TMI Blog2023 (12) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... ference of money, bullion, jewellery or any other items mentioned in the above definition of undisclosed income were mentioned either in the assessment order or in the penalty order by the A.O. The assessee s offer of additional income, which does not amount to undisclosed income as per the above definition. The A.O. has not brought on record any material which points to the undisclosed income as defined u/s. 271AAB. Whereas CIT(A) in his order refers to the questions stated in the statements recorded u/s. 132(4) of the Act, namely assessee s son marriage expenses. In our considered view, any disclosures made in the course of search and statement recorded u/s.132(4) itself cannot be construed as undisclosed income as per the definition provided in the Act. There is no incriminating material found by the Revenue on the alleged additional income offered by the assessee. Thus the levy of penalty u/s. 271AAB is against the provisions and inbuilt definition in the Act. Therefore the same is not sustainable in law. We hereby delete the levy of penalty levied u/s. 271AAB(1)(b) - Decided in favour of assessee. - Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1. The above reply was considered by the A.O. however not satisfied with the same and levied penalty @ 20% of Rs. 7,50,000/- (Rs.1,50,000/-) u/s. 271AAB(1)(b) and Penalty @ 30% of Rs. 46,957/- (Rs.14,087/-) u/s. 271AAB(1)(c) of the Act. Thus total penalty of Rs. 1,64,087/- was levied. 4. Aggrieved against the appellate order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) confirmed the levy of penalty by a detailed order which reads as follows: 7.6.1 It is important to mention here that during the course of search action u/s. 132 of the Act, the statement of the appellant Shri Rajnikant L. Bhesdadiya was recorded. In the statement, the appellant could not explain the transactions mentioned in the incriminating documents found in his reply of question no. 6, 7, 8, 11 etc. It is also important to mention here that during the course of search action, some bills/vouchers were found related to the appellant's son marriage and in the statement, the appellant had admitted that some bills/vouchers were not recorded in the books of accounts. Accordingly, keeping in view of discrepancies found during the course of search action and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also in law, may kindly be deleted. 3.0 Your Honor's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal. 6. Ld. Counsel Shri Mehul Ranpura appearing for the assessee submitted that the penalty proceedings initiated by the A.O. suffers from procedural as well as legal infirmity as the notice does not specify under which limb, penalty u/s. 271AAB had been initiated. Thus Ld. A.O. initiated the penalty proceedings in a mechanical manner by issuing pre-printed draft proforma of notice, the same is bad in law and relied upon various case laws. Further penalty u/s. 271AAB is not mandatory because parliament in its wisdom use the word may and not shall . Further the additional income disclosed in the Return of Income would not ipso facto partake the character of undisclosed income . 6.1. As per the Explanation of undisclosed income if it is represent by money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of search. All if any income is represented by any expense found recorded if any document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall pay by way of penalty, in addition to tax, if any, payable by him, (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) undisclosed income means (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA thus revolves within the sphere of undisclosed income . 8.4. A plane reading of the aforesaid definition of undisclosed income clearly shows that the undisclosed income should be represented by money, bullion jewellery or other valuable articles or things or any unrecorded entry as per documents found or any false entry recorded in the books of account etc. No such reference or nexus of disclosure to such specified items were made in the assessment order or in the penalty order. In view of the statutory definition of undisclosed income, a disclosure made merely to buy peace does not tantamount to undisclosed income per se. The applicability of section 271AAA is dependent upon the income falling within the sweet of clear and express definition of expression undisclosed income . An ad-hoc and lumsum declaration as a consequent of search without any reference made by A.O towards any money, bullion, jewellery or other valuable articles or thing or any entry in the books of account etc. cannot be deemed to be automatically an undisclosed income for the purposes of imposition of penalty under section 271AAA of the Act. The onus is on A.O to bring on record material which po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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