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Showing 341 to 360 of 835 Records
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2010 (4) TMI 901
Demand of service tax - Photography services - Supreme Court dismissed the appeal after condonation of delay where tribunal has held that appellants are eligible to abatement of the value of the goods and materials consumed under the notification.
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2010 (4) TMI 900
Whether the applicant falls within the scope of the expression ‘employees’ mentioned in section 445(3) of the Companies Act ?
Held that:- A reading of section 445 (3) of the Act makes it clear that the order of winding up also amounts an order of discharge to the applicant in view of the fact that on that date, the business of the company was at an end and was not continued. Sadly, in this case, the applicant himself had brought the petition for winding up of the respondent company on his own behalf and on behalf of unpaid workers of the company and it was on his petition that this order came to be passed. To my mind, the scope of the expression "discharge" used in section 445(3) of the Companies Act, 1956 cannot be taken to mean that all employees, thus, discharged are deemed to have left the insurable employment on attaining the age of superannuation, as required under rule 61 of the ESI (Central) Rules, 1950. Appeal dismissed.
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2010 (4) TMI 899
Restoration of the name of the company to the Register of Companies seeked - Held that:- For the Court to now take the view that it would be just and proper for such a company to be given an opportunity to raise the share capital to the minimum required after being restored to the Register of Companies, would, to my mind, amount to a travesty and cannot be permitted. Petition dismissed.
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2010 (4) TMI 898
Winding up - claim for damages - Held that:- In the present proceedings the test is not to finally assess the merits of the claim or the defence unless the defence is such that it is demurrable. The company court will proceed no further once it sees that a triable issue has been raised which calls for a more detailed scrutiny. Just as it would not do for a company to create an illusion of a defence, it is also mandatory that a petitioning creditor affirmatively establish the debt before the petition can progress to the second stage after admission. It is for such reason that the petitioner has to be left to pursue the claim in the arbitral reference or in a suit that the petitioner may bring.
The claim of the petitioner may be pursued in the arbitral proceedings already commenced or in a suit that the petitioner may institute in accordance with law. C.P. No. 199 of 2009 is permanently stayed. For the company's showing in its affidavit, it will pay costs to the petitioner assessed at 1,000 GM.
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2010 (4) TMI 897
Whether a period of 21 days, which is the time contemplated by section 434 of the Companies Act, 1956, should be added to such date, i.e. June 19, 2006 and limitation should be reckoned after a period of three years therefrom?
Held that:- It is evident from paragraph 12 of the petition that the petitioner was aware that the claim could no longer be enforced since a period of more than three years had elapsed from the date of the last admitted payment. The petitioner then thought up a date and included it in paragraph 12 of the petition though there is no mention of a payment having been made in July, 2007 in the statutory notice issued in January, 2009. The statement of accounts appended to the petition at pages 18 to 20 also does not reveal that any payment had been made by the company to the petitioner during the financial year 2007-08.
For a petitioning creditor to approach this equitable jurisdiction, the person must come with clean hands and utmost candour. Irrespective of whether the petitioner can avail of section 15(2) of the Limitation Act, which appears to be inapplicable to the present case, since it is evident that the relevant averment by the petitioner at paragraph 12 of the petition is contrary to the statements in the statutory notice where the petitioner had categorically stated that the last payment had been made by the company to the petitioner on June 19, 2006, C. P. No. 299 of 2009 is permanently stayed. The petitioner may avail of any other remedy that may be available to the petitioner in respect of the subject-matter of the claim herein.
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2010 (4) TMI 896
Whether an application for review can be entertained when an appeal has been disposed of under section 260A of the Act. – Assessee after losing in appeal preferred an application for review and at that juncture the issue of maintainability of the application was raised – The judgment was passed in a miscellaneous appeal preferred under section 260A of the Income-tax Act against which only an appeal can be preferred under section 261 before the apex court and there is no provision of review of the appellate order in the Income-tax Act which is a code by itself.
In the context of the Income-tax Act it is a code by itself and in the absence of any provision for review against an appellate order passed under section 260A of the Act, no review can be exercised by the High Court. In appropriate cases, inherent power of the court to correct apparent mistakes is permissible to be used by the High Court and such inherent power may be invoked by this court to consider this review application.
The High Court is a superior court of record and under article 215 shall have all powers of such a court of record including the power to punish contempt of itself – Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court.
If the decision of a superior court on a question of its jurisdiction is erroneous, it can, of course, be corrected by appeal or revision as may be permissible under the law, but until the adjudication by a superior court on such a point is set aside by adopting the appropriate course, it would not be open to be corrected by the exercise of the writ jurisdiction of this court.
The High Court as a court of record, as envisaged in article 215 of the Constitution, must have inherent powers to correct the records. A court of record envelops all such powers whose acts and proceedings are to be enrolled in a perpetual memorial and testimony. A court of record is undoubtedly a superior court which is itself competent to determine the scope of its jurisdiction. The High Court, as a court of record, has a duty to itself to keep all its records correctly and in accordance with law.
Hence, the High Court has not only the power, but a duty to correct any apparent error in respect of any order passed by it. This is the plenary power of the High Court – No scintilla of doubt that the High Court can entertain the application for review arising out of a judgment passed under section 260A of the Act the decisions rendered in Bihar Rajya Sahakari Bhumi Vikas Bank Simitee (supra), Bibhay Kumar Sah (supra), J. B. Associates (P) Ltd. and Bengali Singh (HUF) through Bengali Singh [2010] 325 ITR 350 (Patna)[ 2010 (4) TMI 894 - PATNA HIGH COURT ] are overruled.
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2010 (4) TMI 894
Family arrangements - merger of order - principle of merger - held that:- Supreme Court judgment in the case of Kunhayammed [2000 (7) TMI 67 - SUPREME COURT] is an authority on the issue as towhether a judgment and order of the High Court or any tribunal wouldmerge with the order of the Supreme Court in case prayer for grant ofspecial leave to appeal is rejected.
The aforesaid general principle of law regarding merger does not comein the way of the proposition advanced before us on behalf of the Income-tax Department. In the context of the Income-tax Act it has rightly been submitted that the Act is a code by itself and in the absence of any pro-vision for review against an appellate order passed under section 260A ofthe Act, no review can be exercised by the High Court. Hence, we are con-strained to hold that this review petition is not maintainable.
Once review is not provided by the Income-tax Act, it would not beproper for us to exercise jurisdiction of review in the garb of exercise ofinherent power which normally is to be exercised only to correct clerical orsuch similar mistakes and not for going into the merits of the case once again.
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2010 (4) TMI 893
Reassessment - notice us/ 148 - Deduction u/s 80IB - held that:- notice fails to satisfy the ingredients necessary for reopening the assessment under section 147 of the Act after expiry of four years from the end of the relevant assessment year.
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2010 (4) TMI 892
Denying deduction under s. 10B of the profits in excess of the ALP by invoking the provisions of s. 10B(7) r/w s. 80-IA(10) - Held that:- the provisions of s. 80-IA(10) do not give an arbitrary power to the AO to fix the profits of the assessee. The AO has to specify as to why he feels that the profits of the assessee are being shown at a higher figure. He has further to show as to how he has computed the ordinary profits which he deems to be the ordinary profits which the assessee might be expected to generate. The fact that the AO has also not shown any calculation on the basis of which he has determined the excess profit received by the assessee cannot stand in view of the fact that he has not shown as to what he feels is the actual ordinary profit which the assessee could have generated nor has he shown any particulars he has used for arriving at such a figure especially when the assessee himself has filed the calculation showing the error in the difference between the profits and the ALP as filed before the TPO. Under these circumstances the reduction of the eligible profits of the assessee as done by the AO by invoking the provisions of s. 80-IA(10) r/w s. 10B(7) is unsustainable and consequently the same is deleted.
CIT(A) not giving relief by treating the income from the scrap sales as business income - Held that:- As it is noticed that as per the provisions of s. 10B, it is the profits and gains derived by the assessee from a 100 per cent export oriented undertaking that are eligible for deduction. The sale of scrap is not profit and gain derived by the assessee from the 100 per cent export oriented undertaking. The sale of scrap is not an export and on that ground itself the assessee is not entitled to relief. Further while filing its return of income, the assessee itself has treated the income from the sale of scrap as income from other sources. It is not open to the assessee to modify its stand in its return in the course of assessment proceedings other than by filing a revised return as held by the Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (2006 (3) TMI 75 - SUPREME COURT). Under these circumstances, the findings of the learned CIT(A) stand confirmed.
CIT(A) directed AO to allow 5 per cent of the interest income as expenditure relatable to the earning of the interest income - Held that:- Merit in the submissions of the DR that the assessee has not produced any evidence of having incurred any expenditure for the purpose of earning the interest income. In the absence of any expenditure having been incurred the Act does not provide for any ad hoc estimated expenditure. This is because the income of the assessee itself is assessed as per the books of account maintained by the assessee, wherein all the expenditure have been claimed. Under these circumstances, no expenditure is liable to be allowed. Even otherwise, as per the provisions of s. 57(iii), as the assessee has not been able to point out any expenditure which has been laid out or expended wholly or exclusively for the purpose of making or earning such interest income from the bank, no ad hoc expenditure is allowable. Under these circumstances, the findings of the CIT(A) stand reversed and ground of the Revenue is allowed.
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2010 (4) TMI 891
Claim for drawback under special brand rate for the export on abandoned goods - drawback declaration attached to the shipping bill was signed by both M/s. MMTC (exporter) as well as M/s. HMIL (manufacturer) - disclaimer certificate revealed that the goods were exported by M/s. MMTC on behalf of M/s. TATA AIG General Insurance Co. Ltd. – Held that:- Once the state of identity of the impugned goods has already changed and once the applicant has abandoned all rights and interests in the “said goods” then, the applicant should and can not have any liaison with any happening (profitable or expenditure) connected with those “abandoned goods”. M/s. HMIL had abandoned their rights, title and interest in the impugned goods to the insurance company and had received the insurance claim of Rs. 25.59 crores - title of goods got transferred to the M/s. TATA AIG who in turn has exported the goods through M/s. MMTC. Since the disclaimer certificate is disputed by M/s. MMTC, the benefit of said certificate cannot be extended to the applicant in this case – drawback allowed to MMTC
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2010 (4) TMI 890
Search – clandestine removal of goods – DIL (manufacturer) were engaged in procuring raw materials without accounting them and were engaged in the manufacture of “Manikchand Gutkha” illicitly and selling them without payment of duty, etc. - allegation was that, the assessee used to bring back the transit documents viz., LR, Invoice and Waybill and send the same along with subsequent consignments – Held that:- Department had to produce evidence such as procurement of excess material, excess electricity consumption, purchase of basic packing materials such as Plastic Laminate Rolls (PLR) which is used for manufacture of the pouches, etc. and no such evidence is forthcoming - Department raided the Respondent’s factory in May 2001 and again on 20-6-2002, on both the occasions, the department verified stock of raw materials and finished goods and found no discrepancy - there is no evidence to prove clandestine manufacture and clearance by DIL - allegation of clandestine removal based upon the repeated use of LRs, will not be applicable in this case as there is no concrete evidence of clandestine removal - revenue is not able to substantiate by any evidence to corroborate the clandestine manufacturing and clearances of the goods – in favor of assessee
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2010 (4) TMI 889
Transfer pricing - adjustment - held that:- AO has given more importance to the imports made by the assessee from China as the assessee had paid lesser price to Chinese DETPCL though the purity percentage was quite high or equivalent to the purity given by the AE of the assessee in Danmark. - addition delete.
Written off of sundry creditor - set off from bad debts - held that:- the assessee has taken only to the P&L account by reducing the net profit from the bad debts written off. In our opinion as rightly held by the ld CIT(A), the AO made double addition.
Disallowance of ESIC contribution paid after the due date but before filing of returns – Held that:- In the case of Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT ) - addition made by the AO in respect of ESIC contribution deleted and the respective ground is allowed
Disallowance of provision for non recoverable advance - AO made the disallowance on the ground that it is merely a provision which is not allowable business expenditure – Held that:- There is no basis for making the provision in respect of non-recoverable advances; we therefore, confirm the addition made by the AO – In favor of revenue
Lease premium written back from ‘eligible profits’ for deduction u/s 80IB. – assessee pleaded that the same is to be allowed, if the expenditure was debited to the P&L account in the earlier years – Held that:- This aspect has not been considered by the AO - assessee also argued that this issue has been decided in favour of the assessee in assesee’s own case for assessment year 2001-02 and 2003-04 - issue in respect of the ‘lease premium written back’ to the file of the AO - assessee is also directed to file the P&L account of the respective years, if any in which the said expenditure was debited.
Restriction of deduction u/s 80HHC invoking section 80IB (13) r,.w.s 80IA(9) of the Act – Held that:- Assessee fairly submitted that this issue has been decided against the assessee in asseesse’s own case - issue is decided against the assessee and accordingly, the ground of the assessee is dismissed – against assessee
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2010 (4) TMI 888
Enhancement of income – rectification of order - ITO issued notice under section 154 to rectify the assessment order in respect of the income - Assessing Officer vide order dated 18-11-2008 rectified its order and enhanced the income which was confirmed by CIT(A) – Held that:- rectification was made beyond 4 years - It is not open to Assessing Officer while giving effect to order of CIT(A) to invoke provisions of section 154 of the Act with regard to issue of original assessment - Assessing Officer’s order dated 3-2-2004 had already merged into the order of CIT(A) dated 6-10-2005. The Assessing Officer cannot disturb the same in effect giving order. - it is only order of CIT(A) which could be rectified by him alone - appeal of the assessee is allowed.
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2010 (4) TMI 887
Advance tax - interest on the amount of prepaid taxes – Held that:- Interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in sub-section (1A) - assessee is entitled to grant of interest under section 214 and under section 244(1A) – in favor of assessee
Once the amount of advance tax is treated as payment of tax in respect of income of the relevant previous year and credit as such for the amount has been given to the assessee in the assessment order, the amount loses its character of advance tax and becomes income-tax paid in respect of the income of the relevant previous year
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2010 (4) TMI 886
Rejection of return - revised return u/s 139(5) – method of accounting - Assessee-company was following ‘completion method of accounting’ - During year under consideration, to match with Assessing Officer’s finding in assessment year 1983-84 onwards, assessee changed its method of accounting from ‘completion method of accounting’ to ‘percentage method of accounting’ and filed original return - assessee filed revised return on the basis of ‘completion method of accounting’ to maintain its consistency and in accordance with issue settled by Tribunal - Assessing Officer opined that a revised return could be used to correct obvious omission and mistake in the original return and it could not be used to raise an entirely new claim - He accordingly, rejected revised return and proceeded to make assessment on basis of original return - assessee filed revised return on the basis of ‘completion method of accounting’ to maintain its consistency - assessee unable to take one stand whether he should stick to their own stand to follow ‘completion method of accounting’ or to follow the Assessing Officer by following ‘percentage method of accounting’, that situation itself is sufficient to prove the bona fide of the assessee - revised return of income filed by assessee was in accordance with sub-section (5) of section 139 and, therefore, Assessing Officer was not justified in rejecting said return - in favour of the assessee
Disallowance on account of administrative charges paid to HDFC as a revenue expenditure and treating the same as deferred revenue expenditure - Assessee-company paid certain amount as administrative charges on loan obtained from bank – Held that:- There was no material on record on basis of which it could be said that there was an in-built condition of liability for a number of years - it was not revenue’s case that assessee had incurred a liability to pay a larger amount than what it had borrowed at a future date - loan obtained cannot be treated as an asset or advantage for the enduring benefit of the business of the assessee. A loan is a liability and has to be repaid and, it is erroneous to consider a liability as an asset or an advantage - expenditure was made for securing the use of money for a certain period - expenditure was revenue expenditure - expenditure in question was not in the nature of capital expenditure and was laid out or expended wholly or exclusively for the purpose of the assessee’s business which is allowable expenses
Capital gain - genuineness of the transaction - conversion from investment into stock-in-trade – Held that:- Genuineness of the transaction or genuineness of conversion of assets from investment to stock-in-trade which has already converted in earlier year and not during the year, cannot be examined in the year of the sale of stock-in-trade. It can be examined only in the year when the asset was acquired or converted from investment into stock-in-trade – in favor of assessee
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2010 (4) TMI 884
Taxability - receipt of barge hire charges - permanent establishment – Assessee was a tax resident of UAE - The test of ‘commercial and geographical coherence’ - assessee carried out two projects in India - Assessing Officer was of view that these two contracts were executed in same geographical area, for same party and were, therefore, required to be viewed as geographically and commercially coherent - He, further, held that since period of two contracts, taken together, worked out to 294 days which was in excess of threshold limit of nine months, assessee could be said to have a permanent establishment in India as per provisions of article 5(2)(i) of India-UAE tax treaty – Held that:- There is no finding that there is any interdependence and interconnection between the two contracts, or that these contracts are such that they can only be viewed as a coherent whole and not in isolation with each other - aggregation of time spent on different projects can only arise for connected projects. On the contrary, these two contracts are of different nature inasmuch as while one contract is for barge hire, the other one is for installation work - assessee did not have a ‘permanent establishment’ in India - amount received by the assessee as barge hire was rightly brought to tax by the Assessing Officer - any receipt for services rendered outside India’s continental shelf and economic zone are not taxable in India
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2010 (4) TMI 883
TP adjustment - determining the arm’s length price - MAM selection - expenses incurred by the assessee which were reimbursed by the associated concern to the assessee - whether mark up percentage over cost being 5 per cent is correct or not? - whether the comparable cases, as selected by TPO, were substantially similar to the assessee’s function or not?
HELD THAT:- SIRO Clinpharm Pvt. Ltd. was engaged in conducting clinical trial services. It was an organization which was mainly doing the clinical research activity and, therefore, when the TPO was adopting it as a basis for comparing the assessee’s transaction then as per rule 10B(1)(a)(ii ), she was required to adjust in regard to differences. As per sub-clause (iii) of clause (c) of rule 10B, when cost method is adopted, the normal gross profit is required to be adjusted to take into account the functional and other differences, if any, between the international transaction and the comparable uncontrolled transactions. Therefore, 17.14 per cent mark up in the case of SIRO Clinpharm Pvt. Ltd. was required to be adjusted before it could be made applicable for determining the arm’s length price in regard to international transaction entered into by the assessee.
As details of expenses incurred by the assessee which were reimbursed by the associated concern to the assessee contained and pointed out that the assessee had incurred such expenses which were directly relatable to the research activity. We find the laboratory charges paid are Rs. 11,875 but the payments to hospital for initiating study is Rs. 7,54,050.
This clearly shows that mainly the assessee has made the payment not for laboratory test but mainly to hospitals that carried out the clinical test on the patients. The assessee’s infrastructure was only in the form of furniture, vehicle, office equipments and computers, which were used for general administration and it was not sufficient for carrying out the whole research activity. Therefore, the assessee was solely dependent on the data provided by the doctors in various hospitals.
The main function of the assessee was to collate the data and transmit the same to Byk Gulden for which it was suitably reimbursed by Byk by mark up of 5 per cent over the cost. The assessee’s functions were more like co-ordinator/facilitator rather than performing the function itself. Further, the assessee’s submission that its profits were exempt under section 10B carries lot of substance because the assessee was, in no way, benefited by charging 5 per cent mark up as against 17.14 per cent fixed by TPO because, in any view of the matter, the profits were exempt.
The assessee has also pointed out that the profits by the AEs have been subjected to tax in the respective overseas jurisdiction and, therefore, there is no necessity for the assessee to transfer the profits in any overseas jurisdiction. This aspect should not have been lost sight of while examining the issue. In view of above discussion, we do not find any infirmity in the order of ld. CIT(A) and, accordingly, we uphold the same.
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2010 (4) TMI 882
Issues:
1. Nature of cost of acquisition of development rights - revenue expenditure or cost of acquisition of a capital asset.
Analysis:
The appeal before the Appellate Tribunal ITAT Chennai pertained to the assessment year 1999-2000, challenging the finding by the Commissioner of Income-tax (Appeals) regarding the nature of the cost of acquisition of development rights. The assessee, engaged in real estate development, claimed a sum under "cost of acquisition of development rights." The Assessing Officer proposed disallowing the claim but allowing depreciation as an intangible asset. The assessee contended that the expenditure for acquiring development rights constituted trading assets, not fixed assets, as they were linked to stock-in-trade and were disclosed under "Current assets, loans and advances-Work-in-progress." The Commissioner of Income-tax (Appeals) held that the development rights were revenue expenditure, not a cost of acquisition of a capital asset, as they were linked to the built-up space in the assessee's business and extinguished upon sale of the built-up space. The Tribunal noted that commercial rights acquired were not fixed assets and were not capable of further exploitation after the sale of built-up space. The Tribunal distinguished previous cases where commercial rights were not linked to physical space and were not extinguished during trading operations. Therefore, the Tribunal upheld the finding that the cost of acquisition of development rights was a revenue expenditure, dismissing the revenue's appeal.
In conclusion, the Tribunal's decision clarified that the cost of acquisition of development rights in this case was considered a revenue expenditure rather than the cost of acquisition of a capital asset. The Tribunal emphasized the intrinsic link between the development rights and the stock-in-trade of built-up space, which were extinguished upon sale, distinguishing them from traditional intangible assets eligible for depreciation. The Tribunal's analysis focused on the nature of the commercial rights acquired, their connection to the business operations, and their ultimate extinguishment upon sale, leading to the determination that the expenditure in question was rightly treated as revenue expenditure.
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2010 (4) TMI 881
Issues Involved:
1. Deletion of disallowance under section 40A(3) of the Income-tax Act, 1961.
2. Addition of Rs. 2,40,130 on account of non-existence of a trading liability.
Issue-Wise Detailed Analysis:
1. Deletion of Disallowance under Section 40A(3) of the Income-tax Act, 1961:
Facts and Arguments:
- The assessee, a partnership firm engaged in trading broiler chickens, made total purchases of Rs. 1,20,51,240, out of which Rs. 1,08,18,051 were from M/s. Bismi Agencies.
- The Assessing Officer (AO) found that payments were made in cash, violating section 40A(3) and show-caused the assessee.
- The assessee contended that cash payments were necessary due to the absence of banking facilities and the illiteracy of vehicle drivers.
- The AO rejected these claims, noting that both the assessee and supplier maintained bank accounts and had turnovers in crores, and basic banking facilities were available even in rural areas.
- The CIT(A) favored the assessee, citing nighttime purchases, illiterate drivers, and the supplier's village location outside bank clearing house operations.
Tribunal's Analysis:
- The Tribunal noted the amendments to section 40A(3) and rule 6DD, emphasizing that the mitigating circumstances under rule 6DD(j) were withdrawn due to the availability of banking services in rural areas.
- It held that the assessee's case did not fall within any specific clause of rule 6DD, as both the assessee and the supplier had access to banking facilities.
- The Tribunal found the assessee's explanations unsubstantiated and aligned with the AO's findings, reversing the CIT(A)'s order.
Conclusion:
- The Tribunal restored the AO's decision, confirming the disallowance under section 40A(3) due to the lack of substantiated extenuating circumstances and the availability of banking facilities.
2. Addition of Rs. 2,40,130 on Account of Non-Existence of a Trading Liability:
Facts and Arguments:
- The AO added Rs. 2,40,130 as a liability outstanding in the name of M/s. Bismi Agencies, which was denied by the supplier.
- The assessee initially did not offer an explanation but later claimed an accounting mistake by the supplier, which the AO found unsatisfactory.
- The CIT(A) deleted the addition, stating the assessee was not confronted with the supplier's statement.
Tribunal's Analysis:
- The Tribunal noted that the technical rules of evidence law are not applicable to proceedings under the Income-tax Act.
- It found no merit in the assessee's claim of not being provided the supplier's statement, as there was no request for a copy or cross-examination.
- The Tribunal emphasized that the burden of proof lies with the revenue to establish facts and circumstances indicating understatement or concealment of consideration.
- It found the assessee's explanation of an accounting mistake unsubstantiated and unsupported by any cogent evidence.
Conclusion:
- The Tribunal restored the AO's addition of Rs. 2,40,130, finding the CIT(A)'s deletion unjustifiable and unsupported by the facts and circumstances.
Final Decision:
- The Tribunal allowed the revenue's appeal, restoring the AO's decisions on both the disallowance under section 40A(3) and the addition of Rs. 2,40,130.
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2010 (4) TMI 880
Issues Involved:
1. Legitimacy of penalties levied under section 271(1)(c) of the Income-tax Act.
2. Assessment of income on an agreed basis.
3. Allegations of concealment of income and furnishing inaccurate particulars.
4. Compliance with accounting standards and revenue recognition.
5. Burden of proof and evidence required for imposing penalties.
Issue-wise Detailed Analysis:
1. Legitimacy of penalties levied under section 271(1)(c) of the Income-tax Act:
The appeals were preferred by the revenue against the orders of the CIT(A) deleting the penalties levied under section 271(1)(c) of the Income-tax Act. The penalties were initially imposed by the Assessing Officer (AO) on the grounds that the assessee failed to furnish accurate particulars of income and resorted to concealment of income by suppressing receipts and inflating expenditures. However, the CIT(A) concluded that the income was estimated on an agreed basis and there was no evidence showing that the assessee concealed particulars of income or furnished inaccurate particulars.
2. Assessment of income on an agreed basis:
The assessee company, part of the Agri Gold Group, was engaged in the business of purchasing agricultural lands and selling them in small farm plots. During a search under section 132 of the Act, it was observed that the assessee had various schemes for selling farm plots. The AO estimated the income at 8% of gross receipts, which was later scaled down to 5% after discussions with the chairman of the group. The CIT(A) found that the income was assessed on an agreed basis to avoid disputes and buy peace, and not due to any concrete evidence of concealment.
3. Allegations of concealment of income and furnishing inaccurate particulars:
The AO claimed that the assessee's accounting system was not in accordance with the "matching cost concept," leading to an inaccurate determination of true profits. However, the CIT(A) noted that no evidence was found during the search showing suppression of receipts or inflation of expenditures. The assessee's accounts were audited, and the accounting policy for revenue recognition was in line with the standards issued by ICAI. The CIT(A) concluded that the AO did not discharge the burden of proving that the assessee concealed income or furnished inaccurate particulars.
4. Compliance with accounting standards and revenue recognition:
The assessee followed a specific accounting system where considerations received under different schemes were shown as advances and later as sale receipts after the collection of the last installment. The AO objected to this method, stating it did not align with the matching cost concept. However, the CIT(A) found that the accounting policy was consistently followed and accepted by the department before the search. The assessee's explanation for debiting expenditures in the P&L account was in accordance with section 37(1) of the Act.
5. Burden of proof and evidence required for imposing penalties:
The CIT(A) emphasized that for imposing penalties under section 271(1)(c), the AO must show that the assessee concealed income or furnished inaccurate particulars. The burden of proof lies on the department to establish concealment. The CIT(A) referred to various judgments, including those from the Supreme Court, which state that merely disbelieving the assessee's claim or estimating income does not justify penalties. The CIT(A) found that the AO did not provide sufficient evidence to prove concealment or inaccuracy, leading to the deletion of penalties.
Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming that the penalties under section 271(1)(c) were not justified. The income was assessed on an agreed basis, and there was no evidence of concealment or furnishing inaccurate particulars. The appeals of the revenue were dismissed.
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9911796707
