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2017 (9) TMI 1872 - ITAT MUMBAI
Nature of receipt - sales tax subsidy - revenue or capital receipt - HELD THAT:- There is no doubt about the principles governing the subsidies-if the subsidy is in the field of setting up of a business or for capital goods it has to be considered a capital receipt or same has to be taxed as revenue receipt. The said broad categorisation is applicable to all kind of subsidies. As the various schemes announced by the state government from time to time lay down different conditions for availing the incentive schemes, so, without analysing the scheme, as a whole, no final conclusion can be drawn. Considering the peculiar facts and circumstances of the case, we are of the opinion, that in the interest of justice matter should be restored back to the file of the AO for fresh adjudication. He is directed to compare the scheme deliberated upon by the Tribunal in the case of RIL and the scheme of 1993 applicable for the year under appeal. He would afford a reasonable opportunity of hearing to the assessee. First Ground of appeal is decided in favour of the assessee, in part.
Income under the head capital gains from sale of plot of land at Mulund - applicability of provisions of section 50 - HELD THAT:- Following the judgment of the Hon'ble Bombay High Court in the case of Heatex Products [2016 (7) TMI 1393 - BOMBAY HIGH COURT] the Tribunal decided the issue in favour of the assessee held provisions of Section 50C would apply only to capital assets being land or building or both and it could not be applied to transfer of lease hold rights in land.
Not referring the matter to the DVO for determining the market value of the assets - we hold that the FAA had not interpreted the provisions of section 50(2) of the Act correctly, that the AO should have referred that matter to the DVO.
FMV of the land as on 01.04.1982 - A perusal of the Indian Valuers Directory and Reference Book (Pg. 340 of the PB) reveal that the market value of land located in the adjoining areas of Mulund on 01.04.1981 was ₹ 400-480/- per Sq. feet. Tribunal, in the case of Kumar K Chabaria [2010 (2) TMI 1252 - ITAT, MUMBAI] has considered the said Reference Book as a reliable source for valuation of capital assets. So, in our opinion, FMV adopted by the assessee as on 01.04.1981 cannot be brushed aside-rather it is quite reasonable.
Reference to the DVO u/s. 55A of the Act is concerned, we would like to say that after the judgments of the Hon'ble Bombay High Court in the cases of Daulal Mohta (360 ITR 680) and Pooja Prints (360 ITR 697) there is no doubt that the AO cannot make a reference to the DVO for purpose of valuation, where the value of the property, declared by the assessee, is not less than FMV. In other words reference u/s. 55A of the Act can only be made in cases where the value of capital asset shown by an assessee is less than the FMV of the land. In the case under consideration, the value shown the assessee is more than the FMV and therefore there was no justification for making a reference to the Valuation Cell. Besides, the AO had made the reference after the assessment was over. In short, in our opinion the FAA was not justified in endorsing the views of the AO. Considering the above, grounds No. 2-5 are decided in favour of the assessee.
Entitlement of deduction u/s. 54G - Assessee, in the case under consideration, had entered in to an agreement with a developer for selling rights in the plots of land. But, the agreement was cancelled later on due to differences between the assessee and the developer. It found a new developer and sold the specified assets resulting in accruing of capital gains. There is no doubt that after receiving the sale proceeds from the developer, the assessee had invested the money in purchasing P&M and part of it was deposited in a designated bank account. P & M purchased by it at the time of shifting the premises had nothing to do with the new P & M acquired after sale of capital assets. There is no precondition in the section that new machinery should be purchased at the time of shifting of industrial undertaking. No undertaking can function without P & M. But, the assessee can purchase machinery even after shifting and commissioning of business from the new premises. Expansion of business can take place any time. Generally, shifting of industrial unit from urban to rural areas take place simultaneously. But, in a few cases, there can be time lag between shifting of unit and receipt of capital gains. In such cases what is be considered is sale of assets and receipt of capital gains - we are of the opinion that the AO and the FAA had wrongly denied the benefit of the section 54 G of the Act to the assessee.
Sale of right of the plot of land - As per the assessee the AO had erroneously reduced the area of assets sold by it. It was also argued that there was a mistake in determining the proportionate cost of improvement calculation - HELD THAT:- AR argued that the AO and FAA erroneously reduced the area of assets sold, that there was error in calculation of proportionate cost of improvement, that it had sold development rights in land and not the land itself, that the area to be considered had to be measured in terms of FSI and not area of land, that the AO should have considered FSI potential of 7.08 lakhs sq. ft. for computing the cost in the hands of the assessee, that in the development agreement it had mentioned that saleable land was 6.38 lakhs sq.ft., that the FAA had reduced the cost of acquisition and cost of improvement - both these facts needs further verification on part of the AO. So, in the interest of justice we direct the AO to decide both the issue afresh. He is directed to consider all the facts and figures produced by it, before us, during the appellate proceedings. Both the grounds stand partly allowed.
Ad hoc disallowance of various expenses - HELD THAT:- Disallowances in question is made on an ad hoc basis merely on the ground that there would be a possibility that some of the expenses would have not been incurred. The Assessee provided complete break up of all the details in the course of assessment proceedings and also an extract of the ledger account in respect of the details provided. The assessing officer has not asked for any specific detail or proof in the nature of any particular bill from the assessee during the assessment proceedings. No explanation regarding allowability or reasonableness of the expenses was asked for during the course of assessment proceedings. On this factual matrix, we hold that the ad hoc disallowance is nothing but a sheer surmise and such disallowance cannot be sustained.
