RAJENDRA KUMAR GUPTA, Jaipur V. DCIT, Jaipur

ITA 359/JPR/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6492 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JHA ACIT
• Assessee Lawyers: S R SHARMA; R K BHATRA
• Keywords: Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause; Block assessment; Retraction
• Section: 271(1)(c); 143(3); 153A; 69B; 69; 132; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 359/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14 SHRI RAJENDRA KUMAR GUPTA S-3 MAHESH MARG, BAPU NAGAR, JAIPUR. CUKE VS. THE DCIT, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACQPG 4728 D VIHYKFKHZ@ APPELLAN T IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI R.K. BHATRA (C.A.)& SHRI S.R. SHARMA ( C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJENDRA JHA (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 05/11/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 18/01/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), JAIPUR DATED 27.03.2017 FOR THE ASSESSMENT YEAR 2013-14 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS WRONG, UNJUST AND HAS ERRED IN CONFIRMING THE PE NALTY OF RS 10,00,000 IMPOSED BY THE ASSESSING OFFICER U/S 271A AB OF THE INCOME TAX ACT, 1961. ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 2 2. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE ASS ESSEE HAS MOVED AN APPLICATION SEEKING PERMISSION FOR TAKING THE FO LLOWING ADDITIONAL GROUND OF APPEAL AS UNDER:- THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, N OTICE ISSUED BY THE ASSESSING OFFICER U/S 271AAB OF THE INCOME TAX ACT IS WRONG AND BAD IN LAW IN AS MUCH AS IT DID NOT SPECIFY IN WHICH LIMB OF SECTION 271AAB OF THE ACT, THE PENALTY PROCEEDINGS HAVE BEEN INITIATED. 3. THE LD. AR HAS SUBMITTED THAT THE ISSUE RAISED I N THE ADDITIONAL GROUND IS PURELY A LEGAL ISSUE AND IT GOES TO THE R OOT OF THE MATTER, THE SAME SHOULD BE ADMITTED IN THE INTEREST OF JUSTICE. IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER CORPORATION LTD. VS. CIT 229 ITR 383. THE LD. DR IS HEARD WHO HAS NOT RAISED ANY SPECIFIC OBJECTI ON AGAINST THE ADMISSION OF THE ADDITIONAL GROUND. AFTER HEARING B OTH THE PARTIES AND CONSIDERING THE MATERIAL AVAILABLE ON RECORD, WE F IND THAT THE ASSESSEE HAS CHALLENGED BASICALLY THE ISSUE OF SHOW CAUSE NO TICE BY THE ASSESSING OFFICER, THE SAID ADDITIONAL GROUND BEING A PURELY LEGAL GROUND, THE SAME IS BEING ADMITTED FOR ADJUDICATION ON MERITS. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION AND SUPPLY OF BUILDING MATERIAL, AND HAS REPORTED INCOME FROM BUSINESS, CAPITAL GAIN S AND OTHER SOURCES IN HIS RETURN OF INCOME. A SEARCH UNDER SECTION 13 2 WAS CARRIED OUT ON 31.10.2012 AT VARIOUS PREMISES OF MOTISONS GROUP IN CLUDING THE RESIDENTIAL PREMISES OF THE ASSESSEE AND THE STATEM ENT OF THE ASSESSEE WAS RECORDED U/S 132(4) WHEREIN HE HAS SURRENDERED INCOME TO THE TUNE OF RS 1,00,00,000/-. THE ASSESSEE SUBSEQUENTL Y FILED HIS RETURN OF ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 3 INCOME ON 16.10.2013 DECLARING TOTAL INCOME OF RS. 1,05,28,110/- WHICH INCLUDES AN AMOUNT OF RS. 1,00,00,000/- TOWARDS UND ISCLOSED INCOME SURRENDERED DURING THE COURSE OF SEARCH IN HIS STAT EMENT RECORDED U/S 132(4) OF THE ACT. THE AO SUBSEQUENTLY COMPLETED TH E ASSESSMENT U/S 143(3) R.W.S 153B(1)(B) OF THE ACT VIDE ORDER DATED 23.02.2015 AT A TOTAL INCOME OF RS. 1,05,28,110/-. THE AO SIMULTANE OUSLY INITIATED PENALTY PROCEEDINGS U/S 271AAB OF THE ACT VIDE ISS UANCE OF SHOW CAUSE NOTICED DATED 23.02.2015 AND THEREAFTER VIDE ORDER DATED 19.08.2015 HAS IMPOSED A PENALTY OF RS. 10,00,000/- U/S 271AAB(1)(A) OF THE ACT @ 10% OF THE UNDISCLOSED INCOME SURRENDE RED DURING THE COURSE OF SEARCH. ON APPEAL BY THE ASSESSEE, THE LD . CIT(A) HAS CONFIRMED THE SAID LEVY OF PENALTY AND AGAINST THE SAID ORDER, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, THE LD. AR DRAWN O UR REFERENCE TO THE PENALTY NOTICE U/S 271AAB DATED 23.02.2015 AND SUBMITTED THAT SECTION 271AAB OF THE ACT HAS THREE DIFFERENT LIMBS FOR LEVY OF PENALTY AT THREE DIFFERENT RATES AND THE IMPUNGED NOTICE IS SUED FOR INITIATION OF PENALTY U/S 271AAB OF THE ACT IS OF VERY GENERAL NA TURE AND DOESNT SPECIFY THE SPECIFIC LIMB OF SECTION 271AAB WHICH T HE AO WISHES TO INVOKE IN THE ASSESSEES CASE. IT WAS SUBMITTED TH AT THOUGH THE NOTICE HAS BEEN RECEIVED BY THE ASSESSEE, HOWEVER, THE ASS ESSEE WAS NOT IN A POSITION TO REPLY TO SPECIFIC DEFAULT WHICH HE HAS COMMITTED. IN THE CIRCUMSTANCES, ISSUANCE OF SUCH NOTICE LEFT THE ASS ESSEE BEREFT OF PROPER OPPORTUNITY AND SPECIFIC DEFENCE. IT WAS SUB MITTED THAT THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY BY QUOTING THE SPECIFIC PROVISIONS UNDER WHICH PENALTY IS IMPOSABLE SO THAT ASSESSEE C AN FURNISH HIS ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 4 ADEQUATE DEFENCE. IT WAS SUBMITTED THAT THE ASSESSI NG OFFICER HAS NOT STRUCK OFF AND HAS NOT TICKED THE RELEVANT PROVISIO NS WHILE ISSUING THE PENALTY NOTICE AND IT SHOWS THAT THE PENALTY PROCEE DING HAVE BEEN INITIATED IN A VERY LIGHT AND TRIVIAL MANNER. IN S UPPORT, RELIANCE WAS PLACED ON THE DECISION OF HONBLE KARNATAKA HIGH CO URT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 5 65, DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF SHEVETA CON STRUCTION CO. PVT LTD (DBIT APPEAL NO. 534/2008 DATED 6.12.2016) AND THE DECISION OF THE COORDINATE BENCH IN CASE OF DCIT VS R. ELANGOVA N (ITA NO. 1199/CHN/2017 DATED 5.4.2018. 