Shri Amit Tiwari, Indore V. The DCIT (Central)-2, Indore

ITA 699/Ind/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7763 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 10-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Loose papers; Document seized; Opportunity of being heard; Principle of natural justice; Question of law; Documents seized; Set aside; Bogus
• Section: 27; 132; 271(1)(c); 139; 143(3); 153A; 250; 292BB; 274; 113; 73; 13; 158BFA; 22; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.699/IND/2019 ASSESSMENT YEAR:2015-16 SHRI AMIT TIWARI 3176-E, SUDAMA NAGAR INDORE / VS. DCIT (CENTRAL) - 2 INDORE ( APPELLANT ) ( REVENUE ) P.A. NO. ACVPT3933C APPELLANT BY SHRI S.N. AGRAWAL , C A REVENUE BY SHRI V.J. BORICHA , SR. DR DATE OF HEARING: 12.08.2020 DATE OF PRONOUNCEMENT: 19.08.2020 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)(IN SHORT LD. CIT(A), BHOPAL- 3 DATED 23.04.2019. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN MAINTAINING THE LEV Y OF PENALTY AMIT TIWARI 2 UNDER SECTION 271AAB OF THE ACT WITHOUT PROPERLY AP PRECIATING THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE H IM. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN MAINTAINING THE LEVY O F PENALTY UNDER SECTION 271AAB OF THE ACT EVEN WHEN THE SHOW CAUSE NOTICE AS ISSUED FOR LEVY OF PENALTY WAS DEFECTIVE WHEREIN NO SPECIFIC CHARGE WAS FRAMED AGAINST THE APPELLANT AN D THEREFORE PENALTY IMPOSED ON THE BASIS OF SUCH DEFECTIVE NOTI CE IS NOT MAINTAINABLE IN LAW. 3. THE APPELLANT RESERVES HIS RIGHT TO ADD, ALTER A ND MODIFY THE GROUNDS OF APPEAL AS TAKEN BY HIM. 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT A SEARCH AND SEIZURE ACTION WAS CARRIED OUT ON THE BUSINESS AS W ELL AS RESIDENTIAL PREMISES OF THE MOIRA GROUP OF INDORE INCLUDING THE ASSESSEE. IT IS OBSERVED BY THE ASSESSING OFFICER THAT DURING THE C OURSE OF SEARCH AND SEIZURE PROCEEDINGS STATEMENT U/S 132(4) OF THE INCOME TAX ACT 1961(HEREINAFTER REFERRED AS THE ACT) WAS RECORDE D WHEREIN THE ASSESSEE SURRENDERED UNDISCLOSED INCOME OF RS.8,00, 00,000/- IN VARIOUS FINANCIAL YEARS AFTER CONSIDERING THE SEIZE D DOCUMENTS IN HIS CASE. THEREFORE, THE ASSESSING OFFICER ISSUED A NOTICE U/S 271AAB OF THE ACT FOR LEVYING PENALTY. IN RESPONSE THERETO, THE ASSESSEE FILED WRITTEN SUBMISSION WHICH WAS NOT ACC EPTED BY THE ASSESSING OFFICER AND HE PASSED PENALTY ORDER U/S 2 71AAB OF THE ACT, THEREBY, LEVIED PENALTY @10% OF THE UNDISCLOSE D INCOME AMIT TIWARI 3 AMOUNTING TO RS.6,83,498/-. 3. AGGRIEVED AGAINST THIS ORDER ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSION S CONFIRMED THE PENALTY. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUN AL. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SYNOPSIS. FOR THE SAKE OF CLARITY SUBMISSIONS OF TH E ASSESSEE ARE REPRODUCED AS UNDER: A.1] THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGA INST THE ORDER OF THE LD. CIT (A)-3, BHOPAL DATED 23-04-2019. A.2] SEARCH AND SEIZURE OPERATIONS UNDER SECTION 132 O F THE INCOME TAX ACT WERE CARRIED OUT AT THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF THE MOIRA GROUP OF INDORE INCLUDING THE APPELLANT AND OTHER CONCERNS/BUSINESS ASSOCIATES ON 17-06-2015. A.3] THE APPELLANT ACCEPTED ADDITIONAL INCOME TO THE TUNE OF RS. 8,00,00,000/- DURING THE COURSE OF SEARCH IN HIS STA TEMENT RECORDED UNDER SECTION 132(4) OF THE INCOME-TAX ACT, 1961 WHI CH WAS DULY OFFERED FOR TAX IN HIS INCOME-TAX RETURN AND LEGITIMA TE AMOUNT OF TAX DUE WAS ALSO PAID ON SUCH ADDITIONAL INCOME. THE APPE LLANT SUBSEQUENTLY ALSO FILED AN AFFIDAVIT DATED 30-11-2015 DURING THE COURSE OF POST SEARCH PROCEEDINGS WHEREIN THE BREAK -UP OF ADDITIONAL INCOME OF RS. 8,00,00,000/- AS ACCEPTED DURING THE CO URSE OF SEARCH WAS GIVEN. A.4] IT WAS FURTHER STATED THAT AN AMOUNT OF RS. 68 ,34,975/- ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE PERT AINED TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2015- 16 AND BALANCE AMOUNT OF ADDITIONAL INCOME PERTAINED TO THE PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR 2016-17. A.5] THE INCOME-TAX RETURN OF THE APPELLANT FOR THE ASSESSMENT YEAR 2015-16 WAS THEREAFTER FILED ON 31-03-2016 WHEREIN T OTAL INCOME WAS DECLARED AT RS. 1,10,17,010/- INCLUDING ADDITIONA L INCOME OF RS. 68,34,975/- ON ACCOUNT OF INVESTMENT IN CONSTRUCTIO N OF HOUSE. AMIT TIWARI 4 A.6] THE ASSESSING OFFICER HOWEVER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 IN RESPECT OF SUCH ADDITIONAL INCOME OF RS. 68,34,975/- AND SUBSEQUENTL Y LEVIED PENALTY OF RS. 6,83,498/- BEING 10% OF SUCH INCOME OF RS. 68,34,975/- STATING THAT THE APPELLANT SURRENDERED SU CH UNDISCLOSED INCOME DURING THE COURSE OF SEARCH. A.7] THE APPELLANT THEREAFTER PREFERRED AN APPEAL BE FORE THE LD CIT (A)-3, BHOPAL AGAINST THE PENALTY ORDER AS PASSED UNDE R SECTION 271AAB OF THE INCOME-TAX ACT, 1961 AND TOOK THE FOLL OWING GROUNDS OF APPEAL: 1] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD ASSESSING OFFICER ERRED IN LEVIED PENALTY U/S 271AAB OF THE ACT OF RS 6,83,498/-, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION MADE BEFORE HIM. 2] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD ASSESSING OFFICER ERRED IN LEVIED PENALTY U/S 271AAB OF THE ACT OF RS 6,83,498/- WITHOUT RECORDING PROPER SATIS FACTION FOR INITIATION OF THE PENALTY IN THE ASSESSMENT ORDER A ND ALSO IN THE SHOW CAUSE NOTICE AS ISSUED. 3] THE APPELLANT RESERVES HIS RIGHT TO ADD, ALTER AN D MODIFY THE GROUND OF APPEAL TAKEN BEFORE THE FIRST APPELLATE A UTHORITY. A.8] HOWEVER, THE LD CIT (A)-3, BHOPAL VIDE ORDER DATE D 23-04-2019 CONFIRMED THE PENALTY OF RS. 6,83,498/- AS LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 BY OBSERVING THAT THE IMPUGNED AMOUNT WOULD NOT HAVE BE EN OFFERED FOR TAXATION HAD THERE BEEN NO SEARCH AND SEIZURE OPERAT ION. THE LD CIT (A) CONFIRMED THE LEVY OF PENALTY UNDER SECTION 271AA B OF THE INCOME-TAX ACT, 1961 WITHOUT DEALING WITH EACH GROUN D OF APPEAL RAISED BEFORE HIM WHICH IS NEITHER LEGAL NOR PROPER . A.9] THE APPELLANT HAS THEREFORE PREFERRED AN APPEAL BEFORE THE HONBLE BENCH AGAINST THE ORDER OF THE LD CIT (A)-3, BHOPAL AND HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN MAINTAINING THE LEVY OF PENA LTY UNDER SECTION 271AAB OF THE ACT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. 2] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN MAINTAINING THE LEVY OF PENA LTY UNDER SECTION 271AAB OF THE ACT EVEN WHEN THE SHOW CAUSE NOTICE A S ISSUED FOR LEVY OF PENALTY WAS DEFECTIVE WHEREIN NO SPECIFIC C HARGE WAS FRAMED AGAINST THE APPELLANT AND THEREFORE PENALTY IMPOSED O N THE BASIS OF SUCH DEFECTIVE NOTICE IS NOT MAINTAINABLE IN LAW. AMIT TIWARI 5 3] THE APPELLANT RESERVES HIS RIGHT TO ADD, ALTER AN D MODIFY THE GROUNDS OF APPEAL AS TAKEN BY HIM. 1] GROUND NO. 2 CHALLENGING THE LEVY OF PENALTY O F RS. 6,83,498/- UNDER SECTION 271AAB OF THE INCOME-TAX AC T, 1961 SINCE THE SHOW CAUSE NOTICE ISSUED PRIOR TO THE LEVY OF PENALTY WAS DEFECTIVE WHEREIN NO SPECIFIC CHARGE WAS FRAMED 1.1] THE APPELLANT IN THE GROUND OF APPEAL HAS CHAL LENGED THE LEVY OF PENALTY OF RS. 6,83,498/- UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 SINCE THE SHOW CAUSE NOTICE ISSUED PRIOR TO THE LEVY OF PENALTY WAS DEFECTIVE WHEREIN NO SPECIFIC CHARGE WAS FRAMED AGAINST THE APPELLANT. 1.2.1] THE PROVISION OF SUB-SECTION (3) OF SECTION 271AAB OF THE INCOME-TAX ACT, 1961 PROVIDES THAT PROVISIONS OF SEC TION 274 AND 275 SHALL APPLY IN RELATION TO PENALTY REFERRED TO I N THIS SECTION WHICH IMPLIES THAT THE ASSESSING OFFICER IS BOUND TO ISSUE A NOTICE UNDER SECTION 274 OF THE INCOME-TAX ACT, 1961 AND PROVIDE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PA SSING ANY ORDER IMPOSING PENALTY. 1.2.2] THE OPPORTUNITY OF BEING HEARD THAT OUGHT TO BE GIVEN TO THE ASSESSEE SHOULD BE A MEANINGFUL ONE AND NOT FARCE. 1.3.1] THE PROVISIONS OF SECTION 271AAB OF THE INCO ME-TAX ACT, 1961 FURTHER LAY DOWN VARIOUS CONDITIONS RELATING TO LEVY OF PENALTY @ 10% OR 20% OR 30% OR 60%, AS THE CASE MAY BE. THE SHOW CAUSE NOTICE AS ISSUED PRIOR TO THE LEVY OF PENALTY MUST SPECIFI CALLY POINT OUT TOWARDS THE RELEVANT CLAUSE THAT SHALL BE APPLICABL E IN A PARTICULAR CASE. THE ASSESSING OFFICER SHALL ALSO SPECIFY THE DEFAULT COMMITTED BY THE ASSESSEE SO AS TO ATTRACT THE PENALTY @ 10% OR 20% OR 30% OR 60% OF THE UNDISCLOSED INCOME. 1.3.2] COPY OF SHOW CAUSE NOTICES DATED 30-11-2017 A ND 04-05- 2018 AS ISSUED UNDER SECTION 274 READ WITH SECTION 271 AAB OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2015-1 6 ARE ALSO REPRODUCED HEREUNDER FOR YOUR READY REFERENCE : AMIT TIWARI 6 AMIT TIWARI 7 AMIT TIWARI 8 1.3.3] ON PERUSAL OF THESE SHOW CAUSE NOTICES, IT I S QUITE EVIDENT THAT THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 BUT THE APPELLAN T WAS SHOW CAUSED ON THE CHARGE OF CONCEALMENT OF PARTICULARS O F INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME WHICH F ALLS UNDER THE SCOPE AND PURVIEW OF SECTION 271(1)(C) OF THE INCOME -TAX ACT, 1961 AND NOT UNDER THE PURVIEW OF SECTION 271AAB OF THE I NCOME-TAX ACT, 1961. 1.3.4] THE ASSESSING OFFICER IN THE SHOW CAUSE NOTI CE DID NOT SPECIFY THE DEFAULT AND CHARGE AGAINST THE APPELLANT WHICH N ECESSITATED LEVY OF PENALTY UNDER SECTION 271AAB OF THE INCOME-TAX A CT, 1961. THE SHOW CAUSE NOTICE AS ISSUED PRIOR TO THE LEVY OF PEN ALTY UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 WAS VAGU E AND ISSUED IN A CASUAL FASHION WHICH MAKES THE ALLEGED SHOW CA USE NOTICE DEFECTIVE AND INVALID AND CONSEQUENTLY, ORDER IMPOSING PENALTY OF RS. 6,83,498/- UNDER SECTION 271AAB OF THE INCOME-TA X ACT, 1961 DESERVES TO BE QUASHED. 1.4.1] THE AFORESAID ISSUE IS DULY COVERED IN THE FAVO UR OF THE APPELLANT BY THE RECENT JUDGMENTS OF THE HONBLE ITA T, INDORE BENCH WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT THE SHOW CAUSE NOTICE WHICH IS NOT IN ACCORDANCE WITH THE MANDATES OF LAW AND WHEREIN THE MATTER WRITTEN IN THE BODY OF THE NOTICE ISSUED U NDER SECTION 274 OF THE INCOME-TAX ACT, 1961 DOES NOT REFER TO THE CH ARGES OF PROVISION OF SECTION 271AAB OF THE INCOME-TAX ACT, 1961, MAKE S THE ALLEGED NOTICE DEFECTIVE AND INVALID AND THUS, PENALTY ORDER PA SSED CONSEQUENTIALLY DESERVES TO BE SET-ASIDE. RELEVANT EXTRACTS FROM FEW OF THESE JUDICIAL PRECED ENTS WHICH HAVE ENUNCIATED THE ABOVE MENTIONED PRINCIPLES ARE REPRODU CED HEREUNDER FOR YOUR READY REFERENCE: 1.4.2] THE HONBLE ITAT INDORE BENCH IN THE CASE OF DR. RAJESH JAIN VS. DCIT (CENTRAL)-1 [ITA NO. 905/IND/2018] VIDE OR DER DATED 19-02- 2020 HAS CATEGORICALLY HELD THAT: 16. WE, THEREFORE RESPECTFULLY FOLLOWING THE JUDGME NT/DECISION REFERRED ABOVE AND IN THE GIVEN FACTS AND CIRCUMSTAN CES OF THE CASE WHEREIN THE MATTER WRITTEN IN THE BODY OF THE NOTIC E ISSUED U/S 274 OF THE ACT DOES NOT REFER TO THE CHARGES OF PROVISI ON OF SECTION AMIT TIWARI 9 271AAB OF THE ACT MAKES THE ALLEGED NOTICE DEFECTIVE AND INVALID AND THUS DESERVES TO BE QUASHED. SINCE THE PENALTY PR OCEEDINGS ITSELF HAS BEEN QUASHED THE IMPUGNED PENALTY OF RS. 2 ,04,900/- STANDS DELETED. WE ACCORDINGLY ALLOW THE LEGAL GROUND RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF NOTICE ISSUED U /S 274 R.W.S. 271AAB OF THE ACT AND QUASH THE PENALTY PROCEEDING A S VOID AB INTIO. IN THE RESULT APPEALS OF THE ASSESSEE(S) FOR ASSESSMENT YEARS 2014-15 IS ALLOWED ON LEGAL GROUND. [EMPHASIS SUPPL IED] 1.4.3] THE HONBLE ITAT INDORE BENCH IN THE CASE OF SHRI VIVEK CHUGH VS. ACIT (CENTRAL)-2 [ITA NO. 636/IND/2017] HA S HELD THAT: 7. A BARE READING OF THE ABOVE NOTICE SUGGESTS THA T THE NOTICE HAS BEEN ISSUED IN A CASUAL FASHION. THE ASSESSING OFFIC ER HAS NOT APPLIED HIS MIND AND NO SPECIFIC CHARGE IS MENTIONED FO R WHICH THE ASSESSEE WAS REQUIRED TO BE SHOW CAUSED. IN ABSENCE OF THE REQUISITE CONTENTS OF SPECIFIC CHARGE THE INITIATION OF PROCE EDINGS CANNOT BE SUSTAINED BEING BAD IN LAW. ADMITTEDLY, LD. CIT(A) RE DUCED THE PENALTY BY APPLYING THE PROVISIONS OF SECTION 271AA B(1)(A). THERE IS NO AMBIGUITY UNDER THE LAW SO FAR POWERS OF LD. CIT( A) IS CONCERNED, HE CAN MODIFY THE PENALTY ORDER BY ENHANCING OR REDUC ING THE PENALTY. HOWEVER, WHERE THE ACT PROVIDES FOR TWO DI FFERENT RATES UNDER DIFFERENT TWO PROVISIONS OF LAW IN OUR CONSIDER ED VIEW, THE ASSESSEE OUGHT TO HAVE BEEN GIVEN AN OPPORTUNITY OF HEARING ON THIS ASPECT. HOWEVER, IN THE PRESENT CASE AT THE VERY IN CEPTION NOTICE INITIATING PENALTY IS NOT IN ACCORDANCE WITH MANDAT ES OF LAW. MOREOVER, IT IS SETTLED POSITION OF LAW THAT SUCH DE FECT IS NOT CURABLE U/S 292BB OF THE ACT. THEREFORE, WE HEREBY QUASH TH E PENALTY ORDER. [EMPHASIS SUPPLIED] 1.4.4] THE HONBLE ITAT CHENNAI BENCH IN THE CASE O F DCIT VS. SHRI R. ELANGOVAN [ITA NO. 1199/CHNY/2017] HAS CATEGORIC ALLY HELD THAT: 5..IT IS CLEAR FROM THE SUB SECTION (3) OF SECTI ON 271 AAB THAT SECTIONS 274 AND SECTION 275 OF THE ACT SHALL, S O FAR AS MAY BE, APPLY. SUB SECTION (1) OF SECTION 274 OF THE ACT MAND ATES THAT ORDER IMPOSING PENALTY HAS TO BE IMPOSED ONLY AFTER HEARIN G THE ASSESSEE OR GIVING A ASSESSEE OPPORTUNITY OF HEARING. OPPORT UNITY THAT IS TO BE GIVEN TO THE ASSESSEE SHOULD BE A MEANINGFUL ONE AND NOT A FARCE. NOTICE ISSUED TO THE ASSESSEE REPRODUCED (SUPRA), DOES NOT SHOW WHETHER PENALTY PROCEEDINGS WERE INITIATED FOR CONC EALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR AMIT TIWARI 10 HAVING UNDISCLOSED INCOME WITHIN THE MEANING OF SECT ION 271AAB OF THE ACT. NOTICE IN OUR OPINION WAS VAGUE. HONBLE K ARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) REL YING IN ITS OWN JUDGMENT IN THE CASE OF MANJUNATHA COTTON AND GI NNING FACTORY (SUPRA) 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 EXPLI CITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHI NG OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOM E IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PE NALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALID DESPITE THE AMENDMENT OF SECTION 271(1B) WITH RETROSPECTIVE EFFE CT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIAT ED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING THE APPEALS AGAINS T THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOUT TAKING INTO CONSIDERATION THE ASS ESSMENT ORDER WHEN THE ASSESSING OFFICER HAS SPECIFIED THAT THE AS SESSEE HAS CONCEALED PARTICULARS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE A SSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SEC TION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE 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 INITIAT ED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COT TON AND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGM ENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION , NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINA TION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. IN THE EARLIER CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) THEIR LORDSHIP HAD OBSERVED AS UNDER:- AMIT TIWARI 11 NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFI CALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C) , I.E., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL THE GROUNDS ME NTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQU IREMENT OF LAW; THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD B E IMPOSED ON THE ASSESSEE;) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW; PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEE DINGS: THOUGH PROCEEDINGS FOR IMPOSITION OF PENALTY EMANATE FROM PROCEEDINGS OF ASSESSMENT, THEY ARE INDEPENDENT AND A SEPARATE ASPEC T OF THE PROCEEDINGS; THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS I N SO FAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCORRECT PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PRO CEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE PROCEEDINGS ON THE MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED INVALID IN THE PENALTY 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 JUDG MENT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA), SPECIFICALLY O BSERVING THAT THERE WAS NO MERITS IN THE PETITION FILED BY THE REV ENUE. CONSIDERING THE ABOVE CITED JUDGMENTS, WE HOLD THAT THE NOTICE ISS UED U/S.274 R.W.S. 271AAB OF THE ACT, REPRODUCED BY US AT PARA 5 ABOVE WAS NOT VALID. EX-CONSEQUENTI, THE PENALTY ORDER IS SET ASIDE. [EMPHASIS SUPPLIED] 1.4.5] THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF SHRI RAVI MATHUR VS. DCIT [ITA NO. 969/JP/2017] HAS HELD THAT: 7. AS REGARDS THE VALIDITY OF NOTICE UNDER SECTION 2 74 FOR WANT OF SPECIFYING THE GROUND AND DEFAULT, WE FIND THAT WHEN TH E BASIC CONDITION OF THE UNDISCLOSED INCOME NOT RECORDED IN THE BOOKS OF ACCOUNTS DOES NOT EXISTS, THEN THE SAME HAS TO BE SP ECIFIED BY THE AO IN THE SHOW CAUSE NOTICE AND FURTHER THE AO IS RE QUIRED TO GIVE A FINDING WHILE IMPOSING THE PENALTY UNDER SECTION 271A AB. EVEN IF THE AO IS SATISFIED AND COME TO THE CONCLUSION THAT THE ASSESSEE HAS AMIT TIWARI 12 NOT RECORDED THE UNDISCLOSED INCOME IN THE BOOKS OF AC COUNTS OR IN THE OTHER DOCUMENTS / RECORD MAINTAINED IN NORMAL COU RSE RELATING TO SPECIFIED PREVIOUS YEAR, THE SHOW CAUSE NOTICE SHALL ALSO SPECIFY THE DEFAULT COMMITTED BY THE ASSESSEE TO ATTRACT THE PENA LTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THERE IS NO DI SPUTE THAT THE AO HAS NOT SPECIFIED THE DEFAULT AND CHARGE AGAINST T HE ASSESSEE WHICH NECESSITATED THE LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. CONSEQUENTLY, THE ASSESSEE WAS NOT GIVEN AN OP PORTUNITY TO EXPLAIN HIS CASE FOR SPECIFIC DEFAULT ATTRACTING THE LEVY OF PENALTY IN TERMS OF CLAUSES (A) TO (C) OF SECTION 271AAB(1) OF THE ACT..