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Income Tax - Case Laws
Showing 1 to 20 of 6519 Records
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2013 (12) TMI 1767
Issues Involved:
1. Validity of assessment orders u/s 153A r.w.s. 143(3).
2. Unexplained investment in the construction of a house.
3. Unexplained expenditure on education.
4. Charging of interest u/s 234B, 234C, and 220(2).
5. Initiation of penalty proceedings u/s 271(1)(c).
6. Validity of notice u/s 153C.
7. Unexplained investment in purchase of shares.
8. Unexplained expenditure based on loose papers (LPS-3).
9. Unexplained investment in purchase of land.
10. Enhancement of assessment by CIT(A).
Summary:
1. Validity of Assessment Orders u/s 153A r.w.s. 143(3):
The Tribunal examined whether the assessment orders passed u/s 153A r.w.s. 143(3) were valid, especially in the absence of any incriminating material found during the search. It was argued that no addition could be made unless there was some incriminating material found during the course of the search. The Tribunal referred to various judicial pronouncements, including the case of Jai Steel (India) vs. ACIT, which held that in the absence of any incriminating material, the completed assessment can only be reiterated and not disturbed.
2. Unexplained Investment in the Construction of a House:
The Tribunal found that the lower authorities had not allowed credit for payments made to six parties for which affidavits were filed. The Tribunal directed the Assessing Officer to give credit for Rs. 2,12,531/- incurred by the assessee and actually paid through account payee cheques. After allowing a deduction of 25% for the rate difference between CPWD and local PWD rates, no addition survived.
3. Unexplained Expenditure on Education:
The Tribunal accepted the assessee's contention that the education expenses of his daughter were borne by her grandfather, supported by an affidavit. The Tribunal found no merit in the addition of Rs. 50,000/- made on account of educational expenses and directed its deletion.
4. Charging of Interest u/s 234B, 234C, and 220(2):
The Tribunal found the charging of interest u/s 234B, 234C, and 220(2) to be unjustified and directed the deletion of such interest charges.
5. Initiation of Penalty Proceedings u/s 271(1)(c):
The Tribunal found that the initiation of penalty proceedings u/s 271(1)(c) was not justified in the absence of any incriminating material and directed the deletion of such penalties.
6. Validity of Notice u/s 153C:
The Tribunal examined the validity of notices issued u/s 153C and found that such notices were not justified when no incriminating material was found during the search. The Tribunal referred to various judicial pronouncements to support its decision.
7. Unexplained Investment in Purchase of Shares:
The Tribunal found that the addition of Rs. 34,035/- being unexplained investment in the purchase of shares was not justified as the same was reflected in the statement of affairs filed by the assessee.
8. Unexplained Expenditure Based on Loose Papers (LPS-3):
The Tribunal found that the loose papers (LPS-3) were dumb documents and did not carry any weightage. The Tribunal directed the Assessing Officer to consider such documents in the hands of the respective family members and not in the hands of the assessee.
9. Unexplained Investment in Purchase of Land:
The Tribunal found that the assessee's daughter had purchased agricultural land for Rs. 1,50,000/- and the payment was made through her bank account. The Tribunal directed the deletion of the addition of Rs. 1,74,000/- made on account of unexplained investment in the purchase of land.
10. Enhancement of Assessment by CIT(A):
The Tribunal found that the enhancement of assessment by Rs. 2,57,760/- in respect of cash found during the course of the search was not justified. The Tribunal directed the deletion of such enhancement.
Conclusion:
The Tribunal allowed the appeals in part, directing the deletion of various additions and interest charges, and found the initiation of penalty proceedings to be unjustified. The Tribunal emphasized the importance of incriminating material for making additions in assessments u/s 153A and 153C.
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2013 (12) TMI 1749
Issues Involved:
1. Deletion of addition under Section 69 of Rs. 69,000/- for insufficient cash for making a Fixed Deposit.
2. Deletion of addition of Rs. 8,49,000/- on account of long-term capital gain.
3. Deletion of addition under Section 68 of Rs. 2,58,000/- on account of deposits in a joint loan account with State Bank of India.
4. Deletion of addition under Section 69 of Rs. 11,19,980/- on account of transactions with the Indian Bank Loan account.
5. Violation of Rule 46A of the Income Tax Rules regarding additional evidence admitted by CIT(A).
Issue-wise Detailed Analysis:
1. Deletion of Addition under Section 69 of Rs. 69,000/- for Insufficient Cash for Making a Fixed Deposit:
The Assessing Officer (AO) added Rs. 69,000/- under Section 69, citing insufficient cash for making a fixed deposit. The CIT(A) deleted this addition, noting the appellant had an opening cash balance of Rs. 25,224/- and sufficient cash inflow from a fruit and cold drinks business. However, the CIT(A) estimated a sum of Rs. 30,000/- as income, granting partial relief. The Tribunal confirmed the CIT(A)'s action to the extent of Rs. 55,224/-, confirming a balance addition of Rs. 13,776/-.
2. Deletion of Addition of Rs. 8,49,000/- on Account of Long-Term Capital Gain:
The AO denied the exemption under Section 54F, as the long-term capital gains were invested in the name of the assessee's wife, not the assessee. The CIT(A) deleted the disallowance, referencing judicial pronouncements, including the Madras High Court's ruling in CIT vs. V. Natarajan, which allowed such exemptions. The Tribunal upheld this deletion, citing the Delhi High Court's decision in CIT vs. Kamal Wahal, which supported the exemption even if the property was purchased in the spouse's name.
3. Deletion of Addition under Section 68 of Rs. 2,58,000/- on Account of Deposits in a Joint Loan Account with State Bank of India:
The AO added Rs. 2,58,000/- under Section 68, suspecting unexplained deposits in a joint loan account. The CIT(A) deleted this addition, noting the loan was for purchasing a shop where the appellant's wife conducted business. The payments were made by the wife, who had sufficient income to justify the deposits. The Tribunal partly upheld this deletion, restricting the addition to Rs. 83,000/- based on the wife's income.
4. Deletion of Addition under Section 69 of Rs. 11,19,980/- on Account of Transactions with the Indian Bank Loan Account:
The AO added Rs. 11,19,980/- under Section 69, questioning the deposits in the Indian Bank loan account. The CIT(A) deleted this addition, clarifying that the deposits were from a mortgage loan and additional loan accounts, used for property purchase, then redeposited when the purchase did not materialize. The Tribunal upheld this deletion, confirming the availability of funds from the loan accounts.
5. Violation of Rule 46A of the Income Tax Rules:
The Revenue argued that CIT(A) violated Rule 46A by admitting additional evidence without calling for a remand report from the AO. The Tribunal noted that the CIT(A) had considered all relevant accounts and found the deposits were from loan accounts, thus not interfering with CIT(A)'s findings.
Conclusion:
The Tribunal partly allowed the Revenue's appeal, confirming some additions and upholding deletions based on the evidence and judicial precedents. The order was pronounced on 31st December 2013.
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2013 (12) TMI 1747
Issues Involved:
1. Levy of interest u/s 234B of the Act.
2. Adoption of property value u/s 50C of the Act.
Summary:
Issue 1: Levy of Interest u/s 234B of the Act
The assessee contended that the ITO wrongly levied interest u/s 234B without considering the peculiar circumstances stated in section 50C, making it difficult to estimate the correct tax liability. The CIT(A) upheld the AO's action, confirming the levy of interest u/s 234B. The Tribunal, referencing the Hon'ble Karnataka High Court's decision in Gouli Mahadevappa, held that interest u/s 234B is mandatory and cannot be avoided by the assessee. The Tribunal dismissed the assessee's grounds, stating that the assessee was aware of the value adopted by the registering authority for stamp duty purposes at the time of executing the sale deed and thus could foresee the income to be assessed.
Issue 2: Adoption of Property Value u/s 50C of the Act
The assessee sold a property for Rs. 2,11,68,000, but the Stamp Valuation Authority valued it at Rs. 3,27,66,000. The AO, following the CIT's direction u/s 263, referred the matter to the DVO, who valued the property at Rs. 2,67,59,000. The AO adopted this value for computing capital gains. The assessee argued that since the DVO's valuation was less than the SVA's, the AO should accept the sale deed value. The Tribunal, referencing the statutory provisions and CBDT Circular No. 8/2002, held that the AO correctly adopted the DVO's valuation as it is binding when it is less than the SVA's value. The Tribunal dismissed the additional ground raised by the assessee, affirming the CIT(A)'s order.
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2013 (12) TMI 1741
Issues Involved:
1. Disallowance of interest expenses in Dera Bassi unit.
2. Estimation of notional interest on capital work in progress.
3. Estimation of notional interest on additions to fixed assets.
4. Estimation of notional interest on funds in the name of Baddi trading unit.
5. Capitalization of web/software development expenses.
6. Reduction of claim u/s 80IC by shifting/allocating expenses.
7. Wrong calculation of deduction u/s 80IC.
8. Disallowance of carried forward depreciation loss.
Summary:
Issue 1: Disallowance of Interest Expenses
The assessee, engaged in drug formulation with units at Dera Bassi and Baddi, faced disallowance of Rs. 31,06,069/- in interest expenses for Dera Bassi unit due to alleged fund diversion to Baddi unit. The Assessing Officer (AO) computed disallowance based on 10.75% interest rate. The CIT(A) upheld this disallowance. The Tribunal directed the AO to recompute disallowance using the average cost of debt, considering mixed funds, following the ratio in CIT Vs Abhishek Industries Ltd. and DCIT Vs MTZ Polyfilms Ltd.
Issue 2: Notional Interest on Capital Work in Progress
The AO observed that interest on capital work in progress should be capitalized. The Tribunal agreed but directed the AO to apply the average cost of debt for disallowance computation.
Issue 3: Notional Interest on Additions to Fixed Assets
The AO noted that interest on fixed assets additions should be capitalized. The Tribunal found no merit in disallowance if assets were put to use within the year, allowing the assessee's claim.
Issue 4: Notional Interest on Funds in Baddi Trading Unit
The Tribunal directed the AO to consider only the opening balance for disallowance computation and apply the average cost of debt. The total disallowance should not exceed Rs. 31,06,069/-.
Issue 5: Capitalization of Web/Software Development Expenses
The AO capitalized web/software development expenses, allowing 60% depreciation. The Tribunal upheld this, citing the amendment to include computer software as tangible assets under Rule 5 of Income Tax Rules, 1962.
Issue 6: Reduction of Claim u/s 80IC by Shifting/Allocating Expenses
The AO allocated common expenses among units, reducing the deduction u/s 80IC. The Tribunal directed the AO to consider turnover and expenses of all units, avoiding double disallowance.
Issue 7: Wrong Calculation of Deduction u/s 80IC
The Tribunal directed the AO to recompute the deduction u/s 80IC, ensuring no double addition.
Issue 8: Disallowance of Carried Forward Depreciation Loss
The assessee did not press this ground, and it was dismissed.
Conclusion:
The appeal was partly allowed, with directions for recomputation and consideration of average cost of debt for interest disallowance, proper allocation of expenses, and avoidance of double disallowance.
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2013 (12) TMI 1740
Issues involved:
1. Interpretation of Section 40(a)(ia) regarding deduction of tax at source on warehousing charges.
2. Valuation of closing stock of Soyabean for assessment purposes.
Issue 1: Interpretation of Section 40(a)(ia) regarding deduction of tax at source on warehousing charges:
The appeal by the Revenue challenged the CIT(A)'s decision regarding the applicability of Section 40(a)(ia) on warehousing charges. The Revenue contended that tax should have been deducted at source on the warehousing charges paid. The CIT(A) had held that since no amount was outstanding at the year-end as "payable," no disallowance under Section 40(a)(ia) could be made. The Revenue argued that the CIT(A)'s decision was not in line with a previous Tribunal decision and should be reversed. The Tribunal agreed with the Revenue, stating that even if no amount was "payable" at the end of the year but was debited to the profit and loss account without tax deduction at source, Section 40(a)(ia) applied. The Tribunal reversed the CIT(A)'s decision and allowed the Revenue's appeal for this issue. However, the CIT(A) had not adjudicated on the applicability of Section 40(a)(ia) to the facts of the case, so the matter was restored to the CIT(A) for further consideration.
Issue 2: Valuation of closing stock of Soyabean for assessment purposes:
The Revenue contested the CIT(A)'s decision to adopt an average value of closing stock of Soyabean at a lower rate compared to the Assessing Officer's valuation. The Assessing Officer had determined the closing stock value based on market rates obtained from APMC, Latur. The CIT(A) upheld an addition to the closing stock value, considering the market price information and average value per quintal. The Tribunal found the CIT(A)'s decision to be reasonable and reasoned, as it was based on the information provided by the Assessing Officer. Therefore, the Revenue's appeal on this issue was dismissed.
Conclusion:
The Tribunal allowed the Revenue's appeal regarding the interpretation of Section 40(a)(ia) on warehousing charges but remanded the matter to the CIT(A) for further consideration. The Tribunal dismissed the Revenue's appeal on the valuation of closing stock of Soyabean, upholding the CIT(A)'s decision.
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2013 (12) TMI 1737
Issues involved:
The judgment involves the interpretation of Article 24 of the Double Taxation Avoidance Agreement (DTAA) between India and Singapore, the determination of whether a payment constitutes Royalty under the DTAA, and whether the Royalty has arisen in India as per the provisions of Article 12(7) of the DTAA.
Interpretation of Article 24 of DTAA:
The Tribunal held that the income, even if construed as Royalty, does not arise in India under Article 12(7) because the payer is a resident of Singapore. Referring to the OECD Commentary on Article 11, it was emphasized that the state of source of royalties is the state where the payer is a resident. The Tribunal also noted that the amount paid was subject to tax in Singapore under its domestic laws, leading to the conclusion that Article 24 of the DTAA does not apply. The Tribunal dismissed the Revenue's appeal on this ground based on the decision of a co-ordinate Bench.
Nature of Payment as Royalty under DTAA:
The Tribunal did not find it necessary to decide whether the payment in question was in the nature of Royalty under the DTAA, as it had already determined that the Royalty did not arise in India as per the provisions of Article 12(7) of the Treaty. This decision was in line with a previous decision of the Tribunal, and accordingly, the appeal filed by the Revenue was dismissed.
Royalty Arising in India u/s Article 12(7) of DTAA:
The Tribunal analyzed the relevant provisions of Article 12(7) of the Indo-Singapore DTAA and referred to a previous decision regarding the necessity of an economic link between the payment of royalties and the Permanent Establishment (PE) in India. It was concluded that since there was no economic link between the payment of royalties and the Indian PE, the Royalty did not arise in India as per the Treaty provisions. The Tribunal dismissed the Revenue's appeal on this ground, following the decision in the assessee's own case.
Separate Judgment by Judges:
The judgment was delivered by Shri N.K. Billaiya, AM, and Shri B.R. Mittal, JM. The issues of interpretation of the DTAA, nature of payment as Royalty, and the Royalty arising in India u/s Article 12(7) of the DTAA were comprehensively addressed and decided in favor of the assessee based on previous Tribunal decisions and legal interpretations.
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2013 (12) TMI 1736
Issues Involved: Cross appeals filed by Assessee and Revenue in ITA Nos. 925/Ahd/12 & 1086/Ahd/12 regarding addition of land restoration expenses for assessment year 2007-2008.
Assessee's Appeal (ITA No. 925/Ahd/2012):
The Assessee challenged the addition of Rs.6,67,849 out of total addition of Rs.79,41,759 made by the AO on account of disallowance of land restoration expenses. The Assessee argued that the expenses should be allowed as revenue expenses since the corresponding projects were completed in earlier years and income was already booked. The CIT(A) confirmed the addition, stating that expenses can only be allowed if corresponding income is disclosed during the year. The Assessee failed to co-relate the expenses with income generated, leading to partial confirmation of disallowances.
Revenue's Appeal:
The Revenue contested the deletion of Rs.72,73,910 out of the total addition of Rs.79,41,759, treating land restoration expenses as capital expenditure. The Co-ordinate 'A' Bench set aside the issue to the CIT(A) for reconsideration. The A.O. did not provide a clear finding in the remand report, and the CIT(A) did not address the nature of expenditure in the second round. Despite the Assessee's failure to clarify the nature of expenses initially, the CIT(A) had treated the expenses as revenue expenditure in the first round. The Revenue's appeal was dismissed based on the nature of the expenses being deemed revenue in previous findings.
Conclusion:
Both the Assessee's and Revenue's appeals were dismissed, with the Tribunal upholding the disallowance of Rs.6,67,849 of land restoration expenses and confirming the treatment of expenses as revenue rather than capital expenditure. The Orders were pronounced on 20.12.2013 by the ITAT Ahmadabad.
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2013 (12) TMI 1735
Penalty u/s 271D and 271E - Assessee obtained unsecured loans in cash in excess of the amounts specified in section 269SS of the Act - Assesse argued for deletion of penalty broadly on the following grounds:(1) It is a transaction between the sister concern or the directors.(2) It is the first year of operation, hence, assessee was not well aware of the statutory provisions. (3) Assessee has proved its bonafide by disclosing unsecured loans in the financial statement along with return of income.
HELD THAT- The undisputed facts are that the unsecured loans are taken either from sister concern or directors, who are closely related to the assesse, secondly the AO has also not doubted the genuineness of the transaction, as he has accepted the unsecured loan without making any addition in this regard.
The High Court in [2010 (7) TMI 818 - MADRAS HIGH COURT], also expressed similar view when the transaction is between sisters concern, penalty under section 271E and 271D cannot be imposed.
Appeals filed by the assessee are allowed.
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2013 (12) TMI 1733
Issues involved: Appeal against order of CIT(A) cancelling rectification order passed by AO u/s. 154 of the Income-tax Act, 1961 regarding deduction u/s. 80HHC for Assessment Year 2002-03.
Summary:
The Appellate Tribunal ITAT Kolkata heard the appeal by revenue against the order of CIT(A) cancelling the rectification order passed by the AO u/s. 154 of the Act. The original assessment was completed u/s. 143(3) by ACIT, Kolkata, where deduction u/s. 80HHC was in question. CIT(A) directed the AO to recompute the deduction u/s. 80HHC, leading to a dispute. The AO rectified the order, but CIT(A) allowed the claim of the assessee, stating that the rectification was against the law. The Tribunal upheld CIT(A)'s decision, emphasizing that the computation of turnover was a debatable issue and the AO's rectification was not valid u/s. 154. The appeal of revenue was dismissed, confirming the quashing of rectification proceedings.
The AO's rectification order was challenged by the revenue before the Appellate Tribunal. The Tribunal noted that the original assessment involved a dispute over deduction u/s. 80HHC, leading to directions from CIT(A) for recomputation. The AO rectified the order, but CIT(A) allowed the assessee's claim, stating that the rectification was not valid as the computation of turnover was a debatable issue. The Tribunal upheld CIT(A)'s decision, dismissing the revenue's appeal and confirming the quashing of rectification proceedings.
The Tribunal considered the appeal by revenue against the order of CIT(A) cancelling the rectification order passed by the AO u/s. 154 regarding deduction u/s. 80HHC. The original assessment by ACIT, Kolkata involved a dispute over the deduction, leading to directions from CIT(A) for reevaluation. The AO's rectification was challenged, but CIT(A) found it to be against the law due to the debatable nature of the turnover computation. The Tribunal agreed with CIT(A)'s decision, dismissing the revenue's appeal and upholding the cancellation of rectification proceedings.
The Tribunal addressed the appeal by revenue concerning the cancellation of the AO's rectification order by CIT(A) u/s. 154 regarding deduction u/s. 80HHC. The original assessment by ACIT, Kolkata raised issues regarding the deduction, resulting in directions from CIT(A) for reassessment. The Tribunal upheld CIT(A)'s decision to cancel the rectification, citing the debatable nature of turnover computation. Consequently, the revenue's appeal was dismissed, affirming the quashing of rectification proceedings.
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2013 (12) TMI 1731
Issues Involved:
1. Accommodation entries and income @ 0.25%.
2. Addition u/s 40A(3) for cash payments exceeding Rs. 20,000/-.
3. Addition for office expenses.
4. Addition for rent expenses.
5. Addition for printing and stationery expenses.
6. Addition for salary expenses.
7. Acceptance of fresh evidence by CIT(A) without opportunity to A.O.
Summary:
1. Accommodation Entries and Income @ 0.25%:
The ITAT held that it is an admitted fact that the assessee has only given accommodation entries to earn income @ 0.25%. The assessee admitted during the survey that he issued bills and received a commission of 0.25% on the amount of bills. The CIT(A) and ITAT directed the Assessing Officer to compute the income at 0.25% on the total turnover, which was confirmed by the High Court.
2. Addition u/s 40A(3) for Cash Payments Exceeding Rs. 20,000/-:
The Assessing Officer made an addition of Rs. 3,52,44,338/- u/s 40A(3) for cash payments exceeding Rs. 20,000/-. The CIT(A) deleted this addition, stating that the transactions were only paper entries and no actual cash payments were made. The ITAT confirmed this deletion, and the High Court upheld the ITAT's decision, agreeing that the payments were not actually made in cash.
