BY THE DEPARTMENT WITHOUT VERIFICATION THE CORR ECTNESS OF THE VALUE OR COST OF ACQUISITION AT THE TIME OF PURCHASE. HE HAS SUBMITTED THAT SINCE THE JEWELLERY FOUND BELONGS TO THE FAMILY MEM BERS OF THE ASSESSEE AND SOME OF WHICH INHERITED FROM FOREFATHE R THEREFORE, THE COST OF ACQUISITION AT THE TIME OF PURCHASE OF JEWE LLERY SHOULD HAVE BEEN TAKEN INTO CONSIDERATION NOT THE PREVAILING RA TES AT THE TIME OF SEARCH. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF SHRI P ADAM CHAND PUNGLIYA VS. ACIT (SUPRA) AS WELL AS DECISION DATED 11.04.20 19 IN CASE OF GOPAL DAS SONKIA VS. DCIT IN ITA NO. 306/JP/2018. THUS, T HE LD. AR HAS CONTENDED THAT WHEN THIS JEWELLERY BELONGS TO THE F AMILY MEMBERS OF THE ASSESSEE THEN THE SAME WOULD NOT REPRESENT UNDI SCLOSED INCOME OF THE ASSESSEE. 4.4. AS REGARDS OF RS. 50 LACS SURRENDERED BY THE A SSESSEE ON ACCOUNT OF ANY OTHER IRREGULARITY THE SAME CANNOT BE TREATE D AS UNDISCLOSED INCOME AS NO IRREGULARITY OR DISCREPANCY WAS FOUND BY THE DEPARTMENT ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 14 AT ANY STAGE EITHER DURING THE COURSE OF SEARCH AND SEIZURE OR DURING THE POST SEARCH INQUIRY AS WELL AS DURING THE ASSES SMENT PROCEEDINGS. WHEN THE ASSESSING OFFICER HAS NOT FOUND ANY MATERI AL OR ANY IRREGULARITY OR DISCREPANCY THEN THE SAID SURRENDER OF RS. 50 LACS CANNOT BE HELD AS UNDISCLOSED INCOME FOR THE PROVISIONS OF SECTION 271AAB OF THE ACT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIE D UPON THE DECISION OF THIS TRIBUNAL IN CASE OF M/S RAMBHOJOS VS. ACIT (S UPRA) AS WELL AS DECISION DATED 18.01.2019 IN CASE OF SHRI RAJENDRA KUMAR GUPTA VS. DCIT IN ITA NO. 359/JP/2017. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE SURRENDER IS BASED ON SEIZED MATERIAL WHICH IS INCRIMINATING MAT ERIAL REFLECTING UNACCOUNTED CASH EXPENDITURE AS WELL AS THE JEWELLE RY WAS FOUND IN THE POSSESSION OF THE ASSESSEE AND THEREFORE, THE SAID AMOUNT OF SURRENDER FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS PE R EXPLANATION TO SECTION 271AAB OF THE ACT. THE LD. DR HAS EMPHASIZE D THAT UNACCOUNTED EXPENDITURE FOUND DURING THE COURSE OF SEARCH IS NOTHING BUT UNDISCLOSED INCOME. FURTHER PART OF THE ENTRIES IN THE SEIZED MATERIAL HAS NOT BEEN DISPUTED BY THE ASSESSEE AS T HE SAME WERE ALSO FOUND RECORDED IN THE BOOKS OF ACCOUNTS THEREFORE, THE SEIZED ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 15 DOCUMENTS CANNOT BE DISPUTED IN PART. THE ASSESSEE HAS NOT QUESTIONED THE INCOME SURRENDERED AS UNDISCLOSED INCOME RATHER IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT THE ASSESSEE AS ADMI TTED THE SAID AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE. THE A SSESSEE HIMSELF AGREEED TO THE PENALTY AT MINIMUM RATE ON THE SURRE NDER AMOUNT AND THEREFORE, THERE WAS NO ERROR OR ILLEGALITY IN THE ORDER PASSED BY THE AO U/S 271AAB AS WELL AS THE LD. CIT(A). HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE AS SESSEE IS EARNING AND DECLARING INCOME FROM SALARY, RENT, AND OTHER SOURC ES. EVEN THE ASSESSING OFFICER IN THE CAPTION OF THE ASSESSMENT ORDER HAS ACCEPTED THE NATURE OF SOURCE OF INCOME AS SALARY. THEREFORE , IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NEVER DECLARED ANY INCOME FRO M BUSINESS ACTIVITY EITHER IN PAST OR IN FUTURE. THE ASSESSEE IS PARTNE R IN PARTNERSHIP FIRMS NAMELY M/S SETHIA REAL ESTATES, M/S MANGLAM VARDHMA N DEVLOPERS LLP AND M/S SATHIA REAL DEVELOPMENT CORPORATION. THE AS SESSEE IS ALSO DIRECTOR IN THE COMPANY M/S RICHWELL ENTERPRISES PV T. LTD. AND M/S SANDWORTH REAL ESTATE PVT. LTD. DURING THE COURSE O F SEARCH AND SEIZURE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 16 ACTION ON 17.12.2014 CERTAIN DOCUMENTS WERE FOUND C ONTAINING THE DETAILS OF THE EXPENDITURE INCURRED IN RESPECT OF V ARIOUS HOUSING PROJECTS. EVEN THE EXPENDITURE INCURRED ON PARTICUL AR ITEMS I.E. IRON, CEMENT, WOOD, PLYWOOD, TILES, SANITARY, HARDWARE, C ARD, POP, PAINT, BRICKS, ELECTRIC AND STONE WERE RECORDED IN THE LOO SE PAPER FOUND DURING THE COURSE OF SEARCH. THESE LOOSE PAPERS ALSO MENTI ONED THE DETAILS OF PROJECTS NAMELY IMPERIAL HIEGHTS, SILVER CROWN, HOR IGON AND ARCADIA GREENS ETC. APART FROM THE DOCUMENTS CERTAIN JEWELL ERY WERE ALSO FOUND AT THE RESIDENCE OF THE ASSESSEE AND SUBSEQUENTLY T HE ASSESSEE HAS MADE THE SURRENDER INCLUDING AN AMOUNT OF RS. 5,94, 42,193/- COMPRISING OF RS. 5,17,32,630/- ON ACCOUNT OF UNACC OUNTED EXPENDITURE ON VARIOUS PROJECTS, RS. 62,17,563/- ON ACCOUNT OF JEWELRY, RS. 2,17,563/- ON ACCOUNT OF SILVER ITEMS AND RS. 50 LA CS FOR ANY OTHER IRREGULARITY OR DISCREPANCY. WE WILL BE DEAL EACH O F THE THREE ITEMS OF SURRENDER ONE BY ONE. 6.1 SURRENDER OF RS. 5,17,32,630/- ON ACCOUNT OF UNACCOUNTED EXPENDITURE ON VARIOUS PROJECTS:- IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT THE ASSESSEE HAS STA TED IN RESPONSE TO QUESTION NO. 4 ABOUT THE SOURCE OF HIS INCOME AS IN TEREST, REMUNERATION ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 17 FROM FIRMS AND SALARY FROM COMPANY. THE ASSESSEE IN RESPONSE QUESTION NO. 7 HAS ALSO GIVEN THE DETAILS OF VARIOU S FIRMS AND COMPANIES IN WHICH THE ASSESSEE IS PARTNER AS WELL AS DIRECTO R. IT IS ALSO EXPLAINED THAT THESE COMPANIES WERE ENGAGED IN THE BUSINESS O F REAL ESTATE, CONSTRUCTION OF RESIDENTIAL COMPLEXES AND OTHER REL ATED ACTIVITIES. NOTHING WAS FOUND OR EVEN BROUGHT ON RECORD BY THE DEPARTMENT TO SHOW THAT THE ASSESSEE HAS EVER ENGAGED IN ANY BUSI NESS OF CONSTRUCTION OF RESIDENTIAL PROJECTS WHICH ARE THE ACTIVITIES OF THE VARIOUS FIRMS AND COMPANY OF THE ASSESSEE. IN REPLY TO QUESTION NO. 20 THE ASSESSEE HAS AGAIN EXPLAINED ABOUT THE SEIZED D OCUMENTS AS-2 PAGE 13 BEING EXPENSE SHEET OF PROJECTS OF IMPERIAL HEIGHTS AS WELL AS SUMMARY SHEET CONTAINING THE ENTRIES OF EXPENSES IN RESPECT OF M/S RICHWELL ENTERPRISES PVT. LTD. AND DULY RECORDED IN THE BOOKS OF THE SAID COMPANY. SIMILARLY IN RESPONSE TO QUESTION NO. 21 T HE ASSESSEE HAS EXPLAINED THE ENTRIES AT PAGE 14 AS-2 AS THE DETAIL S OF THE RESIDENTIAL PROJECT, SILVER CROWN. THERE IS NO DISPUTE ALL THES E PROJECTS WERE UNDERTAKEN BY THE FIRMS AND COMPANIES OF THE ASSESS EE AND NOT BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. FURTHER SOME O F THE ENTRIES IN THE SEIZED MATERIAL REGARDING THE EXPENDITURE WERE ALSO FOUND RECORDED IN THE BOOKS OF ACCOUNT OF THE CONCERNED COMPANY WHICH IS DOING BUSINESS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 18 OF CONSTRUCTION AND UNDERTAKEN PARTICULAR REAL ESTA TE PROJECTS. EVEN FROM THE STATEMENT AND SEIZED MATERIAL IT IS MANIFE ST THAT EXPENDITURE RECORDED IN THE DOCUMENTS PERTAINS TO SPECIFIC PROJ ECT WHICH BELONG TO THE COMPANIES AS WELL AS THE PARTNERSHIP FIRMS OF T HE ASSESSEE. FURTHER, AS PER AS-3 THERE WAS SALE AGREEMENT IN RESPECT OF THE PROJECT OF ARCADIA GREENS VAISHALI ESTATE AND THE SAID AGREEME NT BELONGS TO M/S SETHIA REAL ESTATES THE PARTNERSHIP FIRM OF THE ASS ESSEE. THEREFORE, THE SEIZED MATERIAL FOUND DURING THE SEARCH