Ita/37/2011 Of Commissioner Of Income Tax-Iii, Ludhiana v. B.k. Jain

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.37 of 2011 (O&M)Date of decision: 19.5.201 The Commissioner of Income Tax III, Ludhiana .....- Appe Vs, Shri B.K.Jain, 94-D, Bhai Randhir Singh Nagar, Ludhiana ...mespondent CORAM: HON’BLE MR. JUSTICEK AJAY KUMAR MITTAHON’ BLE MR. JUSTICE JASPAL SINGH Present:Mr. Rajesh Katoch, Advocate for the appellant. Mr. Sachin Bhardwaj, Advocate for the respondent. Ajay Kumar Mittal,J, 1.This order shall dispose of ITA Nos.37 and 38 of 2011 aslearned counsel for the parties are agreed that common question of law 1sinvolved in both the appeals besides one additional question in ITA No.38of 2011. However, the facts are being extracted from ITA No.37 of 2011. |ITA No.37 of 2011 has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short, “the Act”) against theorder dated 29.4.2010, Annexure 3, passed by the Income Tax AppellateTribunal, Chandigarh Bench ‘A’ Chandigarh in ITA No.1088/CHD/2008, forthe assessment year 2003-04, proposing to raise following substantialquestions of law:- “'1) Whether on the facts and in the circumstances of the casethe Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition by applying rateof 0.5% as against 1% applied by the Assessing Officer’ 11) Whether on the facts and in the circumstances of the case,the Hon'ble ITAT is right in upholding the order of CIT(A)dated 29.9.2008 thereby deleting the addition ofv64,86, 705/made by the Assessing Officer on account of unexplainedinvestment? 3)On 14.11.2011, while issuing notice of motion, the following order was recorded:- “The Revenue has claimed the following substantial questionsof law arising out of the order dated 29.4.2010 passed by theIncome Tax Appellate Tribunal, Chandigarh Bench,Chandigarh: 1. Whether on the facts and in the circumstances of the casethe Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition by applyingrate of 0.5% as against 1% applied by the Assessing Officer?the Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition by applyingrate of 0.5% as against 1% applied by the Assessing Officer? 2. Whether on the facts and in the circumstances of the casethe Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition of464,86,/705/- made by the Assessing Officer on account ounexplained investment?the Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition of464,86,/705/- made by the Assessing Officer on account ounexplained investment? Question No.l stands concluded by the order dated14.11.2011 passed by this Court in ITA No.36 of 2011 titled‘The Commissioner of Income Tax-Ill, Ludhiana y.B.kK. JainTherefore, question No.! does not arise forconsideration|14.11.2011 passed by this Court in ITA No.36 of 2011 titled‘The Commissioner of Income Tax-Ill, Ludhiana y.B.kK. JainTherefore, question No.! does not arise forconsideration| Notice of motion for 30.1.2012 in respect of questionNo.2.”No.2.” 4A The admission order passed on 31.1.2012 reads thus:- “Admitted on the following question of law:- (1) Whether on the facts and in the circumstances of the case,the Hon'ble ITAT is right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition of=a64,86, 705/ made by the Assessing Officer on account of unexplainedinvestment?’ 4]In view of the above, question No.(11) arises for considerationin ITA No.37 of 2011. 6.In ITA No.38 of 2011, similarly, identical question No.(1) washeld to be covered by decision in ITA No.36 of 2011 and it was admitted on31.1.2012 for determining the following questions of law:- (1)Whether on the facts and in the circumstances of the case,the Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition of ©L74,04,000/- made by the Assessing Officer on account ofunexplained investment? (1) Whether on the facts and in the circumstances of the case,the Hon'ble ITAT is right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition of=a64,86, 705/ made by the Assessing Officer on account of unexplainedinvestment?’ 4]In view of the above, question No.(11) arises for considerationin ITA No.37 of 2011. 6.In ITA No.38 of 2011, similarly, identical question No.(1) washeld to be covered by decision in ITA No.36 of 2011 and it was admitted on31.1.2012 for determining the following questions of law:- (1)Whether on the facts and in the circumstances of the case,the Hon'ble ITAT 1s right in upholding the order of CIT(A)dated 29.9.2008, thereby deleting the addition of ©L74,04,000/- made by the Assessing Officer on account ofunexplained investment? (11)Whether on the facts and in the circumstances of the case,the Hon'ble ITAT 1s right in deleting the addition of —=15,00,000/- made on account of surrender made by theassessee during the survey under Section 133A of the LT.Act?’ TiA few tacts relevant for the decision of the controversyinvolved, as narrated in ITA No.37 of 2011, may be noticed. The assesseewas a Chartered Accountant by profession and operating from his officecum residence at 94-D, Bhai Randhir Singh Nagar, Ludhiana. He had notfurnished his return of income for the years under consideration within thetime allowed under Section 139 of the Act. Survey operations were carriedout under Section 133A of the Act at the office of the assessee on 15.6. 