2004 (9) TMI 339 - AT - Income Tax

Issues involved:
1. Deletion of trading addition of Rs. 54,496
2. Deletion of addition of Rs. 2,52,846 made on account of short stock found at the time of survey
3. Sustaining of disallowance of Rs. 3,000 out of total disallowance of Rs. 5,578 in respect of office expenses
4. Sustaining of disallowance of Rs. 1,500 out of total disallowance of travelling expenses at Rs. 2,802

Detailed Analysis:
1. Deletion of trading addition of Rs. 54,496:
The appeal by the Revenue and cross-objection by the assessee arose from the order of CIT(A) for the assessment year 1994-95. The Revenue's appeal challenged the deletion of a trading addition of Rs. 54,496 based on the Gross Profit (GP) rate applied by the Assessing Officer (AO). The AO had estimated income by applying a higher GP rate compared to the assessee's declared GP. The CIT(A) deleted the addition, citing that the AO did not provide the assessee with an opportunity to explain the difference in GP rates and that no discrepancies were found during a survey. The ITAT agreed with the CIT(A), stating that there was no justification for rejecting the book results and confirmed the deletion of the addition.

2. Deletion of addition of Rs. 2,52,846 made on account of short stock found at the time of survey:
The second issue concerned the deletion of an addition of Rs. 2,52,846 due to a perceived short stock found during a survey. The AO made the addition based on assumptions without concrete evidence of sales outside the books. The CIT(A) deleted the addition, noting the lack of evidence supporting the AO's claim. The ITAT upheld the CIT(A)'s decision, emphasizing that no discrepancies were found during the survey and that the AO failed to verify the method of stock valuation used by the assessee.

3. Sustaining of disallowance of Rs. 3,000 out of total disallowance of Rs. 5,578 in respect of office expenses:
The cross-objection by the assessee challenged the sustaining of a disallowance of Rs. 3,000 out of a total disallowance of Rs. 5,578 for office expenses. The AO disallowed the amount without specific justification, leading to the CIT(A) reducing the disallowance. The ITAT found no justification for the disallowance, as the expenses were lower than the previous year, and no specific instances warranted the disallowance. Therefore, the ITAT set aside the CIT(A)'s decision and deleted the disallowance.

4. Sustaining of disallowance of Rs. 1,500 out of total disallowance of travelling expenses at Rs. 2,802:
The final issue involved the sustaining of a disallowance of Rs. 1,500 out of a total disallowance of travelling expenses at Rs. 2,802. The CIT(A) upheld the disallowance due to the unverifiable nature of the expenses. The ITAT declined to interfere with this decision, considering the nominal amount involved. Consequently, the ITAT rejected the ground of cross-objection related to this disallowance.

In conclusion, the ITAT dismissed the Revenue's appeal and partly allowed the cross-objection filed by the assessee, based on the detailed analysis and considerations of each issue presented before the tribunal.

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