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2015 (3) TMI 440 - AT - Income Tax


Issues Involved:
1. Restriction of trading addition by CIT(A).
2. Application of Gross Profit (G.P.) rate by CIT(A).
3. Rejection of books of account under Section 145(3).
4. Disallowance of employee's contribution towards P.F.
5. Disallowance out of telephone expenses.

Issue-wise Detailed Analysis:

1. Restriction of Trading Addition by CIT(A):
The CIT(A) restricted the trading addition made by the Assessing Officer (A.O.) for A.Y. 2008-09 from Rs. 15,80,694/- to Rs. 2,80,383/- and for A.Y. 2009-10 from Rs. 47,07,724/- to Rs. 8,82,962/-. The revenue contended that the CIT(A) erred in reducing the additions despite upholding the application of Section 145(3). The CIT(A) justified the reduction by considering the increase in turnover and the nature of the assessee's business.

2. Application of Gross Profit (G.P.) Rate by CIT(A):
The CIT(A) applied a G.P. rate of 1.75% for A.Y. 2008-09 and 1.5% for A.Y. 2009-10, which the revenue argued was erroneous as the A.O. had applied a G.P. rate of 1.98% based on past history. The CIT(A) considered the increase in turnover and market conditions to justify the lower G.P. rates.

3. Rejection of Books of Account under Section 145(3):
The A.O. rejected the books of account under Section 145(3) due to perceived deficiencies, such as the absence of quality-wise registers, incomplete daily stock details, and discrepancies in production records. The assessee argued that maintaining quality-wise stock was impractical and not industry practice. The Tribunal found that the assessee maintained proper day-to-day stock registers and upheld the books of account, reversing the lower authorities' actions.

4. Disallowance of Employee's Contribution towards P.F.:
The assessee contended the disallowance of Rs. 4824/- towards employee's contribution to P.F. The Tribunal allowed this disallowance, noting that the payment was made before filing the return.

5. Disallowance out of Telephone Expenses:
The A.O. disallowed Rs. 38,855/- out of telephone expenses due to the absence of a call register. The Tribunal found this disallowance excessive and reduced it to 10% of the claimed expenses, considering a reasonable view.

Conclusion:
The Tribunal dismissed the revenue's appeals for A.Y. 2008-09 and 2009-10, allowed the assessee's cross-objection for A.Y. 2008-09, and partly allowed the assessee's appeal for A.Y. 2009-10. The Tribunal upheld the assessee's books of account, deleted the trading additions, allowed the P.F. contribution, and reduced the disallowance of telephone expenses.

 

 

 

 

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