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Income Tax - Case Laws
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2021 (12) TMI 1194 - ITAT CHENNAI
Assessment u/s 153A - Disallowance of interest expenditure u/s.37 - assessment of income from other sources u/s.68 r.w.s. 115BBE - HELD THAT:- There is no reference to any seized material / incriminating material in respect of assessment of income from other sources u/s.68 r.w.s 115BBE of the Act. It is well settled principles of law by the decisions of various Courts, including decision of the Hon'ble Supreme Court in the case of PCIT Vs. Meeta Gutgutia Prop. M/s. Ferns N Petals [2017 (5) TMI 1224 - DELHI HIGH COURT] that in absence of incriminating material found as a result of search u/s.132 or requisition u/s.153A of the Act, completed assessments cannot be disturbed in the assessment framed u/s.153A. Also see CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD., ALL CARGO GLOBAL LOGISTICS LTD. [2015 (5) TMI 656 - BOMBAY HIGH COURT] and KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT].
The sum and substance of ratios laid down by various High Courts is that unabated/completed assessments cannot be disturbed in absence of any incriminating material found as a result of search.
As assessments for assessment years 2011-12 to 2014-15 are unabated / completed. Further, no reference of any incriminating material found as result of search in respect of additions made by the Assessing Officer towards disallowance of interest u/s.37 of the Act and for assessment of income from other sources u/s.68 r.w.s 115BBE of the Income Tax Act, 1961 - we direct the Assessing Officer to delete additions made towards interest u/s.37 of the Act and assessment of income from other sources u/s.68 r.w.s. 115BBE of the Act for all assessment years. - Decided in favour of assessee.
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2021 (12) TMI 1193 - ITAT SURAT
Estimation of income - Bogus purchases u/s 69C - HELD THAT:- Since the issue is squarely covered by the order of Co-ordinate Bench of this Tribunal in the case of Pankaj K. Choudhary,[2021 (10) TMI 653 - ITAT SURAT]. Hence,respectfully following the above binding precedent we disallow 6% of the impugned purchases.
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2021 (12) TMI 1192 - ITAT SURAT
Disallowance u/s 40A(3) - payment in cash of more than ₹ 20,000/- in a day - HELD THAT:- Assessee has not disclosed the fact as to when the consignment reached at the destination and when the deliveries of goods were received by assessee. No such expediencies are disclosed by the assessee that either transporter insisted for cash payment or the assessee was unable to prepare the cheque against such delivery immediately - it is not the case of assessee that the assessee was maintaining the bank account in co-operative Bank and realisation of cheque from their banker take a longer time - assessee in Anupam Tele Services [2014 (2) TMI 30 - GUJARAT HIGH COURT] is not applicable on the facts of the present case - the principal company insisted that payment by cheque which was drawn a co-operative bank takes longer time in realization and they insisted for payment - the said case law relates to assessment year 2006-07. The Rule 6DD has been amended in the year 2008 by making significant changes with effect from assessment year 2009-10, which is subject assessment year in the present case.
We find one more reason as recorded by ld CIT(A) that during the first round of appeal before the Tribunal, of the assessee took his stand that assessee has not made payment exceeding of ₹ 20,000/- or aggregate of exceed of ₹ 20,000/- in order to attract the provision of section 40A(3) - The assessee instead of substantiating that submission raised a new plea by taking the excuse of alleged conditions No.6 and 17, allegedly printed on back side of bill of transporter. No such copy of bill is produced for our perusal. In aforesaid circumstances, we do not find any justification to interfere with the order of Ld. CIT(A). In the result, the ground of appeal raised by the assessee is dismissed.
Disallowance of deduction u/s 80P(2)(a)(iii) - No new facts are required to adjudicate the additional grounds of appeal. The assessee in facts seeking deduction under different clauses of section 80P(2)(a) only. In our view, the assessee has right to raise new claim in additional ground of appeal before the appellate authority as has been held by series of decisions of superior courts. Therefore, the additional grounds of appeal raised by the assessee are admitted.
However, considering the fact that the assessee has raised alternative plea for claiming the deduction under different subclause of clause-(a) and sub-section 80P, for the first time before the Tribunal. Therefore, we deem it appropriate to restore the issue back to the file of Ld. CIT(A) who shall examine the alternative plea of assessee and pass the order in accordance with law. CIT(A) would be at liberty to seek the remand report from the Assessing Officer on the alternative claim of assessee. The assessee is also directed to provide complete details and evidence before Ld. CIT(A) as and when called for and not to take any adjournment without any valid reason as the case relates to assessment year 2009-10. In the result the additional ground of appeal is allowed for statistical purpose.
