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Showing 101 to 120 of 835 Records

• 2010 (4) TMI 1141
  
  Issues involved:
  The issue in this case revolves around whether the assessee is the rightful owner of windmills and entitled to claim depreciation under section 32 of the Income Tax Act.
  
  Judgment Summary:
  
  1. Ownership of Windmills and Claim for Depreciation:
  The case pertains to the assessment years 1997-98 and 1998-99, where the assessee claimed ownership of windmills purchased from its sister company, with all considerations duly recorded and bank loans discharged. The Assessing Officer (AO) disallowed depreciation, citing the windmills still being hypothecated with the bank in the sister company's name. However, the appellate authority found evidence supporting the transfer of possession to the assessee, with a board resolution for purchase and income declaration. The Tribunal upheld the assessee's ownership, considering possession, income declaration, board approval, and loan repayment by the assessee, dismissing the Revenue's appeal.
  
  2. Consideration of Grounds and Conclusion by Tribunal:
  The appellant raised concerns regarding non-consideration of grounds and doubted the transfer with the sister company, which also claimed depreciation. However, the Tribunal's conclusions, based on possession, loan repayment, and income assessment in the assessee's hands, were deemed correct. The High Court found no error in fact appreciation or material consideration, dismissing the tax case appeal and closing related petitions without costs.
  
  In conclusion, the High Court affirmed the Tribunal's decision, emphasizing the factual evidence supporting the assessee's ownership of windmills and entitlement to claim depreciation under the Income Tax Act.

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• 2010 (4) TMI 1140
  
  Issues Involved:
  1. Deletion of addition on account of unexplained investment in purchases.
  2. Deletion of addition on account of unaccounted income on sale of goods.
  3. Confirmation of addition on account of unrecorded expenditure for octroi payment.
  4. Confirmation of addition on account of unaccounted sales due to stock discrepancy.
  
  Summary:
  
  Issue 1: Deletion of Addition on Account of Unexplained Investment in Purchases
  The department challenged the deletion of Rs. 45,75,000/- added as unexplained investment in purchases. The assessee argued that the octroi duty of Rs. 1,01,000/- was charged due to irregularities found during a spot inspection by the Octroi Department on 17.7.99, not due to unaccounted purchases. The CIT(A) deleted the addition, stating there was no evidence of unaccounted purchases and the duty was paid on behalf of principal companies. The Tribunal upheld the department's view that the onus was on the assessee to show the purchases were recorded in the books. However, the Tribunal accepted that the entire investment could not have been made on a single day and restored an addition of Rs. 1,93,202/- as unaccounted investment in purchases.
  
  Issue 2: Deletion of Addition on Account of Unaccounted Income on Sale of Goods
  The CIT(A) deleted the addition of Rs. 1,37,250/- for unaccounted income on sales, following the deletion of the unexplained investment in purchases. The Tribunal, however, upheld the addition, reasoning that the assessee earned GP on the sale of these goods.
  
  Issue 3: Confirmation of Addition on Account of Unrecorded Expenditure for Octroi Payment
  The CIT(A) confirmed the addition of Rs. 1,01,000/- for octroi duty paid, as it was not recorded in the books even after four months. The assessee's claim of taking a loan from family members for the payment was unsupported by evidence. The Tribunal upheld this addition.
  
  Issue 4: Confirmation of Addition on Account of Unaccounted Sales Due to Stock Discrepancy
  The CIT(A) held that only GP @ 3% amounting to Rs. 2,378/- could be taxed from the unaccounted sales resulting from a stock shortage of Rs. 79,266/-. The Tribunal, however, upheld the full addition of Rs. 79,266/- as the assessee failed to explain the stock deficiency.
  
  Conclusion:
  The Tribunal partly allowed the departmental appeal, restoring additions for unaccounted investment in purchases and GP on sales while upholding the additions for octroi duty and unaccounted sales due to stock discrepancy.

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• 2010 (4) TMI 1139
  
  Issues Involved:
  1. Addition of unproved purchases made by the AO and deleted by the ld CIT(A).
  2. Disallowance of miscellaneous expenses, conveyance, staff welfare, and traveling expenses.
  
  Issue 1: Addition of Unproved Purchases:
  The assessee, engaged in manufacturing and assembling engineering components, declared total sales and net profit for the assessment year 2005-06. The AO issued enquiry letters u/s 133(6) to 29 parties to verify business transactions. The assessee failed to produce parties but submitted confirmation letters. The AO added the aggregate purchases of &8377; 99,35,141 as unproved purchases u/s 69 of the IT Act. Further additions were made for specific parties. The ld CIT(A) deleted the entire addition citing lack of clarity, inconsistencies, and failure to consider confirmations and explanations. The revenue appealed, arguing against the deletion.
  
  The Tribunal noted that no summons were issued u/s 131 to the parties. The assessee's counsel argued that all details were submitted, with confirmations from most parties. Discrepancies in the AO's addition were highlighted, indicating arbitrary approach. The Tribunal found no reason to interfere with the ld CIT(A)'s decision to delete the addition, confirming the same.
  
  Issue 2: Disallowance of Expenses:
  The AO made an ad hoc disallowance of &8377; 34,453 out of miscellaneous expenses, conveyance, staff welfare, and traveling expenses, citing lack of proper vouching. The ld CIT(A) deleted the addition, finding the AO's reasoning unclear and arbitrary. The Tribunal agreed, emphasizing that disallowances must be justified by showing how expenses are unrelated to the business. The deletion of the addition was upheld, and the appeal by the revenue was dismissed.
  
  In conclusion, the Tribunal upheld the ld CIT(A)'s decision to delete the additions related to unproved purchases and expenses, dismissing the revenue's appeal. The order was pronounced on April 30, 2010.

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• 2010 (4) TMI 1138
  
  Issues Involved:
  
  1. Erroneous order by CIT(A) on facts and in law.
  2. Addition of amounts invested by partners.
  3. Onus of proving genuineness of investments.
  4. Applicability of Supreme Court decision in CIT Vs. Bharat Engineering and Construction Company.
  5. Credit for additional income offered in revised return.
  6. Merits of additions sustained by CIT(A) for each partner's capital introduction.
  
  Summary:
  
  1. Erroneous order by CIT(A) on facts and in law:
  The assessee contended that the CIT(A)'s order was erroneous both on facts and in law.
  
  2. Addition of amounts invested by partners:
  The CIT(A) confirmed the addition of amounts invested by partners: Rs. 1,05,000 (K. Sri Hari), Rs. 1,20,000 (B. Srinivasa Rao), Rs. 1,16,000 (Bavanpalli Srinivasa Rao), Rs. 1,46,000 (T. Venkanna), Rs. 1,94,000 (B. Hari Prasad), and Rs. 1,85,000 (M. Kishore Kumar).
  
  3. Onus of proving genuineness of investments:
  The assessee argued that they discharged the onus by providing detailed addresses, confirmation letters, and proving the genuineness of the investments.
  
  4. Applicability of Supreme Court decision in CIT Vs. Bharat Engineering and Construction Company:
  The assessee cited the Supreme Court decision in CIT Vs. Bharat Engineering and Construction Company (83 ITR 187)(SC), arguing that the capital introduced in the first year of business should be considered as capital receipts. However, the Tribunal noted that this decision was distinguished by the Calcutta High Court in CIT V/s. Ashok Timber Industries (125 ITR 336)(Cal) and the Madhya Pradesh High Court in Bansidhar Agarwal Panna V/s. CIT (148 ITR 523), making S.68 of the Income-tax Act, 1961 applicable.
  
  5. Credit for additional income offered in revised return:
  The Tribunal rejected the plea for credit for additional income offered in the revised return, noting no nexus between the credit entries in partners' accounts and the business income determined at the end of the year.
  
  6. Merits of additions sustained by CIT(A) for each partner's capital introduction:
  - K. Sri Hari: Addition reduced to Rs. 50,000 from Rs. 1,05,000, allowing credit for Rs. 55,000 borrowed from friends.
  - B. Srinivasa Rao: Addition reduced to Rs. 60,000 from Rs. 1,20,000, allowing credit for agricultural income.
  - Bavanpalli Srinivasa Rao: Addition reduced to Rs. 46,000 from Rs. 1,16,000, allowing credit for Rs. 70,000 borrowed.
  - T. Venkanna: Addition reduced to Rs. 40,000 from Rs. 1,46,000, allowing credit for agricultural income and Rs. 72,000 borrowed.
  - B. Hari Prasad: Addition reduced to Rs. 75,000 from Rs. 1,94,000, allowing credit for agricultural income.
  - M. Kishore Kumar: Addition reduced to Rs. 40,000 from Rs. 1,85,000, allowing credit for agricultural income and Rs. 98,000 borrowed.
  
  Conclusion:
  The appeal was partly allowed, with reductions in the additions sustained by the CIT(A) for the capital introduced by the partners.
  
  Order pronounced in the open Court on 9/4/2010.

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• 2010 (4) TMI 1137
  
  Issues Involved:
  1. Addition on account of scrap.
  2. Disallowance of foreign traveling expenses.
  3. Disallowance of telephone expenses.
  4. Addition out of job work income.
  
  Addition on account of scrap:

  The Assessing Officer (AO) added Rs. 6,50,000/- for sale of scrap in A.Y 2004-05 and Rs. 6,63,832/- in A.Y 2005-06, citing that the sale of scrap/wastage material shown by the assessee was quite low considering the size of turnover. The assessee contended that the ad hoc addition was without any basis and there was no evidence of any sale of scrap outside the books of account. The CIT (Appeals) deleted the additions, stating that the AO made no case for suppression of value or sale of scrap. However, in A.Y 2006-07, the CIT (Appeals) upheld an ad hoc addition of Rs. 8,75,188/-, reasoning that the AO's estimation was reasonable. The Tribunal found no defects in the books of account and no legal basis for the ad hoc additions, directing the deletion of the additions in all three years.

  Disallowance of foreign traveling expenses:

  The AO disallowed Rs. 22,37,578/- for A.Y 2004-05 and Rs. 11,14,390/- for A.Y 2005-06, stating that the assessee failed to provide complete details of utilization of foreign exchange and evidence of business purpose for visits to Hongkong, Dubai, and Singapore. The CIT (Appeals) deleted the disallowances, noting that the expenses were reasonable, incurred for business purposes, and supported by vouchers. The Tribunal upheld the CIT (Appeals)'s decision, finding sufficient material on record to support the conclusion that the expenses were incurred for business purposes.

  Disallowance of telephone expenses:

  The revenue challenged the deletion of disallowance of telephone expenses of Rs. 48,018/- each for A.Y 2004-05 and 2005-06. The Tribunal found no justification for disallowing the amounts in question, given the turnover and income shown by the assessee, and rejected this ground of appeal.

  Addition out of job work income:

  In A.Y 2005-06, the AO added Rs. 1,97,773/- to the income of the assessee, finding a discrepancy between the TDS Certificate and the job work receipt shown in the return. The CIT (Appeals) deleted the addition, noting that the job work receipt pertained to A.Y 2004-05 and was duly accounted for in that year. The Tribunal confirmed the CIT (Appeals)'s action, stating that there was no justification for the addition.

  Conclusion:

  The revenue's appeals for A.Y 2004-05 and 2005-06 were dismissed, and the assessee's appeal for A.Y 2006-07 was allowed.

  Pronounced in Open Court during the course of hearing on 26.04.2010.

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• 2010 (4) TMI 1136
  
  Issues involved: Appeal against order upholding re-opening of assessment u/s 148 and addition u/s 68 for AY 2002-03.
  
  The appellant challenged the order upholding the re-opening of assessment u/s 148 and confirming the addition of Rs. 4,61,500 made u/s 68 of the Income Tax Act, 1961 for the assessment year 2002-03. The appellant initially raised one ground of appeal but later introduced an additional ground questioning the validity of the reassessment u/s 147. The appellant argued that the conditions for reopening under u/s 147 were not satisfied and there was no reason to believe that income chargeable to tax had escaped assessment. The appellant relied on the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. to support their case.
  
  During the hearing, the appellant's counsel contended that the additional ground challenging the reopening of assessment was inadvertently omitted from the original appeal memo. The appellant requested the admission of this ground, emphasizing that it involved a pure question of law. The appellant also highlighted that the reasons recorded by the Assessing Officer for issuing the notice u/s 148 were not provided to the appellant, which was a crucial aspect in determining the validity of the reassessment u/s 147. The appellant urged that the matter be remanded to the Assessing Officer for proper consideration in light of the Supreme Court's decision in GKN Driveshafts (India) Ltd.
  
  The Revenue representative did not contest the submissions made by the appellant's counsel during the hearing, indicating a lack of opposition to the appellant's arguments regarding the validity of the reassessment u/s 147. After considering the contentions from both sides and reviewing the lower authorities' orders, it was observed that the reasons recorded by the Assessing Officer for issuing the notice u/s 148 were not furnished to the appellant, aligning with the legal requirement outlined in previous judgments.
  
  Referring to the judgment of the Hon'ble Rajasthan High Court in a similar case, the Tribunal acknowledged the procedural steps to be followed when a notice u/s 148 is issued. These steps included filing a return in response to the notice, requesting and receiving the reasons for the notice, filing objections, and allowing the assessing authority to decide on the objections before proceeding with reassessment. In light of these principles, the Tribunal admitted the additional ground raised by the appellant and directed the Assessing Officer to provide the reasons recorded for issuing the notice u/s 148. The appellant was granted the opportunity to file objections, following which the Assessing Officer was instructed to pass an appropriate order and re-adjudicate the addition of Rs. 4,61,500 in accordance with the law.
  
  Separate Judgement: None mentioned.

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• 2010 (4) TMI 1135
  
  Issues involved: Revenue's appeal against Ld CIT(A)'s order for assessment year 2004-05.
  
  Issue 1 - Foreign Traveling Expenses:
  The Assessing Officer disallowed a portion of foreign traveling expenses claimed by the assessee, stating that 25% of hotel boarding and lodging expenses were incurred for non-business purposes. However, the Ld CIT(A) deleted this disallowance based on evidence provided by the assessee, including emails to customers abroad and future sales transactions, concluding that the expenses were indeed for business purposes.
  
  Issue 2 - Telephone, Vehicle Maintenance Expenses:
  The Assessing Officer disallowed a portion of telephone expenses and vehicle maintenance expenses, citing lack of log books to prove business use. Additionally, depreciation on car expenses was also partially disallowed. The Ld CIT(A) overturned these disallowances, emphasizing that the company, as a separate juristic entity, could not have personal use of the vehicle and telephone, and no specific instances of non-business use were pointed out.
  
  Issue 3 - Sales Promotion Expenses:
  The Assessing Officer disallowed a portion of sales promotion expenses, suspecting un-vouched personal ledger expenses. However, the Ld CIT(A) found that all details were provided during assessment proceedings, and no specific instances of non-business use were identified. Therefore, the adhoc disallowance was deemed unsustainable.
  
  In conclusion, the Appellate Tribunal upheld the Ld CIT(A)'s decision to delete the disallowances on all three issues, as the Assessing Officer failed to provide sufficient evidence to justify the partial disallowances. The appeal of the revenue was dismissed.

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• 2010 (4) TMI 1134
  
  Issues Involved:
  1. Validity of the reopening notice under section 148 of the Income-tax Act, 1961.
  2. Eligibility of income of Rs. 51,75,000 for deduction under section 80HHC of the Income-tax Act.
  3. Overall consideration of facts and circumstances by CIT(A) in the appeal.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of the Reopening Notice under Section 148:
  The primary contention was whether the CIT(A) erred in upholding the reopening notice under section 148 of the Income-tax Act, 1961. The facts revealed that a survey under section 133A was conducted, and additional income of Rs. 1.10 crores was offered to tax. The AO allowed deduction under section 80HHC on the amount of stock and advances receivable disclosed during the survey. However, the AO later opined that the assessee was not eligible for the deduction on these amounts and issued a notice under section 148. The assessee argued that the original assessment completed under section 143(3) could not be reopened on a mere change of opinion. The CIT(A) upheld the reopening, citing the AO's power under section 147 and relevant case laws, including Phoolchand Bajrang Lal Vs. ITO and Rakesh Agrawal Vs. ACIT, which support the AO's belief that income had escaped assessment.
  
  2. Eligibility of Income for Deduction under Section 80HHC:
  The second issue was whether the income of Rs. 51,75,000 disclosed during the survey was eligible for deduction under section 80HHC. The AO restricted the deduction, arguing that the disclosed stock and receivables were not derived from the business of exports and thus not eligible for deduction. The CIT(A) supported this view, stating that the additional income declared during the survey did not have a nexus with the profit derived from export business. The CIT(A) emphasized that the income declared was of an undisclosed nature and not related to the regular course of business, thereby not qualifying for the deduction under section 80HHC.
  
  3. Overall Consideration of Facts and Circumstances:
  The assessee contended that the CIT(A) failed to consider the overall facts and circumstances of the case. The CIT(A) dismissed this ground, stating that the powers of the AO under section 147 are extensive and that there was prima facie material to justify the reopening of the assessment. The CIT(A) concluded that the additional income declared during the survey could not be considered as business income for the purpose of deduction under section 80HHC.
  
  Judgment:
  The tribunal found that the AO reopened the assessment on the same set of facts available during the original assessment, which amounted to a change of opinion. Citing various judgments, including Kaira District Co-op. Milk Producers' Union Ltd. v ACIT and Jindal Photo Films Ltd., the tribunal held that reopening on a mere change of opinion is not permissible. Consequently, the tribunal quashed the impugned assessment order, allowing ground nos. 1 and 2 of the appeal. As a result, ground no. 3 became infructuous, and ground no. 4 was dismissed as it was general in nature.
  
  Conclusion:
  The appeal was partly allowed, with the tribunal quashing the reopening of the assessment on the grounds of a change of opinion and upholding that the additional income disclosed during the survey was not eligible for deduction under section 80HHC. The order was pronounced in the open court on 9-04-2010.

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• 2010 (4) TMI 1133
  
  Issues involved: The appeal by the Revenue against the order of the CIT(A)-X, Ahmedabad dated 15-11-2006 for assessment year 2001-02 regarding the deletion of demand levied u/s 201(1) of the I. T. Act and interest charged u/s 201(1)(1A).
  
  Summary:
  
  Issue 1: Time limitation for passing orders u/s 201(1) and interest u/s 201(1A):
  The CIT(A) directed the AO to delete the demand and interest, noting that the order passed by the AO was time-barred, beyond the limitation of four years. The appellant established that the party had already paid taxes under self-assessment. The CIT(A) accepted the plea of the assessee regarding time limitation based on various Tribunal decisions. The amendment in section 201(1A) effective from 1/6/2006 made it mandatory for the appellant to pay interest before furnishing the quarterly statement. The order passed by the ITO was beyond the four-year period, leading to the deletion of the interest levied u/s 201(1A).
  
  Issue 2: Judicial precedent and time limitation for passing orders:
  The learned DR argued that there was no time limitation under the Act for passing the order, while the Counsel for the assessee contended that the order was time-barred. The AO's order was passed after the expiry of four years from the end of the relevant financial year. Citing the judgment of the Hon'ble Delhi High Court in the case of CIT Vs NHK Japan Broadcasting Corporation, it was emphasized that the time limit of four years prescribed by the Tribunal was crucial, and action had to be initiated within this period.
  
  Conclusion:
  Considering the findings of the CIT(A) and the judicial precedent, the Tribunal held in favor of the assessee, dismissing the departmental appeal. The judgment of the Hon'ble Delhi High Court supported the view that the date of knowledge was irrelevant for exercising jurisdiction under the Act, emphasizing the importance of the four-year time limit. The acceptance of liability by the assessee did not extend the period of limitation. The departmental appeal was accordingly dismissed based on the established legal principles.
  
  Order pronounced on 09-04-2010.

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• 2010 (4) TMI 1132
  
  Issues involved: Appeals against penalty u/s 271(1)(c) of the I.T. Act for Assessment Years 2004-05 and 2005-06.
  
  Issue 1: Penalty u/s 271(1)(c) for Assessment Year 2004-05
  
  The appellant filed two appeals against the penalty levied by the Assessing Officer (AO) under section 271(1)(c) for the Assessment Year 2004-05. The AO had imposed a penalty of &8377; 2,94,50,000 based on inaccurate particulars furnished by the appellant regarding understatements of receipts and expenses. The CIT(A) confirmed the penalty, emphasizing the inconsistency in reporting income and expenses related to a joint venture. The appellant argued that no real income accrued to the joint venture due to an agreement transferring work to another entity. The Tribunal, after considering the submissions, held that since the additions made by the AO were deleted in the quantum proceedings, no penalty could be sustained. The Tribunal cited legal precedents to support its decision, including the Supreme Court ruling in C.I.T. vs. Reliance Petro Products 322 ITR 158 (SC), stating that disallowing a claim does not amount to furnishing inaccurate particulars.
  
  Issue 2: Penalty u/s 271(1)(c) for Assessment Year 2005-06
  
  The facts of the case for Assessment Year 2005-06 were similar to those of the previous year. Following the reasoning applied for the Assessment Year 2004-05, the Tribunal canceled the penalty imposed by the AO and confirmed by the CIT(A) for this year as well.
  
  In conclusion, both appeals filed by the assessee against the penalties imposed for Assessment Years 2004-05 and 2005-06 were allowed by the Tribunal, citing the lack of sustainability for the penalties based on the quantum additions being deleted.

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• 2010 (4) TMI 1131
  
  Issues Involved:
  1. Disallowance of expenses incurred by the Joint Venture.
  2. Allowability of Provident Fund (PF) and Employees' State Insurance Corporation (ESIC) contributions.
  3. Claim of loss due to sub-contract charges paid.
  4. Assessment of income from the project and disallowance of expenses in subsequent years.
  5. Initiation of penalty proceedings under Section 271(1)(c).
  6. Deduction under Section 80IA.
  7. Recovery of tax and interest from the Association of Persons (AOP).
  
  Detailed Analysis:
  
  1. Disallowance of Expenses Incurred by the Joint Venture
  The primary issue was the disallowance of Rs. 41,35,814/- incurred by LGE&C after 2-9-2002. The assessee argued that these expenses were necessary for maintaining staff and establishment as part of the Joint Venture (JV). However, the Tribunal upheld the disallowance, stating that after the agreement dated 2-9-2002, LGE&C had completely withdrawn from the JV, transferring all responsibilities to Patel Engineering Ltd. (PEL). Thus, no association of persons (AOP) survived, and the expenses incurred by LGE&C could not be set off against the income of the JV.
  
  2. Allowability of Provident Fund (PF) and Employees' State Insurance Corporation (ESIC) Contributions
  The Tribunal ruled in favor of the assessee, citing the Supreme Court's decision in CIT vs. Alom Extrusion Ltd., which held that contributions paid before the filing of the return are allowable. However, this was subject to the claim of expenses pertaining to the period before 2-9-2002.
  
  3. Claim of Loss Due to Sub-Contract Charges Paid
  The assessee claimed a loss of Rs. 8,81,52,174/- as sub-contract charges paid to Nitin Construction Ltd. This claim was rejected because it was not made in the return of income and was not written off in the books of accounts, as required by Section 36(2) of the Act. The Tribunal upheld the disallowance, noting that any loss due to non-recovery of advance from Nitin Construction Ltd. would be borne by LGE&C, not the JV.
  
  4. Assessment of Income from the Project and Disallowance of Expenses in Subsequent Years
  For the assessment years 2004-05 and 2005-06, the AO assessed 7% of the total receipts from NHAI as income of the JV and disallowed expenses incurred by LGE&C. The Tribunal ruled that the agreement dated 2-9-2002 created an overriding title in favor of PEL, and thus, no real income accrued to the JV after this date. Consequently, the income from the project should be assessed in the hands of PEL, not the JV. The Tribunal also rejected the applicability of Section 40A(2)(b), as the JV was not in existence after 2-9-2002.
  
  5. Initiation of Penalty Proceedings under Section 271(1)(c)
  The Tribunal dismissed this issue as premature, stating that the merits of the penalty could only be decided in the appeal proceedings resulting from the order levying the penalty.
  
  6. Deduction under Section 80IA
  The Tribunal upheld the CIT(A)'s decision that the JV was not eligible for deduction under Section 80IA, as it was not a consortium of Indian companies. LGE&C, being a Korean company, disqualified the JV from availing this deduction.
  
  7. Recovery of Tax and Interest from the Association of Persons (AOP)
  The Tribunal ruled that tax and interest relating to the period up to 2-9-2002 could be recovered from the AOP. However, no tax or interest could be recovered for the period after 2-9-2002, as no income accrued to the AOP after this date. The Tribunal also directed that any tax paid by the JV for the period after 2-9-2002 should be credited to PEL.
  
  Conclusion
  The appeals were partly allowed, with the Tribunal ruling in favor of the assessee on some issues while upholding the AO's and CIT(A)'s decisions on others. The key takeaway is the Tribunal's recognition of the agreement dated 2-9-2002 as creating an overriding title in favor of PEL, thereby shifting the income and tax liability from the JV to PEL.

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• 2010 (4) TMI 1130
  
  Issues involved: The judgment involves issues related to the delay in filing appeals, disallowance of service charges, disallowance of payment of LIC Group Gratuity Scheme, chargeability of interest u/s.234D, charging of interest u/s.234B and 234C, disallowance of payment of employees provident fund, and the reopening of the case.
  
  Delay in filing appeals: The assessee filed appeals in ITA Nos. 922 & 923/Coch/2008 after a delay of 886 days. The delay was condoned after considering the reasons provided by the assessee, and the appeals were admitted for hearing.
  
  Disallowance of service charges: The main issue in several appeals was the deletion of disallowance of service charges paid to the Government of Kerala. The assessee argued that these charges were for commercial expediency and hence deductible. The Commissioner contended that such charges were not allowable under section 37 of the I.T. Act, 1961. The Tribunal decided in favor of the assessee based on a precedent from the jurisdictional High Court.
  
  Payment of LIC Group Gratuity Scheme: The Tribunal upheld the CIT(Appeals) decision regarding the disallowance of payment of LIC Group Gratuity Scheme, as it was not related to the assessment year under appeal.
  
  Chargeability of interest u/s.234D: The Tribunal decided in favor of the assessee regarding the chargeability of interest u/s.234D, citing that the operation of section 234D is not retrospective and the impugned assessment year predated the amendment.
  
  Charging of interest u/s.234B and 234C: The Tribunal upheld the CIT(Appeals) order directing the Assessing Officer to pass a speaking order on charging interest u/s.234B and 234C, finding no reason to interfere at that stage.
  
  Disallowance of employees provident fund payment: The Tribunal allowed the claim of the assessee on the issue of payment of employees provident fund, citing various legal precedents supporting the deduction of such payments made before the due date of filing the return.
  
  Reopening of the case: The Tribunal rejected the assessee's argument against the reopening of the case, following a decision of the Hon'ble Supreme Court, and decided the issue in favor of the Revenue.
  
  Result: The appeals were disposed of with some being dismissed and others being partly allowed based on the specific issues and arguments presented in each case.

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• 2010 (4) TMI 1129
  
  Issues Involved:
  1. Deletion of penalty levied u/s 271(1)(c) of the Act.
  2. Interpretation of provisions of Explanation 1 to Sec. 271(1)(c).
  3. Various disallowances and their impact on penalty.
  
  Summary:
  
  1. Deletion of Penalty u/s 271(1)(c):
  The revenue appealed against the CIT(A)'s order deleting the penalty of Rs. 60,89,535/- levied u/s 271(1)(c) for the assessment year 1993-94. The AO had levied the penalty based on various disallowances confirmed by the Tribunal, including rent, repairs, rates and taxes, disallowance u/s 40A(9), depreciation, repair expenses disallowed as capital expenditure, entertainment expenses disallowed, and deduction u/s 80I.
  
  2. Interpretation of Explanation 1 to Sec. 271(1)(c):
  The revenue contended that the CIT(A) failed to properly interpret Explanation 1 to Sec. 271(1)(c), which applies to certain additions made in the order. The learned DR argued that the assessee made non-bonafide claims with an intention to reduce taxable income, amounting to furnishing inaccurate particulars of income.
  
  3. Disallowances and Penalty:
  - Rent, Repairs, Rates, and Taxes: The assessee claimed expenses u/s 37(4), which were disallowed as they were governed by sections 30, 31, and 32. The Tribunal found that the assessee had not furnished inaccurate particulars but made claims based on a debatable interpretation of law.
  - Disallowance u/s 40A(9): The assessee's claim for payments to statutory bodies was disallowed as they were not approved funds. The Tribunal noted that the assessee disclosed all relevant facts, and the disallowance was due to provisions of the Act, not concealment of income.
  - Depreciation: The claim for depreciation on Rs. 4 crores paid to tenants was disallowed as the premises were residential and not used for business. The Tribunal found the claim was made on a bonafide belief and not inherently wrong.
  - Repair Expenses Disallowed as Capital Expenditure: The Tribunal held that the disallowance of repair expenses as capital expenditure was a debatable issue and not a false claim.
  - Entertainment Expenses Disallowed: The Tribunal found that the disallowance was due to provisions of law and not because the assessee made a false claim.
  - Deduction u/s 80I: The assessee's claim was based on an estimated working and revised during assessment proceedings. The Tribunal found no concealment of income or furnishing of inaccurate particulars.
  
  Conclusion:
  The Tribunal concluded that merely because the claims were disallowed, it does not automatically lead to furnishing inaccurate particulars or concealment of income warranting penalty. The assessee disclosed all relevant facts, and the claims were based on a bonafide belief. The penalty u/s 271(1)(c) was not justified, and the appeal of the revenue was dismissed. The decision was pronounced in the Open Court on 30.4.2010.

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• 2010 (4) TMI 1128
  
  Issues involved: Appeal against Tribunal's order regarding deduction under section 54F of the Income Tax Act.
  
  Summary:
  
  Issue 1: Tribunal's interpretation of section 54F
  The appellant, a chartered accountant, sold his business to a company and claimed exemption under section 54F of the IT Act for investing in a new property. The AO disallowed the deduction as the property was not purchased out of the consideration received from the transferred asset. The CIT(A) allowed the claim, stating the option to invest within a year before the transfer date. The Tribunal remanded the matter and eventually allowed the claim. The Revenue appealed, arguing that the property was not purchased from the sale consideration. The High Court held that section 54F does not impose such a pre-condition and confirmed the Tribunal's decision, emphasizing the need to interpret tax statutes based on language and objectivity.
  
  Issue 2: Conditions for applicability of section 54F
  Section 54F allows individuals or HUFs to claim exemption on capital gains from a long-term asset by investing in a residential house within specific time frames. The Board's circular further explains the provision's intent to promote house construction and the conditions necessary for exemption eligibility. The High Court found that the appellant met all conditions required under section 54F, rejecting the Revenue's argument that investment should be solely from sale consideration.
  
  In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to allow the deduction under section 54F, stating no substantial question of law arose for consideration.

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• 2010 (4) TMI 1127
  
  Issues involved: Appeal against order of CIT(A)-II, Ahmedabad regarding disallowance of interest and unexplained cash credits.
  
  Disallowance of interest issue: The Revenue appealed against the CIT(A)'s decision to delete the addition of interest amounting to Rs. 13,98,220 made by the Assessing Officer. The ITAT upheld the CIT(A)'s decision based on the reasoning that the borrowed funds were utilized for the business purposes of the assessee, as holding cash for timely payments was essential to the business transaction. The ITAT found no error in the CIT(A)'s order and dismissed the Revenue's appeal.
  
  Unexplained cash credits issue: The Revenue appealed against the CIT(A)'s decision to delete the addition of Rs. 11,25,000 made by the Assessing Officer on account of unexplained cash credits. The assessee had provided details of creditors to the CIT(A) but not to the Assessing Officer. The ITAT held that the assessee had discharged the burden of proving the cash credits by providing confirmation of creditors, bank passbook copies, income tax return acknowledgments, and computation of income of the creditors. Citing the decision in Commissioner of Income Tax Vs. Orissa Corporation P. Limited, the ITAT concluded that the assessee had fulfilled the onus of proving the cash credits, and therefore upheld the CIT(A)'s decision to delete the addition. Consequently, the Revenue's appeal was dismissed.
  
  Separate Judgement: No separate judgment was delivered by the judges.

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• 2010 (4) TMI 1126
  
  Issues Involved:
  1. Bogus Purchases from M/s. Deep Chem.
  2. Bogus Purchases from Seven Other Parties.
  3. Disallowance of Purchases by CIT(A).
  4. Appeals by Assessee and Revenue.
  
  Summary:
  
  1. Bogus Purchases from M/s. Deep Chem:
  The Assessing Officer (AO) noticed a drastic fall in the gross profit and net profit percentages from the previous year. Upon investigation, it was found that the assessee had purchased raw material worth Rs. 55,64,931 from M/s. Deep Chem. The proprietor of M/s. Deep Chem, Shri Apurva Ashwin Masalia, admitted to issuing accommodation bills without actual sales. Despite opportunities, the assessee did not respond or cross-examine Shri Masalia. Consequently, the AO added Rs. 55,64,931 to the assessee's income as bogus purchases.
  
  2. Bogus Purchases from Seven Other Parties:
  The AO issued notices u/s 133(6) to seven other parties to verify the genuineness of purchases amounting to Rs. 4,70,72,384. One notice was returned unserved, and the other six parties did not respond. The assessee failed to produce these parties for verification. The AO, therefore, added Rs. 4,70,72,384 to the assessee's income as bogus purchases, totaling Rs. 5,26,37,315 (Rs. 55,64,931 + Rs. 4,70,72,384).
  
  3. Disallowance of Purchases by CIT(A):
  The CIT(A) noted that the assessee maintained proper books of account, audited by auditors, and the AO did not find any fault to reject them. The CIT(A) observed that the assessee might have inserted accommodation bills for other purchases made without bills to set right its records. The CIT(A) held that disallowing the entire claim of purchases was not justified. Instead, the CIT(A) directed the AO to restrict the disallowance to 8% of the total purchases, amounting to Rs. 42,10,985.
  
  4. Appeals by Assessee and Revenue:
  Both the assessee and the Revenue appealed against the CIT(A)'s order. The Revenue argued that the entire amount of Rs. 5,26,37,320 should be added to the assessee's income. The assessee contended that the disallowance of 8% was too high. The Tribunal found merit in the Revenue's argument regarding the Rs. 55,64,931 from M/s. Deep Chem and upheld the addition. However, for the remaining seven parties, the Tribunal restored the matter to the AO for fresh verification, giving the assessee another opportunity to substantiate the genuineness of the purchases.
  
  Conclusion:
  The appeal filed by the Revenue was partly allowed for statistical purposes, and the appeal filed by the assessee was dismissed.

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• 2010 (4) TMI 1125
  

  Taxability of income - Waiver of the principal amount - Purpose of business or trading activity or acquiring any capital asset - AO held that since this loan amount was related to the business of the assessee, the same would be assessable under the head "Business" therefore, brought the said amount to tax as income includible in the assessee's total income - CIT(A) decided this issue in favour of the assessee by holding that the provisions of s. 2(24) or s. 28(i) or 28(iv) and s. 41(1) are not applicable to the present case. Being aggrieved, the Revenue is in appeal.

  Assessee had taken or obtained loan from the SBI, and later, as a result of compromise between the assessee and SBI, the outstanding liability towards interest payable on loan amount was waived. Thus, there is no dispute with regard to the waiver of interest includible in the total income of the assessee for the year under consideration. However, a dispute has arisen between the Department and the assessee with regard to waiver of the principal amount

  HELD THAT:- In the light of the discussions, and following the decision of Hon'ble Bombay High Court in the case of Solid Containers Ltd. vs. Dy. CIT [2008 (8) TMI 156 - BOMBAY HIGH COURT] where the principle enunciated by the Hon'ble Supreme Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons Ltd.[1996 (9) TMI 1 - SUPREME COURT] has been applied, we held that the principal amount of loan, which is taken for the purpose of business or trading activity, on its waiver by the creditor, would constitute income chargeable to tax under the Act.

  However, if the loan is utilized for the purpose of acquiring any capital asset, the same, on its waiver, would not constitute income chargeable to tax as held by Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd. vs. CIT [2003 (1) TMI 71 - BOMBAY HIGH COURT] and Hon'ble Delhi High Court in the case of CIT vs. Tosha International Ltd.[2008 (9) TMI 31 - HIGH COURT DELHI] either u/s. 41(1) or 28(iv) or 2(24).

  The assessee has not brought any material or evidences on record to show that the loan taken by the assessee from bank in cash credit account, CTL account and WCTL account was utilized for the purpose of acquiring any capital asset. On the other hand, the material available on record including the notes to the accounts indicates that the assessee has obtained the loan or credit facility by way of hypothecation of finished goods, semi-finished goods, raw material, book debts, receivable claims, securities, and rights by way of first charge, which indicates that the assessee have obtained the loan facility for its business activity or trading operations.

  However, this aspect of the matter, whether the whole of the loan amount has been utilized either for the purpose of acquiring capital asset or for the purpose of business activity or trading activity, has not been looked into or examined by the authorities below nor the assessee has established that the loan amount was utilized only for the purpose of acquiring capital asset. We, therefore, restore this issue back to the file of the AO for his fresh adjudication with a direction to the assessee to furnish all the details and particulars of loan, and the purpose for which the loan taken from bank was utilized.

  In the result, this appeal filed by the Revenue is treated to be allowed for a statistical purpose in the manner as indicated above.

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• 2010 (4) TMI 1124
  
  Issues Involved: Disputed additions u/s.40A(3) and u/s.68 of the Income-tax Act, 1961.
  
  Addition u/s.40A(3):
  The Assessing Officer disallowed 20% of cash payments made by the assessee, adding it to the total income. The CIT(A) confirmed this action stating the payments did not fall under exceptional circumstances. The AR did not dispute the excess cash payments but failed to prove they were exceptional. The Tribunal upheld the disallowance as justified, dismissing the appeal.
  
  Addition u/s.68:
  The Assessing Officer observed discrepancies in the cash book and sales invoices, suspecting the introduction of secret funds. He added the amount of unexplained fund utilization to the total income. The CIT(A) upheld this decision. The AR argued that unrecorded cash receipts balanced the negative cash, but lacked evidence. The Tribunal found the negative balance unexplained but limited the addition to the peak negative balance, ordering only a portion to be added to the income. Consequently, the appeal was partly allowed.
  

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• 2010 (4) TMI 1123
  
  Issues involved:
  The judgment involves challenges to the deletion of addition of unexplained cash credit u/s. 68 of the Income-tax Act, 1961 and deletion of addition of pre-operative expenses.
  
  Issue 1: Unexplained Cash Credit u/s. 68 of the Act
  The Assessing Officer added &8377; 1,08,50,000 as unexplained cash credit u/s. 68 of the Act due to doubts about the creditworthiness of the shareholders. However, the CIT(A) deleted the addition, stating that necessary evidences were provided by the assessee. The CIT(A) found that the Assessing Officer's doubts were unfounded and lacked concrete evidence. The CIT(A) directed the Assessing Officer to delete the addition, emphasizing that the source of the share application money was duly exhibited by the assessee company. The Revenue appealed against this decision.
  
  Issue 2: Pre-operative Expenses
  The Assessing Officer disallowed &8377; 13,446 as pre-operative expenses, claiming that the expenditure was incurred before earning any income. The CIT(A) overturned this disallowance, stating that the expenses were revenue in nature and necessary for running the business. The CIT(A) found that the Assessing Officer had not provided sufficient reasoning for disallowing the expenses. The Revenue challenged the deletion of this addition.
  
  Judgment Summary:
  The ITAT Mumbai upheld the CIT(A)'s decision in both issues. Regarding the unexplained cash credit, the ITAT found that the Assessing Officer's doubts were not substantiated and that the source of the funds was adequately explained by the assessee. The ITAT cited the decision in Lovely Exports Pvt. Ltd. to support its conclusion that the share application money cannot be treated as undisclosed income of the assessee company. As for the pre-operative expenses, the ITAT agreed with the CIT(A) that the expenses were revenue in nature and necessary for business operations. The Revenue's appeal was dismissed in both matters.

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• 2010 (4) TMI 1122
  
  Issues Involved:
  1. Taxability of interest income.
  2. Disallowance of business loss.
  
  Summary:
  
  Issue 1: Taxability of Interest Income
  
  The assessee contested the taxability of interest income of Rs. 11,24,251 u/s "income from other sources." The assessee had advanced a loan to M/s. Soorajmull Nagarmull in 1959, but due to heavy losses, the debtor firm could not repay the loan with interest. The Calcutta High Court appointed a Receiver who sold some shares and paid Rs. 11,91,271 to the assessee in the Assessment Year under consideration. The Assessing Officer, after deducting legal fees of Rs. 67,020, assessed the net interest income of Rs. 11,24,251 under "income from other sources." The assessee argued that the interest should be taxed on an accrual basis due to the mercantile system of accounting. However, the CIT(A) held that since the assessee did not offer the interest income on an accrual basis in earlier years, it was rightfully taxed in the year of receipt. The Tribunal modified the orders, directing that only Rs. 6,24,251, excluding the principal amount of Rs. 5 lakhs, be assessed as income for the Assessment Year under consideration.
  
  Issue 2: Disallowance of Business Loss
  
  The assessee, aged 65, claimed a business loss of Rs. 13,56,841 from the purchase and sale of suiting and shirting. The Assessing Officer found the transactions to be non-genuine, stating that the assessee conducted business only for a few days with non-entities and without any incidental expenses like transportation or brokerage. The CIT(A) upheld the disallowance, agreeing that the business loss was created to set off the substantial interest income. The Tribunal confirmed the CIT(A)'s order, rejecting the claim of business loss due to lack of genuine transactions and adequate opportunity provided to the assessee to prove otherwise.
  
  Conclusion:
  
  The appeal of the assessee was allowed in part, with the interest income being partially adjusted and the business loss disallowance being upheld.

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