SHRI GOPAL DAS SONKIA, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 306/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8312 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2019
• 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
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: RAJNIKANT BATRA
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Question of law; Initiation of penalty proceedings; Reasonable cause; Documents seized; Set aside
• Section: 69; 132; 271(1)(c); 2; 139; 143(3); 153A; 69B; 292BB; 274; 139(1); 73; 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, 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. 306/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15. SHRI GOPAL DAS SONKIA 367, SONKIA BHAWAN, SMS HIGHWAY OPP. TARKESHWAR MANDIR CHAURA RASTA, JAIPUR. CUKE VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. BJQPS 9676 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) & SHRI RAJNIKANT BATRA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.03.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 11/04/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13 TH DECEMBER, 2017 OF LD. CIT (A)-4, JAIPUR ARISING FR OM THE PENALTY ORDER PASSED UNDER SECTION 271AAB OF THE IT ACT FOR THE ASSESSMENT YE AR 2015-16. THE ASSESSEE HAS RAISED 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 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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. 90,10,000/- IMPOSED BY THE LD. ASSESSING OFFICER U/ S 271AAB OF THE IT 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. GROUND NO. 1 IS REGARDING VALIDITY OF INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271AAB OF THE IT ACT FOR WANT OF SPECIFYING THE DEFAULT AS PER CLAUSE (A) TO (C) OF SECTION 271AAB( 1) OF THE IT ACT. 2. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FR OM TRADING IN SHARES AND SECURITIES, LTCG AND STCG ON SALE OF SHARES AND INT EREST UNDER THE HEAD INCOME FROM OTHER SOURCES. A SEARCH AND SEIZURE ACTION UN DER SECTION 132(1) OF THE I.T. ACT WAS CARRIED OUT ON 15 TH OCTOBER, 2014 IN CASE OF SURANA GROUP, JAIPUR IN W HICH THE CASE OF ASSESSEE WAS ALSO COVERED. IN THE COURSE O F SEARCH AND SEIZURE ACTION, CERTAIN DOCUMENTS WERE FOUND AND SEIZED MARKED AS A NNEXURE-B EXHIBIT-1 CONTAINING THE ENTRIES OF ADVANCES FOR LAND AND OTH ER LOANS/ADVANCES. IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS. 9,01,00,000/- AS RECORDED IN THE SEIZED DOCUMENT. THE ASSESSEE FILED HIS RETURN OF INCOME UNDER SECTION 1 39(1) ON 30 TH SEPTEMBER, 2015 DECLARING TOTAL INCOME OF RS. 12,29,00,990/- INCLUD ING THE AMOUNT OF RS. 9,01,00,000/- DISCLOSED DURING THE COURSE OF SEARCH AND SEIZURE ACTION. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 153B(1)(B) OF THE ACT ON 14 TH DECEMBER, 2016 ACCEPTING THE RETURNED INCOME. THE AO INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271AAB BY ISSUING SHOW CAUSE NOTICES DATED 14 TH 3 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. DECEMBER, 2016, 10 TH MARCH, 2017 AND THEREAFTER ON 15 TH MAY, 2017. THE ASSESSEE FILED HIS REPLY TO THE SHOW CAUSE NOTICE BUT THE SA ME WAS NOT ACCEPTED BY THE AO AND CONSEQUENTLY A PENALTY OF RS. 90,10,000/- WAS I MPOSED UNDER SECTION 271AAB OF THE ACT WHILE PASSING THE ORDER DATED 14 TH JUNE, 2017. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BEING W RONG, UNWARRANTED AND BAD IN LAW. HOWEVER, THE LD. CIT (A) HAS CONFIRMED THE LEV Y OF PENALTY BY HOLDING THAT THE PENALTY UNDER SECTION 271AAB IS MANDATORY IN NATURE . 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE AO WHILE ISSUING THE SHOW CAUSE NOTICE UNDER SECTION 274 READ WITH S ECTION 271AAB HAS NOT SPECIFIED THE DEFAULT OF THE ASSESSEE IN TERMS OF CLAUSE (A) TO (C) OF SECTION 271AAB OF THE ACT. THEREFORE, THE INITIATION OF PENALTY PROCEEDINGS IS ILLEGAL DUE TO SHOW CAUSE NOTICE IS DEFECTIVE. THEREFORE, THE NOTICES WERE ISSUED IN R OUTINE MANNER WITHOUT MENTIONING UNDER WHICH CLAUSE OF SECTION 271AAB(1) OF THE ACT THE ASSESSEE IS LIABLE FOR PENALTY. HE HAS REFERRED TO THE PROVISIONS OF SECT ION 271AAB(1) AND SUBMITTED THAT THERE ARE THREE CLAUSES (A) TO (C) AND EACH CLAUSE OF SUB-SECTION (1) PROVIDES THE CIRCUMSTANCES AND VIOLATION ATTRACTING THE PENALTY @ 10%, 20% AND 30% OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY OTHERWISE THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. EVEN IN THE ASSESSMENT ORDER THE AO HAS NOT SPECIFIED UNDER WHICH CLAUSE THE PENALTY IS LIABLE TO BE IMPOSED BUT THE AO HAS MENTIONED THAT THE PENALTY PROCEEDINGS UNDER SECTION 271AAB OF THE ACT ARE BEI NG INITIATED. THERE IS NO APPLICATION OF MIND AT THE TIME OF ISSUING THE SHOW CAUSE NOTICES AS THE AO HAS NOT SPECIFIED THE UNDISCLOSED INCOME ON WHICH THE ASSES SEE IS REQUIRED TO SHOW CAUSE. 4 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. EVEN THE AO HAS NOT GIVEN ANY GROUND FOR LEVY OF PE NALTY FOR WHICH THE ASSESSEE COULD PUT HIS DEFENCE. THUS IN THE ABSENCE OF SPE CIFIC CHARGE AGAINST THE ASSESSEE, THE ASSESSEE WAS NOT GIVEN THE PROPER OPPORTUNITY T O COUNTER THE SHOW CAUSE NOTICE ISSUED BY THE AO AS WELL AS TO FILE THE COGENT REPL Y TO THE SAME. IN THE ABSENCE OF ANY GROUNDS SPECIFIED IN THE SHOW CAUSE NOTICE AS W ELL AS ANY AMOUNT TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE PURPO SE OF LEVY OF PENALTY UNDER SECTION 271AAB, THE INITIATION OF PENALTY IS NOT VA LID AND, THEREFORE, THE CONSEQUENTIAL ORDER PASSED UNDER SECTION 271AAB OF THE ACT IS ALSO LIABLE TO BE QUASHED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIE D UPON THE FOLLOWING DECISIONS :- CIT VS. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KARNATAKA) MUNINAGA REDDY VS. ACIT 396 ITR 398 (KARNATAKA) CIT VS. SSAS EMERALD MEADOWS 73 TAXMANN.COM 248 (SC) RAVI MATHUR VS. DCIT ITA NO. 969/JP/2017 DATED 13.06.2018. APART FROM THE ABOVE DECISIONS, THE LD. A/R HAS ALS O REFERRED TO A SERIES OF DECISIONS ON THIS POINT THAT PENALTY PROCEEDINGS UNDER SECTIO N 271AAB IS NOT MANDATORY BUT DISCRETIONARY AND THE AO HAS TO TAKE A DECISION BY CONSIDERING THE REPLY AND EXPLANATION OF THE ASSESSEE AND GIVING A FINDING WH ETHER THE INCOME DISCLOSED BY THE ASSESSEE DURING THE SEARCH AND SEIZURE ACTION I S UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 2 71AAB OF THE IT ACT. 5 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY IN NATURE AND, THEREFOR E, THE AO IS NOT REQUIRED TO SPECIFY THE CLAUSE AS PER SUB-SECTION (1) OF SECTIO N 271AAB OF THE ACT IN THE SHOW CAUSE. HE HAS REFERRED TO THE EXPLANATORY NOTE OF FINANCE BILL, 2012 WHEREBY THE PROVISIONS OF SECTION 271AAB IS INSERTED IN THE STA TUTE AND SUBMITTED THAT THE LEGISLATURE HAS MADE IT CLEAR THAT THE PENALTY UNDE R SECTION 271AAB IS MANDATORY IN NATURE. THE LD. D/R HAS SUBMITTED THAT THE ASSESSE E WAS VERY WELL AWARE ABOUT THE DEFAULT AND THE NATURE OF INCOME HE HAS