1995 (2) TMI 132 - AT - Income Tax

Account Books, Assessing Officer, Assessment Year, Manufacture And Sale, Provident Fund, Raw Material

Issues Involved:

1. Trading addition of Rs. 5,00,000.
2. Disallowance under section 43B.
3. Addition of Rs. 5,000 in Staff Welfare Account.
4. Addition of Rs. 5,051 in Inspection & Other Expenses Account.
5. Disallowance of Extra Shift Allowance of Rs. 37,500.

Issue-wise Detailed Analysis:

1. Trading Addition of Rs. 5,00,000:

The assessee, a private limited company engaged in the manufacture and sale of electric conductors and aluminium re-draw rods, was subjected to a trading addition of Rs. 5,00,000 for the assessment year 1986-87. The Assessing Officer (AO) noted discrepancies in the consumption of electricity units and production of goods, particularly in the second and fourth quarters. The AO attributed these variations to unaccounted purchases and sales, leading to an addition of Rs. 6,00,000, which the CIT(A) reduced to Rs. 5,00,000.

The Tribunal found that the assessee had consistently maintained accounts, which were audited and supervised by Excise and Electricity Board officers. The Tribunal emphasized that variations in electricity consumption and production could be due to multiple factors, including quality of raw material, energy supply interruptions, and manufacturing processes. Citing precedents from the Kerala and Andhra Pradesh High Courts, the Tribunal concluded that electricity consumption alone is not a reliable basis for making trading additions. The Tribunal also noted that the subsequent conduct of the assessee, such as being fined for unaccounted purchases, was not relevant to the current assessment year. Consequently, the Tribunal deleted the trading addition of Rs. 5,00,000.

2. Disallowance under Section 43B:

The assessee claimed a deduction of Rs. 5,586 for Provident Fund (PF) and Family Pension Fund (FPF) liabilities, which was disallowed by the AO under section 43B as the liability remained outstanding at the end of the accounting period. However, the Tribunal noted that the liability was discharged by actual payment on 14-10-1985, before the due date for filing the return under section 139(1). Following the consistent view of the Tribunal and the Andhra Pradesh High Court decision in Srikakollu Subba Rao v. Union of India, the Tribunal directed that the disallowance be deleted.

3. Addition of Rs. 5,000 in Staff Welfare Account:

The assessee did not press this ground, and the Tribunal dismissed it as not pressed.

4. Addition of Rs. 5,051 in Inspection & Other Expenses Account:

Similar to the previous issue, the assessee did not press this ground, and the Tribunal dismissed it as not pressed.

5. Disallowance of Extra Shift Allowance of Rs. 37,500:

The assessee's claim for Extra Shift Allowance was not addressed by the AO or the CIT(A). The Tribunal noted that the claim for Extra Shift Allowance should follow the allowance of depreciation. The Tribunal directed the AO to examine and allow the claim as per rules when giving effect to the order.

Conclusion:

The appeal was partly allowed, with the Tribunal deleting the trading addition of Rs. 5,00,000 and the disallowance under section 43B, while dismissing the grounds related to staff welfare and inspection expenses as not pressed. The Tribunal also directed the AO to examine the claim for Extra Shift Allowance.

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