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2017 (12) TMI 533 - AT - Income TaxAddition on account of under invoicing - addition on the basis of email correspondence between the Director Mr. Pradeep Thampi and the customer - Held that:- When the rates charged are competitive with the charges billed to other customers, there cannot be any inference that the books of accounts of the assessee need to be rejected. The rates quoted in the email can by no stretch of imagination be treated as the final bill, the receipt against which has been clandestinely received by the assessee. There is no mention of any incriminating cash, bank balance etc. found which can corroborate this hypothesis of the assessing officer. In the course of survey also it is not the case that Shri Pradeep Thampi had admitted that assessee company has received any clandestine amount. Thus, there is no case that any person had admitted the receipt of differential amount in the course of survey. The email conversation which has been explained to be a quotation, can by no stretch of imagination be treated as conclusive evidence that the assessee company has made under billing and received a sum of ₹ 42,89,213/- which has not been disclosed in the books of accounts. This fact is more accentuated when it is noted that the rates charged are competitive and no case has been made out that it is lower than any rate charged to other customers. Hence in the background of aforesaid discussion, we are of the considered opinion that this addition has been made dehors any cogent material and, hence, the same is not at all sustainable. Accordingly, we reverse the order of the authorities below on this issue and delete the addition in this regard. Disallowance of incentive payment - test of commercial expediency - expenditure wholly and exclusively laid out for the purpose of the business - Held that:- For determining whether the expenditure was wholly and exclusively laid out for the purpose of the business the reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. Hence, torch bearer of the corporate governance mantle donned by the assessing officer is uncalled for and the disallowance is not sustainable on the facts and circumstances of this case. Another reasoning given by the assessing officer is that it is a repayment of capital contribution of ₹ 1 crore, on the basis of the statement of the said director. The ld. Commissioner of Income Tax (Appeals) has correctly held that this cannot be sustained as a capital contribution of Shri Pradip Thampi remains at ₹ 1 crore, at the end of the relevant assessment year. Hence, the view that the payment is reimbursement of capital is wholly unsustainable. Hence, in our considered opinion, there is no justification whatsoever in making the disallowance. Accordingly, in the background of the above discussion and precedent, in our considered opinion, there is no cogent basis for making the disallowance on the ground that it is a capital reimbursement and/or not commensurate with the services provided. Accordingly, we set aside the order's of the authorities below and delete the disallowance. Revenue appeal dismissed.
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