BHAGCHAND, A.M. The appeal filed by the assessee emanates from the order passed U/s 263 of the Income Tax Act, 1961 (in short the) by the ld. Pr. CIT, Jaipur-1, Jaipur dated 27/03/2018 for the A.Y. 2013-14.

2. The assessee is an individual and derives income from house property, capital gain and other sources. The original return of income was e-filed on 31/10/2013 declaring total income of Rs. 15,46,83,000/-, which includes additional income officer to tax Rs. 14,97,82,023/- under the head ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 2 cash advances, interest received on cash advances to various persons and undisclosed investment in the stock of firms, wherein the assessee is a partner. A search was conducted on 18/07/2012 in the case of Nuwal Group, Jaipur to which the assessee belongs. During the course of search, various assets/books of account and documents were found and seized. The Assessing Officer passed penalty order on 20/08/2015 U/s 271AAB of the and levied the penalty @ 10% at Rs. 1,49,78,202/- on total undisclosed iincome of Rs. 14,97,82,023/-. The ld. Pr.CIT, Jaipur-1, Jaipur, has passed order U/s 263 of the and penalty imposed by the Assessing Officer is enhanced by Rs. 2,99,56,404/-.

3. Now the assessee is in appeal before theAT by taking following grounds of appeal:

1. In the facts and circumstances of the case the ld. Pr. CIT, Jaipur-1, Jaipur has erred in passing the order u/s 263 of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed.

2. In the facts and circumstances of the case the ld. Pr. CIT, Jaipur-1, Jaipur has erred in passing the order u/s 263 of the Income Tax Act, 1961 after issuing final certificate by the Pr. CIT- Central in Form-5 under the Direct Tax Dispute Resolution Scheme, 2016 which is ultra- virus and against the principle of natural justice and without having any jurisdiction over the issue.

3. In the facts and circumstances of the case the ld. Pr.CIT, Jaipur-1, Jaipur has erred in passing the order u/s 263 of the Income Tax Act, 1961 by holding that the order passed by Ld. Assessing Officer u/s 271AAB of the Income Tax Act, 1961 dated 20.08.2015 was erroneous and prejudicial to the interest of the revenue. ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 3

4. In the facts and circumstances of the case the ld. Pr. CIT, Jaipur-1, Jaipur has erred in holding that the assessee has not substantiate the manner of earning of income in the statement recorded u/s 132(4) of the Income Tax Act, 1961.

5. In the facts and circumstances of the case the ld. Pr. CIT, Jaipur-1, Jaipur has erred in holding that the penalty us/ 271AAB of the Income Tax Act, 1961 is leviable @ 30% instead of 10% imposed by the Ld. Assessing Officer in the given circumstances.

4. The main issue involved in the appeal is passing order U/s 263 of the by the ld. Pr.CIT and confirming the penalty U/s 271AAB of the. The ld. Pr.CIT has passed order U/s 263 of the, the main contents of his order is reproduced hereunder:

11. While imposing the penalty u/s 271AAB of the act it is seen that the AO has also arrived at the conclusion that the assessee has not substantiated this income as during assessment proceedings the assessee could not satisfactorily explain the source of the income and could not produce any evidentiary documents in its favor. However while imposing the penalty he has grossly erred in levying it @10% instead of @30% which was mandated by the. The Act leaves no discretion with the AO u/s 271AAB regarding the quantum of penalty to be applied once it is established that the undisclosed surrendered income cannot be substantiated. Where the Income Tax Act leaves no discretion with the AO there can be no question of an opinion being formed that can be debated. What could be debated was whether the assessee has substantiated his undisclosed income. On this question it is seen that the AO has formed an opinion that the assessee has not done so and this opinion of the AO stands accepted. What is termed erroneous here is the application of ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 4 wrong clause which has led to short levy of penalty. Wrong application of the clauses in the said section would render the order as erroneous and if there is short levy of tax it would be considered as prejudicial to the interest of revenue also. The Honble Supreme Court in several judgments including that of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 831 held that an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. In this case it is seen that the AO has not considered his own findings available on records while imposing penalty @ 10% under clause (a) of Sec. 271AAB the. The AO has without application of mind applied the wrong provision/clause of Sec. 271AAB to the facts available on record which has caused revenue loss to the minimum extent of Rs. 2,99,56,404/- as clause (c) of section 271AAB was to be applied to the facts of the case. This omission as made by the assessing officer resulting in an order which is erroneous as well as prejudicial to the interest of revenue. It has necessitated the initiation of proceedings under section 263 of the Income Tax Act. This has been done in a very mechanical way. This action of the AO has resulted in an erroneous penalty order under Section 271AAB of the Income Tax Act, which is clearly prejudicial to the interest of revenue and clearly calls for invocation of section 263 of the Income Tax Act 1961.

12. Keeping the above discussion in view by the virtue of the powers conferred on the undersigned under the provisions of Section 263 of the IT Act 1961, I hold that the order under Section 271AAB dated 20/8/2015 for assessment year 2013-14 passed by the assessing officer is erroneous insofar as it is prejudicial to the interest of revenue as the order has been passed by the assessing officer in a routine and perfunctory manner by applying the incorrect clause of section 271AAB in the case of theA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 5 assessee for imposing penalty. It is therefore liable to revision under explanation (2) clause (a), clause (b) of section 263 of the Income Tax Act. Therefore holding that there has been short levy of penalty of Rs. 2,99,56,404/- the penalty order dated 20/8/2015 is set aside on this issue with a direction to the assessing officer to pass the same in the case of the assessee de novo in accordance with law after making the necessary examination and verification regarding the issue under discussion .The AO is directed to finalize the penalty order keeping in view the facts of the case and correct application of law. However an opportunity to the assessee to state its case is to be allowed in the interest of natural justice.

5. While pleading on behalf of the assessee, the ld AR has submitted as under:- A search was conducted on 18.07.2012 in the case of Nuwal group, Jaipur to which the assessee belongs to. The original return of income was filed on

31.10.2013 for the above Assessment Year declaring a total income of Rs. 15,04,61,890/- which included surrendered income of Rs. 14,97,82,023/- offered to tax on a/c of undisclosed cash advances, interest on the cash advances, and undisclosed investment in Stocks of firms wherein the assessee is a partner. The Ld. Assessing Officer completed the assessment u/s 143(3)/153B(1)(b) on

13.03.2015 almost accepting the returned income. However while completing the assessment the Ld. Assessing Officer initiated penalty proceedings u/s 271AAB without specifying any clause (a), (b) or (c) of section 271AAB(1). Further in the assessment order no satisfaction has been recorded by the Ld. Assessing Officer with respect to any default of the assessee in terms of clause (a), (b) or (c) of section 271AAB(1). Subsequently a penalty has been imposed by the Ld. Assessing Officer u/s 271AAB of Rs. 1,49,71,202/- being 10% of the undisclosed income of Rs. 14,97,82,023/-. Even while passing the penalty order the Ld. Assessing Officer has not specified the default of the assessee with respect of ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 6 clause (a), (b) or (c) of section 271AAB(1). The penalty order has been passed u/s 271AAB. It is this penalty order which has been subjected to proceedings u/s 263 by the Ld. Pr. CIT-1 and she has quashed the penalty order passed by the Ld. Assessing Officer vide order dated 27.03.2018 and has directed to impose penalty more by Rs. 2,99,56,404/-. The directions of the Pr. CIT-1 are scanned below: - The perusal of the aforesaid concluding para of the order u/s 263 passed by PCIT-1 reveals the following: - (i) The Ld. Assessing Officer has passed the penalty order without application of mind and applied the wrong provisions/clause of section 271AAB. (ii) The penalty order has been passed by the Ld. PCIT in a routine and perfunctory manner by applying the incorrect clause of section 271AAB. It is submitted that the order passed u/s 263 by the Ld. PCIT is erroneous and unlawful. In the penalty order the Ld. Assessing Officer has not referred to any clause of section 271AAB(1). As such the Ld. Pr. CIT is ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 7 wrong in observing that the Ld. Assessing Officer has imposed penalty by applying wrong clause/incorrect clause. The entire problem in the penalty is that no clause has been quoted. Not only in the penalty order even in the assessment order while initiating penalty proceedings u/s 271AAB the specific clause (a), (b) or (c) of sub-section (1) have not been quoted. In view of this the order u/s 263 is assailed as under: -

