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Issues: Whether the Assessing Officer is required to allow deduction of expenditure against unaccounted cash receipts from sale of spent solvents/scrap and, if so, what is the appropriate quantification of such expenditure for the assessment years under consideration.
Analysis: The Tribunal examined the seized Excel workbook and admissions recorded during search, noting that the same material records both cash inflows from sale of spent solvents/scrap and cash outflows in names of employees. The entries and sworn affidavits corroborate that amounts received were largely disbursed for handling and disposal of hazardous waste. Given absence of direct records for all components of expenditure (transportation, packing, handling, wages), the Tribunal accepted that a reasonable estimate is required. Prior reasoning in a related ITAT Hyderabad decision for a group company was applied by treating the seized material as a whole and considering the notarized affidavits as having evidentiary value to support the existence of expenditure. On quantification, the Tribunal analysed the pattern of disbursals and the nature of disposal activity and concluded that a larger portion of receipts should be treated as expenditure than the 10% allowed by the lower authority.
Conclusion: The Tribunal directed that 60% of the unaccounted cash receipts from sale of spent solvents/scrap be allowed as expenditure and 40% of the addition on account of such unaccounted receipts be sustained for the assessment years 2015-16, 2018-19 and 2019-20; appeals are partly allowed in favour of the assessee.
Final Conclusion: The decision results in partial relief to the assessee by allowing a quantified estimation of deductible expenditure (60% of receipts) against unaccounted sale proceeds of spent solvents/scrap for the years under appeal.
Ratio Decidendi: Where seized material records both unaccounted receipts and corresponding cash outflows, it must be read as a whole and, in absence of direct evidence of each cost component, a reasonable estimated proportion of receipts may be allowed as expenditure; on facts, 60% of receipts was held deductible.
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