2013 (1) TMI 66 - HC - Income Tax

Penalty u/s 271(1)(C) - undisclosed income - advance of Rs. 2,50,000/- shown against the land in his capital account - assessee claimed that this was on account of forfeiture of the earnest money for sale of his plot - Held that - Assessee s claim of Rs. 2,50,000/- in the capital account based on a similar transaction was accepted by ITAT vide order dated 27.03.2008. That pertained to an agreement entered with one Harish Aggarwal for sale of plot No. 85/104 Khasra No. 16, Village Jandi, Ambala, which transaction did not materialize and the amount of the earnest money received by the appellant-assessee was forfeited. The appellant-assessee had set up an agreement dated 04.07.2002 for that assessment year. That transaction has no relevance to the assessment year 2002-03. The controversy raised on this point is held against the appellant. Though copy of agreement produced by the appellant assessee was entered with Leela Dhar Gupta son of Chandgi Ram, yet the draft of Rs. 2,50,000/- received by the appellant-assessee was prepared from the account of one Deepak Gupta and issued by the Bank. There was of course account of one Leela Dhar in the said Bank, who was contacted by the Department in the enquiry but that Leela Dhar stated that he never entered into such a transaction with the appellant-assessee. The authorities below also took serious note of the fact that there were transactions running into more than 40 crores in the account of said Deepak Gupta. Seriousness of such transaction was under investigation of the Department of Income Tax and ultimately it was found that the Bank has been closed by the Reserve Bank of India because of the shady deals in which the said Bank was indulging. There is no illegality committed by the authorities below in holding that the assessee routed undisclosed income in his capital account as forfeited amount, and thus added the amount in his income for the assessment year in question. The assessee is giving different addresses in the returns and Ward/Circles etc. shown are different and incomplete, there is no evidence of filing these returns as from the photocopy, stamp of the Department is not legible. Further enquiry had revealed that B-29, Som Dutt Chamber, Bhikaji Cama Place, New Delhi, is an incomplete address. The assessee, therefore, cannot say that he had proved the identity of Sh. Leela Dhar Gupta. There was no agreement with Deepak Gupta nor the appellant assessee claimed any direct link with Deepak Gutpa, whose account was under investigation in a separate case. This point is also found against the appellant - When the transaction has not been accepted as genuine, there is no question of taking recourse of Section 51 - against assessee.

Summary

Issues involved:

1. Legality of the authorities' action based on a similar transaction decided in favor of the assessee.
2. Consideration of material/evidence produced by the assessee.
3. Opportunity for the assessee to cross-examine the person whose statement was relied upon by the department.
4. Obligation of the assessee to explain the source of funds.
5. Applicability of Section 51 of the Income Tax Act (IT Act) and revenue neutrality.
6. Adverse inference against the department regarding the account from which the assessee received the amount.
7. Overall legality of the impugned orders.

Detailed Analysis:

1. Legality of the authorities' action based on a similar transaction decided in favor of the assessee:

The court dismissed this issue, noting that the acceptance of a similar transaction for the assessment year 2003-04 involving a different plot and different parties did not bear relevance to the assessment year 2002-03. The court held that the controversy raised on this point is against the appellant.

2. Consideration of material/evidence produced by the assessee:

The court found that this issue did not constitute a substantial question of law. It was determined that the authorities' appreciation of evidence regarding the genuineness of the transaction was within their purview. The appellant had previously assured the ITAT of his ability to produce Leela Dhar Gupta but failed to do so. The authorities noted discrepancies in the transaction, including the involvement of Deepak Gupta, whose account was found to be dubious. The court held this point against the appellant.

3. Opportunity for the assessee to cross-examine the person whose statement was relied upon by the department:

The court rejected the appellant's argument that he was not given an opportunity to cross-examine Leela Dhar. It was noted that the appellant claimed the Leela Dhar Gupta involved in the transaction was different from the one contacted by the department. Therefore, this argument was found to be fallacious.

4. Obligation of the assessee to explain the source of funds:

The court decided this point against the appellant, reiterating the findings on point No. (iii). The authorities' concurrent findings on the material collected justified the addition of Rs. 2,50,000/- as undisclosed income.

5. Applicability of Section 51 of the Income Tax Act (IT Act) and revenue neutrality:

The court held that the appellant could not rely on Section 51 of the IT Act as the transaction was not accepted as genuine. Moreover, this plea was not raised before any of the authorities below. The provisions of Section 51 were deemed inapplicable to the facts of the case.

6. Adverse inference against the department regarding the account from which the assessee received the amount:

The court found that the investigation into Deepak Gupta's account in Jai Laxmi Cooperative Bank Ltd. was irrelevant to the appellant's assessment. There was no direct link between the appellant and Deepak Gupta. This point was also found against the appellant.

7. Overall legality of the impugned orders:

The court concluded that the legality of the impugned orders depended on the determination of the other questions. Since no substantial question of law arose from the appeal, the court upheld the conclusions of the authorities below.

Conclusion:

The court found no merit in the appeal and dismissed it, holding that no substantial question of law arose that would warrant a remand or interference with the authorities' conclusions. The appeal was dismissed.