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2011 (12) TMI 614
Issues involved: Appeal against order of CIT-II Pune dated 14-5-2010 regarding exemption u/s 80G and registration u/s 12A.
Exemption u/s 80G: The appellant's main grievance was the grant of exemption u/s 80G in an earlier year. The appellant relied on a circular dated 5-5-2009 issued by the Chief CIT, stating that in deserving cases, the production of certificate u/s 12A may not be necessary. The Tribunal, in a similar case, directed the CIT to reexamine the registration u/s 12AA by condoning delay. The Tribunal found the facts similar and restored the issue to the CIT to reevaluate the matter. The burden was placed on the revenue to demonstrate that registration was not granted earlier. The CIT was instructed to review the issue afresh and grant relief to the assessee as per law.
Registration u/s 12A: The Tribunal observed that the trust had been granted benefits such as exemption u/s 11 and eligibility u/s 80G for many years. Despite the trust's inability to produce the registration certificate u/s 12A, the Department could not claim that registration was not granted. The Tribunal directed the CIT to reexamine the registration u/s 12AA in light of the legal discussion and grant relief to the assessee. The appeal was allowed for statistical purposes, and the decision was pronounced on 30-12-2011.
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2011 (12) TMI 613
Issues Involved:
1. Disallowance of Sales Promotion Expenses.
2. Taxability of Excise Duty Refund and eligibility for deduction under section 80IB of the Income Tax Act, 1961.
Issue 1: Disallowance of Sales Promotion Expenses
The assessee claimed a total expenditure of Rs. 6,32,080 on Sales Promotion Expenses, asserting that these were incurred for business activities and should be allowed as business expenditure. The Assessing Officer (AO) disallowed Rs. 3,33,754 of these expenses, deeming them personal in nature, particularly focusing on expenses related to club membership and foreign tours of a partner, Shri Uday Kairon. The CIT (Appeals) upheld this disallowance.
The learned A.R. for the assessee argued that the expenses were commensurate with the business turnover and necessary for marketing in multiple states. Despite some ambiguity in the vouchers, the nature of the expenditure was claimed to be business-related.
The Tribunal noted that the AO disallowed expenses incurred by Shri Uday Kairon, totaling Rs. 2,42,270, including Rs. 1,29,775 for a foreign tour to China, which was considered business-related. The remaining expenses incurred by different branches amounted to Rs. 3,89,810. The Tribunal held that these branch expenses should be allowed in entirety, and the foreign tour expenses were also to be allowed. Consequently, the disallowance was restricted to Rs. 60,000. Thus, the ground of appeal was partly allowed.
Issue 2: Taxability of Excise Duty Refund and Eligibility for Deduction under Section 80IB
The assessee received an excise duty refund of Rs. 139.80 lacs and claimed it as exempt, arguing it had a direct nexus with manufacturing activities and was eligible for deduction under section 80IB. The AO, however, viewed the refund as a promotional reimbursement unrelated to the manufacturing process and not eligible for the deduction, relying on the Supreme Court's decision in Liberty India Vs. CIT.
The learned A.R. for the assessee cited various judgments, including CIT Vs. Dharam Pal Prem Chand and the Jammu & Kashmir High Court's decision in M/s Shree Balaji Alloys & Others Vs. CIT, arguing that the refund should be considered a capital receipt, not taxable.
The learned D.R. for the Revenue contended that the assessee, being under the jurisdiction of the Punjab & Haryana High Court, should follow the precedent set in CIT Abhishek Industries, which dealt with subsidies related to government notifications.
The Tribunal admitted the additional ground of appeal regarding the excise duty refund being a capital receipt. Referring to the Jammu & Kashmir High Court's decision in M/s Shree Balaji Alloys & Others, which held that such incentives were capital receipts, the Tribunal concluded that the excise duty refund of Rs. 139.80 lacs was a capital receipt and not taxable. Consequently, the additional ground of appeal was allowed, and the issue of eligibility for deduction under section 80IB was dismissed in limine.
Conclusion
The appeal was partly allowed. The disallowance of sales promotion expenses was restricted to Rs. 60,000, and the excise duty refund was held to be a capital receipt, not taxable.
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2011 (12) TMI 612
Scope of revision u/s 263 - Held that:- Issues which were considered and decided by the CIT(A), cannot be made subject to the provisions of Section 263 of the Act by the CIT, as is evident from the reproduction of sub-clause ‘c’ of Explanation to Section 263(1) of the Act:
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2011 (12) TMI 611
The Supreme Court condoned the delay in filing Special Leave Petition (Civil) Nos. 26671-26674/2011 and granted leave for the appeals to be heard based on the SLP Paper Books. Additional documents can be filed by the parties.
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2011 (12) TMI 610
Issues Involved:
1. Confiscation of goods and imposition of fines and penalties on M/s. Trishul Arcanut Granules Pvt. Ltd. (TAG), M/s. Wahab Stores, and M/s. Embee Agencies.
2. Demand of duty and penalties on TAG for alleged clandestine manufacture and clearance of goods.
3. Penalty on the Managing Director of TAG, Shri H.S. Nataraj.
4. Validity of the extended period of limitation for the demand of duty.
Detailed Analysis:
Confiscation of Goods and Imposition of Fines and Penalties:
1. Appeal No. E/559/2008 by TAG:
- Challenged the confiscation of goods, demand of duty of Rs. 2,85,634/-, and penalty of Rs. 50,000/-.
- Confiscation of goods valued at Rs. 4,59,515/- was allowed to be redeemed on payment of a fine of Rs. 50,000/-.
- Penalties of Rs. 50,000/- on TAG, Rs. 20,000/- on M/s. Embee Agencies, Rs. 10,000/- on M/s. Prakash Stores, Rs. 10,000/- on M/s. Wahab Stores, Rs. 1,000/- on M/s. Amud Stores, and Rs. 3,000/- on M/s. Veerbadrappa & Sons were imposed.
2. Appeal No. E/825/2008 by M/s. Wahab Stores:
- Challenged the imposition of a penalty of Rs. 10,000/-.
3. Appeal No. E/826/2008 by M/s. Embee Agencies:
- Challenged the imposition of a penalty of Rs. 20,000/-.
Demand of Duty and Penalties on TAG:
1. Appeal No. E/69/2008 by TAG:
- Challenged the demand of duty of Rs. 4,29,95,446/- along with interest and imposition of a penalty of equal amount under Section 11AC and a further penalty of Rs. 42 lakhs under Rule 25 of the Central Excise Rules, 2002.
2. Capacity of Production:
- Experiment on 30.12.2005 indicated each packing machine could produce 68-70 pouches per minute.
- TAG had 10 machines initially, increasing to 18 machines by 19.6.2005, and 27 machines in total by adding machines in Unit-II.
- The production capacity was significantly higher than the accounted production.
3. Procurement of Raw Materials/Packing Materials/Consumables:
- Documents indicated unaccounted purchases from M/s Sanjay Enterprises, M/s Divya Enterprises, and M/s Arun Agencies.
- TAG admitted to unaccounted purchases and destruction of private records.
- TAG's Managing Director admitted to unaccounted production and clearance of goods.
4. Unaccounted Clearances:
- Seizure of unaccounted goods from dealers.
- Admissions by dealers of purchasing goods without bills and paying in cash.
Penalty on the Managing Director of TAG:
1. Appeal No. E/70/2008 by Shri H.S. Nataraj:
- Challenged the imposition of a penalty of Rs. 5 lakhs under Rule 26 of the Central Excise Rules, 2002.
- Penalty upheld due to his involvement in the clandestine removal of goods and manipulation of records.
Validity of the Extended Period of Limitation:
1. Extended Period of Limitation:
- The show-cause notice dated 31.1.2007 was based on further investigation and evaluation of evidence.
- The extended period of limitation was justified as TAG systematically destroyed records and suppressed production.
- The decision of the Supreme Court in Nizam Sugar Factory and other relevant cases supported the invocation of the extended period of limitation.
Final Judgment:
1. Appeal No. E/669/08 by TAG:
- Demand of Rs. 9,66,224/- for 2002-03, Rs. 1,35,28,624/- for April 2003 to July 2004, and Rs. 50,05,439/- for April & May 2005 upheld.
- Penalties of equal amounts under Section 11AC upheld.
- Duty for April 2004 to March 2005 to be reworked based on production capacity.
- Penalty of Rs. 42 lakhs under Rule 25 set aside.
2. Appeal No. E/559/08:
- Confiscation of goods and redemption fine of Rs. 50,000/- upheld.
- Penalty of Rs. 50,000/- upheld.
- Demand of Rs. 2,85,634/- set aside.
3. Appeal No. E/70/2008 by Shri H.S. Nataraj:
- Penalty of Rs. 5 lakhs upheld.
4. Appeal No. E/826/08 by M/s Embee Agencies:
- Penalty of Rs. 20,000/- upheld.
5. Appeal No. E/825/08 by M/s Wahab Stores:
- Penalty of Rs. 10,000/- upheld.
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2011 (12) TMI 609
Issues Involved:
1. Legality of the detention order under Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
2. Delay in executing the detention order.
3. Maintainability of a pre-execution writ petition.
4. Authority of the person issuing the detention order.
5. Grounds for detention being vague, extraneous, and irrelevant.
6. Petitioner's alleged absconding and use of false identity.
7. Subsequent activities of the petitioner post-detention order.
Detailed Analysis:
1. Legality of the Detention Order:
The detention order dated 13.04.2000 was challenged on grounds of being issued for a wrong purpose, based on vague, extraneous, and irrelevant grounds, making it illegal, arbitrary, and mala fide. The petitioner argued that the import of four used cars by non-resident Indians was the basis of the order, and customs duty was paid by the importers. The petitioner contended that there was a gross delay of more than ten years in executing the order.
2. Delay in Executing the Detention Order:
The petitioner's counsel highlighted a delay of more than ten years in executing the order, arguing that the delay resulted in snapping the link between the alleged activities and the detention order. The respondents countered by stating that the petitioner was absconding and using a false passport. The court noted that the petitioner had shifted his base and evaded authorities, justifying the delay.
3. Maintainability of a Pre-Execution Writ Petition:
The petitioner's counsel cited various Supreme Court judgments to argue that a pre-execution writ petition is maintainable, especially when the detention order is issued by an unauthorized person. However, the respondents contended that the writ petition became infructuous after the detention order was executed. The court held that the writ petition could still be considered despite the execution of the order, as the petitioner was arrested during the pendency of the writ petition.
4. Authority of the Person Issuing the Detention Order:
The petitioner argued that the detention order was issued by a person not authorized to do so. However, the court found that the order was passed by the Joint Secretary to the Government of India, who is authorized under Section 3 of the Act. Therefore, the contention based on the fifth ground in Gadia's case was rejected.
5. Grounds for Detention Being Vague, Extraneous, and Irrelevant:
The petitioner argued that the detention order was based on vague, extraneous, and irrelevant grounds. The court noted that the grounds of detention were not produced by the petitioner, and there were orders of penalty passed against the petitioner in two cases before the detention order was issued. Therefore, the court did not find merit in this argument.
6. Petitioner's Alleged Absconding and Use of False Identity:
The respondents argued that the petitioner was absconding and using a false passport. The court noted that the petitioner had obtained passports under different names and evaded authorities. The petitioner's claim that he had not traveled overseas since 1993 was found to be incorrect, as evidence showed he had used different passports.
7. Subsequent Activities of the Petitioner Post-Detention Order:
The respondents presented evidence indicating that the petitioner continued his smuggling activities post-detention order. The court found that the petitioner was absconding and continued his activities, justifying the delay in executing the order.
Conclusion:
The court dismissed the writ petition, finding no merit in the arguments presented by the petitioner. The detention order was deemed legal, the delay in execution was justified due to the petitioner's absconding, and the grounds for detention were not found to be vague or irrelevant. The petitioner's pre-execution challenge was not upheld, and the court emphasized the discretionary nature of judicial review in such cases.
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2011 (12) TMI 608
Whether the computer peripherals like CD writer, Printer, Network Cables, switches, isolators etc. are entitled to depreciation @ 60% or depreciation at the normal rate applicable to plant and machinery - Held that:- In view of the decision of this Court in CIT v. BSES Rajdhani Power Limited, [2010 (8) TMI 58 - DELHI HIGH COURT] this question has to be decided against the Revenue and in favour of the assessee.
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2011 (12) TMI 607
Issues:
Dismissal of application under Section 311 of Cr. P.C. for recalling witnesses for cross-examination and examination of new witnesses.
Analysis:
The petitioner filed an application under Section 311 of Cr. P.C. to recall a witness for cross-examination and examine new witnesses, which was dismissed by the ACMM. The ACMM reasoned that the case dated back to 1987, with charges framed in 2003 and sufficient opportunities given for post-charge evidence until 2006. The prosecution evidence was closed in 2006, and the statement of accused persons was recorded in 2010. The ACMM found the application filed in 2010 to be belated, potentially leading to the persecution of accused persons if further evidence was allowed. The ACMM highlighted that one witness was not even listed, questioning the relevance of the new witnesses requested. The ACMM dismissed the application based on the stage of the case and the potential reopening of the case, leading to undue delay and persecution of the accused.
The petitioner argued that recalling the witness for cross-examination and examining new witnesses was crucial for a just decision. The Court acknowledged the power under Section 311 of Cr. P.C. to recall or summon witnesses even after evidence is closed, emphasizing that this discretion must be judiciously exercised. The Court noted that the case had been ongoing for over 24 years at the trial stage, criticizing the department's lethargic approach. The Court found no sufficient reason for the delay in filing the petition challenging the impugned order, questioning the necessity of examining the new witnesses at such a belated stage. The Court also questioned the relevance of examining certain witnesses, emphasizing that the exercise of judicial discretion should not prolong trials indefinitely. Ultimately, the Court dismissed the petition, emphasizing the need to end trials conducted with a condemnable lethargic attitude and highlighting the importance of exercising judicial discretion judiciously.
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2011 (12) TMI 606
Issues Involved:
1. Justification of the CIT(A) in holding that rectification is not possible.
2. Determination of whether the issue of taxability of interest on compensation is debatable.
3. Application of the Supreme Court judgment in CIT v. Ghanshyam (HUF) for rectification under section 154.
4. Examination of whether the interest received is exempt under section 10(37).
Detailed Analysis:
1. Justification of the CIT(A) in holding that rectification is not possible:
The CIT(A) held that the action of the Assessing Officer (AO) in rejecting the rectification application under section 154 was justified. The AO had processed the return under section 143(1) without any adjustment and granted a refund. The AO concluded that there was no mistake apparent from the record warranting rectification because the assessee had not claimed the relevant relief in the original return nor revised it as per law. The CIT(A) agreed with this view, emphasizing that rectification under section 154 is not appropriate for making new claims or revising decisions based on new interpretations of law.
2. Determination of whether the issue of taxability of interest on compensation is debatable:
The CIT(A) and AO both held that the issue of taxability of interest on compensation is debatable, especially since it had traveled up to the Supreme Court. The AO noted that while the Supreme Court in CIT v. Ghanshyam (HUF) clarified that interest under section 28 of the Land Acquisition Act is part of the enhanced compensation, this does not automatically justify rectification under section 154. The AO emphasized that rectification is not a proper process for deciding debatable issues or for cases where the assessee did not initially claim the relevant relief.
3. Application of the Supreme Court judgment in CIT v. Ghanshyam (HUF) for rectification under section 154:
The Tribunal acknowledged the Supreme Court's judgment in CIT v. Ghanshyam (HUF), which clarified that interest received under section 28 of the Land Acquisition Act is part of the enhanced compensation. However, the Tribunal highlighted that rectification under section 154 is permissible only when the mistake is self-evident and apparent from the record. The Tribunal found that the foundational facts necessary for applying the Supreme Court judgment were not self-evident or apparent from the record. The assessee had not indicated in the return of income or the computation sheet that the interest was received under section 28. Therefore, the Tribunal concluded that the mistake pointed out by the assessee was not a mistake apparent from the record and could not be rectified under section 154.
4. Examination of whether the interest received is exempt under section 10(37):
The Tribunal noted that exemption under section 10(37) is available only upon fulfilling certain conditions. The assessee claimed that the interest, being part of the enhanced compensation, was exempt under section 10(37). However, the Tribunal found that no material was placed before it to establish that the conditions laid down in section 10(37) were fulfilled. The Tribunal emphasized that the claim of exemption under section 10(37) would require examination of the facts, which is not permissible in rectification proceedings under section 154. The Tribunal concluded that the claim of exemption under section 10(37) could not be considered for rectification under section 154.
Conclusion:
The Tribunal dismissed the appeals, holding that the AO rightly declined to exercise rectification jurisdiction under section 154. The Tribunal emphasized that rectification under section 154 is limited to correcting mistakes that are self-evident and apparent from the record. The Tribunal also noted that the rectification application filed by the representative of the assessee was incompetent as it was not filed by the assessee himself. The Tribunal thus confirmed the orders of the AO and CIT(A).
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2011 (12) TMI 605
The Supreme Court directed the appellant to deposit 50% of the additional demand mentioned in the recovery notice within four weeks to avoid coercive recovery steps for the remaining amount.
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2011 (12) TMI 604
Issues Involved:
1. Consideration of revised computation of depreciation and deduction under Section 80-IA of the Income Tax Act on captive power plant.
2. Deletion of addition made by AO on account of apportionment of common expenses as per Section 80-IC.
Issue-wise Detailed Analysis:
1. Consideration of Revised Computation of Depreciation and Deduction under Section 80-IA:
The Department objected to the direction given to the Assessing Officer (AO) to consider the revised computation of depreciation and deduction under Section 80-IA of the Income Tax Act on the captive power plant. The assessee initially claimed a deduction under Section 80-IA amounting to Rs. 1,72,31,805. During the assessment proceedings, the assessee revised this claim to Rs. 2,46,75,216 due to an error in the depreciation rate applied initially (25% instead of the correct 15%).
The AO did not consider the revised claim, but the Commissioner of Income Tax (Appeals) [CIT(A)] allowed the revised claim, stating that the AO has a duty to determine the tax liability correctly based on all available facts, even if the claim was not made in the original return. The CIT(A) emphasized that the AO should consider all relevant material and make an assessment of the total income or loss of the assessee, determining the sum payable or refundable.
The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the CIT(A)'s findings. The Tribunal agreed that the AO should have considered the revised computation since it was filed before the completion of the assessment and was in accordance with the correct depreciation rate.
2. Deletion of Addition on Account of Apportionment of Common Expenses:
The AO made an addition of Rs. 34,36,058 by apportioning common expenses between the captive power plant and the principal unit based on their turnover ratio, as per Section 80-IC. The AO argued that certain services and amenities provided by the head office (HO) to the captive power plant should be charged at market value to ascertain the true profit of the captive power plant.
The assessee contended that the captive power plant operated independently, with a single supplier and customer, and did not require the extensive infrastructure or services of the HO. The assessee maintained separate books of account for the captive power plant, which were duly audited, and had already allocated Rs. 1,00,000 towards any missed expenses.
The CIT(A) found the AO's apportionment unjustified, noting that the assessee had already debited all relevant expenses and depreciation in the captive power plant's accounts. The CIT(A) referenced previous decisions in similar cases, concluding that no further apportionment was necessary.
The Tribunal upheld the CIT(A)'s decision, agreeing that the apportionment made by the AO was not correct. The Tribunal noted that the assessee had maintained separate books of account and had already allocated a reasonable amount for any missed expenses. The Tribunal also cited the Supreme Court's decision in Rajasthan State Warehousing Corporation vs. CIT, which supported the principle that when an assessee carries on business in various ventures, the entire permissible expenditure in earning the income from that head is deductible if all ventures constitute one indivisible business.
Conclusion:
The Tribunal dismissed the Department's appeal, confirming the CIT(A)'s findings on both issues. The revised computation of depreciation and deduction under Section 80-IA was to be considered, and the addition made by the AO on account of apportionment of common expenses was deleted.
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2011 (12) TMI 603
Issues involved: Disallowance of expenses under section 40(a)(ia) for failure to deduct TDS under section 194C(2).
Summary:
The appeal before the Appellate Tribunal ITAT Visakhapatnam concerned the disallowance of expenses amounting to Rs. 6,52,49,300/- under section 40(a)(ia) of the Income Tax Act due to the failure to deduct tax at source under section 194C(2). The assessing officer disallowed the expenses, but the CIT(A) deleted the disallowance, leading to the revenue's appeal.
The assessee firm, engaged in transport business, received transport charges from M/s ITC Ltd. and claimed deductions for "Lorry Hire charges" paid to various lorry owners. The assessing officer contended that TDS should have been deducted under section 194C(2) on these payments. The CIT(A) ruled in favor of the assessee, stating that the lorry owners did not carry out contract work but facilitated the assessee's contract with ITC Ltd.
The revenue argued that there was a contract between the assessee and the lorry owners, making the provisions of section 194C applicable. The revenue relied on various case laws to support its position. However, the assessee maintained that mere hiring of lorries did not constitute sub-contract work, citing precedents and emphasizing the interpretation of "carrying out any work" under section 194C(1).
After hearing both sides, the Tribunal found that the hiring of lorries did not amount to sub-contract work unless the lorry owners actively participated in the main contract's execution. Referring to previous decisions, the Tribunal concluded that the provisions of section 194C(2) did not apply to the assessee in this case. Additionally, the Tribunal noted that the procedure for obtaining Form No.15I for sub-contractors did not apply since hiring lorries did not fall under sub-contracting.
Ultimately, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision regarding the disallowance of expenses under section 40(a)(ia) for failure to deduct TDS under section 194C(2.
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2011 (12) TMI 602
Issues involved:
The judgment involves challenges to the orders of the CIT(A) canceling the orders of the ITO (TDS) u/s 201 and 201(1A) of the Income-tax Act for the assessment years 2006-07 and 2007-08.
Details of the Judgment:
1. Background and Facts:
The appellant, a Public Sector undertaking, was under scrutiny for compliance with TDS provisions. The Assessing Officer issued show cause notices u/s 201(1) and 201(1A) based on inquiry findings, leading to demands for two financial years. The CIT(A) canceled these orders, citing a Tribunal decision in the appellant's favor.
2. Arguments Presented:
The Revenue appealed the CIT(A)'s decision, with the DR supporting the AO's orders and the AR advocating for upholding the CIT(A)'s decision.
3. Tribunal's Analysis:
The Tribunal reviewed the CIT(A)'s order and noted that the issue was previously decided in the appellant's favor by a co-ordinate Bench. The Tribunal referenced a specific case and circulars from the Central Board of Direct Taxes to support the appellant's position.
4. Legal Precedents and Circulars:
The Tribunal highlighted the insertion of a proviso to section 194H by the Finance Act, 2007, exempting certain deductions. It emphasized that this exemption applied to the assessment year 2008-09 and was also applicable for prior years, as established in previous Tribunal decisions.
5. Decision and Conclusion:
Based on the analysis and legal precedents, the Tribunal upheld the CIT(A)'s decision to cancel the orders of the AO u/s 201 and 201(1A) for the relevant years, ultimately dismissing the Revenue's appeals.
6. Final Verdict:
Both appeals by the Revenue were dismissed, and the judgment was pronounced on 7th December 2011.
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2011 (12) TMI 601
Issues Involved:
1. Undisclosed investment in the purchase of a flat in Mumbai.
2. Undisclosed investment in the purchase of land at Village Bajri.
3. Undisclosed investment in Plot No. 108, Sector-14, Faridabad.
4. Undisclosed investment in the purchase of land in Dabua Village.
5. Undisclosed investment in 2.5 acres of land at Village Bhakri.
6. Undisclosed investment in Shop No. 2 at H.No. 2/IF/34, NIT Faridabad.
7. Undisclosed investment in a plot at Dabua Pali Road.
8. Undisclosed investment in a plot near Hotel Gazal.
9. Undisclosed investment in property No. 1D/14B, NIT, Faridabad.
10. Undisclosed investment in a plot at Mujesar Phatak.
11. Undisclosed investment in shops at Badhkal Road.
12. Undisclosed investment in the purchase of a Maruti Zen Car.
13. Undisclosed investment in the film "Hamara Kanoon."
14. Undisclosed deposits in a bank account in the name of Sh. Ashok Kumar.
15. Undisclosed income from the repair of electronic goods and interest income on goods sold on credit.
16. Undisclosed income from the Lucky Car Draw Scheme.
17. Undisclosed commission income from the auction of chit business.
Issue-wise Detailed Analysis:
1. Undisclosed Investment in the Purchase of Flat in Mumbai:
The AO added Rs. 10,51,153/- as undisclosed investment in a flat in Mumbai, rejecting the assessee's explanation regarding loans and cash flow statements. The CIT(A) partially deleted the addition, accepting the explanation for Rs. 6,72,000/- but sustaining Rs. 1,72,000/-. The Tribunal found no basis for the sustained addition, concluding that the entire addition was unjustified and allowed the assessee's appeal.
2. Undisclosed Investment in the Purchase of Land at Village Bajri:
The AO added Rs. 60,00,000/- based on a statement from Sh. Som Nath. The CIT(A) deleted the addition, noting that Sh. Som Nath did not know the appellant and there was no corroborative evidence. The Tribunal upheld the CIT(A)'s decision, finding no justification for the addition.
3. Undisclosed Investment in Plot No. 108, Sector-14, Faridabad:
The AO added Rs. 15,00,000/- based on a vague statement from Mr. Narinder Malhotra. The CIT(A) deleted the addition, noting the lack of evidence and confrontation with the appellant. The Tribunal upheld this decision, finding no justification for the addition.
4. Undisclosed Investment in the Purchase of Land in Dabua Village:
The AO added Rs. 5,00,000/- based on documents not found during the search. The CIT(A) deleted the addition, noting the documents referred to the appellant's wife, not the appellant. The Tribunal upheld this decision, finding no evidence to support the addition.
5. Undisclosed Investment in 2.5 Acres of Land at Village Bhakri:
The AO added Rs. 6,00,000/- based on statements from Sh. Rampal and Sh. Lakhichand. The CIT(A) deleted the addition, noting the lack of evidence and confrontation with the appellant. The Tribunal upheld this decision, finding no justification for the addition.
6. Undisclosed Investment in Shop No. 2 at H.No. 2/IF/34, NIT Faridabad:
The AO added Rs. 3,00,000/- based on documents found at the appellant's mother-in-law's residence. The CIT(A) deleted the addition, noting the documents referred to the appellant's wife. The Tribunal upheld this decision, finding no evidence to support the addition.
7. Undisclosed Investment in a Plot at Dabua Pali Road:
The AO added Rs. 1,00,000/- based on a power of attorney document. The CIT(A) deleted the addition, noting the lack of evidence linking the appellant to the investment. The Tribunal upheld this decision, finding no justification for the addition.
8. Undisclosed Investment in a Plot Near Hotel Gazal:
The AO added Rs. 21,00,000/- based on a statement from Mr. Narinder Malhotra. The CIT(A) deleted the addition, noting the lack of evidence and confrontation with the appellant. The Tribunal upheld this decision, finding no justification for the addition.
9. Undisclosed Investment in Property No. 1D/14B, NIT, Faridabad:
The AO added Rs. 10,70,000/- based on a sale deed. The CIT(A) deleted the addition, noting the sale deed did not support the AO's conclusion. The Tribunal upheld this decision, finding no evidence to support the addition.
10. Undisclosed Investment in a Plot at Mujesar Phatak:
The AO added Rs. 6,66,666/- based on a statement from Mr. Narinder Malhotra. The CIT(A) deleted the addition, noting the lack of evidence and confrontation with the appellant. The Tribunal upheld this decision, finding no justification for the addition.
11. Undisclosed Investment in Shops at Badhkal Road:
The AO added Rs. 8,00,000/- based on a statement from Mr. Narinder Malhotra. The CIT(A) deleted the addition, noting the lack of evidence and confrontation with the appellant. The Tribunal upheld this decision, finding no justification for the addition.
12. Undisclosed Investment in the Purchase of a Maruti Zen Car:
The AO added Rs. 3,35,928/- based on the car being found at the appellant's residence. The CIT(A) deleted the addition, noting the car was registered to Mr. Gulshan Bhatia and financed by M/s BTL Investments Ltd. The Tribunal upheld this decision, finding no justification for the addition.
13. Undisclosed Investment in the Film "Hamara Kanoon":
The AO added Rs. 25,00,000/- based on estimated expenses. The CIT(A) deleted the addition, noting the lack of evidence. The Tribunal upheld this decision, finding no justification for the addition.
14. Undisclosed Deposits in a Bank Account in the Name of Sh. Ashok Kumar:
The AO added Rs. 8,56,931/- based on the cheque book found at the appellant's residence. The CIT(A) deleted the addition, noting the lack of evidence linking the account to the appellant. The Tribunal upheld this decision, finding no justification for the addition.
15. Undisclosed Income from the Repair of Electronic Goods and Interest Income on Goods Sold on Credit:
The AO added Rs. 3,36,749/- based on documents A-14 and A-17. The CIT(A) deleted the addition, noting the documents did not support the AO's conclusion. The Tribunal upheld this decision, finding no justification for the addition.
16. Undisclosed Income from the Lucky Car Draw Scheme:
The AO added Rs. 1,07,89,800/- based on documents A-4 and A-5 and statements from third parties. The CIT(A) deleted the addition, noting the lack of evidence and the similarity to the case of the appellant's brother, where the Tribunal had dismissed the revenue's appeal. The Tribunal upheld this decision, finding no justification for the addition.
17. Undisclosed Commission Income from the Auction of Chit Business:
The AO added Rs. 7,87,000/- based on documents A-4 and A-5 and statements from third parties. The CIT(A) deleted the addition, noting the lack of evidence and the similarity to the case of the appellant's brother, where the Tribunal had dismissed the revenue's appeal. The Tribunal upheld this decision, finding no justification for the addition.
Conclusion:
The appeal of the assessee is partly allowed, and the revenue's appeal is partly allowed for statistical purposes.
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2011 (12) TMI 600
Issues Involved:
1. Deletion of addition under Section 68 of the IT Act.
2. Sustaining of addition under Section 68 of the IT Act.
3. Deletion of addition under Section 69 of the IT Act.
4. Deduction under Section 54EC of the IT Act.
Issue-wise Detailed Analysis:
1. Deletion of Addition under Section 68 of the IT Act:
The department's appeal contested the deletion of Rs. 38,79,420/- out of the total addition of Rs. 40,28,420/- made by the Assessing Officer under Section 68 of the IT Act. The assessee had purchased 50,000 equity shares of Mantra Online Ltd. through a recognized stockbroker and later sold them, resulting in a long-term capital gain of Rs. 40,28,420/-. The assessee invested Rs. 41,00,000/- in Rural Electrification Ltd. bonds and claimed exemption under Section 54EC.
The Assessing Officer doubted the genuineness of the transactions, noting discrepancies such as the surrender of the broker's license in 1997 and the purchase of shares in cash. The Assessing Officer concluded that the transactions were manipulated and added the sale consideration under Section 68.
The CIT (A) conducted a detailed inquiry and found that the shares were indeed purchased and sold through proper channels, with confirmations from the stock exchange and depository. The CIT (A) deleted the addition of Rs. 38,79,420/- but sustained Rs. 1,49,000/- for an unverified transaction. The tribunal upheld the CIT (A)'s findings, noting that the transactions were genuine and properly documented.
2. Sustaining of Addition under Section 68 of the IT Act:
The assessee's cross-objection challenged the addition of Rs. 1,49,000/- sustained by the CIT (A). This amount represented the sale of 2,000 shares on 19.12.2002, which was not confirmed by the Calcutta Stock Exchange. Despite the overall genuineness of the transactions, the CIT (A) sustained this addition due to the lack of verification.
The tribunal, however, found that the sale proceeds were received through proper banking channels and that the shares were indeed sold. Therefore, the tribunal deleted the addition of Rs. 1,49,000/-, allowing the assessee's cross-objection.
3. Deletion of Addition under Section 69 of the IT Act:
The department's appeal also contested the deletion of Rs. 41,00,000/- made under Section 69 by the Assessing Officer, who argued that the assessee had no funds of his own for the investment in REC bonds. The CIT (A) found that the investment was made from the sale proceeds of shares and allowed the deduction under Section 54EC.
The tribunal upheld the CIT (A)'s decision, noting that the source of investment was explained and that the addition by the Assessing Officer amounted to double addition, as the same amount was already considered for the sale of shares.
4. Deduction under Section 54EC of the IT Act:
This issue was consequential to the first ground. The tribunal confirmed that the sale transactions were genuine and that the assessee had invested the sale proceeds in REC bonds within the stipulated period, making the deduction under Section 54EC allowable. The tribunal upheld the CIT (A)'s direction to allow the deduction.
Conclusion:
The tribunal dismissed the department's appeal and allowed the assessee's cross-objection, confirming the deletion of the addition under Section 68, the deletion of the addition under Section 69, and the allowance of the deduction under Section 54EC. The order was pronounced in the open court on 09.12.2011.
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2011 (12) TMI 599
Issues involved: Interpretation of Rule 13E in ITAT Members (Recruitment and Conditions of Service) Rules, 1963 regarding eligibility of retired Members to represent parties before the Tribunal.
Summary:
The appeal was heard regarding the eligibility of a retired Member, Shri. D. C. Agrawal, to represent the assessee before the Tribunal. A controversy arose after the insertion of Rule 13E in the ITAT Members (Recruitment and Conditions of Service) Rules, 1963, debarring retired Members from appearing before the Tribunal on behalf of parties. A Special Bench decision in the case of Concept Creations v. ACIT, Range, Panipat clarified that Members retiring after the notification date are not eligible to represent parties before the Tribunal.
In response to the Special Bench decision, Shri. D. C. Agrawal argued against his disqualification based on various grounds. However, the Tribunal, bound by the Special Bench order, held that Rule 13E applies to Members retiring after the notification date, regardless of when they were recruited. The crucial date for application is the retirement date, and Members retiring after the specified date are debarred from representing parties before the Tribunal, even if otherwise qualified under section 288.
Therefore, the Tribunal concluded that Shri. D. C. Agrawal is not eligible to represent the assessee before the Tribunal and directed the Registry to schedule a fresh hearing for the case.
This judgment emphasizes the strict application of Rule 13E to retired Members and upholds the decision of the Special Bench regarding the eligibility of retired Members to appear before the Tribunal as representatives for parties.
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2011 (12) TMI 598
Issues Involved:
1. Applicability of Section 40(a)(ia) of the Income Tax Act.
2. Expenditure not for the objects of the trust.
Detailed Analysis:
Issue 1: Applicability of Section 40(a)(ia) of the Income Tax Act
2.1 The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 58.00 lakhs made under Section 40(a)(ia) of the Act, arguing that the provisions were not applicable in the instant case.
2.2 The CIT(A) held that Section 40(a)(ia) applies only when income is chargeable under the head "profits and gains of business or profession." Since the appellant trust's income is not chargeable under this head and there was no contractual relationship between the appellant and RSAMB, the provisions of Section 40(a)(ia) were deemed inapplicable. The CIT(A) also noted that the trust is registered under Section 12A, thus supporting the deletion of the addition.
2.3 The Tribunal upheld the CIT(A)'s decision, referencing the Jurisdictional High Court's ruling in CIT vs Krishi Upaj Mandi Samiti, which clarified that contributions to the Agricultural Marketing Board are an application of income and not subject to tax deduction at source. The Tribunal emphasized that the income of a trust should be computed based on commercial principles, not under different heads, making Section 40(a)(ia) inapplicable.
2.4 Following these discussions, the Tribunal concluded that the CIT(A) was justified in deleting the addition of Rs. 58.00 lakhs.
Issue 2: Expenditure Not for the Objects of the Trust
3.1 The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 49,36,880/- on the grounds that the expenditure was not for the objects of the trust.
3.2 The CIT(A) considered judicial precedents indicating that payment of income tax should be seen as an application for charitable purposes, as it preserves the trust's corpus. The cited cases include CIT vs Janaki Ammal Ayya Nadar Trust and CIT vs Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust.
3.3 The CIT(A) concluded that the payment of tax is to preserve the trust's corpus and should be treated as an application for charitable purposes, leading to the deletion of the addition.
3.4 The Tribunal agreed with the CIT(A), referencing the Jaipur Bench's decision in ITO vs KUMS, Baran, which held that payment of tax is an application of income. Thus, the Tribunal upheld the deletion of the addition.
Similar Cases:
- ITA No. 245/JU/2010 - KUMS, Anupgarh: The Tribunal followed its findings in the Krishi Upaj Mandi Samiti case, deleting the additions under Section 40(a)(ia) and for expenditures not aligned with the trust's objects.
- ITA No. 246/JU/2010 - KUMS, Rawla: Similar deletions were upheld.
- ITA No. 247/JU/2010 - KUMS, Gharsana: The Tribunal upheld deletions of Rs. 58,57,000/- under Section 40(a)(ia).
- ITA No. 248/JU/2010 - KUMS, Jetsar: Deletions of Rs. 8,50,000/- and Rs. 31,81,354/- were upheld.
- ITA No. 250/JU/2010 - KUMS, Suratgarh: Deletions of Rs. 1,03,11,194/- and Rs. 39,66,760/- were upheld.
- ITA No. 99/JU/2010 - KUMS, Padampur: Deletions of Rs. 1,30,00,000/- and Rs. 80,000/- were upheld.
- ITA No. 101/JU/2010 - KUMS, Gajsingpur: Deletions of Rs. 53,05,000/- and Rs. 6,25,000/- were upheld.
- ITA No. 102/JU/2010 - KUMS, Sri Ganganagar: Deletions of Rs. 1,76,48,145/- and Rs. 1,64,82,000/- were upheld.
- ITA No. 103/JU/2010 - KUMS, Raisinghnagar: Deletions of Rs. 48,45,000/- and Rs. 44,59,789/- were upheld.
Conclusion:
The appeals of the Revenue were dismissed, and the Tribunal consistently upheld the CIT(A)'s decisions across all cases, confirming that the provisions of Section 40(a)(ia) were not applicable and that the expenditures in question were aligned with the objects of the trust. The order was pronounced in open court on 16-12-2011.
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2011 (12) TMI 597
Unexplained cash credit u/s 68 - Genuineness of payment - Held that:- The assessee is having income from house property, income from other sources , long term capital gain and business income. The business income is interest and remuneration from the firm. It is nowhere mentioned in the assessment order that assessee has maintained the books of account in which sale proceeds of the shares were credited. The sale proceeds of shares were credited in the bank account. When monies are deposited in bank, the relationship i.e. constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. The pass book supplied by the bank to its customer is not books of account maintained by the bank and it is not the account book of the assessee. Such pass book is not maintained b the bank under the instruction of client. The pass book supplied by the bank to the assessee cannot be regarded as a book of the assessee. See CIT vs Bhai Chand G Gandhi [1982 (2) TMI 28 - BOMBAY High Court] . Such credit in the pass book may fall within the ambit of Section 69 as unexplained investment and not in Section 68 of the Income Tax Act, 1961. The ld.CIT(A) held that the amount could not have been added u/s 68 of the Act. The Revenue in its grounds of appeal has nowhere mentioned that such addition should be considered u/s 69 of the Act. We therefore, hold that the ld.CIT(A) was justified in deleting the addition
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2011 (12) TMI 596
Limitation in passing the order u/s 158BD - Held that:- Issue of notice u/s 158BD after two years from the date of completion of the assessment in respect of the person against whom search was carried out is barred by limitation. Thus the block assessment order passed against the assessee u/s 158BD is barred by limitation.
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2011 (12) TMI 595
Issues Involved:
1. Whether the Assessing Officer is correct in making the addition of various amounts to the profits declared by the assessee by changing the project completion method of accounting to percentage completion method.
Summary:
Issue 1: Addition of Amounts by Changing Accounting Method
The revenue appealed against the CIT(A)'s order, questioning the Assessing Officer's (AO) decision to add various amounts to the assessee's profits by switching from the project completion method to the percentage completion method. The assessee, a real estate developer, declared an income of Rs. 11,79,81,345/- for AY 2007-08. The AO added Rs. 15,67,33,801/- for Saraswati and Rakhi Project, Rs. 12,81,15,367/- for Golden Willows Project, and Rs. 33,21,57,324/- for Beau Monde Project, based on AS 7 and 9 standards and advances received.
The CIT(A) deleted these additions, noting the assessee's consistent use of the project completion method since AY 2000-01, which the AO had accepted in previous and subsequent years. The assessee argued that income was declared upon project completion, with specific project details provided for Saraswati & Rakhi, Golden Willows, and Beau Monde projects, showing delays due to legal issues and completion timelines.
The Tribunal observed that the AO's method of adding amounts was inconsistent and incorrect, as it did not uniformly apply the percentage completion method. The AO's approach ignored project costs and did not justify treating advances as income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the project completion method is a recognized accounting method, consistently followed by the assessee and accepted by the Revenue. The Tribunal also noted that the AO failed to demonstrate any distortion of profits due to the assessee's method.
The Tribunal referenced legal principles, including the Supreme Court's ruling in CIT vs. Bilahari Investment (P) Ltd 299 ITR 1, which supports an assessee's right to follow a consistent accounting method unless it distorts profits. The Tribunal found no reason to disturb the assessee's method and dismissed the Revenue's appeal and the cross-objection as academic.
Conclusion:
The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's grounds and maintaining the assessee's consistent use of the project completion method. The cross-objection was dismissed as academic. The order was pronounced on 16th December 2011.
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