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Income Tax - Case Laws
Showing 381 to 400 of 10077 Records
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2019 (12) TMI 761
Income from house property - Computation of ALV of the office premises at Balaji Bhavan when the premises were as lying vacant - HELD THAT:- As observed that though the benefit of computing the “ALV‟ u/s 23(1)(c) could not be extended to a case where the property was not let out at all, however the same would duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year.
When in the case of the present assessee the property under consideration had remained let out for a period of 36 months, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but had never remained under the self occupation of the assessee, thus, no infirmity emerges from the computation of the “annual value‟ of the said property under Sec. 23(1)(c) by the assessee.
Ground of appeal No. 1 and 2 of the assessee are allowed and the determination of the “annual value‟ of the property under consideration viz. Unit No. 401 & 425 of project Balaji Bhavan by the A.O by taking recourse to Sec. 23(1)(a), which thereafter was sustained by the CIT(A), is vacated.
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2019 (12) TMI 760
Validity of assessment - HELD THAT:- We find that the assessee submitted that the assessment order might have passed in the month of January, 2011, with an ante-date, but, there is no evidence to support his argument. We are of the view that there is no basis for the assessee to raise this ground and hence, the same is dismissed.
Case was selected for scrutiny under CASS and not for any specific purpose. The AO has power under jurisdiction to scrutinize the entire of the assessee and, therefore, this ground of the assessee is dismissed.
Short term capital gain on profit on shares - Period of holding - HELD THAT:- The assessee is buying shares and selling the same within 2 days for profit. All the shares in the above table except one scrip pertaining to EASUN Reyrol, which is purchased on 25/07/2007 and sold on the same day, the assessee purchased on 24/07/2007 and sold on 206/07/2007 i.e. within two days. Therefore, it is very much evident that the intention of the assessee is only to make the profit by buying and selling the shares in a systematic manner. The assessee did not hold any shares for a longer period that means, the assessee’s intention is not at all earn dividend income, but, only he wanted to make profit. In the written submissions, the ld. counsel for the assessee relied on various case law as well as CBDT Circular No. 6 of 2016, dated 29/02/2016. In our view, the same are not relevant to the facts of the case of the assessee. Therefore, the revenue authorities treated the assessee as a trader and not an investor is proper and accordingly, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee in this regard.
Disallowance of expenses under the head ‘conveyance & travelling’ and vehicle maintenance - AO made the disallowance on the ground that some of the vouchers are self made and not supported by bills and disallowance was to the extent of 30% of the amounts under the said heads of expenses - HELD THAT:- AO made the disallowances @ 30% of the expenditure on the ground that the some of the vouchers submitted by the assessee are self-made vouchers. The CIT(A) restricted the disallowance to 15%. Therefore, we find no infirmity in the order of CIT(A) and therefore, the same is hereby upheld dismissing the ground raised by the assessee on this issue.
Income from house property - HELD THAT:- Additional ground raised by the assessee is rejected in view of the fact that the CIT(A) has already adjudicated the same by remitting the same to the file of the AO. This ground is dismissed.
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2019 (12) TMI 759
Disallowance of interest u/s.36(1)(iii) - interest paid on borrowed capital - HELD THAT:- Assets acquired by the assessee were only stock in trade and not any plant and machinery warranting installation of the same and correspondingly putting use of the same would require some time. From the list of assets taken over by the assessee as tabulated above, we find that even the fixed assets taken over by the assessee company comprised predominantly of Goodwill to the tune of ₹ 582.25 Crores and very miniscule operation of fixed assets of ₹ 1.27 Crores were taken over by the assessee which admittedly was paid out of equity funds and the borrowed funds were not utilized at all for the same.
This fact is not controverted by the revenue before us. Hence, it could be safely concluded that the borrowed funds were used for acquiring only stock in trade by the assessee and hence, the same were meant only for the purpose of business of the assessee. Accordingly, the proviso to Section 36(1)(iii) of the Act would not come into operation at all. Once, the borrowing has been made for the purpose of business, interest paid thereon would become eligible for deduction u/s.36(1)(iii)
Merely because the assessee company had not claimed any depreciation on Goodwill during the year under consideration, it would not make any difference or alternatively it would not change the character of the assets taken over by the assessee company which are purely in the form of liquid assets such as finance receivables, trade receivables and claims receivables thereby forming part of stock in trade of the assessee.
We direct the ld. AO to grant deduction of interest paid on borrowed capital in the sum u/s.36(1)(iii) of the Act in the A.Y.2015-16. Accordingly, the ground raised by the assessee is allowed.
Disallowance of expenses being the cost of arranger fees, credit rating fees and loan processing fees to obtain loan funds - HELD THAT:- There is no dispute that the entire payments were made by the assessee company in connection with raising loan funds for the purpose of business. As rightly observed by the assessee, the allowability of the expenses incurred for raising loan funds would not depend on the utilisation of the loan funds for the purpose of procured assets. What is to be seen is whether the loans have been borrowed for the purpose of business by the assessee. In the instant case, there is absolutely no dispute that the loans have been borrowed by the assessee for the purpose of its business. The expenses payments of ₹ 15.35 Crores are only payments made to various parties who had assisted in procuring those loans and loan processing fees paid to banks. Hence, this is linked with the liabilities i.e. loans borrowed by the assessee. We also find that the ld. CIT(A) has also placed reliance on the CBDT Circular No.56 dated 09/03/1971. Accordingly, the said expenses are squarely allowable as deduction - Grounds raised by the revenue are dismissed.
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2019 (12) TMI 758
Claim of deduction u/s. 10B/10A - first appellate authority power to entertain a fresh claim of deduction not been made before the Assessing Officer - Whether deduction u/s. 10A shall not be admissible unless the assessee furnishes Form No. 56F along with the return of income and the report of an accountant as specified? - assessee made an alternative claim of deduction u/s.10A of the Act by filing a revised return but the same has not been entertained by the AO as there was no consistency in the claim of deduction and not supported by recognized certification - HELD THAT:- C IT(A) held that the assessee is eligible for deduction u/s. 10A of the Act and he relied on the judgment of the Delhi High Court in the case of CIT vs Technovate E Solutions P Ltd [2013 (3) TMI 372 - DELHI HIGH COURT]
Considering the fact that the assessee itself had claimed two different amounts for the deduction to be allowed u/s 10A and the Assessing Officer also had mentioned in the remand report submitted about change in the turnover subsequent to the order passed u/s 263, the Assessing Officer was directed to work out the claim of deduction to be allowed u/s 10A afresh in accordance with the Act. Accordingly, the CIT(A) allowed the appeal of the assessee.
Eligible for alternate claim of deduction u/s. 10A - No such claim was made by the appellant in the return of income filed and this was not raised as an additional ground/claim but as an alternative claim before the appellate authority, where as a claim for deduction u/s. 10B was already mad ein the return of income - HELD THAT:- As decided in M/S FLYTXT TECHNOLOGY P. LTD. [2017 (10) TMI 872 - KERALA HIGH COURT] no reason to think that the Tribunal has committed an illegality by directing the Assessing Officer to decide the matter afresh duly adverting to the claim of the assessee for the benefit of Section 10A.
Ground relating to entertaining a new claim of deduction u/s. 10A - There is no bar to entertain such claim by the CIT(A) otherwise than by filing a revised return as held by the Supreme Court of India in the case of Goetze (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT]
Disallowance of interest on diverted fund - HELD THAT:- Even if disallowance is made towards notional interest on account of diversion of funds to the sister concerns, it is of no consequence since the assessee’s income is exempted u/s. 10A of the I.T. Act.
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2019 (12) TMI 757
Reopening of assessment u/s 147 - unexplained investment - cash payment by the assessee in respect of the land purchased by them - addition based on seized material - HELD THAT:- As perused the statements of Shri Madan Mohan Gupta as produced before us as per directions of the Bench to the Department as well as statements of Shri Shankar Lal Saini and Shri Kanhiya Lal Saini and found that nothing incriminating has been stated in the statement of Shri Madan Mohan Gupta as well as in the statement of Saini brothers about the cash payment by the assessees in respect of the land purchased by them. Therefore, even if the seized material along with the statements of Shri Madan Mohan Gupta and Saini brothers are taken into consideration nothing has come out to be regarded as any incriminating material or fact to reveal any cash payments by the assessees for purchase of lands in question.
The addition made by the AO is solely on his own presumption of payment of cash without any tangible material or evidence in support of his decision. When the seized material found from Shri Madan Mohan Gupta as well as other material gathered during post search inquiry has not established any direct or proxy connection with the transaction of purchase of land by the assessees then the assumption and presumption of the AO that the assessee might have paid cash over and above the consideration shown in the sale deeds is only surmises and conjectures.
We note that the AO of the Saini brothers and father while framing the assessment U/s 144 r.w.s. 147 of the Act dated 18.03.2015 accepted the sale consideration as recorded in the sale deeds for the purpose of the assessing the capital gain. The AO however, made additions on account of unexplained investment by them on account of cash payment reflected in the seized material.
AO has not disturbed the sale consideration received by Saini brothers and father in respect of sale of land to the assessees before us. The said finding of the AO in case of Saini brothers and father demolished the case of the AO presuming the payment of cash by the assessees before us for purchase the land from Saini family members. Accordingly, when the transaction of sale of land and sale consideration is accepted by the AO of the Saini family members as recorded in the sale deeds then the addition made by the AO on account of cash payment by the assessees U/s 69B of the Act has no legs to stand in the absence of any incriminating material but the said addition is merely based on assumption of the AO.
Reopening after 4 years - no approval u/s 151 - absence of any valid sanction the notice issued u/s 148 - HELD THAT:- As perused the statements of Shri Madan Mohan Gupta as produced before us as per directions of the Bench to the Department as well as statements of Shri Shankar Lal Saini and Shri Kanhiya Lal Saini and found that nothing incriminating has been stated in the statement of Shri Madan Mohan Gupta as well as in the statement of Saini brothers about the cash payment by the assessees in respect of the land purchased by them. Therefore, even if the seized material along with the statements of Shri Madan Mohan Gupta and Saini brothers are taken into consideration nothing has come out to be regarded as any incriminating material or fact to reveal any cash payments by the assessees for purchase of lands in question. The addition made by the AO is solely on his own presumption of payment of cash without any tangible material or evidence in support of his decision.
When the seized material found from Shri Madan Mohan Gupta as well as other material gathered during post search inquiry has not established any direct or proxy connection with the transaction of purchase of land by the assessees then the assumption and presumption of the AO that the assessee might have paid cash over and above the consideration shown in the sale deeds is only surmises and conjectures. We note that the Assessing Officer of the Saini brothers and father while framing the assessment U/s 144 r.w.s. 147 of the Act dated 18.03.2015 accepted the sale consideration as recorded in the sale deeds for the purpose of the assessing the capital gain.
AO made additions on account of unexplained investment by them on account of cash payment reflected in the seized material. AO has not disturbed the sale consideration received by Saini brothers and father in respect of sale of land to the assessees before us. The said finding of the Assessing Officer in case of Saini brothers and father demolished the case of the AO presuming the payment of cash by the assessee before us for purchase the land from Saini family members. Accordingly, when the transaction of sale of land and sale consideration is accepted by the AO of the Saini family members as recorded in the sale deeds then the addition made by the AO on account of cash payment by the assessees U/s 69B of the Act has no legs to stand in the absence of any incriminating material but the said addition is merely based on assumption of the AO. - Decided in favour of assessee.
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2019 (12) TMI 756
Reopening of assessment u/s 147 - application of mind by concerned sanctioning authority u/s Section 151 - HELD THAT:- 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 that “ON THE BASIS OF ‘A’ ABOVE, I AM SATISFIED”, in the Reasons for Initiating Proceedings u/s. 147 and For obtaining the Approval of the Addl. Commissioner of Income Tax, Range-23, New Delhi, a copy thereof is placed at page no. 1 of the Paper Book, and therefore, the legal issue in dispute is squarely covered by the aforesaid finding of the Tribunal, hence, respectfully following the aforesaid precedent i.e. Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New Delhi decided [2019 (8) TMI 1121 - ITAT DELHI] respectively relevant to assessment year 2011-12, the reassessment is hereby quashed - Decided in favour of assessee.
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2019 (12) TMI 755
Revision u/s 263 - correctness of the claim of deduction u/s 80IB - case of the assessee was selected under CASS - whether the matter was selected for limited scrutiny or complete scrutiny ? - HELD THAT:- We find that firstly, there is no mention in the notice u/s 143(2) that the matter has been selected for limited scrutiny, secondly, along with notice u/s 142(1), a detailed questionnaire was issued by the AO on various issues emanating from the return of income filed by the assessee and the same have been responded by the assessee company from time to time. Had the case of the assessee being selected for limited scrutiny as so claimed by the ld AR, the questionnaire/inquiry/investigation would have been limited and restricted to such issues as also apparent from Instruction No. 5/2016 dated 14th July, 2016 issued by CBDT, which has been relied upon by the ld. AR and binding on the AO.
We are therefore unable to agree with the contentions of AR that merely because in the initial show cause notice issued by the Pr. CIT., it has been stated that the case was selected for limited scrutiny, it should be accepted that the case of the assessee was selected for limited scrutiny in view of material facts, as we have noticed above, as emanating from the records which shows clearly that the case of the assessee was selected for complete scrutiny.
Assessee having participated in the assessment proceedings and not raising this objection before the AO during the assessment proceedings cannot be permitted to raise this contention in the revision proceedings. We are therefore of the considered view that the case of the assessee had been selected under complete scrutiny and not under limited scrutiny.
In the assessment order passed u/s 143(3), AO has stated that “the assessee firm is notified by the Central Govt. in the special economic zones for construction and development of low cost project of houses and is also entitled for claim of deduction under section 80IB for any 10 consecutive assessment years out of fifteen years beginning from the year in which special economic zone has been notified.” This finding of the Assessing officer is clearly out of sync with the factual position and claim made by the assessee company in its return of income. This again shows clear non-application of mind and mechanical acceptance of the claim of deduction.
It is a clear case of lack of enquiry on part of the AO in not examining the claim of deduction u/s 80IB of the Act and the order passed by the Assessing officer is clearly erroneous and prejudicial to the interest of the Revenue and where the CIT has directed further examination by the AO and the matter has been set aside to the file of the AO, we see no infirmity in the action of the Pr CIT by invoking her jurisdiction u/s 263
When the matter has not been examined at first place by the AO and there are specific directions given by the Pr. CIT to examine the same after providing reasonable opportunity to the assessee, we do not see any infirmity in the action of the Pr CIT. The assessee would be within its right to raise all its contention on merit before the Assessing Officer and the same are left open and not examined by us. We therefore upheld the order passed by the ld Pr CIT u/s 263 of the Act and the grounds of appeal taken by the assessee are dismissed.
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2019 (12) TMI 754
Addition on the basis of loose paper - resumption u/s 292C - undisclosed income - survey u/s 133A carried out by the Department on the business premises of the assessee - details of share speculation transaction due to favorable share market position - HELD THAT:- As per statement itself 4 no document of assessee kept anywhere outside. No other irregularity found in books. Admittedly, the assessee had never entered into any share transaction in past or even subsequently. It defies any logic why the assessee should have ventured into share transaction, that too, speculative in nature, suddenly and without any reason. It also defies logic, why, if it was so lucrative so as to earn ₹ 1.28 crores in such a short period and absolutely without any effort, the assessee should discontinue such activity after few months.
The Survey Party was obviously aware about such lacuna/defects/non - existence of any detail, as not a single question was asked about such vital details/missing links, shortcomings, which any normal investigation officer would have asked.
We are of the view that the alleged print out in both the cases i.e. Shreeji Transport Services and Amplas Ploymerts Pvt. Ltd., both are dumb documents and no cognizance of the same can be taken for making addition. Both the authorities below have erred in making addition. Hence, addition in the case of Shreeji Transport Services Pvt. Ltd. and addition is deleted. - Appeals of assessee are allowed.
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2019 (12) TMI 753
Addition u/s 69 - addition based on a single loose sheet found from third party - HELD THAT:- In the case under consideration, the document in the form of receipt dated 2/5/2012 for ₹ 10 lakhs was seized from a third party and the party from whom the receipt has been seized, categorically stated, vide letter dated 12/2/2016, that the receipt dated 2/5/2016 was cancelled, as no payment has been made by the assessee. No corroborative evidence has been brought on record by the Department to indicate that the assessee had made cash payment of ₹ 10 lakhs for booking of the flat.
Merely relying on the receipt, which was seized from a third party, and despite the unrebutted fact that the said receipt had been cancelled by the Company, as affirmed by the Director, in his letter dated 12/2/2016, it cannot be concluded that the assessee had made payment of ₹ 10 lakhs for booking of the flat. Therefore, the addition so made by the AO and confirmed by the CIT(A), purely on guesswork and conjectures and surmises, cannot be sustained.
We reverse the order under appeal and delete the addition of ₹ 10 lakhs made u/s 69. - Appeal of the assessee is allowed.
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2019 (12) TMI 752
Computation of the capital gain on sale of residential properties - denial of benefit of indexation for the purpose of computing capital gain - AO rejected the claim of the assessee, as assessee did not furnish it through a return of income but by way of a letter - HELD THAT:- According to us it was not a fresh claim of the assessee but merely correction of a computation of capital gain. This issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in Principal Commissioner of Income tax v. Oracle (OFSS) BPO Services Ltd [2019 (1) TMI 1087 - DELHI HIGH COURT] .
Where assessee had filed a revised computation of income requesting allowance of certain amounts as deduction from capital gain, since it was not a case where any new claim for deduction was made and there was merely recomputation of claim already made by assessee, such revised computation was to be accepted in the assessment proceedings. We reverse the finding of the learned CIT – A and learned assessing officer holding that the learned AO should have considered recomputation of the claim of the assessee of capital gain.
