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Income Tax - Case Laws
Showing 201 to 220 of 661 Records
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2021 (8) TMI 992 - ITAT BANGALORE
Disallowance of Bad debts on account of TDS - amount which credited was not given to the assessee u/s. 199 of the Act, though relevant income was taxed in the hands of assessee - HELD THAT:- In the present case, the assessee has not furnished the details of TDS from deductor by furnishing valid TDS certificates. It is incumbent upon the assessee to show that the amount has actually been deducted by the deductor towards TDS due from the assessee. Once the assessee establishes that it has been actually deducted from the deductor, the corresponding write off by the assessee on non-recovery of TDS credit is to be allowed. With these observations, we remit this issue to the file of Assessing Officer for fresh consideration. Accordingly, the main ground and additional ground raised by the assessee on this issue is disposed of.
Allowability towards service tax which was written off as bad debt u/s. 36(1)(vii) - contention of the ld. AR is that the claim of bad debt was allowable to the assessee if the same has been written off as irrecoverable by the assessee and it was not necessary to establish that the debt has actually become bad - HELD THAT:- In this case, the consideration paid as service tax was to be claimed as receivable from DIP. In the assessment year under consideration, the assessee came to know that it is not recoverable and has written off as bad debts in the books of account. The only contention of the ld. DR is that since it has not routed through Profit & Loss account, it cannot be allowed as bad debt - argument of the ld. DR is not tenable and cannot be accepted on the reason that service tax is shown as receivable from the DIP which was not received on the fact that DIP is not paying service tax in view of the guidelines of the DAVP of the Central Govt. and it is also not paying service tax to any other advertising agencies. However, the assessee has already paid this amount to the Government. Since service tax payment recovery is denied by the DIP, the assessee has written off it as bad debt. Therefore, we are of the view that the assessee is justified in claiming it as bad debt by writing off in the Profit & Loss account. Accordingly we allow the claim of the assessee - Decided in favour of assessee.
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2021 (8) TMI 986 - ITAT DELHI
Income accrued in India - PE in India - business service agreement/single unified agreement - multiple agreements entered as argued by assessee - Addition based on the billings scheme showing consolidated invoices and various SOF have been operated as a single project - AR argued that Article 5 of the Treaty defines PE to mean a fixed place of business through which the business of an enterprise is wholly or partly carried on - HELD THAT:- With regard to the contention that services specified in various SOFs constituted specific project and their services governed by uniform terms & conditions agreed between the parties and mere mention of the varying services and common agreement does not make it consolidated project cannot be found to be correct on the facts of the case as the agreement dated 18.08.2010 between the assessee namely Telenor SA and Uninor. It is this contract which defines the mutual obligations and implementation. There is no other inter-se agreement with any of the parties or among the parties. This gives rise to a conclusion that the business service agreement is a single unified agreement. On going through the clauses of the agreement, we find that no single clause is giving it a shape of multiple agreements.
With regard to the contention that different services under SOFs are not inter related and are unique, it is necessary to go through the entire activity of the assessee with relation to the UNINOR - The launch of UNINOR services happened after Telenor Group finalized the transaction with Unitech Group and made the first investment into UNINOR. The statement of the Stein-Erik Vellan, Managing Director of UNINOR at the time of launch “with launch in seven circles and roaming agreements in place for the rest, we have started our service in India on day one as a pan-Indian national operator. This is a proud achievement of a committed and talented team. While our launch today is indeed a milestone in a longer journey to become a significant operator in India, we are delighted to have made such a strong start" augments the fact that there are only two entities involved UNINOR and Telenor, the assessee.
With regard to the scheme of billing, the bills are raised on quarterly basis, consolidated invoices raised irrespective of the SOFs under which the services were rendered. The common billing by the recipient and the common payments gives rise to a conclusion that this is one single contract. We have gone through the various service order forms wherein it has been mentioned continuously that the contracts are performed in accordance with the service agreement between UNINOR and Telenor ASA, referred as the contractor and UNINOR referred as the recipient for all the services.
On going through the sequence of activities and commentary of the OECD with regard to the Article 5(2)(1), it can be concluded that the activities consists of same and enter-connected projects.
Activities of the assessee with regard to the recipients for services can be said to be inter-connected, inter laced, sequential technical services. It cannot be said that they are unrelated to each other as none of the activity could stand in isolation with the other activity and no single activity can give rise to performance and achieving of the purpose of the recipient. The activities start with preparation, execution and negotiation of the Global System for Mobile Communication (GSM) to devising the strategy development, preparation of IT solutions architect, benchmarking the same, recruiting the manpower for the purpose of implementation and training them for various activities in relation to GSM role out to customers. It is a clear commercial coherence between the said activity as no single activity mentioned above doesn’t serve any purpose individually, when segregated. All these activities are different facet of one seamless function. The project as defined in the Article 5 (2)(1) consists of bundle of inter- connected and inter- related services with the underlying theme of completion of projects. In the instant case, the implementation of one SOF leads to the other and it can be observed that they are well integrated, the outcome of one SOF become the inputs for the other SOF.
