Search disclosure immunity under voluntary disclosure law defeated concealment penalty where tax and interest were paid in time.

Section 14(5A) of the Voluntary Disclosure of Income and Wealth Act, 1976 protected searched assessees from concealment penalty where the disclosed income formed part of the assessed demand and the statutory tax and prescribed simple interest were paid within the amended time limit. The amendment in section 38 of the Finance Act, 1977 preserved immunity if the unpaid tax and interest were discharged before 1 January 1978. On the stated facts, the tax was paid in time and the interest already paid under section 220(2) of the Income-tax Act was sufficient, so the assessee satisfied the statutory conditions and penalty under section 271(1)(c) did not survive.

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Issues: Whether the assessee was entitled to immunity under section 14(5A) of the Voluntary Disclosure of Income and Wealth Act, 1976 so as to avoid penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis: The disclosure made by the assessee fell within the special scheme applicable to searched assessees under section 14 of the Voluntary Disclosure of Income and Wealth Act, 1976. The tax on the voluntarily disclosed income merged with the tax payable in the regular assessment, and the statutory scheme did not require separate treatment of that amount once it formed part of the assessed demand. By the amendment introduced by section 38 of the Finance Act, 1977, immunity continued where the unpaid tax and the prescribed simple interest were paid before 1 January 1978. On the facts, the tax remaining unpaid had been paid within time, and the interest already paid under section 220(2) of the Income-tax Act, 1961 was sufficient to meet the statutory requirement, or in any event no further amount was shown to be due with certainty.

Conclusion: The assessee satisfied the requirements of section 14(5A) and was entitled to immunity from concealment penalty. The penalty under section 271(1)(c) could not survive.

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