The Commissioner of Income Tax-IV vs. M/s.Mahaveer Enterprises [I] Ltd

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 165 / 2008 Late Sh Shiv Shankar Khandelwal through his legal heir Smt. Usha Rani W/o Late Shri Shiv Shankar Khandelwal R/o Kumher, Bharatpur, Rajasthan. ----Appellant Versus 1. The Commissioner of Income Tax (Appeals)- III Jaipur. 2. Assistant Commissioner of Income Tax, Circle Alwar, Bharatpur.

----Respondents

_____________________________________________________ For Appellant(s) : Mr. P.K. Kasliwal For Respondent(s) : Mr. Parinitoo Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment Per Hon’ble Jhaveri, J. 26/04/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee and dismissed the appeal of the department. 2. This Court while admitting the appeal on 20.10.2008 has framed the following substantial questions of law: “(i) Whether, under the facts and circumstances of the case, the Tribunal has rightly sustained the basis adopted by the lower authorities to calculate the undisclosed income as provided u/s 158BB

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of the Income Tax Act, 1961 for the Block Period as provided Under Chapter XIV of the Act and was further justified in not allowing credit of basic exemption limit of Rs.2,89,000/- while calculating the undisclosed income on the ground that no evidence of income and regular returns were filed for the Block Period Year wise, such conclusion is legally sustainable? (ii) Whether, the Tribunal was justified in restricting the claim of assets as on 31.03.1986 at Rs.2,50,000/- as against Rs.4,50,000/- as confirmed by the CIT(A) on the basis that no evidence was filed by the assessee irrespective of the fact that the assessee filed all the evidence in the shape of Assessment Order, computation of income, registration certificate and statement of affairs, such conclusion can be said to be complete and sustainable in the eyes of law?” 3. Counsel for the appellant has contended that the first issue is squarely covered by the decision of this Court in the case of Chain Sukh Rathi vs. Commissioner of Income Tax & Anr. [2004] 270 ITR 368 and on second issue counsel for the appellant has taken us to the order of the CIT(A) more particularly para 13 and para 16 of the order of the Tribunal which reads as under: “13. The next ground of the appellant relates to not allowing the deduction of net assets as on 31-03-1986 at Rs. 4,50,000/-. The Assessing Officer did not allow the credit of the same for the reason that no details in this regard were filed by the assessee. The ld. AR of the appellant argued that the assessee has claimed opening capital of Rs. 4,50,000/- on estimated basis by considering the following:

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Particulars Amount Capital balance in Prop. Firm M/s Shiv Shankar Industries, Kumher in the A.Y. 78-89 In support of which copy of assessment order U/s 143(3) is placed in the paper book. 2,60,000 Share received after withdrawl of partnership from M/s Murarilal Kapoor Chand from A.Y. 81-82 and invested in prop. Firm M/s Shiv Shankar Industries (Approx) 1,50,000/- Saving and accumulation from business & capital withdrawn from prop. Firm M/s Khandelwal khad bhandar closed in FY. 83-84 and invested in this firm 40,000 4,50,000

He further argued that though the legal heir of the assesswee has no direct evidence about the above capital at the beginning of the block period but the circumstantial evidence suggests that he was engaged in different activities from which claim of opening capital is reasonable. It is further supported by the opening capital of Rs.1,95,641/-, 1,96,186/- & 3,13,278/- claimed in the case of Shri Kapoor chand Khandelwal, Shri Vishnu Kumar Khandelwal & Hari Om Gupta which is supported with evidence. Hence considering the activities of the assessee prior to the block period and capital of other brothers of the assessee the claim is reasonable and should be accepted.” “16. We have heard the parties. Briefly stated the facts in this case are that the assessee has claimed the deduction of net assets amounting to Rs. 4,50,000/- as at 31-3-86. The same was disallowed by the

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AO for want of the details. The Id. CIT (A) after considering the facts of the case was of the view that the assessee was having business prior to the block period and the business cannot be done without the capital. Since the assessee does not have any document and to meet the ends of justice Rs. 2,50,000/- was considered reasonable as investment in the business before the block period for treatment as opening capital as at the beginning of the block period and sustained the addition of Rs 2.00 lacs as aginast Rs. 4,50,000/- claimed by the assessee.” 4. Counsel for the respondents has supported the order of the Tribunal and contended that on close scrutiny of the evidence which has estimated the value and therefore, except item No.1 the other items were on estimated basis and the view taken by the Tribunal is just and proper. Counsel for the respondents has submitted that the view taken by the CIT(A) is not proper and the view taken by the Tribunal is just and proper. 5. We have heard counsel for both the sides. 6. The first issue in view of the decision of Chain Sukh Rathi vs. Commissioner of Income Tax & Anr. (supra) benefits which are required to be granted under Section 158BB, statutory benefits may be granted to the assessee. However, on second issue we uphold the order of the Tribunal the amount of Rs.2,60,000/- is accepted under section 473 of the Income Tax Act, 1961 ought to have been accepted by the Tribunal. 7. To that extent the first issue is required to be answered in favour of the assessee and against the department and the second issue in favour of the assesee to the extent of Rs.10,000/- only.

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