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Income Tax - Case Laws

Showing 41 to 60 of 1116 Records

• 2015 (10) TMI 2785
  

  TDS u/s 194C - CIT(A) held that the definition of goods carriage as provided in section 44AE(7) also applicable u/s 194C(6) since the payment have been made to the agencies not to persons who plied the trucks - HELD THAT:- CIT(A) has correctly observed that the inference drawn by the AO that for the purpose of claiming the benefit of sub section (6) of section 194C, the assessee is required to satisfy the ownership criteria mentioned in Explanation (b) below section 44AE(7) is not correct.

  Reference of Explanation to section 44AE(7) in section 194C is only in the context of definition of ‘goods carriage’. Clause (a) of Explanation to Section 44AE(7) defines ‘goods carriage’ and clause (b) defines ‘deemed ownership’. CIT(A) has correctly held that clause (a) is applicable to both sections i.e. section 194C and 44 AE, clause (b) is applicable only to section 44AE, since for the benefit of presumptive taxation the assessee should not own more than ten goods carriages.

  Assessee is not required to satisfy the ownership criteria as mentioned in clause (b) of Explanation to section 44AE (7). On a perusal of section 194C (6) read with Explanation (II) to section 194C, it is crystal clear that the transport contractor is not required to be the owner of goods carriage for applicability of section 194C(6) - At this stage, we may observe here that an amendment has been made vide Finance Act, 2015 in section 194C (6) wherein it is specifically stated that w.e.f. 1.6.2015, the benefit of non deduction of tax on payment made to transport contractors would be applicable only if the transport contractor owns ten or less goods carriages at any time of the previous year and a declaration to this effect is furnished.

  Legislature has intentionally inserted the ownership condition for claiming the benefit of non deduction of tax which was not existing in the erstwhile section 194C(6) - Assessee (Person responsible) cannot be treated as ‘assessee in default’ for not deducting tax on the payments made to the Bilaspur District Truck Operators Co-operative Society thus, we do not find any infirmity in the order of CIT(A) and accordingly we uphold the same. The appeal of the Revenue is dismissed.

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• 2015 (10) TMI 2781
  

  Condonation of delay - extraordinary delay of 795 days in re-filing this appeal - HELD THAT:- Turning to the application the Court finds that the reasons adduced for the delay of 795 days (i.e. over two years and one month) is not convincing at all. The only explanation is that delay occurred in curing the defects pointed out by the Registry. By no stretch of imagination, can a delay of over two years and one month in curing defects be countenanced.

  The Court is, therefore, not inclined to condone the delay of 795 days in re-filing the appeal. This is one of several instances of the Revenue's appeals being re-filed with extraordinary delay ranging between one and three years. This Court has in certain other cases issued detailed directions on this aspect and it is expected that the Revenue will take corrective steps without delay.

  Search and seizure operation - Whether mere surrender of undisclosed income by Mr. Brij Mohan Gupta did not automatically establish the liability in the hands of the Assessee “unless he is evidently linked with the accounts of certain "M.P. Gupta" in a third party search - HELD THAT:- Concurrent findings of fact have been rendered by the CIT (A) as well as by the ITAT. Nothing has been pleaded in the memorandum of appeal to persuade the Court to hold that those findings are perverse or contrary to the facts on record. Secondly, there is not a whisper in the order of the AO about any bag recovered from the premises of the Assessee during the search of the Assessee's premises on 22nd March 2006. There is no such averment even in the memorandum of appeal filed before this Court. The material referred to in the order of the AO is that which was recovered from the premises of Mr. Brij Mohan Gupta and nothing else. That material has been discussed threadbare in the order of the CIT (A). Detailed reasons have been given as to why that material was insufficient to link the Assessee with "MP Gupta" whose name finds mention in the diary and the documents seized from the premises of Mr. Brij Mohan Gupta.

  The Court is not persuaded to permit the Revenue, for the first time, before this Court to set up an entirely different case of there having been a bag seized from the premises of the Assessee which according to the Revenue contained incriminating material against the Assessee.

