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Income Tax - Case Laws
Showing 481 to 500 of 506 Records
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2021 (11) TMI 55 - MADRAS HIGH COURT
Reopening of assessment u/s 147 - Reason to believe - consideration received from the issue of shares that exceeds the face value of such shares requires to be assessed to tax u/s 56(2)(viib) - HELD THAT:- Single Bench, after noting the facts, found that no tangible material or fresh material has come to the notice of the Assessing Officer, as could be seen from the reasons for reopening. After referring to Section 147 of the Act, the learned Single Bench rightly held that, if such type of reopening is permitted, there would be no end to the number of times when successive officers might apply and re-apply their mind to the same set of materials and come to different conclusions every time.
On facts, the Court found that the financials annexed to the return of income disclose two lot of shares, one numbering 1,00,000 and the second numbering 2,17,870 and the valuation thereof has also been clearly stated. After noting the said fact, the learned Single Bench rightly observed that this has not escaped the attention of the Assessing Officer at the original instance and he has, in fact, made a modification to the valuation of the first lot of the shares and for the reasons best known to the Assessing Officer, the second lot has been left untouched. Thus, the Court rightly held that there is no material that has come to the notice of the Assessing Officer in the year 2018, warranting re-assessment.
Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Kelvinator India Limited [2010 (1) TMI 11 - SUPREME COURT] and observed that the existence of new tangible material is a jurisdictional fact and this fact must necessarily exist in order to validate the assumption of jurisdiction in law.
We are of the clear view that the learned Single Bench had rightly allowed the writ petition and quashed the impugned proceedings and the Revenue has not made any ground to interfere with the said order.
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2021 (11) TMI 54 - ITAT DELHI
Unexplained income of the assessee - Unexplained cash deposits - Assessee submitted that the assessee has deposited an amount out of the amount given by his son Mr. Tinku Chaudhary after sale of his buffalows, cow and popular trees - HELD THAT:- Admittedly, the assessee during the course of assessment proceedings had explained before the A.O. regarding the source of cash which was given by his son Mr. Tinku Chaudhary after sale of his Buffallows, cow and popular trees. Neither the A.O. asked the assessee to produce his son for examination nor the assessee had volunteered to produce him before the A.O.
Now that Assessee is willing to produce Mr. Tinku Chaudhary before the A.O. for his examination and substantiate the cash payment therefore, considering the totality of the facts and circumstances of the case and in the interest of justice, I deem it proper to restore the issue relating to addition to the file of A.O. with a direction to give an opportunity to the assessee to substantiate the cash deposit by producing cogent evidence - Decided in favour of assessee for statistical purposes.
Addition of long term capital gains - As per Assessee when the property was purchased by the wife of the assessee and sold by the wife of the assessee, no addition on account of long term capital gains can be made in the hands of the assessee and the lower authorities have not properly appreciated the facts of the case - HELD THAT:- We deem it proper to restore the issue to the file of A.O. for adjudicating the issue afresh as per fact and Law, after giving due opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes.
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2021 (11) TMI 53 - ITAT GAUHATI
CIT(A) enhancing the total income by exercising his powers u/s 251 - addition u/s 68 - income from plying of mini truck - Gp estimation - HELD THAT:- We note that the assessee’s case is that he is into the business of potato/onion/grocery and has offered presumptive tax u/s 44AE of the Act since he is not maintaining any books of accounts. According to the assessee, he has gross receipt from this business to the tune of ₹ 18,17,625/- and therefore he has offered presumptive tax of ₹ 1,45,410/- which is 12.5% of the gross receipt. This income of the assessee from potato/onion/grocery need to be accepted since it has been brought to our notice that the assessee has been consistently assessed in the earlier assessment years also the income from this business and therefore the same to be accepted from this business
Income from plying of mini truck - As action of the authorities below not to accept the genuinety of gross receipt from freight from a mini truck is a plausible view. CIT(A) for want of any proof in respect of the credit entry in the bank account has made addition u/s 68 of the Act without giving any consideration to the debit/withdrawal of the money. So the action of the Ld. CIT(A) on this score cannot be per-se countenanced. And it is equally interesting to note that both AO/Ld. CIT(A) has accepted the presumptive tax from mini truck offered by assessee u/s 44AE of the Act which means the authorities below has accepted that the assessee is in to the business of plying vehicle and eligible for adopting presumptive tax u/s 44AE of the Act which action we also concur/confirm. Therefore we order accordingly.
Cash deposits in the assessee’s bank account as depicted in the chart given by the AO - It goes without saying that when there is cash deposits in his account, he is duty bound to explain the nature and source of the deposits in it during the proceedings before the AO. Be that as it may be, reasonable estimation of the income of the assessee need to be made on the cash deposit/withdrawal made in the assessee’s bank account. Therefore, we set aside the order of the Ld. CIT(A) and remand to the AO for estimation of income in respect of the sums deposited. For that the AO to consider the withdrawn amount also and after allocation of reasonable gross receipt from the mini-truck and taking in to consideration from grocery, reasonable estimation of income to be computed in accordance to law - we set aside the impugned order of the CIT(A) and remand the matter back for the limited purpose as afore-stated. The assessee is directed to file written submission/documents to substantiate his claim and the AO to give an opportunity of hearing if the assessee avails for it. Appeal of the assessee is partly allowed for statistical purposes
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2021 (11) TMI 52 - ITAT KOLKATA
Deduction u/s 80P(2) on interest income - assessee is a primary agricultural credit society registered under the West Bengal Cooperative Societies Act and carrying on business of banking and providing credit facilities to its members and also taking deposits from its farmer members - HELD THAT:- As in case of a cooperative society engaged in carrying on business of banking or providing credit facilities to its members, the whole of the amount of profits of business attributable to any or more of such activities as mentioned in section 80P(2), are exempt from taxation. Admittedly, as mentioned by the AO in the assessment order itself, the assessee-society was carrying on business of banking and providing credit facilities to its members and also taking deposits from its farmer members.
