1981 (3) TMI 155 - AT - Income Tax

Summary

Issues:
1. Disallowance of loss in the garlic account and additional profit estimation in potato and onion accounts.
2. Disallowance and estimation of additional profit in wheat and rice accounts.
3. Disallowance of loss in M/s Mishrilal Chunilal.
4. Disallowance of shop expenses.
5. Addition of income from other sources in the name of Shri Gyandeo Prasad.
6. Charging of interest under sections 139 and 217 of the Act.

Detailed Analysis:
1. The Assessing Officer disallowed the loss shown in the garlic account and estimated additional profit in the potato and onion accounts. The CIT(A) deleted the additional profit but maintained the disallowance of loss in the garlic account. The Tribunal held that since the additional profit was deleted and the trading account in the Head Office was accepted, there was no justification for disallowing the loss in the garlic account. Therefore, the disallowance of the loss was allowed.

2. In the case of M/s Gyandeo Pd. Pannalal, the Assessing Officer disallowed a portion of the profit shown by the assessee in wheat and rice accounts. The CIT(A) upheld the disallowance. However, the Tribunal noted that the profit declared by the assessee had been virtually accepted, and the addition made by the Assessing Officer would only marginally impact the gross profit percentage. Considering various factors, the Tribunal deleted the addition made by the Assessing Officer.

3. The Assessing Officer disallowed the loss in M/s Mishrilal Chunilal, which was upheld by the CIT(A). The assessee claimed that the loss was due to unfavorable market conditions but failed to provide sufficient proof. The Tribunal found the disallowance of the loss to be fair and confirmed it.

4. The Assessing Officer disallowed a portion of the shop expenses claimed by the assessee, which was partially upheld by the CIT(A). The Tribunal found the disallowance to be excessive and restricted it to a lower amount.

5. The issue of adding income from other sources in the name of Shri Gyandeo Prasad was raised. The Assessing Officer determined an unexplained investment by Shri Gyandeo Prasad, but did not add it to the total income of the assessee. The Tribunal noted that the identity and capacity of Shri Gyandeo Prasad were proven, and the deposit made could not be considered unexplained. Therefore, even if other additions were deleted, no addition could be made for the amount deposited by Shri Gyandeo Prasad.

6. The final issue concerned the charging of interest under sections 139 and 217 of the Act. The Tribunal observed that the Assessing Officer did not mention the intention to charge interest in the assessment order. The interest was included in the demand notice received by the assessee. The Tribunal found that the assessee had the right to challenge the interest charged, and directed the Assessing Officer to reconsider the matter after allowing the assessee an opportunity to be heard. The assessment of the assessee and its partners was to be modified accordingly.