Appeal Details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 7618 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 6 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-01-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2015-2016
Appeal Filed On
27-06-2018
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES A JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 845/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2015-16 SHRI ANIL GHATIWALA KRISHNA BHAWAN, NATH OPTICAL BUILDING, CHAURA RASTA, JAIPUR CUKE VS. DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACQPG5049K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. S. R. SHARMA (CA) & SH . RAJNIKANT BHATRA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 12/10/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 11/01/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD. CIT(A)-04, JAIPUR DATED 02.04.2018 PERTAINING T O A.Y 2015-16 WHEREIN THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READS AS UN DER:- 1. THAT THE LD. CIT(A) IS WRONG, UNJUST AND HAS ER RED IN LAW IN CONFIRMING PENALTY OF RS. 4,95,189/- IMPOSED BY THE ASSESSING OFFICER U/S 271AAB OF THE ACT. 2. THAT THE CIT(A) IS WRONG AND HAS ERRED IN LAW IN CONFIRMING THE SAID PENALTY OF RS. 4,95,189/- U/S 271AAB OF THE AC T, HOLDING THAT IT IS MANDATORY IN NATURE AND NOT DISCRETIONARY AND SO AS SESSING OFFICER IS CORRECT IN LAW WHILE IMPOSING PENALTY ON APPELLANT. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 2 3. THAT THE CIT(A) IS WRONG AND HAS ERRED IN LAW IN CONFIRMING THE SAID PENALTY OF RS. 4,95,189/- U/S 271AAB IMPOSED B Y ASSESSING OFFICER ALTHOUGH THE NOTICE ISSUED BY ASSESSING OFFICER FOR INITIATING THE PENALTY U/S 271AAB OF THE I.T. ACT, 1961 IS NOT IN ACCORDAN CE WITH LAW NOT BEING SPECIFICALLY POINTING OUT THE DEFAULT FOR WHICH THE LD. AO SOUGHT TO IMPOSE PENALTY U/S 271AAB. 4. THAT THE LD. CIT(A) IS WRONG IN CONFIRMING PENAL TY OF RS. 4,95,189/- U/S 271AAB OF THE ACT IN AS MUCH THE PENALTY WAS LEVIED BY ASSESSING OFFICER SIMPLY ON THE BASIS THAT THE A SSESSEE ADMITTED THE INCOME OF RS. 49,51,885/- AND DISCLOSED IN THE RETU RN WITHOUT PROVING THAT THE SAID INCOME WAS UNDISCLOSED INCOME OF AS SESSEE WITHIN THE MEANING OF SECTION 271AAB OF I.T. ACT, 1961. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE DERIVES INCOME FROM HOUSE PROPERTY, BUSINESS AND OTHER SOURCES. A SEAR CH U/S 132 OF THE ACT WAS CONDUCTED ON 05.02.2015 IN CASE OF BUNDI SILICA GRO UP, KOTA AND THE ASSESSEE WAS PART OF THE SAID GROUP. DURING THE COURSE OF S EARCH PROCEEDINGS, THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) O F THE ACT WHEREIN HE HAS DECLARED UNDISCLOSED INCOME OF RS. 49,51,885/-. SU BSEQUENTLY, THE ASSESSEE FILED HIS ORIGINAL RETURN OF INCOME ON 27.09.2015 D ECLARING TOTAL INCOME OF RS. 73,37,190/- WHICH INCLUDES ADDITIONAL INCOME OF RS. 49,51,885/- OFFERED TO TAX DURING THE COURSE OF SEARCH. THE ASSESSMENT PRO CEEDINGS WERE SUBSEQUENTLY COMPLETED U/S 143(3) R.W.S 153B(1)(B) AT AN ASSESSED INCOME OF RS 77,55,460/-. THE ASSESSING OFFICER SEPARATELY IN ITIATED THE PENALTY PROCEEDINGS U/S 271AAB IN RESPECT OF UNDISCLOSED IN COME OF RS 49,51,885/- BY WAY OF ISSUE OF NOTICE U/S 274 R.W.S 271AAB OF THE ACT DATED 28.12.2016 WHICH WAS DULY SERVED ON THE ASSESSEE. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 3 3. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSING OFFICER STATED THAT ALL THE ESSENTIAL REQUIREMENT OF SECTION 271AA B(1)(A) ARE SATISFIED IN THE INSTANT CASE AND GIVEN THAT THE ASSESSEE HAD ADMITT ED UNDISCLOSED INCOME OF RS. 49,51,885/- IN ITS STATEMENTS U/S 132(4) OF THE ACT, PAID THE TAXES TOGETHER WITH INTEREST THEREON AND FILED HIS RETURN OF INCOM E BEFORE SPECIFIED DATE, PENALTY @ 10% U/S 271AAB ON THE UNDISCLOSED INCOME OF RS. 49,51,885/- AMOUNTING TO RS 4,95,189/- WAS LEVIED ON THE ASSESS EE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) HAS CONFIRMED THE LEVY OF PE NALTY U/S 271AAB OF THE ACT HOLDING THAT THE PENALTY IS MANDATORY IN NATURE AND THERE IS NO DISCRETION WITH THE AO AND UNLIKE SECTION 271AAA WHEREIN IMMUNITY F ROM IMPOSITION OF PENALTY IS POSSIBLE SUBJECT TO FULFILLMENT OF CONDITIONS IN SECTION 271AAA(2), THERE IS NO IMMUNITY CLAUSE PROVIDED FROM PENALTY U/S 271AAB. B EING AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE SHOW CAUSE NOTICE DATED 28.12.2016 ISSUED BY THE ASSESSING OFF ICER INITIATING THE PENALTY PROCEEDINGS HAS BEEN ISSUED IN A ROUTINE MANNER WIT HOUT MENTIONING UNDER WHICH CLAUSE OF SECTION 271AAB OF THE ACT, THE ASSE SSEE IS LIABLE FOR PENALTY. IT IS SUBMITTED THAT SECTION 271AAB(1) HAS THREE CLAUS ES (A) TO (C) AND EACH CLAUSE OF SUB-SECTION (1) TO SECTION 271AAB PROVIDE S FOR SEPARATE RATE OF PENALTY AND UNLESS THE SAME IS SPECIFIED, THE ASSES SEE IS NOT IN A POSITION TO RESPOND AND THUS, THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. IT WAS SUBMITTED THAT THERE IS NO APPLICATION OF MIND ON T HE PART OF THE AO, AT THE TIME OF ISSUING THE SHOW CAUSE NOTICE, AS THE SHOW CAUSE NOTICE ISSUED BY THE AO DO NOT SPECIFY THE UNDISCLOSED INCOME ON WHICH T HE ASSESSEE IS REQUIRED TO SHOW CAUSE. EVEN THE AO HAS NOT GIVEN ANY GROUND FO R LEVY OF PENALTY FOR WHICH THE ASSESSEE COULD PUT HIS DEFENSE. THUS IN T HE ABSENCE OF SPECIFIC ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 4 CHARGE AGAINST THE ASSESSEE, THE ASSESSEE WAS NOT I N A POSITION TO RESPOND TO THE SHOW CAUSE NOTICE ISSUED BY THE AO. IT WAS SUBM ITTED THAT THOUGH THE AO WHILE PASSING THE IMPUGNED ORDER HAS IMPOSED THE PE NALTY AS PER CLAUSE (A) OF SECTION 271AAB(1) OF THE ACT, HOWEVER, NO SUCH GROU ND WAS SPECIFIED IN THE SHOW CASUE NOTICE ISSUED U/S 271AAB READ WITH SECTI ON 274 OF THE ACT. IN SUPPORT, RELIANCE WAS PLACED ON THE HONBLE KARNATA KA HIGH COURT DECISION IN THE CASE OF CIT VS. M/S SSAS EMERALD MEADOWS REPOR TED IN 2015 (11) TMI 1620, IN CASE OF MANJUNATHA COTTON & GINNING FACTOR Y [2013] 359 ITR 565 (KARNATAKA) AND VARIOUS DECISIONS OF THE CO-ORDINAT E BENCHES OF THE TRIBUNAL. IT WAS ACCORDINGLY SUBMITTED THAT NOTICE ISSUED U/S 271AAB IS BAD IN LAW AND THEREFORE, THE PENALTY LEVY U/S 271AAB(1)(A) DESERV ES TO BE DELETED. 6. IT WAS FURTHER SUBMITTED THAT THE LOWER AUTHORIT IES HAVE ERRED IN HOLDING THE LEVY OF PENALTY U/S 271AAB OF THE ACT AS MANDAT ORY IN NATURE. DRAWING SUPPORT FROM THE DECISION OF THE CO-ORDINATE BENCH IN CASE OF DCIT VS. MANISH AGARWAL REPORTED IN 92 TAXMANN.COM 81, IT WAS SUBMI TTED THAT IMPOSITION OF PENALTY U/S 271AAB IS NOT MANDATORY BUT DISCRETIONA RY IN NATURE DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. 7. IT WAS FURTHER SUBMITTED THAT IN THIS CASE, SEAR CH U/S 132 OF THE ACT WAS CARRIED OUT IN ASSESSEES PREMISES BUT NO EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH EXCEPT ANN. A EXHIBIT- 1 PAGE NO. 1 TO 3. THAT ON SAID PAGES NO. 1 TO 3 OF SAID EXHIBIT, TOTAL ALLEGED ADVANCE FIGURE OF RS.37,00,000/- WERE WRITTEN. THE SEARCH PARTY HELD THIS AMOUNT AS UNDISCLOSED CA SH ADVANCE. THE ASSESSEE STATED IN HIS STATEMENT THAT SAID SURRENDER WAS MAD E TO BUY PIECE AND AVOID LONG LITIGATION WITH DEPARTMENT ON THE REQUEST THAT NO PENALTY PROCEEDINGS ETC. BE INITIATED AGAINST HIM. IT WAS SUBMITTED THAT THU S NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH AND SAID ANNEX-A EXHIBI T- 1 PAGE NO. 1-3 WAS CONTAINING IMAGINARY NAME AND FIGURE. FURTHER THE O FFICERS OF SEARCH ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 5 PROCEEDINGS AND LD. A.O. MADE NO FURTHER ENQUIRY/IN VESTIGATION REGARDING ENTRIES MADE IN THE SEIZED PAPERS. THE SAID ENTRIES IN THE SEIZED PAPER GIVING ADVANCES ITSELF ARE NOT AN UNDISCLOSED INCOME. THE REVENUE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINED THE SURRENDER O F INCOME FROM THE ASSESSEE. THE CBDT IN