SHRI VIMAL CHAND SURANA, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 304/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4780 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Jaipur
• Assessment Year: 2015-2016
• Appeal Filed On: 05-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Search and seizure; Salary income; Document seized; Opportunity of being heard; Principle of natural justice; Question of law; Initiation of penalty proceedings; Reasonable cause; Block assessment; Documents seized; Set aside
• Section: 32; 69; 27; 132; 271(1)(c); 139; 273B; 143(3); 153A; 69B; 250; 292BB; 274; 139(1); 44AB; 73; 72; 13; 158BFA; 22; 101; 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, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 304/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16. SHRI VIMAL CHAND SURANA, B-7, SURANA ENCLAVE, RAM SINGH ROAD, OPP. SMS HOSPITAL, JAIPUR. CUKE VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AFEPS 6866 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) & SHRI RAJNI KANT BHATRA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.04.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/05/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 14.12.2017 OF LD. CIT (A)-4, JAIPUR ARISING FROM PENALTY ORDER PA SSED UNDER SECTION 271AAB OF THE IT ACT FOR THE A.Y. 2015-16. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS :- 1. THAT THE NOTICE ISSUED BY ASSESSING OFFICER FO R INITIATING THE PENALTY U/S 271AAB OF THE I.T. ACT, 1961 IS NOT IN ACCORDANCE WITH LAW NOT BEING SPECIFICALLY POINTING OUT THE DE FAULT FOR WHICH THE LD. A.O. SOUGHT TO IMPOSE PENALTY U/S 271AAB. 2. THAT WITHOUT PREJUDICE TO THE GROUND NO. (1) ABO VE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A ) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIRMING PENALTY O F RS. 1,09,98,000/- IMPOSED BY THE LD. ASSESSING OFFICER U/S 271AAB OF THE I.T. ACT, 1961. 3. THAT THE APPELLANT CRAVES THE PERMISSION TO ADD TO OR AMEND TO ANY OF THE ABOVE GROUNDS OF APPEAL OR TO WITHDRAW A NY OF THEM. 2 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 2. THE ASSESSEE IS AN INDIVIDUAL AND ABOUT 80 YEARS OF AGE. THE ASSESSEE DERIVES INCOME FROM SALARY, HOUSE PROPERTY AND OTHE R SOURCES. THE ASSESSEE IS PARTNER IN THE PARTNERSHIP FIRM AND ALSO DIRECTOR I N VARIOUS COMPANIES. THERE WAS A SEARCH AND SEIZURE UNDER SECTION 132 OF THE IT ACT ON 15.10.2014 AT THE RESIDENCE AND BUSINESS CONCERN OF M/S. BHURAMAL RAJMAL SURANA , A PROPRIETORSHIP CONCERN OF SHRI VIMAL CHAND SURANA HUF. DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING DOCUMENTS CONTAINING THE ENTRIES OF ADVANCE, UNACCO UNTED STOCK AT BUSINESS PREMISES AS WELL AS RESIDENCE, CASH AT THE RESIDENC E OF THE ASSESSEE AND JEWELLERY AT THE RESIDENCE OF THE ASSESSEE WERE FOUND AND SEIZED . IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE IT ACT, THE ASSESSEE DI SCLOSED/SURRENDERED INCOME OF RS. 10,99,80,000/-. THE ASSESSEE FILED HIS RETURN OF INCOME UNDER SECTION 139(1) ON 2 ND SEPTEMBER, 2015 DECLARING TOTAL INCOME OF RS. 11,2 6,92,000/- INCLUDING THE SURRENDER OF ADDITIONAL INCOME OF RS. 10,99,80,000/ -. THE AO WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) ON 20 TH DECEMBER, 2016 ACCEPTED THE RETURNED INCOME. HOWEVER, PENALTY PROCEEDINGS UNDER SECTION 271AAB WERE INITIATED BY ISSUING NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE IT ACT. THE AO PASSED THE PENALTY ORDER UNDER SECTION 271AAB ON 14 .06.2017 WHEREBY A PENALTY OF RS. 1,09,98,000/- BEING 10% OF UNDISCLOSED INCOME W AS LEVIED. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE LD. CIT (A) HAS CONFIRMED THE LEVY OF PENALTY BY HOLDING THAT LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY IN NATURE AND, THEREFORE, ONCE THE ASS ESSEE HAS DISCLOSED UNDISCLOSED INCOME, THE PENALTY UNDER SECTION 271AAB IS MANDATO RY AND THERE IS NO IMMUNITY OR 3 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. ESCAPEMENT FROM IMPOSITION OF THE PENALTY. THE LD. A/R HAS FURTHER SUBMITTED THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 274 REA D WITH SECTION 271AAB ARE ALSO NOT VALID WHEN THE AO HAS NOT SPECIFIED THE GROUNDS IN THE SHOW CAUSE NOTICE. THE LD. A/R HAS CONTENDED THAT THE AO HAS NEITHER SPECI FIED THE UNDISCLOSED INCOME ON WHICH THE PENALTY WAS TO BE LEVIED NOR HAS SPECIFIE D THE DEFAULT OF THE ASSESSEE ATTRACTING THE QUANTUM OF PENALTY WHETHER 10%, 20% OR 30% OF UNDISCLOSED INCOME AS PRESCRIBED IN CLAUSE (A), (B) AND (C) OF SECTION 271AAB(1) OF THE IT ACT. THUS NON-SPECIFICATION OF THE LIMB OR GROUND BY THE AO I N THE SHOW CAUSE NOTICE HAS RESULTED NOT GIVING A PROPER OPPORTUNITY TO THE ASS ESSEE TO RESPOND TO THE SHOW CAUSE NOTICE AND, THEREFORE, THERE IS A VIOLATION O F PRINCIPLES OF NATURAL JUSTICE. THE LD. A/R HAS CONTENDED THAT IN A SERIES OF DECISIONS IT HAS BEEN HELD THAT THE ASSESSEE SHOULD KNOW THE GROUNDS ON WHICH THE AO PROPOSED TO LEVY THE PENALTY SO THAT HE HAS TO MEET THE CHARGES LEVIED BY THE AO, OTHERWISE , THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR.) AS WELL AS THE DECISION IN CASE OF C IT VS. M/S. SSAS EMERALD MEADOWS, 73 TAXMANN.COM 241 WHICH WAS CHALLENGED BY THE REVENUE BEFORE THE HONBLE SUPREME COURT BUT THE SLP OF THE REVENUE WA S DISMISSED BY THE HONBLE SUPREME COURT REPORTED IN 242 TAXMAN 180. THE LD. A/R HAS ALSO RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N CASE OF RAVI MATHUR VS. DCIT IN ITA NO. 969/JP/2017 DATED 13.06.2018. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SHEVET A CONSTRUCTION CO. PVT. LTD. IN DBIT APPEAL NO. 534/2008 DATED 06.12.2016 AND SUBMI TTED THAT THE HONBLE HIGH COURT HAS ALSO TAKEN A SIMILAR VIEW AS TAKEN BY THE HONBLE KARNATAKA HIGH COURT IN 4 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) . THE LD. A/R HAS THEN RELIED UPON THE DECISION OF THIS TRIBUNAL DATED 05.04.2019 IN CASE OF SHRI PADAM CHAND PUNGLIYA VS. ACIT IN ITA NO. 112/JP/2018. THUS HE HAS SUBMITTED THAT IN ALL THESE DECISIONS IT HAS BEEN HELD THAT THE DEFECT IN THE S HOW CAUSE NOTICE RENDERS THE INITIATION OF PROCEEDINGS ILLEGAL AND CONSEQUENTLY THE ORDER PASSED UNDER SECTION 271AAB OF THE IT ACT IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. 4. ON THE MERITS, THE LD. A/R HAS SUBMITTED THAT TH E LD. CIT (A) HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY I N NATURE, HOWEVER, THE TRIBUNAL IN A SERIES OF DECISIONS HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AB IS NOT MANDATORY BUT THE SAME IS DISCRETIONARY. IN SUPPOR T OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISIONS :- M/S. RAMBHAJOS VS. ACIT ITA NO. 991/JP/2017 DATED 11.01.2019. SHRI RAVI MATHUR VS. DCIT ITA NO. 969/JP/2017 DATED 13.06.2018. SHRI PADAM CHAND PUNGLIYA VS. ACIT ITA NO. 112/JP/2018 DATED 05.04.2019. HENCE, THE LD. A/R HAS SUBMITTED THAT THE IMPUGNED ORDER OF THE AO AS WELL AS THE LD. CIT (A) ARE BASED ON PRESUMPTION OF INCORRECT L AW AND FACTS AND, THEREFORE, NOT SUSTAINABLE IN LAW. 5. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE AO ISSUED NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB FOR THE CHARGE OF (1) HAVE CONCEALED THE PARTICULARS OF INCOME/FURNISHED INACCURATE PARTICUL ARS OF INCOME, (2) HAVE UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 27 1AAB OF THE ACT. THE LD. D/R HAS RELIED UPON THE DECISION OF HONBLE ALLAHABAD H IGH COURT IN CASE OF PCIT VS. 5 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. SANDEEP CHANDAK, 93 TAXMANN.COM 405 (ALLAHABAD) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS OBSERVED THAT PENALTY UNDER SECTION 271AAB IS AUTOMATICALLY ATTRACTED. HE HAS ALSO RELIED UPON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF SHRI RAJENDRA KUMAR GUPTA VS. DCIT IN IT A NO. 359/JP/2017 DATED 18.01.2019 AS WELL AS IN CASE OF SHRI RAJA RAM MAHE SHWARI VS. DCIT IN ITA NO. 992/JP/2017 AND SUBMITTED THAT THE TRIBUNAL HAS HEL D THAT ONCE THE AO HAS ISSUED SHOW CAUSE NOTICE FOR LEVY OF PENALTY UNDER SECTION 271AAB, NO FAULT CAN BE FOUND IN THE SHOW CAUSE NOTICE. THE LD. D/R HAS FURTHER SUB MITTED THAT EVEN IN CASE OF RAMBHAJOS VS. ACIT IN ITA NO. 991/JP/2017 THE TRIB UNAL HAS TAKEN A SIMILAR VIEW AND REJECTED THE OBJECTION OF THE ASSESSEE REGARDIN G VALIDITY OF INITIATION OF PENALTY. THE LD. D/R HAS THEN REFERRED TO THE FINANCE BILL 2 012 THEREBY A NEW SECTION 271AAB WAS INSERTED AND SUBMITTED THAT THE LEGISLATURES HA VE MADE IT CLEAR THAT THE ASSESSEE SHALL PAY BY WAY OF PENALTY IN ADDITION TO TAX A SUM COMPUTED @ 10%, 20% OR 30% AS THE CASE MAY BE. HENCE THE LEVY OF PE NALTY IS MANDATORY IN NATURE. HE HAS FURTHER REFERRED TO SECTION 273B AND SUBMITT