1999 (5) TMI 50 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 15,81,553 based on seized materials.
2. Valuation of unaccounted sales and stock.
3. Inclusion of income from other firms.
4. Disallowance of telephone expenses.
5. Non-consideration of specific grounds of appeal by CIT(A).

Detailed Analysis:

1. Addition of Rs. 15,81,553 based on seized materials:
The appeal concerns the addition of Rs. 15,81,553 made by the AO based on seized materials, specifically an Akar Note Book and loose papers. The AO found discrepancies in sales, purchases, and stock not reflected in the regular books of accounts. The assessee filed a revised return disclosing additional income of Rs. 5,69,403. However, the AO did not accept these figures and computed the total concealed income as Rs. 15,81,553.

2. Valuation of unaccounted sales and stock:
The AO valued unaccounted sales at Rs. 30 per kg for scrap and Rs. 22 per kg for stock. The CIT(A) substituted the rate of Rs. 19 per kg for sales but upheld the Rs. 22 per kg for stock. The assessee contended that the scrap was of poor quality and should be valued at Rs. 15 per kg for sales and Rs. 19 per kg for stock. The Tribunal decided that unaccounted sales should be estimated at Rs. 16 per kg and unaccounted stock at Rs. 19 per kg, noting the lack of specific reasoning for the CIT(A)'s estimates.

3. Inclusion of income from other firms:
The assessee argued that amounts disclosed in the names of other firms (M/s Mahavir Metals and M/s Arihant Rolling) should not be included in its income. The CIT(A) directed the AO to allow benefits of income disclosed under s. 132(4). The Tribunal found that the AO had correctly given deductions for additional income disclosed by the assessee-firm and that no further deductions were warranted for disclosures in other firms' names.

4. Disallowance of telephone expenses:
The AO disallowed 1/5th of the telephone expenses as personal use by partners. The CIT(A) upheld this disallowance. The Tribunal modified this, restricting the disallowance to 10% instead of 20%, acknowledging the lack of specific details of personal use.

5. Non-consideration of specific grounds of appeal by CIT(A):
The assessee raised grounds regarding the disallowance of Rs. 6,000 from interest paid and the charging of interest under ss. 215, 216, and 201(1A), which were not considered by the CIT(A). The Tribunal directed the first appellate authority to consider and dispose of these grounds in accordance with the law after giving the assessee an opportunity to be heard.

Conclusion:
The Tribunal partly allowed the appeal, modifying the valuation rates for unaccounted sales and stock, restricting the disallowance of telephone expenses, and directing the CIT(A) to consider specific grounds of appeal not previously addressed.