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Issues Involved:
1. Deletion of addition of Rs. 1,15,226 on account of low gross profit (G.P.). 2. Disallowance of Jeep car expenses. Detailed Analysis: Issue 1: Deletion of Addition of Rs. 1,15,226 on Account of Low Gross Profit (G.P.) 1. Background: The assessee, a registered firm and authorized stockist of goods manufactured by M/s Larsen & Toubro Ltd., was assessed for the year 1982-83. The Income Tax Officer (ITO) required the assessee to produce an agreement effective for the assessment year under consideration. The assessee provided an agreement effective from April 1, 1981, claiming it was identical to the previous year's agreement. 2. ITO's Observations: The ITO, after reviewing the agreement and making inquiries, concluded that the gross profit rate should be 20% based on the discount given by Larsen & Toubro Ltd. The ITO calculated the gross profits for category 'A' and 'B' products, resulting in a total profit of Rs. 3,56,400. However, the assessee disclosed a profit of only Rs. 2,41,174, leading the ITO to add Rs. 1,15,226 to the returned income. 3. Assessee's Arguments: During the first appellate proceedings, the assessee argued that the addition was based on surmises and conjectures, ignoring the material placed before the ITO. The assessee's method of accounting had been regularly accepted in previous years. Detailed statements showing bill-wise commission and sales were provided to the ITO, but were ignored. 4. CIT(A)'s Findings: The CIT(A) deleted the addition, observing that the ITO should have directly obtained the correct sales figures from Larsen & Toubro. The ITO failed to prove that purchases were inflated or sales were depressed. The CIT(A) noted that the book results could not be summarily rejected without reason and that the ITO did not make necessary inquiries from Larsen & Toubro. 5. Tribunal's Decision: The Tribunal confirmed the CIT(A)'s order, noting that the ITO relied on imaginary figures and ignored actual facts and figures provided by the assessee. The reconciliation statement prepared by the assessee, which was based on the same figures submitted to the ITO, showed a nominal difference that could be ignored. The Tribunal found no fresh evidence was furnished to the CIT(A) to the exclusion of the ITO. The trading results for the year under consideration and preceding years showed only a minor decline in gross profit rate, which did not justify the ITO's deviation from past assessments. The Tribunal rejected the first ground in the Revenue's appeal. Issue 2: Disallowance of Jeep Car Expenses 1. Background: The ITO disallowed 1/3rd (Rs. 10,040) of the total Jeep car expenses (Rs. 30,120) on account of personal use by the partners of the firm. 2. CIT(A)'s Findings: The CIT(A) restricted the disallowance to 1/4th, reasoning that personal use could not be completely eliminated but the ITO's disallowance was excessive. The CIT(A) noted that only two of the seven partners were working for the firm and that the expenses on the Jeep were reasonable given the business needs. 3. Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, finding no good grounds to interfere. The CIT(A) had provided detailed and cogent reasons for restricting the disallowance to 1/4th, and there were no substantial arguments from the Revenue to warrant a different view. The second ground in the Revenue's appeal was also rejected. Conclusion: The appeal by the Revenue was dismissed, with the Tribunal confirming the deletion of the addition of Rs. 1,15,226 on account of low gross profit and upholding the CIT(A)'s decision to restrict the disallowance of Jeep car expenses to 1/4th.
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