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Income Tax - Case Laws

Showing 281 to 300 of 654 Records

2014 (2) TMI 867 - ITAT DELHI

Deletion of penalty u/s 272B of the Act - Failure to mention PAN – Held that:- Section 272B of the Act is to be read in conjunction with section 139A(5B) of the Act - CIT(A) has restricted penalty to the tune of Rs. 30,000/- in all the appeal following the clarification embodied in the CBDT letter dated 05.08.2008 - Since this fact is not disputed by the revenue that CBDT has issued a clarification whereby it has been clarified penalty u/s 272B of Rs. 10,000/- is linked to the person and not with the number of defaults – thus, there is no infirmity in the orders of CIT(A) – Decided against Revenue.
2014 (2) TMI 866 - DELHI HIGH COURT

Penalty u/s 272B of the Act – Failure to mention PAN - PAN were not furnished by the Truck owners - Held that:- assessee cannot be penalized under Section 272B. - Section 139A also imposes the obligation on the deductees to furnish PAN Number to the deductor.
Secondly, the stand taken by the revenue is contrary to the stand taken by Central Board of Direct Taxes - Board in the letter dated 5.8.2008 vide No.275/24/2007-IT(B) has clarified that penalty of Rs.10,000/- under Section 272B is linked to the person who is responsible to deduct TDS, and not to the number of defaults regarding the PAN quoted in the TDS return. - Penalty cannot be imposed by calculating the number of defective entries in each return and by multiplying them with Rs.10,000/- This also appears to be a legislative intent, as in many cases, the TDS amount may be small or insignificant fraction of Rs.10,000/-.
There is no substantial question of law arises from the appeal – Decided against Revenue.
2014 (2) TMI 859 - ITAT KOLKATA

Disallowance of loss on sale of paintings – Held that:- The CIT(A) was of the view that the assessee has earned profit in respect of paintings sold to very same purchasers amounting to Rs.2.21 crores - the painting sold was constituting assessee’s stock-in-trade, had the assessee any intention to evade any tax, the assessee could have valued stock at cost price or market price, whichever is lower - the assessee has sold some of the paintings to the very same party at profit of Rs. 2.21 crores, which was more than the loss suffered by the assessee in respect of sale of other paintings to the very same party - Had the assessee any intention to reduce its profit or to evade any tax, he could have easily managed to show marginal profit in respect of transaction with the very same party and could have easily come out from the doubts raised by the AO by showing net profit – the findings of the CIT(A) have not been controverted by the revenue by bringing any positive material on record – thus, there is no reason to interfere in the order of CIT(A) in deleting the loss – Decided against Revenue.
Deletion made u/s 40A(2)(b) of the Act - Excess interest paid on unsecured loan – Held that:- The prevailing market rate of interest even in respect of secured loan was @12% and in respect of unsecured and unguarateeed loan the rate of interest was ranging from 15-18% - the loan taken by the assessee was unsecured, the rate of interest paid by the assessee was very much reasonable - the rate of interest paid by the assessee was reasonable and no disallowance is warranted u/s 40A(2)(b) of the Act – the findings of the CIT(A) have not been controverted by the revenue by bringing any positive material on record – thus, there is no reason to interfere with the finding of the CIT(A) – Decided against Revenue.
2014 (2) TMI 851 - DELHI HIGH COURT

Notice of reassessment u/s 147/148 of the Act – Held that:- The Court refrains from making an enquiry, at a time when the AO has, in the first instance, failed to spell out clearly in the section 148 notice itself that such report was not on record - In other words “the reasons to believe” do not state that even in one sentence that the investigation report of 13.3.2006 was not with the AO when he completed the assessment - Relying upon CIT vs. Kelvinator (India) Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] – The circumstances of the case is based upon stale information which was available at the time of the original assessment and in fact appears to have been used by the AO at the relevant time i.e. during the completion of proceedings under section 143(3) – thus, the attempt to reopen the proceedings under section 147/148 is really the result of a change of opinion – and thus beyond the pale of the AD’s jurisdiction - Decided in favour of Assessee.
2014 (2) TMI 850 - MADRAS HIGH COURT

Scope and power of rectification u/s 154 of the Act –Held that:- The decision in Honda Siel Power Products Limited Vs. Commissioner of Income-tax [2007 (11) TMI 8 - Supreme Court of India] followed – the fundamental principle has nothing to do with the inherent powers of the Tribunal/authority - the important reason for giving power of rectification is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record - the first appellate authority rightly entertained the application under Section 154 and rectified the error solely on the ground that as per the law, which holds the land, at the relevant point of time, no penalty was imposable when a loss has been incurred by the assessee - the term "income" in Section 271(1)(c) was interpreted to mean "prospective income" - the assessment order disclose loss to be carried forward – thus, the Commissioner was justified in entertaining the application and rectifying the mistake – thus, the order of the Tribunal set aside.
Levy of Penalty u/s 271(1)(c) of the Act – Held that:- The Tribunal had allowed the Department's appeal only on the question of jurisdiction under Section 154 of the Income-tax Act – thus, it would be proper to remit back the matter for decision on the question of levy of penalty – The appeal allowed only on the aspect of jurisdiction of the CIT(A)Decided partly in favour of Assessee.
2014 (2) TMI 849 - GUJARAT HIGH COURT

Attachment and recovery of amount from PPF account u/s 226(6) of the Act – Held that:- Considering the benevolent provisions of the PPF Act, 1968 and taking harmonious construction of the relevant provisions of the PPF Act read with the provisions of the Civil Procedure Code and the provisions contained in the Income-tax Act, 1961 for recovery of the tax dues, it clearly emerges that as long as an amount remains invested in a PPF account of an individual, the same would be immune from attachment from recovery of the tax dues - The situation may change as and when such amount is withdrawn and paid over to the subscriber, which is not the situation in the present case - the clarification issued by the CBDT does not take into account the provisions of Rule 10 of the Second Schedule to the Income-tax Act, 1961 and the provisions of Section 60(1) of the Code of Civil Procedure - The said clarification is contrary to such statutory provisions – thus, the action of revenue of attaching and withdrawing the sum of PPF account is set aside – Decided in favour of Assessee.
2014 (2) TMI 848 - DELHI HIGH COURT

Claim of depreciation u/s 32 - ownership of truck given on hire - Whether there was any material before the Tribunal to come to the conclusion that the trucks in question were given on hire and the claim of depreciation on the trucks can be accepted or not – Held that:- The Tribunal was of the view that the trucks can be got registered only when necessary formalities about the completion of the body building, insurance, etc. were completed - the trucks were registered during the period from 14.03.1986 to 28.03.1986 – thus, the finding of the Tribunal that the assessee was owner of the trucks cannot be disputed.
The Tribunal has noted that the assessing officer, before whom the affidavit was filed did not summon Sardar Inder Singh to verify the correctness of contents of the affidavit nor did he make any inquiries through the Inspector - There are other materials on the basis of which the Tribunal held that the assessee did receive hire charges for letting out the trucks on hire - It has noted that the hire charges received by the assessee in the accounting year relevant to the assessment year 1986-87 were assessed as the assessee’s income - The sale consideration was found by the Tribunal to have been received by the assessee directly from the finance companies - the Tribunal did not find any justification to doubt the genuineness of the sale of the trucks.
The Tribunal came to the conclusion in all the three years that the assessee was in receipt of hire charges and thus satisfied the second condition of Section 32(1) i.e. that the asset owned by the assessee should be used for the purpose of the business of the assessee - the assessing officer was not able to discredit or impeach the evidence adduced by the assessee to show that it was in receipt of hire charges - The assessing officer was not able to show that the claim was bogus – thus, there was material before the Tribunal to come to the conclusion that the trucks in question were given on hire - There is no substantial question of law framed on the aspect of whether the assessee was the owner of the trucks - Thus both the conditions of Section 32(1) stand satisfied – thus, the Tribunal was correct in law in accepting the assessee’s claim for depreciation on the trucks –Decided against Revenue.
2014 (2) TMI 847 - GUJARAT HIGH COURT

Rejection of books of accounts u/s 145 of the Act – Estimation of GP rate @2%, whether on lower side or higher side - Held that:- The AO as well as the Tribunal noticed a rather irregular pattern of output by the assessee in comparison to the electricity consumption - the average production from using of power consumption widely fluctuated from month to month - The explanation rendered by the assessee was not accepted - the Tribunal noted that in addition to such fluctuation in the output ratio, the assessee also did not record the work in progress in its books of accounts - The Tribunal has rightly recorded that the CIT (Appeals) thus effectively and essentially rejected the books of accounts of the assessee - In addition to wide fluctuation in the productivity compared to the electricity consumption, significant factor was that the assessee had not recorded the work-in-progress in the books of accounts.
The assessee has produced no evidences - If the oil output was vastly different for different oil seeds, which was the reason for fluctuation in productivity, the assessee could have easily demonstrated from the books of accounts and other literature - Merely suggesting that the Gujarat Electricity Board would issue the bills for minimum contracted units without full consumption, is merely stating the obvious – thus, the ground does not involve any substantial question of law – Decided against Assessee.
Addition on account of gross profit ratio – Both Revenue and Assessee are in appeal regarding the estimation of GP ratio – Held that:- In the absence of any satisfactory explanation, the fact provides a reasonable basis for working out the suppressed production on the basis of units of power consumed in remaining months of the year – thus, the additions made were sustained by the Tribunal - The issue is based on appreciation of material on record - The Tribunal having given its consideration and having adopted the GP rate of 2% by giving its own reasons – thus, no substantial question of law arises for consideration – Appeal Rejected for both revenue and assessee.
2014 (2) TMI 846 - GUJARAT HIGH COURT

Disallowance of claim u/s 11(1) Explanation 2 of the Act - Nature of grant received – Held that:- The decision in CIT v . Gujarat State Disaster Management Authority [2014 (2) TMI 789 - GUJARAT HIGH COURT] followed - the amount received by the assessee by way of grant cannot be said to be an income – thus, the ITAT has rightly deleted the addition made by the Assessing Officer - when the amount received by the assessee by way of grant from the State Government cannot be said to be an income and consequently the additions made by the Assessing Officer is deleted, then there is no need to interfere in the order of ITAT – Decided against Revenue.
2014 (2) TMI 845 - ITAT MUMBAI

Penalty u/s 271(1)(c) of the Act - Inflation in expenses – Concealment of income - Expenses debited not connected with the business – Held that:- The CIT(A) held that the appellant has not been able to place any evidence on record that Mr. Jayanti Mehta, in fact, travelled abroad on behalf of the assessee firm and procured the business for the appellant firm - Merely having vast experience in the line of the business of the firm, is not a sufficient criteria to allow an expense incurred on a person, who is otherwise not connected in any way with the business operations of the appellant firm.
The assessee has also failed, both during the course of assessment proceedings as well as in the penalty proceedings to substantiate its claim that the travelling expenses of Mr. Jayanti mehta was incurred for business purposes - the disallowance was related to the interest genuinely incurred for the purposes of business and the disallowance was made u/s 14A of the Act - the assessee has failed to prove that the travel expenses of Shri Janti Mehta for the purposes of its business, i.e., the assessee has failed to address the view of the AO that the expenses were inflated, which has resulted in concealment of income – thus, there is no reason to interfere with the order of the CIT(A) – Decided against Assessee.
2014 (2) TMI 844 - ITAT MUMBAI

Confirmation of net profit - Whether the CIT(A) was justified in confirming the amount of net profit estimated by the AO – Held that:- The year wise expenditure incurred by the assessee shows that the progress made by the assessee in the implementation of the project for the year under consideration was very little - it has incurred expenditure towards the bank liability - The year wise expenditure details substantiate the claim of the assessee that it did not make much progress in the assessment year 2009-10 - there was a valid reason for not offerring income in assessment year 2009-10 - the assessee was justified in not offering any income for the assesment year 2009-10 - The claim of the assessee that it has made considerable progress in subsequent years and it has also offered income in those years requires verification at the end of the assessing officer – the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
2014 (2) TMI 843 - ITAT MUMBAI

Reduction in capital advances given to suppliers - Acquisition of land from Capital-Work-in- Progress – Held that:- The assessee has merely given the advances to the suppliers/contactors/sellers and the expenses have not been actually incurred - Nor any bills have been raised by the persons to whom the advances have been made – the CIT(A) has rightly held that the said advances given by assessee towards expenditure that may arise or may arise in future cannot be said to be capital in nature -there is no confirmation regarding expenditure incurred or to be incurred by assessee – Decided against Assessee.
Disallowance u/s 14A r.w Rule 8D of the Act – Held that:- The contention of the assessee has merits that no borrowed funds were used by assessee for making the said investment - the borrowed money was taken by assessee from IDFC as secured loan which the assessee could utilized only for setting up hotel project – the disallowances of out of interest is not justified - AO has made disallowance of expenses as per Rule 8D(iii) of the Rules, the formula prescribed by Legislature which is applicable from assessment year under consideration - there is no arbitrarily disallowance, made by AO but has followed the statutory formula to make the disallowance towards attributable administrative expenses – there is no need to interfere in the decision of CIT(A) in confirming the disallowance – Decided partly in favour of Assessee.
2014 (2) TMI 842 - ITAT DELHI

Opportunity of being heard – Assessment completed u/s 144 of the Act - Held that:- The assessment proceedings were completed u/s 144 of the Act and the appeal of the assessee was dismissed by the CIT(A) in absence of the assessee by passing a very short and cryptic order – the assessee made repeated written request to the Assessing Officer with a humble request that the copies of the impounded documents are needed to place the actual factual matrix of the case – the assessee could not get required copies of the documents impounded during the survey conducted on the premises of the assessee on 10.2.2009 - neither the original books of accounts and record nor its copies were provided to the assessee enabling him to submit its explanation during the assessment and appellate proceedings - The assessee could not get due opportunity of hearing before the authorities below and the assessee could not offer a suitable explanation and other evidence and documents to support its case either before the Assessing Officer or before the appellate authority - the Commissioner of Income Tax(A) decided the appeal in a cryptic manner without giving a suitable notice of hearing to the assessee - thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
2014 (2) TMI 841 - ITAT MUMBAI

Disallowance of interest Expenditure - Loan confirmatory letters not furnished - Interest debited in the work–in–progress - Revenue was of the view that the assessee could not prove the genuineness of the loan and, accordingly, the interest has been disallowed and had been deducted from work–in–progress – Held that:- Once the loan has been received in the earlier assessment year which are duly reflected in the Balance Sheet filed along with the return of income and the same has not been disturbed by the Department, then such a loan taken in the earlier years cannot be held to be non–genuine in this year - If the interest has been paid / payable in the earlier years, as well as in the present assessment year, then there cannot be a question of doubting the genuineness of the loan in this year, only for the purpose of disallowing the interest in this year.
Since, no addition has been made on account of unexplained credit of loan in the earlier year under section 68, then no disallowance can be made out of interest in the present year - the assessee has duly deducted TDS on such payment of interest and has been deposited with the Government account, the details of which are already there in the record – thus, disallowance of interest by way of reducing the work–in–progress as on 31st March 2007, cannot be sustained – Decided in favour of Assessee.
2014 (2) TMI 840 - ITAT HYDERABAD

Additions made u/s 68 of the Act – Unexplained credits – Creditworthiness of documentary evidence - Held that:- The Assessee has demonstrated the identity and creditworthiness of the creditors and genuineness of the transactions as the transactions done through banking channel - the Assessee repaid the loans taken by him from the creditors - There is also no incriminating material in the search proceedings and all the credits were old and repaid by the time of search – thus, the additions made by the AO and the CIT(A) is not proper – Decided in faovur of Assessee.
2014 (2) TMI 839 - ITAT HYDERABAD

Expenditure incurred on construction of compound wall – Held that:- The Assessee has not proved the cost on the improvement made to the property and even the cash flow statement filed does not show any expenditure incurred - in the absence of any evidence of incurring the amount, the same cannot be considered as deduction while computing capital gain - To that extent, the order of the AO/ CIT(A) is confirmed – the AO made the addition to total income returned where as he has to adjust the same in capital gain computation – the AO is directed to exclude the amount as a direct addition to the total income returned and to compute capital gain separately, as capital gain tax rate is lesser than the tax on other incomes – Decided against Assessee.
Addition towards domestic expenses on estimate basis - Held that:- No evidence was furnished against the withdrawal from any other source towards domestic expenditure - in view of smallness of the personal expenditure claimed, it would be reasonable to restrict the disallowance – Decided partly in favour of Assessee.
Addition made u/s 68 of the Act – Advances against sale of shop and agricultural land – Held that:- Assessee contended that the documentary evidence submitted by him has not been properly verified by the AO - it is better to examine the parties concerned and also the cash flow statement furnished by Assessee, which was not done by AO – thus, the matter remitted back to the AO – Decided in favour of Assessee.
Disallowance of expenditure - Leveling of land and construction of compound wall claimed as cost of improvements for the purpose of capital gains – Held that:- The amount has not been shown as expenditure in ways and means statement – thus, in the absence of explanation about source / evidence of having spent the amount of expenditure by way of documents, it cannot be allowed to that extent – Decided against Assessee.
Addition on account of interest receipt – Held that:- The decision in G. Venkat Rao & Others Versus Asstt. Commissioner of Income-tax, Circle 8(1), Hyderabad [2012 (10) TMI 530 - ITAT HYDERABAD] followed - assessee submitted that there is income for the year under consideration and the profit & loss account does not debit any interest paid to the partners - Even the capital account does not have any credit under the head 'interest' - Interest paid to partners, which has been disallowed in the hands of the partnership firms cannot be assessed in the hands of the partners – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
2014 (2) TMI 838 - ITAT HYDERABAD

Transfer pricing adjustments - Classification of assessee company - Whether the assessee was one of ITES company only when the assessee is both in the activities of IT as well as ITES – Held that:- The assessee has been categorised as ITES Company - According to the TPO, companies within the category of data processing services come within the back office operation as per the CBDT Circular No. SO 890 (E) dated 26-9-2000 - the overall business of the assessee is ITES - This view of the TPO was also upheld by the DRP - the matter is required to be considered afresh by the TPO – thus, the matter remitted back to the TPO for fresh adjudication – Decided in favour of Assessee.
Selection of comparables – Held that:- Since the issue relating to classification of the assessee remitted back to the TPO and since the final classification of the assessee IT and ITES company or only ITES Company, would have an impact on the selection of comparables – thus, this matter also remitted back to the TPO for adjudication.
Claim of pre-operating expenses as part of operating cost – Held that:- The assessee's claim cannot be accepted as the facts and materials on record shows that the assessee was incorporated as a company on 17-1-2007, it has been clearly mentioned that the assessee company has commenced its operations from 1st April, 2007 and hence when the assessee company has commenced its operations from 1st April, 2007, the assessee's claim of prior period expenses for the period subsequent to the commencement of operation cannot be accepted. We therefore dismiss the grounds raised by the assessee.
Computation of deduction u/s 10A of the Act – Exclusion of communication charges – Held that:- The decision in CIT v. Gem plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT ] followed – thus, the AO is directed to re- compute the deduction claimed u/s 10A of the Act after reducing communication charges both from the export turnover as well as total turnover – Decided in favour of Assessee.
2014 (2) TMI 837 - ITAT CHENNAI

Conversion of stock in trade into capital asset - Computation of period of holding - AO held that trading in shares is not incidental activity but main business activity of the assessee – Held that:- It is the prerogative of the assessee to manage the affairs of his business - the assessee has to follow consistent method in accounting policies and treatment of his assets – Relying upon CIT Vs. N.S.S. Investments P. Ltd. [2005 (4) TMI 45 - MADRAS High Court ] - the profit on sale of shares held as investment is to be treated as capital gains instead of 'Business Income' and that the assessee can hold some shares as capital for the purpose of earning dividend and some shares as stock in trade for the purpose of doing business of buying and selling - when shares were sold by the assessee, they were converted into capital asset – the gain arising there from on sale would be assessable as capital gain - where the property-in-question is held by the assessee as stock in trade for the purpose of its business and the same had been converted by the assessee into investment, the period for which the said property was held as stock in trade cannot be reckoned for ascertaining as to whether it was a 'Long Term Capital Asset' or a 'Short Term Capital Asset' within the meaning given in Section 2(29A) and 2(42A) of the Act.
The period for which the shares were held as stock in trade by the assessee is to be excluded from the total period for which the shares were held by the assessee - Since, the date of acquisition of shares is not forth coming from the records – the matter is remitted back to the AO for determination of total period of holding of shares as capital asset – Decided in favour fo Assessee.
2014 (2) TMI 836 - ITAT MUMBAI

Revision u/s 263 - Deductibility of expenses u/s 37(1) of the Act – Fluctuation in rate of exchange - Held that:- The decision in CIT v. Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] followed – the loss suffered by the assessee is on revenue account towards foreign exchange difference as on the date of balance sheet and is an item of expenditure deductible u/s 37(1) - The loss due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered on the last date of accounting year and it is deductible u/s 37(1) of the Act - the view taken by AO to allow loss while making assessment u/s 143(3) on account of derivative contract outstanding is not an erroneous view taken by AO, nor the action of AO is prejudicial to the interest of revenue - the order of Commissioner of Income Tax u/s 263 of the Act to hold that the action of AO is erroneous to the extent the loss considered as allowable on account of derivative contracts outstanding as on the date of balance sheet i.e. 31.3.2008 is neither justified nor in accordance with law – the order of the CIT set aside – Decided in favour of Assessee.
2014 (2) TMI 835 - ITAT AHMEDABAD

Disallowance of payment of premium under "Keyman Insurance Policy – The decision in ITO Versus Ashoka Dyeing & Printing Mills [2010 (9) TMI 430 - ITAT, AHMEDABAD ] followed - Held that:- The existence of employer-employee relationship is a sine-qua-non for the deductibility of keyman insurance premia - CIT(A) held that maturity or surrender amount under the Keyman Insurance Policy was not exempted but taxable as "Salaries" u/s.17(3)(ii) of the Act or as "Profits and Gains of Business" u/s.28(vi) or as income from Other Sources" u/s.56(2)(iv) of the Act in the hands of the recipient - the legislature did not intend that such premium be allowed only where "employer employee relationship existed" - the disallowance made on account of premium paid towards Keyman Insurance Policy in respect of partner of the appellant firm is set aside.
Expenditure on premia of keyman insurance for a firm on life of partners bestows personal benefits to the partners -The amount on claim or maturity under a keyman insurance policy is not exempt under section 10(10D) of the Income Tax Act when the company pays the premia, because in such situation the benefits received acquire the nature of capital receipts – decided against Revenue.