(Per : HONOURABLE MR. JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgment of the Tribunal dated 19-12-2008 raising following questions for our consideration:-
"Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) and thereby setting aside the issue relating to addition of Rs.1,95,60,427 to the file of the Assessing Officer with the further rider to verify the assessee's claim that the said income of Rs.1,95,60,427 computed on the basis of Annexure-A-26 (Page No.122 & 137 to 333) was gross income or net income and if It is found that the income so computed was gross, then the assessee's claim of expenses, disallowance of which has been confirmed by CIT(A), may be allowed?"
"Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the addition of Rs.76,23,000/- made on account of illegal expenses?"
"Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT(A) deleting the addition of Rs.4,38,81,688 made in respect of unexplained cash receipts?"
2. Insofar as questions [A] and [B] are concerned, we have already dealt with them in connected Tax Appeal No.1924/2009 arising out of the same judgment of the Tribunal. The sequence of questions presented before us was in the reverse. We had found no reason to entertain these questions. In the said order, we made the following observations:-
"2. At the outset, we may notice that questions No.[B] and [C] pertain to the same issue and, therefore, basically overlap.
3. With respect to question [A], the issue arises thiswise. During search and seizure operation with respect to the respondent assessee and the group companies, the Assessing Officer came in possession of certain papers containing entries of payments to Government officers. The Assessing Officer deciphered such entries and concluded that a total payment of Rs.76.23 lakhs was made which was not reflected in the books of accounts. In the assessment order under consideration, the Assessing Officer confronted the assessee with such payments. The assessee responded to such query by raising three contentions, (1) that there are no specific annexures with respect to such alleged payments (2) that whatever payments the assessee had made to Government agencies towards RTO tax, sales tax etc. have been duly accounted in the books and (3) that the other records seized during the search operations with respect to other companies, have no bearing on the accounts of the assessee and the payments, if at all were made to Government officials outside the books, were not made by the assessee.
4. The Assessing Officer, however, did not accept such contentions and proceeded to hold that the payment of Rs.76.23 lakhs was made by the assessee and that such expenditure would not fall within section 37(1) of the Income Tax Act, 1961 (hereinafter to be referred to as 'the Act'). The Assessing Officer held such amount as a deemed income of the assessee under section 69C of the Act.
5. The assessee carried the issue in appeal before the Commissioner, however unsuccessfully. Thereupon the assessee approached the Tribunal. The Tribunal by the impugned order deleted the additions holding that the Assessing Officer has not referred to any evidence which could show that the notings pertaining to such expenditure establish that the expenditure was incurred by the assessee. In absence of such finding, amount of such noting cannot be added to the assessee's income by invoking section 69C of the Act. The Tribunal observed as under:-
"7.1 So far as present case is on concerned, it is observed from paragraph No.9, wherein the Assessing Officer has recorded the assessee's explanation that the assessee had neither claimed the deduction of these expenses nor had admitted to have incurred the expenses in question. The relevant part of the assessee's reply, reads under:-
"Vide para 5 of your letter dtd. 31.7.2001, your goodselves have asked us to furnish the details of payment made to the government officials and government agencies from books of account seized from Samudra Complex, Gopinath Complex, Shriram Estate and residence of Yogesh Marwadi. In this connection we have to explain as under:
(a) At the outset your goodselves have not pointed out the specific Annexure and page numbers in which such alleged payments to government officials and government agencies have been made.
(b) Whatever payments were required to be made by the assessee company such as RTO tax, Sales tax etc. have been made and which have been accounted for in the books of account.
(c) The other records which your goodselves is referring, which have been seized from the Gopinath Estate, Shriram Estate and residence of Yogesh Marwadi pertains to the business activity carried an by the group in various firms and companies, Records pertaining to us are all account for wherein all the payments made to the government have been duly recorded. In the absence of details of specific Annexure which is in the mind of your goodselves, we are unable to furnish the details of such payments."
7.2 It is further observed from the Assessing Officer's order that he has made addition of Rs.76,23,000/- just by observing that "On verification, following payments related to Government officials and government agencies; are considered for disallowance of expenditure u/s. 37(1)." No other evidence of any kind has been referred to by the assessing Officer.
