Vallabh Yarns Pvt. Ltd v. Commissioner Of Income Tax, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Vallabh Yarns Pvt. Ltd. Versus Commissioner of Income Tax, Ludhiana ITA No. 195 of 2011 (O&M)Date of Decision: 14.7.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rishab Kapoor, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 28.4.2010 passed by the Income Tax AppellateTribunal, Chandigarh, Bench 'B' (hereinafter referred to as “theTribunal”) in ITA No. 79/CHD/2010, relating to the assessment year2006-07, claiming the following substantial question of law:- “Whether on the true and correct interpretation of theprovisions of sections 145 and 80-IB, the finding aresustainable for charging the Income fromUndisclosed Sources attributable to discharge of“onus” assigned on the assessee whereas the ITA No. 195 of 2011 (O&M) decision of another Hon'ble High Court places the “onus on the revenue”?” 2.Put shortly, the facts necessary for adjudication as narrated in the appeal are that the assessee-company, is a trader, manufacturerof knitted cloth and readymade garments. It filed its return on29.11.2006 for the assessment year 2006-07 at a total income ofRs.84,49,800/-. A survey was conducted under Section 133A of the Actat the business premises of the assessee and the assesseesurrendered additional income of Rs.44,00,000/-. The assesseeclaimed deduction under Section 80-IB of the Act to the tune ofRs.35,91,572/-. The Assessing Officer completed the assessment videorder dated 8.12.2008 at an amount of Rs.1,19,17,850/-. Thededuction of Rs.1,23,519/- was allowed under Section 80-IB of the Actagainst deduction claimed at Rs.35,91,572/- by the assessee. Feelingaggrieved, the assessee filed an appeal before the Commissioner ofIncome Tax (Appeals) [in short “the CIT(A)”] who vide order dated11.11.2009 upheld the aforesaid disallowance. Still feeling dissatisfied,the assessee filed an appeal before the Tribunal. The Tribunal videorder dated 28.4.2010 upheld the order of the CIT(A) denying the claimunder Section 80-IB of the Act on surrendered income. This gave riseto the assessee to approach this Court by way of instant appeal. 3.We have heard learned counsel for the appellant. 4.The Tribunal while deciding the issue against the assesseehad recorded that the undisclosed income which was surrendered bythe assessee during the course of survey under Section 133A of the Actdid not relate to business income which could be held to be derived ITA No. 195 of 2011 (O&M)-3- from eligible industrial undertaking. Once that is so, the assessee wasrightly held not entitled to claim deduction under Section 80-IB of theAct on the said amount. The relevant findings recorded by the Tribunalread thus:- “Although, the assessee has pleaded that theadditional income is on account of realization ofsundry debtors and this to our mind is also suspect.In this connection, we may refer to the letter ofsurrender dated 10.11.2005, which has beenadverted to by the learned counsel during the courseof hearing, to support the submissions. The contentsof the surrender letter read as under: “Please refer to the survey proceedingsconducted u/s 133A of the Income Tax Acttoday at our business premises at Rahon Roadand Sunder Nagar, Ludhiana. from eligible industrial undertaking. Once that is so, the assessee wasrightly held not entitled to claim deduction under Section 80-IB of theAct on the said amount. The relevant findings recorded by the Tribunalread thus:- “Although, the assessee has pleaded that theadditional income is on account of realization ofsundry debtors and this to our mind is also suspect.In this connection, we may refer to the letter ofsurrender dated 10.11.2005, which has beenadverted to by the learned counsel during the courseof hearing, to support the submissions. The contentsof the surrender letter read as under: “Please refer to the survey proceedingsconducted u/s 133A of the Income Tax Acttoday at our business premises at Rahon Roadand Sunder Nagar, Ludhiana. Duringsurveyproceedings,somediscrepancies and certain paper sheet entrieswere found which could not be explained atthat moment. However, in order to buy peaceand to avoid any litigation with the departmentwith respect to the explanation of suchdiscrepancies and paper sheet entries, wehereby offer for taxation an additional incomeof Rs.44 lacs from business in the hands of thecompany for the assessment year 2006-2007 subject to no penalty or prosecution under anyprovisions of the Income Tax Act to cover alldiscrepancies or unexplained entries. The Income Tax due on the above amountshall be paid on or before the due date ofpayment of advance tax for the assessmentyear 2006-2007.” A perusal of the aforesaid demonstrates that all whatthe assessee had offered as additional income isstated to be earned 'from business'. Apart from theaforesaid, there is no material or evidence led by theassessee to demonstrate the nature of incomesurrendered. In any case, the plea of the assesseethat the surrendered income is by way of realizationof debtors is unsubstantiated. Even if it is acceptedthat the additional income surrendered is to beregarded as business income, there cannot be anypresumption that the same is eligible for the benefitsu/s 80-IB of the Act because it is further required tobe established that such business income is derivedfrom the eligible Industrial Undertaking following theparity of reasoning in the case of M/s Sterling Foods(supra). Quite clearly, there is no material toestablish the same and, therefore, we find no error inthe approach of the income tax authorities in denyingdeduction u/s 80-IB of the Act on an amount of Rs.44 -5- lacs surrendered by the assessee as additionalincome consequent to survey u/s 133A of the Act.” 5.No perversity or illegality in the findings recorded by theTribunal could be pointed out by the learned counsel for the assesseewhich may raise any substantial question of law in this appeal forconsideration of this Court. Accordingly, the appeal is dismissed. 6.Since the appeal has been dismissed on merits, no furtherorders are required to be passed on the applications for condonation ofdelay in filing and refiling the appeal and the same are disposed of assuch. (AJAY KUMAR MITTAL) JUDGE July 14, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE