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TMI Blog2014 (1) TMI 1537X X X X Extracts X X X X X X X X Extracts X X X X ..... ry same bank and they have encashed the cheques either through their account or they have collected the cash from the banks - The amounts paid to the employees represent the amounts in excess of the actual expenses - The reasoning given that the vouchers are prepared after the financial year and voucher payment is made by cheques and therefore, genuineness of the cheques cannot be doubted and does not represent the inflation is incorrect - The payments are made to the sister concern are supported by the material on record, which shows that they have encashed the cheques but no corresponding entries are recorded in the accounts to show that what is the actual expenditure incurred – The Managing Director of the assessee company has admitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred an appeal to the Commissioner of Income Tax (Appeals). The Commissioner granted relief in respect of item Nos.2 and 3 and also a sum of Rs.5,75,516/- which comprises in the first item. Still aggrieved, the assessee preferred an appeal before the Tribunal. The subject matter of the appeal before the Tribunal was Rs.51,93,124/- on account of inflation of expenses for the assessment year 1997 98 and Rs.15,49,302/- on account of inflation of expenses for assessment year 1998 99. The revenue also preferred an appeal against the order of the appellate authority to the extent that the appellate authority granted relief to the assessee. Both the appeals were heard together by the Tribunal. The Tribunal dismissed the appeal preferred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent person to speak about the vouchers and expenses incurred by the assessee. In fact, payment were made by cheques and all these amounts are reflected in the books of accounts and the finding recorded by the assessing authority as well as the first appellate authority is purely based on suspicion which is unsustainable. However, he supported the finding recorded by the Tribunal and first appellate authority and submits that there is no case for interference. He added the addition would lead to absurd percentage of profits. 6. In the light of the aforesaid facts and rival contentions, the substantial questions of law which arise for consideration are as follows:- 1. Whether the Tribunal was correct in holding that the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son of the Managing Director A.S.Kupparaju, who is also the shareholder of the assessee Company. He has stated that the amounts drawn from the company by him and by his father were not accounted and vouchers were prepared after the end of the year by claiming the expenditure under various heads as shown in the profit and loss account. It is on that basis the assessing authority proceeded to hold that the expenses which are reflected in the books of the accounts as well as in the vouchers which are seized at the time of search did not represent the true facts. Admittedly, there is a inflation of the expenditure. Therefore, he directed addition of the said amount of Rs.51,93,124/- for the assessment year 1997 98 and Rs.15,49,302/- for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the tribunal were justified in deleting the said amounts. Therefore, we do not find any error committed by both the appellate authorities. The substantial question of law framed in respect of 2 and 3 are answered in favour of the assessee and against the revenue. 8. Insofar as addition of Rs.51,93,124/- and 15,49,302/- are concerned, the Tribunal holds that the search materials contradict the statement of Sri Nagaraju, in as much as it is misconceived on the part of the person who has prepared accounts at the end of the year and during the accounting year which are supported by vouchers. It is impossible that after the end of the year payments could be made by cheques to an extent of Rs.40,35,443/- for the year ended 31.03.1997, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently cannot refer to the cheque payments made during the past year. If we understand the statement of Nagaraju and the other material on record, what transpires is that the assessee incurred expenditure but he has inflated the figure. Cheques have been issued to the employees who are also having their accounts in the very same bank and they have encashed the cheques either through their account or they have collected the cash from the banks. The amounts paid to the employees represent the amounts in excess of the actual expenses. Therefore, the reasoning given that the vouchers are prepared after the financial year and voucher payment is made by cheques and therefore, genuineness of the cheques cannot be doubted and does not represen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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