2013 (8) TMI 1075 - AT - Income Tax

Issues Involved:
1. Jurisdiction and validity of additions and disallowances u/s 143(3).
2. Application of Sec. 145(3) and GP rate adjustments.
3. Disallowance of bank guarantee charges.
4. Disallowance of bank commission.
5. Disallowance of interest on loans.
6. Disallowance of interest on machinery loan.
7. Deduction for sales tax payment.
8. Charging of interest u/s 234A, 234B, 234C, and 234D, and withdrawal of interest u/s 244A.

Summary:

1. Jurisdiction and Validity of Additions and Disallowances u/s 143(3):
The assessee challenged the jurisdiction and validity of the additions and disallowances made in the order dated 23.12.2011 u/s 143(3). The Tribunal did not find merit in these grounds, and they were dismissed as not pressed.

2. Application of Sec. 145(3) and GP Rate Adjustments:
The Assessing Officer (A.O.) rejected the books of account due to discrepancies such as lack of stock register, unvouched expenses, and incomplete records, invoking Sec. 145(3). The A.O. applied a net profit (NP) rate of 12.5% on gross contract receipts. The CIT (A) reduced this to 11.1%, considering the average NP rate of the preceding two years. The Tribunal found the CIT (A)'s approach unreasonable and directed an average NP rate of 10.5%, subject to deductions for depreciation, remuneration, interest to partners, and other business-related expenses.

3. Disallowance of Bank Guarantee Charges:
The CIT (A) disallowed bank guarantee charges amounting to Rs. 2,69,527/-. The Tribunal remitted this issue to the A.O. for verification and deduction if found incurred for business purposes.

4. Disallowance of Bank Commission:
The CIT (A) disallowed bank commission amounting to Rs. 1,40,647/-. The Tribunal remitted this issue to the A.O. for verification and deduction if found incurred for business purposes.

5. Disallowance of Interest on Loans:
The CIT (A) disallowed interest paid on loans amounting to Rs. 2,25,000/-. The Tribunal remitted this issue to the A.O. for verification and deduction if found incurred for business purposes.

6. Disallowance of Interest on Machinery Loan:
The CIT (A) disallowed interest on machinery loan amounting to Rs. 3,42,665/-. The Tribunal remitted this issue to the A.O. for verification and deduction if found incurred for business purposes.

7. Deduction for Sales Tax Payment:
The CIT (A) did not clearly allow a separate deduction for sales tax payment. The Tribunal did not address this issue specifically in the final order.

8. Charging of Interest u/s 234A, 234B, 234C, and 234D, and Withdrawal of Interest u/s 244A:
The assessee contested the charging of interest u/s 234A, 234B, 234C, and 234D, and withdrawal of interest u/s 244A. The Tribunal directed the A.O. to give consequential effect.

Conclusion:
The assessee's appeal was partly allowed for statistical purposes, and the revenue's appeal was dismissed. The Tribunal directed the A.O. to apply an average NP rate of 10.5% and verify certain expenses for business purposes. The order was pronounced on 20.8.2013.

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