2003 (2) TMI 175 - AT - Income Tax

Issues involved:
1. Admissibility of additional evidence (excise register).
2. Sustenance of trading addition of Rs. 1,44,286.
3. Deletion of addition of Rs. 8,22,806 to the trading account.
4. Deletion of disallowance of telephone expenses of Rs. 69,614.
5. Deletion of disallowance of Rs. 4,78,702 on foreign travel expenses.
6. Reduction of trading addition by Rs. 60,000.
7. Deletion of disallowance of Rs. 1,25,442 under s. 43B of the Act.
8. Treatment of Rs. 9,84,936 as deemed dividend under s. 2(22)(e) of the IT Act, 1961.

Detailed Analysis:

1. Admissibility of additional evidence (excise register):
The Tribunal rejected the assessee's request to admit the excise register as additional evidence. Despite directions, the assessee failed to produce the register before the AO on the appointed day or thereafter. The Tribunal emphasized that the issue could not be kept pending beyond the limitation period, and thus, the prayer for admitting the stock register was denied.

2. Sustenance of trading addition of Rs. 1,44,286:
The Tribunal upheld the CIT(A)'s decision to sustain the trading addition of Rs. 1,44,286. The assessee did not produce the stock register or necessary bills and entries regarding purchases, sales, expenses, and receipts before the AO. Consequently, the books of account were liable to be rejected, and the addition was justified.

3. Deletion of addition of Rs. 8,22,806 to the trading account:
The Tribunal dismissed the Revenue's ground regarding the deletion of the addition of Rs. 8,22,806. The CIT(A) had held that the provisions of s. 145 were not attracted, and there was no justification for the addition. The Tribunal found no authorization or supporting evidence from the CIT, Jaipur, and thus, the ground was dismissed as not pressed.

4. Deletion of disallowance of telephone expenses of Rs. 69,614:
The Tribunal dismissed the Revenue's ground regarding the deletion of telephone expenses disallowance. The CIT(A) had held that no disallowance could be made in the case of a company. The Tribunal found no authorization or supporting evidence from the CIT, Jaipur, and thus, the ground was dismissed as not pressed.

5. Deletion of disallowance of Rs. 4,78,702 on foreign travel expenses:
The Tribunal dismissed the Revenue's ground regarding the deletion of foreign travel expenses disallowance. The CIT(A) had held that the entire expenses were allowable under s. 37 of the Act. The Tribunal found no authorization or supporting evidence from the CIT, Jaipur, and thus, the ground was dismissed as not pressed.

6. Reduction of trading addition by Rs. 60,000:
The Tribunal dismissed the Revenue's ground regarding the reduction of trading addition by Rs. 60,000. The CIT(A) had admitted fresh evidence in violation of r. 46A of the IT Rules, 1962. The Tribunal found no authorization or supporting evidence from the CIT, Jaipur, and thus, the ground was dismissed as not pressed.

7. Deletion of disallowance of Rs. 1,25,442 under s. 43B of the Act:
The Tribunal dismissed the Revenue's ground regarding the deletion of disallowance under s. 43B of the Act. The CIT(A) had admitted fresh evidence without following the provisions of r. 46A of the IT Rules, 1962. The Tribunal found no authorization or supporting evidence from the CIT, Jaipur, and thus, the ground was dismissed as not pressed.

8. Treatment of Rs. 9,84,936 as deemed dividend under s. 2(22)(e) of the IT Act, 1961:
The Tribunal held that Rs. 1,25,936, representing the current year's profit, should be treated as deemed dividend under s. 2(22)(e) of the IT Act, 1961. The Tribunal rejected the assessee's plea to set off unabsorbed depreciation and losses against accumulated profits. It was determined that the amount of state capital investment subsidy and other subsidies received by M/s Supreme Metprodes Ltd. were capital receipts and not accumulated profits. Consequently, the Tribunal modified the CIT(A)'s order to treat Rs. 1,25,936 as deemed dividend.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, resulting in the treatment of Rs. 1,25,936 as deemed dividend under s. 2(22)(e) of the IT Act, 1961.

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