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2017 (3) TMI 199 - AT - Income TaxValidity of reopening of assessment - deposits in the UTI Bank and the interest earned thereon not disclosed - Held that:- Once the additional income declared by the assessee was processed u/s. 143(1), we are unable to understand on what basis the AO formed a belief that additional income has escaped assessment. We are therefore of the view that there was no substantive material before the AO to form a belief that income has escaped assessment. Under these facts, we are of the considered view that reopening was not based on requisite cogent material. Accordingly we hold the reopening to be bad in law. TDS u/s 194H - supplying arrack to different vendors at different vending points - non-deduction of tax at source - Held that:- Since the assessee has a taken a categorical stand that it is supplying arrack to different vendors at different points or locations in the respective operational areas as permitted by Govt. of Karnataka and the shops of vendors are duly authorised by Govt. of Karnataka, it is all the more necessary to examine the facts whether the assessee has sold arrack on principal to principal basis to these vendors, or vendors were acting as commission agents of the assessee. If it is established that assessee has issued invoices in the name of vendors and supplied arrack to them, the transaction would be on principal to principal basis and the vendors cannot be held to be commission agents of the assessee. Nomenclature to the difference in receipt of sale proceeds and sale consideration is irrelevant. But these aspects were not examined by the lower authorities. Since the assessee has taken a categorical stand before the CIT(Appeals) that the vendors were duly authorised and approved by the Govt. of Karnataka to transact in arrack, the CIT(A) should have examined as to how sale of arrack was effected and in whose favour invoice was raised. Therefore, we are of the opinion that this issue requires fresh adjudication by the AO. Disallowance of interest - Held that:- We have carefully examined the order of CIT(A) for AY 2005-06 where the issue was examined in detail and we find that the CIT(A) has directed the AO to recompute the interest disallowance as per opening debit balances in the partners capital account. We do not find any infirmity in the directions of the CIT(A). TDS u/s 194H - bank guarantee commission - Held that:- CIT(Appeals) is right in holding that bank guarantee commission is basically in the nature of interest for a credit facility which may or may not be utilised and it does not create any type of principal-agent relationship so as to attract the provisions of section 194H of the Act Assessee in default - Held that:- We find that now the provisions of section 201(1) and section 40(a)(ia) has been toned down by subsequent amendments and as per second provisio to section 40(a)(ia), when the assessee is not in default, it is to be presumed that assessee has deducted and paid the taxes. This aspect was not examined by the CIT(A). Therefore, we are of the view that let this issue be examined in the light of the amended provisions of section 40(a)(ia) of the Act by the Assessing Officer. Accordingly, this issue is restored to the file of the Assessing Officer. Disallowance of telephone expenses - Held that:- AO has disallowed 20% of the total claim towards telephone expenses on account of personal use. Since the possibility of personal use of telephone cannot be ruled out, some disallowance has to be made. However, the disallowance made by the AO is on the higher side and we restrict the same to 10% of the total claim of expenses.
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