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2021 (8) TMI 1334
TP Adjustment - comparable selection - exclusion of Infosys Ltd., as a comparable company - turnover filter - HELD THAT:- As relying on Autodesk India Pvt. Ltd. [2018 (7) TMI 1862 - ITAT BANGALORE] we are of the view that the CIT(A) ought to have excluded Infosys Ltd., as a comparable company by applying the turnover filter. We direct that this company should be excluded as a comparable company.
Excluding Persistent Systems Ltd. - Persistent Systems Ltd. was excluded from the list of comparable companies on the ground that these companies were engaged in diversified activities and earning revenue from various activities including licensing of products and income from maintenance contracts and there was no segmental reporting so that the operating margins of SWD services of this company can be compared with the assessee. In the light of the aforesaid decision CSG Systems International (I) P. Ltd [2019 (8) TMI 350 - ITAT BANGALORE] we do find merit in ground raised by the Assessee and allow the same.
Adjustment towards working capital differences - CIT(A) was not justified in denying adjustment on account of working capital adjustment. Since, the CIT(A) has not found any error in the TPO's working of working capital adjustment, the working capital adjustment as worked out by the TPO has to be allowed. We may also add that the complete working capital adjustment working has been given by the Assessee and a copy of the same. No defect whatsoever has been pointed out in these working by the CIT(A). We may also further add that in terms of Rule 10B(1)(e) (iii) of the Rules, the net profit margin arising in comparable uncontrolled transactions should be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions which could materially affect the amount of net profit margin in the open market. It is not the case of the CIT(A) that differences in working capital requirements of the international transaction and the uncontrolled comparable transactions is not a difference which will materially affect the amount of net profit margin in the open market. - Thus we hold that the working capital adjustment as claimed by the Assessee should be allowed. We hold and direct accordingly.
Computation of deduction u/s 10A - HELD THAT:- Taking into consideration the decision rendered by the Hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that whatever is excluded from export turnover should also be excluded from total turnover while computing deduction u/s. 10A of the Act. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. Moreover, the order of the Hon'ble Karnataka High Court has been upheld by the Hon'ble Supreme Court in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT]
Exclusion of M/S. Kals Information Systems Ltd., by the CIT(A) as not comparable with the Assessee - The company is engaged in the development of software products and providing related services. It also provides implementation and maintenance of software products. It has developed a range of products such as Shine ERP software, Docuflo, Dac 4 Cast, CMSS, La Vision, Virtual Insure and Aldon. The annual report also confirms that the company is engaged in development of software and software products. The company holds significant inventories which account for 27% of the total current assets which demonstrates that it is a product development company as against a pure software service provider like the assessee. The functions carried out by the two companies being substantially different, this company ought to stand rejected as a comparable. The company is being consistently excluded from the list of comparables in similar cases. Since the circumstances leading to it being excluded as being functionally dissimilar in the previous assessment continue to remain same, the company ought to remain excluded in the current assessment year. Thus this company to be excluded in the case of assessees similar to the Assessee herein.
Persistent Systems Ltd - This is the claim of the assessee before us that VAT is leviable only on sale of goods and therefore, it has to be seen that what is the quantum of sale of goods by that company and whether segmental information in that regard is available or not. It has been submitted that as per the remaining three Tribunal orders rendered in the case of WM Global Technology Services (India) (P.) Ltd. [2018 (4) TMI 429 - ITAT BANGALORE] and in the case of Tecnotree Convergence Pvt. Ltd. [2018 (6) TMI 1688 - ITAT BANGALORE] the matter was remanded back to the TPO for fresh decision and therefore, in our considered opinion and in the facts of present case, we feel that this issue should also be restored back to the file of TPO for fresh decision in the light of all these four Tribunal orders after providing adequate opportunity of being heard to the assessee.
Software development services segment - We restore the matter back to the AO/TPO for fresh decision regarding the assessee's claim for exclusion of Larsen & Toubro Infotech Ltd. and Persistent Systems Ltd. after providing adequate opportunity of being heard to the assessee and the issue should be decided after considering all available Tribunal orders for Assessment Year 2013-14 in respect of exclusion of these two companies. Accordingly ground Nos. 9 and 10 are allowed for statistical purposes.
CG - VAK Software Exports Ltd. - CG - VAK Software Exports Ltd. is a software development company and was doing the work of integration, assimilation or patch work for its client and for that purposes is also rendering some services on-site. Therefore it cannot be urged that it was a product company. These findings are directly contradictory to the findings of the Tribunal rendered in the case of Hewlett Packard India Software operation Pvt. Ltd. [2021 (3) TMI 1379 - ITAT BANGALORE] Hence, we deem it proper to remand the issue of comparability of this company also to the TPO/AO for consideration afresh to find out from the financials and annual report and if necessary to issue notice u/s. 133(6) of the Act and in other manner provided in the Act, to find out the true position with regard to the AO.
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2021 (8) TMI 1332
Penalty issued u/s 271D and 271E - Amounts were received and paid by the assessee otherwise than through account payee cheques - Tribunal decided to remand the cases to the assessing authority, after finding that the First Appellate Authority had accepted evidence without receiving a remand report from the assessing officer as per Rule 46A of the Income Tax Rules - HELD THAT:- In an appreciation of the circumstances of the case and the purpose for which the matter is remanded, we find force in the contention of the learned Senior Counsel. The observations of the Tribunal, especially those extracted in the earlier paragraph may have the effect of serving as a guiding factor or as a controlling observation over the discretion of the assessing authority while it comes to the conclusion regarding the nature of transactions. The assessee apprehends that the observations may denude the assessing officer of any discretion, especially since at this distance of time, making the cheques physically available for examination may be next to impossible especially since the cheques had been handed over to the Banks. The apprehension is not unfounded.
For the purpose of entering into a conclusion on the veracity of the claim of the assessee that the transactions in question were through Bank accounts, different modes of proof would be available. Physical examination of the cheque alone is not the only method. Direct, indirect or circumstantial evidence can be adduced to satisfy the assessing authority while coming to the conclusion on the issue remanded to it. In the aforesaid circumstances, we are of the firm view that the observations of the Tribunal restricting the option of the assessing authority to physical examination of the cheques in question can cause prejudice to the assessee.
While we affirm the order of remand in all these cases to the assessing authority, we clarify that the assessing authority will consider and pass orders untrammelled by the observations in the order of the Tribunal and will be free to accept evidence of any legally acceptable nature produced by the assessee in support of its claim.
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2021 (8) TMI 1328
Weighted deduction u/s 35(2AB) - Claim Denied on expenditure incurred for Research and Development on the ground of Non furnishing of Certificate in Form 3CL from Department of Scientific and Industrial Research (DSIR) - HELD THAT:- Both the lower authorities have rejected the same for the sole reason that the then taxpayer had failed to file corresponding Form-3CL issued by the prescribed authority i.e., Department of Scientific and Industrial Research ‘DSIR’. Case file indicates that the assessee has filed its additional evidence petition dt.08-10-2020 placing on record the DSIR’s approval in Form- 3CI, dt.28-11-2017 whereas the CIT(A)’s order under challenge is dt.30-10-2017. We therefore deem it appropriate to restore the instant former issue back to the Assessing Officer to be examined afresh in light of the DSIR approval dt.28-11-2017 issued in assessee’s case in AYs.2014-15 to 2016-17; as the case may be.
Disallowance of depreciation - appellant acquired leasehold rights on land to setup a unit in SEZ - revenue contention in support of the impugned disallowance is that the assessee ought to have amortized the same u/s.35 - HELD THAT:- We find no merit in the instant contention per se in view of the fact that neither there is any specific provision in the Act nor is any CBDT circular to this effect. Hon'ble apex court’s recent decision in Taparia Tools Ltd. [2015 (3) TMI 853 - SUPREME COURT] rather holds that the claim of revenue expenditure is not to be denied merely because the same could also be split over a period of years. Coupled with this, this tribunal’s Special Bench in ACIT Vs. Progressive Constructions Ltd. [2017 (3) TMI 1167 - ITAT HYDERABAD] decides the issue in assessee’s favour that a right to operate any asset forms an intangible asset u/s.32(1)(ii) of the Act entitled for depreciation.
Assessee in the instant case has taken land on lease to set up an SEZ and therefore, the same ought not to be taken as eligible for depreciation - We find no substance in the instant last plea as well as the assessee has claimed the impugned relief qua lease premium of Rs.5,85,30,062/- than regarding acquisition of the land along with its title. We therefore distinguish the Revenue’s arguments based on case law M/s. Mahanadi Coalfields Ltd [2018 (1) TMI 326 - ITAT CUTTACK] and M/s. Cyber Park Development & Construction Ltd.[2018 (1) TMI 326 - ITAT CUTTACK] in light of the foregoing Special Bench decision (supra). The assessee’s instant second substantive ground is accepted in principle. AO shall frame his consequential computation as per law.
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2021 (8) TMI 1322
Discount on issue of ESOP - allowable deduction in computing the income under the head profits and gains of the business or not? - as per HC assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of accounts - HELD THAT:- Issue notice.
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2021 (8) TMI 1321
Disallowance u/s. 36(1) - interest on housing loans - HELD THAT:- As decided in own case [2019 (12) TMI 1600 - ITAT DELHI] assessee stated that 62.75% in on account of interest on long term housing loan and worked out applying that percentage on the total business income calculated a sum of Rs. 549834543/- pertaining to long term housing loan and computed deduction @20% of Rs. 10.99 crores as deduction.
AO changed the above ratio from 62.75 % to 55.89% as he considered the total receipt of business for the purpose of working out proportion. In the present case the methodology adopted by the assessee is consistently followed for last eight years. Same was accepted by the revenue without any objection.
The only issue is with respect to how the profit of the business for the purpose of long term housing finance shall be worked out. The only issue is that assessee is computed with respect to the total income with respect to the interest income whereas the Id AO has applied the above ratio to the total receipt. When the method has been consistently accepted for the above year we do not find any reason to defer from that. In view of this we do not find any infirmity in allowing the assessee claim of deduction u/s 36(1 )(viii) of the Act applying the ratio of 62.75%. In the result we do not find any merit in ground No. 1 of the appeal.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- CIT(A) followed the binding precedent in the case of Joint Investments (P)Ltd. vs. CIT, [2015 (3) TMI 155 - DELHI HIGH COURT] and deleted the addition. It is not established before us that the finding of fact by the ld. CIT(A) is in any way wrong. We, therefore, are of the opinion that in view of the binding precedent followed by the ld. CIT(A), findings of CIT(A) cannot be found fault with. Ground No. 2 of the Revenue’s appeal is accordingly dismissed.
Deduction in respect of education cess and higher and secondary education cess paid during the year - HELD THAT:- As aR places reliance on the decision in the case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] and prayed that relief may be granted. DR submitted that this plea was not taken before either of the authorities below and therefore, the facts need to be verified. Ld. AR reports no objection. Recording the same, we leave the issue open to be adjudicated before the Assessing Officer. For this purpose, we remand the issue to the file of Assessing Officer for verification and taking a view in accordance with law.
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2021 (8) TMI 1319
Reopening of assessment u/s 147 - Mandation to consider objections against reopening filled by assessee - HELD THAT:- Undisputedly, the said notice came to be issued by respondent no.1, Assessing Officer, Income Tax, Special Range, Kanpur. In response to that notice, petitioner filed return through e-mode on 26.05.2021. Subsequently, on its further request, the petitioner was supplied the "reasons to believe", to initiate the re-assessment proceedings by email communication along with the approval order issued by the Principal Commissioner, under section 151 of Income Tax Act.
In response to the same, the petitioner has filed its written objection to the initiation of the re-assessment proceeding, vide objection dated 28.06.2021 filed on 29.06.2021 before the respondent no.1. Thus, the reassessment proceedings are stated to be pending.
Undisputedly, in view of the decision of the Supreme Court [2002 (11) TMI 7 - SUPREME COURT] as regularly followed by this Court by way of procedural principle, the Court does not directly entertain the challenge to re-assessment proceeding before disposal of the objection filed by the assessee to the initiation of such re-assessment proceeding. Thus the principle enunciated by the decision of Supreme Court in the case of GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] has been consistently applied by this Court.
In view of above, we consider it proper that the assessee's objection dated 28.06.2021 filed on 29.06.2021 may be decided by its assessing authority before proceeding to issue any further notice to conduct the re-assessment proceeding.
Order:
Within one week from today, the petitioner shall file a physical copy of this order along with covering application before the respondent no.1 to inform him about this order and the compliance to be made.Upon such compliance being made by the petitioner, a notice may be issued by the concerned authority within a week thereafter. It may be served on the petitioner fixing a date to decide the objection dated 28.06.2021. At least two weeks notice may be given before the date fixed.
On the date fixed, the objections may be decided either upon physical hearing or through virtual proceedings, through online mode.
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2021 (8) TMI 1317
Deduction u/s 80IB - Unaccounted money, found during the search proceedings and explained as on money received, are eligible for deduction under Section 80IB(10) - transactions entered into, with the buyers of flats, are eligible for deduction, even though there is violation of the sub-Sections(e) and (f) of Section 80IB(10), on the ground that these transactions were entered into before the amendments to sub-Section (3) and (f) of Section 80IB(10) - HC allowed assessee appeal - HELD THAT:- Leave granted.
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2021 (8) TMI 1316
Assessment u/s 153A - benami income arising out of the sales and purchases transactions of 70 entities as assessed in the hand of assessee - reliance on pen-drive as found during the course of search proceedings - HELD THAT:- As no substance could be found in the plea that the pen-drive did not belong to the assessee or the same was not found from assessee’s premises particularly when the contents of the pen drive completely matched with incriminating material found during the course of search operations. The seizure of the same was duly recorded in the Panchnama which was vouched by independent Panchas. The vital link was established between the pen drive and the estimate sheets as well as the regular books of benami concerns being run by the assessee. Therefore, we do not find any substance in this plea as raised by Ld. AR before us and therefore, we reject the same.
So far as the other arguments are concerned, we find that that the assessee was running more than 70 benami concern under name-sake directors / partners /proprietors. These persons were acting as per the direction of the assessee against remuneration. Most of them, in their statement u/s 132(4), made admission of those facts. They also made admission that they assisted / abetted the assessee in the business of providing accommodation entries. Their PAN Cards, IDs, blank signed cheque books etc were found at centralized premises. They were visiting the centralized premises to sign the blank cheque books as per the directions of the assessee. All these persons had superficial knowledge about nature of business being conducted by their respective concerns.
Most of these persons were residing at premises owned by the assessee group. The books of accounts of all these entities were being maintained at two premises in a centralized manner. The books were found in the same computer and audited by common Auditor. The auditor admitted to have signed the financial statements as per the directions of Shri Lunkaran Parasmal Kothari without verifying the books of accounts. This is further fortified by survey action at BKC, Mumbai wherein more than 30 firms were found to be operating from common premises. All the 70 entities were found to have common features in their respective financial statements. All these factors strongly prove the allegations of the department that all the concerns were being run by the group in a combined manner with a view to provide accommodation entries to various beneficiaries against commission.
So far as the retraction of the statement made by the assessee is concerned, we find that the retraction was made after more than 8 months and the same was devoid of any material evidence. The statements were made on oath u/s 132(4) and heavy onus was on assessee to rebut the same with cogent material while retracting the same. However, nothing of that sort as done by the assessee, has been shown before us. Glaring contradictions as well as similarities has been found in the retraction affidavits. As rightly held by lower authorities, the retraction was nothing but mere after-thought and tutored statement to thwart the process of investigation. The retraction was bereft of any material evidence and therefore, the same was to be completely ignored.
