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2022 (11) TMI 1312 - ITAT BENGALURU
Revision u/s 263 - unaccounted cash credit under Section 68 - Assessee applied for the Direct Tax Vivad Se Viswas (DTVSV) scheme and has filed a letter before the CIT(A) for withdrawal of his appeal filed against the order passed under Section 143(3) - whether revision proceedings can be initiated when the assessee has opted for DTVSV? - HELD THAT:- We notice that in assessee’s case the issue of cash deposits during the demonetisation period have been considered by the AO in original assessment proceedings under Section 143(3) of the Act and the assessee has opted for DTVSV scheme for the additions made in this regard. Section 8 of DTVSV Act as quoted by the PCIT, clearly mentions that the immunity is not available for any proceedings other than those in relation to which the declaration has been made.
In the given case however the PCIT has initiated the revision proceedings u/s.263 on the same issue for which the assessee has already opted for DTVSV. It is also noticed the assessee has filed the necessary forms under the DTVSV scheme which have been accepted and therefore in our considered view the decision of the Hon'ble Madras High Court is clearly applicable to the assessee’s case.
Accordingly we hold that the PCIT is not justified in initiating the impugned proceedings under Section 263 of the Act when the assessee has opted to settle the dispute under DTVSV scheme. We therefore quash the order of PCIT and allow the appeal in favour of the assessee.
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2022 (11) TMI 1309 - ITAT MUMBAI
MAT computation - Exclusion of profit on sale of investment being capital profits in computing Book Profit us 115JB - HELD THAT:- There is no dispute that the amount in question was in the capital field, and that it does not, therefore, is not required to be routed through the profit and loss account. On such facts, and in the case of Shivalik Ventures Pvt Ltd. [2015 (8) TMI 979 - ITAT MUMBAI] a coordinate bench of thisb Tribunal has, inter-alia, held that “In view of the above said legal provisions, the assessee has contended that the profits and gains arising on transfer of a capital asset by a company to its subsidiary company does not fall under the definition of "Income" as given in sec. 2(24) of the Act and hence it does not enter into the computation provisions of the Income tax Act.
As contended that, an item of receipt which is not considered as "income" at all and which does not enter into the computation provisions of the Income tax Act, cannot be subjected to tax u/s 115JB of the also”. Learned Departmental Representative has not been able to show anything contrary to this decision of the coordinate bench. In this view of the matter, and respectfully following the views of the coordinate bench, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB.
Addition of provision for interest on income-tax in computing Book Profit u/s 115JB - HELD THAT:- The law is clear and unambiguous, as Explanation 1 to Section 115JB categorically provides that “income tax paid or payable, and the provision in respect thereof” is to be added back to the book profits under section 115JB. We thus see no merits in the assessee's plea and reject the same.
Notionally allocated expenditure which is alleged to be incurred to earn dividend income in computing Book Profit u/s 115JB - HELD THAT:- We are of the considered view that the assessee deserves to succeed in this plea for the reason that, eventually, there is no disallowance under section 14A on the facts of this case, and, in any event, the issue is covered, as regards the question of adjustment of book profits under section 15JB for the 14A disallowance, in favour of the assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd. [2017 (6) TMI 1124 - ITAT DELHI] The assessee gets relief on this point as well.
Sales tax incentives - Nature of expenses - HELD THAT:- In the case of CIT Vs Chaphalkar Brothers [2017 (12) TMI 816 - SUPREME COURT] Hon'ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature.
Pre-payment of deferred sales tax liability as a capital receipt - HELD THAT:- This issue is covered, in favour of the assessee in the case of CIT Vs Sulzer India Ltd [2014 (12) TMI 267 - BOMBAY HIGH COURT] which is now approved by Hon'ble Supreme Court in the case of CIT Vs Balkrishna Industries Ltd [2017 (11) TMI 1626 - SUPREME COURT]
Excise duty exemption availed by the assessee as capital receipt - HELD THAT:- As decided in Swastik Sanitary Works Ltd. [2006 (4) TMI 89 - GUJARAT HIGH COURT] it was a case in which, the Government subsidy was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries. In such a case, specified percentage of the fixed capital cost, which was the basis for determining the subsidy, would be granted. The Court held that, such basis for determining the subsidy was only a measure adopted under the scheme to quantify the financial aid and it was not a payment, directly or indirectly to meet any portion of the actual cost of acquisition of capital asset.
Disallowance of Community Welfare Expenses - HELD THAT:- Right from the assessment years 1988-89 to 1994-95, the coordinate benches have allowed appeal of the assessee on this point, and from the assessment years 1995-96 to 2004-05, in which the first appellate authority has deleted similar disallowance, the coordinate benches have rejected the grievances of the Assessing Officer, against the reliefs so granted by the CIT(A). Learned Departmental Representative does not dispute this position but relies upon the stand of the Assessing Officer nevertheless. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches all along.
Pre-operative expenses - HELD THAT:- The expenses, being in the nature of expenses incurred for the expansion of existing business, cannot be disallowed. Accordingly, the disallowance was deleted.
Additional depreciation on all the eligible assets acquired before 01.04.2008 - HELD THAT:- As decided in Gloster Jute Mills Limited [2017 (3) TMI 1807 - ITAT KOLKATA] only objection of the AO is that the provisions refer to "new machinery or plant" and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The expression "new machinery" is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01-04-2006. The plain language of the section warrants such an interpretation. - Decided in favour of assessee.
Unutilized CENVAT credit - HELD THAT:- Learned representatives fairly agree that this issue is covered, in favour of the assessee, by decisions of the coordinate benches in assessee‟s own cases for the assessment years 1999-2000 to 2004-05, even though the learned departmental representative rather dutifully relied upon the stand of the Assessing Officer. We see no reasons to take any other view of the matter than so taken by the coordinate benches.
Compute Surcharge @ 7.5% instead of @10% while computing Tax us 115-O - HELD THAT:- As in terms of the provisions of Finance Act 2010 the applicable surcharge was 7.5%, that the related Finance Bill was introduced in the Parliament on 26th February 2010, and that, in terms of the provisions of Section 294 of the Income Tax Act, “If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income-tax for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force”. It was on this basis of this factual and legal position, and following in the case of Kesoram Industries & Cotton Mills Ltd [1965 (11) TMI 41 - SUPREME COURT] that the learned CIT(A) has granted the impugned relief. No material has been brought before us to dislodge these findings and contrary to the legal position set out above. In this view of the matter, we see no reasons to disturb the conclusions arrived at by the learned CIT(A). We approve the same and decline to interfere in the matter.
Loss on stock options offered to the employees - Debit under the head “Employees Compensation Expenses‟ under the employee stock option scheme - HELD THAT:- As long as a loss, even though it may not actually have crystallized, can be reasonably estimated, as indeed has been done in this case, it has to be taken into account in the computation of business income. In view of these discussions, as also following the views of the coordinate bench in the assessee‟s own case, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned disallowance - The assessee gets the relief accordingly.
Disallowance u/s 14A r.w.r.8D - MAT computation u/s 115JB - HELD THAT:- As we restrict the disallowance under section 14A under rule 8D so as not to disallow any amount on account of interest, and delete the adjustment on account of 14A disallowance from book profits computed under section 115 JB. The assessee gets the relief accordingly.
Deduction u/s 80-IA on captive power generating units -“market value‟ is required to be taken into account -HELD THAT:- As which market value of the power is to be taken into account in the computation of profit for deduction under section 80IA, i.e. the market value to the end consumer or market value in the power trading companies, is no longer res integra. There are several decisions of the coordinate benches holding that it is market value for the customer which must be adopted for this purpose, such as in the case of West Coast Paper Mills Ltd [2005 (6) TMI 547 - ITAT MUMBAI] The same were the views of another coordinate bench in the case of Reliance Industries Ltd. [2019 (2) TMI 178 - BOMBAY HIGH COURT] Hon'ble jurisdictional High Court has upheld the Tribunal‟s order holding that it is price to the consumer, and not the intra-power companies trading price, which must be taken into account - we deem it fit and proper to uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment - The assessee gets the relief accordingly.
Disallowance of claim made for Rail System u/s 80-IA - HELD THAT:- Authorities below had decided the matter in favour of the assessee, came up before a coordinate bench of this Tribunal, and, in the said case, the matter was decided in favour of the assessee.
While it is indeed true that there is no res judicata in the income tax assessment proceedings, at the same time, following the principles of consistency duly recognized by Hon'ble Supreme Court in the case of Radhasoami Satsang Vs CIT [1991 (11) TMI 2 - SUPREME COURT] unless there is a change in the material facts, the issues which have been settled one way or other must to be disturbed. In this view of the matter, and respectfully following the coordinate bench in the case of Ultratech Cement Ltd (supra), we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance in respect of claim of 80IA in respect of rail system.
Deduction claimed u/s. 80IA in respect of the Port facility developed by the Appellant - HELD THAT:- As a result of the construction of the jetty, the travel distance from the factory to the port from 110 kms is said to have been reduced to 11 km, there are significant savings in stevedoring and storing charges as also in wharfage. The manner in which the computations of the Assessing Officer work is that if the assessee spends Rs 100 in covering a distance of 11 km, the savings are worked out on the basis that the assessee will, at best, spend Rs 120 (that is at 20% markup on the actual expenses of Rs 100); that is a clearly incongruous approach. There is no good reason to reject the actual figures, just because actual figures show higher savings. There is thus not only there is no legally sustainable reason for invoking section 80IA(10), what the Assessing Officer has done post invoking section 80IA(10) is equally devoid of legally sustainable reasons.
Considering case of Assam Cardon [2005 (12) TMI 212 - ITAT CALCUTTA-A] we uphold the plea of the assessee, and vacate the adjustment made by the Assessing Officer to the claim of the assessee- particularly when similar claims were all along allowed to the assessee. The Assessing Officer is directed to delete the disallowance made by him, and grant the claim of deduction under section 80IA in respect of the jetty, as claimed by the assessee.
Treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 80IA as cost of the eligible undertakings - HELD THAT:- It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any event, the fiction envisages under section 80IA(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units are other units are treated as independent of each other, and the profit computations are on a standalone basis, the eligible unit must get the corresponding credit for the CENVAT credits availed by the other units. Viewed thus, not accounting for the CENVAT credit does not, in our considered view, vitiate the profits of the eligible undertaking, as long as all such credits are fully availed by the other units as is the undisputed position anyway. What the assessee has done is that the expenses are debited net of the CENVAT credit availed. To this extent, we see no infirmity in the stand of the assessee.
As also bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment on account of CENVAT in the profits of the eligible units. The assessee gets the relief accordingly.
Apportioning indirect Head Office expenses and in adjusting such allocated amount in computing Tax Holiday u/s 80IA/ 80IC - HELD THAT:- The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if they are independent of each other, and once that fiction sets in, the expenses incurred by someone other than eligible unit, in the interest of the eligible unit, are to be taken into account while computing the profits of the eligible unit. Accordingly, the allocation of expenses, as the learned Assessing Officer rightly contends, must be done. The assessee has further contended that HO expenses are not “derived from‟ or “derived by‟ the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation would be more appropriate based on expenditure incurred by the units vis-à-vis overall expenditure. To this extent, we uphold the plea of the assessee.
As also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee‟s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis-à-vis overall expenditure.
Claim for exclusion of profit on sale of investment being capital profit while computing book profits u/s. 115JB - HELD THAT:- We uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB. The assessee gets the relief accordingly.
Leave encashment on provision basis while computing book profits u/s. 115 B - HELD THAT:- We are of the considered view that the stand of the Assessing Officer is unsustainable in law in view of the Hon'ble Supreme Court‟s judgment in the case of Bharat Earth Movers Ltd [2000 (8) TMI 4 - SUPREME COURT] wherein Their Lordships have observed that “we are satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability”. Accordingly, we delete the impugned adjustment. The assessee gets the relief accordingly.
Payment of NPV of the sales tax liability, under the HP General Sales Tax (Deferred Payment of Tax) Scheme 2005 - difference between the sales tax liability and the NPV paid can be treated as capital receipt - case of the assessee is that the purpose of the scheme is expansion of industries and industrialization of the backward areas, and that the issue is now settled in favour of the assessee in the case of Sulzer India Ltd [2014 (12) TMI 267 - BOMBAY HIGH COURT] - HELD THAT:- This is a recurring issue and has come up for consideration in a number of preceding assessment years. In the assessee‟s own case for the immediately preceding year, and for the detailed reasons set out in paragraphs 37 to 39 and following the decisions in the preceding assessment years referred to therein, we have upheld the similar relief allowed to the assessee. We see no reasons to take any other view of the matter for this assessment year. Respectfully following our decisions in the assessee‟s own cases, we uphold the relief granted by the learned CIT(A) on this count as well. We thus confirm the conclusions arrived at by the CIT(A) on this count as well, and decline to interfere in the matter.
Cessation of liability towards sundry creditors, which was outstanding for a very long period of time - HELD THAT:- CIT(A) has rightly observed, just because entries are old entries and have remained unpaid, and particularly when the Assessing Officer has not conducted any enquiries which lead to the conclusion about lack of bonafides of such entries, it cannot be inferred that there is a cessation of liability and these entries can be added to the income of the assessee. We have noted that the Assessing Officer has not conducted any enquiries whatsoever, and there is nothing more than the entries being old that has been put against the assessee. In these circumstances, in our considered view, the learned CIT(A) was indeed justified in deleting the impugned addition on account of income from the cessation of liability. We approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
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2022 (11) TMI 1308 - DELHI HIGH COURT
Benefit of VSV Act - delay in payment - Timeline to pay under the VSV - Petitioner Companies were unable to pay the disputed amount as determined by Respondents in Form 3 prior to the last date provision permitting the Respondents to extend the time for payment - Petitioners stated that the delay in payment was not intentional and the Petitioners always intended to settle the dispute with the Income tax department and avail the benefit of VSV Act - Petitioners seek a direction to the Respondents to accept the declaration/application (Form 1 and Form 2) filed by the Petitioners as valid declarations though delayed - HELD THAT:- Timeline to pay under the VSV was not mandatory as the last date stipulated under the VSV Act (3 of 2020) was extended by virtue of Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020.
This Court is further of the opinion that the delay in payments of the amounts, in the present cases are attributable to unforeseen and extraneous circumstances that were beyond control of the Petitioners. In fact, the country was intermittently in lockdown on account of the COVID-19 pandemic from 25th March, 2020. In recognition of these difficulties as pointed out hereinabove, the Scheme was amended several times to extend the deadline for payment. Moreover, death of the Managing Director of the companies was an extraordinary and exceptional event which would render non-grant of relief on equitable consideration irrational.
Though this Court is in agreement with the submission of learned counsel for the respondents that the power to condone the delay with regard to delay in payment is not vested with the Departmental Authorities, yet this Court under its inherent powers in extraordinary writ jurisdiction under Article 226 of the Constitution of India can pass any order necessary to remedy the injustice. The Supreme Court in B.C.Chaturvedi v. Union of India [1995 (11) TMI 379 - SUPREME COURT] has held “It deserves to be pointed out that the mere fact that there is no provision parallel to Article 142 relating to the High Courts, can be no ground to think that they have not to do complete justice”.
Consequently, the power of the High Court under Article 226 of the Constitution of India to grant relief in extraordinary and exceptional circumstances cannot be taken away or curtailed by any legislation.
No prejudice caused to the respondents by accepting the prayer of petitioner - This is also a fit case where no prejudice will be caused to the Respondents by accepting the prayer of the Petitioners. Rather, the Respondents benefit and achieve the purpose of the Scheme, namely, to reduce pendency of cases, generate timely revenue for the government and provide certainty and savings of resources that would be spent on the long-drawn litigation process.
Consequently as the delay in payment in the present cases were unintentional and supported by justifiable reasons, this Court is of the opinion that the cause of substantial justice deserves to be preferred, and this unintentional delay deserves to be condoned. This approach will only further the object and purpose of the VSV Act.
Relief - The present writ petitions are allowed and the respondents are directed to accept the declarations/applications (Forms-1 and 2) dated 04th March, 2021 filed by the petitioners as valid declarations/applications within two weeks and accept the balance disputed amounts as stipulated by respondents in Forms-3 dated 07th May, 2021 and 22nd June, 2021 issued under VSV Act along with simple interest @ 9% per annum till the date the amounts are paid within four weeks.
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2022 (11) TMI 1306 - SC ORDER
Reopening of assessment u/s 147 - validity of second show cause notice - Section 129 as permits to continue with the earlier proceedings in case of change of the AO - Appellant feeling aggrieved and dissatisfied with the impugned judgment of High Court has not only quashed and set aside the reopening of the assessment but has also quashed and set aside the Assessment Order for the A.Y. 2008-09 - HELD THAT:- Section 129 of the Act permits to continue with the earlier proceedings in case of change of the Assessing Officer from the stage at which the proceedings were before the earlier AO - In that view of the matter, as such, fresh show cause notice dated 18.01.2016 was not at all warranted and/or required to be issued by the subsequent Assessing Officer. Still, for whatever reason, the subsequent Assessing Officer issued the fresh notice on dated 18.01.2016 which, as observed hereinabove, was not warranted and/or required at all. Section 129 of the Act is very clear.