DISCLOSED A ND SURRENDERED DURING THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE IT A CT. THE SURRENDER IN QUESTION WAS MADE BECAUSE THE ASSESSEE WAS UNABLE TO EXPLAIN THE SOURCE OF THE INVESTMENT IN QUESTION. IT IS A CLEAR CASE OF UNDISCLOSED INCO ME DETECTED DURING THE COURSE OF SEARCH AND SEIZURE ACTION AND, THEREFORE, THE SURRE NDER MADE BY THE ASSESSEE HIMSELF IS SELF-EXPLANATORY TO THE NATURE OF INCOME SURRENDERED BY THE ASSESSEE. THE LD. D/R HAS CONTENDED THAT THE ASSESSEE HAS PAR TICIPATED IN THE PENALTY PROCEEDINGS AND HAS NOT RAISED ANY OBJECTION OR HAS DEMANDED BEFORE THE AO ABOUT HIS UNAWARENESS OF THE NATURE OF DEFAULT ATTRACTING THE LEVY OF PENALTY UNDER SECTION 271AAB. IT IS NOT THE CASE OF THE ASSESSEE THAT THE DISCLOSURE WAS TAKEN UNDER COERCION AND FURTHER THE ASSESSEE HAS OFFERED THE S AID AMOUNT TO TAX IN THE RETURN OF INCOME WHICH RULES OUT THE SCOPE OF ANY PRESSURE OR COERCION BY THE SEARCH TEAM FOR TAKING DISCLOSURE FROM THE ASSESSEE. THUS THE OBJE CTION RAISED BY THE ASSESSEE THAT THE AO HAS NOT SPECIFIED THE CLAUSE UNDER SECTION 2 71AAB(1) OF THE ACT HAS NO MERIT WHEN THE ASSESSEE HIMSELF HAS EXPLAINED THE NATURE OF INCOME DISCLOSED AND SURRENDERED AND ALSO PAID THE TAX ON THE SAME. THE LD. D/R HAS SUBMITTED THAT AS 6 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. PER THE EXPLANATORY NOTE OF FINANCE BILL, 2012, THE PROVISIONS OF SECTION 271AAB ARE MANDATORY IN NATURE AND THE AO HAS NO DISCRETION BU T THE ASSESSEE SHALL PAY THE PENALTY IN ADDITION TO THE TAX ON THE UNDISCLOSED I NCOME SURRENDERED UNDER SECTION 132(4) OF THE ACT. HE HAS RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 4.1. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK AND OT HERS DATED 27 TH NOVEMBER, 2017 IN I.T. APPEAL NO. 122, 128 AND 129 OF 2017 AND SUB MITTED THAT EVEN OTHERWISE IF THE SHOW CAUSE NOTICE DOES NOT MENTION THE SECTION CORRECTLY IT WILL NOT BE INVALID AS THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE ACT. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMIT AGARWAL, 88 TAXMANN.COM 288. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF SEARCH AND SEIZURE AC TION UNDER SECTION 132 OF THE ACT CONDUCTED ON 15 TH OCTOBER, 2014, THE ASSESSEE DISCLOSED INCOME OF RS . 9,01,00,000/- IN HIS STATEMENT MADE UNDER SECTION 1 32(4) OF THE ACT. THE SAID DISCLOSURE WAS MADE IN PURSUANT TO THE ENTRIES ON A CCOUNT OF ADVANCES FOR LAND, EXCESS CASH AND EXCESS JEWELLERY FOUND IN THE SEIZE D DOCUMENTS. THE DETAILS OF THE UNDISCLOSED INCOME SURRENDERED BY THE ASSESSEE ARE AS UNDER :- FOUND FROM ANNEXURE/ EXHIBIT NO. RELEVANT PAGE NO. AMOUNT PARTICULARS 1839, BARAH GANGAUR KA RASTA, JOHRI BAZAR, JAIPUR. ANN. B EXHIBIT NO.1 1 - 6 7,81,00,000/ - ADVANCES FOR LAND AND OTHER LOANS/ADVANCES EXCESS CASH FOUND 20,00,000/ - EXCESS JEWELLERY FOUND 1,00,00,000/ - TOTAL DECLARATION 9,01,00,000/ - 7 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. IT IS PERTINENT TO NOTE THAT THE DISCLOSURE OF ADDI TIONAL INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF IS NOT SUFFICI ENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT UNTIL AND UNLESS THE INCO ME SO DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME DEFIN ED IN THE EXPLANATION TO SECTION 271AAB(1) OF THE ACT. THEREFORE, THE QUESTION WHET HER THE INCOME DISCLOSED BY THE ASSESSEE IS UNDISCLOSED INCOME IN TERMS OF THE DEFI NITION UNDER SECTION 271AAB OF THE ACT HAS TO BE CONSIDERED AND DECIDED IN THE PEN ALTY PROCEEDINGS. SINCE THE ASSESSEE HAS OFFERED THE SAID INCOME IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT, THEREFORE, THE QUESTION OF TAKIN G ANY DECISION BY THE AO IN THE ASSESSMENT PROCEEDINGS ABOUT THE TRUE NATURE OF SUR RENDER 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 UNDER SE CTION 132(4) IS AN UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDED UNDER 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 THE SURRENDER AND THEN ARRIVE TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION O F UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO THE SAID SECTION. THEREFORE, WE DO NOT AGREE WITH THE CONTENTION OF THE LD. D/R THAT THE LEVY OF PENALTY UNDER SECTI ON 271AAB IS MANDATORY SIMPLY BECAUSE THE AO HAS TO FIRST ISSUE A SHOW CAUSE NOTI CE TO THE ASSESSEE AND THEN HAS TO MAKE A DECISION FOR LEVY OF PENALTY AFTER CONSID ERING THE FACT THAT ALL THE CONDITIONS PROVIDED UNDER SECTION 271AAB ARE SATISF IED. AT THE OUTSET, WE NOTE THAT 8 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORD INATE 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 D IARY WHICH WAS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SE IZURE ACTION. THIS IS YEAR OF SEARCH AND THE FINANCIAL YEAR WOULD END ON 31 ST MARCH, 2015. HOWEVER, THE ASSESSEE DISCLOSED THIS AMOUNT OF RS. 10,02,00,000/- BASED ON THE ENTRIES IN THE DIARY REGARDING INVESTM ENT IN REAL ESTATE. THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SE CTION 139(1) WAS 30 TH SEPTEMBER, 2015. IT IS UNDISPUTED FACT THAT THE A SSESSEE IS AN INDIVIDUAL AND WAS NOT MAINTAINING REGULAR BOOKS OF ACCOUNT. THEREFORE, THE TRANSACTIONS RECORDED IN THE POCKET DIARY FOUND DURING THE COURSE OF SEARCH ITSELF WOULD NOT LEAD TO THE P RESUMPTION THAT THE ASSESSEE WOULD NOT HAVE OFFERED THIS INCOME TO TAX IF THE SEARCH IS NOT CONDUCTED ON 30 TH OCTOBER, 2014. FURTHER, THE ENTRIES IN THE DIARY ITSELF DO NO NOT REPRESENT THE INCOME OF THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION THOUGH THE ASSESSEE WAS REQUIRE D TO EXPLAIN THE SOURCE OF INVESTMENT IN QUESTION AND THAT SOURCE WO ULD BE THE INCOME OF THE ASSESSEE. IT IS MOST LIKELY THAT THE INVEST MENT IN QUESTION WAS MADE FROM THE UNACCOUNTED INCOME OF PRECEDING YEARS . HENCE THE INVESTMENT IN THE REAL ESTATE ITSELF WOULD NOT REVE AL THE NATURE OF INCOME AND THE SOURCE OF INCOME OF THE YEAR UNDER C ONSIDERATION. IT IS A PRE-CONDITION FOR INVOKING THE PROVISIONS OF SECT ION 271AAB THAT THE ASSESSEE ADMITTED THE UNDISCLOSED INCOME IN THE STA TEMENT UNDER SECTION 132(4). THE DEFINITION OF UNDISCLOSED IN COME IS PROVIDED IN 9 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. SECTION 271AAB ITSELF AND, THEREFORE, THE AO IN THE PROCEEDINGS UNDER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS OF THE CASE AND THEN ARRIVE TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO SAID SECTION. THE FIRST QUESTION ARISES IS WHETHER THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY AND CONSEQUENTIAL TO THE DISCLOSURE OF INCOME BY THE ASSESSEE UNDER SECTION 132(4) OR THE AO HAS TO TAKE A DECISION WHETHER THE GIVEN CASE HAS SATISFIED THE REQUIREMENTS FOR LEVY OF PENALTY UNDER SECTION 271A AB OF THE ACT. IN ORDER TO CONSIDER THIS ISSUE, THE PROVISIONS OF SEC TION 271AAB ARE TO BE ANALYZED. FOR READY REFERENCE, WE QUOTE SECTION 2 71AAB 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 (SE