Therefore, accepting deposits on interest is one of the activities of the assessee-society. In the business of banking or credit facilities, not only accepting deposits but also investment of the deposits is also the part of the business activity of such an entity. To invest the deposits accepted from the members or the surplus funds available with it, is part of the banking/credit business of the assessee-society. Therefore, the investment of the surplus amount in the banks by the assessee-society cannot be said to be not related to the business activity of the assessee-society. Therefore, the interest/dividend income earned by the assessee for such investment, will be eligible for deduction u/s 80P(2).
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2021 (11) TMI 51 - ITAT GAUHATI
Protective addition - assessee runs a Society of Education - case was selected for scrutiny through CASS and reason for scrutiny selection “substantial cash deposit in the bank account” - HELD THAT:- CIT(A) has made a categorical finding of fact that there was no substantial addition of such an amount made prior in the case of M/s. Society of Education and this finding of fact has not been rebutted/controverted or assailed by the revenue before us by filing specific ground to this effect in this appeal. From a perusal of the grounds of appeal raised by the revenue it is clear that the revenue has only assailed the decision of the Ld. CIT(A) in deleting the protective addition made by the AO. And it can be very well seen that the basis for deletion resorted by Ld CIT(A) to delete the protective assessment in the hands of assessee was because there was no substantial addition in the hands of M/s. Society of Education.
This crucial fact has not been rebutted/controvered/assailed before us. No infirmity in the action of Ld. CIT(A) to have deleted the protective assessment in the hands of the assessee when the fact was that there was no substantive addition in the hands of M/s. Society of Education or other assessee’s and ergo the same is confirmed. - Decided against revenue.
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2021 (11) TMI 50 - ITAT AHMEDABAD
Addition of gross profit instead of net profit from the sale of Ghee - apportion the expenses to different activities for determining the net profit - assessee is engaged in the trading activity of Ghee which is not possible without incurring the indirect/administrative expenses - HELD THAT:- As it is not possible for any organization to run its activities without incurring the basic expenditures. Likewise, the assessee among other activity, is also carrying out the activity of trading in Ghee which is not possible to run without incurring the administrative expenses. The assessee is engaged in multiple activity and some of the activity are eligible for deduction u/s 80P - some of the activity of the assessee are taxable. But the assessee is maintaining common books of accounts, common infrastructure, common facilities, manpower etc.
Thus in such a situation, the only option available to the assessee is to apportion the expenses to different activities for determining the net profit of each activity. Accordingly, we are not convinced with the finding of the authorities below by treating the gross profit as taxable income of the assessee. It was the duty of the revenue to pinpoint the infirmity in the expenses apportion by the assessee towards the activity under consideration. To our understanding, all the expenses apportion by the assessee cannot be ignored without bringing any cogent reason on record. Hence, we set aside the finding of the CIT (A) and direct the AO to take the net profit declared by the assessee as taxable income and delete the amount over and above such taxable income of the assessee. Hence the ground of appeal of the assessee is allowed.
Non granting the deduction provided u/s 80P (2)(c)(ii) - CIT (A) observed that the activity of the assessee falls under clause (b), therefore the assessee cannot claim the deduction u/s 80P(2)(c)(ii) - HELD THAT:- As coordinate bench of Hyderabad Tribunal in case of Film Nagar Co-operative Society Ltd . [2002 (7) TMI 233 - ITAT HYDERABAD-B] by following the judgment in case of CIT vs. Ratanabad Co-operative Housing Society Ltd. [1994 (12) TMI 31 - BOMBAY HIGH COURT] held that “The expression 'profits and gains' in clause (c) of sub-section (2) of section 80P is not confined to 'Profits and gains of business' under clause (a)”. Thus, in case of co-operative credit society, income to which benefit of section 80P(2)(a)(i) is not allowed, e.g., rental income, interest income from surplus funds kept in FDs' of banks, etc., basic exemption of ₹ 50,000/- as provided for in section 80P(2)(c)(ii) must be granted.
It appears that, though the word 'activity' is not defined, yet the investment activity, activity of renting of immovable property, trading of Ghee etc., and the consequent income attributable to such activities would be covered u/s 80P(2)(c). Hence, we set aside the finding of the learned CIT (A) and direct the AO to allow the deduction to the assessee under the provisions of section under section 80P(2)(c)(ii) of the Act. Hence the ground of appeal of the assessee is allowed.
