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Income Tax - Case Laws

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• 2013 (11) TMI 892
  

  Additions u/s 41(1) - cessation of liability - assessee claimed setoff with sundry debtors - Held that:- the assessee has not booked the income receivable from sundry debtors i.e. ETV Kannada during the relevant year i.e. A.Y. 2003-04. The assessee has not written off the said debt. Hence, at this stage there cannot be any automatic set off of the amounts relating to amounts payable to sundry creditors against the amount receivable from sundry debtors. - Decided against the assessee.

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• 2013 (11) TMI 891
  

  Allowability of deduction under section 10B and under section 80HHE of the Act - Deduction under section 10B is allowable to 100% export oriented undertakings engaged in the export of articles, things or computer software and which have been approved for this purpose by the competent authority. Deduction under section 80HHE is available in respect of profit from the export of computer software or from its transmission to a place outside India or from providing technical services outside India in connection with development/production of computer software - Assessee is engaged in contract research activity on behalf of the foreign pharmaceutical companies and is also engaged in medical transcription activity – Held that:- The matter restored to the file of Commissioner(A), to decide the issue afresh in the light of various judgments s.a. CIT vs. Black & Veatch Consulting (P) Ltd [2012 (4) TMI 450 - BOMBAY HIGH COURT ], wherein it has been held that deduction under section 10B has to be allowed before setting off brought forward losses. Also, in the light of judgments in the case of Shirke Constructions Ltd.[2007 (5) TMI 194 - SUPREME Court], wherein it has been held that brought forward loss has to be adjusted before allowing deduction under section 80HHC.

  Treatment of expense regarding renovation of director’s office which being the rented premises, a capital expenditure of revenue expenditure – Held that:- In view of Explanation -1 to section 32(1) inserted from assessment year 1988-89, the capital expenditure incurred by way of renovation or extension or improvement even in rented premises has to be considered as owned by the assessee on which depreciation is allowable - Full details of expenditure has not been brought on record either in the order of AO or in the order of CIT(A). Further CIT(A) has also mentioned that copy of agreement with landlord had not been produced by the assessee which in our view is necessary in understanding the true nature of expenses - Matter requires fresh examination and hence restored this issue also, back to CIT(A) for passing a fresh order.

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• 2013 (11) TMI 841
  

  Addition u/s 68 of the Income tax act – Addition on account of sale of shares – Held that:- It is well established by the appellant regarding genuineness of share transaction and he has sufficiently discharged the onus cast upon him. AO's action is not well founded in position of law in adding entire amount of sale of shares as income from undisclosed and unexplained sources u/s 68 of I.T. Act - Deleted the entire amount of Rs.19,51,038/-.

  There is no evidence on record as referred in assessment order, to prove that the proceeds received against sale of shares represent appellant's undisclosed income. Hon'ble Apex Court in the case of Kishan Chand Chella Ram vs CIT rep[orted in [1980 (9) TMI 3 - SUPREME Court] has held "that the burden is on the Department to prove that the money belongs to the assessee by bringing proper evidence on record and the assessee could not be excepted to call the concerned person in evidence to help the Department to discharge the burden that lay upon it".

  Assess was in possession of the shares in question and had sold the said shares in course of ordinary transaction of sale of shares at stock exchange and if the broker did not file any evidence since the same were seized by the Revenue Department, there is no fault with the assessee. From the aforesaid facts it is clear that the shares in question were allotted to the assessee in the public issue which were held in demat a/c of Stock Holding Corporation of India Ltd. The shares were transferred to Abhipra Capital Ltd. The sale consideration was received by demand draft. Therefore, the transaction in question cannot be said to be fake and is a genuine transaction – Decided against the Revenue.

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• 2013 (11) TMI 840
  

  Addition u/s 69 and penalty u/s 271(1)(c) of the Income tax Act – Held that:- The revised return had been acted upon by the Assessing Authority and in fact, the loss of Rs. 13,87,540/- declared by the assessee in the revised return filed on 24.3.1992, had been accepted in toto. The bonafide of the assessee is therefore established because it was not able to produce the necessary documentary evidence for proving the capacity of the shareholders and depositors to the full extent within a short span of time as the assessment was getting barred by limitation. Even the depreciation of Rs. 24,62,390/- claimed in the revised return, had been accepted by the Assessing Officer. The share capital and the unsecured loans amounting to Rs. 12,23,100/- declared by the assessee in the revised return has also been accepted.

  Moreover, decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Stellar Investments Ltd. [2000 (7) TMI 76 - SUPREME Court] and CIT vs. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA], the subscription made by the various shareholders in the share capital of a company cannot be taxed at the hand of the company and can only be taxed at the hands of the shareholder under Section 69 of the Act.

  Failure of the assessee in proving the capacity of the various shareholders to invest in the share capital, could not have been a ground for initiating penalty proceedings – Deleted the penalty u/s 271(1)(c) of the Income tax act – Decided against the Revenue.

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• 2013 (11) TMI 839
  

  Whether issuance of notice u/s 143(2) of the act is mandatory and not procedural – Deeming provision under section 292BB of the Act - No valid reassessment order could be passed before issuing the said notice within the time prescribed under law – Reassessment done u/s 147 of the Income tax act - Without issuing notice under section 143(2) of the Act the Assessing Officer straight away proceeded to issue notice dated 7th January, 2003 under section 142(1) of Act calling upon the assesseee to explain the issue regarding taxability of lease rent and deduction from it the expenses regarding business income - Assessment had been framed under section 147 read with section 143(3) of the Act without issuing notice under section 143(2) of the Act which is the mandatory requirement – Held that:- Time limit for issuing notice under section 143(2) has also been fixed which was earlier twelve months from the end of the month in which the return was furnished now it has been reduced to six months by Finance Act, 2008 with effect from 1st April, 2008. The notice contemplated under section 142(1) of the Act is only in respect of furnishing information on points or matters as the Assessing Officer may require. The two notices contemplated under section 142(1) and under section 143(2) of the Act are for entirely difference purposes.

  Reliance has been placed on the judgment in the case of Commissioner of Income Tax Allahabad and another vs. Sh. Mukesh Kumar Agarwal [2012 (7) TMI 543 - Allahabad High Court], wherein it was held that a deeming provisions to validate the notice in certain circumstances, would not have any effect where the very foundation of the jurisdiction of the Assessing officer is on the issuance of the notice under Section 143(2) of the Act - Following the aforesaid decision, the order of the Tribunal upholding the order of the Commissioner of Income Tax (Appeals) annulling the assessment under sections 147/148 read with Section 143(3) of the Act for want of issuance of notice under Section 143(2) of the Act does not suffer from any legal infirmity – Decided against the Revenue.

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• 2013 (11) TMI 838
  

  Disallowance u/s 37(1) of the Income tax act - Disallowance of Rs. 2 lacs being 50% of Club Membership Fees treating as personal expenses - Assessee had debited Rs. 4 lacs as Club Membership fee in his books of accounts – Held that:- Judgment of Hon'ble Bombay High Court delivered in the case of Otis Elevator [1991 (4) TMI 53 - BOMBAY High Court] is distinguished from - In certain cases issue regarding membership of clubs has been decided, but all such cases are of corporate assessee unlike the present case where assessee is proprietor of a concern. FAA had endorsed the views of the AO that element of utilisation of facilities for himself and the family members could not be ruled out. But, neither AO nor FAA had found as what was the facilities provided by the Club and what facilities were availed by the assessee for himself or his family members during the year under consideration - So, in the interest of justice restored the issue back to the file of the AO for fresh adjudication.

  Disallowance in respect of Sundry Balance written off - Assessee had debited Rs. 4, 87, 189/- under the head Sundry Expenses – Contention of Revenue that amount in question was in nature of advance to suppliers, that no actual purchases were made – Held that:- Assessee had not routed the said transaction to P & L Account, that it had claimed that amount in question could not be recovered - He had given details of sundry debtors/creditors balance written to the AO - AO has not taken into consideration the submissions made by the assessee in this regard – Proper opportunity of being heard was not provided to the Assessee - In the interest of justice matter needs to be restored to the file of the AO for fresh adjudication.

  Disallowance u/s 40(a)(ia) of the Income tax act - Addition on account of non-deduction of TDS as per the provisions of section 194C(1) of the Act – Addition of Rs. 10. 44 lacs - Assessee had paid Rs. 10, 44, 010/- to contractor, and he did not deduct tax at source – Held that:- As per the provisions of the Act individuals and HUFs, who were subject to mandatory audit, had to deduct tax at sources from AY. 2003 -04. While introducing the amendment to section w. e. f. , 01. 06. 2002, if legislature in its wisdom did not include the individuals and HUFs, who had not to get their accounts audited u/s. 44AB of the Act, to deduct tax source than it was a case of reasonable classification. But, legal position was very clear that during the year under consideration proviso was very much applicable and the assessee had to deduct tax as his turn over exceeded the monetary limits prescribed by the provisions of section 44AB of the Act - FAA had rightly held that Proviso was applicable and assessee had to deduct tax source u/s. 194C of the Act for the payments made by him during the AY under consideration. - Decided against the assessee.

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• 2013 (11) TMI 837
  

  Deduction u/s 10B of the Income tax Act - Declined exemption u/s 10B on the short ground that the blending of tea does not amount to manufacture or production of tea for the purpose of claiming exemption u/s 10B – Held that:- This appeal was squarely covered by the decision of the Co-ordinate Bench of this Tribunal in assessee's own case for the immediately succeeding assessment year [2012 (7) TMI 531 - ITAT KOLKATA] wherein the Coordinate Bench of this Tribunal has held that, the assessee who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B. - Decided in favor of assessee.

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• 2013 (11) TMI 836
  

  Classification of head of Income – adventure in the nature of trade or sale of capital asset - sale of property after getting the flats constructed - whether it is case of conversion of property (capital asset) into the stock in trade u/s 45(2) - Whether the income falls under the head Capital Gains or Business income - Held that:- Arrangement between these co-owners and GPIL cannot be termed as commercial arrangement for the simple reason that the piece of land including the bungalow inherited by these co- owners was a capital asset - Character of these asset, which was capital in nature, remained the same even after construction - Sale consideration received by these co-owners was on account of sale of capital asset – Decided against the Revenue.

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• 2013 (11) TMI 835
  

  Exemption u/s 10AA - SEZ unit - Conversion of partnership firm into Company - trading activity - The definition of `services' under the SEZ Act includes `trading' activity’ – Held that:- Trading activity has been permitted by the Competent authority under the SEZ Act. As such, there can be no question of denial of exemption u/s. 10AA of the Act – Reliance has been held in the case of DCIT v. Goenka Diamond & Jewellers Ltd.[ 2012 (3) TMI 258 - ITAT JAIPUR] in which it has been held that trading of the eligible goods entitles the assessee to the benefit of section 10AA of the Act – Judgment of Hon’ble Mumbai Bench in M/s Gitanjali Exports Corportion Limited v. ADCIT [2013 (11) TMI 563 - ITAT MUMBAI], reiterates the above order – Decided against the Revenue.

  Non- fulfillment of requisite condition as per Section 10AA(4)(iii) of the Act – Condition that undertaking should not be formed by transfer of machinery or plant to a new business which was previously used for any purpose – Held that:- Assesssee-company is successor of the partnership firm which was originally approved by the competent authority under the SEZ Act to do this business. The said firm claimed exemption u/s. 10AA of the Act for two years before the partnership firm got converted into assessee- company - Assessment of the firm was completed u/s. 143(3) of the Act in which benefit of exemption under this provisions was allowed. The granting of such exemption in earlier years implies that the AO got satisfied with the requisite conditions as per section 10AA(4). Since the assessee-company is nothing but the conversion of the erstwhile firm, at this stage it can not be said that the condition required under clause (iii) is not satisfied – Allowed exemption u/s 10AA of the Act – Decided against the Revenue.

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• 2013 (11) TMI 834
  

  Application of section 41(1) of the Income tax act - Assessee has incurred losses and has obtained waiver of principle as well as interest - Assessee company received financial assistance of Rs. 598 lakhs under venture capital fund scheme comprising convertible rupee term loan of Rs. 480 lakhs and subscription of 100 lakhs to the equity share capital and 17.5% redeemable convertible accumulative preferential shares of 98 lakhs - Further received financial assistance of 104 million under project finance scheme for the expansion cum up- gradation project for the manufacture of smart cards by way of term loan from IDBI - Since Assessee ended up in losses, it has entered into one time settlement for the dues – Held that:- Loan sanctioned is not received in the course of trading transaction, this being a capital receipt for purpose of purchase of assets/ business. All amounts received during the course of business cannot be considered as amount received in the course of trading transaction - Relied upon Hon'ble Supreme Court decision in the case of CIT Vs. Tosha International [2009 (7) TMI 1149 - SUPREME COURT], on similar issue, held that Assessee had not got any deduction on account of acquisition of capital assets as it has been reflected in the balance sheet and not in the P&L A/c and the remission of principle amount of loan obtained from bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier year, hence, section 41(1) was not applicable.

  Relying upon the judgment of Hon’ble Supreme Court in the case of Nector Beverages (P) Ltd. [2009 (7) TMI 5 - SUPREME COURT], it has been held that if Assessee has not got any deduction as a trading liability in any of the earlier years, provisions of section 41(1) does not apply - Unless principle amount pertains to any amount received during the course of trading activity, the same cannot be brought to tax as income of Assessee particularly only in those situations as stated by the Hon'ble Supreme Court in the case of TVS Sundaram Iyyengar & Sons [1996 (9) TMI 1 - SUPREME Court] – Decided in favor of Assessee.

  Jurisdiction u/s 263 of the Income tax Act – CIT directed u/s 263 to treat entire amount of Capital receipt as Income – Held that:- Direction of CIT to treat the entire capital amount as income is not correct on the facts of the case and also on the principles of law - Once a decision was taken by AO on the said facts, the CIT cannot review the same under the provisions of section 263. When there are two views possible, one of the plausible opinion taken by the AO cannot be dissented by CIT under section 263. Therefore, CIT lacks jurisdiction and so the direction of CIT is cancelled – Reliance has been placed on the judgment in the case of Malabar industrial Co. Ltd. Vs. CIT, [2000 (2) TMI 10 - SUPREME Court] – Decided in favor of Assessee.

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• 2013 (11) TMI 833
  

  Monetary limit for filing an appeal - ‘Tax effect’ less than the prescribed limit – INSTRUCTION No.3/2011(F:No.279/MISC.142/2007-ITJ) dt.9.2.2011 – Reference to Board's instruction No. 5/2008 dated 15-5-2008 – Held that:- Since this appeal has been filed by department on 21.04.2011 and the tax effect in this appeal is Rs.2,33,155/-, the above instructions of CBDT are applicable and the appeal filed by department is liable to be dismissed as the tax effect in this appeal is below Rs.3 lakhs – Decided against the Revenue.

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• 2013 (11) TMI 832
  

  Taxability of income from Surrender of tenancy rights - capital gains - exemption u/s 54 – Held that:- Surrender of tenancy rights;as contemplated in clause 16 of the impugned agreement;had not taken place during the year under consideration, that there was no taxable event giving rise to capital gains on account of the impugned agreement, that asssessee had not to pay any tax on alleged capital gains - Inspector of the AO had visited the place and from his on-the-spot-report it was proved, beyond doubt, that till he visited the premises alleged transaction had not fructified. Tax has to be paid by an assessee, if he earns some taxable income or some income accrues to him. An unexecuted agreement does not give rise to earning or accrual of income. Tax can be imposed on real income and not on hypothetical income. It is true that a tripartite agreement was entered into among the tenants, including the assessee, developer and the owner of the property. But it is also a fact the because of the orders of the BMC said agreement could not be implemented - Inspector proved that on that particular date property was occupied by the assessee as a tenant, that there was no change in his position vis-à-vis the owner, that rent receipts, electricity and MTNL Bills, Passport proved that assessee was in possession of the tenanted premises – Decided against the Revenue.

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• 2013 (11) TMI 831
  

  Block assessment - Penalty u/s 158BFA(2) of the Act – Undisclosed income - Entries made in the peace of paper separate from the regular books of accounts – Held that:- If the time limit for filing return of income has not expired, then the income from the transactions entered in the books of account or any other documents maintained in the regular course of business has to be excluded from the computation of income. In this case, what was found during the course of search operation is the amount shown as receivables. Though the assessee claims that this is the document maintained in the regular course of business, this Tribunal is of the considered opinion that the amount shown as receivables in a piece of paper cannot be treated as books of account maintained in the regular course of business in the absence of a corresponding entry in respect of the credit sales in the books of account maintained in the regular course of business.

  What was recorded in a piece of paper as amount receivable has to be treated as turnover outside the books of account. Therefore, this Tribunal is unable to accept the contentions of the assessee that the seized document which discloses the amount receivables on credit sale has to be treated as document maintained in the regular course of business – Decided against the Assessee.

