M/S SILVER AND ART PALACE, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 236/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3305 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Opportunity of being heard; Principle of natural justice; Reasonable cause; Fair market value; Block assessment; Set aside
• Section: 132; 271(1)(c); 273B; 143(3); 69B; 250; 274; 69A; 191; 246A; 158B(b); 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. 236/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2015-16 M/S SILVER & ART PALACE, 313-A, OLD AMER ROAD, JAIPUR-302002. CUKE VS. THE DCIT, CENTRAL CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AALFS 5749 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VINOD KUMAR GUPTA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI B.K. GUPTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 14/11/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 11/02/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), JAIPUR DATED 15.12.2017 FOR THE ASSESSMENT YEAR 2015-16 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. IMPUGNED ORDER PASSED U/S 250 IS BAD IN LAW AND ON FACTS BEING AGAINST THE PRINCIPAL OF NATURAL JUSTICE AND FOR MA NY MORE OTHER REASONS. ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 2 2. UNDER THE FACTS AND CIRCUMSTANCE, LD. CIT(A) HAS ERRED BY HOLDING THAT PENALTY U/S 271AAB IS MANDATORY IN NATURE. 3. UNDER THE FACTS AND CIRCUMSTANCES, LD. CIT(A) HA S ERRED BY CONFIRMING PENALTY OF RS. 2,65,05,088/- U/S 271AAB. THE PENALTY CONFIRMED IS UNJUSTIFIED ILLEGAL OR EXCESSIVE. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS OF TRADING OF GEMS, JEWEL LERY, PRECIOUS AND SEMI PRECIOUS STONES, DIAMONDS, WOODEN AND HANDICRA FT ITEMS IN THE NAME AND STYLE OF M/S. SILVER AND ART PALACE. A S EARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CARRIED OUT AT THE AS SESSEES PREMISES ON 11.03.2015. DURING THE COURSE OF SEARCH, STATEMENT OF ONE OF THE PARTNERS IN THE ASSESSEE FIRM U/S 132(4) OF WAS R ECORDED, WHEREIN AN AMOUNT OF RS. 26,50,50,888/- WAS SURRENDERED (RS. 2 5,80,25,888/- ON ACCOUNT OF DIFFERENCE IN VALUATION OF STOCK AND RS. 70,25,000/- ON ACCOUNT OF ADVANCES GIVEN TO DIFFERENT PARTIES). TH E ASSESSEE THEREAFTER FILED ITS RETURN OF INCOME ON 27.9.2015, DECLARING TOTAL INCOME OF RS. 29,30,41,580/- INCLUDING RS. 26,50,50,888/- SURREND ERED DURING THE COURSE OF SEARCH. THE ASSESSMENT PROCEEDINGS WERE C OMPLETED BY THE ASSESSING OFFICER AND AN ORDER U/S 143(3) R/W 153B( 1)(B) OF THE ACT WAS PASSED ON 23.12.2016 AT RS. 29,30,53,964/- BY ACCEP TING THE RETURNED INCOME EXCEPT MAKING A DISALLOWANCE OF RS. 12,384/- ON ACCOUNT OF DELAY IN DEPOSITION OF ESI & PF. SIMULTANEOUSLY, PE NALTY PROCEEDINGS U/S 271AAB WERE INITIATED BY ISSUANCE OF NOTICE ON 23.12.2016. SUBSEQUENTLY, PENALTY WAS IMPOSED U/S 271AAB(1)(A) OF THE ACT AT THE RATE OF 10% AMOUNTING TO RS. 2,65,05,090/- VIDE ORD ER DATED 24.4.2017. AGGRIEVED WITH THE ORDER, THE ASSESSEE F ILED APPEAL BEFORE LD. CIT(A), WHEREIN THE LATTER CONFIRMED THE ORDER OF THE AO VIDE ORDER ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 3 DATED 15.12.2017. AGGRIEVED WITH THE SAID ORDER, TH E ASSESSEE HAS MOVED THE PRESENT APPEAL. 3. DURING THE COURSE OF HEARING, THE LD. AR DID NOT PRESS GROUND NO. 1. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE FINDING OF THE LD. CIT(A) THAT PENALTY U/S 271AAB OF THE ACT IS MA NDATORY IN NATURE. 5. DURING THE COURSE OF HEARING, LD. AR SUBMITTED T HAT SECTION 271AAB OF THE ACT CONTAINS THE WORD MAY WHICH ME ANS DISCRETION IS VESTED WITH THE ASSESSING OFFICER WHETHER TO LEVY P ENALTY OR NOT. SECONDLY, THE INTENTION OF THE LEGISLATURE IS CLEAR BY MAKING THE ORDER PASSED U/S 271AAB AS APPEALABLE ORDER BY AMENDING S UB CLAUSE (B) OF CLAUSE (HB) OF SECTION 246A W.E.F. 01.07.2012 THAT IT IS DISCRETIONARY AND NOT MANDATORY TO GIVE RELIEF TO THE ASSESSEE. IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDATORY BU T ARE ALWAYS DISCRETIONARY CONSIDERING THE OVERALL FACTS AND CIR CUMSTANCES OF THE CASE. 6. THE LD. AR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 271AAB OF THE ACT ARE PARI MATERIA WITH THAT OF SECTION 158BFA(2) OF THE ACT RELATING TO BLOCK ASSESSMENT AND OUR REFERE NCE WAS DRAWN TO RELEVANT PROVISIONS OF SECTION 271AAB AND 158BFA(2) WHICH READS AS UNDER: 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 4 WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 BUT BEFORE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASS ENT OF THE PRESIDENT, THE ASSESSEE SHALL PAY BY WAY OF PENALTY , IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM SECTION 158BFA(2): THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS CHAPTER, MAY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALT Y A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE B UT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFI CER UNDER CLAUSE (C) OF SECTION 158BC. 7. THE LD. AR FURTHER SUBMITTED THAT THE INTERPRETA TION OF WORD MAY DIRECT IN CONTEXT OF SECTION 158BFA(2) OF THE ACT HAS COME UP FOR JUDICIAL SCRUTINY BEFORE THE COURTS AND OUR REFERE NCE WAS DRAWN TO THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT I N THE CASE OF M/S. SRI RADHA KRISHNA VIHAR VS. PR.CIT (IN ITA NO. 740 OF 2017 DATED 13.12.2017) WHEREIN IT WAS HELD AS UNDER: 7. WHILE WE RESPECTFULLY AGREE WITH THE VIEWS OF B OTH THE HIGH COURTS REFERRED TO ABOVE, WE NOTICE AN ADDITIONAL FEATURE FROM THE LANGUAGE OF SECTION 158BFA OF THE ACT. WHILE IN SUB-SECTION (1) THEREOF, WHICH DEALS WITH THE PAYMENT OF INTEREST ON UNDISCLOSED I NCOME, THE WORDS THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST ARE USED, WHEREAS IN SUB-SECTION (2) THEREOF, THE WORDS MAY DIRECT ARE U SED REFERRING TO THE ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 5 POWER OF THE ASSESSING OFFICER TO DIRECT THE PERSON CONCERNED TO PAY PENALTY. NO DOUBT, THE WORDS SHALL MAY AT TIMES BE CONSTRUED AS DIRECTORY AND THE WORD MAY MAY BE CONSTRUED AS MA NDATORY AS THE CONTEXT WARRANTS. HOWEVER, IN SECTION 158BFA OF THE ACT, THESE PHRASES HAVE BEEN USED BY THE LEGISLATURE IN TWO DIFFERENT CONTEXTS, ONE IN THE MATTER OF PAYMENT OF INTEREST AND ANOTHER IN THE MA TTER OF PAYMENT OF PENALTY. THE FACT THAT VARIED PHRASEOLOGY IS USED I N THE SAME PROVISION ITSELF SHOWS THAT LEGISLATURE TREATED SUB-SECTIONS (1) AND (2) OF SECTION 158BFA OF THE ACT IN DIFFERENT VEINS. IN THE CONTEX T IN WHICH THESE PHRASES ARE USED, WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LIABLE IN SUB-SECTION (1) OF SECTION 158BFA OF THE ACT ARE INTENDED TO BE MANDATORY, THE WORDS MAY DIRECT IN SUB-SECTION ( 2) THEREOF ARE INTENDED TO BE DIRECTORY. IN OTHER WORDS, WHILE PAY MENT OF INTEREST IS MANDATORY, LEVY OF PENALTY IS DISCRETIONARY. SUB-SE CTION (2) OF SECTION 158BFA OF THE ACT, ACCORDINGLY, VESTS DISCRETION IN THE COMMISSIONER (APPEALS) WHETHER TO LEVY OR NOT TO LEVY PENALTY. I T IS TRITE POSITION OF LAW THAT ANY DISCRETION VESTED IN AN AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE F ACTS AND CIRCUMSTANCES OF EACH CASE. 8. IN THE LIGHT OF THE TRUE PURPORT OF SUB-SECTION (2) OF SECTION 158BFA OF THE ACT AS EXPLAINED ABOVE, WE ARE OF THE OPINIO N THAT THE ORDER OF THE TRIBUNAL CONFIRMING THE ORDER OF THE COMMISSION ER (APPEALS) DOES NOT SUFFER FROM ANY ILLEGALITY. BOTH THE APPELLATE FORA HAVE TAKEN INTO CONSIDERATION THE FACT THAT ON RECEIPT OF THE NOTIC E FOLLOWING THE SEARCH AND SEIZURE, THE ASSESSEE HAS FILED HIS RETURNS WIT HIN TEN DAYS OF THE EXPIRY OF THE TIME STIPULATED FOR FILING SUCH RETUR NS AND PAID A PART OF THE TAX ON THE ADMITTED UNDISCLOSED INCOME. THE VIE W WAS, THEREFORE, ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 6 TAKEN BY BOTH THE APPELLATE FORA THAT ON THE FACTS OF THE CASE, THE ASSESSING OFFICER OUGHT NOT TO HAVE EXERCISED HIS D ISCRETION FOR IMPOSITION OF PENALTY. 