Penalty under Section 271AAB quashed by ITAT for lack of search under Section 132.

The ITAT concluded that the penalty under Section 271AAB could not be sustained as the assessee was not subjected to a search under Section 132. Consequently, the penalty levied for both assessment years was deleted. The other grounds raised by the assessee were not addressed as the primary ground was sufficient for the decision. Both appeals of the assessee were allowed.

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Issues Involved:
1. Validity of penalty under Section 271AAB.
2. Applicability of Section 271AAB when no search under Section 132 was conducted.
3. Jurisdiction of the Assessing Officer to levy penalty under Section 271AAB.
4. Validity of notice issued under Section 271AAB.
5. Discretionary power of the Assessing Officer in levying penalty.
6. Nature of income declared in the return (whether undisclosed or not).

Issue-Wise Detailed Analysis:

1. Validity of Penalty under Section 271AAB:
The assessee challenged the penalty levied under Section 271AAB for the assessment years 2012-13 and 2013-14. The penalty was imposed on account of undisclosed income declared during post-survey proceedings. The CIT(Appeals) confirmed the penalty, leading the assessee to appeal before the ITAT.

2. Applicability of Section 271AAB When No Search under Section 132 Was Conducted:
The primary argument of the assessee was that no search under Section 132 was conducted in their case. Instead, the search was conducted in the case of M/s Vishwa Developers & Builders, Hubli. Consequently, the assessee's case was covered under Section 153C, not Section 132. The ITAT agreed with the assessee, citing that Section 271AAB applies only when a search under Section 132 is conducted, and the penalty under this section is not justified if no such search took place.

3. Jurisdiction of the Assessing Officer to Levy Penalty under Section 271AAB:
The assessee contended that the Assessing Officer did not have the proper jurisdiction to levy the penalty under Section 271AAB as the assessment was framed under Section 153C. The ITAT supported this view, referencing the provisions of Section 271AAB, which specifically mention that the penalty applies where a search has been initiated under Section 132.

4. Validity of Notice Issued under Section 271AAB:
The assessee argued that the notice issued under Section 271AAB was invalid as it did not specify the particular limb of Section 271AAB under which the penalty was being levied. The ITAT did not delve into this issue deeply as the primary ground regarding the applicability of Section 271AAB was decided in favor of the assessee.

5. Discretionary Power of the Assessing Officer in Levying Penalty:
The assessee argued that the Assessing Officer should have exercised discretion and not levied the penalty as a routine matter. The ITAT did not specifically address this issue, as the appeal was allowed on the primary ground of the inapplicability of Section 271AAB.

6. Nature of Income Declared in the Return (Whether Undisclosed or Not):
The assessee claimed that the income declared was not undisclosed but was offered to buy peace with the department. The ITAT did not need to address this argument due to the decision on the primary ground.

Conclusion:
The ITAT concluded that the penalty under Section 271AAB could not be sustained as the assessee was not subjected to a search under Section 132. Consequently, the penalty levied for both assessment years was deleted. The other grounds raised by the assessee were not addressed as the primary ground was sufficient for the decision. Both appeals of the assessee were allowed.

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