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2017 (9) TMI 735 - HC - Income TaxAddition u/s 69C - additions towards unexplained expenditure as well as on-money - Held that - both the amounts namely the on money as well as the unexplained expenditure cannot be brought to tax according to the Tribunal. If the unaccounted expenditure so incurred was from the on money received by the assessee then the question of making any addition under Section 69C does not arise because the source of the expenditure is duly explained. It is only the on money which can be considered for the purpose of taxation. That is what the Tribunal therefore concluded and once the on money is considered as revenue receipt then any expenditure out of such money cannot be treated as unexplained expenditure for that would amount to double addition in respect of the same amount. It is not a general or vague observation and finding or an inference drawn contrary to any specific legal provision but it is a conclusion imminently possible from the facts and circumstances peculiar to the assessee and its business. It is not as if any general observations have been made particularly on law by the Tribunal and we therefore do not see its reasoning in paras 39 and 40 in isolation or read it out of context. If we peruse the order of the Tribunal in its entirety and for all the relevant assessment years then the reasons in paras 38 and 40 cannot give rise to any substantial question of law. It is a factual exercise which has been performed by the Tribunal and its conclusion that there could not be a double addition given the explanation for the source of expenditure is also a permissible one. It is not as if such a conclusion is unknown to law. That is not even the stand of the Revenue before us. - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of the Revenue's appeals and the assessee's appeals. 2. Validity of the Tribunal's order and the Assessing Officer's conclusions. 3. Consideration of substantial questions of law under Section 260A of the Income Tax Act, 1961. 4. Justification for the addition under Section 69C of the Income Tax Act, 1961. 5. Legitimacy of the 'on money' transactions and their assessment. Issue-wise Detailed Analysis: 1. Legitimacy of the Revenue's Appeals and the Assessee's Appeals: The appeals filed by both the Revenue and the assessee were initially heard by the High Court at Aurangabad, which partially allowed both sets of appeals and quashed the Tribunal's order. The Division Bench confirmed the Assessing Officer's determination of the tax liability of the assessee for the block period following a search and seizure operation. Dissatisfied with this judgment, the assessee filed Civil Appeals in the Supreme Court, which set aside the High Court's judgment on the ground that substantial questions of law were not framed as required by Section 260A of the Income Tax Act, 1961. This led to the remand of the cases to the High Court for reconsideration. 2. Validity of the Tribunal's Order and the Assessing Officer's Conclusions: The Revenue argued that the questions arising from the Tribunal's order for the Assessment Year 1990-91 were substantial questions of law. The assessee, a partnership firm engaged in property development, had its premises searched under Section 132 of the Income Tax Act, 1961, revealing various incriminating documents. The Assessing Officer's order, which included references to the Departmental Valuation Officer (DVO) for determining the cost of construction, was partially modified by the Tribunal. The Tribunal upheld the Assessing Officer's exercise but modified the determination of 'on money' transactions based on the location of the shops. 3. Consideration of Substantial Questions of Law under Section 260A of the Income Tax Act, 1961: The Supreme Court remanded the case to the High Court because the High Court had not framed substantial questions of law as required by Section 260A. The High Court, upon reconsideration, agreed with the assessee's counsel that the Revenue's appeals did not raise substantial questions of law but rather sought re-appreciation of factual materials. The High Court found no perversity or error of law in the Tribunal's order, which had applied the test of no double addition to the income. 4. Justification for the Addition under Section 69C of the Income Tax Act, 1961: The Tribunal concluded that the 'on money' received by the assessee for booking shops was a revenue receipt and could not be treated as unexplained expenditure under Section 69C. The Tribunal found that the unaccounted expenditure was explained by the 'on money' received, and thus, no addition under Section 69C was warranted. The High Court agreed with this conclusion, finding it a permissible one based on the facts and circumstances of the case. 5. Legitimacy of the 'on money' Transactions and Their Assessment: The Tribunal found that the 'on money' transactions were justified and that the Assessing Officer's determination of 'on money' for shops sold in the open market was correct. However, the Tribunal modified the Assessing Officer's order by considering the location of the shops and the advantages derived from their location. The High Court upheld the Tribunal's reasoning, finding no substantial question of law arising from its factual determinations. Conclusion: The High Court dismissed the Revenue's appeals, finding no substantial questions of law. The Tribunal's order, which partially allowed the assessee's appeals and modified the Assessing Officer's determinations, was found to be justified. The High Court also dismissed the assessee's appeals, finding no serious legal infirmity or perversity in the Tribunal's order. All appeals were dismissed without any order as to costs.
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