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2010 (12) TMI 1268
Issues involved: Reopening of assessment u/s 148 of the Income-tax Act and addition of Rs. 4,01,000/- u/s 68.
Reopening of assessment u/s 148: The assessee challenged the reopening of assessment by the Assessing Officer, arguing that the reasons recorded did not indicate any income escaping assessment due to accommodation entries. The counsel cited a Delhi High Court judgment in a similar case where the court quashed the reopening based on insufficient reasons provided by the AO. The court noted that the AO did not mention any specific information suggesting the assessee made a bogus claim or received accommodation entries. Comparing the facts of the present case with the cited judgment, the tribunal held that the AO was not justified in reopening the assessment and quashed the reassessment order.
Addition of Rs. 4,01,000/- u/s 68: The tribunal did not delve into the issue of the addition of Rs. 4,01,000/- as it was not necessary after deciding in favor of the assessee regarding the reopening of assessment. Consequently, the appeal of the assessee was allowed, and the reassessment order was quashed.
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2010 (12) TMI 1267
Issues Involved:1. Extent of power vested in the Government in reviewing its order granting or refusing sanction to prosecute a public servant u/s 19 of the Prevention of Corruption Act, 1988. Summary:Issue 1: Extent of Power Vested in the Government in Reviewing Its Order Granting or Refusing Sanction to Prosecute a Public Servant u/s 19 of the Prevention of Corruption Act, 1988The question raised in this appeal, by special leave, is as regards the extent of power vested in the Government in reviewing its order granting or refusing sanction to prosecute the public servant in terms of Section 19 of the Prevention of Corruption Act, 1988 (for short, `the 1988 Act'). Nishant Sareen, the respondent, was caught red-handed accepting a bribe of Rs. 5,000/- and was arrested. Initially, the Principal Secretary (Health) refused to grant sanction to prosecute the respondent, citing the complaint as frivolous and a result of personal enmity. However, upon reconsideration, the competent authority granted sanction to prosecute the respondent, stating that the facts did not support the contention of false implication. Section 19 of the 1988 Act ensures that a public servant does not suffer harassment on false, frivolous, concocted, or unsubstantiated allegations. The Government or the sanctioning authority must apply its mind to the entire material and evidence placed before it. The exercise of power under Section 19 is not an empty formality. In previous cases, such as Gopikant Choudhary v. State of Bihar and Ors. and Romesh Lal Jain v. Naginder Singh Rana & Ors., the Supreme Court held that an order granting or refusing sanction must be preceded by the application of mind. If the order suffers from non-application of mind, it may be called into question before the competent court of law. In State of Punjab and Anr. v. Mohammed Iqbal Bhatti, the Supreme Court observed that while the State exercises statutory jurisdiction in the matter of grant or refusal to grant sanction, it does not mean that power once exercised cannot be exercised again. However, the power of review is not unbridled or unrestricted. Once the statutory power under Section 19 of the 1988 Act has been exercised, it is not permissible for the sanctioning authority to review or reconsider the matter on the same materials again. In the present case, it is not the appellant's case that fresh materials were collected by the investigating agency and placed before the sanctioning authority for reconsideration. The subsequent order granting sanction was based on the same materials, which is impermissible. The investigating agency should have challenged the initial order refusing to grant sanction if they had a legitimate grievance. There is no merit in this appeal, and it is dismissed.
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2010 (12) TMI 1266
The Bombay High Court admitted a petition for winding up a company on the ground of inability to pay debts. The company did not respond, and the petition was made absolute with costs of Rs. 10,000.
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2010 (12) TMI 1265
The Supreme Court dismissed the special leave petitions after hearing the counsel for the Department. Delay was condoned.
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2010 (12) TMI 1264
Issues Involved:
1. Validity of the assessment order due to non-issuance of notice u/s 143(2) within the prescribed time.
2. Whether the penalty u/s 158BFA(2) was justified.
3. Consideration of additional grounds of appeal regarding the validity of the assessment order.
Summary:
Issue 1: Validity of the assessment order due to non-issuance of notice u/s 143(2) within the prescribed time.
The Tribunal noted that the assessee filed the block return on 23-02-1998, and the notice u/s 143(2) was issued on 09-11-1999, beyond the prescribed 12-month period. The Hon'ble Supreme Court in the case of Hotel Blue Moon held that issuing notice u/s 143(2) within the prescribed time is mandatory, and non-issuance renders the assessment illegal. Consequently, the Tribunal concluded that the block assessment order was bad in law.
Issue 2: Whether the penalty u/s 158BFA(2) was justified.
The assessee argued that the income in question was already reflected in the regular assessment and books of account, thus not constituting concealment. The Tribunal found that the block assessment itself was without jurisdiction due to the invalid notice u/s 143(2). Therefore, the penalty u/s 158BFA(2) could not be sustained, as the underlying assessment was void.
Issue 3: Consideration of additional grounds of appeal regarding the validity of the assessment order.
The Tribunal admitted the additional ground of appeal, emphasizing that the validity of the assessment is a pure question of law and does not require further investigation of facts. The Tribunal referenced the decisions in Tidewater Marine International Inc. and Dhiraj Suri, which support raising the question of validity of assessment in penalty appeals.
Conclusion:
The Tribunal quashed the penalty imposed u/s 158BFA(2) due to the invalidity of the block assessment order, which was rendered void by the non-issuance of notice u/s 143(2) within the prescribed time. The appeal of the assessee was allowed.
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2010 (12) TMI 1263
Disallowance of expenditure incurred towards Employees Stock Option Scheme - The assessee claimed expenditure on allotment of equity shares for the AY 2003- 04. and allotment of shares under the employment scheme for the AY 2004-05, claimed under the head ‘Staff Welfare Expenses’ and u/s 37(1). AO disallowed the expenditure. On account of the same lapse penalty was levied in the AY 2004-05 and the same was confirmed by the CIT(A).
Against the quantum addition confirmed by the CIT(A), the assessee is in appeal before us. The penalty levied by the AO was deleted by the CIT(A). Against this the revenue is in appeal before us.
HELD THAT:- The decision of Delhi Bench of ITAT in the case of Ranbaxy Laboratories Ltd. [2009 (6) TMI 126 - ITAT DELHI-I] cited by the DR is directly applicable in the present case and the same squarely covers the issue under consideration against the assessee and in favour of the Revenue.
In the case of Ranbaxy Laboratories Ltd. (supra) shares were allotted by the assessee company to its employees under ESOP at price less than the market price and the resultant difference was claimed as expenditure relying, inter alia, on SEBI guidelines. The Tribunal, however, confirmed the disallowance made by the authorities below on account of the said expenditure after examining all the relevant aspects and after giving elaborate reasons as can be seen from the relevant portion of its order which is extracted from the held portion:
''The receipt of share premium is not taxable and hence any short receipt of such premium will only be a notional loss and not actual loss for which no liability is incurred. SEBI guidelines are relevant for the purpose of accounting but are not conclusive for the purpose of allowing the same as expenditure. Therefore, such notional losses are not allowable under the Act. Therefore, such pay any liability under the claim. Therefore, such notional loss cannot be held to be allowable under the scheme of the Act. It is now settled law that entry or absence thereof in books of account is not conclusive either for treating the amount as income or allowability or otherwise of the expenditure. Thus, only on the basis of entry in the books of account the claim of expenditure is not allowable. ''
Respectfully following the decision of the coordinate Bench of this Tribunal in the case of Ranbaxy Laboratories Ltd. (supra) we uphold the impugned order of the CIT(A) confirming the disallowance made by the AO on account of ESOP expenses claimed by the assessee and dismiss the ground taken by the assessee.
In the result, the assessees appeals in ITA Nos.1099/H/2006 & 1114/H/2008 are dismissed.
levy of penalty u/s 271(1)(c) - HELD THAT:- In our opinion, the penalty proceedings stood on different footings. The disallowance of claim of expenditure by the assessee in respect of ESOPS cannot be construed as furnishing of inaccurate particulars of income or concealing of income. The claim of the assessee is based on judicial precedents in the case of SSI Limited cited [2004 (12) TMI 680 - ITAT CHENNAI] wherein it was held that;
'' ESOP was a benefit conferred on the employee and a benefit, which could not be taken back by the company. So far as the company is concerned, once the option is given and exercised by the employee, the liability in this behalf is ascertained. The fact is recognized even by SEBI and the entire ESOP scheme are governed by the Guidelines issue by the SEBI. It is not the case of contingent liability depending upon various factors on which the assessee had no control. ''
In view of this, there is a basis for claiming of deduction by the assessee and it cannot be said that the assessee furnished inaccurate particulars of income or concealed the income. As such, levy of penalty is not justified. Accordingly, we do not find any infirmity in the order of the CIT(A) in deletion of penalty and the same is confirmed.
In the result, all the appeals filed by the assessee as well as revenue are dismissed.
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2010 (12) TMI 1262
Issues Involved:
1. Disallowance of VSAT, Leaseline, and Transaction charges u/s 40(a)(ia).
2. Treatment of Rs. 47,23,828/- as Capital Gain vs. Business Income.
3. Direction to recompute disallowance u/s 14A in accordance with Rule 8D.
Summary:
1. Disallowance of VSAT, Leaseline, and Transaction charges u/s 40(a)(ia):
The revenue contended that the learned CIT(A) erred in deleting the disallowance of Rs. 2,21,755/- u/s 40(a)(ia) for VSAT, Leaseline, and Transaction charges, arguing these were for professional and technical services requiring TDS deduction. The CIT(A) relied on the ITAT Mumbai decision in Kotak Securities Pvt. Ltd., which held that such fees are not for technical services, thus no TDS was required. The Tribunal upheld the CIT(A)'s decision, referencing the ITAT ruling that transaction fees paid to the stock exchange do not constitute fees for technical services, and thus, the provisions of section 40(a)(ia) were not applicable.
2. Treatment of Rs. 47,23,828/- as Capital Gain vs. Business Income:
The AO treated the short-term capital gains of Rs. 47,23,828/- as business income, citing the assessee's frequent transactions and use of borrowed funds. The CIT(A) reversed this, noting the assessee maintained separate demat accounts for investments and trading, and the AO accepted long-term capital gains of Rs. 2,37,29,464/-. The Tribunal supported the CIT(A), emphasizing the assessee's clear demarcation between investment and trading activities, and the lack of evidence that borrowed funds were used for investments. The Tribunal also referenced CBDT Circular No. 4/2007, which allows for separate portfolios for investment and trading.
3. Direction to recompute disallowance u/s 14A in accordance with Rule 8D:
The AO disallowed Rs. 4,69,413/- as expenditure related to earning dividend income, applying Rule 8D. The CIT(A) upheld this, following the ITAT Special Bench decision in Daga Capital Management Pvt. Ltd. The Tribunal noted the Bombay High Court's ruling in Godrej and Boyce Mfg. Co. Ltd. v. DCIT, which stated Rule 8D is not retrospective and thus not applicable for AY 2005-06. The Tribunal restored the issue to the AO to reconsider the assessee's claim that no expenditure was incurred for earning dividend income.
Conclusion:
The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes. The Tribunal upheld the CIT(A)'s decisions on the disallowance of VSAT, Leaseline, and Transaction charges, and the treatment of capital gains. The issue of disallowance u/s 14A was remanded to the AO for reconsideration.
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2010 (12) TMI 1261
Issues Involved:
1. Deletion of addition on account of undervaluation of closing stock.
2. Restriction of disallowance on telephone and car expenses.
3. Deletion of addition on account of traveling, generator, and packing expenses.
4. Deletion of addition on account of advertisement expenses.
Summary:
1. Deletion of addition on account of undervaluation of closing stock:
The CIT(A) deleted the addition of Rs. 19,24,047 made by the AO on account of undervaluation of closing stock. The AO had determined the value of closing stock at Rs. 2 crores against Rs. 1,80,75,953 disclosed by the assessee, enhancing the net profit by Rs. 19,24,047. The CIT(A) observed that the assessee maintained proper bills and vouchers, and the books of account were audited without any defects pointed out by the auditors. The gross profit rate declared by the assessee was slightly better than the previous year. The AO did not find any defect in the books of accounts and made the addition without any factual basis. The Tribunal upheld the CIT(A)'s order, noting that the AO did not bring any material on record to justify the addition and the valuation of closing stock was done based on physical verification by the directors and employees.
2. Restriction of disallowance on telephone and car expenses:
The AO disallowed Rs. 1,46,347 at the rate of 25% out of telephone and car expenses, including depreciation, on the ground that the directors used them for personal purposes. The CIT(A) restricted the disallowance to 10%. The Tribunal upheld the CIT(A)'s decision, finding the AO's disallowance at 25% to be on the higher side and made without quoting any specific instance of non-business use.
3. Deletion of addition on account of traveling, generator, and packing expenses:
The AO disallowed Rs. 51,341, which is 15% of the total expenses of Rs. 3,42,276 claimed under traveling, generator, and packing expenses, due to improper vouchers. The CIT(A) deleted the addition, noting that the AO made the disallowance without any factual findings or cogent evidence. The Tribunal upheld the CIT(A)'s order, agreeing that the AO did not establish that any part of the claim was not genuine.
4. Deletion of addition on account of advertisement expenses:
The AO disallowed Rs. 1 lakh out of advertisement expenses, alleging that all advertisements were made by Raymonds Company or on its behalf by the assessee-company. The CIT(A) deleted the disallowance, stating that the AO did not gather any material evidence to prove the claim was not genuine. The Tribunal upheld the CIT(A)'s decision, noting that the AO made the disallowance without issuing a show cause notice or providing an opportunity of being heard to the assessee.
Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on all grounds. The order was pronounced in the open Court on 30.12.2010.
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2010 (12) TMI 1260
Refund claim - Notification No. 41/07-ST dated 06.10.2007 - Duty drawback - held that: - since the goods in question have been exported without availing drawback of service tax under the Customs, Central Excise Duties and Service Tax drawback Rules, 1995, therefore recovery of refund claim of service tax paid on specified services on the ground that goods have been exported under claim of drawback is not tenable.
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2010 (12) TMI 1259
Refund of the pre-deposit amount before CESTAT - rejection on the ground that the claim was belated, under Section 11B of the Central Excise Act, 1944 - contention of the petitioner herein is that being in the nature of pre-deposit, Section 11B of the Act could not be invoked and the return of deposit should be made in terms of Section 35F of the Act.
HELD THAT:- In terms of the circular dated 8-12-2004 and in the light of the decision of the Apex Court in U.O.I. VERSUS SUVIDHE LTD. [1996 (8) TMI 521 - SC ORDER] confirming the view of the Bombay High Court in SUVIDHE LTD. VERSUS UNION OF INDIA [1996 (2) TMI 136 - BOMBAY HIGH COURT], the pre-deposit to maintain the appeal is not to be equated to the payment of duty to invite the provisions of Section 11B of the Act. Learned counsel for the petitioner submits that the order now passed invoking Section 11B of the Act is unsustainable.
Going by the admitted fact that the pre-deposit was made in terms of Section 35F of the Act, the question of invoking Section 11B of the Act to reject the claim of the petitioner as time-barred, does not arise. As pointed out in the circular dated 2-1-2002, when the claim can be made even by a simple letter along with attested xerox copy of the order in appeal, the question of the Department further adjudicating the matter invoking Section 11A of the Act, hence, does not arise. The Circulars of the Board are binding on the respondents who have the responsibility of respecting the same. More so, in the context of the decision of the Apex Court, the question of re-agitating the issue now does not arise. In the circumstances, accepting the case of the petitioner, the writ petitions are allowed.
The respondents are directed to refund the amount within a period of eight weeks from the date of order along with interest at 6% per annum from the date of receipt of the order till the date of payment - Petition allowed.
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2010 (12) TMI 1257
Issues involved: Appeal against order of C.I.T.(A) for assessment year 2006-07; Addition of Rs. 3,70,240/- by AO; Confirmation of AO's action by Ld. CIT(A); Appeal by assessee before ITAT Kolkata.
Addition of Rs. 3,70,240/-:
The AO added Rs. 3,70,240/- to the assessee's income, stating it was outstanding balance from contract work for Simplex Concrete Piles (India) Ltd. Assessee explained it as retention money or security deposits not to be considered as turnover. Ld. CIT(A) upheld AO's decision, noting the balance sheet should reflect outstanding receivables under mercantile system of accounting. Assessee presented a letter from Simplex Concrete Piles (India) Ltd. confirming receipt of the amount, requesting deletion of the addition. ITAT Kolkata admitted additional evidence but found discrepancies in the letter, remitting the issue back to AO for re-decision after verification.
Conclusion:
ITAT Kolkata allowed the appeal of the Assessee for statistical purposes, ordering re-decision of the issue by the AO after considering additional evidences and providing a reasonable opportunity of being heard to the assessee.
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2010 (12) TMI 1256
Issues involved: Validity of initiation of reassessment proceedings u/s 147 and confirmation of addition of Rs. 5,00,000.
Validity of initiation of reassessment proceedings:
The appeal was against the CIT(A) order confirming proceedings u/s 147 initiated after four years from the end of the relevant assessment year. The AO received information alleging that the assessee had taken a loan of Rs. 5,00,000 from M/s Sober Associates Pvt.Ltd. The assessee argued that all material facts were disclosed during the original assessment u/s 143(3). The CIT(A) upheld the initiation of reassessment proceedings, stating that the confirmation allegedly filed during the original assessment was not available on record. The assessee challenged the validity of the initiation of reassessment proceedings, claiming that there was no failure to disclose material facts necessary for assessment. The AR contended that the reasons given by the AO were vague and did not mention any failure to disclose material facts. The AR cited relevant case laws to support the argument that the reassessment proceedings were invalid.
Confirmation of addition of Rs. 5,00,000:
The AO added the loan amount to the assessee's income based on information received from the Investigation Wing. The assessee claimed to have provided evidence during the original assessment to prove the genuineness of the loan, which was accepted by the AO. However, the AO initiated reassessment proceedings based on a report alleging the loan was not genuine. The CIT(A) found that the confirmation allegedly filed during the original assessment was not on record and upheld the addition. The AR argued that the reassessment proceedings were wrongly initiated as all material facts were disclosed during the original assessment. The DR supported the CIT(A)'s order, stating that the addition was rightly confirmed as the assessee did not furnish any evidence. The Tribunal directed the AO to provide the source of information regarding the loan and to allow the assessee to substantiate the genuineness of the entry. The appeal was partly allowed for statistical purposes.
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2010 (12) TMI 1255
Issues Involved:
1. Whether the write-off of the deposit was a trading loss or capital in nature.
2. Whether the interest earned from the deposits was income from other sources or income from business or profession.
Summary:
Issue 1: Write-off of Deposit as Trading Loss or Capital in Nature
The assessee company contended that the write-off of the deposit was a trading loss and not capital in nature. The CIT (A) had disallowed the deduction claimed for the irrecoverable inter-corporate deposits written off, stating that the deposit was not a trade debt but capital in nature. The Tribunal noted that the assessee was engaged in lending/depositing monies to other companies and had placed an inter-corporate deposit with ICNET Ltd. The Tribunal found that the CIT (A) did not provide sufficient evidence to single out ICNET and concluded that the deposit was not a normal business activity. The Tribunal held that once the assessee had written off debts as irrecoverable in its accounts, it was not required to prove that they had become bad. The Tribunal cited various judicial pronouncements, including T.R.F. Ltd. v. CIT (2010) 323 ITR 397 (SC), which stated that it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Therefore, the Tribunal allowed the deduction of Rs. 15 lakhs written off in its books of account u/s 36(1)(vii) r.w.s. 36(2)(i) of the Act.
Issue 2: Interest Earned from Deposits as Income from Other Sources or Business Income
The CIT (A) had observed that the interest earned from the deposits was income from other sources and not income from business or profession. The Tribunal referred to the ruling of the Hon'ble Bombay High Court in CIT v. Indo Swiss Jewels Ltd. and Anr. 284 ITR 389 (Bom), which held that interest earned on short-term deposits of money kept apart for business purposes should be treated as business income. The Tribunal also cited the Hon'ble High Court of Madras in CIT v. Tamilnadu Dairy Development Corporation Ltd. 216 ITR 535 (Mad), which stated that interest on short-term deposits made out of business funds should be treated as business income. The Tribunal concluded that the interest income from such inter-corporate deposits is to be treated as business income.
Conclusion:
(i) The assessee was entitled to claim the deduction of Rs. 15 lakhs written off in its books of account u/s 36(1)(vii) r.w.s. 36(2)(i) of the Act.
(ii) The interest earned from inter-corporate deposits was to be treated as income from business.
(iii) The additional ground raised by the assessee during the course of hearing was deemed superfluous and was not addressed.
Result:
The assessee's appeal was allowed.
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2010 (12) TMI 1254
Issues involved: Interim relief for retained goods by Customs authorities, examination of live consignments, recording of statements u/s 108 of Customs Act, 1962, handling of seized goods, prohibition on arrest, timeline for completion of procedures, listing for final disposal.
Interim Relief for Retained Goods: The Supreme Court, in response to a Writ Petition, directed an interim arrangement for goods retained by Customs authorities, noting that a case had already commenced against the petitioners. The examination of live consignments under seizure and recording of statements of all petitioners u/s 108 of the Customs Act, 1962, were ordered to be conducted by the Customs Department. The recording of statements and examination of goods were to be completed within specified timelines, with the petitioners allowed to engage their own labor for handling the consignment.
Prohibition on Arrest: The Court further directed that the petitioners shall not be arrested in connection with the case until further orders. This prohibition on arrest was extended as part of the interim relief granted to the petitioners pending final disposal of the Writ Petition.
Timeline and Procedures: Specific timelines were set for the completion of procedures, with the examination of live consignments and recording of statements to be conducted within designated time frames. The Department assured that the recording of statements and examination of goods would be video-graphed for transparency and accuracy.
Listing for Final Disposal: Both Writ Petitions were scheduled for final disposal after eight weeks, allowing the respondents to file their counter affidavits within six weeks and any rejoinder affidavit within two weeks thereafter. This timeline was established to ensure a timely resolution of the legal matters at hand.
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2010 (12) TMI 1253
Issues involved: Delay in filing appeal before Tribunal, Block assessment years 1990-91 to 2000-01, Unaccounted sales, Central Excise Department findings, Assessment under section 158BD, Appeal before CIT (A), Grounds raised by Assessee and Revenue, Calculation of undisclosed income, Telescoping of excess stock, Arithmetical errors in assessment.
Delay in filing appeal before Tribunal: Department filed a petition to condone the delay of 52 days in filing the appeal, which was found to have a sufficient and reasonable cause, leading to the admission of the appeal for disposal.
Unaccounted sales and Central Excise Department findings: During search operations, discrepancies in stock and sales outside books of accounts were found by Central Excise Department, leading to initiation of proceedings under section 158BD. Assessing officer brought out discrepancies and undisclosed income totaling &8377; 47,52,170, based on Central Excise Department's findings.
Appeal before CIT (A): CIT (A) considered the case and determined undisclosed income at &8377; 4,38,951 for the block period, allowing telescoping on excess stock. Assessee and Revenue both appealed against this decision.
Grounds raised by Assessee and Revenue: Assessee challenged the addition of &8377; 4,38,951, while Revenue argued for a higher undisclosed income. Arguments included discrepancies in stock statements, reliance on Central Excise Order, and acceptance of allegations under Kar Vivad scheme.
Calculation of undisclosed income: CIT (A) determined undisclosed income at &8377; 4,38,951, but after considering arguments and evidence, the undisclosed income was revised to &8377; 2,62,430, based on unaccounted sales and excess stock value.
Telescoping of excess stock: Value of excess stock outside books of accounts was considered in determining undisclosed income, leading to a revised figure of &8377; 2,62,430 instead of the initial &8377; 4,38,951.
Arithmetical errors in assessment: CIT (A) identified errors in stock statements and calculations, leading to a revised determination of undisclosed income. The appeal filed by the assessee was partly allowed, while the appeal of the revenue was dismissed.
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2010 (12) TMI 1252
‘2G Spectrum Scam’ - Invocation of Jurisdiction of this Court under Article 136 of the Constitution - Refusal of the Division Bench of the Delhi High Court to entertain the writ petition filed by them for a court monitored investigation by the Central Bureau of Investigation (CBI) or a Special Investigating Team into what has been termed as ‘2G Spectrum Scam’ for unearthing the role of respondent No.5-Shri A. Raja, the then Union Minister for the Department of Telecommunications (DoT), senior officers of that department, middlemen, businessmen and others - HELD THAT:- The Division Bench of the High Court committed a serious error by dismissing the writ petition at the threshold ignoring that the issues raised by the appellants, whose bonafides have not been doubted, are of great public importance.
We are, prima facie, satisfied that the allegations contained in the writ petition and the affidavits filed before this Court, which are supported not only by the documents produced by them, but also the report of the Central Vigilance Commission, which was forwarded to the Director, CBI on 12.10.2009 and the findings recorded by the CAG in the Performance Audit Report, need a thorough and impartial investigation. However, at this stage, we do not consider it necessary to appoint a Special Team to investigate what the appellants have described as 2G Spectrum Scam because the Government of India has, keeping in view the law laid down in Vineet Narain’s case and orders passed in other cases, agreed for a Court monitored investigation. The reports produced before the Court show that the CBI and the Enforcement Directorate have started investigation in the right direction.
Keeping in view the statements made by the learned Solicitor General and the learned senior counsel representing the CBI and with a view to ensure that in a serious matter like this, comprehensive and coordinated investigation is conducted by the CBI and the Enforcement Directorate without any hindrance, we deem it proper to issue the following directions:
(i) The CBI shall conduct thorough investigation into various issues highlighted in the report of the Central Vigilance Commission, which was forwarded to the Director, CBI vide letter dated 12.10.2009 and the report of the CAG, who have prima facie found serious irregularities in the grant of licences to 122 applicants, majority of whom are said to be ineligible, the blatant violation of the terms and conditions of licences and huge loss to the public exchequer running into several thousand crores. The CBI should also probe how licences were granted to large number of ineligible applicants and who was responsible for the same and why the TRAI and the DoT did not take action against those licensees who sold their stakes/equities for many thousand crores and also against those who failed to fulfill rollout obligations and comply with other conditions of licence.
(ii) The CBI shall conduct the investigation without being influenced by any functionary, agency or instrumentality of the State and irrespective of the position, rank or status of the person to be investigated/probed.
The progress reports based on the investigations conducted by the CBI and the Enforcement Directorate shall be produced before the Court in sealed envelopes on 10.2.2011. The case be listed for further consideration on 10.2.2011.
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2010 (12) TMI 1251
Issues Involved: Review of a decision based on unauthorized submission by Assistant Solicitor General, interpretation of a government policy for excise duty exemption, rectification of notification regarding industrial unit location, legal implications of promises made in a policy, authority of the court to rectify government notifications.
Review Application No. 81 of 2006: The High Court allowed the review petition as the Assistant Solicitor General was not authorized to make a submission regarding a correction in a previous order. The Court recalled the order dated 20th April 2006 and directed that the original writ petition be heard afresh.
Interpretation of Government Policy: An industrial unit sought excise duty exemption under a government policy announced on 7th January 2003. The policy required substantial expansion for existing units to qualify for benefits. However, the lack of a clear definition of "substantial expansion" in the policy led to ambiguity. The policy only became conclusive upon the publication of a notification on 10th June 2003, specifying the criteria for expansion to avail benefits.
Rectification of Notification: The petitioner's industrial unit was located in an estate not specifically mentioned in the notification. Despite efforts to rectify this omission, the Central Government did not incorporate the correct location details in the notification. The petitioner sought a mandamus to rectify this mistake, but the Court found it beyond its authority to expand the policy through judicial intervention.
Legal Implications of Promises in Policy: The Court analyzed whether the petitioner could act to its detriment based on the promises made in the policy. It concluded that without specific details on expansion requirements, the petitioner could not have reasonably acted to qualify for benefits under the policy dated 7th January 2003.
Authority to Rectify Government Notifications: While acknowledging the error in omitting certain location details, the Court held that it could not rectify the notification unilaterally. The Central Government's decision to amend the notification in 2005 was deemed a conscious policy choice, limiting the Court's intervention. The Court also dismissed claims of discrimination in the policy based on location.
Conclusion: The Court closed the matter but directed the Central Government to inform the petitioner of the outcome of their representation within six weeks. The Court refrained from delving into the petitioner's claims of substantial expansion, emphasizing the limited scope of its review in policy matters.
