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TMI Blog2020 (3) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (3) of Section 271AAB, the provisions of section 274 and section 275 as far as may be applied in relation to penalty under this section which means that before levying the penalty, the AO has to issue a show-cause granting an opportunity to the assessee. Order levying the penalty is an appealable order and therefore, the fact that the statue has provided for an appellate remedy against the levy of penalty, the levy of penalty cannot be held as mandatory but the same will depend upon facts and circumstances of each case. Thus, we agree with the contentions of the ld AR that the levy of penalty is not mandatory in all cases but the Assessing officer has to decide based on facts and circumstances of the case. In fact, it is a consistent view of this Tribunal across various Benches that levy of penalty u/s 271AAB is not automatic in nature but the AO has the discretion and has to take a decision after arriving at the conclusion that the income disclosed by the assessee in the statement recorded U/s 132(4) of the Act is an undisclosed income in terms of Section 271AAB(1) r/w. explanation defining the undisclosed income. Where the discretion so applied by the Assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. That the notice issued by assessing officer for initiating the penalty u/s 271AAB of the I.T. Act, 1961 is not in accordance with law not being specifically pointing out the default for which the Ld. AO sought to impose penalty u/s 271AAB. 2. That without prejudice to the ground No. (1) above on the facts and in the circumstances of the case the Ld. CIT(A) is wrong, unjust and has erred in law in confirming penalty of ₹ 20,57,007/- imposed by the Ld. Assessing Officer u/s 271AAB of the I.T. Act, 1961. 2. Briefly stated, the facts of the case are that a search and seizure action u/s 132 of the Act was carried out on Surana Group on 15.10.2014 and assessee is one of the members of the said Group. During the course of search, the statement of assessee (since expired) was recorded u/s 132(4) wherein he surrendered income on account of excess jewellery amounting to ₹ 2,05,70,072/-. Thereafter, the assessee firm filed his return of income on 30.09.2015 declaring total income of ₹ 2,12,24,350/- which represents the additional income surrendered during the course of search. The assessment u/s 143(3) read with section 153B(1)(b) was completed on 22.12.2016 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, otherwise, the principles of natural justice are violated and on the basis of such proceeding, no penalty could be imposed on the assessee. Thus, there is no application of mind at the time of issuing the show cause notice by the AO. It was submitted that the Assessing Officer has finally levied penalty as per clause (a) of section 271AAB of the Act, however, no such ground was specified in the show cause notice issued u/s 271AAB read with section 274 of the Act. 6. It was further submitted that the AO and the ld CIT(A) are not correct in stating that the levy of penalty u/s 271AAB is mandatory in nature as the provisions of section 271AAB states that the Assessing Officer may levy penalty which thus permits the Assessing Officer to use his discretion to levy or not to levy a penalty depending upon facts and circumstances of the case. It was further submitted that the legislature has included the provisions of section 274 and 275 of the Act in context of section 271AAB of the Act with clear intention to consider the imposition of penalty judicially. Therefore, the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family of assessee is of repute and means. Thus looking to the status of the family, customs of the society and other facts and circumstances, the total weight of gold is reasonable and source of acquisition was explained. However, the assessee to buy piece and avoid litigation with department offered the said valuation of jewellery as his additional business income of the current year. The Ld AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as income of current year. Therefore merely on the basis of surrender made in the search statement, this cannot be held as Undisclosed Income for the purpose of levy of penalty u/s 271AAB of the Act. In support, the reliance was placed on the Co-ordinate Bench decision in case of Shyam Sunder Khandelwal vs. DCIT, CC-2, Jaipur (ITA No. 307/JP/2018 dated 11.04.2019). 8. Per contra, the ld. DR is heard who has relied on the order of the lower authorities and submitted that once the assessee has surrendered the amount during the course of search in the statement recorded u/s 132(4) of the Act of the one of the partners of the assessee firm, therefore, there is no basis to state that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and thus, the assessee is granted an opportunity to refute such charge and file its explanations/submissions. Unlike provisions of section 271(1)(c) which provides for separate charge of concealment of particulars of income or furnishing of inaccurate particulars of income , there is a singular charge under section 271AAB in terms of the existence of undisclosed income for the specified previous year found during the course of search. Therefore, in the instant case, where the notice dated 22.12.2016 is issued to the assessee firm to