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January, 02nd 2014

+                INCOME TAX APPEAL NO. 563/2013

                                     Date of decision: 22nd November, 2013
                                                            ..... Appellant
                               Through Ms. Suruchi Aggarwal, Sr. Standing


                                                            ..... Respondent
                               Through Nemo.

                 INCOME TAX APPEAL NO. 564/2013

                                                            ..... Appellant
                               Through Ms. Suruchi Aggarwal, Sr. Standing


                                                            ..... Respondent
                               Through Nemo.



        We feel that the order of the tribunal is just and fair. Rs.20 cores

ITA Nos. 563/2013 & 564/2013                                       Page 1 of 7
was surrendered as undisclosed income at the time of search and it was

agreed that the tax liability should be paid as set out in the statement

recorded under Section 132(4) of the Income Tax Act, 1961 (Act, for

short) of Virendara Kumar Gupta.        The said statement has been

reproduced in the impugned order passed by the tribunal.

Subsequently, affidavit of Sarad Jain was filed on 15th May, 2009

wherein the undisclosed income of Rs.20 crores was duly maintained

and accepted. The disclosure was bifurcated into Rs.7.50 crores, as on

account of discrepancies in inventory prepared at the business premises

of M/s Gupta and Company Private Limited. Rs.12.50 crores was

disclosed as income earned through joint enterprise of Virendara

Kumar Gupta, Sarad Jain and Sudhir Jain, described as ,,Sugandh

Sansar in terms of agreement dated 9th January, 1998.

2.      The ,,Sugandh Sansar as an Association of Persons (AOP) filed

return of income for the Assessment Year 2009-10 on 30th October,

2009 declaring income of Rs.11 crores under the head "income from

business and profession" after claiming operational expenses of Rs.1.5

crores from the surrendered amount of Rs.12.5 crores. The Assessing

Officer, however, came to the conclusion that this amount should not

be taxed in the hands of three member AOP, but individually in the

hands of Virendara Kumar Gupta, Sarad Jain and Sudhir Jain.

Thereafter, ,,Sugandh Sansar AOP filed a revision petition under

ITA Nos. 563/2013 & 564/2013                                    Page 2 of 7
Section 264 of the Act and the Commissioner of Income Tax, Delhi-

VII passed an order dated 18th June, 2012. The relevant portion of the

order reads as under:-

                "6. I have given a careful consideration to the case
                law cited by the assessee and am of the view that
                the relief may be allowed to the assessee. This
                reminds me the judgement of Supreme Court in the
                case of ITO vs Ch. Atchaiah (218 ITR 239)
                wherein it is held that the income has to be assessed
                in the hands of "right person" alone. By "right
                person" is meant the person who is liable to be
                taxed, according to law, with respect to a particular
                income. There are no words in the Income Tax Act,
                which empower the Income Tax Officer or give
                him an option to tax either the AOP or its members
                individually. If it is the income of the AOP in law,
                the association of persons alone has to be taxed;
                The members of the AOP cannot be taxed
                individually in respect of the income of the AOP.
                Consideration of the interest of the revenue has no
                place in this scheme. In the present case,
                department has taken a view that the surrendered
                income of Rs.12.5 crore belongs to the members
                individually and not to the AOP hence, no different
                view can be taken in the case of AOP by taxing the
                same amount again on the ground that the assessee
                himself had originally filed the return offering the
                surrendered amount in the hands of AOP. Hence
                the 2nd revised return filed by the assessee on
                08.01.2011 requires consideration. The revisional
                powers of the Commissioner u/s 264 of the Income
                Tax Act 1961, has all the trappings of a judicial
                power. Jurisdictional High Court in the case of
                Aparna Ashram vs Director of Income Tax (258
                ITR 401), after relying upon the judgement of
                Supreme Court in the case of Dwarka Nath vs
                ITO (57 ITR 349) have held that the jurisdiction
                conferred u/s 264 is a judicial one. The nature of
                the jurisdiction and the rights decided carry with
                them necessarily the duty to Act judicially in

ITA Nos. 563/2013 & 564/2013                                        Page 3 of 7
                disposing of the revision. The revisional power has
                to be exercised on an objective consideration of the
                facts and circumstances of the case. The power is
                coupled with a duty to be exercised in the interest
                of doing real justice between the parties,
                particularly when under the Act the order passed u/s
                263 is final. The assessee's claim has substantial
                merit. Assessment at Rs.22 crore made in the
                intimation u/s 143(1) requires to be set aside and
                the income has to be determined at "Nil".

                7. It was specifically asked to the assessee as to
                what happened to the cash of Rs.1,46,46,900/-
                seized during search which was requested to be
                treated as advance tax and also to the sum of
                Rs.1,05,00,000/- (Rs.35 lac x 3) paid by all the 03
                members of AOP equally as self assessment tax as
                the relief has been claimed only with respect to a
                sum of Rs.1,58,68,840/- paid by the AOP as self
                assessment tax. It has been explained by the
                assessee that the cash seized during search is
                already considered in the hands of persons from
                whom the same was seized. Similarly, amount of
                Rs.35 lac paid by each member as self assessment
                tax (total Rs.1,05,00,000/-) has been considered in
                the hands of each member and therefore, relief is
                claimed only with respect to a sum of
                Rs.1,58,68,840/-. I am of the view that when the
                sum of Rs.1,46,46,900/- and Rs.1,05,00,000/- has
                been considered in the hands of members then the
                relief may also be granted to the assessee with
                respect to self assessment tax of Rs.1,58,68,8401-
                and the same be considered in the hands of all the
                03 members of AOP equally as self assessment tax
                paid by them with respect to the surrendered
                amount of Rs.12.5 crore.

                8. In view of the fact that the appeals in the
                individual cases of the members of the AOP namely
                Shri V.K. Gupta, Shri Sudhir Jain and Shri Sharad
                Jain are still pending before CIT(A), the assessee
                was asked to clarify its position with regard to these
                appeals. The assessee has filed an undertaking from

ITA Nos. 563/2013 & 564/2013                                         Page 4 of 7
                all the three members of the AOP pointing out that
                the appeal have been filed against the additions
                made of the same amount which had been offered
                to tax by the assessee AOP M/s Sugandh Sansar.
                Further it has been stated that in case the relief i
                allowed to the AOP M/s Sugandh Sansar, all the
                three members of the AOP undertake to withdraw
                their appeals from the CIT(A). In view of his
                undertaking, it is further held that the relief granted
                in the preceding para will be effective only after the
                appeals have been withdrawn in the case of
                members of the AOP and the same have become

3.      Revenue has not challenged and questioned the said order.

4.      In terms of the said order, Rs.12.5 crores was equally bifurcated

in the hands of Virendara Kumar Gupta, Sarad Jain and Sudhir Jain.

Taxes on Rs.12.5 crores have been duly paid.

5.      The question raised in the present appeals is whether the two

assessees are liable to pay penalty @ 10% under Section 271AAA.

6.      Learned counsel for the appellant-Revenue submits that initially

the amount of Rs.12.5 crores was declared and disclosed by the AOP

but subsequently the AOP had filed a revised return declaring ,,nil

income. Therefore, the conditions for exoneration from penalty under

Section 271AAA were not satisfied. It is stated that the individual-

assessees in their return of income had not declared proportionate

amount of Rs.12.5 cores nor had they substantiated their statements as

to the manner in which the income was derived.

ITA Nos. 563/2013 & 564/2013                                          Page 5 of 7
7.      We have considered the said contention, but do not find any

merit in the same. The AOP consisted of Virendara Kumar Gupta,

Sarad Jain and Sudhir Jain. Initially, the AOP had declared the entire

undisclosed income.            AOPs are taxed at maximum marginal rate,

whereas individuals are taxed on cascading scale.         The Assessing

Officer had himself given tax credit to individual members of the tax

paid by AOP. AOP consisted of three persons, including the present

respondent-assessee. The tribunal has taken the realistic and pragmatic

view and accordingly deleted the penalty under Section 271AAA of

the Act noticing the factual matrix. ,,Sugandh Sansar had filed ,,nil

return of income only after the Assessing Officer had decided that

Rs.12.5 crores should be equally divided and taxed in the hands of

Virendara Kumar Gupta, Sarad Jain and Sudhir Jain.            The three

respondent-assessees had filed appeal before the Commissioner

(Appeals) questioning the said order/position. Meanwhile, the AOP

filed an application under Section 264, which was accepted by the

Commissioner of Income Tax, Delhi-VII and in terms of the said order,

the individual assessees withdrew the appeals. Taxes and applicable

interest were paid on the undisclosed income. Details of nature of

undisclosed income and manner of earning was recorded in the

statement of Virendara Kumar Gupta. It was stated that the income

was derived from trading transactions not recorded in the books.

ITA Nos. 563/2013 & 564/2013                                    Page 6 of 7
8.      In light of the facts of the present case, we are not inclined to

interfere and entertain the present appeals. The same are accordingly


                                        SANJIV KHANNA, J.

                                        SANJEEV SACHDEVA, J.
        NOVEMBER 22, 2013

ITA Nos. 563/2013 & 564/2013                                     Page 7 of 7
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