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Showing 281 to 300 of 536 Records
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2007 (12) TMI 276
Income Tax Return- Form which is to be submitted- It is for the statutory authority, and it is not for the court, to decide whether the income tax return should be filed in a particular Form. The court cannot do so even if there is paucity of time and the requisite form is not available.
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2007 (12) TMI 274
Business Income or Income from House property- The assessee had received interest free deposit in respect of shops given on rent. For the assessment year 1995-96, the Assessing officer added notional interest on the interest free deposit at the rate of 18% per annum under section 28(iv) of the Act. The addition was deleted by the Commissioner and Tribunal. Held that- dismissing the appeal, as a plain reading of section 28(iv) indicates that the question of any notional interest on an interest free deposit being added to the income of an assessee on the basis that it may have been earned by the assessee if placed as a fixed deposit does not arise.
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2007 (12) TMI 271
Business income and income from other sources under section 28, 56 – interest – The assessee is an exporter. The issue is that whether the interest income received by the assessee on short term fixed deposit constituted part of the total turnover of the assessee’s business and also whether it formed part of the total business income of the assessee. Held that- the matter has not examined the factual basis, as according to the department it was the case of surplus being invested in FDR while according to assessee it was the case of advance having been received from the exporter which was invested in FDR for short duration. Thus the matter is remitted to the tribunal for fresh decision.
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2007 (12) TMI 270
Block Assessment under section 158BC, 158BD – Rectification of mistake – The assessee had income for the assessment year 1994-95 and 1995-96, but had not filed returns for the two assessment years. The assessee filed returns in response to the notice under section 158BD, including the amount for the assessment years but claiming that an application under the Voluntary Discloser of Income Scheme, 1997, had been filed. The Assessing officer treated the undisclosed income under the provisions of section 158BC and computed the income. The Tribunal dismissed the appeal as it was infructuous in view of the acceptance of the voluntary disclosers made by the assessee. Held that the certificate u/s 68(2) of scheme placed before the tribunal for consideration and adjudication, but it had not been taken into consideration by the Tribunal while passing the first order. That mistake had been rectified by the Tribunal. The appeal is dismissed.
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2007 (12) TMI 263
Applicability of section 43B for Service tax payable - Deemed to be revenue receipt? - Receipt of service taxes not to route through the P&L Account - Payments in respect of taxes and Government dues - non-receipt of payments from the receiver of the services there is liable to pay services tax ? - Payment of service tax on or before due date for filing of return of income - HELD THAT:- It is clear from sec 43B, that the rigour of this provision would be attracted only in a case where an item is allowable as deduction but because of the failure to make payment such deduction will not be allowed. It can be argued that in the case of ST also the assessee does not claim deduction since it has been held that non-payment of sales-tax would attract provisions of section 43B, but that is being done on the basis of the principles laid down by the Calcutta High Court in the case of Chowranghee Sales Bureau Ltd. v. CIT [1974 (6) TMI 5 - CALCUTTA HIGH COURT] that sales-tax is part of the trading receipt.
Further, section 145A clearly provides that for the purpose of determining income under the head 'Profits and gains of business or profession', the amount of purchase and sales i.e., turnover would include any tax, duty, cess or fee. Therefore, the rigour of section 43B may be applicable in the case of sales-tax or Excise Duty but the same cannot be said to be the position in case of service tax because of two reasons. Firstly, the assessee is never allowed deduction on account of service tax which is collected on behalf of the Government, and paid to the Government accordingly. Therefore, a service provider is merely acting as an agent of the Government, and is not entitled to claim deduction on account of service tax.
Hence, on this account alone addition u/s 43B could not be made and the same has been correctly deleted by the CIT (Appeals).
Now, in the case of service tax, when and how the amount becomes payable has been provided in section 68 of Finance Act, 1994 as well as Rule 6 of Service Tax Rules - A plain reading of Rule 6 would show that service provider becomes liable to make the payment of service tax by the 5th of the month immediately following the calendar month in which the payments are received towards the value of taxable service.
If there is no liability to make the payment to the credit of Central Government because of non-receipt of payments from the receiver of the services, then it cannot be said that such service tax has become payable in terms of clause (a) of section 43B because that clause specifically mentions "sum payable by the assessee". In this regard, the Hon'ble Andhra Pradesh High Court in the case of Srikaollu Subba Rao & Co.[1988 (3) TMI 46 - ANDHRA PRADESH HIGH COURT].
Thus, we are of the view that since service tax was not payable by the assessee, the rigour of section 43B could not have been applied to the case of the assessee. Hence, we find nothing wrong with the order of the CIT (Appeals) on this issue and the same is confirmed.
In the result, the appeal filed by the revenue is dismissed.
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2007 (12) TMI 261
Surplus earned from sale of shares - long-term capital gain Or business income - Disallowance on interest expenses and guard salary expenses.
Income From Sale Of Shares - long-term capital gain Or business income - demarcation line between business and investment is hazy or that assessee has not maintained an investment portfolio and it was dealing in shares only like a trader? - HELD THAT:- We find that the assessee is dealing in shares both as a trader as well as investor. It has kept separate accounts from both types of dealings. Valuation of holdings has been done at cost (for investment portfolio). At least there is no allegation or material to come to the conclusion that valuation of investment portfolio has been done on cost or net realizable value whichever is low. The shares which are sold out of investment portfolio, this year, were purchased two to three years ago showing that assessee had intention, while purchasing them, to hold them. They were reflected in the balance sheet as investment. The assessee has enjoyed dividend income and declared the same in return of income. The frequency of such purchase or sale in this portfolio is not large enough to doubt that this portfolio is only a device to pay lesser taxes by parking some stock-in-trade in investment portfolio.
We notice that in trading portfolio the assessee had purchased during the year shares worth Rs. 21,38,353 and same shares were sold for Rs. 23,89,805. There was neither opening stock nor closing stock. In investment portfolio, opening stock of shares was Rs. 19,22,203 and closing stock was Rs. 46,23,274, whereas sales out of investment portfolio were Rs. 31,80,423. It shows that turnover to stock ratio in investment portfolio is very low as compared to that in trading portfolio.
In our considered view the assessee has discharged its primary onus by showing that it is maintaining separate account for two portfolios and there is no intermingling. The onus now shifted on the Revenue to show that apparent is not real. There is no material brought in by the Revenue to show that separate accounts of two portfolios are only a smoke screen and there is no real distinction between two types of holdings. This could have been done by showing that there is intermingling of shares and transactions and the distinction sought to be created between two types of portfolios is not real but only artificial and arbitrary.
Therefore, in absence of any material to the contrary, and on appreciation of cumulative effect of several factors present, we hold that the surplus is chargeable to capital gains only and assessee is not to be treated as trader in respect of sale and purchase of shares in investment portfolio. As a result this ground of the assessee is allowed.
Disallowance on interest expenses - HELD THAT:- In our considered view there is no case for sustaining the addition. Once land has been shown as business asset in the balance sheet then it is for the Revenue to bring material on record to show that land was not a business asset but was acquired for non-business considerations. Once it is not proved that apparent is not real, payment of interest on funds borrowed for investing in the land which is apparently for business purposes, the claim of interest, therefore cannot be disallowed. This ground of the assessee is therefore allowed.
Disallowance of expenses on salary of guard - HELD THAT:- After hearing the parties we do not find any reason to sustain the addition. It is the discretion of the assessee to employ Chowkidar to safeguard its assets against encroachment. The business discretion of the assessee cannot be substituted for that of AO. The expenditure is clearly for business necessity. The addition is therefore deleted. As a result this ground is allowed.
As a result appeal filed by the assessee is allowed.
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2007 (12) TMI 260
Exemption u/s 10(10C) - Voluntary Retirement Payments - Difference of opinion between the Members - Third Member Order - Validity of opinion expressed by the Chartered Accountant - Reserve Bank of India ('RBI') announced VRS known as Optional Employees Retirement Scheme ('OERS') - assessee opted for OERS - Disallowed - as scheme of early retirement did not fulfil guidelines laid down in rule 2BA of the Income-tax Rules - treated as ex gratia and subjected to deduction of tax at source - ld. Judicial Member agreed with the finding of the ld. CIT(A) -
HELD THAT:- ld. Accountant Member opined that the assessee has fulfilled the conditions laid down in rule 2BA of the Income-tax Rules. He also held that finding of the RBI was based upon the opinion given by M/s. Choksi & Co., Chartered Accountants regarding liability of RBI for deduction of tax at source. He was of the opinion that the view taken by the RBI on the opinion of the Chartered Accountants cannot be the sole basis for denying assessee's claim under section 10(10C) of the Act. Accordingly, the ld. AM held that assessee is entitled to exemption under section 10(10C) of the Act.
Third Member - ITAT Mumbai Benches has considered similar issue in group cases of 222 assessees who also took Voluntary Retirement from RBI under the same scheme in Vaishali A. Shekar v. Asstt. CIT [2007 (3) TMI 293 - ITAT BOMBAY-K] held that; ''Neither the opinion of the Chartered Accountants nor the views of the RBI will finally determine the fate of exemption that is claimed under section 10(10C) but the satisfaction of the conditions or guidelines laid down by the Income-tax Rules, 1962. A plain reading of section and guidelines of Rule 2BA shows that the scheme in question leaves no doubt in our minds that the sums in question are already exempt under section 10(10C) of the Act up to the extent of Rs. 5 lakhs."
No contrary decision is brought to my knowledge. Thus, agree with the ld. AM and hold that the assessee is entitled for exemption under section 10(10C) of the Act amounting to Rs. 5 lakhs out of sum of Rs. 13,52,784 received by him on Voluntary Retirement from RBI.
The Hon'ble Vice President has concurred with the views of the ld AM. Thus, in accordance with the majority view, the assessee's appeal is allowed.
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2007 (12) TMI 257
Issues Involved:1. Levy of penalty u/s 271(1)(c) for concealment of income/filing of inaccurate particulars of income. 2. Recording of requisite satisfaction by the Assessing Officer for initiating penalty proceedings. Summary:Issue 1: Levy of Penalty u/s 271(1)(c)The appellant, a private limited company, faced penalty orders u/s 271(1)(c) for assessment years 1999-2000, 2000-01, and 2002-03. The penalty was based on additions made during assessments framed u/s 153A read with section 143(3) of the Act. The additions included extra income of Rs. 5,67,926 not recorded in regular books and cash expenditure of Rs. 56,085 added u/s 40A(3). The Assessing Officer levied a penalty of Rs. 2,08,480 for concealment of income/filing of inaccurate particulars. The assessee challenged the penalty on both legal and merit grounds. Issue 2: Recording of Requisite SatisfactionThe Tribunal examined whether the Assessing Officer recorded the requisite satisfaction for initiating penalty proceedings. The Tribunal noted that the Assessing Officer merely mentioned that penalty proceedings were being separately initiated without a definite conclusion of concealment or furnishing inaccurate particulars. The Tribunal referred to several judicial precedents, including the Hon'ble Supreme Court's rulings in Dilip N. Shroff v. Jt. CIT and T. Ashok Pai v. CIT, which emphasized that penalty proceedings are quasi-criminal and require a heavy burden of proof on the Department to establish concealment. The Tribunal found that the Assessing Officer failed to record specific satisfaction, which is a jurisdictional defect that cannot be cured. The Tribunal also cited decisions from the Hon'ble Delhi High Court in CIT v. Ram Commercial Enterprises Ltd. and Diwan Enterprises v. CIT, which held that the Assessing Officer must record satisfaction during assessment proceedings before initiating penalty proceedings. The Tribunal concluded that the absence of specific satisfaction in the assessment order and notice u/s 271(1)(c) invalidated the penalty proceedings. In light of these findings, the Tribunal quashed the penalty orders for all three assessment years and allowed the assessee's appeals. Conclusion:The Tribunal allowed the appeals for assessment years 1999-2000, 2000-01, and 2002-03, quashing the penalty orders due to the Assessing Officer's failure to record the requisite satisfaction for initiating penalty proceedings u/s 271(1)(c).
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2007 (12) TMI 256
Disallowance on generator running expenses - Travelling expenses - Telephone expenses and Mobile Phone expenses - vehicle maintenance expenses.
Disallowance on generator running expenses - expenses not fully vouched or partly vouched or supported by internal vouchers - HELD THAT:- Admittedly and obviously the assessee has processed 37.71 lakh kgs. of seeds in this year as compared to the 36.39 lakh kgs. seeds in the preceding year. Therefore, consumption of electricity is definitely required more than the last year. The assessee keeps the generator set on stand by and it is not possible to prove on record that electrical supply was erratic during relevant year. I do not agree with learned CIT(A) that there cannot be any co-relation of generator expenses with the quantity of seeds processed. Rather, these are directly related to each other.
It is an admitted fact that the books of accounts of the assessee were not rejected and the production is more in this year. The small amounts of diesel expenses were not verifiable. The lump sum addition of Rs. 70,000 is not based on any logic. Therefore, legally it is not possible to sustain this addition as the two years are not comparable and the reasoning of the assessee are plausible. Therefore, this addition is hereby ordered to be deleted. As a result, this ground of appeal is allowed.
Travelling expenses - disallowed 1/5th of such expenses on account of personal user of these expenses - By comparing the expenses of one year with the other year is not a valid basis at least for making disallowances of travelling expenses unless these expenses are found to be unexplained or unvouched. The assessee has claimed that these were spent wholly and exclusively towards his business of export. There is no iota of evidence on record which can point out that any part of these expenses was incurred except than for business purposes.
Thus, it is not justifiable to make ad hoc disallowance on the pretext that personal user must have been involved therein. In this regard, Tribunal in the case of Ganesh Foundry vs. Asstt. CIT [2002 (8) TMI 278 - ITAT JODHPUR] held therein that when a disallowance is made without pointing out an item of disallowable nature it could not be sustained. The facts of this ground are exactly similar to the case of Ganesh Foundry. Therefore, by respectfully following the same, delete the entire addition and allow ground No. (3) of the appeal of the assessee.
Telephone expenses and Mobile Phone expenses - The element of personal user in telephone expenses cannot be ruled out but keeping in view the entire facts of this case, I find that the impugned disallowance is on higher side. Instead of 20 per cent disallowance. I restricted the same to 10 per cent and reduce this addition to just half. Therefore, ground No. (4) is partly allowed.
Disallowance out of vehicle maintenance expenses - 1/5th of total expenses - disallowance is on higher side and, therefore, I restrict the same to 1/10th and reduce the same to just half in the interest of justice and fair play. As a result, ground No. (5) is also partly allowed.
In the result, the appeal of the assessee is partly allowed.
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2007 (12) TMI 253
Issues Involved:
1. Validity of action taken u/s 147 r/w s. 148 and the assessment framed u/s 143(3)/148.
2. Additions on account of disallowance of sales discount, travelling expenses, transportation expenses, household withdrawals, and agricultural income.
3. Addition of Rs. 61,000 as undisclosed income and disallowance of interest on the deposit.
4. Set off of addition on various counts.
5. Charging of interest under ss. 234A, 234B, and 234D.
Summary:
Ground Nos. 1 and 2:
The assessee challenged the reopening of assessment u/s 147 r/w s. 148, arguing that the AO lacked sufficient material to believe that income had escaped assessment. The Tribunal found merit in the assessee's argument, noting that the AO's belief was based on suspicion without concrete evidence. The Tribunal referenced past decisions, including the Tribunal's own order for the assessee's case in the asst. yr. 2001-02, which had accepted the genuineness of the loans and interest payments. Consequently, the Tribunal held the notice issued u/s 148 and the subsequent assessment order as invalid, deciding these grounds in favor of the assessee.
Ground Nos. 3 to 7:
The assessee contended that the additions made by the AO were beyond the scope of the reasons recorded for reopening the assessment. The Tribunal agreed, stating that the AO did not have sufficient material to justify these additions during the reassessment proceedings. The Tribunal directed the deletion of additions related to sales discount, travelling expenses, transportation expenses, household withdrawals, and agricultural income, allowing these grounds in favor of the assessee.
Ground Nos. 8 and 9:
The AO had added Rs. 61,000 as undisclosed income and disallowed Rs. 2,000 out of Rs. 18,268 as interest on the deposit from Smt. Mamta Gupta. The Tribunal found that the assessee had provided sufficient evidence, including confirmations and affidavits, to prove the genuineness of the deposit and interest payment. The Tribunal directed the deletion of these additions, deciding these grounds in favor of the assessee.
Ground Nos. 10 and 11:
Given the Tribunal's findings on the above grounds, the issues raised in these grounds did not survive. The charging of interest under ss. 234A, 234B, and 234D was deemed consequential. These grounds were dismissed.
ITA No. 28/Jp/2007:
The Tribunal adopted similar arguments and decisions as in ITA No. 1013/Jp/2006 for the identical issues raised. For the new issue regarding the addition of Rs. 87,500 as undisclosed income from M/s Keladevi Transport Co., the Tribunal found that the AO lacked sufficient material to justify the addition. The Tribunal directed the deletion of this addition and other related disallowances, allowing these grounds in favor of the assessee.
Conclusion:
Both appeals were partly allowed, with the Tribunal ruling in favor of the assessee on most grounds, particularly regarding the invalidity of the reopening of assessments and the unjustified additions made by the AO.
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2007 (12) TMI 251
Issues Involved:
1. Validity of assessment order u/s 143(3).
2. Validity of action taken u/s 147 r/w s. 148.
3. Validity of assessment order due to non-service of notice u/s 143(2).
4. Application of provisions of s. 145(3) and consequent addition.
5. Disallowance of depreciation on new plant and machinery.
6. Disallowance of depreciation on new building.
7. Treatment of expenditure on color TV as capital expenditure.
8. Disallowance of advocate fees.
9. Ad hoc disallowance of various expenses.
10. Charging of interest u/s 234B, 234D, and 244A.
11. General grounds.
Summary:
1. Validity of Assessment Order u/s 143(3):
The assessee challenged the assessment order dated 25th Jan., 2006, claiming it was bad in law and lacked jurisdiction. The Tribunal found that the notice u/s 143(2) was served after the statutory period, rendering the assessment order void and without jurisdiction. Thus, the impugned assessment was quashed.
2. Validity of Action Taken u/s 147 r/w s. 148:
The assessee argued that the notice u/s 148 issued on 8th April, 2004, was premature as the time to issue a notice u/s 143(2) had not expired. The Tribunal agreed, citing precedents that initiation of proceedings u/s 148 before the expiry of the period for issuing notice u/s 143(2) is invalid. Consequently, the notice and the assessment were quashed.
3. Validity of Assessment Order Due to Non-Service of Notice u/s 143(2):
The Tribunal noted that the notice u/s 143(2) was served after the expiry of the 12-month period from the end of the month in which the return was filed. Therefore, the assessment order was quashed for being without jurisdiction.
4. Application of Provisions of s. 145(3) and Consequent Addition:
The AO invoked s. 145(3) due to alleged defects in the valuation of closing stock and yield rates. The Tribunal found that the assessee consistently followed a method of accounting, and the minor difference in yield was not substantial. The addition of Rs. 32,43,594 was deleted, and the order of the CIT(A) was reversed.
5. Disallowance of Depreciation on New Plant and Machinery:
The AO disallowed depreciation on new plant and machinery, questioning its installation and use. The Tribunal found that the machinery was put to use, and passive use also qualifies for depreciation. The disallowance was deleted, and the CIT(A)'s decision was reversed.
6. Disallowance of Depreciation on New Building:
The AO disallowed depreciation on the new factory building, claiming it was incomplete. The Tribunal held that since the plant and machinery were operational, the building was in use. The disallowance was deleted, and the CIT(A)'s decision was reversed.
7. Treatment of Expenditure on Color TV as Capital Expenditure:
The AO treated the purchase of a color TV as capital expenditure. The Tribunal concurred with the CIT(A) that the expenditure was capital in nature. Thus, the ground was dismissed.
8. Disallowance of Advocate Fees:
The AO disallowed advocate fees, claiming it did not accrue in the relevant financial year. The Tribunal found the provision for fees valid under the mercantile system of accounting. The disallowance was deleted, and the CIT(A)'s decision was reversed.
9. Ad Hoc Disallowance of Various Expenses:
The AO made ad hoc disallowances for personal and non-business expenses. The Tribunal found no infirmity in the CIT(A)'s reasoned decision to sustain some additions and allow some relief. Thus, the ground was dismissed.
10. Charging of Interest u/s 234B, 234D, and 244A:
The Tribunal noted that the charging of interest is mandatory and consequential.
11. General Grounds:
The Tribunal found the general grounds raised by the assessee did not require adjudication.
Conclusion:
The appeal was partly allowed, with several disallowances and additions being deleted, while some grounds were dismissed.
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2007 (12) TMI 249
Issues involved: Appeal against order of CIT (A) regarding addition of surplus income and disallowance of expenses u/s 10(23C)(iiiad) for asst. yr. 2003-04.
Issue 1 - Addition of Surplus Income and Disallowance of Expenses:
The AO disallowed exemption under s. 10(23C)(iiiad) to the assessee society running a school, citing non-essential activities like transportation and mess services. The AO contended that the society's profit accumulation indicated a profit motive, contrary to the educational institution's purpose. However, the CIT (A) found the ancillary activities essential to education and not profit-oriented. The institution's surplus, unutilized for personal gain, did not negate its educational purpose. Citing legal precedents, the Tribunal upheld the CIT (A)'s decision, emphasizing the institution's non-profit motive and educational focus.
Issue 2 - Interpretation of Educational Institution's Purpose:
The Tribunal noted that providing transportation and meals to students were integral to the educational activities of the society. The institution's aim to enhance educational quality justified these ancillary services. The re-enacted s. 10(23C)(iiiad) exempted non-profit educational institutions from income tax, emphasizing the absence of profit motive. Legal rulings supported this stance, emphasizing the institution's educational objectives over surplus income declarations. The Tribunal dismissed the Revenue's appeal, aligning with established legal principles and the educational institution's non-profit nature.
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2007 (12) TMI 248
Issues Involved:
1. Assessability of syndication charges.
2. Set off of brought forward losses and unabsorbed depreciation.
3. Jurisdiction and powers of the CIT(A).
Summary:
Issue 1: Assessability of Syndication Charges
The AO observed that the assessee, M/s Pennar Electronics (P) Ltd., admitted an income of Rs. 16,17,154 under 'Other income,' which included Rs. 12,06,778 as syndication charges. The AO disallowed the set off of brought forward losses from the TV business against this income, as the TV business was discontinued from April 1995. The CIT(A) held that the syndication charges were earned by the managing director, Shri N. Ravi Kumar Reddy, in his individual capacity, and directed the AO to reopen his assessment. The Tribunal reversed this finding, holding that the CIT(A) was not justified in directing the AO to assess the syndication charges in the hands of the managing director, and upheld the AO's stand of assessing the syndication charges in the hands of the assessee company.
Issue 2: Set Off of Brought Forward Losses and Unabsorbed Depreciation
The AO disallowed the set off of brought forward losses and unabsorbed depreciation against the income from syndication charges and waiver of interest treated as income u/s 41 of the Act. The CIT(A) did not adjudicate on this issue. The Tribunal set aside the order of the CIT(A) and restored the matter to the CIT(A) for fresh adjudication, including the grounds raised by the assessee regarding the set off of brought forward losses and unabsorbed depreciation.
Issue 3: Jurisdiction and Powers of the CIT(A)
The Tribunal discussed the jurisdiction and powers of the CIT(A) in detail, citing various judgments, and concluded that the CIT(A) has no power to enhance the assessment by discovering a new source of income not considered by the AO in the order appealed against. The Tribunal held that the CIT(A) was not justified in holding that the syndication charges were earned by the managing director and in directing the AO to reopen his assessment. The Tribunal reversed the order of the CIT(A) to this extent and upheld the AO's stand of assessing the syndication charges in the hands of the assessee company.
Conclusion:
The Tribunal allowed the Revenue's appeal (ITA No. 1074/Hyd/2003) and the assessee's appeal (ITA No. 1056/Hyd/2003) for statistical purposes, and allowed the appeal of Shri N. Ravi Kumar Reddy (ITA No. 327/Hyd/2006), cancelling the reassessment order passed by the AO and the appellate order of the CIT(A).
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2007 (12) TMI 247
Issues involved:
The primary grievance of the assessee is the default under ss. 201 and 201 (1A) of the IT Act for the financial year 2001-02 despite a favorable Tribunal decision in the previous year.
Summary:
Issue 1: Default under ss. 201 and 201 (1A) of the IT Act
The assessee, a university, deducted tax at source on salaries and benefits but was questioned for not deducting tax on accommodation provided to staff. The AO treated the assessee in default, a decision upheld by the CIT(A) despite a previous Tribunal ruling in favor of the assessee for the financial year 2000-01.
Issue 2: Failure to consider Tribunal's order
The CIT(A) did not consider a Tribunal order from the previous year in the assessee's favor, choosing to follow his own earlier order which had been overruled. The Tribunal emphasized the binding nature of its decisions on lower authorities and overturned the CIT(A)'s decision, holding that the assessee was not in default for the financial year 2001-02 regarding accommodation provided to employees.
Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing the importance of following Tribunal orders as binding precedent and maintaining judicial discipline. The decision highlighted that the CIT(A) erred in not considering the Tribunal's previous ruling and held that the assessee was not in default under ss. 201 and 201 (1A) for the financial year 2001-02.
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2007 (12) TMI 246
Surrendered amount represent as Concealed Income? - Penalty levied u/s 271(1)(c) - Onus to prove - creditworthiness and genuineness of the transaction - HELD THAT:- We find no force in the argument of the learned counsel for the assessee that there is a jurisdictional defect in initiating the penalty proceedings as the AO has failed to record any satisfaction in terms of s. 271(1)(c) of the Act in the assessment order inasmuch as the said satisfaction is discernable from the assessment order. The AO while considering the said gift has specifically observed penalty proceedings under s. 271 (1)(c) are being initiated on this point as the onus to prove genuineness of this amount was not discharged by the assessee.
Following the ratio laid down in the case of CIT vs. Aggarwal Pipe Co.1999 (7) TMI 57 - DELHI HIGH COURT] squarely applies to the instant case. Therefore, we are of the view that the AO was not justified to impose the penalty under s. 271(1)(c) on the assessee. We, therefore, direct to delete the penalty.
In the result, the appeal filed by the assessee is allowed.
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2007 (12) TMI 245
Issues Involved:1. Disallowance of PF and ESI payments u/s 43B of the IT Act. 2. Retrospective application of the omission of the second proviso to s. 43B by the Finance Act, 2003. Summary:Issue 1: Disallowance of PF and ESI payments u/s 43B of the IT ActDuring the assessment proceedings, the AO noticed that certain payments of PF and ESI had been deposited beyond the due dates. The AO disallowed the claim of deduction u/s 43B of the Act and added an amount of Rs. 6,10,794 for PF and Rs. 83,196 for ESI to the income of the assessee. On appeal, the CIT(A) reduced the disallowance from Rs. 6,93,990 to Rs. 1,23,587, observing that most of the cheques were tendered within the grace period permitted. However, payments for August 1999 and November 2000 were considered belated and hit by the provisions of s. 43B. Issue 2: Retrospective application of the omission of the second proviso to s. 43B by the Finance Act, 2003The assessee argued that the omission of the second proviso to s. 43B by the Finance Act, 2003, effective from 1st April 2004, should be considered retrospective, allowing deductions for payments made before the due date for filing the return. The learned counsel cited various case laws, including the Special Bench of Tribunal, Chennai in the case of Kwality Milk Foods Ltd., and the Gauhati High Court in CIT vs. George Williamson (Assam) Ltd. However, the learned Departmental Representative relied on the decision in CIT vs. Synergy Financial Exchange Ltd., which held that the omission of the second proviso was not retrospective. The Tribunal noted that the jurisdictional High Court of Delhi in CIT vs. Dharmendra Sharma held that contributions towards PF and ESI, though paid after the due date but before the due date of filing the return, are entitled to deduction. Therefore, the Tribunal set aside the matter to the AO to allow the claim of the assessee accordingly. Conclusion:The appeal filed by the assessee is allowed for statistical purposes, with instructions to the AO to re-examine the facts in light of the observations made regarding the retrospective application of the omission of the second proviso to s. 43B.
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2007 (12) TMI 244
Issues Involved:
1. Validity of notice u/s 143(2) of the Income-tax Act, 1961.
2. Consequences of failure to serve notice u/s 143(2) within the statutory period.
Summary:
Issue 1: Validity of Notice u/s 143(2)
The assessee contended that the notice u/s 143(2) was not served within the prescribed time limit, making the assessment invalid. The CIT(A) upheld the validity of the notice, relying on the Supreme Court's decision in Prima Realty v. Union of India, which deemed the Post Office as the agent of the assessee, thus considering the notice served on the date it was dispatched (31-10-2002).
Issue 2: Consequences of Failure to Serve Notice u/s 143(2) within the Statutory Period
The Tribunal examined whether the Assessing Officer could establish the service of the notice within 12 months from the end of the month in which the return was filed. It was concluded that mere issuance of the notice within the statutory period is insufficient; the notice must be served within this period. The Tribunal found that the Assessing Officer failed to prove the service of the notice by 31-10-2002, making the subsequent assessment proceedings time-barred and invalid.
Legal Precedents and Case Law:
1. Whirlpool India Holdings Ltd. v. Dy. DIT: The Tribunal held that the date of service, not the date of issue, is crucial for compliance with the statutory period.
2. CIT v. Vardhman Estate (P.) Ltd.: The Delhi High Court ruled that the date of dispatch cannot be deemed the date of service.
3. CIT v. Bhan Textiles (P.) Ltd.: The court emphasized that notice must be served within the prescribed time limit.
4. CIT v. Lunar Diamonds Ltd.: The Delhi High Court upheld the Tribunal's decision that failure to serve notice within the statutory period invalidates the assessment.
5. Raj Kumar Chawla v. ITO: The Special Bench of the Tribunal held that failure to serve notice within the statutory period results in the loss of jurisdiction to make an assessment.
Conclusion:
The Tribunal concluded that the revenue failed to establish the service of the notice u/s 143(2) within the statutory period, rendering the assessment invalid. Consequently, the assessment framed by the Assessing Officer was quashed, and the demand raised thereunder was also cancelled. The appeal filed by the assessee was allowed on these grounds, making it unnecessary to adjudicate the other grounds on merits.
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2007 (12) TMI 243
Issues:
- Allowability of provision for bad and doubtful debts under Income-tax Act
- Interpretation of Explanation to section 36(1)(vii) of the Act
- Applicability of RBI guidelines on provisions for bad and doubtful debts
- Scope of Assessing Officer's power under section 154 for rectification
Issue 1: Allowability of provision for bad and doubtful debts under Income-tax Act
The appeal concerned the deletion of an addition on account of provisions for doubtful debts of Rs. 32,43,895. The Assessing Officer disallowed the provision as a deduction under the Income-tax Act, stating that it was in the nature of diminishing the value of assets and not a provision to meet a liability. The appellant, a Non-Banking Financial Company (NBFC), argued that the provision was made in accordance with NBFC Prudential Norms issued by the RBI, which mandate such provisions. The ITAT allowed the claim based on similar precedents and the appellant's compliance with RBI guidelines.
Issue 2: Interpretation of Explanation to section 36(1)(vii) of the Act
The Finance Act, 2001 inserted an Explanation to section 36(1)(vii) with retrospective effect from 1-4-1989. The Explanation clarified that any bad debt written off in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts. The ITAT emphasized that the legislative intention was to deny the benefit of section 36(1)(vii) in respect of provisions made for bad and doubtful debts. The insertion of the Explanation aimed to make this position clear and beyond controversy or doubt.
Issue 3: Applicability of RBI guidelines on provisions for bad and doubtful debts
The appellant argued that the RBI guidelines for NBFCs mandated provisions for bad and doubtful debts, and the provisions of section 45Q of the RBI Act had overriding effect on the Income-tax Act. However, the ITAT held that RBI guidelines could not override statutory provisions of the Income-tax Act. The ITAT clarified that the legislative framework did not permit a hybrid system of accounting for NBFCs, emphasizing the need for adherence to the provisions of the Income-tax Act.
Issue 4: Scope of Assessing Officer's power under section 154 for rectification
The Assessing Officer's power under section 154 was scrutinized, with the appellant arguing that corrections should be limited to mistakes apparent from the record. The ITAT emphasized that the Assessing Officer could rectify mistakes related to interpretation of law under section 154. The ITAT reinstated the Assessing Officer's order disallowing the claim for provisions for bad and doubtful debts, highlighting the importance of adhering to statutory provisions and clarifications provided by the legislature.
In conclusion, the ITAT upheld the Assessing Officer's decision to disallow the claim for provisions for bad and doubtful debts, citing the legislative intent clarified by the Explanation to section 36(1)(vii) of the Act. The judgment emphasized the importance of adhering to statutory provisions and the limitations of the Assessing Officer's power under section 154 for rectification.
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2007 (12) TMI 242
Issues Involved:
1. Validity of assessment u/s 148/143(3).
2. Levy of interest u/s 234B and 234C.
3. Confirmation of additions u/s 68 regarding gifts received by the assessees.
Summary:
1. Validity of Assessment u/s 148/143(3):
The assessees contended that the assessment framed u/s 148/143(3) was arbitrary, unjust, and illegal. However, the Tribunal found this ground to be of a general nature without specific details. Consequently, this ground was rejected as it required no adjudication.
2. Levy of Interest u/s 234B and 234C:
The Tribunal noted that the issue of interest levy u/s 234B and 234C is consequential and does not require separate adjudication. The Assessing Officer will consider it while giving appeal effect.
3. Confirmation of Additions u/s 68:
The core issue was the genuineness of the gift transactions. The Assessing Officer had added the amounts received as gifts to the income of the assessees u/s 68, citing lack of proof regarding the donors' capacity and the genuineness of the transactions. The CIT(A) confirmed these additions, holding that the assessees failed to establish the genuineness of the gifts despite proving the identities and creditworthiness of the donors.
The Tribunal upheld the CIT(A)'s findings, emphasizing that the gifts were unusual and unnatural, given that the donors had no relationship with the assessees and had not given similar gifts to their own family members. The Tribunal referred to precedents, including the Apex Court's decision in CIT v. P. Mohanakala and the Delhi High Court's decision in Rajiv Tandon v. Asstt. CIT, which supported the view that the genuineness of gift transactions must be scrutinized considering human probabilities and surrounding circumstances.
The Tribunal concluded that the gift transactions were not genuine and should be treated as the assessees' income from undisclosed sources. Although the additions were initially made u/s 68, the Tribunal held that they should be made u/s 69A, as the amounts were found credited in the assessees' bank accounts without satisfactory explanation.
Conclusion:
The Tribunal dismissed the appeals, upholding the CIT(A)'s order with a modification that the additions should be made u/s 69A instead of u/s 68.
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2007 (12) TMI 241
Reopening of assessment - invalid notice - Income Escaping Assessment - issuance of notice u/s 148 by assuming jurisdiction - Valuation of agricultural land - invoking the provisions of section 131 (d) - HELD THAT:- It is clear that the capital gain is to be computed by deducting from the 'full value' of the consideration received or accruing as a result of the transfer of the capital asset i.e., the cost of acquisition and expenditure incurred in connection with the transfer are to be deducted from the full market value of the asset. The expression 'full value of the consideration' does not mean 'market value' or 'fair market value' of the asset transferred. Hence, capital gain tax cannot be computed and levied with reference to the market value determined on the basis of valuation report.
Hence, from this angle also the basis for reopening of the assessment for taxing capital gain in the hands of the assessee, being market value as estimated by the Departmental Valuation Officer cannot be a proper basis under the relevant provisions of law contained under section 48 of the Income-tax Act for the reopening of the assessment.
There is another aspect of the matter. The valuation report is an expert opinion at the most. In relation to the transaction of transfer such report cannot be treated to be proof of the fact that there is some under hand dealing and consideration has passed more than what is disclosed.
Since in the present case the reasons recorded for reopening and the facts taken into account for formation of belief by the Assessing Officer that income of the assessee has escaped assessment is based on the report of DVO, in view of the above authorities, the assumption of jurisdiction under section 148 by the Assessing Officer on this basis is not legally justified. The contention of the assessee that the 'reason to believe' should be considered with reference to the relevant provisions of the Act under which the income is chargeable to tax also carries force.
In the instant case, therefore, the Assessing Officer was required to base his reasons for reopening of the assessment with reference to the provisions of section 48. He has not done so. On the other hand, he has gone on totally irrelevant consideration which is estimated value of the land, which aspect is not relevant so far as section 48 is concerned. The issuance of notice under section 148 by assuming jurisdiction on the basis of such irrelevant material, is not justified in law.
Since notice issued under section 148 in the instant case has not been issued after testing the grounds of issuing such notice in the light of section 48, the jurisdiction of the Assessing Officer in issuing such a notice on the basis of such material, as has been taken by the Assessing Officer in this case, is not justified.
In view of the above discussion, ground Nos. 1, 2 and 3 as taken in this appeal are allowed.
In view of our finding on ground Nos. 1 to 4, the assessment order is quashed and on these grounds the appeal of the assessee is allowed - As we have quashed the assessment order, we are not required to adjudicate other grounds raised in this appeal and go into the merits of the case.
Assessee's appeal stands allowed accordingly.
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