CIT, FARIDABAD vs. M/S OM PARKASH AND SONS FARIDABAD

ITA/147/2010HC Punjab & HaryanaPHHC01093050201014 February 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL26 pages
AI SummaryRemanded

What were the facts?

The Revenue (Commissioner of Income-Tax, Faridabad) filed two appeals against orders of the Income Tax Appellate Tribunal (ITAT) concerning the assessee, M/s Om Parkash and Sons. ITA No. 147 of 2010 pertained to assessment year 2000-01, and ITA No. 158 of 2010 related to a block period from 1.4.1990 to 3.8.2000. The reassessment proceedings were initiated based on information from a search operation on M/s Friends Portfolio (P) Ltd., which revealed that Manoj Aggarwal, its controller, was involved in providing bogus accommodation entries. The assessee allegedly received a cheque for Rs. 16 lacs in lieu of cash and also showed consideration for the sale of shares of M/s B.S. Holdings & Credit (P) Ltd. through certain brokers. These receipts were claimed as long-term capital gains, with exemptions sought under Sections 54F and 54EA. Additions were made to the declared income.

What did the High Court hold?

The High Court held that the questions raised by the Revenue had to be answered in its favour. The Court found that it was evident from the assessment order of the searched person that the Assessing Officer was satisfied that the assessee had undisclosed income connected to the search material. The Court clarified that while satisfaction must be formed during the assessment of the searched person, the law does not mandate a specific format for recording it. The Revenue's reliance on Commissioner of Income Tax Vs. Pearey Lal and sons (EP) Ltd. was deemed appropriate. Regarding the delay in issuing the notice under Section 158BD, the Court found merit in the Revenue's contention that the delay was due to the complexity and scale of the fraud involving accommodation entries and tax evasion across multiple assesses, making coordination time-consuming. Therefore, the delay was not considered unreasonable or vitiating the assessment. The Court disagreed with the CIT(A) and Tribunal's conclusion that no requisite satisfaction was recorded and that the block assessment proceedings were vitiated. However, by way of abundant caution, the Court remanded the matter to the CIT(A) for a fresh decision in accordance with the law, granting the assessee an opportunity to appear on 25.4.2011. The issue of whether the notice should have been issued more promptly after satisfaction was formed was considered in light of Khandubhai Vasanji Desai and others Vs. DCIT and another (1999) 236 ITR 73, with the Court stating promptness depends on circumstances.

What were the issues?

The Tribunal had to decide the following substantial questions of law raised by the Revenue: 1. Whether the ITAT's findings were perverse and contrary to evidence, given the assessee's alleged failure to discharge the onus of proving the genuineness of share sale transactions. 2. Whether the CIT(A)'s and ITAT's findings were perverse because the assessee failed to furnish evidence of the genuineness of sale transactions, such as market quotations and comparable rates, beyond broker contract notices. 3. Whether the ITAT erred in holding that the notice under Section 158BD was bad in law and the order liable to be annulled, as it was issued after the completion of assessment in the cases of Manoj Aggarwal or M/s Friends Portfolio (P) Ltd., through whom the assessee dealt. Assessee's arguments (as presented by the Revenue's challenge): The Revenue argued that the assessee failed to discharge the onus of proving the genuineness of share sale transactions and did not provide sufficient evidence beyond broker contract notices. Revenue's arguments: The Revenue contended that the ITAT's findings were perverse. For ITA No. 158 of 2010, the Revenue argued that the Assessing Officer had recorded the requisite satisfaction for initiating proceedings under Section 158BD, and that the notice was not bad in law even if issued after the assessment of the searched person, citing the complexity of the fraud. The Revenue relied on Commissioner of Income Tax Vs. Pearey Lal and sons (EP) Ltd. (2009) 308 ITR 438 (P&H).

Which sections of the Income-tax Act were involved?

Section 260A,Section 158BD,Section 54F,Section 54EA,Section 147,Section 148,Section 158BFA(2)

AI-generated summary — verify with the full judgment below

Income-tax Appeal No.147

of 2010

-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.147

of 2010

Date of decision: 14.2.2011 Commissioner of Income-Tax, Faridabad ...Appellant Versus M/s Om Parkash and sons ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Sr. Standing Counsel for the appellant. Mr. S.K.Mukhi, Advocate with Ms. Jyoti, Advocate for the respondent.

**** ADARSH KUMAR GOEL, J (

Oral)

.

1.

This order will dispose of Income Tax Appeals No.147 and 158 of 2010 as both relate to same assessee and questions raised are inter-connected.

2.

ITA No.147 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (for short “the Act”) against the order dated 25.5.2009 of the Income Tax Appellate Tribunal, Delhi Bench 'F', Delhi in I.T.A. No.3550/Del/08 for the assessment year 2000-01 raising following substantial questions of law:- “i) Whether on the facts and in the circumstances of the case, the findings recorded by the ld. ITAT are perverse and contrary to

The order continues below.

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