Om Parkash Harbans Lal Sangrur v. Commissioner Of Income Tax, Patiala

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A No. 197 of 2003 Date of decision : October 15, 2008 Om Parkash Harbans Lal Sangrur ...... Appellant. through Mr.Pankaj Jain, Advocate v. Commissioner of Income Tax, Patiala ...... Respondent through Ms. Urvashi Dhugga, Advocate CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY TEWARI *** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest ?****** AJAY TEWARI, J This is an appeal filed by the appellant under Section 260A ofthe Income Tax Act, 1961, against the order of the Income Tax AppellateTribunal dated 29.9.2002 for the assessment year 1986-87, proposing thefollowing substantial questions of law :- “ 1)Whether on the facts and circumstances of the casethe learned Tribunal is right in law and on fact insustaining the levy of penalty on Rs.6,50,433/- againstthe deletion on total amount of Rs.3,98,433/- ? 2)Whether on the facts and circumstances of the case the Tribunal was justified in sustaining the levy ofpenalty by applying and on true interpretation of theprovisions of section 68 ? 3)Whether on the facts and circumstances of the case in case the provisions of section 68 are held to beapplicable to the present case whether the income accruesand arises in the year under assessment to be called itsconcealed income ? The assessee was a partnership firm. It executed a partnershipdeed on 21.3.1986 made effective from 1.4.1985 which was filed with theI.T.O, Sangrur on 31.3.1986 and, thus, the firm came into existence w.e.f1.4.1985. It had also paid advance tax by way of two instalments ofRs.366/- each on 12.9.1985 and 15.3.1986. The firm was engaged in thebusiness of purchase and sale of liquor. On 16.5.1986 the officials ofIncome Tax Department carried out search and seizure action u/s 132(1) ofthe Income Tax Act, 1961 (for short “the Act”). During search certainbooks of accounts and several documents were found and seized,scrutiny whereof revealed earning of substantial income from liquorcontracts. The assessee had not filed return of income for the assessmentyear 1986-87. The Assessing Officer issued a notice under Section 139(2)of the Act on 12.11.1986 i.e after the search. In response, the assessee filedreturn on 7.3.1988 showing `nil' income with a note that no such firmexisted during the said assessment year. The proceedings were filed by theI.T.O on 29.3.1988. The association of persons (AOP) filed return of income on23.2.1988 declaring total income of Rs.15,63,163/-. The AOP also filed an I.T.A No. 197 of 2003 application before the Settlement Commission on 9.3.1988 averring thereinthat its books of accounts were destroyed for the period from 1.4.1985 to31.12.1985. The books of accounts for the period from 1.1.1986 to1.3.1986 were available and the return of income was prepared and filed inthe office of the I.T.O, CC Patiala on 23.2.1988. The said application wasrejected by the Settlement Commission on 17.7.1990 on the ground that noAOP comprising of 11 persons was in existence during the assessment year1986-87. Even if such AOP existed, the ITO CC, Patiala with whom thereturn was allegedly filed did not exercise any jurisdiction and, therefore, noproceedings in the case of AOP were pending with the ITO CC, Patiala. Itwas held that the income disclosed of Rs.15,63,163/- in the return was onthe basis of seized documents and, therefore, no complexity of investigationwas involved in this case. On the same date i.e 17.7.1990, the AO issued anotice under Section 148 of the Act to the firm calling upon the assessee tofile return. The assessee filed return of income on 3.9.1990 declaring totalincome of Rs.17,63,163/-. Thereafter, the AO took up assessmentproceedings. The seized documents included balance sheets for variousmonths. Apart from the profit earned and shown in the balance sheets, thesame also indicated cash credits aggregating to Rs.13,98,000/- in the namesof 11 persons. The assessee was called upon by the AO, vide letter dated6.9.1990 to furnish complete names and addresses of the persons, their GIRnumber and the name of the AO where they were being assessed to tax etc.to prove the source and genuineness of these credits. No information to thiseffect was furnished. Ultimately, the AO made an addition of I.T.A No. 197 of 2003 ::4:: Rs.13,98,533/- and also initiated penalty proceedings. The addition wasupheld up to the Tribunal. Subsequently, in penalty proceedings, the AOimposed a penalty of Rs.15 lacs. In appeal, the Commissioner of IncomeTax set aside the penalty order. Aggrieved therefrom the matter was carriedup by the revenue to the Tribunal, which held that the assessee did notdischarge primary onus of furnishing addresses of those persons in whosenames unexplained credit was found. It, however, held that an amount ofRs.5,48,100/- appeared in the balance sheet prior to 31.3.1985. It also heldthat a credit of Rs.2 lacs claimed by the assessee being income surrenderedcould not be treated as concealed income. In these circumstances, theTribunal limited the penalty amount to Rs.6,50,433/-. We find no infirmity in the order of the Tribunal which isprimarily based on appreciation of facts and hold that the questionsproposed do not arise. The appeal is dismissed. ( AJAY TEWARI ) JUDGE October 15, 2008'kk' ( ADARSH KUMAR GOEL ) JUDGE