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2012 (5) TMI 816
Deduction of Unexplained Expenditure u/s 69C - Contention was that assessee was involved in business of receiving bogus purchase entries so as to inflate its profit for claiming deduction u/s 80HHC - HELD THAT:- To enable invocation of the provisions of section 69C of the Act, the AO needs to be in possession of some material indicating that the assessee has incurred expenditure on purchases which have not been reflected in the books of account. Existence of such material with the AO, in fact, is the sine qua non for invoking section 69C of the Act. However, he ignored the source of the purchases, even though adequately explained by the assessee - Decision in favour of Assessee.
Computation of GP Rate - The GP rate of 14 per cent has been applied by the AO only on the basis of assumptions - Very same AO had, pertinently, himself, accepted the gross profit of 50 per cent under similar cases - HELD THAT:- The GP rate is the difference between the sale value and the purchase value. In the present case, if the AO harboured any doubt concerning the GP rate earned by the assessee, it was well within his rights to investigate not only the rate and the quantity of the sales, but also the rate and quantity of the purchases, and to examine and compare the same with the market rate.
AO has not doubted the sale value declared by the assessee. Rather, he has accepted the same to be genuine. Even so, after having done so, he applied the GP rate of 14 per cent without any basis and computed the value of the alleged unaccounted purchase, without even first ascertaining the market value of such purchases and without discharging his onus to establish that the assessee had paid anything over and above what had been stated in its books of account. The GP rate of 14 per cent was applied ignoring that of 50 per cent applied by himself in the cases noted in the preceding para. He did not even venture to differentiate those cases from the present one.
CIT(A), while deciding this issue in favour of the assessee, in our considered opinion, has correctly appreciated the full factual as well as legal matrix, as discussed above. We find no error in the findings of the learned CIT(A) in this regard and we hereby confirm the same.
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2012 (5) TMI 815
Issues Involved:
1. Jurisdiction of Delhi Courts.
2. Nature of the Agreement (Sale of Shares vs. Sale of Immovable Property).
3. Applicability of Section 16 and Section 20 of CPC.
4. Waiver and Estoppel regarding Jurisdiction Objections.
5. Maintainability of Petitions under Section 9 and Section 11 of the Arbitration and Conciliation Act.
Summary:
Jurisdiction of Delhi Courts:
The primary issue was whether the Delhi High Court had jurisdiction to entertain the petitions. The petitioner argued that the Delhi Court had jurisdiction because the MOU was executed in Delhi, payments were made in Delhi, and both parties had their offices in Delhi. The respondent contended that the subject matter of the dispute was immovable property located in Amritsar, thus falling u/s 16(d) of the CPC, which mandates that suits related to immovable property must be filed where the property is situated.
Nature of the Agreement:
The court had to determine if the MOU was an agreement for the sale of shares or for the sale of immovable property. The petitioner argued it was merely for the transfer of shares, while the respondent claimed it was essentially for the transfer of immovable property, disguised as a share transfer to avoid duties and levies.
Applicability of Section 16 and Section 20 of CPC:
The court examined whether the proviso to Section 16 or Section 20 CPC applied. The petitioner cited several judgments to argue that the relief sought could be obtained through personal obedience, thus falling under the proviso to Section 16 and Section 20 CPC. However, the court found that the relief sought included the transfer of possession of land, which could not be obtained solely through personal obedience, thus falling under Section 16(d) CPC.
Waiver and Estoppel:
The petitioner argued that the respondent had waived their right to challenge jurisdiction by admitting it in their written statement and participating in the proceedings for almost two years. The court held that jurisdiction over the subject matter could not be conferred by consent or waiver, citing the Supreme Court's ruling in Harshad Chiman Lal Modi vs. DLF Universal Ltd. and other precedents.
Maintainability of Petitions under Section 9 and Section 11:
The court noted that for a petition under Section 9 of the Arbitration and Conciliation Act to be maintainable, the court must have jurisdiction over the subject matter. Since the subject matter involved immovable property in Amritsar, the Delhi High Court lacked jurisdiction. The court also emphasized that Section 9 does not allow for specific performance of the contract but only for interim measures to preserve the subject matter of the dispute.
Conclusion:
The Delhi High Court dismissed the petitions u/s 9 and Section 11 of the Arbitration and Conciliation Act due to lack of jurisdiction over the subject matter, which involved immovable property situated in Amritsar. The court vacated the interim order dated 03.7.2009.
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2012 (5) TMI 814
Issues Involved:
The judgment addresses the maintainability of a suit under Section 20 of the Arbitration Act filed by a petitioner-defendant against a plaintiff regarding the dissolution of an undissolved firm and accounting.
Maintainability of Suit under Section 20 of Arbitration Act:
The petitioner argued that the suit was not maintainable as the firm was unregistered and not dissolved, relying on Section 69 of the Partnership Act, 1932, and the Supreme Court decision in Jagdish Chandra Gupta Vs. Kajaria Traders (India) Ltd. The Court found that the suit was filed for arbitration to consider the dissolution of the firm and accounting. It was noted that if the suit is filed for accounting and dissolution of the firm, both issues can be addressed together. The Court held that the exceptions provided in Section 69(3) of the Act, 1932, apply to arbitration proceedings, and since the suit was filed for appointing an arbitrator to consider the dissolution of the firm and accounting, it falls under the exception (a) of Section 69(3). Consequently, the Court found no legal error in the order and dismissed the petition.
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2012 (5) TMI 813
Issues Involved:
1. Jurisdiction of the Company Law Board to entertain the petition.
2. Applicability of arbitration clause u/s 8 of the Arbitration and Conciliation Act, 1996.
3. Allegations of oppression and mismanagement.
4. Validity of the termination of the joint venture agreement.
Summary:
1. Jurisdiction of the Company Law Board:
The applicant argued that the petition is misconceived and not maintainable as the Company Law Board has no jurisdiction to entertain and hear the petition. It was contended that the disputes arising from the joint venture agreement should be referred to arbitration as per clause 20 of the agreement, which was also incorporated as article 59 of the previous articles of association of respondent No. 4. The applicant emphasized that the Board does not have the jurisdiction to entertain the question of the validity of the termination of the joint venture agreement.
2. Applicability of Arbitration Clause u/s 8 of the Arbitration and Conciliation Act, 1996:
The Board noted that the joint venture agreement contained an arbitration clause (Clause 20) which mandated that disputes should be resolved by arbitration. The Board referred to section 8 of the Arbitration and Conciliation Act, 1996, which requires judicial authorities to refer parties to arbitration if the matter is subject to an arbitration agreement. The Board concluded that it is bound to refer the matter to arbitration as the dispute arises from the joint venture agreement which includes an arbitration clause.
3. Allegations of Oppression and Mismanagement:
The respondents argued that the reliefs claimed in the company petition under sections 397 and 398 of the Companies Act, 1956, cannot be granted by an arbitrator and can only be granted by the Company Law Board. They contended that the illegal acts of the applicant, including amending the articles of association, removing directors, and attempting to transfer shares, amounted to oppression and mismanagement. However, the Board found that the core disputes relate to the joint venture agreement, which contains an arbitration clause, and thus should be referred to arbitration.
4. Validity of the Termination of the Joint Venture Agreement:
The main allegation of the petitioner was the contravention and violation of the joint venture agreement and articles of association of the company. The Board noted that the petitioners did not challenge the termination of the joint venture agreement but challenged the actions initiated by the company after the termination. The Board concluded that the issue of the validity of the termination of the joint venture agreement should be decided by arbitration as per clause 20 of the joint venture agreement.
Conclusion:
The Company Law Board allowed the application filed by the applicant (respondent No. 5) and referred the matter to arbitration as per clause 20 of the joint venture agreement. Consequently, C.P. No. 48 of 2011 was dismissed, and all interim orders were vacated. The Board emphasized that it has no discretion in this matter and must refer the parties to arbitration as mandated by section 8 of the Arbitration and Conciliation Act, 1996.
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2012 (5) TMI 812
Issues Involved:
1. Delay in filing the appeal.
2. Refusal to supply information under RTI Act.
3. Applicability of Supreme Court judgment in Shaunak H. Satya.
4. Intellectual property and public interest.
5. Fiduciary relationship and confidentiality.
6. Public interest and transparency.
Summary:
1. Delay in Filing the Appeal:
The appeal impugned the order dated 22nd December 2010 of the learned Single Judge dismissing in limine WP(C) No. 8558/2010. Notice of this appeal and the application for condonation of 106 days delay in filing this appeal was issued vide order dated 26th May 2011.
2. Refusal to Supply Information under RTI Act:
The respondent sought certified copies of original question papers and correct answers of all Mch super-speciality entrance exams conducted from 2005-2010. The Information Officer of the appellant refused to supply the information citing that the questions and their answers are intellectual property of AIIMS and their disclosure would be against larger public interest, invoking Section 8(1)(d) and 8(1)(e) of the Right to Information Act, 2005.
3. Applicability of Supreme Court Judgment in Shaunak H. Satya:
The appellant argued that the subject matter of this appeal is not covered by the judgment of the Supreme Court in Shaunak H. Satya as the facts and circumstances are completely different. The Supreme Court in Shaunak H. Satya dealt with the disclosure of question papers and suggested answers which were already in the public domain, unlike the present case.
4. Intellectual Property and Public Interest:
The CIC directed the appellant to provide the information, noting that the question papers could not be termed as intellectual property and the appellant had been unable to invoke any exemption sub-clause of Section 8(1) of the Act. The learned Single Judge upheld this decision, observing that the appellant had not shown how the disclosure would adversely affect the competitive position of any third party.
5. Fiduciary Relationship and Confidentiality:
The appellant contended that there was no fiduciary relationship between the experts who helped develop the question bank and the appellant, and thus Section 8(1)(e) was not attracted. The Supreme Court in Shaunak H. Satya held that the instructions and solutions to questions communicated by the examining body to the examiners are information available in their fiduciary relationship and exempted from disclosure under Section 8(1)(d).
6. Public Interest and Transparency:
The appellant argued that disclosure of the question papers would compromise the selection process, as it would lead to selection of students with good memory rather than an analytical mind. The Court agreed, stating that the nature of the examination is materially different from the one considered by the Supreme Court in Shaunak H. Satya. The Court emphasized the need to balance transparency and accountability with the preservation of confidentiality of sensitive information and efficient operation of public authorities.
Conclusion:
The appeal was allowed, and the orders of the CIC and the learned Single Judge were set aside. The Court held that it is not in public interest to divulge the information sought, and the information is exempt from disclosure under a purposive construction of Section 8 of the RTI Act. No order as to costs.
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2012 (5) TMI 811
Issues involved: The judgment involves the issue of treating the sale of shares for Long Term Capital Gains (LTCG) instead of as "Income from other Sources" u/s 143(3) of the Income Tax Act, 1961.
Issue 1 - LTCG vs. Income from Other Sources:
The appeals were filed against the order of CIT(A) treating the sale of shares for LTCG instead of as "Income from other Sources." The AO observed that the assessee did not prove the identity, creditworthiness, and genuineness of the transaction. The trading of shares was suspended by CSE and SEBI due to malpractices. The CIT(A) deleted the disallowance, stating that the capital gain on the sale of shares was genuine and supported by documentary evidence. The revenue appealed, but the tribunal upheld the CIT(A)'s decision. The tribunal noted that necessary details and documentary evidence were provided by the assessee, and the payments were made through banking channels, supporting the claim of LTCG. The tribunal dismissed the appeal of the revenue.
Issue 2 - Similar Grounds in Another Appeal:
In a separate appeal with similar grounds, the revenue raised the same issue as in the first appeal. The tribunal found the facts to be similar and upheld the order of the CIT(A), dismissing the appeal of the revenue.
In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision in both appeals, dismissing the revenue's appeals and confirming the treatment of the sale of shares as Long Term Capital Gains.
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2012 (5) TMI 810
Issues involved:
The judgment involves the consideration of appointment on compassionate grounds u/s prevailing scheme, eligibility criteria based on family income, and the interpretation of relevant legal precedents.
Appointment on Compassionate Grounds:
- Respondent filed application for appointment on compassionate grounds, rejected due to family income exceeding specified limit.
- Tribunal directed reconsideration of the case, leading to appeal before High Court and subsequently to Supreme Court.
- Appellants argued that appointments must adhere to scheme parameters, making ineligible those with family income above prescribed limit.
- Compassionate appointment not a matter of right, but an exception to provide for sudden financial crisis in deceased employee's family.
- Citing legal precedents, Court emphasized the need to consider financial condition of deceased employee's family for compassionate appointments.
Interpretation of Legal Precedents:
- Court referred to Govind Prakash Verma case, stating that family pension and terminal benefits should not be grounds for refusal of compassionate appointment.
- Relying on Punjab National Bank case, Court reiterated the need to follow rules and regulations for compassionate appointments based on family's financial condition.
- Mentioning Mumtaz YunusMulani case, Court emphasized adherence to scheme criteria regarding terminal benefits for eligibility in compassionate appointments.
Scheme Parameters and Family Income:
- Circular by Comptroller and Auditor General of India specified income limits for compassionate appointments based on group categories.
- Appellants rejected Respondent's case due to family receiving terminal benefits exceeding prescribed limit.
- Court upheld rejection, as family income surpassed &8377; 3 lakhs, rendering Respondent ineligible for Group 'C' post.
- Consequently, the appeal was allowed, and impugned judgments/orders were set aside.
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2012 (5) TMI 809
Issues Involved:1. Application for exemption. 2. Substitution of legal heir. 3. Delay in re-filing and filing the appeal. 4. Bar of suit by Benami Transactions (Prohibition) Act, 1988. 5. Bar of suit by limitation. Summary:1. Application for Exemption:C.M. No. 8372/2012 (Exemption) - Application allowed, subject to all just exceptions. C.M. stands disposed of. 2. Substitution of Legal Heir:C.M. No. 8337/2012 (U/O 22 Rule 4 CPC) - Since respondent No.2 is stated to have died after the filing of the appeal in the Registry, the application is allowed, and the legal heir of respondent No.2 as stated in para 4 of this application, is brought on record. C.M. stands disposed of. 3. Delay in Re-filing and Filing the Appeal:C.M. No. 8336/2012 (Delay in re-filing) and C.M. No. 8335/2012 (Delay in filing) - Though, in my opinion, prima facie, there does not appear to be a good ground for condonation of huge delay of 202 days in re-filing the appeal, since however, I have heard the appeal on merits, I am allowing the application for delay in filing and re-filing the appeal subject to just exceptions. C.M. stands disposed of. 4. Bar of Suit by Benami Transactions (Prohibition) Act, 1988:RFA No. 207/2012 - The challenge by means of this Regular First Appeal (RFA) filed u/s 96 of the Code of Civil Procedure, 1908 (CPC) is to the impugned judgment of the trial Court dated 2.4.2011 dismissing the suit and/or rejecting the plaint by holding that the same is barred by Benami Transactions (Prohibition) Act, 1988 and also by limitation. The disputes center around the ownership of a flat No. C-1/F, DDA Flats, Munirika, Delhi. The appellant/plaintiff claims to be the owner of the suit property, but the title documents stand in the name of defendant No.1/respondent No.1 since 1981. The trial court held that the suit was barred by Section 4 of the Benami Act and by limitation, noting that the appellant had previously filed a suit in 1984 seeking to declare himself as the actual owner, which was withdrawn in 1987. The present suit was filed after 23 years in 2010. The court observed that Section 4(3)(b) of the Benami Act protects rights where the property is held in a fiduciary capacity, but this does not apply to the present case as the relationship alleged does not meet the criteria of a fiduciary capacity as per the Benami Act. The court also noted that the Benami Act brought an end to the ownership rights of an actual owner against the benami owner, and the provisions of Sections 81, 82, and 94 of the Indian Trusts Act, 1882, which previously helped the plaintiff, were repealed by Section 7 of the Benami Act. 5. Bar of Suit by Limitation:The trial court rightly held the suit to be barred by limitation. The appellant had claimed title in the suit property by way of a suit filed in 1984, which was withdrawn in 1987. The present suit filed in 2010 is beyond the prescribed period of 12 years for filing a suit for possession of an immovable property as per Article 65 of the Limitation Act, 1963. The court noted that the right to sue first accrued in 1984 or 1986, and the present suit filed in 2010 is ex facie barred by limitation. In view of the above, the court found no reason to interfere with the impugned judgment of the trial Court dated 2.4.2011. The present appeal, being without any merit, is accordingly dismissed, leaving the parties to bear their own costs.
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2012 (5) TMI 808
Issues Involved:
1. Deletion of disallowance u/s 68 of the Act on account of unexplained credits.
2. Deletion of disallowance out of operation and other expenses incurred by the assessee.
Summary:
Issue 1: Deletion of disallowance u/s 68 of the Act on account of unexplained credits
The Revenue's appeal contested the CIT(A)'s deletion of the disallowance of Rs. 1,97,61,900/- u/s 68 of the Act, which was added as unexplained cash credit. The AO had questioned the creditworthiness of Shri Sunil Bhatia, a director of the assessee company, who contributed the amount through foreign remittance without furnishing RBI approval. The AO relied on case laws such as CIT Vs. Mussadilal Ram Bharose and Sumati Dayal Vs. CIT. The CIT(A) admitted additional evidence under Rule 46A, including bank statements and passport copies, and deleted the addition, stating that the evidence was crucial to the issue. The Revenue argued that the CIT(A) admitted the evidence without proper justification and failed to consider the AO's objections regarding the share premium. The Tribunal found that the CIT(A) admitted the additional evidence without following Rule 46A requirements and set aside the matter back to the CIT(A) for fresh consideration.
Issue 2: Deletion of disallowance out of operation and other expenses incurred by the assessee
The Revenue also contested the deletion of Rs. 8,92,396/- out of operation and other expenses. The AO had disallowed 25% of the expenses, arguing that the company worked only for three days in the relevant year. The CIT(A) allowed the expenses, stating that the veracity of the expenses was not questioned by the AO. The Tribunal found that the CIT(A) did not provide proper reasons for deleting the addition and directed the CIT(A) to decide the issue on merits after perusing the original assessment record.
Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, directing the CIT(A) to reconsider both issues afresh after examining the assessment record and complying with Rule 46A requirements.
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2012 (5) TMI 807
Issues involved: Appeal against order of CIT(A) deleting addition made by AO under section 14A of the Income Tax Act, 1961 and against order of CIT(A) allowing credit of STT under section 88E of the Act.
Issue 1: Addition under section 14A
The appeal by revenue challenged the deletion of addition made by AO under section 14A of the Act. The assessee, engaged in share dealing business, earned exempt dividend income. The AO disallowed expenses under section 14A applying Rule 8D. The CIT(A) allowed deduction of interest under section 36(1)(iii) based on Kerala High Court decision. The Tribunal noted that AO did not attribute any expenditure to dividend income and did not record any satisfaction about incorrectness of expenditure claim. Therefore, the Tribunal confirmed CIT(A)'s decision to delete the addition, as no disallowance could be made without proper findings. The issue was dismissed in favor of the assessee.
Issue 2: Credit of STT under section 88E
The revenue appealed against CIT(A)'s decision to allow credit of STT under section 88E. The AO found no computation of MAT as per section 115JB in the return of income. The CIT(A) held that book profit from share trading was eligible for STT credit. Citing a Bangalore Bench decision, the Tribunal explained that the rebate of STT is allowable from income tax computed under section 115JB, irrespective of regular provisions or deeming provision. As the assessee's total income included income from taxable Securities Transactions, the Tribunal allowed the claim for STT rebate. Following the precedent, the Tribunal dismissed this ground of revenue's appeal.
In conclusion, the Tribunal dismissed the appeal of the revenue, upholding the decisions of the CIT(A) regarding both issues.
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2012 (5) TMI 806
Issues Involved:
1. Classification of receipts as fees for technical services (FTS).
2. Taxability of interest accrued in foreign bank accounts.
3. Inclusion of doubtful debts recovered in gross receipts.
4. Permanent Establishment (PE) status of liaison offices.
5. Chargeability of interest u/s 234B.
6. Remand report for allowable expenses.
Summary of Judgment:
Issue 1: Classification of Receipts as Fees for Technical Services (FTS)
The Tribunal affirmed the CIT(A)'s decision that the receipts from M/s. Godavari EPC Project and M/s. Spectrum Power Generation Ltd. were not FTS. It was held that the income from the operation and maintenance (O&M) of the power plant did not fall within the definition of FTS u/s 9(1)(vii) Explanation 2 of the IT Act or Article 13(4) of the DTAA between India and the UK. The income should be taxed on a net basis as business income, not on a gross basis.
Issue 2: Taxability of Interest Accrued in Foreign Bank Accounts
The Tribunal ruled that interest earned on bank accounts maintained in the UK cannot be taxed in India under Article 12(2) of the DTAA. The interest income from UK bank accounts should be excluded from taxable income in India, while interest earned in India should be taxed as normal income.
Issue 3: Inclusion of Doubtful Debts Recovered in Gross Receipts
The Tribunal found that the doubtful debts recovered, which were previously disallowed, should not be included in the gross receipts for the assessment year 2005-06 to avoid double disallowance. The receipts from the Godavari O&M Project should be taxed on a net basis.
Issue 4: Permanent Establishment (PE) Status of Liaison Offices
The Tribunal held that liaison offices (LOs) in India are fundamentally cost centers and do not generate any notional income. The LOs facilitate communication and compliance with regulatory authorities and do not provide any benefit to the head office in the UK. Therefore, no income should be added to the costs incurred by the LOs.
Issue 5: Chargeability of Interest u/s 234B
The Tribunal ruled that no interest u/s 234B is chargeable as the entire income of the foreign company is liable for deduction of tax at source u/s 195 of the Income Tax Act. This decision is supported by various judgments, including "Jacabs Civil Incorporated" and "SNC Lavalin International Inc."
Issue 6: Remand Report for Allowable Expenses
The Tribunal found no requirement for the CIT(A) to call for a remand report from the AO, as the CIT(A) had followed the Tribunal's order and recorded factual findings. The CIT(A) correctly allowed the expenses claimed by the assessee without giving an opportunity to the AO for further scrutiny.
Conclusion:
The appeal filed by the Department for the assessment year 2005-06 is dismissed. The assessee's appeals for the assessment years 2007-08 and 2008-09 are allowed. The impugned orders passed by the AO are canceled, and the Tribunal's decisions are upheld.
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2012 (5) TMI 805
Issues Involved: Non-prosecution of appeal by the assessee.
Summary:
The appeal was filed by the assessee against the order of ld. CIT(A)-I, Bhopal, dated 16.12.2011, but during the hearing, nobody appeared on behalf of the assessee. The appeal was fixed for hearing on 8.5.2012, and notice was duly served to the assessee. However, the assessee did not attend the hearing or request an adjournment. The Tribunal noted that the mere filing of an appeal is not sufficient; effective prosecution is also required. Citing relevant judicial pronouncements, the Tribunal emphasized the importance of actively pursuing an appeal. As a result, the appeal filed by the assessee was dismissed for non-prosecution.
The Tribunal's decision was based on the principle that the party appealing must actively pursue the case and ensure effective representation. Failure to appear at the hearing or take necessary steps for the case can lead to dismissal of the appeal. The Tribunal referred to previous cases where appeals were dismissed due to the absence of the party or lack of communication regarding adjournment. In this case, since the assessee failed to attend the hearing or provide any explanation for non-appearance, the appeal was deemed liable for dismissal.
The Tribunal highlighted the importance of fulfilling the duty to actively prosecute an appeal, beyond just filing it. The decision to dismiss the appeal was made in accordance with legal principles and precedents that emphasize the need for effective representation and participation in the proceedings. The Tribunal's ruling was based on the assessee's failure to attend the hearing or make arrangements for representation, leading to the dismissal of the appeal for non-prosecution.
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2012 (5) TMI 804
Issues involved: The judgment involves the estimation of profit of the assessees from the business of retail trade in liquor for the assessment years 2007-08 and 2008-09.
Estimation of Profit: The assessing officer found that the assessees were unable to produce evidence for their turnover in the form of sale bills. The assessing officer computed the turnover by adopting profit margins of 30% for one assessee and 27% for another, adding the difference to the income of the assessee as suppressed turnover. On appeal, the CIT(A) directed the assessing officer to estimate the net profit at 3% of the purchases or stock put for sale during the year, ensuring the assessed income is not less than the returned income. The Revenue appealed against the CIT(A)'s orders, but the Tribunal upheld the decision based on previous rulings, confirming the CIT(A)'s orders and rejecting the Revenue's grounds in both appeals.
Decision: The Tribunal dismissed both appeals of the Revenue, affirming the CIT(A)'s orders based on consistent rulings and confirming the estimation of profit at 3% of purchases or stock put for sale during the year.
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2012 (5) TMI 803
Issues involved: Estimation of profit of the assessees from the business of retail trade in liquor.
Summary:
The Appellate Tribunal ITAT Hyderabad heard two appeals by the Revenue against orders of the Commissioner of Income-tax(Appeals)- VI, Hyderabad. The appeals concerned the estimation of profit of the assessees from the business of retail trade in liquor for the assessment years 2007-08 and 2008-09. The assessing officer had found that the assessees were unable to produce evidence for their turnover in the form of sale bills. The officer computed the turnover by adopting profit margins and added the differences to the income of the assessees as suppressed turnover. On appeal, the CIT(A) directed the assessing officer to estimate the net profit at 3% of the purchases or stock put for sale during the year, based on a previous Tribunal decision. The Revenue appealed against the CIT(A) orders.
The Tribunal noted that the CIT(A) orders were based on a previous Tribunal decision and that other benches had consistently followed the same decision in similar cases. Therefore, the Tribunal found no issue with the CIT(A) orders and confirmed them. Consequently, the appeals of the Revenue were dismissed, and the orders were pronounced on 4.5.2012.
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2012 (5) TMI 802
Issues involved: Determination of understatement of sales, comparison with other wine shops, estimation of net profit, applicability of past history or comparable cases for income estimation.
The Appellate Tribunal ITAT Hyderabad, in the case concerning the assessment year 2007-08, addressed the appeal by the Revenue and Cross Objection by the assessee. The Revenue contended that the CIT (A) should have upheld the total understatement of sales based on gross profit percentage fixed by APBCL and adopted by the AO. Additionally, the Revenue argued against the comparison with M/s Kanaka Durga Wines and the estimation of net profit at 3%. The Tribunal referred to a previous decision involving M/s Kanaka Durga Wines and held that the net profit should be estimated at 3% of purchases or stock put for sale during the year. The Tribunal upheld the CIT (A) order, directing the AO to estimate net profit at 3% of purchases or stock put for sale, ensuring the assessed income is not less than the returned income. Consequently, the appeal by the Revenue was dismissed, rendering the Cross Objection filed by the assessee supporting the CIT (A) findings as infructuous and dismissed accordingly.
Conclusion: The Tribunal upheld the CIT (A) order, directing the AO to estimate net profit at 3% of purchases or stock put for sale during the year, based on a previous decision involving M/s Kanaka Durga Wines, ensuring the assessed income is not less than the returned income.
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2012 (5) TMI 801
Issues involved: Addition of agricultural income, addition of estimated household expenses, addition of cash deposit in bank account, addition of unaccounted bank interest.
Addition of Agricultural Income: The assessee credited &8377; 34,000 to his capital account as "Agricultural income," but only declared &8377; 15,000 as net agricultural income. The Assessing Officer added the remaining &8377; 19,000 as the source was unexplained. The CIT(A) upheld the addition of &8377; 34,000. The Tribunal found that no enhancement notice was issued for the added &8377; 15,000, thus it cannot be sustained. The addition of &8377; 19,000 was upheld. This ground was partly allowed.
Addition of Estimated Household Expenses: The Assessing Officer added &8377; 2,00,000 as estimated household expenses due to insufficient withdrawals for personal and household expenses. The CIT(A) upheld this addition based on the family composition and lack of justification for the low amount available for household expenses. The Tribunal found the addition justified based on the total withdrawals and family expenses. This ground was not allowed.
Addition of Cash Deposit in Bank Account: The assessee deposited &8377; 5 lakh in his bank account claiming it was a loan from the bank. The Assessing Officer treated it as unexplained cash credit. The CIT(A) upheld the addition. The Tribunal noted that the amount withdrawn and deposited matched, and the assessing authority failed to prove misuse of the funds. The addition was not justified, and this ground was allowed.
Addition of Unaccounted Bank Interest: The assessee paid &8377; 56,606 as bank interest, which was unaccounted for and not utilized for business. The Assessing Officer made an addition for this amount, which was upheld by the CIT(A). The Tribunal found no evidence to support why the interest was not recorded, thus upholding the addition. This ground was not allowed.
Conclusion: The appeal was partly allowed, with the addition of agricultural income partially sustained, estimated household expenses upheld, cash deposit addition reversed, unaccounted bank interest addition upheld, and another addition not pressed and dismissed.
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2012 (5) TMI 800
The Supreme Court of India in 2012 condoned delay, issued notice, permitted Dasti service, and tagged the petition with S.L.P. (C) No.29816 of 2011. The Respondent did not appear.
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2012 (5) TMI 799
Issues involved: Appeal against assessment order u/s 143(3) for AY 2007-2008 regarding long term capital gain on transfer of properties in Mumbai.
Facts: Assessee, an individual, acquired properties in 1994-1995 and 1995-1996, sold them in AY 2007-2008, initially declared long term capital gain at Rs. 1,08,24,593. Revised return filed within time limit after realizing cost of acquisition should be from date of agreement, not payment dates.
Assessing Officer's Decision: Rejected claim, assessed gain at initial amount, citing non-acceptance of ITAT Mumbai Bench decision in similar case.
CIT(A) Decision: Appreciated assessee's explanation, directed assessment based on agreement date for cost of acquisition, not payment dates, in line with ITAT Mumbai Bench decision.
Arguments: Senior DR contested CIT(A) decision, while AR supported it with other ITAT Mumbai Bench decisions on similar issue.
ITAT Decision: After considering arguments and relevant findings, upheld CIT(A) decision to compute gain from agreement date, not payment dates. Cited various judgments supporting this approach.
Conclusion: Benefit of indexation to be given from agreement date for property acquisition, not payment dates. CIT(A) decision upheld, revenue's appeal dismissed.
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2012 (5) TMI 798
Addition made in the Income - Assessee received as security deposit (Cost of equipment) in respect of supplies deep-freezers/freezers/fridges to various vendors - Sale proceeds of land - to be treated as business income or under capital gains.
Addition made in the Income - As per agreement entered into between the assessee and the vendors, the assessee supplies them with deep-freezers/freezers/fridges of sizes as per requirement of the Vendors concerned after taking from them full cost of the equipment as Security Deposit - HELD THAT:- Since the co-ordinate bench in the case of High Range Foods (P) Ltd.[2011 (2) TMI 1117 - ITAT, COCHIN] has already taken a view on identical issue, by following the said decision, we hold that the deposits collected from vendors cannot be considered as the income of the assessee so long as the agency agreement continues. Accordingly, we set aside the order of Ld CIT(A) on this issue in the hands of both the assessees and direct the AO to delete the addition made on this issue in the hands of both the assessees herein.
Sale proceeds of land - to be treated as business income or under capital gains - Tribunal has held in the case of High Range Foods (P) Ltd,(supra) that the intention of the assessee at the time of purchasing the land would decide the nature of income arising on its sale, i.e. if an assessee purchases a land in order to hold it as a “Capital asset”, then the gain arising on its sale shall be assessed as “Capital gain”. On the other hand, if the intention was to hold it as stock in trade, then the profit arising on its sale would be assessed as “Income from business”.
Accordingly, we set aside the order of the Ld. CIT(A) on this issues and restore the same to the file of the AO with the direction to examine the issue afresh in the light of principles discussed by the co-ordinate bench of Tribunal in the case of High Range Foods (P) Ltd, supra, and decide the issue accordingly.
In the result, the appeals filed by both the assesses are treated as allowed for statistical purposes.
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2012 (5) TMI 797
Issues involved: Assessment of taxable income based on estimation of net profit percentage u/s 5% of stocks put to sale, dispute over estimation of profit margin, comparison with previous trading results, application of relevant case laws.
The Miscellaneous Application was filed by the assessee challenging the ex-parte order of ITAT, Hyderabad. The assessee clarified that non-attendance at the hearing was due to inadvertence, not disinterest. The ITAT recalled its order upon finding that the assessee was interested in prosecuting the appeal. The issue raised in the appeal was disposed of along with the Miscellaneous Application, as it was covered by a decision of the co-ordinate bench of ITAT, Hyderabad.
In the assessment order, the AO proposed estimating profit at 27% on the cost of goods sold due to non-verifiableness of sales figures and lack of sale bills/receipts. The CIT(A) directed the AO to recompute taxable income by estimating net profit at 5% of stocks put to sale. The assessee appealed this decision, arguing that the 5% estimation did not meet the ends of justice and cited a previous case where profit estimation was restricted to 3% on purchases. The ITAT upheld the CIT(A)'s decision, stating that net profit should be estimated at 5% of purchases or stock put for sale, subject to the assessed income not being less than the returned income.
The learned counsel for the assessee argued for following the analogy of restricting profit estimation to 3% on purchases based on a previous case. The learned DR highlighted cases where rejection of books of account and estimation of GP@30% of sales were upheld by the ITAT. The DR emphasized the need for appropriate tax collection from the liquor trade, citing instances of sales above MRP and the contribution of the liquor trade to the state exchequer. The ITAT upheld the CIT(A)'s decision to estimate net profit at 5% of purchases, considering the arguments presented by both parties.
In conclusion, the ITAT allowed the Miscellaneous Application and partly allowed the appeal, upholding the CIT(A)'s order to estimate net profit at 5% of purchases or stock put for sale during the year, ensuring the assessed income is not less than the returned income.
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