PARAS MAL JAIN,JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, JAIPUR

ITA 1469/JPR/2024

AI Insights

The case involves Shri Paras Mal Jain, who appealed against the penalty imposed by the Assessing Officer (AO) under Section 271AAB for undisclosed income admitted during a search operation. The search, conducted under Section 132 of the Income Tax Act, 1961, led to the seizure of various documents and assets, and the assessee admitted additional business income during the search. The AO imposed a penalty, which was upheld by the CIT(A). However, the Tribunal found that the penalty was not justified as the income declared was in line with the provisions of the Act and the definitions provided therein. The Tribunal's decision was influenced by precedents and the interpretation of 'undisclosed income' under Section 271AAB.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28407 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR; THRU V.C
• Assessee Lawyers: R.K. BHATRA
• Keywords: Set aside; Business income; Capital asset; Opportunity of being heard; Question of law; Unexplained cash credit; Unexplained investment; Fair market value; Income from undisclosed sources; Document seized; Documents seized; Onus to prove; Gift; Retraction; Principle of natural justice; Search and seizure; Bogus
• Section: 143(3); 142(1); 271(1)(c); 132; 69; 69B; 13; 274; 145; 72; 246A; 158BFA

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘’A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh xxu Xkks;y ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 1469JP/2024 fu/kZkj.k o\"kZ@Assessment Year : 2014-15 Shri Paras Mal Jain 535,Tiwari Ji Ka Bagh, Adarsh Nagar, Jaipur 302 004 cuke Vs. The DCIT Central Circle-1 Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABTPJ 9660 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri R.K. Bhatra, CA jktLo dh vksj ls@ Revenue by: Shri Arvind Kumar, CIT-DR (Thru’ V.C.) lquokbZ dh rkjh[k@ Date of Hearing : 06/02/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 26/02/2025 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM The assessee has filed an appeal against the order of the ld. CIT(A), Jaipur-4 dated 23-10-2024 for the assessment year 2014-15 in the matter of Section 271AAB of the Act wherein the assessee has raised the following grounds of appeal. ‘’1. That on the facts and in the circumstances of the case the learned CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 1,00,11,335/- imposed by the learned AO u/s 271AAB of the IT Act, 1961 after 2 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR (a) rejecting submission of the appellant that reason for imposition of penalty was not specified neither in assessment order nor in notice issued for imposition of penalty. (b) upholding finding recorded by the learned AO that imposition of penalty u/s 271AAB is mandatory in nature, and © rejecting submission of the appellant that penalty u/s 271AAB cannot be imposed only on the basis of admission of income by the appellant without proving it to be undisclosed income within meaning of section 271AAB of the IT Act, 1961.’’ 2.1 Brief facts of the case are that a search and seizure action u/s 132(1) of the Income Tax Act, 1961 was carried out on 23-05-2013 at various premises of Shri Rajendra Kumar Jain and Rajendra Bardiya & other Group, Jaipur. Business/ residential premises (8, Bardiya Colony, Museum Road, Jaipur) of the assessee was also covered by the Department. It is noted from the penalty order that notice u/s 142(1) of the Act was issued to the assessee on 13-04-2015 which was duly served upon the assessee. In response to notice issued u/s 142(1), the assessee furnished return of income on 28-11-2014 declaring total income of Rs. 10,13,77,660/- which includes the undisclosed income of Rs.10,01,13,351/- which had been accepted by the assessee himself during his statements u/ 132(4) of the Act during search. It is noted that the assesee is a partner of the firm M/s Gehna Creations (35%) share of M/s. Gehna Collection (10% shares). He is a proprietor of the firm M/s Paras Gottom & Company which is engaged in the manufacturing of Export of Precious and Semi-precious stones. He has declared income from rent 3 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR (Flat in Mumbai), business income from M/s. Paras Gottom & Company, profit from firm M/s. Gehna Creations and M/s. Gehna Collection, interest from Bank, Interest from FDR and dividend during this year. It is also noticed that assessment u/s 143(3) r.w.s. 153B(1)(b) of the Act was completed on 30-03-2016 at assessed income of Rs.10,16,91,450/-. The penalty proceedings were also initiated u/s 271AAB of the Act for ‘’undisclosed income’’ admitted during the course of search vide penalty show cause notice dated 30-03-2016 and 07-09-2018 which were duly served upon the assessee. It is noted from the records that in the course of search, the assessee surrendered an income of Rs.10,01,13,351/- which he admitted as his additional business income for current year under following heads. (i) Land Advances Rs.8,40,00,000/- (ii) Increase in value of stock Rs. 68,00,000/- (iii) Jewellery and silver etc. Rs. 91,13,351/- (iv) Cash Rs. 2,00,000/- Rs10,01,13,351/- In this case, the assessee filed original return on 28-11-2014 declaring total income of Rs.10,13,77,660/- which included said additional income of Rs.10,01,13,351/- offered to tax in the course of search. The assessment u/s 143 (3) r.w.s. 153B (1) (b) of I. T. Act, 1961 was completed on 30-03-2016 after disallowance of expenses on account of personal element/unverifiable expenses. The A.O. simultaneously initiated penalty proceedings u/s 271AAB of the Act. The assessee filed his explanation to the said notice which was rejected by A.O. and vide impugned 4 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR penalty order dated levied a penalty of Rs.1,00,11,335/- on assessee firm. The present appeal is against said penalty imposed by Ld. A.O. vide impugned penalty order dated 23-03-2020. 2.2 Being aggrieved by the order of the AO, the assessee carried the matter before the ld.CIT(A) who after taking into consideration the submissions as well decisions cited by the assessee and also the penalty order, dismissed the appeal of the assessee by observing as under:- ‘’6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the penalty order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In this ground of appeal the appellant has challenged that the income is earned during the course of search and seizure action does not fall under the definition of undisclosed income as per section 271AAB of the Act. There is no dispute that the appellant had earned income which was not disclosed earlier and which was detected during the course of search and seizure action and had the search and seizure action taken place such income could not have been unearthed. a) Penalty on the issue of land advance of Rs.8,40,00,000 It is submitted by the appellant that during the course of search Ann. AS-2 page no. 1 to 5 and AS-3 page no 1-6 were found. In the said Annexure(s) entries of total land advances amounting to Rs.8,40,00,000/- were mentioned. Copy of said seized papers are enclosed. The assessee in the course of search specifically stated in his statement u/s 132 (4) and 131 of the IT Act, 1961 that said amount of 5 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR Rs.8.40 Crore Lakh is declared as current year business income buy piece and avoid long litigation with department. Thus, it is a dumb written paper. Further the officers of search proceedings and Ld. A.O. also accepted that the same is dumb written names, places and figures as no further enquiry/investigation was made. The Ld AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as business income of current year. Therefore, merely on the basis of surrender made in the search statement, this cannot be held as \"Undisclosed Income\" for the purpose of levy of penalty u/s 271AAB. The appellant has relied upon the judgement of Hon'ble ITAT in his own case on the issue of penalty u/s 271AAB for the land advances in ITA No. 353/JP/2022. However the appellant has not furnished the copy of the assessment order and penalty order for that year and also not submitted any matching of facts for the year for which the judgement has been referred by the appellant and the appellant year under appeal. The onus is on the appellant to show that the facts of the two years are same. The appellant has not discharged the onus and has merely claimed that the penalty should be deleted without showing that the facts of the two years are same. Accordingly in view of these pressing circumstances, there is no option but to treat the issue as 'not covered and deny the benefit of the judgement relied upon by the appellant. Hon'ble jurisdictional ITAT, Jaipur Bench, Jaipur in case of Mukund Sharan Goyal Vs. DCIT, CC-2, Jaipur (ITA No. 293/JP/2018 order dated 23-09-2019) has while deleting the penalty u/s 271AAB of the Act has inter-alia held that \"these papers are the seized material being a pocket diary contains some artificial entries in the names of artificial persons and thus the issue is to be decided as per the facts of the case by seeing whether the entries of land advance appear to be genuine or appear to be artificial. In the present case it is not the claim of the appellant that the names and the transactions mentioned in the diary are fictitious or artificial. The appellant has not filed any copy of submissions made before the assessing authority whereby this factual claim was made by the appellant with respect to the transactions noted in the diary that these 6 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR entries are artificial entries or fictitious entries. Similarly in the appeal proceedings also no where the appellant has made any clear-cut factual statement that the transactions mentioned in the diary are bogus and fictitious. The appellant has merely relied upon the judgements and has relied upon the extent of enquiry is done by the search team/assessing authority. In other words the appellant from his own side has not made any categorical statements and has not placed on record the contradiction and retraction, in such a scenario, the question of not accepting the transactions as genuine and to carry out for the verification and enquiry in the same to ascertain the genuineness on the part of the assessing authority does not arise. Nullus commodum capere potest de injuria sua propria meaning no man can take advantage of his own wrong-is a maxim of law, recognized and