The Commissioner Of Income Tax, Jalandhar v. Sh. Ashwani Trehan

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.R. No.170 of 1998 Date of decision: 8.7.2010 The Commissioner of Income Tax, Jalandhar. Vs. Sh. Ashwani Trehan. -----Applicant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Vivek Sethi, Sr. Standing Counselfor the revenue.for the revenue. Mr. S.K. Mukhi, Advocate andMs. Jyoti, Advocate for the assessee. --- ADARSH KUMAR GOEL, J. 1. The Income Tax Appellate Tribunal, Amritsar, underSection 256(1) of the Income Tax Act, 1961 (for short, “the Act”),has referred following questions of law for opinion of this Court,arising out of its orders dated 3.12.1997 and 10.6.1998 in IT(SD)A.No.4(ASR)/1997 in respect of block assessment period from1.4.1985 to 13.12.1995:- (i) “Whether, on the facts and in the circumstances of thecase, the Ld. ITAT is right in law in deleting theaddition of Rs.5 lacs representing income introducedthrough the ‘WILL’ allegedly left by the assessee’scase, the Ld. ITAT is right in law in deleting theaddition of Rs.5 lacs representing income introducedthrough the ‘WILL’ allegedly left by the assessee’s deceased father, Sh. Gopal Dass Trehan Pertainingto the relevant period falling in the block period1.4.1985 to 13.12.1995?” (ii) “Whether, on the facts and in the circumstances of thecase, the Ld. ITAT is right in law in holding that theterm “Due Date” as referred to in Section 158B (1) (c)of the Income Tax Act, 1961 also includes the returnof income furnished u/s 139(4) of the Act?” 2. The assessee is an individual and his sources ofincome are salary, interest and dividend. A search was conductedat his residence on 13.12.1995 and 14.12.1995 on which twoWills executed by his father and mother were found. As per thewill of the father, he bequeathed a sum of Rs.5 lacs in cash infavour of mother of the assessee, the assessee himself, his wifeand his two children. The source of money found as per the Will,as claimed by the assessee, was doubted on the ground that hisfather had met with an accident and was unable to run thebusiness. The Assessing Officer held that the amount wasunexplained income of the assessee. On appeal, plea of theassessee was upheld on the ground that execution of Will had notbeen challenged and in absence of further investigation, therewas no justification to reject the explanation furnished by theassessee that inspite of accident, his father continued to dobusiness. 3. The assessee also took the plea that he had filedreturn for the assessment year 1995-96 on 25.3.1996, which was before the due date and the amount disclosed in the said returncould not be treated as concealed income. The Assessing Officerdid not accept this plea on the ground that disclosure in returnfiled after search was not relevant. However, on appeal, theTribunal upheld this plea of the assessee on the ground thatreturn was before due date under Section 139(4) of the Act. 4. We have heard learned counsel for the parties andperused the record. 5. We proceed to deal with the questions referred. Re. Que.(i): The finding of the Tribunal with regard to question (i)is as under:- 14. After considering all the facts, we are inagreement with the arguments of the learned counselfor the assessee. Execution of will is not challengedby the A.O. nor the explanation given by the assesseeduring statement recorded at the time of search wastreated as unbelievable otherwise the Departmentwould have made sincere efforts to falsify the factsstated by the assessee. No investigation after thatexplanation of the assessee. In view of all these facts,no justification to treat the amount left by his father asunexplained income of the assessee, which is to bedeleted. The ground succeeds and the A.O. isdirected to delete the amount so added.” Re. Que.(i): The finding of the Tribunal with regard to question (i)is as under:- 14. After considering all the facts, we are inagreement with the arguments of the learned counselfor the assessee. Execution of will is not challengedby the A.O. nor the explanation given by the assesseeduring statement recorded at the time of search wastreated as unbelievable otherwise the Departmentwould have made sincere efforts to falsify the factsstated by the assessee. No investigation after thatexplanation of the assessee. In view of all these facts,no justification to treat the amount left by his father asunexplained income of the assessee, which is to bedeleted. The ground succeeds and the A.O. isdirected to delete the amount so added.” In view of above finding, which is not shown to beperverse, we are of the view that the Tribunal was justified in holding that the explanation of the assessee was valid. Therewas no investigation into the plea of the assessee that his fathercontinued to do business even after the disability. In absencethereof, the view taken by the Tribunal that the explanation of theassessee could not be rejected, cannot be held to be perverse orunreasonable. Accordingly, question (i) referred is answeredagainst the revenue and in favour of the assessee. Re. Que.(ii): 6. The finding of the Tribunal on this aspect is as under:- “4. After considering the rival submissions, weare of the definite view that plea advanced by thelearned counsel for the assessee has to prevail. Theword used by the legislature in section 158BB(1)(c) isdue date for filing the return of income and in the casein hand the return under section 139(1) was to be filedby 30.6.1995 by applying the provisions of section 139(4) the assessee has an option to file return within ayear after expiry of the date prescribed under Section139(1) of the Act and admittedly the assessee hadfiled the return within that extended one year period.The legislature has not used the provision of section139(1) in section 158BB(1)(c) as it has beenspecifically used in section 158BB(1)(d) of the Act andthus the assessee who has filed return under Section139(4) cannot be deprived of the benefit of filing thereturn in time and he cannot be hit by the provision ofsection 158BB(1)(c) of the Act. The ground standsallowed and we direct the A.O. to reduce the incomeshown by the assessee, in return for the assessment year 1995-96 filed on 25.3.1996 for the purpose ofworking out the undisclosed income.” Under Section 158BB, undisclosed income isaggregate of income for the previous year falling in the blockperiod, on the basis of evidence found in search, reduced by theincome determined on the basis of returns already filed or wheredate for filing of return had not expired, on the basis of entriesmade in the books of account. In other words, return filed aftersearch was not at par with disclosed income. The stand of theassessee that he had filed return under Section 139(4) of the Acton 25.3.1996, which should be taken into account could not beaccepted. The return filed could be taken into account only if thesame was before the date of search, as provided under Clause(b) of Section 158BB and if the return had not been filed but thedate was still available, only entries in books of account could betaken into account. In view of this clear scheme of Section158BB of the Act, the interpretation placed by the Tribunal intaking into account the return filed after the search, is against theexpress statutory provision under Clause (b) of Section 158BB. Itis well settled that the Section has to be read as a whole and ifinterpretation taken by the Tribunal is to be accepted, the samewill be against the scheme of Clause (b) of Section 158BB. In M.R. Singhal v. Assistant Commissioner of Income Tax[2007] 290 ITR 162 (P&H), same view was taken and it was heldthat return filed after search even before ‘due date’ under Section M.R. Singhal v. Assistant Commissioner of Income Tax[2007] 290 ITR 162 (P&H), same view was taken and it was heldthat return filed after search even before ‘due date’ under Section 139(4) of the Act could not be taken into account. The relevantobservations are as under:- “Though learned counsel for the assessee hasrelied upon section 139(4) of the Act which permitsthe return to be filed even after the expiry of due date,for purposes of Section 158BB(1)(c) of the Act, theconsequence of the return having not been filed bythe due date cannot be nullified by a return filed undersection 139(4) of the Act. Even otherwise, section158BB(1)(c) of the Act clearly provides that evenwhere the date for filing the return has not expired,transactions recorded on the basis of entries relatingto income in the books of account have to be takeninto account. In the present case, no advance tax orself-assessment tax had been paid at the relevanttime. In such a situation, the return filed underSection 139(4) of the Act could no be taken intoaccount.” In view of above, the view taken by the Tribunalcannot be sustained Question (ii) has to be answered in favour ofthe revenue and against the assessee. The reference is disposed of accordingly. (ADARSH KUMAR GOEL) JUDGE July 08, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE