RUPESH TAMBI,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPUR

ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The present appeal is because the above named assessee was dissatisfied with the finding recorded in the order of the Commissioner of Income Tax (Appeals), Jaipur -4 [ for short CIT(A) ] dated 29/10/2024 for assessment year 2015-16. The said order of the ld. CIT(A) arises as against the order dated 20.03.2020 passed under section 271AAB(1)(c) of [ for short AO].

(b) upholding finding recorded by the learned AO that imposition of penalty u/s 271AAB is mandatory in nature, and (c) rejecting submission of the appellant that penalty u/s 271AAB cannot be imposed only on the basis of admission of income by the appellant without proving it to be undisclosed income within meaning of section 271AAB of the IT Act, 1961.

2. That without prejudice to the ground No. (1) above the Id. CIT(A) is wrong, unjust and has erred in law in confirming finding recorded by the Id. AO that appellant has allegedly not been able to substantiate manner in which additional income of Rs. 74,03,832/-offered to tax during the course of search and therefore imposition of penalty of Rs. 22,21,149/- under sub section 1(c) of section 271 AAB of the IT Act, 1961 @30% in above said additional income.

3. Succinctly, the fact as culled out from the records is that a search and seizure action u/s 132 of the Income Tax Act, 1961 ("the Act") and/or survey action u/s 133A of the Act was carried out by the Income Tax Assessee is one of the members. For the year under consideration the Assessee had filed a return of Income for Previous Year 2014-15 relevant to Assessment Year 2015-16 declaring an income of Rs. 1,28,41,980/-on 30-09-2015. As the search was conducted on 15-10-2014 i.e. FY 2014-15 relevant to AY 2015-16 and as per clause (b)(ii) of explanation to section 271AAB, the year under consideration falls within the definition of 'specified year. The total income declared in the ROI for the 'specified year included the undisclosed income of Rs. 69,78,903/- which represented the undisclosed income comprising of Rs. 49,50,000/- surrendered on account of investment in construction of house and in respect of excess stock of Rs. 20,28,903/-, the assessee has claimed that there was no difference in the stock in quantity and the difference in the stock was due to valuation taken at market value totaling to Rs. 69,78,903/- is a undisclosed income. Similarly, addition was made of Rs. 4,24,929/- on account of excess stock which was deducted during in the course of search thereby leaving undisclosed income at Rs. 74,03,832/- was considered liable for levy of penalty as per clause (c) of sub-section (1) of section 271AAB of the Act for an amount of Rs. 22,21,149/- being thirty percent of the undisclosed specified year by an order dated 20.03.2020.

4. Aggrieved from the order of the ld. AO levying penalty as referred above the assessee preferred an appeal before the ld. CIT(A), who disposed of the appeal of the assessee by observing as under :

6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the penalty order for the year under consideration.

(a) In the present case the penalty has been levied w.r.t. the undisclosed income of Rs. Rs.74,03,832. As per the assessment order undisclosed income of Rs. 69,78,903 was disclosed in the ITR filed in response to the notice u/s 153A of the Act. Thus Rs. 4,24,929 represents the addition done in the assessment order which is on account of unexplained excess stock found during search.

In the appeal the appellant has inter-alia submitted as under- ".........during the course of search in the statement recorded u/s 132(4) of the I.T. Act, 1961 the assessee offered a sum of Rs.20,28,903/- on account of alleged excess stock. The deferential value of stock of Rs.20,28,903/- offered by assessee firm as additional business income is nothing but the difference in valuation of stock. Thus no excess stock found during the course survey. It is only difference in valuation of stock valued by registered valuer."

……the surrender of amount of Rs. 49,50,000/- on account of house construction……….

The appellant has contended that the income which is subject matter of the impugned penalty is only due to the valuation issue in the stock and there is no difference in the stock quantity and it has been contended that due to this reason the penalty cannot be levied.

The contention raised by the appellant is omni bus and vague as they cannot be any legal provision/interpretation which would exempt the assessee from levy of Rupesh Tambi vs. ACIT penalty if such assessee records the correct quantity of stock in the books of accounts however EITHER the purchase cost is suppressed in the books by making part payment in unaccounted manner which would lead to money laundering and would result into earlier unaccounted concealed income being made as part of the stock in an illegal manner and such unaccounted income / unaccounted cash in itself is also liable for penalty OR the value of the closing stock is suppressed which would lead to suppressed amount of gross profit and resultantly the suppressed amount of income disclosed for taxation. Both the acts are deliberate attempt by such assessee to suppress the income and evade the taxes in an artificial manner.

Further, it is noticed that the appellant has not proven that the difference in stock is only due to the valuation/rate and not due to any other reason.

A party who relies on a recital has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. [Refer: judgement of Hon'ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540] Further, the case laws judgements relied upon by the appellant are rendered in the specific facts of such cases and the facts of the case of appellant being different, the ratio of the judgements is not applicable to the facts of the case of the appellant.

Further, the appellant has contended that the impugned income should fall under the definition of "undisclosed income" as given in explanation in section 271AAB of the Act. This contention of the appellant in principle is acceptable. In this regard it is to be seen whether the additional income which was rendered by the appellant during the course of search and seizure action is falling under the definition of "undisclosed income or not.

During the appellate proceedings, notice was issued to the appellant and it was requested to furnish the stock inventory sheet of the actual stock found during the course of search and the physical stock as per the books of accounts on the date of search and seizure action.

Rupesh Tambi vs. ACIT From the stock inventory sheet as per the search and seizure valuation report as submitted by the appellant in response, it is seen that the total of the gross weight of various 18 Kt. Gold jewellery (s. No. 1 to 9) comes to 6715.6 grams whereas the weight of the 18 Kt. Gold studded jewellery as per the stock details as per the books of accounts as submitted by the appellant comes to 5799.42 grams. This itself shows that there is huge difference in the quantity of stock.The other items have not been verified. The onus is on the appellant to have shown and submitted that comparison in the written submissions as to how the physical quantity of the stock is found during the course of search and as mentioned in the books of accounts was same which is the appeal of the appellant. However the appellant has not discharged this onus. Further the stock details as per the books of accounts as submitted by the appellant are not having any stamping of the search party and it cannot be verified that the sheet is from the seized material.

Further in the last submission the appellant has also contended that the stock difference was of only Rs. 4,24,929 and however the appellant has not clarified on what account surrender of Rs 20,28,903 was made during the search and seizure action and how the surrender is different from the stock difference of Rs. 4,24,929. Thus the appellant has in effect amended its submissions on the issue of stock to the amount of Rs. 4,24,929.

Whereas as per the penalty order the penalty has been levied both on Rs.20,28,903 (as part of the overall surrender of Rs. 69,78,903) and on Rs. 4,24,929. However the appellant has not made any submissions on this aspect. The appellant has not clarified the facts and has not discharged the onus that the surrendered income does not fall under the definition of the undisclosed income as provided under section 271AAB of the Act.

In nutshell, after considering the last submission of the appellant, in effect, the appellant has made submission against the penalty with respect to the income of Rs. 4,24,929 and with respect to the income of Rs.49,50,000 and thus effectively there is no submission of the appellant against the penalty with respect to the income of Rs.20,28,903.

(b) Undisclosed income and Unaccounted constructed portion of the House Now coming to the penalty w.r.t. the undisclosed income of Rs.49,50,000 the appellant has merely stated that the same was surrendered to buy peace of mind however that is bald and baseless statement. In the submissions nowhere the appellant has given the factual matrix as to how the issue of this income was Rupesh Tambi vs. ACIT identified during the search and seizure action and how and in what circumstances the surrender was made by the appellant. The appellant has failed to discharge its basic onus.