The aforesaid factual matrix as well as findings would lead to inescapable conclusion that all the 70 entities under consideration were being managed and controlled by the assessee group and therefore, lower authorities were quite justified in estimating commission income earned by the assessee group from all these benami concerns. - Decided against assessee.
Estimation of Quantum Additions - The estimation of 0.02% on import purchases as made by Ld. CIT(A) is based on confessional statement of the assessee and the same is also corroborated by relevant entries made in the estimation sheets which is illustrated in the impugned order. Therefore, we confirm this estimation.
The estimation of commission on local purchase is based primarily on the assumption that the assessee would have earned commission on all the transactions. However, there is no reference to any incriminating material while making this enhancement. The assessee has also not admitted to have earned such commission. Thus, the same is based on mere presumption and hence, we are inclined to delete the same. The estimation of 0.05% on accommodation entries of bogus purchases provided by assessee is based on our estimation in the case of Shri Rajendra P. Jain.
Our estimation with respect to bogus unsecured Loans provided by assessee draw strength from the fact that the assessee has carried out maximum transactions of this nature. The rate of commission may not be constant in all the transactions. Therefore, estimating the same merely on the basis of few illustrations only may not be a correct approach. Keeping in view the notions of equity and reasonableness, we have estimated the same @1% per annum which is much more than our estimation in the case of Shri Rajendra P. Jain.
The expenses allowance of 25%, in our considered opinion, would be more than enough to take care of the estimated expenses being incurred by the assessee to carry out its operations under all these concerns keeping in view the magnitude of the transactions. The assessee was maintaining all the concerns in a centralized manner. Evidently, the assessee was employing only a limited number of trusted employees only and the expenditure would remain, more or less, constant even if the number of concerns would have become more. The expenditure could not be assumed to have increased in direct proportion to the increase in turnover. Therefore, the estimation as made by Ld. CIT(A) is reasoned one and no further relief could be provided to the assessee, on this account.
Having said so, no other benefit / credit of returned income etc. would be available to the assessee. No credit of taxed paid by various entities would be available since TDS refund has been claimed by many of these entities.
The addition in the hands of the assessee would be over and above respective returned income of these concerns and also without any benefit of taxes paid by these concerns.
Unexplained jewellery - As quite evident that during appellate proceedings, the assessee was able to reconcile the jewellery as found during the course of search operations vis-à-vis jewellery declared in the wealth tax return. It is undisputed fact that declared jewellery was more than actual jewellery found during search operations. The findings of Ld. CIT(A) remain undisturbed before us. Therefore, our interference in the matter is unwarranted. This ground of revenue’s appeal stands dismissed.
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2021 (8) TMI 1312
Undisclosed investment u/s 69 in purchase of land properties - profit arising on sale of land by the firm required to be taxed in the hands of the firm OR in the hands of the partner - Assessee filed applications before the ITSC for settlement of his case in the first round of litigation - HELD THAT:- We find that the addition made by the Assessing Officer is contrary to the findings and the decision of the ITSC in the assessees’ own cases as the ITSC, while dealing with the application of the assessees has discussed the facts and after considering the report of the PCIT under rule 9, has also rendered a categorical finding stating that “we have no doubt in our mind that both the unaccounted investment in land purchased by the firm M/s RNR Devcon as well as the profit arising on sale of land by the firm are required to be taxed in the hands of the firm.
The receipts of the applicants (accounted as well as unaccounted) in lieu of forgoing their partnership share to Kakwani family would be capital receipts and not revenue receipts.” Therefore, even as per the categorical findings of the ITSC in the assessees’ own cases, the alleged unaccounted investment could not have been taxed in the hands of the present assessee.
These observations of the ITSC have been accepted by the PCIT/Assessing Officer in so far as the order of ITSC has not been challenged. The Assessing Officer failed to bring any evidence suggesting that the alleged on-money for purchase of the land was paid by the assessees out of their personal resources. There is no reference of any enquiry having been conducted from the firm. Thus, the addition has been made only on surmises and conjectures. Thus, we have no doubt in our mind that the investment in land purchase by the said firm as well as the profit arising on sale of land by the firm is required to be taxed in the hands of the firm and not in the hands of the partner i.e. present assessees. - Decided against revenue.
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2021 (8) TMI 1307
On-money received on sale of various units - Assessment u/s 153A - CIT-A deleted the addition - HELD THAT:- We find that the Ld. CIT-DR, except placing his reliance on the findings of the Assessing Officer, could not bring any corroborative material on record to justify the additions made by the Assessing Officer. We find that the assessee had duly shown the short-term capital gain from sale of units in ‘The View’ project and business income from sale of units in ‘Almas Elements’ project in his original returns of income furnished u/s 139 of the Act. We further find that during the course of the assessment proceedings, the assessee had duly furnished all the necessary details, documents, bills, vouchers etc. in respect of both the projects before the Assessing Officer. We also find that the Assessing Officer has also not made any independent enquiry or investigation from the buyers of the property as regard to actual receipt of sale consideration despite specifically being insisted by the assessee during the course of the assessment proceedings. Further, the Assessing Officer has also not brought any incriminating material or evidence on record which could substantiate that the assessee has actually received any on-money from the sale of units in ‘The View’ and ‘Almas Elements’ projects. We also found that the assessee has duly shown the income by having regard to the provisions of section 50C of the Act. Therefore, we are of the considered view that the Assessing Officer has made the additions purely on his guess work and surmises which do not have any basis whatsoever. We do not find any reason to interfere with the findings of the Ld. CIT(A). Accordingly, the action of the Ld. CIT(A) in deleting the additions on account of ‘The View’ and ‘Almas Elements’ projects respectively, is hereby sustained. - Decided against revenue.
