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2011 (1) TMI 1367
Revision u/s 263 - no evidence that any inquiry was conducted in respect of creditors and sundry creditors and the truthfulness of the confirmation letter was accepted without demur - case selected for scrutiny in order to verify low gross profit, high sundry creditors, advances and fresh loans - HELD THAT:- In the case of Rampyari Devi Saraogi, [1967 (5) TMI 10 - SUPREME COURT] came to the conclusion that non-verification of initial capital, gifts, sale of ornaments and profits from business lead to an assessment, which is erroneous and prejudicial to the interest of revenue. To our mind, the ratio of this case is applicable to the facts of case at hand.
In the case of Gee Vee Enterprises [1974 (10) TMI 29 - DELHI HIGH COURT] clearly mentioned that the Assessing Officer cannot remain passive in the face of the return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances are such as to provoke an inquiry.
Looking to the reasons for taking up the case for scrutiny, it was incumbent on the Assessing Officer to make inquiries into genuineness of book profits and credits. Nothing like that has been done.
Relying on the decision in the case of Gee Vee Enterprises, the order of the CIT was upheld. The facts of our case are in pari-materia with the facts of our case on this point. On consideration of these cases, we are of the view that the learned CIT was right in exercised her revisionery jurisdiction. Appeal is dismissed.
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2011 (1) TMI 1366
Issues involved: Challenge against the levy of penalty u/s 271C of the Income Tax Act, 1961 for non-deduction of tax at source.
Summary:
Issue 1: Assessment of Penalty under Section 271C
The appellant, a trust, paid godown rent without deducting tax at source to a family trust. The appellant believed that as the property was jointly held by co-owners, the share of payment to each beneficiary did not exceed the maximum amount under Section 194(I) of the IT Act, hence no TDS was deducted. The AO imposed penalty for non-deduction of TDS, which was upheld by the CIT(A). The appellant contended that there was no conscious disregard for the law and that taxes were already paid by the payee. The ITAT considered the provisions of Section 273B, emphasizing the requirement of "reasonable cause" for failure to deduct TDS. Citing relevant case laws, the ITAT held that the appellant had a reasonable cause for non-compliance as the taxes were paid by the payee and interest under Section 201(1A) was also paid. The ITAT concluded that there was no loss to the Revenue and canceled the penalty, ruling in favor of the appellant.
Decision:
The ITAT set aside the orders of the authorities below and canceled the penalty u/s 271C, as the appellant had a reasonable cause for failure to comply with the TDS provisions. The appeal of the assessee was allowed.
This summary provides a detailed overview of the legal judgment, highlighting the key issues, arguments, and the final decision made by the ITAT.
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2011 (1) TMI 1365
Issues involved: Department's appeal against deletion of addition on account of purchases from Nirav Traders and deletion of addition on labour payments; assessee's cross-objection against confirmation of addition of 10% of purchase from Nirav Traders; Department's appeal against deletion of penalty under Section 271(1)(c) of the Act.
Issue 1: Deletion of addition on account of purchases from Nirav Traders
The Department's appeal challenged the deletion of addition of Rs. 6,48,000 out of disallowance of Rs. 7,20,000 on purchases from Nirav Traders. The assessee's cross-objection contested the confirmation of addition of 10% of the purchase from the same party. The Tribunal had earlier set aside the CIT(A)'s order for reconsideration. The AO disallowed the purchase citing non-availability of the party and discrepancies in contact details. However, the CIT(A) accepted the genuineness of the purchases, noting payments through account payee cheques and reasonable purchase rates. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of evidence of funds returning to the assessee and the consistency of purchase rates with other traders. The Department's appeal and the assessee's cross-objection were dismissed.
Issue 2: Deletion of addition on labour payments
In the Department's appeal, the deletion of addition of Rs. 6,80,030 on labour payments was contested. The AO disallowed the payments due to non-compliance by certain parties. The CIT(A) found the transactions genuine based on detailed evidence provided by the assessee, including bank account statements and payment details. The Tribunal upheld the CIT(A)'s decision, noting the genuineness of transactions and payments through banking channels. No adverse material against the assessee warranted interference. Therefore, the Department's appeal on this issue was dismissed.
Issue 3: Deletion of penalty under Section 271(1)(c) of the Act
The Department challenged the deletion of penalty under Section 271(1)(c) based on the additions discussed in the appeals. The CIT(A) had cancelled the penalty considering the genuineness of transactions and deletions of additions. The Tribunal upheld the CIT(A)'s decision, stating that the additions did not indicate concealment of income or inaccurate particulars. Therefore, the penalty was cancelled. Consequently, the Department's appeals and the assessee's cross-objection were dismissed.
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2011 (1) TMI 1364
Issues involved:
The issues involved in this case are jurisdictional errors in assessment under section 144, validity of notices u/s 142(1)/143(2), breach of principles of natural justice, determination of short term capital gains on transfer of property, and incorrect valuation under section 50C.
Assessment under section 144:
The appellant, an individual with income below the taxable limit, had not filed a return of income for the relevant year. The assessment order u/s. 144 was passed by the ITO (HQ)(CIB), Pune, which the appellant challenged on grounds of incorrect name in the order and lack of proper jurisdiction. The appellant contended that the order was invalid due to the incorrect name and lack of territorial jurisdiction, breaching principles of natural justice. The appellant's submissions were not adequately considered, leading to a flawed assessment order.
Determination of short term capital gains:
The appellant, along with co-owners, received a plot of land as additional compensation, which was later transferred to M/s. Saraswati Developers. The CIT(A) held that the transfer of development rights resulted in short term capital gains, computed based on the full value of consideration and cost of acquisition. The appellant's share of the gains was determined, and the addition made by the AO was restricted accordingly. The CIT(A) decision was based on the lease agreement and development rights transfer, leading to the computation of short term capital gains for the appellant.
Jurisdictional errors and validity of notices:
The appellant raised jurisdictional issues regarding the assessment framed in the incorrect name and lack of valid notices u/s. 142(1)/143(2). The appellant cited relevant case laws emphasizing the importance of valid notices and jurisdiction based on correct information. It was highlighted that the AO's jurisdiction depends on the issuance of valid notices, and the absence of proper notices rendered the proceedings null and void. Additionally, the failure to issue a valid notice u/s. 143(2) further undermined the assessment process.
Incorrect valuation under section 50C:
The appellant contended that the valuation under section 50C was incorrect as no opportunity was provided to challenge it. Referring to a specific case law, the appellant argued that the matter should have been referred to a Valuation Officer when objections were raised regarding the valuation. The substitution of actual sale consideration by stamp duty valuation without allowing the appellant to dispute it rendered the AO's order legally flawed. The appellant's argument highlighted the importance of providing opportunities to challenge valuations under section 50C.
Conclusion:
The appellate tribunal allowed the appellant's appeal, considering the jurisdictional errors, lack of valid notices, incorrect determination of short term capital gains, and flawed valuation under section 50C. The decision emphasized the importance of procedural fairness, correct jurisdiction, and accurate valuation in assessment proceedings. The appellant's contentions regarding jurisdictional issues, valuation discrepancies, and procedural lapses were upheld, leading to the allowance of the appeal.
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2011 (1) TMI 1363
Issues Involved:1. Deletion of addition u/s 68 of the IT Act on account of unexplained share capital. Summary:Issue 1: Deletion of Addition u/s 68 of the IT Act on Account of Unexplained Share CapitalThe only ground raised by the revenue in this appeal is that the CIT(A) erred in deleting the addition of Rs. 31,80,000/- u/s 68 of the IT Act on account of unexplained share capital. In the assessment made u/s 143(3), the Assessing Officer (AO) added Rs. 31,80,000/- as unexplained share capital. The assessee had received share application money amounting to Rs. 54,80,000/- from 10 parties, out of which Rs. 23,00,000/- was accepted as genuine by the AO, and the balance Rs. 31,80,000/- was treated as unexplained income. The AO issued notices u/s 133(6) to all share applicants, but some notices were either not responded to or returned undelivered. The assessee provided all requisite details, including confirmations, income tax returns, PAN, and bank statements of the share applicants. The CIT(A) deleted the addition, noting that the assessee had submitted sufficient evidence to prove the identity and creditworthiness of the share applicants, and the transactions were through banking channels. The CIT(A) observed that the mere non-availability of share applicants at given addresses does not justify treating the share capital as undisclosed income. The CIT(A) relied on various judicial precedents, including CIT vs. Lovely Exports (P) Ltd., which held that if the share application money is received from alleged bogus shareholders whose names are given to the AO, the Department is free to proceed against them individually. The Tribunal upheld the CIT(A)'s order, emphasizing that the initial burden of proof lies on the assessee to prove the identity of the share applicants by furnishing their PAN or income tax assessment number and showing the genuineness of the transaction. Once this is done, the onus shifts to the Revenue. The Tribunal noted that the AO did not bring any material to contradict the documents provided by the assessee. The Tribunal also referred to several decisions of the Hon'ble Delhi High Court, including CIT vs. Dwarkadhish Investment (P) Ltd., CIT vs. Victor Electrodes Ltd., and CIT vs. Winstral Petrochemicals Pvt. Ltd., which supported the assessee's case. The Tribunal concluded that the assessee had discharged its initial burden, and the Revenue failed to rebut the evidence provided. Therefore, the addition of Rs. 31,80,000/- was rightly deleted by the CIT(A). In the result, the appeal filed by the revenue was dismissed. This decision was pronounced in the Open Court on 7th January, 2011.
