2018 (5) TMI 1604 - AT - Income Tax

Addition made on account of undisclosed investment in house property - Held that - land was allotted to the assessee by ADDA on 23.08.1976 and the construction thereon was carried out by the assessee out of his salary savings loan from LIC and retirement benefits - thus the sources for investment in land and building stands duly explained - thus the addition is deleted - Decided in favor of assessee. Value of closing stock of fuel - Held that - the stock statement submitted to the bank did not take into account the evaporation loss and handling loss of fuel - due to this naturally value of closing stock shown to the bank would always be higher when compared to that in the balance sheet -thus the appeal of revenue is dismissed - Decided in favor of assessee. Disallowance of expenses incurred on advertisement and publicity - Held that - the expenses incurred and giving of various gifts to customers have not been proved by the assessee with supporting documents - In petrol pump business there is no necessity of incurrence of this expenditure - thus expenses are disallowed - Decided against the assessee.

Issues:
1. Addition of undisclosed investment in house property
2. Restriction of addition towards closing stock
3. Disallowance of expenses incurred on advertisement and publicity expenditure

Issue 1: Addition of undisclosed investment in house property
The appeal was directed against the order passed by the Commissioner of Income Tax (Appeals) regarding the addition of undisclosed investment in a house property. The Assessing Officer (AO) added a certain amount as undisclosed investment made by the assessee based on the valuation by the bank's valuer. The Commissioner of Income Tax (Appeals) observed that the property in question was purchased long back and was not part of the business. Therefore, he deleted the addition, stating that bringing the property into the balance sheet would only increase the capital account of the assessee. The Tribunal upheld the decision, stating that the sources for investment were duly explained and no addition could be made towards undisclosed investment in the property.

Issue 2: Restriction of addition towards closing stock
The second issue involved the restriction of addition towards closing stock discrepancy. The AO added a certain amount to the closing stock, considering the difference between the stock statement submitted to the bank and the one in the balance sheet. The Commissioner of Income Tax (Appeals) restricted the addition, noting that the stock statement to the bank did not consider evaporation loss, which was accounted for in the balance sheet. The Tribunal upheld the decision, stating that the disallowance was restricted to 10% of the loss, which was deemed appropriate and in line with standard practices.

Issue 3: Disallowance of expenses incurred on advertisement and publicity expenditure
The last issue involved the disallowance of expenses incurred on advertisement and publicity expenditure. The AO disallowed a certain amount, stating that the expenses were not relevant for the business purpose and were incurred for non-business reasons. However, the Commissioner of Income Tax (Appeals) deleted the disallowance, considering the gifts given as part of business promotion. The Tribunal, on the other hand, allowed the disallowance, noting that the expenses were not supported by proper documentation and were not necessary for a petrol pump business.

In conclusion, the Tribunal partly allowed the appeal of the revenue, upholding the decisions on the addition of undisclosed investment in the house property and the restriction of addition towards closing stock, but allowing the disallowance of expenses incurred on advertisement and publicity expenditure.

← Previous Next →