C.I.T. vs. KISHOR MOHANLAL TELWALA

ITA/411/1999HC GujaratGJHC24025150199924 April 2000Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE MOHIT S. SHAH4 pages
AI SummaryDismissed

What were the facts?

The Commissioner of Income-tax (Revenue) filed an application under Section 256(2) of the Income-tax Act, 1961, seeking a direction to the Income Tax Appellate Tribunal (ITAT) to raise and refer two questions of law to the High Court. The assessee, Kishor Mohanlal Telwala, was engaged in the construction business. For the block assessment period from 1986-87 to 1995-96 and April 1, 1995, to October 6, 1995, the Revenue added Rs. 1.47 crores to his income. The assessee appealed to the ITAT, which allowed the appeal. The Revenue's grievance pertained to the ITAT admitting a new plea regarding development expenditure of Rs. 38 lacs paid to Shri Harlalka and Shri Jain and allowing expenditure claims based on oral evidence, contrary to the Assessing Officer's findings.

What did the High Court hold?

The High Court held that neither of the questions posed by the Revenue involved a substantial question of law. Regarding the first question, the Court found that the ITAT had duly considered evidence that was not considered by the Assessing Officer due to a delay in its submission. Crucially, the Revenue had not raised any objection to the ITAT's consideration of this evidence at the time of the appeal hearing. Citing the ratio of the judgments relied upon by the assessee, the Court concluded that this did not present a question of law. Concerning the second question, the Court agreed that it also did not involve a question of law. The Tribunal had rightly considered that in the absence of financial records, the profit was presumed to be more than 8% as per Section 44AD of the Act. The Court did not agree with the Revenue that the entire receipt should be treated as income simply because no accounts or substantiation for expenditure were provided, acknowledging that the assessee would have incurred reasonable expenditure. The Court found the Tribunal's findings not to be perverse, especially in light of Section 44AD, and deemed it unnecessary to call for a statement of case.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was justified in law in admitting a new plea contrary to the facts on record, that the development expenditure of Rs. 38 lacs paid to Shri Harlalka and Shri Jain is admissible expenditure, contrary to Rule 28 read with Rule 10 of the Appellate Tribunal Rules, and basing its finding thereon? The Revenue argued that the ITAT should not have allowed this expenditure as no evidence was adduced by the assessee, and the Tribunal should not have presumed expenditure in the absence of evidence. The assessee contended that the question pertains to a question of fact, not law, as the Tribunal considered evidence produced at the eleventh hour, which the Assessing Officer had not examined, and the department did not object to its consideration. The assessee relied on Aluminium Corporation of India Ltd. v. CIT and CIT v. Durga Prasad More. 2. Whether, on the facts and circumstances of the case, the ITAT, having held that only the profit of the undisclosed income has to be taxed in the block assessment, was justified in admitting the claim of expenditure on the basis of oral evidence, though the department had discharged its onus to prove the undisclosed receipt in the form of on-money based on material seized during search? The Revenue argued that the entire undisclosed income should have been considered as income for the block assessment period and the Tribunal was not justified in admitting expenditure claims based on oral evidence. The assessee objected to referring this question as it also involved a disputed question of fact.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 44AD

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX APPLICATION No 411 of 1999

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO ofJ

JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? :

The order continues below.

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