8. THE LD. AR FURTHER SUBMITTED THAT SUB-CLAUSE (3) OF 271AAB OF THE ACT STATES THAT THE PROVISIONS OF SECTION 274 AND 2 75 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED T O IN THIS SECTION. SECTION 274 SAYS NO PENALTY CAN BE IMPOSED UNLESS T HE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. IT FURTHER RE-AFFIRMS THAT PENALTY IS NOT AUTOMATIC OT HERWISE MAKING THE PROVISION FOR GIVING HEARING OR OPPORTUNITY WILL NO T MAKE ANY SENSE. 9. THE LD. AR FURTHER SUBMITTED THAT THE QUESTION W HETHER PENALTY UNDER SECTION 271AAB IS MANDATORY OR NOT, HAS ALSO COME UP FOR SCRUTINY BEFORE VARIOUS BENCHES OF THE TRIBUNAL AND IT HAS BEEN HELD TO BE DISCRETIONARY IN NATURE. IN SUPPORT, RELIANCE WA S PLACED ON DECISION IN CASE OF MOTHUKURI SOMABRAHMAN VS. ACIT (ITA NO. 126/VIZAG/2017 DATED 16.03.2018), ACIT, CENTRAL CIRCLE-2 V/S. MARVEL ASSOCIATES (ITA NO. 147/VIZAG/2017) , MANISH AGARWAL VS. DCIT (ITA NO. 1479/ KOL/2015, DATED 09.02.2018), DCIT VS. SUBHAS CHANDRA AGARWALA (ITA NO. 1470/KOL/2015 DATED 19.02.2018), RAVI MATHUR VS. DCIT (ITA NO. 969/JP/2017 DATED 13.06.2018), ANUJ MATHUR VS. DCIT (ITA NO. 971/JP/2017 DATED 13 TH JUNE 2018) AND SHRI SURESH CHAND MITTAL VS. DCIT, CC-2 (ITA NO. 931/JP/2017 ORDER DATED 02.07.2018). 10. IT WAS ACCORDINGLY SUBMITTED THAT LEVY OF PENAL TY IS NOT MANDATORY IN NATURE. IT IS TO THE DISCRETION OF AO TO LEVY PENALTY OR NOT ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 7 AFTER CONSIDERING THE FACTS OF THE CASE AND AFTER G IVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE PEN ALTY HAS BEEN IMPOSED BASED UPON THE WRONG INTERPRETATION OF LAW WITHOUT GOING FURTHER INTO THE FACTS OF THE CASE, HENCE, DESERVES TO BE DELETED. 11. PER CONTRA, THE LD. DR SUBMITTED THAT THE LEVY OF PENALTY U/S 271AAB IS MANDATORY IN NATURE WHERE THE CONDITION P RESCRIBED THEREIN ARE SATISFIED. IT WAS SUBMITTED THAT THE PROVISION S OF SECTION 273B OF THE ACT PROVIDING FOR NON IMPOSITION OF PENALTY ARE NOT APPLICABLE TO THE PENALTY PROVISIONS U/S 271AAB OF THE ACT. IT WAS FU RTHER SUBMITTED THAT UNLIKE SECTION 271AAA WHEREIN IMMUNITY FROM IMPOSIT ION OF PENALTY IS POSSIBLE SUBJECT TO FULFILLMENT OF CONDITIONS IN SE CTION 271AAA(2), THERE IS NO IMMUNITY CLAUSE PROVIDED FROM PENALTY U/S 271 AAB OF THE ACT. IT WAS ACCORDINGLY SUBMITTED THAT THE PENALTY U/S 271A AB IS MANDATORY AND IS IMPOSED AT THE VARYING RATE OF 10% TO 30% DE PENDING ON THE FULFILLMENT OF CERTAIN CONDITIONS SPECIFIED THEREIN . THE LD. DR PLACED RELIANCE ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF PCIT VS. SANDEEP CHANDAK [2018] 93 TAXMANN.COM 405. IT W AS FURTHER SUBMITTED THAT THE DECISION OF THE COORDINATE BENCH IN CASE OF RAVI MATHUR (SUPRA) IS DISTINGUISHABLE AS THE PROVISIONS OF SECTION 273B WERE NOT CONSIDERED IN THE SAID DECISION. FURTHER, RELIA NCE WAS PLACED ON THE NOTES OF CLAUSES OF THE FINANCE BILL, 2012 RELATING TO INSERTION OF SECTION 271AAB OF THE ACT. IT WAS ACCORDINGLY SUBMITTED THA T THERE IS NO DISCRETION WHICH HAS BEEN GRANTED BY THE LEGISLATUR E TO THE ASSESSING OFFICER IN RESPECT OF PENALTY U/S 271AAB OF THE ACT AND THE SAME IS MANDATORY IN NATURE. IT WAS FURTHER SUBMITTED THAT THE DISCRETION WHICH IS AVAILABLE WITH THE ASSESSING OFFICER IS REGARDIN G THE RATE OF PENALTY ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 8 WHICH CAN VARY FROM 10% TO 30% DEPENDING ON THE FAC TS AND CIRCUMSTANCE OF THE PARTICULAR CASE. IT WAS ACCORDI NGLY SUBMITTED THAT THE FINDINGS OF THE LD. CIT(A) REGARDING MANDATORY NATURE OF PENALTY U/S 271AAB SHOULD BE CONFIRMED. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE REFER TO THE PROVISIONS OF SECTION 271AAB WHICH BEGINS WITH THE STIPULATION THAT THE ASSESSING OFFI CER MAY DIRECT THE ASSESSEE AND THE ASSESSEE SHALL PAY THE PENALTY AS PER CLAUSE (A) TO (C) SO SATISFIED IN SUB-SECTION (1) TO SECTION 271AAB. FURTHER, AS PER SUB- SECTION (3) OF SECTION 271AAB, THE PROVISIONS OF SE CTION 274 AND SECTION 275 AS FAR AS MAY BE APPLIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PENALTY, THE AS SESSING OFFICER HAS TO ISSUE A SHOW-CAUSE GRANTING AN OPPORTUNITY TO TH E ASSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMATIC BUT THE ASSESS ING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTANCES OF THE CASE AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. SIMILAR VI EW HAS BEEN TAKEN BY THE VARIOUS CO-ORDINATE BENCHES AND USEFUL REFERENC E CAN BE DRAWN TO THE DECISION OF THE CO-ORDINATE BENCH IN CASE OF AC IT VS MARVEL ASSOCIATES 92 TAXMANN.COM 109 WHEREIN IT WAS HELD A S UNDER: 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. DURING THE APPEAL HEARING, THE LD. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPRESSION THAT THE LEVY OF P ENALTY IN THE CASE OF ADMISSION OF INCOME U/S 132(4) IS MANDATORY. THE LD . A.R. FURTHER STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MA NDATORY BUT ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 9 DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARI MATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELA TING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT DISCRETIONARY. WHEN THERE IS REASONABLE CAUSE, THE PENALTY IS NOT EXIGIBLE. THE LD. A.R. TAKEN US TO THE SECTION 271AAB OF THE ACT AND ALSO SECTION 158B FA(2) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WORDS USED IN SECTION 158BFA(2) OF THE ACT ARE IDEN TICAL. HENCE, ARGUED THAT THE PENALTY SECTION 271AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REFEREN CE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT AND SECTION 271AAB OF THE ACT WHICH READS AS UNDER: 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING 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 1S T DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITI ON TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHI CH THE UNDISCLOSED INCOME WAS DERIVED; AND ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 10 (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 TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (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 FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CENT 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 CLAUSES (A) AND (B). ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 11 (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESS EE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTIO N (1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY D IRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHAL L NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF T HE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CL AUSE (C) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MA DE IN RESPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TA X PAYABLE ON THE BASIS OF SUCH RETURN HAS BEEN PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OF FERS 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 THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDI NG PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY TH E ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RET URN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UND ISCLOSED INCOME ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 12 DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDI SCLOSED 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 P ENALTY'. SIMILAR WORDS ARE USED SECTION 158BFA(2) OF THE ACT. THE WO RD MAY DIRECT INDICATES THE DISCRETION TO THE AO. FURTHER, SUB SE CTION (3) OF SECTION 271AAB OF THE ACT, 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 INTE NTION TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS B EEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, F ROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE P ENALTY CANNOT BE IMPOSED UNLESS THE ASSESSEE IS GIVEN A REASONABLE O PPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GI VEN TO THE ASSESSEE, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BA SIS OF THE FACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUN D BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENAL TY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNI TY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNA VIHAR I N ITTA NO.740/2011 WHILE DEALING WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 13 OPINION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO BE M ANDATORY, THE WORDS MAY DIRECT IN SUB SECTION 2 THERE OF INTENDED TO DI RECTORY'. IN OTHER WORDS, WHILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DIS CRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND R ATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE E ACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF THE ACT INDICA TES 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 C ASE. 13. THE CONTENTION OF THE LD DR THAT THE PROVISIONS OF SECTION 273B OF THE ACT PROVIDING FOR NON IMPOSITION OF PENALTY ARE NOT APPLICABLE TO THE PENALTY PROVISIONS U/S 271AAB OF THE ACT IS CORRECT BUT THE SAME DOESNT TAKE AWAY THE DISCRETIONARY NATURE OF PENAL TY AS DISCERNABLE FROM THE PLAIN READING OF SECTION 271AAB. IT IS ALS O CORRECT THAT THE PROVISIONS OF SECTION 271AAB HAVE BEEN FURTHER STRE NGTHENED IN COMPARISON TO SECTION 271AAA AND UNLIKE SECTION 271 AAA(2), THERE IS NO IMMUNITY CLAUSE PROVIDED IN 271AAB OF THE ACT, A T THE SAME TIME, WE ARE OF THE CONSIDERED VIEW THAT THE LEGISLATURE HAS RETAINED THE PHRASE MAY AND THUS THE ASSESSING OFFICER HAS BEE N EMPOWERED TO EXERCISE HIS DISCRETION TO LEVY PENALTY DEPENDING U PON FACTS AND CIRCUMSTANCES OF A PARTICULAR CASE. THE CONTENTION OF THE LD DR THAT THE DISCRETION WHICH IS AVAILABLE WITH THE ASSESSING OF FICER IS LIMITED TO THE RATE OF PENALTY WHICH CAN VARY FROM 10% TO 30% DEPE NDING ON THE FACTS AND CIRCUMSTANCE OF THE PARTICULAR CASE IS AL SO NOT ACCEPTABLE AS ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 14 THE ESSENTIAL CONDITION FOR LEVY OF PENALTY THAT TH ERE IS UNDISCLOSED INCOME WHICH IS FOUND DURING THE COURSE OF SEARCH H AS TO BE NECESSARILY SATISFIED BEFORE EXAMINING ADDITIONAL CONDITIONS SO SPECIFIED FOR DETERMINING THE RATE OF PENALTY. FURTHER, MERE DISC LOSURE OF INCOME UNDER SECTION 132(4) WOULD NOT AUTOMATICALLY LEAD T O LEVY OF PENALTY BUT THE ASSESSING OFFICER HAS TO GIVE A CLEAR AND SPECI FIC FINDING THAT THE CASE OF THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLO SED SO DEFINED IN THE EXPLANATION TO SECTION 271AAB. THE FACTS AND CIRCU MSTANCES OF EACH CASE THUS NEEDS TO BE CLOSELY EXAMINED BY THE ASSES SING OFFICER WHICH SHOWS THAT THE LEVY OF PENALTY IS NOT AUTOMATIC. O NCE THE ASSESSING OFFICER COMES TO A DEFINITIVE FINDING THAT THE CASE OF THE ASSESSEE FALLS WITHIN THE AMBIT OF SECTION 271AAB, THE QUANTUM OF PENALTY AT THE RATE OF 10% TO 30% TO BE DETERMINED SUBJECT TO EXPLANATI ON OF THE ASSESSEE. THE DECISION OF HONBLE ALLAHABAD HIGH C OURT IN CASE OF PCIT VS. SANDEEP CHANDAK (SUPRA) DOESNT SUPPORT THE CAS E OF THE REVENUE AS THE ISSUE BEFORE THE HONBLE HIGH COURT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 271AAB ON ACCOUNT OF MENTIONIN G THE WRONG PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND IN T HAT CONTEXT, IT WAS HELD THAT:- 28. SINCE ADMITTEDLY, NO PROCEEDING UNDER SECTION 271(1) ARE INITIATED BY THE ASSESSING AUTHORITY DURING THE COURSE OF THE ASSESSMENT PROCEEDING UNDER SECTION 143(3), THE IMPUGNED PENAL TY PROCEEDINGS UNDER SECTION 271AAB ARE FULLY JUSTIFIED AND ARE IN ITIATED IN ACCORDANCE WITH LAW. WE FIND THAT THE ORDER OF THE ITAT CANNOT SUSTAIN, THEREFORE, THE SAME IS SET ASIDE AND THE PENALTY ORDERS UNDER SECTION 271AAB ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 15 PASSED BY THE ASSESSING AUTHORITY, CONFIRMED BY THE CIT(APPEALS), ARE AFFIRMED AND ARE RESTORED. 14. IN LIGHT OF ABOVE DISCUSSIONS, WE ARE OF THE C ONSIDERED VIEW THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MAN DATORY IN NATURE AND IT NEEDS TO BE EXAMINED WHETHER THERE IS ANY BA SIS FOR LEVY OF PENALTY AND WHETHER THE ASSESSEE HAS SATISFIED THE NECESSARY CONDITIONS FOR LEVY OF PENALTY U/S 271AAB. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED. 15. NOW COMING TO GROUND NO. 3 OF THE ASSESSEES AP PEAL WHEREIN THE ASSESSEE HAS CHALLENGED THE FINDING OF THE LD. CIT( A) ON MERITS IN CONFIRMING THE LEVY OF PENALTY U/S 271AAB OF THE A CT. 16. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE P ROCEEDING UNDER CONSIDERATION HAS BEEN INITIATED U/S 271AAB, WHICH IS PENAL IN NATURE AND HAS TO BE DISTINGUISHED WITH THE ASSESSMENT PRO CEEDINGS. TAX, PENALTY AND INTEREST ARE DIFFERENT CONCEPTS UNDER T HE INCOME TAX ACT, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF HARSHAD SHANTILAL MEHTA V. CUSTODIAN AND ORS. WHEREIN IT WAS HELD AS UNDER:- '...TAX, PENALTY AND INTEREST ARE DIFFERENT CONCEPT S UNDER THE INCOME- TAX ACT. THE DEFINITION OF 'TAX UNDER SECTION 2(43) DOES NOT INCLUDE PENALTY OR INTEREST. SIMILARLY, UNDER SECTION 156, IT IS PROVIDED THAT WHEN ANY TAX, INTEREST, PENALTY, FINE OR ANY OF OTHER SU M IS PAYABLE IN CONSEQUENCE OF ANY ORDER PASSED UNDER THIS ACT, THE ASSESSING OFFICER SHALL SERVE UPON THE ASSESSEE A NOTICE OF DEMAND AS PRESCRIBED. THE ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 16 PROVISIONS FOR IMPOSITION OF PENALTY AND INTEREST A RE DISTINCT FROM THE PROVISIONS FOR IMPOSITION OF TAX...' 17. IT WAS FURTHER SUBMITTED THAT IT HAS BEEN HELD THAT BY VARIOUS COURTS THAT PENALTY PROCEEDING IS NOT CONTINUATION OF THE ASSESSMENT PROCEEDINGS. THE TRIBUNAL IN THE CASE OF SHRI RAMAM OORTHY SRIDHARAN VS. INCOME TAX OFFICER (ITA NO. 181/HYD/2014) RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF AN ANTARAM VEERASINGHIAH VS. CIT 123 ITR 457 HAS HELD AS UNDER : 28. WE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS. PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDING AND THE MATT ER IS TO BE CONSIDERED AFRESH: IT IS AN UNDISPUTED POSITION THA T PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND THE MATTER HAS TO B E LOOKED INTO AGAIN AS THE ASSESSMENT ORDER IS NOT THE FINAL WORD IN THE PENALTY PROCEEDINGS. THE DECISION OF THE SUPREME COURT IN T HE CASE OF ANANTARAM VEERASINGHIAH VS. CIT REPORTED AT 123 ITR 457 IS THE MAIN DECISION ON THIS ISSUE. IT IS THUS POSSIBLE FOR THE ASSESSEE DURING THE COURSE OF THE PENALTY PROCEEDINGS FOR CONCEALMENT T O FILE DOCUMENTS AS WELL AS TO GIVE EXPLANATIONS WHICH WERE NOT GIVEN I N THE ASSESSMENT PROCEEDINGS. MERELY BECAUSE AN ADDITION HAS NOT BEE N CONTESTED, IT CANNOT BE PRESUMED THAT THE ADDITION REPRESENTS CON CEALED INCOME. IT HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF S IR SHADILAL SUGAR & GENERAL MILLS LTD. REPORTED AT 168 ITR 705 THAT FRO M THE ASSESSEE AGREEING TO ADDITIONS TO HIS INCOME, IT DOES NOT FO LLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCEALED INCOME. THERE MAY BE A HUNDRED AND ONE REASONS FOR SUCH ADMISSION. HENCE IN THE PR ESENT CASE, EVEN ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 17 THOUGH THE HON'BLE ITAT HAS CONFIRMED THE APPEAL ON MERITS (THOUGH ADMITTED BY THE HON'BLE HIGH COURT) THE PENALTY PRO CEEDINGS STAND UNDER A DIFFERENT FOOTING AND IS NOT AUTOMATIC. 18. THE LD. AR FURTHER SUBMITTED THAT THE PROCEEDIN G UNDER CONSIDERATION IS PENAL IN NATURE AND IT IS A SETTLE D LEGAL POSITION THAT PENAL SECTION SHOULD BE CONSTRUED STRICTLY. THE TRI BUNAL IN THE CASE OF DCIT, CC (2), KOLKATA VS. MANISH AGARWAL (SUPRA) WH ILE DISCUSSING THE PENALTY PROVISIONS U/S 271AAB HAS HELD THAT THE FIRST CONTENTION OF THE LD. AR IS THAT SINCE SECTION 271AAB OF THE ACT IS A PENALTY SECTION, IT SHOULD BE CONSTRUED STRICTLY, WHICH WE AGREE BEING IT IS A TRITE LAW THAT PENALTY PROVISIONS HAVE TO BE STRICTLY INTERPRETED . 19. IT WAS FURTHER SUBMITTED THAT JAIPUR BENCH OF THE TRIBUNAL IN CASE OF SHRI RAVI MATHUR VS. DCIT, CC-4, (SUPRA) AND SHR I SURESH CHAND MITTAL VS. DCIT, CC-2 (SUPRA) HAS OBSERVED THAT MER ELY ON THE BASIS OF SURRENDER AND SUBSEQUENTLY SHOWING THE SAME IN RETU RN OF INCOME, PENALTY CANNOT BE IMPOSED UNDER SECTION 271AAB. THE A.O. IS DUTY BOUND TO EXAMINE THE FACTS OF THE CASE IN LIGHT OF PROVISION 271AAB INCLUDING THE DEFINITION OF THE WORD UNDISCLOSED I NCOME GIVEN IN THE SAID SECTION. PENALTY U/S 271AAB IS ATTRACTED ON U NDISCLOSED INCOME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4 ) OR DISCLOSING INCOME IN RETURN OF INCOME. 20. IT WAS SUBMITTED BY THE LD AR THAT IN THE INSTA NT CASE PENALTY HAVE BEEN IMPOSED AND CONFIRMED SOLELY ON THE BASIS OF ADMISSION U/S 132(4) AND DISCLOSURE IN RETURN OF INCOME. IT IS IM PORTANT TO NOTE THAT ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 18 DURING THE PENALTY PROCEEDING AND BEFORE CIT(A), A DETAILED FACTUAL AND LEGAL SUBMISSION WAS MADE AND WITHOUT POINTING OUT ANY ERROR IN FACTS OR CONTENTIONS, PENALTY HAS BEEN IMPOSED AND CONFIR MED MERELY ON THE BASIS OF ABOVE REFERRED PREMISES. THEREFORE, WE SUB MIT HEREINAFTER THE FACTS VIZ.-A-VIZ. LEGAL PROVISION CONTAINED IN SECT ION 271AAB TO EXAMINE WHETHER INCOME UNDER CONSIDERATION FALLS UNDER UND ISCLOSED INCOME AS DEFINED IN THE SAID SECTION. 21. IT WAS SUBMITTED BY THE LD AR THAT DURING THE S EARCH, TOTAL SURRENDER WAS OF RS. 26,50,50,888/- AND ON THAT PEN ALTY @ 10% OF RS. 2,65,05,090/- LEVIED BY THE LD. AO AND CONFIRMED BY LD. CIT(A), DETAILS OF WHICH IS AS FOLLOWS:- PARTICULARS SURRENDERED AMOUNT PENALTY @10% ON ACCOUNT OF EXCESS STOCK FOUND 25,80,25,888 2,58,02,588 ON ACCOUNT OF ADVANCE GIVEN TO PARTIES 70,25,000 7,02,500 TOTAL 26,50,50,888 2,65,05,088 PENALTY ON EXCESS STOCK FOUND 22. IT WAS FURTHER SUBMITTED THAT RS. 25,80,25,888/ - WAS SURRENDERED ON ACCOUNT OF EXCESS STOCK FOUND IN STATEMENT RECOR DED U/S 132(4). EXCESS STOCK AT THE TIME OF SEARCH HAS BEEN WORKED OUT IN FOLLOWING MANNER:- ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 19 TO WORKOUT THE BOOK STOCK, ONE TRADING ACCOUNT AND FOUR MANUFACTURING ACCOUNTS WERE DRAWN NUMBERED AS (A) TO (E). THE TOT AL VALUE WORKED OUT AS PER BOOKS AS ON 10.03.2015 WAS RS. 27,84,49,663/-, ANNEXED AT PBP 01-02. TRADING ACCOUNT (A) IS RELATED TO GENERAL GOODS REP RESENTING ALMOST 17 CATEGORIES OF GOODS. WITHIN THESE CATEGORIES, THERE ARE THOUSANDS OF VARIETIES AND WITHIN THESE VARIETIES, THERE ARE THO USANDS OF SPECIFICATIONS IN TERMS OF SIZE, MATERIAL, QUALITY, COMPOSITION ETC. IT IS AN ADMITTED FACT THAT THE STOCK OF GENERAL GOODS AS ON THE DATE OF THE SEARCH HAS BEEN WORKED OUT BY APPLYING THE PREVIOUS YEARS GROSS PROFIT RATE I.E. 23.43%. IT IS A FACT THAT WHILE WORKING O UT THE STOCK AS PER BOOKS NEITHER THE CATEGORY NOR THE VOLUME NOR DIVER SITY HAVE BEEN CONSIDERED, RATHER ON AN AVERAGE BASIS OR ON LUMP-S UM BASIS THE VALUE OF BOOKS STOCK HAVE BEEN WORKED OUT. SINCE THE WORK ING WAS ON APPROXIMATE BASIS THEREFORE, BOOK STOCK WAS SUMMARI ZED AS TENTATIVE. PERUSAL OF MANUFACTURING ACCOUNTS (B) TO (E) SHOWS THAT THERE IS NO MOVEMENT EITHER SALE OR PURCHASE DURING THE YEAR. S AME STOCK IS COMING AS IT IS FROM PREVIOUS YEAR AND TAKEN WHILE WORKING OUT THE BOOK STOCK AT SAME CARRYING VALUE OF THE PREVIOUS YEAR. TO WORKOUT THE VALUE OF THE STOCK PHYSICALLY FOUND AT THE TIME OF SEARCH, A PHYSICAL INVENTORY WAS PREPARED. THESE ITEMS WERE FURTHER BI FURCATED IN TWO CATEGORIES; ONE IS VALUABLE ITEMS AND SECOND IS OTHER THAN VALUABLE ITEMS. THE TOTAL VALUE DERIVED AS ON 10.03.2015 WA S RS. ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 20 53,64,75,551/-. VALUABLE ITEMS WERE VALUED BY THE A PPROVED VALUER, WHILE VALUING THE ITEMS THE RATE OF PRECIOUS METALS AS WELL AS OTHER VALUABLES HAS BEEN TAKEN THE VALUE AS OF 10.03.2015 . THE OTHER THAN VALUABLE ITEMS HAVE BEEN VALUED ON THE BASIS OF MAR KET VALUE AS ON DATE OF SEARCH; WHICH IS FURTHER ON TENTATIVE BASIS AS EVIDENT FROM THE FACTS THAT SAME IS NOT ON THE BASIS OF ANY DOCUMENT ARY SUPPORT AND PERUSAL FURTHER SHOW ALMOST ALL ITEMS HAVE BEEN TAK EN IN ROUND OFF ON LUMP-SUM BASIS SUCH AS (I) OLD TEXTILE READYMADE ( STITCHED) WITHOUT MENTIONING THE NUMBER, SIZE, QUALITY, ONLY ON LUMP SUM ESTIMATED BASIS HAS BEEN VALUED AT RS. 98.50 LAKHS, (II) SILVER FOI LED WOODEN FIGURE, ALL ITEMS HAVE BEEN VALUED AT RS. 50 PER GRAM, IT IS IM PORTANT TO NOTE THAT IT IS ONLY SILVER FOIL NOT OF SILVER AND MAJOR WEIG HT IS OF WOODEN BUT VALUED AT SILVER RATE, (III) BRASS GOODS HAVE BEEN VALUED WITHOUT TAKING INTO ACCOUNT NUMBER, NATURE, SIZE ETC. ON LUMP SUM, (IV) MARBLE GOODS HAVE BEEN VALUED AT RS. 18 LAKHS WHEREAS DURING THE YEAR THERE IS NO PURCHASE AND VALUE OF OPENING STOCK TAKEN AT RS. 13 .09 LAKHS, (V) SAND STONE GOODS HAVE BEEN VALUED WITHOUT MENTIONING NUM BER, QUALITY, SIZE ETC. ON LUMP SUM BASIS, (VI) CAMEL BONE GOODS HAVE BEEN VALUED WITHOUT CONSIDERING THE NUMBERS, QUALITY ETC., (VII ) ENTRY NO. 49 AND 50 ON SHOWS THAT DIFFERENT KIND OF STONES HAVE BEEN V ALUED AT SAME PRICE, (VIII) SILVER ORNAMENTS OF 15 DIFFERENT TYPES, ALL HAVE BEEN VALUED AT RS. 100 PER GRAM WITHOUT SPECIFYING THE WEIGHT AND RATE OF THE STONE WHEREAS ALL ARTICLE MUST HAVE DIFFERENT WEIGHTS OF STONE, HOWEVER SAME HAVE BEEN VALUED AT RS. 100 PER GRAM, (IX) MIXED JE WELLERY WITHOUT SPECIFYING THE WEIGHT/ NATURE OF THE DIAMOND/ STONE / PEARL AND WITHOUT FINDING OUT THE NET WEIGHT, (X) MIXED JEWELLERY, TH E GROSS AND NET WEIGHT HAS BEEN TAKEN SAME WHEREAS IT IS 22 CARAT J EWELLERY ETC. ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 21 23. THE LD. AR FURTHER SUBMITTED THAT DURING THE SE ARCH NO INCRIMINATING DOCUMENTS FOUND WHICH SUGGEST ANY PUR CHASE WITHOUT RECORDING INTO THE BOOKS OF ACCOUNTS. THE ALLEGED U NDECLARED STOCK IS NOT CLEARLY IDENTIFIABLE OR DOES NOT HAVE INDEPENDE NT IDENTITY BUT IS INTEGRAL AND INSEPARABLE PART OF DECLARED STOCK. AS SESSEE IS DEALING IN THESE ITEMS, THEREFORE, ALL THESE ITEMS ARE STOCK I N TRADE FOR IT. FURTHER, ASSESSEE FIRM IS IN THIS TRADE SINCE 1974. ASSESSEE CONTINUOUSLY VALUES ITS STOCK AT ESTIMATED COST AS EVIDENT FROM THE NOT ES TO ACCOUNTS. THE INCOME SURRENDERED HAS BEEN DISCLOSED IN THE RETURN OF INCOME AS BUSINESS INCOME, WHICH HAS BEEN ACCEPTED AS IT IS I N THE ASSESSMENT ORDER. 24. IT WAS FURTHER SUBMITTED THAT WHAT EMERGES FROM THE FOREGOING DISCUSSION OF FACTS IS THAT BOTH THE INGREDIENTS OF WORKING OUT THE EXCESS STOCK I.E. STOCK AS PER BOOKS AND PHYSICAL STOCK AR E BASED ON ESTIMATION, APPROXIMATION AND FULL OF TENTATIVENESS . IT IS WELL KNOWN FACT THAT GROSS PROFIT RATE NEVER REMAIN CONSTANT. IT IS ALWAYS VARYING DEPENDING UPON THE COMPOSITION OF PRODUCT MIXED, MA RKET SCENARIO, NATURE OF CUSTOMER, FINANCIAL POSITION, VOLUME ETC. THE VALUE ADOPTED UNDER THE FACTS ARE MARKET VALUE AS ON DATE ON SEAR CH WHICH IS INCONSISTENT TO THE PRACTICE ADOPTED BY THE ASSESSE E I.E. AT ESTIMATED COST. LOOKING TO THE NATURE OF TRADE WHEREIN, VARIO US ITEMS TOOK EXORBITANT LONG TIME TO SELL, SINCE, ASSESSEE IS DE ALING WITH ANTIQUES AND PRECIOUS ITEMS UNDER THE FACTS IT BECOMES MORE IMPO RTANT TO WORK OUT THE ESTIMATED COST ALSO, WHICH HAS NOT BEEN WORKED OUT. UNDER THE FACTS THE WORKING OF EXCESS STOCK NOT ONLY ON APPRO XIMATE BASIS BUT ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 22 METHOD IS ALSO NOT BACKED WITH LEGAL PROVISIONS, WH ICH SAYS IT SHOULD BE WORKED OUT IN CONSISTENT MANNER. DUE TO THE DEFECTI VE METHOD OF WORKING OUT EXCESS STOCK, ASSESSEE HAVE BEEN IN FAC T TAXED ON EXPECTED PROFIT ON THE STOCK IN HAND, WHICH IS NOT THE INTEN T OF LAW AND DOES NOT FALL WITHIN THE DEFINITION OF TERM UNDISCLOSED INC OME. 25. IT WAS SUBMITTED THAT AN ANALYSIS OF DEFINITION OF TERM UNDISCLOSED INCOME GIVEN IN SECTION TO 271AAB SHO WS THAT THERE MUST BE UNDISCLOSED INCOME WHICH IS REPRESENTED EITHER W HOLLY OR PARTLY BY ANY MONEY, BULLION ETC. IT IS IMPORTANT TO NOTE THA T ACCORDING TO SECTION, THERE ARE TWO LIMBS OF UNDISCLOSED INCOME, ONE IS INCOME AND SECOND IS ASSETS OR EXPENDITURE. BOTH ARE EXCLUSIVE TO EACH OTHER AND CUMULATIVE IN NATURE. BY USING THE WORD REPRESENTE D, THE LEGISLATURE HAS DEPARTED FROM ITS INTENTION AND THE MEANING OF THE WORD UNDISCLOSED INCOME FROM THE MEANING PREVIOUSLY GI VEN TO THE UNDISCLOSED INCOME U/S 158B(B) WHICH IS AGAIN REPRO DUCED FOR READY REFERENCE:- UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLION, JE WELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON AN Y ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHER E SUCH MONEY, BULLIONS, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT, OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE . ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 23 26. IT WAS SUBMITTED THAT PERUSAL OF THE SAME SHOWS THAT THE DEFINITION OF UNDISCLOSED INCOME USES THE WORD INC LUDES MEANS NEITHER IT IS EXHAUSTIVE NOR INCOMES OR ASSETS/EXPENSES IS MUTUALLY EXCLUSIVE TO EACH OTHER. PERUSAL OF THE ABOVE DEFINITION SHOWS T HAT THERE SHOULD BE AN INCOME WHICH MUST BE REPRESENTED WHOLLY OR PARTL Y BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS . IN THE INSTANT CASE, NEITHER ANY MONEY, BULLION, JEWELLERY NOR OTH ER VALUABLE ARTICLE NOR THING NOR ANY ENTRY IN THE BOOKS OF ACCOUNT NOR OTHER DOCUMENTS NOR TRANSACTIONS FOUND. FURTHERMORE, THERE IS NO ID ENTIFIABLE/ SEPARABLE STOCK FOUND, WHICH CAN BE SAID AS UNDISCLOSED. 27. IT WAS SUBMITTED THAT IT IS ALSO RELEVANT TO NO TE THAT THERE ARE TWO SUB-CLAUSES TO THE CLAUSE (I) TO THE DEFINITION WHI CH IS CUMULATIVE IN NATURE WHILE READING THE CLAUSE (I) DEFINING THE ME ANING OF UNDISCLOSED INCOME. SUB-CLAUSE (A) SAYS THAT, NOT ONLY ANY INC OME REPRESENTED BY SUCH VALUABLES, DOCUMENTS OR TRANSACTIONS SHOULD BE FOUND BUT ALSO IT MUST NOT BE RECORDED ON OR BEFORE THE DATE OF SEARC H IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN REGULAR C OURSE RELATED TO SUCH PREVIOUS YEAR OR (B) NOT OTHERWISE BEEN DISCLO SED TO THE CHIEF- COMMISSIONER BEFORE THE DATE OF SEARCH. IN THE INST ANT CASE, THERE IS NOT A SINGLE ITEM/ DOCUMENT/TRANSACTION FOUND WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR NOT DISCLOSED TO CHIEF- COMMISSIONER. UNDER THE LAW AND THE FACTS, IT IS CLEAR THAT THERE IS NO UNDISCLOSED INCOME WITHIN THE MEANING GIVEN IN THE SAID SECTION. ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 24 28. IT WAS SUBMITTED THAT IT IS AN ADMITTED FACT TH AT THERE IS NO IDENTIFIABLE/SEPARABLE STOCK FOUND WHICH CAN BE SAI D AS UNDISCLOSED. MORE PARTICULARLY, ASSESSEE HAS NO UNEXPLAINED PURC HASES OR SALES. AT MOST WITHOUT ADMITTING THE EXCESS STOCK, IT IS A CA SE OF DIFFERENCE IN VALUE, WHEREIN SAME HAS BEEN WORKED OUT ON THE BASI S OF ESTIMATION, APPROXIMATION AND INCORRECT APPLICATION OF METHOD. UNDER THE FACTS AND CIRCUMSTANCES, THE DIFFERENCE IN VALUE IS DUE TO SU CH ESTIMATION AND DUE TO PROBABLE PROFIT ON STOCK IN TRADE TO BE ACCRUED. THERE IS NO REAL INCOME AND NO REAL EXCESS STOCK. WITHOUT ESTABLISHI NG REAL INCOME, NO PENALTY CAN BE IMPOSED PRESUMING THE HYPOTHETICAL I NCOME. 29. IT WAS SUBMITTED THAT IN THE INSTANT CASE, THE SURRENDER HAS BEEN MADE ON ACCOUNT OF EXCESS STOCK, IT IS NOT A CASE W HERE DURING SEARCH, UNACCOUNTED SALES OR UNEXPLAINED PURCHASES HAVE BEE N FOUND. THEREFORE, WHENEVER THE ASSESSEE WILL SELL THESE ST OCKS, THE RESULTED PROFIT WILL AUTOMATICALLY GET INCORPORATED IN ITS T AXABLE PROFITS. UNDER THE FACTS AND CIRCUMSTANCES, IN NO CASE THERE WOULD BE ANY UNDISCLOSED INCOME OF THE ASSESSEE, THEREFORE, PROVISION OF THI S SECTION IS NOT ATTRACTED IN THE INSTANT CASE. 30. IT WAS ACCORDINGLY SUBMITTED THAT FORGOING DISC USSIONS OF THE FACTS SHOWS THAT IT IS NOT THE CASE WHERE DEPARTMEN T EITHER FOUND ANY INCOME OR ANY ASSETS OR ANY EXPENSES NOT RECORDED I N THE REGULAR BOOKS OF ACCOUNTS OR DOCUMENTS, HENCE, DOES NOT MET THE D EFINITION OF UNDISCLOSED INCOME GIVEN IN SECTION 271AAB. IT IS C LEAR THAT INCREASE IN VALUE OF STOCK WILL AUTOMATICALLY REDUCE THE PROFIT IN FUTURE AT THE TIME OF SALE, THEREFORE, TO AVOID THE PROTRACTED AND IMP OSED LITIGATION AND TO ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 25 BUY PEACE OF MIND, SURRENDER WAS MADE AND DISCLOSED IN THE RETURN OF INCOME, AS IT WILL NOT IMPACT THE FINANCIAL TAX LIA BILITY IN TOTALITY. 31. IT WAS SUBMITTED THAT THE TURNOVER OF THE FIRM DURING THE YEAR WAS RS. 45.86 CRORES. THE DECLARED GROSS PROFIT AND NET PROFIT OF THE BUSINESS OF THE YEAR UNDER CONSIDERATION IS RS. 35. 34 CRORES AND RS. 29.30 CRORES RESPECTIVELY. THUS, G.P. RATE COMES TO 77.06% AND N.P. RATE COMES TO 63.90%. THIS FACT SHOWS THAT THE RESU LT SHOWN IS ABNORMAL AND NOT REFLECTING THE CORRECT PICTURE OF THE YEAR UNDER CONSIDERATION. IN NONE OF THE PREVIOUS ASSESSED YEA RS, ASSESSEE HAS EARNED THIS MUCH OF PROFIT. 32. IT WAS FURTHER SUBMITTED THAT A PERUSAL OF THE FINDING OF CIT(A) SHOWS THAT HE HAS CONFIRMED THE PENALTY BY OBSERVIN G THAT NO QUANTUM APPEAL HAS BEEN MADE. IT IS A CASE WHERE INCOME HAS BEEN OFFERED FOR TAXATION, THEREFORE QUESTION OF APPEAL DOES NOT ARI SES. LD. CIT(A) FAILED TO APPRECIATE THAT PENALTY PROCEEDING IS NOT CONTIN UATION OF ASSESSMENT PROCEEDING. FURTHER, HE HAS NOT APPRECIATED THE FAC TUAL AND LEGAL SUBMISSION MADE BEFORE HIM WHEREIN IT IS CONTENDED THAT THERE IS NO UNDISCLOSED INCOME IN TERM OF SECTION 271AAB. UNDER THE FACTS AND CIRCUMSTANCES, HIS FINDING IS MISPLACED AND BASED U PON THE WRONG PRESUMPTION. 33. THE LD AR PLACED RELIANCE ON THE DECISION OF TH E TRIBUNAL IN CASE OF MOTHUKURI SOMABRAHMAN VS. ACIT (ITA NO. 126/VIZA G/2017, VIDE ORDER DATED 16.03.2018) WHEREIN IT WAS HELD AS UNDE R: ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 26 9. PENALTY U/S 271AAB ATTRACTS ON UNDISCLOSED INCO ME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4). THE AO M UST ESTABLISH THAT THERE IS UNDISCLOSED INCOME ON THE BASIS OF IN CRIMINATING MATERIAL. IN THE INSTANT CASE A LOOSE SHEET WAS FOUND ACCORDI NG TO THE A.O., IT WAS INCRIMINATING MATERIAL EVIDENCING THE UNDISCLOS ED INCOME. IN THE PENALTY ORDER THE AO OBSERVED THAT LOOSE SHEET SHOW S THE COST PER SQUARE FEET IS RS. 3,571/- PER SFT. AND ASSESSEE ST ATED TO HAVE SUBMITTED IN SWORN STATEMENT COST PER SQ. FEET AT R S. 2,200/- TO RS. 2,300/- PER SQ. FEET. HOWEVER NEITHER THE AO NOR TH E LD. CIT(A) HAS VERIFIED THE COST OF CONSTRUCTION WITH THE BOOKS AN D PROJECTIONS FOUND AT THE TIME OF SEARCH. THE COUNSEL ARGUED THAT IT WAS MERE PROJECTION BUT NOT THE ACTUALS. THE WRITE UP HEADING ALSO MENTIONE D THAT SUMMARY OF THE PROJECTED PROFITABILITY STATEMENT. THERE IS NO EVIDENCE TO ESTABLISH THAT PROJECTIONS REFLECTED IN THE LOOSE SHEET IS RE AL. NO OTHER MATERIAL 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 DOCUMENT S TRANSACTIONS WERE FOUND DURING THE COURSE OF SEARCH INDICATING THE AS SETS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, WHOLLY OR PARTLY. THE REVENUE DID NOT FIND ANY UNDISCLOSED ASSET, ANY OTHER UNDISCLOSED INCOME OR THE INFLATIO N OF EXPENDITURE DURING THE SEARCH/ASSESSMENT PROCEEDINGS. THOUGH A LOOSE SHEET OF PAGE NO. 107 OF ANNEXURE A/GS/MA/1 WAS FOUND THAT D OES NOT INDICATE ANY SUPPRESSION OF INCOME BUT IT IS ONLY PROJECTION OF PROFIT STATEMENT. THE AMOUNT OF RS. 3,571/- MENTIONED IN THE PROJECTI ONS REFERS TO COST AND PROFIT WHICH IS APPROXIMATE SALE PRICE BUT NOT THE COST AS STATED BY THE AO IN THE PENALTY ORDER. THE COST OF CONSTRUCTI ON IN THE PROJECTIONS ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 27 PROJECTED AT RS. 2,177/- WHICH IS IN SYNCH WITH THE STATEMENT GIVEN BY THE ASSESSEE. THE AO WAS HAPPY WITH THE DISCLOSURE GIVEN BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSITION WI TH THE BOOKS OF ACCOUNTS AND PROJECTIONS AND BRING THE EVIDENCE TO UNEARTH THE UNDISCLOSED INCOME. NEITHER THE A.O. NOR THE INVEST IGATION WING LINKED THE COST OF PROFIT OR COST OF ASSET TO THE ENTRIES IN THE BOOKS OF ACCOUNTS OR TO THE SALES CONDUCTED BY THE ASSESSEE TO THE SA LE DEEDS. THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE REVEN UE THAT THE LOOSE SHEET FOUND DURING THE COURSE OF SEARCH INDICATES A NY UNDISCLOSED INCOME OR ASSET OR INFLATION OF EXPENDITURE. THE HO NBLE ITAT DELHI BENCH IN THE CASE OF AJAY SHARMA VS. DCIT (2012) 32 CCH 334 HELD THAT WITH RESPECT TO THE ADDITION ON ACCOUNT OF ALL EGED RECEIVABLES AS PER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT ANY INCOME RECEIVED BY THE ASSESSEE HAS NOT BE EN DECLARED BY THE ASSESSEE. AN ADDITION HAS BEEN MADE ON THE BASIS OF LOOSE DOCUMENT, WHICH DID NOT CLOSELY PROVE ANY CONCEALMENT OR FURN ISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. HENCE PENALTY U/S 158BFA (2) OF THE ACT IS NOT LEVI ABLE. THE FACTS OF THE ASSESSEES CASE SHOWS THAT THERE W AS NO UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND NO INC RIMINATING MATERIAL WAS FOUND, HENCE WE HOLD THAT THERE IS NO CASE FOR IMPOSING PENALTY U/S 271AAB OF THE ACT, ACCORDINGLY, WE SET ASIDE THE OR DER OF THE LOWER AUTHORITIES AND CANCEL THE PENALTY U/S 271AAB OF TH E ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 28 34. IT WAS FURTHER SUBMITTED THAT SINCE AMOUNT OF E XCESS STOCK HAS BEEN WORKED OUT ON ESTIMATION AND BY APPLYING WRONG METHOD AS EXPLAINED HEREIN BEFORE, EVEN ON ESTIMATED ADDITION OR INCOME, NO PENALTY CAN BE IMPOSED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS IN CASE CIT VS. RAHARNAT KHAN BIRBAF KHAN BADRUDDIN & PARTY (1999) 240 ITR 778 (RAJ), IN CASE OF HARI GOPAL SINGH VS. CIT [2002] 258 ITR 85 (P&H), IN CASE OF CIT VS. RAVAIL SINGH & CO.[200 2] 254 ITR 191 (P&H), IN CASE OF CIT V. RAJ BANS SINGH [2005] 276 ITR 351 (ALL), IN CASE OF J. A. TRIVEDI BROS. V. CIT [1986] 158 ITR 705 (MP) AND IN CASE OF BOMBAY HARDWARE SYNDICATE V. CIT [1978] 114 ITR 586 (MAD). 