2001 (3) TMI 817 - AT - Income Tax

Summary

Issues:
1. Disallowance of purchases made from M/s. Khan Packages.
2. Add back of expenses on account of wages and salary.
3. Disallowance of travelling and telephone expenses.

Issue 1: Disallowance of purchases made from M/s. Khan Packages
The Assessing Officer disallowed purchases made from M/s. Khan Packages due to the absence of vouchers/bills, treating them as fictitious. The CIT(A) upheld the disallowance of Rs. 16,627 out of the total amount of Rs. 1,55,867. The appellant argued that the CIT(A) incorrectly mentioned the disallowed amount and failed to consider the genuine nature of the purchases. However, the appellant could not produce bills to substantiate the transactions. The Tribunal held that the CIT(A) was justified in proceeding ex parte due to the appellant's failure to attend the proceedings. Since no evidence was presented to prove the existence of Khan Packages at the given address or the authenticity of the purchases, the Tribunal upheld the disallowance of the claimed amount.

Issue 2: Add back of expenses on account of wages and salary
The Assessing Officer disallowed a portion of the claimed expenses on wages and salary, alleging fabrication of accounts. The CIT(A) upheld the disallowance of Rs. 15,133 out of the total claimed amount of Rs. 55,133. The appellant argued that the estimate made by the Assessing Officer was unreasonable, given the turnover of the business. The Tribunal agreed and estimated the wages and salary at Rs. 50,000, reducing the disallowance to Rs. 5,133 based on the facts and circumstances of the case.

Issue 3: Disallowance of travelling and telephone expenses
The appellant did not press the grounds related to the disallowance of Rs. 3,000 for travelling expenses and Rs. 5,000 for telephone expenses before the Tribunal. As a result, these grounds were rejected as not pressed.

In conclusion, the Tribunal partially allowed the appeal by reducing the disallowance of expenses on wages and salary and rejecting the grounds related to travelling and telephone expenses. The disallowance of purchases made from M/s. Khan Packages was upheld due to the lack of evidence supporting the genuineness of the transactions.