THE COMMISSIONER OF INCOME TAX,PATIALA V. V.P.SINGH

ITA/194/2002

AI Insights

The case revolves around an appeal by the Commissioner of Income-tax, Patiala, challenging the decision of the Income-tax Appellate Tribunal, which had deleted certain additions made by the Assessing Officer (A.O.) regarding undisclosed income for the assessment year 1995-96. The Tribunal's decision was based on the grounds that the cash in hand reported in the assessee's balance sheet and the NRE gifts received were adequately disclosed and did not qualify as undisclosed income under the relevant sections of the Income Tax Act, 1961. The High Court examined the substantial questions of law regarding the interpretation and application of Sections 158BB(1) and 158B(b) of the Act, particularly in the context of block assessments following a search operation under Section 132.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 718969 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 16-04-2012
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax vs. Shamlal Balram Gurbani, Commissioner of Income-Tax vs. Vimla Khatri, Commissioner of Income-Tax vs. Smt. Maya Chotrani, M.R. Singhal vs. Assistant commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: S K MUKHI
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Balance sheet; Block assessment; Cash in hand; Non-filing of return; NRE gifts; Undisclosed income
• Section: 132; 69; 158BC; 158B(b); 158BB(1)

Judgement Text

"ITA No.194 of 2002 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.194 of 2002 Date of decision: 16.04.2012 The Commissioner of Income-tax, Patiala ....Appellant Versus Sh. V.P. Singh ....Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE ALOK SINGH Present: - Ms. Savita Saxena, Advocate, for the appellant. Mr. S.K. Mukhi, Advocate, for the respondent. 1.Whether to be referred to the Reporters or not? 2.Whether the judgment should be reported in the Digest? ***** ALOK SINGH, J. 1. Present appeal against the judgment dated 28.3.2002 passed by Income-tax Appellate Tribunal, Chandigarh Bench 'B', was admitted on the following substantial questions of law: - “1. Whether on the facts and circumstances of the case, the ITAT was right in law in deleting the addition of ` 39,356/- made by the A.O. on account of non-filing of return for the A.Y. 1995-96 particularly, when there is a specific provision for computation of undisclosed income of the block period in such cases under the provisions of Section 158BB(1) of the I.T. Act, 1961? 2. Whether on the facts and circumstances of the case, the ITAT was right in laws and on facts in deleting the addition of ` 4 lacs made on account of receipt of alleged NRE gifts holding the same to be not covered in the definition of undisclosed income as defined in Section 158B(b) of the I.T. Act, 1961, particularly when the assessee has not filed the return of his income for the ITA No.194 of 2002 -2- previous year relevant to the assessment year in which the alleged NRE gifts were received?” Question No.1 2. Brief facts of the present case, for the purpose of this question of law, inter alia, are that a search was conducted at the residential premises of assessee on 23.11.1995 under Section 132 of the Income Tax Act, 1961 (for brevity 'the Act'); certain incriminating documents were found and seized; cash amounting to ` 63,625/- was found out of which amount of ` 30,500/- was seized; notice under Section 158BC of the Act was issued; learned A.O. has added ` 30,000/- as opening cash in hand on 1.4.1985 as undisclosed income for the assessment year 1986-87 on the ground that assessee was not maintaining personal books of account. However, learned Tribunal on the basis of balance sheet filed by the assessee before the A.O., as on 31.3.1985 till 23.11.1995, has held that balance sheet is a statement of affairs showing assets and liabilities of the assessee as on a particular date; it also incorporates opening balance of various assets and liabilities brought forward from earlier years along with net increase/decrease in each of the assets and liabilities during the year; if the closing balance or cash in hand is disclosed income, opening balance cannot be regarded to be undisclosed income. Learned Tribunal has also observed that addition on the ground that assessee was not maintaining personal books of account is not correct. 3. There is no dispute that assessee has submitted the balance sheet before the A.O. and in the balance sheet closing balance or cash in hand was disclosed, therefore, opening balance cannot be regarded to be ITA No.194 of 2002 -3- undisclosed income; entries in the balance sheet have not been disputed by the A.O. 4. Hon'ble Apex Court in the case of Commissioner of Income- Tax vs. Shamlal Balram Gurbani (2001) 249 ITR 501 has held that the conclusion of the Tribunal that there was no reason for treating the said income as undisclosed income for the purpose of block assessment was based on facts, therefore, no substantial question of law arose. 5. Therefore, question of law No.1 is answered against the revenue-appellant and in favour of the assessee-respondent. Question No.2 6. Brief facts of the present case for the purpose of this question, inter alia, are that A.O. has noted that assessee has received NRE gifts from the following persons: - Date Name of Donor Amount 29.6.94 Sh. Amrik Singh 50,000 S/o Waryam Singh R/o Dubai 30.6.94 Sh. Kirpal Singh Kang 2,00,000 S/o Charan Singh R/o Canada 4.7.94 Sh. Kulwaran Singh 50,000 S/o Darshan Singh R/o Mascat 5.7.94 Sh. Nirmal Singh 1,00,000 S/o Lachman Singh R/o USA Total 4,00,000 7. Learned A.O. asked the assessee to furnish the details as regards the relationship with the donors and the occasions on which gifts were received and also prove the genuineness of the transactions. The ITA No.194 of 2002 -4- assessee submitted affidavits of the donors, certificates of bank managers to prove the genuineness but in respect of relationship and the occasion of the gifts, the assessee submitted that none of the provisions under the Act require that there should be an occasion or there should be relationship for gift transaction. The A.O. treated the amount of ` 4,00,000/- as undisclosed income of the assessee under Section 69 of the Act. However, on appeal, learned Tribunal has observed that assessee in the instant case was regular assessee for income tax for over 30 years. He was filing his return of income regularly in all the years except where his income did not exceed the maximum amount to chargeable to tax for the assessment year in question i.e. 1995-96. However, assessee had received the gift through the bank account either through bank drafts or cheques, which were duly deposited in the Oriental Bank of Commerce, which reflect in the balance sheet; the amount, whatever, was received through gifts by the assessee was transferred to the account of the partnership firm and was credited in the capital account of the assessee on two dates i.e. ` 2,50,000/- on 5.7.1994 and ` 1,50,000/- on 28.7.1994; partnership firm and the assessee are assessed by the ACIT Inv. Circle, Patiala, which is apparent from the copy of the assessment order of the partnership firm filed before the Tribunal; books of account for all the years in the block period are seized and are with the department; merely that the assessee has not filed return in respect of one assessment year in which his income did not exceed the maximum amount not liable to income tax, is not sufficient to hold that the assessee has not disclosed the entry of the gifts to the revenue; gift amount was received by the assessee in the bank account and the said ITA No.194 of 2002 -5- amount was transferred to the capital account of the assessee in the partnership firm in which the assessee was a partner and return of the partnership firm was duly filed before the A.O. and A.O. duly accepted the capital account of the partner while making the assessment of firm; gift was duly recorded in the bank account, therefore, gift received by the assessee cannot be said to be undisclosed income. 8. Learned counsel for the revenue has vehemently argued that since assessee has not filed return for the assessment year 1995-96, therefore, A.O. was perfectly well within its jurisdiction to treat ` 4,00,000/- as undisclosed income. 9. In the present case, admittedly respondent-assessee was filing his return and return of the partnership firm, of which he is partner, regularly and learned Assessing Officer has assessed the income of the partnership firm as well as of the assessee and has not doubted any entry therein, therefore, non-filing of the return for the assessment year 1995- 96 on the ground that after allowing the deduction under the Act income remains below the taxable limit cannot be treated as undisclosed income for the block period. 10. We find support from the judgments of Division Bench of Madhya Pradesh High Court in the case of Commissioner of Income- Tax vs. Vimla Khatri, (2007) 288 ITR 168 (MP) as well as in the case of Commissioner of Income-Tax vs. Smt. Maya Chotrani, (2007) 288 ITR 175 (MP), judgment of this Court in the case of M.R. Singhal vs. Assistant commissioner of Income-Tax, (2007) 290 ITR 162 (P&H) and judgment of Bombay High Court in the case of Commissioner of Income-Tax vs. Shamlal Balram Gurbani (2001) 249 ITR 501. ITA No.194 of 2002 -6- 11. This is no more res integra that non-filing of the return on the ground that total income of the assessee remains below the taxable limit after allowing the deduction available under the law cannot be good ground to hold the income as undisclosed income while making the block assessment. 12. In view of the above, question No.2 also stands answered against the revenue and in favour of the assessee. 13. In view of the answer to the substantial questions of law, present appeal is dismissed. (M.M. Kumar) Judge (Alok Singh) Judge April 16, 2012 R.S. "