2010 (5) TMI 679 - AT - Income Tax

Summary

Issues:
1. Wrong selection of the case under compulsory scrutiny.
2. Addition of Rs. 13,29,206 on account of salary and interest.

Issue 1 - Wrong selection of the case under compulsory scrutiny:
The assessee appealed against the order passed by the CIT(A) challenging the selection of the case under compulsory scrutiny. The appellant argued that the assessment order should be quashed as the selection was erroneous, making the order void ab initio. However, during the hearing, the appellant withdrew this ground, and it was dismissed accordingly.

Issue 2 - Addition of Rs. 13,29,206 on account of salary and interest:
The main contention was the addition of Rs. 13,29,206 on account of salary and interest. The appellant argued that the Revenue authorities did not consider the facts correctly and cited a previous Tribunal decision where a similar deduction was allowed. The Departmental Representative, on the other hand, supported the Assessing Officer's decision based on non-compliance with the provisions of section 144 and section 184(5) of the Income-tax Act, disallowing the deduction. Reference was made to judicial precedents supporting the disallowance due to non-compliance with notices.

The Tribunal analyzed the facts and the previous decision cited by the appellant. It was noted that the Assessing Officer disallowed the interest and salary under section 184(5) due to the absence of the assessee during assessment proceedings. The Tribunal disagreed with the first appellate authority's view that the original default under section 142 remained intact even after producing books of accounts. Referring to the previous Tribunal decision, the Tribunal held that once the books of account were produced, the deduction of interest and salary should be allowed. Therefore, the Tribunal concluded that the issue was covered by the previous decision, and the addition in dispute was deleted, allowing ground No. 2 of the appeal.

In conclusion, the appeal was partly allowed based on the deletion of the addition related to salary and interest, as the Tribunal found in favor of the appellant on this issue.