Whether the indexation of the property shall be allowed to the assessee from the date of allotment of property or from the date on which the possession was given to the assessee/the date of registration? - Date on which the assessee paid the booking money for allotment of the house, he ‘held’ the property from that date, he might have ‘acquired/ purchased’ the property on later date. The basic reason for granting indexation of the cost of acquisition, which is linked with the cost inflation index, is to tax only the real income of the assessee and not the capital gain being appreciation of the property including inflation in the price (increase in the cost of living). Therefore, as the intention is to tax only the appreciation in the property excluding the appreciation in the price of the property due to inflation, the assessee must be granted the indexation of the cost in the financial year in which it has incurred/paid, irrespective of the fact that house property is subsequently registered in the name of the assessee or the possession is granted to the assessee of that property later on. In view of this, we are of the view that assessee must be granted indexed cost of acquisition of the sum paid in financial year 2005 – 2006 by applying the cost inflation index applicable to financial year 2005 – 2006 of 497 instead of cost inflation index of 551 applicable for financial year 2007 – 2008 (the year in which the possession of the property was given) to the assessee.
Sale of shares allotted to the assessee under employee stock option plan[ ESOP] and taking the sale value above fair market value as income from other source u/s 56 (2) (vii) - Correct head of Income - there is no transfer of any controlling interest - assessee has sold the shares and has not received any other property - chargeable to tax under the head capital gain or as a business income - benefit of section 54F denied - HELD THAT:- Issue squarely covered by the circular number 6/2016 of the CBDT and letter dated 2/05/2016 the above transaction of the sale of the shares and consequent gain arising therefrom should be chargeable to tax under the head capital gains only. Accordingly we direct the learned AO to tax gain arising on the sale of about shares under the head capital gain only. Thus as we have already held that the profits on sale of shares would be chargeable to tax under the head capital gain, the ground number 3 of the appeal of the assessee is allowed and ground number 1 and 2 of the appeal of AO are dismissed.
Grant of benefit under section 54F - As we have already held that the gains arising on the sale of the shares would be chargeable to tax under the head of capital gain, we direct learned assessing officer to grant deduction u/s 54F
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2019 (12) TMI 751
Initiation of re-assessment proceedings - HELD THAT:- More recently, the Hon’ble Supreme Court in Pr. CIT Vs. Maruti Suzuki India Ltd. [2019 (7) TMI 1449 - SUPREME COURT] has dealt with a similar situation in which notice was issued in the name of an amalgamating company. It was held that after amalgamation, the amalgamating company ceased to exist and thus the notice issued was rendered void ab-initio.
Their Lordships further held that participation in the proceedings by the assessee cannot operate as estoppel against law. It is manifest that the facts and circumstances of the instant case are mutatis mutandis similar to those as considered by the Hon’ble Supreme Court and the Hon’ble Bombay High court in the aforenoted cases. Respectfully following precedent, it is held that the initiation of re-assessment proceedings and the proceedings following thereafter in the name of the deceased are void ab-initio. The assessment order is set-aside.
Tribunal on the legal issue against the initiation of re-assessment proceedings, there is no need to dispose off the grounds on merits.
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2019 (12) TMI 750
Disallowance of expenditure incurred on feasibility study - HELD THAT:- Jurisdictional precedents in assessee’s own case and in view of the fact that no appeal was preferred by the Revenue for AYs 1986-87 to 2004-05 on the similar issue of incurrence of expenditure for feasibility study for project consultancy, we hold that the assessee is entitled for deduction as Revenue expenditure.
Disallowance of expenses on account of education cess - HELD THAT:- M/S ITC LIMITED VERSUS ACIT AND DCIT, CIRCLE-8, KOLKATA VERSUS M/S ITC LIMITED [2018 (11) TMI 1611 - ITAT KOLKATA] we direct the learned AO to grant deduction on account of education cess.
Disallowance u/s 14A - HELD THAT:- We direct the AO to disallow only to 1% of total exempt income under section 14A
Disallowance of commission paid to selling agents for effecting sale to Government parties - HELD THAT:- In the instant case, we find that the learned CIT(A) had categorically observed that the commission agents had indeed rendered liaison services to the assessee in connection with effecting sales to various Government authorities. It is also not in dispute that these commission agents had acted on behalf of the assessee to liaison with the Government parties and they are appointed as agents only by the assessee and not by the Government parties. Hence, the Government parties in response to notice under section 133(6) of the Act had replied, wherever applicable, that they had dealt with the assessee directly and not through the agent. We also find that the majority of the commission agents had indeed furnished the confirmations duly specifying the requisite details before the learned AO which are already on record but we find that there is no factual finding recorded by the lower authorities with regard to veracity of the said confirmations. Hence, as vehemently argued by the learned DR, we deem it appropriate to remand this issue to the file of the AO for de novo adjudication in accordance with law.