Thus, based on the unified agreement, consolidated billing pattern, the activities being inter related as found in the preceedings paras, we hereby hold that the existence of the PE of the assessee is undeniable.
What is the taxable income earned by the assessee in India - As find from the records that the AO made ad-hoc disallowance of 60% of the revenues received by the assessee allowing only the 40% of the receipts as expenditure. The assessee argued that only the mark- up of 3.5 % of the cost which translates to 3.38% of the revenues could at best be considered as the income attributable to the revenues pertaining to the PE in India. We are also in agreement with the assessee that the revenues raised out of the services rendered from Norway cannot be attributed to the PE of the assessee in India. The issue of determination of the profits is remanded back to the file of the Assessing Officer to pass an order by taking into consideration, the services rendered by the assessee from India and also from Norway, the evidence of the expenses incurred as submitted by the assessee. - Appeal of assessee dismissed.
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2021 (8) TMI 983 - ITAT AHMEDABAD
Rejection of books of accounts - disallowance of loss for after rejecting the book of accounts by treating the loss claimed by it as bogus in nature - HELD THAT:- As decided in own case [2017 (1) TMI 1759 - ITAT AHMEDABAD] AO was erroneous as he has selected only few transactions on which only loss has incurred without giving cognizance to the fact that assessee has gained in other transactions with the impugned parties which are very well evidenced with the independent itemwise transaction details forming part of the books of account of assessee -In the present case when the assessee is maintaining regular books of account which are audited and all transactions are fully supported by bills and vouchers, impugned transactions have taken place through banking channels, confirmations have been received from the alleged parties no adversity has been found in the statements recorded by the Revenue of the alleged parties, quantitative records are regularly maintained, similar transactions have not been disputed even in the subsequent assessment u/s 143(3) of the Act as supported by the copy of the order u/s 143(3) of the Act for Asst. Year 2012-13 framed on 13.2.2015. We, therefore, hold that the impugned 15 transactions giving rise to loss of are genuine and cannot be termed as colourable with the intention of evasion of tax and ld. Assessing Officer erred in disallowing the same. - Decided in favour of assessee.
Addition made on account of diversion of fund - disallowance of interest expenses - AR before us contended that the own fund and interest free fund of the assessee exceeds the interest-free advances, therefore he was of the view that disallowance of interest is not warranted - HELD THAT:- Admittedly the assessee has given interest free loan and advances amounting to ₹ 31,61,09,415/- and simultaneously incurred interest cost of ₹ 14,51,773/- only. The ld. AR before us contended that interest free funds were available with assessee which exceeds the amount of loan and advances given without charging interest. There cannot be any disallowance of interest expenses in a situation where the own fund exceeds the amount of interest free advances provided by the assessee. As such, there is a presumption that the interest free advances has been made by the assessee out of its own without involving any borrowed fund. In holding so we draw support and guidance from the judgment of Hon’ble jurisdictional High court in the case of CIT vs. Torrent Power Ltd [2010 (6) TMI 414 - BOMBAY HIGH COURT]
Thus we hold that there cannot be any disallowance of interest expenses provided the own fund of the assessee exceeds the interest free advance. Accordingly, we direct the AO to verify whether the own fund of the assessee exceeds the amount of interest free advances and adjudicate the issue afresh in accordance with the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.
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2021 (8) TMI 982 - ITAT MUMBAI
Deduction of education cess - allowable business expenditure - HELD THAT:- We find that provisions of Section 40(a)(ii) of the Act, the education cess paid on Income Tax doesn't come under the purview of the definition as it is levied on the amount of Income Tax, but not on profits of business. We also find that the assessee also relied on the CBDT Circular No. 91/58/66-ITJ(19) dated 18th May 1967, which states that the effect of the omission of the words "cess" from section 40(a)(ii) of the Act is that, only taxes paid are to be disallowed in the assessment for the assessment years 1962-63 onwards. The assessee also relied on the judgment of Hon'ble Rajasthan High Court wherein identical issue was decided in favour of the assessee and particularly held that education cess is an allowable expenditure. We also note that the learned CIT(A) has also allowed the claim by referring to the contents of the CBDT Circular 91/58/66-ITJ(19), dated 18th May 1967 as while relying upon the judgment of CHAMBAL FERTILISERS AND CHEMICALS LTD. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT]. We further notice that in the case of Sesa Goa Ltd. vs. JCIT, [2020 (3) TMI 347 - BOMBAY HIGH COURT], held the similar view. In view of the aforesaid, we see no legal infirmity in the impugned decision of the learned CIT(A) - Decided against revenue.
