When an assessee can escape penalty by surrendering an amount as income
An assessee subject to search and seizure operation can escape penalty under section 271(1)(c) in respect of an amount discovered during the search operation and surrendered in the following circumstances :-
(i) Statement u/s 132(4) :- By making a statement under section 132(4) that any money, bullion, jewellery or other valuable articles or things found in his possession or under his control has been acquired out of his income which has not been disclosed in the returns of income filed before the search and consequently claim immunity under Explanation 5(2) to section 271(1)(c). [See in this connection discussion on Explanation 5 of section 271(1)(c) in Para 8]
(ii) Preparing surrender document:- Where no assets have been discovered or seized, the assessee should ensure that a document is prepared claiming that an amount is being surrendered without there being any material to hold against him and it is being made to buy peace without prejudice to his rights and furth er the assessee should make it clear that according to his perception no penalty is leviable and none be levied. The assessee has also to ensure that the surrender be made of the amount to be added to the returned income and that no part of it is income or concealed income.
(iii) Surrender during survey :- to buy peace : Similarly, in cases of surrender during survey operations under section 133A of stock or cash, the surrender statement should clarify that it does not represent income but the offer is being made in order to buy peace and to expedite assessment and is without prejudice to his contention that income shown in the return is correct income. This should be also with a request that no penalty be levied.
(iv) If such precautions are taken while drafting the letter of surrender and also while submitting explanation under section 274(1) to notice under section 271(1)(c), the assessee cannot be burdened with penalty.