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2010 (4) TMI 1062 - AT - Income TaxUndisclosed income detected at the time of survey - discrepancies in the books of account found and impounded at the time of the survey - AO rejected the books of account of the assessee and made the addition to the trading result declared by the assessee in the books - Whether the AO was justified in rejecting the books of account of the assessee? - HELD THAT:- The assessee failed to point out that amount of ₹ 20,000 received on 12th Sept., 2004 was accounted for in the books of account. we find that the assessee has merely given a fanciful and blunt explanation without the same being supported by any iota of evidence that dinner to be arranged by the assessee on 15th Dec., 2004 was ultimately cancelled. We, therefore, have no hesitation in holding that the receipt against the said catering services rendered by the assessee to Mr. Kushaal has not been recorded in the books of account, and has been kept outside the books, and thus, the receipts have been suppressed by the assessee. It is well-settled that when there is suppression of sales or receipts, the books of the assessee can be rejected and income can be estimated. It is of great importance that the details of all the sales and receipts should be verifiable and correctly recorded. The books can be rejected even if the some of 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. Quantum of reasonable addition - addition made to trading results - As assessee himself admitted in its letter that assessee was grateful to all the officers of the Department for extending their full support and co-operation to the assessee during and after the survey proceedings. The assessee has also stated in the aforesaid letter that the assessee shall be able to achieve the object of buying peace with the Department and ensure smooth sailing for it not only at the investigation stage but also at the assessment stage. From the aforesaid averment made by the assessee in its letter it is fully established and proved that it is not the case where disclosure has been made either under coercion or pressure or because of any misunderstanding and/or mistaken reading of the document. It was never the case of the assessee that the assessee has misunderstood the contents of the various documents and papers found at the time of the survey and has wrongly declared the amount which was submitted after about two months from the date of the survey in the light of various documents and papers found at the time of the survey. The assessee's conduct in not including the aforesaid sum in the light of the various documents and papers found at the time of the survey on which tax was also paid in advance, is not justified but is an unwarranted attempt to reduce its due and just tax liability. It is also well-settled that once the books of account of the assessee are rightly rejected u/s. 145(3) of the Act, the AO has to proceed to determine the assessee's income on the basis of material available on record and to the best of his judgment. The fact that assessee has been indulging in suppressing sales of its business has been detected as a result of a survey conducted by the Department during the course of which various documents and papers were found and impounded indicating that all the transactions of receipts and payments were not recorded in the books of account submitted by the assessee to the Department. we, therefore, uphold the order of the CIT(A) in confirming the addition made to the trading results declared by the assessee. This ground raised by the assessee is thus rejected. Business promotion expenses - CIT(A) confirmed the disallowance by observing that the assessee has filed only copy of accounts of business promotion expenses, and from the copy of accounts, it is noted that the some of the expenses are in the form of hotel and restaurant bills and have been incurred from credit card and while some expenses incurred in cash also, and, therefore, the assessee has not been able to justify that entire expenses - HELD THAT:- We are of the considered view that the authorities below are unjustified in disallowing part of the total expenses incurred on 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 ₹ 1,00,000 out of the business promotion expenses We, therefore, delete the disallowance. Disallowance out of vehicle running and maintenance and depreciation - Addition made as expenses incurred for personal use - HELD THAT:- The present case is a case of private limited company, where the vehicles belonging to the company were also used by the directors. Even if the directors were using the vehicle for their personal use, insofar as company is concerned, the expenses are to be treated as being incurred for the purpose of business. If any personal benefit is accruing to the directors by use of vehicle for their personal purposes, the perquisite value could have been added as income in the hands of the directors. It is also to be noted that providing a car to the director by the company cannot be said to be on non-business account. Moreover, the books of account of the assessee have been rejected and the addition has been made by the AO in the trading result, and, therefore, there would be no justification to make further disallowance out of the expenses claimed in the P&L a/c when the addition has already been made by the AO. We, therefore, delete this addition sustained by the learned CIT(A). In the result, the appeal filed by the assessee is partly allowed.
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