TaxTMI 
TaxTMI 
2024 (3) TMI 1399
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....he parties are also represented by same counsels, these were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity. Since the grounds in all appeals are identical, except change of figures, the first appeal being ITA No. 97/Ind/2024 of Mukesh Ranka for AY 2017-18 is taken as a lead case and the effective grounds taken therein are only re-produced below. However, the decision taken in lead case shall apply equally to all other appeals: 1. The Ld. CIT(A)-3, Bhopal erred in fact and in law in confirming the action of Ld. ACIT, Central Circle, Ujjain, [the AO"] in initiating penalty u/s 271AAB of the Income-tax Act, 1961. 2. The Ld. CIT(A) erred in fact and in law in confirming the action of Ld. AO in levying penalty of Rs. 15,00,000/- u/s 271AAB(1A) of the Act. 3. The Ld. CIT(A) erred in fact and in law in confirming the action of Ld. AO in levying penalty u/s 271AAB(1A) of the Act without appreciating the fact that the penalty initiated by the ld. AO is void-ab-initio. 4. The Ld. CIT(A) erred in fact and in law in confirming the action of Ld. AO in levying pena....
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....s show-cause notices. In response, the assessees filed replies to AO which the AO did not accept. Ultimately, the AO passed penalty-orders dated 28.06.2021/18.09.2021 imposing penalties of Rs. 15,00,000/- in AY 2017-18 and Rs. 90,00,000/- in AY 2018-19 upon both assessees u/s 271AAB(1A). The penalties were computed as equal to 60% of additional incomes. Aggrieved, the assessees filed first-appeal to CIT(A) and made a detailed submission but did not find any favour from CIT(A) who upheld penalties. Now, the assessees have come in next appeals before us challenging the orders of lower-authorities. 4. Ld. AR for assessee carried us to the assessment-order, penalty-order, order of first-appeal, the documents filed in paper-books and copies of judicial rulings separately filed in a case-law paper-book. Ld. Representatives of both sides also made vehement oral arguments. We have heard them peacefully at length and considered the documents held on record as well as their submissions. 5. Ld. AR for assessee firstly drew our attention to Para 5 & 7 of assessment-order passed by AO. Those paras read as under: "5...... Further, the return for the A.Y. 2017-18 was filed on 11.01....
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....not earned either in disclosed or in undisclosed form. The disclosure made by the assessee is itself an evidence that the assessee had income which was not offered to tax." 8. Analysing above orders, Ld. AR submitted that (i) The Para No. 5 & 7 of assessment-order passed by AO does not refer any incriminating material and the AO has merely assessed the surrendered income already offered by assessee in the return of income, and (ii) In the 'Office Notes' appended to assessment-order the AO has clearly mentioned that he has examined the seized-material and nothing incriminating was found & the bank a/c of assessee was also examined and no adverse view is required. Despite this, the AO has imposed penalty u/s 271AAB(1A), vide Para No. 4.1 & 4.2 of penalty-order re-produced above, merely by observing that (i) Had the search not been carried, the assessee would have not offered income for taxation, and (ii) If there would have not been any corroborative document to prove the undisclosed income, there would have been no need for the assessee to offer income for taxation. Ld. AR contended that while making such observations, the AO has travelled beyond the scope and ambit of section 27....
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.... under section 132, 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." 9. Ld. AR submitted that a simple reading of section 271AAB(1A), without making any effort, clearly shows that the section prescribes penalty @ 30% or 60% of the "undisclosed income" and the term "undisclosed income" has also been defined by Parliament in the Explanation to section 271AAB itself. The said Explanation prescribes "For the purposes of this section, ..... (c) "undisclosed income" means .....". Thereafter, the term "undisclosed income" is defined,....
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....f these point to any undisclosed or suppressed income. The appellant stated that the income should be seen in terms of additional income offered for these years and not as undisclosed income. (ii) The explanation to section 271AAB of the Act defines 'undisclosed income' and unless the income surrendered by the appellant falls within the ambit of this definition, section 271AAB cannot be invoked. 4.1.4. Looking to the intricacies of the case, I feel that it would be pertinent to examine the scheme of penalty provisions as given in the IT Act, 1961 and also to further look at the role of an 'Explanation' while interpreting a statute. In the Income-tax Act, there are three mutually exclusive sections for levying penalty on an assessee viz. section 270A, section 271(1)(c) and section 271AAB. Here one is referring to cases where there is a discrepancy between the assessee's returned income and the income determined by the I.T. Authorities. It will be seen that each of these penalty sections deals with a different species of income:- (i) Section 270A imposes a penalty for 'under-reporting' and misreporting of income. Sections 270A(2) and 270A(9) give t....
