Commissioner Ofincome Tax v. Gobind Ram

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No. 430 of 2005 |Date of decision: 02.05.2014 Commissioner of Income [Tax (Central), Ludhiana -----Appellant Vs) Shri Gobind Ram Prop. M/s Gobind Ram & Sons Attar1 Bazar,Jalandhar. ----Respondent CORAM:-HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICEK JASPAL SING Present: Mr.Rajesh Katoch, Advocate for the appellant.Mr. J.S.Bhasin, Advocate for the respondent. Ajay Kumar Mittal,J 1]This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short, “the Act”)against the order dated 8.4.2005, Annexure A.4 passed by the IncomeTax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “theTribunal’) in LT.(SS) A.No.15(ASR)/2001 for the block period1.4.1988 to 22.9.1998, proposing to raise following substantialquestions of law:- “'1) Whether, on the facts and in the circumstances of th case, the ITAT was justified in deleting the addition of426,24,280/- made on account of disallowances undersection 40A(3) of the I.T.Act? 11) Whether, on the facts and 1n the circumstances of thecase, the ITAT was justified 1n directing the A.O. not tocharge interest under Section 158BFA(1) for late filing ofreturn, when the learned CIT(A) already dismissed theappeal of the assessee on this ground being infructuousone?’ 2 A tew facts relevant for the decision of the controversyinvolved, as narrated in the appeal, may be noticed. The respondent-assessee 1S a proprietary concern. It deals in fire crackers, toys etc. Asearch and seizure operation was carried out at the residential andbusiness premises of the respondent on 22.9.1998. Simultaneously,survey under Section 133A of the Act was conducted at the shop andgodown of the respondent. Notice under Section I158BC of the Act waissued on 10.12.1998 for filing the return for the block period in FormNo.2B. In response to the notice, return was filed by the respondent on|25.2.1999 declaring income otfLT31,42,090/-. Assessment under Section158BC of the Act was completed at an undisclosed income of —=6,46,52,570/- on 28.9.2000, Annexure A.1. Besides the other additions,addition ofan26,24,280/- was also made on account of disallowancesunder Section 40A(3) of the Act. Addition of46,11,31,013/- was madeby the Assessing Officer on account of suppressed profit. Interest underSection 1S8BFA(1) of the Act was also charged for late filing of return|in response to notice under Section 158BC of the Act. Aggrieved by theorder, the respondent filed appeal before the Commissioner of Income ITA No.430 of 2005. Tax (Appeals) [CIT(A)]. Vide order dated 30.3.2001, Annexure A.2, theCIT(A) partly allowed the appeal. However, the CIT(A) confirmed theaddition on account of unexplained investment and charging of interestunder Section 158BFA(1) of the Act for late filing of return. The CIT(A)vide order dated 14.6.2001 passed under section 154 of the Act partlyallowed rectification application filed by the respondent for correctingcertain errors which had crept in the order dated 30.3.2001. The plea ofthe respondent for reducing the income was rejected. Not satisfied withthe findings of the CIT(A), the respondent as well as the revenue went inappeal before the Tribunal. The Tribunal vide order dated 8.4.2005,Anenxure A.4 allowed the appeal of the assessee on the ground ofunexplained investment and charging of interest under Section 158BFA(1) of the Act and dismissed the appeal of the department on the groundof addition on account of disallowances under Section 40A(3) of the Act,The issue relating to addition made by the Assessing Officer on accountof suppressed profits was restored back to the file of CIT(A) toadjudicate upon the issue afresh 1n the light of the fact that the provisionsof section 145(3) of the Act were now applicable to the block assessmentafter amendment of Section I158BC(b) of the Act for fresh decisionHence the present appeal by the revenue. 3.We have heard learned counsel for the parties and perused the record. 3.We have heard learned counsel for the parties and perused the record. 4This Court while admitting the appeal on August 22, 2006noticed that in so far as question No.(1) 1s concerned, the same wascovered against the revenue. A Division Bench judgment of this Court in Commissioner ofIncome Tax v. Smt.Santosh Jain, (2008) 296 ITR 324had adjudicated the said question in favour of the assessee and againstthe revenue holding that where the income of the assessee has beencomputed by applying gross profit rate, there 1s no need to invoke theprovisions of Section 40A(3) of the Act as the gross profit rate takes careof expenditure incurred otherwise than by way of cross cheques also. 5 Adverting to question No.(i1), the issue herein arisesregarding chargeability of interest under section 158BFA(1) of the Actfor late filing of return. As noticed by the Tribunal in its order dated8.4.2005, Annexure A.4, the Assessing Officer issued show cause noticeunder Section 1S8BC of the Act to the assessee on 10.12.1998. Theassessee vide letter dated 7.12.1998 1.e. prior to the issue of the showcause notice requested for supply of the seized material. The assesseedeposited the requisite charges but even then the copies of the documentswere not supplied to it in time. Ultimately, vide letter dated 5.1.1999,the assessee requested that since the copies of the documents were notsupplied, 1t was not possible to file true and correct return for the blockperiod in question and as such the time may be extended. The assesseefiled return for the block period on 25.2.1999. ‘The assessee declaredthe undisclosed income in the sum of.L31,42,090/-.The Tribunal afterconsidering the aforesaid facts had come to the conclusion that there wasno delay on the part of the assessee in filing the return. The assesseecould not file the return for the block period as the department had taken|time to supply the copies of the seized documents on the basis of whichthe assessee had filed the return for the block period on 25.2.1999. There was no delay on the part of the assessee 1n filing the return afterthe supply of copies of the seized documents by the revenue. In suchcircumstances, deletion of levy of interest by the Tribunal 1s justified. 6 Further, learned counsel for the respondent had relied uponjudgment of the Delhi High Court 1n-CIT vy. Mesco Airlines Limited(2010) 48 DTR (Delhi) 81 wherein it was held that the time taken forsupplying the documents by the department to the assessee has to beexcluded for purposes of determining the delay in filing the return andfor charging of interest under section I58BFA(1) of the Act. Therelevant observations read thus:- “10. On the other hand, the department also slept over therequest of the assessee for furnishing the copies of thedocuments. It took more than one year in supplying thedocuments as the request was made on 1.10.1997 anddocuments were supplied on 20.11.1998. For this delaywhich is attributable to the department, the assessee cannotsuffer and pay the interest. Thus, the approach of theAssessing Officer in directing the assessee to pay the interestfor the entire period which included aforesaid 13 monthsconsumed by the department in supplying the documents 1sclearly wrong. The Tribunal, on the other hand, ignored thefact that the assessee made a request for supply of copies ofdocuments after waiting for 41 days and thereafter tookanother 41 days in filing the return. It counted the period of45 days, as required under the law for filing the return, onlyfrom 20.11.1998 and absolved the assessee from lable to payany interest. If such practice 1s allowed, any assessee on thelast date of filing the return may ask for supply of copy ofdocuments and thereafter from the date when the documentsare supplied, would get another 45 days to file the return. This also has to be countered.’|Accordingly, question No.(11) is also answered against therevenue. 8 As a result, the appeal stands dismissed. (Ajay Kumar Mittal)Judge May 02, 2014 (Jaspal Singh)sudge