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Income Tax - Case Laws
Showing 21 to 40 of 640 Records
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2021 (2) TMI 1322 - ITAT MUMBAI
TP Adjustment - Re-characterization of the assessee as a high-end information technology enabled service (ITES)/knowledge process outsourcing (KPO) service provider - TPO has re-characterized the assessee as a KPO service provider - HELD THAT:- Assessee has drew our attention to the Safe Harbour Rules, 2017 issued by the Central Board of Direct Taxes (CBDT) ON 07-06-2017, wherein, various services have been classified under ITeS and KPO categories. As contention of assessee, the services provided by the assessee are coming under the ITeS category even under the Safe Harbour Rules, 2017 of the CBDT, all the aspects have not at all been examined either by the TPO or by learned DRP while re-characterising the assessee as a high-end ITeS/KPO service provider.
We restore the issue to the AO for considering assessee’s claim that it is a low end ITeS service provider and not a KPO service provider. While doing so, the Assessing Officer must verify all the documentary evidences furnished by the assessee to demonstrate the exact nature of services provided to the AEs. Further, the Assessing Officer will also examine assessee’s claim that there is no change in the nature of service provided in earlier years, wherein, it has been accepted as a low end ITeS provider. Needless to mention, the Assessing Officer must provide reasonable opportunity of being heard to the assessee before deciding the issue. Assessee’s appeal is partly allowed for statistical purpose.
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2021 (2) TMI 1321 - ITAT MUMBAI
TP Adjustment - most appropriate method to benchmark the transaction with the AE - applicability of internal TNMM as opposed to external TNMM - HELD THAT:- Tribunal in assessee’s own case for Assessment Year 2011-12 [2017 (5) TMI 1795 - ITAT MUMBAI] has held that internal TNMM as adopted by the assessee is the most appropriate method to benchmark the transaction with the AE.
Following the aforesaid decision,while deciding assessee’s appeal for AY 2012-13 in [2019 (11) TMI 1774 - ITAT MUMBAI] has reiterated that internal TNMM is the most appropriate method to benchmark the transaction with AE. Thus, following the consistent view of the Tribunal in assessee’s own case, as referred to above, we hold that the international transaction with the AE has to be benchmarked by applying internal TNMM as adopted by the assessee.
Accordingly, we restore the issue back to the AO for examining assessee’s benchmarking under internal TNMM and in case the assessee is able to justify its own benchmarking, then it has to be accepted. Of course, the AO while deciding the issue must provide due opportunity of hearing to the assessee.
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2021 (2) TMI 1320 - ITAT DELHI
TP Addition - Admissibility of additional evidences by CIT-A - HELD THAT:- On perusal of the order sheet of transfer pricing proceedings, it is undisputed that query regarding the comparable M/s Alta Moda was made only one day prior to the passing of the order by the TPO and thus it is evident that no sufficient opportunity was provided to the assessee to adduce evidence in support to challenge of the comparable, namely, M/s Alta Moda. Thus, we do not find any error in the finding of the Ld. CIT(A) that the assessee is eligible for filing additional evidences under Rule 46A(1)(d) of the Rules.
In view of the decision of the Hon’ble Delhi High Court in the case of Manish Buldwell Private Limited 2010 (12) TMI 760 - ITAT - DELHI (E) the Ld. CIT(A) was required to forward the additional evidences for the comment of the Learned AO/TPO on merit.
The assessee has produced additional evidence before the Ld. CIT(A), which were forwarded to the Learned TPO. The Ld. CIT(A) in the impugned order has reproduced the comment of the TPO on the issue of selection of comparable M/s Alta Moda and reimbursement of expenses.
On perusal of the above comments of the Learned TPO, we find that that there is no violation on the part of Ld CIT(A). He had duly forwarded all evidences for the comment of the Ld. TPO, but the Ld. TPO consciously did not give any comment on the evidences related to reimbursement of expenses. The Ld. CIT(A) can’t be faulted in such circumstances for the inaction of the Ld TPO. In view of above facts and circumstances, we don’t find any violation on the part of Ld. CIT(A) in admitting additional evidences under Rule 46A of the Rules. The ground no. 1 of the appeal is accordingly dismissed.
Exclusion of comparable M/s Alta Moda -. As far as contention of the learned Counsel that the company, M/s Alta Moda is engaged in construction, we find that under the clause of general information (schedule -13) to the significant accounting policies and notes of account.
