TaxTMI 
TaxTMI 
2006 (9) TMI 346
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.... On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition by way of disallowance of Rs. 35,77,500 mentioned in Ground No. 1, claimed by the assessee as reimbursement of expenses paid on behalf of their client without appreciating that these payments made in the form of bribes to employees 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....
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....fied in making the impugned disallowance. 5. We have heard the parties. The revenue has challenged the deletion of impugned disallowance of Rs. 35,77,500 on the short ground that the payments in respect of which impugned disallowance has been made are nothing but illegal payments made in the form of bribes to employees and therefore not allowable 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,....
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....e. He therefore rejected the plea of the assessee that it was a mere estimate of renovation expenses. It is in this background that the Assessing Officer has made the impugned addition of Rs. 7,77,480 being un-explained investment on renovation of office premises of the assessee. On appeal, the learned CIT(A) has confirmed the aforesaid addition for the reasons 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....
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....ned CIT(A) is deleted. Ground No. 1 is allowed. 9. Ground No. 2 taken by the department reads as under : "Addition of Rs. 36,28,700 on account of alleged unexplained loans and Rs. 5,98,735 on account of alleged undisclosed interest income. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the addition made by the Assessing 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 addi....
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....n by the debtors nor was any amount received by them as interest thereon. It was pointed out before the ld. CIT(A) that 90 per cent of the parties mentioned in the seized paper had given the affidavit while remaining 10 per cent filed their affidavits before the CIT(A). Ld. CIT(A), however, confirmed the order of the Assessing Officer with the following observations: "7.3 On going 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 m....