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This Tribunal in the case of Ravi Mathur vs. DCIT (supra) while considering an issue of levy of penalty under section 271AAB has held in para 4 to 9 as under :-

"4. We have considered the rival submissions as well as relevant material on record. A search was conducted under section 132 of the IT Act on 30th Mukesh Kumar Ranka & Anju Jain L/H of Late Sushil Jain, Indore ITA Nos.97 & 98/Ind/2024 and 104 & 103/ Ind/2024 - AYs. 2017-18 & 2018-19 October, 2014 at the premises of the assessee. The assessee in his statement recorded under section 132(4) has disclosed an income of Rs. 10,02,00,000/- in pursuant to the entries of advances given for purchase of land recorded in the pocket diary which was found and seized during the course of search and seizure action. This is year of search and the financial year would end on 31st March, 2015. However, the assessee disclosed this amount of Rs. 10,02,00,000/- based on the entries in the diary regarding investment in real estate. The due date of filing of return of income under section 139(1) was 30th September, 2015. It is undisputed fact that the assessee is an Individual and was not maintaining regular books of account. Therefore, the transactions recorded in the pocket diary found during the course of search itself would not lead to the presumption that the assessee would not have offered this income to tax if the search is not conducted on 30th October, 2014. Further, the entries in the diary itself do no not represent the income of the assessee during the year under consideration though the assessee was required to explain the source of investment in question and that source would be the income of the assessee. It is most likely that the investment in question was made from the unaccounted income of preceding years. Hence the investment in the real estate itself would not reveal the nature of income and the source of income of the year under consideration. It is a pre-condition for invoking the provisions of section 271AAB that the assessee admitted the undisclosed income in the statement under section 132(4). The definition of 'undisclosed income' is provided in section 271AAB itself and, therefore, the AO in the proceedings under section 271AAB has to examine all the facts of the case and then arrive to the conclusion that the income disclosed by the assessee falls in the definition of undisclosed income as stipulated in the explanation to said section. The first question arises is whether the levy of penalty under section 271AAB is mandatory and consequential to the disclosure of income by the assessee under section 132(4) or the AO has to take a decision whether the given case has satisfied the requirements for levy of penalty under section 271AAB of the Act. In order to consider this issue, the provisions of section 271AAB are to be analyzed. For ready reference, we quote section 271AAB as under :-

(c) are satisfied. As per sub-section (3) of section 271AAB the provisions of section 274 and 275 as far as may be applied in relation to the penalty referred in this section which means that before imposing the penalty under sec. 271AAB, the AO has to issue a show cause notice and give a proper opportunity of hearing to the assessee. Thus the levy of penalty u/s. 271AAB is not automatic but the A.O. has to take a decision to impose the penalty after giving a proper opportunity of hearing to the assessee. It is statutory requirement that the explanation of the assessee for not fulfilling the conditions as prescribed u/s 271AAB of the Act is required to be considered by the AO and particularly whether the explanation furnished by the assessee is Mukesh Kumar Ranka & Anju Jain L/H of Late Sushil Jain, Indore ITA Nos.97 & 98/Ind/2024 and 104 & 103/ Ind/2024 - AYs. 2017-18 & 2018-19 bonafide and non-compliance of the same is due to the reason beyond the control of the assessee. Therefore, the penalty u/s 271AAB is not a consequential act but the AO has to first initiate proceedings by issuing a show cause notice and after considering the explanation and reply of the assessee has to take a decision. This requirement of giving an opportunity of hearing itself makes it clear that the penalty u/s 271AAB is not mandatory but the AO has to take a decision based on the facts and circumstances of the case otherwise there is no requirement of issuing any notice for initiation of proceedings but the levy of penalty would be consequential and only computation of the quantum was to be done by the AO as in the case of levy of interest and fee u/s 234A to E. Even the quantum of penalty leviable u/s 271AAB is also subject to the condition prescribed under clauses (a) to (c) of sub-section (1) and the AO has to again give a finding for levy of penalty @ 10% or 20% or 30% of the undisclosed income. Thus the AO is bound to take a decision as to what default is committed by the assessee and which particular clause of section 271AAB(1) is attracted on such default. Further, mere disclosure of income under section 132(4) would not ipso facto par take the character of undisclosed income but the facts of each case are required to be analyzed in objective manner so as to attract the provisions of section 271AAB of the Act. Since it is not automatic but the AO has to give a finding that the case of the assessee falls in the ambit of undisclosed income as defined in Explanation to the said section. Therefore, the provisions of section 271AAB stipulate that the AO may come to the conclusion that the assessee shall pay the penalty. The only mandatory aspect in the provision is the quantum of penalty as specified under clauses (a) to (c) of Sec. 271AAB(1) of the Act as 10% to 30% or more as against the discretion given to the AO as per the provisions of section 271(1)(c) of the Act where the AO has the discretion to levy the penalty from 100% to 300% of the tax sought to be evaded. Thus the AO is duty bound to come to the conclusion that the case of the assessee is fit for levy of penalty under section 271AAB and then only the quantum of penalty being 10% or 20% or 30% has to be determined subject to the explanation of the assessee for the defaults.

6. The question whether levy of penalty under section 271AAB by the AO is mandatory or discretionary has been considered by the Visakhapatnam Bench of this Tribunal in case of ACIT vs. M/s. Marvel Associates (supra) in para 5 to 7 as under :-

"5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. During the appeal hearing, the Ld. A.R. vehemently argued that the A.O. has levied the penalty under the impression that the levy of penalty in the case of admission of income u/s 132(4) is mandatory. The Ld. A.R. further stated that penalty u/s 271AAB of the Act is not mandatory but discretionary. The provisions of section 271AAB of the Act is pari materia with that of section 158BFA of the Act relating to block assessment and accordingly argued that the levy of penalty under section 271AAB is not mandatory but discretionary. When there is reasonable cause, the penalty is not exigible. The Ld. A.R. taken us to the section 271AAB of the Act and also section 158BFA(2) of the Act and argued that the words used in section 271AAB of the Act and the words used in section 158BFA(2) of the Act are identical. Hence, argued that the penalty section 271AAB of the Act penalty is not automatic and it is on the merits of each case. For ready reference, we reproduce hereunder section 158BFA (2) of the Act and section 271AAB of the Act which reads as under:

[Emphasis supplied]

18. In another case of Aeswarya Jain v. Dy. CIT, Central Circle Kota -

ITAT, Jaipur - (2020) SCC online ITAT 2258, which is again a decision authored by same Judicial Member as forming part of this Bench, the ITAT observed and held thus:

Mukesh Kumar Ranka & Anju Jain L/H of Late Sushil Jain, Indore ITA Nos.97 & 98/Ind/2024 and 104 & 103/ Ind/2024 - AYs. 2017-18 & 2018-19 "So far as the penalty u/s 271AAB is concerned, the AO has to take the decision after considering the explanation of the assessee and based on the facts and circumstances of the case as well as by considering the satisfaction of the conditions as provided u/s 271AAB of the Act. The Tribunal has held that levy of penalty u/s 271AAB of the Act is not mandatory but the AO has discretion to take the decision and the same shall be based on judicious decision of the AO. Therefore, the AO is required to first examine the facts and circumstances under which the assessee surrendered the income as well as the seized material to arrive at a conclusion that the income so disclosed by the assessee during the course of search and seizure proceedings falls in the definition of undisclosed income as provided in the Explanation to Section 271AAB of the Act. The definition of undisclosed income provided in clause (c) of Explanation to Section 271AAB Act contemplates any income represented by any money, bullion, or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of search u/s 132 of the Act which has not been recorded in the books of account or other documents maintained in normal course on or before the date of search. If the definition of undisclosed income provided under Explanation to Section 271AAB is applied to the facts of the present case, we find the seized documents which is Plan and Map of a residential house in the name of assessee's wife Smt. Usha Jain containing only the design of the house as well as electric plan. Therefore, the said seized documents itself does not reveal any undisclosed income or any other unaccounted expenditure but it is a electric plan which means that house was to be constructed as per the said plan whether the said work as given in the Plan and design has been actually carried out or not, was not the subject matter of the search and seizure action. The said seized documents also do not reveal the actual expenditure or tentative expenditure for carrying out the electric work as per plan. Thus the said seized documents in the absence of any other materials revealing the unexplained expenditure cannot be said to be an incriminating materials. The searched party has not made any allegation about the actual expenditure incurred by the assessee in the construction of residential house, if any. There is nothing either in the proceedings u/s 132 or in the statement recorded u/s 132(4) of the Act regarding unaccounted expenditure incurred by the assessee on construction of house. Further, there is no mention of the actual construction of the house Shri Aeshwarya Jain vs DCIT, Central Circle, Kota by the assessee or the timing the construction period or completion of construction work. Even the alleged expenditure not recorded in the books of account is not based on any documentary evidence or even on physical verification of the Electrical items as well as furniture and fixture installed in the house of the assessee. When the said income is not represented by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions then even if the assessee has surrendered a sum of Rs. 10.00 lacs as unaccounted expenditure, the same would not fall in the ambit of undisclosed income as defined in explanation to Section 271AAB of the Act. A bare surrender of income not representing the money, bullion, jewellery or other valuable article or thing or any entry in the books of account will not be regarded as undisclosed income for the purpose of levy of penalty u/s 271AAB of the Act. In the case in hand, Mukesh Kumar Ranka & Anju Jain L/H of Late Sushil Jain, Indore ITA Nos.97 & 98/Ind/2024 and 104 & 103/ Ind/2024 - AYs. 2017-18 & 2018-19 it is clear from the records that the assessee in his statement recorded u/s 132(4) of the Act has made a surrender of Rs. 10.00 lacs based on said seized materials marked as Annexure A-2 Page 60 to 62 which is Electric Plan and Site Map of the house. Therefore, in the absence of any undisclosed income revealed by said sized materials, the income surrendered by the assessee cannot be said to be undisclosed income for the purpose of Section 271AAB of the Act. Hence, in the facts and circumstances of the case when income surrendered by the assessee does not fall in the ambit of undisclosed income as defined in Section 271AAB of the Act, the same would not attract the levy of penalty u/s 271AAB of the Act. Accordingly, the penalty levied by the AO is deleted."