ACIT, NEW DELHI vs. SH. SHARUK PASSI, NEW DELHI

The above captioned appeals by the Revenue for assessment years 2006-07 to 2011-12 are preferred against the separate orders of the ld. CIT(A). Since the issues raised are common in all these appeals, they are being disposed of by this common order for the sake of convenience and brevity.

The roots for assessment lie in the search and seizure action u/s 132 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] conducted on Pasco Group of cases on 17.02.2012. Accordingly, notice u/s 153A of the Act was issued and served upon the assessee.

During the course of scrutiny assessment proceedings, the Assessing Officer made some enquiries/queries and completed assessment by making addition on account of bogus expenses of rebate /discounts/incentives, inflated claim of transportation expenses, bogus expenses on new vehicles, travelling expenses, personal expenses and disallowance u/s 14A of the Act. In all the years under consideration before us, additions were made under the heads mentioned hereinabove, though the quantum may differ in every Assessment Year.

The assessee vehemently agitated the matter before the ld. CIT(A) and contended that none of the additions/disallowances is based upon any incriminating material found during the course of search proceedings. Therefore, the ratio laiddown by the Hon'ble High Court of Delhi in the case of Kabul Chawla 380 ITR 573 squarely applies on the facts of the case in hand and hence the assessment deserves to be set aside.

After considering the facts and submissions, the ld. CIT(A) was convinced that none of the additions were based upon any incriminating material and drawing support from the decision of the Hon'ble High Court of Delhi in the case of Kabul Chawla [supra] held that the additions made by the Assessing Officer cannot be sustained and accordingly, directed the Assessing Officer to delete the additions. The ld. CIT(A) further deleted the additions on merits of the case.

Before us, the ld. DR vehemently submitted that the books of account were seized during the course of search proceedings and on perusal of the entries in the books of account, the Assessing Officer found that the entries in the books of account were not genuine and the same should be treated as incriminating material found at the time of search. It is the say of the ld. DR that in so far as the books of account are concerned, the same are incriminating material qua the entries therein and it is only after perusal of the ledger account, the Assessing Officer came to know that the cheques which were issued by the assessee were bearer cheques, which fact was subsequently confirmed by respective banks. The ld. DR continued by saying that the entries were incriminating and therefore, the ratio laid down by the Hon'ble High Court of Delhi [supra] do not apply on the facts of the cases in hand.

We have given thoughtful consideration to the orders of the authorities below. The undisputed fact is that the entire additions have been framed on the books of account of the assessee. In fact, the Assessing Officer, in his assessment order, proceeded by observing “From the examination of books of account of the assessee, it is observed that the assessee has claimed business expenses………”.

In our considered opinion, audited books of account found at the time of search cannot be treated as incriminating material. Further, the allegation that on perusal of ledger account, it was not known whether the payments have been made by bearer cheques or account payee cheques, is also ill-founded because the ledger extracts relied upon by the Assessing Officer and emphasized by the ld. DR contain only entries in respect of account payee cheques and on post search enquiries, banks have submitted details in respect of payments made by account payee cheques.

We do not find anything incriminating in these entries. The bearer cheques were encashed by some persons who were having transactions with the purchasers of the assessee and those persons claimed to get additional rebate/discount from the assessee and, therefore, they may have shared some discount/rebate from the parties to whom it was given by the assessee by making payments through bearer cheques. Though the Assessing Officer has stated that the persons who were enchasing cheques were employees of the assessee but surprisingly, when those persons were cross examined by the assessee, their statements were totally ignored by the Assessing Officer and during the course of cross examination, they have categorically stated that they are not employees of the assessee and encashing cheques because they were also getting some money from the purchasers.

As mentioned elsewhere, the heads under which the additions have been made are identical in all the Assessment Years under appeal. However, in for Assessment Year 2008-09, there is one addition in respect of cash found to be deposited in the books of account as under:

The Assessing Officer made addition of Rs. 1,20,000/- as unexplained cash deposit. A perusal of the assessment order shows that all the entries are duly reflected in the regular books of account and there is nothing to suggest that these entries were detected as a result of search out of some incriminating material. The entries of deposits are duly reflected in the books of account and hence we are of the opinion that the provisions of section 153A of the Act do not apply on such entries.

Considering the totality of the facts on record, we are also convinced that no addition is based on any incriminating material found during the course of search and, therefore, the ratio laid down by the Hon'ble High Court of Delhi in the case of Kabul Chawla [supra] squarely applies. The relevant findings of the Hon'ble High Court read as under:

In light of the above, we do not find any error or infirmity in the findings of the ld. CIT(A). All the appeals filed by the revenue are, accordingly, dismissed on the point of law. Therefore, we do not find it necessary to dwell into the merits of the case.

In the result, the appeals of the revenue in to 4291/DEL/2016 are dismissed.