PERTAINS TO THE VARIOUS FIRMS AND COMPANY AND IN RESPECT OF EXPENDITURE AND BUSIN ESS ACTIVITY OF THOSE COMPANIES AND FIRMS AND HAVE NO CONNECTION WI TH THE BUSINESS ACTIVITY OF THE ASSESSEE IN HIS INDIVIDUAL CAPACITY , THE DEPARTMENT HAS NOT DISPUTED THE FACT OF REAL ESTATE PROJECTS OF TH E FIRMS AND COMPANIES. THEREFORE, THE EXPENDITURE IS IDENTIFIED TO A PARTI CULAR PROJECT AND THE SAID PARTICULAR PROJECT IS CONSTRUCTED BY THE COMPA NY OR THE FIRM IN WHICH THE ASSESSEE IS EITHER THE PARTNER OR DIRECTO R. IN THESE FACTS AS RECORDED BY THE DEPARTMENT IN THE STATEMENT RECORDE D U/S 132(4) OF THE ACT AS WELL AS IT IS ALSO MANIFEST FROM THE SEI ZED MATERIAL ESTABLISHED THAT ALL THESE ENTRIES RECORDED IN THE SEIZED MATERIAL DO NOT BELONG TO THE ASSESSEE BUT THESE ARE THE EXPENDITUR E IN RESPECT OF VARIOUS PROJECTS BELONGING THE FIRMS AND COMPANY. T HEREFORE, EVEN IF ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 19 SOME UNACCOUNTED EXPENDITURE FUND RECORDED IN THE S EIZED MATERIAL THE SAME DO NOT DISCLOSE ANY INCOME OF THE ASSESSEE MUC HLESS THE UNDISCLOSED INCOME OF THE ASSESSEE. WE HAVE CAREFUL LY PERUSED THE SEIZED MATERIAL AS WELL AS STATEMENT RECORDED U/S 1 32(4) OF THE ACT. IT IS APART FROM THE RECORD THAT THOUGH THE UNACCOUNTE D EXPENDITURE FOUND RECORDED IN THE SEIZED MATERIAL UNDISPUTEDLY AND UNDOUBTEDLY PERTAINS TO THE VARIOUS PROJECTS OF THE COMPANIES A ND FIRMS HOWEVER, FOR THEIR OWN CONVENIENCE THE DEPARTMENT HAS OBTAIN ED THE SURRENDER FROM THE ASSESSEE IN HIS INDIVIDUAL CAPACITY INSTEA D OF HIS CAPACITY AS THE PARTNER AND DIRECTOR IN THOSE COMPANIES TO DISC LOSE AND SURRENDER UNDISCLOSED INCOME OF VARIOUS COMPANIES AND PARTNER SHIP FIRMS. THERE IS NO AMBIGUITY ABOUT THE IDENTIFICATION OF THE PAR TICULAR EXPENDITURE PERTAINS TO A PARTICULAR PROJECTS AND IN TURN PERTA INS TO A PARTICULAR FIRM OR COMPANY THEREFORE, A MERE SURRENDER BY THE ASSES SEE OF THE AMOUNT WHICH DOES NOT BELONG TO THE ASSESSEE WOULD NOT BE TREATED AS UNDISCLOSED INCOME IN TERMS OF SECTION 271AAB OF TH E ACT. IT IS MANIFEST FROM THE RECORD THAT THE UNACCOUNTED EXPENDITURE PE RTAINS TO THE FIRM OR THE COMPANY IN RESPECT OF WHOSE PROJECTS THE EXP ENDITURE WAS INCURRED AND FOUND UNACCOUNTED. THEREFORE, IN THESE FACT AND CIRCUMSTANCES AS EMERGED FROM THE RECORD WE HAVE NO HESITATION TO ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 20 HOLD THAT THE SURRENDER OF RS. 5,17,32,630/- ON AC COUNT OF EXPENDITURE INCURRED FOR PURCHASE OF VARIOUS CONSTRUCTION MATER IAL PERTAINING TO THE PROJECTS UNDERTAKEN BY THE FIRM AND THE COMPANY IN WHICH THE ASSESSEE IS A PARTNER AND DIRECTOR CANNOT BE TREATED AS UNDI SCLOSED INCOME OF THE ASSESSEE. IF THE ASSESSEE AS WELL AS DEPARTMENT FOR THEIR CONVENIENCE HAS GOT THE SURRENDER IN THE HANDS OF THE ASSESSEE INSTEAD OF IN THE HANDS OF THE FIRMS AND COMPANIES TO WHICH THE ALLEG ED UNACCOUNTED EXPENDITURE PERTAINS THEN THE DEPARTMENT SHOULD RES T THEIR CASE ONCE THE ASSESSEE HAS PAID THE TAXES ON THE SAID SURREND ER AMOUNT. FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB OF THE ACT IT IS INCUMBENT UPON THE DEPARTMENT/AO TO ESTABLISH THAT THE SURRENDER M ADE BY THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME A S PER THE EXPLANATION TO SECTION 271AAB OF THE ACT. IN VIEW OF THE FACTS THAT THE ALLEGED UNACCOUNTED EXPENDITURE DOES NOT BELONG TO THE ASSE SSEE THEN THE MERE THE SURRENDER MADE BY THE ASSESSEE U/S 132(4) OF THE ACT WILL NOT IPSO FACTO BRINGS THE CASE IN THE MISCHIEF OF SECTI ON 271AAB OF THE ACT AS THE DOCUMENTARY EVIDENCE SPEAKS CONTRARY TO THE STAND OF THE DEPARTMENT THAT THE EXPENDITURE BELONGS TO THE ASSE SSEE. RATHER IT PERTAINS TO THE VARIOUS REAL ESTATE PROJECTS OF THE FIRMS AND COMPANIES ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 21 AND CONSEQUENTLY TREATING THE SAME AS UNDISCLOSED I NCOME OF THE ASSESSEE IS COMPLETELY RULED OUT. 6.2 AS REGARDS THE POINT RAISED BY LD. AR THAT THE EXPENDITURE BY ITSELF DOES NOT FALL IN THE DEFINITION OF UNDISCLOS ED INCOME AS PER SECTION 271AAB OF THE ACT. WE NOTE THAT THE COORDINATE BENC H OF THIS TRIBUNAL IN CASE OF SHRI PADAM CHAND PUNGLIYA VS. ACIT (SUPR A) WHILE CONSIDERING AN IDENTICAL ISSUE AS HELD IN PARA 8 AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. OUT OF THE FOUR ITEMS REPRESEN TING THE UNDISCLOSED INCOME DISCLOSED BY THE ASSESSEE DURING THE STATEME NT UNDER SECTION 132(4) OF THE IT ACT, ONLY TWO ITEMS, NAMELY, EXPEN DITURE ON HOUSE CONSTRUCTION AND UNDISCLOSED ADVANCES ARE BASED ON THE SEIZED MATERIAL. THE OTHER TWO ITEMS BEING REPRESENTING E XCESS STOCK AND UNDISCLOSED JEWELLERY ARE NOT BASED ON THE SEIZED D OCUMENTS BUT THESE ARE BASED ON THE VALUATION OF THE STOCK AS WELL AS THE JEWELLERY FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION. FIRST, WE TAKE UP THE UNDISCLOSED INCOME ON ACCOUNT OF EXPENDITURE ON HOU SE CONSTRUCTION OF RS. 2,44,63,575/-, THE RELEVANT ALLEGED SEIZED D OCUMENT IN THIS RESPECT ARE THE ENTRIES IN THE DIARY ON 04.04.2013, 14.04.2013, 28.04.2013, 28.05.2013 AND 01.06.2013. IT IS PERTI NENT TO NOTE THAT ALL THESE NOTINGS ARE DONE DURING THE MONTH OF APRIL, O NE IN MAY AND ONE IN 1 ST JUNE, 2013. THE CONSTRUCTION OF HOUSE IS NOT A TAS K TO BE COMPLETED FROM 1 ST APRIL, 2013 TO 1 ST JUNE, 2013, THAT TOO WHEN THE ALLEGED EXPENDITURE OF RS. 2,44,63,575/- WAS INCURR ED IN RESPECT OF VARIOUS ARTICLES AND CONSTRUCTION MATERIALS. IT APP EARS FROM THE SEIZED DOCUMENTS THAT THESE ARE THE NOTINGS ON THESE 5 PAG ES OF A DIARY ARE DONE IN ONE GO, WHEREAS THE SAID NOTINGS ARE PURPOR TED TO BE ON DIFFERENT DATES OF MONTH OF APRIL, MAY AND JUNE. SO ME OF THE ENTRIES ARE EVEN UNREALISTIC LIKE RS. 15 LACS TOWARDS PURCH ASE OF PAINT. IT IS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 22 PERTINENT TO NOTE THAT HOW PAINT IS PURCHASED PRIOR TO THE COMPLETION OF CONSTRUCTION AND AS PER THE ENTRIES IN THESE PAPERS THERE IS AN ENTRY OF SOME MARBLE FIXING OF RS. 5 LACS. FROM THESE ENTRI ES IN THE ALLEGED SEIZED MATERIAL, IT IS MANIFEST THAT MOST OF THEM A RE UNREALISTIC AS ENTRY OF RS. 70 LACS IS SHOWN TOWARDS FURNITURE WHICH IS HIGHLY IMPOSSIBLE. ANOTHER ENTRY OF RS. 45 LACS IS SHOWN TOWARDS STEEL . THUS FROM THE NOTINGS OF THESE PAPERS IT IS CLEAR THAT THESE ARE NOT ENTRIES REPRESENTING THE REAL AND ACTUAL TRANSACTIONS. FUR THER, NEITHER DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS NOR EV EN IN THE COURSE OF STATEMENT RECORDED UNDER SECTION 132(4) ANY EFFORTS WERE MADE BY THE SEARCH PARTY TO FIND OUT THE ACTUAL EXISTENCE OF TH ESE ASSETS TOWARDS WHICH THE ALLEGED ENTRIES ARE RECORDED IN THE SEIZE D MATERIAL/PAPERS. THOUGH THE ADMISSION ON THE PART OF THE ASSESSEE IS A RELEVANT EVIDENCE, HOWEVER, WHEN THE ENTRIES/NOTINGS IN THE LOOSE PAPERS ARE APPARENTLY NOT REPRESENTING THE REAL TRANSACTIONS T HEN IT WAS INCUMBENT UPON THE DEPARTMENT TO FIND OUT AND ESTAB LISH THE EXISTENCE OF THESE ASSETS IN THE POSSESSION OF THE ASSESSEE. IN THE ABSENCE OF SUCH EFFORTS AND EVEN