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2011 (2) TMI 1618
Issues Involved:
1. Addition of unexplained cash credits under section 68 of the Income Tax Act.
2. Disallowance of excessive payments made to relatives under section 40A(2)(b) of the Income Tax Act.
3. Disallowance of brokerage/commission payments.
4. Disallowance of personal use expenses for telephone, vehicle, and depreciation on motor car.
5. Disallowance of proportionate interest paid/payable on unsecured loans.
Issue-wise Detailed Analysis:
1. Addition of Unexplained Cash Credits under Section 68:
Assessment Year 2004-05:
- Assessee's Appeal: The assessee challenged the addition of Rs.39,20,000 out of Rs.55,20,000 as unexplained cash credits. The credits were categorized into four groups based on the nature of evidence provided.
- Group 1 (Dana Textiles and Noori Processors): The assessee provided confirmations, PAN details, and bank statements. The Tribunal restored the addition related to Dana Textiles to the Assessing Officer (AO) for verification from assessment records. For Noori Processors, the addition was upheld as the assessee failed to provide sufficient evidence.
- Groups 2, 3, and 4: The Tribunal found that the assessee had furnished necessary details, including confirmations, PAN, and bank statements. The mere fact that cash was deposited just before issuing cheques or that the loan amount exceeded the creditors' capital was not sufficient to treat the credits as unexplained. The Tribunal directed the AO to delete the additions for these groups.
- Revenue's Appeal: The Revenue contested the deletion of Rs.16 lakhs related to six creditors. The Tribunal upheld the deletion, noting that the creditors were assessed to tax, and the loans were through account payee cheques.
Assessment Year 2005-06:
- Assessee's Appeal: The assessee challenged the addition of Rs.4,53,070 on account of brokerage/commission paid to Shri Sanjay Maheswari. The Tribunal allowed 50% of the commission, recognizing the services rendered by Shri Maheswari.
- Revenue's Appeal: The Revenue contested the deletion of Rs.29,37,197 on account of commission payments. The Tribunal upheld the deletion, following the decision for the previous assessment year.
2. Disallowance of Excessive Payments Made to Relatives under Section 40A(2)(b):
Assessment Year 2004-05:
- The assessee challenged the disallowance of Rs.3,30,000 out of the salary paid to relatives. The Tribunal upheld the disallowance, noting that the payments were excessive and unreasonable given the nature of the business and the qualifications of the relatives.
3. Disallowance of Brokerage/Commission Payments:
Assessment Year 2004-05:
- The AO disallowed Rs.75,54,740 out of Rs.90,65,688 paid as brokerage/commission, deeming it excessive. The Tribunal upheld the deletion of the disallowance by the Commissioner of Income Tax (Appeals), noting that the brokerage was justified given the significant increase in turnover and the services rendered by the brokers.
Assessment Year 2005-06:
- The AO disallowed Rs.33,90,267 out of commission paid, following the previous year's reasoning. The Tribunal upheld the deletion of Rs.29,37,197 and allowed 50% of the commission paid to Shri Sanjay Maheswari.
4. Disallowance of Personal Use Expenses:
Assessment Year 2005-06:
- The AO disallowed 10% of expenses for telephone, vehicle, and depreciation on motor car due to personal use. The Tribunal upheld the disallowance, noting that personal use could not be ruled out.
5. Disallowance of Proportionate Interest Paid/Payable on Unsecured Loans:
Assessment Year 2005-06:
- The Tribunal directed the AO to allow interest paid to cash creditors deemed genuine after giving effect to the order for the assessment year 2004-05.
Conclusion:
- For Assessment Year 2004-05: Both the assessee's and Revenue's appeals were partly allowed.
- For Assessment Year 2005-06: The Revenue's appeal was dismissed, and the assessee's appeal was partly allowed.
Order Pronounced in the Court on 28.02.2011.
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2011 (2) TMI 1617
Issues Involved:
Assessment of interest under section 244A on tax refund arising from appellate proceedings.
Issue 1: Assessment of interest under section 244A on tax refund arising from appellate proceedings
The assessee filed its return of income declaring total income for the assessment year 2002-03. The assessment was completed under section 143(3) of the Income Tax Act, 1961, resulting in a total income. Subsequently, the CIT(A) granted reliefs to the assessee, leading to a negative total income and a tax refundable amount. However, the Commissioner of Income Tax opined that interest under section 244A could not be granted to the assessee as the refund arose due to the CIT(A) order. The Assessing Officer then withdrew the interest granted to the assessee, attributing the delay to the assessee. The CIT(A upheld this view, stating that the delay in granting the refund was due to the assessee's actions. The assessee contended that the rectification proceedings were without jurisdiction, citing the Supreme Court judgment in T S Balaram, ITO vs. Volkart Bros & Ors (1971) 82 ITR 50 (SC).
The Appellate Tribunal, after careful consideration, found in favor of the assessee. It noted that the refund arose from the appellate proceedings and there was no evidence to suggest that the assessee delayed these proceedings. The Tribunal highlighted that filing an appeal and seeking reliefs are legitimate means to challenge tax liability, and the mere act of filing an appeal does not constitute delaying proceedings. The Tribunal emphasized that the delay in the appellate proceedings must be attributable to the assessee for interest under section 244A to be excluded. It concluded that the income tax authorities' decision to withdraw the interest was not justified as there was no evidence of delay caused by the assessee in the appellate proceedings. The Tribunal set aside the orders of the income tax authorities and allowed the appeal filed by the assessee.
In summary, the Appellate Tribunal ruled in favor of the assessee, emphasizing that interest under section 244A on tax refund arising from appellate proceedings cannot be denied based on unsubstantiated claims of delay by the assessee. The Tribunal highlighted the importance of assessing the actual cause of delay in proceedings before withholding interest, ultimately setting aside the income tax authorities' decision and allowing the appeal.
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2011 (2) TMI 1616
Issues involved:
The petition seeks to set aside an order related to a cheque bouncing case under Section 138 r/w 142 of Negotiable Instruments Act. The main issue is the determination of the age of the ink on the cheque.
Summary:
Issue 1: Setting aside the order in the cheque bouncing case
The petitioner, an accused in a cheque bouncing case, filed a petition to challenge the order made by the Additional District and Sessions Judge and confirmed by the Judicial Magistrate. The proceedings were initiated based on a private complaint for an offence under Section 138 r/w 142 of the Negotiable Instruments Act.
Issue 2: Determination of the age of the ink on the cheque
During the proceedings, the petitioner filed an application under Section 45 of the Indian Evidence Act to send the cheque for expert examination to determine the age of the ink. The application was initially dismissed by the Judicial Magistrate based on the lack of scientific facility to determine the age of the ink. However, the petitioner produced evidence suggesting that the Central Forensic Science Laboratory in Hyderabad could ascertain the age of the ink by comparing it with an admitted signature from the same period.
Judgment:
The High Court allowed the criminal original petition, setting aside the orders of the Additional District and Sessions Judge and the Judicial Magistrate. The petitioner was directed to submit his admitted signature for comparison within two weeks. The lower court was instructed to send both documents to the Central Forensic Science Laboratory for examination. Failure to produce the admitted signature would result in the petitioner losing the opportunity for comparison.
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2011 (2) TMI 1615
Issues involved: The judgment involves penalty proceedings under Section 271D and 271E of the Income Tax Act for accepting a loan from a director and repayment of the same, alleged violation of Sections 269SS and 269T of the Act, and the question of whether the transactions were in the nature of loan or current account transactions.
Penalty Proceedings u/s 271D and 271E:
The Assessee, a private limited company, had taken a loan from its Director and repaid the same in cash, leading to penalty proceedings under Section 271D and 271E of the Act. The Addl. CIT initiated these proceedings for violating the provisions of Sections 269SS and 269T of the Act. The Assessee contended that the loans were necessary due to increased working capital requirements and were used to tide over cash flow issues. The CIT(A) allowed the appeal and deleted the penalties, emphasizing that the transactions were not in the nature of loans but current account transactions between identifiable parties.
Interpretation of Section 269SS:
The revenue challenged the CIT(A)'s decision, arguing that the transactions should be considered loans under Section 269SS, despite the lender being a Director of the Assessee company. The Assessee maintained that the transactions were current account based and not loans or deposits. The Tribunal examined various legal precedents and highlighted that the law aims to prevent tax evasion and fictitious entries in accounts. It was noted that the transactions were genuine, accepted by the AO, and not involving fictitious entries.
Legal Precedents and Conclusion:
The Tribunal referred to judgments by the Supreme Court and High Courts, emphasizing that transactions between identifiable parties, not involving interest or formal loan agreements, do not constitute loans or deposits under Section 269SS. Citing the Madras High Court's ruling, it was clarified that current account transactions without interest do not breach Section 269SS. Ultimately, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeals and affirming that no substantial question of law arose for consideration.
Conclusion:
The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s decision to delete the penalties imposed under Section 271D and 271E. The judgment emphasized the genuine and current account nature of the transactions, in line with legal interpretations and precedents.
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2011 (2) TMI 1614
Issues involved: Revision under Sections 397, 401 of Cr.PC for setting aside order dated 26-4-2010 passed by Fourteenth Additional Sessions Judge, Gwalior, in Criminal Revision No. 170/2010, concerning application filed under Section 45 of the Evidence Act by the respondent/accused.
Summary:
The applicant/complainant filed a complaint against the respondent for an offence under Section 138 of the Negotiable Instrument Act, alleging that a cheque issued by the respondent was dishonored by the bank due to "stop payment" by the respondent. The respondent filed applications under Section 45 of the Evidence Act and Section 311 of Cr.PC, requesting a Handwriting Expert's report on the disputed cheque and recalling the complainant and witness for further cross-examination. The Trial Court rejected both applications, but the Revisional Court allowed the application under Section 45 of the Evidence Act, leading to this revision.
The applicant argued that since the respondent admitted his signature on the cheque, there was no need for a Handwriting Expert examination. Citing Section 139 of the Act and a relevant case law, it was contended that the presumption favored the holder of the cheque unless proven otherwise. The belated application under Section 45 of the Evidence Act was also highlighted as a point of contention.
In response, the respondent contended that while admitting his signature, he denied writing the other contents of the cheque, emphasizing the need for a Handwriting Expert examination. The respondent's defense included reporting the lost cheque and sending a "stop payment" intimation to the bank.
After considering the arguments and documents, the Court noted that the respondent admitted his signature on the cheque, triggering a presumption under Section 20 of the Act that the cheque was issued by the signatory after proper filling. The Court agreed with the Trial Court's decision that no Handwriting Expert examination was necessary for the disputed cheque's other contents. The order allowing the application under Section 45 of the Evidence Act was deemed illegal and unsustainable, leading to setting it aside and allowing the revision.
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2011 (2) TMI 1613
Issues Involved:
1. Challenge to the arbitral award u/s 34 of the Arbitration and Conciliation Act, 1996.
2. Limitation period for filing the application u/s 34.
3. Presumption of service of the arbitral award.
Summary:
1. Challenge to the arbitral award u/s 34 of the Arbitration and Conciliation Act, 1996:
The Petitioner, New Globe Transport Company, moved a petition u/s 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitral award dated 5th August, 2008, passed by the learned arbitrator. The Petitioner contended that they were unaware of the award until they received a letter dated 30th June, 2010, on 9th July, 2010, which enclosed a copy of the award. The Petitioner argued that the award was never served upon them and thus the limitation period should start from 9th July, 2010.
2. Limitation period for filing the application u/s 34:
The Court noted that the application was prima facie barred by limitation as the award was made and published on 5th August, 2008. The Petitioner argued that the limitation period should start from the date they received the letter on 9th July, 2010. The Respondent contended that the award was sent by registered post with acknowledgment due on 8th August, 2008, and returned with the postal endorsement 'Not Claimed', which should be considered as good service, thus starting the limitation period from that date.
3. Presumption of service of the arbitral award:
The Court examined whether the postal endorsement 'Not Claimed' constituted good service. The Respondent cited various legal provisions and judgments to support their claim that the presumption of service is in their favor. The Court referred to the General Clauses Act and relevant case law, including the Supreme Court's decision in C.C. Alavi Haji v. Palapetty Muhammed, which held that service of notice is deemed to have been effected unless the sendee proves otherwise.
Conclusion:
The Court concluded that the postal endorsement 'Not Claimed' amounted to good service and the award was deemed to have been served on 8th August, 2008. Consequently, the petition filed by the Petitioner was barred by limitation u/s 34(3) of the Arbitration and Conciliation Act, 1996, and was dismissed.
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2011 (2) TMI 1612
Issues Involved:
1. Addition of Rs. 4,50,000 as unexplained cash credit u/s 68.
2. Levy of interest u/s 234A, 234B, 234C, and 234D.
3. Initiation of penalty u/s 271(1)(c).
Summary:
Issue 1: Addition of Rs. 4,50,000 as unexplained cash credit u/s 68
The primary issue was the addition of Rs. 4,50,000 as unexplained cash credit u/s 68 of the Income Tax Act. The Assessing Officer (AO) added this amount, stating that the assessee failed to prove the genuineness, creditworthiness, and existence of creditors, namely M/s. Parshva Sales Corporation, Shakti Corporation, and M.D. Mehta & Co. The Commissioner of Income Tax (Appeals) upheld this addition, emphasizing that the assessee did not discharge the onus of proving the identity, genuineness, and creditworthiness of the creditors. The Tribunal, however, found that the assessee had provided sufficient evidence, including PAN cards and income tax details, and that transactions were made through account payee cheques. The Tribunal cited the Gujarat High Court's decision in CIT vs. Sanjay K. Thakkar, which held that if the AO is not satisfied with the creditor's capacity or source, the addition should be made in the creditor's hands, not the assessee's. Consequently, the Tribunal deleted the addition of Rs. 4,50,000 u/s 68.
Issue 2: Levy of interest u/s 234A, 234B, 234C, and 234D
The second issue was the levy of interest u/s 234A, 234B, 234C, and 234D. As no submissions were made by the assessee's Authorized Representative during the hearing, this ground of appeal was dismissed for want of prosecution.
Issue 3: Initiation of penalty u/s 271(1)(c)
The third issue concerned the initiation of penalty u/s 271(1)(c). Similar to the second issue, no submissions were made by the assessee's Authorized Representative, leading to the dismissal of this ground of appeal for want of prosecution.
Conclusion:
The appeal was partly allowed, with the Tribunal deleting the addition of Rs. 4,50,000 made u/s 68, while dismissing the grounds related to the levy of interest and initiation of penalty due to lack of prosecution.
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2011 (2) TMI 1611
Issues involved: Petition for passport issuance without father's name indication.
Comprehensive details:
1. Issue of Clause Interpretation: The Petitioner, a minor through her mother, seeks a passport without indicating the father's name. The Respondents relied on Clause 4(2) of the Instructions dated 5th October 2009, which applies post-remarriage after divorce. However, the Petitioner's mother has not remarried after divorce, making this clause inapplicable.
2. Affidavit Submission: The Petitioner's mother is willing to provide an affidavit to the Passport Authority, confirming her intention not to remarry. She also agrees to inform the Passport Authority in advance if she plans to remarry, as stated by the Petitioner's counsel.
3. Reference to Previous Instructions: The Respondents enclosed another set of instructions in a reference letter issued on 21st April 1999. Clause 3.2(a) of these instructions addresses cases involving children born out of wedlock or with a single parent. It specifies the procedure for cases where the father's identity is unknown or where the father has terminated the relationship with the mother after conception.
4. Application of Instructions: Considering the mutual divorce decree issued by the civil court in 2007, the Petitioner's case falls under Clause 3.2(a) of the instructions dated 21st April 1999. This clause allows for the omission of the father's name in the passport upon submission of the required affidavit by the mother.
5. Directive for Affidavit Submission: The Petitioner's mother is directed to present an affidavit sworn before a Magistrate in accordance with Clause 3.2(a) to the Regional Passport Officer within two weeks. This affidavit should also include a commitment to inform the RPO if she plans to remarry. Upon submission of this affidavit, the RPO is instructed to leave the father's name blank in the Petitioner's passport within an additional two-week period.
6. Disposition of Petition: The petition is disposed of with the above directions, ensuring compliance with the necessary procedures for issuing the passport without indicating the father's name.
7. Order for Counsel: Dasti order is issued to the counsel for the parties for further action.
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2011 (2) TMI 1610
Issues involved: Whether the Director of Income Tax (CIB), Chandigarh was justified in penalizing the appellant u/s 271FA of the Income Tax Act, 1961.
Summary:
The Appellate Tribunal ITAT Chandigarh heard four appeals filed by the Sub Registrar, Tehsil Office, Khamano, Fatehgarh Sahib, regarding penalty imposed u/s 271FA of the Income Tax Act. The penalty was calculated at Rs.100/- per day for each financial year under consideration. The appellant challenged the penalty on grounds of not considering their replies and alleged errors in the penalty amounts for different financial years.
The Tribunal deliberated on whether the appellant could directly appeal before the Tribunal without approaching the CIT(Appeals) first. The CBDT clarification highlighted that the CIT(Appeals) has the authority to dispose of penalties u/s 271FA and can hear appeals against orders passed by the DIT (CIB). The Tribunal concluded that the appellant should have first appealed to the CIT(Appeals) before approaching the Tribunal directly. Consequently, all four appeals were dismissed.
In conclusion, the Tribunal upheld the penalty imposed by the Director of Income Tax (CIB), Chandigarh, and dismissed all four appeals filed by the appellant for not following the proper appeal procedure.
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2011 (2) TMI 1609
The Bombay High Court ruled that interest paid by the assessee for non-maintenance of cash reserve ratio/statutory liquidity ratio is not a penalty, allowing the interest claim. The Tribunal's decision was upheld, and the appeal by the revenue was dismissed with no costs.
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2011 (2) TMI 1608
Issues Involved:
1. Basis for promotion under the BCR Scheme.
2. Applicability of the Tribunal's order dated 07.07.1992 to non-applicants.
3. Validity of promotions based on seniority in the basic grade post the circular dated 13.12.1995.
Summary:
1. Basis for Promotion under the BCR Scheme:
The Supreme Court examined the basis for promotion from Grade-III to Grade-IV within the Department of Telecommunications. Initially, promotions were based on seniority and departmental examinations. The Government introduced the One Time Bound Promotion Scheme and later the Biennial Cadre Review (BCR) Scheme, which allowed upgradation based on seniority in the basic grade after 26 years of service. The Tribunal's order dated 07.07.1992 directed that promotions to 10% posts in Grade-IV should be based on seniority in the basic grade, subject to fulfillment of other conditions in the BCR Scheme.
2. Applicability of the Tribunal's Order Dated 07.07.1992 to Non-Applicants:
The Tribunal's order dated 07.07.1992 in O.A. No. 1455 of 1991 was affirmed by the Supreme Court in Civil Appeal No. 3201 of 1993. However, the Supreme Court clarified that this order applied only to the applicants in the original O.A. and not to other employees who did not approach the Tribunal. The principle from K.I. Shephard's case, which allows non-litigants to benefit from a court's decision, was deemed inapplicable here as the Tribunal did not extend its order to non-applicants.
3. Validity of Promotions Based on Seniority in the Basic Grade Post the Circular Dated 13.12.1995:
The Supreme Court noted that the Government issued a fresh circular on 13.12.1995, stating that promotions to Grade-IV should be based on seniority in the basic grade. This circular was prospective and could not be applied retroactively. The Tribunal's decision to allow promotions based on seniority in the basic grade prior to this circular was incorrect. The Supreme Court held that the respondents, who filed O.A. No. 2484 of 1997 and O.A. No. 2099 of 1997, could not claim promotions based on seniority in the basic grade before 13.12.1995.
Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's orders dated 22.05.2003 and the Tribunal's common order dated 11.08.2000. The respondents' claims for promotion based on seniority in the basic grade prior to 13.12.1995 were rejected. There was no order as to costs.
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2011 (2) TMI 1607
Issues:
1. Delay of 561 days in filing the appeal.
2. Condonation of delay under Section 5 of the Limitation Act.
3. Merits of the case based on the Tribunal's decision in the assessee's own case.
4. Revenue's right over tax revenue due to delay in filing the appeal.
Analysis:
The appeal before the Appellate Tribunal ITAT Hyderabad was directed against the order of the CIT (A)-I, Hyderabad for the assessment year 2005-06, with a significant delay of 561 days in filing the appeal. The assessee sought condonation of the delay by explaining that the order of the CIT (A) was misplaced by a clerk, leading to the delay in filing. The assessee also argued that the issue in question was covered by the Tribunal's decision in their own case dated 28-8-2009. On the contrary, the departmental representative contended that the assessee failed to provide sufficient reasons for the delay, emphasizing that each day's delay must be justified. The Tribunal noted that while the assessee can file an appeal beyond the stipulated time with a petition to condone the delay under Section 5 of the Limitation Act, mere filing of the petition does not automatically entitle the assessee for admission of the appeal. It was observed that the reasons presented by the assessee for the delay were not convincing, indicating negligence and carelessness on their part. Citing precedents, the Tribunal highlighted the importance of a sufficient cause to condone the delay, emphasizing that the revenue's right over tax revenue should not be disturbed lightly due to delay in filing appeals.
The Tribunal referred to the case of Karnataka Forest Development Corporation Limited vs. ACIT and the judgment in Ramlal & Others vs. Rawa Coals Fields Limited to support the revenue's stand on the issue of delay. It was emphasized that the expiration of the limitation period created a vested right for the revenue, and such rights accrued by lapse of time should not be lightly disturbed. In this case, the Tribunal found that the delay of 561 days was primarily due to the negligence of the assessee, leading to a refusal to condone the delay. Consequently, the appeal was dismissed, and the Tribunal declined to delve into the merits of the case due to the un-admitted appeal on the grounds of limitation. The order was pronounced on 25-2-2010, upholding the dismissal of the assessee's appeal.
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2011 (2) TMI 1606
Issues Involved:
1. Justification of deletion of addition based on the statement recorded during the survey u/s 133A.
2. Evidentiary value of statements recorded during the survey u/s 133A.
3. Retraction of statements made during the survey.
Summary:
1. Justification of Deletion of Addition Based on the Statement Recorded During the Survey u/s 133A:
The revenue challenged the deletion of an addition of Rs. 1,91,00,000/- made by the A.O. based on a statement recorded during a survey u/s 133A. The A.O. found discrepancies in the assessee's books and recorded a statement from a partner, Shri Shakir Husain Qureshi (SHQ), who offered Rs. 1,90,00,000/- as additional income. However, the assessee later filed a return without including this amount, explaining that the discrepancies were due to pending entries and that all transactions were recorded correctly. The Ld. CIT (A) accepted the assessee's explanation and deleted the addition, noting that no incriminating material was found during the survey to support the addition.
2. Evidentiary Value of Statements Recorded During the Survey u/s 133A:
The A.O. argued that statements made during the survey have high evidentiary value unless proven otherwise. However, the Ld. CIT (A) and the Tribunal noted that statements recorded u/s 133A do not have the same evidentiary value as those recorded u/s 132(4), which can be used as evidence. The Tribunal cited various judgments, including Paul Thomas & Sons vs. CIT and Premsons, to support the view that statements recorded during surveys cannot be the sole basis for additions unless corroborated by other evidence.
3. Retraction of Statements Made During the Survey:
The assessee retracted the statement made during the survey, explaining that it was made under confusion and without proper verification of records. The Ld. CIT (A) found that the assessee provided all necessary documents and explanations in post-survey proceedings, which were not disputed by the A.O. The Tribunal upheld this view, noting that the retraction was supported by credible evidence and that the A.O. failed to provide any material to counter the assessee's claims.
Conclusion:
The Tribunal dismissed the revenue's appeal, affirming that the addition of Rs. 1,91,00,000/- based solely on the statement recorded during the survey u/s 133A was not justified without corroborating evidence. The Tribunal emphasized that statements made during surveys do not have conclusive evidentiary value and can be retracted if supported by credible evidence. The order was pronounced on 15th February 2011.
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2011 (2) TMI 1605
The Supreme Court granted leave for the appeal to be heard on the SLP paper book. The interim order was modified to allow the department to raise demands against the appellants to prevent time-barring, but the appellants must continue paying the admitted amount. The disputed amount should be put in an 'ESCROW account', and no coercive steps can be taken to recover it without the Court's permission.
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2011 (2) TMI 1604
Issues involved: Appeal filed by Revenue regarding lease equalization charges and professional charges disallowance.
Lease Equalization Charges: The Revenue appealed against the allowance of lease equalization charges of Rs. 77,19,523 by the CIT(Appeals). Assessee claimed this as a revenue expense based on the ICAI guidance note on accounting for leases. The Assessing Officer disallowed the claim as notional, but the CIT(Appeals) upheld it citing a previous Tribunal decision in favor of the assessee. The Tribunal found the claim legitimate and justified, as no higher judicial authority had overturned the previous decision. The Revenue's appeal on this ground was dismissed.
Professional Charges Disallowance: The Revenue challenged the deletion of disallowance of professional charges amounting to Rs. 1,38,19,260 by the CIT(Appeals). The payments were made to M/s PCR Investments for refraining from competitive business. The Assessing Officer considered it capital expenditure and disallowed it, but the CIT(Appeals) deleted the disallowance based on a previous Tribunal decision in favor of the assessee. The Tribunal found the payments properly accounted for and valid, directing the Assessing Officer to deduct the professional charges while computing taxable income. As the factual situation remained the same, the Tribunal upheld the CIT(Appeals) decision to delete the disallowance of professional charges. The Revenue's appeal on this ground was also dismissed.
In conclusion, the appeal filed by the Revenue was dismissed by the Tribunal, upholding the decisions of the CIT(Appeals) regarding both lease equalization charges and professional charges disallowance.
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2011 (2) TMI 1603
Issues Involved: The judgment involves the deletion of interest u/s 234B and 234D levied by the Assessing Officer.
Issue of Interest u/s 234B:
The Assessing Officer levied interest u/s 234B on the assessee, who contended that as the income was subject to Tax Deduction at Source (TDS) u/s 195, interest u/s 234B should not be applicable. The Ld. Commissioner of Income Tax (Appeals) considered the arguments and referred to relevant legal provisions and case laws. The Ld. Commissioner held that interest u/s 234B is not leviable when tax liability has been discharged by way of TDS, as per decisions of the Hon'ble Jurisdictional High Court of Uttarakhand and other relevant cases. The Tribunal upheld the Ld. Commissioner's decision, dismissing the Revenue's appeal.
Issue of Interest u/s 234D:
The Assessing Officer charged interest u/s 234D on the assessee, who argued that only the refund granted on account of excess TDS, advance tax, and self-assessment tax over the tax liability should be considered for the purpose of charging interest u/s 234D. The Ld. Commissioner of Income Tax (Appeals) agreed with the assessee's contention, citing relevant legal provisions and case laws. The Tribunal found the assessee's argument to be valid and upheld the Ld. Commissioner's decision to charge interest u/s 234D based on the correct amount of TDS, excluding interest granted u/s 244A. The Revenue's appeal was dismissed, and the Tribunal upheld the Ld. Commissioner's order.
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2011 (2) TMI 1602
Issues involved: Disallowance of interest u/s 40A(2)(b) of the Income-tax Act, 1961.
Summary:
The appeal was filed by the assessee against the CIT(A)'s order for the assessment year 2006-07 regarding the disallowance of interest under Section 40A(2)(b) of the Income-tax Act, 1961. The AO observed that the assessee paid excess interest to specified persons under Section 40A(2)(b) compared to the interest rate on a bank loan. The CIT(A) partially allowed the claim, considering 15% interest as reasonable and restricting the disallowance to 3%. The ITAT found that the effective bank interest rate was 18.35%, including various additional costs, while the assessee paid interest at 18% to specified persons. The Tribunal noted that the assessee arranged additional funds from unsecured loans due to insufficient bank financing, and loans from friends and relatives were easily accessible compared to bank loans with stringent collateral requirements. Considering these factors, the ITAT allowed the appeal, finding no merit in restricting the interest rate to 15%.
This judgment emphasizes the need to consider all costs associated with obtaining bank finance, not just the basic interest rate, when determining the reasonableness of interest paid to specified persons under Section 40A(2)(b) of the Income-tax Act, 1961.
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2011 (2) TMI 1601
Issues Involved:
1. Validity of invoking Section 17 of the Land Acquisition Act, 1894.
2. Legitimacy of the acquisition process and deprivation of the right to file objections under Section 5A.
3. Justification for the urgency clause in land acquisition.
Summary:
1. Validity of invoking Section 17 of the Land Acquisition Act, 1894:
The appellants were aggrieved by the Calcutta High Court's order annulling the invoking of Section 17 of the Land Acquisition Act, 1894 ("the Act") by the State Government for acquiring premises No. 14 and 12/1, Hare Street, Calcutta. The High Court quashed the acquisition on the grounds that the urgency clause under Section 17(4) was improperly invoked, depriving the respondents of their right to file objections under Section 5A.
2. Legitimacy of the acquisition process and deprivation of the right to file objections under Section 5A:
The respondents challenged the notifications issued by the State Government under Section 4(1) read with Section 17(4) of the Act, arguing that there was no valid ground for invoking Section 17(4), which resulted in depriving them of the right to file objections under Section 5A. The Division Bench of the High Court quashed the acquisition, emphasizing the importance of public enquiry and the rule of natural justice. The court noted that the government proceeded with a closed mind, paying attention only to the statutory phrases without genuine consideration of the facts.
3. Justification for the urgency clause in land acquisition:
The Supreme Court considered the applicability of Section 17 of the Act, referencing precedents such as Narayan Govind Gavate v. State of Maharashtra and Anand Singh v. State of Uttar Pradesh. The Court highlighted that the urgency clause should not be invoked lightly and must be justified by exceptional circumstances. In this case, the Court found that the time gap between the quashing of the first notification and the issuance of the second notification was too long to justify invoking the urgency clause. The appellants failed to explain why they could not comply with the requirement of Section 5A, and the urgency clause was improperly invoked on the pretext of complying with the High Court's direction.
Conclusion:
The Supreme Court upheld the Division Bench's decision, stating that the High Court did not err in quashing the notifications issued under Section 4(1) read with Section 17 and Section 6 of the Act. The appeals were dismissed, and the parties were left to bear their own costs.
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2011 (2) TMI 1600
Issues involved: The judgment involves the issue of directing the AO to substitute a sum in place of an addition made u/s 69C of the Income Tax Act.
Details of the Judgment:
1. The appeal was against the order of the CIT(A) for AY 2001-02, where the AO had made an addition u/s 69C of &8377; 9,36,509/- for unexplained expenses in stock and car expenses. The CIT(A) deleted this addition but noted other expenses claimed by the assessee. The CIT(A) divided the interest claimed into two parts, allowing a deduction of &8377; 68,245/- under the head of interest incurred on the cost of construction sold during the year. The balance of &8377; 8,63,513/- was required to be disallowed and added to the work in progress.
2. The assessee appealed against the CIT(A)'s order, arguing that the CIT(A) erred in making an enhancement that the AO had not considered. The counsel referred to a case law stating that the CIT(A) had no power to tax a new source of income. The DR contended that the same source of income was considered, and the case law did not apply.
3. The Tribunal found that the CIT(A) had the power to enhance the assessment and had only analyzed the same source of income. The argument that the CIT(A) taxed a new source of income was deemed devoid of cogency.
4. Another issue raised was regarding the deduction of interest paid in respect of capital borrowed for business purposes. The Tribunal clarified that the question was about interest allocated to stocks and sales made during the year, not interest on capital borrowed.
5. The assessee also raised concerns about not being given an opportunity to address the enhancement made by the CIT(A). The Tribunal agreed that the assessee should have been given a chance to respond and remitted the issue back to the CIT(A) for necessary action.
6. The appeal by the assessee was allowed for statistical purposes, and the decision was pronounced on 25th February 2011.
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2011 (2) TMI 1599
Issues Involved:
1. Disallowance of expenditure on re-conditioning of buses and withdrawing depreciation.
2. Disallowance of employer's contribution to the Provident Fund under Section 43B.
3. Disallowance of guest house expenditure.
4. Disallowance of depreciation on new addition of assets.
5. Applicability of Minimum Alternate Tax (MAT) under Section 115JB.
Detailed Analysis:
1. Disallowance of expenditure on re-conditioning of buses and withdrawing depreciation:
The Revenue challenged the deletion of disallowance of Rs. 4,34,03,541/- for re-conditioning buses and withdrawing depreciation of Rs. 5,22,635/-. The Tribunal referred to its earlier decisions in the assessee's own cases for different assessment years, where it was held that such expenditure is of revenue nature as it was incurred to preserve and maintain existing assets without bringing new assets into existence. The Tribunal cited the Supreme Court's decision in CIT Vs. Sarvana Spinning Mills P Ltd., which clarified that repairs to maintain existing assets fall under "current repairs" under Section 31(i). The Tribunal found no infirmity in the CIT(A)'s findings and dismissed the Revenue's appeal on this issue.
2. Disallowance of employer's contribution to the Provident Fund under Section 43B:
The Revenue contested the deletion of disallowance of Rs. 5,75,12,229/- for employer's contribution to the Provident Fund. The Tribunal noted that the contributions were made within the due date for filing the return of income, as observed by the Assessing Officer. The Tribunal referred to the Delhi High Court decision in CIT v. P.M. Electronics Ltd., which held that contributions made within the due date are allowable. The Tribunal followed this precedent and dismissed the Revenue's appeal on this issue.
3. Disallowance of guest house expenditure:
The Revenue appealed against the deletion of disallowance of Rs. 1,00,000/- for guest house expenses. The assessee conceded that this issue was covered against them by the Tribunal's earlier decisions in their own cases, where it was held that such expenses are not allowable following the Supreme Court's decision in Britannia Ind. Ltd. The Tribunal, respecting its earlier decision, reversed the CIT(A)'s order and allowed the Revenue's appeal on this issue.
4. Disallowance of depreciation on new addition of assets:
The Revenue challenged the deletion of disallowance of Rs. 2,60,53,207/- for depreciation on new assets. The Tribunal found that the Assessing Officer disallowed the claim due to a lack of details, but the CIT(A) allowed it based on the consistency of the assessee's audited claims and the verification by statutory auditors. The Tribunal upheld the CIT(A)'s findings that the auditing by statutory auditors could not be dismissed as unreliable and confirmed the allowance of the depreciation claim, dismissing the Revenue's appeal on this issue.
5. Applicability of Minimum Alternate Tax (MAT) under Section 115JB:
The Revenue contested the CIT(A)'s decision that the assessee, a state-owned corporation, was not liable to pay MAT under Section 115JB. The Tribunal reviewed the facts and submissions, noting that the assessee was not a company under the Companies Act but a corporation established under the Road Transport Corporation Act, 1950. The Tribunal referred to the Kerala High Court decision in Kerala State Electricity Board v. DCIT, which held that such corporations are not liable under Section 115JB. The Tribunal found that the assessee's accounts were not prepared under the Companies Act but under specific provisions of the Road Transport Corporation Act. It upheld the CIT(A)'s decision that the assessee was not liable to MAT, dismissing the Revenue's appeal on this issue.
Conclusion:
The Tribunal dismissed the Revenue's appeals on issues 1, 2, 4, and 5, while allowing the Revenue's appeal on issue 3. The final judgment resulted in the Revenue's appeal being partly allowed.
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