TaxTMI 
TaxTMI 
2026 (8) TMI 1104
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....ncome-Tax Act, 1961, without appreciating the fact that the assessee admitted undisclosed income on account of unexplained advances of Rs. 8,95,00,000 in his statement recorded u/s 132(4) of the I.T. Act. (ii) That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing." 3. Briefly stated, the facts of the case are that the assessee is a partnership firm, a constituent concern of the Bundi Silica Group, Kota, engaged in the business of mining and dealing in sandstone items. A search and seizure action under section 132 of the Act was carried out on 05.02.2015 in the case of the Bundi Silica Group, of which the assessee forms part. In the statement recorded under section 132(4) of the Act, the assessee disclosed additional income of Rs. 10,19,77,839 for the year under consideration, made up of four heads, namely- (i) unaccounted cash found/seized of Rs. 1,10,00,000; (ii) unexplained land/other advances given to various parties of Rs. 8,95,00,000; (iii) undisclosed investment on renovation of the residential premises, Silica House, Kunhari, Kota, of Rs. 14,25,121; and ....
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....0, passed the impugned penalty order dated 23.03.2020 under section 271AAB(1)(a) of the Act. In that order the AO reproduced the provisions of section 271AAB together with the Explanation, set out the four essential ingredients of the section, namely that there should be a search under section 132 conducted on or after 01.07.2012, that there should be undisclosed income, and that such undisclosed income should relate to the specified previous year, and held that all these ingredients were satisfied. The AO reasoned that the undisclosed income of Rs. 10,19,77,839 had been admitted in the statement under section 132(4) of the Act, reaffirmed by the letter dated 16.03.2015, declared in the return and the tax thereon paid, that the disclosure was founded upon incriminating documents found in the search and could not be explained away as having been made merely to buy peace, and that the objection regarding non-specification of the clause in the notice was an afterthought since the section had been mentioned in the assessment order. On that basis the AO levied penalty at 10% on the entire surrendered sum of Rs. 10,19,77,839, computed at Rs. 1,01,97,784. The AO did not embark upon any se....
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....liya (ITA No. 112/JP/2018, dated 05.04.2019) is sub judice before the Hon'ble Rajasthan High Court, and that Nikhil Madan (ITA No. 117/JP/2018, dated 27.07.2020), and Paras Mal Jain (ITA No. 1469/JP/2024, dated 26.02.2025), were not carried in further appeal only on account of low tax effect under CBDT Circular Nos. 5/2024 and 9/2024, so that no acquiescence on the merits could be presumed. Finally, it was submitted that the impugned order is internally inconsistent in confirming penalty on some entries appearing in the very same diary while deleting it on the advances. 10. The learned Authorised Representative (hereinafter referred to as "AR") supported the impugned order and submitted that the advances of Rs. 8,95,00,000 were recorded merely as loose notings in a diary found during the search, without any date, surname, address, mode of payment or particulars of the land or the parties, and without any corresponding underlying asset having been found in the course of the search. It was further submitted by the learned AR that the surrender was made to buy peace and to avoid protracted litigation; that neither during the search nor in the post-search enquiry nor in the assessme....
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....erived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; 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 which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of secti....
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....ndisclosed income in the statement under section 132(4) of the Act and fulfils the further conditions, or does not so admit it, or falls in the residuary clause. Sub-section (3) makes the provisions of sections 274 and 275 applicable to the levy, so that penalty cannot be imposed without a show cause notice and a reasonable opportunity of hearing. Two features of the section are significant for the present purpose. First, the charge in every clause is levied not upon the amount surrendered as such, but upon the "undisclosed income of the specified previous year"; the existence of "undisclosed income", as defined, is thus the jurisdictional foundation of the levy. Second, the use of the word "may", coupled with the mandate of section 274, indicates that the AO is required to apply his mind and record a finding that the surrendered amount answers the statutory definition, rather than to treat the levy of penalty as an automatic consequence of the disclosure. The expression "undisclosed income" is exhaustively defined in clause (c) of the Explanation to the section. 13. Being a penal provision which carries its own exhaustive definition of the very income on which it operates....
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....cifying 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 hands of the assessee. Therefore, once there is an inflow of funds by way of income, there can be subsequent outflow by way of an advance to any third party. Giving an advance and income thus connotes different meaning and connotation and thus cannot be ....
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.... 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." 15. The point is placed beyond doubt by the manner in which the AO himself dealt with the amount in the quantum proceedings. The AO in the present case has not invoked the provisions pertaining to unexplained income to tax the sum of Rs. 8,95,00,000. Instead, he has taxed the same as the assessee's business income of the year. Further, the deeming fictions of sections 69/69B of the Act, being confined to the purposes for which they are enacted, cannot in any event be automatically imported into section 271AAB which carries its own self-contained definition of 'undisclosed income'. 16. Further, the advances were reflected only as bare notings in a diary, without date, surname, address, mode of payment, or any particulars of the land or of the persons concerned; no independent enquiry was made, and no corroborating material was gathered, to establish that these notings represented real transactions or real income of the assessee. Such notings, unsupported by any underlying asset or verifiable par....
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....ccepted as business income of current year. ..... Hence in view of the above facts, circumstances of the case and the decisions cited (supra), we hold that there is no undisclosed income within the meaning of section 271AAB which is either admitted by assessee or determined by A.O. in assessment and hence penalty of Rs. 1,00,11,335/- imposed by A.O. u/s 271AAB and sustained by the ld. CIT(A) are wrong and bad in law and the same is directed to be deleted. 19. The decisions in Suraj Mal Bansal (HUF) v. DCIT (supra) and Nikhil Madan v. ACIT (supra) are to the same effect, the penalty on land/other advances surrendered in the course of search having been deleted for want of their satisfying the statutory definition of undisclosed income. This settled view of the coordinate Benches has to be followed when no distinguishing facts have been shown to us in the present case. 20. The reliance by the Revenue on MAK Data (P.) Ltd. (supra) is misplaced. That decision was rendered in the context of section 271(1)(c) of the Act and dealt with the evidentiary effect of a voluntary surrender for the purpose of a concealment penalty; it does not dilute, much less displace, t....