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2019 (1) TMI 1057 - AT - Income TaxPenalty u/s 271AAB (1)(a) - amount surrendered during the course of search - additional income duly declared in the return of income filed u/s 139(1) - Held that:- Levy of penalty under section 271AAB is not mandatory. Firstly, regarding stock of Kundan Meena, and diamond and other gemstones studded jewellery which has been surrendered during the course of search, we find that AO has merely gone by the surrender statement and has not examined the matter from the perspective of determining the cost of such stock and the quantification thereof after allowing deduction for Chapadi, wax, etc. which is a well established step as part of valuation methodology of such kind of jewellery and which has been followed at other locations except at Jaipur. No finding that there is any excess stock which has been physically found and which has not been found recorded in the books of accounts as on the date of search - difference in stock of jewellery and silver items as per books and as found at the time of search is on account of valuation of such stock at the market value instead of cost and such valuation difference and on account of non-deduction of Chapadi, wax, etc while weighing the Kundan Meena Jewellery and the same cannot be a basis to hold that it represent undisclosed income so defined in explanation to section 271AAB and the penalty levied thereon is liable to be set-aside. Surrender made on account of cash advances for land purchases in the statement recorded u/s 132(4) undisclosed investment by way of advance for purchase of land 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. Surrender on account of other discrepancies, 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 in absence of a specific finding as to how the same qualify as an undisclosed income so defined u/s 271AAB of the Act. Hence, penalty levied thereon is liable to be set-aside. Regarding surrender of cash found from the residence of the partners and which has been admitted as belonging to the assessee firm in statement recorded u/s 132(4) and not found recorded in the books of accounts at the time of search, there cannot be any dispute that the same represents undisclosed income and liable for penalty u/s 271AAB which is hereby confirmed. The penalty U/s 271AAB is sustained to the extent of cash found during the course of search and penalty is hereby directed to be deleted on rest all items of surrender made during the course of search in absence of the same qualifying as undisclosed income as so defined under section 271AAB of the Act. Appeal filed by the assessee is partly allowed.
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