1989 (9) TMI 152 - AT - Income Tax

Summary

Issues:
1. Trading addition challenge regarding valuation of closing stock.
2. Disallowance under section 43B of the IT Act.
3. Disallowance of claimed travelling and sumptuary allowance paid to partners.

Detailed Analysis:

1. Trading Addition Challenge:
The appeal involved a challenge by the assessee against the order of the CIT(A) regarding trading additions. The primary issue was the valuation of the closing stock by the Income Tax Officer (ITO). The ITO applied a gross profit rate higher than what the assessee had shown, resulting in an addition of Rs. 30,621. The CIT(A) upheld this decision based on the absence of a qualitative stock register and the inability to correlate sales with purchases. However, the Appellate Tribunal disagreed with this reasoning. They held that the rejection of book results was unwarranted solely due to the lack of a qualitative stock register. The Tribunal directed the deletion of the trading addition, emphasizing that no sufficient grounds existed for rejecting the trading results under the proviso to section 145(1).

2. Disallowance under Section 43B of the IT Act:
The next issue pertained to the disallowance of Rs. 32,864 under section 43B of the IT Act. This matter was linked to a previous case involving Kalinga Service Station and Iswari General Traders. The Tribunal referred to a previous judgment and remitted the matter back to the CIT(A) for fresh consideration. The Tribunal highlighted the introduction of Explanation 2 to section 43B and the applicability of the first proviso to the section. The case required a detailed examination of the time limits prescribed under the Act, specifically focusing on the due date for furnishing the return of income under section 139(1). The Tribunal ordered a reconsideration of the disallowance under section 43B based on these factors.

3. Disallowance of Claimed Travelling and Sumptuary Allowance:
The final issue revolved around the disallowance of Rs. 50,000 claimed as travelling and sumptuary allowance paid to partners. This matter was heard in conjunction with another case, and the disallowance was upheld based on the reasons detailed in the order of the related appeal. The Tribunal affirmed the disallowance of the claimed allowances, indicating a consistent approach in similar cases.

In conclusion, the Appellate Tribunal allowed the assessee's appeal in part, directing the deletion of the trading addition while remitting the matters related to the disallowance under section 43B back to the CIT(A) for further examination. The disallowance of claimed travelling and sumptuary allowance paid to partners was upheld based on previous decisions.