The subsequent issuance of the notice cannot be said to be dropping the earlier show cause notice as observed and held by the High Court. The reasons to reopen the assessment for the A.Y. 2008-09 were already furnished after the first show cause notice which ought to have been considered by the High Court. However, the High Court has considered the reasons recorded after the second show cause notice which was not required to be considered at all.
The finding recorded by the High Court that the subsequent notice dated 18.01.2016 can be said to be barred by limitation is unsustainable.
It is required to be noted that the Assessment Order is passed on the basis of the first notice dated 23.03.2015 and not on the basis of the notice dated 18.01.2016.
Under the circumstances and in view of the above factual aspect, the High Court has erred in quashing and setting aside the reopening of the assessment for the A.Y. 2008-09. The impugned judgment and order passed by the High Court holding so is unsustainable and the same deserves to be quashed and set aside.
the impugned judgment and order passed by the High Court is set aside. - Decided in favor of Revenue
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2022 (11) TMI 1305 - DELHI HIGH COURT
Stay of demand - Recovery of demand - requirement of payment of twenty per cent of disputed tax demand as a pre-requisite - ‘Assessee-in-default’ for short deduction of tax at source - payment to the extent of 20% of total tax demand arising under Section 201(1) - HELD THAT:- This Court is of the view that the requirement of payment of twenty per cent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of twenty per cent of the demand can be relaxed in appropriate cases. Even the Office Memorandum gives instances like where addition on the same issue has been deleted by the appellate authorities in the previous years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee.
As pointed out by the learned senior counsel for the petitioner, the Supreme Court in the case of PCIT vs. M/s LG Electronics India Pvt. Ltd [2018 (7) TMI 1905 - SC ORDER] has held that tax authorities are eligible to grant stay on deposit of amounts lesser than twenty per cent of the disputed demand in the facts and circumstances of a case.
In the present cases, the impugned orders are non-reasoned orders. Neither the AO nor the Commissioner of Income Tax have either dealt with the contentions and submissions advanced by the petitioner nor has considered the three basic principles i.e. the prima facie case, balance of convenience and irreparable injury while deciding the stay application.
The impugned orders and notices are set aside and the matters are remanded back to the respondent No.1-Commissioner of Income Tax for fresh adjudication in the application for stay.
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2022 (11) TMI 1304 - DELHI HIGH COURT
Scope of the DTVSV scheme - Requirement to settle all the pending appeals filed by the respondents-revenue for an assessment year - settlement any appeal under the DTVSV Act - what is the rule of interpretation that the Court must apply while interpreting the DTVSV Act? - whether the DTVSV Act is a taxing statute or an amnesty act or a beneficial/remedial act, one has to examine what is the objective and intent behind enacting the statute? - HELD THAT:- Every modern legislation is actuated with some policy. While the intent of taxing statutes is to collect taxes, the intent of amnesty acts like Voluntary Disclosure of Income Scheme (for short ‘VDI Scheme’) is to provide an opportunity to the assesses to declare their undisclosed income on fulfilling certain terms and conditions. There are also legislations which are directed to cure some mischief and bring into effect some type of reform by improving the system or by relaxing the rigour of the law or by ameliorating the condition of certain class of persons who according to present-day notions may not have been treated fairly in the past. Such welfare, beneficent or social justice oriented legislation are also known as Remedial statutes.
It is settled law that any ambiguity in a taxing statute enures to the benefit of the assessee, but any ambiguity in the amnesty act or exemption clause in an exemption notification has to be construed in favour of the revenue and amnesty/exemption has to be given only to those assesses who demonstrate that they satisfy all the conditions precedent for availing the amnesty/exemption. [See: Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company and Ors [2018 (7) TMI 1826 - SUPREME COURT].
For determining whether the DTVSV Act is a taxing statute or an amnesty act or a beneficial/remedial act, one has to examine what is the objective and intent behind enacting the statute.
It is a statute which provides benefit as it recovers the taxes for the Department upfront without having to wait to succeed in the litigation which itself is uncertain. DTVSV Act also provides a sop to an assessee, as it puts an end to the litigation and the assessee is relieved of payment of interest and penalty if the same were to imposed. The DTVSV Act also benefits the society as it reduces litigation, acrimony, decongests the Courts and relieves the system of unnecessary burden. Consequently, this Court is of the view that DTVSV Act is neither a taxing statute nor an amnesty act. It is a remedial/beneficial statute.
The Courts have only to see that the particular case is within the mischief to be remedied and falls within the language of the enactment.” The words of such a statute must be so construed as “to give the most complete remedy which the phraseology will permit,” so as “to secure that the relief contemplated by the statute shall not be denied to the class intended to be relieved. Consequently, the appropriate principles of interpretation to be applied having regard to the entire conspectus of facts are the principles of purposive and liberal interpretation.
Applicability of judgment of the Supreme Court in Commissioner of Customs vs. Dilip Kumar & Co. [2018 (7) TMI 1826 - SUPREME COURT] which deals with interpretation of exemption notification - The benefit of the notification was denied to the assessee on the ground that the goods imported by the assessee contained chemical ingredient for animal feed and not animal feed/ prawn feed as such. Therefore, the question before the Supreme Court was whether the assessee who is seeking exemption from taxation under the provisions of the Act is covered by the said exemption notification. It was in this context that the Supreme Court held that the exemption notification is required to be construed strictly and any ambiguity in the exemption notification must enure to the benefit of the revenue. As already held hereinabove, the DTVSV Act is neither an amnesty act nor an exemption scheme as it does not provide for any exemption or benefit solely to the taxpayer.
