C.I.T. vs. ABHISHEK CORPORATION

Facts

This case involves an Income Tax Reference filed by the Commissioner of Income Tax (CIT) against Abhishek Corporation for assessment years 1987-88 to 1997-98. The assessee had filed a return of undisclosed income in response to a notice under Section 158BC, disclosing Rs. 30 lakhs as net income earned on the Uday Towers project. The Assessing Officer assessed Rs. 1,88,59,400/- as 'On Money'/Premium. The Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeal and deleted the addition. The Supreme Court directed the ITAT to draw up a statement of case and refer questions of law to the High Court. The High Court is considering these references.

Held

The High Court held that the questions referred were squarely covered by its previous decisions, particularly in Tax Appeal No. 323 of 2000 with Tax Appeal No. 325 of 2000. The Court reiterated the principle that even upon detection of 'on money' or unaccounted cash receipts, only the profit element embedded in such receipts, not the entire receipts, can be brought to tax. The Court cited its own decisions in CIT vs. President Industries, CIT vs. Gurubachhan Singh J. Juneja, and CIT vs. Samir Synthetics Mill, as well as a decision of the M.P. High Court in Man Mohan Sadani vs. CIT, to support this view. The Court noted that the ITAT had previously relied on its judgment in Kishor Mohanlal Telwala, which was upheld by the High Court, confirming that the Tribunal was justified in considering a reasonable amount for expenditure to arrive at the taxable profit. Therefore, the High Court found no interference was called for in the ITAT's decision to accept the profit element out of the total undisclosed receipt. The reference was answered against the revenue and in favour of the assessee.

Key Issues

The High Court was asked to decide two questions of law: 1. Whether the ITAT was justified in admitting a new plea that the net profit in respect of supervision charges should be linked to flat booking receipts of Rs. 2.63 crores, contrary to Rules 29 and 10 of the Appellate Tribunal Rules. 2. Whether the ITAT, having held that the assessee received unaccounted receipts, was justified in requiring the Assessing Officer to discharge the onus regarding 'on-money' by showing the assessee invested Rs. 1,58,59,400/- out of such receipts, especially when the assessee's claim for extra expenditure was found incorrect. The Revenue argued that the ITAT erred in reversing the Assessing Officer's order, as 'on money' collection by the assessee was established, and the Tribunal should not have rescinded directions for tax collection. The Assessee contended that no question of law arises. They argued that even if 'on money' collection is believed, only the income, not the entire receipt, is taxable. The assessee relied on decisions in CIT vs. President Industries, CIT vs. Gurubachhan Singh J. Juneja, CIT vs. Samir Synthetics Mill, and an unreported decision of the High Court.