35. IT WAS FINALLY SUBMITTED THAT IT IS CLEAR THAT PENALTY HAS BEEN IMPOSED WITHOUT CONSIDERING THE ARGUMENT MADE BEFOR E THE A.O. AND LD. CIT(A), FURTHER, AS DEMONSTRATED HEREINBEFORE B ASIC INGREDIENTS OF IMPOSING PENALTY U/S 271AAB I.E. ANY INCOME REPRESE NTED BY CERTAIN TYPE OF ASSETS IS MISSING IN THE INSTANT CASE. THE PENALTY PROVISION HAS TO READ STRICTLY WITHOUT IMPORTING ANY WORD OR MEAN ING TO UNAMBIGUOUS WORDS AND SENTENCES USED IN THE SECTION. UNDER THE FACTS, CIRCUMSTANCES AND LAW, IT IS REQUESTED TO DELETE TH E PENALTY WHICH IS IMPOSED @ 10% U/S 271AAB BY LD.AO AND CONFIRMED BY LD. CIT(A). PENALTY ON ADVANCE GIVEN TO PARTIES 36. IT WAS SUBMITTED THAT RS. 70,25,000/- WAS SURRE NDERED AS ADVANCE TO PARTIES, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT IN THE STATEMENT RECORDED U/S 132(4). PERUSAL OF THE F ACTS SHOWS THAT ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 29 THERE IS A DIARY WHICH WAS PLACED IN THE DRAWER OF A TABLE. ON THE FIVE PAGES OF THE DIARY, CERTAIN NOTING WAS THERE. OUT O F WHICH NOTING CONTAINED ON PAGE NOS. 1, 2 AND 4 HAVE BEEN CONSIDE RED AS AN INCOME. IT IS AN IMPORTANT TO NOTE THAT ENTRIES IN DIARY IT SELF DO NOT REPRESENT INCOME OF THE ASSESSEE. IT ALSO DOES NOT REPRESENT THAT IT IS RELATED TO THE YEAR UNDER CONSIDERATION. IN THE INSTANT CASE, NO INCRIMINATING DOCUMENTS FOUND WHICH SUGGEST THAT ASSESSEE HAS EAR NED ANY UNDISCLOSED INCOME PERTAINING TO YEAR UNDER CONSIDE RATION. THEREFORE, IN ALL PROBABILITIES, IT MAY BE RELATED TO THE PREC EDING YEARS, HENCE, INVESTMENT BY WAY OF ADVANCES ITSELF DOES NOT REVEA L THE NATURE OF INCOME AND SOURCE OF INCOME OF THE YEAR UNDER CONSI DERATION. HENCE, IT IS NOT THE UNDISCLOSED INCOME AS DEFINED IN THE SEC TION 271AAB. 37. IT WAS SUBMITTED THAT ALTERNATIVELY, IT IS RELE VANT TO NOTE THAT ENTRIES UNDER CONSIDERATION IS NOTED IN A DIARY AND PLACED UNDER PROPER SECURITY, IT IS SO BECAUSE IT PROVES THAT ASSESSEE DOES NOT HAVE GUILTY MIND AND INTENTION TO CONCEAL THE INCOME. IT ALSO D OES NOT PROVE THAT HAD THERE BEEN NO SUCH OPERATION, THE ASSESSEE WOUL D NOT HAVE DECLARED SUCH INCOME IN RETURN OF INCOME. THE SAID PRESUMPTION IS NOT TENABLE IN LAW AS AMPLE TIME WAS LEFT FOR FILING TH E RETURN OF INCOME. THE LD. A.O. HAS NOT BROUGHT ON RECORD ANYTHING TO PROVE THE INTENTION OF THE ASSESSEE OTHERWISE; FURTHER, EVEN HE HAS NOT DOUBTED THE INTENTION OF THE ASSESSEE. PERUSAL OF CLAUSE (I) AN D (II) TO EXPLANATION (C) TO SECTION 271AAB REPRODUCED HEREINBEFORE SHOWS THA T ANY ENTRY CAN BE TERMED AS UNDISCLOSED INCOME ONLY IF EITHER IT IS NOT ENTERED IN THE BOOKS OF ACCOUNTS OR DOCUMENTS MAINTAINED IN NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR OR OTHERWISE NOT BEEN DISCLOSED. IT IS RELEVANT TO ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 30 NOTE THAT ENTRIES UNDER CONSIDERATION WERE NOTED IN A DAIRY USED AS MEMORANDUM BOOK AS EVIDENT FROM THE FACT THAT SAID DIARY CONTAINS ENTRIES THROUGH BANK AS WELL AS CASH, WHICH ITSELF SHOWS THAT IT WAS MAINTAINED IN NORMAL COURSE RELATING TO PREVIOUS YE AR. FURTHER, AS FAR AS INTENTION OF NOT TO BE DISCLOSED, NEITHER DOUBTED N OR IT IS A CASE OF THE A.O. UNDER THE FACTS AND CIRCUMSTANCES, IT DOES NOT FALL UNDER THE DEFINITION OF UNDISCLOSED INCOME. JURISDICTIONAL ITAT IN CASE OF SHRI RAVI MATHUR VS. DCIT, CC-4, ITA NO. 969/ JP/2017 VI DE ORDER DATED 13 TH JUNE,2018 AND SHRI SURESH CHAND MITTAL VS. DCIT, CC -2, ITA NO. 931/JP/2017 VIDE ORDER DATED 02.07.2018 HAS OBSERVE D THAT THE DIARY MAINTAINED IS OTHER DOCUMENT MAINTAINED IN REGULAR COURSE, IN THE FACTS AND CIRCUMSTANCES OF THAT CASE. 38. PER CONTRA, THE LD. DR SUBMITTED THAT UNDISPUTE D FACTS ARE THAT THE ASSESSEE HAS MADE DISCLOSURE OF RS. 25,80,28,88 8/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SEARCH, WHICH WAS NOT RECORDED IN ITS REGULAR BOOKS OF ACCOUNTS. DURING THE PROCEEDINGS BEFORE THE LD. C1T(A), IT HAS BEEN SUBM ITTED BY THE ASSESSEE THAT THE STOCK WAS VALUED ON THE BASIS OF ESTIMATION ONLY. HOWEVER, IT IS TO BE NOTED THAT THE VALUATION MADE BY THE DEPARTMENT VALUER DURING THE SEARCH PROCEEDINGS WAS ACCEPTED TO BE TRUE AND FAIR BY THE ASSESSEE FIRM IN THE STA TEMENT RECORDED U/S 132(4). A REFERENCE MAY ALSO MADE TO SCHEDULE 1 6 RELATING TO SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUN TS WHEREIN IT HAS BEEN MENTIONED THAT THE ASSESSEE FIRM DOES NOT MAINTAIN ITEM WISE PURCHASE AND SALES AND NO STOCK REGISTER HAS BEEN MAINTAINED AND THE ESTIMATED COST OR THAT REALIZABL E VALUE ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 31 INVOLVES TECHNICAL JUDGMENTS OF PARTNER, WHICH HAS BEEN RELIED UPON BY THE AUDITORS. THUS, NOW NO ISSUE CAN BE RAI SED ABOUT THE VALUATION OF STOCK FOUND DURING THE COURSE OF SEARC H. FURTHER, THE ASSESSEE FIRM HAS INCORPORATED THE EXCESS STOCK IN ITS BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. THE ASSE SSEE FIRM HAS ACCEPTED THE SAME AS UNDISCLOSED INCOME IN ITS STAT EMENT RECORDED U/S 132(4) OF THE ACT. THUS, THE EXCESS ST OCK IS CLEARLY COVERED UNDER THE DEFINITION OF UNDISCLOSED INCOME. IT WAS FURTHER SUBMITTED THAT UNDISPUTED FACT THAT THE ENTRIES REL ATING TO ADVANCES MADE FOR PURCHASES OF LAND WERE NOT RECORD ED IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED IN THE NORMAL COURSE OF BUSINESS. THUS, IN VIEW OF THE ABOVE DISCUSSION, IT IS CRYSTAL CLEAR THAT THE UNDISCLOSED INCOME DECLARED BY THE ASSESSE E U/S 132(4) OF THE ACT IS SQUARELY COVERED BY THE DEFINITION OF UNDISCLOSED INCOME. OTHERWISE, IT IS DIFFICULT TO COMPREHEND U NDER WHAT CONDITIONS AND SITUATIONS, THE INCOME DECLARED BY T HE ASSESSEES WOULD FALL UNDER THE DEFINITION OF UNDISCLOSED INC OME. IN SUPPORT, RELIANCE WAS PLACED ON DECISION IN CASE OF SONAL STEEL TRADING PVT. LTD. VS. ACIT (ITA NO. 396/CHNY/2018 DATED 23.07.2018). IT WAS ACCORDINGLY SUBMITTED THAT THE PENALTY IMPOS ED BY THE AO U/S 271AAB SHOULD BE SUSTAINED. 39. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS A SETTLED PROPOSITION TH AT PENALTY PROVISIONS NEED TO BE CONSTRUED STRICTLY. FOR THE PURPOSES OF LEVY OF PENALTY U/S 271AAB, WHAT HAS TO BE DETERMINED IS WHETHER THE SU RRENDER SO MADE, IN TERMS OF STATEMENT OF THE ASSESSEES PARTNER REC ORDED U/S 132(4) ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 32 DURING THE COURSE OF SEARCH, FALLS IN THE DEFINITIO N OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR WHICH HAS BE EN SPECIFICALLY LAID DOWN IN TERMS OF CLAUSE (C) OF EXPLANATION TO SECTI ON 271AAB WHICH READS AS UNDER: (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME O F THE SPECIFIED PREVIOUS YEAR REPRESENTED, 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 SU CH PREVIOUS YEAR; OR (B) OTHERWISE 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, EITHE R 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 ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 33 WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED. 40. IN THE INSTANT CASE, STOCK OF GEMS, GOLD, SILV ER AND STUDDED JEWELLERY, PRECIOUS AND SEMI-PRECIOUS STONES, WOODE N ARTICLES, IVORY ITEMS, MARBLE ITEMS, OTHER HANDICRAFT ITEMS AND TEX TILE AND READYMADE GOOD WERE FOUND DURING THE COURSE OF SEARCH. THESE ARE GOODS WHICH ARE REGULARLY TRADED BY THE ASSESSEE AND ARE THUS S TOCK-IN-TRADE OF THE ASSESSEE FIRM. IN THIS REGARD, WHAT HAS TO BE DETE RMINED IS THE INCOME OF SUCH PREVIOUS YEAR WHICH IS REPRESENTED BY SUCH STOCK OF GOODS WHICH IS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT S MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE RELATING TO SUCH PREV IOUS YEAR. THE VALUATION OF SUCH EXCESS STOCK IS REQUIRED TO DETER MINE THE INVESTMENT WHICH HAS BEEN MADE IN SUCH EXCESS STOCK AND WHICH HAS REMAINED UNDISCLOSED TO THE REVENUE AUTHORITIES. THE INVEST MENT IN STOCK IS THUS THE FUNCTION OF PRICE OR COST AT WHICH STOCK HAS BE EN PURCHASED BY THE ASSESSEE AND THEREFORE, WHAT IS TO BE DETERMINED AT THE COST PRICE OF SUCH STOCK AND NOT THE MARKET PRICE. WHERE SUCH STO CK IS ULTIMATELY SOLD, ANY PROFIT ARISING THEREFROM WOULD BE BROUGHT TO TAX IN REGULAR COURSE AND THE DETERMINATION OF MARKET PRICE WOULD BE RELEVANT AT THAT POINT IN TIME. IN OTHER WORDS, THE VALUE AT WHICH SUCH STOCK HAS BEEN ACQUIRED BY THE ASSESSEE AND NOT THE VALUE WHICH SU CH STOCK CAN FETCH IN THE MARKET OR THE FAIR MARKET VALUE OF SUCH STOC K IS TO BE DETERMINED. 