While interpreting “Kar Vivad Samadhan Scheme”, the Supreme Court in Commissioner of Income Tax, Rajkot Versus Shatrusailya Digvijaysingh Jadeja, [2005 (9) TMI 362 - SUPREME COURT] held that the object of the said Scheme was to settle tax arrears locked in litigation at a substantial discount and it provided that any tax arrears could be settled by paying the prescribed amount of tax arrears, and it offered benefits and immunities from penalty and prosecution. The Supreme Court held that the “Kar Vivad Samadhan Scheme” was in substance a recovery scheme though it was nomenclatured as a "litigation settlement scheme" and was not similar to the earlier VDI Scheme. It further held that the object of “Kar Vivad Samadhan Scheme” was to put an end to all pending matters in the form of appeals, reference, revisions and writ petitions under the IT Act/Wealth Tax Act and the object was to put an end to litigation in various forms and at various stages under the IT Act/Wealth Tax Act and therefore the rulings on the scope of appeals and revisions under the IT Act or VDI Scheme will not apply. Consequently, the judgment of the Supreme Court in Dilip Kumar (supra) which deals with interpretation of exemption notification, has no application to the present case.
As under the DTVSV Act, 2020 each appeal, writ petition or SLP is treated as a separate dispute which is evident from Section 2(1)(j) read with Section 2(1)(a) of the Act - The unit for settlement of dispute under the DTVSV Act, 2020 is an appeal, writ petition or SLP and not the assessment year as had been canvassed by the revenue.
Even assuming that the DTVSV Act is a taxing statute, there is no restriction on an assessee to choose an appeal to be settled under the DTVSV Act as Section 2(1)(j) uses the words “any appeal” which even on a literal interpretation would mean any one or more appeals.
The issues raised by the Department in the SLP filed before the Supreme Court is in respect of deduction for salary paid to expatriates and the applicability of Section 115JB of the Act. However, this issue is not at all connected with the deemed appeal arising from the order of the Tribunal dated 16th September, 2019 wherein the issue of taxability of ECB interest and levy of interest under Section 234D of the Act is involved. Since, the issues involved in both the appeals are different and unconnected, this Court is of the view that the contention of the Department that the Petitioner ought to have settled the SLP pending in the Supreme Court, along with the deemed appeal of the Department is incorrect and bad in law.
Reliance on FAQ-7, 27, 11 and 14 is misconceived and untenable in law - FAQ - 27 is consequential to FAQ - 7, as it provides for the manner of computing disputed tax when the declarant files a declaration for settlement of issues which are remanded by an appellate authority to the AO. FAQ - 27 states that in the event the declarant decides to settle the issues remanded by an appellate authority, the declarant is also required to settle the issues which are not set aside by the appellate authority and further provides that the disputed tax for the issues remanded to the AO will be the same amount if the addition was to be repeated by the AO.
FAQ-27 has no application in the instant case as the Petitioner had filed a declaration with respect to a deemed appeal of the Department arising from the order of the Tribunal dated 16th September, 2019 and there were no issues pending before the AO for consideration.
This Court is of the view that FAQ No. 11 deals with cases where in one appeal a qualifying and a non-qualifying issue arise for consideration. However, the case of the Petitioner does not fall under any clauses of the section 9, which defines non-qualifying tax arrears. Consequently, FAQ-11 has no applicability to the present case.
This Court is also of the view that FAQ-14 supports the case of the Petitioner as it allows the assessee to make a declaration for settlement of a dispute with respect to "one" order and does not require the assessee to settle all the disputes arising from different orders for a particular year.
Option to the assessee to choose appeals for the same assessment year, which are pending before different forums, to be settled under the provisions of DTVSV Act - The contention of the respondents-revenue that the option is available to the petitioner only in a case where there are cross appeals arising from the same order is incorrect as FAQ-19 in unequivocal terms indicates that the assessee has an option to choose the appeals to be settled under the DTVSV Act and there is no obligation on the petitioner to settle all the appeals filed by the assessee for a particular assessment year.
This Court is of the view that an assessee is free to settle any appeal under the DTVSV Act and is not required to settle all the pending appeals filed by the respondent-revenue for an assessment year.
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2022 (11) TMI 1303 - BOMBAY HIGH COURT
Deduction u/s 80IB - some of the flats constructed in Tower ‘A’ of its housing project had exceeded the area of 1000 sq.ft. - structural changes noticed in the building as on the date of survey - Facts at all unearthed during survey proceedings which clearly suggest non compliance of the requirement of provision of section 80IB - HELD THAT:- We have also gone through the very comprehensive order passed by the CIT, which has discussed all the issues which have been flagged by the survey team point by point.
The statement of one Samir Makhani to the extent that he had purchased a single unit with one entrance, but under two agreements in regard to Flat No.1603 and 1604, also appears to have been subsequently changed when he stated that changes have been made in the said flats by merging the same and while Flat No.1603 was standing in his name, Flat No.1064 was in the name of his mother and that two separate agreements had been executed.
The conclusions drawn by the CIT (Appeals) based on the material on record goes to show that the view expressed and subsequently upheld by the Tribunal cannot be in any way said to be a view or a conclusion which is perverse.
The question essentially involved in the case, which had to be established beyond any doubt by the Revenue, ought to have been that the respondent had not only built but also sold the residential units, in respect of which the benefit of 100% deduction was claimed with an area of more than 1000 sq.ft., which only then could have justified the action of the Revenue in denying the benefit of 100% deduction under the said provision. In the present case, however, the revenue has failed to establish that fact. Not only this even the completion certificate could not have been issued by the competent authority, as rightly held by the Tribunal, if there was any violation of the approved plans by the municipal authorities.
No substantial question of law arises. Appeal is dismissed.
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2022 (11) TMI 1302 - DELHI HIGH COURT
Disallowance u/s 14A - necessity of recording satisfaction - as argued AO has failed to record proper satisfaction before rejecting the explanation offered for the disallowance made by the Assessee itself and proceeding to make the disallowance u/s 14A read with Rule 8D(2)(iii) - HELD THAT:- AO recorded his dissatisfaction with the computation of disallowance after examining the accounts of the Assessee. Section 14A read with Rule 8D(2)(iii) prescribes the method to be applied for determining the expenditure incurred for earning exempt income. AO and the appellate authorities, in the facts of this case, cannot be faulted for applying the statutory method for determining the expenditure and rejecting the Assessee’s suo moto disallowance.
