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Showing 101 to 120 of 639 Records
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2010 (6) TMI 805
Issues:
1. Delay in filing an appeal before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT).
2. Service of notices on the Managing Director instead of the Official Liquidator of the petitioner Cooperative Spinning Mill.
3. Rejection of condonation of delay and subsequent appeals by CESTAT.
Analysis:
1. The writ petition was filed challenging the order of CESTAT refusing to condone the delay of 1831 days in filing the appeal. The petitioner, a Cooperative Spinning Mill in liquidation, had its appeal rejected due to the delay. The Court noted the delay and the grounds for refusal to condone it.
2. The petitioner argued that notices should have been served on the Official Liquidator instead of the Managing Director, as the company was in liquidation. The Court agreed that service on the Managing Director did not amount to due service on the company, as the Official Liquidator was the authorized officer during liquidation. The Court directed the payment of costs to set aside CESTAT's order and allowed the appeal to be entertained.
3. The Court found that since notices were served only on the Managing Director, the Official Liquidator could not have had sufficient knowledge of the service. Therefore, the Court set aside CESTAT's order rejecting the application to condone the delay and allowed the appeal to proceed on payment of costs. The appeal was to be decided on its merits and in accordance with the law by CESTAT.
In conclusion, the writ petition was disposed of accordingly, with no order as to costs in the circumstances. The Court's decision highlighted the importance of proper service of notices during liquidation proceedings and the need to consider the authorized officer for communication in such situations.
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2010 (6) TMI 804
Issues involved: The judgment involves the confirmation of penalty u/s 271BA of the Income Tax Act by the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2006-07.
Details of the judgment:
1. Issue of Penalty u/s 271BA:
The Assessing Officer noted the non-filing of the Chartered Accountant's Report in Form No. 3CEB relating to International transactions along with the return of income by the due date. The penalty proceedings were initiated, despite the assessee's contentions that the report was obtained in time but could not be filed due to online filing without attachments. The Ld. Commissioner of Income Tax (Appeals) upheld the penalty, citing the decision in the case of C.I.T. vs. Escorts Finance. However, the Tribunal found that the assessee had a reasonable cause for the delay in filing the report, as it was obtained before the due date and provided to the Assessing Officer before the assessment was completed. Relying on the Apex Court decision in Hindustan Steel vs. State of Orissa, the Tribunal held that penalty should not be imposed for a technical breach when there is a genuine belief of non-liability. Consequently, the Tribunal set aside the penalty of &8377; 1,00,000 imposed u/s 271BA.
2. Legal Provisions Considered:
The Tribunal referred to sections 92E and 271BA of the Income Tax Act, which mandate obtaining and filing an Audit Report for international transactions. Section 273B provides for no penalty if there is a reasonable cause for non-compliance with the provisions. The Tribunal emphasized that in this case, the assessee had a valid reason for not filing the report along with the return, as it was obtained before the due date and provided to the Assessing Officer in due course.
3. Precedent and Conclusion:
In light of the legal provisions and the precedent set by the Apex Court, the Tribunal concluded that the penalty was not justified in this case. The Tribunal allowed the appeal filed by the assessee and deleted the penalty of &8377; 1,00,000. The order was pronounced in the open court on 15/06/2010 upon the conclusion of the hearing.
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2010 (6) TMI 803
Issues Involved:
1. Error in remanding the matter to the Chief Commissioner instead of the Commissioner of Central Excise.
2. Error in dismissing the appeal filed by the department based on Circular No. 825/2/2006-CX.
Issue-wise Detailed Analysis:
1. Error in remanding the matter to the Chief Commissioner instead of the Commissioner of Central Excise:
The Tribunal had remanded the matter to the Chief Commissioner of Central Excise, Shillong, for a fresh decision. The Tribunal noted that the Committee did not meet within the prescribed time schedule nor accorded a hearing to the assessees before deciding on the issues involved. The Tribunal observed that without the Committee's scrutiny, the proceedings initiated by the Commissioner of Excise, Shillong, were a "mockery of quasi-judicial process." Consequently, the Tribunal interfered with the orders dated 30-1-2006 and remanded the matter to the Chief Commissioner of Central Excise, Shillong, for a fresh decision. However, the High Court found this direction untenable, as the Committee had, albeit belatedly, held its meetings and scrutinized the claims. The High Court concluded that the Tribunal's assumption was unfounded and thus interfered with the Tribunal's determination regarding the appeals filed by the assessees.
2. Error in dismissing the appeal filed by the department based on Circular No. 825/2/2006-CX:
The Tribunal dismissed the appeal of the Revenue on the ground that the authorization made by one Chief Commissioner for preferring the appeal in the event of a difference of opinion between the two members had no sanction of law. The High Court noted that at the relevant time, Circular No. 825/2/2006-CX permitted an appeal to be filed at the instance of one member of the Committee in case of a difference of opinion. However, with the amendment to Section 35E of the Act effective from 10-5-2008, the procedure required the Committee to state the points of difference to the Board of Central Excise, which would then direct the Commissioner to apply to the Tribunal. The High Court held that the appeal of the Revenue was not maintainable under the current law and thus sustained the Tribunal's decision to dismiss the Revenue's appeal.