Claim of depreciation on Gopalpur project assets - HELD THAT:- DR submitted that this issue is not covered by the orders passed by this Tribunal for earlier years as the same is incurred for ISP project at Bareili. We find that the basic facts pertaining to this issue are not available for our records from the orders of the lower authorities. At the same time, if this is consequential issue arising from AY 1997-98 onwards in the form of grant of depreciation, the same should not be denied to the assessee. Hence, we deem it fit appropriate, to admit the additional ground raised by the assessee and remand the entire additional ground to the file of the AO for de novo adjudication in accordance with law. All the arguments of both the parties with regard to the said issue are left upon and no opinion is rendered herein on the same. Accordingly, the additional ground No. 6 raised by assessee is allowed for statistical purposes.
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2019 (12) TMI 749
Disallowance of reimbursement to two employees - absence of details and nature of expenditure incurred - Non-production of details of evidences - HELD THAT:- CIT(A) has sustained the disallowance mainly on the ground of non-production of details of evidences, therefore, to support its ground of appeal, the onus was on to the assessee to produce those relevant documents before the Tribunal. Before us, assessee did not produce any such vouchers of incurring expenses by those employees and claimed as reimbursement. In absence of any documentary evidences of incurring of expenditure by the concerned employees, the issue, whether the amounts are reimbursement to the employees, cannot be examined. Moreover, being the identical amount to all the employees, the payments appear in the nature of allowance rather than reimbursement of actual expenses incurred on behalf of the assessee.
No error in the order of the learned CIT(A) on the issue in dispute and accordingly, we uphold the disallowance sustained by the learned CIT(A). The grounds of the appeal of the assessee are accordingly dismissed.
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2019 (12) TMI 748
Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- As relying on MAXOPP INVESTMENT [2018 (3) TMI 805 - SUPREME COURT] CIT(A) has rightly sustained the order of the AO in including strategic investments in subsidiaries for computing disallowance u/s 14A r.w. Rule 8D(2)(iii). Therefore, the ground of appeal No. 4(e) is dismissed. Also similar grounds of appeal pleading for excluding investment in group companies stating those being strategic in nature are dismissed.
In respect of the other grounds of appeal, we are of the considered view that the ratio laid down in Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] that only those investments are to be considered for computing average value of investment which yielded exempt income during the year has relevance in the instant case.
Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income earned by the assessee during the year under consideration as laid down in HSBC Investment Direct (India) Ltd. [2019 (2) TMI 731 - BOMBAY HIGH COURT] , M/s Empire Package Pvt. Ltd. [2016 (2) TMI 505 - PUNJAB AND HARYANA HIGH COURT] .
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2019 (12) TMI 747
Addition u/s 14A r.w.r. 8D - suo-moto disallowance made by the assessee - computing the income under normal computation as well as MAT computation under section 115JB - HELD THAT:- As own fund of the assessee exceeds the investment. Therefore in our considered view there cannot be any disallowance of interest expenses. See GUJARAT STATE FERTILIZERS & CHEMICALS LTD. [2013 (7) TMI 701 - GUJARAT HIGH COURT]
We further hold that the disallowances on account of interest expenses in the case on hand cannot be made in view of the fact that the own fund of the assessee exceeds the impugned investments.
As already held that there cannot be made any disallowance of any interest as well as administrative expenses in the given facts and circumstances due to the fact that the AO has not pointed out any defect in the disallowances made by the assessee as well as no satisfaction was recorded as mandated under section 14A r.w.r. 8D of Income Tax Rules.
Addition in the book profit under section 115JB - HELD THAT:- Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. . [2014 (11) TMI 1169 - CALCUTTA HIGH COURT]
Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - HELD THAT:- ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the condition that the disallowance shall not exceed the amount of disallowance determined by the authorities below.
Disallowance on account of late payment of employees contribution to Provident fund - HELD THAT:- The delay in deposit made to the employees Provident fund and ESIC is not eligible for deduction by virtue of the decision of Hon’ble Gujarat High Court in the case of CIT versus GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT]
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2019 (12) TMI 746
Penalty u/s 271 (1)(c) - Surrender of income in the revised return - difference of amount received from share profits and the amount declared in the revised return - HELD THAT:- DR has not pointed out any distinguishing fact in the present case, hence, following the decision of the Tribunal in the case of ‘Gajjan Singh Thind vs ACIT’ [2019 (9) TMI 934 - ITAT CHANDIGARH] for sake of consistency, the penalty levied by the Assessing Officer declared in the revised return is ordered to be deleted, whereas, the penalty @ 100% of the tax amount sought to be evaded in respect of the difference of amount received from share profits and the amount declared in the revised return i.e. on the income of ₹ 40,015/- is hereby confirmed.
