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2011 (9) TMI 1122
Issues:
Challenge to order of Central Board of Excise and Customs suspending monthly payment of excise duty and directing payment without utilizing CENVAT credit. Contention of absence of mens rea in availing credit twice. Interpretation of Notification No.32/2006-C.E. (N.T.) regarding violations and penalties. Justification of revenue for imposing restrictions based on the conduct of the assessee.
Detailed Analysis:
Issue 1: Challenge to order of Central Board of Excise and Customs
The appellant, engaged in manufacturing ATM Machines, challenged the order suspending the facility of monthly payment of excise duty and directing payment without utilizing CENVAT credit. The inspection revealed the assessee availed credit twice against a single document, leading to proceedings initiated by the department. The Central Board of Excise and Customs suspended the facility based on serious misconduct by the assessee.
Issue 2: Contention of absence of mens rea
The appellant contended that the revenue failed to prove mens rea before withdrawing benefits granted earlier. The appellant argued that the revenue should establish knowingly involvement before passing the impugned order. The appellant justified the incident as a bona fide mistake, emphasizing the balance of credit exceeding the amount pointed out by the revenue.
Issue 3: Interpretation of Notification No.32/2006-C.E. (N.T.)
The core issue revolved around whether the revenue had sufficient materials to conclude the involvement of the assessee in a fraudulent transaction with mens rea. The notification outlined violations and penalties for manufacturers and exporters involved in malpractices, aiming to discourage misuse of facilities. The authorities were entitled to withdraw benefits in case of proven violations based on prima facie evidence of fraudulent actions by the assessee.
Issue 4: Justification of revenue for imposing restrictions
The revenue justified imposing restrictions based on the conduct of the assessee, indicating a deliberate attempt to avail credit twice by splitting the amount into multiple entries. The evidence collected by the Department of Central Excise supported the action against the appellant, demonstrating intentional splitting of credit entries. The appellant's defense of having a significant credit balance did not negate the deliberate act of splitting credit entries, showcasing mens rea.
Conclusion:
The court upheld the revenue's decision, concluding that the materials presented clearly indicated the appellant's knowing involvement in availing credit twice. The court found no reason to overturn the decision, dismissing the writ appeal and closing the connected matters without costs.
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2011 (9) TMI 1121
The Supreme Court dismissed an appeal where the respondent failed to comply with the Settlement Commission's direction to deposit additional demand under Section 127B(1) of the Customs Act, 1962. The appeal was rendered infructuous.
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2011 (9) TMI 1120
Liability of tax on sub-contractor - the main contractor has discharged the entire Service tax on the cost value of the contract - Revenue's grievance is limited to the fact that Commissioner (Appeals) has set aside the demand and penalties without actually verifying as to whether the prime contractor had discharged the tax on the full value of the contract or not.
Held that:- Inasmuch as the verification is one of the essential fact for setting aside of demand, we are of the view that matter should be remanded to the original adjudicating authority for carrying out the verification of the above factual fact and decide the consequent duty liability of the respondents - matter on remand.
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2011 (9) TMI 1119
Issues involved: Determination of duty payable under the Central Excise Act.
Summary:
Issue 1: Assessment of duty payable
The Tribunal set aside the demand on the grounds that the assessee had already paid the duty as per law, leading to relief being granted to the assessee. The demand was initially for &8377; 58,09,607/- based on 108 invoices, but after the assessee pointed out that they had paid &8377; 33,89,224/-, a revised demand of &8377; 24,55,273/- based on 52 invoices was raised.
Issue 2: Application of Ujagar Prints formula
In a previous round of litigation, the Tribunal directed the authorities to assess the demand using the Ujagar Prints formula. The assessee had paid duty incorrectly based on the manufacturer's sale price, whereas as per the formula, they were liable to pay &8377; 9,89,248/-. The assessee had already paid &8377; 9,32,364/-, with the balance payable being only &8377; 50,884/-, which was also paid. Consequently, the assessee was found not liable to pay any further duty.
Issue 3: Duty payable based on sale price of manufacturer
The revenue argued that duty should be payable based on the sale price of the manufacturer. However, the determination of duty payable under the Act falls under Section 130(L) of the Central Excise Act, as per the decision in the case of COMMISSIONER OF CENTRAL EXCISE vs. M/s MANGALORE REFINERIES AND PETRO CHEMICALS LIMITED. The High Court rejected the appeal, stating it was not maintainable and reserving the liberty for the appellant to appeal to the Apex Court for further consideration. All other contentions raised by the revenue were kept open for future litigation.
The High Court directed the registry to return the certified copy of the Tribunal's order and other relevant documents to the appellant.
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2011 (9) TMI 1118
CENVAT credit - canteen services - Held that: - reliance placed in the case of Commissioner of Central Excise, Bangalore-III, Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT], where it was held that it becomes a condition of service as far as the employees are concerned - credit allowed - decided in favor of assessee.
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2011 (9) TMI 1117
The Supreme Court dismissed the appeal as the respondent complied with the Settlement Commission's order, making the appeal infructuous. No costs were awarded.
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2011 (9) TMI 1116
Issues involved: The appeal challenges the order of the Commissioner of Income-tax(Appeals) u/s 143(3) of the I.T. Act, 1961 for assessment year 2006-07, focusing on jurisdiction u/s 263 and related additions/enhancements.
Jurisdiction u/s 263:
The appeal contests the CIT's assumption of jurisdiction u/s 263, arguing that the original assessment was diligently conducted, and detailed submissions were made. The CIT's decision to enhance income by disallowing TDS on freight charges is challenged, citing failure to consider relevant judgments.
Additions/Enhancements:
The CIT invoked s.263 due to non-deduction of TDS on freight charges, leading to an income enhancement of Rs. 9.45 Cr. The CIT also addressed issues related to Section 40A(3), setting aside the matter for further examination by the AO. The CIT's decision was based on the separate legal status of the Union and truck owners, holding the Union liable for TDS on payments to truck owners.
Legal Precedents:
The judgment references decisions by the Hon'ble Punjab & Haryana High Court and the Himachal Pradesh High Court, emphasizing that Section 194C(2) did not apply in cases where the Union acted in a representative capacity. These precedents influenced the decision to allow the deduction claimed by the assessee for freight charges paid to truck operators.
Conclusion:
The Tribunal partly allowed the assessee's appeal, directing the allowance of the Rs. 9.45 Cr deduction for freight charges. The issues related to Section 40A(3) were dismissed based on the AR's admission. The decision aligned with legal precedents and upheld the original assessment against the CIT's enhancements.
Note: Separate judgments were not delivered by the judges.
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2011 (9) TMI 1115
The Supreme Court dismissed an appeal as infructuous since the respondent complied with the Settlement Commission's order, which was not challenged by the Revenue. No costs were awarded. [Case citation: 2011 (9) TMI 1115 - SC]
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2011 (9) TMI 1114
Issues:
Challenge to final order passed by High Court dismissing writ petition by Revenue against Settlement Commission's order on valuation of imported goods.
Analysis:
The Supreme Court heard the appeal challenging the High Court's order dated 12th January, 2006, which dismissed the writ petition filed by the Revenue against the Settlement Commission's decision on the valuation of imported goods by the respondent. The High Court, in its order, noted that the respondent had already deposited the differential amount of customs duty even before the Settlement Commission's decision. Considering this, the High Court chose not to delve into the merits of the Settlement Commission's order. The Supreme Court, after considering the purpose and powers of the Settlement Commission, agreed with the High Court's decision, stating that the High Court's view was justified.
The Supreme Court highlighted an order from 24th April, 2007, which stayed the refund of the excess amount paid by the respondent, subject to a condition that the Union of India file an undertaking to pay interest at the rate of 6% per annum if the petition was dismissed on merits. However, the Revenue failed to comply with this condition by not furnishing the required undertaking. Consequently, there was no stay on the refund of the excess amount, and the direction regarding the payment of interest at the rate of 6% per annum lost its effectiveness. As a result, the Supreme Court dismissed the appeal with no order as to costs.
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2011 (9) TMI 1113
Issues Involved: Appeal against the order of the Commissioner of Income-tax (Appeals) regarding the allowance of depreciation on immovable property.
Issue 1: Allowance of Depreciation
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in allowing the assessee's claim of depreciation on immovable property amounting to Rs. 59,44,712, despite the capital expenditure on the assets being treated as application of income in previous years. The Assessing Officer disallowed the depreciation claim as the corresponding capital expenditure had already been allowed as application of income. The assessee, a trust running educational institutions, relied on the judgment of the Hon'ble Bombay High Court in DIT(E) v Framjee Cawasjee Institute to justify the claim. The Commissioner of Income-tax (Appeals) upheld the claim based on the High Court's decision. The Revenue argued that allowing depreciation would result in double deduction, but the Tribunal affirmed the Commissioner's order, citing precedents and stating that denial of depreciation solely based on past application of income was not justified.
Issue 2: Legal Precedents and Interpretation
The Tribunal considered the Revenue's reliance on the decision of the Hon'ble Supreme Court in Escorts Ltd v. Union of India, where the Revenue claimed double deduction. However, the Tribunal found that the judgment was distinguishable, as there was no instance of double deduction in the present case. Referring to the judgment of the Hon'ble Punjab & Haryana High Court in CIT, Karnal v. Market Committee, the Tribunal concluded that the Revenue's plea based on the Escorts Ltd. case lacked merit. Upholding the Commissioner's order, the Tribunal emphasized that the allowance of depreciation should not be denied solely on the grounds of past application of income, as per the decisions of the jurisdictional High Court and relevant precedents.
In conclusion, the Appellate Tribunal ITAT Pune dismissed the Revenue's appeal against the Commissioner of Income-tax (Appeals) order, affirming the allowance of depreciation on immovable property for the assessee trust running educational institutions. The Tribunal's decision was based on the interpretation of legal precedents and the principle that denial of depreciation should not be automatic based on past application of income, as established by relevant court judgments.
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2011 (9) TMI 1112
Issues Involved: Computation of deduction u/s 80HHC of the Income Tax Act in relation to income from DEPB and DFRC treated as business income.
The judgment pertains to the appeal by the Revenue which was remanded back to the Tribunal by the Hon'ble Punjab & Haryana High Court in view of the ratio laid down in the case of CIT Vs. F.C. Sondhi & Company (P) Ltd. The issue at hand is the computation of deduction u/s 80HHC of the Income Tax Act concerning income from DEPB and DFRC to be treated as business income.
Both authorized representatives relied on submissions made in earlier cases with the lead order in M/s Fitex Industries, Ludhiana Vs. A.C.I.T.-V, Ludhiana. The Tribunal had previously directed the Assessing Officer to recompute the deduction u/s 80HHC in line with the directions given in the earlier order, after allowing a reasonable opportunity of hearing to the assessee.
The issue in the current appeal is identical to the one in M/s Fitex Industries & Others, and the order in that case shall apply mutatis mutandis. The Assessing Officer is instructed to compute the deduction under section 80HHC following the directions in the earlier order, after providing a reasonable opportunity to the assessee.
The captioned appeal is disposed of in accordance with the directions of the Hon'ble Bombay High Court in Kalapatru Colours & Chemicals, which was approved by the Jurisdictional Court. The Registry is directed to enclose a copy of the order in Fitex Industries & Others for reference. The appeal is allowed for statistical purposes.
The order was pronounced in the Open Court on the 7th day of September, 2011.
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2011 (9) TMI 1111
Issues involved: Whether the allotment/agreement/sale of flats by real estate developers attracts liability of commercial tax and can be treated as 'works contract'.
Judgment Details:
Issue 1: Interpretation of 'works contract' in real estate transactions
The Court noted the reference made by the Supreme Court to a larger bench regarding the classification of tripartite agreements as 'works contract'. The petitioner argued that doubts raised on previous opinions should prevent the Assessing Officer from issuing show cause notices and making assessments. The Court opined that agreements involving construction of flats by developers could potentially be categorized as 'works contract', subject to individual case facts.
Issue 2: Interim orders and assessment proceedings
Acknowledging the numerous writ petitions and interim orders in similar cases, the Court decided to provide interim relief in the present case as well. It was ordered that assessments for the relevant year could proceed and be finalized, but the assessment order should not be served on the petitioner until further notice.
Additional Direction:
The Additional Chief Standing Counsel was tasked with compiling a list of similar cases to be consolidated for a joint hearing on 27th September, 2011, indicating a coordinated approach to addressing the legal issues at hand.
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2011 (9) TMI 1110
Issues involved: Appeal by department and cross objection by assessee against the order of ld. CIT (A) relating to assessment year 2000-01.
Issue 1 - Addition under section 40A(3) and section 37(1) of the IT Act:
The department objected to the deletion of the addition of Rs. 7,76,829/- made under section 40A(3) and the deletion of the addition of Rs. 5,58,120/- made under section 37(1) of the IT Act. The AO observed that certain payments were made in violation of these sections. The assessee's explanation was deemed unsatisfactory, and affidavits were filed but not considered as the parties were not produced for examination. Regarding the payment of Rs. 5,58,120/-, it was argued that the payments were not made to any one person in a day and were made through employees or business associates for onward payments. The AO did not consider affidavits of employees and the provisions of Rule 6DD (f), (g), and (j) of IT Rules. The ld. CIT (A) applied a net profit rate of 9.5% and made an addition of Rs. 2,72,330/- while deleting the remaining addition of Rs. 10,62,619/-.
Issue 2 - Disagreement on Net Profit Rate:
The department objected to the separate addition made by the AO, while the assessee objected to the application of a net profit rate of 9.5% instead of the 7.25% declared by the assessee. The ITAT found no substance in the department's appeal but agreed that the assessee deserved partial success. The ITAT considered a net profit rate of 8.5% to be more appropriate than the 7.25% declared by the assessee. Referring to the decision of the Hon'ble Allahabad High Court, the ITAT directed the AO to recompute the income at 8.5% instead of 9.5% applied by the ld. CIT (A), subject to allowing depreciation, interest, and remuneration to the partners as directed by ld. CIT (A).
In conclusion, the appeal of the department was dismissed, and the cross objection of the assessee was allowed in part.
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2011 (9) TMI 1109
Issues involved: Disallowance of property tax and treatment of rent received.
Dispute 1 - Disallowance of property tax:
The appeal was against the disallowance of property tax amounting to Rs. 24,59,281 by the Assessing Officer (AO) for the assessment year 2004-05. The AO disallowed the claim as he found that the property tax was the liability of the purchasers based on the agreements. The Assessee contended that the municipal tax was paid as per BMC demand and should be deductible. However, the tribunal upheld the disallowance stating that as per the agreements, the purchasers were liable to pay the municipal tax, and hence, the deduction claimed by the Assessee was not allowable.
Dispute 2 - Treatment of rent received:
The second dispute was regarding the treatment of rent received from BPL Mobile Company. The AO assessed the rental income as business income, considering it as temporary exploitation of a commercial asset. The Assessee argued that the income should be treated as income from house property as it was received for letting out space on the terrace. The tribunal upheld the AO's decision, stating that the rental income from the commercial exploitation of a business asset should be assessed as business income, not income from house property.
In conclusion, the tribunal dismissed the appeal of the Assessee, upholding the disallowance of property tax and the treatment of rent received as business income.
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2011 (9) TMI 1108
Issues Involved:1. Confirming the penalty of Rs. 48,499/- u/s 271(1)(c) of the Income-tax Act, 1961. Summary:Issue 1: Confirming the penalty of Rs. 48,499/- u/s 271(1)(c) of the Income-tax Act, 1961The assessee filed a return of income for AY 2006-07 declaring Rs. 27,61,760/-. The assessment was completed u/s 143(3) at Rs. 31,44,188/-, with additions including short term capital gains. The assessing officer initiated penalty proceedings u/s 271(1)(c) for concealment and furnishing inaccurate particulars of income. The assessee argued that the mistake in calculating short term capital gains was due to misunderstanding the mutual fund switch in and switch out scheme and was not intentional. The AO rejected this, noting the failure to file a revised return within the time allowed u/s 139(5) and imposed a penalty of Rs. 48,490/-. Before the CIT (Appeals), the assessee contended that the income was offered for tax voluntarily before any detection by the AO, relying on various judicial decisions. The CIT (A) upheld the penalty, stating that the assessee attempted to conceal and furnish inaccurate particulars of income in the original return. On appeal, the assessee reiterated that the error was detected and corrected voluntarily, and no notice was issued by the AO before the correction. The assessee argued that the complex nature of mutual fund transactions led to the error and that the explanation was bona fide. The Department argued that the revised computations indicated concealment of income. The Tribunal noted that the assessee had invested in mutual funds with an automatic switch in and switch out scheme. The AO had not issued a notice pointing out the incorrect computation before the assessee filed the revised computation. The Tribunal referred to the Supreme Court's decision in CIT Vs. Reliance Petro Products P. Ltd., which held that mere making of an incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal found that the assessee's explanation was bona fide and that the mistake was due to the complex nature of the transactions. Therefore, it was not a case of concealment of income. In conclusion, the Tribunal held that the CIT (A) was not justified in confirming the penalty u/s 271(1)(c) and canceled the penalty imposed. The appeal filed by the assessee was allowed. The order pronounced in the open court on: 23rd September, 2011.
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2011 (9) TMI 1107
Issues Involved:
The judgment involves issues related to additions on account of advances from debtors and disallowance of certain expenses.
Additions on Account of Advances from Debtors:
The Assessing Officer observed advances from debtors and treated discrepancies as cessation of liability, adding it to the assessee's income u/s 41(1). The CIT(A) deleted one addition but confirmed another under sec. 68 for lack of explanation on the source of credits. The appellant argued that these were opening balances from earlier years and challenged the CIT(A)'s decision. The Tribunal held that credits introduced in earlier years cannot be assessed as income u/s 68 for the current assessment year, thus deleting the addition.
Disallowance of Expenses:
The Assessing Officer disallowed 20% of motor car and telephone expenses for potential personal use, which was reduced to 10% by the CIT(A). The Tribunal upheld the CIT(A)'s decision, stating that without specific details on usage, the 10% disallowance was justified for an individual assessee.
In conclusion, the appeal was partly allowed, with the Tribunal ruling in favor of the assessee on the issue of advances from debtors but upholding the 10% disallowance of expenses made by the CIT(A).
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2011 (9) TMI 1106
Issues involved: Appeal by Revenue against CIT(A) order regarding deletion of notional interest on security deposit from annual letting value u/s 23(1)(a) for AY 2001-02.
Summary:
1. The Assessee, a company engaged in letting out properties, claimed income as "Income from Business" but AO assessed it as "Income from House Property." Dispute arose over determination of annual value of property for income calculation. AO added notional interest on interest-free security deposit to actual rent received, resulting in higher annual value. CIT(A) held notional interest cannot be added u/s 23(1)(a). Revenue appealed.
2. Full Bench of Delhi High Court in CIT Vs. Moni Kumar Subba clarified that notional interest on security deposit cannot be determinative factor for fair rent u/s 23(1)(a). Municipal valuation can be basis for determining annual letting value (ALV). Extraneous circumstances may affect fair rent determination. Similar view by Bombay High Court in related cases.
3. In this case, AO's addition of notional interest to actual rent for determining ALV u/s 23(1)(a) was incorrect. Only municipal valuation is relevant for this purpose. CIT(A)'s decision upheld. Revenue's appeal dismissed.
Judgment: Appeal dismissed, CIT(A)'s order upheld.
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2011 (9) TMI 1105
Issues involved: Disallowance u/s 14A r.w. r. 8D, Disallowance u/s 43B(f) for leave encashment, Addition u/s 2(24)(x) r.w.s. 36(1)(va) for PF/ESIC contribution.
Issue 1 - Disallowance u/s 14A r.w. r. 8D:
The appellant contested the disallowance of &8377; 6,70,976 u/s 14A r.w. r. 8D. The Counsel argued that Rule 8D is not retrospective, citing the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT. The DR acknowledged the non-applicability of Rule 8D for the assessment year 2006-2007. The Tribunal directed the Assessing Officer to recompute the disallowable amount u/s 14A.
Issue 2 - Disallowance u/s 43B(f) for leave encashment:
A sum of &8377; 3,49,606 was disallowed u/s 43B for unpaid leave encashment. The CIT(A) rejected the plea based on the decision of the Kolkata High Court, which was stayed by the Apex Court. Both parties agreed that as per section 43B(f), the amount unpaid for leave encashment should be disallowed. The Tribunal upheld the CIT(A)'s decision and rejected the appellant's ground.
Issue 3 - Addition u/s 2(24)(x) r.w.s. 36(1)(va) for PF/ESIC contribution:
The Assessing Officer added back the PF/ESIC contribution as the payment was made beyond the prescribed date. The CIT(A) confirmed this action. However, the appellant relied on a decision of the ITAT, Mumbai, Special Bench to argue that payments made before the closure of the previous year are not covered u/s 2(24)(x). The Tribunal accepted this plea and set aside the addition of &8377; 59,325. Consequently, the appeal by the assessee-company was partly allowed.
Separate Judgement: None.
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2011 (9) TMI 1104
Issues Involved:
1. Invocation of provisions u/s 263 by the CIT.
2. Disturbance in the computation of Long Term Capital Gains (LTCG).
3. Disallowance of provisions for warranty and discount.
4. Verification of set off of brought forward losses.
Summary:
1. Invocation of Provisions u/s 263:
The assessee contended that the CIT was not justified in invoking the provisions of s. 263 as the order of the AO was neither erroneous nor prejudicial to the interests of revenue. The CIT initiated proceedings u/s 263, stating that the assessment order was erroneous and prejudicial to the interests of revenue due to lower taxation of LTCG on mutual funds, allowance of contingent provisions for warranty and discount, and inadequate verification of set off of capital loss. The Tribunal upheld the CIT's invocation of s. 263, agreeing that the AO had not adequately considered the issues and that the CIT's actions were within his jurisdiction.
2. Disturbance in Computation of LTCG:
The CIT directed the AO to re-examine the computation of LTCG, suggesting that the tax on LTCG should be calculated at 10% without allowing the benefit of indexation as per s. 112 of the Act. The Tribunal found no infirmity in the CIT's direction, noting that the CIT had only asked for verification of the arithmetical accuracy of the LTCG computation in accordance with s. 112, and thus, the assessee's apprehension was unfounded.
3. Disallowance of Provisions for Warranty and Discount:
The CIT disallowed the provisions for warranty and discount, considering them contingent liabilities as per the Audit Report in Form 3CD. The Tribunal, however, noted that the provisions were based on consistent accounting practices and judicial precedents, and thus, were not contingent in nature. The Tribunal remitted the issue back to the AO for re-examination, directing the AO to consider the assessee's contentions and judicial rulings while making a decision.
4. Verification of Set Off of Brought Forward Losses:
The CIT directed the AO to verify the correctness of the set off of brought forward losses, as there was no evidence of such verification in the AO's order. The Tribunal found no abnormality in the CIT's direction, emphasizing the need for verification to ensure the accuracy of the assessee's claim.
Conclusion:
The Tribunal partly allowed the assessee's appeal, upholding the CIT's invocation of s. 263 and directions regarding LTCG and set off of losses, but remitting the issue of provisions for warranty and discount back to the AO for re-examination. The order was pronounced on 26th September 2011 at Bangalore.
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2011 (9) TMI 1103
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... ... ..... . Balaram Das,Adv. O R D E R Heard learned counsel for the petitioner. Delay condoned. The special leave petition is dismissed.
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