Commissioner of Income Tax vs Ram Gopal Manda

Heard learned counsel for parties. This Court, while admitting the appeal, framed the following substantial questions of law on 15th Feb., 2011:

(i) Whether the Tribunal was justified in directing set off of Rs. 54,10,054 as against the surrendered income of the assessee amounting to Rs. 1,29,07,00 by upholding the finding of CIT(A) on this issue?

(ii) Whether the finding recorded by the Tribunal in para 7 is factually sustainable in the absence of any discussion much less cogent discussion, more so when assessee was not represented?

The relevant facts, for disposal of this appeal, are that during the course of survey under s. 133A conducted on 28th Jan., 2003, certain incriminating documents/loose papers/note-books etc. were found at the business premises of the assessee and on the basis of the said material, the assessee had surrendered a sum of Rs. 1,75,00,000 vide his letter dt. 31st Jan., 2003 before the Department.

During the assessment proceedings, the assessee claimed set off against this surrendered amount claiming that the said income was from business. The AO did not agree with the submission of assessee and came to a conclusion that the surrendered amount of Rs. 1,75,00,000 is an income from other sources vide assessment order dt. 28th March, 2006 in respect of financial year 2002-03 i.e. asst. yr. 2003-04.

Being aggrieved with the assessment order passed by AO, whereby set off was not allowed, the assessee preferred an appeal before the appellate authority. The CIT(A)-II, Bikaner vide its order dt. 18th Dec, 2006 (Annex. 2) partly allowed the appeal filed by the assessee. The CIT(A) discussed the matter in detail and came to a conclusion that assessee is entitled to get set off of Rs. 54,10,054 and directed the AO to give set off of the said amount against total surrendered income. The Revenue preferred appeal before Tribunal. The Tribunal vide its order dt. 27th June, 2008 (Annex. 1) dismissed the appeal of the Revenue and affirmed the finding of the appellate authority. Hence, the Revenue has preferred this appeal before this Court.

Submission of Mr. K.K. Bissa, learned counsel appearing on behalf of Revenue, is that learned appellate authority as well as Tribunal, both committed an illegality in treating the surrendered amount of Rs. 1,75,00,000 as income of assessee from business, whereas the learned AO was absolutely right in not allowing the set off by recording a finding that the said surrendered income was income of the assessee from other sources. He, therefore, submitted that orders passed by appellate authority as well as Tribunal, both be set aside and order of AO be restored.

Mr. Dinesh Mehta, learned counsel appearing on behalf of assessee, supported the impugned orders passed by Tribunal as well as appellate authority and submitted that amount of Rs. 1,75,00,000 was surrendered with specific conditions, which were considered and dealt with by the appellate authority. He submitted that AO did not consider all the facts including the conditions mentioned by assessee, while surrendering the amount. He further submitted that appellate authority quoted all the conditions, which were mentioned in the letter, while surrendering the amount of Rs. 1,75,00,000. He referred the finding of the appellate authority and submitted that Revenue is unable to point out any perversity in the finding recorded by the appellate authority as well as Tribunal. He, therefore, submitted that there is no force in the submission of learned counsel for Revenue. He also submitted that the questions framed in the present case are not the questions of law, therefore, this appeal is liable to be dismissed.

We have considered the submissions of learned counsel for parties and examined the impugned orders passed by appellate authority as well as Tribunal and also the assessment order and other documents available on record.

From the various orders as well as submissions of learned counsel for the parties, it appears that the question involved in the present case is as to whether the surrendered amount of Rs. 1,75,00,000 should be treated as income of assessee from business or from other sources. The appellate authority as well as Tribunal, both have recorded a finding that the said surrendered amount was an income of the assessee from business and not from other sources as pointed out by AO. The conditions mentioned in the letter of surrender by assessee are reproduced, as under:

(a) The note books and loose papers contain entries pertaining to my business,

(b) I have examined the entries and after discussion about such entries with the worthy CIT, Bikaner, I offer income of Rs. 1.75 crores to tax for the current year 2002-03,

(c) The surrendered income covers all the entries appearing in such note books and loose papers,

(d) I am surrendering this income to purchase peace and in full and final settlement of my case. It is requested that no action to levy of penalty and prosecution etc. will be taken against me,

(e) It is to cooperate with the Department that I have surrendered the above income over all above the regular income to be declared for the financial year 2002-03 which shall not be less than the income disclosed for the asst. yr. 2002-03,

(f) The tax on the above income surrendered will be paid as agreed by the worthy CIT, Bikaner,

(g) I request that my above submission may be accepted so that no dispute at all in my case once for all which I have surrendered the above income of Rs. 1.75 crore for the asst. yr. 2002-03.

From the conditions quoted above, it is clear from condition Nos. (a), (b) and (c) that the assessee had claimed that the surrendered amount was income from the business. From the order of AO, it appears that AO considered only the condition Nos. (e) and (f) and not the condition Nos. (a), (b) and (c) at all. The CIT(A) considered ail the conditions mentioned in the letter of surrender and other facts and circumstances of the case and thereafter recorded a finding that the surrendered amount was an income of the assessee from business and not from other sources as held by AO and consequently it was held that assessee is entitled to get set off of Rs. 54,10,054.

Whether the surrendered amount is an income from business or from other sources is essentially a question of fact. In the present case, the CIT(A) as well as Tribunal, both have recorded a concurrent finding of fact based on cogent material available before them, that surrendered amount was an income of the assessee from business and not from other sources. Learned counsel for Revenue is unable to point out any perversity in the said finding recorded by appellate authority as well as Tribunal. There is no dispute between the parties on the issue that in case, the surrendered amount is treated as an income from business, then assessee is entitled to get set off of the amount of Rs. 54,10,054.

In view of the above, the questions of law framed in the present case, particularly when no perversity has been pointed out in the finding of CIT(A) as well as Tribunal to the extent that the surrendered amount was an income of the assessee from business and not from other sources as held by AO, cannot be said to be the questions of law. Therefore, both the questions are liable to be answered in favour of the assessee. In view of above discussions, we do not find any merit in this appeal and the same is liable to be dismissed and is hereby dismissed with no order as to costs.