1991 (9) TMI 114 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of Rs. 25,000 on account of a debit note issued by the assessee.
2. Deletion of addition of Rs. 12,720 under section 69C of the Income-tax Act, 1961.
3. Addition of Rs. 21,431 under section 40A(3) of the Income-tax Act for payments made on account of freight charges.

Detailed Analysis:

1. Deletion of Rs. 25,000 on Account of a Debit Note Issued by the Assessee:
The revenue objected to the deletion of Rs. 25,000 added by the Assessing Officer (AO) due to a debit note issued by the assessee for rainwater damage to paper supplied by M/s. Bengal Trading Co. The AO added this amount to the trading account as it was not accounted for in the relevant assessment year (1982-83). The assessee contended that the amount was settled and accounted for in a subsequent year. The CIT(A) accepted the assessee's contention, stating that the right to receive the amount did not accrue until the supplier accepted the debit note in the subsequent year. The tribunal upheld the CIT(A)'s decision, noting that the debit note was not accepted by the supplier within the relevant accounting year, thus the amount did not accrue during the assessment year 1982-83.

2. Deletion of Addition of Rs. 12,720 under Section 69C of the Income-tax Act, 1961:
The revenue objected to the deletion of Rs. 12,720 added by the AO under section 69C for expenses that were recorded in the cash book at a later date. The AO suspected that unaccounted money was used to meet these expenses. The CIT(A) found that the assessee had sufficient cash balances on the dates the expenses were incurred and that the expenses were recorded in a consolidated form later. The tribunal upheld the CIT(A)'s decision, agreeing that the assessee had enough cash balance on the relevant dates and the practice of recording expenses later was justified given the nature of the business.

3. Addition of Rs. 21,431 under Section 40A(3) of the Income-tax Act for Payments Made on Account of Freight Charges:
The assessee objected to the addition of Rs. 21,431 under section 40A(3) for cash payments exceeding Rs. 2,500 each to M/s. Shibnath Pd. Singh and Meenakshi Roadways. The CIT(A) found that out of the total disallowed amount of Rs. 62,983, only Rs. 21,431 related to payments exceeding Rs. 2,500 for freight charges, while the rest were for smaller amounts not attracting section 40A(3). The assessee argued that these payments were covered by a CBDT Circular and were necessary due to the nature of the business. The tribunal noted that fresh evidence (an affidavit and a certificate) was produced by the assessee, which was not evaluated by the lower authorities. Thus, the tribunal set aside the CIT(A)'s order on this issue and remanded it back to the AO for re-evaluation with the new evidence.

Conclusion:
The tribunal upheld the CIT(A)'s decisions on the deletion of Rs. 25,000 and Rs. 12,720, finding no merit in the revenue's appeals on these points. However, it remanded the issue of the Rs. 21,431 addition under section 40A(3) back to the AO for fresh consideration with new evidence provided by the assessee. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes.