1998 (9) TMI 128 - AT - Income Tax

Summary

Issues Involved:
1. Sales tax penalty
2. Deduction of Rs. 3,67,723
3. Joint venture loss of Rs. 43,42,232
4. Initiation of penalty u/s 221
5. Deduction u/s 32AB

Summary:

Sales Tax Penalty:
The Commissioner set aside the assessment due to the non-inclusion of sales tax penalty of Rs. 6,83,304 in the total income, which was erroneously not increased by the Assessing Officer despite the assessee's request. The Tribunal upheld the Commissioner's decision, stating that the assessment was erroneous and prejudicial to the interests of revenue.

Deduction of Rs. 3,67,723:
The Tribunal found that the Assessing Officer allowed the deduction of Rs. 3,67,723 being loss on remittance of foreign loan instalments without proper enquiry. The communication from Dalamal & Sons (London) Ltd. indicated that the increased liability was due to exchange rate fluctuations, necessitating adjustment under section 43A. The Tribunal upheld the Commissioner's revisionary jurisdiction on this issue, citing failure to make necessary enquiries.

Joint Venture Loss of Rs. 43,42,232:
The Tribunal held that the Assessing Officer had made pointed queries and adopted the share of the assessee's loss in joint ventures after due application of mind. The Tribunal found no error in the assessment on this issue and vacated the Commissioner's order, stating that the assessment was not erroneous.

Initiation of Penalty u/s 221:
The Tribunal stated that initiation of penalty proceedings u/s 221 is not mandatory during the course of assessment proceedings. The assessment order cannot be deemed erroneous for non-initiation of penalty under section 221. The Tribunal vacated the Commissioner's order on this issue, declaring it without jurisdiction.

Deduction u/s 32AB:
The Tribunal noted that the Assessing Officer did not address the eligibility of profit on sale of fixed assets for deduction u/s 32AB, focusing instead on the assessee's claim of deduction before adjustment of joint venture losses. The Tribunal upheld the Commissioner's revisionary powers on this issue, acknowledging the debate over the eligibility of such profit under the amended provisions.

Conclusion:
The appeal was decided with the Tribunal upholding the Commissioner's revisionary powers on the issues of sales tax penalty, deduction of Rs. 3,67,723, and deduction u/s 32AB, while vacating the Commissioner's order on the issues of joint venture loss and initiation of penalty u/s 221.