Rajesh Syal v. Commissioner Of Income-Tax-I, Bassi Building,Sector 17-A, Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No.852 of 2008 (O&M Date of decision: 1.9.2009. Rajesh Syal ......Appellant Vs. Commissioner of Income-tax-I, Bassi Building,Sector 17-A, Chandigarh. ...Respondent CORAM:-HON'BLE MR.JUSTICE ADARSH KUMAR GOELHON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT:Mr.S.K.Mukhi, Advocate, for assesseeMs.Urvashi Dhugha, Standing Counsel for revenue.**** ADARSH KUMAR GOEL, J. (Oral) 1.This appeal has been preferred by the assessee under Section260A of the Income Tax Act, 1961 (for short, “the Act”) against the order ofIncome Tax Appellate Tribunal, Bench 'B', Chandigarh, in ITA No.1132/Chandi/1996 for the block period from 1.4.1985 to 7.9.1995 dated28.2.2008, proposing to raise the following substantial questions of law: i) “ That the ITAT is not justified intreating the income voluntarily declaredfor the period from 1.4.1995 to 7.9.1995being the period for which the date offiling of the return u/s 139(1) has notexpired as undisclosed income which isagainst the express provisions of Section158BB(i)(d) of the Income Tax Act, 1961treating the income voluntarily declaredfor the period from 1.4.1995 to 7.9.1995being the period for which the date offiling of the return u/s 139(1) has notexpired as undisclosed income which isagainst the express provisions of Section158BB(i)(d) of the Income Tax Act, 1961 and thereby taxing it at the special rate of60% instead of normal tax rates for thesaid year which is against the expressprovisions of law and thus unjustified” ii) “That the ITAT was not justified onfacts and in law in treating variousincomesreturned/surrenderedasundisclosed income and charging thesame to tax at special rate of 60% on theone hand while not allowingcorresponding assets in the form ofshares, cash, IVPs and FDRs beingdirectly related out of the said income.”facts and in law in treating variousincomesreturned/surrenderedasundisclosed income and charging thesame to tax at special rate of 60% on theone hand while not allowingcorresponding assets in the form ofshares, cash, IVPs and FDRs beingdirectly related out of the said income.” iii)“That the Income Tax AppellateTribunal was not justified on facts & inlaw in confirming additions to the extentof Rs.3,61,750/- on account of some kittyaccount as per seized document which isdumb document neither written in thehands of the appellant nor belonging tohim or mentioning his name or any othernexus thereof as per Annexure A-6.”Tribunal was not justified on facts & inlaw in confirming additions to the extentof Rs.3,61,750/- on account of some kittyaccount as per seized document which isdumb document neither written in thehands of the appellant nor belonging tohim or mentioning his name or any othernexus thereof as per Annexure A-6.” iv)“That the Income Tax AppellateTribunal was not justified on facts and inlaw in confirming additions to the extentTribunal was not justified on facts and inlaw in confirming additions to the extent of Rs.36,53,148/- out of the totaladdition by the Assessing Officer ofRs.52,07,311/- without considering theaddition by the Assessing Officer ofRs.52,07,311/- without considering the facts, of the case and evidences on record, balance/sheets/income Tax Returns, cash flow statements being prepared on the basis of seized documents, declared bank accounts and incomes of the respective years, including surrendered income wherein due taxes have been paid and thus the order of the ITAT being on the basis ofconjectures and surmises relying uponconjectures and surmises relying upon rough drafts indicating transaction butwithout any evidence corroborating orconfirming the same.”without any evidence corroborating orconfirming the same.” of Rs.36,53,148/- out of the totaladdition by the Assessing Officer ofRs.52,07,311/- without considering theaddition by the Assessing Officer ofRs.52,07,311/- without considering the facts, of the case and evidences on record, balance/sheets/income Tax Returns, cash flow statements being prepared on the basis of seized documents, declared bank accounts and incomes of the respective years, including surrendered income wherein due taxes have been paid and thus the order of the ITAT being on the basis ofconjectures and surmises relying uponconjectures and surmises relying upon rough drafts indicating transaction butwithout any evidence corroborating orconfirming the same.”without any evidence corroborating orconfirming the same.” 2.Search was conducted at the business and residential premisesof the assessee on 7.9.1995 resulting in seizure of cash, FDRs and otherdocuments. In response to notice under Section 158BC, the assessee filedreturn as per Section 44AD. Assessment was made in respect ofundisclosed income. On appeal, the assessment was affirmed except fordeletion of some of the amounts, as indicated in the impugned order. 