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Income Tax - Case Laws
Showing 101 to 120 of 747 Records
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2021 (10) TMI 1219 - KARNATAKA HIGH COURT
TDS u/s 194J - Accrual of income - payment for service charges - whether the payment paid by the assessee includes the service charges and constitutes the income - Assessee’s main ground that no service charges were paid to the KIADB and the amount of ₹ 1225 Crores paid to the KIADB is part of the compensation to the lands acquired requires consideration - HELD THAT:- The liability to deduct tax would arise only if payment was made towards service charges by the assessee which attracts tax liability. The primary factor to attract Section 194J is the ingredient of ‘income comprised therein’ as held in Kalyani Steels Ltd. [2018 (5) TMI 152 - KARNATAKA HIGH COURT].
In order to establish the same,assessee has referred to Annexure to Schedule – D – Annexure – D1; deposit from allottees in the balance sheet of the KIADB as at 31.03.2013, copy of which is made available at page 179 of the appeal memo. In Sl.No.16 of the said Annexure – D1, Code No.5047 shows deposit of Bangalore Metro Rail Project as ₹ 12250000050.00 and it is submitted that the same tallies with the payment shown by the assessee for the assessment years in question. It is vehemently contended that ledger accounts in books of KIADB reflects that no service charges from BMRCL has been collected. On the contrary, the assessment orders of the KIADB placed before the Court refers to certain sum shown as the amount received towards service charges. However, the break-up of the same is not available. Be that as it may, it is the strong case of the assessee that the amount of ₹ 1225 Crores paid by it, is shown as deposit by the KIADB.
The aforesaid factual aspects requires re-examination by the Tribunal being the last fact finding authority inasmuch as the payment of ₹ 1225 Crores made by the assessee vis-à-vis the accounts of KIADB relating to the said transaction - A finding is necessary whether ₹ 1225 Crores includes the service charges or not which is the primary dispute. Hence, we restore the matter to the file of the Tribunal sans answering the substantial questions of law, setting aside the impugned order, keeping open all the rights and contentions of the parties.
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2021 (10) TMI 1217 - ORISSA HIGH COURT
Assessment proceedings u/s 153A - whether no incriminating material recovered? - HELD THAT:- The exercise u/s 153A is not to be undertaken mechanically - it is not possible to accept the contention of the Department that there was an obligation to initiate the assessment proceedings u/s 153-A of the Act only because a search has been conducted, even though no incriminating materials whatsoever have been found during search. It does not matter that the original assessment was not completed under Section 143(3) of the Act for that purpose.
In the present cases, with there being absolutely no incriminating materials found or seized at the time of search, there was no justification for the initiation of assessment proceedings under Section 153A. On this ground therefore the writ petitions ought to succeed. - Decided in favour of assessee.
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2021 (10) TMI 1216 - ORISSA HIGH COURT
Validity of reopening of assessment u/s 147 - Proof of new material to justify the re-opening of the assessment - change of opinion - whether the reopening of the assessment was based on mere "change of opinion" as contended by the Assessee or was there new material which could not have been examined earlier and which justified the reopening of the assessment? - HELD THAT:- In the present case, the reasons for reopening the assessment do not point to any new material that was available with the Department. What appears to have happened is that the same material viz., the accounts produced by the Assessee were reexamined and a fresh opinion was arrived at by the Opposite Party No.1 regarding the claim of the deduction on account of the loss of sale of assets. This had already been disclosed in the detailed accounts filed by the Assessee. In fact, a questionnaire had been issued by the AO in the course of the original assessment proceedings to the Assessee which was responded to by the Assessee - there was conscious application of mind by the AO to the said materials. Therefore, the inevitable conclusion as far as the present case is concerned is that the ‘reason to believe’ of Opposite Party No.1 that income for the AY in question had escaped assessment is based on a mere ‘change of opinion’
The threshold set by the Supreme Court of India in Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT] to justify the reopening of the assessment has not been met in the present case. Consequently, the Court is unable to sustain the reopening of the assessment. Accordingly, for the aforementioned reasons, the impugned notice and all proceedings of the Department pursuant thereto stand hereby quashed. - Decided in favour of assessee.
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2021 (10) TMI 1215 - MADRAS HIGH COURT
Offences u/s 276CC and 276C[1] - Non disclosure of income - assessee had not filed the Annual Return as mandated under Section 139[1] of the Act, 1961, nor under the extended time u/s 139[4] - HELD THAT:- As the petitioner had laid the blame on his previous employer stating that there has been a mismatch in the income earned as given in Form 16 and as uploaded in Form 26AS. It had also been stated that this was not brought to the knowledge of the petitioner since he had left employment. It was also stated that even though the Show Cause Notices have been received, he was under the bona fide impression that since tax had been paid, no further action is required to be clarified from his end.