The remark of business of construction may be with reference to construction of the store, however, for verifying this fact beyond doubt, we feel it appropriate to set aside the finding of the Learned CIT(A) on the issue in dispute and restore the matter back to the AO/TPO for ascertaining the functions of the company during relevant year from the company itself using authority under section 133(6) of the Act.
As to whether the company is in retailing through its own shop or though ‘Franchise’ model is concerned, on perusal of chart of financial statement of the company for financial year 2008-09 (i.e. assessment year under consideration) available in impugned order, we find that in financial year 2008-09, no franchise commission has been shown as received.
As far as the ground that while computing margin of the Company, the custom duty paid on import of products has been excluded, is concerned, we are of the opinion that for comparability gross profit margin of both the company and the assessee has to be computed in similar manner. Both in the case of assessee as well as in the comparable company treatment of the custom duty has to be given in the similar manner. If the custom duty is part of the trading account then same is to be treated in identical manner while computing the gross profit margin of the company as well as the assessee. Since we have already rendered the issue of verifying the function of the company to the Ld AO/TPO, so if the company is found to functionally similar to the assessee, the Ld AO/TPO, shall compute the margin of the company in view of our direction above. Appeal of the Revenue is accordingly allowed for the statistical purposes
Adjustment to the international transaction of reimbursement of expenses to Associated Enterprises (AEs) - HELD THAT:- There is no dispute on the fact that only sample bills of expenses reimbursed to the AEs were produced before the learned TPO during original transfer pricing proceedings and therefore the learned TPO proposed adjustment in respect of the expenses for which bills/invoices were not produced before her. During appellate proceedings before the CIT(A), the assessee has produced entire details of expenses reimbursed along with bills/invoices as additional evidence, which were forwarded by the Learned CIT(A), to the learned TPO for his comments.
TPO objected to the admission of the additional evidences and abstained from giving his comments on the evidences of expenses, which shows that he was unable to point out any defect in the evidences of the assessee. Before us, the Ld DR has also not pointed out any defect or irregularity in analysis of the CIT(A) on the issue of expenses reimbursed. In such circumstances, no useful purpose will be served by sending the matter back to Ld. TPO. We, accordingly reject the arguments of the Ld. DR and dismiss the ground No. 3 of the appeal.
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2021 (2) TMI 1319 - ITAT MUMBAI
Disallowance u/s. 14A r.w.r 8D(2)(iii) - suo motto amount offered by it in its revised return of income - HELD THAT:- The additional ground of appeal raised by the assessee wherein it had sought restriction of the disallowance u/s 14A to the extent of the dividend income received during the year under consideration merits acceptance. Accordingly, following our view taken while disposing off the cross-appeals of the assessee and the revenue for A.Y 2010-11 and A.Y 2011-12 [2021 (2) TMI 666 - ITAT MUMBAI] vide our consolidated order passed we herein direct the A.O to restrict the disallowance u/s 14A to the extent of the exempt dividend income received by the assessee during the year in question. Accordingly, the additional ground of appeal no. 1 raised by the assessee is allowed
Whether no disallowance u/s 14A r.w Rule 8D was called for in its case? - We are afraid the same does not find favour with us. As the method for computing the disallowance u/s 14A had been prescribed in Rule 8D vide the IT(Fifth Amendment) Rules 2008, w.e.f 24.03.2008 thus, no infirmity arises from the disallowance worked out by the A.O by following the said prescribed method. The Ground of appeal No. 1 raised by the assessee is dismissed.
Disallowance u/s 14A r.w Rule 8D(2)(iii) while disposing off the assessee’s appeal - We herein direct the A.O to consider only those investments which had yielded dividend income for the purpose of computing the “average value of investments‟ for computing the disallowance u/s 14A r.w. Rule 8D(2)(iii). The Ground of appeal No. 2 is partly allowed for statistical purposes.
Disallowance of interest expenditure u/s 14A r.w Rule 8D(2)(ii) - revenue is aggrieved with the order of the CIT(A) wherein it is stated that the appellate authority had wrongly directed the A.O to follow the decision in the case of HDFC Bank, Mumba[2014 (8) TMI 119 - BOMBAY HIGH COURT] - HELD THAT:- We find that no such direction/observation is discernible from the order of the CIT(A). In fact, as the A.O had not made any disallowance of any interest expenditure u/s 14A r.w Rule 8D(2)(ii) during the year in question thus, there was no occasion on the part of the CIT(A) to have relied upon the aforesaid judgments of the Hon’ble High Court of Bombay which are in context of the issue of disallowance of interest expenditure u/s 14A r.w Rule 8D(2)(ii) in the backdrop of availability of sufficient interest free funds with the assessee.
CIT-A Advising the A.O to consider only those investments made in the non-subsidiary companies which had yielded dividend income for the purpose of disallowance u/s 14A r.w Rule 8D(2)(iii), which as claimed by the revenue is contrary to the CBDT Circular No. 5 of 2014, dated 11.02.2014 - As respectfully following the view taken by the Tribunal while disposing off the revenue’s appeal for A.Y 2010-11 [2021 (2) TMI 666 - ITAT MUMBAI], though approve the view taken by the CIT(A) that only those investments which had yielded exempt income during the year are to be considered for computing the “average value of investments‟ while working out the disallowance u/s 14A r.w Rule 8D(2)(iii), but then considering the judgment of the Hon’ble Apex Court in the case of Maxopp Investment Ltd.[2018 (3) TMI 805 - SUPREME COURT] are not persuaded to further confine the same only to the extent of such investments which were made by the assessee in non-subsidiary companies. The Grounds of appeal No. 2 & 3 raised by the revenue are partly allowed in terms of our aforesaid observations.
TP Adjustment - international transaction of providing corporate guarantee/counter guarantee by the assessee to various banks and other corporate bodies for and on behalf of its AEs - HELD THAT:- Hon’ble High Court of Bombay in the case of CIT Vs. Everest Kento Cylinders Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] had observed, that considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and thus, no feasible comparison could be made between the guarantees issued by the commercial banks as against a corporate guarantee issued by a holding company for the benefit of its AE, a subsidiary company.
After so observing, the Hon’ble High Court had approved the guarantee fees of 0.5% charged by the assessee before them from its AE, as against that of 3% that was adopted by the TPO by referring to the bank guarantee rate. In our considered view the guarantee fee of 1% p.a of the value of the international transaction charged by the assessee before us from its AEs for providing corporate guarantee for and on their behalf, which was been benchmarked by it by applying external CUP method was at arm’s length and no adjustment as regards the same was liable to be made. We herein direct the A.O/TPO to vacate the upward transfer pricing adjustment made as regards the international transaction of providing of corporate guarantee by the assessee to its AEs. The Grounds of appeal raised by the assessee are allowed in terms of our aforesaid observations.
Levy of Education Cess and the Secondary and Higher Education Cess on the total income of the assessee is allowable as deduction u/s 37 - HELD THAT:- As relying on SESA GOA LIMITED case [2020 (3) TMI 347 - BOMBAY HIGH COURT]we herein direct the A.O to allow the assessee’s claim for deduction of education cess and secondary and higher education cess u/s 37 of the Act. The additional ground of appeal no. 2 is allowed.
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2021 (2) TMI 1318 - ITAT MUMBAI
TP Adjustment - determine the arm’s length purchase price of Bisoprolol Fumarate - Selection of MAM - TPO proposed to apply comparable uncontrolled price (CUP) method on the reasoning that similar product has been exported by Unichem Laboratories Ltd at a price of Rs.32,624.56, whereas, the assessee has purchased the same product from AE @Rs.64,815/- per keg - HELD THAT:- When the matter ultimately travelled to Tribunal, the co-ordinate bench, though, upheld applicability of CUP, however, accepting assessee’s plea held that considering strict quality control and stringent regulatory method followed in Germany compared to India, 10% quality adjustment has to be provided while determining ALP under CUP. Further, accepting assessee’s plea, the Tribunal in no uncertain terms has held that only the price at which the product is sold in domestic market, that too, sale transaction exceeding quantity of 20 kgs has to be considered for applying CUP. Admittedly, in the facts of the present case the TPO while applying CUP has considered the price charged for export sales made by Unichem Laboratories Ltd. Therefore, in our considered view, such price adopted for applying CUP is invalid. That being the case, when no comparable price for sale of the product in the domestic market is available in terms of the directions of the Tribuanl in assessee’s own case for Assessment Years 2009-10 and 2010-11 [2016 (3) TMI 1105 - ITAT MUMBAI], there is no other course left open, but to accept the benchmarking of the assessee under TNMM. In view of the above, we delete the addition of Rs.95,48,976/-. This ground is allowed.
Disallowance of 70% out of the expenditure incurred towards distribution of samples - HELD THAT:- While deciding identical issue in assessee’s own case for Assessment Year 2003-04 [2013 (9) TMI 306 - ITAT MUMBAI] the Tribunal has restored the issue to the Assessing Officer for fresh examination after verifying the details of names and addresses of doctors. Keeping in view the aforesaid directions of the Tribunal in assessee’s own case, we restore the issue to the Assessing Officer for fresh examination after due opportunity of being heard to the assessee. While doing so, the Assessing Officer may also examine the decision of the co-ordinate bench in case of Johnson & Johnson Ltd [2014 (2) TMI 555 - ITAT MUMBAI] This ground is allowed for statistical purpose.
Disallowance u/s 14A - assessee while working out the disallowance AO has also included investment in REC Bond and investment in NSB, NABARD and REC Bonds - HELD THAT:- Such investment should be excluded for computing disallowance under rule 8D(2)(iii). We find substantial force in the aforesaid submission of the assessee. Accordingly, we direct the Assessing Officer to verify the claim of the assessee and exclude the investments capable of yielding taxable income from the average value of investment for computing the disallowance under rule 8D(iii). Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue.
Disallowance by invoking section 145A - AO while examining the details of loans and advances furnished by the assessee, noticed that the assessee had receivables on account of CENVAT credit and other taxes - HELD THAT:- It is a fact that while deciding identical issue in assessee’s own case for Assessment Year 2003-04, the Tribunal in the order referred to above, has restored the issue to the Assessing Officer for fresh examination keeping in view that the adjustment, if any, has to be made to opening stock, purchases, sales and closing stock. We have also noted that while giving effect to the order of the Tribunal, the Assessing Officer has deleted the adjustment made under section 145A of the Act. In view of the above, we restore the issue back to the Assessing Officer for fresh examination keeping in view the directions of the Tribunal in Assessment Year 2003-04 that adjustment, if any, must be made to opening stock, purchases, sales and closing stock. This ground is allowed for statistical purpose.
It is a fact that while deciding identical issue in assessee’s own case for Assessment Year 2003-04, the Tribunal in the order referred to above, has restored the issue to the Assessing Officer for fresh examination keeping in view that the adjustment, if any, has to be made to opening stock, purchases, sales and closing stock. We have also noted that while giving effect to the order of the Tribunal, the Assessing Officer has deleted the adjustment made under section 145A of the Act. In view of the above, we restore the issue back to the Assessing Officer for fresh examination keeping in view the directions of the Tribunal in Assessment Year 2003-04 that adjustment, if any, must be made to opening stock, purchases, sales and closing stock. This ground is allowed for statistical purpose.
Disallowance of club expenditure holding it to be of capital nature - HELD THAT:- We have noticed that while deciding identical issue in assessee’s own case for Assessment Year 2007-08 [2013 (9) TMI 163 - ITAT MUMBAI] the Tribunal has allowed the claim of the assessee. Facts being identical, respectfully following the aforesaid decision of the Tribunal, we delete the disallowance made by the Assessing Officer. This ground is allowed.
Disallowance u/s 43B(f) - HELD THAT:- We find that in case of UOI Vs. Excide Industries Ltd. [2020 (4) TMI 792 - SUPREME COURT] while reversing the judgment of the Hon’ble Calcutta High Court, has held hat this type of expenditure has to be disallowed under section 43B(f) of the Act if they were not actually paid during the year. Following the decision of the Hon’ble Supreme Court noted above, we dismiss the ground of the assessee.
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2021 (2) TMI 1317 - ITAT MUMBAI
TP Adjustment - applying LIBOR + 2% interest rate on the monthly closing balance of advances to subsidiaries during the period relevant to the assessment year under appeal - HELD THAT:- Both sides are unanimous in stating that the nature of transaction of advancing loans by assessee to its overseas AEs is identical to the one as in assessment year 2007-08.
Co-ordinate Bench after considering the issue in detail held that advancing of loans to AEs is an international transaction and as regards determination of interest rate, Tribunal held that LIBOR +2% on monthly closing balances of advances be applied for transaction to be at arm’s length.
Hon'ble Bombay High Court [2017 (6) TMI 1087 - BOMBAY HIGH COURT] in Income Tax Appeal No. 1869 of 2014 Tribunal was justified in directing the Assessing Officer to determine the Arm’s Length interest by considering the LIBOR (London Inter Bank Operative Rate) plus 2% on the monthly closing balances of the advances
The Hon’ble High Court upheld the findings of the Tribunal on this issue and dismissed the appeal of Revenue. Since the issue has now been settled by the Hon’ble Jurisdictional High Court in favour of the assessee, we find no infirmity in the order of CIT(A), hence, the same is upheld, ergo, the appeal of Revenue is dismissed sans merit.
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2021 (2) TMI 1314 - ITAT DELHI
Vivad Se Vishwas Scheme, 2020 - assessee requested for withdrawal of the appeals and stated that the assessee has opted to settle the dispute relating to the tax arrears for the assessment years under consideration under the Vivad Se Vishwas Scheme, 2020 - HELD THAT:- As we accept the request of the assessee for withdrawal of the appeals.
In the result, the appeals of the assessee are dismissed as withdrawn. Above decision was announced on conclusion of Virtual Hearing in the presence of both the parties on 17th February, 2021.
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2021 (2) TMI 1312 - ITAT KOLKATA
Rectification of mistake - Validity of order of this Tribunal as an ex-parte order passed against a dead person - HELD THAT:- We find that a mistake apparent on record, has crept into the order of this Tribunal dt. 22/11/2019, as it was passed on a dead person, though, the legal heir of the assessee had filed an application for being brought on record. Under these circumstances, we recall the impugned order dt. 22/11/2019. The registry is directed to bring on record, the legal heir of the assessee Shri Sumitro Das and post the case for fresh hearing, in due course. The registry is further directed to issue notice of hearing to the legal heir Shri Sumitro Das.
This miscellaneous application of the assessee is allowed.
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2021 (2) TMI 1310 - ITAT SURAT
Addition on account of unsecured loan - HELD THAT:- We have gone through the detailed findings of ld CIT(A) and noticed that assessee has failed to produce books of accounts, vouchers, bills and Bank Statements before the assessing officer as well as before ld CIT(A). The Ld Counsel in his written submissions stated that if a chartered Accountant gives unqualified certificate in the prescribed form then in that situation books of accounts, voucher, bills, bank statements etc should not be called for either in the case of public company or in the case of private companies where the accounts have been audited by an auditor qualified to audit a public company's account and he has given a certificate, similar to that given in the case of a public company. We do not agree with ld Counsel.
The purpose of scrutiny assessment under section 143(3) is to examine, books of accounts, voucher, bills, bank statements etc. That is, in order to verify the unsecured loan, octroi expenses and advances, the assessing officer has to examine books of accounts, voucher, bills, bank statements, confirmations etc. which the assessee has failed to produce before us. The argument of the ld Counsel to the effect that if the assessee submits audit report then in that situation, the assessee need not to furnish books of accounts, voucher, bills, bank statements, confirmations etc. is not acceptable.
We have gone through the order of the CIT (Appeals) and noticed that the Assessee has not submitted any evidence or documents during the appellate proceedings in respect of loans, advances and expenses. Therefore, we do not find any infirmity in the order of CIT (Appeals). We decline to interfere in the order of ld. CIT (Appeals). His order on this issue is hereby upheld and grounds of appeal raised by the assessee is dismissed.
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2021 (2) TMI 1309 - ITAT DLEHI
Direct Tax Vivad Se Vishwas Act - HELD THAT:- Assessee, vide letter dated nil, has requested for withdrawal of the appeal filed by assessee and stated that the assessee has opted to settle the dispute relating to the tax arrears under the Vivad Se Vishwas Scheme, 2020 for the assessment year under consideration. A certificate to this effect under section 5(1) of The Direct Tax Vivad Se Vishwas Act, 2020 has also been filed.
We accept the request of the assessee for withdrawal of the appeal. Appeal of the assessee is dismissed as withdrawn.
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2021 (2) TMI 1298 - ITAT PUNE
Disallowance u/s 14A - assessee offered a suo-motu disallowance towards the expenditure to earn dividend income - As specifically contended before the AO and the ld. CIT(A) that no borrowed funds were utilized for the purpose of making the investments which yielded the dividend income for the year under consideration - HELD THAT:- The lower authorities without considering the submissions made in proper perspective had proceeded to make the disallowance. On perusal of the material it is clear that no borrowings were utilized for the purpose of making the investments which yielded the dividend income. The borrowings shown in the books of account were made for specific purpose.
In the absence of evidence to the contrary, it cannot be presumed that the borrowed funds have been utilized for the purpose of making the investments which yielded the dividend income. Therefore, we are of the considered opinion that no further disallowance u/s 14A of the Act is warranted. Accordingly, we direct the Assessing Officer to delete the addition made u/s 14A of the Act. Appeal of assessee allowed.