  However, penalty reduced from 200% to 100%. - Decided partly in favor of assessee.

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• 2013 (11) TMI 830
  

  Interest u/s 234B and 234C of the Income tax act – Application of section 210 which requires payment of advance tax as calculated u/s. 209 - Advance tax must not fall short by more than 10% of the assessed tax – Contended that Assessee was not liable to pay any advance tax as the taxes paid by way of TDS were more than 90% of the Assessed tax and hence there was no interest chargeable u/s. 234 B and 234 C – Held that:- One of the reasonable mode of collection is to collect taxes in instalments. If assessees fail to adhere to schedule of payment, provisions have to be made to compensate the exchequer. Payment of interest or imposition of penalty can be considered justified modes of compensation.

  Assessee had the liability to pay advance-tax as provided in sections 207 and 208 within the time prescribed u/s. 211 of the Act, that the liability to pay such tax existed on the last date for payment of advance tax as provided under the Act or at least on the last date of the financial year preceding the assessment year in question - It is not the case that such liability arose subsequently, when the last date for payment of advance tax or even the last date of the financial year preceding the assessment year was over and the assessee had no liability to pay advance tax. In these circumstances it has been held that assessee was liable to pay advance tax for the year under consideration - It had failed to pay advance tax on stipulated dates. Therefore, the order passed by the FAA u/s. 154 of the Act; to recalculate the interest u/s. 234B and 234C of the Act, after giving credit to the taxes paid by the assessee;does not suffer from any legal infirmity – Decided against the Assessee.

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• 2013 (11) TMI 829
  

  Addition u/s 69 of the Income tax act - Relevancy of third party evidence to explain the investment made and addition made u/s 69 of the Income tax act – Held that:- In reply to remand report, the Ld AR submitted that all queries made by the Assessing Officer and replies given by the assessee were already on the file of the Assessing Officer as these replies were given by the appellant during assessment proceedings itself and therefore it was submitted that the Assessing Officer's finding that it was difficult to verify the capacity and genuineness of transaction should not be accepted as the Assessing Officer was not able to find anything wrong or missing from third party evidence.

  The Assessing Officer without going through the third party evidences filed by the assessee continued to direct assessee to file proofs of income tax returns of earlier years in support of his acquiring assets ion earlier years and made additions because of non compliance which is not justified specially in view of the fact that he did not find any defect in the documents filed by the assessee - In view of the above, set aside the case to the file of Assessing Officer for re-adjudication who on the basis of any enquiries from third parties in respect of their confirmations may arrive at the conclusion of addition if any u/s 69 of the Act.

  Addition u/s 69A on the ground of household expenses – Held that:- There is no other yard stick to measure household expenses of a person other than on the basis of facts and circumstances of that person with respect to size of the family, school going children, assets owned by that person and other surrounding circumstances – Assessee relied upon the case of Shri G.S. Bhatia [1997 (5) TMI 402 - ITAT MUMBAI], wherein it was held that unless and until it is established with evidence that it was only the assessee who had incurred all the household expenses, revenue was not justified in invoking the deeming provision of section 69A - In the present case, Ld AR did not bring to our notice any drawings made by wife of assessee for contribution to household expenses. Therefore the case laws relied upon by Ld AR do not hold force as the facts and circumstances of the present cases are distinguishable – Addition upheld – Decided against the Assessee.

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• 2013 (11) TMI 828
  

  Stay petition against the operation of order passed u/s 263 – Held that:- Relying upon the case of Narendra Kumar Mehta [2013 (11) TMI 821 - ITAT KOLKATA], it has been held that no purpose would be served by staying proceedings in respect of giving effect to the order passed under section 263 rather than delaying in time available to the assessee to respond to the requisition by the Assessing Officer in the interest of natural justice, stay should not be granted in this case and the same stands dismissed - Decided against the Assessee.

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• 2013 (11) TMI 827
  

  Indo Denmark DTAA - Taxability of software as Royalty or FTS - Shipping Business - income from software usage which has been developed and maintained by the assessee – Held that:- Article-9(1) of Indo Denmark DTAA provides that the profits derived from operations of the ships in international traffic shall be taxable at a place where the effective management of the enterprise is situated and such a profit is exempt from tax in the other contracting State. The term "Profit" under this Article has to be construed more broadly so as to include not only the activities directly connected with the shipping operations but also to include income from activities which facilitates or support such operation as well as any ancillary activities - The OECD commentary on Article-8 (similar to Article-9 of the Indo-Denmark DTAA) also expresses the same view. If any activity is directly linked with carrying on shipping operations and results into some kind of an income, then it has to be treated as a part of such shipping operations only.

  In assessee's own case of the earlier year, it has been held that the cost recovered from the various agents towards usage of software are directly connected with the shipping operations then the same has to be treated as covered under Article-9(1) and, hence, it cannot be taxed in India. Thus, respectfully following the judicial precedence, held that any kind of receipts recovered by way of software usage/development cost from MIPL cannot be taxed in India under Article-9(1) of DTAA.

  Further, this receipt also cannot be taxed as fees for technical services or royalty independently because in the present case, the assessee is not rendering any service of managerial, technical or consultancy to its agent or group entities by allowing its group companies to be usage of software. The assessee's main income is only from freight receipt received from operations of ships and it is not providing any technical service to them. It has developed a software for running of shipping business globally in a more effective and efficient manner and access of such software has been provided to various agents/group companies all over the world who are using this software for facilitating the freight receipts from shipping, for which they are reimbursing the cost to the assessee without any mark-up. Such a recovery of a cost cannot be held to be fees for technical services – Decided against the Revenue.

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• 2013 (11) TMI 826
  

  Cancellantion of registration u/s 12AA(3) of the Income tax Act - Assessee is running a medical college at Karimnagar and has also established a 750 bedded hospital at Nanganur village of Karimnagar District - For the first reason put forth for cancellation of registration, viz., collection of capitation fee, it is submitted that in the course of search, one Excel sheets were found containing the names of students, names of parents and the amount. In the course of search and, thereafter, statements of chairman of the assessee trust were recorded on a number of occasions, with reference to the entries in these Excel sheets. It was explained that circumstances in which the Excel sheets were found was not ascertainable. It was contended that uncorroborated notings in the Excel sheets should not be acted upon to derive any inference against the society - Reasons for cancellation of registration are that the assessee has violated the provisions of sections 11 and 12 of the Act and the assessee has not conducted itself in accordance with the object for which it was established and registered u/s. 12A of the Act.

  Seized material in the form of Excel sheets said to be recovered from the assessee's office cannot be considered as sufficient evidence so as to decide collection of capital fees by the assessee as it lacked independent corroboration. The Department failed to collect sufficient evidence to show that the assessee has actually collected the amount mentioned in the Excel sheets and the statement of Sri B. Srinivasa Rao is also not supporting the collection of capitation fees by the assessee. Moreover, no data confirming the contents of Excel sheets were recovered from the seized computer hard disk. In the absence of corroborative material, the Excel sheets recovered from the computer cannot be considered as a sufficient evidence so as to confirm collection of capitation fee. The seized material being Excel sheets which is an unsigned document and not being identified by the Department regarding author of these Excel sheets and it cannot be considered as an independent evidence. Being so, it has no evidentiary value as held by the co-ordinate Bench in the case of Smt. K.V. Lakshmi Savitri Devi vs. ACIT [2013 (11) TMI 805 - ITAT HYDERABAD]

  Evidence collected by the Revenue authorities is not sufficient to establish the stand that the assessee has collected the capitation fee/excess fee for admission under management quota seats in assessee society - Entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and conduct and human probability - Applying this principle to the present case, difficulty in rejecting the assessee's plea as opposed to the normal course of human conduct. The circumstances surrounding the case also not strong enough to reject the assessee's plea - Department cannot rely on party’s statements, more so, when it was not confronted to the assessee for cross examination, the same cannot be relied upon - Assessee society cannot be deprived of the registration granted to the assessee u/s. 12AA of the Act – Decided against the Revenue.

  Re-opening of assessment u/s 147 of the Income tax act – Search u/s 132 has unearthed material which revealed collection of amounts by the assessee over and above the fee prescribed by the Government for admission into medical courses particularly in respect of students admitted in the academic years 2006-07, 2007-08 and partly for 2009-2010. The said material found at the time of search did not reveal anything specifically relating to assessment year 2003-04, which is the year under appeal – Held that:- In the absence of any specific and concrete material possessed by the assessee to suggest collection of amounts over and above the prescribed fee, at the time of initiating proceedings under S. 147, the reopening of assessment cannot be held to be legal or valid, and it has to be held to be just based on the suspicion that the assessee might have collected such amounts even in the year under appeal - Issue relating to the legality and validity of the reopening of assessment under S. 147 decided in favour of the assessee.

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• 2013 (11) TMI 825
  

  Addition u/s 41(4A) - Withdrawal from special reserve account - In the Balance sheet, the assessee has reduced the Special Reserve Account with certain amount. According to the assessee, it is a contra adjustment only and it has made corresponding reduction from "Loans and Advances account" also. According to the assessee, it was required to do so as per the directions issued by IDBI, which the assessee is required to comply with. According to the said guidelines, the Assets and Liabilities should be reduced to the extent of Provision utilised from the cumulative balance of reserves created u/s 36(1)(viii), i.e., the assets are to be shown as net of provisions.

  Held that:- As per the guidelines of the IDBI, the assessee is required to classify its assets, mainly loans and advances, into four categories, viz., Standard assets, Sub-standard assets, Doubtful assets and Loss assets. The purpose of classification of the assets in the above categories appears to be to ascertain about the intrinsic strength of those assets - IDBI has also specified the criteria or basis for classifying the assets in the four categories stated above. According to the said guide lines, the assessee is also required to make provisions against the assets classified as Sub-standard, Doubtful and loss category, possibly these categories bear risk of recovery. According to the said guidelines, the SIDCs are required to determine the amount of provision for bad and doubtful debts. According to the guidelines issued by IDBI, the amount available in the Special Reserve Account u/s 36(1)(viii) of the Act is admissible for provision purposes.

  SIDCs can take into account the amount available in the Special Reserve Account while determining the amount of provision - The provision for bad and doubtful debts is created only to safeguard the financial institution against bad debts, i.e., the possible bad debts risk is evened out to a number of years. Hence, the permission given by IDBI for utilising the amount available in Special Reserve Account for making provision does not mean that the SIDC has actually utilised the Special Reserve Account. The said relaxation only allows the SIDC to determine the amount of "Provision for bad and doubtful debts" that is required to be made as per the guidelines issued by IDBI, i.e., in terms of IDBI guidelines, the provision for bad and doubtful amount shall be computed by aggregating the amount available in Special Reserve account with the amount available in Provision for bad and doubtful account.

  Provisions of sec. 41(4A) would not apply so long as the SIDC maintains the Special Reserve Account intact in its books of account. The method of presentation of the same in the Balance Sheet also, does not matter for the purposes of sec. 36(1)(viii) r.w.s. sec. 41(4A) of the Act, there is no reason to invoke the provisions of sec. sec. 41(4A) of the Act, on the basis of Balance sheet, wherein certain adjustments have been made by the assessee for the purpose of presenting it to the share holders and the regulator - Deleted the impugned addition of ₹ 53.96 crores – Decided against the Revenue.

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• 2013 (11) TMI 824
  

  Penalty u/s 271(1)(c) of the Income tax act – Allegation of concealment of particulars of income - Shri Gopal G. Pairkh interrogated u/s. 131 on 20.11.1995 and who is the partner of M/s. Madhuri Developers and admitted this transaction of sale of land was unrecorded - Assessee offered for taxation Rs.28 lacs as unaccounted own money taken in various land transaction. Even he did not disclose after admission of additional income before the A.O. in regular return which was relevant to A.Y. 96-97 but filed VDIS before the Commissioner, which was rejected on the basis of not paying tax – Held that:- Apex court decision in the case of Union of India vs. Dharamendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] clearly point out that the penalty is leviable for deliberate deception of the claim. Thus, the levy of penalty would depend on the existence or otherwise of the conditions calling for levy of penalty. The object behind the enactment of section 271(1)(c), read with the Explanations, indicates that the section has been enacted to provide for a remedy for loss of revenue, by reason of concealment of particulars of income - Thus, the assessee filed inaccurate particulars of income and concealed income – Penalty under section 271(1)(c) leviable – Decided in favor of Revenue.

  Quantum of penalty u/s 271(1)(c) of the Income tax act being 125% of the tax concealed – Held that:- The penalty imposed @ 125% which is reduced to 100% of tax sought to be evaded. Therefore, A.O. is directed to re-calculate the penalty @ 100% - Decided against the Revenue.

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