1. Addition on account of alleged understatement of sales consideration of shops — S. 2A

No addition could be made in the absence of any material brought on the record to show that the consideration received was indeed more than what has been stated in the Transfer Deed.

CIT vs. Emerald Construction Pvt. Ltd. (2007) 212 CTR 20 (Raj.)

2. Additional evidence — S. 250

Sub Rule 4 of Rule 46A of the Income-tax Rules, 1962 permits the CIT(A) to direct the assessee or the A.O. to produce of any documents or to examine any witness so as to dispose of the appeal before him. The High Court in the present case held that the Tribunal was justified in relying upon the documents filed subsequently at appellate stage before the CIT(A), which, was nothing but continuation of the books of account and the other documents filed before A.O., which were not filed before the A.O. due to some reasonable cause. The High Court further held that the powers of a statutory appellate authority are co-terminus with the powers of the authority at first instance.

CIT vs. Poddar Swadesh Udyog P. Ltd. — [(2007) 199 Taxation 32 (Gau)]

3. Additional ground of appeal — Challenge to jurisdiction as notice under section 143(2) barred by limitation — S. 143(2)

Issuance of notice under section 143(2) is mandatory and its non-issuance would make Assessment Order illegal, and, thus, ground raised and sought to be added was a legal ground which goes to the root of matter. Therefore, Tribunal should permit assessee to add additional grounds and adjudicate the same.

Mohan Davey vs. UOI [2007] 163 Taxman 274 [All.]

4. Additions without confronting the evidence to the assessee not justified — S. 28

The A. O. on the basis of documents seized from the purchaser of land, made additions in the hands of the assessee who was the seller. The assessee was not confronted with the evidence relied upon by the A. O. The deletion of addition by the Appellate Tribunal was upheld relying on the decision of the Apex Court in the case of Kishchand Chellaram vs. CIT (1980) 125 ITR 713 (SC).

C.I.T. vs. Ram Kumar [2007] 163 Taxman 253 [Punj. & Har.]

5. Adventure in the nature of trade — S. 28

Selling of own land after plotting it out in order to secure better price, is not an adventure in the nature of trade. An isolated transaction or activity of selling of land cannot be part of business. There must be regular activities of purchase and sale of land to treat the said activity as business.

CIT vs. Suresh Chand Goyal [2007] 163 Taxman 54 (M.P.)

6. Agricultural land – Ss. 2(14), 45

The assessee sold land and claimed exemption from capital gains tax on the ground that the said land was agricultural till date of sale. But, A.O. rejected the said claim on the ground that the purchaser of the said land wanted to use it for non-agricultural purpose. The Income-tax Tribunal accepted assessee’s contention and held that capital gains could not be levied on appeal to the High Court by the Department, it was held that it was an admitted fact that till the date of sale, agricultural activities were carried out by the assessee. The said land was put to use only for agricultural purposes and not for anything else. The fact that the purchaser had put it to use for a totally different purpose from that of the assessee ought not to have weighed with the tax authority. Hence, Capital Gains tax could not be levied.

M. S. Srinivasa Naicker & Others vs. ITO (2007) 292 ITR 481 (Mad.)

7. Appeal — Admitted tax — S. 249(4)

The premises of the husband of the assessee were searched u/s. 132. Subsequently, notices u/s. 158 BC were issued to both husband and wife. In response to the said notices, both of them filed returns, but they did not make payment of tax as per their returns.

However, A.O. made assessments. Both the assessees filed appeals to CIT(A). The CIT(A) did not admit the said appeals since taxes were not paid as per Block Returns. Income-tax Tribunal upheld the same view.

On appeal to High Court, it was held that looking into the facts and circumstances of the case if both the assessees made payments within four weeks of the order, then CIT(A) would look into the merits of the case and pass appropriate orders in accordance of law.

D. Komalakshi, D. Rajkumar vs. DCIT (2007) 292 ITR 99 (Kar.)

8. Appeal — Condonation of delay — S. 252

The Tribunal’s order denying to condone the delay of twelve (12) days in filing appeal before it was set aside as being perverse, where the appellant in its application for condonation of delay before the Tribunal, had stated that on account of strike of the bank the appeal fees could not be paid and this resulted in belated filing of appeal before the Tribunal.

Babu Lal Jain vs. ITO — [(2007) 200 Taxation 183 (M.P.)]

