SARDAR MUHAMMAD ANWAR KHAN, JUDICIAL MEMBER.- Cross appeals for the assessm ent years 1989-90 and 1990-91 have been filed to call in question the legality and correctness of the order dated 15.10.1991 by the learned CIT(A), Faisalabad, recorded in Income-tax Appeals No. 218 & 420.
2. The assessee, a private limited company, continued to derive income from sale of imported tyres during the years under consideration. The declared results for both the years under consideration are as under:- 1989-90 1990-91 Declared sales Rs. 1,57,55,498/- Rs. 2,16,80,025/- GP rate 5.9% 5.9% The assessing officer discarded the declared version for various defects mentioned in the body of the assessm ent orders and estimated the sales at Rs. 1,70,00,000/- and Rs. 2,35,00,000/- as against the declared sales of Rs. 1,57,55,498/- and Rs. 2,16,80,025/- and applied a GP rate at 6% as against the declared GP rate at 5.9%. Certain additions were also made out of the P&L account expenses and net income was determined at Rs. 1,82,304/- and Rs.2,81,256/- for the years under consideration.
3. Feeling aggrieved the assessee filed first appeals for both the years. The learned first appellate authority vide the impugned order dated 15.10.1991 reduced the sales estimate to Rs. 1,60,00,000/- for assessm ent years 1989-90 and to Rs. 1,20,0, 000/- for assessment years 1990-91 but confirmed the GP rate. Partial relief under the head P&L account expenses was allowed for both the years under consideration.
4. The Department as well as the assessee have come up in record appeal before us on various grounds. The appeals are decided as under:-
5. It was argued by the learned AR of the assessee that the dis-allowance maintained by the first appellate authority are un-justified, un-called for and against the facts of the case. The order of the learned CIT(A) was also contested to be illegal on the issue of addition of Rs. 244,502/-. On the other hand, the learned DR argued that the first appellate authority erred in law and on facts in reducing the sales from Rs. 2,35,00,000/- to Rs. 2.20.0. 000/- and the relief allowed under the heads; printing & stationery, travelling expenses, motor vehicles expenses are not justified as the same were un-vouched and un-verifiable. The assessing officer while framing the assessment order was impressed by the past history of the assessee and held "examination of books of accounts revealed that these are defective as before, therefore, merit rejection." After making these remarks, the sales were estimated at Rs. 1,70,00,000/- which were reduced in appeal to Rs. 160,00,000/- by the learned CIT(A) for the assessm ent year 1989-90 and from Rs. 2.35.0. 000/- to Rs. 2,20,00,000/- for the assessm ent year 1990- 91. The reduction in estimate of sales by the learned first appellate authority being reasonable and just is maintained. The application of GP rate at 6% by the assessing officer and confirmed by the learned CIT(Appeals) for both the years does not call for any interference as the assessee himself declared GP rate at 5.9% for both the year Unders consideration.
Additions out of P&L account expenses.
6. The assessee claimed travelling expenses at Rs. 107,655/- for the assessment year 1989-90 out of which the to dis-allowed Rs. 30,000/- due to lack of details and verification. The dis-allowance was restricted to Rs. 20,000/- by the CIT(Appeals) keeping in view the volume of business of the assessee. The impugned curtailment is maintained. The telephone expenses were claimed at Rs.
21567/-. Due to non-business use Rs. 5000/- were dis-allowed by the to. The dis-allowance was restricted to Rs. 3000/- by the learned CIT(A). It is about 15% of the total claim of the assessee. The dis-allowance needs no interference. Advertisement charges were claimed at Rs. 43,800/- out of which Rs. 10,000/- were dis-allowed by the to due to lack of details and verification and part admissibility. The learned CIT(A) confirmed the same. The impugned addition does not call for any interference on our behalf and is maintained, Rs. 16,380/- were claimed on account of entertainment expenses out of which Rs. 8000/- were dis-allowed by the to which estimated was confirmed by the CIT(Appeals). After considering the facts of the case, we feel that this is slightly excessive and is reduced to Rs. 4000/-. The other additions are in line with the history of the assessee and are maintained.
7. The appeal of the assessee for the Assessment Year 1989-90 succeeds only to the extent that the additions under the head entertainment is reduced to Rs. 4000/-.
8. As far as the addition made in the P&L account expenses for the assessment year 1990-91 is concerned, the same are all maintained being reasonable except the addition made under the head "Entertainment" which is slightly excessive and is reduced to Rs. 3500/-.
9. The assessee appeals succeeds to the excent and in the appeal indicated above while the departmental appeals being devoid of any merit are rejected.