Income Tax Case

suresh IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1199 OF 2008 Messers D.K. Enterprises having its office at Mangrol Mansion,Gunbow Street, Fort,Mumbai – 400 001. .... Petitioner - Versus - 1. Income-tax Appellate Tribunal Mumbai Bench, Mumbai through Registrar having its office at Registrar having its office at Old CGO Building, 101, Maharshi Karve Road, Mumbai – 400 020. 2. The Assistant Commissioner of Income-tax 12(1), Room No.117, 1[st] Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400 020. 3. The Union of India, through the Secretary, Ministry of Finance, Government of India, North Block, New Delhi – 110 001..... Respondents WITH INCOME TAX APPEAL NO.144 OF 2002WITHINCOME TAX APPEAL NO.145 OF 2002WITH INCOME TAX APPEAL NO.220 OF 2002WITH INCOME TAX APPEAL NO.227 OF 2002 Page 1 of 38 suresh 915-WPG-1199.2008.doc WITH INCOME TAX APPEAL NO.228 OF 2002 M/s D.K. EnterpriseMangrol Mansion, Fort,Mumbai. …. Appellant- Versus - 1. The Dy. Commissioner of Income Tax, Central Circle No.15, CGO Annex, Mumbai. 2. The Commissioner of Income Tax, Central Circle 15, CGO Annex, Mumbai.…. Respondents Mr. J.D. Mistri, Senior Advocate, with Mr. AtulK. Jasani for the Petitioner/Appellant.Mr. A.R. Malhotra with Mr. N.A. Kazi for the Respondents in all matters. CORAM: S.C. DHARMADHIKARI &B.P. COLABAWALLA, JJ. DATE : OCTOBER 03, 2018 ORAL JUDGMENT (Per Shri S.C. DHARMADHIKARI, J.): 1.This writ petition under Article 226 of the Constitution of India challenges an order, dated 28-9-2007,passed by the Income Tax Appellate Tribunal (“ITAT/Tribunal” Page 2 of 38 suresh 915-WPG-1199.2008.doc for short), Bench at Mumbai, in Miscellaneous ApplicationNos.316, 317, 318, 319 & 320/Mum/2007, for Assessment Years1989-90, 1990-91, 1991-92, 1992-93 & 1993-94. 2.The miscellaneous applications filed on 3-12-2003 bythe present petitioner prayed for the order of the ITAT, initiallypassed and a consolidated one, to be corrected. 3.What we have found from a reading of the orderinitially passed by the ITAT is that the appeals of the Revenueand that of the assessee were decided by a common order andboth were partly allowed. When they were partly allowed by acommon order, but the assessee being concerned with certainissues and arising out of the appeals for particular assessmentyears, filed a miscellaneous application invoking Section 254(2)of the Income Tax Act, 1961 (“the IT Act” for short). 4.A copy of the miscellaneous application is atExhibit-V (page 357) to the petition. In that application, it isstated by M/s. D.K. Enterprise, the petitioner before us, that theappeals were disposed of by a common order of the Tribunal on Page 3 of 38 suresh 29-6-2001. There are certain mistakes in this order which needrectification. 5.The application said that the core or major issue was an addition on account of “on-money”. 6.It is stated that there was a search and seizure actionunder Section 132 of the IT Act on 9-3-1992 and 26-10-1994during which certain incriminating papers were seized. Duringthe search and seizure, statement of Shri D.K. Shah (sincedeceased), the main partner of the applicant/petitioner, wasrecorded under Section 132(4) of the IT Act wherein he haddeclared that Rs.30,00,000/- was received as on-money overand above the agreement value of the units booked in theirproject at Dadar Manish Market. 7.Due to the search and seizure actions, theassessments were reopened either under Section 147 or underSection 263 of the IT Act. Particularly, assessments for theAssessment Years 1989-90 and 1993-94 were reopened underSection 147, and assessment for the Assessment Year 1990-91 Due to the search and seizure actions, the Page 4 of 38 suresh 915-WPG-1199.2008.doc was reopened under Section 263 of the IT Act. 7.Due to the search and seizure actions, theassessments were reopened either under Section 147 or underSection 263 of the IT Act. Particularly, assessments for theAssessment Years 1989-90 and 1993-94 were reopened underSection 147, and assessment for the Assessment Year 1990-91 Due to the search and seizure actions, the Page 4 of 38 suresh 915-WPG-1199.2008.doc was reopened under Section 263 of the IT Act. 8.It was alleged by the petitioner/applicant that in theinitial order of the Tribunal, which is a common order, in paraNo.12, internal page 11, the Tribunal came to the conclusionthat 40% of the on-money be taken as income after observingthat the assessee had disclosed 21% of gross receipts in theAssessment Year 1992-93 and therefore it can be reasonablyestimated that at least double the percentage, as disclosed by theassessee, constituted the element of profit in the on-money. 9.The petitioner/applicant alleged that this estimatewas without any basis. It is stated that the issue as regards theestimation of profit at 40% of on-money was never raised andtherefore, it is an apparent mistake. At the most and withoutprejudice, double the percentage of profit from the project atDadar Manish Market would be 4.86%. Since the total profitdeclared from the project comes to Rs.39,52,784/- (2.43%),which after adding the declared amount of Rs.30,00,000/-comes to Rs.69,52,784/-, percentage-wise it comes to 4.27%. It Page 5 of 38 suresh 915-WPG-1199.2008.doc is stated that from the assessment order for the Assessment Year1998-99, it was observed that the profit from the project wasfinally arrived at Rs.39,52,784/-, but the Assessing Officerassessed the profit from the project at Rs.64,24,841/- justbecause it was so offered. If these facts and figures are takeninto account, the profit from the said project comes to 3.95%,that too after considering the disclosure of Rs.30,00,000/- andthus the estimate of on-money would workout double of 3.95%to 7.90% and not 40%, as held. 10.This is how the mistakes were pointed out, ground-wise and appeal-wise. 11.It was, therefore, prayed that the mistakes becorrected. 