Itta/27/1999 Of P.ram Gopal Varma v. Dy Commr Of Income Tax (Assts)Hyd

HON’BLE THE CHIEF JUSTICE SRI MADAN B. LOKURANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR ITTA No.27 of 1999 28[th] December, 2011 Between: P. Ram Gopal Varma … Appellant And The Dy. Commissioner of Income-Tax (Assets),Spl. Range – 2, Hyderabad. … Respondent Counsel for the appellant : Sri C.V. NarasimhamCounsel for the respondent : Sri S.R. Ashok, Standing Counsel for Income-Tax HON’BLE THE CHIEF JUSTICE SRI MADAN B. LOKURANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR ITTA.No.27 of 1999 JUDGMENT: (per Hon’ble the Chief Justice Shri Madan B. Lokur) The substantial question of law framed for our consideration inthis appeal filed under Section 260A of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) is as follows:- Whether the proviso to Section 69C of the Income TaxAct, 1961 is merely declaratory of the existing legalposition, in which case the provision could operate inrespect of the previous assessment years or it creates a new liability? 2 . During the course of submissions learned counsel for theassessee proposed an additional question of law which is as follows: Whether the additions confirmed as undisclosedexpenditure of Rs.20,90,000/- as payments to artists,Rs.5,15,300/- as film production expenses at Madras andRs.18,95,000/- as payments to artists, technicians,manager, etc., are on basis of mere suspicions, surmisesand conjectures and therefore the findings of theAppellate Tribunal are unsustainable? 3. Broadly, the facts of the case indicate that search operationswere carried out at the office-cum-residence of the assessee atBombay on 6.12.1995 and 7.12.1995. A search was also carried outat his premises in Hyderabad from 7.12.1995 to 20.1.1996. 4. During the search operations, the Revenue seized records in theform of loose slips as well as computerized accounts relevant for theprevious years 1993-94, 1994-95 and partly for the year 1995-96. Inaddition, some cash was also seized. 5. On an examination of the seized material, the Assessing Officerconcluded that the assessee had some undisclosed income whichwas required to be assessed under Chapter XIV-B of the Act asintroduced by the Finance Act, 1995. Accordingly, a notice underSection 158-BC(a) of the Act was issued to the assessee requiring himto file a return for the block period 1986-87 to 1996-97. 6. The assessee filed the block return in which he admitted anincome of Rs.45,48,600/-. After reconciliation of accounts, theundisclosed income relevant for the assessment year 1994-95 wasreturned at Rs.3,44,600/- and for the assessment year 1996-97 theundisclosed income was returned at Rs.40,75,370/-. The admittedundisclosed income returned was, therefore, Rs.44,18,970/- for theblock period. As against this, the Assessing Officer determined the undisclosed income at Rs.1,33,78,974/- by his block assessment orderdated 31.12.1996. 7. Feeling aggrieved, the assessee preferred an appeal, which wasallowed in part by the Income Tax Appellate Tribunal (for short ‘theTribunal’) by its order dated 28.12.1998. It is under thesecircumstances, that the present appeal has arisen at the instance ofthe assessee. 8. On the first substantial question, whether the proviso to Section 69C of the Act has retrospective effect or not, it is necessary tofirst go through the provisions of Section 69C of the Act. It may bementioned at this stage that the substantive provision was introducedin the Act by the Taxation Laws (Amendment) Act, 1975 with effectfrom 1.4.1976. The proviso was introduced by the Finance (No.2) Act,1998 with effect from 1.4.1999. The section including the proviso readsas follows: “Section 69C – Unexplained expenditure etc. 8. On the first substantial question, whether the proviso to Section 69C of the Act has retrospective effect or not, it is necessary tofirst go through the provisions of Section 69C of the Act. It may bementioned at this stage that the substantive provision was introducedin the Act by the Taxation Laws (Amendment) Act, 1975 with effectfrom 1.4.1976. The proviso was introduced by the Finance (No.2) Act,1998 with effect from 1.4.1999. The section including the proviso readsas follows: “Section 69C – Unexplained expenditure etc. Where in any financial year an assessee has incurred anyexpenditure and he offers no explanation about the sourceof such expenditure or part thereof, or the explanation, ifany, offered by him is not, in the opinion of the AssessingOfficer, satisfactory, the amount covered by suchexpenditure or part thereof, as the case may be, may bedeemed to be the income of the assessee for suchfinancial year. Provided that, notwithstanding anything contained in anyother provision of this Act, such unexplained expenditurewhich is deemed to be the income of the assessee shallnot be allowed as a deduction under any head of income.” 