2006 (4) TMI 208 - AT - Income Tax

Summary

Issues:
1. Deletion of trading addition by Revenue.
2. Addition on account of undisclosed investment in marriage.
3. Addition of interest receipts of income-tax refund.
4. Disallowance of conveyance expenses.
5. Subsequent enhancing of disallowed amount.
6. Charging of interest under s. 234B.

Deletion of Trading Addition by Revenue:
The Revenue appealed the deletion of a trading addition of Rs. 3,04,911 by the CIT(A) for the assessment year 1998-99. The AO rejected the books of account due to a slight decline in gross profit (GP) rate and non-maintenance of stock register. However, the CIT(A) found the rejection unjustified, as the assessee had maintained the stock register, explaining the decline in GP rate due to increased sales. The ITAT upheld the CIT(A)'s decision, citing lack of defects in the books of account and the reasonable explanation for the GP rate decline.

Addition on Account of Undisclosed Investment in Marriage:
The Revenue challenged an addition of Rs. 3,00,000 made for an undisclosed investment in the marriage of the assessee's son. The CIT(A) deleted the addition after verifying the expenditure sources, including contributions from family members and settlements made post-marriage. The ITAT agreed with the CIT(A)'s decision, finding no error in the deletion of the impugned addition.

Addition of Interest Receipts of Income-tax Refund:
The assessee contested an addition of Rs. 30,457 on interest receipts of income-tax refund for various years. The ITAT noted confusion regarding the receipt of these amounts during the relevant year and remanded the issue back to the AO for further examination, emphasizing the importance of clarifying the receipt timing for tax purposes.

Disallowance of Conveyance Expenses:
The cross-objection raised concerns about the disallowance of Rs. 91,216 in conveyance expenses, deemed excessive. The ITAT reduced the disallowance to Rs. 9,121, considering it more reasonable and aligning with the AO's restriction on other expenses.

Subsequent Enhancing of Disallowed Amount:
The issue of subsequent enhancing of Rs. 59,603, initially disallowed but not added in the assessment order, was raised. The ITAT determined that this issue did not arise from the appellate order and dismissed the ground of appeal accordingly.

Charging of Interest under Section 234B:
Regarding the charging of interest under s. 234B of the Act, the ITAT affirmed it as mandatory and consequential, granting only consequential relief to the assessee. Consequently, the Revenue's appeal was dismissed, and the cross-objection was partly allowed for statistical purposes.