2012 (5) TMI 596 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of advance against order.
2. Disallowance u/s 40(a)(ia).
3. Addition on account of purchases.
4. Addition on account of sampling expenses.
5. Disallowance on account of conveyance, repair, maintenance, and staff welfare expenses.
6. Disallowance on account of depreciation on car, insurance, repair and maintenance, and telephone expenses.

Summary:

1. Addition on account of advance against order:
The assessee debited Rs. 45,03,927 under "expenses" for advances against orders. The Assessing Officer (AO) disallowed this, questioning the genuineness and business necessity of the transaction. The CIT(A) deleted this addition, and the Tribunal upheld this decision, noting the assessee's bona fide belief in the transaction and subsequent steps taken upon discovering the fraud.

2. Disallowance u/s 40(a)(ia):
The AO disallowed Rs. 5,00,000 paid as refundable security for factory premises rent, citing non-deduction of TDS. The CIT(A) confirmed this disallowance. The Tribunal, however, allowed the assessee's appeal, referencing Circular No. 718, which clarifies that TDS is not required on refundable security deposits.

3. Addition on account of purchases:
The AO added Rs. 32,657 for items not disclosed in the closing stock. The CIT(A) confirmed this addition. The Tribunal found no error in this decision and rejected the assessee's appeal on this ground.

4. Addition on account of sampling expenses:
The CIT(A) deleted the addition of Rs. 48,075 made by the AO. The Tribunal did not specifically address this issue, implying agreement with the CIT(A)'s deletion.

5. Disallowance on account of conveyance, repair, maintenance, and staff welfare expenses:
The AO disallowed Rs. 90,000 due to lack of supporting material. The CIT(A) confirmed this disallowance. The Tribunal upheld this decision, noting the absence of detailed evidence from the assessee.

6. Disallowance on account of depreciation on car, insurance, repair and maintenance, and telephone expenses:
The AO disallowed Rs. 90,000 from the total expenses of Rs. 1,86,388 due to insufficient details. The CIT(A) confirmed this disallowance. The Tribunal upheld this decision for similar reasons as the conveyance and maintenance expenses.

Conclusion:
The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal, specifically allowing the claim related to the refundable security deposit but upholding other disallowances and additions. Decision pronounced on 18.05.2012.