1977 (11) TMI 68 - AT - Income Tax

Summary

Issues:
1. Addition of excess sales-tax realized by the assessee.
2. Disallowance of commission paid to agents.

Analysis:
1. The first issue in this appeal pertains to the addition of Rs. 19,455 on account of excess sales-tax realized by the assessee. The Assessing Officer (AO) found that the Central and U.P. Sales tax accounts showed an excess realization of Rs. 19,455. The AO required the assessee to justify why this amount should not be assessed as income for the year. The assessee contended that the entire amount realized as sales-tax was payable to the government, citing a legal precedent. However, the AO held that the assessee maintained sales tax accounts on a cash basis, unlike the mercantile basis claimed by the assessee. The assessee challenged this addition before the Appellate Authority Commissioner (AAC), who upheld the AO's decision. The assessee further argued that all amounts collected were paid to the government, maintaining books on a mercantile basis. The Income Tax Appellate Tribunal (ITAT) found that the AO incorrectly held that the sales-tax accounts were on a cash basis, noting that the assessee maintained accounts on a mercantile basis. The ITAT also observed discrepancies in the AO's findings and concluded that the addition of Rs. 19,455 was unjustified, ultimately deleting the addition.

2. The second issue involves the disallowance of Rs. 6,389 out of the commission paid by the assessee to its agents. The AO disallowed a portion of the commission, which was later reduced by the AAC based on a previous year's order. The assessee contested this disallowance, highlighting that the previous year's order had been reversed by the Tribunal, allowing the entire commission as a deduction. The ITAT found that the disallowance sustained by the AAC was based on the reversed order from the previous year and was not justified. Consequently, the ITAT deleted the disallowance of Rs. 6,389. Other grounds raised were not pursued and were consequently rejected. The appeal was partly allowed based on the above analysis.