TaxTMI 
TaxTMI 
2014 (1) TMI 1537
X X X X Extracts X X X X
X X X X Extracts X X X X
....ishka Hotel', at Gandhi Nagar, Bangalore. One Sri A.S.Kupparaju is the Chairman and Managing Director of the assessee Company. Consequent to the search, block assessment proceedings under Chapter IXV - B of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') were initiated and following additions were made:- (i) Inflation of expenditure as per documents seized for the assessment years 1997-98, 1998-99 & 1999-00 : Rs. 73,17,942 (ii) Inflation of expenses for assessment years 1989-90 to 1996-97 relating to Cheques payments : Rs. 41,38,608 (iii) Inflation of expenses for assessment years 1989-90 to 1996-97 relating to cash payments : Rs.18,39,543 3. Aggrieved by the said order, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nditure. Further, the Tribunal was in error in ignoring the legal evidence and in holding that the inflation is not established and in granting relief to the assessee. He submitted that insofar as the other additions are concerned, though no incriminating documents were seized, from the materials available on record, it could be inferred that it is a case of inflation of expenses and therefore, the assessing authority was justified in adding the said amount to the income of the assessee which has been erroneously deleted by the first appellate authority and confirmed by the Tribunal. 5. Per contra, learned Counsel for the assessee submitted that there is no material on record to show that these vouchers were bogus. Nagaraju who has exami....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited to the accounts of the assessee's sisters concern without establishing the nature of expenditure. 3. Whether the Tribunal was correct in holding that the inflation of expenses of assessment year 1989-90 to 1996-97 relating to cash payments of Rs.18,39,543/- cannot be added back as held by the Assessing Officer despite the Assessing Officer having held that the same were bogus and were not supported by any vouchers. 7. The material on record discloses that the assessee has filed its return of income for the assessment year 1997 - 98 and accounts were audited for 31/03/1998 before the date of search. A search took place in the premises of the assessee on 22/07/1998 and 14/10/1998 and a statement & vouchers were seized ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by assessing authority, which was a condition precedent for block assessment. He also directed the deletion of Rs.5,75,516/- which is for the year 1998 - 99 as nothing was seized pertaining to this period and the due date prescribed for filing the returns has not expired as the search was done on 22.07.1998. Aggrieved by the said order, both the revenue and the assessee preferred these two appeals. Insofar as deletion of Rs.41,38,608/- and 18,39,543/- are concerned, the first appellate authority has given good reasons which is in accordance with law. Therefore, the Tribunal declined to interfere with the said order. As the preconditions for block assessment was not found in respect of these additions, as estimation is not permitted in bl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s book represent an inflated figure, it does not mean that the voucher were bogus. The amounts mentioned therein and also the amount mentioned in the cheques, which are encashed by their own employees or sister concern did not actually represent the amount spent towards expenditure. Therefore, the assessing authority should have directed only the excess amount and not the entire amount to be added. It is a mistake committed by the assessing authority, which is also confirmed by the appellate authority. But the Tribunal has not properly appreciated the case of the revenue in proper prospective. It proceeded with the assumption that these vouchers are prepared after the financial year and the payments were made by cheques during the course of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unning of the hotel on day to day basis and therefore, his statement was accepted by the assessing authority and who has categorical terms admitted the inflated figures. In the light of the aforesaid material, the assessing authority holding that the vouchers represent the inflated figure cannot be found fault with. However, the entire amount cannot be treated as inflated figure and added to the income of the assessee. That aspect has been completely missed by the assessing authority. The assessee may be heard by the assessing authority to substantiate his claim and add only that amount which represent the inflated figure, which would meet the ends of justice. 10. In the light of the aforesaid facts and circumstances, we pass the followi....