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Showing 241 to 260 of 639 Records
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2010 (6) TMI 665
Issues:
1. Appeal against Company Court order in a tender for disposal of assets of a company in liquidation.
2. Acceptance of belated offer after sealed tenders have been opened.
3. Discretion of Company Court to accept higher offers in tender proceedings.
Issue 1: Appeal against Company Court order in a tender for disposal of assets of a company in liquidation
In this case, the appellant participated in a tender for the disposal of assets of a company in liquidation. The Official Liquidator received 12 sealed tenders, with the highest being Rs. 1,62,88,000. The appellant, however, filed a company application stating that he could not properly inspect the properties, leading to his offer of Rs. 1,58,51,585. Despite this, he made a belated offer of Rs. 1,73,00,000. The Company Court observed that accepting such belated offers would prejudice other participants and disrupt the sanctity of the sealed tender process. The Court emphasized the importance of upholding the integrity of the tender proceedings conducted by the Official Liquidator.
Issue 2: Acceptance of belated offer after sealed tenders have been opened
The appellant relied on decisions of the Supreme Court to argue that the Company Court had discretion to accept higher offers even after the sealed tenders were opened. However, the Court distinguished this case from those precedents, noting that there were no justifiable grounds to deviate from the completed tender process. It was highlighted that allowing the appellant to make a higher offer after the formalities of the tender had been completed and tenders opened would undermine the fairness of the process. The Court also pointed out that the increase in the appellant's offer compared to the highest bid was marginal, further supporting the dismissal of the belated offer.
Issue 3: Discretion of Company Court to accept higher offers in tender proceedings
The Court concluded that the Company Judge's decision did not warrant interference. It was determined that the circumstances did not justify accepting the appellant's belated offer, as it would disrupt the established tender process and potentially lead to endless challenges from other participants. The Court upheld the sanctity of the sealed tender process and affirmed the importance of adhering to the rules and procedures set forth by the Official Liquidator. Consequently, the appeal was dismissed for lacking merit.
This comprehensive analysis of the judgment highlights the key issues addressed by the Court and provides a detailed overview of the reasoning behind the decision to dismiss the appeal.
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2010 (6) TMI 664
Winding up petition - whether the debt is time barred?
Held that:- It is, thus, clear that for enabling a person to institute a suit for recovery of a time barred debt on the basis of the provisions of section 25(3) of the Indian Contract Act, there has to be express promise to pay and not implied promise, as has been held by the learned single judge.
In any case the learned single judge could not have made an order for payment of ₹ 9,00,000 in the company petition. The most that could have been done by the learned single judge was to issue a direction for deposit of the amount. In our opinion, also considering the fact that till today the original petitioner has not filed a civil suit for recovery of the amount, which according to the original petitioner was due to him, the appropriate order would be to set aside the order passed by the learned single judge.Therefore, the appeal is allowed. The order passed by the learned single judge impugned in the appeal is set aside
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2010 (6) TMI 663
Issues Involved:
1. Entitlement to Post Maturity Interest (PMI) at 10%.
2. Requirement of succession certificate.
3. Entitlement for repayment despite non-surrender of fixed deposit receipts within 30 days prior to maturity.
4. Binding nature of the order dated May 18, 2009.
5. Correctness of the calculation made by the applicants.
Issue-wise Detailed Analysis:
1. Entitlement to PMI at 10%:
The Company Law Board consistently mandated that PMI be paid at 10%. The company's contention against this was repeatedly refused. Thus, in the execution proceedings, the Bench upheld the order dated February 12, 2009, and June 30, 2008, affirming that PMI at 10% must be paid, rendering the company's objections invalid.
2. Requirement of Succession Certificate:
The High Court had previously dismissed the necessity of a succession certificate for the payment of deposits and accrued interest. The company's attempt to raise this issue in execution proceedings was deemed meritless. The proceedings aimed at enforcing an order already confirmed by the High Court, thus the Bench could not reassess the merits of entitlement.
3. Entitlement for Repayment Despite Non-Surrender of Fixed Deposit Receipts:
The issue of whether the applicants are entitled to repayment despite not surrendering fixed deposit receipts within 30 days prior to maturity was considered a matter for the main case, not for execution proceedings. Consequently, the company's contention was invalidated.
4. Binding Nature of the Order Dated May 18, 2009:
The order reducing PMI from 10% to 7% was passed without involving the applicants and did not specify its applicability to them. Therefore, the Bench ruled that this order did not bind the applicants and did not affect the finality of the February 12, 2009, order. The Bench lacked the power to review the February 12, 2009, order, thus maintaining the 10% PMI directive.
5. Correctness of the Calculation Made by the Applicants:
The company did not contest the amount of Rs. 48,12,418.52, except for the interest rate. The Bench found the applicants' calculation correct, noting that the company had already paid Rs. 24,96,956. The remaining balance of Rs. 23,15,462.52 plus interest was due to the applicants. The applicants' acceptance of partial payment under protest entitled them to the balance.
Reliefs and Orders:
The Bench appointed a Special Officer to take possession of and sell the company's tea stocks to satisfy the balance due. Other reliefs, such as an injunction on the company's assets and the appointment of a special officer for rent collection, were not granted due to insufficient disclosure of property values and rents by the applicants. The application was partly allowed, with liberty to the applicants to seek further relief if the sale proceeds of the tea stocks were insufficient to cover the outstanding balance and costs.
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2010 (6) TMI 662
Jurisdictional issue pertaining to the Committee – Commissioner of Central Excise, Dibrugarh, had by his order dated 23-4-2008 dropped all the charges brought against M/s. Kothari Products Ltdand consequentially allowed its products to be cleared from the factory - Members of the Committee on a consideration of the materials on record, adjudged the said decision of the Commissioner and directed him (Commissioner of Central Excise, Dibrugarh) to apply to the Tribunal for a correct determination of the points as enumerated in its order dated 24-7-2008 – Respondents preferred against the decision dated 24-7-2008 of the Committee, questioned its (Committee) jurisdiction and authority contending that the composition thereof was not in accordance with the mandatory requirements of Section 35(1B) of the Act and the relevant Rules framed thereunder – According to them, two members thereof namely Shri Rajendra Prasad who acted as Chief Commissioner of Central Excise, Shillong, and Shri Hrishikesh Sharan who did so as Chief Commissioner of Central Excise, Kolkata, had no locus standi to discharge their said roles as the necessary notification under Rule 3(2) of the Central Excise Rules, 2002 to that effect which is obligatory, had not been issued.
Held that:- By the Notification No. 23/2005-C.E. (N.T.), dated 13-5-2005 issued by the Joint Secretary to the Government of India, Finance Department, the appointment of Chief Commissioners of Customs to act as the Chief Commissioners of Central Excise for the purpose of constitution of committees under Section 35B(1B) of the Act was notified. The constitution of such committees was similarly notified by the Notification No. 24/2005-C.E. (N.T.) of the even date. At Sl. No. 21 of the said notification the composition of the committee for the area of jurisdiction (Dibrugarh/Shillong) has been indicated as hereunder :1.Chief Commissioner of Central Excise, Shillong. 2.Chief Commissioner of Central Excise, Kolkata.
Board is empowered to specify the jurisdiction of a Chief Commissioner of Central Excise, Commissioner of Central Excise or Commissioner of Central Excise (Appeals), it has to essentially do so by means of a notification. Rule 3(2) only enables the Board to confer the jurisdiction of the Officers mentioned therein if it so chooses but once it decides to do so it has to cause the same to be effected only by a notification and not otherwise.
Date on which the Committee involved herein had rendered its decision i.e. 24-7-2008, there was no notification conferring jurisdiction on Shri Rajendra Prasad to function as the Chief Commissioner of Central Excise, Shillong. Moreover, there was no regular incumbent in the office of the Central Excise, Shillong Zone. The Office Order No. 146/2008 dated 23-6-2008 whereby the Chief Commissioner of Customs, Kolkata, had been assigned the additional charge of the Chief Commissioner of Central Excise, Shillong, for the limited purpose of reviewing the orders passed by the Commissioners of Dibrugarh and Shillong until further orders not only on the face of it was a make shift arrangement, but also not at all in conformity with the peremptory prescription of Rule 3(2) of the Rules. As by the said order the Chief Commissioner Customs was being endowed with the jurisdiction to act as the Chief Commissioner of Central Excise, the same could not have been effected without a notification ordained by Rule 3(2). This coupled with the admitted absence of regular incumbent in the office of the Chief Commissioner of Central Excise, Shillong,has rendered the proceedings before the Committee comprised of Shri Rajendra Prasad and Shri Hrishikesh Sharan a nulity.
Alike the Tribunal this Court has not expressed any opinion on the merits of the case and this determination is limited to the jurisdictional issue pertaining to the Committee - On a totality of the consideration, no merit in the appeal, accordingly dismissed.
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2010 (6) TMI 661
Deduction Tax (TDS) u/s 194LA - The petitioner is aggrieved of the deduction of 10 per cent of the compensation deposited by the requisitioning authority in the Land Acquisition Court towards the income-tax, which according to the petitioner is not permissible to be deducted, the land in question being an ‘agricultural land’ and is clearly excluded from the provisions of deduction of tax under s. 194LA of the IT Act. – held that:- , it is for the petitioner to approach the IT authorities by filing necessary proceedings and to get necessary certificates with regard to the nature and character of the land concerned and to have it produced before the concerned authority. Once the petitioner produces the certificate as to the nature of the property showing it as an agricultural land as contended, the Sub Court shall consider the same and appropriate orders shall be passed on Ext. P2 cheque application. If the amount has already been parted with and deposited with the IT Department, it will be open to the petitioner to submit such certificate before the IT authority, to get necessary refund.
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2010 (6) TMI 660
Condonation of delay - plea for setting aside the sale through auction - Held that:- The delay in filing the first appeal before District Judge, Ludhiana, for setting aside the sale has not been so huge warranting its dismissal on such hypertechnical ground. In fact, appellant had taken all possible steps to prosecute the matter within time. Had there been an intimation sent to the appellant by its erstwhile Advocate, and if even thereafter appellant had acted callously then the negligent attitude of the appellant would have been understood but that was not the case here.
While considering the application for condonation of delay no straight jacket formula is prescribed to come to the conclusion if sufficient and good grounds have been made out or not. Each case has to be weighed from its facts and the circumstances in which the party acts and behaves. From the conduct behaviour and attitude of the appellant it cannot be said that it had been absolutely callous and negligent in prosecuting the matter.
After all, justice can be done only when the matter is fought on merits and in accordance with law rather than to dispose it of on such technicalities and that too at the threshold. Both sides had tried to argue the matter on merits but we refrain ourselves from touching the merits of the matter as that can best be done by the Executing Court which had denied an opportunity to the appellant to lead evidence and to prove the issues so formulated - ends of justice would be met by setting aside the impugned orders and matter is remitted to the Executing Court to consider and dispose of appellant's objections filed under Order 21 Rule 90 of CPC on merits and in accordance with law as appellant would not have gained in any manner whatsoever, by not filing the appeal within the period of limitation.
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2010 (6) TMI 659
Cenvat credit - capital goods were installed and were being used for manufacture of excisable goods – subsequently final products manufactured by them namely, polyester and acrylic yarn got exempted - respondent thereafter sold the machinery on which they had taken the above credit on 1-10-2004 - Show cause notice dated 18-12-2006 was issued alleging that the party failed to reverse the credit taken by them on the capital goods – Held that:- Goods removed after use cannot be treated as cleared “as such” - demand is time barred - appeal by the Department is rejected.
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2010 (6) TMI 658
Rejection of books of account - non-verifying of few purchases - HELD THAT:- We find that assessee has maintained regular books of account and they were audited u/s 44AB also. AO drew an adverse inference against the assessee and rejected the books of account. In our considered view only on account of non-verifying of few purchases the rejection of books of account was not justified as there was no other defect found by the AO in maintaining books of account.
It is also not the case of the Department that there is any material outside the books which indicates that these purchases are bogus. Payments were made through proper banking channel. There is a possibility that sometimes after a gap of 1/2 years the party may not be available at the address given or that they did not bother to reply the summons issued by the Department. It is also a matter of fact that sales made against those purchases have been accepted by the AO himself. Therefore, in our considered view rejection of books of account were not justified. Accordingly, we allow this ground of the assessee.
Disturbing trading result - addition in GP rate - marginal decline in the GP rate as compared to earlier year - HELD THAT:- As seen that there is a marginal decline in the GP rate as compared to earlier year as in earlier year the GP rate shown by the assessee was 19.93 per cent and in the year under consideration the GP rate was 17.89 per cent. This is a small variation in the GP rate.
In our considered view, due to a small variation of GP rate, disturbance in the trading result was also not justified. The High Court in the case of Malani Ramjivan Jagannath v. Asstt. CIT [2006 (10) TMI 145 - RAJASTHAN HIGH COURT] held that merely on account of deviation in GP rate it cannot be a ground for rejecting the books of account and disturbing the trading result. The AO has relied upon two cases for disturbing the trading result whereas assessee has cited four cases including the two cases relied upon by AO and it is seen that GP rate shown by all these assessees were less than the GP rate declared by the assessee.
Therefore, for this reason also, in our considered view, disturbance in the trading result was unjustified. Accordingly, we direct the AO to accept the GP rate declared by the assessee. The AO is also directed to delete the addition.
TP Adjustment - Addition by applying ALP - difference in the price declared - DRP has vehemently argued that there was an amendment to the provisions of sub-section (2) of section 92C by which it was provided that where more than one price is determined by the most appropriate method, the ALP shall be taken to be the arithmetical mean of such prices, or at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent of such arithmetical mean.HELD THAT:- As per amended provision to sub-section (2) of section 92C, it does not say that Board’s circular has been withdrawn. The Board’s circular issued in 2001 is still applicable as the same has not been withdrawn. Even the amended provision does not say that the arithmetical price adopted by the Assessing Officer as per ALP does exceed 5 per cent. then the price adopted by assessee should be disturbed. Therefore, adopting ALP at the end of the Assessing Officer on the fact of the present case, in our considered view, was not justified. There should be some material to suggest that the price shown by the assessee is not justified. Merely on the basis that material has been sold to one of the associates, does not prove that the price shown by assessee is on lower side. In view of these facts and circumstances, we are of the view that addition made on the basis of ALP at the end by the Assessing Officer was not justified and the learned CIT(A) was also not justified in confirming the addition made by Assessing Officer. Accordingly, the addition is deleted.
Addition of telephone and vehicle expenses - HELD THAT:- We are of the view that if addition on account of telephone expenses and addition on account of vehicle expenses is sustained, that all meet the ends of justice. Accordingly, we restrict the addition to that extent.
In the result, appeal of the assessee is partly allowed.
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2010 (6) TMI 657
Issues Involved:
1. Exemption under section 10(10CC) of the Income-tax Act.
2. Charging of interest under section 234B of the Income-tax Act.
3. Initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act.
Detailed Analysis:
1. Exemption under section 10(10CC) of the Income-tax Act:
The primary issue in these appeals was whether the tax paid by the employer on behalf of the employee constitutes a non-monetary perquisite eligible for exemption under section 10(10CC) of the Income-tax Act. The Tribunal referred to the decision of the Special Bench in the case of RBF Rig Corpn. LIC (RBFRC) v. Asstt. CIT, where it was held that the tax paid by the employer on the perquisite falling under clause (2) of section 17 is exempt in the hands of the employee. The Tribunal observed that the legislative intention was clear from the Finance Act, 2002, and other related provisions such as section 40(a)(v), sections 192(1A), and 195A. It was concluded that the tax paid by the employer is a perquisite and not a monetary payment, thus qualifying for exemption under section 10(10CC). The Tribunal reversed the orders of the authorities below and allowed the assessee's claim for exemption under section 10(10CC).
2. Charging of interest under section 234B of the Income-tax Act:
The Tribunal addressed the issue of charging interest under section 234B, referencing the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Sedco Forex International Drilling Co. Ltd. It was held that when income is subject to TDS and there is a bona fide dispute, no interest is leviable under section 234B. The Tribunal found that in the instant appeals, the employer's failure to deduct tax at source should not result in the assessee being faulted, and thus, charging of interest under section 234B was not justified. The Tribunal directed the Assessing Officer to re-calculate taxes accordingly.
3. Initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act:
The Tribunal noted that the ground challenging the initiation of penalty proceedings under section 271(1)(c) was not pressed by the assessees and hence, dismissed this ground.
Conclusion:
The Tribunal allowed the appeals of the assessees, holding that the tax paid by the employer on behalf of the employee constitutes a non-monetary perquisite exempt under section 10(10CC). It also held that no interest is leviable under section 234B due to the employer's failure to deduct tax at source. The ground challenging the initiation of penalty proceedings under section 271(1)(c) was dismissed as it was not pressed. The Assessing Officer was directed to modify the assessment orders accordingly.
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2010 (6) TMI 656
Issues Involved:1. Deletion of addition of Rs. 75,00,000 made by the Assessing Officer on account of expenditure towards keyman insurance policy. 2. Determination of whether the insured individuals qualify as key persons of the company. Summary:Issue 1: Deletion of Addition of Rs. 75,00,000The Revenue appealed against the order dated December 17, 2009, by the Commissioner of Income-tax (Appeals) concerning the assessment year 2006-07. The primary issue was the claim of Rs. 75 lakhs made by the assessee for the deduction towards payment of premium on keyman insurance policy for two working directors, Ms. Priyanka Mittal and Mrs. Binita Gupta. The Assessing Officer disallowed the claim, arguing that the insured individuals were neither directors nor held managerial posts and that the expenses were not laid out wholly and exclusively for the assessee's business as per the memorandum of association. The Commissioner of Income-tax (Appeals) reversed this decision, allowing the claim by noting that both individuals were directors and key persons of the company, and the premium paid was allowable as business expenditure per the Central Board of Direct Taxes Circular No. 762, dated February 18, 1998. Issue 2: Determination of Key PersonsThe Assessing Officer contended that Ms. Priyanka Mittal and Mrs. Binita Gupta were not key persons as their business decisions required approval from other directors, and there was no employer-employee relationship evidenced by the lump sum salary payments. The Commissioner of Income-tax (Appeals) found that both individuals were qualified and involved in the day-to-day functioning of the company, thus qualifying as key persons. The Tribunal upheld this view, noting that the policies taken on their lives had significant effects on the business's profitability and that the maturity amount received from these policies was included in the company's income, demonstrating compliance with the relevant circular and tax laws. Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the Commissioner of Income-tax (Appeals)'s decision to allow the deduction of Rs. 75 lakhs towards the keyman insurance policy premium, recognizing the insured individuals as key persons of the company.
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2010 (6) TMI 655
Issues Involved:
1. Disallowance under section 40A(2)(b) of the Income-tax Act.
2. Addition on account of low net profit and rejection of book results.
3. Under valuation of work-in-progress/semi-finished goods and stock in transit.
4. Disallowance of depreciation.
5. Addition on account of sundry creditors.
Issue-wise Detailed Analysis:
1. Disallowance under section 40A(2)(b) of the Income-tax Act:
The revenue challenged the deletion of an addition of Rs. 8,65,314 made by the Assessing Officer (AO) under section 40A(2)(b) for payments to specified persons. The AO disallowed 10% of the expenditure due to lack of tenders for minimum price. The CIT(A) deleted the addition, stating the disallowance was ad hoc and lacked evidence of excessiveness compared to the fair market value. The Tribunal upheld CIT(A)'s decision, noting the AO did not establish that payments were excessive or unreasonable.
2. Addition on account of low net profit and rejection of book results:
The AO rejected the book results and made an addition of Rs. 10 lakhs due to alleged undervaluation of semi-finished goods and lack of day-to-day quantitative records. The CIT(A) deleted the addition, noting the AO did not point out specific defects and the addition was ad hoc. The Tribunal upheld CIT(A)'s decision, emphasizing that the AO failed to provide a basis for the addition and did not dispute the maintenance of books in earlier years.
3. Under valuation of work-in-progress/semi-finished goods and stock in transit:
The AO made an addition of Rs. 5 lakhs for alleged under valuation of work-in-progress. The CIT(A) confirmed the addition, noting the assessee admitted under valuation of Rs. 1,51,855 but did not provide other details. The Tribunal modified the addition to Rs. 1,51,855, stating the ad hoc addition of Rs. 5 lakhs was unjustified without adequate details.
4. Disallowance of depreciation:
The AO allowed depreciation before calculating deduction under section 80-IB, following the ITAT Special Bench decision in Vahid Paper Converters. The CIT(A) upheld the AO's decision. The Tribunal set aside the CIT(A)'s order, directing reconsideration of the issue in light of the judgments in National Dairy Development Board and Kandla Port Trust, which addressed the treatment of depreciation not claimed in earlier years.
5. Addition on account of sundry creditors:
The AO added Rs. 97,391 for unexplained sundry creditors. The CIT(A) deleted the addition, stating the AO did not specify the section under which the addition was made and failed to prove cessation of liabilities. The Tribunal upheld CIT(A)'s decision, noting the liabilities were acknowledged in the balance sheet and there was no remission or cessation of liabilities.
Separate Judgments:
The judgment was delivered by a bench comprising Bhavnesh Saini and A.N. Pahuja, JJ., without separate judgments from each judge.
Conclusion:
The Tribunal dismissed the departmental appeals and partly allowed the assessee's appeals, providing detailed reasoning for each issue, emphasizing the need for specific evidence and proper application of legal provisions.
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2010 (6) TMI 654
Unaccounted cash - Addition u/s 69A - CIT(A) deleted the addition - whether CIT(A) was justified in deleting the addition made by AO on the basis of the statements which were never confronted to the assessee for rebuttal nor any opportunity granted to the assessee to cross-examine the deponents in spite of repeated requests by the assessee to the Assessing Officer to allow such opportunity? - HELD THAT:- Undeniably, the statements of Shri Brij Mohan Gupta, his son Rajeev Gupta and the accountant, Ram Avtar Singhal are the basis of the addition made by the Assessing Officer under section 69A of the IT Act. Undeniably again, these statements were never provided to the assessee for rebuttal. Also, he was not afforded any opportunity to cross-examine the deponents of these statements. This is despite the fact that the assessee had made repeated requests to the Assessing Officer for providing the statements to him and for affording him an opportunity to cross-examine these deponents. Pertinently, even at the first appellate stage, the matter was remitted by the learned CIT(A) to the Assessing Officer, however, once again, no such opportunity was provided to the assessee.
CIT(A) observed that AO had failed to establish any case against the assessee, nor was any corroborative evidence gathered by the AO in relation to the assessee. The AO, as observed by the CIT(A), merely summarized the salient features of the assessment proceedings relating to Brij Mohan Gupta and thereafter, summarily rejected the reply of the assessee as not acceptable.
Though the AO referred to the statement of Brij Mohan Gupta and others admitting their involvement in cash loan transactions, these statements were not provided to the assessee. The allegation of the assessee having entered into loan transaction with Brij Mohan Gupta was not proved, since nothing was brought on record by the AO regarding any further investigations to confirm any such loan transaction. CIT(A) deleted addition u/s 69A made by AO.
Addition was not valid, or for the proposition that in a case of no opportunity provided to the assessee, the matter cannot be set aside to the AO to fill up the lacuna, have been quoted by the Department.
No error whatsoever with the order of the learned CIT(A), the same is hereby confirmed. In the result, the appeal filed by the Department is dismissed.
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2010 (6) TMI 653
Issues involved: Assessment year 1998-99 - Addition under section 68 - Validity of reassessment proceedings - Time limitation for assessment.
Validity of reassessment proceedings:
The appeal filed by the Revenue challenged the order of the learned CIT(A) relating to the assessment year 1998-99. The Revenue contended that the reassessment proceedings were not time-barred, despite the CIT(A) holding otherwise. The proceedings were initiated under section 147 based on information from a search and seizure operation. The Assessing Officer issued a notice under section 148 to the assessee, who challenged the proceedings by filing a writ petition before the High Court. The High Court passed interim orders restraining the Assessing Officer from passing the final assessment order. The interim relief was extended until a certain date. However, after the expiry of the last extension, no further relief was granted. The assessee objected to the proceedings on the grounds of limitation, but the AO proceeded and completed the assessment. The CIT(A) held that the assessment was indeed barred by limitation, as the time limit for completion of assessment had expired before the assessment order was passed. The Tribunal agreed with the CIT(A) and confirmed that the assessment was invalid due to being time-barred.
Conclusion:
The Tribunal dismissed the appeal, upholding the decision that the assessment for the year 1998-99 was invalid due to being barred by limitation. As a result, the Tribunal did not find it necessary to decide on the addition made under section 68.
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2010 (6) TMI 652
Issues Involved:
1. Addition on account of alleged unexplained investment in stock.
2. Rejection of valuation of stock by the assessee.
3. Trading addition of Rs. 50,000.
4. Disallowance of petrol, depreciation on car, and telephone expenses.
5. Disallowance of staff welfare and entertainment expenses.
Summary:
1. Addition on account of alleged unexplained investment in stock:
The assessee contested the addition of Rs. 21,07,651 confirmed by the CIT(A) on account of unexplained investment in stock. The CIT(A) had reduced the addition from Rs. 70,46,946 to Rs. 53,47,294 by allowing a deduction of 13% for discounts. The Tribunal found that the valuation method adopted by the survey party was erroneous and the assessee's method of valuing stock at the lower of cost or net realizable value was consistent and supported by purchase invoices. The Tribunal allowed the assessee's appeal, rejecting the addition u/s 69 of the Income-tax Act, 1961.
2. Rejection of valuation of stock by the assessee:
The CIT(A) rejected the valuation of stock by the assessee, which was based on purchase invoices and consistent past practice. The Tribunal found that the CIT(A) erred in not accepting the assessee's valuation, which was supported by evidence and consistent with the method prescribed u/s 145A of the Act. The Tribunal allowed the assessee's appeal on this ground.
3. Trading addition of Rs. 50,000:
The CIT(A) deleted the ad hoc trading addition of Rs. 50,000 made by the Assessing Officer u/s 145(3) to cover possible leakages, as there was no material or evidence to justify the addition. The Tribunal upheld the CIT(A)'s decision, finding no basis for the addition.
4. Disallowance of petrol, depreciation on car, and telephone expenses:
The CIT(A) restricted the disallowance of these expenses to 10% as against 20% made by the Assessing Officer. The Tribunal found the CIT(A)'s decision to be reasoned and based on appreciation of facts, and thus upheld the CIT(A)'s decision.
5. Disallowance of staff welfare and entertainment expenses:
The CIT(A) deleted the disallowance of Rs. 16,444 out of staff welfare expenses and Rs. 11,440 out of entertainment expenses, finding that these expenses were incurred for business purposes. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in it.
Conclusion:
The assessee's appeal was allowed, and the revenue's appeal was dismissed.
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2010 (6) TMI 651
Issues Involved:
1. Lack of opportunity and application of mind by the Assessing Officer.
2. Merits of the case regarding unexplained cash credits, bank deposits, and fixed deposits.
3. Treatment of unexplained cash and withdrawals for personal expenses.
Summary:
1. Lack of Opportunity and Application of Mind:
The assessee argued that the assessment order should be set aside and reconsidered as the Assessing Officer did not provide sufficient opportunity to explain his case and did not objectively consider the evidence provided. The Tribunal found that the assessee was given numerous opportunities to present his case, as detailed in the assessment order. Therefore, the Tribunal rejected the argument of lack of opportunity and application of mind, stating that the assessment order was not whimsical or arbitrary.
2. Merits of the Case:
The assessee sought to explain the source and genuineness of funds used for bank deposits, claiming they were received from various parties for different purposes. The Assessing Officer rejected these explanations, finding the confirmation letters lacked credence and were fabricated. The Tribunal upheld the Assessing Officer's findings, stating that the confirmation letters did not prove the creditworthiness of the persons who allegedly provided the funds. The Tribunal noted that the assessee, a professor, could not reasonably be expected to act as a custodian or real estate agent for such large sums of money. Therefore, the Tribunal upheld the treatment of unexplained cash credits, bank deposits, and fixed deposits as undisclosed income.
3. Treatment of Unexplained Cash and Withdrawals:
The Assessing Officer added Rs. 11,75,300 as unexplained cash and Rs. 16,05,469 as unexplained withdrawals for personal expenses. The Tribunal found that these amounts should not be treated as independent items of undisclosed income, as they could be part of the recycled funds from the assessee's unauthorized activities. The Tribunal deleted these additions, providing a relief of Rs. 27,80,769 to the assessee.
Conclusion:
The Tribunal partly allowed the appeal, providing relief for the unexplained cash and withdrawals but upholding the rest of the Assessing Officer's and Commissioner of Income-tax (Appeals)' orders.
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2010 (6) TMI 650
Issues Involved:1. Deduction u/s 10B of the Income-tax Act, 1961. 2. Transfer and use of previously used machinery. 3. Applicability of sub-section (9) of section 10B. 4. Interpretation of Board Circular No. 378 and Circular No. 8 of 2002. Summary:Issue 1: Deduction u/s 10B of the Income-tax Act, 1961The Revenue contended that the CIT(A) erred in allowing deduction u/s 10B, as the assessee did not fulfill the conditions in sub-section (2) of this section. The machinery used by the assessee had been previously used by another entity, HICS, before its transfer and takeover by the assessee. Issue 2: Transfer and use of previously used machineryThe assessee claimed deduction u/s 10B despite using machinery previously used by HICS. The Assessing Officer denied the deduction, stating that the conditions in sub-section (2) were not satisfied. The CIT(A) allowed the deduction, relying on the decision in Tech Books Electronics Services (P.) Ltd. v. Addl CIT, where it was held that a mere change in ownership does not lead to the inference of splitting up or reconstruction of a business already in existence. Issue 3: Applicability of sub-section (9) of section 10BSub-section (9) of section 10B, applicable for assessment years 2002-03 and 2003-04, states that if the ownership or beneficial interest in the undertaking is transferred, the deduction shall not be allowed for the assessment year relevant to such previous year and subsequent years. The Tribunal agreed with the Departmental Representative that this provision applies to both the transferor and transferee, denying the deduction for the years 2002-03 and 2003-04. Issue 4: Interpretation of Board Circular No. 378 and Circular No. 8 of 2002The assessee relied on Board Circular No. 378, which states that the benefit of section 84 attaches to the undertaking and not to the owner. However, the Tribunal noted that this circular pertains to section 84, not section 10B. Circular No. 8 of 2002 explains that sub-section (9) of section 10B was introduced to prevent trading in incentives, but genuine business reorganizations were not intended to be affected. The Tribunal found no evidence that the transfer was for genuine business purposes and not for tax avoidance, thus denying the deduction for the years 2002-03 and 2003-04. Conclusion:Appeals for assessment years 2002-03 and 2003-04 are allowed, denying the deduction u/s 10B. The appeal for assessment year 2004-05 is dismissed, allowing the deduction u/s 10B.
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2010 (6) TMI 649
Issues Involved:
1. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the surrender of income by the assessee was voluntary or under compulsion.
3. The adequacy of the assessee's explanation regarding unexplained cash credits.
4. Applicability of judicial precedents cited by both parties.
Detailed Analysis:
Legitimacy of the Penalty Levied under Section 271(1)(c):
The assessee appealed against the order confirming the penalty of Rs. 2,01,628 levied by the Assessing Officer (A.O.) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed for the Assessment Year 2006-07 due to the addition of Rs. 6 lakhs as unexplained cash credit under Section 68. The A.O. determined that the assessee had concealed particulars of its income, leading to the initiation of penalty proceedings.
Voluntariness of the Surrendered Income:
The assessee claimed that the Rs. 6 lakhs were surrendered voluntarily to avoid penal action. However, the A.O. and CIT(A) found that the surrender was not voluntary but was made after the A.O. issued a show cause notice and conducted inquiries, which revealed that many notices to creditors were returned unserved or unanswered. The Tribunal agreed that the surrender was not voluntary but made under compulsion, citing that the assessee was cornered by the revenue's inquiries.
Adequacy of Assessee's Explanation:
The assessee's explanation was deemed inadequate as it failed to substantiate the identity, creditworthiness, and genuineness of the transactions. The A.O. found that the addresses provided for many creditors were incomplete or incorrect, and no credible evidence was submitted to establish the identity and creditworthiness of the creditors. The Tribunal noted that the assessee did not provide sufficient details or evidence even during penalty proceedings, thus failing to discharge the burden of proof required under Explanation 1 to Section 271(1)(c).
Applicability of Judicial Precedents:
The assessee cited several judicial precedents to argue against the penalty, including CIT v. Suresh Chandra Mittal and Smt. Raj Rani Mittal v. ITO-Rudrapur. However, the Tribunal found these cases inapplicable as they involved different contexts where the additions were made purely on the basis of surrender without any incriminating material. In contrast, the present case involved incriminating material collected by the A.O. through inquiries. The Tribunal also referenced the case of CIT v. Shri Rakesh Suri, which supported the view that a conditional/agreed surrender of income does not preclude the levy of penalty if the surrender was not voluntary.
Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) was justified as the surrender of income was not voluntary but made under compulsion after the A.O.'s inquiries. The assessee failed to provide a bona fide explanation and did not furnish all relevant material particulars. The appeal filed by the assessee was dismissed, affirming the CIT(A)'s order.
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2010 (6) TMI 648
Issues involved: Whether payment received by the assessee company for providing software constitutes royalty under Article 12(3) of the DTAA between India and USA.
Summary:
In the appeal before the Appellate Tribunal ITAT Mumbai, the revenue challenged an order regarding the assessment year 2004-05. The main issue was whether the payment of Rs. 16,72,61,927 received by the assessee company for supplying software to Reliance Infocomm Ltd. constituted royalty under the DTAA between India and USA.
The assessee contended that the consideration received for the software supply was not taxable in India as it was business profit, not royalty, and as the assessee was a tax resident of the USA, it could not be taxed under the DTAA. The agreement between the assessee and RIL contained clauses granting rights to use the software but retaining copyright ownership with the assessee.
The Assessing Officer relied on a previous assessment order where a similar issue was considered and the claim of the assessee was rejected. However, the Tribunal in the previous assessment year upheld the order of the CIT(A) stating that the amount received for software use could not be treated as royalty under the IT Act or DTAA.
In the assessment year 2004-05, the CIT(A) examined the agreement clauses and relevant provisions, concluding that the payment received was for the sale of a copyright article and not royalty under the DTAA. The Tribunal, based on the previous year's decision, agreed with the CIT(A) and dismissed the revenue's appeal.
Therefore, the Tribunal upheld the CIT(A)'s decision that the payment received by the assessee for providing software did not amount to royalty under the DTAA between India and USA, resulting in the dismissal of the revenue's appeal.
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2010 (6) TMI 647
Issues:
1. Challenge to the action of the ld. CIT(A) regarding the taxability of marketing contribution and reservations assessment fees received by the assessee.
Analysis:
The appeal was filed by the Revenue against the order of the ld. CIT(A)-V(2)(2), Mumbai, challenging the holding that the marketing contribution and reservations assessment fees received by the assessee are not taxable as "royalty" or "fees for technical services." The Tribunal observed that the relief was granted to the assessee based on a previous decision in the assessee's own case for the assessment year 1997-98. The Tribunal noted that the monies received were not unfettered receipts but were to be used for agreed purposes, indicating a fiduciary capacity. The Tribunal held that these receipts could not be considered income of the assessee and were not taxable as royalty or fees for technical services. The Tribunal directed the Assessing Officer to delete the addition, providing relief to the assessee.
In a subsequent case for assessment years 1998-99, 1999-2000, and 2001-02, a similar issue arose, and the Tribunal restored the matter to the Assessing Officer for re-adjudication. The Tribunal found discrepancies in the receipts and payments, indicating that the amounts were not received in a fiduciary capacity. The Tribunal directed the Assessing Officer to ascertain the true facts and re-adjudicate the issue, considering whether the marketing contribution and reservation assessment fees should be treated as Royalty under the DTAA between India and the USA.
The learned counsel for the assessee argued that the aspect considered by the Tribunal in the subsequent case was not relevant to determine the nature of the amounts received. However, the Tribunal found this aspect relevant and necessary for re-consideration. Considering the judicial propriety and discipline, the Tribunal set aside the order of the ld. CIT(A) and restored the issue to the Assessing Officer for fresh consideration, following the direction given in the previous case. Consequently, the appeal of the revenue was treated as allowed for statistical purposes.
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2010 (6) TMI 646
Issues Involved:
1. Validity of the service of notice under section 143(2) of the Income-tax Act, 1961.
2. Service of notice by affixture without exhausting other means.
3. Compliance with the procedure laid down in the CPC for service by affixture.
4. Timing and manner of service of notice under section 143(2).
Issue-wise Detailed Analysis:
1. Validity of the Service of Notice under Section 143(2):
The primary contention raised by the assessee was that the notice under section 143(2) was not served within the prescribed time limit. The return of income was filed on 31-10-2005, and the notice under section 143(2) was required to be served on or before 31-10-2006. The notice dated 31-10-2006 was served by affixture and sent through speed-post, which was received by the assessee on 2-11-2006. The CIT(A) upheld the validity of the notice, stating that the Assessing Officer had made sincere efforts to serve the notice within the time limit.
2. Service of Notice by Affixture Without Exhausting Other Means:
The assessee argued that the notice served by affixture was invalid as other means of service were not exhausted. The CIT(A) noted that the Assessing Officer had limited time to serve the notice and had dispatched it through speed-post on 31-10-2006. Due to the closure of business premises on account of a local holiday, the notice was served by affixture. The CIT(A) found that the Assessing Officer had acted promptly and made the best possible efforts to serve the notice.
3. Compliance with Procedure Laid Down in CPC for Service by Affixture:
The assessee contended that the service by affixture did not follow the procedure prescribed in the CPC, 1908. Specifically, the names and addresses of persons identifying the place of business and witnessing the affixture were not mentioned. The Tribunal analyzed the provisions of Order V, Rule 17 of the CPC, which requires the serving officer to use due diligence and provide details of witnesses. The Tribunal found that the IT Inspector's report was witnessed only by another IT Inspector, without any independent witness, and there was no evidence that the place of business was personally known to the Inspectors.
4. Timing and Manner of Service of Notice under Section 143(2):
The Tribunal examined whether the service of notice by affixture on 31-10-2006 was in accordance with the law. The Tribunal referred to several judicial precedents, including the cases of Ess Aar Exports and Avi-Oil India (P.) Ltd., which emphasized the necessity of following the prescribed procedure for substituted service. The Tribunal concluded that the notice served by affixture was invalid as it did not comply with the CPC requirements. Consequently, the subsequent notice received on 2-11-2006 was beyond the permissible time limit, rendering it invalid.
Conclusion:
The Tribunal held that the first notice served by affixture was invalid and the second notice served beyond the 12-month period was also invalid under section 143(2) of the Act. Therefore, the assessment was annulled. As the assessment was annulled, the Tribunal did not address the merits of the other grounds raised by the assessee. The appeal was allowed, and the assessment was set aside.
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