1995 (5) TMI 59 - AT - Income Tax

Issues Involved:
1. Addition under Section 68 vs. Section 69 of the IT Act.
2. Disallowance of expenses under the head 'Onam and Vishu Presents.'
3. Disallowance of foreign travel expenses.
4. Computation of relief under Section 80HHC of the IT Act.
5. Addition towards the stock of Huqqas.
6. Disallowance of repair charges of Huqqas.
7. Deletion of unexplained credits treated as unexplained credits.

Detailed Analysis:

1. Addition under Section 68 vs. Section 69 of the IT Act:
The primary issue was whether the addition of Rs. 2 lakhs should be made under Section 68 or Section 69 of the IT Act. The assessee argued that the addition should fall under Section 69, as the credits were not mere cash credits but were related to purchases recorded in the books. The Tribunal noted that the onus under Section 69 lies with the Revenue to prove that payments were made outside the books. The Tribunal found that the assessee had provided sufficient details of the blacksmiths and that the Revenue had not adequately discharged its onus. Therefore, the Tribunal sustained a smaller addition of Rs. 10,000 for the assessment year 1983-84 and Rs. 5,000 for the assessment year 1984-85, deleting the balance.

2. Disallowance of Expenses under the Head 'Onam and Vishu Presents':
The Assessing Officer disallowed Rs. 26,795 for Onam and Vishu presents due to the lack of verifiable vouchers. The CIT(A) reduced the disallowance to Rs. 11,795, acknowledging the customary nature of these presents but noting the potential for inflated expenses. The Tribunal found no justification to interfere with the CIT(A)'s order.

3. Disallowance of Foreign Travel Expenses:
The Assessing Officer disallowed the entire foreign travel expense of Rs. 25,009. The CIT(A) found that the managing partner's visit to Singapore was for business purposes but disallowed Rs. 12,500 as the managing partner was accompanied by his family. The Tribunal upheld the CIT(A)'s decision.

4. Computation of Relief under Section 80HHC of the IT Act:
The assessee claimed relief under Section 80HHC amounting to Rs. 1,32,690, while the Assessing Officer computed it at Rs. 1,20,832 after excluding freight and insurance. The CIT(A) upheld the Assessing Officer's computation. The Tribunal found no reason to interfere with the CIT(A)'s order.

5. Addition Towards the Stock of Huqqas:
The Assessing Officer added Rs. 10,00,000 for unaccounted sales based on discrepancies in stock pledged to banks versus stock recorded in the books. The CIT(A) reduced the addition to Rs. 5,50,000, considering the explanation of goods in transit and the strike at the Bombay port. The Tribunal further reduced the addition to Rs. 1,00,000, acknowledging the existence of damaged Huqqas included in the stock statements for bank loans.

6. Disallowance of Repair Charges of Huqqas:
The Assessing Officer disallowed Rs. 42,000 claimed as repair charges, as the repairer stated he did not receive any payment. The CIT(A) upheld this disallowance, and the Tribunal declined to interfere with the CIT(A)'s order.

7. Deletion of Unexplained Credits Treated as Unexplained Credits:
The Assessing Officer added Rs. 3,03,833 as unexplained credits in the partners' accounts. The CIT(A) deleted this addition, noting that the credits were explained as advances to another firm and that the partners were separately assessed to tax. The Tribunal agreed with the CIT(A), stating that the identity of the creditors was established and the addition in the hands of the assessee-firm was not justified.

Conclusion:
The Tribunal partly allowed the assessee's appeals, allowed the cross-objection, and dismissed the Departmental appeal.

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