2. Initiation of penalty proceedings is unlawful: - The assessment was completed u/s 143(3) r.w.s. 153B(1)(b) of the IT Act, 1961 almost accepted the income disclosed by the assessee. However the Ld. Assessing Officer initiated penalty proceedings u/s 271AAB of the Income Tax Act, 1961 as per para 5 of the assessment order scanned below: - ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 8 The perusal of the aforesaid paras of the assessment order disclosed that the Ld. Assessing Officer has initiated the penalty u/s 271AAB without specifying clause (a), (b) or (c) of section 271AAB. Further there is no satisfaction of the Ld. Assessing Officer for initiating penalty proceedings u/s 271AAB. The provisions of section 271AAB are quoted below: - Section - 271AAB. Penalty where search has been initiated. (1) The Assessing Officer 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, 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 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; (c) a sum which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 9 previous year, if it is not covered by the provisions of clauses (a) and (b)." The perusal of the aforesaid provisions reveals that there are three different defaults mentioned in cause (a), (b) & (c). It was incumbent upon the Ld. Assessing Officer to have mention the specific clause of section 271AAB(1) while initiating the penalty proceedings. Before that the Ld. Assessing Officer was also required to have recorded his satisfaction in the assessment order regarding the specific default committed by the assessee. None of this has been done by the Ld. Assessing Officer. Therefore the very initiation of the penalty proceedings was unlawful. Similarly while issuing penalty notice the Ld. Assessing Officer has again not specified the clause of section 271AAB(1) for which penalty was initiated. The penalty notice is scanned below: - ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 10 Thus in view of the aforesaid facts it is clear that initiation of penalty proceedings was wrong on the following counts: - (i) The Ld. Assessing Officer did not record any satisfaction with reference to the specific clause of section 271AAB(1). Copy of assessment order is available on paper book page number 6 to 8. (ii) In the assessment order the Ld. Assessing Officer also did not initiated penalty proceeding with reference to any specific clause (a) to (c) of section 271AAB(1). (iii) The notice issued u/s 274 read with section 271 on 13.03.2015 along with the assessment order also did not mention any specific clause of section 271AAB such as 271AAB(1)(a), 271AAB(1)(b) or 271AAB(1)(c). In view of the aforesaid facts on record there was no case for levy of any penalty subsequently on such unlawful initiation of the penalty proceedings. As the very initiation of the penalty proceedings is unlawful the subsequent imposition of penalty is automatically void. The Ld. PCIT has set aside the order of penalty passed u/s 271AAB with the direction to levy penalty @ 30% in place of 10% imposed by the Ld. Assessing Officer. The case of the assessee is that the Ld. Pr. CIT has set aside the penalty and not the assessment order which still exists. The penalty proceedings have been emanated from the assessment order which stands as on date. Since the very initiation of the penalty proceedings in the assessment order itself is defective and unlawful there was no case for levy of any penalty leave aside @ 10% or 30%. Thus in the face of unlawful initiation of penalty proceedings and when such assessment order from where such unlawful initiation of penalty proceeding emanated still exists, the direction of the Ld. PCIT to impose penalty afresh u/s 271AAB(1)(c) is unlawful and illegal. In fact what was required on the part of Pr. CIT was to have modified the assessment order itself so as to correct the initiation of the penalty proceedings. This having not been done, penalty is not at all imposable in the case of the assessee ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 11 despite the direction of the Pr. CIT given u/s 263 of the Income Tax Act, 1961 and hence the order u/s 263 deserves to be quashed. It is submitted that the above proposition is the settled position of law that penalty proceeding should be initiated lawfully under the specific provisions of the/specifying the particular limb of the section and intimating the assessee the specific clause/limb for which his defense/explanation is sought. The following case laws are quoted in support: - (i) AUTORIDERS INDIA PVT. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX (BOMBAY TRIBUNAL (2018) 161 DTR 0217 (Mumbai)(Trib), Penalty u/s 271(1)(c)Concealment of incomeFurnishing of inaccurate particulars of incomeValidity of penalty orderAppellant-assessee company was incorporated under provisions of Companies Act, 1956 Assessee filed return of income at loss which was subjected to scrutiny u/s 143(3) and subsequently disallowance was made on account of foreign travelling expenses, Interest payment, Cash credits and interest on investments, thus, total disallowance made in original order was within meaning of section 271(1)(c)By virtue of disallowance which was disallowed was deemed to represent income in respect of which particulars had been concealedMinimum penalty 100% of tax evaded on account of concealed income was worked out and penalty was levied u/s 271(1)(c)CIT(A) upheld penalty u/s 271(1)(c)Appellant-assessee challenged imposition of penalty u/s 271(1)(c)Held, section 271(1)(c) empowered AO to impose penalty to extent specified if, in course of any proceedings under the, he was satisfied that any person had concealed the particulars of his income or furnished inaccurate particulars of such incomePenalty could be levied on existence of any of two situations, namely, for concealing particulars of income or for furnishing inaccurate particulars of incomeTherefore, imposition of penalty was invited only when conditions prescribed u/s 271(1)(c) exist Concealment of particulars of income and furnishing of inaccurate particulars of income referred to in section 271(1)(c) denote different connotationsIn notice issued u/s 274 r.w.s. 271(1)(c) of even date, both limbs of section 271(1)(c) were reproduced in proforma notice and irrelevant clause had not been struck-offObservation of AO in ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 12 assessment order and non-striking off of irrelevant clause in notice clearly brings out diffidence on part of AO and there was no clear and crystallized charge being conveyed to assessee u/s 271(1)(c), which had to be met by AOQuasi-criminal proceedings u/s 271(1)(c) ought to comply with principles of natural justiceCharge being made against assessee qua section 271(1)(c) was not firm and, therefore, proceedings suffered from non-compliance with principles of natural justice inasmuch as AO was himself unsure and assessee was not made aware as to which of two limbs of section 271(1)(c) he had to respondNotice issued by AO u/s 274 r.w.s. 271(1)(c) was untenable as it suffered from vice of non application of mindPenalty imposed u/s 271(1)(c) liable to be deleted Assessees appeal allowed. (ii) MUNINAGA REDDY vs. ASSISTANT COMMISSIONER OF INCOME TAX (HIGH COURT OF KARNATAKA) (2017) 396 ITR 0398 (Karn) PenaltyValidity of penalty u/s 271(1)(c)NoticeIn assessment proceedings assessment order came to be passed by assessing authority and ultimately penalty of Rs.1,78,35,511 was imposed u/s 271(1)(c) by orderCommissioner did not interfere with order of imposition of penaltyTribunal confirmed decision of CIT(A) in levy of penalty u/s 271(1)(c)Held, during course of hearing assessee tendered copy of notice issued to assessee u/s 271(1)(c) for imposition of penalty, which as per assessee was part of record in proceedings before TribunalRevenue was unable to dispute that notice was issued by revenue for imposition of penalty u/s 271(1)(c)Hence, said notice for purpose of consideration was taken on recordSaid notice disclosed that it was printed notice and further no specific ground was mentioned, which might show that penalty could be imposed on particular ground for which said notice was issuedIn case of M/s.Manjunatha Cotton and Ginning Factory, it was held that notice would have to specifically state ground mentioned in s 271(1)(c) as to whether it was for concealment of income or furnishing incorrect particulars of income said penalty proceedings was being initiatedThat sending of printed form wherein grounds mentioned in s 271 of the would not satisfy requirement of lawFurther, assessee should know ground which he had to meet specifically otherwise principles of natural justice would be violated and consequently, no penalty could be imposed on the assessee if there was no specific ground mentioned in noticeTribunal at one point of time did observe that since specific contention was not raised by assessee before Appellate ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 13 Authority, it was mixed question of law and fact and same might also be permissibleRelevant observations of Tribunal were referred in order passed in M.A.No.62/BANG/15 for rectification and Tribunal, had not accepted contention raised thereinIt was hardly required to be stated that if question of law was raised which goes to root of matter and for which no undertaking of factual examination was required, same could be permitted by TribunalHad it been case where notice for penalty was not on record in proceedings of assessment, matter might stand on different footingIn any case, where notice for imposition of penalty u/s 271(1)(c) was already there on record and when Tribunal was to examine applicability of this Court decision in case of M/s Manjunatha Cotton and Ginning Factory and law laid down, it was case where contention ought to have been considered and examinedAs observed herein above, decision in case of M/s Manjunatha Cotton and Ginning Factory would apply and if notice was found to be illegal and was found to be unsustainable in law, consequences would be that there was breach of natural justiceHence, ultimate order for imposition of penalty couldnt be sustainedQuestion was answered in favour of assessee, against revenueIt was held that order of Tribunal in main appeal as well as in M.A.No.62/BANG/15 insofar as it related to not interfering with order for imposition of penalty was set-asideIt was further observed and declared that as question was answered in favour of assessee and against revenue, order for imposition of penalty should remain set-aside Appeals were allowed to the aforesaid extent (iii) CIT vs. Samson Perinchery (Bombay High Court) (INCOME TAX APPEAL NO. 1154 OF 2014 DATE : 5th JANUARY, 2017 (iii) Mradula Agarwal vs. Income Tax Officer in ITA No. 176/JP/2016 dated 16.09.2016 (iv) Manjunatha Cotton & Ginning Factory 259 ITR 565. This decision has got the approval of the Apex Court of the Country. SLP filed before the Honble Supreme Court by the revenue stands dismissed in the case SSAS Emerald Meadows [2016] 73 taxmann.com 248 (SC) SPECIAL LEAVE TO APPEAL (C) NO. 11485 OF 2016 AUGUST 5, 2016.

3. Order levying penalty u/s 271AAB of the Income Tax Act, 1961 is unlawful: - It is submitted that the Ld. Assessing Officer has passed the order u/s 271AAB. In the entire penalty order the Ld. Assessing Officer has not discussed under which ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 14 clause (a), (b) or (c) of section 271AAB the assessee has defaulted or which clause (a), (b) or (c) of section 271AAB is applicable in the case for the assessee and in what manner. The relevant paras of the penalty order are scanned below: - The perusal of the aforesaid paras reveal that the Ld. Assessing Officer has passed the order in a routine manner. It is submitted that on the basis of the observations of the Ld. Assessing Officer that "The assessee has not substantiated this income. During assessment proceedings the assessee could not satisfactorily explain the source of the income and could nto produce any evidentiary documents in its favour". The Pr. CIT has observed in para 11 of her order as under: - ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 15 The perusal of the aforesaid observation of the Pr. CIT reveals that entire order is based on the observation of the Ld. Assessing Officer in the penalty order that assessee failed to substantiate his income during the assessment proceedings. But there is no such finding in the assessment order that assessee failed to substantiate his income. The copy of the assessment order is available on paper book page number 10 to 13. It is only during the course of assessment proceedings that assessee should have been afforded opportunity to substantiate his income. This was not done. Therefore the observation of the Ld. Assessing Officer in the penalty order is false that during the course of assessment proceedings the assessee failed to substantiate his income. Not only this even in the prolonged statement recorded u/s 132(4) on 18.07.2012, the assessee was not put any question regarding substantiating the income. He was never put to explain the source of income disclosed by him. Copy of statement is enclosed with the submission. Therefore it is wrong on the part of the Ld. Assessing Officer to have observed in the penalty order that the assessee failed to substantiate his income. And even it is far worse that the Ld. Pr. CIT was guided and led by this false observation of the Ld. Assessing Officer in the penalty order. She could have rather she should have perused the assessment order herself and should have ascertained whether at any stage assessee was required to substantiate his income. In view of these facts the Pr. CIT has erred in ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 16 passing the order u/s 263 and giving direction for levy of penalty @ 30% instead of 10%. The submission of the assessee that the penalty order was unlawful, illegal and has no legs. The observation in the penalty order as discussed above is false. On such false observation the Ld. Pr. CIT has based her order and hence the order is ab-initio void. The following case laws are quoted in support: - (i) ASSISTANT COMMISSIONER OF INCOME TAX vs. SHREe NARAYAN SITARAM MUNDRA (2017) 166 ITD 0047 (Ahemdabad Trib) Levy of Penalty u/s.271AAAPenalty where search has been initiated Deletion of PenaltyAssessee admitted unaccounted income and included same while filing return of income pursuant to notice under s.153A of theIncome returned under s.153A of the was assessed at same figure and penalty under s.271AAA was imposed by AO on ground that conditions specified in section 271AAA for exoneration from penalty had not been satisfied by assesseeAO accordingly imposed penalty on undisclosed incomeCIT(A) deleted penalty holding that exception provided in section 271AAA for non-imposition of penalty had duly fulfilledHeld, as per section 271AAA(2)(i), one of conditions for obtaining relief from imposition of penalty under s.271AAA was that assessee in statement recorded under s.132(4) of the admitted undisclosed income and specifies manner in which such income was derivedRevenue admitted that assessee had not failed to substantiate manner in which undisclosed income derivedAssessee had not failed to specify manner at first place when substantiation thereof had not been called into question by RevenueThus, case of Revenue required to be summarily dismissed on this ground aloneIncome considered as undisclosed income in statement under s.132(4) had been duly incorporated in return filed pursuant to searchRevenue could not plead deficiency on part of assessee to specify manner which had not been called into question at time of searchNowhere in assessment order or in penalty order, revenue made out case that manner of earning undisclosed income was enquired into post search stage eitherRevenue had not pointed out any query which remained unreplied or evaded in course of search or post search investigationRevenues Appeal dismissed. (ii) ASSISTANT COMMISSIONER OF INCOME TAX vs. RITU SINGAL (DELHI TRIBUNAL) (2016) 49 ITR (Trib) 0664 (Delhi) ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 17 Penalty for failure to keep and maintain information and document in respect of international transaction Deletion of Penalty Search and seizure action u/s 132 was carried out in case of Company B Case of assessee was also covered u/s. 132 Assessee had filed return of income for AY 2010-11, electronically, declaring income of Rs. 20,47,14,190 During course of assessment proceedings, it was noticed by AO that assessee had made disclosure of undisclosed income earned during financial year 2009-10 (relevant to assessment year 2010-11) to extent of Rs. 20 Crores during course of search and post search proceedings on basis of seized material found during course of search It was further noted by AO that provisions of section 271AAA were applicable with respect to undisclosed income found during course of search and declared by assessee in her return of income for assessment year 2010- 11 AO initiated penalty proceedings u/s. 271AAA during assessment proceedings on ground that assessee had not specified manner in which undisclosed income was earned also failed to substantiate, it and accordingly, imposed penalty of Rs. 2 Crore on assessee for such failure CIT(A) deleted penalty and allowed appeal of Assessee Held , in case of Mothers Pride Education Personna Pvt. Ltd. vs DCIT it held that during course of search proceedings authorized officer of department had not raised any specific query regarding manner in which undisclosed income had been derived and on contrary assessee had tried to explain earning of undisclosed income in question in its reply during course of recording of his statement u/s 132(4) It held that in absence of query raised by authorized officer during course of recording of statement u/s 132(4) about manner in which undisclosed income had been derived and about its substantiation, AO was not justified in imposing penalty u/s 271 AAA specially when offered undisclosed income had been accepted and due tax thereon had been paid by assessee CIT(A) while deleting penalty in dispute, passed well reasoned order and same did not need any interfere Therefore, respectfully following precedents of ITAT as mentioned in CIT(A)s order, ITAT upheld order of CIT(A) wherein CIT(A) deleted penalty in dispute Revenues Appeal dismissed. (iii) NEERAT SINGAL vs. ASSISTANT COMMISSIONER OF INCOME TAX (DELHI TRIBUNAL) (2014) 101 DTR 0238 (Del) Search was carried out at premises of assessee in which certain documents were seized, assessee had surrendered certain amount as an undisclosed income which was also declared in his return of income for ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 18 AY 2010-11Due taxes thereon was also paid before filing of return and same was acceptedIn statement u/s 132 (4) assessee stated that said income was derived from forward / speculative and property transactions carried out by him during financial year 2009-10AO being not satisfied with explanation of assessee imposed penalty u/s 271AAACIT(A) upheld findings of AOHeld, penalty u/s 271AAA is not leviable where assessee specify manner in which an undisclosed income was derived and also substantiate mannerIn instant case no query was raised by authorized officer during course of recording of statement of assessee u/s 132 (4) about manner in which undisclosed income has been derived and about its substantiationIn absence of query raised by authorized officer, AO was not justified in imposing penalty u/s 271AAA specially when offered undisclosed income had been accepted and due tax had been paid by assesseePenalty imposed u/s 271AAA set aside Assessees appeal allowed

