Commissioner Of Income-Tax, Jalandhar v. M/S Gagneja Traders, Gur Mandi, Jalandhar

ITA No. 157 of 1999 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 157 of 1999 Date of Decision: 18.8.2010 Commissioner of Income-tax, Jalandhar ....Appellant. Versus M/s Gagneja Traders, Gur Mandi, Jalandhar ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Advocate for the appellant. Mr. Surjeet Bhadu, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.The instant appeal has been preferred by the revenueunder Section 260A of the Income Tax Act, 1961 (in short “the Act”)against order dated 27.5.1999 passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (hereinafter referred to as “theTribunal”), in ITA No. 834(ASR)/1991, for the assessment year 1988-89proposing to raise the following substantial question of law:- “Whether, on the facts and the circumstances of thecase, the Ld. Tribunal was right in law in setting asidethe order of the CIT (A) sustaining the penalty ofRs.30,245/- imposed u/s 271 (1)(c) of the IncomeTax Act, 1961 by the A.O., holding that surrenderingof the amount did not make it a case of concealedincome as also that it was at least not a fit case wherein the lower authorities should have imposedthe penalty upon the assessee on the allegation ofconcealed income?” 2.Put succinctly, the facts of the case are that the assesseewas a partnership concern comprising Sh. Joginder Pal and Smt.Sheela Devi as partners having 50% share each. It derived income frompurchase and sale of Gur and Sugar etc. The assessee followed thefinancial year as its previous year relevant to the assessment year1988-89 and filed return on 29.7.1988 declaring an income ofRs.38,584/-. On an intimation received from the Investigation Wing ofthe Department vide letter letter 24.7.1989 that the assessee purchaseda demand draft for Rs.70,230/- on 14.3.1988 from the State Bank ofIndia, Imam Nasar, Jalandhar, found that the said draft was notaccounted by the assessee in its books of account. The proceedingsunder Section 147 of the Act were initiated against the assessee andnotice was served on 28.8.1989. The books of account of the assesseewas signed on 19.7.1989 by the Inspector of the Investigation Wing.The assessee filed a revised return on 21.7.1989 surrendering the saidamount of Rs.70,320/- by declaring an income of Rs.1,08,904/- ofwhich no notice was taken by the Assessing Officer as the originalreturn had already been processed under Section 143 (1) by then.However, in response to notice under Section 148 of the Act, return wasfiled on 15.2.1990 again surrendering the amount of Rs.70,320/-declaring total income of Rs.1,08,904/-. The Assessing Officerassessed the total income of the assessee at Rs.1,14,404/- includingan addition of Rs.70,320/- on account of unexplained investment. The Assessing Officer imposed a penalty of Rs.30,245/- being 100% of thetax on the concealed income of Rs.70,320/- vide order dated28/29.8.1990. Against the said penalty, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals) [in short “the CIT(A)] who dismissed the appeal. Still feeling dissatisfied, the assesseefiled an appeal before the Tribunal who deleted the penalty ofRs.30,245/- imposed by the Assessing Officer and upheld by the CIT(A). Hence, the present appeal by the revenue. 3.We have heard learned counsel for the parties. 4.The solitary issue that arises for consideration in this caseis - whether the penalty amounting to Rs.30,245/- on account ofconcealment of income of Rs.70,230/- which arose from purchase of ademand draft on 14.3.1988 from State Bank of India, Imam Nagar,Jalandhar not accounted for in the books of account was justified. 5.The Assessing Officer while imposing penalty underSection 271(1)(c) of the Act had concluded that the draft for Rs.70,320/-was unaccounted money of the assessee as it was not depicted in thebooks of account. 3.We have heard learned counsel for the parties. 4.The solitary issue that arises for consideration in this caseis - whether the penalty amounting to Rs.30,245/- on account ofconcealment of income of Rs.70,230/- which arose from purchase of ademand draft on 14.3.1988 from State Bank of India, Imam Nagar,Jalandhar not accounted for in the books of account was justified. 5.The Assessing Officer while imposing penalty underSection 271(1)(c) of the Act had concluded that the draft for Rs.70,320/-was unaccounted money of the assessee as it was not depicted in thebooks of account. 6.On appeal by the assessee, the Commissioner of IncomeTax (Appeals) [in short “the CIT (A)] upheld the order of the AssessingOfficer and had recorded as under:- “The revised return filed by the assessee on 21.7.89vide receipt No. 505 showing an income ofRs.1,08,904/- is not a voluntarily return as claimed bythe assessee. The department had in its possessioninformation regarding purchase of demand draft for Rs.70,320/- purchased by the assessee on 14.03.88prior to the date of filing of the revised return by theassessee. The Inspector of the Department hadsigned the cash book of the assessee on 19.7.89 andit was established on 19.7.89 by the Department thatthe purchase of demand draft for Rs.70,320/- was notaccounted for in the books of account for theassessment year 1988-89. Therefore the revisedreturn filed on 21.7.89 is not voluntarily return. The revised returned filed after the completionof assessment is invalid return. In the case ofassessee the assessment for the asstt. year 1988-89was completed on 28.12.88 u/s 143 (1) and hencethe revised return filed by the assessee was invalid.Under the circumstances the only legal course opento the Department was to issue notice u/s 148 andthe department had in his possession material factsto show the assessee had escaped income for theasstt. year 1988-89. Filing of a revised return inresponse to notice u/s 148 for the 2[nd] time on 15.2.90does not make a voluntarily return. During the course of asstt. proceedings theassessee was especially asked about the source ofmoney that was used for the purchase of demanddraft of Rs.70,320/-. The assessee conceded that itwas not in the books of a/c and, therefore, it may be treated as income from undisclosed sources. It is clear that the assessee furnishedinaccurate particulars of income and failed to furnishall material facts relating to the income for theassessment year 1988-89. The revised return wasfiled by the assessee not voluntarily return but onlyafter establishment of concealment by theDepartment.” 7.However, feeling dissatisfied with the aforesaid orders, theassessee carried the matter in appeal to the Tribunal. The Tribunaldeleted the penalty with the observation that the assessee hadproduced a photo copy of the cash book wherein an entry was made inthe cash book on 16.3.1988 regarding the aforesaid draft dated14.3.1988 and, therefore, there was no concealment. Against the orderof the Tribunal deleting penalty, the revenue has approached this Court. 8.Learned counsel for the revenue submitted that theTribunal was in error in deleting the penalty as the finding recorded bythe Tribunal was not borne out from the record and from the facts andcircumstances of the case. Learned counsel submitted that theacceptance of the plea that entry was made in the cash book on16.3.1988, i.e. after two days of the purchase of the draft is against therecord as in case the assessee had shown in the books of account,there was no occasion for the assessee to surrender the same on21.7.1989 and again on 15.2.1990 and pay the tax. It was also arguedthat no additional evidence in terms of Rule 46A of the Income TaxRules, 1962 (in short “1962 Rules”) had been claimed before the CIT 8.Learned counsel for the revenue submitted that theTribunal was in error in deleting the penalty as the finding recorded bythe Tribunal was not borne out from the record and from the facts andcircumstances of the case. Learned counsel submitted that theacceptance of the plea that entry was made in the cash book on16.3.1988, i.e. after two days of the purchase of the draft is against therecord as in case the assessee had shown in the books of account,there was no occasion for the assessee to surrender the same on21.7.1989 and again on 15.2.1990 and pay the tax. It was also arguedthat no additional evidence in terms of Rule 46A of the Income TaxRules, 1962 (in short “1962 Rules”) had been claimed before the CIT (A) or under Rule 29 of the Income Tax (Appellate Tribunal) Rules,1963 (hereinafter referred to as “1963 Rules”) before the Tribunal and,therefore, no reliance could be placed on photo copy of cash bookproduced before the Tribunal. He drew the attention of this Court toorder of the Assessing Officer wherein it was recorded by the AssessingOfficer that the assessee on being asked for the source of money hadspecifically conceded that it was not entered in the books of accountand it may be treated as income from undisclosed sources. He, thus,submitted that the finding of the Tribunal being erroneous, thesubstantial question of law as claimed arises in this appeal. 9.On the other hand, learned counsel for the assesseesubmitted that the finding of fact has been recorded that there was noconcealment inasmuch as the books of account of the assesseedepicted the entry in the cash book on 16.3.1988, a photo copy of whichhad been produced before the Tribunal and this could not bechallenged now by the revenue as no separate question has beenclaimed. According to the learned counsel, no substantial question oflaw arises in this appeal. He relied upon a judgment in CIT v. SurajBhan [2006] 294 ITR 481 in support of his submission. 10.We have given our thoughtful consideration to therespective submissions made by learned counsel for the parties. TheTribunal while deleting the penalty has relied upon an entry in the cashbook on 16.3.1988, a photo copy of which was shown to the Tribunal atthe time of hearing. However, we are of the opinion that the finding isnot based on record and cannot withstand judicial scrutiny for reasonshereinafter enumerated. ITA No. 157 of 1999 11.The assessee himself had accepted before the AssessingOfficer in the assessment proceedings that there was no entry made inthe cash book and that the same may be treated as its undisclosedincome. It was further corroborated from the fact that the assesseewhile filing the revised return on 21.7.1989 i.e. after a period of one yearand four months from the date of purchase of demand draft and again inreturn filed on 15.2.1990 in response to notice under Section 148 of theAct had disclosed this as its unexplained investment in the purchase ofthe draft. The cash book which was signed by Inspector HarbhajanSingh on 19.7.1989 did not find the entry dated 16.3.1988 therein.Moreover, the assessee never claimed that additional evidence underthe 1962 Rules or 1963 Rules should be allowed before the CIT (A) orthe Tribunal on the basis of which it could have shown that there was anentry with regard to the demand draft on 16.3.1988 as claimed by theassessee. It is, thus, concluded that the draft for Rs.70,320/- preparedon 14.3.1988 was from the concealed income of the assessee andpenalty under Section 271(1)(c) was rightly imposed by the AssessingOfficer and upheld by the CIT (A). 12.The substantial question of law claimed by the revenue iscomprehensive which includes regarding the sustainability of penaltyunder Section 271(1)(c) of the Act and necessarily includes challenge tothe aforesaid finding as well. No separate question was required to beclaimed to challenge veracity of alleged entry dated 16.3.1988. 12.The substantial question of law claimed by the revenue iscomprehensive which includes regarding the sustainability of penaltyunder Section 271(1)(c) of the Act and necessarily includes challenge tothe aforesaid finding as well. No separate question was required to beclaimed to challenge veracity of alleged entry dated 16.3.1988. 13.Now adverting to the judgment relied upon by learnedcounsel for the assessee in Suraj Bhan's case (supra), this Court onthe individual fact situation of the case had come to the conclusion that ITA No. 157 of 1999 the findings recorded by the Tribunal were based on record and therewas no perversity in the findings. The said judgment does not help thecase of the assessee. 14.Accordingly, the finding recorded by the Tribunal deletingthe penalty cannot be sustained. The question of law proposed aboveis answered in favour of the revenue and against the assessee. 15.The appeal is allowed and the order of the Tribunal is setaside. (AJAY KUMAR MITTAL) JUDGE August 18, 2010gbs (ADARSH KUMAR GOEL) JUDGE