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2019 (2) TMI 655 - HC - Income TaxBogus expenses - expenses on shell companies - Held that:- Whatever may be the argument of the assessee we cannot be oblivious of the fact that the Rule 9 report accused the appellant of showing the bogus expenses of ₹ 272 crores or thereabouts in their accounts. Four shell companies were identified to which these expenses were made for allegedly procuring material and services to the assessee. Thereafter, the persons were identified as sub-dealers or sub-agents to whom this money was diverted. So much so that the entire bank accounts of these so called shell companies and sub-dealers were drained out. Now, this is not a very simple or usual discovery of facts. The assessee had just shown ₹ 126 crore as expenses. It was its duty to give an account for the rest of the money. It was also the duty of the Settlement Commission to ensure that the assessee did furnish proper accounts. In default adverse inference was drawn against them. The Commission was entitled to pass a best judgment order but doing so on the basis of gross receipts and expenses ratio or profit is not at all the wholly acceptable procedure. Some further enquiry was required. Equally the arbitrary was the method of addition of ₹ 36 crore to the expenses of the assessee. On what basis the Settlement Commission got this figure? Most probably it was using the figure to bring the receipt expenses or profit/expenses ratio of the assessee within the acceptable range. In the case of Ajmera Housing Corporation & Anr. Vs. Commissioner of Income Tax [2010 (8) TMI 35 - SUPREME COURT OF INDIA] as clearly tells us that where the settlement commission passed a final order without considering unexplained expenses, loans and surplus etc., the Court of jurisdiction could interfere. Assessment of undisclosed income can only be made following the principle of Brij Lal & Ors. Vs. Commissioner of Income Tax [2010 (10) TMI 8 - SUPREME COURT] - decided against assessee.
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