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TMI Blog2009 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal, Patna Bench, Patna, in ITA(SS) No.21/Pat/1997, for the block assessment period 1.4.1994 to 31.3.1995, and 1.4.1995 to 7.2.1996. 2. A brief statement of facts essential for the disposal of this appeal may be indicated. The appellant is a company with its foundry and casting unit at Muzaffarpur in the State of Bihar. It had submitted its returns for the period 1994-95 on 30.11.1995. While the returns awaited application of the mind and order of assessment by the learned assessing authority, there was a search and seizure in the appellant‟s premises at Surat (Gujarat) on 15.12.1995 and 7.2.1996. Consequently, the respondent authorities issued notice under section 142(1) read with section 158BC of the Act to the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer and has in substance held that the business expenditure for which deduction is being claimed were fictitious transactions, inter alia, for two reasons. A show was made of issuance of account-payee cheque. The same were later on with the help of interpolations converted into bearer cheque(s) which is in violation of section 40A (3) of the Act. It has also been found that the amounts were credited to different accounts other than the names of the payee written on the cheques, cash were withdrawn from the accounts, and returned to the assessee. 5. By order dated 19.10.2006 this Court formulated the following substantial questions of law: (i) Whether the Tribunal was correct in law in holding that an expenditure incurred in cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 81 (Deputy Commissioner of Income-Tax and others vs. Shaw Wallace and Co. Ltd.); (ii) (2001) Vol. 248 ITR 562 (Bhagwati Prasad Kedia vs. Commissioner of Income-Tax); (iii) (2001) Vol. 250 ITR 141 (Commissioner of Income-Tax vs. Ravi Kant Jain); (iv) (2002) Vol. 256 ITR 129 (Commissioner of Income-Tax Vs. Vikram A. Doshi); 6.1) In his submission, "such evidence" occurring in Section 158BB of the Act is relatable to the materials found during the course of search and seizure alone. He relies on the following reported judgments: (i) (2006) 284 ITR 220 (Mad) (Commissioner of Income-Tax Vs. G.K. Senniappan). (ii) (2008) 298 ITR 98 (Raj) (Commissioner of Income-Tax Vs. Chandra Chemoux P. Ltd.). 7. The learned Standing Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly violative of section 40A (3) of the Act which reads as follows: "40A(3).Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, twenty per cent of such expenditure shall not be allowed as deduction: Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the assessee for any expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A (3) of the Act which disentitles the appellant to the claim of deduction. 9. There is yet another aspect of the matter. Law is well settled that fraud unravels everything. We are satisfied that the materials on record disclose that the appellant engaged itself in acts of fraud indicated hereinabove and the same by itself will defeat the appellant‟s claim for deduction. Reference may be made to the judgment of Court of appeal in England reported in (1956)1 All E.R. 341 (Lezarus Estates Vs. Beasley). Speaking for the Court Lord Denning observed as follows: "... If this argument is correct, the landlords would profit greatly from their fraud. The increase in rent would pay the fine many times over. I cannot accede to this arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation and a hide and seek game was played. Therefore, it emerges that the assessee had not disclosed this income in its regular returns...". (Emphasis added) 11. We are thus convinced that the transactions in question are violative of section 40A (3) of the Act, were acts of fraud, and are directly and clearly relatable to the materials which have been found during the course of search and seizure. The assessee had not disclosed this income in its original returns. 12. In view of the foregoing discussion, we answer the three substantial questions of law against the appellant and in favour of the Department. 13. In the result, this appeal is dismissed with costs quantified at Rs.10,000/- which shall form part of the demand notice. (S K ..... X X X X Extracts X X X X X X X X Extracts X X X X
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