Settlement Of Cases Under Section 245 D(4)

Saraf Textile Mills Pvt Ltd
SA No 20/1/45/81-IT

ITSC Delhi
Order dt 27.6.95
83 Taxman 67

Assessment for assessment year 1979-80 had been completed on an income of Rs 16,99,970/- against returned loss of Rs 12,03,924/-. Revenue proposed addition on grounds of inflation of expenses through front organisation. Books of account rejected. Whether profits for 1979-80 as well as two subsequent years could be estimated in SOF.
Held ; YES.

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Shri Mohan M Meharwade

ITSC Chennai
Order dt 25.03.92
199 ITR (AT) 108

Search of premises resulted in seizure of Rs 1,20,000/-. Assessments for two years completed, third year is pending when settlement application was filed and allowed to be proceeded with. Issue related to unexplained investments and undisclosed income from money lending and commission. There was undisclosed construction worth Rs 2 lakh spread over 1982-85. Assessments for 1984-85, 1985-86 had been re-opened u/s 245E.

Final Settlement reached. Interest chargeable u/s 139(8) and 215/217 was levied on revised income. Penalties u/s 271 & 273 waived and immunity from prosecution granted.

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Shri Manoranjan Mondal & Others
S.A.No.2/1/47/97-98/IT

ITSC Calcutta
Order dt. 15.03.2000

The applicants filed their applications for block period covered by searches of their premises and certain assessment years. The CIT requested for ordering further enquiry u/s 245D(3). This was denied for the reason that in the considered opinion of the Commission the cases did not merit further enquiry.

The question considered was whether in a block assessment, the concealed income has to be computed with reference to seized materials only and not beyond that by the AO

Held : Yes, under Chapter XIV-B, an AO would have to confine himself to the seized material only.

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Mehji Girdhar Lal (HUF) Neemuch
F No 15/8/79/84-WT

ITSC Delhi
Order dated 16.9.95

The application may not be allowed to be proceeded with even if no objection is raised by the CWT, if the Commission comes to the conclusion that no complexity of investigation is involved.

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Shri PKV Panicker & Mrs Thankomoni
SA No 13/TVM/30 & 32/95/IT

ITSC Chennai
Order dated 10.1.96

The applicants filed the settlement applications for assessment year 1989-90 to 1995-96. The CIT had objected to admission on the ground that there was no complexity of investigation involved in either case. It was held that CIT was correct. The consequence of seizure of documents valuables etc would not provide a special circumstance justifying admission. The assessments were pending having been set aside by the CIT(A) therefore in de novo proceedings of assessments the issues in question were wide open.

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M/s Benz Automobiles
SA No 16/2/6 & 37/IT

ITSC Chennai
Date of Order 23.11.98

Whether the decision of the Supreme Court in ALA Firm Vs CIT (189 ITR 285) was applicable to the facts and circumstances of this case and accordingly, whether the closing stock as on the date of conversion has to be valued at market price for ascertaining the profits of the firm as at the end of the relevant period or whether the decision of the Kerala High Court in S Kaders case was applicable. In this case, the Kerala High Court held that on the taking over of the business of a partnership firm, by a limited company, the closing stock need not be valued at the market price as on the date of such taking over.

It was held that in such cases where the business has not come to an end and there is no evidence to infer dissolution of the firm and all assets and liabilities are transferred at book value, thje ALA firms case can have no application. The Kerala High Court decision in S Kaders case would be directly applicable to the facts of the instant case. The High Court referring to the findings given by the tribunal held that in the case of dissolution of the firm, the assets are to be valued at their fair market value to the firm in respect of stock in trade, though the assessee has got the option to value it at lower of cost or market price, in the event of dissolution it should be only at the market price. In the case before me, all the assets and liabilities of the firm were taken over by the company with same persons as shareholder.

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M/s Minimuttoo Mutual Funds Ltd
SA No 16/2/27/98-IT

ITSC Chennai
Date of order 14.7.98

Whether the applicant is justified in its plea to show taxable income for the relevant years under consideration on cash system of accounting even though it is regularly following the mercantile system of accounting.

The Sacha Committee formed to carry out reforms in the Companies Act, had found certain corporate bodies maintain all or certain accounts on cash basis in which a true and fair picture of the state of affairs of the company, and therefore it was desired by the Committee to make it obligatory on all companies to maintain accounts only on mercantile system of accounting. It it, therefore, wrong to argue that the amendments with regard to mercantile system of accounting by a company is only for the benefit of the share-holders. The obligation on the company in this regard is total. There is no choice in the matter of method of accounting, as may be the case with non-corporate assessees. In our view the applicant is prohibited from adopting regularly one method of accounting for its own purpose and yet another method for income-tax purpose. Such a dual system of accounting is not contemplated anywhere in the IT Act.

Whether under the IT Act only the real income can be taxed and not the interest accrued income.

It was held that the applicant had overlooked one important factual position ie the applicant itself has been showing interest income on accrual basis by crediting interest reveivable account and debiting the parties for interest payable year after year.
There the interest income credited to the accounts on accrual basis is taxable as income and therefore the cash flow statements and separate statements for income tax purposes will not postpone the accrual of income or defeat the real income concept.

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