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2022 (6) TMI 1161 - ITAT MUMBAI
Validity of order u/s 144 - HELD THAT:- In order of learned CIT (A), it was categorically held that all the submissions produced before the learned Assessing Officer was considered. Further, in response to notice under Section 153A of the Act, the assessee did not care to file even the return of income. Therefore, we find that no force in the ground no.1 of the appeal. Hence, dismiss.
Addition made without having any incriminating material - HELD THAT:- We find that during the course of search enough evidences were found which are tabulated by the learned Assessing Officer and based on that addition has been made. Therefore, it cannot be said that there is no incriminating material found during the course of search. In the result ground number 3 of the appeal of the assessee is dismissed.
Bogus purchases - HELD THAT:- We find that the CIT – A has considered all the explanations furnished by the assessee. He has categorically stated that the assessee had booked purchases from six suppliers identified by the sales tax Department as hawala/bogus dealers. The assessee is also not in possession of the bills and other supporting evidences for purchases to the tune of ₹ 5.92 crores. Therefore, there was no doubt that the assessee has indulged in bogus purchases for all these years. The learned and CIT – A observed that the average ratio of bogus purchases to the turnover is merely 1.04% and therefore the bogus purchases were estimated for assessment year 2007 – 08 to 2009 – 10 at ₹ 60.76 crores. When assessee was confronted with evidences, the key persons, managing director enhanced the admission and offered an additional amount of unaccounted income. On that basis the learned CIT – A the addition of ₹ 223,411,367/–. In view of this, we do not find any infirmity in the orders of the lower authorities in confirming the addition of the above amount on account of alleged bogus purchase. Accordingly, ground number 2 of the appeal is dismissed.
Disallowance on account of speed money - HELD THAT:- CIT – A confirmed the addition however he telescope the same in view of the addition confirmed by him on account of bogus purchases for the reason that in answer to question number 135 the managing director of the company has stated that the source of the above speed money paid is on account of bogus purchases. Therefore we do not find any infirmity in the order of the learned CIT – A in allowing the telescoping of the above disallowance with respect to the addition confirmed by him on account of bogus purchases. Accordingly, ground numbers 1 – 2 of the appeal of the AO are dismissed.
Disallowance u/s 14A - assessee has incurred substantial interest expenditure and has also made investment where from exempt dividend on income could have been earned - HELD THAT:- As we find that now with effect from 1 April 2022 the Finance act, 2022 has introduced an explanation, which makes it very clear that the provisions of Section 14A with respect to the disallowance will apply and shall be deemed to have always been applied in case where the assessee has not earned any exempt income. Therefore, in view of the amendment made we set-aside these grounds back to the file of the learned assessing officer to grant an opportunity of the hearing to the assessee and decide the issue afresh. Accordingly, these grounds are allowed with above directions.
Disallowance of interest expenditure - CIT- A has deleted the above disallowance holding that assessee has interest free funds available with it in the form of share capital and reserve - HELD THAT:- As relying on the decision of the honourable Bombay High Court in case of Reliance utilities and powers Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] held that the presumption is available in favour of the assessee that no interest-bearing funds have been utilized for the above interest free loans and advances. The learned departmental representative could not show any infirmity in the order of the learned CIT – A. Therefore, we confirm the action of the learned CIT – A in deleting the above disallowance and accordingly ground of the appeal of the AO is dismissed.
Disallowance of deduction u/s 80 IA - AO did not allow the claim of the assessee for the reason that no audit report in form number 10CCB was filed - Before the learned CIT – A assessee also failed to show that any such form has been filed before the assessing officer. The assessee also did not produce any evidence before the learned CIT – A also. CIT – A also asked the assessee to produce certain details, which were not produced. Accordingly, the deduction was disallowed - HELD THAT:- No such details were also produced before us. Disallowance confirmed.
Disallowance on account of purchases of development rights of fully developed when the power site acquired from Vish wind infrastructure LLP[ LLP] - HELD THAT:- CIT- A on perusal of the finding of the learned assessing officer, settlement commission as well as in absence of any further information except the further valuation report, confirmed the action of the learned assessing officer. We find that when the payment was not found to be genuine, the party to which payments have been made did not have any capability of performing such work, the report of expert was found to be backdated and without any further evidence, the expert also did not visit the site or carry out any personal inspection, there is no doubt in our mind that the expenditure incurred by the assessee is bogus. Accordingly we confirm the action of the learned CIT – A in disallowing the above expenditure. Accordingly, ground of the appeal is dismissed.
Disallowance u/s 37 (1) - This offer was made by the assessee before the settlement commission - addition was on account of the provisions of Section 43B of the act since the above sum is not paid before the end of relevant year - HELD THAT:- During the course of assessment proceedings, also assessee did not object to the same. Before the learned CIT – A also no evidences were produced. There are no evidences that the above sum has been paid even before the due date of filing of the return of income. Therefore, we do not have any other alternative but to confirm the action of the learned CIT – A in confirming the above disallowance - Accordingly, ground of the appeal is dismissed.
Disallowance of certain expenditure - HELD THAT:- On careful analysis of the order of the learned CIT – A we find that in each of the disallowance, he is faced with the situation where no complete details are available on record but comparative analysis of expenditure is available. He applied his mind and applied reasonable ratio to uphold the disallowance. No infirmity can be imputed in such an order.
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2022 (6) TMI 1160 - ITAT COCHIN
Penalty u/s 271C - assessee did not remit the TDS on the due date - Genuine hardship due to accumulated loss - amount with interest was deposited before issuance of notice - HELD THAT:- As the major part of the TDS relates to remuneration to the Directors credited to the unsecured loan account - TDS was payable on that amount also, but the same could not be remitted due to acute fund shortage for the assessee-company. The assessee-company had incurred huge loss during the relevant financial year and accumulated losses as on 31.03.2010.
In addition to the heavy losses, the assessee had huge liability towards bank loan and other borrowings, which is evident from the balance sheet placed on record. In the subsequent years, the bank had taken action under SARFAESI Act and taken possession of the resort and the resort was kept closed for a long time. It was also submitted that after bank had taken possession of the property, one of the NRI Directors had brought in additional funds and settled the dues to the bank and reopened the resort.
After reopening due to Covid pandemic, resort was again closed in the month of March 2020. Therefore, the total accumulated losses as per the books of account as on 31.03.2021 is Rs.32,17,77,436. Only because of these hardships there was delay in remitting the TDS. Therefore, there is reasonable cause as envisaged u/s 273B for the delayed remittance of TDS. Moreover, the assessee had paid the entire TDS amount along with interest on 30.04.2011, much prior to notice u/s 274 r.w.s. 271C of the I.T.Act was issued to the assessee-deductor on 05.03.2013. Therefore, for the aforesaid reasoning and the judgment of Lakshadweep Development Corporation Ltd. [2019 (3) TMI 333 - KERALA HIGH COURT] we delete the penalty imposed u/s 271C - Assessee appeal allowed.
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2022 (6) TMI 1159 - ITAT AHMEDABAD
Addition u/s 68 - unexplained share application money - HELD THAT:- We note that the assessment for impugned assessment year 2011-12 was re-opened on the basis that during the course of assessment proceedings for assessment in 2012-132020 (3) TMI 227 - ITAT AHMEDABAD], it was found that the assessee company received share application money from M/s Mars Software International Ltd. and Mr. Anil Jain - The “reasons to believe” for assessment year 2011-12 specifically mentioned that the basis for the opening the case under section 147 of the Act is that during the course of assessment proceedings for assessment year 2012-13, it was found that the assessee accepted the share application money in respect of which additions under section 68 of the Act were made.
The first appellate authority in the appeal for assessment year 2012-13 deleted the addition for the reason that the said share application money pertained to the earlier year and hence could not be added in assessment year 2012-13. It was for this reason, reassessment proceedings were initiated for the impugned assessment year 2011-12 to tax the aforesaid share application money in the hands of the assessee, which could not be taxed in assessment year 2012-13 since it did not pertain to that year.
However, since Ahmedabad ITAT in the assessee’s own case and in respect of the share application money received from the same parties (as in the impugned assessment year 2011-12) has deleted the addition under section 68 which formed the basis for reopening of assessment for the assessment year 2011-12, respectfully following the above ITAT decision the assessee’s own case for assessment year 2012-13, we hereby delete addition in respect of share application money under section 68 of the Act. In the result, ground number 1 of the assessee’s appeal is allowed.
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2022 (6) TMI 1158 - ITAT AHMEDABAD
Addition of Short term capital gain - AO has made addition of revaluation of the land in the books of the assessee treating the same as short term capital gain - transfer of asset by the partnership firm to partners - Case reopened u/s 147 on the ground that the assessee was one of the beneficiaries of Client Code Modification (“CCM”) and during the financial year 2008-09 profit shifted and loss shifted resulting into net reduction in income due to CCM - CIT(A)held that revalued amount of capital asset which was transferred to capital account of the partners in their respective shares of profit, was not liable to capital gain tax in view of section 45(4) - HELD THAT:- DR could not produce before us any judgments in favour of the Revenue, as against the addition made on account of revaluation of the land in the partnership firm. Similarly, the ld.DR could not place before us any contradictory finding as relied by the ld.CIT(A). In the absence of any further materials or judgments, we do not find it necessity to interfere with the order passed by the ld.CIT(A). Further, the fact in the case of Om Namah Shivay Builders & Developers [2010 (11) TMI 137 - ITAT, MUMBAI]relied upon by the ld.DR is that one of the partners died and his legal heirs continued in the firm and then retired from the said firm, and this fact is not applicable to the facts of the present case. Thus, the order passed by the ld.CIT(A) does not require any interference on the facts brought out therein are not disputed by the Revenue, therefore, the same is liable to be upheld. - Decided against revenue.
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2022 (6) TMI 1157 - ITAT AHMEDABAD
Revision u/s 263 - Admissibility of deduction u/s 54 and 54F - as submitted claim of deduction u/s 54 and 54F has been accepted in the case of the assessee’s brother, who was owning 50% share in the above property - HELD THAT:- It is seen from the paper book that the assessee has made a detailed reply to the show cause notice by producing relevant document viz. sale deed; property tax receipts, copy of Income-Tax Returns for earlier years showing rental income from the above property; copies of bank accounts and copy of the Will executed by the assessee’s father. Without appreciating the above documents, the ld.CIT has come to a conclusion that Plot No.34 does not mention anywhere that there was a residential building sold through the sale deed.
Further, CIT absolutely erred in stating that the assessee has made 100% claim of deduction whereas she has only 50% as co-owners in the above properties and from going through the Sale Deeds both the lands are vacant lands. Thus, the above finding of the ld.CIT is not correct from the perusal of the above record. The ld.CIT has not given due credence to the reply filed by the assessee and passed this revision order. However, it can be seen from the co-owner, assessee’s brother Shri Vijay Patel’s case that similar deduction was being allowed by the ITO (International Taxation), Baroda after detailed inquiry, wherein the assessee’s brother has also given detailed reply dated 12.12.2011. After considering the above reply, the ITO(International taxation) has accepted the returned income and allowed the deduction by passing order under section 143(3) of the Act dated 29.12.2011 and that assessment order was not subject matter of revision or reopening by the Department, but in the case of the assessee being co-owner of the same properties, a show cause notice under section 263 of the Act dated 23.8.2013 was issued and explanation was called for from the assessee. Here it is to be noted that ld.CIT has not verified, what happened to other co-owner viz. assessee’s brother Shri Vijay Patel case which assessment has attained finality.
Thus different treatments cannot be given on the same set of facts in respect of different co-owners of a common piece of land which are subjected to capital gains. If such action on the part of Revision Authority is approved, it would militate against the principle of equality of law as enshrined in the Article 14 of the Constitution. Further, it is seen that the ld.CIT has not taken any steps for reopening the case of other co-owner viz. Shri Vijay Patel and thereby accepted similar long term capital gain and claim of deduction under section 54 and 54F of the Act on the said transaction. Therefore, in our considered view, the assessee cannot be treated differently for similar transaction. This ground of appeal of the assessee is allowed on this preliminary aspect, and Revision Order under section 263 of the Act is hereby quashed. - Decided in favour of assessee.
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2022 (6) TMI 1156 - ITAT BANGALORE
Benefit of exemption u/s 54F - case of the assessee was selected for computer assisted scrutiny selection (CASS) under the limited scrutiny category - According to the AO, as per the JDA, the assessee was entitled to more than 2 residential houses i.e., flats and therefore the deduction under section 54F of the Act cannot be allowed to the assessee - plea of the assessee is that whatever area it got from the developer under the JDA has to be regarded as one residential unit and exemption under section 54 of the Act should be allowed to the assessee - HELD THAT:- .According to the terms of the agreement, the assessee bargained for only a built-up area and it has to be regarded as one residential area for the purpose of claiming deduction under section 54F of the Act. In this regard, we find that neither before the AO nor before the CIT(A) such a plea was taken. In fact, the plea before the AO was that the assessee should be allowed the benefit of deduction of exemption atleast in respect of one residential unit and it has been submitted that for the convenience, the built-up area was divided into 3 units and that cannot be basis that the assessee got 3 residential houses. In order to decide this issue, it would be necessary to examine the plan and the manner in which the construction of the 3 units has been done and how the property has been assessed and enjoyed by the assessees. We therefore deem it fit and proper to remand this issue to the AO for fresh consideration after affording opportunity of being heard to the assessee. Thus, both the appeals of the assessees are treated as partly allowed for statistical purposes.
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2022 (6) TMI 1155 - ITAT AHMEDABAD
Deduction u/s 80P - assessee has earned interest income from nationalised banks i.e. other than cooperative banks and claimed deduction under section 80P(2)(d) - HELD THAT:- On the issue whether the interest earned on deposits kept with nationalised bank is eligible for deduction under section 80 P of the Act, in our view, the issue is directly covered in favour of the Revenue in view of the Supreme Court decision the case of Totgars, Co-operative Sale Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] held that interest earned by assessee would come in category of 'Income from other sources' taxable under section 56 and would not qualify for deduction as business income under section 80P(2)(a)(i).
Gujarat High Court in the case of State Bank of India (SBI) [2016 (7) TMI 516 - GUJARAT HIGH COURT] held that where assessee, a co-operative society, having accepted deposits from its members, kept idle funds with bank, since there was no nexus between interest earned on said deposits and business of assessee providing credit facilities to its members, it could not claim deduction under section 80P(2) of the Act in respect of interest income in question.
In the case of Baroda Citizen Community Co-op. Credit Society Ltd. [2022 (1) TMI 987 - ITAT AHMEDABAD] held that in case of a society engaged in providing credit facilities to its members, income from investments made in banks is not deductible under section 80P of the Act.
Respectfully following the decisions cited above, we do not find any infirmity in the decision of Ld. CIT(A). Therefore, the appeal of the assessee is dismissed on this issue in respect of Ground Number 1.
Disallowance of deduction under section 80P of the Act in respect of “rental income” and “other miscellaneous income” - HELD THAT:- Bihar High Court in the case of Bihar Rajya Sahkari Bhoomi Vikas Co-operative Bank Ltd. [2008 (9) TMI 310 - PATNA HIGH COURT] held that income earned by assessee, a co-operative bank, by way of interest on provident fund amount of employees and rent from house property could not be treated as income attributable to banking business and would not qualify for deduction under section 80P(2) of the Act. In the case of CIT v. Nainital District Co-Operative Bank[2007 (3) TMI 256 - UTTARAKHAND HIGH COURT] held that where the assessee-bank derived the income in question from the house property and not from the banking business, the assessee could not be allowed deduction under section 80P of the Act in respect of the income derived by house property. In view of the consistent view taken by the various High Court/Tribunals, we are of the considered view that the Ld. CIT(Appeals) has not erred in facts and law in confirming the addition made by the Ld. Assessing Officer by denying deduction under section 80P of the Act in respect of rental income/miscellaneous income. In the result, Ground number 2 of the assessee’s appeal is dismissed.
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2022 (6) TMI 1154 - ITAT AHMEDABAD
Revision u/s 263 - Erroneous allowance of deduction u/s 54B - distinction between lack of inquiry and inadequate inquiry - AO without making inquiries or verification with respect to the deduction/exemption claimed under section 54 thus assessment is erroneous insofar prejudicial to the interest of the Revenue and thus requiring revision by Pr. CIT u/s 263 - as per CIT the new property purchased by the assessee at Talluka Vejalpur Ahmadabad is a developed land and not an agricultural land as the same falls in Town Planning Scheme-5 (Bodakhedev- Makraba-Vejalpur) within Ahmadabad Municipal Corporation and as per the provision of section 54B of the Act, the exemption is available if there is a transfer of agricultural land and purchase of a new agricultural land - HELD THAT:- An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon’ble High Courts in this regard.
Delhi High Court in the case of CIT Vs. Sunbeam Auto [2009 (9) TMI 633 - DELHI HIGH COURT] made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry.
Thus the principle which emerges is that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind.
Now in the facts before us, in the case of the assessee the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, the Ld. AO framed assessment under section 143(3) accepting the return of income - it is not the case that the AO has not made enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of exemption claimed under section 54B of the Act. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the Ld. AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee.
Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.
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2022 (6) TMI 1153 - ITAT AHMEDABAD
Exemption u/s 11 - disallowing deduction u/s 11(2) for late filing of Form-10 for the Asstt.Year 2015- 16 - Form No.10 was not accompanied along with return of income, thereby 143(1) intimation was passed - assessee uploaded Form No.10 by online on 2.1.2017 and filed its rectification application on 6.10.2017 which was rejected - HELD THAT:- As going by the insertion of new sub-clause (c) of section 11(2) of the Act, the assessee is required to furnish Form No.10 along with Return of Income from the Asst.Year 2016-17 onwards. As per the CBDT Circular No.7 of 2018, representation from the assessee that Form No.9A and 10 could not be filed in specific time for the Asst.Year 2016-17, which were the first year of efiling of these forms, and also to condone such delay by invoking section 11(2)(b) of the Act. All the above provisions & circulars make it clear that non-filing or delay in filing the Form No.10, there was no time limit prescribed under the Act for the present Asst.Year 2015-16. Following the Supreme Court judgments, if the Form No.10 is filed before the assessing authority before completion of regular assessment, the assessee is eligible for the deduction.
We find that in this case only an intimation under section 143(1) has been made rejecting the claim of deduction to the assessee. There is no regular assessment made for the A.Y. 2015-16. The assessee’s rectification petition filed under section 154 of the Act is also rejected without considering insertion of sub-clause (c) in section 11(2) of the Act as well as CBDT Circular No. 7 of 2018. Thus, the ld.CIT(A) has not applied his mind while disposing of the appeal filed by the assessee.