established. During the appeal proceedings notice dated 05.10.2024 was issued to the appellant whereby the appellant was required to furnish inter-alia the following details regarding land advances:- \"evidence from the seized books of accounts etc., the source evidence of unexplained assets of land advance’’ However the appellant has not submitted these details and has maintained silence on the issue in the reply filed in response to the notice. Thus adverse inference is drawn in this regard. It is a settled law that an appellant is required to be in clean hands This also distinguishes the facts of the case of the appellant from the facts of the judgements relied upon by the appellant. Further in the present case it is not the case that the land had already been purchased. The unaccounted cash available with the appellant was given by the appellant to the parties for the prospective purchase of the lands. This fact is clear from the notings in the diary. Thus the question of going into the specific address of specific land does not arise. Further from the perusal of the statement of the appellant recorded during the course of search and seizure action the appellant has 7 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR surrendered the unaccounted money which was used by the appellant to pay for the unaccounted/undisclosed and transactions. It is not the advance per se directly, but the money used by the appellant to pay for such advances, has been surrendered by the appellant during the course of search and seizure action. The appellant is accepted in the statement that unaccounted income was earned by him and out of that the payment for the undisclosed advances was made. So as per the factual scenario in the case of the appellant, the inflow money was offered by the appellant as the undisclosed income which was subsequently invested in the advances. It is mentioned by the appellant in reply to question number 25 on page number 13 of the statement that (translated). ‘’this money is my unaccounted money, of which there is no entry in the accounts books.’ It is mentioned by the appellant in reply to question number 25 on page 14 of the statement that (translated) ‘’this income was earned by me from sale purchase in my jewellery business.’’ Further, from the perusal of statement of the appellant it is seen that almost each of the transactions of money for land advance have been noted in the question and accepted by the appellant is with specific details of- (1) amount, (ii) date, (iii) road/colony where land is required (iv) name of recipient (v) detail of person through whom payment was made (vi) purpose of payment 8 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR Thus specific details of each transaction were explained by the appellant during the statement u/s 132(4) of the Act. There is no retraction from the appellant till date. It is the settled law that the statement u/s 132(4) of the Act is evidence in itself. The unaccounted money which is admittedly earned by the appellant and is the undisclosed income and which was not recorded in the books of accounts (which was later on used by the appellant to make payments for advances), such unaccounted money is the undisclosed income given in section 271AAB of the Act. And consequently the advance is the right of nature of capital asset and an undisclosed asset and falls in definition of the undisclosed income given in section 271AAB of the Ac in the facts and circumstances of the case as per judgement in Mukund Sharan Goyal Vs. DCIT, CC-2, Jaipur (ITA No. 293/JP/2018 order dated 23-09-2019) as discussed in earlier paras. In view of the above discussed facts and circumstances, as per the definition of the undisclosed income given in section 271AAB of the Act, the undisclosed income means any income of the specified previous year represented, either wholly or partly. by any money, bullion, jewellery or other valuable article or thing or In the present case, the unaccounted money and the resultant unaccounted investment (advance) were found during the course of search and seizure action which is squarely covered under the definition of the undisclosed income (b) Unaccounted/excess stock of Rs.68,00,000 It is submitted by the appellant that during the course of search in the statement recorded u/s 132(4) of the I.T. Act. 1961 the assessee surrendered a sum of Rs.68,00,000/- on account of excess value of stock. In business premises of assessee stock of precious & semi precious stones were found which was got valued from Govt. Registered Valuer who determined the value of stock at a fair market price which it could fetch. The stock found in course of search was so valued at Rs. 25,99,24,947/- The stock as per books at cost as per books of accounts was worked at Rs.25,31,30,767/- and thus in search 9 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR excess stock in value was worked out to Rs.68,00,000/-, However, no stock excess in quantity was found or determined. With respect to the above contention of the appellant, the notice dated 05.10.2024 was issued by me requiring the appellant to furnish the details of quantitative details of the actually found stock as on the date of the search and quantitative details as per the books of accounts. The query is as under:- Quantitative details of stocks as per the books of accounts as on the date of search & seizure action along with supporting documents & the quantitative details of actual stock found along with inventory sheet prepared during search However the appellant has not furnished the details and has not stated anything on the specific query raised in appeal and the appellant is concealing the evidences. Thus adverse inference is drawn against the appellant. The appellant has contended that the addition has not been made in the assessment order under section 69/69A etc. and thus the penalty is not leviable. However this contention of the appellant is misfounded as is not such condition for the levy of penalty under section 271AAB of the Act. Specific additions under section 68/69/69A etc. is required for levy of penalty under section 271AAC of the Act. Whereas in the present case the penalty has been levied under section 271AAB of the Act. For the purposes of levy of penalty under section 271AAB of the Act, the language of this section and the conditions mentioned under this section are to be seen as per which there is no such requirement that the addition has to be under section 69/69A etc. The contention raised by the appellant is omni bus and vague as they cannot be any legal provision/interpretation which would exempt the assessee from levy of penalty if such assessee records the correct quantity of stock in the books of accounts however EITHER the purchase cost is suppressed in the books by making part payment in unaccounted manner which would lead to money laundering and would result into earlier unaccounted concealed income being made as part of the stock in an illegal manner and such unaccounted income 10 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR / unaccounted cash in itself is also liable for penalty OR the value of the closing stock is suppressed which would lead to suppressed amount of gross profit and resultantly the suppressed amount of income disclosed for taxation. Both the acts are deliberate attempt by such assessee to suppress the income and evade the taxes in an artificial manner. Further, it is noticed that the appellant has not proven that the difference in stock is only due to the valuation/rate and not due to any other reason. A party who relies on a recital has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. [Refer judgement of Hon'ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR Further, the case laws judgements relied upon by the appellant are rendered in the specific facts of such cases and the facts of the case of appellant being different, the ratio of the judgements is not applicable to the facts of the case of the appellant. Further, the appellant has contended that the impugned income should fall under the definition of \"undisclosed income\" as given in explanation in section 271AAB of the Act. This contention of the appellant in principle is acceptable. In this regard it is to be seen whether the additional income which was rendered by the appellant during the course of search and seizure action is falling under the definition of \"undisclosed income or not. During the search and seizure action the physical inventory of the stock/goods was done and the same was compared with the stock as per the books of accounts and it was found that the actual stock was more than the stock as per the books of accounts. 11 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR As noted by the Id. AO, the stock was taken by a registered valuer in the presence of the key person of the assessee company The difference in value of the stock was unearthed during the course of search proceeding itself and the same would not have been disclosed or surrendered by the assessee if the search would not have been carried out. Hence, the excess stock found and accepted by the assesseee as his undisclosed income in the statement recorded u/s 132(4) of the Act and duly affirmed by affidavit is undisclosed income within the meaning of explanation (c) of section 271AAB. In the appeal submissions even though the appellant has raised the issue that the difference in stock is only due to the valuation however the appellant had not placed on record any working and any justification to show that the quantity of the stock as per the books of accounts and as found during the course of search and seizure action were same. A specific notice was issued by me requesting for the quantitative details of the stock as on the date of search actually found and quantitative details of the stock as per the books of such accounts on the date of search action. However the quantitative details were not submitted. When the appellant itself is not maintaining the stock register quantity as per books of accounts on the date of search and seizure action, how can the appellant claim that the penalty is not leviable because the assessing authority did not prove that the quantity of stock as per the books of accounts and as found during the course of search and seizure action were different. It is a settled law that no one can be allowed to take advantage of its own wrong. Nullus commodum capere potest de injuria sua propria - meaning no man can take advantage of his own wrong is a maxim of law, recognized and established. As per the definition of the undisclosed income given in section 271AAB of the Act the undisclosed income means any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or…… In the present case, the excess stock was found during the course of 12 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR search and seizure action which is squarely covered under the definition of the undisclosed income. Reliance is also placed up on the judgment of Hon'ble ITAT, Jaipur Benchs-B. Jaipur order in the case of Shri Raja Ram Maheshwari Vs. DCIT Central Circle-3, Jaipur in ITA No. 992/JP/2017 dated 10.01.2019, wherein the Hon'ble ITAT has held that \"Having accepted such excess stock of jewellery found at the time of search and which has not been found recorded at the time of search in the books of account maintained in the normal course of assessee's business relating to such previous year, income represented by such excess stock of jewellery found the time of search will fall in the definition of undisclosed income and will be subject to levy of penalty u/s 271AAB.