It is the case of the petitioner herein that there was no wilful act of non disclosure of income. As a matter of fact, it is the further contention that not just was tax paid, but Self Assessment Tax had also been paid. However, it is seen that it is the consistent case of the respondent / Department that the petitioner had not explained the high level transactions in purchase and sale of mutual funds and transactions in credit cards.
As stated in SASI ENTERPRISES [2014 (2) TMI 19 - SUPREME COURT] the claim of the petitioner herein that he was innocent and ignorant and therefore, indulgence should be granted to him, is actually a fact which should be proved by him in a Court of law. Such innocence or ignorance cannot be presumed. On the other hand, what can be presumed is the culpable mental status and it is for the petitioner herein to prove the contrary.
Insofar as the judgment relied on by the learned counsel for the petitioner in VINAYCHANDRA CHANDULAL SHAH [1993 (12) TMI 10 - GUJARAT HIGH COURT] learned Judge, with due respect, has not at all considered the presumption as given in Section 278E of the Act, 1961, regarding culpable mental state. This was a provision brought into the Taxation Law in the year 1986 itself. The burden lies on the assessee to show that he had no wilful intention not to file the Return. Any explanation to discharge such burden can be tested only during the course of trial.
This Court cannot presume that the petitioner herein is innocent of any of the offences complained. It is for the petitioner to establish such innocence. The platform for establishing such innocence is the Court where the trial is to be conducted and in the present case, that particular Court is the Court of the Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai.
A direction is given to the learned Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai, to commence trial and to complete the same on or before 31.01.2022. The petitioner is directed to cooperate in the trial process.
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2021 (10) TMI 1214 - BOMBAY HIGH COURT
Validity of assessment u/s 144B - no draft assessment order was issued as required under sub clause (xvi) of sub Section (1) of Section 144B - Addition u/s 68 - there is a specific allegation that there is not even a whisper of these additions either in the alleged draft assessment order or in any of the notices issued in the course of assessment proceedings and no opportunity whatsoever was given to petitioner to file its objections against these additions - HELD THAT:- In the affidavit in reply of respondent, there is no denial of this fact. In the affidavit in reply, the affiant has gone on the merits of the two additions but does not deny the fact that neither the alleged draft assessment order or any of the notices have not even referred to this proposed additions under Section 68 of the Act. Issuance of show cause notice is the preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by respondent - See Om Shri Jigar Association Vs. Union of India - [1994 (5) TMI 24 - GUJARAT HIGH COURT] Therefore, on this ground also the impugned order is required to be set aside.
This Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records of the case leading to the passing of the impugned order u/s 143(3) r.w.s. 144B of the Act for the assessment year 2018-19 and after going through the same and examining the question of legality thereof quash, cancel and set aside such impugned order.
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2021 (10) TMI 1213 - BOMBAY HIGH COURT
Assessment u/s 144B - no draft assessment order was served - HELD THAT:- Sub Section 5 reproduced earlier provides that all communication among the assessment unit, review unit, verification unit or technical unit or with the assessee or any other person with respect to the information or documents or evidence or any other details, as may be necessary for the purposes of making a faceless assessment shall be through the National Faceless Assessment Centre. Even the final assessment order has been issued by the National Faceless Assessment Centre. Therefore, even for a moment we accept what the affidavit in reply says that Regional Unit sent draft assessment order under Section 143(3) of the Act, it could not have sent any such communication to the assessee. The said communication should have originated from the National Faceless Assessment Centre.
Affidavit in reply has not been filed by the person who passed the assessment order. Nobody knows, even counsel does not know, who is the faceless person who passed the assessment order. The only person who could have answered this point categorically was the person who wrote and pass the assessment order and not some other officer who is relying upon input received from the National Faceless Assessment Center.
We have to hold that the assessment order has been issued without following the mandatory procedure prescribed under Section 144B of the Act, in as much as, if the review unit of respondents had reviewed the draft assessment order, it should have followed the procedure laid down under sub clause (b) of clause (xvi) of sub-Section (1) of Section 144B.
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2021 (10) TMI 1212 - DELHI HIGH COURT
Certificate for deduction at lower rate u/s 197 - India Netherlands DTAA read with the Protocol and MFN clause - HELD THAT:- Issue notice. Mr.Ruchir Bhatia, Advocate accepts notice on behalf of the Respondents. He admits that the issue raised in the present writ petition is squarely covered in CONCENTRIX SERVICES NETHERLANDS B.V. OPTUM GLOBAL SOLUTIONS INTERNATIONAL BV [2021 (4) TMI 1051 - DELHI HIGH COURT] - Accordingly, the impugned order and certificate are set aside.
Consequently, a certificate u/s 197 of the Act will be issued in favour of the Petitioner, indicating therein, that the rate of tax, on dividend, as applicable qua the Petitioner is 5% under India-Netherlands DTAA.
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2021 (10) TMI 1211 - BOMBAY HIGH COURT
Validity of Reopening of assessment u/s 147 - disallowing the provision for negative reserve - HELD THAT:- This Court in a recent judgment in Ananta Landmark (P.) Ltd [2021 (10) TMI 71 - BOMBAY HIGH COURT] has held that where assessment was not sought to be reopened on reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fairly full material fact that were necessary for computing of income it was not the case wherein assessment as sought could be reopened. On account of change of opinion of Assessment Officer about the manner of computation to deductions u/s 57 of the Act, reopening was not justified. The proposition in this judgment squarely applies to the case in hand as well.
ITAT has concluded that during the assessment proceeding respondent had furnished actuarial form that showed negative result and the Assessing Officer had made addition during the original assessment proceeding on account of actuarial surplus.
Negative reserve was part of document furnished during the assessment and therefore it cannot be said that there was non disclosure of material facts relevant for assessment. ITAT has also observed that AO while passing assessment order has referred to the actuarial report as on 31/3/2003 and hence it cannot be said that AO has not made any inquiry in respect of negative reserve which has been shown in actuarial report. ITAT has also observed that the assessment order was passed with due application of mind and the Assessing Officer has not brought any tangible material on record to show that there was any failure on the part of the assessee to disclose fully and truly all material on record necessary for assessment. - Decided in favour of assessee.
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2021 (10) TMI 1210 - DELHI HIGH COURT
Revision u/s 263 - Deduction u/s 80-IB(10) - HELD THAT:- CIT, in exercise of powers u/s 263 of the Act, had concededly, even according to the petitioner, interceded, via order dated 18.05.2012, and held that, the assessment order passed by the petitioner was erroneous and prejudicial to the interest of the revenue.
The petitioner’s asserts that the case set up by him, which was not examined by the Tribunal, was simply this: the subject assessment order was passed in good faith, in exercise of the adjudicatory powers conferred upon him by the Act and that it was passed neither on account of corrupt motive or recklessly.
According to the petitioner, since he had passed the assessment order in his role, as a quasi-judicial authority, he could not have been served with the chargesheet for performing such functions unless his action could be slotted into exceptions adverted hereinabove.
In our opinion, the manner in which the matter has been dealt with by the Tribunal, is less than satisfactory. The action of the respondent which was impugned by the petitioner before Tribunal has serious ramifications for petitioner, and thus, could not have dealt with the matter so nonchalantly. Accordingly, the impugned order is set aside.
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2021 (10) TMI 1209 - KARNATAKA HIGH COURT
Revision u/s 263 by CIT - Deduction u/s 35D - assessee had wrongly claimed the deduction as it was not an industrial undertaking within the meaning of such expression as envisaged u/s 35D - HELD THAT:- Considering the fact that in respect of financial year 2006-07 relatable to assessment year 2007-08 the assessee had been granted the benefit of amortization under Section 35D[1] of the Act and no action under Section 147 or 263 of the Act had been taken in relation to the said assessment year. Thus, it has been held that once the claim has been granted by the assessing officer in respect of previous years, such claim cannot be disallowed subsequently without disturbing the decision in the initial year. In that context, it was held that the view adopted by the assessing officer is not a plausible view, it is now well settled that if two views are possible and the assessing officer has adopted one view, the same would not warrant exercise of the powers under Section 263 of the Act.
No doubt, in the present case, it is not in dispute that during the first year relating to the assessment year 2007-08, Section 154 proceedings were initiated, subsequent to initiation of revisional proceedings under Section 263, the same would not pass the test of law as enunciated by the Hon'ble Apex Court in Shasun Chemicals and Drugs Ltd.[2016 (9) TMI 1199 - SUPREME COURT] since the same being post revision proceedings and has resulted in giving relief to the assessee on some other ground. Even in terms of Gujarat Narmada Valley Fertilizers Co. Ltd. [2013 (8) TMI 300 - GUJARAT HIGH COURT], the claim which has been granted by the Assessing Officer could not be disallowed subsequently, without disturbing the decision in the initial year. Post action of the Assessing Officer in modifying the original order would not cure the flaw pointed out in Shasun Chemicals and Drugs Ltd. [2016 (9) TMI 1199 - SUPREME COURT] - We answer this issue in favour of the assessee and against the Revenue.
Whether share premium collected on the issue of Share Capital by the Appellant cannot be taken as part of the ‘Capital Employed’ for allowing deduction under Section 35D? - HELD THAT: This question of law has been considered by the Hon'ble Apex Court and answered in favour of the Revenue in Berger Paints India Ltd., V/s. Commissioner of Income-tax, Delhi-V, [2017 (3) TMI 1531 - SUPREME COURT] Accordingly, this substantial question of law is answered in favour of the Revenue and against the Assessee.
Cost of acquisition of companies cannot be treated as asset for allowing deduction u/s 35D - assessee submitted that the acquisition of 100% subsidiary shares of the two companies has to be construed as cost of project - HELD THAT:- The assessee itself stated before the revisional authority under 263 proceedings with regard to computation of cost of project it had incurred, that expenditure towards issue of Global Depository Receipt and Foreign Currency Convertible Bonds was related to extension of industrial undertaking of the assessee; there being no definition of the word “extension” under the Act, the word “expansion” has to be considered as “extension”. Thus, going by meaning assigned to the word “extension”, quite apart from the horizontal expansion in the industrial undertaking, vertical expansion also stands included within the meaning of the term “extension” of the industrial undertaking. It was further stated that the assessee has incurred expenditure for the purpose of acquisition of Subex Americas Inc., and Subex UK Limited and the same was incurred for the purpose of expansion of the business. As aforementioned, there being vast difference between “expansion” and “extension”, the arguments of the learned counsel for the assessee, placing reliance on the consolidation procedures as per the Accounting Standard [AS-21], cannot be countenanced. - Decided in favour of revenue.
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2021 (10) TMI 1208 - ITAT BANGALORE
Penalty u/s 271D and penalty u/s 271E - Assessee for taking loan in cash and repaying the loan in cash - failure to comply with the provisions of secs. 269SS and 269T - HELD THAT:- The material in record clearly goes to show that the assessee as well as Dr. P Dayananda Pai who were admittedly nephew and uncle and confirmed that the loans were personal loans to enable the assessee to purchase a flat. The source of cash has also been explained by Dr. P Dayananda Pai in his letter addressed to the AO dated 21/2/2013. The facts as asserted by the assessee and supported by Dr. P Dayananda Pai have not been controverted with any material by the Revenue - We concur with the view of the CIT(A) that the moneys in question were received and repaid for personal transaction and there is no material to come to the conclusion that these were in relation to any business transactions. The decision relied on by the ld.Counsel for the assessee before us and several other decisions clearly supports the proposition that acceptance and repayment of cash for personal purpose between near relatives do not attract the provisions of sec.269AA and 269T.
Hon’ble Madras High Court held that receipt of cash by the daughter-in-law from father-in-law does not attract the provisions of sec. 269SS of the Act. Similarly in SRI MANSUR ALI LASKAR [2011 (12) TMI 732 - ITAT KOLKATA] wherein, it was held that niece, uncle, aunty, wife of brother, wife’s sister and cousin are part of family members and the transactions with sister-in-law and nephew should also to be considered as a transaction between family members - Decided against revenue.
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2021 (10) TMI 1207 - ITAT RAIPUR
Additions of varied amounts on account of unaccounted on-money - Seized material in search - whether the whole amount of on-money received can be subjected to taxation or only the income embedded therein can be brought to tax in the facts of the case? - HELD THAT:- Undisputed fact that certain seized materials were found in the course of search showing unrecorded receipts and consequently, a disclosure of this amount was made in aggregate in various assessment years by way of statement recorded u/s 132(4) of the Act at the time of search. The assessee, however, has offered the net profit elements whereas the Revenue has attempted to tax the gross amount in tune with deposition made in the statement on behalf of the assessee- company at the time of search.
In the course of search, certain loose-papers were found showing unaccounted receipts. The assessee readily surrendered the aforesaid receipts as undisclosed income of the assessee. Apart from the loose-papers of incriminating nature, the search team could not lay on hands on any excess cash of serious amount, nor could unearth any unaccounted assets or investment to corroborate the unaccounted gross receipts in question. Besides, the deposition made in statement u/s 132(4) suggests that the amount generated by way of gross receipts have been ploughed back in the business of the assessee. Question No.13 of the statement under Section 132(4) clearly vouches this significant aspect. In this factual backdrop, the case made out on behalf of the assessee that only the profit element embedded in the gross receipt is susceptible to tax cannot be brushed aside.
We find merit in the plea of the assessee that the Assessing Officer was not justified in bringing to tax the whole amount of unrecorded receipts. In the light of judicial precedents cited above and many more, entire gross receipts cannot be brought to tax. The action of the assessee to restrict the inclusion of unaccounted income in ROI to the extent of profit embedded in such unaccounted receipts cannot be faulted in the facts and circumstances of the case. - Decided in favour of assessee.
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2021 (10) TMI 1206 - ITAT MUMBAI
TP adjustment on Export of finished products - Selection of MAM - application of CUP method - HELD THAT:- While considering the issue of comparability with an uncontrolled transaction, the condition prevailing in the market in which the respective parties to the transaction operate, including the geographical location along with other factors would be relevant to decide which method would be suitable for benchmarking the transactions. Finally, the application of CUP method has been rejected by the bench and the adjustment has been deleted - we reject application of CUP method and delete the impugned adjustment as proposed by Ld. TPO. This ground stand allowed.
TP adjustment against payment for technical know-how (Royalty) - AO Adopted the benchmarked royalty rate of 4% as against effective rate of 4.57% paid by the assessee and proposed an adjustment - TPO disallowed the royalty payment on adhoc basis and benchmarked the transactions using CUP method - HELD THAT:- Tribunal deleted the adjustment on the premises that Ld. TPO was bound to determine the ALP by following any one of the prescribed method and determination of ALP on adhoc basis could not be sustained. It was also held that CUP method could not be applied since comparable agreements were between entities located outside India. In AY 2014-15[2019 (7) TMI 1314 - ITAT MUMBAI], Ld. TPO applied CUP method to benchmark the transactions. However, the coordinate bench, in its order for AY 2014-15, held that CUP was not most appropriate method for benchmarking the transactions because of geographical differences. We find that in this year, Ld. TPO has followed same methodology as in AY 2014-15 and applied CUP method which has already been rejected by Tribunal in AY 2014-15. Therefore, following consistent view of Tribunal, we delete this adjustment. The ground thus raised stands allowed.
TP Adjustment against payment of interest on ECB Loan - HELD THAT:- ALP of such transaction could be more accurately determined by following rate of interest fixed by RBI in respect of ECB loan. This decision has subsequently been followed in AY 2014-15[2019 (7) TMI 1314 - ITAT MUMBAI] - The assessee has followed the same RBI rate to benchmark the transactions in this year. Therefore, respectfully following earlier stand of Tribunal, we delete the impugned adjustment. The grounds thus raised stand allowed.
TP adjustment against payment to AE for Software charges - According to the terms of agreement, the assessee was required to pay two (2) charges namely, IS charge (a recurrent service fee for regular recurrent services) and S3 charge (a specific service fee for development /acquiring and implementation of "S3 ERP Program") - HELD THAT:- We find that IS charges were paid by the assessee for obtaining access to ERP software and for regular recurrent services and such charges were paid in earlier years also. In AY 2012-13, similar adjustment proposed by Ld. TPO was deleted by coordinate bench on the premises that Ld. TPO was duty bound to determine ALP by following any one of the prescribed methods and determination of ALP on adhoc basis could not be sustained. It was also observed that the assessee had submitted substantial evidences in support of the claim. This order was followed subsequently in AY 2013-14. In AY 2014-15, Ld. TPO allowed external cost but did not allow cost allocated to the assessee on the ground that the claim was unsubstantiated. This adjustment was also deleted by the Tribunal. Therefore, we find that this issue is recurring in nature. The charges have been paid pursuant to the agreement and the assessee has already placed on record third part audit certificate along with sample third party invoices raised by the vendors on its AE. In support of benefits, the assessee submitted a flowchart of the manufacturing operations, depicting the inter-linkage between the manufacturing operation and application provided /services received as part of IS and S3 services. Therefore, Ld. TPO, in our opinion, was not justified in denying this cost to the assessee.
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2021 (10) TMI 1205 - ITAT CUTTACK
Exemption u/s 11 - Whether CIT(A) is not justified in accepting the contentions of the assessee and not accepting the findings of the AO in violation of Rule 46A of the IT Rules? - HELD THAT:- CIT(A) had called remand report from the Assessing Officer but the AO has not objected to the written submission filed by the assessee trust. Therefore, the ld. CIT(A) is fully justified in directing the AO allow exemption u/s. 11 of the Act.
As regards the acceptance of submission of the assessee in violation of Rule 46A as claimed by the department, we find that after receiving the various written submissions and documents, the CIT(A) had called for the remand report and after getting the remand report, the explanation of the assessee was called for and the rejoinder was filed by the assessee. Therefore, it cannot be established that the CIT(A) has accepted the new evidence in violation of Rule 46A of the IT Rules. Therefore, we reject the grounds of appeal of the revenue.
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2021 (10) TMI 1204 - ITAT PUNE
Accrual of income - Addition account of accrued interest on seed money loans - classification of sticky advances - whether there was no basis for accounting said accrued interest income on cash basis as section 145(1)? - HELD THAT:- Admittedly, the respondent-assessee is following the mercantile system of accounting. It is the policy of the respondent-assessee company to account for the interest on such loans under seed money assistance scheme on receipt basis following the uncertainty of the recovery, realization of the interest. This policy is clearly stated in Clause (5) of Note No.23 read with 36 of Notes to Accounts forming part of Audited Financial Statements. Thus, material on record clearly indicates that there is uncertainty as to the recovery of the principal amount and interest on such advances. Therefore, the issue that comes up for our consideration is that whether can it be said that the interest had accrued on such advances when the assessee is following mercantile system of accounting.
As decided in own case WESTERN MAHARASHTRA DEVELOPMENT CORPORATION LIMITED [2021 (6) TMI 1068 - ITAT PUNE] we do not find any merit in the grounds of appeal raised by the Revenue. Accordingly, the appeal filed by the Revenue stands dismissed.
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2021 (10) TMI 1203 - ITAT SURAT
Rejection of books of accounts - best judgment assessment - gross profit estimation - CIT(A) was of the view that 1% to 2% on profits may be estimated depending upon the market situation in such cases - CIT(A) noted that all transactions in assessee`s case are with the associated concerns and no physical transfer of goods took place thus profit cannot be estimated at a normal market rate. In fact, it calls for appropriate rate
HELD THAT:- It is well settled that in a best judgment assessment there is always a certain degree of guesswork. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment and should not act totally arbitrarily. Department must act judiciously, while passing the order u/s 144 of the Act and must be guided by judicial consideration and by rule of justice, equity and good conscience. And also that there must be honest and fair estimate of the proper figure of assessment, for which consideration of local knowledge and repute, besides the previous returns an assessment of the assessee concerned, and all other matters must be taken into account for fair and proper estimate which of course, would fall in the category of guesswork, but a honest guesswork.
In the assessee`s case under consideration, we note that assessee did not submit books of accounts. On examination of the profit and loss account of the assessee, the ld CIT(A) noted that total expenditure other than purchases mentioned in the profit and loss account, is a negligible amount of ₹ 2,71,150/- for business turnover of ₹ 2,39,05,01,881/-. Therefore, books of accounts of the assessee cannot be believed. The breakup of these expenses also shows that no expenses were recorded towards transportation. With negligible amount of transportation cost, how the assessee has achieved turnover of ₹ 2,39,05,01,881/-? Therefore, it simply implies that the transactions of purchase and sales are made through book entry. Needless to say, that no physical transfer of goods has taken place in view of the fact that there was no transportation expenses recorded. Hence, we are of the view that Gross Profit rate at 1% sustained by ld CIT(A) is quite reasonable.
There is gross failure on the part of the assessee, as the assessee has deliberately refrained from producing the books of account till the very last stage of the assessment proceedings. The reason being that the books of account were not good enough to pass the test of verification of the Assessing Officer. It needs to be appreciated that verification of the books of account is a primary and fundamental tool for finalizing the assessment under section 143(3) - in the light of the judgment of the Hon`ble Apex Court in the case of CIT Vs. Simon Carves Ltd [1976 (8) TMI 4 - SUPREME COURT], and taking into account the assessee`s facts, as narrated above, we are of the view that estimation made by ld CIT(A) is based on sound reasoning. That being so, we decline to interfere with the order of Id. CIT(A) in sustaining the additions at the rate of 1% of gross profit. His order on these additions are, therefore, upheld and the grounds of appeal of the assessees, as well as Revenue are dismissed.
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2021 (10) TMI 1202 - ITAT MUMBAI
Sundry debtors written off - assessee has not demonstrated how the debts have become bad or what efforts have been taken for recovery - HELD THAT:- CIT(A) has given finding that it is clear that the ledger accounts and sales invoices along with a detailed chart has been furnished by the assessee which demonstrates that the amount involved in the debts have been offered as income in the earlier years. CIT(A) has rightly rejected the AO’s plea that the assessee has not demonstrated how the debts have become bad or what efforts have been taken for recovery. As the said issue is duly covered by the decision in the case of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT] wherein it was held that after amendment in the Act write off in the account is sufficient for the claim of debts written off. Hence, in our considered opinion there is no infirmity in the order of learned CIT(A). Moreover, this ITAT in assessee’s own case for A.Y. 2011-12 & 2012-13 in [2021 (6) TMI 615 - ITAT MUMBAI] on the issue of bad debts similarly raised, has allowed the same in favour of the assessee.
Finished goods written off - HELD THAT:- In order to bring out the effect of the change in the method of accounting the assessee had reduced the effect which is ₹ 37.41 cores from the consumption which would decrease valuation of opening stock and increase the profit. Further in order to negate this effect the assessee had debited the same amount to the profit and loss account as exceptional items written off. Thus there is no effect on the profit and loss account and the assessee has not tinkered with the opening stock. To recapitulate, the assessee has reduced the value of opening stock by a sum of ₹ 37.41 crores which is a credit effect increasing the income and has simultaneously debited the profit and loss account by the same amount as exceptional items written off to nutralize the effect. Thus actually there is no effect and this has also been detailed in Note No. 4 given by the auditors in the notes to accounts. In this view of the matter in our considered opinion, we do not find any infirmity in the order of learned CIT(A).
We note that in the present case before us aforesaid amount added by the AO is erroneous as assessee’s adjustment has not affected to the profit and loss account. In this view of the matter we do not find any infirmity in the order of learned CIT(A). Hence, we uphold the same.
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2021 (10) TMI 1201 - ITAT JABALPUR
Addition u/s 68 - Unexplained cash credit - primary discharge of onus - HELD THAT:- Where the document furnished explained a credit - cash available to the required extent in the instant case, there is a prima facie discharge of the onus on the assessee, and it is for the AO to, where not satisfied, seek further explanation, so that his non-seeking the same, as stated by Sh. Modh during hearing, cannot disturb the said prima facie discharge of the onus by the assessee.
In the instant case, however, the argument of a prima facie discharge of onus by the assessee is not available to him as, as found, he had been specifically required by the AO to furnish the source of the cash available with the creditors, also drawing their cash flow statements, and which had not been complied with. As afore-stated, the reference of cash availability to the opening cash-in-hand (i.e., as on 31/3/2011), only implies that the source of the cash is to be found in an anterior period - nothing more and nothing less.
The matter, on balance, warrants being remitted back to the file of the AO for fresh adjudication, which is hereby directed. It shall be open for him to question the assessee, or even, where so considered, the concerned creditor/s, and/or seek further evidence in validation of the document/s (balance-sheet, income statement, etc.) submitted, which, where belonging to the creditors, would need to be signed by them. He shall make an objective and fair assessment of the different variables impinging on the cash availability, and decide in accordance with law per a speaking order after affording a reasonable opportunity to the assessee to present his case before him.
Another aspect of the matter that needs to be before parting clarified is that the Revenue has not disallowed the interest allowed by the assessee on the impugned credits, stated to be loans thereto, and which in fact follows in consequence of the same being, or ought to be the case where it is, deemed as the assessee's income. Though inconsistent, that would not by itself render the assessee's case as proved, which will have to be adjudged on its merits. Why, regarding so would make the Revenue's case a non-starter, and allowing the assessee the benefit of what is essentially a fallacy on the part of the Revenue, which ought to have been addressed by the first appellate authority inasmuch as it is, as afore-said, inconsistent with the impugned credits being regarded by it as the assessee's income. Why, for that matter, even the said interest having been returned by them, may have been assessed as the creditor's income for the relevant year. That, again, though would not by itself absolve the assessee from discharging the burden of proof on it
Addition toward low house-hold withdrawals - AO effected the same finding the disclosed withdrawal as inadequate to satisfactorily explain the personal and house-hold expenditure, i.e., for self and family. The position before the first appellate authority, and in fact even at the second appellate stage, remains the same; the assessee being unable to show as to how the estimated expenditure was excessive, as alleged per his ground of appeal. The same is found reasonable considering the obtaining price levels, with, as afore-said, the assessee not improving his case before me in any manner. We decide accordingly.
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2021 (10) TMI 1200 - ITAT DELHI
Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - Addition being 0.5% of the average of opening and closing investment in mutual funds pertaining to financial year 2012-13 - whether AO failed record his dissatisfaction with the working given by the assessee that they have not incurred any expenditure to earn the dividend income? - HELD THAT:- When assessee has come up with a categoric defence that no expenditure has been incurred to earn the dividend income during the years under assessment and that all the investment during the years under assessment are “dividend reinvested” (Debt Oriented Funds) and that no direct investment has been made rather dividend has been reinvested by the company during the years under assessment and has brought on record complete fund statement issued by the ICICI Prudential Fund wherein the entire investment shown in the year under consideration is “dividend reinvested” (Debt Oriented Funds), AO was required to record his categoric dissatisfaction as to working of the assessee that such and such expenses have been incurred to earn dividend income, but not shown.
When ld. CIT (A) himself recorded that, “it may not be possible to find out the actual expenditure incurred in relation to the earning of exempt income”, it is difficult to reject the working brought on record by the assessee too that no expenditure has been incurred to earn dividend income by the assessee. Moreover, the entire investment made by the assessee during the years under assessment is “dividend reinvested” and in these circumstances, the provisions contained u/s 14A read with Rule 8D cannot be invoked mechanically.
In AY 2014-15 also, AO has mechanically applied section 14A read with Rule 8D without recording any dissatisfaction as to the working given by the assessee as to not incurring any expenses to earn the dividend income rather based his findings on the basis of generic observations that such a huge investment cannot be made without incurring expenditure. For AY 2014-15 also, assessee has brought on record fund statement also showing entire investment for the year under assessment as “dividend reinvested” which ratifies the working given by assessee.
By following the law laid down in Godrej & Boyce Manufacturing Company Ltd. [2017 (5) TMI 403 - SUPREME COURT] and Maxopp Investment Ltd. [2011 (11) TMI 267 - DELHI HIGH COURT] we are of the considered view that disallowance for Assessment Years 2013-14 & 2014-15 respectively by mechanically applying the provisions contained u/s 14A read with Rule 8D(2) are not sustainable in the eyes of law because sub-section (2) & (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee.
It is a matter of fact that the entire investment during the year under consideration is on account of dividend reinvested (Debt Oriented Funds) not creating any occasion for the assessee company to put in their administrative and managerial manpower for making investment. So, AO is directed to delete the disallowance for Assessment Years 2013-14 & 2014-15 respectively after due verification that apart from “dividend reinvested” no other investment has been made by the assessee company. - Decided in favour of assessee.
Education Cess (EC) and Secondary & Higher Education Cess (SHEC) on income-tax being an allowable expenditure for computing the total income - HELD THAT:- As it is settled principle of law that Education Cess and Secondary & Higher Education Cess paid on income-tax is an allowable deduction for computing the total income being not hit by the provisions contained u/s 40A(ii) of the Act, as has been held by Hon’ble Bombay High Court in case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT].
Hon’ble High Court in Sesa Goa Ltd. case (supra) held that education cess or any other cess is not included in clause (ii) of section 40(a) of the Act so there is no prohibition in claiming deduction of such amounts while computing the income of the assessee under the head ‘profits & gains of business or profession’.
Coordinate Bench of the Tribunal in case of Sicpa India Private Ltd. [2020 (4) TMI 425 - ITAT DELHI] also decided the identical issue by holding that education cess on income-tax, dividend distribution tax and fringe benefit tax is not a disallowable expenditure under section 40(a)(ii) of the Act having been expressly excluded from section 40(a)(ii) - education cess and secondary & higher education cess is an allowable deduction being not hit by the provisions of section 40(a)(ii) of the Act. - Decided in favour of assessee.
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2021 (10) TMI 1199 - ITAT CHENNAI
Disallowance of supervisory charges paid - ingenuine expenditure - assessee had made a claim for deduction u/s. 40(a)(i) of the 'supervisory charges' paid to the parent company - as per DR CIT(A) has erred in deleting supervisory fees paid by the assessee to its parent company based on fresh evidences submitted for the first time during appellate proceedings without giving any opportunity to the Assessing Officer in violation of Rule 46A of Income Tax Rules, 1962 - HELD THAT:- The assessee has furnished necessary evidences, including agreement between the parties, invoices raised by parent company, travel documents of expatriates, who visited India for rendering services, their visa, passport and air tickets. The assessee had also furnished e-mail correspondence between its parent company for exchange of information regarding technological support required for manufacturing and installation of industrial furnaces. The said payment has been made after withholding necessary TDS applicable as per law - supervisory fees paid by the assessee to its parent company M/s. Dong Woo HST Co. Ltd. in pursuant to an agreement dated 25.12.2007 is genuine expenditure incurred wholly and exclusively for the purpose of business of the assessee and which is supported by necessary evidences.
AO has disbelieved genuine expenditure incurred by the assessee for the purpose of business only for the reason that said transaction was entered into between the assessee and its parent company. AO had also questioned necessity of making such payments. Therefore, he opined that payment made to its parent company for rendering supervisory fees is nothing but shifting of profit from one tax territory to another tax territory without any actual business expediency and as against which no particular service is received.
As gone through reasons given by the AO in light of various evidences filed by the assessee including agreement between parties and we do not ourselves subscribe to reasons given by the Assessing Officer for the simple reason that it is well settled principle of law that the Assessing Officer cannot sit in the armchair of businessman and decide whether particular expenditure is required to be incurred or not. It is also an admitted legal position that the Assessing Officer cannot question rational and necessity of incurring any particular expenditure. What is required to be seen is whether particular expenditure is incurred wholly and exclusively for the purpose of business of the assessee and further such expenditure is supported by necessary evidences. In this case, the assessee has filed all possible evidences including agreement between parties to prove genuineness of expenditure incurred for supervisory services.
There is no doubt of whatsoever with regard to genuineness of payment made by the assessee to its parent company, because such payment was made in pursuant to agreement between parties and further, the assessee has deducted applicable TDS as per law. The assessee had also furnished other supporting evidences to prove receipt of services from its parent company - expenditure incurred by the assessee towards payment made to its parent company for rendering supervisory services is genuine expenditure, which was incurred wholly and exclusively for purpose of business of the assessee.
AO without appreciating facts has simply disallowed supervisory fees paid to the assessee's parent company. The learned CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer. Hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the Revenue.
Non-deduction tax deducted at source and consequent disallowance of expenditure by the assessee in certain years and claiming deduction for said expenditure in the year of payment is not disputed by the Assessing Officer, because the Assessing Officer has primarily held that expenditure incurred by the assessee under the head supervisory fees is held to be not deductible under section 37 of the Income Tax Act, 1961. But, the ld. CIT(A) has examined suo motu disallowance made by the assessee in earlier years for non-deduction of tax deducted at source and subsequent deduction claimed in the year of payment and held that the assessee has rightly claimed deduction towards expenditure incurred in earlier years in the impugned assessment years, because, it was disallowed in earlier years for non deduction of TDS and further, the same has been claimed as and when TDs has been deducted and remitted to Govt. account. - Decided in favour of assessee.
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