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Tribunal News
1) Hitesh D. Gajaria v. ACIT
ITAT ‘K’ Bench, Mumbai
Before J. Sudhakar Reddy (AM) and
P. Madhavi Devi (JM)
ITA No. 992/Mum./2007
A.Y. : 2003-04. Decided on : 22-2-2008
Counsel for assessee/revenue : Deepak Shah/
Manvendra Goyal
S. 271B r.w. S. 44AB of the Income-tax Act, 1961 — Penalty
for failure to get accounts audited — Assessee, a chartered accountant by
profession, being proprietor and also a partner in a firm — Gross receipts
excluding his share of income from the firm was less than Rs.10 lacs — Penalty
imposed for failure to get the accounts audited — Whether AO justified — Held,
No.
Per P. Madhavi Devi :
Facts :
The assessee was a chartered accountant by profession. He had
a proprietory concern besides being a partner in Bharat S. Raut & Co. During the
year, he received share of profit and remuneration from the said firm, each of
which was more than Rs.10 lacs. However, the gross receipts earned by his
proprietary concern were less than Rs.10 lacs. According to the AO, the
provisions of S. 44AB were applicable. However, the assessee relying on the
opinion of the senior counsel contended that partner’s allocated amounts were
not gross receipts as contemplated in S. 44AB and accordingly, he was not
required to get the accounts audited. However, the AO did not agree and levied a
penalty u/s.271B r.w. S. 274 of the Act. On appeal, the CIT(A) confirmed the
AO’s order.
Held :
The Tribunal noted that assessee’s major income was not from
profession, but from the share of his profit from the professional firm.
According to it, share of profit cannot be equated with income from profession.
Further, it noted that the assessee had relied on the opinion of the senior
counsel, where-in it was opined that it was not necessary to get the accounts
audited. Therefore, relying on the Jodhpur Bench decision in the case of Dr.
Sunderlal Surana, the Tribunal held that the assessee had reasonable cause for
the failure to get his accounts audited as required u/s.44AB of the Act.
Accordingly, the penalty imposed by the lower authorities was deleted.
Case referred to :
Dr. Sunderlal Surana v. ITO, (2006) 105 TTJ (Jd) 907
2) ITO
v.
Lalitaben B. Kapadia
ITAT ‘K’ Bench, Mumbai
Before J. Sudhakar Reddy (AM) and
P. Madhavi Devi (JM)
ITA No. 8763/Mum./2004
A.Y. : 2001-02. Decided on : 20-9-2007
Counsel for assessee/revenue : N. R. Agarwal/
Milind Bhusari
S. 55A of the Income-tax Act, 1961 — Reference to
Valuation Officer — Value returned by the assessee was more than the fair market
value arrived at by the Valuation Officer and accepted by the AO — Whether
action of the AO in making reference to the Valuer justifiable — Held, No.
Per P. Madhavi Devi :
Facts :
The assessee had returned income under the head long-term
capital gain from the sale of immovable property. For the purpose, the assessee
had shown fair market value (FMV) as on 1-4-1981 as Rs.10 lacs. U/s.55A, the AO
made reference to the Valuation Officer who valued the property at Rs.6.6 lacs
as on the said date. On appeal, the CIT(A) took the FMV at Rs.9.36 lacs. Being
aggrieved, the Revenue appealed before the Tribunal.
Held :
According to the Tribunal, reference u/s.55A could be made
only if the AO was of the opinion that the value returned by the assessee was
less than its FMV. The act of the AO in accepting the valuation made u/s.55A,
which was undoubtedly less than the FMV claimed by the assessee, proved that the
AO was of the opinion that the assessee’s claim was more than its FMV. Thus,
according to the Tribunal, the AO was not justified in making reference to the
Valuation Officer. Therefore, relying on the decision of the Mumbai Tribunal in
the case of Rubab M. Kazerani, the Tribunal dismissed the appeal filed by the
Revenue.
Case referred to :
Rubab M. Kazerani v. JCIT, 97 TTJ (TM) 698 (Mum.)
3. Manisha R. Chheda v. ITa Mukesh P. Chheda v. ITa ITAT ‘B’ Bench, Mumbai Before J. Sudhakar Reddy (AM) and P. Madhavi Devi OM) ITA No. 5961 and 5962/Mum./2004
A.Y. : 2001-02. Decided on: 17-8-2007 Counsel for assessee/revenue: Pradeep Kapasi/ Chet Ram
s. 263 of the Income-tax Act, 1961 – Power to revise AO’s order – AO making certain additions to the income returned – Whether the Commissioner has power to revise AO’s order in order to sustain the addition but on different reasons – Held, No.
Per J. Sudhakar Reddy:
Facts:
In their return of income filed, both the assessees had returned besides other income, income from agriculture. According to the AO, the assessees had not proved with evidence that they were engaged in agricultural activities. Therefore, the income so declared was treated by the AO as income from other sources.
According to the CIT, the reasons for additions given by the AO were grossly inappropriate and inadequate for sustaining the additions. In order to strengthen the case of the Revenue, he held both the orders passed by the AO as erroneous and prejudicial to the interest of the Revenue. Accordingly, he directed the AO to make fresh assessment. The assessees challenged the orders passed by the CIT before the TribunaL
Held:
According to the Tribunal, the crr wanted to indicate the same thing what the AO had indicated, but for different reasons. It further observed that an order u/ s.263 cannot be passed for giving additional reasons or substituting reasons by a higher authority to support the same cause. According to it, when the AO had in fact rejected the claim of the assessee, it cannot be said that any prejudice was caused to the Revenue. Merely because the CIT was not happy with the reasons given by the AO, the same did not give jurisdiction to invoke the powers conferred on him u/ s.263. The Tribunal further observed that once an addition was made, the issue if appealed against, travelled to the First Appellate Authority whose powers were co-terminus with that of the Assessing Officer. The first appellate authority, according to the Tribunal, can always, if he feels that the reasoning given by the Assessing Officer was not sufficient, strengthen the order by giving his own reasons, if the situation so permitted. If the assessees did not carry the matter in appeal, the assessment orders attain finality. Thus, it was noted that, in either case, the scheme of the Act does not permit the supervisory Commissioner to give additional reasons for supporting the same additions that had been made by the AO.
For the reasons stated as above, the Tribunal quashed both the orders passed by the CIT u/ s.263 and allowed the appeals filed by the assessee.
4. Boon Industries v. ITO ITAT ‘K’ Bench, Mumbai Before O. K. Narayanan (AM) and Sushma Chowla OM) ITA No. 6736 and 6737/Mum./2006 A.Ys. : 1998-99 & 1999-2000. Decided on: 27-11-2007
Counsel for assessee Zrevenue :
Prakash Jhunjhunwala/Malathi Sridharan
S. 271(1)(b) read with S. 142(1) and S. 143(2) of the Income-tax Act, 1961 – Penalty for non-compliance with notices issued – On the facts held that penalty cannot be imposed.
Per O. K. Narayanan:
Held:
The penalty of Rs.0.2 lac each imposed for the years under appeal for non-compliance of statutory no-tices issued u/s.142(1) and S. 143(2) were deleted by the TribunaL According to it, it cannot be said that the assessee was indifferent in the matter and did not co-operate with the assessing authorities, when it complied with the requirements twelve times out of the sixteen times. It further held that the non-compliance cannot be said to be willful when the time given to the assessee to attend be-fore the AO was only four to six days. According to it, the failure of the assessee to sought adjournment or inform the AO was not that much material in the light of the conduct of the assessee by appearing before the AO for not less than twelve times.
5. Jayram Rajgopal Poduval v. ACIT ITAT ‘H’ Bench, Mumbai Before R. S. Syal (AM) and Sushma Chowla OM) ITA No. 7072/M/2004 AY. : 2001-02. Decided on: 18-1-2008 Counsel for assessee/revenue: Rajan Vora/ B. K. Singh
S. 6(6) of the Income tax Act, 1961 – Resident but not ordinarily resident – Whether the two conditions specified in the provisions are cumulative – Held, No.
Per R. S. Syal :
Facts:
The assessee’s stay in India in the preceding 10 years was as under:
According to the AO, the assessee was not ‘non-resident’ in 9 out of 10 years and had also resided in India for more than 730 days in the preceding 7 years. Hence, he held that the status of the assessee was ‘Resident and ordinarily resident’ (ROR). According to the CIT(A), in order that a person could be considered as Resident but not ordinarily resident (RNOR), he must fulfil the following two conditions given in S. 6(6)(a) viz. :
- He has not been resident in India in nine out of the ten previous years; and
- He has not during the seven previous years preceding that year been in India for a period of 730 days or more.
Since the assessee’s stay in India was for more than 730 days in the 7 preceding years, he, relying on the decision of the Gujarat High Court in the case of Pradeep J. Mehta, dismissed the appeal filed by the assessee.
Held:
The Tribunal noted that the provisions of S. 6(6)(a) uses the term ‘or’ and not ‘and’ between the two conditions given therein. Accordingly, the person would be considered as RNOR if he complies with either of the two conditions given therein. It dis-agreed with the CIT(A) that in order to qualify as RNOR, the assessee should fulfil both the condi-tions. In the case of the assessee, since he was not resident in India in nine out of ten previous years, his status would be that of RNOR. In support it also relied on the decision of the Apex Court in the case 4 of Morgenstern Werner.
Cases referred to :
1. Cl’T and Another v. Morgenstern Werner, (2003) 259 ITR 486 (SC)
2. PradeepJ. Mehta v. CIT, (2202) 256 ITR 647 (Guj.)
Note: The provisions of S. 6(6) have been substituted by the Finance Act, 2003 w.e.f. 1-4-2004. As per the substituted provisions, in order to qualify as RNOR, the person should be non-resident in nine out of ten previous years. The other alternative condition remains unchanged.
6. Innerwheel Club of Bombay v. ADIT ITAT ‘e’ Bench, Mumbai Before O. K. Narayanan (AM) and P. Madhavi Devi OM) ITA No. 4855/Mum.l2003
AY. : 1999-2000. Decided on: 12-10-2007 Counsel for assessee/revenue: Jayesh Dadia/ J. K. Garg
S. 272A(2)(e) r.w. S. 139(4A) of the Income-tax Act, 1961 – Penalty for failure to file return of income – Net income before claiming deduction u/s.11 be-low the taxable limit – Whether AO justified in levying penalty for delay in filing of return – Held, No.
Per P. Madhavi Devi :
Facts:
The assessee was a public charitable trust eligible for deduction u/s.ll. During the year under appeal, its gross total income was Rs.0.71 lac and after deducting establishment expenses of Rs.0.7Iac, the surplus remained was only Rs.353. It filed its return of income on 15-5-2000. For delay in filing return of income, the AO imposed a penalty of Rs.13,500 which was confirmed by the CIT(A).
Held:
The Tribunal noted that the AO had not rejected the audited accounts of the assessee. And as per the accounts, the net income of the assessee was below taxable limit even before claiming deduction u/s.11.
Therefore, relying on the decision of the Mumbai Tribunal in the case of Durgadevimata and of the Delhi Tribunal in the case of Purakh Chand Askaran Pugella Charitable Trust, the Tribunal held that the AO was not justified in levying penalty.
Cases referred to:
1. Durgadevimata v. lTG, (ITA No. 36/M/2000)
2. Purakh Chand Askaran Pugella Charitable Trust, 124 Taxman (Mag) 74 (Del.)
