----- Forwarded Message -----
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Friday, 7 June 2013 5:30 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Fwd: Allahabad high court on Challenge to Jurisdiction of AO ITAT not competent authority u/s 124 where assessee is required to challenge jurisdiction as per prescribed procedure; Unsubstantiated factual plea liable to be ignored; Concealment penalty (ITAT reversed ass fav) ITAT No enhancement power; cash credit & trading estimated additions;
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Friday, 7 June 2013 5:30 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Fwd: Allahabad high court on Challenge to Jurisdiction of AO ITAT not competent authority u/s 124 where assessee is required to challenge jurisdiction as per prescribed procedure; Unsubstantiated factual plea liable to be ignored; Concealment penalty (ITAT reversed ass fav) ITAT No enhancement power; cash credit & trading estimated additions;
Gist of the Allahabad high court orders
- Allahabad high court mass impact question of jurisdiction of AO u/s 124 competent authority (CIT or Board) and raising a factual plea without substantiation (liable to be ignored); (ITAT reversed revenue fav)
- Allahabad high court on Concealment penalty estimated additions etc (ITAT reversed ass fav)
- Allahabad high court Cash credit addition post books rejection (balanced proposition)
- Allahabad high court on ITAT : No power to enhancement
INCOME TAX APPEAL NO. 89 OF 2003
Commissioner of Income-tax, Gorakhpur----Appellant
Versus
M/s All India Children Care & Educational
Development Society, Azamgarh -----------Respondent HIGH COURT OF JUDICATURE AT ALLAHABAD Dated:- 30th May, 2013
Commissioner of Income-tax, Gorakhpur----Appellant
Versus
M/s All India Children Care & Educational
Development Society, Azamgarh -----------Respondent HIGH COURT OF JUDICATURE AT ALLAHABAD Dated:- 30th May, 2013
In view of the above, question as to place of assessment could not have been gone into by the Tribunal and it definitely committed error of law on the facts of the present case in entertaining it and adjudicating it. The decision taken by the Tribunal is based on ignorance of scheme of the Income Tax Act, 1961 as also Section 124 thereof. Probably, attention of the Tribunal was not drawn to the relevant statutory provisions by the department. The contention that no opportunity of hearing was given before transferring raised for the first time before the Tribunal could not be substantiated by producing any evidence. The assessee was the appellant before the Tribunal and it was for him to establish that before transferring the cases, no opportunity of hearing was given and in which he failed. Mere raising the argument which requires determination of fact in absence of any supporting material is liable to be ignored.
In view of the above, we answer all the five substantial questions of law in favour of the department and against the assessee by holding that the question of jurisdiction of the Assessing Authority in view of Section 124 of the Act could not have been raised by the assessee before the Tribunal and the Tribunal is not the competent authority to adjudicate upon when it was not raised in terms of Section 124 before the Assessing Authority. The scheme of the Act shows that no appeal in regard to the place of assessment is contemplated under the Act. Under Section 124, a question as to the place of assessment, when it arises is determined by the Commissioner, by the Commissioners if more than one Commissioner is involved and then by the Board
In view of the above, we answer all the five substantial questions of law in favour of the department and against the assessee by holding that the question of jurisdiction of the Assessing Authority in view of Section 124 of the Act could not have been raised by the assessee before the Tribunal and the Tribunal is not the competent authority to adjudicate upon when it was not raised in terms of Section 124 before the Assessing Authority. The scheme of the Act shows that no appeal in regard to the place of assessment is contemplated under the Act. Under Section 124, a question as to the place of assessment, when it arises is determined by the Commissioner, by the Commissioners if more than one Commissioner is involved and then by the Board
Appellant :- Commissioner Of Income Tax -I HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
Respondent :- M/S G.S.Tiwari And Co Order Date :- 30.05.2013
Respondent :- M/S G.S.Tiwari And Co Order Date :- 30.05.2013
It may be mentioned that in the case of CIT vs. Maduri Rajaiahgari Kistaiah; 120 ITR 294 (AP), it was observed that where a particular business income of the assessee has been estimated and determined and in such a case certain sundry creditors are found, the AO may be precluded from adding the said unexplained sundry creditors as undisclosed income from the business, the income of which was determined on estimate basis. But where the unexplained sundry creditors are not referable to the business income of the assessee which was estimated, the AO is not precluded from treating the unexplained sundry creditors as income from other sources such as salaries securities or any other income from a business, the source of which was not disclosed by the assessee. Where certain unexplained sundry creditors are found in the account books of the assessee, whose business income is determined on estimate basis and not on the basis of his returned income, the AO is not prevented from treating the unexplained sundry creditors standing in the books of account as income from undisclosed sources.
In the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at any point of time the assessee take the stand that the sundry creditors are referable to the income of the business which has been determined on estimate basis. Hence, the assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid.
In the view of above discussion and by considering the totality of the facts and circumstances of the case, we set side the impugned order passed by the Tribunal and remit the matter back with a direction to examine the identity, creditworthiness and genuineness of the transactions of the sundry creditors
In the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at any point of time the assessee take the stand that the sundry creditors are referable to the income of the business which has been determined on estimate basis. Hence, the assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid.
In the view of above discussion and by considering the totality of the facts and circumstances of the case, we set side the impugned order passed by the Tribunal and remit the matter back with a direction to examine the identity, creditworthiness and genuineness of the transactions of the sundry creditors
May 30, 2013 HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
Appellant :- Naresh Chand Agarwal
Respondent :- Commissioner Of Income Tax-I Lko (i) Whether on a true and correct interpretation of the section 275 of the Act, the Tribunal was legally correct in holding that the penalty order dated 28.09.2006 had been passed within the limitation period as prescribed thereunder, and in upholding the validity thereof?
(iii) Whether on a true and correct interpretation of the provisions of section 271 (1) (c), the Tribunal was legally correct in holding that the assessee's case fall within the said penal provisions and in upholding the levy of penalty thereunder? On the other hand, Sri D.D.Chopra, learned counsel for the department relied on the order passed by the lower authorities. He submits that earlier, the A.O. vide order dated 24.03.1995 has treated the amount of interest on FDR as income of the assessee separately. While applying net profit rate AO has refused the netting of interest claimed by the assessee. He further submits that in the second round, the A.O. vide order dated 28.03.2006 observed that the FDRs were not purchased out of the capital of the assessee and therefore, the netting of the interest accrued on FDR is not allowable. So, the A.O. has rightly treated the interest accrued on FDRs amounting to Rs. 2,23,344/= as 'income from other sources'. He also submits that the books of account were rejected under Section 145 of the Act and on the net profit rate was computed @ 8% prescribed in the statute. Lastly, he justified the levy of the penalty of Rs.4,00,000/- under Section 271 (1)(c). In the instant case, the penalty was imposed in the second round by the A.O. after making the addition by rejecting the books of account In the instant case, nothing was concealed by the assessee. It was the A.O. who has rejected the books of account in the second round and applied the 8% net profit rate prescribed under Section 44 AD. In the instant case, the turnover is more than 40 lacs, so Section 44 AD is not applicable, nonetheless the A.O. has inspired with the provision of Section 44 AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) of the Income Tax Act, can be imposed as per the ratio laid down in the case of C.I.T. vs. Arjun Prasad Ajit Kumar, (2008) 214 CTR (All) 355, Moreover, it may be mentioned that no finding of deliberate concealment of income was brought in the instant case as the assessee has never suppressed the interest income from FDRs. Interest income from FDR was duly shown. It was for the A.O. to treat this income as business income or income from other sources. But the fact remains that there is no concealment on the part of assessee. So, no penalty for concealment is leviable as per the ratio laid down in the case of C.I.T. vs. Attar Singh and bros, 2008 (11) MTC 35 (All).
By considering the totality and circumstances of the case, we set aside the impugned orders and cancelled the levy of the penalty of Rs.4,00,000/= (four lacs). The assessee will get the relief accordingly. The answer for both the substantial questions of law is in favour of the assessee and against the revenue.
Appellant :- Naresh Chand Agarwal
Respondent :- Commissioner Of Income Tax-I Lko (i) Whether on a true and correct interpretation of the section 275 of the Act, the Tribunal was legally correct in holding that the penalty order dated 28.09.2006 had been passed within the limitation period as prescribed thereunder, and in upholding the validity thereof?
(iii) Whether on a true and correct interpretation of the provisions of section 271 (1) (c), the Tribunal was legally correct in holding that the assessee's case fall within the said penal provisions and in upholding the levy of penalty thereunder? On the other hand, Sri D.D.Chopra, learned counsel for the department relied on the order passed by the lower authorities. He submits that earlier, the A.O. vide order dated 24.03.1995 has treated the amount of interest on FDR as income of the assessee separately. While applying net profit rate AO has refused the netting of interest claimed by the assessee. He further submits that in the second round, the A.O. vide order dated 28.03.2006 observed that the FDRs were not purchased out of the capital of the assessee and therefore, the netting of the interest accrued on FDR is not allowable. So, the A.O. has rightly treated the interest accrued on FDRs amounting to Rs. 2,23,344/= as 'income from other sources'. He also submits that the books of account were rejected under Section 145 of the Act and on the net profit rate was computed @ 8% prescribed in the statute. Lastly, he justified the levy of the penalty of Rs.4,00,000/- under Section 271 (1)(c). In the instant case, the penalty was imposed in the second round by the A.O. after making the addition by rejecting the books of account In the instant case, nothing was concealed by the assessee. It was the A.O. who has rejected the books of account in the second round and applied the 8% net profit rate prescribed under Section 44 AD. In the instant case, the turnover is more than 40 lacs, so Section 44 AD is not applicable, nonetheless the A.O. has inspired with the provision of Section 44 AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) of the Income Tax Act, can be imposed as per the ratio laid down in the case of C.I.T. vs. Arjun Prasad Ajit Kumar, (2008) 214 CTR (All) 355, Moreover, it may be mentioned that no finding of deliberate concealment of income was brought in the instant case as the assessee has never suppressed the interest income from FDRs. Interest income from FDR was duly shown. It was for the A.O. to treat this income as business income or income from other sources. But the fact remains that there is no concealment on the part of assessee. So, no penalty for concealment is leviable as per the ratio laid down in the case of C.I.T. vs. Attar Singh and bros, 2008 (11) MTC 35 (All).
By considering the totality and circumstances of the case, we set aside the impugned orders and cancelled the levy of the penalty of Rs.4,00,000/= (four lacs). The assessee will get the relief accordingly. The answer for both the substantial questions of law is in favour of the assessee and against the revenue.
Case :- INCOME TAX APPEAL No. - 163 of 2008
[Assessment Year - 2001-02]
Appellant :- Kanpur Plastipack Ltd. ( Through Its Managing Director Sri
Respondent :- Commissioner Of Income -Tax -Ii 15/295a, Vaibhav Bhawan HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
[Assessment Year - 2001-02]
Appellant :- Kanpur Plastipack Ltd. ( Through Its Managing Director Sri
Respondent :- Commissioner Of Income -Tax -Ii 15/295a, Vaibhav Bhawan HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
. Whether on a true and correct interpretation of the provision of Section 254, it was legally correct for the Tribunal to pass the impugned order which has the effect of reducing the relief under Section 80 HHC to "NIL", even though the Assessing Officer himself had allowed the same at Rs.16,89,778/- ?
However, it may be mentioned that the Tribunal can not enhance the addition as per the ratio laid down in the case of State of Kerala vs. Vijaya Store 116 ITR 15 (SC), where it was clearly observed that the Tribunal has no jurisdiction or power to enhance the assessment in the absence of an appeal or cross objection filed by the department.
Further, it may be mentioned that the Tribunal can not go beyond grounds of appeal. Its jurisdiction is limited than that of the first appellate authority, who has the power of enhancement and is treated as having all the powers of the Assessing Officer, as per the ratio laid down in the case of Manchanda International vs. C.I.T. [2005] 272 ITR, 577 (Delhi).
In the instant case, the A.O. has allowed the claim of deduction by an order passed under Section 154 on 17.06.2004 for a sum of Rs.16,89,778/-. Thus, the benefit of this amount was allowed by the A.O. and the same was enhanced by the first appellate authority to Rs.28,15,3162 vide order dated 14.02.2005, but the Tribunal has not allowed either one. The relief which was given by the A.O. was also declined by the Tribunal and the same is not permissible in the eye of law, as discussed above.
Hence, we allow the deduction which was already allowed by the A.O. vide order passed under Section 154 of the Act, dated 17.06.2004 for a sum of Rs.16,89,778/-. The assessee is entitled to get this relief. For this purpose, the impugned order passed by the Tribunal is modified. Except the relief for Rs.16,89,778/-, we uphold the impugned order passed by the Tribunal.
However, it may be mentioned that the Tribunal can not enhance the addition as per the ratio laid down in the case of State of Kerala vs. Vijaya Store 116 ITR 15 (SC), where it was clearly observed that the Tribunal has no jurisdiction or power to enhance the assessment in the absence of an appeal or cross objection filed by the department.
Further, it may be mentioned that the Tribunal can not go beyond grounds of appeal. Its jurisdiction is limited than that of the first appellate authority, who has the power of enhancement and is treated as having all the powers of the Assessing Officer, as per the ratio laid down in the case of Manchanda International vs. C.I.T. [2005] 272 ITR, 577 (Delhi).
In the instant case, the A.O. has allowed the claim of deduction by an order passed under Section 154 on 17.06.2004 for a sum of Rs.16,89,778/-. Thus, the benefit of this amount was allowed by the A.O. and the same was enhanced by the first appellate authority to Rs.28,15,3162 vide order dated 14.02.2005, but the Tribunal has not allowed either one. The relief which was given by the A.O. was also declined by the Tribunal and the same is not permissible in the eye of law, as discussed above.
Hence, we allow the deduction which was already allowed by the A.O. vide order passed under Section 154 of the Act, dated 17.06.2004 for a sum of Rs.16,89,778/-. The assessee is entitled to get this relief. For this purpose, the impugned order passed by the Tribunal is modified. Except the relief for Rs.16,89,778/-, we uphold the impugned order passed by the Tribunal.
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