GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (11) TMI 287 - BOMBAY HIGH COURT

2015 (11) TMI 287 - BOMBAY HIGH COURT - [2015] 379 ITR 160 (Bom) - Addition 'on money' receipt - Held that:- The finding reached by officers of the Tribunal is essentially a finding of fact. There was evidence available on record indicating receipt of 'on money' particularly for the period 1989 to 1996. This evidence of receipt of 'on money' with regard to the sale of Stenter machines is found in the appellant's letter dated 25 July 1998 is an admission of receipt 'on money' for sale for Stenter .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lausible view. This view has not been shown to be arbitrary or perverse. - Decided against assessee.

Claim of the expenses made in cash disallowed - Held that:- In the present facts, we find that the documents found during the course of the search are inchoate. It does not indicate the person to whom the payment has been made, the address of the recipient, the person by whom the payment is made and the documents itself indicates that it is prepared for either seeking of funds or reimb .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

der this Act that the contents of such documents are true and correct. It will be noted that the section uses the word 'may presume' and not 'shall presume' or 'conclusively presume'. The words 'may presume' are in the nature of discretionary presumption different from a compulsory presumption. Therefore this presumption has to be invoked by the authorities passing an order under the Act particularly when the invocation of such presumption is discretionary on the authorities. During the course o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not bring about any material change in the conclusion arrived at upon the existing facts.The finding of facts recorded by the authorities under the Act on the issue of payment not being made is a possible view. The same is not shown to be perverse on arbitrary. - Decided against assessee.

Consideration received on sale of scrap - Held that:- the conclusion reached by the majority members of the Tribunal that there was in fact sale of scrap is a possible view. This is particularly so a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f scrap, but scrap is certainly generated during the course of manufacturing final products, cannot be faulted. The appellant-assessee was manufacturing Stenter machines and in the normal course there would have been scrap generated in the manufacturing Stenter machines. It is the scrap which is likely to be sold in the open market for the consideration received by the appellant. Moreover, the appellant has not produced any evidence before the authorities to indicate who the suppliers of the scr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es i/b Dave & Girish & Co. For the Respondent : Mr. Suresh Kumar, Advocate JUDGMENT ( Per: M.S. Sanklecha, J. ) This appeal under Section 260A of the Income Tax Act, 1961 (the 'Act') challenges the order dated 6 July 2000 passed by the Income Tax Appellate Tribunal (the 'Tribunal'). The impugned order of the Tribunal disposes the revenue's appeal for the block period 1 April 1986 to 12 September 1996. 2. This appeal was admitted by this Court on 29 July 2002 on the fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t he has a third view? (3) Whether on the facts and in the circumstances of the case, the Tribunal erred in not allowing any deduction out of the expenditure of ₹ 1,82,38,330/? (4) Whether on the facts and in the circumstances of the case, the conclusion of the Tribunal that the loose papers represented receipt of ₹ 8,78,085/, by the appellant on sale of scrap was perverse, being based merely on presumptions, conjectures and surmises? 3. Mr. Nitesh Joshi, the learned Counsel for the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

b) During the course of the search, the stocks lying in premises of the appellant were inventorised. Besides various loose documents, newspapers and books of accounts were seized by the officers of the revenue. (c) Consequent to the search, on 16 December 1996, a notice under Section 158BC of the Act was served on the appellant. Upon service of the above notice, the appellant filed its return of income on 6 March 1997 disclosing its income at ₹ 1.15 crores for the block period i.e. 1 April .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llowing: (i) Undisclosed income on account of onmoney on sale of textile machinery Rs.4,10,22,595/ (ii) Expenditure disallowed Rs.1,82,38,330/ (iii) Undisclosed Income on sale of scrap ₹ 8,78,085 ₹ 6,01,39,010/ (e) Being aggrieved, the appellant filed an appeal from order dated 30 September 1997 to the Tribunal. The appeal was filed to the extent of the following three additions made by the Assessing Officer: (i) Receipt of 'on money' to the extent of sale of textile machiner .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

three issues: (i) 'Onmoney' received for the period 198689 ₹ 40.39 lakhs The Accountant Member sustained the addition only to the extent of ₹ 10 lakhs. The Judicial Member sustained the addition to the extent of ₹ 32.30 lakhs. (ii) Disallowance of alleged expenses ₹ 1.82 crores The Accountant Member allowed an amount of ₹ 45.59 lakhs as expenditure out of ₹ 1.82 crores as claimed. The Judicial Member disallowed the entire claim for expenditure of ͅ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

difference of opinion as under: (i) 'on money' for the period 1986 to 1989 the addition of only ₹ 10 lakhs is sustained. Thus agreeing with the view of the Accountant Member of the Regular Bench of the Tribunal; (ii) disallowance of alleged expenses, the entire claim of of ₹ 1.82crores was held to be not sustainable. Thus agreeing with the view of Judicial Member of the Regular Bench of the Tribunal; and (iii) sale of scrap, the entire addition of ₹ 8.78 lakhs was sust .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the period 1986 to 1989; (ii) On the issue of disallowance of expenditure, the amount of ₹ 1.82 crores made by the Assessing Officer was sustained; and (iii) On sale of scrap, the addition of ₹ 8.78 lakhs made by the Assessing Officer was sustained. (i) Consequent to the order dated 6 July 2000, the appellant had preferred the present appeal which was admitted on 29 July 2002. We shall now deal with the three substantial questions of law which according to the appellant arise for ou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

received was ₹ 40.37 lakhs. (b) The appellant does not dispute the Assessment Order dated 30 September 1997 to the extent it holds receipt of 'on money' to the extent of ₹ 3.69 crores for the period 1 April 1989 to 12 September 1996. The appellant on the issue of receipt of 'on money' only disputes that it had received any 'on money' during the period 1 April 1986 to 31 March 1989. (c) Mr. Joshi, the learned Counsel for the appellant submits that the addition .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Thus, so far as the period 1 April 1986 to 31 March 1989 is concerned, as no incriminating evidence was found evidencing receipt of any 'on money' either by the appellant or it's agents on the sale of Stenter machines, the addition on account of 'on money' is bad. (ii) Any evidence found of receipt of 'on money' for the period 1989 to 1996 cannot by itself be the basis of the estimating undisclosed income for the period 1986 to 1989 as has been done in this case; an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

med as expenditure were paid out of cash receipts. In particular, he invites our attention to Annexure 'A' and 'C' to the Assessment order which indicates that payments had been made in cash during the year 1988-89 admittedly out of amounts received in cash by the appellant; and (ii) The appellants in reply to the show cause notice have themselves offered ₹ 5 to 7 lakhs as being an amount received in cash as about 10 Stenter machines were sold during the period 1986-89 in S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y in the books of account or other documents or transactions which have not been disclosed or would not have been disclosed for the purposes of the Act. It is submitted that in this case, there is no evidence in the form of any entry in the books of account or any other document to establish receipt of 'on money' by the appellant. Consequently, the amount of ₹ 10 lakhs being added to the appellant's income as being 'on money' received for the period 1986-1989 is unsusta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tside the regular books of accounts was a subject of consideration by the Supreme Court in Commissioner of S.T. Vs. H.M. Esufali AIR 1973(SC) 2266 and it was not disturbed. This interalia on the ground that the task of detecting escaped turnover is not easy and would involve some element of guess work. The above decision of Apex Court is sought to be distinguished on the ground that it was a case of best judgment assessment and therefore would have no application to the case of undisclosed incom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ut of amounts received in cash according to the appellant. (f) Be that as it may, we find that the impugned order has proceeded on the basis that the appellant had himself admitted to receipt of 'on money' to the extent of ₹ 6 to 7 lakhs in its letter dated 25 September 1997. This according to the appellant is an incorrect reading of the communication as in that communication, the appellant had specifically stated that there is no receipt of 'on money' by the appellant duri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unication by the appellant dated 25 July 1997 which reads as under: Without prejudice to the above, we beg to state that we had sold about 10 machines, amounting to ₹ 1,30,56,000/during this period in Surat market. Discrepancy in figures, if at all is to be considered should be within the region of ₹ 5 lakhs to ₹ 7 lakhs. A list of parties to whom the machines were sold is enclosed. We submit that the receipt of portion of sale price in cash is peculiar only to Surat market. Fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is the full and final sale proceeds which need no disturbance. (emphasis supplied) (g) From the above, it is evident that the appellants have themselves admitted that sale in Surat market had to be in cash as the buyers of the Stenter machines would insist on paying the appellant a part consideration in cash. Thus the appellant had no option but to accept the same. This coupled with the fact that in its appeal memo to the Tribunal, the appellant has urged the following ground: The Assessing Off .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s undisputedly, receipt of 'on money' even for the period 1 April 1986 to 31 March 1989 is admitted by the appellant. The estimate of ₹ 10 lakhs on the consideration of the facts is not shown to be perverse. (h) The appellant interalia placed reliance upon the following decisions: CIT Vs. Dr. M.K.E. Memon 248 ITR 310 (Bom) CIT Vs. R.M.L. Mehrotra 320 ITR 403 (All) CIT Vs. Faqir Chand Chamanlal 262 ITR 295 (P&H) CIT Vs. Rajendra Prasad Gupta 248 ITR 350 (Raj) CIT Vs. Smt. Usha T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

'on money' was received by the appellant even for the earlier period. These decisions are of no assistance as the addition on account of 'on money' is based on evidence and the admission of the appellant. (i) We are of the view that the finding reached by officers of the Tribunal is essentially a finding of fact. There was evidence available on record indicating receipt of 'on money' particularly for the period 1989 to 1996. This evidence of receipt of 'on money' .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Tribunal, that the addition of ₹ 10 lakhs as receipt of 'on money' for the period 1986 to 1989 in the circumstances of the case on appraisal of the facts before them is a plausible view. This view has not been shown to be arbitrary or perverse. Thus Question No.1 is answered in negative i.e. in favour of the revenue and against the appellant-assessee. 6. Regarding Question No.3: (a) The claim of the expenses made in cash to the extent of ₹ 1.82 crores was disallowed by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts paid as speed money, protection money to union workers and (iii) Documents indicating an expenditure of ₹ 55.04 lakhs paid as overtime to the workers. The expenditure in the aggregate was ₹ 1.82 crores. The Assessing Officer in his order dated 30 September 1997 did not accept that any expenditure was incurred on the ground that complete evidence in support of payment was not provided. It further added the same as appellant's income under Section 69C of the Act as the appellant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ant may have incurred some expenditure for business purposes. The rest of the expenditure was disallowed. While the Judicial Member denied the entire deduction on the ground that no evidence had been led to establish that any expenditure had been incurred. In any event, according to him, the same would also be hit by the Explanation below Section 37(1) of the Act. Similarly, the third member concurred with the view of the Judicial Member and also held that the appellant had not established that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has been spent for the purposes as reflected in the seized documents. It was submitted that once the receipt of amount in cash was accepted, the payment in cash should also be accepted. In support, reliance was placed upon the decision of Kerala High Court in CIT Vs. P.D. Abraham @ Appachand 349 ITR 452. (ii) In any view of the matter, Section 292 of the Act, which was introduced by the Finance Act, 2007 with retrospective effect from 1 October 1975, raise a presumption that any document found d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is submitted that the appeal be restored to the Tribunal to reconsider this issue on application of Section 292C of the Act. (iii) In any case, the disallowance of the expenditure in terms of Explanation to Section 37(1) of the Act is concerned, it would only be applicable if the purposes of the expenditure was an offence or if it was prohibited by law. The impugned order does not establish that the purposes for which the expenditure was incurred in cash was an offence or it was prohibited by la .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es of the recipients nor their addresses. The findings of the Assessing Officer have also been corroborated by the impugned order of the Tribunal. Each of them separately hold that the appellant has not been able to establish that any expenditure was in fact incurred as claimed. (ii) The finding of the Assessing Officer as well as of the Tribunal in the impugned order that no payment having been made by the appellant so as to claim deduction on account of expenditure, is a finding of fact. This .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

so that the expenditure has been incurred for the purposes of business. It is only thereafter that the occasion to examine the explanation to Section 37(1) of the Act would arise. It is therefore submitted that in the facts of this case the examination of Explanation to Section 37(1) of the Act is not warranted. (iv) The retrospective amendment to Section 292C of the Act would not come to the aid of the appellant as the same only gives discretion to the revenue authorities, to presume that the d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

exclusively for the purposes of business. The Assessing Officer on detailed examination of the facts has held that the appellants were unable to establish that payments had in fact been made. This on the basis that the identity of the recipients and their addresses is not forthcoming nor is the identity of the persons who made the payment of such huge amounts is forthcoming. Besides the loose papers do not indicate clearly whether or not the money has been paid. The documents indicated seeking o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

en reiterated independently by the Accountant Member that no concrete evidence has been produced by the appellants so as to establish that the payments as claimed by them had in fact been made. Notwithstanding the above, the Accountant Member did allow deduction 25% of the total expenditure claimed on the ground that it may have been incurred for business purposes. This after holding that the exact quantification is not possible. (g) On the other hand, we find that the Judicial member on conside .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion 37(1) of the Act. Similarly, the third member to whom the issue of allowablity of the expenditure as deduction was referred to has held that the appellants had not furnished any evidence what so ever to prove the expenditure was incurred and that it was incurred for the purposes of business. (h) Therefore we notice that the impugned order of the Tribunal has come to a conclusion that there is no evidence produced to prove that the expenditure claimed as deduction was in fact incurred by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and the Tribunal, the findings arrived at cannot be said to be perverse and/or arbitrary. In fact there is no challenge to the aforesaid finding on the ground that it is perverse. It is a plausible view on the basis of the evidence available. (i) The appellants contended that once the authorities have accepted that amounts were received in cash, it must necessarily also accept that expenditure has been incurred in cash. The reliance is placed upon the decision of the Kerala High Court in P.D. A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d have no application to the present facts. (j) The reliance is placed on Section 292C of the Act which was introduced by the Finance Act, 2007 with retrospective effect from 1 October 1975 by the appellant to submit that the documents found during the course of search are presumed to correctly reflect the facts. It is on the basis of the documents found during the course of search that the Assessing Officer had classified them into three different categories indicating the alleged heads of expe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icates that it is prepared for either seeking of funds or reimbursement of funds. Therefore even if the presumption is to be applied and the documents are accepted as true, it would not lead to the conclusion that payments have been made in cash so as to claim the expenditure. Thus no purpose would be served in remanding the issue to the Tribunal. Further Section 292 of the Act provides that where any documents are found in possession or control of any person in the course of search under Sectio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hen the invocation of such presumption is discretionary on the authorities. During the course of the assessment proceedings, the appellant-assessee sought to explain the fact that these expenses on which the deduction is claimed had in fact been incurred. This was in response to the show cause notice issued to the appellant. Thereafter Explanation offered by the appellant was not found satisfactory on the basis of the evidence available before the authorities and the Tribunal. In this view of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nce was placed upon numerous decisions. However, in the facts of the present case, this would arise for examination only if we were come to the conclusion that amounts claimed as expenditure had in fact been incurred by the appellant-assessee. Therefore in the present facts, we have not examined the issue of applicability of Explanation to Section 37(1) of the Act to the payments made. Consequently, the numerous case laws cited at the bar also not examined. (m) The finding of facts recorded by t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ription of material, corresponding weight per kg. and the rate applied. Besides at the bottom of each of the loose pages, there is a signature below the words 'received' with date also thereon. Some of the chits which were recovered also indicates truck numbers. The Assessing Officer was of the primafacie view that these indicated sale proceeds of scrap material which have not been accounted in the regular books of accounts. Consequently, the Assessing Officer issued notice to the appell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ept the contentions of the appellant-assessee and on facts held that in the course of manufacture of Stenter machines, scrap would be generated and it is this scrap which is sold by the appellant-assessee. The Assessing Officer held that scrap is not produced/manufactured, but in the course of manufacturing of finished product, scrap is generated. Thus on facts the Assessing Officer concluded that the amounts indicated in the loose papers aggregating to ₹ 8.78 lakhs was nothing but sale pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the appellant being in possession of the signed document. The Judicial Member on the other hand on preponderance of probability came to the conclusion that in the normal course of human conduct, purchase of scrap if utilized in manufacturing activity would have been recorded in the normal books of accounts as deduction would be available. In these circumstances, he was of the view that purchase of scrap is ruled out and it has to be considered as sale of scrap. The third member on a reference .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cknowledging the receipt of money was found in the possession of the appellant is indicative of the fact that the amount would have been paid on purchase of scrap and seller of scrap would have knowledge of the receipt of the same. This receipt is what is found during the course of the search. Thus, the finding of the Judicial Member and the third member is not only erroneous but also perverse. Thus the same has to be deleted. 9. On the other hand, Mr. Suresh Kumar points out that these findings .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version