Monday, November 9, 2015

High Court rejects Sec. 292C presumption for treating seized docs as true/correct; disallows exp.

Section 292C provides that where any document is found in possession or control of any person in the course of search, then it may be presumed that the contents of such documents are true and correct. However, in the instant case, the documents (in respect of alleged expenditure) found during the course of the search did not indicate the name of payee and payer. Therefore, even if the presumption of Section 292C is to be applied and the documents are accepted as true, it would not lead to the conclusion that payments have been made so as to claim the expenditure.
Facts:
a)  During the course of search, the search party came across with documents pertaining to alleged expenditure incurred by assessee.
b)  The assessee wants to claim deduction under Section 37(1) on basis of such seized documents. Assessee was of the view it was not required to prove that it had actually incurred alleged expenditure as any document found during search presumed to be true and correct as per Section 292C.
c)  Assessing Officer (AO) disallowed such expenditure on ground that complete evidence in support of payment was not provided.
d)  The third member bench of Tibunal affirmed the order of AO. Aggrieved by the order of Tribunal, assessee filed the instant appeal before the High Court.
The High Court held in favour of revenue as under-
1)  Section 292C provides that where any document is found in possession or control of any person in the course of search, then it may be presumed that the contents of such documents are true and correct.
2)  The words 'may presume' as provided in Section 292C are in the nature of discretionary presumption. Therefore, invocation of such presumption is at discretion of the revenue authorities.
3)  An expenditure could be claimed under section 37(1) only when it has in fact been incurred and that too wholly and exclusively for the purposes of business.
4)  In the instant case, the documents found during the course of the search were inchoate. Document did not indicate the name of payee and payer. Therefore, even if the presumption is to be applied and the documents are accepted as true, it would not lead to the conclusion that payments have been made so as to claim the expenditure. Hence, AO was right in disallowing the expenditure- Harish Textile Engrs. Ltd. v. DCIT [2015] 63 taxmann.com 66 (Bombay)


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