TMI Blog2006 (9) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigate 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 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees and, therefore, not allowable as deduction under section 37 of the Income-tax Act, 1961." 3. The assessee-company is engaged in the business of customs house clearance of imports and exports on behalf of its clients. It provides package of services to the exporters and importers in the matter of clearance of their imports and exports. Search and seizure operation under section 132 of the Income-tax Act was carried out on 2-12-1999 at the office premises of the assessee as well as residential premises of its Directors. During the course of search, certain loose papers and notebooks were found and seized. However, no valuable was seized except a sum of Rs. 2 lakhs in cash from the residence of a Director and a cash of Rs. 52,866 from the office premises of the assessee. During the course of search, it was stated by the Director that they had paid Rs. 800 to Rs. 1,000 per consignment to various authorities for having the consignments cleared. It was also stated that a sum of Rs. 2,500 to Rs. 3,000 was spent in the Docks in cash per consignment on account of processing and handling charges, container de-stuffing charges, container retainer charges, mutilation charges etc. on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable as deduction under section 37 of the Income-tax Act, 1961. Section 37 provides for allowance of any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession carried on by the assessee. Explanation to section 37(1) bars deduction of any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. Section 37 or its Explanation cannot therefore be pressed into service unless the assessee seeks deduction for the expenditure. Disallowance of expenditure can arise only when there is a claim for its allowance. If the assessee does not claim allowance for any expenditure in the Profit and Loss Account, the question of disallowance of such expenditure cannot arise. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons given in para 6 of his order with the following observations : "6.3 On perusal of the loose papers being page No. 18 of Annexure A-1, it is seen that the appellant has not brought any verifiable material on records to refute that the renovations amounting to Rs. 7,77,480 were made by it. The appellant has only relied upon legal decisions to substantiate its claim. The appellant has not been able to dislodge the presumption as mentioned in section 132(4A) of the Income-tax Act. Considering this, I find that the Assessing Officer has correctly made the addition of Rs. 7,77,480 in the hands of the assessee. I, therefore, confirm the addition made by the Assessing Officer thereby taxing the amount of Rs. 7,77,480 as undisclosed income of the appellant. The Assessing Officer has telescopically adjusted the addition of Rs. 7,77,480 in the addition of Rs. 1.68 crores. Considering the fact that I have granted relief in respect of the addition made of Rs. 1.68 crores, the telescopic adjustment of Rs. 7,77,480 cannot be made. Considering the same, the amount of Rs. 7,77,480 is taxed as the appellant s undisclosed income. Thus, this ground of appeal is dismissed." 8. We have heard both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer on account of unexplained loans amounting to Rs. 36,28,700 and Rs. 5,98,735 as alleged unexplained interest income. The addition aggregates to Rs. 42,27,435. In doing so, the ld. CIT(A) has erred in not considering the evidence submitted by the appellant in support of its claim." 10. The impugned addition is based upon the notings in the loose paper marked page No. 15 of Annexure A-1 of the documents seized from the residence of Shri Shyam Sunder Makkar. A copy of the said paper has been placed at page 35 of the paper book submitted by the assessee before us. The said paper carries only 3 digits without any zero suffixing them. Shri Shyam Sunder Makkar admitted in his statement recorded on 3-12-1999 that the figures mentioned in the said paper were in codified form and therefore should be read by adding three zeroes to them ( i.e. 297 denoting Rs. 2,97,000). The said paper is in the handwriting of Shri Om Prakash Makkar, who is handling the business of the assessee at Panipat. In its explanation dated 10-11-2001, the assessee explained before the Assessing Officer that the said paper contained rough list of assessee s debtors. Along with the said letter, the assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oing through the loose papers and the above submissions of the appellant as well as the contentions of the Assessing Officer, I find that the Assessing Officer has correctly made the addition of Rs. 42,27,475. I therefore, confirm the addition made by the Assessing Officer. The Assessing Officer has telescopically adjusted the addition of Rs. 36,28,700 in the addition of Rs. 1.68 crores. Considering the fact that I have granted relief in respect of the addition of Rs. 1.68 crores, the telescopic adjustment of Rs. 36,28,700 cannot be made. Considering the same, the amount of Rs. 36,28,700 is taxed as the appellant s undisclosed income. Insofar as the interest amount of Rs. 5,98,735 is concerned, the Assessing Officer has not telescopically adjusted this addition. Hence, the Assessing Officer is directed to make this addition of Rs. 36,28,700. Thus, this ground of appeal is dismissed." 12. We have heard the parties and also perused a copy of the seized paper placed in the paper book filed before us. Section 69 empowers the Assessing Officer to treat the investments made by the assessee in a given financial year as unexplained investment of that year if the investment so made by him i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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