2000 (1) TMI 156 - AT - Income Tax

Summary

Issues:
1. Trading addition of Rs. 12,789
2. Disallowance of Rs. 1,000 out of total disallowance of Rs. 3,000

Trading Addition of Rs. 12,789:
The assessee closed her business and transferred the closing stock to her son's sole proprietorship concern at no profit no loss basis. The Assessing Officer (AO) estimated profit @3% on this transaction, resulting in an addition of Rs. 12,989 in the declared profits. The assessee argued that she was not obliged to charge profit on the transfer and provided details showing a gross profit rate of 10.5% on balance sales. The Departmental Representative claimed the transfer was a tax avoidance scheme. The Tribunal held that tax should only be levied on real income, not hypothetical income. As the transaction was genuine and no evidence proved the assessee charged a 3% profit, the AO's addition was unjustified. The Tribunal directed the AO to delete the Rs. 12,789 addition.

Disallowance of Rs. 1,000:
The next issue concerned the disallowance of Rs. 1,000 out of a total disallowance of Rs. 3,000 made by the AO. After reviewing submissions, the Tribunal found no reason to interfere with the CIT(A)'s decision to confirm the Rs. 1,000 disallowance. Consequently, the Tribunal partly allowed the appeal, upholding the Rs. 1,000 disallowance while directing the deletion of the Rs. 12,789 trading addition.