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2021 (11) TMI 49 - ITAT KOLKATA
TP Adjustment - determination of arm’s length price of specified domestic transaction (‘SDT’)involving purchase of raw materials by the assessee from its sister concern/AE - manner of application of CUP Method challenged - assessee has benchmarked the SDT with the ‘arithmetical mean rate’ at which the related parties sold the same product to independent buyers and TPO has benchmarked it by taking the ‘lowest/minimum rate’ at which the related parties sold the same product to independent buyers - HELD THAT:- As taxing statute must be strictly construed and, therefore, save and except the words and phrase expressly used or employed by the legislature, nothing more can be taken into account while interpreting any provision. Casus Omissus is not permitted. At the same time, it has to be kept in mind that the judicial/quasi judicial authorities are also not permitted to ignore or overlook the expression or words expressly used. There is no scope for intendment while interpreting a deeming provision of a taxing provision, particularly when the words employed are of precise meaning.
The proviso to Section 92C(2), as it stood during the relevant year, clearly states that where more than one price is determined by the most appropriate method, the arm’s length price shall be taken to be the arithmetical mean of such prices. Hence, when the computation of arithmetical mean has been expressly set out in the said provision, this Tribunal is not permitted to ignore or overlook the said expression and read weighted average mean in its place. No force in the Ld. CIT, DR’s contention for use of weighted average mean as against arithmetical mean computed by the assessee.
Revenue’s contention that when the assessee has accepted the draft assessment order, pursuant to the TPO’s order making the T. P. adjustment, by not filing objections before the DRP, resulted in automatic acceptance of the T.P. adjustment - As in the statute that if the assessee is not agreeable to the T.P. Adjustment which has been incorporated in the draft assessment order pursuant to the TP order, then the assessee has two alternative appellate routes viz., (a) to object to the draft order inter alia including the T P Adjustment before the DRP or (b) post passing of the final assessment order, prefer an appeal against the action of the TPO before the Ld. CIT(A). In the facts of the present case, the assessee has availed the alternate remedy and chose to challenge the action of the TPO before the Ld. CIT(A). Such action of the assessee of choosing to file appeal before the CIT(A) rather than the DRP cannot be objected to by the AO/Revenue nor does it in any manner tantamount to acceptance of the draft assessment order by the assessee.
Taxability of power subsidy and VAT subsidy received by the assessee under the State Industrial Policy by way of revenue receipt - The incentive in the form of sales tax/VAT subsidy and power subsidy have been granted for setting up new units in the States of West Bengal which lagged behind in industrial development for development of industries and generation of employment opportunities. The object of the assistance was not to enable the assessee to run the business more profitably but encourage them to set up a new unit or expand the existing unit for overall economic development of the State and so we concur/endorse this finding of Ld CIT(A) on this issue to the same effect.
We find that this particular issue is now no longer res integra in light of the decision in the case of CIT Vs Chaphalkar Brothers [2017 (12) TMI 816 - SUPREME COURT] wherein the Supreme Court after analysing the ratio laid down in their earlier judgments in the cases of CIT vs Rajaram Maize Products[2001 (8) TMI 13 - SC ORDER], M/s Sahney Steel & Press Works Ltd. vs. CIT [1997 (9) TMI 3 - SUPREME COURT] and CIT vs. Ponni Sugar & Chemicals Ltd.[2008 (9) TMI 14 - SUPREME COURT] held that the subsidies granted under the State Industrial Scheme to accelerate industrial development and generate employment in the State, is capital in nature - Decided in favour of assessee.
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2021 (11) TMI 48 - ITAT JAIPUR
Addition u/s 2(24)(x) read with section 36(1)(va) - delay in payment of ESI and PF made by CPC - whether CPC as no power to make adjustment u/s 143(1) of the Income Tax Act for disallowance of ESI/PF late deposit u/s 36(1)(va)/43B ? - HELD THAT- In the instant case, admittedly and undisputedly, the employees’ contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) - D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021 - there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case.
The addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees’s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
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2021 (11) TMI 47 - ITAT GUWAHATI
Jurisdiction of the AO to frame the assessment order - scrutiny assessment instruction for non corporate assessee - As argued since the assessee has declared more than ₹ 20 lacs as his returned income, then the scrutiny assessment could have been done by only the ACIT/DCIT and not by the ITO who does not have the pecuniary jurisdiction to do so - scope of CBDT Instruction No. 1/11 (F. No. 187/12/2010-IT(AT) dated 31.01.2011 CBDT has fixed new monetary limit in Mufassil areas - HELD THAT:- As per Instruction of the CBDT it is evident that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect to the ‘non corporate returns’ filed where income declared is only upto ₹ 15 lacs; and the ITO doesn’t have the pecuniary jurisdiction to conduct assessment if it is above ₹ 15 lakhs. Above ₹ 15 lacs income declared by a non-corporate person i.e. like assessee, the pecuniary jurisdiction lies before AC/DC.
In this case, admittedly, the assessee an individual (non corporate person) who undisputedly declared income of ₹ 20,03,070/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the paper book, it reveals that the statutory notice u/s. 143(2) of the Act was issued by the then ITO, Ward- 4(3), Guwahati on 20.09.2016 and the same was served upon the assessee as noted by the AO in the assessment order. Later on the ITO taking note that since the returned income is more than ₹ 15 lacs, he transferred the case to DCIT, Circle- 4, Guwahati who issued interim notice u/s 142(1) dated 03.03.2017 and framed the assessment order without issuing notice u/s 143(2) of the Act.
Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice, he duly transferred the file to the DCIT, Circle-4, Guwahati, when the DCIT issued notice u/s 142(1) of the Act and did not issue notice u/s 143(2) of the Act within the time limit prescribed for issuance of notice u/s. 143(2) of the Act for the assessment year 2015-16. We note that the DCIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became coarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, in this case, the omission/non-issuance of notice by the DCIT, Circle-4, Guwahati before the limitation period for issuance of statutory notice u/s. 143(2) of the Act has set in, goes to the root of the case because the DCIT gets jurisdiction to frame assessment order u/s 143(3) of the Act only thereafter. Ergo, the assessment order passed by the DCIT, Circle-4 u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law, and consequently we quash it. Therefore, the legal issue raised by the assessee is allowed. Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.
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2021 (11) TMI 46 - ITAT CHANDIGARH
Revision u/s 263 - lack of inquiry/inadequate inquiry - whether case of difference of opinion ? - assessee's case had been reopened u/s 147 - Unexplained cash deposits - as per CIT AO had not conducted inquiries which were required to be done in the present case - HELD THAT:- Assessee's justification for the cash deposited in his bank account, as having been received from one Shri Pradeep Singh for leasing out his agricultural land to him for 10 years substantiated by an affidavit, is contradicted by the ‘nakal jamabandi’ of the said land for the period which records the assessee as cultivator of the land.
Clearly these are contradictory facts, with the affidavit stating Shri Pradeep Singh as cultivator, while the Revenue records showing the assessee as the cultivator and controverting his claim that he had leased out his land to Shri Pradeep Singh.
We agree with the Revenue that this contradict ion should have prompted further inquiry by the AO regarding the genuineness of the claim of the assessee that he had received amount by leasing out his land to Shri Pradeep Singh. The documents on record by no stretch justify the acceptance of the claim of the assessee by the AO. No person of sound and logical mind could have, in the circumstances, found the claim of the assessee justifiable in the light of the conflicting documents before the AO - AO, therefore, not proceeding with conducting further inquiry on the issue and having accepted the claim of the assessee, the order passed by the AO we agree with the ld. PCIT, is erroneous and prejudicial to the interest of the revenue.
In the present case, it is not a case of difference of opinion but infact it is clear that the opinion of the AO was one which was not justified by the evidences on record and therefore, the finding of error by the Ld.Pr. CIT on account of lack of inquiry/inadequate inquiry by the AO on the issue is, we hold, in accordance with law for the purpose of exercising revisionary jurisdiction u/s 263 of the Act. The order of the Ld. Pr.CIT is accordingly upheld. - Decided against assessee.
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2021 (11) TMI 45 - ITAT BANGALORE
Deduction u/s 54F denied - owning more than one residential house at the time of sale of original asset - scope of amendment brought in Finance (No.2) Act 2014 to the proviso to section 54F(1) - as submitted residential property in Jayanagar has to be considered as one residential house since it is a duplex house containing single Khatha number, single Property Identification (PID) number - HELD THAT:- As in case of Bhatkal Ramarao Prakash [2019 (2) TMI 1059 - ITAT BANGALORE] has held that a residential house where ground floor is used for assessee’s own residence and the first floor was let out has to be considered as one residential house for the purposes of S. 54F of the Act though having independent entries, deduction has to be allowed.
The assessee is having one building which consists of two units; one was let out and another is self-occupied by the assessee.
The assessee owns one independent building which has two units one in ground floor and another in first floor and having two units cannot change the nature of the building, it remains as “one residential house” as in the case of Shri Ramaiah Harish [2021 (9) TMI 1138 - ITAT BANGALORE] Thus, we direct the AO to allow deduction u/s. 54F of the Act. The grounds raised by the assessee are allowed.
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2021 (11) TMI 44 - ITAT AHMEDABAD
Disallowance of salary to specified person u/s. 40A(2)(b) - excessive or unreasonable payments - mandation of recording satisfaction - HELD THAT:- No addition is allowed without placing on record any material which could prove to the hilt that the payments were excessive or unreasonable, having regard to the fair market value of the services for which the same were made or keeping in view the legitimate needs of the business of the assessee or the benefit derived by or accruing to the assessee therefrom. Be that as it may, we are of the considered view that in the absence of satisfaction of the basic condition for invoking of Sec. 40A(2)(a) by both of the lower authorities, the disallowance of the related party expenses made under Se. 40A(2)(a) cannot be sustained - Decided in favour of assessee.
Gain on sale of shares - LTCG or Business income - assessee has not shown the sold share in the balance sheet as investment and treated the same as business income - HELD THAT:- As assessee has specifically submitted in his submission that he has invested in the shares of Infosys in 1990 - Infosys declared bonus shares and capital gain was earned on the sale of bonus shares. In this regard, the assessee has also placed copies of contract note, demat statement, statement of holding of Infosys shares in the paper book. After perusal of the detail filed by the assessee, it is clear that Assessing Officer has not taken into consideration the relevant submission along with copies of document filed by the assessee in support of his claim of long term capital gain on the sale of impugned shares. Therefore, we restore this issue to the file of the Assessing Officer for deciding de-novo after verification of the detail filed - Decided in favour of assessee for statistical purposes.
