1979 (6) TMI 55 - AT - Income Tax

Tribunal decision: Tax assessment upheld, gross profit dispute resolved, expenses allowed.

The Tribunal dismissed the additional ground raised by the assessee regarding the determination of tax amount in the assessment order, emphasizing that ... - Issues:1. Additional ground raised regarding the determination of tax amount in the assessment order.2. Dispute over the computation of gross profit and addition to book results.3. Disallowance of expenditure incurred towards tea, Pan Bidi.4. Addition in the ready-made garments account.Analysis:1. The appeal involved an additional ground raised by the assessee regarding the determination of the tax amount in the assessment order under section 143(3)(a). The assessee contended that the failure to indicate the tax payable in the body of the assessment order rendered it illegal and void. The Tribunal considered legal precedents and held that the omission of the tax computation in the assessment order did not invalidate the assessment. The Tribunal emphasized that the tax calculation was made in a separate form, and the failure to include it with the assessment order did not make the assessment a nullity. The additional ground raised by the assessee was dismissed.2. The dispute over the computation of gross profit and addition to book results was another key issue. The Income Tax Officer (ITO) rejected the book results of the assessee and added to the disclosed results based on estimated turnover and gross profit percentage. The assessee argued that the rejection of book results was unjustified as the nature of their business did not require stock maintenance. The Tribunal considered the facts of subsequent years and accepted the assessee's disclosed gross profit percentage as reasonable, thereby deleting the addition made by the ITO.3. The third issue involved the disallowance of expenditure incurred towards tea, Pan Bidi. The ITO disallowed a certain amount as entertainment expenditure, which was later restricted by the Appellate Authority to cover non-business expenses. The Tribunal found that the disallowance under section 37(2A) of the Act was not sustainable in the absence of contrary evidence, and therefore, the disallowance of a specific amount was deleted.4. The final contention related to the addition in the ready-made garments account. The ITO made a lump sum addition for lack of quantitative details, which was later reduced by the Appellate Authority. The Tribunal deemed the nominal addition unnecessary considering the disclosed gross profit percentage, and thus, deleted the additional amount. Overall, the appeal was partly allowed in favor of the assessee.