COMMISSIONER OF INCOME-TAX VS ABHISHEK CORPORATION
2004 P T D 2152
[255 I T R 45]
[Supreme Court of India]
Present: S.P. Bharucha, C.J.L. Shivaraj V. Patil and Arijit Pasayat, JJ
COMMISSIONER OF INCOME‑TAX
Versus
ABHISHEK CORPORATION
Civil Appeal No.8176 of 2001, decided on /01/.
th
November, 2001. (Appeal by special leave from the judgment and order, dated. October 25, 1999, of the Gujarat High Court in I.T.A. No. 272 of 1999).
Income‑tax‑‑‑
‑‑‑‑Reference‑‑‑Question of law‑‑‑Unaccounted receipts‑‑‑Onus in respect of on‑money to show investment of funds‑‑‑Question of law‑‑‑Indian Income Tax Act, 1961, Ss.68 & 256(2).
The respondent‑firm undertook supervision work of two cooperative societies and also booking of flats. Pursuant .to search conducted of the premises of an architect and the two cooperative societies, a paper was seized showing purchase of flat at Rs.455 per sq. ft. though the document in fact indicated the price of Rs.265 per sq. ft. On the basis of this information the Assessing Officer arrived at an investment of Rs.1,58,59,400 as having been made by the firm from unaccounted receipts. Pursuant to a notice from the Assessing Officer the respondent declared undisclosed income of Rs.30 lakhs. The Appellate Tribunal, considering the fact that the respondent was earning only supervision charges and taking into consideration the expenses, etc., arrived at a rate of 1.31 per cent. of undisclosed receipts as net profit; that the undisclosed income was not less than the net profit calculated at 1.31 per cent and that there was no material placed on record to indicate huge investment by the respondent and held that the Department had failed to prove that the claim of the respondent regarding extra expenditure was incorrect. The Tribunal and the 'High Court rejected the Department's application for a reference, inter alia, for the question: "Whether the Tribunal, having held that the assessee had received unaccounted receipts, was justified in holding that the Assessing Officer had to discharge the onus in respect of on‑money by showing that the assessee had invested Rs.1,58,59,400 out of such receipts, whereas the claim of the assessee for extra expenditure was found to be incorrect? "On appeal to the Supreme Court:
Held, reversing the decision of the High Court on that question, that the question of law arose out of the order of the Appellate Tribunal and the Tribunal had to state a case to the High Court on that question.
Being aggrieved by the order passed by the Income‑tax Appellate Tribunal, Ahmedabad Bench "C", Ahmedabad (hereinafter referred to as "the Tribunal"), in R.A. No.869/And of 1997 the Commissioner of Income‑tax, Surat ("the CIT" for short) has filed this application before this Court under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for referring the following questions of law:
(1)Whether on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal was justified in law in admitting a new plea contrary to the facts on record that the net profit in respect of the supervision charges should be linked to the receipts of booking of flats to the tune of Rs.2.63 crores contrary to the provisions of rule 29 read with rule 10 of the Appellate Tribunal Rules and to base its finding thereon?
(2)Whether, on the facts and circumstances of the case, the Income‑tax Appellate Tribunal having held that the assessee has received unaccounted receipts, was justified in law in holding that the Assessing Officer has to discharge the onus in respect of on‑money by showing that the assessee has invested Rs.1,58,59,400 out of such receipts whereas the claim of the assessee for extra expenditure was found to be incorrect?
So far as Question No. 1 is concerned the Tribunal in para. 8 has recorded as under:
"As regards Question No. 1 raised by the Revenue, it is seen that the question talks about acceptance of new plea contrary to the provisions of rule 29 read with rule 10 of the Appellate Tribunal Rules. However, neither any fact contrary to record was stated by the assessee nor it has been noted by the Tribunal in its order and as such rule 10 is not applicable. Similarly; no additional evidence was produced by the assessee. As such rule 29 is also not applicable because a new plea cannot be equated with the new evidence."
So far as Question No.2 is concerned it may be stated that the same has been raised on the premise that the claim for extra expenditure having been incurred by the assessee for earning on‑money was found to be incorrect. The Tribunal has expressed the view that this premise itself is incorrect because the Department has failed to prove that the claim. of the assessee regarding extra expenditure as incorrect. On the other hand, as a result of search by the Department, no unaccounted assets/ investments exceeding Rs.30 lakhs were found by the Department. Before us it was submitted that one Uttamchand Jain who purchased two flats entered into an agreement. The said document was signed by Uttamchand Jain, M.D. Patel and Udai Tejani. It seems that on the top of the page "465 per sq. ft." was mentioned and the sale price of each flat has been calculated accordingly for arriving at a conclusion. The agreement does not refer to the said price. Mr. Naik submitted that the statement of the architect was recorded. Uttamchand Jain has come out with the version that no premium was paid. Except the paper found from Madhavji nothing is placed on record to draw an inference against the assessee. No statement of other flat owner is recorded.
Mr. Soparkar, for the respondent‑assessee, has relied upon a decision of the Division Bench of this Court (Coram: R. Balia and A.R. Dave, JJ.) rendered in Income‑tax Application No 53 of 1999 on April 20, 1999, in the case of CIT v. President Industries. In this case, the Division Bench has observed as under:
"It cannot be matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative."
The assessee, a partnership firm comprising of Udai Tejani and Arvind Patel having equal shares undertook the supervision work of two cooperative societies and also of booking the flats. One Madhavji Patel, architect and builder of the said two cooperative societies was subjected to search and seizure proceedings under section 132(1) of the Act. From the possession of the said Madhavji Patel a paper was seized from which an inference was drawn that one Uttamchand Jain purchased two flats at the rate of Rs.455 per sq., ft. The document in fact was suggesting the price at Rs.265 per sq. ft. The Assessing Officer on the basis of this piece of evidence arrived at a conclusion of addition of income of Rs.1,58,59,400. The paper relied upon was not found from the possession of the assessee or its partners. Extra work was to be carried out by Madhavji Patel for which amount was charged. Uttamchand Jain denied having paid any premium in respect of the flats purchased. If a document is found from the possession of a person, section 132(4A) can be invoked.
In response to a notice the assessee declared undisclosed income of Rs.30 lakhs. In para. 6 and concluding para. of the judgment of the Tribunal it is pointed out that considering the fact that the assessee was entitled to supervision charges taking into consideration depreciation, salary, etc. profit rate will come to 1.31 per cent. Considering the rate at Rs.265 per sq. ft. total receipt would be 2.65 crores on which the profit earned was Rs.3,43,672 (after deducting all expenses). The profit at the rate of 1.31 per cent was not disputed by the Revenue at the time of hearing as observed by the Tribunal. One has to bear in mind that the assessee was engaged as a supervisor. Investment in land, investment in construction work which would be of huge amount is not shown to have been made by the assessee. The Tribunal opined that the undisclosed income of Rs.30 lakhs declared by the assessee is not less than the net profit calculated at 1.31 per cent. The Tribunal also considered the fact that no material on record has been placed to indicate the investment of huge amount by the assessee. Considering all these facts, the Tribunal has rendered its decision on appreciation of material placed on record.
Thus, the Tribunal on appreciation of evidence has found that no referable question of law has arisen. After going through the decision rendered by the Tribunal we are also of the view that no referable question of law arises in this matter. Hence, the application is rejected. Rule discharged. No order as to costs.
The Department preferred an appeal to the Supreme Court.
Mukul Rohtagi, Additional Solicitor General of India (Ms.Neera Gupta and B.V. Balaram Das, Advocates with him) for Appellant.
H.A. Raichura, Ms. S.H. Raichura and Shailendra Singh, Advocates for Respondent.
JUDGMENT
Delay condoned.
Leave granted.
The High Court declined to call for a reference, inter alia, of the following question:
"Whether, on the facts and circumstances of the case, the Income‑tax Appellate Tribunal, having held that the assessee has received unaccounted receipts, was justified in law in holding that the Assessing Officer has to discharge the onus in respect of on‑money by showing that the assessee has invested Rs. 1,58,59,400 out of such receipts whereas the claim of the assessee for extra expenditure was found to be incorrect?"
It did so on an appreciation of evidence and based on certain judgments of that High Court.
We have seen the relevant portions of the order of the Income tax Appellate Tribunal from which the question has arisen. We think that the question, does require the consideration of the High Court. We do not, however, express any view on the merits of the case on either side.
The civil appeal is allowed. The order under challenge is set aside, insofar as it relates to Question No.2 before the High Court. The said question (quoted above) shall stand referred to the High Court for its consideration and the Tribunal shall draw up an appropriate statement of case.
No order as to costs.
M.B.A./1107/FCAppeal allowed.