9911796707
TMI Blog2010 (4) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey operation under s. 133A conducted against the assessee on 14th Dec., 2004 by the Department at assessee's various business premises. During the course of survey various incriminating documents were found and some of the documents were also impounded. 2.3 In this connection, the AO stated that in the light of the various discrepancies revealed from the various documents and papers found during the survey, the assessee company voluntarily surrendered amount of Rs. 25,00,000 as additional income vide letter dt. 11th Feb., 2005 and, the assessee also paid the advance tax thereupon, but on perusal of P&L a/c and balance sheet filed along with the return of income, it was found that the assessee has not included in the return of income the aforesaid sum of Rs. 25,00,000 surrendered by the assessee vide letter dt. 10th Feb., 2005. During the assessment proceedings, the assessee was, thus, asked by the AO to explain the reason for not disclosing the amount of Rs. 25,00,000 surrendered by the assessee vide aforesaid letter. In reply, the assessee submitted as under : "We have surrendered Rs. 25,00,000 at that point of time, the surrender was made in spite of there being no clari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee was running a totally unorganized sector. 2.9 Since the various transactions found recorded in the papers found during the course of survey were not recorded in the books of account, the AO vide order sheet entry dt. 10th Dec., 2007 asked the assessee to explain as to why the books of the assessee should not be rejected under s. 145 of the Act. In reply thereto, the assessee vide letter dt. 12th Dec., 2007 submitted that the assessee's accounts were audited under s. 44AB of the Act, and also under the Companies Act, and duly audited accounts along with audit reports were filed along with return of income filed by the assessee. The assessee further submitted that the list of books of account maintained by the assessee are mentioned in the tax audit report, and all entries of business were duly recorded in the books of account. The assessee vide letter dt. 18th Dec., 2007 further submitted that since survey was conducted on 14th Dec., 2004 and the same lasted till wee hours on 15th Dec., 2004 creating a lot of stress on all the employees and work and the business was hampered to a great extent, the assessee immediately cancelled the function of Mr. Kushaal as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the context in which they were written. They were not signed nor dated. The nature of calculation made on those documents was also not known. The assessee, therefore, contended that addition of Rs. 25,00,000 made by the AO on the basis of assessee's declaration was not justified. The assessee also relied upon the various decisions as mentioned in the CIT(A)'s order. The assessee further contended that since the alleged discrepancies pointed out by the AO were duly explained, the AO was not justified in rejecting the books of account of the assessee and then making the addition of Rs. 25,00,000. 2.13 After considering the assessee's submission and the AO's order including the assessment records and the various materials and papers collected in the present case, the CIT(A) confirmed the addition by observing and holding as under : (i) Various decisions relied upon by the assessee are of no assistance to the assessee in as much as, in the present case, the assessee has surrendered the income not during the course of the survey proceedings but surrendered the income voluntarily vide letter dt. 11th Feb., 2005 filed after about two months from the date of the surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the survey were with reference to the catering services intended to be given to one Mr. Kushaal, to whom services were ultimately not given because of survey taken place at the assessee's premises on 14th Dec., 2004 continued upto wee hours of 15th Dec., 2004. He further contended that various other discrepancies pointed out by the AO are purely based on rough noting and working having no relation or connection to the actual business activity carried on by the assessee. He further submitted that merely on the basis of declaration without the same being supported by any material or evidences found during the course of the survey, no addition can be made. He further submitted that the statement made at the time of the survey is not conclusive so that any income offered by the assessee in the statement can be brought to tax merely on the basis of assessee's statement without the same being supported by any supporting evidences. He, therefore, submitted that the addition of Rs. 25,00,000 made by the AO and further confirmed by the CIT(A), is unjustified. 2.16 The learned Departmental Representative, on the other hand, submitted that the assessee has not been able to give any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the party booked in respect of one function at the premises of one Mr. Kushaal to be organized, was ultimately cancelled, and no receipt towards catering services was received by the assessee and, therefore, the question of entering those receipts in the books of account did or could not arise. The assessee submitted that for the reason that a survey was conducted on 14th Dec., 2005 at the assessee's premises and the assessee was very much upset by the survey, the function arranged for 15th Dec., 2004 for Mr. Kushaal was cancelled as if the assessee would have gone ahead with the arrangements, the assessee would not have been able to carry out the same efficiently and there would have been a total loss of reputation. The explanation of the assessee as well as the AO's stand in this respect of the matter have been examined and considered by us. We have gone through the relevant seized papers placed at p. 110 of the paper book filed by the assessee. In this page, it is mentioned that on occasion of Shaadi, an arrangement was to be made on 15th Dec., 2004. Number of guests guaranteed by the host were given at 600, and numbers of guests expected were mentioned as 700. The rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales are found to be verifiable and the rest are not verifiable. Therefore, we hold that the AO was justified in rejecting the books of the assessee and in estimating the income my making addition to the trading results declared by the assessee. 2.19 We find that the assessee has not been able to give any satisfactory explanation as to the following discrepancies found in the books of account maintained by the assessee vis-a-vis various documents and papers found and impounded during the course of the survey : "Discrepancies noticed : Annex. A9/p. 16, B-6, Hauz Khas It is a hand written rough working. It is a plain paper in the name of Kunal Lalani regarding details of functions dt. 6th Nov., 2004 for dinner party on 6th Nov., 2004 for 325 persons. The amount quoted is Rs. 2,34,737. The same has not been accounted for in the books of account. The assessee's explanation is that, it is handwritten rough working and not relevant with the books of account, is not acceptable. Page 39/A-1 dt. 28th Nov., 2004'Rs. 22,375 It is a note in respect of some casual boys. Corresponding entry of receipts are not appearing in the books of account. A-1/p. 42 Expenditure of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Number of documents and papers were found during the course of the survey, which were marked as Annex. 1 to Annex. 10 and then Annex. A1 and A2. Annex. A1(1) contained 127 pages, Annex. A1(2) contained 242 pages, Annex. A1(3) contained 218 pages, Annex. A1(4) contained 273 pages, Annex. A1(5) contained 86 pages, Annex. A1(6) contained 98 pages, Annex. A1(7) to Annex. A1(14) contained various papers regarding material transferred from one unit to another, daily day book, vehicle log book, stock register, staff attendance report, payment received books etc. In other words voluminous papers and documents about the assessee's business activities and the receipts and expenses were found during the course of the survey. These documents were thoroughly examined and verified by Investigation Wing, and the assessee was given a full and sufficient opportunity to give necessary explanation as to the nature and contents thereof. The assessee was also given sufficient opportunities to examine and verify all the various documents and papers found during the course of the survey. Thereafter, the assessee vide its letter dt. 11th Feb., 2005 had chosen or decided to make a disclosure of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various documents seized and impounded by the Department and that too after about two months from the date of survey. It is not a case where disclosure was made at the spot at the time of the survey without examining and verifying the various documents and papers found at the time of the survey, but, it is a case where voluminous documents and records or papers found at the time of the survey were duly examined and verified by the assessee, and the disclosure was made after various queries on the seized documents and records were raised by the Department, and after various hearings were taken place, and after the assessee was given sufficient opportunities to give explanation to the various queries raised by the Department. It is only at the time when the return of income was filed by the assessee on 30th Oct., 2005 that the assessee retracted from its own statement made in its letter dt. 11th Feb., 2005 declaring additional income of Rs. 25,00,000, and changed the stand without any valid reason. When no explanation as to the discrepancies in accounts was given at the time of the survey and thereafter at the stage of various hearings given to the assessee and when the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich tax was also paid in advance, is not justified but is an unwarranted attempt to reduce its due and just tax liability. 2.24 The assessee's disclosure of an amount of Rs. 25,00,000 on the basis of various documents and papers found at the time of the survey in respect of which various enquires were raised by the Department from time to time and various hearings had taken place and the assessee was provided sufficient opportunity to explain the documents etc. before the disclosure was made by the assessee, and payment of advance tax due thereupon, are itself sufficient piece of evidence and basis on which the addition of Rs. 25,00,000 can be made to the trading result declared by the assessee in its books. This is the case where addition have not been merely on the basis of assessee's declaration but the addition made in the light of the various discrepancies or defects found in the books of account maintained by the assessee and in the light of the suppressed sales or expenses found recorded in the seized documents or papers found at the time of the survey, on the basis of which the assessee has made a declaration of Rs. 25,00,000. 2.25 It is also well-settled that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess promotion expenses, the main expenditure is related to restaurant bills and some hotel bills in India where the directors go for meeting the clients for the purpose of business of the hospitality industry and hence there is a lot of expenditure incurred in the restaurants for meeting the clients and for obtaining the business from the clients. Since our clients are very high profit (sic'profile) and for that we have to take them to various restaurants to update them about the various kinds of cuisines and equipments available with us. Besides this, since our industry is food oriented industry, we have to update our information and we have to know about our competitor's recipes and new recipes/items available in the market ....... Besides this some expenditure is made on the flower arrangements/bouquets sent to prestigious clients on various occasions to get them updated and for public relation and for getting more business from them as our clients are repeat clients over the years." 3.2 After considering the assessee's submissions, the AO disallowed the expenses to the extent of Rs. 1,00,000 by observing as under : "From the details of the expenditure incurred it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of business promotion expenses. The AO should have pointed out some of the instances in respect of which he was of the view that expenses were not incurred for the purpose of business, but the AO has not done so and, has disallowed the amount purely on estimate. In this view of the matter, we, therefore, do not find any justification in sustaining the disallowance of Rs. 1,00,000 out of the business promotion expenses of Rs. 7,08,293. We, therefore, delete the disallowance of Rs. 1,00,000. 4. Ground No. 4 is directed against the CIT(A)'s order in sustaining the disallowance of Rs. 75,000 out of the total disallowance of Rs. 1,00,000 made by the AO out of vehicle running, vehicle maintenance and depreciation. 4.1 The sum of Rs. 1,00,000 has been disallowed by the AO out of vehicle running and maintenance and depreciation treating the same to have been incurred for personal use. The disallowance so made by the AO has been sustained to the extent of Rs. 75,000 by granting a relief of Rs. 25,000 by the learned CIT(A). 4.2 We have heard both the parties and carefully gone through the orders of the authorities below. 4.3 The present case is a case of private limited comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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