2012 (12) TMI 597 - AT - Income Tax

Tribunal Rules for Assessee on Disallowances & Additions

Mr. Ashwin Ramshankar Trivedi Versus Income Tax Officer, Ward–17(3) (1), Mumbai

Mr. Ashwin Ramshankar Trivedi Versus Income Tax Officer, Ward–17(3) (1), Mumbai - TMI Issues:1. Disallowance of expenses from proprietary firms2. Addition under section 41(1) of sundry creditors3. Disallowance of expenses from another proprietary firm4. Disallowance of loss on derivatives transactionsIssue 1: Disallowance of Expenses from Proprietary FirmsThe Assessing Officer disallowed various expenses from the proprietary firms of the assessee, namely M/s. Ashwin & Co. and M/s. Art Craft International. The disallowances included business promotion expenses, telephone expenses, motor car expenses, staff welfare expenses, maintenance, and more. The learned Commissioner (Appeals) confirmed these disallowances, leading to an appeal by the assessee. The counsel for the assessee did not provide substantial arguments to justify the rejection of the disallowances, resulting in the dismissal of this ground.Issue 2: Addition under Section 41(1) of Sundry CreditorsThe Assessing Officer added a balance of Rs. 2,00,000 under section 41(1) concerning sundry creditors. The assessee claimed this amount as an advance for sales in a prior year. Despite the assessee's explanation, the addition was made. In the appeal, the additional evidence presented by the assessee, including ledger accounts and bank statements, proved that the amount had been paid through account payee cheques. The Tribunal, considering the evidence, deleted the addition, ruling in favor of the assessee.Issue 3: Disallowance of Expenses from Another Proprietary FirmThe Assessing Officer disallowed expenses from M/s. Art Craft International due to incomplete vouchers, leading to a 20% disallowance. The assessee contended for a reduction to 10%, which was partially allowed by the Tribunal. The disallowance was restricted to 10% of the gross amount, directing the Assessing Officer to recompute the disallowances accordingly.Issue 4: Disallowance of Loss on Derivatives TransactionsThe Assessing Officer treated derivative losses as speculative transactions under section 43(5)(d) of the Act, disallowing the amount for carry forward. The learned Commissioner (Appeals) upheld this decision. However, the Tribunal found a precedent in favor of the assessee, citing a co-ordinate bench's decision. Following this precedent, the Tribunal allowed the ground raised by the assessee, resulting in a partial allowance of the appeal.In conclusion, the Tribunal partly allowed the assessee's appeal, addressing various issues related to disallowances, additions, and treatment of losses on derivative transactions.