2003 (7) TMI 289 - AT - Income Tax

2012 (10) TMI 1059 - AT

Issues Involved:
1. Sustenance of disallowance of Rs. 1,36,500.
2. Enhancement of income by Rs. 38,68,810.
3. Credit in the name of Shri Kamlesh Rs. 4,00,000.
4. Addition on account of credit in the current account of Shri Pratap Bherwani, partner.
5. Disallowance out of salary Rs. 1,32,240.
6. Disallowance of Rs. 6,760 on account of entertainment expenses.
7. Disallowance of Rs. 14,910 out of conveyance expenses.

Detailed Analysis:

1. Sustenance of Disallowance of Rs. 1,36,500:

The appellant agitated over the disallowance of expenses incurred on telephone and travelling only. The disallowance made under all other heads were not pressed. The assessee-firm claimed total expenditure on postage, telegraph, fax, and telephone at Rs. 2,81,860. The AO disallowed 1/5th of the claim due to partially vouched expenses and potential personal use by partners, which was confirmed by the learned Dy. CIT(A). The Tribunal found the disallowance of 1/5th to be reasonable and declined to interfere with the order of the learned Dy. CIT(A).

2. Enhancement of Income by Rs. 38,68,810:

The learned Dy. CIT(A) enhanced the income by Rs. 38,68,810 on various grounds including credits in accounts and disallowances. The Tribunal examined each component of the enhancement in detail.

3. Credit in the Name of Shri Kamlesh Rs. 4,00,000:

The appellant had taken an interest-free loan from Shri Kamlesh Kalwani. The learned Dy. CIT(A) treated it as suppression of sale through export of goods. The Tribunal found that the learned Dy. CIT(A) did not justify the enhancement as the credit entry was verified and found genuine by the AO. The Tribunal deleted the enhancement of Rs. 4,00,000.

4. Addition on Account of Credit in the Current Account of Shri Pratap Bherwani, Partner:

The learned Dy. CIT(A) enhanced the income by Rs. 33,00,000 (correct amount Rs. 30,00,000) due to unexplained credit, alleging underinvoicing and suppression of sales. The Tribunal found no material evidence to support the learned Dy. CIT(A)'s conclusion and noted that the amount was withdrawn from another firm where the partner was involved. The Tribunal deleted the enhancement of Rs. 33,00,000.

5. Disallowance Out of Salary Rs. 1,32,240:

The learned Dy. CIT(A) disallowed Rs. 1,32,240 for being expenses incurred for non-business consideration, alleging payments to relatives and partners without proof of services. The Tribunal found that the salary was paid to employees, including relatives, but not to partners. The Tribunal noted that the AO had examined the case in detail and allowed the claim. The Tribunal deleted the disallowance of Rs. 1,32,240.

6. Disallowance of Rs. 6,760 on Account of Entertainment Expenses:

The appellant claimed Rs. 13,246 as entertainment expenses. The AO disallowed Rs. 3,245, and the learned Dy. CIT(A) further disallowed Rs. 6,760. The Tribunal found the additional disallowance unjustified and deleted it.

7. Disallowance of Rs. 14,910 Out of Conveyance Expenses:

The AO disallowed 1/5th of the total claim of Rs. 72,008, amounting to Rs. 14,402. The learned Dy. CIT(A) further enhanced this disallowance by Rs. 14,910. The Tribunal found that the learned Dy. CIT(A) made the disallowance due to unsupported vouchers and lack of business purpose details. The Tribunal confirmed the disallowance of Rs. 14,910.

Conclusion:

The appeal was allowed in part, with significant deletions of disallowances and enhancements made by the learned Dy. CIT(A), except for the confirmed disallowance of Rs. 14,910 out of conveyance expenses.

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