Disallowance of bad debt - since the assessee has not offered the corresponding income in its books, therefore, claim of bad debt is not allowable - HELD THAT:- As per the agreement in case of non-recovery from such parties, the same will be recovered from the sub-broker. In this regard, the assessee has placed copy of debit not of Motilal Investment Services, statement of bad debt written off, copy of customer account from books of the assessee etc. After perusal of the aforesaid facts and material filed by the assessee, we are of the view that the issue of trading loss instead of bad debt as claimed by the assessee is required to be examined from the submission made by the assessee, therefore, we restore this issue to the file of Assessing Officer for deciding de-novo after examination/verification of the details to be furnished by the assessee in the set aside proceedings upon affording adequate opportunity to the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes.
Addition of unexplained capital - assessee has claimed that the source of addition to the capital account was out of withdrawal made in the past three years - HELD THAT:- As assessee has not furnished any relevant supporting evidences before the lower authorities. On this issue, we find that even during the course of appellate proceedings before us, the assessee has only furnished the copy of balance sheet of the assessee without any relevant supporting evidences to demonstrate that the source of addition to the capital accoun was actually out of the explained withdrawal. Therefore, we do not find any infirmity in the decision of ld. CIT(A) on this issue. Accordingly, this ground of appeal of the assessee is dismissed.
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2021 (11) TMI 43 - ITAT JAIPUR
Faceless proceedings - Violation of principles of natural justice - without issuing a notice of hearing to the assessee - HELD THAT:- Under the new scheme of faceless proceedings before the CIT(A), there is no requirement of physical hearing unless and until it is considered as necessary but that does not mean that the right to have a proper opportunity of hearing is either forfeited or obliterated. It is pertinent to note that the CIT(A) has stated in the caption of the impugned order in the column of presence of appellant as well as presence of Department as not applicable. There is no mention about any notice issued by the CIT(A) before passing the impugned order.
Even otherwise the impugned order was passed by the CIT(A) without considering any submissions including written submissions of the assessee. Therefore, it is manifest from the record that the CIT(A) has not granted even an opportunity to the assessee to file the written submissions as well as a documentary evidence in support of its claim. Accordingly in the facts and circumstances of the case we are of the considered view that the impugned order is passed by the ld. CIT(A) without giving an opportunity of hearing much less a sufficient opportunity of hearing to the assessee which has resulted violation of principles of natural justice rendering the impugned order as not sustainable in law. Hence, the impugned order is set aside and matter is remanded to the record of the ld. CIT(A) for deciding the same afresh after granting sufficient opportunity of hearing to the assessee.
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2021 (11) TMI 42 - ITAT CUTTACK
Assessee in default u/s 206C - assessee has not collected tax at source (TCS) from buyers on sale of iron ore for the period July 2012 to March 2013 and the tax levied - HELD THAT:- It is not dispute that the assessee has already paid the tax due on it. However, there was a confusion prevailing regarding the appropriate Form 27C. Accordingly, the assessee did not collect any TCS from the buyer who were using the goods for the purpose of manufacturing, processing or producing articles of things or for the purpose of generation of power and not for trading purposes and also collected such declaration in old Form 27C and also submitted the same to the appropriate authorities and thus complied with the spirit of the law, details including copies of Form 27C as well as copy of the Income Tax Returns and taxes paid therein for the Assessment Year 2013-14 were filed by the Buyers. The same were not considered by the AO as well as the CIT(A).
CIT(A) dismissed the appeal of the assessee by observing that the buyers did not submit Form 27C at the purchase of iron ore and confirmed the order of the AO. It was amended later on and Form 27C placed before us - as agreed by both the parties, we set aside the order of the authorities below and remit the matter back to the file of the AO to verify the documents as submitted by the assessee i.e. Form 27C required for considering the case of the assessee and pass order as per law after giving due opportunity to the assessee. Hence, the issue is remitted for limited purposes i.e. verification of Form 27C - Appeal of the assessee is allowed for statistical purposes.
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2021 (11) TMI 41 - ITAT DELHI
Addition of profits on account of circular transaction - assessee has made purchases and sales from one M/s. Balaji Electronics Pvt. Ltd. and at the end of the year the amounts of purchases and the amounts of sales made from this party is almost equal - AO was of the view that in the sale and purchase bill shown the description of the material only as electronic goods and the manner of the creation of the circular activity is also doubtful - HELD THAT:- Assessing Officer could not show any legal bar of making purchases and sales from the same party. Further Balaji Electronics Pvt. Ltd. in response to notice under Section 133(6) of the Act has confirmed the transactions. Further, for assessment year 1998-99 it is shown that the assessee accepted the GP ratio of 1.09% only for the reason that in that case the transaction with the circular trading parties resulted into profit of just 0.53%. In the present case, the Assessing Officer has made a profit of 1.5% whereas the assessee has itself shown the profit of 2.28%. Therefore, the estimate of the profit made by the Assessing Officer is far less than the income of such circular income disclosed by the assessee. In view of this, we do not find any reason to disturb the order of the ld. CIT (Appeals). Accordingly, the order of the ld. CIT (Appeals) deleting the addition confirmed.