Nature of receipts - Fertilizer Subsidy received - whether receipt is capital in nature and is chargeable to tax - HELD THAT:- This scheme is introduced with the object of passing the benefit to the farmers at the same time, there is no fresh investment and innovations were not coming to the industry due to low profitability in this industry. In order to attract the new investments, to increase the productivity and to reduce the manufacturing cost by bringing new innovation in the industry in order to achieve ultimate reduction in the price of the fertilizers. Therefore, the scheme was mainly to attract the investment in the industry and the purpose test is that the attraction of new players in the industry and also attracts the existing players to bring new investment. How the benefit of scheme is passed on to the industry matters. Sometime, Govt. introduces direct concession in the investments or introduces mechanism in relation to the ultimate achievement of the objects of the scheme. In this scheme, the ultimate object is to make available the required fertilizers and at appropriate price to the farmers, this can be achieved only by bringing new investments in the industry. It is only the mechanism to pass on the capital subsidy to the companies, who bring in new investments and innovation. The subsidy calculated and MRP are under constant monitoring of the Ministry. Therefore, we are inclined to accept the adoption of purpose test by the learned CIT(A) in this case and the subsidy can be classified as capital in nature. In our considered opinion, a receipt that is held to be a capital in nature and not chargeable to tax under the normal provisions of the Act. Hence the same lies outside the purview of Act. When a receipt is not in the nature of income, it cannot form part of taxable profit - Decided against revenue.
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2021 (8) TMI 981 - ITAT DELHI
Stay of recovery proceedings - Grant of stay for six months or till the disposal of the appeal, whichever occurs first - HELD THAT:- We find that the facts and circumstances which prevailed with our Coordinate Bench in granting stay on the recovery of the demand, continues to prevail. It is also borne out from the records that the delay in disposal of appeal pending before the tribunal cannot be attributable to the conduct of the applicant-assessee. Now, it has been brought out that the corresponding appeal is listed for hearing before a regular bench on 06.09.2021 and applicant is ready to argue the same. In these circumstances, we deem it fit and proper to extend the stay on the recovery of outstanding demand for a period of 180 days from today or till the disposal of the appeal, whichever is earlier.
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2021 (8) TMI 979 - ITAT PUNE
TP Addition - addition towards interest on debentures/CCDs - HELD THAT:- Since the facts and circumstances of the instant appeal are mutatis mutandis similar to those of the preceding year, respectfully following the precedent [2020 (12) TMI 779 - ITAT PUNE] we approve the view taken by the ld. CIT(A) and hold that the AO was not justified in re-characterising the transaction of issue of debentures/CCDs as that of equity shares. As regards the ALP determination, we again follow the view taken by the Tribunal for the immediately preceding year and direct the AO/TPO to recompute the ALP of the transactions of payment of interest on debentures/CCDs. Thus the departmental grounds are dismissed. Since the matter of ALP determination has been sent back to the AO/TPO, the direction given by the ld. CIT(A) in this regard, which forms the subject matter of the assessee’s ground, has become infructuous.
Education Cess and Secondary and Higher Secondary Cess - whether claim may be allowed as a deduction while computing the total income of the assessee company? - HELD THAT:- The issue raised through the additional ground is no more res integra in view of the judgment of Hon’ble jurisdictional High Court in Sesa Goa Lt. [2020 (3) TMI 347 - BOMBAY HIGH COURT] in which it has been held that Education Cess is not disallowable expenditure u/s.40(a)(ii) - Similar view was earlier taken in Chambal Fertilisers and Chemicals Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT]. We, therefore, direct the AO to ascertain the correct amount of education cess and then allow a deduction for it, after allowing opportunity of hearing to the assessee.
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2021 (8) TMI 976 - GAUHATI HIGH COURT
Exemption u/s 10(46) - application in the appropriate format or not? - HELD THAT:- As the petitioner had apparently made an application in the appropriate format on 14.05.2020 to the Principal Commissioner of Income Tax, NER at Guwahati, it prima-facie does not appear to us that the petitioner had not made the application in the required procedure as provided in the letter dated 24.06.2013 of the CBDT. But, however, Mr. S Sarma, learned counsel points out that a copy of such application is also required to be forwarded to the Under Secretary (ITA-1) of the CBDT.
Without going into any such question, we require the petitioner to file a fresh application claiming exemption u/s 10(46) of the Income Tax Act, 1961 in the given format provided in clause 3 of the letter dated 24.06.2013 of the CBDT and the said application be sent to the Principal Commissioner of Income Tax, NER, Guwahati. A copy thereof be also given to the Under Secretary (ITA- 1), CBDT. The application be made within a period of 15(fifteen) days from today.
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2021 (8) TMI 975 - GAUHATI HIGH COURT
Revision u/s 263 - HELD THAT:- Two conditions of the order being erroneous and prejudicial to the interest of revenue have to be present at the stage when the Principal Commissioner or the Commissioner initiates the exercise of the jurisdiction u/s 263.
The very reading of the clause 4.0 of the order would go to show that the Principal Commissioner, Income Tax is yet to arrive at his prima facie conclusion that the order of the AO was erroneous and in order to arrive at a satisfaction whether it was erroneous, the Principal Commissioner requires the matter to be examined further in depth. From such point of view, it is submitted by Dr. Saraf that the pre-condition to be present for invoking the Section 263 is absent in this case inasmuch as there is no prima facie satisfaction by the Principal Commissioner on the basis of the materials available as to whether the order of the Assessing Officer which is sought to be reviewed under Section 263 of the IT Act was an erroneous order.
Income Tax Department prays for an adjournment to examine the matter.Prayer is allowed. List again on 26.08.2021
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2021 (8) TMI 974 - GAUHATI HIGH COURT
Revision u/s 263 - assessee had omitted to disclose the long term capital gain - AO had failed to examine and consider the fact that the assessee had omitted to disclose the long term capital gains while computing his income - HELD THAT:- By referring to the returns submitted by the assessee available a submission is made that the aforesaid conclusion is arrived at by the Principal Commissioner that there is merit in the claim that the Assessing Officer failed to examine and consider that the assessee had omitted to disclose the long term capital gains amounting to ₹ 5,30,257/- . Accordingly a submission is made that the conclusion of there being an erroneous assessment is absent.
Counsel also raises the submission that the aforesaid items are covered under the provisions of Section 10(38) of the IT Act wherein itself there is a provision that the aforesaid items are exempted from payment of income tax and even if there is any discrepancy in the return submitted by the assessee, the same would not be prejudicial to the interest of revenue.
We find that a prima facie case has been made out by the petitioner. Considering the balance of convenience and irreparable loss that the petitioner may suffer, further process pursuant to the order dated 24.03.2021 under Section 263 of the IT Act shall remain stayed until further order(s).
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2021 (8) TMI 971 - DELHI HIGH COURT
Adjustment of tax due under Direct Tax Vivad Se Vishwas Act, 2020 [DTVSV Act] with the amount as already been deposited by the Petitioner on account of the Penalty Order and to refund the excess amount in a time bound manner - HELD THAT:- In the opinion of this Court, if the petitioner is entitled to refund of ₹ 11,36,800/- after making payment of ₹ 4,21,000/-, it is not understood as to why the respondents cannot itself adjust the amount of ₹ 4,21,000/- against the amount of ₹ 11,36,800/- already deposited by the petitioner on account of the Penalty Order dated 04th January, 2018.
The present writ petition is disposed of with a direction to the respondents to adjust the tax demand amounting to ₹ 4,21,000/- under DTVSV Act with the amount of ₹ 11,36,800/- already deposited by the petitioner on account of the Penalty Order dated 04th January, 2018 on or before 31st August, 2021 and refund the balance amount within a further period of four weeks.
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2021 (8) TMI 964 - ITAT DELHI
Penalty u/s 271(1)(c) - defective notice u/s 274 - Assessment framed u/s 92CA(3) - HELD THAT:- Following the decisions rendered in the cases of CIT vs. Manjunatha Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT], CIT vs. SSA’s Emerald Meadows [2016 (8) TMI 1145 - SC ORDER] and Pr. CIT Vs Sahara India Life Insurance Company Ltd [2019 (8) TMI 409 - DELHI HIGH COURT]we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable.
Thus when the very initiation of the penalty by way of issuance of vague and ambiguous notice u/s 271(1)(c) read with section 274 of the Act without specifically charging the assessee if he has concealed the particulars of income or has furnished inaccurate particulars of such income, subsequent penalty proceedings are not sustainable, hence penalty levied by the AO and confirmed by the Id. CIT (A) is not sustainable.
Assessment framed u/s 92CA(3) - TPO simply did not accept the bench marking of the assessee and has directed the Assessing Officer to consider the levy of penalty u/s 271(1)(c) of the Act in accordance with Explanation 7. As decided in VERIZON INDIA PVT. LTD. [2016 (8) TMI 1287 - DELHI HIGH COURT] in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessee who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7 - we do not find any merit in levy of penalty u/s 271(1)(c) of the Act.- Decided in favour of assessee.
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2021 (8) TMI 962 - ITAT DELHI
Addition u/s 68 - Addition based on evidences collected and statements of various person in search - assessee was one of the entry provider of accommodation entry and provided entries in the nature of bogus transaction in the form of sales/purchases and unsecured loans - HELD THAT:- It is pertinent to note that all the documents were before the Assessing Officer and the Assessing Officer has merely relied upon the statement of Sh. Rajendra Jain which was later on retracted. The assessee has given the details of purchase bills, sales bills, stock register and bank statements and after going through the evidences which was before the Assessing Officer and before us , it is found that the same is tallying with, with the transaction which was allegedly held as bogus transaction by the Assessing Officer . Thus, as per the documents provided by the assessee transaction is genuine, parties were before the search/investigation wherein and there statements on record which does not reflect that the assessee is actual for the of the accommodation entry. The statements were also retracted later on. Thus, the sanctity of the statement cannot be the sole basis for making an addition.
The transaction in the present Assessment Year i.e. Assessment Year 2008- 09 is genuine, identity and the credibility has also been established by the assessee. Therefore, Section 68 will not attract and the additions made by the Assessing Officer which was confirmed by the CIT(A) is not just and proper. - Decided in favour of assessee.
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2021 (8) TMI 961 - ITAT DELHI
Penalty u/s 271(1)(c) - Assessee wrongly claimed the income as agricultural income - Entitled for exemption u/s 10(1) denied - HELD THAT:- The present assessment years also are not the simple case of disallowance of expenditure as in the case of Reliance Petro Products Private Limited [2010 (3) TMI 80 - SUPREME COURT]. The facts remains unchanged that the real activity of purchase of the seeds has been planned and arranged in such a way as it look like the agricultural activity but the assessee has not succeeded in camouflaging its real activity.
One of the strange features in the kind of arrangement or documentation of the assessee is that in case of no yield or damage of crop, the expenses on labour or service or fertilizer etc. has to be borne by the farmer because in absence of no crop, there would be no procurement price to the farmer and the farmer will get nothing. In such circumstances, how the assessee could explain that the cultivation has been done by the company. Another strange feature is that how the assessee can claim as cultivator as its name is not appearing in the revenue land records maintained either as lessee of the land or the cultivator. Since the Tribunal in preceding Assessment Years have already given a finding that the assessee made claim of agricultural income in mala fide manner in gross abuse of the provisions of the Income Tax Act and since the facts of the impugned year are identical, therefore, respectfully following the order of the Tribunal in assessee’s own case in preceding year,[2017 (12) TMI 1058 - ITAT DELHI] we uphold the penalty imposed by the AO. Thus, the order of the CIT(A) is reversed and we uphold the findings of the Assessing Officer. - Decided in favour of revenue.
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2021 (8) TMI 959 - ITAT AHMEDABAD
Addition on account of long term capital gain - Assessment in the hands of members of the assessee society or society itself - AO has taken a view that the long term capital gain on sale of plot of land to be taxed in the hands of the assessee society whereas the assessee pleaded that such long term capital gain will be taxable in the hands of the members of the assessee society who were the real owners of the land - HELD THAT:- Members of the society have contributed funds for the purchase of the land. The land was purchased by the society only after the introduction of the new members along with the old continuing members who were the real owners of the land.
On sale of the land, the society has made distribution to the members in the proportion of the contribution made by the members at the time of the purchase of the land. The genuineness of the member was established from the filing of their income tax return and assessment made in some of the cases.
AO has not brought on record any material which establish non-genuineness of the members of the society - all the members of the society were assessed to tax, in the case of the four members assessments have been made u/s. 143(3) of the Act, the capital gain shown by them in their return of income was duly accepted by the AO, in all these four cases assessment were made in the jurisdiction of the same range wherein the case of the society was assessed - action of the AO for taxing the long term capital gain arising on sale of land in the hands of the assessee society is amount to double taxation since the same has been taxed in the hands of individual member. After considering the above cited facts and circumstances, we consider that ld. CIT(A) has rightly deleted the impugned addition - Decided in favour of assessee.
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2021 (8) TMI 955 - ITAT BANGALORE
Validity of search u/s 132 - contention of the ld. AR is that search action was not valid and due procedure laid down u/s. 132 of the Act was not followed - HELD THAT:- In this case, search was conducted u/s. 132 on 15.10.2015 by issuing valid warrant in the name of assessee and also Panchanama was drawn with proper local witnesses. As on date there was Explanation inserted in section 132 by the Finance Act, 2017 with retrospective effect from 1.4.1962 prohibiting appellate authorities to go into the reasons recorded by the concerned appellate authorities for directing search against the assessee. This amendment will have effect in the present case. Therefore, the Tribunal cannot be expected to go into the said question.
It is only for the Constitutional posts to examine the validity of search action. More so, this issue was also decided in the case of Prathibha Jewellery House [2017 (11) TMI 1744 - KARNATAKA HIGH COURT]where the writ petition was dismissed holding that law was amended by insertion of aforesaid Explanation by the Parliament in section 132 by the Finance Act, 2017 w.r.e.f. 1.4.1962 and it was held that the Appellate Authorities could not go into the reasons recorded by the concerned Income Tax Authority for directing Search action. In view of this, we are of the opinion that the assessee is precluded in challenging the validity of search action before the Tribunal.
Validity of notice issued u/s. 153A - HELD THAT:- As per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and whether after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be determined afterwards and not at the time of issue of notice u/s 153A. Similar view was taken in the case of Rajesh Exports Ltd.[2018 (12) TMI 278 - ITAT BANGALORE]in para 17 of the Tribunal’s order. In this view of the matter, this ground is dismissed.
Status of the assessee - According to the ld. AR, trust is not a person referred to in section 2(31) of the Act and the CIT(Appeals) ought to have held that assessment made on a nonexistent status is bad in law - HELD THAT:- In this case, the assessee itself has filed return of income in the status of “trust” and the same was followed by the AO in framing assessment u/s. 153A of the Act. Being so, we do not find any infirmity in the order of AO. This ground is dismissed.
Validity of assessment u/s 153A - HELD THAT:- There are various incriminating material found during the course of search and as rightly pointed out by the ld. DR, it cannot be accepted that no incriminating material was found during the search action. As in Canara Housing Development Co. case [2014 (8) TMI 642 - KARNATAKA HIGH COURT] held that once the assessment is validly reopened, the AO has to take into account all the three types of income to complete the assessment or reassessment, as the case may be. The three types of income are (i) income disclosed in the return of income, (ii) undisclosed income during the search, and (iii) any other income which is not disclosed in the earlier return and not unearthed during the search. In our considered opinion, if incriminating material is found during the search u/s. 153A, all three types of income has to be assessed by the AO and in view of the judgment of Canara Housing Development Co. (supra) this legal ground has no merit.
Unaccounted capitation fees in cash - Reliance on seized material and post-search statements - HELD THAT:- Addition made by the AO is based on unsubstantiated loose sheets and jottings without proper cross-examination of the person who has admitted the contents therein. Being so, it cannot be stated as full-proof of material evidence to substantiate the addition. In our opinion seized documents do not support the AO’s contention that assessee has received unaccounted capitation fees for admission of the students to the college. It also does not suggest that the assessee has paid commission to agents to bring the students for admission to college.
Similarly it does not suggest payment of any amount to the trustees for their self-benefit. Going through the entire facts of the case it creates only a suspicion in the minds of the revenue authorities that the assessee has collected unaccounted capitation fee - the suspicion not enough to hold that the assessee has collected unaccounted capitation fees in absence of concrete evidence bought on record by the authorities concerned. The suspicion cannot replace the material evidence brought on record by the authorities
Statement of 2 cannot be basis for making such huge additions on collection of capitation fees. It cannot be considered as appropriate sample to frame the assessment on the basis of their statement - assessee requested for cross examination of all the parties whoever have given the statements against the assessee, if any, which was not provided at all - such statements cannot be relied upon.The revenue authorities bound to follow the principle of natural justice and ought to have given proper opportunity of examination and cross examination of the parties concerned whose statements are relied upon to frame the assessment. In our opinion the discovery of documents not only sufficient to conclude the collection of unaccounted capitation fees, cross examination of concerned parties is also important.
The revenue authorities recorded statement of only 5 students out of more than 800 students and out of 5 only 2 are confirmed. The two statements recorded cannot be relied upon without confronting the same to the assessee. The statement of these two persons confirming payment of capitation fees is fully uncorroborated and non-production of them for cross-examination cannot be considered as incriminating material so as to sustain the addition. The rough notings in the loose papers are not full-proof evidence without proving the correctness of the same. Nothing was recorded in the orders of lower authorities that assessee has deviated from its objects for which approval u/s. 12A was granted and not applied its funds towards its objects. No evidence was brought out to show that the amount of capitation fees alleged to have been collected resulted in creation of any unaccounted assets by the trust or trustees or by any interested person. On this count also the addition cannot be sustained.
Evidence collected by the authority is not sufficient to establish that the stand that the assessee has collected unaccounted capitation fees for admission of students to various courses in the assessee’s college. We are aware that entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of assessee is opposed to normal course of human thinking, conduct and human probability. Even applying this principle to the present case, we have difficulty in rejecting the assessee’s plea as opposed to normal course of human conduct. The circumstances surrounding the case are also not enough to reject the assessee’s explanation. We have considered all the material on record and also the statement of the parties as discussed in the earlier paragraphs.
No evidence was brought on record to show that amount of alleged capitation fees which have been collected was misused by the assessee or by any interested persons.There is no allegation that the assessee is not imparting education and it is an admitted fact that thousands of students are studying in the college and assessee has been carrying on educational activities imparting medical education. It fulfilled the requirement of imparting education which are not doubted or challenged by the authorities. Being so, exemption u/s. 11 of the Act cannot be denied.
The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words “may be presumed” in section 132(4) of the Act given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same.
No addition can be made in the absence of any corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of revenue that assessee is collecting huge unaccounted capitation fees in the guise of carrying on educational activities.
As already held that there are various loose sheets, scribblings, jottings and Excel sheets taken from the computer having no signature or authorization from the assessee’s side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets - Decided in favour of assesee.
Denial of exemption u/s. 11 - AO denied the exemption under sec 11 of the Act for the major reason that the trust has received capitation fee in cash and has been carrying on the activities which are not in accordance with the objects of the trust - HELD THAT:- Unless the department shows that there was breach of conditions laid down for grant of exemption u/s. 11 of the Act, the benefit of exemption u/s. 11 cannot be denied. The assessee enjoyed registration granted during this period and the assessee also demonstrated that the assessee’s predominant objects remain the same i.e., carrying out the charitable activities for the purpose of advancement of education and not to earn profit. Earning surplus income by carrying out educational activities is not a reason to deny exemption u/s. 11 of the Act. The assessee’s predominant activity is carrying out educational activities which is charitable in nature.