Disallowance of provision for leave encashment - HELD THAT:- We find that the FAA has not adjudicated the issue, though a specific ground was raised before him with regard to provision for leave encashment. As per the Hon'ble Bombay High Court additional claim can be raised before the appellate authorities Pruthvi Brokers and Shareholders Private Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] . Therefore, we are of the opinion matter should be restored back to the file of the FAA for fresh adjudication, who would decide the issue after affording a reasonable opportunity of hearing to the assessee and after considering the cases relied upon before us. Fifth ground of appeal is allowed in favour of the assessee, in part.
Deduction in respect of provision for leave encashment - HELD THAT:- We find that the assessee had made the claim as per the judgment of the Calcutta High Court that was late on stayed by the Hon'ble Apex Court. As far as the matters of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT] and Aditya Birla Nuvo Ltd. , [2014 (8) TMI 1032 - ITAT MUMBAI] are concerned, we will like to mention that both did not have benefit of the judgment of the Hon'ble Supreme Court in the case of Exide Industries Ltd. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] - Therefore, in our opinion, the order of the FAA does not suffer from any legal or factual infirmity. Confirming the same, we decide first ground of appeal, against the assessee
Additional depreciation u/s. 32(1)(iia) in respect of eligible plant and machinery required and store during the F.Y. 2005-06 - HELD THAT:- only objection of the AO is that the provisions refer to "new machinery or plant" and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/s. 32(1)(iia) and not new in subsequent years. The expression "new machinery" is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01.04.2006. The plain language of the section warrants such an interpretation. - Decided against revenue
Not allowing foreign exchange fluctuation loss incurred by assessee in respect of currency swap and derivative transactions - HELD THAT:- During the year under consideration the assessee had accounted for foreign exchange loss of ₹ 350.18 lakhs, that it was net of foreign exchange gain, that the loss mainly comprised of swap loss of ₹ 493.50 lakhs, that the assessee was consistently booking loss or gain on Foreign exchange on the basis of the foreign exchange rate as on the last date of particular year. In the subsequent year i.e. AY 2011-12 when the assessee had shown surplus the AO had taxed the same. In our opinion the AO should follow uniform policy for taxing or not taxing the foreign exchange loss/gains. If gains are to be taxed of a particular transaction the losses arising out of same cannot be denied to the assessee. The AO/FAA has not commented upon the fact that assessee was following AS-11. Considering the above, we are of the opinion that FAA was not justified in confirming the order of the AO. Ground decided in favour of the assessee.
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2017 (9) TMI 1871 - ITAT CUTTACK
Income from undisclosed sources - when the assessee has never disclosed four such bank accounts to the department, even in the statement recorded u/s.131 by the AO - HELD THAT:- CIT(A) observed that he has gone through the bank account and other documents and found the submission of the assessee to be correct. He observed that the assessee has paid the amounts to M/s. Reeva (P) Ltd. for purchase of a flat at Sirdi in the name of Smt Archana Samal. This shows that the assessee’s account was used for transactions on behalf of his sister Smt Archana Samal and the payments made by the assessee for the property in the name of Smt Archana Samal are sourced from Smt. Samal. Smt. Samal is assessed to tax and return filed for the Assessment year 2010-11 shows returned income of ₹ 37,75,150/-. Therefore, the CIT(A) held that the submission of the assessee that an amount of ₹ 14 lacs was received from Smt. Samal in cash and deposited in the HDFC Bank account from which Cheque/DD/cash was paid for purchase of the property in the name of Smt. Samal is credible and acceptable. Hence, he held that the source of deposit of ₹ 14 lakh out of ₹ 25,31,686/-, is explained and deleted the addition to the extent of ₹ 14 lakhs and sustained balance amount of ₹ 11,31,686/-.
D.R. though supported the order of the Assessing Officer has brought no positive and credible material on record to controvert the findings of the CIT(A) who after appreciating all the facts of the case deleted the addition of ₹ 15 lakhs. In the circumstances, we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of revenue is dismissed.
Addition under the head “unexplained receipts in cash/cheque - CIT (A) has himself admitted that there is a mismatch of dates in the submission made by the so-called creditor of ₹ 9,45,000/- - HELD THAT:- CIT(A) also observed that the record shows that the assessee received an amount of ₹ 10 lakhs by RTGS on 9.3.2010 from Capt Mohapatra and 22.3.2010 and cash of ₹ 12 lakhs was deposited on 31.3.2010. The bank account also shows that an amount of ₹ 11 lakhs was returned to Capt. Mohapatra by RTGS. Therefore, he held that the explanation of the assessee that ₹ 11 lakhs was received by Capt Mohapatra including cash of ₹ 1 lakh was correct. Further, Capt. Mohapatra has confirmed by filing confirmation having given amount of ₹ 11 lakhs, ₹ 10 lakhs by RTGS and ₹ 1 lakh as cash to the assessee. Therefore, he held that there is no merit in the addition and treated the sum of ₹ 11 lakhs out of ₹ 12 lakhs as explained and deleted the addition of ₹ 11 lakhs and sustained the addition of ₹ 1 lakh.
D.R. relied on the order of the Assessing Officer. He could not bring any positive material on record to controvert the above findings of the CIT(A). We find that the CIT(A) after appreciating the facts of the case in its entirety has deleted the addition. Therefore, we find no infirmity in the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed.
Unexplained deposit in HDFC bank account - HELD THAT:- The assessee explained that ₹ 4,04,991/- was deposited out of ₹ 5,05,000/- received from Smt. Archana Samal which is part of ₹ 19,05,000/- received in cash from the assessee. Thus, it cannot be said that the assessee could not explain the source of ₹ 4,04,991/- being deposit made in HDFC Account No. 00441000124939. D.R. could not controvert the above submission of ld A.R. of the assessee by bringing any positive material on record. Therefore, we set aside the orders of lower authorities and delete the addition made as unexplained deposit in HDFC Bank and allow this ground of the appeal.
Deposits in the bank account was out of withdrawal from different banks - HELD THAT:- We find that no material was brought on record either by the Assessing Officer or by the CIT(A) after examining the details and documents filed by the assessee before lower authorities to show that the assessee did not have the amount available with it out of earlier withdrawals made from different banks for making the same as deposit in the bank account as claimed by the assessee. In absence of any such material being brought on record, we find that the lower authorities were not justified in making the addition in the hands of the assessee as unexplained deposit in bank account. Therefore, we set aside the orders of lower authorities and delete the addition and allow this ground of appeal of the assessee.
Unexplained cash deposit - HELD THAT:- D.R. could not controvert the submission of ld A.R. of the assessee that the deposit of ₹ 1 lakh in bank account was out of maturity proceeds of fixed deposit made by the assessee by withdrawal through yourself cheque from Axis Bank on 12.8.2010. Therefore, we set aside the orders of lower authorities and delete the addition of ₹ 1 lakhs and allow this ground of appeal of the assessee.
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2017 (9) TMI 1870 - ITAT MUMBAI
Travelling expenses incurred on behalf of family members of players - Disallowance of expenses holding that these persons have not rendered any service to the appellant and the expenses are private expenses of individuals unrelated to the business - HELD THAT:- We find that no evidence has been led by the assessee to substantiate the claim that the presence of spouse/family members attracts sponsors or how it is related to business of the assessee. Even in the agreement, it is no where provided that it will be the liability of the assessee to incur travelling or other expenses for the spouse or family members of the players. Thus assessee was not contractually obliged to incur any expenditure for spouses or family members of the players. CIT(A) has dealt with the above grounds after considering the facts of the present case.
No new facts have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the assessee stands dismissed.
Addition of 10% of hospitality expenses on adhoc basis by holding that the same is not related to assessee’s business - HELD THAT:- As decided in own case [2017 (8) TMI 1596 - ITAT MUMBAI] we do not find any merit for the disallowance of 10% of the hospitality expenses on adhoc basis in the hands of the assessee being a corporate entity/artificial person.
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2017 (9) TMI 1867 - BOMBAY HIGH COURT
Depreciation to assets transferred upon amalgamation from the amalgamating company by the order of the BIFR - HELD THAT:- Substantial question of law covered by our decision delivered in M/s. Ballarpur Industries Limited vrs. Commissioner of Income Tax [2017 (9) TMI 490 - BOMBAY HIGH COURT]
Disallowance of expenses in the nature of advisory fees - HELD THAT:- Issue covered by the decision of Punjab State Industrial Development Corporation Ltd. Vs. CIT [1996 (12) TMI 6 - SUPREME COURT]
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2017 (9) TMI 1866 - ITAT VISAKHAPATNAM
Assessment u/s 153A - additions were made during the course of search & seizure operation relating to unsecured loans - addition on basis of incriminating material only - HELD THAT:- In the assessment order, the assessing officer has not brought on record any evidence found during the course of search relating to the additions made. On verification of the assessment order, it is evident that the addition was made on the basis of the entries made in the regular books of accounts but there was no reference with regard to the seized material.
Hence, the reliance of the Ld. D.R. on statement of facts that the assessment was made on the basis of seized material is not correct. Ld. D.R. further argued the legal position subsequent to the introduction of provisions u/s 153A of the Act and 153C of the Act for search assessments the incriminating material not necessary is not tenable. This issue has been considered by the special bench in the case of All Cargo Logistics Limited cited [2012 (7) TMI 222 - ITAT MUMBAI(SB)] and answered that the assessment u/s 153A of the Act will be made on the basis of incriminating material. Therefore, the argument of the Ld. D.R. lacks merit on this issue. As discussed earlier, in this appeal no addition was made on the basis of seized material and the assessment got completed - Decided in favour of assessee.
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2017 (9) TMI 1864 - ITAT CHENNAI
Addition on the basis of the so-called agreement said to be found during the course of survey operation - Addition of sum paid to Shri Basheer Ahmed HELD THAT:- It cannot be said that the assessee has paid ₹ 2.38 Crores to Shri Basheer Ahmed. When Shri Basheer Ahmed denied the fact of receipt of money, it cannot be concluded that the assessee has paid ₹ 2.38 Crores to Shri Basheer Ahmed. As per the observation made by the lower authorities, agreement for sale was for sale of property after disposal of cases pending before Principal Sub-Judge at Trichy. When the matter was pending before the Principal SubJudge for adjudication and the power of attorney, who entered into the agreement, claimed that he has not received any money, this Tribunal is of the considered opinion that there cannot be any presumption that the assessee has paid ₹ 2.38 Crores to Shri Basheer Ahmed. The assessment proceeding being a judicial proceeding, this Tribunal is of the considered opinion that addition has to be made only on the basis of concrete evidence. Presumption and surmise have no role to play in judicial proceeding. Therefore, the addition of ₹ 2.38 Crores made by the Assessing Officer as confirmed by the CIT(Appeals) cannot stand for the scrutiny of law. Accordingly, the orders of both the authorities below are set aside and the addition
Assessment u/s 153A - date of search and seizure operation conducted u/s 132A - HELD THAT:- Second proviso to Section 153A of the Act clearly says that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years, is pending on the date of initiation of search under Section 132A of the Act, the same shall stand abated. In this case, the search proceeding, admittedly, took place on 18.11.2011. Therefore, the assessment proceeding pending as on 18.11.2011 shall stand abated in view of second proviso to Section 153A of the Act. Therefore, the assessment order passed by the Assessing Officer under Section 143(3) of the Act cannot stand in the eye of law. In other words, the Assessing Officer has to pass an order under Section 153A or 153C of the Act as the case may be. Hence, the regular assessment passed by the Assessing Officer has to be quashed. Accordingly, the orders of both the authorities below are quashed and the appeal of the assessee allowed
Purchase of landed properties - search and seizure operation was conducted under Section 132A - HELD THAT:- In the absence of concrete evidence for payment of ₹ 2.38 Crores, the addition made by the Assessing Officer as confirmed by the CIT(Appeals) cannot stand in the eye of law. Accordingly, the orders of both the authorities below are set aside and the addition of ₹ 2.38 Crores is deleted.
Addition in respect of sundry creditors balances - HELD THAT:- During the course of survey operation on 17.11.2009, there were trade creditors to the extent of ₹ 2,08,76,976/-. The assessee claimed that a sum of ₹ 1,25,71,162/- was settled before hand. However, the same was not reflected in the accounts of the assessee. The assessee claimed that loans were obtained from relatives. Since the relationship among the relatives from whom the assessee said to have received loan was estranged, he admitted the same for taxation. Even the details of credits were not explained before the AO and the CIT(Appeals). Since the assessee admitted the credit balance, which was proportionately added in the hands of the assessee and other three children of the assessee, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Addition in respect of loan creditors - assessee claimed before the Assessing Officer that the loans were borrowed from close relatives - HELD THAT:- Statement reflected loan creditors to the extent of ₹ 11,89,000/-. The details of creditors were not furnished before the Assessing Officer and the CIT(Appeals). Moreover, such details were also not furnished before this Tribunal. When the assessee claims that the loan was borrowed from close relatives, it is for the assessee to establish the identity of creditors, creditworthiness of creditors and genuineness of the transaction. In the absence of such details to substantiate the claim of loans, this Tribunal is of the considered opinion that the Assessing Officer has rightly made addition
Assessment u/s 153C - Addition towards drawings - HELD THAT:- The provisions of Section 153C of the Act very clearly says that the assessment has to be made on the basis of material found during search operation, only the person other than the searched person. In the case before us, no material was found during the search operation with regard to personal expenses. The Assessing Officer appears to have estimated the expenditure without any material. The Assessing Officer on the basis of presumption found that the assessee was living in a joint family and not made any drawings, therefore, he added a sum of ₹ 3 lakhs towards personal expenses. This being an assessment proceeding under Section 153C in the absence of any material found during the search operation with regard to personal expenses, this Tribunal is of the considered opinion that there cannot be any addition. Moreover, when the assessee is found to be in joint family, the drawing of the other members of the family is also to be taken into consideration. In the absence of any material found during search, the addition of ₹ 3 lakhs cannot stand in the eye of law.
Unexplained payment - AO found that the assessee has paid a sum of ₹ 30 lakhs to each of his three sisters - oral evidence for payment of ₹ 30 lakhs to each of the sisters and the registered release deed discloses payment of ₹ 10,50,000/-, which one would prevail? - HELD THAT:- This Tribunal is of the considered opinion that the oral statement or evidence cannot override the registered release deed. The registered release deed would prevail over all the oral evidence available on record. Moreover, the sisters, who were said to be examined under Section 131 of the Act, have also filed affidavit denying they have not received ₹ 30 lakhs. This affidavit is in conformity with the registered release deed. Therefore, this Tribunal is of the considered opinion that the oral statement said to be recorded from the assessee or from sisters of the assessee cannot override the statement contained in the registered release deed and affidavit. Hence, the addition made by the Assessing Officer to the extent of ₹ 90 lakhs under Section 69C of the Act cannot stand in the eye of law. Accordingly, the orders of both the authorities below are set aside and the addition of ₹ 90 lakhs is deleted.
