1983 (6) TMI 73 - AT - Income Tax

Summary

Issues: Disallowance of car expenses and addition of manufacturing expenses

Disallowance of Car Expenses:
The appeal was against the disallowance of Rs. 3075 out of car expenses claimed by the assessee. The disallowance was upheld by the CIT(A) due to lack of evidence proving the claim as excessive. The ITAT also found no material to interfere with the CIT(A)'s decision. Therefore, the disallowance was upheld.

Addition of Manufacturing Expenses:
The addition of Rs. 86,720 out of the total claim of Rs. 1,15,625 was contested by the assessee. The dispute arose from the fall in gross profit rate compared to the previous year. The ITO initially accepted the reasons provided by the assessee for the fall in profit rate but later made an addition to the expenses claimed. This addition was based on the alleged inflation of Jhalai expenses by the assessee to reduce taxation. The ITO's decision was supported by the AAC. However, the ITAT found contradictions in the ITO's findings. While the ITO accepted the gross profit rate, he still made additions to expenses, which would increase the gross profit. The ITAT also noted that the statements of workers made during the survey were not provided by the revenue. The ITAT analyzed the statements made by workers during assessment proceedings and found them to be in favor of the assessee. The ITAT concluded that there was insufficient evidence to support the addition of manufacturing expenses. Therefore, the addition was reversed, and the assessee was granted relief of Rs. 86,720.

Conclusion:
The ITAT partially allowed the appeal, reversing the addition of manufacturing expenses. The disallowance of car expenses was upheld.