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2014 (1) TMI 1537 - KARNATAKA HIGH COURTAddition on account of inflation of expenses - Held that:- The assessing authority should have directed only the excess amount and not the entire amount to be added – The entire amount cannot be said to be bogus - It is a mistake committed by the assessing authority, which is also confirmed by the appellate authority - The Tribunal has not properly appreciated the case of the revenue in proper prospective – From the statement of Nagaraju and the other material on record it can be inferred 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 - 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 the mischief of inflated figures - The entire amount cannot be treated as inflated figure and added to the income of the assessee – Only the inflated part be added – Partly allowed in favour of assessee.
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