MONICA THAPAR vs. COMMISSIONER OF INCOME TAX

This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.9.2013, Annexure A.5 passed by the Income Tax Appellate Tribunal, Chandigarh (in short, “the Tribunal”) in ITA No.58/CHD/2007 for the assessment year 1998-99, claiming following substantial questions of law:- “A. Whether the finding of the ITAT in reversing the judgment of learned CIT(A) and making the impugned addition by invoking the provisions of Section 69A of the Income Tax Act, 1961 in 1998-99 is misconceived in view of the bills of purchase of jewellery pertaining to assessment year 1987-88? B. Whether under the facts and in the circumstances of the case and in view of legal provisions, the ITAT was justified in confirming addition for assessment year 1998-99 on account of GURBAX SINGH 2014.10.13 11:11 integrity of this document High Court Chandigarh jewellery purchased and declared for assessment year 1987-88 under VDIS Scheme? C. Whether under the facts and in circumstances of the case and in view of legal provisions, the ITAT was justified in going into the source of acquisition of jewellery for assessment year 1987-88 where no proceedings were pending for the said year and thereby making addition in assessment year 1998-99? D. That without prejudice to above, the appellant disputes the findings of ITAT on the above said issues/grounds being perverse.”

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant is engaged in business at Ludhiana. She purchased jewellery worth ` 10,19,809/- during the year 1986-87. However, the same remained as unaccounted asset of the appellant till 1997 when the Central Government launched Voluntary Disclosure of income Scheme 1997 (VDIS). The appellant declared ` 10,19,809/- under VDIS on 30.12.1997 stating before the Commissioner of Income Tax, Ludhaina that the jewellery was acquired in the year 1986-87. The appellant filed declaration to that extent alongwith affidavit and valuation report as on 1.4.1987 from the approved jewellery valuer M/s New Kailash Jewellery House, New Delhi. Due to unforeseen circumstances, payment of due taxes by 31.12.1997 was not made at the time of declaration under VDIS. Later on, the appellant offered to pay due taxes by way of cheque vide letter dated 28.3.1998 which was filed before the income tax authorities on 16.4.1998 stating that she could not pay the taxes by 31.12.1997 due to financial difficulty and further requested the department to encash the cheque which was not accepted by the department. GURBAX SINGH 2014.10.13 11:11 integrity of this document High Court Chandigarh As period allowed under Section 67(1) of the VDIS had expired, the declaration by the assessee was not accepted and the cheque was returned back to her. The appellant filed return of income declaring income at ` 28,956/- for assessment year 1998-99 and notice under Section 148 of the Act was issued to the appellant on 31.3.2005 for the assessment year 1998- 99 on the ground that she had made declaration under VDIS 1997 but had not made payment of taxes due on declared amount and hence income of ` 10,19,809/- being the amount of jewellery declared therein escaped assessment. The Assessing Officer vide order dated 28.3.2006, Anenxure A.1 made addition of ` 21,47,176/- valuing the jewellery declared in the year 1986-87 at ` 10,19,809/- as per approved valuer report as on 31.3.1997 by adopting its value as on 31.3.1998 relevant to the assessment year 1998-

Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 25.9.2006, Annexure A.2, the CIT(A) partly allowed the appeal. Aggrieved by the order, the revenue filed appeal before the Tribunal and the appellant filed cross objections. The Tribunal vide order dated 18.1.2008, Annexure A.3, dismissed the appeal of the revenue and allowed the cross objections filed by the assessee. Aggrieved by the order dated 18.1.2008, the revenue filed appeal before this Court under Section 260A of the Act. During the pendency of the aforesaid proceedings/appeal, this Court passed judgment that the issuance of notice under sections 147/148 of the Act for the assessment year 1998-99 was valid but remanded the second issue for redetermining the same on merits to the Tribunal vide order dated GURBAX SINGH 2014.10.13 11:11 integrity of this document High Court Chandigarh 14.12.2010, Annexure A.

While deciding the appeal against the order dated 18.1.2008, this Court following the judgment in Prem Pal's case (supra) upheld the issuance of notice under Sections 147/148 of the Act and remanded the second issue for reconsideration. Against the order dated 14.12.2010, SLP has been filed before the Apex Court wherein notice has been issued and the matter is stated to be pending for hearing. On the other hand, the matter was under consideration before the Tribunal wherein the impugned order dated 24.9.2013, Annexure A.5 was passed. Hence the instant appeal by the assessee.

We have heard learned counsel for the appellant and perused the record.

The Tribunal while allowing the appeal of the revenue recorded as under:- “20. The learned AR for the assessee, time and again has pointed out that the said jewellery which was declared to be purchased in the financial year 1986-87 cannot be included as income from undisclosed sources in the hands of the assessee in assessment year 1998-99. In the abovesaid facts and circumstances of the case, where the assessee has failed to offer an explanation about the nature and source of acquisition of the said items of jewellery in financial year 1986-87, statutory presumption provided under section 69A of the Act comes into play and the value of the said jewellery is deemed to be income of the assessee for the said financial year 1997-

The said issue stands settled by the Hon'ble Punjab and Hon'ble High Court has held that the Assessing officer was justified in initiating the proceedings for reassessment under section 148 of the Act and holding that the valuables found were liable to be added to the income of the assessee for the assessment year 1998-99 in the absence of valid explanation. GURBAX SINGH 2014.10.13 11:11 integrity of this document High Court Chandigarh As pointed out herein above, the assessee in the present case has failed to justifiably explain the source of investment in the said items of jewellery in financial year 1986-87 and in respect of one item of jewellery, no bill of acquisition had been filed and consequently, the market value of jewellery as on 31.3.1998 i.e. the year in which the assessee was found to be in possession of the said items of jewellery amounting to ` 21,47,176/- is to be added as income of the assessee under section 69A of the Act. Reversing the order of CIT(Appeals) we allow the ground No.2 raised by the revenue.”

The Tribunal had categorically recorded that since the assessee failed to explain the nature and source of acquisition of the items of jewellery in the financial year 1986-87, presumption under section 69A of the Act came into play and the value of the said jewellery was deemed to be income of the assessee for the assessment year 1998-99 in which the assessee was found to be in possession of the said items of jewellery. No illegality or perversity could be demonstrated in the said finding which may warrant interference by this Court. Accordingly, no substantial question of law arises. The appeal being devoid of any merit, stands dismissed. (Ajay Kumar Mittal) Judge September 15, 2014 (Fateh Deep Singh) 'gs' Judge GURBAX SINGH 2014.10.13 11:11 integrity of this document High Court Chandigarh