2010 (4) TMI 1137 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of scrap.
2. Disallowance of foreign traveling expenses.
3. Disallowance of telephone expenses.
4. Addition out of job work income.

Addition on account of scrap:

The Assessing Officer (AO) added Rs. 6,50,000/- for sale of scrap in A.Y 2004-05 and Rs. 6,63,832/- in A.Y 2005-06, citing that the sale of scrap/wastage material shown by the assessee was quite low considering the size of turnover. The assessee contended that the ad hoc addition was without any basis and there was no evidence of any sale of scrap outside the books of account. The CIT (Appeals) deleted the additions, stating that the AO made no case for suppression of value or sale of scrap. However, in A.Y 2006-07, the CIT (Appeals) upheld an ad hoc addition of Rs. 8,75,188/-, reasoning that the AO's estimation was reasonable. The Tribunal found no defects in the books of account and no legal basis for the ad hoc additions, directing the deletion of the additions in all three years.

Disallowance of foreign traveling expenses:

The AO disallowed Rs. 22,37,578/- for A.Y 2004-05 and Rs. 11,14,390/- for A.Y 2005-06, stating that the assessee failed to provide complete details of utilization of foreign exchange and evidence of business purpose for visits to Hongkong, Dubai, and Singapore. The CIT (Appeals) deleted the disallowances, noting that the expenses were reasonable, incurred for business purposes, and supported by vouchers. The Tribunal upheld the CIT (Appeals)'s decision, finding sufficient material on record to support the conclusion that the expenses were incurred for business purposes.

Disallowance of telephone expenses:

The revenue challenged the deletion of disallowance of telephone expenses of Rs. 48,018/- each for A.Y 2004-05 and 2005-06. The Tribunal found no justification for disallowing the amounts in question, given the turnover and income shown by the assessee, and rejected this ground of appeal.

Addition out of job work income:

In A.Y 2005-06, the AO added Rs. 1,97,773/- to the income of the assessee, finding a discrepancy between the TDS Certificate and the job work receipt shown in the return. The CIT (Appeals) deleted the addition, noting that the job work receipt pertained to A.Y 2004-05 and was duly accounted for in that year. The Tribunal confirmed the CIT (Appeals)'s action, stating that there was no justification for the addition.

Conclusion:

The revenue's appeals for A.Y 2004-05 and 2005-06 were dismissed, and the assessee's appeal for A.Y 2006-07 was allowed.

Pronounced in Open Court during the course of hearing on 26.04.2010.