12.The important prayer in this application is that theinitial order be recalled and the appeals be re-heard. 13.The miscellaneous application was placed before theTribunal and it passed an order on the same, partly allowing it. Page 6 of 38 suresh That order was passed on 12-7-2002. 14.It appears that the Tribunal also had before it othermiscellaneous applications but the petitioner was of the viewthat the Tribunal's discussion in the order dated 12-7-2002 onone miscellaneous application, revolves around the on-moneyissue and that the entire on-money cannot be added to income.However, the first ground of appeal raised by the petitioner asregards the quantum of on-money worked out by the AssessingOfficer had remained to be considered. Hence, againmiscellaneous applications were filed by the petitioner/applicantfor the Assessment Years 1989-90 to 1993-94, pointing out inthe application for the Assessment Year 1989-90 the first groundof appeal had remained to be considered and that application, soalso the other applications were taken on record. They werestyled as miscellaneous applications dated 3-11-2003, copies ofwhich are at Exhibits “X-1” to “X-5” (pages 371-380). 15.Since they were not being heard for a considerableperiod, the petitioner/applicant followed up the matter. The Page 7 of 38 suresh 915-WPG-1199.2008.doc petitioner was informed by the Registry of the Tribunal under itscovering letter about the rejection of the applications inchamber. That letter is dated 12-10-2004. Together with that,copy of the order dated 5-5-2004 (Exhibit-Y, page 381) wasforwarded to the petitioner. 15.Since they were not being heard for a considerableperiod, the petitioner/applicant followed up the matter. The Page 7 of 38 suresh 915-WPG-1199.2008.doc petitioner was informed by the Registry of the Tribunal under itscovering letter about the rejection of the applications inchamber. That letter is dated 12-10-2004. Together with that,copy of the order dated 5-5-2004 (Exhibit-Y, page 381) wasforwarded to the petitioner. 16.The Tribunal's order of 5-5-2004 was challenged byfiling a writ petition in this Court being O.S. Writ PetitionNo.1259 of 2005. This Court passed an order thereon, dated24-10-2005, setting aside the Tribunal's order dated 5-5-2004. Itis stated that the petitioner filed an appeal before this Court inrespect of a question of law arising out of the Tribunal's orderdated 29-6-2001, but as the ground of appeal regarding thequantum of on-money was not decided, no question in thatbehalf was raised. The Tribunal by its order dated 28-9-2007dismissed the miscellaneous applications and while dismissingthem, it held that the initial order, as also the order passed bythe Tribunal and impugned in the appeals, decided the matterproperly. It is not necessary to allow these miscellaneousapplications. Page 8 of 38 suresh 915-WPG-1199.2008.doc 17.The Tribunal noted the rival contentions and heldthat the on-money issue has been discussed. In para 9 of theinitial order that came to be discussed and there is a referencethereto to the search and seizures and the statement of Shri D.K.Shah. In that statement, Shri Shah admitted to having collectedRs.30,00,000/- on-money over and above the agreement value.A reference was made to the answer in relation to one questionand that is also extracted in the initial order. In para 10 of theinitial order, the contention of the then Advocate for theassessee has been recorded and he had urged that addition ofthe entire on-money cannot be accepted. This means that theassessee had accepted the position that indeed on-money wasreceived. There was no serious issue with regard to non-receiptof on-money. It is only the extent to which the money could bebrought to tax, was an issue before the Tribunal. That is how theTribunal refused to accept the argument of the assessee thatthere was any mistake apparent from the record in the initialorder. It has, therefore, dismissed the miscellaneous applicationsby order dated 28-9-2007. Page 9 of 38 suresh 18.Aggrieved and dissatisfied with such an order, thepresent writ petition has been filed. 19.It has been argued before us by Mr. Mistri, learnedSenior Counsel, that if the initial as also the subsequent ordersare perused, it would be evident that the ground was indeedurged. The assessee never accepted the position that on-moneywas received. The assessee never, therefore, gave any concessionnor could the argument be construed as an acceptance of thereceipt of on-money. The Tribunal could not have held that thearguments focused only on the extent of the on-money receivedand to be offered to tax. In fact, if the impugned order of theTribunal is perused, it would be evident that this is not theposition. 