THIS REGARD ISSUED A CIRCULAR F.NO.286/2/2003-IT(INV.) DATED 10-03-2003 AND HAS EXPRESSED ITS CONCERN ABOU T THE PRACTICE OF CONFESSION OF ADDITIONAL INCOME DURING THE COURSE O F SEARCH AND SEIZURE PROCEEDINGS AND, THEREFORE, CLARIFIED THAT THE CONF ESSION DURING THE COURSE OF SEARCH AND SURVEY OPERATION DO NOT SERVE ANY USEFUL PURPOSE. THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE O F INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NO T LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPARTMENT. THE BOARD HAS AGA IN ISSUED A CIRCULAR DATED 18 TH DECEMBER, 2014 AND ADVISED THE TAXING AUTHORITIES TO AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COE RCION/UNDUE INFLUENCE. IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 271AAB CLEARLY REQUIRES THAT SUCH UNDISCLOSED INCOME TO BE SUBSTANTIATED AND, THEREFO RE, THE ASSESSEE IS REQUIRED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FURTHER SUBSTANTIATE THE SAME FURNISHING MATERIAL AVAILABLE WITH HIM. IN THE ABSENCE OF ANY RECORD OR MATERIAL TO SHOW ANY UNDISCLOSED SOUR CE OF INCOME, THE ENTIRE DISCLOSURE WAS ON PAPERS IS TO AVOID UNDUE HARASSME NT AND UNWANTED LITIGATION AND THE ASSESSEE COULD NOT HAVE SUBSTANTIATED SUCH INCOME SO DECLARED DURING THE COURSE OF SEARCH. IT WAS SUBMITTED THAT THERE I S NO IOTA OF EVIDENCE THAT SURRENDERED INCOME WAS UNDISCLOSED INCOME OF THE AS SESSEE. IT WAS SUBMITTED THAT SAID SURRENDER WAS MADE TO BUY PIECE AND AVOID LONG LITIGATION WITH DEPARTMENT ON THE REQUEST THAT NO PENALTY PROCEEDIN GS ETC. BE INITIATED AGAINST IT. IN SUPPORT, RELIANCE WAS PLACED ON THE CO-ORDIN ATE BENCH DECISION IN CASE OF ACIT VS. MARVAL ASSOCIATES 92 TAXMANN.COM 109 WHERE IN IT WAS HELD THAT PENALTY U/S 271AAB IS ATTRACTED ON UNDISCLOSED INCO ME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4) OF THE ACT. THE AO MUST ESTABLISH THAT THERE ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 6 IS UNDISCLOSED INCOME ON THE BASIS OF INCRIMINATING MATERIAL. FURTHER, RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH IN DECISION IN CASE OF AJAY SHARMA VS. DCIT [2013] 30 TAXMANN.COM 109 WHEREIN IT WAS HELD THAT ADDITION ON ACCOUNT OF ALLEGED RECEIVABLES AS PER SEIZED PAPER CANNOT B E MADE AS THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT ANY INCOM E RECEIVED BY THE ASSESSEE WHICH HAS NOT BEEN DECLARED BY THE ASSESSEE. THE FA CTS OF THE ASSESSEES CASE SHOWS THAT THERE WAS NO UNDISCLOSED INCOME FOUND DU RING THE COURSE OF SEARCH AND NO INCRIMINATING MATERIAL WAS FOUND, HENCE THER E IS NO CASE FOR IMPOSING PENALTY U/S 271AAB OF THE ACT. FURTHER, RELIANCE WA S PLACED ON THE CO-ORDINATE BENCH DECISIONS IN CASE OF SH. RAJENDRA KUMAR GUPTA VS. DCIT, CC-2, JAIPUR (ITA NO. 359/JP/2017 DATED 18.01.2019) AND SURAJ MAL BANSAL HUF AND OTHER CASES VS DCIT, CC-3, JAIPUR (ITA NO. 124-127/JP/18 DATED 8.04.2019), IT WAS SUBMITTED THE FACTS OF THE SAID CASE SQUARELY APPLI ES IN CASE OF ASSESSEE AND THEREFORE, THE PENALTY SO LEVIED SHOULD BE DELETED. 8. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH, RS 8,94,800/- WAS FOUND FROM RESIDENCE OF ASSESSEE AND RS.3,54,00 0/- WAS FOUND FROM LOCKER OF SMT. NIRMALA GHATIWALA. THE SEARCH PARTY, OUT OF RS.8,94,800/- SEIZED CASH OF RS.8,00,000/- AS UNDISCLOSED CASH AND ACCEPTED T HE REMAINING CASH OF RS.94000/- AS GENUINE (RS.94000/- WAS CASH BALANCE OF HIS WIFES PROPRIETORSHIP BUSINESS.) IT WAS SUBMITTED THAT THE SAID CASH FOUND WAS NOT A UNDISCLOSED INCOME RATHER IT IS HIS ACCUMULATED SAV INGS OVER THE PERIOD OUT OF WITHDRAWALS MADE BY HIM. THE LD AO HAS NOT DETERMIN ED IT AS INCOME FROM OTHER SOURCES U/S 69 OF INCOME TAX ACT IN THE ASSES SMENT BUT ACCEPTED AS BUSINESS INCOME OF CURRENT YEAR. THEREFORE MERELY O N THE BASIS OF SURRENDER MADE IN THE SEARCH STATEMENT, THIS CANNOT BE HELD A S UNDISCLOSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB. 9. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) OF THE I.T. ACT, 1961 THE ASSESSEE OFFERED A SUM ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 7 OF RS.4,51,885/- AS HIS ADDITIONAL BUSINESS INCOME ON ACCOUNT OF PROFIT EARNED ON ALLEGED UNACCOUNTED SALE. IN THIS CONNECTION IN THE COURSE OF SEARCH, THE DEPARTMENTAL VALUER VALUED THE TOTAL VALUE OF STOCK AT HIS BUSINESS PREMISES AT RS.99,37,587/- WHEREAS INVESTIGATION TEAM CALCULATE D/ARRIVED THE FIGURE OF CLOSING STOCK AS PER BOOKS AT RS.1,49,88,578/- BY A PPLYING THE G.P. RATE OF PRECEDING YEAR I.E. 8.95% ON HIS TOTAL SALES. ACCOR DINGLY INVESTIGATION TEAM CONCLUDED THAT THE STOCK IS SHORT BY RS.50,48,991/- (1,49,88,578 99,37,587). THE SEARCH TEAM APPLIED THE G.P. RATE OF 8.95% ON S AID ALLEGED SHORT STOCK OF RS.50,48,991/- AND TAKEN THE SURRENDER OF RS.4,51,8 85/- AS UNDISCLOSED PROFIT ELEMENT ON UNRECORDED SALES FROM ASSESSEE IN THE ST ATEMENT RECORDED DURING THE COURSE OF SEARCH. THE SAID ALLEGED PROFIT OF RS .4,51,885/- OFFERED BY ASSESSEE AS HIS ADDITIONAL BUSINESS INCOME IS NOTHI NG BUT THE DIFFERENCE IN VALUATION OF STOCK. THUS NO SHORT STOCK FOUND DURIN G THE COURSE SEARCH. IT IS ONLY DIFFERENCE IN VALUATION OF STOCK VALUED BY REG ISTERED VALUER. IT IS SUBMITTED THAT THERE IS NO SHORT STOCK FOUND DURING THE COURS E OF SEARCH. NO DOCUMENTARY EVIDENCE OR PAPERS RELEVANT TO UNRECORDED SALES WER E FOUND DURING THE COURSE OF SEARCH. MORE PARTICULARLY, ASSESSEE HAS NO UNEXP LAINED PURCHASES OR SALES. THERE IS NO REAL INCOME AND NO SHORT STOCK. WITHOUT ESTABLISHING REAL INCOME, NO PENALTY CAN BE IMPOSED PRESUMING THE HYPOTHETICA L INCOME. ACCORDINGLY IT WAS SUBMITTED THAT SAID ALLEGED PROFIT ELEMENT ON A LLEGED UNACCOUNTED SALES DOES NOT MET THE DEFINITION OF UNDISCLOSED INCOME G IVEN IN SECTION 271AAB. THE ASSESSEE IN HIS STATEMENT TO AVOID THE PROTRACT ED AND IMPOSED LITIGATION AND TO BUY PEACE OF MIND, MADE SURRENDER AND DISCLO SED THE SAME IN HIS RETURN OF INCOME. THE LD AO HAS ALSO NOT DETERMINED IT AS INCOME FROM OTHER SOURCES U/S 69 OF INCOME TAX ACT IN THE ASSESSMENT BUT ACCE PTED AS INCOME OF CURRENT YEAR. THEREFORE MERELY ON THE BASIS OF SURRENDER MA DE IN THE SEARCH STATEMENT, THIS CANNOT BE HELD AS UNDISCLOSED INCO ME FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 8 10. PER CONTRA, THE LD. DR HEAVILY RELIED ON THE F INDINGS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD DR THAT THE ASSESSEE HAS SURRENDERED THE UNDISCLOSED INCOME OF RS. 49,51,885/- IN ITS ST ATEMENT RECORDED DURING THE COURSE OF SEARCH U/S 132(4) OF THE ACT AND THE SAID SURRENDER IS CLEARLY AN ADMISSION ON THE PART OF THE ASSESSEE THAT THERE IS UNDISCLOSED INCOME WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. ONCE TH E SURRENDER OF UNDISCLOSED INCOME HAS BEEN MADE BY THE ASSESSEE, THERE IS NO C AUSE OF ACTION WHICH LIES WITH THE ASSESSING OFFICER TO ESTABLISH FURTHER THA T THERE IS ANY UNDISCLOSED INCOME SO EARNED BY THE ASSESSEE. IN THIS CASE, THE SEARCH WAS CONDUCTED ON 5.02.2015 WHEREIN THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) WHEREIN HE HAS SURRENDERED THE AMOUNT OF RS 49,51,8 85/-. SUBSEQUENTLY, THE ASSESSEE HAS DISCLOSED THE SAME IN ITS RETURN OF IN COME FILED ON 27.09.2015. THEREFORE, THE ASSESSEE WAS HAVING AMPLE TIME TO RE TRACT FROM SAID SURRENDER, HOWEVER THERE IS NO SUCH RETRACTION DURING POST-SEA RCH PROCEEDINGS AND EVEN THE ASSESSEE HAS INCLUDED THE SAME IN ITS RETURN OF INCOME. EVEN FROM THE PERUSAL OF THE ASSESSEES STATEMENT, THERE IS NOTHI NG WHICH DEMONSTRATES THAT THERE IS ANY FORCED SURRENDER BY THE ASSESSEE. THE CONTENTION OF THE LD AR THEREFORE HAS THUS NO BASIS WHERE HE CONTENDS THAT THE SEARCH PARTY HAVE EXERTED UNDUE PRESSURE AND OBTAINED SURRENDER OF IN COME AND THEREFORE, THERE WAS NO UNDISCLOSED INCOME IN THE HANDS OF THE ASSES SEE. IT WAS FURTHER SUBMITTED THAT THE LEVY OF PENALTY U/S 271AAB IS MA NDATORY IS NATURE AND REFERENCE WAS DRAWN TO PROVISIONS OF SECTION 271AAA WHICH PROVIDES FOR IMMUNITY FROM LEVY OF PENALTY AS AGAINST THE PROVIS IONS OF SECTION 271AAB WHEREIN THERE IS NO SUCH PROVISION PROVIDING FROM I MMUNITY. IT WAS ACCORDINGLY SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDER O F THE ASSESSING OFFICER WHEREIN HE HAS LEVIED THE PENALTY @ 10% OF THE UNDI SCLOSED INCOME AS PER THE PROVISIONS OF SECTION 271AAB AND ORDER OF THE LD. C IT(A) WHO HAS CONFIRMED THE SAID LEVY SHOULD BE UPHELD. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 9 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSE D THE MATERIAL AVAILABLE ON RECORD. REGARDING VARIOUS LEGAL CONTENTIONS RAI SED BY THE LD AR, WE FIND THAT THE COORDINATE BENCH IN CASE OF RAJENDRA KUMAR GUPTA (SUPRA) HAS EXHAUSTIVELY DEALT WITH EACH OF THESE CONTENTIONS A ND WE DEEM IT APPROPRIATE TO REFER TO ITS FINDINGS WHICH READ AS UNDER: 6. HEARD BOTH THE PARTIES. THE PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROCEEDINGS, WHICH ARE INITIATED WITH TH E ISSUE OF NOTICE U/S. 274 AND CULMINATE WITH PASSING OF THE PENALTY ORDER U/S. 271AAB OF THE ACT. FURTHER, THERE CANNOT BE ANY DISPUTE THAT THE ASSESSEE SHOULD BE CONFRONTED WITH THE CHARGE AGAINST HIM WHICH IS SIN E QUA NON FOR ANY VALID PENALTY PROCEEDINGS. IT IS ONLY WHEN THE ASSE SSEE IS MADE AWARE OF SUCH A CHARGE AGAINST HIM THAT HE CAN PRESENT HIS C ONTENTIONS. THUS PRESCRIBING THE CHARGE IN THE PENALTY NOTICE AND PE NALTY ORDER IS MUST. ABSENCE OF A CHARGE IN THE PENALTY NOTICE AND NOT F INDING THE ASSESSEE GUILTY OF A CLEAR OFFENCE IN THE PENALTY ORDER VITI ATES 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 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 QUANTIF YING THE PENALTY, THE ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 10 ASSESSING OFFICER HAS TO EXAMINE THE SATISFACTION O F ANCILLARY CONDITIONS AS SPECIFIED UNDER CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB. MERELY BECAUSE THE QUANTUM OF PE NALTY VARIES FROM 10% TO 30% SUBJECT TO COMPLIANCES WITH THE ANCILLIA RY CONDITIONS, IT CANNOT BE SAID THAT WHERE THE AO HAS INITIATED THE PENALTY UNDER SECTION 271AAB, THERE IS ANY AMBIGUITY IN THE CHARGE OR THE RE IS ANY LACK OF APPLICATION OF MIND ON PART OF THE ASSESSING OFFICE R. FURTHER, THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT BASED ON ADDITI ON MADE AND INVESTIGATION/ENQUIRY CONDUCTED DURING THE COURSE O F ASSESSMENT PROCEEDINGS, RATHER IT IS BASED ON SEARCH CONDUCTED ON THE ASSESSEE ON OR AFTER THE 1ST DAY OF JULY, 2012, IN SUCH A SITUA TION, WHERE THE PENALTY SHOW-CAUSE NOTICE IS ISSUED U/S 271AAB, THE ASSESSI NG OFFICER IS MAKING THE ASSESSEE AWARE OF THE CHARGE AGAINST HIM IN TER MS OF UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND THUS, THE ASSESSEE IS GRANTED AN OPPORTUNITY TO REFUTE SUCH CHARGE AND FI LE HIS EXPLANATIONS/SUBMISSIONS. UNLIKE PROVISIONS OF SECT ION 271(1)(C) WHICH PROVIDES FOR SEPARATE CHARGE OF CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, T HERE IS A SINGULAR CHARGE UNDER SECTION 271AAB I.E, OF THE EXISTENCE O F UNDISCLOSED INCOME FOR THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND DURI NG THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE. THEREFORE, IN THE INS TANT CASE, WHERE THE NOTICE DATED 23.02.2015 IS ISSUED TO THE ASSESSEE T O SHOW-CAUSE WHY PENALTY SHOULD NOT BE LEVIED U/S 271AAB OF THE ACT IN RESPECT OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, THE ASSESSEE IS MADE AWARE OF THE SPECIFIC CHARGE AGAINST HIM AND AN OPP ORTUNITY HAS THUS BEEN GIVEN TO HIM TO REBUT SUCH CHARGE AND THEREFOR E, WE DONOT SEE ANY INFIRMITY IN THE INITIATION OF THE PENALTY PROCEEDI NGS AND CONSEQUENT PENALTY ORDER SO PASSED BY THE AO. A SIMILAR VIEW HAS BEEN TAKEN BY THE ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 11 CO-ORDINATE BENCH IN CASE OF MAHESH KUMAR JAIN & OT HERS (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 WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALT Y, 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 12 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 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 RESPECT 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 SPE CIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS 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 THIS SECT ION. 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 13 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 REP RESENTED, EITHER WHOLL Y 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 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 14 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 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% WHERE THERE IS DECLARATION IN THE STATEMENT RECORDED DURING THE COURSE OF SEARCH, AND WHERE THERE IS NEITHER A DECLARATION IN THE STATEMENT U/S 132(4) R ECORDED DURING THE COURSE OF SEARCH NOR A DECLARATION IN THE RETURN OF INCOME, THE PENALTY HAS BEEN KEPT AT A HIGHER PEDESTAL WHICH CAN VARY F ROM 30% TO 90%. FURTHER, IT IS NOTED THAT THE PROVISIONS OF SECTION 271AAB OVERRIDES SECTION 271(1)(C) WHICH INFACT CONTAIN PROVISIONS F OR LEVY OF PENALTY UNDER TWO SEPARATE LIMBS- CONCEALMENT OF PARTICULAR S OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. FURTH ER, THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SAS EMERALD MEADOW S (SUPRA) RENDERED IN THE CONTEXT OF TWO SEPARATE LIMBS/CHARG ES UNDER SECTION 271(1)(C) THEREFORE DOESNT SUPPORT THE CASE OF THE ASSESSEE COMPANY. IN OUR CONSIDERED VIEW, BOTH THE PROVISIONS OF SECT ION 271AAB(1)(A) AND ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 15 271AAB(1)(C) PROVIDES FOR LEVY OF PENALTY FOR AN ID ENTICAL CHARGE I.E, UNDISCLOSED INCOME FOR THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND DURING THE COURSE OF SEARCH INITIATED 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 CIT(A) HAS ERRED IN CONFIRMING TH E LEVY OF PENALTY U/S 271AAB(1)(A) WHICH PROVIDES FOR A SEPARATE AND INDE PENDENT CHARGE AND COMES UNDER DIFFERENT SECTION THAN THE PROVISIONS O F SECTION 271AAB(1)(C) WHICH HAS 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 PENA LTY PROCEEDINGS CAN BE MADE GOOD WITH A CLEAR-CUT CHARGE IN THE PENALTY OR DER. IN ANY CASE, EXISTENCE OF A CLEAR-CUT CHARGE IN PENALTY ORDER 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 AND T HEREFORE, DEEM IT RELEVANT TO CONSIDER THE SAME FOR THE PURPOSES OF P RESENT APPEAL. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 16 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 (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 N ATURE 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 TH E AO REQUIRED TO SPECIFY IN THE PENALTY NOTICE/ORDER AS TO WHETHER I T IS A CASE OF 'CONCEALMENT OF PARTICULARS OF INCOME'; OR 'FURNISH ING OF INACCURATE PARTICULARS OF INCOME'; OR BOTH OF THEM, WHICH CAN BE EXPRESSED BY USING THE WORD 'AND' BETWEEN THE TWO EXPRESSIONS. WHEN TH E AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF CONCEALMENT OF PARTI CULARS OF INCOME, HE MUST SPECIFY IT SO IN THE NOTICE AT THE TIME OF INI TIATION OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. THE AO C ANNOT INITIATE PENALTY ON THE CHARGE OF 'CONCEALMENT OF PARTICULARS OF INC OME', BUT ULTIMATELY FIND THE ASSESSEE GUILTY IN THE PENALTY ORDER OF 'F URNISHING INACCURATE PARTICULARS OF INCOME'. IN THE SAME MANNER, HE CANN OT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING O F INACCURATE PARTICULARS OF INCOME BY USING SLASH BETWEEN THE TW O EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', HE MUST AGAIN SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. AFTER INITIATING PENALTY ON THE CHARGE OF 'FURNISHI NG OF INACCURATE PARTICULARS OF INCOME', HE CANNOT IMPOSE PENALTY BY FINDING THE ASSESSEE GUILTY OF 'CONCEALMENT OF PARTICULARS OF INCOME'. A GAIN, HE CANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 17 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 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 SPECIFICAL LY FIND THE ASSESSEE GUILTY OF 'CONCEALMENT OF PARTICULARS OF INCOME' AN D ALSO 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' IN THE PENALTY OR DER. IF THE CHARGE IS NOT LEVIED IN THE ABOVE MANNER IN ALL THE THREE CLEAR-C UT SITUATIONS DISCUSSED ABOVE IN THE PENALTY NOTICE AND ALSO IN THE PENALTY ORDER, THE PENALTY ORDER BECOMES UNSUSTAINABLE IN LAW. 16. THE HON'BLE KARNATAKA HIGH COURT IN CIT V. MANJ UNATHA 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 PROCEEDIN GS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(L)(C) DO NOT E XIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE HON'BLE HIGH COURT WENT 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 ONC E THE PROCEEDINGS ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 18 ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALS O BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF P ENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT 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 CONCEALM ENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF S UCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDIN G 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 COURT 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 SATISFIE D AT 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 PARTICULARS OF INCOME) OR AN UNCERTAIN CHARGE (CONC EALMENT OF PARTICULARS ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 19 OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF I NCOME), THE PENALTY CANNOT BE SUSTAINED. 20. ANOTHER CRUCIAL FACTOR TO BE KEPT IN MIND IS TH AT 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 BEEN MADE, B UT THE AO IS NOT SURE AT THE STAGE OF INITIATION OF PENALTY PROCEEDI NGS OF THE PRECISE CHARGE AS TO 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME'. IN SUCH CIRCUMST ANCES, HE MAY USE SLASH BETWEEN THE TWO EXPRESSIONS AT THE TIME OF IN ITIATION OF PENALTY PROCEEDINGS. HOWEVER, DURING THE PENALTY PROCEEDING S, HE MUST GET DECISIVE, WHICH SHOULD BE REFLECTED IN THE PENALTY ORDER, AS TO WHETHER THE ASSESSEE IS GUILTY OF 'CONCEALMENT OF PARTICULA RS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOM E'. UNCERTAIN CHARGE AT THE TIME OF INITIATION OF PENALTY, MUST NECESSARILY BE SUBSTITUTED WITH A CONCLUSIVE DEFAULT AT THE TIME OF PASSING THE PENAL TY ORDER. IF THE PENALTY IS INITIATED WITH DOUBT AND ALSO CONCLUDED WITH A D OUBT AS TO THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME ETC., THE PENALTY ORDER IS VITIATED. IF ON THE OTHER HAND, IF THE PENALTY IS INITIATED WITH AN UNC ERTAIN CHARGE OF ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 20 'CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME' ETC., BUT THE ASSESSEE IS ULTIMATELY FOU ND TO BE GUILTY OF A SPECIFIC CHARGE OF EITHER 'CONCEALMENT OF PARTICULA RS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', T HEN NO FAULT CAN BE FOUND IN THE PENALTY ORDER. 22. IN MANU ENGINEERING WORKS (SUPRA), THE HON'BLE GUJARAT 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 PROPER IN ISSU ING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CA SE OR A QUASI-CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE A SSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 21 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 PENAL TY HAS BEEN MADE GOOD AND SUBSTITUTED WITH A CONCLUSIVE DEFAULT AT THE TI ME 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 PENALTY ORDER SO PASSED BY THE ASSESSING OFFICER AND THE CONTENTIONS SO RAISED BY THE LD AR IN THIS REGARD CANNOT BE ACCEPTED. FURTHER, WE FIND THAT TH E DECISION OF THE COORDINATE BENCH IN CASE OF R ELANGOVAN (SUPRA) SO RELIED UPON BY THE LD AR, HAS BEEN RENDERED WITHOUT TAKING INTO CONSIDERA TION THE EARLIER DECISION OF THE CO-ORDINATE BENCH IN CASE OF MAHESH JAIN (SUPRA) AND DECISION OF THE LARGER BENCH OF THE TRIBUNAL IN CAS E OF ONGC MITTAL (SUPRA) WHICH HAS DULY CONSIDERED THE DECISION IN C ASE OF MANJUNATHA (SUPRA) AND THUS DOESNT ACT AS A BINDING PRECEDENT . AS FAR AS DECISION OF THE HONBLE RAJASTHAN HIGH COURT IS CONCERNED, WE F IND 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 ABOVE DIS CUSSIONS, THE ADDITIONAL GROUND SO RAISED BY THE ASSESSEE IS HEREBY DISMISSE D. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 22 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 FACTS AN D CIRCUMSTANCES OF THE CASE. IN SUPPORT, RELIANCE WAS PLACED ON PROVISION S OF SECTION 158BFA(2) WHEREIN SIMILAR PHRASELOGY HAS BEEN USED BY THE LEG ISLATURE AND THE DECISIONS OF THE COORDINATE BENCHES IN CASE OF DCIT VS MANISH AGARWAL 92 TAXMANN.COM 81 AND ACIT VS MARVEL ASSOCIATES 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 I S IMPOSED AT THE VARYING RATE OF 10%, 20% OR 30% DEPENDING ON THE FU LFILLMENT OF CERTAIN CONDITIONS THEREIN. IT WAS SUBMITTED THAT ALL THE C ONDITIONS SPECIFIED IN SECTION 271AAB HAVE BEEN FULFILLED IN THE INSTANT C ASE, THEREFORE, THE PENALTY U/S 271AAB BEING IN THE NATURE OF MANDATORY PENALTY AND THERE BEING NO DISCRETION WITH THE INCOME TAX AUTHORITIES , THE PENALTY SO IMPOSED BY THE AO WAS RIGHTLY CONFIRMED BY THE LD C IT(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 ASSESSING OFFI CER MAY DIRECT THE ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 23 ASSESSEE AND THE ASSESSEE SHALL PAY THE PENALTY AS PER CLAUSE (A) TO (C) SO SATISFIED IN SUB-SECTION (1) TO SECTION 271AAB. FURTHER, AS PER SUB- SECTION (3) OF SECTION 271AAB, THE PROVISIONS OF SE CTION 274 AND SECTION 275 AS FAR AS MAY BE APPLIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PENALTY, THE AS SESSING OFFICER HAS TO ISSUE A SHOW-CAUSE GRANTING AN OPPORTUNITY TO THE A SSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMATIC BUT THE ASSESSING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTANCES OF THE CASE. SIMI LAR VIEW HAS BEEN TAKEN BY THE VARIOUS CO-ORDINATE BENCHES AND USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF THE CO-ORDINATE BENCH IN C ASE OF ACIT VS MARVEL ASSOCIATES (SUPRA) WHEREIN 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 LD. A.R. VEHE MENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPR ESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INCOME U/S 132(4) IS MANDATORY. THE LD. A.R. FURTHER STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. THE PRO VISIONS OF SECTION 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AA B IS NOT MANDATORY BUT DISCRETIONARY. WHEN THERE IS REASONAB LE CAUSE, THE PENALTY IS NOT EXIGIBLE. THE LD. A.R. TAKEN US TO T HE SECTION 271AAB OF THE ACT AND ALSO SECTION 158BFA(2) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WORDS USED IN SECTION 158BFA(2) OF THE ACT ARE IDEN TICAL. HENCE, ARGUED THAT THE PENALTY SECTION 271AAB OF THE ACT P ENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 24 REFERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2 ) OF THE ACT AND SECTION 271AAB OF THE ACT WHICH READS AS UNDER: 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, I N 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 PEN ALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECT ION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHE R 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 TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 25 (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) 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 P ER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE I N RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION ( 1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 26 (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE 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 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. FURT HER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VI EW. 