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TMI Blog2018 (10) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... both on facts and law. Such an opportunity ought to be extended and no technicalities should come in the way of a proper and complete adjudication of the contested issues. As the last fact finding authority, the Tribunal was, therefore, not empowered to apply the formula and which was invented by it. If there was a discretionary power to correct that mistake, which it discovered and discerned from its order and it was apparent from it, then, that should have been utilised. The order on the miscellaneous application was passed in a haphazard manner. No useful purpose will be served by now sending the matters back to the Tribunal. The matters, if sent back now, may not necessarily benefit the Revenue. It is only a conjecture and surmise or pure guess work that when sent back, the Revenue will necessarily succeed. There is no such guarantee. In the facts and circumstances peculiar to this case and because there are on- money details which were in issue, but such transactions having been flatly denied much less the quantum derived therefrom, all the additions were in the realm of guess work. They were pure conjectures and surmises. Now, sending back both the parties to the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i D.K. Shah (since deceased), the main partner of the applicant/petitioner, was recorded under Section 132(4) of the IT Act wherein he had declared that ₹ 30,00,000/ was received as on- money over and above the agreement value of the units booked in their project at Dadar Manish Market. 7. Due to the search and seizure actions, the assessments were reopened either under Section 147 or under Section 263 of the IT Act. Particularly, assessments for the Assessment Years 1989 -90 and 1993- 94 were reopened under Section 147, and assessment for the Assessment Year 1990- 91 was reopened under Section 263 of the IT Act. 8. It was alleged by the petitioner/applicant that in the initial order of the Tribunal, which is a common order, in para No.12, internal page 11, the Tribunal came to the conclusion that 40% of the on- money be taken as income after observing that the assessee had disclosed 21% of gross receipts in the Assessment Year 1992 93 and therefore it can be reasonably estimated that at least double the percentage, as disclosed by the assessee, constituted the element of profit in the on- money. 9. The petitioner/applicant alleged that this estimate was without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since they were not being heard for a considerable period, the petitioner/applicant followed up the matter. The petitioner was informed by the Registry of the Tribunal under its covering letter about the rejection of the applications in chamber. That letter is dated 12- 10 -2004. Together with that, copy of the order dated 5- 5 -2004 (Exhibit -Y, page 381) was forwarded to the petitioner. 16. The Tribunal's order of 5- 5- 2004 was challenged by filing a writ petition in this Court being O.S. Writ Petition No.1259 of 2005. This Court passed an order thereon, dated 24-10 -2005, setting aside the Tribunal's order dated 5 -5- 2004. It is stated that the petitioner filed an appeal before this Court in respect of a question of law arising out of the Tribunal's order dated 29- 6 -2001, but as the ground of appeal regarding the quantum of on- money was not decided, no question in that behalf was raised. The Tribunal by its order dated 28- 9 -2007 dismissed the miscellaneous applications and while dismissing them, it held that the initial order, as also the order passed by the Tribunal and impugned in the appeals, decided the matter properly. It is not necessary to allow thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assessee. If indeed the arguments revolved around the extent to which the on- money could be brought to tax, then, the Tribunal should have clearly held that there is a clear admission of the assessee that such on- money was received. If the Tribunal was of that view and that is how it relied upon the statement of Shri D.K. Shah, then, there was no occasion to observe, in para 13 of the initial order, that in Income Tax Appeal No.1708/Bom/95, the assessee had taken an additional ground of appeal in regard to the addition in respect of on- money which had not been originally taken due to oversight. If that ground has been admitted as one of the main ground of appeal, then, the finding in para 12 is clearly inconsistent with what the Tribunal held in para 13 of the initial order. Thus, there was indeed a ground raised before the Tribunal. There is an inconsistency in the findings and conclusions. Our attention is, therefore, invited to para 13 of the Tribunal's order in that behalf. It is submitted by Mr. Mistri that it is erroneous to hold that the ground was not raised at all. The finding is rendered on alternate submissions and not on the main plea or ground. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be set aside and the appeals be directed to be re heard. 23. Further, without prejudice and strictly in the alternative, Mr. Mistri would submit that the petitioner would like to put an end or a quietus to these matters. These are fairly old matters. Even the records may be scattered and it would be difficult, if not impossible, to retrieve and collate them. Even if the petition succeeds and the appeals before the Tribunal are revived, still, both sides would find it difficult to trace out the old records and make appropriate submissions. The petitioner is not averse to buying peace and, therefore, relying upon the charts Mr. Mistri submits that it is possible to leave the matter to this Court and after inviting our attention to the total amount received from the auction by the Revenue and stated to be ₹ 7,04,83,875/ , Mr. Mistri would submit that the assumption by the Tribunal, in the initial order, is highly excessive, exorbitant and arbitrary. Now, on the own showing, the Assessment Officer's conclusions for the Assessment Year 1992 -93 and the estimate of on- money should be ₹ 3,000/ per sq. ft. for the ground floor shops, ₹ 1,500/ per sq. ft. for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petitions are entertained, that would send a wrong signal and message. The assessee would go on taking chances and by change of Advocate and authorised representative re agitate concluded issues. The factual matters then would be reopened and to the detriment of the public revenue. We must, therefore, not uphold the arguments of Mr. Mistri and dismiss this writ petition. 25. Mr. Malhotra submits that for the Assessment Year 1993- 94, the assessee has advisedly not brought any appeal to this Court under Section 260A of the IT Act. In that order, the Tribunal has upheld 40% of the addition. That is now final. The on- money calculation cannot be now reduced and below 40%. On merits, the Department has accepted the work- in- progress method. The assessee suddenly went and changed the method to an estimation of profits at a percentage of the gross receipts. This is not a bona fide act at all. In that regard, our attention is invited to page 210 to 212 of the paper- book and it is submitted that the findings in the order of the First Appellate Authority are eloquent enough. Mr. Malhotra highlights page 211 of the paper- book, which is para 2.3 in the order of the First Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal's order in the field which the Assessing Officer has distinguished on the ground that it was rendered when no construction work had started and there was nothing received as no flats were in fact sold. However, the situation changed from the Assessment Year 1989 -90. The assessee had shown more than ₹ 1.7 crores as receipts from the prospective buyers and there was a pooja performed in the beginning of the accounting year relevant to the Assessment Year 1989 90. It is in these circumstances and by applying the legal principles, the Tribunal, in para 7, finally opined that the profits of each year should be computed and if the method of accounting adopted by the assessee does not serve this objective, then, that method of accounting should be rejected by invoking Section 145 of the IT Act. The Assessing Officer has rightly rejected the method of accounting of the assessee and computed the profits at 15% of the work -in -progress for the respective assessment years. There is no quarrel or dispute raised with regard to this ground in the writ petition. 28. Then, in para 8 the ground raised in respect of method of accounting and common to income tax appeals, which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value. A reference is made to the answer to question No.9, and both the question and the answer are reproduced. Below that reproduction, there is a reference to the finding by the Assessing Officer in the assessment order pertaining to the Assessment Year 1992- 93. The Tribunal's observation that the Assessing Officer in detail has discussed this finding and gathered during the search and estimated the on- money at the rates which we have already enumerated above. 33. In para 10 the argument of the assessee's representative, who submitted that addition of the entire on- money cannot be accepted, is noted. Then, the Advocate urged that it is an accepted fact that out of the on- money reasonable expenses have to be deducted and the balance profit is to be taxed. The entire on- money does not represent income. There is a legal argument then canvassed that the proviso to Section 69C of the IT Act was inserted with effect from 1 -4 -1999 and is not retrospective in operation. Thus, this is how the Tribunal sums up the assessee's arguments on the point. There is a reference to several case laws relied upon by him. 34. The Departmental representative referred to the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew has also been accepted in the case of CIT V. S.C. Kothari (82 ITR 794)(SC). From the aforementioned two decisions, it is clear that if a business is illegal neither the profits earned nor the losses incurred would be enforceable in law. But the profits from such business would be taxable and in calculating the same expenses relatable to that business have to be allowed. Main object is to compute real income of the assessee. As regards the allowability of expenses, we find that in the assessment year 1990 91, the A.O. while scrutinising the documents found a substantial evidence regarding on- money marked as Annexure A 3, on the Dadar Manish Market Project site. This annexure A 3 contained the detailed chart regarding the work done for every month. During the financial year 1989 90 the project expenses incurred on the site comes to ₹ 1.09 crores, while the total project expenses debited in the return for the assessment year 1990 91 was only ₹ 77.12 lakhs, after excluding ₹ 12 lakhs towards water proofing charges which were provisional. The A.O. found that there was difference in the total project expenditure of about ₹ 44 lakhs. He also pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the work done as per the books be added. 37. In para 13, which we have reproduced above, all the additional grounds have been admitted and in para 14 it is held that, the issue of on- money raised in Income Tax Appeal Nos.2872/M/97, 3340/Bom/94, 2873/M/97, 1929/M/99 and 1708/Bom/95 is decided as above. 38. Upon a reading of this paragraph, we find some substance in the complaint of Mr. Mistri. It is difficult, if not impossible, to reconcile this conflict and contrary conclusions, if the Tribunal admits the additional grounds of appeal and indeed refers to them, then, how these grounds of appeal have been dealt with ought to be clarified in the order itself. The Tribunal is a last fact finding authority. It is obliged to consider the appeal on facts and law. The aggrieved parties before the Tribunal must get an opportunity to demonstrate that the findings of the Assessing Officer even if confirmed by the First Appellate Authority, are indeed erroneous both on facts and law. Such an opportunity ought to be extended and no technicalities should come in the way of a proper and complete adjudication of the contested issues. Ultimately, Courts and Tribunals are set up an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. Though Mr. Malhotra would like us to go through the entire record and would like us to uphold the order impugned in the petition, in the light of our foregoing observations and findings, we find it difficult to accede to Mr. Malhotra's submissions. If we accept them, we would be putting our seal of approval or imprimatur on the perfunctory manner of disposal of legal proceedings by the last Appellate Authority. That would make a mockery of the law. It is now very difficult even for the Revenue and might prejudice it in the event the matters are sent back, for afresh adjudication, to the Tribunal. The matters are appeals pertaining to the Assessment Years 1989 90 to 1993 94. The initial order of the Tribunal, which is a common order on these appeals, has been delivered and pronounced on 29- 6-2001. The miscellaneous application filed to rectify the mistakes allegedly crept in this order came to be rejected some time in October, 2001. Thereafter, fresh miscellaneous applications were filed and which were rejected on 5 -5- 2004. This order of the Tribunal came to be set aside in a writ petition filed in this Court by the assessee. That order of this Court has already been note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come would be a fresh adjudication of all the appeals and after a good 22 years from the end of the assessment year. It would be a travesty of justice if after 22 years from the date of the order of the First Appellate Authority and seventeen- and -half years after the order of the Tribunal these appeals are re heard. 44. Today, we have a position where the on- money additions which have been made by the Income Tax Department are to the extent of ₹ 11,52,15,097/ . The additions sustained by the First Appellate Authority are to the extent of ₹ 4,64,59,769/ . 45. On our suggestion, charts were made and handed over. They are all on record. Though the Income Tax Department would justify the gross additions to the extent of ₹ 11,52,15,097/ , but the additions to the extent of ₹ 4,64,59,769/ have been sustained by the Income Tax Appellate Tribunal. Therefore, the amount of ₹ 11,52,15,097/has never been sustained. Even if the appeals brought by the Revenue before the Tribunal were only partly allowed and that order has gained finality, the Department could not recover anything above and what is sustained by the Income Tax Appellate Tribunal. The susten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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