2012 (10) TMI 395 - AT - Income Tax

Appeal partially allowed: Tribunal upholds accounting method, dismisses addition, and reinstates disallowances

The Income Tax Officer, Ward-2, Rohtak. Versus Shri Madan Lal Prop Tarun Sales

The Income Tax Officer, Ward-2, Rohtak. Versus Shri Madan Lal Prop Tarun Sales - TMI Issues:1. Discrepancy in accounting of credit notes from Tata Tele Services Ltd.2. Discrepancy in account balance with M/s. Johnson & Johnson Ltd.3. Disallowance of interest liability on advances made to M/s. Shree Jee Sales.4. Disallowance of various expenses like telephone, petrol, staff welfare, and traveling expenses.Analysis:1. Discrepancy in accounting of credit notes from Tata Tele Services Ltd.:The primary issue revolved around the addition of Rs. 72,71,713/- by the Assessing Officer (AO) due to a discrepancy in the account of Tata Tele Services Ltd. The Appellate Tribunal noted that the assessee accounted for credit notes upon receipt and immediately passed on the benefits to dealers. The Tribunal upheld the decision of the Ld. CIT(A) that no income accrued to the assessee in respect of the credit notes, as they were intended for the dealers. The Tribunal dismissed the grounds raised by the revenue, emphasizing that the assessee's accounting method was appropriate and no error was found in the Ld. CIT(A)'s order.2. Discrepancy in account balance with M/s. Johnson & Johnson Ltd.:Regarding the credit balance of Rs. 95,710/- with M/s. Johnson & Johnson Ltd., the AO added this amount to the total income due to a reconciliation difference. However, the Ld. CIT(A) deleted the addition after considering evidence provided by the assessee, including the reconciliation statement and proof of payment. The Tribunal partially allowed this ground, stating that the assessee had paid Rs. 94,860/- against the liability, but no explanation was provided for the remaining difference of Rs. 850/-.3. Disallowance of interest liability on advances made to M/s. Shree Jee Sales:The AO disallowed Rs. 1,42,100/- as interest liability on advances made to M/s. Shree Jee Sales. The assessee explained that the advances were made from interest-free funds exceeding the loan amount, and therefore, no interest liability should be disallowed. The Tribunal agreed with the Ld. CIT(A) that since the assessee had interest-free funds exceeding the loan amount, no disallowance of interest liability was warranted.4. Disallowance of various expenses:The AO disallowed expenses amounting to Rs. 23,000/- for telephone, petrol, staff welfare, and traveling expenses, citing lack of proper vouchers and potential personal use. The Ld. CIT(A) had deleted these disallowances, considering them adhoc without specific deficiencies in the books or vouchers. The Tribunal reinstated some disallowances for staff welfare and traveling expenses due to lack of proper vouchers but upheld the deletion of disallowances for telephone and petrol expenses, where no specific reasons were provided in the assessment order.In conclusion, the appeal was partly allowed, with certain grounds being dismissed or partially allowed based on the detailed analysis and evidence presented before the Appellate Tribunal.