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. [EMPHASIS SUPPLIED] 1.4.6] THE HONBLE APEX COURT IN THE CASE OF CIT VS SSAS EMERALD MEADOWS AS REPORTED IN [2016] 73 TAXMANN.COM 248 (SC) DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT A GAINST THE ORDER OF THE HONBLE KARNATAKA HIGH COURT. THE HON'BLE KA RNATAKA HIGH COURT IN THE CASE OF CIT VS SSA'S EMERALD MEADOWS AS R EPORTED IN [2016] 73 TAXMANN.COM 241 (KARNATAKA) FOLLOWING ITS OWN DECISION IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING F ACTORY AS REPORTED IN [2013] 35 TAXMANN.COM 250/218 TAXMAN 423/359 ITR 565 DISMISSED THE APPEAL OF REVENUE BY OBSERVING AS UND ER: 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER U NDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY W HICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BE EN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME.THE TRIBUNAL, WHIL E ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF CIT V. MA NJUNATHA COTTON & GINNING FACTORY [2013] 359 ITR 565/218 TAXMAN 423/35 TAXMANN.COM 250 (KAR.) . 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGM ENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION , NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINAT ION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED.[EMPHASIS SUPPLI ED] AMIT TIWARI 13 1.4.7] THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF PR CIT VS KULWANT SINGH BHATIA [ITA NO. 9 TO 14 OF 2018] H ELD THAT NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LEVIAB LE WHEN THERE IS NO SPECIFIC CHARGE MENTIONED IN THE SHOW CAUSE NOTICE [ REFER PARA 11 OF THE DECISION]: 11. ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LE ARNED COUNSEL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THA T THE GROUND MENTIONED IN SHOW-CAUSE NOTICE WOULD NOT SATISFY THE REQUIREMENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE V IEW THAT THE LEARNED TRIBUNAL HAS RIGHTLY RELYING ON THE DECISIO N OF CIT V/S. MANJUNATHA COTTON GINNING FACTORY (SUPRA) AND CIT V/ S. SSA'S EMERALD MEADOWS(SUPRA) RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ORDER OF PENALTY IMPOSED BY THE AUTHORITIES. NO SUBSTANTIAL QUESTION OF LAW IS ARIS ING IN THESE APPEALS. ITA.NO(S).9/2018, 10/2018, 11/2018, 12/201 8, 13/2018 AND 14/2018, FILED BY THE APPELLANT HAVE NO M ERIT AND ARE HEREBY DISMISSED.[EMPHASIS SUPPLIED] 1.5] IN VIEW OF THE ABOVE DISCUSSION AND JUDICIAL P RECEDENTS CITED SUPRA, IT IS QUITE CLEAR THAT THE ASSESSING OFFICER MECHANICALLY ISSUED THE SHOW CAUSE NOTICE IN A GENERAL PROFORMA WITHOUT APPLYING HIS MIND AND WITHOUT MENTIONING ANY SPECIFIC CHARGE FOR W HICH THE APPELLANT WAS REQUIRED TO BE SHOW CAUSED THEREBY NEGA TING THE PRINCIPLES OF NATURAL JUSTICE. IT IS ALSO PERTINENT TO MENTION THAT THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDE R SECTION 271AAB OF THE INCOME-TAX ACT, 1961 BUT THE APPELLAN T WAS SHOW CAUSED ON THE DUAL CHARGE OF CONCEALMENT OF PARTICULA RS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME WHICH F ALLS UNDER THE SCOPE AND PURVIEW OF SECTION 271(1)(C) OF THE INCOME -TAX ACT, 1961 AND NOT UNDER THE PURVIEW OF SECTION 271AAB OF THE I NCOME-TAX ACT, 1961. THE SHOW CAUSE NOTICE THUS SUFFERS FROM A FAT AL ERROR WHICH IS NOT CURABLE UNDER SECTION 292BB OF THE INCOME-TAX AC T, 1961 AND HENCEFORTH, PENALTY OF RS. 6,83,498/- AS LEVIED UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 ON THE BASIS OF SUCH DEFECTIVE AND INVALID SHOW CAUSE NOTICE IS NOT SUSTAINABLE ON THIS GROUND ITSELF AND DESERVES TO BE DELETED IN ENTIRETY. 2] GROUND NO. 1 CHALLENGING THE LEVY OF PENALTY O F RS. 6,83,498/- UNDER SECTION 271AAB OF THE INCOME-TAX AC T, 1961 AMIT TIWARI 14 2.1] THE APPELLANT IN THIS GROUND OF APPEAL HAS CHAL LENGED THE LEVY OF PENALTY OF RS. 6,83,498/- UNDER SECTION 271AAB OF TH E INCOME-TAX ACT, 1961 ON MERITS OF THE CASE. 2.2] THE APPELLANT ACCEPTED ADDITIONAL INCOME TO THE TUNE OF RS. 68,34,975/- ON ACCOUNT OF INVESTMENT IN CONSTRUCTIO N OF HOUSE PERTAINING TO THE ASSESSMENT YEAR 2015-16 IN HIS ST ATEMENT RECORDED UNDER SECTION 132(4) OF THE INCOME-TAX ACT, 1961. HOWEVER, THE ASSESSING OFFICER SUBSEQUENTLY LEVIED PENALTY @ 10% ON SUCH ADMISSION MADE BY THE APPELLANT UNDER SECTION 132(4) OF THE INCOME- TAX ACT, 1961 WHICH COMES TO RS. 6,83,498/-. 2.3.1] THE RELEVANT EXTRACT OF PROVISION OF SECTION 271AAB OF THE INCOME-TAX ACT, 1961 IS REPRODUCED HEREUNDER FOR YOUR READY REFERENCE: 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIREC T THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 BUT BEFORE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT OF THE PRESIDENT, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITI ON TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UN DER SUB-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 UNDISCL OSED 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 SPECIFIE D PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; [EMPHASIS SUPPLIED] 2.3.2] ON A CAREFUL READING OF THE ABOVE EXTRACT OF PROVISION OF SECTION 271AAB OF THE INCOME-TAX ACT, 1961, IT BECO MES QUITE CLEAR THAT THE WORDS USED IN THE BEGINNING ARE ASSESSING OFFICER MAY DIRECT WHICH IMPLIES THAT THE IMPOSITION OF PENALT Y UNDER SECTION AMIT TIWARI 15 271AAB OF THE INCOME-TAX ACT, 1961 IS NOT MANDATORY IN NATURE BUT IS DISCRETIONARY. THE LEGISLATURE HAS INCLUDED THE PR OVISIONS OF SECTION 274 AND SECTION 275 IN SECTION 271AAB OF THE INCOME-TAX ACT, 1961 WITH A CLEAR INTENTION TO CONSIDER THE IM POSITION OF PENALTY JUDICIALLY SINCE SECTION 274 OF THE INCOME-TAX ACT, 1961 DEALS WITH THE PROCEDURE TO LEVY PENALTY ONLY AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ONCE T HE ASSESSING OFFICER IS BOUND TO HEAR THE ASSESSEE AND TO GIVE REA SONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDAT ORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JUSTICE. IT IS TRITE POSI TION OF LAW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISE D IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE F ACTS AND CIRCUMSTANCES OF THE EACH CASE. THE AFORESAID VIEW H AS BEEN AFFIRMED IN THE LANDMARK JUDGMENT OF THE HONBLE ITAT VISAKHAPATNAM BENCH IN THE CASE OF ACIT (CENTRAL CI RCLE)-2 V. MARVEL ASSOCIATES AS REPORTED IN [2018] 194 TTJ 338 (VISAKHAPATNAM - TRIB.) WHICH LEADS US TO A CONCLUS ION THAT PENALTY UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 IS NOT AUTOMATIC. 2.3.3] FURTHER, IT IS ALSO QUITE EVIDENT THAT THE TE RM UNDISCLOSED INCOME ASSUMES SIGNIFICANT IMPORTANCE FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 SINCE PE NALTY UNDER THIS SECTION IS LEVIED AS A PERCENTAGE OF UNDISCLOSED INC OME. THE TERM UNDISCLOSED INCOME HAS BEEN DEFINED IN CLAUSE (C) O F EXPLANATION TO SECTION 271AAB OF THE INCOME-TAX ACT, 1961 WHICH IS REPRODUCED HEREUNDER FOR YOUR READY REFERENCE: (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY 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 SE ARCH UNDER SECTION 132 , WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH 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 C HIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR AMIT TIWARI 16 (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED I N 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 SE ARCH NOT BEEN CONDUCTED.