However some basic information has been noted from the statement of the appellant during the search and seizure action. In reply to question number 20 which is on the issue of a diary/pad (AS-4) which is found and seized during the course of search and seizure action wherein address 2/181 of the new house been constructed by the appellant in the Sangram Colony was mentioned and wherein the cash payments with respect to such construction were mentioned in the total of such payments was Rs. 49,50,000. The appellant has not filed the copy of the seized material during the appellate proceedings. In reply to this question it was stated by the appellant that a new house was being constructed by the appellant at 2/181 Sangram Colony and that it is mentioned in the seized documents were regarding the construction expenses of such house. The appellant further stated that the payments have been done in cash and these payments have not been recorded in the books of accounts. The appellant also stated that these payments were done by the appellant out of the undisclosed income and further the appellant offered this undisclosed income for the taxation.

As per the definition of the undisclosed income in the section 271AAB of the Act, “.............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 In the present case the unaccounted investment by the appellant in the house is the unexplained investment of the appellant. The appellant stated during the search and seizure action that such investment was done by the appellant out of cash payments which was out of the undisclosed income of the appellant. The appellant and the undisclosed income is which was invested by the appellant in the new house. The documents and transactions were found during the course of search and seizure action. The undisclosed income is also represented by the valuable article or thing in the form of constructed portion of the house. Both, such undisclosed income and such undisclosed asset/house construction, are the undisclosed income of the appellant as per the section 271AAB of the Act.

Reliance is also placed up on the judgment of Hon'ble ITAT, Jaipur Benchs-B, Jaipur order in the case of Shri Raja Ram Maheshwari Vs. DCIT Central Circle-3, Jaipur in dated 10.01.2019, wherein the Hon'ble ITAT has held that:

Having accepted such excess stock of jewellery found at the time of search and which has not been found recorded at the time of search in the books of account maintained in the normal course of assessee's business relating to such previous year, income represented by such excess stock of jewellery found the time of search will fall in the definition of undisclosed income and will be subject to levy of penalty u/s 271AAB.

(c) Issue of Mens rea:- The appellant has also contended that in imposition of penalty mens-rea also plays a vital role before imposing the penalty, it is always compulsory to prove the mens-rea of the assessee as malafide for concealment of income or for avoidance of any provision of law in force intentionally.

The above contention of the appellant regarding the approving of mens rea is also legally incorrect. There is no such condition mentioned in the section 271AAB of the Act. The appellant has not referred to any provision in the section in this regard. Even otherwise it is now a settled issue that penalty under the income tax act is a civil liability and not a quasi-criminal liability and for the purpose of civil liability, the requirement of mens rea is not at all required.

(below is quoted from the para 38 of the judgement in the case of Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Karnataka)/[2013] 263 CTR 153 (Karnataka) [13-12-2012])

The Supreme Court in the case of Gujarat Travancore Agency v. CIT [1989] 44 Taxman 278, at page 55, paragraph 4 held as under:

....It is sufficient for us to refer to section 271(1)(a), which provides that a penalty may be imposed if the Income-tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to section 2760 which provides that if a person wilfully fails to furnish in due time the return of income required under section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of proceeding under Section 27(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in section 271(1)(a) which provision.....

(below is quoted from the para 46 of the judgement in the case of Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Kamataka)/[2013] 263 CTR 153 (Karnataka) (13-12-2012])

In a recent judgment the Supreme Court after referring to the aforesaid Judgments in the case of Reliance Petroproducts (P.) Ltd. (supra) held as under:

not accurate, not exact or correct, nor according to truth: erroneous, as an inaccurate statement, copy or transcript

(below is quoted from the para 47 of the judgement in the case of Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Karnataka)/[2013] 263 CTR 153 (Karnataka) [13-12-2012]) The object behind the enactment of section 271(1)(c) read with the Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the Income-Tax Act. The word 'penalty by its nature will not be determinative to conclude the nature of proceedings being criminal or quasi-criminal. That the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. There is nothing in section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. Mens rea is an essential or sine qua non for criminal offence. Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities. It was only on the point of mens rea that the judgment in Rupesh Tambi vs. ACIT Dilip N. Shroff (supra) was upset in Dharmendra Textile Processors (supra). It was only the ultimate inference in Dilip N. Shroff (supra) to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff (supra) was overruled. For the applicability of Section 271(1)(c) conditions stated therein must exist. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) exist before the penalty is imposed.

In view of the judgement of honourable Supreme Court in the case of Dharmendra Textiles Processors (supra), the requirement of "mens rea" is no longer there and the judgement in the case of Dilip N. Shroff (supra) stands overruled in this regard.

Some of the definitions of 'mens-rea' are as under:-

The intention or knowledge of wrongdoing that constitutes part of a crime, as opposed to the action or conduct of the accused.

Mens rea is the state of mind statutorily required in order to convict a particular defendant of a particular crime.

Crimes require a culpable mental state called "mens rea," which is Latin for a "guilty mind." "Mens rea" refers to the defendant's state of mind and criminal intent when they commit a criminal act.

Mens rea, in Anglo-American law, criminal intent or evil mind. In general, the definition of a criminal offense involves not only an act or omission and its consequences but also the accompanying mental state of the actor. All criminal systems require an element of criminal intent for most crimes.

The intent to commit a crime is officially known as "mens rea," which is Latin for "guilty mind."

Mens rea is a legal term that generally refers to the guilty mental state, the lack of which negates the crime situation on any given occasion. It's one of the most important aspects of criminal liability. Only when an act is done intentionally that is prohibited by law is it considered a criminal offence. The intent, which is the driving force behind the illegal conduct, is referred to as mens rea. Only when an act is committed with a guilty conscience does it become criminal. In most cases, a crime is not committed if the individual committing the act has an innocent mind.

In view of the above legal position, even if the assessee furnishes the inaccurate particulars of income or concealed the particulars of income without deliberate intention in his mind, the penalty under section 271(1)(c) of the Act is leviable if the other conditions of this provision are met. THUS THE STATE OF MIND OF THE ASSESSEE WHETHER THE ACT WAS INTENTIONAL OR NOT IS NOT RELEVANT AND WHAT IS RELEVANT IS THE ACTUAL CONDUCT/ACTION ONLY.

The above is in the context of section 271(1)(c) whereas in the context of section 271AAB of the Act even these are not required to be proved whether the assessee furnished inaccurate particulars of income or concealed the particulars of income. The approach of the section 271AAB of the Act is completely different and there is no such onus on the assessing authority.

According to this contention of the appellant is hereby rejected.

(d) Issue of addition not done under section 69 of the Act.- The appellant has contended that 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.

However this contention of the appellant is misfounded as is not such condition for the levy of penalty under section 271AAB of the Act.

The acceptance during the course of search and seizure action and the offering of the income in the return of income on these accounts is guided by the principle of section 69 of the Act. It is a settled law that even before sections 68/69 etc. were inserted in the statute, the additions were made and sustained applying the similar principles and these actions are mere codification of the earlier settled legal principles.

In the case also it is held by the Hon'ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC) [08-03-1977] that even after the items (stock in trade) were "introduced in the books of account of its business", the assessee was still required to "to prove satisfactorily the nature and source of these assets" and in the event of failure to prove these, "the revenue could legitimately hold that these assets represented the undisclosed income of the assessee".

Roshan Di Hatti (supra) is case on the issue involving issue of stock in trade which was included by the assessee in the books of accounts and even then it was held in the judgement that assessee was still required to prove satisfactorily the nature and source of these assets and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee.

There is no presumption in favor of business income. Onus to prove is on assessee.

The Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968) has held as under- "There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC). Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case.

The High Court, in disposing of the application under section 66(2). expressed the view that because the amount of Rs. 20,000 was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source. But it was not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the Tribunal at the hearing of the appeal. The question again assumes that it was for the Income-tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed".

Rupesh Tambi vs. ACIT As per the headnotes "Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922] Method of accounting System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source - Held, yes".

As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.

