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2009 (9) TMI 991
Issues involved:
The judgment involves issues related to the interpretation of provisions of section 263 of the Income-tax Act, 1961, and the correct computation of deduction u/s 10A of the Act for the assessment year 2004-05.
Interpretation of Section 263:
The appeals arose from orders of the Commissioner of Income Tax (CIT) u/s 263 of the Act, contending that the assessment orders completed u/s 143(3) were erroneous and prejudicial to the revenue's interest due to the non-reduction of certain expenses from the export turnover while calculating deduction u/s 10A.
Computation of Deduction u/s 10A:
The CIT directed the Assessing Officer to reduce professional and consultancy charges and traveling expenses incurred in foreign currency from the export turnover for computing deduction u/s 10A. The CIT held that the failure to make these reductions resulted in an excess deduction u/s 10A.
Arguments and Decision:
The assessee argued that no adjustment was warranted from the export turnover for foreign currency expenses as they were not engaged in providing services outside India. Alternatively, if adjustments were necessary, they should apply to both export turnover and total turnover. The CIT rejected these arguments and held the assessment order as erroneous and prejudicial to revenue.
Judicial Precedents and Rulings:
The Bangalore ITAT referred to various judicial pronouncements, including the case of M/s Sak Soft Ltd., to support the exclusion of foreign currency expenses from both export turnover and total turnover for computing deductions u/s 10A. The Tribunal also cited decisions like Tata Elxsi Limited and others, emphasizing the need for consistent standards in such computations.
Decision and Conclusion:
In light of the legal precedents and consistent interpretations, the ITAT allowed the appeals partially, directing that the expenses incurred in foreign currency be reduced from both export turnover and total turnover for uniformity in computing the deduction u/s 10A of the Act.
Conclusion:
The ITAT's decision on the appeals highlighted the importance of consistent application of legal principles in interpreting tax provisions, ensuring uniformity in computing deductions for taxpayers.
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2009 (9) TMI 990
Issues involved:
The judgment involves a common issue regarding the claim of deduction u/s.10B of the Income-tax Act, 1961.
Details of the Judgment:
Issue 1: Claim of Deduction u/s.10B
- The cross appeals by the assessee and the Revenue arose from a common order of the Commissioner of Income-tax (Appeals)-VIII, Ahmedabad.
- The assessment for the year 2003-04 was framed by the Income-tax Officer, Ward-4(1), Ahmedabad u/s.143(3) of the Income-tax Act, 1961.
- The assessee contended that second-hand library books purchased from a sister company were not considered "plant" u/s.43(3) of the Act for the purpose of claiming exemption u/s.10B.
- The Revenue challenged the direction to allow eligible deduction u/s.80HHC in view of the denial of the claim u/s.10B.
- The Tribunal considered the distinct nature of the appellant's business from that of the sister concerns engaged in computer training, emphasizing the eligibility for deduction based on the formation of a new unit not constituted by the transfer of old machinery.
- Relying on precedents and the Supreme Court's decision, the Tribunal upheld the claim of the assessee on merits, emphasizing that once the deduction is allowed in the initial year, it cannot be denied in subsequent years on the same ground.
- The Department Representative acknowledged that the deduction was allowed in the earlier year, leading to the Tribunal's decision to dismiss the Revenue's appeal and allow the assessee's appeal.
Conclusion:
The Tribunal ruled in favor of the assessee, highlighting the eligibility for deduction u/s.10B based on the distinct nature of the business and the formation of a new unit not involving the transfer of old machinery. The decision was supported by legal precedents and the principle that once a deduction is allowed in the first year, it cannot be denied in subsequent years.
