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Issues involved: Appeal against CIT(A)'s order for A.Y. 2007-08. Grounds include addition to income, disallowance of expenses, and charging/withdrawing of interest u/s 234B, 234C, 234D, and 244A of the I.T. Act.
Addition to Income: The assessee, a firm of Chartered Accountants, maintained books on a cash basis. The dispute arose regarding amounts lying to the credit in the balance-sheet, representing unpaid bills for which no reimbursement was received from clients. The AO added these amounts to income, alleging they were professional receipts not included in the income on a cash basis. The assessee explained that these credit balances were non-reimbursed expenses by clients and not reflective of income. The Tribunal agreed, stating that the entries did not represent cash receipts and were in conformity with accounting standards and Sec. 145. Citing relevant case laws, the Tribunal deleted the additions, ruling in favor of the assessee. Disallowance of Expenses: The AO disallowed a portion of expenses, attributing them to personal expenses of partners. The assessee contended that the disallowances were unjustified, providing explanations for the nature of expenses incurred. The Tribunal found no justification for further disallowances, noting that the senior partners' car expenses and other car expenses were essential for business purposes. Additionally, the disallowance of depreciation on cars and telephone expenses was deemed unwarranted. Relying on the arguments presented, the Tribunal allowed the appeal, deleting the disallowances made by the lower authorities. Interest u/s 234B, 234C, 234D, and Withdrawal u/s 244A: The issue of charging interest u/s 234B, 234C, 234D, and withdrawing interest u/s 244A of the I.T. Act was also raised. However, the judgment primarily focused on the addition to income and disallowance of expenses, ultimately allowing the appeal on those grounds.
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