The DCIT, Circle-8,, Ahmedabad v. Sanghi Infrastructure Ltd.,, Ahmedabad

ITA 2576/AHD/2012 | 2009-2010
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 257620514 RSA 2012
Assessee PAN AALCS2163A
Bench Ahmedabad
Appeal Number ITA 2576/AHD/2012
Duration Of Justice 3 year(s) 10 month(s) 21 day(s)
Appellant The DCIT, Circle-8,, Ahmedabad
Respondent Sanghi Infrastructure Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-09-2016
Date Of Final Hearing 07-09-2016
Next Hearing Date 07-09-2016
Assessment Year 2009-2010
Appeal Filed On 09-11-2012
Judgment Text
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