20.Mr. Mistri has taken us through the initial order ofthe Tribunal, copy of which is at Exhibit-U, from page 333 of thepaper-book. Mr. Mistri has taken us through the grounds and hewould submit that ground Nos.2, 3, 4 and 5 clearly reflects theabove position. Ground No.6 can be said to be a repetition of Page 10 of 38 suresh 915-WPG-1199.2008.doc 20.Mr. Mistri has taken us through the initial order ofthe Tribunal, copy of which is at Exhibit-U, from page 333 of thepaper-book. Mr. Mistri has taken us through the grounds and hewould submit that ground Nos.2, 3, 4 and 5 clearly reflects theabove position. Ground No.6 can be said to be a repetition of Page 10 of 38 suresh 915-WPG-1199.2008.doc ground No.4. Then, our attention is invited to paras 6, 7, 8 and9 of the initial order of the Tribunal to submit that the issue wasin respect of on-money received by the assessee. If indeed thearguments revolved around the extent to which the on-moneycould be brought to tax, then, the Tribunal should have clearlyheld that there is a clear admission of the assessee that suchon-money was received. If the Tribunal was of that view andthat 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 hadtaken an additional ground of appeal in regard to the addition inrespect of on-money which had not been originally taken due tooversight. If that ground has been admitted as one of the mainground of appeal, then, the finding in para 12 is clearlyinconsistent with what the Tribunal held in para 13 of the initialorder. Thus, there was indeed a ground raised before theTribunal. There is an inconsistency in the findings andconclusions. Our attention is, therefore, invited to para 13 of theTribunal's order in that behalf. It is submitted by Mr. Mistri that Page 11 of 38 suresh 915-WPG-1199.2008.doc it is erroneous to hold that the ground was not raised at all. Thefinding is rendered on alternate submissions and not on themain plea or ground. Mr. Mistri would submit that there is adistinction and which is accepted and recognised in law that, anargument which is canvassed by the assessee through itsrepresentative as a main plea remains intact and merely becausesome alternate or without prejudice arguments are raised, doesnot mean that the main plea or the main argument is given up.If it is to be held that such a main plea or main argument isgiven up, then that must be expressly observed. Rejection of thealternate argument by an alleged consideration thereof cannotbe construed as displacing or rejecting the main plea orargument. Even on the alternate arguments, there areinconsistent findings, according to Mr. Mistri. For these reasons,he would submit that the writ petition be allowed. Mr. Mistri hastaken us through the grounds in this writ petition and to urgethat the Tribunal has completely lost sight of the ambit andscope of the powers conferred in it by Section 254(1) and sub-section (2) of the said section. Thus, the Tribunal may rectify the Page 12 of 38 suresh 915-WPG-1199.2008.doc mistake apparent from the record either suo moto or on anapplication in that behalf. Mr. Mistri submits that throughoutthe endeavour of the petitioner was to point out to the Tribunalthat the first ground of appeal remained to be considered. Thisnon-consideration of a ground of appeal is a mistake apparenton record. For these reasons, Mr. Mistri would submit that thewrit petition be allowed. 21.Pertinently and without prejudice to the abovearguments, Mr. Mistri fairly tenders before us some charts. Hesays that these charts would demonstrate the additions. Herelies upon a chart which is, according to him, very crucial. Thatis chart 2. Mr. Mistri submits that this shows the actual rate atwhich the Income Tax Department itself was able to auction theappellant/petitioner's shops in the Financial Year 2001-02 forrecovery of tax arrears and a comparison thereof with the ratesadopted by the Assessing Officer in the assessment of thepetitioner/appellant for the Assessment Years 1989-90 to1993-94. Page 13 of 38 915-WPG-1199.2008.doc 21.Pertinently and without prejudice to the abovearguments, Mr. Mistri fairly tenders before us some charts. Hesays that these charts would demonstrate the additions. Herelies upon a chart which is, according to him, very crucial. Thatis chart 2. Mr. Mistri submits that this shows the actual rate atwhich the Income Tax Department itself was able to auction theappellant/petitioner's shops in the Financial Year 2001-02 forrecovery of tax arrears and a comparison thereof with the ratesadopted by the Assessing Officer in the assessment of thepetitioner/appellant for the Assessment Years 1989-90 to1993-94. Page 13 of 38 915-WPG-1199.2008.doc 22.Mr. Mistri would submit that since he is arguing notonly the writ petition but pointing out even the grounds raisedin the memo of appeals and which have been held to besubstantial questions of law on which the accompanying incometax appeals have been admitted, then, all the more, his requestis that the initial order must be set aside and the appeals bedirected to be re-heard. 23.Further, without prejudice and strictly in thealternative, Mr. Mistri would submit that the petitioner wouldlike to put an end or a quietus to these matters. These are fairlyold matters. Even the records may be scattered and it would bedifficult, if not impossible, to retrieve and collate them. Even ifthe petition succeeds and the appeals before the Tribunal arerevived, still, both sides would find it difficult to trace out theold records and make appropriate submissions. The petitioner isnot averse to buying peace and, therefore, relying upon thecharts Mr. Mistri submits that it is possible to leave the matter tothis Court and after inviting our attention to the total amountreceived from the auction by the Revenue and stated to be Page 14 of 38 suresh 915-WPG-1199.2008.doc Rs.7,04,83,875/-, Mr. Mistri would submit that the assumptionby the Tribunal, in the initial order, is highly excessive,exorbitant and arbitrary. Now, on the own showing, theAssessment Officer's conclusions for the Assessment Year1992-93 and the estimate of on-money should be Rs.3,000/- persq. ft. for the ground floor shops, Rs.1,500/- per sq. ft. for thefirst floor shops and Rs.450/- for residential flats, cannot besustained. More so, in the light of the further developments. 