INCOME TAX ACT, 1961

Section 68

Income from undisclosed source - Addition under section 68 - Bogus expenditure -

Assessee was engaged in the business activities in India or elsewhere as traders, merchants, retailers, listeners, stockist, distributors, importers, etc. AO noted that during the search proceedings assessee had raised an invoice as commission for supply of medicines to M/s V, but no details of service was mentioned in invoice. Assessee pleaded before AO that assessee had not booked any bogus expenditure and in fact, in the books of assessee this transaction, whereby assessee had earned income which was shown and taxes were paid. Assessee also submitted the complete details of the contract and invoices are appearing in the books of account of the assessee. AO, however, did not find the explanation of assessee as convincing and treated the invoice amount as bogus expenses under section 68. Held: Assessee admitted to have received the amounts covered by the invoices. There was no comment on the books of accounts of assessee by AO, but according to AO there was no document which was not prepared by assessee company on its own in support of the contentions of assessee. AO was of the opinion that bogus expenses were booked and such bogus expenses were to be disallowed. On this premise AO added the receipts to the income of assessee. Therefore, AO was not sure whether he was adding the income or disallowing the expenses. The veracity of agreement between M/s V and assessee needed to be verified by AO and accordingly matter was remanded back to AO for verification of the agreement and to reach a right conclusion.

Relied:CIT v. Jansampark Advertising & Marketing (P) Ltd. (2015) 56 taxmann.com 286 (Delhi) : 2015 TaxPub(DT) 0992 (Del-HC)

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2011-12

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