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Income Tax - Case Laws
Showing 501 to 520 of 10077 Records
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2019 (12) TMI 505
Reopening of assessment - no notice u/s 143 (2) - HELD THAT:- Non-issuance of notice under section 143 (2) of the Act is thus seen as a jurisdictional error vitiating the assessment. See M/S. HOTEL BLUE MOON [2010 (2) TMI 1 - SUPREME COURT].
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2019 (12) TMI 504
Non-deduction of tax - assessee submitted that the A.O. made addition for non-deducting tax at source in respect of interest paid - Counsel submitted that form 15G/15H was filed late, however, the same was duly filed before the CIT(A) and CIT(A) ought to have considered these evidences - Ld. D.R. opposed these submissions and supported the order of the authorities below - HELD THAT:- As heard the rival submissions. It is not disputed by the revenue that the assessee had filed form 15G/15H. CIT(A) should have considered the evidences supplied by the assessee and in case he was not satisfied, he should have got it verified from the bank. Therefore, direct the A.O. to delete this addition.
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2019 (12) TMI 503
Rectification u/s 154 - AO rectified the original assessment order deleting the entire Transfer Pricing adjustment to give effect to the direction of DRP - HELD THAT:- In the present case, the assessee filed objections before the DRP after passing the draft assessment order. DRP issued certain directions to the Transfer Pricing Officer. AO was very well aware that the DRP has given certain directions to the Transfer Pricing Officer and it is binding on the Assessing Officer to follow every direction issued by the Dispute Resolution Panel as per as per Section 144C(10) of the Act.
Sub-Section (10) of Section 144C is not procedural but a mandatory requirement. If the Transfer Pricing Officer has not passed any order, the AO should have taken into account the DRP’s direction and would have taken cognizance in the final assessment order, but the Assessing Officer choose not to follow the DRP’s direction. Subsequently, when the Transfer Pricing Officer passed the order giving effect to DRP’s directions vide order dated 21.02.2014, the Assessing Officer on suo moto basis has rectified the assessment order u/s 154 thereby giving effect to directions of the DRP. As per Section 143(3), the Assessing Officer has to pass the assessment order within the prescribed period otherwise the assessment becomes time barred.
Assessing Officer has followed the statutory provisions of Section 143(3) thereby passing assessment order. But as per the binding section i.e. Section 144C(10) of the Act, the mandatory provision was not followed by the Assessing Officer, thereby it is binding on the Assessing Officer to follow the directions of the DRP. Therefore, the assessment becomes null and void. As regards rectification, there is no mistake committed on part of Assessing Officer, in fact Assessing Officer was very well aware that the DRP has given certain directions so it could not be termed that there is a mistake apparent on record. When the Assessing Officer has deliberately chosen not to follow a binding provisions u/s 144C of the Act while passing the final assessment order, the Assessment Order, itself becomes null and void. The case laws referred by the Ld. AR are categorically highlighting the same position of law. The submissions of the Ld. DR that after passing assessment order, the Transfer Pricing Officer has given final effect to the DRP direction and thereafter the Assessing Officer u/s 154 has rectified the original assessment order well within time thereby deleting the entire Transfer Pricing adjustment, does not hold the test of legal sanctity as per the provisions of Section 144C(10) of the Act. Thus, assessment order itself is quashed. Therefore, Ground Nos. 1 and 2 of the Assessee’s appeal are allowed.
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2019 (12) TMI 502
Deduction u/s 80P(2) - CIT(A) passed order u/s 154 of the I.T.Act, wherein the claim of deduction u/s 80P of the I.T.Act was denied - HELD THAT:- In the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that when a certificate has been issued to an assessee by the Registrar of Co-operative Societies characterizing it as primary agricultural credit society, necessarily, the deduction u/s 80P(2) has to be granted to the assessee.
Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid down by the Full Bench of the Hon’ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
Interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P on such interest income, the Assessing Officer shall follow the law laid down in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly.
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2019 (12) TMI 501
Deduction u/s 80P(2) - CIT(A) passed order u/s 154 of the I.T.Act, wherein the claim of deduction u/s 80P of the I.T.Act was denied - HELD THAT:- In the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that when a certificate has been issued to an assessee by the Registrar of Co-operative Societies characterizing it as primary agricultural credit society, necessarily, the deduction u/s 80P(2) of the I.T.Act has to be granted to the assessee.
Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid down by the Full Bench of the Hon’ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
Interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P on such interest income, the Assessing Officer shall follow the law laid down in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly.
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2019 (12) TMI 500
Default in Deduction of Tax at source - payment of license fee - non-allowable deduction - reimbursement of expenses - escapement of income - HELD THAT:- This issue is covered in favour of the assessee by the decision of the Pune Bench of the Tribunal in assessee own case JOHN DEERE INDIA PVT. LIMITED VERSUS THE DY. DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) -1, PUNE. [2019 (8) TMI 1437 - ITAT PUNE] where it was held that lease line charges are at best reimbursement of expenses and hence, not liable for deduction of tax at source.
The Ld. DR could not bring any material or relevant documents on records to demonstrate that the order of the Tribunal in assessee‟s own case has been set aside or stayed by the Higher Judicial Forum. The Revenue has not pointed out any distinguishing feature in the facts of the case with that of the assessee‟s own case in earlier year - following the findings in the earlier year and for similar reasons, it can be held that the assessee has not defaulted in deduction of TDS on the impugned payments made - the order of the Ld. CIT(Appeals) set aside.
Appeal allowed - decided in favor of assessee.
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2019 (12) TMI 499
Deduction u/s 80IA(4) - sale of steam - operation of captive power plant - AO asked the assessee to explain why the deduction u/s. 80IA(4) should not be disallowed since the same is claimed on vapour income and vapour does not fall within the meaning of power - Reliance placed in the case of M/S. NR. AGARWAL INDUSTRIES LTD. VERSUS THE DCIT., CENT. CIR-3, SURAT [2014 (1) TMI 1289 - ITAT AHMEDABAD] wherein as para 3 of the order the issue of deduction u/s. 80IA(4) on steam was restored to the file of the ld. CIT(A) for deciding the issue de-novo.
Reliance also placed on the decision of Co-ordinate Bench in the case of THE ACIT (OSD) -1, AHMEDABAD VERSUS J.H. KHARAWALA PVT. LTD. [2015 (4) TMI 1282 - ITAT AHMEDABAD] wherein the issue of deduction u/s. 80IA(4) on the value of steam is decided in favour of the assessee.
Thus, the assessing officer is directed to allow the claim of the assessee of deduction u/s 80IA(4) on steam - appeal of assessee allowed.
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2019 (12) TMI 498
Reopening of assessment u/s 147 - validity of reasons to believe - HELD THAT:- AO has issued notice within 4 years and AO has recorded detailed reasons and came to the conclusion that there is an escapement of income on the ground that falsification of books of account and also manipulation of accounts for the last several years as well as the statement given by the Chairman Shri Ramalinga Raju and material evidence, which are necessary to be considered, were not at all considered by the AO while passing the order u/s 143(3) of the Act. After going through the reasons recorded by the AO and material available on record, we find that the AO after recording the detailed reasons, reopened the assessment and, therefore, the question of change of opinion does not arise because the assessee has not expressed any opinion at all. Thus, we find that the AO has rightly reopened the assessment. We, therefore, uphold the reopening of assessment made by the AO u/s 147 of the Act. Accordingly, the grounds raised by the assessee on this issue are dismissed.
Addition on account of unexplained loans and advances - segregation of interest income and assessing it as income from other sources and treating the income from trading in shares as speculation income. Therefore, the grounds raised by the assessee on these issues are dismissed.
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2019 (12) TMI 497
Penalty u/s 271(1)(c) - deduction of guesthouse expenses - HELD THAT:- Whether the assessee has furnished inaccurate particulars of income by claiming the guest house expenses incurred by it. The wrong claim made by the assessee for the guest house expenses in the income tax return cannot be equated with inaccurate particular of income. It is because the genuineness of the guest house expenses incurred by the assessee was not in doubt, but the same was wrongly claimed in the profit and loss account.
There was the short fall of the recoveries against the guest house expenses, that too on account of depreciation allowance amounting only. Had there been some more recoveries against the guest house expenses, then there would not have been any disallowance of such expenses. Thus we are of the view that the assessee has not deliberately claimed such expenses.
Once the assessee has furnished all the particulars of expenses which were correct but wrongly claimed as deduction, does not attract the penalty. We hold that the assessee has made the wrong claim for the guest house expenses.
But the wrong claim does not mean that the assessee has furnished inaccurate particular of income. Similarly, the disallowance of the repair expenses on estimated basis cannot be subject matter of the penalty as the questions for concealing and furnishing inaccurate particular of income does not arise.
Penalty levied u/s 271(1)(c) is not justifiable in the given facts and circumstances. Accordingly, we delete the penalty imposed by the authorities below. Hence, the ground of appeal of the assessee is allowed.
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2019 (12) TMI 496
Exemption u/s 11 - Contiued registration u/s 12AA denied - CIT(E) granted registration for the assessment years 1998-99 to 2008-09 and in the same order from assessment year 2009-2010 denied to continue the registration u/s.12AA - HELD THAT:- In the present case, in the same order, the ld CIT(E) granted registration to the assessee from assessment year 1998-99 to 2008-09 and also denied continuance of registration w.e.f 2009-10 onwards without affording an opportunity to the assessee regarding the doubts arisen in the minds of the CIT(E).
Therefore, keeping in view the fact that the assessee has already move upto the Tribunal in three rounds of proceedings seeking grant of registration u/s.12AA of the Act, we are of the considered view that it would be a great injustice to the appellant if the case is restored to the file of the CIT(E) for third time. Thus, we decline to accept the prayer of ld CIT DR for restoring the matter to the file of the CIT(E) for fresh consideration.
Income earned by the assessee from commercial lease rent, which is the only point of denying the continuance of registration from assessment year 2009-2010 is not a sustainable ground for dis-continuing the registration already granted to the assesse. When the registration u/s.12A of the Act has been granted to the appellant and ld CIT (E) is satisfied that the activities of the assessee trust falls within the ambit of charitable and OF general public utility and on the same basis, he has granted registration u/s.12A of the Act to the appellant from the assessment years 1998-99 to 2008-09. The barriers created by the CIT(E) from 2009-2010 onwards, where he denied to continue the same registration is also not sustainable on this count that the assessee was not provided proper opportunity of hearing before passing such order denying continuance of registration as per mandate of sub-section(3) of Section 12AA of the Act. We dismiss the observation of ld CIT(E) recorded for the purpose of restricting the registration u/s.12AA of the Act from 2009-2010 onwards.
CIT (E) has granted registration u/s.12A of the Act, then, same is required to be continued till it is cancelled by way of following the procedure provided in sub-section (3) & (4) of Section 12AA of the Act and without following such procedure, the registration cannot be restricted or upto the specified time and cannot be discontinued by way of cancelling the same for subsequent period in the same order. Therefore, we set aside the order of ld CIT (E) and hold that the registration granted for the assessee w.e.f. A.Y. 1998-99 to 2008-09 is also continued direct him to grant registration from 2009-10 onwards. Hence, the grounds of appeal of the assessee are allowed in the terms as indicated above,.
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2019 (12) TMI 495
Rectification of mistake u/s 154 - scope of limited scrutiny under CASS - determining the fair market value of the property as on 01/04/1981 - HELD THAT:- There was no query raised about the fair market value of the property in question as on 01/04/1981, therefore, the said issue cannot be treated as part of the limited scrutiny under CASS when none of the queries raised under the scrutiny relating to the computation of the capital gain but all are regarding deduction claimed under Chapter IV and particularly U/s 54 of the Act and the variation of the sale consideration shown in the ITR and TDS return as well as the deposits made in the bank account. Thus, we find that the issue which was taken up by the A.O. while passing the order U/s 154 of the Act determining the fair market value of the property as on 01/04/1981 was not within the scope of scrutiny assessment.
If the A.O. has taken up the issue of determining fair market value of the property in question as on 01/4/1981 without converting the limited scrutiny to comprehensive scrutiny by taking the prior approval of the competent authority then the said order passed by the A.O. will be nullity as beyond his jurisdiction.
AO neither in the assessment order nor in the assessment proceedings sheet has mentioned about any proposal of converting the limited scrutiny to comprehensive scrutiny and consequential approval of the Competent Authority being Principal CIT/DIT.
Assessee has produced the certified copy of the assessment proceedings sheet which does not contain any such proposal of the AO for expanding the limited scrutiny to complete scrutiny. Further, the revenue has also not produced anything to show that the AO has obtained the necessary approval from the Competent Authority for conversion of the limited scrutiny to comprehensive scrutiny. Accordingly, the issue which is taken up by the AO in the proceedings under section 154 is illegal and void being beyond his jurisdiction to frame the limited scrutiny assessment. Accordingly, we set aside and quash the order passed by the AO under section 154 of the Act.
Since we have quashed the order passed by the AO under section 154 of the Act for want of his jurisdiction on this issue, therefore, we do not propose to take up the other grounds raised by the assessee in this appeal.
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2019 (12) TMI 494
Assessment u/s 153A - materials seized in the search - Addition on account of interest on PDC’s - interest was paid in cash to the vendors of the land by the vendee company on monthly basis @ 1.25% p.m. on the amount of PDC’s and this cash payment of interest by the vendee company was not accounted for by it, in its books of account. - CIT(A) deleted the interest in respect of one sale deed and sustained the balance amount in respect of three sale deeds - HELD THAT:- We find merit in the arguments of the Ld. Counsel for the assessee. Admittedly the first search took place on 15.11.2007 whereas the assessee company was incorporated on 06.07.2009 - Further there is nothing on record to show that during the course of search that took place on 07.12.2010 which was concluded on 05.02.2011, any document either belonging to the assessee or relating to the assessee were found i.e. either from the premises of the assessee or any of its group concerns.
We, therefore, find merit in the submission of the assessee that when the assessee company was not in existence at the time of first search and when none of the documents found during the course of second search belong to the assessee and considering the fact that the AO in the body of the assessment order has not referred to any seized material found during the course of second search pertaining to assessee which gave any clue even in remotest manner with respect to payment of interest on PDCs out of books beyond 6 months from the sale deed, no addition could have been sustained.
We find under identical circumstances the Tribunal in the case of M/s. Improper Infrastructure Private Limited, another sister concern, has deleted the addition made by the AO and sustained by the CIT(A) is not justified. We, therefore, direct the AO to delete the disallowance - Decided in favour of assessee.
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2019 (12) TMI 493
Addition to the returned income - reimbursement of interst u/s. 40A(ia) of the Act - wages paid u/s 40a(ia) of the act - remuneration paid by invoking provision of section 40(A)(2) of the Act - addition on account of section 40A(3) of the Act - addition on vehicle running expenses’ and ‘telephone expenses’ respectively on estimate basis treating the same as personal in nature - whether the receipt is of such incomes on which tax had been paid on those incomes by the respective recipients as envisaged under the proviso to section 201(1) of the Act, also not considered - principles of natural justice.
HELD THAT:- There are considerable cogency in the contention of the ld. counsel for the assessee that the authorities below erred in disallowing ₹ 10,68,968/- under section 40a(ia) of the Income Tax Act, 1961 without even pausing to consider whether the receipt is of such incomes on which tax had been paid on those incomes by the respective recipients as envisaged under the proviso to section 201(1) of the Act.
It is also noted that the this has not been verified at the level of the Assessing Officer during assessment, therefore, there is force in the contention of the ld. Counsel for the assessee that the matter may be remanded back to the Assessing Officer for consideration and fresh orders.
Appeal allowed for statistical purposes.
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2019 (12) TMI 492
Capital gain by accepting 75% of the value estimated by the Registered Value - rejection of details of cost construction expenses and addition made by the assessee - HELD THAT:- Since the CIT(A) has already accepted the fact that there was a construction and has not doubted the valuation report of the Registered Valuer. Thus, the Assessee before the AO has given the construction cost and the details while incurring the same. Therefore, the same cost cannot be estimated and cannot be disallowed. The evidences show that there is a construction cost incurred by the assessee and through the records the same was properly valued by the Registered valuer. Therefore, the estimation done by the CIT(A) is not justified in absence of any contrary material before the Assessing Officer as well as before the CIT(A). Therefore, we set aside the directions given by the CIT(A). Ground No.2 is allowed.
Disallowance on account of commission paid on sale of property - AR submitted that usually for carrying out any purchase and sale transactions in the case of property, an agent is hired and the same is a common practice - HELD THAT:- We have heard both the parties and perused all the relevant materials available on record. As regards commission paid, the assessee has not given any documentary evidence as regards to the payment made to the so-called agent. The evidence was not before the Assessing Officer as well as before the CIT(A). Therefore, in absence of any evidence, the CIT(A) has rightly confirmed this addition on account of commission expenses. Ground No.3 is dismissed.
Disallowance of exemption u/s 54 - HELD THAT:- We have heard both the parties and perused all the materials available on records. From the perusal of records, it can be seen that the assessee submitted certain documents before the Assessing Officer and the CIT(A) in respect of claiming benefit of exemption u/s 54F of the Act. The fact remains that the assessee sold property situated at Okhla and purchased a flat at Gurugaon. Whether the transaction of purchase is from borrowed fund or through own funds has not been properly verified by the AO or the CIT(A) before rejecting the assessee’s said claim u/s 54F. Therefore, it will be appropriate to remand back this issue to the file of the AO to decide this issue a fresh after taking into consideration all the documents pertaining to sale and purchase of the properties and determine whether the investment is made either through borrowed fund or own fund. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 4 is partly allowed for statistical purpose.
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2019 (12) TMI 491
Bogus loss on account of CCM [Client Code Modification] - information was received from the office of the Pr. Director of Income Tax (Inv.), Ahmedabad that some brokers were diverting profits/losses through adopting Client Code Modification facility - HELD THAT:- The corrections as effected in the CCMs were of a most nominal amount of ₹ 2 Lakhs plus which could not lie in the realm of manipulation. The broker of the assessee on enquiry had confirmed that the modifications were all genuine. AO had not found any evidence of any under-hand commission having been paid to the broker for manipulations. Whatever was paid to the broker was all through regular channels and was at the rates as prescribed by the stock exchange.
AO failed to also note these punching errors occurred in seriatim only in the month of January of that year whereas the assessee's trading in share transactions was spread over the entire year. The fact that the error which occurred could be the product of a novice's mistake at the broker's end has been completely lost sight of by the AO.
Commissioner (Appeals) while deciding the issue was overtaken by the decision of the Apex Court in SEBI vs. Rakhi Trading Pvt. Ltd. [2018 (2) TMI 580 - SUPREME COURT] . CIT(A) in his enthusiasm to apply the ratio of the case appears to have overlooked the indispensible conditions spelt in the decision itself. In the circumstances it is noted that since the nominal loss as incurred by the Assessee and claimed as such is due to genuine errors in CCM as explained to the Assessing Officer in details and there is nothing irregular about it, hence, the same is directed to be allowed and addition made on this account is hereby cancelled by allowing the appeal of the assessee. - Appeal filed by the assessee is allowed.
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2019 (12) TMI 490
Expenditure incurred for charitable purpose u/s. 11 - Addition on capital expenditure incurred by the appellant on the asset of Pandit Deendayal Petroleum University (PDPU) - expenditure disallowed for charitable purposes - assessee submitted the details with the explanation that the assessee is bound to incur expenses time to time towards the set-up and expansion of the university in terms of Provision of Sec. 25 of the Pandit Deendayal Petroleum University Act, 2007 - HELD THAT:- In SARLADEVI SARABHAI TRUST [1988 (3) TMI 53 - GUJARAT HIGH COURT] issue decided in favour of the assessee in the identical facts and circumstances of the case as aforesaid, we do not find irregularities in allowing the exemption by the CIT(A) as claimed by the assessee since the expenditure has been incurred as per the object of the society and in terms of a statutory provision of another trust having similar object so as to warrant interference. Hence the order is passed in affirmative i.e. in favour of the assessee and against the Revenue. The appeal preferred by the Revenue is, thus, found to be devoid of any merit and hence dismissed.
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2019 (12) TMI 489
Reopening of assessment u/s 148 - assessee argued for non service of notice - HELD THAT:- Assessee, at Bar, in all fairness, accepted that the assessee has not filed any return of income in response to notice issued u/s.148 of the Act. However, in para 3 of the reassessment order dated 26.11.2009, the Assessing Officer has mentioned that notice u/s 143(2) of the Act and notice u/s.142(1) of the Act was served on the assessee on 26.5.2009. In absence of any return or response to the notice u/s.148 of the Act, the assessee cannot raise any objection or ground regarding service of notice. Therefore, the additional ground of the assessee being devoid of merits is dismissed.
Determining capital & revenue expenditure & receipts and computed the income - assessee is not registered u/s.12A and hence, it is not claiming any exemption u/s.11 - HELD THAT:- In the present case, undisputedly, the assessee has incurred capital expenditure over and above its capital receipts and same cannot be allowed to be set off from the revenue surplus for the purpose of calculation of tax liability of the assessee.
Admittedly, the capital receipts in the current year are less than the capital expenditure and that is why the assessee wants to set off against surplus in the revenue account. In view of above, we see no reason to interfere with the order of the CIT(A) in confirming the addition made by the AO.
Validity of reopening of assessment - AY 2008- 09 - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT] wherein newly substituted provision of section 147 of the Act with effect from 01.04.1989 is interpreted by observing, that section 147 of the Act, as substituted w.e.f. 01.04.1989 does not postulates conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. Further, if 'reason to believe' of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147 r.w.s. 148 of the Act
In the absence of any fresh material, the reappraisal of same material to initiate reassessment proceedings tantamounts to change of opinion and hence bad in law. We also find that in the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. From the above facts of the case and following the decisions quoted above, we are of the considered view that the reassessment order u/s. 147 r.w.s. 144 dated 29.1.2014 of the Act is bad in law a hence, same is quashed and allow the additional ground of appeal.
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2019 (12) TMI 488
Income accrued in India - turstee of a trust - representative assessee - short term capital gains - Benefit of Indo Dutch Tax Treaty (DTAA) - India-Netherlands Double Taxation Avoidance Agreement - Determining treaty protection - HELD THAT:- When an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection. Viewed thus, this is beyond doubt that the income in question has actually accrued to the taxable entities on the Netherlands, which, according to the approach adopted by the AO, is sine qua non for tax treaty protection. It would thus appear that the treaty protection has indeed been wrongly declined to the assessee.
The reservation on treaty protection has arises only on account of INGEMEF, a tax transparent entity which is in the nature of contractual arrangement, being in the picture, but then the assessee being a representative assessee of a tax transparent entity requires the beneficiaries or constituents of the tax transparent entity being looked at. The assessee is indeed a trustee of INGEMEF but then INGEMEF is only a contractual arrangement for common investments by three investors and it cannot be treated as a beneficiary as it is not even a legal entity, it's a tax transparent conduit contractual arrangement for the purpose of collective investments.
The beneficiaries are thus clearly taxable entities in Netherlands. What essentially follows is like this. If the assessee is to be taxed in its own right, which is not even the case of the revenue, there cannot be any dispute that the assessee is a taxable entity in the Netherlands, and, for this reason, the assessee is liable for treaty protection. If the assessee is to be taxed as a trustee in representative capacity, in our considered opinion, on the facts of this case clearly the beneficiaries are the three investors all of which are taxable entities in the Netherlands, and not the INGEMEF per se. Whichever way we look at it, thus, the assessee is entitled to treaty protection. Once that is found to be the position, article 13(5) clearly provides that the "gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 4 shall be taxable only in the State of which the alienator is a resident".
So far as sale on gains of shares are concerned, only article 13(4) can come into play and that too is not applicable on the facts of this case and it is not even the case of the revenue that the gains are on sale of unlisted shares which form part of substantial interest in the capital stock or are of the companies which hold principally immovable properties, other than the property in which the business is carried out. In any case, article 13(5) lays down the broad principle and article 13(1) to 13(4) set out the exceptions.
It is not even the case of the AO, and rightly so, that these exception clauses come into play on the facts of this case. This being the position, the capital gains, on sale of shares, in the hands of the assessee, and the investors it represents as trustee, are treaty protected from taxation in India. As we hold so, we may add that we are dealing with pre 1st April 2013 legal position and the requirements of Tax Residency Certificate (TRC) do not, therefore, come into play - direct the Assessing Officer to grant the benefit of Indo Dutch tax treaty on the facts of this case. Decided in favour of assessee.
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2019 (12) TMI 487
Enhancing the income by CIT-A u/s 251(2) - assessee has raised the issue of breach of principle of natural justice for not considering the submission of the assessee as well as disregard of voluminous evidence tendered before the Assessing Officer - HELD THAT:- CIT(A) issued show cause notice under section 251(2) of the Act proposing to enhance the income on the issues raised in the said notice. After considering the submission of the assessee, he rejected the objection of the assessee.
We find that the learned CIT(A) has followed the decision of the Hon’ble Supreme Court in the case of CIT Vs Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME COURT] on this issue and Ld. counsel of the assessee could not rebut before us the finding of the learned CIT(A) on the issue.
In the facts of the instant case before us, the addition has been made in respect of source of income shown in the return of income and the opportunity has been provided to the assessee by way of issue show cause notice by the learned CIT(A). In view of these facts, we do not find any violation of the principle of natural justice. In our opinion, the finding of the learned CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the authority of the learned CIT(A) in enhancing the income. The grounds of appeal of the assessee in this respect are accordingly dismissed.
Difference in cash balance available in bank as well as in books of accounts - HELD THAT:- The assessee in its written submissions has raised the issue that opening balance of trade receivables has not been taken into account by the learned CIT(A) and also no adjustment has been made for other non-cash expenditure like depreciation, forex loss booked, etc. CIT(DR) has submitted that issue needs verification at the end of lower authorities. We are in agreement with the learned DR because this is a matter of factual verification on the basis of financial statement of earlier year as well as financial statement of the year under consideration.
Accordingly, we set aside the finding of the learned CIT(A) on the issue of addition and restore the matter back to the file of the Ld. CIT(A) for deciding afresh after providing adequate opportunity of being heard to both the assessee as well as to the Assessing Officer.
Addition for 50% out of trade payables - HELD THAT:- Mere sample copy of documentary evidence for one transaction of import, is not sufficient to decide the issue in dispute whether the purchases in reference are bogus as held by the learned CIT(A) and the assessee should produce documentary evidence in support of all the purchases made during the year under consideration. We are of the considered opinion that this issue needs verification by the lower authorities. Accordingly, we set aside the finding of the learned CIT(A) on the issue in dispute and restore the matter back to the file of the learned CIT(A) for deciding afresh in accordance with law, after affording adequate opportunity of being heard to both the assessee as well as the Assessing Officer. The grounds of appeal are accordingly allowed for statistical purposes.
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2019 (12) TMI 486
Disallowance of travelling expenses - Allowable business expenses - assessee replied that foreign travelling was made by directors along with their relatives for the business purpose and it is the general practice of the company that directors travel for the business purpose - HELD THAT:- assessing officer has asked the assessee to justify the claim of foreign travel made with business purpose, however, the assessee has explained that it is in general practice of the company that directors travel for the business purpose. In this regard, it is observed that assessee was in the business of real estate and could not substantiate before the lower authorities with any relevant evidences that foreign travel expenses were incurred for the purpose of business of the assessee, therefore, we do not find any reason to interfere in the finding of ld. CIT(A) on this issue, therefore, this ground of appeal of the assessee is rejected.
Income from House Property - property is used as stock in trade - notional annual letting value made u/s. 23 - HELD THAT:- Hon’ble Jurisdictional High Court of Gujarat in the case of CIT vs. Neha Builders Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] held that if property is used as stock in trade, then, said property would become partake character of stock and any income derived from stock would be income from business and not income from house property. We have further noticed that on identical issue on similar fact, the Co-ordinate Bench of the Bombay in the case of M/s. Runwal Constructions Runwal & Omkar Esquare [2018 (2) TMI 1707 - ITAT MUMBAI] to hold that the unsold flats which are stock in trade when they were sold they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head 'income from house property. we direct the assessing officer to delete the addition on account of notional annual letting value made u/s. 23 of the act as income from house property, therefore, this ground of appeal of the assessee is allowed.
Disallowance of forfeited amount as trade loss - Revenue contended that the assessee has shown advance which cannot be claimed as business loss - HELD THAT:- Assessee was of the view that if the assessee company purchases the said property at a price consideration of ₹ 13 crores in the subsequent sale, the company would not fetch more than ₹ 8 crores and there was likely loss to the company as the assessee could not find out buyer of the said property as the real estate market was in a deteriorated condition as well as marketability of the property in the Dev Arc Mall was also of doubtful nature. Therefore, the dispute arose between the company and the vendor was referred to the arbitrator as per the direction of the arbitrator, the vendor has forfeited the amount of ₹ 3.5 crore out of advance amount of ₹ 5 crores paid by the assessee company to the vendor. The assessee has treated the aforesaid advance of ₹ 3.5 crore as loss incurred in the normal business activity of the company of buying and selling of the property and the same amount has been debited in the profit and loss account for the year ended on 31st March, 2014.
We find substance in the findings of the ld. CIT(A) that as per the normal course of business the assessee has entered into an agreement and the impugned property was being purchased as stock-in-trade and subsequently expecting loss on selling the property in future, the deal was cancelled, therefore, forfeiture of advance in a transaction which was entered in the normal course of business is in the nature of business loss. Accordingly, the appeal of the Revenue is dismissed.
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