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Income Tax - Case Laws
Showing 121 to 140 of 7776 Records
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2021 (12) TMI 1244
Rectification of mistake u/s 154 - Addition u/s 14A determining the book profit under the provisions of section 115JB - HELD THAT:- We hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the I.T. Rules, cannot be applied to the provisions of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [2014 (11) TMI 1169 - CALCUTTA HIGH COURT]
From the above it is revealed that there is no ambiguity to the fact that no disallowance can be made while computing the book profit under the provisions of section 115JB of the Act in the manner as provided under section 14A read with rule 8D of income tax rules. Thus, the issue on hand cannot be rectified in the proceedings initiated under section 154 of the Act being a debatable issue. Hence, we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed.
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2021 (12) TMI 1220
Validity of Section 194A(3)(ixa) - tax deducted at source on the interest payable under an award of the Motor Accident Claims Tribunal (“MACT”) - petitioner had filed a writ petition initially before the High Court of Delhi which was disposed of by granting him liberty to move the Central Board of Direct Taxes (“CBDT”) in a representation - fresh writ petition challenging the decision of the CBDT was dismissed both on the grounds of locus and delay with liberty to file a public interest litigation.
HELD THAT:- The petitioner is not personally aggrieved by the award of the MACT. A challenge of this nature would have to be brought before the Court by a person aggrieved. We see no reason to entertain a petition which is styled one filed in public interest. In the circumstances, this Court is not expressing any opinion on the question of law raised. The petition is dismissed on the grounds which are set out above.
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2021 (12) TMI 1219
Validity of assessment u/s 144B - main contention of the Petitioner as denied the opportunity of personal hearing before passing the assessment order - HELD THAT:- As Petitioner had made an oral request for personal hearing. However, the said request was turned down without assigning any reason. It is, in these circumstances and to comply with Section 144B the Petition deserves to be allowed and remitted back to the Respondent No.1.
The following order is passed Assessment Order dated 17/8/2021, passed under Section 143(3) r/w Section 144B of the Income Tax Act, 1961 passed by the National Faceless Centre is, hereby, quashed and set aside. The matter is remanded to the Respondent No.1 to complete the assessment proceedings by following due procedure as contemplated by Section 144B of the the Income Tax Act, 1961.
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2021 (12) TMI 1218
Exemption u/s 10(10C) - seeking for condonation of delay to file a revised return by an application u/s 119(2)(b) - Period of limitaiton of 6 years - Earlier the request for rectification of mistake was rejected - HELD THAT:- Taking note of the peculiar facts of the case, the fact remains that the entitlement of exemption under Section 10(10C) of the Act was noticed by the Assessing Officer. In fact the petitioner had also sought relief of rectification by way of letter dated 18.03.2008. As no order appears to have been passed on the letter of 18.03.2008, the petitioner decided to seek for condonation of delay to file a revised return by an application u/s 119(2)(b) of the Act. If an order had been passed as regards the rectification application, the assessee may have got relief at that end itself. As no order was passed, the assessee then decided to explore the possibility of filing a revised return.
Unfortunately, the assessee’s application u/s 119(2)(b) has been rejected on the ground that the same was filed beyond the period of 6 years, while observing that the Circular 9/2015 dated 09.06.2015 does not permit condoning the delay beyond 6 years.
Letter that could be construed to be a rectification application is not decided, noticing the merits of the claim for exemption, a fit case is made out for consideration of the revised return on its merits.
Accordingly, it would be appropriate to set aside the order of 119(2)(b) and condone the delay. It is also to be noticed that the reasons assigned while seeking condonation of delay are also satisfactory.
Accordingly, the impugned order at Annexure-G dated 17.02.2017 is set aside, the delay is condoned and the application under Section 119(2)(b) of the Act is allowed. It is however clarified that as regards to the grant of refund, eventually in light of the delay, there would be exclusion of interest on the amount of refund. It is also clarified that the order is passed taking note of the peculiar facts and circumstances of the case and accordingly, may not be considered to have laid down the law as regards the aspect of condonation of delay under Section 119(2)(b) of the Act or on other issues dealt with herein.
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2021 (12) TMI 1217
Revision u/s 263 by CIT - Violation of principles of natural justice - no opportunity of hearing to the assessee given - HELD THAT:- The procedure followed by the Principal Commissioner in passing the impugned order without giving an opportunity of hearing to the assessee is in clear violation of Section 263 of the IT Act and in breach of principles of natural justice. Thus, on this score alone, we allow this Writ Petition by setting-aside the impugned orders and remand the matters before the Principal Commissioner of Income-Tax (Central), Visakhapatnam, who is directed to give an opportunity of hearing to the assessee and pass appropriate orders in accordance with law. Such exercise shall be concluded within three (3) months from the date of communication of this order and the assessee shall not seek un-necessary adjournment in the matter. We further make it clear that we have not expressed any opinion with regard to merits of the case, which is kept open to be decided by the respondent-Principal Commissioner, independently
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2021 (12) TMI 1216
Reopening of assessment u/s 147 - income of Assessee escaped assessment in the subject Assessment year - HELD THAT:- It is not the case of Revenue that the subject matter of the notice under Section 147 was not the subject matter before the Appellate Authority. Therefore, in all fours, the second proviso is attracted to the case on hand.
