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2019 (8) TMI 1225 - AT - Income TaxPenalty u/s 271AAB - surrender of additional income - HELD THAT:- Penalty u/s 271AAB of the Act is not mandatory as the provisions of section 274 of the Act have been made applicable in relation to the penalty referred to section 271AAB of the Act. It has been held that the penalty u/s 271AAB will not be attracted if the surrendered income would not fall in the definition of ‘undisclosed income’ as defined under explanation to section 271AAB - See M/S SEL TEXTILES LIMITED VERSUS THE DCIT, CENTRAL CIRCLE-III, LUDHIANA [2019 (4) TMI 1719 - ITAT CHANDIGARH] No incriminating material is found during the search action and the surrendered income does not fall in the definition of undisclosed income as defined u/s 271AAB of the Act, the penalty is not warranted. The Coordinate Bench of the Tribunal has also discussed the proposition of law laid down in the ‘Principal CIT vs Sandeep Chandak and Ors.’ [2017 (12) TMI 70 - ALLAHABAD HIGH COURT] and has held that the facts of the said case are distinguishable and do not apply to the facts of the case in which no incriminating material is found during the search action. Assessee has been fair enough to admit that it is not in all the cases that no incriminating material was found. That certain items of jewellery of silver were found / noticed during the search action, the source of income from which as held by the Assessing Officer also stood explained and also the manner of earning of the income was also substantiated. He, therefore, has been fair enough to admit that penalty under the provisions of section 271AAB (1)(a) of the Act was liable to be confirmed to the extent of the property / material found during search action. In the case of Mrs. Rama Rani for assessment year 2016-17, as noted from the above chart, jewellery worth ₹ 1.33 crores was found, whereas, income surrendered by her during the search action was of ₹ 2 crores. In view of the discussion made above, the penalty us 271AAB(1)(a) of the Act is restricted to the value of the jewellery found during search action i.e. ₹ 1.33 crores, the 10% of which comes to ₹ 13.30 lacs, hence, the penalty in the case of Mrs. Rama Rani is restricted to ₹ 13.30 lacs as against ₹ 20 lacs imposed by the Assessing Officer. In the case of Mrs. Veena Rani for assessment year 2016-17, the total income surrendered was of ₹ 1.90 crores, whereas, the jewellery found during search action was of the value of ₹ 54.23 lacs and silver found of ₹ 8.40 lac. Hence, the penalty leviable on the aforesaid gross amount of 6.263 lacs ( ₹ 54.23 lcs + ₹ 8.40 lacs), which is calculated @ 10% at ₹ 6.263 lacs. Hence, the penalty is calculated and restricted to ₹ 6.263 lacs in this case. In the case of Sudkharan Kumar for the assessment year 2016-17, neither any incriminating material nor valued property was found, hence, no penalty in this case under the provisions of section 271AAB (1)(a) of the Act is exigible. The penalty in this case is ordered to be deleted. In the cases of M/s R.D. Palace Pvt. Ltd, Ludhiana for the assessment years 2015-16 and 2016-17, since, no incriminating material or valued property was found in these cases and further no unaccounted property was found during the search action, hence, the penalty is not leviable in these cases and the same is accordingly ordered to be deleted.
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