3. Addition for Office Expenses:
The Assessing Officer disallowed Rs. 52,840/- for office expenses due to lack of supporting evidence. The CIT(A) deleted this addition, and the ITAT confirmed the deletion. The High Court upheld the ITAT's decision.
4. Addition for Rent Expenses:
The Assessing Officer disallowed Rs. 91,000/- for rent expenses due to lack of supporting evidence. The CIT(A) deleted this addition, and the ITAT confirmed the deletion. The High Court upheld the ITAT's decision.
5. Addition for Printing and Stationery Expenses:
The Assessing Officer disallowed Rs. 28,790/- for printing and stationery expenses due to lack of supporting evidence. The CIT(A) deleted this addition, and the ITAT confirmed the deletion. The High Court upheld the ITAT's decision.
6. Addition for Salary Expenses:
The Assessing Officer disallowed Rs. 4,05,500/- for salary expenses due to lack of supporting evidence. The CIT(A) deleted this addition, and the ITAT confirmed the deletion. The High Court upheld the ITAT's decision.
7. Acceptance of Fresh Evidence by CIT(A) without Opportunity to A.O.:
The revenue contended that the CIT(A) accepted fresh evidence without giving an opportunity to the Assessing Officer. The ITAT decided the case on merits without addressing this specific ground. The High Court found no substantial question of law in this regard and dismissed the appeals.
Conclusion:
The High Court dismissed the tax appeals, upholding the decisions of the CIT(A) and ITAT, and confirmed that no substantial question of law arises in the present tax appeals.
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2013 (12) TMI 1728
Issues Involved:
1. Disallowance of expenditure u/s 40(a)(i) due to non-deduction of TDS by assessee's branches abroad.
2. Deletion of prior period expenses disallowed by the Assessing Officer.
Summary:
Issue 1: Disallowance of Expenditure u/s 40(a)(i)
The Department challenged the CIT(A)'s decision to allow expenditures incurred by the assessee's branches in the USA, UK, and Japan, arguing that no TDS was deducted as required u/s 195 of the Income Tax Act. The Assessing Officer had disallowed Rs. 9,44,57,453/- for A.Y. 2002-03, Rs. 2,77,71,671/- for A.Y. 2005-06, Rs. 1,90,41,453/- for A.Y. 2006-07, and Rs. 89,18,411/- for A.Y. 2007-08. The assessee contended that payments were made by foreign branches to non-residents whose income was not taxable in India, thus no TDS was required. The CIT(A) concluded that the recipients had no permanent establishment in India, and the payments fell under the exceptions provided in section 9(i)(vii)(b) of the Act and relevant DTAAs. Consequently, the CIT(A) directed the deletion of the disallowances. The Tribunal upheld the CIT(A)'s order, noting that the provisions of section 195 did not apply as the payments were not chargeable to tax in India.
Issue 2: Deletion of Prior Period Expenses
The Department disputed the deletion of Rs. 1,85,891/- out of Rs. 2,68,099/- disallowed by the Assessing Officer on the grounds that the expenses pertained to an earlier accounting year. The assessee argued that the expenses, though related to the previous year, were crystallized and paid in the current year. The CIT(A) allowed the claim, except for Rs. 64,463/- for telephone bills and Rs. 17,745/- for car rental charges, which were not claimed in the current year. The Tribunal upheld the CIT(A)'s decision, stating that the liability had accrued in the assessment year under consideration, and there was no evidence that the expenses were claimed in the preceding year.
Conclusion:
The Tribunal dismissed all appeals by the Department for A.Y. 2002-03, 2005-06, 2006-07, and 2007-08, upholding the CIT(A)'s orders on both issues. The Tribunal found no infirmity in the CIT(A)'s decisions regarding the non-applicability of TDS provisions u/s 195 and the crystallization of prior period expenses in the current year.
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2013 (12) TMI 1726
Issues Involved:
1. Reduction of agricultural income.
2. Disallowance of brick expenses.
3. Disallowance of labor charges.
Summary:
1. Reduction of Agricultural Income:
The first issue concerns the reduction of agricultural income from Rs. 2,95,535/- to Rs. 1,77,323/-. The A.O. observed that the assessee did not furnish proof of agricultural income and expenditure during the assessment proceedings despite multiple opportunities. Consequently, the A.O. treated the entire agricultural income as undisclosed income. The CIT(A) partly allowed the appeal, reducing the agricultural income by considering 40% of the receipts as expenditure. The Tribunal, after hearing the arguments and considering the evidence, decided that 30% of the receipts should be considered as expenditure and directed the A.O. to re-compute the agricultural income accordingly.
2. Disallowance of Brick Expenses:
The second issue involves the disallowance of brick expenses amounting to Rs. 5,04,567/-. The A.O. treated the purchases as bogus due to non-response from the suppliers and lack of evidence from the assessee. The CIT(A) upheld the disallowance, not admitting additional evidence. However, the Tribunal admitted the additional evidence under ITAT Rule 29, noting that the A.O. had recorded statements from the brick suppliers during the remand report. The Tribunal directed the A.O. to make necessary inquiries and take a decision as per law, setting aside the CIT(A)'s order.
3. Disallowance of Labor Charges:
The third issue pertains to the disallowance of labor charges. The A.O. disallowed Rs. 50,000/- out of Rs. 59,38,958/- due to unverifiable cash payments through self-made vouchers. The CIT(A) restricted the disallowance to Rs. 30,000/-, considering the nature of the business. The Tribunal upheld the CIT(A)'s decision, finding it reasonable given the circumstances.
Conclusion:
The assessee's appeal is partly allowed, with directions for re-computation of agricultural income and further inquiry into the brick expenses, while the disallowance of labor charges is confirmed.
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2013 (12) TMI 1725
Issues Involved:
1. Validity of notice u/s 148 of the Act.
2. Reopening of assessment beyond four years.
3. Full and true disclosure of material facts by the assessee.
4. Computation of "profits of the business" for deduction u/s 80HHC.
Summary:
1. Validity of notice u/s 148 of the Act:
The assessee challenged the validity of the notice issued u/s 148, arguing it was issued after four years from the end of the relevant assessment year, and the original assessment was made u/s 143(3). The assessee contended that the notice's validity depended on the fulfillment of conditions prescribed in the first proviso to section 147, which requires a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
2. Reopening of assessment beyond four years:
The Tribunal noted that the reasons recorded by the Assessing Officer (AO) for reopening the assessment did not contain any averment that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Citing the judgment of the Hon'ble Bombay High Court in Titanor Components Ltd. vs. ACIT, it was held that the absence of such an averment rendered the initiation of proceedings u/s 147 legally infirm.
3. Full and true disclosure of material facts by the assessee:
The Tribunal found that the assessee had made a full and true disclosure of all material facts in relation to the assessment, including the computation of income and the claim for deduction u/s 80HHC. The AO had duly applied his mind to the issue during the original assessment proceedings, as evidenced by the detailed records and the Chartered Accountant's certificate in Form No. 10CCAC.
4. Computation of "profits of the business" for deduction u/s 80HHC:
The issue revolved around the determination of "profits of the business" as defined in Explanation (baa) to section 80HHC. The AO's action of excluding 90% of Rs. 98,43,701/- from the "profits of the business" was contested. The Tribunal concluded that the assessee had disclosed all material facts fully and truly, and the AO had applied his mind during the original assessment. Therefore, even if a wrong claim was allowed, it could not justify reopening u/s 147 as there was no withholding of material facts by the assessee.
Conclusion:
The Tribunal held that the initiation of proceedings u/s 147 was bad in law due to the absence of failure on the part of the assessee to disclose fully and truly all material facts. Consequently, the assessment was annulled, and the appeal of the assessee was allowed.
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2013 (12) TMI 1724
Issues involved: The issues involved in the judgment are the interpretation of statutory provisions regarding adjustment of State Development Tax, the validity of circulars issued by the Commissioner Trade Tax, and the proportionate adjustment of State Development Tax in relation to exemption or reduction in the rate of tax.
Interpretation of Statutory Provisions:
The Court emphasized that the State Development Tax shall be adjustable in the monetary limit specified in the eligibility certificate issued under section 4-A of the U.P. Trade Tax Act. It was clarified that the adjustment of the State Development Tax should not be proportionate to the trade tax under a notification dated 31.3.1995, as the two taxes are distinct and governed by separate provisions. The Court held that until a clarification or amendment is made by the Legislature, the entire State Development Tax can be adjusted up to the monetary limit prescribed in the eligibility certificate.
Validity of Circulars:
The Court declared that no notification or circular issued by the department can override the statutory provisions of the Act. It was emphasized that the statutory provisions should be followed as they are without any additional interpretations or modifications. The Court stayed the operation of certain notices issued by the Deputy Commissioner (Assessment) Trade Tax, which aimed at allowing only proportionate adjustment of State Development Tax, contrary to the statutory provisions.
Proportionate Adjustment of State Development Tax:
In a related case, the Court clarified that the interpretation of the Commissioner, suggesting proportionate adjustment of State Development Tax based on the exemption or reduction in the rate of tax, was incorrect. The Court highlighted that the adjustment of State Development Tax should be based on the monetary limit specified in the eligibility certificate, without considering proportional changes in the rate of tax. Consequently, the Assessing Authority was directed to pass appropriate orders for adjustment of State Development Tax in accordance with the Court's decision, expeditiously.
This judgment provides clarity on the adjustment of State Development Tax, emphasizing adherence to statutory provisions and rejecting the notion of proportionate adjustment based on other tax rates or circular interpretations.
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2013 (12) TMI 1722
Issues Involved:
1. Deletion of disallowance of various expenses.
2. Deletion of disallowance of commission expenses.
3. Deletion of disallowance of Kharajat expenses.
4. Deletion of disallowance of unexplained cash credit.
5. Deletion of disallowance u/s 68.
6. Deletion of disallowance u/s 69A.
7. Deletion of disallowance of unexplained outstanding credits.
8. Deletion of disallowance of interest chargeable on interest-free advance.
Summary:
1. Deletion of disallowance of various expenses:
The A.O. disallowed Rs. 74,732/- on account of vehicle and telephone expenses, citing lack of supporting bills and personal use. The CIT(A) deleted the disallowance, noting that such expenses are petty and usually incurred in cash without verifiable receipts. ITAT upheld the A.O.'s addition as the Assessee had agreed to it during assessment proceedings.
2. Deletion of disallowance of commission expenses:
The A.O. disallowed Rs. 14,400/- out of Rs. 72,000/- commission expenses paid in cash, suspecting suppression of profits. CIT(A) deleted the disallowance, stating the commission was paid to the Assessee's father for business supervision, and the genuineness was not disputed. ITAT upheld the A.O.'s addition as the Assessee had not objected during assessment.
3. Deletion of disallowance of Kharajat expenses:
The A.O. disallowed Rs. 2,59,940/- out of Rs. 10,39,760/- Kharajat expenses due to lack of verifiable documents. CIT(A) reduced the disallowance to 10%, granting partial relief. ITAT further reduced the disallowance to 15%, considering the substantial cash expenses and lack of third-party evidence.
4. Deletion of disallowance of unexplained cash credit:
The A.O. added Rs. 60,000/- as unexplained cash credit due to a discrepancy in the balance shown by Lakhani Enterprises. CIT(A) deleted the addition, accepting the Assessee's explanation of accounting the draft in the subsequent year. ITAT upheld the A.O.'s addition due to lack of evidence supporting the Assessee's explanation.
5. Deletion of disallowance u/s 68:
The A.O. added Rs. 10 lakhs as unexplained cash credit u/s 68, questioning the genuineness of the loan from Markandeshwar Scrap Traders. CIT(A) deleted the addition, noting the Assessee had provided sufficient documentary evidence, and the onus was on the A.O. to disprove it. ITAT remitted the issue back to CIT(A) for fresh examination due to contradictory statements and lack of evidence.
6. Deletion of disallowance u/s 69A:
The A.O. added Rs. 16.50 lakhs u/s 69A, suspecting unrecorded income. CIT(A) deleted the addition, accepting the explanation of Markandeshwar Scrap Traders. ITAT remitted the issue back to CIT(A) for fresh examination due to contradictory statements and lack of evidence.
7. Deletion of disallowance of unexplained outstanding credits:
The A.O. added Rs. 83,19,857/- as unexplained outstanding credits due to lack of confirmations and supporting documents. CIT(A) deleted the addition, noting the transactions were business-related and the Assessee had provided sufficient details. ITAT upheld CIT(A)'s decision as the Revenue could not controvert the findings.
8. Deletion of disallowance of interest chargeable on interest-free advance:
The A.O. disallowed Rs. 4,02,177/- interest expense, citing interest-free advances given by the Assessee. CIT(A) deleted the addition, noting the A.O. failed to establish a nexus between interest-bearing loans and interest-free advances. ITAT upheld CIT(A)'s decision as the Revenue could not provide contrary evidence.
Conclusion:
The appeal of the Revenue is partly allowed for statistical purposes.
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2013 (12) TMI 1721
Issues involved: Validity of initiation of proceedings u/s 153A and claim of deduction u/s 80IB in respect of scrap sales.
Validity of initiation of proceedings u/s 153A:
The appeals by the assessee challenged the order of the learned CIT(A)-I, New Delhi for the AY 2008-09 & 2009-10, specifically contesting the initiation of proceedings u/s 153A of the Income-tax Act, 1961. Ground No.1 in both years was against the validity of the initiation of proceedings under Section 153A. However, during the hearing, no specific arguments were presented against the validity of the notice under Section 153A. Consequently, the Tribunal treated ground No.1 as not pressed and rejected the same.
Claim of deduction u/s 80IB in respect of scrap sales:
The second ground of the assessee's appeal related to the claim of deduction under Section 80IB concerning scrap sales. The Assessing Officer had allowed the deduction under Section 80IB but excluded the scrap sales from the profit of the industrial undertaking for the years under consideration. The learned counsel argued that the issue was favorably decided for the assessee by the Hon'ble Jurisdictional High Court in a specific case. The Departmental Representative, however, contended that the facts of the present case differed from the case relied upon by the assessee. After considering the arguments and facts, the Tribunal agreed with the assessee's contention, citing the decision of the Hon'ble Jurisdictional High Court which held that receipts from scrap sales are part of the gains derived from the industrial undertaking for computing deduction under Section 80IB. Consequently, the Tribunal directed the Assessing Officer to compute the deduction under Section 80IB by including the scrap sales. As a result, the appeals of the assessee were partly allowed.
Decision:
The decision was pronounced in the open Court on 20th December 2013 by the Appellate Tribunal ITAT Delhi, with Shri G.D. Agrawal, Vice President, and Shri Aby T. Varkey, Judicial Member presiding over the case. The legal representatives for the appellant and respondent were Shri Niren Gupta, CA, and Shri S.N. Bhatia, DR, respectively.
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2013 (12) TMI 1718
Deduction u/s 10B - Business of granite export. - AO observed that the assessee’s activity could not be termed as ‘manufacture or production’ since the granite had only been made fit for transportation. - CIT(A) deleted the additions and allowed deduction. - HELD THAT- The assessee was allowed the benefit of section 10B by the ITAT [2011 (2) TMI 1415 - ITAT CHENNAI] on the ground that the assessee had exported polished granite. While doing so, the Tribunal had observed that the assessee extracts granite blocks from the quarry, dresses them and polishes them before exporting. We have perused the Tribunal order and have considered the entire facts and evidence available before us. We are in agreement with the ld. CIT(A) that there is no change in the business of the assessee from earlier years and similar type of export is being done in this year too. Therefore, assessee becomes entitled to deduction u/s 10B under identical facts and circumstances.
Decision in favor of assessee.
