SHRI VIJAY JAIN, JAIPUR V. DEPUTY COMMMISSIONER OF INCOME TAX, JAIPUR

ITA 224/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5995 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 15-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S L PODDAR
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Salary income; Loose papers; Opportunity of being heard; Principle of natural justice; Rule of consistency; Initiation of penalty proceedings; Reasonable cause; Fair market value; Retraction; Set aside
• Section: 271(1)(c); 143(3); 153A; 69B; 292BB; 274; 139(1); 69; 27; 132; 2; 139

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 JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA- @ ITA NO. 224/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 SHRI VIJAY JAIN 501, PEARL EXCELLENCY, SB-168, BAPU NAGAR, JAIPUR. CUKE VS. THE DCIT, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADHPJ 0798 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.L. PODDAR (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MS ANURADHA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/08/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/09/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.01.2018 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 2014-15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE LEARNED ASSESSING OFFICER IN PASSING THE ORDER DATED 27.09. 2016 PASSED ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 2 UNDER SECTION 271AAB OF THE INCOME TAX ACT, 1961 WI THOUT RECORDING THE SATISFACTION THAT UNDER WHICH LIMB TH E ASSESSEE HAS COMMITTED OFFENCE FOR WHICH PENALTY IS LEVIABLE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 60,28,500/- U/S 271AAB OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE CRAVES YOUR INDULGENCE AND ADD AMEN D OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE BRIEF FACTS LEADING TO LEVY OF PENALTY U/S 2 71AAB OF THE ACT ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DIRECTOR IN VARIOUS COMPANIES ENGAGED IN THE BUSINESS OF REAL ESTATE. THERE WAS A SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT ON 04.09.2013 ON THE MEMB ERS OF OKAY PLUS GROUP-JKD GROUP AND THE ASSESSEE WAS ALSO COVERED B Y THE SAID SEARCH AND SEIZURE ACTION. DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS CERTAIN INCRIMINATING MATERIAL WAS FOUND AND SEIZED INCLUDING SOME LOOSE PAPERS AND DIARY CONTAINING NOTINGS OF THE AD VANCE GIVEN FOR LAND. IN THE STATEMENT RECORDED U/S 132(4) THE ASSESSEE A DMITTED AND DISCLOSED A SUM OF RS. 6,02,85,000/- AS UNDISCLOSED INCOME FROM THE REAL ESTATE BUSINESS. THE ASSESSEE FILED HIS RETURN OF INCOME U/S 139(1) DECLARING TOTAL INCOME OF RS. 6,18,77,850/- INCLUD ING THE SURRENDER INCOME OF RS. 6,02,85,000/-. THE ASSESSMENT WAS COM PLETED U/S ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 3 143(3) R.W.S. 153(1)(B) OF THE ACT ON 30.03.2016 DE TERMINING THE TOTAL INCOME AT THE RETURN INCOME. SUBSEQUENTLY, THE AO I NITIATED THE PENALTY PROCEEDINGS U/S 271AAB OF THE ACT AND LEVIED THE PE NALTY BEING 10% OF THE SURRENDER AMOUNT OF RS. 6,02,85,000/-. THE ASSE SSEE CHALLENGED THE ACTION OF THE AO OF LEVY THE PENALTY U/S 271AAB OF THE ACT BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE LD. CIT(A) WHILE CONFIRMING THE PENALTY HAS HELD THAT T HE PENALTY U/S 271AAB OF THE ACT IS MANDATORY IN NATURE AND THEREF ORE, ONCE THE ASSESSEE HAS DISCLOSED THE UNDISCLOSED INCOME DURIN G THE STATEMENT RECORDED U/S 132(4) OF THE ACT THE PENALTY U/S 271A AB OF THE ACT IS AUTOMATIC. THE LD. AR HAS SUBMITTED THAT THIS FINDI NG OF THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF SECTION 271AAB OF THE ACT AS WELL AS VARIOUS DECISION ON THIS POINT. THEREFORE, THE FIND ING OF THE LD. CIT(A) IS CONTRARY TO THE BINDING PRECEDENTS AND A CONSISTENT VIEW TAKEN BY THIS TRIBUNAL IS NOT SUSTAINABLE. HE HAS REFERRED TO THE PROVISIONS OF SECTION 271AAB OF THE ACT AND SUBMITTED THAT SUB- SECTION ( 1) BEGINS WITH THE TERMED THE AO MAY AND THEREFORE IT IS NOT A MANDA TORY PROVISIONS BUT THE AO HAS TO TAKE A DECISION FOR LEVY OF PENALTY A S WELL AS THE QUANTUM ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 4 OF PENALTY BEING 10% OR 20% OR 30% OF UNDISCLOSED I NCOME. FURTHER, THE ASSESSING OFFICER IS ALSO REQUIRED TO EXAMINE W HETHER ALL THE CONDITIONS AS PRESCRIBED U/S 271AAB OF THE ACT ARE SATISFIED TO ATTRACT THE LEVY OF PENALTY. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON A SERIES OF DECISIONS OF THIS TRIBUNAL INCLUDING DECI SION DATED 13.06.2018 IN CASE OF RAVI MATHUR VS. DCIT IN ITA NO. 969/JP/2 017 AS WELL AS DECISION DATED 10.01.2019 IN CASE OF SHRI RAJA RAM MAHESHWARI VS DCIT IN ITA NO. 992/JP/2017. HE HAS ALSO RELIED UPO N THE FOLLOWING DECISIONS:- DINESH KUMAR AGARWAL VS. ACIT ITA NOS. 855 & 856/JP/2017 DATED 24.07.2018. M/S. RAMBHAJOS VS. ACIT ITA NO. 991/JP/2017 DATED 11.01.2019. RAJENDRA KUMAR GUPTA VS. DCIT ITA NO. 359/JP/2017 DATED 18.01.2019. SHRI PADAM CHAND PUNGLIYA VS. ACIT ITA NO. 112/JP/2018 DATED 05.04.2019. THE LD. AR HAS THEN CONTENDED THAT NEITHER THE AO N OR THE LD. CIT(A) HAS GIVEN A FINDING THAT THE INCOME SURRENDER BY TH E ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME U/S 271AAB OF THE ACT AS DEFINED IN THE EXPLANATION TO THE SAID SECTION. HE HAS FURT HER CONTENDED THAT THE NOTINGS FOUND IN THE DIARY IS ONLY AN OUT GO OF FUNDS AND THE SAME ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 5 IN THE ABSENCE OF INFLOW OF THE FUNDS CANNOT BE TRE ATED AS INCOME OF THE ASSESSEE AND THEREFORE THESE ENTRIES OF ADVANCE FOR PURCHASE OF LAND ITSELF CANNOT BE HELD AN UNDISCLOSED INCOME. F OR THE PURPOSE OF LEVY U/S 271AAB OF THE ACT IT IS CONDITION PRECEDEN T THAT THE INCOME SURRENDER BY THE ASSESSEE SHALL FALL IN THE DEFINIT ION OF UNDISCLOSED INCOME PROVIDED IN THE EXPLANATION TO THE SAID SECT ION THEREFORE, UNTIL AND UNLESS THE ENTRIES/NOTINGS IN THE DIARY REPRESE NTS ANY MONEY, BULLION, JEWELLERY, VALUABLES ARTICLES THE MERE ENT RIES CANNOT BE TREATED AS UNDISCLOSED INCOME. HE HAS FURTHER CONTENDED THA T IN THE ABSENCE OF ANY TRANSACTION OF ACTUAL PURCHASE OF THE LAND O R ACQUISITION OF THE SAID LAND THERE WILL BE NO ASSET CORRESPONDING TO T HE ALLEGED ENTRIES AND THEREFORE, IT IS NOT FALLING IN THE AMBIT OF TH E UNDISCLOSED INCOME. THE LD. AR HAS CONTENDED THAT THE REVENUE AUTHORITI ES EXERTED UNDUE AND UNCALLED FOR PRESSURE TO OBTAIN SURRENDER OF IN COME OTHERWISE THERE WAS NO UNDISCLOSED INCOME IN THE HAND OF THE ASSESSEE. HE HAS SUBMITTED THAT SUCH CONFESSIONAL STATEMENT VIOLATES BOARDS CIRCULAR F. NO. 286/2/2003 DATED 10.03.2003 WHEREBY THE CBDT HA S INSTRUCTED THE TAXING AUTHORITY NOT TO OBTAIN CONFESSION BY US ING FORCE RATHER FOCUS AND CONCENTRATION SHOULD BE GIVEN TOGETHER TH E EVIDENCE. THE CBDT HAS AGAIN REITERATED ITS INSTRUCTION VIDE F. NO. 286/98/2013 ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 6 DATED 18.12.2014 THEREFORE, IT IS AGAINST THE SPIRI T OF LAW AND INSTRUCTION OF THE CBDT TO OBTAIN THE SURRENDER IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. ALTERNATIVELY, THE LD. AR HAS SUBMITTED THAT WHEN THE ASSESSEE IS NOT REQUIRED TO MAINTAIN THE REGULAR BOOKS OF ACCOUNT THEN THE NOTINGS IN THE DIARY WILL BE TREAT ED AS RECORDING OF THE TRANSACTION IN THE OTHER RECORD REGULARLY MAINTAINE D BY THE ASSESSEE AND THEREFORE, IT IS NOT A CASE OF NOT RECORDING TH E TRANSACTION IN THE BOOKS OF ACCOUNTS OR OTHER RECORD MAINTAINED BY THE ASSESSEE. HENCE, THE LD. AR HAS PLEADED THAT THE PENALTY LEVIED U/S 271AAB OF THE ACT IS LIABLE TO BE DELETED WHEN THE SURRENDER MADE BY THE ASSESSEE DURING THE SEARCH AND SEIZURE ACTION DOES NOT FALL IN THE AMBIT OF UNDISCLOSED INCOME. THE PENALTY U/S 271AAB ATTRACTS ON UNDISCL OSED INCOME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4 ). THE AO MUST ESTABLISH THAT THERE IS UNDISCLOSED INCOME ON THE BASIS OF INCRIMINATING MATERIAL. IN THE INSTANT CASE A LOOSE SHEET WAS FOUND ACCORDING TO THE A.O., IT WAS INCRIMINATING M ATERIAL EVIDENCING THE UNDISCLOSED INCOME. IN THE PENALTY O RDER THE AO OBSERVED NOTHING RELATED TO LOSE PAPERS. HOWEVER NE ITHER THE AO NOR THE LD.CIT(A) HAS VERIFIED THE CONTENTS OF THE LOOSE SHEET WITH THE BOOKS FOUND AT THE TIME OF SEARCH. NO OTHE R MATERIAL ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 7 WAS FOUND DURING THE COURSE OF SEARCH INDICATING TH E UNDISCLOSED INCOME. THERE WAS NO MONEY, BULLION, JEWELLERY OR V ALUABLE 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 O R PARTLY. THE REVENUE DID NOT FIND ANY UNDISCLOSED ASSET, OR THE INFLATION OF EXPENDITURE DURING THE SEARCH/ ASSESSMENT PROCEE DINGS. THOUGH A LOOSE PAPER WAS FOUND THAT DOES NOT INDICA TE ANY SUPPRESSION OF INCOME. THE AO WAS HAPPY WITH THE DI SCLOSURE GIVEN BY THE ASSESSEE AND DID NOT VERIFY THE FACTUA L POSITION WITH THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS. THE HON' BLE ITAT DELHI BENCH IN THE CASE OF AJAY SHARMA VS. DCIT (20 12) 32 CCH 334 HELD THAT WITH RESPECT TO THE ADDITION ON ACCOU NT OF ALLEGED RECEIVABLES AS PER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT ANY INCOME RECEIVED BY T HE ASSESSEE HAS NOT BEEN DECLARED BY THE ASSESSEE. AN ADDITION HAS BEEN MADE ON THE BASIS OF LOOSE DOCUMENT, WHICH DID NOT CLOSELY PROVE ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICU LARS BY THE ASSESSEE. ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 8 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT THE ASSESS EE HIMSELF EXPLAINED THE NATURE OF ENTRIES FOUND RECORDED IN T HE SEIZED MATERIAL AND HAS ADMITTED THE UNDISCLOSED INCOME FR OM THE BUSINESS OF REAL ESTATE DURING THE YEAR UNDER CONSI DERATION. ONCE THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF TH E INVESTMENT RECORDED IN THE SEIZED MATERIAL THE SAME FALLS IN T HE AMBIT OF UNDISCLOSED INCOME CONSEQUENTLY THE PROVISIONS OF S ECTION 271AAB OF THE ACT ARE ATTRACTED. THE SURRENDER MADE BY THE ASSESSEE ITSELF IS SELF EXPLANATORY TO THE NATURE O F SURRENDER AND INCOME THEREFORE, THE ASSESSEE CANNOT BE PERMITTED TO DENIED THE INCOME DISCLOSED DURING THE SEARCH BEING UNDISCLOSE D INCOME. THE LD. DR HAS FURTHER CONTENDED THAT AS PER EXPLANATOR Y NOTE ON FINANCE BILL, 2012 THE PROVISIONS OF SECTION 271AAB OF THE ACT ARE MANDATORY IN NATURE AND THE AO HAS NO DISCRETION BU T THE ASSESSEE SHALL PAY THE PENALTY IN ADDITION TO TAX O N THE UNDISCLOSED INCOME SURRENDER IN THE STATEMENT RECOR DED U/S 132(4) OF THE ACT. THE LD. DR HAS RELIED UPON THE D ECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF PR. CIT VS. SHRI SANDEEP ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 9 CHANDAK 405 ITR 648. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE PENALTY U/S 271AAB OF THE ACT WHETHER IT IS MANDATORY OR DISCRETIONARY TH IS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN A S ERIES OF DECISIONS INCLUDING THE DECISION IN CASE OF RAVI MA THUR VS. DCIT (SUPRA) AS WELL AS IN CASE OF SHRI RAJA RAM MAHESHW ARI VS.DCIT (SUPRA). IN THE CASE OF RAVI MATHUR VS. DCIT THE TR IBUNAL AFTER CONSIDERING AN ANALYZING THE PROVISIONS OF SECTION 271AAB R.W.S. 274 AND 275 OF THE ACT HAS HELD IN PARA 4 TO 6 ARE AS U NDER:- 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 ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 10 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 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 OF THE PRESIDENT 50 ], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADD ITION 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 ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 11 (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 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 M ANNER 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 S IXTY PER CENT OF THE UNDISCLOSED INCOME OF THE ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 12 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)]. (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 DU E 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 A SSESSEE 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 PA RTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VAL UABLE 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 REPR ESENTED, 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 ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 13 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 CONDITIONS AS PR ESCRIBED UNDER CLAUSES (A) TO (C) ARE SATISFIED. AS PER SUB-SECTION (3) OF SE CTION 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 IM POSING THE PENALTY UNDER SEC. 271AAB, THE AO HAS TO ISSUE A SHOW CAUSE NOTIC E AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE LE VY OF PENALTY U/S. 271AAB IS NOT AUTOMATIC BUT THE A.O. HAS TO TAKE A DECISIO N TO IMPOSE THE PENALTY 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 EXPLANATION FUR NISHED BY THE ASSESSEE IS BONAFIDE AND NON-COMPLIANCE OF THE SAME IS DUE TO T HE REASON BEYOND THE CONTROL OF THE ASSESSEE. THEREFORE, THE PENALTY U/S 271AAB IS NOT A CONSEQUENTIAL ACT BUT THE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANA TION AND REPLY OF THE ASSESSEE HAS TO TAKE A DECISION. THIS REQUIREMENT OF GIVING AN OPPORTUNITY OF HEARING ITSELF MAKES IT CLEAR THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT THE AO HAS TO TAKE A DECISION BASED ON THE FACTS AN D CIRCUMSTANCES OF THE CASE OTHERWISE THERE IS NO REQUIREMENT OF ISSUING A NY NOTICE FOR INITIATION OF PROCEEDINGS BUT THE LEVY OF PENALTY WOULD BE CONSEQ UENTIAL 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 QUANTU M OF PENALTY LEVIABLE U/S 271AAB IS ALSO SUBJECT TO THE CONDITION PRESCRIBED UNDER CLAUSES (A) TO (C) OF SUB-SECTION (1) AND THE AO HAS TO AGAIN GIVE A FIND ING FOR LEVY OF PENALTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THUS TH E AO IS BOUND TO TAKE 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) WOUL D NOT IPSO FACTO PAR TAKE THE CHARACTER OF UNDISCLOSED INCOME BUT THE FACTS O F EACH CASE ARE REQUIRED TO BE ANALYZED IN OBJECTIVE MANNER SO AS TO ATTRACT TH E PROVISIONS OF SECTION 271AAB OF THE ACT. SINCE IT IS NOT AUTOMATIC BUT T HE AO HAS TO GIVE A FINDING THAT THE CASE OF THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED IN EXPLANATION TO THE SAID SECTION. THEREF ORE, THE PROVISIONS OF ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 14 SECTION 271AAB STIPULATE THAT THE AO MAY COME TO TH E CONCLUSION THAT THE ASSESSEE SHALL PAY THE PENALTY. THE ONLY MANDATORY ASPECT IN THE PROVISION IS THE QUANTUM OF PENALTY AS SPECIFIED UNDER CLAUSES ( A) TO (C) OF SEC. 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 ACT 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 UND ER SECTION 271AAB AND THEN ONLY THE QUANTUM OF PENALTY BEING 10% OR 20% OR 30% H AS TO BE DETERMINED SUBJECT TO THE EXPLANATION 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 HONBLE HIGH COURT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 271AAB ON ACCOUNT OF MENTIONIN G WRONG PROVISION OF THE ACT BEING 271(1)(C) OF THE ACT. THE HONBLE HIGH C OURT AFTER CONSIDERING THE FACT THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO TH OUGH MENTIONS SECTION 271(1) IN THE CAPTION OF THE SAID NOTICE, HOWEVER, THE BODY OF THE SHOW CAUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS F ULLY COMPREHENDED BY THE ASSESSEE AS REVEALS IN THE REPLY FILED BY THE ASSES SEE AGAINST THE SAID SHOW CAUSE NOTICE. HENCE THE HONBLE HIGH COURT HAS HEL D AS UNDER :- THE LD. A.RS HAVE ALSO CHALLENGED THAT THE CAPTIO N OF THE NOTICE MENTIONED ONLY SECTION 271 AND NOT 271AAB. I N THIS RESPECT, THE COPY OF NOTICE HAS BEEN PRODUCED BY TH E LD. A.R. BEFORE ME. IT IS SEEN THAT THE LD. A.R IS CORRECT I N OBSERVING THAT THE SECTION OF PENALTY HAS NOT BEEN CORRECTLY MENTI ONED BY THE AO IN THE CAPTION. HOWEVER, THE AO WILL GET THE BE NEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUSE F IRSTLY, THE ASSESSEE HAS RAISED NO OBJECTION BEFORE THE AO IN T HIS REGARD. SECONDLY, LAST LINE OF THE NOTICE CLEARLY MENTIONS SECTION 271AAB. THIRDLY, THE ASSESSEE HAS GIVEN REPLY TO SA ID NOTICE WHICH SHOWS THAT THE ASSESSEE FULLY COMPREHENDED TH E IMPLICATION OF THE NOTICE THAT IT IS FOR SECTION 27 1AAB. THE ASSESSEE HAS ALSO CHALLENGED THAT THE PRINCIPLE S OF NATURAL JUSTICE HAS NOT FOLLOWED BY THE AO. THE DETAILED SU BMISSIONS OF A.R IN THIS REGARD HAS ALREADY BEEN REPRODUCED ABOV E. THE A.R DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WAS NO T GIVEN ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 15 PROPER OPPORTUNITY OF HEARING. IT IS CLEAR FROM THE PENALTY ORDER THAT THE AO HAS GIVEN PENALTY NOTICE AND WHICH WAS ALSO REPLIED BY THE ASSESSEE. THEREFORE, IN MY OPINION, PRINCIPL E OF NATURAL JUSTICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOV E DISCUSSION PENALTY IMPOSED BY AO U/S 271AAB OF THE ACT IS CONF IRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UND ER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF THE SAME. THE SAID DECIS ION WILL NOT HELP THE CASE OF THE REVENUE SO FAR AS THE ISSUE INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTION 271AAB. AS REGARDS THE DECISION OF KOLKATA BENCHES OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMIT AGARWAL (SUPRA), WE FIND THAT THE SAID 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 AS SESSEE. THEREFORE, THE DECISION RELIED UPON BY THE LD. D/R IS NO MORE IN E XISTENCE. 6. THE QUESTION WHETHER LEVY OF PENALTY UNDER SECTI ON 271AAB BY THE AO IS MANDATORY OR DISCRETIONARY HAS BEEN CONSIDERED B Y THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN CASE OF ACIT VS. M/S. MAR VEL 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 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 CASE WHER E SEARCH HAS BEEN INITIATED UNDER ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 16 SECTION 132 ON OR AFTER THE 1 ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION 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-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES 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; (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 SP ECIFIED 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 THE ASSESSEE IN RESPECT OF THE UNDI SCLOSED INCOME REFERRED TO IN SUB-SECTION (1). ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 17 SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) 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 AMOUNT OF TA X LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX 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 ASSE SSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUC H CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DE TERMINED 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 . 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 ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 18 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 DISCRETION TO TAKE A DECISION AND SHALL BE BASED ON JUDICIOUS DECISION OF THE AO. HENCE WE FOR TIFY OUR VIEW BY THE ABOVE DECISIONS OF TRIBUNAL IN CASE OF ACIT VS. MARVEL AS SOCIATES. A SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF RAJA R AM MAHESHWARI VS. DCIT. EVEN IN THE OTHER DECISIONS AS RECUED UPON BY THE LD. AR THE TRIBUNAL HAS TAKEN A CONSTITUENT VIEW THAT THE LEVY OF PENALTY U/S 271AAB IS NOT MANDATORY BUT THE AO HAS TO TAKE A DE CISION ON THE BASIS OF RELEVANT FACTS OF THE CASE AND AFTER CONSI DERING THE REPLY OF THE ASSESSEE WHETHER THE SURRENDER MADE BY THE ASSESSEE FALLS IN THE ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 19 DEFINITION OF UNDISCLOSED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB(1) OF THE ACT. ACCORDINGLY, FOLLOWIN G THE EARLIER DECISION OF THIS TRIBUNAL WE HOLD THAT THE PENALTY U/S 271AAB OF THE ACT IS DISCRETIONARY AND NOT MANDATORY. IT IS NOT A N AUTOMATIC AS A CONSEQUENCE OF SURRENDER OF INCOME BY THE ASSESSEE BUT THE CONDITIONS PRECEDENT AS PROVIDED U/S 271AAB ARE TO BE SATISFIE D FOR LEVY OF THE PENALTY. THEREFORE, THE FINDING OF THE LD. CIT(A) T HAT THE PENALTY IS MANDATORY IN NATURE IS NOT SUSTAINABLE AND THE SAME IS SET ASIDE. IT IS ALSO PERTINENT TO NOTE THAT IN ALL THESE DECISIONS THE TRIBUNAL GIVEN A FINDING AFTER CONSIDERING THE DECISIONS OF HONBLE ALLAHABAD HIGH COURT IN CASE OF PR. CIT VS. SHIR SANDEEP CHANDAK (SUPRA) . 5.1 ON THE MERITS OF LEVY OF PENALTY WE NOTE THAT THAT THE ASSESSEE IS A DIRECTOR IN A NUMBER OF COMPANIES INCLUDING M/ S JKD PLUS INDIA DEVELOPER PVT. LTD. THEREFORE, IT IS APPARENT FROM THE FACTS EMERGING FROM RECORD AND PARTICULARLY FROM THE STATEMENT REC ORDED U/S 132(4) OF THE ACT THAT THE ASSESSEE IS DOING THE BUSINESS OF REAL ESTATE NOT IN HIS INDIVIDUAL CAPACITY BUT ONLY THROUGH THE COMPANY IN WHICH THE ASSESSEE IS A DIRECTOR. THE ASSESSEE HAS BEEN REPORTING INCO ME UNDER THE HEAD INCOME FROM SALARY RECEIVED FROM M/S JKD PLUS INDIA DEVELOPER PVT. ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 20 LTD. INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND I NCOME FROM OTHER SOURCES. ONLY FOR THE YEAR UNDER CONSIDERATION THE UNDISCLOSED INCOME AS SURRENDERED BY THE ASSESSEE DURING THE SEARCH IS THE ALLEGED BUSINESS INCOME. THERE IS NO MATERIAL ON RECORD THA T EITHER IN THE PAST OR IN THE SUBSEQUENT YEAR THE ASSESSEE HAS CARRIED OUT ANY BUSINESS IN HIS INDIVIDUAL CAPACITY IN REAL ESTATE. FURTHER, EN TRIES AS RECORDED IN THE DIARY ON ACCOUNT OF ADVANCE FOR LAND OR VERY VAGUE AND SHOWING ONLY THE RATE AND THE AMOUNT PAID WITHOUT GIVING THE PAR TICULARS OF THE PERSON TO WHOM THE ALLEGED AMOUNT WAS PAID FOR PURC HASE OF LAND OR EVEN WITHOUT GIVING THE DETAILS OF THE LAND FOR WHI CH THESE ADVANCES WERE PAID BY THE ASSESSEE. IT IS ALSO PERTINENT TO NOTE THAT THE FIRST ENTRY IS REGARDING THE LAND ON TOK ROAD UPTO 31TH D ECEMBER, 2013 WHEREAS THE SEARCH WAS CONDUCTED ON 04.09.2013 THER EFORE, HOW THE ENTRY CAN BE MADE UPTO 31.12.2013 PRIOR TO THE DATE OF SEARCH. WITHOUT GOING INTO THE CONTROVERSY WHETHER THESE EN TRIES ARE ARTIFICIAL OR ACTUAL PAYMENT MADE BY THE ASSESSEE WHEN THERE W AS NO ASSET ACTUALLY ACQUIRED BY THE ASSESSEE OR POSSESSED BY T HE ASSESSEE THEN THE MERE NOTINGS OF PAYMENT BEING ADVANCED FOR LAND CANNOT BE HELD AS UNDISCLOSED INCOME OF THE ASSESSEE. THE REVENUE HAS NOT MADE ANY EFFORTS TO ASCERTAIN THE CORRECT AND PROPER PARTICU LARS OF THE LAND AND ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 21 THE PERSON TO WHOM THE ALLEGED PAYMENT WAS MADE BY THE ASSESSEE. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAS FINALLY ACQUIRED THESE LANDS BY EXECUTING SOME DOCU MENTS OR TITLE DEEDS. WHEN THERE IS NO ACQUISITION OF LAND THEN IN THE ABSENCE OF THE CORRESPONDING ASSET ACQUIRED BY THE ASSESSEE THE ME RE NOTING OF THE ADVANCE WHICH IS OUT FLOW OF THE FUNDS CANNOT BE HE LD AS UNDISCLOSED INCOME. THE COORDINATE BENCH OF THIS TRIBUNAL IN CA SE OF SHRI RAJA RAM MAHESHWARI VS DCIT (SUPRA) HAS CONSIDERED THIS ISSUED IN PARA 19 TO 21 ARE AS UNDER:- 19. IN ORDER TO APPRECIATE THE AFORESAID CONTENTIO N OF THE LD AR, WE REFER TO THE STATEMENT OF THE ASSESSEE RE CORDED DURING THE COURSE OF SEARCH U/S 132(4) AND THE RELE VANT EXTRACT THEREOF IS REPRODUCED AS UNDER FOR SAKE OF REFERENCE: IZ'U&16-VKIDS ;GKWA LPZ DH DK;ZOKGH ESA ,D UHY XXU UKSVCQD FEYH GS] FTLS VUSDLJ ,&1 DK UKE FN;K X;K GS] BUESA NTZ FOOJ.K DH TKUDKJH NSA& MKJ ESUSA FINYS 4 EGHUKSA ESA TEHU [KJHNUS GSRQ FO FHKUU YKSXKSA DKS VFXZE JKF'K NH GS] TKS NL IZDKJ GS %& IST UA- UKE FRFFK JKF'K 1 YKYPUN 10-11-2013 8]00]000@& 2 JKE/KU ;KNO 18-11-2013 12]00]000@& 3 LHRKJKE 'KEKZ 02-12-2013 16]00]000@& 4 JKETHYKY LKGW 30-12-2013 19]50]000@& ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 22 5 DKYWYKY LSUH 06-01-2014 17]50]000@& 6 JO.K DQEKOR 11-01-2014 24]00]000@& 7 LQYRKU FLAG O 15-01-2014 21]00]000@& DY;K.K FLAG 8 'KKSTHJKE C;KTK 29-01-2014 10]00]000@& 9 JKEKSRKJ 'KEKZ 03-02-2014 11]00]000@& 10 JES'K XQIRK 15-02-2014 2]00]000@& BL IZDKJ LS ;S VL :I;S 1]41]00]000@& DKS FOOJ.K GS TKS ESUSA TEHU ISVS FOFHKUU YKSXKSA DKS FN;S GSAA IZ'U&17-D`I;K CRKB;S FD TKS MIJKSDR 1]41]00]000@& : I;S TEHU ISVS VKIUS FOFHKUU YKSXKSA DKS FN;S GS OKS VKIDH YS[KK IQLRDKS A ESA FDL IZDKJ NTZ GS\ MKJ ;S :I;S 1]41]00]000@& ESJH FDLH HKH IZDKJ DH Y S[KK IQLRDKSA ESA FDLH HKH IZDKJ LS NTZ UGHA GSA ;G ESJH V|KSFKR VK; ESA LS FD;K X;K FUOS'K GSA ESA BL :I;S 1]41]00]000@& DKS PKYW FOK OKZ DH V?KKSFKR VK; DS :I ESA LOHDKJ DJRS GQ, TKS HKH VK;DJ GKSXK PQDK NWA XKA IZ'U&18- VKIUS IWOZ ESA CRK;K FD VKIDS FUOKL LFKKU 26&A LAXZKE DKWYKSUH] T;IQJ DS FUEKZ.K ESA 30 LS 90 YK[K :I;S DK FUOS'K G QVK GS] D`I;K CRKB;S FD VKIUS BL FUOS'K DKS VIUH YS[KK IQLRDKSA ESA FDL IZD KJ N'KKZ;K GS\ MKJ ;S EDKU ESJS VKSJ ESJS HKKBZ JH FXJKZT EKGS'OJ H US FEYDJ CUOK;K GS FTLESA NKSUKSA US VIUH LQFO/KKUQLKJ FUOS'K FD;K GSA NQDKU IJ J[KS DEI;WVJ IJ TKS FMVSY J[KH GS MLDS VUQLKJ ESUSA VC RD :I;S 31]5 1]609@& DK FUOS'K FD;K GS VKSJ ESJS HKKBZ US TC RD :I;S 2169150@& DK FUOS'K FD;K GSA BL IZDKJ GE NKSUKSA HKKBZ;KSA US VKT DH LPZ DH DK;ZOKG H RD DQY FUOS'K 5322759@& :I;S VIUH YS[KK IQLRDKSA ESA FN[KK;K GQVK GSA ESA ;G EKURK GWWA FD ESUSA VIUH V?KKSFKR VK; ESA LS HKH EDKU FUEKZ.K ES A FUOS'K FD;K GSA TSLK FD ESUSA CRK;K FD DQY FUEKZ.K YKXR 80 LS 90 YK[K :I;S GSA ES A FUEKZ.K YKXR YXHKX 85 YK[K :I;S EKURS GQ, :I;S 3177000@& DS FUOS'K DKS VIUH V?KKSFKR VK; ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 23 DS :I ESA PKYW FOK OKZ ESA LOHDKJ DJRK GWWA VKSJ DJ GSRQ FOHKKX DKS LEFIZR DJRK GWWAA IZ'U 19VKT VKIDS ;GKWA LPZ DH DK;ZOKGH ESA VKIDS FU OKL LFKKU DS CSLESUV ESA TKS LVKWD IK;K X;K GS MLDS CKJS ESA VKIUS CRK;K FD OKS VKIDS FDL DULUZ DK GSA BL CKJS ESA VKI CRKUS ESA VLEFKZ GSA] D`I;K CRKBZ, FD ;G LVKWD VKIDH YS[KK IQLRDKSA ESA FDL IZDKJ VK JGK GS BLDK LIVHDJ.K NSOSA\ MKJ ESJS VKSJ ESJS HKKBZ DH DULUZ E'K% ES- FLYOJ FIZUL VKSJ FLYOJ ,.M TSEL ,DLIKSVZ DK LVKWD FUOKL LFKKU DH CSLESUV VKSJ 3LH, PESYH EKDSZV] T;IQJ ESA ,D LKFK J[KK GQVK GSA VKSJ BLDKS VYX&VYX UGHA FD;K TK LDRK GSA GEKJS FUOKL DH CSLESUV VKSJ NWDKU 3LH, PESYH EKDSZV T;IQJ ESA FUEU LVKWD IK;K X;K GS %& LFKKU EN EK=K EWY; 1- FUOKL DK CSLESAV FLYOJ TOSYJH 72-340 KGS 2893600 FUOKL DK CSLESAV ESVY TOSYJH 8-962 KGS 31367 FUOKL DK CSLESAV LSEH IZHFL;L LVKWU 573-086 KGS 39]75]676 2- NWDKU FLYOJ TOSYJH 453-412 KGS 39]75]676 ESVY TOSYJH 93-300 KGS 3]26]550 LSEH IZHFL;L LVKWU 154-748 KGS 928488 3- NKSUKSA DK ;KSX FLYOJ TOSYJH 525-752 KGS 22390316 ESVY TOSYJH 102-262 KGS 357867 LSEH IZHFL;L LVKWU 727-834 KGS 49]04]164 GEKJH NWDKU IJ J[KS DEI;WVJ ESA TKS YS[KK IQLRDSA CUKBZ TKRH GS MUDS VUQLKJ GEKJH NKSUKSA DULUZ DS LVKWD DH FLFKFR LPZ D S FUN RD FUEU IZDKJ GSA %& UKE UKEUKE UKE EN ENEN EN EK=K EK=K EK=K EK=K EWY; EWY;EWY; EWY; 1- FLYOJ ,.M TSEL ,DLIKSV ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 24 FLYOJ TOSYJH 153-564 KGS 732950 FLYOJ 38-406 KGS 504335 LSEH IZHFL;L LVKWU 9-190 KGS 124872 2- FLYOJ FIZUL FLYOJ TOSYJH 291-563 KGS 1925364 FLYOJ 6-663 KGS 136163 LSEH IZHFL;L LVKWU 8-022 KGS 108548 3- DQY ;KSX FEDL FLYOJ TOSYJH 445-127 KGS 2658314 FLYOJ 45-039 KGS 640498 LSEH IZHFL;L LVKWU 17-212 KGS 233420 BL IZDKJ ESVSY TOSYJH DK BUNZKT GEKJH YS[KK IQLRDK SA ESA UGH GSA YS[KK IQLRDKSA ESA TKS FLYOJ GS 45-039 FDYKSXZKE OKS ES JS HKKBZ JH FXJKZT EKGS'OJH CSADKWAD TKUS LS IGYS FOFHKUU DKJHXJKSA DKS TOSYJH FUEKZ.K DS FRY, NSDJ X;S FKS FTLDH TKUDKJH MUGHSA DKS GSA OKS OKFIL VKUS IJ BLDK FOOJ.K VKIKDS IZLRQR DJ NSAXSA BL IZDKJ HKKSFRD LR;KIKU ESA FUEU LVKWD GEKJH YS[K K IQLRDKSA DS EQDKCYS VF/KD IK;K X;KA ESVY TOSYJH 102-262 KG LSEH IZHFL;L LVKWU 710-622 KG FLYOJ TOSYJH 80-625 KG MIX JEWELLERY VKT VIZQOM OSY;WJ US LPZ@LOSZ DS NKSJKU TKS OSY;W' KU DGH GS MULS MIJKSDR VKBZVE DK VOJST JSV BL IZDKJ GS & ESVY TOSYJH 357867@102-262 = 3499-51 LSEH FIZFL;L LVKWD = 4904164@727-834 = 6738-03 ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 25 FLYOJ TOSYJH = 22390316@525-752 = 42587-22 MIJKSDR JSV DS FGLKC LS TKS VF/KD LVKWD IK;K X;K G S MLDH EWY; BL IZDKJ LS GS %& EN VF/KD IKBZ XBZ EK=K JSV EWY; ESVY TOSYJH 102-262 KG 3499-51 357867 LSEH FIZFL;L LVKWD 710-622 KG 6738-03 4788192 FLYOJ TOSYJH 80-625 KG 42587-22 3433595 BL IZDKJ GEKJS ;GKWA LPZ DH DK;ZOKGH DS NKSJKU :I; S 85]79]654@& DK LVKWD VF/KD IK;K X;K GS FTLDS CKJS ESA DKSBZ HKH LI VHDJ.K NSUS ESA ESA VLEFKZ GWWAA BL VF/KD IK;S X;S LVKWD ESA FUOS'K DKS ESA PK YW FOK OKZ DH VIUH V|KSFKR VK; DS :I ESA LOHDKJ DJRK GWWA VKSJ DJ GSRQ FOHKKX DKS LEFIZR DJRK GWWA IZ'U 20 VKIUS VKIUS C;KUKSA ESA CRK;K GS FD VF/KD I K;S X;S LVKWD ESA] EDKU DS FUEKZ.K ESA VKSJ FOFHKUU O;FDR;KSA DKS TEHU ISVS FN;S X;S ,MOKAL ESA TKS V|KKSFKR VK; DK MTKXJ FD;K GS] D`I; K BLDS L=KSR DK MTKXJ DHFT;SA MKJ MIJKSDR LELR DJ DS FY;S ?KKSFKR DH XBZ V?KKSF KR VK; PKYW FORRH; OKZ ESA TOSYJH O LVKWUL DH VU VDKMUVSM FO; LS VFTZR DH XBZ GS TKS FD ESJH FU;FER YS[KK IQLRDKSA D S CKGJ DH GSA IZ'U 21 D`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{KK DJSAA 20. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS STATED THAT ABOVE UNDISCLOSED INCOME AGAINST LAND ADVANCES , UNDISCLOSED INVESTMENT IN CONSTRUCTION OF HOUSE AND UNDISCLOSED INVESTMENT IN STOCK HAS BEEN REAFFIRMED BY THE ASSESSEE BY WAY OF FILING AN AFFIDAVIT ON 14.05.201 4, ALMOST AFTER 3 MONTHS FROM THE DATE OF SEARCH ON 26.02.201 4 DURING THE POST SEARCH PROCEEDINGS AND SUBSEQUENTLY , THE ASSESSEE HAS DISCLOSED THE SAME IN HIS RETURN OF IN COME FILED ON 22.11.2014. THEREFORE, THE ASSESSEE WAS H AVING AMPLE TIME TO RETRACT FROM SAID SURRENDER, HOWEVER THERE IS NO SUCH RETRACTION DURING POST-SEARCH PROCEEDINGS A ND EVEN THE ASSESSEE HAS INCLUDED THE SAME IN HIS RETURN OF INCOME. EVEN FROM THE PERUSAL OF THE STATEMENT, THERE IS NO THING WHICH DEMONSTRATES THAT THERE IS ANY FORCED SURREND ER BY THE ASSESSEE. THE CONTENTION OF THE LD AR THEREFOR E HAS NO LEGAL LEG TO STAND WHERE HE CONTENDS THAT THE REVEN UE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINE D SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UNDISCLOSED I NCOME IN THE HANDS OF THE ASSESSEE. IN ANY CASE, THE ASSESSMENT PROCEEDINGS ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 27 HAVE ATTAINED FINALITY WHERE SUCH UNDISCLOSED INCOM E HAS BEEN OFFERED AND BROUGHT TO TAX. FOR THE PURPOSES OF LE VY OF PENALTY, WHAT HAS TO BE SEEN IS THAT WHETHER THE SURRENDER S O MADE, IN TERMS OF STATEMENT OF THE ASSESSEE RECORDED U/S 132 (4) DURING THE COURSE OF SEARCH, FALLS IN THE DEFINITION OF U NDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TE RMS OF CLAUSE (C) OF EXPLANATION TO SECTION 271AAB WHICH READS AS UNDER: (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR RE PRESENTED, 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 SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHE RWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, 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 SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH N OT BEEN CONDUCTED. ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 28 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIAR Y) HAS BEEN FOUND WHEREIN THERE ARE NOTINGS RELATING TO ADVANCE GIVEN TO VARIOUS PERSONS TOWARDS PURCHASE OF LAND. THE N OTINGS DESCRIBE THE NAME OF THE PERSONS, THE AMOUNT ADVANC ED WHICH RANGES FROM RS 2 LACS TO RS 24 LACS TO 10 PER SONS AND THE DATE OF SUCH ADVANCE DURING THE PERIOD NOVE MBER, 2013 TO FEBRUARY, 2014. THEREFORE, WHAT HAS BEEN FO UND DURING THE COURSE OF SEARCH IS CERTAIN ENTRIES RELA TING TO UNDISCLOSED INVESTMENT IN PURCHASE OF LAND. BESIDES , THE SAID ENTRIES, THERE ARE NO OTHER DOCUMENT IN TERMS OF ANY AGREEMENT TO SELL, THE DESCRIPTION OF THE PROPERTY WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. AS PER THE DEFINITION OF UNDISCLOSED INCOME U/S 271AAB, THE UNDISCLOSED INVESTMENT IN PURCHASE OF LAND CANNOT B E STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MON EY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG. WHETHER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED INVESTMENT R EPRESENTS 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 OU TFLOW OF FUNDS FROM THE ASSESSEES HAND AND AN INCOME PER SE REPRE SENTS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE. THER EFORE, ONCE THERE IS AN INFLOW OF FUNDS BY WAY OF INCOME, THERE COULD BE SUBSEQUENT OUTFLOW BY WAY OF INVESTMENT. INVESTMEN T AND INCOME THUS CONNOTES DIFFERENT MEANING AND CONNOTAT ION AND THUS CANNOT BE USED INTER-CHANGEABLY. IN THE DEFIN ITION OF UNDISCLOSED INCOME, WHERE IT TALKS ABOUT 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, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN FOUND RECORDED BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMEN TS, AND WHICH HAS NOT BEEN RECORDED BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 29 ASSESSEE IN THE NORMAL COURSE. WE ARE ALSO CONSCIOU S OF THE FACT THAT THERE ARE DEEMING PROVISIONS IN TERMS OF SECTI ON 69 AND 69B WHEREIN SUCH INVESTMENTS ARE DEEMED TO BE TREATED A S INCOME IN ABSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND SECTION 6 9B WHERE INVESTMENTS WHICH ARE FOUND EITHER NOT RECORDED OR FOUND RECORDED AT A LESSER VALUE IN THE BOOKS OF ACCOUNTS , AND SUCH INVESTMENTS ARE DEEMED TO BE INCOME OF THE ASSESSEE OF THE YEAR IN WHICH SUCH INVESTMENTS HAVE BEEN MADE, CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271 AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEEMING PRO VISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN THE CONTEX T OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE STATUE BOOK A ND NOT OTHERWISE. IN THE INSTANT CASE, THE DEEMING PROVIS IONS ARE CONTAINED IN SECTION 69 AND SECTION 69B AND THEREFO RE, THE SAME HAVE TO BE APPLIED IN THE CONTEXT OF BRINGING TO TA X SUCH INVESTMENTS TO TAX IN THE QUANTUM PROCEEDINGS. THE SAME CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDIN GS AND MORE SO, WHERE THE PROVISIONS OF SECTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271 AAB, BEING A PENAL PROVISION, THE SAME MUST BE STRICTLY CONSTR UED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIED THEREIN. I N LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVANCE FOR PURCHASE OF LAND CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDINGS, HOWEVER THE SAME CANNOT BE SAI D TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALTY SO LE VIED DESERVE TO BE SET-ASIDE. ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 30 WE FURTHER NOTE THAT THE TRIBUNAL HAS CONSISTENTLY HELD THAT MERE ENTRIES OF ADVANCE FOR LAND CANNOT BE TREATED AS UN DISCLOSED INCOME. ACCORDINGLY, FOLLOWING THE DECISION OF THE COORDINA TE BENCH AND MAINTAINING THE RULE OF CONSISTENCY WE HOLD THAT TH E PENALTY U/S 271AAB IS NOT SUSTAINABLE IN RESPECT OF THE INCOME SURRENDER ON ACCOUNT OF ADVANCE FOR LAND BECAUSE OF ALLEGED TRAN SACTIONS DO NOT FALL IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED IN EX PLANATION TO SECTION 271AAB(1) OF THE ACT. ACCORDINGLY THE PENALTY LEVIE D U/S 271AAB IS IN THE CASE OF THE ASSESSEE IS DELETED. 6. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND WHICH READS AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEA RNED ASSESSING OFFICER U/S 271AAB OF THE INCOME TAX ACT ON THE BASIS OF NOTICE DATED 30.03.2016 WHICH IS VOID-AB-INITIO AND ISSUED WITHOUT MENTIONING THE SPECIFIC PROVISION OF SECTIO N FOR LEVY OF PENALTY AND WITHOUT APPLICATION OF MIND IS BAD IN L AW AND THEREFORE INITIATION OF PENALTY PROCEEDINGS WAS NOT PROPER. THOUGH THE LD. AR AS WELL AS LD. DR HAS ARGUED ON T HE ADDITIONAL GROUND AT LENGTH AND ALSO RELIED UPON DECISIONS IN SUPPORT OF THEIR CONTENTIONS HOWEVER, IN VIEW OF OUR FINDING ON THE MERITS OF THE LEVY OF ITA NO. 224/JP/2018 SHRI VIJAY JAIN VS. DCIT 31 PENALTY THIS ISSUE RAISED IN THE ADDITIONAL GROUNDS BECOMES ACADEMIC IN NATURE AND WE DO PROPOSE TO ADJUDICATE THE SAME. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/09/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/09/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI VIJAY JAIN, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-2, 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. 224/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR