Income Tax Appeal No. 870 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 870 of 2008 Date of decision: 29.3.2011 The Commissioner of Income-tax Panchkula --- Appellant Versus Ajay Aggarwal --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Yogesh Putney, Senior Standing Counsel for the appellant-Revenue. None for the respondent-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 15.4.2008, passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No. 173/CHANDI/2006, relating to the assessment year 1999-2000. 2. The following substantial questions of law have been claimed for determination of this Court: “(i) Whether on the facts and in the circumstances of the case, Hon’ble ITAT has erred in holding that the provisions of Section 69 are not attracted in this case? Income Tax Appeal No. 870 of 2008 2 (ii) Whether the averment made in an FIR lodged with the Police can be regarded as a tangible and relevant evidence for holding for the purposes of Section 69 that the assessee made the investment/advanced the amount when the assessee had failed to show that the averment made in the FIR was wrong or erroneous.? 3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the assessee lodged an FIR dated 29.4.1999 for an offence punishable under Section 420 of the Indian Penal Code at Police Station, Baldev Nagar, Ambala City wherein he claimed to have paid a sum of Rs. 33,00,000/- to one Parmod Khosla for investment in agricultural land in August, 1998. This fact having come to the knowledge of the Income Tax Department, a notice under Section 148 of the Act was served on the assessee and in response thereto, the assessee filed the return of his income on 23.4.2004, showing business income of Rs. 35,200/-. Notices under Sections 143(2) and 142(1) of the Act were also issued to the assessee. An enquiry was made wherein the assessee failed to furnish any evidence with regard to source of payment of such huge amount and denied having paid the said amount by taking the plea that the said fact in the FIR had been mentioned by mistake. Consequently, the assessee was asked to show cause why the aforesaid amount of Rs. 33,00,000/- be not added to his income under Section 69 of the Act. Further enquiry into the matter leading to the same conclusion i.e. the assessee had failed to explain the source of payment of the amount of Rs.33,00,000/-, the assessing officer made addition of the said amount to the income of the assessee, vide order dated 30.3.2005. Income Tax Appeal No. 870 of 2008 3 4. The Commissioner of Income-tax (Appeals) {in short “the CIT (A)”} allowed the appeal by order dated 27.12.2005. The CIT(A) deleted the addition made by the assessing officer by observing that the very basis for addition was derived from the allegations made in the FIR that was got registered by the assessee, and once on investigation of the matter, the facts mentioned in the FIR were not substantiated, the addition so made was unjustified. 5. The Tribunal dismissed the appeal carried by the Revenue vide the order under appeal and this is how the present appeal has been filed. 6. No one chose to put in appearance on behalf of the respondent- assessee despite service. 7. The point that arises for determination in this appeal is, whether the amount of Rs. 33,00,000/- in respect of which the assessee had lodged an F.I.R. with the averments that he had paid that amount to one Parmod Khosla son of H.R. Khosla, resident of House No. 148, Sector 7, Ambala City, could be treated as income of the assessee under Section 69 of the Act. 8. We have heard learned counsel for the appellant-Revenue and have perused the record. 9. The assessee had lodged FIR on 29.4.1999 for the offence punishable under Section 420 of the Indian Penal Code wherein it was specifically claimed by him that he had paid Rs. 33,00,000/- to Parmod Khosla for investment in agricultural land which was taken on lease from the Punjab Wakf Board. There was an averment of factual aspect in the F.I.R. which was in the nature of an admission on behalf of the assessee. The onus was on the assessee to show that the amount of Rs.33,00,000/- Income Tax Appeal No. 870 of 2008 4 as had been claimed to have been paid to Parmod Khosla, was accounted for. 10. It would be advantageous to refer to the discussion made by the Tribunal while upholding the order of the CIT(A) deleting the addition, which is as under: “We have given our careful consideration to rival contentions. The addition of Rs. 33,00,000/- was made by the Assessing Officer by invoking his powers u/s 69 of the Act. Section 69 is attracted where the assessee is found to have made investment which is not recorded in the books of account and the assessee offers no explanation or the explanation is not satisfactory. Therefore, the section gets attracted only when the assessee is established to have made undisclosed investment. In this case the assessee had filed an FIR claiming that a sum of Rs. 33 lacs had been paid to one Shri Parmod Khosla. However, this FIR could not be supported by any evidence. Therefore, no action could be taken by the police. Subsequently, even the court has closed the proceedings against Shri Parmod Khosla. There is no other evidence to suggest that the FIR filed by the assessee was true and correct. In the light of evidence on record to suggest that the FIR was not based on facts much less by any evidence, provisions of Section 69 are not attracted. The CIT (A) was, therefore, in our view justified in deleting the addition of Rs.33,00,000/-“ Income Tax Appeal No. 870 of 2008 5 11. A perusal of the observations of the Tribunal reproduced above shows that the Tribunal had adverted to the issue solely on the ground that an FIR which had been lodged by the assessee claiming that a sum of Rs. 33 lacs had been paid to aforesaid Parmod Khosla therein, the said issue had been decided in favour of Parmod Khosla, and, therefore, no addition under Section 69 of the Act could be made as the same was not attracted. The Tribunal had proceeded on the basis that the onus was on the Revenue to prove the truth or the correctness of the F.I.R. The decision in Parmod Khosla’s criminal case is a piece of evidence which is not conclusive and it shall be upon the assessee to offer any plausible explanation either explaining the circumstances for disowning the contents of the F.I.R. or to substantiate that the amount allegedly paid was his accounted for money in the books of account, otherwise he would be liable for all repercussions flowing from such admission. In the absence of any satisfactory and plausible explanation from the assessee, it could not be held that the said amount was not on account of unexplained investment under Section 69 of the Act. Thus, the CIT(A) and the Tribunal have not appreciated the issue in the right perspective. 12. In view of the above, the substantial questions of law are answered in favour of the Revenue. The orders of the CIT(A) and the Tribunal are set aside and the matter is remanded to the CIT(A) to consider the issue afresh in accordance with law. 13. The appeal stands disposed of. (AJAY KUMAR MITTAL) JUDGE Income Tax Appeal No. 870 of 2008 6 (ADARSH KUMAR GOEL) March 29, 2011 JUDGE *rkmalik*