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Showing 61 to 80 of 1235 Records
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2012 (8) TMI 1182
Issues Involved:
1. Legality of the search and seizure procedure.
2. Reliability of the prosecution witnesses.
3. Non-examination of independent witnesses.
4. Possibility of tampering with the sample.
5. Recording of the purpose of the police visit.
Summary of Judgment:
1. Legality of the Search and Seizure Procedure:
The prosecution's case was that on 09.01.2002, a police team conducted a traffic check and intercepted a motorcycle without a registration number. The pillion rider was carrying a bag containing charas. The accused consented to be searched by the police officials present. The charas weighed 3 Kg. 100 grams, and samples were taken and sealed. The trial court acquitted the respondents, questioning the validity of the consent memo and the lack of independent witnesses.
2. Reliability of the Prosecution Witnesses:
The High Court found the statements of the official witnesses trustworthy and reliable. It emphasized that "the conviction can be recorded merely on the basis of statement of official witness, if it inspires confidence." The court noted that there were no contradictions in the statements of the police officials involved in the search and seizure.
3. Non-examination of Independent Witnesses:
The trial court's acquittal was partly based on the non-examination of independent witnesses. However, the High Court cited several Supreme Court judgments, including *Ravindran alias John Vs. Superintendent of Customs* and *Girja Prasad Vs. State of M.P.*, which held that the testimony of official witnesses could be sufficient for conviction if it inspires confidence. The court noted that efforts were made to include independent witnesses, but they were either hostile or unavailable.
4. Possibility of Tampering with the Sample:
The defense argued that the sample could have been tampered with as it remained in the police station. The High Court dismissed this argument, noting that the sample was received intact by the Chemical Analyst, as confirmed by PW-9.
5. Recording of the Purpose of the Police Visit:
The defense also argued that the police did not record the purpose of their visit in the rapat roznamcha. The High Court found that the departure report was recorded, as stated by PW-1, Constable Sunder Singh.
Conclusion:
The High Court allowed the appeal, setting aside the trial court's judgment and convicting the accused u/s 20 of the Narcotic Drugs and Psychotropic Substances Act, 1985. The court ordered the accused to be produced for sentencing.
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2012 (8) TMI 1181
Issues Involved: Appeal by Department against CIT(A) order for AY 2008-09 regarding depreciation and financial expenses.
Depreciation and Financial Expenses:
The Department appealed against the CIT(A) order allowing depreciation and financial expenses based on a net profit rate of 8%. The AO rejected the books of accounts due to lack of proper documentation and applied an 8% net profit rate on gross receipts, disallowing depreciation and interest claimed. The assessee contended that better results were declared compared to a previous case and cited precedents to support their claim. The CIT(A) upheld the rejection of books but allowed depreciation and finance charges based on a previous Tribunal order for AY 2006-07. The Department's appeal was supported by the ld. DR, while the assessee's counsel relied on the Tribunal's previous decision and case laws. The Tribunal noted the earlier decision supporting allowance of depreciation and financial expenses from net profit, citing relevant case laws. Consequently, the Tribunal dismissed the Department's appeal, affirming the CIT(A)'s order.
(Order Pronounced in the open Court on 30-08-2012).
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2012 (8) TMI 1180
Issues involved: Appeal against addition of unexplained cash credit u/s.68 of the Income Tax Act, 1961 for AY 2007-08.
Summary:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax (appeals) confirming the addition of Rs. 29,00,000 made by the Assessing Officer on account of unexplained cash credit. The Assessing Officer found that the assessee had received loans in cash from different persons, including relatives and staff, throughout the assessment year. Despite providing names and addresses of the creditors, the assessee failed to furnish complete details and documents to substantiate the creditworthiness of the creditors. The Assessing Officer, therefore, added the amount to the total income u/s.68 of the Income Tax Act, 1961, a decision upheld by the CIT(A). The assessee contended that all transactions were recorded in the books of account, and the loan liability was shown in the balance sheet. The loans were received from friends, relatives, and staff for business purposes during a financial crunch. The assessee provided supporting materials and documentary evidence, but the authorities did not thoroughly examine the evidence. The DR supported the addition, stating that the assessee failed to prove the conditions under Section 68.
Upon hearing the contentions and examining the records, the Tribunal found that the CIT(A) confirmed the addition without properly considering the details and evidence submitted by the assessee. The Tribunal noted that the assessee had provided a Paper Book containing loan ledger accounts, loan confirmations, and repayment details. In the interest of justice, the Tribunal set aside the CIT(A)'s order and remanded the issue back to the Assessing Officer for a fresh consideration based on the evidence provided by the assessee. The Tribunal directed the Assessing Officer to decide the issue in accordance with the law, ensuring natural justice is followed. As a result, the appeal of the assessee was allowed for statistical purposes.
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2012 (8) TMI 1179
The High Court of Madras set aside the assessment order dated 31.05.2012 for not issuing a prior notice to the petitioner as required by Rule 52 of the Tamil Nadu General Sales Tax Act, 1959. The respondent was directed to issue a fresh notice, receive objections, and provide a personal hearing before passing a new assessment order. The writ petition was ordered accordingly with no costs.
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2012 (8) TMI 1178
Issues Involved:
1. Admissibility of business expenditure u/s 30 to 37 of the Income Tax Act.
2. Deduction of expenses u/s 57(iii) of the Income Tax Act.
Summary:
Issue 1: Admissibility of Business Expenditure u/s 30 to 37 of the Income Tax Act
The assessee filed its return for the assessment year 2007-08 declaring nil income, claiming business expenditure under Sections 30 to 37 of the Income Tax Act, 1961. The business was under liquidation, and expenses on employees' remuneration, interest on bank loans, administration, selling, and distribution were incurred. The Assessing Officer disallowed the business expenditure, holding that the assessee was not carrying on any business activity. The CIT(A) upheld the Assessing Officer's decision. The Tribunal partly allowed the appeal and remanded the issue to the Assessing Officer. The High Court found no merit in the appeal, stating that the business of the assessee was closed, and income from interest was chargeable to tax as 'income from other sources' under Section 56 of the Act.
Issue 2: Deduction of Expenses u/s 57(iii) of the Income Tax Act
The assessee argued that the expenses should be deductible u/s 57(iii) of the Act, as they were incurred for earning interest income. The High Court examined the provision and relevant case law, including the Supreme Court's decision in Vijaya Laxmi Sugar Mills Ltd. v. Commissioner of Income Tax (1991) and the High Court's decision in Consumer Electronics (Punjab) Ltd. Vs. ACIT. The Court concluded that for expenses to be deductible u/s 57(iii), there must be a nexus between the expenditure and the earning of the income. The Court found no evidence that the expenses were incurred to earn interest income. Consequently, the Tribunal's decision in favor of the revenue was upheld, and the appeals were dismissed.
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2012 (8) TMI 1177
Issues involved: Appeal against addition of loan amount u/s 68 of the IT Act, 1961.
Summary:
The appeal was directed against the order of the ld. CIT (A)-IV, Rajkot for the assessment year 2006-07. The only grievance of the assessee was regarding the confirmation of addition of Rs. 4.80 Lakhs on account of a loan taken from 25 depositors. The AO had held the loan as non-genuine and added it to the total income of the appellant u/s 68 of the IT Act, 1961. The appellant produced Xerox copies of identity proofs for some creditors but failed to produce them for verification. The CIT(A) upheld the AO's decision. The ITAT set aside the CIT(A)'s order and directed the AO to provide the assessee with one more opportunity to produce the loan creditors and documentary evidence of loan repayment. The AO was instructed to pass a fresh decision after considering all evidence presented by the assessee.
In conclusion, the assessee's appeal was allowed for statistical purposes, and the matter was remanded back to the AO for fresh consideration with specific instructions to provide a reasonable opportunity for the assessee to present necessary evidence.
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2012 (8) TMI 1176
Issues involved:
The appeal concerns the validity of a reassessment proceeding u/s 147 of the Income Tax Act, 1961, specifically regarding the timing of supplying reasons for reopening assessment within the six-year limit.
Summary:
Issue 1: Validity of Reassessment Proceeding
The revenue appealed against the Tribunal's order allowing the assessee's appeal without examining the merits, based on the ground that reasons for reopening were not supplied within six years from the end of the relevant assessment year. The AO observed bogus transactions by the assessee based on accommodation entries, leading to an addition of Rs. 38,99,527. The CIT (A) rejected the appeal on merits and dismissed the contention that reassessment was invalid due to being initiated after the limitation period. The Tribunal, following a previous decision, quashed the reassessment due to reasons not being supplied within the six-year period.
Issue 2: Legal Interpretation
The revenue argued that there is no legal requirement to serve reasons for reopening assessment along with the notice u/s 148. They cited legal precedents to support their contention. The assessee defended the Tribunal's decision, emphasizing that the notice was served after the six-year limit, depriving the AO of jurisdiction to reopen assessment.
Court's Decision
The Court analyzed the legal provisions and cited relevant case laws. It clarified that serving the notice is a pre-condition for making the assessment order u/s 148, not the service on the assessee. As the notice was issued within the six-year limit, the AO had jurisdiction despite late service. The Court rejected the assessee's argument that reasons must be furnished along with the notice, citing a previous Division Bench decision. It highlighted that the assessee had ample time to respond to the reasons recorded for reopening, ensuring a fair opportunity as mandated by law. Consequently, the Court set aside the Tribunal's order and remanded the matter for consideration on its merits.
In conclusion, the Court upheld the legality of the reassessment proceeding, emphasizing compliance with statutory provisions and established legal principles.
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2012 (8) TMI 1175
Deductions - Interest paid on borrowings - MAT - Peak load infringement charges - Sales tax incentive.
Interest paid on borrowings - HELD THAT:- Respectfully following the principles laid down in the Setabganj Sugar Mills Ltd vs. CIT [1960 (11) TMI 10 - SUPREME COURT] and by the Coordinate bench in assessee’s own case, we modify the order of the CIT (A) and allow the expenditure as revenue expenditure u/s 36(1)(iii). The amendment to the section wherein the borrowed funds are to be capitalized till the date on which such asset was put to use has come up with effect from 1.4.2004. As seen from the facts of the claim from the order of the CIT (A) all the borrowings are for the existing business, even though new advantages have been created. Therefore, the interest expenditure is allowable as revenue expenditure. Accordingly this ground is allowed.
Peak load infringement charges - HELD THAT:- What assessee has paid is additional charges for overdrawing the power sanctioned to it which the HPSEB has levied as peak load infringement charges. These are nothing but electricity charges but paid for additional drawal of power than the sanctioned load at that particular point of time. The amounts are compensatory in nature and not penalty for surcharge violation. The same cannot be disallowed by invoking Explanation to section 37(1). In view of this, we direct AO to allow the amount. Ground is allowed.
Sales tax incentive - power tariff freeze - Electricity duty - Road Transport subsidy as capital receipt - MAT - HELD THAT:- We are of the view that so far as the exclusion of these items from book profits under section 115JB is concerned, we find that even though there are Coordinate Bench decision in favour of assessee, this precedence no longer hold good law in view of the Special Bench decision of this Tribunal in the case of Rain Commodities [2010 (7) TMI 794 - ITAT HYDERABAD]. Respectfully following the Coordinate Bench decision in assessment year 1998- 99 which in turn followed the above Special Bench decision, we reject the grievance of assessee and uphold the stand of the authorities on this issue. The grounds are rejected.
Disallowance of interest on funds borrowed in connection with earning incomes exempt u/s 10(33) - HELD THAT:- Since the CIT (A) has considered the issue on facts wherein a finding has given that assessee has own funds to make investments, no disallowance is required on facts. Not only that the Hon'ble Supreme Court in the case of Munjal Sales Corporation vs. CIT & Another [2008 (2) TMI 19 - SUPREME COURT] held that when assessee had sufficient own funds and profits to provide interest free loans, the submission that loans to sister concerns were out of those funds has to be accepted. Similar view is also taken by the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Thus, we do not see any reason to interfere with the order of the CIT (A). Accordingly Revenue ground is rejected.
In the result, Revenue appeal is dismissed.
In the result assessee’s appeal is partly allowed and Revenue appeal is rejected.
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2012 (8) TMI 1174
The Appellate Tribunal ITAT Jaipur dismissed the appeal filed by the assessee for the assessment year 2005-06 as the notice sent to the assessee's last known address was returned unserved, indicating the assessee's lack of seriousness in pursuing the case. The appeal was dismissed in limine based on precedents.
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2012 (8) TMI 1173
Issues Involved:1. Legality of proceedings initiated u/s 153C. 2. Validity of additions made based on documents impounded during the survey. 3. Determination of the profit element in unaccounted sale proceeds. Summary:1. Legality of Proceedings Initiated u/s 153C:The assessee challenged the framing of assessment u/s 153C, arguing that no incriminating documents belonging to the assessee company were found during the search at the residence of its Director, Shri Ramesh Kumar Agrawal. The CIT(A) dismissed this contention, stating that documents pertaining to the assessee company were indeed found at the Director's residence and that these documents indicated that the assessee had not fully recorded the sale consideration in its books of accounts. The Tribunal upheld the CIT(A)'s view, noting that the documents found were sufficient to initiate proceedings u/s 153C, as the requirement is only for the seized documents to belong to the assessee, not necessarily to be incriminating. 2. Validity of Additions Based on Documents Impounded During the Survey:The assessee contended that the additions made were based on documents impounded during the survey u/s 133A at the business premises, which were not incriminating. The CIT(A) and the Tribunal, however, found that the documents impounded from the business premises and those seized from the Director's residence indicated receipt of cash against the sale of plots, which was not recorded in the books of accounts. Thus, the additions were justified. 3. Determination of Profit Element in Unaccounted Sale Proceeds:The Tribunal considered various judicial pronouncements, including those from the Hon'ble Gujarat High Court and the Hon'ble M.P. High Court, which held that only the profit element embedded in unaccounted sales can be brought to tax, not the entire sale proceeds. The Tribunal directed the Assessing Officer to take 25% of the sale proceeds received in cash as the assessee's income, rather than adding the entire amount of sale proceeds received in cash. Conclusion:The appeals of the assessee were allowed in part, with the Tribunal directing the Assessing Officer to add only the profit element (25%) of the unaccounted sale proceeds received in cash to the assessee's income.
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2012 (8) TMI 1172
Deduction for Co-operative Society u/s 80P(2)(a)(i). - It was contended that Assessee, a cooperative society derives income from providing credit facilities to its relatives. Also, after insertion of 80P(4), deduction is only available to primary agricultural credit society and primary cooperative agricultural and rural development bank. Hence, not liable for deduction.
HELD THAT:- The assessee society is providing credit facilities to its members only and not to the public at large, therefore, the case of the assessee is covered under sec. 80P(2) and not by 80P(4). It is undisputed fact that the Assessee is registered as a credit cooperative society. Also, the objects of the society are fortified by the letter of the President as per which it has been specifically mentioned that the society is restricted to employees of BHEL and no outsider is permitted to become a member or shareholder of depositor or lender or borrower. The finding of the AO is contrary to the facts. Since the assessee society is providing credit facilities to its members only, therefore, clearly entitled to deduction u/s 80P(2) of the Act - Decision in Favour of Assessee.
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2012 (8) TMI 1171
Issues Involved:
1. Addition towards deferred income
2. Disallowance of provision for doubtful debts
3. Disallowance of management expenses
4. Addition towards reversal of income
5. Disallowance u/s 14A
6. Determination of losses to be carried forward
Summary of Judgment:
1. Addition towards Deferred Income
The first common issue in the grounds of all these appeals relevant to the assessment years 2002-03, 2006-07 to 2008-09 is that the Commissioner of Income Tax (Appeals) erred in confirming the addition made towards deferred income. The Tribunal referenced the Chennai Special Bench decision in the case of ACIT v. Mahindra Holidays & Resorts (India) Ltd., which held that the entire amount of timeshare membership fee receivable by the assessee up front at the time of enrolment of a member is not the income chargeable to tax in the initial year due to the contractual obligation to provide services in future over the term of the contract. Hence, the issue was decided in favor of the assessee.
2. Disallowance of Provision for Doubtful Debts
For the assessment year 2006-07, the assessee's counsel submitted that this ground of appeal is not pressed. Accordingly, the ground of appeal raised on disallowance of provisions for doubtful debts is dismissed as not pressed.
3. Disallowance of Management Expenses
The Assessing Officer disallowed 50% of the increase in management expenses incurred by the assessee on the ground of substantial increase compared to the preceding year and a reduction in income. The Commissioner of Income Tax (Appeals) confirmed this disallowance. The Tribunal, however, found that the management fee was directly linked to resort income, which had actually increased. Therefore, the disallowance of Rs. 55,49,807/- on account of management expenses was deleted.
4. Addition towards Reversal of Income
For the assessment year 2007-08, the Assessing Officer made an addition of Rs. 1,31,51,275/- due to the provision for expenses made on 31.03.2007 and reversed on 01.04.2007. The Commissioner of Income Tax (Appeals) confirmed this disallowance. The Tribunal restored this issue to the file of the Assessing Officer to examine the additional evidence produced by the assessee.
5. Disallowance u/s 14A
For the assessment year 2002-03, the Assessing Officer disallowed Rs. 11,00,577/- u/s 14A read with Rule 8D. The Commissioner of Income Tax (Appeals) restricted the disallowance to 2% of the dividend earned, but since there was no dividend income, the Tribunal dismissed the grounds of appeal of the assessee on this issue. For the assessment year 2008-09, the Tribunal restored the issue to the Assessing Officer to decide afresh in light of the Bombay High Court's decision in the case of Godrej & Boyce Mfg. Co. Ltd.
6. Determination of Losses to be Carried Forward
For the assessment year 2008-09, the Commissioner of Income Tax (Appeals) sustained the order of the Assessing Officer in determining the losses to be carried forward at Rs. 53,06,83,140/- as against Rs. 138,01,61,035/-. The Tribunal set aside the issue to the file of the Assessing Officer to re-examine and determine the correct losses to be carried forward.
Conclusion
The appeals of the assessee in I.T.A. Nos. 471 & 472/Mds/2012 are partly allowed, and I.T.A. Nos. 473 & 160/Mds/2012 are partly allowed for statistical purposes. The order was pronounced on Thursday, the 30th of August, 2012, at Chennai.
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2012 (8) TMI 1170
Issues Involved:
The judgment involves the validity of proceedings initiated u/s 158BD of the I.T. Act, estimation of undisclosed investments, and the application of additional gross profit rate.
Validity of Proceedings u/s 158BD:
The appeal challenged the validity of the proceedings initiated u/s 158BD of the I.T. Act. The CIT(A) upheld the validity of the proceedings, which was contested by the appellant. However, during the hearing, the AR representing the assessee conceded that grounds 1 to 3 were not pressed, leading to their dismissal.
Estimation of Undisclosed Investments:
The AO estimated undisclosed investments at Rs. 10,44,491 on the assessee u/s 158BD. The CIT(A) acknowledged that since sales were not suspected, corresponding purchases were entered in the books, albeit not in the name of the vendor. The CIT(A) estimated the undisclosed investments at Rs. 2,61,627, being 25% of the amount held as undisclosed by the AO, and added 5% of GP on the same. The AR argued that the additions could not be sustained as they pertained to transactions recorded in the regular books of account, citing relevant judgments.
Application of Additional Gross Profit Rate:
The DR supported the revenue authority's order, stating that the assessee was a beneficiary of hawala transactions, leading to the initiation of proceedings u/s 158BD. The AO added back the aggregate of such entries as bogus investments. The CIT(A) reduced the disallowance from Rs. 10,46,490 to Rs. 2,61,627 and added 5% of GP on the initial amount. The ITAT considered the arguments and upheld the addition of Rs. 52,325 as additional gross profit, while ordering the deletion of the investment addition of Rs. 2,61,627.
Conclusion:
The ITAT partially allowed the appeal filed by the assessee, emphasizing the deletion of the investment addition and sustaining the additional gross profit addition. The judgment highlighted the importance of assessing transactions recorded in the books of account and the application of relevant provisions under Chapter XIVB of the I.T. Act.
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2012 (8) TMI 1169
Issues involved: Appeal against order u/s 143(3) read with section 144C of the Income Tax Act, 1961; Rejection of objections by DRP-II; Addition on account of difference in arm's length price of international transactions.
Summary:
Issue 1: Assessment u/s 143(3) and 144C
The appeal was filed against the order of the ITO Ward 13(4), New Delhi u/s 143(3) read with section 144C of the Income Tax Act, 1961. The DRP-II rejected the objections raised by the assessee and directed the Assessing Officer to proceed with the assessment as proposed in the Draft Assessment Order.
Issue 2: Addition on Arm's Length Price
The Assessing Officer proposed an assessment at an income different from the one returned by the appellant, based on the arm's length price of international transactions. The appeal contested the addition made on account of the difference in the arm's length price, as determined by the TPO under section 92CA(3) of the Act.
Facts:
The Draft Order u/s 144C of the Act was passed, and objections were filed by the assessee before DRP-II against proposed additions. The objections were rejected, leading to finalization of assessment by the Assessing Officer based on the Arm's Length Price margin. The assessee contended that additional evidence application was not duly considered by the tax authorities.
Judicial Precedents:
The assessee relied on a judgment of the Hon'ble Jurisdictional High Court of Delhi, emphasizing the Tribunal's discretion to allow additional evidence for proper adjudication. Another judgment of ITAT, Delhi A Bench was cited, highlighting the importance of considering additional evidence for determining the arm's length price of international transactions.
Decision:
The Tribunal found that the tax authorities passed orders without considering the additional evidence application submitted by the assessee. In light of the judgments cited, the Tribunal directed the matter to be restored to the file of DRP-II for considering the additional evidence and deciding the case afresh. The appeal of the assessee was allowed for statistical purposes.
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2012 (8) TMI 1168
Issues involved: Appeal by Revenue u/s 260-A of Income Tax Act against ITAT order regarding additions made by Assessing Officer on unaccounted purchases of castor seeds and gross profit on unaccounted sale.
Addition of unaccounted purchases: The Assessing Officer made additions for unaccounted purchases of castor seeds and gross profit on unaccounted sales. CIT(A) set aside the additions, accepting the explanation that production was dependent on various factors, including electricity consumption variations due to moisture content in fresh castor seeds. The Tribunal dismissed the appeal, noting that the Assessing Officer made presumptive additions without finding defects in the books of account or invoking section 145(3) for book rejection. The Tribunal held that if books were prepared based on bills and vouchers without unrecorded raw material purchases or production, there was no basis for presumptive additions. The Tribunal's findings were based on relevant material, concluding that variations in electricity consumption did not justify the additions, which were made on presumption. As the Tribunal's findings were factual, the appeal did not raise any substantial question of law, leading to the dismissal of the appeal.
Gross profit on unaccounted sale: The Assessing Officer also made an addition for gross profit on unaccounted sales. The CIT(A) and Tribunal both overturned this addition, emphasizing that the Assessing Officer did not find any defects in the books of account or invoke section 145(3) for book rejection. The Tribunal held that without discrepancies in production consumption and based on detailed manufacturing activity, there was no basis for the presumptive addition. The Tribunal's decision was based on the totality of circumstances and case laws, affirming that the CIT(A) correctly reversed the Assessing Officer's findings. The Tribunal's conclusion was factual, and as such, the appeal did not present any substantial question of law, resulting in the dismissal of the appeal.
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2012 (8) TMI 1167
Issues Involved:1. Confirmation of disallowance out of interest expense amounting to Rs. 40,14,765/-. Summary:Issue 1: Confirmation of Disallowance of Interest ExpenseThe assessee filed a return of income declaring a loss of Rs. 1,05,880/- for the assessment year 2008-09. The case was selected for scrutiny, and the AO noticed that the assessee received rent from M/s. Cottage Industries Exposition Ltd. and had shown income under different heads including 'Income from House Property'. The AO disallowed a portion of the interest expense claimed by the assessee, amounting to Rs. 52,51,355/-, on the grounds that the secured loans were not fully utilized for the construction of the building but were also used for giving interest-free advances to group companies and acquiring shares of group companies. The AO allowed only Rs. 24,51,957/- as interest u/s 24(b) of the Act. The assessee contended that the entire interest should be allowed either under the head 'Income from House Property' or 'Income from Business'. The CIT(A) partially accepted the assessee's claim, allowing Rs. 36,88,547/- as interest u/s 24(b) but confirmed the disallowance of the remaining Rs. 40,14,765/-. The CIT(A) observed that the assessee had invested borrowed funds partly in shares and partly in giving interest-free advances, which could not be allowed under the head 'Income from Business' or 'Income from Other Sources' due to the provisions of Section 14A of the Act. On appeal, the Tribunal noted that the assessee had declared income from house property and claimed deduction u/s 24(b) for interest on term loans used for construction. The Tribunal agreed with the CIT(A) on the allowable interest u/s 24(b) but found that the AO and CIT(A) had not fully examined the commercial expediency of the interest-free advances to group companies. The Tribunal referred to the Supreme Court's decision in S.A. Builders Ltd. vs. CIT, emphasizing the need to examine the purpose and commercial expediency of such advances. The Tribunal remanded the issue of the remaining interest of Rs. 40,14,765/- back to the AO for fresh adjudication, directing that the deduction u/s 24(b) should not be disturbed. In conclusion, the appeal of the assessee was partly allowed for statistical purposes. (Order Pronounced in the open Court on 31-08-2012)
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2012 (8) TMI 1166
1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment are: - Whether the Assessing Officer can reopen an assessment after the expiry of four years on the ground that income chargeable to tax had escaped assessment, despite the fact that the query raised was replied to by the assessee and an assessment order was passed under Section 143(3) of the Income Tax Act, 1961.
- Whether the reopening of the assessment was justified under Section 147 of the Income Tax Act, given the alleged failure to disclose fully and truly all material facts necessary for the assessment.
- Whether the concept of "change of opinion" applies in this case, thereby rendering the reopening of the assessment invalid.
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Reopening of Assessment after Four Years - Relevant Legal Framework and Precedents: Section 147 of the Income Tax Act, 1961, allows for the reopening of assessments if the Assessing Officer has reason to believe that income has escaped assessment. The proviso to Section 147 restricts reopening after four years unless there is a failure to disclose material facts fully and truly.
- Court's Interpretation and Reasoning: The court emphasized that reopening is not permissible merely on a change of opinion. The original assessment involved specific queries that were addressed by the assessee, and the Assessing Officer's satisfaction led to the assessment order under Section 143(3).
- Key Evidence and Findings: The petitioner had disclosed all relevant facts, including provisions for exchange differences, in the balance sheet, and these were queried and answered during the original assessment.
- Application of Law to Facts: The court applied the principle that reopening based on a change of opinion is not allowed unless there is new tangible material indicating escaped income.
- Treatment of Competing Arguments: The petitioner argued that there was no failure to disclose material facts, while the respondent contended that the original order lacked explanations for certain provisions. The court sided with the petitioner, noting the absence of new tangible material.
- Conclusions: The court concluded that the reopening was based on a change of opinion without new tangible material, rendering it invalid.
Issue 2: Justification for Reopening under Section 147 - Relevant Legal Framework and Precedents: The court referred to the Supreme Court's decision in Commissioner of Income Tax Delhi Vs. Kelvinator of India Ltd., which clarified that reopening requires tangible material and cannot be based on a mere change of opinion.
- Court's Interpretation and Reasoning: The court found no new tangible material to justify reopening and emphasized the need for such material to avoid arbitrary use of power by the Assessing Officer.
- Key Evidence and Findings: The original assessment addressed all queries, and the reopening was not supported by any new evidence.
- Application of Law to Facts: The court applied the Kelvinator principle, determining that the reopening was not based on any new tangible evidence.
- Treatment of Competing Arguments: The respondent's argument that Explanation 1 to Section 147 applied was rejected, as the court found that all necessary disclosures were made by the petitioner.
- Conclusions: The court held that the reopening was unjustified under Section 147 due to the lack of new tangible material.
3. SIGNIFICANT HOLDINGS - Preserve Verbatim Quotes of Crucial Legal Reasoning: "It is not open to the Assessing Officer to change his opinion unless there is some new tangible material available with the Assessing Officer, on the basis of which he has reason to believe that income chargeable to tax has escaped assessment."
- Core Principles Established: The court reaffirmed the principle that reopening assessments based on a change of opinion is not permissible without new tangible material. The necessity for full and true disclosure by the assessee was emphasized, but the burden of proof for reopening lies with the presence of new evidence.
- Final Determinations on Each Issue: The court quashed the notice under Section 148 and the order rejecting the petitioner's objections, holding that the reopening of the assessment was invalid due to the absence of new tangible material and was merely a change of opinion.
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2012 (8) TMI 1165
The Supreme Court of India granted leave for the appeal and ordered parties to complete their pleadings within eight weeks. The case is to be placed along with another Civil Appeal arising from S.L.P. (C) No.32081 of 2011.
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2012 (8) TMI 1163
Issues involved: Appeals filed by Revenue and Cross Objections filed by assessee against order of Commissioner of Income Tax (Appeals) regarding allowance of depreciation.
Issue 1: Allowance of Depreciation
The Revenue contended that the Commissioner of Income Tax (Appeals) erred in allowing depreciation to the assessee trust based on certain court decisions. The assessee argued that the order granting registration under section 12AA of the Act justified the claim for depreciation. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to verify the claim of depreciation. The Revenue argued that the issue of deductibility of depreciation for charitable institutions was debatable, citing a Kerala High Court decision. The assessee relied on the decision of Punjab & Haryana High Court and Supreme Court to support the allowance of depreciation.
Judgment:
The Tribunal found no merit in the Revenue's appeals. It noted that if the issue of depreciation was debatable, then the Assessing Officer was also not justified in disallowing depreciation. The Tribunal referred to a decision of the Madras High Court in favor of the assessee regarding the allowability of depreciation for charitable institutions. Therefore, it upheld the order of the Commissioner of Income Tax (Appeals) and dismissed all appeals of the Revenue.
Cross Objections:
The assessee's Cross Objections were in support of the Commissioner of Income Tax (Appeals)'s order and did not raise any new grounds. As a result, the Cross Objections were dismissed as infructuous.
Conclusion:
All appeals of the Revenue and Cross Objections of the assessee were dismissed by the Tribunal in its order pronounced on August 22, 2012, at Chennai.
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2012 (8) TMI 1162
Issues Involved:
1. Deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for filing the original return beyond the due date u/s 139(1).
2. Calculation of penalties based on the difference between the tax on the income shown in the first returns and the tax on the incomes assessed.
3. Failure of the assessee to perform a statutory obligation.
4. Deletion of penalty without considering relevant case laws.
5. Applicability of the Hon'ble Supreme Court's decision in CIT Central - III vs. Surya Herbal Ltd. despite the tax effect being below Rs. 3 lakhs.
Summary:
Issue 1: Deletion of Penalty u/s 271(1)(c) for Late Filing of Return
The assessee filed the original return beyond the due date u/s 139(1) and subsequently revised it within a few days. The CIT(A) observed that both returns were filed voluntarily and not after detection by the Income Tax Department. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in G.L. Didwania vs. ITO, which states that penalty should not be imposed unless there is deliberate defiance of law or dishonest conduct.
Issue 2: Calculation of Penalties
The Tribunal noted that the assessee revised the return within a short period after discovering an omission. The act of revising the return was seen as an honest correction rather than an admission of concealment. The Tribunal concurred with the CIT(A) that the penalty on the difference between the original and revised returns was not justified.
Issue 3: Failure to Perform Statutory Obligation
The Tribunal agreed with the CIT(A) that the assessee's act of revising the return promptly after discovering the omission demonstrated a bona fide belief and correction, thus not warranting a penalty for failure to perform a statutory obligation.
Issue 4: Deletion of Penalty Without Considering Relevant Case Laws
The Tribunal found that the AO's reliance on certain case laws was not applicable to the present facts and circumstances. The CIT(A) had rightly distinguished these cases, and the Tribunal upheld this view.
Issue 5: Applicability of Supreme Court's Decision Despite Low Tax Effect
The Tribunal dismissed the Revenue's appeal, noting that the facts of the case did not warrant the application of the Supreme Court's decision in CIT Central - III vs. Surya Herbal Ltd., as the issues were resolved based on the bona fide actions of the assessee.
Conclusion:
The Tribunal dismissed the appeals filed by the Revenue in both cases, upholding the CIT(A)'s decision to delete the penalties imposed u/s 271(1)(c) of the Income Tax Act, 1961. The order was pronounced in the open court on 6th August 2012.
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