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2010 (12) TMI 1250
Issues Involved:
1. Verification of the disqualification petition.
2. Jurisdiction of the Additional Collector.
3. Alleged merger of the political party.
4. Disqualification under Section 3(1)(a) of the Maharashtra Local Authority Members Disqualification Act, 1986.
5. Disqualification under Section 3(1)(b) of the Act.
6. Compliance with procedural rules.
7. Alleged malafide actions by respondents.
8. Preliminary issue of maintainability of the disqualification petition.
Detailed Analysis:
1. Verification of the Disqualification Petition:
The appellants contended that the disqualification petition was not verified in accordance with Rule 6(4) and 6(3) of the Maharashtra Local Authority Members Disqualification Rules, 1987, and thus should have been dismissed in limine. The court held that the provisions are directory in nature and defects in verification are curable. Citing various precedents, including *H.D. Revanna vs. G. Puttaswamy Gowda* and *Murarka Radhey Shyam Ram Kumar vs. Roop Singh Rathore*, the court concluded that defects in verification do not affect the jurisdiction of the Collector to entertain and decide a disqualification petition.
2. Jurisdiction of the Additional Collector:
The appellants argued that the Additional Collector lacked jurisdiction to entertain and decide the disqualification petition. The court noted that this argument was not raised before the Additional Collector or the High Court. Furthermore, statutory delegation under Section 13(3) of the Maharashtra Land Revenue Code, 1966, allows Additional Collectors to exercise the powers of Collectors. The court found that the Additional Collector was competent to decide the petition, supported by a notification delegating such powers.
3. Alleged Merger of the Political Party:
The appellants claimed that their political front had merged with Congress (I), thus protecting them from disqualification under Section 5 of the Act. The court found no factual basis for this claim, noting the lack of specific pleadings or evidence supporting a merger. The court emphasized that Section 5 requires the original political party to merge, which was not the case here as the appellants had formed a separate group.
4. Disqualification under Section 3(1)(a):
The court examined whether the appellants had voluntarily given up their membership of NCP, which would result in disqualification under Section 3(1)(a). The court found that the appellants had indeed left NCP and formed a new group, thus incurring disqualification. The legal effect of these admitted facts was that the appellants had voluntarily given up their membership of NCP.
5. Disqualification under Section 3(1)(b):
The respondents argued that the appellants had also incurred disqualification under Section 3(1)(b) by disobeying a whip issued by NCP. The court found that the appellants had signed a requisition for a no-confidence motion against the President, contrary to the whip, and voted in favor of the motion. This constituted a violation of Section 3(1)(b), leading to disqualification.
6. Compliance with Procedural Rules:
The appellants contended that non-compliance with Rule 4(3) and Rule 5(1) of the Disqualification Rules, 1987, was fatal. The court rejected this argument, stating that these rules are procedural and their non-compliance does not affect the substantive rights or the political affiliation of the councillors.
7. Alleged Malafide Actions by Respondents:
The appellants alleged malafide actions by the respondents in co-opting two councillors and constituting new committees. The court found no substance in these allegations, noting that there was no stay against such actions and they would not impact the disqualification issue.
8. Preliminary Issue of Maintainability:
The appellants argued that the Additional Collector failed to decide the preliminary issue of maintainability of the disqualification petition. The court found that the issue of merger was not relevant to the maintainability of the petition, as the case was about voluntary defection from NCP, not a merger.
Conclusion:
The Supreme Court dismissed the appeals, holding that the appellants had incurred disqualification under Section 3(1)(a) and Section 3(1)(b) of the Maharashtra Local Authority Members Disqualification Act, 1986. The court found no merit in the appellants' arguments regarding verification, jurisdiction, procedural compliance, or alleged malafide actions by the respondents.
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2010 (12) TMI 1249
Issues Involved:
1. Sustenance of disallowance of expenses incurred for buyback of shares.
2. Sustenance of disallowance of expenses incurred for giving gifts to employees.
3. Sustenance of disallowance of bad debts.
4. Sustenance of disallowance in respect of prior period expenses.
5. Sustenance of addition of unclaimed credit balances.
6. Sustenance of addition of provision for leave encashment.
7. Sustenance of disallowance of expenses under section 14A of the Income Tax Act.
8. Sustenance of disallowance of provident fund and ESIC under section 43B of the Income Tax Act.
Detailed Analysis:
1. Sustenance of Disallowance of Expenses Incurred for Buyback of Shares:
The assessee incurred expenses of Rs. 11,56,818 on the buyback of shares, which were charged to the Profit & Loss Account. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] disallowed these expenses, treating them as capital expenditure since they were related to restructuring the capital base of the company. The Tribunal, however, referred to various case laws, including Selan Exploration Technology Ltd., Echjay Industries Ltd., and Protos Engineering Co. Pvt. Ltd., and concluded that the buyback expenses did not result in any enduring benefit. Therefore, the disallowance of Rs. 11,56,818 was deleted.
2. Sustenance of Disallowance of Expenses Incurred for Giving Gifts to Employees:
The AO disallowed Rs. 91,500 claimed as expenses for gifts to employees, considering it unwarranted since the company already offered various incentives. The CIT(A) upheld this disallowance. However, the Tribunal found that the amount was a provision from the previous year and not charged in the current year. The Tribunal set aside the orders of the revenue authorities and remanded the matter back to the AO for fresh consideration.
3. Sustenance of Disallowance of Bad Debts:
The AO disallowed Rs. 10,21,641 out of the total bad debts claimed, questioning the recoverability from reputed companies and government bodies. The CIT(A) upheld this disallowance. The Tribunal referred to the Supreme Court's decision in TRF Limited, which stated that it is sufficient if the debt is written off as irrecoverable. Respectfully following this decision, the Tribunal deleted the disallowance of Rs. 10,21,641.
4. Sustenance of Disallowance in Respect of Prior Period Expenses:
The AO disallowed Rs. 5,33,782 as prior period expenses since the assessee followed the mercantile system of accounting. The CIT(A) upheld this disallowance. The Tribunal, however, noted that these expenses were determined and crystallized in the current year and allowed similar claims in previous cases. Hence, the Tribunal deleted the disallowance of Rs. 5,33,782.
5. Sustenance of Addition of Unclaimed Credit Balances:
The AO added Rs. 43,414 shown as unclaimed credit balances to the income, which the CIT(A) upheld. The Tribunal referred to the Supreme Court's decision in T.V. Sundaram Iyengar & Sons Ltd., which held that such amounts, if unclaimed for long, attain the character of income. Thus, the Tribunal upheld the addition of Rs. 43,414.
6. Sustenance of Addition of Provision for Leave Encashment:
The assessee did not press this ground, and the Tribunal, in the absence of any supporting material, rejected the grounds related to the provision for leave encashment of Rs. 8,71,541.
7. Sustenance of Disallowance of Expenses under Section 14A of the Income Tax Act:
The AO disallowed Rs. 6,41,128 under section 14A related to dividend income. The CIT(A) reduced the disallowance to 10% of the dividend income. The Tribunal, following the jurisdictional High Court's decision in Godrej & Boyce Mfg. Co. Ltd., remanded the matter back to the AO for fresh determination of expenses related to exempt income.
8. Sustenance of Disallowance of Provident Fund and ESIC under Section 43B of the Income Tax Act:
The AO disallowed Rs. 30,098 for late payment of EPF and ESIC contributions. The CIT(A) upheld this disallowance. The Tribunal referred to the Supreme Court's decision in CIT Vs. Alom Extrusions Ltd., which allowed such deductions if payments were made before the due date for filing returns. The Tribunal directed the AO to allow the deduction after due verification.
Conclusion:
The appeal was partly allowed for statistical purposes. The Tribunal provided detailed reasoning for each issue, often referring to relevant case laws and ensuring that the principles of justice and consistency were upheld.
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2010 (12) TMI 1248
Issues involved:
The issues involved in the judgment are the validity of the notice issued under Section 148 of the Income Tax Act, 1961, the rejection of objections filed by the petitioner against the notice, and the assessment/re-assessment of the petitioner's income for the assessment year 2003-2004.
Validity of Notice u/s 148:
The petitioner, a foreign company engaged in the business of extracting mineral oil, challenged the notice dated 31-03-2010 issued under Section 148 of the Act for reopening the assessment for the assessment year 2003-04. The petitioner contended that the reasons for initiating proceedings under Section 147 were based on a Division Bench Judgment and were not applicable to their case. The petitioner argued that their services were not technical in nature but related to providing equipment/tools on hire and services in connection with mineral oil extraction.
Change of Opinion and Jurisdiction:
The petitioner relied on judgments by the Delhi High Court and the Supreme Court to argue against the change of opinion by the assessing officer. They contended that the officer could not use Section 147 to correct an error resulting from oversight and that the change of opinion did not give jurisdiction to initiate proceedings under Section 147. The assessing officer, on the other hand, argued that under Section 147, they had the jurisdiction to assess or reassess income that had escaped assessment, as per the provisions of the Act.
Interpretation of Provisions:
The assessing officer justified the notice under Section 148 by citing Explanation 2(c) of Section 147, which allows for reassessment in cases where income has been underassessed or assessed at too low a rate. The officer argued that there was no time bar for escaped assessment and that the case fell within the scope of the explanation. The court examined the judgments in the Kelvinator case and the O.N.G.C. case to understand the applicability of the provisions in the present case.
Court's Direction and Interim Measure:
After considering the arguments, the court directed that the assessment proceedings could continue but no final order should be passed until further hearing. The court noted that the question of whether the services provided by the petitioner were technical required scrutiny. The respondent was given four weeks to file a counter affidavit, and the matter was listed for admission/orders.
Conclusion:
The court's interim measure allowed the assessment proceedings to proceed but prevented the assessing officer from passing a final order until further examination of the technical nature of the petitioner's services. The validity of the notice under Section 148 and the jurisdiction of the assessing officer to reassess the income that had allegedly escaped assessment were key points of contention in the judgment.
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