Conclusion and Directions:
The High Court sustained the Tribunal's decision regarding the appeal of the Revenue but interfered with the Tribunal's determination concerning the assessees' appeals. The High Court remanded the matter to the Tribunal to scrutinize the assessees' claims on all relevant aspects, including the acceptance of secured payments as final investments. The Tribunal was directed to dispose of the appeals within 60 days, providing reasonable opportunities for hearing to the parties. The High Court also allowed the Tribunal to consider interim protection against coercive action by the Revenue if requested by the assessees. The appeal was disposed of accordingly, with no costs.
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2010 (6) TMI 802
Issues involved: Penalty imposed under Section 112 of Customs Act, 1962 for abetting in disposal of raw silks imported into India on the basis of Advance License contrary to license terms.
Summary:
The appellant was penalized with Rs. 1 lakh each in two orders under Section 112 of Customs Act, 1962 for abetting in the disposal of raw silks imported into India against license terms. The appellant argued that he did not deal with the goods liable for confiscation and hence the penalty was unjustified, citing previous Tribunal decisions. The Department argued that the Tribunal decisions cited by the appellant were not applicable due to the Supreme Court's decision in Sachindananda Banerji case. The Tribunal considered both arguments and observed that the issue at hand was the illegal disposal of goods contrary to law.
The Tribunal referred to the Supreme Court's observations in the Sachindananda Banerji case, emphasizing that dealing with prohibited goods includes any prior arrangement or agreement related to such goods. The Tribunal noted that the appellant's actions facilitated the disposal of imported goods in violation of license terms, making him actively involved in dealing with prohibited goods. The Tribunal also highlighted that mens-rea is not necessary for imposing penalties under Section 112 of the Customs Act, 1962.
After considering all arguments and circumstances, the Tribunal found no merit in the appeals but decided to reduce the penalties due to the appellant's age, financial situation, and the period over which the transactions occurred. The penalties were reduced to Rs. 50,000 in one case and Rs. 10,000 in the other.
*(Pronounced in open Court)*
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2010 (6) TMI 801
Issues involved: Whether deductions of payments made to sub-contractors are justified for assessment year 1994-95.
Summary:
The High Court of Kerala considered the appeal regarding the justification of allowing deductions of total payments made by the respondent to three sub-contractors. The Tribunal had allowed the claim based on the contract provision for payment to sub-contractors on receipt from the awarder, Cochin Port Trust. The appellant contended that the payment was voluntary without legal liability. The crucial question was whether the respondent actually made payments to sub-contractors during the relevant assessment year and if TDS was recovered on these payments. The Court noted that assessments of the same amounts in the hands of sub-contractors were not proven. The Tribunal's decision was based solely on the payment scheme in the contract, without considering the sub-contractors' income admission and tax payment. As there was no provision for sub-contractors to share the award amount in arbitration proceedings, the Court could not uphold the Tribunal's decision. The Court allowed the appeal, reversed the Tribunal's order, and remitted the matter to the Assessing Officer for verification of TDS deduction by the respondent and tax payment by sub-contractors. If TDS was recovered and assessments were made in the sub-contractors' hands, the department could not apply a different standard to the respondent. The Assessing Officer was directed to verify the TDS position and decide on allowing or disallowing the deductions accordingly.
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2010 (6) TMI 800
Issues Involved:
1. Unexplained investment in two cars.
2. Undisclosed investment in land purchased from Smt. Sarla Devi.
3. Undisclosed income in purchase of Plot No. 3D/46, NIT, Faridabad.
4. Undisclosed investment in purchase of land measuring 15 Kanal 4 Marlas in Village Pali.
5. Undisclosed investment in purchase of land from Smt. Sarla Devi & Shri Tek Chand.
6. Undisclosed investment in purchase of land in the name of Shri Mulak Raj Bhatia.
7. Income from money lending.
8. Undisclosed investment in plot No. 64, Neelam Bata Road, Faridabad.
9. Undisclosed income from real estate business.
10. Unexplained purchase of household goods.
11. Income from Lucky Car draw scheme.
12. Undisclosed commission income from chits business.
Issue-wise Detailed Analysis:
1. Unexplained investment in two cars:
The assessee contested the addition of Rs. 8,80,000 for alleged unexplained investment in two cars. The Tribunal noted that the Assessing Officer (AO) did not ask the assessee about these cars during the statement recorded on 26.4.1999, nor was any enquiry made from Dinesh Kumar or Subash Chander. The Tribunal remanded the issue back to the AO for fresh decision after detailed enquiries and providing the assessee an opportunity to cross-examine his brother Inderjit Singh Sabharwal.
2. Undisclosed investment in land purchased from Smt. Sarla Devi:
The AO added Rs. 5,00,000 based on an alleged agreement to purchase land from Smt. Sarla Devi. The Tribunal found no evidence supporting this claim, as no such agreement was found during the search. The CIT(A) deleted the addition, and the Tribunal upheld this decision, finding the AO's conclusions misplaced and misconceived.
3. Undisclosed income in purchase of Plot No. 3D/46, NIT, Faridabad:
The AO estimated the market value of the plot at Rs. 7,000 per sq. yard, resulting in an addition of Rs. 8,40,000. The Tribunal found no incriminating material indicating any extra payment and held that the addition based on market price estimation was unjustified. The CIT(A)'s deletion of the addition was upheld.
4. Undisclosed investment in purchase of land measuring 15 Kanal 4 Marlas in Village Pali:
The AO added Rs. 30,90,000 based on statements suggesting the land was purchased for Rs. 16 lacs per acre. The Tribunal noted the land was taken on lease for Rs. 3,000, and no material indicated an outright purchase. The CIT(A)'s deletion of the addition was upheld.
5. Undisclosed investment in purchase of land from Smt. Sarla Devi & Shri Tek Chand:
The AO added Rs. 10,00,000 based on statements from Tek Chand and Budh Ram. The Tribunal found no evidence linking the assessee to these transactions, and the CIT(A)'s deletion of the addition was upheld.
6. Undisclosed investment in purchase of land in the name of Shri Mulak Raj Bhatia:
The AO added Rs. 9,35,000 alleging Mulak Raj Bhatia was a benamidar of the assessee. The Tribunal found no evidence supporting this claim, and the CIT(A)'s deletion of the addition was upheld.
7. Income from money lending:
The AO added Rs. 6,61,261 based on entries in a seized diary. The Tribunal noted the AO added two zeros to the figures without basis and found no corroborative evidence. The CIT(A)'s deletion of the addition was upheld.
8. Undisclosed investment in plot No. 64, Neelam Bata Road, Faridabad:
The AO added Rs. 5,00,000 alleging the plot was a benami investment. The Tribunal found no evidence supporting this claim, and the CIT(A)'s deletion of the addition was upheld.
9. Undisclosed income from real estate business:
The AO added various amounts based on documents not recovered from the assessee. The Tribunal found the AO did not examine the assessee regarding these documents, and the CIT(A)'s deletion of the additions was upheld.
10. Unexplained purchase of household goods:
The AO added Rs. 98,000 for household goods. The Tribunal noted the assessee lived with his family, and household goods worth Rs. 30,000 were declared by the spouse. The CIT(A)'s deletion of the addition was upheld.
11. Income from Lucky Car draw scheme:
The AO added Rs. 43,27,400 based on statements and documents not linked to the assessee. The Tribunal found no evidence supporting the AO's conclusions, and the CIT(A)'s deletion of the addition was upheld.
12. Undisclosed commission income from chits business:
The AO added Rs. 20,41,050 alleging the assessee earned commission from chits. The Tribunal found no evidence supporting the AO's conclusions, and the CIT(A)'s deletion of the addition was upheld.
Conclusion:
The Tribunal upheld the CIT(A)'s deletions of various additions made by the AO, finding no evidence supporting the AO's conclusions in each case. The assessee's appeal was partly allowed for statistical purposes, and the revenue's appeal was dismissed.
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2010 (6) TMI 799
Issues involved: Appeal against CIT(A)'s order disallowing expenses u/s 143(3) for Asstt. Year 2005-06.
Details of the Judgment:
Issue 1: Disallowance of expenses
The AO disallowed 1/3rd of total expenses of &8377; 12,96,230 incurred by the assessee due to lack of supporting vouchers. The assessee explained that the vouchers were missing. The CIT(A) upheld the AO's decision. The assessee, a partnership firm in management consultancy, provided detailed expenses breakdown including establishment, repairs, staff welfare, telephone, tours, and vehicle running. Payments were made by cheques and cash, with names of recipients provided. The AO did not verify the expenses' genuineness despite details being furnished. The Tribunal found the ad hoc disallowance unjustified and deleted it, allowing the appeal.
Conclusion:
The Tribunal allowed the appeal, overturning the disallowance of expenses made by the AO and upheld by the CIT(A).
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2010 (6) TMI 798
Issues Involved:
1. Principle of natural justice violated.
2. Retraction of statements.
3. Addition of Rs. 1.50 crores.
4. Treating Smt Sushila Malge as benamidar.
Summary:
1. Principle of Natural Justice Violated:
The Tribunal noted that the Assessing Officer (A.O) did not follow the direction of the Hon ITAT passed on 11.1.2008, which specifically required the A.O to provide copies of statements and evidence to the assessee. The A.O's failure to furnish the statement recorded u/s 132(4) dated 14.7.1996 and other documents, despite repeated requests, was deemed a violation of the principles of natural justice. The Tribunal emphasized that the orders of the Tribunal are binding on all tax authorities and must be complied with.
2. Retraction of Statements:
The A.O made the addition of Rs. 1.50 crores based on a statement recorded u/s 132(4) on 14.7.1996, which the assessee subsequently retracted and clarified on 17.7.1996. The Tribunal noted that the A.O did not properly consider the retraction and clarification letters dated 17.7.1996 and 30.7.1996, which indicated that the initial statement was not binding.
3. Addition of Rs. 1.50 Crores:
The A.O estimated the undisclosed income of Rs. 1.50 crores, ignoring the details and explanations provided by the assessee regarding bank credit entries and loan confirmations. The Tribunal found that the determination of the undisclosed income was not based on the analysis of the evidence seized during the search operations but rather on the alleged offer made by the assessee in the statement given u/s 132(4) on 14.7.1996.
4. Treating Smt Sushila Malge as Benamidar:
The A.O treated the assessee's wife, Smt Sushila Malge, as a benamidar and assessed the income shown in her hands as the income of the assessee. The Tribunal found that the A.O failed to appreciate that Smt Sushila Malge had been assessed to tax for over ten years and merely because her husband managed her business affairs, it could not be concluded that she was a benamidar without any material evidence.
Conclusion:
The Tribunal set aside the assessment orders and restored the matter to the A.O with clear directions to frame the assessment de-novo after supplying the copies of the statements recorded on 13 and 14th July 1996 u/s 132(4) of the Act. The Tribunal also imposed a cost of Rs. 5000/- on the A.O for non-compliance with the Tribunal's specific directions and violation of judicial discipline. The appeals filed by both the assessees were allowed for statistical purposes.
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2010 (6) TMI 797
Issues Involved:1. Whether the profit arising on the sale of shares of Jubilant Organosys Ltd. (JOL) should be treated as 'Capital Gains' or 'Business Income'. Summary:Issue 1: Treatment of Profit Arising on Sale of SharesThe revenue's solitary grievance is that the Ld. CIT(A) erred in directing the AO to treat the profit arising on the sale of shares of JOL as 'Capital Gains' instead of 'Business Income' as held by the AO. Facts of the Case:The assessee, a non-banking financial company (NBFC) registered with the Reserve Bank of India, filed its return of income declaring a loss. The case was selected for scrutiny, and the AO observed that the assessee sold 2,09,500 shares of JOL, claiming a capital gain of Rs. 168,492,709/- as exempt u/s 10(38) of the Income Tax Act, 1961. The AO suspected that the assessee used a colorable device to evade tax by selling shares from the investment portfolio while keeping shares held as stock in trade unsold. AO's Findings:The AO did not accept the assessee's contention that the shares sold were from the investment portfolio. The AO treated the transaction as a business transaction, rejecting the claim of the assessee for treating the gain as long-term capital gain. Assessee's Contention:The assessee argued that it maintained two separate accounts for business and investment purposes. It submitted that the shares were acquired as investments, supported by board resolutions and accounting standards. The shares were valued at cost, not at the lower of cost or market value, indicating long-term investment. The sale profits were not reflected as turnover but as profit on sale of investment. CIT(A)'s Decision:The Ld. CIT(A) accepted the assessee's stand, noting that the shares sold were from the investment portfolio, giving rise to capital gains. The CIT(A) summarized the reasons for this conclusion, including the substantial shareholding in JOL since 2000-01, the valuation of shares at cost, and the objective of earning dividend income. Tribunal's Analysis:The Tribunal considered the rival contentions and the relevant sections of the Income Tax Act. It noted that shares held as investment qualify as a capital asset, and profit arising on their sale would be taxable as capital gain. The Tribunal referred to various judicial precedents, including the Hon'ble Supreme Court and High Courts, which supported the assessee's claim of maintaining separate accounts for investment and stock in trade. The Tribunal found that the AO did not provide evidence to contradict the assessee's claim and upheld the CIT(A)'s order, dismissing the revenue's appeal. Conclusion:The Tribunal concluded that the assessee's profit from the sale of shares of JOL should be treated as 'Capital Gains' and not 'Business Income'. The appeal of the revenue was dismissed. Order Pronounced:Order pronounced in the open court on 30.6.2010.
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2010 (6) TMI 796
Issues involved: Appeal against deletion of addition on account of TDS not deducted on transport expenses and error in auditable accounts.
Issue 1: Addition of TDS not deducted on transport expenses
The appeal was filed by the revenue against the deletion of an addition of Rs. 88,35,698/- made on account of TDS not deducted on transport expenses. The assessee, engaged in the business of tempo plying, claimed transport expenses in the Profit & Loss account. The Assessing Officer disallowed the expenses as no TDS was deducted on them. However, the Commissioner of Income Tax(Appeals) found that in the preceding year, the assessee was not liable to deduct TDS as per section 44AB. Therefore, the deletion of the addition was upheld as the assessee was not required to deduct TDS from the transport payments made. The appeal of the revenue was dismissed, confirming the decision of the Commissioner.
Issue 2: Error in auditable accounts
Another ground of appeal was the error in auditable accounts due to a clerical mistake by the accountant. The assessee claimed that the turnover and expenses were projected higher due to the mistake, and filed the return on presumptive taxation basis under section 44AE. The Commissioner considered the submission and found that the turnover figure was erroneous, given the volume of business. As the turnover was below Rs. 30,00,000/-, the provisions of section 194C read with section 40a(ia) were not applicable. The error in the accounts was attributed to the accountant, and the addition made by the Assessing Officer was deleted. The appeal of the revenue was dismissed, upholding the decision of the Commissioner.
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2010 (6) TMI 795
Issues involved: Whether the fee for design and engineering documentation received by the assessee company is taxable in India.
Summary:
Issue 1: Taxability of fee for design and engineering documentation
The appeal was against the order relating to the assessment year 1991-92, specifically on the taxability of the fee received by the assessee company for design and engineering services provided to establish a compressor house. The assessee claimed that the payment was not taxable under the Indian Income Tax Act as it was a transaction of sale of goods outside India. The AO and CIT (A) rejected this claim.
Issue 2: Offshore supply of goods
The Tribunal examined the clauses in the agreement between the assessee company and the purchaser, which indicated that the preparation and delivery of design and drawings were to take place in Japan. Citing the Supreme Court's decision in Ishikawajima Harima Heavy Industries Ltd. case, the Tribunal held that if all parts of the transaction occur outside India, the transaction cannot be taxed in India. As the design and engineering drawings were prepared and delivered in Japan, the transaction fell outside Indian taxation.
Issue 3: Nature of payment
The assessee argued that the payment for design and drawing constituted a plant and not a fee for technical services. They relied on Supreme Court decisions to support this argument. The Tribunal agreed with this view, stating that since the payment was for the outright purchase of design and engineering drawings, it did not fall under the definition of fee for technical services in the Income Tax Act.
Issue 4: Comparison with precedent
The Tribunal distinguished the present case from a previous decision of the Delhi ITAT Bench, where design and drawing charges were considered fee for technical services. In that case, it was held that the fee could be taxed in India if some part of the work originated from Indian territories. However, in the current case, since the preparation and delivery of the design and engineering drawings occurred outside India, the amount received by the assessee could not be subjected to tax in India.
In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the order of the CIT (A) and directing the AO to delete the addition on the issue of taxability of the fee for design and engineering documentation.
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2010 (6) TMI 794
Issues involved: The appeal against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the levy of penalty u/s 271(1)(c) of the IT Act for assessment year 2001-02.
Summary:
Issue 1: Disallowance of expenses
The Assessing Officer disallowed expenses amounting to &8377; 4722756/- related to the pre-commencement period of the business. The Ld. Commissioner of Income Tax (Appeals) partially allowed relief to the assessee, leading to a balance addition of &8377; 347221. Penalty proceedings were initiated based on the disallowed expenses, with the Assessing Officer justifying the penalty citing enduring benefits derived by the assessee. The Ld. Commissioner of Income Tax (Appeals) upheld the penalty, considering the nature of expenses and referring to relevant case law.
Issue 2: Penalty imposition
The Ld. Commissioner of Income Tax (Appeals) observed that the penalty was justified due to the nature of expenses and upheld the penalty on prior period expenses and website development. The assessee contended that the expenses were revenue in nature, but the penalty was imposed based on false claims. The Ld. Commissioner of Income Tax (Appeals) directed the re-computation of penalty u/s 271(1)(c) by excluding a specific amount related to website development expenses incurred after a certain date.
Issue 3: Appeal before ITAT
The assessee appealed against the order, arguing that the expenses were not bogus and there were differing opinions on their treatment. The ITAT found that the nature of the expenses allowed for two possible interpretations and concluded that the assessee cannot be penalized u/s 271(1)(c) for holding a legitimate claim. The ITAT referenced relevant case law to support its decision and ultimately allowed the appeal, deleting the penalty imposed.
In conclusion, the ITAT ruled in favor of the assessee, highlighting the importance of considering all relevant circumstances before imposing penalties for failure to meet statutory obligations.
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2010 (6) TMI 793
Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of Section 94(7) of the Income Tax Act, 1961.
3. Bona fide nature of the assessee's claim.
4. Interpretation and application of various judicial precedents.
Detailed Analysis:
1. Deletion of Penalty Levied Under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue in this case is whether the penalty of Rs. 3,14,478/- levied by the Assessing Officer (AO) under Section 271(1)(c) for concealment of income was justified. The AO initiated penalty proceedings after detecting that the assessee had not applied the provisions of Section 94(7) while calculating its income, resulting in an addition of Rs. 8,59,817/-. The AO concluded that the assessee failed to disclose material facts and imposed the penalty. The CIT(A) deleted the penalty, considering the issue as debatable and involving a difference of opinion. However, the Tribunal found that the assessee did not furnish full and true particulars relating to the claim and upheld the AO's imposition of the penalty.
2. Applicability of Section 94(7) of the Income Tax Act, 1961:
Section 94(7) deals with disallowance of losses arising from transactions in securities or units where the dividend or income on such securities or units is exempt. The AO noted that the assessee, a stockbroker, did not apply the provisions of Section 94(7) while filing its return, despite being aware of them. The Tribunal observed that the assessee furnished details of dividend and bonus stripping only after being queried by the AO, indicating that the claim was not made suo moto. The Tribunal found no ambiguity in the provisions of Section 94(7) and concluded that the assessee's failure to apply these provisions was not bona fide.
3. Bona Fide Nature of the Assessee's Claim:
The assessee argued that the loss was due to market movements and not intended to adjust with other profits. However, the Tribunal noted that the assessee did not disclose the loss on sale of shares in its return or audited accounts, and only provided details after the AO's inquiry. The Tribunal concluded that the claim was not bona fide and that the assessee's conduct was deliberate, aimed at claiming double benefits by exempting dividend income while setting off the loss on sale of shares.
4. Interpretation and Application of Various Judicial Precedents:
The Tribunal considered various judicial precedents cited by both parties:
- Reliance Petroproducts Pvt. Ltd.: The Tribunal distinguished this case, noting that the assessee in the present case did not furnish full and true particulars relating to the claim, unlike in Reliance Petroproducts.
- Haryana Warehousing Corporation and Siddharatha Enterprises: The Tribunal found these judgments inapplicable as the facts differed, particularly noting that the assessee in the present case did not disclose the loss on sale of shares in its return or audited accounts.
- KP Madhusudhanan vs. CIT: The Tribunal relied on this judgment, which supports the imposition of penalty when the assessee fails to offer a bona fide explanation for not applying the provisions of the Act.
The Tribunal also criticized the CIT(A) for incorrectly interpreting the Tribunal's decisions and for concluding that the issue was debatable without providing supporting material.
Conclusion:
The Tribunal reversed the order of the CIT(A) and restored the AO's order, concluding that the penalty under Section 271(1)(c) was justified. The Tribunal emphasized that the assessee's claim was not bona fide, and the provisions of Section 94(7) were clear and unambiguous. The appeal filed by the revenue was allowed.
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2010 (6) TMI 792
Issues:
1. Dropping of penalty under Section 11AC by the Commissioner (Appeals).
Analysis:
The appeal was filed by the Revenue against the dropping of the penalty of Rs. 2,08,253/- under Section 11AC by the Commissioner (Appeals). The case involved the clandestine removal of goods without payment of Central Excise duty by the respondents, who were engaged in the manufacture of Cast Iron Casting and Cast Steel Castings. The Preventive Officers visited the factory premises and recorded statements indicating the evasion of duty. The show-cause notice was issued for demanding duty, interest, and penalty under Rule 25 of Central Excise Rule 2002 read with Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) reduced the duty demand but set aside the penalty under Section 11AC based on the decision of Machino Montell (I) Ltd. 2004 (62) RLT 709, which stated that if duty is paid before the issuance of the show-cause notice, no penalties are applicable under Section 11AC.
The Revenue contended that there was suppression of fact with intent to evade payment of duty, citing the decision of the Hon'ble Apex Court in Union of India vs. Rajasthan Spinning & Weaving Mills. The Revenue argued that mandatory penalty under Section 11AC should be imposed if there is evidence of duty evasion. On the other hand, the respondent's advocate argued that the show-cause notice did not propose a penalty under Section 11AC, relying on the case of Schrader Duncan Ltd. vs. CCE Mumbai III. This case highlighted that when a show-cause notice involves Rule 25 of the Central Excise Rules, 2002, no penalty can be levied under Section 11AC.
Upon examination of the show-cause notice, it was found that there was no proposal to penalize the respondent under Section 11AC, aligning with the findings in the Schrader Duncan Ltd. case. The Tribunal upheld that when there is a proposal under Rule 25, no penalty can be imposed under Section 11AC. The Tribunal concluded that penalties under Section 11AC should not be imposed on the respondent, following the precedent set by the cited case. Consequently, the impugned order dropping the penalty was upheld, and the appeal filed by the Revenue was rejected.
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2010 (6) TMI 791
Issues Involved:
1. Sustaining addition as unexplained investment based on DVO's report.
2. Disallowance of expenses.
3. Acceptance of assessee's submission regarding discrepancies in DVO's report.
4. Deduction in respect of self-supervision.
Summary:
1. Sustaining Addition as Unexplained Investment Based on DVO's Report:
The assessee contested the addition of Rs. 2,46,515 sustained by the CIT(A) as unexplained investment, arguing that the investment in the construction of 'Jagat Hospital' was fully recorded in the books of account. The AO had referred the matter to the DVO, who estimated the cost of investment at Rs. 80,31,500 against the disclosed Rs. 41,84,472. The assessee objected to the DVO's valuation, claiming it was erroneous and not reflective of the actual market prices. The Tribunal noted that the AO did not find any specific discrepancies in the assessee's records and relied solely on the DVO's report. Citing the jurisdictional High Court's decision in CIT v. Meerut Cement Co. (P) Ltd., the Tribunal held that the expenditure shown in the books of account should be accepted if the DVO's report is proven unreliable. Consequently, the addition was deleted.
2. Disallowance of Expenses:
Ground No. 4 related to disallowance of expenses was not pressed by the assessee and hence dismissed.
3. Acceptance of Assessee's Submission Regarding Discrepancies in DVO's Report:
The Revenue's appeals (ITA Nos. 245 and 246/Luck/2010) contested the CIT(A)'s acceptance of the assessee's claims regarding discrepancies in the DVO's valuation and the deduction for self-supervision. Since the Tribunal deleted the additions in the assessee's appeals, the Revenue's grounds became infructuous and were dismissed.
4. Deduction in Respect of Self-Supervision:
The CIT(A) had accepted the assessee's claim for a 10% deduction for self-supervision instead of the 7.5% allowed by the DVO. The Tribunal's decision to delete the additions rendered this issue moot.
Conclusion:
The Tribunal allowed the assessee's appeals partly, deleting the additions based on the DVO's report, and dismissed the Revenue's appeals as infructuous.
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2010 (6) TMI 790
Issues Involved:
1. Deletion of quantum addition.
2. Reopening of assessment.
Summary:
1. Deletion of Quantum Addition:
The revenue challenged the deletion of Rs. 1,03,36,300/- in the case of M/s. Lhasa Construction Pvt. Ltd. and Rs. 1,00,86,300/- in the case of Smt. Madhu Arora. The AO alleged that the purchasers understated the purchase price of a property, leading to a reference to the DVO, who valued the property at Rs. 2,84,72,600/-. The difference was added as unexplained investment in the hands of the purchasers and as undisclosed business income for M/s. Lhasa Construction. The Tribunal upheld the CIT(A)'s deletion of these additions, noting that no material evidence was provided by the AO to prove that any amount over and above the declared sale consideration was paid. The Tribunal emphasized that the burden of proving understatement or concealment lies with the revenue, as held in the case of K.P. Varghese vs. ITO, 131 ITR 597.
2. Reopening of Assessment:
The revenue also contested the CIT(A)'s decision that the reopening of assessment was incorrect. The AO had issued a notice u/s 148 based on information that the sale proceeds of a property were understated. The CIT(A) held that the reopening was invalid, citing that the AO did not dispose of the objections filed by the assessee against the reopening. The Tribunal, however, found that there was sufficient information for the AO to form a prima facie opinion that income had escaped assessment. The Tribunal reversed the CIT(A)'s finding on this issue, allowing the ground of appeal related to the reopening of assessment.
Conclusion:
The Tribunal dismissed ITA No. 1197/Del/2007 (Smt. Madhu Arora) and partly allowed ITA No. 3806/Del/07 (M/s. Lhasa Construction Pvt. Ltd.), upholding the deletion of quantum addition but reversing the CIT(A)'s decision on the reopening of assessment.
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2010 (6) TMI 789
Issues Involved: Appeal against order denying exemption u/s.11 for holding exhibitions, whether activity is incidental to the objects of the Trust.
Issue 1: Denial of Exemption u/s.11 for Holding Exhibitions
The appeal was filed by the revenue against the order of the ld. CIT(A) for the Assessment Year 2005-06, where the assessee, a company registered u/s.25 of the Companies Act, 1956, organized Tooltech Exhibition to promote the machine tool industry in India. The Assessing Officer observed that the Income Tax Department had previously denied exemption u/s.11 for similar activities. The Assessing Officer, despite the assessee maintaining separate books of accounts for the exhibition, treated the income as business income, stating that the activity was not incidental to the Trust's objects. On appeal, the ld. CIT(A) held that holding exhibitions was a business activity incidental to the Trust's objects, in line with previous ITAT orders. The revenue challenged this decision, but both parties agreed that the issue was covered in favor of the assessee by previous Tribunal orders for different assessment years.
Issue 2: Activity of Holding Exhibitions as Incidental to Trust's Objects
The Tribunal, in the assessee's own case for Assessment Year 1998-99, had previously held that holding exhibitions for the trade and industry of machine tools in India was incidental to the Trust's objects. Citing consistency with previous Tribunal orders, the Tribunal upheld the ld. CIT(A)'s decision, emphasizing that the conditions of Section 11(4A) were fulfilled as separate books were maintained for the exhibition activity. The Tribunal dismissed the revenue's appeal, stating that the activity was indeed incidental to the Trust's objects. The assessee's cross objections were also rejected based on the consistent view of the Tribunal on this issue.
Conclusion
The Tribunal, based on past precedents and the consistent view on the issue, upheld the ld. CIT(A)'s decision that holding exhibitions was a business activity incidental to the Trust's objects, entitling the assessee to exemption u/s.11 of the Income Tax Act, 1961. Both the revenue's appeal and the assessee's cross objection were dismissed, affirming the decision in favor of the assessee.
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2010 (6) TMI 788
Issues involved: The judgment involves appeals filed by the revenue against separate orders of the CIT (A)-II, Hyderabad for the assessment years 2002-03 and 2004-05, addressing issues related to sales commission, processing charges, treatment of other incomes, computation of deductions under sections 80HHC, 80IA, and 80IB, and treatment of non-compete fees.
Sales Commission Issue: The appeal addressed the addition of sales commission paid to foreign agents without TDS under section 40(a)(ia) of the Act. The CIT(A) deleted the addition, citing Circular 786 dated 17-2-2000, which exempts commission paid directly to non-resident agents for services abroad from TDS. The Tribunal upheld the CIT(A)'s decision, stating that the case law cited by the Departmental Representative was not applicable as the payment was made directly to non-resident agents.
Processing Charges Issue: The issue pertained to the treatment of processing charges in computing the deduction under section 80HHC of the Act. Both parties agreed that the matter was settled in favor of the department by the decision of the Bombay High Court in the case of Ajanta Pharma Ltd., Vs ACIT, and others reported in 295 ITR 218. The Tribunal allowed the ground raised by the revenue based on this precedent.
Treatment of Other Incomes Issue: This issue involved the treatment of foreign exchange gains and miscellaneous income while computing deductions under sections 80IA and 80IB of the Act. The Tribunal preferred to follow a decision in favor of the assessee from a previous assessment year, citing that the gain on foreign exchange arose from exports of goods and not on the purchase of capital goods. Consequently, the Tribunal confirmed the orders of the CIT(A) on this issue.
Computation of Deductions Issue: The issue related to the computation of deductions under sections 80HHC, 80IA, and 80IB after reducing the claim of deduction under section 80IA and 80IB from the adjusted profit for 80HHC calculation. The Tribunal referred to a previous case to explain the legislative intent to prevent repetitive deductions on the same profit under different provisions. Following this guidance, the Tribunal directed the matter back to the assessing officer for proper computation of deductions, treating the revenue's ground as allowed for statistical purposes.
Non-Compete Fees Issue: The final issue concerned the treatment of non-compete fees received by the assessee company as taxable capital gain. The Tribunal ruled in favor of the assessee, citing a decision from a previous case and the inapplicability of a specific provision introduced in the Income-tax Act in 2003 to the assessment year in question. Consequently, the ground raised by the revenue was dismissed.
Conclusion: Both appeals filed by the revenue were treated as partly allowed for statistical purposes, with the Tribunal providing detailed reasoning and legal interpretations for each issue addressed in the judgment.
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2010 (6) TMI 787
Addition u/s 68 - Unexplained share application money - search and seizure operation - creditworthiness and genuineness of the shareholders - Third Member Order - difference of Opinion between learned Members - Whether, the learned Vice President is correct in confirming the order of the CIT(A) deleting the addition of ₹ 5,00,000 made by the Assessing Officer on substantive basis on account of unexplained share application money from one company, or the issue is to be restored to Assessing Officer for fresh consideration as opined by the ld Accountant Member?
learned Vice President - HELD THAT:- We are of the view that there is no material to disturb the order of the first appellate authority. It is true that some of the evidences were not before the Assessing Officer. That alone is not sufficient to remand the matter back to the file of the Assessing Officer. Assessee made request to admit additional evidence and it was accepted and remand report was called for. The registration of the Companies is evidenced by the Registrar’s certificate issued by the Registrar of Companies. The share application is also reflected in their returns. The allotment of share is also reflected from the share allotment done by the assessee.
From the Schedule 3, i.e., investment in shares by this companies, which appears that they had their holding, which they had applied for shares from among other companies, which is reflected and was before the competent authorities, which was produced along with the return and this fact is not denied. All these indicate the existence of companies. Registration of the companies cannot be denied in the light of the above facts, merely because in case of certain companies when the enquiry conducted, the details were not forthcoming ipso facto coming to the conclusion that the application and allotment of shares is false.
Thus, we are of the view that there is no material before us to disturb the order of the learned first appellate authority.
The appeal by the revenue on this ground fails.
Deletion of the addition on substantive basis on account of explanation of share application money from one company - Assessee explained that this was also a part of share application money. In the absence of any clinching evidence to the contrary there is no reason to interfere with the order of learned first appellate authority. Hence, appeal by the revenue on both grounds fails and it is dismissed.
In the result, the appeal of the revenue and cross-objection of the assessee is dismissed.
ld. Accountant Member, wrote the dissent, opined that the matter needs to be restored to the Assessing Officer for fresh consideration.
Third Member Order - I have carefully examined the above documents, which are available in assessee’s Paper Book filed before the Tribunal. In my opinion, the assessee has discharged the onus which lay upon him u/s 68 of the Act. It is observed that the ld. CIT(A) has also examined the documentary evidences referred to above furnished by the assessee before him and after examining the same, the ld. CIT(A) came to the conclusion that the shareholding has to be accepted as genuine.
The ld. CIT(A) and the ld. V.P. have examined the question of identity, creditworthiness and genuineness of each of the shareholders. Even the documentary evidence referred to above shows that the assessee has offered an explanation about the nature and source of the sum found credited in its books and the explanation is satisfactory. The assessee has not only established the identity of each of the shareholders but has also proved that each of them are income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their income-tax returns as well as in their balance sheets. Thus, no addition is called for.
Thus, I agree with the order of the ld. V.P. in confirming the deletion of addition of ₹ 20 lakhs made by the Assessing Officer on protective basis and also in confirming the deletion of addition of ₹ 5 lakhs made by the Assessing Officer on substantive basis on account of unexplained share application money.
The matter will now go to the Division Bench to pass order as per majority view.
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2010 (6) TMI 786
Issues involved: Interpretation of Rule 16 of Central Excise Rules, 2002 regarding clearance of waste & scrap generated from rejected finished goods on which Cenvat Credit was taken.
Summary:
The Appellant, engaged in manufacturing BOPP films, received rejected final products in their factory for reprocessing after payment of duty. They availed Cenvat Credit under Rule 16 of Central Excise Rules, 2002. The rejected goods were processed, resulting in waste & scrap, which was used to manufacture Reprocessed Granules (RPG). The RPG was either used internally for duty-paid BOPP films or cleared duty-free under an exemption. The department contended that the waste & scrap, cleared on payment of duty, were made from rejected goods on which Cenvat Credit was taken. The department demanded duty payment equal to the Cenvat Credit taken on the rejected goods. No demand was raised on the initial rejected BOPP films. A duty demand of Rs. 72,244 was confirmed, with a penalty under Rule 25 of Central Excise Rules, 2002.
The Appellant argued that the issue was settled in their favor in a previous Tribunal decision (Order No.A/72/WZB/AHD/2010). The Revenue accepted this position. Following the precedent set in the earlier case, the Tribunal set aside the impugned order, allowing the appeal and granting relief to the Appellant.
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