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2012 (6) TMI 682 - AT - Income TaxAddition in Gross Profit - invoking the provisions of section 145(3) - assessee has declared GP ratio @ 12.67% as compared to gross profit rate ratio at 15.07% - Held that:- As the assessee did not maintain stock register of raw material, work in progress, consumable and finished products the necessary verification of the trading results cannot be made - the AO has correctly applied the provisions of section 145(3)as the GP ratio declared by the assessee for the year under consideration was on lower side as compared to GP rate of immediate preceding year failing to give any plausible explanation regarding the fall in GP ratio at 2.40% particularly when the turn over has remained almost consistent as per past year - as the GP rate at 14% estimated by the AO and confirmed by the CIT(A) is on higher side therefore, in the interest of justice same is to be reduced to 13% - partly in favour of assessee. Addition under the head Disallowance u/s 40A(2)(b) - AO noted that the assessee has paid excess salary to his son as compared to other employees - Held that:- The disallowance u/s 40A(2)(b) can be made only to the extent the payment for the services is excessive or unreasonable vis-a-vis the market price of such services but what is essentially required is that the market price of these services is established and then amount paid in excess of such market price is to be disallowed - estimate of salary made by AO @ Rs. 5,000/- per month is without any basis and against the express provisions of Section 40A(2)(b) - disallowance of Rs. 60,000/- in this case will meet the ends of justice and thus, the assessee gets a relief of Rs. 1,25,000/- on this count - partly in favour of assessee. Addition under the head Disallowance u/s 43B - payment of bonus and leave with wages after filing of return - Held that:- Payment of liability covered u/s 43B are liable to be paid before the due date of filing of the return as prescribed u/s 139(1) and there is no relevance with regard to the date of filing of the income tax return - as the assessee paid the amount in question on 8.11.2007 i.e. before the due date of filing of return i.e. 15.11.2007, which was extended time for filing the return u/s 139(1) the addition are to be deleted - in favour of assessee. Addition under the head Provision for Foreign exchange - Held that:- As a detailed reply dated 30.11.2009 was filed before the AO in support of the contention claiming the provision for foreign exchange as Revenue expenditure in the profit and loss account for the year under consideration which the authorities have ignored while deciding the issue in hand - remand this issue back to the file of the AO to consider it afresh. Addition under the head Disallowance of Telephone expenses - AO disallowed 1/5th of the expenses which comes to Rs. 31,799/- observing that the element of personal use of telephone - Held that:- Considering the assessee submission that in the computation of income, the assessee himself has disallowed 1/10th out of telephone expenses which comes to Rs. 15,900 the addition of Rs. (31,799/- minus (-) Rs. 15,900/-) = Rs. 15,899/- may of sustained - partly in favour of assessee. Addition under the head Disallowance of Vehicle Expenses - Held that:- Considering the Copies of acknowledgment of return and computation of income assessee has already added back Rs. 32,775/- being 1/5th out of car expenses of Rs. 1,63,873/- plus Rs. 68,911/- being 1/5th out of car depreciation of Rs. 3,44,553/- aggregating to Rs. 1,01,686/- in the computation of income chart under the head "Car expenses" and "Car depreciation - in favour of assessee.
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