1991 (11) TMI 86 - AT - Income Tax

Summary

Issues Involved:
1. Addition made by the ITO in the declared manufacturing/trading results.
2. Application of proviso to Section 145(1) and Section 145(2).
3. Applicability of Section 43B regarding unpaid sales-tax.
4. Levy of interest under Section 217.
5. Disallowance of sundry expenses.

Detailed Analysis:

1. Addition made by the ITO in the declared manufacturing/trading results:
The main issue across the appeals was the addition made by the ITO to the declared manufacturing/trading results. The assessee, a manufacturer of industrial chemicals, disclosed varying gross profit (G.P.) rates over the assessment years 1983-84, 1984-85, and 1985-86. The ITO adopted a G.P. rate of 29.9% based on the preceding years, leading to significant additions in the declared profits. The CIT(A) partially accepted the assessee's declared G.P. rates and applied a 20% G.P. rate for 1984-85 and 1985-86. The Revenue appealed against the relief granted, while the assessee cross-appealed against the sustained additions.

2. Application of proviso to Section 145(1) and Section 145(2):
The ITO justified the application of the proviso to Section 145(1) due to the absence of day-to-day consumption records and substantial variations in the consumption of nickel. The assessee argued that the G.P. rates were supported by regular books of accounts, vouchers, and statutory records. The Tribunal found that the decline in G.P. was mainly due to an increase in raw material costs, particularly nickel, which was not matched by a corresponding rise in selling prices. The Tribunal concluded that the ITO's rejection of the books was invalid, and the declared results should be accepted as correct.

3. Applicability of Section 43B regarding unpaid sales-tax:
The CIT(A) held that Section 43B was not applicable if the unpaid sales-tax at the end of the year was paid within the statutory time allowed under the Sales-tax Act. This position was supported by the Tribunal's decision in Chandulal Venichand vs. ITO. The Tribunal confirmed the CIT(A)'s direction to verify the timely payment of sales-tax and allow the deduction accordingly.

4. Levy of interest under Section 217:
For the assessment years 1984-85 and 1985-86, the CIT(A) directed the ITO to recompute the interest under Section 217 after giving effect to the appellate order. No further arguments were advanced on this issue, and the Tribunal directed the ITO to grant consequential relief.

5. Disallowance of sundry expenses:
The CIT(A) confirmed the disallowance of Rs. 1,548 for 1984-85 and Rs. 2,000 for 1985-86 out of sundry expenses. The assessee did not advance any further arguments on these disallowances, and the Tribunal upheld the CIT(A)'s order.

Conclusion:
The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals. The ITO was directed to delete the entire amount of additions made in the declared trading results for the assessment years under consideration. The Tribunal confirmed the CIT(A)'s findings on the applicability of Section 43B and directed the ITO to verify the timely payment of sales-tax. The directions regarding the recomputation of interest under Section 217 and the disallowance of sundry expenses were also upheld.