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2012 (11) TMI 1176
Issues involved: Application for review of order dated 28th February, 2012 and condonation of delay of 120 days in filing the review application.
Review Application No. 549/2012:
The applicant, Revenue, Commissioner of Central Excise, Delhi-IV, filed a review application challenging the order dated 28th February, 2012. The applicant's counsel submitted that the order in original dated 18th August, 2011 was passed hastily, denying natural justice and fair opportunity to the non-applicant. The applicant's letter dated 15th March, 2012 conveyed instructions to protect revenue interest, not to treat the order as cancelled. The High Court found the letter's averments vague and lacking clear directions. It was noted that no date of hearing was fixed after 4th August, 2011, leading to the hurried passing of the order on 18th August, 2011. Consequently, the Court dismissed the application for condonation of delay and the review application.
Condonation of Delay (CM No. 12203/2012):
The application sought condonation of a 120-day delay in filing the review application. The Court observed that the order dated 18th August, 2011 was passed hastily without granting a fair opportunity to the non-applicant. The applicant's counsel was directed to obtain specific instructions due to the rushed nature of the original order. As no hearing date was fixed post 4th August, 2011, the non-applicant was justified in claiming denial of justice. Consequently, the Court declined to issue notice on the condonation of delay application, leading to the dismissal of both the delay condonation application and the review application.
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2012 (11) TMI 1175
Issues involved: Appeal against order of ld. CIT(A)-XV, Ahmedabad dated 1st June, 2012 regarding additions made u/s 40(a)(ia) and u/s 40A(3) of the Income Tax Act.
Addition u/s 40(a)(ia) - Issue 1 & 2:
The Revenue appealed against the deletion of addition of Rs. 1,96,24,849 made u/s 40(a)(ia) for non-compliance with Section 194C provisions. The A.O. found TDS deductions not deposited on time, invoking Section 40(a)(ia). However, ld. CIT(A) deleted the addition citing retrospective nature of the amendment by Finance Act, 2010. The CIT(A) relied on precedents from ITAT Ahmedabad and Calcutta High Court, directing deletion of the expenditure. The Tribunal upheld this decision, dismissing Revenue's grounds.
Addition u/s 40A(3) - Issue 3:
The A.O. added Rs. 1,97,000 u/s 40A(3) for cash payments exceeding Rs. 20,000 on single days. Assessee explained payments were made through different individuals but accounted as single entry. A.O. disallowed the amount due to lack of evidence. However, ld. CIT(A) accepted the appellant's explanation, noting the established practice of making payments below Rs. 20,000 through a supervisor. CIT(A) referred to precedents and directed deletion of the addition. The Tribunal upheld this decision, dismissing Revenue's appeal.
In conclusion, the Tribunal upheld the decisions of ld. CIT(A) regarding both issues, resulting in the dismissal of Revenue's appeal.
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2012 (11) TMI 1174
Whether expenditure is revenue or capital in nature - current repairs - replacement of broken A.C. Sheets and replacement of factory wall plaster etc. - Held that:- All the expenses were made after a period of 3-4 years but were in the nature of current repairs and were chargeable as revenue expenditure. Also the expenditure so incurred was essentially for repair of building/machinery and by incurring these expenditure neither capacity nor building was extended nor the machinery did undergo any change. Thus the findings recorded do not suffer from any legal infirmity - Decided in favor of the assessee.
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2012 (11) TMI 1173
Issues Involved:
1. Non-grant of fresh licences for imports.
2. Non-granting of Export Obligation Discharge Certificate (EODC).
Summary:
Issue 1: Non-grant of fresh licences for imports
The petitioners, manufacturer exporters, applied for fresh licences for duty-free imports of inputs used in manufacturing export goods. Their requests were denied based on a letter from the Directorate of Revenue Intelligence (DRI) alleging that the petitioners lacked the necessary manufacturing facilities. The DRI's investigation suggested that the petitioners had no capacity and machinery to process the imported yarn, and the 100% Export Oriented Units (EOUs) to which the petitioners supplied goods were non-functional. Consequently, the Joint Director of Foreign Trade issued a show-cause notice and eventually declared the petitioners as defaulters, placing them on the denied entities list and refusing further licences.
The court found that the orders were passed in gross violation of principles of natural justice. The respondent No.1 relied heavily on the DRI report without sharing it with the petitioners, thus breaching the requirement of a fair hearing. The court emphasized that any adverse material must be shared with the petitioners, and they must be given an opportunity to respond. The court quashed the impugned orders and directed respondent No.1 to reconsider the matter, ensuring compliance with principles of natural justice.
Issue 2: Non-granting of Export Obligation Discharge Certificate (EODC)
The petitioners claimed to have fulfilled their export obligations and applied for EODC to liquidate their bank guarantees. However, their applications remained pending since 2005/2006 due to ongoing DRI investigations. The court noted that such an issue cannot be kept pending indefinitely and directed respondent No.1 to take a final decision on the applications. If respondent No.1 is not inclined to grant the certificate, he must communicate tentative reasons to the petitioners and allow them to make representations.
Directions:
1. The orders impugned in Special Civil Applications No.10600/2012, 10602/2012, 10605/2012, and 10607/2012 are quashed. Respondent No.1 is to reconsider and dispose of the proceedings in accordance with law, ensuring that any adverse material is shared with the petitioners.
2. Respondent No.1 shall take a final decision on the show-cause notice proceedings by 28-2-2013, and depending on the outcome, process the applications for fresh advance licences expeditiously.
3. In Special Civil Applications No.10601/2012, 10604/2012, 10606/2012, and 10609/2012, respondent No.1 is directed to decide on the applications for EODC within three months, providing tentative reasons if not inclined to grant the certificate and allowing the petitioners to make representations.
4. The petitioners shall appear before respondent No.1 on 8th November, 2012, for further proceedings.
The petitions are disposed of with these directions.
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2012 (11) TMI 1172
Issues Involved:
1. Eligibility of profits for relief u/s 10A.
2. Estimation of profits u/s 10A.
3. Set-off of losses from non-10A units against profits of 10A units.
Summary:
1. Eligibility of Profits for Relief u/s 10A:
The Revenue contended that the profits derived by the assessee from the export-oriented unit were due to extraordinary arrangements with a German company, aimed at boosting profits. The Tribunal, however, found no evidence of such collusion and upheld that the profits of Rs. 20,53,26,910/- should be considered for relief u/s 10A. This decision was based on the Tribunal's earlier ruling for the assessment year 2004-05, which was affirmed by the Hon'ble Jurisdictional High Court. The Tribunal emphasized that extraordinary profits alone do not indicate collusion and penalizing efficient functioning is unjustified.
2. Estimation of Profits u/s 10A:
The Assessing Officer (AO) had estimated the profits for deduction u/s 10A by adopting a 60% gross profit rate, contrary to the 67.91% shown by the assessee. The Tribunal, referencing its previous decision, held that the AO failed to prove any arrangement between the assessee and the German company that resulted in extraordinary profits. The Tribunal noted that the cost of raw materials and other operational efficiencies justified the higher profits, and there was no evidence of inflated sales prices or understated expenses.
3. Set-off of Losses from Non-10A Units Against Profits of 10A Units:
The Revenue argued that losses from the non-10A trading unit should be set off against the profits of the 10A export-oriented unit before computing the deduction u/s 10A. The Tribunal, following its earlier decision and supported by the Hon'ble Jurisdictional High Court, held that deduction u/s 10A should be computed on the profits of the eligible undertaking alone, without adjusting for losses from other units. The Tribunal cited the decision in Siemens Information System Ltd. v/s ACIT and emphasized that the relief under section 10A is to be determined based on the profits of the business of the undertaking, not the total income of the assessee.
Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, affirming that the profits derived from the export-oriented unit should be considered for relief u/s 10A without setting off losses from the non-10A unit. The decision was pronounced in the open Court on 30th November 2012.
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2012 (11) TMI 1171
Issues involved:
The only issue involved in the appeal of the Revenue relates to the action of the CIT(A) in cancelling the penalty u/s 271D of the Act.
Details of the Judgment:
Issue 1: Imposition of Penalty u/s 271D
The Assessing Officer imposed a penalty of Rs. 24,01,500 u/s 271D of the Act for the assessment year 2005-06, based on the belief that the assessee had contravened the provisions of S.269SS by accepting a cash loan. The CIT(A) deleted the addition made under S.68 of the Act, stating that the cash loan taken by the assessee was shown in the Receipts and Payments Account, hence no addition could be made under S.68. The CIT(A) observed that no cash loan was accepted by the assessee, as the transaction was a journal entry between M/s. Lahari Green Park and the vendor, with no direct involvement of the assessee. The Revenue contended that there was a clear violation of S.269SS and the penalty should be upheld. However, the Authorised Representative for the assessee argued that no cash loan was accepted, and the CIT(A) rightly deleted the penalty. The Tribunal decided to remit the matter to the Assessing Officer to verify if a cash loan was actually received by the assessee or if there were only journal entries, directing a reevaluation of the applicability of the penal provisions of S.271D.
Separate Judgment:
The cross-objection of the assessee, which supported the CIT(A)'s order, was dismissed as it did not require independent adjudication. The Revenue's appeal was allowed for statistical purposes, and the assessee's cross objection was dismissed.
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2012 (11) TMI 1170
Issues Involved:
1. Addition of Rs. 25,00,000 as income from undisclosed sources.
2. Enhancement of addition by Rs. 2,12,06,226 by CIT(A).
3. Applicability of Section 68 regarding realization from debtors.
4. Substitution of one asset by another and applicability of Section 68.
5. Power of CIT(A) to enhance income beyond the subject matter of assessment.
6. Request for deletion of addition and cancellation of penalty proceedings u/s 271(1)(c).
Summary:
1. Addition of Rs. 25,00,000 as income from undisclosed sources:
The Assessing Officer (AO) added Rs. 25,00,000 to the assessee's income as undisclosed sources, observing that the assessee could not explain cash deposits totaling Rs. 50,09,700 in a joint bank account.
2. Enhancement of addition by Rs. 2,12,06,226 by CIT(A):
The CIT(A) enhanced the income by Rs. 2,12,06,226, making the total addition Rs. 2,37,06,226. The CIT(A) noted that the assessee failed to explain the source of cash deposited in the joint bank account and invoked Section 68, stating that the assessee did not provide necessary details to substantiate the claim that the cash was received from debtors.
3. Applicability of Section 68 regarding realization from debtors:
The CIT(A) held that the provisions of Section 68 are applicable as the assessee failed to explain the nature and source of the cash credited in the books of accounts. The assessee's argument that Section 68 does not apply to the substitution of one asset by another was rejected.
4. Substitution of one asset by another and applicability of Section 68:
The CIT(A) disagreed with the assessee's contention that Section 68 is not applicable in cases where one asset is substituted by another. The CIT(A) emphasized that the assessee must explain the source of any sum credited in the books, regardless of whether it creates a new liability or replaces an existing asset.
5. Power of CIT(A) to enhance income beyond the subject matter of assessment:
The CIT(A) justified the enhancement, stating that no new source of income was being assessed. The enhancement was based on the same cash deposits considered by the AO, and thus within the CIT(A)'s power.
6. Request for deletion of addition and cancellation of penalty proceedings u/s 271(1)(c):
The Tribunal found that the revenue authorities did not reject the books of accounts maintained by the assessee, which showed substantial reduction in sundry debtors and creditors. Consequently, the Tribunal held that the additions made by the AO and the enhancement by the CIT(A) were not justified and deleted both.
Conclusion:
The Tribunal allowed the appeal, deleting the addition of Rs. 25,00,000 made by the AO and the enhancement of Rs. 2,12,06,226 by the CIT(A). The appeal of the assessee was allowed, and the order was pronounced on 9.11.2012.
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2012 (11) TMI 1169
Issues Involved:
1. Addition on account of alleged job work.
2. Addition on account of household expenses.
3. Addition on account of unexplained self-assessment tax.
4. Addition on account of difference in cost of construction.
5. Disallowance of deduction u/s 54.
6. General grounds of appeal.
Summary:
1. Addition on Account of Alleged Job Work:
The assessee challenged the addition of Rs. 54,000/- (and similar amounts in other appeals) made on account of alleged job work based on a statement recorded during a search operation u/s 132 of the Act. The Tribunal found that the addition was made purely on the basis of the statement without any corroborative material. It was held that the revenue failed to demonstrate any material evidence to support the addition. The Tribunal emphasized that the onus of proof lies on the revenue to substantiate the claim of unaccounted income. Consequently, the addition on account of job work was deleted.
2. Addition on Account of Household Expenses:
The assessee contested the addition made by the AO and confirmed by the CIT(A) for household expenses. The Tribunal found that the AO's estimation of household expenses was based on assumptions and lacked corroborative evidence. However, the CIT(A) had partially reduced the addition considering contributions from other family members. The Tribunal upheld the CIT(A)'s findings as fair and reasonable, confirming the reduced addition.
3. Addition on Account of Unexplained Self-Assessment Tax:
In ITA No. 803/Chd/2012, the assessee contested the addition of Rs. 11,435/- on account of unexplained self-assessment tax. The Tribunal did not find any specific discussion or findings on this issue in the provided text, implying that the ground was not pressed or lacked merit.
4. Addition on Account of Difference in Cost of Construction:
The assessee challenged the addition based on the report of the departmental Valuation Officer. The CIT(A) confirmed the addition partially, considering the evidence provided by the assessee but also noting discrepancies. The Tribunal upheld the CIT(A)'s findings as reasonable and dismissed the ground of appeal.
5. Disallowance of Deduction u/s 54:
The assessee contested the disallowance of deduction u/s 54 for the investment in a new house. The CIT(A) found that the assessee failed to provide documentary evidence to substantiate the claim of construction within the stipulated period. The Tribunal upheld the CIT(A)'s findings, noting the lack of compliance with statutory requirements.
6. General Grounds of Appeal:
The general grounds raised by the assessee, including the assertion that no material was found during the search to justify the additions, were dismissed as they were either general in nature or not pressed by the assessee.
Conclusion:
The appeals were partly allowed, with the Tribunal deleting the additions on account of alleged job work while upholding the additions related to household expenses, unexplained self-assessment tax, difference in cost of construction, and disallowance of deduction u/s 54, based on the findings and evidence presented.
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2012 (11) TMI 1168
Issues involved:
1. Disallowance of interest paid on loans for setting up a new unit and modernization of plant.
2. Deductibility of expenditure on partly convertible debentures.
Disallowed Interest on Loans:
The Revenue raised a question regarding the deletion of disallowance of interest paid on loans for setting up a new unit and modernization of the plant. The Income Tax Appellate Tribunal allowed the interest under Section 36(1)(iii) as the borrowed capital was used in connection with the existing business of the assessee. The Tribunal's decision was supported by the Supreme Court ruling in Dy. Commissioner of Income tax v/s. Core Health Care Limited, which clarified that Explanation 8 to Section 43 of the Act would not apply in such cases. Therefore, the Tribunal's decision to allow the claim of the assessee was upheld, and the first question raised by the Revenue was not entertained.
Expenditure on Partly Convertible Debentures:
The second question raised by the Revenue concerned the deductibility of expenditure incurred on partly convertible debentures. The Revenue argued that such expenses are capital in nature and should be disallowed. However, the Rajasthan High Court, in the case of Commissioner of Incometax v/s. Secure Meters Limited, held that debentures, whether convertible or nonconvertible, represent a loan and are allowable as revenue expenditure. This decision was supported by the Apex Court's dismissal of the Revenue's Special Leave Petition against the High Court's ruling. Therefore, the second question raised by the Revenue was not entertained.
The High Court of Bombay dismissed the appeal with no order as to costs.
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2012 (11) TMI 1167
Additions based on statement during Survey Proceedings - Assessee is a manufacturer and trader of umbrellas. During survey, certain documents were found which were impounded. A statement of the Karta of assessee was recorded in which he had admitted that there were certain discrepancies in the impounded documents and he had surrendered for taxation some amount to cover possible anomaly. During the assessment proceedings, he had refuted the surrendered on the ground that there was no undisclosed income. The AO on the basis of statement found that the assessee was liable for further addition of the said amount and assessed the respondent accordingly. - HELD THAT:- Merely on the basis of statement recorded during the survey u/s 133A, such addition could not have been made. To make such addition, some corroborating evidence against undisclosed income was required, which could not be found by the AO.
Decision in the case of COMMISSIONER OF INCOME-TAX VERSUS DHINGRA METAL WORKS [2010 (10) TMI 29 - DELHI HIGH COURT], relied upon.
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2012 (11) TMI 1166
Disallowance u/s 14A - Held that:- In the case of Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that provisions of Rule 8D are applicable from AY 2008-2009 onwards. The provisions of Rule 8D are statutorily mandatory and any working of disallowance u/s 14A is required to be worked out as per formula provided in Rule 8D(2) only. As per the provisions of Rule 8D(2) the disallowance u/s 14A worked out to ₹ 340/- only whereas the appellant itself had offered disallowance u/s 14A at ₹ 5,64,531/-. AO was not justified in disallowing further expenditure of ₹ 34,68,900/- u/s 14A. The disallowance made by the AO is, therefore, deserved to be deleted.
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2012 (11) TMI 1165
The High Court of Bombay dismissed the appeal by the Revenue regarding the rejection of the order passed by the Transfer Pricing Officer. The court upheld the Income Tax Appellate Tribunal's decision based on findings of fact, stating no substantial question of law arises.
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2012 (11) TMI 1164
Addition on account of share application money received from the shareholders - assessee has failed to prove genuineness of transactions and creditworthiness of the shareholders - Held that:- The matter is squarely covered by the decision of Hon'ble Supreme Court in the case of Steller Investment Ltd. [2000 (7) TMI 76 - SUPREME Court] That being the position, we are of the considered opinion that the order passed by the Tribunal does not suffer from any legal infirmity.
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2012 (11) TMI 1163
Issues involved: Disallowance u/s 40(a)(ia) of the Income-tax Act, 1961 for failure to deduct tax at source on service charges paid to KEM Hospital.
Summary:
The appeal was against the order of the Commissioner of Income-tax (Appeals)-III Pune, arising from the Assessing Officer's order u/s 143(3) of the Income-tax Act, 1961 for the assessment year 2007-08. The dispute centered around the disallowance of &8377; 46,92,094/- under section 40(a)(ia) of the Act due to the assessee's failure to deduct tax at source on service charges paid to KEM Hospital.
The assessee, a partnership firm running a Diagnostic Centre in KEM Hospital, contended that the payment made was akin to 'rent' under sec. 194-I and not subject to TDS. However, both the Assessing Officer and CIT(A) deemed it as 'fees for professional services' u/s 194-J, necessitating TDS. The CIT(A) upheld the disallowance u/s 40(a)(ia), leading to the appeal.
During the appeal, the assessee argued that since the entire amount was paid by the due date and no outstanding amount existed, sec. 40(a)(ia) should not apply. Citing the Vishakhapatnam Tribunal's decision in Merilyn Shipping & Transports, the assessee sought deletion of the addition.
The Tribunal noted that sec. 40(a)(ia) disallows deductions when TDS is not deducted or paid within the prescribed period. As the amount in question was fully paid by the due date, the Tribunal ruled in favor of the assessee, following the Vishakhapatnam Tribunal's decision. Consequently, the order of the CIT(A) was set aside, directing the Assessing Officer to delete the disallowance.
In conclusion, the appeal of the assessee was allowed, and the decision was pronounced on 20th November 2012.
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2012 (11) TMI 1161
Issues involved: Determination of nature of income from sale and purchase of shares - Whether income should be treated as short term capital gain or business income.
Assessment Proceedings:
- Assessing Officer noticed STCG claim of Rs. 2,78,77,456 under section 111A.
- Assessee asked to furnish details of STCG.
- Assessing Officer considered frequency of share payments and short holding period.
- Assessee asked to justify why STCG should not be considered as business income.
- Assessing Officer concluded transactions were in the nature of trade.
- CIT(A) found assessee engaged in share transactions for only 69 days in a year.
- CIT(A) held assessee as investor, not trader, directing STCG assessment.
Arguments:
- Revenue supported Assessing Officer's view based on ITAT Jaipur Bench decision.
- Counsel for assessee cited jurisdictional High Court decision distinguishing investment and business transactions.
Judgment:
- Tribunal considered factual situation of majority shares held for long resulting in STCG.
- CIT(A) correctly noted limited share transactions by assessee.
- Tribunal agreed with CIT(A) that assessee is investor, not trader.
- CIT(A)'s direction to assess income as STCG upheld, appeal by Revenue dismissed.
Conclusion: The Tribunal upheld the CIT(A)'s decision to treat the income from sale and purchase of shares as short term capital gains, dismissing the appeal filed by the Revenue.
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2012 (11) TMI 1160
Method of accounting - Excess collection of cash – correct date of payment of PF dues – accrual of interest on government securities – claim of deduction u/s 36(1)(vii)(a) - advance income received by way of commission, exchange and discount, including locker rent - Held that:- All the issues decided against revenue in HC case [2010 (12) TMI 1199 - BOMBAY HIGH COURT] - No ground is made out for our interference with the impugned judgment. SLP dismissed.
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2012 (11) TMI 1159
Deduction u/s 80-IB - pure housing project or not - with or without commercial use - built up area - Held that:- Since the expression ‘housing project’ was not defined under the Act, its meaning would have to be gathered from the Rules and Regulations framed by the approving local authority. The Hon’ble High court explained that since a ‘local authority’ could approve the project to be a housing a project with or without commercial use, it was therefore, the intent of the legislature that deduction envisaged u/s 80-IB(10) was allowable to such housing projects. Therefore, the aforesaid objection raised by the Revenue to dis-entitle the assessee from claiming of deduction u/s 80-IB(10) is untenable.
Since the project of the assessee commenced prior to 1-4-2005 the definition of ‘built up area’ as provided in sec. 80-IB(14)(a) cannot be applied in this case. Thus the objection raised by the Revenue to disentitle the assessee from claiming of deduction u/s 80-IB(10) of the Act is untenable.
Disallowance on the basis of layout plant - Held that:- The original lay out plan of this commercial building was mentioned as ‘residential plus commercial’ in the original commencement. It is therefore, held that appellant was entitled for deduction u/s 80-IB(10) - Decided in favour of assessee.
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2012 (11) TMI 1158
The Gujarat High Court set aside the order blacklisting the petitioner as it was passed without giving the petitioner an opportunity to be heard. The respondents are directed to provide a hearing to the petitioner. The petitioner is to submit a detailed representation by a specified date, and the respondents must decide on it within two weeks. No fresh tenders are to be finalized until then.
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2012 (11) TMI 1157
Addition u/s 69C - Held that:- CIT(A) was of the view that the AO had established that the appellant has provided branded seeds and fertilizer to the Bataidars. In the statement recorded of Shri Raju Neware, the Baraidar has accepted that the assessee has borne agricultural expenses for branded seeds and fertilizers. Copy of statement was given to the assessee, however, the assessee did not choose to cross-examine the witness. CIT(A) was of the view that the AO was justified in making an addition u/s 69C of the Act. Thus, the CIT(A) dismissed the ground.
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2012 (11) TMI 1156
Issues involved: Appeal against order u/s 154 of the IT Act for assessment year 2008-09 regarding deduction of housing loan interest and exempt income on account of interest.
Deduction of Housing Loan Interest:
The assessee did not claim deduction of housing loan interest in the return of income processed u/s 143(1)(a). The AO rejected the claim u/s 154 as it was not originally made in the return. The CIT(A) upheld the AO's decision stating that no mistake was apparent as the claim was not in the original return. The assessee argued that the exempt income claimed should have led to the deduction. However, as per Section 143(1)(a), the AO must process the return as filed, and no arithmetical error or incorrect claim was found. The claim for deduction was made for the first time in the application u/s 154, not in the original return. The AO is not required to investigate claims not made in the return. The failure to file a revised return further weakened the assessee's case. The Tribunal found no grounds to interfere with the CIT(A)'s decision and dismissed the appeal.
Exempt Income on Account of Interest:
The assessee claimed exempt income of &8377; 1,50,000 in Schedule-E, which was not considered for deduction during processing u/s 143(1)(a). The assessee argued that this was a mistake on record and should have led to the deduction. However, the Tribunal held that as the claim was not made in the return of income, the AO was not obligated to consider it during processing. The failure to clarify the claim in the return itself meant there was no apparent mistake for rectification u/s 154. The Tribunal upheld the CIT(A)'s decision to dismiss the appeal, emphasizing the importance of making claims in the original return to avoid such issues.
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