Disallowance of deduction u/s 80IB - deduction with respect to its software unit at Goa - HELD THAT:- As survey team took the action one year after the operations stopped at those units where the software was manufactured/developed. The signatory to the Excise record of the assessee was the same employee whose statement was used by the assessing officer. It is also a fact that the deduction under those sections were already allowed to the assessee u/s 143 (3) of the income tax act by the learned assessing officer after completely examining all these details. In view of this, we do not find any reason to interfere with the order of the learned CIT – A deleting disallowance made by ld AO u/s 80IB of the act. No evidences were produced before us that there was no manufacturing facility available at those plants, the details submitted by the assessee with respect to the manpower available at those units was also not denied, the learned assessing officer has also categorically accepted after verification of the excise records that it matched with the books of accounts of the assessee and there is a production according to those records. In view of these overwhelming evidences, we confirm the order of the learned CIT appeal and dismiss ground number 2 of the appeal of the AO.
Disallowance of expenditure on research and element expenditure - AO made the disallowance for the reason that according to him there was no research and development facility existing at Solan - HELD THAT:- Assessee has shown the correspondence exchanged between the appellant and Department of science and technology government of India and further there is an evidence in the form of meeting with the Ministry of science on the projects undertaken by the appellant in the minutes of the meetings cannot be said to be merely a paperwork and general research. In fact the assessee is also having recognition letter from the Ministry of science with respect to the research and development activity of the assessee. In fact himself has allowed part of the expenditure therefore it cannot be said that there is no research and activities carried out by the assessee it may not be fruitful. However, for this reason disallowance of expenditure cannot be made. Further in the original assessment proceedings u/s 143 (3) of the act the learned assessing officer after proper examination has allowed the complete claim of these expenditure. It is not also the claim of the AO that these expenditure are found to be bogus and have not been at all incurred by the assessee. In view of this, we confirm the order of the learned CIT appeal in deleting the above disallowance.
Disallowance of travelling expenditure - family members of the directors have travelled abroad with them and therefore all the visits of the family members cannot be attributed bullion exclusively for the purpose of business - unexplained foreign expenditure - HELD THAT:- AO has failed to bring on record any specific instance of the company’s fund being used in funding the tour of the family members of the directors. The disallowances also made on ad hoc basis. In the original assessment proceedings u/s 143 (3) of the act no such disallowances were made despite verification of the complete details at the time. In absence of any definite finding by the learned assessing officer, naturally the disallowance made by the learned assessing officer is merely on conjectures and surmises which cannot be upheld and rightly deleted by the learned CIT – A .
Addition of advances given to the subsidiary company as written off by the assessee - HELD THAT:- Subsidiary company was engaged in the business of paging services and the loan and advances given to that company become not recoverable because of the usual losses suffered by that particular company. The fact was also noted that the entire capital of that particular subsidiary company was eroded by the accumulated losses by more than 2.5 times of itself capital. Thus, it was a bona fide decision of the assessee company to write of the above amount under the head of its finance business and claim it as a business loss. Merely because the subsidiary company has not shown the cessation of the liability, the claim of the assessee cannot be disallowed. CIT – A after considering the various judicial pronouncements has allowed the claim of the assessee on both the above account. Before us, the revenue could not show that there were an incriminating evidences available with the revenue during the course of search with respect to the above claim of the assessee or the loss incurred by the assessee has not arise and during the course of the finance business of the assessee.
Late deposit of employees contribution towards the respectively provident fund and ESIC account in view of the provisions of Section 2 (24) (x) read with Section 36 (1) (v) - HELD THAT:- We uphold the order of the learned CIT – A in deleting the disallowance of late payment of employee’s contribution of provident fund according to the respective due dates prescribed Under the respective law but paid before the due date of filing of the return of income.
Disallowance of expenses on ad hoc basis due to the non-production of the books of accounts - CIT-A deleted the disallowance - HELD THAT:- Before us, the learned DR could not produce any material to show that the disallowance made by the learned assessing officer was based on any particular incident of or instances of expenditure debited by the assessee that are not incurred wholly and exclusively for the purposes of the business. Appeal of the learned assessing officer for assessment year 2004 – 05 wherein similar disallowances were made out of the total expenditure incurred by the assessee is deleted by us confirming the order of the learned CIT – A.
Adoption of the profit rate of 1.09% of circular trading transactions - assessee is aggrieved by the order of the learned CIT – A wherein he has upheld the addition to the extent of ₹ one point to 09% of the profit. - HELD THAT:- We e find that identical issue is involved in the appeal of the assessee for assessment year 2005 – 06 wherein we have confirmed the order of the learned and CIT – A because of the reason that overall profit in circular trading transaction entered into by the assessee has resulted into loss. In earlier years in assessee’s own case i.e. AYs 98 – 99 and 99 – 2000 the gross profit rate of one point to 09% on circular trading has been upheld by the learned CIT – A not been challenged by the assessee before the higher forum. Therefore we find no reason to deviate from that order and accordingly we confirm the order of the learned and CIT – A upholding the addition to the extent of profit at the rate of 1.09% on circular trading transactions entered into by the assessee. Thus, the appeal of the assessee is dismissed.