\" In view of the above discussion, it is found that the learned AO has examined the facts of the case in detail and examined the provisions of the law and thereafter levied the penalty. Per contra, the appellant has not been able to show any illegality in the opinion of the learned AO. The appellant has not been able to make out a case of wrong decision by the assessing authority. (c) Unaccounted/Excess cash found Rs.2,00,000:- During the search unaccounted/excess cash was found. The appellant has submitted that the Ld AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as business income of current year Therefore, merely on the basis of surrender made in the search statement, this cannot be held as \"Undisclosed Income for the purpose of levy of penalty u/s 271AAB. As per the definition of the undisclosed income given in section 271AAB of the Act. the undisclosed income means any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or In the present case, the excess stock was found during the course of search and seizure action which is squarely covered under the definition of the undisclosed income. 13 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR (d) Unaccounted/Excess Jewellery Rs.91,13,351:- During the search unaccounted/excess jewellery was found. The appellant has submitted that the assessee declared a sum of Rs.91,13,351/- on account of excess gold jewllery of 2600.784 Gms valued at Rs.62,41,882/-, 64106 Gms Silver valued at Rs.24,86,068/- and loose stones of Rs.3,85,401/- It is submitted by the appellant that during the course of search total gold jewellery/ornaments of net weight of 10,580.690 gms. was found from residence and lockers of bedroom of assessee. That total weight of gold jewellery/ornaments as per wealth tax return of assessee's family members and also earlier shown/declared in VDIS Scheme, 1997 were 7979.906 Gms. Thus, the excess gold jewellery of 2600.784 gms was determined. It is submitted by the appellant that the said jewellery items were personal items of the family members and holding is very old and reasonable looking to the status of family. And that looking to the status of the family, customs of the society and other facts and circumstances the total silver found is reasonable and source of acquisition was explained. However, the assessee to buy piece and avoid litigation with department offered the said valuation of silver as his additional business income of the current year. The appellant has submitted that the department has not made any efforts to ascertain the year of acquisition of the gold jewellery and then to apply the rates as prevailing in the year of acquisition and some of the jewellery even not acquired by the assessee or the family members but is inherited, then the manner in which the disclosure is obtained on account of the jewellery would not represent the undisclosed income as defined in the explanation to section 271AAB of the Act. The above contention of the appellant is irrelevant as well as non- bona fide. The appellant evaded the tax and accumulated unaccounted assets from such unaccounted income. When the search action took place such assets created out of ill-gotten money were found and the appellant also accepted them to be from the undisclosed income. Now the penalty proceeding the appellant is arguing that the Id. AO did not 14 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR identify in which year which piece of the jewellery was acquired by the appellant. The jewellery was acquired by the appellant out of undisclosed income and no bills and documents have been maintained by the appellant and no year-wise information was provided for the verification by the learned AO, however the appellant wants and making a vague claim the assessing authority to determine the year of acquisition for each jewellery item. In the case of Kailash Swaroop Agarwal vs Commissioner of Income Tax, Ajmer in D.B. Income Tax Appeal No. 175/2012 in order dated 03/10/2017 the addition on account of unexplained cash deposits was upheld by the Hon'ble Rajasthan High Court. As noted in the order of Hon'ble Tribunal as referred in the order of Hon'ble High Court, the explanation of the assessee was rejected by the Hon'ble Tribunal in the following paras- \"5.2 Coming to the impugned addition of Rs. 14.70 lacs, we observe the assessee's explanation as fantastic by all counts, bordering on the bizarre, Firstly, the need to raise funds, which constitutes the essence of the assessee's explanation, is itself not understood…………… 5.3 The second query that arises directly, again to no answer, is as regards the mode of acceptance of the funds. Why were the funds accepted in cash? Acceptance of loans in cash, which is a risky proposition by any standards, is particularly so in the instant case considering that the funds are to be admittedly transmitted to another station, involving time and risk, if not also cost. That is, the stated course represents another act that no reasonable man of ordinary prudence and average intelligence exercising diligence would ordinarily undertake……… Further, the transmission, even if the loans came to be accepted in cash, could easily be effected through deposit of cash in the assessee's bank account (with Union Bank of India assuming the deposit to be necessarily made in that account - or ICICI Bank) at Ahmedabad, the bank accounts, even though maintained by the home branch, are not strictly branch-specific, so that they could be operated and accessed from any station where the bank has a branch. Now, it is certainly not the case that either Union Bank of India or ICICI Bank has no branch at Ahmedabad, a much bigger place than Ajmer itself. In fact, the funds could also have been 15 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR deposited in the son's account at Ahmedabad, and transmitted to Ajmer through the banking channel……… Finally, needless to add no evidence in respect of transmission of cash from Ahmedabad to Ajmer or vice versa stands adduced by the assessee before any authority. 5.4 Another equally intriguing aspect of the assessee's case, as made out, is that no receipts were admittedly obtained from the creditors upon repayment of loans. Why? In fact, there is no contemporaneous material to evidence either the receipt of funds from, or their repayment to, the creditors, which is uncomprehensible indeed, given that both the receipt as well as repayment of loans is in cash. Any creditor would insist on being issued a receipt, if not execution of a pronote, witnessed independently and also containing the terms of the loan, including as to repayment…….. 5.5 The next aspect which is the vital to the validity and, thus, the acceptance of the assessee's explanation, is the non-production of the creditors before the AO for his examination, as specifically called for by him……… This requirement is nonnegotiable, and assumes prime significance as the law envisages satisfaction' or otherwise only of the AO, so that the purview of an appellate authority like us is to examine whether the nonsatisfaction expressed by the AO is sustainable in law, le.. is the explanation furnished by the assessee one which should satisfy a man of ordinary prudence, acting reasonably and judicially, given the normal course of events, as well that of human conduct. 5.6 ………The first instalment of the bank loan (through which purchase transaction was eventually financed) was availed on 20-06- 2007, so that the decision to do so, ie, to go for the bank loan for the purpose was taken even prior thereto. Secondly, why was a loan availed when the assessee had no immediate intention to mature the purchase, time for which was available up to 21-07-2007, the balance amount of bank loan being availed only on 11-07-2007, and only understandably so, considering that acquisition was completed on 13- 07-2007. This is as loan entails interest and, besides, keeping cash in hand is always a risky proposition, so that nobody would do so. particularly where it does not serve any purpose. 16 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR 5.7 ……….The law in the matter is trite, and for which we may refer to case laws by the hon'ble apex court, which has time and again explained that the receipt of money of which the assessee is a beneficiary is itself a prima facie evidence against him, who has to satisfactorily explain the same, i.e., render an explanation as to its nature and source, which is proper, reasonable and acceptable, even as a finding as to non- satisfaction therewith is to be rendered on the basis of proper appreciation of the material and other attending circumstances available on record, application of mind being a sine qua non for forming an opinion…….. Further, the acceptance during the course of search and seizure action and the offering of the income in the return of income on these accounts is guided by the principle of section 69 of the Act. It is a settled law that even before sections 68/69 etc. were inserted in the statute, the additions were made and sustained applying the similar principles and these actions are mere codification of the earlier settled legal principles. In the case of Commissioner of Income-tax v. Md. Warasat Hussain [1987] Taxman 227 (Patna)/[1988] 171 ITR 405 (Patna)/[1988] 67 CTR 75 (Patna) [100% 1987] it was held by Hon'ble Patna High Court as under:- \"This was a matter with the special knowledge of the assessee. The Tribuna could not be expected to produce the sale deed. The learned counsel for the assessee submitted that even if the assessee did not produce the original sale deed, the revenue could have obtained certified copy of the sale deed from the registration office and disproved the stand of the assessee that the land had been sold really for a sum higher than Rs. 49,500. This does not lie in the mouth of the assessee. No Court or the Tribunal should countenance an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decried by Chinnappa Reddy, J. in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC).\" Further, the evidences and the documents and all the statements and the seizure memo etc. pertaining to the search and seizure action and pertaining to assessment proceedings have not been placed on record 17 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR during the appellate proceedings. The unexplained jewellery found during the course of search and seizure action also falls under the definition of undisclosed income as given in Clause (c) of the Explanation in section 271AAB. Reliance is also placed up on the judgment of Hon'ble ITAT, Jaipur Benchs-B, Jaipur order in the case of Shri Raja Ram Maheshwari Vs. DCIT Central Circle-3, Jaipur in ITA No. 992/JP/2017 dated 10.01.2019, wherein the Hon'ble ITAT has held that \"Having accepted such excess stock of jewellery found at the time of search and which has not been found recorded at the time of search in the books of account maintained in the normal course of assessee's business relating to such previous year, income represented by such excess stock of jewellery found the time of search will fall in the definition of undisclosed income and will be subject to levy of penalty u/s 271AAB.\" In view of the above discussion, it is found that the learned AO has examined the facts of the case in detail and examined the provisions of the law and thereafter levied the penalty. Per contra, the appellant has not been able to show any illegality in the opinion of the learned AO. The appellant has not been able to make out a case of wrong decision by the assessing authority (e) Allegation of application of pressure by the search team:- It is submitted by the appellant that the authorities of search have exerted undue pressure and obtained the surrender of income from the assessee. Appellant has also referred to Board's Circular dated 10th March, 2003 wherein the Board has expressed its concern about the practice of confession of additional income during the course of search and seizure proceedings and, therefore, clarified that the confession during the course of search and survey operation do not serve any useful purpose. The appellant there is making contradictory claims. 18 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR First, of all the appellant is making the bald and baseless allegations of undue pressure by the search team during the search action to take the surrender from the appellant. The appellant has not filed any retraction after the search action. The appellant has also not filed any complaint with the authorities after the search action. Further the appellant even disclose this unaccounted and undisclosed income which was detected during search action in its return of income. This shows that the additional income found in detected during the course of search and seizure action and accepted by the appellant was supported by evidences and there was no pressure from the search team. Secondly, the appellant has referred to the circular from the board and contended that additional income cannot be surrendered during the course of search and seizure action. In that case the appellant has not stated then why the search team would exert the pressure on the assessee for the surrender of income for taxation as there is no requirement from the Board in this regard. This contention of the appellant itself shows that the allegation of the appellant of undue pressure is false and mala fide, just to try to wriggle out of the penalty. Thirdly, the appellant was requested to file the various documents and the statement recorded during the course of search and seizure action and the documents filed before the assessing authority however the appellant has not filed these documents. This for the shows that the appellant is concealing the evidences. In view of the above discussion this contention of the appellant is rejected. (1) Claim of appellant that surrender was done to buy peace of mind and to avoid litigation:- The contention raised by the appellant that the surrender was done during the course of search and seizure action to buy peace of mind is a mere self-serving statement The surrender of income was with respect to specific undisclosed assets and investments which were found during the course of search and seizure action. 19 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR The amount of total acceptance of undisclosed income (normally referred as surrender) is not small and is substantial running into crores of rupees. It is beyond human probabilities that any assessee who is having assistance of legal Counsels and also having the legal options of representation during assessment, appeals, wrt petitions etc. would admit the undisclosed income of several crores just like that. The contention of the appellant is baseless and not bona fide. Hon'ble Supreme Court in the decision dated 30.10.2013 in Civil appeal No. 9772 of 2013 in the case of MAK Data P. Ltd. v. CIT -II (2013) 38 taxmann.com 448 (SC) has held the contentions of voluntary surrender to buy peace and avoid litigation etc cannot be considered as defence for non levy of penalty under section 271(1)(c) of the Act. The present appeal pertains to penalty under section 271AAB of the Act wherein the conditions for the levy of the penalty are much more in favour of the revenue as there is no onus on the assessing authority to show either the concealment or the furnishing of any inaccurate particulars by the assessee. Even in context of section 271(1)(c), the contentions of voluntary surrender to buy peace and avoid litigation etc. are liable to be rejected and in the context of section 271AAB even the question of considering such contentions does not arise. From the perusal of the statement of the assessee recorded in the course of search and seizure action it is seen that the issue was disclosure of the undisclosed income has been done by the appellant on the basis of specific incriminating material found during the course of search and seizure action and the disclosure of unaccounted income is duly supported with evidences found during the course of search and seizure action. As the contention of the appellant is found to be devoid of merit and is rejected. (g) Contention that addition has not been done by the Id. AO u/s 69 of the Act 20 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR The appellant has contended that the Ld AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as income of current year. Therefore merely on the basis of surrender made in the search statement, this cannot be held as \"Undisclosed Income\" for the purpose of levy of penalty u/s 271AAB. However this contention of the appellant is misfounded as is not such condition for the levy of penalty under section 271AAB of the Act. The acceptance during the course of search and seizure action and the offering of the income in the return of income on these accounts is guided by the principle of section 69 of the Act. It is a settled law that even before sections 68/69 etc. were inserted in the statute, the additions were made and sustained applying the similar principles and these actions are mere codification of the earlier settled legal principles In the case also it is held by the Hon'ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] that even after the items (stock in trade) were \"introduced in the books of account of its business, the assessee was still required to \"to prove satisfactorily the nature and source of these assets\" and in the event of failure to prove these, \"the revenue could legitimately hold that these assets represented the undisclosed income of the assessee Roshan Di Hatti (supra) is case on the issue involving issue of stock in trade which was included by the assessee in the books of accounts and even then it was held in the judgement that assessee was still required to prove satisfactorily the nature and source of these assets and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee. There is no presumption in favor of business income. Onus to prove is on assessee. 21 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR The Hon'ble Supreme Court in the case of Commissioner of Income- tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968] has held as under- \"There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC), Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case. ……… The High Court, in disposing of the application under section 66(2). expressed the view that because the amount of Rs. 20,000 was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source. But it was not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the Tribunal at the hearing of the appeal The question again assumes that it was for the Income-tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed\" As per the headnotes \"Section 145 of the Income-tax Act, 1961 (Corresponding to section 13 of the Indian Income tax Act, 1922]- Method of accounting System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to 22 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source-Held, yes\" As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed. In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] it is held by the Hon'ble Supreme Court as under- \"Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commissioner of Income-tax (1958) 34 ITR 807 810 (SC) that: \"There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature.\" To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained 23 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source, vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC) Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue could legitimately hold that these assets represented the undlisclosed income of the assessee (emphasis supplied) (i) Onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the source of amount Invested/spent. The burden has to be discharged with positive material. [As per principles laid down in Roshan Di Hatti v. Commissioner of Income-tax [1977] 127 ITR 938 (SC) (08-03-1977), Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963), CIT v. M.Ganapathi Mudaliar [1964] 53. ITR 623 (SC)/A, Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)] (ii) If the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Ravenue to show that income is from any other particular source. [As per pimciple laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)). (iii) Unexplained cash / unexplained investment cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)(01-08-1968) Making book entries regarding the unexplained income / unexplained cash does not result into such income to be treated as explained. The 24 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR assessee is required to show and explain the source with verifiable information. [Ratio of judgements of Hon'ble Supreme Court in the cases of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968 and Roshan Di Hatti v Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] (iv) Once it was found by Assessing Officer that there was unaccounted cash/unexplained investment, in absence of explanation by assessee, conclusion was inescapable that unaccounted cash/unexplained investment, was from undisclosed sources Further once assessee's explanation, if any, had not been accepted, resultant position was that there was unaccounted cash unexplained investment undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. v Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed reported at [2022] 141 taxmann.com 477 (SC)/(2022) 288 Taxman 635 (SC) (25- 07-2022) Further not mentioning of the section in the assessment order is not due to the fault of the assessing authority but due to the reason that the income was already offered by the appellant in the return of income and further, the assessment year being 2014-15, and considering the facts of the case, whether the income was being taxed as per rate given in section 115BBE or as per normal rates, was immaterial. No addition has been made in the assessment order in this regard. Further, specific additions under section 68/69/69A etc. is required for levy of penalty under section 271AAC of the Act. Whereas in the present case the penalty has been levied under section 271AAB of the Act. For the purposes of levy of penalty under section 271AAB of the Act, the language of this section and the conditions mentioned under this section are to be seen as per which there is no such requirement that the addition has to be under section 69/69A etc. and thus this contention of the appellant is hereby rejected. In view of the above discussion, this ground of appeal is hereby dismissed.’’ 25 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR 2.3 During the course of hearing, the ld .AR of the assessee repeated the same arguments as made before the ld. CIT(A) and prayed that the ld. CIT(A) is not justified in confirming the penalty u/s 271 AAB of the Act. The ld.AR of the assessee has also filed following submission and the case laws to counter the order of the ld. CIT(A). ‘’Submission of the assessee I. On legal The Ld. A.O. has levied impugned penalty u/s 271AAB of the I T Act, 1961. In this connection it is submitted that the section 271AAB of Act has three limbs as specified in Section i.e. 271AAB (1) (a), (b) & (c) and the notice dated 30-03-2016 sent to assessee alongwith assessment order does not specify in which limb the penalty sought to be levied and only mentioning of Section271AAB in notice do not satisfy the requirement of law. The language of the said notice issued is“Whereas in the course of assessment proceedings before me for the A.Y. 2014-15 it appears to me that as per section 274 and 275 read with section 271AAB of the I T Act you are liable for penalty on assessed undisclosed income. The Ld. A.O. thereafter issued another show cause notice dated 16-08-2016 by changing only date of notice stating the same wordings of earlier notice dated 30-03-2016 that ““Whereas in the course of assessment proceedings before me for the A.Y. 2014-15 it appears to me that as per section 274 and 275 read with section 271AAB of the I T Act you are liable for penalty on assessed undisclosed income.” Again, a third show cause notice dated 07-09-2018 was issued having the same wordings of earlier notice(s). The assessee after receiving this notice filed his explanation on 14-09- 2018. The Ld. A.O. on receipt of explanation of assessee passed the penalty order on 23-03- 2020. It is verifiable that all the three notices were issued in a routine manner without mentioning under which clause of section 271AAB of the Act the assessee is liable for penalty. It 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 assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are violated. On the basis of such proceeding, no penalty could be imposed on the assessee. Thus, there is no application of mind 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 the assessee is required to show cause. Even the AO has not given any ground for levy of penalty for which the assessee could put his defense. 26 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR Thus, 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 his cogent reply to the show cause notice. Though the AO while passing the impugned order has imposed the penalty as per clause (a) of section 271AAB(1) of the Act, however, no such ground was specified in the show cause notice issued under section 271AAB read with section 274 of the Act. In this respect Reliance is placed on the judgement of Hon'ble Karnataka High Court in the case of CIT Vs. M/s SSA’s EMERALD MEADOWS reported in 2015 (11) TMI 1620 - , wherein Hon'ble Court has held that: - “3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271 (1) (c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX – VS – MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. In our view, since the matter is covered by judgement of the Division Bench of this Court, we are of the opinion, no substantial question of law arised in this appeal for determination by this Court. The appeal is accordingly dismissed.” The department has filed SLP in Hon'ble Supreme Court which has been dismissed. Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT Vs. SSA’s Emerald Meadows And CIT Vs Manjunatha Cotton &Ginnign Factory & others [2013] 359 ITR 565. Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T. Ashok Pai (Supra) held as under:- “………. Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars 27 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR of income. The Standard proforma without striking of the relevant clauses will lead to an inference as to non application of mind…..? The Hon’ble ITAT, Jaipur Bench, Jaipur in the case of Anuj Mathur Vs DCIT, CC-4, Jaipur (ITA No. 971/JP/17) held that “As regards the validity of notice under section 274 for want of specifying the ground and default, we find that when the basic condition of the undisclosed income not recorded in the books of accounts does not exists, then the same has to be specified by the AO in the show cause notice and further the AO is required to give a finding while imposing the penalty under section 271AAB. Even if the AO is satisfied and come to the conclusion that the assessee has not recorded the undisclosed income in the books of accounts or in the other documents / record maintained in normal course relating to specified previous year, the show cause notice shall also specify the default committed by the assessee to attract the penalty @ 10% or 20% or 30% of the undisclosed income. There is no dispute that the AO has not specified the default and charge against the assessee which necessitated the levy of penalty under section 271AAB of the Act. Consequently, the assessee was not given an opportunity to explain his case for specific default attracting the levy of penalty in terms of clauses (a) to (c) of section 271AAB(1) of the Act. In view of the above the show cause notice issued by the AO in the case of assesee is not sustainable. The appellant also relied on the following decision:- i. DCIT vs. Shri R. Elangovan in ITA No. 1199/CHNY/2017 dated 05-04-2018 : The Hon’ble Tribunal in the said case while considering the validity of show cause notice and initiation of proceedings under section 271AAB and following the decision of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) as well as the decision of Hon’ble Supreme Court dismissing the SLP filed by the revenue in the case of CIT vs. SSA’s Emerald Meadows, 242 Taxman 150 (SC) held that the notice issued under section 274 read with section 271AAB of the Act not specifying the ground and clauses for levy of penalty was not valid and consequently the penalty order was set aside. ii. Hon’ble Jurisdictional High Court in the case of Sheveta Construction Co. Pvt. Ltd. in DBIT Appeal No. 534/2008 dated 06.12.2016 wherein the Hon'ble High Court at Para 9 of its order held as under: - “…… Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observation made in the said judgement, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing officer in the assessment order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it 28 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR is so he has to say so in the notice and record a finding in the penalty order ….” (Emphasis Supplied). iii. Narayana Heihts& Towers, Vs. I.T.O. Ward – 2- 4 Jaipur ITA No. 1033/JP/2016 iv. The ITAT, Jaipur Bench, Jaipur in case of Lal Chand Mittal Vs. DCIT (ITA No. 772/JP/2016 order dated 29-12-2011 and various other cases decided by it held that on the basis of such notice issued by sending printed where only all the ground of section 271 (1) (c) are mentioned or where show cause notice u/s 271 (1) (c) for imposing of penalty without specifying the limb for reasons to impose penalty whether for concealment of income or furnish inaccurate particulars of income is not as per law and assessing officer did not have any jurisdiction to impose penalty u/s 271 (1) (c). In the case(s) Radha Mohan Maheshwari Vs. DCIT (ITA No. 773/JP/2013) Mohd. Sharif Khan Vs. DCIT (ITA No. 441/JP/2014) Shankar Lal Khandelwal Vs. DCIT (ITA No. 878/JP/2013)Murari Lal Mittal (ITA No. 334/JP/2015 order dated 9-11-2016 and Mridula Agarwal (ITA No. 176/JP/2016) the Hon'ble Bench upheld the same view. v. The Hon’ble ITAT, Jaipur Bench, Jaipur in a recent case of Gopal Das Sonkia Vs. DCIT, CC-2, Jaipur (ITA No. 306/JP/2018) order dated 11-04-2019 held that “it is clear that both the show cause notices issued by the AO for initiation of penalty proceedings under section 271AAB are very vague and silent about the default of the assessee and further the amount of undisclosed income on which the penalty was proposed to be levied. Even the Hon’ble Jurisdictional High Court in case of Shevata Construction Co. Pvt. Ltd in DBIT Appeal No. 534/2008 dated 