4. Dispute Resolution Scheme under Finance Act, 2016- Order u/s 204(2) r.w.s. 206 of the Finance Act, 2016 dated 09.11.2016 by Pr. CIT (Central), Jaipur - Over and above the submission made in the forgoing paras it is submitted that during the course of proceedings u/s 263 it was brought to the kind notice of the Ld. Pr. CIT that the assessee has availed benefit of the direct tax dispute resolution scheme-2016. In this regard copies of order passed by Pr. CIT(Central), Jaipur dated 18.10.2016 and 09.11.2016 were produced before him. Under the dispute resolution scheme the assessee was required to only Rs. 37,44,551/- in place of penalty levied u/s 271AAB of Rs. 1,49,78,202/-. The matter thus got finality after the payment made by the assessee of Rs. 37,44,551/-. During the course of proceedings u/s 263 the assessee furnished reply under letter dated

20.03.2018 copy of which is available on paper book page no. 53 to 61. The relevant portion is quoted below: - "5. Subsequently the Ld. Assessing Officer has imposed the penalty u/s 271AAB of the Income Tax Act, 1961 by order dated 20.08.2015 @ 10% of surrendered income by considering that the assessee fulfilled all the condition as mentioned in clause (a) of sub-section (1) section 271AAB of the Income Tax Act, 1961. However the assessee has not received any notice as mentioned in penalty order for show cause notice dated

10.07.2015. ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 19

6. The assessee subsequently filed appeal against the levy of penalty u/s 271AAB of the Income Tax Act, 1961 to the CIT(A)-4, Jaipur on

01.09.2015. Against levy of penalty of Rs. 1,49,78,202/-.

7. Thereafter in the finance act 2016, the direct tax dispute resolution scheme-2016 was introduced and the assessee filed application under DRS scheme and which was accepted by the Pr. CIT-Central, Jaipur vide certificate dated 09.11.2016. Copy of certificate is enclosed herewith.

8. Thereafter the CIT(A) has also decided the appeal of the assessee copy of order dated 11.11.2016 is enclosed herewith. (Page 2 to 4) From the above facts it is clearly emerges that the matter of imposing penalty got finality by issue of certificate in form no. 5 of the Direct Tax Dispute Resolution Rules 2016 by the order F.No. Pr. CIT(Central)/Tech/2016-17/2347 dated 18.10.2016 and the assessee has also granted immunity from prosecution for the above penalty proceedings. In the Direct Tax Dispute Resolution Scheme 2016 sub-section (3) of section 204 which reads as under: - "Every order passed under sub-section (2), determining the sum payable under this Scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be re-opened in any other proceeding under the Income Tax Act or the Wealth-tax Act or under any other law for the time being in force, or as the case may be, under any agreement, whether for protection of investment or otherwise, entered into by India with any other country or territory outside India." So when the penalty levied u/s 271AAB of the Income Tax Act, 1961 of the assessee has been finalized by passing order under sub-section(2) of section 204 of the Direct Dispute Resolution Scheme 2016 there is no question of any revision u/s 263 of the Income Tax Act, 1961 which is clear violation of section 204 of the." In her order the Ld. Pr. CIT has observed that assessee wrongly availed the benefit under the dispute resolution scheme 2016 as he was not entitled for the same, it being a case of search. In this regard the submission of the assessee is that the assessee is not expected to know the scheme better than the officers of the department of the level of Pr. CIT (Central). The order passed u/s 204(2) ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 20 r.w.s. 205 of the Finance Act 2016 dated 09.11.2016 is none other than by Pr. CIT (Central), Jaipur who deals only with search cases. The jurisdiction of Pr. CIT (Central) is exclusively were search and seizure cases. Further the matter of penalty u/s 271AAB which is also directly related with search cases and such penalty is imposed only in such assessments. The facts being so how could it be that the dispute resolution scheme was not applicable to the assessee despite the Ld. Pr. CIT (Central) Jaipur granted the certificate. There is no fault of the assessee in availing scheme. Once a certificate u/s 204(2) r.w.s. section 205 has been granted, the Ld. Pr. CIT-1 was precluded in passing order u/s 263 of the Income Tax Act, 1961. The order passed u/s 263 deserves to be quashed.

