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2019 (1) TMI 1546 - AT - Income TaxPenalty u/s 271AAB - undisclosed income in terms of clause (c) of explanation to section 271AAB - non specific limb of section 271AAB which the AO wishes to invoke in the assessee’s case - undisclosed investment, stock of jewellery - HELD THAT:- In the instant case, the deeming provisions are contained in section 69 and section 69B and therefore, the same have to be applied in the context of bringing to tax such investments to tax in the quantum proceedings. The same 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. The undisclosed investment by way of advance for purchase of land can be subject matter of addition in the quantum proceedings, 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 deserve to be set-aside. Regarding undisclosed investment in the construction of house, we find that such undisclosed investment has been worked out based on assessee’s statement of approximate investment in the construction of house and after determining the amount which has been reflected in the books of accounts, and the difference has been estimated at ₹ 31,77,000. There has been nothing tangible in terms of any entries or documents relating to actual expenditure on construction of house which has been incurred which is found to be false during the course of search and therefore, penalty levied thereon deserve to be set-aside. Physical stock of metal jewellery, semi-precious jewellery and silver jewellery, such stock has been physically found in excess of what has been recorded in the assessee’s regular books of accounts at the time of search and such excess stock has been valued at ₹ 85,79,654. It is not the case of the assessee that such excess stock has been wrongly inventorised during the course of search or there is any dispute regarding the value at which such stock has been valued. Having accepted such excess stock of jewellery found at the time of search and which has not been found recorded at the time of search in the books of account maintained in the normal course of assessee’s business relating to such previous year, income represented by such excess stock of jewellery found at the time of search will fall in the definition of “undisclosed income” and will be subject to levy of penalty u/s 271AAB. The assessee has admitted such undisclosed stock in his statement u/s 132(4) and in response to question no. 20 has specified the source of investment in such jewellery which is the unaccounted sale of jewellery and stones during the current financial year which has not been recorded in his regular books of accounts. Thus, admission has been made by the assessee in his statement u/s 132(4) and specification of the manner in which such investment in jewellery has been derived has been specified as arising from his jewellery business. The return of income has been filed disclosing such undisclosed income and taxes have been paid prior to such filing. Thus, the charge of undisclosed found during the course of search has been duly satisfied and other conditions so specified under section 271AAB(1)(a) duly fulfilled and satisfied in the instant case, the penalty levied u/s 271AAB in respect of such undisclosed stock of jewellery is hereby sustained. - Appeal of the assessee is partly allowed.
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