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2011 (1) TMI 1362
Issues involved: Addition of Sundry Creditors u/s.41[1]
Summary:
1. The Assessing Officer (AO) noticed outstanding liabilities of the assessee with sundry creditors for more than three years, leading to the addition of the amount u/s.41[1].
2. The CIT(A) upheld the addition, emphasizing that the liabilities had remitted or ceased to exist, as the appellant had not demonstrated an intention to meet them.
3. The appellant argued that the inability to pay creditors due to business losses did not imply a lack of intention to pay, supported by payments made to some creditors and absence of write-offs.
4. The Tribunal found in favor of the appellant, noting that as long as the amounts were shown as outstanding and not written off, the liabilities could not be considered ceased, overturning the CIT(A)'s decision.
5. Citing legal precedents and factual findings, the Tribunal concluded that the liabilities had not ceased to exist, and hence, deleted the addition u/s.41[1].
Judges' Decision:
- Appellate Tribunal ITAT MUMBAI Citation: 2011 (1) TMI 1362 - ITAT MUMBAI
- Judges: SHRI D.K.AGARWAL, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER
- Appellant's Counsel: Shri Vimal Punmiya
- Respondent's Counsel: Shri Sanjeev Dutt
- Order Pronounced: 28th January 2011
This summary provides a detailed breakdown of the issues involved in the legal judgment regarding the addition of Sundry Creditors u/s.41[1] and the subsequent decisions made by the authorities involved.
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2011 (1) TMI 1361
Issues involved:
The issues involved in this case are the denial of exemption in respect of export profits under section 10A(2)(i)(b) of the Income Tax Act, incorrect citation of section 10B instead of section 10A, rejection of additional grounds raised by the assessee, and the failure to entertain the claim of exemption under section 10A.
Denial of Exemption under Section 10A:
The assessee appealed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2007-08, challenging the denial of exemption in respect of export profits under section 10A(2)(i)(b) of the IT Act. The counsel for the assessee argued that there was a technical mistake in claiming deduction under section 10B instead of section 10A, which led to the denial of the exemption. The assessee also raised an additional ground of appeal before the CIT(A), which was not admitted. The Tribunal found that the issue raised by the assessee in the additional ground of appeal was crucial and should have been considered. The Tribunal set aside the issue to the Assessing Officer for a fresh decision, directing to provide a reasonable opportunity to the assessee to substantiate its claim for deduction under section 10A.
Incorrect Citation of Section 10B:
The Departmental Representative contended that the conditions for deduction under sections 10A and 10B are substantially different, and approval from different authorities is required for each section. He cited the decision of the Hyderabad Bench of the Tribunal in Infotech Enterprises Ltd. v/s. JCIT to support the Revenue's stance. The Departmental Representative argued that the additional ground raised by the assessee was rightly rejected by the CIT(A) as no valid reason was provided for not including it in the original appeal memo.
Rejection of Additional Grounds:
The assessee raised an additional ground of appeal asserting eligibility for exemption under section 10A, even though it was not explicitly claimed. The Tribunal found that the CIT(A) erred in rejecting this additional ground, as it was fundamental to the matter at hand. The Tribunal emphasized that the issue of deduction under section 10A had not been addressed by any Revenue authority, necessitating a fresh consideration by the Assessing Officer.
Failure to Entertain Claim under Section 10A:
The CIT(A) failed to entertain the claim specifically made under section 10A of the IT Act in the original grounds of appeal. The Tribunal noted that the decision of the AP High Court in the case of CIT v/s. Gangappa Cables Private Limited was not considered by the CIT(A), indicating an oversight in adjudicating the claim for exemption under section 10A.
In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes and directed the Assessing Officer to reevaluate the issue of exemption under section 10A in accordance with the law, providing the assessee with a fair opportunity to present its case.
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2011 (1) TMI 1360
Issues Involved:
1. Disallowance of freight paid due to non-deduction of TDS.
2. Disallowance of transportation charges due to non-deduction of TDS.
3. Applicability of TDS provisions for payments below specified limits.
4. Disallowance of loading and unloading charges due to non-deduction of TDS.
5. Disallowance of expenses actually paid within the previous year without TDS.
6. Disallowance of transportation charges due to non-furnishing of names and addresses of the parties.
Issue-wise Detailed Analysis:
1. Disallowance of Freight Paid Due to Non-Deduction of TDS:
The assessee contended that out of the total freight paid of Rs. 15,76,761, an amount of Rs. 4,77,637 comprised payments to individual persons where each payment was less than Rs. 20,000, thus not requiring TDS deduction. For the remaining amount of Rs. 10,98,273, the assessee claimed to have obtained Form 15-I from truck owners, exempting them from TDS. However, the Assessing Officer and Ld. CIT(A) disallowed the total amount due to the failure to submit Form 15-J to the jurisdictional CIT and lack of satisfactory evidence. The Tribunal partially allowed the appeal, deleting the disallowance of Rs. 4,77,637 but upheld the disallowance of Rs. 10,98,273 due to non-compliance with TDS provisions.