After the reading of the second proviso to Section 147 of the Act and the consideration by the CIT(Appeals) and the Tribunal, we are of the view that the distinction sought to be introduced by the Standing Counsel fails, for the very reasons recorded by the Authorities in the orders under appeal. We are of the view that the re-assessment proceedings in the subject assessment year, has been initiated contrary to second proviso to Section 147 (1) of the Act. For the above reasons and expressing full agreement with the the findings recorded by the CIT(Appeals) and Tribunal, we answer the question against Revenue and in favour of the Assessee.
Addition on electricity duty and short provision of interest on Government loan made u/s 43B - HELD THAT:- Question No.2 is covered by the judgment of this Court in Kerala State Electricity Board V. Deputy Commissioner of Income Tax [2019 (8) TMI 727 - ITAT COCHIN] against the Revenue and in favour of Assessee.
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2021 (12) TMI 1215
Reopening of assessment u/s 147 - assessment as reopened beyond a period of four years - Availability of tangible material to initiate reopening - HELD THAT:- Mere availability of tangible material would be sufficient for the purpose of invoking the powers under Section 147 of the Act. This failure on the part of the petitioner was considered for reopening of assessment and the finding is given that the assessee company has misleading the assessing authorities by furnishing incorrect particulars. However, this Court cannot arrive a finding in this regard. It is for the assessee to establish his case during the course of reassessment proceedings. The writ petition is filed, challenging the reopening proceedings.
Objective satisfaction would be sufficient for the purpose of allowing the Assessing authority to proceed with the reopening proceedings. Once, the materials are available and such materials were not taken into consideration by the original assessing authority, or any findings are given in the assessment order, which would be sufficient for the purpose of reopening of assessment and once such reopening is made based on tangible materials, then the assessee has to defend his case by furnishing further particulars or explanations or documents during the course of reopening proceedings.
High Court cannot form any opinion in respect of such findings to be made. Only endeavour of the High Court is to ensure that, whether the conditions stipulated and the process adopted for the purpose of reopening of assessment in consonance with the provisions of the Act and in accordance with the Directives of the Hon’ble Supreme Court of India in the case of GKN Driveshafts [2002 (11) TMI 7 - SUPREME COURT] are not. If the conditions are fulfilled, then it is for the assessee to defend their case in the manner known to law.
The reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiated beyond a period of four years and therefore, the petitioner is bound to participate in the reopening proceedings for the purpose of defending their case by availing the opportunities to be provided by the authorities in accordance with law.
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2021 (12) TMI 1214
Compounding of the alleged offence u/s 279 (2) - belated filling of returns - HELD THAT:-Since there has been belated filing of income tax return, which can attract the penal provisions, therefore, the prosecution in this regard can be launched. On perusal of the sanction order passed by the first respondent dated 06.02.2017 in this regard, it discloses that the return of income tax for the assessment year 2013-14 should have been filed on or before 3/1.07.2013 u/s 139(1) since the same has not been filed, which was belatedly filed, it attracts the penal provisions u/s 276 CC (ii) and therefore, Sanction u/s 279 was given. Insofar as the belated filing of income tax return for other year, that is, assessment year 2012-13, no such prosecution was launched, it seems.
This has been exactly pointed out by the learned counsel for the petitioner that the reason for non-filing of return or belated filing of return for the two or three assessment years consecutively is because of the calamities, which he pointed out in his representation, taken place in his family, where there has been a lot of litigations, which had to be faced by the family of the petitioner, hence he could not concentrate on filing of returns.
Whether these reasons have been considered in a proper perspective before rejecting the said reason by analyzing the same, has to be looked into and in this context, when we read the impugned order, no such consideration seems to have been shown by the first respondent except the generalized comment as stated supra in the impugned order.
This Court feels that, the reason cited by the petitioner, after giving him an opportunity, can once again be considered and accordingly, a fresh order can be passed by considering all these aspects in a proper perspective by the first respondent. For the said purpose, this Court feels that, the impugned order can be set aside and remanded back for fresh consideration.