[EMPHASIS SUPPLIED] 2.3.4] IN VIEW OF THE ABOVE, IT CAN BE SATISFACTORI LY CONCLUDED THAT DISCLOSURE OF ADDITIONAL INCOME IN STATEMENT RECORDE D UNDER SECTION 132(4) OF THE INCOME-TAX ACT, 1961 ITSELF IS NOT SU FFICIENT TO LEVY PENALTY UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 UNTIL AND UNLESS INCOME SO DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME DEFINED IN EXPLANATION TO SECTIO N 271AAB OF THE INCOME-TAX ACT, 1961. 2.4.1] THE APPELLANT ACCEPTED ADDITIONAL INCOME TO T HE TUNE OF RS. 68,34,975/- ON ACCOUNT OF INVESTMENT IN CONSTRUCTIO N OF HOUSE PERTAINING TO THE ASSESSMENT YEAR 2015-16. HENCE, I T BECOMES SIGNIFICANTLY IMPORTANT TO ANALYZE AS TO WHETHER IN VESTMENT IN CONSTRUCTION OF HOUSE FALLS WITHIN THE DEFINITION O F UNDISCLOSED INCOME SO AS TO ATTRACT THE PENAL PROVISIONS OF SE CTION 271AAB OF THE INCOME-TAX ACT, 1961. THE DEFINITION OF UNDISCLOSED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE INCOME-TAX ACT, 1961 ALONG WITH CORRESPONDING EXPLANATION/JUST IFICATION OF THE APPELLANT IN RESPECT OF ITS APPLICABILITY IN THE FA CTS OF THE PRESENT CASE IS SUMMARIZED AS UNDER FOR YOUR READY REFERENCE : SUB - CLAUSE OF THE DEFINITION DEFINITION OF UNDISCLOSED INC OME EXPLANATIONS/JUSTIFICATION OF THE APPELLANT (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 , WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR THE APPELLA NT ACCEPTED ADDITIONAL INCOME OF RS. 68,34,975/- ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE PERTAINING TO THE ASSESSMENT YEAR 2015-16. THE INCOME AS ACCEPTED BY THE APPELLANT WAS ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE AND WAS NOT ON ACCOUNT OF EITHER ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH WHICH WAS NOT RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS. HENCE, IT IS QUITE CLEAR THAT THE ADDITIONAL INCOME OF RS. 68,34,975/- AS ACCEPTED BY THE APPELLANT DID NOT FALL WITHIN THE DEFINITION OF UNDISCLOSED INCOME AS PER SUB-CLAUSE (I) (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY AS STATED ABOVE, THE APPELLANT ACCEPTED AND OFFERED ADDITIONAL INCOME ON ACCOUNT OF AMIT TIWARI 17 ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED INVESTMENT IN CONSTRUCTION OF HOUSE PERTAINING TO THE YEAR UNDER CONSIDERATION. IT WAS ABSOLUTELY NOT A CASE WHEREIN THE ADDITIONAL INCOME WAS REPRESENTED BY ANY ENTRY IN RESPECT OF EXPENSE RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS WHICH WAS FOUND TO BE FALSE OR WOULD NOT HAVE BEEN FOUND HAD THE SEARCH NOT BEEN CONDUCTED. THE APPELLANT ACCEPTED ADDITIONAL INCOME ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE WHICH CAN BY NO STRETCH OF IMAGINATION BE TREATED AS ENTRY IN RESPECT OF AN EXPENSE. HENCE, IT IS QUITE CLEAR THAT THE ADDITIONAL INCOME OF RS. 68,34,975/- AS ACCEPTED BY THE APPELLANT DID NOT FALL WITHIN THE DEFINITION OF UNDISCLOSED INCOME AS PER SUB-CLAUSE (II) 2.4.2] ON PERUSAL OF THE ABOVE TABLE, IT IS QUITE C LEAR THAT THE AMOUNT OF ADDITIONAL INCOME OF RS. 68,34,975/- AS ACCEPTED B Y THE APPELLANT ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE W AS OUTSIDE THE SCOPE AND PURVIEW OF THE DEFINITION OF UNDISCLOSED IN COME AS PROVIDED IN EXPLANATION TO SECTION 271AAB OF THE INC OME-TAX ACT, 1961. IT IS PERTINENT TO NOTE THAT SINCE THE AMOUNT OF ADDITIONAL INCOME OF RS. 68,34,975/- AS ACCEPTED IN THE STATEME NT RECORDED UNDER SECTION 132(4) OF THE INCOME-TAX ACT, 1961 DID NOT FALL WITHIN THE DEFINITION OF UNDISCLOSED INCOME AS PROVIDED IN EXPLANATION TO SECTION 271AAB OF THE INCOME-TAX ACT, 1961; HENCE, THERE ARISES NO QUESTION OF LEVY OF PENALTY OF RS. 6,83,498/- UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 AND THE PENALTY SO LEVIE D NOW REQUIRES TO BE DELETED IN ENTIRETY. RELEVANT EXTRACTS FROM FEW OF THE JUDICIAL PRECEDEN TS WHICH HAVE ENUNCIATED THE ABOVE MENTIONED PRINCIPLES ARE REPRODU CED HEREUNDER FOR YOUR READY REFERENCE: 2.5.1] THE HONBLE ITAT VISAKHAPATNAM BENCH IN THE CASE OF ACIT (CENTRAL CIRCLE)-2 V. MARVEL ASSOCIATES AS REPORTED IN [2018] 194 TTJ 338 (VISAKHAPATNAM - TRIB.) HAS HELD THAT: 9.PENALTY U/S 271AAB ATTRACTS ON UNDISCLOSED INCOME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4). THE AO M UST ESTABLISH THAT THERE IS UNDISCLOSED INCOME ON THE BASIS OF INC RIMINATING MATERIAL. IN THE INSTANT CASE A LOOSE SHEET WAS FOU ND ACCORDING TO THE A.O., IT WAS INCRIMINATING MATERIAL EVIDENCING THE U NDISCLOSED INCOME. IN THE PENALTY ORDER THE AO OBSERVED THAT LO OSE SHEET SHOWS THE COST PER SQUARE FEET IS RS.3571/- PER SFT. AND ASSESSEE STATED TO HAVE SUBMITTED IN SWORN STATEMENT COST PER SQ. FEET AT RS.2200/- TO AMIT TIWARI 18 RS.2300/- PER SQ. FEET. HOWEVER NEITHER THE AO NOR THE LD.CIT(A) HAS VERIFIED THE COST OF CONSTRUCTION WITH THE BOOKS AND PROJECTIONS FOUND AT THE TIME OF SEARCH. THE COUNSEL ARGUED THAT IT WA S MERE PROJECTION BUT NOT THE ACTUALS. THE WRITE UP HEADING ALSO MENT IONED THAT SUMMARY OF THE PROJECTED PROFITABILITY STATEMENT. TH ERE IS NO EVIDENCE TO ESTABLISH THAT PROJECTIONS REFLECTED IN THE LOOS E SHEET IS REAL. NO OTHER MATERIAL WAS FOUND DURING THE COURSE OF SEARCH INDICATING THE UNDISCLOSED INCOME. THERE WAS NO MONEY, BULLION, JEW ELLERY OR VALUABLE ARTICLE OR THING OR ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUMENTS TRANSACTIONS WERE FOUND DURING THE COURSE OF SEARCH INDICATING THE ASSETS NOT RECORDED IN THE BOOKS OF A CCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, WHOLLY OR PARTLY. THE REVENUE DID NOT FIND ANY UNDISCLOSED ASSET, ANY OTHER UNDISCLOSED INCOME OR THE INFLATION OF EXPENDITURE DURING THE SE ARCH/ ASSESSMENT PROCEEDINGS. THOUGH A LOOSE SHEET OF PAGE NO.107 OF ANNEXURE A/GS/MA/1 WAS FOUND THAT DOES NOT INDICATE ANY SUPPRES SION OF INCOME BUT IT IS ONLY PROJECTION OF PROFIT STATEMEN T. THE AMOUNT OF RS.3571/- MENTIONED IN THE PROJECTIONS REFERS TO COS T AND PROFIT WHICH IS APPROXIMATE SALE PRICE BUT NOT THE COST AS STATE D BY THE AO IN THE PENALTY ORDER. THE COST OF CONSTRUCTION IN THE PROJE CTIONS PROJECTED AT RS.2177/- WHICH IS IN SYNCH WITH THE STATEMENT GIVE N BY THE ASSESSEE. THE AO WAS HAPPY WITH THE DISCLOSURE GIVE N BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSITION WITH THE BOOKS OF ACCOUNTS AND PROJECTIONS AND BRING THE EVIDENCE TO UN EARTH THE UNDISCLOSED INCOME. NEITHER THE A.O. NOR THE INVESTI GATION WING LINKED THE COST OF PROFIT OR COST OF ASSET TO THE ENTRIES IN THE BOOKS OF ACCOUNTS OR TO THE SALES CONDUCTED BY THE ASSESSEE TO THE SALE DEEDS. THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTION O F THE REVENUE THAT THE LOOSE SHEET FOUND DURING THE COURSE OF SEARCH IND ICATES ANY UNDISCLOSED INCOME OR ASSET OR INFLATION OF EXPENDIT URE. THE HON'BLE ITAT DELHI BENCH IN THE CASE OF AJAY SHARMA V. DY. C IT [2013] 30 TAXMANN.COM 109 HELD THAT WITH RESPECT TO THE ADDITION ON ACCOUNT O F ALLEGED RECEIVABLES AS PER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT ANY INCOME RECEIVE D BY THE ASSESSEE HAS NOT BEEN DECLARED BY THE ASSESSEE. AN AD DITION HAS BEEN MADE ON THE BASIS OF LOOSE DOCUMENT, WHICH DID NOT CLOSELY PROVE ANY CONCEALMENT OR FURNISHING OF INACCURATE P ARTICULARS BY THE ASSESSEE. HENCE PENALTY U/S 158BFA (2) OF THE ACT I S NOT LEVIABLE. THE FACTS OF THE ASSESSEE'S CASE SHOWS THAT THERE W AS NO UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND NO INCRIM INATING MATERIAL WAS FOUND, HENCE WE HOLD THAT THERE IS NO CA SE FOR IMPOSING PENALTY U/S 271AAB OF THE ACT, ACCORDINGLY, WE SET ASIDE THE ORDER OF AMIT TIWARI 19 THE LOWER AUTHORITIES AND CANCEL THE PENALTY U/S 271 AAB OF THE ACT.