Dissatisfaction of the AO is expressly recorded in the assessment order. The said dissatisfaction has been upheld by the appellate authorities after perusing the records of the Assessee. We do not find any merit in the submission of the Appellant that the AO has failed to record satisfaction. The Assessee has failed to point out any error in the findings of the appellate authorities except to state that the disallowance offered by the Assessee should be accepted as it was done in AY 2008-09 and AY 2009-10 on the principle of consistency. In this regard, we observe that this Court in its decision for AY 2008-09 while setting aside the deletion under Section 14A has not upheld the self devised method adopted by Assessee for making the allowance but adjudicated on the failure of the AO to record his proper satisfaction before invoking Section 14A.
We have already rejected the submission of application of principle of consistency and further, held that the disallowance offered by the Assessee in the assessment years under consideration being on an ad-hoc basis has been rightly rejected by the AO. We, therefore, do not find any reason to interfere with the said concurrent findings of the appellate authorities.
A perusal of the record reveals that the AO has applied his mind to the controversy as he firstly examined accounts, secondly duly invited the reply of the Assessee to explain the basis of the disallowance offered by the Assessee and thirdly after examining the explanation of the Assessee has recorded its dissatisfaction after observing that the ‘basis’ adopted by the Assessee for making such an estimate was unclear. CIT(A) and ITAT, which are the fact finding authorities upon examination of record, have concurred with the said finding of dissatisfaction of the AO. No substantial question of law arises.
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2022 (11) TMI 1301 - MADRAS HIGH COURT
Assessment u/s 153A - limitation for passing of the aforesaid orders u/s 153A - Period of limitation - HELD THAT:- The limitation for passing of the aforesaid orders under Section 153A of the Act, admittedly, expires on 31.03.2023 as the last date of the authorizations is dated 06.07.2021. To be noted that Section 153B provides for a limitation of one year from the end of the financial year in which the last of the authorization was issued for completion of the assessments under Section 153A.
As far as the order of assessment challenged is concerned, a regular assessment, limitation for completion of the same expires on 31.03.2023.
In light of the apparent violation in compliance with the principles of natural justice, all impugned orders of assessment are set aside. Let the petitioner be heard and orders passed de novo, in accordance with law and in strict adherence to the principles of natural justice and law, within the expiry of limitation.
To facilitate the commencement of the proceedings, let the petitioner appear before the authority on Friday, the 18th of November, 2022 at 10.30 a.m. without awaiting any further notice in this regard.
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2022 (11) TMI 1300 - MADRAS HIGH COURT
Party to writ petition - WP filed by the appellant espousing the cause of his wife for a simple mandamus - specific case of the petitioner is that the petitioner's wife has filed a suit against one P.M.Elavarasan - Parties to civil suit, and their wives or husbands. Husband or wife of person under criminal trial - suits have been transferred to the IV Additional City Civil Judge, City Civil Court, Chennai - single Judge, after considering the arguments, at the time of admission, has dismissed the writ petition and also imposed costs of on the ground that neither the petitioner's wife nor the said Ilavarasan has been made a party in the said writ petition - HELD THAT:- Only in a proceeding initiated before a Court of law or any authority, the appellant could appear and depose evidence on behalf of his wife. Therefore, the Writ Petition could not have been filed by the appellant as a witness of his wife. It was for the appellant's wife to have filed the said Writ Petition after impleading the proper and necessary parties.
We are in agreement with the views expressed by the learned Single Judge while dismissing the Writ Petition. Therefore, there is no merit in the present Writ Appeal. That apart, the appellant cannot rely on Section 120 of the Indian Evidence Act, 1872, to justify in filing of the Writ Petition
Only in a proceeding initiated before a Court of law or any authority, the appellant could appear and depose evidence on behalf of his wife. Therefore, the Writ Petition could not have been filed by the appellant as a witness of his wife. It was for the appellant's wife to have filed the said Writ Petition after impleading the proper and necessary parties.
We are therefore inclined to dismiss this Writ Appeal. We however expunge the cost imposed on the appellant, considering the fact that the appellant's wife may have a case against the said P.M.Ilavarasan.
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2022 (11) TMI 1299 - ITAT KOLKATA
Undisclosed sales - AO found difference between Tax Audit Report & Audited Accounts in local sales - CIT-A deleted the addition - HELD THAT:- CIT(A) considered the submissions of the assessee including the tax audit report and other details/particulars and based on the same deleted the addition stating that AO acted in an erroneous manner by comparing the particulars of sales to AEs reported u/s 40A(2)(b) with the sales figure reported in the Profit & Loss Account - also find merit in the appellant's case that the sales made was in the nature of deemed exports since the aforesaid body corporate is located in an SEZ and hence it was rightly reported by way of export sales. It is noted that once the sales made to M/s Pacific Jute Ltd is excluded, the sales to related entities within the territory of India (excluding deemed exports) which was lower than the overall local sales - In the circumstances impugned addition made by way of unrecorded local sales was untenable on the given facts of the case - Decided in favour of assessee.
Addition u/s 68 - unexplained increase in short term borrowings under the head ‘advance received from the parties’ and increase in liability under the had ‘trade payables for goods - CIT(A) considered the submissions of the assessee including the tax audit report and other details/particulars, deleted the addition - HELD THAT:- AO did not consider aspect while making additions of sundry creditor under Section 68 of the Income Tax Act there was no case for disallowance for corresponding purchase, no addition could be made under Section 68 inasmuch as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. We are, therefore, of the opinion that no substantial question of law arises for consideration in this case - AO was unjustified in adding the net increase in current liabilities invoking Section 68 of the Act. The Ld. AO is accordingly directed to delete the impugned addition in full. - Decided in favour of assessee.