9. Appeal — High Court — S. 260A

Question not raised before Income-tax Tribunal nor considered by Tribunal cannot be raised before High Court nor can be considered by High Court.

The A.O. while completing the assessment disallowed the claim of the assessee in respect of replacement expenditure of auto coner and moulds as revenue expenditure and treated the same as capital expenditure.

Aggrieved by the said order, the assessee went in appeal to CIT(A) who reversed the A.O’s order on this ground. The revenue took up the matter to ITAT. The ITAT also decided the issue in favour of the assessee. Hence, department was in appeal to High Court. Department in its appeal raised one more question about the concept of Block of asset for the purpose of depreciation which was not before the ITAT. The High Court held that no claim of depreciation was ever made before any authorities either by the assessee or by the revenue, the same cannot be considered by High Court.

CIT vs. Fenner (I) Ltd. (2007) 292 ITR 604 (Mad.)

The questions, which are not raised by the Appellant before the Tribunal, cannot be permitted to be raised in appeal before High Court u/s. 260A of the Act.

CIT vs. Jolly Engineer’s Contractor’s — [(2007) 200 Taxation 89 (P & H)]

10. Appeal — Question of law — S. 260a

The assessee claimed that the activity of producing mushroom amounted to business activity and claimed deduction u/s. 80-IA. The Tribunal rejected assessee’s appeal and claim u/s. 80-IA. Before the High Court however a question was raised as to whether the activity of producing mushroom was agricultural income and hence exempt. The High Court held that the aforesaid question did not arise for consideration out of the Tribunal’s order.

Himalaya International Ltd. vs. CIT — [(2007) 199 Taxation 240 (Del)]

11. Appeal to High Court – Department cannot follow the policy of pick and choose — S. 260A

In the absence of any reasons the Department cannot resort to policy of pick and choose for filing appeals u/s. 260A. It was further observed that it would not be proper or in the interest of justice to allow revenue to seek to recover tax from one assessee while declining to recover tax from another assessee on identical facts.

CIT vs. Moonlight Builders & Developers [2007] 163 Taxman 134 (Del.)

12. Appeal to Tribunal — Judicial discipline — S. 254

Special bench decision – challenged before H.C. — no stay of operation – sub-ordinate authorities bound to follow the same.

The assessee, a tax resident in Finland. It was deriving income from supply of telecommunication equipment to Indian Telecom operators and filed NIL Tax Return for A.Y. 2003-04.

There was a Special Bench decision in the assessee’s own case for earlier years; i.e., for A.Ys. 1997-98 and 1998-99 which had considerably reduced the tax liability of the assessee from that determined by the A.O. For A.Ys. 1999-2000 to 2001-02, the Tribunal followed its earlier order passed by the special Bench and gave relief to the assessee.

The Department had filed appeal to High Court against special Bench decision which was pending for final disposal. In spite, the A.O. raised the demand of Rs. 37.47 crores by way of tax and Rs. 14.05 crores by way of interest for A.Y. 2003-04.

Aggrieved by the said order of A.O. assessee preferred appeal to CIT(A).

The High Court directed CIT(A) to hear the appeal in keeping with the high standard of judicial discipline for which the sub-ordinate authority such as the CIT(A) should not feel hesitant to follow the order of the Special Bench which was not suspended by a competent court.

Nokia Corporation vs. D.I. (International Taxation) & Others (2007) 292 ITR 22 (Delhi)

13. Appeal to Tribunal — S. 254

Tribunal must record its reasons for its decision while disposing of case – otherwise it is not proper.

The revenue had filed appeal before Income-tax Tribunal. Tribunal dismissed department’s appeal without assigning any reason in its order for dismissing appeal of the revenue, save and except that in the peculiar facts and circumstances of the case, no interference is called for.

Aggrieved by the said order of Income-tax Tribunal, Revenue filed appeal to High Court.

The High Court held that it is well settled law that while disposing of an appeal, the appellate authority must record reasons for its decision. The appellate authority has examined the record of the case and has taken a view without giving any reason. This does not serve the cause of justice. The High Court remanded the matter to the Tribunal for a fresh consideration in accordance with law. The Tribunal should give its reasons for whatever conclusion it arrives at on the merits of the case.

D. I. (E) vs. Uma Maheshwar Parmurth Trust (2007) 292 ITR 352 (Delhi)

14. Appeals — Maintainability of appeals — S. 260A

If tax effect is below certain limit, Appeal should not be maintained as per CBDT Notification which is binding.

