Valuation difference in closing stock is not undisclosed income for Section 271AAB penalty where no excess stock is found.

Penalty under Section 271AAB was held unsustainable where the search did not reveal excess physical stock and the surrender arose only from a difference in valuation of closing stock. The record showed no discrepancy in quantity, so the addition was merely a valuation dispute and did not satisfy the statutory description of undisclosed income for penalty purposes. The penalty was directed to be deleted.

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Issues: Whether penalty under Section 271AAB of the Income-tax Act, 1961 was leviable where the surrender during search related only to valuation difference in closing stock and no excess quantity of stock was found during search.

Analysis: The penalty was founded on the assessee's surrender of income attributable to the value of closing stock. The record showed that the controversy was not about excess physical stock found in search, but only about the manner of valuation. Where there is no discrepancy in quantity and the addition arises merely from a valuation dispute, the surrendered amount does not answer the statutory description of undisclosed income for the purpose of Section 271AAB.

Conclusion: The penalty was not sustainable and was directed to be deleted.

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