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Income Tax - Case Laws
Showing 201 to 220 of 747 Records
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2021 (10) TMI 1043 - ITAT VISAKHAPATNAM
Delayed payment qua employees share of ESI and PF - deposit of employees contribution qua ESI & PF after the prescribed dates as per the relevant Acts i.e. ESI & PF, but before filing of return u/sec. 139(1) - contention of the Assessee is that PF and ESI contribution of Employees, if paid within the due date of filing of return of income u/s 139(1) of the Act, then the same is allowable for deduction as per section 43B - HELD THAT:- We are of the considered view that as in the instant case, the employees contribution qua ESI & PF for the Asst. Year: 2019-20 has been deposited before the due date of furnishing the return of income u/sec. 139(1) of the Act and therefore cannot be subjected to disallowance, consequently, the addition sustained by the ld. Commissioner (NFAC) is liable to be deleted. - - Decided in favour of assessee.
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2021 (10) TMI 1042 - ITAT MUMBAI
Addition of commission paid to overseas agent - assessee was unable to prove the need for commission @ 25% paid to M/s. Khadlaj Perfumes LLC, whereas commission incurred with other parties was @ 0.5% to 5.85% - HELD THAT:- Assessee in this case has paid commission to its overseas commission agent. Agreement has been duly submitted. Payment has been duly made to the overseas commission agents. The same is duly approved by the RBI.
AO has questioned necessity of high rate of commission. In his opinion lower commission was to be paid. No case has been made out that the payment is bogus. In fact there was search and seizure operation at the premises of the assessee and no evidence was unearthed that the payments were bogus and non-genuine. Names and address of the overseas commission agents were very much there with the Assessing Officer. He insisted the assessee to produce principal officer of the overseas entity. Assessing Officer has made no effort whatsoever to make any independent examination of his own. He sits in the shoes of the businessman and decided that lower rate of interest should have been charged. In our considered opinion this is legally totally unsustainable.
CIT(A) has elaborately examined the issue and after detailed analysis of the factual data has come to the conclusion that the assessee’s performance has hugely increased pursuant to support from the commission agents. In this view of the matter in our considered opinion learned CIT(A) has passed a correct order. Addition made by the Assessing Officer is solely based upon surmises and conjecture without any cogent independent verification on record. See RAJARANI EXPORTS PVT LTD [2013 (5) TMI 410 - CALCUTTA HIGH COURT].
TP Adjustment - transfer of fund for equity capital - assessee advanced interest free loan to its subsidiary - HELD THAT:- As assessee has given funds to its subsidiary initially which has been converted later on into equity capital. For the intervening period the Assessing Officer has charged 10% notional interest. The Revenue was relied upon the case of Perot System TSI India Ltd.[2009 (10) TMI 638 - ITAT DELHI]. There was no issue of conversion of fund into equity in the case of Parot System TSI India Ltd. (supra). However in the present case the plea is that fund transferred was for conversion into equity and there was some procedural delay. This has been accepted by learned CIT(A) on the touchstone of the ITAT Ahmedabad decision in the case of Micro Inks Ltd. [2009 (10) TMI 638 - ITAT DELHI] We find that the proposition that transfer of fund for equity capital does not attract transfer pricing adjustment.
Assessment u/s 153A - addition when no incriminating material was found and these were completed assessment - HELD THAT:- Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT]has held that in the case of completed assessment no addition can be made under section 153A of the Act dehorse any incriminating material found. It is not disputed that upto A.Y. 2006-07 these were completed assessment and no incriminating material was found. To this extent this ground raised by the Revenue stands dismissed.
Addition of staff welfare expenses - AO also disallowed expenses on account of purchase of goats for distributing it to its employees for Eid celebration - CIT(A) has upheld the addition by holding that there is nothing to indicate that this expenditure was incurred specifically on the employees of the assessee company and there is no detail available as to the number of employees of the assessee company, the number of employees who are Muslims and the reasonableness of the said expense - HELD THAT:- We find that learned CIT(A) has passed reasonable order. In the absence of necessary details in this regard expenditure involved cannot be allowed as business expenditure. The decision of Borsad Tobacco Co. P. Ltd. [2019 (9) TMI 1600 - ITAT MUMBAI] referred by learned Counsel of the assessee are not applicable on the facts of this case. Hence, we uphold the order of learned CIT(A)
Expense for obtaining special number for car - as per AO there is no benefit to business in any way and therefore he disallowed the expenses - HELD THAT:- We find that the orders of the authorities below are appropriate that expenditure for obtaining “fancy number for the car” is not at all business expenditure. Hence, there is no question of allowing the same as revenue expenditure or capitalizing the same and allowing depreciation thereon. Hence, we uphold the order of learned CIT(A).
Excess physical stock found in search - HELD THAT:- We find that the addition in this regard is based upon the excess stock found during search and we do not find any infirmity in the order of the authorities below. Even the assessee is taking shifting stand partly accepting and partly denying the veracity of findings. This is not sustainable. Hence, we uphold the same.
Excess cash found - amount of the seized cash would be added to the Total Income u/s. 69A - We find that the assessee has contended that it was never a case the assessee has not pressed for this ground. Hence, in our considered opinion this issue has been left unadjudicated by learned CIT(A). Moreover the Assessing Officer has rejected the assessee’s explanation without mentioning as to what was the explanation. Hence, in the interest of justice we remit this issue to the file of learned CIT(A). The learned CIT(A) is directed to consider this issue afresh and decide as per law.
Addition of commission paid to overseas agent - HELD THAT:- As decided in own case commission on export activity had been fully disclosed in all correspondences and activities in relation to export, the commission was paid through banking channel of RBI approval and it was paid pursuant to an agreement approved by Government of India and UN. The payment of commission was for business consideration and there was apparently no illegality in making payment of commission. Besides this, nothing has brought on record to show that the transactions relating to payment of commission are non-genuine or are excessive and unreasonable.
Unexplained purchases - HELD THAT:- We find that the addition has been made by the Assessing Officer without any cogent material. The assessee has supplied all purchase/evidence. This has been rejected by the Assessing Officer without any reasoning whatsoever. Moreover learned CIT(A) has also given finding that the said purchase was not routed through profit and loss account as expenditure. For all these reasons 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 1041 - ITAT INDORE
Addition u/s 68 - advances for agricultural land as shown by the assessee - assessee failed to provide necessary evidences to prove the genuineness or transactions and creditworthiness of the persons giving advances - CIT-A deleted the addition - HELD THAT:- Addition as made by the Assessing Officer on account of advance received against sale of land by invoking the provisions of section 68 of the Income-Tax Act, 1961 were unjustifiable since the amount of advances received by the assessee were subsequently adjusted against the sales made by the assessee and the same was also verifiable from the registered sale deeds - AO was not justified in treating the amount of advance received by the assessee as his income as the AO failed to consider the fact that the assessee had sold agricultural land belonging to him to Shri Rakesh Agrawal in lieu of consideration which included the amount of advance received from the said party. Accordingly, we are of the view that the additions made by the Assessing Officer were rightly deleted by the Ld CIT(A). - Decided against revenue.
Additions u/s 68 - unsecured loan from various persons - HELD THAT:- On perusal of the remand report, we find that the Assessing Officer did not comment on any of the documents filed by the assessee during the course of the appellate proceedings rather the Assessing Officer reiterated the findings of the then Assessing Officer. Thus, it is clear that the Assessing Officer failed to controvert the genuineness of the transaction and identity as well as creditworthiness of these parties.
As from documentary evidences, it is apparent that the assessee satisfactorily discharged the primary onus cast upon him under section 68 of the Income-Tax Act, 1961 to establish the identity and creditworthiness of these parties and genuineness of the transactions as entered into with them. Taking into consideration all these facts, the ld. CIT(A) examined each and every entry in respect of unsecured loan received from the creditors and reached to the conclusion that the addition made by the Assessing Officer is unjustified. In view of these facts, we are of the view that it is a settled position of law that no addition is called for under section 68 of the Income-Tax Act, 1961 on account of unsecured loans if the assessee establishes the identity and creditworthiness of the parties and genuineness of the transactions as entered into with them - Decided against revenue.
Disallowance of interest out of property income and on account of disallowance of interest out of income from other source - HELD THAT:- We find that copy of repayment schedule/ loan statement in respect of the loan taken from ICICI Bank Ltd. and State Bank of India have been filed so as to justify the amount of interest paid and claimed as deduction during the year under consideration. In view of these facts, it is clear that the disallowance made by the Assessing Officer was unjustified as the borrowed funds were utilized towards purchase of the properties which were let-out and rental income earned therefrom was offered for tax under the head ‘Income from House Property’ and more so when such deduction on account of interest was allowed in the preceding as well as subsequent years. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A) on this point. Accordingly, ground of the Revenue is dismissed.
Addition on account of interest claimed under the head ‘Income from Other Sources’ - assessee failed to prove the direct nexus of funds borrowed and advanced to the parties from whom interest income was earned - HELD THAT:- It is clear that the disallowance made by the Assessing Officer was unjustified as the borrowed funds were utilized towards advancement of loan to the parties from whom interest income was earned and was duly offered for tax under the head ‘Income from Other Sources’ and more so when such deduction on account of interest was allowed in the preceding as well as subsequent years. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A) on this point. Accordingly, ground no.4 raised in the appeal of the Revenue is dismissed.
Taxability of agricultural income as income from other sources - HELD THAT:- We find that the assessee had submitted before the Revenue Authorities that that agricultural land owned by him was given on Batai and agricultural income earned therefrom was duly shown in the income-tax return and the Assessing Officer himself did not disbelieve the agricultural lands owned by the assessee. Further, the assessee has filed the detail of the persons to whom agricultural land was given on Batai and from whom agricultural income was received during the year along with the details with respect to area of land - the amount of agricultural income was duly shown by the assessee in his income-tax return every year and the agricultural income shown by the assessee had also been duly examined and accepted in the preceding as well as subsequent years.
On consideration of above facts, it is clear that non-acceptance of agricultural income shown by the assessee in his income-tax return was unjustified more so when agricultural income was shown by the assessee on a year-to-year basis and such agricultural income had also duly been examined and accepted in the preceding as well as subsequent years. Thus, we direct the Assessing Officer to accept the agricultural income in full.
Disallowance u/s 40(a)(ia) of the I.T. Act for non-deduction of TDS on the amount of late payment charges - benefit of the second proviso to section 40(a)(ia) - HELD THAT:- As second proviso to section 40(a)(ia) of the Act shall have retrospective effect from 01-04-2005 and in the present case, the relevant assessment year is the Assessment Year 2010-11 and the benefit of the second proviso to section 40(a)(ia) of the Act shall be available to the assessee as the assessee had obtained and furnished the certificate of the CA of the broker wherein it has been clearly certified that the amount on which TDS not deducted by the assessee was included in the total income of the payee and requisite amounts of taxes due were also paid on it. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A) on this point. Accordingly, ground no.6 raised in the appeal of the Revenue is dismissed.
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2021 (10) TMI 1023 - ITAT DELHI
Income accrued in India - Business Connection and Permanent Establishment - AO in conclusion held that the assessee has PE in India has a BC and PE in India - HELD THAT:- The issue of Appellant's PE/BC in India is covered against it by the above decisions of Hon'ble Delhi High Court [2014 (8) TMI 902 - DELHI HIGH COURT] and Hon'ble Delhi ITAT. [2011 (3) TMI 1819 - ITAT DELHI]in Appellant's predecessor's case.
Excessive attribution to alleged PE of the Appellant in India - manner of attribution i.e. whether attribution is on sales or the net profits- HELD THAT:- PE attribution at 15% of gross revenue less the expenses (as already allowed by the Ld. AO and Ld. DRP), as per the decision of Galileo International Inc (GII) [2011 (3) TMI 1819 - ITAT DELHI] reduces the taxable income to Nil and thus, no income is taxable in India.
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2021 (10) TMI 1021 - DELHI HIGH COURT
Illegal retention of seized money - petitioner is aggrieved by the failure of the respondents/revenue in not refunding sum retained illegally, after adjusting the tax and penalty due, out of the money seized by them - HELD THAT:- As revenue, says that, the petitioner, ordinarily, should have moved an application for rectification under Section 154 of the Income Tax Act, 1961 but having regard to the fact that, several years have passed since the adjustment was made, the best course would be to remit the matter to the AO with a direction to pass a speaking order, qua the grievances articulated by the petitioner in the writ petition.
Given the circumstances obtaining in the case, that, indeed, would be the best way forward.
Writ petition is disposed of with the following directions:-
(i) The writ petition will be treated as the petitioner’s representation/application.
(ii) The AO, after hearing the petitioner and/or his authorised representative, will pass a speaking order. This exercise will be completed by the AO at the earliest, though not later than 6 weeks from the date of the receipt of a copy of this order.
(iii) The petitioner will file a copy of the writ petition along with the annexures appended herein, with the AO.
(iv) The AO will issue a prior written notice to the petitioner, indicating the date and time for hearing. The AO will have the discretion to hear the petitioner and/or his authorised representative, via video-conferencing mechanism.
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2021 (10) TMI 1020 - MADRAS HIGH COURT
Assessment u/s 153A - denial of natural justice - no opportunity of cross examination of the persons whose statements are relied upon by the respondent for making additions or disallowance - argument of violation of the principles of natural justice, arbitrary, mechanical and without any independent application of mind and also stating that the Income Tax Department has not discharged the burden of proof, proving that the income determined and sought to be taxed were not from the materials seized during the time of search - HELD THAT:- As petitioners have sought for copies of panchanamas in the 63 places searched, but however, the department had admittedly not given all the panchanamas to the petitioners even though they accepted that the petitioners are entitled to the same in the counter filed.
The stand taken by the department now by way of counter of non furnishing of panchanamas cannot be accepted. It is also not explained as to which are the concern, the respondent department concluded as belonging to the other group and what was the basis for such conclusion when the petitioners in its communication dated 28.07.2021 has explained their interest in every concern.
Non furnishing of the panchanama to the assessee is a violation of the principles of natural justice as it disables the petitioners from having knowledge of the seized materials and the alleged incriminating materials relied upon by the respondent department.
Refusal of cross examination of the persons whose statements were recorded during the time of search under Section 132(4) - The person against whom a statement is used, should be given opportunity to counter and contest the same. We are unable to accept the contention of the learned Senior Counsel that since the statements recorded were of persons who were employees of the assessee and therefore the assessee cannot seek for cross examination of them. The basic principles of jurisprudence governing the law of evidence can in no way interfered and could not be by the Income Tax Act provisions and neither the authorities functioning under the Income Tax Act has any discretion in such matters.
In view of the violation of the principles of natural justice and also due to the non compliance of Section 65(B) of the Indian Evidence Act, this Court feels that it is a fit case for setting aside the assessment orders. The alternative remedy under the statute is in the case of violation of principles of natural justice should be an effective one capable of remedying the violations by providing afresh, but however, it remains the fact that after amendment to Section 251(1)(a) of the Income Tax Act on 01.06.2001, the CIT(Appeals) does not have the power of remand. Therefore, in the facts and circumstances of the case, since the petitioners have made out a clear case of violation of principles of natural justice and the statute, this Court feels that it is a fit case for interfering with the impugned orders. In such circumstances, plea of alternative remedy which is also an effective one to undo the violations committed by the respondent, cannot be sustained. This Court is well within its power to set aside the impugned orders and remand back the same for fresh consideration.
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2021 (10) TMI 1019 - ITAT JABALPUR
Speculative business / transaction - Disallowance of loss suffered by the assessee on account of ‘Sauda Settlement’ - disallowance being in respect of a specific loss or expenditure, made on the basis of non-acceptance of the assessee’s explanation qua the same - HELD THAT:- The assessee shall not be, because of the transaction being open-ended and, in any case, unsupported by any materials, saved by section 43(5)(a). The same, being carried in the regular course of the assessee’s business, shall qualify for being set off only against the profits of a speculative business which, in terms of Explanation 2 to section 28, is to be regarded as a separate and distinct business. There is, thus, no question of it being set off against the assessee’s other, regular business of trading in food grains and oilseeds or, as stated before me, of commission agent/broker. This, further, would also result in non-explanation of the recovery of railway freight by the assessee therefrom. This also explains of this being stated as in the alternative, even as, as afore-stated, it is also without any details or material in support.
Again, much less several, as claimed, no similar bargain stands shown as executed during the year, or even in the past, even as the same does not detract from the fact that the bargain under reference is wholly unproved, so that the factum of other bargains would not impact positively on the allowance of this transaction. Such transactions would, similarly, result in either a gain or a loss to the assessee, also demonstrating the manner in which the same is accounted for.
There is complete opaqueness about the nature and truth of the transaction/s between the assessee and SAOL, including the impugned credit of ₹ 10,43,274 thereto on 31/03/2013. The same thus cannot be regarded as a business loss and, in any case, is not available for set off against the business profit from its’ wholesale business. The same stands rightly disallowed by the Revenue. - Decided against assessee.
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2021 (10) TMI 1018 - ITAT JABALPUR
Reopening of assessment u/s 147 - genuineness of partnership deed - ascertainment of correct date of the deed - front page was signed - reason/s to believe escapement of income from assessment to tax based on an audit objection - HELD THAT:- As Auditor has only made the assessing authority aware of the law impinging on the matter, the same could not be disqualified inasmuch as it is not expression of opinion by him. In the facts of the case, all that the Revenue Audit has brought forth for the consideration of the Assessing Officer are some facts, which may have a bearing on the compliance or otherwise of s.147; s. 40(a)(ia); and s.184 (leading to the consequence of s.185). That the same appealed to the AO is another matter. The reasons recorded, thus, cannot be faulted with on this score i.e., for being based on an audit objection/s. The assessee’s argument, thus, fails.
Eligibility of reason to believe - Late furnishing of the return of income by itself affords no ground to entertain any reason to believe escapement of income from assessment. Likewise, there is no allegation of non-filing of the declaration (F-15H) by the assessee, which only could lead to a valid reason to believe disallowance u/s. 40(a)(ia), not effected in the original assessment. No wonder, the ld. Sr. DR, Ms. Agarwal did not respond to the Revenue’s case qua these two reasons in her arguments/
No contravention of s. 184 due to non- signing of the front pages of the partnership deed by the partners so as to attract s.185. The Revenue is only making a guess in view of the long time interval between possible date of execution (as stated in the deed itself), i.e., 1.4.2007, and the date of its notarization; rather, admitting that the matter needs to be examined and ascertained. That is, there is a reason to suspect, and not a reason to believe for want of the relevant information. - Decided in favour of assessee.
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2021 (10) TMI 1017 - ITAT JAIPUR
Revision u/s 263 by CIT - unexplained share application money - HELD THAT:- We agree with the contentions advanced by the ld AR that the share transactions are duly reflected in the bank statement as well as in the balance sheet of the investor company and therefore, the same cannot form the basis for holding that the order passed by the Assessing officer was erroneous as he failed to consider such discrepancies.
Regarding identity and creditworthiness of the investor company and genuineness of the transaction, we find that where the ld PCIT has himself accepted the fact that the share application money atleast to the extent of ₹ 20 lacs has been received through the banking channel from Maxius Ventures, the identity and nature of the transaction is very much accepted by him. Regarding creditworthiness, the assessee has submitted that during the course of reassessment proceedings, the assessee has submitted the copy of bank statement of the investor company which shows clearly the money standing to the credit of the investor company account from its share trading business and out of which, the investment has been made in the assessee’s company.
Further, the assessee has submitted copy of balance sheet, income-tax return, company master data available on MCA website of the investor company which has details of its directors/shareholders and other relevant details as well as copy of confirmation from the investor company. Besides, the Assessing officer has also directly called for information from the investor company u/s 133(6) and has verified the same with the books of accounts of the assessee company. We therefore find that where the assessee has submitted all these documentation and the same has been duly examined by the Assessing officer by independently calling for the information and cross-verifying the same with the investor company and with the books of accounts of the assessee company, it cannot be held that the Assessing officer has failed to carry out proper verification of the transaction under consideration.
We are of the considered view that there is no legal and justifiable basis to interfere with the findings of the Assessing officer as the necessary enquiries and examination as reasonably expected have been carried out by the Assessing officer and he has taken a prudent, judicious and reasonable view after considering the entire material available on record and the order so passed u/s 143(3) r/w 147 cannot be held as erroneous in so far as prejudicial to the interest of Revenue.- Decided in favour of assessee.
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2021 (10) TMI 1016 - ITAT BANGALORE
Rectification of mistake u/s 154 - restriction of the TDS credit - CIT(A) restored the issue to the A.O. for examination and grant of correct TDS credit - HELD THAT:- A.O. while giving effect to the CIT(A)’s order dated 05.12.2018 granted the TDS credit as originally claimed in the return of income. Therefore, the present proceedings, which arise out of 154 proceedings of the A.O. dated 28.03.2014 has been subsumed by the later proceedings of the CIT(A) dated 05.12.2018 and the order giving effect to the CIT(A) by the A.O. dated 25.10.2019. Therefore, this appeal of the Revenue in essence is rendered infructuous and the same is dismissed as such.
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2021 (10) TMI 1015 - ITAT JAIPUR
Rectification of mistake u/s 254 - issuance and service of notice U/s 148 - HELD THAT:- In the present case, there doesn’t exist any legal or factual mistake, apparent from record and the assessee has merely sought to rectify the impugned Tribunal’s order, on the basis of different view conceived by the assessee, in respect of the issue in question raised in the Miscellaneous Application. It is further added that this issue raised by the Revenue through the impugned Miscellaneous Application is debatable question, not mistake apparent from record and hence, is not amenable to rectification jurisdiction conferred on the Tribunal u/s. 254(2) of the Act. It is a settled legal proposition that in the garb of Miscellaneous Application for rectification, the assessee cannot be allowed to re-open the whole matter, which is beyond the scope of section 254(2) of the Act, in the absence of any manifest error, which is obvious, clear and self evident.
Tribunal is not competent to recall its previous order and re-write the same again and reverse the earlier decision taken on merit what can be rectified under the said section is a mistake apparent from record and not the mistake which needs elaborate reason or inquiry to establish the same.
There is e difference between a power to review and a power to rectify a mistake apparent from record. In a nut-shell the scope of such power of rectification, in exercise of jurisdiction u/s 254(2) of the Act, clearly contemplates what can be corrected is an apparent mistake from record and not to deal with merits of the case and to recall the order, on the basis of taking a second opinion, on the merit, which is not the scope of such rectification. The scope of section 254(2) is very limited and it is only the apparent error, which can be rectified and the Tribunal can be held to be justified in rejecting the application for rectification raising a matter relating to the merit of the case and not involving an apparent mistake to be rectified - Thus the ground/issue raised by the Revenue in the impugned Miscellaneous Application is dismissed with no order as to costs.
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2021 (10) TMI 1014 - ITAT DELHI
Addition u/s 68 - addition in Share Capital only by confirming the reference of RBI Inspection report - assessee submitted that alleged shareholders deposited the fund out of compensation received from Government Authorities for acquisition of the land - HELD THAT:- Addition has been made by the Assessing Officer not merely on the basis of the statement of the alleged shareholders but in view of failure on the part of the assessee in substantiating the ingredient of section 68 - assessee has failed to provide complete address and produce the two alleged shareholders namely Rakesh Kumar and Jagveer.
The claim of source of fund in the hands of alleged share holders is also not been found correct as the assessee has not supported any documents in respect of the land compensation received by those alleged shareholders - Assessing Officer duly confronted the statement of two alleged shareholders during the course of the assessment proceeding - no cross-examination was sought by the assessee during the assessment proceeding and for the first time the assessee asked cross-examination before the Ld. CIT(A). Those persons have been claimed by the assessee as shareholders and thus onus was on the assessee to produce before the Assessing Officers.
It is only when the assessee failed to produce those persons, the Assessing officers issued summons requesting them to appear before him. When summons were issued to them on the request of the Assessee, the onus was on the assessee to be present during recording of their statement but assessee ignored to present before the AO. The assessee did not ask cross examination even after confronting the statement to the Authorised representative. Thereafter asking cross examination before the Ld First Appellate Authority is not justified.
As in preceding year, the assessee itself has admitted the addition made by the Assessing Officer on identical ground, then in view of rule of consistency, the assessee is not justified in raising the grounds without any valid reasons. - Decided against assessee.
Disallowance of expenditure in terms of section 37 of the Act on proportionate basis for diversion of the fund - According to AO loans were issued in violation of the norms and hence proportionate cost cannot be allowed because of the illegality involved - HELD THAT:- Assessee has admitted the disallowance in immediately preceding assessment year. In the year under consideration the Assessing Officer made addition relying on his finding in the preceding assessment year. Once the assessee has admitted addition in immediately preceding assessment year, preferring appeal on same issue in the year under consideration is not justified and against the rule of consistency.
When the loans have been disbursed in violation of the rules of RBI to give benefit to a few, than expenses corresponding to such loans are not wholly and exclusively for the purpose of the business of the assessee and therefore also such expenses are not allowable as deduction - We uphold the finding of the Leonard CIT(A) on the issue in dispute and dismiss the ground of the appeal of the assessee.
Disallowance of expenditure on various heads - AO made disallowance following the finding of his predecessor in the earlier year - CIT(A) allowed part relief on repair maintenance and travelling and conveyance and restricted the disallowance to 20% instead of 30% made by the Assessing Officer - HELD THAT:- We find that disallowance has been made relying on the audit report of the RBI, where specific defects or deficiency of vouchers have been raised. Further, in immediately preceding assessment year 2013-14, the assessee has admitted the disallowance in respect of the identical expenses based on the audit report of the RBI. In our opinion following the rule of consistency, the assessee is not justified in preferring the appeal on same issue in the year under consideration without any valid reasons. The assessee has not submitted any rebuttal of the observation by the RBI in respect of deficiency of vouchers of the expenses. In the circumstances, the finding of the Ld. CIT(A) on the issue in dispute is upheld. - Decided against assessee
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2021 (10) TMI 1013 - ITAT JAIPUR
Reopening of assessment u/s 147 - prior approval of the PCCIT/CCIT/CIT before issuance of notice u/s 148 obtained or not? - HELD THAT:- In the instant case, as against provisions of section 151(1) read with proviso thereto, the provisions of section 151(2) are applicable as no assessment has been completed earlier either u/s 143(3) or section 147 and in terms of mandatory condition prescribed u/s 151(2), the Assessing officer has duly sought and obtained approval from the JCIT who was the competent authority as so prescribed under law before issuance of notice u/s 148 - This is thus no oversight on part of the AO and no inherent lacunae affecting the very correctness of the notice issued under Section 148 - Therefore, the said decision is distinguishable on facts and doesn’t support the case of the assessee. Similar is the case with the other decisions relied upon by the ld A/R which stand distinguishable on facts. Therefore, the contention so advanced by the ld A/R cannot be accepted and the same is hereby dismissed.
AO in the assessment order has stated that “the reasons for reopening were duly conveyed to the assessee” and therefore, on this basis itself, where the reasons have been duly communicated to the assessee, the contention so advanced by the ld A/R deserve to be rejected.
As noted that the assessment was completed u/s 147 r/w 143(3) vide order dated 23.10.2015 and after completing of the assessment proceedings, the assessee is claiming to have requested the AO vide his letter dated 10.01.2017 to supply copy of the reasons.
As during the entirety of the assessment proceedings, the assessee has neither sought copy of the reasons so recorded nor any objections have been filed against such reasons during the assessment proceedings and therefore, where the assessee has not sought and has infact participated in the assessment proceedings, we don’t find there is any prejudice which has been caused to the assessee and even there is no violation of any of the directions so laid down by the Courts in this regard. Thus, the contention so advanced cannot be accepted.
AO had no reason to believe but reason to suspect that the income has escapement assessment and there is no honest application of mind and it was clearly a case of borrowed satisfaction - We have gone through the reasons so recorded by the Assessing officer and find that the AO was having sufficient material in his possession for formation of prima facie belief that the income has escaped assessment in the hands of the assessee. In the result, the contention so advanced cannot be accepted.In the result, ground no. 1 and 2 of assessee’s appeal are dismissed.
Unexplained cash deposits - HELD THAT:- CIT(A) has returned a finding that claim of gift from the mother couldn’t be proved and copies of cheques produced were illegible and corresponding bank account of the assessee in which the same were deposited were also not produced. It has been claimed before us that the copies of cheques as well as bank statement of the assessee showing deposit of cheque were submitted before the AO and the same has not been considered by the ld CIT(A). We accordingly remand the matter back to the file of the AO to verify the said claim of the assessee and decide as per law after providing reasonable opportunity to the assessee.
Tuition fee receipts from assessee’s wife - The explanation which has been submitted is that the assessee’s wife has been teaching for past several years and she has been receiving the tuition fees from the students besides there are other household savings which have been handed over to the assessee for deposit during the year. We find that such an explanation has to be supported with certain credible facts and figures for each of the past years and should be balanced and not one-sided in terms of receipts, expenditure and savings for each of the past years and availability thereof. And therefore, a mere explanation without reasonable corroboration with facts and figures remains merely an assertion and which cannot be accepted on face value. In the result, the explanation so submitted in support of source of deposit of ₹ 6 lacs cannot be accepted and is hereby dismissed.
Balance claimed to be out of past savings - We find that where the assessee has already claimed deposits of ₹ 3.2 lacs out of opening cash in hand, the same is nothing the past savings which is available at the beginning of the year. In such a situation, we failed to understand how the assessee is claiming source of cash deposits out of opening cash in hands and past savings twice. In any case, no credible evidence has been placed on record in terms of past savings as so claimed and the contention so advanced is hereby dismissed.
Plea of working out the peak credit - As been claimed that there are deposits which have been made out of earlier withdrawals during the year and the same has been ignored by the AO. In absence of any findings recorded by the AO, we set-aside the matter to the file of the AO to examine the said claim of the assessee and decide as per law after providing reasonable opportunity to the assessee.
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2021 (10) TMI 1012 - ITAT LUCKNOW
Cancellation of registration u/s 12A - powers of CIT (Exemptions) when the matter is pending with the Settlement Commission - HELD THAT:- As due to search on the assessee, cash was found at the premises of the Trust as well as with the trustees and which the assessee claimed to have received as cash gifts from students, and the assessee for the purpose of bringing these donations to tax, filed application before Settlement Commission and learned CIT (Exemptions) proceeded to cancel the registration u/s 12A on the basis of these facts.
We hold that issue of cancellation of registration u/s 12A arose from the search conducted on the assessee and there was no other reason to initiation of proceedings for cancellation of registration therefore, as per the provisions of section 245D read with order of Hon'ble Delhi High Court in the case of Tahiliani Design Pvt. Ltd. [2021 (2) TMI 106 - DELHI HIGH COURT] all the powers of income tax authorities including power to cancel the registration u/s 12A got vested exclusively with Settlement Commission. The assessee filed the application before Settlement Commission on 05/01/2017 which had been accepted by the Settlement Commission on 17/01/2017. The learned CIT (Exemptions) has passed the order on 26/03/2019 which is after the date on which the Settlement Commission had admitted the application filed by the assessee
The important findings in this case law are contained in para C & D wherein their Lordships have held that powers of Settlement Commission under section 245D(4) also extend to examining such further evidence as may be placed before it or may be obtained by it and then the Hon'ble court held that since Settlement Commission was still seized of the matter, it would be within its rights to deal with the aspect of violation of Section 269ST of the Act. The Hon'ble court further held in para D that the issue of section 271DA and that of section 153A both had their origin in the search and therefore, held that both are part of the same. In the case before us also we have observed that the instance of going to Settlement Commission regarding settlement of dues as well as cancellation of registration by learned CIT (Exemptions) occurred due to a search on the assessee and therefore, both incidents are part of the same search.
We are in agreement with the arguments of learned A.R. and hold that learned CIT (Exemptions) was not empowered to pass the order u/s 12A cancelling the registration granted to the assessee when the issue was still pending with Settlement Commission. The written arguments filed by the Revenue relate to the merits of cancellation of the registration and do not relate to arguments raised by learned A.R. therefore, these submissions are of no help to Revenue.
Ground nos. 2 & 3 of the appeal are allowed and order of CIT (Exemptions), cancelling the registration, is cancelled.- Decided in favour of assessee.
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2021 (10) TMI 1011 - ITAT DELHI
Credit of tax paid in Japan - claim of foreign tax credit - Disallowing complete credit of taxes paid by appellant in Japan on income from sale of software under Article 23 of India-Japan Double Taxation Avoidance Agreement - HELD THAT:- We find that the India-Japan DTAA is worded in similar lines with that of India-USA DTAA. Therefore, the aforesaid decision quoted by this Tribunal in HCL COMNET SYSTEMS AND SERVICES LTD VERSUS THE DY. C.I.T CIRCLE – 12 (1) NEW DELHI [2020 (7) TMI 169 - ITAT DELHI] squarely applies on the facts of the case in hand. Therefore, we direct accordingly.
Application of incorrect rate of MAT - We direct the Assessing Officer to consider the applicable rate of MAT for the year under consideration as per provisions of law.
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2021 (10) TMI 1010 - ITAT DELHI
Disallowance of Employee Stock Option Scheme Compensation - Addition on the ground expenditure was on account of issuance of share capital, which being in the nature of capital expenditure, was not allowed as business expenditure - CIT-A allowed the deduction - HELD THAT:- We find that learned CIT(A) has allowed the appeal of the assessee following the decision of the Special Bench of Tribunal in the case of Biocon Ltd.[2013 (8) TMI 629 - ITAT BANGALORE]and other decision of jurisdictional High Court. We do not find any infirmity in the order of the Learned CIT(A) in following binding precedents, and allowing employee stock option compensation as revenue expenditure. The ground of the appeal of the Revenue is, accordingly, dismissed.
Disallowance u/ 14A r.w. Rule 8D - assessee claimed exempted income which included dividend income and profit on redemption of investment - assessee made suo motu disallowance for earning the above exempted income - CIT(A) has deleted the disallowance mainly on the ground that investment from growth fund is taxable, and therefore, said investment should be excluded while working out the disallowance under Rule 8D(2)(iii) of the Rules. Also directed not to consider investment in subsidiary, which according to the Ld. CIT(A), was for controlling stake - HELD THAT:- As in view of the recent decision of the Hon’ble Supreme Court in the case of Maxxop Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] strategic investment for obtaining controlling stake has also been found liable for computing disallowance under Rule 8D(2)(iii) of the Rules and therefore to this extent, the order of the Ld. CIT(A) is set aside and matter restored back to the learned Assessing Office for re-computing the disallowance under Rule 8D(2)(iii) of the Rules. The Assessing Officer is also directed to verify whether income from growth funds has been included under taxable income and if so, then he shall exclude the said investment for computing disallowance in terms of Rule 8d(2)(iii) of Rules. The ground of the appeal of the Revenue is accordingly allowed partly for the statistical purposes.
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2021 (10) TMI 1009 - ITAT DELHI
MAT Computation u/s 115JB - Amount of the provision for bad and doubtful debt to be taken for the purpose of computing book profit u/s 115JB - AO rejected the contention of the claim of bad debt on the ground that assessee had not placed anything on record to substantiate its claim - claim of bad debt written off under section 115JB for computation of the book profit was rejected by the learned CIT(A) - HELD THAT:- Under the provisions of the Act book profit is computed after making adjustment mentioned in the section 115JB of the Act. In view of the settled position in the case of Apollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT] and Malyalam Manorama [2008 (4) TMI 20 - SUPREME COURT], the assessee or the Assessing Officer is not permitted to make any adjustment to the book profit except which has been specifically provided therein and, therefore, the assessee was required to add back provision which has been provided in the books of accounts.
CIT(A) has held that claim of bad debt actually incurred during the year did not appear in the profit and loss account and, therefore, same could not be added back since the same is not covered under Explanation 1 below section 115JB of the Act. Thus, as per the Learned CIT(A), the Assessee has not credited the amount in relation to the bad debt in the profit and loss account made on the basis of the books of account, whereas claim of the assessee is that effect of the bad debt written off has been taken into consideration in books of accounts.
In our opinion, this is a matter of the verification with the books of account of the assessee. From the details filed before us prima facie it appears that the amount of bad debt written off has been reduced while computing the income as per provision of Act and, therefore, we feel it appropriate to restore this issue back to the file of the Assessing Officer for deciding after verification of the books of account and financial statement prepared thereon for the year under consideration. Assessing Officer has to verify the amount of provision for doubtful debt in the books of accounts and book profit has to computed as per Explanation 1 below the section 115 JB - Appeal of assessee is allowed for statistical purposes.
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2021 (10) TMI 1008 - ITAT DELHI
Characterization of income - non-compete fee on account of executing of negative covenant - whether consideration received by the assessee as non-compete fee was capital receipt not liable to tax - HELD THAT:- As evident from the aforesaid clauses of Sale and Purchase Agreement, the assessee was paid sum that assessee will not for a period of two years from the closing date, directly or indirectly or otherwise carry out any business or activity in any manner similar to the business which was transferred. Thus, there was a clear cut negative covenant for which assessee had received non-compete fee. Since the payment of non-compete fee has been made in assessment year 1998-99, therefore, same is prior to the amendment brought to section 28 (va).
Hon’ble Supreme Court in the case of Shiv Raj Gupta vs. CIT [2020 (7) TMI 544 - SUPREME COURT] wherein their Lordship following the principle laid down in the case of Guffic Chem vs CIT [2011 (3) TMI 6 - SUPREME COURT] held that prior to the amendment brought by the Finance Act 2002 w.e.f. 1.4.2003 in section 28(va), the compensation received by the assessee under non compete agreement was a capital receipt not taxable. Thus, issue as raised in the cross objection is squarely covered by the judgment of Hon’ble Apex Court.
Accordingly, we hold that the payment of non-compete fee received by the assessee company has not compete fee is a capital receipt and not liable to be taxed. - Decided in favour of assessee.
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2021 (10) TMI 1007 - ITAT INDORE
Reopening of assessment u/s 147 - Eligibility of reason to believe - reason to believe” V/S “suspicion” - Independent opinion of assessee need to be recorded - Addition u/s 69A on unexplained money - AO has mentioned about section 40A(3) in the reasons of reopening, however, the AO deviated from his aforesaid stand and later on while framing the assessment, he added the said amount u/s 69A- HELD THAT:- It is mandatory that the opinion should be that of assessing officer for forming belief whereas in the instant case, he has relied upon the information received from the DCIT-Central for which he himself was not sure on the question of authenticity as perceived from the word “it appears” noted in the reasons u/s 148(2) wherein in the first line, the AO wrote that “it appears that payments to the tune of ₹ 7,12,00,000/- was given to M/s Ferro Concrete Const. (I) Pvt. Ltd. to M/s Keti Constructions Ltd.”. Thus, these words show that AO was not having “reason to believe”, rather he has reopened the case on mere “suspicion”.
As the main component of reasons should be AO having reason to believe. The words "has reason to believe" are stronger than the words "is satisfied". The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material.
Where reasons recorded by AO "lack clarity and it was practically impossible to derive meaning out of it and was incapable of being understood", reassessment notice was liable to be quashed.
AO mentioned about section 40A(3) in the reasons of reopening and opined that the said transaction of ₹ 7.12 crores attracts the violation of section 40A(3). However, we find that the AO deviated from his aforesaid stand which he basically took while reopening the case and later on while framing the assessment he added the said amount u/s 69A. Thus, from this action of AO, it is concluded that he was not sure in himself since beginning that the transaction involved is of what nature, which section is attracted here and what kind of violation is there. Therefore, the Ld. AO has absolutely changed his view which was formed initially and which was formed while concluding the assessment. Therefore, the statutory provisions per ‘reasons’ and contents in ‘assessment order’ are distinct which shows that the reasons were not on account of application of mind on the part of AO. Thus it is a clear case of lack of basic ingredient of section 147 i.e. “reason to believe”, as AO himself was not able to decide about the legal provisions which are being attracted in the given case.
Reassessment proceedings were initiated under suspicion as narrated above, therefore, the proceedings u/s 147 is bad in law for want of jurisdiction in the light of first proviso to section 147 and in the absence of cogent reasons to form belief that the assessee’s income had escaped assessment and also in the light of the fact that the AO deviated from his stand by changing his view which was formed initially and which was formed while concluding the assessment as he was not sure in himself since beginning that the transaction involved is of what nature, which section is attracted here and what kind of violation is there. Thus, the reassessment proceedings are bad in law and accordingly, we quash the present assessment order for the assessment year 2009-10 being void and invalid.
As on merits of the case, we find that there is no case of assessing the income as there was no material evidencing movement of cash. Further, principal of natural justice was badly ignored by accepting version of third party without affording opportunity for cross examine. We also find that Section 40A(3) applies for payment otherwise than account payee cheque or bank draft against expenses and in the instant case, we find that no goods or service were provided by M/s Keti Construction Ltd. against which payment warranting action under section 40A(3) would be required. We find that the primary onus as regard to movement of cash, as alleged was on M/s Keti Construction Ltd. Therefore, it had bearing in the assessment in the case of above named person. It has not been brought on record either in the reasons under section 148(2) or during the assessment proceedings at any stage as to what action has been taken in the case of M/s Keti Construction Ltd.
Section 69A deals on the question of money etc. found to be in the ownership of the assessee and such money is not recorded in the books of accounts - in the instant case, there is no evidence that the assessee was found to be the owner of any money during the subject year. There is no other tangible material on records which shows that assessee was actually indulged into any such transaction and the authenticity of copy of ledger account of assessee in the books of Keti Construction Ltd. was also doubted by the assessee.
AO has discussed about the statement of one Shri Kedarmal Jakhetiya, director of Keti Constructions Ltd. the ld. Assessing Officer placed reliance on the said statement where Mr. Jakhetiya has submitted a list of certain bogus petty contractors in which assessee’s name was also included. However, we observe that during the entire assessment proceedings, neither the copy of the statement was provided to the assessee nor the said person was allowed to be confronted by the assessee. Ld. AO was duty bound to provide an opportunity to assessee to confront Mr. Jakhetiya regarding the same. But AO did not follow the principle of natural justice. Thus in such a situation, the discussion made by AO about the statement of director of said company is invalid in view of the violation of principle of natural justice.
Assessing Officer applied n.p. rate of 1% higher than disclosed making an addition on account of low net profit. Thus, the addition was already included in regular assessment on account of low n.p.-. Accordingly, we do not find any merit in confirming the addition on estimation basis by the ld. CIT(A). - Decided in favour of assessee.
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2021 (10) TMI 1006 - ITAT DELHI
Unexplained credit u/s. 68 - addition has made by the AO owing to non-production of principle officer of the 9 entities who have lend the monies to the assessee - assessee argued for non issue of summons - HELD THAT:- We find that the assessee has given the new addresses and requested the AO to send the summons u/s. 131 to the new address which the AO failed to do. Having failed to issue the summons and making the enquiries at the new address despite having the information provided to the AO by the assessee, Assessing Officer made the addition, holding that the Directors of the companies have failed to attend for recording of the statement.
CIT(A) issued summons which have been duly complied by the Principle Officer of the loan parties and duly recorded the statement. The facts of recording of the statement and the compliance made has also been conveyed to the Assessing Officer who has not objected to the proceedings before the ld. CIT(A).
Hence, in view of the undisputed facts on the record with regard to proving of the identity, creditworthiness, genuineness of the loan parties, the statement recorded by the ld. CIT(A), the turnover of the companies & the profits earned thereof, the position of the reserves & surplus available with the lenders, we hereby decline to interfere with the well reasoned order of the ld. CIT(A).
Accordingly, the interest disallowed by the Assessing Officer on account of interest expenses claimed by the assessee is also directed to be deleted. - Decided against revenue.
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