show-cause why penalty should not be levied u/s 271AAB of the Act, the assessee is made aware of the specific charge against it and an opportunity has thus been given to rebut such charge and therefore, we donot see any infirmity in the initiation of the penalty proceedings and consequent penalty order so passed by the AO on this account. Further, even for sake of argument, if it is assumed that primary charge of undisclosed income has to be read along with ancillary conditions and thus multiples charges have been prescribed in terms of clause (a), clause (b) or clause (c) to sub-section (1) to Section 271AAB and where the Assessing officer has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts and circumstances of each case. Thus, we agree with the contentions of the ld AR that the levy of penalty is not mandatory in all cases but the Assessing officer has to decide based on facts and circumstances of the case. In fact, it is a consistent view of this Tribunal across various Benches that levy of penalty u/s 271AAB is not automatic in nature but the AO has the discretion and has to take a decision after arriving at the conclusion that the income disclosed by the assessee in the statement recorded U/s 132(4) of the Act is an undisclosed income in terms of Section 271AAB(1) r/w. explanation defining the undisclosed income. Further, where the discretion so applied by the Assessing officer has been rightly exercised or not in a particular case can be reviewed and subject to appellate remedy as so provided in the Act. 11. This now takes us to next contention of the ld AR regarding amount surrendered during the course of search not qualifying as an undisclosed income u/s 271AAB r/w explanation thereto and merely surrender made in the statement recorded u/s 132(4) is not sufficient for levy of penalty. It is a settled legal proposition that the penalty provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e residence. The said income was also declared in the return of income. The ld. A/R of the assessee has submitted that the family of the assessee consisting of 10 members i.e. assessee himself, wife, 2 sons, 2 daughters-in-law and 3 grandsons and 1 grand daughter. The said jewellery found during the search was received from both sides of relatives and friends at the time of marriage and thereafter on various other festivals and auspicious occasions. It is customary in Indian society that every parent, friends relatives to present gold ornaments etc. to her daughter son in law at the time of marriage. The family of assessee is repute and means. Thus looking to the status of the family, customs of the society and other facts and circumstances the total weight of gold is reasonable and source of acquisition was explained. However, the assessee to buy peace and avoid litigation with department offered the said valuation of jewellery as his additional business income of the current year. The ld. AO has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as business income of current year. Therefore merely on the basis of surren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the jewellery even not acquired by the assessee or the family members but is inherited, then the manner in which the disclosure is obtained on account of the jewellery would not represent the undisclosed income as defined in the explanation to section 271AAB of the Act. We find that the order passed by the AO under section 271AAB as well as the order of the ld. CIT (A) are silent on the issue of incorrect valuation as well as the timing of acquiring of the personal jewellery of the assessee and the family members. Therefore, in the facts and circumstances of the case, the personal jewellery of the assessee and family members acquired in the past and some part of which was also inherited will not fall in the ambit of undisclosed income. Hence the penalty levied by the AO against such disclosure is not sustainable. It may be pertinent to mention that the statement recorded under section 132(4) itself would not either constitute an incriminating material or undisclosed income in the absence of any corresponding asset or entry in the seized document representing the undisclosed income. Accordingly, the penalty levied by the AO under section 271AAB of the Act is deleted. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat thereafter also, she continues to receive some small items by various other close friends and relatives of both the sides as well as on the auspicious occasion of birth of a child whether male or female and the CBDT, looking to such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are of the firm opinion that it should also mean that to the extent of the aforesaid jewellery, found in possession of the varoius persons, even source cannot be questioned. It is certainly 'Stridhan' of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers, find jewellery beyond the said weight, then certainly they can question the source of acquisation of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the said limit as unexplained investment of the person with whom the said jewellery has been found. Further, the jewellery so found during the course of search was old jewellery except for 98 grams, therefore, for the purposes of determining undisclosed income by way of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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