TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 545
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....under:- "In the facts and circumstances of the case and in law, the ld. AO erred in treating the declared income during the course of search as 'undisclosed income' within the meaning as defined in section 271AAB. Action of the ld. AO is illegal. Relief may please be granted by quashing the penalty order" 3. We have heard the ld. AR as well as the ld. DR on the admission of the additional ground, we find that the assessee has raised a legal issue in the additional ground that the income surrendered by the assessee during the course of search is not 'undisclosed income' within the meaning as defined in the explanation to Section 271AAB of the IT Act. Therefore, the additional ground raised by the assessee is purely a question of law and does not involve investigation of any new facts or inquiry for adjudication of the same. There is no quarrel on the point that the parties in appeal can raise a fresh plea or ground before this Tribunal for the first time so long as the relevant facts for adjudication of such legal plea are already on record. Therefore, once the relevant facts are already on record for adjudication of the question raised in the additional ground and no new facts a....
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.... the stock found was duly recorded in the accounts. Therefore, there was no discrepancy found in the stock of the assessee at the time of search and hence the payment made in cash for purchase of raw material itself is not undisclosed income of the assessee. The ld. AR has further contended that as per the definition of undisclosed income given in explanation to Section 271AAB of the Act the purchase of raw material cannot be stated to be income which is represented by any money, bullion, jewellery or other valuable article or thing. In the definition of undisclosed income 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 U/s 132 of the Act". The investments which are found not recorded cannot be deemed as undisclosed income in the context of Section 271AAB of the Act. The ld. AR has relied upon the decision of the Coordinate Bench of this Tribunal dated 11.01.2019 in case of M/s Rambhajo's vs. ACIT in ITA No. 991/JP/2017 and submitted that the Tribunal has held that the investment itself cannot be deemed as undisclosed income for the purpose of Section 271AAB of the Act. Hence, the ld. AR has submi....
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....ision of the assessee to disclose the said income but the said amount of Rs. 65,00,000/- was not declared while filing the return of income by the assessee and only in the revised return of income filed on 25.03.2015 the assessee has cleared the said income of Rs. 65,00,000/-. Therefore, it is a clear default and violation of provisions of Section 271AAB(1) of the Act which attracts the levy of penalty @ 30% to 90% of undisclosed income. The ld. DR has further submitted that once the seized documents clearly manifest the cash payment by the assessee for purchase of raw material then it is undisclosed income of the assessee which is not recorded in the books of account. Therefore, the disclosure made by the assessee even vide letter dated 25.01.2013 is covered by the definition of undisclosed income U/s 271AAB of the Act. He has relied upon the orders of the authorities below. 7. We have considered the rival submissions as well as the relevant material on record. During the course of search and seizure action carried on 06.11.2012 the statement of Shri Kailash Kanodia the director of the assessee was recorded U/s 132(4) on 06.11.2012 and 07.11.2012. After going through the statemen....
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....nd. Once, no question was raised or asked about the undisclosed income for purchase of iron ore as recorded in the exehibit-2 page 25 at the time of search then the disclosure made by the assessee vide letter dated 25.01.2013 on account of the cash purchases cannot be considered as undisclosed income for the purpose of levy of penalty U/s 271AAB of the Act. Neither the investigating team nor the AO during the assessment proceedings detected any excess stock or discrepancy in the stock as recorded in the books of accounts by the assessee in comparison to the stock which was found at the time of search and seizure action. The Coordinate Bench of this Tribunal in case of M/s Rambhajo's vs. ACIT (supra) while considering the issue on account of cash advance for land purchase has held in para 39 as under:- "39. Now, coming to surrender made on account of cash advances for land purchases in the statement recorded u/s 132(4) of the Act. During the course of search, a diary has been found wherein there are notings relating to advance given to various persons towards purchase of land. The notings describe the name of the persons, the amount advanced which ranges from Rs. 2 lacs to Rs. 50....
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....ed 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 statute 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 are contained in section 69 and section 69B and therefore, the same 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 AO has not even invoked the said deeming provisions in the quantum proceedings in the instant case. Therefore, even on this account, the 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 ot....