Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 0775 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 3 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-03-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2014-2015
Appeal Filed On
14-12-2017
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KN O ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 987/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15. SHRI KRISHNA YADAV, 116-119, ANAND NAGAR, SIRSI ROAD, JAIPUR. CUKE VS. THE DCIT, CENTRAL CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADPY 8394 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHI B.K. GUPTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/02/2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/03/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3 RD NOVEMBER, 2017 OF LD. CIT (A)-4, JAIPUR ARISING FROM THE PENA LTY ORDER PASSED UNDER SECTION 271AAB OF THE I.T. ACT FOR THE ASSESSMENT YEAR 2014 -15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED IN PASSED THE ORDER U/S 271AAB OF THE INCOME TAX ACT, 1961 WHICH IS VOID AB-INITIO DESERVES TO BE QU ASHED. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARN ED ASSESSING OFFICER IN IMPOSING THE PENALTY OF RS. 1,00,10,000/ - U/S 271AAB OF THE INCOME TAX ACT, 1961. 2 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 3. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD, AMEN D OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVED INCOME FROM RENT, CAPITAL GAIN AND CIVIL CONTRACT WORK. A SEARCH WAS CONDUCTED ON 4 TH /5 TH SEPTEMBER, 2013 IN THE CASE OF THE ASSESSEE. DURING THE COURSE OF SEARCH AND S EIZURE ACTION, CERTAIN INCRIMINATING MATERIAL WERE FOUND AND SEIZED WHICH INCLUDE A BLACK COLOUR NOTE BOOK CONTAINING CERTAIN ENTRIES AT PAGES 1 TO 13. THE A SSESSEE WAS ASKED TO EXPLAIN THE ENTRIES IN THE SAID DIARY REGARDING ADVANCES GIVEN BY THE ASSESSEE FOR PURCHASE OF LAND TOTAL AMOUNTING TO RS. 5,14,00,000/-. THE ASS ESSEE DISCLOSED THE SAID AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE CURRE NT YEAR I.E. F.Y. 2013-14 RELEVANT TO ASSESSMENT YEAR 2014-15. CERTAIN OTHER ENTRIES WERE ALSO FOUND RECORDED IN THE SEIZED MATERIAL AND ACCORDINGLY THE ASSESSEE IN HIS STATEMENT TO QUESTION NO. 15 HAS DISCLOSED TOTAL UNDISCLOSED INCOME OF RS. 10,01,00, 000/- ON ACCOUNT OF ADVANCE FOR PURCHASE OF LAND. THE ASSESSEE EXPLAINED THE SOURC E OF THE AMOUNT AS THE BUSINESS OF CIVIL CONTRACT. IN THE RETURN OF INCOME FILED O N 29.11.2014 THE ASSESSEE DECLARED TOTAL INCOME OF RS. 13,51,13,640/- INCLUDING SURREN DERED INCOME OF RS. 10,01,00,000/-. THE AO COMPLETED THE ASSESSMENT UN DER SECTION 143(3) READ WITH SECTION 153A ON 29 TH FEBRUARY, 2016 ON A TOTAL INCOME OF RS. 13,55,63,6 40/-. THUS THE AO MADE AN ADDITION OF RS. 4,50,000/- TO THE RE TURNED INCOME. THE AO THEREAFTER INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271AAB IN RESPECT OF THE INCOME SURRENDERED BY THE ASSESSEE OF RS. 10,01,00, 000/- VIDE SHOW CAUSE NOTICE DATED 29 TH FEBRUARY, 2016 AND 16.08.2016. THE ASSESSEE RAISE D OBJECTIONS AGAINST THE INITIATION OF PENALTY PROCEEDINGS AS WELL AS TH E LEVY OF PENALTY. HOWEVER, THE AO 3 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND L EVIED THE PENALTY OF RS. 1,00,10,000/- UNDER SECTION 271AAB VIDE ORDER DATED 30.08.2016. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE AO ISSUED SHOW CAUSE NOTICE ON 29 TH DECEMBER, 2016 ALONG WITH COMPLETION OF ASSESSMENT AND THEREAFTER A SHOW CAUSE NOTICE DATED 16 TH AUGUST, 2016 WAS ISSUED FOR IMPOSING PENALTY UNDER SECTION 271AAB. BOTH THE NOTICES WERE ISSUED IN A ROUTINE MANNER WITHOUT MENTIONING UNDER WHICH CLAUSE OF SECTION 27 1AAB OF THE ACT THE ASSESSEE IS LIABLE FOR PENALTY. THE LD. A/R HAS SUBMITTED THAT SECTION 271AAB(1) HAS THREE CLAUSES (A) TO (C) AND EACH CLAUSE OF SUB-SECTION ( 1) TO SEC. 271AAB PROVIDES THE CIRCUMSTANCES AND VIOLATION ATTRACTING THE PENALTY @ 10% OR 20% OR 30% OF UNDISCLOSED INCOME OF SPECIFIED PREVIOUS YEAR. THE LD. A/R HAS POINTED OUT THAT EVEN IN THE ASSESSMENT ORDER THE AO HAS NOT SPECIFI ED UNDER WHICH CLAUSE THE PENALTY IS LIABLE TO BE IMPOSED BUT THE AO HAS MENT IONED THE PENALTY PROCEEDINGS UNDER SECTION 271AAB OF THE IT ACT ARE BEING INITIA TED. THUS THERE IS NO APPLICATION OF MIND AT THE TIME OF ISSUING THE SHOW CAUSE NOTIC E AS THE SHOW CAUSE NOTICE ISSUED BY THE AO DO NOT SPECIFY THE UNDISCLOSED INCOME ON WHICH THE ASSESSEE IS REQUIRED TO SHOW CAUSE. EVEN THE AO HAS NOT GIVEN ANY GROUN D FOR LEVY OF PENALTY FOR WHICH THE ASSESSEE COULD PUT HIS DEFENCE. THUS THE LD. A/ R HAS CONTENDED THAT IN THE ABSENCE OF SPECIFIC CHARGE AGAINST THE ASSESSEE, HE WAS NOT IN A POSITION TO COUNTER THE SHOW CAUSE NOTICE ISSUED BY THE AO AS WELL AS H IS COGENT REPLY TO THE SHOW CAUSE NOTICE. THOUGH THE AO WHILE PASSING THE IMPU GNED ORDER HAS IMPOSED THE PENALTY AS PER CLAUSE (A) OF SECTION 271AAB(1) OF T HE ACT, HOWEVER, NO SUCH GROUND 4 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT WAS SPECIFIED IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271AAB READ WITH SECTION 274 OF THE ACT. THEREFORE, THE SHOW CAUSE NOTICE WAS UNLAWFUL IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA). THE LD. A/R HAS ALSO RELIED ON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL DATED 5 TH APRIL, 2018 IN THE CASE OF DCIT VS. SHRI R. ELANGOVAN IN ITA NO. 1199/CHNY/2017 AND SUBMITTED T HAT THE TRIBUNAL IN THE SAID CASE WHILE CONSIDERING THE VALIDITY OF SHOW CAUSE N OTICE AND INITIATION OF PROCEEDINGS UNDER SECTION 271AAB AND FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FAC TORY (SUPRA) AS WELL AS THE DECISION OF HONBLE SUPREME COURT DISMISSING THE SL P FILED BY THE REVENUE IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS, 242 TAXMAN 1 50 (SC) HELD THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271AAB O F THE ACT NOT SPECIFYING THE GROUND AND CLAUSES FOR LEVY OF PENALTY WAS NOT VALI D AND CONSEQUENTLY THE PENALTY ORDER WAS SET ASIDE. THE LD. A/R HAS ALSO RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHEVETA CO NSTRUCTION CO. PVT. LTD. IN DBIT APPEAL NO. 534/2008 DATED 06.12.2016. THUS THE LD. A/R HAS SUBMITTED THAT THE ORDER OF IMPOSING PENALTY UNDER SECTION 271AAB IS U NLAWFUL AND NOT SUSTAINABLE IN LAW. THE SECOND LEG OF CONTENTION OF LD. A/R IS TH AT WITHOUT GIVING THE FINDING THAT THE INCOME IN QUESTION IS AN UNDISCLOSED INCOME AS PER SEC. 271AAB AND PARTICULARLY THE EXPLANATION UNDER SECTION 271AAB DEFINING THE T ERM UNDISCLOSED INCOME THE ORDER PASSED BY THE AO IS A NON-SPEAKING ILLEGAL OR DER. HE HAS FURTHER SUBMITTED THAT NO UNDISCLOSED INCOME WAS FOUND DURING THE COU RSE OF SEARCH UNDER SECTION 132 THOUGH A POCKET DIARY WAS FOUND AND SEIZED DURING T HE SEARCH WHICH CONTAINS THE 5 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT ADVANCES GIVEN BY THE ASSESSEE FOR PURCHASE OF LAND . HOWEVER, THE SAID ENTRY IN THE POCKET DIARY GIVING ADVANCES FOR PURCHASE OF LA ND ITSELF IS NOT AN UNDISCLOSED INCOME. THE REVENUE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINED THE SURRENDER OF INCOME FROM THE ASSESSEE. HE HAS REFE RRED TO THE BOARDS CIRCULAR DATED 10 TH MARCH, 2003 AND SUBMITTED THAT THE BOARD HAS EXPRE SSED ITS CONCERN ABOUT THE PRACTICE OF CONFESSION OF ADDITIONAL INCO ME DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS AND, THEREFORE, CLARIFIED T HAT THE CONFESSION DURING THE COURSE OF SEARCH AND SURVEY OPERATION DO NOT SERVE ANY USEFUL PURPOSE. THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPARTMENT. THE BOARD HAS AGAIN ISS UED A CIRCULAR DATED 18 TH DECEMBER, 2014 AND ADVISED THE TAXING AUTHORITIES T O AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE. THE LD. A/R HAS THUS CONTENDED THAT EXCEPT THE STATEMENT UNDER SECTION 1 32(4) THERE IS NO UNDISCLOSED INCOME IN THE CASE OF THE ASSESSEE. THE ASSESSEE W AS FORCED TO ADMIT AND SURRENDER THE INCOME IN THE STATEMENT RECORDED UNDE R SECTION 132(4). THE PROVISIONS OF SECTION 271AAB CLEARLY REQUIRES THAT SUCH UNDISCLOSED INCOME TO BE SUBSTANTIATED AND, THEREFORE, THE ASSESSEE IS REQUI RED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FURTHER SUBS TANTIATE THE SAME FURNISHING MATERIAL AVAILABLE WITH HIM. IN THE ABSENCE OF ANY RECORD OR MATERIAL TO SHOW ANY UNDISCLOSED SOURCE OF INCOME, THE ENTIRE DISCLOSURE ON PAPERS IS TO AVOID UNDUE HARASSMENT AND UNWANTED LITIGATION. THE LD. A/R HA S THEN CONTENDED THAT THE AO WHILE PASSING THE ORDER UNDER SECTION 271AAB HAS TO EXAMINE THE CASE IN TERMS OF 6 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT THE PROVISIONS OF SAID SECTION AND, THEREFORE, THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT AUTOMATIC BUT DISCRETIONARY. ONLY WH EN THE AO IS SATISFIED THAT THE CONDITIONS AS PRESCRIBED UNDER SECTION 271AAB ARE S ATISFIED AS CONTAINED IN VARIOUS CLAUSES OF SUB-SECTION (1), THE PENALTY CAN BE LEVI ED ACCORDINGLY. IN THE ABSENCE OF SUCH FINDING OF THE AO AS TO HOW THE CASE OF THE AS SESSEE FALLS UNDER THE PURVIEW OF SECTION 271AAB, THE IMPUGNED ORDER PASSED BY THE AO IS CONTRARY TO THE PROVISIONS OF THE ACT AND, THEREFORE, LIABLE TO BE QUASHED. I N THE INSTANT CASE NO QUERY WAS RAISED BY THE AUTHORIZED OFFICER DURING THE COURSE OF RECORDING OF STATEMENT OF ASSESSEE U/S 132(4) ABOUT MANNER IN WHICH UNDISCLOS ED INCOME HAS BEEN DERIVED AND ABOUT ITS SUBSTANTIATION. IN THE ABSENCE OF QU ERY RAISED BY AUTHORIZED OFFICER, THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 27 1AAB SPECIALLY WHEN OFFERED UNDISCLOSED INCOME HAD BEEN ACCEPTED AND DUE TAX HA D BEEN PAID BY ASSESSEE. THE LD. A/R SUBMITTED THAT IN SECTION 271AAB THE WORD MAY IS USED INSTEAD OF SHALL SO IT IS NOT MANDATORY BUT IT IS DISCRETIONARY. SECON DLY, THE INTENTION OF THE LEGISLATURE IS CLEAR BY MAKING THE ORDER PASSED U/S 271AAB AS A PPEALABLE ORDER BY AMENDING SUB CLAUSE (B) OF CLAUSE (HB) OF SECTION 246A W.E.F . 01.07.2012 THAT IT IS DISCRETIONARY AND NOT MANDATORY TO GIVE RELIEF TO T HE ASSESSEE WHERE THE AUTHORITIES HAVE NOT USED THEIR DISCRETION TO PROVIDE RELIEF TO THE ASSESSEE. IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDA TORY BUT ARE ALWAYS DISCRETIONARY CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE. IN IMPOSITION OF PENALTY MENS-REA ALSO PLAYS A VITAL ROLE BEFORE IMPOSING TH E PENALTY, IT IS ALWAYS COMPULSORY TO PROVE THE MENS-REA OF THE ASSESSEE AS MALAFIDE F OR CONCEALMENT OF INCOME OR FOR AVOIDANCE OF ANY PROVISION OF LAW IN FORCE INTENTIO NALLY. IN THE CASE OF THE ASSESSEE, 7 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT THE AO HAS NOT MENTIONED ANYTHING IN THE ASSESSMENT ORDER PASSED BY HIM ON 29.02.2016 U/S 143(3)/153A OF THE ACT. FROM THE AS SESSMENT ORDER IT IS CLEAR THAT THE ASSESSEE HAS MAINTAINED A SEPARATE DIARY FOR TH E INCOME SURRENDERED DURING THE COURSE OF SEARCH. THE DIARY WAS ALSO MAINTAINING AS BOOKS OF ACCOUNTS (PLACED ON PAPER BOOK PAGE NO. 1 TO 13). IN THIS DIARY ALL TH E ENTRIES ARE FOR THE CURRENT FINANCIAL YEAR I.E. FROM 01.04.2013 TO DATE OF SEAR CH I.E. 04/05.09.2013. ALL THE TRANSACTIONS ARE RECORDED. NOTHING ADVERSE WAS FOUN D WHICH SUGGEST THAT THE ASSESSEES INTENTION WAS NOT TO DISCLOSE THE INCOME RECORDED IN THE SEIZED DOCUMENTS. THE SETTLED POSITION OF LAW IS THAT THE POWER TO LEVY PENALTY INHERENTLY HAS POWER NOT TO LEVY PENALTY. THUS, THE LD. CIT ( A) CONFIRMED THE PENALTY UNDER A WRONG NOTION. THE PROVISIONS OF SECTION 271AAB ITSE LF SPEAK THAT THESE ARE NOT MANDATORY. HE HAS REFERRED TO SECTION 271AAB AND S UBMITTED THAT THE TERM THE AO MAY USED IN THE SECTION DOES NOT MAKE THE LEVY OF PENALTY AS MANDATORY. THE SECTION STARTS THAT THE ASSESSING OFFICER MAY DIR ECT. THUS IT IS NOT SHALL WHICH WOULD HAVE MADE THE LEVY OF PENALTY MANDATORY. THUS THE LD. CIT (A) WAS WRONG IN OBSERVING THAT LEVY OF PENALTY U/S 271AAB WAS MANDA TORY. SECONDLY THE PROVISIONS OF SECTION 271AAB(3) LAY DOWN THAT PENALTY SHALL BE LEVIED UNDER THE SECTION WITH REFERENCE TO SECTION 274. IN OTHER WORDS THE PROVI SIONS OF SECTION SHALL APPLY IN LEVYING PENALTY UNDER THIS SECTION. SECTION 274 SPE AKS THAT NO ORDER IMPOSING PENALTY UNDER THIS CHAPTER SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THUS HEARING HAS TO BE GIVEN TO THE ASSESSEE BEFORE LEVY OF PENALTY. THIS ITSELF SHOWS THAT PENALTY IS LEVIABLE ONLY AFTER HEARING THE ASSESSEE AND IN CASE ASSESSEE IS ABLE TO MAKE OUT A CASE BY 8 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT SHOWING SOME REASONABLE CAUSE OR OTHERWISE THEN PEN ALTY SHALL NOT BE LEVIABLE. PENALTY IS NOT LEVYABLE AUTOMATIC. THE LD. A/R PLA CED RELIANCE ON THE FOLLOWING CASE LAWS :- DCIT VS. MADAN LAL BESWAL (ITAT KOLKATA) IN ITA NO. 1475/KOL2015 DATED 14.3 .2018. ACIT VS. M/S. MARVEL ASSOCIATES (ITAT VIZAG) IN ITA NO. 147/VIZAG/2017 DTED 16.03 .2018. DCIT VS. SHRI R. ELANGOVAN (ITAT CHENNAI) IN ITA NO. 1199/CHNY/2017 DATED 05 .04.2018. ACIT VS. MOTHUKURI SOMABRAHMAM (ITAT VIZAG) IN ITA NO. 126/VIZAG/2017 DATED 16.0 3.2018. SHRI RAJA RAM MAHESHWARI VS. DCIT IN ITA NO. 992/JP 2017 DATED 10.01.2019 THE LD. A/R SUBMITTED THAT IN VIEW OF THE AFORESAI D DISCUSSION AND VARIOUS CASE LAWS CITED ABOVE THE PENALTY IN THIS CASE WOULD NOT BE L EVIED BECAUSE OF THE FOLLOWING FACTS :- (I) THERE IS NO VALID GROUND GIVEN IN THE ASSESSMENT OR DER FOR INITIATING PENALTY PROCEEDINGS. (II) THE INITIATION OF PENALTY IS STATUTORILY DEFECTIVE. (III) THE ASSESSEE FILED THE RETURN IN GOOD FAITH AND SUR RENDERED INCOME TO PURCHASE PEACE OF MIND AND AVOID LITIGATI ON. (IV) ASSESSMENT HAS BEEN COMPLETED ACCEPTING THE INCOME DECLARED BY THE ASSESSEE. 9 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT (V) IF AT ALL THERE IS ANY DEFAULT IT IS TECHNICAL. THE RE IS VIRTUALLY NO CONCEALMENT OF INCOME. NO PARTICULARS OF INCOME HAV E BEEN FILED INACCURATELY. 3.1. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED T HAT THE ASSESSEE WAS VERY WELL AWARE ABOUT THE DEFAULT AND THE NATURE OF INCOME HE HAS DISCLOSED AND SURRENDERED DURING THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE IT ACT. THE SURRENDER IN QUESTION WAS MADE BECAUSE THE ASSESSEE WAS UNABLE T O EXPLAIN THE SOURCE OF THE INVESTMENT IN QUESTION. IT IS CLEAR CASE OF UNDISCL OSED INCOME DETECTED DURING THE COURSE OF SEARCH AND SEIZURE ACTION AND, THEREFORE, THE SURRENDER MADE BY THE ASSESSEE ITSELF IS SELF-EXPLANATORY TO THE NATURE O F INCOME SURRENDERED BY THE ASSESSEE. THE LD. D/R HAS CONTENDED THAT THE ASSES SEE HAS PARTICIPATED IN THE PENALTY PROCEEDINGS AND HAS NOT RAISED ANY OBJECTIO N OR HAS DEMANDED BEFORE THE AO ABOUT HIS UNAWARENESS OF THE NATURE OF DEFAULT A TTRACTING THE LEVY OF PENALTY UNDER SECTION 271AAB. IT IS NOT THE CASE OF THE ASS ESSEE THAT THE DISCLOSURE WAS TAKEN UNDER COERCION AND FURTHER THE ASSESSEE HAS O FFERED THE SAID AMOUNT TO TAX IN THE RETURN OF INCOME WHICH RULES OUT THE SCOPE OF A NY PRESSURE OR COERCION BY THE SEARCH TEAM FOR TAKING DISCLOSURE FROM THE ASSESSEE . THUS THE OBJECTION RAISED BY THE ASSESSEE THAT THE AO HAS NOT SPECIFIED THE CLAU SE UNDER SECTION 271AAB(1) OF THE ACT HAS NO MERIT WHEN THE ASSESSEE HIMSELF HAS EXPLAINED THE NATURE OF INCOME DISCLOSED AND SURRENDERED AND ALSO PAID THE TAX ON THE SAME. THE LD. D/R HAS SUBMITTED THAT AS PER THE EXPLANATORY NOTE OF FINAN CE BILL, 2012, THE PROVISIONS OF SECTION 271AAB ARE MANDATORY IN NATURE AND AO HAS N O DISCRETION BUT THE ASSESSEE 10 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT SHALL PAY THE PENALTY IN ADDITION TO THE TAX ON THE UNDISCLOSED INCOME SURRENDERED UNDER SECTION 132(4) OF THE ACT. SHE HAS RELIED UP ON THE ORDERS OF THE AUTHORITIES BELOW. 3.2. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK AND OT HERS 405 ITR 648 AND SUBMITTED THAT EVEN OTHERWISE IF THE SHOW CAUSE NOTICE DOES N OT MENTION THE SECTION CORRECTLY IT WILL NOT BE INVALID AS THE AO WILL GET THE BENEF IT OF SECTION 292BB OF THE ACT. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF KOLKAT A BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMIT AGARWAL, 88 TAXMANN.COM 288. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT ON IDENTICAL FA CTS, ISSUES AS WELL AS THE CONTENTIONS RAISED BY THE PARTIES, THIS BENCH OF TH E TRIBUNAL IN CASE OF RAVI MATHUR VS. DCIT IN ITA NO. 969/JP/2017 DATED 13 TH JUNE, 2018 HAS CONSIDERED AND DECIDED THE ISSUE OF LEVY OF PENALTY IN PARA 4 TO 9 AS UNDE R :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. A SEARCH WAS CONDUCTED UNDER SECTION 13 2 OF THE IT ACT ON 30 TH OCTOBER, 2014 AT THE PREMISES OF THE ASSESSEE. THE ASSESSEE IN HIS STATEMENT RECORDED UNDER SECTION 132(4) HAS DISCLOS ED AN INCOME OF RS. 10,02,00,000/- IN PURSUANT TO THE ENTRIES OF ADVANC ES GIVEN FOR PURCHASE OF LAND RECORDED IN THE POCKET DIARY WHICH WAS FOUND A ND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE ACTION. THIS IS YEAR O F SEARCH AND THE FINANCIAL YEAR WOULD END ON 31 ST MARCH, 2015. HOWEVER, THE ASSESSEE DISCLOSED THIS AMOUNT OF RS. 10,02,00,000/- BASED ON THE ENTRIES I N THE DIARY REGARDING INVESTMENT IN REAL ESTATE. THE DUE DATE OF FILING O F RETURN OF INCOME UNDER SECTION 139(1) WAS 30 TH SEPTEMBER, 2015. IT IS UNDISPUTED FACT THAT THE 11 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT ASSESSEE IS AN INDIVIDUAL AND WAS NOT MAINTAINING R EGULAR BOOKS OF ACCOUNT. THEREFORE, THE TRANSACTIONS RECORDED IN THE POCKET DIARY FOUND DURING THE COURSE OF SEARCH ITSELF WOULD NOT LEAD TO THE PRESU MPTION THAT THE ASSESSEE WOULD NOT HAVE OFFERED THIS INCOME TO TAX IF THE SE ARCH IS NOT CONDUCTED ON 30 TH OCTOBER, 2014. FURTHER, THE ENTRIES IN THE DIARY ITSELF DO NO NOT REPRESENT THE INCOME OF THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION THOUGH THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF INVE STMENT IN QUESTION AND THAT SOURCE WOULD BE THE INCOME OF THE ASSESSEE. I T IS MOST LIKELY THAT THE INVESTMENT IN QUESTION WAS MADE FROM THE UNACCOUNTE D INCOME OF PRECEDING YEARS. HENCE THE INVESTMENT IN THE REAL ESTATE ITSE LF WOULD NOT REVEAL THE NATURE OF INCOME AND THE SOURCE OF INCOME OF THE YE AR UNDER CONSIDERATION. IT IS A PRE-CONDITION FOR INVOKING THE PROVISIONS O F SECTION 271AAB THAT THE ASSESSEE ADMITTED THE UNDISCLOSED INCOME IN THE STA TEMENT UNDER SECTION 132(4). THE DEFINITION OF UNDISCLOSED INCOME IS PROVIDED IN SECTION 271AAB ITSELF AND, THEREFORE, THE AO IN THE PROCEEDINGS UN DER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS OF THE CASE AND THEN ARRIVE T O THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFIN ITION OF UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO SAID SECTION. THE FIRST QUESTION ARISES IS WHETHER THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY AND CONSEQUENTIAL TO THE DISCLOSURE OF INCOME BY THE AS SESSEE UNDER SECTION 132(4) OR THE AO HAS TO TAKE A DECISION WHETHER THE GIVEN CASE HAS SATISFIED THE REQUIREMENTS FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. IN ORDER TO CONSIDER THIS ISSUE, THE PROVISIONS OF SEC TION 271AAB ARE TO BE ANALYZED. FOR READY REFERENCE, WE QUOTE SECTION 2 71AAB AS UNDER :- 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANY THING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 49 [BUT BEFORE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT O F THE PRESIDENT 50 ], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 12 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 132 , ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE M ANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 132 , DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; (C) A SUM 51 [COMPUTED AT THE RATE OF SIXTY PER CENT] OF THE UND ISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY TH E PROVISIONS OF CLAUSES (A) AND (B). 52 [(1A) THE ASSESSING OFFICER MAY, NOTWITHSTANDING AN YTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE DATE ON WHICH THE TAXATION LAWS (S ECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT OF THE PRESIDENT, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF THIRTY PER CENT OF TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF THE ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 132 , ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE M ANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF SIXTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED UNDER THE PROVI SIONS OF CLAUSE ( A).] (2) NO PENALTY UNDER THE PROVISIONS OF 53 [ SECTION 270A OR] CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF T HE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1) 52 [OR SUB-SECTION (1A)]. (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. 13 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE DUE DATE OF FURNISHING O F RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NO TICE ISSUED UNDER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHI NG THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE D ATE OF SEARCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER V ALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 , WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH I N THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE 54 [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR 54 [PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SE ARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECOR DED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND W OULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED.] THE SECTION BEGINS WITH THE STIPULATION THAT THE AO MAY DIRECT THE ASSESSEE SHALL PAY BY WAY OF PENALTY IF THE CONDITIONS AS PR ESCRIBED UNDER CLAUSES (A) TO (C) ARE SATISFIED. AS PER SUB-SECTION (3) OF SE CTION 271AAB THE PROVISIONS OF SECTION 274 AND 275 AS FAR AS MAY BE APPLIED IN RELATION TO THE PENALTY REFERRED IN THIS SECTION WHICH MEANS THAT BEFORE IM POSING THE PENALTY UNDER SEC. 271AAB, THE AO HAS TO ISSUE A SHOW CAUSE NOTIC E AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE LE VY OF PENALTY U/S. 271AAB IS NOT AUTOMATIC BUT THE A.O. HAS TO TAKE A DECISIO N TO IMPOSE THE PENALTY AFTER GIVING A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS STATUTORY REQUIREMENT THAT THE EXPLANATION OF THE ASSESSEE FO R NOT FULFILLING THE 14 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT CONDITIONS AS PRESCRIBED U/S 271AAB OF THE ACT IS R EQUIRED TO BE CONSIDERED BY THE AO AND PARTICULARLY WHETHER THE EXPLANATION FURNISHED BY THE ASSESSEE IS BONAFIDE AND NON-COMPLIANCE OF THE SAME IS DUE T O THE REASON BEYOND THE CONTROL OF THE ASSESSEE. THEREFORE, THE PENALTY U/S 271AAB IS NOT A CONSEQUENTIAL ACT BUT THE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANA TION AND REPLY OF THE ASSESSEE HAS TO TAKE A DECISION. THIS REQUIREMENT OF GIVING AN OPPORTUNITY OF HEARING ITSELF MAKES IT CLEAR THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT THE AO HAS TO TAKE A DECISION BASED ON THE FACTS AN D CIRCUMSTANCES OF THE CASE OTHERWISE THERE IS NO REQUIREMENT OF ISSUING A NY NOTICE FOR INITIATION OF PROCEEDINGS BUT THE LEVY OF PENALTY WOULD BE CONSEQ UENTIAL AND ONLY COMPUTATION OF THE QUANTUM WAS TO BE DONE BY THE AO AS IN THE CASE OF LEVY OF INTEREST AND FEE U/S 234A TO E. EVEN THE QUANTU M OF PENALTY LEVIABLE U/S 271AAB IS ALSO SUBJECT TO THE CONDITION PRESCRIBED UNDER CLAUSES (A) TO (C) OF SUB-SECTION (1) AND THE AO HAS TO AGAIN GIVE A FIND ING FOR LEVY OF PENALTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THUS THE AO IS BOUND TO TAKE A DECISION AS TO WHAT DEFAULT IS COMMITTED BY THE ASSESSEE AND WHICH PARTICULAR CLAUSE OF SECTION 271AAB(1) IS ATTRACTED ON SUCH DEFAULT. FURTHER, MERE DISCLOSURE OF INCOME UNDER SECTION 132(4) WOUL D NOT IPSO FACTO PAR TAKE THE CHARACTER OF UNDISCLOSED INCOME BUT THE FACTS O F EACH CASE ARE REQUIRED TO BE ANALYZED IN OBJECTIVE MANNER SO AS TO ATTRACT TH E PROVISIONS OF SECTION 271AAB OF THE ACT. SINCE IT IS NOT AUTOMATIC BUT T HE AO HAS TO GIVE A FINDING THAT THE CASE OF THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED IN EXPLANATION TO THE SAID SECTION. THEREF ORE, THE PROVISIONS OF SECTION 271AAB STIPULATE THAT THE AO MAY COME TO TH E CONCLUSION THAT THE ASSESSEE SHALL PAY THE PENALTY. THE ONLY MANDATORY ASPECT IN THE PROVISION IS THE QUANTUM OF PENALTY AS SPECIFIED UNDER CLAUSES ( A) TO (C) OF SEC. 271AAB(1) OF THE ACT AS 10% TO 30% OR MORE AS AGAIN ST THE DISCRETION GIVEN TO THE AO AS PER THE PROVISIONS OF SECTION 271(1)(C ) OF THE ACT WHERE THE AO HAS THE DISCRETION TO LEVY THE PENALTY FROM 100% TO 300% OF THE TAX SOUGHT TO BE EVADED. THUS THE AO IS DUTY BOUND TO COME TO THE CONCLUSION THAT THE 15 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT CASE OF THE ASSESSEE IS FIT FOR LEVY OF PENALTY UND ER SECTION 271AAB AND THEN ONLY THE QUANTUM OF PENALTY BEING 10% OR 20% OR 30% HAS TO BE DETERMINED SUBJECT TO THE EXPLANATION OF THE ASSESSEE FOR THE DEFAULTS. 5. BEFORE WE PROCEED FURTHER, THE DECISIONS RELIED UPON BY THE LD. D/R ARE TO BE CONSIDERED. IN THE CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK & OTHERS (SUPRA) THE ISSUE BEFORE THE HONBLE HIGH COURT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 271AAB ON ACCOUNT OF MENTIONIN G WRONG PROVISION OF THE ACT BEING 271(1)(C) OF THE ACT. THE HONBLE HIGH C OURT AFTER CONSIDERING THE FACT THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO TH OUGH MENTIONS SECTION 271(1) IN THE CAPTION OF THE SAID NOTICE, HOWEVER, THE BODY OF THE SHOW CAUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS F ULLY COMPREHENDED BY THE ASSESSEE AS REVEALS IN THE REPLY FILED BY THE ASSES SEE AGAINST THE SAID SHOW CAUSE NOTICE. HENCE THE HONBLE HIGH COURT HAS HEL D AS UNDER :- THE LD. A.RS HAVE ALSO CHALLENGED THAT THE CAPTIO N OF THE NOTICE MENTIONED ONLY SECTION 271 AND NOT 271AAB. IN THIS RESPECT, THE COPY OF NOTICE HAS BEEN PRODUCED BY THE LD. A.R. BEFORE ME. IT IS SEEN THAT THE LD. A.R IS CORRECT IN OBSERVING THAT THE SECTIO N OF PENALTY HAS NOT BEEN CORRECTLY MENTIONED BY THE AO IN THE CAPTION. HOWEVER, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUSE FIRSTLY, THE ASSESSEE HAS RAISED NO OBJECTI ON BEFORE THE AO IN THIS REGARD. SECONDLY, LAST LINE OF THE NOTICE CLEA RLY MENTIONS SECTION 271AAB. THIRDLY, THE ASSESSEE HAS GIVEN REPLY TO SA ID NOTICE WHICH SHOWS THAT THE ASSESSEE FULLY COMPREHENDED THE IMPL ICATION OF THE NOTICE THAT IT IS FOR SECTION 271AAB. THE ASSESSEE HAS ALSO CHALLENGED THAT THE PRINCIPLE S OF NATURAL JUSTICE HAS NOT FOLLOWED BY THE AO. THE DETAILED SUBMISSION S OF A.R IN THIS REGARD HAS ALREADY BEEN REPRODUCED ABOVE. THE A.R DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WAS NOT GIVEN PROPER O PPORTUNITY OF 16 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT HEARING. IT IS CLEAR FROM THE PENALTY ORDER THAT TH E AO HAS GIVEN PENALTY NOTICE AND WHICH WAS ALSO REPLIED BY THE AS SESSEE. THEREFORE, IN MY OPINION, PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOVE DISCUSSION PENALTY IMPOSED BY AO U /S 271AAB OF THE ACT IS CONFIRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UND ER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF THE SAME. THE SAID DECIS ION WILL NOT HELP THE CASE OF THE REVENUE SO FAR AS THE ISSUE INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTION 271AAB. AS REGARDS THE DECISION OF KOLKATA BENCHES OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMIT AGARWAL (SUPRA), WE FI ND THAT THE SAID DECISION WAS SUBSEQUENTLY RECALLED BY THE TRIBUNAL AND A FRE SH ORDER DATED 14 TH MARCH, 2018 WAS PASSED BY THE TRIBUNAL IN FAVOUR OF THE AS SESSEE. THEREFORE, THE DECISION RELIED UPON BY THE LD. D/R IS NO MORE IN E XISTENCE. 6. THE QUESTION WHETHER LEVY OF PENALTY UNDER SECTI ON 271AAB BY THE AO IS MANDATORY OR DISCRETIONARY HAS BEEN CONSIDERED B Y THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN CASE OF ACIT VS. M/S. MAR VEL ASSOCIATES (SUPRA) IN PARA 5 TO 7 AS UNDER :- 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. DURING THE APPEAL HEARING, THE LD. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENA LTY UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INCOME U/S 132( 4) IS MANDATORY. THE LD. A.R. FURTHER STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MA NDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARIMATERIA WITH TH AT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LE VY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT DISCRETIONARY. WHEN THERE IS REAS ONABLE CAUSE, THE PENALTY IS NOT EXIGIBLE. THE LD. A.R. TAKEN US TO THE SECTION 271AAB OF THE ACT AND ALSO SECTION 158BFA(2) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WORDS USED IN SECTION 17 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED T HAT THE PENALTY SECTION 271AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REFERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT A ND SECTION 271AAB OF THE ACT WHICH READS AS UNDER; 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HA S BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JULY, 2012, THE ASSESSEE SHAL L PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT O F THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4_) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, I N RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER C ENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PRE VIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). 18 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCL OSED INCOME REFERRED TO IN SUB-SECTION (1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY DIRECT THAT A P ERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVI ABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UND ISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MO NEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVI SO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PE NALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS I N EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 6. CAREFUL READING OF SECTION 271AAB OF THE ACT, TH E WORDS USED ARE AO MAY DIRECT AND THE ASSESSEE SHALL PAY BY WAY OF PENALTY. SIMILAR WORD S ARE USED SECTION 158BFA(2) OF THE ACT. THE WORD MAY DIRECT INDICATES THE DISCRETION TO THE AO. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VIEW. SUB SECTION (3) OF SECTION 271AAB: THE PROVISIONS OF SECTION 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CLEAR INTENTION TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, W HEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN R EADING OF SECTION 271AAB OF THE ACT, IT IS 19 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT EVIDENT THAT THE PENALTY CANNOT BE IMPOSED UNLESS T HE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE O PPORTUNITY IS GIVEN TO THE ASSESSEE, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDAT ORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONAB LE OPPORTUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JU STICE. HONBLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALIN G WITH THE PENALTY U/S 158BFA HELD THAT WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL B E LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO BE MANDATORY , THE WORDS MAY DIRECT IN SUB SECTION 2 THERE OF INTENDED TO DIRECTORY. IN OTHER WORDS, WH ILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS TRITE POSITION O F LAW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SE CTION 271AAB AND 274 OF THE ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE AC T IS NOT MANDATORY BUT DIRECTORY. ACCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON MERITS OF THE EACH CASE. THUS THE TRIBUNAL HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETION TO TAKE A D ECISION AND SHALL BE BASED ON JUDICIOUS DECISION OF THE AO. HENCE WE FORTIFY OUR VIEW BY THE ABOVE DECISIONS OF TRIBUNAL IN CASE OF ACIT VS. MARVEL ASSOCIATES. THIS TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE LEVY OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT THE AO HAS DISCRETION TO T AKE A DECISION AFTER ARRIVING TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASS ESSEE IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT IS AN UNDISCLOSED INCOME IN T ERMS OF SECTION 271AAB(1) R.W. EXPLANATION DEFINING THE UNDISCLOSED INCOME. THE DE CISION RELIED BY THE LD. CIT-DR IN CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. SA NDEEP CHANDAK 405 ITR 648 IS ONLY ON THE POINT OF BENEFIT OF SECTION 292BB OF TH E INCOME TAX ACT IS AVAILABLE 20 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT TO THE AO WHEN THE SHOW CAUSE NOTICE ISSUED U/S 274 R.W.S. 271AAB OF THE ACT MENTIONS IN ITS CAPTION ONLY SECTION 271 AND NOT 27 1AAB. THE HONBLE HIGH COURT AFTER CONSIDERING THE FACT THAT BODY OF THE SHOW CA USE NOTICE AND PARTICULARLY THE LAST LINE OF THE NOTICE CLEARLY MENTIONS SECTION 271AAB OF THE ACT AND THEREFORE, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE I.T. A CT. THERE WAS NO QUESTION BEFORE THE HONBLE HIGH COURT REGARDING THE MANDATORY OR D ISCRETIONARY NATURE OF THE LEVY OF PENALTY U/S 271AAB OF THE ACT AND THE OBSERVATIO NS OF THE HONBLE HIGH COURTS WERE ONLY IN THE CONTEXT THE TYPOGRAPHICAL MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE. THEREFORE, THE SAID DECISION CAN NOT BE APPLIED ON THE ISSUE BEFORE US. ACCORDINGLY, FOLLOWING THE EARLIER DECIS IONS OF THIS TRIBUNAL, WE HOLD THAT THE LEVY OF PENALTY U/S 271AAB OF THE ACT IS NOT MA NDATORY BUT THE AO HAS DISCRETION TO TAKE A DECISION ABOUT THE UNDISCLOSED INCOME. 5. ON MERITS OF THE LEVY OF PENALTY U/S 271AAB OF T HE ACT, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNA L IN CASE OF RAVI MATHUR VS. DCIT (SUPRA) HAS HELD IN PARA 8 & 9 AS UNDER:- 8. EVEN OTHERWISE, WITHOUT RESTRICTING OURSELVES T O THE VALIDITY OF SHOW CAUSE NOTICE, WE NOTE THAT SECTION 271AAB OF THE AC T CONTEMPLATES IMPOSITION OF PENALTY PURSUANT TO THE DISCLOSURE OF UNDISCLOSE D INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) AND, THEREFORE, THE L EVY OF PENALTY UNDER THIS SECTION DOES NOT DEPEND ON THE ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS. HENCE THE PENALTY PROCEEDINGS UNDER SE CTION 271AAB ARE COMPLETELY INDEPENDENT OF THE ENQUIRY AND FINDING O F THE AO IN THE ASSESSMENT ORDER EXCEPT FOR THE LIMITATION PROVIDED AS PER SECTION 275 OF THE 21 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT ACT. WE HAVE ALREADY HELD THAT THE PENALTY IS NOT AUTOMATIC BUT THE AO HAS TO TAKE A DECISION TO IMPOSE THE PENALTY AFTER GIVI NG AN OPPORTUNITY OF HEARING TO THE ASSESSEE IN TERMS OF SECTION 274 OF THE ACT. THUS THE AO IN THE PROCEEDINGS UNDER SECTION 271AAB OF THE ACT HAS TO FIRST DECIDE THAT THE CONDITIONS PRESCRIBED UNDER THE SAID SECTION ARE SA TISFIED FOR LEVY OF PENALTY AND THEN TO FURTHER TAKE A DECISION AFTER CONSIDERI NG THE EXPLANATION OF THE ASSESSEE FOR NON COMPLIANCE OF ANY OF THE CONDITION S UNDER CLAUSES (A) TO (C) OF SUB-SECTION (1) REGARDING THE QUANTUM OF PENALTY . THE PRIMARY CONDITION FOR LEVY OF PENALTY IS THE EXISTENCE OF UNDISCLOSED INCOME AS PER THE DISCLOSURE MADE BY THE ASSESSEE UNDER SECTION 132(4 ). THE TERM UNDISCLOSED INCOME HAS BEEN DEFINED IN EXPLANATIONS TO SECTION 271AAB. THEREFORE, AS PER THE DEFINITION PROVIDED IN THE EXPLANATION, THE UNDISCLOSED INCOME MAY HAVE VARIOUS FORMS AND THE SAME IS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN NORMAL COURSE RELATIN G TO THE SPECIFIED PREVIOUS YEAR. AS PER SUB-CLAUSE (I) OF CLAUSE (C) OF THE EXPLANATION , THE UNDISCLOSED INCOME MEANS ANY INCOME OF THE SPEC IFIED PREVIOUS YEAR REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR VAL UABLE ARTICLE OR THINGS OR ANY ENTRY IN BOOKS OF ACCOUNTS OR OTHER DOCUMENTS O R TRANSACTIONS FOUND IN THE COURSE OF SEARCH. THIS DEFINITION IS FURTHER S UBJECT TO TWO CONDITIONS THAT THE SAID INCOME HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR OR OTHERWISE NOT BEI NG DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER, PRINCIPAL COMMISSIONER OR COMMI SSIONER BEFORE THE DATE OF SEARCH. THE OTHER FORMS OF UNDISCLOSED INCOME A S DEFINED IN SUB CLAUSE (II) IS ANY ENTRY IN RESPECT OF EXPENSES RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE. THEREFO RE, THE CLAUSE (II) CONTEMPLATES UNDISCLOSED INCOME IN THE FORM OF FALS E ENTRIES OF EXPENSES RECORDED IN THE BOOKS OF ACCOUNTS WHICH IS NOT RELE VANT FOR THE CASE IN HAND. SINCE IN THE CASE OF ASSESSEE THE TRANSACTIONS OF I NVESTMENT WERE FOUND IN THE DIARY, THEREFORE, WHETHER THESE ENTRIES IN THE DIARY CONSTITUTE UNDISCLOSED INCOME AS PER CLAUSE (C)(I) OF EXPLANATION TO SECTI ON 271AAB OF THE ACT. THE 22 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT ASSESSEE IS AN INDIVIDUAL AND FOR THE YEAR UNDER CO NSIDERATION THE ASSESSEE HAS NOT REPORTED ANY BUSINESS INCOME NOR IT WAS ASS ESSED BY THE AO. THEREFORE, IT IS CLEAR THAT THE ASSESSEE WAS NOT RE QUIRED BY ANY MANDATE OF LAW TO MAINTAIN REGULAR BOOKS OF ACCOUNTS. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN INCOME FROM SALARY, INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. THE RETURNED INCOME WAS ACCEPTED BY THE AO WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) A ND HENCE ASSESSEES CASE DOES NOT FALL IN THE CATEGORY WHERE THE REGULA R BOOKS OF ACCOUNTS ARE MANDATORY. THE ENTRIES OF INVESTMENT IN REAL ESTAT E WERE FOUND RECORDED IN THE DIARY AND IN THE ABSENCE OF ANY OTHER DOCUMENT MAINTAINED IN THE NORMAL COURSE RELATING TO THE YEAR UNDER CONSIDERATION, TH E ENTRIES IN THE DIARY ARE TO BE CONSIDERED AS RECORDED IN THE DOCUMENTS MAINTAIN ED IN THE NORMAL COURSE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS RECORDED THE OTHER TRANSACTIONS IN THE OTHER DOCUMENTS MAINTAINED IN T HE REGULAR COURSE RELATING TO THE YEAR UNDER CONSIDERATION AND ONLY THESE ENTR IES ARE RECORDED IN THE DIARY. SINCE THE LEVY OF PENALTY UNDER SECTION 271 AAB IS NOT BASED ON THE ADDITION AND ENQUIRY CONDUCTED BY THE AO IN THE ASS ESSMENT PROCEEDINGS, THEREFORE, IT IS INCUMBENT ON THE AO TO CONDUCT A P ROPER EXAMINATION OF FACTS, CIRCUMSTANCES AND EXPLANATION FURNISHED BY THE ASSE SSEE BEFORE ARRIVING TO THE CONCLUSION THAT PENALTY UNDER SECTION 271AAB IS LEVIABLE 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 AFTER GIVING THE A SSESSEE AN OPPORTUNITY TO EXPLAIN THE CHARGES/GROUNDS ON WHICH THE PENALTY IS PROPOSED TO BE LEVIED. HENCE IT IS A PRE-REQUISITE CONDITION THAT THE AO F IRST SPECIFY THE CHARGES AGAINST THE ASSESSEE AND TO MAKE KNOWN THE ASSESSEE OF HIS DEFAULT SO AS TO AFFORD AN OPPORTUNITY TO EXPLAIN THE DEFAULT/CHARGE S SO BROUGHT AGAINST THE ASSESSEE. WITHOUT CONSIDERING THE EXPLANATION OF T HE ASSESSEE ON THE SPECIFIC DEFAULT, THE ORDER PASSED BY THE AO UNDER SECTION 2 71AAB SUFFERS FROM SERIOUS ILLEGALITY AND THEREFORE NOT SUSTAINABLE IN LAW. WHEN A STRINGENT ACTION IS PROVIDED IN THE STATUTE AGAINST THE DEFAU LT COMMITTED BY THE 23 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT ASSESSEE, THEN IT ALSO CAST AN EQUALLY STRINGENT AN D STRICT DUTY ON THE AUTHORITY RESPONSIBLE TO TAKE SUCH ACTION. THEREFORE, WHEN T HE PROVISIONS FOR LEVY OF PENALTY UNDER SECTION 271AAB IS A SPECIFIC PROVISIO N TO DEAL WITH THE UNDISCLOSED INCOME AND IT PROVIDES A STRICT PENAL A CTION THEN THE CORRESPONDING DUTY OF THE TAX AUTHORITY IS ALSO EQU ALLY STRINGENT. THE AO CANNOT ESCAPE FROM FOLLOWING THE STRICT MANDATORY R EQUIREMENT OF LAW AND PARTICULARLY THE PRINCIPLE OF NATURAL JUSTICE. THE AO HAS NEITHER SPECIFIED THE GROUNDS AND CLAUSE OF SECTION 271AAB NOR HAS DEALT WITH THE SAME IN THE IMPUGNED ORDER PASSED UNDER SECTION 271AAB. THE AO HAS ALSO NOT GIVEN A FINDING THAT THE CASE OF THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME PROVIDED UNDER CLAUSE (C)(I) OF EXPLANATION TO SECTION 271AAB. WHEN THE TRANSACTIONS OF INVESTMENT IN REAL ESTATE ARE R ECORDED IN THE DIARY BEING OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE FOR THE SAID PURPOSE, THEN IN THE ABSENCE OF ANY REQUIREMENT OF MAINTAINING REGULAR B OOKS OF ACCOUNTS BY THE ASSESSEE, THE CASE OF THE ASSESSEE WOULD NOT FALL I N THE DEFINITION OF UNDISCLOSED INCOME AS PER CLAUSE (C) OF EXPLANATION TO SECTION 271AAB OF THE ACT. 9. THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MADAN LAL BESWAL (SUPRA) HAS CONSIDERED THIS ISSUE OF THE ALL EGED INCOME FOUND RECORDED IN THE OTHER DOCUMENTS WOULD FALL IN THE D EFINITION OF UNDISCLOSED INCOME IN PARA 3 AND 4 AS UNDER :- 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ISSUE I NVOLVED HEREIN IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN THE C ASE OF DCIT VS MANISH AGARWALA (ANOTHER MEMBER IN THE SAME NEZONE GROUP) IN ITA NO. 1479/KOL/2015 FOR AY 2013-14 DATED 9.2.2018 BY THE ORDER OF THIS TRIBUNAL , WHEREIN IT WAS HELD AS UNDER:- 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO HAS LEVIED THE PENALTY U/S. 271AAB ON THE GROUND THAT THE INCOME FROM COMMODITY PROFIT HAS BEEN FOUND DURING SEARCH U/S.132 OF THE ACT WHICH IS NOT REFLE CTED IN THE REGULAR BOOKS OF ACCOUNT. THE AO HAS ACCEPTED THAT DURING SEARCH THE ASSESSEE HAS ADMITTED 24 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT U/S. 132(4) OF THE ACT THE INCOME FROM SPECULATIVE TRADING. THE UNDISPUTED FACTS THE AO HAS GIVEN FINDING PERTAINING TO THIS C ASE IS AS FOLLOWS: I) THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHI CH THE INCOME WAS DERIVED. II) FURNISHED THE RETURN OF INCOME THEREIN AND III) PAID THE TAX ALONG WITH INTEREST. BASED ON THE SAID FINDING, ACCORDING TO AO, THE ASS ESSEE SATISFIES THE CONDITIONS ENUMERATED IN SEC. 271AAB(I)(A) OF THE A CT AND THEREAFTER LEVIED TEN PERCENT OF RS.3 CR., WHICH HAVE BEEN DELETED BY THE IMPUGNED ORDER OF LD. CIT(A). 4. THE LD. DR BROUGHT TO OUR NOTICE THAT IN THE VE RY SAME GROUP CASE OF MANOJ BESWAL & ORS. THE TRIBUNAL HAD CONFIRMED T HE LEVY OF PENALTY AND CONTENDED BEFORE US THAT PENALTY U/S. 271AAB OF THE ACT IS MANDATORY AND THEREFORE, ACCORDING TO LD. DR, THE LD. CIT(A) ERRE D IN DELETING THE PENALTY BY STATING THAT THE ASSESSEE DID NOT HAD ANY MENS REA NOT TO DISCLOSE THE AMOUNT IN QUESTION. ACCORDING TO HIM, PENALTY HAS T O BE MANDATORILY LEVIED U/S. 271AAB OF THE ACT ON THE UNDISCLOSED INCOME FO UND DURING SEARCH. ON THE OTHER HAND, LD. AR SHRI MIRAZ D. SHAH, SUPPO RTING THE DECISION OF LD. CIT(A) MADE CONTENTIONS THOUGH TAKEN UP BEFORE THE LD. CIT(A) BUT HAS NOT BEEN ADJUDICATED ON THOSE AVERMENTS, WHICH THE LD. AR URGES BEFORE US TO CONSIDER WHILE ADJUDICATING THE APPEAL OF THE REVENUE. THE LD. AR ALSO POINTED OUT THAT THE CONTENTIONS WHICH HE IS GOING TO RAISE HAS BEEN TAKEN UP BEFORE THE AO ALSO, HOWEVER, ACCORDIN G TO LD. COUNSEL, THOSE LEGAL ARGUMENTS WERE NOT CONSIDERED BY THE AO IN THE RIGHT PERSPECTIVE. THE FIRST CONTENTION OF THE LD. AR IS THAT SINCE SEC. 271AAB OF THE ACT IS A PENALTY SECTION IT SHOULD BE CONSTR UED STRICTLY, WHICH WE AGREE BEING IT IS A TRITE LAW THAT PENALTY PROVISIO NS HAVE TO BE STRICTLY INTERPRETED. NEXT CONTENTION OF LD. AR IS THAT SEC. 271AAB OF THE ACT IS NOT MANDATORY BECAUSE PARLIAMENT IN ITS WISDOM HAS USED THE WORD MAY AND NOT SHALL. SO, ACCORDING TO HIM, IT IS THE DISCRE TION BESTOWED UPON THE AO WHETHER TO INITIATE AND IMPOSE PENALTY U/S. 271AAB OF THE ACT. WE AGREE WITH THE SAID CONTENTION OF LD. AR BECAUSE WHEN A S IMILAR ISSUE WAS ADJUDICATED BY ITAT LUCKNOW (THE AUTHOR OF THIS ORD ER WAS A MEMBER OF THE BENCH) IN SANDEEP CHANDAK & ORS. VS. CIT (2017) 55 ITR (TRIB) 209 AND 2017 (5) TMI 675- ITAT-LUCKNOW IN ITA NO. 416, 417 AND 418/LKW/2016 DATED 30.01.2017 WHILE ADJUDICATING A CASE WHERE PENALTY WAS LEVIED UNDER SECTION 271AAB OF THE ACT IT WAS H ELD THAT THE PROVISIONS OF SEC. 271AAB OF THE ACT ARE NOT MANDATORY, WHICH MEANS THAT PENALTY NEED NOT BE LEVIED IN EACH AND EVERY CASE WHEREVER THE ASSESSEE HAS MADE DEFAULT AS STATED IN CLAUSES (A), (B) AND (C) OF THE ACT. SUB-SECTION (1) OF SEC. 271AAB OF THE ACT USES THE WORD MAY N OT SHALL. MAY CANNOT BE EQUATED WITH SHALL ESPECIALLY IN PENALT Y PROCEEDING. USING THE WORD MAY IN OUR OPINION, GIVES A DISCRETION TO TH E AO TO LEVY THE PENALTY OR NOT TO LEVY, EVEN IF THE ASSESSEE HAS MADE THE D EFAULT UNDER THE SAID PROVISION. THEREFORE, THE 2 ND GROUND OF REVENUE FAILS AND WE HOLD THAT PENALTY U/S. 271AAB OF THE ACT IS NOT MANDATORY AND IS DISCRETIONARY. BEFORE PROCEEDING FURTHER, WE NOTE THAT THE EX PART E ORDER PASSED BY THE 25 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT COORDINATE BENCH RELIED UPON BY LD. DR, MANOJ BESWA L, SUPRA, HAVE BEEN RECALLED IN MA NOS. 218 TO 220/KOL/2017 DATED 12.01.2018 BY OBSERVING AS UNDER: BY VIRTUE OF THESE MISCELLANEOUS APPLICATIONS, THE ASSESSEE SEEKS TO RECALL THE ORDER PASSED BY THIS TRIBUNAL IN I.T. A. NOS. 1471, 1475&1476/KOL/2015 IN THE HANDS OF AMIT AGARWAL, MA DAN LAL BESWAL AND MANOJ BESWAL RESPECTIVELY FOR THE ASSESS MENT YEAR 2013-14 ON THE GROUND THAT NOTICE WAS NOT SERVED ON THE ASSESSEE