2010 (7) TMI 1049 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of carting expenses.
2. Disallowance of accident expenses.
3. Disallowance of vehicle expenses and depreciation.
4. Disallowance of telephone expenses and shortage.
5. Disallowance of bad debt.
6. Disallowance of traveling expenses.

Summary:

1. Disallowance of Carting Expenses:
The assessee challenged the disallowance on account of carting expenses restricted to 1%, while the Revenue challenged the restriction of disallowance to 1% from 2.5%. The AO disallowed carting expenses due to unsupported vouchers and lack of driver identity. The CIT(A) restricted the disallowance to 1% based on past appellate orders. The Tribunal upheld the CIT(A)'s decision, noting the assessee's agreement to the 1% disallowance and the specific defects pointed out by the AO.

2. Disallowance of Accident Expenses:
The AO disallowed accident expenses of Rs. 34,647/- as the primary liability was of the vehicle owner. The CIT(A) upheld the disallowance, noting the assessee's failure to substantiate the business exigency. The Tribunal confirmed the CIT(A)'s decision, citing the assessee's concession that the issue was covered against them by a previous Tribunal judgment.

3. Disallowance of Vehicle Expenses and Depreciation:
The AO disallowed 10% of vehicle expenses and depreciation due to potential personal use. The CIT(A) upheld this disallowance based on past records. The Tribunal confirmed the disallowance, noting the issue was covered against the assessee in the previous year and personal use was not ruled out.

4. Disallowance of Telephone Expenses and Shortage:
The AO disallowed 10% of telephone expenses due to installation at the assessee's residence and disallowed Rs. 15,291/- for shortage due to evaporation of chemicals. The CIT(A) restricted the shortage disallowance to Rs. 8,000/- based on past orders. The Tribunal upheld the CIT(A)'s decision, noting the issues were covered against the assessee in the previous year.

5. Disallowance of Bad Debt:
The AO disallowed bad debts of Rs. 3,30,301/- due to lack of evidence of recovery efforts. The CIT(A) upheld the disallowance, noting the debts were not proven irrecoverable. The Tribunal remanded the issue to the AO for reconsideration in light of the Supreme Court's decision in T.R.F. Ltd. v. CIT, which clarified that post-1989, it is sufficient if the bad debt is written off in the accounts.

6. Disallowance of Traveling Expenses:
The AO disallowed 10% of traveling expenses due to potential personal use and lack of documentary evidence. The CIT(A) upheld the disallowance. The Tribunal found the disallowance excessive and restricted it to Rs. 10,000/-, noting the absence of specific findings by the AO.

Conclusion:
The Tribunal partly allowed the assessee's appeal and dismissed the departmental appeal, with specific directions for reconsideration and adjustments on certain issues.