ED THAT THE REASONABLE EXPLANATION IN CASE OF PENALTY UNDER SECTION 271AAB IS NOT AVAILABLE TO THE ASSESSEE AS PROVIDED UNDER SECTION 273B OF THE IT ACT. THER EFORE, ALL THESE PROVISIONS MAKE IT CLEAR THAT THE LEVY OF PENALTY UNDER SECTION 271 AAB IS MANDATORY IN NATURE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS ISSUED SHOW CAUSE NOTICE DATED 20 TH DECEMBER, 2016, 10 TH MARCH, 2017 AND 15 TH MAY, 2017. ALL THESE SHOW CAUSE NOTICES ARE IDENT ICAL OR THE MERE IMAGE OF EACH OTHER EXCEPT THE DATE. FOR THE PURPOSE OF REFERENCE, WE REPRODUCE THE SHOW CAUSE NOTICE DATED 15 TH MAY, 2017 AS UNDER :- 6 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 7 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THUS THE AO HAS ISSUED THESE SHOW CAUSE NOTICES TO LEVY THE PENALTY UNDER SECTION 271AAB WITHOUT SPECIFYING THE UNDISCLOSED INCOME WH ETHER A PART OF THE SURRENDER MADE BY THE ASSESSEE WAS TO BE SUBJECT MATTER OF PE NALTY OR THE ENTIRE DISCLOSURE WAS SUBJECT MATTER OF PENALTY AND FURTHER THE AO HA S ALSO NOT SPECIFIED THE PENALTY PROPOSED TO BE LEVIED @ 10%, 20% OR 30% AS PER CLAU SE (A), (B) AND (C) OF SECTION 271AAB(1) OF THE IT ACT. THEREFORE, THESE SHOW CAU SE NOTICES ARE VAGUE AND GENERAL AND HAS NOT SPECIFIED THE CHARGE OR GROUND ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. AS REGARDS THE DECISIONS RE LIED UPON BY THE LD. D/R, WE FIND THAT THE ISSUE BEFORE THE HONBLE ALLAHABAD HIGH CO URT IN CASE OF PCIT VS. SANDEEP CHANDAK, 93 TAXMANN.COM 405 (ALLAHABAD) WAS ONLY RE GARDING THE TYPOGRAPHICAL MISTAKE IN THE CAPTION OF THE SHOW CAUSE NOTICE. T HE FINDINGS OF THE LD. CIT (A) AND THE TRIBUNAL WERE REPRODUCED BY THE HONBLE HIGH CO URT AND THEREAFTER IT WAS OBSERVED THAT THE CONTENTS OF THE PENALTY NOTICE IS SUED UNDER SECTION 274 READ WITH SECTION 271AAB CLEARLY INDICATED THAT PROCEEDINGS U NDER SECTION 271AAB BEING INITIATED. THUS THE HONBLE HIGH COURT FOUND THAT A TYPOGRAPHICAL MISTAKE IN THE CAPTION OF THE SHOW CAUSE NOTICE IS COVERED UNDER S ECTION 292BB OF THE IT ACT ONCE THE BODY OF THE SHOW CAUSE NOTICE CLEARLY INDICATED THAT PROCEEDINGS UNDER SECTION 271AAB WERE INITIATED. EVEN OTHERWISE, THE OBSERVA TION REGARDING THE PROVISIONS OF SECTION 271AAB AUTOMATICALLY ATTRACTED ARE ONLY WIT H REGARD TO THE VALIDITY OF THE SHOW CAUSE NOTICE WHERE THERE WAS A MISTAKE OF MENT IONING THE SECTION IN THE CAPTION OF THE NOTICE. THERE WAS NO ISSUE OR QUEST ION BEFORE THE HONBLE HIGH COURT REGARDING THE VALIDITY OF INITIATION ON ACCOUNT OF NOT SPECIFYING THE GROUND/CHARGE IN THE SHOW CAUSE NOTICE. THE HONBLE JURISDICTIONAL HIGH COURT ON THE ISSUE OF NOT SPECIFYING THE CHARGE IN THE SHOW CAUSE NOTICE FOR LEVY OF PENALTY UNDER SECTION 8 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 271(1)(C) IN CASE OF SHEVETA CONSTRUCTION CO. PVT. LTD. (SUPRA) HAS CONCLUDED IN PARA 9 AS UNDER :- 9. TAKING INTO CONSIDERATION THE DECISION OF THE ANDHRA PRADESH HIGH COURT WHICH VIRTUALLY CONSIDERED THE SUBSEQUEN T LAW AND THE LAW WHICH WAS PREVAILING ON THE DATE THE DECISION WAS R ENDERED ON 27.08.2012. IN VIEW OF THE OBSERVATIONS MADE IN TH E SAID JUDGMENT, WE ARE OF THE OPINION THAT THE CONTENTION RAISED BY THE APPELLANT IS REQUIRED TO BE ACCEPTED AND IN THE FINDING OF ASSES SING OFFICER IN THE ASSESSMENT ORDER IT IS HELD THAT THE AO, HAS TO GIV E A NOTICE AS TO WHETHER HE PROPOSES TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. HE CANNOT HAVE BOTH THE CONDITIONS AND IF IT IS SO HE HAS TO SAY SO IN THE NOTICE AND RECORD A FINDING IN THE PENALTY ORDER. WE FIND THAT THOUGH THE TRIBUNAL IN SOME OF THE CAS ES RELIED UPON BY THE LD. D/R HAS TAKEN A VIEW THAT NO FAULT CAN BE FOUND IN THE SHOW CAUSE NOTICE FOR NOT SPECIFYING THE SPECIFIC CLAUSE OF SECTION 271AAB(1) OF THE ACT , HOWEVER, IN THOSE CASES THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT H AS NOT BEEN CONSIDERED. IN THE RECENT DECISION IN CASE OF SHRI PADAM CHAND PUNGLIY A VS. ACIT (SUPRA), THE TRIBUNAL AFTER CONSIDERING AN IDENTICAL ARGUMENT ON BEHALF O F BOTH THE PARTIES HAVE HELD IN PARA 5.1 AS UNDER :- 5.1. THE SECOND LIMB OF CHALLENGING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS FOR NOT SPECIFYING THE GROUND A ND DEFAULT IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 HAS BEEN CONSIDERED BY 9 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE O F RAVI MATHUR VS. DCIT (SUPRA) IN PARA IN PARA 7 AS UNDER :- 7. AS REGARDS THE VALIDITY OF NOTICE UNDER SECTION 274 FOR WANT OF SPECIFYING THE GROUND AND DEFAULT, WE FIND THAT WHEN THE BASIC CONDITION OF THE UNDISCLOSED INCOME NOT R ECORDED IN THE BOOKS OF ACCOUNTS DOES NOT EXISTS, THEN THE SAM E HAS TO BE SPECIFIED BY THE AO IN THE SHOW CAUSE NOTICE AND FU RTHER THE AO IS REQUIRED TO GIVE A FINDING WHILE IMPOSING THE PE NALTY UNDER SECTION 271AAB. EVEN IF THE AO IS SATISFIED AND CO ME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT RECORDED THE UNDISCLOSED INCOME IN THE BOOKS OF ACCOUNTS OR IN THE OTHER DO CUMENTS / RECORD MAINTAINED IN NORMAL COURSE RELATING TO SPECIFIED PREVIOUS YEAR, THE SHOW CAUSE NOTICE SHALL ALS O SPECIFY THE DEFAULT COMMITTED BY THE ASSESSEE TO ATTRACT THE PENALTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THER E IS NO DISPUTE THAT THE AO HAS NOT SPECIFIED THE DEFAULT A ND CHARGE AGAINST THE ASSESSEE WHICH NECESSITATED THE LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. CONSEQUENTLY, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO EXPLAIN HIS CASE FO R SPECIFIC DEFAULT ATTRACTING THE LEVY OF PENALTY IN TERMS OF CLAUSES (A) TO (C) OF SECTION 271AAB(1) OF THE ACT. THE CHANNAI B ENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SHRI R. ELANGOVAN (SUPRA) AT PAGES 7 TO 10 HAS HELD AS UNDER :- IT IS CLEAR FROM THE SUB SECTION (3) OF SECTION 271 AAB THAT SECTIONS 274 AND SECTION 275 OF THE ACT SHALL, SO FAR AS MAY BE, APPLY. SUB SECTION (1) OF SECTION 274 OF THE ACT MANDATES THAT ORDER IMPOSING PENALTY HAS TO BE IMPOSED ONLY AFTER HEARING THE ASSESSEE OR GIVING A ASSESSEE OPPORTUNITY OF HEARING. OPPORTUNITY THAT IS TO BE GIVEN TO THE ASS ESSEE SHOULD BE A MEANINGFUL ONE AND NOT A FARCE. NOTICE ISSUED TO TH E ASSESSEE REPRODUCED 10 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. (SUPRA), DOES NOT SHOW WHETHER PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR HAVING UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT. NOTICE IN OUR OPINION WAS VAGUE. HONBLE KARNA TAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) RELYING IN IT S OWN JUDGMENT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPR A) HAD HELD AS UNDER:- 2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWI NG SUBSTANTIAL QUESTIONS OF LAW: (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITL Y MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISH ING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF I NCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HA D CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE P ENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AN D INVALID DESPITE THE AMENDMENT OF SECTION 271(1B) WITH RETRO SPECTIVE EFFECT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSIN G OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SAT ISFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING THE APPEALS AGAI NST THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WIT HOUT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSI NG OFFICER HAS SPECIFIED THAT THE ASSESSEE HAS CONCEALED PARTICULA RS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT T HE ACT) TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELI ED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE O F CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDG MENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIA L QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE AP PEAL IS ACCORDINGLY DISMISSED. 