200 and it was discovered that the assessee was engaged in givingaccommodation/book entries on account of long/short term capitalgains/eifts/loans by charging commission. The cash received from different beneficiaries was deposited in various bank accounts of the assessee, his ITA No.37 of 2011(0&M) family members and other share brokers from where cheques were issued 1nfavour of the clients for bogus capital gains/share profits/gifts etc. Theassessee in his statement recorded during the course of survey on 15.6.2004admitted these facts. Simultaneous survey operation under section 133A ofthe Act was carried out at the business premises of other brokers atLudhiana and they admitted to have issued cheques for bogus profitsagainst cash provided by clients. The assessee after conclusion of surveyvide letter dated 1.3.2005 made a surrender ofa27 lakhs 1.e a15 lakhsrelating to assessment year 2004-05 and an12 lacs relating to assessmentyear 2005-06. The income surrendered by the assessee was disclosed 1n thereturn of income furnished for the assessment years 2004-05 and 2005-06.The assessee had not furnished any return of income since after assessmentyear 1996-97 till the date of survey on 25.6.2004. In view of theinformation gathered during the survey, the Assessing Officer found that theassessee’s income relevant to the assessment year 2003-04 had escapedassessment within the meaning of Section 147 of the Act and henceproceedings under Section 148 of the Act were initiated, in response towhich the assessee furnished return of income declaring income of |=48,000/- relating to the assessment year 2003-04 on 30.3.2005. Assessmentfor the assessment year 2003-04 was completed under Section 143(3) readwith section 147 of the Act on 30.3.2006 at total taxable income of.L1,82,69,609/-. Aggrieved by the order, the assessee filed appeal beforeCommissioner of Income Tax (Appeals) II, Ludhiana |CIT(A)]. Vide orderdated 29.9.2008, Annexure 2, the CIT(A) held that Gross profit rate of 0.5%be applied on the turnover as against 1% applied by the Assessing Officer ITA No.37 of 2011(0&M) 5 and also addition of“a64,86,/05/- made on account of unexplainedinvestment 1n the purchase of shares was deleted. Both the assessee and thedepartment filed appeals before the Tribunal. Vide order dated 29.4.2010,Annexure 3, the Tribunal dismissed the appeal of the revenue in ITANos.1087 to 1089/Chd/2009 and partly allowed the appeal of the assesseein ITA Nos.1094 to 1096/Chd/2008. Hence the present appeals by theTEVENUEC ITA No.37 of 2011(0&M) 5 and also addition of“a64,86,/05/- made on account of unexplainedinvestment 1n the purchase of shares was deleted. Both the assessee and thedepartment filed appeals before the Tribunal. Vide order dated 29.4.2010,Annexure 3, the Tribunal dismissed the appeal of the revenue in ITANos.1087 to 1089/Chd/2009 and partly allowed the appeal of the assesseein ITA Nos.1094 to 1096/Chd/2008. Hence the present appeals by theTEVENUEC |We have heard learned counsel for the parties and perused therecord. Q Learned counsel for the revenue submitted that whileremanding the issue to the Assessing Officer, the Tribunal had erred indirecting that telescoping should be done on the basis of income assessed 1nthe earlier years while computing the unexplained investments. It was urgedby the learned counsel for the revenue that the Assessing Officer hadrecorded that the assessee had made further investment of=a64,86,705/- forthe purchase of 3,83,000 shares during the previous year relevant to theassessment year 2003-04. In such a situation, once there was no sale ofshares, the scope of telescoping does not arise. Reliance was placed onjudgments in.Anantharam Veerasinghaiah & Co. v. CIT,(1980) 123 ITR457 (SC), CIT v. K.N.Satyapalan,(2001) 247 ITR 105 (Ker) and|GroverFabrics dndia) (P) Limited v. CIT,(2011) 332 ITR 312 (P&H). 10.On the other hand, counsel for the assessee supported the orderpassed by the Tribunal. 114After hearing learned counsel for the parties and perusing therecord, we find that the issue arising under Question No.1 in both the ITA No.37 of 2011(0&M) 6 appeals as per order of the Tribunal stands remitted to the Assessing Officer.It 1s, however, clarified that telescoping can only be done to the extent thereis direct nexus of receipt of amount on account of sale of shares which hasbeen invested in the purchase of shares during the period from 1.4.2002 to31.3.2003 and 1.4.2003 to 31.3.2004. Therefore, for the assessment years2003-04 and 2004-05, benefit of telescoping shall only be allowed by theAssessing Officer after recording a finding that there 1s direct nexusresulting from sale of shares and investment in shares made by the assessee,Question (1) in both the appeals stands answered accordingly. 12.As regards the substantial question of law (II) in ITA No.38 of2011, the Tribunal had recorded the following findings:- “49. The Assessing Officer in the present case had worked outthe additional mcome to be included in the hands of theassessee on the basis of various evidences found during thesurvey operations. The assessee during the course of surveyhad surrendered an additional income ofL15 lakhs relating toassessment year 2004-05 which in turn was returned by theassessee in his return of income for the year. We find merit inthe claim of the assessee that the credit of income surrenderedAT|LT15 lakhs is to be allowed 1n the hands of the assessee whilecomputing the net income assessable in the hands of theassessee, as the assessee had already offered the said additionalincome of.<a15 lakhs in his return of income. Accordingly, theground No.1|1 raised by the assessee in assessment year 200404 1s allowed.” It was noticed by the Tribunal that the assessee had surrendered a sum of=15 lacs, the credit of which was allowed to him. It may be noticed that oncethe assessee had surrendered the amount, necessary credit could not be ITA No.37 of 2011(0&M) erroneous in any manner. Thus, no interference is called for in the findingsrecorded by the Tribunal on this issue. 13,In view of the above, both the appeals are disposed of. May 19, 2014=9%= (Ajay Kumar Mittal)Judge|(Jaspal Singh)Judge