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Showing 201 to 220 of 1052 Records
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2011 (4) TMI 1356
Issues Involved:
1. Validity of assessment framed under Section 158BC of the IT Act, 1961.
2. Treatment of purchase of plant and machinery and films from Delhi parties as fictitious and/or bogus.
3. Disallowance of depreciation on new plant and machinery.
4. Disallowance of financial expenses.
5. Levy of interest under Section 158BFA(1) of the IT Act, 1961.
6. Double additions in respect of financial charges for specific assessment years.
Detailed Analysis:
1. Validity of Assessment Framed Under Section 158BC:
The assessee argued that the assessment under Section 158BC was illegal since no search was conducted on the appellant company in its individual corporate capacity. The Tribunal found that a search and seizure action was indeed carried out at the business premises of the assessee company and that there was a warrant of authorization under Section 132(1) of the IT Act, 1961. The Tribunal dismissed the assessee's claim, concluding that the grievance regarding the lack of search was without basis.
2. Treatment of Purchase of Plant and Machinery and Films from Delhi Parties as Fictitious and/or Bogus:
The assessee claimed depreciation on plant and machinery purchased from Delhi-based parties. The AO found several discrepancies, including the absence of transport expenses, octroi payments, and insurance for the machinery. Additionally, blank and brand new bill books of two Delhi-based parties were found at the business premises of the assessee, leading the AO to suspect the genuineness of the transactions. The Tribunal noted that all the machineries were physically found at the business premises of the assessee during the survey and search. It held that the existence of the machineries was established and that the disallowance of depreciation based on suspicion alone could not be justified in a block assessment.
3. Disallowance of Depreciation on New Plant and Machinery:
The AO disallowed the claim for depreciation on the grounds that the purchases were bogus. The Tribunal, however, found that the machineries were physically present and used for business purposes. It concluded that the disallowance of depreciation could not be sustained in a block assessment under Chapter XIV-B of the Act, as there was no evidence found during the search to prove that the depreciation claim was false.
4. Disallowance of Financial Expenses:
The AO disallowed financial expenses related to hire-purchase and lease agreements, suspecting the transactions with Delhi-based parties to be bogus. The Tribunal, however, held that the disallowance of financial expenses could not be justified in a block assessment, as the machineries were physically found and used for business purposes. The Tribunal allowed the assessee's claim for financial expenses.
5. Levy of Interest Under Section 158BFA(1) of the IT Act, 1961:
The Tribunal did not specifically address the issue of the levy of interest under Section 158BFA(1) in detail, but it implied that the issue would not survive in view of the conclusions on the other grounds.
6. Double Additions in Respect of Financial Charges for Specific Assessment Years:
The assessee argued that financial charges for certain assessment years were already disallowed by the assessee in its computation of income. The Tribunal, in view of its conclusions on the other grounds, held that this issue would not survive.
Conclusion:
The Tribunal allowed the appeal by the assessee partly, holding that the disallowance of depreciation and financial expenses could not be sustained in a block assessment under Chapter XIV-B of the Act. It left open the question of whether such disallowances could be made in regular assessments.
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2011 (4) TMI 1355
Issues Involved:
1. Disallowance of product development expenses.
2. Allowability of enhanced depreciation on UPS.
3. Disallowance of EDP charges.
4. Claim of depreciation in relation to software expenses disallowed earlier.
5. Addition on account of unutilized MODVAT credit.
6. Disallowance of interest under section 36(1)(iii) of the Income-tax Act.
7. Disallowance of expenditure under section 14A of the Income-tax Act.
8. Disallowance of leave encashment expenses.
9. Claim of deduction under section 80HHC in respect of DEPB income.
10. Levy of interest under section 234D.
11. Deduction on account of legal and professional fees.
12. Disallowance of contribution to labour welfare fund.
13. Claim of depreciation on motor cars at a higher rate.
14. Depreciation on building.
15. Disallowance of cigarette sampling expenses.
16. Nature of income earned from interest and rent.
17. Exclusion of excise duty from total turnover.
18. Levy of interest under section 234B and 234C.
Issue-wise Detailed Analysis:
1. Disallowance of Product Development Expenses:
The assessee claimed product development expenses for printing cigarette packs. The AO disallowed these expenses as capital in nature. The tribunal, following its decision in the assessee's case for A.Y. 2002-03, allowed the claim as revenue expenditure, noting that the items were consumable stores with a short life.
2. Allowability of Enhanced Depreciation on UPS:
The assessee claimed higher depreciation on UPS, categorizing it as Energy Saving Equipment. The AO rejected this, allowing normal depreciation. The tribunal, following its decision in the assessee's case for A.Y. 2002-03, allowed the higher depreciation, considering UPS as an automatic voltage controller.
3. Disallowance of EDP Charges:
The AO disallowed EDP charges for computer software as capital expenditure, allowing depreciation instead. The tribunal restored the issue to the AO for fresh examination in light of the Special Bench decision in Amway India Enterprises Vs DCIT.
4. Claim of Depreciation in Relation to Software Expenses Disallowed Earlier:
The tribunal restored the issue to the AO for fresh decision, directing that if software expenses are capitalized, the assessee should be allowed depreciation as per rules.
5. Addition on Account of Unutilized MODVAT Credit:
The AO added unutilized MODVAT credit to the closing stock. The tribunal restored the issue to the AO for fresh consideration in light of the Delhi High Court's decision in CIT Vs Mahavir Aluminum Ltd.
6. Disallowance of Interest Under Section 36(1)(iii):
The AO disallowed interest on borrowings, noting interest-free and subsidized loans to a subsidiary. The tribunal restored the matter to the AO for fresh consideration, emphasizing the need to verify the source of funds and commercial expediency.
7. Disallowance of Expenditure Under Section 14A:
The assessee did not press this ground due to the small amount involved, and the tribunal dismissed the grounds as not pressed.
8. Disallowance of Leave Encashment Expenses:
The AO made an estimated disallowance of leave encashment expenses. The tribunal restored the issue to the AO for fresh examination, directing that only previously allowed payments should be disallowed.
9. Claim of Deduction Under Section 80HHC in Respect of DEPB Income:
The AO disallowed the deduction, noting non-fulfillment of conditions in the third proviso to section 80HHC(3). The tribunal, following the Mumbai High Court's decision in CIT Vs Kalpataru Colours & Chemicals, upheld the disallowance.
10. Levy of Interest Under Section 234D:
The tribunal directed the AO to re-compute interest at the time of giving effect to the order.
11. Deduction on Account of Legal and Professional Fees:
The tribunal allowed the claim of legal and professional fees for A.Y. 2003-04, noting that the liability crystallized in that year.
12. Disallowance of Contribution to Labour Welfare Fund:
The AO disallowed the contribution due to late realization. The tribunal, following its decision in the assessee's case for A.Y. 2002-03, allowed the claim, noting timely deposit.
13. Claim of Depreciation on Motor Cars at a Higher Rate:
The AO disallowed higher depreciation on motor cars. The tribunal, following its decision in the assessee's case for A.Y. 2002-03, allowed the higher rate, considering the cars as commercial vehicles.
14. Depreciation on Building:
The AO disallowed depreciation on a building not registered in the assessee's name. The tribunal, following its decision in the assessee's case for A.Y. 2002-03, allowed the claim, noting full possession and use by the assessee.
15. Disallowance of Cigarette Sampling Expenses:
The AO disallowed cigarette sampling expenses. The tribunal, following its decision in the assessee's case for A.Y. 2002-03, allowed the claim, noting that sample distribution is a normal business expense.
16. Nature of Income Earned from Interest and Rent:
The AO treated rental and interest income as income from other sources. The tribunal held rental income as business income but upheld the AO's decision on interest income, noting lack of business nexus.
17. Exclusion of Excise Duty from Total Turnover:
The AO included excise duty in total turnover. The tribunal, following the Supreme Court's decision in CIT Vs Laxmi Machine Works, excluded excise duty from total turnover.
18. Levy of Interest Under Section 234B and 234C:
The tribunal dismissed the cross objections regarding interest levy, directing the AO to recompute interest at the time of giving effect to the order.
Conclusion:
The cross appeals for both years were partly allowed, while the cross objection of the assessee was dismissed. The tribunal provided detailed directions for each issue, ensuring compliance with relevant judicial precedents and statutory provisions.
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2011 (4) TMI 1354
Issues Involved:
1. Exclusion of DFRC income from "Profits of the Business" for deduction under Section 80 HHC.
2. Treatment of "Liabilities no longer required" for deduction under Section 80 HHC.
3. Interest charged and penalty proceedings due to reduction in claim under Section 80 HHC.
4. Adjustment of royalty payment as per Arm's Length Price (ALP) under Section 92CA(3).
Issue-wise Detailed Analysis:
1. Exclusion of DFRC Income from "Profits of the Business" for Deduction under Section 80 HHC:
The appellant contended that the CIT (Appeals) erred in excluding the DFRC income of Rs. 1,25,51,860/- from "Profits of the Business" for calculating deduction under Section 80 HHC. The appellant argued that only "Profits on transfer of DFRC licenses" should be excluded, not the total DFRC income. Alternatively, the appellant suggested excluding only the DFRC licenses transferred during the year and not the total amount, as licenses worth Rs. 36,53,850/- were still on hand and not transferred or utilized. The appellant also argued that only 90% of the DFRC income should be excluded, not 100%.
The CIT (Appeals) confirmed the addition, stating that the appellant's export turnover exceeded Rs. 10 Crores and the appellant did not satisfy the twin conditions required for claiming the benefit on these incentives. The CIT (Appeals) upheld the action of the Assessing Officer (AO) in excluding the DFRC income from the profits of the business.
The Tribunal noted that the appellant conceded that the export turnover exceeded Rs. 10 Crores and did not satisfy the conditions for claiming the benefit. The Tribunal found that the issue was covered against the appellant by the decision of the Hon'ble Bombay High Court in the case of CIT Vs Kalptaru Colours & Chemicals, where it was held that the appellant was not entitled to deduction under Section 80 HHC on the amount received on transfer of DEPB. The Tribunal confirmed the orders of the authorities below in rejecting the claim of the appellant but restored the alternate contention to the file of the AO for reconsideration, directing the AO to verify if any profit was earned on the DFRC license utilized/transferred.
2. Treatment of "Liabilities No Longer Required" for Deduction under Section 80 HHC:
The appellant argued that the amount of Rs. 1,61,067/- under the head "Liabilities no longer required" should not be excluded from the "Profits of the Business" for the purpose of calculating deduction under Section 80 HHC. The appellant contended that this amount was a reversal entry of excise duty on closing stock of finished goods and did not fall under the explanation to Section 80 HHC (4a).
The CIT (Appeals) confirmed the addition, stating that the liability was claimed as a provision for excise duty of finished goods in the previous year and was written back after the amount was paid during the year. The CIT (Appeals) directed the AO to reduce this amount from the profits and work out the deduction under Section 80 HHC.
The Tribunal upheld the findings of the authorities below and dismissed the appellant's claim on this issue.
3. Interest Charged and Penalty Proceedings Due to Reduction in Claim under Section 80 HHC:
The appellant challenged the charging of interest and initiation of penalty proceedings on the enhanced income due to the reduction in the claim under Section 80 HHC, arguing that no interest should be levied as the additions were mainly due to the Taxation Laws Amendment Act, 2005.
The CIT (Appeals) did not accept the appellant's contention, stating that the Board Circular only provides that interest chargeable may be waived if the demand has arisen due to the implementation of the provisions contained in the Taxation Laws Amendment Act, 2005.
The Tribunal found that the issue was covered in favor of the appellant by the decision of the ITAT Ahmedabad in the case of Intas Exports Vs ACIT, where it was held that the short payment of tax could not be attributable to the appellant due to the amendments. The Tribunal directed the AO to recalculate the interest accordingly.
4. Adjustment of Royalty Payment as per Arm's Length Price (ALP) under Section 92CA(3):
The appellant challenged the adjustment of Rs. 24,47,286/- made by the AO relying on the order under Section 92CA(3), wherein the ALP for royalty payment was reduced from Rs. 1,02,49,154/- to Rs. 34,68,448/-. The appellant argued that the payment of royalty was justified and should be allowed in total without any adjustment.
The CIT (Appeals) confirmed the adjustment, following the order of the CIT (A) in the earlier year.
The Tribunal noted that the issue had been decided by the ITAT Ahmedabad in the preceding assessment year 2002-03, where it was held that the ALP computed by the appellant was correct. The Tribunal remanded the matter to the AO for reconsideration in light of the decision of the Tribunal in the preceding assessment year, directing the AO to verify the payment of TDS and allow the claim of expenses accordingly.
Conclusion:
The Tribunal partly allowed the appeals of the appellant, confirming the rejection of the claim for deduction under Section 80 HHC on DFRC income, directing the AO to reconsider the alternate claim regarding the DFRC licenses, and directing the AO to recalculate the interest and reconsider the adjustment of royalty payment as per the ALP. The Tribunal restored the matter to the AO for reconsideration and verification in accordance with the law.
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2011 (4) TMI 1353
Issues Involved:
1. Invocation of provisions u/s 263 of the IT Act.
2. Limitation period for passing the order u/s 263.
3. Merger of original and reassessment orders with CIT(A) orders.
4. Disallowance of expenditure in respect of exempt income u/s 115JB.
Summary:
1. Invocation of Provisions u/s 263 of the IT Act:
The CIT initiated proceedings u/s 263 on the grounds that the Assessing Officer (AO) failed to make necessary disallowance in terms of clause (f) of explanation (1) to section 115JB regarding dividend income claimed exempt u/s 10, resulting in under-assessment of book profit. The CIT held the order passed by the AO u/s 143(3)/147 on 29.11.2006 as erroneous and prejudicial to the interest of the revenue. The CIT directed the AO to pass a fresh assessment order computing book profit u/s 115JB after making necessary adjustments.
2. Limitation Period for Passing the Order u/s 263:
The assessee argued that the order u/s 263 was beyond the limitation period as the issue on which revision was made was not part of the reassessment proceedings. The period of limitation should commence from the original assessment order dated 22.3.2004. The Tribunal, referencing the Supreme Court decision in CIT vs Alagendran Finance Ltd (293 ITR 1), held that the period of limitation begins from the date of the original assessment order when the reassessment does not cover the item sought to be revised.
3. Merger of Original and Reassessment Orders with CIT(A) Orders:
The assessee contended that the original assessment order and the reassessment order merged with the CIT(A) orders dated 30.3.2005 and 17.1.2008, making the order u/s 263 void and bad in law. The Tribunal agreed, citing the doctrine of merger, which applies only to items that were the subject matter of appeal and not to those that were not.
4. Disallowance of Expenditure in Respect of Exempt Income u/s 115JB:
The CIT directed the AO to compute book profit u/s 115JB after making necessary adjustments for disallowance of expenditure related to exempt income. The Tribunal found that the CIT's order was based on presumption and assumption without concrete evidence of expenditure related to exempt income. The Tribunal referenced the decision in Wimco Seedlings Ltd vs DCIT (107 ITD 267) and held that the CIT could not direct the AO to make additions without arriving at a conclusion that there was indeed expenditure related to exempt income.
Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that the order passed by the CIT u/s 263 was barred by limitation and based on assumptions without concrete evidence. The other grounds raised by the assessee were deemed academic and not adjudicated. The order pronounced on 6th April 2011.
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2011 (4) TMI 1352
Issues involved:
The judgment involves issues related to disallowance under section 14A, allocation of motor car expenses, and taxing of refund of municipal tax.
Disallowance under section 14A:
The assessee, a senior partner in legal firms, filed a return of income for assessment year 2005-06, including salary and exempt share of profit. The Assessing Officer disallowed a portion of the expenditure claimed, invoking section 14A of the Income Tax Act, 1961. The Commissioner (Appeals) partly upheld the disallowance. However, the Tribunal held that the expenditure incurred by the assessee on the car did not have a nexus with the share income from the firm. As the firm did not separately reimburse car expenses but included it in remuneration, the proportionate disallowance under section 14A was deemed unnecessary and was thus disallowed.
Allocation of motor car expenses:
The assessee had a practice of disallowing 15% of car expenditure on an ad-hoc basis until the assessment year 2003-04. From the assessment year 2004-05, the assessee claimed expenditure on the car after earmarking certain cars for personal use. The Tribunal noted that the expenditure incurred on the car was wholly and exclusively for professional purposes. As the assessee did not claim expenditure on all family cars and had provided evidence of expenditure and depreciation on specific cars, the ad-hoc disallowance of 15% was deemed unjustified and was deleted.
Taxing of refund of municipal tax:
Regarding the taxing of the refund of municipal tax received during the year, the Tribunal noted that there was no charging section in the Act for such taxation. The Commissioner (Appeals) had accepted an alternate plea by the assessee and granted relief. The Tribunal dismissed this issue as "not pressed" since the relief had already been granted.
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2011 (4) TMI 1351
Issues:
1. Rejection of prayer for cross-examination of witnesses by the competent authority.
Analysis:
The High Court addressed the singular grievance raised in the writ petition, which was the rejection of the prayer for cross-examination of witnesses by the competent authority. The Court noted that this was the second round of litigation, referring to a previous order issued in a related case. The Court highlighted the procedural history, including the filing of affidavits and the granting of adjournments. The petitioner claimed inadequate opportunity for hearing and expressed readiness to file a comprehensive reply before the adjudicating authority. The respondent argued that the petitioner failed to appear despite notice. The Court set aside the order of the adjudicating authority and directed the petitioner to file a show cause reply by a specified date, emphasizing cooperation with the adjudicatory process. The Court stressed the importance of reasons in the adjudicating authority's order and the petitioner's right to appeal any adverse decision.
The petitioner's senior counsel contended that despite previous orders, the benefit of cross-examination had not been granted. The Court opined that the issue of non-examination of witnesses could be raised in the statutory appeal, refraining from commenting on the merits at the present stage. The Court clarified that statements in the show cause would be considered as prima facie facts, allowing the petitioner to respond and present all contentions for the adjudicating authority's consideration. Ultimately, the Court disposed of the writ petition with the provided reasons and directions, leaving the door open for further legal recourse through the statutory appeal process.
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2011 (4) TMI 1350
Issues Involved: Cross-appeals and Cross Objection (CO) arising out of ITA No.2763/Ahd/2007 by Revenue against the order of Commissioner of Income-tax(Appeals)-VIII, Ahmedabad in appeal No. CIT(A)-VIII/AC-4/237/06- 07 dated 05-04-2007 for the assessment year 2004-05.
Issue 1: Disallowance under section 14A of the Act
The assessee contested the disallowance under section 14A of the Act related to interest paid on borrowings made for investments in tax-free securities. The Commissioner of Income Tax (Appeals) confirmed the disallowance. However, both parties agreed that the issue was covered by a previous decision of the ITAT in the assessee's own case for assessment year 2001-02. The Tribunal had set aside the issue to the file of the Assessing Officer, emphasizing the need for judicial consistency between the revenue and taxpayers. Consequently, the issue was remanded to the Assessing Officer for further consideration based on the Tribunal's decision.
Issue 2: Disallowance of administrative expenses under section 14A
The Commissioner of Income Tax (Appeals) confirmed the disallowance of administrative expenses under section 14A of the Act. The Tribunal referred to a previous decision in the assessee's own case for assessment year 2001-02 and directed the issue to be reconsidered by the Assessing Officer in line with the Tribunal's decision, providing the assessee with a reasonable opportunity to be heard.
Issue 3: Disallowance of depreciation on assets of sale and leaseback transaction
The Revenue appealed the deletion of disallowance of depreciation on assets of a sale and leaseback transaction. Both parties acknowledged that the issue was previously decided in favor of the assessee by the Tribunal for the assessment year 2000-01. The Tribunal upheld the decision based on the principle of consistency and dismissed the Revenue's appeal on this ground.
Separate Judgement:
The Cross Objection (CO) filed by the assessee became infructuous due to the decision on the Revenue's appeal related to the disallowance of depreciation on sale and leaseback. Therefore, the CO was dismissed as infructuous. The appeal filed by both the assessee and Revenue was partly allowed for statistical purposes.
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2011 (4) TMI 1349
Issues involved:
The judgment deals with the annulment of assessment completed u/s. 147 r.w.s. 143(3) of the Income Tax Act, 1961 for Assessment Years 2002-03 and 2003-04.
Assessment Year 2002-03:
The Assessing Officer framed the assessment u/s. 143(3) originally, considering the facts and circumstances, including the issue of applicability of explanation to section 73 of the Act. The assessee disclosed all material facts necessary for assessment, including details of share trading business and purchases of shares. The assessee valued closing stock of shares at lower of cost or market value due to market value fall, resulting in a loss. The proviso to section 147 states that if the original assessment is u/s. 143(3), it cannot be reopened after four years unless there is a failure to disclose all material facts. As there was no such failure, the CIT(A) rightly held the reopening as void. The Tribunal upheld this decision, dismissing the revenue's appeals for both assessment years.
Separate Judgment by CIT(A):
The CIT(A) quashed the reassessment notice beyond the four-year time limit, as the assessee had disclosed all material facts during the original assessment. The reasons supplied did not indicate any failure on the assessee's part to disclose necessary facts. The CIT(A) held that the reassessment suffered from a change of opinion without fresh material. Referring to a decision of the Delhi High Court, it was concluded that the assessment could not be reopened beyond four years if full disclosure was made. Consequently, the order of assessment under section 147/143(3) was annulled.
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2011 (4) TMI 1348
Assessment made u/s 153C r.w.s. 153A - Validity of Order Passed u/s 153C rws 143(3) - Unfettered Powers of AO - Incriminating Documents found pertaining to the third party - Documents were seized from a employee looking after the accounts of assessee's trust - AO after satisfying himself about the invocations of provisions of section 153C, issued a notice
HELD THAT:- In SINHGAD TECHNICAL EDUCATION SOCIETY VERSUS ACIT, CENTRAL CIRCLE 2 (2) , PUNE [2011 (4) TMI 871 - ITAT, PUNE], it was held "AO shall not possess unfettered powers of summarily opining or reopening the concluded assessments of all the six assessment years in respect of the third party mentioned in section 153C without having in possession the AY-specific incriminating documents/other listed items. Settled assessments must not be disturbed merely based on the dumb documents gathered and seized by the revenue."
It is the decision of this bench of the Tribunal, taken relying on the decision of the Tribunal ie in the case of LMJ INTERNATIONAL LIMITED. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX. [2007 (12) TMI 237 - ITAT CALCUTTA-E] that where nothing incriminating is found in the course of search relating to any assessment year, the assessments for such years cannot be distributed. Thus, the assessments made by the AO u/s 153C of the Act without the existence of AY-specific incriminating documents are invalid.
In present case, based on the existence of the seized documents, these six AYs can categorized into two categories:
AYs without seizure of any documents - In the present case regarding AYs 2000-01 to 2003-04 & 2005-06, admittedly, there is no seizure of the documents, thus issuance of notices u/s 153C, is invalid.
AY with the seizure of some documents - For AY 2004-05, admittedly, there is some seizure of the documents. We are convinced that the said ledger is an accounted one. Mere appearance of names does not mean anything as section 153C is intended for taxing the undisclosed income of the third party based on the material/others seized during the search action. The documents, the ledger in the instant case relevant for the AY 2004-05, with no financial implications can neither be considered incriminating nor be considered capable of springing satisfaction to any AO that there is scope of undisclosed income in respect of the third party assasable u/s 153C of the Act.
Accordingly, the legal grounds raised by assessee relating to the validity of the notice u/s 153C are allowed in favour of the assessee in respect of all the AYs under consideration.
Review of Power of CIT u/s 263 - Validity of Order passed by AO u/s 263 rws 153C rws 143(3) - HELD THAT:- We have upheld the invalidity of the notices issued u/s 153C and in effect, we hold that the orders passed u/s 153C r w s 143(3) by the AO for the AYs under consideration are held to be null and void. Consequently, the assessment orders reviewed by the CIT u/s 263 are null and void and therefore, the review order of the CIT also becomes null and void.
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2011 (4) TMI 1347
Issues Involved:
The only issue raised in this appeal is the deletion of penalty u/s 271(1)(c) of the IT Act amounting to Rs. 21,08,228/- levied by the AO for furnishing inaccurate particulars of income.
Issue 1: Deletion of Penalty u/s 271(1)(c) of the IT Act
The AO imposed a penalty of Rs. 21,08,228/- on the assessee for furnishing inaccurate particulars of income amounting to Rs. 59,05,401/- for A.Yr. 2004-05. The CIT(A) deleted the penalty citing that the appellant had furnished all necessary particulars and the concealment of income was not deliberate. The CIT(A) observed that the penalty could not be imposed solely based on diverse views on certain payments made during different financial years. The ITAT confirmed the CIT(A)'s decision to delete the penalty, stating that the assessee had adopted a plausible view based on divergent opinions and claimed exemption under section 43B of the IT Act in good faith. Therefore, the provision of section 271(1)(c) was deemed not applicable, and the appeal of the Revenue was dismissed.
Separate Judgement:
No separate judgment was delivered by the judges in this case.
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2011 (4) TMI 1346
Issues involved: Addition u/s 41(1) of the Income-tax Act on account of cessation of liability, charge of interest u/s 234C.
Addition u/s 41(1) - Cessation of liability:
The AO added Rs. 26,20,274/- to the total income of the assessee under section 41(1) due to the outstanding credit balance in the name of M/s. Matulya Mills Ltd. since financial year 2000-01. The assessee contended that the amount was received for plumbing work and not a trading activity, hence no addition should be made u/s 41(1). However, the AO observed that the amount was received in financial year 1999-2000, and Matulya Mills Ltd. had closed down business in 2002. CIT(A) held that the amount was a trading liability, as work had been done and no evidence was produced that the company was claiming the money back. The tribunal noted that the burden of proving the liability had ceased to exist was on the revenue, and since no material was presented to show the claim was forgotten, the addition made in the current year was not justified. The tribunal also considered the unilateral write-back of the liability by the assessee in the year 2010-11, and thus deleted the addition.
Charge of interest u/s 234C:
The Learned AR admitted that the charge of interest was only consequential, and the AO would recompute the interest at the time of giving effect to the tribunal's order.
In conclusion, the tribunal allowed the appeal of the assessee, setting aside the addition made u/s 41(1) and directing the AO to recompute the interest charge u/s 234C.
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2011 (4) TMI 1345
Issues Involved:
1. Addition u/s 2(24)(x) r.w. Explanation to sec. 36(1)(va) for employees' contribution to PF.
2. Disallowance u/s 43B r.w. Explanation to sec. 36(1)(va) for employer's contribution to PF.
3. Depreciation rate on Dumpers.
4. Disallowance of penalty.
5. Deduction u/s 80IA(4)(i).
6. Prior period expenses.
7. General grounds.
Summary:
1. Addition u/s 2(24)(x) r.w. Explanation to sec. 36(1)(va) for employees' contribution to PF:
The assessee contested the addition of Rs. 18,97,330/- made by the Assessing Officer for employees' contribution to PF not paid before the due date but paid before filing the return. The Tribunal, referencing the Supreme Court decision in CIT vs Alom Extrusions Ltd and other relevant cases, held that the contribution paid before the due date of filing the return cannot be disallowed. Thus, the order of the CIT(A) was set aside, and the ground raised by the assessee was allowed.
2. Disallowance u/s 43B r.w. Explanation to sec. 36(1)(va) for employer's contribution to PF:
The assessee challenged the disallowance of Rs. 23,05,077/- for employer's contribution to PF paid after the grace period but before the due date of filing the return. The Tribunal, following consistent views of coordinate Benches, held that such contributions paid before the due date of filing the return must be allowed as a deduction. The order of the CIT(A) was set aside, and the ground raised by the assessee was allowed.
3. Depreciation rate on Dumpers:
The assessee claimed higher depreciation rates on Dumpers, which the Assessing Officer restricted to 25%, treating them as plant & machinery. The Tribunal, referencing its previous decision in the assessee's own case and distinguishing it from the Madras High Court decision in CIT vs Bajrang Enterprises, held that Dumpers registered as Heavy Goods Vehicles qualify for higher depreciation rates applicable to commercial vehicles. The order of the CIT(A) was set aside, and the ground raised by the assessee was allowed.
4. Disallowance of penalty:
The assessee did not press this ground due to the smallness of the amount (Rs. 47,235/-). The ground was dismissed as not pressed.
5. Deduction u/s 80IA(4)(i):
The assessee acknowledged that due to retrospective amendment, contractors are not eligible for deduction u/s 80IA. Consequently, this ground was dismissed.
6. Prior period expenses:
The assessee sought allowance of prior period expenses disallowed in subsequent assessment years. The Tribunal admitted the additional ground and directed the Assessing Officer to allow the expenditure in the year it was incurred after due verification. The additional ground was allowed.
7. General grounds:
Grounds of appeal that were general in nature were dismissed.
Conclusion:
All three appeals by the assessee were partly allowed, with specific grounds being allowed or dismissed based on the merits of each issue. The order was pronounced on the 27th day of April 2011.
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2011 (4) TMI 1344
Issues Involved:
1. Disallowance of provision for trade guarantees.
2. Disallowance of bad debts.
3. Disallowance under Section 14A of the Income Tax Act.
4. Disallowance of set off of long-term capital loss.
5. Deduction of actual expenditure incurred in respect of trade guarantee performance.
6. Disallowance of liquidated damages.
7. Deletion of addition on account of interest under Section 14A and Rule 8D.
Issue-wise Detailed Analysis:
1. Disallowance of Provision for Trade Guarantees:
The assessee challenged the CIT(A)'s order confirming the Assessing Officer's (AO) disallowance of Rs. 1,41,92,093/- for trade guarantees. The AO noted the provision was inconsistent and unscientific, deeming it a contingent liability. The CIT(A) upheld this but allowed actual expenditure deduction. The Tribunal found the issue covered in favor of the assessee by previous Tribunal decisions and the Supreme Court's ruling in Rotork Controls India P Ltd vs CIT, allowing the assessee's claim.
2. Disallowance of Bad Debts:
The AO disallowed Rs. 74,01,262/- claimed as bad debts, stating the assessee did not justify the claim. The CIT(A) allowed most of the claim but upheld Rs. 1,32,009/- disallowance, citing non-compliance with Section 36(2). The Tribunal agreed the amount could not be allowed as bad debt but remanded the issue to the AO to verify if it could be allowed as a trading loss under Section 37(1), provided the assessee proves service tax payment during the year.
3. Disallowance Under Section 14A:
The AO disallowed Rs. 1,18,98,725/- under Section 14A read with Rule 8D, attributing interest and administrative expenses to exempt income. The CIT(A) upheld only the administrative expenses disallowance. The Tribunal, referencing the jurisdictional High Court's decision in Godrej & Boyce Mfg P Ltd, noted Rule 8D was not applicable for the assessment year 2005-06 and remanded the issue to the AO for re-computation.
4. Disallowance of Set Off of Long-Term Capital Loss:
The AO disallowed the set off of Rs. 98,13,766/- brought forward long-term capital loss against short-term capital gains, citing amended Section 74. The CIT(A) upheld this. The Tribunal acknowledged the differing facts from the previous year and remanded the issue to the AO for fresh adjudication in light of relevant High Court decisions.
5. Deduction of Actual Expenditure Incurred in Respect of Trade Guarantee Performance:
The revenue appealed against the CIT(A)'s direction to allow deduction of actual expenditure for trade guarantees. The Tribunal, referencing its earlier decisions, directed the AO to verify and withdraw any subsequent year allowances based on actual payments.
6. Disallowance of Liquidated Damages:
The AO disallowed Rs. 38,71,816/- claimed as liquidated damages due to lack of evidence. The CIT(A) allowed the claim based on past consistent allowances. The Tribunal found the CIT(A)'s decision unsustainable due to lack of evidence and remanded the issue to the AO for fresh adjudication, directing the assessee to substantiate the claim with evidence.
7. Deletion of Addition on Account of Interest Under Section 14A and Rule 8D:
The revenue contested the CIT(A)'s deletion of Rs. 80,30,403/- interest disallowance under Section 14A and Rule 8D. The Tribunal, correlating this with the assessee's appeal, remanded the issue to the AO for fresh adjudication in light of the Godrej & Boyce Mfg P Ltd decision, ensuring due opportunity for the assessee.
Conclusion:
The appeals of both the assessee and the revenue were partly allowed for statistical purposes, with several issues remanded to the AO for fresh adjudication and verification based on provided guidelines and relevant judicial precedents.
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2011 (4) TMI 1343
Unaccounted expenditure - receipt of ‘on money’ - In the present case assessee is dealing in several immovable property i.e. flats and shops which he has constructed. A single flat is a capital asset for the purchaser but for the assessee all the flats together constitute stock-in-trade. HELD THAT:- it is undisputed position that out of this on money assessee has incurred various expenditure/investment. Therefore, ‘on money’ as such and as a whole cannot be taxed over and above the income accruing on the basis of entries recorded in the books of account. on the basis of decision held in E.D. Sassoon & Co.Ltd. & Ors. vs. CIT [1954 (5) TMI 2 - SUPREME COURT] we hold that advance money received either by way of cheque or by way of cash will partake the character of taxable income when registered sale deed of the flats is executed in subsequent years. As a result, the sum of ₹ 10 crores will not taxable in Asst. Year 2008-09. The appeal of assessee is accordingly allowed.
Regarding interest bearing fund - If assessee is able to show the nexus that interest bearing funds or part thereof was given as advance on which assessee has earned interest, to that extent netting can be allowed. If assessee is not able to establish such nexus of interest bearing funds and advances on which assessee has earned interest netting will not be allowed and interest income to that extent would be taxed separately. This ground of assessee is, therefore, allowed but for statistical purposes.
Regarding interest free advances - In our considered view this issue is also required to be examined afresh from the point of view of nexus. AO has to show that interest bearing funds were advanced as interest free to these partners. If it is so then rather taxing interest income, part of interest expenditure can be disallowed. But where assessee has sufficient personal capital or interest free funds then no such addition can be made. With these observations we restore this issue also to the file of AO. As a result, appeal filed by the assessee is partly allowed and partly allowed for statistical purposes.
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2011 (4) TMI 1342
Issues Involved: Appeal and Cross Objection filed by Revenue and assessee against CIT(Appeals) order for assessment year 2005-06.
Revenue's Appeal:
The Revenue contested the eligibility of the assessee for claiming deduction u/s 80-IA of the Income-tax Act, 1961. The dispute arose from the rejection of the assessee's claim by the Assessing Officer due to unabsorbed depreciation from earlier years. The CIT(Appeals) ruled in favor of the assessee, citing the option to claim deduction for ten consecutive years from the commencement of power generation. The Revenue challenged this decision, arguing for the set off of notional depreciation before calculating relief u/s 80-IA. However, the Tribunal upheld the CIT(Appeals) decision based on the precedent set by the jurisdictional High Court, stating that notional unabsorbed depreciation cannot be carried forward for the initial assessment year under Section 80-IA.
Cross Objection by Assessee:
The Cross Objection raised by the assessee concerned the allocation of common expenses to the Pondicherry unit for the purpose of deduction u/s 80-IA. The Assessing Officer allocated certain expenses to the Pondicherry unit, which the assessee disputed, claiming that similar expenses were incurred even before the unit's commencement. The CIT(Appeals) upheld the AO's allocation, stating that there should be no incremental bifurcation of expenses. The assessee argued that the Head Office expenses for the old and new units could not be proportionally distributed, but the Tribunal found the AO's allocation based on total turnover to be reasonable. Consequently, the Cross Objection was dismissed.
In conclusion, both the Revenue's appeal and the Cross Objection of the assessee were dismissed by the Tribunal, affirming the decisions of the CIT(Appeals) on both issues.
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2011 (4) TMI 1341
Issues involved:
The judgment deals with the issue of penalty under section 271(1)(c) of the Income-tax Act arising from the treatment of trading losses as speculation losses under Explanation to section 73.
Summary:
Issue 1: Penalty u/s 271(1)(c) of the Act
The appellant, a limited company engaged in trading software and shares, faced penalty proceedings u/s 271(1)(c) due to the treatment of trading losses as speculation losses. The Assessing Officer (AO) levied a penalty, contending that the loss was deemed speculative. However, the CIT (Appeals) cancelled the penalty citing precedents and the appellant's disclosure of all relevant facts. The High Court decision in CIT vs. Auric Investment & Securities Ltd. was referenced to support the cancellation, emphasizing that the mere treatment of business loss as speculation loss does not imply concealment of income. The CIT (Appeals) emphasized that the appellant had not willfully concealed any particulars, and the penalty was deleted based on the disclosure of material facts and absence of mens rea.
Issue 2: Assessment of Penalty
During the hearing, the Departmental Representative (D.R) argued for upholding the penalty, but the ITAT Delhi concurred with the CIT (Appeals) decision to cancel the penalty. The ITAT noted that the appellant had provided all necessary details, and the AO's treatment of trading loss as speculation loss was based on the information disclosed. The ITAT supported the CIT (Appeals) decision based on the appellant's full disclosure of income particulars and the absence of inaccurate information. Citing the Delhi High Court case, it was concluded that since the appellant had not concealed any particulars and had provided accurate details, the penalty under section 271(1)(c) was rightly cancelled.
In conclusion, the ITAT upheld the CIT (Appeals) decision to cancel the penalty under section 271(1)(c) for the assessment year 1997-98, emphasizing the appellant's disclosure of all relevant facts and the absence of willful concealment or inaccurate particulars.
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2011 (4) TMI 1340
Issues involved:
The issue involves the classification of payments made by an assessee company to a subcontractor for transportation of cargo containers under the Income Tax Act.
Facts:
The assessee company paid amounts to a subcontractor during the financial year 2006-07, and tax was deducted at source. The Assessing Officer treated the payment as hire charges and held the assessee liable for not deducting tax at source under sec. 194-I. The CIT(A) held that the payments fall under sec. 194C for sub-contract work and that the tax had been correctly deducted.
Arguments before CIT(A):
The assessee argued that the payments were for transportation of containers, not hire charges, and that tax had been correctly deducted. The CIT(A) agreed, citing sec. 194C and the absence of a written contract as not essential. The CIT(A) also considered the alternate ground raised by the assessee regarding non-recovery of tax if paid by the deductee.
Decision:
The CIT(A) ruled in favor of the assessee, stating that the payments were for sub-contract work under sec. 194C and that tax had been correctly deducted. The CIT(A) also upheld the alternate ground regarding non-recovery of tax from the deductor if paid by the deductee. The revenue's appeal was dismissed as the grounds raised became academic due to the non-challenge of the CIT(A)'s decision on the alternate ground.
Conclusion:
The Appellate Tribunal upheld the CIT(A)'s decision, emphasizing that the payments were for sub-contract work under sec. 194C and that tax had been correctly deducted. The revenue's appeal was dismissed, and the decision was pronounced on April 6, 2011.
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2011 (4) TMI 1339
Assessment made u/s 153C r.w.s. 153A - Validity of Order Passed u/s 153C rws 143(3) - Unfettered Powers of AO - Incriminating Documents found pertaining to the third party - Documents were seized from a employee looking after the accounts of assessee's trust - AO after satisfying himself about the invocations of provisions of section 153C, issued a notice
HELD THAT:- In SINHGAD TECHNICAL EDUCATION SOCIETY VERSUS ACIT, CENTRAL CIRCLE 2 (2) , PUNE [2011 (4) TMI 871 - ITAT, PUNE], it was held "AO shall not possess unfettered powers of summarily opining or reopening the concluded assessments of all the six assessment years in respect of the third party mentioned in section 153C without having in possession the AY-specific incriminating documents/other listed items. Settled assessments must not be disturbed merely based on the dumb documents gathered and seized by the revenue."
It is the decision of this bench of the Tribunal, taken relying on the decision of the Tribunal ie in the case of LMJ INTERNATIONAL LIMITED. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX. [2007 (12) TMI 237 - ITAT CALCUTTA-E] that where nothing incriminating is found in the course of search relating to any assessment year, the assessments for such years cannot be distributed. Thus, the assessments made by the AO u/s 153C of the Act without the existence of AY-specific incriminating documents are invalid.
In present case, based on the existence of the seized documents, these six AYs can categorized into two categories:
AYs without seizure of any documents - In the present case regarding AYs 2000-01 to 2003-04 & 2005-06, admittedly, there is no seizure of the documents, thus issuance of notices u/s 153C, is invalid.
AY with the seizure of some documents - For AY 2004-05, admittedly, there is some seizure of the documents. We are convinced that the said ledger is an accounted one. Mere appearance of names does not mean anything as section 153C is intended for taxing the undisclosed income of the third party based on the material/others seized during the search action. The documents, the ledger in the instant case relevant for the AY 2004-05, with no financial implications can neither be considered incriminating nor be considered capable of springing satisfaction to any AO that there is scope of undisclosed income in respect of the third party assasable u/s 153C.
Accordingly, the legal grounds raised by assessee relating to the validity of the notice u/s 153C are allowed in favour of the assessee in respect of all the AYs under consideration - Decision in favour of Assessee
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2011 (4) TMI 1338
Issues involved:
The judgment involves the issue of assessing long-term capital gain as short-term capital gain on the sale of shares of a demerged company, and the validity of a re-revised return filed beyond the prescribed time limit.
Assessment of long-term capital gain:
The assessee, an individual, initially declared total income but later filed a re-revised return claiming long-term capital gain instead of short-term capital gain on the sale of shares of a demerged company. The Assessing Officer (A.O.) rejected the re-revised return as non-est due to being filed beyond the time limit, relying on the decision in Goetze (India) Ltd. v. CIT. The Commissioner of Income-tax (Appeals) (CIT(A)) upheld the A.O.'s decision. The assessee appealed, citing various legal precedents to support the claim of long-term capital gain. The Tribunal found that the A.O. had not examined the issue on merits and remanded the matter back to the A.O. for fresh consideration, emphasizing the right of the assessee to claim deductions and refunds as per law.
Legal precedents and Tribunal's decision:
The Tribunal referred to legal precedents such as Mahindra Mills v. ACIT and CIT v. Sun Engineering Works Pvt. Ltd. to support the assessee's claim. It highlighted the Tribunal's authority to entertain additional grounds for a just decision, as seen in CIT v. Jai Parabolic Springs Ltd. The Tribunal emphasized that if an amount is legally deductible, the Tribunal can accept such a plea, as clarified in Nathpa Jhakri Joint Venture v. ACIT. Additionally, the Tribunal noted a CBDT circular emphasizing the assessee's responsibility to claim refunds and reliefs. The Tribunal's decision was based on the principle that the correct assessment of tax liability is paramount, allowing the assessee to raise valid legal claims even during appellate proceedings.
Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes, remanding the matter back to the A.O. for a fresh decision in accordance with law. The Tribunal stressed the importance of assessing tax liability correctly and providing the assessee with a fair opportunity to be heard. The judgment highlighted the assessee's right to claim deductions and refunds as per legal provisions, ensuring a just and lawful assessment process.
Separate Judgment:
No separate judgment was delivered by the judges in this case.
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2011 (4) TMI 1337
Issues involved:
1. Challenge to deletion of addition of notional interest on interest free deposit u/s 24
2. Challenge to deletion of addition on account of low gross profit
Issue 1:
The revenue challenged the deletion of addition of notional interest on interest free deposit u/s 24 by the Learned CIT(A). The assessee, an individual, declared total income for the assessment year 2003-04. The Assessing Officer added notional interest on an interest free deposit to the income from house property. The CIT(A) deleted this addition based on rent received being more than the Municipal ratable value, citing the decision in CIT vs. J.K. Investors (Bom) Ltd. The Tribunal upheld the CIT(A)'s decision based on similar precedents and dismissed the revenue's appeal.
Issue 2:
The revenue challenged the deletion of an addition made by the Assessing Officer on account of low gross profit. The assessee, engaged in trading Seasonal Apparels, showed a lower gross profit rate for the year under consideration. The Assessing Officer applied a higher G.P. rate resulting in a trading addition. The CIT(A) deleted this addition after finding the fall in G.P. rate satisfactorily explained and no material defects in the books of account. The Tribunal upheld the CIT(A)'s decision, emphasizing the requirement for specific and material defects in the books of account to reject the shown results.
In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, dismissing the revenue's appeal.
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