TaxTMI 
TaxTMI 
2018 (5) TMI 1591
X X X X Extracts X X X X
X X X X Extracts X X X X
....osure petition filed by him. Further, the ld AO acknowledges that the assessee has filed his return of income for AY 2013-14 on 27.7.2013 declaring total income of Rs. 1,89,69,260/-. According to ld AO, on verification of computation of income, he noticed that the assessee for the relevant year disclosed a sum of Rs. 1,32,44,000/- and had shown the commodity profits under the head "Income from other sources". Then the ld AO notes that the return was selected for scrutiny and assessment was completed u/s. 143(3) of the Act on 17.04.2014 on total income of Rs. 1,89,69,260/- (on the same income returned by the assessee in the ROI) and penalty proceedings were initiated u/s. 271AAA of the Act on the commodity profit disclosed in the sum of Rs. 1,32,44,000/- disclosed during search. This penalty notice was later shifted to proceedings u/s 271AAB of the Act vide issuance of fresh notice dated 29.1.2015. The assessee submitted that penalty proceedings u/s 271AAA of the Act cannot be initiated in respect of search conducted on or after 1.7.2012 and that only proceedings u/s 271AAB of the Act could be initiated from the said date. The ld AO after considering the submission of the assessee, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ord 'may' and not 'shall'. So, according to him, it is the discretion bestowed upon the ld AO whether to initiate and impose penalty u/s. 271AAB of the Act. The ld DR argued penalty has to be mandatorily levied u/s. 271AAB of the Act on the undisclosed income found during search. We are inclined to agree with the contentions of the ld AR because when a similar issue was adjudicated by the Co-ordinate Bench of Lucknow Tribunal in the case of Sandeep Chandak v. CIT reported in 185 TTJ (Lucknow) 265 dated 30.1.2017 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 ld AO to levy the penalty or not to levy, even if the assessee has made the default under the said provision." Therefore we hold that levy of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... gains from the business are deemed to be the profits and gains of the assessee under [section 44AE] [or section 44BB or section 44BBB], as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such [previous year; or]] (iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,] keep and maintain such books of account and other documents as may enable the [Assessing] Officer to compute his total income in accordance with the provisions of this Act. (3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom other sources'. The ld AO cannot change the character of income in a derivative proceeding which is an off-shoot of assessment proceedings i.e. the penalty proceedings without contesting and making a finding against the claim of the assessee in the assessment order as discussed above. 7. At this juncture, it would be relevant to reproduce the provisions of section 271AAB defining 'undisclosed income' as under:- Penalty where search has been initiated. 271AAB. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee- ** ** ** Explanation - For the purposes of this section, - (a).......... (b).......... (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 en....