Law:

Section:

Section 271(1)(c), read with section 132, of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1988-89 - Whether in relation to search and seizure proceedings, for becoming entitled to immunity from levy of penalty under Explanation 5, basic requirement in relation to Exception No. 2, is disclosure in statement made under section 132(4); disclosure or otherwise in return of income post date of search would not absolve an assessee from deeming provision, namely, 'deemed concealment' once an assessee is found in possession of a valuable asset at time of search - Held, yes - Whether there is no prescription in Explanation 5 to section 271(1)(c) as to point of time when tax has to be paid qua amount of income declared in statement made under section 132(4); there would be sufficient compliance of provision if tax is shown to have been paid before assessment was completed - Held, yes FACTS Search operations took place at the premises of a concern under section 132 on 3-7-1987. Admittedly, the assessee was also present at that point of time at the said premises. A personal search of the assessee was undertaken and diamonds worth Rs. 5,06,712 were found from the person of the assessee and were seized. The assessee filed a return of income declaring total income of Rs. 20,880. That was followed by a revised return filed on 27-9-1990 declaring total income of Rs. 5,27,600 including the value of diamonds found from the possession of the assessee. Assessment was completed on 25-2-1991 on a total income of Rs. 5,77,600. The Assessing Officer also levied penalty under section 271(1)(c) which was confirmed in the first appeal. On second appeal, the Tribunal deleted the penalty by holding that the assessee's case was covered by the second Exception provided in Explanation 5 to section 271(1)(c) and, therefore, in light of the statement recorded at the time of search under section 132(4), no penalty was leviable for concealment. In the reference before the High Court, the revenue contended that the statement made under section 132(4) by the assessee at the time of search did not contain any averment as to the manner in which such income had been…

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