The need for disposal of objections by way of a speaking order by the Assessing Officer, who is performing a quasi-judicial function. The soul of a quasi-judicial decision making is in the reasoning for coming to the decision taken by the quasi-judicial officer. While on this aspect of the matter, we may usefully refer to the observations made by the Hon'ble Supreme Court, in the case of Union Public Service Commission v. Bibhu Prasad Sarangi and Ors., [2021 (3) TMI 1349 - SUPREME COURT] - While these observations are in the context of the judicial officers, these observations will be equally applicable to the decisions by the quasi-judicial officers like us, as indeed the Assessing Officer CPC.
As in the present case the immediately after the intimation order was passed on 15.9.2016, the assessee realized the mistake of not upholding Form No.10 along with Return of Income, however, uploaded the same on 02.11.2017 and filed rectification application on 6.10.2017 requesting to rectify the mistake in the intimation. But the DCIT(CPC) simply rejected the rectification by his order dated 31.10.2019 by holding that there is no prima facie error in the order sought to be rectified, and simply rejected the rectification application filed by the assessee. CIT(A) even gone one step further by dismissing the appeal without considering Circulars issued by the CBDT, as well as Hon’ble Supreme Court’s judgment and other High Courts’ judgments placed by the assessee before the ld.CIT(A), NFAC - as in spite of Circular 14 of 1955, the Departmental Officers are taking advantage of the ignorance of the assessee, instead of assisting the taxpayers more particularly in the matter of claim of relief, issuance of refund, but the officers had not taken any initiative in guiding the taxpayers in accordance with law. This attitude will not give long term benefit to the department and discourage the confidence to the taxpayers. In simple words, when a litigant knocks the doors of the Temple of Justice, Justice to be rendered to his door steps itself and he should not be allowed to run from pillar to post for the Justice
Thus we quash the orders passed by the lower authorities, and delete the additions. Thus, the grounds of appeal raised by the assessee are hereby allowed.
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2022 (6) TMI 1152 - ITAT AHMEDABAD
Deduction u/s 80P - deduction on interest earned from Co-Operative Banks u/s 80P(2)(d) - HELD THAT:- CIT(A) has erred in law in holding that the observations of the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT (2016 (7) TMI 516 - GUJARAT HIGH COURT] to the effect that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act haveno binding effect on the jurisdictional Revenue Authorities.
In the case of Surendranagar District Co-op. Milk Producers Union Ltd. [2019 (9) TMI 978 - ITAT RAJKOT] ITAT held that assessee-co-operative society could not claim benefit of section 80P(2)(d) in respect of interest earned by it from deposits made with nationalised/private banks, however, said benefit was available in respect of interest earned on deposits made with co-operative bank.
In the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017 (1) TMI 1100 - KARNATAKA HIGH COURT), the Karnataka High Court has held that the interest income earned by a co- operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.
Respectfully, following the decision of Honourable High Court of Gujarat and other cases cited above, in our view, interest earned by the assessee on surplus held with cooperative bank amounting would be eligible for deduction under Sec.80P(2)(d) - Decided in favour of assessee.
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2022 (6) TMI 1151 - ITAT INDORE
Income from other sources u/s 56(2)(vii) - difference in price as finalized by Ld. DVO and actual purchase-price - HELD THAT:- As the assessee has submitted comparable instances to Ld. DVO as well as Ld. CIT(A) with supportive evidences to demonstrate that the assessee has purchased land at much higher price as compared the prices paid in the those comparable instances. But no finding has been given by the lower authorities on this submission. Secondly, we observe that the land purchased by the assessee is situated in interior area, is rocky and is not suitable for activities. These undisputed features, which are well-accepted by Ld. TPO, have a substantial bearing on the valuation of land and must be taken into account. Thirdly, we observe that the difference in valuation is about 13.14% which is a meagre difference which against is due to estimation involved in the valuation.
We observe that these factual aspects are similar to the facts involved in the decision of Hon'ble, ITAT, Mumbai Bench in Suresh C Mehta (2014 (1) TMI 192 - ITAT MUMBAI) relied upon by Ld. AR. On perusal of the decision, we observe that in the similar set of facts, the Hon'ble ITAT has set aside the order passed by the learned Commissioner (Appeals) and remitted the matter back to him to decide afresh after considering the objections of the assessee to V.O's estimate as well as claim for benefit when the difference is less than 15%. At this stage, we would like to make it clear that this decision pertains to Section 50C of the act but that does not make any difference because section 56(2)(vii) is pari materia section 50C.
Respectfully following the decision of Hon'ble Co-ordinate Bench, we also think it fit to remit the present matter back to Ld. CIT(A) for a fresh adjudication after considering the objections of assessee. Appeal of assessee is allowed for statistical purposes.