FOR THE HEARING AND ON CERTAIN FACTUAL ERROR THAT H AD CREPT IN THE ORDER OF THE TRIBUNAL. THE FIRST PRELIMINARY OBJECT ION RAISED BY THE LD. AR WAS THAT THE NOTICE OF HEARING WAS NOT SERVE D ON THE ASSESSEE FOR THE HEARING SCHEDULED ON 06.11.2017 AN D HENCE, THE ASSESSEE COULD NOT BE PRESENT ON THE SAID DATE BY W AY OF PERSONAL APPEARANCE. THE SECOND OBJECTION RAISED BY THE LD. AR WAS THAT THE TRIBUNAL HAD STATED IN PARA 9 OF ITS ORDER THAT THE ASSESSEE HIMSELF HAD ACCEPTED THAT HE IS ENGAGED IN COMMODIT IES TRADING BUSINESS AND THEREFORE MANDATED TO MAINTAIN BOOKS O F ACCOUNTS IN TERMS OF SECTION 44AA OF THE ACT AND THEREBY INFERR ING THAT THE ASSESSEE HAD REPORTED THE PROFIT FROM COMMODITIES T RADING BUSINESS UNDER THE HEAD INCOME FROM BUSINESS OR PR OFESSION. BASED ON THIS CRUCIAL FINDING, THE TRIBUNAL HAD CON CLUDED THAT SINCE THE TRANSACTION OF COMMODITIES TRADING HAD NOT BEEN ENTERED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH ON 01.08.2012 AND THEREBY IT TAKES THE CHARACTER OF UN DISCLOSED INCOME FOR WHICH PENALTY U/S 271AAB OF THE ACT IS E XIGIBLE. IN THIS REGARD, WE FIND THAT THE LD. AR DREW OUR ATTENTION TO THE COMPUTATION OF THE TOTAL INCOME WHEREIN THE ASSESSE E HAD OFFERED INCOME FROM COMMODITY TRADING ONLY UNDER THE HEAD I NCOME FROM OTHER SOURCES. WE ALSO FIND THAT THE LD. AO HAD ALS O SPECIFICALLY STATED IN THE BODY OF THE ASSESSMENT ORDER VIDE COL UMN NO. 10 THAT THE ASSESSEE IS HAVING ONLY SALARY INCOME AND INCOM E FROM OTHER SOURCES. WE FIND THAT DUE TO THE ABSENCE OF THE ASS ESSEE AT THE TIME OF HEARING THIS PARTICULAR FACT HAD ESCAPED TH E ATTENTION OF THE TRIBUNAL. ON PERUSAL OF THE FACT AVAILABLE ON RECOR D, WE FIND THAT THE FINDING RECORDED BY THIS TRIBUNAL IN PARA 9 OF ITS ORDER DATED 10.11.2017 THAT THE ASSESSEE IS MANDATED TO MAINTAI N BOOKS OF ACCOUNTS U/S 44AA OF THE ACT IS FACTUALLY INCORRECT AND DESERVES TO BE RECTIFIED. THIS MISTAKE OF PRIMARY FACT HAD LEAD TO A CONCLUSION OF UPHOLDING THE LEVY OF PENALTY U/S 271AAB OF THE ACT . HENCE, IN THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE AF ORESAID MISTAKE OF PRIMARY FACT RIGHTLY POINTED OUT BY THE LD. AR , WE DEEM IT FIT TO RECALL THE ORDERS OF THIS TRIBUNAL DATED 10.11.2017 IN THE CASE OF AFORESAID ASSESSEES. IN THE AFORESAID SCENARIO, THE LEGAL POSITION IS TH AT AN ORDER WHICH HAS BEEN RECALLED FOR DE NOVO ADJUDICATION, IS NO ORDER IN THE EYES OF LAW AND SO IT CANNOT BE TREATED AS A PRECEDENT. HENCE, THE RELIANCE PLACED BY THE LD. DR IN RESPECT OF ASSESSEES IN THE SAME GROUP C ONCERN CASES AS 26 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT DECIDED BY THE TRIBUNAL NO LONGER SURVIVES AND CANN OT BE TREATED AS COVERED AGAINST THE ASSESSEE. 5. THE THIRD CONTENTION OF THE LD. AR IS THAT THE ASSESSEE IS AN INDIVIDUAL, WHO WAS DRAWING SALARY INCOME. SO, ACCO RDING TO HIM, HE NEED NOT MAINTAIN ANY BOOKS OF ACCOUNT AS PER THE ACT. A CCORDING TO LD. AR, UNDISPUTEDLY THE ASSESSEE WAS ENGAGED FOR THE FIRST TIME THIS AY ONLY IN TRADING OF COMMODITIES, THAT TOO WHICH WAS CONDUCTE D IN A NON- SYSTEMATIC MANNER AND THE INCOME FROM IT WAS DULY O FFERED TO TAX BY THE ASSESSEE IN HIS RETURN OF INCOME UNDER THE HEAD IN COME FROM OTHER SOURCES, WHICH, ACCORDING TO LD. AR WAS ACCEPTED A S SUCH BY THE AO AND DREW OUR ATTENTION TO PAGE ONE OF ASSESSMENT OR DER, (NOT THE PENALTY ORDER) WHEREIN WE NOTE THAT THE AO HAS ACKNOWLEDGED THAT THE ASSESSEE OWNED UP RS. 3 CR. AS HIS INCOME FROM COMMODITY PRO FIT AND IT HAS BEEN DISCLOSED IN HIS INCOME AND EXPENDITURE FOR AY 2013 -14 UNDER THE HEAD INCOME OUT OF SPECULATIVE BUSINESS FROM SALE OF CO MMODITIES, AND THEREAFTER THE AO CONFIRMED THE ASSESSEES CLAIM AN D THEREAFTER TOTAL INCOME WAS ASSESSED BY THE AO AS PER THE RETURN SUB MITTED BY THE ASSESSEE. IN THE LIGHT OF THE AFORESAID FACTS DISCE RNED FROM ASSESSMENT ORDER, THE ASSESSEES CASE IS THAT FOR THE FIRST TI ME IN THIS AY HE WAS DOING UNSYSTEMATIC SPECULATIVE ACTIVITY WHICH EARNED INCO ME AND, IT WAS BROUGHT UNDER THE HEAD INCOME FROM OTHER SOURCES, AND SO, ACCORDINGLY, HE IS NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNT AS STIPUL ATED IN SEC. 44AA OR SEC. 44AA(2)(II) OF THE ACT BECAUSE, THESE PROVISIO NS ARE ONLY FOR ASSESSES WHO ARE EARNING INCOME UNDER THE HEAD BUS INESS OR PROFESSION. WE NOTE THAT SEC. 44AA OR SEC. 44AA(2) (II) OF THE ACT CASTS A DUTY UPON THE ASSESSEE WHO ARE INTO BUSINESS OR PR OFESSION AND SUCH ASSESSEES ARE BOUND TO MAINTAIN BOOKS OF ACCOUNT A S STIPULATED THEREIN. FOR APPRECIATING THIS SUBMISSION LET US GO THROUGH THE PROVISIONS OF LAW. 44AA. (1) EVERY PERSON CARRYING ON LEGAL, MEDICA L, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROF ESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DE CORATION OR ANY OTHER PROFESSION AS IS NOTIFIED BY THE BOARD IN THE OFFICIAL GAZETTE SHALL KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND O THER DOCUMENTS AS MAY ENABLE THE [ASSESSING] OFFICER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF T HIS ACT. (2) EVERY PERSON CARRYING ON BUSINESS OR PROFESSION [NOT BEIN G A PROFESSION REFERRED TO IN SUBSECTION (1)] SHALL, (I) IF HIS INCOME FROM BUSINESS OR PROFESSION EXCE EDS [ONE LAKH TWENTY] THOUSAND RUPEES OR HIS TOTAL SALES, TURNOVE R OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFES SION EXCEED OR EXCEEDS [TEN LAKH] RUPEES IN ANY ONE OF THE THREE Y EARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR; OR (II) WHERE THE BUSINESS OR PROFESSION IS NEWLY SET UP IN ANY PREVIOUS YEAR, IF HIS INCOME FROM BUSINESS OR PROFESSION IS LIKELY TO EXCEED [ONE LAKH TWENTY] THOUSAND RUPEES OR HIS TOTAL SALE S, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFESSION ARE 27 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT OR IS LIKELY TO EXCEED [TEN LAKH] RUPEES, [DURING S UCH PREVIOUS YEAR; OR (III) WHERE THE PROFITS AND GAINS FROM THE BUSINESS ARE DEEMED TO BE THE PROFITS AND GAINS OF THE ASSESSEE UNDER [SECTIO N 44AE] [OR SECTION 44BB OR SECTION 44BBB], AS THE CASE MAY BE, AND THE ASSESSEE HAS CLAIMED HIS INCOME TO BE LOWER THAN TH E PROFITS OR GAINS SO DEEMED TO BE THE PROFITS AND GAINS OF HIS BUSINESS, AS THE CASE MAY BE, DURING SUCH [PREVIOUS YEAR; OR]] (IV) WHERE THE PROFITS AND GAINS FROM THE BUSINESS ARE DEEMED TO BE THE PROFITS AND GAINS OF THE ASSESSEE UNDER SECTION 44AD AND HE HAS CLAIMED SUCH INCOME TO BE LOWER THAN THE PROFIT S AND GAINS SO DEEMED TO BE THE PROFITS AND GAINS OF HIS BUSINESS AND HIS INCOME EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME- TAX DURING SUCH PREVIOUS YEAR,] KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER D OCUMENTS AS MAY ENABLE THE [ASSESSING] OFFICER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. (3) THE BOARD MAY, HAVING REGARD TO THE NATURE OF THE BUSINESS OR PROFESSION CARRIED ON BY ANY CLASS OF PERSONS, PRESCRIBE, BY R ULES, THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS (INCLUDING INVENTORIES, WHEREVER NECESSARY) TO BE KEPT AND MAINTAINED UNDER SUB-SECTION (1) OR SUB-SECTION (2), THE PARTICULARS TO BE CONTAINED THEREIN AND THE FORM AN D THE MANNER IN WHICH AND THE PLACE AT WHICH THEY SHALL BE KEPT AND MAINT AINED. (4) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (3), THE BOARD MAY PRESCRIBE, BY RULES, THE PERIOD FOR WHICH THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS TO BE KEPT AND MAINTAINED UNDER SUB-SECTI ON (1) OR SUB-SECTION (2) SHALL BE RETAINED.] SO FROM A READING OF THE ABOVE PROVISIONS WHICH CLE ARLY STIPULATES THAT ASSESSEE WHO ARE CARRYING ON BUSINESS OR PROFESSION SHALL KE EP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH MAY ENABLE THE AO TO COMPUTE THE TOTAL INCOME. WE NOTE THAT ASSESSEE IN THE STATEMENT OF T OTAL INCOME FILED BEFORE THE AO HAS SHOWN INCOME ONLY UNDER TWO HEADS (I) SALARY INCOME (II) INCOME FROM OTHER SOURCES. WE WOULD LIKE TO REPRODUCE THE SUMMA RY OF TOTAL INCOME OF THE ASSESSEE FILED ALONG WITH THE RETURN: INCOME FROM SALARY RS. 45,57,600 INCOME FROM OTHER SOURCES RS.3,00,24,047 RS.3,45,81,647 6. WE NOTE THAT THE AO HAS ACCEPTED THE AFORESAID STATEMENT OF TOTAL INCOME FILED BEFORE HIM WITHOUT CONTESTING THE CLAIM OF TH E ASSESSEE AS TO WHETHER THE ASSESSEES CLAIM OF INCOME OTHER THAN FROM SALARY S HOULD BE FROM INCOME FROM BUSINESS. THE CONFUSION THAT HAS ARISEN IN THIS CA SE, WE NOTE IS ON THE MISDIRECTION OF AO IN THE ASSESSMENT PROCEEDINGS WH EREIN THE ASSESSMENT ORDER 28 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT OF THE ASSESSEE, THE AO HAS OBSERVED DURING SEARCH AND SEIZURE OPERATION, SHRI MANOJ BESWAL HAD MADE A CONSOLIDATED DISCLOSURE OF RS.32 CRORE VIDE HIS DISCLOSURE PETITION. OUT OF THIS CONSOLIDATED DISCL OSURE, THE ASSESSEE OWNED UP RS. 3 CR. IN THE DISCLOSURE PETITION SHRI MANOJ BES WAL IT WAS STATED THAT THE SOURCE OF SUCH UNDISCLOSED INCOME WAS OUT OF COMMODITY PRO FIT. IT HAS BEEN SUBMITTED THAT THE AMOUNT HAS ALREADY BEEN DISCLOSED IN HIS I NCOME & EXPENDITURE ACCOUNT FOR THE AY 2013-14 UNDER THE HEAD INCOME OUT OF SP ECULATIVE BUSINESS FROM SALE OF COMMODITIES. VERIFICATION OF ACCOUNTS CONF IRMS HIS CLAIM. THIS OBSERVATION IS FLAWED BECAUSE, WE NOTE THAT AO GOT CARRIED AWAY BY PERUSAL OF THE INCOME & EXPENDITURE ACCOUNT FOR AY 2013-14 S UBMITTED BY THE ASSESSEE BEFORE HIM, WHEREIN IT WAS SHOWN IN THE INCOME SIDE THAT IS RIGHT HAND COLUMN AS INCOME FROM SPECULATIVE BUSINESS FROM SALE OF COMM ODITIES AND LEFT HAND SIDE COLUMN REFLECTS THE EXPENDITURE; AND AO CAME TO THE CONCLUSION THAT ASSESSEE HAS DISCLOSED UNDER THE HEADING INCOME OUT OF SPECU LATIVE BUSINESS FROM SALE OF COMMODITIES. THE CHARACTER OF A RECEIPT AND THE HEA D UNDER WHICH IT HAS TO BE TAXED IS NOT BASED ON THE NOMENCLATURE OF RECEIPT O F INCOME SHOWN IN INCOME & EXPENDITURE ACCOUNT. ALL THE INCOMES OF REVENUE NAT URE WILL BE POSTED IN THE RIGHT HAND SIDE COLUMN OF INCOME IN THE INCOME & EXPEND ITURE ACCOUNT AND THE DESCRIPTION GIVEN THEREIN CANNOT DETERMINE THE HEAD OF INCOME PRESCRIBED UNDER CHAPTER IV OF THE ACT. THEREFORE, THE OBSERVATION O F THE AO IN ASSESSMENT ORDER IN THE LIGHT OF HIS ACTION OF ACCEPTING THE STATEME NT OF TOTAL INCOME FILED BY THE ASSESSEE ALONG WITH RETURN WHICH WITHOUT BEING CONT ESTED, IS ERRONEOUS, UNLESS THE AO WAS ABLE TO NEGATE THE CLAIM OF THE ASSESSEE BY BRINGING THE INCOME FROM COMMODITY TRANSACTIONS AS PART OF BUSINESS INCOME. IT SHOULD BE REMEMBERED THAT UNDER THE INCOME TAX ACT 1961, THE TOTAL INCOM E OF AN ASSESSEE INDIVIDUAL /COMPANY IS CHARGEABLE TO TAX U/S. 4 OF THE ACT. TH E TOTAL INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT. SECTION 14 OF THE ACT LAYS DOWN THAT FOR THE PURPOSE OF COMPUTATION, INCOME OF AN ASSESSEE HAS TO BE CLASSIFIED UNDER FIVE HEADS. IT IS POSSIBLE FOR AN ASSESSEE/INDIVIDUAL/COMPANY TO HAVE FIVE DIFFERENT SOURCES OF INCOME, EACH ONE OF IT WILL BE CHARGEABLE TO INCOME TAX ACT. PROFITS AND GAINS OF BUSINESS OR PROFESSIO N IS ONLY ONE OF THE HEADS UNDER WHICH AN ASSESSEES INCOME IS LIABLE TO BE AS SESSED TO TAX. IF AN ASSESSEE HAS NOT COMMENCED BUSINESS THERE CANNOT BE ANY QUES TION OF ASSESSMENT OF ITS PROFITS AND GAINS OF BUSINESS. THAT DOES NOT MEAN T HAT UNTIL AND UNLESS THE ASSESSEE COMMENCES ITS BUSINESS, ITS INCOME FROM AN Y OTHER SOURCE WILL NOT BE TAXED AS HELD BY THE HONBLE SUPREME COURT IN THE C ASE OF TUTICORIN ALKALI & CHEMICALS LTD. VS. CIT (1997) 227 ITR 172 (SC). IT HAS BEEN FURTHER HELD THAT WHEN THE QUESTION IS WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTION FROM THAT RECEIPT IS PRINCIPLES O F LAW AND NOT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE. FURTHER, THE HONBLE APEX COU RT HELD THAT THE QUESTION AS TO WHETHER A PRINCIPAL RECEIPT IS OF THE NATURE OF INCOME AND FALLS WITHIN THE CHARGE OF SEC. 4 OF THE ACT IS A QUESTION OF LAW WH ICH HAS TO BE DECIDED BY THE COURT ON THE BASIS OF THE PROVISIONS OF THE ACT AND INTERPRETATION OF THE TERM INCOME GIVEN IN A LARGE NUMBER OF DECISIONS OF TH E HONBLE SUPREME COURT, HIGH COURT AND PRIVY COUNCIL. AFTER TAKING NOTE OF THE A PEX COURT ORDER AS ABOVE, WE NOTE THAT THE AO IN THE ASSESSMENT ORDER AFTER HAVI NG ACCEPTED THE STATEMENT OF TOTAL INCOME (SUPRA) AND THE RETURN WHEREIN THE ASS ESSEE HAS SHOWN THE INCOME FROM COMMODITIES UNDER THE HEAD INCOME FROM OTHER SOURCES CANNOT NOW AFTER PERUSAL OF INCOME & EXPENDITURE ACCOUNT DETERMINE THE CHARACTER OF TRANSACTION IN THE PENALTY PROCEEDINGS AS INCOME F ROM BUSINESS OR PROFESSION 29 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT WHICH APPROACH/ACTION IS ERRONEOUS. WE NOTE THAT TH E ASSESSEE IN HIS STATEMENT OF TOTAL INCOME ALONG WITH RETURN HAS CLASSIFIED HI S INCOME UNDER TWO HEADS (I) SALARY AND (II) FROM OTHER SOURCES AND THE INCOME O F RS. 3 CR. AS INCOME FROM OTHER SOURCES, WHICH WE FIND THE AO HAS NOT CONTEST ED IN THE ASSESSMENT ORDER, HAS THUS CRYSTALLIZED AND THE NECESSARY INFERENCE D RAWN IS THAT ASSESSEE AN INDIVIDUAL WHO WAS ADMITTEDLY A SALARIED PERSON ENG AGED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION (THAT TOO FOR THE FIRST TIME) IN AN ACTIVITY FROM WHICH HE DERIVED INCOME FROM OTHE R SOURCES ARE NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNT WHICH ARE APPLICABLE O NLY IF THE ASSESSEE WAS ENGAGED IN BUSINESS OR PROFESSION. HOWEVER, WE FURT HER NOTE THAT THE TRANSACTIONS WHICH YIELDED INCOME, THE ASSESSEE HAD IN FACT MAINTAINED RECORDS FROM WHICH THE AO WAS ABLE TO DEDUCE THE TRUE INCOM E AND EXPENDITURE OF THE ASSESSEE. WE NOTE THE AO IN THE ASSESSMENT ORDER HA S ACCEPTED THE RETURNED INCOME COMPRISING OF INCOME FROM SALARY AND INCOME FROM OTHER SOURCES BY OBSERVING AS UNDER : TOTAL INCOME ASSESSED AS PER RETURN RS.3,44,65,120 /-. AND FURTHER WE NOTE THAT THE AO HAD SPECIFICALLY ST ATED IN THE BODY OF THE ASSESSMENT ORDER VIDE COLUMN NO. 10 THAT THE ASSESS EE IS HAVING ONLY SALARY INCOME AND INCOME FROM OTHER SOURCES. THUS FROM A P ERUSAL OF THE ASSESSMENT ORDER, IT IS NOT IN DISPUTE THAT ASSESSEE IS NOT EN GAGED IN ANY BUSINESS. AND THE AO CANNOT CHANGE THE CHARACTER OF INCOME IN A DERIV ATIVE PROCEEDING WHICH IS AN OFF-SHOOT OF ASSESSMENT PROCEEDINGS I.E. THE PENALT Y PROCEEDINGS WITHOUT CONTESTING AND MAKING A FINDING AGAINST THE CLAIM O F THE ASSESSEE IN THE ASSESSMENT ORDER AS DISCUSSED ABOVE. 7. FINALLY, THE LD. AR SUBMITTED THAT DURING THE S EARCH, THE SEARCH PARTY FOUND THE RECORDS OF THE ASSESSEES TRANSACTIONS IN SPECULATIVE COMMODITY FROM THE DRAWER OF ASSESSEES ACCOUNTANT FROM WHICH THE AO COULD COMPUTE THE INCOME OF THE ASSESSEE FROM THE SAID TRANSACTION WH ICH AMOUNT ASSESSEE DECLARED DURING SEARCH AND WHICH WAS DULY RETURNED AND WHICH FIGURE WAS ACCEPTED BY THE AO. ACCORDING TO LD. AR, THE FACT T HAT SEARCH HAPPENED ON 01.08.2012 NEED TO BE TAKEN NOTE OF SINCE UNDISPUTE DLY THERE WAS ENOUGH AND MORE TIME FOR THE ASSESSEE TO SUBMIT THE ACCOUNTS D URING ASSESSMENT PROCEEDINGS WHICH FACT HAS BEEN TAKEN NOTE OF AND C ONCURRED BY THE LD. CIT(A). THEREAFTER, THE LD. AR DREW OUR ATTENTION TO THE DE FINITION OF UNDISCLOSED INCOME GIVEN UNDER SECTION 271AAB WHICH READS AS UNDER: PENALTY WHERE SEARCH HAS BEEN INITIATED. '271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE 30 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT ******** EXPLANATION FOR THE PURPOSES OF THIS SECTION, - (A) . (B) . (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, 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 IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEA RCH 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] C OMMISSIONER 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 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 FA LSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED. ACCORDING TO THE LD. AR, FROM THE FACTS AND CIRCUMS TANCES DESCRIBED ABOVE, SINCE THE ASSESSEE IS NOT ENGAGED IN BUSINESS OR PR OFESSION, HE DOES NOT REQUIRE TO MAINTAIN THE BOOKS OF ACCOUNT AS PER SEC. 44AA O R SEC. 44AA(2) OF THE ACT, THEREFORE, THE ASSESSEES CASE FALLS IN THE SECOND LIMB I.E. OR OTHER DOCUMENTS AS STIPULATED U/S. 271AAB EXPLANATION (C) (SUPRA) W HICH DESCRIBES UNDISCLOSED INCOME FOR THE PURPOSES OF THIS SECTION WHICH IS VE RY IMPORTANT TO ADJUDICATE THIS ISSUE. THEREFORE, THE QUESTION IS WHEN THE SEARCH T OOK PLACE, THE ASSESSEES TRANSACTIONS (IN THIS CASE, THE SPECULATIVE TRANSAC TION) HAS BEEN FOUND TO BE RECORDED IN THE OTHER DOCUMENTS WHICH IS (RETRIEV ED FROM THE ASSESSEES ACCOUNTANTS DRAWER) AND BASED ON THAT THE ASSESSEE DECLARED RS. 3 CR. DURING SEARCH AND LATER RETURNED INCOME OF RS. 3 CR. AS IN COME UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WAS ACCEPTED BY THE AO IN TOTO. WE NOTE THAT SINCE THE INCOME UNDER QUESTION (RS. 3 CR.) WAS IN FACT E NTERED IN THE OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE AY 2013-14, WHICH DOCUMENT WAS RETRIEVED DURING SEARCH, HENCE, THE AM OUNT OF RS. 3 CR. OFFERED BY THE ASSESSEE DOES NOT FALL IN THE KEN OF UNDISCLOS ED INCOME DEFINED IN SEC. 271AAB OF THE ACT. SO, RS. 3 CR. WHICH WAS COMMODIT Y PROFIT RECORDED IN THE OTHER DOCUMENT MAINTAINED BY THE ASSESSEE WHICH WAS RETRIEVED DURING SEARCH CANNOT BE TERMED AS UNDISCLOSED INCOME IN THE DEF INITION GIVEN U/S. 271AAB OF THE ACT. SINCE RS. 3 CR. CANNOT BE TERMED AS UNDIS CLOSED INCOME AS PER SEC. 31 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 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. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 4. WE FIND THAT THE FACTS IN THE AFORESAID CASE AN D THE DECISION RENDERED THEREON ARE SQUARELY APPLICABLE TO THE FAC TS OF THE INSTANT CASES BEFORE US AND RESPECTFULLY FOLLOWING THE SAME, WE D ISMISS THE APPEALS OF THE REVENUE. THEREFORE, WHEN THE ASSESSEE IS NOT REQUIRED TO MAI NTAIN THE BOOKS OF ACCOUNT AS PER SECTION 44AA, THEN THE MATTER IS REQ UIRED TO BE EXAMINED WHETHER THE ALLEGED UNDISCLOSED INCOME IS RECORDED IN THE OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE AS PER CLAUSE (C) T O EXPLANATION TO SECTION 271AAB. UNDISPUTEDLY THE ALLEGED INCOME WAS FOU ND RECORDED IN THE DIARY WHICH IS NOTHING BUT THE OTHER RECORD MA INTAINED IN THE NORMAL COURSE, THUS THE SAME WOULD NOT FALL IN THE DEFINIT ION OF UNDISCLOSED INCOME. ONCE THE SAID INCOME IS FOUND AS RECORDED IN THE OT HER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, THEN IT CANNOT BE PRESUMED THAT THE ASSESSEE WOULD NOT HAVE DISCLOSED THE SAME IN THE R ETURN OF INCOME 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 A S THE VARIOUS DECISIONS ON THIS POINT, WE HOLD THAT THE PENALTY LEVIED UNDER S ECTION 271AAB IS NOT SUSTAINABLE AND THE SAME IS DELETED. IN THE CASE IN HAND THOUGH THE ASSESSEE WAS REQUIRE D TO MAINTAIN REGULAR BOOKS OF ACCOUNTS AS PER THE PROVISIONS OF SECTION 44AA OF T HE IT ACT, HOWEVER, THE AO IN THE ASSESSMENT PROCEEDINGS REJECTED THE BOOKS OF ACCOUN TS OF THE ASSESSEE UNDER SECTION 145(3) AND ASSESSED THE INCOME FROM THE ACT IVITY OF CIVIL CONTRACT ON ESTIMATED BASIS BY MAKING A LUMP SUM ADDITION OF RS . 4,50,000/-. THE DIARY FOUND DURING THE COURSE OF SEARCH AND SEIZURE AT THE BUSI NESS PREMISES OF THE ASSESSEE 32 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT CONTAINS THE ENTRIES OF ADVANCES GIVEN FOR PURCHASE OF LAND. HOWEVER, UNTIL AND UNLESS THE SAID TRANSACTION IS CARRIED OUT AS PART OF REGULAR BUSINESS ACTIVITY, THE SAME IS NOT REQUIRED TO BE RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND, THEREFORE, THE SAID AMOUNT OF ADVANCE GIVEN FOR PURCHASE OF LA ND CAN BE RECORDED IN THE CAPITAL ACCOUNT OF THE ASSESSEE. THUS THE TRANSACTIONS FOU ND RECORDED IN THE DIARY ARE TO BE RECORDED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AS WELL AS IN THE BALANCE SHEET PREPARED AS ON 31 ST MARCH, 2014 AND NOT ON THE DATE OF SEARCH AS ON 4 TH /5 TH SEPTEMBER, 2013. THE NATURE OF TRANSACTIONS IF NOT CARRIED OUT OR ENTERED INTO AS PART OF THE BUSINESS ACTIVITY ARE NOT REQUIRED TO B E RECORDED IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED FOR THE PURPOSE OF BUSINESS ACT IVITY OF THE ASSESSEE. THIS TRIBUNAL IN CASE OF SHRI RAJA RAM MAHESHWARI VS. DC IT IN ITA NO. 992/JP2017 VIDE ORDER DATED 10.01.2019 HAS AGAIN CONSIDERED THIS IS SUE OF UNDISCLOSED INCOME AS PER DEFINITION GIVEN IN THE EXPLANATION TO SECTION 271A AB OF THE ACT AND HELD IN PARA 12 TO 14 AS UNDER: 12. NOW, COMING TO ANOTHER CONTENTION OF THE LD AR WHERE HE HAS CHALLENGED THE FINDINGS OF THE LD. CIT(A) THAT PENA LTY 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 SUBMITTED THAT IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDATORY BUT ARE ALSO DISCRETIONARY CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE. IN SUPPORT, RELIANCE WAS PLACED ON PROVISIONS OF SECTION 158BFA (2) WHEREIN SIMILAR PHRASELOGY HAS BEEN USED BY THE LEGISLATURE AND DEC ISION OF HONBLE A.P HIGH COURT IN CASE OF RADHAKRISHNA VIHAR (ITA NO. 7 40/2011). 33 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 13. IN THIS REGARD, WE REFER TO THE PROVISIONS OF S ECTION 271AAB WHICH BEGINS WITH THE STIPULATION THAT THE ASSESSIN G OFFICER MAY DIRECT THE ASSESSEE AND THE ASSESSEE SHALL PAY THE PENALTY AS PER CLAUSE (A) TO (C) SO SATISFIED IN SUB-SECTION (1) TO SECTION 271A AB. FURTHER, AS PER SUB-SECTION (3) OF SECTION 271AAB, THE PROVISIONS O F SECTION 274 AND SECTION 275 AS FAR AS MAY BE APPLIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PENALTY , THE ASSESSING OFFICER HAS TO ISSUE A SHOW-CAUSE GRANTING AN OPPOR TUNITY TO THE ASSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMAT IC BUT THE ASSESSING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTAN CES OF THE CASE. SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS CO-ORDIN ATE BENCHES AND USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF TH E CO-ORDINATE BENCH IN CASE OF ACIT VS MARVEL ASSOCIATES 92 TAXMANN.COM 109 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 AUTHORITI ES BELOW. DURING THE APPEAL HEARING, THE LD. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPRESSION THAT THE LEVY OF P ENALTY 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 MA NDATORY BUT DISCRETIONARY. THE PROVISIONS 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 S ECTION 271AAB 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 A RGUED THAT THE 34 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT WORDS USED IN SECTION 271AAB OF THE ACT AND THE WOR DS USED IN SECTION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED T HAT THE PENALTY SECTION 271AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REFERENCE, WE REPROD UCE 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, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1S T DAY OF JULY, 2012, 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 SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND S PECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; 35 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB - SECTION (4_) OF SECTION 132, DOES NOT ADMIT THE UND ISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE- (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) 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 SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIO NS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN R ESPECT 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 DIRECT T HAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO 36 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETER MINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MA DE IN RESPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE 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 BY TH E ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RET URN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UND ISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDI SCLOSED 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 P ENALTY'. SIMILAR WORDS ARE USED SECTION 158BFA(2) OF THE ACT. THE WO RD MAY DIRECT INDICATES THE DISCRETION TO THE AO. FURTHER, SUB SE CTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VIEW. SUB SECTION (3) OF SECTION 271AAB: THE PROVISIONS OF SECTION 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION . 37 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CLEAR INTE NTION TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS B EEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, F ROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE P ENALTY CANNOT BE IMPOSED UNLESS THE ASSESSEE IS GIVEN A REASONABLE O PPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GI VEN TO THE ASSESSEE, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BA SIS OF THE FACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUN D BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENAL TY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNI TY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNA VIHAR I N ITTA NO.740/2011 WHILE DEALING WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO BE M ANDATORY, THE WORDS MAY DIRECT IN SUB SECTION 2 THERE OF INTENDED TO DI RECTORY'. IN OTHER WORDS, WHILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DIS CRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND R ATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE E ACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF THE ACT INDICA TES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. ACCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON MERITS OF THE EACH C ASE. 38 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT 14. THEREFORE, WE AGREE WITH THE CONTENTIONS OF THE LD AR THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATO RY. IN THE INSTANT CASE, IT THEREFORE NEEDS TO BE EXAMINED WHETHER THE RE IS ANY BASIS FOR LEVY OF PENALTY OR NON-LEVY THEREOF AND THE SAME WI LL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH W E SHALL DISCUSS IN SUBSEQUENT PARAGRAPHS. HENCE FOLLOWING THE EARLIER DECISIONS OF THE COORD INATE BENCH OF THE TRIBUNAL IN THE CASE OF RAVI MATHUR VS. DCIT (SUPRA) AS WELL AS SHR I RAJA RAM MAHESHWARI VS. DCIT (SUPRA), WE DELETE THE PENALTY LEVIED UNDER SECTION 271AAB OF THE ACT. SINCE THE ISSUE OF LEVY OF PENALTY U/S 271AAB OF THE ACT HAS BEEN DECIDED ON MERITS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE THEREFORE, THE ISSUE OF VALIDITY OF INITIATION OF THE PENALTY PROCEEDING DUE TO DEFECTIVE SHOW CAU SE NOTICE BECOME ACADEMIC IN NATURE AND WE DO NOT PROPOSE TO ADJUDICATE THE SAM E. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 26/03/2019 . SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 26/03/2019. DAS/SANTOSH 39 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI KRISHNA YADAV, JAIPUR. 2. THE RESPONDENT THE DCIT, CENTRAL CIRCLE-4, JAIP UR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 987/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 40 ITA NO. 987/JP/2017 SHRI KRISHNA YADAV VS. DCIT
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