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2011 (10) TMI 663
Treatment to loss - Held that:- No infirmity in the order of CIT(A) treating the loss from share trading as speculation loss and the same is therefore upheld.
Levy of interest u/s. 220(2) - Held that:- The original assessment order has been set aside by the Tribunal and matter restored to the Assessing Officer for fresh assessment and therefore in view of the circular of CBDT No.334 Dt.3.4.1982 , the interest can be levied only from the date of default of the demand notice issued in pursuance of the fresh assessment order. The order of CIT(A) holding that interest under section 220(2) has to be levied from the date of default as per the original assessment order therefore cannot be sustained.
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2011 (10) TMI 662
Issues Involved:
1. Deletion of disallowance u/s 14A of the Income Tax Act.
2. Confirmation of disallowance towards Administrative Expenses.
Summary:
Issue 1: Deletion of disallowance u/s 14A of the Income Tax Act
The Revenue appealed against the deletion of disallowance of Rs. 3,08,64,359 out of interest and Rs. 1,06,16,355 out of indirect expenses by the CIT (Appeals). The Assessing Officer (AO) had invoked the provisions of section 14A read with Rule 8D, disallowing expenses related to earning exempt income. The CIT (Appeals) noted that there was no increase in investments covered under section 14A, and the investments were made from surplus funds and internal accruals, not from borrowed funds. The CIT (Appeals) also referenced the Tribunal's decision in the assessee's own case for the assessment year 2004-05, which was affirmed by the Hon'ble Punjab & Haryana High Court, confirming that no disallowance u/s 14A was warranted as the investments were made from the assessee's own funds. The Tribunal upheld the CIT (Appeals)'s findings, noting that the Revenue did not controvert these findings.
Issue 2: Confirmation of disallowance towards Administrative Expenses
The assessee's Cross Objection challenged the confirmation of disallowance of Rs. 2,00,000 towards Administrative Expenses. The Tribunal referred to the Hon'ble Bombay High Court's decision in Godrej & Boyce Mfg. Co. Ltd. v. DCIT, which held that Rule 8D applies prospectively from assessment year 2008-09 and that the AO could apportion expenses related to exempt income even without Rule 8D. The Tribunal also cited the Hon'ble Punjab & Haryana High Court's decision in CIT v. Hero Cycles Ltd., which supported the non-sustainability of disallowance u/s 14A when investments were made from dividend proceeds. However, the Tribunal upheld the disallowance of Rs. 2,00,000 as it was deemed relatable to earning exempt income.
Conclusion:
The appeal of the Revenue and the Cross Objection of the assessee were both dismissed. The Tribunal upheld the CIT (Appeals)'s deletion of disallowance u/s 14A and confirmed the disallowance of Rs. 2,00,000 towards Administrative Expenses.
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2011 (10) TMI 661
The Bombay High Court dismissed a motion seeking condonation of delay in filing an appeal by the Commissioner of Customs. The court deemed the motion as an abuse of the process of law and imposed costs of Rs. 3,000.
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2011 (10) TMI 660
Issues involved: Application for waiver of pre-deposit of duty, interest, and penalty u/s Section 112(a) and Section 114A of the Customs Act, regarding the import of Hydraulically Operated Self Propelled Piling Rig under Notification No. 21/2002-Cus. for road construction diverted to Delhi Metro Rail Project.
The applicant imported a rig under Notification No. 21/2002-Cus. for road construction but was diverted to the Delhi Metro Rail Project, leading to a dispute on the intended use of the imported goods.
The applicant's argument revolves around the duty already being paid during the investigation and the discrepancy in the imposition of penalty under Section 114A of the Customs Act, which was beyond the scope of the show-cause notice invoking Section 112(a).
Regarding interest, the applicant contests the demand based on alleged violation of post-import conditions, claiming the rig was indeed used for road construction during the implementation of the metro rail project in Delhi.