9 . On a plain reading of this section, it is clear that it merelyprovides, as a rule of evidence, that if an assessee incurs someexpenditure and is unable to explain the source of that expenditure,then the expended amount will be deemed to be his income. Theproviso (which was introduced much later) lays down that such deemed income shall not be allowed as a deduction under any headof income. From a reading of the section (minus the proviso), it doesappear that an assessee could claim deductions on the deemedincome. It seems that the proviso was introduced to prevent this andensure that such deductions “shall not be allowed”. The question iswhether a deduction “shall not be allowed” in respect of only futureclaims or even in respect of existing or closed claims. In other words,what is required to be ascertained is whether the proviso is declaratoryor clarificatory of the law and therefore retrospective in operation orwhether it creates a new obligation on an assessee and is thereforeprospective in operation. That is the substantial question of law framedfor our consideration. 10. During the course of submissions, it was not disputed that thesubstantive provision of Section 69C of the Act is a declaratory orclarificatory provision. Indeed, this question did not arise, and it is forthis reason that no such dispute was raised. However, we may only note that in Yadu Hari Dalmia v. CIT[[1]]it was held by the Delhi HighCourt that Section 69C of the Act is a clarificatory provision andembodies a rule of evidence. It was, therefore, given retrospectiveoperation. 11. It may be added, en passant, that in relation to Section 69C ofthe Act, the Central Board of Direct Taxes (for short ‘CBDT’) issuedCircular No.204 dated 24.7.1976 to the following effect: “Unexplained expenditure to be treated as income forfinancial year in which expenditure incurred 17. The new section 69C provides that where an assesseeincurs in any financial year an expenditure about thesource of which he offers no explanation or theexplanation offered by him is found to be not satisfactory,the amount covered by such expenditure shall be treatedas income of the assessee for the financial year in whichsuch expenditure is incurred. The provision is onlyclarificatory. Accordingly, although it comes into force with effect from 1-4-1976, the principle will apply not only inrelation to assessments for the assessment year 1976-77and subsequent years but also to assessments for earlierassessment years.” While the Circular may not be conclusive of the interpretation of Section 69C of the Act, it does suggest the legislative intent to giveretrospective effect to the section. 17. The new section 69C provides that where an assesseeincurs in any financial year an expenditure about thesource of which he offers no explanation or theexplanation offered by him is found to be not satisfactory,the amount covered by such expenditure shall be treatedas income of the assessee for the financial year in whichsuch expenditure is incurred. The provision is onlyclarificatory. Accordingly, although it comes into force with effect from 1-4-1976, the principle will apply not only inrelation to assessments for the assessment year 1976-77and subsequent years but also to assessments for earlierassessment years.” While the Circular may not be conclusive of the interpretation of Section 69C of the Act, it does suggest the legislative intent to giveretrospective effect to the section. 12. Coming back to the interpretation of the proviso to Section 69Cof the Act, it is necessary to survey the law on the subject.13. There can be no dispute that Parliament, or indeed anyLegislature, has the power to enact retrospective legislation. However,there are certain recognized limitations such as if the statute affects asubstantive (or vested) right, then it has only prospective effect, unlessthe language of the statute is clear that it has retrospective operation(or it must necessarily be so implied). This general proposition wasaccepted by the Supreme Court in Commissioner of Income Tax v. Gold Coin Health Foods[[2]]wherein it was held: “It is a cardinal principle of construction that everystatute is prima facie prospectiveunless it is expressly orby necessary implication made to have a retrospectiveoperation. But the rule in general is applicable where theobject of the statute is to affect vested rights or to imposenew burdens or to impair existing obligations.” On the other hand, if the statute affects a procedural right, thenthe presumption is that the statute is intended to have retrospectiveeffect. This general proposition was acknowledged in ThirumalaiChemicals Ltd. v. Union of India[[3]]in the following words: “Substantive law refers to body of rules thatcreates, defines and regulates rights and liabilities. Rightconferred on a party to prefer an appeal against an orderis a