Shri. Naraindas Bodaram, Bangalore v. DCIT, Bangalore

ITA 910/BANG/2010 | misc
Pronouncement Date: 17-03-2011 | Result: Allowed

Appeal Details

RSA Number 91021114 RSA 2010
Bench Bangalore
Appeal Number ITA 910/BANG/2010
Duration Of Justice 7 month(s) 29 day(s)
Appellant Shri. Naraindas Bodaram, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 17-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 17-03-2011
Assessment Year misc
Appeal Filed On 19-07-2010
Judgment Text
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