Wednesday, March 7, 2012

Document Submitted to Bank Cannot be Taken for making P&l Entry by A.O.

AO not justified in drawing monthly P&L A/c taking into account statement of stock filed by assessee with bank and disallow losses incurred - [2012] 19 taxmann.com 72 (Delhi - Trib.)



I. Section 145 of the Income-tax Act, 1961 - Method of accounting - Estimation of profit - Assessment year 2007-08 - Assessee was a manufacturer of conveyor belts which were supplied mainly to Government undertakings - In course of assessment proceedings Assessing Officer issued summons under section 131 to bank requiring it to furnish statement of stock given by assessee - Assessee, for purpose of availing credit facilities had been providing information to said bank - On basis of information supplied by bank and details of monthly sales, purchases and direct expenses, Assessing Officer drew up profit and loss account on monthly basis - After undergoing such exercise Assessing Officer found that there was loss for three different months - As assessee did not offer any explanation, Assessing Officer disallowed such losses and made addition - Whether method of drawing up separate profit and loss account by Assessing Officer on monthly basis could not be approved as same was against norms of any business or guidelines issued by ICAI - Held, yes - Whether, therefore, addition made by Assessing Officer was to be deleted - Held, yes [In favour of assessee]
II. Section 14 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 2007-08 - Whether cenvat credit available to assessee is not liable to tax as it does not constitute income in hands of assessee - Held, yes [In favour of assessee]
III. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 2007-08 - Assessee debited certain amounts on account of liquidated damages and miscellaneous adjustments for delayed supplies made to Government undertakings - Assessing Officer denied deduction on ground that they were not allowable under section 36(1)(vii), read with section 36(2) - Whether since it is a common feature in contract business that on delayed supplies deductions are made and sometimes entire sale proceeds are not received and are subject to certain deductions by purchaser, deductions so made would be allowable as business expenditure - Held, yes  [In favour of assessee]
IV. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 2007-08 - Assessee incurred expenses on foreign travel by its partners - Whether since assessee had not given any evidence, proving business purpose requiring those foreign visits, said expenditure was to be disallowed - Held, yes [In favour of revenue]


[2012] 19 taxmann.com 72 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'E'
Assistant Commissioner of Income-tax
v.
Murcury Rubber Mills*
RAJPAL YADAV, JUDICIAL MEMBER
AND K.D. RANJAN, ACCOUNTANT MEMBER
IT APPEAL NO. 3489 (DELHI) OF 2010
[ASSESSMENT YEAR 2007-08]
SEPTEMBER 23, 2011

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