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2007 (7) TMI 661
Issues Involved:
1. Validity of reassessment framed under sections 147/148 of the IT Act, 1961.
2. Service of notice under section 148 of the IT Act, 1961.
3. Reliance on the statement of the donor, Smt. Sukhdev Kaur.
4. Presence of the advocate during the recording of the donor's statement.
5. Opportunity given to the assessee to controvert the affidavit filed by the donor.
6. Justification for rejecting the affidavit of the donor dated 8th Jan., 2003.
7. Capacity and genuineness of the gift given by the donor.
8. Overall genuineness of the gift and the donor's capacity to give the gift.
Detailed Analysis:
1. Validity of Reassessment under Sections 147/148 of the IT Act, 1961:
The assessee contended that the reassessment framed under sections 147/148 was invalid due to non-service of notice under section 148. However, the Tribunal upheld the reassessment, noting that the assessee had filed a return in response to the notice and actively participated in the assessment proceedings. This conduct amounted to a waiver of the right to claim non-service of notice, rendering the reassessment valid.
2. Service of Notice under Section 148 of the IT Act, 1961:
The assessee argued that the notice under section 148 was not served at the correct address. The Tribunal found that the assessee's participation in the assessment proceedings and filing of the return in response to the notice constituted a waiver of the requirement for proper service under section 282. The Tribunal cited several case laws to support the principle that procedural irregularities in the service of notice do not invalidate the reassessment if the assessee had knowledge of the notice and participated in the proceedings.
3. Reliance on the Statement of the Donor, Smt. Sukhdev Kaur:
The assessee claimed that the statement of Smt. Sukhdev Kaur was recorded at their back and should not be relied upon. The Tribunal found that the statement was recorded in the presence of the assessee's counsel, Shri V.K. Mittal, who was given the opportunity to cross-examine the donor. The Tribunal upheld the findings of the CIT(A) that the statement was recorded properly and could be relied upon.
4. Presence of the Advocate during the Recording of the Donor's Statement:
The assessee contended that their advocate was not present during the recording of the donor's statement. The Tribunal noted that the donor confirmed the presence of Shri V.K. Mittal, advocate for the assessee, during the recording of her statement and that he was given the opportunity to cross-examine her. This contention was rejected based on the clear evidence of the advocate's presence and participation.
5. Opportunity Given to the Assessee to Controvert the Affidavit Filed by the Donor:
The assessee argued that they were not given reasonable opportunity to controvert the affidavit filed by the donor. The Tribunal found that the AO had provided the assessee with an opportunity to respond to the affidavit, and the assessee had filed written submissions in response. The Tribunal upheld the CIT(A)'s finding that reasonable opportunity was given.
6. Justification for Rejecting the Affidavit of the Donor Dated 8th Jan., 2003:
The AO rejected the affidavit dated 8th Jan., 2003, purportedly filed by the donor, as she categorically denied having given any gift or filed such an affidavit. The Tribunal upheld the rejection of the affidavit, noting that the donor's statement and the supporting affidavit filed later clearly contradicted the claims made in the earlier affidavit.
7. Capacity and Genuineness of the Gift Given by the Donor:
The AO added the gift amount as unexplained cash credit under section 68, finding that the donor did not have the capacity to give the gift, there was no blood relation or occasion for the gift, and the circumstances were highly suspicious. The Tribunal upheld this finding, agreeing with the AO and CIT(A) that the assessee failed to prove the genuineness of the gift and the donor's capacity to give it.
8. Overall Genuineness of the Gift and the Donor's Capacity to Give the Gift:
The Tribunal concluded that the assessee failed to prove the genuineness of the gift and the donor's capacity. The donor's statement and the circumstantial evidence indicated that the gift was not genuine. The Tribunal upheld the addition of the gift amount as unexplained cash credit under section 68, dismissing the assessee's appeal.
Conclusion:
The appeal of the assessee was dismissed on all grounds, with the Tribunal upholding the reassessment and the addition of the gift amount as unexplained cash credit. The Tribunal found that the assessee had waived the right to claim non-service of notice, the donor's statement was reliable, and the assessee failed to prove the genuineness and capacity of the donor to give the gift.
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2007 (7) TMI 660
Issues Involved:
1. Legality of the merger of Vayudoot with Indian Airlines.
2. Determination of the cut-off date for seniority.
3. Method of absorption and seniority placement of SHOD employees.
4. Alleged discrimination between Indian Airlines and Air India employees.
5. Compliance with principles of natural justice.
Issue-wise Detailed Analysis:
1. Legality of the Merger of Vayudoot with Indian Airlines:
The primary contention was whether there was a formal merger between Vayudoot and Indian Airlines. The court held that the decision to merge Vayudoot with Indian Airlines was a policy decision taken by the Central Government on 25.05.1993. Despite the absence of a formal merger until 16.03.2000 or the notification dated 05.02.2001, the policy decision remained valid. The creation of SHOD as part of Indian Airlines and the subsequent steps taken were sufficient to establish the merger's validity. The argument that the absence of a formal merger rendered subsequent decisions non-est was rejected.
2. Determination of the Cut-off Date for Seniority:
The cut-off date for seniority was a significant point of contention. The court upheld the cut-off date of 10.03.1998, as it was the date when the principles of merger were first considered. The court found that fixing this date balanced the equities between the erstwhile Vayudoot employees and Indian Airlines employees, with the former sacrificing five years of service for better career prospects. The argument for a cut-off date of 25.05.1993 or 10.04.1994 was rejected, as the policy decision was taken only after thorough discussions in 1998.
3. Method of Absorption and Seniority Placement of SHOD Employees:
The method of absorption involved placing SHOD employees at the bottom of the respective grade/pay scale as on 10.03.1998, with protection of their pay and past services. The court found no arbitrariness in this method, as it was a well-thought-out policy decision balancing the interests of both sets of employees. The argument that SHOD officers should be placed at the entry level of the cadre was rejected. The court noted that the policy was framed after extensive deliberations and was not arbitrary or unreasonable.
4. Alleged Discrimination Between Indian Airlines and Air India Employees:
The appellant argued that there was discrimination as Air India absorbed Vayudoot employees at the entry level, while Indian Airlines absorbed them horizontally. The court rejected this argument, stating that the merger processes for Air India and Indian Airlines were independent and based on different circumstances. The court found no obligation for the government to adopt identical policies for both organizations. The difference in the number of employees absorbed and the separate processes justified the different approaches.
5. Compliance with Principles of Natural Justice:
The appellant argued that the exclusion of their association from the policy-making process violated principles of natural justice. The court rejected this argument, stating that there was no right for the association to be part of the policy-making process. The authorities were aware of the interests of Indian Airlines employees and had considered their future while framing the policy. The court found no arbitrariness in the policy decision and held that the non-participation of the appellant association did not render the policy decision non-est.
Conclusion:
The Supreme Court upheld the Division Bench's decision, rejecting the appeals and affirming the policy decisions regarding the merger and absorption of SHOD employees into Indian Airlines. The court found the policy decisions to be reasonable, non-arbitrary, and compliant with legal principles. All appeals were dismissed with costs.
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2007 (7) TMI 659
Seeking injunction against the appellant restraining it from encashing the bank guarantee - Application filed u/s 9 of the Arbitration and Conciliation Act, 1996 - allegations of breach of terms and conditions of the agreement entered between the parties - Whether the bank guarantee in question is a conditional one or not - Invited tenders for undertaken expansion of sugar factory from 2500 TCD to 4000 TCD crushing capacity per day - Payment of huge amount due and payable to the respondent - HELD THAT:- In the present case the respondent in its application filed u/s 9 of the Arbitration and Conciliation Act, 1996 in the district court, mostly highlighted as to how the very vital conditions of the agreement have been breached by the appellant herein by not arranging the funds at the proper time. It is alleged that the appellant did not even complete their obligation in respect of providing storage facilities for valuable goods etc. It is specifically alleged that required funds were not available with the appellant. On account of non availability of funds there were two halts of nine months and five months during the execution of the project from 03.12.2001 to 14.08.2002 and from 14.08.2002 to 10.01.2003.
It is further alleged that the appellant failed to arrange for all the pre-requisites. It is not necessary for the purpose of disposal of this appeal to notice all the allegations and averments filed by the respondents except to note that the main thrust of the allegation relate to alleged breach of the conditions of the agreement by the appellant. It was further contended that the bank guarantees were conditional bank guarantees and not unconditional.
We have referred to the substance of the allegations only to highlight that no factual foundation as such has been laid in the pleadings as regards the allegation of fraud. In fact there is no serious allegation of any fraud except using the word "fraud". It is also not stated as to how irreparable loss would be caused in case the appellant is allowed to encash the bank guarantee. The only two exceptions, namely fraud and irretrievable injury based on which injunction could be granted restraining encashment of bank guarantee are singularly absent in the pleadings.
Once it is held that the bank guarantee furnished by the banker is an unconditional one, the appellant in our considered opinion cannot be restrained from encashing the bank guarantee on the ground that a serious dispute had arisen between the parties and on the allegations of breach of terms and conditions of the agreement entered between the parties.
The bank guarantee executed by the bank in the instant case in favour of the appellant herein does not contain any such clause. Mere fact that the bank guarantee refers to the principal agreement without referring to any specific clause in the preamble of the deed of guarantee does not make the guarantee furnished by the bank to be a conditional one. In the very said judgment this Court observed that "what is important, therefore, is that the bank guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee or the person on whose behalf the guarantee was furnished. The terms of the bank guarantee are, therefore, extremely material.
Since the bank guarantee represents an independent contract between the bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the terms of the bank guarantee, or else, the invocation itself would be bad." What is relevant, therefore, is the terms incorporated in the guarantee executed by the bank. On careful analysis of the terms and conditions of the guarantee, we find the guarantee to be an unconditional one. The respondent, therefore, cannot be allowed to raise any dispute and prevent the appellant from encashing the bank guarantee.
Therefore, we hold that the respondent herein did not make out any case for grant of injunction restraining the appellant herein from encashing the bank guarantee.
Thus, the impugned judgment of the Appellate Court is set aside and the appeal is allowed.
Before parting with the judgment, it is made clear that the observations, if any made, in this order shall have no bearing whatsoever upon the dispute pending before the Arbitrator which is required to be disposed of on its own merits uninfluenced by the observations, if any, made in this order.
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2007 (7) TMI 658
Issues Involved:
1. Disallowance of customs duty paid by the assessee.
2. Deductibility of the balance in RG23A (Part II) and PLA.
3. Disallowance of interest accrued but not payable to IDBI Ltd.
4. Depreciation on the written-down value (WDV) of technical know-how fees.
5. Enhancement of income due to customs duty paid on imported raw material lying in closing stock.
6. Non-exclusion of certain sums from income taxed in the previous year.
7. Deductibility of provision for leave encashment.
8. Disallowance of club expenses.
9. Deductibility of depreciation on capital expenditure on technical know-how.
10. Enhancement of the value of foreign exchange denominated assets for depreciation.
11. Treatment of expenses on food and lodging in hotels as entertainment expenditure.
12. Deductibility of the cost of stores and spares written off.
13. Treatment of cash credits and interest thereon.
14. Treatment of interest income for the purpose of deduction u/s 80HHC.
Detailed Analysis:
1. Disallowance of Customs Duty Paid by the Assessee:
The Tribunal held that the provisions of section 145A were not applicable to the year under consideration. The customs duty liability had been incurred and paid in the relevant year, making it deductible under section 43B. The removal of the amount from the closing stock by the assessee was an effective way of granting the deduction under section 43B without disturbing the closing stock figure. Thus, the CIT(A) erred in including the customs duty in the closing stock, and the ground was allowed.
2. Deductibility of Balance in RG23A (Part II) and PLA:
The Tribunal noted that the advance deposit had been made, but the goods had not been removed. The liability was incurred on 'manufacture,' and the duty payable on finished goods exceeded the amount deposited. The credits in PLA and RG23A (Part II) did not amount to actual payment under section 43B, as they were advances to meet future liabilities. The ground was dismissed.
3. Disallowance of Interest Accrued but Not Payable to IDBI Ltd.:
The Tribunal held that clause (d) of section 43B applied only if the interest was payable within the previous year. Since the interest was payable after the close of the previous year, the provision of clause (d) was not applicable, and the disallowance was not justified. The ground was allowed, subject to verification by the Assessing Officer.
4. Depreciation on WDV of Technical Know-How Fees:
The Tribunal followed the decision of a co-ordinate Bench and directed the Assessing Officer to grant depreciation on the WDV determined as per the order of the Tribunal for the earlier assessment year. The ground was allowed.
5. Enhancement of Income Due to Customs Duty Paid on Imported Raw Material Lying in Closing Stock:
Since the Tribunal had already allowed the ground regarding customs duty paid in respect of goods in transit, this ground was also allowed.
6. Non-Exclusion of Certain Sums from Income Taxed in the Previous Year:
The Tribunal held that the amount of Rs. 66,85,647/- was deductible in the current year, while the other sum of Rs. 83,15,315/- was not deductible. The ground was partly allowed.
7. Deductibility of Provision for Leave Encashment:
The Tribunal held that only the incremental liability of the current year could be allowed as a deduction, following the orders of the Pune Benches. The Assessing Officer was directed to work out the incremental liabilities and allow the same. The ground was partly allowed.
8. Disallowance of Club Expenses:
The Tribunal held that the expenditure incurred for corporate membership of clubs was for business purposes and did not confer any enduring benefit on the assessee. The entire expenditure was allowed as deductible. The ground was allowed.
9. Deductibility of Depreciation on Capital Expenditure on Technical Know-How:
Following the decision for the earlier assessment year, the Tribunal directed the Assessing Officer to allow depreciation on the WDV of the capitalized amount of technical know-how. The ground was partly allowed.
10. Enhancement of Value of Foreign Exchange Denominated Assets for Depreciation:
The Tribunal followed its earlier order and dismissed the ground, holding that the amendment in section 43A was prospective and applicable from A.Y. 2003-04 onwards.
11. Treatment of Expenses on Food and Lodging in Hotels as Entertainment Expenditure:
The Tribunal held that 35% of the expenditure was attributable to employees and was not entertainment expenditure. The balance was to be treated as entertainment expenditure under section 37(2). The ground was partly allowed.
12. Deductibility of Cost of Stores and Spares Written Off:
The Tribunal allowed the write-off of chemicals as they were used in the manufacturing process and had expired. However, the write-off of stores and spares from capital work in progress was remanded to the Assessing Officer for fresh examination. The ground was partly allowed.
13. Treatment of Cash Credits and Interest Thereon:
The Tribunal held that the assessee had not provided sufficient evidence for some of the credits. It was decided that eight credits aggregating to Rs. 5.20 lakh were unexplained, and the interest on these credits was disallowed. The ground was partly allowed.
14. Treatment of Interest Income for Deduction u/s 80HHC:
The Tribunal directed the Assessing Officer to compute the deduction based on the finally assessed income, following the decision of the Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equipment. The ground was partly allowed.
Conclusion:
All the appeals were partly allowed, with specific directions given for each ground based on the merits of the case and existing legal precedents.
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2007 (7) TMI 657
Issues Involved:
1. Upgradation of aided schools.
2. Alleged discrimination against respondent schools.
3. Financial constraints as a ground for rejection.
4. Compliance with statutory rules for upgradation.
Summary:
1. Upgradation of Aided Schools:
The appeal by the State of Kerala challenges the Division Bench's judgment directing the State to upgrade two aided schools, treating them at par with two other schools previously upgraded. The respondent schools' request for upgradation from primary to secondary level was declined by the State due to lack of funds. The Single Judge upheld this decision, citing the mandatory procedure in Chapter V of the Kerala Education Rules, 1959, which was not challenged for validity.
2. Alleged Discrimination Against Respondent Schools:
The Division Bench accepted the plea of discrimination, directing the State to upgrade the respondent schools similarly to the two other schools. However, the Supreme Court found this plea untenable, emphasizing that the decision for upgradation must follow the comprehensive procedure laid down in the Rules, which includes preparing and publishing lists of areas for new schools or upgradation, inviting applications, and considering objections.
3. Financial Constraints as a Ground for Rejection:
The State argued that financial constraints justified the rejection of the upgradation requests. The Supreme Court agreed, noting that upgradation involves significant financial commitment and that the applications for upgradation were not invited as per Rule 2A. The Court found the State's decision neither arbitrary nor unreasonable.
4. Compliance with Statutory Rules for Upgradation:
The Supreme Court highlighted the necessity of strict compliance with the statutory rules for upgradation. Any deviation or relaxation of these rules without statutory power could lead to discrimination and arbitrariness. The Court emphasized that even executive orders must conform to the Rules, and any departure could be struck down upon judicial review.
Conclusion:
The Supreme Court set aside the Division Bench's judgment, stating that the respondents' applications for upgradation were not as per the prescribed procedure and that the plea of discrimination was unfounded. The appeal was allowed, and the writ petitions were dismissed without any order as to costs.
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2007 (7) TMI 656
Issues Involved:
1. Delay in Adjudication Proceedings
2. Jurisdiction of Adjudicating Authority
3. Violation of Natural Justice
Summary:
1. Delay in Adjudication Proceedings:
The petitioners raised a preliminary objection that the alleged contraventions under FERA pertained to 1991-92, with show cause notices issued between 1990-94. Hearings concluded in November 1997, but no decision was rendered until the proceedings were revived in July 2006. The petitioners argued that this delay caused serious detriment and prejudice, violating natural justice. The Adjudicating Authority noted that the delay was due to ongoing litigations in various courts, including the Supreme Court, and that the proceedings against the petitioners were interconnected with those against their employees. The Authority found no inactivity on the Department's part and rejected the contention that the delay caused prejudice, noting that the petitioners had been actively involved in the litigation process.
2. Jurisdiction of Adjudicating Authority:
The petitioners contended that the Adjudicating Authority was acting without jurisdiction, as they had complied with the requirements before the show cause notice was issued. The court clarified that the issue was not about the initial jurisdiction but whether subsequent events affected the Authority's jurisdiction. The court held that the mere fact that illegalities were not repeated did not negate the Authority's jurisdiction. The objection was not raised in the preliminary objections before the Adjudicating Authority and was thus rejected.
3. Violation of Natural Justice:
The petitioners argued that the long delay and unavailability of records and employees hampered their defense, violating natural justice. The court noted that the petitioners had been aware of the proceedings and had filed various affidavits, indicating that records were available. The contention that the proceedings were in violation of natural justice was rejected. The court emphasized that the delay was not due to any fault of the respondents and that the petitioners could not take advantage of their own wrongs, such as the unavailability of records.
Conclusion:
The court found no merit in the petition, dismissing it and discharging the rule. The application for stay was rejected, and the petitioners were granted four weeks to file an additional reply.
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2007 (7) TMI 655
Issues:
Challenge to notices for assessment years 1994-95 and 1995-96, validity of authorisation under Section 21(2) of the Act.
Analysis:
The petitioner challenged the notices issued by the Assistant Commissioner for assessment years 1994-95 and 1995-96, along with the authorisation granted by the Additional Commissioner under Section 21(2) of the Act. The petitioner argued that the decision of the Gujarat High Court cited for the authorisation was not applicable, and the authorisation was granted without proper consideration of the petitioner's reply, based on a mere change of opinion. The petitioner contended that previous tribunal decisions had already established the taxability of liquid glucose as a medicine, making any escapement of tax unlikely. The respondent, on the other hand, justified the proceedings based on the Supreme Court's decision regarding liquid glucose not being classified as a drug. The respondent also argued that re-assessment based on a change of opinion was permissible under the law.
The High Court analyzed the facts and legal arguments presented by both parties. It noted that the original assessment had taxed liquid glucose at 7.5%, following a tribunal decision from the previous year. The dismissal of the Special Leave Petition by the Supreme Court regarding the classification of liquid glucose as a drug was not considered a binding decision. The court cited precedents to explain that a dismissal at the Special Leave Petition stage does not constitute res judicata or imply a decision on the merits of the case. The court also emphasized the importance of assigning reasons for granting approval or sanction under Section 21(2) of the Act.
The court found that the Additional Commissioner had not provided any reasons for granting approval for re-assessment, as required by law. As a result, the authorisation and subsequent proceedings were set aside. The court directed the Additional Commissioner to issue a fresh order in compliance with the law and previous court directions. The writ petition was allowed, with no costs imposed.
In conclusion, the High Court ruled in favor of the petitioner, setting aside the notices for assessment and the authorisation for re-assessment due to the lack of reasons provided by the Additional Commissioner. The judgment emphasized the necessity of proper justification for granting approval under Section 21(2) of the Act and directed a fresh order to be issued in accordance with the law.
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2007 (7) TMI 654
Issues Involved:
1. Disallowance of deduction claimed u/s 80-M of the Income Tax Act, 1961.
2. Applicability of Section 115-O (5) of the Income Tax Act, 1961.
Summary:
Issue 1: Disallowance of Deduction Claimed u/s 80-M
The assessee company received dividend income of Rs. 1,00,95,751/- from seven different Indian companies during the Assessment Year 2003-04 and distributed Rs. 1,00,90,000/- as dividend on 07.08.2003. The assessee claimed a deduction u/s 80-M of the Income Tax Act, 1961. The Assessing Officer disallowed the claim, stating that the deduction u/s 80-M was only available for dividends distributed between 01.04.2002 and 31.03.2003. The CIT(A) upheld this disallowance, noting that Section 80-M was omitted by the Finance Act, 2003 with effect from 01.04.2004, and thus, the assessee was not entitled to the deduction for dividends distributed after 31.03.2003.
Issue 2: Applicability of Section 115-O (5)
The CIT(A) further reasoned that Section 115-O (5) prohibits any deduction for the amount on which dividend distribution tax has been paid. The CIT(A) concluded that since the dividend distribution tax was paid on the dividend distributed after 01.04.2003, the deduction u/s 80-M could not be allowed. The assessee argued that the deduction was claimed on account of dividend earned, not distributed, and that Section 115-O (5) does not restrict the allowability of the claim u/s 80-M. The Tribunal agreed with the assessee, stating that Section 115-O (5) does not restrict the deduction u/s 80-M, which pertains to dividends received, not distributed.
Conclusion:
The Tribunal held that the assessee is entitled to claim the deduction u/s 80-M for the dividend income received during the year to the extent of Rs. 1,00,90,000/-. The appeal filed by the assessee was allowed.
Order Pronounced:
The appeal was allowed on 18th July, 2007.
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2007 (7) TMI 653
Jurisdiction - proper officer - power of Assistant Commissioner to file appeal - Held that: - The Assistant Commissioner was authorized by the Commissioner to file the appeal and therefore, it was not necessary that the Original Authority who passed the order should have filed the appeal.
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2007 (7) TMI 652
Issues involved: Condonation of delay in filing appeal before Tribunal, challenge towards penalty imposed, dismissal of appeal by Commissioner on time bar.
Condonation of delay: The applicant filed an application for condonation of delay in filing the appeal before the Tribunal. The delay was attributed to the negligence of the Manager of the applicant. The Tribunal, considering the submissions and perusal of records, found the reasons for delay genuine. Citing the liberal approach endorsed by the Hon'ble Supreme Court in a previous case, the Tribunal allowed the application for condonation of delay, emphasizing the importance of substantial justice over technical considerations.
Stay application: The issue involved in the case pertained to the challenge towards the penalty imposed on the applicant by the adjudicating authority. Since the issue was deemed to be of narrow compass, the Tribunal allowed the stay application and proceeded to take up the appeal for disposal.
Dismissal of appeal by Commissioner: The Commissioner had dismissed the appeal solely on the grounds of being time-barred, as the appeal was filed after the statutory time limit. However, the Tribunal noted that the Commissioner's approach contradicted established legal principles highlighted by the Hon'ble Supreme Court. Given that the issue involved personal penalty imposed on the appellant, the Commissioner could have condoned the delay and heard the appeal on merits. Consequently, the Tribunal condoned the delay in filing the appeal before the Commissioner and remanded the matter for reconsideration on merit within a specified timeframe. Additionally, the appellant was directed to pay costs and provide proof of payment for further proceedings before the Commissioner.
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2007 (7) TMI 651
Issues Involved:
1. Legality of the detention order under Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act).
2. Delay in executing the detention order.
3. Subjective satisfaction of the detaining authority.
4. Availability and absconding of the detenu.
5. Right to representation and procedural safeguards.
Detailed Analysis:
1. Legality of the Detention Order:
The petitioner challenged the legality of the detention order passed by the Joint Secretary to the Government of India under Section 3(1) of COFEPOSA Act. The detaining authority opined that it was necessary to detain the petitioner's husband to prevent him from acting in any manner prejudicial to the augmentation of foreign exchange resources and the prevention of smuggling activities.
2. Delay in Executing the Detention Order:
The court focused on the delay in executing the detention order. The detention order was passed on 27.11.2003 but was executed only on 07.12.2006, a delay of more than three years. The petitioner argued that the detenu was available at his residence and had not absconded, as evidenced by his participation in family events and compliance with other statutory notices. The court noted that there was no satisfactory explanation from the detaining authority or the executing agency for this delay, which undermined the nexus between the alleged prejudicial activity and the detention order.
3. Subjective Satisfaction of the Detaining Authority:
The court examined whether the subjective satisfaction of the detaining authority was genuine and real. It was argued that the long delay in executing the order indicated that the detaining authority was not serious about the immediate necessity of detaining the detenu. The court cited several precedents, including *A.Mohammed Farook vs. Joint Secretary to Government of India* and *SMS Sultan Abdul Khader vs. Joint Secretary to Government of India*, to support the view that unexplained delay in execution vitiates the subjective satisfaction of the detaining authority.
4. Availability and Absconding of the Detenu:
The respondents contended that the detenu was absconding, which caused the delay in executing the order. However, the petitioner provided evidence, such as participation in his daughter's marriage and compliance with other statutory notices, to show that the detenu was available at his residence. The court found the explanation of the respondents unsatisfactory, noting that no serious efforts were made to arrest the detenu despite his known whereabouts.
5. Right to Representation and Procedural Safeguards:
The detaining authority had informed the detenu of his right to make a representation against the detention order to various authorities, including the Advisory Board. However, the court did not delve deeply into this issue, as the case was decided on the ground of delay in execution.
Conclusion:
The court concluded that the unexplained delay in executing the detention order vitiated the subjective satisfaction of the detaining authority and rendered the detention order invalid. The court ordered the release of the detenu, stating that the detention order must stand vitiated by reason of non-execution within a reasonable time.
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2007 (7) TMI 650
Whether, on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in holding that the addition of ₹ 10 lakhs being the unexplained credit is not leviable?
Held that:- The Tribunal had given a factual finding that the assessee had sufficient sources in Sri Lanka to cover the remittances to India. The finding that the assessee has enough source, is a question of fact. The order of the Tribunal is not perverse and the concurrent finding given by both the authorities below is based on valid materials and evidence. In the case of CIT v. P. Mohanakala [2007 (5) TMI 192 - SUPREME Court] the Supreme Court held that whenever there is a concurrent finding by the authorities below, no interference should be called for by the High Court. Under these circumstances, find no error or legal infirmity in the order of the Tribunal so as, to warrant interference.
In view of the foregoing reasons, no substantial question of law arises for consideration of this court and accordingly, the tax case is dismissed. Appeal dismissed.
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2007 (7) TMI 649
Issues involved: Denial of Cenvat credit u/s duty paying documents.
Summary:
The appeal was filed by the revenue against the order-in-appeal. The issue revolved around the denial of Cenvat credit to the respondents for not receiving the inputs as mentioned on the duty paying documents. The respondents acknowledged the error, paid the entire duty liability before the show cause notice, and did not dispute it during the proceedings. The Ld. Commissioner (Appeals) set aside the penalty and interest imposed on the respondents, considering their timely payment. The decision was influenced by a previous ruling of the Hon'ble High Court of Bombay in a similar case. The appellate tribunal found the impugned order appropriate in absolving the interest and penalty, thus rejecting the revenue's appeal.
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2007 (7) TMI 648
Issues involved: Reopening of assessment proceedings u/s 147 of the Income-tax Act, 1961 for the assessment year 1996-97 based on statement of a third party.
The High Court of Delhi considered the appeal challenging the reopening of assessment proceedings for the assessment year 1996-97. The Income-tax Appellate Tribunal had earlier allowed the appeal of the assessee, declaring the reassessment proceedings to be bad in law. The revenue appealed under section 260A of the Income-tax Act, 1961, contending that the Assessing Officer had valid reasons to believe that income had escaped assessment.
The reassessment proceedings were initiated based on the statement of Sh. V.K. Jain, Director of M/s. Visa Fin Cap Pvt. Ltd., alleging money laundering activities and providing non-genuine loans. The Assessing Officer disallowed the loan from M/s. Visa Fin Cap Pvt. Ltd. and share application money from other individuals, adding a substantial amount to the assessee's income from undisclosed sources.
The Tribunal, upon reviewing Sh. V.K. Jain's statement, found it to be too general and lacking specific details linking the assessee to the alleged transactions. The Court emphasized the requirement of tangible material for initiating action u/s 147, stating that the Assessing Officer must have a valid reason to believe that income has escaped assessment. As the statement did not mention the present assessee, the reassessment proceedings were deemed not initiated in accordance with the law.
In line with the precedent set in United Electrical Co. (P) Ltd.'s case, the Court dismissed the appeal, stating that no substantial question of law arose in the present case. The appellant was directed to pay costs of Rs. 5,000 to the Delhi High Court Legal Services Committee within four weeks.
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2007 (7) TMI 647
Bogus purchases of goods - Additions u/s 68 and 69C - deemed income on account of unexplained expenditure on purchases - non-genuineness of exports - HELD THAT:- In the present case, the assessee had furnished purchase bills issued by abovenamed four parties, their CST/RST numbers, PANs, proof regarding payment made by account payee cheques, etc. which was expected from a prudent purchaser. We are thus of the view that the assessee had discharged its primary onus. Besides two parties of the purchase i.e. M/s Adinath Traders and M/s Om Shree Jewellers had appeared before the AO and confirmed the sales made to the assessee. The assessee had also accounted for all purchases in the books. The goods purchased from these four parties were exported and customs authorities have certified the exports made by the assessee.
In support of the exports, necessary documents were furnished which included invoice of sending the goods to Image Link Co. Ltd., Japan and M/s A.R. Gems Co. Ltd., Bangkok. The goods were exported by Thai Airways International Public Co. Ltd. and payments were made to custom house agent Shri P.K. Jain. The cargo was handled through Rajasthan Small Industries Corporation Ltd. and foreign currency was received through bank. The assessee had also credited the export realization received through banking channel in its books of account.
Thus, we are of the view that the balance of bona fide of purchases made from the abovenamed four parties is in favour of the assessee especially in absence of any positive evidence which the AO ought to have brought on record that goods were purchased from some other named parties if not from the abovenamed four parties and that amount paid to them through account payee cheques by the assessee was ultimately returned by them to the assessee. In absence of such positive evidence, the AO in our view was not justified in treating the purchases claimed to have been made from the abovenamed four parties as non-genuine and bogus. The learned CIT(A) has also erred in sustaining the addition made in this regard u/s 69C of the Act and again under proviso to s. 69C of the Act without appreciating the aforesaid facts and circumstances properly.
Thus, there was no occasion before the AO to invoke provisions of s. 145(3) of the Act and making additions in question i.e. u/s 69C of the Act and under proviso to s. 69C of the Act. Both the additions are directed to be deleted. Ground Nos. 1 and 2 are thus allowed in favour of the assessee.
In the result, appeal is allowed.
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2007 (7) TMI 646
Issues Involved:1. Non-deduction of tax at source on tips paid to employees. 2. Limitation period for passing orders u/s 201(1) and 201(1A). Summary:Issue 1: Non-deduction of tax at source on tips paid to employeesThe assessee challenged the decision of CIT(A) treating it in default for non-deduction of tax on tips paid by customers to employees and consequential charge of interest u/s 201(1A). The Assessing Officer (AO) observed that the assessee had not deducted tax at source on banquet tips and other outlet tips paid to casual workers and regular employees respectively. The AO held that these tips constituted taxable income under the head salary and thus, liable for deduction of tax at source. The CIT(A) upheld the AO's order, treating the assessee in default u/s 201(1) and upheld the charge of interest u/s 201(1A). On appeal, the tribunal noted that the assessee received the tips in a fiduciary capacity on behalf of employees and acted as a conduit pipe for passing these amounts to the employees. The tribunal held that tips could not be considered as part of salary since they were not payments made by the employer. The tribunal also noted that it was reasonable for the employer to form a bona fide belief that tips were not part of salary, and thus, the assessee could not be treated in default for not deducting tax at source. The tribunal set aside the order of CIT(A) and allowed the claim of the assessee. Issue 2: Limitation period for passing orders u/s 201(1) and 201(1A)The assessee raised a legal issue that the orders passed by the AO for financial years 1998-99 and 1999-2000 were barred by limitation as they were passed after four years from the end of the relevant financial year. The tribunal noted that the orders were indeed passed after the expiry of four years and referred to the decision in Mitsubishi Corporation v. Dy. CIT, which held that orders passed after four years were barred by limitation. The tribunal quashed the orders passed by the AO u/s 201(1)/201(1A) for the financial years 1998-99 and 1999-2000. Conclusion:In the result, all the appeals filed by the assessee were allowed.
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2007 (7) TMI 645
Issues involved: Validity of notice u/s 143(2) of the Income-tax Act, 1961 for assessment year 2001-02.
Summary:
Issue 1: Service of notice under section 143(2) of the Income-tax Act, 1961
The revenue challenged an order by the Income-tax Appellate Tribunal regarding the service of a notice on the assessee. The Assessing Officer issued a notice on 29-10-2002, but it could not be served through normal postal channels. An Inspector was then deputed to affix the notice at the last known address. The assessee denied receiving the notice due to the premises being locked. The Tribunal found that the revenue failed to prove that the notice was served on the assessee, as the affixation was done without an independent witness. The High Court upheld the Tribunal's decision, stating that the issue did not raise any substantial question of law.
Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision that the notice under section 143(2) was not validly served on the assessee for the assessment year 2001-02.
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2007 (7) TMI 644
Issues involved:
The judgment involves the interpretation of Section 80-IA of the Income Tax Act, 1961 regarding the eligibility for deduction of profits derived from trading activities in addition to manufacturing activities.
Assessment Year 1998-99:
The assessee, a Limited Company engaged in manufacturing knitted cloth from raw wool and trading goods, filed a return for the assessment year 1998-99. The Assessing Officer observed that the income claimed for deduction under Section 80-IA included profits from trading activities, which were not eligible. The CIT (A) allowed the deduction under Section 80-IA, citing similar decisions from the preceding year. The revenue challenged this decision before the Tribunal, which relied on the judgment in the case of M/s Liberty Shoes Ltd. to hold that profits from trading activities are not eligible for deduction under Section 80-IA. The Tribunal emphasized that only profits derived from the actual conduct of the industrial undertaking are eligible for the deduction.
Assessment Year 2000-01:
Similar facts were involved in the assessment year 2000-01. The Tribunal, following the precedent set by the Supreme Court in the cases of Sterling Foods and Pandian Chemicals Ltd., upheld the revenue's appeal and denied the deduction under Section 80-IA for profits derived from trading activities. The Tribunal clarified that the expression "derived from" in Section 80-IA only covers receipts directly related to the industrial undertaking's business activities.
Conclusion:
The High Court upheld the Tribunal's decision, stating that no substantive question of law arose for consideration. The Court agreed with the Tribunal's interpretation of Section 80-IA, emphasizing that only profits directly derived from the industrial undertaking's business activities are eligible for deduction. Therefore, the appeals were deemed without merit and dismissed.
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2007 (7) TMI 643
Non deduction of TDS u/s 194C - hiring charges - Demand raised u/s 201(1) and 201(1A) - HELD THAT:- We find no infirmity in the findings of the ld. CIT(A). The main reason for holding that the assessee is in default for non-deduction of taxes in view of the provisions of section 194C was that the assessee hired trucks through suppliers and the Assessing Officer was of the view that the assessee had made payments to suppliers and not directly to the truck owners. The Assessing Officer was also of the view that if the cumulative figures of payment are taken into consideration then the payments exceed ₹ 20,000. Since no details in regard to suppliers/agents were filed, therefore, the Assessing Officer estimated 90 per cent of the total payment and held that they are in violation of the provisions of section 194C.
From this clarification by CDBT Circular, it became clear that if the contracts are between the truck owner/driver and GR is separate then the payment made for that truck has to be treated as separate payment. In the present case, it is seen that the assessee engaged trucks through agents and suppliers and for each truck they have made separate payment because each truck was for separate destination. Therefore, in our considered view it cannot be said that there was contract between the suppliers and not with truck owners/drivers. Thus, it clearly seen that the contract was with the truck owners/drivers and not with the agents or suppliers. Therefore, in our considered view, the CIT(A) was justified in holding that the provisions of section 194C are not applicable on the facts of the present case.
We have seen the detailed submissions filed on behalf of the assessee before the ld. CIT(A) as the same has been reproduced by the ld. CIT(A) in his order and found that the assessee has clarified each and every point and have met with the objections raised by the Assessing Officer successfully. Therefore, we confirm the findings of the ld. CIT(A).
In the result, the appeal filed by the department is dismissed.
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2007 (7) TMI 642
Issues involved: Miscellaneous Application filed by the assessee challenging the Tribunal order for not following the Supreme Court decision and seeking rectification u/s 254(2).
Summary:
Issue 1: Alleged mistake in Tribunal order
The assessee filed a Miscellaneous Application contending that the Tribunal did not follow the Supreme Court decision approving the judgment of the Hon'ble Karnataka High Court in the case of CIT vs. Kwality Biscuits Ltd. The assessee argued that there was a mistake apparent in the Tribunal order dated 5.8.2004 and requested for its recall.
Issue 2: Comparison of cases
During the hearing, it was highlighted that the issue in the Kwality Biscuits Ltd. case was about charging interest u/s. 234B and 234C on book profit computed u/s.115J, whereas in the present case, it was about charging interest u/s.2346 on book profit computed u/s.115JA. The Bangalore Bench of the Tribunal had ruled in favor of the assessee in a similar case, IBM vs. CIT, reported in 290 ITR (AT) 183. The Departmental Representative argued that there was no mistake in the Tribunal order.
Judgment:
After considering the submissions and reviewing the material, the Tribunal found no merit in the assessee's Miscellaneous Application. It was noted that the judgment of the Hon'ble Karnataka High Court in the Kwality Biscuits Ltd. case was duly considered in the impugned Tribunal order but was not followed as it pertained to Section 115J, whereas the present case involved Section 115JA. The Tribunal observed that the provisions differed between the two sections, and hence, the judgment was not applicable. The Tribunal also clarified that the judgment of the IBM case cited by the assessee was not relevant to the present case as it was issued after the impugned Tribunal order. Therefore, the Tribunal dismissed the assessee's application, stating that there was no mistake in the Tribunal order that required rectification u/s 254(2).
Result:
The Miscellaneous Application of the assessee was dismissed, and the order was pronounced in the open court on 19.7.2007.
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