Unexplained investment in property - AO noted while examining the books of account of the assessee family, this payment was not found recorded in the regular books of account of any of the assessees of Chugh family - HELD THAT:- We find that the Ld. CIT-DR, except placing his reliance on the findings of the Assessing Officer, could not bring any corroborative material on record to justify the additions made by the Assessing Officer. We find that during the course of the assessment proceedings, the assessee has duly furnished a notarized affidavit of Shri Anil Sogani, one of the partners of M/s. Gold Terrace Apartment, stating that except a payment of Rs.50,00,000/-, no other payment was made towards the said agreement. However, the said Affidavit was not controverted by the Assessing Officer. We also find that during the course of the assessment proceedings only, the assessee has also demonstrated the refund of Rs.50,00,000/- to Shri Nitesh Chugh on 29.04.2013 through RTGS but, the Assessing Officer did not make any reference thereof in his assessment order and instead, the AO made an incorrect finding to the effect that the amount of Rs.50,00,000/- was not found refunded by the seller to the assessee family. We also find that the Assessing Officer, except placing his reliance on the payment terms stated in the unsigned and undated agreement, could not bring any corroborative evidence on record to establish that the installment of Rs.1,75,00,000/- was actually paid before the date of the search. We have also carefully perused the judicial pronouncements cited and discussed by the Ld. CIT(A) in the impugned order.
Unexplained investment for purchase of plots in Pulak City - HELD THAT:- Merely on the presumption basis, any difference in the guideline value and apparent consideration paid by an assessee for purchase of an immovable property cannot be deemed as income of the assessee. Undisputedly, in the present case, no positive evidence has been brought on record to establish that the assessee has parted with any consideration over and above that shown in the registered sale deeds. In such circumstances, we are of the considered view that the Ld. CIT(A) has rightly deleted the addition made by the Assessing Officer in the assessee’s income on the allegation of payment of on-money by the assessee and his son Shri Vivek Chugh. Accordingly, this ground of the Revenue for the A.Y. 2013-14 is dismissed.
Eligibility of Deduction u/s. 54F in respect on-money - HELD THAT:- We find merit in the argument of the AR that under provisions of clause (b) of section 153A, the Assessing Officer is required to assess or reassess the total income of an assessee. We also find that the expression ‘total income’ has been defined under clause (45) of section 2 of the Act and according to which, the expression ‘total income’ means the total amount of income referred to in section 5, computed in the manner laid down in the Act.
Thus, in our considered opinion, even in the assessment proceedings u/s. 153A, the total income has to be computed in the same manner in which it is computable under the normal assessments under the provisions of s.143(3) of the Act and no discriminatory treatment can be given for computation of total income in pursuance of the assessment made u/s. 153A of the Act. We also find that the position of law for giving a different treatment has got changed only by way of insertion of a new section 115BBE in the statute by way of the Finance Act, 2012 w.e.f. 1-4-2013, which is not applicable for the assessment year under consideration. Thus, we are of the considered view that the assessee is eligible for claim of deduction u/s. 54F of the Act in respect of the on-money of Rs.2,08,00,000/- received from sale of subject capital asset. This view is supported by the decision of the Coordinate Bench of ITAT, Pune in the case of Shri Manish Madhav Malpani [ 2015 (5) TMI 1232 - ITAT PUNE] as also relied upon by the ld. CIT(A). - Thus action of the Ld. CIT(A) in deleting the addition on account of receipt of on-money from sale of agricultural land, is confirmed.
Addition of cash loan given from unaccounted income - unexplained investment in purchase of plots by the assessee - HELD THAT:- We find that the Ld. CIT-DR, except placing his reliance on the findings of the Assessing Officer, could not bring any further material on record to justify the addition made by the Assessing Officer. We find that the assessee himself had offered a sum as additional income on account of cash loans in his return of income filed post-search for the A.Y. 2013-14. Thus, the Assessing Officer was not justified in re-making the addition to the tune of Rs.1,89,000/- in the assessee’s income for the relevant assessment year.
Also we find that the said loose paper is in the form of a promissory note dated 25.03.2007 given by Shri Sanjay Wadhwani in favour of Shri Vivek Chugh. We are in full agreement with the finding of the ld. CIT(A) that the said promissory note neither contains the name of the assessee nor it pertains to the assessment year under consideration and in such circumstances, no addition could be made in the assessee’s income on this count for the relevant assessment year. Accordingly, the action of the ld. CIT(A) in deleting the entire addition.