  As regards the second plea, it is trite that the Revenue has to make out a case against each Assessee separately. The mere fact that the Revenue's appeal against Atul Gupta, the son of the Assessee, has been admitted cannot ipso facto mean that the appeal against the Assessee should also be admitted. The Revenue's case against the Assessee has to be substantiated by the material seized. For the reasons already noted, the Court finds no case made out for interference with the factual findings on the basis of the analysis of the said material in the impugned orders of the ITAT and the CIT (A).

  No substantial question of law arises for determination by the Court.

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• 2015 (10) TMI 2779
  

  Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We find that the assessee had received dividend of ₹ 1.06 lakhs during the year hat the AO and FAA had applied the provisions of section 14A of the Act r.w. Rule 8D hat the arguments of strategic investment and availability of funds were not dealt with. If the shares were not purchased from the borrowed funds then there was no justification in making disallowance of interest expenditure. The provisions of section 14A were brought in to Act to prevent the mischief of claiming expenses against the exempt income. But that does not mean that whenever an assessee claims exempt income automatic disallowance has to be made. The AO and the FAA have without considering the relevant facts made the disallowance. - Decided in favour of assessee.

  TDS u/s 194J or 192 - TDS on fee paid to the directors - disallowance made u/s. 40(a)(ia) - HELD THAT:- sitting fees paid to the directors does not amount to fees paid for any professional services as has been mentioned in the explanation to section 194J(1). We further find from the memorandum explaining to provisions of the Finance Bill 2012 that as per clause No.71 it was specifically mentioned that there was no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. We find the provisions of section 194J(1)(ba) speaks of any remuneration or fees or commission by whatever name called other than those on which tax is deductible u/s.192 to a director of a company on which tax has to be deducted at the applicable rate and the above provision has been inserted by the Finance Act, 2012 w.e.f., 01-07-2012. We, therefore, find force in the submission of the learned counsel for the assessee that no tax is required to be deducted u/s.194J out of such director's sitting fees for the A.Y. 2007-08. In this view of the matter, the order of the CIT(A) is set-aside and the ground raised by the assessee on the issue of TDS on sitting fees paid to Directors is allowed.

  Disallowance of bad debts written off u/s 36(2) - HELD THAT:- We find that the assessee had claimed bad debts of ₹ 57.73 lacs only in the books of accounts and the AO and the FAA had not considered the amounts added back by it that it had written off only net amount receivable from BEST Undertaking. In our opinion he assessee is the right person to decide as to whether a particular amount has become bad or not. The AO/FAA cannot decide the issue referring to the entity from whom money is to be received. If the assessee had in its books of accounts written off an amount he revenue authorities cannot disallow in light of the judgment of the Hon’ble Apex Court delivered in the case of TFR Ltd.[2010 (2) TMI 211 - SUPREME COURT] - There is no doubt about the writing off the amount in question in the books of accounts. So, reversing the order of the FAA, we decide ground in favour of the assessee.

  Provision for doubtful debts written back - HELD THAT:- We find that the assessee and added back the two sums i.e. ₹ 7.17 lacs and ₹ 5.91 lacs under the head provisions for doubtful debts and service tax payable respectively. Therefore, we are of the opinion that the action of the AO/FAA has resulted in taxing the same sum twice. Reversing the order of the FAA ground decided in favour of the assessee .

  Disallowance of interest on interest free loan granted - HELD THAT:- We find that assessee had advanced money to Ferrari on account of purchase of shares of Radio Midday, that in the date wise summary a credit entry is appearing on 30th June 2008, that from the said entry it is clear that the shares of Radio (West) were bought by the assessee from Ferrari. Considering these facts we are of the opinion that money advanced by the assessee to M/s. Ferrari was solely for the purpose of buying the shares and that the transactions could not be termed as advance of interest free loan. Therefore, reversing the order of the FAA, we decide the last ground of appeal in favour of the assessee.

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• 2015 (10) TMI 2778
  

  Disallowance on tax free investment u/s 14A rw. rule 8D - HELD THAT:- It is true that Rule 8D is not applicable for assessment year 2007-08. To the above extent, the Ld. CIT(A) is absolutely correct.

  We set aside the findings of the Ld. CIT(A) on this issue and remand the matter to CIT(A) with the direct ion to decide the same afresh keeping in view the observations of the Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing. Co. Ltd Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]. The CIT(A) shall provide an opportunity of being heard to the assessee in the matter. For statistical purposes, the ground No.1 of the appeal is allowed.

  Disallowing the claim of the assessee u/s 80IC on job work - Whether income from job charges cannot be treated to have been derived by the undertaking by manufacturing or producing any article or thing not prohibited by 13^th Schedule - HELD THAT:- We by our order of even date in the case of ACIT Vs. M/s Cremica Agro Foods Pvt Ltd., Ludhiana [ 2015 (10) TMI 2703 - ITAT CHANDIGARH] have set aside the order of CIT(A) and remanded the identical issues to the file of the CIT(A) for a fresh decision in accordance with law. For the detailed reasons given therein, we set aside the order of CIT(A) and remand the issues to the file of CIT(A) with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee.

  Investments in shares and mutual funds which was exempt u/s 10(34) - HELD THAT:- It is apparent from the order of the CIT(A) that assessee earned dividend income of ₹ 53,11,447/- which was claimed exempt u/s 10(34) & 10(35) of the Act, during the course of assessment proceedings. It was shown as taxable in the return of income as the assessment has been made u/s 115JB, it did not affect any taxability of the income. Considering the entire facts and circumstances of the present case, we are satisfied that the assessee was prevented by sufficient cause from filing the present appeal. At the same time, it is also well settled law that length of delay is not to matter in the context of condonation of delay. The jurisdiction to condone delay should be exercised liberally. The matter relating to Condonation of Delay should be judged broadly and not in a pedantic manner. In the case of Collector, Land Acquisition Vs. Mst. Katji [1987 (2) TMI 61 - SUPREME COURT] the Hon'ble Supreme Court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay. It is also well settled that ordinarily, a litigant does not stand to benefit by lodging an appeal late. In fact, he runs a serious risk. In view of the above, we condone the delay in filing the appeal.

  Since we have restored the main issue to the CIT(A) and, therefore, we think it appropriate to remand this issue also to the CIT(A) with the direction to consider the content ion of the assessee and dispose of the same in accordance with law.

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• 2015 (10) TMI 2777
  

  Disallowance of loss claimed on cancellation of forward exchange contracts - HELD THAT:- On a perusal of the list of forward contract and related transactions it is noticed that all such contracts were cancelled after maturity. Only in respect of two contracts, dated 11th April 2007 and 26th April 2007, which are for export of goods, the contracts were cancelled before maturity but the assessee has booked profit.

  Forward contract dated 23rd August 2007, for import was also cancelled before maturity but the assessee has again booked profit. Thus, from the aforesaid fact, it is very much clear that forward contracts, except the above referred three contracts were cancelled after maturity. Therefore, the allegation of the Department that forward contracts were cancelled prematurely is without any basis. That being the case, the principle laid down by the Hon'ble Jurisdictional High Court in Badridas Gauridu India Ltd. [2003 (1) TMI 61 - BOMBAY HIGH COURT] clearly applies. Therefore, factually as well as by applying the principle of law, we are of the view that the loss claimed by the assessee cannot be treated as speculative loss and as a consequence it has to be allowed

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• 2015 (10) TMI 2775
  

  Assessment u/s 153A - whether the proviso to Section 153C (1) of the Act is confined to the second proviso to Section 153A (1) of the Act, and therefore, applies on to cases of abatement of pending assessments? - HELD THAT:- In decision in SSP Aviation Limited v. Deputy Commissioner of Income Tax [2012 (4) TMI 335 - DELHI HIGH COURT] it was categorically held that, in the case of the other person, the question of both pendency and abatement of the proceedings of assessment or reassessment would be examined with reference to the date of handing over the books of account or documents or Assessing Officer having jurisdiction over such other person.

  No substantial question of law arises in the facts and circumstances of the present case.

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• 2015 (10) TMI 2773
  

  Deduction u/s. 80IA(4) - Whether erection of foot over bridges and installation of road signage can be construed as “infrastructure facility” within the meaning of Explanation to section 80IA(4) ? - HELD THAT:- In the instant case, the assessee has constructed three foot over bridges and has installed road signage for the Indore Municipal Corporation. The major part of income during the year was received on account of execution of work of road signage. Thus, the facts in the present case are identical to the one adjudicated by the Co-ordinate Bench in the group concern of the assessee. Respectfully following the same, we hold that the activities carried on by the assessee do not fall within the ambit of “infrastructure facility” defined in Explanation to section 80IA(4). Thus, the assessee is not eligible to claim deduction u/s. 80IA(4). - Decided against assessee.

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• 2015 (10) TMI 2772
  

  Validity of proceedings u/s. 263 - HELD THAT:- We find the Hon’ble Madras High Court in the case of Sakti Charities [2000 (2) TMI 75 - MADRAS HIGH COURT] has held that revisional power is not meant to correct every error of fact. The power of revision should not be exercised for purpose of directing the AO to hold another investigation. When the order of the CIT does not indicate as to how the order of the ITO was erroneous and prejudicial to the interest of the revenue, the CIT lacks the jurisdiction to revise the order of the AO.

  Since the assessee in the instant case has furnished full details as called for by the AO during the course of assessment proceedings and since the order of the CIT is silent as to how the order of the AO is erroneous and prejudicial to the interest of the revenue, therefore, in view of the above decisions cited we are of the considered opinion that the Ld.CIT was not justified in setting aside the order passed u/s.143(3) r.w.s. 144C(13) of the I.T. Act by invoking the provisions of section 263. We, therefore, set aside the same. The grounds raised by the assessee are allowed.

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• 2015 (10) TMI 2771
  

  Disallowance of business loss treating the same as speculation loss arising out of foreign exchange contracts - HELD THAT:- We are of the view when the assessee is not a dealer in foreign exchange but an exporter of commodities and assessee had entered into forward contracts with banks in respect of foreign exchange but some of these contracts could not be honoured by the assessee for which it has to pay and which was debited to the P&L Account and claimed the same as business loss/hedging loss.

  In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank but the export contract entered into by the assessee for export of commodities in some cases failed, the assessee is entitled to claim for deduction of loss as a business loss. Accordingly, respectfully following Hon’ble jurisdictional High court in the case of Soorajmull Nagarmull [1980 (9) TMI 69 - CALCUTTA HIGH COURT] we allow the claim of the assessee. This issue of assessee’s appeal is allowed.

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• 2015 (10) TMI 2770
  

  Disallowance on account of mark to market loss - CIT(A) allowed assessee’s claim - HELD THAT:- As found from the record that forward contracts were hedged against the debtors. Accordingly resultant loss was claimed as mark to market loss. The issue under consideration is squarely covered in the case of Bank of Bahrain and Kuwait, [2010 (8) TMI 578 - ITAT, MUMBAI] which have been elaborately dealt by the CIT(A) while reaching to the conclusion that mark to market loss on account of foreign contract done to hedge the risk of exchange fluctuations is allowable as business loss and which has been determined as per accounting method regularly followed by the assessee. Accordingly, we do not find any merit in the order of CIT(A). - Decided against revenue

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• 2015 (10) TMI 2769
  

  Disallowance u/s.14A - HELD THAT:- We have been informed that the AO has not passed fresh order so far in pursuance to the order of the Tribunal. in AY 2006-07. In our considered opinion, before this issue can be decided in the impugned year i.e. A.Y. 2007-08, it is imperative that it is first decided by Assessing Officer in A.Y. 2006-07.

  In case, we decide this issue first, it may pre-empt the order of Assessing Officer for A.Y. 2006-07, and it may also close the gates for the AO to make proper examination of facts and circumstances in A.Y. 2006-07. Therefore, to avoid this situation, we deem it proper to send this issue of disallowance u/s 14A, in totality, to the file of Assessing Officer. He shall re-decide this issue, after giving adequate opportunity of hearing to the assessee and after considering the facts and circumstances of the case and the law available at the time of deciding this issue.

  Expenditure for the ‘in-house’ research facility - Disallowance of deduction u/s 35(2AB) and u/s 37(1), by treating the same as capital expenditure - HELD THAT:- Since we have received order of Department of Scientific & Industrial Research (DSIR) dt. 24.08.2010, in which the DSIR while approving our R & D facilities for the purpose of section 35(2AB) has not considered clinical trial expenditure incurred by us as a part of "in-house R & D expenditure" on the ground that by definition these expenditure were incurred outside of approved R & D facility. This is the stand taken by DSIR for all pharma R & D companies.

  Accordingly, we withdraw our claim for weighted deduction of the aforesaid expenditure u/s.35(2AB). However, we submit that the aforesaid expenditure should be allowed as an expenditure u/s 37(1) (without weightage of 150%).

  With respect to alternate claim made by the assessee u/s 37(1) of the Act, it is noted that the invoice of M/s. Reliance Clinical Research Services Pvt. Ltd. dated 31.03.2007 is enclosed at page no. 3 of the paper book, showing that payment has been made to the said company under the head “Clinical Trial Fees” – for the month of March, 2007 for time spent on 1st March to 31st March, 2007 for conducting clinical trials, in support of to all ‘K projects’, for a sum of ₹ 57,65,564/-. It is further noted that on the back side of the invoice, complete details have been given with respect to time spent by 22 employees of RCRS, also giving particulars of the studies done by these employees. Names of these employees have been given along with their rates per hour. It is further noted that ld. Assessing Officer has shown no doubts about the genuineness of these expenses. It was held by Ld. CIT(A) that since claim of assessee with respect to deduction u/s.35(2AB) has been denied, therefore, these expenses are capital in nature. It was further observed by ld. CIT(A) that Assessing Officer, as well as assessee, have treated these expenses as capital in nature. In our view, the observations of Ld. CIT(A) are misplaced and without any basis. We have gone through details of these expenses. In our considered view, these expenses are apparently revenue in nature. Ld DR also could not point out as to which expenses are capital in nature. Thus, in our view, these expenses are of revenue nature.

  TDS u/s 194J - Disallowance of software expenses incurred by treating the same as capital expenditure - Counsel has submitted that injustice has been done by the Ld. CIT(A) by not examining the facts and evidences placed by assessee - HELD THAT:- It is noted that full co-operation has been extended by the assessee at all times i.e. during course of assessment proceeding, and also during appellate proceeding before the ld. CIT(A). If the CIT(A) wanted to have one separate petition under Rule 46A, the same could have been very well pointed out to the assessee. Without affording opportunity to the assessee, the valid claim of the assessee should not have been denied to it, merely for some technical reasons. Under these circumstances, we find it appropriate to send this issue back to the file of ld. CIT(A) who shall give opportunity to the assessee to file all the evidences as may be considered appropriate, along with petition under Rule 46A etc.

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• 2015 (10) TMI 2767
  

  Addition u/s 40A(2)(b) towards interest paid on loans - whether the interest paid @ 15% to related parties can be considered as excessive and unreasonable to invoke the provisions of section 40A(2)? - HELD THAT:- As per the provisions of section 40A(2) of the Act the Assessing Officer has to establish on record that the payment made by the assessee is unreasonable and excessive compared to the market rate. Nowhere in the assessment order, has the Assessing Officer brought any material to establish the market rate of interest on such types of loan.

  Commissioner (Appeals) has also ignored this aspect. Therefore, there is no reason why interest payment to related party should be confined to 12.6%. More so, when the loans are not secured against any asset unlike bank loans and the lender always runs a risk of recovery of loan, therefore, charges interest at a bit higher rate. The decision cited by the learned Authorised Representative also supports this view. Moreover, it is a fact on record that the assessee has paid interest @ 15% even to unrelated parties. That being the case, interest paid @ 15% to related parties should be allowed. Ground raised by the assessee is allowed and grounds raised by the Revenue are dismissed.

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• 2015 (10) TMI 2766
  

  Grant of approval u/s 80G(5)(vi) - assessee is a society registered under the Society Registration Act and was granted the registration under section 12AA - HELD THAT:- We find that the finding given by the learned Commissioner of Income Tax (Exemption) that neither the assessee had spent 85% of gross receipts, nor has it made a declaration in Form No.10 is factually incorrect. In these circumstances, the order of the learned Commissioner of Income Tax (Exemption) rejecting the application under section 80G of the Act is not as per law.

  There is one more sound reason for quashing the said order of the Commissioner of Income Tax (Exemption) rejecting the application for approval under section 80G of the Act. The provisions of section 11(2) are not relevant for granting approval under section 80G of the Act. This aspect of granting approval under section 80G of the Act has been very aptly discussed in the order of the Chandigarh Bench of the I.T.A.T. in the case of Shri Krishna Kirpa Gaushala Samiti Vs. CIT(E) [2015 (9) TMI 1563 - ITAT CHANDIGARH] where on the issue of anonymous donation as appearing in Section 115BBC of the Act, the approval sought by the assessee under section 80G of the Act was rejected.

  In the present case also, the only reason given by the Commissioner of Income Tax(Exemption) is the provision of section 11(2) of the Act, which is not at all relevant for the said purpose, which otherwise is also factually incorrect. In view of the above, we direct the learned Commissioner of Income Tax (Exemption) to grant the assessee approval under section 80G of the Act.

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• 2015 (10) TMI 2764
  

  Accrual of income - sales tax subsidy - AO treating the same as revenue receipt taxed it under the head ‘income from other sources’ - HELD THAT:- The assesses have received sales tax subsidy from Punjab Government under the scheme named, ‘Industrial Policy & Incentive Code, 1996’. We have gone through the said policy and found that the scheme though not verbatim as that of West Bengal or Gujarat schemes, but the sum and substance of all these schemes are the same, therefore, relying on our finding given in the case of Bhushan Limited [2015 (6) TMI 1195 - ITAT CHANDIGARH] we hold that the sales tax subsidy received by the assessee is capital in nature.

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• 2015 (10) TMI 2763
  

  Addition on account of alleged artificial capital gain - Addition on account of alleged payment of commission - HELD THAT:- DR fairly accepted that though the assessee had submitted requisite documentary evidences in support of its claim and AO could not bring on record contrary evidences to contradict the evidences filed by the assessee, but there statements of few persons against the assessee.

  When bench put across factual queries to the parties, both the parties i.e., Ld. Counsel as well as Ld. DR fairly agreed that there were some gaps and contradictions. It has been stated by the AO in the assessment order, that there is no Demat account - counsel has contended that shares were converted in the Demat account on the sale of shares. Ld. AO has field to verify the demat account. Further the company namely Fast Track Entertainment Ltd., is existing on the records of ROC as well as on the records of income tax department.

  AO failed to make inquiries of the said company with these agencies, and further, AO should make inquiries with the authorized persons of the brokers only. Therefore we find it appropriate to send this matter back to the file of the AO with the direction to make proper inquiries and to examine all the documentary evidences as have been submitted by the assessee in support of its claim and for this purpose the AO shall afford opportunity of hearing to the assessee.

  AO shall exercise its powers, as has been conferred upon him under the law, to make inquiries from the persons/agencies concerned. The assessee shall extend all requisite cooperation as may be directed by the AO by filing complete address and any particulars of the persons concerned. AO shall grant opportunity of cross examination to the assessee, in case he would be relying upon statement of any of the persons against the assessee. We, therefore, send this matter back to the file of the AO with our directions as stated above. Appeal of the assessee is allowed for statistical purposes.

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• 2015 (10) TMI 2759
  

  MAT - Adjustment of book profit u/s.115JB - estimated gratuity provision made on the basis of actuarial valuation, which is an unascertained liability - CIT-A deleted addition - Whether the provision for gratuity is ascertained liability or not for the purpose of computing the book profit u/s.115JB? - HELD THAT:- This issue was duly examined by the Coordinate Bench in the earlier years in the case of the assessee [2013 (1) TMI 135 - ITAT AHMEDABAD] wherein issue decided in favour of assessee. Therefore, taking a consistent view, we hereby dismiss this ground of Revenue’s appeal.

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• 2015 (10) TMI 2758
  

  Addition towards unpaid sundry creditors treated as bogus - HELD THAT:- Revenue has failed to controvert the findings of the learned CIT(A) in respect of 16 creditors which have been accepted by learned CIT(A) as genuine, therefore we find no merit in the appeal of the revenue.

  In respect of five creditors which were held to be non-genuine, we hold that certain more facts need to be brought on record to decide the issue, therefore, after hearing both the sides, we restore this issue to the file of the AO to decide de novo. The assessee shall provide correct addresses of these five creditors and the AO will verify whether these concerns are showing outstanding in their books of accounts against the assessee. Whether the creditors are genuine or not. After considering all these, AO shall decide the issue as per law. Revenue’s appeal is dismissed and the assessee’s appeal is allowed for statistical purposes.

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• 2015 (10) TMI 2757
  

  Disallowance u/s 14A r.w.r. 8D - Computing disallowance applying the proportionate method - HELD THAT:- Out of the total expenses claimed of ₹ 31,13,082/-, the amount disallowed in relation to dividend is of ₹ 25,36,669/-. Now, this is evidently absurd on the face of it and the assessee is correct in contending that since there is huge other income, the quantum of disallowance is entirely unreasonable. Rather, a reasonable disallowance can be made, if the accounts of the assessee are considered, without taking recourse to Rule 8D of the Rules.

  As assessee has contended that the total expenses claimed (as above) being ₹ 31,13,082/-, the total income ( as above) being of ₹ 80,189,889/- and out of this income, dividend being of ₹ 904,668/-, the disallowance of expenses needs to be worked out by applying the proportionate method, as per which, the disallowance works out to ₹ 35120/- it is found to be acceptable. The total income, the dividend and the total expenses claimed being as above, as discussed, the disallowable expenses would work out to ₹ 35,120/-, applying the proportionate method. Therefore, the disallowance is restricted to ₹ 35,120/-. Accordingly, Ground No.1 is partly accepted.

  Disallowance u/s 94(7) - According to CIT(A) as per section 94(7) only the short term capital loss ought to have been added - HELD THAT:- Since no worthwhile challenge had been laid to the above finding of the ld. CIT(A) by the assessee before us, finding no error therein, the action of the ld. CIT(A) in restricting the addition

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• 2015 (10) TMI 2755
  

  Claim of deduction u/s 80IB(10) in respect of two projects undertaken by the assessee i.e. Kumar Kruti and Kumar Shantiniketan - prorata claim of deduction in respect of project Kumar Shantiniketan - Two of the flat bearing Nos.3 and 4 in building ‘D’ had covered area exceeding 1500 sq.ft. and on that basis, the deduction claimed under section 80IB(10) was denied to the assessee - HELD THAT:- Tribunal had in the earlier years relating to assessment years 2008-09 and 2009-10, allowed the claim of assessee with directions to the AO to allow prorata deduction u/s 80IB(10) and denied the said deduction in respect of two flats i.e. flat Nos.3 and 4 in building ‘D’, which had covered area of more than prescribed limit. The relevant findings of the Tribunal which are being referred to, but not being reproduced for the sake of brevity. In the entirety of the above said facts and circumstances, where the issue is identical to the issue before the Tribunal in the earlier years, following the same parity of reasoning, we direct the AO to re-work prorata deduction under section 80IB(10).