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2021 (12) TMI 1185 - ITAT HYDERABAD
Assessment u/s 153A - Non issue of the notice u/s 143(2) - HELD THAT:- There is no issuance of the 143(2) notice. Even, if we go through the assessment order, assessee filed his return of income on 7th December, 2011 in response to the notice u/s 142(1) dated 26/10/2010, whereas, notices u/s 143(2) & 142(1) were issued on 18th November, 2011, the date of which is before filing of the return of income, how is it possible to issue a notices before filing of return of income.
Even if we correlate the notice u/s 143(2) with the assessment order, the issue of notice is time barred. This is a search year, in which, assessment has been framed u/s 143(3) of the Act, but, the assessment has not been framed u/s 153A. Therefore, even if notice issued u/s 143(2) is time barred or not issued at all or notice u/s 143(2) is invalid in the eye of law, the assessment framed u/s 143(3) will not survive.
As in the present case, assessment has been framed u/s 143(3), therefore, as per the statute notice u/s 143(2) is mandatory to be issued by the jurisdictional AO, which is absent in this case. Therefore, non-issuance of a valid notice u/s 143(2) of the Act, the entire assessment framed by the AO is void-ab-initio. - Decided in favour of assessee.
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2021 (12) TMI 1183 - CALCUTTA HIGH COURT
Reopening of assessment u/s 147 - correct head of income - non-compete fees receipt - Notice after expiry of 4 years from the end of relevant assessment year on the ground of escapement of income chargeable to tax on the non-compete fees in question by contending that it was taxable as business income under Section 28 (V-A) of the Act instead of income under the head “capital gain” - HELD THAT:- In the facts and circumstances of the case assumption of jurisdiction under Section 147 by the respondent/AO and issuance of impugned notice under Section 148 of the said Act after the expiry of 4 years from the end of the relevant assessment year 2012-13 is bad and not tenable in the eye of law in view of non-fulfilment of criteria under the first proviso to Section 147 of the Act and in view of the fact that the respondent Assessing Officer could not establish from record that there was any omission or failure on the part of the assessee petitioner in disclosing fully and truly all relevant material facts necessary in course of scrutiny assessment under Section 143 (3) of the Income Tax Act, 1961.
In the facts and circumstances of the case invoking of provision of Section 147 read with Section 148 of the Act by the Assessing Officer for reopening the assessment of the assessee on the self-same material which were very much available to the Assessing Officer at the time of scrutiny assessment under Section 143 (3) of the Income Tax Act, 1961 is not justified by taking a view different from his predecessor who had already allowed to tax the nom-compete fees in question as Long Term Capital Gain in scrutiny assessment and by taking a view that the same should be treated as income from business under Section 28 (V-A) of the Income Tax Act, 1961 instead of Long Term Capital Gain.
In the facts and in the circumstances of the case the respondent assessing authority is legally not justified in reopening the assessment in question under Section 147 of the Income Tax Act, 1961 by ignoring the fact that non-compete fees in question had already been treated and taxed as capital gains by the Assessing Officer during the scrutiny assessment proceedings under Section 143 (3) of the Act by accepting the claim of the petitioner after examining, verifying and scrutinising all the facts, relevant documents, details and particulars which were requisitioned by the assessing officer in course of scrutiny assessment and which are matters of records.
In the facts and in the circumstances of the case reopening of assessment by invoking Section 147 and issuance of notice under Section 148 of the Income Tax Act, 1961, after expiry of 4 years from the end of relevant assessment year on the basis of information received from investigation wing which are nothing new and are the same material which were already available before the Assessing Officer and were considered at the time of scrutiny assessment under Section 143 (3) of the Act, and taking a different view on the self-same material is a mere change of opinion. - Decided in favour of assessee.
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2021 (12) TMI 1182 - BOMBAY HIGH COURT
Validity of Reopening of assessment u/s 147 - income chargeable to tax of the Corporate Debtor has escaped assessment - notice under Section 148 to a Corporate Debtor, calling upon it to submit a return in the prescribed form for the assessment year falling prior to the date of approval of Resolution Plan under Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Once the public announcement is made under the IBC by the Resolution Professional calling upon all concerned, including the statutory bodies, to raise claim, it would be expected from all the stakeholders to diligently raise their claim. The Income Tax authorities in that sense, ought to have been diligent to verify the previous years’ assessment of the Corporate Debtor as permissible under the law and to raise the claim in the prescribed form within time before the Resolution Professional.
In the present case, the Income Tax Authorities failed to do so and therefore, the claim stood extinguished.
As stated earlier, there could be a contingency where statuary claim is raised after the approval of the Resolution Plan, owing to receipt of information of the Corporate Debtor having suppressed certain facts while filing returns of the previous years, which then could not be a part of the Resolution Plan. To counter such a situation, the statutory authorities will have to explore the possibility of raising such claims before the Resolution Professional or Adjudicating Authority, as the case may be, by requesting to make certain provisions for payment of statutory claims in the Resolution Plan. Whether to accept such claim is a matter that should be left to the COC, the Resolution Professional or the Adjudicating Authority. However, in absence of any such claim having been made and dealt with by the Resolution Professional and in absence of any provision to settle such claim in the Resolution Plan, such claim could not be raised subsequently. In that sense, the Petitioner is correct in contending that the impugned notice could not have been issued by the Assessing Officer.
We did not come across any such provision under the Income Tax Act, 1961 nor did the parties before us informed of its existence. We, accordingly, record our answer in the negative to the question framed.
Objection of maintainability of the petition - As decided in Ghanashyam Mishra’s case [2021 (4) TMI 613 - SUPREME COURT] the alternate remedy would not operate as a bar for invoking jurisdiction under Article 226 of the Constitution of India in at least three contingencies, namely,
(1) where the writ petition has been filed for the enforcement of any of the Fundamental Rights;
(2) where there has been a violation of the principle of natural justice; and
(3) where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.”
We find that the impugned notice falls under category – 3 above. Accordingly, the preliminary objection is rejected.Both the Petitions are allowed. The impugned notices dated 25.03.2021 and 24.03.2021 are hereby quashed and set aside. - Decided in favour of assessee.
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2021 (12) TMI 1181 - ITAT DELHI
TDS credit - AO did not allow the TDS credit on the ground that the corresponding income of this TDS has not been offered to tax by the assessee as it was not received during the impugned assessment year - assessee during the impugned assessment year has adopted cash method of accounting - HELD THAT:- We find an identical issue had come-up before the Coordinate Bench of the Tribunal in the case of Chander Shekhar Aggarwal [2016 (2) TMI 420 - ITAT DELHI] wherein the Tribunal after considering the identical set of facts has held that assessee would be entitled to credit of the entire TDS offered as income in the year of deduction. We hold that the Ld. CIT(A) is not justified in denying the credit of TDS. Accordingly, order of the Ld. CIT(A) is set aside and the AO is directed to allow the credit of TDS - Decided in favour of assessee.
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2021 (12) TMI 1180 - ITAT MUMBAI
Disallowance with respect to loan advanced by assessee written off and claimed as business loss - CIT(A), who confirmed the disallowance holding that same is neither allowable under section 37(1) or under section 36(1)(vii) or under section 36(2) - HELD THAT:- We find that for assessment year 2014-15, the assessee has earned no interest from private parties and the assessee only earned the interest from bank FDRs. Therefore, if the statement of the partner is looked into with respect to the activities of the assessee for assessment year 2014-15, the facts are stated correctly. However, the partner was fully aware about the loan given and the amount repaid by the borrower. This is demonstrated from answers to questions - such as ledger account of the borrower showing advances of ₹ 10 crores, proof of earning interest income, repayment of sum , outstanding remaining of ₹ 2 Crores, such sum being written off in the books of accounts, object of the partnership deed and past assessment records of the assessee, merely using the statement of the partner against the assessee for disallowance of the above loss is not justified. Merely because the borrower is a related party and in which the partners of the assessee firm are interest, cannot be the reason for disallowance of the above loss. As the assessee has satisfied all the conditions of section 36(1)(vii) read with section 36(2) of the Act, the claim of the assessee is allowable. In the result, we reverse the orders of the lower authorities and direct the assessing officer to delete the above disallowance.
Erroneous set off of business loss against the capital gains rather than against the business income of the year - As per the assessment order, the long term capital gain of the assessee is ₹ 5,48,65,125/-. However, as per the income-tax computation form, the learned assessing officer has taken long term capital gain of ₹ 4,56,01,325/- . Thus, the total income remains same at ₹ 6,56,01,325/- but the figure of the long term capital gain has been changed by the assessing officer in the income-tax computation form. Thus, we direct the learned assessing officer to correctly compute the income-tax computation by taking the long term capital gain at ₹ 5,48,65,125/- only. Accordingly, ground 2 of the appeal of the assessee is allowed.
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2021 (12) TMI 1179 - ITAT HYDERABAD
Validity of assessment u/s 153A - Non issuance of notice U/s 143(2) - Protective assessment - HELD THAT:- AO has not issued a notice u/s 143(2) and even the ld. D.R. also could not bring on record any copy of the notice issued by the assessing officer or any proof of service of notice u/s 143(2) of the Income Tax Act, 1961 as mentioned above. The provisions of section 292BB also do not support the revenue because in the impugned case there is no documentary evidence to show that there was a notice issued U/s 143(2) - Even in the assessment order, the AO has mentioned the notice has been issued before filling of the return of income.
We observe from the assessment order the assessment has been made on a protective basis, but, it is not clear whether any assessment has been framed in substantive basis in case of other/s - when the assessments in other/s assessee’s cases are not framed on substantive basis, how the protective assessment can be framed in the case of the assessee on hand. Therefore, in our considered opinion, the assessment framed on protective basis in the case of the assessee does not stand in the eyes of law.
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2021 (12) TMI 1178 - ITAT DELHI
Assessment u/s 153A - Addition u/s 68 - Unsecured cash credits - Assessment against concluded assessments - HELD THAT:- As concluded assessments cannot be interfered with unless there is incriminating material discovered from the seized documents as a result of search and further, no additions can be made where the assessments are framed u/s.153A for unabated year i.e. where no assessment is pending. The seized documents must at least clearly point out that there is some undisclosed income, which here in this case is completely absent, as is discussed above, and thus, are not in the nature of incriminating material so as to warrant any addition.
Submissions made by ld. CIT-DR, regarding seized documents having bearing on total income becoming incriminating documents automatically, we are not impressed with the arguments of Ld CIT DR, as the same goes contrary to the judgments of jurisdictional high court as cited above. And further, with reference to the order of assessment or even going by the order of learned CIT (A), the learned CIT DR was not able to point out any single document which was not disclosed by assessee prior to search proceedings and neither the judgments so relied by counsel of assessee were rebutted or contradicted by learned CIT DR.
We have no hesitation to hold that firstly, none of the documents mentioned in the order of assessment more specifically the copy of flowchart, email and share certificates are incriminating in nature out of which any adverse inference can be drawn as to any undisclosed income, relating to assessee-company have been unearthed during the course of search and; since, the impugned assessment year from 2008-09 to 2011-12 were not pending, as the assessment stood completed prior to the date of search, therefore, we hold that without any incriminating material, concluded assessments cannot be tinkered with and no addition can be made without there being any incriminating material for the impugned assessment year. Accordingly, we hold that the additions made by the Assessing Officer are beyond the scope of Section 153A. - Decided in favour of assessee.
Addition u/s 68 - HELD THAT:- AO in the order of assessment has relied on report and observations of the Investigation wing, which otherwise does not implicate any of the assessees, whereas, no concrete enquiry or investigation had been carried out by the assessing officer in the order of assessment to dislodge the explanation or rebut the documentary evidence placed and recorded by AO - Thus, when no appropriate investigation has been carried out by the AO and as such the burden which lay upon the learned A.O. has not been discharged, the addition so made is unsustainable and deserves to be deleted.
We have also noticed that that the Revenue has failed to controvert the findings so recorded by learned CIT (A) which is based on documentary evidences as have been discussed above, wherein, substantial relief on merits was provided to assessee by CIT (A). Thus, documentary evidences on record have not been rebutted by the A.O. through any evidence or material on record. No independent enquiry has been made against these documentary evidences except issuing notices under section 133(6), which were also replied by the subscribing companies. Therefore, such documentary evidences clearly support the explanation of assessee that investments made in the assessee companies are genuine.
The assessee apart from submitting the various documents related to receipt of share capital and share premium as listed hereinabove, also furnished the workings for share valuations using discounted cash flow method and furnished explanation for issuing shares at a premium taking into account the future growth in the business of the assessee and also considering the future prospects of the assessee business coupled with the fact entire group had a turnover of over ₹ 2500 crores in financial year 2014-15. - Decided in favour of assessee.
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2021 (12) TMI 1177 - ITAT KOLKATA
Net profit estimation - assessee is agitating for the higher net profit rate applied by the ld. CIT(A) ignoring past net profit track of the assessee - HELD THAT:- Respectfully following the decision of this Tribunal in the case of M/s B.B.C. Project Services Pvt. Ltd [2018 (11) TMI 1884 - ITAT KOLKATA] consistent business of contract work carried out by the assessee and the net profit rate offered in the financial statements and being fair to both the parties are of the view that application of net profit rate of 0.6% on the turnover of contract business during the year i.e. ₹ 87.46 Cr. will meet the end to justice. We accordingly order so and direct the revenue to compute the net profit for the year @ 0.6%. We further make it clear that this net profit rate of 0.6% will take care of all the business expenses including interest and depreciation incurred for the purpose of running contract business and related to the turnover of ₹ 87.46 cr. Accordingly assessee will get part relief on this common issue and revenue fails to succeed. Ground No.1 of the assessee’s appeal for A.Y. 2012-13 is partly allowed.
Addition for sale of immovable property - HELD THAT:- We find merit in the contentions of the assessee that the alleged amount of sale consideration of ₹ 2,81,70,890/- is just one of the many transactions of sale of property executed by the assessee on behalf of the purchaser and the income earned by the assessee from such transactions of purchase/sale carried out in past as well as in the year under appeal have been routed through its books of account and the commission income earned from such transactions have been duly disclosed in the financial statements and offered to tax. We, therefore, set aside the finding of ld. CIT(A) and delete the addition made by the Ld. AO. Thus, ground no.2 raised by the assessee is allowed.
Unexplained cash deposit - HELD THAT:- As assessee has made general submissions that this cash deposited in the bank are out of the business receipts but no such evidence in the form of extract of the cash book of the relevant date has been filed so as to make possible for us examine this fact that whether the assessee had sufficient cash in hands in the books as on the date of deposit of the alleged amount with the HDFC Bank. In lack of necessary evidences, we find no merit in this ground raised by the assessee
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2021 (12) TMI 1176 - ITAT PUNE
Revision u/s 263 by CIT - Addition u/s 68 - scope of section 147 - unsecured creditors - ‘no enquiry’ or ‘inadequate enquiry’ - HELD THAT:- The opening part of section 147 categorically provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section. Thus, it is evident that section 147 duly empowers the AO to make addition on any other income chargeable to tax which escaped the assessment and comes to his notice during the reassessment proceedings, in addition to the point(s) on which the re-assessment was initiated.
Turning to the facts of the instant case, we find that though the AO initiated reassessment for denial of deduction u/s.80G, but he did initiate enquiry on receipt of unsecured loans for which the assessee also furnished certain details as discussed above. In that view of the matter, it cannot be said that the ld. PCIT travelled outside the assessment order passed u/s 147 of the Act, which vitiated the revisionary order.
The assessee, situated in Aurangabad, received loans running into crores from certain companies based in Kolkata or Mumbai, that were neither in the financing business nor had any past business dealings with the assessee. No question was asked by the AO as to how the assessee came into contact with them, the answer to which was neither given to the ld. PCIT nor has it come up before the Tribunal.
AO issued notice u/s 133(6) to such parties. Most of them did not respond and the AO chose to accept the genuineness of the loan creditors without proceeding further as per law, rather, by recording to the contrary in the assessment order.Most of the companies which replied and filed their Balance sheets etc. had shown to have received huge share premium on issue of share capital without any justifiable valuation. Such companies had declared nominal profit running into thousands or a few lakhs, but the share premium was in crores. These companies were prima facie shell or penny stock companies. AO kept the information received on record without blinking.
Four Kolkata based companies who allegedly advanced identical loans of ₹ 25.00 lac each had same address and the AO did not consider it expedient to inquire further.No interest was paid to some of the unsecured loans despite no prior business.
We are fully satisfied that there was utter failure on the part of the AO to conduct enquiry in respect of huge loans received by the assessee from various parties thereby rendering the assessment order erroneous and prejudicial to the interest of the Revenue justifying the exercise of revisionary power u/s 263 of the Act.
Once it is held that the AO failed to apply his mind to the issue of unsecured loans which ought to have been done in the facts and circumstances of the case thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue, the sequitur is that the exercise of revisionary power gets justified. As can be seen, that the ld. PCIT did not enhance the assessment on any issue but simply restored the matter to the file of the AO: `with a direction that the assessment order should be reframed as per the provisions of law after considering proper facts and submissions of the assessee and also for necessary verification in the light of the observations made above, after affording proper opportunity to the assessee’. If the assessee has an explainable case on the issues taken note of by the ld. PCIT, it can put forth the same before him in the course of proceedings giving effect to the order passed u/s 263. - Decided against assessee.
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2021 (12) TMI 1175 - ITAT HYDERABAD
Claim of deduction u/s. 35AD by stating that the appellant did not build the hotel building - HELD THAT:- Provisions of section 35AD of the Act does not specify that the assessee has to construct the entire building by itself or own the building and land. The provisions only specify that the specified business should be in the nature of building and operating a new hotel of 2 star or above category as classified by the Central Government - there is no doubt that the entire investment made by the assessee was for constructing a portion of the building and for operating a new hotel of the category specified under the Act - from the provisions of section 35AD it is obvious that these provisions are brought into the Act in order to promote certain specified business in the country.
These provisions grant deduction to the assessee in respect of the entire capital expenditure incurred wholly and exclusively for the purpose of the specified business which has commenced during the previous year. Even otherwise, by virtue of section 32 of the Act, the assessee is entitled for deduction towards such expenditures u/s.32 of the Act by way of depreciation over a period of time.
There is no loss to the revenue when the whole issue is viewed in its entirety, because when the assessee derives the benefit of Section 35AD of the Act it saves payment of tax in the initial years but in the subsequent years ends up paying higher tax as it is deprived of the benefit of depreciation u/s. 32 of the Act. Provisions of section 35AD of the Act, only helps the assessee to maintain higher cash liquidity during the initial years of its business.
Once deduction u/s.35AD of the Act is claimed then by virtue of section 35AD(4) of the Act, no other deduction in respect of these expenditure shall be allowed as deduction - the beneficial provisions of the Act and our observations mentioned herein above in the instant case before us the assessee is entitled for the benefit of deduction u/s. 35AD towards the expenditure incurred by it for establishing its hotel business of specified category as provided under the Act - we hereby direct the Ld. AO to grant deduction to the assessee under the provisions of section 35AD - Appeal of the assessee is allowed.
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2021 (12) TMI 1174 - ITAT MUMBAI
Penalty u/s.271D & 271E - Accepting and repayment of loan / deposits through journal entries - Period of limitation for imposing penalty u/s 275(1)(c) - assessee has accepted loans / deposits from various sister concerns through journal entries and had repaid loans to various sister concerns through journal entries as according to ld. DCIT, the same were in violation of provisions of Section 269SS and 269T - proof of “reasonable cause‟ in Section 273B for non-imposition of penalty under section 271E - HELD THAT:- Journal entries which had been passed by the assessee company in its books for mutual extinguishment of liabilities between various entities and assignment of debts / receivables from one entity to another entity would not be hit by the provisions of Section 269SS and 269T of the Act as there is sufficient reasonable cause for the same within the meaning of section 273B of the Act.
We find that the ledger accounts produced by the assessee before the ld. AO in the quantum assessment proceedings and before the ld. Addl. CIT during the penalty proceedings had not raised any doubt in respect of genuineness of the transactions and the transactions being entered into in the normal course of business of the assessee. Hence, it could be safely concluded that those entries were passed out of business exigencies with bonafide belief that they are not in contravention of provisions of Section 269SS and 269T of the Act. It is a well known fact that concealment should always be established and could never be presumed. Assessee was under a bonafide belief that passing of journal entries do not violate provisions of law. This is established by the fact that (i) the plea was taken before the ld. AO in the first instance itself ; (ii) this has not been disbelieved by the ld. AO ; and (iii) the assessee group has a common set of accountants, chartered accountants and advisors. In the group cases, the Tribunal and Hon'ble High Court has accepted the explanation of bonafide belief of the assessee. With common set of people, it has to be held that the assessee was also under the same belief
Thus we hold that the assessee had proper reasonable cause within the meaning of section 273B of the Act and hence the transactions passed through journal entries though would be hit by the provisions of sections 269SS and 269T of the Act, since reasonable cause is established in the instant case, the assessee company would get immunity from levy of penalty thereon. Accordingly, the grounds raised by the revenue are dismissed.
Period of limitation for imposing penalty u/s 275(1)(c) - HELD THAT:- the discussion by the AO in the assessment order and making reference to the Addl. CIT for imposition of penalty under section 271D or 271E of the Act, constitutes initiation for action for imposition of penalty and that is the date which should be reckoned for the purpose of limitation as specified in clause (c) of section 275(1) of the Act. - a reference made by the AO to the Addl. CIT for initiation of penalty proceedings in the assessment order, by a preliminary act, constitutes action for imposition of penalty as contemplated in the provisions of section 275(1)(c) of the Act. Hence, the penalty orders passed by the Addl. CIT in all these cross objections are barred by limitation and accordingly, quashed.
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2021 (12) TMI 1173 - ITAT BANGALORE
Disallowance of administrative expenses - Expenses related to Business or to earn capital gain - JDA - CIT(A) based on disallowance made for assessment year 2009-10 being the immediately preceding assessment year and considering the fact that assessee executed JDA during the previous year relevant to assessment year under consideration, allowed expenditure of ₹ 15 lakh as sufficient for running the company - HELD THAT:- We note that in all the preceding assessment years a proportionate amount of expenditure was disallowed, which has not been contested by assessee before this Tribunal. Assessee has restrained from filing any appeal before this Tribunal in any of the preceding assessment years. Further assessee has placed in the paper book, the orders passed by 1st appellate for preceding assessment years. There is a categorical observation in all the preceding assessment years by the Ld. CIT(A) therein that, assessee had an increase in work in progress.
On perusal of the balance sheet for year under consideration placed in the paper book, we note that, no work in progress is accounted for. Under such circumstances, we do not find any reason to allow entire administrative expenses claimed by assessee. Whatever has been allowed by the Ld. CIT(A) is justifiable.
Addition of direct expenses - Whether payments were relating to transfer of capital asset? - HELD THAT:- Clause 3 of the memorandum allows assessee to undertake construction activities. Assessee used to have clubhouse business which could not run well in the past. Assessee had to shut down the business as there was a lull period. It was during this period that, the assessee entered into real estate construction. This led to the JDA with M/s. Palma Developers Ltd. The expenses incurred are towards development of the land as per JDA. Under such circumstances, in our view these expenses pertained to the activities carried on by assessee during the relevant period.Accordingly these expenses are to be allowed as business expenditure.
Computation of capital gains on the constructed area falling into assessee's share as per JDA - CIT(A) treated the refundable deposit as non-refundable, for the purposes of capital gains - HELD THAT:- As on the factual findings in case of M/s. Plama Developers Ltd. that Ld. CIT(A) determined the consideration for transfer of land by assessee to be at ₹ 19.30 crores (16.30+3), during the assessment year 2010-11. Admittedly assessee has received ₹ 19.30 crores during the relevant year under consideration. There is nothing on record to establish that assessee received anything over and above ₹ 19.30 crores. We therefore do not find any infirmity in the observation of the Ld. CIT(A) in treating the money received by assessee to be ₹ 19.30 crore from the developer.
Transfer of capital asset - analyse the JDA along with the power of attorney executed by assessee with M/s. Plama Developers Ltd. - By virtue of the terms and conditions mentioned in the agreements referred to herein above, "transfer" as contemplated under section 2(47)(v) of the Act had taken place during the relevant year under consideration. The land mentioned in the JDA was transferred as was the provisions of the said section and part performance was made by the developer by paying the consideration towards the transfer of the land.
A reading of the JDA coupled with all the supplementary agreement entered into between the party subsequently shows that the owner has transferred the developers share in the land akin to ownership to the developer. Also a real income has arisen in the hands of assessee upon such transfer of developers share which is fortified by the subsequent sup supplementary JDA entered into between the parties in the year 2013. Even otherwise the nomenclature of the amount received by assessee during the year under consideration from the developer is "non-refundable security deposit". Further it is more clear from the supplementary agreement entered into between the parties in the year 2013 that, upon completion of the construction the developer is only handing over the constructed premises to assessee. If one goes by the averments in the JDA and supplementary agreement the intention is very clear that the money received at the time of entering of JDA, automatically leads to the conclusion that it pertained to the transfer of rights and ownership of the developers share in the land.
We are therefore unable to appreciate the arguments advanced by the Ld. AR under such peculiar facts that emanate from records that assessee had only granted right to enter the land for purposes of developing.
Respectfully following the observation of Hon'ble Supreme Court in the case of CIT vs. Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT] and TK. DAYALU [2012 (6) TMI 405 - KARNATAKA HIGH COURT] do not find any infirmity in the view taken by Ld. CIT(A). - Decided against assessee.
Taxability of constructed area to be received by assessee - AO noted that assessee has not declared the capital gains of the constructed area that is receivable and therefore brought to tax by applying cost of construction at ₹ 1880/- per square feet as contemplated to be disclosed by M/s. Plama Developers Ltd - HELD THAT:- On perusal of various supplemental agreement entered into by assessee, there is a mention of additional FAR that may be available, the actual constructed area which will be handed over to the assessee by the developer is not known for the year under consideration. We therefore of the opinion that acted constructed are cannot be determined, as they are non-existent as on the date of entering into JDA and the constructed area that accrues to assessee in the future cannot be predicted. Therefore such constructed area cannot be brought to tax during the year under consideration. For the year under consideration except for the plans having prepared no activity in respect of the development has been completed. There is nothing on record brought by the Ld. AO to show that there was development activity in the land under consideration during the year under consideration, and the cost of construction incurred by the developer was merely an assumption by Ld. AO.
Depreciation granted by Ld. CIT(A) on other assets at normal rates - HELD THAT:- In order that the assessee can be entitled to depreciation, assessee must carry on a business. It is not necessary that the business should in fact yield profits. The carrying on of a business may result in loss; but the particular activity carried on by the assessee must be such as must be calculated to yield profits. The test is not the actual making of the profits; the test is whether the nature of the activity is such as possibly to yield profits to the assessee. Where no business has been carried on by the assessee during the previous year, the assessee cannot claim depreciation.
Admittedly, assessee did not carry on any business during the relevant financial year as observed by Ld. CIT(A) himself in para 6 of the impugned order. We therefore hold that the Ld. CIT(A) was wrong in granting depreciation in part to assessee.
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2021 (12) TMI 1172 - ITAT KOLKATA
Revision u/s 263 by CIT - Reopening of assessment u/s 147 - HELD THAT:- As per the ratio laid by the Hon'ble Bombay High Court in the case of Jet Airways India Pvt. Ltd. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and case of Ranbaxy Laboratories Ltd.[2011 (6) TMI 4 - DELHI HIGH COURT] which ratios were concurred by the Hon'ble jurisdictional Calcutta High Court in the case of M/s. Infinity Infotech Parks Ltd. [2014 (9) TMI 1142 - CALCUTTA HIGH COURT] though in the context of reopening u/s. 147 of the Act wherein the ratio held was that if the AO reopens the assessment of an assessee on 'x' ground and if he finds during the reassessment proceedings, that 'x' ground is absent/non-existing, then the AO should drop the proceedings and cannot make any other addition unless the AO makes an addition on 'x' ground.
We thus find merit in the contention of Ld. A.R. that jurisdictional fact to exercise the revisional jurisdiction being absent/non-existing in this case, the Ld. PCIT ought to have dropped the proceedings and if he found any other issues/error on the part of the AO while framing the assessment order, then he ought to have given opportunity to the assessee and confronted it to the assessee and thereafter he could have made fresh endeavour to exercise revisional jurisdiction, which is not the case before us. Therefore the impugned order of Ld. PCIT dated 08.03.2021 is bad for want of jurisdiction and therefore stands quashed - Appeal of an assessee is allowed.
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2021 (12) TMI 1171 - ITAT KOLKATA
Revision u/s 263 by CIT - accumulation u/s. 11(2) - HELD THAT:- Assessee had applied ₹ 4,50,172/- this year as part of application of amount to the tune of ₹ 2,76,18,535/-. And it had filed the revised schedule rectifying the Schedule-I (page 26 PB) which created the confusion. We note that the assessee has shown surplus to the tune of ₹ 8,53,939/- and has been set apart u/s. 11(2) of the Act. So the fault pointed out by the Ld. CIT(E) based on the mistake of fact which crept into while filing column 4 of Schedule-I cannot change the fact that assessee had set apart ₹ 8,53,939/- as surplus u/s. 11(2).
The question of assessee applying ₹ 4,50,172/- before the beginning of F.Y. i.e. before 01.04.2016, when there is no deficit in preceding year has not been answered by the Ld. CIT(E)/DR. So the apprehension of Ld. CIT(E) that assessee has thus claimed double deduction is erroneous and on wrong assumption of fact - we do not find any omission on the part of AO while framing the assessment order on this issue - AO rightly did not draw any adverse inference on the issue which was pointed out as a fault by the Ld. CIT(E). Therefore, we find that the Ld. CIT(E) has erroneously usurped the revisional jurisdiction u/s. 263 of the Act and resultantly the same is quashed. Appeal of the assessee is allowed.
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2021 (12) TMI 1170 - ITAT KOLKATA
Delayed payment of employees contribution to PF and ESI paid after the due dates prescribed in the relevant Statutes but before the due date of filing of return under section 139(1) - HELD THAT:- As a similar issue relating to the disallowance on account of delayed payment of employees contribution towards PF and ESI was involved in the case of Lumino Industries Limited [2021 (11) TMI 926 - ITAT KOLKATA] and after considering the relevant provisions of the Income Tax Act as amended from time to time as well as the relevant judicial pronouncements on the issue, this Tribunal allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s. 139(1) - Decided in favour of assessee.
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2021 (12) TMI 1169 - ITAT KOLKATA
Revision u/s 263 by CIT - large increase in sundry creditors with respect to turnover as compared to the preceding year - HELD THAT:- PCIT has accepted the gross receipt of ₹ 2.73 crores and cost of ₹ 2.62 crores while doubting the sundry creditors without even doubting the sundry debtors of like amount. So therefore, according to the Ld. AR the action of the A.O to have accepted the explanation given by the assessee after going through the ledgers of the sundry creditors and sundry debtors as well as the balance sheet as well as profit & loss filed by the assessee is a plausible view, so the Ld. PCIT ought not to have interfered with it.
We find force in the submissions of Shri S.M. Surana. We find from the discussion supra and after going through the records especially the details of sundry creditors and sundry debtors, we are of considered opinion that the A.O has taken a plausible view in the facts and circumstances of the case. And at any rate the action of the A.O in the given facts cannot be held to be unsustainable in law.
So, therefore, the action of the A.O in not drawing any adverse inference in respect of sundry creditors in the given facts should not have been interfered by Ld. PCIT exercising his revisional jurisdiction u/s. 263 - the action of the Ld. PCIT to interdict when the A.O has discharged his duty as an investigator as well as that of the adjudicator as discussed above. Since the A.O's action on the facts as discussed is a plausible view, we find merit in the appeal of the assessee and we are inclined to hold that the impugned action of the Ld. PCIT is without jurisdiction and therefore null in the eyes of law so quashed. Appeal of assessee allowed.
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2021 (12) TMI 1168 - ITAT BANGALORE
Late remittance of employees' contribution to PF and ESI - Assessee had paid the employees' contribution to PF and ESI prior to the due date of filing of the return u/s.139(1) - HELD THAT:- On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down by the Hon'ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd. Vs. DCIT [2014 (3) TMI 386 - KARNATAKA HIGH COURT], had held that the assessee would be entitled to deduction of employees' contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s. 139(1) of the I.T. Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory.
The amended provisions of section 43B as well as 36(1)(va) of the I.T. Act are not applicable for the assessment year under consideration. By following the binding decision of the Hon'ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd [2014 (3) TMI 386 - KARNATAKA HIGH COURT] the employees' contribution paid by the assessee before the due date of filing of return of income u/s. 139(1) of the I.T. Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted - Appeal filed by the assessee is allowed.
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