substantive right conferred by a statute whichremains unaffected by subsequent changes in law,unless modified expressly or by necessary implication. Procedural law establishes a mechanism fordetermining those rights and liabilities and machinery forenforcing them. Right of appeal being a substantive rightalways acts prospectively. It is trite law that every statuteis prospective unless it is expressly or by necessaryimplication made to have retrospectiveoperation….. Procedural law is retrospective meaningthereby that it will apply even to acts or transactionsunder the repealed Act.” 14. Declaratory or clarificatory statutes are sometimes referred to ascurative statutes and they are retrospective in operation. Such statutesare intended to remove an existing ambiguity in the interpretation orunderstanding of the Act. Some relevant decisions concerning suchstatutes are: 14.1 Chaman Singh v. Smt. Jai Kaur[[4]]wherein the basic principles were stated in the following words: “It is well settled that if a statute is curative ormerely declares the previous law retroactive operationwould be more rightly ascribed to it than the legislationwhich may prejudicially affect past rights andtransactions.” 14.2 Govind Das v. Income Tax Officer[[5]]cited by learned counsel for the assessee, in which the basic principles of interpretation were reiterated by the Supreme Court: 14.1 Chaman Singh v. Smt. Jai Kaur[[4]]wherein the basic principles were stated in the following words: “It is well settled that if a statute is curative ormerely declares the previous law retroactive operationwould be more rightly ascribed to it than the legislationwhich may prejudicially affect past rights andtransactions.” 14.2 Govind Das v. Income Tax Officer[[5]]cited by learned counsel for the assessee, in which the basic principles of interpretation were reiterated by the Supreme Court: “Now it is a well settled rule of interpretation hallowed bytime and sanctified by judicial decisions that unless the terms ofa statute expressly so provide or necessarily require it,retrospective operation should not be given to a statute so as totake away or impair an existing right or create a new obligationor impose a new liability otherwise than as regards matters ofprocedure. The general rule as stated by Halsbury in Vol. 36 ofthe Laws of England (3rd Ed.) and reiterated in severaldecisions of this Court as well as English Courts is that "allstatutes other than those which are merely declaratory or whichrelate only to matters of procedure or of evidence are primafacie prospective" and retrospective operation should not begiven to a statute so as to affect, alter or destroy an existing rightor create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of theenactment. If the enactment is expressed in language which isfairly capable of either interpretation, it ought to be construed asprospective only.” 14.3 Commissioner of Income Tax, Bhopal v. ShellyProducts[[6]]. In this case, the assessment order was held as void ab initio. Theassessee then sought refund of tax paid on the basis of theassessment order as well as the advance tax and self assessment taxpaid. The Revenue was of the opinion that the assessee was entitledto a refund only of the tax paid pursuant to the assessment order, sincedeclared void. The Revenue placed reliance on proviso (b) to Section240 of the Act, contending that it was retrospective in operation. TheSupreme Court agreed with the Revenue and held that proviso (b) to Section 240 of the Income Tax Act “……seeks to clarify the law so as to remove doubts leading tothe courts giving conflicting decisions, and in several casesdirecting the revenue to refund the entire amount of income-taxpaid by the assessee where the revenue was not in a positionto frame a fresh assessment. Being clarificatory in nature it mustbe held to be retrospective, in the facts and circumstances of thecase. It is well settled that the legislature may pass adeclaratory Act to set aside what the legislature deems to havebeen a judicial error in the interpretation of statute. It only seeksto clear a meaning of a provision of the principal Act and makeexplicit that which was already implicit.” 14.4 Commissioner of Income Tax, Bombay v. Podar Cement Pvt. Ltd.[[7]]wherein the Supreme Court quoted with approval thefollowing passage from Justice G.P. Singh's (Sixth Edition 1996)“Principles of Statutory Interpretation” under the heading ‘Declaratorystatutes’: “In the absence of clear words indicating that theamending Act is declaratory, it would not be so construedwhen the pre-amended provision was clear andunambiguous. An amending Act may be purelyclarificatory to clear a meaning of a provision of theprincipal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effectand, therefore, if the principal Act was existing law whenthe Constitution came into force, the amending Act also”[[8]]will be part of the existing law. 14.5 Sedco International Forex Drill v. Commissioner of Income Tax[[9]], in which the Supreme Court reaffirmed the law and held: “In the absence of clear words indicating that theamending Act is declaratory, it would not be so construedwhen the pre-amended provision was clear andunambiguous. An amending Act may be purelyclarificatory to clear a meaning of a provision of theprincipal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effectand, therefore, if the principal Act was existing law whenthe Constitution came into force, the amending Act also”[[8]]will be part of the existing law. 14.5 Sedco International Forex Drill v. Commissioner of Income Tax[[9]], in which the Supreme Court reaffirmed the law and held: “….. An Explanation to a statutory provision may fulfillthe purpose of clearing up an ambiguity in the mainprovision or an Explanation can add to and widen thescope of the main section [See Sonia Bhatia v. State ofU.P. (1981) 2 SCC 585, 598 = AIR 1981 SC 1274, 1284para 24]. If it is in its nature clarificatory then theExplanation must be read into the main provision witheffect from the time that the main provision came intoforce [See Shyam Sunder v. Ram Kumar (2001) 8 SCC24 (para 44); Brij Mohan Das Laxman Das v. CIT (1997)1 SCC 352, 354; CIT v. Podar Cement (P) Ltd. (1997) 5SCC 482, 506]. But if it changes the law it is notpresumed to be retrospective, irrespective of the fact thatthe phrases used are “it is declared” or “for the removal ofdoubts”. 14.6 Allied Motors v. Commissioner of Income Tax[[10]]wherein it was held that: “A proviso which is inserted to remedy unintendedconsequences and to make the provision workable, aproviso which supplies an obvious omission in thesection and is required to be read into the section to givethe section a reasonable interpretation, requires to betreated as retrospective in operation so that a reasonableinterpretation can be given to the section as a whole.” 14.7 Commissioner of Income Tax v. Alom Extrusions Limited[[11]]in which the Supreme Court referred to Allied Motors and held: “This Court, inAllied Motors (P) Limitedheld that when aproviso is inserted to remedy unintended consequences and tomake the section workable, a proviso which supplies anobvious omission in the section and which proviso is required to be read into the section to give the section a reasonableinterpretation, it could be read retrospective in operation,particularly to give effect to the section as a whole. Accordingly,this Court, inAllied Motors (P) Limited, held that the firstproviso [to section 43B of the Income Tax Act] was curative innature, hence, retrospective in operation with effect from1stApril, 1988.” 15. The principles that emerge from the aforesaid decisions indicate as follows: i. A statute is prima facie prospective in operation, but it maybe given retrospective operation expressly or bynecessary implication.be given retrospective operation expressly or bynecessary implication. ii. If a statute affects a substantive right or a vested right orcreates a new obligation, it is prospective in nature.However, a statute affecting a procedural right isretrospective in operation.creates a new obligation, it is prospective in nature.However, a statute affecting a procedural right isretrospective in operation. iii.A declaratory or a clarificatory or a curative lawremoves doubts on the interpretation of a statute orcorrects its erroneous interpretation. Such a statute isretrospective in nature. Similarly, if an explanatory law isclarificatory in nature or clears an existing ambiguity, it isalso retrospective in nature.removes doubts on the interpretation of a statute orcorrects its erroneous interpretation. Such a statute isretrospective in nature. Similarly, if an explanatory law isclarificatory in nature or clears an existing ambiguity, it isalso retrospective in nature. iii.A declaratory or a clarificatory or a curative lawremoves doubts on the interpretation of a statute orcorrects its erroneous interpretation. Such a statute isretrospective in nature. Similarly, if an explanatory law isclarificatory in nature or clears an existing ambiguity, it isalso retrospective in nature.removes doubts on the interpretation of a statute orcorrects its erroneous interpretation. Such a statute isretrospective in nature. Similarly, if an explanatory law isclarificatory in nature or clears an existing ambiguity, it isalso retrospective in nature. iv.If a statute changes the existing legal position andcreates a new obligation or liability (except in aprocedural issue), then it is not retrospective, unless it isdeclared to be so, or such effect cannot be avoidedwithout doing violence to the language of the statutecreates a new obligation or liability (except in aprocedural issue), then it is not retrospective, unless it isdeclared to be so, or such effect cannot be avoidedwithout doing violence to the language of the statute v.However, an intention to enact a retrospective statutemust be clearly expressed. The mere use of wordsconveying such an intention is not, by itself, sufficient.Therefore, mere use of words such as “it is declared” or“for the removal of doubts” is not conclusive of thelegislative mandate. must be clearly expressed. The mere use of wordsconveying such an intention is not, by itself, sufficient.Therefore, mere use of words such as “it is declared” or“for the removal of doubts” is not conclusive of thelegislative mandate. vi. A proviso, like an explanation, would have retrospectiveoperation if it removes unintended consequences orsupplies an omission or is curative in nature. It would,nevertheless, be governed by the general principlesmentioned above.operation if it removes unintended consequences orsupplies an omission or is curative in nature. It would,nevertheless, be governed by the general principlesmentioned above. 16. On a plain reading of the proviso to Section 69C of the Act, it isquite clear that it creates a new liability or at least impairs an existingright (of claiming a deduction) that an assessee had prior to itsinsertion in the statute. We say this because Section 69C of the Act, without the proviso, merely states that if an assessee has incurredexpenditure and the assessee has no explanation about the source ofsuch expenditure, then that expenditure would be the deemed incomeof the assessee for the relevant financial year. As the section stands,the assessee can justify the expenditure, regardless of the source offunds, and claim the expenditure to be legitimate for a deduction. Inother words, without giving a satisfactory explanation about the sourceof the expenditure, the assessee can still explain the expenditure andclaim a deduction thereon. However, with the insertion of the proviso, it is made clear thatthe deemed income (where the source of the expenditure is notexplained) cannot be allowed as a deduction under any head ofincome. In other words, even if the assessee can justify theexpenditure, but cannot explain its source, the proviso effectivelydisentitles him from claiming a deduction on the deemed income underany head of income. 17. The distinction, therefore, between the section and the provisois that the section deals with the inability of the assessee to explain thesource of the expenditure and, therefore, deems that expended amounthis income for the relevant financial year. This, nevertheless, leaves awindow open for the assessee to justify the expenditure and thereafterclaim a deduction thereon. However, with the insertion of the proviso,that window has been closed and even if an explanation for theexpenditure is forthcoming, it will not benefit the assessee and theexpenditure would nevertheless be taxable as a part of the totalincome. To this extent, the existing right of the assessee to explainand justify the expenditure has been taken away with the insertion ofthe proviso and has made the assessee open to a liability. In view of this, in our opinion, the proviso does not haveretrospective operation inasmuch as it changes the existing legal position and creates a new obligation on the assessee. There is alsonothing in the language of the proviso that compels us to give itretrospective effect. 18. In support of his contention that the proviso to Section 69C of theAct does not have retrospective operation, learned counsel for theassessee relied on Krishna Textiles v. Commissioner of Income Tax[[12]]. It is true that the decision mentions that the proviso does nothave retrospective operation, but that is only in passing and withoutany discussion on the subject. In any event, we are in agreement withlearned counsel that the proviso does not operate retrospectively. 19. What is the understanding of the Revenue on the subject? 20. In our opinion, the Revenue was conscious that the proviso wasin fact creating a new obligation on the taxpayer, and therefore, did notintend it to have retrospective effect. This is clear from two documents,the first being the Notes on Clauses accompanying the Finance (No.2)Bill, 1998 which inserted the proviso to Section 69C of the Act. Eventhough this document may not have any binding force, it does indicatewhat was passing through the mind of the draftsman. The Notes onClauses reads: “Clause 29 seeks to amend section 69C of the Income-tax Act relating to unexplained expenditure, etc. It is proposed to add a proviso to section 69C to providethat notwithstanding anything contained in any other provisionof the Act, such unexplained expenditure which is deemed to bethe income of the assessee shall not be allowed as a deductionunder any head of income. This amendment will take effect from 1[st] April, 1999, andwill, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years.” 