Shrenik K. Mhta v. Asstt. Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.539 OF 1993 1.Messrs Indus Engineering Co.,) Having its office at 504, Loha) Bhavan, P.D. Mello Road, ) Bombay-9 ) 2.Shrenik K. Mhta, Partner of the ) Petitioner No.1 having his ) Office at the aforesaid address )..PETITIONERS Versus 1.Asstt. Commissioner of Income Tax) (Investigation), Circle 17(1), Bombay. ) 2.Commissioner of Income Tax, Bombay) City V, Bombay.) 3.Union of India, Bombay. )..RESPONDENTS Mr. Ashok N. Kotangale with Mr. Arun D. Nagarjun for the Petitioners.Mr. A.S. Shivsharan, for the respondents. CORAM: F.I. REBELLO, & J.H. BHATIA, JJ.13TH APRIL, 200913TH APRIL, 2009 DATE: JUDGMENT (PER F.I. REBELLO, J.) 1. The petitioners have approached this Court against the order dated18[th]December, 1992 in respect of the penalty imposed under Section271(1)(c) of the Income Tax Act. We are concerned with the assessmentyear 1985-86. The assessee had filed return of income for 1985-86 on 1[st]October, 1985 which was subsequently revised.18[th]December, 1992 in respect of the penalty imposed under Section271(1)(c) of the Income Tax Act. We are concerned with the assessmentyear 1985-86. The assessee had filed return of income for 1985-86 on 1[st]October, 1985 which was subsequently revised. 2. Action under Section 133A was conducted on 30[th] June, 1987 at officeand factory premises of assessee. The same was converted into searchand seizure action. In the course of search and seizure action, apartand factory premises of assessee. The same was converted into searchand seizure action. In the course of search and seizure action, apart from undisclosed stock, havala loans to the tune of Rs.36,05,000/- wereadmitted by the assessee. Out of these havala loans, the loans to theextent of Rs.10,65,000/- pertained to assessment year 1985-86 and,admitted by the assessee. Out of these havala loans, the loans to theextent of Rs.10,65,000/- pertained to assessment year 1985-86 and, therefore, the same was taxed as income of assessment year 1985-86along with interest claimed by the assessee on these loans.along with interest claimed by the assessee on these loans. 3.CIT (A) vide letter dated 19[th] December, 1988 confirmed the addition onaccount of bogus loan and disallowed the interest. The order of C.I.T.account of bogus loan and disallowed the interest. The order of C.I.T.(A) has been accepted by the assessee. 4. Proceedings for penalty under Section 271(1)(c) were initiated. After considering thesubmissions, penalty was imposed to the tune of Rs. considering thesubmissions, penalty was imposed to the tune of Rs. 5. The Commissioner of Income Tax after considering the contentions observed that the petitioner had accepted the order of C.I.T. (A) forassessment year 1985-86. It was further observed that it cannot bedisputed that the loan of Rs.10,65,000/- and the interest thereon wasliable to be taxed for income for the assessment year 1985-86. Inassessment year 1985-86. It was further observed that it cannot bedisputed that the loan of Rs.10,65,000/- and the interest thereon wasliable to be taxed for income for the assessment year 1985-86. In the original return filed by the assessee and also in the subsequentrevised return the assessee had not disclosed this income.Therevised return the assessee had not disclosed this income.The concealment of income was detected by the Department duringthecourse of search and seizure action. The assessee had made a declaration under Section 132(4) but it does not entitle the petitioners tocourse 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. the original return filed by the assessee and also in the subsequentrevised return the assessee had not disclosed this income.Therevised return the assessee had not disclosed this income.The concealment of income was detected by the Department duringthecourse of search and seizure action. The assessee had made a declaration under Section 132(4) but it does not entitle the petitioners tocourse 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 explanation 5 ofSection 271 of the Act. Since the income pertained to the previous yearwhich has ended before the date of search and the assessee has alsofiled the return before the said date without disclosing the incomedue to havala loans and interest thereon, the immunity available underExplanation 5 is not available to the assessee. The application underSection 264 was rejected.Section 271 of the Act. Since the income pertained to the previous yearwhich has ended before the date of search and the assessee has alsofiled the return before the said date without disclosing the incomedue to havala loans and interest thereon, the immunity available underExplanation 5 is not available to the assessee. The application underSection 264 was rejected. 6. At the hearing of this petition, on behalf of the petitioners learned Counsel has reiterated the said contentions and has further submittedthat the income was subsequently offered to tax. It is submitted thatunder these circumstances the respondents acted without jurisdiction inimposing penalty. 7. This is not a case of want of jurisdiction. This is a case where thepetitioners were unable to make out that the case fell withinExplanation 5 to Section 271(c). The requirement to fall within theexplanation is not only admission by the petitioner in his statement, butwhat has been set out by the Commissioner. The petitioners werefurther bound to disclose the source of their income. Under thesecircumstances the explanation is not attracted. Learned Counsel hadreferred to us the judgment in the case of Sir Sadilal Sugar and GeneralMills Ltde. & Anr. vs. Commissioner of Income Tax, Delhi, 168 ITR 705,(S.C.), Commissioner of Income Tax vs. Suresh Chandra Mittal, 251 ITR 9 (S.C.), Commissioner of Income Tax vs. Chhabra Emporium 264 ITR249 (Delhi) as also in the case of Commissioner of Income Tax vs. RadhaKishan Goel, 278 ITR 254 (Allahabad) and some other judgments whichwe need not go through. 8. The Commissioner has recorded a finding of fact that the transactionswere disclosed in the course of search. The income was in respect ofwere disclosed in the course of search. The income was in respect of assessment year 1985-86. The search was conducted on 30[th] June, 1987. Apart from that the Commissioner noted that neither in the originalreturn nor in the revised return the petitioner had disclosed the income.It was, therefore, a clear case of concealment of income. In so far as theissue pertaining to Explanation 5, as we have earlier pointed out thepetitioner did not disclose the manner in which such income had beenderived. 9. 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 tocosts.costs. (J.H. BHATIA, J.) (F.I. REBELLO, J.)