Commissioner Of Income-Tax, Faridabad v. Mr.harjit Singh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 79 of 2009 (O&M)Date of decision: 4.8.2009 Commissioner of Income-Tax, Faridabad Vs. Mr.Harjit Singh, Prop. M/s Sabarwal International, ......Appellant ...Respondent CORAM:-HON'BLE MR.JUSTICE ADARSH KUMAR GOELHON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT:Mr.Rajesh Katoch, Standing Counsel for revenue.Mr.Rajiv Sharma, Advocate for the assessee. **** ADARSH KUMAR GOEL, J. (Oral) 1.The revenue has preferred this appeal under Section260A of theIncome Tax Act, 1961 (for short, “the Act”) against the order dated23.5.2008 passed by the Income Tax Appellate Tribunal, Delhi Bench 'I'New Delhi in ITA No. 243 /DEL/2005 for the Block Assessment 1.4.1989 to31.3.1999, proposing to raise the following substantial questions of law: A. “Whether on the facts and in the circumstancesof the case Ld. ITAT was right in law in restoringthe issue of undisclosed investment ofRs.3,77,041/- based on material seized duringsearch (Document No.A-12 pages 3 and 4) onaccount of purchase of Maruti Gypsy Car, back tothe file of Assessing Officer, whereas the assesseedid not produce any details/evidence before the Ld.CIT(A) or the Assessing Officer despiteopportunities allowed by both of them.” B. “Whether on the facts and in the circumstancesof the case Ld. ITAT was right in law inupholding the order of Ld. CIT(A) in restrictingthe addition to Rs.1,30,000/- instead ofRs.7,75,000/- made by the Assessing Officer asundisclosed investment in M/s SabharwalInternational based on Partner's statement, in theabsence of any evidence to the contrary producedby the assessee.” C.“Whether on the facts and in the circumstancesof the case, Ld.ITAT was right in law inrestoring the issue of charging interest u/s 158BFA(1) to the file of Assessing Officer,whereas charging of interest u/s 158 BFA(1) ismandatory in nature.” 2.On the basis of some documents found from search underSection 132(1) of the Act on 12.3.1999, at the premises of Inderjit SinghSabharwal, relative of the assessee, notice under Section 158 BD wasissued. In response, the assessee declared his undisclosed income tobe 'Nil'. The Assessing Officer assessed income on the basis ofunexplained investment in the purchase of car, unexplained investment inthe Firm M/s Sabharwal International and directed that interest be recovered under Section 158 BFA(1). The CIT(A) upheld the assessmentattributable to investment in purchase of car but partly deleted the additionin respect of the investment in M/s Sabharwal International and alsoupheld levy of interest. The Tribunal remanded the matter to the AssessingOfficer in respect of purchase of car and levy of interest but upheld partdeletion towards investment in M/s Sabharwal International. Relevant partof the finding recorded by the Tribunal is as under: “ We have considered the rival contentionsand found from the record that assessee hasgot Maruti Zipsy through M/s Som DuttFinancer Ltd., and also paid margin moneyof 10% . However, due to default inpayment on finance instalments, the vehiclewas taken back by the financer and,therefore nothing was alleged to be paidsubsequently. There is no dispute to thewell settled legal proposition that onus lieson the assessee to substantiate the entriesfound recorded in seized material. In theinstant case, claim made with reference tothe return of vehicle by the financecompany and the fact that only marginmoney was paid, was on the assessee. Ifonly margin money is paid and the assesseedefaults in the very beginning resulting in “ We have considered the rival contentionsand found from the record that assessee hasgot Maruti Zipsy through M/s Som DuttFinancer Ltd., and also paid margin moneyof 10% . However, due to default inpayment on finance instalments, the vehiclewas taken back by the financer and,therefore nothing was alleged to be paidsubsequently. There is no dispute to thewell settled legal proposition that onus lieson the assessee to substantiate the entriesfound recorded in seized material. In theinstant case, claim made with reference tothe return of vehicle by the financecompany and the fact that only marginmoney was paid, was on the assessee. Ifonly margin money is paid and the assesseedefaults in the very beginning resulting in taking over of vehicle by the financecompany, no amount is required to be paidthereafter, therefore, there is no reason formaking any addition by assuming thatinstalments were paid by the assessee. In theinterest of justice and fair play, we restorethis ground to the file of the AssessingOfficer and the assessee is directed tofurnish complete details with regard to theactual payment made towards initial marginand instalemnts and to file confirmationfrom the finance company with regard to theactual amount paid, thereafter the AssessingOfficer is to decide the matter afresh.” xx xx xx xxxx xx xx xx “The CIT(A) in his order quoted exactly thestatement of Shri Surjit Singh, wherein hehas stated that total capital investment at thecommencement of business was aroundRs.6 lacs and his contribution to the capitalof the firm was around Rs.1 lac. It was alsostated that the other partner has alsocontributed similar amount of Rs.1 lac. ON the basis of these statements, the CIT(A) hasrestricted the addition of Rs.6 lascs to theextent of Rs.1 lac, and in respect offurniture etc., in place of addition of Rs.1.75lacs, a sum of Rs.30,000/- was retained. Asthe assessee's share of investment in suchassets were found to the extent ofRs.30,000/-, the CIT(A) retained totaladdition to the extent of Rs.1.30 lacs inplace of Rs.7.75 lacs. We do not find anyreason to interfere in the order of CIT(A) forrestricting the addition of Rs.1,30,000/-which is as per material on record.” “ Before levying such penal interest, defaulton the part of the assessee is required to beestablished, unless such default ifattributable on the part ofd the assessee, therevenue cannot penalize the assess for nodefault on him. Since this interest is penal innature, the department cannot be allowed tosay that levy of interest under Section158BFA(1) is automatic. There is no dispute to the well settled legal proposition thatpenal provisions of the Act should not beconstrued in a manner to make them aninstrument of operation. They levy ofpenalty is to be seen in the back drop of thenature and reasons for which penalty isimposed, unless there is any default on thepart of the assessee or there is a lack ofbona fide the department cannot effectuate4the penal provisions.” 3.We have heard learned counsel for the parties. 4.We are of the view that the findings recorded by the Tribunalare findings of fact based on appreciation of evidence. Moreover, asregards investment in purchase of car and interest, the matter has only beenremanded for giving further opportunity to the assessee, having regard tothe circumstances of the case. 5.No substantial question of law arises.6.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 4, 2009 raghav (DAYA CHAUDHARY) JUDGE