21. The second document in this regard is Circular No. 772 dated23.12.1998 issued by the CBDT, which is to the following effect: “Amendment of Section 69C — Unexplainedexpenditure not to be allowed as deduction 29.1 Under the existing provisions, where an expenditureincurred by the taxpayer in respect of which he eitheroffers no explanation regarding the source of suchexpenditure or where explanation offered is foundunsatisfactory, the expenditure is treated as ‘income’under section 69C. There is no corresponding provisionfor disallowance of such expenditure. 29.2 This used to enable the tax payer charged to taxunder section 69C to claim the expenditure as deductionunder section 37 defeating the very objective of thesection. 29.3 The Act has amended section 69C of the IncomeTax Act according to which unexplained expendituredeemed as income cannot be allowed as deductionunder any head of income. 29.4 This amendment will take effect from 1st day ofApril, 1999 and will, accordingly, apply in relation to the‑assessment year 19992000 and subsequent years.” This document too may not have any binding effect per se, but againthis document suggests that the introduction of the proviso to Section69C of the Act would affect the existing rights of an assessee andmight place a financial burden on the assessee requiring payment oftax with retrospective effect. It is to avoid this situation that the CBDTmade it clear that the provision would have prospective effect. 22. Assuming the CBDT Circular has no binding effect, yet wherethe Revenue itself decides to interpret the law in favour of a citizen,there is no reason why the Court should interpret it to the detriment ofthe citizen and impose on him a financial burden which even theRevenue is not keen to impose. Under these circumstances, itappears to us that even if we are wrong in holding that the proviso toSection 69C of the Act does not have retrospective operation, theCBDT has, in any case, limited its operation prospectively with effectfrom the assessment year 1999-2000 onwards. 22. Assuming the CBDT Circular has no binding effect, yet wherethe Revenue itself decides to interpret the law in favour of a citizen,there is no reason why the Court should interpret it to the detriment ofthe citizen and impose on him a financial burden which even theRevenue is not keen to impose. Under these circumstances, itappears to us that even if we are wrong in holding that the proviso toSection 69C of the Act does not have retrospective operation, theCBDT has, in any case, limited its operation prospectively with effectfrom the assessment year 1999-2000 onwards. 23. Therefore, whichever way the issue is looked at, there can be nodoubt that the proviso to Section 69C of the Act has only prospectiveoperation. 24. As mentioned above, we are concerned in this case with theblock assessment period 1986-87 to 1996-97. Since we have heldthat the operation of the proviso to Section 69C of the Act isprospective, it has no application to the period that we are concernedwith. Accordingly, the first question must be answered in the negative,in favour of the assessee and against the Revenue. 25. Having answered the first substantial question in favour of theassessee, we need to have a look at the additional substantialquestion of law which learned counsel has proposed. This relates tothree items of unexplained expenditure incurred by the assessee. Theattempt of learned counsel is to justify the expenditure as businessexpenditure and thereby claim a deduction under Section 37 of theAct. 26. The first item relates to an addition of Rs.20,90,000/- shown aspayments to various cine artists. According to the sworn statementgiven by the assessee before the Revenue, he had made payments ofRs.55,50,000/- to various artists and technicians in connection with theproduction of the film ‘Rangeela’. However, in the seized books ofaccount, only Rs.34,60,000/- was accounted for. This resulted in anunexplained expenditure of Rs.20,90,000/-. The only explanation given by the assessee was that hisstatement of incurring an expenditure of Rs.55,50,000/- was based onhis memory and the addition could not be based on this, since hismemory could not necessarily be relied upon. The Assessing Officerdid not accept this explanation since the assessee was deeplyinvolved in the production of the movie and would have been aware of the huge payments made by him to various artists and technicians.Even the Tribunal did not believe the assessee on this account andupheld the view of the Assessing Officer on this issue that anexpenditure of Rs.55,50,000/- was made out which an amount ofRs.20,90,000/- was unexplained. 