24.On the other hand, Mr. Malhotra, appearing onbehalf of the Revenue, would submit that the petitioner is tryingto delay the recovery of taxes. The writ petition is nothing butan attempt to postpone the payment of taxes. These taxes areadmittedly due and payable. In the business that the assessee is,namely of construction and development, the subject-projectwas undertaken as a part thereof. This was of construction of acommercial market. The shops and units therein have not beensold by the assessee strictly in accordance with the terms andconditions of the agreement for sale. Particularly, the pricecharged in the agreement and the sum actually received by the Page 15 of 38 24.On the other hand, Mr. Malhotra, appearing onbehalf of the Revenue, would submit that the petitioner is tryingto delay the recovery of taxes. The writ petition is nothing butan attempt to postpone the payment of taxes. These taxes areadmittedly due and payable. In the business that the assessee is,namely of construction and development, the subject-projectwas undertaken as a part thereof. This was of construction of acommercial market. The shops and units therein have not beensold by the assessee strictly in accordance with the terms andconditions of the agreement for sale. Particularly, the pricecharged in the agreement and the sum actually received by the Page 15 of 38 suresh915-WPG-1199.2008.docassessee would reflect that huge amounts over and above theagreement sum have been collected. These have been termed ason-money. On facts, there has been no dispute ever raised andwith regard to the admission in the statement of Shri D.K. Shah.If relying upon that statement, the Counsel or representative ofthe assessee thought it fit to raise before the Tribunal only somegrounds and not all, then, now with the change of Advocate orrepresentative, the assessee cannot be permitted to have asecond inning. In other words, what has been admittedlyvoluntarily, intentionally and deliberately given up, should notbe now permitted to be re-opened. Mr. Malhotra would submitthat a representative or Advocate takes a conscious decision. Hehas a freedom and latitude which he enjoys as a professional. Aclient like the assessee may insist on raising all the grounds ofmemo of appeal but depending upon the position in law and theambit and scope of appellate powers, such representative orAdvocate exercise their discretion. That is strictly as aprofessional. They know best what is in the interest of theirclient and how the interest can be protected. Hence, they project Page 16 of 38 suresh 915-WPG-1199.2008.doc and on most occasions like this an alternate plea or ground,though they may only mention in the passing the main plea ormain ground. It is really the alternate ground which they arepressing and therefore an inference can be drawn by theadjudicating authority and like the ITAT in this case that themain plea or ground is not advisedly raised. In suchcircumstances, as an afterthought, if such writ petitions areentertained, that would send a wrong signal and message. Theassessee would go on taking chances and by change of Advocateand authorised representative re-agitate concluded issues. Thefactual matters then would be reopened and to the detriment ofthe public revenue. We must, therefore, not uphold thearguments of Mr. Mistri and dismiss this writ petition. 25.Mr. Malhotra submits that for the Assessment Year1993-94, the assessee has advisedly not brought any appeal tothis Court under Section 260A of the IT Act. In that order, theTribunal has upheld 40% of the addition. That is now final. Theon-money calculation cannot be now reduced and below 40%.On merits, the Department has accepted the work-in-progress Page 17 of 38 suresh 915-WPG-1199.2008.doc method. The assessee suddenly went and changed the method toan estimation of profits at a percentage of the gross receipts.This is not a bona fide act at all. In that regard, our attention isinvited to page 210 to 212 of the paper-book and it is submittedthat the findings in the order of the First Appellate Authority areeloquent enough. Mr. Malhotra highlights page 211 of thepaper-book, which is para 2.3 in the order of the First AppellateAuthority. It is in these circumstances, according to Mr.Malhotra, that the findings of the Tribunal and on this change ofmethod, which is now a third one, namely, project completionmethod, should not be accepted. No findings of fact can be setaside unless they are demonstrably perverse or vitiated by anerror of law apparent on the face of the record. Hence,according to Mr. Malhotra, we must dismiss the writ petition. 