1 TXA No. 29 of 2013 IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 29 OF 2013 Shri Ivan Singh, S-6, Ground Floor, Landscape Grand, Behind Mahalaxmi Temple, Panaji-Goa. Appellant Versus 1. Asstt. Commissioner Income-Tax, Circle-1 (1), Room No. 208, 1st Floor, Aayakar Bhavan, Panaji, Goa-403 001. 2. Commissioner of Income-Tax, Aayakar Bhavan, Patto, Panaji, Goa-403 001. Respondents Dr. P. Daniel with Ms. Yadika Mandrekar, Advocates for Appellant. Ms. Susan Linhares, Standing Counsel for Respondents. Coram:- M.S. SONAK & SMT. M.S. JAWALKAR, JJ. Date:- 14th February, 2020 ORAL JUDGMENT: (Per M. S. Sonak, J.) Heard Dr. Daniel with Ms. Y. Mandrekar, learned Counsel for appellant-assessee and Ms. Susan Linhares, learned Standing Counsel for respondent-Revenue. 2 TXA No. 29 of 2013 2. On 02.12.2013, this Appeal came to be Admitted on following substantial questions of law: (I) On facts and in circumstances of case and in law, whether Tribunal was right in sustaining additions made of old outstanding sundry credit balances amounting to Rs.62,24,163/- under Section 68 of said Act ? (II) On facts and in circumstances of case and in law, whether Tribunal was right in sustaining allowance made of Rs.26,54,158/- out of labour charges on adhoc basis ? (III) On facts and in circumstances of case and in law, whether I.T.A.T. had any material to confirm adhoc disallowance of labour charges of Rs.26,54,158/- on assumption that same are not genuine ? 3. Insofar as first substantial question of law is concerned, Dr. Daniel has pointed out that Section 68 of Income Tax Act, 1961 (IT Act), is very clear in providing that where any sum is found to be credited in books of assessee for previous year and assessee offers no explanation about nature and source thereof or explanation offered by him is not, in opinion of Assessing Officer, satisfactory, sum so credited may be charged to income tax as income of assessee of that previous year. Relying upon 3 TXA No. 29 of 2013 several decisions, Dr. Daniel submits that since, it is case of Revenue that some amounts were found credited in books of account for financial year 2006-07, there was no question of taking cognizance of such amounts for assessment year 2009-10 and corresponding previous year 2008-09. He submits that on this short ground, first substantial question of law, is liable to be answered in favour of appellant-assessee and against respondent-Revenue. 4. Insofar as second and third substantial questions of law are concerned, Dr. Daniel is quite correct in pointing out that both these substantial questions of law relate to one and same issue of adhoc disallowance of labour charges to extent of 26,54,158/-. He submits that in present case, disallowance is only on basis of some suspicion, which is backed by no material as such. He submits that disallowance is also based upon failure on part of appellant-assessee to challenge similar disallowance for preceding year 2008-09. He submits that in such matters, principles of estoppel or acquiescence cannot be applied and therefore, substantial questions of law are liable to be answered in favour of appellant-assessee and against respondent-Revenue. Dr. Daniel referred to certain decisions in support of his contentions. 4 TXA No. 29 of 2013 5. Ms. Linhares, learned Standing Counsel for respondent-Revenue supports impugned judgments and orders made by ITAT, on basis of reasoning reflected therein. She pointed out that contentions based upon definition of previous year and provisions of IT Act were never raised and therefore, are not reflected in order of ITAT. She pointed out that there are concurrent findings of facts in relation to disallowance of labour charges. She pointed out that opportunity was granted to appellant-assessee to explain cash payment against vouchers amounting to 2.65 crores in respect of labour charges. For these reasons, she submits that substantial questions of law may be decided against appellant-assessee and in favour of respondent- Revenue. 6. Rival contentions now fall for our determination. 7. Insofar as first substantial question of law is concerned, reference at outset is necessary to definition of expression previous year as defined in Section 3 of IT Act. This definition provides that for purposes of IT Act, previous year means financial year immediately preceding assessment year. 8. Thereafter, reference is necessary to provisions of 5 TXA No. 29 of 2013 Section 68 of IT Act, which read as follows: Cash credits. 68. Where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof or explanation offered by him is not, in opinion of Assessing Officer, satisfactory, sum so credited may be charged to income-tax as income of assessee of that previous year: Provided that where assessee is company (not being company in which public are substantially interested), and sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless (a) person, being resident in whose name such credit is recorded in books of such company also offers explanation about nature and source of such sum so credited; and (b) such explanation in opinion of Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in first proviso shall apply if person, in whose name sum referred to therein is recorded, is venture capital fund or venture capital company as referred to in clause (23FB) of section 10. 9. From plain reading of provisions of Section 68 of 6 TXA No. 29 of 2013 IT Act, it does appear that where any sum is found to be credited in books of Account maintained for any previous year and there is no proper explanation for such credit, sum so credited can be charged to income tax as income of assessee of that previous year . 10. In present case, material on record indicates that Assessing Officer has relied upon credits for financial year 2006-07. However, sum so credited, in terms of such credit, is sought to be brought to tax as income of appellant-assessee, for assessment year 2009-10, which means for previous year 2008- 09, in terms of definition under Section 3 of IT Act. Dr. Daniel is justified in submitting that this is not permissible. 11. view taken by this Court in Commissioner of Income-Tax, Poona Vs. Bhaichand H. Gandhi, 141 ITR 67 and by Rajasthan High Court in Commissioner of Income-Tax, Rajasthan Vs. Lakshman Swaroop Gupta & Brothers, 100 ITR 222, supports contentions raised by Dr. Daniel. Similarly, we find that in M/s Bhor Industries Limited Vs. Commissioner of Income Tax, Bombay, AIR 1961 SC 1100, Hon'ble Apex Court in context of provisions of Merged States (Taxation Concessions) Order (1949) has interpreted expression any previous year to 7 TXA No. 29 of 2013 mean as not referring to all previous years, but, previous year in relation to assessment year concerned. Again, this decisions also, to some extent, supports contentions of Dr. Daniel. 12. crucial phrase in Section 68 of IT Act, which provides that sum so credited in books and which is not sufficiently explained, may be charged to income tax as income of assessee of that previous year also lends support to contentions of Dr. Daniel. 13. For all aforesaid reasons, we answer first substantial question of law in favour of appellant-assessee and against respondent-Revenue. 14. Insofar as second and third substantial questions of law are concerned, we find that Assessing Officer, Commissioner (Appeals) as well as ITAT have recorded concurrent findings of facts. contention that no opportunity was afforded to assessee is not correct. order of Assessing Officer clearly indicates that opportunity to explain cash payments to tune of 2.65 crores was afforded to assessee. It is only after taking into consideration explanation offered and further, looking to position of preceding year, which was not even contested, Assessing Officer has 8 TXA No. 29 of 2013 made disallowance only to extent of 10% of 2.65 crores. In these circumstances, we do not think that substantial questions of law, as framed, on this issue of disallowance are required to be answered in favour of appellant-assessee. 15. In Abdul Qayume Vs. Commissioner of Income-Tax, 184 ITR 404, Allahabad High Court has no doubt held that admission or acquiescence cannot be foundation for assessment, where income is returned under erroneous impression or misconception of law. In present case, foundation of assessment order cannot be said to be admission or acquiescence on part of assessee. circumstance that in preceding year that appellant has not allowed disallowance, is only one of considerations taken into account by Assessing Officer. 16. In Laxmi Engineering Industries Vs. Income-Tax Officer, [2008] 298 ITR 203 (Raj) and J.K. Woollen Manufacturers Vs. Commissioner of Income-Tax, U.P., 72 ITR 612, it is held that disallowance should not be on basis of mere suspicion and further, on applying test of commercial expediency, reasonableness of expenditure must be judged from point of view of businessman and not on Income Tax Department. To 9 TXA No. 29 of 2013 similar effect are certain observations in Principal Commissioner of Income-Tax, Mumbai Vs. Chawla Interbild Construction Co. (P) Ltd., [2019] 104 taxmann.com 402 (Bombay). 17. On perusing impugned judgment made by Assessing Officer, Commissioner (Appeals) and ITAT, we are satisfied that all these Authorities have in fact, followed principles laid down in aforesaid decisions. This is not matter where disallowance is based on mere suspicion. Further, it is only accepting principle that commercial expediency has to be judged from view of businessman, that these Authorities have made disallowance of only 10%, in present case. There is neither any unreasonability nor any perversity in approach or findings of these authorities so as to warrant interference. 18. For all these reasons, second and third substantial questions of law are required to be answered against appellant- assessee and in favour of respondent-Revenue. 19. Appeal is accordingly disposed off in aforesaid terms. modification in terms of this judgment and order to be carried out by concerned Assessing Officer, within reasonable period. 10 TXA No. 29 of 2013 20. Appeal is disposed off, without there being any order as to costs. SMT. M. S. JAWALKAR, J. M. S. SONAK, J. EV Ivan Singh v. ACIT, Circle-1(1), Panaji / CIT, Panaji