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2011 (12) TMI 656
Whether the High Court can pass an order on an application entertained after final disposal of the criminal appeal or even suo motu particularly, in view of the provisions of Section 362 of the Code of Criminal Procedure, 1973 - whether in exercise of its inherent jurisdiction under Section 482 Cr.P.C. the High Court can ask a particular investigating agency to investigate a case following a particular procedure through an exceptionally unusual method which is not in consonance with the statutory provisions of Cr.P.C.
Held that:- The error in the impugned orders of the High Court transgresses judicious discretion. The process adopted by the High Court led to greater injustice than securing the ends of justice. The path charted by the High Court inevitably reflects a biased approach. It was a misplaced sympathy for a cause that can be termed as being inconsistent to the legal framework. Law is an endless process of testing and retesting as said by Justice Cardozo in his conclusion of the Judicial Process, ending in a constant rejection of the dross and retention of whatever is pure and sound. The multi-dimensional defective legal process adopted by the court below cannot be justified on any rational legal principle. The High Court was swayed away by considerations that are legally impermissible and unsustainable.
In view of the above, the appeals succeed and are accordingly allowed. The impugned orders challenged herein are declared to be nullity and as a consequence, the FIR registered by the CBI is also quashed.
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2011 (12) TMI 655
Issues involved: Appeal against dismissal of writ petition challenging revocation of approval for GSM based Cellular Telephone Services due to lack of security clearance.
Summary:
1. The appellants appealed against the dismissal of their writ petition challenging the revocation of approval for GSM based Cellular Telephone Services due to lack of security clearance. Original files were produced for perusal, and additional documents were filed by the appellants.
2. The writ petition challenged the FIPB's revocation of approval for GSM services due to lack of security clearance. Relief was sought for reconsideration of the security clearance refusal.
3. The Single Judge provided a detailed judgment on the facts of the case.
4. The Single Judge found the decision to revoke security clearance based on secret sources to be satisfactory and not subject to interference. The Judge also rejected the appellants' plea for disclosure of information, citing the need to protect the sources of information.
5. The Single Judge held that lack of security clearance was a valid reason for revocation of FIPB approval. The decision-making process for foreign investments involves confidential information, and unless mala fide intent is proven, the decision stands.
6. The Court affirmed the Single Judge's findings, stating that no mala fides or victimization were evident in the decision-making process. The expertise of government agencies in security matters was acknowledged, and judicial interference was deemed inappropriate.
7. The Court found the appellants' arguments regarding developments since 2005 and structural changes to be irrelevant to the revocation decision.
8. The appellants' request for further inquiry based on additional documents was denied, as the existing intelligence inputs were deemed sufficient by the Court.
9. The appeal was dismissed for lack of merit.
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2011 (12) TMI 654
Input tax credit - whether input tax credit was liable to be reduced proportionately by 25% to the extent of manufacture of tax exempted "Chaff" ("Chokar") in the process of manufacture of "Aata", "Maida" and "Suji", which are taxable wheat products and for manufacture of which the wheat was purchased by the respondent-assessee upon payment of Sales Tax/VAT and full input tax credit in respect of which was claimed u/s 18 of the Act against the tax payable by the assessee on the sale of "Aata", "Maida" and "Suji" during the period in question? - Section 18 of the VAT Act of 2003.
Held that: - for the period in question before this Court in the present case, namely, 01.04.2006 to 30.06.2006 is prior to the amendment w.e.f. 02.04.2008 and, therefore, bran of wheat or Chaff/Chokar was exempted goods under Schedule-I of the VAT Act and there is no dispute on this from the side of the assessee - Admittedly, while the wheat bran, the exempted goods, were sold as exempted goods and were obtained in the process of manufacture of taxable goods viz. "Aata", "Maida" and "Suji" as merely byproduct Section 18 of the Act of 2003 does not make any distinction between such byproduct or final product, which are taxable goods for the manufacture of which the raw material, namely, wheat was used.
Input tax credit in the present case, was rightly reduced and was allowed only proportionately to the extent of manufacturing and sale of taxable goods by the assessee in the present case, namely, "Aata", "Maida" and "Suji", manufactured out of raw material (wheat) and such input tax credit could not be allowed to the extent of sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar), which has been assessed by the Assessing Authority to the extent of 25% of the input tax credit and reverse tax has been imposed on the respondent-assessee.
Revision petition disposed off - decided partly in favor of Revenue.
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2011 (12) TMI 653
Issues involved: Stay petition for waiver of pre-deposit of differential duty liability, interest, and penalty.
Analysis:
1. The stay petition was filed for the waiver of pre-deposit amounting to Rs. 16,12,304 confirmed as differential duty liability, interest, and an equivalent amount of penalty on the appellant.
2. The Tribunal found that the appeal could be decided promptly as it involved a narrow scope. Consequently, the stay petition was allowed, and the appeal was taken up for disposal.
3. The learned counsel contended that the issue had already been conclusively decided by the same Bench in the appellant's earlier case for a prior period, referencing Final Order No. A/1946/2011-WZB/AHD, dated 16-11-2011.
4. The Senior Departmental Representative (SDR) argued that the issue in the earlier final order dated 16-11-2011 was concerning the same assessee but for a subsequent period.
5. Upon reviewing the Order dated 16-11-2011, the Tribunal observed that the issue in that case and the current case were identical, involving the same assessee. As the Tribunal had previously ruled in favor of the assessee by setting aside the impugned order, the stay petition and appeal were allowed, and the impugned order was overturned.
This judgment showcases the Tribunal's consideration of previous decisions, the similarity of issues, and the ultimate decision to allow the appeal and set aside the impugned order based on the precedent set in the appellant's earlier case.
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2011 (12) TMI 652
Issues Involved: Non-compliance with pre-deposit order u/s 129E of the Customs Act leading to dismissal of appeals.
Summary:
Issue 1: Failure to comply with pre-deposit order
The appellants were directed to pre-deposit 25% of the penalty imposed on them, totaling Rs. 22,70,000. Instead of complying, they challenged the stay order before the High Court, which was unsuccessful. The High Court granted 4 weeks for pre-deposit, starting from 16.9.2011. However, the appellants failed to comply within the given time, leading to the appeals being liable for dismissal under Section 129E of the Customs Act.
Issue 2: Partial deposit made
The appellant claimed to have made a partial deposit of 50% within the granted time and filed a miscellaneous petition seeking waiver of the balance amount. Despite presenting a challan for Rs. 11,35,000, the department noted discrepancies between the payment claimed and their records. However, since the pre-deposit order remained unfulfilled, further examination of this issue was deemed unnecessary.
Issue 3: Pending writ appeal
In Appeal No. C/550/09, the appellant's writ appeal against the Tribunal's stay order was pending before the High Court. The appellant requested to keep the matter on hold until receiving appropriate orders from the High Court. However, as the appellant had not complied with the Tribunal's pre-deposit direction and the writ petition was dismissed by the High Court, the request was denied.
In conclusion, all appeals were dismissed due to the appellants' failure to comply with the pre-deposit requirement as mandated by Section 129E of the Customs Act.
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2011 (12) TMI 651
Penalty u/s 271(1)(c) - Held that:- It is not the case of the Revenue that the gross receipts shown by the assessee are not correct or it is not a case of estimation of income we are of the view that there is no concealment on the part of the assessee which may call for levy of penalty u/s 271(1)(c) of the Act and accordingly, the penalty imposed by the AO and sustained by the ld. CIT (A) is deleted. The grounds taken by the assessee are , therefore, allowed.
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2011 (12) TMI 650
Issues Involved:
1. Deletion of addition made by Assessing Officer in estimating business income from civil contract.
2. Deletion of addition made by Assessing Officer relating to peak credit in bank account.
Issue 1: Estimation of Business Income from Civil Contract:
The ld. CIT(A) deleted the addition made by the Assessing Officer at &8377; 3,33,543/- by estimating the business income from civil contract. The Assessing Officer estimated the profit at &8377; 4,46,303/- based on total cheque amounts received from contract works during the year. The appellant argued that the estimation was too high and arbitrary, as the gross contract receipts exceeded &8377; 40 lakhs, making the application of u/s 44AD(1) inapplicable. The ld. CIT(A) found that the Assessing Officer did not discuss the accounts of the appellant or provide a basis for the estimation, leading to the deletion of the addition. The Tribunal upheld the decision, noting that the books of account were supported by vouchers, and no specific errors were found in the accounts or vouchers. The estimation of profit at 10.37% was deemed baseless, and the order of the ld. CIT(A) was confirmed, dismissing the Revenue's appeal.
Issue 2: Peak Credit in Bank Account:
The ld. CIT(A) deleted the addition made by the Assessing Officer relating to peak credit of &8377; 10,34,382/- in the bank account. The Assessing Officer proposed the addition as unaccounted income, citing transactions in the bank account that were not explained by the assessee. The appellant contended that the account was disclosed in the Balance Sheet and the peak credit did not pertain to the relevant assessment year. The ld. CIT(A) agreed with the appellant, highlighting that the account was disclosed, and the peak credit was outside the relevant accounting year. The Tribunal found no fault in the ld. CIT(A)'s decision, as the explanation provided by the assessee was satisfactory, and no contradictory evidence was presented. Consequently, the addition was deemed unwarranted, and the order of the ld. CIT(A) was upheld, dismissing the Revenue's appeal.
This judgment by the Appellate Tribunal ITAT CHENNAI in 2011 addressed issues related to the estimation of business income from civil contract and the addition of peak credit in a bank account, ultimately ruling in favor of the assessee in both instances.
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2011 (12) TMI 649
Issues Involved:
1. Whether the transactions in question were sales in the course of inter-State trade u/s 3 of the Central Sales Tax Act, 1956.
2. Whether the authorities below correctly appreciated the legal effect of the documents and circumstances.
3. Direction for transfer of refundable tax amount between States.
Summary:
1. Inter-State Trade Determination:
The appellant, a public sector company, challenged the assessment of sales tax on transactions involving the supply of zinc to IISCO and TISCO. The assessing officer issued a show-cause notice indicating that the movement of goods was occasioned by purchase orders placed by IISCO and TISCO on the appellant's branch office in Calcutta. The appellant contended that the goods were transferred by way of stock transfer and sold in West Bengal, not involving inter-State movement u/s 3 and 6 of the Act. However, the assessing officer, appellate authority, and Sales Tax Appellate Tribunal concluded that the sales were in the course of inter-State trade, triggered by firm orders from IISCO and TISCO, thus liable to tax.
2. Legal Effect of Documents and Circumstances:
The appellant argued that the authorities below failed to properly understand the significance of documents showing the appellant as both consignor and consignee. The Tribunal, however, found that the movement of goods was triggered by purchase orders, and the mere fact that deliveries were effected subsequently by the Calcutta office was immaterial. The Tribunal assessed the entire facts and circumstances, including the terms of the purchase orders and the forfeiture clause, to conclude that the transactions were inter-State sales. The Tribunal's decision was based on an appreciation of the facts and circumstances, supported by relevant case law, including Balabhagas Hulaschand v. State of Orissa.
3. Transfer of Refundable Tax Amount:
The appellant requested a direction for the States of West Bengal and Jharkhand to transfer the refundable tax amount to the State of Andhra Pradesh. The court directed the States of West Bengal and Jharkhand to transfer the refundable amount of tax to Andhra Pradesh, as the tax under the Act was due to Andhra Pradesh for the transactions in question.
Conclusion:
The appeal was dismissed, confirming the order of the Appellate Tribunal. The court directed the States of West Bengal and Jharkhand to transfer the refundable tax amount to the State of Andhra Pradesh. No order as to costs was made.
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2011 (12) TMI 648
Issues Involved:
1. Deletion of addition made on account of provision for impairment of stock.
2. Deduction of custom duty deposited with Special Valuation Branch (SVB) loading.
3. Deduction on account of provision for warranty expenses.
4. Chargeability of interest under sec. 234B.
Issue-wise Detailed Analysis:
1. Deletion of Addition Made on Account of Provision for Impairment of Stock:
The revenue contested the deletion of Rs. 18,19,034 out of Rs. 24,25,379 for A.Y. 2004-05 and Rs. 2,60,412 out of Rs. 3,47,216 for A.Y. 2005-06 by the CIT(A) regarding the provision for impairment of stock. The assessee's claim was based on valuing old/used stock at net realizable value. The AO disallowed the claim due to lack of evidence supporting the realizable value and considered the adjustment notional. The CIT(A) restricted the disallowance to 25% of the total disallowance, citing the ITAT Calcutta decision in JCIT vs. I.T.C. Calcutta.
The Tribunal found that the assessee had provided detailed inventory valuations and net realizable values, which were consistent with the method adopted in previous years. The AO had not pointed out any specific defects or irregularities in the valuations. The Tribunal concluded that the assessee's method of valuing stock at cost or net realizable value, whichever is lower, was acceptable and recognized by various courts. Consequently, the Tribunal deleted the 25% disallowance sustained by the CIT(A) and allowed the assessee's total claim.
2. Deduction of Custom Duty Deposited with Special Valuation Branch (SVB) Loading:
The revenue contested the deletion of Rs. 7,93,503 for A.Y. 2004-05 and Rs. 45,556 for A.Y. 2005-06 by the CIT(A) regarding custom duty deposited with SVB loading. The AO disallowed the claims, arguing that no actual payment was made during the relevant years. The CIT(A) directed the AO to verify the actual payment and allow the deduction if the payment was made for the relevant year.
The Tribunal upheld the CIT(A)'s order, noting that the assessee had no option but to make the payment as per the demand notice issued by the customs authorities. The Tribunal referenced the Delhi High Court decision in CIT vs. Hughes Escorts Communications Ltd., which supported the view that such payments fall within section 43B(a) of the Act.
3. Deduction on Account of Provision for Warranty Expenses:
The revenue contested the deletion of disallowance of Rs. 1,04,48,758 for A.Y. 2004-05 and Rs. 87,41,759 for A.Y. 2005-06 by the CIT(A) regarding the provision for warranty expenses. The AO disallowed the claims, arguing that the expenses were based on estimates and not actual liabilities incurred.
The CIT(A) allowed the claims, following the Tribunal's decision in the assessee's own case for A.Y. 2003-04. The Tribunal upheld the CIT(A)'s order, referencing the Supreme Court decision in Rotork Control India P. Ltd. vs. CIT, which held that warranty provisions are integral to the sale price and constitute a present obligation resulting in an outflow of resources. The Tribunal concluded that the assessee's provision for warranty expenses was justified and deductible under sec. 37 of the Act.
4. Chargeability of Interest Under Sec. 234B:
The assessee's ground regarding the chargeability of interest under sec. 234B was noted as consequential. The Tribunal directed the AO to recompute the interest based on the income finally determined in the case.
Conclusion:
The appeals filed by the assessee for both assessment years were allowed, and those filed by the revenue were dismissed. The Tribunal's decision was pronounced on 26th December 2011.
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2011 (12) TMI 647
Issues Involved:
1. Whether the retention money of Rs. 4,14,62,866/- accrued to the assessee is taxable in the assessment year 2004-05.
Summary:
Issue 1: Taxability of Retention Money
The department filed an appeal against the order of the CIT(A) for the assessment year 2004-05, challenging the deletion of retention money amounting to Rs. 4,14,62,866/- accrued to the assessee. The primary issue was whether the retention money should be taxed in the year it was received or in the year the contract was satisfactorily completed.
The assessee, a company incorporated in the Netherlands, was involved in a contract for construction works awarded by the Government of India. The Assessing Officer (AO) noted that the retention money was withheld at 5% from the works executed, and an amount of Rs. 4,14,62,866/- was released against a bank guarantee during the year. The AO brought this amount to tax, arguing that it had accrued to the assessee during the year.
The CIT(A) deleted the addition, referencing decisions from higher courts, including the Hon'ble Mumbai High Court in CIT vs. Associated Cables Pvt. Ltd. 286 ITR 596, which held that retention money does not accrue to the assessee until the contract is satisfactorily completed.
The department argued that since the assessee received the retention money during the year, it should be taxed in that year. They cited the case of DCIT vs. Amarshiv Construction (P) Ltd. 88 ITD 381, where it was held that amounts deducted from running bills as additional security deposit accrued to the assessee in the year the bills were raised.
The assessee contended that the release of retention money against a bank guarantee did not confer an absolute right to the amount, and it should be considered taxable only when the contract was satisfactorily completed. The assessee recognized the retention money as income in the assessment year 2006-07, when the contract was completed.
The Tribunal, after considering the submissions and relevant case laws, upheld the CIT(A)'s order. It observed that similar issues had been considered in the case of Associated Cables Pvt. Ltd., where it was held that retention money does not accrue until the guarantee period is over. The Tribunal also noted that the assessee consistently offered the retention money for taxation in the year the right to receive it accrued unconditionally.
In conclusion, the Tribunal dismissed the department's appeal, affirming that the retention money was not taxable in the assessment year 2004-05.
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2011 (12) TMI 646
Issues involved: Appeal against rejection of renewal of exemption u/s 80G of the Income Tax Act, 1961 due to omission of proviso to Section 80G(5)(vi) by the Finance Act (No.2) 2009 and non-consideration of Board Circular dated 3.6.2010 and 27.10.2010 by the learned DIT(E).
Issue 1: Omission of proviso to Section 80G(5)(vi) by Finance Act (No.2) 2009
The assessee Trust appealed against the rejection of renewal of exemption u/s 80G by the learned DIT(E), citing the omission of the proviso to Section 80G(5)(vi) by the Finance Act (No.2) 2009. The Board Circular dated 3.6.2010 clarified that existing approvals expiring on or after 1st October, 2009 shall be deemed extended in perpetuity, unless specifically withdrawn. The impact of this omission was explained, emphasizing that approvals granted after 1.10.2009 shall continue indefinitely unless withdrawn. The Hon'ble Allahabad High Court in Babu Hargovind Dayal Trust vs ITAT(2011) held that exemptions granted post 1.10.2009 shall be continued perpetually unless withdrawn. The Tribunal directed the DIT(E) to consider this aspect and treat the approval of exemption granted earlier to the assessee in perpetuity if it was to expire on or after 1.10.2009, obviating the need for renewal.
Issue 2: Non-consideration of Board Circular by the learned DIT(E)
The assessee contended that the learned DIT(E) ignored the Board Circular dated 3.6.2010 and 27.10.2010 while rejecting the renewal of exemption u/s 80G. The Tribunal noted that the deletion of the proviso to Section 80G(5)(vi) had not been taken into account by the DIT(E) in the rejection. Consequently, the Tribunal directed the DIT(E) to reconsider the matter, providing the assessee with a fair opportunity to present all necessary details and decide the issue in accordance with the law.
In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the DIT(E) to treat the approval of exemption granted earlier u/s 80G to the assessee in perpetuity if it was to expire on or after 1.10.2009. The Tribunal emphasized the significance of the omission of the proviso to Section 80G(5)(vi) and the applicability of the Board Circular in such cases.
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2011 (12) TMI 645
Issues involved: The judgment involves the issue of import of goods without the required license under Rule 23 of the Drugs and Cosmetics Rules, 1945, leading to confiscation under section 111(d) of the Customs Act, 1962. The subsequent request for re-export of the goods and the imposition of redemption fine and penalty are also at the core of the case.
Import of Goods without License:
The respondent imported goods valued at Rs. 42,34,481.37 without the necessary import license in violation of Rule 23 of the Drugs and Cosmetics Rules, 1945. This non-compliance rendered the goods liable for confiscation under section 111(d) of the Customs Act, 1962. The request for re-export was made after the goods could not be released due to the absence of the required license.
Adjudication and Appeal:
The adjudicating authority initially allowed re-export on payment of a redemption fine of Rs. 5 lakhs and a penalty of Rs. 2 lakhs. Subsequently, the Commissioner (Appeals) reduced the redemption fine to Rs. 25,000 and the penalty to Rs. 75,000, citing lack of deliberate attempt to import without the required license and absence of mens rea. The reduction was based on the finding that there was no mis-declaration and no foreign exchange involved.
Revenue's Appeal:
The Revenue appealed against the reduction of the redemption fine and penalty. However, the Appellate Tribunal found no valid reason presented by the Revenue for enhancement. It was noted that there was no malafide intent on the part of the importer, and the need for re-export arose due to the inability to obtain the necessary license. The Tribunal upheld the decision of the Commissioner (Appeals) to reduce the fine and penalty, ultimately rejecting the Revenue's appeal.
Conclusion:
The Tribunal rejected the Revenue's appeal, affirming the reduction of the redemption fine and penalty by the Commissioner (Appeals). The judgment highlights the importance of compliance with licensing requirements for imports and considers lack of mens rea in determining the appropriate penalties.
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2011 (12) TMI 644
Issues Involved:
1. Condonation of Delay
2. Income Classification: House Property vs. Other Sources
3. Disallowance of Expenses
4. Principles of Mutuality
Summary:
1. Condonation of Delay:
The appeal by the assessee was delayed by 1167 days. The assessee filed an application for condonation of delay, explaining that the delay was due to the time taken in proceedings u/s 154 of the IT Act. The CIT(A) passed an ex-parte order on 31.7.2006, and the assessee filed a petition u/s 154 on 25.9.2006, which was disposed of on 17.7.2009. The Tribunal noted that the delay was not intentional or willful but due to the prolonged proceedings u/s 154. Citing the Hon'ble Allahabad High Court's decision in Subhash Malik vs CIT, the Tribunal condoned the delay, emphasizing a justice-oriented approach.
2. Income Classification: House Property vs. Other Sources:
The assessee had leased out a portion of its terrace to BPL Mobile Communications Ltd. and declared the income as "income from house property," claiming a deduction u/s 24(a). The Assessing Officer treated this income as "income from other sources" and disallowed the deduction. The Tribunal referred to the coordinate Bench's decision in M/s Mahalaxmi Sheela Premises CHS Ltd., which held that income from letting out the terrace should be assessed as "income from house property." The Tribunal followed this precedent and directed the Assessing Officer to assess the income under "income from house property."
3. Disallowance of Expenses:
The assessee claimed further deductions on expenses incurred. The Tribunal held that once a deduction u/s 24(a) at 30% is allowed for income from house property, no additional deductions for expenses are permissible. The Tribunal also noted that the expenses incurred by the society were on behalf of its members and lacked a direct nexus to the income, thus disallowing the claim.
4. Principles of Mutuality:
The assessee raised an additional ground, arguing that the income from letting out a portion of the building should not be taxable based on the principles of mutuality. The Tribunal found this ground to be an alternative to the main grounds and deemed it infructuous in light of its decision on the primary issue of income classification.
Conclusion:
The Tribunal allowed the appeal in part, condoning the delay and directing the income to be assessed under "income from house property," while disallowing further expense deductions and finding the additional ground on mutuality to be infructuous.
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2011 (12) TMI 642
Issues involved: Condonation of delay in filing appeal, applicability of MAT provisions u/s 115JB, interpretation of income tax payable, revision proceeding u/s 263.
Condonation of delay: The appeal was time-barred by 80 days, but the delay was condoned as the assessee provided a valid reason for the delay, attributing it to wrong advice. The delay was caused by a misconceived understanding which was later corrected by Senior Counsel.
Applicability of MAT provisions u/s 115JB: The Assessing Officer failed to invoke the provisions of section 115JB, leading to a higher tax liability of &8377; 7,56,694. The ld. CIT held that the assessment order was erroneous and prejudicial to the interest of revenue due to non-consideration of these provisions.
Interpretation of income tax payable: The Assessing Officer contended that income tax payable on total income should be computed after allowing rebates, contrary to the assessee's argument that the tax payable should be compared before allowing rebates. The Tribunal's decision in a similar case supported the assessee's interpretation, allowing rebate under section 88E from the tax computed as per provisions of section 115JB.
Revision proceeding u/s 263: The ld. CIT invoked revision proceedings u/s 263 based on the non-consideration of section 115JB. However, since the issue was covered in favor of the assessee by previous decisions, the assessment order was found not to be erroneous or prejudicial to the interest of revenue. The ld. CIT should have considered the effect of previous decisions before invoking revision proceedings.
Conclusion: The Tribunal allowed the appeal filed by the assessee, as the non-consideration of provisions of section 115JB did not cause any prejudice to the revenue. The rebate under section 88E was to be allowed from the tax computed as per provisions of section 115JB, and the assessment order was held to be neither erroneous nor prejudicial to the interest of revenue.
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2011 (12) TMI 640
Issues involved: Appeal against disallowance of depreciation claimed by a public charitable trust u/s 11 of the Income Tax Act.
The assessee, a public charitable trust registered u/s 12A(a) of the Income Tax Act, claimed deduction on account of depreciation of Rs. 31,03,118/- in its income and expenditure account. The Assessing Officer disallowed this claim, stating it is not allowable while determining the surplus of the income after considering various revenue expenditure without depreciation, capital expenditure applied to the objects of the Trust, and the amount set apart u/s 11 subsection(2) of the Act.
On appeal, the ld. CIT(A) referred to the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs M/s Tiny Tots Education Society, where it was held that depreciation on capital assets should be allowed as a deduction from the total income of the Trust. The revenue appealed this decision.
The ITAT Delhi, after hearing both parties and considering the precedent set by the Hon'ble Punjab & Haryana High Court, upheld the order of ld. CIT(A) directing the AO to allow depreciation and reduce the same from the income of the trust for determining the percentage of funds to be applied for the purposes of the Trust. The appeal filed by the revenue was dismissed, and the order of the ld. CIT(A) was upheld.
Separate Judgement: No separate judgment was delivered by the judges.
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2011 (12) TMI 639
Issues involved: Appeal against order of Ld. CIT(A) for asstt. year 2006-07 - Disallowance of job work expenses - Addition in value of fringe benefit.
Disallowance of job work expenses: The assessee appealed against the disallowance of Rs. 36,49,370 out of job work expenses. The Ld. CIT(A) upheld the addition made by the Ld. AO under section 40a, as the assessee failed to provide any arguments or evidence in support of the appeal. The Ld. First Appellate Authority did not discuss the issue in detail and the order was deemed not in accordance with the mandate of sub section (6) of section 250 of the Income Tax Act 1961. The ITAT Delhi allowed the appeal, setting aside the order of Ld. CIT(A) and restoring the issue for readjudication by the Ld. First Appellate Authority after providing due opportunity of hearing to the assessee.
Addition in value of fringe benefit: The second substantial ground of appeal was the addition of Rs. 13,89,645 in the value of fringe benefit. The Ld. CIT(A) confirmed this addition as the Ld. AR did not put forth any arguments in support of the appeal. The ITAT Delhi found that the Ld. First Appellate Authority failed to consider the material on record and did not discuss the issue adequately. Consequently, the ITAT Delhi allowed the appeal, setting aside the order of Ld. CIT(A) and remanding the issue for readjudication by the Ld. First Appellate Authority after providing the assessee with a proper opportunity of hearing.
Conclusion: The ITAT Delhi allowed the appeal of the assessee against the disallowance of job work expenses and the addition in the value of fringe benefit, setting aside the order of Ld. CIT(A) and remanding both issues for readjudication by the Ld. First Appellate Authority with the directive to provide the assessee with a fair opportunity of hearing.
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2011 (12) TMI 638
Issues Involved:
1. Acceptance of financial results and treatment of trial production expenses.
2. Confirmation of estimated revenue expenditure.
3. Allowance of depreciation on fixed assets used for trial production.
4. Estimation of income versus claimed loss and unabsorbed depreciation.
5. Disallowance of trial run expenditure from the preceding assessment year.
6. Allegation of non-application of mind by CIT(A).
7. General legality of the order.
Summary:
1. Acceptance of Financial Results and Treatment of Trial Production Expenses:
The learned CIT(A) erred in not accepting the financial results of the company, which were as per recognized accounting policies and standards prescribed by the ICAI, and in treating the entire expenses of income on trial production as capital work in progress. The AO observed that the plant and machinery had already been set up and the period of construction was over before production started. The AO disallowed preoperative expenses of `46,98,37,969/- and estimated net profit @ 0.5% on sales of `37,33,68,091/-.
2. Confirmation of Estimated Revenue Expenditure:
The CIT(A) confirmed the estimated revenue expenditure of `371,501,251 (99.5% of sales `373,368,091) instead of the actual amount incurred by the appellant company amounting to `648,727,055 for the year under consideration. The CIT(A) noted that the sales were claimed as allowable expenditure by the AR, which was not the intent of the AO.
3. Allowance of Depreciation on Fixed Assets Used for Trial Production:
The CIT(A) was wrong in not allowing any depreciation on fixed assets used for trial run production, whereas she estimated income of `1,866,840 on the reported sale of `373,368,091 included under trial run expenditure. The AO observed ambiguity in the assessee's stand of claiming depreciation while stating that the production was a trial production.
4. Estimation of Income Versus Claimed Loss and Unabsorbed Depreciation:
The CIT(A) was wrong in estimating income at `1,866,840/- instead of allowing a loss of `265,020,052 and unabsorbed depreciation of `162,662,308/-. The AO did not allow the expenses of `30,20,64,632/- as revenue expenditure nor allowed them to be carried forward.
5. Disallowance of Trial Run Expenditure from the Preceding Assessment Year:
The CIT(A) grossly erred in disallowing the trial run expenditure of `167,773,337 (out of total expenditure `46,98,37,969) relating to the preceding assessment year 2002-03. The AO disallowed even the capitalization of expenses incurred during the preceding assessment year.
6. Allegation of Non-application of Mind by CIT(A):
The orders passed by the learned CIT(A) were alleged to be without application of mind and without considering all the grounds of appeal. The CIT(A) did not record specific findings on when the trial production ended and commercial production started.
7. General Legality of the Order:
The order was otherwise claimed to be bad in law. The CIT(A) did not adjudicate each of the grounds of appeal separately and did not record findings on the disallowance of expenditure capitalized in the preceding year.
Conclusion:
The matter was set aside to the file of the AO for reconsideration in light of relevant books of accounts and records, including quality control reports, after allowing sufficient opportunity to the assessee. The AO was directed to pass a speaking order, clearly stating when the trial production ended and commercial production started. The appeal was allowed for statistical purposes.
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2011 (12) TMI 637
Issues involved: Challenge to order of Income Tax Appellate Tribunal reducing addition on account of unaccounted sales of man-made fabrics.
Summary:
The Tax Appeal was filed challenging the order of the Income Tax Appellate Tribunal reducing the addition made on account of unaccounted sales of man-made fabrics. The assessee had filed the return of income for the Assessment Year 2003-04, which was finalized at a higher amount by the Assessing Officer due to unaccounted sales. The CIT [A] reduced the additions, providing relief to the assessee. The Revenue challenged this before the Tribunal, which upheld the findings of the CIT [A] based on various factors. The Tribunal considered the gross profit ratio against the unaccounted sales and the deployment of minimum capital investment for making additions on account of undisclosed income. It concluded the issue in favor of the assessee and dismissed the Tax Appeal as it found no infirmity in the Tribunal's order.
In conclusion, the Tribunal's decision reducing the addition on unaccounted sales was upheld based on the facts and material on record, providing relief to the assessee against the Revenue's challenge.
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2011 (12) TMI 636
Issues involved: Appeals against orders passed by the Dispute Resolution Panel (DRP) regarding assessment of income, additions made, and levy of interest u/s 234B and 234D.
ITA No.4362/Del/2010:
The assessee filed a return declaring nil income, but was assessed at an income of ` 14,20,22,828/- with additions for depreciation on acquired business data base and adjustment on arm's length price. The Assessing Officer's order u/s 143(3)/144C(1) was confirmed by the DRP. The assessee objected to the additions, assessment at ` 14,20,22,828/-, levy of interest u/s 234B and 234D, and denial of set off of business losses and unabsorbed depreciation. The AR argued for restoration to DRP for a speaking order, citing the necessity of cogent reasons as per legal precedent.
ITA No.3990/Del/2010:
The assessee filed a return of ` 52,46,51,340/-, assessed at ` 142,97,43,842/- with additions for arm's length price adjustment and disallowed deduction u/s 10A. The AR contested the additions, DRP's order, and the levy of interest u/s 234A, 234B, and 234D. The AR sought restoration to DRP for a speaking order, emphasizing the importance of providing cogent reasons as per legal requirements.
Judgment:
The Tribunal noted that the DRP's orders lacked independent findings and merely relied on the TPO's conclusions. Citing a High Court decision, the Tribunal emphasized the need for DRP to provide cogent and germane reasons in its orders. As the DRP failed to do so, the appeals were restored to the DRP for re-adjudication, with directions to provide a speaking order with reasons for accepting or rejecting the assessee's claims. The Tribunal did not express any opinion on the merits, leaving the re-adjudication to the DRP in accordance with the law.
Result:
Both appeals were considered allowed for statistical purposes, with the matter to be re-adjudicated by the DRP as per the directions given in the Tribunal's order and the provisions of law.
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2011 (12) TMI 635
Issues Involved:
The judgment involves the issue of the validity of a notice issued u/s 158BD of the Income Tax Act, 1961, for the block period from 01-04-1996 to 21-01-2003.
Assessee's Cross Objection (CO):
The CO filed by the assessee raised the issue of the validity of the notice issued u/s 158BD of the Act, contending that it was vague and lacked the requisite satisfaction by the Assessing Officer (AO). The AR of the assessee argued that this additional ground should be admitted based on legal grounds, citing the judgment of the Hon'ble apex court in the case of National Thermal Power Corporation v. CIT (1998) 229 ITR 383 (SC). The Revenue's DR raised objections, but the Tribunal admitted the ground as it was convinced of its legal nature and cited relevant judicial pronouncements. The AR of the assessee further argued that the notice issued in the present case was similar to a previous case where the assessment was quashed due to non-application of mind by the AO and lack of visible satisfaction in the notice. The Tribunal examined the contents of the notice and found it identical to previous cases where assessments were quashed, leading to the decision to quash the block assessment order and allow the additional ground of appeal.
Conclusion:
The Tribunal held that the notice dated 01-06-2005 issued by the Assessing Officer u/s 158BD r.w.s 158BC was not valid as it did not meet the legal requirements established by the Hon'ble apex court in the case of Manish Maheshwari (supra). Consequently, the block assessment order was quashed, and the additional ground of appeal by the assessee was allowed. As a result, the other grounds raised by the assessee in the CO were not decided, and the appeal filed by the Revenue was dismissed as infructuous.
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