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 DIRE CTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 27 HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOSED UNLESS T HE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSESSEE IS BEIN G HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE PENAL TY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND M ERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT T O HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPL AIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENAL TY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPOR TUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLE S OF NATURAL JUSTICE. HON'BLE A.P. HIGH COURT IN THE CASE OF RAD HAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALING WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE OPINION THAT WHILE THE WOR DS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO BE MANDATORY, THE WORDS MAY DIRECT IN SUB SECTIO N 2 THERE OF INTENDED TO DIRECTORY'. IN OTHER WORDS, WHILE PAYME NT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS T RITE POSITION OF LAW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE E XERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE F ACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SE CTION 271AAB AND 274 OF THE ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. A CCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY B UT TO BE IMPOSED ON MERITS 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 MANDATORY. IN THE INSTANT CASE, IT THEREFORE NEEDS TO BE EXAMINED WHETHER THERE IS ANY BASIS FOR LEVY OF ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 28 PENALTY OR NON-LEVY THEREOF AND THE SAME WILL DEPEN D UPON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH WE SHALL DI SCUSS 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 FROM PAGE NO. 1 TO 7 CERTAIN FIGURES, DATES, CRYPTIC NAMES AND/OR PLACES WERE WRITTEN. THE SEARCH PARTIES TOTALED THOSE FIGURES TO BE RS. 82,8 0,000/- HOLDING THAT AMOUNT HAS BEEN GIVEN TO VARIOUS PERSON AS ADVANCES THE ASSESSEE ALSO OFFERED A SUM OF RS.17,20,000/- IN HIS STATEME NT RECORDED U/S 132(4) OF THE ACT AS HIS ADDITIONAL INCOME FOR THE CURRENT YEAR TO COMPENSATE THE DEFECT (IF ANY) FOUND IN HIS BOOKS O F ACCOUNTS. THE ASSESSEE ALSO STATED IN HIS STATEMENT THAT SAID SUR RENDER WAS MADE TO BUY PIECE AND AVOID LONG LITIGATION WITH DEPARTMENT ON THE REQUEST THAT NO PENALTY PROCEEDINGS ETC. BE INITIATED AGAIN ST HIM. THUS NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH AND SAID ANNEX-AS WAS CONTAINING IMAGINARY NAMES AND SOME FIGURES. FU RTHER THE OFFICERS OF SEARCH PROCEEDINGS AND LD. A.O. MADE NO FURTHER ENQUIRY/INVESTIGATION REGARDING ENTRIES MADE IN THE SEIZED PAPERS. THE SURRENDER OF CURRENT YEARS INCOME BY ASSESSEE OF RS . 1,00,00,000/- WAS JUST TO BUY PEACE BY ASSESSEE WHICH ALSO HE CATEGOR ICALLY STATED IN STATEMENT U/S 132 (4). THE SAID ENTRY IN THE POCKET DIARY GIVING ADVANCES ITSELF IS NOT AN UNDISCLOSED INCOME. AND T HERE IS NO DISCREPANCY WHICH HAS BEEN FOUND BY THE ASSESSING O FFICER AND ACCORDINGLY, THERE CANNOT BE ANY UNDISCLOSED INCOME IN RESPECT OF SUM OF RS.17,20,000/-AS WELL. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 29 17. IT WAS SUBMITTED THAT THE REVENUE AUTHORITIES H AVE EXERTED UNDUE, UNCALLED FOR AND AN UNWARRANTED PRESSURE AND OBTAIN ED SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UNDISCLOSED INCO ME IN THE HANDS OF THE ASSESSEE. IT WAS SUBMITTED THAT SUCH CONFESSION AL STATEMENT VIOLATES BOARDS CIRCULAR DATED 10.03.2003 AND 18.12.2014. I T WAS SUBMITTED THAT SUCH FORCEFUL ADMISSION DOES NOT COMPLY WITH THE SP IRIT OF THE LAW. THE PROVISIONS OF SECTION 271AAB(1)(A)(II) CLEARLY REQU IRES THAT SUCH UNDISCLOSED INCOME ADMITTED U/S 132(4) REQUIRES TO BE SUBSTANTIATED. IN OTHER WORDS, THE ASSESSEE IS REQUIRED TO SPECIFY TH E MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FURTHER SUBSTANTIA TE THE SAME BY FURNISHING MATERIAL AVAILABLE WITH HIM. IN THE INST ANCE CASE, NO SUCH SUBSTANTIATION WAS DONE AS IN FACT THERE EXISTED NO UNDISCLOSED INCOME. THE ENTIRE DISCLOSURE WAS ON PAPER AND ASSESSEE ADM ITTED SUCH DISCLOSURE TO AVOID UNDUE HARASSMENT AND UNWANTED L ITIGATION. 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 ACCORDING TO THE A.O, IT WAS INCRIMINATING MATERIAL EVIDENCING THE UNDISCLOS ED INCOME. IN THE PENALTY ORDER THE AO OBSERVED NOTHING RELATED T O THE DIARY. HOWEVER, NEITHER THE AO NOR THE LD.CIT(A) HAS VERIF IED THE CONTENTS OF THE DIARY AS THE SAME WAS MAINTAINED 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 30 WELL. THERE WAS NO MONEY, BULLION, JEWELLERY OR VA LUABLE ARTICLE OR THING OR ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUMENT S TRANSACTIONS WERE FOUND DURING THE COURSE OF SEARCH INDICATING T HE ASSETS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENT S 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 SEARCH/ ASSESSM ENT PROCEEDINGS. THOUGH A DIARY WAS FOUND THAT DOES NOT INDICATE ANY SUPPRESSION OF INCOME. SIMILARLY, NO DISCREPANCY WA S FOUND IN THE BOOKS OF ACCOUNTS. THE AO WAS HAPPY WITH THE DISCL OSURE GIVEN BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSI TION WITH THE BOOKS OF ACCOUNTS 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 RECEI VABLES AS PER SEIZED PAPER, THERE IS NO DIRECT MATERIAL WHICH LEA DS AND ESTABLISHES THAT ANY INCOME RECEIVED BY THE ASSESSE E HAS NOT BEEN DECLARED BY THE ASSESSEE. AN ADDITION HAS BEEN MADE ON THE BASIS OF LOOSE DOCUMENT, WHICH DID NOT CLOSELY PROVE ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSE E. HENCE PENALTY U/S 158BFA (2) OF THE ACT IS NOT LEVIABLE. THE FAC TS OF THE ASSESSEE'S CASE SHOWS THAT THERE WAS NO UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND NO INCRIMINAT ING MATERIAL WAS FOUND, THEREFORE THE PENALTY LEVIED BY THE LEAR NED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) DESERVE S TO BE DELETED. 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 31 COURSE OF SEARCH U/S 132(4) AND THE RELEVANT EXTRAC T THEREOF IS REPRODUCED AS UNDER FOR SAKE OF REFERENCE:- 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 VI UH V?KKSFKR VK; EKURS GQ, BLS DJKJKSI.K GSRW LEFIZR D JRK GWWA LKFK GH ESA 17 YK[K 20 GTKJ DH VFRFJDR VK; DKS TKSM+RS G Q, 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 VIU H EKUFLD 'KKAFR DS FY, DJKJKSI.K DS FY, LEFIZR FD;SA GSA ;FN ESJH YS[KK CFG;KSA ESA DKSBZ DEH IKBZ TKRH GSA RKS BLS BL 17 Y K[K 20 GTKJ LS LEK;KSFTR DJ FN;K TK;SAA BLDS IJ LE;KUQLKJ ESA VFX ZE 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 FORCED SURRENDER BY ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 32 THE ASSESSEE. THE CONTENTION OF THE LD AR THEREFOR E HAS NO LEGAL LEG TO STAND WHERE HE CONTENDS THAT THE REVENUE AUT HORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINED SURRENDER OF IN COME AND THEREFORE, THERE WAS NO UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. IN ANY CASE, THE ASSESSMENT PROCEEDINGS HAVE ATTAINED FINA LITY WHERE SUCH UNDISCLOSED INCOME HAS BEEN OFFERED 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 STATEMENT OF THE ASS ESSEE RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, FALLS IN THE DE FINITION OF UNDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TE RMS OF CLAUSE (C) OF EXPLANATION TO SECTION 271AAB WHICH 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, 