Revenue cannot tax Both On Money and expenditure out of it as same amounts to double addition

If the unaccounted expenditure is determined, then, necessarily the question which would arise for consideration before the Tribunal is whether the Assessing Officer was justified in making addition under Section 69C for the years under consideration. The Tribunal, in para 39 of the order under challenge, found that the explanation as derived from the records and placed by both can be traced to the ‘on money’ received at the time of booking/sale of shops. The statement of the senior partner is referred. The senior partner admitted that the sums have been received as ‘on money’ and at the stage aforesaid. Therefore, both the amounts, namely the ‘on money’ as well as the unexplained expenditure cannot be brought to tax, according to the Tribunal. If the unaccounted expenditure so incurred was from the ‘on money’ received by the assessee, then, the question of making any addition under Section 69C does not arise because the source of the expenditure is duly explained. It is only the ‘on money’ which can be considered for the purpose of taxation. That is what the Tribunal therefore concluded and once the ‘on money’ is considered as revenue receipt, then any expenditure out of such money cannot be treated as unexplained expenditure, for that would amount to double addition in respect of the same amount.

Full Text of the High Court Judgment / Order is as follows:-

1. All these appeals filed by the Revenue and by the assessee were placed before a Bench of this Court at Aurangabad. They were heard extensively and on 3­-10­-2003 the Bench of this Court at Aurangabad passed an order allowing both set of appeals partially and quashing and setting aside the Tribunal’s order impugned in both of them. The Division Bench confirmed the Assessing Officer’s order determining the tax liability of the assessee for the block period pursuant to search and seizure operation.

2. Aggrieved and dissatisfied with such a Judgment and Order of this Court in these appeals, especially aggrieved by the allowing of the Revenue’s appeals in part and dismissal of the assessee’s appeals in part, Civil Appeal No. 5762- ­5771 of 2005 was filed in the Hon’ble Supreme Court of India.

3. Pertinently, the above appeals were by the assessee. By a common order passed on 15­9­2005, the Judgment of the High Court was set aside. The Judgment of the High Court was set aside on the simple ground that the High Court did not frame the substantial questions of law which arose for consideration in the appeal, as required by Section 260A of the Income Tax Act, 1961 (for short, “the I.T. Act, 1961”)).

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