Judgment:
F.I. Rebello, J.
1. The petitioners have approached this Court against the order dated 18th Dec, 1992 in respect of the penalty imposed under Section 271(1)(c) of the Income Tax Act. We are concerned with the assessment year 1985-86. The assessee had filed return of income for 1985-86 on 1-10-1985 which was subsequently revised.
2. Action under Section 133A was conducted on 30-6-1987 at office and factory premises of assessee. The same was converted into search and seizure action. In the course of search and seizure action, apart from undisclosed stock, havala loans to the tune of Rs. 36,05,000 were admitted by the assessee. Out of these havala loans, the loans to the extent of Rs. 10,65,000 pertained to assessment year 1985-86 and, therefore, the same was taxed as income of assessment year 1985-86 along with interest claimed by the assessee on these loans.
3. Commissioner (Appeals) vide letter dated 19-12-1988 confirmed the addition on account of bogus loan and disallowed the interest. The order of Commissioner (Appeals) has been accepted by the assessee.
4. Proceedings for penalty under Section 271(1)(c) were initiated. After considering the submissions, penalty was imposed to the tune of Rs. 6,75,657. It was contended by the petitioners before the CIT in the application under Section 264, that the declaration under Section 132(4) was made, to cover up some discrepancies consisting of some alleged excess stock and unproved loan creditors amounting to Rs. 36.05 lakhs. It was, therefore, pleased (pleaded) that the penalty imposed under Section 271(1)(c) should be waived treating this part of the loan disallowed as part of total declaration made under Section 132(4) on which all the taxes have been paid. It was further submitted by letter of 26-11-1992 that the petitioner had offered the loans as other income voluntarily under Section 132(4) and had disclosed the loan of Rs. 10,65,000 as other income for assessment year 1988-89. It was submitted that there was no concealment of income and, therefore, the penalty should be waived.
5. The CIT after considering the contentions observed that the petitioner had accepted the order of Commissioner (Appeals) for assessment year 1985-86. It was further observed that it cannot be disputed that the loan of Rs. 10,65,000 and the interest thereon was liable to be taxed for income for the assessment year 1985-86. In the original return filed by the assessee and also in the subsequent revised return the assessee had not disclosed this income. The concealment of income was detected by the department during the course of search and seizure action. The assessee had made a declaration under Section 132(4) but it does not entitle the petitioners to immunity from the penal provisions.
6. Penalty, could be waived if the case is covered by Expln. 5 of Section 271 of the Act. Since the income pertained to the previous year which has ended before the date of search and the assessee has also filed the return before the said date without disclosing the income due to havala loans and interest thereon, the immunity available under Expln, 5 is not available to the assessee. The application under Section 264 was rejected.
7. At the hearing of this petition, on behalf of the petitioners learned Counsel has reiterated the said contentions and has further submitted that the income was subsequently offered to tax. it is submitted that under these circumstances the respondents acted without jurisdiction in imposing penalty.*
8. This is not a case of want of jurisdiction. This is a case where the petitioners were unable to make out that the case fell within Expln. 5 to Section 271(1)(c). The requirement to fall within the Explanation is not only admission by the petitioner in his statement, but what has been set out by the CIT. The petitioners were further bound to disclose the source of their income. Under these circumstances the Explanation is not attracted. Learned Counsel had referred to us the judgment in the cases of Sir Shadi Lai Sugar & General Mills Ltd. and Anr. v. CIT : (1987) 64 CTR (SC) 199 : (1987) 168 ITR 705 (SC), CIT v. Suresh Chandra Mittal : (2001) 251 ITR 9 (SC), CIT v. Chhabra Emporium : (2003) 264 ITR 249 (Del) as also in the case of CIT v. Radha Kishan Goel : (2005) 278 ITR 454 (All) and some other judgments which we need not go through.
9. The CIT has recorded a finding of fact that the transactions were disclosed in the course of search. The income was in respect of assessment year1985-86. The search was conducted on 30-6-1987. Apart from that the CIT noted that neither in the original return nor in the revised return the petitioner had disclosed the income. It was, therefore, a clear case of concealment of income. Insofar as the issue pertaining to Expln. 5, as we have earlier pointed out, the petitioner did not disclose the manner in which such income had been derived.
10. Under these circumstances we are clearly of the opinion that there is no merit in this petition. Rule discharged. There shall be no order as to costs.