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Showing 41 to 60 of 1076 Records
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2014 (10) TMI 1046
Exemption u/s 11 - Withdrawal of registration u/s 12AA by the CIT - Whether the Tribunal is justified in holding that the activities of the KLE University are genuine and withdrawal of registration by the CIT was erroneous? - HELD THAT:- Our answer to the above point is in the affirmative for the following reasons:
i. that the donations received by the KLE society cannot be construed as capitation fee for the admission of students by the KLE university;
ii. that the revenue appears to have not properly appreciated the legal point that though the Chairman and few members of ‘the Society’ are the Chairman and members of ‘the KLE University’, they are separate legal entities;
iii. that there is no violation of any of the conditions stipulated under the IT Act, warranting for cancellation of registration of the society;
iv. that the Tribunal on proper appreciation of the grounds urged by the Society and the Revenue has rightly restored the registration.
In view of the above, there is no merit in the contentions urged by the learned counsel for the Revenue and the decisions cited by him are of no avail.
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2014 (10) TMI 1045
Disallowance of interest expenditure u/s 36 (1)(iii) - disallow interest expenses in total disregard of the facts and figures furnished to establish acquisition and use of asset by the appellant - interest was paid on account of capital borrowed towards the acquisition of asset - HELD THAT:- The purpose of the borrowing has to be determined on the facts of each case. Then the use of the capital borrowed is required to be examined. From A.Y. 2004-05 the borrowing is shown specifically for the purpose of acquiring a capital asset. So, the out come of this proviso is that the interest would not be admissible for deduction till date the new asset is brought to use. An option is available to the assessee to capitalized the interest amount. The effect of the “proviso to Section 36(1)(iii) inserted with the fact of 2004-05 is to disallow interest on Money borrowed for acquiring capital asset till the date on which the asset is brought to use; even if it is for expansion of existing business. As per our humble understanding, the law had always made a difference between money borrowed for existing business, whether it is for expansion or otherwise, with that the money borrowed for setting up an altogether new business - now as per this insertion of the proviso the Revenue Department felt that the expansion of business should be put on par with a new business and that interest on borrowing for capital asset for the purposes of expansion should also be treated as part of capital expenditure in the case of Hindustan Zinc Limited . [2003 (7) TMI 21 - RAJASTHAN HIGH COURT].
The undisputed fact is that in terms of the agreements, which are placed on record; the assessee ‘APPL’ has agreed to purchase the said unit. The agreement dated 21st day of May, 2003 has clearly mentioned that MIL desired to transfer and APPL had desired to purchase the said unit with a clear and marketable title. From this agreement, it is also evident that MIL had only permitted APPL as licensee to enter upon the said unit till the completion of sale. Which means that the process of transfer of the property was going on at the time when those agreements were signed, the assessee was in the process of acquiring the said units, (an asset) during the relevant period. Therefore, the AO was of the view that an expenditure incurred, such as interest expenditure, was required to be capitalized for the period during which the capital asset has not been transferred in the name of the assessee. A serious option has been raised by the AO that had this property was owned by the assessee “APPL”, then it should have been disclosed in the balance sheet under the schedule of assets, but it was not so. Reasons given by the AO for the impugned disallowance appears to be sustainable in the eyes of law.
We have to see the applicability of the proviso annexed to Section 36(i)(ii) that whether interest is allowable in respect of money borrowed for “acquisition” of an asset. Then, the appellant has cited the case law of Bright Automobiles and Plastics Ltd. [2004 (9) TMI 24 - MADHYA PRADESH HIGH COURT] to explain the definition of term “acquiring” is for the purpose of Sec.35AB and held that assessee need not become absolute owner of know-how. We are of the view that there in point in mixing up the issue with the other provisions of IT Act and to be strictly decided in the light of the language of Section 36(i)(iii) to be read alongwith the proviso inserted by the statute. Exactly this was opined by the Hon’ble Supreme Court in the case of Core Health Care Ltd.[2008 (2) TMI 8 - SUPREME COURT] that Section 36(i)(iii) has to be read on its own terms because it is a code by itself. Therefore; finally we hereby conclude that the disallowance was rightly made by the Revenue Department in all the years hence confirmed. Resultantly grounds are dismissed.
Disallowance of depreciation was that the Director of the Company had purchased the motor car in his name - HELD THAT:- The bill for the purchase of the car was also in the name of the Director. Hence, it was held that since the assessee company was not the legal owner of the motor car, therefore, claim of depreciation was not allowable. CIT(A) has confirmed the action of the AO. Now before us an order in the case of ITO Vs. Typhoon Financial Services [2011 (1) TMI 1567 - ITAT AHMEDABAD] as held CIT(A) gave a specific finding that the motor car was purchased out of the funds of the assessee-company and was also used for the purpose of business of the assessee-company. Merely because the registration was in the name of one of the directors would not disallow the claim of the assessee. - Decided in favour of assessee.
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2014 (10) TMI 1044
Extension of stay in respect of the stay already granted by Tribunal - HELD THAT:- The stay was granted for a period of six months or the disposal of assessee’s appeal, whichever is earlier. We found that all the conditions stipulated by the Tribunal in its order dated 14-3-2014 have duly been complied with by the assessee. We also found that after grant of stay, whenever the case was fixed for hearing the department has sought for adjournment.
Thus we found that it is a fit case for grant extension of stay. Accordingly, we extend the stay till 27th February, 2015 or the date of passing of the order by the Tribunal, whichever is earlier. We further direct that if the assessee seeks any adjournment, the stay so granted will be automatically withdrawn.
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2014 (10) TMI 1043
Retention of bill amount payable to Respondent No. 2 - criminal complaint for criminal breach of trust - charges Under Section 406 Indian Penal Code - HELD THAT:- In proceedings instituted on criminal complaint, exercise of the inherent powers to quash the proceedings is called for only in case where the complaint does not disclose any offence or is frivolous. It is well settled that the power Under Section 482 Code of Criminal Procedure should be sparingly invoked with circumspection, it should be exercised to see that the process of law is not abused or misused. The settled principle of law is that at the stage of quashing the complaint/FIR, the High Court is not to embark upon an enquiry as to the probability, reliability or the genuineness of the allegations made therein.
Section 420 Indian Penal Code deals with cheating. Essential ingredients of Section 420 Indian Penal Code are: (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security, and (iii) mens rea of the accused at the time of making the inducement.
In the present case, looking at the allegations in the complaint on the face of it, there are no allegations are made attracting the ingredients of Section 405 Indian Penal Code. Likewise, there are no allegations as to cheating or the dishonest intention of the Appellants in retaining the money in order to have wrongful gain to themselves or causing wrongful loss to the complainant - Excepting the bald allegations that the Appellants did not make payment to the second Respondent and that the Appellants utilized the amounts either by themselves or for some other work, there is no iota of allegation as to the dishonest intention in misappropriating the property.
Since no case of criminal breach of trust or dishonest intention of inducement is made out and the essential ingredients of Sections 405/420 Indian Penal Code are missing, the prosecution of the Appellants Under Sections 406/120B Indian Penal Code, is liable to be quashed - appeal allowed - decided in favor of appellant.
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2014 (10) TMI 1042
Nature of expenditure - Product registration expenses - revenue or capital expenditure - assessee had obtained valuable marketing benefits in several countries; hence, the expenditure was in capital field and not a revenue expenditure - AO has disallowed the assessee’s claim of additional depreciation in respect of such machinery which were generating electricity on the ground that those machineries were not producing any “article or thing” hence not eligible for additional depreciation as prescribed u/s.32(1)(iia) - HELD THAT:- Assessee in these cases were involved in different items of manufacturing and purchased windmills. On the identical issue, M/S. VTM LIMITED [2009 (9) TMI 35 - MADRAS HIGH COURT],TEXMO PRECISION CASTINGS [2009 (10) TMI 140 - MADRAS HIGH COURT] AND M/S. HI TECH ARAI LIMITED [2009 (9) TMI 60 - MADRAS HIGH COURT] held that assessee are entitled to additional depreciation on cost of windmill acquired. It is also held that the plant and machinery purchased need not be operationally used for manufacturing articles or things. Since the only objection of the assessing officer was that newly purchased machinery generated electricity which is not articles or thing, is no longer a relevant issue in the light of these decisions.
From the facts narrated in the assessment order and in the appellant's submission, it is clear that appellant fulfilled all the conditions required for claim of additional depreciation on machinery purchased by it. The addition of machinery was after 31st of March 2005. Appellant was already in the business of manufacturing articles for things. The machine purchased is not covered by any clause of proviso to this section. The same was not used by any person before installation. It is not installed in office or residential premises. This is not office appliance or road transport vehicle - these machines are also not eligible for 100 percent depreciation in one year. Considering this appellant fulfils all the conditions required for claim of additional depreciation. Respectfully following the decisions of Madras High Court relied upon by the appellant, assessing officer is directed to allow additional depreciation on new plant and machinery purchased - Decided against revenue.
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2014 (10) TMI 1041
Computation of Deduction u/s 10B - AO deducting expenditure on the leased telecommunication line and other expenses incurred in foreign exchange from export turnover in computing the deduction u/s 10B - HELD THAT:- We find that assessee originally made claim under section 10B and an alternative claim was also made under section 10A of the Act during the assessment proceedings. The Commissioner of Income Tax (Appeals) directed the AO to verify conditions as per section 10A and allow the claim of the assessee. Since the CIT (Appeals) has already directed the AO to verify the claim of the assessee and allow deduction under section 10A, we remit this issue back to the file of the AO to decide this issue also afresh in accordance with law keeping in view the decision of ITO Vs. Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D] relied on by the assessee. Appeal of the assessee is allowed for statistical purposes.
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2014 (10) TMI 1040
Penalty on CHA u/s 114 of CA - exporter was fictitious firm not available at the address given in the shipping bills - control over the “G” and “H” Card holders - allegation based on assumptions and presumptions or not - HELD THAT:- There are no direct allegations either in the show cause notice or direct finding in the impugned order to conclude that it was the present CHA himself who filed shipping bills. The adjudicating authority has relied upon the sole statement of Shri Rakesh Kumar of M/s. Sky Liner Transhipment - As against the statement of Shri Rakesh Kumar, there is statement of Shri S. Malik, proprietor of present CHA denying having filed the shipping bills. As such, the sole statement of Shri Rakesh Kumar, which is also being faced with the statement of Shri S. Malik without any collaborating evidence, cannot be made basis for penalizing the appellant.
The entire case of the Revenue is based upon the assumption and presumption inasmuch as the notice alleges allowing of misuse by the CHA and the impugned order holds him responsible for any misuse or his having no control over the “G” and “H” Card holders without coming to a finding who filed the shipping bills. There is no handwriting opinion in respect of signatures appearing on the shipping bills nor their CHA card holder examined by the Revenue.
There are no merits in the Revenue’s stand of involvement of the present CHA - penalty set aside - appeal allowed - decided in favor of appellant.
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2014 (10) TMI 1039
Revision u/s 263 - Narration in the cash books which reflected deposits in cash to the bank accounts of trade creditors’ and Non-examination of books of account with reference to the deposits into trade creditors’ bank accounts - as per CIT that provisions of section 40A(3) were attracted to cash deposits made directly to the accounts of suppliers - HELD THAT:- There is no dispute that the issue regarding application of section 40A(3) of the Act was verified by the AO during the course of assessment proceedings. That, queries were raised in this regard and assessee had given reply on 8.3.2013 is clear from the paperbook filed by the assessee.
It might be true that there are some decisions of different High Courts which could lead to a view that payments effected directly to suppliers’ bank account in cash would also attract section 40A(3) - it cannot be said that the view taken by AO is not a lawful one, especially when the co-ordinate Bench of the Tribunal in the case of Sandur Sales & Services Pvt. Ltd. [2012 (11) TMI 1305 - ITAT BANGALORE] had held in favour of the assessee in similar facts and circumstances, relying on the decision of Hon’ble Apex Court in Attar Singh Gurmukh Singh [1991 (8) TMI 5 - SUPREME COURT]
So, effectively, the ld. CIT was trying to substitute a lawful view taken by AO with that of his own. The Hon’ble Apex Court in the case of Max India Ltd [2007 (11) TMI 12 - SUPREME COURT] had clearly held that when two views are possible and ITO had taken one view with which Commissioner does not agree, it could not be treated as an erroneous order prejudicial to the interest of revenue, unless view taken by ITO was unsustainable in law. The Hon’ble Bombay High Court in Gabriel India Ltd. [1993 (4) TMI 55 - BOMBAY HIGH COURT] has clearly held that section 263 did not visualize substitution of judgment of Commissioner with that of ITO. We are, therefore, of the opinion that this was not a fit case where powers u/s. 263 could have been invoked. The original assessment order could be stated to be erroneous insofar as it was prejudicial to the interests of revenue. Order of the CIT u/s. 263 is quashed. - Decided in favour of assessee.
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2014 (10) TMI 1038
Characterization of receipt - Clean Development Mechanism [CDM] receipts - revenue receipt or capital receipt - HELD THAT:- The Hyderabad Bench of the Tribunal in the case of M/s My Home Power Ltd. v. DCIT [2012 (11) TMI 288 - ITAT HYDERABAD] has held carbon credit as capital receipts. Also see SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD. VERSUS DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, TIRUPUR [2015 (4) TMI 132 - ITAT CHENNAI] - Thus we hold that the amount received by the assessee on account of CDM (carbon credits) is capital in nature. The impugned order is set aside, the appeal is allowed.
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2014 (10) TMI 1037
TDS credit - Revenue contends that once the assessee had not shown the aforesaid subscriptions as its own income, its TDS claim ought not to have been granted in the lower appellate proceedings - HELD THAT:- There is no quarrel about the factual position that the assessee had collected subscription at the behest of M/s Sun TV Network Ltd. Its payees could only deduct TDS in its name and not that of the latter entity which has already admitted these very payments in return filed. The 'tribunal' in identical circumstances [2013 (12) TMI 900 - ITAT CHENNAI] had held the assessee entitled for TDS credit u/s 199 - In our view, plea of ‘low tax effect’ does not merit acceptance as the department could have treated this issue as a recurring one. There is also no material on record to take a different view as well. In these circumstances, we hold that the CIT(A)’s findings do not warrant any interference. The Revenue’s grounds are rejected.
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2014 (10) TMI 1036
Provisional attachment of the properties - mis-declaration of net worth for allotment of coal blocks - proceeds of crime - HELD THAT:- Once a complaint is received by the Enforcement Directorate that a person is involved in money laundering, the Enforcement Directorate sets in motion the investigation on the allegations of money laundering against the person. Chapter-II of the Act prescribes offence of money laundering and the punishment thereof. Chapter-III prescribes procedure for attachment, adjudication and confiscation of property - Prosecuting for offence of money Laundering requires a full fledged trial and takes considerable time. In the meantime, unless the property is attached, the person is entitled to deal with the property. It is possible for the person to completely dispose of the properties which are acquired by committing crime of money laundering, and also can conceal or deal with such property, which would ultimately frustrate the proceedings for confiscation under the Act. The scheme of the Act would bring out that if the Enforcement Directorate has reason to believe that the property in possession of a person against whom crime is already registered is acquired as a result of proceeds of crime and he has reason to believe that there is possibility to conceal or transfer or deal with in any manner which may result in frustrating the proceedings relating to confiscation of such proceeds of crime, he can provisionally attach the property.
Wide amplitude of powers are vested in the adjudicating authority in dealing with the matter concerning the attachment of properties. A bare look at the provisions of Sections 5 and 8, it cannot be said that Adjudicating Authority is not competent to go into the manner of exercise of power by Enforcement Directorate under Section 5(1). The Adjudicating Authority shall afford due opportunity of hearing to the person concerned. He is mandated to consider all aspects and on duly considering the submissions of the aggrieved person shall record a finding that all or any of the properties shown in the notice issued under Section 8(1) are involved in money-laundering.
The petitioners have effective and efficacious statutory remedies to prove the nature of acquisition of assets and to ventilate their grievances. Furthermore, at the stage of provisional attachment the person concerned is not dispossessed of the property, but is only prevented from dealing with the property till orders are passed by the adjudicating authority under Section 8(2). Against order of the adjudicating authority under Section 8(2), appeal shall lie to the Appellate Tribunal under Section 26 and further appeal to the High Court under Section 42 - The Joint Director is competent to pass orders of attachment. It is not a case of lack of jurisdiction to Enforcement Directorate. Violation of principles of natural justice at the provisional attachment stage does not arise as statute has not made provision of opportunity of hearing prior to provisional attachment. Decision to attach is based on the assessment by Enforcement Directorate as per material in its possession. It is a tentative decision. Such decision is to be placed before the Adjudicating Authority.
Petition dismissed.
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2014 (10) TMI 1035
Revision of assessment order - opportunity of being heard not provided - violation of principles of natural justice - HELD THAT:- While issuing the notice dated 30.12.2013 the respondent had stated that the petitioner/ dealer are given an opportunity of hearing and file their objections if any, within 15 days of the receipt of the notice. Further, the notices indicate that apart from the petitioner's right to file their objection, opportunity of being heard would also be afforded. Under normal circumstances, the first requirement is to file an objection/reply to show cause notice - Though there would have been an intention for giving personal hearing in the show cause notice, the personal hearing ought to be fixed by the respondent and not that the petitioner should seek for a personal hearing to produce the records, since it is a proposal to revise an assessment already made. Since there is violation of principles of natural justice this Court has to interfere with the revision order.
The matter is remanded back to the respondent for fresh consideration - Petition allowed by way of remand.
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2014 (10) TMI 1034
Exemption u/s 11 - refusal of registration u/s 12AA - Proof of charitable activities as prescribed u/s 2(15) - non-approval of the state government for running educational institutions - HELD THAT:- We find that the Directorate of Tamil Nadu Matriculation Schools, Chennai has already accorded approval on 4.3.2014 permitting the assessee to open a school for LKG to VIIIth class from academic year 2014-15. Therefore, the first objection does not survive.
Assessee has not commenced its charitable activities and its activity as a commercial organization - The assessee has already enrolled students in the school. The hon'ble jurisdictional high court in DIT(E) vs M/s Seervi Samaj Tambaram Trust - [2014 (2) TMI 32 - MADRAS HIGH COURT] has held that registration u/s 12AA of the Act ought not be refused on the ground of non-commencement of charitable activities.
Lack of genuineness in the assessee’s activities as well - We accept the assessee’s contentions and hold it entitled for registration u/s 12AA of the Act. Needless to say, the issue of commercial activities and lack of genuineness abovesaid are left to be examined in the course of assessment as per law. - Assessee’s appeal is allowed.
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2014 (10) TMI 1033
Exemption u/s 11 - Corpus donation - whether is taxable as income or not even in the cases in which the trust is not registered under section 12AA ? HELD THAT:- As decided in M/S. GAUDIYA GRANTH ANUVED TRUST [2013 (8) TMI 875 - ITAT AGRA] corpus donation is in the nature of a capital receipt and are not taxable, irrespective of the fact whether the trust is registered under section 12AA or not. CIT (Appeals) considering the material on record gave a specific finding of fact that the assessee society was meant for charitable and religious purposes and was totally devoted to the Buddhist temple/monastery in the year under consideration. The assessee was thus at the stage of construction of the temple and has not carried out any other profession or occupation for earning the income. Therefore, no income accrues to the assessee. The assessee has also specifically pleaded that the donations were received as corpus towards the construction of the temple. Therefore, the learned CIT (Appeals) was justified in holding that there is no receipts in the hands of the assessee in the nature of income - Decided against revenue.
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2014 (10) TMI 1032
Ex-parte order of CIT-A - non appearance by assessee - as submitted reason for non appearance before the Ld. CIT(A) and the Assessing officer is beyond the control of the assessee as assessee had gone abroad and he was not aware about the fixation of the case - HELD THAT:- Three adjournments were sought by the Ld. Counsel for the assessee from the office of the Ld. CIT(A) which were granted. On the last date none appeared. In these circumstances, no doubt the Ld. CIT(A) had the right to proceed on exparte basis but when he is supposed to adjudicate the case after considering the material on record and record his findings. Instead of doing so the Ld. CIT(A) has dismissed the appeal in limine. Therefore in the interest of justice we set aside his order and restore the matter back to his file with a direction to adjudicate the issues after providing adequate opportunity to the assessee. The assessee is also directed to cooperate in the appeal proceedings. Appeal of the assessee is allowed for statistical purposes.
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2014 (10) TMI 1031
Principles of estoppel - Payment of maturity amount of National Savings Certificate - purchase of NSC illegally - Rule 17 of the Post Office Savings Bank General Rules, 1981 - HELD THAT:- It is not possible for us to accept the applicability of the principle of estoppel in the facts and circumstances of this case. No representation is ever shown to have been made to the Appellant. It was the Appellant's individual decision to purchase the NSC. It is not shown, that a fraudulent representation was made to the Appellant. It is also not shown, that a false statement was negligently made to the Appellant. The rule of estoppel, in the present case, could have only been premised on some conduct of the Respondent, which had willfully induced the Appellant to invest in the NSC. Unfortunately, for the Appellant, no such willful conduct has been brought to our notice.
This case would be governed by the proposition evolved in Moorgate Mercantile Company Ltd. v. Twitchings, namely, where two people with the same source of information assert the same truth or agree to assert the same falsehood at the same time, neither can be estoppel against the other. Therefore, whilst it cannot be disputed, that the authorities issuing the NSC were required to ensure, that the same was issued to only such persons who were eligible in law to purchase the same, yet in terms of the mandate of Rule 17 extracted hereinabove, the vires whereof is not subject matter of challenge, it is not possible for us to accept, that the rule of estoppel could be relied upon at the behest of the Appellant, for any fruitful benefit.
It is indeed true, that the NSC was purchased in the name of M/s. Bhagwati Vanaspati Traders. It is also equally true, that M/s. Bhagwati Vanaspati Traders is a sole proprietorship concern of B.K. Garg, and as such, the irregularity committed while issuing the NSC in the name of M/s. Bhagwati Vanaspati Traders, could have easily been corrected by substituting the name of M/s. Bhagwati Vanaspati Traders with that of B.K. Garg. For, in a sole proprietorship concern an individual uses a fictional trade name, in place of his own name. The rigidity adopted by the authorities is clearly ununderstandable. The postal authorities having permitted M/s. Bhagwati Vanaspati Traders to purchase the NSC in the year 1995, could not have legitimately raised a challenge of irregularity after the maturity thereof in the year 2001, specially when the irregularity was curable - Legally, Rule 17 of the Post Office Savings Bank General Rules, 1981, would apply only when an applicant is irregularly allowed something more, than what is contemplated under a scheme.
There was seriously no difficulty at all in the facts and circumstances of the present case, to regularize the defect pointed out, because M/s. Bhagwati Vanaspati Traders, is admittedly the sole proprietorship concern of B.K. Garg. The postal authorities should have solicited the change of the name in the NSC, through a representation by B.K. Garg himself. On receipt of such a representation, the alleged irregularity would have been cured, and the beneficiary of the deposit, would have legitimately reaped the fruits thereof. Rather than adopting the above simple course, the postal authorities chose to strictly and rigidly interpret the terms of the scheme. This resulted in the denial of the legitimate claims of the sole proprietor of the Appellant concern, i.e., B.K. Garg, of the investment made by him. In the above view of the matter, we consider it just and appropriate, in exercise of our jurisdiction Under Article 142 of the Constitution of India, to direct the Senior Superintendent of Post Offices, Meerut, to correct the NSC issued in the name of M/s. Bhagwati Vanaspati Traders, by substituting the Appellant's name, with that of B.K. Garg - The irregularity having been cured, we hope that B.K. Garg will now be released all the payments due to him, in terms of the order passed by the District Forum.
Appeal allowed - decided in favor of appellant.
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2014 (10) TMI 1030
Money Laundering - Validity of notice of eviction - right of appeal - case of petitioner is that limitation for filing an appeal is 45 days and it has not expired. However, the first respondent issued a notice of eviction on 10.10.2014 - HELD THAT:- The petitioner has even taken a demand draft on 10.10.2014 for a sum of ₹ 10,000/- in favour of the Registrar, Appellate Tribunal for moving an appeal. The time limit for filing an appeal has not so far expired. What is provided by Section 26(3) is a statutory right of appeal. Therefore, such a right cannot be defeated by dispossessing the petitioner even before the expiry of the period of limitation.
The petitioner shall file the statutory appeal within the period of limitation before the Appellate Tribunal, along with an application for stay - Petition disposed off.
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2014 (10) TMI 1029
Admission of fresh/new evidences filed by the assessee before the CIT(A) without satisfying the conditions laid down in Rule 46A(1) of the I T Rules 1962 - Assessment u/s 153A - HELD THAT:- In the instant case the entire additional evidence has come on the record of the first appellate authority because the first appellate authority decided to examine the facts of the case in depth and adjudicate upon the matter on the basis of evidence and material thus gathered. The learned CIT(A) was empowered to do so under the provisions of Section 250(4). The results of enquiry conducted by him could either go to further cement the case made out by the assessing officer or to help out the assessee against the findings of the assessing officer. The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the learned CIT(A).
CIT(A) has confronted the assessing officer with the evidence thus received and the material thus gathered and allow the assessing officer to have his say in the matter vide remand report dated 29.4.2013 and being done so this dispute have no merits. No requirement in law that the first appellate authority should invariably consult or confront the assessing officer every time an additional evidence that was not filed before the assessing officer comes on the record of the first appellate authority. Where the additional evidence is obtained by the first appellate authority on its own motion, there is no requirement in law to consult / confront the assessing officer with such additional evidence.
In such cases Sub-rule (2) of rule 46A requires the first appellate authority to allow the assessing officer a further opportunity to rebut the fresh evidence filed by the assessee. Even that requirement cannot be said to be a rule of universal application. If the additional evidence furnished by the assessee before the appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy in such a case no useful purpose served on performing the ritual of forwarding the evidence / material to the assessing officer and obtain his report. In such exceptional circumstances the requirement of Sub-rule (3) may be dispensed with. No merit in the grounds raised by the Revenue and accordingly, the grounds raised by the Revenue in all these appeals are dismissed.
Profit from own chity investment - AO arrived at the investment in own chits by taking the percentage growth of such investment from the AYs 2003-04 to 2004-05 as the basis of projection - AO further estimated the profit earned from own chits @ 10% - HELD THAT:- According to the CIT(A), the AO has also worked out the year-wise investments and estimated income solely on the basis of the seized material A-21. The working of the assessee was also on the basis of the same seized material A-21 and on its verification, the AO has not pinpointed any deviation of the assessee from the seized material. Accordingly, he observed that the view of the AO that the assessee has to adduce further evidences to prove the loss in respect of own chitty investments was not in order. Accordingly, the CIT(A) was of the view that there was no discrepancy in the working furnished by the assessee. He also found that the assessee has admitted more investments in own chits than the figure worked out by the AO. Accordingly, he observed that the addition made by the AO on estimate basis towards profit from own chity investment was not justifiable. Being so, the CIT(A) observed that the addition of ₹ 1,39,264/- for the AY 2004-05 and to the extent of ₹ 74,329/- for the AY 2007-08 are to be made and deleted the balance addition of other AYs.
Addition of the income from Kuri late fee - CIT(A) observed that no incriminating materials relating to the income from kuri late fee were found/seized during the course of search - HELD THAT:- After considering the relevant material, the CIT(A) was of the opinion that there was no reason to disbelieve the submissions made by the assessee that other kuri income offered includes income from kuri late fee. The CIT(A) observed that the AO has made the addition only on pure guess work and not on the basis of any material found/seized during the course of search. Accordingly, the addition of ₹ 4,49,821/- made by the AO for the AY 2008-09 was deleted. We do not find any infirmity in the findings of the CIT(A) in deleting the addition; accordingly, the same is confirmed. The ground raised by the revenue is accordingly rejected.
Disallowance of interest paid on deposits - AO found that the assessee firm has advanced funds to its sister concerns without charging interest and accordingly, he made proportionate disallowance in respect of interest paid on deposits @ 12% p.a and made addition to the total income for AYs 2002-03 to 2005-06 and AYs 2006-07 to 2008-09, no addition was made on this account since the entire interest paid was disallowed u/s 40(a)(ia) - HELD THAT:- In this case, the addition was made by the AO without referring any seized material and the addition was only on presumption without any material to show that borrowed funds have been advanced to sister concerns during the relevant assessment years. In the absence of any material to suggest that the advance made to sister concerns were out of borrowed funds, the deletion of addition by the CIT(A) for the assessment year under consideration is justified. Accordingly, this ground raised by the revenue is accordingly rejected.
Disallowance of interest claimed on housing loan - HELD THAT:- In this case, admittedly, the amount borrowed by the partners was credited to the assessee’s firm and the corresponding payment was also made by the assessee including interest payments. According to the AO, the interest was to be borne by the partners and it was wrongly claimed by the assessee firm. However, there is no material to suggest that the partners were derived any benefit out of the loans availed by the assessee firm. In the absence of any material to suggest the benefits derived by the partners in a personal capacity, we are not in a position to accept the claim of the revenue. Accordingly, this ground raised by the revenue is rejected.
Excess interest received from money lending business - AO rejected the books of account and estimated the interest income from money lending business by taking weighted average of interest rate charged by the assessee firm - HELD THAT:- AR is not able to controvert the findings of the CIT(A). The CIT(A) has considered the average opening and closing balances of the financial year so as to compute the interest income, which is an accepted method of assessment of income and advances when the day-to-day balances of loan is not available. Accordingly, he held that the addition on account of excess interest collected from customers has to be made only in respect of AYs 2002-03, 2004-05 and 2006-07 to 2008-09 and sustained the excess interest for AY 2002-02 - No reason to interfere with the findings of the CIT(A), which is confirmed.
Addition on account of income from chitty business of foreman’s commission - According to the AO, the assessee was not fully accounting the foreman’s commission received from conducting chits - HELD THAT:- On this issue, the assessee furnished reconciliation statement with regard to collection of the foreman commission before the CIT(A). The CIT(A), after going through the reconciliation statement observed that the foreman commission receivable for the AY 2002-03 was at ₹ 21,57,720 and for The AY 2008-09, it was ₹ 23,63,326/-. Accordingly, he sustained the addition towards undisclosed foreman commission at ₹ 8,800/- for the AY 2006-07 and ₹ 16,06,951/- for the AY 2008-09. The assessee could not controvert the above findings of the CIT(A).
Disallowance u/s 40(a)(ia) - assessee has paid canvassing commission without deducing tax at source - HELD THAT:- CIT(A) correctly observed that there was no dispute in respect of the disallowance u/s 40(a)(ia) and accordingly, the same was sustained. We do not find any infirmity in the order of the CIT(A) on this issue.
Disallowance of profit from terminated kuries - AO assumed that the auction discount due to the subscribers who have forfeited kuries was kept as a liability in the balance sheet of the assessee firm, even after the termination of the chitties and the assessee firm has neither returned the auction discount nor offered the same as income in the return of income - HELD THAT:- The assessee filed the detailed working of the profit from the terminated kuries. After going through the details furnished by the assessee regarding the outstanding of terminated kuries, he quantities it at ₹ 3,13,771/- and sustained the same and deleted the balance ₹ 31,11,054/ for the kuries which have not been terminated as on 31.3.2008. The CIT(A) given relief in respect of kuries which are not terminated . While doing so, the CIT(A) relied on the judgment of the Hon’ble jurisdictional High Court in the case of Guruvijaya Kuri Co Ltd, [2008 (1) TMI 267 - KERALA HIGH COURT]We do not find any reason to interfere with the findings of the CIT(A), which is confirmed.
Profit computed by AO from seized materials - On comparison of the books of account seized during the course of search with the results shown in the return of income, it was found that these two sets of accounts do not tally - HELD THAT:- According to the CIT(A) the seized books are not correct and complete and it do not reflect the true state of affairs of the assessee firm and hence he was of the view that a reasonable estimation to be done so as to compute the correct income of the assessee. Considering this, the CIT(A) taken the clue from section 44AF of the Act and estimated the net profit @ 5% of the turnover. We do not find any infirmity in the findings of the CIT(A), which is confirmed. Accordingly, the ground taken by the revenue for these three years is rejected.
Non deduction of TDS u/s 194A/194C - HELD THAT:- CIT(A) correctly observed that income of the assessee for the AYs 2006-07 to 2008-09 was estimated by the AO that there cannot be any further addition after estimating the income of the assessee as relying on TEJA CONSTRUCTIONS VERSUS ACIT [2009 (10) TMI 593 - ITAT HYDERABAD]
Agricultural income - CIT(A) concluded that it would be just and proper to disallow 25% of the declared agricultural income in the returns filed u/s. 153A - CIT(A) observed that the at the time of search, the assessee stated that he was getting Agrl. income from cultivated lands - HELD THAT:- Admittedly, owning agricultural land was not doubted by the Department. There were evidences produced by the assessee suggesting agricultural income generated by the assessee in his land. Being so, since the Department have no evidence contrary to the evidence furnished by the assessee; therefore, it is not proper to hold that the assessee has shown other income in the form of agricultural income. Since evidence brought on record suggest that the agricultural income earned by the assessee; therefore, we do not find any reason to interfere with the findings of the CIT(A), which is confirmed as the reasons advanced by the assessee also bonafide for variation in the agricultural income claimed in the original return filed after the search action. Accordingly, this ground in the above Revenue appeals is dismissed.
Disallowance of receipt from sale of trees - HELD THAT:- The assessee was having landed properties where the trees were grown. The reason for rejection of the assessee’s plea by the Assessing officer is that the certificate from the Revenue authorities was not produced before him. However, the AO has not doubted the certificate issued by the revenue authorities which suggest the availability of timber therein. Being so, it is natural to earn income from sale of trees. Accordingly, we do not find any reason to interfere with the order of the CIT(A) and the same is confirmed. This ground of the Revenue is rejected.
Addition towards investments in fixed deposits/Investment in SB A/c.- HELD THAT:- Considering the additional evidence and the remand report called for from the Assessing Officer and after receiving the comments from the Assessing Officer on the additional evidence given by the assessee, the CIT(A) was of the opinion that the explanation given by the assessee was proper since the assessee has properly substantiated the fixed deposit in the cash flow statement and therefore, the CIT(A) deleted the addition. The CIT(A) was satisfied with the explanation of the assessee regarding the source of fixed deposits. Being so, in the absence of any contrary evidence furnished by the Revenue, we are not in a position to reverse the findings of the CIT(A) and the same is confirmed. Accordingly, this ground in the above Revenue appeals is dismissed.
Investment in immovable properties - HELD THAT:- Assessees have furnished evidence before the CIT(A) and explained the investments in the properties in the cash flow statements. The CIT(A) had also called for remand report. After going through the remand report, the CIT(A) has observed that the unexplained investments in immovable properties were accounted for as fixed assets in the regular books of account of the firm in which the assesses were partners and the same cannot be considered as unexplained investment in immovable properties and it is to be excluded and the properties are owned by the assesses which are duly accounted for in the regular books of accounts. Being so, we have no hesitation in confirming the order of the CIT(A). This ground in all the Revenue appeals is rejected.
Addition towards personal drawings - HELD THAT:- AO estimated very huge drawings. Considering the drawings estimated by the Assessing Officer, the CIT(A) observed that for the assessment year 2005-06 to 2008-09, there is no necessity of any addition as the drawings admitted by the assesses is reasonable as there is drawings by other members of the family namely Lilly, Shju, Jaison, Sabu, Salu and Benny. For the assessment yea₹ 2002-03 and 2004-05, the CIT(A) modified drawings and sustained certain additions on this count. In our opinion, the drawings estimated by the CIT(A) is justified and accordingly, the same is confirmed. Being so, the ground in the above Cross Objections is dismissed.
Investment in residential house - HELD THAT:- According to the CIT(A), the assessee has not offered any explanation regarding the cost of furnishing at ₹ 1,93,410/- estimated by the Assessing Officer. The CIT(A) found that the submission of the assessee regarding pavement work and installation of gate was in order. Therefore, the cost of pavement work at ₹ 95,394/- and cost of gate at ₹ 11,825/- (Total ₹ 1,07,219) included in the valuation report of the Departmental Valuer shall not be treated as unexplained investment for the assessment year 2005-06. The CIT(A) further found that the other contentions such as own timber, procurement of bricks/tiles at reduced prices, cost of kennel, cost of horticultural work, cost of well, etc., were not proved by the assessee with sufficient evidences. Therefore, the CIT(A) deleted the additions accordingly.
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2014 (10) TMI 1028
Addition u/s 68 - AO made addition of opening balances without properly verifying the record - whether AO did not place any material on record or evidence to support that the appellant had in some way generated unaccounted funds and rotated its own unaccounted funds through these creditors? - HELD THAT:- AO did not point out any discrepancy while examining the creditors u/s 131 and gave a finding that an ‘X’ creditor was bogus - AO did not place any material on record or evidence to support that the appellant had in some way generated unaccounted funds and rotated its own unaccounted funds through these creditors. Observations of the AO in the remand are against the provisions laid down in section 68 as he did not bring any adverse finding with corroborative evidence that the sundry creditors were not genuine - There are no fresh credit during the year. Hence section 68 cannot be invoked during the year. Hence we uphold the order of the Ld. CIT(A) and dismiss this ground of the revenue.
Addition being notional interest on loans and advances - whether there is no provision of Income Tax Act which authorizes the AO to tax notional income? - HELD THAT:- The fact that the loans and advances that were given by the appellant in the course of its normal business activities for acquiring land is not in dispute which is also agreed by the Assessing Officer in his remand report. This fact has also been confirmed in writing by the concerned parties. It is also true that the Income Tax Act, does not envisage taxability of any notional income as such.
AO in his remand report has not doubted the nature of advances but has given a vague reasoning for upholding the addition made. As perused the definition of income in Section 2(24) and the various judicial decisions relied upon by the appellant.
Since AO did not establish with any supporting material or evidence that interest was earned or accrued to the appellant, “notional income or interest” cannot be taxed under the provisions of law. Accordingly, the addition made by the Assessing Officer on account of notional interest is here with deleted. Decided in favour of assessee.
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2014 (10) TMI 1027
Capital gain computation - treat fair market value (‘FMV’) of the assessee’s land acquired @ ₹ 5,16,200/- per ground as on 1.4.1981 OR ₹ 10,000/- per ground treated in re-assessment framed on 11.11.2011 - Revenue’s only grievance is that the CIT(A) ought to have taken ‘FMV’ of the property as on 1.4.1981 as per the Sub-Registrar’s correspondence - HELD THAT:- A co-ordinate bench of the 'tribunal' has already averaged the two values qua the same property in assessment year 2006-07. AO has re-opened the assessment on the basis of his findings in the said assessment year. Revenue fails to point out any distinction on facts. In these circumstances, we hold that the CIT(A) has rightly adopted average of the two valuations in partly accepting the assessee’s contentions. The CIT(A)’s findings under challenge are affirmed. The Revenue’s grounds stand rejected.
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