THE COMMR. OF I. TAX PATIALA vs. PREM CHAND

The revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 27.1.2006 passed by the Income Tax Appellate Tribunal, Chandigarh, Bench 'B', in ITA No.12/Chandi/2004, for the assessment year 1997-98, claiming following substantial question of law:- “Whether in the facts and circumstances of the case, the ITAT was right in law in deleting the addition of ` 6,09,247/- by simply relying on the affidavit of the assessee without appreciating the facts that the assessee had not established that the income assessed in assessment years 1985-86 and 1986-87 was available either in the form of cash or in the form of any asset in the year 1996?”

The appeal was admitted on 31.10.2006 for determination of aforesaid substantial question of law.

The Assessing officer made an addition of ` 6,09,247/- holding that the amount which was surrendered by the assessee relating to the assessment years 1985-86 and 1986-87 was not available with him during the current year and as such was undisclosed income of the assessee. However, on appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition holding that the amount which was surrendered in the assessment years 1985-86 and 1986-87 was available with the assessee in the current year. On a further appeal by the revenue, while upholding that the said amount which was not disclosed was not utilised for meeting the expenses or for acquisition of any asset, it was held by the Tribunal that the same could not be added in the income of the assessee. However, since there was deficiency of ` 53,887/- which had not been satisfactorily explained by the assessee, the addition to that extent was upheld by the Tribunal. Not satisfied with the order, the revenue has filed the present appeal.

Learned counsel for the revenue submitted that the CIT (A) as well as the Tribunal had erred in deleting the aforesaid addition of ` 6,09,247/- as the onus was upon the assessee to discharge that the amount which was surrendered by him in the assessment years 1985-86 and 1986-87 was available in the current year. In the absence of satisfactory proof, the Assessing Officer had rightly made the addition.

After hearing learned counsel for the revenue and perusing the record, we do not find any merit in the appeal.

The CIT(A) while deleting the addition has observed that the amount which was surrendered by the assessee in the assessment years 1985-86 and 1986-87 was available and infact the assessee who was an individual was not required to maintain any books of account and in such a situation, it could not be said that the aforesaid amount was undisclosed income. The Tribunal while upholding the aforesaid findings in para 7 had recorded as under:- “7. We have given our careful consideration to the rival contentions. In this case, the assessee was not maintaining any books of account. The only source of income of the assessee in the year under appeal was salary and income from house property. No balance sheet was drawn by the assessee. When the assessee was asked to explain the deficiency of source of expenses to the tune of ` 53,887/- the benefits of opening capital to the tune of `6,63,134/- had been claimed. The assessee had paid tax of ` 2,73. 769/- out of the income of ` 6,21,516/- and ` 3,28,717/- assessed for assessment years 1985-86 and 1986-87. The balance of `6,63,134/-was claimed to be available with the assessee to meet the deficiency of ` 53,887/-. The Revenue had not accepted the availability of cash with the assessee after the gap of 10 to 11 years. In our considered view, since the assessee had not established that the income assessed in assessment years 1985-86 and 1986-87 was available either in the form of cash or in the form of any asset in the year 1996 after the gap of more than ten years, the assessee was not entitled to the benefit of income assessed ten years earlier. So however, the claim of opening capital is not on account of any asset found to be available with the assessee at the end of the previous year except the deficiency of ` 53,887/-. In the light of the affidavit of the assessee that balance capital of ` 6,09,247/- has not at all been utilized in any of the subsequent years for meeting the expenses or for acquisition of any asset, we are of the considered view that addition of ` 6,09,247/- has rightly been deleted by the Commissioner of Income tax (Appeals). In the case neither any books of account are maintained nor has any balance sheet been drawn. There is nothing on record to suggest that the assessee has taken benefits of the opening balance, shown only to cover the deficiency, in acquisition of any assets or expenditure in subsequent years. Therefore, addition on account of opening capital sought to be introduced is not justified. However, since the deficiency of `53,887/- had not been satisfactorily explained, the addition to that extent would be justified in the year under appeal. We accordingly restore the addition of ` 53,887/- only.”

The Tribunal while adjudicating the appeal filed by the revenue has recorded that the assessee was not maintaining any books of account as the only source of his income was salary and income from house property. Further, the assessee had not acquired any asset from that amount or had used it to meet his expenses. The Tribunal, however, upheld the addition to the extent of ` 53,887/- on account of excess of expenditure over the income in the year under appeal to be justified as there was no plausible explanation furnished by the assessee for the same. The said findings have not been shown to be perverse or erroneous in any manner.

In view of the above, the substantial question of law claimed in this appeal is answered against the revenue. Accordingly,