1989 (12) TMI 90 - AT - Income Tax

Summary

Issues:
1. Disallowance of guest house expenses
2. Disallowances objected to during assessment proceedings

Analysis:

Issue 1: Disallowance of Guest House Expenses
The appellant, a company running a sugar mill and distilleries, appealed against the disallowance of Rs. 42,044 for guest house expenses by the CIT(A). The company argued that the expenses were for providing food and snacks to employees on official duties between different units. The lack of day-to-day expense details led to the disallowance. The ITAT considered the nature of the expenses and estimated a reasonable disallowance of Rs. 12,044, reducing the total claimed amount. The ITAT found justification for the disallowance but allowed a relief of Rs. 30,000 under this head.

Issue 2: Disallowances Objected During Assessment Proceedings
The second ground of appeal involved disallowances objected to during assessment proceedings. The IAC and CIT(A) refused to consider the objections as they were not raised before the assessing officer. The ITAT criticized the IAC's refusal to entertain objections during proceedings under s. 144B, stating that the CIT(A) erred in not considering the objections. The ITAT clarified that the right of appeal is separate under s. 246 of the IT Act, and failure to object before the assessing officer does not preclude raising objections before the appellate authority. The ITAT held that the CIT(A) should have considered the objections raised by the appellant, avoiding unnecessary litigation.

Additional Claims:
1. Interest paid to directors: The ITAT rejected the claim based on a Special Bench decision, distinguishing it from a Madhya Pradesh High Court ruling.
2. Catering expenses for Governor's visit: The ITAT allowed 1/3rd of the expenses related to providing tea and coffee to staff, granting a relief of Rs. 1,745.
3. Cane research and development expenses: The ITAT deleted the disallowance of Rs. 3,000 as complete details were maintained and provided to the assessing officer.

In conclusion, the ITAT partly allowed the appeal, addressing various disallowances and objections raised by the appellant during the assessment proceedings.