11 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. IN THE EARLIER CASE OF MANJUNATHA COTTON AND GINNIN G FACTORY (SUPRA) THEIR LORDSHIP HAD OBSERVED AS UNDER:- NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIF ICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOM E. SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW ; THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE OF FENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON TH E ASSESSEE ; ) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW ; PENALTY PROCEEDINGS AR E DISTINCT FROM THE ASSESSMENT PROCEEDINGS : THOUGH PROCEEDINGS FOR IMP OSITION OF PENALTY EMANATE FROM PROCEEDINGS OF ASSESSMENT, THEY ARE IN DEPENDENT AND A SEPARATE ASPECT OF THE PROCEEDINGS ; THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCORREC T PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE PROCEEDINGS ON THE MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE A SSESSMENT OR REASSESSMENT CANNOT BE DECLARED INVALID IN THE PENA LTY PROCEEDINGS. VIEW TAKEN BY THE HONBLE KARNATAKA HIGH COURT IN T HE ABOVE JUDGMENT WAS INDIRECTLY AFFIRMED BY THE HONBLE APEX COURT, WHEN IT DISMISSED AN SLP FILED BY THE REVENUE AGAINST THE JUDGMENT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA), SPECIFICALLY OBSERVING THAT THERE WAS NO M ERITS IN THE PETITION FILED BY THE REVENUE. CONSIDERING THE ABOVE CITED JUDGMEN TS, WE HOLD THAT THE NOTICE ISSUED U/S.274 R.W.S. 271AAB OF THE ACT, REP RODUCED BY US AT PARA 5 ABOVE WAS NOT VALID. EX-CONSEQUENTI, THE PENALTY OR DER IS SET ASIDE. 6. SINCE WE HAVE SET ASIDE THE PENALTY ORDER FOR TH E IMPUGNED ASSESSMENT YEAR, THE APPEAL FILED BY THE REVENUE HAS BECOME IN FRUCTUOUS. IN VIEW OF THE DECISION OF THE CHENNAI BENCH (SUPRA ), THE SHOW CAUSE NOTICE ISSUED BY THE AO IN THE CASE OF THE ASSESSEE IS NOT SUSTAINABLE. WE FURTHER NOTE THAT IN THE CASE IN HAND, THE AO IN THE SHOW CAUSE NOTICE HAS NEITHER SPECIFIED THE GROUNDS AND DEFAUL T ON THE PART OF THE ASSESSEE NOR EVEN SPECIFIED THE UNDISCLOSED INCOME ON WHICH THE 12 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. PENALTY WAS PROPOSED TO BE LEVIED. FOR READY REFER ENCE WE REPRODUCE THE SHOW CAUSE NOTICES ISSUED BY THE AO UNDER SECTI ON 274 READ WITH SECTION 271AAB ON 30 TH MARCH, 2016 AND 16 TH AUGUST, 2016 AS UNDER :- NO. ACIT/CC-1/JPR/2015-16 DATED : 30.03.2016. PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. PAN ABDPP 7196A TO, SH. PADAM CHAND PUNGALIA, 2372, MSB KA RASTA, JOHARI BAZAR, JAIPUR. WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS BEF ORE ME FOR THE A.Y. 2014-15, IT APPEARS TO ME THAT AS PER SECTIONS 274 AND 275 READ WITH SECTION 271AAB OF THE INCOME-TAX ACT YOU ARE LIABLE FOR PENALTY ON ASSESSED UNDISCLOSED INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT MY OFFICE ROOM NO. 103 (NA), N.C.R.B., JAIPUR AT 11.00 A.M. ON 28.04.2 016 AND SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD NOT BE MADE U/S 271AAB R.W.S. 274 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUT HORIZED REPRESENTATIVE, YOU MAY REPLY TO SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE. YOURS FAITHFULLY, SD/- ( SUSHIL KUMAR KULHARI ) ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, JAIPUR. 13 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. NO. ACIT/CC-1/JPR/2016-17/928 DATED : 16.08.201 6. PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. PAN ABDPP 7196A TO, SH. PADAM CHAND PUNGALIA, 2372, MSB KA RASTA, JOHARI BAZAR, JAIPUR. WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS BEF ORE ME FOR THE A.Y. 2014-15, IT APPEARS TO ME THAT AS PER SECTIONS 274 AND 275 READ WITH SECTION 271AAB OF THE INCOME-TAX ACT YOU ARE LIABLE FOR PENALTY ON ASSESSED UNDISCLOSED INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT MY OFFICE ROOM NO. 103 (NA), N.C.R.B., JAIPUR AT 11.00 A.M. ON 25.08.2 016 AND SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD NOT BE MADE U/S 271AAB R.W.S. 274 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUT HORIZED REPRESENTATIVE, YOU MAY REPLY TO SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE. YOURS FAITHFULLY, SD/- ( DEVANGI SWARNKAR ) ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, JAIPUR. THUS IT IS CLEAR THAT BOTH THE SHOW CAUSE NOTICES I SSUED BY THE AO FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 AAB ARE VERY VAGUE AND SILENT ABOUT THE DEFAULT OF THE ASSESSEE AND FU RTHER THE AMOUNT OF UNDISCLOSED INCOME ON WHICH THE PENALTY WAS PROPOSE D TO BE LEVIED. EVEN THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SHEVATA CONSTRUCTION CO. PVT. LTD IN DBIT APPEAL NO. 534/20 08 DATED 06.12.2016 HAS CONCURRED WITH THE VIEW TAKEN BY HON BLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON & G INNING FACTORY, 359 ITR 565 (KARNATAKA) WHICH WAS SUBSEQUENTLY UPHE LD BY THE HONBLE SUPREME COURT BY DISMISSING THE SLP FILED B Y THE REVENUE IN 14 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THE CASE OF CIT VS. SSAS EMERALD MEADOWS, 242 TAXM AN 180 (SC). ACCORDINGLY, FOLLOWING THE DECISION OF THE COORDINA TE BENCH AS WELL AS HONBLE JURISDICTIONAL HIGH COURT, THIS ISSUE IS DE CIDED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE INITIATION OF PENALTY IS NOT VALID AND CONSEQUENTLY THE ORDER PASSED UNDER SECTION 271AAB IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. THEREFORE, IN VIEW OF A SERIES OF DECISIONS AS WELL AS DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE SHOW CAUSE NOTICE ISSU ED BY THE AO WITHOUT SPECIFYING THE DEFAULT AND GROUND FOR WHICH THE PENALTY UNDER SECTION 271AAB WAS PROPOSED TO BE LEVIED RENDERS THE INITIATION OF PENALTY PROCEED INGS INVALID AND CONSEQUENTLY THE ORDER PASSED UNDER SECTION 271AAB OF THE ACT IS LIA BLE TO BE QUASHED. 7. AS REGARDS THE ISSUE OF MANDATORY OR DISCRETIONA RY NATURE OF LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT, THE IDENTICAL ISSU E WAS DISCUSSED AND DECIDED BY THIS TRIBUNAL IN CASE OF PADAM CHAND PUNGLIYA VS. A CIT (SUPRA) IN PARA 5 AS UNDER :- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF SEARCH AN D SEIZURE ACTION UNDER SECTION 132 CONDUCTED ON 4 TH SEPTEMBER, 2013, THE ASSESSEE DISCLOSED INCOME OF RS. 5,01,66,717/- IN HIS STATEMENT MADE U NDER SECTION 132(4) OF THE ACT. THE SAID DISCLOSURE WAS MADE IN PURSUANT TO THE ENTRIES IN THE SEIZED DOCUMENTS. THE DETAILS OF THE UNDISCLOSED I NCOME SURRENDERED BY THE ASSESSEE ARE AS UNDER :- A) UNEXPLAINED EXPENDITURE ON HOUSE CONSTRUCTION 2,44 ,63,575/- B) UNDISCLOSED STOCK 1,91,24,877/- C) UNDISCLOSED JEWELLERY 60,16,265/- D) UNDISCLOSED DEBTORS/ADVANCES 5,62,000/- ------------------ TOTAL : 5,01,66,717/- ------------------ 15 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. IT IS PERTINENT TO NOTE THAT THE DISCLOSURE OF ADDI TIONAL INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF IS N OT SUFFICIENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT UNTIL AND U NLESS THE INCOME SO DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION O F UNDISCLOSED INCOME DEFINED IN THE EXPLANATION TO SECTION 271AAB(1) OF THE ACT. THEREFORE, THE QUESTION WHETHER THE INCOME DISCLOSED BY THE ASSESSEE IS UND ISCLOSED INCOME IN TERMS OF THE DEFINITION UNDER SECTION 271AAB OF THE ACT H AS TO BE CONSIDERED AND DECIDED IN THE PENALTY PROCEEDINGS. SINCE THE ASSE SSEE HAS OFFERED THE SAID INCOME IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT, THEREFORE, THE QUESTION OF TAKING ANY DECISION BY T HE AO IN THE ASSESSMENT PROCEEDINGS ABOUT THE TRUE NATURE OF SURRENDER MADE BY THE ASSESSEE DOES NOT ARISE AND ONLY WHEN THE AO HAS PROPOSED TO LEVY THE PENALTY THEN IT IS A PRE-CONDITION FOR INVOKING THE PROVISIONS OF SECTIO N 271AAB THAT THE SAID INCOME DISCLOSED BY THE ASSESSEE IN THE STATEMENT U NDER SECTION 132(4) IS AN UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDED U NDER SECTION 271AAB. THEREFORE, THE AO IN THE PROCEEDINGS UNDER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS OF THE CASE AS WELL AS THE BASIS OF T HE SURRENDER AND THEN ARRIVE TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS STIPULATED IN T HE EXPLANATION TO THE SAID SECTION. THEREFORE, WE DO NOT AGREE WITH THE CONTE NTION OF THE LD. D/R THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATO RY SIMPLY BECAUSE THE AO HAS TO FIRST ISSUE A SHOW CAUSE NOTICE TO THE AS SESSEE AND THEN HAS TO MAKE A DECISION FOR LEVY OF PENALTY AFTER CONSIDERI NG THE FACT THAT ALL THE CONDITIONS PROVIDED UNDER SECTION 271AAB ARE SATISF IED. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RAVI MATHUR VS. DCIT ( SUPRA) IN PARA 4 TO 6 AS UNDER :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. A SEARCH WAS CONDUCTED UNDER S ECTION 132 OF THE IT ACT ON 30 TH OCTOBER, 2014 AT THE PREMISES OF THE ASSESSEE. TH E ASSESSEE IN HIS STATEMENT RECORDED UNDER SECTION 13 2(4) HAS DISCLOSED AN INCOME OF RS. 10,02,00,000/- IN PURSUANT TO THE ENTRIES OF ADVANCES GIVEN FOR PURCHASE OF LAND RECORDED IN THE POCKET DIARY WHICH WAS FOUND AND SEIZED DURING THE COURSE OF SEA RCH AND SEIZURE 16 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. ACTION. THIS IS YEAR OF SEARCH AND THE FINANCIAL YE AR WOULD END ON 31 ST MARCH, 2015. HOWEVER, THE ASSESSEE DISCLOSED THIS A MOUNT OF RS. 10,02,00,000/- BASED ON THE ENTRIES IN THE DIARY RE GARDING INVESTMENT IN REAL ESTATE. THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1) WAS 30 TH SEPTEMBER, 2015. IT IS UNDISPUTED FACT THAT THE ASSESSEE IS AN INDIVIDUAL AND WAS NOT MAINTAINING R EGULAR BOOKS OF ACCOUNT. THEREFORE, THE TRANSACTIONS RECORDED IN TH E POCKET DIARY FOUND DURING THE COURSE OF SEARCH ITSELF WOULD NOT LEAD TO THE PRESUMPTION THAT THE ASSESSEE WOULD NOT HAVE OFFERE D 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 ASSESSEE DURING THE YEAR UNDER CONSIDERATION THOUGH THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF INVESTMENT IN QUESTION AND THAT SOURCE WOULD BE THE INCOME OF THE ASSESSEE. IT IS MOST LIKELY THAT THE INVESTMENT IN QUESTION WAS MADE FROM THE UNACCOUNTE D INCOME OF PRECEDING YEARS. HENCE THE INVESTMENT IN THE REAL E STATE ITSELF WOULD NOT REVEAL THE NATURE OF INCOME AND THE SOURCE OF I NCOME OF THE YEAR UNDER CONSIDERATION. IT IS A PRE-CONDITION FOR INV OKING THE PROVISIONS OF SECTION 271AAB THAT THE ASSESSEE ADMITTED THE UN DISCLOSED INCOME IN THE STATEMENT UNDER SECTION 132(4). THE DEFINIT ION OF UNDISCLOSED INCOME IS PROVIDED IN SECTION 271AAB ITSELF AND, T HEREFORE, 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 UNDISCL OSED 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 AS SESSEE UNDER SECTION 132(4) OR THE AO HAS TO TAKE A DECISION WHE THER THE GIVEN CASE HAS SATISFIED THE REQUIREMENTS FOR LEVY OF PEN ALTY UNDER SECTION 271AAB OF THE ACT. IN ORDER TO CONSIDER THIS ISSU E, THE PROVISIONS OF SECTION 271AAB ARE TO BE ANALYZED. FOR READY REFE RENCE, WE QUOTE SECTION 271AAB AS UNDER :- 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANY THING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 49 [BUT BEFORE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT O F THE PRESIDENT 50 ], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITI ON TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED 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 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 17 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 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 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 BY TH E 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 PRESIDENT, 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 THIRTY PER CENT OF TH E UNDISCLOSED 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 PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF SIXTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED UNDER THE PROVI SIONS 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 DUE DATE OF FURNISHING O F RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NO TICE ISSUED UNDER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY 18 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHI NG THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE D ATE 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 PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER V ALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S 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 THE 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 REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECOR DED 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 W OULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED.] THE SECTION BEGINS WITH THE STIPULATION THAT THE AO MAY DIRECT THE ASSESSEE SHALL PAY BY WAY OF PENALTY IF THE CONDITI ONS AS PRESCRIBED UNDER CLAUSES (A) TO (C) ARE SATISFIED. AS PER SUB -SECTION (3) OF SECTION 271AAB THE PROVISIONS OF SECTION 274 AND 27 5 AS FAR AS MAY BE APPLIED IN RELATION TO THE PENALTY REFERRED IN T HIS SECTION WHICH MEANS THAT BEFORE IMPOSING THE PENALTY UNDER SEC. 2 71AAB, THE AO HAS TO ISSUE A SHOW CAUSE NOTICE AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE LEVY OF PENALTY U /S. 271AAB IS NOT AUTOMATIC BUT THE A.O. HAS TO TAKE A DECISION TO IM POSE THE PENALTY AFTER GIVING A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS STATUTORY REQUIREMENT THAT THE EXPLANATION OF THE A SSESSEE FOR NOT FULFILLING THE CONDITIONS AS PRESCRIBED U/S 271AAB OF THE ACT IS REQUIRED TO BE CONSIDERED BY THE AO AND PARTICULARL Y WHETHER THE EXPLANATION FURNISHED BY THE ASSESSEE IS BONAFIDE A ND NON-COMPLIANCE OF THE SAME IS DUE TO THE REASON BEYOND THE CONTROL OF THE ASSESSEE. THEREFORE, THE PENALTY U/S 271AAB IS NOT A CONSEQUE NTIAL ACT BUT THE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A S HOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANATION AND REPLY OF THE ASSESSEE HAS TO TAKE A DECISION. THIS REQUIREMENT OF GIVING AN OPP ORTUNITY OF HEARING ITSELF MAKES IT CLEAR THAT THE PENALTY U/S 271AAB I S 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 ISSUI NG ANY NOTICE FOR 19 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. INITIATION OF PROCEEDINGS BUT THE LEVY OF PENALTY W OULD BE CONSEQUENTIAL AND ONLY COMPUTATION OF THE QUANTUM W AS TO BE DONE BY THE AO AS IN THE CASE OF LEVY OF INTEREST AND FE E U/S 234A TO E. EVEN THE QUANTUM OF PENALTY LEVIABLE U/S 271AAB IS ALSO SUBJECT TO THE CONDITION PRESCRIBED UNDER CLAUSES (A) TO (C) O F SUB-SECTION (1) AND THE AO HAS TO AGAIN GIVE A FINDING FOR LEVY OF PENALTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THUS THE 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 ATT RACTED ON SUCH DEFAULT. FURTHER, MERE DISCLOSURE OF INCOME UNDER SECTION 132(4) WOULD NOT IPSO FACTO PAR TAKE THE CHARACTER OF UNDI SCLOSED INCOME BUT THE FACTS OF EACH CASE ARE REQUIRED TO BE ANALYZED IN OBJECTIVE MANNER SO AS TO ATTRACT THE PROVISIONS OF SECTION 271AAB O F THE ACT. SINCE IT IS NOT AUTOMATIC BUT THE AO HAS TO GIVE A FINDING THAT THE CASE OF THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME A S DEFINED IN EXPLANATION TO THE SAID SECTION. THEREFORE, THE PR OVISIONS OF SECTION 271AAB STIPULATE THAT THE AO MAY COME TO THE CONCLU SION THAT THE ASSESSEE SHALL PAY THE PENALTY. THE ONLY MANDATORY ASPECT IN THE PROVISION IS THE QUANTUM OF PENALTY AS SPECIFIED UN DER CLAUSES (A) TO (C) OF SEC. 271AAB(1) OF THE ACT AS 10% TO 30% OR M ORE AS AGAINST THE DISCRETION GIVEN TO THE AO AS PER THE PROVISION S OF SECTION 271(1)(C) OF THE ACT WHERE THE AO HAS THE DISCRETIO N TO LEVY THE PENALTY FROM 100% TO 300% OF THE TAX SOUGHT TO BE E VADED. THUS THE AO IS DUTY BOUND TO COME TO THE CONCLUSION THAT THE CASE OF THE ASSESSEE IS FIT FOR LEVY OF PENALTY UNDER SECTION 2 71AAB AND THEN ONLY THE QUANTUM OF PENALTY BEING 10% OR 20% OR 30% HAS TO BE DETERMINED SUBJECT TO THE EXPLANATION OF THE ASSESS EE FOR THE DEFAULTS. 5. BEFORE WE PROCEED FURTHER, THE DECISIONS RELIED UPON BY THE LD. D/R ARE TO BE CONSIDERED. IN THE CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK & OTHERS (SUPRA) THE ISSUE BEFORE THE HONB LE HIGH COURT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 2 71AAB ON ACCOUNT OF MENTIONING WRONG PROVISION OF THE ACT BEING 271( 1)(C) OF THE ACT. THE HONBLE HIGH COURT AFTER CONSIDERING THE FACT T HAT THE SHOW CAUSE NOTICE ISSUED BY THE AO THOUGH MENTIONS SECTION 271 (1) IN THE CAPTION OF THE SAID NOTICE, HOWEVER, THE BODY OF TH E SHOW CAUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS F ULLY COMPREHENDED BY THE ASSESSEE AS REVEALS IN THE REPL Y FILED BY THE ASSESSEE AGAINST THE SAID SHOW CAUSE NOTICE. HENCE THE HONBLE HIGH COURT HAS HELD 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 MENTIONED BY THE AO IN THE CAPTION. HOWEVER, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUS E FIRSTLY, 20 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THE ASSESSEE HAS RAISED NO OBJECTION BEFORE THE AO IN THIS REGARD. SECONDLY, LAST LINE OF THE NOTICE CLEARLY M ENTIONS SECTION 271AAB. THIRDLY, THE ASSESSEE HAS GIVEN REP LY TO SAID NOTICE WHICH SHOWS THAT THE ASSESSEE FULLY COMPREHE NDED THE 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 A BOVE. THE A.R DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WA S NOT GIVEN PROPER OPPORTUNITY OF HEARING. IT IS CLEAR FR OM THE PENALTY ORDER THAT THE AO HAS GIVEN PENALTY NOTICE AND WHICH WAS ALSO REPLIED BY THE ASSESSEE. THEREFORE, IN MY OPINION, PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOVE DISCUSSION PENALTY IMPOSED BY AO U/S 271AA B OF THE ACT IS CONFIRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UNDER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF TH E SAME. THE SAID DECISION WILL NOT HELP THE CASE OF THE REVENUE SO F AR AS THE ISSUE INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTIO N 271AAB. AS REGARDS THE DECISION OF KOLKATA BENCHES OF THE TRIB UNAL IN THE CASE OF DCIT VS. AMIT AGARWAL (SUPRA), WE FIND THAT THE SAI D DECISION WAS SUBSEQUENTLY RECALLED BY THE TRIBUNAL AND A FRESH O RDER DATED 14 TH MARCH, 2018 WAS PASSED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THEREFORE, THE DECISION RELIED UPON BY THE LD. D/R IS NO MORE IN EXISTENCE. 6. THE QUESTION WHETHER LEVY OF PENALTY UNDER SECTI ON 271AAB BY THE AO IS MANDATORY OR DISCRETIONARY HAS BEEN CONSI DERED BY THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN CASE OF ACI T VS. M/S. MARVEL ASSOCIATES (SUPRA) IN PARA 5 TO 7 AS UNDER :- 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. DURING THE APPEAL HEARING, THE LD. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPRESSION TH AT THE LEVY OF PENALTY 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 MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECT ION 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT DISCRETIO NARY. WHEN 21 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 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 SECTIO N 271AAB OF THE ACT AND THE WORDS USED IN SECTION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED THAT THE PENALTY SECTION 271AAB OF TH E 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 AND SECTION 271AAB OF THE ACT WHICH READS AS UNDER; 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CAS E WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DA Y OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION T O TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND 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 22 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. (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 SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLA USES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT O F THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY DIRECT THAT A P ERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOU NT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TA X SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVI SO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE 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 PENAL TY. SIMILAR WORDS ARE USED SECTION 158BFA(2) OF THE ACT. THE WORD MAY DIRECT I NDICATES THE DISCRETION TO THE AO. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VIEW. SUB SECTION (3) OF SECTION 271AAB: 23 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 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 INTENTIO N TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOS ING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVE N A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN R EADING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT B E IMPOSED UNLESS THE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSE SSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE PENAL TY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND MERITS PLAC ED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE AND T O GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDAT ORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNITY IS NOT A MERE FORMALITY BUT IT IS TO AD HERE TO THE PRINCIPLES OF NATURAL JUSTICE. HONBLE A.P. HIGH COURT IN THE CAS E OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALING WITH THE PENALTY U/S 158BFA HELD THAT WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LI ABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO B E MANDATORY, 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 PENA LTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPEN DING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SE CTION 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 T HE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON MERITS OF THE EA CH CASE. THUS THE TRIBUNAL HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETI ON TO TAKE A DECISION AND SHALL BE BASED ON JUDICIOUS DECISION O F THE AO. HENCE WE FORTIFY OUR VIEW BY THE ABOVE DECISIONS OF TRIBUNAL IN CASE OF ACIT VS. MARVEL ASSOCIATES. 24 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THUS THE TRIBUNAL HAS ANALYZED ALL THE RELEVANT PRO VISIONS OF THE ACT AS WELL AS VARIOUS DECISIONS ON THIS POINT INCLUDIN G THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PR. CIT VS. SAN DEEP CHANDAK, 405 ITR 648 (ALLAHABAD) RELIED UPON BY THE LD. D/R AND THEN ARRIVED AT THE CONCLUSION THAT THE PENALTY UNDER SECTION 271AAB IS NOT MANDAT ORY BUT THE AO HAS THE DISCRETION TO TAKE A DECISION AND THE SAME SHOULD B E BASED ON JUDICIOUS DECISION OF THE AO. ACCORDINGLY FOLLOWING THE EARL IER DECISION OF THIS TRIBUNAL IN THE CASE OF RAVI MATHUR VS. DCIT (SUPRA), WE HOL D THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HA S A DISCRETION AFTER CONSIDERING ALL THE RELEVANT ASPECTS OF THE CASE AN D THEN TO SATISFY HIMSELF THAT THE CASE OF THE ASSESSEE FALLS IN THE DEFINITI ON OF UNDISCLOSED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF TH E ACT. THUS THE TRIBUNAL AFTER CONSIDERING ALL THE DECISIO NS INCLUDING THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF PCIT VS. SANDEEP CH ANDAK (SUPRA) HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATO RY BUT THE AO HAS TO TAKE A DECISION ON THE BASIS OF THE RELEVANT FACTS OF THE CASE AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE WHETHER THE SURRENDER M ADE BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS PROPOSED IN EXP LANATION TO SECTION 271AAB OF THE ACT. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. 8. ON MERITS OF LEVY OF PENALTY , THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THERE ARE THREE ITEMS OF SURRENDER MADE BY THE ASSESSEE DURING THE COURSE OF SEARCH AND SEIZURE UNDER SECTION 132 OF THE IT ACT. THE FIRST ITEM IS REGARDING UNDISCLOSED STOCK OF RS. 10,11,30,000/-. THE LD. A/R HAS SUBMITTED THAT IN THE 25 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. STATEMENT RECORDED UNDER SECTION 132(4) OF THE IT A CT THE ASSESSEE SURRENDERED A SUM OF RS. 10,11,30,000/- ON ACCOUNT OF EXCESS STOC K. THE SAID SURRENDER IS BASED ON THE VALUE OF THE STOCK DETERMINED BY THE DEPARTM ENTAL VALUER FOUND AT THE BUSINESS PREMISES OF M/S. BHURAMAL RAJMAL SURANA, T HE BUSINESS CONCERN OF ASSESSEES HUF. BESIDES THAT, 2 KG GOLD VALUED AT RS. 54,35,220/- WAS KEPT AT THE RESIDENCE WHICH WAS ALSO INCLUDED IN THE SAID UNDIS CLOSED STOCK. THE ALLEGED UNDISCLOSED STOCK AMOUNTING TO RS. 10,11,30,000/- W AS FOUND AND KEPT AT THE BUSINESS PREMISES OF M/S. BHURAMAL RAJMAL SURANA. THE ASSESSEE HAS NEVER DONE ANY BUSINESS IN GEM & JEWELLERY IN HIS INDIVIDUAL C APACITY NEITHER IN THE PRECEDING YEAR NOR IN THE SUBSEQUENT YEAR. HOWEVER, IN HIS S TATEMENT RECORDED UNDER SECTION 132(4) THE ASSESSEE MADE THE SURRENDER OF UNDISCLOS ED UNACCOUNTED STOCK AND THEN STATED THAT THE INVESTMENT IN THE STOCK FROM THE UN DISCLOSED INCOME FROM THE BUSINESS OF GEM & JEWELLERY. THE FACT REMAINS THA T THE ASSESSEE HAS NOT CARRIED OUT ANY SUCH BUSINESS AND THE STOCK WAS NOT BELONGI NG TO THE ASSESSEE BUT IT WAS BELONGING TO THE PROPRIETORSHIP CONCERN OF ASSESSEE S HUF. EVEN OTHERWISE, THE STOCK WAS FOUND ALONG WITH THE STOCK OF M/S. BHURAM AL RAJMAL SURANA, A PROPRIETORSHIP CONCERN OF ASSESSEES HUF AND, THERE FORE, IN THE ABSENCE OF ANY PURCHASE OR SALE OF GEM & JEWELLERY BY THE ASSESSEE IN HIS PERSONAL CAPACITY, THE SAID STOCK WAS NOT AN UNDISCLOSED INCOME OF THE ASS ESSEE REPRESENTING THE UNACCOUNTED STOCK BUT THERE IS NO REAL INCOME AND N O REAL EXCESS STOCK. ONCE NOTHING WAS FOUND TO SHOW ANY CONNECTED PURCHASE OR SALE ON BEHALF OF THE ASSESSEE, THEN THE ALLEGED EXCESS STOCK WAS NOT THE UNDISCLOSED INCOME OF THE ASSESSEE. EVEN OTHERWISE, WHEN THE ASSESSEE WAS NO T DOING ANY BUSINESS, THEN THE ASSESSEE WAS NOT REQUIRED TO MAINTAIN ANY REGULAR B OOKS OF ACCOUNT AND, THEREFORE, 26 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THE QUESTION OF NOT RECORDING THE STOCK IN THE BOOK S OF ACCOUNT OF THE ASSESSEE DOES NOT ARISE. IN ORDER TO AVOID THE PROTRACTED AND FO RCED LITIGATION, THE ASSESSEE SURRENDERED THE SAID INCOME TO BUY PEACE OF MIND AN D ALSO OFFERED THE TAX IN THE RETURN OF INCOME. HOWEVER, THE MERE DISCLOSURE IN THE STATEMENT UNDER SECTION 132(4) WOULD NOT ATTRACT THE PENALTY PROCEEDINGS UN DER SECTION 271AAB OF THE ACT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON TH E FOLLOWING DECISIONS :- M/S. RAMBHAJOS VS. ACIT ITA NO. 991/JP/2017 DATED 11.01.2019. M/S. SILVER & ART PALACE VS. DCIT ITA NO. 236/JP/2018 DATED 11.02.2019. THUS THE LD. A/R HAS SUBMITTED THAT THE SURRENDER M ADE BY THE ASSESSEE ON ACCOUNT OF EXCESS STOCK DOES NOT FALL IN THE AMBIT OF UNDIS CLOSED INCOME AS PER EXPLANATION TO SECTION 271AAB OF THE IT ACT AND CONSEQUENTLY NO PENALTY CAN BE LEVIED. 9. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE ASSESSEE MADE THE SURRENDER ON ACCOUNT OF EXCESS PHYSICAL STOCK OF GE M & JEWELLERY FOUND DURING THE COURSE OF SEARCH AND ALSO STATED THAT HE WAS IN THE BUSINESS OF REAL ESTATE AND ALSO STARTED HIS BUSINESS OF JEWELLERY DURING THE YEAR U NDER CONSIDERATION. THE ASSESSEE HAS ALSO EXPLAINED THAT THE EXCESS STOCK FOUND DURI NG THE SEARCH IS ON ACCOUNT OF UNDISCLOSED INCOME FROM THE BUSINESS OF JEWELLERY D URING THE YEAR UNDER CONSIDERATION AND THE SAME HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. THUS ONCE THE EXCESS STOCK WAS FOUND DURING THE COURSE O F SEARCH AT THE PREMISES OF THE ASSESSEE COVERED UNDER SEARCH ACTION AND THE VALUE OF THE STOCK WAS NOT DISPUTED BY THE ASSESSEE AT THE TIME OF STATEMENT RECORDED U NDER SECTION 132(4) OF THE ACT, 27 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. THEN THE ASSESSEE CANNOT BE ALLOWED TO TAKE A STAND THAT THE STOCK WAS NOT BELONGING TO THE ASSESSEE. FURTHER, IN THE RETURN OF INCOME THE ASSESSEE HAS SHOWN THE UNDISCLOSED INCOME AS BUSINESS INCOME AND ALSO FILED AUDIT REPORT UNDER SECTION 44AB OF THE IT ACT SHOWING THE BUSINESS ACTIVITY AS TRADING. THEREFORE, THE ASSESSEE WAS DOING THE BUSINESS ACTIVITY OF GEM & JEWELLERY DURING THE YEAR UNDER CONSIDERATION. A STATEMENT RECORDED ON OATH UNDER SECTION 132(4) HAS EVIDENTIARY VALUE AND THE SAME IS TO BE PRESUMED TO BE TRUE UNL ESS REBUTTED BY THE PERSON MAKING THE STATEMENT WITH CORROBORATIVE EVIDENCE. THE LD. D/R HAS ALSO REFERRED TO THE AFFIDAVIT DATED 24.11.2014 OF THE ASSESSEE WHER EIN THE ASSESSEE HAS RE-AFFIRMED THE STATEMENT UNDER SECTION 132(4) OF THE ACT. THE ASSESSEE DID NOT DISPUTE THE VALUATION AT THE TIME OF SEARCH, THEREFORE, NO RELI EF SHOULD BE GIVEN TO THE ASSESSEE AS EXCESS STOCK IN TERMS OF QUANTITY WAS FOUND DURI NG THE COURSE OF SEARCH. THE EXCESS STOCK DISCLOSED BY THE ASSESSEE IS COVERED U NDER THE DEFINITION OF UNDISCLOSED INCOME AS PER EXPLANATION TO SECTION 271AAB OF THE ACT. THUS THE LD. D/R HAS SUBMITTED THAT THE PENALTY LEVIED UNDER SECTION 271 AAB OF THE ACT ON ACCOUNT OF EXCESS PHYSICAL STOCK IS JUSTIFIED. HE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. PENALTY ON ACCOUNT OF EXCESS STOCK : 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE IS A N INDIVIDUAL AND HAS NEVER REPORTED ANY INCOME FROM BUSINESS EXCEPT FOR THE YE AR UNDER CONSIDERATION WHERE THE ASSESSEE HAS SURRENDERED THE INCOME IN THE STAT EMENT RECORDED UNDER SECTION 132(4) OF THE IT ACT. EVEN FOR THE YEAR UNDER CONS IDERATION EXCEPT THE SURRENDERED AMOUNT, THERE IS NO OTHER BUSINESS INCOME REPORTED IN THE RETURN OF INCOME WHICH 28 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. WAS ACCEPTED BY THE AO. THE AO ALSO ACCEPTED THIS FACT IN PARA 6 OF ASSESSMENT ORDER THAT THE ASSESSEE PRIMARILY DERIVES INCOME FR OM SALARY AND OTHER SOURCES. IN THE CAPTION OF THE ASSESSMENT ORDER, THE AO HAS ALS O REPORTED THE NATURE OF SOURCE OF INCOME AS SALARY AND OTHER SOURCES AND, THEREFOR E, THE AO HAS NOT DISPUTED THE FACT THAT THE ASSESSEE HAS NEVER REPORTED ANY INCOM E FROM BUSINESS. DURING THE COURSE OF STATEMENT RECORDED UNDER SECTION 132(4), THE ASSESSEE IN REPLY TO QUESTION NO. 4 HAS SUBMITTED THAT THE BUSINESS IS RUN BY HIS SON SHRI PUSHPENDRA KUMAR AND GRANDSON SHRI PUNIT THROUGH COMPANIES, FIRMS AND HU F. FURTHER, IN REPLY TO QUESTION NO. 18, THE ASSESSEE HAS EXPLAINED THAT TH E SAID STOCK WAS ALSO KEPT AT THE PREMISES OF M/S. BHURAMAL RAJMAL SURANA HUF. HOWEV ER, HE HAS SURRENDERED THIS INCOME IN HIS OWN INDIVIDUAL HAND AND STATED THAT O NLY IN THIS YEAR HE HAS STARTED THE BUSINESS. THE STATEMENT OF THE ASSESSEE WAS AG AIN RECORDED UNDER SECTION 132(4) ON 16.10.2014 AND IN REPLY TO QUESTION NO. 4 , THE ASSESSEE AGAIN REITERATED THAT IN THE PREMISES THE STOCK OF M/S. BHURAMAL RAJ MAL SURANA A PROPRIETORSHIP CONCERN OF ASSESSEES HUF AND OTHER DOCUMENTS OF TH E SAID FIRM ARE KEPT. THEREFORE, THE STOCK WHICH WAS TREATED AS UNACCOUNT ED EXCESS STOCK OF THE ASSESSEE WAS FOUND AT THE BUSINESS PREMISES OF M/S. BHURAMAL RAJMAL SURANA AND THE ASSESSEE HAS SURRENDERED THE SAID AMOUNT IN HIS IND IVIDUAL CAPACITY INSTEAD OF IN THE HANDS OF THIS PROPRIETORSHIP CONCERN OF HIS HUF. F ROM THE FACTS IT IS CLEAR THAT THE ALLEGED EXCESS STOCK/UNACCOUNTED STOCK WAS NOTHING BUT THE STOCK OF M/S. BHURAMAL RAJMAL SURANA BUT WHEN THE ASSESSEE OFFERED THE SAM E IN HIS INDIVIDUAL HANDS, THE DEPARTMENT DID NOT TRY TO GET THE DISCLOSURE AND SU RRENDER IN THE HANDS OF THE RIGHT PERSON. IT APPEARS THAT THE DEPARTMENT IS MORE CON CERNED ABOUT THE SURRENDER WHETHER IT IS IN THE HANDS OF THE INDIVIDUAL ASSESS EE OR IN THE HANDS OF THE BUSINESS 29 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. CONCERN OF THE HUF. ONCE THE DEPARTMENT HAS ACCEPT ED THE SURRENDER IN THE HANDS OF THE ASSESSEE THOUGH THE STOCK WAS NOT OF THE ASS ESSEE BUT OF THE HUF BUSINESS CONCERN, THEN AFTER RECEIVING THE TAX FOR LEVY OF P ENALTY UNDER SECTION 271AAB OF THE ACT, THE AO WAS UNDER THE STATUTORY OBLIGATION TO E STABLISH THAT THE SAID STOCK FOUND AT THE TIME OF SEARCH AND DISCLOSURE MADE BY THE AS SESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME OF THE ASSESSEE AS PER EXPLANATI ON TO SECTION 271AAB OF THE ACT. ONCE THE STOCK WAS FOUND AT THE PREMISES OF THE BUS INESS CONCERN OF HUF AND THE SURRENDER WAS TAKEN FROM THE ASSESSEE IN HIS INDIVI DUAL CAPACITY, THEN THE PENALTY CANNOT BE LEVIED BY IGNORING OR OVER-LOOKING THE FA CT THAT WHEN ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS EITHER IN THE PAST OR IN F UTURE OR EVEN DURING THE YEAR UNDER CONSIDERATION. THE AO HAS ACCEPTED THAT THE ASSESSE ES MAIN SOURCE OF INCOME IS ONLY SALARY AND OTHER SOURCES, THUS THE MERE SURREN DER UNDER SECTION 132(4) WOULD NOT IPSO FACTO BRING THE SAME IN THE AMBIT OF UNDIS CLOSED INCOME AS DEFINED IN EXPLANATION TO SECTION 271AAB OF THE ACT. EVEN OTH ERWISE, NEITHER THE AO NOR THE LD. CIT (A) HAS MADE ANY EFFORT TO MADE OUT A CASE THAT THE INCOME SURRENDERED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS PER EXPLANATION TO SECTION 271AAB OF THE ACT. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN ASSESSEE WAS NOT FOUND TO BE DOING AN Y BUSINESS IN HIS INDIVIDUAL CAPACITY AND ALL BUSINESS OF GEM & JEWELLERY ARE RU N THROUGH THE PROPRIETORSHIP CONCERN OF THE ASSESSEES HUF AS WELL AS THE OTHER FIRMS AND COMPANIES IN WHICH THE ASSESSEE AND HIS FAMILY MEMBERS ARE PARTNERS AND DI RECTORS, THE SAID INCOME ON ACCOUNT OF EXCESS STOCK DISCLOSED BY THE ASSESSEE C ANNOT BE REGARDED AS UNDISCLOSED INCOME FOR THE PURPOSE OF LEVY OF PENAL TY UNDER SECTION 271AAB OF THE ACT. THE DEFINITION OF UNDISCLOSED INCOME AS PROVI DED IN EXPLANATION TO SECTION 30 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 271AAB HAS TO BE CONSIDERED FOR THE PURPOSE OF LEVY OF PENALTY AND NOT THE MERE DISCLOSURE OF UNDISCLOSED INCOME UNDER SECTION 132( 4) OF THE IT ACT. ACCORDINGLY, WE DELETE THE PENALTY LEVIED UNDER SECTION 271AAB O F THE ACT IN RESPECT OF THE INCOME SURRENDERED ON ACCOUNT OF EXCESS STOCK. SIN CE WE HAVE CONSIDERED THAT THIS IS NOT UNDISCLOSED INCOME OF THE ASSESSEE, THEREFOR E, WE DO NOT PROPOSE TO GO INTO THE ISSUE OF VALUATION OF CLOSING STOCK. PENALTY ON CASH ADVANCES OF RS. 50,00,000/- : 11. DURING THE COURSE OF SEARCH AND SEIZURE, DOCUME NT EXHIBIT-1 WAS FOUND AND SEIZED CONTAINING THE ENTRIES OF ADVANCES. THIS DO CUMENT CONTAINS 4 ENTRIES. 2 IN THE NAME OF TWO COMPANIES/CONCERNS AND 2 IN THE NAM E OF TWO INDIVIDUALS SHRI HARI KISHAN AND SHRI RAM NATH JI. THE ENTRIES IN THE NA ME OF COMPANIES WERE FOUND TO BE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE . HOWEVER, THE ENTRIES IN THE NAMES OF TWO INDIVIDUALS WERE NOT FOUND TO BE RECOR DED IN THE BOOKS OF THE ASSESSEE AT THE TIME OF SEARCH. THESE ENTRIES ARE AS UNDER :- SHRI HARI KISHAN - RS. 30 LAC ON 02.08.2014. SHRI RAM NATH JI - RS. 20 LAC ON 03.08.2014. THE ASSESSEE MADE DISCLOSURE OF RS. 50,00,000/- IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE LD. A/R OF THE ASSE SSEE HAS SUBMITTED THAT THE ENTRY OF ADVANCES OF RS. 50,00,000/- IS NOT AN INCOME OF THE ASSESSEE BUT IT IS AN OUT GO AND, THEREFORE, IT CANNOT BE HELD AS UNDISCLOSED IN COME FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. THE LD. A /R HAS SUBMITTED THAT THE 31 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. DEPARTMENT HAS TAKEN THE DISCLOSURE ON ACCOUNT OF T HESE ENTRIES FROM THE ASSESSEE WHEREAS THERE WAS NOT AN IOTA OF EVIDENCE THAT THE ASSESSEE WAS HAVING ANY UNDISCLOSED INCOME. HE HAS REFERRED TO THE CBDT IN STRUCTION NO. 286/2/2003-IT (INV.) DATED 10.03.2003 AND SUBMITTED THAT THE CBDT HAS ISSUED THE GUIDELINES THAT NO FORCED CONFESSION SHALL BE OBTAINED REGARDING UN DISCLOSED INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS. THEREFORE, IT WAS ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTI ON OF EVIDENCE OF INCOME WHICH LEAD TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED. DESPITE THE VARIOUS CBDT CIRCULARS ON THIS POINT, T HE DEPARTMENT IS TAKING THE DISCLOSURE WITHOUT ANY EVIDENCE, THEREFORE, ALL THE SE DISCLOSURES ARE IN CONTRAVENTION OF THE CBDT CIRCULARS. HE HAS ALSO RELIED UPON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL DATED 18.01.2019 IN CASE OF RAJENDRA KUMAR GUPTA VS. DCIT (ITA NO. 359/JP/2017) AND SUBMITTED THAT THE TRIBUNAL HAS CO NSIDERED THIS ISSUE AND HELD THAT GIVING ADVANCE IS NOT AN INCOME IN ITSELF BUT IT IS AN OUT GO AND, THEREFORE, IN THE ABSENCE OF ANY EVIDENCE OR SOURCE OF INCOME FOU ND DURING THE COURSE OF SEARCH AND SEIZURE, THE ENTRY OF ADVANCES CANNOT BE TREATE D AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE PURPOSE OF LEVY OF PENALTY UNDER S ECTION 271AAB OF THE IT ACT. 12. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT THE ASSESSEE HAS NOT ONLY DISCLOSED UNDISCLOSED INCOME ON ACCOUNT OF UNDISCLO SED ADVANCES BUT ALSO INCLUDED IN THE TOTAL INCOME AND PAID TAX ON THE UNDISCLOSED INCOME. HE HAS FURTHER CONTENDED THAT THE SEIZED MATERIAL CONTAINS 4 ENTRI ES OUT OF WHICH 2 ENTRIES ARE RECORDED IN THE BOOKS OF ACCOUNT AND, THEREFORE, TH E REMAINING TWO ENTRIES WHICH ARE SUBJECT MATTER OF APPEAL ARE ADMITTED NOT RECOR DED IN THE BOOKS OF ACCOUNT AND HENCE IT IS UNDISCLOSED INCOME OF THE ASSESSEE IN T ERMS OF EXPLANATION TO SECTION 32 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 271AAB OF THE IT ACT. THESE FACTS CLEARLY ESTABLIS HED THAT THE AMOUNT OF RS. 50,00,000/- ADVANCED TO SHRI HARI KISHAN AND SHRI R AM NATH NOT RECORDED IN THE BOOKS OF ACCOUNT AND, THEREFORE, THE SAID AMOUNT IS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HE HAS FURTHER CONTENDED THAT THE DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT APPLI CABLE IN THE FACTS OF THE PRESENT CASE AS IN THOSE CASES THE ADVANCES WERE GIVEN FOR PURCHASE OF LAND. EVEN THE DISCLOSURE MADE FOR BUYING PEACE OF MIND CANNOT BE ACCEPTED AS AN EXPLANATION FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. I N SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF CHENNAI BENCH OF TH E TRIBUNAL DATED 23 RD JULY, 2018 IN CASE OF SONAL STEELS TRADING PVT. LTD. VS. ACIT IN ITA NO. 396/CHNY/2018. HENCE, THE LD. D/R HAS SUBMITTED THAT THE INCOME DI SCLOSED ON ACCOUNT OF ADVANCE/LOANS GIVEN TO THE INDIVIDUALS FOUND RECORD ED IN THE SEIZED MATERIAL AND NOT RECORDED IN THE BOOKS OF ACCOUNT IS AN UNDISCLOSED INCOME OF THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE DISCLOSURE IS BASED ON THE ENTRIES IN THE SEIZED MATERIAL SHOWING ADVANCES OF RS. 50,00,000/- TO TWO PERSONS. THESE ENTRIES OF ADVANCES IN ITSELF ARE NOT THE INCOME OF THE ASSESS EE BUT THESE ARE THE OUT GO OF MONEY FROM THE ASSESSEE AND SOURCE OF WHICH CAN BE THE INCOME OF THE ASSESSEE. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF RA JENDRA KUMAR GUPTA VS. DCIT (SUPRA) WHILE CONSIDERING AN IDENTICAL ISSUE HAS HE LD IN PARA 21 AS UNDER :- 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIA RY) HAS BEEN FOUND REFERRED ON AS ANN. AS WHEREIN THERE ARE CERTAIN NO TINGS RELATING TO 33 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. CASH ADVANCES GIVEN TO VARIOUS PERSONS TOTALING TO RS. 82,80,000/-. REFERRING TO THE STATEMENT OF THE ASSESSEE IN RESPE CT OF THESE NOTINGS RECORDED U/S 132(4), LD. CIT (A) HAS GIVEN A FINDIN G THAT THE ASSESSEE HAS GIVEN A GENERALIZED STATEMENT WITHOUT SPECIFYIN G THE COMPLETE PARTICULARS OF PERSONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE THE SAME. THE SAID FINDINGS HAVE NOT B EEN DISPUTED BY THE REVENUE AND THEREFORE, MERELY BASED ON SURRENDE R AND GENERALIZED STATEMENT OF THE ASSESSEE, IN ABSENCE O F ANYTHING SPECIFIC TO CORROBORATE SUCH ENTRIES, CAN IT BE SAID THAT SU CH ENTRIES/NOTINGS REPRESENT UNDISCLOSED INCOME OF THE ASSESSEE. AS PE R THE DEFINITION OF UNDISCLOSED INCOME U/S 271AAB, THE SAID CASH ADVANC ES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MON EY, BULLION, JEWELLERY OR OTHER VALUEABLE ARTICLE OR THING. WHET HER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES 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. A CASH ADVANCE PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSE SSEES 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 CAN BE SUBSEQUENT OUTFLOW BY WAY OF A N ADVANCE TO ANY THIRD PARTY. GIVING AN ADVANCE AND INCOME THUS CON NOTES DIFFERENT MEANING AND CONNOTATION AND THUS CANNOT BE USED INT ER-CHANGEABLY. IN THE DEFINITION OF UNDISCLOSED INCOME, WHERE IT T ALKS ABOUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHE R 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 BY W AY OF ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WH ICH HAS NOT BEEN RECORDED BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. WE ARE ALSO CONSCIOUS OF THE FACT THAT THERE ARE DEEMING 34 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN S UCH AMOUNTS MAY BE DEEMED AS INCOME IN ABSENCE OF SATISFACTORY EXPL ANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTIO N 69 AND SECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THA T THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE B EEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN TH E CONTEXT OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE ST ATUTE BOOK AND NOT OTHERWISE. IN THE INSTANT CASE, THE DEEMING PR OVISIONS CONTAINED IN SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLI ED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUAN TUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NO T EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS. THEREFORE, EVEN ON THIS ACCOUNT, THE DEEMING FICTION CANNOT BE EXTE NDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM TH E ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SE CTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED IN COME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME MUST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIED THERE IN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE THE SAME HAS BEEN DEFINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WA Y OF ADVANCES CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEE DINGS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RETURN OF IN COME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED IN COME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALTY SO LEVIED THEREON DESERVED TO BE SET-ASIDE. 35 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. A SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BEN CH OF THIS TRIBUNAL IN CASE OF PADAM CHAND PUNGLIYA VS. ACIT (SUPRA). ACCORDINGLY , IN VIEW OF THESE DECISIONS OF THE TRIBUNAL ON THIS ISSUE, WE HOLD THAT THE MERE E NTRY OF ADVANCES REPRESENTING THE OUT GO OF MONEY WOULD NOT CONSTITUTE UNDISCLOSED IN COME OF THE ASSESSEE AS DEFINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. MO REOVER, NO EFFORTS WERE MADE TO ASCERTAIN THE STATUS OF THESE ADVANCES GIVEN TO THE SE TWO PERSONS AND EVEN WHETHER THE ENTRIES IN THE NAME OF THESE TWO PERSONS WERE A RTIFICIAL OR IN THE NAME OF SOME EXISTING PERSONS. ACCORDINGLY, THE PENALTY LEVIED UNDER SECTION 271AAB OF THE ACT ON ACCOUNT OF ENTRIES FOR ADVANCES IS DELETED. PENALTY ON ACCOUNT OF CASH FOUND AT THE RESIDENCE O F THE ASSESSEE : 14. DURING THE COURSE OF SEARCH, CASH OF RS. 38,50, 000/- WAS FOUND AND WAS ALSO DISCLOSED BY THE ASSESSEE IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE CASH FOUND AT THE RESIDENCE OF THE ASSESSEE BELONG TO ENTIRE FAMILY MEMBERS OF THE ASSESSEE AND, THEREFORE, WITHOUT CONSIDERING THE AVAILABILITY OF THE CASH AS PER THE DRAWINGS OF ALL THE MEMBERS OF THE FAMILY OF 8 PERSONS, THE SAME CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE. HE HAS REFERRED TO THE DET AILED DRAWINGS OF THE VARIOUS MEMBERS OF THE ASSESSEES FAMILY AND POINTED OUT TH AT FOR THE LAST 4 YEARS I.E. FINANCIAL YEARS 2011-12 TO 14-15, 6 MEMBERS OF THE ASSESSEE HAVE DECLARED THE INCOME OF SEVERAL CRORES IN EACH HAND. EVEN THE WIT HDRAWALS AS PER THEIR BALANCE SHEETS ARE ALSO IN CRORES DURING THESE YEARS AND, T HEREFORE, THE CASH OF RS. 38,50,000/- FOUND AT THE RESIDENCE OF A FAMILY OF A BOUT 10 MEMBERS, OUT OF WHICH 6 MEMBERS ARE TAX PAYERS AND DECLARED INCOME OF CRORE S OF RUPEES, THEN THE SAID 36 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. AMOUNT OF CASH CANNOT BE TREATED AS UNDISCLOSED INC OME OF THE ASSESSEE. HE HAS REFERRED TO THE DETAILS OF THE INCOME AND WITHDRAWA LS TO JUSTIFY THE JEWELLERY FOUND AT THE RESIDENCE OF THE ASSESSEE AND SUBMITTED THAT BY CONSIDERING THE STATUS OF THE ASSESSEE FAMILY, THEIR BUSINESS INCOME FROM THE VAR IOUS FIRMS, COMPANIES AS WELL AS THE INCOME DECLARED BY THE VARIOUS PERSONS, THE SAI D AMOUNT OF QUANTITY OR JEWELLERY CANNOT BE REGARDED AS UNDISCLOSED INCOME. THUS THE LD. A/R HAS SUBMITTED THAT THE PENALTY LEVIED ON ACCOUNT OF CASH FOUND OF RS. 38,5 0,000/- IS NOT JUSTIFIED. 15. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT THE ASSESSEE HAS FAILED TO EXPLAIN THE CASH AT THE TIME OF SEARCH AND ALSO ADM ITTED THE SAME AS UNDISCLOSED INCOME. THE PENALTY LEVIED UNDER SECTION 271AAB OF THE ACT IS JUSTIFIED AS THE CASH FOUND AT THE TIME OF SEARCH CLEARLY FALLS IN THE DE FINITION OF UNDISCLOSED INCOME AS PER THE EXPLANATION TO SECTION 271AAB OF THE ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. DURING THE SEARCH AND SEIZURE ACTION, A TO TAL SUM OF RS. 38,50,000/- WAS FOUND AT THE RESIDENCE OF THE ASSESSEE. OUT OF WHIC H, A SUM OF RS. 11,844/- AND RS. 67,001/- WERE TREATED AS THE MONEY BELONGING TO THE WIFE OF THE ASSESSEE AND DAUGHTER-IN-LAW OF THE ASSESSEE RESPECTIVELY AND TH E BALANCE OF RS. 38,50,000/- WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. AT THE OUTSET, WE NOTE THAT THE FAMILY OF THE ASSESSEE IS COMPRISING OF 10 MEMBERS AND OUT OF THESE MEMBERS, 6 MEMBERS ARE ASSESSED TO TAX. THE DETAILS OF THESE M EMBERS, THEIR INCOME, WITHDRAWALS FOR THE FINANCIAL YEAR 2011-12 TO 14-15 ARE AS UNDER :- 37 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. AGE/YEAR OF INCORPORA TION F.Y.2011-12 F.Y. 2012-13 F.Y. 2013-14 F.Y. 2014-15 INCOME WITHDRAWAL INCOME WITHDRAWAL INCOME WITHDR AWAL INCOME WITHDRAWAL VIMAL CHAND SURANA HUF SINCE 35 YEARS 3218000 761000 8992000 416000 867000 615000 1110500 0 537000 VIMAL CHAND SURANA 78 YEARS 18040000 325000 -291000 1752000 2943000 559000 112861000 624 000 AMAR KUMAR SURANA 75 YEARS 3818000 21000 14416000 0 11964000 6000 101 60000 45000 MEENA SURANA 55 YEARS 11976000 522000 2879000 1078000 2654000 72 2000 25819000 739000 PUSHPENDRA KUMAR SURANA 57 YEARS 760000 388000 1537000 422000 2270000 35400 0 1609000 772000 PUNEET SURANA 35 YEARS 828000 1154000 2319000 1260000 803000 7110 00 485000 1023000 38640000 3171000 29852000 4928000 21501000 296700 0 162039000 3740000 THEREFORE, DURING THE LAST FOUR YEARS THE INCOMES O F THESE FAMILY MEMBERS OF THE ASSESSEE ARE DECLARED IN SEVERAL CRORES OF RUPEES A ND FOR THE FINANCIAL YEAR 2014-15 IT IS RS. 16,20,39,000/-. THE CUMULATIVE WITHDRAWA L AS SHOWN FOR EACH YEAR IS MORE THAN RS. 30,00,000/-. CONSIDERING THESE INCOME AND WITHDRAWALS, THE AMOUNT OF RS. 38,50,000/- CANNOT BE CONSIDERED AS UNEXPLAINED OR UNDISCLOSED INCOME. THOUGH THE ASSESSEE HAS SURRENDERED THE SAME IN THE STATEM ENT RECORDED UNDER SECTION 132(4) OF THE IT ACT, HOWEVER, THE MERE SURRENDER I N THE STATEMENT UNDER SECTION 132(4) WOULD NOT ITSELF CONSTITUTE UNDISCLOSED INCO ME IGNORING THE OTHER RELEVANT FACTS BEING SOURCE OF CASH FOUND DURING THE SEARCH. ONCE THE ASSESSEE AND OTHER FAMILY MEMBERS OF THE ASSESSEE ARE HAVING THE INCOM E AS WELL AS WITHDRAWALS WHICH ARE MANY TIMES OR IN HUNDRED TIMES OF THE CASH FOUN D AT THE RESIDENCE OF THE ASSESSEE, BY CONSIDERING THESE UNDISPUTED FACTS OF INCOME AND WITHDRAWALS, THE SAID CASH CANNOT BE HELD AS UNDISCLOSED INCOME OF THE AS SESSEE. ACCORDINGLY, PENALTY LEVIED UNDER SECTION 271AAB OF THE ACT ON ACCOUNT O F CASH OF RS. 38,50,000/- FOUND AT THE RESIDENCE IS DELETED. 38 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. 17. WE FURTHER NOTE THAT THERE WAS A DISCLOSURE ON ACCOUNT OF EXCESS JEWELLERY FOUND AT THE RESIDENCE. THE DEPARTMENT HAS GIVEN T HE BENEFIT OF CBDT INSTRUCTION NO. 1916 DATED 11.05.1994 IN RESPECT OF THE ASSESSE E AND HIS WIFE BUT THE OTHER FAMILY MEMBERS OF THE ASSESSEE WERE OVER LOOKED SO FAR AS THE BENEFIT OF THE SAID INSTRUCTION OF CBDT WAS CONCERNED. THERE IS NO DISP UTE THAT THE FAMILY OF THE ASSESSEE CONSISTING OF ASSESSEE, HIS WIFE, HIS SON, DAUGHTER-IN-LAW, MARRIED DAUGHTER, 2 GRANDCHILDREN, GRANDDAUGHTER-IN-LAW AND TWO GREAT GRANDSONS. CONSIDERING THE MARRIED WOMEN IN THE FAMILY AND ONE MARRIED GIRL AS WELL AS THE MALE MEMBERS, WE FIND THAT THE BENEFIT OF THE CIRCU LAR/INSTRUCTION NO. 1916 DATED 11.05.1994 SHALL BE GIVEN IN RESPECT OF ALL THE FAM ILY MEMBERS. THE LD. A/R OF THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE JU RISDICTIONAL HIGH COURT IN CASE OF CIT VS. SATYA NARAIN PATNI, 366 ITR 325 (RAJ.) WHER EIN THE HONBLE HIGH COURT HAS HELD IN PARA 12 & 13 AS UNDER :- 12. IT IS TRUE THAT THE CIRCULAR OF THE CBDT, REFERRED TO SUPRA DT. 11/05/1994 ONLY REFERS TO THE JEWELLERY TO THE EXTENT OF 500 G MS PER MARRIED LADY, 250 GMS PER UNMARRIED LADY AND 100 GMS PER MALE MEMBER OF T HE FAMILY, NEED NOT BE SEIZED AND IT DOES NOT SPEAK ABOUT THE QUESTIONING OF THE SAID JEWELLERY FROM THE PERSON WHO HAS BEEN FOUND WITH POSSESSION OF TH E SAID JEWELLERY. HOWEVER, THE BOARD, LOOKING TO THE INDIAN CUSTOMS A ND TRADITIONS, HAS FAIRLY EXPRESSED THAT JEWELLERY TO THE SAID EXTENT WILL NO T BE SEIZED AND ONCE THE BOARD IS ALSO OF THE EXPRESS OPINION THAT THE SAID JEWELLERY CANNOT BE SEIZED, IT SHOULD NORMALLY MEAN THAT ANY JEWELLERY, FOUND IN P OSSESION OF A MARRIED LADY TO THE EXTENT OF 500 GMS, 250 GMS PER UNMARRIED LAD Y AND 100 GMS PER MALE MEMBER OF THE FAMILY WILL ALSO NOT BE QUESTIONED AB OUT ITS SOURCE AND ACQUISATION. WE CAN TAKE NOTICE OF THE FACT THAT AT THE TIME OF WEDDING, THE DAUGHTER/DAUGHTER-IN-LAW RECEIVES GOLD ORNAMENTS JE WELLERY AND OTHER GOODS NOT ONLY FROM PARENTAL SIDE BUT IN-LAWS SIDE AS WEL L AT THE TIME OF 'VIDAI' (FAREWELL) OR/AND AT THE TIME WHEN THE DAUGHTER-IN- LAW ENTERS THE HOUSE OF HER HUSBAND. WE CAN ALSO TAKE NOTICE OF THE FACT THAT T HEREAFTER ALSO, SHE CONTINUES TO RECEIVE SOME SMALL ITEMS BY VARIOUS OTHER CLOSE FRIENDS AND RELATIVES OF BOTH THE SIDES AS WELL AS ON THE AUSPICIOUS OCCASIO N OF BIRTH OF A CHILD WHETHER MALE OR FEMALE AND THE CBDT, LOOKING TO SUCH CUSTOM S PREVAILING THROUGHOUT INDIA, IN ONE WAY OR THE ANOTHER, CAME OUT WITH THI S CIRCULAR AND WE ACCORDINGLY ARE OF THE FIRM OPINION THAT IT SHOULD ALSO MEAN THAT TO THE EXTENT 39 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. OF THE AFORESAID JEWELLERY, FOUND IN POSSESSION OF THE VAROIUS PERSONS, EVEN SOURCE CANNOT BE QUESTIONED. IT IS CERTAINLY 'STRID HAN' OF THE WOMAN AND NORMALLY NO QUESTION AT LEAST TO THE SAID EXTENT CA N BE MADE. HOWEVER, IF THE AUTHORIZED OFFICERS OR/AND THE ASSESSING OFFICERS, FIND JEWELLERY BEYOND THE SAID WEIGHT, THEN CERTAINLY THEY CAN QUESTION THE S OURCE OF ACQUISATION OF THE JEWELLERY AND ALSO IN APPROPRIATE CASES, IF NO PROP ER EXPLANATION HAS BEEN OFFERED, CAN TREAT THE JEWELLERY BEYOND THE SAID LI MIT AS UNEXPLAINED INVESTMENT OF THE PERSON WITH WHOM THE SAID JEWELLE RY HAS BEEN FOUND. 13. ADMITTEDLY, LOOKING TO THE STATUS OF THE FAMILY AN D THE JEWELLERY FOUND IN POSSESSSION OF FOUR LADIES, WAS HELD TO BE REASONAB LE AND THEREFORE, THE AUTHORIZED OFFICERS, IN THE FIRST INSTANCE, DID NOT SEIZE THE SAID JEWELLERY AS THE SAME BEING WITHIN THE TOLERABLE LIMIT OR THE LIMITS PRESCRIBED BY THE BOARD AND THUS, IN OUR VIEW, SUBSEQUENT ADDITION IS ALSO NOT JUSTIFICABLE ON THE PART OF THE ASSESSING OFFICER AND RIGHTLY DELETED BY BOTH THE T WO APPELLATE AUTHORITIES NAMELY' CIT(A) AS WELL AS THE TRIBUNAL. ACCORDINGLY AFTER GIVING THE BENEFIT OF THE CBDT IN STRUCTION NO. 1916 AND THE STATUS OF THE ASSESSEES FAMILY, THE JEWELLERY FOUND FROM THE RESIDENCE AND LOCKER OF THE ASSESSEE CANNOT BE CONSIDERED AS EXCESS OF THE NORM AL POSSESSION OF THIS JEWELLERY. THEREFORE, EVEN IF THE ASSESSEE HAS DISCLOSED THE U NDISCLOSED INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT BUT FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271AAB, ALL THESE FACTS ARE R EQUIRED TO BE TAKEN INTO ACCOUNT. ONCE ALL THESE FACTS ARE CONSIDERED, THEN THE SAID JEWELLERY FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION CANNOT BE HELD AS UNDISCL OSED INCOME. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/05/2 019. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 30/05/2019. DAS/ 40 ITA NO. 304/JP/2018 SHRI VIMAL CHAND SURANA, JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI VIMAL CHAND SURANA, JAIPUR. 2. THE RESPONDENT THE DCIT CENTRAL CIRCLE-2, JAIP UR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 304/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR