REPORTED DECISIONS

1. Appeal to Tribunal – Rectification u/s. 254(2) – Miscellaneous petition filed by department representatives – Rules of ITAT for filing appeal apply mutatis mutandis to miscellaneous petition as well, which in the case of Revenue is to be signed by the AO and none else – Miscellaneous petition signed by the senior authorised representative of the department is not maintainable – A.Y. 1994-95

DCIT vs. Hydraulics Ltd. (2006) 100 TTJ 857 (Chennai); Order dated 25-11-2005

The procedure for filing of applications is at par with the filing of appeal and the rules framed under ITAT Rules for filing of appeal with apply mutatis mutandis to miscellaneous petitions as well as stay applications and other applications also. The IT Rules, 1962, prescribes an appeal shall be in Form No. 36 appended to the rules and the form gives the required verification portion. It is also prescribed in r. 47 that the memorandum and the grounds of appeal as also the verification portion shall be signed by the appellant as prescribed under r. 45(2). If the entire provisions of the IT Act, 1961, IT Rules, 1962 and ITAT Rules, 1963, are read together it clearly emerges that an application for rectification of mistake in the shape of miscellaneous petition can be filed either by the assessee or the AO, as the case may be. In view of this legal position, the authorised representative whether of the Revenue or of the assessee stands in the same position as an outsider and the only person competent to sign and verify an appeal should sign and verify the various applications like miscellaneous petitions, stay petitions, etc. Therefore, the miscellaneous petition of the Revenue filed by the senior Authorised representative of the department is not maintainable.

2. Capital Gains – Exemption under s. 54F – Another residential house owned by assessee – Word ‘own’ in s. 54F would include only a residential house which is fully and wholly owned by assessee and consequently, would not include a residential house owned by more than one person – Assessee could not be denied exemption under s. 54F on the ground that he was co-owner of another residential house with his wife – A.Y. 1998-99

ITO vs. Rasiklal N. Satra (2006) 100 TTJ 1039 (Mum); Order dated 19-9-2005

The legislature has used the word "a" before the words "residential house". It must mean a complete residential house and would not include shared interest in a residential house. Where the property is owned by more than one person it cannot be said that any one of them is the owner of the property. In such case, no individual person on his own can sell the entire property. No doubt, he can sell his share of interest in the property, but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. So the word "own" would not include a case where a residential house is partly owned by one person or partly owned by other person(s). Since, the legislature has not amended the provisions of section 54F to include part ownership, it has to be held that the word "own" in section 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house was purchased jointly by assessee and his wife. It is nobody’s case that wife is benami of assessee. Therefore, the said house was jointly owned by assessee and his spouse. Therefore, assessee was not the owner of a residential house on the date of transfer of original asset. Consequently the exemption under section 54F could not be denied to assessee.

3. Deduction u/s. 80HHF – Transfer of television software rights – Expression ‘television software’ appearing in s. 80HHF includes television software rights as well – Assessee transferred on sole or exclusive basis DVDs, VCDs and VHS cassette rights of a film for a period of five years and received consideration in respect of the same within the stipulated time – Deduction u/s. 80HHF was allowable – A.Y. 2002-03

K.R. Films (P.) Ltd. vs. ITO [2006] 100 TTJ 825 (Mum); Order dated 27-1-2006

The Tribunal held that the scope of section 80HHF covers not only the software but also the software rights; the expression ‘television software’ includes television software rights as well. VCD, DVD and VHS cassette rights are in the nature of rights on ‘any programme or series of sounds and images recorded on film or tape or digital media’. Revenue does not dispute, and rightly so, that VCD and DVD are in the nature of digital media and VHS cassette is a tape. Therefore, any rights in the nature of rights in respect of VCD, DVD and VHS cassette are clearly covered by the scope of sec. 80HHF. It is important to bear in mind that what is covered by the section is not only the television software; i.e., VHS, VCD and DVD programme but also rights in respect of such programme; i.e., VHS, VCD and DVD. For eligibility for deduction u/s. 80HHF it is not a necessary precondition that television software per se is to be ‘exported or transferred by any means out of India’ but consideration on ‘transfer of rights in respect of the television software’ will also qualify, subject to fulfilment of other conditions, for deduction u/s. 80HHF. Even an ‘export or transfer by any means out of India’ of a television software can entitle, without essentially involving export or transfer by any means out of India of the television software per se, an assessee to deduction under s. 80HHF.