On the other hand, the Revenue asserts that the applicant breached the conditions of the notification, justifying the imposition of interest and penalty.
The Tribunal acknowledged the duty payment in 2007 and the dispute over the notification conditions, leading to a prima facie merit in the applicant's case. Consequently, the pre-deposit of interest and penalty was waived for the appeal hearing, with recovery stayed during the appeal's pendency, thereby allowing the stay petition.
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2011 (10) TMI 659
Issues Involved:
1. Addition on account of undisclosed sales.
2. Addition on account of compounding fees for illegal mining.
3. Denial of benefits u/s 80IB of the Income Tax Act.
Summary:
Issue 1: Addition on account of undisclosed sales
The assessee challenged the addition of Rs. 45,46,457/- for undisclosed sales based on assumptions and third-party reports. The ITAT noted that similar cases involving other assessees from the same area had been remanded to the Assessing Officer (AO) for fresh adjudication. The Tribunal decided to restore the issue to the AO for re-adjudication, considering the outcome of the survey conducted by the Forest Department, PWD, and Revenue Department, and the pending appeal before the Divisional Commissioner, Nainital. The AO is to provide a reasonable opportunity of being heard to the assessee.
Issue 2: Addition on account of compounding fees for illegal mining
The assessee contested the addition of Rs. 25,000/- for compounding fees imposed by the District Magistrate, Nainital, which had not been paid or debited in the books. The ITAT, following the same rationale as in Issue 1, restored this issue to the AO for fresh adjudication, providing the assessee an opportunity to be heard.
Issue 3: Denial of benefits u/s 80IB of the Income Tax Act
The assessee argued that the benefits of section 80IB were not claimed in the original return due to inadvertence but should be allowed. The ITAT referenced multiple case laws and circulars emphasizing that the AO should guide the assessee in claiming eligible reliefs and ensure fair assessment. The Tribunal cited precedents where courts held that statutory exemptions should be granted even if not claimed initially. Consequently, the ITAT restored this issue to the AO for reconsideration and decision as per law.
Conclusion:
The appeal was allowed for statistical purposes, with all issues remanded to the AO for fresh adjudication, ensuring the assessee is given a fair opportunity to present their case. The order was pronounced in open court on October 25, 2011.
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2011 (10) TMI 658
Issues involved:
The appeal by the Revenue u/s 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal regarding the entitlement of additional depreciation u/s 32(1)(iia) for the assessment year 2007-08 in relation to the activity of manufacturing ready mix cement (RMC) by the respondent/assessee.
Summary:
Issue 1: Entitlement to Additional Depreciation
The substantial question of law framed was whether the assessee is engaged in the activity of manufacturing RMC and thus entitled to additional depreciation u/s 32(1)(iia) of the Income Tax Act, 1961. The tribunal's decision was based on a previous order for the assessment year 2004-05. However, the Revenue contended that the tribunal did not consider whether the RMC was used for captive use or sold to third parties, which is crucial as per the judgment in NC Budharaja. It was acknowledged by both parties that if the RMC was used for the assessee's own construction activities, additional depreciation cannot be allowed, but if it was sold as a commodity, then the assessee is entitled to additional depreciation. The tribunal was directed to re-examine the matter on merits after determining whether the RMC was sold to third parties or captively used. The decision was partly in favor of the Revenue, and the matter was remitted to the tribunal for a fresh decision based on the directions provided.
Conclusion:
The decision in a related appeal equally applied to the present case, and the matter was remitted to the tribunal for a fresh decision based on the directions given in the previous appeal. The appeal was disposed of with no costs incurred.
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2011 (10) TMI 657
Entitled to additional depreciation under Section 32(1)(iia) - Held that:- Tribunal has not dealt with and examined the question whether or not the RMC was sold by the assessee to third party buyers or was used by the assessee themselves at their construction sites. Without deciding this primary issue/aspect the tribunal could not have decided the controversy and the issue raised.
Accordingly, the impugned findings in paragraph 7 are set aside with the direction to the tribunal to re-examine the matter on merits after deciding the question whether the RMC was sold to third parties, or was captively used/utilized. The respondent assessee will be entitled to additional depreciation on the machinery/equipment used for the said activity/purpose only if the RMC was sold to third parties. In case, RMC was partly sold and partly self utilized and the effect thereof on the question of additional depreciation will be also examined by the tribunal.
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2011 (10) TMI 656
Issues Involved:
1. Treatment of royalty expenses as revenue or capital expenditure.
2. Applicability and extent of disallowance under Section 14A.
3. Allowability of provision for ex-gratia payments.
4. Disallowance of diminution in value of investments.
5. Verification of claims regarding amounts credited to P&L account.
6. Allowability of provision for derivative contracts.
7. Deduction of amounts transferred to Statutory Reserve under RBI Act.
8. Allowability of bad debts written off.
9. Computation of income under Section 115JB.
Detailed Analysis:
1. Treatment of Royalty Expenses:
The Tribunal upheld the CIT(A)'s decision to treat Rs. 79,24,250/- paid as royalty to Shriram Chits & Investments Pvt. Ltd. for using its logo as revenue expenditure. The CIT(A) relied on the Tribunal's earlier order and the Supreme Court decision in CIT vs Wavin (India) Ltd, which clarified that non-exclusive and non-transferable rights of technical information do not constitute acquisition of an asset. The Supreme Court's decision in M/s Jonas Woodhead & Sons (India) Ltd vs CIT was deemed distinguishable due to different facts. Consequently, the appeal on this issue was dismissed.
2. Applicability and Extent of Disallowance under Section 14A:
The CIT(A) restricted the disallowance under Section 14A to Rs. 4,23,548/- from Rs. 6,23,548/- disallowed by the AO, based on the Bombay High Court's ruling in Godrej Boyce Mfg Co, which stated that Rule 8D is applicable from AY 2008-09 onwards. The Tribunal upheld this decision, noting no contrary decision from the Jurisdictional High Court or Supreme Court. The cross-objection by the assessee was allowed to the extent of correcting the disallowance to Rs. 3,73,548/-.
3. Allowability of Provision for Ex-Gratia Payments:
The Tribunal agreed with the CIT(A) that the provision for ex-gratia payments amounting to Rs. 3,38,948/- was an ascertained liability and allowable under Section 37 of the Act. This decision was supported by the Supreme Court ruling in Rotork Controls India P. Ltd vs CIT, which allowed provisions for warranty claims. The appeal on this issue was dismissed.
4. Disallowance of Diminution in Value of Investments:
The CIT(A) restricted the disallowance to Rs. 9,36,400/- from Rs. 15,56,535/- claimed by the assessee. The Tribunal found that government securities held to comply with SLR requirements were to be treated as stock-in-trade, following the Supreme Court's decision in UCO Bank and Chainrup Sampathram. The remaining amount was disallowed as it did not qualify as stock-in-trade.
5. Verification of Claims Regarding Amounts Credited to P&L Account:
The CIT(A) directed the AO to verify the assessee's claim that Rs. 1,69,96,159/- credited to the P&L account was already taxed in earlier years. The Tribunal upheld this direction, citing the Delhi High Court's decision in CIT vs Industrial Finance Corporation of India Ltd, which allowed such claims. The Supreme Court's decision in Goetz (India) Ltd vs CIT was noted to apply only to the AO, not the Tribunal.
6. Allowability of Provision for Derivative Contracts:
The Tribunal upheld the CIT(A)'s decision to allow Rs. 15,02,237/- as provision for derivative contracts, considering them as hedge transactions and revenue loss. The Delhi High Court's decision in CIT vs Industrial Finance Corporation of India Ltd supported this view. The Tribunal rejected the Revenue's reliance on Goetz (India) Ltd vs CIT, noting the CBDT Circular No.14XL-35 of 1955, which mandates assisting taxpayers in claiming due reliefs.
7. Deduction of Amounts Transferred to Statutory Reserve under RBI Act:
The Tribunal followed its earlier orders in the assessee's own cases, allowing the deduction of amounts transferred to the Statutory Reserve under Section 45 IC of the RBI Act. The CIT(A)'s disallowance was reversed, noting that the transfer was mandatory and not an application of income.
8. Allowability of Bad Debts Written Off:
The Tribunal allowed the assessee's claim for bad debts written off, citing the Supreme Court's decisions in Vijaya Bank vs CIT and TRF Ltd vs CIT, which clarified that actual write-off in the books suffices for deduction under Section 36(1)(vii). The CIT(A)'s disallowance was reversed.
9. Computation of Income under Section 115JB:
The Tribunal allowed the assessee's claim for deduction of amounts transferred to the Reserve Fund under Section 115JB, following its earlier orders in the assessee's own cases. The CIT(A)'s disallowance was reversed, noting that the amounts did not form part of the real income.
Conclusion:
The appeals by the Revenue were dismissed, and the cross-objections and appeals by the assessees were allowed. The Tribunal's decisions were based on established precedents and legal principles, ensuring compliance with judicial rulings and statutory provisions.
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2011 (10) TMI 655
Issues involved: Determination of penalty under section 271(1)(c) u/s 80-O of the Income Tax Act, 1961 for assessment years 1994-95 and 1995-96.
Summary:
Issue 1: Claim of deduction under section 80-O on gross receipts or net receipts
The assessee claimed deduction under section 80-O @ 50% of entire foreign receipts and restricted the claim to gross total income. The Assessing Officer reopened assessment and held that deduction is allowable only on net receipts. The Commissioner (Appeals) and Tribunal upheld this view. Penalty u/s 271(1)(c) was levied, but Commissioner (Appeals) cancelled it citing conflicting decisions and debatable nature of the issue. The Tribunal agreed, noting conflicting decisions and constitution of a Special Bench. The Tribunal found no infirmity in the cancellation of penalty, citing the judgment in Reliance Petroproducts Pvt. Ltd. Consequently, Revenue's appeals were dismissed.
Issue 2: Justification for cancellation of penalty
The Revenue argued that the issue was not debatable and that the assessee did not furnish any explanation. The assessee contended that the issue was debatable, citing various judgments in their favor. The Tribunal found the issue to be debatable, considering conflicting decisions and the assessee's disclosure of the claim in its income computation. The cancellation of penalty was upheld based on the judgment in Reliance Petroproducts Pvt. Ltd.
Separate Judgement:
No separate judgment was delivered by the judges in this case.
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2011 (10) TMI 654
Issues involved: Appeal against order related to computation of deduction u/s 80 HHC in respect of DEPB credit, following Special Bench decision in Topman Exports case, challenge by Revenue in High Court, reversal of decision by Bombay High Court.
Computation of deduction u/s 80 HHC: The appeal was filed by the assessee against the order of CIT(A) regarding the computation of deduction u/s 80 HHC in respect of DEPB credit. The Tribunal relied on the Special Bench decision in the Topman Exports case and directed the Assessing Officer (A.O.) to modify the order. The Hon'ble High Court of Delhi noted that the Tribunal had followed the Special Bench decision, which was subsequently overruled by the Bombay High Court in CIT vs. Kalpataru Colours and Chemicals. Consequently, the High Court set aside the Tribunal's order and remitted the cases back to the Tribunal for a fresh decision based on the factual position. The issue was restored back to the A.O. for verification and a speaking order after giving the assessee a reasonable opportunity to be heard.
Decision: The Tribunal allowed the appeal of the assessee for statistical purposes, pronouncing the order in the Open Court on 25th October 2011.
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2011 (10) TMI 653
Disallowance u/s 14A - Held that:- Rule 8D is not retrospective in its operation, in the light of decision of Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT ]. Even under section 14A of the Act reasonable expenditure, which was necessary for the purpose of earning tax free income has to be considered for disallowance. In the instant case, as rightly pointed out by the learned Counsel, the expenditure incurred by the assessee was only to run the day-to-day activity and expenditure such as listing fees, filing fees, audit fees, appeal fees, etc., cannot be considered to be having any nexus with the earning of tax free income. Under the circumstances, by respectfully following the decision of the ITAT, ‘F’ Bench (supra), we hold that adhoc disallowance of ₹ 37,512/- made by the Assessing Officer is not in accordance with law.
Deduction towards business expenditure - commencement of business - Held that:- It is well settled that in order to claim deduction towards business expenditure it is not necessary that an assessee has to earn business income in the same year so long as it can be shown that the company intends to continue its activities. The expenditure reflected in the assessment year clearly indicate that these are the basic expenditure in order to continue its status as a company and in the absence of proving that the assessee, by its conduct, had taken a decision not to carry on its business forever the minimum expenditure claimed by the assessee cannot be disallowed. We therefore, direct the Assessing Officer accordingly.
Prior period expenses - Held that:- We fail to understand the logic behind the plea of learned DR. Heading of section 43B states that certain deductions can be allowed upon actual payment. It is not in dispute that professional tax can be claimed as deduction, irrespective of the method of accounting followed by an assessee, in the year of actual payment. Admittedly, assessee paid the professional tax in the previous year relevant to the assessment year 2005-2006. Under the circumstances, we are of the firm view that the assessee is entitled to deduction of ₹ 19,850/-. Assessing Officer is directed accordingly.
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2011 (10) TMI 652
Issues involved: Dismissal of appeal for want of prosecution due to non-appearance of the assessee and failure to pursue the appeal effectively.
Summary:
Issue 1: Non-appearance and lack of interest in pursuing the appeal
The assessee's appeal for assessment year 2004-05 was dismissed as unadmitted due to non-appearance of the assessee or their representative despite receiving a notice and directions from the High Court. The Tribunal inferred that the assessee was not interested in pursuing the appeal, leading to its dismissal following established legal principles.
Issue 2: Legal precedents supporting dismissal for want of prosecution
The Tribunal cited legal precedents to support the dismissal of the appeal for want of prosecution. Referring to cases such as CIT vs. B.N. Bhattachargee and Estate of late Tukojirao Holkar vs. CWT, the Tribunal emphasized the importance of effectively pursuing an appeal and appearing for hearings. The Tribunal also mentioned a similar view taken by ITAT, Delhi Bench in a specific case.
Conclusion:
Respectfully following the legal precedents, the Tribunal dismissed the appeal filed by the assessee for want of prosecution. However, the Tribunal clarified that if the assessee provides valid reasons for non-appearance and the Bench is satisfied, the ex-parte order may be recalled for fresh adjudication of the appeal. The appeal was ultimately dismissed for want of prosecution, with the order pronounced in open court on 14.10.2011.
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2011 (10) TMI 651
Penalty u/s. 271(l)(c) - Addition of speculating profit - set off of brought forward losses - addition - Held that:- Invoking the provisions of Section 41(1)he court cannot overlook the facts that only a small percentage of income tax returns are selected for scrutiny and if the assessee makes a claim which is not only incorrect in law but is also without any basis and the explanation furnished by him for making such claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty u/s 271(1)(c) of the Income tax Act, 1961. In the present case also, this is not explained by the assessee as to who committed the oversight resulting in failure to add this amount in question as income in the P & L account and in the computation of total income. It is also not explained as to how and under what circumstances, the oversight occurred and why it was not detected by the person who checked the income tax return when it was filed. Under these facts, we decline to interfere in the order of Ld. CIT(A).
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2011 (10) TMI 650
Issues involved: Application for waiver of predeposit of duty, confirmation of demand for non-duty paid scrap, reasonable steps to ensure goods tally with description in invoices.
In the judgment by Appellate Tribunal CESTAT CHENNAI, the issue at hand was an application for waiver of predeposit of duty amounting to Rs. 1,07,900 along with interest and penalty. The demand was confirmed based on the assertion that the assessees had received non-duty paid scrap from specific suppliers and had not taken adequate steps to ensure that the goods matched the description in the invoices provided by the suppliers.
Upon careful consideration of the arguments presented by both sides, the Tribunal observed that a prima facie case for unconditional waiver had been established. It was noted that the assessees had indeed taken necessary precautions to verify the goods received, as the invoices clearly described the goods as MS scrap/MS wires. The Tribunal also highlighted that the duty paid nature was evident from the invoices, absolving the assessees of any fault in case of supplier fraud. This stance was supported by the Tribunal's previous ruling in Transpek Industry Ltd. Vs CCE Vadodara [2010 (249) ELT 91] and a decision by the Hon'ble Allahabad High Court in CC Vs CE Meerut Vs Muzaffarnagar Pipe Industries (P) Ltd.
Ultimately, the Tribunal granted the prayer for waiver and stayed the recovery of the disputed amounts pending the appeal, emphasizing the importance of the evidence presented in the invoices and the assessees' efforts to ensure compliance with duty payment regulations.
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2011 (10) TMI 649
Penalty u/s. 271(1)(c) - Addition u/s 80IA - Held that:- Penalty u/s. 271(1)(c) is not sustainable. The penalty in respect of disallowance of deduction u/s.80IA we find that this ground is squarely covered in favour of the assessee by the judgment of Hon’ble apex court in the case of CIT v. Reliance Petroproduct Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) wherein as held mere making a claim not allowable will not lead to imposition of penalty.
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2011 (10) TMI 648
Levy of interest under sec. 234B and 234C without allowing credit of the amount of cash seized during the course of search - Held that:- When advance tax is to be payable by an assessee by virtue of the operation of Income-tax Act, 1961 and the department is already possessing money belonging to the assessee and assessee made a prayer for adjusting such amount against the advance tax payment or any tax required to be paid by the assessee then credit ought to be given because the department has deprived the assessee of his money by seizing the cash otherwise assessee would have paid the tax on 12.4.2006 and 12.09.2006.
We allow the appeal of the assessee and direct the department to give credit of ₹ 60,40,000 to the assessee from the date, when assessee made application for treating the cash as payment of advance tax/fare while computing the interest chargeable under sec. 234B and 234C of the Incometax Act, 1961
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2011 (10) TMI 647
Issues Involved:
1. Delay in filing the appeal.
2. Validity of the rectification order u/s 154.
3. Impact of the Kar Vivad Samadhan Scheme (KVSS) on the rectification order.
Summary:
1. Delay in Filing the Appeal:
The appeal was delayed by 286 days. The delay was condoned based on the precedent set in CIT Vs. K.S.P. Shanmugavel Nadar & Ors. (1985) (153 ITR 596) (Mad.), which allows for the time taken in prosecuting other remedies to be considered when determining if there was sufficient cause for the delay.
2. Validity of the Rectification Order u/s 154:
The Assessee challenged the rectification order u/s 154 dated 27.11.2000, which disallowed the full depreciation claim on assets used for less than 182 days, resulting in an additional tax demand of Rs. 51,19,412/-. The CIT(A) upheld the rectification, stating that the mistake was apparent from the record and within the scope of section 154.
3. Impact of the Kar Vivad Samadhan Scheme (KVSS) on the Rectification Order:
The Assessee argued that the rectification was invalid as the tax arrears had been settled under the KVSS, which should be conclusive. The Tribunal agreed, citing the Supreme Court's decision in Killick Nixon Ltd vs Deputy C.I.T. (2002) 258 ITR 627 (S.C), which held that once a declaration under KVSS is accepted and tax is paid, the assessment cannot be reopened or rectified. The Tribunal also referenced decisions from the High Courts of Allahabad and Madhya Pradesh, which supported the finality of orders under KVSS.
Conclusion:
The Tribunal concluded that the Assessing Officer did not have the jurisdiction to rectify the assessment order that was settled under KVSS. The appeal of the Assessee was allowed, and the addition made by the Assessing Officer was deleted.
Order Pronounced:
The appeal of the Assessee was allowed, and the order was pronounced in the open Court on 13.10.2011.
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2011 (10) TMI 646
Issues Involved:
1. Deletion of penalty levied u/s 271(1)(c) of the I.T. Act, 1961.
2. Voluntary surrender of claim u/s 80IB and its implications.
3. Factual and legal objections regarding the conditions for allowance of deduction u/s 80IB(10).
Summary:
Issue 1: Deletion of penalty levied u/s 271(1)(c) of the I.T. Act, 1961
The revenue challenged the order of the Ld. CIT (A) deleting the penalty of Rs. 18,46,849/- levied u/s 271(1)(c) of the I.T. Act, 1961. The Ld. CIT (A) held that the assessee had voluntarily surrendered its claim u/s 80IB to avoid litigation, indicating no criminal intention of concealment or deliberately furnishing inaccurate particulars, i.e., 'mens rea'. The Ld. CIT (A) also noted that the claim was withdrawn by the assessee only after the AO detected that the conditions laid down for allowance of the deduction u/s 80IB were not justified.
Issue 2: Voluntary surrender of claim u/s 80IB and its implications
The assessee, engaged in civil construction, filed a return for A.Y. 2003-04 claiming a deduction u/s 80IB(10) of Rs. 59,49,677/-. The AO issued a notice u/s 148 and completed the assessment by declining the claim. The AO's investigation revealed that the project did not meet the conditions laid down in sec. 80IB(10). The assessee voluntarily withdrew the claim citing health issues and Coastal Zone Regulations (CZR), aiming to avoid litigation and buy peace. The Ld. CIT (A) found the claim to be bona fide and based on the interpretation of sec. 80IB(10), and thus deleted the penalty.
Issue 3: Factual and legal objections regarding the conditions for allowance of deduction u/s 80IB(10)
The AO had reservations about allowing the deduction u/s 80IB(10) due to:
- The project being on two separate plots.
- Each plot being less than one acre.
- More than 50% of flats exceeding the 1000 sq.ft. built-up area.
- Commercial establishment area exceeding the prescribed limit.
The Ld. CIT (A) found that the assessee's claim was based on the audit report in form 10CCB and that the plots were consolidated as per the approved plan by BMC. The Tribunal noted that the assessee's claim was based on the interpretation of sec. 80IB(10) and that the objections raised by the AO were contrary to the decisions of the Tribunal. The Tribunal concluded that the assessee did not consciously make a wrong claim and upheld the Ld. CIT (A)'s order deleting the penalty.
Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the Ld. CIT (A)'s order deleting the penalty u/s 271(1)(c) of the I.T. Act, 1961, as the assessee's claim was found to be bona fide and based on the interpretation of sec. 80IB(10). The Tribunal found no evidence of concealment of income or filing of inaccurate particulars by the assessee.
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2011 (10) TMI 645
Addition u/s 68 - unexplained cash credit - Held that:- Evidence and explanation of the assessee support the case of the assessee that the assessee entered into genuine transaction. The details noted above clearly prove the sources of sales of the shares; therefore, no addition was required to be made u/s 68 of the IT Act. CIT(A) rightly deleted the addition on account of unexplained cash credit u/s 68 of the IT Act.
Nature of gain - STCG OR LTCG - Held that:- Instead of considering the transaction noted in the demat account the revenue authorities should have followed the above circular of the Board and according to the same the date of contract shall be treated as the date of transfer. Since the revenue department did not dispute purchase of the shares from M/s. Swan Securities Pvt. Ltd. in the scrutiny assessment of preceding assessment year 2006-07, therefore, the assessee is able to establish that shares have been purchased in April, 2005. Therefore, instead of short term capital gains, the learned CIT(A) should have treated the gains as long term capital gains. The order of the learned CIT(A) to that extent is, therefore, liable to be set aside. The order of the learned CIT(A) to that extent holding transaction to be short term capital gain is set aside and we direct the AO to accept the claim of the assessee for long term capital gains.
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2011 (10) TMI 644
Issues Involved:
1. Sustaining addition of Rs. 5,00,000/- against Rs. 30,87,080/- made by AO on account of suppressed sales.
2. Deleting disallowance of Rs. 10,00,000/- made by AO on account of indirect expenses.
3. Deleting addition of Rs. 16,99,837/- made on account of net profit from separate electronics and electrical business.
4. Deleting disallowance of Rs. 98,02,544 (Rs. 91,83,554 + Rs. 6,18,990/-) made by AO under section 40(a)(ia) of the Act.
Issue-wise Detailed Analysis:
1. Sustaining Addition of Rs. 5,00,000/- against Rs. 30,87,080/- Made by AO on Account of Suppressed Sales:
The AO observed decreasing GP and NP rates from A.Y. 2004-05 to A.Y. 2007-08 and noted various deficiencies in the assessee's books, including unverifiable cash sales, higher commissions to unidentifiable purchasers, and discrepancies in sales figures. Consequently, the AO rejected the books of account u/s 145(3) and added Rs. 30,87,080/- for suppressed sales. The CIT (A) found the AO's addition unjustified but sustained a lump sum disallowance of Rs. 5,00,000/-. The Tribunal found the disallowance of Rs. 5,00,000/- by the CIT (A) on the higher side and reduced it to Rs. 2.5 lakhs, thus partly allowing the assessee's cross objection.
2. Deleting Disallowance of Rs. 10,00,000/- Made by AO on Account of Indirect Expenses:
The AO compared the GP and NP rates of the assessee's branches and found significant differences, leading to a disallowance of Rs. 10,00,000/- for inflated indirect expenses. The CIT (A) found the disallowance unjustified as the AO did not make any specific enquiry or bring material evidence to show the expenses were false or non-genuine. The CIT (A) deleted the disallowance, and the Tribunal confirmed this decision, finding no reason to interfere with the CIT (A)'s findings.
3. Deleting Addition of Rs. 16,99,837/- Made on Account of Net Profit from Separate Electronics and Electrical Business:
The AO noted a net loss of Rs. 15,21,301/- in the electronics and electricals business and suspected the loss was declared to offset profits from BSNL franchiseeship. The AO compared the assessee's results with another similar business and estimated a net profit of 1%, resulting in an addition of Rs. 16,99,837/-. The CIT (A) found the AO's addition based on suspicion without specific adverse material evidence and deleted the addition. The Tribunal upheld the CIT (A)'s decision, finding no reason to interfere.
4. Deleting Disallowance of Rs. 98,02,544 (Rs. 91,83,554 + Rs. 6,18,990/-) Made by AO under Section 40(a)(ia) of the Act:
The AO disallowed Rs. 91,83,554/- under section 40(a)(ia) for non-deduction of TDS on commission paid to retailers, treating the relationship between the assessee and retailers as that of principal and agent. The CIT (A) found the relationship to be principal-to-principal, not requiring TDS under section 194H, and deleted the disallowance. Similarly, the AO disallowed Rs. 6,18,990/- for scheme and discount payments, which the CIT (A) also deleted on the same grounds. The Tribunal confirmed the CIT (A)'s findings, agreeing that the relationship was principal-to-principal and not subject to TDS provisions.
Conclusion:
The Tribunal dismissed the department's appeal and partly allowed the assessee's cross objection, reducing the sustained addition for suppressed sales to Rs. 2.5 lakhs and confirming the deletion of disallowances for indirect expenses, net profit adjustments, and TDS-related disallowances.
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