27. The second addition is with regard to an unexplainedexpenditure of Rs.5,15,300/- incurred in Madras in July, 1995. As perthe seized documents, the assessee had spent Rs.7,10,000/- duringthis period but the books of account showed an expenditure ofRs.1,94,700/- only. There was no explanation forthcoming from theassessee in this regard except that the expenses were projectedexpenses scribbled on a loose sheet of paper and could not beconclusive proof of actual expenditure. Again, the Assessing Officer did not believe the explanationsince some of the expenses shown on the seized document could notbe deferred such as hotel expenses etc., and therefore the AssessingOfficer disallowed an amount of Rs.7,10,000 - Rs.1,94,700 =Rs.5,15,300/- being unexplained expenditure. The Tribunal also didnot accept the explanation of the assessee in this regard and upheldthe conclusions arrived at by the Assessing Officer. 28. The third addition pertains to an amount of Rs.18,95,000/- Asper the seized documents, the assessee made certain payments ofRs.28,60,000/- out of which an amount of Rs.9,65,000/- was reflectedin the books of accounts of the assessee. The difference ofRs.18,95,000/- was added as unexplained expenditure incurred by theassessee. Again, the Assessing Officer did not believe the explanationsince some of the expenses shown on the seized document could notbe deferred such as hotel expenses etc., and therefore the AssessingOfficer disallowed an amount of Rs.7,10,000 - Rs.1,94,700 =Rs.5,15,300/- being unexplained expenditure. The Tribunal also didnot accept the explanation of the assessee in this regard and upheldthe conclusions arrived at by the Assessing Officer. 28. The third addition pertains to an amount of Rs.18,95,000/- Asper the seized documents, the assessee made certain payments ofRs.28,60,000/- out of which an amount of Rs.9,65,000/- was reflectedin the books of accounts of the assessee. The difference ofRs.18,95,000/- was added as unexplained expenditure incurred by theassessee. In this regard also, the explanation of the assessee was thatpayments were made to artists, technicians, manager etc. inconnection with the film being produced by him and according to theassessee the payments disclosed in the seized documents reflected only preliminary estimates. Some payments were made to identifiablepersons and these could be tallied with the bank account and books ofaccount of the assessee. These payments were accepted by theAssessing Officer, but others were not. The Tribunal also found that noworthwhile explanation was forthcoming with regard to certainexpenses by the assessee. Accordingly, the addition of Rs.18,95,000/-was upheld. 29. In our opinion, the issues raised with regard to the unexplainedexpenditure do not raise a substantial question of law but at best raiseonly a question of law, namely, whether the Assessing Officer hadacted on conjectures and surmises. The conclusions arrived at by theAssessing Officer (which have also been upheld by the Tribunal) arereally issues of fact touching upon the explanation given by theassessee for the expenditure incurred. When some expenses came tobe known from the documents seized from the premises of theassessee both in Bombay and at Hyderabad, it was for the assesseeto explain the expenditure incurred. The assessee was in the bestposition to explain the expenditure incurred as per the books ofaccount maintained, but could give an explanation only with regard toa part of the expenditure and not the entire expenditure. Both theauthorities that is the Assessing Officer as well as the Tribunalconsidered the explanations offered and found them unsustainable, asa matter of fact. We cannot re-appreciate the material on record andcome to a different conclusion, unless the view expressed by theAssessing Officer and the Tribunal are perverse or are views thatcould not reasonably be arrived at. We have not been shown anyperversity in the conclusions arrived at by the authorities below andare unable to accept the contention of learned counsel for theassessee that the additions were made on the basis of conjecturesand surmises. The expenses were mentioned in the documents seizedfrom the premises of the assessee and were admitted by the assessee. It was for the assessee to justify the expenditure incurredas business expenditure. He was able to do so for only a part thereof– the balance remained unexplained and did not find any mention inthe books of account. 