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2019 (1) TMI 1545 - AT - Income TaxPenalty u/s 271AAB - Absence of a charge in the penalty notice and not finding the assessee guilty of a clear offence in the penalty order - undisclosed investment - whether there is any basis for levy of penalty or non-levy? - undisclosed income surrendered during the course of search in his statement recorded u/s 132(4) - existence of undisclosed income for the specified previous year found during the course of search in the case of assessee - Whether it provides for a singular charge of undisclosed income for the specified previous year found during the course of search initiated u/s 132 on or after the 1st day of July, 2012 or it provides for multiples charges as so contended by the AR in terms of clause (a), clause (b) or clause (c) to sub-section (1) to Section 271AAB? - HELD THAT:- The provisions of Section 271AAB(1)(a)(ii) clearly requires that such undisclosed income admitted u/s 132(4) requires to be substantiated. The assessee is required to specify the manner in which such income has been derived and further substantiate the same by furnishing material available with him. In the instance case, no such substantiation was done as in fact there existed no undisclosed income. The entire disclosure was on paper and assessee admitted such disclosure to avoid undue harassment and unwanted litigation. 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 contained in section 69 and section 69B 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. 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 other provisions where the same has been defined or deemed for the purposes of bringing the amount to tax. 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. Regarding surrender on account of other discrepancies if any found in the books of accounts, in absence of any such discrepancy so found by the Assessing officer either during the assessment or penalty proceedings, the said surrender may be the basis for assessment but can’t form the basis for levy of penalty which are separate and distinct proceedings in absence of a specific finding as to how the same qualify as an undisclosed income so defined u/s 271AAB. Hence, penalty levied thereon is liable to be set-aside. - Decided in favour of assessee.
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