Parvinder Jit Singh Bindra V. Commissioner of Income Tax, Central Circle, Ludhiana

ITA/168/2014

AI Insights

The case involves Parvinder Jit Singh Bindra, the appellant, contesting the jurisdiction and the validity of the regular assessment under Section 143(3) of the Income Tax Act, 1961, by the ACIT Central Circle-I, Jalandhar. The appellant argued that the jurisdiction for making a block assessment under section 158 BC was transferred to him, which was not executed due to non-handling of seized cash by FEMA authorities. The Tribunal and the High Court found that the regular assessment was valid as the conditions for a block assessment under Section 158BC were not met, and there was no bar to frame a regular assessment under Section 143(3).

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 672910 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 16-09-2014
• Assessment Year: misc
• Other Referred Cases: Dr. Prem Chand Sharma vs. CIT
• Laws Referred To: Income Tax Act, 1961, Foreign Exchange Management Act (FEMA)
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: JORAWAR BHASIN
• Keywords: Block assessment; FEMA; Income Tax; Jurisdiction; Regular assessment; Seized cash; Unexecuted warrant
• Section: 143(3); 113; 260A; 132A; 158BE; 158(BC)

Judgement Text

"ITA No. 168 of 2014 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 168 of 2014 Date of Decision: 16.9.2014 Parvinder Jit Singh Bindra ....Appellant Versus Commissioner of Income Tax, Central Circle, Ludhiana ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE FATEH DEEP SINGH. PRESENT: Mr. Jorawar Singh Bhasin, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1. This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 19.12.2013 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 270(ASR)/2010 for the assessment year 2001-02, claiming the following substantial questions of law:- “A) Whether in the facts and circumstances of the case, the ACIT Central Circle-I, Jalandhar, was vested with valid jurisdiction to make regular assessment under section 143(3), when the jurisdiction was transferred to him to make block assessment under section 158 BC, which was dropped for non-execution of warrants of GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -2- authorization when the cash seized was not handed over by the FEMA authorities? B) Whether the Tribunal was correct in confirming the regular assessment made under section 143(3) by ACIT Central Circle-I, Jalandhar, for Assessment Year 2001-02 as valid, without first deciding whether he was vested with a competent jurisdiction over the appellant, when the block assessment had been dropped by him? C) Whether in the facts and circumstances of the case, the ld. ITAT was correct in holding that the warrant for requisition issued under section 132A remained unexecuted, simply because the cash seized by FEMA authorities was not handed over to AO, even when books of account and other documents were already handed over, and whether such a finding is not contrary to clause (b) to Explanation 2 of section 158BE where under the authorization u/s 132 is deemed to be executed on receipt of either the books of account or other documents or assets by the Authorized officer? D) Whether in the facts and circumstances of the case, the ITAT was legally correct in mechanically confirming the addition of Rs.16 lacs without adverting to the documentary GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -3- evidence placed on record, more particularly the sworn affidavit of Mr. Banerjee, confirming the transaction of having paid and also received back the said amount by drafts, besides disclosing his new address, his PAN and other assessment particulars, which remained unrebutted? E) Whether in the facts and circumstances of the case, the ld. Tribunal was right in confirming the estimated addition of Rs.10 lacs made in assessment towards commission earned on the alleged distribution of compensatory payments by relying upon statement and documents, recorded/seized by FEMA authorities, when the same documents were ignored to hold that the authorization made u/s 132A was not executed, and also when there was no independent statement recorded by Income tax authorities? F) Whether in the facts and circumstances of the case, the order of the Tribunal is perverse and hence illegal being contrary to facts and evidence brought on record? 2. Briefly the facts as pleaded in the instant appeal may be noticed. On 24.12.2000, a search was conducted by the authorities under the Foreign Exchange Management Act (FEMA) at the residential premises of the assessee and certain documents along with cash amount of ` 12,30,000/- was seized. The vehicle of the assessee was GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -4- intercepted by the Police at Phagwara on 29.1.2001 while the assessee was on the way back to Jalandhar from Delhi and cash amount of ` 15,85,350/- out of ` 16,00,000/- was taken in custody. FIR under Sections 411/414 of the Indian Penal Code and Sections 3(b) and 3(c) of the FEMA was also registered in this regard on the same day. Subsequently, the income tax authorities issued warrant of authorization under Section 132A of the Act to the FEMA authorities for obtaining the said amount of ` 12,30,000/-. The assessee filed return of income on 3.11.2001 for the assessment year 2001-02 declaring the income at ` 38,430/- with the regular ward 2(2), Jalandhar. However, the Commissioner of Income Tax-II vide order dated 4.1.2002 transferred the jurisdiction of the assessee from Ward 2(2), Jalandhar to Central Circle- II, Jalandhar. Accordingly, Assistant Commissioner of Income Tax, Central Circle-II, Jalandhar issued a notice under Section 158BC of the Act for filing return for the block period ending 24.8.2001. In pursuance thereto, the assessee filed return on 2.9.2002 for the block period declaring undisclosed income at ` 12,30,000/- and also offered tax due to be adjusted from the said seized amount. The said return was taken up for scrutiny and notice under Section 143(2)/142(1) dated 5.9.2002 along with a questionnaire was sent to the assessee. However, the