2004 (8) TMI 638 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of operational and maintenance charges.
2. Disallowance of bad debts written off.
3. Disallowance of telephone expenses.
4. Validity of notice under section 147/148.
5. Charging of additional interest for withdrawing interest under section 244A.

Issue-wise Detailed Analysis:

1. Disallowance of Operational and Maintenance Charges:
The assessee-company filed appeals against the orders of CIT(A) for AY 1997-98 and 1998-99, which disallowed operational and maintenance charges paid to M/s. Jagowal Pvt. Ltd. The Assessing Officer (AO) noted a substantial increase in these charges and found that the directors of M/s. Jagowal Pvt. Ltd. were also directors of the assessee-company, suggesting a diversion of income to reduce tax liability. The CIT(A) upheld the AO's decision, citing a lack of evidence of services rendered and unauthorized diversion of electricity. The Tribunal observed several loose ends in the assessee's claim, including insufficient evidence of technical expertise and infrastructure of M/s. Jagowal Pvt. Ltd. However, considering substantial expenditure incurred by M/s. Jagowal Pvt. Ltd. on electricity and wages, the Tribunal remanded the matter to the AO for fresh consideration, allowing the assessee to provide further evidence.

2. Disallowance of Bad Debts Written Off:
The ground relating to the disallowance of Rs. 7,81,904 on account of bad debts written off was not pressed by the assessee's counsel during the hearing. Therefore, this ground was dismissed as not pressed.

3. Disallowance of Telephone Expenses:
The Tribunal addressed the disallowance of Rs. 24,191 out of telephone expenses for alleged personal use by directors, noting that this issue was covered in favor of the assessee by a previous ITAT decision. Consequently, the Tribunal directed the AO to delete the disallowance.

4. Validity of Notice under Section 147/148:
The assessee challenged the issuance of notice under section 147/148 for AY 1997-98. However, this ground, along with others related to procedural aspects, was not pressed by the assessee's counsel during the hearing and was dismissed as not pressed.

5. Charging of Additional Interest for Withdrawing Interest under Section 244A:
The ground regarding the charging of additional interest of Rs. 44,667 for withdrawing interest earlier given under section 244A was also not pressed by the assessee's counsel and was dismissed as not pressed.

Conclusion:
The Tribunal allowed the appeal for AY 1998-99 partly, remanding the issue of operational and maintenance charges to the AO for fresh consideration. The disallowance of telephone expenses was deleted. For AY 1997-98, the Tribunal followed the same decision regarding operational and maintenance charges, remanding the matter to the AO. Other grounds were dismissed as not pressed.