In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC) [08-03-1977) it is held by the Hon'ble Supreme Court as under:-

"Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commisioner of Income-tax [1958] 34 ITR 807, 810 (SC) that:

There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature.

To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source, vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC).

Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee….. (emphasis supplied)

(i) Onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the source of amount invested / spent. The burden has to be discharged with positive material. [As per principles laid down in Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977], Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963), CIT v. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)].

(ii) If the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. [As per principle laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)].

(iii) Unexplained cash / unexplained investment cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] Making book entries regarding the unexplained income / unexplained cash does not result into such income to be treated as explained. The assessee is required to show and explain the source with verifiable information. (Ratio of judgements of Hon'ble Supreme Court in the cases of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968 and Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC) [08-03-1977] Further not mentioning of the section in the assessment order is not due to the fault of the assessing authority but due to the reason that the income was already offered by the appellant in the return of income and further, the assessment year being 2014-15, and considering the facts of the case, whether the income was Rupesh Tambi vs. ACIT being taxed as per rate given in section 115BBE or as per normal rates, was immaterial. Also, it is a settled law that if any wrong has occurred the same cannot be perpetuated.

Specific additions under section 68/69/69A etc. is required for levy of penalty under section 271AAC of the Act. Whereas in the present case the penalty has been levied under section 271AAB of the Act. For the purposes of levy of penalty under section 271AAB of the Act, the language of this section and the conditions mentioned under this section are to be seen as per which there is no such requirement that the addition has to be under section 69/69A etc. and thus this contention of the appellant is hereby rejected.

(e) Claim of appellant that surrender was done to buy peace of mind and to avoid litigation:-

The contention raised by the appellant that the surrender was done during the course of search and seizure action to buy peace of mind is a mere self-serving statement. The surrender of income was with respect to specific undisclosed assets and Investments which were found during the course of search and seizure action.

The amount of total acceptance of undisclosed income (normally referred as surrender) is not small and is substantial running. It is beyond human probabilities that any assessee who is having assistance of legal Counsels and also having the legal options of representation during assessment, appeals, writ petitions etc. would admit the undisclosed income of huge amount just like that. The contention of the appellant is baseless and not bona fide.

Hon'ble Supreme Court in the decision dated 30.10.2013 in Civil appeal No. 9772 of 2013 in the case of MAK Data P. Ltd. v. CIT -II (2013) 38 taxmann.com 448 (SC) has held the contentions of voluntary surrender to buy peace and avoid litigation etc cannot be considered as defence for non levy of penalty under section 271(1)(c) of the Act.

The present appeal pertains to penalty under section 271AAB of the Act wherein the conditions for the levy of the penalty are much more in favour of the revenue as there is no onus on the assessing authority to show either the concealment or the furnishing of any inaccurate particulars by the assessee. Even in context of section 271(1)(c), the contentions of voluntary surrender to buy peace and avoid (f) Manner of earning undisclosed income:-

In the submissions the appellant has not explained the manner of how the undisclosed income was earned and the appellant has not shown that it was so explained in earlier proceedings. Thus this fact is undisputed from the side of the appellant that the manner of earning in terms of section 271AAB is not been explained by the appellant.

As held in judgements the application of clause (a) / (b) / (c) and resultantly the quantum of penalty can be changed even in appellate stage. It is held in the case of Assistant Commissioner of Income-tax, Central Circle 2 (3), Kolkata v. Vishal Agarwal [2018] 100 taxmann.com 283 (Kolkata - Trib.)/[2019] 174 ITD 125 (Kolkata -Trib.) [16-11-2018] that where assessee, in course of search, made a statement under section 132(4) in which he admitted an undisclosed income and specified manner in which such income was earned and had also paid tax along with interest assessee would be liable to pay penalty at rate of 10 per cent in terms of clause (a) of section 271AAB(1) but not under clause (c) at 30 per cent of section 271AAB. Thus, applying this ratio, clause (a) / (b) / (c) are part of single charge of penalty and thus amenable to decision and change at any stage of the proceedings.

(g) In view of the above detailed discussion this ground of appeal of the appellant is hereby dismissed and the levy of penalty under appeal is hereby upheld.

Ground No. 6: That the appellant craves the permission to add to or amend to any of the above grounds of appeal or withdraw any of them.

7.1 The appellant has not added and altered any of the above mentioned ground of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off.

8. In the result, the appeal of the appellant is dismissed. assessee preferred the present appeal before this tribunal on various grounds as listed above in para 2. To support the various grounds raised by the ld. AR of the assessee, has filed the written submissions in respect of the grounds raised by the assessee and the same is reproduced herein below:

The above appeal has been filed by assessee against the appeal order dated 29- 10-2024 passed by the Ld. CIT(A)-4, Jaipur in appeal No. CIT(A), Jaipur- 4/10033/2020-21. The Assessee has raised following solitary ground in the appeal: 1. That on the facts and in the circumstances of the case the learned CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 22,21,149/- imposed by the learned AO u/s 271AAB of the IT Act, 1961 after (a) rejecting submission of the appellant that reason for imposition of penalty was not specified neither in assessment order nor in notice issued for imposition of penalty. (b) upholding finding recorded by the learned AO that imposition of penalty u/s 271AAB is mandatory in nature, and (c) rejecting submission of the appellant that penalty u/s 271AAB cannot be imposed only on the basis of admission of income by the appellant without proving it to be undisclosed income within meaning of section 271AAB of the IT Act, 1961.

2. That without prejudice to the ground No. (1) above the ld. CIT(A) is wrong, unjust and has erred in law in confirming finding recorded by the ld. AO that appellant has allegedly not been able to substantiate manner in which additional income of Rs. 74,03,832/-offered to tax during the course of search and therefore imposition of penalty of Rs. 22,21,149/- under sub section 1(c) of section 271AAB of the IT Act, 1961 @ 30% in above said additional income.

3. That the appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them. Facts of the case Rupesh Tambi vs. ACIT This in response to your notice dated 07-08-2023 issued u/s 271AAB of the IT Act, 1961. The assessee derived income from business being proprietor of Arshia Jewellers. A search u/s 132 was carried out in case of Surana group cases on 15-10-2014 in which assessee was also covered. The assessee for the year consideration filed return declaring income of Rs. 1,28,41,980/- which included income of Rs. 69,78,903/- admitted in course of search. The case was taken up in scrutiny and assessment was completed at an income of Rs. 1,37,83,170/- making some disallowances and additions. The penalty proceeding u/s 271AAB of the I T Act, 1961 has been initiated on the ground that assessee during the course of search in the statement recorded u/s 132(4) offered a sum of Rs.49,50,000/- on account of investment in construction of house and Rs.20,28,903/- on account of excess value of stock found in Prop. Concern M/s Aarshia Jewels and alleged difference of Rs.424929/- in the stock as per books and found during the course of search. The assessee filed original return on declaring total income of Rs. 1,28,41,980/- which included said additional income of Rs.69,78,903/- offered to tax in course of search. Action of Ld. A.O. The assessment u/s 143 (3) r.w.s. 153B (1) (b) of I. T. Act, 1961 was completed on 22-12-2016. The Ld. A.O. also initiated penalty proceedings u/s 271AAB of I. T. Act, 1961 and issued show cause notice along with assessment order. The assessee filed his explanation to the said notice which was rejected by A.O. and vide impugned penalty order dated 20-03-2020 levied a penalty of Rs. 22,21,149/- on assessee. The present appeal is against said penalty imposed by Ld. A.O. vide impugned penalty order dated 24-03-2020. Order of CIT (A) The assessee filed appeal before CIT(A) against said penalty order and in course of hearing filed written submissions which reproduced in appeal order of CIT(A). The Ld. CIT(A)-IV in his order dated 29-10-2024 after considering reply filed by appellant confirmed the penalty levied by Ld. AO. The ground wise submission of assessee are as under:- Ground No. (1) That on the facts and in the circumstances of the case the learned CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 22,21,149/- imposed by the learned AO u/s 271AAB of the IT Act, 1961 after (a) rejecting submission of the appellant that reason for imposition of penalty was not specified neither in assessment order nor in notice issued for imposition of penalty.

Rupesh Tambi vs. ACIT (b) upholding finding recorded by the learned AO that imposition of penalty u/s 271AAB is mandatory in nature, and (c) rejecting submission of the appellant that penalty u/s 271AAB cannot imposed only on the basis of admission of income by the appellant without proving it to be undisclosed income within meaning of section 271AAB of the IT Act, 1961. Submission of the assessee I. On legal 1. It is submitted that the section 271AAB of Act has three limbs as specified in Section i.e. 271AAB (1) (a), (b) & (c). The notice dated 22-12-2016 sent to assessee alongwith assessment order does not specify in which limb the penalty sought to be levied and only mentioning of Section271AAB in notice do not satisfy the requirement of law. The language of the said notice issued are“Whereas in the course of assessment proceedings for the A.Y. 2015-16 penalty proceedings were initiated u/s 274 and 275 read with section 271AAB of the Act and a penalty notice was issued accordingly. You are hereby allowed further opportunity of being heard and show cause why an order imposing penalty on you should not be made u/s 271AAB of the I T Act, 1961.In this connection it is submitted that assessment was completed on 22-12-2016 itself and earlier no penalty notice u/s 271AAB were issued as mentioned in penalty notice dated 22-12-2016. A copy of said notice is enclosed with written submission. In view of the above it is verifiable that notice was issued in very casual manner without specifying the specific provisions/limb of section applicable on assessee. The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are violated. On the basis of such proceeding, no penalty could be imposed on the assessee.

The Ld. A.O. thereafter issued another show cause notice dated 15-05-2017by changing only date of notice stating the same wordings of earlier notice dated 22- 12-2016 that ““Whereas in the course of assessment proceedings before me for the A.Y. 2013-14 it appears to me that as per section 274 and 275 read with section 271AAB of the I T Act you are liable for penalty on assessed undisclosed income.” The Ld. A.O. now issued another show cause notice dated 12-02-2020 in which penalty proceedings has been initiated u/s 271AAB(1)(c). It is submitted that said notices were issued in a routine manner without mentioning under which clause of section 271AAB of the Act the assessee is liable for penalty. It submitted that section 271AAB(1) has three clauses (a) to (c) and each clause of sub-section (1) to sec. 271AAB provides the circumstances and violation attracting the penalty @ 10% or 20% or 30% of undisclosed income of specified previous year. The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are violated. 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 initiating penalty proceeding in the assessment order andissuing the show cause notice as the show cause notice issued by the AO do not specify the undisclosed income on which the assessee is required to show cause. Even the AO has not given any ground for levy of penalty for which the assessee could put his defense. Though the AO while passing the impugned order has imposed the penalty as per clause (c) of section 271AAB(1) of the Act, by simply mentioning that assessee has not substantiate the manner in which the additional income derived. In this respect Reliance is placed on the judgement of Hon'ble Karnataka High Court in the case of CIT Vs. M/s SSA’s EMERALD MEADOWS reported in 2015 (11) TMI 1620 - , wherein Hon'ble Court has held that: - “3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271 (1) (c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX – VS – MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.

Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T. Ashok Pai (Supra) held as under:- “………. Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that Rupesh Tambi vs. ACIT concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The Standard proforma without striking of the relevant clauses will lead to an inference as to non application of mind…..? The Hon’ble ITAT, Jaipur Bench, Jaipur in the case of Anuj Mathur Vs DCIT, CC- 4, Jaipur (ITA No. 971/JP/17) held that “As regards the validity of notice under section 274 for want of specifying the ground and default, we find that when the basic condition of the undisclosed income not recorded in the books of accounts does not exists, then the same has to be specified by the AO in the show cause notice and further the AO is required to give a finding while imposing the penalty under section 271AAB. Even if the AO is satisfied and come to the conclusion that the assessee has not recorded the undisclosed income in the books of accounts or in the other documents / record maintained in normal course relating to specified previous year, the show cause notice shall also specify the default committed by the assessee to attract the penalty @ 10% or 20% or 30% of the undisclosed income. There is no dispute that the AO has not specified the default and charge against the assessee which necessitated the levy of penalty under section 271AAB of the Act. Consequently, the assessee was not given an opportunity to explain his case for specific default attracting the levy of penalty in terms of clauses (a) to (c) of section 271AAB(1) of the Act. In view of the above the show cause notice issued by the AO in the case of assessee is not sustainable. The appellant also relied on the following decision:- (i) DCIT vs. Shri R. Elangovan in dated 05-04- 2018 :

The Hon’ble Tribunal in the said case while considering the validity of show cause notice and initiation of proceedings under section 271AAB and following the decision of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) as well as the decision of Hon’ble Supreme Court dismissing the SLP filed by the revenue in the case of CIT vs. SSA’s Emerald Meadows, 242 Taxman 150 (SC) held that the notice issued under section 274 read with section 271AAB of the Act not specifying the ground and clauses for levy of penalty was not valid and consequently the penalty order was set aside.

Rupesh Tambi vs. ACIT (ii) Hon’ble Jurisdictional High Court in the case of Sheveta Construction Co. Pvt. Ltd. in DBIT Appeal No. 534/2008 dated 06.12.2016 wherein the Hon'ble High Court at Para 9 of its order held as under: - “…… Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observation made in the said judgement, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing officer in the assessment order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order ….” (Emphasis Supplied). (iii) Narayana Heihts& Towers, Vs. I.T.O. Ward – 2- 4 Jaipur (iv) The ITAT, Jaipur Bench, Jaipur in case of Lal Chand Mittal Vs. DCIT (ITA No. 772/JP/2016 order dated 29-12-2011 and various other cases decided by it held that on the basis of such notice issued by sending printed where only all the ground of section 271 (1) (c) are mentioned or where show cause notice u/s 271 (1) (c) for imposing of penalty without specifying the limb for reasons to impose penalty whether for concealment of income or furnish inaccurate particulars of income is not as per law and assessing officer did not have any jurisdiction to impose penalty u/s 271 (1) (c). In the case(s) Radha Mohan Maheshwari Vs. DCIT (ITA No. 773/JP/2013) Mohd. Sharif Khan Vs. DCIT (ITA No. 441/JP/2014) Shankar Lal Khandelwal Vs. DCIT (ITA No. 878/JP/2013)Murari Lal Mittal (ITA No. 334/JP/2015 order dated 9-11-2016 and Mridula Agarwal (ITA No. 176/JP/2016) the Hon'ble Bench upheld the same view. (v) The Hon’ble ITAT, Jaipur Bench, Jaipur in a recent case of Gopal Das Sonkia Vs. DCIT, CC-2, Jaipur (ITA No. 306/JP/2018) order dated 11-04-2019 held that “it is clear that both the show cause notices issued by the AO for initiation of penalty proceedings under section 271AAB are very vague and silent about the default of the assessee and further the amount of undisclosed income on which the penalty was proposed to be levied. Even the Hon’ble Jurisdictional High Court in case of Shevata Construction Co. Pvt. Ltd in DBIT Appeal No. 534/2008 dated 06.12.2016 has concurred with the view taken by Hon’ble Karnataka High Court in case of CIT Vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Karnataka) which was subsequently upheld by the Hon’ble Supreme Court by dismissing the SLP filed by the revenue in the case of CIT Vs. SSA’s Emerald Meadows, 242 taxman 180(SC). Accordingly, following the decision of the Coordinate Bench as well as Hon’ble Jurisdictional High Court, this issue is decided in favour of the assessee by holding that the initiation of Rupesh Tambi vs. ACIT penalty is not valid and consequently the order passed under section 271AAB is not sustainable and liable to be quashed.” Thus it is submitted that notice issued u/s 271AAB by Ld. A.O. to assessee is wrong and bad in law and consequently the penalty levied u/s 271AAB(1)(c) is also wrong and bad in law which deserves to be deleted.

