(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Rajkot Bench ( Tribunal for short) dated 23rd March 2012, raising following substantial questions of law for our consideration :-
[A] Whether in the facts and circumstances of the case in law the Ld. ITAT is right in law and on facts in deleting the addition of Rs.67,00,000/- as labour income and treated as income earned out of undisclosed sources ?
[B] Whether in the facts and circumstances of the case and in law the Ld. ITAT is right in law and on facts in not confirming the order of the A.O. Of addition on account of labour income treated as earned out of undisclosed sources ?
Upon perusal of the impugned judgment of the Tribunal, we notice that for both the issues arising in this appeal, the Tribunal has simply relied on its own order in case of this very assessee. Learned advocate Shri R. K. Patel appearing for the respondent-caveator pointed out that such order of the Tribunal came to be carried in appeal by the Revenue in Tax Appeal No.612 of 2009. The appeal came to be dismissed by the Order of this Court (Coram : D. A. Mehta & Ms. H. N.
Devani, JJ) on 26th July 2010. The Division Bench made following observations :-
5. As can be seen from the impugned order of the Tribunal, before the Tribunal it was contended on behalf of the assessee that the assessee was in the business of stone crushing since over 30 years. In support of the said contention, assessment orders under section 143(3) for the years 1991-92, 1992-93, 1993-94 and 1994-95 had been filed. It was submitted that the assessee was carrying on the same business of giving machinery for labour work under the name of his proprietary concern M/s. Saurashtra Supplying Company. The assessee had produced bills of labour receipts and had pointed out that the assessee was having a stone crushing plant at Navagam which mainly consisted of three stone crushing machines. The book value of the machineries was the written down value as at the end of the relevant year. The assessee was following the practice of giving the entire machinery at the disposal of the contractors, who used to bring their own rubble to the site along with their labour. The contractors used to incur the entire expenses of whatever nature for the crushing of stones. That the assessee used to charge Rs.300/- per brass for the use of machinery hence, the assessee did not have to incur any expenditure on fuel or labour. It was also submitted that the names of the persons concerned were mentioned in the bills. Since the amount was taken in advance, the assessee did not maintain the addresses of the persons who used the machinery for crushing stones. It was submitted that since the machinery was a business asset which had been commercially exploited for the purpose of business, the income derived therefrom was business income. It was also submitted that since there was a definite source of income and there was exploitation of a commercial asset, the decision of this High Court in the case of CIT vs. Fakir Mohmad Haji Hasan, 247 ITR 290 would not be applicable.
6. The Tribunal after appreciation of the evidence on record found that the issue involved in the present case was as to whether the income of the assessee was to be treated as business income or income from undisclosed sources. The Tribunal found as a matter of fact that the assessee was exploiting his land and machinery for putting it to use to make chips from boulders. The Tribunal was of the view that since the assessee was doing job work, it could not be said that there was no commercial exploitation of the asset. The Tribunal further noted that the nature of the business carried on by the assessee was such that it was practically impossible for the assessee to go to different places and purchase raw material which consisted of big boulders for the purpose of crushing. That the assessee therefore, had to depend upon contractors for the purpose of making big boulders available which, in turn, would be converted into chips which could be used by the contractors for building purpose. Simply because the contractors had incurred the expenditure on labour and fuel, it could not be said that the assessee had not exploited the capital asset. From the record as well as the assessment orders placed on record, the Tribunal found that the assessee was in the business since very long. The Tribunal noted that in the assessment orders, it had been mentioned that the business of M/s. Saurashtra Metal Supply is to do job work in the field of crushing stones, metal and 'kapchi' . The assessee had also explained that he had since then merged all his proprietary concerns. In the light of the aforesaid facts, the Tribunal found that the stand of the Department that the assessee had not carried on any business was not borne out by the record and held that since there was an exploitation of a commercial asset, the income derived from labour was an income from business.
7. As can be seen from the assessment order, the assessee had credited an amount of Rs.2,15,80,800/- as labour income. The Assessing Officer after affording the assessee an opportunity to explain the source of the said amount, found that the source and genuineness of the amount of Rs.2,15,80,800/- credited as labour receipt in 1436 different names in the books of accounts of the assessee was not established by the assessee as genuine labour receipt and accordingly held the said amount to be income from undisclosed sources and added the same to the taxable income of the assessee as deemed income of the assessee under section 68 of the Act. Section 68 of the Act which makes provision for cash credits provides that where any sum is found credited in the books of assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of the previous year. In the facts of the present case, it is not as if the sum of Rs.2,15,80,800/- is found to have been only credited in the books of the assessee maintained for the relevant previous year but the assessee has shown the same to be income from business for the assessment year in question. Thus, in the present case, the assessee had already shown the same to be income in the present year hence, the question of invoking the provisions of section 68 would not arise at all. Section 68 of the Act does not permit changing of head of income already disclosed.
Besides, as can be seen from the impugned order of the Tribunal, the Tribunal has upon appreciation of the evidence on record recorded findings of fact to the effect that the respondent assessee was exploiting his land and machinery by putting the same to use for making chips from boulders. That the labour income had been derived by exploitation of the commercial asset of the assessee and as such is a business income. In the circumstances, the conclusions arrived at by the Tribunal being based upon findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it cannot be stated that the Tribunal has committed any legal error so as to give rise to a question of law.
9. In relation to proposed question no.2, as can be seen from the impugned order of the Tribunal, the Tribunal has recorded that the Assessing Officer and Commissioner (Appeals) had mainly disallowed the interest on the ground that the income of the assessee was to be taxed as income from undisclosed sources and not as business income. The Tribunal having already held that the income of the assessee was to be taxed as business income and not as income from undisclosed sources, deleted the addition in relation to interest expenditure. However, before the Tribunal, the Assessing Officer had pointed out that interest amounting to Rs.42,87,359/- had not been paid to the Rajkot Nagrik Sahakari Bank and as such was not allowable under section 43B of the Act. The Tribunal, therefore, confirmed the addition to the extent of Rs.42,87,359/- since the assessee had not paid the amount and deleted addition to the extent of Rs.1,69,12,024/-. The conclusions arrived at by the Tribunal in relation to proposed question no.2 are merely by way of necessary corollary to the conclusion arrived at in relation to proposed question no.1 and as such do not give rise to a question of law as proposed or otherwise.
In the result, present Tax Appeal is also dismissed.
(AKIL KURESHI, J.) (Ms. SONIA GOKANI, J.) Prakash* Page 5 of 5