The Commissioner Of Income Tax – 21, Mumbai v. Shri Kamal Kumar Bhola

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.5781 OF 2010 The Commissioner of Income Tax – 21, Mumbai..Appellant. Versus Shri Kamal Kumar Bhola ..Respondent. Mr.Suresh Kumar for the appellant. Mr.P.J. Pardiwala, Senior Counsel with Mr.S.G. Lakhani for the respondent. CORAM : J.P. Devadhar &K.K. Tated, JJ. P.C. : DATE : 28[th] September 2011 1.Following five questions of law are raised by the Revenue in this appeal. a)Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in allowing personal expenses incurred as business expenditure ?Tribunal was justified in allowing personal expenses incurred as business expenditure ? b)Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in allowing the personal expenses as business expenses even after the denial of cross-examination by the assessee ?Tribunal was justified in allowing the personal expenses as business expenses even after the denial of cross-examination by the assessee ? c)Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in allowing the unaccounted expenses without any evidence for the same ?Tribunal was justified in allowing the unaccounted expenses without any evidence for the same ? d)Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in allowing the set off of undisclosed expenses Tribunal was justified in allowing the set off of undisclosed expenses relatable to F.Y. 2002-03 from the undisclosed income to 1997-1998 i.e. after a gap of four years ? e)Whether, on the facts and circumstances of the case and in law, the Tribunal is justified in allowing in cash expenses of Rs.7,37,000/- out of alleged withdrawal from bank of the group concerns without appreciating that the assessee has failed to provide any nexus between the withdrawal and cash expenses ? 2.The dispute in the present case relates to the block period from 1[st] April 1997 to 13[th] May 2003. 3.A search and seizure operation was held at the premises of the assessee on 13[th] May 2003. In response to a notice issued under Section 158BC of the Income Tax Act, 1961, the assessee filed block return declaring undisclosed income of Rs.30,00,000/-. 4.In the block assessment order, the assessing officer disallowed personal expenses incurred by the assessee and added the same to the income of the assessee. The Commissioner of Income Tax (Appeals) confirmed the order passed by the assessing officer. 5.On further appeal filed by the assessee, the Income Tax Appellate Tribunal (‘Tribunal’ for short) held that these personal expenses are recorded in the regular books of account and, therefore, the question as to whether the said expenses are allowable or not has to be considered in the regular assessment and not in the block assessment. In our opinion, no fault can be found with the decision of the Tribunal and accordingly, first two questions 4.In the block assessment order, the assessing officer disallowed personal expenses incurred by the assessee and added the same to the income of the assessee. The Commissioner of Income Tax (Appeals) confirmed the order passed by the assessing officer. 5.On further appeal filed by the assessee, the Income Tax Appellate Tribunal (‘Tribunal’ for short) held that these personal expenses are recorded in the regular books of account and, therefore, the question as to whether the said expenses are allowable or not has to be considered in the regular assessment and not in the block assessment. In our opinion, no fault can be found with the decision of the Tribunal and accordingly, first two questions 6.As regard questions (c) and (d) are concerned, the assessing officer had made addition of Rs.24,27,520/- on account of various expenses which were not recorded in the books of account in addition to the undisclosed income of Rs.30,00,000/- declared by the assessee. The Tribunal has held that though the assessee had declared undisclosed income of Rs.30 lakhs that amount was not seized during the course of search and in the absence of any finding recorded by the assessing office regarding the utilization of Rs.30 lakhs, the explanation of the assessee that the amount of Rs.30 lakhs offered by the assessee included the undisclosed expenditure of Rs.24,27,520/- was acceptable. Alternatively, the Tribunal held that even if the undisclosed expenses incurred by the assessee were relating to F.Y. 2002-03, in that year the assessee had cash in hand amounting to Rs.74,00,000/- in the books of account and the cash found being Rs.38.34 lakhs, the balance amount remaining in hand could be the source of undisclosed expenditure incurred in F.Y. 2002-03. In these circumstances, the decision of the Tribunal in deleting the addition on the ground that the assessee has explained the source of funds for undisclosed expenditure is based on finding of fact and no question of law arises from the order of the Tribunal. Accordingly, questions (c) and (d) cannot be entertained. 7.As regards question (e) is concerned, the assessing officer made addition of Rs.7,37,000/- being the expenses incurred by the assessee on behalf of associate concerns on the ground that the assessee has failed to prove that the expenses incurred were out of the funds withdrawn from the bank by the associate concerns. The Tribunal in para-9 of its order has recorded a finding of fact that the assessee has furnished a chart showing expenses incurred by him on behalf of various branches of the associate concerns along with withdrawal of Rs.11,00,000/- from various banks of the associate concerns. The Tribunal has recorded a finding that the payments were made by the assessee on behalf of the associate concerns, out of the amounts which was withdrawn from the respective bank of the associate concerns. Since it is not the case of the department that the amount of Rs.11,00,000/- withdrawn from the bank account by the associate concerns were available or were utilized somewhere else, the contention of the assessee was accepted by the Tribunal. In our opinion, the decision of the Tribunal is based on finding of fact. No substantial question of law arises from the order of the Tribunal. Hence, question (e) cannot be entertained. 8.The appeal is accordingly dismissed with no order as to costs. (K.K. Tated, J.) (J.P. Devadhar, J.)