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2022 (6) TMI 1150 - ITAT CHENNAI
Revision u/s 263 - As per CIT penalty proceedings u/s.270A not initiated by AO - observation of underreporting or misreporting of incom - HELD THAT:- We find that although the Hon’ble Allahabad High Court in the case of CIT v. Surendra Prasad Aggarwal (2004 (9) TMI 45 - ALLAHABAD HIGH COURT] has uphold 263 order passed by the PCIT for initiation of penalty proceedings, but the jurisdictional the Hon’ble Madras High Court in the case of CIT v. Chennai Metro Rail Ltd. (2018 (3) TMI 1586 - MADRAS HIGH COURT] has taken a contrary view after considering the decision of the Hon’ble Allahabad High Court in the case of CIT v. Surendra Prasad Aggarwal(supra), and held that in the absence of any findings in the assessment order regarding underreporting or misreporting of income, the PCIT cannot revise the assessment order to initiate penalty proceedings.
Therefore, we are of the considered view that the PCIT has erred in invoking revisional powers u/s.263 of the Act, and set aside the assessment order to initiate penalty proceedings u/s.270A of the Act, because, the AO has chosen not to initiate penalty proceedings. The PCIT cannot substitute his views and observed that, the AO has passed erroneous order which resulted in loss of Revenue to the Department.
We are of the considered view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue and thus, we are of the considered view that the PCIT is erred in revising the assessment order u/s.263 of the Act. Hence, we quashed the revision order passed by the PCIT u/s.263 of the Act. - Decided in favour of assessee.
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2022 (6) TMI 1149 - ITAT PANAJI
Delayed payment of employees’ contribution to ESI & PF account within the due date provided under the PF & ESI Act - HELD THAT:- We note that the issue is no longer res integra. The decisions of Hon’ble High Court Calcutta namely in the case of (i) CIT –vs.- Vijayshree Ltd [2011 (9) TMI 30 - CALCUTTA HIGH COURT], PHILLIPS CARBON BLACK LIMITED [2014 (10) TMI 916 - CALCUTTA HIGH COURT], M/S COAL INDIA LIMITED. [2015 (8) TMI 1451 - CALCUTTA HIGH COURT] and M/S. AKZO NOBEL INDIA LTD. VERSUS COMMISSIONER OF INCOME TAX KOL. -IV [2016 (6) TMI 1128 - CALCUTTA HIGH COURT] - This aspect has been considered by the Coordinate Bench of ITAT Kolkata in the case of Lumino Industries Ltd.[2021 (11) TMI 926 - ITAT KOLKATA] to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeal of assessee succeeds and so, it is allowed in favour of assessee.
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2022 (6) TMI 1148 - ITAT DELHI
Disallowance u/s 14A r.w.r. 8D - Disallowance under Rule 8D(2)(ii) i.e. with respect to the interest disallowance which has been worked out on the basis of gross interest expenses - HELD THAT:- We find that Hon'ble Gujarat High Court in the case of Nirma Credit and Capital Pvt. Ltd. (2017 (9) TMI 485 - GUJARAT HIGH COURT) has held that for the purpose of working out disallowance under Rule 8D(2)(ii) of the Act, the expenditure by way of interest paid by assessee would be after reducing the taxable income earned during the financial year. Before us, Revenue has not placed any contrary binding decision in this case. We therefore in view of the aforesaid decision of Hon'ble Gujarat High Court direct the AO to working out the disallowance under Section 14A r.w. Rule 8D of the Income Tax Rules on the basis of the net interest under Rule 8D(2)(ii) of the Act. We thus direct accordingly. Thus the ground of assessee is partly allowed.
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2022 (6) TMI 1147 - ITAT VARANASI
Addition u/s 68 - unsecured loan - main thrust of the assessee to explain the cash credit in the shape of unsecured loan is that its account are audited under section 44AB of the Act and Audit Report was filed alongwith the return of income - assessee further explained that the loan from Kumar Nagendra is explained by the assessee by filing a copy of account and bank statement of the party but the same was ignored by the authorities - HELD THAT:- The assessee has failed to discharge its onus as required under section 68 of the Act to prove the identity of the loan creditor, creditworthiness of the loan creditor and the genuineness of the transaction. Accordingly, the Assessing Officer made this addition.
As assessee explained the loan from Kumar Nagendra is explained by the assessee by filing a copy of account and bank statement of the party but the same was ignored by the authorities. Except this explanation the assessee has not brought anything on record to prove the identity of the loan creditors, creditworthiness of the loan creditor and genuineness of the transaction
Since the assessee has not produced any documentary evidence in respect of the unsecured loan from Munna Kumar, we find that the assessee failed to discharge its primary onus to prove the identity and creditworthiness of the loan creditor as well as genuineness of the transaction. As regards the unsecured loan of Rs. 40 Lac from Kumar Nagendra is concerned, the Assessing Officer as well as the CIT(A) has recorded this fact from the bank statement that a cash was deposited immediately prior to issuing of D.D. in favour of the assessee.
Merely filing the bank statement by the assessee would not discharge the onus cast upon it to prove the creditworthiness of the loan creditor and genuineness of transaction particularly when the cash was deposited in tranches within a short spam of about ten days before issuing a D.D. in favour of the assessee. In the absence of any material brought on record before us to counter the finding of the Assessing Officer as well as the CIT(A), we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. Accordingly, the impugned order of the CIT(A) is upheld. - Decided against assessee.
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2022 (6) TMI 1146 - ITAT MUMBAI
Allowable business expenditure u/s 37 - deductibility of freebies etc to medical practitioners - referral commission paid to doctors is in violation of the professional conduct under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 - Whether authorities below erred in holding that referral commission paid to doctors is in violation of the professional conduct under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002, and, as such, inadmissible as a tax deduction under section 37? - HELD THAT:- The expression ‘allied healthcare industry’ is required to be interpreted in the context in which appears in the code of conduct for the medical practitioners, and not on the basis of how this expression has been defined in some other context in a journal or on website guidelines. We are unable to see any justification for excluding a medical service provider, like the assessee before us, from the segment of the ‘pharmaceutical and allied healthcare industry’ in the present context.
When an unsuspecting client walks into the consulting chamber of a dentist who advises him to go for stem banking from his dental plump, one cannot be sure whether it is the doctor’s genuine advice on its merits of what the doctor actually believes to be beneficial to the client or it is a piece of advice influenced by the financial inducement by way of ‘referral fee’ that the doctor will get for his client being referred to the service provider in question. Such a situation de facto amounts to receipt of cash or monetary grant by the medical professional from the allied healthcare industry, on the pretext of referral fees- in clear violation of rule 6.8.1(d) of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002. The true consideration for this referral fee is the advice given to the doctor’s patient, and a potential customer of the service provider, in favour of stem cell banking.
The fiduciary relationship between the doctor and patient is, or has the potential of being, compromised as such by the extraneous considerations. That is clearly contrary to the letter, as also the spirit, of the code of conduct for the medical practitioners. The acceptance of such a referral fee by a medical practitioner is thus forbidden by the legally enforceable code of conduct, which renders it an expense for a purpose that is ‘prohibited by law’ depriving the assessee company to claim a tax deduction in respect of the said expenditure. We, therefore, approve the conclusions arrived at by the learned Commissioner (Appeals) on this issue, and decline to interfere in the matter. Ground dismissed.
Additional receipts having been brought to tax in the hands of the assessee - HELD THAT:- Assessee has now got some material to demonstrate that this receipt was already accounted for, but he fairly admits that this material was not available earlier, and, as such, authorities below had no occasion to deal with the same. Learned Departmental Representative also fairly accepts that this issue can be remitted to the file of the Assessing Officer for fresh examination, and taking an appropriate call in the light of such fresh examination. With the consent of the parties, therefore, the matter stands restored to the file of the Assessing Officer. Ground no. 3 is thus allowed for statistical purposes in the terms indicated above.
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2022 (6) TMI 1145 - ITAT RAIPUR
Validity of Reopening of assessment u/s 147 - requirement of recording of “reasons to believe” - validity of jurisdiction assumed by the AO for reopening the case of the assessee - disallowing claim of deduction u/s.54F - HELD THAT:- Assessing Officer had issued Notice u/s. 148 without recording the “reasons to believe” on the basis of which the case of the assessee was reopened by him. In our considered view, the failure on the part of the Assessing Officer to record “reasons to believe” prior to issuance of notice u/s.148, ould go to the very root of the validity of jurisdiction assumed by him u/s. 147 of the Act.
Our aforesaid view, i.e., the absence of recording of “reasons to believe” by the Assessing Officer prior to issuance of Notice u/s. 148 would render the jurisdiction assumed by him for reopening the case of the assessee u/s.147 of the Act and resultantly the consequential assessment so framed as invalid as relying on cases Abdul Majid [2005 (5) TMI 24 - ALLAHABAD HIGH COURT], Baldwin Boys High School [2015 (2) TMI 806 - KARNATAKA HIGH COURT], Shiv Ratan Soni and Baldev Singh Giani [2000 (9) TMI 42 - PUNJAB AND HARYANA HIGH COURT]
Requirement of recording of “reasons to believe” enshrined u/s. 148(1) of the Income Tax Act, 1961 was mandatory on the part of the Assessing Officer. Observing, that the assessment record did not contain reasons recorded by the Assessing Officer, thus the notice of reassessment proceedings had to be treated as nullity.
Thus we are of the considered view, that as the Assessing Officer prior to issuance of Notice u/s.148 had failed to record “reasons to believe”, therefore, he had wrongly assumed jurisdiction and framed the impugned assessment u/s.148/143(3) - Decided in favour of assessee.
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2022 (6) TMI 1144 - ITAT MUMBAI
Assessment u/s 153C - Denial of natural justice - no copy of satisfaction note was provided by the Assessing Officer in the course of assessment proceedings - HELD THAT:- It is fact on record that apart from the statements recorded u/s 131 from the assessee and from Shri Navin Nishar, Shri N K Sodhani and Shri Jayesh Zanani and relied upon by the Assessing Officer, there was no incriminating material found in support of the addition towards receipt of the purported alleged commission receipt. We also notice that though the Ld. CIT(A) has also relied on the statements of Shri Navin Nishar, Shri N K Sodhani and Shri Jayesh Zanani, the assessee was never provided with an opportunity to cross examine Shri Jayesh Zanani. It is also a fact that the statements of these parties were later retracted. We also notice that no new material was ever brought on record by the Assessing Officer to corroborate the allegation of commission receipt even despite the fact that the statements u/s 131 of the Acts relied upon by the Assessing Officer stood retracted. From perusal of the records and order of the lower authorities it is abundantly clear that there is no corroborative evidence or incriminating material to support the allegation on the assessee having received commission income.
We have observed that the assessee was not provided an opportunity of cross examination of Shri Jayesh Zanani, whose statements were relied upon by the AO for passing the order. Without prejudice, there is no mention in the statement of Shri Jayesh Zanani that the assessee has been paid commission at the rate of 0.15 percent by the companies stated to be entry providers. When no opportunity for cross examination is given, it is not proper to rely on such statements and fatal to the order passed.
There has been gross violation of the principles of natural justice and bearing in mind the above judicial precedents, we have no hesitation in holding that there was gross violation of principles of natural justice and fair play as the additions has been made without providing an opportunity to the assessee to cross examine those persons whose statements has been relied upon by the AO. And as regards merits of the case, we find that the issue is covered in favour of the assessee by the decision of the Coordinate bench in assessee’s group case of M/s Hemadri Machine Tools Private Limited wherein the alleged bogus donation on which the commission is alleged to have been earned was deleted.
Thus in view of above findings and also considering the merits of the case in that there is no incriminating material/corroborative evidence to affirm the receipt of commission income, all the grounds stand allowed. The addition made by AO accordingly stands deleted.
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2022 (6) TMI 1143 - ITAT DELHI
Income from house property - AO observed that in view of the provisions of section 23 deemed rental income of the property at Delhi, which remained vacant during the year was required to be taxed under the head Income from House Property’ - assessee as confronted that house was very old and partly damaged and was not in a livable condition - AO got field verification done and rejected the explanation and estimated the ALV of the property at Rs. 12,00,000/- for the AY 2008-09 and added an annual enhancement of 10% on the same for the subsequent years - AO held that since the property was not let out at any time during the period, the vacancy allowance was not available to the appellant - HELD THAT:- AO has not based the estimate on any reasonable working in determining the annual letting value. No description of the property as to the area and the market rates prevalent for rentals has been brought on record. Since, the annual value determined is devoid of any rational endorsement, we hereby delete the addition made by the revenue authorities. Appeal of assessee allowed.
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2022 (6) TMI 1125 - MADRAS HIGH COURT
Nature of subsidy receipt - value of the MILIEV grant given by the Dutch government as a subsidy for purchase of wind turbine generator - transfer of right by the assessee to another company - Whether it could not be brought to tax in the hands of the assessee u/s.28(iv) when the assessee did not purchase the equipment, but transferred the right to another company? - HELD THAT:- ITAT deleted the addition made by the assessing officer, on the ground that the grant was given by the Dutch Government as a matter of policy and it had nexus with the equipment and not with the buyer and hence, it was not possible for the purchaser to transfer the grant and the same was directly disbursed to the manufacturer.
It was also pointed out by the appellate authorities that the revenue failed to produce any cogent material to prove that the assessee received over and above the disclosed consideration of Rs.2 crores; and there was no incriminating document made available against the assessee. The Appellate Authorities further noted that as per the agreements entered into the parties, the finance companies were allowed to operate the wind mills on lease and the payment of lease rentals was assured by Wescare and the assessee was to pay operational lease rental calculated as the electricity consumed x TNEB rates – 25 paise per unit. We do not find any good reason to disagree with the reasonings so recorded by the appellate authorities.
Addition in respect of off set credits alleged to have been received by the respondent / assessee - CIT(A) was of the view that there is absolutely no document on record to indicate with the authority that the assessee did receive offset credits and accordingly, deleted the addition made by the assessing officer, which finding of the CIT(A) was also affirmed by the Tribunal. In the absence of any concrete material, we have no option except to concur with the view taken by the appellate authorities.
Electricity charges paid to Wescare - This court is of the opinion that without any substantive material, the respondent / assessee cannot be construed as owner of the wind mills and hence, the payment made by them to Wescare can be treated only as consumption charges for the electricity supplied to them, that too, for business purposes. As such, there is no question of law much less substantial question of law arisen for consideration.
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