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TMI Blog2023 (8) TMI 1619X X X X Extracts X X X X X X X X Extracts X X X X ..... st of various entities, wherein he has declared a sum of Rs. 66,48,000/- for the assessee which was later confirmed by the assessee. Assessee thereafter had filed his return of income wherein he has not disclosed the above declared income. 3. During the course of assessment, the assessee submitted bills for jewellery and also explained cash belongs to M/s Meghabites, a proprietary concern of his wife and in support of the same he submitted sales tax return of the said firm where cash sales duly reflected. However, assessing officer has not accepted the explanation and added the amount of Rs. 66,48,000/- as declared in the statement by Shri Narendra Hete. In the first assessment proceeding, assessee reiterated the same fact and reconciled the entire jewellery and cash found during the course of search. Ld CIT(A) appreciated the submission of the assessee and accepted jewellery to the extent of bills produced, but explanation in the nature of jewellery related to other family members and received by them on different family rituals was not accepted and confirmed to the tune of Rs. 14,88,464/-. Similarly, for the cash balance also Ld CIT(A) deleted to the extent of balance appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enable the assessee to give an effective reply. Since the same has not been mentioned, the assessee has been denied reasonable opportunity to put forth their submissions. The Tribunal, in paragraph 5 of the impugned order, has verbatim reproduced the penalty notice and we find that the notice is absolutely vague and none of the irrelevant portions had been struck off nor the relevant portions had been marked or indicated. Hence, the Tribunal is right in observing that the penalty could not have been levied based on such defective notice and more particularly, when the assessee has been strenuously canvassing the jurisdictional issue from the inception." 5. Further on merits of the case, Mr. Joshi submitted that the assessee has submitted all the documents to explain source of jewellery found during the course of search and produced bills for the same before AO as well as CIT(A). Part of the jewellery to the extent of Rs. 14,88,464/- was explained as belongs to other family members who have received as gift on various family rituals and functions alongwith supporting documents. Merely because Ld CIT(A) has not accepted the same and confirmed addition to that extent the same canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 Chief 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 so had the search not been conducted.'. 8. As far as the issue involved in this case is concerned, it falls under clause (i) above which envisages that the income in the form of jewellery or cash which has not been recorded in the books of accounts or other documents maintained in the normal course rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 12 to 14 as under:- "12. Now, coming to another contention of the ld AR where he has challenged the findings of the ld. CIT(A) that penalty u/s 271AAB is mandatory in nature and there is no discretion with the Income tax authorities. It was submitted by the ld AR that in section 271AAB, the word 'may' is used instead of 'shall' so it is not mandatory but same is discretionary. It was submitted that it is settled position of law that penalties are not compulsory, not mandatory but are also discretionary considering the overall facts and circumstances of the case. In support, reliance was placed on provisions of section 158BFA(2) wherein similar phraseology has been used by the legislature and decision of Hon'ble A.P High Court in case of Radha Krishna Vihar (ITA No. 740/2011)." 11. From a plain reading the provisions of Section 271AAB, it can be seen that, it begins with the stipulation that the Assessing officer may direct the assessee and the assessee shall pay the penalty as per clause (a) to (c) so satisfied in sub-section (1) to Section 271AAB. Further, as per sub-section (3) of Section 271AAB, the provisions of section 274 and section 275 as far as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) 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 subsection (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 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). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being heard. Once the opportunity is given to the assessee, the penalty cannot be mandatory and it is on the basis of the facts and merits placed before the A.O. Once the A.O. is bound by the Act to hear the assessee and to give reasonable opportunity to explain his case, there is no mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Hon'ble A.P. High Court in the case of Radha krishna Vihar in ITA No.740/2011 while dealing with the penalty u/s 158BFA held that 'we are of the 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 subsection 2 thereof 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 each case. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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