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TMI Blog1996 (3) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the partners Sh. Gopaldas Sonkhia, the stocks of precious and semi-precious stones found at the time of search was not in excess of that recorded in the books. Also, in the opinion of the Assessing Officer, there was separate search in the personal case of Shri Gopaldas. This search got concluded on 14-10-1987 when locker No. 1006 in his name at SMS Highway Branch of S.B.B.J. was opened. Statement of Shri Gopaldas was recorded on 14-10-1987 in which he surrendered Rs. 40,000 as his personal income and also Rs. 3,20,000 as the income of the assessee-firm. This sum of Rs. 3,20,000 was accepted as excess stock found. The assessment was finalised on 15-3-1990 at Rs. 7,36,100 which included this sum of Rs. 3,20,000. Penalty proceedings were initiated under section 271(1)(c) and a show-cause notice was issued to the assessee in this respect. The plea of the assessee was that since Shri Gopaldas had made the surrender in his statement under section 132(4) in his capacity as a partner of the firm during the course of the search, the assessee was entitled to the immunity given under Explanation 5 of section 271(1)(c) and hence no penalty was leviable. The Assessing Officer rejected thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 23-9-1987 which was concluded on 25-9-1987. By the said question, the authorised officer explained the provisions of section 271(1)(c) read with Explanation 5 and enquired if he wished to say anything about it. The reply of Shri. Gopaldas was that since the search at his residence is still on and as soon as the valuation of stocks found there is done, he will make the decision. The same question was put to him on 14-10-1987 after the locker was opened in response to this, Shri Gopaldas declared Rs. 40,000 as his personal income, gave reference of the previous reply by which he had deferred the decision as mentioned above and then surrendered Rs. 3,20,000 as undisclosed income of the firm. Thus the contention of Shri Ranka was that the income of Rs. 3,20,000 was declared in the course of search with a view to buy peace and hence no penalty was leviable. 6. Our attention was drawn to the prohibitory order under section 132(3) made during the search. The said order was lifted only on furnishing of bank guarantee which was after 14-10-1987. It was submitted that anything done till then is deemed to have been done in the course of search only. 7. Finally, it was submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he declaration, by that time the search operation in case of the firm was over. To substantiate this, our attention was drawn to column 4 of the various Panchnamas. Column 4 reads as under : "The search could not be completed today and the Authorised Officer/ Officers .... sealed the following place : ............................................................................................................................... " " 11. In Panchnama dated 28-9-1987, the above column was scored off, indicating thereby that the search was finally concluded on 28-9-1987. Therefore, Shri Bansal went on, the search of the locker on 14-10-1987 was an independent search on Shri Gopaldas himself. In support of this, Shri Bansal submitted that a separate Warrant of Authorisation dated 13-10-1987 was issued in the name of Shri Gopaldas, a copy of which is placed on record. The locker was opened on 14-10-1987 and on the same day the statement was recorded in the course of which Shri Gopaldas declared an undisclosed income of Rs. 3,20,000 on behalf of the firm. But since the search on the firm had already been completed on 28-9-1987, this declaration on 14-10-1987 could not be said to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above provision, clause (2) was added by The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 10-9-1986. The scope of this amendment was clarified by Board in its Circular No. 469 dated 23-9-1986,162 ITR St. 36, as follows : " As per the existing Explanation 5 to section 271(1) of the Income-tax Act, if at the time of search, assets which are not recorded in the books of account are found, a taxpayer is liable to penalty for concealment even if he declares the full value of these assets as his income in the return filed after the search. This provision has been found to operate even in case where the assessee has no intention to fabricate any evidence and he includes in his return the income out of which such assets have been acquired. Hence, by the Amending Act, it has been provided that if an assessee in such cases makes a statement during the course of the search admitting that the assets found at his premises or under his control have 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 prescribed in clause (a) or (b) of section 139(1) and specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 132(12), the CIT will deal with such objection after giving an opportunity of being heard. 20. From the above discussion, it is very clear that section 132 is a complete, comprehensive and a self-contained code in itself. It has its own procedure for search, seizure, determination of the point in dispute, quantum to be retained and also the quantum of tax and interest on the undisclosed income. On account of this, it has been held that the provisions of section 132 should be construed harmoniously in order to give effect to the intention of the Legislature to bring to tax undisclosed income or property. As a natural corollary, it has also been held that the provisions of section 132 should not be construed narrowly. It has been explained that the primary power conferred is the power of seizure. Therefore, the power to enter and search any building or break open the lock of any door, box, locker, safe, etc., is only an incidental power. 21. From the above, it follows that the words ' in the course of search ' appearing in clause (2) of Explanation 5 cannot be interpreted too technically and too narrowly, particularly when search by itself is an incidental power. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a harmonious manner. In our opinion, it would be sufficient if the person concerned declares his undisclosed income in the last of the series of statements. When there is a composite search, no distinction need be made as to which was the last statement for business and which was in personal capacity. This, in no way would give too much liberty to the person concerned as the Assessing Officer has to make the order under section 132(5) within 120 days of the seizure of the assets. It would also be fair that when there are simultaneous searches, the person would be in a better frame of mind to make true disclosure keeping in view the overall picture before him. 23. Coming to the facts of the case, the first statement of Shri Gopaldas was recorded on 23-9-1987, which continued up to 25-9-1987. On 25-9-1987 Sh. Gopaldas was asked as to whether he wishes to declare any undisclosed income on behalf of the firm and avail of the immunity. To this, Shri Gopaldas replied that he would decide about it after the valuation of the stocks found at his residence is over. Exactly at this point the first statement concluded. The officer recording the statement also did not mention anything. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survive. All along, the contention of the partner of the assessee-firm was that there was no excess stock. Whatever was the difference, it was on account of the difference in valuation. The assessee used to account the stocks in its books at cost whereas the valuation got done by the revenue was on the basis of market rates as on the various dates of search. From the various statements recorded, it is evident that it was on account of constant pestering that the assessee ultimately surrendered a sum of Rs. 3,20,000. Otherwise, the department has not been able to muster any material to show that the assessee had any undisclosed income. This is evident from the material on record. As per the departmental valuer the value arrived at was Rs. 15,80,331 whereas as per the books of the assessee it was Rs. 15,86,331. From the statements recorded, it is also observed that some of the insignificant issues were debated upon, like the issue relating to the six lots of previous stones, the one relating to some personal ornaments kept at Calcutta and so on. Thus on account of pressure tactics of the questioning officer, the assessee ultimately declared Rs. 3,20,000 as undisclosed income. In our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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