TMI Tax Updates - e-Newsletter
September 24, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Highlights / Catch Notes
Income Tax
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Penalty u/s 271 - Bank has not calculated the interest over the years possibly for the reason that, in its Accounts, this amount was classified as 'NPA', thus Section 271(1)(c) is not applicable - SC
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Rate of depreciation u/s. 32 - any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force - HC
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Deduction u/s 10-B - STPI unit - There is nothing implying that approval for purposes of an STP also entitled the unit to a benefit under Section 10-B. The orders of the Tribunal are consequently erroneous - HC
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Revision u/s 263 - expenditure related to the dividend income claimed exempt u/s 10 (33) - the issue was debatable - even if it were not debatable, the error by the AO is not “unsustainable” - HC
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DTAA between India and Japan - Where technical services are rendered by an enterprise to another, the same falls within the ambit of the expression “technical services” and constitute the rendering of technical services even though the same required technicians to be deputed for carrying out the work. - HC
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Deduction u/s 80I - The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture. - SC
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Allocation of head office expenses on R&D activity among the manufacturing units is not correct to re-calculate the deduction u/s 80IA. - HC
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Suppression of income - Addition made due to difference in income shown in P&L and TDS certificate – freight payment on behalf of another person - decided in favor of assessee - AT
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Sikim Income Tax Rules, 1948 versus Indian Income Tax Act, 1961 - Since the assessee was not resident within the territories comprised in the of State of Sikkim, the provision of section 10(26AAA) was not applicable to him and income from winning of lottery in Sikkim was liable to tax under the provisions of Indian Income-tax Act, 1961 - AT
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Relinquishment of tenancy rights - allowance of relief u/s 54EC - the property was not occupied jointly and severally but was occupied individually and separately. - benefit allowed - AT
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Mere reconstitution of the partnership firm can hardly be said to amount to the splitting up, or the reconstruction, of the partnership business which was already in existence. - Exemption u/s 10B allowed - HC
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The award of compensation under motor accidents claims cannot be regarded as income. - the interest on such award also cannot be termed as income to the legal heirs of the deceased or the victim himself - HC
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A.O. can assess the undisclosed income as a result of search only on the basis of material or information as are available in the search. He is not authorised to refer the matter to the Valuation Officer under Section 55A (b) (ii) to asses the fair market value - HC
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Deduction u/s. 80IB(10) - The contention of the assessee that the project was started keeping in mind the pre amended provisions of Sec. 80IB(10) and therefore any subsequent changes should not change the project profile cannot be accepted - AT
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Capital gain – inheritance – the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset - AT
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Addition u/s 68 - Assessee himself routed his funds through these companies. - Assessee could not rebut the same by bringing any positive material on record to substantiate the identity and authenticity of investors. - AT
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Agricultural income - Only for the reason that the Basic Seeds are sown in leasehold land and the manpower required are arranged through contract farming, it does not mean that the operations carried out by the assessee are not agricultural operations. - AT
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TDS u/s 194C on sub-contractor - Construction of roads & bridges – subcontract of supply of labour - TDS rate @ 1.2% is correct - AT
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Deduction u/s 80IB – No material could be brought on record by the Revenue to show that the risk incidental to manufacturing was not of the assessee and was liability of any other person. - AT
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Validity of Notice issued u/s 143(2) – expiry of 6 months - circulars or general directions, issued by the CBDT would be binding u/s 119, on all officers and persons, employed in the execution of the Act. - AT
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Approval of loan agreements/ long term infrastructure bonds and rate of interest for the purpose of Section 194LC of the Income-tax Act, 1961- regarding. - Circular
Customs
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Rate of exchange of conversion of each of the foreign currency. - Notification
DGFT
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Amendment in SION A-1691 of Chemical Product Group and in SION H-207 and H-278 of Plastic Product Group. - Public Notice
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Disposal of pending cases for clubbing of advance authorisations filed on or before 31st March, 2012. - Circular
FEMA
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Foreign investment in Single–Brand Product Retail Trading/Multi-Brand Retail Trading/Civil Aviation Sector/Broadcasting Sector/Power Exchanges - Amendment to the Foreign Direct Investment Scheme - Circular
Indian Laws
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Finance Minister approves the Operational Features of the Rajiv Gandhi Equity Savings Scheme (RGESS).
Service Tax
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Mere delay in payment of the Service Tax cannot be construed as suppression or misdeclaration of facts with intent to evade payment of Tax. - AT
Central Excise
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SSI exemption - Clubbing of turnover - assessee having two units - issuance to SCN to both the units does not amount to double jeopardy - AT
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Valuation under central excise - additional income arising out of the transportation charges/freight charges - no undervaluation - demand not sustainable - AT
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Provisional release of the goods – the condition of giving declaration that the assessee will not challenge the value of goods is not sustainable - AT
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Interest is liable to paid even if no SCN is issued u/s 11A of central excise - order of CESTAT reversed - HC
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Cenvat credit - realising the mistake, the assesee took steps to withdraw the claim of depreciation and since that did not materialise, the assessee offered to pay the duty with interest. - No penalty u/s 11AC - HC
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Cenvat Credit - appellants have not reversed the credit taken on inputs/input service used for exempted products - benefit of amended Rule 6 by Section 73 of FA, 2010 is not available - AT
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Once under law the tax is not recoverable, it cannot be justified merely because the party has paid some amount to avoid penal action - HC
VAT
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Mandatory penalty under sales tax - The legislature thought it fit to specify a fixed rate of penalty and not give any discretion in lowering the rate of penalty. - No relief to assessee - SC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (9) TMI 629
Penalty u/s 271 - difference in amount of loan shown in assessee's books of accounts and in decree filled for outstanding amount - Held that:- As in the Books of Accounts of the assessee, the outstanding amount, as on 30th April, 1982, was Rs.52,07,873/-, including interest. However, the decree in favour of the Bank was for Rs.42,45,477/- because that was the amount indicated as the outstanding amount due and payable by the assessee to the Bank in its Books of Account. It appears that the Bank has not calculated the interest over the years possibly for the reason that, in its Accounts, this amount was classified as 'NPA', thus Section 271(1)(c) is not applicable - in favour of assessee.
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2012 (9) TMI 628
Rate of Depreciation u/s. 32 - should not be at the rates prescribed by the income-tax Rules, as amended with effect from 2.4.1983 - Held that:- As decided in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1965 (12) TMI 35 - SUPREME COURT] any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force.” Therefore, whatever is the rate of tax as on April 1, of the financial year 1983-84 is applicable to the assessment year 1983-84 though the assessment is made subsequent to the amendment. Since the higher rates of depreciation have been brought into force on April 2, 1983, they cannot be made applicable to the assessee for the assessment year 1983-84 - assessee's demand for higher depreciation is quashed - against the assessee. Disallowance of expenditure - Rent to be treated as capital expenditure - Held that:- The Tribunal, after analyzing the documents, held that the arrangement between the parties conferred the benefit of ownership upon the assessee without the actual sale during the current accounting year. The Tribunal observed that the assessee had the right of user of the property for a long period and also obtained a future right to exercise the option to purchase the property after five years from the date of commencement of the lease. The Tribunal held that the assessee had acquired a capital asset and the expenditure had to be treated as capital expenditure - against assessee. Disallowance of depreciation - payment which was treated as capital expenditure for acquiring a capital asset - Held that:- There appear to be contradictory findings by the Tribunal. On the one hand, the Tribunal held that the arrangement between the parties was to confer the benefit of ownership upon the assessee and that the assessee had acquired a capital asset and the expenditure in doing so had to be treated as capital expenditure. On the other hand, the Tribunal held that the assessee being a lessee under the agreement, cannot be said to be the owner of the property and was, therefore, not entitled to depreciation under section 32 - as arrangement between the lessor and the assessee was, in effect, an agreement of sale of the property by the lessor to the assessee he is entitled to claim depreciation - in favour of assessee.
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2012 (9) TMI 627
Deduction u/s 10-B - STPI unit - income derived from export of computer software - ITAT allowed the claim as assesses had received approval to start 100 per cent EOU under STP scheme - whether this approval can be deemed one under Section 10-B? - Held that:- For that purpose a 100 per cent EOU is only that which is so approved by the Board appointed by Central Government in exercise of powers conferred under Section 14 of IDAR Act, 1951. The pre-conditions that govern units set up under STP scheme are different from those that govern the units set up as 100 per cent EOUs and so approved by the Board. Some conditions may undoubtedly overlap yet, criteria, such as fulfillment of the employment criteria, foreign exchange, etc., are not common. There is no notification or official document suggesting that either the Inter Ministerial Committee, or any other officer or agency was nominated to perform the duties of the Board (constituted under Section 14 of the IDR Act), for purposes of approvals under Section 10-B. Though the considerations which apply for granting approval under Sections 10-A and 10-B may to an extent, overlap, yet the deliberate segregation of these two benefits by the statute reflects Parliamentary intention that to qualify for benefit under either, the specific procedure enacted for that purpose has to be followed. There is nothing in any of the Circulars or instructions relied on by the Tribunal in all the orders, implying that approval for purposes of an STP also entitled the unit to a benefit under Section 10-B. The orders of the Tribunal are consequently erroneous, and its reasoning, unsupportable - in favour of the revenue
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2012 (9) TMI 626
Revision ou/s 263 - proportionate expenditure related to the dividend income claimed exempt u/s 10 (33), as per provisions of section 14A - revenue appeal - Held that:- The record reveals that the AO had issued notice and held proceedings on several dates (of hearing) before proceeding to frame the assessment. He added nearly Rs. 2 crores to the income at that time. The Commissioner took the view that the assessment order disclosed an error, in that the deduction under Section 14-A had not been made. Now, while the statutory direction to the AO to calculate, proportionately, the expenditure which an assesse may incur to obtain dividend income, for purposes of disallowance, cannot be lost sight of, equally, such a requirement has to be viewed in the context and circumstances of each given case. In the present case, it was repeatedly emphasized that the assesse’s dividend income was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts were material, and had been given weightage by the Tribunal in its impugned order. There is no dispute that the investment to the sister concern, was not questioned even the Commissioner has not sought to undermine this aspect. Equally, there is no material to say that apart from that single dividend warrant, any other dividend income was received. Furthermore, there is nothing on record to say that the assessee had to expend effort, or specially allocate resources to keep track of its investments, especially dividend yielding ones. In these circumstances, it can be said that whether the deduction under Section 14-A was warranted, was a debatable fact. In any event, even if it were not debatable, the error by the AO is not “unsustainable”. Possibly he could have taken another view yet, that he did not do so, would not render his opinion an unsustainable one, warranting exercise of Section 263 - in favour of assessee.
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2012 (9) TMI 625
Notice u/s 271(1)(c) - two impugned notices were issued to the petitioner in respect of deposits in accounts held by him in various banks - Held that:- This Court is of the opinion that the proceedings pending before the TRO should be concluded after involving the writ petitioner and making available to him such material as the tax authorities choose to rely against him in support of their position that the monies and deposits which are said to be the subject matter of judgment under Section 226(3) do not belong to him but to the assessee - Copies of such materials, if in the possession of the TRO shall be made available within two weeks to the petitioner, who shall thereafter make written representation within a week thereafter, setting-out the grounds or reasons why the course of action proposed in attaching the amounts is not feasible or legal The interim arrangement subsisting and binding the parties whereby the amounts lying in deposit are not to be withdrawn.
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2012 (9) TMI 624
DTAA between India and Japan - technical services - the sum payable was “Industrial or Commercial Profits” within the meaning of the Article III of the DTAA - permanent establishment - Held that:- technical services were rendered by Toyo through the medium of the technicians. - It is not the assessee's case that the technicians were not answerable to Toyo. Nor is it the assessee's case that there was a separate agreement between the technicians and itself and that the only role played by Toyo was the provision of technicians and not the rendering of technical services through them. - Where technical services are rendered by an enterprise to another, the same falls within the ambit of the expression “technical services” and constitute the rendering of technical services even though the same required technicians to be deputed for carrying out the work. - A view to the contrary would render the working of the DTAA difficult - in favour of Revenue.
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2012 (9) TMI 623
Addition u/s 69A - reassessment proceedings - ITAT uphold CIT's order of upholding deletion as appropriate opportunity had been denied to the assessee - Held that:- As decided in Dhakeswari Cotton Mills Limited Versus Commissioner Of Income-Tax, West Bengal [1954 (10) TMI 12 - SUPREME COURT] the Tribunal ought not to have merely upheld the CIT (Appeal)’s order but should have remanded the proceeding to correct the irregularities which crept in during the reassessment proceedings. A close reading of the assessment order discloses that neither has the contentions of the assessee been discussed nor any attempt made to connect entry 177 with the assessee. It is also apparent from the Appellate Commissioner’s order that these matter were not put to the assessee. Consequently, there cannot be two opinions of the fact that assessee was denied proper opportunity to deal with the materials sought to be relied upon - direction the AO to consider the entire matter afresh after giving all the necessary materials in his possession which deemed are adverse, to the assessee and also after further affording an opportunity for cross-examination of such witnesses.
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2012 (9) TMI 622
Deduction u/s 80I - cutting of jumbo rolls of photographic films into smaller marketable sizes - `manufacture' - Held that:- As decided in M/s India Cine Agencies & Computer graphics Ltd.Versus CIT [2008 (11) TMI 15 - SUPREME COURT] by process of manufacture something is produced and brought into existence which is different from that, out of which it is made in the sense that the thing produced is by itself a commercial commodity capable of being sold or supplied - The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products, which emerge in the course of manufacture of goods - in favour of assessee.
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2012 (9) TMI 621
Computation of deduction admissible to supporting manufacturer u/s 80HHC(3A) - Whether 90% of export benefits have to be reduced in terms of Explanation (baa) of Section 80HHC - Held that:- As decided in CIT v. Baby Marine Exports [2007 (3) TMI 206 - SUPREME COURT] on a plain construction of section 80HHC(1A), the respondent is clearly entitled to claim deduction of the premium amount received from the export house in computing the total income. The export house premium can be included in the business profit because it is an integral part of business operation of the respondent which consists of sale of goods by the respondent to the export house - appeal of revenue is dismissed.
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2012 (9) TMI 620
AO allocated the R & D expenses debited to the head office to the units proportionate to the turn over of the units. - Consequently the AO reduced the appellant's claim for the said deductions under Chapter VI-A in respect of the said units. - Held that:- In the present case, the said R & D activities were in relation to the new drugs. There is nothing to indicate that in the event of the assessee deciding to commercially exploit the benefits of the R & D work, the products would be manufactured by the said units. The fallacy in the submissions proceeds on the hypothetical basis that the said products would be manufactured by each of the units or any one of them. - Allocation of head office expenses on R&D activity among the manufacturing units is not correct to re-calculate the deduction u/s 80IA. - In favor of assessee. The fallacy also arises on account of an erroneous presumption that the benefit of any R & D activity can only be exploited by an enterprise utilizing the same in its manufacturing activities. An enterprise can always assign the benefit thereof to a third party. It can always grant a licence in respect of any patent or design to a third party. In that event, the other units would not derive any benefit in respect thereof. The presumption of a nexus between the R & D activities and the units is not well founded - in favour of assessee.
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2012 (9) TMI 619
Non-appearance of assessee – Appeal was filed on 10/01/2007 and same was fixed for hearing for 04/02/2009 – Appeal was adjourned twice on assessee request- And finally the appeal was dismissed for non-prosecution - assessee filed miscellaneous petition on 16/09/2011 for restoration of the appeal – Due to non-appearance petition dismissed – Assessee again file miscellaneous application on 28/11/2011 – Despite of several adjournments, finally it adjourn to 06/07/2012 - Held that:- During hearing when the ld. Counsel for the assessee was asked for non-appearance on earlier occasion, it was merely stated that it was the fault of the earlier counsel. One fact is clearly oozing out that the assessee has merely filed the appeal and the miscellaneous application and is not interested to pursue the same. It is clearly the casual approach of the assessee. Therefore, no merit in the second application of the assessee, it is dismissed, especially when the assessee had nothing to say even when opportunity was granted in spite of above facts. Appeal of assessee dismissed
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2012 (9) TMI 618
Addition made on account of substantial cash in bank account – Assessee receive cash from family settlement agreement – Inspite of giving so many opportunities, the assessee did not furnish any documentary evidence nor the explanation for deposit of huge cash in the bank account – Held that:- Cash so deposited in the bank account was received by him out of family settlement and deed executed between the assessee and his brothers was duly submit before CIT(A). Bank entries are also duly supported by confirmation. Appeal decides in favour of assessee. Advance against sale of land – Assessee enter into an agreement for sale of agriculture land - Advance money was also received – Advance was repaid due to breach of agreement - As per family settle deed brothers of the assessee willing to retain the immovable properties and other assets and in turn compensated the assessee by making payment – Held that:- As the advance was repaid is not supported by proper evidence on record. When the agricultural land was alleged to be given in family settlement to other brothers, no question arises for the assessee selling any ancestral agricultural land. Nothing was also brought on record as to when this agricultural land was bought by the assessee and the consideration paid for the same. AO has not given any positive remand report nor the CIT(A) has recorded any of his own finding to the effect that he has examined the proposed buyer of the agricultural land. Therefore issue remand back to AO Assessee receive gift by way of Demand draft from 2 persons – Receive gift of Rs. 1 lacs drawn on three drafts – Receive another gift of Rs. 4 lacs drawn on ten demand drafts i.e. Rs 40000 each - Gift deed submit before CIT(A) - Held that:- Gift have been shown as given in the form of demand drafts which seem to have been purchased in cash as more than or equal to Rs.50,000/- drafts are prepared by banks normally only after the draft purchaser quotes his PAN no. Therefore, Gifts so received were not genuine and the credit worthiness of the donors was not proved. Nothing was brought on record to persuade us to deviate from the findings recorded by lower authorities. Accordingly upheld the addition. Decides in favour of revenue
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2012 (9) TMI 617
Suppression of income - Addition made due to difference in income shown in P&L and TDS certificate – Assessee made freight payment on behalf of another person - Railway freight incurred by the assessee which was directly debited to the said person and when he paid the amount subject to deduction of tax at source u/s 194C – Discrepancy was found due to reimbursement of expenses which was neither shown as income nor the payments made were shown as expenditure - Held that:- The assessee cannot be said to have made the profit from railways insofar as due to provisions for Railways the freight has to be paid by the owner of goods and not the contractor. It was only a portion of the amount owed to the deductee which was paid to the Government Exchequer. The assessee could therefore only claim this amount back from deductor as adjustment of amount on account of railway freight to be borne by the deductor by filing its return under the provisions of the I.T.Act for claiming the tax paid as TDS has been noted by the AO. Appeal decides in favour of assessee
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2012 (9) TMI 616
Validity of notice issued u/s 143(2) – Assessee file ROI on 02/08/2007 – AO issue notice u/s 143(2) on 18/9/2008 – Before 01/04/2008 time limit for issuance of notice u/s 143(2)(ii) within 12 months from the end of the FY, in which the ROI is filed – Period reduce to 6 months w.e.f 01/04/08 – Held that:- The proviso to section 143(2) had undergone a change when the limitation for issuance of notice u/s. 143(2) was still live in the assessee’s case i.e. on 1-4-08 the AO had time to issue notice u/s. 143(2). The provisions of section 143(2) of the Act are procedural in nature. The notice issued u/s. 143(2) by the AO on 18/9/08 and served on the assessee 19-09-2008 is within time. Appeal decide in favour of revenue Income Tax on winning of lottery in Sikim – Whether Income Tax can be levied twice upon a same income, being income on account of winning of Sikkim Lottery, once under Sikim Income Tax Rules, 1948 and again under the Indian Income Tax Act, 1961 in the situation where Sikim is a state of India - Held that:- Since the assessee was not resident within the territories comprised in the of State of Sikkim, the provision of section 10(26AAA) was not applicable to him and income from winning of lottery in Sikkim was liable to tax under the provisions of Indian Income-tax Act, 1961. Following the decision of Bombay High Court in case of Nirmala Mehta (2004 (4) TMI 43). Issue decided in favour of revenue
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2012 (9) TMI 615
Transfer Pricing u/s 92C – Calculation of Arm Length Price – Assessee is an exporter 5 types of minerals – In 3 types of minerals TPO apply CUP (Comparable Uncontrolled Price) method instead of TNMM (Transaction Net Margin Method) method applied by assessee – AO issue draft assessment order by making addition to income – Same was also upheld by DRP – Held that:- TPO had not made suitable study of the case such as: has not made any external comparison of the prices, adopted the special sale price attributable to non-Associates Enterprises on small quantity by instead of AE’s for bulk and regular sales, ignored the factors like additional capital and risk involved, difference in FOB and CIF value, not considered quality variation in different consignments and the corresponding variations reflected in the pricing of exports. - ALP addition deleted - Therefore, appeal decides in favour of assessee
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2012 (9) TMI 614
Assessee is a broking house for public issue. - Assessee had paid sub brokerage to its Holding Co which is a Merchant Banker - primary market brokerage was received by the assessee, whereas the entire work was done by availing the services of the sister concern company. - Held that:- As the payment made by the assessee to its holding company were actually being disbursed to the sub-brokers and the incurrence of such expenditure was for the business expediency of the assessee. The disallowance could not be made under section 40A(2)(a) and also that the amount paid by the assessee was allowable under section 37(1). No controverting material has been placed on record by AO. Decision in favour of assessee Bad debt written off & waiver of interest – Interest waived off in same year in which it was provided in books - Assessee has borrowed interest bearing funds and at the same time advanced interest free loans to its holding company – Assessee also use facilities provided by its holding company – Disallowed u/s 40A(2)(a) claim of expenditure is excessive and unreasonable – Held that:- Since the holding company incur heavy losses. Simultaneously assessee did not pay any compensation to the said concern with regard to facilities being availed by it. Therefore said amount is allowable. Decision in favour of assessee.
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2012 (9) TMI 613
Dis-allowance u/s 40(a)(ia) - expenses towards commission, interest on unsecured loan and machinery hire charges without making any tax deduction at source - Held that:- In view of ruling in case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) wherein it is held that Section 40(a)(ia) is applicable only amount payable as on 31st March of year under consideration. Dis-allowance is directed to be deleted - Decided in favor of assessee Dis-allowance 40A(3) on ground that assessee has paid Rs.6,68,920/- in cash in a day to various parties towards material purchased - assessee contended that that each transaction in a single day is less than Rs.20,000/- and the amended provision under which aggregation of payments made in a single day is to be considered is w.e.f. 1-4-2009 and hence is not applicable for the year under appeal - AY 08-09 - Held that:- In view of decision in case of Shree Mahaveer Corporation vs. ITO, we are inclined to allow the claim of the assessee.
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2012 (9) TMI 612
Penalty u/s 271(1)(c) - bogus claim of exemption of interest income on FDRs u/s. 80IB - Revenue contended interest on FDRs to be income from other sources - Held that:- Appellant has demonstrated that interest on FDRs and interest received from customers had nexus with business inasmuch as such a claim made by the assessee in the immediately preceding assessment year 2001-02 where miscellaneous income including interest was disclosed at Rs.22,30,180 as his business income, the AO himself allowed deduction u/s 80IB on such claim made by him. It is in this backdrop the assessee can be said to have acted bona-fidely while claiming deduction on similar interest as his income derived from industrial undertaking thereby claiming deduction u/s 80IB in the same manner as was done in the immediately preceding year. In any event, at the time when the assessee returned income and made claim, there were two views possible on the issue under consideration and as such the assessee cannot be said to have made a false or mala-fide claim in the return of income filed by him. Assessee having demonstrated that he made a bona-fide claim. Merely because it is held that claim is not sustainable in law that by itself will also not amount to furnishing of inaccurate particulars regarding income of the assessee and as such it would not attract penalty u/s 271(1)(c) - Decided in favor of assessee
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2012 (9) TMI 611
Genuineness of amounts payable to land owners - Revenue contended that this claim was later on made by the assessee only after it was found that the claim of deduction u/s 80IB initially raised by the assessee was not sustainable in law - whereas assessee contended that land on which flats were constructed was not sold to the assessee company, there was only an agreement to build flats on the land and as per the agreement, the consideration for the ultimate transfer of land was to be paid in progression to the sale proceeds of the flats constructed by the assessee - Held that:- Arguments of assessee are relevant in determining the nature of transactions. It is also to be seen that as per the agreement the land owner had a fifty per cent share in the profits of the project. These matters have not been considered by the Ao. The CIT(Appeals), even though might have appreciated these facts, have not brought out the same in his order. Since both the authorities have discussed only half truth, hence matter is remitted back to the file of the AO Dis-allowance u/s 40(a)(ia) - non-deduction of TDS u/s 194C - Held that:- Both the authorities have not examined whether such services were required in the business carried on by the assessee. Matter remitted back to the Assessing Officer for fresh consideration of the issues.
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2012 (9) TMI 610
Addition made by disallowing the provision for standard assets on ground that u/s 36(1)(viia) only provision for bad and doubtful debts was allowable and nature of standard assets as per RBI guidelines are performing assets and thus they are not bad and hence not covered in 36(1)(viia) - Revenue contesting deletion of addition by CIT(A) on ground that CIT(A) should not have decided the matter without admitting the guidelines of RBI, not provided by assessee before AO, as an additional evidence as per Income Tax Rules, 1962 - Held that:- CIT(A) is not justified in accepting the explanation of the assessee which was not made before the A.O. The same should have either been admitted under Rue 46A of the I.T. Rules, 1962 and by having a remand report from the A.O. The same has not been done by the CIT(A). Therefore, the order of CIT(A), at the outset, is against the principles of natural justice and deserves to be reversed. Hence, matter is set aside to the file of the A.O. who will examine the claim of the assessee and find out whether the provisions made is a provision for bad and doubtful debts, first and if so thereafter apply the limit as provided under clause (a) to section 36(a)(viia) - Decided in favor of assessee for statistical purposes.
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2012 (9) TMI 609
Validity of notice issued u/s 148 on March 21, 2003, in respect of the AY 1996-97 which is beyond a period of four years from the end of the relevant AY, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment - dis-allowance u/s 40(a)(ia) - payment of usance interest to nonresidents out of the boundaries of India on purchase of ships - Held that:- A perusal of the reasons recorded shows that there is not even a whisper therein to the effect that there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. Under the circumstances, the notice having been issued after the expiry of a period of four years from the end of the relevant assessment year, the assumption of jurisdiction u/s 147 by the Assessing Officer is without authority of law - Decided in favor of assessee
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2012 (9) TMI 608
Relinquishment of tenancy rights - Income from other sources or Capital gains - non-allowance of relief u/s 54EC - assessee, partner in a firm called George Nainan & Co., surrendered his tenancy right on the property to the other partner of the firm - owners of the property had originally let out the property in to Mr. T who surrendered his tenancy rights on 10.10.82 and the landlord had entered into an agreement with George John and Shri Sunny Nainon on 3.10.1982 for the tenancy - Though the occupation of the premises was spilt between the partners namely Shri George John and Shri Sunny Nainon, the tenant of the property was in fact the firm and not the individual partners - Revenue contended that assessee was not the tenant and, therefore, there arises no question of relinquishment of tenancy right to other partner Held that:- Though in the lease deed, the lessee is Shri George Nainon and Co., it is in fact the partners who are occupying the premises individually. It is also not in dispute that even after 1982, the property was not occupied jointly and severally but was occupied individually and separately. Thus, the advantage of common occupation and enjoyment is absent. It is also worth noting that it was not necessary to mention that the tenancy right over the property could not be separated without mutual consent had it been the right of the firm. Thus the intention of the parties to hold the right of tenancy over the respective portion of the property was clear from the clauses of the lease deed itself. Thus in line with the said clause, when the assessee relinquished his right, it has resulted in capital receipt and thus the assessee has rightly claimed it to be a capital receipt and is also eligible for deduction u/s 54EC of the Act for the amount invested in NABARD capital gains Bonds - Decided in favor of assessee
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2012 (9) TMI 594
Addition on account of purchase of property - benami purchase of property in Seelampur - ITAT deleted the addition - Held that:- Tribunal overlooked that though Om Prakash, one of the property dealer filed an affidavit before the AO, Fakir Chand, the seller of property did not respond to the summons issued by the AO. There is no plausible explanation from the assessee why the documents relating to the property were found in his residence if he had nothing to do with it - The documents include the General Power of Attorney and an Agreement to Sell which bore the signature of Fakir Chand, seller. The fact that the name of the buyer was not mentioned in the documents is a fact which goes in favour of the revenue - neither Fakir Chand nor Om Prakash, the property dealer, came forward to claim the documents which is quite unusual if the intention of handing over the documents was only to enable the assessee to consider the proposal for buying the property. The Tribunal also overlooked that the name of the owner of the property was not mentioned in the affidavit of the property dealer - against assessee. Addition on account of FDRs based on dumb documents - ITAT deleted the addition - Held that:- Tribunal saw the seized paper as a “dumb document” which meant that nothing could be understood from it. The document, according to the Tribunal, merely noted a figure of Rs.27,50,000/- without any details whereas details of other fixed deposits made with Karnataka Bank were given including the interest figure. The Tribunal also felt difficulty in gathering the details of fixed deposits for Rs.27,50,000/- from the seized paper; there was no date or signature therein. On these facts the Tribunal has drawn the conclusion that the addition is without any basis - in favour of the assessee. Addition on account of investment in M/s Fair Deal Garments - ITAT deleted the addition - Held that:- The Tribunal has overlooked that the seized papers contained date-wise receipts of amounts from the assessee between 26.11.1993 and 10.2.1994. Sunil Gupta, the assessee‟s nephew had not started any business during this period. He started the business only on 26.12.1994. There was therefore no possibility or reason for him to make any investment in Fair Deal Garment before 26.12.1994. Sunil Gupta was for some time employed with Jai Pal Aggarwal and that was the reason why the documents were found in his possession. The assessee has not denied this. These crucial aspects have been overlooked by the Tribunal while deleting the addition against assessee. Addition on account of cash deposits made by the assessee - ITAT deleted the addition - Held that:- The Tribunal has not given any valid reason for deleting the addition as it has rested its decision on Annexure 3 in which the assessee had supposedly explained the cash deposits. This Annexure is not before thus court therefore, no means of knowing what the explanation is. Moreover, before the Assessing Officer the assessee does not appear to have submitted any explanation - we set aside the finding of the Tribunal and restore the matter to the file of the Assessing Officer, who shall consider the assessee‟s explanation given in Annexure 3 - in favour of revenue by way of remand.
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2012 (9) TMI 593
Addition on account of Peak credit - undisclosed income - ITAT deleted the addition made in block assessment - Held that:- Considering the gist of the statement of Hemant Shah, Director of the Company who advanced loans it is is seen therefrom that the assessee’s name was not mentioned by him at all as beneficiary of the accommodation entry business carried by him and merely stated that he did not deal with any ship-breaker and he had given only loan after taking cash and deducting commission. Even if the Revenue can be said to have successfully established that Mahendra Shah was carrying on the business of giving accommodation entries for commission, it does not follow that the loans taken by the assessee from the various companies allegedly belonging to the Madhupuri Group of Companies were accommodation loans. From the statement it is not possible to establish any link between Mahendra Shah and the creditor companies or that he was in a position to influence those companies into carrying on the accommodation entry business - The material on the basis of which the addition in the present case is sought to be made falls short of the requirement of the sub-section (1) of 158BB which says that computation of the undisclosed income of the block period has to be made on the basis of evidence found as a result of search as there is nothing to link the assessee with the accommodation entry business stated to be carried on by Mahendra Shah whose statement constituted the sole basis of the addition - in favour of the assessee
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2012 (9) TMI 592
Disallowance of exemption u/s 10B - CIT(A) allowed it approving the admission of the additional evidence - Held that:- As far as the first objection raised by the AO that the assessee was formed by the splitting up, or the reconstruction, of a business already in existence is not acceptable as mere reconstitution of the partnership firm can hardly be said to amount to the splitting up, or the reconstruction, of the partnership business which was already in existence. There is no dispute that after the partnership was reconstitued, the reconstituted firm had started a new business with an amendment to the partnership deed enabling the firm to carry on the manufacture and export of handicrafts items. Prior to the reconstitution the firm was authorized to merely carry on trading and exports of handicrafts etc. That apart the balance sheet as on 31st March, 2006 undisputedly shows that the assessee had acquired tools and the machinery, which were not with the firm prior to the reconstitution. Even the profit and loss accounts drawn up after the reconstitution showed manufacturing expenses and wages.Thus unable to appreciate how the Revenue can contend that the undertaking owned by the assessee was formed by the splitting up or reconstruction of the erstwhile partnership business. The contention is contrary to the facts on record - in favour of assessee. COU - Scope of term manufacture - One of the main objections of the AO was that the EOU was directed to be custom-bonded which was not complied with by the assessee. The CIT(Appeals) held that custom-bonding was required only where imports as per notification No.53/97 –customs dated 3rd June, 1997 are contemplated and since the assessee-firm did not plan to import any materials to be used in the manufacture of ingredients, the EOU was not custom-bonded - in favour of assessee. Disregard to Rule 46 A as no reasonable opportunity was given to the AO before approving the admission of the additional evidence by the CIT(A) - ITAT stated that AO took 15 months and more to submit the remand report - Held that:- The appeals before the CIT(Appeals) were filed by the assessee on 18.1.2010. It was in the course of the appeal proceedings that additional evidence had been produced and a remand report was called for by the CIT(Appeals). The appeals were eventually disposed of by the CIT(Appeals) by a common order dated 30.03.2010. Thus the entire appeal proceedings had taken less than three months for completion. In this background, it is not understandable as to how the Assessing Officer can be blamed to have delayed his remand report beyond 15 months - As the claim of the assessee based on the additional evidence had to be properly verified by the AO restore this issue to the file of the Assessing Officer to enable him to process the claim of the assessee afresh - in favour of revenue.
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2012 (9) TMI 591
Disallowance of Bad debts - ITAT delete the addition - Held that:- The assessee did not receive the payment from Delhi Vidyut Board as the said amount was deducted in lieu of penalty for late delivery of goods (repaired transformers and the matter is subjudice before the arbitrator. The amount may be taxed in the hands of the assessee in the financial year in which it is received by the assessee, if he succeeds in the arbitration - For the present, the amount stands deducted and thus the matter does not call for any interference by the High Court.
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2012 (9) TMI 590
Disallowance u/s 40A (3) - payments made to the butchers - ITAT deleted the addition - Held that:- As decided in The Commissioner Of Income Tax Versus M/S Milky Exports International [2010 (11) TMI 55 - ALLAHABAD HIGH COURT] payment has been made to the butchers whose genuineness has never been doubted - this is finding of fact and there is no illegality in the same can be pointed - against revenue. 'Building Repair & Maintenance' at Mumbai and Meerut - Held that:- Similar issue arise in M/S Milky Exports International [2010 (11) TMI 55 - ALLAHABAD HIGH COURT] case wherein the AO had earned in holding amount were not for 'Building Repair & Maintenance' at Mumbai and Meerut is revenue expenditure - AO had earned in holding that these were not capital expenditure ignoring the fact that the expenditure related to the capital works during the year and the definition of words "current repairs" under Section 31 of the Act - against revenue.
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2012 (9) TMI 589
Penalty u/s 271 (1) (C) - wrong description of the status of the assessee - CIT (A) deleted the levy - Held that:- Wrong description of the status of the assessee, which was corrected immediately by filing revised return, and in which the loss was reduced on account of a notification issued by the Ministry of Awas and Town Planning, could not be treated as furnishing inaccurate particulars to attract the penalty clause under Section 271 (1) (c) - The mistake was immediately accepted and did not result into any loss to the revenue. We may also observe here that when the Assessing Authority was fully aware that Hapur Pilkhuwa Development Authority, constituted under the U.P. Urban Planning and Development Act, 1973 is a local authority, a mere wrong description of the status should not have been a ground to award penalty. No error in the findings of CIT (A) and ITAT that there was no declaration of inaccurate particulars. Even if the mens rea may not be necessary, in attracting the penalty, the ratio of the judgment of the Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein it is held that A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee supports the conclusions of the CIT (A) and ITAT that in this case the penalty under Section 271 (1) (c) of the Act was not attracted - in favour of assessee.