In the result, the appeal of the assessee is treated as partly allowed.
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2019 (12) TMI 745
Addition u/s 68 - unexplained cash credit - loans received by the assessee were not genuine - HELD THAT:- Order passed by the Ld.CIT(A) is in gross violation of the principles of natural justice being based on material collected at the back of the assessee. The entire case of the CIT(A) for holding the credits ingenuine rests on information derived from the bank statements of the creditors, information derived from internet about the creditors, and on the basis of findings recorded by the ITAT in case of one of the creditors. The bank statements of the creditors admittedly were additional evidences filed by the assessee showing cheque issued for making loans to the assessee.
As rightly pointed out by assessee, CIT(A) had not admitted the evidences for adjudication. From the bank statements, we find, the Ld.CIT(A) collected information that there were amounts deposited before the issuance of cheques to the assessee in all cases. Further the Ld.CIT(A) extracted information from the internet that the name of one of the depositor companies had been struck off from the register of companies. She also had information in her possession that the ITAT has held in case of one depositor company that it was engaged in providing accommodation entry only.
Reading all the aforesaid information together, the Ld.CIT(A) held that the loans received by the assessee were not genuine.
Undeniably, the aforesaid information was not confronted to the assessee. Even the Ld. DR has admitted to the said fact and we have not been able to find anything in the order of the CIT(A) showing that the said information was confronted to the assessee. Clearly, the impugned order has been passed in gross violation of the principles of natural justice, that none should be condemned unheard.
Restore the matter back to the CIT(A) for adjudication afresh. The additional evidences filed by the assessee, being imperative to establish the claim of the assessee that the transaction was genuine , are directed to be admitted for adjudication. Appeal filed by the assessee is allowed for statistical purposes.
The Ld.CIT(A) is further directed to obtain report from the AO on the evidences as per the provisions of Rule 46A of the Income Tax Rules,1962 and after confronting all material to the assessee, to decide the issue in accordance with law - Appeal filed by the assessee is allowed for statistical purposes.
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2019 (12) TMI 744
Reopening of assessment - AO Jurisdiction to frame the assessment against the assessee - Addition u/s 69C - unexplained purchases calculated on the basis of peak credit - payment received by purchase parties are returned to the applicant in cash after deducting small commission - HELD THAT:- Primary onus was on assessee to produce the suppliers and substantiate the transactions, particularly in view of the fact that notices issued u/s 133(6) remained un-responded to and the revenue was in possession of specific information that the assessee procured bogus purchase bills from these suppliers, who admitted to have entered into bogus transactions without supplying any material. This onus, in our opinion, remained undischarged and the conduct of the assessee would not inspire us to subscribe to the pleadings made by Ld. AR, in this regard.
AR has also submitted that Ld. AO had no jurisdiction to frame the assessment. However, the same are mere submissions without there being any material to support the same. Nothing has been demonstrated before us to establish that learned AO had no jurisdiction to frame the assessment against the assessee. Therefore, we do not find any force in the legal arguments raised by Ld. AR before us. We concur with the observations made by first appellate authority in the impugned order, in this regard. The submissions made by Ld. AR and case laws being relied upon, in this regard, would not come to the rescue of the assessee.
The assessee was in possession of primary purchase documents. The payment to the suppliers was through banking channels and the assessee had furnished details of corresponding sales made against the impugned purchases. The sales turnover reflected by the assessee was not disturbed by the revenue. At the same time, the assessee failed to rebut the allegations levelled by revenue and could not produce even a single party to confirm the transactions particularly in the backdrop of the fact that these suppliers were major suppliers for the assessee and substantial purchases were sourced by assessee from these suppliers. Notices issued u/s 133(6) remained unresponded to in all the cases. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which lower authorities has rightly done so.
Keeping in view the fact that the assessee was a trader and dealing in low-margin item like metal, which bears a lower VAT rate and also in view of the fact that the assessee had already reflected Gross Profit Rate of 1.71%, the estimation on peak basis as made by learned first appellate authority was on the higher side. We estimate the same @2% of alleged bogus purchases. The same would work out to be ₹ 4,93,589/-. The balance additions stand delete. AO is directed to recompute the income in terms of this order.
Assessee pleaded that the impugned additions made u/s 69C would not be sustainable under law since the transactions were duly recorded in the books of accounts and the payments were through banking channels. However, as concluded by us in the preceding paras that the material would have been sourced by the assessee from undisclosed sources, the payment against those purchases would also be from undisclosed sources. The transactions reported by the assessee from the tainted supplier and the payment through banking channels could not be held to be more than paper transactions. Therefore, we concur with the conclusion of first appellate authority, in this regard, as made in the impugned order. This plea stands rejected.