[EMPHASIS SUPPLIED] 2.5.2] THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF PADAM CHAND PUNGLIYA V. ACIT (CENTRAL CIRCLE)-1 AS REPORTED IN [2 020] 113 TAXMANN.COM 446 (JAIPUR - TRIB.) HAS HELD THAT: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. OUT OF THE FOUR ITEMS REPRESENTING THE UNDISCLOSED INCOME DISCLOSED BY THE ASSESSEE DURING THE STATEMENT UNDER SECTION 132(4) OF THE IT ACT, ONLY TWO ITEMS, NAMELY, EXPENDITURE ON HOUSE CONSTRUCTION AND UNDISCLOSED ADV ANCES ARE BASED ON THE SEIZED MATERIAL. THE OTHER TWO ITEMS BEI NG REPRESENTING EXCESS STOCK AND UNDISCLOSED JEWELLERY ARE NOT BASED ON THE SEIZED DOCUMENTS BUT THESE ARE BASED ON THE VAL UATION OF THE STOCK AS WELL AS THE JEWELLERY FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION. FIRST, WE TAKE UP THE UNDISCLOSED IN COME ON ACCOUNT OF EXPENDITURE ON HOUSE CONSTRUCTION OF RS. 2,44,63 ,575/-, THE RELEVANT ALLEGED SEIZED DOCUMENT IN THIS RESPECT ARE T HE ENTRIES IN THE DIARY ON 04.04.2013, 14.04.2013, 28.04.2013, 28 .05.2013 AND 01.06.2013. IT IS PERTINENT TO NOTE THAT ALL THESE NOTINGS ARE DONE DURING THE MONTH OF APRIL, ONE IN MAY AND ONE IN 1ST JUNE, 2013. THE CONSTRUCTION OF HOUSE IS NOT A TASK TO BE COMPL ETED FROM 1ST APRIL, 2013 TO 1ST JUNE, 2013, THAT TOO WHEN THE AL LEGED EXPENDITURE OF RS. 2,44,63,575/- WAS INCURRED IN RESPECT OF VARI OUS ARTICLES AND CONSTRUCTION MATERIALS. IT APPEARS FROM THE SEIZED DO CUMENTS THAT THESE ARE THE NOTINGS ON THESE 5 PAGES OF A DIARY A RE DONE IN ONE GO, WHEREAS THE SAID NOTINGS ARE PURPORTED TO BE ON DIFFE RENT DATES OF MONTH OF APRIL, MAY AND JUNE. SOME OF THE ENTRIES ARE EVEN UNREALISTIC LIKE RS. 15 LACS TOWARDS PURCHASE OF PAI NT. IT IS PERTINENT TO NOTE THAT HOW PAINT IS PURCHASED PRIOR TO THE COM PLETION OF CONSTRUCTION AND AS PER THE ENTRIES IN THESE PAPERS THERE IS AN ENTRY OF SOME MARBLE FIXING OF RS. 5 LACS. FROM THESE ENT RIES IN THE ALLEGED SEIZED MATERIAL, IT IS MANIFEST THAT MOST OF THEM AR E UNREALISTIC AS ENTRY OF RS. 70 LACS IS SHOWN TOWARDS FURNITURE WHIC H IS HIGHLY IMPOSSIBLE. ANOTHER ENTRY OF RS. 45 LACS IS SHOWN T OWARDS STEEL. THUS FROM THE NOTINGS OF THESE PAPERS IT IS CLEAR T HAT THESE ARE NOT ENTRIES REPRESENTING THE REAL AND ACTUAL TRANSACTIO NS. FURTHER, NEITHER DURING THE COURSE OF SEARCH AND SEIZURE PROC EEDINGS NOR EVEN IN THE COURSE OF STATEMENT RECORDED UNDER SECTIO N 132(4) ANY EFFORTS WERE MADE BY THE SEARCH PARTY TO FIND OUT TH E ACTUAL EXISTENCE OF THESE ASSETS TOWARDS WHICH THE ALLEGED ENTRIES ARE AMIT TIWARI 20 RECORDED IN THE SEIZED MATERIAL/PAPERS. THOUGH THE AD MISSION ON THE PART OF THE ASSESSEE IS A RELEVANT EVIDENCE, HO WEVER, WHEN THE ENTRIES/NOTINGS IN THE LOOSE PAPERS ARE APPARENTLY NOT REPRESENTING THE REAL TRANSACTIONS THEN IT WAS INCUMBENT UPON TH E DEPARTMENT TO FIND OUT AND ESTABLISH THE EXISTENCE OF THESE ASSETS IN THE POSSESSION OF THE ASSESSEE. IN THE ABSENCE OF SUCH EFFORTS AND EVEN ANY QUESTION PUT TO THE ASSESSEE REGARDING THE EXIS TENCE OF THESE ASSETS, THESE ENTRIES ALONE WOULD NOT IPSO FACTO CO NSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE. EVEN OTHERWISE, THESE ENTRIES IN ITSELF ARE NOT HAVING ANY INCOME ELEMENT BUT THE SE ARE ALL EXPENDITURE ENTRIES AND, THEREFORE, UNTIL AND UNLESS A CORRESPONDING ASSET IS FOUND IN THE POSSESSION OF THE ASSESSEE, TH E ENTRIES ALONE CANNOT BE REGARDED AS REPRESENTING THE UNDISCLOSED INC OME OF THE ASSESSEE. THEREFORE, WHEN THE DURATION OF THE CONST RUCTION PERIOD OF THE HOUSE HAS NOT BEEN ASCERTAINED BY THE DEPARTMENT , THEN SHOWING THE ENTIRE COST OF CONSTRUCTION WITH IMAGIN ARY FIGURES FOR A PERIOD OF 2 MONTH IS NOT JUSTIFIED. EVEN WE FIND THAT THE CONSTRUCTION MATERIAL ENTRIES ARE ON SUBSEQUENT DATES AND FURNITU RE AND TV ENTRIES ON THE EARLIER DATES WHICH DO NOT SUPPORT OF THE CASE OF THE DEPARTMENT THAT THESE ENTRIES/NOTINGS IN THE SEIZED DO CUMENTS REPRESENTS THE REAL TRANSACTIONS/ASSETS PURCHASED BY THE ASSESSEE OR IN THE POSSESSION OF THE ASSESSEE. THE POSSESSIO N OF THE ASSET WAS A MATTER OF FACT AT THE TIME OF SEARCH AND IN TH E ABSENCE OF SUCH ASSET EITHER FOUND OR OTHERWISE DISCOVERED DURING THE COURSE OF SEARCH AND SEIZURE, THESE ENTRIES IN THE SEIZED DOCUME NTS WOULD NOT CONSTITUTE UNDISCLOSED INCOME ON ACCOUNT OF EXPENDIT URE IN CONSTRUCTION OF THE HOUSE. SIMILARLY, THE ENTRIES I N RESPECT OF ADVANCES OF RS. 5,62,000/- ALSO VERY VAGUE AND AMBIG UOUS NOT GIVING ANY DETAILS ABOUT THE PURPOSE OR DATE ON WHIC H THESE ADVANCES WERE GIVEN. ONLY A DATE IS MENTIONED AT THE BOTTOM OF THE PAGE BUT NOT AGAINST EACH AND EVERY ENTRY OF THE PAG E. FURTHER, WE NOTE THAT THE DEPARTMENT HAS NOT TRIED TO ASCERTAIN T HE FULL PARTICULARS OF THE ALLEGED PERSONS WHOSE NAMES ARE N OTED IN THE SEIZED DOCUMENTS AGAINST CERTAIN AMOUNTS WHICH ARE CO NSIDERED AS ADVANCES GIVEN BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT WITHOUT ASCERTAINING THE FULL PARTICULARS OF THE PERSONS IN WHOSE NAMES THE ENTRIES ARE MADE, IT IS POSSIBLE THAT ALL THESE NAM ES ARE ONLY IMAGINARY AND NOT THE NAMES OF ANY EXISTING PERSONS. THEREFORE, THESE VAGUE ENTRIES ITSELF DO NOT REPRESENT THE REAL TRANSACTION AND CONSEQUENTLY THE UNDISCLOSED INCOME OF THE ASSESSEE...ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION O F THE COORDINATE AMIT TIWARI 21 BENCH OF THIS TRIBUNAL IN THE CASE OF RAJENDRA KUMAR GUPTA (SUPRA), WE HOLD THAT THE ENTRIES IN THE SEIZED DOCUMENTS REPR ESENTING THE EXPENDITURE ON ACCOUNT OF CONSTRUCTION OF THE HOUSE AND PURCHASE OF OTHER ASSETS AS WELL AS ADVANCES IN THE ABSENCE OF THE REAL TRANSACTIONS DO NOT CONSTITUTE THE UNDISCLOSED INCOME OF THE ASSESSEE AS DEFINED IN THE EXPLANATION TO SECTION 27 1AAB OF THE ACT. ACCORDINGLY, THE PENALTY LEVIED UNDER SECTION 271AAB IN RESPECT OF THE SAID AMOUNT IS NOT SUSTAINABLE AND LIABLE TO BE S ET ASIDE.[EMPHASIS SUPPLIED] 2.5.3] THE HONBLE ITAT JAIPUR BENCH A IN THE CAS E OF SMT. APARNA AGRAWAL V. DCIT (CENTRAL CIRCLE), KOTA AS REPORTED I N [2019] 105 TAXMANN.COM 233 (JAIPUR - TRIB.) HAS HELD THAT: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS LEVIED THE PENALTY UN DER SECTION 271AAB OF THE ACT IN RESPECT OF THE INCOME SURRENDER ED BY THE ASSESSEE ON ACCOUNT OF LTCG FROM PURCHASE AND SALE O F EQUITY SHARES. THE QUESTION ARISES WHETHER THE SURRENDER MA DE BY THE ASSESSEE IN THE STATEMENT RECORDED UNDER SECTION 132 (4) WILL BE REGARDED AS UNDISCLOSED INCOME WITHOUT TESTING THE SA ME WITH THE DEFINITION AS PROVIDED UNDER CLAUSE (C) OF EXPLANATION TO SECTION 271AAB OF THE ACT. THERE IS NO DISPUTE THAT IN THE STATEMENT RECORDED UNDER SECTION 132(4), THE ASSESSEE HAS DISC LOSED THE INCOME UNDER CONSIDERATION AS UNDISCLOSED INCOME ON A CCOUNT OF LTCG. HOWEVER, FOR THE PURPOSE OF LEVYING THE PENAL TY UNDER SECTION 271AAB, THE PRIMARY CONDITION IS THAT THE ASSESSEE SHALL PAY THE PENALTY EQUIVALENT TO 10 PERCENT, 20 PERCENT OR 30 PERCENT OF UNDISCLOSED INCOME OF SPECIFIED PREVIOUS YEAR DEPENDIN G UPON THE SATISFACTION OF THE CONDITION AS PROVIDED UNDER SECTI ON 271AAB. THE TERM 'UNDISCLOSED INCOME' HAS BEEN DEFINED IN THE EXPL ANATION TO SECTION 271AAB AND, THEREFORE, THE PENALTY UNDER THE SAID PROVISION HAS TO BE LEVIED ONLY WHEN THE INCOME SURRENDERED BY THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED UN DER THIS SECTION. THE MERE DISCLOSURE OF INCOME IN THE STATE MENT RECORDED UNDER SECTION 132(4) WOULD NOT IPSO FACTO BE REGARDED AS UNDISCLOSED INCOME UNLESS AND UNTIL IT IS TESTED AS PE R THE DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT..THE LEVY OF PENALTY UNDER SECTION 271AAB DO ES NOT DEPENDENT ON THE ADDITION MADE DURING THE ASSESSMENT PR OCEEDINGS BUT THE CONDITIONS PROVIDED UNDER SECTION 271AAB ARE PRECEDENT FOR LEVY OF PENALTY. THE ASSESSMENT ORDER IS RELEVANT ON LY FOR THE AMIT TIWARI 22 PURPOSE OF LIMITATION PROVIDED UNDER SECTION 275 OF TH E IT ACT WHEREAS THE PENALTY UNDER SECTION 271AAB HAS TO BE I MPOSED ONLY WHEN THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN T HE AMBIT OF UNDISCLOSED INCOME AS DEFINED UNDER SECTION 271AAB OF THE ACT. THE DEFINITION OF UNDISCLOSED INCOME CONTEMPLATES VARIOUS FORMS AND THE PRIMARY CONDITION IS THAT THE INCOME OF THE SPECIFI ED PREVIOUS YEAR REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHE R VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OT HER DOCUMENTS OR TRANSACTIONS FOUND DURING THE COURSE OF SEARCH WHICH HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOK S OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE REL ATING TO SUCH PREVIOUS YEAR. IN THE CASE IN HAND, SINCE THE SURREN DER WAS MADE IN RESPECT OF THE LTCG RECORDED IN THE SEIZED MATERIAL, THEREFORE, IT IS BASED ON THE ENTRIES IN THE OTHER DOCUMENTS FOUND DURI NG THE COURSE OF SEARCH. THE INCOME IN THE SHAPE OF ENTRIES IN OT HER DOCUMENTS FOUND DURING THE COURSE OF SEARCH WOULD BE CONSIDERED AS UNDISCLOSED INCOME IF THE SAID INCOME HAS NOT BEEN R ECORDED IN THE BOOKS OF ACCOUNT ON OR BEFORE THE DATE OF SEARCH. I N THE CASE IN HAND, IT IS UNDISPUTED FACT THAT ALL THE TRANSACTIONS OF P URCHASE AND SALE AND LTCG ARISING FROM THE SALE OF EQUITY SHARES OF T HE LISTED COMPANIES ARE DULY RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, IT IS NOT THE CASE OF ANY INCOME OF THE