Trust can adjust its excess expenditure in earlier years against income of subsequent years:

Assessee adjusted its excess expenditure incurred in earlier years against income of the year under consideration. AO denied such an adjustment. On appeal, both the lower authorities directed AO to allow the adjustment of excess expenditure in earlier years against income of year under consideration. The said view was also upheld by the Hon’ble High Court. Revenue’s appeal was dismissed accordingly.

[CIT Vs. OSHWAL EDUCATION TRUST - TAX APPEAL NO.391 of 2012 - GHC]

Addition u/s 68 cannot be made in respect of Opening balance:

AO made an addition of Rs.10,09,000/- on account of unsecured loans. The Tribunal observes that out of the said sum, only a sum of Rs.50,000/- was received in the year under consideration and the balance was on account of opening balance. Hence, the addition was restricted to Rs.50,000/- by the Tribunal. The said view was also upheld by the Hon’ble High Court. Revenue’s appeal was dismissed accordingly.

[CIT Vs. JAGATKUMAR SATISHBHAI PATEL - TAX APPEAL NO.324 of 2012 - GHC)

MAT credit needs to be taken into consideration before calculating interest u/s 234B and the said amendment is retrospective in nature:

S.234B provides for interest for defaults in payment of advance tax. While calculating “Assessed tax” for the purpose of calculating interest u/s 234B, the amount of “MAT credit” allowed to be set off in accordance with the provisions of S.115JAA shall be reduced from the same. The said amendment was effective from 01/04/2007. AO was of the view that the said amendment was “Prospective” in nature and hence he didn’t consider the MAT credit while calculating interest u/s 234B. It was held by the Hon’ble High Court that the said amendment was for the purpose of removal of ambiguity and needs to be held as “Retrospective” in nature. Revenue’s appeal was dismissed accordingly.

[CCIT Vs. GUJARAT MITRA PVT. LTD. - TAX APPEAL NO.274 of 2012 - GHC]

No addition can be made u/s 41(1) unless Revenue establishes that such liability has seized even if assessee doesn’t furnish details, addresses and identity of the creditors:

AO made an addition u/s 41(1) since the assessee had not furnished details, addresses and identity of the creditors at the assessment stage. ITAT deleted the said addition after holding that onus is on the Revenue to establish that the liability has seized and the Revenue had failed to establish the same. On Revenue’s appeal, the Hon’ble High Court upheld the ITAT’s view and dismissed Revenue’s appeal.

[MUKESH PRINTS - TAX APPEAL NO.264 of 2012 - GHC]

No addition can be made u/s 69C as “Unexplained stock” by aggregating negative stock from time to time. Peak of such stock can only be added.

AO found that there was negative stock in assessee’s case from time to time. He took aggregate of such negative stock and made an addition of Rs.47,72,525/- u/s 69C as “Unexplained stock”. ITAT observed that the peak of the negative stock i.e. Rs.(-)2,10,452/- was much less than the amount of addition made by AO. Assessee dealt in several variety of items and hence, it was not possible for it to maintain details of stock. Assessee had produced all the books and vouchers before AO for verification. Even profit rate had improved as compared to earlier year. Considering such facts, ITAT restricted the addition to Rs.3,00,000/-. The said view was upheld by the Hon’ble High Court and Revenue’s appeal was dismissed.

[JHAVERI INDUSTRIES - TAX APPEAL NO.257 of 2012 - GHC]

Interest income earned from share application money can be set off against public issue expenditure:

Interest earned on Share application money parked in a separate account till allotment can be adjusted towards expenditure incurred for raising share capital.

[SHREE RAMA MULTI TECH LTD. - TAX APPEAL NO.235 of 2012 - GHC]

Disallowance made u/s 40(a)(ia) in respect of expenditure for the purpose of developing housing projects would qualify for deduction u/s 80IB(10):

AO made disallowance u/s 40(a)(ia) in respect of expenditure incurred by the assessee for the purpose of developing housing projects since the assessee had not deducted tax at source as per the requirements of the Act. Hon’ble High Court held that such disallowance would ultimately go to increase the assessee’s profit from the business of developing housing projects. Deduction u/s 80IB(10) was already allowed to the assessee by following the decision in the case of “CIT vs. Radhe Developers – 341 ITR 403 (Guj)”. Hence, profit computed after disallowance u/s 40(a)(ia) would qualify for deduction u/s 80IB(10). Revenue’s appeal was dismissed accordingly.

[ITO Vs. KEVAL CONSTRUCTION - TAX APPEAL NO.443 of 2012 – GHC]

Once GP addition is made, no separate addition is called for in respect of unaccounted stock and discrepancy in stock as per books and as per bank statements:

Revenue challenged two additions viz. one in respect if unaccounted stock and another in respect of difference in stocks as per statement given to bank and as per the Balance-sheet. Since the ITAT had confirmed the GP addition made on account of negative GP, both the said additions were deleted by it. ITAT was of the opinion that there was nothing on record to show that extra GP addition confirmed by it was invested somewhere else. The said view was upheld by the Hon’ble High Court also.

[DEVSHREE SYNTEX PVT. LTD. - TAX APPEAL NO.166 of 2012 - GHC]

Deduction can be claimed in respect of “Provision for Performance Guarantee”:

The appellant had undertaken Govt. Contracts and had made provision for “Performance Guarantee” since it was to maintain certain establishment and undertake certain tasks in case any performance complaint is received for a period of three as agreed in the contract. AO disallowed the same on the ground that the liability was contingent and no proper estimation was made for arriving at such a figure. On Revenue’s appeal, the Hon’ble High Court observed that the appellant had taken statistics from experienced suppliers from the market and had also taken help of experts. The appellant was to widen its network of engineers and technical staff to different places in the State so that every compliant could be attended within minimum span of time not exceeding 24 hours. Penalty of Rs.500 per day was also envisaged if complaint was not attended within 24 hours. The appellant was also to set apart 3% of the deal value towards performance warranties. The Hon’ble High Court was of the view that it was not a case where estimation of performance guarantee was on ad hoc basis without any foundation. Hence, Revenue’s appeal was dismissed.

[S KUMAR INDUSTRIES LTD. – TAX APPEAL NO.162 of 2010 - GHC]

Delay in filing tax appeal is to be condoned if the same is on account of time taken in disposal of rectification application moved before ITAT:

There was a delay of 314 days in filing the tax appeal before the Hon’ble High Court. The Hon’ble High Court observed that the appellant had moved a rectification application before the ITAT. When such application was dismissed by ITAT, the appellant preferred a tax appeal before the Hon’ble High Court and filed a Civil Application for condonation of delay of 314 days. In light of the aforesaid facts, the said delay was condoned by the Hon’ble High Court.

[POONAM DYEING AND PTG. MILLS PVT. LTD. – CA 309 of 2012 - GHC]

No ad-hoc disallowance can be made in absence of any specific material and without pointing out any defects in vouchers:

AO disallowed 10% of vehicle/diesel oil-grease expense. CIT(A) and ITAT found that there was no specific material with the AO for making such disallowance. Assessee had maintained all the vouchers for the said expenditure and increase in expenditure was justified on account of inflation in diesel prices. Hence, the lower appellate authorities held that AO couldn’t have made such ad-hoc disallowance without pointing out any defects in bills and vouchers maintained by the assessee. The Hon’ble High Court didn’t interfere with the said order of ITAT since the issue was purely based on facts.

[G.K. PATEL & CO. - TAX APPEAL NO.1580 of 2011 - GHC]

Sales-tax Dept. cannot attach property of a person to recover outstanding sales tax dues of proprietary concerns of his mother and father:

The petitioner bought a Shed from a person who had bought the same from a Bank in a public auction. The said shed was situated at an Industrial estate which in the nature of a Co-Operative Society and the said society refused to transfer the said shed in the name of the petitioner on the count that the said shed was attached by Sales tax Dept. since there were huge outstanding sales tax dues recoverable from two proprietary concerns of father and mother of the original owner of the said shed. The Hon’ble High Court observed that the original owner of the shed stood as a guarantor in respect of loan granted by the concerned bank (which conducted the auction) to the proprietary concern of his mother and this transaction took place prior to attachment of the said shed by the sales tax Dept. Since the proprietary concern of mother of shed’s original owner couldn’t pay off her dues to bank, the bank auctioned the shed as per the provisions of SARFAESI Act and the sales tax Dept. didn’t raise any objection when the bank issued a public notice in respect of the said auction. It was held that the original owner of the shed had no legal relation with the said two proprietary concerns and hence, the sales tax Dept. couldn’t have attached the shed for recovering the dues of the said entities moreso when the original owner had no outstanding sales tax dues. Hence, the attachment by sales tax Dept. was set-aside and the Co-Operative Society was directed to register the said shed in the name of the petitioner.

[GIRIRAJ M. SHAH - SCA 10707 of 2012 - GHC]

No disallowance can be made u/s 40A(2)(b) unless AO brings on records any comparable case as to fair market value of similar services:

AO made disallowance u/s 40A(2)(b) which was deleted by the both the lower appellate authorities. On further appeal, the Hon’ble High Court observed that assessee had explained the AO the circumstances in which payment was made to sister concern and there was nothing unreasonable about such payment. AO made the said disallowance without referring to any comparable case to find out fair market value of similar services and what would be the reasonable amount for such work. Further, AO had accepted such payment in earlier years. It was held that the question as to whether any expenditure is excessive or unreasonable is a question of fact and hence was not required to be considered by the Hon’ble High Court.

[G.K. PATEL & CO. - TAX APPEAL NO.1580 of 2011 - GHC]

TRO cannot ignore or overrule NOC granted by ACIT after considering the facts in its entirety in respect of sale of immovable property and attach the said property on account of outstanding income tax dues:

Tax Recovery Officer (TRO) issued an order prohibiting and restraining original owner of an immovable property under consideration from transferring or charging the said property and the said order has been challenged by the petitioner who bought the said property from the original owner. On Writ, the Hon’ble High Court observed that the original owner having huge outstanding income-tax dues approached the ACIT for obtaining NOC to sell the said property. ACIT granted NOC subject to a condition that entire sale proceeds of the said property to the extent of income tax dues shall be remitted to the Dept. While granting such NOC, ACIT was fully aware of the fact that the sale proceeds were less than income-tax dues. The said NOC has not been even recalled. TRO couldn’t have ignored or overruled NOC granted by ACIT without any further process. It was thus held that the impugned order shall be set-aside subject to a condition that the entire sale proceeds shall be deposited with Dept. along with interest.

[VIKRAMSINH JILUBHA VALA - SCA 10847 of 2012 - GHC]

Commission paid to a foreign agent is allowable u/s 37:

AO disallowed commission paid by the assessee to a foreign agent. ITAT observed that the export sale proceeds received by the assessee were only net amount i.e. gross bill amount less agent’s commission. There was no dispute regarding the commission paid by the assessee and even the foreign buyer had stated that the commission would be distributed to agents abroad. Hence, it was held that assessee was eligible for deduction u/s 37 in respect of the said commission paid to a foreign agent. The said view was also upheld by the Hon’ble High Court.

[VISHAL JANAKKUMAR AGARWAL - TAX APPEAL NO.550 of 2011 - GHC &  SUPREME (INDIA) IMPEX LTD.  - TAX APPEAL NO.563 of 2011 - GHC]

Once order passed by CIT u/s 263 is quashed, AO has no jurisdiction to pass consequential order u/s 143(3) r.w.s. 263:

CIT passed an order u/s 263 which was quashed by ITAT. AO passed an order u/s 143(3) r.w.s. 263 as per the directions of CIT. Assessee challenged the said order passed by AO. Hon’ble ITAT held that since CIT’s order passed u/s 263 was quashed by ITAT, AO had no jurisdiction to pass any such consequential order. The said view was upheld by the Hon’ble High Court also.

[B DEVCHAND & SONS SHIPPING PVT. LTD. - TAX APPEAL NO.53 of 2012 - GHC]

Delay in filing appeal must be condoned if the same is technical in nature and well explained:

Assessee challenged the Asst. Order before CIT(A) who decided the issue against the assessee vide his order dated 09.01.02. Assessee preferred second appeal against the said order of CIT(A) and also moved an application u/s 154 before CIT(A). Assessee was granted substantial relief by CIT(A) vide his rectification order dated 17.03.03 and appeal before ITAT came to be withdrawn by the assessee on 10.03.04 since it was not interested in pursuing second appeal for the remaining small portion of disputed addition. Revenue preferred an appeal before ITAT against the rectification order dated 17.03.03 passed by CIT(A) and the same was allowed by ITAT vide order dated 31.03.08. Hence, assessee moved a rectification application before ITAT seeking to revive its previous appeal against order of CIT(A) and the same was dismissed by ITAT vide order dated 15.05.09.Thereafter, assessee filed an appeal before ITAT challenging CIT(A)’s original order dated 09.01.02 and also sought for condonation of delay. ITAT refused to condone the delay of 7 years and 3 months in filing second appeal and dismissed assessee’s appeal. On challenging the said order further, the Hon’ble High Court observed that by virtue of ITAT’s order dated 31.03.08 allowing Revenue’s appeal, the order of CIT(A) dated 09.01.02 came to be revived. After CIT(A) passed a rectification order in favour of the assessee, the assessee was aggrieved by the original order of CIT(A) 09.01.02 only when ITAT passed an order dated 31.03.08. Between 17.03.03 (when CIT(A) passed rectification order) and 31.03.08 (when ITAT reversed such rectification order), assessee had no cause, no reason or no possibility of maintaining an appeal against the original order of CIT(A) dated 09.01.02. It was held that the delay was technical in nature and well explained. Hence, the order of the ITAT was reversed, delay in filing the appeal before ITAT was condoned and the matter was remanded to ITAT for deciding the same on merits.

[UMAKANT  LEASING AND FINANCE PVT. LTD. - TAX APPEAL NO.1550 of 2011 - GHC]

If delay in filing appeal is explained, matter must be decided on merits rather than on technicalities:

ITAT dismissed assessee’s appeal on the ground of limitation since it was not convinced by assessee’s explanation in respect of delay of 791 days in filing appeal. The Hon’ble High Court observed that General Manager of the assessee company filed an affidavit stating that grounds of appeal were prepared, signature of the authorised person were obtained and appeal fees were also paid in time. However, for filing the said appeal, grounds of appeal against earlier order of CIT(A) dated 19.08.1994 were required and the same couldn’t be traced since the matter was very old. After continuous follow-up with the Income-tax Department, the same could be obtained and thereafter the appeal came to be filed. In due course, there was a delay of 7941 days in filing the appeal. The Hon’ble High Court was of the view that when cause substantial justice is pitted against technicalities, Courts are reluctant to terminate legal proceedings on technical grounds. Hence, ITAT’s order was reversed and ITAT was directed to decide the same on merits.

[GUJARAT ELECTRICITY BOARD - TAX APPEAL NO.1379 of 2011 - GHC]

Unintentional delay in filing of appeal must be viewed liberally and appeal must be decided on merits rather than on technical counts:

ITAT dismissed assessee’s appeal merely on a technical ground that there was a delay of 883 days in filing the said appeal. The Hon’ble High Court observed that the assessee had instructed the concerned Chartered Accountant to present the appeal but it couldn’t be presented in time on account of oversight of the office boy. Though the affidavit of the office boy was not filed at the time of hearing, the same was filed before the decision of the ITAT. The Hon’ble High Court was of the view that unintentional delay in filing of appeal must be viewed liberally and appeals must be decided on merits rather than on technical aspects. It was held that the ITAT ought to have taken into account the said affidavit and minor discrepancy in the name of office boy should not be fatal to the main cause. Accordingly, the matter was remanded to the ITAT to reconsider the issue after taking into account the affidavit of the office boy.

[MAHENDRA AMBALAL PATEL - TAX APPEAL NO.1584 of 2011 - GHC]

Exemption u/s 54EC can be claimed in respect of “Depreciable assets”:

Assessee sold certain “Depreciable Assets” forming part of “Block of Assets” which were held for more than 36 months, earned capital gain, invested such funds in specified bonds and claimed exemption u/s 54EC which was denied by AO since he was of the view that by virtue of S.50, such capital gain shall be “Short term capital gain” whereas exemption u/s 54EC is available only in respect of “Long Term Capital Gain”. The Hon’ble High Court held that special provisions of S.50 for computation of capital gains in case of depreciable assets are confined in relation to S.48 & 49 only. S.54EC is available in respect of “Long term capital asset”. Once such condition is fulfilled, the fact that asset was such on which depreciation has been allowed and therefore computation of capital gain would be done as per S.50 by applying modifications in S.48 & 49 would not change the “Nature” of capital assets for “Availability of exemption u/s 54EC”.

[HIMALAYA MACHINERY PVT. LTD. - TAX APPEAL NO.271 of 2012 - GHC]

Books of accounts can’t be rejected merely on the basis of variation in consumption of electricity:

AO rejected assessee’s books of accounts and made addition u/s 145(3). Both the lower authorities observed that AO did not find any specific defects in the books of accounts and had rejected the same merely on the basis of variation in consumption of electricity. Hence, it was held that AO had committed an error in rejecting the books and the addition was deleted. The said view was upheld by the Hon’ble High Court.

[PRIYANKA POLYSTER - TAX APPEAL NO.231 of 2012 - GHC]

No penalty u/s 271(1)(c) if claim is made on the basis of orders of earlier years and entire facts are within are within the knowledge of Revenue:

AO levied penalty u/s 271(1)(c) which was deleted by lower appellate authorities after finding that the claim in respect of which penalty was levied was made on the basis of orders of earlier years and entire facts were within the knowledge of the Revenue. The said view was upheld by the Hon’ble High Court also.

[SOMA TEXTILES AND INDUSTRIES LTD. - TAX APPEAL NO.205 of 2012 - GHC]

No penalty can be levied u/s 271D if assessee proves that there was a reasonable cause:

AO levied penalty u/s 271D since the assessee had accepted certain deposits in cash. CIT(A) and ITAT found that assessee was supposed to show certain bank balance for obtaining U.S. visa for his son and hence, he accepted the said cash deposits. CIT(A) and ITAT found it to be a reasonable cause for accepting deposits in cash and deleted the said penalty. The said view was upheld by the Hon’ble High Court also.

[PANACHAND HIRALAL LUNECHIA - TAX APPEAL NO.239 of 2012 - GHC]

No penalty can be levied u/s 271E if assessee proves that there was a reasonable cause for failure on his part:

Assessee had huge outstanding dues to various creditors for over 20 years and also had to recover huge amount from one entity for which he had filed a petition before Hon’ble High Court in 1983. As per Hon’ble High Court’s decision, he received part payment from his debtors from which he made payments to his creditors in cash and hence, AO levied penalty u/s 271E. Assessee explained the Hon’ble ITAT that his creditors insisted on cash payments and were visiting his house every day. He was 80 years old and was unaware of the legal requirement of making such payments through cheque. The said explanation was found to be bona fide by ITAT and so, ITAT deleted the said penalty in view of provisions of S.273B. The said view was upheld by the Hon’ble High Court also.

[MAHESH HARIKRISHANDAS AMIN HUF - TAX APPEAL NO.190 & 191 of 2012 - GHC]