Rupesh Tambi Vs ACIT (ITAT Jaipur)
A search was conducted on 15.10.2014 in the Surana Group, where the Assessee, proprietor of Arshia Jewellers, was also covered. The AO levied a penalty of ₹22.21 lakh u/s 271AAB(1)(c) on alleged undisclosed income of ₹74.03 lakh, comprising ₹49.50 lakh (investment in house construction) & ₹24.53 lakh (difference in stock valuation). CIT(A) upheld the levy.
Before Tribunal, the Assessee contended that:
- The penalty notices were vague, not specifying whether it was under clause (a), (b) or (c) of s. 271AAB;
- Penalty u/s 271AAB is not mandatory, as the section uses “may”;
- The surrendered income was already recorded or represented valuation difference, not undisclosed income per Explanation (c) to s. 271AAB; &
- The manner of earning income was duly explained during search.
ITAT noted that the AO had issued a standard notice without striking off inapplicable limbs, showing non-application of mind. Relying on CIT v. SSA’s Emerald Meadows (SC) & Manjunatha Cotton & Ginning Factory (359 ITR 565), the Bench held that such defective notice vitiates penalty proceedings.
Further, ITAT observed that mere valuation difference in stock or cash investment already offered in return cannot be treated as “undisclosed income” for s. 271AAB purposes. Since there was no independent incriminating material proving concealment, & the AO had not specified any clause under which penalty was leviable, the levy could not be sustained.
