1976 (7) TMI 78 - AT - Income Tax

Issues Involved:
1. Disallowance of Veopari expenses under Section 37(2B) for the assessment years 1970-71 and 1971-72.
2. Disallowance of bad debt claims for the assessment year 1970-71.
3. Refusal of renewal of registration of the assessee firm for the assessment year 1971-72.

Detailed Analysis:

1. Disallowance of Veopari Expenses:
Assessment Years 1970-71 and 1971-72:
The Income-tax Officer (ITO) disallowed Rs. 7,330 out of Rs. 12,000 claimed under Veopari expenses for the assessment year 1970-71, and the entire claim of Rs. 12,572 for the assessment year 1971-72, considering these as entertainment expenses under Section 37(2B). The Appellate Assistant Commissioner (AAC) observed that Veopari expenses had always been allowed in past years with nominal disallowances for personal expenses. The AAC restricted the disallowance to Rs. 1,500 for each year, considering these expenses as essential revenue expenses for commission agents in the fruit trade. The Tribunal upheld the AAC's decision, stating that such expenses are customary and cannot be considered entertainment, thereby confirming the AAC's restriction of disallowance to Rs. 1,500 for each year.

2. Disallowance of Bad Debt Claims:
Assessment Year 1970-71:
The ITO disallowed Rs. 25,692 out of the bad debt claims, arguing that the debts were still in the process of realization and not time-barred. The AAC, however, examined specific accounts and observed that the debts were genuinely irrecoverable due to various reasons, such as the debtors running away or having no assets. The AAC restricted the disallowance to Rs. 7,000, accepting the balance amount of Rs. 18,692 as genuine bad debts. The Tribunal referred to a previous decision of the Delhi Bench 'B' of the Tribunal, which emphasized the need to consider each item of bad debt individually. The Tribunal restored the matter to the AAC to allow claims of bad debts below Rs. 1,000 and to examine evidence for the rest, directing the AAC to decide each item according to law.

3. Refusal of Renewal of Registration:
Assessment Year 1971-72:
The ITO refused the renewal of registration, stating that the form filed by the assessee was not in the prescribed form and was filed late by three days. The AAC observed that the filing of the new prescribed form was a mere formality, and the delay was not substantial enough to refuse registration. The AAC emphasized the substance over form, noting that the genuineness of the firm was not in doubt. The Tribunal agreed with the AAC, stating that the defect was curable and the assessee had complied with the formality by filing the new form on 22nd November 1973. The Tribunal confirmed the AAC's order, allowing the renewal of registration.

Conclusion:
The Tribunal partly allowed the appeal for the assessment year 1970-71 and dismissed the appeal for the assessment year 1971-72 regarding Veopari expenses and bad debt claims. The Tribunal also dismissed the appeals filed by the revenue regarding the refusal of renewal of registration for the assessment year 1971-72, confirming the AAC's order.

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