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TMI Blog2019 (2) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the fact that the assessee has failed to explain the source and the manner in which the undisclosed income was earned and therefore, the assessee was not covered by the exception provided in the subsection 2 of the section 271AAA of the Income Tax Act, 1961 and consequently liable for penalty under Section 271AAA of the Act?" 2. The issue pertains to imposition of penalty under Section 271AAA of the Income Tax Act ("the Act" for short). During search the assessee in the statement recorded under Section 132(4) of the Act had admitted certain undisclosed income. The Assessing Officer however was of the opinion that since the assessee had not disclosed the manner of earning such income, the assessee cannot claim immunity from penalty. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment the manner in which income has been derived has not been stated, but has been stated subsequently, it amounts to compliance with Explanation 5(2). 4. In case of Mahendra C. Shah (supra) Gujarat High Court reiterated this position and held that:" 15. In so far as the alleged failure on the part of the assessee to specify in the statement under Section 132(4) of the Act regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in case of Commissioner of Income Tax vs. Mahendra C.Shah and Allahabad High Court in case of Commissioner of Income Tax vs. Radha Kishan Goel (supra) have put considerable stress on the recording of the statement under section 132(4) of the Act in the context of the requirement of the assessee to disclose the manner in which the undisclosed income was derived in order to avoid penalty. The High Court in case of Commissioner of Income Tax vs. Mahendra C. Shah, in particular, observed that considering the social environment, it is not possible to expect from an assessee to be specific and to the point regarding the conditions stipulated by exception No.2 while making statement under section 132(4) of the Act. The Court went on to observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of Section 271AAA thus while retaining the other requirements of avoiding penalty as provided in clause (ii) of Explanation 5 has now introduced an additional requirement of the assessee having to substantiate the manner in which, the undisclosed income was derived. It is this requirement which the counsel for the Revenue would place great emphasis on. According to her, onus is now entirely shifted on the assessee not only to make a disclosure of the undisclosed income but also to specify the manner, in which, the income has been derived and to substantiate the same. It was therefore, contended that the earlier decisions of this Court in case of Commissioner of Income Tax vs. Mahendra C.Shah and the decision of Allahabad High Court in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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