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Issues involved: Addition of expenses without proper vouchers, Non-charging of interest on advances, Allowance of interest liability not debited in books of account.
Addition of Expenses without Proper Vouchers: The first issue pertains to the addition of expenses amounting to Rs. 30,65,300/- for various categories like rent, office maintenance, sales promotion, conveyance, legal charges, and others for A.Y. 2002-03. The Assessing Officer disallowed these expenses citing lack of proper vouchers and documentary evidence. However, the CIT(A) found the disallowance to be baseless and without any valid justification. The CIT(A) noted that the assessee had produced vouchers, filed all required details, and maintained regularly audited books of account. The Tribunal concurred with the CIT(A) and upheld the deletion of the disallowances, stating that the Assessing Officer's actions lacked a basis. Non-charging of Interest on Advances: The second issue concerns the addition of Rs. 47,83,343/- due to non-charging of interest on advances made to Chirag Trust and Dopsons Pharma India Ltd. for property purchase at Bombay. The Assessing Officer alleged that these advances were for siphoning off money and computed interest at 15%. However, the CIT(A) found this computation unjustified as the advances were made towards the end of the year. The CIT(A) referred to a previous year's deletion of a similar addition and ruled in favor of the assessee. The Tribunal agreed with the CIT(A), emphasizing the timing of the advances and the lack of fund flow, ultimately upholding the CIT(A)'s decision. Allowance of Interest Liability Not Debited in Books of Account: The final issue involves the direction by the CIT(A) to allow the liability of interest, even though it was not debited in the books of account and not claimed through a revised return. The assessee followed the mercantile system of accounting, and the CIT(A) accepted the claim based on this consistent method. The Tribunal highlighted the principle that the Assessing Officer must ascertain the correct assessable income, regardless of how the assessee initially reported it. Citing CBDT circulars, the Tribunal supported the CIT(A)'s decision, emphasizing the importance of guiding the assessee to ensure accurate assessment. Referring to a specific circular, the Tribunal upheld the CIT(A)'s order, emphasizing the department's obligation not to exploit the assessee's ignorance for excessive tax collection. In conclusion, the Tribunal dismissed both appeals by the revenue, affirming the CIT(A)'s decisions on all the issues discussed in the judgment.
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