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TMI Blog1980 (12) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing the ld. Reps. of both the parties, the appeals are disposed of as under. ITA. No. 2221 (Alld)/1979—Asst. yr. 1972-73. 2. The first ground relates to disallowance of Rs. 225 out of Rs. 1,022 claimed as advertisement expenses. At the time of hearing, the ground was not pressed and, therefore, it is not gone into. 3. The second ground is against the addition of Rs. 5,000 retained in the trading account. The assessee-firm admitted gross profit rate 2.2 per cent on a turnover of Rs. 25,28,835 in respect of sales of M/s Orient Paper Mills and 5.8 per cent on a turnover of Rs. 1,50,611 in respect of Sirpur Paper Mills. On the basis of loose papers found in the sister concern of "United Commercial Agency" which contained information wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of profit and, therefore, such addition should not be sustained. On merits, it was argued that the fall in the rate of gross profit in respect of Orient Paper Mills was negligible while the decline in the rate of gross profit in respect of Sirpur Paper Mills was due to the fact that the turnover had gone down from Rs. 16.68 lakhs to Rs. 1.5 lakhs and the rates of gross profits in this account for the earlier 2 years and later year were accepted. The ld. CIT(A) has observed that there was force in the submission of the ld. counsel and, however, he was of the view that the addition was made not merely because the loose sheets of original entry were not produced but for other detailed reasons given by the assessing officer. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years and also in the later year as per the contention urged before the CIT(A). The rate of fall in the gross profit in respect of Orient Paper Mills is quite negligible. It is to be seen whether there is material on record to warrant invoking of proviso to s. 145(1). The assessing officer has not pointed out the specific vital information which is not reflected in the books of account. Therefore, it is only on suspicion or surmise he was of the opinion that proviso to s. 145(1) was applicable to this case. The assessee is following mercantile method of accounting and admittedly regular books of account were maintained. The assessing officer has not given a finding of fact that the method of accounting employed by the assessee was such that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,100 last year. On appeal, the disallowance was confirmed by the CIT(A) for non-production of vouchers and some of the payments were made to Lions Club, Rotary Club, etc. After hearing both the representatives of the parties and as the reasons given by the authorities were the same as in the asst. yr. 1974-75 and keeping in view our decision thereon, we consider that the disallowance is uncalled for. Therefore, the addition is deleted. 9. The second ground is against disallowance of Rs. 1,000 out of telephone expenses of Rs. 6,397. The ITO disallowed the amount on account of personal use of the phone by the partners. On appeal, the disallowance was confirmed. At the time of hearing, the ld. Rep. for the assessee pointed out the details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast records, the disallowance is excessive and, therefore, is reduced to Rs. 1,500 and the assessee gets relief of Rs. 500. 13. The next ground is against disallowance of Rs. 2,000 out of telephone expenses made by the assessing officer and which has been confirmed in appeal by the CIT(A). Keeping in view our decision in respect of this point, the disallowance is reduced to Rs. 1500 and that the assessee gets relief of Rs. 500. 14. ITA No. 2225 (Alld)/1979—Asst. yr. 1978-79. The first ground is against disallowance of Rs. 8,000 out of advertisement expenses claimed at Rs. 15,001. The assessee has paid Rs. 13,250 by way of account payee cheque to M/s Communication Consultants, proprietor of Hyderabad Agencies Pvt. Ltd., Calcutta-17 towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he excessive of unreasonable expenditure which is not related to legitimate business needs of the assessee and the benefits derived or accrued calls for disallowance. Therefore, the disallowance made by the authorities clearly establishes that the claim of the assessee falls under the head "advertisement". It cannot be disputed that person to whom the payment is made is not the person as specified in sub-r. 2(ii) of r. 6B, and, therefore, the disallowance of excessive or unreasonable expenditure is not called for under s. 6B (2)(i). There is nothing on the record to show that the payment was not for legitimate business needs of the assessee and the benefits derived or accrued to the assessee. If the claim is considered from the point of vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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