Sec. 271(1)(c) of Income Tax Act, 1961 – Penalty – A search and seizure operation was carried out under section 132 of the IT Act in the case of the assessee as well as group concern and certain documents were found revealing the nature of finance activities carried out by the assessee known as 100 days financing scheme. In the statement recorded under section 132(4) of the IT Act, the assessee surrendered an income of Rs. 10 crores and offered to tax in the returns of income filed in response to notices issued under section 153A of the IT Act. The AO made the additions to the total income declared by the assessee on account of undisclosed interest income, on account of disallowance of expenses and on account of deposits made in the bank accounts of the employees of the assessee. On appeal, CIT(A) partly deleted the additions. Tribunal deleted the additions made on account of undisclosed interest income as well as on account of deposits made in the bank accounts of the employees of the assessee whereas the additions made on account of disallowance of expenditure were set aside to the record of the AO for fresh adjudication. The AO levied the penalty for the A.Yrs in question. The CIT(A) deleted the penalty levied by the AO for all these years on the legal issue of validity of initiation of penalty proceedings. ITAT dismissed the appeals of the revenue holding that:– when the AO has failed to even make any reference to any incriminating material representing the undisclosed material or the income declared by the assessee, the Explanation 5A to section 271(1)(c) would not be applied in the case of the assessee – DEPUTY CIT Vs. PRAKASH CHAND SHARMA [2020] 79 ITR (TRIB) 386 (ITAT-JAIPUR)