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CIT vs. M/s Golani Brothers (Bombay High Court)
September, 26th 2017

S. 69C "On Money": If the unaccounted expenditure incurred is from the 'on money' received by the assessee, then, the question of making any addition u/s 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. Once the 'on money' is considered as a 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

(i) The Tribunal had before it several issues for consideration in the appeals of the Revenue as well as the assessee. The principal issue being the deals and transactions with those who are interested in buying shops, book them in advance and pay certain sums in cash. The initial disclosure of the assessee on this cash receipt was not found to be satisfactory. It was rather a misleading explanation and which led to several actions, including search and seizure. After the materials were seized, including incriminating documents, the Assessing Officer went about the exercise of scrutinising the revised return of income. During the course of the same, several queries and questions were raised. The ‘on money’ deals were probed in the backdrop of a contract awarded by the Jalgaon Municipal Council to the respondent/assessee contractor and developers. There were certain shops which were to be allotted to the nominees of the Municipal Council and certain shops could have been sold in open market. It is in relation to the shops and sold essentially in the open market that the issue arose for determination. The sums received in cash so as to book the shops were paid by the interested parties. These interested parties were identified, equally the shops and the consideration determined. If the total consideration was determined and certain component of it was received in advance or as ‘on money’ in cash, then, the Tribunal concluded that the Assessing Officer could have treated that as a receipt. That was a receipt of income which was not disclosed but discovered on account of operations such as search and seizure carried out at the office premises as also the residence of the partners of the assesseefirm. During the course of such scrutiny, the Assessing Officer has found that there were shops and specific in number to be allotted to the nominees of the Municipal Council, shops to be sold in open market, all of which were located floorwise. Therefore, he ought to have carried out a proper exercise, according to the Tribunal. The ‘on money’ could not have been treated as uniform irrespective of the location of the shop. There are specific advantages derived by the location of the shop on the ground floor, or basement and with frontage to the road. Therefore, all these factors and test not being applied, the Tribunal modified the Assessing Officer’s order. The Tribunal, to be fair to both sides, did not probe or scrutinise the source of the power of the Assessing Officer in making reference to the DVO. It proceeded on the footing that such a reference could have been made and if made, what are the consequences thereof. Thus, the consequences then have been considered, properly analysed and to the extent the law permits, the order of the Assessing Officer has been maintained.

(ii) When it was disturbed and interfered with, the Tribunal found that there was indeed a justification for such interference. If the unaccounted expenditure is determined, then, necessarily the question which would arise for consideration before the Tribunal is whether the Assessing Officer was justified in making addition under Section 69C for the years under consideration. The Tribunal, in para 39 of the order under challenge, found that the explanation as derived from the records and placed by both can be traced to the ‘on money’ received at the time of booking/sale of shops. The statement of the senior partner is referred. The senior partner admitted that the sums have been received as ‘on money’ and at the stage aforesaid. Therefore, 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.

(iii) 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.¬


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