  Deduction u/s 80IB(10) in respect of project Kumar Kruti - deduction was denied to the assessee on account of two accounts i.e. where the project Kumar Kruti was part of larger project named Kumar City, and where the assessee had not completed the project by 31.03.2008, prorata deduction was allowed to the assessee - HELD THAT:- Tribunal after considering the issue, held that the project Kumar Kruti was an independent project since the building plan of the said project was sanctioned independently on 16.07.2006 and in view thereof, there was no justification in holding that the project Kumar Kruti was part of Kumar City. The relevant findings of the Tribunal are reproduced which are being referred to, but not being reproduced for the sake of brevity. Tribunal further held that the assessee was entitled to prorata deduction under section 80IB(10) in respect of eligible units, which were within covered area limit of 1500 sq.ft. However, few flats, which exceeded the prescribed covered area were denied the deduction under section 80IB(10) - We uphold the order of CIT(A) in directing the Assessing Officer to work out the prorata deduction in respect of units sold in Kumar Kruti project. In the entirety of the above said facts and circumstances, we uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue.

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• 2015 (10) TMI 2753
  

  Initiation of the reassessment proceedings u/s 147 - addition u/s 68 - non application of mind by AO - HELD THAT:- At the time of recording of the reasons the Assessing Officer apparently was not having any idea about the nature of the transactions entered into by the assessee. In the reasons recorded there is no mention about the nature of the transactions. As per provision of section 147 an assessment can be reopened if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment.

  The reasons to believe has to be that of the AO and further there have to be application of mind by the Assessing Officer though the reasons to believe does not mean that the Assessing Officer should have finally ascertained the fact that income has escaped assessment but at the same time, it also means that the Assessing Officer is required to examine the facts on the basis of the information and Satisfy himself that the taxable income has escaped assessment. In the Present case on going through the reasons it is quite evident that AO was also not aware of the nature of the accommodation entries. In the reasons recorded he has simply mentioned the name of the party and the amount and nowhere has stated the nature of such entry. This also shows that the Assessing Officer has made no effort to look into the return of the assessee which was available with him.

  From sheet appended to the reasons and quoted on page 4 of the assessment order whereby against Item no. 7; whether the assessment is proposed to be made for the first time, the Assessing Officer has stated 'Yes', and in Column no. 7(a), whether any voluntary return had already been filed and in Column no. 8 (b), date of filing the said return 'NA' has been stated. Thus this is clear case of non-application of mind by the Assessing Officer.

  The reopening of the assessment is without application of mind and examination of the facts and accordingly the reopening is held to be invalid and accordingly the same is quashed.

  Bogus purchases - addition to 20% of the purchases as profit earned by the assessee on these purchases by CIT-A - HELD THAT:- The purchases and sales were within the walled city of Delhi where the transportation is by manual driven cans and the charges for the same are debited under the head cartage. Further when sales are accepted as genuine, then definitely the transactions have occurred and movements of goods have taken place. It is also not the case of the CIT(A) that transactions has not happened. Thus transportation on such facts cannot be a basis to draw adverse inference against the assessee. CIT(A) has upheld the allegation of the Assessing officer of the bogus purchases by making an observation that the appellant's dealing with these parties is not free from any doubt. It is a settled law that doubt cannot be a basis for sustaining the allegation. On the contrary the assessee had lead sufficient evidences in support of its purchases which the Assessing Officer in my view has not been able to rebut. Accordingly in the facts and circumstances of the case it cannot be said that the purchases made by the assessee are bogus.

  As regards the addition of sustained by the CIT(A)since purchases are not bogus, the addition on this account cannot be sustained. Even otherwise the addition of 20% on the facts and circumstances is apparently too high. Once the purchases are held to be bogus then the trading result declared by the assessee cannot be accepted and right course in such case is to reject books of accounts and profit has to be estimated by applying a comparative profit rate in the same trade. Though there can be a little guess work in estimating profit rate but such profit rate cannot be punitive. - Decided in favour of assessee.

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