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2009 (9) TMI 989
Consultancy charges paid to Non-Executive Director of the company - As per AO payment was made just to avoid the tax liability and for non-business purposes - Tribunal came to the conclusion that payment was, in fact, made Non executive director for obtaining the consultancy services in the field of Review of Annual Accounts, Audit Review and Review of Internal Controls, etc. Even the applicable Tax at Source was deducted and paid by the company and also accepted the contention of the assessee that corporate governance and related disclosures were made mandatory by the SEBI Guidelines in the year 2001 and for this reason it was thought expedient by the company to avail the services of Mr. Mirza’s expertise in this behalf - HELD THAT:- We are of the opinion that the aforesaid finding of fact is based on cogent material and it cannot be termed as perverse nor such an attempt is made by the learned counsel for the Revenue. Since it is a pure finding of fact arrived at by the Tribunal that consultancy charges were paid by the assessee to Mr. Mirza[Non-Executive Director] against actual services rendered, we are of the opinion that no question of law in this regard arises.
Payment for Advisory services in regulatory compliance - Classification of expenditure - According to the assessee, the payment was made as a normal business activity for the aforesaid purpose in order to maintain good and cordial relationship with the shareholders and, at the same time, safeguarding the interests of the existing shareholders - as per AO expenses were incurred for the buyback of the shares, which is directly related to the capital of the assessee. Therefore, he treated it as capital expenditure - Tribunal differed with the Assessing Officer and CIT(A) holding that the expenditure in question was not in relation with the share capital of the assessee-company - HELD THAT:- As decided in EMPIRE JUTE COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [1980 (5) TMI 1 - SUPREME COURT] When the expense incurred relates to the issue of fresh shares, which leads to an inflow of fresh funds into the company, such expenditure is to be treated as capital expenditure and where no such flow of funds or increase in the capital employed, the expenditure incurred would be revenue expenditure, as in such a case the company would not acquire benefit or addition of enduring nature.
In the present case, consultancy fee for advisory services was paid by the assessee-company for buyback of shares. Instead of increase in the share capital, it was going to result in the decrease in funds with the buyback of the shares. In these circumstances, the Tribunal rightly held that the assessee had not acquired the benefit or addition of enduring nature because after the buyback, benefit or addition of enduring nature would not arise as capital employed had, in fact, gone down. The expenditure incurred had not resulted into bringing into existence any asset. Therefore, it was rightly held to be an expense of revenue nature.. The contention of learned counsel for the Revenue that with lesser capital dividend in future payable shall be less and, therefore, it shall be treated as a benefit of enduring nature cannot be accepted.
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2009 (9) TMI 988
Issues involved: The judgment involves the deletion of interest expenditure by the Commissioner of Income Tax(Appeals) in various Assessment Years and the addition made by the Assessing Officer on account of unexplained cash seized from Mumbai Central Railway Station.
Deletion of Interest Expenditure:
In the Assessment Years 2001-02 to 2005-06, the Revenue appealed against the deletion of interest expenditure totaling different amounts in each year. The Assessing Officer disallowed the interest claimed by the assessee due to substantial cash in hand not used for business purposes. The Commissioner of Income Tax(Appeals) held that the cash balance was necessary for the business of transporting parcels and cash, ensuring timely deliveries under unforeseen circumstances. The Commissioner found the disallowance unjustified as the cash balance was maintained for business purposes, and the borrowed funds were utilized for business, deleting the disallowance under section 36(1)(iii) of the Income Tax Act.
Addition of Unexplained Cash:
Regarding the addition of unexplained cash seized from Mumbai Central Railway Station, the Assessing Officer added Rs. 20 lakhs to the income of the assessee, questioning the transfer of cash between branches. The Commissioner of Income Tax(Appeals) overturned this addition, noting that the cash belonged to the Mumbai branch, was being transferred to the Ahmedabad branch, and was supported by evidence and entries in the Mumbai branch's books. The Commissioner held that the decision to transfer cash between branches was the prerogative of the assessee, and there was no requirement to transfer only to the head office. The addition was deleted as the cash was part of the accumulated balance and no defects were found in the Mumbai branch's accounts.
Conclusion:
The Appellate Tribunal upheld the decisions of the Commissioner of Income Tax(Appeals) in both issues, dismissing the appeals filed by the Revenue. The judgment emphasized the business necessity of maintaining cash balances for timely operations and the prerogative of the assessee in managing inter-branch cash transfers.
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2009 (9) TMI 987
The High Court of Gujarat admitted the appeal and issued notice to the respondent on the substantial question of law regarding the treatment of intercorporate deposits under the Interest Tax Act, 1994. The case will be heard along with other tax appeals.
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2009 (9) TMI 986
The Allahabad High Court directed the standing counsel to file a counter affidavit within four weeks and allowed for a rejoinder affidavit to be filed within three weeks in connection with Writ Petition No.1792 of 2009. The petitioner raised concerns about conflicting judgments of the court and sought resolution. As an interim measure, penalty proceedings against the petitioner were put on hold following a notice dated 6th August, 2009.
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2009 (9) TMI 985
Issues involved: Challenge to rejection of refund claim for TDS amount deducted from compensation awarded for land acquisition u/s 194-A of the Income-tax Act, 1961.
Summary:
The petition challenged the rejection of the refund claim for Tax Deducted at Source (TDS) amount deducted from the compensation awarded for land acquisition. The petitioners sought refund of the TDS amount along with interest, which was deducted from the compensation awarded to them. The respondents contended that TDS was deducted in accordance with Section 194A of the Income-tax Act, and TDS certificates were issued to those who filed representations.
The court noted that TDS could be deducted from the interest realized from enhanced compensation as per Section 194A of the Act. Referring to a previous case, it was established that interest received on delayed payment of compensation is considered a revenue receipt liable to tax under the Income Tax Act. The Supreme Court's rulings emphasized that interest on delayed payment of compensation is a revenue receipt and thus taxable. Therefore, TDS under Section 194A of the Act is applicable to interest income on delayed payments.
The court rejected the argument that interest income should be treated as agricultural income, stating that once interest is considered a revenue receipt, it falls under the charging section of the Act. Consequently, the petition was dismissed based on the precedent set in a previous judgment. The court found that the issues raised in the petition were already addressed in the earlier case, leading to the dismissal of the current petition.
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2009 (9) TMI 984
Issues involved: Appeal by revenue u/s 260A of Income-tax Act regarding treatment of provisions for non-performing assets/doubtful debts/advances in computation of book profits u/s 115JA.
Summary:
1. The dispute in this case revolves around the computation of book profits of the assessee company for the assessment year 1999-2000 as per section 115JA of the Income-tax Act, 1961.
2. The revenue contended that provisions made for bad and doubtful debts should be added back to the book profits, while the assessee argued against it.
3. The Assessing Officer disagreed with the assessee, but the Commissioner (Appeals) and the Income-tax Appellate Tribunal ruled in favor of the assessee.
4. The revenue appealed, citing a legislative amendment introduced by the Finance (No. 2) Act, 2009, which added clause (g) to the Explanation of section 115JA, allowing for provisions for diminution in the value of any asset to be added back to book profits.
5. The court held that the amended provision applies to the case, as it covers situations where provisions are made for future diminution in asset value, even if not actually carried out.
6. The court emphasized the distinction between setting aside an amount and making a provision for future write-offs, ruling in favor of the revenue based on the new legislative amendment.
7. The appeal by the revenue was allowed, setting aside the Tribunal's order and upholding the assessing authority's view based on the new clause (g) of the Explanation to section 115JA.
8. The assessee's request for reserving liberty to claim benefit of a Supreme Court judgment in case the new provision is found invalid was declined by the court, citing speculative nature of the request.