Unexplained investment for purchase of plots in Pulak City - HELD THAT:- Assessing Officer failed to discharge such onus and made the addition merely on presumption and assumption. We further find force in the contention of the assessee that the impugned transactions of purchases were carried out during the financial year 2012-13 relevant to A.Y. 2013-14 and for such year, the provisions of s.56(2)(vii) were not made applicable. It is worth notable that the provisions of s.56(2)(vii) have been introduced in the statute by the Finance Act, 2013 w.e.f. 1.4.2014 only and such provisions are not retrospective in the nature. In such circumstances, merely on the presumption basis, any difference in the guideline value and apparent consideration paid by an assessee for purchase of an immovable property cannot be deemed as income of the assessee. Undisputedly, in the present case, no positive evidence has been brought on record to establish that the assessee has parted with any consideration over and above that shown in the registered sale deeds. In such circumstances, we are of the considered view that the Ld. CIT(A) has rightly deleted the addition made by the Assessing Officer in the assessee’s income on the allegation of payment of on-money by the assessee
Provisions of section 43CA which have been inserted in the Statute by the Finance Act, 2013 w.e.f. 1-4-2014, were not applicable in the case of the assessee firm for the assessment year under consideration. Therefore, we do not find any reason for making addition by the Assessing Officer in the assessee’s income on this count.
Unexplained expenditure in ‘Sun City’ project - HELD THAT:- No addition in the assessee’s income merely on guess work without bringing any cogent and corroborative material or evidence on record.
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2021 (8) TMI 1305
Rectification of mistake u/s 254 - Taxability of the interest received on compensation under the Land Acquisition Act - AO brought to tax the interest received on compensation placing reliance on the provisions of section 145A r.w.s. 56(2)(viii) - HELD THAT:- As on mere reading of the order of Tribunal, we find that the Tribunal relying upon the decision of the Hon’ble Supreme Court in the case of (i) Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT] and (ii) Bikram Singh & Ors. [1996 (9) TMI 6 - SUPREME COURT] had deleted the additions without adverting to the provisions of section 145A r.w.s. 56(2)(viii) of the Act. In our considered opinion, non-consideration of the particular provisions of the Act especially when the lower authorities had placed reliance for the purpose of making the addition, is a mistake apparent from the record which is capable of being rectified u/s 254(2) of the Act. Thus, the appeal is recalled for a limited purpose of deciding as to the applicability or otherwise of provisions of section 145A r.w.s. 56(2)(viii) of the Act. Accordingly, the Registry is directed to fix the appeal in due course of hearing.
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2021 (8) TMI 1300
Maintainability of appeal - low tax effect - Special Order directed filing of appeal on merit, in cases involving organized Tax Evasion Activity - HELD THAT:- Since the tax effect involved in this matter is Rs.66,89,957/-, in terms of Circular dated 08.08.2019 issued by the Department of Revenue, Central Board of Direct Taxes, Ministry of Finance, Government of India, we see no reason to interfere in this matter. The Special Leave Petition is dismissed, leaving all the questions of law open.
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2021 (8) TMI 1297
Offence under Black money - permission to travel abroad to petitioner defaulter - Learned Single Judge has, permitted Respondent No.1 to travel to U.S. for a two years course in Masters in Public Administration at the Harvard Kennedy School, John F. Kennedy School, subject to the conditions stipulated therein - whether the LOC issued in 2019 can now stand in the way of the petitioner travelling abroad? - HELD THAT:- As stringent conditions have been imposed by the learned Single Judge while permitting Respondent No.1 to travel to U.S. Additionally, learned counsel appearing for Respondent No.1 voluntarily undertakes that the father of the original Petitioner, Respondent No.1 herein, namely, Shri Kuldeep Bishnoi S/o Late Shri Bhajan Lal shall deposit his Passport with the Registrar General of this Court, within two days from today.
It is accordingly directed that on receipt of the passports as aforesaid, the Registrar General shall keep the passports of Shri Kuldeep Bishnoi S/o Late Shri Bhajan Lal in safe custody in a sealed cover. As and when the father of Respondent No.1 would require the said passports for certain genuine and valid reasons, the father of Respondent No.1 may apply to this Court for necessary permission. In the absence of any further order by this Court, the Registrar General shall not release the passports to Sh. Kuldeep Bishnoi.
Learned counsel appearing for Respondent No.1 further undertakes voluntarily that within one week of Respondent No.1 reaching the Harvard College, Respondent No.1 shall surrender his passport with the concerned Authorities at the Office of the Indian Embassy in United States of America (‘USA’), which is located closest to the College/University where respondent no. 1 is going to study.
The undertaking given on behalf of Respondent No.1 is accepted by this Court. It is directed that as soon as the Passport is surrendered by Respondent No.1, the concerned Authority / Officer at the Indian Embassy shall place the same in a sealed cover and retain in safe custody, until further orders passed by this Court or any other Court of competent jurisdiction, in India. Needless to state that in case Respondent No.1 requires the Passport for a genuine cause, he shall be at liberty to prefer an appropriate application before this Court.
We, however, make it clear that Respondent No.1 is being permitted to travel subject to compliance of the conditions imposed by the learned Single Judge and abiding by the undertaking given to this Court today.
