Om Parkash Harbans Lal vs Commissioner of Income Tax

Ajay Tewari, J.—This is an appeal filed by the appellant u/s 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal dated 29-9-2002 for the assessment year 1986-87, proposing the following substantial questions of law:

(1) Whether on the facts and circumstances of the case, the learned Tribunal is right in law and on fact in sustaining the levy of penalty on Rs. 6,50,433 against the deletion on total amount of Rs. 3,98,433?

(2) Whether on the facts and circumstances of the case, the Tribunal was justified in sustaining the levy of penalty by applying and on true interpretation of the provisions of Section 68?

(3) Whether on the facts and circumstances of the case, in case the provisions of Section 68 are held to be applicable to the present case whether the income accrues and arises in the year under assessment to be called its concealed income?

The assessee was a partnership firm. It executed a partnership deed on 21-3-1986 made effective from 1-4-1985 which was filed with the ITO, Sangrur on 31-3-1986 and, thus, the firm came into existence with effect from 1-4-1985. It had also paid advance tax by way of two instalments of Rs. 366 each on 12-9-1985 and 15-3-1986. The firm was engaged in the business of purchase and sale of liquor. On 16-5-1986 the officials of Income Tax Department carried out search and seizure action u/s 132(1) of the Income Tax Act, 1961 (for short "the Act"). During search certain books of account and several documents were found and seized, scrutiny whereof revealed earning of substantial income from liquor contracts. The assessee had not filed return of income for the assessment year 1986-87. The Assessing Officer issued a notice u/s 139(2) of the Act on 12-11-1986 ie., after the search. In response, the assessee filed return on 7-3-1988 showing ''nil'' income with a note that no such firm existed during the said assessment year. The proceedings were filed by the ITO on 29-3-1988.

The association of persons (AOP) filed return of income on 23-2-1988 declaring total income of Rs. 15,63,163. The AOP also filed an application before the Settlement Commission on 9-3-1988 averring therein that its books of account were destroyed for the period from 1-4-1985 to 31-12-1985. The books of account for the period from 1-1-1986 to 1-3-1986 were available and the return of income was prepared and filed in the office of the ITO, CC, Patiala on 23-2-1988. The said application was rejected by the Settlement Commission on 17-7-1990 on the ground that no AOP comprising of 11 persons was in existence during the assessment year 1986-87. Even if such AOP existed, the ITO, CC, Patiala with whom the return was allegedly filed did not exercise any jurisdiction and, therefore, no proceedings in the case of AOP were pending with the ITO, CC, Patiala. It was held that the income disclosed of Rs. 15,63,163 in the return was on the basis of seized documents and, therefore, no complexity of investigation was involved in this case. On the same date i.e., 17-7-1990, the Assessing Officer issued a notice u/s 148 of the Act to the firm calling upon the assessee to file return. The assessee filed return of income on 3-9-1990 declaring total income of Rs. 17,63,163. Thereafter, the Assessing Officer took up assessment proceedings.

The seized documents included balance sheets for various months. Apart from the profit earned and shown in the balance sheets, the same also indicated cash credits aggregating to Rs. 13,98,000 in the names of 11 persons.

The assessee was called upon by the Assessing Officer, vide letter dated 6-9-1990 to furnish complete names and addresses of the persons, their GIR number and the name of the Assessing Officer where they were being assessed to tax etc., to prove the source and genuineness of these credits. No information to this effect was furnished. Ultimately, the Assessing Officer made an addition of Rs. 13,98,533 and also initiated penalty proceedings. The addition was upheld up to the Tribunal. Subsequently, in penalty proceedings, the Assessing Officer imposed a penalty of Rs. 15 lakhs. In appeal, the Commissioner of Income Tax set aside the penalty order. Aggrieved therefrom the matter was carried up by the revenue to the Tribunal, which held that the assessee did not discharge primary onus of furnishing addresses of those persons in whose names unexplained credit was found. It, however, held that an amount of Rs. 5,48,100 appeared in the balance sheet prior to 31-3-1985. It also held that a credit of Rs. 2 lakhs claimed by the assessee being income surrendered could not be treated as concealed income. In these circumstances, the Tribunal limited the penalty amount to Rs. 6,50,433.

We find no infirmity in the order of the Tribunal which is primarily based on appreciation of facts and hold that the questions proposed do not arise.

The appeal is dismissed.