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.... Now, we will examine section 271AAB and more particularly the 'Explanation' to section 271AAB which purports to give the meaning of 'Undisclosed Income' for the levy of the penalty. Having looked at the penal provisions of the I.T. Act, it is clear that the income which is not shown by the assessee to the I.T. Authorities falls broadly into (a) underreported or misreported income (b) cases where particulars of income have been concealed or inaccurate particulars have been furnished (c) a residual category of ' Undisclosed Income' unearthed by I.T. Authorities during the search action u/s 132 of the Act. Hence, the purpose of the Explanation in section 271AAB is to set apart and distinguish 'Undisclosed income' from under-reported income, misreported income and income suppressed by the concealment of particulars of income or by furnishing inaccurate particulars of income. To this end, the 'Explanation' cites the various ways in which 'Undisclosed income' can be manifested viz. money, bullion, jewellery or other valuable articles or things or any entry in the books of accounts or other documents or transactions. The purpose of this 'Explanation' is not to define 'Undisclose....
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....various loose documents and papers were impounded during the search and in light of the anomalies therein the appellant offered his undisclosed income for taxation in the statement recorded u/s 132(4). On being confronted with the various seized documents the appellant made a voluntary surrender because he was in possession of special and private knowledge of the undisclosed income represented by those documents. In order that the IT Department might not probe further, he offered the undisclosed income represented therein to tax and thereby brought further investigation to an end. The relevant extract of the statement u/s 132(4) Shri.Sushil Jain (Partner of Shri Mukesh Ranka) is reproduced hereunder:- 49. आयकर search एवम seizure की कार्यवाही के दौरान आपका शपथ पूर्वक बयान आयकर की धारा 132 (4) में दर्ज किय....
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....6; bifurcation दिया था उसे एक बार पुनः दोहराता हूँ । (1) रु.44 लाख जिसे कार्यवाही के दौरान नकद बरामद किया गया था एवं विभाग द्वारा जब्त किया गया था को चालू वित्तिय वर्ष 2017-18 की विभिन्न तरीकों से अर्जित की गई मेरे एव मेरे घरेलू मित....
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....2309;घोषित आय के रुप में स्वीकार करता हूँ । (3) रु. 3.50 करोड़ को मेरे एव मेरे घरेलू मित्र श्री मुकेश रांका (उनकी स्वीकृति से) एवम् हम लोगों से संबंधित फर्म की अघोषित व्यवसायिक आय एवं हम लोगों के परिसरों से प्राप्त विभि....
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.... submitted that the CIT(A) has, although taken into account the assessee's submission qua the provision of section 271AAB(1A) read with Explanation thereto, but he has made a misinterpretation of those provisions. He submitted that in Para 4.1.4 to 4.1.6 of his order, the CIT(A) has made an unnecessary/wrong comparison of section 270A, section 271(1)(c) and section 271AAB so as to paint a picture that the Explanation to section 271AAB was not exhaustively defining the term "Undisclosed income" and thereafter, in next Para No. 4.1.7, went on observing that if the definition of "undisclosed income" is interpretated as exhaustive, the section 271AAB shall be reduced to a nullity and the resulting situation would be one where even though the assessee has been found to be concealing income during a search and has voluntarily surrendered the same, no penalty could be initiated. Ld. AR submitted that it is a settled law, which nobody can dispute, that penalty provisions have to be interpreted strictly. That apart, the Explanation itself states "for the purposes of this section... (c) 'Undisclosed income' means". The phraseology used by Parliament clearly shows that the Explanation as well....
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....- (2018) 92 Taxmann.com 109 (Vishakhapatnam- Trib) 7. Smt. Aparna Agarwal v. Dy. CIT, Central Circle, Kota - ITAT, Jaipur (2019) 105 Taxmann.com 233 (Jaipur Trib). 8. Lajwantiben M. Manglani v. Dy. CIT, Cir-I, Baroda 2020 SCC online ITAT 2690 9. Order dated 13.06.2018 - I.T.A. No. 971/JP/2017 - Anuj Mathur v. Dy. CIT, Central Circle-4, Jaipur - Jaipur ITAT 10. Shiv Bhagwan Gupta v. ACIT, Central Circle-I, Patna (2021) 125 Taxmann.com (Patna-Trib) 11. Order dated 20.12.2021 - I.T.A. No. 125 & 126/Nag/2021 - Chandra Suresh Kothari v. Dy. CIT, Central Circle 2(2) - Nagpur ITAT 14. Ld. AR prayed that the case of assessee is squarely covered on facts and in law by the above decisions. Therefore, in the light of those decisions, the AO is wrong in imposing penalty and the CIT(A) is also wrong in upholding AO's order. Hence, the penalty imposed upon assessee is not tenable and must be quashed. 15. Then, Ld. AR submitted that if the assessee's grievance is resolved and penalty is quashed, the Ground No. 8 would become academic and would not require any adjudication. 16. Per contra, Ld. DR for revenue re-iterated the observations made in....
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.... "4. We have considered the rival submissions as well as relevant material on record. A search was conducted under section 132 of the IT Act on 30th October, 2014 at the premises of the assessee. The assessee in his statement recorded under section 132(4) has disclosed an income of Rs. 10,02,00,000/- in pursuant to the entries of advances given for purchase of land recorded in the pocket diary which was found and seized during the course of search and seizure action. This is year of search and the financial year would end on 31st March, 2015. However, the assessee disclosed this amount of Rs. 10,02,00,000/- based on the entries in the diary regarding investment in real estate. The due date of filing of return of income under section 139(1) was 30th September, 2015. It is undisputed fact that the assessee is an Individual and was not maintaining regular books of account. Therefore, the transactions recorded in the pocket diary found during the course of search itself would not lead to the presumption that the assessee would not have offered this income to tax if the search is not conducted on 30th October, 2014. Further, the entries in the diary itself do no not represent the ....
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....e; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (1A) 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 date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, p....
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....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." The section begins with the stipulation that the AO "may" direct the assessee shall pay by way of penalty if the conditions as prescribed under clauses (a) to (c) are satisfied. As per sub-section (3) of section 271AAB the provisions of section 274 and 275 as far as may be applied in relation to the penalty referred in this section which means that before imposing the penalty under sec. 271AAB, the AO has to issue a show cause notice and give a proper opportunity of hearing to the assessee. Thus the levy of penalty u/s. 271AAB is not automatic but the A.O. has ....
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.... penalty from 100% to 300% of the tax sought to be evaded. Thus the AO is duty bound to come to the conclusion that the case of the assessee is fit for levy of penalty under section 271AAB and then only the quantum of penalty being 10% or 20% or 30% has to be determined subject to the explanation of the assessee for the defaults. 5. Before we proceed further, the decisions relied upon by the ld. D/R are to be considered. In the case of Principal CIT vs. Sandeep Chandak & Others (supra) the issue before the Hon'ble High Court was the defect in the notice issued under section 271AAB on account of mentioning wrong provision of the Act being 271(1)(c) of the Act. The Hon'ble High Court after considering the fact that the show cause notice issued by the AO though mentions section 271(1) in the caption of the said notice, however, the body of the show cause notice clearly mentions section 271AAB, which was fully comprehended by the assessee as reveals in the reply filed by the assessee against the said show cause notice. Hence the Hon'ble High Court has held as under :- "The ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not ....
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....levy of penalty in the case of admission of income u/s 132(4) is mandatory. The Ld. A.R. further stated that penalty u/s 271AAB of the Act is not mandatory but discretionary. The provisions of section 271AAB of the Act is pari materia with that of section 158BFA of the Act relating to block assessment and accordingly argued that the levy of penalty under section 271AAB is not mandatory but discretionary. When 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: XXX Section 158BFA(2): (2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax l....
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....o hear the assessee and to give reasonable opportunity to explain his case, there is no mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Hon'ble A.P. High Court in the case of Radhakrishna Vihar in ITTA No.740/2011 while dealing with the penalty u/s 158BFA held that 'we are of the opinion that while the words shall be liable under sub section (1) of section 158BFA of the Act that are entitled to be mandatory, the words may direct in sub section 2 there of intended to directory'. In other words, while payment of interest is mandatory levy of penalty is discretionary. It is trite position of law that discretion is vested and authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of the each case. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case." Thus the Tribunal has held that t....
