1978 (1) TMI 110 - AT - Income Tax

Summary

Issues:
1. Refusal of renewal of registration
2. Addition of Rs. 1,181 for sales tax
3. Addition of Rs. 3,000 in the salary account
4. Disallowance of shop rent of Rs. 2,400
5. Addition of Rs. 3,500 and Rs. 9,500 in diesel and mobil account

Issue 1: Refusal of renewal of registration
The assessee firm filed its return without form No.12, necessary for registration renewal. The Appellate Assistant Commissioner upheld the refusal based on lack of evidence of form No.12 submission. However, the Tribunal found the return and enclosures were submitted on time, including form No.12, concluding the form was indeed filed. The Tribunal directed the Income-tax Officer to allow continuation of registration, citing benefit of doubt to the assessee.

Issue 2: Addition of Rs. 1,181 for sales tax
The Income-tax Officer added Rs. 1,181 to the assessee's income for unremitted sales tax. On appeal, the Appellate Assistant Commissioner upheld the addition, stating the accounts were on cash basis. However, the Tribunal noted the assessee followed the mercantile method, evidenced by past practices, and deleted the addition as the sales tax was held as a liability.

Issue 3: Addition of Rs. 3,000 in the salary account
The Income-tax Officer disallowed Rs. 3,000 of the claimed salary increase, which the Appellate Assistant Commissioner upheld. The Tribunal agreed, stating the turnover increase did not justify the salary hike, thus confirming the disallowance.

Issue 4: Disallowance of shop rent of Rs. 2,400
The Income-tax Officer disallowed the claimed shop rent due to lack of receipts. The Appellate Assistant Commissioner partially allowed Rs. 1,200. The Tribunal, considering a prior year's decision, allowed rent payment at Rs. 2,500, following consistency in treatment.

Issue 5: Addition of Rs. 3,500 and Rs. 9,500 in diesel and mobil account
The Income-tax Officer added amounts to petrol, diesel, and mobil accounts due to unvouched expenses and low profits. The Appellate Assistant Commissioner confirmed the additions. The Tribunal reduced the petrol and diesel addition to Rs. 1,500, deeming the expenses partially unvouched. It accepted the mobil oil account's gross profit of 10.04%, concluding the profit shown was reasonable.

In conclusion, the Tribunal partly allowed the appeal, directing the Income-tax Officer to modify the assessment based on the decisions for each issue discussed.