3We have heard learned counsel for the parties. 4. Learned counsel for the assessee submits that the impugned I.T.A. No.852 of 2008 order is perverse inasmuch as income for the assessment year in whichsearch took place, could not be treated as undisclosed income in view ofprovisions of Section 158BB(1)(d) of the Act. We are unable to accept thesubmission. The Tribunal observed: “It was contended that the contention onbehalf of the assessee that the income ofRs.5,25,325/- was recorded in regular booksof account is not well founded in so for theassessee had not maintained any books ofaccount. Moreover, the income as perassessee's own statement for earlier yearswas nominal at least below the maximumlimit not liable to tax. The assessee could nothave earned substantial income in a period offive months. It was contended that as per theprovisions of Section 158BB(i)(d), no creditwas available to the assessee for the incomeclaimed to be taxable at normal rates. Thelearned DR further contended that thedocuments found in the course of searchhave been admitted by the assessee to be hisdocuments and, therefore, additions based onentries of such documents was justified. Itwas pointed out that huge cash of more than Rs.12 lacs was found at the time of search.The assessee was also found to be owner ofvarious assets with aggregate value of Rs.51lacs in his own name. He was neither Incometax payee, nor a Wealth -tax assessee. Theassessee had not furnished any evidence tosupport the claims during the course ofassessment proceedings with reference to theownership of IVPs, loans etc. It was furthercontended that in respect of the alleged loan,the assessee had been given sufficientopportunity to produce the creditors whichhe failed. The addition was thus made onsound basis, it was contended. In counter reply, the learned counsel forthe assessee contended that the AssessingOfficer was required to give credit for theincome up to assessment year 1993-94 to theextent the income which was not chargeableto tax. Reliance was placed on the decisionof the Patna High Court in the case of CITand another vs. Smt.Lily Tobias (2004) 266ITR 401(Pat) to support the contention. Itwas further contended that once the advancetax is paid by the assessee, the Assessing In counter reply, the learned counsel forthe assessee contended that the AssessingOfficer was required to give credit for theincome up to assessment year 1993-94 to theextent the income which was not chargeableto tax. Reliance was placed on the decisionof the Patna High Court in the case of CITand another vs. Smt.Lily Tobias (2004) 266ITR 401(Pat) to support the contention. Itwas further contended that once the advancetax is paid by the assessee, the Assessing Officer cannot claim that the income whichwas subsequently declared by the assessee inthe return was undisclosed income. For thisreliance has been placed on the decision ofthe Gauhati High Court in the case of i)Dr.Mrs.Alaka Goswami ii) Dr.Anil KumarGoswami vs. CIT (2004) 268 ITR 178(Gauhati). The learned counsel for theassessee further contended that the AssessingOfficer has wrongly levied tax on the incomeof the proprietary concern namely PanchkulaCivil Construction @ 60% as against thenormal rates. It was further contended thatthe assessee had pointed out that he wasengaged in the business of sale and purchaseof land, money lending etc. Therefore, theAssessing Officer ought to have given creditfor the income pertaining to the assessmentyear 1993-94 in which the income did notexceed the maximum non-taxable limit. Itwas further contended that the AssessingOfficer had never demanded to produce theparties before him and, therefore, no additioncould be made for non-production of theparties. Relying upon the decision of the Delhi High Court in the case of CIT v. RaviKant Jain (2001) 250 ITR 141, it wascontended that the Assessing Officer cannotmake any addition without any documentfound in the course of search to support theaddition. It was accordingly pleaded that theappeal of the assessee may be allowed. We have given our carefulconsideration to the rival contentions andhave also perused the record including thepaper book filed by the assessee as well as bythe department. At the very outset, we wouldlike to make it very clear that the statementof the learned counsel for the assessee thatthe assessee was a regular tax payer beforethe date of search, is contrary to the facts onrecord and no material has been placedbefore us to support the claim. On the contrary, the learned DR afterverification of records has made a statementthat the assessee was neither income-taxassessee nor wealth-tax assessee before thedate of search. The assessee had also notmaintained any books of account in respectof his business or for his income. Therefore, the contention advanced on behalf of theassessee that he was entitled to credit inrespect of the business income recorded inthe books of account or disclosed in thereturns of income filed before the search isnot well founded as the assessee had neitherfiled any return of income before the date ofsearch nor maintained any books of account.Therefore, the declared income in the returnby the assessee of Rs.3,50,777 /- andRs.5,25,325/- was rightly assessed by theAssessing Officer as undisclosed income asper the return filed by the assessee andcharged to tax @ 60%.” 