6. On the other hand, the ld CIT DR has relied on the order of the ld. Pr.CIT and prayed to uphold the order.

7. We have heard both the sides on this issue. We have also perused the lace laws relied upon both the sides. We have also gone through the various relevant materials available on the record. The original return was e-filed 31/10/2013 declaring total income of Rs. 15,46,83,000/-. A search and seizure operation was carried out on 18/07/2012, thus the search was conducted during the financial year relevant to assessment year 2013-14. The Assessing Officer initiated the penalty proceedings U/s 271AAB by issuing notice U/s 274 read with Section 271 of the I.T. Act, 1961 on 13/03/2015 wherein the penalty has been initiated on assessed undisclosed income as evident from copy of notice scanned at page No. 9 ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 21 of this order. The Assessing Officer has not specified under which sub clause of Section the notice has been issued. Thus, it is clear from records that the assessee has not been sufficiently noticed about the sub clause of the provisions of Section 271AAB of the. The Assessing Officer has levied the penalty @ 10%. This fact establishes that penalty has been levied U/s 271AAB (1)(a) of the. The assessee has filed an appeal against the order of levy of penalty by the Assessing Officer on 01/09/2015. During the pendency of appeal before the ld. CIT(A), the assessee filed an application under the Direct Tax Dispute Resolution Scheme, 2016. The Ld. Pr.CIT (Central), Jaipur has accepted the application under the Direct Tax Dispute Resolution Scheme, 2016 and issued certificate dated 09/11/2016. This fact establishes that the issue regarding levy of penalty attained finality. This certificate issued by the Ld. Pr.CIT(Central), Jaipur dated 09/11/2016 has not been withdrawn till date. By the certificate, the assessee has been granted immunity from prosecution also. Sub-section(3) of Section 204 of the Direct Tax Dispute Resolution Scheme, 2016 also provides that every order passed under sub-section (2), determining the sum payable under this Scheme, shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceedings under the Income Tax Act or the Wealth Tax or under any other law for the time being in force, ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 22 or as the case may be, under any agreement, whether for protection of investment or otherwise, entered into by India with any other country or territory outside India. Thus, the certificate issued in terms of clauses of Direct Tax Dispute Resolution Scheme, 2016, the issue regarding levy of penalty U/s 271AAB of the got finalize. Further it has been also observed from the order of the ld. Pr.CIT that during the proceedings U/s 263 of the, ld. Pr.CIT has not arrived at a clear and final conclusion that penalty levied by the Assessing Officer @ 10% was not justified in view of the materials collected and statement recorded during the search. Ld. Pr.CIT in his order U/s 263 of the has directed that the penalty order dated 20/08/2015 is set aside on this issue with a direction to the A.O. to pass the same in the case of assessee de novo in accordance with law after making the necessary examination and verification regarding issue under discussion. Thus, the ld Pr.CIT had not given clear finding on the issue. The Assessing Officer have levied penalty @ 10% and ld. Pr.CIT wants to levy 30% of penalty U/s 271AAB of the. The A.O. has not specified the sub clause in notice. In such a factual situation, in our considered view, the ratio laid down by the Honble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (supra) that an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous, shall not be applicable in this ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 23 case. In absence of a clear cut finding of ld. Pr.CIT on the basis of documents found and seized and statements recorded during the search, the Pr.CIT. was not justified in issuing such direction. The Pr.CIT cannot reach at a conclusion that the provisions of Section 271AAB (1)(c) are applicable in assessees case without clear and final finding on this issue. We would also like to hold that once the assessee has preferred the appeal against the order of Assessing Officer for levy of penalty U/s 271AAB of the, there is no scope for the ld. Pr.CIT to invoke the provisions of Section 263 of theto cover any legal lacuna. Moreover, in a situation where the assessee has been granted certificate under the Direct Tax Dispute Resolution Scheme, 2016 which continues to be valid then also provisions of Section 263 could not be invoked. We would also like to mention that once the certificate issued under DRS Scheme is withdrawn in future then the appeal of assessee before CIT(A) shall revive. In such a situation also the Pr.CIT shall not have jurisdiction to invoke provisions of Section 263 of the. There is no scope for treating the penalty order passed by the Assessing Officer as erroneous and prejudicial to the interest of revenue. Accordingly, the order U/s 263 of the passed by the ld. Pr.CIT is hereby quashed. ITA 419/JP/2018_ Shri Ashok Kr. Maheshwari Vs Pr.CIT 24

8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 14/06/2018. Sd/- Sd/- fot; iky jko Hkkxpan (VIJAY PAL RAO) (BHAGCHAND) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 14 th June, 2018 *Ranjan vknsk dh izfrfyfi vxzsfkr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Ashok Kumar Maheshwari, Jaipur.

2. izR;FkhZ@ The Respondent- The Pr.C.I.T. Jaipur-1, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDrvihy@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 419/JP/2018) vknskkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar