1 TXA No. 29 of 2013
\nIN THE HIGH COURT OF BOMBAY AT GOA
\nTAX APPEAL NO. 29 OF 2013
\nShri Ivan Singh, S-6, Ground Floor, The
\nLandscape Grand, Behind Mahalaxmi Temple,
\nPanaji-Goa. \u2026. Appellant
\nVersus
\n1. The Asstt. Commissioner Income-Tax,
\nCircle-1 (1), Room No. 208, 1st Floor,
\nAayakar Bhavan, Panaji, Goa-403 001.
\n2. The Commissioner of Income-Tax, Aayakar
\nBhavan, Patto, Panaji, Goa-403 001. \u2026.
\nRespondents
\n***
\nDr. P. Daniel with Ms. Yadika Mandrekar, Advocates for the Appellant.
\nMs. Susan Linhares, Standing Counsel for the Respondents.
\nCoram:- M.S. SONAK &
\nSMT. M.S. JAWALKAR, JJ.
\nDate:- 14 th February, 2020
\nORAL JUDGMENT: (Per M. S. Sonak, J.)
\nHeard Dr. Daniel with Ms. Y. Mandrekar, the learned
\nCounsel for the appellant-assessee and Ms. Susan Linhares, the learned
\nStanding Counsel for the respondent-Revenue.
\n2 TXA No. 29 of 2013
\n2. On 02.12.2013, this Appeal came to be Admitted on the
\nfollowing substantial questions of law:
\n(I) On the facts and in the circumstances of the
\ncase and in law, whether the Tribunal was
\nright in sustaining the additions made of old
\noutstanding sundry credit balances
\namounting to Rs.62,24,163\/- under Section
\n68 of the said Act ?
\n(II) On the facts and in the circumstances of the
\ncase and in law, whether the Tribunal was
\nright in sustaining the allowance made of
\nRs.26,54,158\/- out of labour charges on an
\nadhoc basis ?
\n(III) On the facts and in the circumstances of the
\ncase and in law, whether the I.T.A.T. had any
\nmaterial to confirm the adhoc disallowance
\nof labour charges of Rs.26,54,158\/- on an
\nassumption that the same are not genuine ?
\n3. Insofar as the first substantial question of law is concerned,
\nDr. Daniel has pointed out that Section 68 of the Income Tax Act,
\n1961 (IT Act), is very clear in providing that where any sum is found
\nto be credited in the books of the assessee for the previous year and the
\nassessee offers no explanation about the nature and source thereof or
\nthe explanation offered by him is not, in the opinion of the Assessing
\nOfficer, satisfactory, the sum so credited may be charged to the income
\ntax as the income of the assessee of that previous year. Relying upon
\n3 TXA No. 29 of 2013
\nseveral decisions, Dr. Daniel submits that since, it is the case of
\nRevenue that some amounts were found credited in the books of
\naccount for the financial year 2006-07, there was no question of taking
\ncognizance of such amounts for the assessment year 2009-10 and the
\ncorresponding previous year 2008-09. He submits that on this short
\nground, the first substantial question of law, is liable to be answered in
\nfavour of the appellant-assessee and against the respondent-Revenue.
\n4. Insofar as the second and third substantial questions of law
\nare concerned, Dr. Daniel is quite correct in pointing out that both
\nthese substantial questions of law relate to one and the same issue of
\nadhoc disallowance of labour charges to the extent of \u20b926,54,158\/-.
\nHe submits that in the present case, disallowance is only on the basis of
\nsome suspicion, which is backed by no material as such. He submits
\nthat the disallowance is also based upon the failure on the part of the
\nappellant-assessee to challenge the similar disallowance for the
\npreceding year 2008-09. He submits that in such matters, principles
\nof estoppel or acquiescence cannot be applied and therefore, the
\nsubstantial questions of law are liable to be answered in favour of the
\nappellant-assessee and against the respondent-Revenue. Dr. Daniel
\nreferred to certain decisions in support of his contentions.
\n4 TXA No. 29 of 2013
\n5. Ms. Linhares, the learned Standing Counsel for the
\nrespondent-Revenue supports the impugned judgments and orders
\nmade by the ITAT, on the basis of the reasoning reflected therein. She
\npointed out that the contentions based upon the definition of the
\n\u201cprevious year\u201d and the provisions of the IT Act were never raised and
\ntherefore, are not reflected in the order of the ITAT. She pointed out
\nthat there are concurrent findings of facts in relation to disallowance of
\nlabour charges. She pointed out that opportunity was granted to the
\nappellant-assessee to explain the cash payment against vouchers
\namounting to 2.65 crores in respect of \u20b9 labour charges. For these
\nreasons, she submits that the substantial questions of law may be
\ndecided against the appellant-assessee and in favour of the respondent-
\nRevenue.
\n6. Rival contentions now fall for our determination.
\n7. Insofar as the first substantial question of law is concerned,
\nreference at the outset is necessary to the definition of the expression
\n\u201cprevious year\u201d as defined in Section 3 of the IT Act. This definition
\nprovides that for the purposes of the IT Act, \u201cprevious year\u201d means the
\nfinancial year immediately preceding the assessment year.
\n8. Thereafter, reference is necessary to the provisions of
\n5 TXA No. 29 of 2013
\nSection 68 of the IT Act, which read as follows:
\nCash credits.
\n68. Where any sum is found credited in the books
\nof an assessee maintained for any previous year, and
\nthe assessee offers no explanation about the nature
\nand source thereof or the explanation offered by him
\nis not, in the opinion of the Assessing Officer,
\nsatisfactory, the sum so credited may be charged to
\nincome-tax as the income of the assessee of that
\nprevious year:
\nProvided that where the assessee is a company (not
\nbeing a company in which the public are
\nsubstantially interested), and the sum so credited
\nconsists of share application money, share capital,
\nshare premium or any such amount by whatever
\nname called, any explanation offered by such
\nassessee-company shall be deemed to be not
\nsatisfactory, unless\u2014
\n(a) the person, being a resident in whose
\nname such credit is recorded in the books of
\nsuch company also offers an explanation
\nabout the nature and source of such sum so
\ncredited; and
\n(b) such explanation in the opinion of the
\nAssessing Officer aforesaid has been found to
\nbe satisfactory:
\nProvided further that nothing contained in the first
\nproviso shall apply if the person, in whose name the
\nsum referred to therein is recorded, is a venture
\ncapital fund or a venture capital company as referred
\nto in clause (23FB) of section 10.
\n9. From the plain reading of the provisions of Section 68 of
\n6 TXA No. 29 of 2013
\nthe IT Act, it does appear that where any sum is found to be credited
\nin the books of Account maintained for any previous year and there is
\nno proper explanation for such credit, the sum so credited can be
\ncharged to the income tax as the income of the assessee of \u201cthat
\nprevious year\u201d.
\n10. In the present case, the material on record indicates that
\nthe Assessing Officer has relied upon the credits for the financial year
\n2006-07. However, the sum so credited, in terms of such credit, is
\nsought to be brought to tax as the income of the appellant-assessee, for
\nthe assessment year 2009-10, which means for the previous year 2008-
\n09, in terms of the definition under Section 3 of the IT Act. Dr.
\nDaniel is justified in submitting that this is not permissible.
\n11. The view taken by this Court in Commissioner of
\nIncome-Tax, Poona Vs. Bhaichand H. Gandhi, 141 ITR 67 and by
\nRajasthan High Court in Commissioner of Income-Tax, Rajasthan
\nVs. Lakshman Swaroop Gupta & Brothers, 100 ITR 222, supports
\nthe contentions raised by Dr. Daniel. Similarly, we find that in M\/s
\nBhor Industries Limited Vs. Commissioner of Income Tax,
\nBombay, AIR 1961 SC 1100, the Hon’ble Apex Court in the
\ncontext of provisions of the Merged States (Taxation Concessions)
\nOrder (1949) has interpreted the expression \u201cany previous year\u201d to
\n7 TXA No. 29 of 2013
\nmean as not referring to all the previous years, but, the previous year in
\nrelation to the assessment year concerned. Again, this decisions also, to
\nsome extent, supports the contentions of Dr. Daniel.
\n12. The crucial phrase in Section 68 of the IT Act, which
\nprovides that the sum so credited in the books and which is not
\nsufficiently explained, may be charged to the income tax as income of
\nthe assessee of \u201cthat previous year\u201d also lends support to the
\ncontentions of Dr. Daniel.
\n13. For all the aforesaid reasons, we answer the first substantial
\nquestion of law in favour of the appellant-assessee and against the
\nrespondent-Revenue.
\n14. Insofar as the second and third substantial questions of law
\nare concerned, we find that the Assessing Officer, the Commissioner
\n(Appeals) as well as the ITAT have recorded concurrent findings of
\nfacts. The contention that no opportunity was afforded to the assessee
\nis not correct. The order of the Assessing Officer clearly indicates that
\nopportunity to explain the cash payments to the tune of \u20b92.65 crores
\nwas afforded to the assessee. It is only after taking into consideration
\nthe explanation offered and further, looking to the position of the
\npreceding year, which was not even contested, the Assessing Officer has
\n8 TXA No. 29 of 2013
\nmade disallowance only to the extent of 10% of \u20b92.65 crores. In these
\ncircumstances, we do not think that the substantial questions of law, as
\nframed, on this issue of disallowance are required to be answered in
\nfavour of the appellant-assessee.
\n15. In Abdul Qayume Vs. Commissioner of Income-Tax,
\n184 ITR 404, the Allahabad High Court has no doubt held that an
\nadmission or an acquiescence cannot be the foundation for an
\nassessment, where the income is returned under an erroneous
\nimpression or misconception of law. In the present case, the
\nfoundation of the assessment order cannot be said to be an admission
\nor an acquiescence on the part of the assessee. The circumstance that
\nin the preceding year that the appellant has not allowed disallowance,
\nis only one of the considerations taken into account by the Assessing
\nOfficer.
\n16. In Laxmi Engineering Industries Vs. Income-Tax
\nOfficer, [2008] 298 ITR 203 (Raj) and J.K. Woollen
\nManufacturers Vs. Commissioner of Income-Tax, U.P., 72 ITR
\n612, it is held that disallowance should not be on the basis of mere
\nsuspicion and further, on applying test of commercial expediency, the
\nreasonableness of the expenditure must be judged from the point of
\nview of the businessman and not on the Income Tax Department. To
\n9 TXA No. 29 of 2013
\nthe similar effect are certain observations in Principal Commissioner
\nof Income-Tax, Mumbai Vs. Chawla Interbild Construction Co.
\n(P) Ltd., [2019] 104 taxmann.com 402 (Bombay).
\n17. On perusing the impugned judgment made by the Assessing
\nOfficer, Commissioner (Appeals) and the ITAT, we are satisfied that all
\nthese Authorities have in fact, followed the principles laid down in the
\naforesaid decisions. This is not a matter where the disallowance is
\nbased on mere suspicion. Further, it is only accepting the principle
\nthat commercial expediency has to be judged from the view of
\nbusinessman, that these Authorities have made disallowance of only
\n10%, in the present case. There is neither any unreasonability nor any
\nperversity in the approach or the findings of these authorities so as to
\nwarrant interference.
\n18. For all these reasons, the second and the third substantial
\nquestions of law are required to be answered against the appellantassessee
\nand in favour of the respondent-Revenue.
\n19. The Appeal is accordingly disposed off in the aforesaid
\nterms. The modification in terms of this judgment and order to be
\ncarried out by the concerned Assessing Officer, within a reasonable
\nperiod.
\n10 TXA No. 29 of 2013
\n20. The Appeal is disposed off, without there being any order as
\nto costs.
\nSMT. M. S. JAWALKAR, J. M. S. SONAK, J.
\nEV<\/p>\n","protected":false},"excerpt":{"rendered":"
The crucial phrase in Section 68 of the IT Act, which provides that the sum so credited in the books and which is not sufficiently explained, may be charged to the income tax as income of the assessee of \u201cthat previous year\u201d also lends support to the contentions of Dr. Daniel<\/p>\n