This Court is inclined to dispose of this writ petition with the following order: that the impugned order is set aside and the matter is remitted back to the first respondent for re-consideration. While reconsidering the same whatever the reasons cited by the petitioner in his representations to invoke Section 279 (2) for compounding the offence and also further inputs if any to be supplied in this regard, for which, an opportunity of being heard be given to the petitioner assessee, the first respondent can consider the said aspects objectively and pass a reasoned order to that effect.
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2021 (12) TMI 1213
Correct head of income - nature of receipt from lease/ rent - assessee moved BIFR for rehabilitation scheme - rental income received by the assessee from Apollo Tyres Ltd.- whether constitutes business income or income from other sources? - HELD THAT:- AO preferred to decide the contemporaneous activity undertaken by the assessee by referring to the lease agreement and absence of a clause in the lease agreement about the revival of business of assessee. This consideration throughout weighed with AO for reaching the final conclusion. The fallacy in this behalf is further evident that the AO, inspite of noticing that all the terms and conditions are governed by the scheme sanctioned by the BIFR, declines to give effect to the working of scheme by observing that the scheme is not clear on what would happen after the expiry or completion of lease period.
Under the scheme, the assessee has reduced its overhead expenditure by closing down the head office, sales and marketing offices. With the closure of these divisions, there is no chance of revival of business of the assessee as Tyre manufacturer. These observations are very centric or influenced the conclusion. We are, prima facie, of the view that there is no objective consideration of the modus operandi or working of the scheme, the statutory obligation under which the assessee had come by filing an application before BIFR. The subtle difference between a voluntary arrangement between parties and arrangement approved as part of a statutory consideration for revival is not noticed by the AO, while concluding that the lease rental income shall be computed under the head income from other sources. The Appellate Authority has confirmed the order of AO and the dismissal of first appeal resulted in filing of appeal before the Tribunal.
Tribunal in the impugned order first appreciated the scheme approved by BIFR, agreement between parties for irrevocable lease for 8 years of assessee's plant, machinery, land etc. and held that inspite of the agreement with ATL the assessee continues to exist as a corporate entity. The additional investment of 110 crores by ATL for eight years is to modernise the plant and again to make the manufacturing viable, the induction of a few directors from ATL in Board of the assessee is merely change in administration and of administrative officers, such changes could not be understood as the existence of assessee as corporate entity has disappeared or the assessee ceases to exist. The taking over of the manufacturing activity by ATL is not to take over the assessee company. The consideration of future happening of reviving the business by assessee is not a circumstance in the facts of the case. Finding is recorded that the lease rental receipt is income of business of the assessee.
Case for revival and rehabilitation of its business before BIFR - The assessee, under approved scheme is obligated to exploit the business assets, earn income, adjust/get off accumulated losses/unadjusted depreciation, and turn as a positive company. Any other view in a situation as the present is unavailable and again counterproductive to an approved scheme under Act, 1985. Sequentially enquired, it transpires that the assessee was obligated to work under a statutory approved scheme; the lease of eight years is to ATL, which is into the same business and lease was for utilising the Plant, Machinery etc. for manufacturing tyres; the actuals are reimbursed to assessee by ATL; the work force of assessee has been deployed for manufacturing tyres; the total production from the assessee unit is taken over by ATL; over all affairs of assessee company are made viable by entering into settlement etc; at this juncture, we are convinced that coupled with all other primary circumstances, the assessee employed commercial assets to earn income. Unless and until the income is treated as business income, the scheme does not result on expected lines for losses; unavailed depreciation etc. will continue to be present in the accounts of assessee. The scheme is appreciated as one providing a solution to business problem of the assessee. From the above discussion we are convinced that the claim of lease rental receipt as income of business is justifiable for the subject assessment years and the findings of the Tribunal even if treated as mixed question of law and fact, we hold that the findings are justifiable and warranted in the circumstances of the case. Hence substantial question as answered in favour of the assessee and against the revenue
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2021 (12) TMI 1212
Addition u/s 68 - Estimation of rate of commission - CIT(A) observed that in the interest of Justice and revenue to tax the assessee by adopting the brokerage rate on various bogus transactions at 0.75% is proper - HELD THAT:- The assessee is an accommodation entry provider and his real income is only towards the commission/brokerages, we are of the considered opinion that the estimate shall be reasonable having regard to the business conducted by the assessee. In the case of JRD stockbrokers [2008 (7) TMI 449 - ITAT DELHI-C] it was held to be appropriate at 0.6% whereas in the case of Adonis financial services private limited it was held to be at 0.5%. Inasmuch as the assessee accepted the commission at 0.6% by not preferring any appeal against the impugned order, we are not inclined to disturb the findings of the Ld. CIT(A) in this matter to the effect that the commission at 0.6% is appropriate. On this premise, we uphold the findings of the Ld. CIT(A) and find the grounds of appeal of the Revenue is devoid of any merits. Accordingly, the appeal of the Revenue is liable to be dismissed.
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2021 (12) TMI 1211
Bogus LTCG - undisclosed income u/s. 69 - HELD THAT:- The factual contentions of the assessee, vis-à-vis the addition made on account of alleged bogus Long Term Capital Gain pertaining to the investment made in the securities therein as detailed in the reasons recorded for reopening the case of the assessee as reproduced was never considered either by the A.O. or the Ld. CIT(A). This despite the fact that the assessee had filed all documents before them in support of its contention that it had never claimed any Long Term Capital Gain or for that matter the impugned investment did not relate to it at all.
We are of the view that the issue needs to be reconsidered and decided in the light of the factual contentions made by the assessee after duly verifying the same. The issue is therefore restored back to the A.O. to consider both the factual contentions of the assessee as stated above regarding no claim of any Long Term Capital Gain made by it nor any such investment ,as stated in the reasons recorded ,being made. The A.O. is directed to verify the claim of the assessee and thereafter adjudicate the issue in accordance with law. . Appeal of the assessee is therefore allowed for statistical purpose.
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2021 (12) TMI 1210
Addition made on account of deemed rental income on unsold flats / units held by the assessee as ‘stock in trade’ - HELD THAT:- We hold that no addition on account of deemed rental income could be made in respect of unsold stock of flats held as ‘stock in trade’ upto A.Y.2017-18. However, the amendment has been brought in the statute in Section 23(5) from A.Y.2018-19 providing a moratorium period of two years. Hence, no addition could be made even for A.Y.2018-19 also. Accordingly, the ground raised by the assessee for all the three years in respect of addition made on account of deemed rental income of unsold stock of flats as ‘stock in trade’ are allowed.
Addition u/s.69A on account of alleged unaccounted cash - whether any protective addition could at all survive when no substantive addition at all were made in the hands of any other person? - HELD THAT:- Admittedly, no substantive addition was made by the revenue either in the hands of M/s Fisher Health Resorts Pvt ltd or in the hands of any other person. In Respectfully following the aforesaid decision of VIKASH IRON & STEEL PRIVATE LIMITED [2015 (7) TMI 1394 - ITAT KOLKATA] since no substantive addition was made, the protective addition made in the hands of the assessee company does not survive. Hence, we have no hesitation in directing the ld. AO to delete the addition made in the sum of ₹ 13,86,600/- on protective basis u/s.69A of the Act for A.Y.2018-19. Accordingly, the ground raised by the assessee is allowed.
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2021 (12) TMI 1209
Addition on account of share premium as income from other sources - addition of share capital and premium as unexplained cash credit u/s 68 - character and nature of receipt - admissibility of additional evidence under rule 29 of the Rules - HELD THAT:- Additional evidence filed in the form of Revenue’s paper book which mainly contains the CBI charge sheets, statements recorded before CBI under section 161 of CrPC and 164 CrPC before Magistrate, correspondences between the companies and the Govt. of Andhra Pradesh, documents procured from various State Govt. Authorities i.e. Govt. of Andhra Pradesh, statements recorded by the AO during the penalty proceedings, various documents containing allotment of land etc., in our view, are not relevant for deciding the issues before us i.e. addition of share premium under section 56 of the Act and share capital and share premium u/s 68 because the entire details relating to facts and tax laws are available in the orders of the lower authorities i.e. assessment order and the order of CIT(A) and assessment records. Hence, we do not admit these additional evidences and reject the application filed by Revenue under rule 29 of the Rules.
Addition u/s 56 - lower authorities had made an addition under the head ‘income from other sources’ without mentioning the relevant section under which the addition is sought to be made. If the same is to be considered as an addition made u/s 56(1) of the Act, then the receipt should be income - lower authorities had categorically accepted to the fact that the nature of receipt was only share capital and share premium from the investor companies. Their only allegation is that these investor companies had paid share capital and share premium to the assessee company and that the share capital component at par value is acceptable and reasonable, but the premium component at ₹ 350/- per share was not justifiable since assessee is a nascent company.
Provisions of section 56(1) of the Act are general provisions and gets triggered for a receipt having the character of ‘income u/s 2(24) of the Act’ and not getting taxed under Chapter IV A to IV E of the Act.
Though the ld. Special Counsel for the Revenue argued the case on the basis of applicability of provisions of section 68 of the Act, but that was not the section in which, the addition was sought to be made by the lower authorities. Hence it results in a situation wherein, the ld. Special Counsel for the Revenue is only trying to improve the case of the lower authorities before us, which is impermissible in law , as this tribunal does not have power of enhancement. We find that the provisions of section 68 of the Act , either way, falls in Chapter VI of the Act under the heading “Aggregation of Income”. It becomes income of the assessee only by way of deeming legal fiction. We find that the residuary head “Income from Other Sources” falls in Chapter IV F of the Act. Hence what is added u/s 68 of the Act cannot be treated as income from other sources. The provisions of ‘Income from Other Sources’ starts from section 56 and ends with Section 59 of the Act. Section 68 of the Act falls in totally different chapter altogether.
We hold that “Income from other sources” is mutually exclusive to section 68. We find that the ld. CIT(A) having co-terminus powers could have enhanced the assessment by invoking the provisions of section 68 of the Act in the instant case, which was not done by him. This goes to conclusively prove that both the lower authorities were thoroughly convinced of the fact that the assessee company had duly proved the three necessary ingredients of section 68 of the Act viz. (i) identity of the investors ; (ii) creditworthiness of the investors and (iii) genuineness of transactions.
Either way, on merits, it could be seen from the aforesaid submissions of the ld. AR that assessee had indeed duly proved the three necessary ingredients of section 68 of the Act in the instant case, in view of the fact that those factual submissions remain uncontroverted by the revenue before us. Hence we hold that the provisions of section 68 of the Act are not applicable in respect of addition in the facts and circumstances of the instant case. Hence all the case laws that were relied upon by the ld. Special Counsel for the Revenue in the context of provisions of section 68 of the Act, need not be gone into at all, as they are not germane to the issue before us.
As first the receipt of share capital and share premium should be income u/s 2(24) of the Act. It is trite law that the receipt of share capital and share premium are only capital receipts, not chargeable to tax at all under any of the provisions of the Act, atleast for the year under consideration. Hence a receipt , once it is not chargeable to tax at all under any of the provisions of the Act, it cannot be brought to tax under the head ‘Income from other sources’.
Receipt of share capital and share premium had been construed to be capital receipts not chargeable to tax by the decision of the Hon’ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd.,[2014 (10) TMI 278 - BOMBAY HIGH COURT] -We find that this decision was accepted by the CBDT and instruction No.2/2015 dated 29/01/2015 was issued by CBDT to all its Field Officers to accept the said decision. - Thus we hold that the addition made under the head ‘income from other sources’ is hereby directed to be deleted. Accordingly, the grounds raised in this regard are allowed.
Addition u/s 68 - The assessee cannot be held responsible for enquiries conducted by the Mumbai Investigation Wing at the wrong address. However, the assessee had furnished all the relevant details that were called for by the ld. AO with regard to the said investor company.
All the eight entities had filed their income tax returns regularly, which fact had been acknowledged by the ld. AO by himself. The bank statement of all the investors were furnished before the ld. AO wherein it could be seen that the immediate source of credit for those investor companies were not cash deposits and were either mere fund transfers received in their regular course of business or out of their available bank balances. Hence, the creditworthiness of all investor companies is also proved by the assessee. All the transactions had been routed through regular banking channels. The assessee had also furnished the copy of share certificates together with the relevant share application form in respect of all the eight investor companies. Six out of eight investor companies had indeed confirmed the fact of having made investments in the assessee company at a premium of ₹ 350/- per share.
We hold that when all the relevant details of the investor companies were indeed furnished by the assessee company, merely because the share subscribers could not be found at the given address when sought to be verified by the revenue at the relevant point in time, it does not mean automatically that adverse inference could be drawn on the assessee and conclude that assessee had indeed routed its undisclosed income in the form of share capital and share premium in the names of the various investor companies.
In any case, the nature of receipt being share capital and share premium had not been doubted by the Revenue in the instant case. We find that the assessee duly proved the nature and source of credit being share capital and share premium as contemplated in Section 68 of the Act. The law is very well settled that the receipt of share capital and share premium would only be capital receipt and cannot be brought to tax as income of the assessee - Decided in favour of assessee.
Revision u/s 263 - AO has not examined Genuineness of the investment by the Carmel Asia - HELD THAT:- the issue which is sought to be revised by the ld. CIT by invoking revision jurisdiction u/s.263 of the Act in the instant case, was already the subject matter of addition made in the hands of the Caramel Asia Holdings Ltd., (holding company of the assessee). In any case, in the scrutiny assessment order passed in the hands of the assessee company for A.Y.2008-09 u/s.143(3) of the Act dated 31/12/2010, the ld. AO had given a categorical finding on more than one occasion at several places of his order, that the receipt of share capital at par value from the promoters category (which includes the holding company i.e. Caremel Asia) and outsiders category are accepted as genuine and reasonable. This has been admittedly done by the ld. AO after considering all the relevant documents with supporting evidences furnished by the assessee company including the direct confirmations filed by those investor companies before the ld. AO in response to the notices issued u/s.133(6) or summons u/s.131 of the Act. Hence, the ld. AO in the light of these supporting documents had indeed taken a possible view. We find that the ld. CIT by invoking his revisionary powers is only trying to substitute his view in place of the view already taken by the ld. AO. This is not permitted in the light of the decision of the Hon’ble Bombay High Court in the case of Gabriel India Ltd.[1993 (4) TMI 55 - BOMBAY HIGH COURT].
The main case of the ld. CIT in his revision order is only directing the ld. AO to examine source of source. We hold that the assessee is not bound to establish the source of source of the investor company - we hold that the order of the ld. AO is neither erroneous nor prejudicial to the interest of the Revenue for A.Y.2008-09, warranting revision u/s.263 - Decided in favour of assessee.
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2021 (12) TMI 1208
Correct head of income - earning income from leasing of the properties - income from house property or business income - HELD THAT:- The intention of the assessee can be understood only by its actions. Considering the fact that assessee is an individual and over the years assessee has declaring the income only under the head "Income from House Property" and it is far-fetched for the assessee to rely on the decision in the case of Chennai Properties & Investment Ltd. [2015 (5) TMI 46 - SUPREME COURT] with the assessee’s case. Therefore, we do not find any reason to entertain the grounds raised by the assessee. Accordingly, it is dismissed.
Addition of bad debts - Assessee has earned the property for the purpose of earning interest income and assessee has declared the source of income in the return of income. From the record we observed that the company M/s. Rusam Developer Pvt. Ltd., has gone into liquidation and assessee could not recover anything from them including loan amount and the interest. Since the assessee has already declared the interest income as business income and revenue has accepted the source of income therefore the bad debts incurred by the assessee is certainly an expenditure allowable deduction u/s. 37 of the Act. Therefore, we direct the Assessing Officer to allow the bad debts claimed by the assessee. Accordingly, Ground No. 2 is allowed.
Disallowing business loss as incurred by the Assessee due to cancellation of property booked by the Assessee with the Builder - Assessee recovered the cost of the property based on the agreement with the builder and the cost incurred by the assessee for registration are remained as expenditure. Since the property is clearly bought for the purpose of lease and this income will be charged to tax under the head "Income from House Property" and the cost incurred by the assessee by not recovery of registration charges can be a loss claimable under the head "Income from House Property". Accordingly, we direct the Assessing Officer to allow the loss claimed by the assessee.
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2021 (12) TMI 1207
Unexplained investment in closing stock u/s. 69 - difference in the quantity of closing stock as per software - CIT(A) deleted the additions - HELD THAT:- As when there is no difference in the quantity of closing stock as per software, addition cannot be made towards unexplained investment in stock merely because there is difference in price of certain items in Jilaba software, more particularly when assessee has explained such difference in price - CIT(A) in his appellate order for AY 2012-13 had given a categorical finding that all the showrooms of the assessee were subjected to search and all the stock in various showrooms were valued by the departmental value and hence all the stock on the date of search was in the possession of the department and was subjected to valuation by the departmental valuer. Any discrepancy found as a result of this exercise was offered as additional income in its return of income for AY 2015-16 by the assessee. Assessee had also submitted a letter from the Jilaba manufacturer which clarified that the value of purchase/stock cannot be obtained from Jilaba data as purchases were not entered in the Jilaba system.
As during the assessment proceedings, the assessee had also submitted a letter from the Jilaba which clarified that "if column is used to find the value of stock, then it may be wrong as the is only an approximate value calculated based on the gold rate, wastage/making charges given at the time of tagging. While selling it, there may be a discount on wastage/making charges and also the gold rate may change. So, we cannot consider the column for the calculation of stock value. Apart from that, it is not calculated based on the purchase cost. So, we cannot consider it as stock value.
AO had made addition only on the basis of the addition made by the then AO, as the assessee could not give details of stock as per Jilaba software.AO has not brought on record any defects in the books of accounts nor has pointed out any unrecorded sales/purchases. We further, found that during the year under consideration also the assessee has obtained bank loan against the stock and the said stock has been verified by the bank by appointing independent auditors.
AR has also pointed out that the AO has misrepresented the fact by mentioning that "Assessee Company stated that till implementation of GST, the 'Jilaba' software was in use." - after introduction of GST, the said software was removed from all the systems." We also find force in the argument of AR that once the said software was stopped being used after the search due to its shortcomings and was also removed from all the systems, it was not possible for the assessee to give required details of stock as per Jilaba software - we found that the ld. CIT(A) has passed a well-reasoned and speaking order discussing all the facts and circumstances of the case, therefore, we do not find any reason to interfere or to deviate from the findings so recorded by the ld. CIT(A), accordingly, we uphold the same.- Decided against revenue.
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2021 (12) TMI 1206
Assessment u/s 153A - Addition of interest income - CIT-A deleted the addition - HELD THAT:- We find force in the submissions of the ld. AR that the interest income added by the AO without any incriminating material being found during the search for the FY 2008-09 to 2011-12 are not sustainable.
No new facts and circumstances of the case has been put forth by the ld. CIT-DR. The ld. CIT(A) has passed a well speaking order discussing all the material facts and circumstances as well as legal proposition of law, therefore, considering the totality of the facts and circumstances, we do not find any reason to interfere or deviate from the findings so recorded by the ld. CIT(A), accordingly, we uphold the same. - Decided against revenue.
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2021 (12) TMI 1205
Disallowance u/s 14A r.w.r. 8D - Assessee submitted that only exempt yielding investments were to be considered to compute the disallowance - HELD THAT:- It is settled legal position that it was incumbent on the part of Ld. AO to record dissatisfaction, having regards to the accounts of the assessee, as to why the disallowance offered by the assessee was not acceptable. The failure to do so would make the disallowance bad in law. We find that no such dissatisfaction has been recorded by Ld. AO in the assessment order.
Secondly, upon perusal of assessee's financial statements for the year ending 31.03.2011 & 31.03.2012 as placed on record, it could be seen that own funds in the shape of share capital and free reserves far exceed the investments made by the assessee and therefore, unless nexus of borrowed funds vis-à-vis investment was established by Ld. AO, a presumption would run in assessee's favor that the investments were sourced out of assessee's own funds. We find that no such nexus has been established by Ld. AO.
Thirdly, the disallowance as offered by the assessee is in accordance with the earlier decisions of the Tribunal for AYs 2010-11 & 2011-12. In fact, these decisions were followed in AY 2013-14 [2019 (12) TMI 1567 - ITAT CHENNAI] - The revenue preferred further appeal against the same before Hon'ble High Court of Madras[2020 (8) TMI 885 - MADRAS HIGH COURT] wherein Hon'ble Court refused to admit the substantial question of law as raised by the revenue.
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2021 (12) TMI 1204
Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted disallowance by stating that there was no exempt income and hence, there cannot be any disallowance - HELD THAT:- Hon’ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, [2018 (3) TMI 805 - SUPREME COURT] has held that once there is no exempt income, no disallowance can be made by invoking the provisions of section 14A r.w.r 8D of the Rules. Hence, we find no infirmity in the order of CIT(A) and the same is affirmed. The appeal of Revenue on this issue is dismissed.
MAT computation u/s 115JB - disallowance of expenses made invoking the provisions of section 14A r.w.rule 8D of the Rules, while computing book profit u/s.115JB - HELD THAT:- This issue is squarely covered by the decision of Vireet Investment P. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein held that no adjustment of disallowance can be made while making computation u/s.115JB of the Act. We noted that Special Bench of this Tribunal observed while holding that disallowance u/s.14A r.w.rule 8D cannot be added while computing book profits as per section 115JB of the Act, as Explanation to that section does not specifically mention the provisions of section 14A of the Act. Hence, we find no infirmity in the order of CIT(A) and the same is affirmed. This issue of Revenue’s appeal is also dismissed.
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2021 (12) TMI 1203
Addition u/s. 56(2)(vii) - difference between the stamp duty guideline value and purchase consideration i.e. 50 percent u/s 56(2)(vii)(b) - HELD THAT:- AO completely ignored the valuation report of the registered valuer submitted by the assessee and submissions made thereon. AO mechanically applied the provisions of section 56(2)(vii) to bring the difference of stamp duty valuation and actual sale consideration paid by the assessee, without making any efforts to find out the actual cost of property, when in fact the assessee stated that the property when purchased was under litigation and pending before the Civil Court, the AO was not bothered about these impediments and straightaway considered the stamp duty valuation for the purpose of making addition u/s. 56(2)(vii) of the Act. In such circumstances, it was very necessary for the AO to refer the matter to the DVO which he failed to do so.
DR submitted that referring the matter to the DVO is only with regard to applicability of section 50C in the case of seller and it is not all required to refer the matter to the DVO u/s. 56(2)(vii) of the Act which is totally misconceived - in our opinion, the addition made by the AO is totally unjustified and cannot be sustained - revenue cannot be allowed a second innings by sending the matter back to the AO to refer the matter to the DVO to ascertain the correct fair market value of the property purchased by the assessee, when assessee all along disputed the valuation of property adopted by the AO for the purpose of registration of the same and the AO failed to find out the correct value of the property both at the assessment stage as well as at the first appellate stage.
This was considered by the Agra Bench of the Tribunal in the case of Hari Om Garg [2019 (5) TMI 1834 - ITAT AGRA] wherein a view was taken that the Department cannot be allowed a second inning by sending the matter back to the Assessing Officer enabling the revenue to fill the lacunae and shortcomings and further putting the assessee to face a re-trail for no fault of him and to prove before the Assessing Officer that the sale consideration was the fair market value of the property purchased by him - We delete the addition made by the AO u/s. 56(2)(vii)(b) of the Act. This ground of the assessee is allowed.
Non-granting of deduction u/s. 54F - AO has not allowed the exemption for the reason that on the date of transfer of immovable property the assessee owned two residential properties, one at Jayanagar and other at Basavanagudi as on 01.04.2013 - residential property situated at Jayanagar was gifted by the assessee to his daughter Ms. Rashmi vide registered gift deed executed on 25.07.2013 - HELD THAT:- This property was vested on these four persons vide partition dated 16.8.1991. Originally there was one katha for all these properties and on account of partition, this property was shared between 4 persons. However, this property has been purchased by the assessee by a single Sale Deed as a single property and this property owned by 4 persons cannot constitute distinct and separate properties so as to deny deduction u/s. 54F. For the purpose of convenience on earlier occasion Katha of these properties was in the name of 4 individuals, later after purchasing the above properties the assessee once again got the Katha merged which is kept on record at pages 267 & 268 of PB. It is observed that the Katha has been transferred in the name of the present assessee and all the properties have been merged to Sy.No.12/1 as a single property. The property though purchased from four Vendors remains as a single property. Being so, the property has to be considered as a single property and deduction u/s. 54F should be granted. See SRI. MAURICE PATRICK DE REBELLO VERSUS THE INCOME TAX OFFICER, WARD 7 (1) , BENGALURU [2021 (1) TMI 213 - ITAT BANGALORE].
Being so, the assessee cannot be denied deduction u/s. 54F on the reason that the assessee purchased 4 properties instead of one. DR’s objection is that though assessee gifted the property to his daughter on 25.7.2013, the property is still shown in the balance sheet of the assessee as on 31.3.2014. The assessee explained that it is the bona fide mistake by the assessee’s CA and the assessee is not well educated on these matters and hence the bona fide mistake committed by the auditor is to be condoned. Admittedly, there is a valid gift deed dated 25.7.2013 in respect of Jayanagar property in favour of assessee’s daughter. In the balance sheet prepared by the assessee’s CA for the year ending 31.3.2014, the said property has been shown in the name of assessee, which is bona fide error committed by the auditor for which no importance could be given. Appeal of assessee allowed.
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2021 (12) TMI 1202
Addition u/s.40A(2)(b) - disallowance of computer and other equipments - hire charges paid by the assessee is unreasonable and excessive when compared to market rates - HELD THAT:- As gone through orders of the authorities below. In order to invoke provisions of section 40A(2)(b) AO has to bring on record some comparable cases of similar nature to allege that hire charges paid by the assessee is unreasonable and excessive, when compared to market rates - on perusal of details filed by the assessee, third party service providers rate is more than rate charged by service provider to the assessee - cost incurred by the lessor of the asset does not relevant to decide whether hire charges fixed for said equipment is excessive or unreasonable. The only way to compare rate paid by the assessee is with reference to third party service providers. In this case, rate charged by third party service providers is more than rate paid by the assessee and thus, we are of the considered view that the AO as well as learned CIT(A) were erred in disallowing computer and other equipments hire charges u/s.40A(2)(b) - Hence, we direct the Assessing Officer to delete additions made towards disallowance of system hire charges u/s.40A(2)(b).
Ad-hoc disallowance of consultancy charges paid to Mr. V.C.Kartik, Director of the assessee company u/s.40A(2)(b) -. Admittedly, except board resolution passed by the company authorizing its Board of Directors to pay consultancy charges to Mr. V.C.Kartik, no other credible evidence has been placed on record before the AO or CIT(A), including before us to justify payment of consultancy charges to Mr.V.C.Kartik. The board resolution copy filed by the assessee may be an evidence which suggest availing need based services from consultant. But what is required to support case of the assessee is evidences which suggest actual rendering of services. In this case, the assessee has neither furnished necessary evidence to prove rendering of services by service provider nor placed on record any evidence to prove kind of service obtained from Mr. V.C.Kartik.
CIT(A) after considering relevant facts and has also taken note of association of Mr. V.C.Kartik with the assessee company has allowed 50% relief and directed the AO to restrict disallowance of consultancy charges to 50% of total claim. The assessee has failed to controvert findings of fact recorded by the learned CIT(A) with any evidence, hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the assessee.
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