PARVEEN KUMAR V. COMMR.INCOME TAX

ITA/6/2000

AI Insights

The case involves an appeal by Parveen Kumar against the orders of the Assessing Officer and the Income Tax Appellate Tribunal, which added Rs.8,98,550 to his undisclosed income following a search of his premises. The primary contention in the appeal was the inclusion of Rs.75,000 as income from Kohinoor Hotel for the year 1995-96, which the appellant argued was not legally sustainable. The High Court examined whether the addition was in contravention of Sections 158-BB and 158-BC of the Income Tax Act, 1961. The court upheld the Tribunal's decision, finding that the income assessment was reasonable based on the evidence and the appellant's own statements.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 674639 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 08-08-2008
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: VINAY KUTHIALA; VANDANA KUTHIALA
• Assessee Lawyers: HEMANT VAID
• Keywords: Block period; Exparte assessment; Search and seizure; Undisclosed income; Income from hotel
• Section: 142(1); 158(BC); 158 BB

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA I.T. Appeal No. 6 of 2000 Judgment reserved on 1.8.2008 Date of decision: 8.8.2008 Parveen Kumar …Appellant. Versus The Commissioner of Income Tax and another …Respondents. Coram The Hon’ble Mr. Justice R.B. Misra, Judge. The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 For the appellant: Mr. Hemant Vaid, Advocate. For the respondents: Mr. Vinay Kuthiala & Ms. Vandana Kuthiala, Advocates. Surjit Singh, Judge This appeal by the assessee is directed against the order dated 26.9.1997 of the Assessing Officer and order dated 23.9.1999 of the Income Tax Appellate Tribunal, whereby on search of the premises of the assessee undisclosed income to the tune of Rs.8,98,550/- having been found, tax liability at the rate of 60% of such income was determined. 2. Relevant facts may be summed up thus. On 21.6.1996 residential premises of the appellant / assessee were searched by the Income Tax Authorities. Notice was issued on 3.7.1996, under Section 158-BC of the Income Tax Act, to the appellant / assessee calling upon him to file return of his income for the block period 1.4.1986 to 20.6.1996 in Form 2-B. There was no response from the appellant / assessee. He Whether reporters of the local papers may be allowed to see the judgment? …2… was reminded vide letter dated 11.4.1997. Reminder also did not fetch any response. Ultimately notice under Section 142 (1), along-with a detailed questionnaire, was served upon the assessee on 28.5.1997. He was called upon to appear on 5.6.1997 and file return, failing which assessment was to be made exparte. Appellant / assessee appeared along-with a Chartered Accountant. Assessing Officer, based on the reply to the questionnaire submitted by the assessee and other records and proceedings of search and seizure, held that the appellant / assessee had the following items of undisclosed income:- (i) Purchase and renovation of a hotel building known as Kohinoor Hotel = Rs.6,03,000/-; (ii) Deposit in Bank Account No. 400 with Punjab National Bank, Shimla = Rs. 50,000/-; (iii) Purchase of vehicle = Rs.1,45,000/-; (iv) Income from Kohinoor Hotel during the year 1995-96 = Rs. 1,00,000/-. --------------------------------------------------------------------------------- Total = Rs.8,98,550/-. --------------------------------------------------------------------------------- 3. Appellant / assessee felt aggrieved and filed appeal before the Income Tax Appellate Tribunal. The Tribunal upheld the order of the Assessing Officer in respect of the aforesaid items, except item (iv) pertaining to income from Kohinoor Hotel. On appeal to the Appellate Tribunal it was held that in view of the facts and circumstances of the case, income from the said hotel was to be taken to be Rs.75,000/- for the year 1995-96. Present appeal is directed only against the income from the said hotel, which was assessed at Rs.1,00,000/- by the Assessing Officer and has been reduced in appeal by the Appellate Tribunal to Rs.75,000/-. It is alleged that the addition of Rs.75,000/- to the undisclosed income of the appellant / assessee is not legally sustainable …3… and is in contravention of provisions of section 158-BB and 158-BC of the Income Tax Act, 1961. 4. Appeal was admitted on the following substantial question of law, vide order dated 16.11.2000:- “Whether in the facts and circumstances of the case, additions sustained by the Income Tax Appellate Authority of Rs.75,000/- is legally sustainable or is in contravention of Section 158-BB / 158-BC of the Income Tax Act, 1961?” 5. We have heard the learned counsel for the appellant as also the learned counsel representing the respondent / Revenue. 6. Admittedly, the appellant / assessee had not maintained any record of the income from the hotel, in question. Appellant / assessee himself took the plea before the learned Appellate Tribunal that he had purchased the hotel building on 10.1.1995 and it took three – four months to renovate the building. That means the building was ready for use as a hotel in the month of April 1995. In other words, the hotel was functional throughout the financial year 1995-96. Assessee claimed that there were only seven rentable rooms in the hotel and that the tariff, as fixed by the Tourism Department, was Rs.125/- per room. He stated that the hotel being away from motor-able road, occupancy was negligible. Appellant / assessee did not produce any material on record indicating that occupancy was negligible. In fact, as noticed hereinabove, he maintained no accounts of the income from the hotel. Under these circumstances, the Tribunal and the Assessing Officer were right in assuming that the hotel was functional throughout the year and occupancy was normal and to the extent of other hotels of Shimla town. 7. According to appellant’s own saying, daily tariff of seven rooms was Rs.975/-. Now, even if it be assumed that only half of the rooms remained occupied and those too only for half of the total number …4… of days of the year, the amount of tariff comes to around Rs.1,00,000/-. Hence the amount of Rs.75,000/-, assumed as income from the hotel by the Tribunal, cannot be said to be on the higher side. 8. It was not pointed out during the course of hearing how the addition, made by the Assessing Officer and the Income Tax Appellate Tribunal on account of income from the said hotel to the income from other sources of the assessee, is contrary to the provisions of Section 158-BB and 158-BC of the Income Tax Act or otherwise illegal. 9. In view of the above discussion, we answer the question against the appellant and consequently dismiss his appeal. ( Surjit Singh ) ( R.B. Misra ) Judge Judge August 8, 2008 (BC) …5… IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA I.T. Appeal No. 6 of 2000 Judgment reserved on 1.8.2008 Parveen Kumar …Appellant. Versus The Commissioner of Income Tax and another …Respondents. Judgment for consideration, please. ( Surjit Singh ), J. I agree / do not agree. ( R.B. Misra), J. List for pronouncement of judgment on _______________ ( R.B. Misra ), J. Court Secretary "