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2009 (9) TMI 983
Issues Involved:1. Deletion of addition made on account of suppressed production of mung dal. Summary:Issue 1: Deletion of addition made on account of suppressed production of mung dalThe Revenue appealed against the CIT(A)-VII, Ahmedabad's order dated 07-12-2005 for the assessment year 2002-03, challenging the deletion of an addition of Rs. 11,75,658/- made on account of suppressed production of mung dal. The facts of the case reveal that a survey operation u/s 133A of the Income Tax Act, 1961, was conducted on 04-02-2002, uncovering discrepancies in stock and cash. The AO noticed a discrepancy in the percentage of chuni and wastage, which was 8% of the total consumption, whereas the assessee had shown it as 11.44%. The AO issued a show cause notice and an exhaustive questionnaire to the assessee, who provided a detailed reply explaining the actual production and wastage percentages. The assessee contended that the real waste was 3.9%, not 8%, as the fotri (kurma or chuni) was sold in the open market and credited in the books of accounts. The assessee maintained day-to-day quantity details, periodically inspected by the civil supplies department, and certified by auditors. The AO, however, did not accept the assessee's explanation and made an addition of Rs. 11,75,658/-. On appeal, the CIT(A) deleted the addition, observing that the AO's methodology was flawed. The CIT(A) noted that the AO did not deduct the weight of bardan and shortage in weight while working out the actual yield. The CIT(A) also referenced a similar case involving M/s. Jai Pulse Mills, where a proper wastage allowance of 9.5% was accepted, resulting in a yield of 90.5%. The CIT(A) found that the yield for the year actually worked out to 90.88%, supporting the assessee's case. The Tribunal upheld the CIT(A)'s order, agreeing that the AO's basis was incorrect and that the CIT(A) had passed a well-reasoned order after appreciating the facts and evidence. The Tribunal noted that in previous assessment years (1999-2000 and 2000-01), similar additions were deleted by the CIT(A), and the Revenue did not challenge those orders before the Tribunal. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order and finding no valid ground for interference. The order was pronounced in the open court on 25-09-09.
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2009 (9) TMI 982
Issues Involved:
1. Disallowance of interest and lease rent.
2. Disallowance of PF contribution made after due dates.
3. Inclusion of excise duty in the value of closing stock.
4. Treatment of expenditure on installation/replacement/re-membraning in membrane cell plants.
5. Disallowance of contributions to GACL Employees' Welfare Trust and GACL Benevolent Fund.
Summary:
1. Disallowance of Interest and Lease Rent:
The AO disallowed the claim for deduction of interest and lease rent, asserting that the borrowings were utilized for new projects which had not commenced commercial production. The CIT(A) allowed the claim, relying on previous ITAT orders. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in DCIT v. Core Health Care Ltd., which clarified that interest on borrowings for business purposes is deductible u/s 36(1)(iii) regardless of whether the borrowed capital is used to acquire a revenue or capital asset.
2. Disallowance of PF Contribution Made After Due Dates:
The AO disallowed Rs. 1,78,722 for employees' contribution deposited after the due date. The CIT(A) upheld the disallowance. However, the Tribunal allowed the assessee's appeal, noting that the payment was made within the grace period permitted under the relevant enactment, referencing CIT v. Salem Co-operative Spinning Mills Ltd.
3. Inclusion of Excise Duty in the Value of Closing Stock:
The assessee contested the inclusion of excise duty in the closing stock valuation. The CIT(A) directed the AO to verify the payment of excise duty and allow deduction u/s 43B. The Tribunal dismissed the assessee's ground but directed the AO to consider the deduction u/s 43B in accordance with the law.
4. Treatment of Expenditure on Installation/Replacement/Re-membraning in Membrane Cell Plants:
The AO treated the expenditure as capital in nature, allowing depreciation. The CIT(A) upheld this view. The Tribunal, however, allowed the assessee's appeal, emphasizing the principle of consistency, as similar claims were treated as revenue expenditure in earlier years without any change in facts or circumstances.
5. Disallowance of Contributions to GACL Employees' Welfare Trust and GACL Benevolent Fund:
The AO disallowed the contributions, and the CIT(A) upheld the disallowance due to the lack of factual data. The Tribunal also upheld the disallowance, noting that the assessee failed to provide necessary details or submissions regarding the applicability of sec. 40A(9) and 40A(10).
Conclusion:
The appeal of the Revenue was dismissed, while the appeals of the assessee were partly allowed. The Tribunal upheld the CIT(A)'s findings on interest and lease rent, PF contributions, and excise duty inclusion but reversed the decision on the treatment of membrane cell expenditure, emphasizing consistency. The disallowance of contributions to welfare funds was upheld due to insufficient evidence.
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2009 (9) TMI 981
Issues involved: Disallowance of transport charges u/s 40(a)(ia) and disallowance of interest paid on deposits u/s 40(a)(ia).
Issue 1: Disallowance of transport charges u/s 40(a)(ia)
The Appellate Tribunal ITAT Ahmedabad addressed the disallowance of transport charges amounting to Rs. 1,72,200 paid by the assessee for the assessment year 2005-2006. The Assessing Officer disallowed the transport charges invoking section 40(a)(ia) of the Income Tax Act, stating that tax was not deducted at source as required by section 194C. The assessee contended that there was no transport contract between them and the transporters, as the transporters were engaged by agents in Calcutta. The Tribunal examined the bills and found no evidence of a transport contract between the assessee and the transporters. Referring to Circular No.715 and precedents, the Tribunal held that the assessee was not liable to deduct tax under section 194C, and thus section 40(a)(ia) did not apply. Consequently, the disallowed transport charges were directed to be allowed.
Issue 2: Disallowance of interest on deposits u/s 40(a)(ia)
The second issue pertained to the disallowance of interest amounting to Rs. 1,09,165 paid on deposits made by an individual, Jitendra R. Patel. The Assessing Officer disallowed the interest payment under section 40(a)(ia) for failure to deduct tax as required by section 194A. The assessee argued that Jitendra Patel, a partner in the firm, received the interest in his individual capacity, not as a representative of the Hindu Undivided Family (HUF). However, the Tribunal upheld the disallowance, stating that any interest payable to a resident must have tax deducted as per section 194A for it to be allowed as a deduction. Since the tax was not deducted, the interest payment could not be claimed as a deduction. The Tribunal found no provision exempting the interest payment from tax deduction and upheld the decision of the income tax authorities.
The appeal of the assessee was partly allowed by the Appellate Tribunal ITAT Ahmedabad, with the disallowance of transport charges under section 40(a)(ia) being overturned, while the disallowance of interest on deposits under the same section was upheld.
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2009 (9) TMI 980
Issues involved: Appeal against disallowance under section 40(a)(ia) and treatment of income from other sources instead of business income for deduction under section 80IB.
Issue 1: Disallowance under section 40(a)(ia)
The assessee, engaged in manufacturing, claimed deductions for transport, security charges, and commission expenses. The Assessing Officer disallowed these deductions under section 40(a)(ia) due to delayed TDS deposit and non-deposit of TDS on commission expenses. The Commissioner of Income Tax(Appeals) upheld the disallowance, stating that allowing deduction under section 80IB would result in double benefit for the assessee. The Authorized Representative argued that disallowance increased eligible profits for deduction under section 80IB. The Tribunal found that disallowance of business expenditure led to an increase in eligible unit profits, making the assessee eligible for deduction under section 80IB. The fear of double deduction expressed by the Commissioner was deemed unfounded, and the Tribunal directed the Assessing Officer to allow deduction under section 80IB for the entire profit derived from the industrial undertaking, considering the provisions under section 40(a)(ia).
Key Takeaways:
- Disallowance under section 40(a)(ia) due to delayed TDS deposit.
- Commissioner's concern of double deduction deemed unfounded.
- Tribunal directed Assessing Officer to allow deduction under section 80IB for entire profit derived from industrial undertaking.
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2009 (9) TMI 979
... ...
... ... ..... condoned. The Civil Appeals are dismissed.
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2009 (9) TMI 978
The Delhi High Court ruled that donations received by a Charitable Organisation for its corpus are considered capital receipt and not taxable. The trust used the donations to acquire land for building a college. The court upheld the decision of the CIT(A) and ITAT, stating no legal question arises.
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2009 (9) TMI 977
... ...
... ... ..... elay condoned. The appeal is admitted for hearing.
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2009 (9) TMI 976
Issues involved: Addition of unverified creditors and denial of deduction u/s 80HHC.
Summary:
Issue 1: Addition of unverified creditors
The appeal arose from the CIT(A)'s decision to uphold the addition of Rs. 14,89,000 made by the Assessing Officer concerning unverified creditors and the denial of deduction u/s 80HHC. The original assessment was conducted u/s 143(1), followed by a notice u/s 148. The Assessing Officer requested confirmatory letters from the sundry creditors, which the assessee failed to provide. Consequently, the Assessing Officer added Rs. 14.89,000 to the accounts of three creditors due to lack of verifiable information. The assessee contended that the Assessing Officer did not act on the request to issue summons u/s 131 or call for information u/s 133(vi) of the Act. The CIT(A) directed the Assessing Officer to do so, but the notices u/s 133(vi) came back with observations that the creditors did not exist at the provided addresses. The counsel for the assessee argued that the transactions were related to export activities and due to the time gap, notices could not be served at the available addresses. However, no satisfactory explanation was provided regarding the outstanding balances with the creditors. The Tribunal noted that the impugned addition was specific to the year under consideration and that the outstanding balances with the creditors were significant, indicating ongoing transactions. As the assessee failed to provide evidence that the goods purchased were used in the export business, the claim for deduction u/s 80HHC was rejected. Consequently, the appeal was dismissed.
Issue 2: Denial of deduction u/s 80HHC
The assessee's claim for deduction u/s 80HHC was denied due to the failure to substantiate that the goods purchased from the creditors were utilized in the export business. The Tribunal found that without such evidence, the claim for deduction could not be accepted. Therefore, in light of the facts and circumstances, both grounds of the assessee were rejected, leading to the dismissal of the appeal.
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2009 (9) TMI 975
Bail application - seizure of Maruti Zen Car carrying a huge quantity of contraband i.e. 22.855 kg of heroin - It is alleged that the recovered contraband were supplied by the present petitioner to the co-accused persons - Held that: - it does appear that the petitioner was not in conscious possession of the said contraband. therefore, I am satisfied that there are reasonable grounds for believing that the petitioner is not guilty of the offences for which he has been charged. As regards the question as to whether he is likely to commit any offence while on bail, no circumstance has been brought to my notice which would indicate that there is such a likelihood. It is also not the case of the State that the petitioner has been involved in any other NDPS related cases. In this view of the matter, the petitioner is directed to be released on bail on furnishing a personal bond in the sum of ₹ 50,000/- with two sureties of the like amount to the satisfaction of the concerned trial court - the petitioner be released on bail on his furnishing bail bond in the sum of ₹ 1 lakh - petition allowed - decided partly in favor of petitioner.
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2009 (9) TMI 974
Whether in the facts and circumstances of the case and in law the CESTAT is right in dismissing the appeal of revenue and holding that no redemption fine can be imposed and penalty levied when the goods are physically not available for confiscation?
Held that: - as the goods are not available for confiscation no redumption fine can be imposed - In so far as penalty is concerned, the Commissioner of Customs reduced the penalty from ₹ 60,000/to ₹ 5,000/- - appeal dismissed - decided against appellant.
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2009 (9) TMI 973
Issues Involved:
1. Deletion of addition on account of accrued interest on investments in FDRs.
2. Deletion of addition on account of cash seized by police.
3. Deletion of addition on account of unexplained investment in CDs and instruments.
4. Deletion of addition on account of unexplained investment in diamonds.
Detailed Analysis:
1. Deletion of addition on account of accrued interest on investments in FDRs:
The issue pertains to the addition made by the AO on account of accrued interest on investments in Fixed Deposit Receipts (FDRs) for the assessment years 2001-02 to 2006-07. The AO argued that the interest should be taxed on an accrual basis under the mercantile system of accounting, despite the assessees consistently following the cash system of accounting. The CIT(A) deleted the addition, noting that the assessees had regularly employed the cash system for all sources of income, which had been accepted by the department in previous years. The CIT(A) emphasized that the choice of the accounting method lies with the assessee, as long as it is consistently followed. The Tribunal upheld the CIT(A)'s decision, referencing judicial precedents that support the assessee's right to choose their method of accounting.
2. Deletion of addition on account of cash seized by police:
The AO added the seized cash of Rs. 5,79,000/- to the income of the assessees, rejecting their claim that the cash belonged to Modheshwari (Matangi) Devsthan Trust, a charitable trust. The CIT(A) deleted the addition, accepting the assessees' explanation supported by documentary evidence, including the trust's audited accounts and tax returns. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide sufficient evidence to disprove the assessees' claim and that the explanation was consistent with the trust's financial records.
3. Deletion of addition on account of unexplained investment in CDs and instruments:
The AO added Rs. 83,368/- each to the income of the assessees, claiming that the CDs and instruments found during the police search were unexplained investments. The assessees contended that the CDs belonged to the trust and provided supporting evidence, including the trust's books of accounts. The CIT(A) deleted the addition, finding that the AO had not adequately considered the documentary evidence provided by the assessees. The Tribunal agreed with the CIT(A), emphasizing that the AO's decision was based on suspicion rather than concrete evidence.
4. Deletion of addition on account of unexplained investment in diamonds:
The AO added Rs. 13,500/- each to the income of the assessees, citing a discrepancy in the valuation of diamonds found during the police search. The assessees argued that the difference was due to varying valuation dates and methods. The CIT(A) deleted the addition, noting that the valuation differences were minor and that the AO had accepted the assessees' books of accounts for other purposes. The Tribunal upheld the CIT(A)'s decision, agreeing that the valuation discrepancy was an honest difference of opinion and that the AO should have accepted the assessees' recorded cost of acquisition.
Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT(A)'s decisions on all issues. The Tribunal emphasized the importance of consistency in the method of accounting and the need for concrete evidence to support any additions made by the AO.
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2009 (9) TMI 972
Bogus share transactions - transaction is off-market - AO has doubted the purchase of shares by the assessee mainly because of the report received from the ADIT (Inv.), Kolkotta, that the transaction of purchase of shares by the assessee is an off-market transaction as no evidence could be found from the Calcutta Stock Exchange - CIT(A) deleted the addition - HELD THAT:- As regards the purchase of shares from off market, the assessee has placed reliance upon the decision of Mukesh R. Marolia [2005 (12) TMI 457 - ITAT MUMBAI] wherein it has been held that the purchase and sale of shares outside floor of stock exchange is not an unlawful activity and the off-market transactions are not illegal.
As regards the AO’s observation that there is exorbitant rise in the sale price of the shares which created a doubt about the genuineness of the transaction, the assessee has placed reliance upon the decision of Smt. Memo Devi [2008 (3) TMI 689 - ITAT AGRA] wherein it has been held that increase in share price by more than 25 times cannot be the basis to assume that the transaction was bogus as abnormal increase in the share price is a normal phenomena. As decided in the case of ITO vs. Smt. Kusumlata [2006 (8) TMI 266 - ITAT JODHPUR] wherein it has been held that for making an addition u/s 69, the Department is required to prove to the hilt that the impugned transactions are bogus.
Transactions of sale being accepted as genuine in the AY 2003-04 but the same being disallowed by the AO in the year 2004-05, the learned counsel for the assessee placed reliance upon the decision of ‘F’ Bench of the Delhi Tribunal in the case of ITO vs. Smt. Neelam Chawla [2007 (12) TMI 477 - ITAT DELHI] wherein it has been held that after the assessee furnished proof for purchase, sale, registration of shares in her name duly supported by market quotations etc. and AO ignored the same on the basis of the statement of the share broker through whom the assessee has sold the shares, the purchase of shares made in earlier years cannot be doubted.
We find that the CIT(A) has considered the factual matrix of the case in detail and the propositions of the assessee are supported by the legal precedents cited supra. Revenue’s appeal is dismissed.
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