COND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT OF THE PRESIDENT 50 ], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF 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 MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF 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 10 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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 MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF SIXTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED UNDER THE PROVISIONS OF CLAUSE (A).] (2) NO PENALTY UNDER THE PROVISIONS OF 53 [ SECTION 270A OR] CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF T HE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1) 52 [OR SUB-SECTION (1A)]. (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 BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE 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 11 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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 REPRESENT ED, 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 SPECIF IED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WO ULD 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 275 AS FAR AS MAY BE APPLIED IN RELATION TO THE PENALTY REFERRED IN THIS SECTION WHICH MEANS THAT BEFORE IMPOSING THE PENALTY UNDER SEC. 271AAB, THE AO HAS TO ISSUE A SHOW CAUSE NOTICE AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE LEVY OF PENALTY U/S. 271AAB IS N OT AUTOMATIC BUT THE A.O. HAS TO TAKE A DECISION TO IMPOSE THE PENAL TY AFTER GIVING A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS STATUTORY REQUIREMENT THAT THE EXPLANATION OF THE ASSESSEE FO R NOT FULFILLING THE CONDITIONS AS PRESCRIBED U/S 271AAB OF THE ACT IS R EQUIRED TO BE CONSIDERED BY THE AO AND PARTICULARLY WHETHER THE E XPLANATION FURNISHED BY THE ASSESSEE IS BONAFIDE AND NON-COMPL IANCE OF THE SAME IS DUE TO THE REASON BEYOND THE CONTROL OF THE ASSE SSEE. THEREFORE, THE PENALTY U/S 271AAB IS NOT A CONSEQUENTIAL ACT BUT T HE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANATION AND REPLY OF THE ASSESS EE HAS TO TAKE A DECISION. THIS REQUIREMENT OF GIVING AN OPPORTUNIT Y OF HEARING ITSELF MAKES IT CLEAR THAT THE PENALTY U/S 271AAB IS NOT M ANDATORY BUT THE 12 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. AO HAS TO TAKE A DECISION BASED ON THE FACTS AND CI RCUMSTANCES OF THE CASE OTHERWISE THERE IS NO REQUIREMENT OF ISSUING A NY NOTICE FOR INITIATION OF PROCEEDINGS BUT THE LEVY OF PENALTY W OULD BE CONSEQUENTIAL AND ONLY COMPUTATION OF THE QUANTUM WAS TO BE DONE BY THE AO AS IN THE CASE OF LEVY OF INTEREST AND FEE U/S 234A TO E. EVEN THE QUANTUM OF PENALTY LEVIABLE U/S 271AAB IS ALSO SUBJECT TO T HE CONDITION PRESCRIBED UNDER CLAUSES (A) TO (C) OF SUB-SECTION (1) AND THE AO HAS TO AGAIN GIVE A FINDING FOR LEVY OF PENALTY @ 10% O R 20% OR 30% OF THE UNDISCLOSED INCOME. THUS THE AO IS BOUND TO TA KE A DECISION AS TO WHAT DEFAULT IS COMMITTED BY THE ASSESSEE AND WHICH PARTICULAR CLAUSE OF SECTION 271AAB(1) IS ATTRACTED ON SUCH DEFAULT. FURTHER, MERE DISCLOSURE OF INCOME UNDER SECTION 132(4) WOULD NOT IPSO FACTO PAR TAKE THE CHARACTER OF UNDISCLOSED INCOME BUT THE FA CTS OF EACH CASE ARE REQUIRED TO BE ANALYZED IN OBJECTIVE MANNER SO AS T O ATTRACT THE PROVISIONS OF SECTION 271AAB OF THE ACT. SINCE IT IS NOT AUTOMATIC BUT THE AO HAS TO GIVE A FINDING THAT THE CASE OF THE A SSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED IN EXPLANATI ON TO THE SAID SECTION. THEREFORE, THE PROVISIONS OF SECTION 271A AB STIPULATE THAT THE AO MAY COME TO THE CONCLUSION THAT THE ASSESSEE SHA LL PAY THE PENALTY. THE ONLY MANDATORY ASPECT IN THE PROVISIO N IS THE QUANTUM OF PENALTY AS SPECIFIED UNDER CLAUSES (A) TO (C) OF SE C. 271AAB(1) OF THE ACT AS 10% TO 30% OR MORE AS AGAINST THE DISCRETION GIVEN TO THE AO AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE A CT WHERE THE AO HAS THE DISCRETION TO LEVY THE PENALTY FROM 100% TO 300 % OF THE TAX SOUGHT TO BE EVADED. THUS THE AO IS DUTY BOUND TO COME TO THE CONCLUSION THAT THE CASE OF THE ASSESSEE IS FIT FOR LEVY OF PENALTY UNDER SECTION 271AAB AND THEN ONLY THE QUANTUM OF PENALTY BEING 10% OR 20% OR 30% HAS TO BE DETERMINED SUBJECT TO THE EXPL ANATION OF THE ASSESSEE FOR THE DEFAULTS. 13 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 5. BEFORE WE PROCEED FURTHER, THE DECISIONS RELIED UPON BY THE LD. D/R ARE TO BE CONSIDERED. IN THE CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK & OTHERS (SUPRA) THE ISSUE BEFORE THE HONB LE HIGH COURT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 271AA B ON ACCOUNT OF MENTIONING WRONG PROVISION OF THE ACT BEING 271(1)( C) OF THE ACT. THE HONBLE HIGH COURT AFTER CONSIDERING THE FACT THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO THOUGH MENTIONS SECTION 271 (1) IN THE CAPTION OF THE SAID NOTICE, HOWEVER, THE BODY OF THE SHOW C AUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS FULLY COMPREHEND ED BY THE ASSESSEE AS REVEALS IN THE REPLY FILED BY THE ASSES SEE AGAINST THE SAID SHOW CAUSE NOTICE. HENCE THE HONBLE HIGH COURT HA S HELD AS UNDER :- THE LD. A.RS HAVE ALSO CHALLENGED THAT THE CAPTIO N OF THE NOTICE MENTIONED ONLY SECTION 271 AND NOT 271AAB. I N THIS RESPECT, THE COPY OF NOTICE HAS BEEN PRODUCED BY THE LD. A.R . BEFORE ME. IT IS SEEN THAT THE LD. A.R IS CORRECT IN OBSERVING THAT THE SECTION OF PENALTY HAS NOT BEEN CORRECTLY MENTIONED BY THE AO IN THE C APTION. HOWEVER, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUSE FIRSTLY, THE ASSESSEE HAS RAISED NO OB JECTION BEFORE THE AO IN THIS REGARD. SECONDLY, LAST LINE OF THE NOTIC E CLEARLY MENTIONS SECTION 271AAB. THIRDLY, THE ASSESSEE HAS GIVEN REP LY TO SAID NOTICE WHICH SHOWS THAT THE ASSESSEE FULLY COMPREHENDED TH E IMPLICATION OF THE NOTICE THAT IT IS FOR SECTION 271AAB. THE ASSESSEE HAS ALSO CHALLENGED THAT THE PRINCIPLE S OF NATURAL JUSTICE HAS NOT FOLLOWED BY THE AO. THE DETAILED SU BMISSIONS OF A.R IN THIS REGARD HAS ALREADY BEEN REPRODUCED ABOVE. THE A.R DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WAS NOT GIVEN PROPER OPPORTUNITY OF HEARING. IT IS CLEAR FROM THE PENALT Y ORDER THAT THE AO HAS GIVEN PENALTY NOTICE AND WHICH WAS ALSO REPLIED BY THE ASSESSEE. THEREFORE, IN MY OPINION, PRINCIPLE OF NATURAL JUST ICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOVE DISCUSSION PENALTY IMPOSED BY AO U/S 271AAB OF THE ACT IS CONFIRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UNDER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF TH E SAME. THE SAID 14 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. DECISION WILL NOT HELP THE CASE OF THE REVENUE SO F AR AS THE ISSUE INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTIO N 271AAB. AS REGARDS THE DECISION OF KOLKATA BENCHES OF THE TRIB UNAL IN THE CASE OF DCIT VS. AMIT AGARWAL (SUPRA), WE FIND THAT THE SAI D DECISION WAS SUBSEQUENTLY RECALLED BY THE TRIBUNAL AND A FRESH O RDER DATED 14 TH MARCH, 2018 WAS PASSED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THEREFORE, THE DECISION RELIED UPON BY THE LD. D/R IS NO MORE IN EXISTENCE. 6. THE QUESTION WHETHER LEVY OF PENALTY UNDER SECTI ON 271AAB BY THE AO IS MANDATORY OR DISCRETIONARY HAS BEEN CONSI DERED BY THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN CASE OF ACI T VS. M/S. MARVEL ASSOCIATES (SUPRA) IN PARA 5 TO 7 AS UNDER :- 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. 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 PENALTY IN THE CASE OF ADMISSION O F INCOME U/S 132(4) IS MANDATORY. THE LD. A.R. FURTHER STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSM ENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MAN DATORY BUT DISCRETIONARY. WHEN THERE IS REASONABLE CAUSE, THE PENALTY IS NOT EXIGI BLE. THE LD. A.R. TAKEN US TO THE SECTION 271AAB OF THE ACT AND ALSO SECTION 158BFA(2 ) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WOR DS USED IN SECTION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED THAT THE PENAL TY SECTION 271AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REFERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT A ND SECTION 271AAB OF THE ACT WHICH READS AS UNDER; 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E SEARCH HAS BEEN INITIATED UNDER 15 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. SECTION 132 ON OR AFTER THE 1 ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT O F THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4_) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER C ENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SP ECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDI SCLOSED INCOME REFERRED TO IN SUB-SECTION (1). 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 AMOUNT OF TA X LEVIABLE BUT WHICH SHALL NOT 16 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C ) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MO NEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVI SO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PE NALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS I N 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 INDICATES THE DISCRETION TO THE AO. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF THE A CT, FORTIFIES THIS VIEW. SUB SECTION (3) OF SECTION 271AAB: THE PROVISIONS OF SECTION 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CLEAR INTENTIO N TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROC EDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS E VIDENT THAT THE PENALTY CANNOT BE IMPOSED UNLESS THE ASSESSEE IS GIVEN A REASONABLE O PPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSE E, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND M ERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE A ND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREM ENT OF IMPOSING PENALTY, BECAUSE 17 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPOR TUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JU STICE. HONBLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHIL E DEALING WITH THE PENALTY U/S 158BFA HELD THAT WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT A RE ENTITLED TO BE MANDATORY, THE WORDS MAY DIRECT IN SUB SECTION 2 THERE OF INTENDED TO DIRECTORY. IN OTHER WORDS, WHILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENA LTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DISCRETION IS VESTED AND AUTHO RITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE F ACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF THE ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. ACCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON MERITS OF THE EACH CASE. THUS THE TRIBUNAL HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETI ON TO TAKE A DECISION AND SHALL BE BASED ON JUDICIOUS DECISION O F THE AO. HENCE WE FORTIFY OUR VIEW BY THE ABOVE DECISIONS OF TRIBUNAL IN CASE OF ACIT VS. MARVEL ASSOCIATES. THUS THE TRIBUNAL HAS ANALYZED ALL THE RELEVANT PRO VISIONS OF THE ACT AS WELL AS VARIOUS DECISIONS ON THIS POINT INCLUDING THE DECIS ION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PR. CIT VS. SANDEEP CHANDAK, 405 ITR 648 (ALLAHABAD) RELIED UPON BY THE LD. D/R AND THEN ARRIVED AT THE CONCLUSION THAT THE PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETION TO T AKE A DECISION AND THE SAME SHOULD BE BASED ON JUDICIOUS DECISION OF THE AO. A CCORDINGLY FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL IN THE CASE OF RAVI MATHU R VS. DCIT (SUPRA), WE HOLD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MAN DATORY BUT THE AO HAS A 18 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. DISCRETION AFTER CONSIDERING ALL THE RELEVANT ASPEC TS OF THE CASE AND THEN TO SATISFY HIMSELF THAT THE CASE OF THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF TH E ACT. 5.1. THE SECOND LIMB OF CHALLENGING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS FOR NOT SPECIFYING THE GROUND AND DEFAULT IN THE SH OW CAUSE NOTICE ISSUED UNDER SECTION 274 HAS BEEN CONSIDERED BY THE COORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF RAVI MATHUR VS. DCIT (SUPRA) IN PARA IN PAR A 7 AS UNDER :- 7. AS REGARDS THE VALIDITY OF NOTICE UNDER SECTION 274 FOR WANT OF SPECIFYING THE GROUND AND DEFAULT, WE FIND THAT WHE N THE BASIC CONDITION OF THE UNDISCLOSED INCOME NOT RECORDED IN THE BOOKS OF ACCOUNTS DOES NOT EXISTS, THEN THE SAME HAS TO BE S PECIFIED BY THE AO IN THE SHOW CAUSE NOTICE AND FURTHER THE AO IS REQU IRED TO GIVE A FINDING WHILE IMPOSING THE PENALTY UNDER SECTION 27 1AAB. EVEN IF THE AO IS SATISFIED AND COME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT RECORDED THE UNDISCLOSED INCOME IN THE BOOKS OF ACC OUNTS OR IN THE OTHER DOCUMENTS / RECORD MAINTAINED IN NORMAL CO URSE RELATING TO SPECIFIED PREVIOUS YEAR, THE SHOW CAUSE NOTICE SHALL ALSO SPECIFY THE DEFAULT COMMITTED BY THE ASSESSEE TO AT TRACT THE PENALTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THER E IS NO DISPUTE THAT THE AO HAS NOT SPECIFIED THE DEFAULT AND CHARG E AGAINST THE ASSESSEE WHICH NECESSITATED THE LEVY OF PENALTY UND ER SECTION 271AAB OF THE ACT. CONSEQUENTLY, THE ASSESSEE WAS NOT GIVE N AN OPPORTUNITY TO EXPLAIN HIS CASE FOR SPECIFIC DEFAULT ATTRACTING TH E LEVY OF PENALTY IN TERMS OF CLAUSES (A) TO (C) OF SECTION 271AAB(1) OF THE ACT. THE CHANNAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S. SHRI R. ELANGOVAN (SUPRA) AT PAGES 7 TO 10 HAS HELD AS UNDE R :- 19 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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 (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 20 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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. 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. 21 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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 DEFAULT ON THE PA RT OF THE ASSESSEE NOR EVEN SPECIFIED THE UNDISCLOSED INCOME ON WHICH THE PENAL TY WAS PROPOSED TO BE LEVIED. FOR READY REFERENCE WE REPRODUCE THE SHOW CAUSE NOT ICES ISSUED BY THE AO UNDER SECTION 274 READ WITH SECTION 271AAB ON 14 TH DECEMBER, 2016, 10 TH MARCH, 2017 AND 15 TH MAY, 2017 AS UNDER :- NOTICE UNDER SECTION 274 READ WITH SECTION 271 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. DATED : 14.12.2016. TO, NAME SHRI GOPL DAS SONKIA ADDRESS 367, SONKIA BHAWAN, SMS HIGHWAY, OPP. TARKESHWAR MANDIR, CHAURA RASTA, JAIPUR. PAN BJQPS 9676 A WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2015-16 PENALTY PROCEEDINGS WERE INITIATED U/S 274 AND 275 READ WITH THE SECTION U/S 271AAB OF THE IT ACT AND A PENALTY NOTICE WAS ISSUE D ACCORDINGLY. YOU ARE HEREBY ALLOWED FURTHER OPPORTUNITY OF BEING HEARD AND TO SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD N OT BE MADE U/S 271AAB 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 SHOW CAUSE IN WRITING ON OR BEFORE THE DATE FIXED FOR HEARING ON 22 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 10.01.2017 AT 11.00 AM WHICH WILL BE CONSIDERED BEF ORE ANY SUCH ORDER (S) IS/ARE MADE. SD/- ( KAMLESH KUMAR MEENA ) DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. NOTICE UNDER SECTION 274 READ WITH SECTION 271 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. DATE : 10-03-2017. TO, NAME SHRI GOPAL DAS SONKIA ADDRESS 367, SONKIA BHAWAN, SMS HIGHWAY, OPP. TARKESHWAR MANDIR, CHAURA RASTA, JAIPUR. PAN BJQPS 9676 A WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2015-16 PENALTY PROCEEDINGS WERE INITIATED U/S 274 AND 275 READ WITH THE SECTION U/S 271AAB OF THE IT ACT AND A PENALTY NOTICE WAS ISSUE D ACCORDINGLY. YOU ARE HEREBY ALLOWED FURTHER OPPORTUNITY OF BEING HEARD AND TO SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD N OT BE MADE U/S 271AAB 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 SHOW CAUSE IN WRITING ON OR BEFORE THE DATE FIXED FOR HEARING ON 20.03.2017 AT 11.00 AM WHICH WILL BE CONSIDERED BEF ORE ANY SUCH ORDER (S) IS/ARE MADE. SD/- ( KAMLESH KUMAR MEENA ) DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. 23 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. NOTICE UNDER SECTION 274 READ WITH SECTION 271 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. DATE : 15-05-2017. TO, NAME M/S/SHRI/SMT. GOPAL DAS SONKIA ADDRESS 365, SONKIA BHAWAN, SMS HIGHWAY, JAIPUR. PAN BJQPS 9676 A WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2015-16 PENALTY PROCEEDINGS WERE INITIATED U/S 274 AND 275 READ WITH THE SECTION U/S 271AAB OF THE IT ACT AND A PENALTY NOTICE WAS ISSUE D ACCORDINGLY. YOU ARE HEREBY ALLOWED FURTHER OPPORTUNITY OF BEING HEARD AND TO SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD N OT BE MADE U/S 271AAB 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 SHOW CAUSE IN WRITING ON OR BEFORE THE DATE FIXED FOR HEARING ON 25.05.2017 AT 11.00 AM WHICH WILL BE CONSIDERED BEF ORE ANY SUCH ORDER (S) IS/ARE MADE. SD/- ( KAMLESH KUMAR MEENA ) DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. THUS IT IS CLEAR THAT ALL THE SHOW CAUSE NOTICES IS SUED BY THE AO FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271AAB ARE VERY V AGUE AND SILENT ABOUT THE DEFAULT OF THE ASSESSEE AND FURTHER THE AMOUNT OF U NDISCLOSED INCOME ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. EVEN THE HONBL E JURISDICTIONAL HIGH COURT IN CASE OF SHEVATA CONSTRUCTION CO. PVT. LTD IN DBIT A PPEAL NO. 534/2008 DATED 06.12.2016 HAS CONCURRED WITH THE VIEW TAKEN BY HON BLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY , 359 ITR 565 (KARNATAKA) 24 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. WHICH WAS SUBSEQUENTLY UPHELD BY THE HONBLE SUPREM E COURT BY DISMISSING THE SLP FILED BY THE REVENUE IN THE CASE OF CIT VS. SSAS E MERALD MEADOWS, 242 TAXMAN 180 (SC). ACCORDINGLY, FOLLOWING THE DECISION OF THE C OORDINATE BENCH AS WELL AS HONBLE JURISDICTIONAL HIGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE INITIATION OF PENALTY IS NOT VALID AND CON SEQUENTLY THE ORDER PASSED UNDER SECTION 271AAB IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. GROUND NO. 2 IS REGARDING LEVY OF PENALTY UNDER SEC TION 271AAB OF THE ACT BEING UNJUST AND AGAINST THE PROVISIONS OF LAW. 6. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE AO WHILE PASSING THE PENALTY ORDER UNDER SECTION 271AAB HAS NOT GIVEN A FINDING THAT THE INCOME DISCLOSED BY THE ASSESSEE IS AN UNDISCLOSED INCOME AS PER DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 271AAB(1) OF THE ACT. HE HA S FURTHER SUBMITTED THAT WHEN THE LEVY OF PENALTY IS NOT MANDATORY BUT TO BE IMPO SED ON MERITS OF EACH CASE, THEN THE AO IS DUTY BOUND TO FIRST HOLD THAT THE INCOME DISCLOSED BY THE ASSESSEE IS UNDISCLOSED INCOME AS PER THE PROVISIONS OF SECTION 271AAB AND THEN TAKE A DECISION OF IMPOSING THE PENALTY. HE HAS REFERRED TO THE RE LEVANT DISCLOSURE MADE BY THE ASSESSEE IN THE STATEMENT RECORDED UNDER SECTION 13 2(4) AND SUBMITTED THAT IT IS A CLEAR CASE OF OBTAINING THE DISCLOSURE FROM THE ASS ESSEE WITHOUT ANY INCRIMINATING MATERIAL DISCLOSING ANY UNDISCLOSED INCOME. THE AL LEGED SEIZED MATERIAL OF ANNEXURE-B EXHIBIT NO. 1 ARE NOTHING BUT CONTAINING SOME IMAGINARY NAMES AND DETAILS AND SOME FIGURES WHICH WERE SPECIFICALLY ST ATED BY THE ASSESSEE IN HIS STATEMENT. THE LD. A/R HAS THUS CONTENDED THAT THE SAID SEIZED DOCUMENTS ARE 25 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. NOTHING BUT DUMB AND DEAF PAPERS WITHOUT INDICATING ANY UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSEE HAS SURRENDERED THE INCOME JUST TO BUY PEACE AND AVOID UNNECESSARY LITIGATION, HOWEVER, THERE IS NO IOTA O F EVIDENCE THAT THE SURRENDERED INCOME WAS UNDISCLOSED INCOME OF THE ASSESSEE. ALL THE ENTRIES IN THE SEIZED DOCUMENTS ARE WRITTEN AGAINST SOME IMAGINARY NAMES AND FIGURES AND DO NOT REPRESENT ANY ACTUAL TRANSACTION BUT ONLY FOR SAKE OF OBTAINING THE SURRENDER FROM THE ASSESSEE, THE SEARCH PARTY HAS FORCED UPON THES E DOCUMENTS ON THE ASSESSEE. THE LD. A/R HAS REFERRED TO THE CBDT CIRCULAR NO. 2 86 OF 2003 DATED 10 TH MARCH, 2003 AND SUBMITTED THAT THE CBDT EXPRESSED ITS CONC ERN ABOUT THE PRACTICE OF CONFESSION OF ADDITIONAL INCOME DURING THE COURSE O F SEARCH AND SEIZURE PROCEEDINGS WHICH DO NOT SERVE ANY USEFUL PURPOSE IN THE ABSENC E OF ANY EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DIS CLOSED OR IS NOT LIKELY TO BE DISCLOSED. HENCE THE LD. A/R HAS SUBMITTED THAT TH E BOARD HAS TIME AND AGAIN ADVISED THE TAXING AUTHORITIES TO AVOID OBTAINING A N ADMISSION/CONFESSION OF UNDISCLOSED INCOME UNDER COERCIVE/UNDUE INFLUENCE. HE HAS THEN REFERRED TO THE CIRCULAR DATED 18 TH DECEMBER, 2018 AND SUBMITTED THAT THE CBDT HAS REP EATED ITS EARLIER INSTRUCTIONS. THUS THE LD. A/R HAS SUBMITTE D THAT IN THE ABSENCE OF ANY UNDISCLOSED INCOME INDICATED OR DISCOVERED ON THE B ASIS OF SEIZED MATERIAL, THE DISCLOSURE MADE IN THE STATEMENT UNDER SECTION 132( 4) IS NOT SUFFICIENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT. IN SUPPOR T OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISIONS :- 26 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. RAVI MATHUR VS. DCIT ITA NO. 969/JP/2017 DATED 13.06.2018. DINESH KUMAR AGARWAL VS. ACIT ITA NOS. 855 & 856/JP/2017 DATED 24.07.2018. RAJA RAM MAHESHWARI VS. DCIT ITA NO. 992/JP/2017 DATED 10.01.2019. M/S. RAMBHAJOS VS. ACIT ITA NO. 991/JP/2017 DATED 11.01.2019. RAJENDRA KUMAR GUPTA VS. DCIT ITA NO. 359/JP/2017 DATED 18.01.2019. THUS THE LD. A/R HAS SUBMITTED THAT EVEN IF THE SEI ZED MATERIAL DISCLOSES SOME OUT- FLOW OF FUNDS FROM THE ASSESSEES HANDS, THE SAME C ANNOT NECESSARILY BE AN INCOME OF THE ASSESSEE. THEREFORE, IN THE ABSENCE OF ANY OTHER MATERIAL OR EVIDENCE TO SHOW THE UNDISCLOSED INCOME OF THE ASSESSEE, ONLY T HE ENTRIES IN THE SEIZED MATERIAL WHICH IS DUMB AND DEAF DOCUMENT CANNOT BE THE BASIS OF LEVY OF PENALTY UNDER SECTION 271AAB OF THE IT ACT. THUS NO INCRIMINATIN G DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION AND THE ALLEGED SEIZED PAPERS ON THE BASIS OF WHICH SURRENDER WAS TAKEN BY THE DEPARTMENT CONTAIN S ONLY IMAGINARY NAMES AND SOME FIGURES. NEITHER DURING THE SEARCH PROCEEDING S NOR THE AO HAS MADE ANY ENQUIRY OR INVESTIGATION REGARDING THE ENTRIES MADE IN THE SEIZED PAPERS. THE SURRENDER OF THE SAID INCOME BY THE ASSESSEE WAS JU ST TO BUY PEACE AS IT IS EVIDENT FROM THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE SAID ENTRIES IN THE POCKET DIARY GIVING ADVANCES ITSELF IS NOT AN U NDISCLOSED INCOME BUT DUE TO UNDUE PRESSURE EXERTED BY THE REVENUE AUTHORITIES T O OBTAIN THE SURRENDER, THE ASSESSEE HAS MADE THE SURRENDER OF THE SAID INCOME. 27 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 7. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE ASSESSEE HAS DISCLOSED UNDISCLOSED INCOME BASED ON THE SEIZED MATERIAL CON TAINING THE ENTRIES ON ACCOUNT OF ADVANCES FOR LAND. THE ENTRIES IN THE SEIZED MAT ERIAL PERTAINS TO THE SPECIFIED PREVIOUS YEAR AND, THEREFORE, ALL THE CONDITIONS AS PROVIDED UNDER SECTION 271AAB OF THE ACT ARE SATISFIED FOR LEVY OF PENALTY. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS APPARENT FROM THE SEIZED DOCUMENTS, THE ASSESSEE DISCLOSED INTER ALIA THE INCOME OF RS. 7,81,00,000/- ON ACCOUNT OF ADVAN CES FOR LAND. ON CAREFUL PERUSAL AND CONSIDERATION OF THE SEIZED DOCUMENTS, WE FIND THAT VARIOUS ENTRIES ARE MADE AGAINST VARIOUS NAMES FROM THE MONTH OF MAY, 2014 T O 4 TH OCTOBER, 2014. THESE ENTRIES ARE IN RESPECT OF CERTAIN AMOUNTS AGAINST S OME IMAGINARY NAMES AND THE DEPARTMENT HAS NOT MADE ANY EFFORT OR CONDUCTED ANY ENQUIRY EITHER DURING THE SEARCH AND SEIZURE ACTION OR DURING THE ASSESSMENT PROCEEDINGS OR IN THE PENALTY PROCEEDINGS TO ASCERTAIN THE PARTICULARS OF THESE P ERSONS WHETHER THESE ARE REAL EXISTING PERSONS OR ONLY FAKE NAMES ARE WRITTEN IN THE SEIZED DOCUMENTS. FURTHER, THERE IS NO DESCRIPTION OF ANY LAND FOR WHICH THE A LLEGED ADVANCES ARE FOUND TO BE NOT IN THE SEIZED MATERIAL. APART FROM THESE ENTRI ES, THERE IS NOTHING ON RECORD OR EVEN ANY ENQUIRY WAS CONDUCTED BY THE DEPARTMENT TO FIND OUT THE PARTICULARS OF THE DETAILS OR TRANSACTIONS FOR WHICH THE ALLEGED ADVAN CES WERE GIVEN BY THE ASSESSEE. THE MERE ENTRIES IN THESE DOCUMENTS DO NOT REVEAL T HE CORRECT NATURE OF TRANSACTION AND THE EXISTENCE OF THE CORRESPONDING ASSET FOR WH ICH THE ALLEGED ADVANCES WERE GIVEN. THE DEPARTMENT HAS CONCENTRATED ONLY TO OBT AIN THE SURRENDER FROM THE 28 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. ASSESSEE BUT NO RELEVANT QUESTION OR ENQUIRY WAS CO NDUCTED TO FIND OUT THE PARTICULARS OF THE LAND AND THE FULL PARTICULARS OF THE PERSONS TO WHOM THE ADVANCES WERE GIVEN. IN THE ABSENCE OF THE EXISTENCE OF THE LAND FOR WHICH THE ALLEGED ADVANCES WERE GIVEN, THESE ENTRIES ALONE WOULD NOT IPSO FACTO UNDISCLOSED INCOME OF THE ASSESSEE. EVEN OTHERWISE, THESE ENTRIES ITSELF ARE NOT HAVING ANY ELEMENT OF INCOME BUT THESE ARE ALL EXPENDITURE ENTRIES AND, T HEREFORE UNTIL AND UNLESS THE FULL PARTICULARS OF THE LAND OR THE ASSET AGAINST WHICH THE ADVANCES WERE GIVEN IS IDENTIFIED ALONG WITH THE PERSONS TO WHOM THE ADVAN CES WERE GIVEN, IT WOULD NOT BE REGARDED AS REPRESENTING THE UNDISCLOSED INCOME OF THE ASSESSEE. FURTHER, THE ADVANCES GIVEN IN THE MONTH OF MAY, 2014 MAY NOT NE CESSARILY BE REPRESENTING THE UNDISCLOSED INCOME OF THE YEAR UNDER CONSIDERATION. NEITHER ANY OTHER DOCUMENT LIKE AGREEMENT TO PURCHASE AND SALE OF LAND OR RECE IPT TO INDICATE THE REAL TRANSACTION ENTERED INTO BY THE ASSESSEE WITH THE P ERSONS WHOSE NAMES ARE RECORDED IN THE SEIZED MATERIAL ARE EITHER FOUND OR BROUGHT ON RECORD BY THE AO. THE EXISTENCE OF THE ASSET BEING LAND FOR WHICH THE ALLEGED ADVANCES WERE GIVEN IS ESSENTIAL TO ESTABLISH THAT THE ASSESSEE HAS ACTUAL LY ENTERED INTO THESE TRANSACTIONS AND PAID THE ADVANCES. IN THE ABSENCE OF SUCH FACT OR THE LAND FOR WHICH THE ADVANCES WERE GIVEN OR THE FULL PARTICULARS OF THE PERSONS TO SHOW THAT THE NAMES APPEARING IN THE SEIZED DOCUMENTS ARE REAL EXISTING PERSONS, THESE ENTRIES IN THE SEIZED DOCUMENTS WOULD NOT CONSTITUTE UNDISCLOSED I NCOME ON ACCOUNT OF ADVANCES FOR LAND. THEREFORE, WITHOUT ASCERTAINING THE FULL PARTICULARS OF THE PERSONS IN WHOSE NAMES THE ENTRIES ARE MADE, IT IS POSSIBLE THAT ALL THESE NAMES ARE IMAGINARY AND NOT THE NAMES OF ANY EXISTING PERSONS. THE VAGUE E NTRIES ITSELF DO NOT REPRESENT THE 29 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. REAL TRANSACTION AND CONSEQUENTLY THE UNDISCLOSED I NCOME OF THE ASSESSEE. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF RAJEND RA KUMAR GUPTA VS. DCIT (SUPRA) HAS CONSIDERED THE ISSUE OF OUT FLOW OF FUNDS FROM THE ASSESSEE CAN BE AN UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 271AA B OF THE ACT IN PARA 21 AS UNDER :- 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIA RY) HAS BEEN FOUND REFERRED TO AS ANN. AS WHEREIN THERE ARE CERT AIN NOTINGS RELATING TO CASH ADVANCES GIVEN TO VARIOUS PERSONS TOTALING TO RS 82,80,000. REFERRING TO THE STATEMENT OF THE ASS ESSEE IN RESPECT OF THESE NOTINGS RECORDED U/S 132(4), LD CI T(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GIVEN A GENER ALIZED STATEMENT WITHOUT SPECIFYING THE COMPLETE PARTICULA RS OF PERSONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE THE SAME. THE SAID FINDINGS HAVE NOT BEEN DISPUTED BY THE REVENUE AND THEREFORE, MERELY BASED ON SURRENDER AND GENERALIZED STATEMENT OF THE ASSESSEE , IN ABSENCE OF ANYTHING SPECIFIC TO CORROBORATE SUCH EN TRIES, CAN IT BE SAID THAT SUCH ENTRIES/NOTINGS REPRESENT UNDISCL OSED INCOME OF THE ASSESSEE. AS PER THE DEFINITION OF UNDISCLO SED INCOME U/S 271AAB, THE SAID CASH ADVANCES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHETHER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES REPRESENTS INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACT IONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 . A CASH ADVANCE 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 30 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. 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 PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN S UCH AMOUNTS MAY BE DEEMED AS INCOME IN ABSENCE OF SATISFACTORY EXPL ANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTIO N 69 AND SECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THA T THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE B EEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN TH E CONTEXT OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE ST ATUE BOOK AND NOT OTHERWISE. IN THE INSTANT CASE, THE DEEMING PROVIS IONS CONTAINED IN SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUAN TUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NO T EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS. THEREFORE, EVEN ON THIS ACCOUNT, THE DEEMING FICTION CANNOT BE EXTE NDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM TH E ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SE CTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED IN COME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME MUST BE S TRICTLY CONSTRUED 31 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIE D THEREIN 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. ACCORDINGLY IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE AS WELL AS THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE HOLD THAT THE ENTRIES IN THE SEIZED DOCUMENTS REPRESENTING THE PAYMENT ON ACCOUNT OF LA ND IN THE ABSENCE OF THE OTHER ESSENTIAL FACTS REGARDING THE PARTICULARS OF THE LA ND AS WELL AS THE PERSONS DO NOT CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE AS DE FINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. ACCORDINGLY, THE PENALT Y LEVIED UNDER SECTION 271AAB BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS NOT SUST AINABLE AND LIABLE TO BE DELETED. 9. AS REGARDS THE EXCESS CASH OF RS. 20,00,000/- FO UND DURING THE COURSE OF SEARCH AND SEIZURE ACTION, THE LD. A/R OF THE ASSES SEE HAS SUBMITTED THAT THE ASSESSEE HAS DULY EXPLAINED THE COURSE OF CASH AS P AST SAVINGS. HE HAS REFERRED TO THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT AND SUBMITTED THAT IN RESPONSE TO QUESTION NO. 18 REGARDING THE CASH FOUN D DURING THE SEARCH, THE ASSESSEE HAS EXPLAINED THE SOURCE OF THE SAME AND A LSO EXPLAINED THAT A SUM OF RS. 7 TO 8 LACS IS ALREADY RECORDED IN THE BOOKS OF ACC OUNT OF THE ASSESSEE AND FAMILY 32 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. MEMBERS AND AN AMOUNT OF RS. 1,20,000/- REPRESENTIN G THE PETTY POCKET MONEY. THEREFORE, DESPITE THE SOURCE EXPLAINED BY THE ASSE SSEE, AN AMOUNT OF RS. 20,00,000/- WAS DISCLOSED DUE TO INSISTENCE OF THE SEARCH PARTY. THE LD. A/R HAS SUBMITTED THAT THE SAID CASH DOES NOT BELONG TO ONE PERSON BUT BELONG TO ALL THE FIVE FAMILY MEMBERS. IT WAS ACCUMULATED SAVINGS OF ALL THE FIVE FAMILY MEMBERS. THE AO HAS ACCEPTED THE RETURNED INCOME INCLUDING THE A MOUNT OF RS. 20,00,000/- REPRESENTING THE CASH AS BUSINESS INCOME OF THE CUR RENT YEAR. THEREFORE, MERELY ON THE BASIS OF SURRENDER MADE IN THE STATEMENT UNDER SECTION 132(4), THIS CANNOT BE HELD AS UNDISCLOSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. 10. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT WHEN THE CASH WAS FOUND DURING THE COURSE OF SEARCH AND THE ASSESSEE HAS SU RRENDERED THE SAME IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, THEN IT IS AN UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDED IN THE EXPLANATION T O SECTION 271AAB OF THE ACT. HE HAS FURTHER SUBMITTED THAT OUT OF THE TOTAL CASH FO UND DURING THE COURSE OF SEARCH AND SEIZURE OF RS. 21,20,000/-, THE ASSESSEE HAS DI SCLOSED RS. 20,00,000/- AND THE REMAINING AMOUNT OF RS. 1,20,000/- WAS CONSIDERED A S NORMAL CASH WITH THE ASSESSEE AND HIS FAMILY MEMBERS. HE HAS RELIED UPO N THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. SINCE THE CASH WAS FOUND FROM THE RESIDENT IAL PREMISES OF THE ASSESSEE DURING THE COURSE OF SEARCH AND SEIZURE ACTION, THE N THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF CASH. FOR THE PURPOSE OF CON SIDERING THE CASH FOUND DURING 33 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. THE SEARCH AS UNDISCLOSED INCOME OF THE ASSESSEE, T HE DEFINITION AS PROVIDED UNDER SECTION 271AAB CLEARLY CONTEMPLATES THAT ANY INCOME OF THE SPECIFIED PREVIOUS YEAR INTER ALIA REPRESENTED BY ANY MONEY AND NOT RECORDE D ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS M AINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR. THUS SO FAR AS THE AMOUNT OF MONEY RECORDED IN THE BOOKS OF ACCOUNT, THE SAME WOULD NOT FALL IN THE DE FINITION OF UNDISCLOSED INCOME. HOWEVER, THE CASH WHICH WAS NOT FOUND RECORDED IN T HE BOOKS OF ACCOUNT AS ON THE DATE OF SEARCH WOULD DEFINITELY FALL IN THE AMBIT O F UNDISCLOSED INCOME AS PER CLAUSE (C) OF EXPLANATION TO SECTION 271AAB OF THE ACT. W E FIND THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF THE CASH FOUND DURING THE S EARCH IN HIS ANSWER TO QUESTION NO. 18 RECORDED IN THE STATEMENT UNDER SECTION 132( 4) OF THE ACT TO THE EXTENT OF RS. 7 TO 8 LACS. THE DEPARTMENT HAS NOT EITHER CONTROV ERTED THAT EXPLANATION OR BROUGHT ANY MATERIAL TO SHOW THAT THE EXPLANATION OF THE AS SESSEE IS INCORRECT. THE ASSESSEE HAS CLEARLY STATED THAT ABOUT RS. 7 TO 8 LACS IS RE CORDED IN THE BOOKS OF ACCOUNT OF THE FIVE FAMILY MEMBERS OF THE ASSESSEE AS WELL AS THE ASSESSEE HIMSELF AND, THEREFORE, TO THAT EXTENT THE CASH FOUND DURING THE SEARCH CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. HENCE IN VIEW OF THE FACT THAT ONCE THE ASSESSEE IN THE STATEMENT EXPLAINED THE FACT OF CAS H OF RS. 7 TO 8 LACS RECORDED IN THE BOOKS OF ACCOUNT, THEN ONLY THE BALANCE AMOUNT CAN BE TREATED AS UNDISCLOSED INCOME. AS REGARDS THE BALANCE AMOUNT OF RS. 12 LA CS, THE LD. A/R HAS SUBMITTED THAT IT REPRESENTS THE PAST SAVINGS OF THE FAMILY M EMBERS OF THE ASSESSEE AND NOT THE CASH OF THE ASSESSEE ALONE. WE FIND MERIT IN T HIS CONTENTION THAT WHEN THE CASH WAS FOUND FROM THE RESIDENCE OF THE ASSESSEE AND FR OM DIFFERENT ROOMS OF THE 34 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. HOUSE, THEN THE SAVINGS OF THE OTHER FAMILY MEMBERS CANNOT BE IGNORED WHILE CONSIDERING THE UNDISCLOSED INCOME ON ACCOUNT OF CA SH FOUND AT THE RESIDENTIAL PREMISES OF THE ASSESSEE. FROM THE STATEMENT RECOR DED UNDER SECTION 132(4) ITSELF, THE DEPARTMENT HAS POINTED OUT THAT THE CASH WAS FO UND FROM DIFFERENT ROOMS OF THE RESIDENTIAL PREMISES AND, THEREFORE, THE BENEFIT OF PAST SAVINGS OF OTHER FAMILY MEMBERS IS REQUIRED TO BE GIVEN ON THIS ACCOUNT. A CCORDINGLY, HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE THAT OUT OF RS. 21,20,000/-, THE DEPARTMENT HAS ACCEPTED RS. 1,20,000/- AS PETTY POCKET MONEY A ND FROM REMAINING RS. 20,00,000/-, THE ASSESSEE ALREADY STATED THAT RS. 7 TO 8 LACS WERE ALREADY RECORDED IN THE BOOKS OF ACCOUNT OF THE FAMILY MEMBERS AS WE LL AS OF THE ASSESSEE, THEN THE BALANCE AMOUNT OF RS. 12 LACS HAS TO BE CONSIDERED IN THE LIGHT OF THE FACT THAT THE CASH WAS FOUND AT THE RESIDENTIAL PREMISES AND FROM DIFFERENT ROOMS AND, THEREFORE, THE PAST SAVINGS OF THE FAMILY MEMBERS CANNOT BE IG NORED WHILE CONSIDERING SAID AMOUNT OF RS. 12 LACS AS UNDISCLOSED INCOME OF THE ASSESSEE. ACCORDINGLY, IN THE ABSENCE OF ANY CLEAR CUT FINDING ABOUT THE CASH NOT REPRESENTING AND BELONGING TO THE OTHER FAMILY MEMBERS AS THEIR PAST SAVINGS, THE SAME CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION. HENCE THE PENALTY LEVIED BY THE AO IN RESPECT OF THE CASH FOU ND DURING THE SEARCH IS DELETED. EXCESS JEWELLERY FOUND : 12. DURING THE COURSE OF SEARCH AND SEIZURE ACTION, GOLD JEWELLERY AND SILVER WAS FOUND AT THE RESIDENCE OF THE ASSESSEE. THE ASSESS EE HAS DECLARED A SUM OF RS. 1.00 CRORE IN HIS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT ON ACCOUNT OF THE EXCESS GOLD JEWELLERY AND SILVER FOUND FROM THE RESIDENCE. THE SAID INCOME WAS 35 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. ALSO DECLARED IN THE RETURN OF INCOME. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE FAMILY OF THE ASSESSEE CONSISTING OF FIVE MEMBE RS I.E. ASSESSEE HIMSELF, WIFE, SON, DAUGHTER-IN-LAW AND GRANDSON. THE SAID JEWEL LERY FOUND DURING THE SEARCH WAS RECEIVED FROM BOTH SIDES OF RELATIVES AND FRIENDS A T THE TIME OF MARRIAGE AND THEREAFTER ON VARIOUS OTHER FESTIVALS AND AUSPICIOU S OCCASIONS. IT IS CUSTOMARY IN INDIAN SOCIETY THAT EVERY PARENT, FRIENDS & RELATIV ES TO PRESENT GOLD ORNAMENTS ETC. TO HER DAUGHTER & SON IN LAW AT THE TIME OF MARRIAG E. THE FAMILY OF ASSESSEE IS REPUTE AND MEANS. THUS LOOKING TO THE STATUS OF THE FAMILY, CUSTOMS OF THE SOCIETY AND OTHER FACTS AND CIRCUMSTANCES THE TOTAL WEIGHT OF GOLD IS REASONABLE AND SOURCE OF ACQUISITION WAS EXPLAINED. HOWEVER, THE ASSESSE E TO BUY PEACE AND AVOID LITIGATION WITH DEPARTMENT OFFERED THE SAID VALUATI ON OF JEWELLERY AS HIS ADDITIONAL BUSINESS INCOME OF THE CURRENT YEAR. THE LD. AO HA S NOT DETERMINED IT AS INCOME FROM OTHER SOURCES U/S 69 OF INCOME TAX ACT IN THE ASSESSMENT BUT ACCEPTED AS BUSINESS INCOME OF CURRENT YEAR. THEREFORE MERELY O N THE BASIS OF SURRENDER MADE IN THE SEARCH STATEMENT, THIS CANNOT BE HELD AS UNDIS CLOSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271AAB. 13. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT ONCE THE JEWELLERY WAS FOUND AT THE RESIDENCE AND THE ASSESSEE HAS ADMITTE D THE FACT THAT THE JEWELLERY WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, THEREFORE, IT IS AN UNDISCLOSED INCOME OF THE ASSESSEE FOR THE SPECIFIED PREVIOUS YEAR FOR THE PU RPOSE OF SECTION 271AAB OF THE ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORI TIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT WHAT IS FOUND IS THE JEWELLERY BELONG TO THE FAMILY 36 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. MEMBERS OF THE ASSESSEE AND IT IS NOT DISPUTED BY T HE DEPARTMENT THAT THE JEWELLERY DO NOT BELONG TO ASSESSEE ALONE. THEREFORE, MERELY BECAUSE THE ASSESSEE HAS DECLARED THE INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4), IT WOULD NOT IPSO FACTO BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE IN THE ABSENCE OF THE FACT OR ANY OTHER MATERIAL TO ESTABLISH THAT THE EN TIRE JEWELLERY FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION WAS ONLY ACQUIRED BY THE ASSESSEE AND BELONG TO THE ASSESSEE ALONE. WE FIND THAT IN THE INDIAN FAMILY MOST OF THE JEWELLERY BELONG TO THE WOMEN OF THE FAMILY. IT IS ALSO CUSTOMARY IN I NDIAN SOCIETY THAT THE WOMEN AND PARTICULARLY THE MARRIED WOMEN USED TO RECEIVE THE JEWELLERY FROM THE RELATIVES AND FRIENDS ON VARIOUS OCCASIONS INCLUDING MARRIAGE, BI RTH OF CHILD AS WELL AS OTHER AUSPICIOUS OCCASIONS LIKE ANNIVERSARIES ETC. THE D EPARTMENT HAS NOT MADE ANY EFFORT TO FIND OUT THE FACT WHETHER THE JEWELLERY WAS ACQU IRED DURING THE YEAR UNDER CONSIDERATION OR IT IS OLD JEWELLERY. THEREFORE, O NCE THE JEWELLERY WAS NOT FOUND TO BE PURCHASED DURING THE YEAR UNDER CONSIDERATION, T HEN THE SAME CANNOT BE TREATED AS AN UNDISCLOSED INCOME FOR THE YEAR UNDER CONSIDE RATION WHICH IS SPECIFIED PREVIOUS YEAR. THE JEWELLERY BELONG TO THE FAMILY M EMBERS OF THE ASSESSEE AND FOUND AT THE RESIDENCE WAS OLD JEWELLERY AND, THERE FORE, THE VALUATION OF THE JEWELLERY FOR THE PURPOSE OF COMPUTING THE UNDISCLO SED INCOME BY APPLYING THE CURRENT RATES ON THE GROSS WEIGHT IS NOT PERMISSIB LE. HENCE WHEN THE DEPARTMENT HAS NOT MADE ANY EFFORTS TO ASCERTAIN THE YEAR OF A CQUISITION OF THE JEWELLERY AND THEN TO APPLY THE RATES AS PREVAILING IN THE YEAR O F ACQUISITION AND SOME OF THE JEWELLERY EVEN NOT ACQUIRED BY THE ASSESSEE OR THE FAMILY MEMBERS BUT IS INHERITED, THEN THE MANNER IN WHICH THE DISCLOSURE IS OBTAINED ON ACCOUNT OF THE JEWELLERY 37 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. WOULD NOT REPRESENT THE UNDISCLOSED INCOME AS DEFIN ED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. WE FIND THAT THE ORDER PASSED B Y THE AO UNDER SECTION 271AAB AS WELL AS THE ORDER OF THE LD. CIT (A) ARE SILENT ON THE ISSUE OF INCORRECT VALUATION AS WELL AS THE TIMING OF ACQUIRING OF THE PERSONAL JEW ELLERY OF THE ASSESSEE AND THE FAMILY MEMBERS. THEREFORE, IN THE FACTS AND CIRCUMS TANCES OF THE CASE, THE PERSONAL JEWELLERY OF THE ASSESSEE AND FAMILY MEMBERS ACQUIR ED IN THE PAST AND SOME PART OF WHICH WAS ALSO INHERITED WILL NOT FALL IN THE AMBIT OF UNDISCLOSED INCOME. HENCE THE PENALTY LEVIED BY THE AO AGAINST SUCH DISCLOSURE IS NOT SUSTAINABLE. IT MAY BE PERTINENT TO MENTION THAT THE STATEMENT RECORDED UN DER SECTION 132(4) ITSELF WOULD NOT EITHER CONSTITUTE AN INCRIMINATING MATERIAL OR UNDISCLOSED INCOME IN THE ABSENCE OF ANY CORRESPONDING ASSET OR ENTRY IN THE SEIZED D OCUMENT REPRESENTING THE UNDISCLOSED INCOME. ACCORDINGLY, THE PENALTY LEVIE D BY THE AO UNDER SECTION 271AAB OF THE ACT IS DELETED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 11/04/ 2019. 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:- 11/04/2019. DAS/ 38 ITA NO. 306/JP/2018 SHRI GOPAL DAS SONKIA, JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI GOPAL DAS SONKIA, JAIPUR. 2. THE RESPONDENT THE DCIT, CENTRAL CIRCLE-2, JAI PUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 306/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR