2004 (4) TMI 29

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....al was right in law in reducing the disallowances made by the Assessing Officer to an arbitrary hypothetical figure without any basis and when the same were not supported by the vouchers or books of account? 3. Whether, on the facts and circumstances of the case, the Tribunal was justified in setting aside the interest paid to the wife of the assessee when it was proved that the loan was advanced not for business purposes and whether the said deduction in contravention of section 36(1)(iii) of the Act? For the assessment year 1994-95, return was filed disclosing the income of Rs. 1,45,608 on January 27, 1997. That was a belated return. Therefore, notice under section 148 was issued, which was duly served on the assessee on February 6,1997. In response to the notice, the assessee replied that the return filed on January 27, 1997, may be treated as the return in compliance with the notice issued under section 148. Notices under sections 143(2) and 142(1) were issued along with the detailed query letter. Some details were filed as required, but books of account and vouchers were not produced. Then summons under section 131 of the Income-tax Act was issued for personal attendance. Th....

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....ging the higher amount than shown in the bills, the addition of Rs. 7,48,800 is not justified. The second issue relates to disallowance of expenses. The assessee has claimed expenses on account of wages and salaries, diesel, drilling compressor, machinery repairs. When he was asked to produce the vouchers for test check purpose, the assessee failed to produce the vouchers of the expenses. Then the Assessing Officer has estimated the disallowance on account of non-production of the vouchers to the tune of 25 per cent, of the expenses claimed. That has been affirmed by the Commissioner of Income-tax (Appeals). However, the Tribunal has reduced this disallowance to Rs. 10,000 for the assessment year 1993-94, Rs. 25,000 for the assessment year 1994-95 and Rs. 35,000 for the assessment year 1996-97. The third issue for our consideration in these appeals is whether the Tribunal was justified in deleting the addition, which was made for paying the interest on borrowings and not charging the interest on interest free loan advanced to the wife of the assessee. The Assessing Officer has considered this aspect in para. 23 of its order. He found that the assessee is paying interest on the bo....

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....mits that when the books are not accepted, it is only a matter of estimate and the Income-tax Officer and the Commissioner of Income-tax (Appeals) have estimated the disallowance of 25 per cent, of the total expenses. The Tribunal has reduced it to Rs. 10,000 in the assessment year 1993-94, Rs. 25,000 in the assessment year 1994-95 and Rs. 35,000 in the assessment year 1996-97. So it is estimate against estimate, therefore, the order of the Tribunal, should not be disturbed on this count. There is no dispute on the fact that after search the documents which are seized, the Assessing Officer found that the weight of the marble block shown in the bills is different from the actual weight, which has been found by the mining department for the purpose of payment of the royalty and royalty has been paid as per actual weight. In para. 7, the Assessing Officer has considered and calculated the amount of addition on the basis of weight. For ready reference that reads as under: During the year under consideration, the assessee has issued total bills 194 starting from bill No. 791 to bill No. 984, including two bills for sale of 'Khanda'. The total sale consideration recorded in the bills ....

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....by the Assessing Officer in para. 11. For ready reference that reads as under: "During the course of assessment, the assessee was asked to produce the books of account and vouchers in support of the various expenses claimed in the trading and profit and loss account. However, the assessee has neither produced the vouchers as well as books of account for test check purpose and, therefore, in the absence of vouchers, expenses claimed in the trading and profit and loss account are disallowed as follows: ------------------------------------------------------------ Nature of               Exp.            % age         Disallowance expenses                claimed   disallowance ------------------------------------------------------------ Wages and salaries 1,57,390     25          39,347 Diesel             &n....