BALIA, J. - (1.) HEARD learned counsel for the parties.
(2.) THIS appeal is directed against the order of the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur, dated 26th Feb. 1994 relating to penalty proceeding for the Assessment Year 1992-93. The Tribunal dismissed the appeal of the revenue and affirmed the order of the C. I. T. Appeal 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 C. I. T. (Appeals ). A search under section 132 (1) of the Act was conducted at the residential premises of the assessee and his family members on 10. 3. 92. During the course of search, statements of 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 was stated that 50% of such unexplained income belongs to assessee and 50% belongs to his son. His statement was also endorsed by his son Amarchand Soni Assessee submitted in his returns Rs. 4 lacs on account of unexplained investment in money lending and interest earned thereon. Though the assessee in first instance spread over undisclosed income under Section 132 (4) for 9 assessment years but finally agreed to be assessed for entire sum of Rs. 4 lacs as income of the year in which search took place and assessment was accordingly made by making additions. During the statement recorded under Section 132 (4) of the Act that the assessee had disclosed a sum of Rs. 4 lacs as income from money lending business inclusive of capital and interest thereon, which had hitherto been not disclosed, hence assessment order become final. During the course of Assessment proceedings for Assessment Year 1992-93 penalty proceedings under Section 271 (1) (c) was also imposed against appellant as well as his son Amar Chand Soni, as the Assessing Officer was of the opinion that the assessee had not concealed the particulars of income. The Assessee had claimed that since he in his statement under Section 132 (4) has disclosed Rs. 4 lacs as his unexplained investment in money lending, IVPs and FDRs, and has also surrendered such amount as his income, so no penalty is leviable on account of concealment of particulars of income in terms of Explanation 5 of the Section 271 (1) (c ). 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. 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. 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 operation cannot be made subject matter of disclosure under Section 132 (4) Since money invested in money lending business was not actually seized during the course of search operation and was to be found from the incriminating documents during the course of search and seizure, it could not form part of disclosure under section 132 (4) and hence cannot be considered for immunity from levy of penalty for concealment of particulars of income in terms of Explanation (5) to Section 271 (1) (c ). On these premises the assessing officer did not extend benefit of Explanation (5) to Section 271 (1) (c) and imposed the penalty aforesaid in respect of a sum of Rs. 4 lacs.
(3.) THE view expressed by the Assessing Officer did not find favour with the CIT Appeals, who was of the opinion that Assessing Officer was not justified in imposing the penalty for concealment on account of income surrendered by the appellant during the course of search by making statement under section 132 (4) because entire undisclosed income on account of unexplained investment in money-lending business, pursued by the appellant jointly along with his son Shri Amar Chand Soni, was considered and taxed. Shri Amarchand Soni had already got immunity in respect of imposition of penalty under K. V. S. S. 1998 and it would be unfair and unethical if the appellant is penalised for the same act. In coming to this conclusion a specific statement about admitting of Rs. 8 lacs invested in money lending business which is undisclosed and it is derived from the capital investment and interest earned thereon. Out of 8 lacs 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 lacs to be treated as his income of current financial year and remaining four lac rupees be treated income of his son Amarchand. Amarchand had also put endorsement to it. The only reason that prevailed with Assessing Officer in not extending the benefit of Explanation (5) in respect of disclosure made during 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 assets verifiable through incriminating documents (Promissory notes ). According to Assessing Officer such disclosure does not fall within the scope of Explanation (5) to Section 271. No other reason has been found to denying the benefit of Explanation (5) to the assessee. Explanation 5 to Section 271 reads as under :- Explanation 5.-Where in the course of a search under Section 132, the assessee is found to be owner of any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date, such income has not been declared therein; or (b) for any previous year which is to end on or after the date of the search, then notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub section (1) of this Section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless,- (1) Such income is, or the transactions resulting in such income are recorded,- (i) in a case falling 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 sub-section (4) of Section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has 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 or clause (b)] sub section (1) of Section 139, and also specifies in the statement in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. ]" Explanation (5) deals with situation in which any assets are found to be in the ownership of the assessee in the course of search under Section 132 of the Income Tax Act, 1961. It makes no distinction between tangible assets or intangible assets. Clause 2 of explanation (5) makes it clear that where in the course of search the assessee makes a statement under Section 132 (4) and owns that any of such assets he acquired out and of his income from undisclosed income, not so far returned, and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income, no presumption of concealment has to be drawn, not with standing admission to that effect. In other words to the extent assessee makes a clean breast of his undisclosed income represented by assets found to be in possession of the assessee, he is not deemed to have concealed his income in concealed particulars thereof. ;