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2009 (3) TMI 1050 - ITAT MUMBAI

2009 (3) TMI 1050 - ITAT MUMBAI - TMI - ITA No. 5092/M/2007 and ITA No. 5164/M/07 - Dated:- 23-3-2009 - SHRI D.K. AGARWAL, J.M. AND SHRI A.L. GEHLOT, A.M. Assessee by : Mr. H.N. Shah Revenue by : Mr. S.K. Pahwa ORDER PER A.L. GEHLOT, A.M.: These cross appeals filed are directed against the order of CIT (A) - Central VIII, Mumbai, passed on 18.06.2007 for the assessment year 2003-04. 2. The common ground raised in these cross appeals is in respect of addition on account of notional interest. 3. B .....

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e advanced in the current year. The AO noticed that the assessee was incurring huge expenses on borrowings and, therefore, had these loan been recovered from the subsidiary companies, the interest expenses of the assessee would have been less. The AO disallowed interest claim of assessee at ₹ 2,62,74,000/- by applying 12% of interest. In respect of interest-free loans to Pentasia Investment India Ltd., the assessee submitted that this company has merged with the assessee company as per the .....

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ount related to Pentasia Investment(I) Ltd and Asian Paints Industrial Coatings Ltd. and the assessee is in appeal against action of the CIT(A) in confirming the disallowance of interest pertaining to Technical Instruments Manufacturing Ltd. 6. At the outset, the learned AR submitted that this issue is covered by the decision of ITAT wherein the ITAT has passed an order in ITA No. 5063/M/05 and others for AY 2001-02 to 2002-03 and for the block period 01.04.95 to 21.03.2002 vide order dated 9th .....

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to the file of CIT(A) instead of to the file of AO. The learned AR did not object to sending this matter to the file of CIT(A) instead of AO. 8. We have heard the learned representatives of the parties and perused the record. We find that on identical set of facts the ITAT has sent the matter back to the file of the AO. Since the facts of the case under consideration are identical to that of AY 2001-02 to 2002-03 and both the parties agreed to remit the matter back to the file of CIT(A) instead .....

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g stock. 11. During the course of assessment proceedings, the AO noticed that the assessee had taken the value of unserviceable, damaged and inert stock of goods at Nil. The AO was of the view that the assessee did not follow the correct method of valuation of closing stock as the assessee itself admitted that the assessee totally excluded the damaged stock for the purpose of valuation. It was also admitted that as and when such stock was sold, the sale consideration were taken into consideratio .....

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ds should also be required to be valued at the end of the year. As regards estimation of amount of the said stock we find that there is no material available on record for estimation of a different amount of the stock than estimated by the AO. We, therefore, confirm the orders of the revenue authorities on this issue. 13. Ground No. 3 is in respect of addition of ₹ 4.70 lacs being 50% of expenditure incurred on account of presentation of gift articles. 14. The assessee claimed an amount of .....

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view that the AO was not justified in making the entire disallowance. Hence, the CIT(A) reduced the disallowance to 50% i.e. ₹ 4,69,604/- as against the disallowance of ₹ 9,39,208/- made by the AO. 15. At the outset, the learned AR submitted that this issue is covered by the decision of ITAT in assessee s own case for AY 1996-97 in ITA No. 949/Mum/2000 vide order 5th February, 2004 where the ITAT dismissed the similar ground raised by the revenue in its appeal. The alternative submis .....

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sentatives of the parties and perused the record. We find that in earlier year for AY 1996-97 the ITAT has dismissed the ground raised by the revenue in its appeal by holding that the presentation of articles does not carry any logo or name of the company. But in the case under consideration the assessee has not filed details of expenses. Some expenditure of gifts related to public servant which is admittedly not allowable expenses. Keeping in view the facts that in the past disallowances made w .....

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f addition of ₹ 98.36 lacs on account of prior period adjustments. 19. The assessee did not make any claim of ₹ 98.36 lacs on account of prior period adjustments in the return of income filed but the assessee claimed that such was pressed during the course of assessment proceedings. The AO did not allow the claim of the assessee. Before the CIT(A), the assessee submitted that the claim was made before the AO vide letter dated 28.02.2006 but the same has not been allowed. The details .....

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e in the return of income filed, it cannot be claimed subsequently, for which he placed reliance on the judgment of Supreme Court in the case of Goetze (India) Ltd., 284 ITR 323 wherein it was held that such claim is not allowable. The CIT (A) finally rejected the assessee s claim by further observing as under:- 10.3… It is further noticed that the appellant is claiming that in the prior period items, there is an amount of ₹ 98,36,024/- on account of balances written off. The appell .....

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a possibility cannot be ruled out in the present case also. Further, when the appellant has already claimed deduction on account of debts written off, it is not understood why the appellant not clubbed these amounts written off with other debts which were also written off and for which the appellant has claimed deduction in the prof it & loss account. If these amounts were really written off in the current year, the appellant has not explained as to how these amounts can be treated as prior .....

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s not allowable by relying on the judgment ion the case of Goetze (India) Ltd., 284 ITR 323, but, it was observed by him that such claim is allowable u/s 36(1)(vii). The CIT(A) further held that there is no evidence on record that these amounts are really irrecoverable. He accordingly, disallowed the claim of the assessaee. In this appeal, the preliminary question that falls for consideration relates to scope of powers of CIT(A) whether the CIT(A) was having power to admit assessee s claim witho .....

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f the AO to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the income-tax appellate tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs. 21.1 From the above finding of the Apex court, we find that the Apex court has decided the .....

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educe, enhance or annul the assessment (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, .....

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ssment proceedings the ITO made addition to the assessee's income to the extent of ₹ 2,45,000 on account of ostensible transactions in hundi loans shown by the assessee. On appeal, the AAC, while sustaining the aforesaid addition also took notice of 10 other items of ostensible hundi loans amounting to ₹ 2,30,000 and directed that the total income be enhanced by the sum of ₹ 2,30,000. The Tribunal, however, deleted the said addition holding that the AAO had exceeded his jur .....

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ficer and, therefore, it was not open to the AAC in appeal to consider the new sources and to assess them. 21.3 On appeal to the Supreme Court, The Supreme Court has held as under:- (Pages 612 to 614) In Jute Corpn. of India Ltd.'s case (supra) this Court has referred to the earlier decision of this Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, which was also a decision of a three Judge Bench wherein the scope of section 31(3)(a) of the Indian Income-tax Act, 1922 [which was almos .....

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esh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do'." (p. 693) After referring to these observations, this Court in Jute Corpn. of India Ltd.'s case (supra) has stated : "The above observations are squarely applicable in the interpretation of section .....

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, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed befor .....

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