Auto Vogue Private Limited Vs DCIT/ACIT (ITAT Chandigarh)
Survey Addition Cannot Be Extrapolated for Whole Year – ITAT Chandigarh Restricts Bogus Salary Addition to One Month Only
The Chandigarh Bench of the ITAT partly allowed the appeal of M/s Auto Vogue Pvt. Ltd. for AY 2018-19 and curtailed a large addition made on the basis of extrapolation from a single document found during survey proceedings.
During a survey u/s 133A, an Excel sheet listing 35 bogus employees and salary payments of ₹2.54 lakhs for the month of July 2017 was found from the cashier’s cabin. Statements of the cashier and HR manager admitted that the list pertained to bogus employees and the payments were not recorded in the books. The Assessing Officer assumed that similar cash salary payments were made throughout the year and, by extrapolating the July figure for 12 months, made an addition of ₹28.09 lakhs. The CIT(A) confirmed the addition.
The Tribunal held that:
- The incriminating document showed payments only for one month (July 2017).
- There was no admission or evidence that similar payments were made in other months.
- Survey additions must be strictly based on incriminating material found, and not on presumptions or estimates.
- Extrapolation without corroboration is impermissible, in view of binding precedents including VM Spinning Mills (P&H HC) and Gurdip Cycle Industries (ITAT).
Accordingly, the ITAT restricted the addition to ₹2.54 lakhs only (actual amount found in the document) and deleted the balance extrapolated addition. The sustained amount was directed to be taxed u/s 69C r.w.s. 115BBE. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