ANY QUESTION PUT TO THE ASSES SEE REGARDING THE EXISTENCE OF THESE ASSETS, THESE ENTRIES ALONE WOUL D NOT IPSO FACTO CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE. EVE N OTHERWISE, THESE ENTRIES IN ITSELF ARE NOT HAVING ANY INCOME ELEMENT BUT THESE ARE ALL EXPENDITURE ENTRIES AND, THEREFORE, UNTIL AND UNLES S A CORRESPONDING ASSET IS FOUND IN THE POSSESSION OF THE ASSESSEE, T HE ENTRIES ALONE CANNOT BE REGARDED AS REPRESENTING THE UNDISCLOSED INCOME OF THE ASSESSEE. THEREFORE, WHEN THE DURATION OF THE CONST RUCTION PERIOD OF THE HOUSE HAS NOT BEEN ASCERTAINED BY THE DEPARTMEN T, THEN SHOWING THE ENTIRE COST OF CONSTRUCTION WITH IMAGINARY FIGU RES FOR A PERIOD OF 2 MONTH IS NOT JUSTIFIED. EVEN WE FIND THAT THE CONS TRUCTION MATERIAL ENTRIES ARE ON SUBSEQUENT DATES AND FURNITURE AND T V ENTRIES ON THE EARLIER DATES WHICH DO NOT SUPPORT OF THE CASE OF T HE DEPARTMENT THAT THESE ENTRIES/NOTINGS IN THE SEIZED DOCUMENTS REPRE SENTS THE REAL TRANSACTIONS/ASSETS PURCHASED BY THE ASSESSEE OR IN THE POSSESSION OF THE ASSESSEE. THE POSSESSION OF THE ASSET WAS A MA TTER OF FACT AT THE TIME OF SEARCH AND IN THE ABSENCE OF SUCH ASSET EIT HER FOUND OR OTHERWISE DISCOVERED DURING THE COURSE OF SEARCH AN D SEIZURE, THESE ENTRIES IN THE SEIZED DOCUMENTS WOULD NOT CONSTITUT E UNDISCLOSED INCOME ON ACCOUNT OF EXPENDITURE IN CONSTRUCTION OF THE HOUSE. ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 23 SIMILARLY, THE ENTRIES IN RESPECT OF ADVANCES OF RS . 5,62,000/- ALSO VERY VAGUE AND AMBIGUOUS NOT GIVING ANY DETAILS ABOUT TH E PURPOSE OR DATE ON WHICH THESE ADVANCES WERE GIVEN. ONLY A DATE IS MENTIONED AT THE BOTTOM OF THE PAGE BUT NOT AGAINST EACH AND EVERY E NTRY OF THE PAGE. FURTHER, WE NOTE THAT THE DEPARTMENT HAS NOT TRIED TO ASCERTAIN THE FULL PARTICULARS OF THE ALLEGED PERSONS WHOSE NAMES ARE NOTED IN THE SEIZED DOCUMENTS AGAINST CERTAIN AMOUNTS WHICH ARE CONSIDE RED AS ADVANCES GIVEN BY THE ASSESSEE. IT IS PERTINENT TO NOTE THA T WITHOUT ASCERTAINING THE FULL PARTICULARS OF THE PERSONS IN WHOSE NAMES THE ENTRIES ARE MADE, IT IS POSSIBLE THAT ALL THESE NAMES ARE ONLY IMAGINARY AND NOT THE NAMES OF ANY EXISTING PERSONS. THEREFORE, THESE VA GUE ENTRIES ITSELF DO NOT REPRESENT THE REAL TRANSACTION AND CONSEQUEN TLY THE UNDISCLOSED INCOME OF THE ASSESSEE. THE COORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF RAJENDRA KUMAR GUPTA VS. DCIT (SUPRA) HAS C ONSIDERED THE ISSUE OF OUT FLOW OF FUNDS FROM THE ASSESSEE CAN BE AN UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 271AAB OF THE ACT IN PARA 21 AS UNDER :- 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIA RY) HAS BEEN FOUND REFERRED TO AS ANN. AS WHEREIN THERE ARE CERT AIN NOTINGS RELATING TO CASH ADVANCES GIVEN TO VARIOUS PERSONS TOTALING TO RS 82,80,000. REFERRING TO THE STATEMENT OF THE ASS ESSEE IN RESPECT OF THESE NOTINGS RECORDED U/S 132(4), LD CI T(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GIVEN A GENER ALIZED STATEMENT WITHOUT SPECIFYING THE COMPLETE PARTICULA RS OF PERSONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE THE SAME. THE SAID FINDINGS HAVE NOT BEEN DISPUTED BY THE REVENUE AND THEREFORE, MERELY BASED ON SURRENDER AND GENERALIZED STATEMENT OF THE ASSESSEE , IN ABSENCE OF ANYTHING SPECIFIC TO CORROBORATE SUCH EN TRIES, CAN IT BE SAID THAT SUCH ENTRIES/NOTINGS REPRESENT UNDISCL OSED INCOME OF THE ASSESSEE. AS PER THE DEFINITION OF UNDISCLO SED INCOME U/S 271AAB, THE SAID CASH ADVANCES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BULLION, JEWELLE RY OR OTHER VALUABLE ARTICLE OR THING. WHETHER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES REPRESENTS INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 24 SEARCH UNDER SECTION 132. A CASH ADVANCE PER SE RE PRESENTS AN OUTFLOW OF FUNDS FROM THE ASSESSEES HAND AND AN IN COME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS OF THE A SSESSEE. THEREFORE, ONCE THERE IS AN INFLOW OF FUNDS BY WAY OF INCOME, THERE CAN BE SUBSEQUENT OUTFLOW BY WAY OF AN ADVANCE TO ANY THIR D PARTY. GIVING AN ADVANCE AND INCOME THUS CONNOTES DIFFERENT MEANI NG AND CONNOTATION AND THUS CANNOT BE USED INTER-CHANGEABL Y. IN THE DEFINITION OF UNDISCLOSED INCOME, WHERE IT TALKS AB OUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUM ENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN FOUND BY W AY OF ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WH ICH HAS NOT BEEN RECORDED BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. WE ARE ALSO CONSCIOUS OF THE FACT THAT THERE ARE DEEMING PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN S UCH AMOUNTS MAY BE DEEMED AS INCOME IN ABSENCE OF SATISFACTORY EXPL ANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTIO N 69 AND SECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THA T THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE B EEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN TH E CONTEXT OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE ST ATUE BOOK AND NOT OTHERWISE. IN THE INSTANT CASE, THE DEEMING PROVIS IONS CONTAINED IN SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUAN TUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NO T EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS. THEREFORE, EVEN ON THIS ACCOUNT, THE DEEMING FICTION CANNOT BE EXTE NDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM TH E ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SE CTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED IN COME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME MUST BE S TRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIE D THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE THE SAME HAS BEEN ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 25 DEFINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WA Y OF ADVANCES CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEE DINGS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RETURN OF IN COME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED IN COME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALTY SO LEVIED THEREON DESERVED TO BE SET-ASIDE. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION OF THE COORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF RAJENDRA KUMAR GUPTA VS. DCIT (SUPRA), WE HOLD THAT THE ENTRIES IN THE SEIZED DOCUMENTS REPRESENTING THE EXPENDITURE O N ACCOUNT OF CONSTRUCTION OF THE HOUSE AND PURCHASE OF OTHER ASS ETS AS WELL AS ADVANCES IN THE ABSENCE OF THE REAL TRANSACTIONS DO NOT CONSTITUTE THE UNDISCLOSED INCOME OF THE ASSESSEE AS DEFINED IN TH E EXPLANATION TO SECTION 271AAB OF THE ACT. ACCORDINGLY, THE PENALT Y LEVIED UNDER SECTION 271AAB IN RESPECT OF THE SAID AMOUNT IS NO T SUSTAINABLE AND LIABLE TO BE SET ASIDE. THUS THE DISCLOSER OF ADDITIONAL INCOME IN THE STAT EMENT RECORDED U/S 132(4) OF THE ACT ITSELF IS NOT SUFFICIENT TO LEVY OF PENALTY U/S 271AAB OF THE ACT UNTIL AND UNLESS THE INCOME SO DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS DEFINED IN EXPLANATION TO SECTION 271AAB OF THE ACT. FURTHER THE ADMISSION ON THE PAR T OF THE ASSESSEE MAY BE A RELEVANT EVIDENCE HOWEVER, WHEN THE ENTRIE S/NOTINGS IN THE LOOSE PAPERS ARE ALSO NOT REPRESENTING THE UNDISCLO SED INCOME OF THE ASSESSEE THEN IN THE ABSENCE OF ANY SUCH FINDING ON THE PART OF THE AO ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 26 TO ESTABLISH THAT THESE ENTRIES ARE REPRESENTING TH E UNDISCLOSED INCOME OF THE ASSESSEE THE PENALTY LEVIED U/S 271AAB OF TH E ACT IS NOT SUSTAINABLE IN LAW AND LIABLE TO SET ASIDE. 