7.3 So far as CIT(Appeals)'s order is concerned, he has, again, not referred to any evidence on record, which could establish that the expenditure in question was incurred by the assessee.
8. In view of above facts and circumstances of the case, first of all, we are of the opinion that the assessee having not claimed the deduction of this amount from undisclosed income, there was no question of disallowing the amount considering the same as expenditure incurred by the assessee. The only question with respect to this aspect could be that who had incurred the expenses and what was the source and since, the Revenue, as discussed hereinbefore, has not referred to any evidence which could show that the notings in Annexure A/16 reproduced by the Assessing Officer in paragraph No.9 of the assessment order, in fact, established that it was expenditure and that the expenditure was incurred by the assessee, the amount of such nothings cannot be added towards the assessee's income by invoking the provisions of section 69-C of the Act. Consequently, we are of the opinion that the CIT (Appeals) was not justified in allowing the assessee's claim in part. The order of the CIT (Appeals) is, therefore, set aside and addition of Rs.76,23,000/- having been made by invoking the provisions of section 69-C of the Act is directed to be deleted. Assessee's ground No.1 is allowed, whereas Revenue's ground No.1ii) is rejected."
6. Having heard learned counsel for the revenue and for the assessee, we are of the opinion that the Tribunal has discussed the evidence and accordingly come to conclusions which are purely factual in nature and do not give rise to any question of law. We have, all the same, ourselves perused the order of the Assessing Officer. We are in complete agreement with the view of the Tribunal that the Assessing Officer has not referred to any evidence and come to the conclusion that the expenditure referred to in the document Annexure A/16 was made by the assessee. It may be that such document reflected certain payments made to Government officials. It may be that the Assessing Officer suspected that such payments must have been made by the assessee. However, that would not be sufficient to hold that the expenditure was actually made by the assessee in absence of any other evidence. In the result, this question is not required to be considered.
7. In respect of questions [B] and [C], the Assessing Officer made addition of total sum of Rs.1.95 crores (rounded off) as undisclosed income of the assessee. Such addition was carried in appeal by the assessee before the C.I.T. (Appeals). The C.I.T. (Appeals) was of the opinion that the addition was justified. Such addition must be reduced by the depreciation which the assessee was entitled to. He accordingly, after granting benefit of such depreciation and expenses, reduced the additions of Rs.1.95 crores by 33.73 lakhs (rounded off) and sustained the addition of Rs.1.61 crores (rounded off).
8. This issue was carried further in appeal by the assessee. The Tribunal remanded the entire issue making following observations:-
"10. It was, in view of above facts and circumstances of the case, that the Ld. Counsel for the assessee reiterated the submissions advanced before the Revenue Authorities and pleaded that so far as expenditure is concerned, the undisclosed income having been computed without considering the expenses incurred by Shri Rishabh Jain out of withdrawals made by him, the Revenue Authorities was not justified in rejecting the claim straight-way without verifying the correctness of the same. According to him, the law is that it is the net income, whether as per regular books of account or to be taxed and not to the gross receipts and, therefore, the income of Rs.1,95,60,427/- computed on the basis of page Nos.122 of Annexure A/26, page Nos.137 to 333 of Annexure A/26 and for the period 01/04/1999 to 22/06/1999 by applying gross profit rate was the gross undisclosed income, the assessee was legally entitled to expenses incurred out of withdrawals made by Shri Rishabh Jain which are recorded in the Annexure A/26 itself."
9. When the entire issue is placed back before the Assessing Officer to re-work out the additions on the basis of further inquiry, by applying gross profit rate to ascertain a gross undisclosed income and thereafter to grant benefit of expenses incurred out of the withdrawals made by one of the partners which was recorded in the annexure itself, we do not find any reason to interfere since no question of law arises.
10. In the result, the tax appeal is dismissed."
3. With respect to third and sole surviving question, the issue arises in following background. During the search and seizure operations, the revenue found certain loose papers from the office premises of the respondent assessee company. The Assessing Officer deciphered the notings therein and came to the conclusion that such notings represented unaccounted income of Rs.4.38 crores of that of the assessee. Since the respondent assessee had contended that such documents and the notings therein do not pertain to the respondent assessee but to two individuals namely Mr. Rishab Jain and Mr. Jitendra Jain, the Assessing Officer while framing assessment substantively in the hands of the respondent assessee company, also taxed the same amount on protective basis in case of those two individuals. The Assessing Officer was of the opinion that the entire amount represented the income of the respondent company.
4. The respondent assessee carried the issue in appeal before the Commissioner (Appeals). The Commissioner (Appeals) held that the documents and the notings contained therein pertain to the two individuals and not the assessee company. The unaccounted amount of Rs.4.38 crores thus could not have been taxed in the hands of the assessee. While, therefore, deleting the substantive taxing of the amount in the hands of the assessee company and confirming the protective assessment in the case of the individuals, he further limited the tax liability of such persons not on the entire receipt but on the basis of profit therein. With respect to this later issue, we are not directly concerned in this appeal.
5. Revenue appealed against such order of the C.I.T. (Appeals). The Tribunal confirmed the decision of the C.I.T. (Appeals) making the following observations:-
"17. The Assessing Officer as dealt with this issue as per findings contained in paragraph Nos.8.1 to 8.3 of his order and after allowing the assessee an opportunity to explain the contents at page Nos.1 to 20 of documents found during the search, and marked as Annexure A/1 Rejected the assessee's plea that nothings in that documents were totalling to Rs.4.3 lacs. According to Assessing Officer, the notings were coded after omitting two zeros. In this way, he computed the total of nothings in the aforesaid document to Rs.4,38,81,688/-. The relevant part of the assessment order (paragraph No.8.3) reads as under:-
"8.3 Thus the assessee has contended that the Annex A-1 contains actual figure.
The reply of the assessee is far from the fact. The fact is that the assessee is in receipt of cash of Rs.4.38 crore. It has been discussed conclusively that the Annexure A-1 page 1 to 20 is totally in coded form. The cash book pertains for the period 1.12.94 to 31.3.96. The assessee has stated that the personal transactions for which the cash was withdrawn from common pool is without any supporting evidences i.e. cash books of other concerns which have disclosed the aforesaid income to the Department and paid tax on it.
Further, the suggestion of the assessee to add peak is also not accepted since cash book clearly shows the receipt. Since this cash book is seized from the office of the assessee, it is presumed that the assessee is in receipt of cash of Rs.4.38 crores for which assessee has no explanation to offer. The transactions of Rs.4.38 crore are for the period of 1.12.94 to 31.3.95 relevant to A.Y. 1995-96 and 1996-97.
In view of the above fact, the receipt of Rs.4,38,81,688/- is added as undisclosed income for the period above on substantive basis.
(Addition:Rs.4,38,81,688/-)"
19.1.
So far as present case is concerned, the Revenue has not drawn our attention towards any evidence except its claim of presumption available under law, and, consequently, we are, specially, in view of the fact that the assessee had been denying the ownership of the document from the very beginning and the persons to whom it belonged had also been earning the same from the very beginning, cannot upheld the Revenue's stand. Consequently, we do not find any infirmity in the order of the CIT (Appeals) on this point, which is confirmed.
20. In the result, Revenue's ground No.1(i) is rejected."
6. Having heard learned counsel for the revenue and for the assessee, we are of the opinion that the Tribunal has taken into account the evidence on record and come to conclusions which are purely factual in nature. On the basis of available evidence, the Tribunal while confirming the order of C.I.T. (Appeals) held that there was no evidence to rebut the assessee's contention that the documents do not pertain to the assessee but to the individuals. When the C.I.T. (Appeals) and Tribunal both concurrently came to such factual conclusions, in absence of any perversity, in our view, no question of law arises.
7. In the result, the tax appeal is dismissed.
( Akil Kureshi, J. ) ( Harsha Devani, J. ) hki Top