Payment made to Shri S.A. Kandasamy - during the search operation Revenue authorities found a receipt for the payment made to Shri S.A. Kandasamy - assessee claimed before the Assessing Officer that the payment was part of payment made for Karur land purchase - HELD THAT:- The details of payment made for Karur land purchase are available at page 21 of seized material. It is not in dispute that these details do not reflect the payment made to Shri S.A. Kandasamy. When the details contained in the seized material with regard to payment made for Karur land purchase do not reflect the payment made to Shri S.A. Kandasamy, this Tribunal is of the considered opinion that the payment was made over and above the details contained in the seized material for the purchase of Karur land, hence, the same cannot be allowed in the absence of any evidence. Therefore, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Unexplained investment of the assessee in gold jewellery u/s 69A - HELD THAT:- The exemption claimed by the assessee under CBDT circular is only for seizure of gold jewellery during the course of search operation. As rightly submitted by the Ld. Departmental Representative, it does not absolve the assessee from explaining the source for acquisition of such jewellery. Therefore, the CBDT circular would not come to the rescue of the assessee. The assessee is expected to explain the source for acquisition of jewellery found during the course of search operation. Since proper explanation was not offered, this Tribunal is of the considered opinion that the Assessing Officer has rightly treated ₹ 13,67,995/- as unexplained investment of the assessee in gold jewellery, under Section 69A of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Unaccounted purchases made outside the books - CIT(Appeals) found that the assessee himself has taken into account the profit on unaccounted sales while calculating the gross profit, therefore, even the 10% need not be added - HELD THAT:- The assessee has taken himself the profit of unaccounted sales while calculating the gross profit. When the profit on unaccounted sales were taken into account for the purpose of calculating the gross profit, this Tribunal is of the considered opinion that there is no need for any further addition. Hence, the order of the CIT(Appeals) is confirmed and the appeal of the Revenue stands dismissed.
Unexplained jewellery under Section 69A - HELD THAT:- It is not in dispute that 744.28 gms of jewellery was found and the same was valued at ₹ 20,26,868/-. The assessee has disclosed unaccounted jewellery to the extent of ₹ 18,42,693/- in the cash flow statement. The balance of ₹ 1,84,175/- was added under Section 69A of the Act. The assessee claimed before the Assessing Officer that a married lady is entitled for 500 gms of gold jewellery. This Tribunal is of the considered opinion that 500 gms of gold jewellery for a married lady as per CBDT circular relates to seizure. It does not absolve the responsibility of the assessee from explaining the source of acquisition. In fact, the Assessing Officer has given relief in respect of gift / Sridhan jewellery received by the assessee’s wife during marriage and also most of the gifts said to be received. The relief given by the Assessing Officer was to the extent of ₹ 18,42,693/-. The assessee could not explain the source of acquisition of jewellery to the extent of ₹ 1,84,175/-. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Addition under the head “Income from business” - addition from the profit from KAS Nagar project - assessee claims that the income to the extent of estimation made by the Assessing Officer, is very much available for making investment or the income from other sources - HELD THAT:- The contention of the Revenue appears to be that the assessee himself disclosed income from KAS Nagar project at 10% of sale value separately. This Tribunal is of the considered opinion that when the additional income was available due to estimation made by the Assessing Officer on KAS Nagar project, the same should be telescoped towards addition made under the head “Income from Other Sources”. Therefore, the CIT(Appeals) has rightly directed the Assessing Officer to telescope. Hence, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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2017 (9) TMI 1863 - ITAT BANGALORE
Deduction u/s 10A - Computation of deduction - HELD THAT:- This issue is covered in favour of the assessee by the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Tata Elxsi Ltd.[2011 (8) TMI 782 - KARNATAKA HIGH COURT] this issue is decided in favour of the assessee and the AO is directed to reduce the telecommunication expenses incurred in foreign currency and attributable to computer software and also other foreign currency expenses which are reduced by AO from export turnover for the purpose of computing deduction u/s 10A allowed the assessee to reduce from total turnover also for the purpose of computing this deduction because it was held by Hon’ble High Court that total turnover is sum of total of export turnover and domestic turnover and therefore, if any amount is reduced from export turnover then the total turnover also gets reduced by the same amount automatically. Accordingly ground no. 4 is allowed.
Comparable selection - HELD THAT:- Various objections were raised by the assessee regarding various comparables such as high turnover, over size, brand and high profitability and on none of these objections, any specific finding has been recorded by the DRP and such a cryptic order of DRP cannot be approved. Hence, we feel it proper to restore this matter back to the file of DRP for fresh decision by way of a speaking and reasoned order.
Foreign exchange gain considered for computing profit percentage for the purpose of ALP - HELD THAT:- Foreign exchange gain is nothing but an integral part of the sales proceeds of an assessee carrying on export business. To this extent, there is no quarrel but in our considered opinion, even after holding that the Foreign Exchange fluctuation gain is operating profit, it has to be seen as to whether the same can be considered for the purpose of computing ALP if the said gain is not in respect of sale of the present year. This is so because for the purpose of ALP under TNMM, what is determined is the percentage of profit by dividing the profit of the year by turnover of the year and such profit percentage of the assessee is compared with the average profit percentage of the comparables. Hence, even after holding that foreign exchange fluctuation gain is operating profit, it has to be seen as to whether the said gain is in respect of turnover of the present year or turnover of the earlier year because if the gain is on account of turnover of the present year than the gain is included in the numerator i.e. profit but the relevant turnover is not included in the denominator and therefore, the result will be absurd. Hence, we restore this matter to the file of the A.O. with the direction that the foreign exchange gain should be considered for computing profit percentage for the purpose of ALP if it is in respect of turnover of the present year.
We feel it proper that either the foreign exchange gain of comparable should not be considered in that situation or such details should be obtained from the respective comparable companies u/s. 133(6) of the IT Act, 1961. Ground allowed for statistical purposes
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2017 (9) TMI 1862 - ITAT BANGALORE
Unexplained jewellery in the case of the appellant owned by his daughters-in-law - HELD THAT:- This appeal came up for hearing on 14.09.2017 but none appeared despite valid service of notice of hearing. We therefore had no option but to hear the appeal ex-parte and accordingly revenue was heard.
We have carefully examined the order of the CIT(A) in the light of the rival submissions and we find that CIT(A) had adjudicated the issue raised before it in detail and since we do not find any infirmity therein, we confirm his order.
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2017 (9) TMI 1861 - ITAT AMRITSAR
Capital gain computation - JDA - receipt of adjustable advance/earnest money and benefits in expectancy with in the ambit of transfer as contemplated u/s 53A of Transfer of Property Act - transfer as contemplated u/s 2(47) - HELD THAT:- As decided in C.S. ATWAL VERSUS ACIT [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] we find that the order of Ld. CIT(A) is not sustainable as the Hon'ble. Court has decided that under these circumstances the capital gain has to be restricted to the proportionate amount of sale consideration received during the year and the rest of the capital gain will be taxable in the year in which rest of the consideration is received. Therefore the Assessing Officer is directed compute capital gains tax on the basis of actual receipts during the year.
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2017 (9) TMI 1860 - RAJASTHAN HIGH COURT
Reopening of assessment u/s 147 - disallowance of additional depreciation u/s. 32(1)(iia) - Tribunal in upholding the decision of CIT(A) in quashing the reassessment proceedings - HELD THAT:- In this case the assessment year involved is A.Y. 2008-09 where the assessment under section 143(3) was originally completed on 31.12.2010 and notice has been issued u/s 148 on 17.08.2012. Therefore, the proviso to section 147 is not relevant and therefore not been considered by us.
Whether the issue of claim of additional depreciation has been examined by the Assessing Officer in the course of original assessment proceedings or not? - Briefly the facts of the case are that the assessee is engaged in the business of manufacturing of cement. For uninterrupted supply of power, assessee during the year, acquired and installed new P&M i.e. power plant at Morak and a windmill at Jaisalmer for production of electricity for captive consumption in manufacturing of cement. The electricity produced from power plant at Morak was directly utilized in manufacturing of cement whereas the electricity produced from windmill at Jaisalmer was supplied to Jaipur Vidhyut Vitran Nigam Ltd. who in turn reduce that quantity of electricity from the power bill raised on the assessee. On these P&M, assessee claimed additional depreciation u/s 32(1)(iia) of the Act.
Firstly, in the reason recorded before issue of notice u/s 148, the AO has stated as under:
As the additional depreciation was allowable only on such plan and machinery which came under the clause (ii) of section 32(i) of Income Tax Act, while the assets of power generating units have been covered under the clause (i) of the ibid section, therefore no amount of additional depreciation was allowance on the assets of Mangalam Power Plant, Morak unit and Mangalam Wind Power plant in Jaisalmer. - Decided against revenue
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2017 (9) TMI 1858 - ITAT MUMBAI
Disallowance u/s 40(a)(ia) - payment by way of rent and repairs - HELD THAT:- CIT(A) has recorded a finding that M/s CKIL has duly complied with TDS provisions at the time of making payments to the concerned payees. Thus, it is noticed that the payment by way of rent and repairs have been duly subjected to deduction of tax at source. The assessee has reimbursed the amount to M/s CKIL on which tax has already been deducted at source.
Since the impugned payments have been made M/s CKIL on behalf of the assessee and the tax has been deducted at source there from by M/s CKIL, it should be construed that M/s CKIL has deducted tax at source also on behalf of the assessee. The obligation of the assessee to deduct tax at source has been fulfilled by M/s CKIL and hence agree with the view taken by Ld CIT(A) that the provisions of sec. 40(a)(ia) would not get attracted in this factual matrix. Accordingly uphold the decision taken by Ld CIT(A) on the above said reasoning.
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2017 (9) TMI 1857 - ITAT JAIPUR
Ad hoc disallowance of expenses - as pleaded by assessee that once the addition has been made by estimating the income then ad hoc disallowance out of various expenses claimed in the P&L account should not have been made or sustained by the CIT(A) - HELD THAT:- We do agree with the contention of the ld AR that where income has been estimated after rejecting the books of account then no further disallowance is required to be made out of various expenses claimed in the P&L account. However, the facts of this case are completely different. CIT(A) has sustained the net profit of 25% of the gross commission earned @ 6% on the sales which were not reflected in the assessee’s books of account and these sales were made for the other Adathiyas.
CIT(A) sustained net profit @ 25% of gross commission. The revenue is not in appeal on relief granted by the ld. CIT(A). No reason but to agree with the order of the ld. CIT(A) for estimating net profit @ 25% of gross commission. Hence ground No. 4 of the appeal stands dismissed.
