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Addition made u/s 68 - non genuine loan / advance - Held that:- The assessee had placed on record a confirmation from the creditor and that the amount was received by account payee cheque and subsequently repaid by account payee cheques - no inquiry has been made by AO from the bank or from the creditor on the contrary he had asked the assessee to furnish the copies of return of income, financial statement and bank statement of the lender. No independent inquiry through Inspector or by issuing summons to the creditor was made for verification of veracity of claim of assessee before making addition, the action of the A.O. treating the receipt of loan/advance as income of the assessee is not justified - in favour of assessee.
Addition made in closing stock - building materials purchased in the month March not shown as stock - Held that:- Considering assessee's explanation that it is a common practice that the material is supplied to the supplier as and when it is required, however, bill is sent later on & that even otherwise also an addition of closing stock is revenue in nature since the closing stock of this year becomes the opening stock of the next year - this issue is restored back to the file of Ld. CIT(A) for fresh adjudication - in favour of assessee for statistical purpose.
Disallowance u/s. 40(a)(ia) - Held that:- The payments made to transporters will attract the provisions of section 40(a)(ia), wherein, the appellant was bound to deduct the TDS and remit the same in Govt. account before the due date - as it is evident that the tax was deposited in the government account on -7-04-2006 well before filing of income tax return and that the AO has wrongly computed figure of TDS which is paid in time - this issue is restored back to the file of AO who is directed to verify the claim of the assessee, if the tax is deposited before filing of income tax return such amount shall be deleted from the addition and rest other amount be decided afresh as per law after giving opportunity of being heard - in favour of assessee for statistical purpose.
Disallowance of interest notionally charged - Held that:- Considering assessee's submission that AO has ignored to appreciate that the assessee has not given loan from interest bearing fund was given out of accumulate profits - restored back to the file of Assessing Officer who is directed to verify the claim of assessee - in favour of assessee for statistical purpose.
Addition made u/s 68 - non genuine loan / advance - Held that:- The assessee had placed on record a confirmation from the creditor and that the amount was received by account payee cheque and subsequently repaid by account payee cheques - no inquiry has been made by AO from the bank or from the creditor on the contrary he had asked the assessee to furnish the copies of return of income, financial statement and bank statement of the lender. No independent inquiry through Inspector or by issuing summons to the creditor was made for verification of veracity of claim of assessee before making addition, the action of the A.O. treating the receipt of loan/advance as income of the assessee is not justified - in favour of assessee.
Addition made in closing stock - building materials purchased in the month March not shown as stock - Held that:- Considering assessee's explanation that it is a common practice that the material is supplied to the supplier as and when it is required, however, bill is sent later on & that even otherwise also an addition of closing stock is revenue in nature since the closing stock of this year becomes the opening stock of the next year - this issue is restored back to the file of Ld. CIT(A) for fresh adjudication - in favour of assessee for statistical purpose.
Disallowance u/s. 40(a)(ia) - Held that:- The payments made to transporters will attract the provisions of section 40(a)(ia), wherein, the appellant was bound to deduct the TDS and remit the same in Govt. account before the due date - as it is evident that the tax was deposited in the government account on -7-04-2006 well before filing of income tax return and that the AO has wrongly computed figure of TDS which is paid in time - this issue is restored back to the file of AO who is directed to verify the claim of the assessee, if the tax is deposited before filing of income tax return such amount shall be deleted from the addition and rest other amount be decided afresh as per law after giving opportunity of being heard - in favour of assessee for statistical purpose.
Disallowance of interest notionally charged - Held that:- Considering assessee's submission that AO has ignored to appreciate that the assessee has not given loan from interest bearing fund was given out of accumulate profits - restored back to the file of Assessing Officer who is directed to verify the claim of assessee - in favour of assessee for statistical purpose.
Justification of CIT(A) assuming jurisdiction u/s.264 - wrong carry forward of speculation loss - Held that:- Sec. 73(4) was amended with effect from 1.4.2006 to the effect that “no loss shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed.” The assessee was having brought forward speculation loss pertaining to A.Y. 2000-01 which the AO has allowed to be carry forward. However, in the assessee’s case, the brought forward loss of A.Y. 2000-01 has already expired in A.Y. 2004-05 - set aside with order with direction that the Assessing Officer should verify whether the assessee is eligible to avail carry forward speculation loss pertaining to the A.Y. 2000-01 in view of the amended provisions of sub-section (4) of Sec. 73.
Computation of book profit u/s 115JB without adding the amount disallowed u/s 14A - Held that:- As the expenditure disallowed interest of the exempted income was not added back while computing book profit for the purpose of Section 115JB though, it was required to be added back under clause (f) of Explanation 1 of Section 115JB the Order is also set aside to the file of the AO for re-adjudication, as the details and explanations submitted by the assessee during the course of proceedings us. 263 were not adjudicated by the AO - No infirmity into the order passed by CIT as is evident from the records that AO has not applied his mind whether clause (f) of the Explanation 1 of Section 115JB was applicable or not and as also not examined the issue of eligibility of set off of carry forward speculation loss as provided in amended Section 73(4).
Justification of CIT(A) assuming jurisdiction u/s.264 - wrong carry forward of speculation loss - Held that:- Sec. 73(4) was amended with effect from 1.4.2006 to the effect that “no loss shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed.” The assessee was having brought forward speculation loss pertaining to A.Y. 2000-01 which the AO has allowed to be carry forward. However, in the assessee’s case, the brought forward loss of A.Y. 2000-01 has already expired in A.Y. 2004-05 - set aside with order with direction that the Assessing Officer should verify whether the assessee is eligible to avail carry forward speculation loss pertaining to the A.Y. 2000-01 in view of the amended provisions of sub-section (4) of Sec. 73.
Computation of book profit u/s 115JB without adding the amount disallowed u/s 14A - Held that:- As the expenditure disallowed interest of the exempted income was not added back while computing book profit for the purpose of Section 115JB though, it was required to be added back under clause (f) of Explanation 1 of Section 115JB the Order is also set aside to the file of the AO for re-adjudication, as the details and explanations submitted by the assessee during the course of proceedings us. 263 were not adjudicated by the AO - No infirmity into the order passed by CIT as is evident from the records that AO has not applied his mind whether clause (f) of the Explanation 1 of Section 115JB was applicable or not and as also not examined the issue of eligibility of set off of carry forward speculation loss as provided in amended Section 73(4).
Addition in respect of gifts of immovable properties - assessee submitted that mistake of the accountant as journal entries were wrongly made to the credit side of the Capital Account - Held that:- CIT(A) has given a finding on the basis of remand report of the A.O that no revised balance sheet was produced before AO and also the balance sheet of earlier years to which assessee contented that he was not given opportunity to explain the revised balance sheet - as in the interest of justice this matter is remitted back to the file of AO to adjudicate afresh after giving sufficient opportunity to the assessee - in favour of assessee for statistical purposes.
Addition made under Section 68 - Held that:- Considering the assessee submission that if he is afforded opportunity he will furnish confirmation from Sh. Rahul V shah and Shri Naresh V. Shah who gave interest free loan to the assessee and place genuineness and credit worthiness - this issue is remitted back to the file of AO for fresh decision of the transaction - in favour of assessee for statistical purposes.
Addition of income in respect of on-money on sale of agricultural land - Held that:- Finding force into the contention of assessee that if it is proved that land was agriculture land, therefore, would not be subject to capital gain tax liability. Therefore, after considering totality of facts, this issue is also remitted back to the file of AO fresh decision.
Addition of entire alleged on money involved in the sale of land at village Godhavi as the income of the Assessee failing to appreciate the fact that the land in question was owned and sold jointly by the appellant with his wife - this issue is also restored to the file of AO for fresh adjudication
Addition in respect of gifts of immovable properties - assessee submitted that mistake of the accountant as journal entries were wrongly made to the credit side of the Capital Account - Held that:- CIT(A) has given a finding on the basis of remand report of the A.O that no revised balance sheet was produced before AO and also the balance sheet of earlier years to which assessee contented that he was not given opportunity to explain the revised balance sheet - as in the interest of justice this matter is remitted back to the file of AO to adjudicate afresh after giving sufficient opportunity to the assessee - in favour of assessee for statistical purposes.
Addition made under Section 68 - Held that:- Considering the assessee submission that if he is afforded opportunity he will furnish confirmation from Sh. Rahul V shah and Shri Naresh V. Shah who gave interest free loan to the assessee and place genuineness and credit worthiness - this issue is remitted back to the file of AO for fresh decision of the transaction - in favour of assessee for statistical purposes.
Addition of income in respect of on-money on sale of agricultural land - Held that:- Finding force into the contention of assessee that if it is proved that land was agriculture land, therefore, would not be subject to capital gain tax liability. Therefore, after considering totality of facts, this issue is also remitted back to the file of AO fresh decision.
Addition of entire alleged on money involved in the sale of land at village Godhavi as the income of the Assessee failing to appreciate the fact that the land in question was owned and sold jointly by the appellant with his wife - this issue is also restored to the file of AO for fresh adjudication
Disallowance of bad debts claimed - CIT(A) deleted the disallowance - Held that:- Considering settled law by the decision rendered in the case of T. R. F. Ltd. Vs CIT [2010 (2) TMI 211 - SUPREME COURT ] that it is not necessary for the assessee to establish that debt to have become irrecoverable. Bad debts can be charged to the profit & loss account of the assessee if they are written off in the books of accounts of the assessee as irrecoverable - in favour of assessee.
Addition on account of interest invoking section 14A - CIT(A) deleted the addition - Held that :- From the chart imbedded in the assessment order & the balance sheet duly certified by the Chartered Accountants it is evident that the assessee’s capital as on 01-04-2005 was Rs.96,58,043/- and as on 31-03-2005 was Rs.1,14,64,439 clearly established that the investment made by the assessee earning exempt income u/s 10(34) being either Rs.60,78,419/- or Rs.80,56,190/- flows from the own funds of the assessee being Rs.1,14,64,439/- as on the date of such investment - In such circumstances, disallowance u/s 14A made by the AO is not warranted because the assessee had made the investments from his own funds viz. “Own Capital” and not from the “interest bearing funds” - in favour of assessee.
Addition on account of agricultural income - CIT(A) deleted the addition - Held that:- CIT(A) has deliberated the issue in detail and after perusing the evidences produced before him has observed that the learned AO had made such addition of Rs.2,56,000/- merely on the basis of conjecture and surmises as AO had failed to make any inquiry on the submission of the assessee and disallowance was made on ad hoc basis - in favour of assessee.
Disallowance of bad debts claimed - CIT(A) deleted the disallowance - Held that:- Considering settled law by the decision rendered in the case of T. R. F. Ltd. Vs CIT [2010 (2) TMI 211 - SUPREME COURT ] that it is not necessary for the assessee to establish that debt to have become irrecoverable. Bad debts can be charged to the profit & loss account of the assessee if they are written off in the books of accounts of the assessee as irrecoverable - in favour of assessee.
Addition on account of interest invoking section 14A - CIT(A) deleted the addition - Held that :- From the chart imbedded in the assessment order & the balance sheet duly certified by the Chartered Accountants it is evident that the assessee’s capital as on 01-04-2005 was Rs.96,58,043/- and as on 31-03-2005 was Rs.1,14,64,439 clearly established that the investment made by the assessee earning exempt income u/s 10(34) being either Rs.60,78,419/- or Rs.80,56,190/- flows from the own funds of the assessee being Rs.1,14,64,439/- as on the date of such investment - In such circumstances, disallowance u/s 14A made by the AO is not warranted because the assessee had made the investments from his own funds viz. “Own Capital” and not from the “interest bearing funds” - in favour of assessee.
Addition on account of agricultural income - CIT(A) deleted the addition - Held that:- CIT(A) has deliberated the issue in detail and after perusing the evidences produced before him has observed that the learned AO had made such addition of Rs.2,56,000/- merely on the basis of conjecture and surmises as AO had failed to make any inquiry on the submission of the assessee and disallowance was made on ad hoc basis - in favour of assessee.
Allocation of expenses between the DTA and EOU unit - expenses are to be charged to the EOU also in order to compute the benefit u/s 10B - Re assessment made u/s 147 r.w.s. 143(3) - Held that:- It is well settled that if the entire material has been placed by the assessee before the A.O. at the time when the original assessment was made and the A.O. applied his mind to that material and accepted the view taken by the assessee, merely because he did not express this in the assessment order that by itself would not come as a ground to a conclude that assessee has escaped assessment and therefore, the assessment needed to be reopened. On the other hand, if the A.O. did not apply his mind and omitted a lapse, there is no reason why the assessee should be made to suffer the consequence of that laps.
The question of such claim was subject matter of enquiry at the stage of original assessment proceedings with a questionnaire dated 18.03.2004 in which A.O. specifically required the assessee to furnish certified copy of the profit and loss accounts and the balance sheet of the unit EOU claiming exemption of income u/s 10B and to furnish the same along with the detail of sales/purchases, other income and major expenses to which assessee replied furnishing complete break up of the profit and loss accounts, as per schedule-VI of the Companies Act, showing separately for EOU and other units, thus the assessment order is sought not to be reopened though within the period of four year as it is case of change of opinion - order of quashing the reassessment proceedings - in favour of assessee.
Allocation of expenses between the DTA and EOU unit - expenses are to be charged to the EOU also in order to compute the benefit u/s 10B - Re assessment made u/s 147 r.w.s. 143(3) - Held that:- It is well settled that if the entire material has been placed by the assessee before the A.O. at the time when the original assessment was made and the A.O. applied his mind to that material and accepted the view taken by the assessee, merely because he did not express this in the assessment order that by itself would not come as a ground to a conclude that assessee has escaped assessment and therefore, the assessment needed to be reopened. On the other hand, if the A.O. did not apply his mind and omitted a lapse, there is no reason why the assessee should be made to suffer the consequence of that laps.
The question of such claim was subject matter of enquiry at the stage of original assessment proceedings with a questionnaire dated 18.03.2004 in which A.O. specifically required the assessee to furnish certified copy of the profit and loss accounts and the balance sheet of the unit EOU claiming exemption of income u/s 10B and to furnish the same along with the detail of sales/purchases, other income and major expenses to which assessee replied furnishing complete break up of the profit and loss accounts, as per schedule-VI of the Companies Act, showing separately for EOU and other units, thus the assessment order is sought not to be reopened though within the period of four year as it is case of change of opinion - order of quashing the reassessment proceedings - in favour of assessee.
Reopening of assessment u/s 147 - Held that:- As under Section 151(2) no notice can be issued u/s 148 by AO who is below the rank of Joint Commissioner after the expiry of 4 years from the end of the relevant AY unless the Joint Commissioner is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice - as in present case the Additional Commissioner of Income Tax forwarded the proposal submitted by the AO to the CIT. The approval which has been granted is not by the Additional Commissioner of Income Tax but by the Commissioner of income Tax - this is not a fit case for the issuance of a notice under Section 148 & CIT is not a Joint Commissioner within the meaning of Section 2(28C) - the reopening of assessment by the A.O. u/s 147 is not sustainable - in favour of assessee.
Reopening of assessment u/s 147 - Held that:- As under Section 151(2) no notice can be issued u/s 148 by AO who is below the rank of Joint Commissioner after the expiry of 4 years from the end of the relevant AY unless the Joint Commissioner is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice - as in present case the Additional Commissioner of Income Tax forwarded the proposal submitted by the AO to the CIT. The approval which has been granted is not by the Additional Commissioner of Income Tax but by the Commissioner of income Tax - this is not a fit case for the issuance of a notice under Section 148 & CIT is not a Joint Commissioner within the meaning of Section 2(28C) - the reopening of assessment by the A.O. u/s 147 is not sustainable - in favour of assessee.
Addition on account of annual letting value of the house property - Held that:- The assessee had chosen Mumbai house for self occupied and for ALV to Ahmedabad house which he submitted before the A.O. even then he had assessed the ALV at Mumbai house - the Rent Control Act is applicable in Mumbai thus the annual valuation u/s 23(1)(a) cannot exceed the standard rent under the Rent Control act. The A.O. had accepted the ALV on the basis of Rent Control Act in earlier years as well as subsequent year in scrutiny assessment whereas in year under consideration, the A.O. had taken basis of capital value of property. Such estimation is not justified - CIT(A) was correct in deleting the addition.
Addition on account of annual letting value of the house property - Held that:- The assessee had chosen Mumbai house for self occupied and for ALV to Ahmedabad house which he submitted before the A.O. even then he had assessed the ALV at Mumbai house - the Rent Control Act is applicable in Mumbai thus the annual valuation u/s 23(1)(a) cannot exceed the standard rent under the Rent Control act. The A.O. had accepted the ALV on the basis of Rent Control Act in earlier years as well as subsequent year in scrutiny assessment whereas in year under consideration, the A.O. had taken basis of capital value of property. Such estimation is not justified - CIT(A) was correct in deleting the addition.
Disallowance of Professional fees - that the expenditure either falls u/s 14A or was incurred for earning income taxable under the head capital gain - assessee claimed exemption u/s Section 28(va)(ii)- Held that:- Disallowance of professional fees includes Rs.45 lacs paid as consultancy fees for investment advisory services - the assessee company has invested in fixed assets, debentures, advances, ICD and bank deposits, immovable property and shares and mutual funds etc and therefore, it cannot be said that the services rendered by these two persons is in respect of investment in shares - no income is reported by the assessee under the head ‘income from other sources’ being on account of investment other than investment in shares for which this payment of professional fee was said to have been paid by the assessee - the entire payment of professional fee has to be considered towards earning of dividend income in the absence of any other income from any other investment being shown by the assessee - in favour of assessee.
Inclusion of Sales Tax and Excise Duty in total turnover for the purpose of computation of deduction u/s 80HHC - Held that:- As decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - direction of CIT(A) for excluding it thus warranted - against revenue.
Reduction of export shortage from the turnover - Held that:- The export turnover can be verifiable from the report in Form No.l0 CCAC & assessee has also provided invoice wise FOB value realized for the whole year - this proves that the claim of shortage is further paid as compensation which makes the cost of exports higher, but actually does not reduce the export turnover. In fact, this is a normal business practice in all trades where shortage in handling is compensated by payment, but does not mean that the goods were not cleared or payment not received for the full amount of export turnover - against revenue.
Disallowance of Professional fees - that the expenditure either falls u/s 14A or was incurred for earning income taxable under the head capital gain - assessee claimed exemption u/s Section 28(va)(ii)- Held that:- Disallowance of professional fees includes Rs.45 lacs paid as consultancy fees for investment advisory services - the assessee company has invested in fixed assets, debentures, advances, ICD and bank deposits, immovable property and shares and mutual funds etc and therefore, it cannot be said that the services rendered by these two persons is in respect of investment in shares - no income is reported by the assessee under the head ‘income from other sources’ being on account of investment other than investment in shares for which this payment of professional fee was said to have been paid by the assessee - the entire payment of professional fee has to be considered towards earning of dividend income in the absence of any other income from any other investment being shown by the assessee - in favour of assessee.
Inclusion of Sales Tax and Excise Duty in total turnover for the purpose of computation of deduction u/s 80HHC - Held that:- As decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - direction of CIT(A) for excluding it thus warranted - against revenue.
Reduction of export shortage from the turnover - Held that:- The export turnover can be verifiable from the report in Form No.l0 CCAC & assessee has also provided invoice wise FOB value realized for the whole year - this proves that the claim of shortage is further paid as compensation which makes the cost of exports higher, but actually does not reduce the export turnover. In fact, this is a normal business practice in all trades where shortage in handling is compensated by payment, but does not mean that the goods were not cleared or payment not received for the full amount of export turnover - against revenue.
Deemed Dividend u/s 2(22) - held that:- As per the decision of Special bench of the Tribunal rendered in the case of Bhaumik Colour (2008 (11) TMI 273 - ITAT BOMBAY-E), section 2(22)(e) can be invoked only in such a case where the person who has received the loan is having shareholding in the company who has given the loan and such person should be a registered as well as beneficial shareholder of that company which has given the loan. In the present case, this is noted by Ld. CIT(A) on page 1 of his order that the assessee company is a closely held company with Shri Hariprasad Yadav and Shri Anil H. Yadav holding 22.09% & 51.14% of shares respectively and these two people are holding 12.8% and 24.60% shares in the sister company Sai Jyoti Fashions Pvt. Ltd.
This goes to show that the loan taker company i.e. the assessee company is neither a registered shareholder nor the beneficiary shareholder of loan giving company and, therefore, as per this decision of Special bench of the Tribunal, the amount received by the assessee company as loan from Sai Jyoti Fashions Pvt. Ltd. cannot be assessed as deemed dividend in the hands of this assessee company by invoking the provisions of Section 2(22)(e) of the Income tax Act, 1961.
Deemed Dividend u/s 2(22) - held that:- As per the decision of Special bench of the Tribunal rendered in the case of Bhaumik Colour (2008 (11) TMI 273 - ITAT BOMBAY-E), section 2(22)(e) can be invoked only in such a case where the person who has received the loan is having shareholding in the company who has given the loan and such person should be a registered as well as beneficial shareholder of that company which has given the loan. In the present case, this is noted by Ld. CIT(A) on page 1 of his order that the assessee company is a closely held company with Shri Hariprasad Yadav and Shri Anil H. Yadav holding 22.09% & 51.14% of shares respectively and these two people are holding 12.8% and 24.60% shares in the sister company Sai Jyoti Fashions Pvt. Ltd.
This goes to show that the loan taker company i.e. the assessee company is neither a registered shareholder nor the beneficiary shareholder of loan giving company and, therefore, as per this decision of Special bench of the Tribunal, the amount received by the assessee company as loan from Sai Jyoti Fashions Pvt. Ltd. cannot be assessed as deemed dividend in the hands of this assessee company by invoking the provisions of Section 2(22)(e) of the Income tax Act, 1961.
Treatment of long term capital gain as business income - Held that:- Persuing the material on record except of few shares, all the shares were held for 10 years or more, it cannot be said that these shares were held by the assessee as business asset or stock in trade, thus it has to be admitted that the profit earned by the assessee after holding the shares for such a long period cannot be assessed as business income - as decided in Commissioner of Income-Tax Versus Rewashanker A. Kothari [2006 (1) TMI 80 - GUJARAT HIGH COURT ] to treat the gain under the head "Capital gains" and not as "Income from business" - in favour of assessee.
Treatment of long term capital gain as business income - Held that:- Persuing the material on record except of few shares, all the shares were held for 10 years or more, it cannot be said that these shares were held by the assessee as business asset or stock in trade, thus it has to be admitted that the profit earned by the assessee after holding the shares for such a long period cannot be assessed as business income - as decided in Commissioner of Income-Tax Versus Rewashanker A. Kothari [2006 (1) TMI 80 - GUJARAT HIGH COURT ] to treat the gain under the head "Capital gains" and not as "Income from business" - in favour of assessee.
Addition on account of undisclosed cash credit - CIT(A) deleted addition - Held that:- As per copy of the bank statement it can be concluded that all the withdrawals are on account of payment to LIC of India and all the deposits are cash deposits - the explanation of the assessee cannot be rejected without bringing on record the evidences that these payments to LIC by the assessee from bank account is not on behalf of the customers of the assessee but on assessee’s own behalf as no such material has been brought on record by the A.O. - affidavit filed with the A.O. in which it was stated that the cash deposited in the bank account is assessee’s own income was just one day before her delivering a premature baby was filed under duress belief that once income is admitted, there will be no further I.T. proceedings - as there are no cash withdrawals and no personal expenditure of the appellant was met out of the bank account, AO’s observation that the appellant’s explanation is a concocted story does not stand to reason - in favour of assessee.
Addition on account of undisclosed cash credit - CIT(A) deleted addition - Held that:- As per copy of the bank statement it can be concluded that all the withdrawals are on account of payment to LIC of India and all the deposits are cash deposits - the explanation of the assessee cannot be rejected without bringing on record the evidences that these payments to LIC by the assessee from bank account is not on behalf of the customers of the assessee but on assessee’s own behalf as no such material has been brought on record by the A.O. - affidavit filed with the A.O. in which it was stated that the cash deposited in the bank account is assessee’s own income was just one day before her delivering a premature baby was filed under duress belief that once income is admitted, there will be no further I.T. proceedings - as there are no cash withdrawals and no personal expenditure of the appellant was met out of the bank account, AO’s observation that the appellant’s explanation is a concocted story does not stand to reason - in favour of assessee.
Addition on account of excess stock and cash - survey u/s 133A - Held that:- Sales tax authorities had carried out survey at the assessee’s premises declaring excess stock to the extent of 34.310 mt. whereas IT dept. declared excess stock of 586.826 mt at survey conducted immediately after 3 days of survey by sales tax authorities - These three days included two holidays - as decided in CIT vs. Anandha Metal Corporation (2004 (7) TMI 49 - MADRAS HIGH COURT ) that return accepted by the Commercial Tax Department is binding on the I.T. authorities and the A.O. has no jurisdiction to go beyond the value of the closing stock declared by the assessee and accepted by the Commercial Tax Department - in favour of assessee.
Addition on account of sundry creditors & advance against supply though trading liability - Held that:- The assessee shows the advance from customers and sundry creditors as its liability in the balance sheet, thus merely because the liabilities are outstanding for many years, it cannot be inferred that the said liabilities have ceased to exist. The assessee has not written back the amount and the outstanding liabilities are still in existence would prove that the assessee acknowledges its liability as per the books of accounts - the Revenue has also not brought any material on record to prove that the purchases & advance are not genuine and the creditors have remitted the amounts due to them section 41(1)cannot be attracted there is nothing to suggest that the assessee has obtained any benefit either by way of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet - in favour of assessee.
Addition on account of belated payment of Provident fund and ESIC - Held that:- As deduction of statutory liability towards Provident fund and other funds referred to in clause (b) of sec.43B is permissible if the payments are made by the assessee before the due date of submission of return u/s. 139(1) Addition on account of belated payment need to be deleted - in favour of assessee.
Initiation of penalty u/s. 271(1) (c ) as the same is consequential the same is not adjudicated
Addition on account of excess stock and cash - survey u/s 133A - Held that:- Sales tax authorities had carried out survey at the assessee’s premises declaring excess stock to the extent of 34.310 mt. whereas IT dept. declared excess stock of 586.826 mt at survey conducted immediately after 3 days of survey by sales tax authorities - These three days included two holidays - as decided in CIT vs. Anandha Metal Corporation (2004 (7) TMI 49 - MADRAS HIGH COURT ) that return accepted by the Commercial Tax Department is binding on the I.T. authorities and the A.O. has no jurisdiction to go beyond the value of the closing stock declared by the assessee and accepted by the Commercial Tax Department - in favour of assessee.
Addition on account of sundry creditors & advance against supply though trading liability - Held that:- The assessee shows the advance from customers and sundry creditors as its liability in the balance sheet, thus merely because the liabilities are outstanding for many years, it cannot be inferred that the said liabilities have ceased to exist. The assessee has not written back the amount and the outstanding liabilities are still in existence would prove that the assessee acknowledges its liability as per the books of accounts - the Revenue has also not brought any material on record to prove that the purchases & advance are not genuine and the creditors have remitted the amounts due to them section 41(1)cannot be attracted there is nothing to suggest that the assessee has obtained any benefit either by way of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet - in favour of assessee.
Addition on account of belated payment of Provident fund and ESIC - Held that:- As deduction of statutory liability towards Provident fund and other funds referred to in clause (b) of sec.43B is permissible if the payments are made by the assessee before the due date of submission of return u/s. 139(1) Addition on account of belated payment need to be deleted - in favour of assessee.
Initiation of penalty u/s. 271(1) (c ) as the same is consequential the same is not adjudicated
Denial of claim of deduction u/s 80IB - the “industrial undertaking” should not be formed by “splitting up” or “re-construction” of a business already in existence - Held that:- No evidence with the AO through which it could be demonstrated that the machinery was transferred from old unit to new unit with no iota of evidence to say that it was a case of “ splitting up of the old business”. The old unit was closed down way back in the year 1998 and the new unit had come up in the year 2002 and an entirely new building was constructed with the deployment of new technology to manufacture new type of telephone instrument - as assessee has successfully demonstrated that the new unit was set up with the substantial investment in plant & machinery no force in the grounds of the Revenue for denial claim of deduction - in favour of assessee.
Denial of claim of deduction u/s 80IB - the “industrial undertaking” should not be formed by “splitting up” or “re-construction” of a business already in existence - Held that:- No evidence with the AO through which it could be demonstrated that the machinery was transferred from old unit to new unit with no iota of evidence to say that it was a case of “ splitting up of the old business”. The old unit was closed down way back in the year 1998 and the new unit had come up in the year 2002 and an entirely new building was constructed with the deployment of new technology to manufacture new type of telephone instrument - as assessee has successfully demonstrated that the new unit was set up with the substantial investment in plant & machinery no force in the grounds of the Revenue for denial claim of deduction - in favour of assessee.
Addition on account of unaccounted on-money paid for purchase of Shop - assessee contested against inordinate delay in inflation of action u/s.158BD and proceedings u/s.158BD - Held that:- The search u/s.132 was conducted on 29.10.1999 at developers which means that the investment in the properties was made earlier to the said date - proceedings u/s.158BD in the case of the Assessee was initiated 5 (five) years later thus there has been an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD - Explanation regarding the investment in the said properties was furnished by the Assessee and if the Authorities failed to utilize and communicate such information on time, then the Assessee could not be penalized and kept in the loop of the Authorities for such a long period of 7 (seven) years - against revenue.
Addition on account of unaccounted on-money paid for purchase of Shop - assessee contested against inordinate delay in inflation of action u/s.158BD and proceedings u/s.158BD - Held that:- The search u/s.132 was conducted on 29.10.1999 at developers which means that the investment in the properties was made earlier to the said date - proceedings u/s.158BD in the case of the Assessee was initiated 5 (five) years later thus there has been an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD - Explanation regarding the investment in the said properties was furnished by the Assessee and if the Authorities failed to utilize and communicate such information on time, then the Assessee could not be penalized and kept in the loop of the Authorities for such a long period of 7 (seven) years - against revenue.
Addition on account of unaccounted on-money paid for purchase of flat - assessee contested against inordinate delay in inflation of action u/s.158BD and proceedings u/s.158BD - Held that:- The search u/s.132 was conducted on 29.10.1999 at developers business premises which means that the investment in the properties was made earlier to the said date - proceedings u/s.158BD in the case of the Assessee was initiated 5 (five) years later thus there has been an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD - Explanation regarding the investment in the said properties was furnished by the Assessee and if the Authorities failed to utilize and communicate such information on time, then the Assessee could not be penalized and kept in the loop of the Authorities for such a long period of 7 (seven) years - against revenue.
Addition on account of unaccounted on-money paid for purchase of flat - assessee contested against inordinate delay in inflation of action u/s.158BD and proceedings u/s.158BD - Held that:- The search u/s.132 was conducted on 29.10.1999 at developers business premises which means that the investment in the properties was made earlier to the said date - proceedings u/s.158BD in the case of the Assessee was initiated 5 (five) years later thus there has been an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD - Explanation regarding the investment in the said properties was furnished by the Assessee and if the Authorities failed to utilize and communicate such information on time, then the Assessee could not be penalized and kept in the loop of the Authorities for such a long period of 7 (seven) years - against revenue.
Penalty – 100% EOU imported goods duty free by availing benefit of Notification No. 53/1997-Cus - these duty free goods against the advance license to another 100%EOU - adjudicating authority has held that the company, being 100%EOU trading unit could not have sold the goods under advance license as per the provisions of Para 9.21 of the Export Import Policy – Held that:- According to CBEC Circular No. 49/2000-Cus dated 22.5.2000 that EOU trading units were allowed to supply the goods to other EOU/STP units against valid advance license or specific customs entitlements - company had cleared the goods imported by them on which the customs duty was foregone to advance license holders EOU – penalty set aside
Regarding penalties on the Directors – Held that:- In the absence of any duty liability on the main Company, the provisions of Section 112 and 117 for imposition of penalties on the Directors cannot be invoked - to that extent it imposes penalty on the appellants herein, is liable to be set-aside
Penalty – 100% EOU imported goods duty free by availing benefit of Notification No. 53/1997-Cus - these duty free goods against the advance license to another 100%EOU - adjudicating authority has held that the company, being 100%EOU trading unit could not have sold the goods under advance license as per the provisions of Para 9.21 of the Export Import Policy – Held that:- According to CBEC Circular No. 49/2000-Cus dated 22.5.2000 that EOU trading units were allowed to supply the goods to other EOU/STP units against valid advance license or specific customs entitlements - company had cleared the goods imported by them on which the customs duty was foregone to advance license holders EOU – penalty set aside
Regarding penalties on the Directors – Held that:- In the absence of any duty liability on the main Company, the provisions of Section 112 and 117 for imposition of penalties on the Directors cannot be invoked - to that extent it imposes penalty on the appellants herein, is liable to be set-aside
Redemption fine - penalty under Section 112 (a) of the Customs Act – import of 2 Nos Off Road Mining Truck with accessories and filed bill of entry for warehousing - imported vehicle has been confiscated for violation of licence on the ground that vehicle is Left Hand Drive and is not permissible under the explanatory note to Chapter 87 – Held that:- Goods allowed to be warehoused and at the time of ex-bonding the appellants shall produce required licence with endorsement thereon and after it is found in accordance with the law the adjudicating authority shall consider the same and if those are found in order shall release the goods - warehousing of the goods allowed
Redemption fine - penalty under Section 112 (a) of the Customs Act – import of 2 Nos Off Road Mining Truck with accessories and filed bill of entry for warehousing - imported vehicle has been confiscated for violation of licence on the ground that vehicle is Left Hand Drive and is not permissible under the explanatory note to Chapter 87 – Held that:- Goods allowed to be warehoused and at the time of ex-bonding the appellants shall produce required licence with endorsement thereon and after it is found in accordance with the law the adjudicating authority shall consider the same and if those are found in order shall release the goods - warehousing of the goods allowed
Sanction of the Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation / reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation - in terms of the Scheme of Amalgamation, the whole or part of the undertakings, the properties, rights and powers & all the liabilities and duties of the Transferor Company be transferred to the Transferee Company, without any further act or deed be transferred to and vest in the Transferee Company - Petitioner Companies would voluntarily deposit a sum of Rs. 1,00,000/- in the Common Pool fund of the Official Liquidator - scheme ao amalgamation granted.
Sanction of the Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation / reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation - in terms of the Scheme of Amalgamation, the whole or part of the undertakings, the properties, rights and powers & all the liabilities and duties of the Transferor Company be transferred to the Transferee Company, without any further act or deed be transferred to and vest in the Transferee Company - Petitioner Companies would voluntarily deposit a sum of Rs. 1,00,000/- in the Common Pool fund of the Official Liquidator - scheme ao amalgamation granted.
Demand of service tax – alleged that assessee is holder of service tax registration and they did not pay Service Tax on taxable service viz. Banking & Other Financial Services and Business Auxiliary Services - assessee contended that the financial agreements of the assessee is not taxable under the Banking Financial Services (BFS) on the ground that as per the definition of BFS under section 65(12) the assessee has the option or is entitled to own the asset at the end of lease period - as per agreement they are the owner of the asset and there is no clause in the agreement which say that their clients had the option to purchase the asset on expiry of the lease agreement – Held that:- As a lot of factual verification was not done, expert consultation was not made any total demand has been drastically curtailed without adequate verification or analysis, the entire matter may be remanded for de novo adjudication - order set aside and matter remanded to the Original Authority
Demand of service tax – alleged that assessee is holder of service tax registration and they did not pay Service Tax on taxable service viz. Banking & Other Financial Services and Business Auxiliary Services - assessee contended that the financial agreements of the assessee is not taxable under the Banking Financial Services (BFS) on the ground that as per the definition of BFS under section 65(12) the assessee has the option or is entitled to own the asset at the end of lease period - as per agreement they are the owner of the asset and there is no clause in the agreement which say that their clients had the option to purchase the asset on expiry of the lease agreement – Held that:- As a lot of factual verification was not done, expert consultation was not made any total demand has been drastically curtailed without adequate verification or analysis, the entire matter may be remanded for de novo adjudication - order set aside and matter remanded to the Original Authority
Services provided was to arrange finance - Business auxiliary service (BAS) - held that:- in the case of Chambal Motors (P) Ltd & Bhatia & Co.(2008 (7) TMI 69 - CESTAT, NEW DELHI), it is settled that the appellant s activities shall fall within the category of BAS.
The appellants are small business entity. Perusal of the adjudication order shows that the confusion of the law at the insertion had caused hardship in determining liability and law was under debate. Law being in infancy stage for the impugned period, the appellants deserve consideration under Section 80 of the Finance Act, 1994. - Penalty waived.
Services provided was to arrange finance - Business auxiliary service (BAS) - held that:- in the case of Chambal Motors (P) Ltd & Bhatia & Co.(2008 (7) TMI 69 - CESTAT, NEW DELHI), it is settled that the appellant s activities shall fall within the category of BAS.
The appellants are small business entity. Perusal of the adjudication order shows that the confusion of the law at the insertion had caused hardship in determining liability and law was under debate. Law being in infancy stage for the impugned period, the appellants deserve consideration under Section 80 of the Finance Act, 1994. - Penalty waived.
Consulting Engineers Services - application for waiver of pre-deposit of service tax - Held that:- As the appellants main objective is to undertake construction activities for and on behalf of the serving employees of Government of M.P. in the Police Department, the appellant body consists various working officers of the Police department, who are managing the affairs of the Corporation, neither the corporation nor the individuals handling the said corporation are professionally qualified engineers or an engineering form, in which case they would not be prima facie covered by the definition of consulting engineers as appearing in Section 65 (31) - in favour of assessee.
Consulting Engineers Services - application for waiver of pre-deposit of service tax - Held that:- As the appellants main objective is to undertake construction activities for and on behalf of the serving employees of Government of M.P. in the Police Department, the appellant body consists various working officers of the Police department, who are managing the affairs of the Corporation, neither the corporation nor the individuals handling the said corporation are professionally qualified engineers or an engineering form, in which case they would not be prima facie covered by the definition of consulting engineers as appearing in Section 65 (31) - in favour of assessee.
Business Auxiliary Services – distributor of garments - small scale exemption in terms of Notification No.6/2005 – Held that:- matter remanded to original adjudicating authority for deciding the issue of applicability of small scale notification, afresh in the light of the observations made by the Tribunal in the case of Peoples Automobiles Ltd. (2011 (8) TMI 903 (Tri))
Business Auxiliary Services – distributor of garments - small scale exemption in terms of Notification No.6/2005 – Held that:- matter remanded to original adjudicating authority for deciding the issue of applicability of small scale notification, afresh in the light of the observations made by the Tribunal in the case of Peoples Automobiles Ltd. (2011 (8) TMI 903 (Tri))
Cenvat credit – Input service - input for manufacturing unit as well as for registered dealer for sale were brought in the same truck – appellant taken cenvat credit of whole service tax paid – Held that:- Service Tax credit in respect of input service attributable to trading activities is not available.
Cenvat credit – Input service - input for manufacturing unit as well as for registered dealer for sale were brought in the same truck – appellant taken cenvat credit of whole service tax paid – Held that:- Service Tax credit in respect of input service attributable to trading activities is not available.
Limitation - demand was confirmed after denying the benefit of Notification No. 16/97 – Held that:- Demand is for the period from 30.9.1997 to 1.1.1998 and the show-cause notice was issued on 5.5.1998 by invoking the extended period of limitation on ground of suppression with intent to evade payment of duty - Commissioner (Appeals) has not given any finding on the contention raised by the appellant on the issue of limitation - matter is remanded to the Commissioner (Appeals)
Limitation - demand was confirmed after denying the benefit of Notification No. 16/97 – Held that:- Demand is for the period from 30.9.1997 to 1.1.1998 and the show-cause notice was issued on 5.5.1998 by invoking the extended period of limitation on ground of suppression with intent to evade payment of duty - Commissioner (Appeals) has not given any finding on the contention raised by the appellant on the issue of limitation - matter is remanded to the Commissioner (Appeals)
Cenvat credit on service tax paid on 'Goods Transportation Agencies' beyond the place of removal – Held that:- In the case of ABB Ltd. (2011 (3) TMI 248 - KARNATAKA HIGH COURT ) if service tax is paid on transportation charges, it fell within the phrase "clearance of final products from the place of removal" and therefore, the assessee was entitled to CENVAT credit - in favour of the assessee
Cenvat credit on service tax paid on 'Goods Transportation Agencies' beyond the place of removal – Held that:- In the case of ABB Ltd. (2011 (3) TMI 248 - KARNATAKA HIGH COURT ) if service tax is paid on transportation charges, it fell within the phrase "clearance of final products from the place of removal" and therefore, the assessee was entitled to CENVAT credit - in favour of the assessee
CENVAT credit of service tax paid on GTA service which was used for transportation of their final product from factory to the port for export - place of removal of the goods was the port of export – Held that:- Definition of 'input service' under rule 2(l) of the CENVAT Credit Rules, 2004 will squarely cover the above service which was used by the respondent for transportation of the goods from the factory to the place of removal
CENVAT credit of service tax paid on GTA service which was used for transportation of their final product from factory to the port for export - place of removal of the goods was the port of export – Held that:- Definition of 'input service' under rule 2(l) of the CENVAT Credit Rules, 2004 will squarely cover the above service which was used by the respondent for transportation of the goods from the factory to the place of removal
Duty on waste and scrap - SSI exemption - rebate of duty paid on inputs raw material used in the manufacture of goods under the provisions of Notification No. 41/2001 CE(NT) – Held that:- value of clearances during the years in question was below the ceiling limit prescribed in the SSI exemption Notification - benefit of Notification No. 89/95-C.E., dated 18-5-1995 granting exemption from payment of duty on waste and scrap arising in the course of manufacture of exempted goods is available to them as cycle parts exported by them are not liable to duty - in favour of assessee
Duty on waste and scrap - SSI exemption - rebate of duty paid on inputs raw material used in the manufacture of goods under the provisions of Notification No. 41/2001 CE(NT) – Held that:- value of clearances during the years in question was below the ceiling limit prescribed in the SSI exemption Notification - benefit of Notification No. 89/95-C.E., dated 18-5-1995 granting exemption from payment of duty on waste and scrap arising in the course of manufacture of exempted goods is available to them as cycle parts exported by them are not liable to duty - in favour of assessee
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