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2013 (12) TMI 1716
Issues Involved:
1. Exemption u/s 11 & 12 of the Act.
2. Corresponding allowance of expenditure.
3. Claim of depreciation.
4. Plurality of objects in form no.10.
5. Reopening of assessment u/s 148.
6. Exemption u/s 10(26AAB).
Summary:
Issue 1: Exemption u/s 11 & 12 of the Act
The first issue pertains to the non-granting of benefit u/s 11(2) due to delay in filing form no.10 and accumulation for several objects. The CIT(A) allowed the assessee's contention to accept the form no.10 based on the Supreme Court's decision in CIT Vs. Nagpur Hotel Owners Association, but upheld the assessing officer's contention that the notice for accumulation did not specify a specific purpose. The Tribunal directed the assessing officer to reconsider the claim of section 11(2) in light of relevant judgments, restoring the issue for fresh examination.
Issue 2: Corresponding Allowance of Expenditure
The second issue involves the grant of relief for various payments made as per the directions of the Director of Marketing, which the assessing officer did not allow. The CIT(A) sustained the addition due to the absence of the Director's directions. The Tribunal referred to the Andhra Pradesh High Court's decision in CIT Vs. Agricultural Market Committee, Giddalore, which recognized the government's power to direct such payments. The Tribunal directed the assessing officer to verify and allow the claims as per the Director's directions.
Issue 3: Claim of Depreciation
The third issue concerns the claim of depreciation not allowed due to lack of details. The Tribunal cited various judicial authorities, including the Punjab & Haryana High Court in CIT Vs. Market Committee, Pipli, which upheld that depreciation is allowable on capital assets from the income of charitable trusts. The Tribunal directed the assessing officer to allow the depreciation after obtaining necessary details from the assessee.
Issue 4: Plurality of Objects in Form No.10
In some appeals, the assessing officer denied exemption u/s 11(2) due to alleged violation of section 13 and plurality of objects in form no.10. The Tribunal, referring to the first issue, restored the matter to the assessing officer for fresh examination.
Issue 5: Reopening of Assessment u/s 148
In several appeals, the ground on reopening the assessment u/s 148 was not pressed and accordingly treated as withdrawn.
Issue 6: Exemption u/s 10(26AAB)
The issue of exemption u/s 10(26AAB) was considered against the assessee by the Andhra Pradesh High Court in a batch of appeals involving various Agricultural Market Committees. The Tribunal dismissed the grounds related to this issue.
Conclusion:
The Tribunal restored various issues to the assessing officer for fresh consideration and verification, allowing the appeals partly for statistical purposes. The Tribunal directed the assessing officer to consider the issues accordingly, following the principles laid down in relevant judicial decisions.
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2013 (12) TMI 1715
Issues involved:
The appeal by revenue against the order of CIT(A) deleting the addition of unexplained cash credits worth Rs. 14.75 lakhs.
Details of the Judgment:
Issue 1: Addition of unexplained cash credits
The revenue appealed against the CIT(A)'s deletion of the addition of Rs. 14.75 lakhs as undisclosed source, citing lack of creditworthiness of loan creditors. The AO added unsecured loans as income from undisclosed sources u/s. 68 of the Act due to insufficient evidence provided by the assessee. However, the CIT(A) observed that the appellant had submitted loan confirmations, PAN cards, bank statements, and replies to notices u/s. 133(6) from the loan creditors, establishing the genuineness of the loans. The CIT(A) found that the appellant fulfilled the onus of proving the identity and creditworthiness of the loan creditors, while the AO failed to provide any material casting doubt on the transactions. The High Court precedent emphasized that when the identity and genuineness of the transaction through account payee cheques are established, the AO should verify the transactions with the creditor, especially when the creditor is an income tax assessee. As the appellant provided complete details and followed the High Court's principle, the order of the CIT(A) was upheld, and the revenue's appeal was dismissed.
Conclusion:
The appeal by revenue was dismissed, and the order was pronounced on 24th Dec., 2013.
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2013 (12) TMI 1714
Issues Involved:
1. Application of incorrect 'peak credit' by the Assessing Officer (AO).
2. Invocation of provisions u/s 68 of the Income Tax Act.
3. Addition of commission income along with peak credit.
Summary of Judgment:
Issue 1: Application of Incorrect 'Peak Credit'
The assessee contested the AO's application of incorrect 'peak credit' for AY 2009-10 and 2010-11. The AO assessed peak credits of Rs. 5.05 lakh and Rs. 39.95 lakh for the respective years, rejecting the assessee's calculation of Rs. 1 lakh and Rs. 6.50 lakh. The CIT(A) upheld the AO's assessment, stating that the AO rightly applied the combined peak theory after considering all entries in the undisclosed bank accounts.
Issue 2: Invocation of Provisions u/s 68
The AO invoked provisions u/s 68 of the Income Tax Act, which the assessee argued was not applicable as no sum was found credited in the books of account. The CIT(A) supported the AO's decision, referencing similar cases where the ITAT, Kolkata upheld the addition to income by the combined peak credit theory.
Issue 3: Addition of Commission Income
The assessee argued that once the peak credit was added, the commission income should not be added again. The CIT(A) disagreed, confirming the addition of commission income as it was admitted by the assessee and disclosed in the return of income.
Tribunal's Decision
The Tribunal set aside the common issue to the file of the AO for verification of facts and fresh adjudication according to law. The AO was directed to examine the source of cash deposits, the names and addresses of beneficiaries, and whether the cash withdrawals were utilized for investments. The appeals were allowed for statistical purposes.
Order Pronounced: The appeals were allowed for statistical purposes and the order was pronounced in the open court on 19th Dec., 2013.
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