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....d as under:- "2. This appeal has been filed raising the following substantial questions of law: (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under Section 274 r.w.s. 271(1)(c) is bad in law and invalid despite the amendment of Section 271(1B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has conce....
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.... declared invalid in the penalty proceedings''. View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that there was no merits in the petition filed by the Revenue. Considering the above cited judgments, we hold that the notice issued u/s. 274 r.w.s. 271AAB of the Act, reproduced by us at para 5 above was not valid. Ex-consequenti, the penalty order is set aside. 6. Since we have set aside the penalty order for the impugned assessment year, the appeal filed by the Revenue has become infructuous." In view of the decision of the Chennai Bench (supra), the show cause notice issued by the AO in the case of the assessee is not sustainable. 8. Even otherwise, without restricting ourselves to the validity of show cause notice, we note that section 271AAB of the Act contemplates imposition of penalty pursuant to the disclosure of undisclosed income in the statement recorded under section 132(4) and, therefore, the levy of penalty under this section does no....
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....assessee the transactions of investment were found in the diary, therefore, whether these entries in the diary constitute undisclosed income as per clause (c)(i) of Explanation to Section 271AAB of the Act. The assessee is an Individual and for the year under consideration the assessee has not reported any business income nor it was assessed by the AO. Therefore, it is clear that the assessee was not required by any mandate of law to maintain regular books of accounts. In the computation of income, the assessee has shown income from Salary, income from house property and income from other sources. The returned income was accepted by the AO while framing the assessment under section 143(3) and hence assessee's case does not fall in the category where the regular books of accounts are mandatory. The entries of investment in real estate were found recorded in the diary and in the absence of any other document maintained in the normal course relating to the year under consideration, the entries in the diary are to be considered as recorded in the documents maintained in the normal course. It is not the case of the revenue that the assessee has recorded the other transactions in the oth....
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....ee would not fall in the definition of undisclosed income as per clause (c) of Explanation to section 271AAB of the Act. 9. The Kolkata Bench of the Tribunal in the case of DCIT vs. Madan Lal Beswal (supra) has considered this issue of the alleged income found recorded in the other documents would fall in the definition of undisclosed income in para 3 and 4 as under :- "3. We have heard rival submissions and gone through the facts and circumstances of the case. We find that the issue involved herein is squarely covered in favour of the assessee in the case of DCIT vs Manish Agarwala (another member in the same Nezone Group) in ITA No. 1479/Kol/2015 for AY 2013-14 dated 9.2.2018 by the order of this tribunal, wherein it was held as under:- "3. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO has levied the penalty u/s. 271AAB on the ground that the income from commodity profit has been found during search u/s. 132 of the Act which is not reflected in the regular books of account. The AO has accepted that during search the assessee has admitted u/s. 132(4) of the Act the income from speculative tr....
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....as 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 AO to levy the penalty or not to levy, even if the assessee has made the default under the said provision." Therefore, the 2nd ground of Revenue fails and we hold that penalty u/s. 271AAB of the Act is not mandatory and is discretionary. Before proceeding further, we note that the ex parte order passed by the Coordinate Bench relied upon by Ld. DR, Manoj Beswal, supra, have been recalled in MA Nos. 218 to 220/Kol/2017 dated 12.01.2018 by observing as under: "By virtue of these miscellaneous applications, the assessee seeks to recall the order passed by this Tribunal in I.T.A. Nos. 1471, 1475 & 1476/Kol/2015 in the hands of Amit Agarwal, Madan Lal Beswal and Manoj Beswal respectively for the assessm....
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....d for de novo adjudication, is no order in the eyes of law and so it cannot be treated as a precedent. Hence, the reliance placed by the Ld. DR in respect of assessee's in the same group concern cases as decided by the Tribunal no longer survives and cannot be treated as covered against the assessee. 5. The third contention of the Ld. AR is that the assessee is an individual, who was drawing salary income. So, according to him, he need not maintain any books of account as per the Act. According to Ld. AR, undisputedly the assessee was engaged for the first time this AY only in trading of commodities, that too which was conducted in a non-systematic manner and the income from it was duly offered to tax by the assessee in his return of income under the head "Income from Other Sources", which, according to Ld. AR was accepted as such by the AO and drew our attention to page one of assessment order, (not the penalty order) wherein we note that the AO has acknowledged that the assessee owned up Rs. 3 cr. as his income from commodity profit and it has been disclosed in his income and expenditure for AY 2013-14 under the head "income out of speculative business from sale of commo....
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....ains 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 therein and the form and the manner in which and the place at which they shall be kept and maintained. (4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the p....
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....shown in Income & Expenditure Account. All the incomes of revenue nature will be posted in the right hand side column of 'income' in the Income & Expenditure Account and the description given therein cannot determine the head of income prescribed under chapter IV of the Act. Therefore, the observation of the AO in assessment order in the light of his action of accepting the statement of total income filed by the assessee along with return which without being contested, is erroneous, unless the AO was able to negate the claim of the assessee by bringing the income from commodity transactions as part of business income. It should be remembered that under the Income Tax Act 1961, the total income of an assessee individual /company is chargeable to tax u/s. 4 of the Act. The total income has to be computed in accordance with the provisions of the Act. Section 14 of the Act lays down that for the purpose of computation, income of an assessee has to be classified under five heads. It is possible for an assessee/individual/company to have five different sources of income, each one of it will be chargeable to Income Tax Act. Profits and gains of business or profession is only one of the he....
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....me and expenditure of the assessee. We note the AO in the assessment order has accepted the returned income comprising of income from salary and income from other sources by observing as under : "Total income assessed as per return Rs. 3,44,65,120/-". And further we note that the AO had specifically stated in the body of the assessment order vide column no. 10 that the assessee is having only salary income and income from other sources. Thus from a perusal of the assessment order, it is not in dispute that assessee is not engaged in any business. And the 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. Finally, the Ld. AR submitted that during the search, the search party found the records of the assessee's transactions in speculative commodity from the drawer of assessee's accountant from which the AO could compute the income of the assessee from the said transaction which amount assessee declared during search and which was duly returned an....
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.... before us and respectfully following the same, we dismiss the appeals of the revenue." Therefore, when the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Hence, in view of the above facts and circumstances of the case as well as the various decisions on this point, we hold that the penalty levied under section 271AAB is not sustainable and the same is deleted." Thus the Tribunal has taken a consistent view that the penalty under section 271AAB is not automatic but the AO has to t....
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....e u/s 132(4) is mandatory. The Ld. A.R. further stated that penalty u/s 271AAB of the Act is not mandatory but discretionary. The provisions of section 271AAB of the Act is parimateria with that of section 158BFA of the Act relating to block assessment and accordingly argued that the levy of penalty under section 271AAB is not mandatory but discretionary. When 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: XXX 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 2....
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....ty or non-levy thereof and the same will depend upon the facts and circumstances of the present case which we shall discuss in subsequent paragraphs." Hence in view of the facts and circumstances as discussed in detail in foregoing paras as well as following the earlier decision of this Tribunal, we hold that the income surrendered by the assessee in the statement recorded under section 132(4) does not fall in the ambit of definition of undisclosed income as contemplated in Explanation to section 271AAB of the Act. Accordingly, the penalty levied by the AO and sustained by the ld. CIT(A) is not sustainable and the same is deleted." [Emphasis supplied] 18. In another case of Aeswarya Jain v. Dy. CIT, Central Circle Kota - ITAT, Jaipur - (2020) SCC online ITAT 2258, which is again a decision authored by same Judicial Member as forming part of this Bench, the ITAT observed and held thus: "So far as the penalty u/s 271AAB is concerned, the AO has to take the decision after considering the explanation of the assessee and based on the facts and circumstances of the case as well as by considering the satisfaction of the conditions as provided u/s 271AAB of the Act.....
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....e house Shri Aeshwarya Jain vs DCIT, Central Circle, Kota by the assessee or the timing the construction period or completion of construction work. Even the alleged expenditure not recorded in the books of account is not based on any documentary evidence or even on physical verification of the Electrical items as well as furniture and fixture installed in the house of the assessee. When the said income is not represented by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions then even if the assessee has surrendered a sum of Rs. 10.00 lacs as unaccounted expenditure, the same would not fall in the ambit of undisclosed income as defined in explanation to Section 271AAB of the Act. A bare surrender of income not representing the money, bullion, jewellery or other valuable article or thing or any entry in the books of account will not be regarded as undisclosed income for the purpose of levy of penalty u/s 271AAB of the Act. In the case in hand, it is clear from the records that the assessee in his statement recorded u/s 132(4) of the Act has made a surrender of Rs. 10.00 lacs based on said seized mat....