C I T vs. SUDARSHAN GUPTA

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:20.5.2008 ITA No.487 of 2007 Commissioner of Income tax, ......Appellant Ludhiana-II Versus Smt. Sudarshan Gupta through L/H Smt. Kanika Gupta Prop. M/s Jatindra Engg. Works.,82-R, Indl. Area 'B' Ludhiana

......Respondent Commissioner of Income tax, ......Appellant Ludhiana-II Versus Sh. Tilak Raj C/o Pankaj Sales Cor., Public Market, Overlock Road, Ludhiana

......Respondent CORAM:- HON'BLE MR.JUSTICE RAJIVE BHALLA HON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present: Mr. Rajesh Sethi, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . These appeals have been filed by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the order dated 2.3.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench-B, Chandigarh passed in ITA No.707/Chandi/2006 and ITA No.706/Chandi/2006. Since the issues involved in these appeals are inter-related and arises from the common order of the Tribunal, both these appeals are being disposed of by this common judgement. For the sake of convenience facts are being extracted from ITA No.487 of 2007. The assessee is an individual and engaged in the business of trading of iron and steel in the name of M/s Pankaj Sales Corporation. The assessee had filed the return declaring an income of Rs.1,28,285/-. The said return was processed under Section 143(1)(a) of the Act, 1961. Subsequently, the Assessing Officer received an information from DDIT (Inv.), Ludhiana that the assessee had indulged in fictitious sale of goods to M/s Goyal Industries and received cheques aggregating to Rs.7,65,000/- against payment of cash. The Assessing Officer after getting the approval of the Commissioner of Income Tax-II, Ludhiana reopened the assessment by issuing notice under Section 148 of the Act on 30.3.2005 which was served upon the assessee on the same date. During the course of reassessment proceedings, the assessee was confronted with the statements of Shri Jatinder Kumar, Prop. M/s Goyal Industries made before the DDIT (Inv.), Ludhiana on 22.11.1999 and on 31.1.2000 under Section 131(1)(A) of the Act on the basis of which the Assessing Officer had formed an opinion that the assessee had paid cash aggregating to Rs.7,65,000/- to Shri Jatinder Kumar, Prop. M/s Goyal Industries to get the cheques of equal amount. Addition of Rs.7,65,000/- was thus made to the returned income of Rs.1,28,285/- as cash paid out of undisclosed sources.

The appeal filed by the assessee against the order of the Assessing Officer was dismissed by the Commissioner of Income Tax (Appeals) [for short 'CIT(A)']. Being not satisfied with the findings of the CIT(A), the assessee preferred an appeal before the Income Tax Appellate Tribunal, who vide order dated 2.3.2007 passed in ITA No.707/Chandi/2006 while deleting the addition of Rs.14,95,000/- made by the Assessing Officer, observed as under:

