Tribunal allows appeals, remands for fresh adjudication.

The Tribunal allowed both appeals for statistical purposes, setting aside the orders of the CIT(A) and AO and restoring the matters back to the AO for fresh adjudication in accordance with the law and after providing reasonable opportunities to the assessee.

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Issues Involved:
1. Disallowance out of wages and bonus.
2. Disallowance out of salary given to a lady director.
3. Disallowance out of staff welfare, conveyance, traveling, festival, and telephone expenses.
4. Levy of interest under Section 234.

Detailed Analysis:

1. Disallowance out of Wages and Bonus:
The appellant, a private limited company, filed its return of income showing a total income of Rs. 15,45,390, which was assessed at Rs. 57,13,713 by the AO. The AO disallowed Rs. 40,31,743 out of wages and bonus, citing that 25% of the wage bill was bogus based on a fingerprint expert's report. The CIT(A) reduced this disallowance to Rs. 8 lakhs, granting relief of Rs. 32,31,743. The Revenue appealed against this relief, while the assessee appealed against the Rs. 8 lakhs disallowance. The Tribunal found that the AO had not provided the assessee with a reasonable opportunity to respond to the expert's report, which was only given to the assessee on 30th March 1999, just before the assessment was completed. The Tribunal held that the disallowance was made in violation of principles of natural justice and Section 142(3) of the IT Act. The matter was restored to the AO to provide the assessee an opportunity to submit comments on the expert's report, cross-examine the expert, and produce evidence of the existence and identity of the workers.

2. Disallowance out of Salary Given to Lady Director:
The AO disallowed Rs. 48,000 paid as remuneration to a lady director. The CIT(A) deleted this disallowance, and the Revenue did not challenge this relief granted by the CIT(A), making this issue uncontested.

3. Disallowance out of Staff Welfare, Conveyance, Traveling, Festival, and Telephone Expenses:
The AO disallowed 20% of the aggregate expenditure amounting to Rs. 88,580. The CIT(A) confirmed this disallowance. The Tribunal, however, found that the AO had not provided specific reasons for the disallowance, nor had the CIT(A) discussed it in detail. The Tribunal set aside the orders of the CIT(A) and AO on this point and restored the matter to the AO for fresh examination, directing the AO to point out specific instances of disallowable expenses and provide a reasonable opportunity to the assessee.

4. Levy of Interest Under Section 234:
The issue of levy of interest under Section 234 was deemed consequential. The Tribunal restored this matter to the AO, instructing to pass a speaking order for the levy of interest under specific provisions while passing the fresh order.

Conclusion:
The Tribunal allowed both appeals for statistical purposes, setting aside the orders of the CIT(A) and AO and restoring the matters back to the AO for fresh adjudication in accordance with the law and after providing reasonable opportunities to the assessee.

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