TaxTMI 
TaxTMI 
2011 (3) TMI 1039
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....ng misappropriation and siphoning of the funds of the company by Maharaj Prithvi Raj and Maharaj Jai Singh. This complaint was made by a close family friend of the Director, namely, Maharaj Dev Raj. In the complaint it was mentioned that the assessee company had booked expenses of Rs.50 crores under the head repair and maintenance of the building which had been siphoned off with the help of a contractor appointed in consultation and for personal benefit of Maharaj Prithvi Raj. Ld CIT, therefore, issued show-cause notice to the assessee requiring the assessee to submit explanation with reference to the complaint received. 3. Ld CIT observed that the AO during the course of the assessment proceedings verified the genuineness of the expenses under the head 'repairs and maintenance'. The AO specifically asked the assessee to furnish complete details of contractors to whom payment exceeding Rs.50,000/- was made but the assessee filed details of payment exceeding Rs.5 lakhs only and failed to file the remaining details before the AO. The AO also requested the assessee to produce four parties, namely, Shri Choti Lal, Shri Chander Singh, Shri Sat Narain and M/s. Singh Constructio....
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....e expenditure was capital. The AO was required to disallow the expenses of Rs.6,67,88,079/-. Further, the ld. CIT (A) had not given any finding that the expenditure on repairs and maintenance was not genuine. Hence the order of the AO is erroneous and prejudicial to the interest of the Revenue. 5. The next issue raised in the show cause notice related to the issue that as per complaint the Directors of the company had illegally withdrawn/siphoned off approximately Rs.5 crores under the head travel and conveyance in the years 2003-04 to 2007-08. These expenses were personal expenses of Maharaj Prithvi Raj and Maharaj Jai Singh as these expenses were not related to the business of the company as they were not incurred for procuring business outside India. The AO while dealing with the issue noted that the documents submitted by the assessee for the foreign visit of the Directors were manipulated and the letter submitted by them were of similar font. The assessee company had not produced the pass-ports of the Directors and others who have undertaken the foreign visits. Travelling expenses incurred by the Directors and others are of personal expenses of the Directors. He has ....
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.... all the reasons for which it was required to be made. 7. As regards the third issue that as per para 2 of the complaint the assessee company had siphoned off Rs.40 crores between year 2002-03 and 2008-09 by illegally withdrawal of money in the guise of additions to the fixed assets. This means that the assessee had not actually acquired fixed assets, but siphoned off by showing bogus purchases/acquisition of fixed assets. From the schedule of depreciation, it was seen that the assessee had shown addition of Rs.50 lakhs between 1st April to 30th September and Rs.1,88,45,697/- between 1st October to 31st March. The AO, however, has failed to make any enquiries into this allegation/aspect. It was submitted by the assessee that the AO by questionnaire dated 21st November, 1988 asked the assessee for various details relating to addition/reduction to block of assets vide its letter dated 8/09/2008. The assessee furnished details regarding description of assets purchased during the year, date of purchase, cost of asset and depreciation on fixed assets purchased during the year. The details furnished were discussed by the assessing officer who did not ask for any further informa....
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....er submitted that the complaint was received by the AO on 19/11/2008 alleging certain allegations for siphoning off the funds of the company by illegally by way of bogus expenses or acquisition of assets not in existence. The AO had treated 90 per cent of the expenditure capital in nature. There was no material to doubt the genuineness of the expenditure incurred on the basis of the complaint. The ld. CIT while initiating proceedings on the basis of the complaint issued notice in respect of expenditure incurred on travelling on the ground that the expenditure incurred was of personal nature. Another issue relates to depreciation claimed on assets, which has been allowed by the AO without making any enquiries. It has been submitted in compliance to the show cause notice that the assessee had filed replies with same evidence as was filed before the assessing officer. It was also stated that the complaint made against the assessee was frivolous without having any supporting evidences. The AO had considered the complaints and required the assessee to satisfy about the genuineness of the expenditure in respect of each of the head, which was duly complied with by the assessee. It was fur....
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....llowed the expenditure on the ground that the Directors have not filed their Pass-ports. The ld. CIT(DR) further submitted that the AO had not made enquiries from the parties. Therefore, the order passed by the AO without making third party enquiries is erroneous in so far as it is prejudicial to the interest of the Revenue. He placed reliance on the following decisions:- 1. CIT vs. Pushpa Devi (1987) 164 ITR 639 (Pat.); 2. Gee Vee Enterprises vs. Addl. CIT (1975) 99 ITR 375 (Del.); 3. Indian Textiles vs. CIT (1986) 157 ITR 112 (Mad.) 12. We have heard both the parties and gone through the material available on record. Under section 263 of the Act the ld. Commissioner of Income-tax is empowered to cancel the assessment, if the order passed by the assessing officer is erroneous in so far as it is prejudicial to the interest of Revenue. Hon'ble Supreme Court in the case of Malabar Industrial Corporation has held that in order to exercise of jurisdiction u/s 263 by the Commissioner is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interest of Revenue. The Commissioner has to be satisfied of twin condi....
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....ssee to furnish the addresses of the parties to whom the payment exceeding Rs.50,000/- was made during the year under consideration under the head 'repairs and maintenance of the building'. The assessee submitted the addresses of the parties to whom payment exceeding Rs.5 lakhs was made. The AO had noted that the assessee had not furnished complete details of contractors. The assessing officer also asked the assessee to produce four parties S/Shri Choti Lal, Chandar Singh, Sat Narain and M/s. Singh Construction, but those parties were not produced. The AO on the basis of these facts came to the conclusion that the genuineness of the expenses could not be verified. Thereafter, the AO discussed various case laws to arrive at the conclusion that 90 per cent of the expenditure was of capital in nature. In this case, a complaint was received by the AO on 19/11/2008 and the AO had issued questionnaire to the assessee on 21st November, 2008. Therefore, the AO while examining the case before him had knowledge of the complaint filed against the assessee. 14.1 On appeal the ld. CIT (Appeals) deleted the addition relying on the expenditure incurred by the assessee in earlier years. ....
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....s foreign visit. As such, the travelling expenses could not be treated as personal expenses of the Directors. Further, it was also submitted that the AO had passed order under fringe benefit tax wherein the entire travelling expenses have been treated as eligible for FBT. FBT liability has been paid by the assessee on the entire travelling expenses. Reliance was placed on CBDT Circular No. 8/2005 dated 29th August, 2005 clarifying that the employer is not liable to pay FBT on personal expenses. Therefore, it was submitted that the AO had considered the expenses as revenue expenses incurred for wholly and exclusively for the purpose of business. The assessee also submitted copies of Pass-ports and Visa of Directors on sample basis evidencing the foreign travel undertaken by the directors of the company. The assessee also invited the attention to the documentary evidences furnished by it during the course of assessment proceedings which were furnished on sample basis and which consists of mails from foreign travel agents evidencing meeting with them. The ld. CIT (Appeals) on the basis of the above submissions, held that foreign travel expenses were incurred wholly and exclusively for....