Managing Director cannot be made liable for the unaccounted Income of the Company: Income Tax Appellate Tribunal, Mumbai.
In the recent case of ITAT, Mumbai Bench, the tribunal held that the Managing Director is not liable for the undisclosed and unaccounted income of the company. According to the facts of the case, the managing director of the company M/s VNR Infrastructure Limited. When the company as well as its directors were searched, certain incriminating material was found against the company. According to the submission of the managing director of the company, there was a huge amount of expenditure which was undisclosed by the company.
In the further hearing the Assessing Officer also contended that there was error of law and facts made by the CIT(A) when they reversed the Assessing Officer’s action of adding the unaccounted expenditure and income. All the statements of the Assessing Officer, Directors, Assessees, and other persons were recorded accordingly. The Cit(A) review shows that all the twin additionals of unrevealed spending and unrevealed revenue (supra), which are contested in the case of the M /s. VNR Infrastructure Limited Assessee’s firm, have been removed for the sole reason that they have been evaluated properly.
After listening to all the contentions, the tribunal held that the CIT(A) has correctly withdrawn such twin additions in the hands of the assessee/individual, as its M/s. VNR Infrastructure Limited carrying on the market in its own name is responsible for the corresponded unknown and unacknowledged revenues. The ITAT made it clear that the revenue did not even show the fact that the profits itself exceeded the business evaluation.