5.From the above finding, it is clear that even though time forfiling return had not expired, there was no disclosure by the assessee in anymanner. Benefit of Section 158BB(1)(d) could be available only when therewas disclosure in the books of account and other documents maintained inthe normal course on or before the date of search. The relevant provision isreproduced below: “ 158BB.(1) The undisclosed income of the block period shall be the aggregate of thetotal income of the previous years falling 5.From the above finding, it is clear that even though time forfiling return had not expired, there was no disclosure by the assessee in anymanner. Benefit of Section 158BB(1)(d) could be available only when therewas disclosure in the books of account and other documents maintained inthe normal course on or before the date of search. The relevant provision isreproduced below: “ 158BB.(1) The undisclosed income of the block period shall be the aggregate of thetotal income of the previous years falling within the lock period computed, [inaccordance with the provisions of this Act,on the basis of evidence found as a result ofsearch or requisition of books of account orother documents and such other materialsor information as are available with theAssessing Officer and relatable to suchevidence”, as reduced by the aggregate ofthe total income, or as the case may be, asincreased by the aggregate of the losses ofsuch previous years, determined.” (a) .....xx............x.x..............xx.................. (b) .............xx............x.x...............xx.........© ...xx.......xxx.......x.xx...........xxx..............(d) where the previous year has not beenended or the date of filing the return ofincome under sub-section (1) of Section139 has not expired, on the basis of entriesrelating to such income or transactions asrecorded in the books of account andother documents maintained in the normalcourse on or before the date of the searchor requisition relating to such previousyears: 6.The scheme of Section 158BB (1)(d) is that the assessee mayget credit for the income which may have already been disclosed prior tosearch either in the form of return or in the form of entries in books ofaccount or documents maintained in the normal course. Disclosure can be inthe form of advance tax also. 7.Learned counsel for the assessee has placed reliance on CIT v. Jai Parkash, [2008] 7 DTR 177 (P&H),CIT v. Ravi Kumar [2007] 294ITR 78 (P&H), CIT v. Vimla Khatri[2007] 288 ITR 168 (MP), CIT v.J.K.Narayanan [ 2007] 293 ITR 179 (Mad),Dr.Mrs.Alaka Goswami Vs.CIT 268 ITR 178 to submit that assessee should get credit even if incomedisclosed later, when time for return had not expired. 8.We are unable to accept the submission. The judgments reliedupon are distinguishable. In Jai Parkash (supra), the assessee had paid theentire advance tax and to that extent the income was held to be disclosed.The appeal of the revenue filed in this Court was dismissed. In RaviKumar (supra), explanation of the assessee in respect of proposed additionin the form of loose slip was found to be satisfactory, having regard to thefacts of that case and, thus, no inference was drawn of there beingundisclosed income, on the basis of loose slip. The appeal of the revenuewas dismissed by the High Court. In Vimal Khatri (supra), the income ofthe assessee was found to be below taxable and the Tribunal held that therewas no undisclosed income. The revenue's appeal to this Court wasdismissed. In J.K.Narayanan (supra), belated returns were held to begenuine and on that ground, the revenue's appeal by the High Court was I.T.A. No.852 of 2008 dismissed. In Dr.Mrs.Alaka Goswami (supra) advance tax having beenpaid, in the facts and circumstances of that case, it was held that there wasno undisclosed income. There is no inflexible rule in any of the judgmentsthat mere fact that time for return had not expired was enough to hold thatthe income disclosed after search could not be treated as undisclosed. Suchinterpretation is not justified even on plain language of the statute. Thus, it isnot possible to hold that finding of fact with regard to undisclosed income isperverse. 9.No substantial question of law arises. 10.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE September 01, 2009raghav (DAYA CHAUDHARY) JUDGE Note: Whether this case is to be referred to the Reporter? ........Yes/No