POONAM JINDAL vs. C I T

IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH Date of Decision: 10.04.2013 ITA No.331 of 2007 Poonam Jindal

....Petitioner Versus CIT, Chandigarh

...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA

HON’BLE MS. JUSTICE RITU BAHRI Present: Mr. Pankaj Jain, Advocate, for the petitioner.

Ms. Savita Saxena, Advocate, for the respondent. HEMANT GUPTA, J.

The brief facts are that a search was carried on the business and residential premises of the assessee on 20.11.1997. The fixed deposit receipts and share certificates were found and seized. The Assessing Officer finalized block assessment for the period from 01.04.1987 to 20.11.1997. Prior to such assessment, the assessee has filed a return for the Assessment year 1994-95 declaring income of Rs.28,250/-. In the block assessment pertaining to Assessment Year 1994-95, the Assessing Officer made addition of Rs.1,50,000/- whereas for the assessment years 1990-91 and 1991-92, the undisclosed income was found to be Rs.26,750/- and Rs.61,000/- respectively. The entire undisclosed income in the assessment years 1990-91 and 1991-92 were taxed at higher rate, whereas exemption was allowed in respect of return filed for the assessment year 1994-95. It is the said order, which has been affirmed by the Tribunal in appeal on 03.04.2000 out of which the present appeal under Section 260A of the Income Tax Act, 1961 arises. Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh

ITA No.331 of 2007

The following substantial question of law arises for consideration in the present appeal: “Whether in the facts and circumstances of the case, the Tribunal is justified in law in finding that tax is to be charged on the total undisclosed income in cases pertaining to block assessment even if the amount of the undisclosed income is below the taxable limit for which no return under Section 139(1) was required to be filed?”

The said question of law has been answered against the assessee in ITA No.94 of 2000 titled “Satpal Singh Vs. ACIT INV Circle, Patiala” vide separate order passed today. It has been held that: “The ‘undisclosed income’ as defined in Section 158B(b) is inclusive definition and includes the income which has not been or would not have been disclosed for the purposes of this Act. Therefore, the disclosure of income prior to search is a relevant factor to arrive at the quantum of undisclosed income. Section 158BA(1), gives overriding jurisdiction to the Assessing Officer to assess the undisclosed income in accordance with Chapter XIVB. The assessment under Chapter XIVB is an addition to the regular assessment in respect of each previous year and the income assessed is not be included in the regular assessment of any previous year including in the block period. Sub-section (3) of Section 158BA enjoins an obligation to the assessee to prove to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, such income shall not be included in the block period. In other words, on satisfaction of the Assessing Officer from the books of accounts or other documents maintained in the normal course, the income recorded therein can be excluded from the income in the block period. The assessee is, thus, not entitled to basic exemption irrespective of the entries in the books of accounts or the documents, as a matter of course, but the assessee has to satisfy the Assessing Officer of generation of income from the books of accounts or other documents so as to seek exclusion from the “undisclosed income”. It is Section 158BB, which contemplates that undisclosed income shall be aggregate of the total income on the basis of evidence found as a result of Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh

ITA No.331 of 2007

search or requisition of books of account or other documents. It is only on the satisfaction of the Assessing Officer on the basis of books of accounts and documents, certain part of undisclosed income can be excluded from the block assessment. Chapter XIVB is a special provision to frame assessment consequent to search and seizure operations carried out by the Revenue. Section 158BA confers recording of satisfaction of the Assessing Officer to exclude any income from the block assessment on the basis of books of accounts and other documents maintained in the normal course. None of the provisions of Chapter XIVB contemplates that an assessee shall be entitled to exemption even if he has not maintained any books of accounts or produced documents to satisfy the Assessing Officer that the income generated is not part of undisclosed income.”

In view of the said finding, the entire undisclosed income in the assessment years 1990-91 and 1991-92 has been rightly brought to tax. The assessee has declared the income of Rs.28,250/- in his return for the assessment year 1994-95, which amount has been rightly taken into consideration while making addition in the aforesaid year.

However, an additional argument has been raised by the learned counsel for the appellant that addition made in the assessment year 1994-95 is liable to be set aside as in penalty proceedings, a finding has been affirmed by the Tribunal that the assessee has explained the source of loan before the Assessing Officer. Therefore, it is argued that the additions made by the Assessing Officer and affirmed by the Tribunal in the quantum proceedings are not sustainable.

We do not find any merit in the said argument. The penalty proceedings are consequent to quantum proceedings. The finalization of the quantum proceedings gave rise to penalty proceedings, so as to impose penalty on satisfaction of the conditions of imposition. The findings in the penalty proceedings in respect of non-satisfaction of intention to evade tax cannot Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh

ITA No.331 of 2007

regulate or control the quantum proceedings. In the quantum proceedings, the Assessing Officer has returned a finding of fact and such finding has been affirmed by the Tribunal that the assessee has failed to explain cash credit of Rs.1,50,000/-. It is a question of fact; whether the cash credit entry is genuine or not in assessment proceedings. The Authorities under the Act have taken a view that cash credit entries are not genuine. Therefore, such finding will not give rise to any substantial question of law.

Consequently, we do not find any merit in the present appeal. The same is dismissed.

(HEMANT GUPTA)

JUDGE

10.04.2013

(RITU BAHRI)

Vimal

JUDGE

Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh