AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 997
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....to or amend to any of the above grounds of appeal or to withdraw any of them." 2. The assessee is an individual and derives income from business as well as other sources. A search and seizure action U/s 132 of the Act was conducted on 05/02/2015 in the case of Bundi Silicon Group, Kota in which the case of the assessee was also covered. In the course of search, some documents were found and seized, marked as Annexure-AS Exihibti-13 containing certain notings/entries of advances on account of land and otherwise. In the statement recorded U/s 132(4) of the Act, the assessee surrendered a sum of Rs. 1.30 crores on this account and subsequently the assessee filed her return of income U/s 139(1) of the Act on 29/09/2015 declaring total income of Rs. 1,38,18,810/- including the said amount of Rs. 1.30 crores disclosed during the course of search and seizure action. The A.O. completed the assessment U/s 143(3) r.w.s. 153B(1)(b) of the Act on 15/12/2016 accepting the returned income. The A.O. also initiated the penalty proceedings U/s 271AAB of the Act by issuing a show cause notice on 15/12/2016 and consequently a penalty of Rs. 13,00,000/- was levied by the A.O. U/s 271AAB of the Act vi....
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.... after arriving at the conclusion that the income disclosed by the assessee in the statement recorded U/s 132(4) of the Act is an undisclosed income in terms of Section 271AAB(1) r.w. explanation defining the undisclosed income. In this regard, we refer to the decision of the Tribunal in case of Rajendra Kumar Gupta vs DCIT (Supra) wherein it was held as under: "12. Now, coming to the main ground of appeal. In this regard, the ld AR has raised the contention challenging the findings of the AO that penalty U/s 271AAB is mandatory in nature and there is no discretion with the Income tax authorities. It was submitted by the ld AR that in section 271AAB, the word 'may' is used instead of 'shall' so it is not mandatory but same is discretionary. It was submitted that it is settled position of law that penalties are not compulsory, not mandatory but are also discretionary considering the overall facts and circumstances of the case. In support, reliance was placed on provisions of section 158BFA(2) wherein similar phraselogy has been used by the legislature and the decisions of the Coordinate Benches in case of DCIT vs Manish Agarwal 92 taxmann.com 81 and ACIT vs Marvel Associates 92 ta....
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....n there is reasonable cause, the penalty is not exigible. The Ld. A.R. taken us to the section 271AAB of the Act and also section 158BFA(2) of the Act and argued that the words used in section 271AAB of the Act and the words used in section 158BFA(2) of the Act are identical. Hence, argued that the penalty section 271AAB of the Act penalty is not automatic and it is on the merits of each case. For ready reference, we reproduce hereunder section 158BFA (2) of the Act and section 271AAB of the Act which reads as under: 271AAB [Penalty where search has been initiated]: (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- (i) in the course of search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived. (ii) Substantiate....
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....portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return. 6. Careful reading of section 271AAB of the Act, the words used are 'AO 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 AO. 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. 7. 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....
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.... 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." 13. In the instant case, during the course of search, a diary has been found wherein there are notings relating to advance given to certain persons towards purchase of land. The notings describe the name of certain persons, the amount advanced which ranges from Rs. 25 lacs to Rs. 70 lacs and the date of such advance is from 16.12.2014 to 28.01.2015 before the date of search on 5.02.2015. Therefore, what has been found during the course of search is certain entries relating to undisclosed advances/in....
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....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 article or thing. Whether it can then be said that such undisclosed cash advances represents 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. 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 ....
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....me, 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 deserved to be set-aside." 14. In light of above discussions and following the earlier decision of the Coordinate Bench of the Tribunal in the case of Rajendra Kumar Gupta (supra), we delete the penalty levied under section 271AAB of the Act on cash advances of Rs. 2,25,00,000 towards purchase of land. Since the issue of levy of penalty U/s 271AAB of the Act has been decided on merits, therefore, the issue of validity of initiation of the penalty proceeding due to defective show cause notice become academic in nature and we do not propose to adjudicate the same. 15. In the result, the appeal of the assessee is allowed. ITA No. 125/JP/18 16. In ITA No. 125/JP/18 in case of Ashok Bansal, both the parties submitted that the facts and circumstances of the case are identical....