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2021 (8) TMI 1296
Black Money - Application seeking suspension of the look-out circular (“LOC”) so as to enable him to travel to US - It is the case of the petitioner that the LOC against him was issued in 2019 at the behest of respondent no.4, which fact came to his knowledge only on 05.11.2019, when he was stopped from boarding a flight to Dubai at the New Delhi International Airport - HELD THAT:- The fact that the petitioner had, on earlier occasions, been granted permission to go abroad, albeit for shorter periods when he duly returned back to India, is undisputed. It is also undisputed that the petitioner, who has already obtained degrees in B.Sc and M.Sc from prestigious universities abroad, has now secured admission at the Harvard Kennedy School, John F. Kennedy School of Government for undergoing a two-year MPA course. In light of the fact that the petitioner’s father is willing to furnish an undertaking not to leave the country while the petitioner is abroad, do not find the petitioner evidencing any intent of absconding from India. The question of whether the LOC issued in 2019 can now stand in the way of the petitioner travelling abroad is yet to be determined. No doubt, the respondent claims to have already filed a complaint against the petitioner for an offence under the Black Money Act; however, as on date, no cognizance has been taken of the said complaint and therefore, I am inclined to grant permission to the petitioner to travel to US for a period of two-years to attend the MPA Course, subject to the following conditions:
(i) The petitioner will keep the respondents informed about his travel itinerary from time to time;
(ii) He will not tamper with the evidence or contact any person who is a part of the investigation;
(iii) The petitioner’s father will file an undertaking before the Registrar General of this Court that he will not leave the country as long as the petitioner is abroad;
(iv) The petitioner, besides the security already furnished by him in respect of AG-059 (Old No.FLG 04), Phase-I, Ansal Plaza, Greater Noida, UP and the security of ₹ 5 Lakhs - which is already lying with the Registrar General of this Court in terms of order dated 22.02.2021, will furnish a security to the satisfaction of the Registrar General of this Court for a further sum of ₹ 1 Crore in the form of an FDR or a deposit.
(v) The petitioner will appear before any office of the Indian Embassy in the US, once in every eight weeks.
It is, however, made clear that this order will not come in the way of the concerned Additional Chief Metropolitan Magistrate from passing any orders requiring the petitioner’s presence in the country; in which case, it will be for the petitioner to move an appropriate application before the concerned Court, which will be considered in accordance with law.
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2021 (8) TMI 1294
Validity of reopening of assessment u/s 147 - condition precedent for re~opening of an assessment under Section 147 of the Act is not satisfied in the present case - HELD THAT:- An order of assessment under Section 143(3) had been passed at the original instance and thus the proviso to Section 147 would stand attracted and would have to be satisfied. The proviso casts responsibility upon the Department to establish that the escapement of income alleged has been occasioned by virtue of the assessee not having made a full and true disclosure of its taxable income in its return of income/in the course of original assessment.
Also attention drawn to the reasons recorded, communicated on 09.07.2021, wherein, in both the points cited as being the basis for the impugned re~assessment, reference is made to verification of the records of assessment including Form 3CD of the audit report. Thus, and prima facie, the documents relied upon in support of proceedings for re~assessment are very much part of the records. According to the petitioner, there is no other, let alone tangible material, that has been discerned to justify the impugned proceedings.
As the petitioner has, and rightly, filed an objection to the assumption of jurisdiction before the Assessing Authority and orders are awaited in regard to the same, it would be appropriate that the procedure for re-assessments, as set out by the Hon’ble Supreme Court in the case of GKN Drive Shafts[2002 (11) TMI 7 - SUPREME COURT] is complied with.
Since the impugned proceedings are yet to culminate in a speaking order on the aspect of jurisdiction, I am of the view that this Writ Petition is pre-mature and that the petitioner should await passing of the speaking order. Let the respondent hear the petitioner and pass orders on the objections dated 12.07.2021 within a period of four (4) weeks from today.
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2021 (8) TMI 1292
Undisclosed income - mismatch of ITS details as per 26AS which showed gross receipts including FDR interest - HELD THAT:- It is a settled proposition of law that in case of difference between the assessees books of account and as per the TDS certificate, then on the said difference, the only embedded portion of the profits is to be taken into consideration and addition is to be made thereon. There are number of judicial pronouncements by which the principle to this effect has been laid down that the total sale cannot represent as the profit of the assessee. The net profit rate has to be adopted and once the net profit is adopted it cannot be said that there is perversity of approach. Thus, taking into consideration the entire aspect of the matter, we do not find any justification in making the addition of the entire turnover to the income of the assessee. Having regard to the peculiar facts and circumstances of the case, we find it justified to restrict the addition at 5% of the net profit on the gross receipt of ₹ 11,93,79,537/-. The Ld. Assessing Officer is directed to grant relief to the assessee as on the above terms.
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2021 (8) TMI 1291
Validity of Faceless Assessment - despite the Petitioner requesting for a personal hearing in terms of Section 144B(7)(vii) of the Income Tax Act, 1961, the impugned assessment order was passed without affording such a hearing - HELD THAT:- Not only is the Assessee given a right to make a request for personal hearing, but it is mandatory for the authority to provide for such personal hearing.
With there being no dispute that the Petitioner did make such a request, it was incumbent on the Opposite Parties to have given it an opportunity of being heard. The reply filed by the Opposite Parties only deals with the merits of the assessment itself and does not dispute that the above mandatory procedural requirement was not complied with.
In that view of the matter, on this short ground, the impugned assessment order is set aside and the matter is remanded to the assessing officer, i.e. National e-Assessment Centre, for compliance of the mandatory requirement of Section 144 B (7) (vii) of the Act and provide a personal hearing to the Petitioner as requested by it on a date and time to be conveyed to it at least one week in advance. It is made clear that the hearing can be in either physical or virtual mode. A fresh assessment order shall be passed thereafter within three months. If aggrieved by such order, it would be open to the Petitioner to seek appropriate remedies in accordance with law.
The Court makes it clear that it has not expressed any view on the merits of the case, except on the above limited procedural error of non-compliance with the mandatory requirement of Section 144 B (7) (vii) of the Act. The writ petition is disposed of in the above terms.
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2021 (8) TMI 1287
Addition u/s 40(a)(ia) - assessee contended that during appellate proceedings, assessee failed to get the certificate u/s 201 - HELD THAT:- We are of the considered view that when the assessee has obtained the certificate from M/s. Bajaj Auto Finance Ltd. u/s 201 of the Act after first appellate proceedings, the AO is to allow the same after due verification. So far as interest disallowed in case of Barclays Investment & Loan is concerned, assessee’s contention is that it has closed its operation in India. AO is directed to conduct the proper enquiry from the available sources if certificate issued by Barclays Investment & Loan finds corroboration from some other record and the issue may be decided accordingly after providing an opportunity of being heard to the assessee. Consequently, ground no.1 is determined in favour of the assessee for statistical purposes.
Disallowance of interest @ 12% per annum on the advance made as the plant and machinery was not put to use - CIT(A) confirmed the addition - HELD THAT:- We are of the considered view that when expenditure/advances paid in question for purchase of plant and machinery by the assessee during the year under assessment was not for extension of any existing business, the same is allowable u/s 36(1)(iii) of the Act. So, the addition made by the AO and confirmed by the ld. CIT (A) is ordered to be deleted. Consequently, ground no.2 is determined in favour of the assessee.
Addition on account of excessive bill discounting charges paid - assessee has failed to bring on record any documentary evidence regarding existence of any such agreement between the parties to substantiate its claim without interest - HELD THAT:- When the facts have come on record that in case of Sandhar Automotives (Dhumspur), the assessee is paying bill discounting charges from 15% to 16% but, at the same time, it is paying bill discounting charges @ 19% to Sandhar Enterprises which is reconcilable and as such, excess interest paid by the assessee to Sandhar Enterprises to the tune of ₹ 1,40,946/- has been rightly disallowed by the ld. CIT(A). So, we find no ground to interfere in the findings returned by the ld. CIT (A). Consequently, ground no.3 is determined against the assessee.
Proportionate disallowance of interest - addition made by the AO by calculating the interest @ 12% per annum - HELD THAT:- When assessee is having huge interest free funds at its disposal, the presumption lies in favour of assessee that interest free funds were utilized for giving interest free advances - Following the cases S.A. Builders Ltd. [2006 (12) TMI 82 - SUPREME COURT] and Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] we are of the considered view that addition made by the AO and confirmed by the ld.CIT(A) is not sustainable, hence ordered to be deleted. So, ground no.4 is determined in favour of the assessee.
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2021 (8) TMI 1285
Penalty u/s 271(1)(c) - no proper recording of satisfaction - as per HC there is no record of satisfaction by the AO that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner - HELD THAT:- We are not inclined to interfere with the impugned order. The special leave petition is, accordingly, dismissed.
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2021 (8) TMI 1284
Addition u/s 68 - genuineness of the transactions - stark difference between the amount mentioned by the assessee in his books and that shown in the books of M/s. Basant Marketing - HELD THAT:- The assessee has furnished copy of audited accounts, balance sheet and P&L account along with annexure, copy of ledger of Basant Marketing P. Ltd. And during the course of assessment proceedings, Basant Marketing P. Ltd. categorically confirmed the entry of ₹ 2,43,00,000/- with copy of bank accounts reflecting the transaction therein. And M/s. Basant Marketing P. Ltd. has confirmed amount outstanding in the account of assessee company is only ₹ 1,93,00,000/- which has been repaid during F.Y. 2014-15. And so far remaining amount 50,00,000/- is concerned, assessee filed separate proof of payment to the A.O. and again filed before the Ld. CIT(A) and it was at Calcutta conducted detailed enquiry of Basant Marketing P. Ltd. wherein it is mentioned that Basant Marketing is not a fake company and its activities are genuine.
Assessee has filed an order of ITAT Mumbai Benches [2019 (6) TMI 1606 - ITAT MUMBAI] wherein one person namely Shri Harsh Dalmia was the beneficiary to the tune of ₹ 1,14,85,500/- from the group companies namely Basant Marketing P. Ltd. who was assessed to tax with them who provided accommodation entry and Department issued notice and Ld. A.O. made addition in the case of Harsh Dalmia.
Thereafter in appeal before the Ld. CIT(A) relief was granted to the assessee and thereafter Department appeal was dismissed by the ITAT holding that activities of Basant Marketing are found to be genuine. And thereafter no appeal was filed by the Department against the order of the ITAT Mumbai Benches. So considering above all these facts, we are of the opinion that order of Ld. CIT(A) is detailed and reasoned and same does not require any kind of interference at our end. - Decided against revenue.
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