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2006 (9) TMI 346 - AT - Income TaxDisallowance u/s 37 - Reimbursement of expenses paid on behalf of their client - illegal payments made in the form of bribes - Search and seizure operation u/s 132 - Unexplained investments & unexplained interest income - HELD THAT:- In the matter before us, it is the claim of the assessee that it has not claimed any deduction for the impugned expenditure in its Profit & Loss Account and hence the Assessing Officer was not justified in disallowing the same. The Department has not placed any material before us to controvert the aforesaid submission made on behalf of the assessee. In this view of the matter, the appeal filed by the Department is liable to be dismissed. We order accordingly. Addition on alleged renovations at office premises - seized loose papers - HELD THAT:- In our view, the loose papers as also the statements made at the time of search simply provided a clue to the Department to investigate the matter further and verify as to whether any alteration was at all carried out at the office premises and if so, the expenditure incurred in carrying out those renovations. This was all the more necessary when both the directors had retracted from their statements and when it was stated before the Assessing Officer that the items mentioned in the seized papers were non-existent at the office premises. Since the Department has not linked the contents of the seized paper with the actual renovations allegedly carried out at the office premises, it is difficult to sustain the addition. Rebuttable presumption raised by section 132(4A) is restricted to accepting the genuineness of the document found at the time of search and not to the interpretation of those documents. Thus, the impugned addition made by the Assessing Officer and sustained by the learned CIT(A) is deleted. Ground No. 1 is allowed. Addition on account of alleged unexplained loans and of alleged undisclosed interest income - HELD THAT:- In the matter before us, the assessee had filed a list of parties along with their addresses in respect of whom the jottings were made in the seized paper and requested the Assessing Officer to examine them. It was therefore for the Assessing Officer to find out as to whether the jottings made in the seized paper really pertained to the debtors recorded in the assessee’s books of account. Secondly, the assessee had filed affidavits of the parties mentioned in the seized paper and requested the Department to summon them and verify the facts, which the Assessing Officer did not do. Thirdly, it is not a case where the assessee has not offered any explanation about the nature and source of the transactions shown in the seized papers. If the Department was keen to reject them, it was open to them to do so after examining the executants of the affidavits and after rebutting the explanation given by the assessee. The Assessing Officer presumed the unexplained nature of jottings made in the said seized paper without examining the concerned parties who have filed their affidavits. Additions cannot be made on the basis of conjectures and surmises. In our view, the materials brought on record by the Assessing Officer are not sufficient to bring the case of the assessee within the ambit of section 69 of the Income-tax Act. Ground No. 2 is allowed. Appeal filed by the assessee is allowed.
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