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Issues:
1. Addition of Rs. 3,000 in the trading account. 2. Charging of interest of Rs. 1,734 under section 217 of the Income Tax Act. Detailed Analysis: 1. Addition of Rs. 3,000 in the trading account: The appellant, a firm engaged in manufacturing and sale of bifurcated rivets, filed a return declaring a taxable income of Rs. 97,280 for the assessment year 1974-75. The Income Tax Officer (ITO) completed the assessment at Rs. 1,09,560, making various disallowances including Rs. 3,000 for labour charges paid to an associate concern. The Appellate Tribunal found no justification for this addition, noting that the charges were fixed and did not vary with profits. The Tribunal held that the ITO's action in disallowing the Rs. 3,000 was unjustified, and the Appellate Assistant Commissioner (AAC) erred in confirming the addition. Consequently, the Tribunal vacated the addition, accepting the appellant's contention on this issue. 2. Charging of interest under section 217: The appellant was required to pay advance tax of Rs. 8,734, which was paid, but the tax worked out to Rs. 10,728 in the return. The Revenue argued that the assessed income should be considered for interest calculation under section 217, and even excluding the Rs. 3,000 addition, the difference in tax exceeded the prescribed margin. However, the appellant contended that filing an estimate under section 212(3a) was only necessary if the current year's income was likely to exceed the advance tax computation. The Tribunal agreed with the appellant, stating that the appellant was not obliged to file an estimate under section 212(3a) based on the facts of the case. The Tribunal held that the charging of interest under section 217 was not warranted, as the difference in tax amounts did not exceed the allowable margin. Therefore, the Tribunal deleted the interest of Rs. 1,734. The appellant received relief of Rs. 3,000 in addition to the interest deletion. 3. Appeal on the charging of interest under section 217: The appellant argued that it had the right to challenge the levy of interest under section 217 in an otherwise valid appeal. The Revenue contended that no appeal could be filed against the charging of interest under section 217. The Tribunal referred to various judgments, including one from the Allahabad High Court, which held that such appeals were not maintainable. However, the Tribunal noted conflicting judicial authorities on the issue and concluded that in a validly filed appeal, the levy of interest under section 217 could be challenged. Since the appellant's appeal was found to be valid, the Tribunal held that the appellant was within its rights to contest the interest levy. The Tribunal deleted the interest amount of Rs. 1,734 based on the merits of the case. In conclusion, the Appellate Tribunal partially allowed the appeal, vacating the addition of Rs. 3,000 in the trading account and deleting the interest charged under section 217.
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