The trust cannot be deprived of the benefit of exemption u/s. 11. Further, as we have discussed in elsewhere in the order there is no concrete evidence for collection of unaccounted capitation fees and it is not possible to deny the exemption u/s 11 of the act. It is also noted that even if the assessee constructed the temple inside the campus of the education institution for the benefit of the students and employees and also for public, it cannot be construed as violation of section 12(1)(a) of IT Act. There was one more allegation that assesse has collected exorbitant fees but in our opinion the fees has been fixed by the state authority and there was no violation noted by the state authority or MCI. As discussed in earlier para of this order about the authenticity of the seized material, we have held that it is not foolproof. In such circumstances it cannot be relied upon - Decided in favour of assessee.
Allowance of depreciation - HELD THAT:- The assessee is entitled for depreciation u/s. 32 on assets where it has been laid out as application of income for charitable purposes u/s. 11(1)(a) of the Act. The amendment brought to section 11(6) of the Act by the Finance (No.2) Act, 2014 which became effective from AY 2015-16 and depreciation in such case being precipitation in nature. Accordingly, by placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT v. Rajasthan & Gujarati Charitable Foundation Poona, [2017 (12) TMI 1067 - SUPREME COURT] the AO is directed to grant depreciation for AY 2010-11.
Undisclosed cash receipts - HELD THAT:- We have already held in earlier para of this order that unsubstantiated material cannot be full-proof material evidence to sustain the addition. We also hold that mere existence of concealment even in one year is not sufficient to estimate the income of other years on that basis. It is pertinent to place reliance on the order of this Tribunal in the case of Anjaneya Brick Works. [2002 (1) TMI 256 - ITAT BANGALORE] wherein it was held that estimation of income could not be made relying on the seized documents which related to another accounting period and not the accounting year under consideration and, therefore, addition could not be made on the basis of incriminating documents relating to subsequent year.
So the rule of uniformity cannot be and should not be applied on the estimate basis. There can be time and times when the uniformity can be maintained but for that case there should be some direct evidence available in a given case - As decided ANAND KUMAR DEEPAK KUMAR. [2006 (8) TMI 166 - DELHI HIGH COURT] merely because some discrepancies were found in assessee’s books in the pre-search period of unaccounted sales, it could not be presumed that such a discrepancy continued even in the post-search period, when there is no evidence to support such a view, and, therefore, addition could not be made on the basis that the assessee had made unaccounted sales throughout the accounting year. Being so, there is no question of extrapolation of income in all these assessment years.
Disallowance of donation u/s 37 - HELD THAT:- The donations have been given to the registered and approved institution i.e., R.L. Jalappa Foundation which is duly registered u/s. 12A of the Act by way of account payee cheque and the same is to be allowed as an application of income. This ground of the appeal of the assessee is allowed.
Rate of Tax - contention of the AR is that even if exemption u/s. 11 is denied, maximum margin rate of tax cannot be applied in view of the CBDT circular number 320 dated 11/01/1982 - HELD THAT:- We are agreeing with the contention of the AR. in our opinion this ground of appeals does not require any adjudication as we have already held that assessee is entitled for exemption 11 of the I.T. Act.
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2021 (8) TMI 954 - ITAT DELHI
Penalty u/s 271(1)(c) - claim of deduction u/s 10A denied - HELD THAT:- Levy of penalty in this case is unsustainable because mere preferring a claim which is unacceptable to the Revenue does not ipso facto lead to levy of penalty. Here in this case, Form No. 56F duly signed by the Chartered Accountant justifies the plea of bona fide belief on the part of the assessee. It is not the allegation against the assessee that any material fact relating to the income had to be unearthed with any efforts of the Revenue.
It is only on the basis of the material furnished by the assessee, claim of the assessee for benefit u/s. 10A of the Act in respect of 31 units as independent, was rejected. Every disallowance does not lead to penalty, and more particularly such disallowances in relation to the issues which are debatable, in respect of which, the substantial questions of law are admitted by the Hon'ble High Court, are immune from penalty proceedings. With this view of the matter, we do not find any justification to sustain the penalty and consequently, we direct the Assessing Officer to delete the same. - Decided in favour of assessee.
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2021 (8) TMI 953 - ITAT DELHI
TP Adjustment - benchmarking of AMP services - HELD THAT:- Applying the principles laid down by the Hon'ble High Court in the assessee's own case [2016 (10) TMI 1073 - DELHI HIGH COURT] the benchmarking is undertaken by comparing the gross profit earned by the assessee net of AMP expense with similar adjusted gross profit margin earned in undertaking uncontrolled transactions.
Since, the adjusted gross profit margin earned by the assessee from international transaction at 14.92% is higher than the adjusted gross profit margin earned on similar transactions with unrelated third party at 8.17%, the entire adjustment made by the TPO is liable to be deleted. - Decided in favour of assessee.
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2021 (8) TMI 952 - ITAT KOLKATA
Addition under suspense account - assessee contended before the Ld. CIT(A) that first of all he did not get proper opportunity before the AO to explain about the suspense account - HELD THAT:- HELD THAT:- We are of the opinion that in the peculiar facts of the case and taking into consideration the consistent practice adopted by the assessee and accepted by the department in earlier and subsequent years, the assessee's claim that it has offered for taxation in the subsequent assessment years the very same receipts it has shown in the suspense account to the tune of ₹ 16,50,203/- out of ₹ 19,04,784/- then the addition to that extent (₹ 16,50,203/-) would amount to double taxation of the same income, therefore, we set aside the impugned order and remand this issue back to the AO and direct that if the assessee has already offered for taxation in the subsequent assessment years out of this amount added by the AO in this relevant assessment year to the tune of ₹ 19,04,784/-, then addition of ₹ 16,50,203/- need to be deleted.
Coming to the balance amountthe details of which are given in page 29 of the paper book, we note that these are receipts from FYs 2005-06 to 2010-11. This amount if the assessee has offered to tax in the subsequent assessment years then it should not be taxed and this also the AO need to consider afresh after verification and pass order in accordance to law.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We note that the assessee has prepared separate income and expenditure account (personal) where dividend income which assessee claimed as exempt. According to Ld. AR, even though the portfolio management expenses of ₹ 39,18,761/- has been debited as expenses relating to portfolio management expenses, this expenses has not been claimed as deduction in the computation of total income which fact has not been verified by the AO or the Ld. CIT(A). According to Ld. AR, the assessee has incurred expenses of only ₹ 39,18,761/- for earning exempt income and the assessee has not claimed any deduction of the same in its revised computation of total income which is placed from pages 2 to 7 of the paper book. Therefore this issue need to be examined by AO afresh, for that we set aside the impugned order of Ld. CIT(A) and remand this issue back to AO with a direction to verify this fact and the AO to examine the claim of the assessee.AO has to examine the account of the assessee and if he is not satisfied with the correctness of the claim of the assessee, then he has to record the same and thereafter, only he can invoke rule 8D of the Rules.
Appeal of the assessee is partly allowed for statistical purposes.
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2021 (8) TMI 951 - ITAT HYDERABAD
Revision u/s 263 - AO has stated that he had examined the cash flow statement for the relevant assessment year, income & expenditure statement, balance sheet, source of cash receipts, bank statements, particulars of agricultural income, agreement in respect to sale of agricultural produce, Dharma Kanta Bills, documents regarding purchase of immovable property during the relevant assessment year, cash book, bank book etc., and thereafter passed the assessment order - HELD THAT:- The assessee has also stated before the ld. PCIT that he had produced the Pattadar Pass Book and other relevant documentary evidence for earning agricultural income before the ld. AO - it is evident from the Order of the Ld. PCIT that he has produced the same before him also. Similarly, as regards the Chit Bid amounts received by the assessee, the assessee has produced the bank statements and other relevant documents before the Ld. PCIT and also claimed to have produced before the Ld. AO.
With respect to loan received from HDFC bank also the assessee had produced the bank statement before the Ld. PCIT and also claimed to have produced the same before the Ld. AO. In this situation, the ld. PCIT without examining the documents furnished by the assessee setting aside the order of the Ld. AO and directing the Ld. AO to re-do the assessment de novo is not appreciable. It is apparent from the order of the Ld. PCIT itself that the assessee had produced all the requisite documents before him.
From the order of the Ld. PCIT and Ld. AO it is apparent that the Ld. AO has not only examined the documents produced by the assessee but also made enquiries through his inspectors and thereafter came to the conclusion that the income declared by the assessee in his return of income is in order. We are of the view that the order of the Ld. PCIT is devoid of merits. Therefore, we hereby set aside the order of the Ld. PCIT and reinstate the order of the Ld. AO. Appeal of the assessee is allowed
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2021 (8) TMI 942 - ITAT MUMBAI
Addition u/s 36(1)(ii) - payment of incentive to the Chairman and Managing director - CMD having substantive share holding - AO proceeded to disallow the same u/s. 36(1)(ii) on the premises that the same is distribution of dividend in the guise of incentive - HELD THAT:- As observed that other shareholders-cum-directors have not been paid any dividend/incentive during the year. Dividend is usually a return on the investment made by a person. However, in the present case, the incentive has been paid to Shri Rustom Joshi only for the services rendered by him and not a return on the investment made by him.
If it was a dividend which was paid in the name of incentive, similar payments would have been made to the other shareholders of the company. However, this is not the case. The allegation of Ld. AO that there was violation of the provisions of The Companies Act, is not supported by any concrete material on record. The allegation of Ld. AO that dividend was being paid in the guise of incentive, has no legs to stand since the assessee has substantiate the fact that incentive was paid only against services rendered by Shri Rustom Joshi. Therefore, the additions have rightly been deleted. - Decided in favour of assessee.
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