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2011 (3) TMI 1662
Issues involved: Revenue's appeal against the order of Commissioner of Income tax (Appeals)-XI, Ahmedabad regarding the deletion of addition of excess stock found during a survey taxed u/s.69B of the I.T. Act for the assessment year 2005-06.
Summary:
The Revenue appealed against the order of the Commissioner of Income tax (Appeals)-XI, Ahmedabad, which deleted the addition of excess stock found during a survey and taxed u/s.69B of the I.T. Act. The assessee, engaged in retail trading of garments, disclosed unaccounted stock of &8377; 12,03,462 during a survey operation. The Assessing Officer made a further addition of the same amount, contending that the disclosed stock was squared up in the trading account. The Ld. CIT(A) deleted the addition after considering the trading account produced by the assessee, which clearly showed the additional income offered towards excessive stock. The Revenue's appeal was dismissed as the disclosed income was found to be correctly accounted for in the trading account, upholding the Ld. CIT(A)'s decision.
The Ld. CIT(A) observed that the disclosed income made by the appellant towards additional income was reflected in the trading account, despite debiting and crediting the closing stock of &8377; 12,03,462. The entries made by the assessee in its books of account accurately represented the additional income offered towards excessive stock. Therefore, the Ld. CIT(A) decided to delete the addition made by the Assessing Officer, as the disclosed income was appropriately accounted for in the trading account. The order passed by the Ld. CIT(A) was upheld, and the Revenue's appeal was dismissed.
Order pronounced in Open Court on 15/03/2011.
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2011 (3) TMI 1661
Issues Involved:
1. Denial of claim under section 80HHE on 10 percent of the profits of the undertaking.
2. Expenditure incurred in foreign currency and its exclusion from export turnover but not from total turnover in computing deduction under section 10B.
3. Telecommunication expenditure and its exclusion from export turnover but not from total turnover in computing deduction under section 10B.
4. Loss on account of foreign exchange fluctuation.
5. Levy of interest under section 234D of the Act.
Issue-Wise Detailed Analysis:
Issue 1: Denial of Claim under Section 80HHE on 10 Percent of the Profits of the Undertaking
The assessee claimed that the remaining 10% of profits, after the 90% deduction under section 10B, should be eligible for deduction under section 80HHE. The assessee argued that section 10B(6)(iii) excludes deductions under sections 80HH, 80HHA, 80-I, 80-IA, and 80-IB but not under section 80HHE. The Tribunal noted that the provisions of section 10B and section 80HHE should be read in harmony, allowing simultaneous deductions under both sections. The Tribunal cited the decision of the Hon'ble Madras High Court in the case of CIT vs M/s Ambatture Clothing Ltd, which supported the assessee's claim. Consequently, Ground No.1 of the assessee's appeal was allowed.
Issue 2: Expenditure Incurred in Foreign Currency
The assessee contended that expenses incurred in foreign exchange should be excluded from both export turnover and total turnover when computing the deduction under section 10B. The Tribunal agreed with the assessee, referencing the Special Bench decision in the case of Sak Soft Ltd, which supports the exclusion of such expenses from both export and total turnover. However, the Tribunal restored the issue to the Assessing Officer to verify if the expenses were indeed related to providing technical services outside India. Hence, this ground was allowed for statistical purposes.
Issue 3: Telecommunication Expenditure
The Tribunal noted that this issue was not pressed at the time of hearing and thus dismissed it. However, the Tribunal's findings on Issue 2 also applied to this issue, indicating that telecommunication expenses should be excluded from both export and total turnover. Therefore, Ground No.4 was restored to the Assessing Officer with similar directions as given for Ground No.2 and allowed for statistical purposes.
Issue 4: Loss on Account of Foreign Exchange Fluctuation
The assessee incurred a loss due to foreign exchange fluctuations, which was rejected by the Assessing Officer as notional loss. The Tribunal found that the loss was related to revenue transactions and was computed based on 'Accounting Standard 11' issued by ICAI. The Tribunal upheld the deduction of this loss from business profits, referencing the Hon'ble Supreme Court's decision in CIT vs Woodward Governor India Pl Ltd.
Issue 5: Levy of Interest under Section 234D
The Tribunal noted that the provisions of section 234D are not retrospective and only applicable from assessment year 2004-05. The Tribunal followed the decision of the ITAT Delhi Special Bench in the case of ITO vs Ekta Promoters Pvt. Ltd and the Hon'ble Delhi High Court in the case of Jacobs Civil Incorporated. Consequently, the Tribunal confirmed the finding of the ld. CIT(A) and dismissed the Revenue's appeal on this ground.
Conclusion:
The appeal of the assessee was partly allowed and partly allowed for statistical purposes, while the appeal of the Revenue was dismissed. The order was pronounced in the open court on 18.3.2011.
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2011 (3) TMI 1660
Issues involved: Directions regarding hearing of appeals before the Tribunal, release of goods subject to conditions, submission of monthly statements, payment of duty, and renewal of bank guarantees.
Hearing of Appeals before Tribunal: The High Court directed the Tribunal to hear the appeals expeditiously, preferably within three months from the date of the order. This direction was given in relation to Excise Appeal Nos. 629 of 2009, 630 of 2009, 631 of 2009, Excise Appeal No. 472 of 2010, and Excise Appeal No. E/488/2010-DB.
Release of Goods: The petitioner was directed to deposit a sum of Rs. 2 lakhs in cash and furnish a bank guarantee of Rs. 2 lakhs from a nationalized bank for the release of the goods in question. The petitioner complied with this order by depositing the cash and providing the bank guarantee, resulting in the release of the goods.
Submission of Monthly Statements: The petitioners were instructed to file monthly statements with the respondent No.1, detailing all footwear exceeding a maximum retail price of Rs. 260 per pair received at their premises after a specified date. These statements were required to be submitted within ten days from the end of each month. Additionally, the petitioners were directed to deposit 50% of the duty in cash and furnish bank guarantees from nationalized banks to secure the remaining 50% of the duty.
Continued Compliance: Until the disposal of the appeals before the Tribunal, the petitioners were ordered to continue submitting monthly statements and making payments as per the previous directions. It was emphasized that all bank guarantees should be kept renewed, with renewal to take place at least one month before expiry upon notice to respondent no.1. Failure to renew the bank guarantees might result in their invocation. The bank guarantees and cash deposits were to be subject to the outcome of the pending appeals before the Tribunal.
Final Instructions: Affidavits were not requested, indicating that the allegations in the writ petition were not deemed to have been admitted. All parties were required to act based on a signed photostat copy of the order, adhering to the usual undertakings.
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2011 (3) TMI 1659
Issues Involved:
1. Whether the income from the sale of shares should be treated as short-term capital gains or business income.
Detailed Analysis:
1. Treatment of Income from Sale of Shares:
The primary issue in this case is whether the income from the sale of shares should be classified as short-term capital gains (STCG) or business income. The Assessing Officer (AO) assessed the short-term capital gains on the sale of shares held as investments as business income. However, the AO accepted the gains on the sale of Mutual Funds as short-term/long-term capital gains. The assessee argued that the investments in Mutual Funds and shares were made with the objective of capital appreciation and were not held as stock-in-trade. The assessee emphasized that the shares were shown as investments in the balance sheet and the profits on their sale were offered for taxation under the head "capital gains."
2. AO's Stand:
The AO disagreed with the assessee's claim and treated the amount as business income, citing frequent transactions of sale and purchase of shares as indicative of business activity. The AO observed that the assessee's transactions in shares were frequent and spread throughout the year, suggesting a motive to earn profit from trading rather than holding the shares as investments.
3. CIT(A)'s Decision:
The Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to treat the income from the sale of shares as short-term capital gains instead of business income. The CIT(A) noted that the shares were shown as investments, purchased out of the assessee's own funds, and the transactions were authorized by the company's Memorandum of Articles of Association. The CIT(A) highlighted that the volume of transactions was not high, and the assessee had received dividends on the shares, indicating an investment motive.
4. Department's Appeal:
The Department challenged the CIT(A)'s decision, arguing that the assessee was involved in frequent trading of shares and did not maintain separate books of account. The Department relied on various case laws and CBDT Circulars to support its claim that the income should be treated as business income.
5. Tribunal's Analysis:
The Tribunal examined the facts and found that the assessee had consistently shown the shares as investments in its balance sheet and offered the profits under the head "capital gains." The Tribunal noted that the assessee's transactions were not frequent enough to classify the activity as a business. The Tribunal also considered the assessee's infrastructure, which was not indicative of a business activity, and the fact that the investments were made out of the assessee's own funds.
6. Case Laws and Circulars:
The Tribunal referred to various case laws and CBDT Circulars cited by both parties. It distinguished the facts of the present case from those in the cited cases and found that the assessee's treatment of shares as investments was consistent with its main objective as per its Memorandum of Articles of Association. The Tribunal concluded that the CIT(A) had correctly directed the AO to treat the income as short-term capital gains.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to treat the income from the sale of shares as short-term capital gains instead of business income. The appeals filed by the Department were dismissed, and the Tribunal found no error in the CIT(A)'s orders. The decision was based on the consistent treatment of shares as investments by the assessee, the nature and volume of transactions, and the assessee's infrastructure and funds used for investments.