6.3 THIS TRIBUNAL IN CASE OF M/S RAMBHOJOS VS. ACI T (SUPRA) AGAIN CONSIDERED THE ISSUE OF UNDISCLOSED INCOME ON ACCOU NT OF THE EXPENDITURE/ADVANCE FOR PURCHASE OF LAND IN PARA 39 AS UNDER:- 39. NOW, COMING TO SURRENDER MADE ON ACCOUNT OF CA SH ADVANCES FOR LAND PURCHASES IN THE STATEMENT RECORD ED U/S 132(4) OF THE ACT. DURING THE COURSE OF SEARCH, A DIARY HAS BEEN FOUND WHEREIN THERE ARE NOTINGS RELATING TO ADVANCE GIVEN TO VARIOUS PERSONS TOWARDS PURCHASE OF LAND. THE NOTI NGS DESCRIBE THE NAME OF THE PERSONS, THE AMOUNT ADVANCED WHICH RANGES FROM RS 2 LACS TO RS 50 LACS TO 4 PERSONS TOTALING TO RS 1.12 CRORES AND THE DATE OF SUCH ADVANCE DURING THE PERIOD 28.07.2013 TO 3.9.2013 JUST BEFORE THE DATE OF SEAR CH ON 4.9.2013. THEREFORE, WHAT HAS BEEN FOUND DURING THE COURSE OF SEARCH IS CERTAIN ENTRIES RELATING TO UNDISCLOSED I NVESTMENT IN PURCHASE OF LAND. BESIDES THE SAID ENTRIES, THERE A RE NO OTHER DOCUMENTS/MATERIAL IN TERMS OF ANY AGREEMENT TO SEL L, THE DESCRIPTION OF THE PROPERTY ETC, WHICH HAS BEEN FOU ND DURING THE COURSE OF SEARCH. AS PER THE DEFINITION OF UNDISCL OSED INCOME U/S 271AAB, THE UNDISCLOSED INVESTMENT IN SO CALLED PUR CHASE OF LAND CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHETHER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED I NVESTMENT REPRESENTS INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132. AN INVESTMENT PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSE SSEES HAND ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 27 AND AN INCOME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE. THEREFORE, ONCE THERE IS AN INFLO W OF FUNDS BY WAY OF INCOME, THERE COULD BE SUBSEQUENT OUTFLOW BY WAY OF INVESTMENT. INVESTMENT AND INCOME THUS CONNOTES DI FFERENT MEANING AND CONNOTATION AND THUS CANNOT BE USED INT ER- CHANGEABLY. IN THE DEFINITION OF UNDISCLOSED INCOM E, WHERE IT TALKS ABOUT INCOME BY WAY OF ANY ENTRY IN THE BOOK S OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COU RSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN EN VISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN FOUND RECORDED BY WAY OF ANY ENTRY I N THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT B EEN RECORDED BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE N ORMAL COURSE. WE ARE ALSO CONSCIOUS OF THE FACT THAT THER E ARE DEEMING PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN S UCH INVESTMENTS ARE DEEMED TO BE TREATED AS INCOME IN A BSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND SECTION 69B WHERE IN VESTMENTS WHICH ARE FOUND EITHER NOT RECORDED OR FOUND RECORD ED AT A LESSER VALUE IN THE BOOKS OF ACCOUNTS, AND SUCH INVESTMENT S ARE DEEMED TO BE INCOME OF THE ASSESSEE OF THE YEAR IN WHICH S UCH INVESTMENTS HAVE BEEN MADE, CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEEMING PROVISIONS ARE L IMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN THE CONTEXT OF PROVISION S WHEREIN THEY HAVE BEEN BROUGHT ON THE STATUE BOOK AND NOT OTHERW ISE. IN THE INSTANT CASE, THE DEEMING PROVISIONS ARE CONTAINED IN SECTION 69 AND SECTION 69B AND THEREFORE, THE SAME COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUANTUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS IN THE INSTANT CASE. THEREFORE , EVEN ON THIS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 28 ACCOUNT, THE DEEMING FICTION CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM TH E ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SE CTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCL OSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME H AS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION , THE SAME MUST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFAC TION OF CONDITIONS SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE THE SAME HAS BEEN DEFINED OR DEEME D FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT O F THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVANCE FOR PURCHA SE OF LAND CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PR OCEEDINGS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN TH E RETURN OF INCOME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALTY SO LEVIED THERE ON DESERVED TO BE SET-ASIDE. A SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN A SERIES OF DECISION AS RELIED UPON BY THE ASSESSEE ACCORDINGLY, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED BY US AND FO LLOWING THE EARLIER DECISION BY THIS TRIBUNAL THE PENALTY LEVIED U/S 27 1AAB OF THE ACT IN RESPECT OF THE SURRENDER MADE ON ACCOUNT OF UNACCOU NTED EXPENDITURE FOR VARIOUS REAL ESTATE PROJECTS BELONG TO THE FIRM S AND COMPANY AND NOT TO THE ASSESSEE IS DELETED. ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 29 6.4 SURRENDER ON ACCOUNT OF JEWELLERY AND SILVER IT EMS FOUND AT THE RESIDENCE OF THE ASSESSEE OF RS. 52,17,563/- :- DURING THE COURSE OF SEARCH AND SEIZURE THE DOCUMENT EXHIBIT-6 WAS FOUND CONTAINING TRANSACTIONS OF PURCHASE OF SILVER OF RS . 4,35,125/-. THE ASSESSEE SURRENDER HALF OF THE SAID AMOUNT IN HIS H AND AND HALF WAS SURRENDER OF HIS SON NAMELY KAMAL SHETHIA. THUS, TH E LD. AR OF THE ASSESSEE HAS SURRENDERED AN AMOUNT RS. 2,17,563/-. APART FROM PURCHASE OF SILVER THE ASSESSEE HAS ALSO SURRENDERE D OF RS. 50 LACS ON ACCOUNT OF THE JEWELLERY FOUND IN THE BANK LOCKER. THE ASSESSEE HAS NOW RAISED THE OBJECTION REGARDING VALUATION OF THE JEWELLERY FOUND IN THE BANK LOCKER AND FURTHER SUBMITTED THAT SOME OF THE JEWELLERY WAS NOT ACQUIRED BY THE ASSESSEE BUT INHERITED. WE FIND THAT IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT THE ASSESS EE HAS PRODUCED SOME OF THE BILLS REGARDING THE PURCHASE OF JEWELLE RY HOWEVER, THE BALANCE QUANTITY OF 1770 GRAMS THE ASSESSEE COULD N OT PRODUCE THE BILLS AND VOUCHERS AND ACCORDINGLY SURRENDER OF RS. 50 LA CS WAS MADE ON THIS ACCOUNT. THE SURRENDER WAS TAKEN AS UNDISCLOSE D INCOME EARNED FROM THE REAL ESTATE BUSINESS WHEREAS NOTHING HAS B EEN FOUND OR BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAS EVE R DONE ANY BUSINESS OF REAL ESTATE IN HIS PERSONAL CAPACITY. W E FURTHER, NOTE THAT ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 30 THE PERSONAL JEWELLERY OF FAMILY MEMBERS OF THE ASS ESSEE AS WELL AS JEWELLERY INHERITED BY THE ASSESSEE AND OTHER FAMIL Y MEMBERS WAS NOT IDENTIFIED. DURING THE COURSE OF SEARCH AND SEIZURE ACTION AND THE