SPECIFIED YEAR REP RESENTING THE ENTRY IN THE OTHER DOCUMENTS WHICH HAS NOT BEEN RECO RDED IN THE BOOKS OF ACCOUNT ON THE DATE OF SEARCH. THEREFORE, THE PRIMARY CONDITION OF UNDISCLOSED INCOME THAT THE INCOME REPRE SENTED BY THE ENTRY IN THE OTHER RECORD IS NOT RECORDED IN THE BOOK S OF ACCOUNT ON THE DATE OF SEARCH IS NOT SATISFIED. THE DEFINITION O F 'UNDISCLOSED INCOME' IS SUBJECTED TO TWO CONDITIONS THAT THE SAID INCOME HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RE LATING TO SUCH PREVIOUS YEAR. THE SECOND CONDITION IS NOT RELEVANT FOR OUR PURPOSE SINCE THESE ENTRIES ARE UNDISPUTEDLY DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. WE FURTHER NOTE THAT THE S EIZED MATERIAL DOES NOT REVEAL THE NATURE OF TRANSACTION BEING GENU INE OR BOGUS BUT THE ENTRY IN THE SEIZED MATERIAL IS ONLY THE COMPUTA TION OF LONG-TERM CAPITAL GAIN ON SALE OF SHARES. THEREFORE, THE DOCUM ENTS WHICH WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE ACTION CONTAINS THE DETAILS OF LTCG WOULD NOT BE REGARDED A S INCRIMINATING MATERIAL DISCLOSING ANY INCOME NOT RECORDED IN THE BOOKS OF ACCOUNT. HENCE THE PRIMARY CONDITION FOR TREATING SUCH INCOM E AS UNDISCLOSED INCOME IN TERMS OF SECTION 271AAB IS NOT SATISFIED FOR BRINGING THE INCOME SURRENDERED BY THE ASSESSEE IN T HE FOLD OF AMIT TIWARI 23 UNDISCLOSED INCOME AS PER THE DEFINITION OF 'UNDISCLO SED INCOME' IN EXPLANATION TO SECTION 271AAB, THE SAID INCOME MUST REPRESENT EITHER ANY MONEY, BULLION, JEWELLERY OR OTHER VALUA BLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUME NTS BUT HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT AS ON THE DATE OF SEARCH. THEREFORE, THE PRIMARY CONDITION FOR TREATING AN IN COME AS UNDISCLOSED INCOME IS THAT IT SHOULD REPRESENT INTER ALIA ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS FOUND DURING THE SEARCH BUT THE SAID INCOME IS NOT RECORDED IN THE BOOKS OF ACCOU NT. IN THE CASE IN HAND, THE DOCUMENT FOUND DURING THE SEARCH IS NOT A N INCRIMINATING MATERIAL WHEN THE ENTRY AND THE INCOME WERE DULY RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, THE STA TEMENT OF THE ASSESSEE RECORDED UNDER SECTION 132(4) WOULD NOT CONS TITUTE INCRIMINATING MATERIAL. THEREFORE, THE SAID INCOME DISCLOSED BY THE ASSESSEE CANNOT BE CONSIDERED AS UNDISCLOSED INCOME I N TERMS OF SECTION 271AAB OF THE ACT. THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE PENALTY UNDER SECTION 271AAB IS NOT AUTOMAT IC BUT THE AO HAS TO TAKE A DECISION AS PER THE PROVISIONS OF SECT ION 271AAB AND PARTICULARLY IN THE LIGHT OF THE DEFINITION OF THE U NDISCLOSED INCOME AS PRESCRIBED IN THE EXPLANATION TO SECTION 271AAB OF T HE ACT.[EMPHASIS SUPPLIED] 2.5.4] THE HONBLE ITAT AHMEDABAD BENCH C IN THE CASE OF M/S SHREE VALLABHA DEVELOPERS VS. DCIT, CENTRAL CIRCLE-2 [ITA NO. 1873 & 1874/AHD/2018] HAS HELD THAT: 5. WE FIND THAT A TOTAL DISCLOSURE OF RS.10.51 CROR ES WAS MADE WITH RESPECT TO VARIOUS ENTITIES INCLUDING ASSESSEE AS W ELL AS BHARATKUMAR PARIKH BESIDES OTHER ENTITIES. IN THE CA SE OF ASSESSEE, THE DISCLOSURE WAS ON ACCOUNT OF INFLATED EXPENSES. HOWEVER, NO INCRIMINATING MATERIAL WAS FOUND DURING SEARCH OPERAT IONS AND THE UNDISCLOSED INCOME WAS NOT REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNTS. NONE OF THE ENTRIES IN THE BOOKS WAS F OUND TO BE FALSE AND THE DISCLOSURE WAS VOLUNTARY. THEREFORE, THE SA ME WOULD NOT FALL WITHIN THE TERM UNDISCLOSED INCOME AS DEFINED IN EXPLA NATION-C(II) TO SEC.271AAB. HENCE, THE FACTUAL MATRIX DOES NOT CONVIN CE US TO CONFIRM THE IMPUGNED PENALTIES. BY DELETING THE SAME , WE ALLOW BOTH THE APPEALS.[EMPHASIS SUPPLIED] 2.6] IN VIEW OF THE ABOVE DISCUSSION AND JUDICIAL P RECEDENTS CITED SUPRA, IT IS CLEARLY EVIDENT THAT THE MERE DISCLOSUR E OF INCOME IN THE AMIT TIWARI 24 STATEMENT RECORDED UNDER SECTION 132(4) OF THE INCOME -TAX ACT, 1961 WOULD NOT IPSO FACTO BE REGARDED AS UNDISCLOSED INCOME UNLESS AND UNTIL IT IS TESTED AS PER THE DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE INCOME-TAX ACT, 1961. HOWEVER , IN THE FACTS OF THE PRESENT CASE, THE ASSESSING OFFICER MERELY L EVIED PENALTY @ 10% ON THE ADDITIONAL INCOME ACCEPTED IN THE STATEME NT RECORDED UNDER SECTION 132(4) OF THE INCOME-TAX ACT, 1961 WIT HOUT TESTING WHETHER THE ADDITIONAL INCOME FELL WITHIN THE DEFIN ITION OF UNDISCLOSED INCOME AS PROVIDED IN EXPLANATION TO SEC TION 271AAB OF THE INCOME-TAX ACT, 1961. HENCE, PENALTY OF RS. 6,83,498/- AS LEVIED UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1 961 IN ABSENCE OF SUCH A FINDING IS NEITHER LEGAL NOR PROPER AND DES ERVES TO BE DELETED IN ENTIRETY. WITHOUT PREJUDICE TO THE ABOVE 2.7] THE APPELLANT IS AN INDIVIDUAL AND HE MAINTAINS SEPARATE BOOKS OF ACCOUNTS FOR THE PROPRIETORSHIP BUSINESS CARRIED OUT IN THE NAME OF M/S SHREE ENGINEERS. HOWEVER, THE APPELLANT IS NOT R EQUIRED TO MAINTAIN HIS PERSONAL BOOKS OF ACCOUNTS. HENCE, IT IS SUBMITTED THAT DETAILS OF CONSTRUCTION EXPENSES AS INCURRED BY THE A PPELLANT WAS IN FACT FOUND ENTERED IN OTHER DOCUMENTS WHICH WERE RE TRIEVED DURING THE COURSE OF SEARCH AND HENCEFORTH, IT CANNOT BE TR EATED AS UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE INCOME-TAX ACT , 1961. RELEVANT EXTRACTS FROM FEW OF THE JUDICIAL PRECEDEN TS WHICH HAVE ENUNCIATED THE ABOVE MENTIONED PRINCIPLES ARE REPRODU CED HEREUNDER FOR YOUR READY REFERENCE: 2.8.1] THE HONBLE ITAT KOLKATA BENCH B IN THE CA SE OF DCIT, CIRCLE- 2(2), KOLKATA VS. MANISH AGARWALA [ITA NO. 1479/KOL /2015] HAS HELD THAT: 7 ACCORDING TO THE LD. AR, FROM THE FACTS AND CIRCUMST ANCES DESCRIBED ABOVE, SINCE THE ASSESSEE IS NOT ENGAGED IN BUSINESS OR PROFESSION, HE DOES NOT REQUIRE TO MAINTAIN THE BOOK S OF ACCOUNT AS PER SEC. 44AA OR SEC. 44AA(2) OF THE ACT, THEREFORE , THE ASSESSEES CASE FALLS IN THE SECOND LIMB I.E. OR OTHER DOCUMEN TS AS STIPULATED U/S. 271AAB EXPLANATION (C) (SUPRA) WHICH DESCRIBES UNDISCLOSED INCOME FOR THE PURPOSES OF THIS SECTION WHICH IS VE RY IMPORTANT TO ADJUDICATE THIS ISSUE. THEREFORE, THE QUESTION IS W HEN THE SEARCH TOOK AMIT TIWARI 25 PLACE, THE ASSESSEES TRANSACTIONS (IN THIS CASE, T HE SPECULATIVE TRANSACTION) HAS BEEN FOUND TO BE RECORDED IN THE OTH ER DOCUMENTS WHICH IS (RETRIEVED FROM THE ASSESSEES ACCOUNTANT S DRAWER) AND BASED ON THAT THE ASSESSEE DECLARED RS. 3 CR. DURING S EARCH AND LATER RETURNED INCOME OF RS. 3 CR. AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WAS ACCEPTED BY THE AO IN T OTO. WE NOTE THAT SINCE THE INCOME UNDER QUESTION (RS. 3 CR.) WA S IN FACT ENTERED IN THE OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURS E RELATING TO THE AY 2013-14, WHICH DOCUMENT WAS RETRIEVED DURING S EARCH, HENCE, THE AMOUNT OF RS. 3 CR. OFFERED BY THE ASSESS EE DOES NOT FALL IN THE KEN OF UNDISCLOSED INCOME DEFINED IN SEC. 271A AB OF THE ACT. SO, RS. 3 CR. WHICH WAS COMMODITY PROFIT RECORDED IN T HE OTHER DOCUMENT MAINTAINED BY THE ASSESSEE WHICH WAS RETRIEV ED DURING SEARCH CANNOT BE TERMED AS UNDISCLOSED INCOME IN TH E DEFINITION GIVEN U/S. 271AAB OF THE ACT. SINCE RS. 3 CR. CANNO T BE TERMED AS UNDISCLOSED INCOME AS PER SEC. 271AAB OF THE ACT, NO PENALTY CAN BE LEVIED AGAINST THE ASSESSEE. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE AFORESAID REASONING RENDERED BY US.[E MPHASIS SUPPLIED] 2.8.2] THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF SHRI RAVI MATHUR VS. DCIT, CENTRAL CIRCLE-4, JAIPUR [ITA NO. 969/JP/ 2017] HAS CATEGORICALLY HELD THAT: 8..SINCE IN THE CASE OF ASSESSEE THE TRANSACTI ONS OF INVESTMENT WERE FOUND IN THE DIARY, THEREFORE, WHETH ER THESE ENTRIES IN THE DIARY CONSTITUTE UNDISCLOSED INCOME AS PER CL AUSE (C)(I) OF EXPLANATION TO SECTION 271AAB OF THE ACT. THE ASSES SEE IS AN INDIVIDUAL AND FOR THE YEAR UNDER CONSIDERATION THE AS SESSEE HAS NOT REPORTED ANY BUSINESS INCOME NOR IT WAS ASSESSED BY THE AO. THEREFORE, IT IS CLEAR THAT THE ASSESSEE WAS NOT RE QUIRED BY ANY MANDATE OF LAW TO MAINTAIN REGULAR BOOKS OF ACCOUNT S. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN INCOM E FROM SALARY, INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOU RCES. THE RETURNED INCOME WAS ACCEPTED BY THE AO WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) AND HENCE ASSESSEES CASE DOES NOT FALL IN THE CATEGORY WHERE THE REGULAR BOOKS OF ACCOUNTS ARE MANDATORY. THE ENTRIES OF INVESTMENT IN REAL ESTATE WERE FOUND RECORDED IN THE DIARY AND IN THE ABSENCE OF ANY OTHER DOCUMENT MAINTAINED IN THE NORMAL COURSE RELATING TO THE YEA R UNDER CONSIDERATION, THE ENTRIES IN THE DIARY ARE TO BE CO NSIDERED AS RECORDED IN THE DOCUMENTS MAINTAINED IN THE NORMAL CO URSE. IT IS NOT AMIT TIWARI 26 THE CASE OF THE REVENUE THAT THE ASSESSEE HAS RECOR DED THE OTHER TRANSACTIONS IN THE OTHER DOCUMENTS MAINTAINED IN TH E REGULAR COURSE RELATING TO THE YEAR UNDER CONSIDERATION AND ONLY THE SE ENTRIES ARE RECORDED IN THE DIARY. SINCE THE LEVY OF PENALTY UNDE R SECTION 271AAB IS NOT BASED ON THE ADDITION AND ENQUIRY CONDU CTED BY THE AO IN THE ASSESSMENT PROCEEDINGS, THEREFORE, IT IS INCUMBENT ON THE AO TO CONDUCT A PROPER EXAMINATION OF FACTS, CIRCUM STANCES AND EXPLANATION FURNISHED BY THE ASSESSEE BEFORE ARRIVIN G TO THE CONCLUSION THAT PENALTY UNDER SECTION 271AAB IS LEV IABLE AND FURTHER WHETHER IT IS 10% OR 20% OR 30% OF SUCH UNDISCLOSED INCOME. THEREFORE, THE AO IS UNDER STATUTORY OBLIGATION TO EXAMINE ALL THE ISSUES DURING THE PROCEEDINGS UNDER SECTION 271AAB AF TER GIVING THE ASSESSEE AN OPPORTUNITY TO EXPLAIN THE CHARGES/GROU NDS ON WHICH THE PENALTY IS PROPOSED TO BE LEVIED. HENCE IT IS A P RE-REQUISITE CONDITION THAT THE AO FIRST SPECIFY THE CHARGES AGA INST THE ASSESSEE AND TO MAKE KNOWN THE ASSESSEE OF HIS DEFAULT SO AS TO AFFORD AN OPPORTUNITY TO EXPLAIN THE DEFAULT/CHARGES SO BROUG HT AGAINST THE ASSESSEE. WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE ON THE SPECIFIC DEFAULT, THE ORDER PASSED BY THE AO UNDER SEC TION 271AAB SUFFERS FROM SERIOUS ILLEGALITY AND THEREFORE NOT SU STAINABLE IN LAW. WHEN A STRINGENT ACTION IS PROVIDED IN THE STATUTE AG AINST THE DEFAULT COMMITTED BY THE ASSESSEE, THEN IT ALSO CAST AN EQUA LLY STRINGENT AND STRICT DUTY ON THE AUTHORITY RESPONSIBLE TO TAKE SUC H ACTION. THEREFORE, WHEN THE PROVISIONS FOR LEVY OF PENALTY UNDER SECTION 271AAB IS A SPECIFIC PROVISION TO DEAL WITH THE UND ISCLOSED INCOME AND IT PROVIDES A STRICT PENAL ACTION THEN THE CORR ESPONDING DUTY OF THE TAX AUTHORITY IS ALSO EQUALLY STRINGENT. THE AO CANNOT ESCAPE FROM FOLLOWING THE STRICT MANDATORY REQUIREMENT OF LAW AND PARTICULARLY THE PRINCIPLE OF NATURAL JUSTICE. THE AO HAS NEITHER SPECIFIED THE GROUNDS AND CLAUSE OF SECTION 271AAB NO R HAS DEALT WITH THE SAME IN THE IMPUGNED ORDER PASSED UNDER SEC TION 271AAB. THE AO HAS ALSO NOT GIVEN A FINDING THAT THE CASE O F THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME PROVIDED UNDER CLAUSE (C)(I) OF EXPLANATION TO SECTION 271AAB. WHEN THE T RANSACTIONS OF INVESTMENT IN REAL ESTATE ARE RECORDED IN THE DIARY B EING OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE FOR THE SAID PURP OSE, THEN IN THE ABSENCE OF ANY REQUIREMENT OF MAINTAINING REGUL AR BOOKS OF ACCOUNTS BY THE ASSESSEE, THE CASE OF THE ASSESSEE WOULD NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME AS PER CLAUSE (C ) OF EXPLANATION TO SECTION 271AAB OF THE ACT. 9..THEREFORE, WHEN THE ASSESSEE IS NOT REQUIRED TO MAINTAIN THE BOOKS OF ACCOUNT AS PER SECTION 44AA, THEN THE MATTER IS REQUIRED AMIT TIWARI 27 TO BE EXAMINED WHETHER THE ALLEGED UNDISCLOSED INCOME IS RECORDED IN THE OTHER DOCUMENTS MAINTAINED IN THE NORMAL COUR SE AS PER CLAUSE (C) TO EXPLANATION TO SECTION 271AAB. UNDISP UTEDLY THE ALLEGED INCOME WAS FOUND RECORDED IN THE DIARY WHICH IS NOTHING BUT THE OTHER RECORD MAINTAINED IN THE NORMAL COURSE, TH US THE SAME WOULD NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME. ONCE THE SAID INCOME IS FOUND AS RECORDED IN THE OTHER DOCUMENTS MA INTAINED IN THE NORMAL COURSE, THEN IT CANNOT BE PRESUMED THAT T HE ASSESSEE WOULD NOT HAVE DISCLOSED THE SAME IN THE RETURN OF I NCOME TO BE FILED AFTER ABOUT ONE YEAR FROM THE DATE OF SEARCH. HENCE , IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE VARIOUS DECISIONS ON THIS POINT, WE HOLD THAT THE PENALTY LEV IED UNDER SECTION 271AAB IS NOT SUSTAINABLE AND THE SAME IS DELETED.[EM PHASIS SUPPLIED] 2.9] IN VIEW OF THE ABOVE DISCUSSION AND JUDICIAL P RECEDENTS CITED SUPRA, IT IS QUITE CLEAR THAT DETAILS OF CONSTRUCTIO N EXPENSES AS FOUND ENTERED IN OTHER DOCUMENTS WHICH WERE RETRIEVED DU RING THE COURSE OF SEARCH CANNOT BE TREATED AS UNDISCLOSED INCOME A S PER THE DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 27 1AAB OF THE INCOME-TAX ACT, 1961. IT IS ALSO PERTINENT TO MENTI ON THAT THE ASSESSING OFFICER HAS NEITHER DEALT WITH THE SPECIFI C GROUND AND CLAUSE OF SECTION 271AAB OF THE INCOME-TAX ACT, 196 1 IN THE IMPUGNED ORDER NOR HAS THE ASSESSING OFFICER GIVEN A FINDING THAT THE CASE OF THE APPELLANT FALLS IN THE DEFINITION OF U NDISCLOSED INCOME PROVIDED UNDER CLAUSE (C)(I) OF EXPLANATION TO SECTI ON 271AAB OF THE INCOME-TAX ACT, 1961. THEREFORE, PENALTY ORDER AS PA SSED UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 DESERVES TO BE QUASHED AMIT TIWARI 28 BEING VOID-AB-INITIO AND PENALTY OF RS. 6,83,498/- A S LEVIED UNDER SECTION 271AAB OF THE INCOME-TAX ACT, 1961 REQUIRES TO BE DELETED ON THIS COUNT ITSELF. 5. LD. DEPARTMENTAL REPRESENTATIVE (DR) OPPOSED THE SE SUBMISSIONS AND SUPPORTED THE ORDER OF THE AUTHORIT IES BELOW. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. THE SUBMISSIONS OF THE ASSESSEE ARE TH AT PENALTY PROCEEDINGS U/S 271AAB AS INITIATED IS BAD IN LAW O N ACCOUNT OF FIRSTLY PENALTY NOTICE SO ISSUED IS DEFECTED AS IT DOES NOT DISCLOSE SPECIFIC CHARGE AND SECONDLY THERE IS NO CONCEALED INCOME AS SEARCH TOOK PLACE PRIOR TO DUE DATE OF FILING OF INCOME TA X RETURN. IT IS ALSO CONTENDED THAT EVEN OTHERWISE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE COOR DINATE BENCHES OF THIS TRIBUNAL. IT IS NOTEWORTHY THAT THE ASSESSING OFFICER ISSUE N OTICE U/S 271AAB OF THE ACT, THE NOTICES SO ISSUE ARE REPRODU CED AS UNDER:- AMIT TIWARI 29 AMIT TIWARI 30 AMIT TIWARI 31 7. NOW WE NEED TO EXAMINE WHETHER ABOVE NOTICES DAT ED 30.11.2017 AND 04.05.2018 ARE IN ACCORDANCE WITH REQUIREMENT O F LAW. SECTION 271AAB OF THE ACT READS AS UNDER: '271AAB. PENALTY WHERE SEARCH HAS BEEN INITIATED.( 1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CON TAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR A FTER 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 UN DER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED 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 SPECIFI ED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UN DER 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 F URNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE AMIT TIWARI 32 SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY TH E 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 ASSESS EE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTIO N (1). (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, A S 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 FURNISH ING OF RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OR T HE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UND ER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS Y EAR (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 O F 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 REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMM ISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAIN ED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YE AR WHICH IS AMIT TIWARI 33 FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED.'. 8. FURTHER SECTION 274 OF THE ACT READS AS UNDER: 274. PROCEDURE (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD, OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD. (2) 6 NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHA LL BE MADE- (A) BY THE INCOME- TAX OFFICER, WHERE THE PENALTY EXCE EDS TEN THOUSAND RUPEES; (B) BY THE ASSISTANT COMMISSIONER, WHERE THE PENALTY E XCEEDS TWENTY THOUSAND RUPEES, EXCEPT WITH THE PRIOR APPRO VAL OF THE DEPUTY COMMISSIONER.] (3) 7 AN INCOME- TAX AUTHORITY ON MAKING AN ORDER UNDER THIS CHAPTER IMPOSING A PENALTY, UNLESS HE IS HIMSELF TH E ASSESSING OFFICER, SHALL FORTHWITH SEND A COPY OF SUCH ORDER TO THE ASSESSING OFFICER'.] 