Prayer to withdraw appeal - validity of assessment order dated 25.07.2013 - Held that:- The appeal is dismissed as withdrawn - It shall, however, be open to the petitioner to take recourse to the remedies available to it in accordance with May 21, 2014.
Penalty levied u/s 271AAA - conditions laid down in sub-section(2) of section 271AAA not been fulfilled by the assessee - surrender of income consequent to search - assessee could not explain the manner in which the undisclosed income had been derived by him - Held that:- The transactions which could not be verified from the regular books of account of assessee’s business were surrendered by him. It is a fact that the A.O. has admitted this surrender on the basis of assessee’s business activity being carried on by him. There is no specific finding or evidence with reference to the seized material or in the statement from which contrary view can be taken.
On similar facts, the Cuttack Bench of the ITAT while deciding the case of Pramod Kumar Jain reported in [2012 (12) TMI 629 - ITAT CUTTACK] as relied upon by the ld. CIT(A), has taken a view that there is no prescribed method to indicate the manner in which income was generated when the definition of ‘undisclosed income’ has been defined in the Act itself when no income of the specified previous year represented “either wholly or partly’ which onus lay upon the assessee stood discharged. Therefore, levy of penalty u/s 271AAA of the Act has been correctly deleted by the ld. CIT(A). - decided in favour of assessee.
Disallowance of depreciation to assessee-trust - depreciation cannot be allowed to the assessee being a trust as the full value of the assets had already been allowed as capital expenses during the earlier years and considered as application of income of the trust - Held that:- CIT(A) deleted the disallowance made by the AO in accordance with the judgmentof CIT Vs. Market Committee [2010 (7) TMI 374 - PUNJAB AND HARYANA HIGH COURT] and no contrary decision was brought to our notice. We, therefore, do not see any merit in these grounds of the departmental appeal.
Addition on account of interest from bank - as credited to earmarked fund account ignoring the fact that it is a revenue receipt and ought to have been credited to Income and Expenditure Account - Held that:- Issue to be decided in favour of the assessee by following the decision in the case of Sukhdeo Charity Estate Vs. Income Tax Officer [1991 (5) TMI 47 - RAJASTHAN HIGH COURT].
Donations received in kind were not income for the purpose of Section 12(1) - Held that:- In the present case, it is an admitted fact that the assessee received the donations in kind and the same could not be applied, accumulated or invested, therefore, it cannot be treated as income. Therefore, the CIT(A) was fully justified in reversing the observations of the Assessing Officer. We do not see any infirmity in the order of the CIT(A) on this issue.
Disallowance of trade discount u/s 40A(2)(b)- Held that:- Issue is squarely covered in favour of the assessee by the decision of Hon'ble Jurisdictional High Court in the case of United Exports Vs. CIT [2009 (8) TMI 60 - DELHI HIGH COURT] wherein their Lordships held that Section 40A(2)(b) is not applicable in respect of trade discount. Section 40A(2)(b) is not applicable in respect of trade discount. - Decided against revenue
Disallowance of business expenditure - assessee company had not commenced during the year under consideration - Held that:- While deciding the appeal for, AY 2005-06 on 11.09.2013,Tribunal had held that assessee commenced its business activity in March 2004 i.e. in AY 2004-05. It was finally held that assessee had set up his business activities in earlier years. As the facts and circumstances for the year under appeal are identical to the earlier AY.s,so,respectfully following the same we decide ground no.1 & 2 against the AO. He is directed to allow the deductions to the assessee as per the provisions of law.
Allowance of interest expenditure under the head ‘Income from House Property’ - Held that:- Referring to orders for the earlier years as held that income of the assessee for the year under consideration has to be assessed under the head ‘Business Income’,therefore, in our opinion ground taken by the AO has to be dismissed.
Tax the Miscellaneous Income,Foreign Exchange Gain and Other Income under the head ‘Business Income’ - Held that:- We find that AO was of the opinion that assessee had not commenced its business activity and therefore, income received under the heads miscellaneous income etc. could not be assessed as business income. But, in the earlier years it has been held by the Tribunal that income from sub-leasing of premises of the I.T.Parks was the business of the assessee and same was set up/commenced in earlier years and we have followed the order of earlier years. In these circumstances, in our opinion, FAA had rightly held that incomes from foreign exchange gain, car parking, penalty etc. were incidental to the business, carried out by the assessee.
Addition on account of income from sub-lease of land and income under the head maintenance - Held that:- Following our order for the earlier year, we hold that income from the sub lease of land and income under the head maintenance has to be assessed under the head Business income and not under the head Income from Other Sources. As a result, we decide first ground of appeal against the AO.
Addition on account of interest paid on borrowings utilised for construction of house property under section 24 - Held that:- It is not in dispute that the assessee had taken loan for construction of buildings and it had also paid interest. FAA had held that out of the interest of ₹ 2.93 Crores ₹ 2.48 Crores should be allowed as interest expenditure under the head income from house property. From the balance sheet it is clear that the assessee has interest amounting to ₹ 2.48 Crores was capitalised. Therefore, FAA was justified in holding that it represented work in progress. For the balance interest payment of ₹ 45 lakhs he held that same was allowable under either of the heads. In our opinion,if interest has been paid by an assessee; for acquiring or constructing assets that are used for earning taxable income; then his claim for interest expenditure has to be allowed. Therefore, confirming the order of the FAA - decided against revenue
Treatment of maintenance income - assessed as income from other sources or business income - Held that:- To be held that the income received by the assessee as maintenance income has to be assessed as business income. - decided against revenue
Application for tracing location of three mobile numbers - Smuggling - Heroin - NDPS Act, 1985 - Appellant contended that the telephone numbers of the Officer effecting the arrest and making the seizure would show that the officers concerned were at some other locations during the time the Appellant's arrest and resultant seizures are alleged to have been made.
Held that:- That electronic records are admissible evidence in criminal trials is not in dispute. Sections 65A and 65B of the Indian Evidence Act make such records admissible subject to the fulfillment of the requirements stipulated therein which includes a certificate in terms of Section 65B(4) of the said Act. To that extent the Appellant has every right to summon whatever is relevant and admissible in his defence including electronic record relevant to finding out the location of the officers effecting the arrest. Be that as it may we do not at this stage wish to pre-judge the issue which would eventually fall for the consideration of the Trial Court.
All that we are concerned with is whether call details which the Appellant is demanding can be denied to him on the ground that such details are likely to prejudice the case of the prosecution by exposing their activities in relation to similar other cases and individuals. It is not however in dispute that the call details are being summoned only for purposes of determining the exact location of the officers concerned at the time of the alleged arrest of the Appellant from Yashica Palace hotel near the bus stand. Ms. Makhijamadea candid concession that any other information contained in the call details will be of no use to the Appellant and that the Appellant would not insist upon disclosure of such information.
Interest of justice would in our opinion be sufficiently served if we direct the Trial Court to summon from the Companies concerned call details of Sim telephone No. 9039520407 and 7415593902 of Tata Docomo company and in regard to Sim No. 9165077714 of Airtel company for the period 24.02.2013 between 4.30 to 8.30 p.m - We further direct that calling numbers and the numbers called from the said mobile phone shall be blacked out by the companies while furnishing such details.
Penalty u/r 173Q and u/r 209A of CER on Shri H.M. Jhangiani, Executive Director of the appellant firm - short payment of duty to the extent of ₹ 19,61,703.42 - the appellant had claimed that the assessments were provisional as the price lists had not been finally approved and the assessments had not been completed - Held that:- There is a merit in the contention of the appellant that during the material period, the assessments were provisional. On the other hand, if the assessments had been finalized, a copy of the final assessment order would be available with the department for the impugned period. Since at the relevant time the assessments had to be done by the Range Officer. No such evidence is forthcoming from the Revenue in this regard - In the absence of any such evidence, the benefit of doubt has to be given to the assessee.
The imposition of penalty when the assessments were provisional at the time of finalization based on the verification done by the Assistant Director (Costs) is clearly unsustainable - penalty set aside - however, the demand confirmed in the impugned order is upheld as the assessment is not disputed - appeal allowed in part.
Exemption u/s 11 - disallowance of depreciation - violation of provisions of sec. 13(1)(c) by making payment to the wife (Ms. Meenakshi Sundararajan) of founder of the trust - Held that:- In the present case, the assessee trust has been created on 1.2.1961. This is before the commencement of the Income-tax Act, 1961. As per Clauses 36 to 41 of the Memorandum of Association of the assessee trust, Ms. Meenakshi Sundararajan is entitled for honorarium in rendering services to the benefits of the assessee society. Therefore, as rightly argued by the learned counsel, the payment made to Ms. Meenakshi Sundararajan is covered by the said exemption. - Exemption allowed - Decided in favor of assessee.
Claim of depreciation - double benefit - Held that:- In fact, there is no question of double benefit. An assessee is getting the benefit of application of funds for charitable purposes from the income computed according to normal accounting practices. Accordingly, it is to be seen that there is no clash between providing depreciation allowance and recognizing the application of funds for charitable purposes.
Registration under section 12AA denied - non charitable activities - Held that:- As confirmed in JAMMU DEVELOPMENT AUTHORITY case [2013 (11) TMI 1578 - JAMMU AND KASHMIR HIGH COURT] wherein it has been held that the objects like sale and purchase of properties makes the Authority, a commercial organization and in absence of any restriction on application of asset for charitable purpose in the event of dissolution or winding up, the objects pursued by the assessee cannot be said to be a charitable in nature.
We find no merit in the claim of registration made by the assessee under section 12A of the Act and we uphold the order of Commissioner of Income Tax in refusing to grant registration under section 12AA of the Act. Appeal of the assessee is dismissed
Addition u/s 40A(3) - argument of the Revenue is that when old gold purchases are made from A and new ornaments sold to B, provisions of Rule 6DD will not be applicable - Held that:- The transaction considered in this case is of same person purchasing new gold ornaments from the assessee against old gold ornaments. In such a case, clause (d) of Rule 6DD clearly applies. The said clause reads that where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee is exempted from the operation of Section 40A(3). Therefore, in the present case, as rightly pointed out by the Commissioner of Income Tax (Appeals), the case of the assessee is protected by clause (d) of Rule 6DD.
The Revenue has raised a contention in the grounds that the assessee may not raise separate bills for purchase of old gold and for sale of new gold ornaments. This view is not correct. There is levy of purchase tax by the State Government on purchase of old gold ornaments. For that matter, the assessee has to keep a separate account of old gold purchase supported by purchase invoices. Likewise, sale of new gold ornaments are again subject to sales tax for which the assessee has to maintain separate sales account supported by sales invoices. - Decided in favour of assessee
Disallowance being hedging loss treated by the assessing authority as speculative loss - Held that:- In the present case, the assessee has entered into a future contract to guard against the loss through future price fluctuations in gold. The assessee is in the business of manufacturing and merchanting of gold. Therefore, the future contract entered into by the assessee is straightaway covered by the first exception provided in clause (a) of Section 43(5). We find that the Commissioner of Income Tax (Appeals) is right in his decision.
Unexplained cash credits - Held that:- The assessee- company has passed journal entries with the concerned amounts, crediting the personal account of the Director and debiting the various expenditure to nominal accounts of the assessee-company. In fact, all the credits reflected in the personal account of the Director of the assessee-company are correspondingly very much reflected on the debit side of different expenditures and nominal accounts of the assessee-company. In that way, these cash credits are self-explaining in the books of accounts itself. There is no basis for the Assessing Officer to treat these credits as unexplained cash credits - Decided in favour of assessee.
Reopening of assessment - no opportunity to cross examine - Held that:- A.O. has been heavily carried away by the information of DDIT(Inv) and has ignored the fact that the share application money was received on 22.03.2006 through cheque No. 453639. M/s. Alliance Intermediatories and Network p. Ltd. is assessed to tax. Board’s resolution and confirmation of this company was filed before A.O. All these documents establish the identity of the share applicant and the genuinity of the transaction is also proved on record. The statement of Shri Mukesh Choksi was recorded at the back of the assessee and no opportunity to cross examine him was given to the assessee.
A.O. has not made his independent inquiries and verification to ascertain the correct facts. Therefore, we can safely hold that the assumption of jurisdiction by A.O. u/s 147 r.w.s. 148 is invalid and the assessment so made becomes authorities below initio void. However, we quash the order made u/s 147/143(3) of the Act in question and also hold that the addition of ₹ 5 lakhs in assessee’s hands is not warranted. Accordingly, we allow the appeal by the assessee.
Reopening of assessment proceedings u/s 147 - bogus share capital receipt - non independent application of mind by AO - borrowed knowledge - Held that:- The reason recorded by the Assessing Officer were merely on the basis of information received from DDIT (Inv.) Udaipur and Mumbai, therefore, from the so called reason, it was not at all discernable as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that on the basis of the material which he had before him the income had escaped assessment, therefore, the reassessment u/s 147 of the Act was not valid and accordingly the same is quashed. - Decided in favour of assessee
Addition on account of write off of the principal portion of cash credit loan waived by Banks - Held that:- As decided in assessee's own case A.Y. 2008- 09 [2014 (1) TMI 1840 - ITAT PUNE] the answer would depend upon the purpose for which the said loan was taken. If the loan was taken for acquiring the capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if this loan was for trading purpose and was treated as such from the very beginning in the books of account, as per T.V. Sundaram Iyengar and Sons Ltd. [1996 (9) TMI 1 - SUPREME Court] the waiver thereof may result in the income more so when it was transferred to the profit and loss account - CIT(A) has rightly confirmed the addition made by the AO to the extent of waiver to the cash credit loan - Decided against assessee.
Addition on account of section 35(2AB) - approval is not in prescribed Form No. 3CM - Held that:- As decided in assessee's own case A.Y. 2008- 09 [2014 (1) TMI 1840 - ITAT PUNE] the finding of the Ld. CIT(A) are acceptable that if the approval is not in prescribed Form No. 3CM is not a serious discrepancy which should result in disallowance of the deduction to the assessee u/s. 35(2AB) of the Act. In this case, it is not disputed that the assessee has applied to the competent authority for getting the approval/recognition and only after the verification of all the details the Prescribed Authority have issued the approval letter. CIT(A) has rightly allowed the claim of the assessee - Decided in favour of assessee
Addition on account of principal amount of waiver of loan - Held that:- As decided in assessee's own case A.Y. 2008- 09 the nature of the loan which has been waived in one time settlement is not disputed. In our opinion, the assessee’s case is squarely covered by the decision in the case of M/s. Xylon Holdings Pvt. Ltd. (2012 (9) TMI 449 - BOMBAY HIGH COURT) as the amount waived pertains to the term loan which was taken by the assessee for acquition of the assets. CIT(A) rightly deleted the addition made by the Assessing Officer on account of principal amount of waiver of loan.- Decided in favour of assessee
Reopening of assessment - legal expenses and charges allowability - expenditure incurred towards filing of patent applications should have been treated as capital expenditure - failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment - Held that:- All material facts with reference to the deductions claimed by the Petitioner in respect of the legal expenses and charges, were disclosed by the Petitioner not only during the original assessment proceedings but also during the scrutiny assessment, which culminated in the assessment order dated 30th December 2008. We therefore find that in fact there had been no failure on the part of the Petitioner to disclose fully and truly all material facts as required under the first proviso to section 147 of the Act.
On a perusal of the reasons for initiating to assessment proceedings, we find that it is not even the case of Respondent No. 1 that any new tangible material was brought to his notice which led him to believe that income had escaped assessment. As stated earlier, all material facts were disclosed by the Petitioner in proceedings that were undertaken under sections 142(1) r/w 143(2), which finally culminated in the assessment order dated 30th December 2008 under section 143(3). It is therefore evident that Respondent No. 1 after passing the original assessment order dated 30th December 2008 has changed his opinion and issued the impugned notice under section 148.
The reasons for the impugned notice as well as the impugned order proceed on the basis that a patent is a capital asset and hence expenditure incurred towards filing of patent applications should have been treated as capital expenditure. Since it was treated as a revenue expenditure, there was computation of excessive loss which resulted in income escaping assessment. Therefore now, despite the fact that in the original assessment order this very expenditure was allowed as a revenue expenditure, Respondent No. 1 now seeks to treat the same as a capital expenditure. This to our mind is nothing but a "change of opinion", and hence Respondent No.1 had no jurisdiction to re-open the assessment proceedings. - Decided in favour of assessee.
Penalty u/s 271(1)(c) - voluntary surrender of income - Held that:- In the present case, the assessee did produce all the relevant material in the form of books of account, bank statements, vouchers, sale bills etc. During the course of further enquiry in the assessment proceedings. The assessee voluntarily offered a sum of ₹ 75 lacs for assessment stating that even though all the material existed, yet in order to buy peace it was offering the amount to tax.
The facts of this case are clearly such that the decision in MAK Data (2013 (11) TMI 14 - SUPREME COURT), in the opinion of this Court, cannot be attracted. The assessee at no point seem to have accepted the revenue’s contentions that such claimed expenditure was bogus and that it was not allowable, he offered the amount only to buy peace. There is also no finding by the AO that the appellant had failed to offer an explanation in respect of the income returned or had failed to disclose material particulars. - Decided in favour of assessee.
Disallowance u/s 14A r.w.r. 8D - Held that:- The payment of interest amounting to ₹ 2,90,95,369/- to Bank of India on account of loan taken of ₹ 30 crores by the assessee during earlier years, which was evident from the sanctioned letter of Bank of India dated 18.05.2006 addressed to the assessee of the credit facilities and terms & conditions mentioned therein in the annexure attached to the same. Thus, the aforesaid amount of loan of ₹ 30 crores had exclusively been assigned with respect to purchase of wind mill from M/s. Enercon was found undisputed. The assessee has also credited an amount of ₹ 7,56,61,095/- on account of sale of power and has also shown profit of ₹ 4,77,10,734/- in Profit & Loss Account from wind mill business. As observed that the aforesaid interest could not be held to be in any way to be related to the earning of exempt income either directly or indirectly. Disallowance made by the Assessing Officer u/s.14A r.w. Rule 8D(2)(ii) of ₹ 77,78,214/- was allowed out of 1,30,30,180/-. This reasoned finding of CIT(A) needs no interference from our side.
Disallowance of expenditure on helicopter - CIT(A) following the decision of ITAT in assessee’s own case for A.Y. 2005-06, has restricted the disallowance on helicopter expenditure to 1/7th - Held that:- It is true that the onus is on the assessee to substantiate the claim of the assesses. Considering the peculiar circumstances better known to the assessee, there is surrender of claim to the extent of 1/7th of the total claims ₹ 93,96,771/- (i.e. ₹ 66,04,980/- on account of depreciation of vehicles and ₹ 27,91,791/- on account of aviation expenses). At this point of time, in our opinion, the Onus has shifted to the revenue to demonstrate that the said surrender is incorrect and estimations made by the AO are fair within the meaning of section 38(2) of the Act. Fairness is an important factor in matters of quantification of the disallowances, when section 38(2) invoked. The revenue has not done any probe independently to demonstrate that assessee’s offer is unfair and his estimations are fair. The estimations made by the AO, which are confirmed in case of the Cessna Aircraft and altered in case of Bell Helicopter are hereby set aside. Thus e are not inclined to interfere with the finding of CIT(A), who has restricted the disallowance on helicopter expenditure to 1/7th. - Decided against revenue.
Estimation of annual value of let out property at Mumbai - Held that:- The assessee has let out space to the sister concern, which is undisputed fact and is receiving ₹ 10,000/- per month from each sister concern. Therefore, the assessee's property is covered by provisions of clause (b) of section 23(1). This is a fact that assessee's actually rent received or receivable in respect of the said property is not in excess of the ALV computed under clause (a) of section 23(1). AO's decision to invoke a comparable case to the property covered under clause (b) is not in tune with the above referred legal position. It is not also the case of the AO that assessee is covered by the exemptions provided in the Maharashtra Rent Control Act and, therefore, ALV of the property shall be determined on the basis of the comparable cases. In any case, the standard rent is upper limit for determination the ALV as held in the case of Makrupa Chemicals Pvt Ltd (2006 (9) TMI 207 - ITAT BOMBAY-F ) - Decided against revenue
Non-payment of dues under a contract for supply of goods - Article 226 of the Constitution - Held that: - in cases like the one in hand, instead of taking recourse to the jurisdiction of the ordinary Civil Court under section 9 of the Code of Civil Procedure Code, 1908, recourse is taken to the writ jurisdiction under Article 226. That is not permissible. The jurisdiction of the Civil Court is intended to provide the ordinary civil remedy for the adjudication of such claims - we see no reason or justification to entertain the petition under Article 226 of the Constitution.
A second writ petition would constitute an abuse of the process of the Court since it had already been expressed by the Division Bench in the earlier proceedings that disputed questions of facts which were raised before the Court, could not be entertained under Article 226 of the Constitution.
It would be inappropriate for the Court to determine the wholly disputed questions of fact which arise in the present proceedings - petition dismissed.
Recovery of alleged dues pursuant to a contractual work - outstanding dues of service tax - jurisdiction under Article 226 - Held that: - In the present case, there is nothing on the record which may persuade us to hold that the contract is a statutory contract. The remedy of the contractor, if he is aggrieved by non-payment, would be to either file an ordinary civil suit or if there is an arbitration agreement between the parties, to invoke the terms of the agreement - this Bench in M/s R.S. Associate Vs. State of U.P. & Ors. (Writ-C No.11544 of 2014, decided on 24 February 2014) declined to entertain a petition which had been filed for making payment of bills under a contract - petition dismissed.
Validity of Section 3 of the M.P. State Co-operative Societies Act, 1960 - power of State Government to appoint the Registrar of the Co-operative Society, as well as Additional Registrar, Joint Registrar, Deputy Registrar, Assistant Registrar etc. - constitutional validity of proviso added to Section 77(3)(b) and Section 77(6) of the Act - Held that: - the Registrar is discharging pure administrative functions - limited powers are given to the Registrar to entertain certain kinds of disputes and take decision thereupon as well. One such provision is Section 55 of the Act which, inter-alia, provides that regarding terms of employment, working conditions and disciplinary action taken by a Society, if a dispute arises between a Society and its employees, the Registrar or any officer appointed by him (not below the rank of Assistant Registrar) shall decide the dispute. Likewise, Section 64 of the Act provides that the Registrar shall decide the dispute touching upon the Constitution, management or business, terms and conditions of employment of a Society or the liquidation of the Society.
No doubt the Registrar exercising powers under Section 48 of the Bihar and Orissa Cooperative Societies Act is held to be a Court - it does not necessarily follow from that the Registrar exercising such powers has to be necessarily a person with judicial/legal background.
We would like to emphasize the need for appointment of suitable persons not only as Registrar, Joint Registrar etc. but as Chairman and members of the tribunal as well. While discharging quasi-judicial functions Registrar, Joint Registrars etc. have to keep in mind that they have to be independent in their functioning. They are also expected to acquire necessary expertise to effectively deal with the disputes coming before them. They are supposed to be conscious of competing rights in order to decide the case justly and fairly and to pass the orders which are legally sustainable.
The State Government shall, keeping in mind the objective of the Act, the functions which the Registrar, Joint Registrar etc. are required to perform and commensurate with those, appointment of suitable persons shall be made - for appointment of the Chairman and Members of the Tribunal, the selection to these posts should preferably be made by the Public Service Commission in consultation with the High Court.
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