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13 ITA 196/JP/2018_ Sh. Om Prakash Modi Vs DCIT In support of this contention further reliance is placed on the recent decision dated 09.02.2018 of Kolkata Bench of the Hon'ble ITAT in the case of DCIT Vs. Manish Agarwala in ITA No. 1479/Kol/2015 (supra).The relevant observations of the Hon'ble Tribunal are as under(case law compilation page 56-60):

"On the other hand, Ld. AR Shri Miraz D. Shah, supporting the decision of Ld. CIT(A) made contentions though taken up before the Ld. CIT(A) but has not been adjudicated on those averments, which the Ld. AR urges before us to consider while adjudicating the appeal of the Revenue. The Ld. AR also pointed out that the contentions which he is going to raise has been taken up before the AO also, however, according to Ld. Counsel, those legal arguments were not considered by the AO in the right perspective. The first contention of the Ld. AR is that since Sec. 271AAB of the Act is a penalty section it should be construed strictly, which we agree being it is a trite law that penalty provisions have to be strictly interpreted. Next contention of Ld. AR is that sec. 271AAB of the Act is not mandatory because Parliament in its wisdom has used the word 'may' and not 'shall'. So, according to him, it is the discretion bestowed upon the AO whether to initiate and impose penalty u/s 271AAB of the Act. We agree with the said contention of Ld. AR because when a similar issue was adjudicate by ITAT, Lucknow (the author of this order was a member of the Bench) in Sandeep Chandak & Ors. V/s CIT (2017) 55 ITR (Trib) 209 and 2017 (5) TMI 675-ITAT-Lucknow in ITA No. 416, 417 and 418/LKW/2016 dated 30.01.2017 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 AO to levy the penalty or not to levy, even if the assessee has made the default under the said provision." Therefore, the 2nd ground of Revenue fails and we hold that penalty u/s 271AAB of the Act is not mandatory and is discretionary."

Accordingly, in view of the facts and circumstances of the case and the legal position emerging out of the aforesaid various decisions, it is submitted that Ld. AO has erred in imposing the penalty u/s 271AAB as the case of assessee in the context of its income of Rs. 12.50 crore so shown in the return of income does not fall within the ambit of 'undisclosed income' for the purpose of section 271AAB and since the levy of penalty u/s 271AAB is not mandatory, therefore, penalty so levied in routine manner was unwarranted. It is therefore humbly prayed that penalty u/s 271AAB deserves to be deleted in its entirety and may kindly be deleted.

"On the other hand, Ld. AR Shri Miraz D. Shah, supporting the decision of Ld. CIT(A) made contentions though taken up before the Ld. CIT(A) but has not been adjudicated on those averments, which the Ld. AR urges before us to consider while adjudicating the appeal of the Revenue. The Ld. AR also pointed out that the contentions which he is going to raise has been taken up before the 32 ITA 196/JP/2018_ Sh. Om Prakash Modi Vs DCIT AO also, however, according to Ld. Counsel, those legal arguments were not considered by the AO in the right perspective. The first contention of the Ld. AR is that since Sec. 271AAB of the Act is a penalty section it should be construed strictly, which we agree being it is a trite law that penalty provisions have to be strictly interpreted. Next contention of Ld. AR is that sec. 271AAB of the Act is not mandatory because Parliament in its wisdom has used the word 'may' and not 'shall'. So, according to him, it is the discretion bestowed upon the AO whether to initiate and impose penalty u/s 271AAB of the Act. We agree with the said contention of Ld. AR because when a similar issue was adjudicate by ITAT, Lucknow (the author of this order was a member of the Bench) in Sandeep Chandak & Ors. V/s CIT (2017) 55 ITR (Trib) 209 and 2017 (5) TMI 675-ITAT-Lucknow in ITA No. 416, 417 and 418/LKW/2016 dated 30.01.2017 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 AO to levy the penalty or not to levy, even if the assessee has made the default under the said provision." Therefore, the 2nd ground of Revenue fails and we hold that penalty u/s 271AAB of the Act is not mandatory and is discretionary."

The Coordinate Bench of this Tribunal under similar facts and circumstances, in the case of Shri Gauri Shankar kandoi Vs DCIT in identical issue in favour of the assessee by holding as under:

"8. Heard both the parties and perused the material available on record. In this case, the search was conducted on 18.07.2012 in case of Kandoi Group, Jaipur to which the assessee belongs. During the course of search, a document was found and seized which states that the assessee has made payment of Rs. 36,83,406/- vide cheque dated 13.07.2012 and Rs. 17,16,594/- towards fully and final payment of a Villa at Suncity Township, Sikar Road, Jaipur. Further, copy of cheque No. 0014 dated 13.07.2012 for an amount of Rs. 36,83,406/- issued by the assessee from his saving bank account maintained with Bank of Baroda was also found, besides physical cash of Rs. 9 lacs. Therefore, it is an admitted position that the the assessee has made total payment of Rs. 54 lacs towards purchase of Villa at Suncity Township at Sikar Road, Jaipur and as far as the cheque payment is concerned, the same has not been disputed by the Revenue and has been taken as disclosed investment by the assessee. However, as far as the cash payment of Rs. 17,16,594/- and cash of Rs. 9 lacs which was found during the course of search, the same has been taken as undisclosed income by the assessee. During the course of search, in his statement recorded u/s 132(4), the assessee has surrendered the said amount and subsequently, offered the same in his return of income. The question that arises for consideration is whether 38 ITA 196/JP/2018_ Sh. Om Prakash Modi Vs DCIT the cash payment towards purchase of Villa at Suncity Township at Sikar Road, Jaipur and cash of Rs. 9 lacs found in possession of the assessee can be termed as undisclosed income within the meaning as defined in section 271AAB as undisclosed income under explanation (c) of section 271AAB of the Act. In this regard, we refer to the Co-ordinate Bench decision in the case of Silver & Art Palace vs. DCIT (supra) wherein it was held that the undisclosed investment by way of purchase of land can be subject matter of addition in the quantum proceedings but the same does not fall strictly within the meaning of undisclosed income as so defined in section 271AAB of the Act and deeming fiction u/s 69B cannot be extended and applied automatically in the context of section 271AAB of the Act. Further, the fact that the transaction so found recorded in a document has not been disputed by the Revenue. Given that the assessee is a salaried person who is not required to maintain any books of accounts and there is no mechanism to report the investment in the tax return, the said investment cannot be held as undisclosed investment and more so, undisclosed income so defined in section 271AAB of the Act. In light of the same, the investment of Rs. 17,16,594/- so found in purchase of Villa at Suncity Township at Sikar Road, Jaipur cannot be termed as undisclosed income within the meaning of "undisclosed income" as so defined u/s 271 AAB of the Act and penalty levied thereon is liable to be set aside."