PUNJAB AND HARYANA HIGH COURT

ITA No.194 of 2002

MR. M.M. KUMAR AND MR. ALOK SINGH, JJ.

Ms. Savita Saxena, Advocate, For the Appellant
Mr. S.K. Mukhi, Advocate, For the Respondent

The judgment of the court was delivered by

Alok Singh J.-1. The present appeal against the judgment dated March 28, 2002, passed by the Income-tax Appellate Tribunal, Chandigarh Bench "B", was admitted on the following substantial questions of law :

         "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting the addition of Rs. 39,356 made by the Assessing Officer on account of nonfiling of return for the assessment year 1995-96 particularly when there is a specific provision for computation of undisclosed income of the block period in such cases under the provisions of section 158BB(1) of the Income-tax Act, 1961 ?

         2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law and on facts in deleting the addition of Rs. 4 lakhs made on account of receipt of the alleged NRI gifts holding the same to be not covered in the definition of undisclosed income as defined in section 158B(b) of the Incometax Act, 1961, particularly when the assessee has not filed the return of his income for the previous year relevant to the assessment year in which the alleged NRI gifts were received ?"

Question No. 1
2. The brief facts of the present case, for the purpose of this question of law, inter alia, are that a search was conducted at the residential premises of the assessee on November 23, 1995, under section 132 of the Income-tax Act, 1961 (for brevity "the Act") ; certain incriminating documents were found and seized ; a cash amounting to Rs. 63,625 was found out of which an amount of Rs. 30,500 was seized ; a notice under section 158BC of the Act was issued ; the learned Assessing Officer has added Rs. 30,000 as opening cash in hand on April 1, 1985, as undisclosed income for the assessment year 1986-87 on the ground that the assessee was not maintaining personal books of account. However, the learned Tribunal on the basis of the balance-sheet filed by the assessee before the Assessing Officer, as on March 31, 1985, till November 23, 1995, has held that the balance-sheet is a statement of affairs showing the assets and liabilities of the assessee as on a particular date ; it also incorporates opening balance of various assets and liabilities brought forward from earlier years along with net increase/decrease in each of the assets and liabilities during the year ; if the closing balance or cash in hand is disclosed income, the opening balance cannot be regarded to be undisclosed income. The learned Tribunal has also observed that the addition on the ground that the assessee was not maintaining personal books of account is not correct.

3. There is no dispute that the assessee has submitted the balance-sheet before the Assessing Officer and in the balance-sheet the closing balance or cash in hand was disclosed, therefore, the opening balance cannot be regarded to be undisclosed income ; the entries in the balance-sheet have not been disputed by the Assessing Officer.

4. The hon'ble court in the case of CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501 (Bom) has held that the conclusion of the Tribunal that there was no reason for treating the said income as undisclosed income for the purpose of block assessment was based on facts, therefore, no substantial question of law arose.

5. Therefore, question of law No. 1 is answered against the Revenueappellant and in favour of the assessee-respondent.

Question No. 2
6. The brief facts of the present case for the purpose of this question, inter alia, are that the Assessing Officer has noted that the assessee has received NRI gifts from the following persons :

7. The learned Assessing Officer asked the assessee to furnish the details as regards the relationship with the donors and the occasions on which gifts were received and also prove the genuineness of the transactions. The assessee submitted affidavits of the donors, certificates of bank managers to prove the genuineness but in respect of the relationship and the occasion of the gifts, the assessee submitted that none of the provisions under the Act require that there should be an occasion or there should be relationship for gift transaction. The Assessing Officer treated the amount of Rs. 4,00,000 as undisclosed income of the assessee under section 69 of the Act. However, on appeal, the learned Tribunal has observed that the assessee in the instant case was a regular assessee for income-tax for over 30 years. He was filing his return of income regularly in all the years except where his income did not exceed the maximum amount to chargeable to tax for the assessment year in question, i.e., 1995-96. However, the assessee had received the gift through the bank account either through bank drafts or cheques, which were duly deposited in the Oriental Bank of Commerce, which reflect in the balance-sheet ; the amount whatever was received through gifts by the assessee was transferred to the account of the partnership firm and was credited in the capital account of the assessee on two dates, i.e., Rs. 2,50,000 on July 5, 1994, and Rs. 1,50,000 on July 28, 1994 ; partnership firm and the assessee are assessed by the Assistant Commissioner of Income-tax, Inv. Circle, Patiala, which is apparent from the copy of the assessment order of the partnership firm filed before the Tribunal ; the books of account for all the years in the block period are seized and are with the Department ; merely that the assessee has not filed return in respect of one assessment year in which his income did not exceed the maximum amount not liable to income-tax, is not sufficient to hold that the assessee has not disclosed the entry of the gifts to the Revenue ; gift amount was received by the assessee in the bank account and the said amount was transferred to the capital account of the assessee in the partnership firm in which the assessee was a partner and the return of the partnership firm was duly filed before the Assessing Officer and the Assessing Officer duly accepted the capital account of the partner while making the assessment of the firm ; gift was duly recorded in the bank account, therefore, gift received by the assessee cannot be said to be undisclosed income.

8. The learned counsel for the Revenue has vehemently argued that since the assessee has not filed a return for the assessment year 1995-96, therefore, the Assessing Officer was perfectly well within its jurisdiction to treat Rs. 4,00,000 as undisclosed income.

9. In the present case, admittedly, the respondent-assessee was filing his return and return of the partnership firm, of which he is a partner, regularly and the learned Assessing Officer has assessed the income of the partnership firm as well as of the assessee and has not doubted any entry therein, therefore, non-filing of the return for the assessment year 1995-96 on the ground that after allowing the deduction under the Act income remains below the taxable limit cannot be treated as undisclosed income for the block period.

10. We find support from the judgments of a Division Bench of the Madhya Pradesh High Court in the case of CIT v. Vimla Khatri [2007] 288 ITR 168 (MP) as well as in the case of CIT v. Smt. Maya Chotrani [2007] 288 ITR 175 (MP), the judgment of this court in the case of M. R. Singhal v. Asst. CIT [2007] 290 ITR 162 (P&H) and the judgment of the Bombay High Court in the case of CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501 (Bom).

11. This is no more res integra that non-filing of the return on the ground that the total income of the assessee remains below the taxable limit after allowing the deduction available under the law cannot be a good ground to hold the income as undisclosed income while making the block assessment.

12. In view of the above, question No. 2 also stands answered against the Revenue and in favour of the assessee.