1995 (7) TMI 103 - AT - Income Tax

Summary

Issues:
1. Service of show cause notice
2. Entitlement to deduction under s. 80-I
3. Deletion of legal and professional expenses
4. Allowance of service charges paid to sister concern
5. Deletion of addition of conveyance and car expenses
6. Adjustment of expenses of Bombay office

Analysis:

1. Service of show cause notice:
The appeal by the Revenue contested the service of the show cause notice upon the assessee, leading to an early assessment order. The CIT(A) found discrepancies in the service of the notice and the timing of the assessment order, ultimately deciding in favor of the assessee due to lack of evidence of proper service. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of evidence supporting the Revenue's claim.

2. Entitlement to deduction under s. 80-I:
The dispute revolved around the assessee's eligibility for a deduction under s. 80-I, with the AO questioning the newness of the industrial undertaking. The CIT(A) and subsequently the ITAT upheld the deduction, considering past records and the nature of the business, ruling in favor of the assessee.

3. Deletion of legal and professional expenses:
The AO disallowed legal and professional expenses, alleging non-business purposes and profit suppression. However, the CIT(A allowed the deduction after considering the nature of the expenses and the business turnover, which the ITAT upheld, citing the reasonableness of the claim.

4. Allowance of service charges paid to sister concern:
The AO disallowed service charges paid to a sister concern, questioning the business relevance of the expenses. The CIT(A allowed the claim, noting past approvals and justifying the expenses. The ITAT upheld the CIT(A)'s decision based on the consistency of past allowances.

5. Deletion of addition of conveyance and car expenses:
The AO disallowed a portion of conveyance and car expenses, alleging personal use by partners. The CIT(A deleted the addition, considering the absence of a car in certain locations and the partners' locations. The ITAT upheld the CIT(A)'s decision, finding no reason to interfere.

6. Adjustment of expenses of Bombay office:
The AO adjusted expenses of the Bombay office, suspecting profit manipulation. The CIT(A, however, allowed the expenses after considering the separate nature of sister concerns and the business activities conducted from the Bombay office. The ITAT upheld the CIT(A)'s decision, emphasizing the legitimacy of the expenses and lack of evidence for profit manipulation.

In conclusion, the ITAT dismissed the appeal, affirming the CIT(A)'s decisions on all disputed points after thorough analysis and consideration of the facts and circumstances presented.