Punjab & Haryana H.C : Where assessee had failed to produce any documentary evidence with regard to proof of agricultural land and sale of agricultural produce in order to substantiate his claim that income was agricultural income claim of assessee could not be accepted

High Court Of Punjab & Haryana

Jaskaran Singh vs. Union Of India

Section : 2(1A), 28(i), 246, 264

Assessment year : 2005-06

Ajay Kumar Mittal And Ms. Anita Chaudhry, JJ.

C.W.P. Nos. 4471 & 4487 Of 2014

March 12, 2014

JUDGMENT

Ajay Kumar Mittal, J. – This order shall dispose of CWP Nos. 4471 and 4487 of 2014 as, according to the learned counsel for the petitioner, the issue involved in both the petitions is identical. However, the facts are being extracted from CWP No. 4471 of 2014.

2. The writ petitions have been filed by the petitioner under article 226 of the Constitution of India for quashing the order dated March 30, 2009, passed by the Commissioner of Income-tax (CIT) and the order dated December 3, 2013, passed by the Commissioner of Income-tax (Appeals) (“the CIT(A)”), annexures P. 4 and P. 6, respectively. Direction has also been sought to respondent No. 3 to decide the appeal of the petitioner on the merits.

3. Briefly, the facts as narrated in CWP No. 4471 of 2014 are that the petitioner is an income-tax assessee. For the assessment year 2005-06, the petitioner filed his income-tax return declaring an income of Rs. 49,886 which included business income from M/s. King International (Marriage Palace) in the shape of salary and interest. In the returns, agricultural income of Rs. 4,68,527 was also declared. In the earlier years also, returns were filed declaring agricultural income as also professional income which was in the shape of interest and salary received. The said returns had been accepted by the Department. The case of the petitioner was taken up for scrutiny. The income-tax cases of the petitioner were being handled by Satish Vijay and Company, chartered accountant. The petitioner being an agriculturist was not aware of the legal technicalities and, hence, a manager, Mr. Hardial Singh, had been employed to look after the affairs of the petitioner. The said notices were either served on the manager or were handed over to him who further handed over the same to the chartered accountant The chartered accountant did not attend the proceedings. The manager also never informed the petitioner. Respondent No. 4 passed an ex parte order dated October 31, 2007, annexure P.1. In the said order, the agricultural income was disallowed and an addition of Rs. 5,50,000 was made to the income. This order was also served upon the manager. The manager never informed the petitioner. Respondent No. 4, vide order dated April 16, 2008, imposed penalty under section 271(1)(c) of the Act. This order was also served on the manager who did not inform the petitioner. The petitioner came to know about the huge demand created by the ex parte order and penalty when summons were served on him in 2008. As per the advice received, the petitioner moved a revision petition, annexure P. 2 on August 1, 2008, under section 264 of the Act. The petitioner also filed an affidavit dated November 11, 2008, annexure P. 3 explaining the position that due to negligence of the chartered accountant, the proceedings culminated in an ex parte order. According to the petitioner, he is an agriculturist and own about 25 acres of land. The return of M/s. King International was also filed to show that it was a partnership firm and the petitioner was only a partner getting salary and interest whereas the Assessing Officer had treated the petitioner as proprietor of M/s. King International. Vide order dated March 30, 2009, annexure P. 4, respondent No. 2 dismissed the revision petition. Aggrieved by the order, the petitioner filed an appeal against the assessment order along with the application for condonation of delay before the Commissioner of Income-tax (Appeals) (“the CIT(A)”). The said appeal was dismissed by the Commissioner of Income-tax (Appeals), vide order dated December 3, 2013, annexure P. 6, holding that since the order of the assessment had merged into order of revision, he had no jurisdiction and, hence, no appeal lies. Hence, the present petitions.

4. Learned counsel for the petitioner argued that the order dated March 30, 2009, passed by the Commissioner of Income-tax under section 264 of the Act was unsustainable. It was further submitted that it was on the advice of the counsel that an appeal was filed before the Commissioner of Income-tax (Appeals) against the order of assessment which was dismissed by him, vide order annexure P. 6 dated December 3, 2013, as not maintainable. Relying upon the judgment of the hon’ble apex court in Rafiq v. Munshilal, AIR 1981 SC 1400, it was urged that on account of default or inaction of the counsel, the party should not be made to suffer.

5. After hearing learned counsel for the petitioner, we do not find any merit in the writ petition.

6. The primary challenge in this writ petition is to the order dated March 30, 2009, annexure P. 4, the order passed by the Commissioner of Income-tax under section 264 of the Act. Quashing of the order dated December 3, 2013 (annexure P. 6) passed by the Commissioner of Income-tax (Appeals) has also been made.

7. Examining the legality of the order dated March 30, 2009 (annexure P. 4) passed by the Commissioner of Income-tax under section 264 of the Act, the factual matrix herein may be noticed.

8. The Assessing Officer framed an ex parte assessment under section 144 of the Act as the assessee had failed to respond in spite of repeated notices. In the assessment order dated October 31, 2007, the Assessing Officer disallowed the agricultural income for want of proof and assessed the income of Rs. 5,50,000 from business.

9. The relevant observations of the Assessing Officer read thus :

“In case you fail to attend before me on appointed date or fail to furnish any evidence in support of your claim of agricultural income or fail to furnish any documents to prove the correctness of your business income, I shall be constrained to frame the ex parte assessment under section 144 of the Act, to the best of my knowledge and on the basis of the information and facts available on record.

The assessee has failed to avail of himself of any of the opportunities allowed to him including the last one. In view of the facts and circumstances of the case, I am constrained to frame the assessment ex parte to the best of my judgment. In framing the assessment, I am also taking note of the observations made by my predecessor officer in his order for the assessment year 2004-05 in which he has, inter alia, treated the agricultural income as the business income of the assessee. Keeping in view the past history of the case and the fact that the assessee has not brought any material on record to establish his claim of agricultural income, I have to hold that the assessee has shown his business income in the guise of agricultural income with an ulterior motive of evading the incidence of income-tax. Therefore, the income of Rs. 4,68,527 declared as agricultural income is assessed as business income of the assessee.”

Against the assessment order, the assessee had remedy of filing an appeal under section 246/246A of the Act. However, the assessee availed of the remedy of revision under section 264 of the Act after the expiry of limitation for filing the appeal had elapsed but within the period prescribed under section 264 of the Act. On revision under section 264 of the Act, the Commissioner of Income-tax, vide order dated March 30, 2009, annexure P. 4 had dismissed the petition with the following observations :

“The facts of the case are that the assessee filed his return of income on September 1, 2005, declaring an income of Rs. 49,886 from business and profession and Rs. 4,68,527 from agriculture. However, the assessee filed no documents in support of the net profit as per the income and expenditure statement. Similarly, no particulars or information or documents were furnished in support of the claim of agricultural income declared in the return of income. Statutory notices under section 142(1)/143(2) along with questionnaires were issued to the assessee on different dates but no co-operation was extended by the assessee in the matter of finalization of assessment during the course of assessment proceedings. No proof of agricultural land and sale of agricultural produce was provided by the assessee. Therefore, when the assessee failed to comply and avail of various opportunities provided to him, the Assessing Officer, having left with no other alternative, framed the assessments ex parte under section 144 by appreciating the material available on record. By doing this, the Assessing Officer treated the agricultural income as business income and assessed the same at Rs. 5,50,000.”

10. The petitioner is aggrieved by the revisional order dated March 30, 2009. The present petition is highly belated as the challenge to this order after almost five years suffers from delay and laches. Moreover, in spite of numerous opportunities having been provided to the assessee by the Assessing Officer, the assessee had failed to produce any documentary evidence with regard to proof of agricultural land and sale of agricultural produce in order to substantiate his claim that the income was agricultural income. In view of the above, the claim of the assessee, thus, cannot be accepted.

11. Furthermore, the assessee, initially, did not challenge the assessment order by way of an appeal, instead filed a petition under section 264 of the Act before Commissioner of Income-tax. After rejection of the revision petition, an appeal along with application for condonation of delay in filing the appeal was filed against assessment order before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) dismissed the appeal as not maintainable. Once the petitioner had taken recourse to revisional remedy under section 264 of the Act and after the rejection of the petition, it was not open to have fallen back on statutory remedy of appeal under the Act. Similar issue had been adjudicated by a Division Bench of the Orissa High Court in Orissa Rural Housing Development Corpn. Ltd. v. Asstt. CIT [2012] 343 ITR 316/204 Taxman 673/17 taxmann.com 186 regarding maintainability of an appeal where the assessee had taken recourse to the revisional jurisdiction under section 264 of the Act. Applying the doctrine of merger, it was held that the assessee was precluded from approaching the appellate court under section 246/246A of the Act against the assessment order. The relevant observations read thus (page 327) :

“Thus, the assessee can invoke the provisions of section 264 of the Income-tax Act only after the time for filing the appeal expired or after waiver of his right of appeal. Section 264 of the Income-tax Act is an alternative remedy available to the petitioner assessee, who does not want to avail of the remedy by way of appeal. Thus, remedy available under section 264 of the Income-tax Act is an alternative remedy and not an additional remedy and the assessee is not permitted to pursue both the remedies either simultaneously or one after another. In the instant case, it is only after rejection of the petition under section 264 by the Commissioner of Income-tax, the assessee has filed appeal, which right as stated above, by approaching the Commissioner of Income-tax under section 264, the petitioner has lost. Apart from the above, once the revisional power vested with the Commissioner of Income-tax under section 264 of the Income-tax Act is invoked and the Commissioner of Income-tax passes the order by exercising his jurisdiction under that section, the order of assessment merges with the order of revision. The order passed by the Commissioner of Income-tax under section 264 is also not an appealable order under section 246/246A of the Income-tax Act.”

12. Learned counsel for the petitioner was unable to justify that when the assessee has already invoked the revisional jurisdiction under section 264 of the Act as the order of the Assessing Officer had merged into the order of the revisional authority, how appeal under section 250(6) was maintainable before the Commissioner of Income-tax (Appeals). The judgment on which reliance has been placed does not come to the rescue of the petitioner in the facts and circumstances of the case as noticed above. Viewed from any angle, the petitioner cannot succeed.

13. Accordingly, finding no merit in the petitions, the same are hereby dismissed.

[Citation : 366 ITR 158]