06.12.2016 has concurred with the view taken by Hon’ble Karnataka High Court in case of CIT Vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Karnataka) which was subsequently upheld by the Hon’ble Supreme Court by dismissing the SLP filed by the revenue in the case of CIT Vs. SSA’s Emerald Meadows, 242 taxman 180(SC). Accordingly, following the decision of the Coordinate Bench as well as Hon’ble Jurisdictional High Court, this issue is decided in favour of the assessee by holding that the initiation of penalty is not valid and consequently the order passed under section 271AAB is not sustainable and liable to be quashed.” Thus, it is submitted that notice issued u/s 271AAB by Ld. A.O. to assessee is wrong and bad in law and consequently the penalty levied u/s 271AAB(1)(a) is also wrong and bad in law which deserves to be deleted. II. Submission on merit : i. It is submitted that Section 271AAB starts with the phrase that ‘The Assessing officer may’ thus while “may” permits the assessing officer to give direction to impose penalty or not, the use of word “shall” does not leave any discretion relating to levy 29 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR of penalty. In this respect reliance is placed on the judgement of Hon'ble Supreme Court in case of CIT Vs Smt. P.K. Noorjahan (1999) 237 ITR 0570 wherein Supreme Court held that word ‘may’ give discretion to A.O. in the matter and said discretion has to be exercised keeping in view the facts and circumstances of the particular case judicially. The fact that the minimum is prescribed does not mean that penalty must necessarily be imposed in every case falling within sub-s (1). Shah, acting CJ said in Hindustan Steel Ltd. v State of Orissa 83 ITR 26. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty. The discretion of the A.O. to levy or not to levy a penalty is still preserved by this section, it must be exercised judicially and on a consideration of all the relevant circumstances. Recently the ITAT Kolkata Bench in case of DCIT Vs. Manish Agarwal (2018) 92 taxmann.com 81 held “We agree with the said contention of Ld. AR because when a similar issue was adjudicated by ITAT Lucknow (the author of this order was a member of the Bench) in Sandeep Chandak v. CIT [2017] 55 ITR (Trib.) 209 (Luck.) while adjudicating a case where penalty was levied under section 271AAB of the Act it was held 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” not “shall”. “May” cannot be equated with “shall” especially in penalty proceeding. Using the word “may” in our opinion, gives a discretion to the A.O. to levy the penalty or not to levy, even if the assessee has made the default under the said provision.” In case of ACIT Vs. Marval Associates the Visakhapatnam Tribunal (2018) 92 taxman.com 109/ (2018) 170 ITD 353 it was held “Careful reading of section 271AAB of the Act, the words used are ‘A.O. 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 A.O. 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. The legislature has included the provisions of section 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, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Once the opportunity 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 mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s 271AAB 30 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case.”The penalty order u/s 271AAB is an appealable order u/s 246A before CIT (A). If the penalty u/s 271AAB had been mandatory there would have not been provision of appeal u/s 246A. The Ld. A.O. is, therefore, wrong and has erred in law in holding that assessee is liable for penalty u/s 271AAB of the I Tact, 1961. ii.It is submitted that in the case search u/s 132 of the Act was carried out in assessee’s business premises no incriminating material was found during the search The surrender of current year additional business income by assessee of Rs.10,01,13,335/- was just to buy peace by assessee. Thus, it is only by admission of assessee on which the assessee declared and included the said amount in return of income filed as his additional business income of current year and paid tax thereon. The Ld. A.O. also accepted the declared income as business income of current year except petty disallowance of expenses. Thus, there is no iota of evidence that surrendered income was undisclosed income. The reliance is placed on the judgement in case of ACITVs. Marval Associate (2018) 170 ITD 353. In the said judgement it was held that Section 271AAB sub-clause (c) of the Act defines undisclosed income as under:- (c) “undisclosed income” means- (i) Any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of accounts or other documents or transactions found in the course of a search under section 132, which has – A. Not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or B. Otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) Any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted. Penalty u/s 271AAB attracts on undisclosed income but not on admission made by the assessee u/s 132 (4). The A.O. must establish that there is undisclosed income on the basis of incriminating material. It is so specifically held by ITAT, Visakhapatnam Bench in ACIT Vs. Marval Associates supra. 31 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR The Ld. A.O. taking the admission of income by assessee as undisclosed income of assessee. In search authorities did not find any undisclosed asset, any other undisclosed income. The Hon'ble ITAT Delhi Bench in the case of Ajay Sharma v. Dy. CIT [2013] 30 taxmann.com 109held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee which has not been declared by the assessee. The facts of the assessee’s case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AB of the Act. In the case of assessee also Ld. A.O. has not established that the income disclosed by assessee in return filed is undisclosed income of assessee within the meaning of Section 271AAB and unless that is established by Ld. A.O. no penalty u/s 271AAB can be imposed on assessee. iii. In the course of search the assessee has offered additional business income of Rs.10,98,80,000/- under the following heads:- a. Land Advances 8,40,00,000/- b. Increase in value of stock 68,00,000/- c. Jewellery and silver etc. 91,13,351/- d. Cash 2,00,000/- ------------------- Total 10,01,13,351 ------------------- Before submitting the detail submission it is submitted that a penalty order u/s 271AAB of I.T. Act, 1961 for the A.Y. 2013-14 (having carbon copy of facts of the case) was also passed in the assessee’s own case by the same Ld. Assessing officer. That the assessee against the said order filed an appeal before the Hon’ble ITAT, Jaipur Bench, Jaipur and Hon’ble Bench deleted the said penalty vide order dated 22-06-2023(ITA No. 353/JP/2022). A copy of said order is enclosed. Thus the appeal is fully covered from the said order of Hon’ble ITAT, Jaipur Bench, Jaipur.’’ 2.4 On the other hand, the ld. CIT(A) supported the order of the ld. CIT(A). 2.5 We have heard both the parties and perused the materials available on record. As regards the issue of Penalty of land advance of Rs.8,40,000/- it is noted that during the course of search Ann. AS-2 page no. 1 to 5 and AS-3 page no 1-6 32 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR were found. In the said Annexure(s) entries of total land advances amounting to Rs.8,40,00,000/- were mentioned. The assessee in the course of search specifically stated in his statement u/s 132 (4) and 131 of the I T Act, 1961 that said amount of Rs.8.40 Crore Lakh is declared as current year business income to buy piece and avoid long litigation with department. Thus, it is a dumb written paper. Further the officers of search proceedings A.O. also accepted that the same is dumb written names, places and figures as no further enquiry/investigation was made. The AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as business income of current year. Therefore, merely on the basis of surrender made in the search statement, this cannot be held as “Undisclosed Income” for the purpose of levy of penalty u/s 271AAB. Thus, it is only by admission of assessee on which the assessee included the said amount in return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. Further the department has carried out search and seizure operations on the assessee group and during the course of search, the department has not found any evidence, which shows that the assessee was having any undisclosed income. The revenue authorities have exerted undue pressure and obtained the surrender of 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 about the practice of confession of additional income during 33 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR the course of search and seizure proceedings and, therefore, clarified that 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. For ready reference the said circular is reproduced herein below: GOVERNMENT OF INDIA MINISTRY OF FINANCE & COMPANY AFFAIRS DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Subject: Confession of additional Income during the course of search & seizure and survey operation -regarding “Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that 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 Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.” The Board has again issued a Circular dated 18th December, 2014 and advised the taxing authorities to avoid obtaining admission of undisclosed income under 34 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR coercion/undue influence. It is noted that the jurisdictional ITAT, Jaipur Bench, Jaipur in case of Mukund Sharan Goyal Vs. DCIT, CC-2, Jaipur (ITA No. 293/JP/2018order dated 23-09-2019) held as under:- ‘’We have considered the rival submissions as well as the relevant material on record. During the course of search and seizure action under section 132 of the IT Act, a pocket diary was found and seized containing the entries of advances for land. The heading of these entries is Land Advance in the name of certain persons. However, neither any particulars of those persons are mentioned nor the particulars of the land for which the alleged advance is given is mentioned in the seized material. The entries are only certain names, dates and amount. Even from the names mentioned in the diary, the identity of these persons cannot be ascertained. Similarly the details of the land are also not given in the seized material. Thus in the absence of corresponding asset being the land acquired by the assessee or any document executed between the parties for acquiring