Search surrender and disclosure during a Section 132(4) statement protected the assessee from concealment penalty.

Penalty under Section 271(1)(c) was held inapplicable where, during search, the assessee admitted undisclosed income in a Section 132(4) statement and expressed readiness to pay tax. The court treated the contemporaneous surrender, read with the search material, as bringing the case within Explanation 5, which protects an assessee from the presumption of concealment when full disclosure is made during search. On those facts, no further explanation about the manner of earning the income was required for penalty purposes, and concealment could not be presumed. Penalty was therefore not leviable.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee, during search, admitted undisclosed income in a statement under Section 132(4) and expressed readiness to pay tax, so as to attract or avoid the deeming fiction in Explanation 5.

Analysis: The assessee's statement recorded during search ed the amount as undisclosed income of the relevant financial year and showed readiness to pay tax. The materials found during search, coupled with the contemporaneous surrender, brought the case within the protective scope of Explanation 5, which prevents a presumption of concealment where the assessee makes a full disclosure in the course of search and accepts liability on the undisclosed income. No further explanation was required to be furnished on the manner of earning for the purpose of attracting penalty in the facts of the case.

Conclusion: Penalty under Section 271(1)(c) was not leviable; the issue was decided in favour of the assessee and against the Revenue.

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