Accumulation of fund u/s 11(2) - Failure to submit Form 10 - information related to accumulation and purpose for utilization of accumulated income -alternatively claim of exemption u/s 10(23C)(iiiad) - HELD THAT:- It is pertinent to note that as per section 11 of the Act, the assessee is required to exercise option for accumulation of funds in a prescribed format as prescribed under rule 17 of the Income Tax Rules (in short ‘the Rules’). The time limit prescribed under the rule 17 for exercising such option is the time limit as prescribed under sub-section 1 of section 139 of the Act for furnishing of return of income. Admittedly, the assessee failed to exercise this option as prescribed under the rule 17.
CIT(A) has pointed out serious discrepancies in the resolution of the society for setting apart of fund. Therefore, the judgement of the Hon'ble Bombay High Court rendered in the case of CIT Vs. Nagpur Hotel Owners Association [1992 (10) TMI 12 - BOMBAY HIGH COURT] in our considered view would not be applicable as in this case, the foundation of exercising the option itself is found to be faulty. Therefore, we do not see any reason to interfere in this finding of the Ld. CIT(A). Same is hereby affirmed. Ground No.3 of the assessee’s appeal is rejected.
Availability of exemption u/s 10(23C)(iiiad) - HELD THAT:- As relying on COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS VERSUS DIRECTOR GENERAL OF INCOME TAX [2012 (3) TMI 289 - DELHI HIGH COURT] we hereby direct the A.O. to grant exemption u/s 10(23C) of the Act and delete the addition.
Addition on account of undisclosed sale of scrap - Addition sustained by the CIT(A) without admitting the additional evidence submitted by the assessee - HELD THAT:- We find that as per RG-1, the assessee has shown various quantities of scrap with job workers. Therefore, there are entries in the RG-1 regarding the scrap with job workers and the AO has taken these quantities from the RG-1. It is not in dispute that in the Stock Register i.e. RG-1, the assessee has shown scrap with various job workers. However, complete details of job workers are not appearing in the stock register due to the format as provided under the excise rules. When the AO asked the assessee to explain the difference of the scrap of sale shown by the assessee in the books of accounts as well as the scrap shown in the RG-1, the assessee has initially explained the reasons for difference which is reproduced by the AO
Excise Duty is leviable because of the reasons that the assessee is a manufacturer of the goods and not the job workers. On further show cause notice issued by the AO regarding partywise details of job work and other relevant materials on the issue, the assessee again filed the replies as well as details. We find that as per the assessment proceeding sheet, the AO has clearly stated that requisite details were filed by the assessee except against Query Nos. 9,25 & 26. The AO has then again asked the assessee to produce the relevant details regarding query Nos. 9,25, & 26. The first query of the AO was about the details of excise duty paid on scrap and sale of scrap as per books of accounts. The second query was regarding furnishing the details of increase in purchase costs and decrease in the sale price. The second query was not related to scrap sale. As regards the first query, the details were produced by the assessee and the AO thereafter has not raised any further query and nothing is appearing in the proceeding sheet. However, the AO finally made the addition of the differential amount which assessee has claimed that the scrap remained with the job workers.
When the assessee has produced all the relevant documentary evidence in support of the claim and also filed an application under Rule 46A of Income Tax Rules with the CIT(A) then rejecting the said application by the ld. CIT(A) only on the ground that the assessee has not produced the said evidence before the AO despite sufficient opportunities is not justified particularly when all the material was forwarded to the AO alongwith written submissions for the remand report. Once the AO was asked to submit the remand report then the evidence produced by the assessee was also required to be examined by the AO. In the case in hand, the AO has not submitted any remand report as pointed out by ld. CIT(A) while passing the impugned order.
Therefore, non-furnishing of remand report cannot taken against the assessee rather it is a ground for taking adverse inference that the evidence produced by the assessee is not disputed by the AO.
Accordingly, in view of the above facts and circumstances of the case, we set aside the orders of the authorities below qua this issue and consequently the addition made by the AO on account of unaccounted scrap sale is deleted.
Disallowance u/s 14A - HELD THAT:- It is clear from the details given by the AO that during the year under consideration there is a substantial reduction in the investment in the shares. There is a sale of shares of more than ₹ 2.00 crores during the year and therefore, it is clear that the source of investment made during the year is sale proceeds of the existing investment in the shares.
Assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. The sale proceeds of shares of Oil India Ltd are much more than the investment in shares of ONGC. Further as per funds available with the assessee, it is clear that assessee's own funds are many times more than the investment in shares. Therefore, in these undisputed facts, no disallowance is called for on account of interest expenditure.
As regards the disallowance of indirect administrative expenditure, we find that there is churning in the investment portfolio during the year under consideration as the assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. Therefore, there is a process of decision making at the highest level of management of the assessee for selling the shares of Oil India Ltd. and purchase of shares of ONGC.
Hence the disallowance on account of indirect administrative expenditure being 5% of average investment is justified. Accordingly, the addition made by the AO u/s 14A is sustained to the extent of ₹ 1,07,094/-.
The Supreme Court dismissed the special leave petition due to low tax effect. Delay was condoned, and any pending application was disposed of. (2019 (12) TMI 833 - SC Order)
Revision by CIT u/s 263 - disallowance u/s 14A ; undervaluation of the closing stocks; interest on borrowed funds w.r.to interest free loan to its sister concerns; and commission on sales - CIT also directed that AO is free to examine any other issues which have not been covered in this order except those issues which have already been considered and decided by the CIT (A) - ITAT held that it was incumbent upon the CIT to have shown as to how the assessment order was prejudicial to the interest of the Revenue and this had to be done on the basis of an assessment of the material on objective criteria and quashed the revision also confirmed by HC - HELD THAT:- Special leave petition is dismissed.
Doubtful advances and debts as allowable deduction u/s 115JB - HELD THAT:- Question can be answered in favour of the revenue and against the assessee by virtue of the retrospective amendment of section 115JB explanation (1)(i) with effect from 1st April 2001. We answer the question accordingly.
Customs duty exemption - mercantile system of accounting - income of the year of incremental growth in FoB value of exports of the year of receipt of certificate/licence - HELD THAT:- Under a customs notification dated 8th April 2005 the goods imported against a duty credit certificate issued under the target plus scheme in the relevant foreign trade policy were exempted from duty. This duty credit certificate was issued to star export house on the basis of incremental growth in FOB value of exports made during the financial year 2003-2004.
The respondent assessee was following the mercantile system of accounting. It had accounted for the amount representing the exemption from duty in the accounts of the financial year in which the certificate was issued. This has been disallowed by the income tax authority.
Assessing Officer, the Commissioner of Income Tax (Appeals) and the tribunal ruled in favour of the assessee.
Deduction u/s 10B(2)(ii) and 10B(2)(iii) - HELD THAT:- The controversy involved in this appeal is squarely covered by a judgment in M/S TRIDENT MINERALS [2018 (12) TMI 640 - KARNATAKA HIGH COURT] . In view of the aforesaid submissions and for the reasons assigned in the aforesaid judgment, substantial question of law No.1 is answered against the Revenue and in favour of the assessee.
Computation of loss - Tribunal is right in holding that the loss should be allowed at 3% of the total quantity and not on the quantity of wastage, as computed by the Assessing Authority? - HELD THAT:- The aforesaid substantial question of law which has been framed by a bench of this Court is not a question of law, but is a question of fact as it pertains to the weight of loss on total quantity. Therefore, we are not inclined to answer the same.
Reopening of assessment u/s 147 - Sanction for issue of notice u/s 151 - HELD THAT:- Admittedly, the impugned notice u/s 148 was issued in respect of Assessment Year 2002-03, which is clearly after four years from the end of the relevant assessment year.
The contention of learned counsel for the parties is not acceptable. The Additional Commissioner is not equivalent to the rank of Commissioner or any other designation as defined under Section 151 (1) of the Act. Therefore, the impugned notice (Annexure-1), which has been issued to the petitioner, is bad in law and is required to be quashed and the same is quashed. Rule is made absolute to the aforesaid extent.