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 SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH I N THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONE R OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEA RCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 33 WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHIC H IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD TH E SEARCH NOT 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 MON EY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHET HER IT CAN THEN BE SAID 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 O F 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 ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 34 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 ABOUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANS ACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HAN DS OF THE ASSESSEE WHICH HAS BEEN FOUND BY WAY OF ANY ENTRY IN THE BOO KS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT BEEN RECORDED BE FORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. W E ARE ALSO CONSCIOUS OF THE FACT THAT THERE ARE DEEMING PROVISIONS IN TE RMS OF SECTION 69 AND 69B WHEREIN SUCH AMOUNTS MAY BE DEEMED AS INCOME IN ABSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND SECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THER EFORE TO BE APPLIED IN THE CONTEXT OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE STATUE BOOK AND NOT OTHERWISE. IN THE INSTANT CASE , THE DEEMING PROVISIONS CONTAINED IN SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVE STMENTS TO TAX IN THE QUANTUM PROCEEDINGS, THOUGH 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 D EEMING FICTION CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SE PARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SECTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME H AS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME M UST BE STRICTLY ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 35 CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITION S SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE T HE SAME HAS BEEN DEFINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WA Y OF ADVANCES CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDIN GS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RETURN OF INCOME, HOW EVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AN D PENALTY 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 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. 12. IN THE AFORESAID DECISION SO PASSED BY THE COOR DINATE BENCH, IT HAS HELD THAT THE PRIMARY CONDITION OR CHARGE FOR LEVY OF PENALTY IS THE EXISTENCE OF UNDISCLOSED INCOME AS SO DEFINED 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 QUANTIF YING THE PENALTY, THE ASSESSING OFFICER HAS TO EXAMINE THE SATISFACTION OF ANCILLAR Y CONDITIONS AS SPECIFIED UNDER CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB. MERELY BECAUSE THE QUANTUM OF PENALTY VARIES FROM 1 0% TO 30% SUBJECT TO COMPLIANCES WITH THE ANCILLIARY CONDITIONS, IT CANN OT BE SAID THAT WHERE THE AO ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 36 HAS INITIATED THE PENALTY UNDER SECTION 271AAB, THE RE IS ANY AMBIGUITY 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 CONDUCTED D URING THE COURSE OF ASSESSMENT PROCEEDINGS, RATHER IT IS BASED ON SEARC H CONDUCTED ON THE ASSESSEE ON OR AFTER THE 1ST DAY OF 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 DURING THE COURSE OF SEARCH AND THUS, THE ASSESSEE IS GRANTED AN OPPORTUNITY TO REFUTE SUCH CHARGE AND FILE HIS EXPL ANATIONS/SUBMISSIONS. UNLIKE PROVISIONS OF SECTION 271(1)(C) WHICH PROVIDES FOR SEPARATE CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME, THERE IS A SINGULAR CHARGE UNDER SECTIO N 271AAB 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 THE ASSE SSEE. WE ENTIRELY AGREE WITH THE SAID FINDINGS AND OBSERVATIONS SO MADE BY THE C OORDINATE BENCH AND IN THE INSTANT CASE, WHERE THE NOTICE DATED 28.12.2016 WAS ISSUED TO THE ASSESSEE TO SHOW-CAUSE WHY PENALTY SHOULD NOT BE LEVIED U/S 271 AAB OF THE ACT IN RESPECT OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEA R, THE ASSESSEE WAS MADE AWARE OF THE SPECIFIC CHARGE AGAINST HIM AND AN OPP ORTUNITY HAS THUS BEEN GIVEN TO HIM TO REBUT SUCH CHARGE AND THEREFORE, WE DONOT SEE ANY INFIRMITY IN THE INITIATION OF THE PENALTY PROCEEDINGS AND CONSE QUENT PENALTY ORDER SO PASSED BY THE AO. 13. FURTHER, IN THE AFORESAID DECISION, THE COORDIN ATE BENCH HAS HELD THAT EVEN IF IT IS ASSUMED THAT PRIMARY CHARGE OF UNDISC LOSED INCOME HAS TO BE READ ALONG WITH ANCILLARY CONDITIONS AND THUS MULTIPLES CHARGES HAVE BEEN PRESCRIBED IN TERMS OF CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB AND WHERE THE ASSESSING OFFICER HAS NOT STAT ED THE SPECIFIED CHARGE AT ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 37 THE TIME OF INITIATION OF PENALTY PROCEEDINGS, SUCH UNCERTAIN CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS CAN BE MADE GO OD WITH A CLEAR-CUT CHARGE IN THE PENALTY ORDER. IN THE INSTANT CASE, WE FIND THAT WHILE PASSING THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS GIVEN A CLEA R FINDING AS REFLECTED IN THE PENALTY ORDER THAT THE ASSESSEE IS LIABLE FOR PENAL TY U/S 271AAB(1)(A) WHICH PROVIDES FOR LEVY OF PENALTY @ 10% OF THE UNDISCLOS ED INCOME. AS HELD BY THE COORDINATE BENCH (SUPRA), THE UNCERTAIN CHARGE AT T HE TIME OF INITIATION OF PENALTY HAS BEEN MADE GOOD AND SUBSTITUTED WITH A C ONCLUSIVE DEFAULT AT THE TIME OF PASSING THE PENALTY ORDER AND THAT IN SUCH A CASE, NO FAULT CAN BE FOUND IN THE PENALTY ORDER. THEREFORE, THE CONTENTI ONS ADVANCED BY THE LD AR IN THIS REGARD CANNOT ACCEPTED. 14. NOW, COMING TO OTHER CONTENTIONS RAISED BY THE LD AR THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT D ISCRETIONARY IN NATURE, WE AGREE WITH THE SAID CONTENTIONS FOLLOWING THE DETAI LED REASONING GIVEN BY THE COORDINATE BENCH IN AFORESAID DECISION. 15. ANOTHER CONTENTION RAISED BY THE LD AR IS THAT THE REVENUE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINE D SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UNDISCLOSED INCOME IN THE H ANDS OF THE ASSESSEE. IN THIS CASE, THE SEARCH WAS CONDUCTED ON 5.02.2015 WH EREIN THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) W HEREIN HE HAS SURRENDERED THE AMOUNT OF RS 49,51,885/-. SUBSEQUEN TLY, THE ASSESSEE HAS DISCLOSED THE SAME IN HIS RETURN OF INCOME FILE D ON 27.09.2015. THEREFORE, THE ASSESSEE WAS HAVING AMPLE TIME TO RE TRACT FROM SAID SURRENDER; HOWEVER THERE IS NO SUCH RETRACTION DURI NG POST-SEARCH PROCEEDINGS AND EVEN THE ASSESSEE HAS INCLUDED THE SAME IN HIS RETURN OF INCOME. EVEN FROM THE PERUSAL OF THE STATEMENT, THERE IS NOTHING WHICH DEMONSTRATES THAT THERE IS ANY FORCED SURREND ER BY THE ASSESSEE. ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 38 THE CONTENTION OF THE LD AR THEREFORE HAS NO BASIS WHERE HE CONTENDS THAT THE REVENUE AUTHORITIES HAVE EXERTED UNDUE PRE SSURE AND OBTAINED SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UND ISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. IN ANY CASE, THE ASSESSMENT PROCEEDINGS HAVE ATTAINED FINALITY WHERE SUCH UNDISCLOSED INCOME HAS BEEN OFF ERED AND BROUGHT TO TAX. 16. FOR THE PURPOSES OF LEVY OF PENALTY, WHAT HAS T O BE SEEN IS WHETHER THE SURRENDER SO MADE, IN TERMS OF STATEMENT OF THE ASS ESSEE RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, FALLS IN THE DEFINITIO N OF UNDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TERMS OF C LAUSE (C) OF EXPLANATION TO SECTION 271AAB OF THE ACT. THE ASSESSEE IN HIS STA TEMENT HAD DISCLOSED CASH ADVANCES OF RS 37,00,000, RS 8,00,000 ON ACCOUNT OF CASH AND RS 451,885/- ON ACCOUNT OF PROFIT ON ACCOUNTED SALES. REGARDING CASH ADVANCE OF RS 37,00,000, WE FIND THAT DURING THE COURSE OF SEA RCH, EXHIBIT 1 PAGES 1-3 HAVE BEEN IMPOUNDED WHERE THERE ARE CERTAIN NOTINGS RELATING TO ADVANCE GIVEN TO CERTAIN PERSONS AND CONTAINS THE DATE, THE AMOUNT IN LACS AND NAME OF PERSONS IN ABBREVIATION. BESIDES THE SAID NOTINGS, THERE ARE NO OTHER DOCUMENTS/MATERIAL DISCLOSING FULL NAME AND ADDRESS OF THE PERSONS TO WHOM THE ADVANCE HAS BEEN GIVEN, PURPOSE FOR WHICH SUCH ADVANCE HAS BEEN GIVEN, ANY AGREEMENT, ETC, WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. THEREFORE, MERE NOTINGS IN CERTAIN LOOSE PAPERS WIT HOUT ANY FURTHER CORROBORATION CANNOT BE HELD AS CONCLUSIVE TO DEMON STRATE ANY TRANSACTIONS WHICH HAVE BEEN UNDERTAKEN BY THE ASSESSEE AND WHIC H HAVE NOT BEEN DISCLOSED TO THE REVENUE. IN ANY CASE, AN ADVANCE R EPRESENTS AN OUTFLOW OF FUNDS AND WHAT HAS BEEN ENVISAGED BY THE LEGISLATUR E WHILE DEFINING UNDISCLOSED INCOME IN SECTION 271AAB IS AN INFLOW OF FUNDS WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOC UMENTS ON OR BEFORE THE DATE OF SEARCH AND NOT AN OUTFLOW OF FUNDS. FURTHER , THE DEEMING FICTION SO ENVISAGED IN SECTION 69 AND 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 39 IN CONTEXT OF SECTION 271AAB WHICH CONTAINS A SPECI FIC DEFINITION OF UNDISCLOSED INCOME. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDIN ATE BENCH IN CASE OF SURAJ MAL BANSAL (SUPRA) WHERE IT WAS HELD AS UNDER: 13. IN THE INSTANT CASE, DURING THE COURSE OF SEAR CH, A DIARY HAS BEEN FOUND WHEREIN THERE ARE NOTINGS RELATING TO ADVANCE GIVEN TO CERTAIN PERSONS TOWARDS PURCHASE OF LAND. THE NOTINGS DESC RIBE THE NAME OF CERTAIN PERSONS, THE AMOUNT ADVANCED WHICH RANGES F ROM RS 25 LACS TO RS 70 LACS AND THE DATE OF SUCH ADVANCE IS FROM 16. 12.2014 TO 28.01.2015 BEFORE THE DATE OF SEARCH ON 5.02.2015. THEREFORE, WHAT HAS BEEN FOUND DURING THE COURSE OF SEARCH IS CERTAIN E NTRIES RELATING TO UNDISCLOSED ADVANCES/INVESTMENT IN PURCHASE OF LAND . BESIDES THE SAID ENTRIES, THERE ARE NO OTHER DOCUMENTS/MATERIAL IN T ERMS OF FULL PARTICULARS AND ADDRESS OF THE PERSON TO WHOM THE ADVANCE HAS B EEN GIVEN, ANY AGREEMENT TO SELL, THE DESCRIPTION AND LOCATION OF THE PROPERTY ETC, WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. THE ASS ESSEE HUF IS A PARTNER IN TWO PARTNERSHIP FIRMS AND DERIVES INCOME FROM SHARE IN THE PROFIT AND INTEREST FROM SUCH PARTNERSHIP FIRMS WHI CH IT HAS REPORTED IN ITS RETURN OF INCOME AND THEREFORE, AS FAR AS MAINT ENANCE OF BOOKS OF ACCOUNTS IS CONCERNED, THE ASSESSEE HUF NOT CARRYIN G ON ANY BUSINESS IS THUS NOT REQUIRED TO MAINTAIN REGULAR BOOKS OF ACCO UNTS. THE DIARY FOUND DURING THE COURSE OF SEARCH AND SEIZURE AT TH E PREMISES OF THE ASSESSEE CONTAINS THE ENTRIES OF ADVANCES GIVEN FOR PURCHASE OF LAND AND THEREFORE, THE SAID AMOUNT OF ADVANCE GIVEN FOR PUR CHASE OF LAND CAN BE RECORDED IN THE CAPITAL ACCOUNT OF THE ASSESSEE. T HUS THE TRANSACTIONS FOUND RECORDED IN THE DIARY ARE TO BE RECORDED IN T HE CAPITAL ACCOUNT OF THE ASSESSEE AS WELL AS IN THE BALANCE SHEET PREPAR ED AS ON 31.03.2015 AND NOT ON THE DATE OF SEARCH AS ON 5.02.2015. THE SE TRANSACTIONS ARE RECORDED IN A DIARY WHICH IS NOTHING BUT OTHER DOC UMENTS MAINTAINED IN ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 40 THE NORMAL COURSE, THEN IT CANNOT BE PRESUMED THAT THE ASSESSEE WOULD NOT HAVE DISCLOSED THE SAME IN THE RETURN OF INCOME TO BE FILED AFTER THE DATE OF SEARCH. ANOTHER QUESTION THAT ARISE FOR CON SIDERATION IS WHETHER THE ADVANCES SO GIVEN FOR PURCHASE OF LAND QUALIFY AS UNDISCLOSED INCOME AS PER DEFINITION GIVEN IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. AN ADVANCE REPRESENTS AN OUTFLOW OF FUNDS AND WHAT HAS BEEN ENVISAGED BY THE LEGISLATURE WHILE DEFINING UNDISC LOSED INCOME IN SECTION 271AAB IS AN INFLOW OF FUNDS WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS ON OR BEFORE T HE DATE OF SEARCH AND NOT AN OUTFLOW OF FUNDS. FURTHER, THE DEEMING F ICTION SO ENVISAGED IN SECTION 69 AND 69B CANNOT BE EXTENDED AND APPLIED A UTOMATICALLY IN CONTEXT OF SECTION 271AAB WHICH CONTAINS A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. AN IDENTICAL MATTER HAS COME U P FOR CONSIDERATION BEFORE THE TRIBUNAL IN CASE OF RAJENDRA KUMAR GUPTA VS DCIT (SUPRA) WHEREIN IT WAS HELD AS UNDER: 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIA RY) HAS BEEN FOUND REFERRED TO AS ANN. AS WHEREIN THERE ARE CERTAIN NOTINGS RELATING TO CASH ADVANCES GIVEN TO VARIOUS PERSONS TOTALING TO RS 82,80,000. REFERRING TO THE STATEMEN T OF THE ASSESSEE IN RESPECT OF THESE NOTINGS RECORDED U/S 1 32(4), LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GI VEN A GENERALIZED STATEMENT WITHOUT SPECIFYING THE COMPLE TE PARTICULARS OF PERSONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE THE SAME. THE SAID FINDINGS HAVE NOT BEEN DISPUTED BY THE REVENUE AND THEREFORE, MERELY BASED ON SURRENDER AND GENERALIZED STATEMENT OF THE ASSES SEE, IN ABSENCE OF ANYTHING SPECIFIC TO CORROBORATE SUCH EN TRIES, CAN IT BE SAID THAT SUCH ENTRIES/NOTINGS REPRESENT UNDI SCLOSED INCOME OF THE ASSESSEE. AS PER THE DEFINITION OF U NDISCLOSED ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 41 INCOME U/S 271AAB, THE SAID CASH ADVANCES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MON EY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHET HER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES REPRESENTS INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER D OCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132. A CASH ADVANCE PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSESSEES HAND AND AN INCOME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE. THEREFORE, ONC E THERE IS AN INFLOW OF FUNDS BY WAY OF INCOME, THERE CAN BE SUBS EQUENT OUTFLOW BY WAY OF AN ADVANCE TO ANY THIRD PARTY. G IVING AN ADVANCE AND INCOME THUS CONNOTES DIFFERENT MEANING 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 D OCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN F OUND BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCU MENTS, AND WHICH HAS NOT BEEN RECORDED BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. WE ARE ALS O CONSCIOUS OF THE FACT THAT THERE ARE DEEMING PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN SUCH AMOUNTS MAY BE DEEMED AS INCOM E IN ABSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND SECTION 6 9B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SE CTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEE MING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 42 BOOK AND HAVE THEREFORE TO BE APPLIED IN THE CONTEX T OF PROVISIONS WHEREIN THEY HAVE BEEN BROUGHT ON THE STATUE BOOK A ND NOT OTHERWISE. IN THE INSTANT CASE, THE DEEMING PROVIS IONS CONTAINED IN SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLI ED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUANTUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUA NTUM PROCEEDINGS. THEREFORE, EVEN ON THIS ACCOUNT, THE D EEMING FICTION CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS AND MO RE SO, WHERE THE PROVISIONS OF SECTION 271AAB PROVIDE FOR A SPEC IFIC DEFINITION OF UNDISCLOSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME MUST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIED 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 T AX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVA NCES CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDIN GS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEAR CH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RE TURN OF INCOME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALTY SO LEVIED THEREON D ESERVED TO BE SET-ASIDE. 