2023 (6) TMI 738 - HC - Income Tax

Addition on account of sale of rice - no stock was maintained by the assessee quality wise and quality of different quality of rice produce from milling of paddy could not be ascertained - HELD THAT - As the income has to be computed in accordance with the method of accountancy followed by an assessee i.e cash or mercantile. Such method has to be followed keeping in view the accounting standard notified by the Central Government from time to time. In the absence of qualitative details it is quite difficult to examine the sales of the assessee. The higher quality of a rice can be shown as sold at a lower rate in the bills. There was flaw in the maintenance of the details. Thus the addition on account of sale of rice has rightly been made. Assessee appeal dismissed.

Summary

Issues Involved:
1. Disallowance of expenditure u/s 40(a)(ia) of the Income Tax Act, 1961.
2. Capitalization of expenses incurred on purchase of UPS.
3. Addition of telephone expenses.
4. Addition on account of sale of rice due to lack of stock maintenance.
5. Addition of foreign travel expenses.

Summary:

1. Disallowance of expenditure u/s 40(a)(ia):
The appellant's payment of Rs.1,01,016/- to Satake India Engg (P) Ltd on account of AMC was disallowed under Section 40(a)(ia) of the Income Tax Act, 1961. The Tribunal upheld this disallowance.

2. Capitalization of expenses incurred on purchase of UPS:
The expenditure of Rs.56,650/- incurred on the purchase of UPS was capitalized, and depreciation was ordered to be charged on it.

3. Addition of telephone expenses:
An addition of Rs.7,650/- was made to the income of the assessee on account of telephone expenses, as the assessee admitted the expenditure incurred on account of telephones installed at residences.

4. Addition on account of sale of rice due to lack of stock maintenance:
An addition of Rs.2,00,000/- was made on account of sale of rice, as the assessee did not maintain stock quality-wise, making it difficult to ascertain the quality of different rice produced from milling of paddy. The court referred to Section 145 of the Income Tax Act, emphasizing that the income has to be computed in accordance with the method of accountancy followed by an assessee. The lack of qualitative details made it difficult to examine the sales, justifying the addition.

5. Addition of foreign travel expenses:
An addition of Rs.6,236/- was made on account of foreign travel expenses.

Conclusion:
The appeal was dismissed, and the order dated 28.03.2013 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'E', was upheld. The court found that the disallowances and additions made by the Assessing Officer were justified due to the lack of proper documentation and maintenance of records by the assessee.