The Commissioner Of Income-Taxpanchkula v. Ajay Aggarwal

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 870 of 2008Date of decision: 29.3.2011 The Commissioner of Income-taxPanchkula Versus --- Appellant Ajay Aggarwal --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Yogesh Putney, Senior Standing Counselfor the appellant-Revenue. None for the respondent-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961(for short “the Act”) has been filed by the Revenue against the order dated15.4.2008, passed by the Income Tax Appellate Tribunal ChandigarhBench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No.173/CHANDI/2006, relating to the assessment year 1999-2000. 2.The following substantial questions of law have been claimed for determination of this Court: “(i)Whether on the facts and in the circumstances of the case,Hon’ble ITAT has erred in holding that the provisions ofSection 69 are not attracted in this case?Hon’ble ITAT has erred in holding that the provisions ofSection 69 are not attracted in this case? (ii)Whether the averment made in an FIR lodged with the Policecan be regarded as a tangible and relevant evidence forholding for the purposes of Section 69 that the assesseemade the investment/advanced the amount when theassessee had failed to show that the averment made in theFIR was wrong or erroneous.?can be regarded as a tangible and relevant evidence forholding for the purposes of Section 69 that the assesseemade the investment/advanced the amount when theassessee had failed to show that the averment made in theFIR was wrong or erroneous.? 3.The facts, in brief, necessary for adjudication as narrated inthe appeal, are that the assessee lodged an FIR dated 29.4.1999 for anoffence punishable under Section 420 of the Indian Penal Code at PoliceStation, Baldev Nagar, Ambala City wherein he claimed to have paid asum of Rs. 33,00,000/- to one Parmod Khosla for investment inagricultural land in August, 1998. This fact having come to the knowledgeof the Income Tax Department, a notice under Section 148 of the Act wasserved on the assessee and in response thereto, the assessee filed thereturn of his income on 23.4.2004, showing business income of Rs.35,200/-. Notices under Sections 143(2) and 142(1) of the Act were alsoissued to the assessee. An enquiry was made wherein the assesseefailed to furnish any evidence with regard to source of payment of suchhuge amount and denied having paid the said amount by taking the pleathat the said fact in the FIR had been mentioned by mistake.Consequently, the assessee was asked to show cause why the aforesaidamount of Rs. 33,00,000/- be not added to his income under Section 69of the Act. Further enquiry into the matter leading to the same conclusioni.e. the assessee had failed to explain the source of payment of theamount of Rs.33,00,000/-, the assessing officer made addition of the saidamount to the income of the assessee, vide order dated 30.3.2005. 4.The Commissioner of Income-tax (Appeals) {in short “the CIT(A)”} allowed the appeal by order dated 27.12.2005. The CIT(A) deletedthe addition made by the assessing officer by observing that the verybasis for addition was derived from the allegations made in the FIR thatwas got registered by the assessee, and once on investigation of thematter, the facts mentioned in the FIR were not substantiated, theaddition so made was unjustified. 5.The Tribunal dismissed the appeal carried by the Revenuevide the order under appeal and this is how the present appeal has been filed. 6. No one chose to put in appearance on behalf of the respondent-assessee despite service. 4.The Commissioner of Income-tax (Appeals) {in short “the CIT(A)”} allowed the appeal by order dated 27.12.2005. The CIT(A) deletedthe addition made by the assessing officer by observing that the verybasis for addition was derived from the allegations made in the FIR thatwas got registered by the assessee, and once on investigation of thematter, the facts mentioned in the FIR were not substantiated, theaddition so made was unjustified. 5.The Tribunal dismissed the appeal carried by the Revenuevide the order under appeal and this is how the present appeal has been filed. 6. No one chose to put in appearance on behalf of the respondent-assessee despite service. 7.The point that arises for determination in this appeal is,whether the amount of Rs. 33,00,000/- in respect of which the assesseehad lodged an F.I.R. with the averments that he had paid that amount toone Parmod Khosla son of H.R. Khosla, resident of House No. 148,Sector 7, Ambala City, could be treated as income of the assessee underSection 69 of the Act. 8.We have heard learned counsel for the appellant-Revenueand have perused the record. 9.The assessee had lodged FIR on 29.4.1999 for the offencepunishable under Section 420 of the Indian Penal Code wherein it wasspecifically claimed by him that he had paid Rs. 33,00,000/- to ParmodKhosla for investment in agricultural land which was taken on lease fromthe Punjab Wakf Board. There was an averment of factual aspect in theF.I.R. which was in the nature of an admission on behalf of the assessee.The onus was on the assessee to show that the amount of Rs.33,00,000/- as had been claimed to have been paid to Parmod Khosla, wasaccounted for. 10. It would be advantageous to refer to the discussion made bythe Tribunal while upholding the order of the CIT(A) deleting the addition,which is as under: “We have given our careful consideration to rival contentions.The addition of Rs. 33,00,000/- was made by the AssessingOfficer by invoking his powers u/s 69 of the Act. Section 69 isattracted where the assessee is found to have madeinvestment which is not recorded in the books of account andthe assessee offers no explanation or the explanation is notsatisfactory. Therefore, the section gets attracted only whenthe assessee is established to have made undisclosedinvestment. In this case the assessee had filed an FIRclaiming that a sum of Rs. 33 lacs had been paid to one ShriParmod Khosla. However, this FIR could not be supported byany evidence. Therefore, no action could be taken by thepolice. Subsequently, even the court has closed theproceedings against Shri Parmod Khosla. There is no otherevidence to suggest that the FIR filed by the assessee wastrue and correct. In the light of evidence on record to suggestthat the FIR was not based on facts much less by anyevidence, provisions of Section 69 are not attracted. The CIT(A) was, therefore, in our view justified in deleting the additionof Rs.33,00,000/-“ 11. A perusal of the observations of the Tribunal reproduced aboveshows that the Tribunal had adverted to the issue solely on the groundthat an FIR which had been lodged by the assessee claiming that a sumof Rs. 33 lacs had been paid to aforesaid Parmod Khosla therein, the saidissue had been decided in favour of Parmod Khosla, and, therefore, noaddition under Section 69 of the Act could be made as the same was notattracted. The Tribunal had proceeded on the basis that the onus was onthe Revenue to prove the truth or the correctness of the F.I.R. Thedecision in Parmod Khosla’s criminal case is a piece of evidence which isnot conclusive and it shall be upon the assessee to offer any plausibleexplanation either explaining the circumstances for disowning thecontents of the F.I.R. or to substantiate that the amount allegedly paidwas his accounted for money in the books of account, otherwise he wouldbe liable for all repercussions flowing from such admission. In theabsence of any satisfactory and plausible explanation from the assessee,it could not be held that the said amount was not on account ofunexplained investment under Section 69 of the Act. Thus, the CIT(A) andthe Tribunal have not appreciated the issue in the right perspective. 12.In view of the above, the substantial questions of law areanswered in favour of the Revenue. The orders of the CIT(A) and theTribunal are set aside and the matter is remanded to the CIT(A) toconsider the issue afresh in accordance with law. 13.The appeal stands disposed of. (AJAY KUMAR MITTAL) JUDGE Income Tax Appeal No. 870 of 2008 6 March 29, 2011*rkmalik* (ADARSH KUMAR GOEL) JUDGE