proceedings under Chapter XIV-B of the Act were dropped as warrant of authorization remained unexecuted. Thereafter, the return for the assessment year 2001-02 filed under Section 139 of the Act was taken up for scrutiny and the regular assessment under Section 143(3) of the Act was framed vide order dated 26.3.2004 (Annexure A-1) at a total income of ` 28,68,340/-. The amount of ` 12,30,000/- declared in block assessment was questioned and added besides making another addition GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -5- of ` 16,00,000/- being credit received from Mr. Banerjee, as advance, against the sale of property at Jalandhar as per agreement dated 27.1.2001 (Annexure A-4). Commission income of ` 10 lacs was also assessed from alleged distribution of Hawala money though it was telescoped against the addition of ` 12.30 lacs cash seized. Feeling aggrieved against the assessment order, the assessee filed an appeal before Commissioner of Income Tax (Appeals) who vide order dated 19.3.2010 (Annexure A-2) upheld the order of the Assessing Officer and dismissed the appeal. Still dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 19.12.2013 (Annexure A-3) partly allowed the appeal. Hence, the present appeal. 3. Learned counsel for the assessee-appellant submitted that the assessee could have been assessed under Section 158BC of the Act and not under Section 143(3) of the Act as warrant of authorization under Section 132A of the Act stood executed. It was also submitted that the authorities below had erred in adding ` 16 lacs which was against the documentary evidence placed on record. Reference was also made to the affidavit of Mr. Banerjee confirming the transaction of having paid cash to the assessee. 4. After hearing learned counsel for the appellant, we do not find any merit in the appeal. In so far as the first submission is concerned, the Tribunal while repelling the contention of the assessee had noticed that the warrant of authorization under Section 132A of the Act had never been carried out as cash of ` 12.30 lacs was not handed over to the Income Tax Department. The assessment under Section 158BC of the Act is a special provision and the conditions prescribed thereunder are required to be satisfied before any action for block GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -6- assessment can be initiated. The assessee had not even paid the taxes due as per return filed for the block period and the Assessing Officer had rightly dropped the proceedings under Chapter XIV-B of the Act. Moreover, special rate of tax of 60% has been prescribed on the undisclosed income of the block period under Section 113 of the Act which is higher than the rate of taxation on the income assessed under Section 143(3) of the Act. Learned counsel for the assessee-appellant was not able to refer to any provision whereby it could be held that there was any bar to frame regular assessment under Section 143(3) of the Act in the present case. Furthermore, learned counsel has also not been able to show that any prejudice has been caused to the assessee by framing of regular assessment under Section 143(3) of the Act. 5. In view of the above and in the facts and circumstances, the assessment framed under Section 143(3) of the Act was in consonance with the provisions of the statute. Thus, the first contention is rejected. 6. Adverting to the second submission, the Tribunal on appreciation of material on record came to the conclusion that the amount was unaccounted in the hands of the assessee. The Assessing Officer had doubted the paying capacity of Mr. Banerjee and no material had been produced to show that Mr. Banerjee had the capacity to pay the amount. The affidavit of Mr. Banerjee by itself would not be sufficient to conclude that he had the capacity to pay the amount in the absence of any supporting material to substantiate the availability of funds with him to give it to the assessee. The findings recorded by the Tribunal are as under:- “17. We have heard the rival contentions and perused the facts of the case. At the outset, we are of GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -7- the view that the Ld. CIT(A) has passed a very reasoned order and we find no infirmity in the same. The reason given by the Ld. CIT(A) is valid that as per agreement dated 27.01.2001, the assessee was claimed to have received a sum of Rs.16 lacs paid by purchaser. As per the terms and conditions of the agreement, if the seller did not honour the agreement then the purchaser was entitled to double of the earnest money i.e. Rs.32 lacs from the seller of the property. Also, none of the seller or purchaser took any legal step against the other party who defaulted in honouring the terms and conditions of the agreement. No details have been placed on record as to what was the compromise between the two parties and how the deal was called off. There are variations in all the documents and in the name of the purchaser and no witness to the agreement. 18. As regards the identity, credit worthiness and genuineness of the transaction, filing of the affidavit does not prove credit worthiness and genuineness of the transaction and it is a story which has been fabricated as a subterfuge to explain the seized cash of Rs.16 lacs. The Ld. CIT(A) has relied upon the decision of the Hon'ble Punjab and Haryana High Court in the case of Dr. Prem Chand Sharma vs. CIT 181 Taxmann 186. Accordingly, in the facts and circumstances of the case, the Ld. CIT(A) rightly GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 168 of 2014 -8- rejected the contention of the assessee and has rightly confirmed the action of AO. We find no infirmity in his order. Thus, ground No.3 of the assessee is dismissed.” 7. Accordingly, no question of law muchless a substantial question of law arises in this appeal for consideration of this Court. Consequently, finding no merit in the appeal, the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE September 16, 2014 (FATEH DEEP SINGH) gbs JUDGE GURBACHAN SINGH 2014.10.17 14:50 I attest to the accuracy and authenticity of this document High Court Chandigarh "