2005 (4) TMI 277 - AT - Income Tax

Summary

Issues:
1. Reduction of disallowance of loss
2. Disallowance of car expenses
3. Disallowance of expenditure on a hired car
4. Charging of interest under section 234B

Reduction of disallowance of loss:
The case involved appeals for the assessment year 1996-97 related to the CIT(A) order. The assessee, dealing in cotton, declared a net loss. The AO made additions, leading to a positive total income figure. The Department challenged the reduction of loss disallowance. The dispute arose from transactions of fully pressed cotton bales. The AO doubted the genuineness of some transactions due to same-day purchases and sales. The CIT(A) found the transactions genuine, reducing the addition but not deleting it entirely. The Tribunal held that no addition can be made based on presumptions. The CIT(A)'s reasoning for the reduction was deemed inconsistent, and the claim of the assessee was accepted in full. The Department's ground was dismissed.

Disallowance of car expenses:
The Department challenged the setting aside of car expenses disallowance. The AO passed a fresh order disallowing the claim, which was confirmed by the CIT(A). However, the ground became infructuous and was dismissed.

Disallowance of expenditure on a hired car:
The assessee disputed the disallowance of expenditure on a hired car. The car was rented out to Sunrise Industries, with the assessee showing a loss in the car account. The AO disallowed repair and diesel expenses due to lack of agreement proof initially. Despite a certificate later filed, the AO rejected it, leading to a sustained addition of half the disallowed amount. The ground was partly allowed based on lack of proper evidence.

Charging of interest under section 234B:
The issue of charging interest under section 234B was addressed, with consequential relief allowed. Ultimately, the Department's appeal was dismissed, and the assessee's appeal was partly allowed.