of the land, these entries itself do not represent the undisclosed income. As per the definition provided in the Explanation to section 271AAB, if the assessee has acquired an asset which is detected during the course of search and not found recorded in the books of account then the said asset would be considered as undisclosed income but in the absence of the asset it is the mere noting in the diary which appears to be made in one go and in the names of some fictitious persons without having the minimum particulars of identity. The department has not even tried to ascertain the identity of these persons found in the seized material as no question was asked during the statement recorded under section 132(4) of the Act. Similarly, no attempt was made to identify the particulars of the land for which the alleged entries of advances are recorded in the seized document. Thus prima facie it appears that these papers are the seized material being a pocket diary contains some artificial entries in the names of artificial persons. The entries in itself do not reveal the realistic 37 ITA No. 293/JP/2018 Shri Mukund Sharan Goyal, Jaipur. transaction in the absence of the minimum particulars and details either of the persons or the land. An identical issue has been considered by the Coordinate Bench of this Tribunal in case of M/s. Rambhajo’s vs. ACIT (supra) as well as Shri Rajendra Kumar Gupta vs. DCIT (supra). Subsequently, the Tribunal in case of Shri Padam Chand Punliya vs. ACIT (supra) has also considered this issue in para 8 as under :- Accordingly, in view of the facts and circumstances of the case as well as the decision of the Coordinate Bench of this Tribunal in the case of Rajendra Kumar Gupta vs. DCIT (supra), we hold that the entries in the seized documents representing the expenditure on account of construction of the house and purchase of other assets as well as advances in the absence of the real transactions do not constitute the undisclosed income of the assessee as defined in the explanation to section 271AAB of the Act. Accordingly, the penalty levied under section 271AAB in respect of the said amount is not sustainable and liable to be set aside.” 35 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR Further in a recent judgment of jurisdictional ITAT, Jaipur Bench, Jaipur in case of Rajendra Kumar Gupta Vs. DCIT, CC-2, Jaipur (ITA No. 359/JP/2017 order dated 18-01-2019 ) held as under:- “2.1 During the course of search, a note book (diary) 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 statement of the assessee in respect of these notings recorded u/s 132 (4), Ld. CIT (A) has given a finding that the assessee has given a generalized statement without specifying the complete 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 assessee, in absence of anything specific to corroborate such entries, can it be said that such entries/notings represent undisclosed income of the assessee. As per the definition of undisclosed income u/s 271AAB, the said cash advances cannot be stated to be income which is represented by any money, bullion, jewellery or other valuable particle or thing. Whether it can then be said that such undisclosed cash represents income by way of any entry in books of account or other documents or transactions found in the course of a search under section 132. A cash advance per se represents an outflow of funds from the assessee’s hand and an income per se represents an inflow of funds in the hands of 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 third party. Giving an advance and income thus connotes different meaning and connotation and thus cannot be used inter-changeably. 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 transactions found in the course of a search under section 132”, what perhaps has been envisaged by the legislature is an inflow of funds in the hands of the assessee which has been found by way of any entry in the books of accounts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course and not vice-versa. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein 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 statue book and have therefore 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 investments to tax in the quantum proceedings, though the fact of the matter is that the A.O. has not even invoked the said deeming provisions in the quantum proceedings. Therefore, even on this account, the 36 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR deeming fiction cannot be extended to the penalty proceedings which are separate 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 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 defined or deemed for the purposes of bringing the amount to tax. In light of the same, the undisclosed investment by way of advances can be subject matter of addition in the quantum proceedings, 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, 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 deserves to be set-aside.” Thus the above findings of law and the said judgment squarely applies in case of assessee on the facts of the case. 2.5.1 As regards the issue relating to increase in value of stock amounting to Rs.68,00,000/-, it is noted that that during the course of search in the statement recorded u/s 132(4) of the I.T. Act, 1961 the assessee surrendered a sum of Rs.68,00,000/- on account of excess value of stock. In business premises of assessee stock of precious & semi precious stones were found which was got valued from Govt. Registered Valuer who determined the value of stock at a fair market price which it could fetch. The stock found in course of search was so valued at Rs. 25,99,24,947/-. The stock as per books at cost as per books of accounts was worked at Rs.25,31,30,767/- and thus in search excess stock in value was worked out to Rs.68,00,000/-. However, no stock excess in quantity was found or determined. It is an admitted fact that there is no identifiable/separable stock found which can be said as undisclosed. More particularly, assessee has no 37 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR unexplained purchases or sales. It is noted that there is no real income and no real excess stock and without establishing it, real income, no penalty can be imposed presuming the hypothetical income. It is further noted that in the instant case, the said surrender has been made on account of excess stock and it is not a case where during search, unaccounted sales or unexplained purchases have been found. Therefore, whenever the assessee will sell these stocks, the resulted profit will automatically get incorporated in its taxable profits. Under the facts and circumstances, in no case there would be any undisclosed income of the assessee, therefore, provision of this section is not attracted in the instant case. It is not the case where Department either found any income or any assets or any expenses not recorded in the regular books of accounts or documents, hence, it does not meet the definition of undisclosed income given in Section 271AAB. It is clear that increase in value of stock will automatically reduce the profit in future at the time of sale, therefore, to avoid the protracted and imposed litigation and to buy peace of mind, surrender was made and disclosed in the return of income, as it will not impact the financial tax liability in totality. We take support to the decision of ITAT, Jaipur Bench, Jaipur in a recent case M/s Rambhajo Vs ACIT CC-1, Jaipur (Ita No. 991/JP/17) dated 11-01-2019 wherein it was held that:- “ 38 Firstly, regarding stock of Kundan Meena, and diamond and other gemstones studded jewellery which has been surrendered during the course of search, what has 38 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR to be determined is the income which is represented by such stock of jewellery which is not found recorded inthe books of accounts maintained in the normal course relating to such previous year. In other words, the value at which such stock 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. In the instantcase, it has been contended that the valuation of the stock has been done at market rate as on date of search without considering the cost disclosed in the books of accounts and without considering the well-accepted accounting policy which has been followed by the assessee firm where it values its stock at lower of cost and net realizable value. The cost can be determined on the basis of historical and/or current cost so recorded in the books of accounts. Alternatively, past gross profit percentage can also give a reasonable basis for determining such cost. In the instant case, the ld AR has contended that where gross profit of the past year determined at the rate of 13.92% is used and applied to the stock valued by the Revenue at thecurrent market value, it will result in a scenario where the stock as per books of account is higher than the stock valued at the time of search. As per computation prepared which we have noted above, we find that stock (including stock of silver jewellery) as per books of accounts comes to Rs 35,11,24,031 as against Rs 34,27,22,924 valued by the Department at the time of search and therefore, contention so advanced by the ld AR is found reasonable. Another aspect which has been submitted by the assessee relates to non-deduction on account of chapadi, wax etc for the Kundan Meena Jewellery while physically weighing the jewellery. It was submitted by the ld AR that the said fact was duly brought to the notice of Assessing officer vide written submission dated 15.12.2015, however, the same has not been considered by the Assessing officer. In our view, given that the assessee has disclosed the whole of the amount surrendered during the course of search in its return of income, the amount so surrendered and disclosed in the return of income has rightly been brought to tax in the quantum proceedings. However, as far as penalty proceedings are concerned, the Assessing officer is required to give a specific finding that there is an undisclosed income found during the course of search and which has not been recorded in the books of account. In the instant case, we find that the Assessing officer has merely gone by the surrender statement and has not examined the matter from the perspective of determining the cost of such stock and the quantification thereof after allowing deduction for Chapadi, wax, etc. which is a well established step as part of valuation methodology of such kind of jewellery and which has been followed at other locations except at Jaipur. There is no finding that there is any excess stock which has been physically found and which has not been found recorded in the books of accounts as on the date of search. In light of above discussions, it is thus clear that difference in stock of jewellery and silver items as per books and as found at the time of search is on account of valuation of such stock at the market value instead of cost and such valuation difference and on account of non-deduction of Chapadi, wax, etc while weighing the Kundan Meena Jewellery and the same 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 liable to be set-aside.” 39 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR We further take support of the decision of ITAT, Jaipur Bench, Jaipur in the case of M/s Silver & Art Palace (ITA No. 236/JP/18), dated 11-02-2019 wherein it was held that “as far as present penalty proceedings u/s 271AAB are concerned which is solely based on the search proceedings and anyways independent of the assessment proceedings, the Assessing officer is required to give a specific finding that there is an undisclosed income found during the course of search in terms of undisclosed stock and which has not been recorded in the books of account. The undisclosed stock could be in terms of physically identifiable stock not found recorded in the books of accounts or the stock not found recorded at the appropriate 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 perspective of determining separate identifiable stock not found recorded in the books of accounts and also the cost of such stock which is not recorded in the books of accounts. There is no finding that there is any excess stock which has been physically found and which has not been recorded in the books of accounts as on the date of search. In light of above discussions, it is thus clear that difference in stock of goods as per books and as foundat the time of search is on account of valuation of such stock at the market value instead of cost and the same cannot be a basis to hold that it represent 40 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR undisclosed income so defined in explanation to section 271AAB of the Act and the penalty levied thereon is liable to be set aside.’’ Hence, in this view of the matter, it is found that the surrender of Rs.68,00,000/- made on account of excess stock is not come within the ambit of term undisclosed income and accordingly no penalty is imposable u/s 271AAB of the I T Act, 1961. 2.5.2 As regards the issue of excess cash found amounting to Rs.2.00 lacs, it is noted the assessee during the course of search declared additional business income of Rs.10,01,13,335/- for the year under consideration and shown as “Current year business income offered to tax during the course of search” in the computation of total income/return of income out of which Rs.2,00,000/- represents cash. The is pertinent to mention that assessee is a leading jeweler of Jaipur and assess to tax and also his family members since last more than 50 years. The excess cash Rs. 2,00,000/- was accumulated from house hold expenses, etc. and gifts received from the friends and relatives on various auspicious occasions. It is also evident from the assessment order that neither during the course of search nor during the assessment proceedings, it has been established by the IT Department that the said cash in hand was acquired, out of undisclosed income. The Bench feels from the entire facts of the case that the above said amount is a petty amount and looking to the status of the family, the said cash of Rs. 2,00,000 does not represents his undisclosed income. The AO has not determined it as income from other sources 41 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR u/s 69 of Income Tax Act in the assessment but accepted as business income of current year. Therefore, merely on the basis of surrender made in the search statement, this cannot be held as “Undisclosed Income” for the purpose of levy of penalty u/s 271AAB. 2.5.3 As regards the issue of Excess Jewellery amounting to Rs.91,13,351, it is noted from the record that the assessee further declared a sum of Rs.91,13,351/- on account of excess gold jewllery of 2600.784 Gms valued at Rs.62,41,882/-, 64106 Gms Silver valued at Rs.24,86,068/- and loose stones of Rs.3,85,401/-. It is also noted that during the course of search total gold jewellery/ornaments of net weight of 10,580.690gms. was found from residence and lockers of bedroom of assessee. That total weight of gold jewellery/ornaments as per wealth tax return of assessee’s family members and also earlier shown/declared in VDIS Scheme, 1997 were 7979.906 Gms. Thus, the excess gold jewellery of 2600.784 gms was determined by the department. It is noted that the said jewellery items were personal items of the family members and holding is very old and reasonable looking to the status of family. The said items were received from both sides of relatives and friends at the time of marriage and thereafter on various other festivals and auspicious occasions. It is customary in Indian society that every parent, friends & relatives to present some gifts in gold etc. to her daughter & son in law at the time of marriage. Thus looking to the status of the family, customs of the society and other facts and 42 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR circumstances the total silver found is reasonable and source of acquisition was explained. However, the assessee to buy piece and avoid litigation with department offered the said valuation of silver as his additional business income of the current year. However the department has not made any efforts to ascertain the year of acquisition of the gold jewellery and then to apply the rates as prevailing in the year of acquisition and some of the jewellery even not acquired by the assessee or the family members but is inherited, then the manner in which the disclosure is obtained on account of the jewellery would not represent the undisclosed income as defined in the explanation to section 271AAB of the Act. It is noted that the AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as income of current year. Therefore merely on the basis of surrender made in the search statement, this cannot be held as “Undisclosed Income” for the purpose of levy of penalty u/s 271AAB. It is thus noticed that the additional business income declared in the income tax return filed u/s 139 (1) of the Income Tax Act, 1961, cannot be treated as “Undisclosed Income” within the specific meaning given in section 271AAB. The Department carried out search and seizure operations over assessee group and during the course of the search, the Department has not found any evidence of unaccounted purchase/sales or source of undisclosed income. The disclosure of additional income was bona-fide disclosure by the assessee to avoid prolonged litigation. 43 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR During the course of assessment proceedings, the A.O. could not prove any source of undisclosed income of the assessee. The A.O. completed the assessment u/s 143 (3) of Income Tax Act and merely on the basis of search statement, the additional business income was accepted. The additional income declared in Profit and Loss Account of the assessee is based on the search statement in order to avoid prolonged litigation. It is noted that the authorities of search have exerted undue pressure and obtained the surrender of income from the assessee. Our attention was drawn towards Board’s Circular dated 10th March, 2003 wherein the Board has expressed its concern about the practice of confession of additional income during the course of search and seizure proceedings and, therefore, clarified that 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 issued a Circular dated 18th December, 2014 and advised the taxing authorities to avoid obtaining admission of undisclosed income under coercion/undue influence. Except the statement under section 132 (4), there is no undisclosed income in the case of the assessee. The assessee was forced to admit and surrender the income in the statement recorded under section 132 (4). The provisions of section 271AAB clearly requires that such undisclosed income to be substantiated and, therefore, the 44 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR 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 source of income, the entire disclosure on papers is to avoid undue harassment and unwanted litigation. Thus there was no undisclosed income in the hands of the assessee, The income of Rs.10,01,13,335/- surrendered in search statement was shown as current year business income. The Ld. A.O. has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as business income of current year. We also rely on the following case laws on the above mentioned issues. a) Shri Raja Ram Maheshwari Vs. DCIT CC-3, Jaipur (ITA No. 992/JP/2017) dated 10-01-2019 b) Dinesh Kumar Agarwal Vs. ACIT, CC-1, Jaipur (ITA No. 855 & 856/JP/2017) dated 24-07-2018. c) Suresh Chand Mittal Vs. DCIT, CC-2, Jaipur (ITA No. 931/JP/2017) dated 02-07- 2018. d) Ravi Mathur Vs DCIT, CC-4, Jaipur (ITA No. 969/JP/2017) dated 13-06- 2018. e) Shyam Sunder Khandelwal Vs. DCIT, CC-2, Jaipur (ITA No. 307/JP/2018) dated 11-04-2019. f) Ram Bhajo Vs. ACIT, CC-1, Jaipur (ITA No. 991/JP/2017 dated 11-01-2019) g) Silver and Art Palace Vs. DCIT, CC-4, Jaipur (ITA No. 236/JP/2018) dated 11-02- 2019. h) Padam Chand Pungalia Vs. ACIT CC-1, Jaipur (ITA No. 112/JP/2018) dated 05- 04-2019. i) Suraj Mal Bansal (HUF) Vs. DCIT, CC-3, Jaipur (ITA No. 124/JP/2018) dated 08- 04-2019. j) Vimal Chand Surana Vs. DCIT, CC-2, Jaipur (ITA No. 304/JP/2018) dated 30-05- 2019. 45 ITA NO. 1469/JP/2024 SHRI PARAS MAL JAIN VS DCIT, CENTRAL CIRCLE-1 JAIPUR Hence in view of the above facts, circumstances of the case and the decisions cited (supra),we hold that there is no undisclosed income within the meaning of section 271AAB which is either admitted by assessee or determined by A.O. in assessment and hence penalty of Rs. 1,00,11,335/- imposed by A.O. u/s 271AAB and sustained by the ld. CIT(A) are wrong and bad in law and the same is directed to be deleted. Conclusively, the appeal of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- ¼xxu Xkks;y ½ ¼lanhi xkslkbZ½ (Gagan Goyal) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 26/02/2025 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Paras Mal Jain, Jaipur 2. izR;FkhZ@ The Respondent- The DCIT, Central Circle-1, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 1469/JP/2024) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar "