TaxTMI 
TaxTMI 
2017 (4) TMI 757
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....0/3/2006 disallowing transport expenditure u/s 40a(ia) of Rs. 49,80,906/-. Thus revised return was filed disclosing income of Rs. 3,79,29,500/-. Against the said return of income, assessment was completed u/s 143(3) on 27/4/2006 at a total income of Rs. 3,79,29,500/-. 2.2 Subsequently, the Commissioner of Income-tax [CIT] exercising power vested u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] set aside the assessment order vide his order dated 27/4/2006. We are informed at the Bar that no appeal was filed against the order of the CIT passed u/s 263. Consequent to this 263 order, assessment order was passed u/s 143(3) r.w.s 263 vide order dated 31/12/2009 determining the total income at Rs. 5,09,51,155/-. While doing so, the Assessing Officer [AO] disallowed excess claim of deduction u/s 80HHC of Rs. 1,23,73,932/- and made addition on account of undervaluation of closing stock of Rs. 66 lakhs. 3. Being aggrieved, an appeal was preferred before the CIT(A) and the same was dismissed by the impugned order. 4. Being aggrieved, the assessee is in appeal before us in the present appeal raising the following grounds of appeal: 1. The Order o....
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....h export sales, ignoring the purchases made for domestic sales. The Appellant seeks your leave to add, alter, amend or delete any of the grounds urged at the time of hearing. 5. Ground Nos.1 to 3 are general in nature and do not require any adjudication. 6. Ground No.4 relates to calculation of deduction u/s 80HHC of the Act. The AO, while calculating deduction u/s 80-HHC of the Act, had reduced expenditure incurred on stewardship and transport charges of Rs. 1,64,24,612/- and also reduced transportation charges disallowed of Rs. 49,80,906/- from export turnover and accordingly computed deduction as a result of which it has resulted in reduction of claim by Rs. 59,52,277/- as against the claim of Rs. 1,23,73,932/- originally allowed. The contention of the assessee-company that the expenditure of Rs. 1.64 crores is in the nature of steward and clearing and forwarding charges and not on account of freight and insurance charges. It is submitted that the expenditure was incurred within the premises of customs station and therefore, according to the assessee-company, this expenditure need not be reduced from export turnover. Furthermore, it is submitted that when the expenditure is r....
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.... were reiterated before the CIT(A) also. The CIT(A) had confirmed the addition as the assessee-company had failed to substantiate it submission. Before us also, no evidence was filed substantiating the explanation for discrepancy in valuation of the closing stock. Even before us, altogether different argument was advanced saying that domestic sales were not taken into consideration while valuating closing stock. It is altogether a new submission and does not emanate from the orders of the lower authorities and no evidence was filed even in respect of this argument. Hence, the ground of appeal cannot be accepted and dismissed as such. 8. In the result, the appeal filed by the assessee is dismissed. ITA No.1009/Bang/2015 (Asst.year: 2007-08): 9. This is an appeal filed by the assessee directed against the order of the Commissioner of Income-tax (Appeals)-11, Bangalore, [CIT(A)] dated 16th January, 2015 for the assessment year 2007-08. 9.1 Briefly facts of the case are that the assessee is a company duly incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of trading iron ore. Return of income for the assessment year 2007-08 was filed decla....
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.... silica and alumina before the same is being converted in to marketable product with completely distinctively name as 'iron ore' only then the product is eligible for export. 8. The CIT (A) ought to have considered that the appellant has established the Export Oriented Unit (EOU) under the ECU scheme in terms of Chapter 6 of the Foreign Trade Policy 2004-09. The EOU has been set up for manufacture of goods as permitted in the LOP/LUT and export thereof. The trading units are excluded under the ECU Scheme. 9. The Ld. CIT (A) erred in confirming the order of the AO wherein the AC has ignored the submissions and various decisions relied on by the appellant with regard to claim of exemption under section 108 of the Act. Disallowance of transportation expenses of Rs. 15,54,39,225 10. The Ld. AO erred in disallowing transportation expenses of Rs. 15,54,39,225 and Ld. CIT(A) erred in confirming the same. 11. The Ld. CIT(A) erred in confirming the order of Ld. AO who disallowed the transportation expenses on the ground that it was not substantiated. 12. The Ld. CIT(A) should have appreciated that all the payments are not subject to TDS. 13. The Ld. CIT(A) ought to have noted th....
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....to describe in detail the various activities we conduct in EoU division in support of our claim I. Procurement of ROM (Run of Mines)/ Waste dump/ Sub grade (over burden ) -Raw Material ROM is just earth excavated from the pit of Mine. Generally this is the basic raw material for production of any mineral. Waste dump is a rejection which is generally called overburden in mining terms. Run of Mines related to Iron Ore contains various impurities such as silica, shale, laterite, quartzite along with Ferrous Generally the size of the ROM shall be from 0 to 150mm. We gererally procure ROM from traders and Mine Owners. The ROM is subject to below process of filtration and screening, sieving , washing, density separation, blending of various chemical grades to arrive at the required grade of saleable iron ore products. The same is with overburden /sub grade raw material except in this material generally impurities will be much higher (between 20 pcnt to 40 pcnt ) than that are in ROM and recovery of ore is varies from 85 to 95 percent depending on the kind of selection. The improvement in ferrous content is achieved by using magnetic separator (Dry screening-primary filtration and scree....
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....ant for dressing wherein it is passed through three stages of beneficiation such as primary filtration, secondary filtration and crushing thereby sizing and dressing of the ROM is ensured which generates final distinguishable saleable product called as calibrated ore of 1omm - 4omm and iron ore fines called as Iron ore fines. * Blendingz- Based on the Ferrous content the various iron ore fines and calibrated iron ore is blended to meet the export requirements. * Transportation to the harbour: - the saleable cargo produced is moved by trucks to the harbour for exports. * Stacking of the iron ore at the harbour:- The ore is unloaded and stacked as different stock piles basis physical and chemical composition. * Loading into the ships:- The cargo is thus loaded into the ships by means of mechanised ore handling equipment. 11.2 Learned AR of the assessee also explained that the following process was conducted in the EOU division and the same was explained as follows: The ROM contains various impurities. The ROM is subjected to processes of screening, sieving, washing, blending of various grades to arrive at the required grade of Iron Ore products. The improvement in Fe content is....
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....he Hon'ble Supreme Court in the case of ITO vs. Arihant Tiles and Marbles P. Ltd. (320 ITR 79). He thus submitted that since assessee-company is only a trader in iron ore, it is not entitled to deduction u/s 10B of the Act. 12. We heard rival submissions and perused material on record. The only issue in these grounds of appeal is whether the assessee-company is eligible for deduction /s 10B of the Act. The AO had denied claim for deduction u/s 10B solely on the ground that the assessee-company is not engaged in any activity of manufacture or production of an article or thing which is a pre-requisite for claiming deduction u/s 10B of the Act. Admittedly, assessee-company was not in the business of extracting iron ore from earth. The assessee-company buys iron ore after carrying out certain process as a result of which the impurities from iron ore are removed and iron ore so generated is exported out of India. The process, as explained by the assessee-company though by not an independent technical expert is that the assessee-company purchases ROM which is subjected to process of screening, sieving, washing, blending of various grades to arrive at the required grade of Iron Ore produ....
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....ed to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. Pathak, J., as he then was, stated the test in the following words : "... Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place...." The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manuf....
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....n of word 'manufacture' it has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combination whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity. 12.3 Furthermore, reference can be made to the decision of the Hon'ble Gujarat High Court in the case of CIT v. Prabhudas Kishordas Tobacco Products (P.) Ltd. [2006] 282 ITR 568, 573 (Guj), wherein it was held as follows: "The tests to ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the apex court and this High Court. Broadly, the requirement is that the raw material must be, in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the endproduct after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must b....
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.... but for the said process. Applying the two-fold test, it was held that printing on bottles does not amount to manufacture. In Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 (SC) confirmed by a Constitution Bench in Ujagar Prints v. Union of India [1989] 179 ITR 317 (SC), (see also Chowgule and Co. Private Ltd. v. Union of India [1981] Tax LR 2929 (SC), it has been observed that whatever may be the operation, it is the effect it has on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of "manufacture". Any process or processes creating something else having distinctive name, character and use would be "manufacture". Manufacture has been held to mean (as a noun) signifying the production of an article for use from raw or prepared materials, by giving these materials new form, quality, properties or combinations, whether by hand labour or by machinery. It is a process of converting some material into a different form, adapted to uses to which in its original form it could not be so readily applied. As a verb 'manufacture' means to make, to invest, to fabricate or to produce an article by hand....
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....5] 5 RC 28. On facts, in the said case, jumbo rolls of tissue paper were cut into various shapes and sizes so that they could be used as table napkins, facial tissues and toilet rolls. The court held that there was no manufacture as the character and the end use of the tissue paper in the jumbo roll and the tissue paper in the table napkin, facial tissue and toilet roll remain the same. Another example of when transformation does not take place is when foreign matter is removed from an article or additions are made to the article to preserve it or increase its shelf life. If the essential character of the product has not changed, there would be no manufacture. However, if by adopting a particular process a transformation takes place which makes the product have a character and use of its own, which it did not bear earlier, then such process would amount to manufacture irrespective of whether there was a single process or several processes. According to the court, a two-fold test had emerged for deciding whether the process is that of manufacture. The first test is extremely important - that by a process, a different commercial commodity must come into existence as a result of the....
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....n Servo-Med Industries (P) Ltd. vs. CCE (2015) 32 GSTR 404 (SC) held that process by which goods are made marketable cannot be called a manufacturing activity. Manufacture takes place on application of one or more processes, each process may lead to a change in goods but every change does not amount to manufacture. There must be something more i.e. there must be transformation by which something new and different comes into being i.e. there must now emerge an article which has distinct name, character or use. The Hon'ble Court went on to explain concept of transformation. It is explained that when a finished product cannot conveniently be used in the form into which it happens to be and it is required to be changed into various size and shape so that it can conveniently be used no transformation takes place if the character and end-use of the first product continues to be the same. 12.10 Finally, the Hon'ble Supreme Court evolved two steps for deciding whether the process is that of manufacturing or not. The first stage is that by process a different commercial commodity must come into existence as a result of identity the original commodity cease to exist. The second test viz., t....
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.... Rs. 32.05 Crores in respect of non EOU business. Out of the above, the company claimed cash expenses to the extent of Rs. 15,54,39,225/- mostly on transportation charges in respect of the said non EOU business of the company. 8. It may be noted that the company has shown profits to the extent of Rs. 5,08,00,512/- only on a turn over of about 125 Crores in respect of non EOU business which, as percentage of total turn over, amounts only 4°% against 33.49% in respect of EOU business of the company. Assessee has no proper explanation as to why such huge variation in profit percentage particularly in view of the fact that there was no value addition in EOU business. Against this back drop, on Verification of expenses and cash book etc. it was found that the company incurred huge expenses in cash for which no details were furnished. When assessee was asked specifically to furnish the details substantiating the genuineness of the claim expenditures, assessee has neither substantiated such expenses nor furnished the relevant vouchers for further examination. On perusal of the books of accounts, no details were available to whom the amounts are paid other than mention of some first n....
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....aw that mere entry in books of account neither establishes accrual of income nor incurring of expenditure. It has to prove conclusively that the expenditure was actually incurred wholly and exclusively for the purpose of business. The very fact that the entire transport expenditure was incurred in cash and no TDS was deducted also leads one to suspect the genuineness of the expenditure. The assessee-company had made no effort to conclusively prove that this expenditure was incurred wholly and exclusively for business purpose. Entry in the books of account is self-made entry, no credence can be given unless and otherwise corroborated by independent evidence. Mere entry in the books of account alone does not enable assessee to claim deduction Kedarnath Jute Mfg. Co Ltd. v. CIT (82 ITR 363)(SC) Sutlej Cotton Mills Ltd. vs. CIT (116 ITR 1)(SC) The assessee-company had failed to bring on record any independent corroborative evidence in support of its expenditure. It is incumbent upon the ac to prove the claim conclusively to the satisfaction of the AO. Failure to do so entails addition and therefore we do not find any reason to interfere with the orders of the lower authorities. Hence, ....
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....lowance. Grounds of appeal of the assessee-company are dismissed. 20. Ground Nos.18 to 20 relate to disallowance of depreciation on machinery of crushing plant of Rs. 24,86,425/-. The AO disallowed depreciation on the machinery on the ground that since no process of iron ore was involved, machinery was not used for the purpose of business. 21. On appeal before the CIT(A), the same was confirmed. According to the CIT(A), assessee-company had failed to establish that activity of manufacturing of an article was carried on. The assessee-company is in appeal before us. 21.1 It was contended that the plant and machinery was used in crushing for the purpose of processing iron ore and it was also submitted that in the immediately assessment year, depreciation on machinery was allowed. Thus, Learned AR of the assessee prayed that depreciation claimed should be allowed. 21.2 On the other hand, learned CIT(DR) placed reliance on the orders of the lower authorities for sustenance of disallowance of depreciation on machinery. 22. We heard rival submissions and perused the material on record. The issue in these grounds of appeal relates to disallowance of depreciation on machinery of crushi....
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....equired to be taken by the miners only. 9. The Ld. CIT (A) ought to have appreciated that the ROM is a raw material and not saleable and is subjected to filtration, screening, sieving, seizing, washing, density separation, blending of various chemical grades to arrive at the required grade of saleable iron ore products, thus ROM purchased has to undergo various process to eliminate and reduce silica and alumina before the same is being converted in to marketable product with completely distinctive name as " Iron ore " only then the product is eligible for export. 10. The CIT (A) ought to have considered that the appellant has established the Export Oriented Unit (EOU) under the ECU scheme in terms of Chapter 6 of the Foreign Trade Policy 2004-09. The EOU has been set up for manufacture of goods as permitted in the LOP/LUT and export thereof. The trading units are excluded under the ECU Scheme. 11. The Ld. CIT (A) erred in confirming the order of the AO wherein the AO has ignored the submissions and various decisions relied on by the appellant with regard to claim of exemption under section 108 of the Act. The Appellant seeks your leave to add, alter, amend or delete any of the ....
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.... the Income tax Act a sum of Rs. 111,05,32,933/- as cost of purchases of illegally mined iron ore. 10. The LD OT (A) ought to have held that the nature of business of the appellant was manufacturing (out of ROM) and trading in Iron Ore and not mining of Iron ore. Thus the activity of trading in iron ore is not tainted with illegality. 11. The Lo CIT (A) ought to have held that invoking explanation to Section 37(1) of the Act when appellant has complied with all the legal requirements of trading in iron ore is not correct in law. 12. The L3 CIT (A) ought to have observed that the AO had not called for an objection from the appellant for the above disallowance. 13. The AO erred in treating the purchases as illegal based on the seized material found in the premises of so called Ali Khan and not in the premises of the appellant. The Lo CIT A ought to have held that action of the AO making additions based on the documents seized in the third party premises is absurd and contrary to law 14. LB CIT (A) ought to have provided cross-examination of Mr. Ali Khan and Mr. Janardhan Reddy during the course of the appellate proceedings, which was denied to the appellant during the course of ....
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....he assessee and in response to same, assessee-company filed return of income on 10/4/2012 declaring total income of Rs. 28,69,62,540/-. Against said return of income, assessment was completed u/s 143(3) read with sec.153A vide order dated 31/3/2013 at a total income of Rs. 1,39,74,95,473/-. While doing so, the AO disallowed expenditure incurred on purchase of iron ore from one Shri Gali Janardhana Reddy [GJR] and his concerns of Rs. 111,05,32,933/- by holding that the expenditure is not allowable in terms of Explanation to sub-section (1) of section 37 of the Act. It is the case of the AO that said GJR was indulging in illegal mining activities and material purchased from such persons cannot be allowed as deduction in terms of Explanation to section 37(1) of the Act. To come to this conclusion, the AO had placed reliance on the seized material and CPU which was seized from the residence of one Mr. Ali Khan [AK] who is alleged to be one of the close-aids of said GJR. CPU was seized and inventorized as AK/CPU/A. Relevant information/documents were retrieved from the said CPU of the computer and enclosed to the assessment order as Annexure AK/CPUA - 13 pages. From the information so r....
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....law as no satisfaction was recorded. The appellant further challenged validity of the assumption of jurisdiction us 153A of the Act. However, CIT(A) held that it was not open to the appellant to question the legality and validity of search and seizure proceedings before appellate authorities. In support of this proposition, CIT(A) has placed reliance on the decision of the Hon'ble Chattisgarh High Court in the case of Trilok Singh Dhillon vs. CIT (2011)41 (1) ITCL 2010. The CIT(A) further held that the decision of the Hon'ble Chattisgarh High Court was approved by the Hon'ble Supreme Curt by dismissal of SLP as reported in 210 Taxman 95(SC). As regards assumption of jurisdiction, CIT(A) upheld assumption of jurisdiction as certain incriminating documents were found as result of search and seizure operation. Thus, the CIT(A) upheld the action of the AO u/s 132 as well as assumption of jurisdiction u/s 153A of the Act. On merits of the issue, CIT(A) confirmed the action of the AO placing reliance on the material retrieved from CPU seized from AK and also the admission of the director of the assessee-company Mr.Somasekar that transactions with GJR and also having regard to the fact t....
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.... is submitted that addition on account of purchase of illegal iron ore cannot be sustained in the eyes of law. 32.2 On the other hand, ld.CIT(DR) vehemently opposed the submissions of the learned AR of the assessee. It is submitted that it is conclusively proved that GJR was involved in illegal mining and such illegal iron was purchased by the appellant contravening statutory provisions governing minds. Thus, any expenses incurred in contravention of the plain provisions of any statute are illegal and cannot be allowed as a deduction in view of Explanation to section 37(1) of the Act. Thus, he prayed that the addition may be sustained. He also relied on the decision of the co-ordinate bench of the Tribunal in the case of J.K.Panthaki & Co. vs. ITO (16 tax.man.com 114)(Bang). 33. We heard rival submissions and perused the material on record. The appellant has raised grounds challenging the very jurisdiction of the AO to frame the impugned assessment order. In short, the contention of the appellant is that the assessment u/s 143(3) r.w.s. 153A is illegal as the AO had no material of incriminating nature. The contention of the appellant cannot be accepted as it is amply clear that r....
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....dulging in illegal mining activity and iron ore mined illegally was sold to several concerns including the appellant. When the appellant was called upon to explain as to why purchases made cannot be treated as illegal in the light of these facts, the appellant had failed to disprove the contention of the AO that the appellant has purchased illegally mined iron ore. This is something which is known to the appellant himself. The appellant was afforded an opportunity by the AO to prove that the iron ore purchased was legally mined. The AO had put forth all the evidence, he gathered during the course of assessment proceedings, to say that the iron ore purchased was illegally mined by GJR. The provisions of section 23C of the Mines & Minerals (Development & Regulation) Act, 1957 [MMDR Act] had empowered the State Government to frame rules for preventing illegal mining, transportation and storage of minerals. Sub-section (2) of section 23C of the said Act, specifically lays down that the Government make Rules for regulation of mineral being transported from the area granted under a prospecting license or a mining lease or a quarrying license or a permit, in whatever name the permission t....
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....f business.[Hazi Aziz & Abdul Shakoor Bros. vs. CIT (1961) 41 ITR 350(SC)]. 35. Now, having held that the purchases made by the appellant are illegal, then the question that arises for consideration is whether this can be allowed as a deduction while computing income under the head 'business' keeping in view the provisions of Explanation to sub-section (1) of section 37 of the Act. The Explanation to sub-section (1) was inserted by the Finance (No. 2) Act, 1998, with retrospective effect from April 1, 1962, which reads thus : "Explanation.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure." The purpose for incorporation of this Explanation had been explained by the Central Board of Direct Taxes in Circular No. 772, dated December 23, 1998 ([1999] 235 ITR (St.) 35, 53) as under : "20. Disallowance of illegal expenses. 20.1 Section 37 of the Income-tax Act is amended to provide that any expenditure incurred by an....
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....duction. In the present case, it is not the case of the appellant that the whole business is illegal business. Under the provisions of section 11 of the Companies Act, 1956, a company can be incorporated only for lawful business. It is a matter of fact that the appellant is a company under the provisions of the Companies Act and therefore, by no stretch of imagination it can be assumed that the company is formed for the purpose of carrying on illegal business. 35.1 The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Maddi Venkataraman & Co.(P) Ltd. [144 ITR 373) had an occasion to deal with identical situation where-in the Hon'ble High Court, after referring to judgment of the Apex Court in the case of Hazi Aziz & Abdul Shakoor Bros (supra) held that there is no distinction in principle between penalty for infraction of law and the amount paid towards execution of illegal activity. Justice Jeevan Reddy, speaking for the bench held as follows: ".......... 9. A careful reading of this passage leaves no one in doubt about the distinction between an infraction of the law committed in the carrying on of a lawful business, and an infraction of the law committed in a business ....
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....n that account cannot be set off against the income from his business. Now, the other principle is this: True it is that an unlawful business is not a business ; but, a man has already carried out such business. It is a fait accompli. For such violation, he may be punished elsewhere; but, there is no reason why he should be allowed to get away with all the profits and gains made in such illegal business, and there is no reason why the state should not tax it. By doing so, it is not condoning the illegal business or trade. Indeed, if in such a case no tax is levied on the ground that the business itself is illegal, it would amount to giving further benefit to a person indulging in an illegal business. " The above judgment of the Hon'ble AP High Court was affirmed by the Hon'ble Apex Court in the following words in 229 ITR 534(SC): "7. The Indian Courts, have also consistently held that payments tainted with illegality cannot be treated as money spent wholly and exclusively for the purpose of business. A long line of decisions was noted in the judgment under appeal. It is not necessary to refer to all of them. We shall refer to three cases decided by this Court. 8. In the case o....
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....that did not take the profits out of the taxing statute. Similarly, that taint of illegality of the business could not detract from the loss being taken into account for computing the amounts which had to be subjected to tax. The tax collector cannot be heard to say that he will bring the gross receipts to tax, he could only tax the profits of a trade or business. That cannot be done without taking the loss and the legitimate expenses of the business. 12. In the case of CIT v. H. Hirjee [1953] 23 ITR 427 (SC), a Bench of four judges of this Court dealt with a case of an assessee who was carrying on the business as selling agent of a company. He was prosecuted under section 18 of the Hoarding and Profiteering Ordinance, 1943, on a charge of selling the goods at prices higher than a reasonable price in contra-vention of the provisions of the section 6 of the Act. A part of the stock of goods was seized and taken away. The prosecution, however, ended in acquittal. The assessee claimed deduction of a sum of money spent in defending the case. The Tribunal found that the expenditure was incurred solely for the purpose of maintaining the assessee's name as a good businessman and to ....
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....n this case cannot, in any way, be allowed as wholly and exclusively laid out for the purpose of assessee's business. 14. We are in agreement with the view expressed by the High Court in this case. The appeal is dismissed." 35.2 The Hon'ble Punjab & Haryana High Court had an occasion to deal with the provisions of Explanation to sub-section (1) of section 37 of the Act in the case of CIT vs. Kap Scan & Daignostic Centre P.Ltd. (344 ITR 476) wherein, after referring to the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulation, 2002, held that commission paid to Doctors for referring the business to a Diagnostic Centre was held to be not allowable as both parties were privies to a wrong. It was held that payment of commission to doctors for referring patients to a Diagnostic Centre could not be accepted to be legal or in accordance with public policy. 35.3 The issue with regard to the amount illegally paid to the police authorities for running their business came up for consideration before the Hon'ble Madhya Pradesh High Court in Gwalior Road Lines v. CIT [1998] 234 ITR 230 wherein it was held that after insertion of the Explanation to....
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....ion gathered as a result of action u/s 132 or otherwise can be used in the assessment proceedings. The fact that the AO mentioned wrong section in the assessment order does not invalidate the order in view of the specific provisions of section 292B of the Act which reads as under: "Return of income, etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. " Thus, the assessment order passed by the AO is valid in law and thus, we dismiss grounds of appeal Nos.4 to 8. 42. Ground Nos. 9 & 10 deals with addition on account of unexplained cash payment outside books of account. It is the case of the AO that the appellant made cash ....