ACIT v. Gebilal Kanhaialal HUF (2012) 252 CTR 345 / 76 DTR 345 (SC)

S. 271(1)(c) : Penalty – Concealment – Immunity – Explanation 5 immunity available even if tax not paid by due date of filing of return – [S. 132(4)]

In a s. 132 search and seizure operation, on July 29, 1987 the assessee was found with unaccounted income of ` 42 lakhs. The assessee made a declaration u/s 132(4) and offered the said amount to tax. However, neither the return of income was filed, nor was the tax due on the surrendered income paid, on the due date  (31-7-1987). The tax was paid during the assessment proceedings. The AO took the view that the assessee was not entitled to immunity from penalty under Explanation 5 to s. 271(1)(c) as it had not paid the tax due on the surrendered income by the due date. The CIT(A) reversed the AO. The Tribunal reversed the finding of CIT(A) High Court reversed the finding of Tribunal and decided in favour of assessee. On appeal by the department the Supreme Court, held dismissing the appeal: Explanation 5 to s. 271(1)(c) is a deeming provision which provides that if, in the course of search u/s 132, the assessee is found to be the owner of unaccounted assets and he claims that such assets have been acquired by him by utilizing, wholly or partly, his income for any previous year which has ended before the date of search or which is to end on or after the date of search, then, in such a situation, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall be deemed to have concealed the particulars of his income for the purposes of imposition of penalty u/s 271(1)(c). Sub-clause (2) confers an immunity from penalty if three conditions are fulfilled, namely, (i) the assessee must make a statement u/s 132(4) in the course of search stating that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income to be furnished before expiry of time specified in s. 139(1), (ii) the assessee should specify in the s. 132(4) statement the manner in which such income stood derived and (iii) the tax together with the interest has to be paid. There is no time limit prescribed in the third condition for the payment of the tax & interest. As the assessee had fulfilled the first two conditions and paid the tax & interest (before the completion of the assessment), it was entitled to immunity under Explanation 5 to s. 271(1)(c).

(A. Y. 1987-88)