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TMI Blog2018 (3) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no direct material which leads and establishes that any income received by the assessee has not been declared by the assessee. An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee. Hence penalty u/s 158BFA (2) of the Act is not leviable. The facts of the assessee’s case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we set aside the order of the lower authorities and cancel the penalty u/s 271AAB of the Act. - Decided in favour of assessee - I.T.A.No.147/Vizag/2017 And C.O. No.44/Vizag/2017 - - - Dated:- 16-3-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri T.Satyanandam, DR For The Respondent : Shri G.V.N. Hari, AR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal filed by the revenue is directed against order of the Commissioner of Income Tax (Appeals)-3 {CIT(A)}, Visakhapatnam vide ITA No.70/2015- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.O. at 30%. The Ld.CIT(A) did not accept the contention of the assessee that there was no incriminating material and observed that page No.107 of Annexure A/GS/MA/1 showed that the cost per sq.ft. at ₹ 3571/- as against ₹ 2200/- to ₹ 2300/- per sq.ft. stated to have been incurred by the assessee. Only when the A.O. has pointed out the difference in cost per sq.ft., the assessee firm had admitted the additional income. CIT(A) further opined that had the AO did not raise this issue, the assessee would not have offered the additional income. The Ld CIT(A) observed that the department has found loose sheet bearing page No.107 of Annexure A/GS/MA/1, which is an incriminating material, hence, held that this is a clear case of concealment of income. Since the assessee has explained the modus operandi, CIT(A) held that the penalty falls under 10% category, accordingly confirmed the penalty at 10% instead of 30%. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). Section 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that while the words shall be liable under sub section (1) of section 158BFA of the Act that are entitled to be mandatory, the words may direct in sub section 2 there of intended to directory . In other words, while payment of interest is mandatory levy of penalty is discretionary. It is trite position of law that discretion is vested and authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of the each case. Plain reading of section 271AAB and 274 of the Act indicates that the imposition 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. 8. In this case, a search u/s 132 of the Act was carried out in the assessee s premises but no evidence was found during the course of search except a loose sheet which was marked as Page No.107 of Annexure A/GS/MA/1. Careful verification of the loose sheet found during the course of search shows the projections and profitability but not the actual expenditure incurred by the assessee. As submitted by the assessee before the A.O. as well as Ld. CIT(A), no othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets not recorded in the books of accounts or other documents maintained in the normal course, wholly or partly. The revenue did not find any undisclosed asset, any other undisclosed income or the inflation of expenditure during the search/ assessment proceedings. Though a loose sheet of page No.107 of Annexure A/GS/MA/1 was found that does not indicate any suppression of income but it is only projection of profit statement. The amount of ₹ 3571/- mentioned in the projections refers to cost and profit which is approximate sale price but not the cost as stated by the AO in the penalty order. The cost of construction in the projections projected at ₹ 2177/- which is in synch with the statement given by the assessee. The AO was happy with the disclosure given by the assessee and did not verify the factual position with the books of accounts and projections and bring the evidence to unearth the undisclosed income. Neither the A.O. nor the investigation wing linked the cost of profit or cost of asset to the entries in the books of accounts or to the sales conducted by the assessee to the sale deeds. Therefore, we are unable to accept the contention of the revenue that the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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