TaxTMI 
TaxTMI 
1980 (12) TMI 80
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....ng account. The assessee-firm admitted gross profit rate 2.2 per cent on a turnover of Rs. 25,28,835 in respect of sales of M/s Orient Paper Mills and 5.8 per cent on a turnover of Rs. 1,50,611 in respect of Sirpur Paper Mills. On the basis of loose papers found in the sister concern of "United Commercial Agency" which contained information which was partly incorporated in the account books of the assessee and partly, not accounted and they were destroyed by the assessee. Therefore, the ITO was of the view that it cannot be said that the entire information found in the loose papers was fully reflected in the accounts maintained by the assessee. Further, the ITO considering the fact of relationship of the partners with the allied concern was of the opinion that the information was deliberately destroyed, and, therefore, the accounts of the assessee does not reflect complete picture from which reasonable profits could be deduced and, therefore, he applied the proviso to s. 145(1). Holding that the rate of gross profit shown in both the accounts is low compared to the results of the firm itself as well as the sister concern dealing with the same commodity, he has enhanced the turnover....
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....nly basis that is left for consideration for making the addition in the trading account, is low rate of gross profit with reference to the past records of the assessee and that of the sister concern. The orders of the authorities are silent on the point regarding the comparative rate of gross profit shown in the sister concern or other comparable cases. The past records of the assessee show that the rate of gross profit shown in respect of Sirpur Paper Mills has been accepted in the earlier 2 years and also in the later year as per the contention urged before the CIT(A). The rate of fall in the gross profit in respect of Orient Paper Mills is quite negligible. It is to be seen whether there is material on record to warrant invoking of proviso to s. 145(1). The assessing officer has not pointed out the specific vital information which is not reflected in the books of account. Therefore, it is only on suspicion or surmise he was of the opinion that proviso to s. 145(1) was applicable to this case. The assessee is following mercantile method of accounting and admittedly regular books of account were maintained. The assessing officer has not given a finding of fact that the method of a....
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....e, the disallowance is considered to be excessive and it is reduced to Rs. 750. 10. The next ground is against disallowance of Rs. 500 out of travelling expenses claimed at Rs. 11,021. The ITO disallowed Rs. 500 on account of personal expenses by the partners. On appeal, the disallowance was sustained by the CIT(A). Since the personal element is not ruled out and the disallowance is also considered to be quite reasonable, the addition is sustained. 11. ITA No. 2224 (Alld)/1979—Asst. yr. 1977-78. The first ground is against disallowance of Rs. 3,000 out of miscellaneous expenses. The assessing officer disallowed Rs. 3,000 out of Rs. 8,355 to cover inadmissible items such as charity, excess payment etc. On appeal, considering the past record, the CIT(A) sustained the same. At the time of hearing, the ld. counsel for the assessee has urged that the disallowance is excessive. Keeping in view the inadmissible item pointed out by the ITO and also the extent of claim this year and disallowance in earlier year, we consider that the disallowance is excessive and, therefore, reduced to Rs. 2000. The assessee gets relief of Rs. 1000. 12. The next ground is against disallowanc....
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....iture on advertisement in terms of r. 6B is also not in dispute. Only on this premises, the excessive of unreasonable expenditure which is not related to legitimate business needs of the assessee and the benefits derived or accrued calls for disallowance. Therefore, the disallowance made by the authorities clearly establishes that the claim of the assessee falls under the head "advertisement". It cannot be disputed that person to whom the payment is made is not the person as specified in sub-r. 2(ii) of r. 6B, and, therefore, the disallowance of excessive or unreasonable expenditure is not called for under s. 6B (2)(i). There is nothing on the record to show that the payment was not for legitimate business needs of the assessee and the benefits derived or accrued to the assessee. If the claim is considered from the point of view of the assessee, the entire claim has to be allowed as legitimate business needs of the assessee. Therefore, the assessing officer is not justified in invoking r. 6B. When such is the position, the ld. CIT(A) was not justified in treating part of the expenditure as donation while upholding the disallowance under the head "advertisement". In other words, the....