TIOL Update - 2016-TIOL-INSTANT-ALL-316

Office Order

ITAT President transfers FOUR Members

CBDT Member Gopal Mukherjee to hold zonal charge of Karnataka, Goa & Kerala in addition to Kolkata, Guwahati & Patna

CASE LAWS

2016-TIOL-1810-HC-AHM-VAT + Story

WEST COAST WATERBASE PVT LTD Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: July 28, 2016)

VAT - Legislature providing for exemption from payment of tax does not necessarily and by itself imply that the product was otherwise exigible to tax - Whether before or after 31.03.2012, all cattle feed including prawn feed continued to fall within the list of goods, the sale or purchase of which are exempt from tax - Assessing Officer could not have ignored the earlier order of determination which was binding on him – Order set aside and petition allowed: High Court [para 16, 19, 23, 24]

Petition allowed

Observations of High Court -

+ Under subsection (3) of section 80 of the VAT Act, the order of determination passed by the Deputy Commissioner under section 62 of the Sales Tax Act would continue to hold the field.

+ Even after introduction of the VAT Act, the order passed by the Deputy Commissioner on 18.01.2001 continued to hold the field, insofar as the question of proper classification of the petitioner's commodity viz. prawn feed was concerned.

+ Assessing Officer was bound by the order of determination passed by the Deputy Commissioner and could not have taken a different view unless of course, there had been any material change.

+ We have noticed that with effect from 31.03.2012, the State Government exempted aquatic feed from all taxes. This by itself would not mean that the legislation indicated that prior to 31.03.2012 the product was taxable.

+ This exemption notification is not in the nature of clarificatory amendment either clarifying or making any amendment with retrospective effect concerning the product in question.

+ Had the legislature made any specific change either prospectively or with retrospective effect which would change the very fundamental question of taxability of the product, Assessing Officer would have been well within the power to consider such question independently ignoring the order of determination passed by the Deputy Commissioner.

+ All that the legislature has done is to provide for a specific exemption for all aquatic products with effect from 31.03.2012. This exemption entry in no manner, amended any provisions of the First Schedule to the VAT Act, which continued to carry Entry 14 pertaining to the cattle feed, and thus whether before or after 31.03.2012, all cattle feed continued to fall within the list of goods, the sale or purchase of which are exempt from tax.

+ The legislature providing for exemption of such product from payment of tax does not necessarily and by itself imply that the product was otherwise exigible to tax.

+ Question of relegating the petitioner to the alternative remedy therefore would not arise, when we find that the Assessing Officer has gone against an order of determination which was binding on him and when we find that his reasons for discarding such order of determination are wholly invalid.

2016-TIOL-1809-HC-MAD-IT + Story

DIX FRANCIS Vs INCOME TAX SETTLEMENT COMMISSION: MADRAS HIGH COURT (Dated: August 12, 2016)

Income tax - Sections 132, 158BC, 245C(1) & 245D(1)

Keywords - block assessment - disclosure of additional tax - filing of Nil return - settlement application & undisclosed income

Whether the High Court exercising writ jurisdiction, should re-examine and interfere with a factual finding recorded by the Settlement Commission - NO: HC

Whether the reasons accorded by the Commission can be substituted by a Writ Court, when there is no allegation of violation of principles of natural justice nor any plea of malafide raised by the assessees - NO: HC

Whether mere fact of involvement of large number of partners & firms, can be claimed by an assessee as a ground to show complexity of investigation, while filing application for settlement - NO: HC

Whether the requirement of filing of return and disclosure of additional tax payable, is a pre-requisite for an assessee to be entitled to file the application before the Settlement Commission and it cannot be reduced to a mere technical requirement - YES: HC

The assessee is a partnership firm engaged in the manufacture and sale of gold and silver ornaments at Kunamkulam Trichur District, Kerala State. The firm consists of about 13 partners, who admittedly, belong to the same family i.e., they are brothers and their respective spouses. The business activities of the brothers and their spouses were manufacture and sale of gold and silver ornaments. According to the assessee, there was intermingling of funds between the family members and business concerns. In the meanwhile, a search was conducted u/s 132 in all the business establishment workshops, residential premises etc., in which about 12kgs of gold were seized apart from that fixed deposit receipts, cash certificates, books of accounts, etc. Pursuant to the search and seizure operation, notices were issued u/s 158BC calling upon the assessees to furnish returns setting forth total income including undisclosed income for the said block period. Uniformly all the assessees filed NIL returns in Form-2B before the AO and after about a month, filed Settlement Application before the Settlement Commission, offering undisclosed income as additional income. The Settlement Commission however rejected the said applications.

Having heard the parties, the High Court held that,

++ the order impugned in the present petition is an order passed by the Settlement Commission. Section 245A of the I-T Act is the definition section, which defines "case" under clause (b) of the Section to mean any proceedings under the Act for the assessment or re-assessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before the Income Tax Authority on the date on which an application u/s 245C(1) is made. Proviso states that where any appeal or application for revision has been preferred after the expiry of the period specified for the filing of such appeal or application for revision and which has not been admitted, such appeal or revision shall not be deemed to be a proceedings pending within the meaning of this clause. It is not in dispute that the application filed by the assessees before the Settlement Commission would fall within the definition of case as defined u/s 245A(b). Section 245C deals with 'Application for Settlement of cases', which provision was invoked by the assessees, while filing their applications. Section 245D stipulates the procedure to be followed by the Commission on receipt of an application u/s 245C. The Settlement Commission has rejected the assessee's application by the impugned orders, the correctness of which are being tested in these petitions. The submission made by the DR before the Commission that the undisclosed income could have been offered by the assessees before the AO, was found to be of considerable force. The Commission was of the view that determining the assessee's income for the block period based on the aggression of their net wealth and cash flow statement does not present any complexity of investigation and that all the assessees have rushed to the Commission soon after filing their block returns declaring NIL income and this buttress an attitude of non-cooperation with the department on the part of the assessees and appears to be an attempt to obstruct the department's enquiry and examination pursuant to the facts, which came to light as a result of search. Further, the Commission was of the view that having regard to the huge seizure of unaccounted assets at the time of search, additional income offered by the assessees in their settlement applications is not prima facie full and true;

++ section 245D postulates three circumstances, which the Commission would take note for either rejecting or entertaining an application for settlement, they being (i) on the basis of the materials contained in the Commissioner's report; (ii) having regard to the nature and circumstances of the case; or (iii) the complexity of the investigation involved therein. The Commission, in the impugned order, has considered the nature and circumstances of the case taken note of and the observations contained in the Commission's report and held that there is no complexity of investigation. The question would be whether this Court exercising Writ jurisdiction would re-examine such factual finding recorded by the Commission. The Division Bench of the Karnataka High Court in the case of N.Krishnan vs. Settlement Commission, has held that the Court should be slow in interfering with the Settlement Commission's order and can be interfered if there are grave procedural defects, such as violation of mandatory procedural requirements of the provisions in Chapter XIX of the Act and/or violation of the rules of natural justice are made out or if it is found that there is no nexus between the reasons given and the decision taken by the Commission and that the Court cannot interfere either with an error of fact or error of law alleged to have been committed by the Commission. The Commission, on examination of the facts, the Commissioner's report, the nature and circumstances of the case, thought fit to reject the applications, as it is not a case worth to be proceeded with. The specific finding of the Commission is that there is no complexity of investigation involved. The counsel for the assessee sought to project the complexity of the case by referring to the number of firms, which were carrying on business and the number of partners. Would this factor alone lead to a complexity of investigation. The Commission in the impugned order took note of the submission of the Revenue that there was a large scale suppression of stock deducted at the time of search and unaccounted gold ornaments were seized, other documents relating to unaccounted investments were seized and the partner of Dix Francis admitted deriving undisclosed income in his sworn statement recorded at the time of search and the subsequent retraction after nearly a year, can be given no credence;

++ the Revenue contended that there is no complexity of investigation and it is a case of sheer non-cooperation by the assessees to complete the block assessment proceedings. This submission by the Revenue found favour with the Settlement Commission to examine the nature and circumstances of the case. The Commission noted the conduct of the assessees and comparing the huge seizure of unaccounted assets at the time of search and the additional income offered in the Settlement Application is not prima facie full and true. Thus, the conclusion arrived at by the Commission stating that there is no complexity of investigation having been rendered taking note of the nature and circumstances of the case and on the basis of the materials contained in the Commissioner's report, the said findings cannot be disagreed on the mere fact that there are several partners and several firms alone would not result in complexity of investigation, especially when the Revenue has clearly set out as to what is the nature and circumstances of the case. The Courts have shown restraint in the matter and refused even to direct the Commission to expedite the process. If such is the position of law as propounded in various decisions, the question would be as to whether this Court should exercise its jurisdiction and interfere with the impugned order;

++ considering the power granted to the Commission u/s 245D(1) coupled with the law referred to in the preceding paragraphs, the only answer to the question should be in the negative. The reasons accorded by the Commission will not be substituted by a Writ Court, more so when there is no allegation of violation of principles of natural justice nor any plea of malafide raised by the assessees. In the view of this court, merely because there are number of partners and several firms, itself will not make the matter complex. The expression complexity of investigation connotes a different meaning and the complexity will be decided by the Commission considering the materials, contained in the Commission's report and having regard to the circumstances of the case. In my view, the contention of the assessee that NIL return has been filed to comply with the "technical requirements", cannot be countenanced. Section 245C(1) states that an assessee may at any stage of the matter relating to him, make an application containing full and true disclosure of his income, which has not been disclosed before the AO, explaining the manner in which such income has been derived, additional amounts of income tax payable on such income and such other particulars, as may be prescribed to the Settlement Commission to have the case settled. To be entitled to file such an application u/s 245C(1), the assessee is required to comply with the conditions provided in the proviso. Therefore, the return which is contemplated under clause (a) of the proviso mandates the assessee to file a return, which he is or was required to furnish under any of the provisions of the Act and (b) the additional amount of income tax payable on the income disclosed in the application exceeds one hundred thousand rupees. In my view the requirement is a pre-requisite to be entitled to file the application before the Commission and cannot be reduced to an insignificant or a mere technical requirement.

Assessee's petition dismissed

2016-TIOL-1808-HC-MUM-IT

CIPLA LTD Vs ACIT: BOMBAY HIGH COURT (Dated: August 9, 2016)

Income Tax Act - Civil Procedure Code - Order 41 Rule 22, Rule 907, 908.

Keywords - appeal, dismissal, removal of office objections, cross objection, maintainability.

Whether the Cross Objection can be entertained by the Court where the appeal itself was never on the file of the Court and was rejected for failure to remove Office Objections - No: HC

The Income Tax Appellate Tribunal passed the impugned Order in respect of the assessment year 1999-2000 and 2000-2001. Being aggrieved by the order of the ITAT, Revenue filed its appeal before the Court. The Department's appeal was served on the applicant-assessee. Assessee filed the Cross Objections. The appeal was rejected for non-removal of office objections. The counsel for the assessee in the Cross Objection submits that the Cross Objection is maintainable notwithstanding the rejection of the appeal in view of the fact that the applicant had notice of the hearing of appeal and it is pursuant to said notice that the Cross Objection came to be filed and within time prescribed by law.

Having heard the parties, the Court held that,

++ the appeal was not dismissed "for default" or "withdrawn" but it came to be rejected, not on merits, but for failure to remove Office Objections. Compliance with office objections is a necessary process and part of the justice administration system and reflecting on parties conduct of the case. Non-removal of objections despite repeated adjournments as in the instant case or even generally, within the time specified signifies inability or a conscious decision on the part of a litigant to not pursue the case. Once a case is rejected for non compliance with objections and more particularly after time was extended by the Court to remove objections within the time specified, the appellant loses his remedy of appeal. It is not then open for the Cross objector to insist, as of right, that the Cross objection must be heard notwithstanding rejection of the appeal; (para 19)

++ the Court had not assumed jurisdiction to entertain the appeal since the appeal was rejected at the very preliminary stage. Since the applicant had filed its Cross Objections even before the appeal was heard for admission, the issue of limitation may not arise. However, filing of the Cross Objection before time in that sense does not entitle the applicant to a hearing of the Cross Objection on merits in the absence of the appeal being admitted; (para 20)

++ there is nothing to show that the Court had assumed jurisdiction and the merits of the matter has been considered. There is nothing to indicate that the matter was actually covered by any prior decision of Court; (para 21)

++ the Appeal was never taken on the file of this Court and was dismissed for nonremoval of office objections. There was no occasion for this Court to consider the issue arising in the appeal on merits. There has not been a hearing on merits at all before the appeal came to be rejected. The record indicates that the Cross Objections nevertheless continued to remain on file since the office objections therein were removed as directed by the Court on 4th October, 2010. In the circumstances, there will be no occasion for the Revenue to be heard on merits in the appeal. The applicant had notice of "date fixed for hearing of the appeal". The expression "notice of date fixed for hearing" necessarily meant the date fixed for hearing of the appeal on merits; (para 23)

++ Under High Court Rule 986, an appeal can be rejected by the Prothonotary and Senior Master if the Appellant does not remove office objections within 30 days of lodging an Appeal. In the present case it is the Court that has granted additional time to remove office objections failing which the appeal would stand rejected and it was accordingly rejected. Rule 907 does not give any right to the Appellant, over and above what is provided under Order 41 Rule 22 Sub-Rule (4). All that it does is to enable the cross objector to seek hearing of the Cross Objection as if the same were Cross Appeal, during pendency of the appeal and nothing more. Present Cross Objection is not maintainable in view of the fact that the Appeal itself was rejected; (para 27)

Assessee’s Cross objection dismissed

2016-TIOL-1807-HC-AHM-VAT

SAMAY ENTERPRISE Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: August 11, 2016)

Gujarat VAT Act - Section 45.

Keywords - dealer's larger liability - provisional attachment & vicarious involvement.

Whether a dealer can be made liable for larger liability through principle of vicarious involvement, without enshrining the evidences to invoke said principle - NO: HC

Whether an order for provisional attachment is required to be exercised with due care, in case such order is of the nature of attachment before judgment - YES: HC

The case of department is that assessee, who are closely connected concerns of same family, were found to be in possession of unaccounted stock of goods in their undeclared godowns. On basis of preliminary investigation, department estimates the tax liability of Rs.2,59,000/- and possible penalty liability of Rs.5.07 crorers. That the investigation in case of M/s. Dharampal Satyapal Ltd. is going on. Preliminary investigation suggests that through 12 fictitious firms, goods worth Rs.961 crores have been traded showing them as interstate sale, whereas the goods were sold within the State and thereby tax with interest and penalty worth more than Rs.400 crores is estimated liability that may arise in said scam. The department seeks to attach joint and several liability on assessees. On such basis, under three separate orders dated 11.2.2016, 19.4.2016 and 22.2.2016, the department has attached various movable and immovable properties of petitioners, which are in nature of bank accounts, immovable properties such as residential bungalow, offices and commercial establishments, stock of goods lying in godowns, cars and other personal belongings of petitioners.

Having heard the parties, the High Court held that,

++ with respect to assessees’ larger liability, it prima facie appears that even according to department, the primary liability would rest on M/s. Dharampal Satyapal Limited. From the orders of attachment or from the affidavit filed by State Government, it is not clear how the assessees are sought to be made liable for such larger liability through principle of vicarious involvement.

++ department, undoubtedly, has powers under section 45 of VAT Act to pass an order of provisional attachment to protect the interest of revenue during pendency of any proceedings of assessment or reassessment of turnover escaping the assessment, if Commissioner is of the opinion that in order to do so, it is necessary to attach any property belonging to the dealer. However, being an order in nature of attachment before judgment, which undoubtedly would have harsh consequences on a dealer, the powers have to be exercised sparingly and with due care.

++ by an interim order, Court had already granted substantial relief to assessees. Attachment of bank accounts of petitioners were lifted. Simultaneously, the condition for maintaining the minimum stock as mentioned in attachment order was also suspended. Court is inclined to confirm the interim directions contained in order dated 6.5.2016 and make the same absolute subject to minor modifications and safeguards.

Petition disposed of

2016-TIOL-1806-HC-AHM-VAT

ARC LAMICRAFT PVT LTD Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: August 19, 2016)

Gujarat VAT Act - Sections 45(1), 64 & 68(4).

Keywords - additional attachment - interest of Revenue & verification of past taxes.

Whether additional attachment of consignment is sustainable, in case the Department has already attached enough goods lying in assessee's gowdown against his alleged tax dues - NO: HC

THE assessee's truck alongwith goods in nature of ceramic tiles in transport came to be detained. Initially movement of goods were halted for the reason of verifying whether petitioner had paid past taxes or not. This was purportedly in exercise of powers under section 64 of the Act. Subsequently, order of attachment under section 45(1) of the Act was passed. The report also reveals that against the dues of the petitioner of Rs.1,59,45,788/, the competent authority has passed a separate order dated 10.08.2016, attaching the petitioner's goods lying at the godown which valued at Rs.1,60,58,600/.

Having heard the parties, the High Court held that,

++ none of the grounds on which an officer incharge of a checkpost can seize the goods and detain the vehicle, include verification of payment of past taxes. It is true that under section 45(1) of the VAT Act, the competent authority has the power to provisionally attach the goods of a dealer pending any proceedings for assessment or reassessment if he is of the opinion that for the purpose of protecting the interest of the Revenue, it is necessary to do so. However, the powers under section 68(4) of the Act and of provisional attachment under section 45(1) of the Act are vastly different in nature.

++ further, against the alleged tax dues of Rs.1.59 crores of assessee, the department has already attached other goods worth Rs.1.60 crores, lying in the petitioner's godown. Additional attachment of the consignment of the goods in question therefore would not be necessary. Respondents are directed to release the truck and the goods in question detained at Bhilad checkpost.

Petition disposed of

2016-TIOL-1514-ITAT-MAD

BAR COUNCIL OF TAMIL NADU Vs DDIT: MADRAS HIGH COURT (Dated: July 15, 2015)

Income tax - Sections 11, 12AA & 119(2)(b)

Keywords - application for registration - condonation of delay & seperate legal entity.

Whether the registration obtained by the Bar Council of Tamil Nadu u/s 12AA can be a basis for claiming exemption u/s 11 for 'Advocates Welfare Fund' merely because the 'Said Fund' was established by the Bar Council, when both the entities are creation of different statutes - NO: ITAT

The assessee is a statutory regulatory body established under Advocates Act, 1961 to regulate the profession of legal practice in India. It has established a Welfare Fund for the benefit of practicing Advocates. According to the assessee's counsel, the Advocates Welfare Fund was not a legal entity, but, was a fund established by the Bar Council of Tamil Nadu for the welfare of legal practitioners. However, the AO as well as the CIT(A) treated the Advocates' Welfare Fund as a separate legal entity and assessed the income. Thereafter, referring to the order of the DIT, the assessee's counsel submitted that on the basis of application filed on 25th Feb 2011, registration u/s 12AA was granted w.e.f 25th Feb 2011. The assessee filed an application before the CBDT u/s 119(2)(b) praying for condonation of delay for the A.Y 2003-04 onwards till 24th Feb 2011 in filing the application for registration u/s 12AA. The CBDT, in fact, condoned the delay in filing the application for the A.Ys 2003-04 to 2010-11. However, the CBDT kept it open to grant registration u/s 12AA to the DIT. Since the delay in filing the application for registration was condoned, the assessee's claim for exemption u/s 11 had to be examined after the order of the DIT for the A.Ys 2003-04 to 2010-11.

Having heard the parties, the Tribunal held that,

++ it is noted that the order of the DIT clearly says "Bar Council of Tamil Nadu and its unit Advocates' Welfare Fund" in the preamble portion of the order. It is not in dispute that Bar Council of Tamil Nadu was established under the provisions of the Advocates Act, 1961. The Bar Council of Tamil Nadu constituted a fund called Advocates' Welfare Fund for the welfare of the practicing advocates. The assessee now claims before this Tribunal that the application for registration u/s 12AA was filed on 25th Feb 2011 and the DIT granted approval u/s 12AA w.e.f 25th Feb 2011. The Bar Council of Tamil Nadu has filed the application before the CBDT for condonation of delay in filing the application for registration u/s 12AA for the A.Ys 2003-04 to 2010-11. In fact, the delay was condoned and the matter was left to the discretion of the DIT to satisfy himself about the fulfilment of the conditions prescribed under the Act which are necessary for granting registration u/s 12AA. It is not in dispute that for A.Ys 2003-04 to 2010-11, the claim of exemption u/s 11 was rejected by the authorities on the ground that there was no registration u/s 12AA. In view of the CBDT's order condoning the delay in filing the application, this Tribunal is of the considered opinion that the matter needs reconsideration by the AO in the case of Bar Council of Tamil Nadu;

++ coming to the Advocates' Welfare Fund, the Revenue claims that the assessee itself applied for Permanent Account Number to treat itself as a separate legal entity. However, the assessee claims that it is a part of Bar Council of Tamil Nadu, therefore, it cannot be treated as a separate legal entity. Section 3 of the Advocates' Welfare Fund Act enables the respective State Governments to constitute a fund called "Advocates' Welfare Fund". At the same time, Section 4 of the Advocates' Welfare Fund Act enables the respective State Governments to appoint Trustee Committee for the purpose of administering the Fund. The office-bearer of the Bar Council of Tamil Nadu and Advocates' Welfare Fund are totally different. Bar Council of Tamil Nadu was administered by the elected Chairman or Vice-Chairman, while Advocates' Welfare Fund is administered by the Trustee Committee nominated by the respective State Governments. Therefore, it is obvious that Bar Council of Tamil Nadu and Advocates' Welfare Fund are two different statutory bodies established under the respective statutory enactments, namely, the Advocates Act, 1961 and the Advocates' Welfare Fund Act, 2001. Sub-section (2) of Section 4 of the Advocates' Welfare Fund Act clearly says that Trustee Committee of Advocates' Welfare Fund shall be a body corporate having perpetual succession and common seal with power to acquire and hold and dispose of the property. Therefore, the Parliament in its wisdom made it very clear that Bar Council of Tamil Nadu is a separate legal entity and Advocates' Welfare Fund is another legal entity. Therefore, this Tribunal is of the considered opinion that the two entities have to be treated separately and the registration, if any, for claiming exemption u/s 11 has to be obtained separately. In other words, the registration obtained by the Bar Council of Tamil Nadu u/s 12AA cannot be a basis for claiming exemption u/s 11 for Advocates' Welfare Fund;

++ in the present case, even though the preamble of order of the DIT says "Bar Council of Tamil Nadu and its unit Advocates' Welfare Fund", the body of the order clearly says that the registration was granted only to the Fund and not to the Bar Council. The CBDT, however, after examining the application filed by the Bar Council of Tamil Nadu, found that the registration was granted with effect from 25.02.2011 on the basis of application. Therefore, there is a confusion as to whether the Bar Council of Tamil Nadu and Advocates' Welfare Fund have filed any joint application for registration or the individual application filed by the respective statutory body was clubbed together by the DIT and passed a common order. These facts are not clear from the order of the lower authorities. Under the scheme of the Income-tax Act, each statutory body has to file independent application for registration u/s 12AA. Be that as it may, now registration was granted apparently to the Advocates' Welfare Fund by the order of the DIT and the CBDT has condoned the delay in filing the application for registration. In view of these factual confusion, this Tribunal is of the considered opinion that the matter needs to be reexamined by the AO.

Case remanded

2016-TIOL-1513-ITAT-VIZAG

DEEPAK MITTAL Vs ACIT: VISAKHAPATNAM ITAT (Dated: July 15, 2016)

Income Tax - Sections 68, 69, 80GGC, 142(1), 143(2) & 143(3).

Keywords - confirmation letters - donation to political party - source of funds - unexplained sundry debtors & unexplained cash deposits.

Whether recognition of a political party by the Election Commission of India, is a necessary condition in order to claim deduction u/s 80GGC in respect of donation given - NO: ITAT

Whether sundry creditors brought forward from previous year, can be treated as unexplained creditors - NO: ITAT

Whether an addition can be made in assessee's income on account of unexplained cash deposits, even if the assessee has no bank account in the disputed bank alleged by the AO - NO: ITAT

Whether when the assessee, in the capacity of proprietor, has proved that it had incurred expenditure being interest on loan and depreciation on motor car used for the purpose of business, is it still possible for the AO to disallow the expense incurred - NO: ITAT

The assessee is an individual engaged in the business of trading in industrial spare parts, filed his return of income for the A.Y. 2009-10 on 30-09-2009 declaring total income of Rs. 4,62,930/-. The case has been selected for scrutiny assessment and accordingly, notices u/s 143(2) and 142(1) of the Act, were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished details called for. The A.O. completed assessment u/s 143(3) of the Act and determined total income of Rs. 1,17,07,175/- by making various additions on account of unexplained deduction u/s 80GGC, unexplained sundry debtors and unexplained cash deposits. On appeal, CIT(A), forwarded additional evidences filed by the assessee to the A.O. for his comments. The A.O. in the remand report, without commenting on the evidences filed by the assessee, stated that additional evidences filed by the assessee may not be accepted. The CIT(A), after considering the evidences filed by the assessee and also taken into account remand report of the A.O. held that as per the provisions of sec. 80GGC, any donation paid to a political party which was recognized by the Election Commission of India was allowed as deduction. The assessee had paid donation to JOGO party which was not recognized by the Election Commission of India. Further, the assessee had not proved donation with confirmation letter from the political party. With these observations confirmed disallowance of deduction claimed u/s 80GGC. As regards the addition towards unexplained sundry creditors, CIT(A) deleted the addition made by A.O. by holding that, the assessee has furnished confirmation letters from the parties and the letters issued by the parties confirmed that all the credits were brought forwarded from last financial year, therefore no addition can be made for brought forward credits during the current financial year. Similarly, CIT(A), deleted the addition towards unexplained credits into ICICI bank account, by holding that assessee had proved that he had not maintained any bank account with ICICI Bank. The A.O. failed to counter with evidence, the contention of the assessee that he does not have any bank account with ICICI Bank.

Having heard the matter, the Tribunal held that,

Unexplained deduction u/s 80GGC

++ assessee contended that, to be qualified for deduction u/s 80GGC, registration u/s 29A of the Representation of People Act, 1951 is must, but not recognition by Election Commission of India. We find force in the arguments of the assessee for the reason that, any contribution given by any person to a political party registered u/s 29A of the Representation of People Act, 1951 whether or not recognized by the Election Commission of India is deductible u/s 80GGC. The assessee has furnished cheque details for having paid the amount. The assessee also furnished details of political party along with confirmation letter issued by the JOGO party. On perusal of details available in the paper book, we find that JOGO party is registered u/s 29A of the Representation of People Act, 1951 by the election Commission of India. The assessee has furnished letter issued by the Election Commission of India, notification published in the Gazette of India and Form No. 24A a return of contributions submitted to Election Commission of India in terms of sec. 29C of the Representation of People Act, 1951. All the documents indicate that JOGO party is unrecognized registered political party u/s 29A of the Representation of People Act, 1951. The contribution return in form No. 24A filed with Election Commission of India, indicate the name and address of donor details. Therefore, we are of the view that the A.O. was erred in disallowing deduction claimed u/s 80GGC. Hence, we set aside the CIT(A) order and direct the A.O. to delete the addition;

Unexplained sundry debtors

++ we find that all the creditors pertain to purchase of goods from parties and are brought forward from previous year and squared up during the current financial year. Therefore, we are of the view that the A.O. was erred in treated sundry creditors brought forward from last year as unexplained creditors. The CIT(A) after considering details filed by the assessee and also taken in to account remand report of the A.O. deleted addition made by the A.O. The facts remain same even before us. The revenue has failed to prove the findings of fact recorded by the CIT(A) is incorrect. Therefore, we upheld the CIT(A) order and delete the addition made by the A.O;

Unexplained cash deposits

++ A.O. made additions towards cash deposits to ICICI Bank account u/s 69. The A.O. made additions for the reasons that the assessee has failed to explain the sources for the credits in to ICICI Bank account. It is the contention of assessee that he does not operate any bank account with ICICI Bank account. We find force in the arguments of the assessee for the reason that the assessee has not maintained any bank account with ICICI Bank and this fact was not disputed by the revenue. The assessee, on the other hand furnished copy of Axis bank account which was recorded in the regular books of accounts. On perusal of bank statement of Axis bank, we find that there are only two cash deposits of Rs. 1600 on 8-7- 2008 and Rs. 8900/- on 18-11-2008 for which sources has been explained. Therefore, we are of the view that the A.O. has made additions without any base. The CIT(A) after considering relevant details filed by the assessee and also taken into account remand report of A.O. deleted additions. The facts remain same even before us. The Revenue has failed to counter the contention of assessee that he does not operate any bank account with ICICI Bank. Therefore, we upheld the CIT(A) order and delete the addition made by the AO;

Unexplained expenditure

++ A.O. disallowed expenditure debited to profit and loss account of Labelle Slimming and Beauty Clinic for the reason that the assessee has not explained the nature and source of income earned from the business. The A.O. further observed that the assessee has failed to prove the nature of business activity. We find force in the arguments of the assessee for the reason that the assessee is the proprietor of M/s India Battery Works and Labelle Slimming and Beauty Clinic. We further noticed that she had reported gross sales income of Rs. 49,31,376/- from trading activity and indirect income of Rs. 16,49,400/- from the business of India Battery Works and Labelle Slimming and Beauty Clinic. The assessee has proved that she had incurred expenditure being interest on loan and depreciation on motor car used for the purpose of business. Therefore, we are of the view that the A.O. was erred in disallowing expenditure incurred for the purpose of business. The CIT(A) rightly deleted the additions. We do not see any error or infirmity in the order of CIT(A). Hence, we are inclined to upheld CIT(A) order and direct the AO to delete additions towards expenditures.

Assessee's appeal allowed