Vasudev Agrawal Vs DCIT (ITAT Jaipur)
The two cross appeals arise from the order of the CIT(A)-2, Udaipur, dated 5 October 2018, concerning penalty under section 271AAB for Assessment Year 2015-16. The assessee, an individual belonging to the Kota Dall Mill Group, filed the original return under section 139(1) declaring income of ₹11,80,51,650, including ₹10,78,04,733 surrendered as Long Term Capital Gain (LTCG). After a search on 2 July 2015, a notice under section 153A was issued, and the assessee filed a return declaring income of ₹11,98,51,650, including ₹10,96,04,733 admitted during the search. The assessment under section 143(3) read with section 153B determined income at ₹11,98,99,765, with minor additions of ₹9,000 for short commission disclosure and ₹39,115 for share trading mismatch.
The Assessing Officer initiated penalty proceedings under section 271AAB and levied penalty at 30% on ₹10,96,52,850 treating the surrendered LTCG as undisclosed income under section 271AAB(1)(c). The CIT(A) reduced the penalty from 30% to 10%, holding that penalty should fall under section 271AAB(1)(a). Both parties appealed.
The assessee argued that the penalty notice did not specify which clause of section 271AAB applied, rendering the penalty invalid. It contended that the CIT(A) applied clause (a) without issuing notice under section 251(2). The assessee maintained that no undisclosed income existed within the meaning of section 271AAB; all share transactions were duly recorded in the books, supported by contract notes, demat statements, bank statements, and broker ledgers, and no incriminating material was found during the search. The surrender during the search was claimed to be due to pressure. It was argued that penalty is not automatic and must satisfy statutory conditions, including testing the surrendered income against the definition of “undisclosed income” in the Explanation to section 271AAB.
