2013 (5) TMI 1027 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of additions related to diamond tuition expenses and auditorium expenses.
2. Deletion of additions related to electric power expenses and electric bills.
3. Deletion of addition related to laser expenses.
4. Deletion of additions related to manufacturing expenses and labor expenses.
5. Upheld net profit estimation.

Summary:

Issue 1: Deletion of Additions Related to Diamond Tuition Expenses and Auditorium Expenses

The revenue challenged the deletion of additions of Rs. 1,00,000/- and Rs. 10,000/- made by the Assessing Officer (AO) for diamond tuition and auditorium expenses respectively. The CIT(A) found that the payments were made through account payee cheques, duly reflected in the books of accounts, and were for training workers, which is a revenue expenditure u/s 37 of the I.T. Act, 1961. The Tribunal upheld the CIT(A)'s decision, noting that the AO's basis for disallowance, a decrease in turnover in the succeeding year, was not a valid reason.

Issue 2: Deletion of Additions Related to Electric Power Expenses and Electric Bills

The revenue contested the deletion of additions of Rs. 48,48,440/- and Rs. 1,24,360/- for electric power expenses and electric bills. The CIT(A) found that the payments were proportionate to the premises used by the assessee, supported by proper bills, and related to business premises. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not find any defects in the maintenance of books of accounts or any unsupported expenditure.

Issue 3: Deletion of Addition Related to Laser Expenses

The revenue appealed against the deletion of Rs. 10,00,000/- for laser expenses. The CIT(A) found that the payments were reflected in the regular books of accounts, supported by proper bills, and no defects were noted by the AO. The Tribunal upheld the CIT(A)'s decision, noting that the AO made a lump sum addition without valid reasons.

Issue 4: Deletion of Additions Related to Manufacturing Expenses and Labor Expenses

The revenue challenged the deletion of Rs. 1,50,00,000/- and Rs. 4,22,95,871/- for manufacturing and labor expenses. The CIT(A) found that the discrepancies noted by the AO were ill-founded, the yield was normal, and the assessee maintained regular books of accounts audited by Chartered Accountants. The CIT(A) directed the AO to estimate the income at 8% of the turnover, which the Tribunal upheld, noting that blind confirmation of additions would result in an unreasonable net profit rate.

Issue 5: Upheld Net Profit Estimation

The assessee appealed against the CIT(A)'s decision to estimate net profit at 8% instead of the declared 7.13%. The Tribunal reduced the estimation to 7.5%, considering the facts and the CIT(A)'s observations.

Conclusion:

The appeal of the revenue was dismissed, and the appeal of the assessee was partly allowed. The Tribunal upheld the CIT(A)'s decisions on various deletions and adjusted the net profit estimation to 7.5%.

Order pronounced in the open Court on 17-05-2013.