TMI Blog2022 (6) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty u/s.271AAB of the Act because this is simpliciter estimation. We noted that the penalty u/s.271AAB of the Act is discretionary and not mandatory as noted by various Co-ordinate Bench decisions and hence, by taking the quantum found in all these three cases and the quantum added in all these is just less then 10%, which is negligible and can be ignored easily due to various reasons noted above. In view of the facts and circumstances, we delete the penalties in these three cases, levied by the AO and confirmed by the CIT(A) u/s.271AAB of the Act and allow these three appeals of assessee. - ITA No.: 287/CHNY/2021 And ITA No.: 288/CHNY/2021 And ITA No.: 289/CHNY/2021 - - - Dated:- 22-6-2022 - Shri Mahavir Singh, Vice President And Shri Manoj Kumar Aggarwal, Accountant Member For the Assessees : Shri G. Baskar Shri I. Dinesh, Advocates For the Revenue : Shri P. Sajit Kumar, JCIT ORDER PER MAHAVIR SINGH, VP: These three appeals by three different assessees are arising out of the orders of Commissioner of Income Tax (Appeals)-18, Chennai in ITA No.30/20-21/CIT(A)-18, 28/20-21/CIT(A)-18 29/20-21/CIT(A)-18, all orders dated 27.04.2021. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore CIT(A) argued his matter and CIT(A) sustained the addition only to the extent of Rs.9,05,818/- which has become final and no further appeal was preferred. Similar is the position in other two assessees. The AO going through the provisions of section 271AAB of the Act, although noted the fact that the CIT(A) in quantum appeals have restricted the addition on estimate basis going into various factors such as family status, community and social norms, traditions, geographical orientations etc., but fact remains that the assessee has made investment in gold which is unexplained to the extent of Rs.9,05,818/-. Accordingly, the AO levied penalty @ 30% of the undisclosed income by observing as under:- On going through the above, it can be seen that the case af the assessee does not fall under clauses (a) and (6) of section 271AAB. Therefore, the penalty in the case is to be levied at the rate of 30% of the undisclosed income as per clause (e) of section 271AAB of the Act. The undisclosed income of the assessee on giving effect to the order of the CIT(A) is Rs. 9,05,818/- The penalty leviable at 30% works out to Rs. 2,71, 745/-. Therefore, an amount of Rs. 2,71,745/- is levied as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld.counsel for the assessee filed the details of unexplained income in respect of jewellery found and jewellery offered in wealth-tax return and treated as unexplained by AO and thereby deleted by CIT(A). The assessee filed details in relation to all three assessees which are as under:- ITA No.287/CHNY/2021 Narendra C. Maher Chart filed by the Appellant relating to Jewellery Total jewellery found during search 2294.80 gms 29.61 cts Jewellery offered in WT return 1312.52 gms Jewellery deemed to be unexplained as per AO 982.28 gms 29.61 cts Jewellery treated as unexplained by AO belonging to CIT(A) Deleted (gms) Confirmed Value of gold- Rs. Value of diamond Rs. Appellant 36.8 gms 36.8 - @ 2386/- = Rs.4,87,412/- @43,584/-= Rs.4,18,406/- Mrinalini (wife) 584 gms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Veena / Anil 488.10 gms 488.10 - 6.1 The ld.counsel from the above charts stated that the total jewellery found from the premises of these assessees and finally assessed in term of quantity as well as in term of value is just below 10% and this 10% is due to variation of various factors and this is just purely estimation. The ld.counsel stated that on estimation, penalty u/s.271AAB of the Act cannot be levied and for this, he relied on the Co-ordinate Bench decision of ITAT, Jaipur in the case of Padam Chand Pungliya vs. ACIT, (2020) 113 taxmann.com 446 (Jaipur-Trib), wherein it is held that once the jewellery was not found to be purchased during the year under consideration, then the same cannot be treated as an undisclosed income for the year under consideration which is specified previous year. Also, the manner in which the disclosure is obtained on account of the jewellery would not represent the UDI as defined in the explanation to section 271AAB of the Act. The ld.counsel for the assessee also argued that the provision begins with the stipulation that the AO may direct the assessee himse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misreporting u/s 270A, 271AAB and 271AAC. The words 'may' is used in these sections to give an opportunity of being heard to the assessee to facilitate the assessee to submit its case, if it does not fall under the criteria mentioned in the respective provisions. Hence, if penalty is initiated for misreporting the assessee should be given an opportunity to explain as to why its case does not fit within clauses mentioned in 270(9) and it falls within 270A(6) and hence penalty will be not leviable. Similarly, in respect of 271AAB, the assessee should be given an opportunity to explain why its penalty should be 30% instead of 60%. For this limited reason the word 'may' is used in these provisions. As the provisions does not empower the AO to accept the explanation offered by assessee, once for the given facts of the assessee the section gets attracted, and drop the penalty, the penalty under these provisions are mandatory. Even the government intention is to reduce the discretionary powers of the