ENTIRE JEWELLERY FOUND IN THE BANK LOCKER HAS TREATED AS P URCHASE MADE DURING THE YEAR UNDER CONSIDERATION WHICH IS NOT POSSIBLE WHEN THERE IS NO MATERIAL TO SHOW THAT THE JEWELLERY FOUND IN THE BA NK LOCKER WAS PURCHASE DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT POSSIBLE THAT THE FAMILY MEMBERS AND SPECIFICALLY MARRIED WO MEN AND OTHER MEMBERS OF THE FAMILY HAVE NO JEWELLERY AS THEIR ST RIDHAN AND OTHER GIFTS RECEIVED ON VARIOUS OCCASIONS LIKE MARRIAGE A ND OTHER CEREMONY. THEREFORE, THE BENEFIT OF CBDT INSTRUCTION NO. 1916 DATED 16.05.1994 TO THE EXTENT 500 GRAM JEWELLERY FOR EACH MARRIED W OMEN AND 250 GRAM FOR UNMARRIED WOMAN AND 100 GRAMS OF PER MADE OF MEMBER OF FAMILY IS REQUIRED BE GIVEN WHILE TREATING THE UNEX PLAINED JEWELLERY FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION. FUR THER, THE VALUATION HAS BEEN DONE BY THE DEPARTMENTAL VALUER AT THE CUR RENT PREVAILING RATE WITHOUT CONSIDERING THE ACTUAL COST OF ACQUISITION AT THE RELEVANT POINT OF TIME WHEN THE JEWELLERY WAS PURCHASED. THE DEPAR TMENT HAS ALSO NOT GIVEN THE BENEFIT OF THE JEWELLERY WHICH WAS IN HERITED AS WELL AS RECEIVED BY THE WOMEN AND MEN MEMBERS AT THE TIME O F MARRIAGE AND ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 31 OTHER OCCASIONS. THEREFORE, CONSIDERING ALL THESE F ACTS AS WELL AS THE STATUS OF THE ASSESSMENT FAMILY THE JEWELLERY FOUND IN THE BANK LOCKER WAS REQUIRED TO BE CONSIDERED AFTER GIVING ALL THE BENEFITS OF THE MINIMUM JEWELLERY TO BE HELD BY EACH FAMILY MEMBERS OF THE ASSESSEE. FURTHER, WHEN THE ASSESSEE HAS DECLARED THE INCOME OF MORE THAN RS. 15 LACS OTHER THAN THE SURRENDERED MADE FOR THE YEA R UNDER CONSIDERATION THEN, THE DRAWING OF THE ASSESSEE AS WELL AS OTHER FAMILY MEMBERS IN THE PAST 5 YEARS IS ALSO REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF SOURCE OF PURCHASE OF JEWELLERY AND SILV ER. THUS WITHOUT CONSIDERING AVAILABILITY OF THE FUNDS IN THE ASSESS EE BEING THE INCOME AND DRAWINGS OF THE PRECEDING YEAR OF ASSESSEE AS W ELL AS OTHER INCOME OF THE FAMILY MEMBERS THE TOTAL QUANTITY OF THE JEW ELLERY TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE IS NOT JUSTIFIED . THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF SHRI PADAM CHAND PUNGLIYA VS. ACIT (SUPRA) HAS CONSIDERED THIS ISSUE IN PARA 12 AS UND ER:- 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE J EWELLERY FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION BELONGS TO THE ASSESSEES FAMILY. THEREFORE, ONCE THE JEWELLERY WAS NOT FOUND TO BE PURCHASED DURING THE YEAR UNDER CONSIDERATION, THEN THE SAME CANNOT BE TREATED AS AN UNDISCLOSED INCOME FOR THE YEAR UNDER CONSIDE RATION WHICH IS SPECIFIED PREVIOUS YEAR. THE DEPARTMENT HAS NOT FO UND THAT THE JEWELLERY WAS PURCHASED OR ACQUIRED BY THE ASSESSEE AND OTHER FAMILY ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 32 MEMBERS ONLY DURING THE YEAR UNDER CONSIDERATION. THE JEWELLERY BELONG TO THE FAMILY MEMBERS OF THE ASSESSEE AND FO UND IN THE LOCKER WAS OLD JEWELLERY AND, THEREFORE, THE VALUATION OF THE JEWELLERY FOR THE PURPOSE OF COMPUTING THE UNDISCLOSED INCOME BY APPL YING THE CURRENT RATES ON THE GROSS WEIGHT IS NOT PERMISSIBLE. HEN CE WHEN THE DEPARTMENT HAS NOT MADE ANY EFFORTS TO ASCERTAIN TH E YEAR OF ACQUISITION OF THE JEWELLERY AND THEN TO APPLY THE RATES AS PREVAILING IN THE YEAR OF ACQUISITION AND SOME OF THE JEWELLERY E VEN NOT ACQUIRED BY THE ASSESSEE OR THE FAMILY MEMBERS BUT IS INHERITED , THEN THE MANNER IN WHICH THE DISCLOSURE IS OBTAINED ON ACCOUNT OF T HE JEWELLERY WOULD NOT REPRESENT THE UNDISCLOSED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. WE FIND THAT THE ORDER PASSED BY THE AO UNDER SECTION 271AAB AS WELL AS THE ORDER OF THE LD . CIT (A) ARE SILENT ON THE ISSUE OF INCORRECT VALUATION AS WELL AS THE TIMING OF ACQUIRING OF THE PERSONAL JEWELLERY OF THE ASSESSEE AND THE FAMI LY MEMBERS. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE PERSONAL JEWELLERY OF THE ASSESSEE AND FAMILY MEMBERS ACQUIR ED IN THE PAST AND SOME PART OF WHICH WAS ALSO INHERITED WILL NOT FALL IN THE AMBIT OF UNDISCLOSED INCOME. HENCE THE PENALTY LEVIED BY TH E AO AGAINST SUCH DISCLOSURE IS NOT SUSTAINABLE. IT MAY BE PERTINENT TO MENTION THAT THE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF WOUL D NOT EITHER CONSTITUTE AN INCRIMINATING MATERIAL OR UNDISCLOSED INCOME IN THE ABSENCE OF ANY CORRESPONDING ASSET OR ENTRY IN THE SEIZED DOCUMENT REPRESENTING THE UNDISCLOSED INCOME. ACCORDINGLY, THE PENALTY LEVIED BY THE AO UNDER SECTION 271AAB OF THE ACT IS DELETE D. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE BENEFIT OF THE PERSONAL JEWELLERY OF VARIOUS FAMILY MEMBERS IS REQUIRED TO BE GIVEN WHILE CONSIDERING THE UNDISCLOSED INCOM E ON ACCOUNT OF JEWELLERY AS WELL AS VALUATION OF THE SAME HAS BEEN BASED ON THE COST OF ACQUISITION FOR TREATED AS UNDISCLOSED INCOME. S INCE, THE VALUATION AS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 33 WELL AS THE YEAR OF ACQUISITION WAS NOT ASCERTAINED EITHER DURING THE COURSE OF SEARCH OR IN THE SUBSEQUENT PREVAILING EV EN IN THE PENALTY PROCEEDING. THEREFORE, THIS ISSUE OF LEVY OF PENALT Y U/S 271AAB OF THE ACT IN RESPECT OF SURRENDER MADE ON ACCOUNT OF JEWE LLERY AND SILVER ITEMS IS SET ASIDE TO THE RECORD OF THE AO TO VERIF Y AND CONSIDER ALL THE RELEVANT FACTS AS DISCUSSED ABOVE AND THEN DECIDE T HE SAME AFRESH AT THE GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSE E. 6.5 THE PENALTY IN RESPECT OF SURRENDER OF RS. 50 LACS AN ACCOUNT OF ANY OTHER DISCREPANCY OR IRREGULARITY:- IT IS CLEAR FROM THE RECORD THAT THE ASSESSEE HAS MADE A SURRENDER O F RS. 50 LACS ON ACCOUNT OF ANY OTHER IRREGULARITY OR DISCREPANCY IF ANY FOUND. THERE IS NO DISPUTE THAT NO SUCH DISCREPANCY OR IRREGULARITY WAS DETECTED EITHER BY THE DEPARTMENT DURING SEARCH PROCEEDINGS OR BY T HE AO DURING THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS THEN MERE SURRENDER OF THE AMOUNT WITHOUT ANY INCRIMINATING MATERIAL OR ANY UNDECLARED ASSETS IT CANNOT BE TREATED AS UNDISCLOSED INCOME O F THE ASSESSEE IN TERMS OF SECTION 271AAB OF THE ACT. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF RAJENDRA KUMAR GUPTA VS. DCIT ( SUPRA) HAS CONSIDERED IN PARA 22 AS UNDER:- ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 34 22. REGARDING SURRENDER OF RS 17,20,000 MADE ON AC COUNT OF OTHER DISCREPANCIES IF ANY FOUND IN THE BOOKS OF AC COUNTS, IN ABSENCE OF ANY SUCH DISCREPANCY SO FOUND BY THE ASS ESSING OFFICER EITHER DURING THE ASSESSMENT OR PENALTY PRO CEEDINGS, THE SAID SURRENDER MAY BE THE BASIS FOR ASSESSMENT BUT CANT FORM THE BASIS FOR LEVY OF PENALTY WHICH ARE SEPARATE AN D DISTINCT PROCEEDINGS IN ABSENCE OF A SPECIFIC FINDING AS TO HOW THE SAME QUALIFY AS AN UNDISCLOSED INCOME SO DEFINED U/S 271 AAB OF THE ACT. HENCE, PENALTY LEVIED THEREON IS LIABLE TO BE SET-ASIDE. IN THE CASE IN HAND WHEN NO SUCH DISCREPANCY OR IRR EGULARITY WAS FOUND BY THE AO THEN THE MERE SURRENDER U/S 132(4) OF THE ACT WILL NOT IPSO FACTO ATTRACT THE PENALTY U/S 271AAB UNTIL AND UNLE SS THE SAME IS QUALIFIED AS UNDISCLOSED INCOME AS PER DEFINITION P ROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT 6.6 BEFORE PARTING WITH THE ISSUE WE MAY POINT OUT THAT THE LEVY OF PENALTY U/S 271AAB IS NOT MANDATORY AND CONSEQUENTI AL BUT THE AO HAS TO TAKE A DECISION AFTER CONSIDERING ALL THE RELEVA NT FACTS AND MATERIAL AND THEREFORE, ONLY ON ARRIVING THE CONCLUSION THAT THE SURRENDER MADE BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLO SED INCOME THE ASSESSING OFFICER HAS TO IMPOSE THE PENALTY U/S 271 AAB OF THE ACT. THIS TRIBUNAL IN CASE OF SHRI PADAM CHAN PUNGLIYA VS. AC IT (SUPRA) HAS CONSIDERED THIS ISSUE IN PARA 5 AS UNDER:- ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 35 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF SEARCH AN D SEIZURE ACTION UNDER SECTION 132 CONDUCTED ON 4 TH SEPTEMBER, 2013, THE ASSESSEE DISCLOSED INCOME OF RS. 5,01,66,717/- IN HIS STATEM ENT MADE UNDER SECTION 132(4) OF THE ACT. THE SAID DISCLOSURE WAS MADE IN PURSUANT TO THE ENTRIES IN THE SEIZED DOCUMENTS. THE DETAILS O F THE UNDISCLOSED INCOME SURRENDERED BY THE ASSESSEE ARE AS UNDER :- A) UNEXPLAINED EXPENDITURE ON HOUSE CONSTRUCTION 2,44,63,575/- B) UNDISCLOSED STOCK 1,91,24,877/- C) UNDISCLOSED JEWELLERY 60,16,265/- D) UNDISCLOSED DEBTORS/ADVANCES 5,62,000/- ------------------ TOTAL : 5,01,66,717/- ------------------ IT IS PERTINENT TO NOTE THAT THE DISCLOSURE OF ADDI TIONAL INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF IS N OT SUFFICIENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT UNTIL A ND UNLESS THE INCOME SO DISCLOSED BY THE ASSESSEE FALLS IN THE DE FINITION OF UNDISCLOSED INCOME DEFINED IN THE EXPLANATION TO SE CTION 271AAB(1) OF THE ACT. THEREFORE, THE QUESTION WHETHER THE INCOM E DISCLOSED BY THE ASSESSEE IS UNDISCLOSED INCOME IN TERMS OF THE DEFI NITION UNDER SECTION 271AAB OF THE ACT HAS TO BE CONSIDERED AND DECIDED IN THE PENALTY PROCEEDINGS. SINCE THE ASSESSEE HAS OFFERED THE SA ID INCOME IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT, THEREFORE, THE QUESTION OF TAKING ANY DECISION BY THE AO IN THE AS SESSMENT PROCEEDINGS ABOUT THE TRUE NATURE OF SURRENDER MADE BY THE ASSESSEE DOES NOT ARISE AND ONLY WHEN THE AO HAS PROPOSED TO LEVY THE PENALTY THEN IT IS A PRE-CONDITION FOR INVOKING THE PROVISI ONS OF SECTION 271AAB THAT THE SAID INCOME DISCLOSED BY THE ASSESSEE IN T HE STATEMENT UNDER SECTION 132(4) IS AN UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDED ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 36 UNDER SECTION 271AAB. THEREFORE, THE AO IN THE PRO CEEDINGS UNDER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS OF THE CASE AS WELL AS THE BASIS OF THE SURRENDER AND THEN ARRIVE TO THE CONCL USION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFIN ITION OF UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO THE SAID SECTION. THEREFORE, WE DO NOT AGREE WITH THE CONTENTION OF THE LD. D/R THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY SIMPLY BE CAUSE THE AO HAS TO FIRST ISSUE A SHOW CAUSE NOTICE TO THE ASSESSEE AND THEN HAS TO MAKE A DECISION FOR LEVY OF PENALTY AFTER CONSIDERI NG THE FACT THAT ALL THE CONDITIONS PROVIDED UNDER SECTION 271AAB ARE SA TISFIED. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CO NSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RA VI MATHUR VS. DCIT (SUPRA) IN PARA 4 TO 6 AS UNDER :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. A SEARCH WAS CONDUCTED UNDER S ECTION 132 OF THE IT ACT ON 30 TH OCTOBER, 2014 AT THE PREMISES OF THE ASSESSEE. TH E ASSESSEE IN HIS STATEMENT RECORDED UNDER SECTION 13 2(4) HAS DISCLOSED AN INCOME OF RS. 10,02,00,000/- IN PURSUANT TO THE ENTRIES OF ADVANCES GIVEN FOR PURCHASE OF LAND RECORDED IN THE POCKET D IARY WHICH WAS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SE IZURE ACTION. THIS IS YEAR OF SEARCH AND THE FINANCIAL YEAR WOULD END ON 31 ST MARCH, 2015. HOWEVER, THE ASSESSEE DISCLOSED THIS AMOUNT OF RS. 10,02,00,000/- BASED ON THE ENTRIES IN THE DIARY REGARDING INVESTM ENT IN REAL ESTATE. THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SE CTION 139(1) WAS 30 TH SEPTEMBER, 2015. IT IS UNDISPUTED FACT THAT THE A SSESSEE IS AN INDIVIDUAL AND WAS NOT MAINTAINING REGULAR BOOKS OF ACCOUNT. THEREFORE, THE TRANSACTIONS RECORDED IN THE POCKET DIARY FOUND DURING THE COURSE OF SEARCH ITSELF WOULD NOT LEAD TO THE P RESUMPTION THAT THE ASSESSEE WOULD NOT HAVE OFFERED THIS INCOME TO TAX IF THE SEARCH IS NOT CONDUCTED ON 30 TH OCTOBER, 2014. FURTHER, THE ENTRIES IN THE DIARY ITSELF DO NO NOT REPRESENT THE INCOME OF THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION THOUGH THE ASSESSEE WAS REQUIRE D TO EXPLAIN THE SOURCE OF INVESTMENT IN QUESTION AND THAT SOURCE WO ULD BE THE INCOME OF THE ASSESSEE. IT IS MOST LIKELY THAT THE INVEST MENT IN QUESTION WAS MADE FROM THE UNACCOUNTED INCOME OF PRECEDING YEARS . HENCE THE INVESTMENT IN THE REAL ESTATE ITSELF WOULD NOT REVE AL THE NATURE OF ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 37 INCOME AND THE SOURCE OF INCOME OF THE YEAR UNDER C ONSIDERATION. IT IS A PRE-CONDITION FOR INVOKING THE PROVISIONS OF SECT ION 271AAB THAT THE ASSESSEE ADMITTED THE UNDISCLOSED INCOME IN THE STA TEMENT UNDER SECTION 132(4). THE DEFINITION OF UNDISCLOSED IN COME IS PROVIDED IN SECTION 271AAB ITSELF AND, THEREFORE, THE AO IN THE PROCEEDINGS UNDER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS OF THE CASE AND THEN ARRIVE TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO SAID SECTION. THE FIRST QUESTION ARISES IS WHETHER THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY AND CONSEQUENTIAL TO THE DISCLOSURE OF INCOME BY THE ASSESSEE UNDER SECTION 132(4) OR T HE AO HAS TO TAKE A DECISION WHETHER THE GIVEN CASE HAS SATISFIED TH E REQUIREMENTS FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. IN ORDER TO CONSIDER THIS ISSUE, THE PROVISIONS OF SECTION 271AAB ARE TO BE ANALYZED. FOR READY REFERENCE, WE QUOTE SECTION 271AAB AS UNDER : - 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANY THING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 49 [BUT BEFORE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT O F THE PRESIDENT 50 ], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITI ON TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM CO MPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOS ED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB- 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 UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF THE UNDISCLOSED INCOME OF THE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 38 SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB- SECTION (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 FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; (C) A SUM 51 [COMPUTED AT THE RATE OF SIXTY PER CENT] OF THE UND ISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED B Y THE PROVISIONS OF CLAUSES (A ) AND (B). 