41. IN THE INSTANT CASE, IT IS NOTED THAT THE ASSES SEE IN THE PENALTY PROCEEDINGS BEFORE THE ASSESSING OFFICER AND THEREA FTER DURING THE APPELLATE PROCEEDINGS BEFORE THE LD CIT(A) HAS CONT ENDED THAT THE VALUATION OF THE GOODS CLASSIFIED AS VALUABLE ITEM S HAS BEEN DONE AT ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 34 MARKET RATE AS ON THE DATE OF SEARCH AND IN RESPECT OF GOODS CLASSIFIED AS OTHER THAN VALUABLE ITEMS, BESIDES THE FACT TH AT VALUATION HAS BEEN DONE ON THE BASIS OF MARKET VALUE, THE VALUATION SO DONE IS TENTATIVE AND ON LUMP-SUM BASIS. IT HAS BEEN CONTENDED THAT V ALUATION HAS BEEN DONE WITHOUT CONSIDERING THE COST DISCLOSED IN THE REGULAR BOOKS OF ACCOUNTS AND WITHOUT CONSIDERING THE WELL-ACCEPTED ACCOUNTING POLICY WHICH HAS BEEN FOLLOWED BY THE ASSESSEE FIRM WHERE IT VALUES ITS STOCK AT LOWER OF COST AND NET REALIZABLE VALUE. WE FIND THAT IN THE PENALTY PROCEEDINGS, THERE IS NO SUCH EXERCISE WHICH HAS BE EN UNDERTAKEN BY THE ASSESSING OFFICER TO DETERMINE THE COST OF THE GOODS SO FOUND DURING THE COURSE OF SEARCH. THE ASSESSING OFFICER HAS ME RELY GONE BY THE SURRENDER MADE DURING THE COURSE OF SEARCH AND SUCH SURRENDER HAS BEEN MADE BASED ON MARKET VALUE AS ON THE DATE OF S EARCH. IN OUR VIEW, GIVEN THAT THE ASSESSEE HAS DISCLOSED THE WHO LE OF THE AMOUNT SURRENDERED DURING THE COURSE OF SEARCH IN ITS RETU RN OF INCOME, THE AMOUNT SO SURRENDERED AND DISCLOSED IN THE RETURN O F INCOME IS SUBJECT MATTER OF ASSESSMENT AND HAS RIGHTLY BEEN BROUGHT T O TAX IN THE QUANTUM PROCEEDINGS. HOWEVER, AS FAR AS PRESENT PE NALTY PROCEEDINGS U/S 271AAB ARE CONCERNED WHICH IS SOLELY BASED ON T HE SEARCH PROCEEDINGS AND ANYWAYS INDEPENDENT OF THE ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER IS REQUIRED TO GIVE A SPECIFI C FINDING THAT THERE IS AN UNDISCLOSED INCOME FOUND DURING THE COURSE OF SE ARCH IN TERMS OF UNDISCLOSED STOCK AND WHICH HAS NOT BEEN RECORDED I N THE BOOKS OF ACCOUNT. THE UNDISCLOSED STOCK COULD BE IN TERMS OF PHYSICALLY IDENTIFIABLE STOCK NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS OR THE STOCK NOT FOUND RECORDED AT THE APPROPRIATE VALUE S O DETERMINED BY THE ASSESSING OFFICER. IN THE INSTANT CASE, WE FIND THA T THE ASSESSING OFFICER ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 35 HAS MERELY GONE BY THE SURRENDER STATEMENT WHERE TH E STOCK HAS BEEN VALUED AT MARKET PRICE PREVAILING AS ON THE DATE OF SEARCH AND HAS NOT EXAMINED THE MATTER FROM THE PERSPECTIVE OF DETERMI NING SEPARATE IDENTIFIABLE STOCK NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS AND ALSO THE COST OF SUCH STOCK WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. THERE IS NO FINDING THAT THERE IS ANY EXCESS STOCK WHICH HAS BEEN PHYSICALLY FOUND AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH. IN LIGHT OF ABO VE DISCUSSIONS, IT IS THUS CLEAR THAT DIFFERENCE IN STOCK OF GOODS AS PER BOOKS AND AS FOUND AT THE TIME OF SEARCH IS ON ACCOUNT OF VALUATION OF SUCH STOCK AT THE MARKET VALUE INSTEAD OF COST AND THE SAME CANNOT BE A BASIS TO HOLD THAT IT REPRESENT UNDISCLOSED INCOME SO DEFINED IN EXPLANATION TO SECTION 271AAB OF THE ACT AND THE PENALTY LEVIED THEREON IS LIABLE TO BE SET- ASIDE. 42. NOW, COMING TO SURRENDER MADE ON ACCOUNT OF CAS H ADVANCES FOR LAND PURCHASES IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. DURING THE COURSE OF SEARCH, A DIARY HAS BEEN FOUND WHEREI N THERE ARE NOTINGS RELATING TO ADVANCE GIVEN TO VARIOUS PERSONS TOWARD S PURCHASE OF LAND. THEREFORE, WHAT HAS BEEN FOUND DURING THE COURSE OF SEARCH IS CERTAIN ENTRIES RELATING TO UNDISCLOSED INVESTMENT IN PURCH ASE OF LAND. BESIDES THE SAID ENTRIES, THERE ARE NO OTHER DOCUMENTS/MATE RIAL IN TERMS OF ANY AGREEMENT TO SELL, THE DESCRIPTION OF THE PROPERTY ETC, WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. AS PER THE DEFI NITION OF UNDISCLOSED INCOME U/S 271AAB, THE UNDISCLOSED INVESTMENT IN SO CALLED PURCHASE OF LAND CANNOT BE STATED TO BE INCOME WHICH IS REPRESE NTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG. WHETHER IT CAN THEN ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 36 BE SAID THAT SUCH UNDISCLOSED INVESTMENT REPRESENTS INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132. AN INVESTMENT PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSESSEES HAND AND AN INCOME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE. THEREFORE, ONCE THERE IS AN INFLOW OF FU NDS BY WAY OF INCOME, THERE COULD BE SUBSEQUENT OUTFLOW BY WAY OF INVESTMENT. INVESTMENT 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 F UNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN FOUND RECORDED BY WAY O F ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH 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. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVA NCE FOR PURCHASE OF LAND CAN BE SUBJECT MATTER OF ADDITION IN THE QU ANTUM PROCEEDINGS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RE TURN OF INCOME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UN DISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANA TION THERETO AND PENALTY SO LEVIED THEREON DESERVED TO BE SET-ASIDE. 43. WE ARE ALSO CONSCIOUS OF THE FACT THAT THERE AR E DEEMING PROVISIONS IN TERMS OF SECTION 69, 69A AND 69B WHER EIN SUCH ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 37 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, 69A AND SECTION 69B WHERE INVESTM ENTS WHICH ARE FOUND EITHER NOT RECORDED OR FOUND RECORDED AT A LE SSER 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 CON TEXT 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 ARE CONTAINED IN SECTION 69, 69A 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 MAT TER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS IN THE INSTANT CASE. THEREFORE, EVEN O N THIS ACCOUNT, THE DEEMING FICTION CANNOT BE EXTENDED TO THE PENALTY P ROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCE EDINGS 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 CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE THE SAME HAS BEEN DE FINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. ITA NO. 236/JP/2018 M/S SILVER & ART PALACE VS. DCIT 38 44. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY U/S 271AAB I S DIRECTED TO BE DELETED ON AMOUNT OF SURRENDER MADE DURING THE COUR SE OF SEARCH IN ABSENCE OF THE SAME QUALIFYING AS UNDISCLOSED INCOM E AS SO DEFINED UNDER SECTION 271AAB OF THE ACT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/02/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/02/2019. * SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SILVER & ART PALACE, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-4, 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. 236/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR