2011 (10) TMI 631 - AT - Income Tax

Addition on account of loading unloading and tempo expenses - failure to produce complete books of accounts vouchers details of the parties etc. - G.P. determination - Held that - head-wise disallowance of expenses was confirmed by the tribunal in the preceding year and the Tribunal did not hold that 25.22% G.P. rate is to be adopted being reasonable in this business. Hence in our considered opinion the percentage of these expenses to gross receipt in the preceding year should be adopted as reasonable in the present year. When we do so we find that percentage of expenses under two heads is below that of the preceding year. For Tempo charges the percentage in the present year is higher by 1.88% and if the same percentage is maintained it will result into a disallowance of 4, 46, 976/- out of tempo charges. It will result into G.P. rate of 20.59% which is higher than G.P. declared by the assessee in the assessment year 2003-04 of 17.22% and in assessment year 2004-05 of 19.91% but we find that in the written submissions of the learned AR of the assessee it is requested that G. P. rate may be adopted at 21%. We accept this request and hold that in the present case. G. P. rate of 21% be adopted as against 18.70% declared by the assessee. It will result into an addition of 2.3% of Gross Receipt of 237, 75, 331/-. Hence net addition will be of 546, 833/- as against 19, 72, 590/- made by the A.O. Since relief allowed by the Ld. CIT(A) is lower the appeal of the revenue is dismissed and the appeal of the assessee is partly allowed.

Summary

Issues:
Cross appeals filed by the assessee and the revenue against the order of Ld. CIT(A) IV, Surat for the assessment year 2005-06.

Analysis:

Issue 1: Addition of Rs. 13,72,590/-
The AO observed discrepancies in loading, unloading, and tempo expenses payable by the appellant. The AO required details of payments made, but incomplete information was provided. The AO disallowed a significant portion of the expenses, considering outstanding payments to laborers as not genuine. The Ld. CIT(A) allowed relief based on a previous Tribunal decision, reducing the disallowance to Rs. 13,72,590/-. The assessee appealed for further relief, while the revenue appealed against the relief granted.

Issue 2: Disallowance of Expenses
The Ld. CIT(A) compared the facts of the current year with the assessment year 2004-05. The Tribunal had allowed partial relief in the previous year, considering the unrealistic increase in GP if the entire disallowance was confirmed. The revenue argued for adopting the GP rate of the previous year, while the assessee proposed a GP rate of 21%. The Tribunal analyzed the expenses, concluding that a disallowance of Rs. 546,833/- was appropriate, dismissing the revenue's appeal and partly allowing the assessee's appeal.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision on the addition of Rs. 13,72,590/- and adjusted the disallowance of expenses, resulting in a net addition of Rs. 546,833/-. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed.