CIT Vs. INDEO AIRWAYS PVT LTD

JUDGEMENT

(1.) The Revenue in the present appeals directed against the common order of the ITAT in ITA Nos.229/Del/2004 and 321/Del/2004 concerning the block period 01.04.1998 to 20.08.1998, claims to be aggrieved by its order dated 11.09.2009. The following questions of law arise for consideration, i.e.,

(2.) The brief facts necessary to decide the case are that search and seizure operation was carried out under Section-132 on 20.08.1998 in the premises of the assessee and the punchnama was drawn in the name of its Director Shri Naveen Gera. Block assessment was completed in respect of Shri Naveen Gera under Section-158 BC. The Revenue alleged that during the course of assessment proceedings in the case of Shri Naveen Gera, certain documents pertaining to the assessee were found. The assessee company was incorporated on 28.02.1997. Its business was to charter and operate flights for transportation of goods. Aircrafts were generally chartered from various foreign airlines and the assessee operated them on the DelhiMoscow sector. The appellant used to consolidate cargo for transportation from Delhi to various foreign destination for which payment was made by Indian exporter either at Delhi or at the destination. After the completion of block assessment in respect of Shri Naveen Gera and on the basis of the material seized, an assessment was separately framed in respect of the assessee company under Section 158BD on 29.08.2002. The sum of Rs 3,68,31,145/- added under Section-68 was on account of credit entries of cash allegedly received from non-existing people. The AO on the basis of materials seized and marked as Annexure A-95 to A-100, held that the genuineness, identity and credit worthiness of the depositors was doubtful. The amount was, therefore, directed to be added back in the hands of the assessee. In the assessee's appeal, the Commissioner - CIT (A) after considering the materials on record held that the total sum of Rs. 2,48,11,926/- i.e. the substantive expenditure under the head "green box expenses" could not be held to be illegal. The CIT (A) was of the opinion that once the undisclosed income of the assessee to the tune of Rs 3 Crores - i.e. the receipts was brought to tax, expenditure also revealed in the same books of accounts had to be deducted. The reasoning of the CIT (A) can be gathered from the following extracts of the order in appeal: -

(3.) Similarly, as regards the commission amount of Rs 8,38,127/- and Rs. 2,48,065/- for the AYs 1998-1999 and 1999-2000, the CIT (A) was of the opinion that these were shown as expenditure in the books seized during the search and in the absence of any material, the opinion of the AO that only 10% of the freight charges were reasonable and the rest was excess, could not be sustained. As far as the amount of Rs. 6,48,500/- and Rs. 6,300/- for AY 1998-99 and 1999- 2000, the AO had held that these heads were inadmissible as they were illegal consideration. On this score, the CIT (A) confirmed the order of the AO.