Disallowances are out of the various expenses debited in the P&L account against the declared turnover by the assessee in its books of account. These disallowances are made for lack of supporting vouchers and documentary evidences and where no details were submitted with regard to the cash discount. Since the ld. CIT(A) has estimated net profit @ 25% of the commission @ 6% on the sales of ₹ 92,02,368/-, therefore, in the interest of justice direct to estimate net profit as 1.5% of declared sales of ₹ 5.00 crores, thus part addition sustained. The declared turnover was of around ₹ 5.00 crores. Hence the estimated income on this turnover comes at ₹ 7.5 lacs. Instead of net income declared in the return of income, the income from declared turnover shall be at ₹ 7.5 lacs. Thus, the total income from the business of Adathiya is estimated at ₹ 8,88,035/- ( 7,50,000/- + 1,38,035/-). Accordingly grounds No. 1 and 2 are partly allowed and ground No. 4 of the appeal is dismissed.
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2017 (9) TMI 1856 - ITAT AMRITSAR
Claim of depreciation on buses @ 15% instead of 30% - assessee company engaged in the business of transportation of passengers and is registered under the Motor Vehicle Act - CIT-A allowed the depreciation @ 30% to the assessee - HELD THAT:- In over all consideration of the "definition" of the Motor Vehicles Act, 1939 as well as perusal of the judgment and submissions of the parties, we do not have any hesitation to hold that Public Transport carries the passenger may be for one stop or more than that may be for smaller which can be limited or even otherwise certainly there is implied contract between passenger and the buses owner for "hire" and in our considered opinion, it cannot be said that the passenger individually or passengers jointly do not have any contract with the bus owner while carrying on journey'.
The submissions of the Revenue Department does not sound good to the extent that the Ld. CIT(A) erred in holding that there is no difference between hiring out the vehicle for a specified period & for a consideration and letting the passenger travel in a vehicle on payment of charges ignoring that a passenger traveling in a bus purchases only right to travel between fixed points as per terms and conditions of the transporter. Hence, the appeals lack the merits and therefore, the order passed by the Ld. CIT(A) is uphold - Appeal filed by the Revenue Department stands dismissed
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2017 (9) TMI 1855 - ITAT PUNE
Deduction u/s 80IB(10) - proportionate deduction - HELD THAT:- On the issue of proportionate deduction, we also find that Hon’ble Madras High Court in the case of CIT Vs. Arun Excello Foundations (P.) Ltd [2012 (12) TMI 415 - MADRAS HIGH COURT] has approved the principle of proportionate deduction to the extent the assessee has complied with the provisions of Sec.80IB(10) of the Act. Following the aforesaid decision of Hon’ble Madras High Court we are of the view that the assessee cannot be denied the deduction for the complete housing project and therefore find no fault in the order of Ld.CIT(A) and thus the grounds of Revenue are dismissed.
Denial of deduction u/s 80IB(10) on account of non compliance of the condition stipulated in clause (f) to Sec. 80IB(10) clauses (e) and (f) were inserted to Sec.80IB(10) by Finance (No.2) Act, 2009 w.e.f 01.04.2010 - The object behind the introduction as explained by the Memorandum explaining the provisions is that the objective of the tax benefit for housing projects was to build housing stock for low and medium income households by ensuring the size of the residential unit. It was circumvented by the developers by entering into agreement to sell multiple adjacent units to a single buyer. Accordingly the new clause was inserted to provide that the undertaking which develops and builds the housing project shall not be allowed to allot more than one residential unit in the housing project to the same person not being an individual and where the person is an individual, no other residential unit in such housing project to spouse or minor children of such individual, to HUF in which the individual is a karta.
In the present case at the time of making sale/booking a unit and for complying with the requirement of clause (e) and (f), the assessee is required to exercise normal due diligence expected of a normal businessman and proceed on the basis of the documents/information furnished by the other person and is not supposed to act like a detective and microscopically investigate and go behind the documents and verify the background of those submissions. Further no guidelines have issued by Revenue Department to show as to what and how the verification has to be conducted and therefore it is not a case of Revenue that the required guidelines issued by Revenue Department so as to check the compliance of clause (e) and (f) have not been followed by assess
Assessee had prima facie exercised normal due diligence expected of a normal businessman more so when the purchasers at the time of booking had given different addresses, were having different surnames and then later on they turned out to be closely related. In such a situation, we are of the view that the assessee cannot be denied the deduction u/s 80IB(10). Claim of deduction u/s 80IB(10) be allowed and thus the grounds of assessee are allowed.
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2017 (9) TMI 1848 - ITAT AHMEDABAD
Unexplained cash deposits - unexplained income of assessee - HELD THAT:- On perusing the ledger account of Induslnd Bank, we find that whenever the cash was deposited, it was immediately transferred to M/s. Shri Krishna Cargo. Therefore, the contentions that the same forms part of the business receipts cannot be brushed aside lightly.
The assessee has not furnished any detail in support of its claim of business receipts. In our considered opinion and considering the manner in which the cash was deposited and transmitted to the firms account, 50% of the cash deposited should be treated as the income of the assessee. We modify the findings of the ld. CIT(A) and direct the A.O. to treat 50% of the cash deposited as undisclosed income of the assessee. Appeals of the Assessee partly allowed
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2017 (9) TMI 1847 - RAJASTHAN HIGH COURT
Assessment u/s 153A - Assessment under section 144 - Cash seized during the course of search - deduction u/d 80P to the assessee-bank - depreciation, repair and maintenance expenses - addition u/s 69 - unexplained gifts and investments - rebate claimed under section 88E - loss on sale of car - HELD THAT:- Present petition is dismissed as infructuous in view of the order dated 19/06/2017 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur in Adarsh Cooperative Bank Ltd. vs. ACIT, Central Circle-1, Jodhpur [2017 (6) TMI 1303 - ITAT JODHPUR]
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2017 (9) TMI 1844 - GUJARAT HIGH COURT
Deduction u/s 80IB - Assessee had not filed the requisite audit report in support of the claim with the return or even during the course of the assessment - HELD THAT:- When the assessee tried to produce the same before the appellate Commissioner, he refused to take it on record. The Tribunal granted such facility and allowed the claim of deduction against which the Revenue is in appeal.