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2012 (9) TMI 588
TDS liability on the amount of interest paid on delayed payment of compensation - Proceedings regarding claim under Motor Vehicle Act - whether the interest paid does not come with in the ambit of section 2(28A)? - ITAT allowed the relief by canceling the liability - AY 1998-99 to 2002-03 - Held that:- The word "interest" as defined under Section 2(28A) has to be construed strictly as necessary ingredients of such interest are that it should be in respect of any money borrowed or debt incurred. The award under the Motor Vehicle Act is neither the money borrowed by the insurance company nor the debt incurred upon the insurance company. As far as the word "claim" is concerned, it should also be regarding a deposit or other similar right or obligation. The definition of Section 2(28A) of the IT Act again repeats the words "monies borrowed or debt incurred" which clearly shows the intention of the legislature is that if the assessee has received any interest in respect of monies borrowed or debt incurred including a deposit, claim or other similar right or obligation, or any service fee or other charge in respect of monies borrowed or debt incurred has been received then certainly it shall come within the definition of interest. Insertion of clause (ix) to Section 194A(3) by the Finance Act 2003 with effect from 1.6.2003 also goes to show that prior to 1.6.2003, the legislature had no intention to charge any tax on the interest received as compensation under the Motor Vehicle Act. Even under the amended Act, interest received in excess of Rs.50,000/- has been subjected to tax liability. Certainly such interest exceeding Rs.50,000/- has further to be split amongst all the claimants and has to be spread over for each of the assessment years. Accordingly there appears to be no justification to cast liability to deduct the tax at source on the amount of interest paid on compensation under Motor Vehicle Act prior to 1.6.2003. The award of compensation under motor accidents claims cannot be regarded as income. The award is in the form of compensation to the legal heirs for the loss of life of their bread earner. Hence the interest on such award also cannot be termed as income to the legal heirs of the deceased or the victim himself - The award under the Motor Vehicle Act is like a decree of the court. It do not come within the definition of income as mentioned in Section 194A(1) read with Section 2(28A) of the Income Tax Act, thus the interest paid on compensation under motor accident claims awards prior to 1.6.2003 cannot be treated as income from the interest - in favour of assessee.
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2012 (9) TMI 587
Determination to the cost of the construction - case referred to departmental Valuation Officer (DVO)- Held that:- As decided in Smt. Amiya Bala Paul Versus Commissioner of Income-Tax [2003 (7) TMI 4 - SUPREME COURT] having assessed the value on the basis of the seized material, the A.O. could not have referred the matter of estimation of value to the Valuation Officer. Section 55A falls in Chapter IV-Computation of Income From Capital Goods. The special procedure for assessment of search case, is provided in Chapter XIV-B. The assessment of undisclosed income as a result of search is made under Section 158BA for which procedure for block assessment is provided under Section 158BC. The A.O. can assess the undisclosed income as a result of search only on the basis of material or information as are available in the search. He is not authorised to refer the matter to the Valuation Officer under Section 55A (b) (ii) to asses the fair market value. Such an enquiry is not permissible in respect of search cases - in favour of assessee. Gift received from Nepal - Held that:- It is a settled preposition of law that the AO can examine the genuineness of gift, the capacity and identity of the donor. The assessees had informed the Assessing Authority that donors are their uncles and they reside in Nepal. It cannot be believed that the assessees did not know the full address of the donors. The address given by the assessees is Krishna Nagar, Nepal. Nepal is a country which has several districts. It was not sufficient on the part of the assessees merely to show that the donors are citizens of Nepal. Hence the identity of the donors was not established. As far as the capacity of the donors is concerned, it was also not proved - Merely because the assessees have shown the receipts by demand drafts from Nepal, it cannot be presumed that the gifts are genuine - against assessee.
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2012 (9) TMI 586
Disallowance of job work charges - no traces of manufacturing activities found - ITAT allowed the claim - Held that:- ITAT allowed the claim as evidence place on record amply affirms that M/s K.S.M. Exports Ltd. was having as much as 543 workers on its roll for whom contribution towards Employees Pension Scheme and Provident Fund etc. was being paid by it and when M/s K.S.M. Exports Ltd. was not carrying on any business of its own, then the only conclusion is that its workers were carrying on job work for and on behalf of the assessee. Thus no infirmity in the assessee's claim of having paid job work charges to M/s K.S.M. Exports Ltd. and the addition made by disallowing the assessee's claim need to be deleted - against revenue.
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2012 (9) TMI 585
Disallowance of deduction u/s. 80IB(10) - CIT(A) allowed the claim - Held that:- As amendment brought under the section w.e.f. 1.4.2005 i.e. A.Y. 2005-06. Clause (d) introduced new condition of claim of deduction u/s. 80IB(10) of the Act restricting maximum commercial built up area of 2000 Sq. ft or 5% of aggregate built up area of the housing project whichever is less. Those housing project having commercial built up area of more than 2000 Sq. ft are not eligible for deduction u/s 80IB(10) and as the assessee has exceeded maximum permissible limit provided in the Act having a commercial built up area of 6415 Sq. ft., hence assessee’s submissions cannot be accepted that prior to amendment there was no upper cap on construction of commercial area. As assessment year involved in the present case is 2006- 07 assessee claims is liable to be rejected - The contention of the assessee that the project was started keeping in mind the pre amended provisions of Sec. 80IB(10) and therefore any subsequent changes should not change the project profile cannot be accepted - findings of the CIT(A) are reversed and that of the AO are restored - against assessee.
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2012 (9) TMI 584
Reassessment proceedings - ITAT quashed the notice issued u/s 148 - Held that:- In view of the judgment in Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME COURT ), after 1st April, 1989, in accepting the returns under Section 143 (1) (a) AO does not apply his mind and that the acknowledgment is received mostly by ministerial staff. In such case where any material is found and the notice u/s 148 has to be issued, the AO is competent to issue the notice except in a case, where more than 4 years have expired. In such cases the satisfaction has to be recorded by an officer higher in rank. The discretion in such a case cannot be left with the A.O. The satisfaction of the Joint Commissioner has to be recorded before the Assessing Officer, who may be an ITO, issues a notice under Section 148. In the present case we find that there is positive finding in the order of CIT (A) that in respect of assessment year 1995-96 the record shows that the Addl. Commissioner of Income Tax has given approval of issuance of notice under Section 148 on 20.3.2002. We, however, do not find any positive finding in this regard in Income Tax Appeal No.749 of 2007 relating to year 1996-97 and 1997-98 - decided in favour of the revenue and remand the matter to the Income Tax Appellate Tribunal to consider the appeal afresh and before considering the matter on merit with regard to assessment years 1996-97 and 1997-98 the Income Tax Appellate Tribunal will ascertain from the record, whether the satisfaction is recorded by the Joint Commissioner or Addl. Commissioner as the case may be or the officer, who was higher to the Income Tax Officer in the relevant year as it is only after he find that such satisfaction is recorded in accordance with Section 152 (2), that he may proceed to decide the appeals - against assessee.
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2012 (9) TMI 583
Transfer Pricing – Addition on account of computation of Arm’s length price - Assessee had imported raw materials, exported finished goods to associate enterprises - The most appropriate method adopted in the Transfer Pricing Report was Transaction Net Margin Method - Identify 5 comparable companies that engaged in same type of business – TPO rejects 4 comparable companies – Held that:- After analysis all the comparable companies by ITAT direct that TPO has to work out the arithmetic mean of these four companies for determining the arms length price of the assessee company for the international transactions. Therefore case remand back to AO.
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2012 (9) TMI 582
Capital gain – Asset inherited to assessee – Computation of Index cost of acquisition – Whether the year in which the previous owner first held the asset or the year in which the asset inherited to assessee used for indexation – Held that:- Following the decision of BOMBAY HIGH COURT in case of Manjula J. Shah (2011 (10) TMI 406) that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift/inheritance, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. Appeal decides in favour of assessee
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2012 (9) TMI 581
Addition made on account of unexplained cash credits u/s 68 as the assessee failed to prove the source of such deposits in his bank account - assessee claims it to be out of sale proceeds of retail business - return filed u/s 44AF - Held that:- Admittedly since the turnover of the assessee is below Rs. 40 lacs, therefore, as per the provisions of section 44AF, the assessee is not expected to maintain books of accounts. The assessee disclosed income of Rs.76,235/- in his return. The impugned amounts were found to be deposited out of the sale proceeds of retail business where the total turnover/sales are to the tune of Rs.13,91,425/-. What documentary evidence can be produced by the assessee from the retail business is always not possible. No other documentary evidence was brought on record by the AO except suspecting the deposits made by the assessee. Therefore, CIT(A) rightly deleted the addition - Decided against Revenue
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2012 (9) TMI 580
Addition u/s 68 - share application money - assessee contesting the assessment framed u/s 143(3) on ground of wrong assumption of jurisdiction - non-serving of notice u/s 143(2)(ii) - assessee also contesting non-admission of additional evidences by CIT(A) - Held that:- Finding recorded by the AO in his remand report and also by CIT(A) in his appellate order with regard to issue and dispatch of notices, on the said address given by the assessee in its PAN application has not been controverted by assessee by brining any positive material on record. Since assessee was in actual receipt of intimation u/s 143(1) and also refund order which was encashed by assessee in its bank account, there is no reason for accepting assessee’s contention for non-service of notice u/s 143(2) on the very same address. Ground taken by the assessee with regard to non service of notice is hereby dismissed. Additional evidences produced by the assessee before the CIT(A) goes to the root of the issue for deciding the identity, creditworthiness and genuineness of transaction in respect of share application money. In the interest of justice, we accept the additional evidence filed by the assessee and direct the AO to consider the issue afresh - Decided in favor of assessee for statistical purposes.
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2012 (9) TMI 579
Addition u/s 68 on account of Share application money – Investor's company invested money in assessee’s share at a premium - Same were bought back by the promoters/director of assessee in the very next year at a 90% discount – Detailed inquiry has been made by the AO – Sending letters u/s 133(6) and personally visited on given address of investors – AO come to conclusion that they were just paper companies and did not exist in reality - Held that:- As no sign board was hang on the premises , neighbor told that office is closed long back and not listen the name of investor company. On an enquiry made from investor’s bank reveals that cash was deposited immediately prior to issue of cheque to the assessee and the account of these companies was closed immediately after transfer of funds. It seems there was no genuine transaction of share capital, the companies were not existed at all. Assessee himself routed his funds through these companies. Assessee could not rebut the same by bringing any positive material on record to substantiate the identity and authenticity of investors. Therefore, confirm the action of AO & CIT (A) for applying provisions of Sec 68 in respect of share capital received from company as well as individual investors. Appeal decides in favour of revenue.
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2012 (9) TMI 578
Disallowance of salary paid to working partner u/s 40(b)(i) – Working partner is an agent of two insurance companies despite being a partner – As per partnership deed, partner without consent of other partners cannot engage in other business either directly or indirectly – No chamber provided to partner in office of assessee – Held that:- Since partners was working as a working partner since inception and regularly attended the work of the assessee’s firm. Assessee submits copy of many bank cheques, having signature of partner as ‘Managing Partner’ and supporting bank statements. Assessee also provides NOC given by another partner for carrying on her own insurance agency business. On remand, the AO examined those documents and found correct. Decision in favour of assessee Addition of Service Tax being debit in P&L – Assessee receive insurance commission from insurance companies – Assessee passes accounting entry by gross commission & debit the Service Tax in P&L – Held that:- As per agreement insurance company will pay net amount after deduction of Service Tax. As per Rule 2 (d)(iii) of Service Tax Rules, this service comes under reverse charge mechanism. Therefore, insurance company liable to pay Service Tax. As far as assessee concern, credited the entire gross commission and debited the service tax in its books. The net result would be the same. Appeal decides in favour of assessee
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2012 (9) TMI 577
Exemption u/s 10 of agricultural income - contract farming - Assessee produce basic seeds in its own lands and hybrid seeds on the lands leased by it – AO’s objection are that the germplasm is generated out of scientific research and, therefore, it is not agricultural activity – Held that:- Simply because the basic seeds are not fit for human consumption, it cannot be said that the produce is not agricultural produce. The assessee procures germplasm and sows in its own field, and carries on all agricultural operations and produces the basic seeds. The Basic Seeds so harvested are again put through agricultural operations intimately connected with leasehold land for finally bringing out the Hybrid Seeds. Only for the reason that the Basic Seeds are sown in leasehold land and the manpower required are arranged through contract farming, it does not mean that the operations carried out by the assessee are not agricultural operations. Assessee has carried out basic as well as secondary agricultural operations. Therefore, entire such income of the assessee is agricultural in nature. Appeal decides in favour of assessee Depreciation on technical know-how fees – Held that:- As the Tribunal for the previous assessment year has directed the AO to consider the alternate plea of the assessee for allowance of depreciation on technical know-how fees, if claim is in accordance with law. Subsequently, the depreciation on technical-know-how fees treated as capital expenditure has been allowed. Therefore, depreciation on technical-know-how fees should be treated as capital expenditure and depreciation allowed. Case remand back to AO
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2012 (9) TMI 576
Writ petition – Re-vesting of property in hand of transferor u/s 269UH - The order u/s 269UD came on April 28, 1993, pursuant to which the subject land stood vested in the Central Government - Writ petition filed by person who was already have an agreement with owner of land – No stay had been granted by the Bombay High Court till August, 1993 - Consideration was not tendered, upto the date of dismissal of Writ petition by HC on Sep 20, 2005 – Present Writ Petition was filed on Nov. 1, 2006 challenging on the basis of that CG had not tendered the amount of apparent consideration by the date fixed by section 269UG – HC did not provide any interim relief to respondent – Held that:- Sec. 269UG, the amount of consideration was required to be tendered within a period of one month from the end of the month in which order of such vesting took place i.e. by end of May, 1993. The writ petition file was dismissed on Sep 20, 2005, after which there was no reason for the CG not to tender the amount. The present petition came to be filed on or about November 1, 2006, and no interim relief has been granted therein. However, till date even in the year 2012, the consideration payable in accordance with the provisions of Sec 269UF has not been tendered to the petitioners. On account of failure on the part of the respondents to tender the amount of consideration payable u/s 269UF, the order dated April 28, 1993 stands abrogated in view of the mandatory provision of Sec 269UG(1) and the Central Government stands divested of the title which was vested in it as in accordance with Sec. 269UH. Decision in favour of assessee
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2012 (9) TMI 575
TDS u/s 194C on sub-contractor - Assessee get work contract for Construction of roads & bridges – Assessee deduct TDS on subcontract of supply of labour @ 1.2% - AO disallow the same because assessee fail to substantiate that work was sub contract – Held that:- As per Sec. 194C, sub-contractor would means a person who enters into a contract with the Contractor for carrying out or for supply of labour for carrying out whole or part of work undertaken by the contractor. Therefore it is clear from the above provision that person supplying the labour is a sub-contractor. And assessee applies TDS rates as per Law. Decision in favour of assessee TDS u/s 194C – Assessee is engage with person for supplying of Bitumen to hot mix plant assessee's site – Assessee consider the same as sub-contractor for the purpose TDS and deduct the TDS @ 1.2% - Held that:- As they are not involved in execution of any part of the contract which was taken by the assessee and accordingly the assessee should have deducted full tax @ 2% from this party. However, at the same time it is also required to be verified whether the payments were made to this party or they are still payable because the Special Bench of the Tribunal, in case of Merilyn Shipping & Transport (2012 (4) TMI 290) has already taken a view of Sec. 40(a)(ia) would be applicable only if the amount remains payable. Therefore case remand back to AO. Delay in deposit of Employees Provident Fund – AO disallows the amount on account of delay in deposit of EPF on due date as per Sec. 36(1)(va) - Held that:- Payment were made with in grace period of 5 days after due date. Therefore, the same would be allowable on the basis of decision given by Punjab & Haryana HC in case of V. Lakhani Rubber Works (2010 (3) TMI 471). Decision in favour of assessee Disallowance u/s 40(a)(ia) – Held that:- Following the decision of Tribunal in case of Merilyn Shipping & Transport(2012 (4) TMI 290) held that disallowance u/s 40(a)(ia) can be made only in respect of payments which remain payable at the end of the year. However, it is not clear from the record which payments have been made and which are payable, therefore, Case remand back to AO.
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2012 (9) TMI 574
Deduction u/s 80IB – Whether assessee can claim deduction u/s 80IB where manufacturing process carried out by an assessee on job work basis - Held that:- As it makes no difference in the manufacturing process carried out by an assessee whether the raw material belongs to the assessee himself or owned by some other person. In both the circumstances, manufacturing activities are carried out in the same process by using the similar plant and machinery and similar manpower. No material could be brought on record by the Revenue to show that the risk incidental to manufacturing was not of the assessee and was liability of any other person. Therefore, dismiss the grounds of appeal. Decision in favour of assessee
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2012 (9) TMI 573
Validity of Notice issued u/s 143(2) – Assessee files ROI 29/06/2007 for the AY 2003-04 & 2005-06 in response to notice u/s 147 – Notice issued u/s 143(2) on 15/07/2008 for the both of years - AO dismissed the same on the ground that Sec. 143(2) amended w.e.f. 1.4.2008 prescribed that notice shall not be issued after the expiry of 6 months from the end of the F.Y. in which the return was filed – Held that:- As per the explanatory note issued by CBDT vide circular no. 1 of 2009, reveals that the amended provision of Sec. 143(2) shall apply to all such returns (irrespective of the assessment year, to which the returns pertain) where notice u/s 143(2) can still be issued on 1.4.2008, under the pre-amended provision. Therefore, circulars or general directions, issued by the CBDT would be binding u/s 119, on all officers and persons, employed in the execution of the Act. Appeal decides in favour of revenue Disallowance due to change in accounting method – AO rejecting method of accounting employed by the assessee u/s 145(3) - Assessee accounting for the incomes on cash basis and the expenses were claimed on mercantile basis under the head PGBP - which is neither cash nor mercantile – Held that:- As the Tribunal direct the AO to consider the allowability of the expenses in question namely interest, salaries and rent in the year of their payment in accordance with law. Appeal decides in favour of revenue
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Customs
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2012 (9) TMI 607
Confiscation of seized betel nuts and to impose penalty - goods are of foreign origin and have been smuggled into the country - Held that:- As betel nuts are not notified items under section 123 of the Customs Act as such, the onus to prove that the same are of foreign origin and were smuggled into the country lies solely on the Revenue. It is the matter of common knowledge that betul nuts grow in west part of the country and are available in abundance, hence there is no affirmative evidence to show that the said betel nuts are of foreign origin apart from the statement of Shri Deepak Kumar, expert of trade opinion which have not been accepted by the Tribunal in various precedent decisions - no reason to uphold the confiscation of the goods - in favour of assessee.
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2012 (9) TMI 606
CHA - Suspension of licence – Held that:- licence of the appellant stands suspended for more than 28 months without final disclosure of the evidence and without final hearing in the matter, it is proper to restore the licence of the appellant as an interim measure - appeal allowed
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2012 (9) TMI 605
Seizure - Gold biscuits of foreign origin - offence under Section 135 of Customs act and Section 85 of Gold Control Act – acquittal of the respondent/accused - Held that:- No seizure mahazar has been drawn at the place where the car was seized nor any witnesses are examined from the neighbourhood - place where the car was stopped was busy area with many shops and commercial establishments, as admitted by PWs.1 and 3 in the cross-examination but none of the occupants of the neighbouring shops and establishments were cited as witnesses and no mahazar was drawn at the place where the vehicle was seized - grounds on which the accused are acquitted are based on the evidence on record and that there is no illegality or infirmity in the order passed by the learned Magistrate - appeal is dismissed.
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2012 (9) TMI 572
Representation submitted by the petitioner - Held that:- As in assessee's own case [2010 (1) TMI 466 - MADRAS HIGH COURT ] assessee was denied of opportunity to represent his case, the respondent is directed to dispose of the representation dated 18.1.2012 made by the assessee on merits and in accordance with law within a period of eight weeks from the date of receipt of a copy of this order.
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2012 (9) TMI 571
Writ petition – Writ Petition was filed contending that the order passed by the Tribunal is without jurisdiction – Held that:- Tribunal has also gone into the question on merits including the process of valuation and incidence of tax and to characterize the nature of the order passed including the process of valuation, it is clear that the appeal would lie to the Supreme Court under Section 130E(b) of the Act - no error or illegality in the order so as to call for interference - appeal is dismissed
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2012 (9) TMI 570
Revision petitions - personal penalty - custom officers had intercepted one passenger Krishan Kumar Gupta with foreign currency - passenger Shri Krishan Kumar Gupta had stated that the seized foreign currency was handed over to him by Shri Rajeev Wadhwa Director M/s. Mahavir Forex (P) Ltd. The second applicant Shri Sanjeev Wadhwa is another Director of said company. Both the applicant failed to appear before Customs for tendering their statement despite repeated summons – Held that:- What extent the said statement is admissible against a third party when the said third party has not been given right to cross-examination - petitioners have been implicated only on the basis of the statement by the third person - order does not even refer to the submissions made on behalf of the petitioners, evidence/material relied upon by the petitioners and deal with them - matter is remanded to the Joint Secretary, Government of India, for fresh adjudication
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Corporate Laws
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2012 (9) TMI 604
Sale of the assets of a company in liquidation - second highest bidder alleging that the offer ascribed to him in the order confirming the sale was not at his bidding - Held that:- Sony may have been unwittingly dragged into a charade enacted by Sarkar, possibly at the behest of Bose or, to do Bose a favour by ensuring that the sale was scuttled and the business of the company was continued in terms of the appellate order of November 2, 2011 for an indefinite period. Sarkar has admitted to having a telephone conversation with Bose on February 29, 2012. The timing of the call matches with Sony’s assertion that he was at the manufacturing facility of the company in liquidation in Maniktala on that day when Bose informed him of the imminent sale of the company; and, on Sony showing interest in the matter and seeking further information, Bose made a call to give Sony the details of how to make a bid therefor. Sarkar appears to have put Sony up to the altar as the sacrificial lamb to sabotage the sale and prolong Bose’s de facto control of the business of the company, now that Saha was out of the way following his disputes with Bose after Saha may have invested for the continued operations of the company in liquidation. Sony was a godsend for Bose to neutralise Saha’s lone bid for taking over the company as a going concern and to catapult Bose from a measly supervisor to a businessman with no care to pay for the tools or the space used for the business by virtue of the court largesse. Sarkar was the perfect ally to prey on the gullibility of Sony with the finesse of a dispassionate executioner. In the light of the conduct of those informally running the business of the company in liquidation as it appeared at the interlocutory stage of the present proceedings, the official liquidator has been directed to take possession of the assets of the company in liquidation and they ought now to be in his control. The official liquidator has applied for a direction for the sale of the assets of the company in liquidation. In view of it not being established that Saha made the frivolous bid to scuttle the sale – on the contrary, Saha appears to have been a victim of sorts - of the company and perpetuate its business operations being informally run, the suo motu rule of contempt issued against him stands discharged and he is honourably acquitted - Saha will be refunded a sum of Rs.4 lakh out of the deposit of Rs. 5 lakh that he has made with the official liquidator. The balance amount will stand forfeited, for Saha having failed to honour his bid but having cited some mitigating circumstances, and be retained by the official liquidator to be available for distribution to the creditors of the company in liquidation in accordance with law. Sony will be refunded a sum of Rs.4.50 lakh out of the deposit of Rs.5 lakh that he has made with the official liquidator. The balance amount will stand forfeited, for Sony not asserting himself at the time of the sale and causing the matter to be blown up beyond it was necessary, and be retained by the official liquidator to be available for distribution to the creditors of the company in liquidation in accordance with law. The Official liquidator will invite offers for sale of the assets of the company in liquidation upon a fresh valuation of the assets by an empanelled valuer other than the one who had been engaged to value the company as a going concern. The expenses for the valuation will be decided at the time of sale, but an initial ad hoc payment of Rs.10,000/-may be made to the valuer from out of the official liquidator’s Establishment Charges Account. Mr. Ashim Sarkar who is working in the office of the Official Liquidator who attempt to cheat is given a desk job not having any connection with any money transaction or anything to do with the sale or preservation of the assets of any company in liquidation till such time that a decision as to his further continuation in the office is taken. Upon the sale of the assets of the company in liquidation being completed, the official liquidator will ensure that all movables are removed from the three rooms in the Sealdah property that continue to be held by the company in liquidation within a reasonable time of the conclusion of the sale and also Maniktala property within reasonable time of the conclusion of the sale. The official liquidator will immediately thereafter engage security guards to protect the Maniktala property from any encroaches or trespasser. The official liquidator will take immediate, appropriate measures to preserve the assets of the company in liquidation till the conclusion of the sale and the handing over thereof to the rightful persons upon consulting the secured creditors and, for such purpose, the secured creditors will have to bear the expenses therefor; such expenditure will be regarded as liquidation expenses and have priority at the time of disbursement.
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Service Tax
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2012 (9) TMI 633
Levy of Service Tax on reverse charge basis on Import of Service – Held that:- Provisions of Rule 2(1)(d)(iv) cannot create any tax liability which is not authorized by law. Before insertion of section 66A with effect from 18-4-2006, there was no authority to levy service tax on Import of service. Explanation below section 65(105) did not give any authority to levy service tax on import of services held in case Bombay High Court in the case of Indian National Ship owners Association (2008 (12) TMI 41) also affirmed by the Apex Court. In view of the aforementioned judgments of the Hon'ble Supreme Court, the service tax liability on any taxable service provided by a non resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of section 66A of the Finance Act, 1994. The Board has accepted this position. Accordingly, the instruction F No. 275/7/2010- CX8A, dated 30.6.2010 stands rescinded. Decision in favour of assessee
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2012 (9) TMI 632
Cenvat credit - company was providing both taxable services and exempted services - appellants submitted that the credit is mostly in respect of capital goods only and there is only a small portion of credit attributable to input services – Held that:- Credit is mostly in respect of capital goods needs to be verified by the adjudicating authority - matter is remanded for verification
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2012 (9) TMI 631
Demand of service tax - Computer training - According to the appellant, they were eligible for exemption under Notification No. 24/04-ST which exempted commercial training or coaching given by a Vocational Training Institute - notification was amended w.e.f. 7th June 2005 vide Notification No. 19/05-ST to exclude the training provided by the Compute Training Institute from the scope of the said Notification - SCN issued on 29.2.09 demanding tax for the period 10.9.04 to March, 2005 – Held that:- They had a bonafide belief that the service was exempt since demand is raised invoking extended period of time, the demand appears to be time barred
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2012 (9) TMI 597
Maintenance or Repairing Service - service tax demand & penalty u/s 78 - Held that:- The definition of Repairing and Maintenance Service has been changed with effect from 16.06.05 and the Appellant pursuant to the same, got registered on 04.08.2005. The reason for delay in payment of Service Tax, as explained by the Appellant, was due to a confusion with regard to determination of the taxable value of the services rendered by them and also on the eligibility of benefit provided to a small-scale service provider. The said explanation appears to be convincing, and nothing contrary to the said claim, has been brought on record by the Department. Mere delay in payment of the Service Tax cannot be construed as suppression or misdeclaration of facts with intent to evade payment of Tax. As the bonafideness of the Appellant is evident from the fact of their getting registered with the Department soon after change in the scope of definition on repairing and maintenance service and also from the fact that the entire receipt relating to the repair and retreading of Tyres during the relevant period, had been duly reflected in their audited Balance Sheet he penalty imposed on the Appellant under Section 78 of the Act, is not maintainable - in favour of assessee.
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2012 (9) TMI 596
Maintainability of appeal - appeal filed against an order passed by the Commissioner as revisionary authority under Section 84 of the Finance Act, 1994 – Held that:- Appeal filed against the Commissioner's "Review Adjudication Order" dated 24.3.2011 is not maintainable under Section 86 of the Act - appellate remedy under Section 86 against such an order was taken away with effect from 19.8.2009 - order passed by the Commissioner of Central Excise under the erstwhile provision of Section 84 on 24.3.2011 on the strength of the aforesaid "explanation" is not appealable to this Appellate Tribunal under Section 86 as this provision stands from 19.8.2009 - appeal is dismissed as not maintainable.
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Central Excise
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2012 (9) TMI 603
Denial of CENVAT Credit on MS round - not eligible input - Held that:- On considering the process initiated for manufacture of the said exciseable final products i.e. ferro alloys products it can be concluded that in order to tap the molten metal, MS round is used, which strikes the pointed furnace wall. Being pushed inside the furnace for making leakage point to bring the hot liquid molten metal out of the furnace, both the lancing pipe as well as MS round are used. These during the process get melted/consumed with the hot liquid metal inside the furnace. The use of MS round is essential as no manual operation is possible under such high temperature. Thus the use of MS round is part of the manufacturing process. Not only is it just part of the manufacturing activity, in fact it is an essential process without which no taping can be done and without which the finished product cannot be manufacture - in favour of assessee.
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2012 (9) TMI 602
COSAVAT FERTIS-WG (Sulphar 90%) - classification under CETH 25030090 OR CETH 38241990 - Held that:- the percentage of sulphur was brought down to 90% by adding other ingredients as in the case of the appellants. - The observations of Hon ble Supreme Court would clearly show that CETH 2503 has to be preferred to other headings. The classification claimed by the Revenue in this case under chapter 3824 cannot be accepted in view of the fact that the specific heading is to be preferred to general heading as held by Hon'ble Supreme Court in M/s. Deepak Agro Solution Ltd Versus Commissioner of Customs, Maharashtra [2008 (5) TMI 8 - SUPREME COURT] defining Salt and Sulphur are dealt with in Chapter 25 and sulphur may be used for different purposes including agricultural purposes. Brimstone 90 is used for agricultural purposes as would appear from the descriptions referred to hereinafter - in favour of assessee.
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2012 (9) TMI 601
SSI exemption - Clubbing of turnover - assessee having two units - issuance to SCN to both the units - period of limitation - Held that:- the show cause notice to the appellants (i.e. Alang unit) had been issued taking into consideration the clearances effected by the Sihor unit as well as the Alang unit. - Whether the Sihor unit had paid duty at the normal rate or concessional rate or availed full exemption, it would not affect the clubbing of clearance value of Sihor unit with Alang unit for the purpose of availing benefit of Notification No.9/98-CE. The show cause notice issued to the Sihor unit for the same period therefore does not amount to double jeopardy as in that case, the appellants had claimed exemption under Notification No.8/98 dated 2-6-98 which was in contravention of clause 2(v) of the Notification and the issue therefore is different from the issue in the present case. As the fact of availment of exemption on Alang unit was not declared in Rule 173B declaration of Sihor unit, cannot be made the basis for establishing intention on the part of the appellants in as much as admittedly the fact of existence of Alang unit was mentioned in the said declaration - as the demand in the present case is admittedly beyond the normal period of limitation of six months the appellant s appeal of the Sihor unit was allowed only on the limitation - in favour of assessee.
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2012 (9) TMI 600
Demand of differential duty - additional income shown by the Respondent Assessee in the Balance Sheet arising out of the transportation charges/freight charges – Sales to Government/Semi-Government organizations were effected as per DGS&D rate contract, where price of the goods is exclusive of freight charges, and terms of delivery of the goods include both the terms - ‘freight to pay’ and ‘pre-paid freight’ with a provision to realize cost of transportation through commercial invoices - Held that:- DGS&D rate contract is ascertainable ex-factory price, and extra realization on account of freight has come out as profit on such account, which cannot form part of assessable value - demand of differential duty is not sustainable.
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2012 (9) TMI 599
Provisional release of the goods – Goods were compressors of various sizes - Held that:- Condition of giving declaration that the assessee will not challenge the value of goods, the assessee cannot be deprived of opportunity to contest classification or valuation - If the condition is allowed, the department can allege any valuation and continue to have goods under detention unless the aggrieved party withdraw the challenge of valuation. The same will amount to denial of justice - To provisionally release of the goods, the authorities have to safeguard the revenue with regard to duty, redemption fine and penalty if any - appellant shall pay the differential duty as provisionally assessed
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2012 (9) TMI 598
Interest on delayed payment of excise duty – Held that:- Non-issue of a demand notice under sub-section (1) of section 11A is nothing to do with leviability of interest for delayed payment - interest is leviable on the differential duty paid in pursuance of a subsequent invoice as the proper duty payable under the law had not been paid on the date of clearance - assessee is liable to pay interest
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2012 (9) TMI 569
Wrongful availment of the credit - interest and penalty equivalent to the amount of duty under section 11AC - Tribunal could not have, on remand, reconsidered the issue relating the duty earlier as proceedings related to the reduction of penalty by this Court has restored - Held that:- The assessee had paid the entire duty amounting to ₹ 17,96,685/- with interest amounting to ₹ 1,80,439/-. Moreover, with a view to put an end to the controversy relating to the modvat credit amounting to ₹ 58,915/- and ₹ 41,600/- which is remanded by the Tribunal, the assessee through its counsel agreed to forgo the amount of ₹ 4,50,000/- already deposited with the revenue. Thus, the duty demand confirmed at ₹ 17,96,685/- as per the original order of the Tribunal stands discharged on account of payment of the said amount with interest. Hence, the first question does not survive. Suppression of facts claiming depreciation on capital goods - Held that:- realising the mistake, the assesee took steps to withdraw the claim of depreciation and since that did not materialise, the assessee offered to pay the duty with interest. In these circumstances, the decision of the Tribunal that Section 11AC is not attracted, cannot be faulted - against revenue.
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2012 (9) TMI 568
Penalty under Rule 25 of Central Excise Rules, 2002 - assessee stated that as no clandestine removal hence no penalty - Held that:- Shortage detected by physical inventory investigation was possible outcome of clandestine removal of the finished goods in absence of any evidence surfaced contradicting investigation story - once the physical inventory resulted in shortage, onus of proof was discharged by investigation, thus burden of proof was discharged by Revenue bringing home the appellant to the shortage found. AS Revenue is not in appeal against reduction in penalty by first appellate authority it is settled law that appellant should not be put to adversity when other side does not challenge the impugned order for restoration of adjudication result. Therefore, penalty imposed under Rule 25 of Central Excise Rules, 2002 does not call for intervention.
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2012 (9) TMI 567
Application for restoration of appeal – Held that:- Only ground in support of the appeal taken in the grounds of appeal is that the opinion of the Committee of Commissioner of Customs was available on the file notings and the appeal was filed under the signatures of the Commissioner who was a Member of the Committee. It has been suggested that the aforesaid fact was not placed before the Tribunal and the only defect was that no formal authorisation order was made - there was not properly maintainable appeal filed at the original stage, there cannot be any repair to be done to the lapse of Revenue by this MA (ROM). Accordingly that is rejected.
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2012 (9) TMI 566
Demand alongwith and equivalent amount of penalty for not reversing the amount equal to 10% of the value of goods cleared without payment of duty by claiming exemption under Notification No. 33/05 – Held that:- As per Rule 6 of Cenvat Credit Rules if the assessee is manufacturing both dutiable as well as exempted goods claiming exemption under a notification, the assessee is required to maintain separate account for inputs/inputs service which has gone into manufacture of dutiable as well as final exempted products - appellants have not done so - appellants have not still reversed the credit taken on inputs/input service alongwith interest which has gone into the manufacture of final exempted products - benefit of this amended Rule 6 by Section 73 of Finance Act, 2010 is not available
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2012 (9) TMI 565
Demand of interest on delayed payment of duty - demand has been raised after coming into force of Section 11-A and 11-B of the Central Excise Act – Held that:- Once the assessment was completed on 22-7-1994, the provision brought in force by the Act, 1996 will have no application to already adjudicated assessments - Once under law the tax is not recoverable, it cannot be justified merely because the party has paid some amount to avoid penal action – in favor of assessee
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CST, VAT & Sales Tax
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2012 (9) TMI 630
Challenge the rate of penalty provided in Section 78(5) of Sales tax Act - Claim for No or Less Penalty - Held that:- As decided in State of Rajasthan & Anr. Vs. D.P.Metals [2001 (10) TMI 881 - SUPREME COURT OF INDIA] that once the ingredients of Section 78(5) are established, after giving a hearing and complying with the principles of natural justice, there is no discretion not to levy or levy lesser amount of penalty - This provision cannot be read as to imply that the penalty of 30% is the maximum and lesser penalty can be levied. The legislature thought it fit to specify a fixed rate of penalty and not give any discretion in lowering the rate of penalty. Thus quantum of penalty under the circumstances enumerated in Section 78(5) cannot be regarded as illegal. The legislature in its wisdom has though it appropriate to fix it at 30% of the value of goods and it had the competence to so fix - against assessee.
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Wealth tax
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2012 (9) TMI 634
Penalty u/s 18(1)(c) – During the course of search under IT Act. assessee furnish Cash Flow statement for the 31.3.2001 to 31.3.2005 – In these years cash balances exceeded minimum exempted amount of Rs. 15.00 lakhs – Assessee has not furnish any return under Wealth Tax Act for these years – AO serve notice u/s 17(1) on 31/5/2007 – AO imposed penalty u/s 18(1)(c) as assessee failed to furnish the return for these years - Such net wealth was deemed to have been concealed – Held that:- By that time the assessee was absolutely knowing the fact that there was cash balance available with the assessee in excess of wealth tax limit of Rs. 15.00 lakhs and at least at that point of time the assessee should have filed wealth tax returns. As per Exp. 3 to Sec 18(1)(c) no notice should have been issued within the limitation period in which the assessment can be completed. Notice has been issue and served on 31.5.2007 and returns up to AY 2004-05 could have been assessed before 31st March, 2007 as per section 17A. Since the notice has been issued only after expiry of time therefore, this condition is also complied for various years upto the Assessment Year 2004-05. Tribunal, confirm the penalty imposed u/s 18(1)(c) for all the years except for Assessment Year 2005-06. Appeal decides in favour of revenue.
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