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2010 (8) TMI 1069
Issues involved: Appeal against order of CIT(A) cancelling reassessment proceedings for assessment year 2000-01.
Summary:
1. The Revenue appealed against the CIT(A)'s order cancelling reassessment proceedings for the assessment year 2000-01.
2. The original assessment disallowed provision for trade guarantees claimed by the assessee under 'operating & administrative expenses'.
3. The AO disallowed the provision as it was in the nature of a contingent liability and not allowable under the I.T. Act.
4. The AO reopened the assessment, disallowing the write back of provision for trade guarantees, which had been allowed in earlier years.
5. The CIT(A) held that the reopening of assessment was not valid as it was beyond four years and amounted to double taxation of the same income.
6. The ITAT upheld the CIT(A)'s decision, citing that the AO's action in reopening the assessment beyond four years was not in accordance with the law.
7. The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld.
This judgment highlights the importance of following legal procedures and principles in reassessment proceedings to avoid double taxation and ensure fairness in tax assessments.
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2010 (8) TMI 1068
Revision u/s 236 - Applicability of deduction u/s 80P(2)(a)(i) - whether assessee being a regional rural bank established under RRB Act, 1976, was to be treated as a co-operative bank or could be considered as a co operative society? - CIT considered, sub-section (4) of section 80P, which was applicable to co-operative banks, as applicable to assessee also - as per assessee AO was very well aware that assessee was a rural bank under RRB Act, 1976 and it was only after considering relevant provisions, he had decided that the assessee was equivalent to a co operative society eligible for deduction u/s 80P(2)(a)(i)
HELD THAT:- There is much strength in the argument of the assessee that it is to be treated as co-operative society in view of the provisions contained in RRB Act, 1976. If so, it would be eligible under section 80P(2)(a)(i) of the Act.
In present case, the AO had carefully considered the claim of the assessee and allowed deduction u/s 80P(2)(a)(i). AO was very well aware that assessee was a rural bank under RRB Act, 1976 and it was only after considering relevant provisions, he had decided that the assessee was equivalent to a co operative society eligible for deduction u/s 80P(2)(a)(i).
Thus, the issue whether assessee was qualified for deduction u/s 80P(2)(a)(i) was very well within the contemplation of the AO and it was only after applying his mind over it that he decided that assessee had to be treated as co-operative society for income tax purpose. May be the order was cryptic, but application of mind is clearly discernible. AO had adopted one of the courses permissible in law and even if such a course resulted in loss to the Revenue, it could not be deemed as erroneous and prejudicial to the interest of the revenue. This position of law has been clearly laid down by Hon'ble Apex Court in the case of CIT v. Max India Ltd.[2007 (11) TMI 12 - SUPREME COURT].
Thus, CIT was only trying to substitute his view for a lawful view taken by the AO in this regard. This is not possible u/s 263. Hence, the order of CIT passed u/s 263, is quashed. Appeal filed by the assessee stands allowed.
In the result, the appeal filed by the assessee stands allowed.
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2010 (8) TMI 1067
Issues Involved:
The issues involved in this case are related to the addition of Rs. 19,00,000 made on the basis of loose papers seized during a search u/s. 132 of the Income Tax Act. The main questions proposed by the appellant revenue are whether the Appellate Tribunal was right in confirming the order passed by the CIT(A) deleting the said addition, and whether the initial onus on the assessee to dislodge the presumption pursuant to the loose papers was fulfilled.
Tax Appeal No.769 of 2009 - M/s. B.M. Transport:
The appellant, M/s. B.M. Transport, was assessed for the block period 1996-97 to 06th February, 2002 u/s 158BC of the Income Tax Act. The Assessing Officer made an addition of Rs. 19,00,000 in the hands of M/s. B.M. Transport based on a Debit Note seized during the search, indicating a transaction with M/s. M.R. Shah Transport Company. The Commissioner (Appeals) and the Tribunal both deleted this addition, stating that the unsigned debit note was not conclusive evidence for the addition, and no material was found during the search to support the transaction. The Tribunal upheld the deletion of the addition, finding no legal infirmity in the order.
Tax Appeal No.770 of 2009 - Shri Prahlad R. Agrawal (HUF):
Shri Prahlad R. Agrawal (HUF) was assessed u/s 158BC of the Act for the same block period. Similar to the previous case, an addition of Rs. 19,00,000 was made in the hands of Shri Prahlad R. Agrawal based on the same Debit Note. The Commissioner (Appeals) and the Tribunal also deleted this addition, stating that the seized document was not conclusive evidence and no supporting material was found during the search. The Tribunal concurred with the findings of the Commissioner (Appeals) and upheld the deletion of the addition.
Appellant's Arguments:
The appellant strenuously supported the assessment orders, arguing that the seized document indicated a business transaction between the parties, and the presumption should be that the transaction took place. However, the Commissioner (Appeals) found that the unsigned debit note was not sufficient evidence for the addition, and no supporting material was found during the search to substantiate the transaction.
Conclusion:
The Tribunal upheld the orders of the Commissioner (Appeals) in both cases, stating that the seized document was not conclusive evidence for the addition. The Tribunal found no legal infirmity in the orders and dismissed both tax appeals, as no substantial question of law arose from the facts and circumstances of the case.
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2010 (8) TMI 1066
The ITAT Mumbai allowed the assessee's appeal for the assessment year 2006-07, directing the CIT(A) to reconsider the case on its merits as he cannot dismiss the appeal for non-prosecution. The appeal is treated as allowed for statistical purposes. (Judgement: Appellate Tribunal ITAT MUMBAI Citation: 2010 (8) TMI 1066 - ITAT MUMBAI)
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2010 (8) TMI 1065
Issues Involved:
1. Legality of the penalty imposed for non-payment of excise duties on the loss in transit of Extra Neutral Alcohol (ENA).
2. Applicability of excise duty on ENA under the Bihar Excise Act, 1915, and the relevant Rules.
3. Jurisdiction of the State to levy excise duty on industrial alcohol not fit for human consumption.
Detailed Analysis:
Issue 1: Legality of the penalty imposed for non-payment of excise duties on the loss in transit of Extra Neutral Alcohol (ENA)
The petitioner, a Public Limited Company, challenged the order dated 05.09.1994, passed by the Excise Commissioner, which affirmed a demand notice requiring the petitioner to pay a penalty of Rs. 29,961.00 for non-payment of excise duties on the loss of ENA in transit beyond the permissible limit. The petitioner argued that no excise duty is payable on ENA as it is not fit for human consumption. The authorities, however, contended that the penalty was imposed for not paying the prescribed duties on the excess wastage of ENA during transit.
Issue 2: Applicability of excise duty on ENA under the Bihar Excise Act, 1915, and the relevant Rules
The court examined Rule 33 of the Rules, which permits admissible wastage of 0.5%. The petitioner transported 1,85,476.00 LPL of ENA, with 1,83,801.90 LPL stored at the destination, resulting in a wastage of 1674.10 LPL. The permissible wastage was 1,008.30 LPL, leading to an excess wastage of 665.80 LPL. The authorities imposed a penal duty of Rs. 29,961.00 for this excess wastage. The court referred to previous judgments, including New Swadeshi Sugar Mills Ltd. v. State of Bihar, which held that Rule 33 does not create a right to levy duty but merely protects the State against claims of unlimited losses due to leakage or evaporation.
Issue 3: Jurisdiction of the State to levy excise duty on industrial alcohol not fit for human consumption
The court reiterated that excise duty under the Act can only be levied on products fit for human consumption. ENA, being an industrial product not fit for human consumption, cannot be subjected to excise duty. This position was upheld by the Supreme Court in several cases, including State of Bihar v. New Swadeshi Sugar Mills Ltd., which confirmed that no duty can be levied on rectified spirit or industrial alcohol under the Constitution. The court emphasized that ENA can be used for diverse commercial purposes and becomes fit for human consumption only after further processing.
Conclusion:
The court concluded that duties of excise under the Act and Rules are not leviable on ENA as it is unfit for human consumption. Consequently, no duty can be imposed on the losses of the product in transit, and the penalty imposed was beyond the scope of the Act and Rules. The court set aside the impugned order dated 05.09.1994 and directed the refund of the amount with 18% interest from the date of deposit till the date of refund. Additionally, the court imposed costs of Rs. 25,000/- to be deposited with the High Court Legal Services Committee, Patna, within four weeks.
The judgment underscores the necessity for authorities to promptly implement court pronouncements to avoid unnecessary litigation and harassment of parties. The writ petition was allowed with costs, and the impugned order was set aside.
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2010 (8) TMI 1064
Money Laundering - violates the fundamental right under Article 20 (1) - In substance, the argument is that the money alleged to have been acquired will not fall within the definition of "proceeds of crime" because the acts leading to its generation were not among the offences listed in the Schedule, as it stood on the date when those acts were committed. The argument is misconceived. It has also been argued that the detention of the petitioner is illegal. This argument is based upon the allegation that the grounds for detention were not communicated as required by Section 19. There is only a prayer for quashing the judicial remand order dated 13.10.2009.
HELD THAT:- A perusal of that remand order shows that no such ground was taken before the Court below at the time when the petitioner was being remanded for detention by a judicial order of the Court below. Being a Pure question of fact, not raised before the Court below, this cannot be permitted to be raised for the first time in writ jurisdiction. Moreover, there is a denial of this fact in the counter affidavit making it a disputed question of fact. Most important of all, after the remand dated 13.10.2009 there would have been several other judicial remand orders which are not under challenge. Therefore, the prayer for quashing the remand order dated 13.10.2009 is redundant. I do not consider it appropriate to go into the greater details as it might embarrass the trial. Therefore, the writ petition fails and it is dismissed.
In the circumstances, I am of the view that the petitioner is not being prosecuted merely for any act which was not a scheduled offence on the date when it was committed. Therefore, the fundamental right of the petitioner guaranteed by Article 20 (1) is not being violated.
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2010 (8) TMI 1063
Issues involved: Appeal u/s 260A of the Income Tax Act, 1961 against Tribunal's order allowing interest deduction when net profit rate was applied.
Adjudication of the appeal: The appellant, a revenue authority, challenged the Tribunal's decision allowing interest deduction to the assessee when a net profit rate was applied by the Assessing Officer. The Assessing Officer had applied a net profit rate of 10% on the receipts due to lack of proper records maintained by the assessee. The CIT (A) allowed the appeal, but the Tribunal upheld this decision. The key question was whether an assessee is entitled to deduction on account of interest when a net profit rate is applied.
Court's Decision: The High Court referred to a previous case where no separate deduction was allowed for interest when a net profit rate was applied. Consequently, the Tribunal erred in allowing the interest deduction to the assessee. The appeal was allowed in favor of the revenue authority, ruling against the assessee.
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2010 (8) TMI 1062
Issues involved: Seizure of amount by enforcement authorities, proceedings under Income-tax Act, petitioner's request for return of seized amount, calculation of amount due, petitioner's willingness to furnish security, retention of amount by income-tax authorities.
In this judgment, an amount of Rs. 88 lakhs was seized from a car by enforcement authorities, which was later handed over to income-tax authorities u/s 132A of the Income-tax Act. The petitioner requested the return of the amount, arguing that even if liable for tax, it would only be 30% of the seized amount, for which he was willing to provide security.
Upon direction, the standing counsel for the Income-tax Department provided a statement calculating the amount due from the petitioner in case proceedings go against him, which was Rs. 60,24,333. The petitioner contended that it was unfair to retain the entire amount when he was ready to secure the due amount, suggesting that any excess should be refunded.
After considering the arguments, the court opined that the maximum amount payable by the petitioner would be Rs. 60,24,333. Therefore, it directed the income-tax authorities to refund the balance amount of Rs. 65,00,000 to the petitioner, pending further proceedings under the Income-tax Act, while preserving the petitioner's right to claim that no amount is due from him. The refund was ordered to be completed within one month.
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2010 (8) TMI 1061
Issues Involved:
1. Non-service of notices under Sections 13(2) and 13(4) of the SARFAESI Act.
2. Statutory violations in the auction process.
3. Allegations of fraud and collusion.
4. Validity of the auction sale and rights of the bona fide purchaser.
5. Availability of alternative remedy.
6. Authorization of representatives and their actions.
7. Directions for investigation and relief.
Issue-wise Detailed Analysis:
1. Non-service of Notices under Sections 13(2) and 13(4) of the SARFAESI Act:
The petitioners contended that no notice under Sections 13(2) and 13(4) was served on the deceased S. Jayakumar or his legal representatives. The bank admitted in its counter affidavit that it was unable to locate S. Jayakumar and proceeded with the auction without serving the mandatory notices. The court highlighted the importance of serving notices as per Rule 3 of the Security Interest (Enforcement) Rules, 2002, which mandates service by registered post with acknowledgment due, speed post, courier, or electronic means. The bank failed to adhere to these requirements, rendering the notices invalid.
2. Statutory Violations in the Auction Process:
The court emphasized that the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002, are subordinate legislation with statutory force. The bank's failure to serve notices as required by law constituted a statutory violation. The court cited several precedents affirming that actions must be performed strictly as prescribed by law, and any deviation invalidates the proceedings.
3. Allegations of Fraud and Collusion:
The court found substantial evidence of fraud and collusion between the bank officials and the alleged authorized agent, P. Md. Thahir. The signatures on the authorization letter and mortgage deed differed significantly, suggesting forgery. The bank's actions, including allowing unauthorized individuals to deposit and withdraw money, raised serious doubts about the integrity of the process. The court ordered a high-level investigation by CB-CID to probe the fraudulent activities.
4. Validity of the Auction Sale and Rights of the Bona Fide Purchaser:
The auction process was marred by tampering with bid amounts to favor the fourth respondent. The court noted that the bids were altered to ensure the fourth respondent's bid was the highest, which indicated fraudulent intent. The court rejected the fourth respondent's claim of being a bona fide purchaser, stating that fraud vitiates all actions. The auction sale was declared invalid, and the fourth respondent was directed to return the property to the petitioners.
5. Availability of Alternative Remedy:
The court addressed the argument regarding the availability of an alternative remedy under Section 17 of the SARFAESI Act. It held that statutory violations, fraud, and violations of fundamental rights justified the petitioners' approach to the High Court under Article 226 of the Constitution. The court cited precedents affirming that alternative remedies do not bar the exercise of writ jurisdiction in cases of statutory and constitutional violations.
6. Authorization of Representatives and Their Actions:
The bank's reliance on an authorization letter allegedly issued by S. Jayakumar was found to be baseless, as Jayakumar had died before the letter was purportedly signed. The court noted discrepancies in the bank's claims about the authorization and the actions of P. Md. Thahir, suggesting collusion and fraud. The court directed an investigation into the authenticity of the authorization and the involvement of bank officials.
7. Directions for Investigation and Relief:
The court ordered a high-level investigation by CB-CID into the fraudulent activities of the bank officials, P. Md. Thahir, and the bidders. It directed the bank to hand over all relevant documents to the investigating agency. The court also imposed exemplary costs of Rs. 50,000 on the respondent bank, payable to the petitioners, and ordered the fourth respondent to return the property within 15 days.
Conclusion:
The judgment comprehensively addressed the issues of non-service of notices, statutory violations, fraud, and the validity of the auction sale. It highlighted the importance of adhering to legal procedures and the consequences of fraudulent actions. The court's directions for investigation and relief aimed to rectify the wrongs committed and ensure accountability.
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2010 (8) TMI 1060
Issues involved: Interpretation of leasehold rights, treatment of leasehold rights as partnership asset, tax liability on consideration paid to partners.
Interpretation of leasehold rights: The judgment pertains to leasehold rights of a property in Bangalore originally belonging to a wakf estate, leased to an individual for 35 years. The individual, along with his daughters, formed a partnership firm to run a hotel business on the leased premises. The partnership deed indicated that the leasehold rights were contributed as capital by the individual, recognized by the wakf. The firm made payments to the lessor, put up additional constructions, and treated the leasehold rights as an asset in their accounts.
Treatment of leasehold rights as partnership asset: The Assessing Officer initially questioned the existence of a sub-lease due to lack of written documentation between the individual and the partnership firm. It was observed that the leasehold rights were first shown as a partnership asset in a 1984 deed, leading to doubts about its treatment as an asset. However, subsequent balance sheets reflected the value of the leasehold rights, indicating their recognition as a partnership asset. The Tribunal concluded that the leasehold rights were indeed treated as a partnership asset from an early stage, despite certain procedural discrepancies.
Tax liability on consideration paid to partners: The Tribunal held that the consideration paid to partners, representing the leasehold rights, did not fall under capital gains tax as the leasehold rights were considered a partnership asset prior to relevant dates. The Tribunal justified its decision based on the long-standing treatment of the leasehold rights as a partnership asset, despite challenges to the validity of certain transactions.
In conclusion, the High Court of Karnataka dismissed the appeals at the admission stage, stating that no substantial question of law arose based on the undisputed facts and legal position presented in the case.
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2010 (8) TMI 1059
Issues involved: Appeals against penalties imposed under S.271(1)(c) of the Income-tax Act, 1961 for assessment years 1998-99 to 2005-06.
Assessee's Appeals:
The assessee contested penalties imposed under S.271(1)(c) based on undisclosed income from pay-in-slips found during a search operation. The Tribunal estimated income at 15% of total deposits in the bank account, reducing additions made. The CIT(A) upheld penalties but directed reduction to 100% of tax evaded. The Tribunal found insufficient evidence to prove the undisclosed income belonged to the assessee, canceling penalties for all assessment years.
Revenue's Appeals:
The Revenue challenged the CIT(A)'s decision to restrict penalties based on the Tribunal's order in the assessee's quantum appeals. The Department disputed the Tribunal's findings on undisclosed income from pay-in-slips. The Tribunal rejected the Revenue's appeals, citing the earlier decision in the assessee's favor and directing penalty reduction to tax evaded amounts. The Tribunal upheld its decision, dismissing the Revenue's appeals.
In conclusion, the Tribunal canceled penalties imposed on the assessee for all assessment years, citing lack of evidence linking the undisclosed income to the assessee. The Revenue's appeals were dismissed, affirming the penalty reduction to tax evaded amounts as directed by the CIT(A) in line with the Tribunal's quantum appeals decision.
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2010 (8) TMI 1058
Issues Involved:
1. Sustaining the penalty imposed u/s 271D.
2. Violation of section 269SS by depositing cash in excess of Rs. 20,000.
3. Reasonable cause for depositing cash to clear debit balance.
4. Applicability of section 269SS to transactions between close relatives.
5. Initiation of penalty proceedings during assessment.
6. Genuineness of the transaction and its acceptance by the AO.
Summary:
1. Sustaining the penalty imposed u/s 271D:
The assessee contested the penalty of Rs. 1,18,000 imposed u/s 271D, arguing that the ld. CIT(A) erred in sustaining it. The appeal sought to set aside the CIT(A)'s order and delete the penalty.
2. Violation of section 269SS by depositing cash in excess of Rs. 20,000:
The assessee deposited Rs. 1,18,000 in cash into his bank account, which included loans from his son. The AO considered this a violation of section 269SS, as the loan was not taken through a bank draft or cheque.
3. Reasonable cause for depositing cash to clear debit balance:
The assessee argued that the cash deposit was made to clear a debit balance in the bank account to avoid cheque bouncing, as directed by the bank. The Tribunal found this explanation reasonable, noting that panic created by the bank's directive could constitute a reasonable cause.
4. Applicability of section 269SS to transactions between close relatives:
The assessee claimed that transactions between closely related persons, such as father and son, fall outside the scope of section 269SS. The Tribunal supported this view, referencing decisions where transactions between family members were considered reasonable cause under section 273B.
5. Initiation of penalty proceedings during assessment:
The assessee argued that penalty proceedings were not initiated during the assessment, making the penalty levy illegal. The Tribunal did not specifically address this point, focusing instead on the reasonable cause for the cash deposit.
6. Genuineness of the transaction and its acceptance by the AO:
The Tribunal noted that the AO accepted the genuineness of the transaction, as no addition was made under section 68. The Tribunal emphasized that once the genuineness is accepted, the explanation for the cash deposit should be considered satisfactory unless proven false.
Conclusion:
The Tribunal canceled the penalty, treating the explanation furnished by the assessee as constituting reasonable cause. The appeal filed by the assessee was allowed, and the penalty u/s 271D was set aside. The order was pronounced in open Court on 6.8.2010.
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2010 (8) TMI 1057
Issues Involved:
The appeal concerns the order of the CIT u/s 263 of the Income Tax Act, involving the deduction claimed u/s 10A and the set off of losses between different units of the assessee.
Grounds of Appeal:
1. The CIT erred in setting aside the assessment for asst. year 2005-06 and directing a fresh assessment regarding the deduction u/s 10A.
2. The CIT wrongly decided that the Assessing Officer allowed the deduction u/s 10A without proper application of mind.
3. The CIT overlooked the certification requirement u/s 10A and the completion of assessment after due verification.
4. The CIT failed to consider the ITAT's dismissal of a departmental appeal on a similar issue for the same year.
Facts and Assessment:
The assessee, engaged in various business activities, filed returns declaring a loss. The Assessing Officer disallowed certain expenses related to foreign exchange, leading to an appeal and subsequent dismissal by the Tribunal. The CIT u/s 263 found the deduction u/s 10A erroneous due to not setting off losses between units.
Arguments and Decision:
The assessee argued that the Assessing Officer had considered the deduction u/s 10A and applied his mind. The CIT held that the deduction is unit-specific and losses cannot be set off. The Tribunal found the CIT's order unsustainable, citing a Special Bench decision that losses of a non-eligible unit cannot be set off against profits eligible for deduction u/s 10A. Therefore, the order of the Assessing Officer was upheld, and the CIT's order u/s 263 was set aside.
This judgment clarifies the application of deduction u/s 10A and the treatment of losses between different units of an assessee, emphasizing the unit-specific nature of the deduction and the inapplicability of set off provisions.
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2010 (8) TMI 1056
The Supreme Court issued an order directing the parties to maintain status quo regarding the management of the company. The respondent can file a counter affidavit within two weeks, with a rejoinder affidavit allowed thereafter. Service on the respondent is dispensed with as they are represented on caveat. The order does not affect proceedings before the Board for Industrial and Financial Rehabilitation and the Appellate Authority.
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2010 (8) TMI 1055
Valuation - import of LDPE/HDPE mixed granules/powder - assessment on the basis of contemporaneous imports - The quantity of goods imported was 51,000 MTs, for which the importer had declared price of USD 228 per MT, which was enhanced by the department to USD 288 per MT by relying on the Chief Commissioners Standing Order dated 03/12/99, PLATT prices and contemporaneous imports of identical/similar goods - Held that: - This Tribunal, after taking the view that the Standing Order dated 03/12/99 issued by the Chief Commissioner of Customs, Mumbai, did not have any legal backing vis-`-vis decision of this Tribunal to the effect that PLATT prices themselves could not be made the basis for enhancement of value, set aside the enhancement ordered by the lower authority - In the impugned order, there is no discussion as to which of the four bills of entry were adopted as the basis of enhancement of value of the subject goods and as to the reasons therefor. In any case, the order passed by the ld. Commissioner (Appeals) without considering the case law cited by the party is not acceptable inasmuch as, in the Tribunals remand order, there was a specific direction to consider the case law - impugned order set aside - appeal allowed - decided in favor of appellant.
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2010 (8) TMI 1054
Issues involved: Penalty u/s 271B of the Act for delay in filing audit report u/s 44AB due to partner's demise, reconstitution of firm, and other factors.
The assessee, a firm, filed its return of income for the assessment year 2006-07 with a delay of five months, citing reasons such as sudden demise of a partner, partners' travel, and reconstitution of the firm. The Revenue issued a show cause notice u/s 271B of the Act for the delay. The ld. AO levied a penalty of Rs. One lakh, which was confirmed by the ld. CIT(A). The appellant contended that the delay was due to cascading effects from the non-finalization of accounts for the previous years. The ld. AR argued for relief based on similar situations in previous assessment years.
The ld. AR argued that the delay in filing the return for the assessment year 2006-07 was due to the cascading effect from the non-finalization of accounts for the previous years. The ld. AO and CIT(A) had granted relief for the earlier assessment years based on similar reasons. The assessee had been regularly filing returns within the prescribed time since then. The Tribunal noted that there was no deliberate or intentional inaction on the part of the assessee. The discretionary power conferred by the Act allowed for leniency in such cases. Therefore, the Tribunal decided to delete the penalty confirmed by the ld. CIT(A) in the interest of justice.
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2010 (8) TMI 1053
Bad and doubtful debts - allowable deduction - Commissioner (Appeals) held as the Assessee did not give paticulars about the provision for bad and doubtful debts and as the credit entry continued, he held, the assessee it not entitled to claim deduction and therefore, he dismissed the appeal - Tribunal held that it is the absolute satisfaction of the Assessee while writing off any bad debt, which has to be seen and Assessee is not required to prove that the debt he become bad in the relevant previous year - HELD THAT:- After referring the claim in respect of each year, in the end, the order passed by the AO as well as the Appellate Authority was set aside with a direction to the Assessing Officer to allow the claim in the light of the findings they have recorded. Further, the Assessing Officer was directed to grant sufficient opportunity to the Assessee of being heard in the matter and to furnish the details. In fact, a common order came to be passed in respect of 08 assessment years.
In that view of the matter, we decline to answer the aforesaid substantial question of law But, affirm the order of remand to the AO to consider the claim for bad debts, in the light of the observations made by the Tribunal and in the light of the judgments in the case of Vijaya Bank Vs CIT and Another [2010 (4) TMI 46 - SUPREME COURT] and T.R.F. Ltd. V/s CIT and Another [2010 (2) TMI 211 - SUPREME COURT].
Computation of deduction u/s 80HHC - whether excise duty should form part of the total turnover and the computation provided in section 80HHC r.w.s 80AB? - HELD THAT:- In the case of CIT Vs Laxmi Machine Tools [2007 (4) TMI 202 - SUPREME COURT] held that It is important to bear in mind that excise duty and sales-tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula u/s 80HHC would become unworkable. Accordingly we hold that the excise duty cannot form part of the turnover for computing deduction u/s. 80HHC.
Deduction u/s 80HH and 80-I - ITAT allowing notional/hypothetical cost for ascertainment of purchase price of raw material for deduction - assessee set up a unit manufacture of toilet soap in the year 1983-84 at Amalner, and basic raw materials required for the manufacture of toilet soap being fatty acid and glycerin, was not available in and around Amalner - Therefore, assessee was purchasing non-edible oils from up-country suppliers and processed the same at Mumbai, the nearest place to Amalner, thus used to pay octroi at Mumbai for non-edible oils and also at Amalner on fatty acid and glycerin. It used to pay transport charges for transportation of raw materials from Amalner to Mumbai and from Mumbai to Amalner for transportation of finished goods - octroi at Mumbai Municipality, freight from Mumbai to Amalner and Amalneroctroi should be excluded for computing the transfer price of fatty acid from FAGP to toilet soap unit. Accordingly, after working out certain percentage of profits would stand reduced. The same was challenged by the assessee - Tribunal has allowed the appeal and has held in the absence of actual sale for the purpose of 80HH and 80I the assessee was justified in taking the market price prevailing in Bombay
HELD THAT:- In the appeal preferred against the very same judgment in respect of the assessment for several (other) years, a Division Bench [2008 (12) TMI 681 - KARNATAKA HIGH COURT] has already held that the market value would mean that the price of the goods would ordinarily fetch in the open market. It connotes the price at which the seller is willing to sell and the price at which the purchaser is willing to buy. It does not mean only the cost of production. Either way, the cost of the goods at the nearest available market would have to be reckoned and to that the cost of transportation, octroi, local taxes etc. has to be added. The figures so arrived at would in terms of the explanation to Section 80-I(8) would constitute the market value.
In the light of the aforesaid judgment rendered between the very same parties for the earlier assessment year, we do not find any justification to have a different view.
Computation of deduction u/s 80HHC - Income from software exports - for earlier year it has claimed exemption. However for the current year, it did not claim any exemption u/s 80HHC - Tribunal holding that income from software exports do not form part of other income mentioned in explanation (baa) to section 80HHC of the Act which is liable to be excluded before the Computation of deduction under section 80HHC of the Act - HELD THAT:- As both the appellate authorities that for the current assessment year when the said amount is not claimed as a deduction u/s. 80HHC and deduction was claimed u/s.10A of the Act, the question whether the assessee could claim deduction of the said amount in addition to the income derived out of the sale of goods and merchandise which had been produced and manufactured in India and exported would not arise for consideration. Therefore, the aforesaid substantial question of law is wrongly framed and there is no need to answer the said question as it would not arise for consideration in the facts of this case.
Exemption u/s.10A - corporate overheads remaining unallocated under section 10(A) including interest can be notionally attributed to the units claiming exemption under section 10(A) - tribunal on appreciation of the admitted facts of the case held, in the absence of any specific finding by the authorities below that the expenditure is incurred by various units claiming exemption/deduction, artificial way of allocating is not justifiable. The profits of undertaking u/s 10A of the Act is correctly worked out and no artificial working can be attributed thereto - HELD THAT:- A perusal of the statement shows the Corporate Office has spent towards the expenses consisted of salaries etc. excluding interest less revenues. They allocated to the various sub-divisions other than the software export sub-division similarly they have recovered from software exports sub-division in the process the excess recoveries. Further, the interest out go to intra business and external agencies. The interest earned from deployment of founds intra-business and with external agencies.
Considering the facts, it does not represent the expenditure incurred by the Corporate Office in respect of its sub-division. In those circumstances, the AO and the First Appellate Authority were not justified in allocating the substantial portion of the amount as the expenses incurred in respect of Section 10A and disallowing the deduction. That is precisely what the Tribunal has held on proper appreciation of the material on record. In that view of the matter we do not find any justification to interfere with the well considered order of the Tribunal. Accordingly, this question of law is answered in favour of the assessee and against to Revenue.
Exemption u/s 10(A) - special import licence premium income and other miscellaneous income considered as income derived from the industrial undertaking - As per AO as the said income is not derived from export of goods manufactured by the assessee as it is in the nature of a by-product, the said amount is not allowable for exemption - HELD THAT:- This special import licence has a direct nexus with the manufacture and export of the products. It falls within the first degree as explained by the Apex Court in more than one judgment. In the judgments relied on by the revenue, as there was no direct nexus and the income did not belong to the first degree and more so the exemption claimed was under Section 80HH not under 10A such exemption was not granted.
Tribunal rightly held those judgments have no application to the facts of the case. This case arises under Section 10A and this special import licence has direct nexus with the manufacturing and export activity of the assessee and this special import licence is a special incentive given to improve the importing of goods. Therefore, the income derived from sale of licence constitutes profits and gains derived by the assessee from the industrial undertaking under Section 10A of the Act and is eligible for exemption. In that view of the matter, we do not see any justification to interfere with the well considered order passed by the Tribunal. Accordingly, this question is held in favour of the assessee and against the revenue.
Deduction u/s 10A - Income from sale of old newspapers deemed to be held as income derived from eligible export oriented units - HELD THAT:- While calculating the profit of the eligible business the expenses and the income of the same unit are required to be netted out. The expenses and the income are relatable to the same nature. Therefore, they directed the computation should be made after netting out expenditure by reducing the income in dispute. Without properly understanding the case put forth by the assessee, the authorities have proceeded on the basis that it is an income derived from the business which has no nexus and, therefore the assessee is not entitled to claim exemption u/s 10A. Therefore, the Tribunal was justified in setting aside those findings and granting the deduction sought for by the assessee. In that view of the matter in the first place the said question do not arise for consideration. We decline to answer the same in the facts of the case.
Revenue or capital expenditure - Expenditure on imported software when the expenditure per se is capital in nature and is not allowable - assessee company claims import of software for the purpose of retail trading pre loading into the Hardware sold and also for in house use. The software is a commodity having copyrights - Tribunal held they cannot go into the question whether the expenditure is capital in nature as that is not what was urged before the lower authorities - HELD THAT:- Assessee claimed deduction on the ground that it falls under revenue expenditure. When the assessing officer accepted the case of the assessee to the substantial portion, merely because the imported goods were used in house by the assessee he was of the opinion that was housed for catering into the requirements of the clients and, therefore, it amounts to royalty and TDS should have been deducted, the same having not been done, the entire amount cannot be claimed as deduction.
Commissioner rightly pointed out it is not a royalty, it is a revenue expenditure and the entire amount is held to be deductible. In those circumstances, it was not open to the revenue to contend that it constitutes and asset. Therefore, the Tribunal declined to entertain the said contention and affirmed the order of the Appellate Authority. In those circumstances, the substantial question of law as framed do not arise for consideration in this appeal and we decline to answer the same.
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2010 (8) TMI 1052
Issues involved: Appeal under s. 260A of the IT Act, 1961 regarding addition of estimated GP, unexplained cash credits, and disallowed interest.
Estimation of GP:
The AO estimated GP @ 3% on gross sales, adding &8377; 10,73,822. However, CIT(A) found fixed commission rates regulated by Government agencies, leading to no justification for higher net profit estimation. Tribunal concurred, stating no adverse findings on income suppression, thus no need for higher GP estimation. Both CIT(A) and Tribunal concluded no question of law arose.
Unexplained Cash Credits and Disallowed Interest:
AO treated unsecured loans of &8377; 41,72,462 as unexplained cash credits under s. 68, disallowing interest of &8377; 3,84,282. CIT(A) noted all details of creditors provided, with confirmations and PANs available. CIT(A) found primary onus discharged by submitting confirmations, with no new credits in the year. Tribunal agreed, finding identity and genuineness of transactions proven, no material to disprove explanation. Tribunal and CIT(A) both concluded no question of law arose, dismissing the appeal.
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2010 (8) TMI 1051
Issues involved: Validity of assessment reopened u/s 147 of the Income Tax Act.
Summary:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-II, Baroda. The main ground of appeal was the validity of the assessment reopened u/s 147 of the Act. The Assessing Officer had recorded reasons for reopening the assessment based on discrepancies in the income declared by the assessee. The authenticity of the particulars of income furnished by the assessee was doubted, leading to the reopening of the assessment.
The Tribunal found that the reasons recorded for reopening the assessment were not challenged by the Departmental Representative. It was noted that the assessment was reopened to verify the particulars provided by the assessee in the original return of income. However, no new material or information was presented to support the belief that income had escaped assessment. The Tribunal emphasized that the power to reopen assessments under section 147 is not a substitute for the regular assessment procedure under section 143(2) of the Act.
Referring to legal precedents, the Tribunal highlighted that the reason to believe must be concrete and reliable, not based on mere suspicion. The reopening of assessments should not be for mere investigation or to find out the probability of escaped income. In this case, the Tribunal concluded that the assessment was reopened to find out the probability of escaped income, which is impermissible in law. Therefore, the Tribunal canceled the re-assessment order, allowing the appeal of the assessee.
As a result of this decision, the other grounds of appeal raised by the assessee were considered moot. The Tribunal refrained from adjudicating on those grounds. Ultimately, the appeal of the assessee was allowed, and the impugned re-assessment order was canceled.
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2010 (8) TMI 1050
Issues involved: Delay in filing appeal, addition under section 68 of the Income Tax Act, 1961, addition on account of peak credit.
Delay in filing appeal: The appeal was filed by the assessee against the order of the Commissioner of Income Tax(Appeals) for the assessment year 2005-06, citing a delay of 19 days due to the sudden illness of the Managing Partner. The delay was condoned based on legal precedents emphasizing that unless malafides are evident, delays should be condoned and matters decided on merits rather than technicalities.
Addition under section 68: The Assessing Officer made an addition of Rs. 5,00,000 under section 68 of the Income Tax Act, 1961, as the cash credit was deemed non-genuine. The party providing the cash was not produced, leading to the addition. The Tribunal directed the assessee to produce the party and provide details regarding the nature of the credit, whether it was a loan, and other relevant information for re-adjudication of the addition.
Addition on account of peak credit: Another addition of Rs. 4,00,000 was made by the Assessing Officer on account of peak credit, which was confirmed by the Commissioner of Income Tax(Appeals). The peak credit calculation discrepancy was highlighted, with the Assessing Officer not properly reconciling the cash balance. The Tribunal upheld the decision of the authorities, rejecting the appeal on this ground.
Conclusion: The Tribunal partly allowed the appeal, directing the assessee to produce the party related to the cash credit for re-adjudication. However, the addition on account of peak credit was upheld based on the detailed discussion and reasoning provided by the Commissioner of Income Tax(Appeals).
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