52 [(1A) THE ASSESSING OFFICER MAY, NOTWITHSTANDING AN YTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE DATE ON WHICH THE TAXATION LAWS (S ECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT OF THE PR ESIDENT, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SU M COMPUTED AT THE RATE OF THIRTY PER CENT OF THE UN DISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF THE ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB- 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 UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF SIXTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED UNDER THE PROVISIONS OF CLAUSE (A).] (2) NO PENALTY UNDER THE PROVISIONS OF 53 [ SECTION 270A OR] CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF T HE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1) 52 [OR SUB-SECTION (1A)]. ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 39 (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE D UE DATE OF FURNISHING OF RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UNDER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE DATE OF SEARCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR P ARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VA LUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OT HER 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 SEARCH I N 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 54 [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR 54 [PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SE ARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REP RESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RE CORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NOR MAL 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.] THE SECTION BEGINS WITH THE STIPULATION THAT THE AO MAY DIRECT THE ASSESSEE SHALL PAY BY WAY OF PENALTY IF THE CONDITI ONS AS PRESCRIBED ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 40 UNDER CLAUSES (A) TO (C) ARE SATISFIED. AS PER SUB -SECTION (3) OF SECTION 271AAB THE PROVISIONS OF SECTION 274 AND 275 AS FAR AS MAY BE APPLIED IN RELATION TO THE PENALTY REFERRED IN THIS SECTION WHICH MEANS THAT BEFORE IMPOSING THE PENALTY UNDER SEC. 271AAB, THE AO HAS TO ISSUE A SHOW CAUSE NOTICE AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE LEVY OF PENALTY U/S. 271AAB IS N OT AUTOMATIC BUT THE A.O. HAS TO TAKE A DECISION TO IMPOSE THE PENAL TY AFTER GIVING A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS STATUTORY REQUIREMENT THAT THE EXPLANATION OF THE ASSESSEE FO R NOT FULFILLING THE CONDITIONS AS PRESCRIBED U/S 271AAB OF THE ACT IS R EQUIRED TO BE CONSIDERED BY THE AO AND PARTICULARLY WHETHER THE E XPLANATION FURNISHED BY THE ASSESSEE IS BONAFIDE AND NON-COMPL IANCE OF THE SAME IS DUE TO THE REASON BEYOND THE CONTROL OF THE ASSE SSEE. THEREFORE, THE PENALTY U/S 271AAB IS NOT A CONSEQUENTIAL ACT BUT T HE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANATION AND REPLY OF THE ASSESS EE HAS TO TAKE A DECISION. THIS REQUIREMENT OF GIVING AN OPPORTUNIT Y OF HEARING ITSELF MAKES IT CLEAR THAT THE PENALTY U/S 271AAB IS NOT M ANDATORY BUT THE AO HAS TO TAKE A DECISION BASED ON THE FACTS AND CI RCUMSTANCES OF THE CASE OTHERWISE THERE IS NO REQUIREMENT OF ISSUING A NY NOTICE FOR INITIATION OF PROCEEDINGS BUT THE LEVY OF PENALTY W OULD BE CONSEQUENTIAL AND ONLY COMPUTATION OF THE QUANTUM WAS TO BE DONE BY THE AO AS IN THE CASE OF LEVY OF INTEREST AND FEE U/S 234A TO E. EVEN THE QUANTUM OF PENALTY LEVIABLE U/S 271AAB IS ALSO SUBJECT TO T HE CONDITION PRESCRIBED UNDER CLAUSES (A) TO (C) OF SUB-SECTION (1) AND THE AO HAS TO AGAIN GIVE A FINDING FOR LEVY OF PENALTY @ 10% O R 20% OR 30% OF THE UNDISCLOSED INCOME. THUS THE AO IS BOUND TO TA KE A DECISION AS TO WHAT DEFAULT IS COMMITTED BY THE ASSESSEE AND WHICH PARTICULAR CLAUSE OF SECTION 271AAB(1) IS ATTRACTED ON SUCH DEFAULT. FURTHER, MERE DISCLOSURE OF INCOME UNDER SECTION 132(4) WOULD NOT IPSO FACTO PAR TAKE THE CHARACTER OF UNDISCLOSED INCOME BUT THE FA CTS OF EACH CASE ARE REQUIRED TO BE ANALYZED IN OBJECTIVE MANNER SO AS T O ATTRACT THE PROVISIONS OF SECTION 271AAB OF THE ACT. SINCE IT IS NOT AUTOMATIC BUT THE AO HAS TO GIVE A FINDING THAT THE CASE OF THE A SSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED IN EXPLANATI ON TO THE SAID SECTION. THEREFORE, THE PROVISIONS OF SECTION 271A AB STIPULATE THAT THE AO MAY COME TO THE CONCLUSION THAT THE ASSESSEE SHA LL PAY THE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 41 PENALTY. THE ONLY MANDATORY ASPECT IN THE PROVISIO N IS THE QUANTUM OF PENALTY AS SPECIFIED UNDER CLAUSES (A) TO (C) OF SE C. 271AAB(1) OF THE ACT AS 10% TO 30% OR MORE AS AGAINST THE DISCRETION GIVEN TO THE AO AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE A CT WHERE THE AO HAS THE DISCRETION TO LEVY THE PENALTY FROM 100% TO 300 % OF THE TAX SOUGHT TO BE EVADED. THUS THE AO IS DUTY BOUND TO COME TO THE CONCLUSION THAT THE CASE OF THE ASSESSEE IS FIT FOR LEVY OF PENALTY UNDER SECTION 271AAB AND THEN ONLY THE QUANTUM OF PENALTY BEING 10% OR 20% OR 30% HAS TO BE DETERMINED SUBJECT TO THE EXPLA NATION OF THE ASSESSEE FOR THE DEFAULTS. 5. BEFORE WE PROCEED FURTHER, THE DECISIONS RELIED UPON BY THE LD. D/R ARE TO BE CONSIDERED. IN THE CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK & OTHERS (SUPRA) THE ISSUE BEFORE THE HONB LE HIGH COURT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 271AA B ON ACCOUNT OF MENTIONING WRONG PROVISION OF THE ACT BEING 271(1)( C) OF THE ACT. THE HONBLE HIGH COURT AFTER CONSIDERING THE FACT THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO THOUGH MENTIONS SECTION 271 (1) IN THE CAPTION OF THE SAID NOTICE, HOWEVER, THE BODY OF THE SHOW C AUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS FULLY COMPREHEND ED BY THE ASSESSEE AS REVEALS IN THE REPLY FILED BY THE ASSES SEE AGAINST THE SAID SHOW CAUSE NOTICE. HENCE THE HONBLE HIGH COURT HA S HELD AS UNDER :- THE LD. A.RS HAVE ALSO CHALLENGED THAT THE CAPTIO N OF THE NOTICE MENTIONED ONLY SECTION 271 AND NOT 271AAB. IN THIS RESPECT, THE COPY OF NOTICE HAS BEEN PRODUCED BY THE LD. A.R. BEFORE ME. IT IS SEEN THAT THE LD. A.R IS CORRECT IN OBSERVING THAT THE SECTIO N OF PENALTY HAS NOT BEEN CORRECTLY MENTIONED BY THE AO IN THE CAPTION. HOWEVER, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUSE FIRSTLY, THE ASSESSEE HAS RAISED NO OBJECTI ON BEFORE THE AO IN THIS REGARD. SECONDLY, LAST LINE OF THE NOTICE CLEA RLY MENTIONS SECTION 271AAB. THIRDLY, THE ASSESSEE HAS GIVEN REPLY TO SA ID NOTICE WHICH SHOWS THAT THE ASSESSEE FULLY COMPREHENDED THE IMPL ICATION OF THE NOTICE THAT IT IS FOR SECTION 271AAB. THE ASSESSEE HAS ALSO CHALLENGED THAT THE PRINCIPLE S OF NATURAL JUSTICE HAS NOT FOLLOWED BY THE AO. THE DETAILED SUBMISSION S OF A.R IN THIS ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 