Assessee is an individual. Search U/Sec. 132 has been conducted on 4.11.2017.  Assessee has not filed the Return of Income for A.Y. 2017-18 U/SEc. 139(1), however the time limit for furnishing the Return was 31.03.2018. Meanwhile the assessee has received the Notice U/Sec. 153A and therefore the assessee has filed the Return of income for A.Y. 2017-18 in response to Notice U/SEc. 153A on 25.03.2018 disclosing the income at Rs. 4750000.00 which included income for LTCG and STCG. The assessing officer has completed the assessment U/SEc. 153A r.w.s 143(3) by making an addition of 675000.00 on account of diffidence between the cost of house property disclosed in the Return of Income and value as per DVO as unexplained investment U/SEC. 69A. and initiated the penalty proceeding U/Sec. 270A(9) for under reporting of Income .

on Appeal filed by the appeal before CIT A, who has accepted the contention of the appellant that since difference of Rs. 675000 is less than 5% is is with in the  tolerance limit  and deleted the addition made . On receipt of CIT A order , A.O. has levied the penalty on the following  ground :

A. Assessee has responded to penalty proceedings

B. Assessee has not raised any ground for initiation of Penalty proceedings U/Sec. 270A(9) of the Act

c. Assessee would not have disclosed this income if search action was not conducted at assessee.

hence AO levied the penalty U/SEc. 270A(9) under misreporting of income @200% on the entire income of  Rs. 4750000.00 disclosed in the return of Income filed in response to Notice U/SEc. 153A

Whether action of A.O. is correct ? what reply assessee should give?