2. It is further submitted that Section 271AAB starts with the phrase that ‘The Assessing officer may’ thus while “may” permits the assessing officer to give direction to impose penalty or not, the use of word “shall” does not leave any discretion relating to levy of penalty. In this respect reliance is placed on the judgement of Hon'ble Supreme Court in case of CIT Vs Smt. P.K. Noorjahan (1999) 237 ITR 0570 wherein Supreme Court held that word ‘may’ give discretion to A.O. in the matter and said discretion has to be exercised keeping in view the facts and circumstances of the particular case judicially. The fact that the minimum is prescribed does not mean that penalty must necessarily be imposed in every case falling within sub-s (1). Shah, acting CJ said in Hindustan Steel Ltd. v State of Orissa 83 ITR 26. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty. The discretion of the A.O. to levy or not to levy a penalty is still preserved by this section, it must be exercised judicially and on a consideration of all the relevant circumstances. Recently the ITAT Kolkata Bench in case of DCIT Vs. Manish Agarwal (2018) 92 taxmann.com 81 held “We agree with the said contention of Ld. AR because when a similar issue was adjudicated by ITAT Lucknow (the author of this order was a member of the Bench) in Sandeep Chandak v. CIT [2017] 55 ITR (Trib.) 209 (Luck.) while adjudicating a case where penalty was levied under section 271AAB of the Act it was held that the provisions of Sec. 271AAB of the Act are not mandatory, which means that penalty need not be levied in each and every case wherever the assessee has made default as stated in clauses (a), (b) and (c) of the Act. Sub-section (1) of Sec. 271AAB of the Act uses the word “may” not “shall”. “May” cannot be equated with “shall” especially in penalty proceeding. Using the word “may” in our opinion, gives a discretion to the A.O. to levy the penalty or not to levy, even if the assessee has made the default under the said provision.” In case of ACIT Vs. Marval Associates the Visakhapatnam Tribunal (2018) 92 taxman.com 109/ (2018) 170 ITD 353 it was held “Careful reading of section 271AAB of the Act, the words used are ‘A.O. may direct’ and ‘the assessee shall pay by way of penalty’. Similar words are used section 158BFA (2) of the Act. The word may direct indicates the discretion to the A.O. Further, sub section (3) of section 271AAB of the Act, fortifies this view. Sub section (3) of section 271AAB:

Rupesh Tambi vs. ACIT The provisions of section 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. The legislature has included the provisions of section 274 and section 275 of the Act in 271AAB of the Act with clear intention to consider the imposition of penalty judicially. Section 274 deals with the procedure for levy of penalty, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is 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. 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.”The penalty order u/s 271AAB is an appealable order u/s 246A before CIT (A). If the penalty u/s 271AAB had been mandatory there would have not been provision of appeal u/s 246A. The Ld. A.O. is, therefore, wrong and has erred in law in holding that assessee is liable for penalty u/s 271AAB of the I Tact, 1961. II. Submission on merit: i) Excess value of Stock of Rs.20,28,903/-:- It is submitted that during the course of search in the statement recorded u/s 132(4) of the I.T. Act, 1961 the assessee offered a sum of Rs.20,28,903/- on account of alleged excess stock. The deferential value of stock of Rs.20,28,903/- offered by assessee firm as additional business income is nothing but the difference in valuation of stock. Thus no excess stock found during the course survey. It is only difference in valuation of stock valued by registered valuer. The observations made by the learned CIT(A) in the bottom para at Page No. 55 that the 18 cts. gold jewellery (Sr. 1 to 9) comes to 6715.6 gms. Whereas, the weight of the 18 cts. gold studded jewellery as per the stock details, as per the books of accounts has submitted by the appellant comes to 5799.42 gms. is incorrect, for the reason that the learned CIT(A) has added the weight of 22 cts studded gold jewellery in the 18 cts gold jewellery vide item No.7 & 8. It is also evident from the stock as per the books of account that 18 cts and 22 Cts ready Rupesh Tambi vs. ACIT are shown separately at Sr. No. 5 & 6. After considering the said fact, there remains no difference in the total weight of gold ornaments as per books of accounts and valuation report. The appellant is submitted a copy of reconciliation statement at PBP…..In view of the above facts, the basis of confirming the penalty imposed on this account by the learned CIT(A) is factually wrong and bad in law. It is submitted that it is an admitted fact that there is no identifiable/separable stock found which can be said as undisclosed. More particularly, assessee has no unexplained purchases or sales. There is no real income and no real excess stock. Without establishing real income, no penalty can be imposed presuming the hypothetical income. In the instant case, the surrender has been made on account of excess value of stock; it is not a case where during search, unaccounted sales or unexplained purchases have been found. Therefore, whenever the assessee will sell these stocks, the resulted profit will automatically get incorporated in its taxable profits. Under the facts and circumstances, in no case there would be any undisclosed income of the assessee, therefore, provision of this section is not attracted in the instant case. Accordingly it is submitted that it is not the case where Department either found any income or any assets or any expenses not recorded in the regular books of accounts or documents, hence, does not met the definition of undisclosed income given in Section 271AAB. It is clear that increase in value of stock will automatically reduce the profit in future at the time of sale, therefore, to avoid the protracted and imposed litigation and to buy peace of mind, surrender was made and disclosed in the return of income, as it will not impact the financial tax liability in totality. ii) Alleged House Construction Expenses Rs.49,50,000/- No incriminating material was found during the search and the surrender of amount of Rs.49,50,000/- on account of house construction was just to buy peace by assessee. Thus it is only by admission of assessee on which the assessee included the said amount in return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. Further the department has carried out search and seizure operations on the assessee group and during the course of search, the department has not found any evidence, which shows that the assessee was having any undisclosed income. The revenue authorities have exerted undue pressure and obtained the surrender of income from the assessee.

Rupesh Tambi vs. ACIT The Hon’ble ITAT, Jaipur Bench, Jaipur in the case of Shri Padam Chand Pungliya Vs ACIT, CC-1, Jaipur (ITA No. 112/JP/2018) Dated 05-04-2019 held that “First, we take up the undisclosed income on account of expenditure on house construction of Rs. 2,44,63,575/-, the relevant alleged seized document in this respect are the entries in the diary on 04.04.2013, 14.04.2013, 28.04.2013, 28.05.2013 and 01.06.2013. It is pertinent to note that all these notings are done during the month of April, one in May and one in 1st June, 2013. The construction of house is not a task to be completed from 1st April, 2013 to 1st June, 2013, that too when the alleged expenditure of Rs. 2,44,63,575/- was incurred in respect of various articles and construction materials. It appears from the seized documents that these are the notings on these 5 pages of a diary are done in one go, whereas the said notings are purported to be on different dates of month of April, May and June. Some of the entries are even unrealistic like Rs. 15 lacs towards purchase of paint. It is pertinent to note that how paint is purchased prior to the completion of construction and as per the entries in these papers there is an entry of some marble fixing of Rs. 5 lacs. From these entries in the alleged seized material, it is manifest that most of them are unrealistic as entry of Rs. 70 lacs is shown towards furniture which is highly impossible. Another entry of Rs. 45 lacs is shown towards steel. Thus from the notings of these papers it is clear that these are not entries representing the real and actual transactions. Further, neither during the course of search and seizure proceedings nor even in the course of statement recorded under section 132(4) any efforts were made by the search party to find out the actual existence of these assets towards which the alleged entries are recorded in the seized material/papers. Though the admission on the part of the assessee is a relevant evidence, however, when the entries/notings in the loose papers are apparently not representing the real transactions then it was incumbent upon the department to find out and establish the existence of these assets in the possession of the assessee. In the absence of such efforts and even any question put to the assessee regarding the existence of these assets, these entries alone would not ipso facto constitute undisclosed income of the assessee. Even otherwise, these entries in itself are not having any income element but these are all expenditure entries and, therefore, until and unless a corresponding asset is found in the possession of the assessee, the entries alone cannot be regarded as representing the undisclosed income of the assessee. Therefore, when the duration of the construction period of the house has not been ascertained by the department, then showing the entire cost of construction with imaginary figures for a period of 2 month is not justified. Even we find that the construction material entries are on subsequent dates and furniture and TV entries on the earlier dates which do not support of the case of the department that these entries/notings in Rupesh Tambi vs. ACIT the seized documents represents the real transactions/assets purchased by the assessee or in the possession of the assessee. The possession of the asset was a matter of fact at the time of search and in the absence of such asset either found or otherwise discovered during the course of search and seizure, these entries in the seized documents would not constitute undisclosed income on account of expenditure in construction of the house. Thus it is only by admission of assessee on which the assessee included the said amount in return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. The reliance is placed on the judgement in case of ACIT Vs. Marval Associates. In the said judgement it was held that Section 271AAB sub-clause (c) of the Act defines undisclosed income as under:- (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 accounts or other documents or transactions found in the course of a search under section 132, which has – 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 (A) 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 so had the search not been conducted. Penalty u/s 271AAB attracts on undisclosed income but not on admission made by the assessee u/s 132 (4). The A.O. must establish that there is undisclosed income on the basis of incriminating material. It is so specifically held by ITAT, Visakhapatnam Bench in ACIT Vs. Marval Associates supra. The Ld. A.O. taking the admission of income by assessee as undisclosed income of assessee. “There was no money, bullion, jewellery or valuable article or thing or entry in the books of account or documents transactions were found during the course of search indicating the assets not recorded in the books of account or other documents maintained in the normal course, wholly or partly. In search Rupesh Tambi vs. ACIT authorities did not find any undisclosed asset, any other undisclosed income. The Hon'ble ITAT Delhi Bench in the case of Ajay Sharma v. Dy. CIT [2013] 30 taxmann.com 109 held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee which has not been declared by the assessee. 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. In the case of assessee also Ld. A.O. has not established that the income disclosed by assessee in return filed is undisclosed income of assessee within the meaning of Section 271AAB and unless that is established by Ld. A.O. no penalty u/s 271AAB can be imposed on assessee. a) It is submitted that the Hon’ble ITAT, Jaipur Bench Jaipur in a recent case of Shri Raja Ram Maheshwari Vs DCIt (ITA No.992/JP/17) dated 11-01-2019 held that “ Para no.22 Regarding undisclosed investment in the construction of house, we find that such undisclosed investment has been worked out based on assessee’s statement of approximate investment in the construction of house and after determining the amount which has been reflected in the books of accounts, and the difference has been estimated at Rs 31,77,000. There has been nothing tangible in terms of any entries or documents relating to actual expenditure on construction of house which has been incurred which is found to be false during the course of search and therefore, penalty levied thereon deserve to be set-aside. b) The Hon’ble ITAT, Jaipur Bench, Jaipur in a recent case M/s Rambhajo Vs ACIT CC-1, Jaipur (Ita No. 991/JP/17) dated 11-01-2019 held that: “ 38 Firstly, regarding stock of Kundan Meena, and diamond and other gemstones studded jewellery which has been surrendered during the course of search, what has to be determined is the income which is represented by such stock of jewellery which is not found recorded inthe books of accounts maintained in the normal course relating to such previous year. In other words, the value at which such stock has been acquired by the assessee and not the value which such stock can fetch in the market or the fair market value of such stock. In the instantcase, it has been contended that the valuation of the stock has been done at market rate as on date of search without considering the cost disclosed in the books of accounts and without considering the well-accepted accounting policy which has been followed by the assessee firm where it values its stock at lower of cost and net realizable value. The cost can be determined on the basis of historical and/or current cost so recorded in the books of accounts. Alternatively, past gross profit percentage can also give a reasonable basis for determining such cost. In the instant case, the ld AR has contended that where gross profit of the past year determined at the rate of 13.92% is used and applied to the stock valued by the Revenue at thecurrent market value, it will result in a scenario where the stock as per books of account is higher than the stock valued at the time of search. As per computation prepared which we have noted above, we find that stock (including stock of silver jewellery) as per books of accounts comes to Rs 35,11,24,031 as against Rs 34,27,22,924 valued by the Department at the time of search and therefore, contention so advanced by the ld AR is found reasonable. Another aspect which has been submitted by the assessee relates to non-deduction on account of chapadi, wax etc for the Kundan Meena Jewellery while physically weighing the jewellery. It was submitted by the ld AR that the said fact was duly brought to the notice of Assessing officer vide written submission dated 15.12.2015, however, the same has not been considered by the Assessing officer. In our view, given that the assessee has disclosed the whole of the amount surrendered during the course of search in its return of income, the amount so surrendered and disclosed in the return of income has rightly been brought to tax in the quantum proceedings. However, as far as penalty proceedings are concerned, the Assessing officer is required to give a specific finding that there is an undisclosed income found during the course of search and which has not been recorded in the books of account. In the instant case, we find that the Assessing officer has merely gone by the surrender statement and has not examined the matter from the perspective of determining the cost of such stock and the quantification thereof after allowing deduction for Chapadi, wax, etc. which is a well established step as part of valuation methodology of such kind of jewellery and which has been followed at other locations except at Jaipur. There is no finding that there is any excess stock which has been physically found and which has not been found recorded in the books of accounts as on the date of search. In light of above discussions, it is thus clear that difference in stock of jewellery and silver items as per books and as found at the time of search is on account of valuation of such stock at the market value instead of cost and such valuation difference and on account of non- deduction of Chapadi, wax, etc while weighing the Kundan Meena Jewellery and the same cannot be a basis to hold that it represent undisclosed income so defined in explanation to section 271AAB of the Act and the penalty levied thereon is liable to be set-aside.” c) Further Hon’ble ITAT, Jaipur Bench, Jaipur in the case of M/s Silver & Art Palace (ITA No. 236/JP/18), dated 11-02-2019 held that “as far as present penalty proceedings u/s 271AAB are concerned which is solely based on the search proceedings and anyways independent of the assessment proceedings, the Assessing officer is required to give a specific finding that there is an undisclosed income found during the course of search in terms of undisclosed stock and which has not been recorded in the books of account. The undisclosed stock could be in terms of physically identifiable stock not found recorded in the books of accounts or the stock not found recorded at the appropriate value so determined by the Assessing officer. In the instant case, we find that the Assessing officer has merely gone by the surrender statement where the stock Rupesh Tambi vs. ACIT has been valued at market price prevailing as on the date of search and has not examined the matter from the perspective of determining separate identifiable stock not found recorded in the books of accounts and also the cost of such stock which is not recorded in the books of accounts. There is no finding that there is any excess stock which has been physically found and which has not been recorded in the books of accounts as on the date of search. In light of above discussions, it is thus clear that difference in stock of goods as per books and as foundat the time of search is on account of valuation of such stock at the market value instead of cost and the same cannot be a basis to hold that it represent undisclosed income so defined in explanation to section 271AAB of the Act and the penalty levied thereon is liable to be set aside. d) Further Hon’ble ITAT, Jaipur Bench, Jaipur in the case of Shri Padam Chand Pungliya (ITA No. 112/JP/18), dated 05-04-2019 held that “accordingly, in view of the above facts and circumstances of the case and following the earlier order of this Tribunal, we hold that the amount representing the excess stock based on the valuation of the departmental valuer cannot be regarded as undisclosed income in terms of definition provided in the explanation to section 271AAB of the Act. Hence, the penalty levied against such amount is not sustainable. Here it is also worthwhile to mention that 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 surrender made in the survey statement, this cannot be held as “Undisclosed Income” for the purpose of levy of penalty u/s 271AAB. Thus it is only by admission of assessee on which the assessee included the said amount in return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. Further the department has carried out search and seizure operations on the assessee group and during the course of survey, the department has not found any evidence, which shows that the assessee was having any undisclosed income. The revenue authorities have exerted undue pressure and obtained the surrender of income from the assessee. In view of the above it is submitted that surrender of Rs.69,78,903/- made on account of house construction and excess stock and addition of Rs.424929/- are not come within the ambit of term undisclosed income and accordingly no penalty is imposable u/s 271AAB of the I T Act, 1961. The CBDT in this regard issued a circular F.No.286/2/2003-IT(Inv.) dated 10-03- 2003 and has expressed its concern about the practice of confession of additional income during the course of search and seizure proceedings and, Rupesh Tambi vs. ACIT therefore, clarified that the confession during the course of search and survey operation do not serve any useful purpose. There should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Department. For ready reference the said circular is reproduced herein below:

GOVERNMENT OF INDIA, MINISTRY OF FINANCE & COMPANY AFFAIRS DEPARTMENT OF REVENUE, CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv.

Subject: Confession of additional Income during the course of search & seizure and survey operation -regarding “Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.”

Rupesh Tambi vs. ACIT The Board has again issued a Circular dated 18th December, 2014 and advised the taxing authorities to avoid obtaining admission of undisclosed income under coercion/undue influence. The Hon’ble jurisdictional ITAT, Jaipur Bench, Jaipur in case of Mukund Sharan Goyal Vs. DCIT, CC-2, Jaipur (ITA No. 293/JP/2018order dated 23-09- 2019)wherein Hon'ble Bench held as under:- We have considered the rival submissions as well as the relevant material on record. During the course of search and seizure action under section 132 of the IT Act, a pocket diary was found and seized containing the entries of advances for land. The heading of these entries is Land Advance in the name of certain persons. However, neither any particulars of those persons are mentioned nor the particulars of the land for which the alleged advance is given is mentioned in the seized material. The entries are only certain names, dates and amount. Even from the names mentioned in the diary, the identity of these persons cannot be ascertained. Similarly the details of the land are also not given in the seized material. Thus in the absence of corresponding asset being the land acquired by the assessee or any document executed between the parties for acquiring of the land, these entries itself do not represent the undisclosed income. As per the definition provided in the Explanation to section 271AAB, if the assessee has acquired an asset which is detected during the course of search and not found recorded in the books of account then the said asset would be considered as undisclosed income but in the absence of the asset it is the mere noting in the diary which appears to be made in one go and in the names of some fictitious persons without having the minimum particulars of identity. The department has not even tried to ascertain the identity of these persons found in the seized material as no question was asked during the statement recorded under section 132(4) of the Act. Similarly, no attempt was made to identify the particulars of the land for which the alleged entries of advances are recorded in the seized document. Thus prima facie it appears that these papers are the seized material being a pocket diary contains some artificial entries in the names of artificial persons. The entries in itself do not reveal the realistic 37 Shri Mukund Sharan Goyal, Jaipur. transaction in the absence of the minimum particulars and details either of the persons or the land. An identical issue has been considered by the Coordinate Bench of this Tribunal in case of M/s. Rambhajo’s vs. ACIT (supra) as well as Shri Rajendra Kumar Gupta vs. DCIT (supra). Subsequently, the Tribunal in case of Shri Padam Chand Punliya vs. ACIT (supra) has also considered this issue in para 8 as under :- Para 8……. Accordingly, in view of the facts and circumstances of the case as well as the decision of the Coordinate Bench of this Tribunal in the case of Rajendra Kumar Gupta vs. DCIT (supra), we hold that the entries in the seized documents representing the expenditure on account of construction of the house and purchase of other assets as well as advances in the absence of the real transactions do not constitute the undisclosed income of the assessee as defined in the explanation to section 271AAB of the Act. Accordingly, the penalty levied under section 271AAB in respect of the said amount is not sustainable and liable to be set aside.” Recently the Hon’ble Coordinate Bench in the case of Vimal Chand Surana Vs DCIT, CC-2, Jaipur (ITA No. 304/JP/2018) dated 30-05-2019 held that “10. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the assessee is an Individual and has never reported any income from business except for the year under consideration where the assessee has surrendered the income in the statement recorded under section 132(4) of the IT Act. Even for the year under consideration except the surrendered amount, there is no other business income reported in the return of income which was accepted by the AO. The AO also accepted this fact in para 6 of assessment order that the assessee primarily derives income from salary and other sources. In the caption of the assessment order, the AO has also reported the nature of source of income as salary and other sources and, therefore, the AO has not disputed the fact that the assessee has never reported any income from business. During the course of statement recorded under section 132(4), the assessee in reply to question no. 4 has submitted that the business is run by his son Shri Pushpendra Kumar and grandson Shri Punit through companies, firms and HUF. Further, in reply to question no. 18, the assessee has explained that the said stock was also kept at the premises of M/s. Bhuramal Rajmal Surana HUF. However, he has surrendered this income in his own Individual hand and stated that only in this year he has started the business. The statement of the assessee was again recorded under section 132(4) on 16.10.2014 and in reply to question no. 4, the assessee again reiterated that in the premises the stock of M/s. Bhuramal Rajmal Surana a proprietorship concern of assessee’s HUF and other documents of the said firm are kept. Therefore, the stock which was treated as unaccounted excess stock of the assessee was found at the business premises of M/s. BhuramalRajmal Surana and the assessee has surrendered the said amount in his individual capacity instead of in the hands of this proprietorship concern of his HUF. From the facts it is clear that the alleged excess stock/unaccounted stock was nothing but the stock of M/s. BhuramalRajmal Surana but when the assessee offered the same in his individual hands, the department did not try to get the disclosure and surrender in the hands of the right person. It appears that the department is more concerned about the surrender whether it is in the hands of the Individual assessee or in the hands of the business concern of the HUF. Once the department has accepted the surrender in the hands of the assessee though the stock was not of the assessee but of the HUF business concern, then after receiving the tax for levy of penalty under section 271AAB of the Act, the AO was under the statutory obligation to establish that the said stock found at the time of search and disclosure made by the assessee falls in the definition of undisclosed income of the assessee as per explanation to section 271AAB of the Act. Once the stock was found at the premises of the business concern of HUF and the surrender was taken from the assessee in his individual capacity, then the penalty cannot be levied by ignoring or over-looking the fact that when assessee has not carried out any business either in the past or in future or Rupesh Tambi vs. ACIT even during the year under consideration. The AO has accepted that the assessee’s main source of income is only salary and other sources, thus the mere surrender under section 132(4) would not ipso facto bring the same in the ambit of undisclosed income as defined in explanation to section 271AAB of the Act. Even otherwise, neither the AO nor the ld. CIT (A) has made any effort to made out a case that the income surrendered by the assessee falls in the definition of Undisclosed Income as per explanation to section 271AAB of the Act. Accordingly, in view of the facts and circumstances of the case when assessee was not found to be doing any business in his individual capacity and all business of Gem & Jewellery are run through the proprietorship concern of the assessee’s HUF as well as the other firms and companies in which the assessee and his family members are partners and directors, the said income on account of excess stock disclosed by the assessee cannot be regarded as undisclosed income for the purpose of levy of penalty under section 271AAB of the Act. The definition of Undisclosed Income as provided in explanation to section 271AAB has to be considered for the purpose of levy of penalty and not the mere disclosure of undisclosed income under section 132(4) of the IT Act. Accordingly, we delete the penalty levied under section 271AAB of the Act in respect of the Income surrendered on account of excess stock. Since we have considered that this is not undisclosed income of the assessee, therefore, we do not propose to go into the issue of valuation of closing stock. The above findings of law in the said judgement squarely applies in case of assessee on the facts of the case. The assessee place reliance on following judgement of Hon'ble Jurisdictional ITAT, Jaipur Bench, Jaipur on the above submissions:- a) Shri Raja Ram Maheshwari Vs. DCIT CC-3, Jaipur (ITA No. 992/JP/2017) dated 10-01-2019 b) Dinesh Kumar Agarwal Vs. ACIT, CC-1, Jaipur (ITA No. 855 & 856/JP/2017) dated 24-07-2018. c) Suresh Chand Mittal Vs. DCIT, CC-2, Jaipur (ITA No. 931/JP/2017) dated 02-07-2018. d) Ravi Mathur Vs DCIT, CC-4, Jaipur (ITA No. 969/JP/2017) dated 13-06- 2018. e) Shyam Sunder Khandelwal Vs. DCIT, CC-2, Jaipur (ITA No. 307/JP/2018) dated 11-04-2019. f) Ram Bhajo Vs. ACIT, CC-1, Jaipur (ITA No. 991/JP/2017 dated 11-01- 2019) g) Silver and Art Palace Vs. DCIT, CC-4, Jaipur (ITA No. 236/JP/2018) dated 11-02-2019.

