TMI Blog2005 (5) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the Tribunal was justified in law in cancelling the penalty under s. 271(1)(c) of the IT Act, 1961 without taking into account the finding of the AO that the assessee had not paid the tax in respect of such income before furnishing his return of income ? 2. The reference relates to the asst. yr. 1988-89. Brief facts of the case are as follows : Assessee-respondent (hereinafter referred to as assessee ) is assessed to tax in the status of individual. On 16th July, 1987, the business and residential premises were searched by the income-tax officials under s. 132 of the Act. In the statement recorded under s. 132(4) of the Act during the course of search, the assessee surrendered a sum of ₹ 35 lakhs as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d confirmed the penalty order. CIT(A), however, confirmed the penalty mainly on the ground that in the statement the manner in which the income has been derived has not been stated. Being aggrieved by the order of CIT(A), assessee filed second appeal before the Tribunal. Tribunal allowed the appeal and quashed the penalty. Tribunal held as follows : We find force in the contention raised on behalf of the assessee in this regard. There is no gain saying the fact that an amount of ₹ 36 lakhs was disclosed. It is also on record that the assessment for the year under consideration stood fully covered by the disclosure made under s. 132(4). It is also a fact that specific query as to the manner in which the income had been earned or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpln. 5 to s. 271(1)(c) of the Act came up for consideration before the Division Bench of this Court in IT Ref. No. 111 of 1993, CIT vs. Radha Kishan Goel decided on 21st April, 2005 [reported at (2006) 200 CTR (All) 300'Ed.]. This Court held as follows : From a perusal of Expln. 5 it is evident that in circumstances which otherwise did not attract the penalty provisions of s. 271(1)(c) of the Act, now a deeming provision was introduced as to attract the penalty provisions to those cases as well. But an exception is provided in cl. (2) of Expln. 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-s. (4) of s. 132 of the Act that the money, bullion, jewellery, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured, harassed and put to a mental agony that he loses its normal mental state of mind and at that stage it cannot be expected from a person to pre-empt the statement required to be given in law as a part of his defence. In these circumstances, we are of the view that under s. 132(4) of the Act unless authorised officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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