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2011 (3) TMI 1658
Issues involved: Appeal against order of Commissioner of Income-tax (Appeals) for Assessment Year 2005-06, addition u/s.36(1)(va) for EPF contribution, disallowance of expenditure on commission u/s.40(a)(ia).
Addition u/s.36(1)(va) for EPF contribution: The appeal was dismissed as nothing was argued on this ground during the hearing.
Disallowance of expenditure on commission u/s.40(a)(ia): The assessee, a Private Limited Company in real estate business, filed an appeal against the disallowance of payment of commission amounting to &8377; 1,13,000 u/s.40(a)(ia) of the Income-tax Act,1961. The Assessing Officer added this amount to the total income of the assessee during assessment. The assessee contended that the provision of Section 40(a)(ia) applies to amounts "payable" but not "paid," citing relevant authorities and circulars. The Tribunal agreed with the assessee, stating that the TDS requirement under Section 40(a)(ia) is on amounts "payable" and not on amounts "paid" already. Therefore, the disallowance made by the Departmental authorities was deemed unsustainable, and the ground raised by the assessee was allowed. The appeal of the assessee was partly allowed as a result.
Separate Judgement: None.
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2011 (3) TMI 1657
Issues involved: Appeal regarding addition of nominee occupancy charges and interest income not exempt under mutuality.
Nominee occupancy charges issue: The Tribunal decided in favor of the assessee, citing the judgment of the Hon'ble Bombay High Court in Mittal Court Premises Co-operative Society Ltd. vs. ITO, where it was held that nominee occupancy charges are exempt from taxation on the principle of mutuality. The Tribunal followed its earlier order in the assessee's own case for the assessment year 2005-06, where a similar decision was made.
Interest income issue: The Tribunal ruled in favor of the assessee, stating that interest earned from surplus funds in a Cooperative Housing Society is not liable to tax. This decision was based on previous orders in the assessee's case for the assessment years 2004-05 and 2005-06, as well as references to judgments of the Delhi High Court and the Karnataka High Court. The Tribunal relied on the principle that interest income from banks and bonds on surplus funds of a Cooperative Housing Society is exempt from taxation.
In conclusion, the appeal of the assessee was allowed with no order as to costs.
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2011 (3) TMI 1656
Issues involved: Appeal against the order of the Commissioner of Income Tax (Appeals) regarding addition of amounts in the capital account of the assessee due to revaluation of assets and land received on retirement from the firm.
Revaluation of Assets Issue:
The assessee, a retired partner, had an amount credited to the capital account after revaluation of firm assets. The Assessing Officer added this amount to total income, invoking section 45(4). However, the Commissioner of Income Tax (Appeals) deleted the addition, stating that section 45(4) applies to partnership firms, not individual partners. The Tribunal upheld this decision, emphasizing that revaluation entries in firm books do not directly impact partners' tax liabilities. Citing relevant case law, the Tribunal concluded that the addition was unjustified, as no transfer occurred. The revenue's appeal on this ground was dismissed.
Land Received Issue:
The assessee received land from the firm on retirement, which the Assessing Officer valued and added to total income. The Commissioner of Income Tax (Appeals) overturned this addition, noting that the firm confirmed the land transfer and the onus of reporting income lies with the transferor. The Tribunal agreed with the CIT(A), highlighting that the land was received in settlement of the individual account, not purchased. As the assessee explained the source of the land, the addition was deemed unwarranted. The revenue's appeal on this issue was also dismissed.
In both instances, the Tribunal emphasized the distinction between partnership firms and individual partners regarding tax implications of firm actions. The decisions were based on the specific circumstances and legal provisions applicable to the cases, ultimately leading to the dismissal of the revenue's appeal.
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2011 (3) TMI 1655
Issues involved: Appeal against order of Commissioner of Income Tax (Appeals) for assessment year 2004-05 regarding disallowance of business loss and expenses.
Ground 1: Challenge to the order of Commissioner of Income Tax (Appeals) as bad in law.
Ground 2: Disallowance of business loss amounting to Rs. 2,04,94,278/- due to lack of export activities and foreign exchange earnings, questioning applicability of sec. 115.
Ground 3: Disallowance of business loss of Rs. 12,76,000/- as no sales were made during the period, with unverified purchases despite having significant stock.
The Tribunal initially decided the appeal but later acknowledged a mistake in not adjudicating Ground No. 3. Upon Department's application, the Tribunal allowed consideration of Ground No. 3.
During the hearing, the Departmental Representative argued that the assessee did not conduct any business in the relevant assessment year, leading to disallowance of declared loss. The Representative contended that the Assessing Officer's decision should be upheld due to lack of exports caused by political unrest.
Conversely, the Authorized Representative of the assessee supported the Commissioner of Income Tax (Appeals)'s decision, emphasizing the expenses incurred for business purposes despite no sales during the period. The Representative provided a breakdown of expenses and defended the claim under "Operating Expenses."
The Tribunal reviewed submissions and lower authorities' orders. It noted the absence of specific mention or disallowance of the disputed sum of Rs. 12,76,000/- in the Commissioner of Income Tax (Appeals)'s order or the Assessing Officer's decision.
After examining the expense details, including foreign exchange loss, the Tribunal affirmed the Commissioner of Income Tax (Appeals)'s decision to allow the claimed expenses related to business activities. It rejected Grounds No. 1 & 2 and upheld the Commissioner of Income Tax (Appeals)'s order, concluding that the assessee maintained its business despite challenges.
Given the lack of challenge to the genuineness of the assessee's claim and the necessity to cover establishment and administrative expenses during the unrest period, the Tribunal dismissed the Department's appeal, supporting the Commissioner of Income Tax (Appeals)'s decision.
The Tribunal directed the reading of the current order with previous decisions and pronounced the appeal dismissal in an open court session on 25.03.2011.
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2011 (3) TMI 1654
Issues involved: Appeal against withdrawal of registration u/s 12A of the Income Tax Act, 1961 and refusal to renew exemption u/s 80G.
Issue 1: Registration u/s 12A
The appellant, a charitable trust, appealed against the withdrawal of registration granted under section 12A of the Income Tax Act, 1961. The CIT had withdrawn the registration on the grounds that the activities of the trust were not genuine or in accordance with its objects. The appellant contended that there was no provision in section 12AA to cancel the registration granted under section 12A. The Tribunal agreed, noting that the relevant provision, section 12AA(3), did not apply to the present case as the trust was registered under section 12A(a) and not under clause (b) of subsection (1) of section 12AA. Although an amendment in 2010 allowed cancellation of registration granted under section 12A, it was effective from June 2010, while the CIT's order was issued in January 2010. Therefore, the Tribunal upheld the appellant's objection and annulled the CIT's order for lack of jurisdiction.
Issue 2: Exemption u/s 80G
The CIT refused to renew the exemption certificate u/s 80G for the appellant trust, citing violations of section 13(1)(b) and non-charitable activities. The CIT held that certain activities of the trust, including running a Kalyan Mandapam, were not charitable as per the amended provision of section 2(15). Consequently, the CIT concluded that the income from these activities could not be exempt under section 11 of the Act. The Tribunal, however, found that the CIT's reliance on section 293C, which pertains to the power to withdraw approval, was misplaced. Section 293C deals with approval, not registration, and therefore could not validate the CIT's order. As a result, the Tribunal allowed the appeal of the assessee, annulling the CIT's order without costs.
In summary, the Tribunal upheld the appellant's objection regarding the withdrawal of registration u/s 12A due to lack of jurisdiction under section 12AA(3). Additionally, the Tribunal annulled the CIT's order refusing to renew the exemption u/s 80G, as the CIT's reliance on section 293C was deemed inappropriate. The appeal was allowed with no order as to costs.
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2011 (3) TMI 1653
Issues Involved:
1. Jurisdiction under section 153A.
2. Validity of additions/disallowances made by the Assessing Officer (A.O.).
3. Reliability of statements made by Mr. Mukesh Choksi.
Summary:
Issue 1: Jurisdiction under section 153A
The assessee contested the jurisdictional issue under section 153A, which was upheld by the CIT(A). However, the cross objections regarding jurisdiction were not pressed during the arguments and were dismissed as withdrawn.
Issue 2: Validity of Additions/Disallowances
The assessee filed returns for the assessment years 2001-02 and 2002-03. The A.O. initiated proceedings u/s 147 and passed an assessment order u/s 143(3) r.w.s. 147, disallowing claims of short-term capital gains on shares deemed bogus. The CIT(A) initially allowed the assessee's appeal against these disallowances. A subsequent search on 28.06.2006 led to reassessment u/s 153A, repeating the same disallowances. The CIT(A) again deleted these additions, and the Revenue did not appeal against the original CIT(A) orders. The Tribunal found no incriminating material from the search to justify reassessment and upheld the CIT(A)'s deletion of additions, confirming that the issues decided in the original assessment could not be reconsidered without fresh material.
Issue 3: Reliability of Statements by Mr. Mukesh Choksi
The A.O. relied on a revised affidavit by Mr. Mukesh Choksi, who admitted to providing accommodation entries. However, the CIT(A) and the Tribunal found Mr. Choksi's statements inconsistent and unreliable, noting his frequent changes in testimony. The Tribunal cited the Hon'ble Calcutta High Court's principle that a person indulging in double-speaking cannot be deemed truthful. The Tribunal concluded that Mr. Choksi's statements lacked credibility and did not support the Revenue's case.
Conclusion:
The Tribunal dismissed the Revenue's appeals and the assessee's cross objections, confirming the CIT(A)'s deletion of additions and disallowances. The Tribunal emphasized the lack of incriminating evidence from the search and the unreliability of Mr. Choksi's statements.
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2011 (3) TMI 1652
Issues Involved:
1. Deduction of irrecoverable amounts in respect of running and terminated chits.
2. Taxability of foreman dividend.
3. Disallowance of finance charges.
4. Levy of interest u/s 234D & 234B.
5. Addition towards commission on removed chits.
6. Addition towards bad debts.
7. Addition of royalty payments.
Summary:
1. Deduction of Irrecoverable Amounts in Respect of Running and Terminated Chits:
The assessee's appeal concerns the disallowance of Rs. 38,52,87,420/- under 'bad debt', alternatively claimed u/s 28(1)/37(1) of the Act. The Assessing Officer (AO) argued that chit fund transactions do not create a debtor-creditor relationship, citing various court decisions. The AO restricted the bad debt claim to 5% of amounts due from prized subscribers, disallowing the remaining 95%. The CIT(A) allowed bad debts for terminated chits but set aside the matter of running chits to the AO for recomputation. The Tribunal upheld the CIT(A)'s order, directing the AO to re-compute bad debts for running chits as per earlier Tribunal directions.
2. Taxability of Foreman Dividend:
The CIT(A) upheld the taxability of foreman dividend at Rs. 10,59,45,915/-. The Tribunal dismissed the assessee's grounds, following its earlier decision in the assessee's own case reported in 83 ITD 792.
3. Disallowance of Finance Charges:
The assessee did not press these issues before the Tribunal, and thus, the grounds were dismissed as not pressed.
4. Levy of Interest u/s 234D & 234B:
These grounds were dismissed as they are mandatory and consequential in nature.
5. Addition Towards Commission on Removed Chits:
The CIT(A) did not appreciate the AO's addition towards commission on removed chits. The Tribunal, following its earlier decision, dismissed this ground taken by the Revenue.
6. Addition Towards Bad Debts:
The Tribunal found the Revenue's ground infructuous as it had already considered the CIT(A)'s order on this issue while deciding the assessee's appeal.
7. Addition of Royalty Payments:
The CIT(A) did not uphold the AO's addition of royalty payments. The Tribunal, following its earlier decision, dismissed the Revenue's ground and directed the AO to allow the assessee's claim.
Conclusion:
The assessee's appeal in ITA No.490/H/2010 is partly allowed, and the Revenue's appeal in ITA No.720/H/2010 is dismissed.
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2011 (3) TMI 1651
Issues involved: Central excise duty demand on wrongly availed cenvat credit, interpretation of Rule 9 of Cenvat Credit Rules, 2004.
Summary:
The case involved M/s. Transformers & Rectifiers (India) Ltd. availing cenvat credit on inputs through invoices from certain dealers. However, it was found that the goods were actually purchased from a different supplier, M/s. Darmin Steel Suppliers, and not from the dealers on the invoices. This led to proceedings being initiated, resulting in a demand for central excise duty, interest, and penalty under Section 11AC of the Central Excise Act.
Upon appeal, the issue was whether the denial of credit was justified due to the discrepancy in the source of the goods as per the invoices and the actual supplier. The appellant argued that the credit was based on valid invoices from the 1st/2nd stage dealers, meeting the requirements of Rule 9 of Cenvat Credit Rules, 2004. The invoices correctly identified the appellant as the consignee, contained all necessary details, and were in compliance with the rules.
The Tribunal noted that the denial of credit was solely based on the fact that M/s. Darmin Steel Suppliers issued their own invoices and received payment, even though the credit was claimed based on invoices from the 1st/2nd stage dealers. It was emphasized that Rule 9 does not mandate payment to the dealer for availing credit, but rather requires the receipt and utilization of goods for manufacturing purposes.
Referring to a relevant circular issued by the Board and a previous Tribunal decision, it was established that the ownership of inputs is not a legal requirement for availing cenvat credit. As there was no evidence to suggest non-receipt of goods or any fraudulent transactions, and all invoices correctly identified the appellant as the consignee, the Tribunal concluded that the denial of credit was unjustified. The impugned order demanding central excise duty was set aside, and the appeal was allowed.
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2011 (3) TMI 1650
Issues Involved:
1. Estimation of cash component of brokerage income.
2. Addition on account of proforma bill despite income being offered in the subsequent year.
Summary:
Issue 1: Estimation of Cash Component of Brokerage Income
The assessee contested the CIT(A)'s confirmation of the AO's action estimating the cash component of brokerage income at Rs. 1,00,000/-. The assessee, a member of the Batra group involved in real estate brokerage, was subjected to a search u/s 132 of the IT Act. The AO noted unaccounted cash components in property sales and estimated brokerage income based on these findings. The AO's estimation was based on seized documents and statements, concluding that 50% of brokerage was received in cash. The CIT(A) upheld this estimation, despite acknowledging no clear evidence of cash components in transactions and the appellant's explanations regarding the seized documents. The Tribunal found no evidence supporting the AO's estimation and noted that the CIT(A) had already sustained an unexplained deposit of Rs. 98,765/-. The Tribunal concluded that presumptions and surmises cannot justify additions and set aside the CIT(A)'s order, allowing the assessee's appeal.
Issue 2: Addition on Account of Proforma Bill
The AO added Rs. 23,140/- based on a proforma bill found during the search, which the assessee claimed was accounted for in the subsequent year. The CIT(A) confirmed this addition, doubting the timing of the income. The Tribunal, however, found that the amount was indeed credited in the subsequent year's bank account and declared as income for the financial year 2003-04. Therefore, the addition for the current year was deemed uncalled for, and the assessee's appeal on this ground was allowed.
Conclusion:
The appeal filed by the assessee was allowed, with the Tribunal setting aside the CIT(A)'s order on both issues. The Tribunal emphasized the lack of evidence for the cash component of brokerage income and acknowledged the proper accounting of the proforma bill in the subsequent year.
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2011 (3) TMI 1649
Benefit of treatment of value received as cum duty - quantification of duty - reduced penalty of 25% - Held that: - question is based purely on facts. Tribunal, as noted, observed that there is no evidence to show that value received by assessee was excluding duty - Further question of reduced penalty was considered by this Court in somewhat similar situation in case of Commissioner of Central Excise and Customs, Surat-II v. Mahalaxmi Industries [2010 (2) TMI 676 - GUJARAT HIGH COURT], where it was held that If the duty amount with interest is not paid in time and even reduced penalty of 25% of the duty amount is not paid in time and option is not given to the respondent assessee, we have taken the view that such option should be given to the assessee and period of 30 days would commence from the date of giving such option - appeal dismissed - decided against appellant.
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2011 (3) TMI 1648
Issues involved: Appeal against CIT(Appeals) order, Block assessment u/s 132, Undisclosed income determination, Jurisdiction of Assessing Officer, Notice u/s 158BD, Satisfaction note recording, Adverse inference, Quashing of block assessment order.
Block Assessment u/s 132:
The appeal was filed by the Revenue against the CIT(Appeals) order related to a block assessment u/s 132 carried out in the case of Nandoliya group of cases. Documents seized during the search revealed discrepancies in the profits declared by the company compared to the profits received by individuals associated with the company. The Assessing Officer concluded that the company had undisclosed income based on the seized documents. The first appellate authority upheld the Assessing Officer's decision.
Jurisdiction and Notice u/s 158BD:
The appellant contended that the Assessing Officer did not have jurisdiction over the case as the company was regularly assessed by a different assessing officer. Additionally, it was argued that no satisfaction was recorded by the Assessing Officer regarding undisclosed income belonging to the assessee, making the notice u/s 158BD invalid. The appellant also challenged the determination of undisclosed income by the CIT(A).
Adverse Inference and Quashing of Block Assessment Order:
After multiple directions to produce assessment records, the Revenue failed to provide the satisfaction note recorded by the Assessing Officer. The appellant requested adverse inference to be taken due to the delay in producing records. The Tribunal agreed that no useful purpose would be served by further adjournments and decided in favor of the appellant. Citing a Supreme Court judgment, the Tribunal quashed the block assessment order due to the lack of recorded satisfaction by the Assessing Officer regarding undisclosed income.
In conclusion, the Tribunal allowed the appeal of the assessee based on the absence of a recorded satisfaction note by the Assessing Officer in the block assessment case. The Tribunal invoked adverse inference due to the Revenue's failure to produce the required records despite repeated directions. The block assessment order was quashed in line with the judgment of the Hon'ble Supreme Court, emphasizing the necessity of recorded satisfaction for undisclosed income determination.
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2011 (3) TMI 1647
Issues Involved:
The judgment involves the question of whether the CIT(A) was justified in deleting disallowances made by the AO on account of deduction u/s. 80IB(3) claimed by the assessee on additional income declared during a survey action u/s. 133A. It also addresses whether the income declared during the survey action qualifies for deduction u/s. 80IB.
Issue 1 - Deduction u/s. 80IB(3):
The Revenue challenged the first appellate order regarding the deletion of disallowances made by the AO on account of deduction u/s. 80IB(3) claimed by the assessee on additional income declared during a survey action u/s. 133A. The CIT(A) allowed the claimed deduction based on a decision of the Pune Bench of the Tribunal in a similar case. The Tribunal upheld the CIT(A)'s decision, stating that the additional income declared during the survey proceedings was business income and eligible for deduction u/s. 80IB.
Issue 2 - Income Derived from Industrial Activity:
The AO declined the deduction claimed by the assessee on the additional income declared during the survey, arguing that it should be treated as income from undisclosed sources. However, the CIT(A) allowed the deduction, considering the additional income as eligible for deduction u/s. 80IB. The Tribunal agreed with the CIT(A), emphasizing that the additional income was related to the assessee's manufacturing business and should be included in eligible profits for deduction u/s. 80IB.
Separate Judgment:
No separate judgment was delivered by the judges in this case.
The judgment highlights the importance of correctly categorizing additional income declared during survey proceedings and its eligibility for deductions u/s. 80IB. The Tribunal's decision provides clarity on the treatment of such income as business income and its inclusion in eligible profits for deduction purposes.
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2011 (3) TMI 1646
Issues involved: Appeal against deletion of addition of unclaimed unsecured loans under section 28(iv) of the Income-tax Act, 1961.
The Appellate Tribunal ITAT DELHI dismissed the appeal where the revenue challenged the deletion of addition of unclaimed unsecured loans amounting to Rs. 47,05,387 by the ld. Commissioner of Income-tax (Appeals). The AO contended that as the assessee had not been carrying on any business activity for many years, the unsecured loans payable were not obligatory to be paid back, thus constituting income u/s 28(iv) of the Income-tax Act, 1961. However, the ld. CIT(Appeals) found that the conditions of section 41(1) were not met, leading to the deletion of the addition.
The AO's argument was based on the decision of the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar & Sons Ltd., 222 ITR 344, where it was held that the amount written off to profit and loss account on account of trading transactions constituted income. However, the Tribunal distinguished this case as the amounts in question were loans, not trading transactions, and had not been written off to the profit and loss account.
The Tribunal further analyzed the nature of the liability, concluding that it was capital in nature and had not been written off to the profit and loss account. The AO's assertion that the assessee was not engaged in business was contradicted by the allowance of a business loss. As the liability had not ceased to exist and no benefit had been derived from it in the past, the Tribunal upheld the deletion of the addition.
In the absence of representation from the assessee, the Tribunal relied on the submissions of the ld. DR and found no error in the impugned order that warranted modification. Consequently, the appeal was dismissed, affirming the decision of the ld. CIT(Appeals).
The judgment was pronounced in the open court on 25 March 2011.
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2011 (3) TMI 1645
Issues involved: Interpretation of section 43B of the Income Tax Act, 1961 in relation to retrospective amendment by the Finance Act, 2003.
Summary:
The High Court of Calcutta heard three appeals together as they involved similar issues. The main question was whether the amendment to section 43B of the Income Tax Act, 1961 by the Finance Act, 2003 is clarificatory and retrospective in nature. The Court referred to previous decisions and concluded that the amendment is retrospective. Therefore, the benefit of the amended provision should be given to the assessee. The Court answered the questions in favor of the assessee and set aside the Tribunal's order disallowing the benefit of the amendment. The appeals were disposed of accordingly with no order as to costs.
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2011 (3) TMI 1644
Issues Involved:1. Whether the retirement from the firm and receiving a sum in lieu of giving up all rights constitutes a transfer of a capital asset giving rise to capital gains tax. 2. Alleged mistakes in the Tribunal's order regarding the treatment of the transaction and the application of relevant legal provisions. Summary:Issue 1: Transfer of Capital Asset and Capital Gains TaxThe Tribunal had to adjudicate whether the Assessee's retirement from the firm M/S. D.S. Corporation and receiving a sum of Rs. 35,59,84,050/- in lieu of giving up all his rights as a partner constituted a transfer of a capital asset, thereby giving rise to capital gains tax. The Tribunal held that the Assessee's share in the partnership and its assets was a capital asset within the meaning of section 2(14) of the Income Tax Act, 1961. On retirement, the Assessee was paid something over and above the sum standing to the credit of his capital account, thus resulting in a capital gain. Issue 2: Alleged Mistakes in Tribunal's Order1. The Assessee pointed out that the Tribunal's discussion on tax avoidance by bringing an asset into a partnership and then retiring was academic and not applicable to the Assessee's case. 2. The Assessee argued that the property acquired by the firm remained its property, and any capital gain tax should be on the firm, not the retiring partner, to avoid double taxation. 3. The Tribunal allegedly relied on the decision in N.A. Mody vs. CIT, which was rendered before the introduction of section 45(4) of the Act. The Assessee contended that post-section 45(4), any taxable sum should be in the hands of the firm. 4. The Tribunal allegedly failed to appreciate the ratio in Prashant Joshi 324 ITR 154 (Bom), which stated that under section 45(4), the charge to capital gain tax can only be in the hands of the partnership. 5. The Tribunal was accused of not following the decision in Prashant Joshi by stating that the Bombay High Court had not considered the earlier decision in N.A. Mody. The Assessee argued that the Tribunal, being a subordinate body, could not disagree with the High Court's judgment. 6. The Tribunal allegedly did not consider the argument that whatever is received by an Assessee from the firm cannot be taxed in the hands of the partner, relying on section 10(2A) of the Act. 7. The Tribunal allegedly failed to consider the decision of a co-ordinate Bench in ITO Vs. Smt. Paru D. Dave, which held that there is no incidence of capital gain tax on the retirement of a partner. The Assessee argued that the Tribunal should have referred the matter to a larger Bench if it disagreed with this view. 8. The Tribunal allegedly wrongly held that the Assessee was paid a lump sum amount over and above the amount standing to his capital account. The Tribunal dismissed the Miscellaneous Application (M.A.), stating that the objections raised did not constitute mistakes apparent from the record. The Tribunal emphasized that its power u/s 254(2) is confined to rectifying any mistake apparent from the record and does not extend to reviewing or revising its order. The Tribunal concluded that the Assessee's arguments were hypothetical and did not demonstrate any patent, obvious, or clear error in the Tribunal's original order. Order pronounced in the open court on 23rd March 2011.
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2011 (3) TMI 1643
Issues Involved:
1. Deletion of addition on account of low gross profit.
2. Deletion of disallowance related to employees' PF contribution.
Issue-wise Detailed Analysis:
1. Deletion of Addition on Account of Low Gross Profit:
The Revenue challenged the deletion of an addition of Rs. 43,40,397/- made by the Assessing Officer (AO) due to low gross profit (GP). The AO noted a decline in the GP rate from 29.25% in the preceding year to 18.98% in the assessment year 2006-07. The AO compared the assessee's GP with other similar manufacturers, which showed GP rates between 22% to 28%. The AO applied a GP rate of 24% on the assessee's gross sales, resulting in the addition.
On appeal, the CIT(A) deleted the addition, noting that the assessee provided a detailed explanation for the decline in GP, including increased costs of raw materials, transportation, and the introduction of new products causing heavy wastage. The CIT(A) found no defects in the assessee's books of accounts and stated that merely a fall in GP does not justify rejecting the books. The CIT(A) highlighted that the AO did not reject the books of accounts before making the GP estimate and that the reasons for the fall in GP were satisfactorily explained.
The Tribunal upheld the CIT(A)'s decision, emphasizing that no defects were pointed out in the books of accounts, and there was no justification for invoking section 145 of the Income-tax Act. The Tribunal cited precedents, including the Gujarat High Court's decision in CIT Vs. Amitbhai Gunwantbhai, which held that without defects in the books, the apparent state of affairs should be accepted. Consequently, the Tribunal dismissed the Revenue's ground on this issue.
2. Deletion of Disallowance Related to Employees' PF Contribution:
The AO disallowed Rs. 1,26,279/- (correct amount Rs. 1,31,162/-) for the belated deposit of employees' contribution towards the Provident Fund (PF), invoking section 36(1)(va) of the Act. The CIT(A) deleted the disallowance, noting that the amount was paid before the due date for filing the return.
The Tribunal referred to various judicial precedents, including the Hon'ble Delhi High Court's decision in CIT v. P.M. Electronics Ltd., which held that contributions made after the due date under the PF Act but before the due date for filing the return are allowable under section 36(1)(va) read with section 43B of the Act. The Tribunal also cited the Supreme Court's decision in CIT vs. Alom Extrusions Ltd., which clarified that the omission of the second proviso to section 43B operated retrospectively from April 1, 1988.
The Tribunal concluded that the employees' contribution towards PF, if made before the due date of filing the return under section 139(1), is admissible. Therefore, the Tribunal upheld the CIT(A)'s findings and dismissed the Revenue's ground on this issue.
General Grounds:
Grounds 3 and 4, being general in nature and mere prayers, did not require separate adjudication and were dismissed.
Conclusion:
The appeal by the Revenue was dismissed in its entirety, with the Tribunal upholding the CIT(A)'s decisions on both the deletion of the addition on account of low gross profit and the deletion of disallowance related to employees' PF contribution. The order was pronounced on 22-03-2011.
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