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Showing 201 to 220 of 383 Records
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2012 (1) TMI 229
Challenge the valuation determined by the DVO as per the provisions of s. 50C(2) - business of construction activities/promoters - sale consideration of basement Nos. 2 and 3 as - valuation of the stamp by Departmental Valuation Officer (DVO) - fair market value (FMV) of the property - calculating the capital gain - HELD THAT:- In the instant case we find that as against the value of ₹ 28,73,000 adopted by the stamp valuation authorities, the DVO has determined the FMV on the date of transfer at ₹ 20,55,000. This itself shows that there is wide variation between the two values. Further, the value adopted by the DVO is also based on some estimate. We find that the difference between the sale consideration shown by the assessee at ₹ 19,00,000 and the FMV determined by the DVO at ₹ 20,55,000 is only ₹ 1,55,000 which is less than 10 per cent. The Courts and Tribunals are consistently taking a liberal approach in favour of the assessee where the difference between the value adopted by the assessee and the value adopted by the DVO is less than 10 per cent.
Since the difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration at ₹ 20,55,000 as against the actual sale consideration of ₹ 19,00,000 disclosed by the assessee. We, therefore, set aside the order of the CIT(A) and direct the AO to take ₹ 19,00,000 only as the sale consideration of the property. The grounds raised by the assessee are accordingly allowed.
In the result, the appeal filed by the assessee is allowed.
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2012 (1) TMI 228
Issues Involved:
1. Disallowance of method of adjustment of carried forward book losses and depreciation for MAT purposes.
Summary:
Disallowance of Method of Adjustment of Carried Forward Book Losses and Depreciation for MAT Purposes:
The appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-V, Pune, which arose from the order passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 for the assessment year 2006-07. The assessee company, engaged in manufacturing pig iron and grey iron castings, raised a solitary issue regarding the disallowance of the method of adjustment of carried forward book losses and depreciation for MAT purposes.
The Tribunal noted that an identical issue had arisen in the assessee's case for the assessment year 2005-06, where the Tribunal had set aside the order of the Commissioner of Income-tax (Appeals) and restored the issue to the file of the Assessing Officer with specific directions. The learned Departmental Representative did not dispute this fact.
The Tribunal reiterated its findings from the previous case, emphasizing that the dispute relates to the computation of book profits for determining tax liability u/s 115JB of the Act. The relevant clause (iii) of Explanation 1 below 115JB(2) prescribes adjustments to the net profit shown in the Profit & Loss Account for computing book profit. The clause specifies that the net profit should be reduced by the amount of loss brought forward or unabsorbed depreciation, whichever is less, as per books of account.
The Tribunal examined the assessee's computation of book profit, which involved adjusting the net profit by the amount of unabsorbed depreciation, resulting in a book profit of 'Nil'. The Assessing Officer, however, computed the book profits differently, leading to a book profit of Rs. 20,24,35,238/-.
The Tribunal found that the methodology adopted by the Assessing Officer was flawed as it did not align with the principles of determining losses and depreciation in each financial year. The Tribunal emphasized the need to follow the principles enshrined in section 115JB and section 205(1)(b) of the Companies Act, 1956, which involves reducing the lower of the loss or depreciation to arrive at the surplus.
Consequently, the Tribunal set aside the order of the Commissioner of Income-tax (Appeals) and remitted the matter back to the file of the Assessing Officer to revisit the working of book profit for the purposes of section 115JB, specifically relating to clause (iii) of Explanation 1 to section 115JB(2) of the Act. The Assessing Officer was directed to carry out this exercise in accordance with the Tribunal's discussion and after allowing the assessee a reasonable opportunity of being heard.
Conclusion:
The appeal of the assessee was partly allowed, with the decision pronounced in the open court on 31st January, 2012.
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2012 (1) TMI 227
Issues involved: Appeal by Revenue against order related to computation of book profits u/s 115JB and deduction u/s 80HHC for assessment year 2002-03.
The appeal was filed by the Revenue against the order of the Commissioner (Appeals)-IX, Mumbai, regarding the computation of book profits u/s 115JB and deduction u/s 80HHC for the assessment year 2002-03. The Tribunal initially dismissed the ground raised by the assessee but later recalled it based on a Supreme Court judgment. The appeal before the Tribunal was limited to adjudicating a specific ground, and both parties agreed that the issue was covered in favor of the assessee by a judgment of the Larger Bench of the Supreme Court. The Tribunal upheld that the deduction claimed u/s 80HHC had to be worked out based on adjusted book profit u/s 115JA. Consequently, the ground raised by the Revenue was dismissed, and the Revenue's appeal was ultimately dismissed.
In conclusion, the Tribunal's decision was based on the interpretation of relevant sections of the Income Tax Act and the precedent set by the Supreme Court. The judgment highlighted the importance of correctly applying the provisions of the law in determining book profits and allowable deductions, ensuring consistency and adherence to legal principles in tax assessments.
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2012 (1) TMI 226
Issues involved: Appeal against order of CIT-II, Jodhpur u/s 263 of IT Act, 1961 for asst. yr. 2008-09 (sic'2006-07).
Details of the Judgment:
Issue 1: CIT's order under s. 263 of IT Act
The CIT observed omissions and lack of inquiry in allowing deduction u/s 10B. Show-cause notice issued to assessee. CIT found AO's order erroneous and prejudicial to Revenue's interest. CIT set aside AO's order directing fresh examination.
Issue 2: Assessee's arguments
Assessee's counsel argued that AO conducted detailed inquiry before allowing deduction u/s 10B. Previous year's order by CIT(A) upheld by Tribunal. Assessee's claim for deduction under s. 10B for previous years was allowed.
Issue 3: Department's stance
CIT-Departmental Representative supported CIT's order, stating AO's lack of inquiry and non-compliance with Jt. CIT's directions. Department did not accept Tribunal's order for previous year.
Judgment
Tribunal found CIT's order liable to be quashed. AO conducted detailed inquiry despite lack of elaboration in order. Assessee's submissions, Jt. CIT's directions, and CIT(A)'s previous order considered by AO. Tribunal upheld AO's order, setting aside CIT's order. Previous year's Tribunal order supporting AO's decision considered. Assessee's appeal allowed, restoring AO's original order.
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2012 (1) TMI 225
Revision u/s 263 - Held that:- CIT noticed that during the course of proceedings u/s 263 of the Act the amount shown is more as compared to the amount shown by the assessee in its books of accounts. The difference is on account of discount which according to the assessee is not included in the receipts mentioned in the TDS certificate. According to the ld. CIT, the AO has not examined this issue and the AO has not even discussed the issue in the assessment order. We have noticed from the assessment order that the AO issued a detailed query letter on 2-11-2006 and in response to that query letter, the assessee filed the written submission before the AO. The paper book filed before us by the assessee does not contain either query letter or reply submitted before the AO. The details have been filed before the AO during the course of set aside assessment proceedings. As a result of order u/s 263 of the Act, it is clear from the record that the ld. AR has not been able to satisfy us that AO made enquiry during the course of assessment proceedings. If the AO fails to make any enquiry then the order is definitely erroneous and prejudicial to the interest of the revenue.
Since the AO has not applied his mind, therefore, we do not feel to record the findings that reconciliation filed by the assessee is correct. Hence, we hold that the ld. CIT was justified in passing the order u/s 263 of the Act
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2012 (1) TMI 224
Disallowance of interest under section 36(1)(i) - Held that:- Under the provisions of section 36(1)(iii), any interest on borrowings made for acquisition of assets for extension of existing business is required to be capitalized till the asset is first put to use.
In this case, assessee had made total advance payments of ₹ 1,53,25,5000/- for acquisition of two new premises out of payment made during the year was ₹ 10,06,000/- and balance payment had been made in the earlier years. Authorities below have proceeded with the presumption that the assets had been acquired from borrowed funds. However, no basis for such finding has been given. The assessee has pointed out that most of the payments had been made in earlier years in which year there was no disallowance of interest. Therefore, in the earlier years, the payments were made from own funds. During the year, payment was only ₹ 10.06 lacs. Assessee had own funds of ₹ 3.95 crores and interest free borrowing of ₹ 7.92 crores. In addition, current year profit was itself ₹ 96.00 lacs. Considering these facts in our view source of current payment is easily explained from own funds. Therefore, when the payment for acquisition of assets have been made from own funds, there cannot be any case of disallowance of interest. We, therefore, set aside the order of CIT(A) and delete the addition made.
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2012 (1) TMI 223
Deduction u/s 80P(2)(a)(i) - interest received by the assessee from the deposit made in Kerala Government Treasury Small Savings Fixed Deposit Scheme - Held that:- Since Government of India has withdrawn India Vikas Patra, as a small savings instrument, funds invested at the discretion of the bank is one of the activities of the banking as per the Banking Regulation Act. Since the assessee co-operative society is in the business of banking the investment in the state promoted treasury small savings fixed deposit certificate scheme is a banking activity, therefore, the interest accrued on such investment has to be treated as business income in the course of its banking activity. Once it is a business income, the assessee is entitled for deduction u/s 80P(2)((a)(i). therefore, this Tribunal is of the opinion that the judgment of the Larger Bench of the apex Court in Karnataka State Cooperative Apex Bank (2001 (8) TMI 9 - SUPREME Court) is applicable to the facts of this case. Appeal of the revenue stands dismissed.
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2012 (1) TMI 222
Trading addition deleted as relying on previous year of assessee
Deemed dividend addition - Held that:- As already held that transactions are of business in nature, therefore, provisions of section 2(22)(e) cannot be applied. In view of these facts and circumstances and in view of the decision of Tribunal in case of sister concern for the same year in which we have held that transactions are business in nature, we uphold the order of ld. CIT (A) indeletingthe addition
Addition u/s 40A(3) - Held that:- There is no infirmity in the finding of ld. CIT (A) as the payment to the transporter on each occasion does not exceed ₹ 20,000/-. Therefore, in our considered view, addition under section 40A(3) could not have been made. Accordingly, we confirm the findings of ld. CIT (A)
Disallowance of telephone expenses - Held that:- We noted that expenditure incurred under this head is exclusively for the purpose of business. The AO has not pointed out any particular expenses which are not for purposes of business. Looking to the turnover of the assessee and other details kept by assessee, we hold that ld. CIT (A) was justified in deleting the addition.
Depreciation @80% on windmill allowed
Addition on account of interest expenses - Held that:- The ground taken by the department is wrong as ld. CIT (A) has remitted the matter back to the file of AO to work out disallowance in view of provisions of section 14A of the Act. The assessee has also challenged the finding of ld. CIT (A) by ground No. 11 and 12 in which it has been held that provisions of section14A are not applicable on the facts of the present case.
Vehicle running & maintenance expense allowed
Disallowance of packaging material expenses
Disallowance of legal and professional expenses - Held that:- On perusal of ledger account of legal and professional expenses, it is noticed that the expenditure is incurred on payment of monthly retainership charges to various consultants/professional charges paid for obtaining consultancy/court charges for appearing and arguing the matters at various levels. All the confirmations have been filed. There is no dispute about rendering of services. Therefore, we hold that there is no question of disallowing of ₹ 50,000/- on adhoc basis. Accordingly, we delete the addition. The ground of the assessee is allowed.
Addition on account of unverified sundry creditors - Held that:- Assessee deserves to succeed in this ground. There is no dispute about liability of the assessee which is coming from last year. This liability has not been ceased to exist
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2012 (1) TMI 221
Issues involved: The judgment deals with the issue of levy of interest under section 234D of the Income Tax Act, specifically in relation to a petition against the order of the Tribunal dated 11.3.2011 in Revenue's appeal in I.T.A.No. 1676/Mds/2010 for assessment year 2002-03.
Summary:
Issue 1 - Levy of interest u/s 234D:
The petitioner raised concerns regarding the levy of interest u/s 234D, arguing that the Tribunal did not consider the absence of a refund u/s 143(1) and the jurisdictional High Court's decision in the case of CIT vs Ramco Industries. The petitioner contended that a mistake apparent from the record, rectifiable u/s 254(2), had occurred in the Tribunal's order. The Tribunal, after considering the submissions, noted that it had the power u/s 254(2) to rectify mistakes within four years from the order date. It was observed that the Assessing Officer had charged interest u/s 234D for refunds granted earlier, but the issue was not clearly presented before the Tribunal. The Tribunal decided to recall the order for further consideration in light of the jurisdictional High Court's decision.
Issue 2 - Consideration of High Court's directive:
The Tribunal acknowledged the directive from the Hon'ble Madras High Court to seek clarification on the non-consideration of the provisions of section 234D and the High Court's decision in the case of Ramco Industries. Despite the Revenue's argument against the need for a rectification petition, the Tribunal proceeded to address the issue based on the directive and relevant legal provisions.
Conclusion:
The Tribunal allowed the miscellaneous petition filed by the assessee, emphasizing the need to reconsider the issue of interest levy u/s 234D in light of the jurisdictional High Court's decision. The order was recalled for further examination, and the appeal was scheduled for a future hearing to address the unresolved issues effectively.
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2012 (1) TMI 220
Unexplained cash credit u/s 68 - sum credited in books of accounts - Held that:- As per section 68 of the Act where any sum is found credited in the books of an assessee and the assessee offers no explanation, the sum so credited may be charged to income tax as the income of the assessee. In this case, no sum has been credited in the books, as the payment of purchase of shares was made and the sale proceed of shares has been received through bank. Thus, it is proved that the sale proceed is against the purchase of shares. Therefore, the amount cannot be treated as cash credit u/s. 68. See ACIT Versus Shri Raj Kumar Soni [2011 (12) TMI 597 - ITAT JODHPUR]
Undisclosed commission payment - Held that:- It is seen that is it very common thing, that a broker has provided the services for purchase and sale of shares and has deducted his brokerage from the sale proceed itself and paid to the appellant the balance amount. Due to this reason, the appellant has not shown payment of brokerage payment. Therefore, the brokerage addition of ₹ 2,250/- made by the AO is deleted.
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2012 (1) TMI 219
The Appellate Tribunal ITAT Jaipur allowed the appeal by the assessee against the order of ld. CIT (A) for assessment year 2006-07. The Tribunal confirmed the addition of Rs. 68,422 by disallowing 25% of unverifiable purchases. The Tribunal considered past GP rates and current circumstances, and sustained a trading addition of Rs. 10,000 to meet the ends of justice. The appeal of the assessee was allowed in part. The order was pronounced on 09.01.2012.
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2012 (1) TMI 218
Issues involved: Appeal against trading addition of unverifiable purchases u/s 132(4) for assessment year 2007-08.
Grounds of appeal:
The assessee appealed against the trading addition of Rs. 8,99,985 by disallowing 25% out of alleged unverifiable purchases of Rs. 35,99,940 from five parties suspected of issuing bogus bills.
AO's findings:
The Assessing Officer (AO) observed that the parties from whom purchases were made issued bogus bills, as confirmed by a statement recorded u/s 132(4) of the Act. The AO also noted that postal authorities confirmed non-existence of the parties at the given addresses. Citing legal precedents, the AO rejected the books of accounts and added 25% of non-verifiable purchases.
CIT(A)'s decision:
The Commissioner of Income Tax (Appeals) upheld the rejection of books of accounts and the trading addition. CIT(A) referred to ITAT Jaipur Bench's decision in similar cases and compared the gross profit rate of the assessee with other traders, finding it significantly lower. Considering past cases and commission payments related to bogus bills, CIT(A) confirmed the addition of Rs. 8,99,985.
Tribunal's ruling:
The Tribunal acknowledged the need to reject books if purchases are unverifiable. Upon reviewing the accounts of the involved parties, the Tribunal noted the absence of closing balances and compared it to a previous case where such balances existed. Considering the gross profit rates and sales figures, the Tribunal found it fair to limit the trading addition to Rs. 40,000. Consequently, the appeal was partly allowed.
The judgment was pronounced on 25-01-2012 by the Appellate Tribunal ITAT Jaipur.
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2012 (1) TMI 217
Deduction u/s 10BA allowed
Addition on account of delay in deposit of employee’s contribution to PF - allowable deduction within the meaning of Section 36(1) read with Section 2(24)(x) - Held that:- No disallowance can be made in respect of Employers P.F. Contribution and Employees P.F. Contribution in case such contributions are paid before due date of filing. It is not in dispute before us that the contributions have not been paid before due date of filing of the return. We therefore, hold that the ld. CIT(A) was justified in deleting the Employers P.F. Contribution and Employees P.F. Contribution
Addition on account of disallowance of bad debt u/s 36(1)(vii) - Held that:- The issue before us stands covered by the decision of Honb'le Apex Court in the of TRF Ltd. vs CIT [2010 (2) TMI 211 - SUPREME COURT]. The Section itself mentions that the assessee can claim deduction on account of writing off any bad debt or part thereof. Hence, it was not necessary for the assessee to have written off the entire debt. The business decision is to be taken by the assessee and the onus was on the Revenue to have established that writing off of part of the debt was not true. The onus was on the Revenue to have collected the material to suggest that writing off of bad debt was for the purpose of evading the tax. We therefore, feel that the ld CIT(A) was justified in deleting the addition.
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2012 (1) TMI 216
Capital account balance received by the appellant on account of his retirement from the firm M/s. Krishna Villa Apartments - taxability - Held that:- The Finance Minister in the budget speech for the year 2003 stated that no confession shall be obtained during search and seizure operation. The instructions were followed by CBDT by issue of a circular on the lines desired by the Finance Minister. There can be an estoppel on the issue of the facts but there cannot be estoppel on the principle of law. It is not the case of the revenue that the assessee was not disclosing the amount received as a result of retirement from the firm. The assessee obtained the legal advice and was of the opinion that such revaluation is capital receipt which is not liable to tax. Hence, we feel that income cannot be added simply on the basis of surrender. The statement recorded u/s 132(4) can be rebutted by the assessee and the case of the assessee is that the amount is not liable to tax.
After considering various case laws relied upon by both the parties, we feel that the issue is to be decided in favour of the assessee because if two constructions are to possible then one has to adopt the construction which is favourable to the assessee. We had also noticed the distinguishing features in this case and it is not a simple case in which other partners joined the firm. This is a case where another firm has been taken over by the firm in which the assessee was a partner. Both the firms were having intangible rights arising from development agreement and right of constructing a housing / commercial complex and none of the firm valued such rights in the form of monetary consideration. Such rights remained with the firm even after retirement of the assessee. We therefore, hold that the ld. CIT(A) was not justified in confirming the addition of ₹ 5,24,47,943/-.
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2012 (1) TMI 215
Issues involved: Validity of reopening of assessment u/s 147 based on change of opinion and excess deduction under section 80HHC.
Validity of Reopening of Assessment u/s 147:
The appeal was filed against the order of the ld. CIT(A) confirming the reopening of the assessment u/s 147 and making additions. The assessee contended that the reopening was beyond the four-year limit from the end of the assessment year and was based on a change of opinion. The Assessing Officer had recorded reasons for reopening, citing a calculation mistake in the original assessment order leading to excess deduction under section 80HHC. However, the reasons were found to be vague and lacking clarity on the calculation error and the basis for allowing the excess deduction. The Tribunal referred to legal precedents emphasizing that reasons for reopening must be clear and objective. As the reasons provided were deemed insufficient, the Tribunal canceled the assessment and allowed the appeal of the assessee.