6. HEARD BOTH THE PARTIES. THE PENALTY PROCEEDING S ARE SEPARATE FROM ASSESSMENT PROCEEDINGS, WHICH ARE INITIATED WI TH THE ISSUE OF NOTICE U/S. 274 AND CULMINATE WITH PASSING OF THE P ENALTY ORDER U/S. 271AAB OF THE ACT. FURTHER, THERE CANNOT BE ANY DIS PUTE THAT THE ASSESSEE SHOULD BE CONFRONTED WITH THE CHARGE AGAIN ST HIM WHICH IS SINE QUA NON FOR ANY VALID PENALTY PROCEEDINGS. IT IS ONLY WHEN THE ASSESSEE IS MADE AWARE OF SUCH A CHARGE AGAINST HIM THAT HE CAN PRESENT HIS CONTENTIONS. THUS PRESCRIBING THE CHARG E IN THE PENALTY NOTICE AND PENALTY ORDER IS MUST. ABSENCE OF A CHAR GE IN THE PENALTY NOTICE AND NOT FINDING THE ASSESSEE GUILTY OF A CLE AR OFFENCE IN THE PENALTY ORDER VITIATES THE PENALTY ORDER. 7. THE QUESTION THAT ARISES FOR CONSIDERATION IS TH E NATURE OF CHARGE(S) SPECIFIED UNDER SECTION 271AAB OF THE ACT . WHETHER IT PROVIDES FOR A SINGULAR CHARGE OF UNDISCLOSED INCOM E FOR THE SPECIFIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH INI TIATED UNDER SECTION ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 5 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 OR IT PRO VIDES FOR MULTIPLES CHARGES AS SO CONTENDED BY THE LD AR IN TERMS OF CL AUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB OF THE ACT. 8. ON CLOSE READING OF PROVISIONS OF SECTION 271AAB , WE FIND THAT THE PRIMARY CONDITION OR CHARGE FOR LEVY OF PENALTY IS THE EXISTENCE OF UNDISCLOSED INCOME FOR THE SPECIFIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH IN THE CASE OF ASSESSEE. ONCE THE SAID PRIMARY CONDITION OR CHARGE IS SATISFIED, FOR THE PURPOSES OF QUANTIFYING THE PENALTY, THE ASSESSING OFFICER HAS TO EXAMINE THE S ATISFACTION OF ANCILLARY CONDITIONS AS SPECIFIED UNDER CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB. MERELY BE CAUSE THE QUANTUM OF PENALTY VARIES FROM 10% TO 30% SUBJECT TO COMPLI ANCES WITH THE ANCILLIARY CONDITIONS, IT CANNOT BE SAID THAT WHERE THE AO HAS INITIATED THE PENALTY UNDER SECTION 271AAB, THERE IS ANY AMBI GUITY IN THE CHARGE OR THERE IS ANY LACK OF APPLICATION OF MIND ON PART OF THE ASSESSING OFFICER. FURTHER, THE LEVY OF PENALTY UNDER SECTIO N 271AAB IS NOT BASED ON ADDITION MADE AND INVESTIGATION/ENQUIRY CONDUCTE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS, RATHER IT IS BASE D ON SEARCH CONDUCTED ON THE ASSESSEE ON OR AFTER THE 1ST DAY O F JULY, 2012, IN SUCH A SITUATION, WHERE THE PENALTY SHOW-CAUSE NOTICE IS ISSUED U/S 271AAB, THE ASSESSING OFFICER IS MAKING THE ASSESSEE AWARE OF THE CHARGE AGAINST HIM IN TERMS OF UNDISCLOSED INCOME FOUND DU RING THE COURSE OF SEARCH AND THUS, THE ASSESSEE IS GRANTED AN OPPORTU NITY TO REFUTE SUCH CHARGE AND FILE HIS EXPLANATIONS/SUBMISSIONS. UNLIK E PROVISIONS OF SECTION 271(1)(C) WHICH PROVIDES FOR SEPARATE CHARG E OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCUR ATE PARTICULARS OF ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 6 INCOME, THERE IS A SINGULAR CHARGE UNDER SECTION 2 71AAB I.E, OF THE EXISTENCE OF UNDISCLOSED INCOME FOR THE SPECIFIED P REVIOUS YEAR WHICH IS FOUND DURING THE COURSE OF SEARCH IN THE CASE OF TH E ASSESSEE. THEREFORE, IN THE INSTANT CASE, WHERE THE NOTICE DA TED 23.02.2015 IS ISSUED TO THE ASSESSEE TO SHOW-CAUSE WHY PENALTY SH OULD NOT BE LEVIED U/S 271AAB OF THE ACT IN RESPECT OF UNDISCLOSED INC OME OF THE SPECIFIED PREVIOUS YEAR, THE ASSESSEE IS MADE AWARE OF THE SP ECIFIC CHARGE AGAINST HIM AND AN OPPORTUNITY HAS THUS BEEN GIVEN TO HIM TO REBUT SUCH CHARGE AND THEREFORE, WE DONOT SEE ANY INFIRMI TY IN THE INITIATION OF THE PENALTY PROCEEDINGS AND CONSEQUENT PENALTY O RDER SO PASSED BY THE AO. A SIMILAR VIEW HAS BEEN TAKEN BY THE CO-OR DINATE BENCH IN CASE OF MAHESH KUMAR JAIN & OTHERS (ITA NO. 630/JP/17 & OTHERS DATED 27.11.2017) WHEREIN IT WAS HELD AS UNDER: 10. THE FIRST AND FOREMOST QUESTION THAT ARISES FOR CONSIDERATION IS THE NATURE OF PENALTY PROVISIONS AS CONTAINED IN SECTIO N 271AAB(1)(A) AND 271AAB(1)(C). IN OTHER WORDS, WHETHER THESE PROVISI ONS PROVIDE FOR LEVY OF PENALTY ON ACCOUNT OF SEPARATE AND INDEPENDENT C HARGES OR THESE PROVISION PROVIDE FOR LEVY OF PENALTY FOR THE SAME CHARGE UNDER SECTION 271AAB, HOWEVER, SUBJECT TO SATISFACTION OF THE PRE SCRIBED CONDITIONS, THE QUANTUM OF PENALTY MAY VARY AS SPECIFIED IN THE RESPECTIVE SUB- CLAUSES OF 271AAB OF THE ACT. 11. IN THIS REGARD, WE REFER TO THE PROVISIONS OF SECTION 271AAB WHICH ARE REPRODUCED AS UNDER: 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 7 WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST 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 THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U NDER SUB-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 UNDISC LOSED INCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U NDER SUB-SECTION (4) OF SECTION 132 , DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CENT BUT WHICH SHALL NOT EXCEED NINETY PERCENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 8 PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIO NS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF 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) O R 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 THI S SECTION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE DUE DATE OF FURNIS HING OF RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UNDER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BU T THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE DATE OF SEARCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER V ALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 9 TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 , WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SE ARCH IN 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 PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR] CO MMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE 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 WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CO NDUCTED. 12. ON READING OF THE ABOVE PROVISIONS, IT PROVID ES THAT THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HA S BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSE E SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM, A SUM COMPUTED AT THE RATE OF 10% OF THE UNDISCLOSED INCO ME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE, IN THE COURSE OF T HE SEARCH, IN A STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 , ADMITS THE UNDISCLOSED INCOME AND SATISFIES OTHER CONDITIONS AS PROVIDED I N 271AAB(1)(A). IT FURTHER PROVIDES THAT WHERE THE DECLARATION OF UNDI SCLOSED INCOME IS NOT MADE BY THE SEARCHED PERSON IN THE COURSE OF SEARCH BUT IS DECLARED IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PR EVIOUS YEAR AND SUBJECT TO SATISFACTION OF OTHER CONDITIONS, PENALT Y @ 20% IS PAYABLE BY HIM. IT FURTHER PROVIDES THAT WHERE THE DECLARATIO N OF UNDISCLOSED ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 10 INCOME IS NEITHER MADE BY THE SEARCHED PERSON IN TH E COURSE OF SEARCH NOR DECLARED IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR AND ADDITIONS ARE MADE DURING THE COURSE OF AS SESSMENT PROCEEDINGS, PENALTY WHICH CAN VARY FROM 30% TO 90% IS PAYABLE BY HIM. 13. BOTH THE PROVISIONS AS CONTAINED IN SECTION 271 AAB(1)(A) AND 271AAB(1)(C) THUS PROVIDES FOR LEVY OF PENALTY IN C ASES WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 AND QUANTUM OF PENALTY HAS BEEN KEPT AT 10% WH ERE THERE IS DECLARATION IN THE STATEMENT RECORDED DURING THE CO URSE OF SEARCH, AND WHERE THERE IS NEITHER A DECLARATION IN THE STATEME NT U/S 132(4) RECORDED DURING THE COURSE OF SEARCH NOR A DECLARAT ION IN THE RETURN OF INCOME, THE PENALTY HAS BEEN KEPT AT A HIGHER PEDES TAL WHICH CAN VARY FROM 30% TO 90%. FURTHER, IT IS NOTED THAT THE PRO VISIONS OF SECTION 271AAB OVERRIDES SECTION 271(1)(C) WHICH INFACT CON TAIN PROVISIONS FOR LEVY OF PENALTY UNDER TWO SEPARATE LIMBS- CONCEALME NT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. FURTHER, THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SA S EMERALD MEADOWS (SUPRA) RENDERED IN THE CONTEXT OF TWO SEPARATE LIM BS/CHARGES UNDER SECTION 271(1)(C) THEREFORE DOESNT SUPPORT THE CAS E OF THE ASSESSEE COMPANY. IN OUR CONSIDERED VIEW, BOTH THE PROVISION S OF SECTION 271AAB(1)(A) AND 271AAB(1)(C) PROVIDES FOR LEVY OF PENALTY FOR AN IDENTICAL CHARGE I.E, UNDISCLOSED INCOME FOR THE SP ECIFIED PREVIOUS YEAR WHICH IS FOUND DURING THE COURSE OF SEARCH INITIATE D UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012. THEREFORE, WE ARE UNABLE TO ACCEDE TO THE CONTENTION OF THE LD AR THAT THE LD C IT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271AAB(1)(A) WHI CH PROVIDES FOR A ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 11 SEPARATE AND INDEPENDENT CHARGE AND COMES UNDER DIF FERENT SECTION THAN THE PROVISIONS OF SECTION 271AAB(1)(C) WHICH H AS BEEN SPECIFICALLY INVOKED BY THE AO. 9. FURTHER, EVEN FOR SAKE OF ARGUMENT, IF IT IS ASS UMED THAT PRIMARY CHARGE OF UNDISCLOSED INCOME HAS TO BE READ ALONG W ITH ANCILLARY CONDITIONS AND THUS MULTIPLES CHARGES HAVE BEEN PRE SCRIBED IN TERMS OF CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB AND WHERE THE ASSESSING OFFICER HAS NOT STATED THE SPECIFIED CHARGE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS, IN O UR CONSIDERED VIEW, SUCH UNCERTAIN CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS CAN BE MADE GOOD WITH A CLEAR-CUT CHARGE IN THE PEN ALTY ORDER. IN ANY CASE, EXISTENCE OF A CLEAR-CUT CHARGE IN PENALTY OR DER IS A MUST SO AS TO VALIDATE ANY PENALTY ORDER AND SO LONG AS THERE IS A CLEAR FINDING IN THE PENALTY ORDER, NO INFIRMITY CAN BE SAID TO ARISE IN TERMS OF INITIATING OF SUCH PROCEEDINGS AND SUBSEQUENT PENALTY ORDER. IN THIS REGARD, REFERENCE CAN BE MADE TO THE THREE MEMBER BENCH DEC ISION IN CASE OF HPCL MITTAL ENERGY VS ADD. CIT REPORTED IN 97 TAXMA NN.COM 03. THOUGH THE SAID DECISION HAS BEEN RENDERED IN CONTE XT OF SECTION 271(1)(C), IT HAS LAID DOWN CERTAIN LEGAL PROPOSITI ON REVOLVING AROUND INITIATION OF PENALTY PROCEEDING AND CHARGES TOWARD S LEVY OF PENALTY AND WE FOUND THE SAME EQUALLY RELEVANT IN CONTEXT OF SE CTION 271AAB FOR THE LIMITED CONTEXT OF EXAMINING MULTIPLE CHARGES A ND THEREFORE, DEEM IT RELEVANT TO CONSIDER THE SAME FOR THE PURPOSES O F PRESENT APPEAL. 10. THE COORDINATE BENCH IN THE AFORESAID DECISION AFTER ANALYZING CATENA OF JUDICIAL PRONOUNCEMENTS, INCLUDING THE DE CISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON A ND GINNING FACTORY ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 12 (SUPRA) WHICH HAS ALSO BEEN CITED BY THE LD AR IN T HE INSTANT CASE HELD AS UNDER:- 15. THE MOOT QUESTION IS THAT WHAT SHOULD BE THE NATUR E OF SPECIFICATION OF A CHARGE BY THE AO AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS AND AT THE TIME OF PASSING THE PENALTY ORDER. IS THE AO REQUIRED TO SPECIFY IN THE PENALTY NOTICE/ORDER AS TO WHETHER IT IS A CASE OF 'CONCEALMENT OF PARTICULARS OF INCOME'; OR 'FURN ISHING OF INACCURATE PARTICULARS OF INCOME'; OR BOTH OF THEM, WHICH CAN BE EXPRESSED BY USING THE WORD 'AND' BETWEEN THE TWO EXPRESSIONS. W HEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF CONCEALMEN T OF PARTICULARS OF INCOME, HE MUST SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. THE AO CANNOT INITIATE PENALTY ON THE CHARGE OF 'CONCEALMENT OF P ARTICULARS OF INCOME', BUT ULTIMATELY FIND THE ASSESSEE GUILTY IN THE PENA LTY ORDER OF 'FURNISHING INACCURATE PARTICULARS OF INCOME'. IN THE SAME MANN ER, HE CANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BET WEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', H E MUST AGAIN SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENAL TY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. AFTER INITIATING PENALTY ON T HE CHARGE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', HE CANNOT IMP OSE PENALTY BY FINDING THE ASSESSEE GUILTY OF 'CONCEALMENT OF PART ICULARS OF INCOME'. AGAIN, HE CANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY U SING SLASH BETWEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 13 OF IMPOSITION OF PENALTY U/S. 271(L)(C) OF THE ACT ON TWO OR MORE ADDITIONS/DISALLOWANCES, ONE OR MORE FALLING UNDER THE EXPRESSION 'CONCEALMENT OF PARTICULARS OF INCOME' AND THE OTHE R UNDER THE 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', H E MUST SPECIFY IT SO BY USING THE WORD 'AND' BETWEEN THE TWO EXPRESSIONS IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS. IF HE RE MAINS CONVINCED IN THE PENALTY PROCEEDINGS THAT THE PENALTY WAS RIGHTLY IN ITIATED ON SUCH COUNTS AND IMPOSES PENALTY ACCORDINGLY, HE MUST SPE CIFICALLY FIND THE ASSESSEE GUILTY OF 'CONCEALMENT OF PARTICULARS OF I NCOME' AND ALSO 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' IN THE PENALTY ORDER. IF THE CHARGE IS NOT LEVIED IN THE ABOVE MANNER IN ALL THE THREE CLEAR-CUT SITUATIONS DISCUSSED ABOVE IN THE PENALTY NOTICE AN D ALSO IN THE PENALTY ORDER, THE PENALTY ORDER BECOMES UNSUSTAINABLE IN L AW. 16. THE HON'BLE KARNATAKA HIGH COURT IN CIT V. MANJUNA THA COTTON AND GINNING FACTORY HAS HELD THAT A PERSON WHO IS ACCUS ED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS SECTIO N 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PRO CEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPAR TMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(L)(C) DO N OT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE HON'BLE HIGH COURT W ENT ON TO HOLD THAT: 'CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME.... BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW.. THUS ONCE THE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 14 PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALT Y SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUN D ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID'. 17. IN MANU ENGG. WORKS (SUPRA) PENALTY WAS IMPOSED BY NOTING: 'THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT I T HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. STRIKING DO WN THE PENALTY, THE HON'BLE HIGH COURT HELD THAT: 'IT WAS INCUMBENT UPO N THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCE ALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT F INDING WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN.' 18. IN PADMA RAM BHARALI (SUPRA), THE HON'BLE HIGH COU RT DID NOT SUSTAIN PENALTY LEVIED U/S. 271(L)(C) WHEN: 'THE IN ITIATION OF THE PENALTY PROCEEDING WAS FOR CONCEALMENT OF THE PARTICULARS O F INCOME. BUT THE TRIBUNAL FINALLY HELD THAT THE ASSESSEE WOULD BE DE EMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR TO HAVE FURN ISHED INACCURATE PARTICULARS OF SUCH INCOME.' 19. THUS IT IS EVIDENT THAT WHEN THE AO IS SATISFIED A T THE STAGE OF INITIATION OF PENALTY PROCEEDINGS OF A CLEAR-CUT CH ARGE AGAINST THE ASSESSEE IN ANY OF THE THREE SITUATIONS DISCUSSED A BOVE (SAY, CONCEALMENT OF PARTICULARS OF INCOME), BUT IMPOSES PENALTY BY HOLDING THE ASSESSEE AS GUILTY OF THE OTHER CHARGE (SAY, FU RNISHING OF INACCURATE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 15 PARTICULARS OF INCOME) OR AN UNCERTAIN CHARGE (CONC EALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PART ICULARS OF INCOME), THE PENALTY CANNOT BE SUSTAINED. 20. ANOTHER CRUCIAL FACTOR TO BE KEPT IN MIND IS THAT THE SATISFACTION OF THE AO AS TO A CLEAR-CUT CHARGE LEVELED BY HIM IN T HE PENALTY NOTICE OR THE PENALTY ORDER MUST CONCUR WITH THE ACTUAL DEFAU LT. IF THE CLEAR-CUT CHARGE IN THE PENALTY NOTICE OR THE PENALTY ORDER I S THAT OF 'CONCEALMENT OF PARTICULARS OF INCOME', BUT IT TURNS OUT TO BE A CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME' OR VICE-VERS A, THEN ALSO THE PENALTY ORDER CANNOT LEGALLY STAND. 21. APART FROM THE ABOVE THREE SITUATIONS IN WHICH THE AO HAS CLEAR-CUT SATISFACTION, THERE CAN BE ANOTHER FOURTH SITUATION AS WELL. IT MAY BE WHEN IT IS DEFINITELY A CASE OF UNDER-REPORTING OF INCOME BY THE ASSESSEE FOR WHICH AN ADDITION/DISALLOWANCE HAS BEE N MADE, BUT THE AO IS NOT SURE AT THE STAGE OF INITIATION OF PENALTY P ROCEEDINGS OF THE PRECISE CHARGE AS TO 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME'. I N SUCH CIRCUMSTANCES, HE MAY USE SLASH BETWEEN THE TWO EXPRESSIONS AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS. HOWEVER, DURING THE PENALTY PROCEEDINGS, HE MUST GET DECISIVE, WHICH SHOULD BE REFLECTED IN THE PENALTY ORDER, AS TO WHETHER THE ASSESSEE IS GUILTY OF 'CONCEALMENT OF P ARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF SUCH IN COME'. UNCERTAIN CHARGE AT THE TIME OF INITIATION OF PENALTY, MUST N ECESSARILY BE SUBSTITUTED WITH A CONCLUSIVE DEFAULT AT THE TIME O F PASSING THE PENALTY ORDER. IF THE PENALTY IS INITIATED WITH DOUBT AND A LSO CONCLUDED WITH A ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 16 DOUBT AS TO THE CONCEALMENT OF PARTICULARS OF INCOM E OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME ETC., THE PEN ALTY ORDER IS VITIATED. IF ON THE OTHER HAND, IF THE PENALTY IS INITIATED W ITH AN UNCERTAIN CHARGE OF 'CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME' ETC., BUT THE ASSESSEE IS UL TIMATELY FOUND TO BE GUILTY OF A SPECIFIC CHARGE OF EITHER 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', THEN NO FAULT CAN BE FOUND IN THE PENALTY ORDER. 22. IN MANU ENGINEERING WORKS (SUPRA), THE HON'BLE GUJ ARAT HIGH COURT NOTICED THAT THE CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS AS WELL IN THE PENALTY ORDER WAS UNCERTAIN AND THE EXPRESSION USED AT BOTH THE STAGES WAS CONCEALMENT OF PARTICULARS OF I NCOME AND/OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME . IT STRUCK DOWN THE PENALTY BY HOLDING THAT THE ASSESSEE MUST HAVE BEEN FOUND TO BE GUILTY OF A CERTAIN CHARGE IN THE PENALTY ORDER. IT, HOWEV ER, DID NOT FIND ANYTHING AMISS WITH THE INITIATION OF PENALTY ON SU CH UNCERTAIN CHARGE, WHICH IS VIVID FROM THE FOLLOWING OBSERVATIONS : 'WE FIND FROM THE ORDER OF THE IAC, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA. 4 OF THE ORDER: 'I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSES SEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FINISHED INACCURATE PARTI CULARS OF SUCH INCOME'. NOW, THE LANGUAGE OF 'AND/OR' MAY BE PROPE R IN ISSUING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI-CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMEN T OF INCOME BY THE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 17 ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF S UCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE.' 23. IT IS THUS EVIDENT THAT UNCERTAIN CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS CAN BE MADE GOOD WITH A CLEAR-C UT CHARGE IN THE PENALTY ORDER. IN ANY CASE, EXISTENCE OF A CLEAR-CU T CHARGE IN PENALTY ORDER IS A MUST SO AS TO VALIDATE ANY PENALTY ORDER . 11. IN THE INSTANT CASE, THE NOTICE INITIATING THE PENALTY PROCEEDINGS TALKS ABOUT INITIATION OF PENALTY PROCEEDINGS U/S 2 71AAB OF THE ACT IN RESPECT OF UNDISCLOSED INCOME OF THE SPECIFIED PREV IOUS YEAR. HOWEVER, WHILE PASSING THE PENALTY PROCEEDINGS, THE ASSESSIN G OFFICER HAS GIVEN A CLEAR FINDING AS REFLECTED IN THE PENALTY ORDER THA T THE ASSESSEE IS LIABLE FOR PENALTY U/S 271AAB(1)(A) WHICH PROVIDES FOR LEV Y OF PENALTY @ 10% OF THE UNDISCLOSED INCOME. AS HELD BY THE COORDINAT E BENCH (SUPRA), THE UNCERTAIN CHARGE AT THE TIME OF INITIATION OF P ENALTY HAS BEEN MADE GOOD AND SUBSTITUTED WITH A CONCLUSIVE DEFAULT AT T HE TIME OF PASSING THE PENALTY ORDER AND THAT IN SUCH A CASE, NO FAULT CAN BE FOUND IN THE PENALTY ORDER. IN SUCH A CASE, WE DONOT SEE ANY INF IRMITY IN THE INITIATION OF PENALTY PROCEEDINGS AND CONSEQUENT PE NALTY ORDER SO PASSED BY THE ASSESSING OFFICER AND THE CONTENTIONS SO RAISED BY THE LD AR IN THIS REGARD CANNOT BE ACCEPTED. FURTHER, WE F IND THAT THE DECISION OF THE COORDINATE BENCH IN CASE OF R ELANGOVAN (SUP RA) SO RELIED UPON BY THE LD AR, HAS BEEN RENDERED WITHOUT TAKING INTO CONSIDERATION THE EARLIER DECISION OF THE CO-ORDINATE BENCH IN CASE O F MAHESH JAIN (SUPRA) AND DECISION OF THE LARGER BENCH OF THE TRIBUNAL IN CASE OF ONGC MITTAL (SUPRA) WHICH HAS DULY CONSIDERED THE DECISION IN C ASE OF MANJUNATHA ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 18 (SUPRA) AND THUS DOESNT ACT AS A BINDING PRECEDENT . AS FAR AS DECISION OF THE HONBLE RAJASTHAN HIGH COURT IS CONCERNED, W E FIND THAT THE SAME IN FACT SUPPORTS THE CASE OF THE REVENUE AS A DEFINITE FINDING HAS BEEN RECORD IN THE PENALTY ORDER. IN LIGHT OF ABOV E DISCUSSIONS, THE ADDITIONAL GROUND SO RAISED BY THE ASSESSEE IS HERE BY DISMISSED. 12. NOW, COMING TO THE MAIN GROUND OF APPEAL. IN T HIS REGARD, THE LD AR HAS RAISED THE CONTENTION CHALLENGING THE FINDIN GS OF THE AO THAT PENALTY U/S 271AAB IS MANDATORY IN NATURE AND THERE IS NO DISCRETION WITH THE INCOME TAX AUTHORITIES. IT WAS SUBMITTED BY THE LD AR THAT IN SECTION 271AAB, THE WORD MAY IS USED INSTEAD OF SHALL SO IT IS NOT MANDATORY BUT SAME IS DISCRETIONARY. IT WAS SUBMITT ED THAT IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDATORY BUT ARE ALSO DISCRETIONARY CONSIDERING THE OVERALL FACT S AND CIRCUMSTANCES OF THE CASE. IN SUPPORT, RELIANCE WAS PLACED ON PROVI SIONS OF SECTION 158BFA(2) WHEREIN SIMILAR PHRASELOGY HAS BEEN USED BY THE LEGISLATURE AND THE DECISIONS OF THE COORDINATE BENCHES IN CASE OF DCIT VS MANISH AGARWAL 92 TAXMANN.COM 81 AND ACIT VS MARVEL ASSOCI ATES 92 TAXMANN.COM 109. 13. PER CONTRA, THE LD. DR SUBMITTED THAT THE ASSES SEE HAS SURRENDERED THE UNDISCLOSED INCOME IN HIS STATEMENT RECORDED U/S 132(4) AND THEREFORE, THERE CANNOT BE ANY QUESTION OF SAID SURRENDER OF INCOME NOT FALLING IN THE DEFINITION OF UNDISCLOSED INCOME. IT WAS SUBMITTED THAT THE PENALTY U/S 271AAB IS MANDATORY IN NATURE AND IS IMPOSED AT THE VARYING RATE OF 10%, 20% OR 30% DEPE NDING ON THE FULFILLMENT OF CERTAIN CONDITIONS THEREIN. IT WAS S UBMITTED THAT ALL THE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 19 CONDITIONS SPECIFIED IN SECTION 271AAB HAVE BEEN FU LFILLED IN THE INSTANT CASE, THEREFORE, THE PENALTY U/S 271AAB BEING IN TH E NATURE OF MANDATORY PENALTY AND THERE BEING NO DISCRETION WIT H THE INCOME TAX AUTHORITIES, THE PENALTY SO IMPOSED BY THE AO WAS R IGHTLY CONFIRMED BY THE LD CIT(A) AND THE ORDER OF THE LD CIT(A) SHOULD BE UPHELD. 14. IN THIS REGARD, WE REFER TO THE PROVISIONS OF SECTION 271AAB WHICH BEGINS WITH THE STIPULATION THAT THE ASSESSIN G OFFICER MAY DIRECT THE ASSESSEE AND THE ASSESSEE SHALL PAY THE PENALTY AS PER CLAUSE (A) TO (C) SO SATISFIED IN SUB-SECTION (1) TO SECTION 271A AB. FURTHER, AS PER SUB-SECTION (3) OF SECTION 271AAB, THE PROVISIONS O F SECTION 274 AND SECTION 275 AS FAR AS MAY BE APPLIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PENALTY , THE ASSESSING OFFICER HAS TO ISSUE A SHOW-CAUSE GRANTING AN OPPOR TUNITY TO THE ASSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMAT IC BUT THE ASSESSING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTAN CES OF THE CASE. SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS CO-ORDIN ATE BENCHES AND USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF TH E CO-ORDINATE BENCH IN CASE OF ACIT VS MARVEL ASSOCIATES (SUPRA) WHEREI N IT WAS HELD AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. DURING THE APPEAL HEARING, THE L D. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENA LTY UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INCOME U/S 132(4) IS MANDATORY. THE LD. A.R. FURTHE R STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 20 THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARI MATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UND ER SECTION 271AAB IS NOT MANDATORY BUT DISCRETIONARY. WHEN THE RE IS REASONABLE CAUSE, THE PENALTY IS NOT EXIGIBLE. THE LD. A.R. TAKEN US TO THE SECTION 271AAB OF THE ACT AND ALSO SECTIO N 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 2 71AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERIT S OF EACH CASE. FOR READY REFERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT AND SECTION 271AAB OF THE ACT WHICH READ S AS UNDER: 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 O N OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WA Y OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT TH E RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INC OME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 21 (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) FURNISH ES THE RETURN OF INCOME FOR THE SPECIFIED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB - SECTION (4_) OF SECTION 132, DOES NOT ADMIT THE UND ISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE- (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PA YS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT CO VERED BY THE PROVISIONS OF CLAUSES (A) AND (B). ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 22 (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESS EE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTIO N (1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY D IRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHAL L NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF T HE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CL AUSE (C) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MA DE IN RESPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISH ED 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 OF FERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDI NG PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED B Y THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON T HAT PORTION OF ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 23 UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 6. CAREFUL READING OF SECTION 271AAB OF THE ACT, TH E WORDS USED ARE 'AO MAY DIRECT' AND 'THE ASSESSEE SHALL PAY BY WAY OF PENALTY'. 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 ACT, FORTI FIES 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 THI S SECTION. 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CL EAR INTENTION TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECT ION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASS ESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNI TY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271 AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOS ED UNLESS THE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSE SSEE 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 F ACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY TH E ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONAB LE OPPORTUNITY IS NOT A MERE FORMALITY BUT IT IS TO AD HERE TO THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE A.P. HIGH CO URT IN THE CASE OF ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 24 RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALIN G 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 SECT ION 158BFA OF THE ACT THAT ARE ENTITLED TO BE MANDATORY, THE WORD S MAY DIRECT IN SUB SECTION 2 THERE OF INTENDED TO DIRECTORY'. IN O THER WORDS, WHILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENA LTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DIS CRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE A ND RATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES O F THE EACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF TH E ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. ACCORDINGLY WE HOLD TH AT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON ME RITS OF THE EACH CASE. 15. THEREFORE, WE AGREE WITH THE CONTENTIONS OF THE LD AR THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATO RY. IN THE INSTANT CASE, IT THEREFORE NEEDS TO BE EXAMINED WHETHER THE RE IS ANY BASIS FOR LEVY OF PENALTY OR NON-LEVY THEREOF AND THE SAME WI LL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH W E SHALL DISCUSS IN SUBSEQUENT PARAGRAPHS. 16. ANOTHER CONTENTION WHICH WAS RAISED BY THE LD A R IS THAT DURING THE COURSE OF SEARCH, NO UNDISCLOSED INCOME WAS FOU ND AS DEFINED U/S 271AAB. FURTHER IN THE CASE SEARCH U/S 132 OF THE A CT WAS CARRIED OUT IN ASSESSEE'S PREMISES BUT NO EVIDENCE WAS FOUND DU RING THE COURSE OF SEARCH EXCEPT ANN. AS WHICH WAS FOUND WHEREIN FR OM PAGE NO. 1 ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 25 TO 7 CERTAIN FIGURES, DATES, CRYPTIC NAMES AND/OR P LACES WERE WRITTEN. THE SEARCH PARTIES TOTALED THOSE FIGURES TO BE RS. 82,80,000/- HOLDING THAT AMOUNT HAS BEEN GIVEN TO VARIOUS PERSON AS ADV ANCES THE ASSESSEE ALSO OFFERED A SUM OF RS.17,20,000/- IN HI S STATEMENT RECORDED U/S 132(4) OF THE ACT AS HIS ADDITIONAL IN COME FOR THE CURRENT YEAR TO COMPENSATE THE DEFECT (IF ANY) FOUN D IN HIS BOOKS OF ACCOUNTS. THE ASSESSEE ALSO STATED IN HIS STATEMENT THAT SAID SURRENDER WAS MADE TO BUY PIECE AND AVOID LONG LITI GATION WITH DEPARTMENT ON THE REQUEST THAT NO PENALTY PROCEEDIN GS ETC. BE INITIATED AGAINST HIM. THUS NO INCRIMINATING MATERI AL WAS FOUND DURING THE SEARCH AND SAID ANNEX-AS WAS CONTAINING IMAGINA RY NAMES AND SOME FIGURES. FURTHER THE OFFICERS OF SEARCH PROCEE DINGS AND LD. A.O. MADE NO FURTHER ENQUIRY/INVESTIGATION REGARDING ENT RIES MADE IN THE SEIZED PAPERS. THE SURRENDER OF CURRENT YEARS INCOM E BY ASSESSEE OF RS. 1,00,00,000/- WAS JUST TO BUY PEACE BY ASSESSEE WHICH ALSO HE CATEGORICALLY STATED IN STATEMENT U/S 132 (4). THE SAID ENTRY IN THE POCKET DIARY GIVING ADVANCES ITSELF IS NOT AN UNDIS CLOSED INCOME. AND THERE IS NO DISCREPANCY WHICH HAS BEEN FOUND BY THE ASSESSING OFFICER AND ACCORDINGLY, THERE CANNOT BE ANY UNDISCLOSED IN COME IN RESPECT OF SUM OF RS.17,20,000/-AS WELL. 17. IT WAS SUBMITTED THAT THE REVENUE AUTHORITIES H AVE EXERTED UNDUE, UNCALLED FOR AND AN UNWARRANTED PRESSURE AND OBTAINED SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UND ISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. IT WAS SUBMITTED THAT SU CH CONFESSIONAL STATEMENT VIOLATES BOARDS CIRCULAR DATED 10.03.200 3 AND 18.12.2014. IT WAS SUBMITTED THAT SUCH FORCEFUL ADMISSION DOES NOT COMPLY WITH THE ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 26 SPIRIT OF THE LAW. THE PROVISIONS OF SECTION 271AAB (1)(A)(II) CLEARLY REQUIRES THAT SUCH UNDISCLOSED INCOME ADMITTED U/S 132(4) REQUIRES TO BE SUBSTANTIATED. IN OTHER WORDS, THE ASSESSEE IS R EQUIRED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FU RTHER SUBSTANTIATE THE SAME BY FURNISHING MATERIAL AVAILABLE WITH HIM. IN THE INSTANCE CASE, NO SUCH SUBSTANTIATION WAS DONE AS IN FACT TH ERE EXISTED NO UNDISCLOSED INCOME. THE ENTIRE DISCLOSURE WAS ON P APER AND ASSESSEE ADMITTED SUCH DISCLOSURE TO AVOID UNDUE HARASSMENT AND UNWANTED LITIGATION. 18. IT WAS FURTHER SUBMITTED THAT THE PENALTY U/S 2 71AAB IS ATTRACTED ON UNDISCLOSED INCOME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4) OF THE ACT. THE AO MUST ESTABLISH THAT T HERE IS UNDISCLOSED INCOME ON THE BASIS OF SOME INCRIMINATI NG MATERIAL. IN THE INSTANT CASE, A DIARY WAS FOUND WHICH ACCORD ING TO THE A.O, IT WAS INCRIMINATING MATERIAL EVIDENCING THE U NDISCLOSED INCOME. IN THE PENALTY ORDER THE AO OBSERVED NOTHIN G RELATED TO THE DIARY. HOWEVER, NEITHER THE AO NOR THE LD.CIT(A ) HAS VERIFIED THE CONTENTS OF THE DIARY AS THE SAME WAS MAINTAINE D AS BOOKS OF ACCOUNTS. NO OTHER MATERIAL WAS FOUND DURING THE C OURSE OF SEARCH INDICATING THE UNDISCLOSED INCOME. THERE IS NO DISCREPANCY WHICH HAS BEEN FOUND BY THE ASSESSING OFFICER AND T HEREFORE, THERE CANNOT BE ANY UNDISCLOSED INCOME IN RESPECT OF SUM OF RS.17,20,000/- AS WELL. THERE WAS NO MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE OR THING OR ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUM ENTS TRANSACTIONS WERE FOUND DURING THE COURSE OF SEARCH INDICATING THE ASSETS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 27 DOCUMENTS MAINTAINED IN THE NORMAL COURSE, WHOLLY O R PARTLY. THE REVENUE DID NOT FIND ANY UNDISCLOSED ASSET, ANY OTH ER UNDISCLOSED INCOME OR THE INFLATION OF EXPENDITURE DURING THE SEARCH/ ASSESSMENT PROCEEDINGS. THOUGH A DIARY WAS FOUND THAT DOES NOT INDICATE ANY SUPPRESSION OF INCOME. SIMILA RLY, NO DISCREPANCY WAS FOUND IN THE BOOKS OF ACCOUNTS. TH E AO WAS HAPPY WITH THE DISCLOSURE GIVEN BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSITION WITH THE BOOKS OF ACCOU NTS AND OTHER DOCUMENTS. THE TRIBUNAL IN THE CASE OF AJAY SHARMA VS. DCIT (2012) 32CCH 334 HELD THAT WITH RESPECT TO THE ADDITION ON ACCOUNT OF ALLEGED RECEIVABLES AS PER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT AN Y INCOME RECEIVED BY THE ASSESSEE HAS NOT BEEN DECLARED BY T HE ASSESSEE. AN ADDITION HAS BEEN MADE ON THE BASIS OF LOOSE DOC UMENT, WHICH DID NOT CLOSELY PROVE ANY CONCEALMENT OR FURN ISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. HENCE PENAL TY U/S 158BFA (2) OF THE ACT IS NOT LEVIABLE. THE FACTS OF THE ASSESSEE'S CASE SHOWS THAT THERE WAS NO UNDISCLOSED INCOME FOUND DU RING THE COURSE OF SEARCH AND NO INCRIMINATING MATERIAL WAS FOUND, THEREFORE THE PENALTY LEVIED BY THE LEARNED ASSESSI NG OFFICER AND CONFIRMED BY THE LEARNED CIT(A) DESERVES TO BE DELE TED. 19. IN ORDER TO APPRECIATE THE AFORESAID CONTENTIO NS OF THE LD AR, WE REFER TO THE STATEMENT OF THE ASSESSEE RECOR DED DURING THE COURSE OF SEARCH U/S 132(4) AND THE RELEVANT EX TRACT THEREOF IS REPRODUCED AS UNDER FOR SAKE OF REFERENCE:- ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 28 IZ'U 14 LPZ DH DK;ZOKGH DS NKSJKU VKIDS FUOKL LFKKU LS :I;KSA YSU&NSU DH DPPH IFPZ;KWA IKBZ XBZ] D`I;K BU IFPZ;KSA DS CKJ S ESA LIV DJSA\ MKJ ESUSA ESJS FUOKL LFKKU IJ IKBZ XBZ LKRKSA IFPZ ;KSA DKS HKYH HKKAFR IWOZD I<+ FY;K GS] ;S :I;SA ESUSA FOFHKUU YKSXKS DKS M/KK J FN;SA GS FTUDK MYYS[K ESJH REGULAR BOOKS OF ACCOUNTS ESA UGH GSA BU IFPZ;KSA DK TKSM+ 82 YK[K 80 GTKJ :I;SA GS PWWAFD BU :I;KSA DK MYYS[K ESA ESJH BOOKS ESA UGH GSA VR% ESA MIJKSDR 82 YK[K 80 GTKJ DKS VIUH V?KKSFKR VK; EKURS GQ, BLS DJKJKSI.K GSRW LEF IZR DJRK GWWA LKFK GH ESA 17 YK[K 20 GTKJ DH VFRFJDR VK; DKS TKSM +RS GQ, DQY 1 DJKSM+ DH VK; DKS DJKJKSI.K GSRQ LEFIZR DJRK GWWAA MIJKSDR 17 YK[K 20 GTKJ :I;SA DH VFRFJDR V?KKSFKR VK; ESA VIUH EKUFLD 'KKAFR DS FY, DJKJKSI.K DS FY, LEFIZR F D;SA GSA ;FN ESJH YS[KK CFG;KSA ESA DKSBZ DEH IKBZ TKRH GSA RKS BLS BL 17 YK[K 20 GTKJ LS LEK;KSFTR DJ FN;K TK;SAA BLDS IJ LE;KUQLKJ ESA VFXZE DJ TEK DJOK NWWAXKA IZ'U 15 D;K VKIDKS VKSJ DQN DGUK GS\ MKJ DGUK GS FD MIJKSDR 1 DJKSM+ :I;S EU DH 'KKAFR DS FY, SURRENDER FD;K GSA ESJK VKILS FUOSNU GS FD MDR IJ FDLH IZDKJ DK PENALTY, PROSECUTION ,OA C;KT U YXK;K TK;SA------------- 20. IN THIS CASE, THE SEARCH WAS CONDUCTED ON 31.1 0.2012 WHEREIN THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) WHEREIN HE HAS SURRENDERED THE AMOUNT OF RS 1,00,00 ,000. SUBSEQUENTLY, ALMOST AFTER A YEAR, THE ASSESSEE HAS DISCLOSED THE SAME IN HIS RETURN OF INCOME FILED ON 16.10.2013. THEREFORE, THE ASSESSEE WAS HAVING AMPLE TIME TO RETRACT FROM SAID SURRENDER; HOWEVER THERE IS NO SUCH RETRACTION DURING POST-SEA RCH PROCEEDINGS AND EVEN THE ASSESSEE HAS INCLUDED THE SAME IN HIS RETURN OF INCOME. EVEN FROM THE PERUSAL OF THE STAT EMENT, THERE IS NOTHING WHICH DEMONSTRATES THAT THERE IS ANY FOR CED SURRENDER ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 29 BY THE ASSESSEE. THE CONTENTION OF THE LD AR THERE FORE HAS NO LEGAL LEG TO STAND WHERE HE CONTENDS THAT THE REVEN UE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINED SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UNDISCLOSED INCOME IN THE H ANDS OF THE ASSESSEE. IN ANY CASE, THE ASSESSMENT PROCEEDINGS H AVE ATTAINED FINALITY WHERE SUCH UNDISCLOSED INCOME HAS BEEN OFF ERED AND BROUGHT TO TAX. FOR THE PURPOSES OF LEVY OF PENALTY, WHAT HAS TO BE SEEN IS WHETHER THE SURRENDER SO MADE, IN TERMS OF STATEMEN T OF THE ASSESSEE RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, FA LLS IN THE DEFINITION OF UNDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TERMS OF CLAUSE (C) OF EXPLANATION TO SECTION 271AAB WHIC H READS AS UNDER: (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEW ELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOU NT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 30 COMMISSIONER OR COMMISSIONER BEFORE THE DA TE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PR EVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH N OT BEEN CONDUCTED. 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIAR Y) 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 GENERALIZED STATEMENT WITHOUT SPECIFYING THE COMPLETE PARTICULARS OF PERS ONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE TH E SAME. THE SAID FINDINGS HAVE NOT BEEN DISPUTED BY THE REVENUE AND THEREFORE, MERELY BASED ON SURRENDER AND GENERALIZE D STATEMENT OF THE ASSESSEE, IN ABSENCE OF ANYTHING SPECIFIC TO CORROBORATE SUCH ENTRIES, CAN IT BE SAID THAT SUCH ENTRIES/NOTI NGS REPRESENT UNDISCLOSED INCOME OF THE ASSESSEE. AS PER THE DEF INITION OF UNDISCLOSED INCOME U/S 271AAB, THE SAID CASH ADVANC ES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHET HER IT CAN THEN BE SAID ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 31 THAT SUCH UNDISCLOSED CASH ADVANCES REPRESENTS INCO ME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132. A CAS H 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 FUNDS BY WAY OF INCOME, THERE CAN BE SUBSEQUENT OUTFLOW BY WAY OF AN ADVANCE TO ANY T HIRD PARTY. GIVING AN ADVANCE AND INCOME THUS CONNOTES DIFFERENT MEANI NG AND CONNOTATION AND THUS CANNOT BE USED INTER-CHANGEABL Y. IN THE DEFINITION OF UNDISCLOSED INCOME, WHERE IT TALKS AB OUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUM ENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF F UNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN FOUND BY WAY OF ANY ENT RY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT BEEN RECORDED BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHE R DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. WE ARE ALSO CONSCIOUS OF THE FACT THAT THERE ARE DE EMING PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN SUCH AMOUNTS MA Y BE DEEMED AS INCOME IN ABSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND S ECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEEMIN G PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN THE CONTEXT OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE STATUE BOOK AND NOT O THERWISE. IN THE INSTANT CASE, THE DEEMING PROVISIONS CONTAINED IN S ECTION 69 AND SECTION ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 32 69B COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRING ING TO TAX SUCH INVESTMENTS TO TAX IN THE QUANTUM PROCEEDINGS, THOU GH THE FACT OF THE MATTER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS. THEREFORE, EVEN ON THIS ACCOUNT, THE DEEMING FICTION CANNOT BE EXTENDED TO THE PENALTY P ROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCE EDINGS AND MORE SO, WHERE THE PROVISIONS OF SECTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271 AAB, BEING A PENAL PROVISION, THE SAME MUST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE THE SAME HAS BEEN DE FINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVANCES CAN B E SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDINGS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STAT EMENT RECORDED U/S 132(4) AND OFFERED IN THE RETURN OF INCOME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALT Y SO LEVIED THEREON DESERVED TO BE SET-ASIDE. 22. REGARDING SURRENDER OF RS 17,20,000 MADE ON ACC OUNT OF OTHER DISCREPANCIES IF ANY FOUND IN THE BOOKS OF ACCOUNTS , IN ABSENCE OF ANY SUCH DISCREPANCY SO FOUND BY THE ASSESSING OFFICER EITHER DURING THE ASSESSMENT OR PENALTY PROCEEDINGS, THE SAID SURREND ER MAY BE THE BASIS FOR ASSESSMENT BUT CANT FORM THE BASIS FOR LEVY OF PENALTY WHICH ARE SEPARATE AND DISTINCT PROCEEDINGS IN ABSENCE OF A S PECIFIC FINDING AS TO ITA NO. 359/JP/2017 SHRI RAJENDRA KUMAR GUPTA VS. DCIT 33 HOW THE SAME QUALIFY AS AN UNDISCLOSED INCOME SO DE FINED U/S 271AAB OF THE ACT. HENCE, PENALTY LEVIED THEREON IS LIABLE TO BE SET-ASIDE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 18/01/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/01/2019. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI RAJENDRA KUMAR GUPTA, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 359/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR