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M/s Abhilash Software And Development Centre Versus Income-Tax Officer, Ward 8 (2) , Bangalore

Enhancing effect of income by changing heads of income and imposing tax on the assessee - principles of natural justice denied - not providing the assessee with a reasonable opportunity of being heard - Held that:- if such change of head of income results in enhancement of income and consequently enhancement of tax, then the CIT(A) has to issue a notice u/s 251(1) of the Act before bringing it to tax. The Hon’ble Allahabad High Court in the case of Tarkeshwar Nath Agarwal vs. CST (1974 (3) TMI 9 .....

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in our opinion, the CIT(A) ought to have issued notice u/s 251(2) of the Act. Since such notice has not been issued by the CIT(A), we set aside the order of the CIT(A) and remit the issue to the file of the CIT(A) with a direction to re-adjudicate the appeal before him de novo in accordance with law after issuing a notice u/s 251(2) of the Act - Decided in favour of assessee for statistical purposes. - ITA No. 710/Bang/2014 - Dated:- 26-5-2015 - P. Madhavi Devi, JM And Jason P Boaz, AM,JJ. For .....

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not providing the assessee with a reasonable opportunity of being heard before giving enhancing effect of income by changing heads of income and imposing tax on the assessee. 3. Brief facts of the case are that the assessee, a partnership concern, filed its return of income for the assessment year 2005-06 on 31/10/2005 declaring taxable income of ₹ 2,64,948/-. During the assessment proceedings u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short], .....

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O, should have been capitalized as this is the first year of commencement. The assessee could not furnish the details and therefore the AO apportioned 10% of the interest claimed as relatable to loan utilized for acquiring other assets and further held that this being capital in nature, the same is also not allowable as revenue expenditure. He, accordingly added it to the returned income of the assessee. As regards the claim of depreciation, he held that 10% of depreciation claim is required to .....

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l for the assessee submitted that the assessee had let out the technology park to its lessee and has offered the rent from the building as income from house property and the rent received for the other amenities as income from other sources . He submitted that interest on loan taken for construction of the building has been claimed as revenue expenditure allowable from the income from house property. He further submitted that from the income from other sources the assessee had claimed depreciati .....

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as are allowable under such heads of income are to be allowed. Thus, it has resulted in enhancement of income and the CIT(A) ought to have issued show cause notice to the assessee prior to such enhancement of income u/s 251 of the Act. He, therefore, submitted that there is violation of principles of natural justice and the order of the CIT(A) needs to be set aside. Copy of the order giving effect to the CIT(A) s order is also filed before us. The learned Departmental Representative, on the oth .....

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at ₹ 1,97,66,178/-. Therefore, it is clear that the assessed income has been enhanced by the order of the CIT(A). Sub-section (2) of sec.251 provides that the CIT(A) shall not enhance an assessment or a penalty or reduce the amount of refund unless the assessee has had a reasonable opportunity of showing cause against such enhancement or reduction. The learned counsel for the assessee argued that no such notice of enhancement has been given by the CIT(A) while the learned Departmental Rep .....

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