TMI Blog2005 (12) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... by promissory notes belong to the person as held by the person in whose favour the promissory note has been executed. If on that basis the assessee could be held owner of the debt represented by the promissory notes he cannot be deemed to be in possession of such actionable claim, an asset of the assessee. Thus, the view propounded by the Assessing Officer and now pursued by the Revenue by drawing distinction between possession of tangible and intangible assets is unsustainable. In fact it was never the case of the Revenue that the assessee had not complied with the requirement of Explanation 5 to section 271, except that no statement about undisclosed income could be made u/s 132(4), it applies only to the declaration of undisclosed tangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was stated that 50 per cent. of such unexplained income belongs to the assessee and 50 per cent. belongs to his son. His statement was also endorsed by his son, Amarchand Soni. The assessee submitted in his returns of Rs. 4 lakhs on account of unexplained investment in money-lending and interest earned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 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 can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial 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 assets verifiable through incriminating documents (promissory notes). According to the Assessing Officer such disclosure does not fall within the scope of Explanation 5 to section 271. No other reason has been found to deny the benefit of Explanation 5 to the assessee. Explanation 5 to section 271 reads as under: E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsection (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 specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. 9. 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recover such asset by exercise of such right. When such loan is represented by promissory note, it could give rise to presumption that money represented by promissory notes belong to the person as held by the person in whose favour the promissory note has been executed. If on that basis the assessee could be held owner of the debt represented by the promissory notes he cannot be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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