2. Disallowance of Transportation Charges Due to Non-Deduction of TDS:
The assessee argued that the transportation charges of Rs. 11,58,302 were below the threshold for TDS deduction. The Ld. CIT(A) disallowed the amount due to insufficient details to verify compliance with Section 194C. The Tribunal found that the Department failed to prove that any payments exceeded the specified limits for TDS deduction and allowed the appeal, deleting the disallowance of Rs. 11,58,302.
3. Applicability of TDS Provisions for Payments Below Specified Limits:
The Tribunal noted that the Department did not dispute that individual payments were below Rs. 20,000 and aggregate payments did not exceed Rs. 50,000 per payee. Thus, the Tribunal held that disallowance under Section 40(a)(ia) was not justified for payments below the specified limits and deleted the disallowance of Rs. 4,77,637.
4. Disallowance of Loading and Unloading Charges Due to Non-Deduction of TDS:
The assessee contended that no payment exceeded Rs. 20,000 at a time, and no aggregate payment to any payee exceeded Rs. 50,000 in the financial year. The Tribunal found that the Department did not provide evidence to the contrary and held that disallowance under Section 40(a)(ia) was not justified. The Tribunal deleted the disallowance of Rs. 2,41,580.
5. Disallowance of Expenses Actually Paid Within the Previous Year Without TDS:
The Tribunal addressed this issue in conjunction with the other grounds, noting that the provisions of Section 40(a)(ia) apply to amounts paid or credited without TDS deduction. The Tribunal found that the general plea regarding non-applicability of Section 40(a)(ia) lacked merit and upheld the disallowance where TDS was not deducted as required.
6. Disallowance of Transportation Charges Due to Non-Furnishing of Names and Addresses of the Parties:
The Assessing Officer disallowed Rs. 21,42,270 due to the assessee's failure to provide names and addresses of the parties. The Ld. CIT(A) confirmed the disallowance on the ground of late TDS remittance. The Tribunal, relying on the decision of the ITAT Mumbai Bench, held that the amendment by the Finance Act, 2010, allowing TDS remittance by the due date of filing the return, applied retrospectively. Thus, the Tribunal deleted the disallowance of Rs. 21,42,270.
Conclusion:
The Tribunal allowed the appeal in part, deleting disallowances where the assessee complied with TDS provisions or where payments were below the specified limits. The Tribunal upheld disallowances where the assessee failed to comply with TDS requirements.
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2011 (1) TMI 1359
Addition u/s 68 - Accommodation entries by way of bogus loans from entities - HELD THAT:- We find that no addition can be made in the hands of the assessee company on account of share application money received. The assessee has filed necessary details for the purpose of proving that it had received actual share application money and the shares have been allotted. The main basis of the Department for making the addition is blank transfer certificates duly signed by the directors which were found from the possession of the manager of the assessee company, in our view, is not a sound basis as by finding blank transfer certificates does not disprove the reality. Reality is that assessee company has received share application money through account payee cheque. Shares have been allotted to the respective companies. The assessee company is showing the shareholders in its balance sheet and these companies are also showing the assets in their balance sheet in the shape of shares in the assessee company. All these companies are assessed to tax and, therefore, in our considered view, the addition sustained by learned CIT(A) is not justified.
In the decision of CIT vs. Steller Investment Ltd.[1991 (4) TMI 100 - DELHI HIGH COURT], which has been affirmed by Hon’ble SC in CIT vs. Steller Investment Ltd. [2000 (7) TMI 76 - SC ORDER]. It has been clearly held that s. 68 shall not apply on the share application money. It was also held that If the Department wants to proceed to unearth the truth about source of funds, then they can reopen the cases of the above three companies from whom the share application money have been received and shares have already been allotted to them. In view of these facts and circumstances, we delete the entire addition for asst. yr. 2005-06.
Appeal for asst. yr. 2005-06 - HELD THAT:- In this case also no cross-examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri Mukesh Choksi. We further noted that all other necessary details have been filed before AO. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate bank statement memorandum of articles copy of share application money audited balance sheet and P&L a/c of these parties were filed.
These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that the assessee has discharged its onus by filing necessary details. we cancel the entire addition made and confirmed by the lower authorities here also.
In the result, appeals of the assessee are allowed.
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2011 (1) TMI 1358
Issues Involved:
The judgment involves challenges against the correctness of the CIT(A)'s order for the assessment year 2004-05 regarding partial disallowance of costume and make up expenses, and adhoc disallowance on conveyance and staff welfare expenses.
Costume and Make Up Expenses:
The appellant, a film actress and model, claimed a tax deduction for expenses on costume and make up. The Assessing Officer disallowed 15% of these expenses citing a personal element in the expenditure. The CIT(A) upheld the disallowance stating that there are reasonable grounds for disallowance as personal elements cannot be ruled out entirely. However, the Tribunal held that once the expenses are accepted as incurred wholly and exclusively for professional purposes, they cannot be treated as personal expenses. The Tribunal noted that all supporting evidence was furnished, and since no specific infirmity was found, the disallowance was unjustified. Therefore, the Tribunal directed the Assessing Officer to delete the disallowance.
Conveyance and Staff Welfare Expenses:
The appellant raised a grievance against adhoc disallowance on conveyance and staff welfare expenses. The disallowance was made based on the assumption that personal expenses could not be ruled out. The Tribunal disagreed with this approach, stating that when expenses are supported by evidence and no specific infirmity is found, they should be allowed. Therefore, the Tribunal directed the Assessing Officer to delete the disallowance to the extent of conveyance and staff welfare expenses.
Conclusion:
The Tribunal partly allowed the appeal, directing the Assessing Officer to delete the disallowances on costume and make up expenses, conveyance expenses, and staff welfare expenses. The judgment was pronounced on 28th January, 2011.
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2011 (1) TMI 1357
Issues involved:
The judgment involves penalty imposition u/s 271(1)(c) for claiming excess deduction u/s 80IB and prior period expenses in A.Y. 2005-06.
Claim of 100% deduction under section 80IB:
The assessee claimed 100% deduction under section 80IB for A.Y. 2005-06, even though the initial 5-year period of eligibility had ended in 2004-05. The Assessing Officer (A.O.) initiated penalty proceedings for inaccurate particulars of income/concealment of income. The assessee contended that the claim was inadvertent and cooperated with authorities, withdrawing the excess claim and paying tax immediately. The Tribunal found the claim to be a bonafide mistake and not deliberate concealment, citing relevant case laws.
Claim of prior period expenses:
The assessee claimed an amount for power and electricity expenses pertaining to 2003 and earlier period, which the A.O. disallowed as a prior period claim. The A.O. initiated penalty proceedings u/s 271(1)(c) for this issue as well. The assessee argued that the expenses were paid under protest in the earlier year and charged to revenue in the subsequent year, based on events. The Tribunal found that there was no intention to conceal income, as the claim was based on accrual basis and audited accounts.
Legal Principles and Precedents:
The Tribunal referred to the legal principles established by the Hon'ble Supreme Court in various cases, including Reliance Petro Products Pvt. Ltd., emphasizing that a mere incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal also cited judgments where penalties were deleted due to debatable issues or inadvertent mistakes, supporting the assessee's contentions in this case.
Conclusion:
After considering submissions and legal precedents, the Tribunal concluded that the excess claim under section 80IB and prior period expenses did not warrant penalty u/s 271(1)(c). The Tribunal found the claims to be bonafide mistakes and not deliberate attempts to conceal income. Therefore, the penalty was withdrawn on these grounds, and the appeal was allowed.
Judgment Date:
The order was pronounced in the open court on 19th January 2011.
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2011 (1) TMI 1356
Issues involved:
The judgment deals with the treatment of gain on sale of shares as short-term capital gain instead of income from other sources for the assessment year 2005-06.
Issue 1: Treatment of gain on sale of shares
The Revenue appealed against the CIT(A)'s direction to treat the gain on sale of shares as short-term capital gain instead of income from other sources. The assessee claimed long-term capital gain of Rs. 14,75,185 on transfer of shares of Bolton Properties P. Ltd., purchased for Rs. 26,372, with the entire gain claimed as exempt u/s.10(38). The AO received information questioning the genuineness of the transaction, leading to an investigation. The ld. CIT(A) found that the shares were actually purchased on 04-11-2004, not 15-05-2003 as claimed, reducing the holding period and directing to tax the gain as short-term capital gain. The Revenue challenged this decision.
The AO issued summons u/s.131 to Bolton Properties Ltd., confirming the transfer of shares to the assessee on 15-05-2003. The company also provided details of the previous owner, M/s. Albright Constructions P. Ltd., and confirmed the listing of shares on Calcutta Stock Exchange. Despite these details, the AO was not convinced of the transaction's genuineness and treated the entire sale proceeds as income from other sources.
The ITAT, after considering the evidence and submissions, found that the purchase of shares by the assessee was adequately proven. The shares were transferred to the assessee's name, and subsequent sale was legitimate. The ITAT upheld the CIT(A)'s decision to treat the gain on sale of shares as short-term capital gain, overturning the AO's assessment. The appeal by the Revenue was dismissed.
The judgment was pronounced on January 21, 2011, by the Appellate Tribunal ITAT Mumbai, with Shri R.S. Syal (AM) and Smt. Asha Vijayaraghavan (JM) presiding over the case. The appellant was represented by Shri Surendra Kumar, and the respondent by Shri Hitesh P. Shah.
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2011 (1) TMI 1355
Issues involved: The judgment involves challenges to penalty orders u/s 271(1)(c) of the Income Tax Act for assessment years 2004-05 and 2005-06.
Issue 1: Assessment Year 2004-05
The assessee filed a revised return disclosing additional income of `30 lacs after a survey u/s 133A revealed capital expenses wrongly claimed as revenue expenses. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) alleging concealment and furnishing inaccurate particulars of income. The CIT(A) upheld the penalty, stating that the assessee deliberately claimed capital expenses as revenue. However, the ITAT found that the issue of capital vs. revenue expenses was debatable, and the assessee's actions did not amount to concealment or furnishing inaccurate particulars. Citing the Reliance Petroproducts case, the ITAT held that the penalty was not justified.
Issue 2: Assessment Year 2005-06
The Assessing Officer levied a penalty u/s 271(1)(c) based on the assessee's agreement during a survey to declare additional income for the assessment year. The CIT(A) confirmed the penalty. However, the ITAT ruled that the penalty was not warranted as the return for the relevant assessment year was not due at the time of the survey. The ITAT found that the premature conclusion that the assessee would not have declared additional income without the survey was not justified, leading to the cancellation of the penalty.
In conclusion, the ITAT allowed both appeals filed by the assessee, setting aside the penalties imposed u/s 271(1)(c) for the assessment years 2004-05 and 2005-06.
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2011 (1) TMI 1354
Issues involved: Appeal against cancellation of penalty u/s 271D for loan transaction through journal entries violating section 269SS.
Issue 1: Cancellation of penalty u/s 271D
- The revenue appealed against the cancellation of penalty of Rs. 71,45,430 u/s 271D by CIT(A) for a loan transaction made through journal entries, contending it violated section 269SS.
- AO levied penalty after finding the loan amount was received otherwise than by Account Payee Cheque or Draft, deeming it a contravention of section 269SS.
- Assessee argued that transactions were not in cash but through journal entries, thus not violating section 269SS.
- CIT(A) referred to ITAT decisions where penalties were not levied for transactions through journal entries, citing the case of N.H.Securities Ltd. vs. Addl. CIT.
- CIT(A) upheld the cancellation of penalty u/s 271D based on the ITAT order, leading to the revenue's appeal before the Tribunal.
Issue 2: Interpretation of law
- The AO alleged the transactions were made to evade tax, disregarding the Assessee's explanation that the loan was received through journal entries, not in cash.
- Assessee cited precedents like the case of Noida Toll Bridge Co. Ltd. and Sunflower Builders (P) Ltd., where penalties were not imposed for transactions through journal entries.
- The Tribunal upheld the CIT(A)'s decision to cancel the penalty, emphasizing that penalty provisions are not attracted for transactions made through journal entries as per previous Tribunal decisions.
- The Tribunal dismissed the revenue's appeal, affirming the cancellation of the penalty u/s 271D based on the consistent interpretation of the law regarding transactions through journal entries.
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2011 (1) TMI 1353
Issues Involved:
1. Addition of notional interest on interest-free security deposit for determining Annual Letting Value (ALV) u/s 23(1)(a) and 23(1)(b).
2. Deduction of maintenance expenses under the head "Income from House Property."
Summary:
Issue 1: Addition of Notional Interest on Interest-Free Security Deposit
The Assessing Officer (AO) added notional interest on the interest-free security deposit to the rent received by the assessee to determine the ALV of the property. The AO relied on the case of Trivoli Investment & Trading Co. Pvt. Ltd., interpreting that the interest-free deposit forms part of the compensation for the premises and thus should be included in the ALV calculation.
The assessee appealed, arguing that the addition of notional interest was done without verifying facts and that the rent received was reasonable and comparable to similar properties. The security deposit was meant to ensure the tenant vacates the property after the lease period and to prevent misuse or damage.
The CIT(A) held that as per the jurisdictional High Court decision in J.K. Investors (Bom) Ltd., the assessee's case falls u/s 23(1)(b), and no notional interest should be added to determine the ALV. The AO was directed to delete the notional interest while calculating the ALV.
The Revenue appealed, arguing that the CIT(A) erred in deleting the addition of notional interest and that the case should be governed by Sec. 23(1)(a). The Tribunal referred to the co-ordinate Bench decision in DCIT Vs Reclamation Realty India Pvt. Ltd., which held that the actual rent received should be the annual value of the property u/s 23(1)(b), and notional interest on interest-free security deposit should not be added. The Tribunal dismissed the Revenue's appeal, following the decision of the co-ordinate Bench.
Issue 2: Deduction of Maintenance Expenses
The AO disallowed maintenance expenses claimed by the assessee under the head "Income from House Property," arguing there is no provision to allow such expenses.
The assessee appealed, citing that the maintenance expenses relate to amenities provided and recovered from tenants. The CIT(A) allowed the deduction, referencing the ITAT's decision in the assessee's own case for A.Y. 1998-99.
The Tribunal upheld the CIT(A)'s decision, referencing the ITAT's earlier decision that maintenance charges should be deducted while arriving at the ALV of the property u/s 23. The Tribunal dismissed the Revenue's appeal on this ground as well.
Conclusion:
The appeal filed by the Revenue was dismissed on both grounds. The Tribunal upheld the CIT(A)'s decisions to exclude notional interest from the ALV calculation and to allow the deduction of maintenance expenses. The order was pronounced on January 28, 2011.
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2011 (1) TMI 1352
Issues involved: Appeal by Revenue against CIT(A) order for assessment year 2006-07 regarding treatment of railway sidings as plant for depreciation.
The Appellate Tribunal ITAT Hyderabad, comprising Shri G.C.Gupta, Vice President, and Shri Chandra Poojari, Accountant Member, heard the appeal by the Revenue against the order of the Commissioner of Income-tax(Appeals) for the assessment year 2006-07. The grounds of appeal raised by the Revenue included the contention that the CIT(A) erred in law and should not have directed to allow depreciation at the rate applicable to plant for railway sidings. The Departmental Representative supported the Assessing Officer's order, while the assessee's counsel relied on the CIT(A) order and cited relevant decisions from the Hon'ble Calcutta High Court, Hon'ble Karnataka High Court, and the Rajkot Bench of the Tribunal. After considering the submissions, the Tribunal found that the issue of whether railway sidings should be considered part of the plant was in favor of the assessee based on the decisions cited. Specifically, the Hon'ble Calcutta High Court had held that railway sidings are to be treated as part of 'plant'. As no contrary decision was presented by the Revenue, the Tribunal upheld the CIT(A)'s order, stating that there was no error in following the decisions of the High Courts and holding that railway sidings are indeed part of 'plant'. Consequently, the grounds of appeal by the Revenue were dismissed, and the Revenue's appeal was ultimately dismissed by the Tribunal on 7.1.2011.
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2011 (1) TMI 1351
Issues involved:
The issue involves a miscellaneous application filed by the assessee seeking a fresh order from the Tribunal after the ex-parte order dated 21/5/2010 was passed in the revenue's appeal regarding depreciation on the value of a membership card of the Bombay Stock Exchange.
Details of the Judgment:
1. Issue of Depreciation on Membership Card:
The CIT(A) had allowed the claim of the assessee based on the decision of the ITAT Mumbai Bench in the case of Techno Shares and Stock Ltd. However, the Hon'ble Bombay High Court later reversed this decision, stating that depreciation under section 32 of the Income Tax Act cannot be allowed on a stock exchange membership card.
2. Ex-Parte Order and Subsequent Developments:
The assessee contended in the miscellaneous application that the ex-parte order was passed as their Chartered Accountant could not appear, leading to reliance on the Bombay High Court's decision. It was highlighted that the Hon'ble Supreme Court later overturned the High Court's decision, supporting the assessee's claim for depreciation on the membership card.
3. Rectification of Tribunal's Order:
After hearing submissions, the Tribunal acknowledged the subsequent Supreme Court decision, which necessitated rectifying the order. Citing the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd., the Tribunal held that the order allowing the revenue's appeal should be rectified, dismissing the appeal and upholding the CIT(A)'s decision to allow depreciation on the membership card.
4. Conclusion:
The Tribunal allowed the miscellaneous application, rectifying the order in favor of the assessee based on the subsequent Supreme Court decision. The order of the Tribunal was amended to dismiss the revenue's appeal and uphold the depreciation claim on the stock exchange membership card.
This judgment showcases the importance of subsequent legal developments and the binding nature of Supreme Court decisions on Tribunal orders, leading to the rectification of the initial decision in favor of the assessee.
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2011 (1) TMI 1350
Issues Involved:
1. Deletion of addition on account of suppression of yield.
2. Deletion of addition on account of excess labor charges.
3. Treatment of loss on cancellation of forward contract as business loss.
Summary:
1. Suppression of Yield:
The first issue concerns the deletion of an addition of Rs. 29,74,132/- made by the Assessing Officer (AO) on account of suppressed yield. The AO noted that the assessee, engaged in the diamond business, showed a yield of 30.77% for polished diamonds, which was lower compared to other similar businesses. The AO estimated a suppressed yield of 1% and added Rs. 29,74,132/- to the income. The CIT(A) deleted this addition, noting that the AO did not find defects in the books of account nor invoked provisions of Section 145 of the Act. The Tribunal upheld the CIT(A)'s decision, agreeing that merely lower yield cannot justify rejection of book results.
2. Excess Labor Charges:
The second issue pertains to the deletion of an addition of Rs. 6,12,797/- made by the AO on account of labor charges. The AO found that the labor charges of Rs. 375/- per carat claimed by the assessee were higher than the industry standard of Rs. 275/- to Rs. 350/- per carat. The CIT(A) deleted the addition, noting that the assessee provided confirmations from labor parties with PAN numbers and that the increase in labor charges was justified by the higher gross profit ratio. The Tribunal confirmed the CIT(A)'s decision, stating that the AO's disallowance was not supported by evidence.
3. Loss on Cancellation of Forward Contract:
The third issue involves the treatment of a loss of Rs. 4,62,105/- on the cancellation of a forward contract. The AO treated this as a speculation loss, while the CIT(A) treated it as a business loss. The Tribunal referred to a similar case (ACIT Circle 9 Surat v. M/s. Marvin Gems) where it was held that such losses, arising from hedging transactions to protect against foreign exchange fluctuations, should be treated as business losses. The Tribunal confirmed the CIT(A)'s decision, treating the loss as a business loss.
Conclusion:
The Tribunal dismissed the Revenue's appeal on all three issues, upholding the CIT(A)'s decisions. The order was pronounced in Open Court on 13/01/2011.
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2011 (1) TMI 1349
Issues Involved:
1. Rejection of Book Result
2. Estimate of Gross Profit
Rejection of Book Result:
The appeal by the assessee challenges the order of CIT(A) confirming the rejection of Book Result due to the destruction of books and records in floods. The appellant argued that the mere fall in gross profit, without specific defects pointed out, should not lead to rejection. However, the Assessing Officer found discrepancies and added the difference in gross profit to the income. As the books of account were destroyed and the appellant failed to provide alternative evidence, the rejection of books was upheld, leading to the dismissal of this issue.
Estimate of Gross Profit:
The second issue raised by the assessee concerns the estimation of gross profit at Rs. 14,61,504, which was confirmed by CIT(A). The Assessing Officer based this estimation on the average profit of the last three years, considering the decline in gross profit. The options considered included extending the previous year's gross profit percentage or the average profit of the last three years. Ultimately, the gross profit was estimated at 33.97%, resulting in the addition of Rs. 14,61,504 to the income. The appellant contested this estimation, arguing that the reasons for the fall in profit were provided and not rejected. However, the estimation was upheld based on the available data and calculations presented during the assessment proceedings.
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2011 (1) TMI 1348
Issues involved: Addition u/s 41(1) of the Income Tax Act and disallowance of fee paid to ROC.
Addition u/s 41(1) of the Income Tax Act:
The Assessing Officer made an addition of Rs. 5027731/- u/s 41(1) of the IT Act, considering certain advances as revenue receipts due to cessation of liability. The Assessee contended that these amounts were credit balances arising from credit notes issued for various reasons. The Ld. Commissioner of Income Tax (Appeals) upheld the addition. However, the ITAT Delhi found that there was no evidence of actual remission or cessation of liability, as the creditors had not confirmed payment and the amounts were not written off in the books of accounts. Therefore, the ITAT Delhi ruled that the addition u/s 41(1) was not justified.
Disallowance of fee paid to ROC:
The Assessing Officer disallowed Rs. 2,10,700/- paid to ROC for increasing authorized share capital, deeming it as a capital expenditure. Citing relevant case law, the Ld. Commissioner of Income Tax (Appeals) upheld the disallowance. The ITAT Delhi concurred with the decision, stating that the issue was settled by the Hon'ble Apex Court rulings referred to. Consequently, the ITAT Delhi upheld the disallowance of the fee paid to ROC.
In conclusion, the appeal filed by the assessee was partly allowed by the ITAT Delhi, with the orders pronounced on 28/01/2011.
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