TaxTMI 
TaxTMI 
2005 (12) TMI 83
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....ommissioner of Income-tax (Appeals) setting aside the order of penalty by which the penalty under section 271(1)(c) of the Act amounting to Rs. 2,30,700 imposed by the Assessing Officer was set aside by the Commissioner of Income-tax (Appeals). 4. A search under section 132(1) of the Act was conducted at the residential premises of the assessee and his family members on March 10, 1992. During the course of search, the statements of the assessee under section 132(4) of the Act were recorded. During the statement under section 132(4) of the Act, the assessee admitted amongst other things, unexplained income from the money-lending business by promissory notes which was a joint venture of himself and his son, estimated at Rs. 8,00,000. It wa....
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....ection 271(1)(c). 6. However, the Assessing Officer did not agree with such contention and for concealment of particulars of income, as per section 271(1)(c) penalty was imposed. A ground for rejecting the contention was that no declaration of unexplained income can be made. His contention was that under section 132(4) no disclosure was made on account of interest on money-lending business and FDR. The provision for not levying the penalty is applicable to disclosure of tangible assets under section 132(4) and it does not provide for disclosure of intangible assets. Unaccounted income represented by incriminating documents, which are verifiable from incriminating documents seized during search operations cannot be made the subject-matter....
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....and it is derived from the capital investment and interest earned thereon. Out of Rs. 8 lakhs as estimated income admitted, of such business, it is further stated that the income was earned through joint business of father and son, therefore, he surrendered Rs. 4 lakhs to be treated as his income of the current financial year and the remaining four lakhs rupees be treated as income of his son, Amarchand. Amarchand had also put endorsement to it. 8. The only reason that prevailed with the Assessing Officer in not extending the benefit of Explanation 5 in respect of disclosure made during the statement recorded under section 132(4) was that it did not relate to any tangible asset found during the search operation, but relates to intangible....
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.... under clause (a), before the date of the search; and (ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Chief Commissioner or Commissioner before the said date; or (2) he, in the course of the search, makes a statement under subsection (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in [clause (a) or clause (b) of] sub-section (1) of section 139, and also spe....
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....nable claims. The fallacy in the reasoning of the Assessing Officer lies in ignoring that a money represented by, a debt, which, could be recovered is an actionable claim which very much is owned and possessed by the money-lender, investor or depositor as the case may be and is an asset owned and possessed by the assessee. If the view of the Assessing Officer is to be accepted, it will amount to accepting that actionable claim is not an asset which is capable of being owned and possessed. The expression used in clause (2) of Explanation 5 is not confined to physical possession but extends to type of possession which is capable of being held. In case the property is an actionable claim it can be possessed by way of possessing the right to re....