2005 (3) TMI 411 - AT - Income Tax

Summary

Issues:
1. Addition out of capital gains computation.
2. Disallowance of expenses in various business expenses.
3. Sustenance of addition on account of low household withdrawal.

Issue 1: Addition out of capital gains computation
The appeal was filed against the order of CIT(A) regarding the sustained addition out of capital gains. The AO computed the capital gain at Rs. 2,00,281, while the assessee declared it at Rs. 84,500. The dispute arose from the valuation of a piece of land sold by the assessee. The AO based the calculation on a report from the sub-registrar related to the sale of agricultural land. However, the assessee contended that the land in question was not agricultural but situated in Abadi land. The CIT(A) reduced the addition to Rs. 1,65,443 based on a sale deed produced by the assessee. The ITAT Member noted discrepancies in the comparison made by the AO and agreed with the assessee's representative that the computation was based on wrong assumptions. The ITAT Member observed that the land in question was part of a residential colony, not agricultural land, and therefore, deleted the addition.

Issue 2: Disallowance of expenses in various business expenses
The second issue involved the disallowance of expenses amounting to Rs. 22,121 in various business expenses. The Authorised Representative presented a comparable chart to support the expenses claimed. The AO disallowed expenses such as telephone, shop, diesel, petrol, travelling, vehicle repairing, and household expenses. However, the ITAT Member noted that the expenses claimed were lower than in previous years, indicating no grounds for additional disallowances. Consequently, this ground was allowed in favor of the assessee.

Issue 3: Sustenance of addition on account of low household withdrawal
The final issue concerned the sustenance of an addition of Rs. 20,000 due to low household withdrawal by the AO. The assessee's family included four members, and the household expenses were claimed at Rs. 29,590. Despite the claims, the ITAT Member found the withdrawals insufficient but reduced the addition to Rs. 15,000 considering the overall circumstances. As a result, the appeal was partly allowed in this regard.

In conclusion, the ITAT Jodhpur ruled in favor of the assessee on the first and second issues, deleting the addition out of capital gains and allowing the disallowed business expenses. However, a partial reduction was made in the addition on account of low household withdrawal, resulting in the appeal being partly allowed.