42 REGARD HAS ALREADY BEEN REPRODUCED ABOVE. THE A.R DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WAS NOT GIVEN PROPER O PPORTUNITY OF HEARING. IT IS CLEAR FROM THE PENALTY ORDER THAT TH E AO HAS GIVEN PENALTY NOTICE AND WHICH WAS ALSO REPLIED BY THE AS SESSEE. THEREFORE, IN MY OPINION, PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOVE DISCUSSION PENALTY IMPOSED BY AO U /S 271AAB OF THE ACT IS CONFIRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UNDER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF TH E SAME. THE SAID DECISION WILL NOT HELP THE CASE OF THE REVENUE SO F AR AS THE ISSUE INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTIO N 271AAB. AS REGARDS THE DECISION OF KOLKATA BENCHES OF THE TRIB UNAL IN THE CASE OF DCIT VS. AMIT AGARWAL (SUPRA), WE FIND THAT THE SAI D DECISION WAS SUBSEQUENTLY RECALLED BY THE TRIBUNAL AND A FRESH O RDER DATED 14 TH MARCH, 2018 WAS PASSED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THEREFORE, THE DECISION RELIED UPON BY THE LD. D/R IS NO MORE IN EXISTENCE. 6. THE QUESTION WHETHER LEVY OF PENALTY UNDER SECTI ON 271AAB BY THE AO IS MANDATORY OR DISCRETIONARY HAS BEEN CONSI DERED BY THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN CASE OF ACI T VS. M/S. MARVEL ASSOCIATES (SUPRA) IN PARA 5 TO 7 AS UNDER :- 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. D URING THE APPEAL HEARING, THE LD. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION O F INCOME U/S 132(4) IS MANDATORY. THE LD. A.R. FURTHER STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSM ENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MAN DATORY BUT DISCRETIONARY. WHEN THERE IS REASONABLE CAUSE, THE PENALTY IS NOT EXIGI BLE. THE LD. A.R. TAKEN US TO THE SECTION 271AAB OF THE ACT AND ALSO SECTION 158BFA(2 ) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WOR DS USED IN SECTION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED THAT THE PENAL TY SECTION 271AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REFERENCE, WE ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 43 REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT A ND SECTION 271AAB OF THE ACT WHICH READS AS UNDER; 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CAS E WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DA Y OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION T O 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-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND S PECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS 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 (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (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 FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, I N RESPECT OF THE UNDISCLOSED INCOME; ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 44 (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER C ENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLA USES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT O F THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY DIRECT THAT A P ERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOU NT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TA X SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVI SO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PENALTY S HALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 6. CAREFUL READING OF SECTION 271AAB OF THE ACT, TH E WORDS USED ARE AO MAY DIRECT AND THE ASSESSEE SHALL PAY BY WAY OF PENALTY. SIM ILAR 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 A CT, FORTIFIES THIS VIEW. SUB SECTION (3) OF SECTION 271AAB: THE PROVISIONS OF SECTION 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION . ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 45 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CLEAR INTENTION TO CO NSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FO R 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 HE ARD. 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 O PPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSE E, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND M ERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE A ND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREM ENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPOR TUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JU STICE. HONBLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHIL E 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 A RE 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 PENA LTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DISCRETION IS VESTED AND AUTHO RITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE F ACTS 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. THUS THE TRIBUNAL HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETI ON TO TAKE A DECISION AND SHALL BE BASED ON JUDICIOUS DECISION O F THE AO. HENCE WE FORTIFY OUR VIEW BY THE ABOVE DECISIONS OF TRIBUNAL IN CASE OF ACIT VS. MARVEL ASSOCIATES. THUS THE TRIBUNAL HAS ANALYZED ALL THE RELEVANT PRO VISIONS OF THE ACT AS WELL AS VARIOUS DECISIONS ON THIS POINT INCLUDING T HE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PR. CIT VS. SAN DEEP CHANDAK, 405 ITR 648 (ALLAHABAD) RELIED UPON BY THE LD. D/R AND THEN ARRIVED AT THE CONCLUSION THAT THE PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETION TO TAKE A DECISION AND TH E SAME SHOULD BE BASED ON JUDICIOUS DECISION OF THE AO. ACCORDINGLY FOLLOWING THE EARLIER ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 46 DECISION OF THIS TRIBUNAL IN THE CASE OF RAVI MATHU R VS. DCIT (SUPRA), WE HOLD THAT THE LEVY OF PENALTY UNDER SECTION 271A AB IS NOT MANDATORY BUT THE AO HAS A DISCRETION AFTER CONSIDE RING ALL THE RELEVANT ASPECTS OF THE CASE AND THEN TO SATISFY HI MSELF THAT THE CASE OF THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. ACCORDINGLY, IN VIEW OF THE CONSISTENT VIEW TAKEN B Y THE TRIBUNAL WE HOLD THAT THE LEVY OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT THE AO IS REQUIRED TO TAKE A DECISION BASED ON THE FACTS AND MATERIAL AND THEN TO ARRIVE TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLO SED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. SI NCE, WE HAVE DECIDED THE ISSUE OF LEVY OF PENALTY ON MERITS IN FAVOUR OF THE ASSESSEE THEREFORE, WE DO NOT PROPOSE TO GO INTO THE ISSUE C HALLENGING THE VALIDITY OF INITIATION OF THE PENALTY U/S 271AAB OF THE ACT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/06/2019. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-17/06/2019. ITA NO. 189/JP/2018 SHRI VIVEK SETHIA VS. ACIT 47 * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI VIVEK SETHIA, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CENTRAL CIRCLE-1, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 189/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR