1995 (2) TMI 114 - AT - Income Tax

Issues Involved:
1. Addition of Rs. 60,000 to the trading account for AY 1982-83.
2. Disallowance of Rs. 1,000 from miscellaneous and traveling expenses for AY 1982-83.
3. Addition on account of cost of construction of godown for AY 1982-83 and 1983-84.
4. Disallowance of Rs. 2,000 from miscellaneous and traveling expenses for AY 1983-84.

Detailed Analysis:

1. Addition of Rs. 60,000 to the trading account for AY 1982-83:
The primary issue was the addition of Rs. 60,000 made to the trading account. The assessee explained that the fall in the gross profit rate was due to various verifiable expenses, including increased dyeing charges, striping charges, and wages. The assessee maintained complete books of accounts, including raw material stock register and production register. The CIT(A) sustained the addition, doubting the empirical formula used for calculating wastage. However, the Tribunal found no specific defects in the accounts maintained by the assessee. The Tribunal noted that the gross profit rate of 25.8% was higher than the previous year's 24.8%, and similar additions were deleted in earlier years. The Tribunal concluded that the addition was not justified and deleted the same.

2. Disallowance of Rs. 1,000 from miscellaneous and traveling expenses for AY 1982-83:
This ground of appeal was dismissed as it was not pressed by the assessee.

3. Addition on account of cost of construction of godown for AY 1982-83 and 1983-84:
For AY 1982-83, the assessee showed a construction cost of Rs. 4,16,456, supported by a valuer's report estimating the cost at Rs. 4,25,514. The Departmental Valuer initially estimated the cost at Rs. 5,50,100, later revised to Rs. 4,93,900. The CIT(A) sustained an addition of Rs. 77,444. The assessee argued that the reference to the Valuation Officer was invalid without first rejecting the accounts. The Tribunal found that the assessee did not maintain complete details of expenditure in relation to the construction and upheld the reference to the Valuation Officer. However, the Tribunal found no material to show that the assessee spent more than recorded in the books and deleted the addition.

For AY 1983-84, the assessee showed a construction cost of Rs. 4,04,204, supported by a valuer's report estimating the cost at Rs. 4,02,500. The Departmental Valuer estimated the cost at Rs. 5,06,000. The assessee's objections were not adequately addressed due to time constraints. The Tribunal found no evidence of excess investment and deleted the addition.

4. Disallowance of Rs. 2,000 from miscellaneous and traveling expenses for AY 1983-84:
This ground of appeal was also dismissed as it was not pressed by the assessee.

Conclusion:
Both appeals were partly allowed, with the Tribunal deleting the additions related to the trading account and cost of construction while dismissing the disallowances of miscellaneous and traveling expenses as they were not pressed by the assessee.

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