17. IN LIGHT OF ABOVE DISCUSSIONS AND FOLLOWING TH E EARLIER DECISIONS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SUR AJ MAL BANSAL AND RAJENDRA KUMAR GUPTA (SUPRA), WE DELETE THE PENALTY LEVIED U NDER SECTION 271AAB OF ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 43 THE ACT ON CASH ADVANCES OF RS 37,00,000/- AS THE S AME DOESNT SATISFY THE REQUIREMENT OF UNDISCLOSED INCOME AS SO DEFINED U/S 271AAB OF THE ACT. 18. AS FAR AS CASH AMOUNTING TO RS 8,00,000/- WHICH HAS BEEN PHYSICALLY FOUND IN POSSESSION OF THE ASSESSEE DURING THE COUR SE OF SEARCH IS CONCERNED, THERE CANNOT BE ANY DISPUTE THAT THE SAME REPRESENT S UNDISCLOSED INCOME SO DEFINED IN SECTION 271AAB AND WHICH HAS NOT BEEN DI SCLOSED ON OR BEFORE THE DATE OF SEARCH. REGARDING THE CONTENTION OF THE LD AR THAT CASH SO FOUND REPRESENTS PAST ACCUMULATED SAVINGS, WE FIND THAT T HESE ARE CONTENTIONS WHICH ARE RELEVANT FOR DETERMINING THE NATURE AND SOURCE OF SUCH UNDISCLOSED INCOME FOR THE PURPOSES OF DETERMINING THE QUANTUM OF PENA LTY WHICH CAN BE LEVIED AND WHICH WE FIND THAT THE LOWER AUTHORITIES HAVE D ULY CONSIDERED WHILE LEVYING PENALTY @ 10%. THE FACT THAT SUCH CASH HAS BEEN FOU ND IN POSSESSION OF THE ASSESSEE AND REMAIN UNDISCLOSED TO THE REVENUE IS N OT UNDER DISPUTE AND THUS REPRESENTS UNDISCLOSED INCOME AS SO DEFINED. IN THE RESULT, WE CONFIRM THE LEVY OF PENALTY @ 10% ON THE UNDISCLOSED INCOME OF RS 8, 00,000/-. 19. REGARDING DISCLOSURE OF RS 4,51,885/-, THE LD A R HAS CONTENDED THAT THE REVENUE HAS APPLIED PREVIOUS YEARS GROSS PROFIT RA TE OF 8.95% ON ALLEGED SHORT STOCK OF RS 50,48,991/- AND TAKEN SURRENDER OF RS 4 ,51,885 AS ALLEGED PROFIT ON UNACCOUNTED SALES, HOWEVER, THE SAME MERELY REPRESE NT DIFFERENCE IN VALUATION OF STOCK AND NO SHORT STOCK HAS BEEN FOUND DURING T HE COURSE OF SEARCH. WE HOWEVER FIND THAT THE ASSESSEE HAS NOT DISPUTED SUC H VALUATION DURING THE SEARCH OR POST-SEARCH PROCEEDINGS AND THEREFORE, AS FAR AS VALUATION OF STOCK IS CONCERNED, THE SAME HAS ATTAINED FINALITY IN THE QU ANTUM PROCEEDINGS. THE QUESTION IS WHETHER THE DIFFERENCE IN STOCK IS ARIS ING OUT OF AND LIMITED TO VALUATION OF STOCK, CAN THE SAME QUALIFY AS UNDISCL OSED INCOME. IN THIS REGARD, WE REFER TO CO-ORDINATE BENCH DECISION IN CASE OF SILVER ARTS AND PALACE VS DCIT (ITA NO. 236/JP/18 DATED 11.02.2019) WHEREIN IT WAS HELD AS UNDER: ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 44 28. IN THE INSTANT CASE, STOCK OF GEMS, GOLD, SIL VER AND STUDDED JEWELLERY, PRECIOUS AND SEMI-PRECIOUS STONES, WOODE N ARTICLES, IVORY ITEMS, MARBLE ITEMS, OTHER HANDICRAFT ITEMS AND TEX TILE AND READYMADE GOOD WERE FOUND DURING THE COURSE OF SEARCH. THESE ARE GOODS WHICH ARE REGULARLY TRADED BY THE ASSESSEE AND ARE THUS STOCK -IN-TRADE OF THE ASSESSEE FIRM. IN THIS REGARD, WHAT HAS TO BE DETE RMINED IS THE INCOME OF SUCH PREVIOUS YEAR WHICH IS REPRESENTED BY SUCH STOCK OF GOODS WHICH IS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS MAIN TAINED BY THE ASSESSEE IN THE NORMAL COURSE RELATING TO SUCH PREV IOUS YEAR. THE VALUATION OF SUCH EXCESS STOCK IS REQUIRED TO DETER MINE THE INVESTMENT WHICH HAS BEEN MADE IN SUCH EXCESS STOCK AND WHICH HAS REMAINED UNDISCLOSED TO THE REVENUE AUTHORITIES. THE INVEST MENT IN STOCK IS THUS THE FUNCTION OF PRICE OR COST AT WHICH STOCK HAS BE EN PURCHASED BY THE ASSESSEE AND THEREFORE, WHAT IS TO BE DETERMINED AT THE COST PRICE OF SUCH STOCK AND NOT THE MARKET PRICE. WHERE SUCH STO CK IS ULTIMATELY SOLD, ANY PROFIT ARISING THEREFROM WOULD BE BROUGHT TO TA X IN REGULAR COURSE AND THE DETERMINATION OF MARKET PRICE WOULD BE RELE VANT AT THAT POINT IN TIME. IN OTHER WORDS, THE VALUE AT WHICH SUCH STOC K HAS BEEN ACQUIRED BY THE ASSESSEE AND NOT THE VALUE WHICH SUCH STOCK CAN FETCH IN THE MARKET OR THE FAIR MARKET VALUE OF SUCH STOCK. 29. IN THE INSTANT CASE, IT IS NOTED THAT THE ASSES SEE IN THE PENALTY PROCEEDINGS BEFORE THE ASSESSING OFFICER AND THEREA FTER DURING THE APPELLATE PROCEEDINGS BEFORE THE LD CIT(A) HAS CONT ENDED THAT THE VALUATION OF THE GOODS CLASSIFIED AS VALUABLE ITEM S HAS BEEN DONE AT MARKET RATE AS ON THE DATE OF SEARCH AND IN RESPECT OF GOODS CLASSIFIED AS OTHER THAN VALUABLE ITEMS, BESIDES THE FACT THAT VALUATION HAS BEEN DONE ON THE BASIS OF MARKET VALUE, THE VALUATION SO DONE IS TENTATIVE AND ON LUMP-SUM BASIS. IT HAS BEEN CONTENDED THAT VALUA TION HAS BEEN DONE WITHOUT CONSIDERING THE COST DISCLOSED IN THE REGUL AR BOOKS OF ACCOUNTS ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 45 AND WITHOUT CONSIDERING THE WELL-ACCEPTED ACCOUNTIN G POLICY WHICH HAS BEEN FOLLOWED BY THE ASSESSEE FIRM WHERE IT VALUES ITS STOCK AT LOWER OF COST AND NET REALIZABLE VALUE. WE FIND THAT IN THE PENALTY PROCEEDINGS, THERE IS NO SUCH EXERCISE WHICH HAS BEEN UNDERTAKEN BY THE ASSESSING OFFICER TO DETERMINE THE COST OF THE GOODS SO FOUND DURING THE COURSE OF SEARCH. THE ASSESSING OFFICER HAS MERELY GONE BY T HE SURRENDER MADE DURING THE COURSE OF SEARCH AND SUCH SURRENDER HAS BEEN MADE BASED ON MARKET VALUE AS ON THE DATE OF SEARCH. IN OUR VIEW , GIVEN THAT THE ASSESSEE HAS DISCLOSED THE WHOLE OF THE AMOUNT SURR ENDERED DURING THE COURSE OF SEARCH IN ITS RETURN OF INCOME, THE AMOUN T SO SURRENDERED AND DISCLOSED IN THE RETURN OF INCOME IS SUBJECT MATTER OF ASSESSMENT AND HAS RIGHTLY BEEN BROUGHT TO TAX IN THE QUANTUM PROC EEDINGS. HOWEVER, AS FAR AS PRESENT PENALTY PROCEEDINGS U/S 271AAB AR E CONCERNED WHICH IS SOLELY BASED ON THE SEARCH PROCEEDINGS AND ANYWAYS INDEPENDENT OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IS RE QUIRED TO GIVE A SPECIFIC FINDING THAT THERE IS AN UNDISCLOSED INCOM E FOUND DURING THE COURSE OF SEARCH IN TERMS OF UNDISCLOSED STOCK AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE UNDISCLOSED S TOCK COULD BE IN TERMS OF PHYSICALLY IDENTIFIABLE STOCK NOT FOUND RE CORDED IN THE BOOKS OF ACCOUNTS OR THE STOCK NOT FOUND RECORDED AT THE APP ROPRIATE VALUE SO DETERMINED BY THE ASSESSING OFFICER. IN THE INSTANT CASE, WE FIND THAT THE ASSESSING OFFICER HAS MERELY GONE BY THE SURRENDER STATEMENT WHERE THE STOCK HAS BEEN VALUED AT MARKET PRICE PREVAILING AS ON THE DATE OF SEARCH AND HAS NOT EXAMINED THE MATTER FROM THE PERSPECTIV E OF DETERMINING SEPARATE IDENTIFIABLE STOCK NOT FOUND RECORDED IN T HE BOOKS OF ACCOUNTS AND ALSO THE COST OF SUCH STOCK WHICH IS NOT RECORD ED IN THE BOOKS OF ACCOUNTS. THERE IS NO FINDING THAT THERE IS ANY EX CESS STOCK WHICH HAS BEEN PHYSICALLY FOUND AND WHICH HAS NOT BEEN RECORD ED IN THE BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH. IN LIGHT OF ABO VE DISCUSSIONS, IT IS ITA NO. 845/JP/2018 SH. ANIL GHATIWALA, JAIPUR VS. DCIT, JAIPUR 46 THUS CLEAR THAT DIFFERENCE IN STOCK OF GOODS AS PER BOOKS AND AS FOUND AT THE TIME OF SEARCH IS ON ACCOUNT OF VALUATION OF SU CH STOCK AT THE MARKET VALUE INSTEAD OF COST AND THE SAME CANNOT BE A BASI S TO HOLD THAT IT REPRESENT UNDISCLOSED INCOME SO DEFINED IN EXPLANAT ION TO SECTION 271AAB OF THE ACT AND THE PENALTY LEVIED THEREON IS LIABLE TO BE SET- ASIDE. IN THE INSTANT CASE AS WELL, WE FIND THAT THE DEPAR TMENT VALUER HAS CARRIED OUT THE VALUATION OF STOCK AS PER THE MARKET VALUE AS O N THE DATE OF SEARCH AND THE SAME HAS RESULTED IN DIFFERENCE IN VALUATION WHICH CANNOT BE A BASIS TO HOLD THAT IT REPRESENT UNDISCLOSED INCOME SO DEFINED IN EXPLANATION TO SECTION 271AAB OF THE ACT AND THE PENALTY LEVIED THEREON IS HEREBY DELETED. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/01/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/01/2021 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SH. ANIL GHATIWALA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-03, 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. 845/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR
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