IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 79 of 2009 (O&M) Date of decision: 4.8.2009 Commissioner of Income-Tax, Faridabad ......Appellant Vs. Mr.Harjit Singh, Prop. M/s Sabarwal International, ...Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT: Mr.Rajesh Katoch, Standing Counsel for revenue. Mr.Rajiv Sharma, Advocate for the assessee. **** ADARSH KUMAR GOEL, J. (Oral) 1. The revenue has preferred this appeal under Section260A of the Income Tax Act, 1961 (for short, “the Act”) against the order dated 23.5.2008 passed by the Income Tax Appellate Tribunal, Delhi Bench 'I' New Delhi in ITA No. 243 /DEL/2005 for the Block Assessment 1.4.1989 to 31.3.1999, proposing to raise the following substantial questions of law: A. “Whether on the facts and in the circumstances of the case Ld. ITAT was right in law in restoring the issue of undisclosed investment of Rs.3,77,041/- based on material seized during search (Document No.A-12 pages 3 and 4) on account of purchase of Maruti Gypsy Car, back to the file of Assessing Officer, whereas the assessee did not produce any details/evidence before the ITA No. 79 of 2009 -2- Ld.CIT(A) or the Assessing Officer despite opportunities allowed by both of them.” B. “Whether on the facts and in the circumstances of the case Ld. ITAT was right in law in upholding the order of Ld. CIT(A) in restricting the addition to Rs.1,30,000/- instead of Rs.7,75,000/- made by the Assessing Officer as undisclosed investment in M/s Sabharwal International based on Partner's statement, in the absence of any evidence to the contrary produced by the assessee.” C.“Whether on the facts and in the circumstances of the case, Ld.ITAT was right in law in restoring the issue of charging interest u/s 158 BFA(1) to the file of Assessing Officer, whereas charging of interest u/s 158 BFA(1) is mandatory in nature.” 2. On the basis of some documents found from search under Section 132(1) of the Act on 12.3.1999, at the premises of Inderjit Singh Sabharwal, relative of the assessee, notice under Section 158 BD was issued. In response, the assessee declared his undisclosed income to be 'Nil'. The Assessing Officer assessed income on the basis of unexplained investment in the purchase of car, unexplained investment in the Firm M/s Sabharwal International and directed that interest be ITA No. 79 of 2009 -3- recovered under Section 158 BFA(1). The CIT(A) upheld the assessment attributable to investment in purchase of car but partly deleted the addition in respect of the investment in M/s Sabharwal International and also upheld levy of interest. The Tribunal remanded the matter to the Assessing Officer in respect of purchase of car and levy of interest but upheld part deletion towards investment in M/s Sabharwal International. Relevant part of the finding recorded by the Tribunal is as under: “ We have considered the rival contentions and found from the record that assessee has got Maruti Zipsy through M/s Som Dutt Financer Ltd., and also paid margin money of 10% . However, due to default in payment on finance instalments, the vehicle was taken back by the financer and, therefore nothing was alleged to be paid subsequently. There is no dispute to the well settled legal proposition that onus lies on the assessee to substantiate the entries found recorded in seized material. In the instant case, claim made with reference to the return of vehicle by the finance company and the fact that only margin money was paid, was on the assessee. If only margin money is paid and the assessee defaults in the very beginning resulting in ITA No. 79 of 2009 -4- taking over of vehicle by the finance company, no amount is required to be paid thereafter, therefore, there is no reason for making any addition by assuming that instalments were paid by the assessee. In the interest of justice and fair play, we restore this ground to the file of the Assessing Officer and the assessee is directed to furnish complete details with regard to the actual payment made towards initial margin and instalemnts and to file confirmation from the finance company with regard to the actual amount paid, thereafter the Assessing Officer is to decide the matter afresh.” xx xx xx xx xx xx xx xx “The CIT(A) in his order quoted exactly the statement of Shri Surjit Singh, wherein he has stated that total capital investment at the commencement of business was around Rs.6 lacs and his contribution to the capital of the firm was around Rs.1 lac. It was also stated that the other partner has also contributed similar amount of Rs.1 lac. ON ITA No. 79 of 2009 -5- the basis of these statements, the CIT(A) has restricted the addition of Rs.6 lascs to the extent of Rs.1 lac, and in respect of furniture etc., in place of addition of Rs.1.75 lacs, a sum of Rs.30,000/- was retained. As the assessee's share of investment in such assets were found to the extent of Rs.30,000/-, the CIT(A) retained total addition to the extent of Rs.1.30 lacs in place of Rs.7.75 lacs. We do not find any reason to interfere in the order of CIT(A) for restricting the addition of Rs.1,30,000/- which is as per material on record.” xx xx xx xx xx xx “ Before levying such penal interest, default on the part of the assessee is required to be established, unless such default if attributable on the part ofd the assessee, the revenue cannot penalize the assess for no default on him. Since this interest is penal in nature, the department cannot be allowed to say that levy of interest under Section 158BFA(1) is automatic. There is no dispute ITA No. 79 of 2009 -6- to the well settled legal proposition that penal provisions of the Act should not be construed in a manner to make them an instrument of operation. They levy of penalty is to be seen in the back drop of the nature and reasons for which penalty is imposed, unless there is any default on the part of the assessee or there is a lack of bona fide the department cannot effectuate4 the penal provisions.” 3. We have heard learned counsel for the parties. 4. We are of the view that the findings recorded by the Tribunal are findings of fact based on appreciation of evidence. Moreover, as regards investment in purchase of car and interest, the matter has only been remanded for giving further opportunity to the assessee, having regard to the circumstances of the case. 5. No substantial question of law arises. 6. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) August 4, 2009 JUDGE raghav Note: Whether this case is to be referred to the Reporter? ........Yes/No ITA No. 79 of 2009 -7-