“The only issue that survives for our consideration is as to whether at least the addition of Rs.10 lacs offered by the assessee for taxation to buy peace of mind is required to be sustained out of the addition of Rs.14,95,000/-. Considering the totality of the facts and circumstances of the case and, in particular, the terms of surrender, we are of the considered view that no addition is justified on the basis of surrender made by deceased assessee's son. In this case, the nature of transactions was not known to the legal heirs of the deceased assessee. They had denied any wrong doing vis-a-vis their transactions with M/s Goyal Industries. So, however, sum of Rs.10 lacs was offered for taxation by Shri Sanjay Gupta son of the assessee to purchase peace of mind. If the Department had accepted the surrender made by the assessee and allowed peace of mind to the assessee on the basis of the decision of Punjab & Haryana High Court in the case of Banta Singh Kartar Singh v. CIT, Patiala 125 ITR 239 (P&H), the addition of Rs.10 lacs would be sustainable. So, however, when the Department does not allow the assessee to buy peace of mind, why should assessee be bound by the offer to pay tax. The offer has got to be accepted in toto or it has got to be ignored. In our view it is not enough material to sustain the addition. The surrender also did not prevent the Assessing Officer from any further enquiry. The addition had been made in the case of Shri Tilak Raj Aggarwal also on the basis of same material. Therefore, no prejudice has been caused to the Revenue by surrender of Rs.10 lacs made by Shri Sanjay Gupta, son of the assessee during the course of assessment proceedings. In the statement of facts filed before the Commissioner of Income Tax (A) the assessee claimed that the surrender of Rs.10 lacs was obtained from Shri Sanjay Gupta by coercion. Since the Assessing Officer did not allow peace of mind to the surrender so made by the son of the deceased assessee due to lack of knowledge, the addition of Rs.10 lacs is also not justified in this case. We accordingly delete entire addition of Rs.14,95,000/- and allow the appeal of the assessee. The decision of Punjab & Haryana High Court in the case of Banta Singh Kartar Singh v. CIT, Patiala (supra) is distinguishable on facts. In that case, penalty had been imposed as agreed by the assessee. The Hon'ble Punjab and Haryana High Court held that an order based on the agreement cannot give rise to grievance and the same cannot be agitated in an appeal. In the present case, the addition of Rs.14,95,000/- is based upon the statement of Shri Jatinder Kumar Prop. of M/s Goyal Industries. The terms of surrender were not accepted by the Assessing Officer in regard to offer of Rs.10 lacs for taxation. The assessee was not allowed to buy peace or escape from litigation. The addition of Rs.14,95,000/- is thus deleted.” Aggrieved against the said order of the Tribunal, the revenue has filed the present appeal challenging the said decision of the Tribunal and has sought to raise the following substantial question of law:- “Whether on the facts and in law, the ITAT was legally justified in deleting the addition of Rs.14,95,000/- made on account of fictitious sale bills in favour of M/s Goyal Industries Ludhiana?” Mr. Rajesh Sethi, learned counsel for the revenue has vehemently argued that the Tribunal was not justified in deleting the addition of Rs.14,95,000/- made by the Assessing Officer on the ground that no such addition was made by the Assessing Officer in the case of Sh. Jatinder Kumar Prop. M/s Jatindra Udyog and Sh. Rajinder Gupta of Ludhiana as their cases were reopened on the same basis. According to the learned counsel for the revenue, the Assessing Officer is not bound to follow the order of the other Assessing Officer and deletion on this count is not justified.

We have heard Mr. Rajesh Sethi, learned counsel for the revenue and find no force in the arguments raised by him. The Tribunal after considering the totality of the facts and circumstances of the case has given a finding that addition on the basis of surrender made by deceased-assessee's son is not justified. It has also been found by the Tribunal that there is not enough material on the record to sustain the addition. In the case in hand, the addition has been made on the basis of Sh. Jatinder Kumar Prop. M/s Jatindra Udyog Industires whereby the terms of surrender were not accepted by the Assessing Officer and, therefore, in view of the decision of this Court, in the case of Banta Singh Kartar Singh (supra) the addition on the basis of said statement is not sustainable. If the Department does not allow the assessee to buy peace of mind, why should the assessee be bound by the offer to pay tax. The statement of surrender has got to be accepted in toto or it has got to be ignored. Thus, we find no error or infirmity in the order of the Tribunal. No question of law arises for the determination of this Court from the order of the Tribunal Thus, both the appeals being devoid of merit are dismissed. (RAKESH KUMAR GARG) JUDGE May 20, 2008

(RAJIVE BHALLA) ps

JUDGE IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:20.5.2008 Commissioner of Income tax, ......Appellant Ludhiana-II Versus Sh. Tilak Raj C/o Pankaj Sales Cor., Public Market, Overlock Road, Ludhiana

......Respondent CORAM:- HON'BLE MR.JUSTICE RAJIVE BHALLA HON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present: Mr. Rajesh Sethi, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . For orders, see ITA No.487 of 2007. (RAKESH KUMAR GARG) JUDGE May 20, 2008

(RAJIVE BHALLA) ps

JUDGE