26.For properly appreciating these contentions, we mustgo to the initial order of the Tribunal. The initial order wasrendered in eight appeals for Assessment Years 1989-90 to 1993-94. The title of the order itself reflects the income tax appealnumbers assessment year-wise (see page 333 of the paper-book). Page 18 of 38 suresh 915-WPG-1199.2008.doc 27.From page 334 of the paper-book, it is evident thatin the initial order the Tribunal expressed its opinion that eightappeals by the assessee and two appeals of the Revenue can bedisposed of by a common order. All of them are directed againstthe orders of the First Appellate Authority. Therefore, thecommon order. In para 2, the Tribunal records that the assesseeis a partnership firm. It had undertaken the project, namely, ofconstruction of Dadar Manish Market at Dadar (West), Mumbai.That started in the year 1985 and continued upto the FinancialYear 1998-99. The assessee was following the projectcompletion method basis for income tax purposes, which basiswas not accepted by the Department and it taxed the incomeevery year on the basis of 15% of the work-in-progress as per theassessee's account. In this backdrop, the first ground of appealwhich is common to income tax appeals for the AssessmentYears 1989-90 to 1992-93 is whether this approach of theRevenue is erroneous. The ground was, that the Revenuewrongly rejected the assessee's method of accounting which wasproject completion method basis. In para 3, the argument of the Page 19 of 38 suresh 915-WPG-1199.2008.doc assessee on this ground has been noted. That argumentcontinues in para 4 as well. In para 5, the argument of theDepartmental representative is noted. In para 6, the Tribunalrecords its finding. It says that the assessee itself switched overfrom its original stand in regard to the project completionmethod of accounting to the estimation of profits at apercentage of the gross receipts and therefore did notconsistently follow the same method of accounting. There was aTribunal's order in the field which the Assessing Officer hasdistinguished on the ground that it was rendered when noconstruction work had started and there was nothing received asno flats were in fact sold. However, the situation changed fromthe Assessment Year 1989-90. The assessee had shown morethan Rs.1.7 crores as receipts from the prospective buyers andthere was a pooja performed in the beginning of the accountingyear relevant to the Assessment Year 1989-90. It is in thesecircumstances and by applying the legal principles, the Tribunal,in para 7, finally opined that the profits of each year should becomputed and if the method of accounting adopted by the Page 20 of 38 suresh 915-WPG-1199.2008.doc assessee does not serve this objective, then, that method ofaccounting should be rejected by invoking Section 145 of the ITAct. The Assessing Officer has rightly rejected the method ofaccounting of the assessee and computed the profits at 15% ofthe work-in-progress for the respective assessment years. Thereis no quarrel or dispute raised with regard to this ground in thewrit petition. 28.Then, in para 8 the ground raised in respect ofmethod of accounting and common to income tax appeals,which are referable to Assessment Years 1989-90, 1992-93,1990-91, 1991-92 and 1993-94, is therefore rejected. 29.Then comes the core issue and that is in respect ofthe on-money received by the assessee. 30.Prior thereto and for completion of the narration, wemust refer to a relevant document, namely, letter of 30-12-1999.A copy of this letter is at page 332 of the paper-book. 31. This is a letter of the assessee's partner Shri D.K. Page 21 of 38 suresh 915-WPG-1199.2008.doc 28.Then, in para 8 the ground raised in respect ofmethod of accounting and common to income tax appeals,which are referable to Assessment Years 1989-90, 1992-93,1990-91, 1991-92 and 1993-94, is therefore rejected. 29.Then comes the core issue and that is in respect ofthe on-money received by the assessee. 30.Prior thereto and for completion of the narration, wemust refer to a relevant document, namely, letter of 30-12-1999.A copy of this letter is at page 332 of the paper-book. 31. This is a letter of the assessee's partner Shri D.K. Page 21 of 38 suresh 915-WPG-1199.2008.doc Shah, addressed to the Hon'ble Members of the ITAT. This lettersays that in Income Tax Appeal No.1708/B/1995, for theAssessment Year 1991-92, there were additional groundsavailable which have not been raised due to oversight. Theadditional grounds are that, the Commissioner of Income Tax(Appeals) has erred in confirming the addition made by theAssessing Officer in respect of the on-money. The addition madein respect of the on-money is exorbitant, excessive and not inconformity with the factual position and the Commissioner ofIncome Tax (Appeals) ought to have considered the facts andcircumstances and deleted/reduced the additions made on thiscount. The other ground was, the Assessing Officer be directedto work out the on-money collection after considering thevarious facts and circumstances. Then, there is another groundwith regard to reduction of project expenses incurred in cashfrom the on-money in arriving at the assessee's total income.These four grounds have been indeed noted and what we find isthat there is a reference made to it in para 13 of the initial orderof the Tribunal. That para 13 reads as under:- Page 22 of 38 suresh “13.In ITA No.1708/Bom/95, the assessee has taken anadditional ground of appeal in regard to the addition inrespect of on-money which had not originally been takendue to oversight. We admit this ground as it was one ofthe main subject matter of appeal. As we have decidedthis issue in para 12 above, we direct accordingly.” 