authorities. This is clear as per the budget speech dated February, 29, 2016 of the Finance Minister wherein the intention of brining in section 270A was explained. Levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent from the charts filed by the assessee relating to addition of jewellery, the jewellery is inherited and acquired in this year or received any gift or pertaining to any specified year is not clear. It is noted that the jewellery found in term of quantity and value and finally addition confirmed by CIT(A) in all three cases remains only to the extent of 10%. The 10% addition sustained on estimate may be on various reasons like valuation of jewellery by estimate in quantity and determination of value i.e., rate. We noted that this all depend on the social circumstances, family status and other consideration for holding of jewellery. But, the Revenue could not prove in these cases that jewellery pertains to any specified year, i.e., assessment year 2015-16. Cumulative of these factors is considered which seems that excess jewellery to the extent of 10% on estimate basis cannot attract penalty u/s.271AAB of the Act because this is simpliciter estimation. 8.1 As regards to the arguments of ld.counsel for the assessee as well as ld. Senior DR, we have to consider the issue whether penalty is mandatory or discretionary. This issue has been considered by the Co-ordinate Bench decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome but the facts of each case are required to be analyzed in objective manner so as to attract the provisions of section 271AAB of the Act. Since it is not automatic but the AO has to give a finding that the case of the assessee falls in the ambit of undisclosed income as defined in Explanation to the said section. Therefore, the provisions of section 271AAB stipulate that the AO may come to the conclusion that the assessee shall pay the penalty. The only mandatory aspect in the provision is the quantum of penalty as specified under clauses (a) to (c) of Sec. 271AAB(1) of the Act as 10% to 30% or more as against the discretion given to the AO as per the provisions of section 271(1)(c) of the Act where the AO has the discretion to levy the penalty from 100% to 300% of the tax sought to be evaded. Thus the AO is duty bound to come to the conclusion that the case of the assessee is fit for levy of penalty under section 271AAB and then only the quantum of penalty being 10% or 20% or 30% has to be determined subject to the explanation of the assessee for the defaults. 5. Before we proceed further, the decisions relied upon by the ld. D/R are to be considered. In the case of Princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision was subsequently recalled by the Tribunal and a fresh order dated 14th March, 2018 was passed by the Tribunal in favour of the assessee. Therefore, the decision relied upon by the ld. D/R is no more in existence. 6. The question whether levy of penalty under section 271AAB by the AO is mandatory or discretionary has been considered by the Visakhapatnam Bench of this Tribunal in case of ACIT vs. M/s. Marvel Associates (supra) in para 5 to 7 as under :- 5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. During the appeal hearing, the Ld. A.R. vehemently argued that the A.O. has levied the penalty under the impression that the levy of penalty in the case of admission of income u/s 132(4) is mandatory. The Ld. A.R. further stated that penalty u/s 271AAB of the Act is not mandatory but discretionary. The provisions of section 271AAB of the Act is parimateria with that of section 158BFA of the Act relating to block assessment and accordingly argued that the levy of penalty under section 271AAB is not mandatory but discretionary. When there is reasonable cause, the penalty is not exigible. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 158BFA(2): (2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC: Provided that no order imposing penalty shall be made in respect of a person if-- (i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable. (iii) Evidence of tax paid is furnished along with the return; and (iv) An appeal is not filed against the assessment of that part of income which is shown in the return: Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such cases the penalty shall be imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case. Thus the Tribunal has held that the levy of penalty under section 271AAB is not mandatory but the AO has the discretion to take a decision and shall be based on judicious decision of the AO. Hence we fortify our view by the above decisions of Tribunal in case of ACIT vs. Marvel Associates. Thus the Tribunal has analyzed all the relevant provisions of the Act as well as various decisions on this point including the decision of Hon'ble Allahabad High Court in the case of Pr. CIT vs. Sandeep Chandak, 405 ITR 648 (Allahabad) relied upon by the ld. D/R and then arrived at the conclusion that the penalty under section 271AAB is not mandatory but the AO has the discretion to take a decision and the same should be based on judicious decision of the AO. Accordingly following the earlier decision of this Tribunal in the case of Ravi Mathur vs. DCIT (supra), we hold that the levy of penalty under section 271AAB is not mandatory but the AO has a discretion after considering all the relevant aspects of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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