TMI Blog2008 (3) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of speed money as part of undisclosed income. The speed money amounted to Rs. 83,29,518. Particulars of certain foreign travels were also found out. The foreign travel expenses of Rs. 4,71,779 were also treated by the assessing authority as undisclosed income. The total addition thus made was Rs. 88,01,297. 3. The block assessment was taken in first appeal. The CIT(A) confirmed the addition of speed money of Rs. 83,29,518. But he deleted the addition of Rs. 4,71,779 relating to foreign travel expenses. 4. The assessee as well as the Revenue, both were aggrieved by the order of the CIT(A). The assessee objected to the confirmation of the addition of speed money amounting to Rs. 83,29,518. The Revenue, on the other hand, objected to the deletion of foreign travel expenses of Rs. 4,71,779. The assessee came in appeal in IT(SS)A No. 703/Mum/2002 and the Revenue came in appeal in IT(SS)A No. 684/Mum/2002. 5. The above two cross-appeals were heard and disposed of by the Tribunal through its common order dt. 25th Aug., 2006, as already stated above. In assessee's appeal, the addition of speed money was confirmed by the Tribunal. But relief was given to the assessee in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order Without making any effort to exercise the right of examination before the assessing authority, the assessee company has made it a complementary ground before the CIT(A) in first appeal. It is in that context, the CIT{A) held that there was no need to give an opportunity to cross-examine Shri S. Srinivasan, who was the employee of the assessee for 15 years. The observation of the CIT(A) may not be proper in law. But still that does not help the case of the assessee. Before the Tribunal also, the assessee company has raised a complementary ground that the assessee was not given an opportunity of cross-examination. It is true in the course of argument of the case before the Tribunal that the learned counsel for the assessee has raised it as the first and foremost ground of appeal. 16. In the facts and circumstances of the case we have to state that the assessee never required the AO to provide an opportunity to cross-examine Shri S. Srinivasan and the assessee has not exercised its right to place its evidence through cross-examination before the assessing authority. This right cannot be invoked before the appellant authorities. Therefore, this objection raised by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to collect materials to facilitate assessment even by private enquiry. But if he desires to use the materials so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it. The Hon'ble Madhya Pradesh High Court in the case of Universal Cables Ltd. vs. Union of India (1977) Tax LR 1825, 1833 has gone a step further to hold that even when the material used is within the knowledge of the person proceeded against, he must be told that it would be used against him, for, unless he is so informed he would have no opportunity of offering his explanation for meeting the inference that the authority seeks to draw from it. 2.4 As already stated above, no such opportunity was given by the learned AO and also by the learned CIT(A) by refusing to allow the assessee to cross-examine Sri Srinivasan. Because of the refusal of the learned CIT(A) to allow cross-examination of Sri Srinivasan, there has been a total denial of natural justice to the appellant. The effect of denial of natural justice to the assessee has been explained by the Hon'ble Supreme Court in the following words, in the case of R.B. Shreeram Durga Prasad Fatehchand Nur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed income' for the purpose of block assessment under s. 158BC. While treating the expenditure relating to speed money as undisclosed income as defined in s. 158B(b) of the IT Act, it appears that the Hon'ble Tribunal has overlooked the above issues as discussed below. 3.1 The provision of s. 158B(b) is reproduced below: 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act (or any expense, deduction or allowance claimed under this Act which is found to be false)'. 3.2 The last two lines as highlighted above were inserted by the Finance Act, 2002 with retrospective effect from 1st July, 1995. The background for inserting these two lines has been explained in the CBDT Circular No. 8 of 2002 dt. 27th Aug., 2002 reported in (2002) 178 CTR (St) 9 : (2002) 258 ITR 13 (St.) as reproduced below: T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the heading, in s. 273(1)(a) or in s. 273(2)(a), the word used is 'untrue'. The word 'false' has also been used in ss. 277, 277A and 278 of the IT Act. In these sections, the word 'false' has been used in combination with the words 'not true'. On a careful reading of these sections, it is clear that the word 'false' is synonymous with the word 'untrue'. If the word 'false' has been used in other sections of the Act with a view to mean 'untrue', it would be reasonable to hold that the word 'false' in s. 158B(b) has also been used in the same sense i.e., untrue. But in the instant case, the assessee has genuinely incurred the expenses relating to speed money which have been duly recorded in its audited books of accounts and supported by vouchers prepared by its employees and as the learned AO at no stage has held such expenses to be false or untrue, it cannot be treated as 'undisclosed income' within the meaning of s. 158B(b) of the IT Act. The disallowance of expenditure relating to speed money in terms of Explanation below s. 37(1) may be permissible in regular assessment of the respective assessment year under s. 143(3)/144 of the IT Act but as such disallowance cannot constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Hon'ble Tribunal in para 17 of its order which may kindly be rectified." 11. As seen from the above detailed submissions made by the assessee petitioner, we find that the following are the mistakes pointed out as apparent from records: "(i) That there is an apparent mistake in the order of the Tribunal in rejecting the assessee's ground for allowing an opportunity of cross-examination of Shri Srinivasan. (ii) That there is an apparent mistake in the order of the Tribunal in treating the entire speed money of Rs. 83,29,518 as undisclosed income under s. 158BC." 12. We heard Shri Sajjankumar Tulsiyan, the learned counsel appearing for the assessee petitioner along with Shri Shashi Tulsiyan. Shri A.D. Joshi, the learned senior Departmental Representative appeared for the Revenue and argued the case. 13. Out of the above two mistakes pointed out by the assessee petitioner, we would like to deal firstly with the apparent mistake explained as treating the speed money of Rs. 83,29,518 as the undisclosed income of the assessee. 14. As already reflected in the orders of the lower authorities and explained by the Tribunal in its order, it is a fact that the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The words "or any expense, deduction or allowance claimed under this Act which is found to be false" was inserted by the Finance Act, 2002 with retrospective effect from 1st April, 1995. It is on the basis of the above amended law that the Tribunal has held that the speed money payment formed part of the undisclosed income even though the expenses were reflected in the books of account. 18. As per the above amended law, any expense, deduction or allowance even if disclosed in the books of account would be treated as undisclosed income only if the expense or deduction or allowance is found to be false. The word "false" has not been defined in s. 158B(b) or elsewhere in the IT Act. The meaning of the word "false" is synonymous with the word "untrue", which word has been used in the text of law contained in s. 273(1)(a) or in s. 273(2)(g) where the word "false" has been used in the heading. The word "false" has been used synonymously with the word "untrue" or otherwise the meaning of the word "false" has been explained as "untrue" in s. 273 of the IT Act, 1961. 19. If analogy is drawn from the meaning given above, it is to be seen that the expense, deduction or allowance claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computing its P L a/c and finally working out the taxable income. All the relevant account statements have been produced before the assessing authority. Therefore, as far as the said expenditure is concerned, it was well disclosed to the IT Department even before the search. Those expenditures were also not false or untrue. Therefore, as rightly argued by the learned counsel appearing for the assessee petitioner, the expenditure relating to speed money payments cannot be treated as undisclosed income under s. 158B(b). 24. As explained above, the Tribunal has committed an error of law in treating the amount of Rs. 83,29,518 as part of the undisclosed income. 25. As this contention of the assessee is accepted by the Tribunal and held that there is a mistake apparent from record, we are not inclined to examine the first point raised by the assessee regarding the issue of cross-examination. 26. Once we find that the Tribunal has committed a mistake in its order, the next step is to rectify the mistake. 27. The rectification can be made in two ways. The first method is to recall the Tribunal order and post the appeal for rehearing and decide the matter afresh. The second metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Merit Enterprises vs. Dy. CIT (2006) 102 TTJ 748 (SB) : (2006) 101 ITD 1 (SB). Now the Supreme Court in the case of CIT vs. Suresh N. Gupta (2008) 214 CTR (SC) 274 : (2008) 297 ITR 322 (SC) has held that proviso to s. 113 is clarifactory and the levy of surcharge is retrospective in nature. Thus, the Supreme Court decision has unsettled the Special Bench decision of the Hyderabad Bench in the case of Merit Enterprises vs. Dy. CIT. Therefore, our decision against the levy of surcharge has become a mistake apparent from records. We are bound to correct the said mistake even if no petition has been moved from either side. As the Tribunal order dt. 25th Aug., 2006 is open before us, we have to rectify the error, suo motu. Accordingly, we hold that the levy of surcharge is justified, if any tax demand is there in the modified order. 32. While allowing the Misc. Appln. No. 42/Mum/2008, we have interfered in our common order dt. 25th Aug., 2006 inasmuch it relates to the appeal filed by the assessee in IT(SS)A No. 703/Mum/2002. We have rectified our earlier finding and held that the speed money of Rs. 83,29,518 will not form part of the undisclosed income. It is deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