Exemption u/s 54 - residential house property - how much area of the total plot area to be considered land appurtenant thereto - assessee is dental surgeon by profession and is Professor in Medical College - case of the assessee was selected for framing scrutiny assessment by Revenue u/s 143(3) read with Section 143(2) - HELD THAT:- It is admitted by assessee before the authorities below that assessee is having a social standing. The assessee is running its clinic from one of the best localities of Chennai namely T.Nagar. Thus, assessee is a man of means having high social status and standing. The investments u/s 54 of the 1961 Act are required to be made in buildings or lands appurtenant thereto , being a residential house and we have already seen definition of ‘residential house’ as above in this order.
Therefore , only land which is appurtenant to residential house can be considered for claiming deduction u/s 54. This is a question of fact which requires investigation into facts and the facts may differ from case to case. The land may be integral part but the same may not necessarily be appurtenant to the building thereon as the same may not be required for enjoyment of the Building situated on the land. We are of the considered view that Revenue has rightly placed reliance on decision of Smt. Asha George v. ITO [2013 (1) TMI 545 - KERALA HIGH COURT] and in the case of CIT v. Zaibunnissa Begum (1985) [1984 (7) TMI 62 - ANDHRA PRADESH HIGH COURT]
The assessee holds plot of land of 4973.125 square feet. It has building existing of 220 square feet on said plot of land which is even less than 5% of the total plot of land . Thus, it could not be said that rest of the plot of land is appurtenant thereto the building of 220 square feet existing on said plot of land for enjoyment of the said building. The assessee has claimed that there is open space which is used for car park, septic tank, garden etc. .
No doubt, these open spaces may be integral part but certainly these are not required to enjoy building existing of 220 square feet on plot of land of 4973.125 square feet. How much land should be treated as appurtenant thereto is a question of fact and depends upon facts and circumstances of the case and in each case , the facts may differ . Both the authorities below have concurred that 25% of the total plot area to be considered land appurtenant thereto. These may require estimation which may involve guess work and it could not be said that estimation done by authorities below in instant case is perverse or without any reasonable basis. We are not inclined to interfere with the decision taken by both the authorities below as we have observed that estimation done by authorities below is honest and reasonable estimates based on facts of the case and could not be said to be a perverse view taken by authorities below. Our above view is strengthened by Decision of Hon’ble Supreme Court in the case of Kachwala Gems v. JCIT [2006 (12) TMI 83 - SUPREME COURT] - Decided against assessee.
Disallowance of deduction u/s. 80IA on ICDs/CFS which are Inland ports - HELD THAT:- This issue is squarely covered by the decision of CIT vs. Container Corporation of India Ltd. [2018 (5) TMI 359 - SUPREME COURT] in which the Hon’ble Supreme Court of India has adjudicated the similar issue against the Revenue as held ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places
Depreciation on intangible assets being value of License acquired from the Indian Railways for running container trains on Indian Railways - HELD THAT:- The issue is squarely covered by the decision of the ITAT for the assessment year 2010-11 in assessee’s own case [2018 (9) TMI 142 - ITAT DELHI] hold that assessee is eligible for depreciation @ 25% on the intangible asset acquired by it, hence, the same is allowed and accordingly, the ground no. 2 raised by the assessee is allowed.
Deduction on account of advance lease rent paid for the land taken on long term lease for business purposes on pro rata basis - HELD THAT:- In assessee’s own case [2018 (9) TMI 142 - ITAT DELHI] dispute is set aside to the file of the AO with the direction to assessee to furnish all requisite details in respect of the claim of depreciation. The AO shall then verify the details to determine whether the claim of the assessee is allowable or not as per law.
Penalty u/s 271(1)(c) - application for condonation of delay - HELD THAT:- Once sufficient material is available on record and assessee made a request for condonation of delay in statement of facts, that is sufficient for Ld. CIT(A) to deal with the submission of the assessee whether to the condone the delay in filing the appeal or not ? Therefore, such is not a relevant reason to reject the claim of assessee.
Considering the above discussion, it is clear that appeal of assessee was filed within the period of limitation. Therefore, there is no occasion for the CIT(A) to hold that appeal of assessee is time barred and should not be admitted to decide on merits. In this view of the matter, we set aside the impugned order of the CIT(A) and hold that appeal filed by the assessee before the Ld. CIT(A) is within the time.
Accordingly, appeal of assessee is restored to the file of CIT(A) with a direction to re-decide the appeal of assessee on merits and in accordance with law, by giving reasonable, sufficient opportunity of being heard to the Assessee and the A.O. Accordingly, appeal of Assessee is allowed for statistical purposes.
Reopening of assessment u/s.147 - Notice issued by ITO who had no jurisdiction over the assessee - HELD THAT:- We find that the assessee has filed his return of income on 25-11-2009 showing address as Plot No. 197, Saurabh Society, Opp. DIP Kiran Society, Gunjan, Vapi, Gujarat with Income Tax Officer, Ward- 1, Vapi. Thus, the assessee himself stated his jurisdiction with Income Tax Officer, Ward- Vapi. The PAN database also shown same address. Therefore, notice u/s 148 has been validly issued by the AO, who was having correct jurisdiction once the assessee on correct address as per address shown in return of income. There is no evidence on record whether the assessee has intimated change of address.Therefore, where the assessee not intimated change of address and not carried out change in PAN database, the AO has correctly exercised his jurisdiction for issue of notice under section 148 of the Act.
Addition being cash deposits by the assessee in bank account with ICICI Bank Ltd. - HELD THAT:- Agricultural land holding is sufficient but same is appearing in the Revenue records in the name of various family members of the assessee being his father who is 95 years old, mother who is 90 years old and one non-resident brother who is residing in London. Thus, the facts remains that the agricultural land holding is hereditary agricultural land and standing in the name of various members of the HUF, including the assessee,on which agricultural operations is being carried out by the assessee and expenses thereon being incurred by the assessee and sale proceeds of same has been used for cash deposits in bank account by the assessee. Since the assessee is the only person looking after financial affairs of the family therefore, it is but natural that sale proceeds of agricultural products have been used for cash deposits in his bank account. Therefore, considering the agricultural land holding of the family, bills of agriculture products, and the assessee is only person who looking after financial affairs and circumstantial surrounding circumstances, we are of the considered opinion that said agricultural income has been used for cash deposits made in the ICICI Bank account. In view of this matter, the addition sustained by the Ld. CIT (A) is therefore, deleted. This ground is therefore, allowed.
Addition on account of bank interest from S/B account of ICICI Bank Ltd. - HELD THAT:- AO made addition of interest of ₹ 1, 306 from ICICI bank, ₹ 1, 340 from Bank of Baroda, ₹ 3, 997 from Union Bank of India as same was not shown by the assessee. These were agreed to be added. However, in appeal these were contested as bank interest up to ₹ 10,000 is exempt under section 80L of the Act. However, CIT (A) held the provision of section 80L was omitted with effect from 01.06.2006 and equivalent provision was introduced u/s. 80TTA with effect from 01.04.2013. Hence, confirmed the same. In view of these circumstances and facts that the assessee has agreed for addition during the course of assessment proceedings, we do not find any merit in this ground, hence, it is dismissed.
Reopening of assessment u/s.147 and issue of notice under section 148 - HELD THAT:- We hold the reopening of assessment as valid and in accordance with law. So far, reliance on the decision of Co-ordinate Bench of tribunals as above, we note that in said decisions, the AO had not made any preliminary enquiries regarding source of cash deposits in bank account. In view of these facts, the above-cited decisions are distinguishable on fact and in law hence, the ratio of the same is not applicable. Further, in the case of Raymond Woollen Mills Ltd. v. ITO [1997 (12) TMI 12 - SUPREME COURT] held that in determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at such stage. Considering all the circumstances, we are of the considered opinion that the AO was justified in reopening of assessment. Accordingly, same is upheld. This ground is therefore, dismissed.
Late filing fees u/s 234E and interest on account of late payment - The said fee u/s 234E was levied on account of late filing of quarterly electronic TDS return, as provided u/s 200(3) of the Act read with Rule 31A of the Income Tax Rules - Scope of amendment - HELD THAT:- As rightly observed by co-ordinate bench in para-17, the decision of Hon’ble Bombay High Court in Rashmikant Kundalia v. Union of India [2015 (2) TMI 412 - BOMBAY HIGH COURT] deal only with examining the constitutional validity of provisions of section 234E of the Act and do not deal with effect of amendment in Section 200A w.e.f. 01.06.2015. We hold that view favorable to the assessee was to be adopted and therefore, the levy of fees u/s 234E for any period prior to 01/06/2015 would not be sustainable in the eyes of law. We order so. See MEDICAL SUPERINTENDENT RURAL HOSPITAL DODI BK AND JUNAGADE HEALTHCARE PVT. LTD. [2018 (10) TMI 1587 - ITAT PUNE]
So far as the levy of interest of ₹ 1,485/- is concerned, the same being mandatory and consequential in nature, would require no interreference on our part. The action of revenue in levying the same is upheld.
Enhancing the addition u/s.251(10) - cash deposited in Bank accounts treated as alleged unexplained cash deposits - HELD THAT:- We find that the bank account of the assessee is showing cash deposits and simultaneously cash withdrawals within a day or today. Therefore, the entire cash deposits cannot be treated as unexplained as there is the debit and credit on both account. It is further discernable from the pattern of cash deposit as reflected from the bank account that these deposits are simultaneously being withdrawn. Therefore, in such a situation the only course of action is to consider the peak balance for addition, which is supported by various decisions cited by ld. counsel. We find that the peak balance as on 18- 09-2019 is at ₹ 1,68,025/- accordingly the addition of ₹ 40,81,465/- is restricted to peak balance of ₹ 1,68,025/-. Accordingly, all the above grounds of appeal are partly allowed.
Penalty u/s 271(1)(c) - HELD THAT:- Penalty u/s.271(1)(c) was initiated for furnishing inaccurate of particular of incomes, whereas the penalty has been imposed by the AO on account of concealment of income. Therefore, the penalty is not tenable in law, in the light of decision of Hon’ble Bombay High Court in the case of CIT v. Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT] wherein it was held that where the AO was initiated penalty proceedings for furnishing inaccurate particulars of income and imposing penalty for concealment of income, the order imposing penalty had to be made only on ground of which penalty proceedings had been initiated and it could not be on fresh ground of which assessee had no notice, penalty has to be deleted. Penalty levied u/s.271(1)(c) is not sustainable in law as no specific charge was levied, hence it is cancelled. Accordingly, the appeal of the assessee is allowed.
Disallowance of deduction u/s 54B - Validity of assessment framed by the AO for want of jurisdiction to take up the issue of disallowance of deduction u/s 54B without having necessary approval of conversion of limited scrutiny to comprehensive scrutiny - HELD THAT:- In the proceedings for limited scrutiny the AO was satisfied with the source of increase in the capital of the assessee and even did not proceed further after the reply and documents filed by the assessee in response to the notice u/s 142(1) dated 4-07-2016. Only after dropping the said notice, the AO issued fresh notice u/s 142(1) on 25-11-2016. The AO has finally made addition only on account of disallowance of deduction u/s 54B.
Therefore, at the time of initiating the complete scrutiny, the issue under limited scrutiny was not pending with the AO as he was satisfied with the reply and documentary evidence on the said issue. In the case in hand, the AO has not intimated the assessee about the conversion of limited scrutiny to complete scrutiny which is a serious violation of the instructions issued by the CBDT.
AO has taken up the issue and initiated proceedings for complete scrutiny without necessary approval with him. Therefore, the issue taken up by the AO regarding disallowance of deduction u/s 54B is prior to the necessary approval communicated to the AO and therefore, in the absence of communication in writing to the AO about the approval, the assumption of jurisdiction by the AO is invalid. Consequently, the addition made by the AO by denying the deduction u/s 54B is not sustainable and the same is deleted. - Decided in favour of assessee.
Delay in filing Miscellaneous Application - Miscellaneous Application filed belatedly with a delay of 546 days - HELD THAT:- When there is no provision of condonation of delay for filing of the Miscellaneous Application, then the Miscellaneous Application filed belatedly is not maintainable being barred by limitation provided under section 254(2) of the Act and accordingly the same is dismissed.
Assessment u/s 153A - suppression of income - Addition made on account of Client Code Modification(CCM) - HELD THAT:- Client code modification is permitted intraday, i.e. on the same day. As per Commodity Exchange, if client code modification is upto 1% of the total orders, there is no penalty and if it is greater than 1% but less than 5%, the penalty is ₹ 500/-. If it is greater than 5% but less than 10%, penalty is ₹ 1000/- and if it is greater than 10%, then penalty is ₹ 10,000/-. From the above, the only inference that can be drawn is that as per MCX, the client code modification upto 1% is absolutely normal and therefore, the broker is permitted to modify the client code upto 1% without paying any penalty. Even client code modification upto 5% is not considered unusually high because that is also permitted with the token penalty of ₹ 500/-.
CIT(A) has given the number of transactions entered into by the assessee for the period 2004-05 to 2007-08 and the number of client code modification and percentage thereof. We have also reproduced the same at paragraph No.6 of our order. From the said details, it is evident that the client code modification was done in four years 36,161 times. As an absolute figure, the client code modification may look very high, but if we look it at in terms of total transactions, it is only 0.94%. The total number of trade transactions is 38.58 lacs and the client code modification is only 36,161. Therefore, the client code modification is less than 1% of the total trading transactions. As per circular of Commodity Exchange, client code modification upto 1% is quite normal and is permitted without any penalty.
AO has not given any reason on what basis he presumed the client code modifications to be unusually high. In the light of the MCX circular, we are of the opinion that the client code modification was quite nominal and not unusually high as alleged by the AO.
Since in the instant case it is an admitted fact that the assessee is not a member of any exchange and cannot execute CCM and the transactions on account of CCM done by the group concerns are not found to be false or untrue and since SEBI or the stock exchange has not taken any action treating the transactions to be non genuine and volume of CCM occurred are within the permissible limit allowed by the SEBI, therefore we are of the considered opinion that there is no perversity in the order of the CIT(A) deleting the addition. - Decided against revenue.
Disallowance u/s 14A - Sufficiency of own funds - HELD THAT:- Only the own funds had been utilized for making investments that had yielded exempt income and hence, there cannot be any disallowance of interest on borrowed funds u/s.14A of the Act. Reliance in this regard was placed on the decision of Reliance Utilities and Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] . We find that with regard to disallowance of indirect expenses, the Co-ordinate Bench of this Tribunal in assessee’s own case [2011 (9) TMI 635 - ITAT MUMBAI] had remanded this issue to the ld. AO for fresh consideration. The ld. AO vide order dated 09/01/2013 in giving effect proceedings to the said Tribunal order had followed the computation mechanism as was given by the Tribunal for the A.Y.2006-07. In other words, the computation methodology adopted by the assessee which was submitted during the course of assessment proceedings for A.Y.2006-07 i.e. the year under appeal before us before the ld. AO was practically adopted by the ld. AO in giving effect proceedings to Tribunal order for A.Y.2001-02. Hence, the workings of disallowance u/s.14A of the Act given by the assessee before the ld. AO towards disallowance u/s.14A of the Act in the sum of ₹ 59,06,284/- had become final and deserves to be upheld.
Set off of unabsorbed depreciation of earlier years while deduction u/s.80IA - HELD THAT:- covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of ACIT vs. Velayudhaswamy Spinning Mills Pvt. Ltd [2016 (11) TMI 373 - SC ORDER] wherein the SLP filed by the revenue against the order of the Hon’ble Madras High Court was dismissed by holding that loss in years earlier to initial assessment year which were already absorbed against profit of other business cannot be notionally brought forward and set off against profits of eligible business in the Initial Assessment Year as no such mandate is provided in Section 80IA(5) of the Act. It is not in dispute that A.Y.2006-07 is the Initial Assessment Year in respect of Jojo Bera unit in terms of Section 80IA(5) of the Act. It is not in dispute that Jojo Bera Unit is an eligible undertaking and is entitled for claim of deduction u/s.80IA of the Act. We also find that the recent Circular issued by the CBDT vide Circular No.1/2016 dated 15/02/2016 also had endorsed the view taken in the case of Velayudhaswamy Spinning Mills supra and had directed the revenue to withdraw the said ground before various appellate forums.
Deduction on prepayment of debentures and its related impact while computing deduction u/s.80IA - HELD THAT:- We direct the ld. AO accordingly to give life to the issue of allowability of deduction towards premium on prepayment of debentures based on the final outcome of the appeals of the revenue for the Asst Years 2004-05 and 2005-06. The ground Nos. 3(a) to 3(d) raised by the assessee are disposed off subject to the directions mentioned hereinabove.
Disallowance u/s.40A(9) of the Act in respect of payments made to local schools in the locality in which eligible undertakings are situated - HELD THAT:- As decided in STATE BANK OF INDIA [2019 (6) TMI 1183 - BOMBAY HIGH COURT] assessee is entitled for deduction in the sum of ₹ 38,85,333/- in respect of payments made to schools in which children of the employees of the assessee are studying, among others.
Disallowance of discount on issue of Euro Bonds - HELD THAT:- AO had observed that in earlier year, the assessee had earned some gain out of this transaction and the same had not been offered to tax as it is notional in nature. We are unable to persuade ourselves to accept to the contentions of the ld. AO that assessee had made certain foreign exchange fluctuation gain in the earlier year which was not offered to tax by the assessee on a totally different footing, whereas the subject mentioned issue in dispute being liability of discount on issue of Euro notes, which has got absolutely nothing to do with the foreign exchange gain which arose in earlier years. Hence, we hold that the ld. AO had grossly erred in disallowing the said sum of ₹ 18,88,103/- towards discount on issue of Euro notes. We find that the action of the assessee is exactly in line with the ratio laid down by the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation [1997 (4) TMI 5 - SUPREME COURT] . Accordingly, ground No.3 raised by the revenue is dismissed.
Disallowance u/s.40a(ia) - payment of retention amount - HELD THAT:- The comments made by the Tax Auditors in the tax audit report that tax has not been deducted at source by the assessee at the time of payment of retention amount was in respect of a solitary case of payment made to United Shippers Ltd, where payments were made during the year by the assessee without deduction of tax at source since adhoc payments were made without reconciliation of the amount finally payable to the party. The assessee had even submitted evidence that even in this case i.e. United Shippers Ltd, the short fall of tax amounting to ₹ 11,21,342/- was indeed remitted to the account of Central Government on 07/03/2006 which is before the end of the previous year relevant to A.Y.2006-07. We find that in any case, the ld. AO is absolutely not justified to take the figure of sundry deposits from the balance sheet and treat the same as retention money and thereafter treat 50% of the said sum as retention money.
The entire exercise of the ld. AO is absolutely without any basis. We hold firstly that there is absolutely no default committed by the assessee in accordance with provisions of Chapter XVIIB of the Act in the instant case. Secondly, the figures taken by the ld. AO are totally incorrect. Hence, by all force, the disallowance u/s.40(a)(ia) of the Act deserves to be deleted which has been rightly done by the ld. CIT(A) on which action, we do not find any infirmity.
Direction of ld. CIT(A) to ld. AO to decide the issue as per the report of ITO International Transaction in respect of TDS on payment to foreign parties - HELD THAT:- We find that the ld. AO cannot have any grievance on this direction as admittedly the ld. AO had been merely directed to follow the order passed by ITO International Transaction, TDS Range-2, Mumbai. It is also pertinent to note that the ld. AO had passed an order dated 13/05/2013 giving effect to the order of the ld. CIT(A) wherein he had merely followed the directions of ITO International Transaction, TDS Range-2, Mumbai and granted some relief to the assessee u/s.40(a)(i) of the Act. We find that assessee had not preferred further appeal to this Tribunal against the findings of International Transaction, TDS Range-2, Mumbai. Hence, we do not find any merit in the ground No.5 raised by the revenue and hence, the same is dismissed.
Disallowance of prior period expenses - HELD THAT:- In the instant case there is no dispute that the entire expenses got crystallized during the year under consideration and hence, we do not find any infirmity in the order of the ld. CIT(A) granting deduction towards prior period expenses to the assessee. Accordingly, ground No.3 raised by the revenue is dismissed.
Rectification of mistake - double deduction - Reduction of premium on prepayment of debentures attributable to the eligible undertaking according to the ld. AO, which was reduced by the ld. AO while computing the deduction u/s.80IA of the Act while framing the assessment - HELD THAT:- CIT(A) had rightly observed that there is double disallowance of ₹ 2,44,86,356/- pursuant to the said action of the ld. AO in view of the fact that the ld. AO had granted deduction towards premium on prepayment of debentures of ₹ 4,32,67,811/- only while framing assessment and had further reduced this sum of ₹ 2,44,86,356/- from the claim of deduction u/s.80IA of the Act. We find that the ld. CIT(A) had directed the ld. AO to verify the record in this regard and rectify the mistake. We are not able to appreciate the grievance, if any, for the revenue in this regard
Validity of the re-assessment framed u/s 147 - as argued initiated on the same set of documents which were available during the original assessment proceedings u/s143(3) - HELD THAT:- AO during the original assessment proceeding has questioned about the different components of core shipping activities and the turnover vide notice dated 1st September, 2008 under section 142(1)
Assessee furnished the details of the excess provisions written back vide letter dated 10th October 2008 along with the submission that it is engaged fully in the business of shipping and no other business activity is carried on by it. The income has been offered to tax under tonnage scheme except the income from dividend and interest on deposits which was suo-moto treated as income from other sources. The copy of the letter is enclosed on pages 143 to 148 of the paper book.
The assessee further vide letter dated 27th October, 2008 has also furnished the details of turnover for core shipping including the excess provision written back of ₹ 23.94 crores, sundry receipts of core shipping of ₹ 1111 lacs and sundry balance written back of ₹ 47 lacs. The copy of the letter is enclosed on pages 150 to 161 of the paper book.
AO in the original assessment proceedings under section 143(3) of the Act has conducted enquiries about the items as mentioned in the reasons recorded issued under section 148 of the Act. Therefore, the reopening under section 147 of the Act based on the same set of documents examined during the original proceedings is not sustainable. - Decided in favour of assessee.
Unexplained investments u/s 69 - HELD THAT:- Revenue had not been able to place on record any ‘material’ which could dislodge or disprove the aforesaid claim of the assessee, and therein prove to the contrary that the aforesaid amounts were actually paid by the assessee. Rather, we are also persuaded to subscribe to the reasoning given by the assessee for the failure on its part to make the aforesaid payments. It is the claim of the assessee that as it was passing through a financial crisis, and also there were certain internal disputes amongst the directors of the assessee company, therefore, the purchase transaction of the aforesaid land at Village : Mundwa, Pune, which was proposed to be acquired for setting up a residential-cum-commercial project had came to a standstill. The aforesaid claim of the assessee is also supported by the fact that an amount of ₹ 2,00,00,000/- had thereafter been received back by the assessee company from the aforementioned persons i.e S/sh. Avinash Bhosale & Amit Bhosale on 05.03.2013. In the backdrop of the aforesaid facts, we are of the considered view, that the CIT(A) after duly appreciating the facts of the case had by way of a very well reasoned order vacated the addition - Decided in favour of assessee.
Bogus purchases - disallowance @12.5% of the aggregate value of impugned purchases - HELD THAT:- Neither the assessee had been able to substantiate the genuineness of the purchase transactions on the basis of any irrefutable documentary evidence, nor the revenue has carried out the required extensive verifications for arriving at a fair conclusion as regards the genuineness of the purchase transactions. Accordingly, in all fairness, we ‘set aside’ the order of the CIT(A) in context of the issue under consideration and restore the matter to the file of the A.O for carrying out necessary verifications. Needless to say, the A.O shall in the course of the ‘set aside’ proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate the genuineness of the impugned purchase transactions on the basis of fresh documentary evidence. Decided in favour of assessee for statistical purposes.
Reopening of assessment u/s 147 - approval to the reopening of assessment in a mechanical manner - HELD THAT:- Since in the present case the approving authority has given approval to the reopening of assessment in a mechanical manner without due application of mind by mentioning only “Yes” in Column No. 12 of the Format for Recording the Reasons for Initiating Proceedings u/s. 147 and For obtaining the Approval of the Addl./JCIT Commissioner of Income Tax and therefore, the legal issue in dispute is squarely covered by the aforesaid finding of the Tribunal, hence, respectfully following the aforesaid precedent in the case of Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New Delhi [2019 (8) TMI 1121 - ITAT DELHI] the reassessment is hereby quashed and accordingly the additional ground no. 2 is allowed.
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