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2022 (11) TMI 1298 - ITAT CHENNAI
Validity of assessment against company non existent - assessee company stands dissolved by NLCT - HELD THAT:- In the present case before us, the admitted facts are that the assessee company is dissolved and there is no successor for assessee company, SBQ Steels Ltd., in our view, no proceedings shall be continued against the assessee company because it is nonexistent as on date. In term of the above, we dismiss these appeals of Revenue as infructuous.
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2022 (11) TMI 1297 - ITAT AHMEDABAD
Addition of interest expenditure u/s 36(1)(iii) - lending business - non-charging interest or interest free loans given - AO held that the interest expenses incurred on loans obtained cannot be treated as business expenditure u/s 57 and the same cannot be allowable out of the income derived from partnership firm as there is no nexus between additions, in income and expenditures as no loans have been invested into a partnership firm as capital as stated by the assessee - HELD THAT:- CIT(A) has taken charging interest at 4.36% as compared to the interest charged at 6% on loans to friends and families but the assessee before us has demonstrated that rate of interest earned at 6% per annum for the time period of loans and advances is for particular set up of loans and advances. Similarly borrowed loan at 6% was also there in the relevant A.Y.
There was 0% return of income on borrowing of unsecured loan and the same was detailed before the AO as well as CIT(A). There was not a single case of non-charging interest or interest free loans while giving the loans by the assessee. Therefore, AO as well as the CIT(A) has made the addition on presumptive and assumptive percentage of charging of interest.
The expenditure incurred was wholly and exclusively for the purpose of business of land trading and the same was also explained by the assessee in respect of lands sold reflected in the opening stock and land which was not sold at the closing stock and various unsecured loans borrowed were utilised during the course of normal business of land trading and financial business. Thus, AO and the CIT(A) was not right in disallowing the interest and has not taken proper cognisance of the provisions of Section 36(1)(iii) - Decided in favour of assessee.
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2022 (11) TMI 1296 - ITAT SURAT
Capital gain computation - valuation of property by DVO - difference in sale value as estimated by DVO and declared value by assessee - value declared by assessee on 01.04.1981 is more than its fair market value - Scope of amendment in Section 55A - whether estimation of value of assets as on 01.04.1981 is required to be ignored? - HELD THAT:- As find that there is no dispute that assessee has sold both the properties / assets prior to the amendment in Section 55A. Therefore as per the decision in the case CIT vs. Gaurangiben S. Shodhan Indl. [2014 (2) TMI 78 - GUJARAT HIGH COURT] the amended provision in clause-(a) of Section 55A, which is inserted with effect from 01.07.2012 and the words “at variance with its fair market value”, is not applicable on the transaction of assessee.
Therefore, find merit in the submission of assessee direct the Assessing Officer to verify the computation of income furnished by assessee which is recorded in para- 7 of this order and grant appropriate relief to assessee. Needless to direct that before passing the order the Assessing Officer shall grant opportunity of hearing to assessee. In the result, the grounds raised by assessee are allowed.
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2022 (11) TMI 1295 - ITAT DELHI
Income deemed to accrue or arise in India - Taxability of the amounts received by the assessee on the sale of software licences - royalty receipts - HELD THAT:- As decided in own case A.Y. 2013-14 the amount received by the assessee from sale of software products/licenses to be not royalty as per Article 12(3) and as per Section 9(1)(vi) of the Act. Thus the grounds of the assessee are allowed.
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2022 (11) TMI 1294 - ITAT JAIPUR
Revision u/s 263 by CIT - mistake of non-initiation or incorrect initiation of penalty - assessment order that Penalty u/s. 271(1)(c) is initiated for concealment of income by way of issue of notice u/s. 274 r.w.s. 271(1)(c) - HELD THAT:- It is well-settled that once an appeal has been preferred against an order of assessment the entire assessment is open before the appellate authority. The appellate authority is entitled to do all that the AO could have done. The powers of the appellate authority are co-extensive and co-terminus with the powers of the AO. It is equally well-settled that PCIT cannot exercise revisional jurisdiction qua proceedings before an appellate authority. The order of assessment does not have any independent existence and stands merged with the order of the appellate authority.
Hence, to read s. 263 as being applicable only in case of an AO for the purposes of initiation and levy of penalty and not being applicable to the appellate authority, cannot be the legislative intent. To the contrary, the inherent indication u/s 271(1) makes it clear that the Pr. CIT / CIT does not have any powers to direct either of the authorities, the AO or the appellate authority, to initiate and levy penalty. The section requires the AO or the appellate authority to be satisfied in the course of ‘any proceedings’. This means, any proceedings before either of the specified authority
Pr. CIT / CIT cannot create proceedings. If he is not permitted to direct the appellate authority (and this is an accepted position) he cannot be permitted to substitute jurisdiction/powers of only the AO by his satisfaction by creating proceedings where none exist- assessment having already been completed.. The identical issue is directly covered by the binding decision in case of CIT vs Keshrimal Parasmal [1985 (5) TMI 34 - RAJASTHAN HIGH COURT]
As decided in Smt.Rekha Shekawat [2022 (8) TMI 791 - ITAT JAIPUR] on examination of assessment record, the PCIT cannot direct initiation of penalty proceedings because penalty proceedings are not part of assessment proceedings. Thus, the PCIT’s revisionary decision relating to non-initiation/ incorrect initiation of penalty which without holding that assessment order passed by the AO as erroneous and prejudicial to the interest of revenue is vague and bad in law.
Being consistent, as there is no contrary finding serviced before us by the revenue we are of the considered view that the invocation of provision of 263 to correct the section under which the penalty is leviable or not is beyond the power vested under section 263 of the Act, when there are other options available with the ld. AO. Therefore, the appeal of the assessee is allowed.
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2022 (11) TMI 1293 - ITAT CHENNAI
Reopening of assessment u/s 147 - reason to believe - Reopening based on audit objection and also change of opinion - HELD THAT:- Thus in view of the above discussion and case law of Hon’ble Madras High Court in the case of Cholamandalam Investment & Finance Co. Ltd.[2018 (1) TMI 146 - MADRAS HIGH COURT] that the reasons recorded in the present case are verbatim what the audit objection is. It means that the AO has not applied his independent mind to the facts of the case before recording reasons and hence, the reason merely based on audit objection cannot be a basis of reopening. Therefore, we held that reopening is bad in law and hence, the reassessment framed is quashed. Appeal filed by the assessee is allowed.
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2022 (11) TMI 1292 - ITAT AHMEDABAD
Levying of penalty u/s 271(1)(c) - addition made on account of LTCG for furnishing of inaccurate particulars of income - HELD THAT:- As relying on CHINUBHAI AMBALAL PATEL [2017 (8) TMI 1685 - ITAT AHMEDABAD] we do not justify the imposition of penalty levelled against the assessee on the basis of the deeming provision of Sub-Section (2) to Section 50C of the Act. Thus, the order passed by the authorities below under Section 271(1)(c) of the Act is found to be erroneous and bad in law and hence, quashed. Assessee’s appeal is allowed.
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2022 (11) TMI 1291 - ITAT HYDERABAD
Disallowance of Expenses written off - M/s. Fortune Construction Pvt. Ltd. has refunded an amount from the security deposit paid by the assessee company under the project development agreement - HELD THAT:- The assessee abandoned the project due to commercial expediency and in terms surrendered the same in favour of the land owner M/s. Fortune Construction Pvt. Ltd. Further, the amount of Rs. 13 crores refunded to the assessee towards security deposits is out of the security deposit of Rs. 80 crores as on 31.03.2009 which reduce to Rs. 67 crores as on 31.03.2010. Nothing was produced by the revenue to controvert the submissions filed by the assessee before the ld. CIT(A) and the finding of the ld. CIT(A) on this issue.
Hon'ble Madras High Court in the case of Chemplast Sanmar Ltd. [2018 (9) TMI 75 - MADRAS HIGH COURT] has held that where assessee company set up a new project which was subsequently abandoned, since new project was managed from common funds, control over all business units was in hands of assessee and there was unity of control, it could not be said that pre-operative expenditure incurred by assessee was on a new line of business, thus, same was to be allowed as revenue expenditure.
Hon'ble Calcutta High Court in the case of Binani Cement Ltd [2015 (3) TMI 849 - CALCUTTA HIGH COURT] has held that expenditure incurred for construction/acquisition of new facility which was subsequently abandoned at work-in-progress stage was allowable in year of write off as incurred wholly and exclusively for purpose of assessee's business.
We do not find any infirmity in the order of the ld. CIT(A) on this issue. Accordingly, the same is upheld and the grounds raised by the revenue are dismissed.
Disallowance of Customers Settlement Claims - said amount did not crystallize in the year under consideration and therefore a contingent liability - direct and intimate connection between the claim and the business - HELD THAT:- It is an admitted fact that the direct and intimate connection between the claim and business is not in dispute before the lower authorities. The settlement of the claim by the assessee pursuant to the legal process arising out of the contractual liability is in the course of carrying on of its business and the same is also not in dispute - claim being revenue in nature is also not disputed by the AO. It is also relevant to mention here that the accounts were duly audited and signed by the auditor on 29.09.2013 before which the order of the State Consumers Disputes Redressal Commission was available and therefore, in view of the guidelines issued by the ICAI for events occurring after the balance sheet date and considering the fact that the tax rate of both the assessment years are same, we do not find any infirmity in the order of the ld. CIT(A) in deleting the addition. Accordingly, ground of appeal no. 1 by the revenue is dismissed.
Addition on account of deposits written off on surrender of land development rights - HELD THAT:- As find from the details so furnished that CASA I, project was implemented and carried. The development rights of project CASA II, were surrendered in terms of registered document dt. 31-10-2012, duly registered as Doc. No. 4758/2012 in the office of Sub-Registrar, Medchal. Pursuant to the cancellation of the development rights, as against the deposit amount of Rs. 17,80,61,366/- the developer returned only an amount of Rs. 14,17,10,000/-. The submission of ld. counsel for the assessee that the balance amount of deposit has not been returned by the developer has not been controverted by the revenue.
The deed of cancellation of surrender of rights is categorical in the preamble mentioned to the effect that the deposit amount refunded was only Rs. 13,67,10,000/-. Once the developer was sure that it is not possible to receive back any further amount of the deposit, as a commercial expediency the balance amount of Rs. 3,63,51,366/- has been written off, since it is arising out of the business exigency and commercial expediency. We uphold the order of the ld. CIT(A) in deleting the addition. The ground raised by the revenue is dismissed.
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2022 (11) TMI 1290 - ITAT VISAKHAPATNAM
Validity of valuation by the DVO u/s 142A - Estimation of value of assets by Valuation Officer - Applicability of provisions of section 142A(6) - CIT-A allowed the appeal of the assessee - HELD THAT:- The valuation officer shall send a copy of the valuation report to the AO within the period of six months from the end of the month in which reference was made under sub section (1) of section 142A - in this case, the DVO has submitted his report on 14.06.2018 based on the reference made by the AO on 12.09.2017. The due date of the report of the valuation officer is ending on March 2018. But the DVO has submitted the report with the delay of 3 months, beyond the due date prescribed under the Act. The Ld.DR also could not contest the argument of the AR that the DVO’s valuation report is non-est in the eyes of law, since it is submitted beyond the prescribed due date u/s 142A(6)
There is no material placed before us regarding any stay being granted on the operation of the order of the Hon’ble ITAT. In the absence of the same pending disposal of the appeal by decision of Hon’ble ITAT in [2019 (9) TMI 628 - ITAT VISAKHAPATNAM] is valid in law as on date. We are therefore, in concurrence with the CIT(A). We are of the considered view that the CIT(A) has rightly considered the provisions of the Act, hence, no interference is required in the order of the Ld.CIT(A). Accordingly, the appeal of the revenue is dismissed.
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