TMI Blog2016 (1) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... A(3) and 40(a)(ia) of the I.T. Act. Therefore, the contention of the Ld. Counsel for the assessee that the entire payments mentioned in the seized material is to be allowed while treating the receipts as income of the assessee is not tenable. However, we also agree with the Ld. Counsel for the assessee that the entire receipts recorded in the registers can not be treated as the income of the assessee. The relatable business expenditure has to be allowed from the receipts to compute the undisclosed income of the assessee. Therefore, the only course open to the Revenue would be to reject the books of account maintained by the assessee and to estimate the business income of the assessee. As the facts relating to the computation of gross profit or net profit of the assessee for the earlier or subsequent assessment years or relating to other assessees in similar business are not before us, we are of the opinion that the issue needs re-look/reconsideration by the A.O. for estimation of the assessee’s income. Since payments mentioned in the seized material are not being considered as the expenditure of the assessee, the applicability or otherwise of the provisions of sections 40A(3) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is non-verifiable and that the receipts have been generated and payments have been made for the assessee company. The year-wise receipts as extracted from the books is as under : Sl.No. Asst. Year Undisclosed receipts 1. 2007-08 83,00,000 2. 2008-09 12,45,11,146 3. 2009-10 7,73,43,692 4. 2010-11 3,73,37,060 Total 24,74,91,898 2.1. In view of the same, the A.O. asked the assessee to explain as to why payments cannot be ignored as they are not allowable expenditure and as to why all the receipts cannot be taxed in the respective years as suppressed receipts of the company. Mr. B. Krishnaiah, Chairman of the Company M/s. BSCPL Infrastructure Ltd and one of the Directors in assessee-company, submitted his objections on 19.12.2011 according to which, Mr. B. Seenaiah is one of the promoters of M/s. Bollineni Casting Steels Ltd., and he personally visits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account and but for the search, this fact would certainly not have come to the notice of the department. She held that by keeping this part of the business out of the regular books of account, the assessee should not be allowed to be in a relatively advantageous position compared to that of the assessee who did his business fairly and honestly. She further held that the transactions in the seized books should be figuratively be brought into the regular books of account and be considered as part of the same for the purpose of assessment. However, as regards the allowability of payments as recorded in the seized material is concerned, she held that the corresponding expenditure can be allowed only if the assessee furnishes the details of the payees concerned along with their confirmations since the payments are claimed to have been made in cash and have no independent corroborative evidence. She held that since the assessee has not filed the requisite details, it is not possible to consider these amounts as part of income anywhere as it would be against the public policy that payment be allowed as expenditure in the hands of the payer and the corresponding receipt in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of B Bench of this Tribunal in the case of DCIT, C.C.2, Hyderabad vs. M/s. Prajay Engineers Syndicate Ltd., Hyderabad in IT(SS) A. No.18/Hyd/2001 dated 22.08.2008. 6. Having regard to the rival contentions and the material on record and the judicial precedents relied by each of the parties, we find that the undisputed facts are that the assessee has accepted that books found and seized during the course of search pertain to the assessee and that the receipts and payments mentioned therein are also relating to the business operations of the assessee. Whatever may be the reason for accepting the receipts mentioned in the books, the lone contention of the assessee before us is that the expenditure relating to the receipts should be allowed. We agree with the contention of the Ld. D.R. that the expenditure which has been incurred wholly and exclusively for the purpose of business alone can be allowed and it is not verifiable from the seized material that this expenditure is incurred wholly and exclusively for the purpose of business of the assessee. We also agree with the Ld. D.R. that most of the expenditure being incurred in cash and some of which may be for illegal purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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