4. Search & seizure – Penalty u/s. 158BFA(2) – Burden of proof – Penalty procedings u/s. 158BFA(2) are akin to s.271(1)(c) proceedings and burden is on the department to prove factum of concealment – Assessee having explained entries in the books and filed confirmation of creditors, burden on assessee stood discharged and penalty imposed u/s. 158BFA(2) only by referring the explanation of assessee on probabilities and assumptions without independent investigation could not be sustained – Block periods 1990-91 to 26-6-1999

Gandhi Service Station vs. ACIT [2006] 100 TTJ 1143 (Ahd); Order dated 13-1-2006

Penalty proceedings u/s. 158BFA(2) are akin to s. 271(1)(c) proceedings, main clause and in sum and substance Department has to prove factum of concealment. Quantum and penalty proceedings are distinct and separate and while deciding the issue of penalty, facts can be reconsidered. In the instant case, it emerges from the record that rough cashbook found at the residential premises of AN was tallied with regular books of account maintained by the assessee-firm at the time of search. Subsequently, assessee produced its regular books of account before DDI in which some insertions, corrections were there, apropos which, explanation of the partner is that petrol pump was at village and cash was carried to Surat which was deposited in the bank by the partners together with loans. Accountant was not aware of these loans and wrote books accordingly. When the assessee came to know about these discrepancies, necessary entries were corrected in the cashbook in place of writing new sets of books. Assessee filed confirmations of all the depositors, which contained names and addresses. Assessee volunteered to produce creditors but only one day’s time was given. In the given facts and circumstances, assessees’ explanation to confirmation etc have been rejected on assumptions drawing adverse inference based on probabilities, i.e. existence of insertions and corrections and probability of accountant knowing fact of cash credits. Since the burden was on the Department, AO should have separately investigated matter in penalty proceedings by calling these parties and accountant to discharge burden. In the given facts and circumstances, assessee has discharged its burden of giving explanations as well as supporting the same by filing confirmations. Department would have discharged its burden by proving that assessees’ explanation was false based on finding of fact and not on assumptions. In view thereof, the penalty is deleted.

5. Search & seizure – Block Assessment – Sec. 158BB – retraction of statement – Addition made solely on the basis of the confessional statement of assessee – Confessional statement should be corroborated with some material to show that assessment made is just and fair. All materials found during search duly explained by assessee on which no adverse comment made by AO – Assessee to be assessed on the income returned by him for the block period – Block periods 1-4-1990 to 20-7-2000

Rajesh Jain vs. DCIT [2006] 100 TTJ 929 (Del); Order dated 27-2-2004

The Tribunal held that it is true that authorized officer carrying on search under section 132 is entitled as per the statutory provision to record statement of the person searched under s. 132(4) and use that statement for purposes of assessment. He is not a police officer and confession made to him is admissible notwithstanding its subsequent retraction by the person making confession. All the same, person carrying the search is a person possession some authority and therefore, assessment wholly and exclusively based on confessional statement is a risky affair. If assessment could be solely based on confessional statement procured by the Revenue authorities, then there was no need to have elaborate provision in the statute. There was no need to use long arm of search to collect material for making assessments. Therefore, it is insisted that confessional statement should be corroborated with some material to show that assessment made is just and fair. IT is not arbitrary and capricious. As to what would be sufficient corroborative material would depend upon the facts and circumstances of the case. Thus, the computation of undisclosed income solely on the basis of confessional statement of assessee was not justified, inter alia, where the conduct of affairs by the Revenue authorities showed that good amount of psychological pressure was built on the assessee to make the said statement and all material found during search was duly explained by assessee on which no adverse comments was made by AO.

6. Survey – Section 133A – Competent authority – Survey conducted by Inspector – Illegal – Consequently additions made is deleted – A.Y. 1997-98

Bombay Marble Industries vs. ITO [2006] 100 TTJ 927 (Jd); Order dated 14-3-2005

The assessee raised additional ground of appeal before the Tribunal that the survey conducted by the Inspector, IT Department, was without jurisdiction and illegal and consequential proceeding and additions deserve to be deleted. The Tribunal admitted the additional ground of appeal and held relying upon the decision in the case of Vastimal vs. ITO 26 Tax World 106 (Jd) that the Inspector of the IT Department is not authorized to conduct survey under section 133A of the Act and hence, the addition made consequent thereof is to be deleted.

7. Unexplained investment in purchases – Section 69 – Addition made since suppliers could not be located and could not be produced for examination – Purchases were properly recorded in books of account and supported by authenticated bills/vouchers – Assessee filed details of supplier & their sales tax numbers and payments were through banking channels – Sales against these purchases are not doubted – Addition could not be sustained – A.Y. 1995-96

Rajesh P. Soni vs. ACIT [2006] 100 TTJ 892 (Ahd); Order dated 28-11-2005

The Tribunal held that the purchases were recorded in the regular books of account maintained and were supported by proper bills/vouchers. The assessee filed the necessary details regarding name, address, sales-tax number and the payments were made through banking channels. Thus, the sale against the purchased is not doubted. It is not the case of the AO that amounts paid for purchases had come back to the assessee. The AO had made addition merely on the ground that the suppliers are not located and they were not produced for examination. After considering the facts of the case when purchases are supported with authenticated purchase bills, having sales-tax numbers and payment through cheques, the addition cannot be made under s. 69 or 69A.