1999 (7) TMI 531 - AT - Income Tax

Summary

Issues:
1. Excessive payment of job charges
2. Addition in the trading account
3. Enhancement of income due to diesel and LDO purchases

Excessive payment of job charges:
The case involved an appeal against the confirmation of an addition of Rs. 1,39,127 due to excessive payment of job charges. The Assessing Officer disallowed the amount as he deemed the job charges to be excessive compared to the previous year. The CIT(A) upheld the disallowance, stating it was diversion of profit to a sister concern. However, the Tribunal found the disallowance unjustified. They noted that similar payments to the same firm were allowed in previous years at higher rates. The Tribunal emphasized that no evidence was presented to prove the payments were not genuine, leading to the deletion of the addition.

Addition in the trading account:
Another issue was the addition of Rs. 4,42,451 in the trading account, which the CIT(A) partially sustained. The Assessing Officer disallowed the amount due to excessive job work charges paid to related concerns. The CIT(A) reduced the addition but still upheld a portion of it. The Tribunal, however, found the addition unjustified and wrong. They highlighted that no concrete evidence was provided to show the payments were not genuine. The Tribunal emphasized that similar additions in previous years were deleted, and the overall gross profit rate declared for the year was reasonable. Consequently, the Tribunal deleted the addition in full.

Enhancement of income due to diesel and LDO purchases:
The third issue concerned the enhancement of income by the CIT(A) due to alleged inflation of diesel purchases and excessive consumption of LDO. The CIT(A) increased the assessment by Rs. 3,72,403 based on estimates of inflated purchases and consumption. The Tribunal, however, found the enhancement baseless. They emphasized that the CIT(A) relied on conjecture and surmises without concrete evidence to prove the alleged discrepancies. The Tribunal noted that the enhancement was made without considering the actual records in the books of account, leading them to delete the entire addition.

In conclusion, the Tribunal partly allowed the appeal, ruling in favor of the assessee on all three issues by deleting the additions made by the Assessing Officer and CIT(A) due to lack of concrete evidence and unjustified reasoning.