32.To continue the narration and in relation to this on- money, we find that the Tribunal, in para 9 of the initial order,has recorded that there were search and seizure actions underSection 132 of the Act on 9-3-1992 and 26-10-1994 duringwhich incriminating documents were seized and the statementof Shri D.K. Shah, the partner, was recorded. He admitted tohaving collected Rs.30,00,000/- as on-money over and abovethe agreement value. A reference is made to the answer toquestion No.9, and both the question and the answer arereproduced. Below that reproduction, there is a reference to thefinding by the Assessing Officer in the assessment orderpertaining to the Assessment Year 1992-93. The Tribunal'sobservation that the Assessing Officer in detail has discussed thisfinding and gathered during the search and estimated theon-money at the rates which we have already enumerated Page 23 of 38 suresh 915-WPG-1199.2008.doc above. 33.In para 10 the argument of the assessee'srepresentative, who submitted that addition of the entireon-money cannot be accepted, is noted. Then, the Advocateurged that it is an accepted fact that out of the on-moneyreasonable expenses have to be deducted and the balance profitis to be taxed. The entire on-money does not represent income.There is a legal argument then canvassed that the proviso toSection 69C of the IT Act was inserted with effect from 1-4-1999and is not retrospective in operation. Thus, this is how theTribunal sums up the assessee's arguments on the point. There isa reference to several case laws relied upon by him. Page 23 of 38 suresh 915-WPG-1199.2008.doc above. 33.In para 10 the argument of the assessee'srepresentative, who submitted that addition of the entireon-money cannot be accepted, is noted. Then, the Advocateurged that it is an accepted fact that out of the on-moneyreasonable expenses have to be deducted and the balance profitis to be taxed. The entire on-money does not represent income.There is a legal argument then canvassed that the proviso toSection 69C of the IT Act was inserted with effect from 1-4-1999and is not retrospective in operation. Thus, this is how theTribunal sums up the assessee's arguments on the point. There isa reference to several case laws relied upon by him. 34.The Departmental representative referred to theorder of the Commissioner of Income Tax (Appeals) for theAssessment Year 1992-93 in-reply and submitted that the FirstAppellate Authority has appreciated and appraised the evidence– oral and documentary – and gathered by the Assessing Officerand that is how the ground of the assessee was rejected. The Page 24 of 38 suresh 915-WPG-1199.2008.doc Departmental representative pointed out that estimation ofthe on-money by the Assessing Officer was on the basis of thecontents of the seized material which had been properlyanalysed by him and the fact of receipt of on-money wasactually accepted by late Shri D.K. Shah and his son Manish D.Shah. The Departmental representative submitted that there areno reasons for these unrecorded expenses. Then, theDepartmental representative referred to the assessment order forthe Assessment Year 1990-91, which was passed in pursuance ofthe exercise carried out under Section 263 of the IT Act, andthen the Departmental representative refuted the contention ofthe assessee and to the effect that the addition under Section69C should be reduced to nil because the said additionrepresented revenue expenditure and therefore was allowable,even if not claimed in the return, but that has been rejectedsince the Commissioner of Income Tax (Appeals) was of theopinion that the expenditure incurred in cash was in any casedisallowance under Section 40A(3) of the Act. Section 69C doesnot contemplate such allowance. Section 69 was the applicable Page 25 of 38 suresh provision. 35.Para 12 of the order, passed initially, reads as under:- Page 25 of 38 suresh provision. 35.Para 12 of the order, passed initially, reads as under:- “12.We have considered the rival submissions and findforce in the arguments of the learned counsel for theassessee. It is the fundamental principle of taxjurisprudence that income is to be taxed and not thereceipt. In plethora of judgments of the Tribunal, it hasbeen held that a portion of on-money receipt should betaxed as income of the assessee. The Hon'ble SupremeCourt in the case of CIT v. Piara Singh (124 ITR 40) heldthat if there is a business unlawfully carried on by theassessee, neither the profits earned nor the losses incurredwould be enforceable in law. But that does not take theprofits out of taxing statute. Similarly, the taint ofillegality of the business cannot detract from the lossesbeing taken into account for computation of the amountwhich can be subjected to tax as 'profits' u/s.10(1) of1922 Act. This view has also been accepted in the case ofCIT V. S.C. Kothari (82 ITR 794)(SC). From theaforementioned two decisions, it is clear that if a businessis illegal neither the profits earned nor the losses incurredwould be enforceable in law. But the profits from suchbusiness would be taxable and in calculating the sameexpenses relatable to that business have to be allowed.Main object is to compute real income of the assessee. Asregards the allowability of expenses, we find that in theassessment year 1990-91, the A.O. while scrutinising thedocuments found a substantial evidence regardingon-money marked as Annexure A-3, on the Dadar ManishMarket Project site. This annexure A-3 contained thedetailed chart regarding the work done for every month.During the financial year 1989-90 the project expensesincurred on the site comes to Rs.1.09 crores, while thetotal project expenses debited in the return for the Page 26 of 38 assessment year 1990-91 was only Rs.77.12 lakhs, afterexcluding Rs.12 lakhs towards water proofing chargeswhich were provisional. The A.O. found that there wasdifference in the total project expenditure of about Rs.44lakhs. He also pointed out that from the estimated ratesof on-money of Rs.3000/- per sq. ft. for ground floorshops, Rs.1500/- per sq. ft. For 1[st] floor shops andRs.450/- per sq. ft. for Residential flats the totalon-money worked out to Rs.44,82,560/- which wasalmost the same figures as mentioned above. The A.O.computed the expenditure of the total work done atRs.2.03 crores by including therein the figure of on-moneyand applied the rate of 15%. The CIT under Sec. 263revised the order of the A.O. and directed for inclusion oftotal on-money of Rs.44.07 lakhs in the income of theassessee. The assessee's contention was that the figures inthe seized papers were for submission to the bank and,therefore, much reliance could not be placed on them.Normally profit element is more in the on-money receiptthan in the normal business activity because in thenormal business activity almost all the expenses incidentalto business are accounted for. The assessee had disclosed21% of gross receipts in the assessment year 1992-93 andtherefore, it can reasonably estimated that at least doublethe percentage as disclosed by the assessee constituted theelement of profit in the on-money. In our opinion, theA.O. was not justified in adopting the same rate in respectof on-money as was applied to work-in-progress as shownby the assessee in his books of account. There is noevidence on record to suggest the invoking of theprovisions of Sec.40A(3). In this view of the matter, wehold that 40% of on-money be taken as income of theassessee and 15% of the work-in progress as computed bythe A.O. on the basis of the work done as per the books beadded.” 36.A bare perusal of this para would indicate that the Tribunal indeed found substance in the assessee's argument. Page 27 of 38 suresh 915-WPG-1199.2008.doc 36.A bare perusal of this para would indicate that the Tribunal indeed found substance in the assessee's argument. Page 27 of 38 suresh 915-WPG-1199.2008.doc After summing up the facts and focusing on the fundamentalprinciple of tax jurisprudence that income has to be taxed andnot the receipts, the Tribunal concludes that the AssessingOfficer was not justified in adopting the same rate in respect ofthe on-money as was applied to work-in-progress, as shown bythe assessee in the books of account. There is no evidence onrecord to suggest that Section 40A(3) can be invoked. Still, theTribunal holds that 40% of the on-money be taken as income ofthe assessee and 15% of the work-in-progress as computed bythe Assessing Officer on the basis of the work done as per thebooks be added. 37.In para 13, which we have reproduced above, all theadditional grounds have been admitted and in para 14 it is heldthat, the issue of on-money raised in Income Tax AppealNos.2872/M/97, 3340/Bom/94, 2873/M/97, 1929/M/99 and1708/Bom/95 is decided as above. 38.Upon a reading of this paragraph, we find somesubstance in the complaint of Mr. Mistri. It is difficult, if not Page 28 of 38 suresh 915-WPG-1199.2008.doc impossible, to reconcile this conflict and contrary conclusions, ifthe Tribunal admits the additional grounds of appeal and indeedrefers to them, then, how these grounds of appeal have beendealt with ought to be clarified in the order itself. The Tribunalis a last fact finding authority. It is obliged to consider theappeal on facts and law. The aggrieved parties before theTribunal must get an opportunity to demonstrate that thefindings of the Assessing Officer even if confirmed by the FirstAppellate Authority, are indeed erroneous both on facts and law.Such an opportunity ought to be extended and no technicalitiesshould come in the way of a proper and complete adjudicationof the contested issues. Ultimately, Courts and Tribunals are setup and established for rendering justice. All proceduralprovisions are but handmaids of justice. If additional groundsare introduced and found to be worthy of acceptance, then,there is an obligation and duty to deal with and consider them.Shortcuts are always dangerous. Such shortcuts always result inremand of cases back to the authorities who are in-charge ofdeciding factual and legal issues. As the last fact finding Page 29 of 38 suresh 915-WPG-1199.2008.doc authority, the Tribunal was, therefore, not empowered to applythe formula and which was invented by it. If there was adiscretionary power to correct that mistake, which it discoveredand discerned from its order and it was apparent from it, then,that should have been utilised. The order on the miscellaneousapplication was passed in a haphazard manner. The initial orderpassed on the miscellaneous application was sought to berecalled by the petitioner by filing other set of miscellaneousapplications and which came to be disposed of, without hearingthe petitioner, in chambers by an order of 5-5-2004. That orderand the approach generally adopted in that regard could not besupported by the Revenue before this Court in the first round ofchallenge by the petitioner. Therefore, virtually by consent, thisorder of 5-5-2004 was set aside and the Tribunal was directed toreconsider the applications for rectification of mistake and pass afresh order thereon. We do not think that the Tribunal hasperformed its duty as a last fact finding authority and in themanner expected by this Court. This Court, without assigningdetailed reasons as that would prejudice the case of both sides, Page 30 of 38 Page 30 of 38 suresh915-WPG-1199.2008.docfound that the manner and methodology of disposal of theappeals and the miscellaneous applications does not satisfy therequirement in law. After this Court's intervention, ampleopportunity was available to the Tribunal and it could havesafely referred to the materials, including the admitted record. Itcould have also considered the matter from the angle that if theDepartment of Income Tax auctioned the petitioner/appellant'sshops in the Financial Year 2001-02 (unsold shops) for recoveryof tax arrears, then, the auction or sale price could have beencompared with the rates adopted by the Assessing Officer forassessment of taxes for the Assessment Years 1989-90 to1993-94. 