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Income Tax - Case Laws
Showing 41 to 60 of 745 Records
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2021 (10) TMI 1333
Income accrued in India - services proved by the appellant as fees for technical services (FTS) u/s 9(1)(vii) - scope of work is in respect of Project Management Consultancy services to ONGC for completion of balance work of G1 and GS 15 development project - HELD THAT:- During the relevant assessment year the appellant assessee has received consideration from ONGC and Leighton India for providing engineering consultancy services. During the course of assessment proceeding the AO had asked the Appellant to show cause why the receipts from ONGC (and Leighton) should not be treated as FTS. Appellant explained that the consideration received by it from ONGC and Leighton India were in relation to the exploration and production of oil and natural gas and did not fall within the definition of FTS under section 9(1)(vii) of the Act. Since the consideration received by the Appellant was covered by the exclusion provided in the definition of FTS for “mining or like projects”, the same should not be treated as FTS under section 9(1)(vii).
Appellant relied on the decision in case of ONGC [2015 (7) TMI 91 - SUPREME COURT] wherein the Hon’ble Supreme Court has held that where the pith and substance of an agreement is providing services for prospecting, extraction or production of mineral oils, payments made to non-resident companies are assessable under the provisions of section 44BB of the Act and not u/s 44D.
From the perusal of the services and the nature of scope of work, we find that duties carried out by the appellant on contract with ONGC in fact has mining activity which was excluded from the definition of FTS u/s 9(1)(vii) as they are essential to the development and exploration of the oil and gas fields of ONGC. These services ostensibly is to be regarded as exclusion to FTS under section 9(1)(vii) and such activities need not itself be of mining or like nature so long as they are related to ‘mining or like project’ as has been clarified in the Circular No. 1862 dated 22.10.1990, that the expressions 'mining projects' or 'like projects' occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas.
In parting of training is a part of mining activity only carried out by his appellant in his contract to the aforesaid parties. In so far as the reliance placed by the Ld. DR on the decision of Paradigm Geophysical Pty Limited, was on different facts as the assessee therein was involved in providing software services definition of which is covered u/s 9(1)(vi) of the Act whereas Appellant’s case is that of FTS under section 9(1)(vii) read with section 44DA of the Act. AR further explained that section 44DA of the Act can be applied only if the income in the first-place falls within the definition of FTS under section 9(1)(vii). In the Appellant’s case, since the services are covered by the exclusion in section 9(1)(vii), they do not qualify as FTS for invoking section 44DA of the Act.
Accordingly we hold that not only receipt of accounts of services which has been accepted by the Ld. CIT (A) was also other scope of work relating to attending meetings but also the other activities are inextricably linked with the contract of design and engineering of submarine pipeline. Therefore the entire receipts for the ONGC as well as Leighton India are taxable u/s 44BB. Accordingly the appeal of the assessee is allowed.
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2021 (10) TMI 1332
Exemption u/s 11 - claim denied on the ground that proviso to section 2(15) of the Act applies to the assessee - HELD THAT:- After hearing both the parties and perusing the material on record including the consolidated order of the co-ordinate Bench of the Tribunal [2020 (12) TMI 20 - ITAT MUMBAI] A.Y. 2012-13 and [2020 (12) TMI 20 - ITAT MUMBAI] A.Y. 2014-15 we find that the issue of exemption under section 11 of the Act has been decided by the co-ordinate Bench of the Tribunal in favour of the assessee by directing the AO to allow the exemption u/s 11 to the assessee.
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2021 (10) TMI 1330
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Onus lies upon the assessee to justify the expenses incurred in relation to exempt income. If the assessee failed to discharge the onus, the only option available to Revenue is to make the disallowance by resorting the provisions of Rule 8D of Income Tax Rules. However, in the interest of justice, fair play and keeping in view to the fact that assessee has made suo moto disallowance we are inclined to extend one more opportunity to the assessee to provide the basis of such disallowance by furnishing the necessary details. Accordingly, the issue with respect to administrative expenses is set aside to the file of AO for fresh adjudication as per the provision of law. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes.
Addition on account of sale of assets under securitization - HELD THAT:- Amortization merely represents a timing difference and since the bank is consistently making profits and paying tax at the highest rate without claiming any tax holiday benefit, it can be safely concluded that the method followed Is revenue neutral. We draw support from the decision of the Hon'ble High Court of Bombay in the cose of Nagri Mills Co. Ltd. [1957 (9) TMI 30 - BOMBAY HIGH COURT ]
Addition on account of commission income from the bank guarantee furnished to the customers - Whether the commission income has accrued to the assessee on furnishing the bank guarantee to the parties? - change in accounting policy - HELD THAT:- It is the management of the company to choose specific accounting policies that are advantageous to the financial reporting of the company. Once a policy has been adopted by the company but on a later date the management decides to change the same then, the onus of justifying the change in accounting policy is on the assessee. In other words, the assessee has to justify the change in the accounting policy on the parameters that it is more logical and transpires sound commercial basis. Furthermore such change in the accounting policy should not defeat or postpone the charge on the income of the assessee which has been earned by it.
The mere receipt of commission does not mean that such amount represents the income of the assessee. It is for the reason that the assessee is exposed to the risk in different financial years, therefore in our considered view the same should relate to the periods where the assessee has undertaken the risk.
As per the accounting standard 9 issued by the ICAI, the fees earned by the bank on furnishing the bank guarantee which is carrying continuing obligations over the guarantee period should be recognised over the period of bank guarantee.
In the given facts, we find that the assessee has issued a refund to the Reliance Power Ltd on account of cancellation of bank guarantee furnished by it. The details of the same is placed. Likewise it is also seen that the assessee has issued a bank guarantee to a company known as Farsight securities Ltd dated 24 January 2011 for a period of 12 months. The period of 12 months is falling in two different financial years. Accordingly, the exposure of the assessee to the risk on such guarantee is relating to different financial years i.e. Financial Year 2011-12 and 2012-13.
It is also important to note that the assessee is paying the taxes at the maximum marginal rate and there is no allegation by the Revenue that the income of the assessee by changing the accounting policy has not been offered to tax. In other words the income of 1 year has been postponed to the another year in the manner and for the reasons as discussed above. In view of the above and after considering the facts in totatlity, we et aside the finding of the ld. CIT-A and directo the AO to delete the addition made by the AO. Hence, the ground of appeal of the assessee is allowed.
No addition to the total income of the assessee by way of interest with respect to the loans and advances which were overdue for 3 months.
Disallowance of lease operating expenses - whether the lease rent expenses claimed by the assessee on SLM basis is allowable deduction under the provisions of the Act? - HELD THAT:- As the liability for the tax under the Act of the initial periods shall be deferred to the later years. But in our considered view this will distort the pictures of the principles of income recognition under the income tax Act. The assessee in the initial year will claim higher amount of lease rent whereas the recipient will claim lesser amount of lease income. Likewise, the assessee will deduct the TDS on the higher amount which will not match with the income of the assessee recipient disclosed in the return of income.
Admittedly, the accounting standard issued by the ICAI are mandatory to be followed by the assessee under the Companies Act. But the question arises, such accounting standards should also be followed while working out the income under the provisions of the income tax Act. So far, the Income Tax Act has not notified the accounting standard 19 issued by the ICAI, though mandatory for the assessee to follow while preparing its books of accounts, but this is not the same under the Income Tax Act. Hence the ground of appeal of the assessee is dismissed.
Addition on the transfer of residential flat as short term capital gain - HELD THAT:- The provisions of section 53A of TOPA were amended w.e.f. 24.09.2001 whereby the requirement of registration of agreement was made mandatory. While the provisions of s. 53A prior to the said amendment were applicable irrespective of whether the contract between the parties had been registered or not, the said relaxation in registration was done away with pursuant to the said amendment.
To attract the provisions of section 53A of the Act, it is necessary that the possession of the property should be handed over to the transferee. However, in the case on hand, the possession of the property has not been transferred. Accordingly, we are of the view that the transfer has not taken place within the meaning of the provisions of section 2(47) of the Act and consequently the provisions of capital gain cannot be attracted.
Besides the above, we also note that there is no loss to the Revenue in the given facts and circumstances for the reason that the assessee has already shown capital gain in the subsequent year. If, the addition sustained in the year under consideration then the same has to be deleted in the subsequent year. After considering the facts in totality as discussed above, we are not inclined to a the finding of the authorities below. Hence the ground of appeal of the assessee is allowed.
Addition on account of prior period expenses - HELD THAT:- As decided in own case Revenue fails to rebut the fact that the assessee has already succeeded on this prior period expenditure disallowance issue in preceding assessment years, We further find that hon'ble jurisdictional high court decision in Adani Enterprises [2016 (7) TMI 1250 - GUJARAT HIGH COURT] holds that such a disallowance is not to be invoked in case an assessee is assessed at the same rate in the two assessment years in question. We therefore affirm the CIT(A)'s findings under challenge. The Revenu’s sole substantive ground
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2021 (10) TMI 1327
TP Adjustment - benchmarking of interest at LIBOR + 700 points in assessment year 2008-09 holding that assessee is not a banker and in view of credit rating and transaction cost, the LIBOR needs to be marked up by 700 basis points - markup of 700 basis point in assessment year 2008-09 and markup of 500 points in assessment year 2009-10 over the LIBOR rate applied by the Assessing Officer for determination of arm’s-length price of international transaction of interest - HELD THAT:- In the instant case, the AE was a relatively new entity in the year under consideration and credit rating of the same being not good, the assessee has advanced loan to the AE, so if in comparable situation, a bank in India sanction a loan to any entity in USA in uncontrolled manner transaction, then credit rating of the loan recipient entity should be taken into account.
AO has followed earlier AY 2007-08 and has not taken into consideration credit rating of the AE in the year under consideration, which has to be based on specific information and not on the basis of assumption. Before the Ld. CIT(A), the assessee has cited the RBI Master Circular and submitted that interest rate on foreign currency working capital loan for a period in excess of 180 days.
We are of the opinion that no markup for transaction cost should be applied on LIBOR rate for benchmarking of the international transaction; however, appropriate markup for credit rating should be applied depending on credit rating of AE. The Assessing Officer in assessment year 2008-09 and 2009-10 has not given any justification for applying markup of 400 points for credit rating and, therefore, in the interest of justice, the issue in dispute is restored to the file of the Learned Assessing Officer for deciding limited issue of markup for credit rating over LIBOR rate of interest after taking into consideration criteria for credit rating during relevant period. The grounds of the appeal of the assessee for both the assessment years are accordingly allowed for statistical purposes.
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2021 (10) TMI 1324
Rectification application u/s 154 - seeking credit of taxes deducted at source and issue of the consequential refund (along with applicable interest u/s 244A) due to the Petitioner for assessment year 2016-17 - Petitioner is aggrieved by the inordinate delay on the part of the Respondent No. 1 in disposing of the rectification application dated 15th April, 2021 (which includes continuing grievances from earlier applications dated 10th April, 2018 and 29th January, 2020) filed under Section 154 - HELD THAT:- Mr. Sanjay Kumar, Advocate accepts notice on behalf of respondents. He states that the petitioner’s earlier rectification application dated 10th April, 2018 has already been disposed of vide order dated 23rd March, 2020. He also states that the order dated 23rd March, 2020 is an appealable order.
A perusal of the order dated 23rd March, 2020 reveals that it neither gives any reason nor does it deals with the issue of TDS raised by the petitioner.
Consequently, this Court directs the Respondent No. 1 to dispose of the petitioner’s rectification application dated 15th April, 2021 for the assessment year 2016-17 within six weeks in accordance with law. In the event the order is not complied with, the petitioner is given liberty to file an appropriate application before this Court.
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2021 (10) TMI 1323
Bogus purchases - ad-hoc disallowance to be sustained with respect to bogus purchases - AO has observed 100% of the purchase value to be added to the income of Assessee, CIT(A) has said it should be 15% and ITAT has said it should be 10% - HELD THAT:- First of all, this would be an issue which requires evidence to be led to determine what would be the actual profit margin in the business that Assessee was carrying on and the matter of calculations by the concerned authority. According to the Tribunal, in all such similar cases, it is ranged between 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchase when material consumption factor do not show abnormal deviation.
Whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal has concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax. No substantial question of law.
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2021 (10) TMI 1322
Transfer pricing adjustment - assessee had opted for MAP proceedings pursuant to Article 27 of Indo-UK DTAA with respect to transfer pricing adjustment from revenue earned by the assessee from its AEs located in UK - HELD THAT:- Following the above order of the Tribunal in the case of J.P.Morgan Services Pvt. Ltd. [2015 (12) TMI 296 - ITAT MUMBAI] we hold the margin adopted for UK transaction, which constitutes almost 83% of the total revenue shall be adopted in other jurisdictional transactions as well. We noticed that the assessee had shown operating / net margin of 15.21% for ITE segments and 15.38% in SWD segments. Therefore, in the facts of the given case, we hold that no transfer pricing adjustment is required.
Disallowance of reimbursement received - assessee had received certain amounts as reimbursement from its AEs towards expat salaries - A.O. decided the issue against the assessee by holding that the assessee has not placed any material on record to show its reimbursement of expenditure towards expat salary - HELD THAT:- AO mentioned that as per provisions of section 144C(13), no further opportunity can be allowed to the assessee. The assessee has very elaborately detailed the nature of reimbursement expenses - The assessee has also furnished the details such as the reimbursement ledger along with sample invoices - The explanation of nature of reimbursements, ledger copies of reimbursement of expenses, sample invoices are also part of assessment records. Therefore, the Assessing Officer’s statement that the details are not available on record, is not correct. Therefore, we restore the issue to the files of the A.O. The A.O. is directed to examine the details which are placed on record such as the reimbursement ledger, sample invoices etc. The A.O. shall also consider the submissions made before the Assessing Officer with regard to reimbursement / recovery of expenses.
Disallowance of vehicle rental expenses - A.O. had disallowed vehicle lease rentals on the ground that payments were made towards purchase of vehicles - HELD THAT:- As decided in own case [2017 (1) TMI 1673 - ITAT BANGALORE] we allow the claim of the assessee regarding lease rentals as an allowable revenue expenditure.
Deduction u/s 10A - Liabilities no longer required written back - HELD THAT:- If the provisions for liabilities made in the last financial year is relatable to the business of the assessee and the same is written back during the year 2008-2009, it will increase the business income of the assessee. It was further directed by the DRP that such increase in income would be entitled for deduction u/s 10A I.T.Act. The A.O., however, rejected the claim of the assessee by holding that the assessee has not placed any evidence on record. It was stated by the A.O. that as per the provisions of section 144C(13) of the I.T.Act, no further opportunity can be allowed to the assessee. Therefore, it is not correct on the part of the A.O. to state that no details are produced. Therefore, we direct the A.O. to examine this issue afresh and also follow the dictum laid down by the judgments of the Hon’ble jurisdictional High Court referred supra. It is ordered accordingly. Hence, ground No.3 is allowed for statistical purposes.
Short grant of TDS - HELD THAT:- DRP in its order had directed the Assessing Officer to verify and give credit for the entire amount of TDS after due verification. On perusal of the final assessment order, it is seen that the A.O. has not examined this issue. Therefore, we restore the issue to the files of the A.O. The A.O. is directed to examine and give due credit of TDS.
Directions to exclude certain expenditure, both from the export turnover as well as from the total turnover, while computing deduction u/s 10A - HELD THAT:- The above issue is no longer res integra as it is settled by the judgment of the Hon’ble Apex Court in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] wherein it was categorically held that when certain expenditure is excluded from the export turnover while calculating deduction u/s 10A of the I.T.Act, the same needs to be excluded also from the total turnover.
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2021 (10) TMI 1320
Revision u/s 263 - as per CIT AO has made inadequate enquiry on investment in immovable property - HELD THAT:- Though the copies of sale deeds were not filed before the AO at the time of assessment proceedings, however, the details of the name of persons and the amount along with confirmations were filed and the same are true and correct vis-à-vis the copies of sale deeds placed before us. Therefore, it cannot be said that there was no enquiry on the part of the AO. Even it is not a case of inadequate enquiry also as the assessment proceedings were initiated for the very basic purpose of examining the investment in immovable property and the source thereof. Prima facie, there seems to be proper application of mind by the AO and the same is further verified by the fact that all the alleged persons mentioned in the list above arte the buyers of the property sold by the assessee and the total sale consideration received from all these eight persons duly supported by registered sale deed was utilized for making investment in the immovable property.
As in the instant case, the assessee has sold certain immovable property to eight persons through registered sale deed and received sum of ₹ 50,78,420/-(which includes Cheque of ₹ 2,65,420/- and the remaining amount in cash) and the sale consideration so received was utilized for making investment in immovable property and these details were placed before the AO in the form of list of persons and confirmation letters and after proper application of mind, he accepted the submissions of the assessee, and, therefore, it cannot be said that there was no enquiry or inadequate enquiry by the AO. Appeal of assessee allowed.
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2021 (10) TMI 1319
Assessment u/s 153C - whether assessment has not abated on the date of search and thus has attained finality? - HELD THAT:- The undisputed facts are that a search action under section 153A was conducted on the assessee on 11.03.2014 whereas the return was filed on 29.09.2011 meaning thereby that on the date of search, the assessment has already attained finality and thus has not abated on the date of search. Thus we observe that indisputably the assessment in the instant year has not abated on the date of search. Keeping in view the said facts and circumstances, we are of the considered view that addition to the income of the assessee can only be made on the basis of incriminating materials found during the course of search. In the present case, there is no such incriminating material and therefore, the AO has no jurisdiction to make addition in the unabated assessment.
CIT(A) has passed a very reasoned order by following various decisions including that of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] wherein it was held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search. - Decided in favour of assessee.
Disallowance by rejecting the expenses claimed in the P&L account - HELD THAT:- We find that the issue of allowability of indirect expenses incurred by the assessee by way of administrative expenses, selling and marketing expenses have been decided by the lfd CIT(A) as discussed above by following the co-ordinate Bench of the Tribunal in M/s. Hiranandani Palace Garden Pvt. Ltd. [2015 (12) TMI 1649 - ITAT MUMBAI] Accordingly, since the assessee has incurred these expenses under the head administrative expenses, marketing and selling expenses, we are inclined to dismiss the ground raised by the Revenue by respectfully following the decision of the coordinate bench as discussed above. The ground no. 4 is dismissed.
Addition on account of interest income on fixed deposits - HELD THAT:- We find that the issue has been decided by the coordinate Bench of the Tribunal in favour of the assessee in the case of sister concern case M/s. Hiranandani Palace Garden Pvt. Ltd. [2015 (12) TMI 1649 - ITAT MUMBAI] wherein it has been held that interest income from fixed deposits during the intervening period i.e their borrowing and deployment is assessable as business income and thus allowed the appeal of the assessee. Therefore, we do not find any infirmity in the order of Ld. CIT(A) and accordingly the same is upheld on this issue by dismissing the ground No.5 of the Revenue’s appeal.
Addition of preliminary expenses incurred after the incorporation of the company - HELD THAT:- As decided in own case [2015 (10) TMI 2246 - ITAT MUMBAI] allowed the appeal of the assesse on this issue. Accordingly, we do not find any infirmity in the order of Ld. CIT(A) on this issue. However, as pointed out by the Ld. Counsel of the assessee that in the subsequent year the amount was higher, however, requested the Bench that the same amount of ₹ 14,87,380/- may kindly be allowed in this year also. Accordingly, we are inclined to direct the AO to allow an amount of ₹ 14,87,380/-. Consequently, the ground no. 6 is partly allowed.
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2021 (10) TMI 1318
Rectification of mistake u/s 254 - mistake apparent from record - disallowance on service charges expenses - HELD THAT:- Nowhere the Ld. CIT(Appeal) has held the service charges is not allowable for want of furnishing of documentary evidences etc. The only reason for disallowing 25% of service charges expenses is that benefit must have accrued to other parties than the assessee i.e. third parties/bottlers.
In this issue of “service charges expenses”, we have examined that one part of finding by the Tribunal is incorrect to the extent that Sub-ordinate Authorities has not disallowed the “service charges expenses” for want of vouchers/details etc. The other part of finding of the Tribunal wherein it has held that benefit may have accrued to the third parties and hence the disallowance, though it is correct but because of wrong finding of fact on the issue of non-filing of documentary evidences/vouchers, mistake apparent from record has crept in while deciding this issue which makes the entire findings on this issue as incorrect and such findings is thus vitiated. When we had asked the Ld. DR regarding the basis for enhancement of disallowance at 40% from 25% of service charges as evident from the impugned order of the Tribunal vide Para 128 and to this query, DR fairly conceded that there has been no basis given for such enhancement of disallowance at 40% of the service charges. On this count also, a mistake apparent from record has crept in the findings of the Tribunal on the issue of service charges expenses.
We are of the considered view that there is a mistake apparent from record which has crept in the impugned order of the Tribunal while deciding the issue of “service charges expenses” and hence, the grounds only pertaining to “service charges expenses” for the relevant assessment years involved is recalled for fresh adjudication.
Depreciation on coolers - Tribunal suo-moto had gone into establishing whether the assessee was owner of the coolers or not and asking the assessee to justify their ownership over the coolers which as a matter of fact was never a point of dispute for adjudication. The other part of the discussion whether the said assets i.e. coolers were used for the purpose of business of the assessee, the Tribunal has given its justification for its findings and that part is not disputed by the assessee.
That the finding of the Tribunal, once again asking the assessee to establish its ownership on the coolers which was already accepted by the Department was in fact going beyond the scope of grounds of appeal filed before the Tribunal and hence, travelling beyond the jurisdiction as held in the case of Pokhraj Hirachand [1962 (9) TMI 68 - BOMBAY HIGH COURT] wherein held that the ITAT has to confine itself to the subject matter of appeal i.e. grounds of appeal.
Therefore, mistake apparent from record has crept in while deciding the issue of depreciation on coolers. That further, when we observe that a part finding of the Tribunal whether such business assets were used for the purpose of business of the assessee, the Tribunal has given its own analysis, though this part is not disputed by the assessee but because of the fact that on the issue of establishing ownership, the Tribunal has exceeded its jurisdiction, in such scenario, therefore, taking guidance from the decision of Daulat Ram Rawatmull [1972 (9) TMI 9 - SUPREME COURT] the entire findings on this issue gets vitiated and has to be held as incorrect. Therefore, in our considered view, mistake apparent from record has crept in while deciding the issue of depreciation on coolers and therefore, grounds pertaining to depreciation on coolers for the relevant assessment years involved is recalled for fresh adjudication.
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2021 (10) TMI 1317
Validity of E-assessment proceedings - Mandation of providing personal hearing - valuable right - opportunity of hearing through video conferencing could not be afforded to the petitioner on account of failure on the part of the petitioner to submit such request as per the guidelines for personal hearing - HELD THAT:- As notice along with the draft assessment order was given to the petitioner on 04.04.2021, the response to the same was given within two days by the petitioner in the mode as prescribed under the Law. It also filed further reply to the said notice on 08.04.2021 as well as on 15.04.2021 in continuation of the first reply of 06.04.2021. It is also a matter of record that there is no reference of the request made on 07.04.2021 in a subsequent reply made in continuity on the part of the petitioner of 08.04.2021 as well as 15.04.2021. However, that would not in any manner question his conduct of requesting for the personal hearing in as much as that aspect is neither disputed nor belied from the material which is available from the eportal of the Income Tax Department. In fact in the affidavit-in-reply itself there is a reference of such a request made by the petitioner which according to the respondent-revenue is impermissible as he has not exercised the option while responding to the notice and the draft assessment order on 06.04.2021.
According to the revenue, on 06.04.2021 while responding to the request, there would have been a hyperlink AVAILABLE which he ought to have clicked and which he had missed out and therefore, if he makes any subsequent request for the same, the same is not sustainable.
We notice from the clause (xii) of sub-section (7) of Section 144B of the IT Act laying down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centre and the Unit set up in an automated and mechanised environment by the Principal Chief Commissioner or the Principal Director General. There is nothing on the record which insists that on the day on which the reply is given, there is any prohibition to tender the subsequent reply in continuity. It also does not anywhere prohibit making of such a request through the e-portal of the department.
Para-11 of E Assessment Scheme, 2019 notified on 12.09.2019 as modified on 13.08.2020 provides that no personal appearance in the Centre or unit would be there but request for personal hearing can be made by the assessee or his authorised representative in Faceless Assessment Scheme.
Having noticed that it was a time when this regime of faceless assessment had merely begun and there were many hiccups in absence of the revenue having shown that the link was created at the relevant point of time and in absence of any material on that issue, when it recognises the fact that it had received the request of 07.04.2021, there was no earthly reason for it to have ignored it and not to avail the hearing.
As the subsequent Guidelines for personal hearing through the video conferencing recommending dos and don’ts cannot be taken into consideration by this Court for the simple reason that the authority which issued and the date from which they have come into practice is missing. Moreover, it is not even known whether this is for the internal circulation as in the public domain these Guidelines have not come, therefore, what presently would guide the case of the petitioner is the FAQs available for seeking the video conferencing and seeking the adjournment of the video conferencing, we hold that there has been a violation when the modified assessment order was to be passed by making an addition of nearly 107 Crore and when a specific request had gone on the 3rd day of issuance of notice from the petitioner and when the time for framing the assessment was not getting barred, non-availment of the opportunity of the personal hearing surely has resulted into the violation of the principle of natural justice and therefore, the indulgence would be necessary.
According to us, the right of hearing being a valuable right as held by the Apex Court in case of M/s. Escorts Farms (Ramgarh) Ltd.) vs. Commissioner, Kumaon Division, Nainital, U.P. & Ors. . [2004 (2) TMI 683 - SUPREME COURT]and denial of such right being a serious breach of statutory procedure prescribed as also being violation of rules of natural justice, this petition merits allowance.
Therefore, not only on the ground of serious prejudice for want of opportunity of hearing but also when there is a huge additions of tax by way of a draft assessment order, which eventually become the final assessment order, as framed by the respondent on 21.04.2021, this Court needs to interfere in the impugned assessment order along with interference in the consequential demand of taxes and of penalty and the same are quashed and set aside. The matter is remanded back to the Assessing Officer, who shall grant an opportunity of personal hearing to the petitioner by way of the video conferencing and thereafter pass a reasoned order in accordance with law.
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2021 (10) TMI 1315
National faceless assessment - Making available the copy of the Video Conferencing which had been recorded on the date on which the hearing had taken place - HELD THAT:- Learned Senior Advocate, Mr. Soparkar has additionally, on instructions, submitted that till the further order of the Court, these FDRs shall not be withdrawn. An undertaking to that effect shall be also filed by the petitioner on or before 21.10.2021.
For now, the matter is being posted on 25.10.2021, accepting the version of learned Senior Advocate with a direction to the concerned bank to be sent through the registry the undertaking given by the petitioner through the learned Senior Advocate for it not to permit the release of FDRs till further order of the Court.
There shall be stay of demand of addition made in the assessment order impugned and the demand of penalty till the next adjourned date. Other and further order with regard to the additional security for protecting the interest of the Revenue shall be passed on 25.10.2021 after hearing both the sides.
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2021 (10) TMI 1314
National faceless assessment - Making available the copy of the Video Conferencing which had been recorded on the date on which the hearing had taken place - Scope of FAQs for seeking VC and seeking VC adjournment - HELD THAT: - We noticed that the answer to the question in the FAQs supplied to us is quite clear that the recording will be made available within a reasonable period, not exceeding the two days of recording. “Recording can be downloaded from the portal through which the video conferencing was held.”
We have noticed that steps have been given to check the recording of the VC, availability and the URL details from which it can be downloaded.
We would like to get more inputs in this regard and know as to whether the recording of VC which had taken place with the petitioner would be available for viewing. If the request had not come on that day itself, because the answer as provided in the FAQs states that providing of such recording would be within a reasonable time, not exceeding the two days of recording. In absence of any further details as to how long such recording would be maintained by the department, the details can be obtained by learned Senior Advocate Mr. Bhatt on seeking necessary instructions in this regard. The said recording of video conferencing if already available on the portal and protected by the password, the details shall be furnished to the Court.
The matter is being posted on the 14.10.2021.
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2021 (10) TMI 1306
Revision u/s 263 by CIT - case of the assessee was selected for limited scrutiny to verify the sales turnover mismatch and expenditure of personal nature - HELD THAT:- Admittedly, the assessee’s case was selected for limited scrutiny for the reason that the assessee had reported higher turnover in service tax return as compared the ITR; the assessee had deposited large amount of cash in saving bank account and there was mismatch in expenditure of personal nature. As pointed out by the ld. counsel in the present case, the AO accepted the return of income filed by the assessee after examining the submissions made by the AR in the light of the documents and details placed on record. Further as pointed out by the ld. counsel the issues examined by the assessee during the limited scrutiny were different from the issues raised by the Ld. PCIT in the impugned order.
This Bench of the Tribunal has already held in the case of Tej Paul Bhardwaj [2021 (5) TMI 485 - ITAT CHANDIGARH] that the ld. PCIT has exceeded jurisdiction u/s 263 of the Act by directing the AO to make fresh assessment on the issues which were not the subject matter of assessment framed in limited scrutiny. Since the issue involved in the present appeal is identical to the issue involved in the case of Tej Paul Bhardwaj vs PCIT (supra), we do not find any reason for taking a different view in this case. Hence, consistent with our findings in the aforesaid case, we hold that the Ld. PCIT has exceeded his jurisdiction under section 263 of the Act by directing the AO to conduct enquiry on the issues which were not the subject matter of limited scrutiny. We therefore allow the appeal of the assessee and set aside the order passed by the ld. PCIT u/s 263 - Appeal of assessee allowed.
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2021 (10) TMI 1304
Consent order passed by the learned Single Judge - WP call for the records pertaining to the impugned second notice - HELD THAT:- When the Writ Petition came up for hearing before the learned Single Judge, the petitioner's counsel submitted that all the contentions of the petitioner may be left open and that the petitioner has already given her reply to the second respondent for the notices issued to her. The learned Single Judge directed the second respondent to give an opportunity of personal hearing to the appellant and thereafter pass orders in accordance with law. The learned Single Judge also made it clear that all the contentions of the writ petitioner are left open.
Since the appellant/writ petitioner has filed the Writ Appeal as against the consent order passed by the learned Single Judge, the same cannot be entertained by this Court.
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2021 (10) TMI 1303
Validity of Proceedings under Section 142(1) - Scope of Income Tax Settlement Commission as discontinued - HELD THAT:- Income Tax Settlement Commission, which was discontinued in view of the amendment under Section 245 B as stipulated under the Finance Act, 2021 leading to setting up of the Interim Board of Settlement by way of Notification No.91 of 2021 on 10.08.2021 for the purpose of settlement of the cases which were pending before the Income Tax Settlement Commission as on 01.02.2021, when the Income Tax Settlement Commission ceased to operate.
The grievance on the part of the petitioner is with regard to the action of the respondent authority of initiating the proceedings under Section 142(1) of the IT Act. A show cause notice dated 15.09.2021 issued under Section 142(1) of the IT Act by respondent No.4, who according to the petitioner would have no authority or jurisdiction to initiate the proceedings for recovery in wake of the pendency of the matter before the Income Tax Settlement Commission and now before the newly constituted Interim Board of Settlement.
Issue urgent Notice, returnable on 25.10.2021. In the meantime, interim relief in terms of prayer 9(D) is granted.
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2021 (10) TMI 1298
TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Assessee is doing business of ITes segment wherein major work is of analytical support and functions with software services as only incidental to and not independent of such analytical functions, thus companies functionally dissimilar with that of assessee need to be deselected.
Also if an extraordinary event has taken place by way of amalgamation that company cannot be considered as a comparable one - See BRINTONS CARPETS ASIA PVT. LTD.case [2019 (4) TMI 56 - ITAT PUNE]
While making the selection of comparables, the turnover filter, has to be the basis for selection. A company having turnover of ₹ 11 crores cannot be compared with a company which is having turnover of ₹ 260 crores which is more than 23 times. See M/S. PENTAIR WATER INDIA PVT. LTD. [2016 (5) TMI 137 - BOMBAY HIGH COURT]
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2021 (10) TMI 1294
Delayed Employees contribution towards EPF and ESI - addition u/s 36(1)(va) - AR has pointed to the statement of the deposits made during the year and from that table he has pointed out that though there has been delay in deposit of the PF/ESIC Contributions but all the amounts have been deposited with the appropriate authorities before filing of return of income by the assessee - Scope of amendment - HELD THAT:- Various Benches of the Tribunal at Delhi and other Tribunal have held that the delayed deposits of PF & ESIC but before the date of filing of return is an allowable expenditure and for which reliance was placed on the decision of Hon’ble Delhi High Court in the case of AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT]
As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that the amendment does not apply to the assessment year under consideration. As far as the reliance of Revenue on the decision of Vedvan Consultants Pvt. Ltd.[2021 (8) TMI 1219 - ITAT DELHI] as find that the various division Benches of the Delhi & other Tribunal have held the delayed deposits of PF/ESIC Contributions to be allowable if the same are deposited with the appropriate authorities before filing of return of income by the assessee.
It is settled law that when two judgments are available giving different views, then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT]. Therefore following the decision rendered by Hon’ble Apex Court in the case of M/s. Vegetable Products Ltd. (supra) and AIMIL Ltd. (supra), of the view that no disallowance was warranted in the present case - therefore direct the AO to delete the addition. Thus the assessee’s ground is allowed.
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2021 (10) TMI 1291
Revision u/s 263 by CIT - non-verification of cash loan received and repaid - eligible approval granted by the JCIT - search and survey of SRK group and it related parties, of which the assessee is also part, has resulted in to impounding of documents/ books of accounts and evidence related with evidence of undisclosed receipt and expenses in respect of project Radhika Homes - initiation of action under section 153C - PCIT held that AO while recording satisfaction for initiating assessment proceedings shown no reference of seized document/evidence - HELD THAT:- We find the there is no dispute that the AO while passing the assessment order accepted the claims of the assessee in non- speaking order. It is not the case of ld PCIT that the AO is not authorised (empowered) to accepted the return of income in nonspeaking order. We have seen that the AO while passing the assessment order recorded that “the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for.
After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the submissions and details collected and in consequence upon the conclusion of proceeding and hearing of evidences, assessment is made by this order”. A perusal of show cause notice under section 263 dated 08.03.2021, clearly demonstrate that the ld PCIT identified all the issues which were the subject matter of the notice under section 142(1)and the questionnaire attached thereto, were issued by the assessing officer, except the issue of initiation of penalty 271D/ 271E .
PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire dated 03.12.2018. And on perusal record and details /evidences available on record, the PCIT noted that AO has not made further inquiry. Thus, the ld. PCIT has not made a case that there was “no enquiry” or “lack of inquiry” rather recorded that the AO called detailed inquiry. We find that the ld. PCIT has not specified that what kind of further inquiry was required, when the income disclosed in IDS was duly accepted by higher authority. And the acceptance of IDS was never questioned by Board or other superior authority then PCIT. It is the AO who has to take a conscious decision if any further inquiry is required or not. Furthermore, the assessment order was duly approved by the ld JCIT. There in not finding of ld PCIT that the approval granted by the JCIT is not proper or non-application of proper procedure.
Non initiation of penalty under section 271D/ 271E we find that in case of CIT Vs Suresh G. Shah [2006 (8) TMI 101 - HIGH COURT, GUJARAT] and CIT Vs Parmanand M. Patel [2005 (7) TMI 72 - GUJARAT HIGH COURT] it was held that CIT cannot exercise his jurisdiction under section 263 for the purpose of initiation of penalty proceedings. Other also we find that the assessee has specifically in its reply to the SCN to the ld PCIT has stated that the cash was received only against the booking and no loan or such transaction was undertaken by them. The ld PCIT failed to specify the transaction on which initiation of penalty either under section 271D or 271E was warranted. And on the issues of validity of discloser in IDS, the ld PCIT has not specified that while making declaration the assessee made any misrepresentation of any facts. Once the IDS in all cases were accepted by ld. PCIT, the AO or the Range head no authority to relook or power to revoke or to examine its validity. We further find that the ld PCIT while directing the AO has not himself revoked the IDS nor directed to refund the payment of tax to the assessee. Further, we find that in the IDS the assessee has paid more tax to the revenue then the rate of normal tax, so there is no loss of revenue.
Hon’ble Delhi High Court in CIT Vs Kelvinator of India Ltd [2002 (4) TMI 37 - DELHI HIGH COURT] held that if the AO has adopted one of the course permissible in law, which resulted in loss of revenue or where two view is possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of revenue unless view taken by the AO is not sustainable in law. At the cost of repetition, we may note that the ld PCIT neither in his show cause notice nor in ultimate / final order has held that the order passed by the AO is unsustainable in law. So far as nonverification of CASS (only issue in AY 207-18 only), we find that the ld PCIT raised this issue that the item under the CASS were not verified by the assessing officer. We find that the assessment of this year (AY2017-2018) the assessment has not been made has been made consequent of survey and not under CASS hence, the said identification of such issue is not misplaced. - Decided in favour of assessee.
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2021 (10) TMI 1290
Set off of deficit in mutuality account as eligible for set off as a “loss” against its income from “Other” sources - HELD THAT:- Hon’ble apex court’s landmark decision in Bangalore Club case [2013 (1) TMI 343 - SUPREME COURT] has settled the law that an assessee has to satisfy the three essential ingredients for the purpose of getting mutuality benefit i.e. a complete identity between contributors and participators, their actions to be very much in furtherance to mandate of the club and that there is no scope for any kind of profiteering from the fund created by them which could only be expended or returned to themselves. It has been further made clear therein that it is only section 2(24)(vii) of the Act wherein a specific instance of a mutual organization has been held to be deriving taxable income.
The legislative expression “head” of income must be taken as any of the five heads of income provided u/s. 14 of the Act i.e. salary, income from house property, profits and gains of business or profession, capital gains and income from other sources; respectively. We thus are of the opinion that once the assessee's impugned deficit arising from mutuality account is neither covered in any of the said heads as well nor u/s. 2(24)(vii) defining “income” in the very account, section 71 of the Act would not apply in isolation. We further deem it proper to refer to hon'ble apex court’s recent larger bench decision in Commissioner of Customs Vs. Dilip Kumar & Co [2018 (7) TMI 1826 - SUPREME COURT]that provisions of a taxing statutes have to be strictly construed only.
As in CIT Vs. Hariprasad and Co. P. Ltd.case [1975 (2) TMI 2 - SUPREME COURT] that a loss arising from a head of income not chargeable to tax is not eligible to be set off against a taxable source - As per Kishorebhai Bikabhai Virani case [2015 (2) TMI 807 - GUJARAT HIGH COURT]a loss under an exempt source is not to be carried forward for set off against subsequent year’s income.
CIT(A) had been directed to consider the assessee’s going by the corresponding statutory provisions in light of relevant facts rather than allowing the same on merits. We further make it clear that the assessee had raised the impugned argument for the first time before the learned co-ordinate bench wherein it thought it proper to redirect the same back to the CIT(A) for necessary verification and adjudication. We thus decline the assessee's instant solitary substantive grievance - Decided against assessee.
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