2011 (8) TMI 1228 - SC - Indian Laws

Disallowance of interest and capital expenditure - Documents seized during the course of search - business by way of bogus unsecured loan - Income from undisclosed sources on receipt of money - deleting the addition u/s.68 - HELD THAT - In present case, we have no hesitation in deleting the addition made in respect of Fort Royal projects for asst. yr. 2007-08. In regard to Revenue's appeals, additions made by AO on account of on-money receipts for asst. yrs. 2002-03 to 2005-06 were also deleted by CIT(A) with the finding that since assessments for these years had already been completed under s. 143(3) of the Act before the date of search and nothing incriminating was found in course of search or survey in respect of receipt of on-money for these years, completed assessments for these years could not be disturbed and no addition on account of 'on-money' could be made merely on the basis of change of opinion. As the Revenue could not controvert the same. THAT, no incriminating material or documents were found in course of the search or survey action with respect to the allowability or otherwise of the expenditure or interest expenses for any of the years under consideration. In the original assessments framed under s. 143(3) of the Act for asst. yrs. 2002-03 to 2005-06, the AO after application of mind and detailed scrutiny of accounts had consciously allowed said expenses and interest On loan. However, later on while framing assessments under s. 144/153C for the said years, under identical circumstances vis-a-vis past, the AO opined that a part of such expenses and interest should have been capitalized to WIP. Accordingly, the same was added back by the AO under s. 144/153C merely on the basis of change of opinion in the guise of search assessment. Hence, CIT(A) has rightly deleted this addition. Accordingly, these two common issues of Revenue's appeals in IT(SS)A Nos. 15, 16, 17, 18, 19, 20 and 21/Kol/2011 are dismissed. THAT, AO alleged that the assessee company was specifically asked for explanation but had not complied. Thus, the said sum of Rs.,10 lacs was added as income of the assessee from undisclosed sources. we find that the allegations and so-called findings of AO serve no purpose as far as assessee is concerned. The AO has observed that 'few layers' had been identified with regard to the source of ₹ 10 lacs received from Toplight Vinimay (P) Ltd. but has not given any details regarding such layers. Further, the AO has failed to prove by bringing on record some cogent evidence that this amount of ₹ 10 lacs had actually been deposited by assessee company directly or indirectly through intermediaries into the account of Toplight Vinimay (P) Ltd. and as such, represented income from undisclosed sources of the assessee. it has successfully proved genuineness and source of loan by furnishing the requisite evidences in the form of IT return and financial statements of Toplight Vinimay (P) Ltd. evidencing receipt of loan for the relevant year and also confirmation of the said party. In view of these facts and circumstances, we confirm the order of CIT(A) deleting the addition and this issue of Revenue's appeal is dismissed.

Issues Involved:
1. Ultra vires nature of Rules 121 and 122-A of the M.P. Rules in relation to Section 15 of the Advocates Act.
2. Implied power of State Bar Councils to enact provisions for removal of office bearers by 'no confidence motions'.
3. Validity of Rules 121 and 122-A of the M.P. Rules for want of prior approval from the Bar Council of India.

Analysis:

Issue 1: Ultra Vires Nature of Rules 121 and 122-A
The primary contention was whether Rules 121 and 122-A of the M.P. Rules were ultra vires Section 15 of the Advocates Act and if the delegation of legislative power under Section 15 was excessive. Section 15 empowers State Bar Councils to frame rules to carry out the purposes of Chapter II of the Advocates Act, which includes the constitution, election, and functions of the Bar Councils. The court held that the power to frame rules under Section 15 should be interpreted broadly to achieve the legislative intent of ensuring democratic functioning within the Bar Councils. The rules for removing office bearers through a 'no confidence motion' were seen as consistent with democratic principles and necessary for the proper functioning of the Bar Councils. Thus, Rules 121 and 122-A were not ultra vires the Advocates Act and did not suffer from excessive delegation.

Issue 2: Implied Power of State Bar Councils
The court examined whether the power to remove office bearers by 'no confidence motions' could be implied under the general clause of Section 15(1). It was held that the State Bar Councils have broad rule-making authority under Section 15(1) to carry out the purposes of Chapter II, which includes maintaining democratic governance within the councils. The ability to remove office bearers through a 'no confidence motion' is an integral part of democratic processes and is supported by the legislative framework of the Advocates Act. Therefore, such power could be read into Section 15(1).

Issue 3: Validity of Rules for Want of Approval
The appellants argued that Rules 121 and 122-A were invalid due to the lack of prior approval from the Bar Council of India. The court noted that the rules had received the necessary approval from the Bar Council of India, as required under Section 15(3) of the Advocates Act. The court also clarified that the issuance of a notification was not a statutory requirement under Section 15(3). Hence, the rules were valid and did not suffer from any procedural irregularity.

Conclusion:
The Supreme Court dismissed the appeals, affirming that:
1. Rules 121 and 122-A of the M.P. Rules are not ultra vires the Advocates Act and do not suffer from excessive delegation.
2. The power to remove office bearers by 'no confidence motions' is implied under Section 15(1) of the Advocates Act.
3. The rules were valid as they had received the necessary approval from the Bar Council of India, and the absence of a notification did not invalidate them.

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