Penalty under section 271(1)(c) not sustainable where no section 132(4) statement was recorded and income was later disclosed promptly.

Penalty under section 271(1)(c) with Explanation 5 was held not to apply where the search ended without recording a statement under section 132(4), and the assessee later disclosed the income at the first available opportunity, paid tax, and returned the income within time. The deeming fiction of concealment could not be invoked in isolation from the statutory requirement of a section 132(4) statement, and the assessee's conduct was treated as bona fide compliance rather than concealment. Immunity from penalty was therefore available.

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Issues: Whether penalty under section 271(1)(c) read with Explanation 5 was leviable when no statement under section 132(4) was recorded during the search and the assessee later disclosed the income and paid tax.

Analysis: The search was interrupted and concluded without recording the assessee's statement under section 132(4). The assessee thereafter made a disclosure at the first available opportunity, furnished the particulars sought, paid advance tax, and returned the income within time. In these circumstances, the deeming fiction of concealment under Explanation 5 could not be applied in isolation from the statutory requirement of a statement under section 132(4), and the assessee's conduct showed bona fide compliance rather than concealment.

Conclusion: Penalty under section 271(1)(c) was not sustainable and the assessee was entitled to immunity from penalty.

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