Mukesh Rasiklal Shah Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that recovery or repayment of fraudulent income does not qualify as an allowable expense since recovery of such income does not constitute an expense incurred wholly and exclusively for the purpose of earning income under Section 57 of the Act. Thus, denial of deductions for subsequent recovery upheld.
Facts- The assessee is a Chartered Accountant by Profession. A search and seizure operation carried out at the residential and office premises of the assessee and several incriminating documents were found and seized. This search has been initiated after the Income-tax Officer, Ward 8(1), Ahmedabad while verifying the claims of refunds in the cases of Amratlal S. Vyas, Kishore B. Jagtiani, Kishore B. Jagatiani (HUF) and Kokilaben H. Shah, became suspicious about the genuineness of the challans attached with the respective Returns of Incomes, as the refunds claimed were disproportionately high compared to the income shown by them. On further verification, it was found that the Income-tax challans have been fabricated and a fraud has been perpetrated by the assessee, who happened to be the Authorized Representative of the above named assesses.
Further scrutiny of the seized documents, case records available with the Income-tax Department and the statement of the assessee recorded, it was found that the assessee had fraudulently earned income to the tune of Rs.2,47,943/- and Rs. 19,36,095/- in the A.Y. 1992-93 and 1993-94 respectively. Thus, the same was added holding that the assessee had defrauded the Govt. of India to the extent of the said amount by entering into illegal activity of encashment of Refunds based on fraudulent challans.