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2019 (12) TMI 743
Revision u/s 263 - Administrative CIT had sought to revise this order passed u/s.154 on the ground that the assessee had violated the provisions of Section 79 due to change in shareholding pattern which fact has not been noticed or enquired by the ld. AO while granting benefit of set off of brought forward losses of earlier years - HELD THAT:- It could be safely concluded that assessee had duly brought to the notice of the ld. AO about the scheme of amalgamation, about the scheme being approved by the Hon’ble High Court, about the shareholding pattern post amalgamation etc as detailed hereinabove. These facts were duly considered by the AO both in the original assessment proceedings as well as in the proceedings u/s.154 of the Act. Hence, having considered those facts and the ld. AO have taking a view thereon, the logical conclusion that could be drawn is that the AO ad taken one of the possible views on the matter, which cannot be the subject matter of revisionary jurisdiction u/s. 263 of the Act by the ld. CIT. Hence, it could be safely concluded that the order of the ld. AO could not be construed as erroneous.
Denial of set off of brought forward losses of earlier years against the income of the assessee for the year under consideration - HELD THAT:- The issue is directly settled in favour of the assessee in the case of CLP Power India (P) Ltd. vs. DCIT [2018 (4) TMI 1282 - ITAT AHMEDABAD] as find considerable merits in the plea on behalf of the assessee that section 79 has not application in the absence of change in beneficial voting power. This being so, we see no error in the order of the AO on this score. This apart, once these facts were brought to the notice of Pr.CIT, the Pr.CIT ought to have appreciated the case of the assessee objectively in perspective and could not shrink his sacrosanct obligations and resort to simply set aside a completed assessment on non-existent ground. Thus, the prerequisites of section 263 are not satisfied.
CIT had directed the ld. AO to directly disallow the benefit of set off of losses of earlier years against the income of current year on the ground that assessee had not complied with provisions of Section 79 of the Act, ignoring the various arguments made by the assessee before him, which are part of the paper book and the materials available on record. Moreover, we find that the ld CIT should have made proper enquiries on the impugned issue before reaching to such conclusion in the light of materials available on record and decided case laws thereon, which he had failed to do so in the instant case. Once he directs the ld AO to make certain disallowance, the ld AO is bound by that and the assessee would not get any chance to adjudicate the issue on merits. In this factual background, we had to address the issue on merits also and adjudicate the issue hereinabove. We find that the ld. CIT had only tried to substitute his opinion on the facts and circumstances of the case in the opinion of the ld. AO. This is not permissible in the revisionary jurisdiction u/s.263 - Decided in favour of assessee.
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2019 (12) TMI 742
Benami Property - Rights of a bona-fide purchaser as given in the section 27(2) of the PBPT Act, 1988 - burden of proof of proving transaction - "Provisional Attachment Order passed u/s 24(4)(a)(i) of the PBPT Act, 1988" - HELD THAT:- Burden of proof is on the I.O. at the initial stage to establish with cogent evidence that the purchase by the Appellant of the subject property is not bona-fide.
Respondent in its rejoinder dated 27.12.2018 at has itself admitted that it was in the possession of the information and documents that the subject property had been sold/transferred to the Appellant by M/s Veena Industries Ltd. Even after coming into possession of such documents the Respondent had chosen not to give any opportunity to the Appellant to explain its case in the proceedings before the Respondent.
Appellant had moved an application for intervention and as such the Adjudicating Authority has powers u/s 26(6) to add name of the party whose presence before the Adjudicating Authority may be necessary to enable it to adjudicate upon and settle all questions involved in the reference. Adjudicating Authority did not exercise it powers and did not implead the Appellant as a party to the proceedings even after application was made before it by the Appellant, and the Respondent had also admitted in its rejoinder to the impleadment application that there is no legal impediment in arraying the Appellant as a party to the proceedings before the Adjudicating Authority.
Appellant is an incorporated entity which has a separate and distinct legal identity to that of M/s Veena Industries Limited. Appellant had acquired the rights and interest in the subject property in its own name after payment of adequate consideration from its own funds, stamp duty and all the applicable fees, taxes and duties. At the time of execution of the Agreement to Sale on 18.03.2013, there was no common director in the two entities i.e. M/s. Veena Industries Ltd. and Kavita Infrastructure Pvt. Ltd. Thus, the allegation made by the respondent of common management/shareholding factually has no substance. The impugned order is set-aside by allowing the appeal.
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