1979 (6) TMI 54 - AT - Income Tax

Summary

Issues:
1. Additional ground raised by the assessee regarding the determination of tax amount in the assessment order.
2. Appeal against the addition to book results.
3. Disallowance of expenditure incurred towards tea, Pan Bidi.
4. Addition in the ready-made garments account.

Detailed Analysis:

1. Additional Ground on Tax Determination:
The appeal involved an additional ground raised by the assessee regarding the determination of tax amount in the assessment order under section 143(3). The assessee argued that the failure to indicate the tax payable in the assessment order rendered it illegal and void. The Tribunal considered legal precedents and held that the omission did not invalidate the assessment. The Tribunal emphasized that the procedure for determining tax liability must be broadly construed to fulfill legislative intent. The Tribunal noted that the computation of tax was included in the notice of demand, and the omission of the calculation sheet did not render the assessment a nullity. Therefore, the additional ground raised by the assessee was dismissed.

2. Appeal Against Addition to Book Results:
The appeal also addressed the addition to book results based on the rejection of disclosed gross profit. The Income Tax Officer (ITO) rejected the book results and added to the disclosed results based on estimated turnover and gross profit. The assessee argued that the rejection was unjustified due to the nature of their job-work business, which did not involve stock maintenance. The Tribunal reviewed the facts and previous decisions, ultimately accepting the assessee's disclosed gross profit rate of 30%, considering the changes in the business operations and profit margins in subsequent years. The Tribunal concluded that no addition to the disclosed results was warranted for the year under appeal.

3. Disallowance of Expenditure:
The disallowance of expenditure incurred towards tea, Pan Bidi was also contested in the appeal. The ITO disallowed a portion of the expenditure as entertainment expenses, which was reduced by the Appellate Authority Commissioner (AAC). The Tribunal found that the disallowance under section 37(2A) was not supported by sufficient evidence, leading to the deletion of the disallowed amount of Rs. 500.

4. Addition in Ready-Made Garments Account:
Lastly, the appeal addressed the addition in the ready-made garments account, where a lump sum addition was made by the ITO. The AAC reduced the addition, and the Tribunal further decreased the amount, considering the disclosed gross profit percentage. The Tribunal found the nominal addition of Rs. 250 unnecessary and deleted the same.

In conclusion, the Tribunal partially allowed the appeal, dismissing the additional ground on tax determination, accepting the disclosed gross profit rate, and deleting the disallowed expenditure and the addition in the ready-made garments account.