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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 26th November, 2013
+ INCOME TAX APPEAL NO. 575/2013
COMMISSIONER OF INCOME TAX ..... Appellant
Through Mr. Rohit Madan, Sr. Standing
Counsel for Ms. Suruchi Aggarwal.
Versus
SUDHIR JAIN ..... Respondent
Through Nemo.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (ORAL):
We feel that the order of the tribunal is just and fair. Rs.20 cores
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
ITA Nos. 575/2013 Page 1 of 6
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
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
ITA Nos. 575/2013 Page 2 of 6
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
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
ITA Nos. 575/2013 Page 3 of 6
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
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
final."
ITA Nos. 575/2013 Page 4 of 6
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
assessee is 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.
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 a realistic and pragmatic
ITA Nos. 575/2013 Page 5 of 6
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
assessees had filed appeals 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.
8. In light of the facts of the present case, we are not inclined to
interfere and entertain the present appeal. The same is accordingly
dismissed.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
NOVEMBER 26, 2013
ITA Nos. 575/2013 Page 6 of 6
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