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2021 (2) TMI 1296 - ITAT DELHI
Disallowance u/s 14A r.w.r 8D - whether the investment is yielding taxable income, exempt income or no income and that the satisfaction regarding the incorrect amount disallowed by the assessee was not recorded by the AO? - HELD THAT:- In view of the admitted position that the facts and circumstances involved for this year are identical to ones involved in assessment years 2009-10, 2010-11 and 2011-12, in which the issue was restored to the file of AO to take a fresh view in the light of directions given [2014 (7) TMI 1314 - ITAT DELHI] for assessment year 2009-10, we are of the considered opinion that the request of the assessee can be accepted. We accordingly, while setting aside the impugned findings of the authorities below, restore the issue to the file of Assessing Officer to decide the same in the light of the view to be taken for earlier assessment years. Appeal of the assessee is allowed for statistical purposes.
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2021 (2) TMI 1294 - ITAT DELHI
Assessment u/s 153A - assessment in respect of seized documents - Proof of incriminatory material was found during the search - HELD THAT:- In view of the admitted position of fact in this case that no incriminatory material was found during the search operations pertaining to this particular assessment year, AO could not have proceeded to frame assessment under section 153A of the Act and on this score we uphold the findings of the Ld. CIT(A) and decline to interfere with the same. - Decided against revenue.
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2021 (2) TMI 1291 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - undisclosed loan transactions - action under Section 147 after the expiry of 4 years from the end of relevant assessment year - whether the revenue is justified in reopening the assessment for the year under consideration? - HELD THAT:- The record indicates that the assessee had disclosed the transactions of loan in their books of accounts and return of income. It is also admitted facts that during the scrutiny assessment proceedings, the assessee had furnished all the details as called for including bank statement of parties from whom loan was taken. It is the case of the revenue that the information received from the concerned, M/s. Ramdev Shares and Securities Pvt. Ltd, is paper company, managed by Mr. Pravin Jain and he was found to be an accommodation entry provider and the alleged transaction is bogus transaction and therefore, the amount of unsecured loan and interest thereon is liable to tax and has escaped assessment.
After careful examination of the reasons recorded and the order of disposing of the objection, we find that on 08.10.2014, the scrutiny assessment was concluded. The search action carried out on 01.10.2013 in the case of Mr. Pravinkumar Jain. In the reasons recorded, it is nowhere mention that on which date the information was received by the department. Thus, we are of the considered view that the information as mentioned in the reasons recorded, cannot be termed as tangible material, as at the time of scrutiny assessment, it was very much available with the department.
Assessee had disclosed fully and truly material facts, with respect to loan transaction as well the interest paid on the loan. Admittedly, the loan was paid up by the assessee on 21.08.2014 with the interest, after deducting TDS thereon. The Assessing Officer at the time of scrutiny assessment, accepted the transaction. Under the circumstances, it cannot be said that the assessee had withheld the primary material and assessee failed to disclose truly and fully all material facts of the assessment. Thus, the conditions precedent for exercise of power under Section 147 after expiry of period of 4 years of relevant assessment year are not satisfied - Decided in favour of assessee.
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2021 (2) TMI 1288 - ITAT MUMBAI
Assessment u/s 153A - Addition equal to 20% of the total labour sub contract expenses - Disallowance on the ground that assessee has not maintained any books of accounts - HELD THAT:- The assessee has made payments to these individuals for the further disbursement to these labourers. We note that AO has not pointed out any defect in the books of accounts of the assessee and in these labour contractors bills and just made the disallowance that these are not allowable under section 37(1) of the Act being not wholly and exclusively incurred for the purpose of business of the assessee. We find that Ld. CIT(A) has taken into account all the aspects of the matter and documents while allowing the appeal of the assessee as has been stated hereinabove copies of bills and vouchers, TDS certificates, copies of PF payments and payment through banking channels etc. The case of the assessee also finds support from the decision of TUV India Pvt. Ltd [2019 (8) TMI 1050 - ITAT MUMBAI] wherein it has been held that where the assessee submits complete details of expenses and AO not finding any defects in the books of accounts, the adhoc disallowance of expenses by the AO are not justified.
Admittedly no incriminating material qua these sub contract expenses were found during the course of search and it is a trait and settled law that that no addition can be made in the unabated assessment which has attained finality on the date of search without any incriminating material. The case of the assessee is supported by the decision of the Apex Court in the case of PCIT vs. Meeta Gutgutia [2018 (7) TMI 569 - SC ORDER] wherein the Hon’ble Supreme Court has held that invocation of section 153A to reopen the concluded assessment was not justified in absence of any incriminating material found during the course of search - Decided against revenue.
Bogus cement purchases - assessee has deviated from SOP which could not be explained during the assessment proceedings - sustaining of addition to the extent of 15% by the ld CIT(A) - HELD THAT:- CIT(A) has observed that AO has declined to examine the gate entry registry, internal transfer challans produced before him. CIT(A) has even noted that AO has not examined the claim of the assessee that bills furnished were in fact invoices cum delivery challans with all details and AO has primarily relied on the statements recorded which had been retracted since then in para 5.14. - CIT(A) has also recorded a finding that there is no evidence brought on record that payments to cement manufacturers have come back to the assessee. Under these facts and circumstances, we are not in agreement with the conclusion drawn by the CIT(A) that a disallowance to the extent of 15% can be sustained. We note that AO has not pointed out any defects in the books of accounts of the assessee. The case of the assessee finds support from the decision of Hon’ble Gujarat High Court in the case of CIT vs. Tejua Rohitkumar Kapadia [2018 (7) TMI 590 - SC ORDER] wherein it has been held that purchases made by the assessee were duly supported by bills and payments and account payee cheques and further confirmed by the seller and the AO not bringing any evidence on record to show that amount is recycled back to the assessee beside accepting the sales out of the purchases , then addition under section 69C was not called for - no disallowance can be made towards bogus purchases and thus the order of Ld. CIT(A) can not be sustained on this. - Decided in favour of assessee.
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2021 (2) TMI 1284 - ITAT MUMBAI
Unexplained cash credit u/s 68 - Bogus LTCG - Addition based on third party statement - onus to prove - Reliance on findings rendered by investigation wing, Kolkata merely on the basis of statement of various operators, entry providers and stock brokers including the statement of Shri Anil Aggarwal - HELD THAT:- AO has nowhere established the involvement of the assessee in price rigging or price manipulation. No collusion between the assessee and alleged entry providers or operators is shown to have existed. Another noteworthy point is that no opportunity to cross-examine the persons making adverse statement was provided to the assessee despite being specifically pointed out before lower authorities. There is no admission or evidence based finding that any cash got exchanged between the assessee and any of the alleged bogus entities. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmise. The addition thus made purely on the basis of third-party statement recorded at the back of the assessee could not be sustained in the eyes of law unless the same are confronted to the assessee and the same are backed by any corroborative material. No effective investigation is shown to have been carried out by Ld. AO to dislodge the assessee’s claim by bringing on record cogent evidences as well as confronting the same. However, except for general allegations as narrated in the investigation wing report, there is no evidence which would link assessee’s involvement in jacking up the prices of the shares with a view to earn artificial gains.
Onus casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said parties. As against this, the assessee’s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue.
Finally, going by the factual matrix and respectfully following the earlier view of coordinate bench in the cited order, we are of the considered opinion that the additions thus made by Ld. AO and confirmed by Ld. CIT(A) are not sustainable in the eyes of law. Therefore, we are inclined to delete the same. Consequentially, the addition of estimated commission also stands deleted. - Decided in favour of assessee.
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2021 (2) TMI 1279 - SC ORDER
Validity of assessment u/s 153A/153C - Maintainability of appeal on low tax effect - HELD THAT:- On perusing the record, it appears that the tax effect in these cases is less than the monetary limit of ₹ 2,00,00,000/- (Rupees two crores only) and thus covered by the Central Board of Direct Taxes (CBDT) Circular No.17 of 2019 dated 08.08.2019.
In that case, these appeals/petitions need not proceed in view of the aforesaid circular issued by the CBDT.
Appellant(s)/petitioner(s) prays for time to take instructions. We see no reason to keep these case(s) pending as the tax effect is less than the amount specified in the stated circular.
Accordingly, we dispose of these case(s), leaving all questions of law open. At the same time, we grant liberty to the appellant(s)/petitioner(s) to revive these appeal(s)/petition(s) in the event the factual position noted above is incorrect.
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2021 (2) TMI 1272 - ITAT HYDERABAD
Reopening of assessment u/s 147 - disallowance u/s 43B towards PF, ESI and TDS - HELD THAT:- AO has failed to record the reasons to the satisfaction of the section 147, under which, the assessment was reopened. Further, as contended by the ld. AR that there is neither any new information available with the AO nor any new tangible material in hand other than the information already existing in original assessment and further, there was no failure on the part of the appellant company to fully and truly disclose the material facts necessary for the assessment..
DR has filed a paper book containing pages 1 to 26, in which, copy of reasons recorded has been placed at pages 1 to 3 and the approval from Pr. CIT is at page 4. We observe that the reasons recorded by the AO, Ward - 1 (3), whereas, assessment was framed by ITO, Ward – 1(2), Hyderabad. From the reasons recorded, we observe that nowhere it is mentioned that there was any incumbency. In the light of these observations, we are of the view that the AO, who has framed the assessment order has not applied his mind properly before reopening the case of the assessee u/s 147 - no sufficient and impeachable reason for reopening the assessment u/s 147 of the Act. Therefore, in the facts and circumstances of the case the issuance of notice u/s 148 and consequently passing of assessment u/s 147 of the Act is unsustainable. Accordingly, we quash the assessment order passed by the AO u/s 143(3) read with section 147 of the Act. Since the assessment itself is quashed, additions made on such assessment do not survive. Decided in favour of assessee.
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2021 (2) TMI 1271 - ITAT AMRITSAR
Addition u/s 40A(3) - payments in question made by the assessee to Government undertakings - payment of legal tender - Whether the cash payments made by the assessee towards purchase of wine to the aforementioned undertakings of the Government, viz. (i) M/s Rajasthan State Ganganagar Sugar Mills Ltd; and (ii) M/s Rajasthan State Beverages Corporation Ltd., which as per him were to be considered as an arm of the State Government that had received the payment in legal tender, i.e., in Indian currency, would by virtue of the exception carved out in Rule 6DD(b) of the Income Tax Rules, 1962 be saved from the disallowance contemplated in Sec. 40A(3)? - HELD THAT:- Referring to tests laid down by the Hon’ble Apex Court in the case of Som Prakash Rekhi [1980 (11) TMI 113 - SUPREME COURT] we are of the considered view, that as both of the aforesaid undertakings, viz. (i) M/s Rajasthan State Ganganagar Sugar Mills Ltd; and (ii) M/s Rajasthan State Beverages Corporation Ltd., are State Government Companies wherein 100% share holding is held by the State Government; there is an existence of deep and pervasive control of the State Government on the said undertakings, and the full control of their working, policy and framework is vested with the State Government, therefore, they can safely be brought within the meaning of “State”.
As regards the requirements contemplated in Rule 6DD(b) that the payment is required to be made in legal tender, we find that the term “legal tender” has not been defined in the Income-Tax Act.
The dictionary meaning of “legal tender” as mentioned in “Aiyer’s Law Terms and Phrases”, is “the coinage of a country in which debts may be paid and which the creditor is bound to accept”. The dictionary meaning of the coin is; “metal used for the time being as money and stamped and issued by the authorities of the state in order to be used.” Therefore, it can be said that “legal tender” means the currency of a state which is to be used as money. Backed up our aforesaid observations, we are of the considered view, that as in the case of the assessee before us the payments in question to the aforementioned State Government undertakings have been made by the assessee in Indian currency, therefore, it can safely, or in fact inescapably be concluded that the same have been made in legal tender.
Thus the payments made by the assessee to the aforementioned Government undertakings , which could safely be held as a part of the Government would fall within the realm of the exception carved out in Clause (b) of Rule 6DD of the Income- Tax Rues, 1962, qua, the applicability of the provisions of Sec. 40A(3) of the Act - Payments in question made by the assessee to the State Government entities in legal tender were covered by the exception contemplated in Rule 6DD(b) of the Income Tax Rules, 1962, therefore, the same could not have been disallowed u/s 40A(3) of the Act, uphold his order. - Decided in favour of assessee.
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2021 (2) TMI 1270 - ITAT CHANDIGARH
Delayed employees' contribution towards ESI and PF - assessee's failure to pay the employees' contribution of ESI & PF within the prescribed due date under the relevant Statute as per section 36(1)(va) - deposit paid before the due date of filing of the return of income u/s. 139(1) - Scope of amendment - HELD THAT:- In the instant case, it is not in dispute that employees' contribution to ESI and PF collected by the assessee from its employees had been deposited well before the due date of filing of return of income u/s. 139(1) of the Act. We find that the issue is squarely covered by the decisions of the Hon'ble Rajasthan High Court, Hon'ble Himachal Pradesh High Court as well as Hon'ble Punjab & Haryana High Court. We further note that though the ld. CIT(A) has not disputed the various decisions of Hon'ble High Courts including the decision of the jurisdictional Punjab & Haryana High Court but has referred to the amendment brought in by the Finance Act, 2021.
It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act, 2021 shall apply w.e.f. assessment year 2021-22 as also evident from the amendment as so introduced in the statue and subsequent assessment years and the impugned assessment year being assessment year 2018-19, the said amendment cannot be applied in the instant case
Thus the addition made by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the deposit of employees' contribution towards ESI and PF paid before the due date of filing of the 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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