30. The general contention of learned counsel for the assessee withregard to the additions was that the statement of the assessee wasrecorded well after midnight and therefore it could not be relied on tohis detriment. Secondly, it was submitted that the statement was in anyevent retracted by the assessee. In support of these submissions,reliance was place on Kailashben Manharlal Choksi v.Commissioner of Income Tax[[13]]and Commissioner of IncomeTax v. S. Khader Khan Son[[14]]. In this context, learned counsel alsoreferred to a circular issued by the CBDT on 10.3.2003 to the followingeffect: 30. The general contention of learned counsel for the assessee withregard to the additions was that the statement of the assessee wasrecorded well after midnight and therefore it could not be relied on tohis detriment. Secondly, it was submitted that the statement was in anyevent retracted by the assessee. In support of these submissions,reliance was place on Kailashben Manharlal Choksi v.Commissioner of Income Tax[[13]]and Commissioner of IncomeTax v. S. Khader Khan Son[[14]]. In this context, learned counsel alsoreferred to a circular issued by the CBDT on 10.3.2003 to the followingeffect: “Instances have come to the notice of the Board whereassessees have claimed that they have been forced toconfess the undisclosed income during the course of thesearch & seizure and survey operations. Such confessions, ifnot based upon credible evidence, are later retracted by theconcerned assessees while filing returns of income. In thesecircumstances, on confessions during the course of searchand seizure and survey operations do not serve any usefulpurpose. It is, therefore, advised that there should be focusand concentration on collection of evidence of income whichleads to information on what has not been disclosed or is notlikely to be disclosed before the Income Tax Department.Similarly, while recording statement during the course ofsearch and seizure and survey operations no attempt shouldbe made to obtain confession as to the undisclosed income.Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedingsalso, assessing officers should rely upon theevidences/materials gathered during the course ofsearch/survey operations or thereafter while framing therelevant assessment orders.” It is no doubt true that an extracted confession cannot be relied on at all. But that is not the situation in the present case. The case ofthe Revenue is mainly based on documents seized during the searchand seizure operation and the inability of the assessee to satisfactorilyexplain their contents with reference to the books of account. Thoughcertain expenses did find a mention in the books (and the benefitthereof was given to the assessee) there still remained someunexplained expenditure outside the books. Only this amount wasadded by the Assessing Officer to the income of the assessee. It is notcorrect for the assessee to say that the case of the Revenue wasbased only on the statement given by him. The decisions cited bylearned counsel for the assessee cannot, therefore, come to his aid. 31. Learned counsel for the assessee also placed reliance on OmarSalay Mohamed Sait v. Commissioner of Income Tax[[15]]and Commissioner of Income Tax v. Rajasthan Mines Ltd.[[16]]tocontend that in an appropriate case the Court can interfere and setaside a finding of fact arrived at by the Tribunal. We have no doubt onthat score, but the jurisdiction of the Court in this regard is notunlimited. On the facts of the case before us, we do not find any reasonto interfere with the conclusions concurrently arrived at by theAssessing Officer and the Tribunal. There is no occasion for us to re-appreciate the evidence and material on record and substitute ouropinion for that of the authorities. As mentioned above, the conclusionsarrived at by the authorities below have not been shown to beperverse. We have also noted that the conclusions are based on thebooks of account of the assessee and his inability to explain theexpenditure incurred outside those books. We do not find this to be a fitcase for interference with the concurrent views of the authoritiesbelow. 32. Therefore, on the proposed additional substantial question oflaw raised by the learned counsel for the assessee, we are of the opinion that such a substantial question of law does not arise andeven if it does, it must be answered in the negative, in favour of theRevenue and against the assessee. 33. The appeal is disposed of in terms of the above. __________________MADAN B. LOKUR, C.J. 28[th] December, 2011. _______________SANJAY KUMAR, J. 32. Therefore, on the proposed additional substantial question oflaw raised by the learned counsel for the assessee, we are of the opinion that such a substantial question of law does not arise andeven if it does, it must be answered in the negative, in favour of theRevenue and against the assessee. 33. The appeal is disposed of in terms of the above. __________________MADAN B. LOKUR, C.J. 28[th] December, 2011. _______________SANJAY KUMAR, J. Note: LR Copy be marked. vtv [1][1980] 126 ITR 48 [2][2008] 304 ITR 308 [3](2011) 6 SCC 739 [4](1969) 2 SCC 429 [5][1976] 103 ITR 123 [6][2003] 361 ITR 267 [7][1997] 226 ITR 625 [8]The passage occurs in the 11[th] Edition (2008) as well. [9][2005] 279 ITR 310 [10][1997] 224 ITR 667 [11][2009] 319 ITR 306 [12][2009] 310 ITR 227 (Guj) [13][2010] 328 ITR 411 (Guj)[14][2008] 300 ITR 157 (Mad)[15][1959] 39 ITR 151 [16][1970] 78 ITR 45