Rupesh Tambi vs. ACIT h) Padam Chand Pungalia Vs. ACIT CC-1, Jaipur (ITA No. 112/JP/2018) dated 05-04-2019. i) Suraj Mal Bansal (HUF) Vs. DCIT, CC-3, Jaipur (ITA No. 124/JP/2018) dated 08-04-2019. j) Vimal Chand Surana Vs. DCIT, CC-2, Jaipur (ITA No. 304/JP/2018) dated 30-05-2019. Ground No. (2) That without prejudice to the ground No. (1) above the ld. CIT(A) is wrong, unjust and has erred in law in confirming finding recorded by the ld. AO that appellant has allegedly not been able to substantiate manner in which additional income of Rs. 74,03,832/-offered to tax during the course of search and therefore imposition of penalty of Rs. 22,21,149/- under sub section 1(c) of section 271 AAB of the IT Act, 1961 @ 30% in above said additional income. Without prejudice to above it is submitted that assessee during the course of search offered additional business income of Rs. 74,03,832/- to buy piece and avoid long litigation with IT department on account of house construction and excess valuation of stock. In this connection it is also submitted that no specific question/ query was raised regarding manner of earning the income to the assessee. Further the Ld. Assessing officer neither in the assessment order nor in the penalty notice issued along with assessment order proposed/initiate the penalty proceedings u/s 271AAB(1)(c) of the I T Act, 1961. It is further submitted that the assessee filed his return of income within the due date of filling of return of income, declaring the additional business income offered to tax during the course of search to which the assessing officer has accepted after being satisfied all the things and conditions as per provisions of the I.T. Act, 1961. The assessee does not know on what basis Ld AO levied the penalty u/s 271AAB(1)(c) instead of 271AAB(1)(a) of the I T Act, 1961. It is thus submitted that there is no undisclosed income within the meaning of section 271AAB which is either admitted by assessee or determined by A.O. in assessment and hence penalty of Rs.22,21,149/- imposed by A.O. u/s 271AAB is wrong and bad in law. Ground No. (3) That the appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them. General ground. The appellant prays accordingly. was placed on the following evidence / records:

S. No. Particulars of Documents Page No. 1 Copy of penalty notice dated 15.05.2017 and 12.02.2020 1-2 issued u/s 271AAB of the IT Act, 1961. 2 Stock reconciliation chart between stock as per books and 3-5 stock as per valuation report 3 Copy of show cause notice dated 08.12.2016 along with its 6-9 reply and trading account for the period 01.04.2014 to 15.10.2014 4 Copy of seized document Exhibit AS-4 page no. 01 10-11 5 Copy of statement recorded u/s 132(4) of the IT Act, 1961 12-21

7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that there is no undisclosed income within the meaning of section 271AAB which is either admitted by assessee or determined by A.O. in assessment and hence penalty of Rs.22,21,149/- imposed by A.O. u/s 271AAB is wrong and bad in law and thereby based on the written submission he prays that the penalty sustained by the ld. CIT(A) is required to be deleted.

9. We have heard the rival contentions and perused the material placed on record. Though the assessee in this appeal has raised mainly two grounds for levy of penalty which was sustained by the ld. CIT(A) for Rs.

22,21,149/- imposed by the learned AO u/s 271AAB of the Act on technical as well as merits of the case and therefore, we deem it appropriate to deal with these grounds together with. As dispute is relates to the levy of penalty u/s. 271AAB of the Act, it would be appropriate to deal with the provision of the Act which reads as under; Penalty where search has been initiated. 13 271AAB. (1) The Assessing Officer 14[or the Commissioner (Appeals)] may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 15[but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President 16], the assessee 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 Rupesh Tambi vs. ACIT 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 respect of the undisclosed income; a sum 17[computed at the rate of sixty per cent] of the undisclosed income (c) of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). 18 [(1A) The Assessing Officer 19[or the Commissioner (Appeals)] may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President 20, 20a[but before the 1st day of September, 2024] the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, if the 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 sixty per cent of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a).] (2) No penalty under the provisions of 21[section 270A or] 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) 18[or sub-section (1A)]. (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) “specified date” means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued 22[under section 148 or under section 153A, as the case may be,] for furnishing of return of income expires, as the case may be; (b) “specified previous year” means the previous year- Rupesh Tambi vs. ACIT (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of 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 otherwise not been disclosed to the 23[Principal Chief Commissioner or] Chief (B) Commissioner or 23[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 so had the search not been conducted.] At this stage before going into the provision of the law it would be appropriate to reiterate the following facts as narrated in the order of assessment by the ld. AO;

4. The Assessee filed a return of income for Previous Year 2014-15 relevant to Assessment Year 2015-16 declaring an income of Rs. 12841980/- on 30-09- 2015. It pertinent to mention here that the search operation relevant to this case has been conducted on 15-10-2014 i.e. FY 2014-15 relevant to AY 2015-16 and as per clause (b)(ii) of explanation to section 271AAB, the year under consideration falls within the definition of 'specified year'. The total income declared in the ROI for the 'specified year' included the undisclosed income of Rs. 69,78,903/- which represented the undisclosed income . Accordingly, penalty u/s 271AAB of the Act is initiated on such amount of Rs. 69,78,903/- by way of issue of notice u/s 274 r.w.s 271AAB of the Act. assessment order it is not disputed that the assessee has declared the total income in the ROI for the 'specified year for Rs. 69,78,903/- which represented the undisclosed income comprising of Rs. 49,50,000/- surrendered on account of investment in construction of house and in respect of excess stock of Rs. 20,28,903/-, the assessee has claimed that there was no difference in the stock in quantity and the difference in the stock was due to valuation taken at market value totaling Rs. 69,78,903/- and the assessee having accepted offered the same while filling the return of income is a undisclosed income. Having accepted that fact the case of the assessee falls in the first proviso to section 271AAB wherein the law as enacted says that the ld. AO may direct that the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year if the assessee in the course of search make a statement and admits the undisclosed income and specified the manner before the authorized officer having accepted that paid the tax and offered the income while filling the ITR and paid the tax and therefore, we are of the considered view that the ld. AO in levying the penalty @ 30 % has erred and even ld. CIT(A) relied upon the various judgment which were delivered before the law which is restrict the levy of penalty @ 10 % instead of 30 % on Rs. 69,78,903/-.

Based on this observation the appeal of the assessee is allowed in part as indicated herein above.

In the result, the appeal of the assessee is Partly allowed.

Order pronounced in the open court on 29/10/2025.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 29/10/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Rupesh Tambi, Jaipur izR;FkhZ@ The Respondent- ACIT, Central Circle-02, Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 1470/JP/2024) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत