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2011 (12) TMI 716
Issues Involved:1. Whether the suit filed on 2.9.1985 was barred by limitation. 2. Whether the account between the parties was a mutual account as envisaged in Article 1 of the Schedule to the Limitation Act, 1963. 3. Which Article in the Schedule to the Limitation Act, 1963 applies to the present case. Summary:Issue 1: Limitation of the SuitThe appeal arises from a judgment and decree dated 29.8.2001, where the suit for recovery of Rs. 26,30,000/- filed by the respondent was decreed against the appellant. The primary issue was whether the suit filed on 2.9.1985 was barred by limitation. The claim was based on 56 bills for hides sold, with the last supply on 3.9.1982. The appellant argued that limitation would run for each supply, and the account was not mutual. The learned Single Judge applied Article 1 of the Schedule to the Limitation Act, 1963, which provides that limitation begins from the close of the year in which the last item is entered in the account, thus holding the suit within the prescribed limitation period. Issue 2: Mutual AccountThe question was whether the account between the parties was mutual. The Supreme Court in Kesharichand Jaisukhlal v. The Shillong Banking Corporation defined a mutual account as one with transactions on each side creating independent obligations. The court observed that for an account to be mutual, there must be reciprocal demands between the parties. In the present case, the dealings disclosed a single contractual relationship of buyer and seller, not creating independent obligations on each side. Thus, the account could not be termed as mutual, and Article 1 of the Schedule to the Limitation Act, 1963, did not apply. Issue 3: Applicable ArticleSince Article 1 did not apply, the court considered which Article in the Schedule to the Limitation Act, 1963, was applicable. The appellant argued for Article 14, which applies to suits for the price of goods sold and delivered when no fixed period of credit is agreed upon. However, the court noted that in a running and non-mutual account, the action is for the balance due at the foot of an account, not for the price of goods sold and delivered. Therefore, Article 14 was not applicable. The residual Article 113, which provides a three-year limitation period from when the right to sue accrues, was applicable. The right to sue accrued when the claim was denied on 13.7.1985, and since Rs. 7,000/- was paid on 13.7.1985 and 24.7.1985, limitation commenced from 24.7.1985. The suit filed on 2.9.1985 was within limitation. Conclusion:The appeal was dismissed, and the judgment and decree dated 29.8.2001 were upheld. The appellant was ordered to pay the costs assessed by the Taxation Officer to the respondent.
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2011 (12) TMI 715
Issues involved: Interpretation of the definition of 'mine' and 'mineral' under Section 3 of the M.P. Electricity Duty Act, 1949.
Summary:
The petitioner sought a direction to declare that ferro-manganese is not a 'mineral' and does not fall under the definition of 'mine' as per Section 3 of the Act. The petitioner argued that they are classified as an alloy industry and should not be subjected to higher electricity duty for manufacturing ferro alloy. The court noted that manganese, a mineral, is processed into ferro-manganese, an alloy, which is subject to levy duty under the Act. The court dismissed the writ petition based on previous orders and upheld the classification of the petitioner under deemed 'mine'.
This judgment clarifies the classification of ferro-manganese under the M.P. Electricity Duty Act, 1949. The court emphasized that the processing of manganese into ferro-manganese falls under the definition of 'mine' as per the Act, thereby subjecting it to levy duty. The court's decision was based on the interpretation of the relevant provisions and previous orders, affirming the classification of the petitioner as an alloy industry.
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2011 (12) TMI 714
Filing of Return u/s 153A beyond the period of limitation - The assessee had claimed interest expenditure of loan in the returns filed u/s. 153A which was not claimed in the returns of income filed u/s. 139(1) - Increase in loss was not carry-forward as response to notice u/s 153A was beyond time limit
HELD THAT:- As laid down by the Mumbai Bench of the Tribunal THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 6 MUMBAI. VERSUS M/S. EVERSMILE CONSTRUCTION CO. PVT. LTD. [2011 (8) TMI 495 - ITAT MUMBAI], If any deduction is claimed by the assessee in the proceedings u/s 153A that cannot be rejected simply on the ground that it was not claimed in the original assessment or was disallowed.
In the case of SUJANI TEXTILES (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. [2003 (1) TMI 281 - ITAT MADRAS-B], it was held that, if the assessee has filed a loss return u/s. 139(3) within the period provided under the Act and if the assessee has filed a revised loss return under Sub-section (5) thereof again within the prescribed time limit, the A.O is bound to take cognizance of the revised return because the original return is replaced by the revised return, undisputedly, the assessment u/s. 153A r.w.s. 143(3) of the Act has been framed on the basis of return filed in response to notice issue u/s. 153A of the Act. Hence, now it is not open to raise contention by the revenue that return was filed beyond the prescribed time period mentioned in the notice issued u/s. 153A of the Act. The return of income filed in response to the notice u/s. 153A on the basis of which assessment in question has been framed thus has replaced the original return for determining the net income in the assessment u/s. 153A.
Thus, in a sense, return filed in response to the notice issued u/s. 153A was a revised return and the assessment was re-assessment. For the purpose of levy of penalty u/s. 271(1)(c ), excess income in difference to the originally assessed income may be subject matter under the facts and circumstances of the case that the same was due to concealment of particulars of income or furnishing inaccurate particulars thereof, but for the purpose of assessment of net income, the return filed in response to notice u/s. 153A of the Act is the revised return superseding earlier return of income and the assessment based upon that original return of income.
We, thus, following the ratio laid down by the Mumbai Bench of the Tribunal in the case of DCIT Vs. Eversmile Construction Pvt. Ltd., hold that the A.O was not justified in denying the claim of carry forward of loss in question in the A.Ys. under consideration - Decision in favour of Assessee.
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2011 (12) TMI 713
Issues involved:
The only issue raised in this case is the deletion of addition/disallowance of Rs. 36,57,034/- made by the Assessing Officer u/s. 40(a)(ia) of the I.T.Act'61.
Summary of Judgment:
Issue: Deletion of addition/disallowance u/s. 40(a)(ia) of the I.T.Act'61.
The Assessing Officer disallowed the expenditure of Rs. 64,36,384/- for non-deduction of tax at source u/s. 200(1) of the I.T Act'61. The Commissioner of Income-tax (Appeals) confirmed an addition of Rs. 26,19,050/- but deleted the balance amount of Rs. 3,657,034/-, stating that payments made to 7 parties were for purchase of equipment/machinery and not subject to tax deduction u/s. 194C. The Commissioner relied on CBDT guidelines and a High Court decision to support this conclusion.
The revenue appealed the decision, arguing that the AO's order should be upheld. The assessee contended that the Commissioner's decision was justified as the material was supplied as per specifications. After reviewing the bills and material on record, the Tribunal upheld the Commissioner's decision, noting that the transactions were related to the purchase of material with specific specifications, in line with the Punjab & Haryana High Court decision.
Therefore, the Tribunal dismissed the revenue's appeal, affirming the deletion of the addition made by the Assessing Officer.
This judgment was pronounced in open court on 15-12-2011.
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2011 (12) TMI 712
Issues involved: Assessment of income u/s 147 of the IT Act, 1961, estimation of gross profits, disallowance of license fee and discount.
Assessment of income: The Assessing Officer assessed income at a higher amount than disclosed by the assessee, based on rejecting the books of accounts and adopting maximum gross margins, resulting in an increased sales estimation and profit amount.
Estimation of gross profits: The CIT(A) reduced the estimated gross profit rate to 24% from the initially adopted rate. The Tribunal, in a similar case, directed the Assessing Officer to compute income at 3% of the stock put up for sale, considering past net profit percentages.
Disallowance of license fee and discount: The Assessing Officer disallowed the license fee and discount, which was confirmed by the CIT(A). However, the Tribunal held that once books of accounts are rejected for profit estimation, no further additions should be made, as all expenditures are deemed to be allowed in the estimation process.
Judgment: The Tribunal partly allowed the assessee's appeal, directing the Assessing Officer to compute income at 3% of the stock put up for sale and disallowing further additions once profit is estimated after rejecting books of accounts.
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2011 (12) TMI 711
Issues Involved:
1. Territorial jurisdiction of the court.
2. Authorization to institute, sign, and verify the plaint.
3. Entitlement to agency commission.
4. Entitlement to interest on the commission.
5. Agreement on discount and commission terms.
6. Conditions for discount applicability.
7. Breach of obligations by the plaintiff.
8. Readiness of the site for installation.
Summary:
Issue 1: Territorial Jurisdiction
The court did not specifically address this issue in the judgment.
Issue 2: Authorization to Institute, Sign, and Verify the Plaint
The appellants contended that the suit was barred u/s 69(2) of the Partnership Act as the respondent was not a registered partnership firm at the time of filing the suit, and Mr. V.P. Verma was not authorized to institute the suit. The court found that the respondent-firm was indeed registered, and Mr. V.P. Verma, as the karta of HUF, was authorized to file the suit. The court relied on Ex.P-6, the certificate of registration, and testimonies confirming Mr. V.P. Verma's status as a partner. The court dismissed the appellants' arguments, citing precedents that a karta of HUF can enter into a partnership.
Issue 3: Entitlement to Agency Commission
The respondent claimed a 15% agency commission, while the appellants argued for a 10% commission due to non-commissioning of machines. The court upheld the respondent's claim for a 15% commission, noting that the appellants unilaterally reduced the commission without mutual consent.
Issue 4: Entitlement to Interest on the Commission
The court did not specifically address this issue in the judgment.
Issue 5: Agreement on Discount and Commission Terms
The respondent offered a 5% discount on a 15% commission if the entire order was placed and 100% commission was paid on receipt of shipping documents. The appellants unilaterally reduced the commission to 10% for two machines, which the court found unjustified.
Issue 6: Conditions for Discount Applicability
The court found that the 5% discount was conditional on the purchase of four machines and 100% commission payment on shipping document presentation, which the appellants did not fulfill.
Issue 7: Breach of Obligations by the Plaintiff
The appellants argued that the respondent failed to commission the machines, causing losses. The court found no merit in this argument, as the appellants did not provide evidence of readiness for installation.
Issue 8: Readiness of the Site for Installation
The court found that the appellants did not have the site ready for installation, as evidenced by the respondent's repeated requests and lack of response from the appellants.
Conclusion:
The court dismissed the appeal, upholding the respondent's entitlement to a 15% agency commission and rejecting the appellants' arguments regarding the suit's maintainability and authorization. No order as to costs was made.
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2011 (12) TMI 710
Issues Involved:1. Deletion and confirmation of 50% addition of Rs. 90,35,298/- on account of provision for impairment of stock. 2. Deletion of addition of Rs. 5,00,00,000/- made by the AO on account of sales of VSAT equipment. 3. Chargeability of interest u/s 234B of the Act. Summary:Issue 1: Provision for Impairment of StockGround No.2 in the revenue's appeal and ground Nos.1 and 2 in assessee's appeal are inter-connected being directed against the CIT(A)'s order in deleting 50% addition of Rs. 90,35,298/- and in confirming the 50% addition of Rs. 90,35,298/- made by the Assessing Officer on account of provision for impairment of stock. The assessee company, engaged in marketing VSATs and providing satellite communications services, valued its inventory at net realizable value, which was lower than the cost. The AO disallowed the adjustment of Rs. 90,35,298/- due to lack of evidence supporting the realizable value. The CIT(A) reduced the disallowance to 50%, citing incomplete details from the assessee. The tribunal found that the assessee consistently valued closing stock at cost or net realizable value, whichever is lower, and provided detailed inventory valuations. The AO did not identify any defects in the details or conduct an inquiry to rebut the net realizable value. The CIT(A) restricted the disallowance on an ad hoc basis without considering the consistent method adopted by the assessee. Therefore, the tribunal deleted the disallowance in toto, allowing the assessee's claim and rejecting the revenue's appeal. Issue 2: Addition on Account of Sales of VSAT EquipmentGround No.3 in revenue's appeal is directed against the learned CIT(A)'s order in deleting the addition of Rs. 5,00,00,000/- made by the AO on account of sales of VSAT equipment. The AO made the addition based on a Sales-tax Officer's order, which alleged unaccounted sales of Rs. 5 crore. The CIT(A) deleted the addition, noting that the Joint Commissioner of Sales Tax had exonerated the assessee, and the demand raised by the Sales Tax Officer no longer stood. The tribunal upheld the CIT(A)'s order, noting that the AO did not contradict the assessee's stand and that the Joint Commissioner of Sales Tax had deleted the addition of sales, confirming that the impounded documents related to installation/de-installation of VSATs, not sales. Therefore, the tribunal found no reason to interfere with the CIT(A)'s order in deleting the addition. Issue 3: Chargeability of Interest u/s 234BThe ground relating to chargeability of interest u/s 234B of the Act, raised by the assessee, is consequential in nature. The AO shall recalculate the interest chargeable u/s 234B, if any, on the income finally determined after giving appeal effect. Conclusion:In the result, the appeal filed by the assessee is allowed, and that of the revenue is dismissed in the manner as indicated above.
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2011 (12) TMI 709
Issues involved: Non-prosecution of appeal by the assessee.
Summary:
The appeal before the Appellate Tribunal ITAT Delhi, arising from an order by Ld. CIT(A) New Delhi for the assessment year 2007-08, was dismissed for non-prosecution as neither the assessee nor their representative appeared for the hearing despite advance notice. Citing precedents, the Tribunal emphasized that merely filing an appeal is not sufficient; it must be effectively pursued. Referring to previous cases, including CIT vs. B.N. Bhattachargee and Estate of late Tukojirao Holkar vs. CWT, the Tribunal highlighted the importance of active participation in the appeal process. In line with Rule 19 of the Appellate Tribunal Rules, 1963, the appeal was treated as unadmitted and dismissed in limine. The decision was pronounced on 19.12.2011 after the hearing concluded.
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2011 (12) TMI 708
Issues involved: Interpretation of Notification No. 126/94 u/s 3(b)(i) and 3(b)(iv) for duty exemption on imported goods and compliance with export obligations.
Interpretation of Notification No. 126/94 u/s 3(b)(i):
The appellant challenged an order by the Customs, Excise & Service Tax Appellate Tribunal regarding duty exemption on imported goods under Notification No. 126/94. The assessee, a 100% export-oriented unit, imported capital goods and raw materials for manufacturing cut flowers but failed to meet export commitments. The Director General, Foreign Trade, canceled duty-free import permission due to shortfall in exports. The Tribunal held that duty was not leviable on capital goods if they were installed and used for exports, even if export commitments were not fulfilled. The Tribunal's interpretation of clause 3(b)(i) of the notification was upheld, emphasizing the requirement for goods to be installed or used within a specified period for duty exemption.
Interpretation of Notification No. 126/94 u/s 3(b)(iv):
Regarding duty on consumables, the relevant clause is 3(b)(iv) which mandates achieving Net Foreign Exchange Earning as a Percentage of Exports (NFEP) and Export Performance. The Tribunal did not provide detailed discussion on the applicability of this clause. The High Court issued a notice to the respondent specifically for interpreting clause 3(b)(iv) of Notification No. 126/94, dated 3-6-1994, indicating a need for further examination on this aspect.
Conclusion:
The High Court's decision focused on the interpretation of Notification No. 126/94, particularly clauses 3(b)(i) and 3(b)(iv), concerning duty exemption on imported goods and compliance with export obligations. The Tribunal's interpretation of clause 3(b)(i) was upheld, while the applicability of clause 3(b)(iv) was highlighted for further scrutiny. The case was listed for further proceedings on 1-2-2012.
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2011 (12) TMI 707
Issues Involved:
1. Nature of the appointment of the respondent: whether it was regular or contractual.
2. Validity of the termination of the respondent's appointment if it was contractual.
Detailed Analysis:
Re: Question No.1 - Nature of the Appointment
The core issue was to determine whether the respondent's appointment was regular or contractual. The initial advertisement did not specify the nature of the appointment. However, the offer letter dated 8th January 1997, clearly indicated that the appointment was on a contractual basis for three years, renewable based on performance, and terminable with three months' notice or salary in lieu thereof. The formal appointment order dated 6th February 1997, reiterated these terms.
The respondent's request for amending Clause (2) of the appointment letter to align with GRIDCO Officers Service Regulations was accepted, but it did not alter the contractual nature of the appointment. The amendments only clarified that the tenure could be extended until superannuation, subject to periodic renewals and performance reviews, without implying a regular appointment.
The GRIDCO Officers Service Regulations, particularly Para 13(3), mandated that appointments to grades above E-9, including the respondent's position, be on a contractual basis. This regulatory framework reinforced the contractual nature of the appointment. The Division Bench's view that the appointment was regular was thus incorrect, as the contractual terms were clear, unambiguous, and consistent with the applicable regulations.
Re: Question No.2 - Validity of the Termination
The second issue addressed the judicial reviewability and the validity of the termination of the respondent's contractual appointment. The scope of judicial review in contractual matters involving the State is limited to examining whether the action was arbitrary, irrational, unreasonable, or mala fide.
The respondent's termination was in accordance with the contractual terms, which allowed termination with three months' notice or salary in lieu thereof. The respondent's performance and the corporation's need for his role were within the discretion of the appellant-Corporation. There was no evidence of mala fides or unfair treatment. The termination was thus a legitimate exercise of the contractual terms.
Judicial precedents, such as Shrilekha Vidyarthi v. State of U.P. and others, establish that State actions in contractual matters are subject to Article 14, ensuring non-arbitrariness. However, the courts do not substitute their judgment for that of the administrative authority unless the decision is perverse or irrational. The respondent's case did not meet the criteria for judicial interference, as the termination was neither arbitrary nor irrational.
In conclusion, the Supreme Court found that the respondent's appointment was indeed contractual, and the termination was valid and in accordance with the terms of the contract. The appeal was allowed, and the judgment of the Division Bench of the High Court of Orissa was set aside. The respondent was allowed to retain any salary and allowances paid pursuant to the impugned judgment, with no recovery directed. Each party was to bear its own costs.
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2011 (12) TMI 706
Issues involved: Stay of arrears of service tax u/s 65 and 66 of the Finance Act, 1994, future liability towards service tax u/s 65 and 66 of the Finance Act, 1994.
Stay of arrears of service tax: The Supreme Court granted leave and directed the appellant to deposit 50% of the arrears towards the service tax in three equated instalments before specific dates. The appellant was also required to provide a solvent surety for the remaining 50% to the satisfaction of the jurisdictional Commissioner. An affidavit undertaking to pay the balance arrears was to be filed within four weeks, and the successful party would be entitled to interest on the amount stayed by the Court. The interim order specified that any default in depositing instalments would result in vacation of the stay order, allowing the department to recover the balance amount.
Future liability towards service tax: The Court clarified that there was no stay of imposition of service tax under sub-clause (zzzz) of clause (105) of Section 65 read with Section 66 of the Finance Act, 1994, concerning the future liability towards service tax from 1st October, 2011. The order emphasized the importance of filing the requisite affidavit within four weeks to avail of the interim stay order. The Court further highlighted that failure to deposit instalments as directed would lead to the vacation of the stay order, enabling the department to recover the outstanding amount in accordance with the law. The judgment was tagged with Civil Appeal No. 8390 of 2011.
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2011 (12) TMI 705
Issues involved:
Challenge to the order of the Income Tax Appellate Tribunal regarding the computation of profit under Explanation (baa) of section 80HHC of the Income Tax Act, 1961.
Summary:
Issue 1: Computation of profit under Explanation (baa) of section 80HHC
The Revenue challenged the Tribunal's order on whether 90% of profits on transfer of Duty Entitlement Pass Book (DEPB) should be excluded while computing business profit u/s 80HHC. The Court noted that the question was previously adjudicated in Tax Appeal No.507 of 2010. The Court reiterated that the benefit of DEPB upon sale by the assessee is eligible for deduction under section 80HHC subject to certain conditions. The Court found that the Tribunal erred in concluding that only the amount in excess of the face value of DEPB credit would form part of profit, and thus ruled in favor of the Revenue and against the assessee. The Court reversed the decisions of the Tribunal in respective appeals, setting aside the Tribunal's order and allowing the appeals accordingly.
Separate Judgement:
The Court granted a certificate under Article 133 and 133A of the Constitution for approaching the Apex Court, acknowledging the involvement of a substantial question of law of general importance in the case.
This summary provides a detailed overview of the judgment, focusing on the computation of profit under Explanation (baa) of section 80HHC and the subsequent decision of the Court in favor of the Revenue.
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2011 (12) TMI 704
Issues involved: Delay in filing Income Tax Appeal, jurisdiction to condone delay, compliance with Apex Court order.
Delay in filing Income Tax Appeal: The Income Tax Appeal filed by the Revenue was delayed by one day, leading to its dismissal by the High Court for failure to seek condonation of delay. The Revenue challenged this order, leading to directions from the Apex Court to file a Notice of Motion seeking condonation of delay within a specified timeframe.
Jurisdiction to condone delay: The High Court, in its initial order, dismissed the appeal on the grounds of lack of condonation of delay and stated that it had no jurisdiction to condone the delay. The Apex Court, however, allowed the Revenue to file a Notice of Motion for condonation of delay within a specified period, failing which the matter would not be considered by the High Court.
Compliance with Apex Court order: Despite the Apex Court's directions, the Revenue filed the Notice of Motion beyond the permitted timeframe. As a result, the High Court held that it could not consider the belated Notice of Motion and dismissed it accordingly. Consequently, the appeal papers were to be consigned to the record department due to the dismissal of the Notice of Motion seeking condonation of delay.
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2011 (12) TMI 703
Issues involved:
The judgment by Appellate Tribunal ITAT Pune pertains to an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals)-III, Pune dated 25.2.2010, arising from an order dated 31.1.2005 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 for the assessment year 2002-03.
Issue 1: Suppressed Sales and Gross Profit Addition
The first issue raised by the Revenue is regarding the addition of suppressed sales as undeclared income. The Assessing Officer added the suppressed sales as undeclared income, but the Commissioner of Income-tax (Appeals) restricted the addition to the gross profit earned on understated sales. The Tribunal affirmed the decision of the Commissioner, noting that the Assessing Officer's proposition of adding the entire amount of sales would result in an abnormal gross profit rate, inconsistent with previous years. The Tribunal found no evidence of unrecorded purchases beyond what was shown in the Profit & Loss account, supporting the Commissioner's decision.
Issue 2: Disallowance under Section 40A(3)
The second issue raised by the Revenue concerns the deletion of a disallowance of &8377; 3,30,899/- made under section 40A(3) of the Act. The Assessing Officer disallowed 20% of payments made in cash/bearer cheques, invoking section 40A(3). However, the Commissioner of Income-tax (Appeals) deleted the disallowance, citing Rule 6DD(f)(ii) which exempts payments for the purchase of produce of animal husbandry or dairy farming from the section 40A(3) prohibition. The Tribunal upheld the Commissioner's decision, stating that the payments in question fell under the exception provided by the rule.
Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the decisions of the Commissioner of Income-tax (Appeals) on both issues. The judgment was pronounced on the 15th Day of December, 2011.
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2011 (12) TMI 702
Assessment u/s 153A - Addition on unsecured loan u/s 68 - accommodation entries - cash credit - genuineness of transaction of the loans - incriminating documents found during search - Assessee surrendered additional income and disclosed the same in the hands of Shri Mahesh Mittal and Shri Pravin Mittal in AY 2007-08.
HELD THAT:- It was observed by the Supreme Court in the case of ITO vs. CH Atchaiah [1995 (12) TMI 1 - SUPREME COURT] that there is no option under the 1961 Act, unlike the one given under 1922 Act and the AO must tax the right person and right person only. By “right person” is meant the person, who is liable to be taxed according to the law with respect to a particular income. The expression “Wrong Person” is obviously used as opposite of the expression “right person”.
Merely because a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact, which course is more beneficial to the Revenue. A person lawfully liable to be taxed can claim no immunity because the Assessing Officer has taxed the said income in the hands of another person contrary to law.
In the instant case, there is no dispute to the identity in so far as Lunkad Group is also on Department’s record and a survey has been carried out at premises of Lunkad Group. The genuineness of transaction of the loans become doubtful in view of the incriminating documents found during survey at Lunkad Group.
Applying the proposition of law been laid down by the Hon'ble Supreme Court in the case of Smt. Taradevi [1972 (11) TMI 2 - SUPREME COURT] to the facts of the instant case, we can safely conclude that the ld. CIT(A) was not justified in deleting the addition in the hands of the assessee company merely on the plea that the same amount has been added in the hands of the creditor company.
We found that in case of Lunkad Group addition was made in respect of cash received by it from persons, whose name, address and other particulars could not be furnished before AO. This addition is mothering to do with the genuineness of loan received by assessee from Lunkad Group. Before reaching to the third criteria of creditworthiness, assessee have to cross the barrier of genuineness of loan transaction, which has become doubtful in view of the incriminating material found during course of survey at Lunkad Group with regard to receipt of cash from the assessee company and issue of cheque against such cash in favour of the assessee company.
Thus, a legally wrong view has been taken by the ld.CIT(A), which made the Department entitled to file an appeal against such order of CIT(A). Thus, there is no merit in the argument of ld. AR to the effect that the Department had wrongly come in appeal against the order of CIT(A).
As we have reversed the order of CIT(A) with respect to deletion of addition made u/s 68, we also uphold the action of AO for disallowing interest expenses and for making addition on account of unexplained source of expenses incurred for the payment of commission on such accommodation entry.
Therefore, we reverse the order of CIT(A) and allow all the appeals of the Revenue in its favour.
Addition in respect of cash credit - Only because of incriminating document pertaining to period 1.4.2006 to 1.5.2006, the Department doubted the genuineness of all the loan transactions pertaining to period starting from 1.4.2001 to 31.3.2007. Before making addition or disallowing the cash credit, on the plea of genuineness, the Department is required to bring on record some evidence to indicate that the assessee has paid cash in consideration of the cheques so issued. Without any evidence, much less a cogent evidence, it is not legally justified to doubt the genuineness of loan transaction or make addition in the hands of the assessee company for which no material much less a cogent material is in possession of Department.
In the interest of justice and fair play, we restore the grounds raised by the assessee in the cross objection to the file of the AO for deciding afresh in terms of our above discussion and as per law.
Addition with respect to the peak amount of loan outstanding - In all these years, the assessee had taken loan and again repaid the same, therefore, the addition should be made only to the extent of peak amount of loan outstanding at any point of time falling during the period starting from 1.4.2001 to 31.3.2007. AO has prepared annexure I, which is forming part of its assessment order in case of Narmada Extrustion indicating party-wise and assessment-wise details of peak credit in respect of loans from Lunkad Group of companies.
As per Annexure I, we found that the peak amount of loan was in the AY 2005-06 amounting to ₹ 2.58 crores, however, the total addition in respect of total peak credit as made by the AO amounts to ₹ 7,59,50,000/- starting from AY 2002-03 to 2007-08. Thus, as per this Annexure the peak amount of the credit was ₹ 2.58 crores. The peak credit of ₹ 2.58 lacs as mentioned by AO in Annexure I appears to be wrong.
In the paper book, we find one more date-wise statement of loan taken by the assessee (Narmada Extrusions Limited) from various Lunkad Group Companies starting from 10th July, 2001 to 31st March, 2007. As per this statement, the peak amount of loan is ₹ 6,44,37,338/- as on 29th June, 2006. We, therefore, direct the AO to reverify and recompute the peak amount of loan and to restrict the addition to the extent of peak amount of the loan. We direct accordingly.
In the result, all the appeals of the Revenue are allowed, whereas cross objections are allowed in part for statistical purposes, in terms indicated hereinabove.
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2011 (12) TMI 701
Issues involved: Validity of notice issued u/s 148 of the Income Tax Act, 1961 for the assessment year 2006-2007.
Summary:
The Petitioner challenged the notice dated 26th July, 2010, issued u/s 148 of the Income Tax Act, 1961 for the assessment year 2006-2007. The Petitioner argued that the Respondent did not have the authority to issue the notice and cited various judgments in support. The Respondent contended that the notice was justified under the relevant provisions of the Income Tax Act, 1961. The Court examined the arguments and judgments presented and found no error in the Tax Authorities' decision to issue the notice u/s 148 for the said assessment year.
The Court noted that the Petitioner's income tax return for the assessment year 2006-2007 had been processed and accepted under Section 143(1) of the Income Tax Act, 1961 on 10th March, 2007. Based on this, the Court found no merit in the Petition and concluded that there was no need to exercise extraordinary writ jurisdiction. Consequently, the Writ Petition was dismissed.
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2011 (12) TMI 700
The Supreme Court granted leave for the appeals to be heard based on the SLP Paper Books. Additional documents can be filed by the parties.
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2011 (12) TMI 699
Issues involved: Appeal against order of Appellate Tribunal for Foreign Exchange imposing penalties for violation of provisions of Foreign Exchange Management Act, 1999 and Regulations.
Question of Law:
1. Whether permission granted under FERA, 1973 remains valid after enactment of FEMA in 1999?
2. Validity of permission issued by RBI under old regulations after repeal of FERA.
3. Whether permission issued under old Act is saved u/s 49 of FEMA?
4. Whether repatriation is necessary?
5. Validity of certificate issued by KPMG.
Summary:
The case involved an appeal against an order imposing penalties for violations of the Foreign Exchange Management Act, 1999 and related Regulations. The Adjudicating Officer found violations of Section 6(3)(a) of FEMA read with relevant clauses of the Regulations, and imposed penalties on the Company and its Director. The Tribunal set aside the decision, prompting the Revenue to raise questions of law regarding the validity of permissions granted under the old FERA, the necessity of repatriation, and the acceptance of a certificate from KPMG.
Upon hearing arguments, the Court found that the Tribunal failed to consider the findings of the Adjudicating Officer on each charge independently. As the First Appellate Authority, the Tribunal should have exhaustively considered these findings before making a determination. The Reserve Bank had granted permission for setting up a subsidiary in Mauritius, leading to subsequent investments in other countries. The Adjudicating Officer found most charges proved, except for one, and imposed penalties accordingly.
The Tribunal's decision focused on the continued validity of the RBI permission post-FEMA enactment, neglecting other charges. The Court noted the lack of consideration for the Adjudicating Officer's findings and remanded the case for a fresh decision. The Court refrained from expressing opinions on the questions of law raised, leaving them to be decided by the Appellate Tribunal. The case was disposed of without costs, with one charge excluded from further proceedings.
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2011 (12) TMI 698
Issues Involved:
1. Deletion of addition on account of Long Term Capital Gain on sale of shares and undisclosed broker's commission.
2. Disallowance of expenses under Section 147.
3. Validity of reassessment proceedings under Section 147 and compliance with statutory conditions under Sections 147 to 151.
Issue-Wise Detailed Analysis:
1. Deletion of Addition on Account of Long Term Capital Gain on Sale of Shares and Undisclosed Broker's Commission:
The Revenue challenged the deletion of Rs. 19,40,000/- plus Rs. 38,800/- made on account of Long Term Capital Gain on sale of shares and undisclosed broker's commission. The Assessing Officer (AO) initiated proceedings based on information from the Investigation Wing, Agra, alleging fictitious long-term capital gains. The AO added the entire amount as income from other sources and Rs. 38,800/- as expenses for arranging such accommodation entries. The CIT(A) deleted these additions, observing that the AO did not deny the purchase of shares in the preceding year, and no material evidence was found to show that the company or transactions were bogus. The Tribunal upheld the CIT(A)'s decision, stating that the AO's conclusion was based on assumptions and lacked positive evidence. The Tribunal emphasized that the burden of proof lies on the Revenue to establish that the documents filed by the assessee were bogus, which the Revenue failed to discharge.
2. Disallowance of Expenses Under Section 147:
The assessee contested the disallowance of 10% of expenses amounting to Rs. 13,830/-. However, during the hearing, the assessee's counsel stated that this ground would not be pressed. Consequently, this ground was dismissed as not pressed.
3. Validity of Reassessment Proceedings Under Section 147 and Compliance with Statutory Conditions Under Sections 147 to 151:
The assessee challenged the validity of the reassessment proceedings, arguing that the AO borrowed the belief of income escapement without independent enquiry and solely based on general information from the Investigation Wing. The Tribunal noted that the AO must have some material with a live link to form a belief of income escapement. The Tribunal found that the AO had sufficient material to form such a belief and that the reassessment proceedings were validly initiated. The Tribunal also addressed the issue of service of notice under Section 148, concluding that substantial evidence was brought on record to substantiate that the notice was properly served on the assessee. The Tribunal upheld the CIT(A)'s decision, which relied on several judicial precedents, including the decision of the Hon'ble Delhi High Court in the case of CIT vs. Vipin Batra, which supported the validity of the reassessment proceedings.
Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection. The deletion of the addition on account of Long Term Capital Gain and undisclosed broker's commission was upheld, and the reassessment proceedings under Section 147 were deemed valid. The disallowance of expenses was dismissed as not pressed. The Tribunal's decision emphasized the importance of concrete evidence and proper procedural compliance in reassessment proceedings.
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2011 (12) TMI 697
Issues: Disallowance under Section 43B of the Income Tax Act, 1961 and disallowance towards contribution to the Cooperative Education Fund.
Issue 1: Disallowance under Section 43B of the Act
The Tribunal upheld the order of CIT(A) regarding disallowance under Section 43B for the assessment year 2004-05, stating that the payments were made before the due date for filing the return of income. The tax audit report confirmed the payment of Rs. 13,03,74,047/- before the due date. The Tribunal found no infirmity in the order passed by the CIT(A) and dismissed the appeal on this ground.
Issue 2: Disallowance towards contribution to the Cooperative Education Fund
The Tribunal referred to the statutory provisions of the Multi State Cooperative Society Act and Rule 25 of the Multi State Coop. Society Rules, 2002. It was noted that the respondent assessee, a cooperative society, is required to contribute 1% of net profits annually to the Cooperative Education Fund as mandated by the statute. The Tribunal observed that this contribution is a statutory requirement and should be allowed as a deduction, as it is not an expense but a statutory payment. Previous cases had established that this contribution is not disallowed under Section 43B of the Act. Therefore, the Tribunal dismissed the appeal on this ground as well.
In conclusion, the High Court upheld the decisions of the Tribunal on both grounds, affirming the disallowance under Section 43B and the contribution to the Cooperative Education Fund. The appeal was dismissed accordingly.
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