9. A CONJOINT READING OF BOTH THESE SECTIONS WOULD SUGGEST THAT WHERE A SEARCH HAS BEEN INITIATED THE AO MAY DIRECT PAYMENT OF PENALTY IN ADDITION TO TAX IF ANY PAYABLE BY HIM. H OWEVER, PROVISIONS OF SECTION 274 AND 275 SHALL SO FAR AS M AY APPLY IN RELATION TO THE PENALTY REFER TO IN SECTION 271AAB OF THE ACT. AS PER SECTION 274 OF THE ACT NO ORDER IMPOSING A PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD, OR HAS BEEN GIV EN A REASONABLE OPPORTUNITY OF BEING HEARD. IN THIS CASE THE ASSESS ING OFFICER HAS GIVEN NOTICES AND IN RESPONSE THERETO THE REPRESENT ATIVE OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER. NOW COMING TO THE QUESTION WHETHER NOTICE SO ISSUED MENTION ANY SPECI FIC CHARGE. A BARE READING OF NOTICE DEMONSTRATES THAT NOTICE REL ATE TO INGREDIENTS OF PENALTY U/S 271(1)(C) OF THE ACT, IT DOES NOT CO NTAIN THE AMIT TIWARI 34 INGREDIENTS OF SECTION 271AAB OF THE ACT. UNDER THE SE FACTS THE NOTICE IS IMPROPER AND IS NOT IN ACCORDANCE WITH RE QUIREMENT OF LAW. THE ASSESSING OFFICER IS EXPECTED TO MAKE HIS DIRECTION CLEAR AS TO WHICH CLAUSE OF SECTION 271AAB OF THE ACT, HE WI SHES TO INVOKE. THERE IS CLEAR ABSENCE OF SUCH DIRECTION. LD. COUNS EL FOR THE ASSESSEE HAS RELIED UPON VARIOUS JUDICIAL PRONOUNCE MENTS IN SUPPORT OF HIS CONTENTION THAT WHERE THE NOTICE IS BEING DEFECTIVE, THEREFORE, NO PENALTY CAN BE LEVIED OR SUSTAINED. 10. THE RELIANCE IS PLACED UPON THE DECISION OF TRI BUNAL REFERRED IN THE CASE OF DR. RAJESH JAIN VS. DCIT (ITANO.905/IND/2018 ). THIS TRIBUNAL AFTER RELYING UPON THE DECISION OF COORDIN ATE BENCH IN THE CASE OF DCIT VS. SHRI R. ELANGOVAN (ITANO.1199/CHNY/2017) UNDER THE IDENTICAL FACTS HELD AS UNDER: 16. WE, THEREFORE RESPECTFULLY FOLLOWING THE JUDGME NT/DECISION REFERRED ABOVE AND IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE WHEREIN THE MATTER WRITTEN IN THE BODY OF THE NOTICE ISSUED U/S 274 DR. RAJESH JAIN ITA NO. 905/IND/2018 OF THE ACT DOES NOT REFER TO THE CHARGES OF PROVISION OF SECTION 271AAB OF THE ACT MAKES THE ALLEGED NOTICE DEFECTIVE AND INVALID AND THUS DESERVES TO BE QUASHED. SINCE THE PENALTY PROCEEDIN GS ITSELF HAS BEEN QUASHED THE IMPUGNED PENALTY OF RS. 2,04,9 00/- STANDS DELETED. WE ACCORDINGLY ALLOW THE LEGAL GROU ND RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF NOTICE ISS UED U/S 274 R.W.S. 271AAB OF THE ACT AND QUASH THE PENALTY PROC EEDING AS VOID AB INTIO. IN THE RESULT APPEALS OF THE ASSESSE E(S) FOR ASSESSMENT YEARS 2014-15 IS ALLOWED ON LEGAL GROUND . 11. THE RELIANCE IS ALSO PLACED ON THE DECISION OF THIS BENCH IN THE CASE OF SHRI HEMANT KUMAR JAIN VS. DCIT (ITANOS.730 & OTHERS/IND/2018), THE TRIBUNAL WAS PLEASED TO DELETE THE PENALTY ON AMIT TIWARI 35 THE GROUND OF DEFECTIVE NOTICES. SIMILARLY IN THE C ASE OF SHRI VIVEK CHUGH VS. ACIT (ITANO.636/IND/2017) THE PENALTY WAS DELETED. 12. FURTHER RELIANCE IS PLACED ON THE COORDINATE BE NCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. MARVEL ASSOCIATES (2018) 92 TAXMAN.COM 109 (VISHAKHAPATNAM TRIBUNAL) HELD AS UNDER: 9. PENALTY U/S 271AAB ATTRACTS ON UNDISCLOSED INCOME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4). THE AO M UST ESTABLISH THAT THERE IS UNDISCLOSED INCOME ON THE BASIS OF INC RIMINATING MATERIAL. IN THE INSTANT CASE A LOOSE SHEET WAS FOU ND ACCORDING TO THE A.O., IT WAS INCRIMINATING MATERIAL EVIDENCING THE U NDISCLOSED INCOME. IN THE PENALTY ORDER THE AO OBSERVED THAT LO OSE SHEET SHOWS THE COST PER SQUARE FEET IS RS 3571/- PER SFT AND A SSESSEE STATED TO HAVE SUBMITTED IN SWORN STATEMENT COST PER SQ.FEET AT RS.2200/- TO RS.2300/- PER SQ.FEET. HOWEVER NEITHER THE AO NOR T HE LD.CIT(A) HAS VERIFIED THE COST OF CONSTRUCTION WITH THE BOOKS AND PROJECTIONS FOUND AT THE TIME OF SEARCH. THE COUNSEL ARGUED THAT IT WA S MERE PROJECTION BUT NOT THE ACTUALS. THE WRITE UP HEADING ALSO MENT IONED THAT SUMMARY OF THE PROJECTED PROFITABILITY STATEMENT. TH ERE IS NO EVIDENCE TO ESTABLISH THAT PROJECTIONS REFLECTED IN THE LOOS E SHEET IS REAL. NO OTHER MATERIAL WAS FOUND DURING THE COURSE OF SEARCH INDICATING THE UNDISCLOSED INCOME. THERE WAS NO MONEY, BULLION, JEW ELLERY OR VALUABLE ARTICLE OR THING OR ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUMENTS TRANSACTIONS WERE FOUND DURING THE COURSE O F SEARCH INDICATING THE ASSETS NOT RECORDED IN THE BOOKS OF A CCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, WHOLLY OR PARTLY. THE REVENUE DID NOT FIND ANY UNDISCLOSED ASSET, ANY OTHER UNDISCLOSED INCOME OR THE INFLATION OF EXPENDITURE DURING THE SE ARCH/ ASSESSMENT PROCEEDINGS. THOUGH A LOOSE SHEET OF PAGE NO.107 OF ANNEXURE A/GS/MA/1 WAS FOUND THAT DOES NOT INDICATE ANY SUPPRES SION OF INCOME BUT IT IS ONLY PROJECTION OF PROFIT STATEMEN T. THE AMOUNT OF RS.3571/- MENTIONED IN THE PROJECTIONS REFERS TO COS T AND PROFIT WHICH IS APPROXIMATE SALE PRICE BUT NOT THE COST AS STATE D BY THE AO IN THE PENALTY ORDER THE COST OF CONSTRUCTION IN THE PROJE CTIONS PROJECTED AT RS.2177/- WHICH IS IN SYNCH WITH THE STATEMENT GIVE N BY THE ASSESSEE. THE AO WAS HAPPY WITH THE DISCLOSURE GIVE N BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSITION WITH THE BOOKS OF ACCOUNTS AND PROJECTIONS AND BRING THE EVIDENCE TO UN EARTH THE UNDISCLOSED INCOME. NEITHER THE A.O. NOR THE INVESTI GATION WING LINKED AMIT TIWARI 36 THE COST OF PROFIT OR COST OF ASSET TO THE ENTRIES IN THE BOOKS OF ACCOUNTS OR TO THE SALES CONDUCTED BY THE ASSESSEE TO THE SALE DEEDS. THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTION O F THE REVENUE THAT THE LOOSE SHEET FOUND DURING THE COURSE OF SEARCH IN DICATES ANY UNDISCLOSED INCOME OR ASSET OR INFLATION OF EXPENDIT URE. THE HONBLE ITAT DELHI BENCH IN THE CASE OF AJAY SHARMA VS. DCIT (2012) 32 CCH 334 HELD THAT WITH RESPECT TO THE ADDITION ON ACCOUN T OF ALLEGED RECEIVABLES AS PER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT ANY INCOME RECEIVED BY TH E ASSESSEE HAS NOT BEEN DECLARED BY THE ASSESSEE. AN ADDITION HAS B EEN MADE ON THE BASIS OF LOOSE DOCUMENT, WHICH DID NOT CLOSELY PR OVE ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. HENCE PENALTY U/S 158BFA (2) OF THE ACT IS NOT LEVI ABLE. THE FACTS OF THE ASSESSEES CASE SHOWS THAT THERE WAS NO UNDISCL OSED INCOME FOUND DURING THE COURSE OF SEARCH AND NO INCRIMINATING MATERIAL WAS FOUND, HENCE WE HOLD THAT THERE IS NO CASE FOR IMPOSI NG PENALTY U/S 271AAB OF THE ACT, ACCORDINGLY, WE SET ASIDE THE OR DER OF THE LOWER AUTHORITIES AND CANCEL THE PENALTY U/S 271AAB OF THE ACT. 13. LD. COUNSEL HAS ALSO RELIED ON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. MANISH AGRAWALA (ITANO.1479/KOL/2015) HAS HELD AS UNDER: THEREFORE, THE QUESTION IS WHEN THE SEARCH TOOK PLA CE, THE ASSESSEE'S TRANSACTIONS (IN THIS CASE, THE SPECULAT IVE TRANSACTION) HAS BEEN FOUND TO BE RECORDED IN THE ' OTHER DOCUMENTS' WHICH IS (RETRIEVED FROM THE ASSESSEE'S ACCOUNTANT'S DRAWER) AND BASED ON THAT THE ASSESSEE DECLARED RS. 3 CR. DURING SEARCH AND LATER RETURNED INCOME OF RS. 3 CR . AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' WHICH WA S ACCEPTED BY THE AO IN TOTO. WE NOTE THAT SINCE THE INCOME UNDER QUESTION (RS. 3 CR.) WAS IN FACT ENTERED IN THE 'OT HER DOCUMENTS' MAINTAINED IN THE NORMAL COURSE RELATING TO THE AY 2013-14, WHICH DOCUMENT WAS RETRIEVED DURING SEARCH, HENCE, THE AMOUNT OF RS. 3 CR. OFFERED BY THE ASSESSEE DOES NO T FALL IN THE KEN OF 'UNDISCLOSED INCOME' DEFINED IN SEC. 271AAB OF THE ACT. SO, RS. 3 CR. WHICH WAS COMMODITY PROFIT RECORDED I N THE OTHER DOCUMENT MAINTAINED BY THE ASSESSEE WHICH WAS RETRI EVED AMIT TIWARI 37 DURING SEARCH CANNOT BE TERMED AS 'UNDISCLOSED INCO ME' IN THE DEFINITION GIVEN U/S. 271AAB OF THE ACT. SINCE RS. 3 CR. CANNOT BE TERMED AS 'UNDISCLOSED INCOME' AS PER SEC. 271AA B OF THE ACT, NO PENALTY CAN BE LEVIED AGAINST THE ASSESSEE. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE AFORES AID REASONING RENDERED BY US. 14. IN THE LIGHT OF THE ABOVE BINDING PRECEDENT AND COUPLED WITH FACT THAT THE LD. CIT(A) OBSERVED THAT THE IMPUGNED AMOUNT WOULD NOT HAVE BEEN OFFERED FOR TAXATION HAD THERE BEEN N O SEARCH AND SEIZURE OPERATION, THIS OBSERVATION GOES TO DEMONST RATE THAT CONVERS OF SUCH OBSERVATION GIVES BENEFIT OF DOUBT TO THE T AXPAYER. IN OUR CONSIDERED VIEW THAT IT IS PURELY A GUESS WORK WITH OUT BEING SUBSTANTIATED BY ANY MATERIAL EVIDENCE. THE IMPUGNE D PENALTY THEREFORE, CANNOT BE SUSTAINED. THE ASSESSING OFFIC ER IS DIRECTED TO DELETE THE PENALTY. 15. IN RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19.08.2 020. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 19/08/2020 PATEL/PS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE