Assessing Officer has made all additions, disallowances, treating the cash credits/foreign receipts as well as the assessee’s declared agricultural income merely on estimate and guess work basis without bringing on record any positive and concrete evidence to be applied against the assessee. We also find that the Assessing Officer has not quoted any comparable case in this line of business, which has shown better gross profit than that shown by the assessee in the present assessment year.
There is no scrutiny assessment in the assessment years 2002-03 and 2003-04. Thus, the Assessing Officer has not formed any opinion on these issues, i.e., about the assessability of interest expenses. There is no condition in section 147 that information should have flown from an external source after filing of the return and only then a notice under section 148 can be issued.
Intention of the assessee was to turn over the stock as frequently as possible to ensure quick realization of profits on sale of shares. In the Tax Audit Report, the nature of the business of the assessee has been shown as trading of shares. The tax auditor has come to the aforesaid conclusion after due examination of the books of account.
From the perusal of the reasons recorded by the Assessing Officer, it is seen that in paragraph 1 the Assessing Officer has mentioned about the receipt of report from the office of the Commissioner of Income-tax indicating that enquiries were initiated by the Directorate of Income-tax (Investigation) to probe into bank account which were used by entry operators for the purpose issue of cheques to beneficiaries against cash paid by them.
Regarding, the issue of technology transfer fee receipts, whether it constitutes operational income or not, learned counsel brought the analogy of these receipts to the developmental works receipts, which is adjudicated by the hon’ble Karnataka High Court in the case of Motor Industries Co. Ltd. (supra). In our opinion, there is a need for finding the fact on the comparability of these receipts on account of developmental work vis-a-vis technology transfer fees raised before us. In case, these receipts are comparable, in our opinion, the assessee is entitled for claiming deduction under section 80HHC as an operational income in view of the finding of the Karnataka High Court in the case of Motor Industries Co. Ltd. (supra).
It is not the case of the assessee that payment of such commission is as per prevailing practice of the trade. When supply of goods is made to Government Departments, commission is not allowable unless it is established that commission was paid for services other than services related to supply of goods to Government Department. As regards working of Government Department, we are of the view that public officials are expected to discharge their duties dispassionately, and decide on the merits of each case.
During the course of assessment proceedings it was observed by AO that the assessee was following ‘exclusive method’ of valuing the cost of its inventory by not increasing it with the amount of excise duty paid thereon, although as per section 145A purchases and inventories are required to be grossed up to include to duty element. That is how an addition of Rs. 1,25,91,360/- was made.
In the present case, the main dispute is regarding revenue recognition relating to unused talk time remaining available as at the end of the year. As noted earlier, there is no dispute that company had to provide talk time to its subscriber till the expiry of the period of card or till complete utilization of talk time, whichever is earlier. As long as assessee is under obligation to provide talk time, it cannot be said that a debt has accrued in favour of assessee-company against the subscriber.
It is after the deduction under Chapter VI-A that the total income of an assessee is arrived at. Chapter VI-A deductions are the last stage of giving effect to all types of deductions permissible under the Act. At the end of this exercise, the total income is arrived at. Total income is thus, a figure arrived at after giving effect to all deductions under the Act. There cannot be any further deduction from the total income as the total income is itself arrived at after all deductions.
As regards another facet of addition in this case which has resulted from enhancement made by the Ld. Commissioner of Income Tax (A) by holding that assessee is not eligible for deduction u/s. 54F(1) on the payment of Rs. 55,70,800/-. This has been denied on the ground that the payment was made by M/s Capital Advertising Pvt. Ltd. wherein the assessee was Director and not by the assessee himself. In this regard, it is the assessee’s claim that the assessee has duly made the arrangement for booking of the flat and necessary documentation were made by the assessee in his individual capacity.