39.We have carefully considered the charts submittedby Mr. Mistri. 40.Though Mr. Malhotra would like us to go throughthe entire record and would like us to uphold the orderimpugned in the petition, in the light of our foregoingobservations and findings, we find it difficult to accede to Page 31 of 38 suresh915-WPG-1199.2008.docMr. Malhotra's submissions. If we accept them, we would beputting our seal of approval or imprimatur on the perfunctorymanner of disposal of legal proceedings by the last AppellateAuthority. That would make a mockery of the law. It is now verydifficult even for the Revenue and might prejudice it in the eventthe matters are sent back, for afresh adjudication, to theTribunal. The matters are appeals pertaining to the AssessmentYears 1989-90 to 1993-94. The initial order of the Tribunal,which is a common order on these appeals, has been deliveredand pronounced on 29-6-2001. The miscellaneous applicationfiled to rectify the mistakes allegedly crept in this order came tobe rejected some time in October, 2001. Thereafter, freshmiscellaneous applications were filed and which were rejectedon 5-5-2004. This order of the Tribunal came to be set aside ina writ petition filed in this Court by the assessee. That order ofthis Court has already been noted by us. That order is dated24-10-2005. The miscellaneous applications were sent back forreconsideration and they were dismissed by the impugned orderon 28-9-2007. Page 32 of 38 suresh 915-WPG-1199.2008.doc 41. We have before us the appeals of these assessment years a writ petition filed in the year 2008. ThoughMr. Malhotra would submit that this writ petition should bedismissed on account of delay alone, for there is not just a delayin bringing the petition but laches, what we find is that this writpetition was pending along with the appeals for the aboveassessment years. They were pending and not disposed of. Itwould be difficult, therefore, to accede to this argument of Mr.Malhotra that the writ petition deserves to be thrown out on thisground alone. 42.We are of the firm opinion that no useful purposewill be served by now sending the matters back to the Tribunal.The matters, if sent back now, may not necessarily benefit theRevenue. It is only a conjecture and surmise or pure guess workthat when sent back, the Revenue will necessarily succeed.There is no such guarantee. In fact, what we have found is thatin the ground of appeal for the Assessment Year 1989-90 in anappeal which was brought before the Tribunal and challenging Page 33 of 38 suresh 915-WPG-1199.2008.doc 42.We are of the firm opinion that no useful purposewill be served by now sending the matters back to the Tribunal.The matters, if sent back now, may not necessarily benefit theRevenue. It is only a conjecture and surmise or pure guess workthat when sent back, the Revenue will necessarily succeed.There is no such guarantee. In fact, what we have found is thatin the ground of appeal for the Assessment Year 1989-90 in anappeal which was brought before the Tribunal and challenging Page 33 of 38 suresh 915-WPG-1199.2008.doc the order dated 7-3-1996 of the First Appellate Authority, thereis a specific plea or grievance. The ground No.2 of this memosays that the Commissioner of Appeals has erred in confirmingthat the assessee/appellant had collected on-money to the extentof Rs.2,19,47,700/- [see page 287 of the paper-book]. Thenthere is a specific ground that the additions made by theAssessment Officer on this ground be deleted and the income berecomputed. Thereafter, ground No.4 is clearly a withoutprejudice and alternate ground of appeal. If all this was indeedpresent to the mind of the Tribunal, then, why it resorted to thismanner of disposal of the appeals, remains unexplained andunclarified to us. None, including the Revenue's Counsel canattempt, and outside the record, to justify what the Tribunal hasdone in this case. With all his persuasive abilities, Mr. Malhotrawas unable to justify the approach of the Tribunal. 43.However, the end result would be to set aside theorder impugned in the writ petition and allow the miscellaneousapplications on the file of the Tribunal for rectification of themistakes in its initial order. The outcome would be a fresh Page 34 of 38 suresh 915-WPG-1199.2008.doc adjudication of all the appeals and after a good 22 years fromthe end of the assessment year. It would be a travesty of justiceif after 22 years from the date of the order of the First AppellateAuthority and seventeen-and-half years after the order of theTribunal these appeals are re-heard. 44.Today, we have a position where the on-moneyadditions which have been made by the Income Tax Departmentare to the extent of Rs.11,52,15,097/-. The additions sustainedby the First Appellate Authority are to the extent ofRs.4,64,59,769/-. 45.On our suggestion, charts were made and handedover. They are all on record. Though the Income TaxDepartment would justify the gross additions to the extent ofRs.11,52,15,097/-,