Amendment of Expl 5 to Sec.271(1)(c). - Income Tax - 1741/CBDT

INSTRUCTION NO. 1741/CBDT Dated: December 29, 1986 The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 has amended Explanation 5 to Section 271(1)(c) w.e.f 10th September, 1986. As per the existing Explanation, if assets which are not recorded in the Books of accounts are found during a search operation a tax payer is liable to penalty for concealment even if he declared the full value of those assets as his income, in the return filed after the search. Therefore, this provision was seen to be operating even in cases where the assessee has no intention to conceal income and was in fact going to declare such assets in the return that was going to be filed for that year. 2. It has now been provided by the amended section that if in the course of a search u/s 132, the assessee makes a statement u/s 132(4) that any asset found in his possession or under this control has been acquired out of his income which has not been disclosed so far in his return of income and specifies in his statement the manner in which this income has been derived and pays the taxes that are due thereon; no penalty for concealment shall be leviable. The salient features of this amendment are that (a) unaccounted assets are found in the course of the search; (b) the person searched makes a statement u/s 132(4) that the unaccounted assets have been acquired out of his income of that year for which return had not been filed so far since the period for filing the return u/s 139(1) had not expired; (c) specifies in the statement the manner in which such income has been earned, (d) pays the tax on such income together with interest, if any; (e) no penalty for concealment is leviable. 3. It is clarified that the words 'in the course of the search' occuring in Explanation 5 of Section 271(1)(c) would include the period during which any locker, godown etc. is the subject matter of an order of restraint u/s 132(3) of I.T Act, 1961 as the search of such lockers etc. prior to the vacation of order u/s 132(3) is legally a recommencement of the search operation. 4. The authorised officers should invariably bring the amended provisions to the notice of the persons searched so that (a) each searched party is afforded an opportunity to make their statements u/s 132(4) and (b) that such statements are correctly recorded as per amended law. These instructions may kindly be brought to the notice of all departmental officers and may be given the widest publicity.