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2021 (11) TMI 40 - ITAT DELHI
Disallowance u/s.14A r.w.r. 8D - investment was made out of own surplus fund - HELD THAT:- As decided in SOUTH INDIAN BANK LTD. VERSUS COMMISSIONER OF INCOME TAX [2021 (9) TMI 566 - SUPREME COURT] proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by the learned ITAT favouring the assessee.
The above conclusion is reached because nexus has not been established between expenditure disallowed and earning of exempt income. The respondents as earlier noted, have failed to substantiate their argument that assessee was required to maintain separate accounts. Their reliance on Honda Siel [2011 (7) TMI 275 - SC ORDER] to project such an obligation on the assessee, is already negated. The learned counsel for the revenue has failed to refer to any statutory provision which obligate the assessee to maintain separate accounts which might justify proportionate disallowance. - Decided in favour of assessee.
Disallowance of amortization of premium paid at the time of purchase of securities over the remaining period of securities - HELD THAT:- As decided in THE CHANASMA NAGRIK SAHAKARI BANK LTD. AND VICE-VERSA [2017 (10) TMI 478 - ITAT AHMEDABAD]at the aforesaid amount represents the excess of acquisition cost over the face value of Government securities taken under HTM category. We find that the issue is squarely covered in favour of assessee by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Rajkot Dist. Co-op Bank Ltd.. [2014 (3) TMI 110 - GUJARAT HIGH COURT] - reliance upon the CBDT Circular No. 17 of 2008 and held that loss on account of premium paid on the face value of the security is required to be amortized for the remaining period of maturity - claim of the assessee towards amortization of security premium requires to be accepted. - Decided in favour of assessee.
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2021 (11) TMI 39 - ITAT AHMEDABAD
Levying penalty u/s 271F - failing to file SFT-014 for assessment year 2017-18 for which the last data was expired on 31st Jan, 2016 - HELD THAT:- The amount of penalty was computed as per the provision of section 271FA. We do not find any merit in the plea of the assessee stating that it was unaware about the filing of impugned statement. Regarding the contention of the assessee that it had not received the notices reported in the penalty order, it is observed that the ld. DIT(I & IC) has also not mentioned the date of serving the two notices dated 11-04-2017 & 1-6-2017 upon the assessee.
We hold that penalty of ₹ 25,800/- (258 days x ₹ 100 per day) on the assessee will be justified. Accordingly, the appeal of the assessee is partly allowed. Appeal of the assessee is partly allowed.
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2021 (11) TMI 38 - ITAT CUTTACK
Addition under the head "conveyance allowance" - AO is of the view that the appellant is eligible for exempt conveyance allowance - HELD THAT:- As per circular No. 6/2004 dated 6.12.2004, the assessee-individual is entitled to deduction of ₹ 9600/- per year with regard to conveyance allowance. In this case, the assessee has claimed ₹ 36,649/-, which is not in accordance with the CBDT circular. Therefore, we concur with the findings of ld. CIT(A) in confirming the disallowance. This ground of appeal is dismissed.
Addition of interest income - HELD THAT:- Assessee had deposited of ₹ 3,00,000/- as fixed deposit and has shown ₹ 1,00,000/- in the return of income. Therefore, the AO calculated the interest income of ₹ 18,000/- on the fixed deposit of ₹ 2,00,000/- and added to the total income of the assessee. We also observe that during the appellate proceedings, the ld. A.R. of the assessee accepted the addition and same was confirmed. If this is the position, there was no necessity to agitate the issue before the Tribunal. Hence, we confirm the addition and this ground of appeal is dismissed.
Unexplained cash deposits and cheque deposits in bank account - undisclosed sources of income - HELD THAT:- AO has not considered the facts of the assessee on right perspective and added the cash collected by him to his income and part of the cheque collection has been allowed. When one part of collection of loan instalment has been allowed being receipt through cheque then other part cannot be disbelieved and disallowed merely because it was cash deposit. It is also not necessary that any other additional positive material should be produced by the assessee in order to discharge this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record by filing a letter dated 7.11.2016 asking the employer to intimate the collection and deposit, irrespective of whether it is complied by the employer or not. If it can be said on a preponderance of probabilities that the failure to give the collection and deposit by the employer has not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee - thus direct the AO to delete the addition.
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2021 (11) TMI 37 - ITAT PUNE
Taxability of receipts - Royalty / Fee for technical services - Switzerland based non-resident assessee from its Indian affiliate - main plank of the ld. AR for claiming the amount in question as not chargeable to tax, is that the receipt was in the nature of reimbursement of IT service cost from RIPL and, in the alternative, it was a receipt of software royalty not chargeable to tax - HELD THAT:- Given the fact that there are 19 global entities availing IT services from the assessee, we fail to comprehend as to how only the Indian entity has been allocated more than 17% of the total costs as against each of the other 18 entities getting allocation of 4.6% on average. From the above discussion, it is manifest that there is no proper and identifiable method of allocating the costs to RIPL under different IT service heads, claimed as reimbursement, thereby throwing the one-to-one correlation between the out go and in flow of the assessee on this score from RIPL to the winds. This shows that the assessee allocated costs for rendering IT Services in a peculiar manner, the modus operandi of which is not open for verification to the tax authorities.
Clause (4) of the Agreement defines "Consideration", which has been elaborated in Appendix-II. Relevant part of it states that: 'The basis for the calculation of the service fees shall include the direct as well as the indirect costs incurred. Generally for the following cost items a mark-up of 5% shall be added: Software and license fees - Charges/cost reimbursements from other related parties' - It shows that the Agreement firstly, talks of incurring software and license fee in rendering the services and then, of loading software and license fee cost with mark-up of 5%. This runs contrary to the assessee's stand that firstly, it did not use third party software for rendering IT services under the Agreement and secondly, that the software costs were recharged on cost to cost basis. This brings us to the inevitable conclusion that the second constituent of Reimbursement, being, recovery of the amount incurred as it is from the other without any plus or minus, also falls on the ground thereby jeopardizing the concept of Reimbursement.
Cumulative satisfaction of both the conditions is essential for constituting 'reimbursement'. If one of them is lacking, the test of reimbursement fails. We are instantly confronted with a situation in which both the conditions are failing. Neither the undiluted benefit of the software cost was passed on to RIPL nor did the assessee recover the amount as it is from RIPL. We are ergo disinclined to countenance the contention of 'Reimbursement', which is hereby jettisoned.
Is receipt a software royalty? - We are concerned with the second stage in which the software licenses, being in the nature of copyrighted article, were purchased by the assessee and then used in the providing various services, such as, Client Based Services (CBS), Business Applications for Sales, Marketing and Technology Users (BASMT), Business Applications for Parts and Service Users (BAPS), Business Applications for Operations Users (BAOP), Business Applications for Finance and Controlling Users (BAFC) etc.
The fact that the assessee utilized the software purchased from third party vendors for integrating them with its own software for making a common centralized integrated IT infrastructure so as to render the IT services is further fortified by the details of the alleged reimbursement submitted by the assessee. First table has last two columns with captions 'Weights for IT infrastructure cost allocation' and 'Weighted average allocation'. On a specific query, the ld. AR submitted that the assessee company spent certain amount on IT infrastructure, independent of the software cost, which was allocated between all the 19 entities and the RIPL's share in it was determined at 17.09%. This shows that apart from purchasing the software for the centralized IT infrastructure Centre, the assessee also incurred certain IT infrastructure costs for integrating them into its centralized system so as to render services to the worldwide entities, which was charged to RIPL at 17.09%. This plentifully proves that the amount recovered by the assessee from RIPL is not towards transfer of any software so as to constitute software royalty. The contention of the ld. AR in this respect stands repelled.
True nature of receipt - Since the nature of services rendered by incurring costs - on maintaining owned software and those purchased from third party vendors - is similar, the amount received by the assessee from RIPL for rendering such services cannot have two different characters viz., one part as taxable and the other as not taxable.
On a pertinent query as to whether revenue of ₹ 20.04 crore received by the assessee from RIPL towards I.T. Services was offered and taxed as Royalty or Fees for technical services, as the same treatment would be given to ₹ 3.84 crore as well, the ld. AR submitted the it did not make any difference as both the royalty/FTS are taxable at the rate of 10% under the DTAA. We, therefore, hold that the authorities below were fully justified in including ₹ 3,88,94,824/- in the total income of the assessee and charging it to tax at 10% in parity with the assessee suo motu offering ₹ 20.04 crore to tax at that rate.
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2021 (11) TMI 36 - ITAT DELHI
Proportionate disallowance of deduction claimed u/s. 80IA - services provided pursuant to ILD/NLD license constitute a new and independent undertaking - assessee claimed deduction u/s 80IA of the Act on profits derived from telecommunication services including the services rendered pursuant to these licenses for the assessment years under consideration - Since the assessee did not provide any segmental income expenditure for NLD and ILD services, proportionate disallowance is made on the basis of revenue - HELD THAT:- Since the factual matrix and the arguments are identical. Facts consider in A.Y. 2011-12, respectfully following the decision of the coordinate bench we direct the AO to delete the proportionate disallowances.
TDS U/S 195 - Addition u/s. 40(a)(i) for non-withholding of taxes - Disallowance of telecommunications expenses paid to Foreign Telecom Operators - assessee contracts with its customers for providing data transmission services in India and overseas in a safe and secure manner - HELD THAT:- On finding parity of facts with the facts of A.Y. 2011-12 respectfully following the findings of this Tribunal (supra) we direct the AO to delete the disallowance.
TDS u/s 194J - Disallowances of telecommunication expense paid to Domestic Telecom Operators - AO disallowed the payments made for these telecom connectivity services - HELD THAT:- It is true that the agreement between the assessee, Bharti Airtel and Reliance clearly show that each party was responsible for its network and for the provisions of services related to it. We are of the considered view that the telecom operators provided connecting, transit and termination services to each other on a reciprocal basis and neither of the parties had any rights in the equipments or in the network of the other parties. The FTOs do not grant any possession or control of any equipment or in the network deployed by them to the assessee. As relying on case of Bharti Airtel [2016 (3) TMI 680 - ITAT DELHI] payment cannot be termed as covered by Explanation 2 read with Section 9(vi) - Decided in favour of assessee.
Short grant of credit for TDS - HELD THAT:- We find that on short grant of TDS given by the AO, the assessee has moved a rectification application which has not been disposed of till date. We direct the AO to consider the claim of the credit of TDS as per the provisions of the law and decide the rectification application expeditiously.
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