Wealth-Tax assessments of the assessee for A.Ys 1980-81 to 1985-86 were completed u/s. 16(1) of the Wealth Tax Act, 1957. Later on, they were reopened u/s. 17 of the said Act on the basis of some audit objections.

However, main ground for reassessment was that the assessee had claimed impurity at the rate of 25% for gold ornaments and 30% for silver utensils. The CIT(A) cancelled the reassessment. The ITAT confirmed CIT(A)’s order.

The revenue filed appeal to H.C. challenging the cancellation of reassessment. The assessee took a preliminary ground about the maintainability of the appeal.

The H.C. after referring to the judgments of the Bombay High Court and Supreme Court dismissed the said appeal since the tax effect is less than Rs. 5,000/- per year on the ground of non-maintainability

CIT vs. Digvijay Singh (2007) 292 ITR 314 (MP)

15. Assessment — S. 143

Clear cut finding in Assessment Order that the investment did not belong to the assessee. Amount not assessable in the hands of assessee. Court cannot give finding regarding person in whose hands assessment could be made.
In the assessment order there was a clear finding given by the A.O. that the assessee was not the owner of the investment and that the assessee had really not earned the income of Rs. 27,320/-. However, the A.O. added the said income in the hands of the assessee by making a protective assessment since the said income according to A.O. belonged to the husband of the assessee.

Aggrieved by the said order, the assessee preferred an appeal to CIT(A) or AAC who modified the said order but upheld the addition in part.

On further appeal, the Income-tax Tribunal set aside the said addition by holding that when the Department itself had taken the stand that the investment did not belong to the assessee, that could not be added to the income of the assessee even on protective basis.

On further reference to High Court it was held that in view of categorical finding by A.O in his order that the assessee was not the owner of the said investment, deletion of the said amount by Tribunal was correct. It was not necessary for the Tribunal to record a specific finding as to whom said amount belonged to.

CIT vs. Smt. Tara Devi (2007) 292 ITR 539 (Raj.)

16. Assessement — S. 143(1)(A)

While processing return u/s. 143(1)(a) of the Act, the A.O. could not make adjustment with respect to incentive bonus received by the assessee, a Development Officer of LIC, as there were divergent decisions of court regarding taxability of the incentive bonus and as such the same was a debatable point.

CIT vs. Manu Bhai M. Patel — [(2007) 199 Taxation 491 (Guj)]

17. Assessment — Instructions to subordinate authorities — S. 119

Once the assessee had filed its return of income, the assessing officer has the authority to proceed with the assessment in terms of section 143 of the Act seeking clarification/information in connection with the return of income. Further, there is no bar in law or in executive instruction for selecting the case for scrutiny. The High Court further held that the petitioner was not prejudiced in any manner whatsoever if a regular assessment is framed in its case.

Atam Valves P. Ltd. vs. Addl. CIT — [(2007) 200 Taxation 127 (P & H)]

18. Bad debt — S. 36(1)(vii)

After the amendment in section 36(1)(vii) w.e.f. 1-4-1989 the assessee need not require to prove that debts had become bad. Assessee only to write it off as irrecoverable in its accounts. If the genuineness of the transaction is not doubted, then the said amount has to be deductible as bad debt as per CBDT’s Circular No. 551 dt. 23-1-1990.

The assessee was engaged in the business of money-lending by way of inter-corporate deposits and other loans. It had written off a sum of Rs. 6 crores as bad debts after initiating legal/criminal proceedings against two borrowers.

However, A.O. added the said amount together with interest accrued thereon.

The CIT(A) also confirmed the same for one borrower but accepted for the other,

The Tribunal held that since the principle was irrecoverable, there was no reason or justification to charge interest on this sum and deleted the disallowance of principal amount also.

The High Court held on further appeal that once it was accepted by the department that the transactions actually took place, then the decision to write-off the loan as bad debt was a consequence of an honest judgment. Any prudent man on learning that an unsecured loan had become perilously irrecoverable would immediately initiate each and every legal remedy available to him as had been manifested itself in the case of the assessee. Therefore, the Tribunal was right in deleting the disallowance of the balance sum.

CIT vs. Morgan Securities & Credits P. Ltd. (2007) 292 ITR 339 (Delhi)

After the amendment to sec. 36(1)(vii) w.e.f. 1-4-1989, the assessee has only to write off the debt as irrecoverable in order to make the claim of Bad Debt as allowable deduction. As debts were written off in the accounts, the same is allowable.

CIT vs. Autometers Ltd. (2007) 210 CTR 339 (Del.)

19. Block assessment — Undisclosed income — S. 158BC

The search action against the assessee didn’t yield any incriminating evidence. However, A. O made addition relying on the report of the valuation officer. Hon’ble Court upheld the Appellate Tribunal’s Order in which additions were held to be unsustainable.

C.I.T. vs. Manoj Jain [2007] 163 Taxman 223 [Delhi]

20. Business expenditure — S. 35Ab

The assessee had paid technical knowhow fees in pursuance to the agreement with NIIT Ltd. for technical assistance. The assessee treated the said expenditure as revenue expenditure. The assessing officer however, treated the fees as capital expenditure u/s. 35AB and allowed only one-sixth (1/6) of the expenditure. On appeal the High Court after analyzing the explanation to section 35AB observed that, the assessee did not indulge in the activities of manufacturing and processing goods referred to in Explanation to section 35AB of the Act.

Accordingly, it held that the expenditure incurred by the assessee was to be treated as revenue expenditure.

CIT vs. Frontline Software & Service Pvt. Ltd. [(2007) 200 Taxation 185 (M.P.)]

21. Business expenditure — S. 37

Where prior to formation of partnership, the parties mutually agreed to take up a works contract and thereafter, the partnership was formed to execute the same. The payments for work done before the formation of partnership, were made after the firm came into existence. On these set of facts the High Court held that the sales have to be equated with receipts for the work done and it was an admitted fact that receipts against the work done prior to formation of firm was received after formation of the firm. Accordingly, till the receipt, the expenses incurred could not be claimed and therefore, the same had to be carried forward and allowed in the year in which the receipts are received.

CIT vs. Guru Nanak Construction Co. — [(2007) 200 Taxation 113 (P & H)]

The High Court held that provision made by the assessee on account of sales tax liability which though had not been quantified on the last day, of previous year was allowable, a ultimately, the assessee was held to be liable to pay sales tax of much more amount provided for by the assessment order passed later on under the Sales Tax Act.

CIT vs. Navbharat Banaspati & Allied Industries — [(2007) 200 Taxation 99 (P & H)]

Repairs and renovations carried out by an Advocate on a rented premises to carry on the profession smoothly and efficiency. Expenditure is allowable as it is revenue by nature.

CIT vs. Dr. A.M. Singhni (2007) 212 CTR 1 (Raj.)

22. Business expenditure — S. 37(3A)

For A.Y. 1985 – 86, expenditure incurred on account of commission paid to dealers and export market development allowance paid cannot be treated as sales promotion expenses u/s. 37(3A) of the Act.

CIT vs. Onkar Nath Aggarwal — [(2007) 199 Taxation 115 (P & H)]

23. Business expenditure — S. 37(3B)

Expenditure incurred on driver’s salary was covered u/s. 37(3B) of the Act and the A.O. was justified in disallowing claim for deduction to the extent of 20% in respect of driver’s salary.

CIT vs. Oswal Woollen Mills — [(2007) 199 Taxation 138 (P & H)]

24. Business expenditure — Ss. 37(1) & 29

Loss on account of embezzlement by the representative of the assessee who was authorized to collect the sale proceeds from the customers was allowable as deduction. The loss so incurred was incidental to carrying on of the business of the assessee and there was a direct and proximate connection / nexus between the loss and business operation of the assessee.

CIT vs. Smt. Pubhraj Wati Bubber — [(2007) 199 Taxation 107 (P & H)]

25. Business expenditure — Disallowance — S. 40a(3) r.w.r. 6dd

Cash payments exceeding specified limit. Cash payments were made on Sunday to persons from unorganized sector. Disallowance not justified as per Rule 6 DD.

The assessee had submitted necessary details for making cash payments. These payments were made to small time vendors, who came from village to sell their product. The CIT(A) and the Income Tax Tribunal noted that the purchases were made from the unorganized sector, cash payments were indispensable.

High Court on appeal confirmed ITAT’s finding by applying CBDT’s guideline which are illustrative u/r 6 DD of the Income Tax Rules, 1962.

CIT vs. K. K. S. K. Leather Processor P. Ltd. (2007) 249 ITR 669 (Mad.)

26. Business expenditure — Factory shifting expenses — Revenue expenditure — S. 37

The expenditure incurred on shifting the factory premises under compelling circumstances, viz., for very survival of the factory itself, expenditure so incurred could be allowed as revenue expenditure.

C.I.T. vs. Loyal Super Fabrics [2007] 163 Taxman 316 [Mad.]

27. Business Income — Income from house property — Ss. 22, 27

The assessee took on lease a property and sublet a portion of the property. The A.O. treated the income derived as ‘Income from House Property’. However, on appeal, CIT(A) treated it as income from business, which was confirmed by Income Tax Tribunal.

On further appeal to High Court it was held that u/s 27(iiib), the assessee by virtue of its right by way of a lease from month to month or for a period not exceeding one year was excluded from the definition of owner of the House Property.

CIT vs. A. V. K. Construction P. Ltd. (2007) 292 ITR 512 (Mad.)

28. Business loss — Loan given to subsidiary company — S. 28

The assessee had advanced large sums of money to its subsidiary companies. Interest was charged on such loans. Interest was not received. However, assessee accounted for the interest on accrual basis and offered the same to tax. The amount was shown as due from the subsidiaries. Interest was written off as irrecoverable. Subsequently, subsidiaries merged with the assessee w.e.f. 1-4-1994.

Assessing Officer did not allow the claim as a business loss but ITAT allowed the deduction.

On further appeal to High Court, it was held that when the assessee had chosen to write off at that time merger had not taken place and hence the debts were available on the crucial date. The retrospective effect given to merger would not nullify the decision with regard to witting off.

CIT vs. United Breweries Ltd. and Another (2007) 292 ITR 188 (Kar.)

29. Capital gain — S. 2(47)

Where a plot of land was contributed as share capital in a firm. The difference between the value as credited in the firm’s book and cost of acquisition of plot was treated as capital gain and taxed accordingly by the assessing officer. On appeal the High Court held that as the partnership in nothing but a compendium of partners and property owned by the firm is property of partner, there was no transfer of asset by the partner to the firm and accordingly no capital gain tax liability arose.

CIT vs. Shri Parker Chand Jain — [(2007) 200 Taxation 106 (P & H)]

30. Capital gains — Interim compensation paid on land acquired by State Government — S. 45

For the A. Ys. 1997-98 and 1998-99 the capital gains on the acquisition of land by the State Government is not chargeable tax as the amounts received by the Assessee as per interim conditional order of the Court was challenged in Appeal by the State.

Anil Kumar Forma (HUF) vs. CIT [2007] 163 Taxman 182 (Mad.)

31. Capital gains — Purchase of residential unit — S. 54F

To claim exemption from capital gains tax under Section 54F the assessee has to purchase a residential unit. The condition is not to become owner of the residential unit.

CIT vs. Ajitsingh Khajanchi [2007] 163 Taxman 426 (M. P.)

32. Capital gains — Valuation of immovable property — S. 45

The assessee along with other three co-owners sold a piece of land. The assessee had 9/16 share on the said plot of land. The assessee for the purpose of capital gains took the value of property as on 1-4-1981, at Rs. 2,86,000/- based on the Valuer’s Report during the relevant assessment year.

The Assessing Officer, computed capital gains tax on the basis of one of the Co-owners’ Wealth Tax Assessment for the A.Y. 1992-93 and computed long-term capital gains.

However, the CIT(A) deleted for addition made to the capital gains made by Assessing Officer.

On appeal to Tribunal by the department, the Tribunal after taking into consideration the judgment of the Punjab & Haryana High Court reported in 107 ITR 477 held that the different treatment cannot be meted out to another co-owner while making the assessment of the same property or while valuing the same property.

On further appeal to High Court by the revenue, High Court applying the ratio laid down in the aforesaid case dismissed Departmental’s appeal.

CIT vs. Kumararani Smt. Achi (2007) 292 ITR 624 (Mad)

33. Capital or revenue expenditure — Expenditure on setting up new unit for the existing business is revenue — S. 37

The expenditure incurred for setting up a new unit to manufacture raw material for the existing manufacturing unit is revenue expenditure.

CIT vs. Usha Iron & Ferro Metal Corp. Ltd. [2007] 163 Taxman 256 (Del.)

34. Capital or revenue expenditure — S. 37

Expenditure incurred on erecting false ceiling and partitions in leasehold premises is to be treated as revenue expenditure.

CIT vs. Shakti Finance Ltd. (2007) 210 CTR 300 (Mad.)

35. Cash credits — Consideration on sale of jewellery disclosed under vdis cannot be added — S. 68

In the absence of any material brought on record to suggest that transaction of sale sham, sum received on account of sale of jewellery could not be brought to tax under section 68.

CIT vs. A. K. Daga & Sons [2007] 163 Taxman 682 (Mad.)

36. Cash credits — Deposits in the partners capital — S. 68

Once partner accepts that he/she has made deposits into the capital a/c. of firm no addition can be made in the hands of the firm by invoking the provision of Section 68.

CIT vs. Rameshwar Dass Suresh Pal Chuka [2007] 163 Taxman 270 (Punj. & Har.)

37. Charitable institution — Profit in activity carried on cannot be the reason to deny registration — S. 12A

There is no requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust to allow registration to said institution even if there is some profit in the activity carried on by the institution. So long as dominate object is of general public utility, it can be said that it is established for charitable purposes.

CIT vs. Agricultural Produce and Market Committee [2007] 163 Taxman 359 (Bom.)

38. Depreciation — S. 32

User of assets – Assessee entitled to claim depreciation on vehicle kept as standby to be used in case of breakdown/emergency situation. Therefore, depreciation and repairs on those assets are allowable.

CIT vs. Raj Kumar Singh & Ors. (2007) 210 CTR 483 (All)

39. Export — Interest — Deduction — S. 80Hhc

Income from manufacture and sale of tea – Deduction u/s. 80HHC is required to be computed before apportionment of income as agriculture and non-agriculture u/r.8.

Williamson Financial Services Ltd. vs. CIT & Anr. (2007) 212 CTR 32 (Gau.)

The expression ‘profit derived from such exports’ occurring in sub-section 3 read with Explanation (baa) of section 80HHC restrict the profits available for deduction u/s. 80HHC, only to those items of income which are directly relatable to export business.

Expression “interest” in Explanation (baa) connotes gross interests less expenditure incurred by the assessee for earning such interest.

CIT vs. Shri Ram Honda Power Equipment & Ors. — [(2007) 199 Taxation 443 (Del)]

The High Court held that there is no distinction between the interest income, which is, assessed as business income or other interest, which is assessed as income from other sources. Accordingly, the assessee has to reduce 90% of such interest under explanation (baa) while computing deduction u/s. 80HHC of the Act.

CIT vs. Malwa Cotton Spinning Mills Ltd. – [(2007) 200 Taxation 150 (P & H)]

40. Income from House Property – Singling out only in one co-owner for addition not justified — S. 22

The assessee, having 1/6th share in a theatre, offered income from the lease rent which the A. O found to be low. The same was enhanced while passing the Assessment Order. Hon’ble Court held that it would be travesty of justice if assessee, one of the co-owners, was solely picked out and the income is enhanced without disturbing the returned income from same property in the case of other five co-owners.

C.I.T. vs. S. Muthu Karupan [2007] 163 Taxman 45 [Mad.]

41. Investment allowance — S. 32A

Refinery unit for processing of oil and manufacturing of vanaspati ghee is eligible for investment allowance u/s. 32A of the Act.

CIT vs. Navbharat Banaspati & Allied Industries – [(2007) 200 Taxation 99 (P & H)]

Refinery is a manufacturing process/ industrial undertaking and eligible for investment allowance u/s. 32A of the Act.

CIT vs. Oswal Woollen Mills — [(2007) 199 Taxation 138 (P & H)]

42. Investment allowance — manufacture — Ss. 80j & 32a

Bleaching, dyeing and printing of grey cloth amounts to manufacture or production of an article or thing for purpose of sections 32A and 80J.

CIT vs. Shree Lalit Fabrics P. Ltd. — [(2007) 200 Taxation 133 (P & H)]

43. KVSS — Pendency of proceedings at the time of filing application – Kvss, 1998

The condition precedent to quality for filing declaration under KVSS, 1998 is pendency of proceedings on the date of filing declaration and not on the date when the concerned authority considered the declaration.

E. N. Murali vs. CIT [2007] 163 Taxman 506 (Kar.)

44. Notice — Proof of service — S. 143(2)

Notice dispatched by registered post on 25-8-1998 which was duly addressed and stamped is to be presumed to have reached the assessee by 28-8-1998 in the absence of any contrary proof. Therefore, the service of notice stood proved.

CIT vs. Shankar Lal Ved Prakash (2007) 212 CTR 47 (Del.)

45. Prosecution for offence — S. 276C

Tribunal on its merits given the finding that there was no case for penalty u/s. 271(1)(c) – Prosecution u/s. 276C has to be quashed.

Rakesh Kalia vs. ITO (2007) 210 CTR 342 (Del.)

46. Reassessment — S. 148

The Tribunal annulled the assessment in the present case on the ground that, reasons were not provided to the assessee, while doing so the Tribunal followed its decision in another case. On reference the High Court refrained to answer the reference observing that the revenue applied the policy of pick and choose, more so when in the other case, on which the Tribunal relied upon while deciding the present appeal, no further proceedings were taken by the revenue.

CIT vs. Vidya Devi Amloh — [(2007) 200 Taxation 136 (P & H)]

The report framed by DVO cannot constitute a reason to believe that the income has escaped assessment. Hence, reassessment proceeding initiated on the basis of DVO’s Reports is invalid and void ab initio.

CIT vs. Smt. Meena Devi Mansinghva (2007) 212 CTR 23 (Raj.)

47. Reassessment — Service of notice — S. 148

There was no valid service of notice nor was it tendered to the assessee nor the same was refused by them – No effort was made by the Assessing Officer to locate the assessee before affixation and the notice sent by registered post was not accompanied by due acknowledgement – Held, reassessment was bad-in-law.

CIT vs. Hotline International Pvt. Ltd. (2007) 212 CTR 207 (Del.)

48. Recovery — S. 220

Priority of claim in respect of the company in liquidation – Sec. 529A of the Companies Act, 1956 – Workmen and/or Secured Creditors have the preference and/or priority over the claims of the Income Tax Department against the company.

ACIT vs. Official Liquidator of Mineral Oil & Industries Ltd. (2007) 210 CTR 445 (Guj.)

49. Recovery — Company in liquidation — Tax liability has no preference over the secured creditors or workers — S. 222

The tax liability of a company in liquidation does not enjoy preference over the secured creditors or workers as envisaged in section 529A of the Companies Act, 1956.

ACIT vs. O. L. of Minal Oils Industries Ltd. (2007) 163 Taxman 1 (Guj.)

50. Rejection of books of account on the ground of deviation gross profit rate not justified — S. 145

Mere deviation in gross profit rate cannot be the ground for rejecting books of account and entering into realm of estimate and guesswork.

CIT vs. Chensing Ventures [2007] 163 Taxman 175 (Mad.)

51. Revision — Reassessment — Ss. 148, 263

Sec. 263 proceeding pending – If notice u/s. 148 is issued when revision proceeding is pending, the Assessing Officer is free to complete the reassessment proceeding

Inductotherm (India) Pvt. Ltd. vs. ACIT (2007) 212 CTR 195 (Guj.)

52. Salary – Ex gratia payment – No embargo – S. 10(10C)

Amount received on account of voluntary retirement consequent upon termination by the employer is profit in lieu of salary within the meaning of sec. 17(3); therefore, covered u/s. 10(10C)

CIT vs. Nagesh Devidas Kalaxmi & Ors. (2007) 210 CTR 471 (Ban.)

53. Summons — Before rejecting the evidence produced by assessee the A. O. should exercise power vested with him — S. 131

The assessee furnished confirmations in support of the commission paid. But was not able to produce the parties for cross examination. Commission was disallowed for non production of parties. It A. O. was not inclined to believe material produced by the Assessee, he should issue summons or carry on independent enquiries before making disallowance.

C.I.T. vs. Genesis Commet (P) Ltd. [2007] 163 Taxman 482 (Del.)

54. Tax collection at source — S. 206c

Where the assessee a wholesaler in liquor purchased liquor from the distilleries and sold the liquor, the assessee being first buyer, on such sale was not liable to collect tax at source u/s. 206C(6) of the Act.

CIT vs. Vira Singh & Co. – [(2007) 199 Taxation 112 (P & H)]

55. Unexplained money — S. 69a

Where no sales outside the books were found; full details of opening stock, purchases, issues, balance were furnished before the A.O. which were not at all examined by him. On these facts the High Court held that addition made by the A.O. u/s. 69A of the Act could not be sustained more so, when the A.O. had ignored very vital details and documents filed before him.

CIT vs. Hindustan Tin Works Ltd. — [(2007) 199 Taxation 361 (Del)]