In a significant case, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that an addition on bogus capital expense based on a statement under section 132(4) of the Income Tax Act, 1961 is not valid when the assessee has rebutted by furnishing evidence.
M/s. Lupin Limited, the assessee is engaged in the business of manufacture and sale of pharmaceuticals products. The assessee filed its return of income for the year under consideration u/s 139(1) of the Act on 30-09-2009 declaring a total income of Rs.77.29 crores under normal provisions of the Act and declaring book profit of Rs.459.47 crores u/s 115JB of the Act.
The return of income filed by the assessee was processed u/s 143(1) of the Act on 31-03-2011 and was selected for scrutiny by issuing notice u/s 143(2) of the Act. During the course of operation of prohibitory order u/s 132(3) of the Act, a Statement was recorded u/s 132(4) from Shri Ramesh Swaminathan, President (Finance & Planning) also. Post search, a statement was recorded from Shri Ramesh Kumar Khaitan, Vice President (Taxation) u/s 131 of the Act on 10-05-2012.
The cashier of the assessee company admitted in his statement that the company has given cheque payments to a commission agent named M/s Versatile Vintrade P Ltd and received cash back from the above-said person. The Managing Director also admitted that the company has made transactions by way of mere book entries in other years also. The AO completed the assessment by making various additions. The CIT(A) granted partial relief.
The assessee submitted that it had booked bogus expenses by way of commission payments only and such commission payments have been duly offered in the return of income filed u/s 153A of the Act. It was submitted that the above-said expenses aggregating to Rs.48,89,052/- are like actual expenses incurred under various heads and these expenses are not bogus in nature. Further submitted that the expenses to the tune of Rs.48,89,052/- were also wrongly included in the commission expenses by the search team.
The Tribunal observed that the assessee has admitted that it has booked bogus expenses by way of commission payments only and has furnished the details of materials purchased through these bills, delivery challans etc., to prove receipt of materials. The tax authorities have ignored all these aspects on merits but placed their reliance on the statement made u/s 132(4) of the Act
A Coram comprising of Shri B.R. Baskaran (AM) & Smt. Kavitha Rajagopal (JM) viewed that the assessee has rebutted the admission by furnishing evidence in support of the expenses. The Tribunal while allowing the appeal, set aside the order passed by CIT(A) and direct the AO to delete the addition of Rs.39,02,582/-.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
