AUTO VOGUE PRIVATE LIMITED,CHANDIGARH vs. DCIT/ACIT(CEN)-1 CHD, CHANDIGARH

The Ld. AR advanced arguments assailing extrapolation of figures as found recorded in document found during survey action.

From the assessment order, it emerges that the assessee was subjected to survey action u/s 133A on 22-08-2017 wherein list of 35 employees was found from the cabin of cashier of the assessee- company. These employees were shown to have been paid salary of Rs.2,54,115/- for the month of July, 2017. The HR Manager admitted that the list was list of bogus employees and it was not entered in the system. During assessment proceedings, the assessee was show- caused wherein the assessee opposed any such addition. In the light of recorded statements during survey, Ld. AO rejected the contentions of the assessee and proceeded to make the addition in the hands of the assessee. It was assumed by Ld. AO that similar expenditure would have been incurred by the assessee throughout the year and by extrapolating the figures as mentioned in this sheet, Ld. AO made addition of Rs.28,09,380/- (Rs.2,54,115x12 months) and finalized the assessment.

During first appeal, it was, inter-alia, argued by the assessee that the alleged excel sheet contained salary payment for a single month only and no evidence was found to establish that such payments continued for the rest of the year. It was further argued that no corroborative evidence was discovered to substantiate the alleged cash salary payments and the addition was on mere presumption.

From the facts, it is crystal clear that an excel sheet was found during survey which contained list of employees which were not entered into regular books of accounts. The assessee is shown to have made payment of Rs.2,54,115/- to these employees for the month of July, 2017. The same has also been admitted by the cashier and the HR manager in their respective statements as extracted by Ld. AO in the assessment order. However, there is no admission that similar payment was made for rest of the other months also. In our considered opinion, the survey addition has to be made strictly in accordance with the incriminating material only. The document found during the survey is the very foundation of the impugned addition. Unless corroboration was done by Ld. AO to support the extrapolation, no presumption could be made that similar payment was made by the assessee during the rest of the months also. The extrapolation is in contradiction to the decision of this Tribunal in Gurdip Cycle Industries vs. DCIT (165 Taxmann.com 299) which has been rendered, inter-alia, after considering the decision of Hon’ble Punjab & Haryana High Court in the case of VM Spinning Mills vs. CIT (16 Taxmann.com 199) as well as various other decisions holding the field. In these decisions, addition on the basis of extrapolation has been held to be unsustainable. Respectfully following the same, we direct Ld. AO to restrict the impugned addition to the extent of Rs.2,54,115/- only. The same would be taxable u/s 69C r.w.s. 115BBE of the Act. No other ground has been urged in the appeal.