2004 (11) TMI 298 - AT - Income Tax

Summary

Issues:
1. Second appeal filed by the Department for tax effect less than Rs. 1 lakh.
2. Charging of interest under section 113 in three appeals.
3. Disallowance under section 40A(3) in IT(SS)A No. 45/Jp/2004.
4. Relief on account of set off in IT(SS)A No. 46/Jp/2004.
5. Relief of Rs. 1,07,687 in IT(SS)A No. 47/Jp/2004.
6. Charging of interest under section 220(2) r/w section 140A of the IT Act in cross-objections.

Issue 1:
The Department filed second appeals for tax effect less than Rs. 1 lakh, contrary to CBDT circular guidelines. The Tribunal emphasized the binding nature of CBDT instructions and cited relevant case law to support the decision, highlighting the importance of adhering to established policies to avoid wasting time on trivial matters.

Issue 2:
In all three appeals, the Department raised concerns regarding the charging of interest under section 113. However, the Tribunal noted that the amendment to section 113 was not retrospective, making it inapplicable to the cases in question based on a CBDT circular. The Tribunal referred to similar cases and concluded that surcharge was not leviable, thereby dismissing the appeals on this ground.

Issue 3:
Regarding disallowance under section 40A(3) in IT(SS)A No. 45/Jp/2004, the AO disallowed a portion of expenditure without proper discussion. The CIT(A) deleted the disallowance following established case law principles, leading the Tribunal to uphold the CIT(A)'s decision due to no infirmity found in the order.

Issue 4:
In IT(SS)A No. 46/Jp/2004, the AO added an amount as unexplained investment, which the CIT(A) later set off against unaccounted profit from sales. The Tribunal found the set off reasonable and upheld the CIT(A)'s decision based on the facts and circumstances of the case.

Issue 5:
In IT(SS)A No. 47/Jp/2004, a similar set off was granted by the CIT(A) regarding unexplained investment, which the Tribunal deemed reasonable, leading to the dismissal of the Departmental appeal and cross-objection on this ground.

Issue 6:
The cross-objections raised the issue of charging interest under section 220(2) r/w section 140A of the IT Act. The Tribunal analyzed the legal requirements for charging interest and found that in the absence of a notice under section 156 and default by the assessee, interest should not be levied. The Tribunal directed not to charge interest and allowed the ground in favor of the assessee in all three appeals.

In conclusion, the Tribunal dismissed the Department's appeals while partly allowing the cross-objections based on detailed analysis and application of relevant legal principles to each issue raised in the judgment.