JUDGMENT

Akil Kureshi, J. - This appeal is filed by the revenue to challenge the judgment of Income Tax Appellate Tribunal. Following question is presented for our consideration:"

Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in upholding the order of CIT(A) deleting the penalty under Section 271AAA without appreciating 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 this context, the reference was made to subsection (2) of Section 271AAA which requires that in addition to admitting the undisclosed income in statement under subsection (4) of Section 132, the assessee also specifies the manner in which such income has been derived. In the opinion of the Assessing Officer, this later requirement of the assessee specifying the manner in which such income have been derived, was not specified. When the issue ultimately reached the Tribunal, the Tribunal by impugned judgment deleted the penalty relying on the decisions of Allahabad High Court in case of Commissioner of Income Tax v. Radha Kishan Goel 2005) 278 ITR 454 (All) and that of the Gujarat High Court in case of Commissioner of Income Tax v. Mahendra C. Shah (2008) 299 ITR 305 (Guj).

3. Having heard learned counsel for the parties and having perused the documents on record, we do not find any error in the view of the Tribunal. The requirement in question flowing from clause (i) of subsection (2) of Section 271AAA of the Act is similar to one specified in sub clause (2) of Explanation 5 to Section 271 of the Act. In context of this provision that Allahabad High Court in case of Radha Kishan Goel (supra) had held that unless the Authorized Officer recording the statement under Section 132(4)(a) of the Act puts the specific question with regard to the manner in which income have been derived, it cannot be expected from a 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 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 Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by Allahabad High Court in case of Commissioner of Income Tax v. Radha Kishan Goel (2005) 278 ITR 454. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the cond