Excess Deduction under Section 80HHC:
The original assessment under section 143(3) allowed a deduction of &8377; 71,64,030 under section 80HHC based on export sales. However, the Assessing Officer treated quota sales as local sales, reducing the deduction to &8377; 68,58,976. The ld. CIT(A) directed to allow the full deduction of &8377; 71,64,030 without addressing the issue of quota sales. The Tribunal noted that the ld. CIT(A) did not discuss the issue raised by the AO regarding quota sales in the assessment order. The Tribunal highlighted that the Department's acceptance or appeal against the CIT(A)'s order was not clear. Citing legal precedents, the Tribunal emphasized the need for clear and unambiguous reasons for any adjustments in deductions. As the reasons for reducing the deduction were not adequately supported, the Tribunal found in favor of the assessee, rendering the other grounds of appeal academic and allowing the appeal.
Conclusion:
The Tribunal ruled in favor of the assessee, canceling the impugned assessment due to insufficient and vague reasons for reopening under section 147 and lack of clarity in reducing the deduction under section 80HHC. The appeal was allowed, and the assessment was deemed infructuous.
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2012 (1) TMI 214
Issues involved: Appeal dismissal due to lack of COD approval, relevance of COD approval post Supreme Court decision.
Summary:
1. The present Miscellaneous Application was filed by the revenue, seeking revival of its appeal which was dismissed by ITAT for want of COD approval. The revenue argued that the mechanism of COD, necessary for approval, was dissolved by the Hon'ble Supreme Court in a 2011 order, making the approval irrelevant. The ITAT agreed and decided to restore the appeal for assessment year 2007-08 for hearing on a specified date.
2. The ITAT considered the revenue's plea in light of the Supreme Court's decision dissolving the COD mechanism, rendering the approval unattainable. Consequently, the ITAT recalled its earlier order and directed the Registry to reinstate the appeal and cross-objection to their original numbers, scheduling them for a hearing on a specified date.
3. The ITAT allowed the revenue's miscellaneous application, acknowledging the impact of the Supreme Court's decision on the relevance of COD approval, and setting the stage for the appeal to be decided on merit.
Decision: The miscellaneous application of the revenue was allowed, and the appeal was restored for further proceedings.
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2012 (1) TMI 213
Issues involved:
1. Return of demand draft and undated cheques
2. Seizure of &8377; 42 lacs without show cause notice
3. Expedited proceedings post show cause notice issuance
Issue 1: Return of demand draft and undated cheques
The respondent-Revenue agreed to return two undated cheques of &8377; 25 lacs each and a demand draft of &8377; 58 lacs to the petitioner within fifteen days.
Issue 2: Seizure of &8377; 42 lacs without show cause notice
The respondent had seized &8377; 42 lacs during a search. The petitioner cited a Gujarat High Court decision stating that under Section 11A of the Central Excise Act, a show cause notice should have been issued before seizure. The respondent confirmed the issuance of a show cause notice and pending proceedings. The court declined to order the refund of &8377; 42 lacs at this stage.
Issue 3: Expedited proceedings post show cause notice issuance
The respondent assured that proceedings following the show cause notice are being conducted promptly, with the petitioner expressing no grievances in this regard.
In conclusion, the writ petition was disposed of in accordance with the agreed terms of returning the demand draft and undated cheques, while the issue of the seized &8377; 42 lacs was deferred pending ongoing proceedings post show cause notice issuance.
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2012 (1) TMI 212
Levying penalty u/s 271(1)(c) - treating income from sale and purchase of shares as capital gain - Held that:- The penalty has been levied by the reason of treatment of capital gain declared by the assessee as business income, which clearly shows that as far as the quantum on account of capital gain or expenditure, no mistake was found by the Assessing Officer, but there was a difference of view and opinion as the assessee declared said income as short term capital gain, which was treated by the Assessing Officer as business income. Accordingly, the claim of the assessee treating the income from sale and purchase of shares as capital gain cannot be treated as impossible view or absolutely illegal and incorrect treatment of income.
Even for the subsequent year i.e. AY 2006-07, the income admitted by the assessee as capital gain was accepted by the Assessing Officer. Therefore, the issue of treatment of the income is a debatable issue and the view taken by the assessee in treating the same as capital gain, though was not acceptable but could not ipso facto lead to the conclusion that the assessee concealed the particulars of income or furnished inaccurate particulars of income. Accordingly, the penalty is not justified in the facts of the present case. Appeal filed by the assessee is allowed.
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2012 (1) TMI 211
Eligibility of deduction of expenses - claim made only during the course of assessment proceedings and it was neither claimed in the return of income and nor by way of filing a revised return of income - Held that:- The claim of the assessee has been wrongly refused to be entertained at the threshold itself, by the lower authorities. Since none of the authorities below has examined the claim of the assessee on merits, we find it appropriate to restore it back to the file of the Assessing Officer who shall examine the claim of the assessee on merits, after allowing the assessee a reasonable opportunity of being heard in support of its claim. Needless to mention, it is a settled position of law that only such expenditure can be permitted deduction which is incurred or the liability thereof has been crystalised in the relevant assessment year. The Assessing Officer shall, therefore, carry out the aforesaid exercise and pass a fresh order on this aspect in accordance with law.
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2012 (1) TMI 210
Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deletion of disallowance of business loss due to foreign exchange fluctuation.
3. Deletion of disallowance of establishment and other expenses.
Summary:
Condonation of Delay:
The appeal filed by the revenue was time-barred by 43 days. An affidavit was filed by the Deputy Commissioner of Income Tax explaining the delay, citing reasons such as the non-communication of the application for filing the second appeal and the processing of papers. The Tribunal, after considering the affidavit and hearing both parties, condoned the delay, stating that the revenue was prevented by reasonable cause from filing the appeal within the stipulated period. This decision was made in view of the Hon'ble Supreme Court's decision in the case of CIT Vs. West Bengal Infrastructural & Financial Corporation Ltd reported in (2011) 196 Taxman 321(SC).
Deletion of Disallowance of Business Loss:
The Assessing Officer disallowed the loss claimed on account of foreign exchange fluctuation of Rs. 5,77,593/- on the grounds that no business activity was carried out during the year. The learned Commissioner of Income-tax (Appeals) deleted the disallowance, relying on a previous decision in the case of M/s. V.N Enterprises Ltd, where a similar issue was decided in favor of the assessee. The Tribunal upheld this deletion, noting that the foreign exchange balance in the EEFC account represented the balance of export proceeds, which were trading receipts. The Tribunal referenced the Supreme Court's decision in Sutlej Cotton Mills Ltd. Vs. CIT (1979) 116 ITR 1 (SC), which held that profit or loss from foreign currency held on revenue account is a trading profit or loss.
Deletion of Disallowance of Establishment and Other Expenses:
The Assessing Officer disallowed Rs. 5,39,089/- on account of establishment and other expenses, arguing that no business activity was conducted during the year. The learned Commissioner of Income-tax (Appeals) deleted this disallowance, stating that the assessee continued to carry on business and incurred necessary expenses to maintain its establishment. The Tribunal upheld this decision, referencing its previous order in the case of the assessee's sister concern, where it was held that expenses incurred for maintaining the establishment were allowable deductions u/s 37(1) of the Act.
Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the decisions of the learned Commissioner of Income-tax (Appeals) on both grounds of disallowance. The order was pronounced in the open court on 23-01-2012.
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