In case of Commissioner of Income-tax v. Gujarat Oil and Allied Industries [1992 (9) TMI 67 - GUJARAT HIGH COURT] the Division Bench of this Court in context of deduction under section 80J of the Act had observed that filing of requisite report during the course of assessment proceedings would be sufficient compliance.
Later on, in case of Panasonic Energy India Co. Ltd. v. Assistant Commissioner of Income-tax [2014 (2) TMI 129 - GUJARAT HIGH COURT] the Court recognized that for sufficient reasons, the assessee may also be allowed to file such a report at the appellate stage. of course, in the said case finding that there were insufficient grounds for allowing the assessee to do so, the report was not taken into consideration when it was sought to be filed directly before the High Court for the first time - Tax Appeal is dismissed
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2017 (9) TMI 1843 - ITAT CHENNAI
Penalty u/s 271(1)(c) - addition made in the quantum assessment proceeding - HELD THAT:- Mere addition made in the quantum assessment proceeding would not result in levy of penalty under Section 271(1)(c) automatically. Each and every addition made in the assessment proceeding, cannot be construed to be concealment of income or furnishing of inaccurate particulars. However, in this case, the assessee claims that the money was not deposited during the year under consideration.
The assessee has not provided the details of deposit of money in the account. In the absence of any details with regard to deposit or investment of money in the bank account, we do not find any reason to find fault with the authorities below that the balance as on 31.12.2001 is the money belonging to the assessee for the year under consideration. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the penalty.
Quantum of penalty, the Assessing Officer levied penalty at 300%. However, the CIT(Appeals) restricted the same to 100%. Tribunal is of the considered opinion that levy of penalty is the discretion of the Assessing Officer. CIT(Appeals) has also power coterminous as that of Assessing Officer. Therefore, when the lower authority exercised his discretion in restricting the penalty to 100% instead of 300% levied by the AO, this Tribunal do not find any reason to interfere with the discretion exercised by the lower authority. Therefore, we do not find any reason to find fault with the CIT(Appeals) in restricting the penalty to 100%.
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2017 (9) TMI 1842 - ITAT CHENNAI
Deduction u/s 35(1)(ii) - bogus transactions of donations - survey was conducted in the premises of the above said two research organizations at Kolkata and it was found during the course of survey that transactions of donations were not genuine and it was only accommodation entry routed through banking channel - AO after reproducing the statement recorded from the respective persons, has concluded that the claim of donation more than 50% of profit was far-fetched one - whether the assessee is entitled to receive copy of statement and other material which were relied upon by the AO in the assessment order?
HELD THAT:- Admittedly, AO placed reliance on the statement recorded during the course of survey operation and other material found during the course of survey operation. Principles of natural justice is one of the cordial rule to be followed in the adversary system of judicial administration. Rule of law is supreme in this country, therefore, unless it otherwise provided in the relevant statute enacted by the Legislature, the principles of natural justice cannot be taken away by means of the procedure or the formalities prescribed in the Office Manual which is meant for the internal administration of Department.
In this case, even the Office Manual was not brought to the notice of the Bench even though the D.R. claims that as per Office Manual, copies need to be furnished only on request. Irrespective of the request of the assessee for the copies of statement and documents, the same shall be furnished to the assessee in case the AO intended to rely on such statement and the documents.
In this case, the copies of the statement and other documents relied upon by the AO were not furnished to the assessee, therefore, there was gross violation of principles of natural justice. Authorities below are set aside and the entire issue is remitted back to the file of the AO. AO shall furnish the copies of documents and statement to the assessee and give sufficient opportunity to rebut the same, and thereafter decide the issue afresh in accordance with law.
This being an accommodation entry and such type of donations are rampant from Chennai to Kolkata institutions, AO shall make a thorough investigation. AO shall also examine, if necessary, through his counterpart at Kolkata how the bank accounts are opened at Kolkata by such institutions. Whether any bank officials were involved in opening such accounts also needs to be found out so that this kind of irregularities can be put to an end at earlier stage.
Appeal of the assessee is allowed for statistical purposes.
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2017 (9) TMI 1839 - ITAT JAIPUR
Disallowance of Provision against Bank’s Debtors as the same has been made as per RBI guidelines - HELD THAT:- It is pointed out by the assessee that this is a Scheduled Bank. This fact is not rebutted by the Revenue by placing any contrary material on record. Therefore, respectfully following the decision of the Co-ordinate Bench M/S NAGAUR URBAN CO-OPERATIVE [2013 (11) TMI 1696 - ITAT JODHPUR] we hereby direct the AO to delete the disallowance. Thus, this ground of the assessee’s appeal is allowed.
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