2001 (7) TMI 261 - AT - Income Tax

Summary

Issues involved:
1. Addition of unaccounted sales
2. Disallowance out of expenses

Addition of unaccounted sales:
The Assessing Officer (AO) noted a substantial decline in gross profit and net profit rate for the assessment year 1997-98 compared to the previous year, along with defective books of accounts. The AO raised various queries regarding power consumption, processing labor charges, job work receipts, and other expenses. The AO, after considering the explanations provided by the appellant, added unaccounted job receipts to the tune of Rs. 41,27,541, citing the rejection of books of accounts under section 145(3) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the appellant's failure to produce required quantity records and the discovery of unaccounted job charges during a search operation. The authorized representative of the appellant argued that the books of accounts were audited and maintained in accordance with the law, presenting detailed explanations for the decline in profits and other discrepancies. The Tribunal concluded that the Revenue authorities failed to identify specific defects in the books of accounts, and since the appellant's books were audited and found to be in order, the addition of unaccounted sales was unjustified. The Tribunal also directed the AO to charge interest under section 234B if applicable.

Disallowance out of expenses:
The second issue pertained to the disallowance of telephone and car expenses by the CIT(A), which the appellant had initially agreed to before the AO. The CIT(A) rejected the appellant's challenge, stating that these expenses were not related to the business. The Tribunal held that once an issue is agreed upon before the AO, it cannot be raised again before an appellate authority without valid justification. As the appellant failed to establish the reasonability of re-raising the issue, the Tribunal rejected the appellant's ground related to the disallowance of expenses. The Tribunal set aside the CIT(A)'s order on this issue and confirmed the AO's decision.

In conclusion, the Tribunal partly allowed the appeal of the assessee, deleting the addition of unaccounted sales while upholding the disallowance of expenses as per the AO's order.