I.T.A No. 197 of 2003 ::1:: IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A No. 197 of 2003 Date of decision : October 15, 2008 Om Parkash Harbans Lal Sangrur ...... Appellant. through Mr.Pankaj Jain, Advocate v. Commissioner of Income Tax, Patiala ...... Respondent through Ms. Urvashi Dhugga, Advocate CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY TEWARI *** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest ? *** AJAY TEWARI, J This is an appeal filed by the appellant under Section 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 I.T.A No. 197 of 2003 ::2:: 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 I.T.O, Sangrur on 31.3.1986 and, thus, the firm came into existence w.e.f 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 accounts 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 under Section 139(2) of the Act on 12.11.1986 i.e 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 I.T.O 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 I.T.A No. 197 of 2003 ::3:: application before the Settlement Commission on 9.3.1988 averring therein that its books of accounts were destroyed for the period from 1.4.1985 to 31.12.1985. The books of accounts 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 I.T.O, 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 AO issued a notice under Section 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 AO 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 AO, vide letter dated 6.9.1990 to furnish complete names and addresses of the persons, their GIR number and the name of the AO 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 AO made an addition of I.T.A No. 197 of 2003 ::4:: Rs.13,98,533/- and also initiated penalty proceedings. The addition was upheld up to the Tribunal. Subsequently, in penalty proceedings, the AO imposed a penalty of Rs.15 lacs. 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 lacs 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. ( AJAY TEWARI ) JUDGE ( ADARSH KUMAR GOEL ) JUDGE October 15, 2008 'kk'