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Income Tax - Case Laws
Showing 161 to 180 of 7776 Records
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2021 (12) TMI 1174
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
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
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
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
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
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
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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2021 (12) TMI 1167
TP Adjustment - payment of royalty at 4% to be at arm’s length - HELD THAT:- As relying on assessee's own case accepting the payment of royalty at 4% to be at arm’s length, we hold that the payment of royalty at 4% in the year under consideration is to be treated as being at arm’s length. Accordingly ground is allowed.
Payment of Interest on Compulsory Convertible Debentures - Whether TPO and DRP erred in treating CCDs as ECBs and benchmarked the interest rate against LIBOR rate? - CCDs is a hybrid instrument and cannot be per se treated as ECB / loan - HELD THAT:- In the instant case, admittedly, the CCDs are issued in INR, interest is paid in INR and CCD’s are repaid also in INR. Therefore, placing reliance on the judgment of the Hon’ble Delhi High Court in the case of CIT v. Cotton Naturals (I) Pvt. Ltd [2015 (3) TMI 1031 - DELHI HIGH COURT] we hold that the TP study of the assessee to justify the interest rate by arriving at average rupee cost and comparing the same with SBI prime lending rate is correct. It is ordered accordingly.
Disallowance u/s 14A computed as per Rules 8D(ii) and (iii) - HELD THAT:- It is an undisputed fact that the assessee did not earn any exempt income during the year under consideration. It is a settled position that in the absence of any exempt income, no disallowance can be made u/s 14A of the Act. See Quest Global Engineering Services Pvt. Ltd. [2021 (3) TMI 434 - KARNATAKA HIGH COURT]
The Hon’ble Bombay High Court in the case of India Debt Management (P.) Ltd. [2019 (9) TMI 920 - BOMBAY HIGH COURT] has held that when the assessee does not receive any dividend income, no disallowance can be made u/s 14A - thus disallowance made u/s 14A of the Act, ought to be deleted, since the assessee was not in receipt of any exempt income during the relevant assessment year.
Disallowance of deduction of expenditure as per first proviso to section 40(a)(ia) - HELD THAT:- The assessee is entitled to claim the deduction of expenditure (as per first proviso to section 40(a)(ia) of the Act) in the year the tax on the same has been deducted at source and remitted to the Government account. Therefore, we reiterate the directions to the DRP and remit the matter to the A.O. The A.O. is directed to grant deduction of aforesaid expenditure, if it is found that tax on the same has remitted to the Government account during the relevant assessment year. It is ordered accordingly.
Disallowance u/s 40(a)(ia) - DRP rejected the claim of the assessee on the ground that the expenses do not pertain to the year under consideration - HELD THAT:- As rightly pointed out by the DRP, the expenditure claimed as deduction does not pertain to the year under consideration. If at all there is an inadvertent offer to tax in the previous year, namely, assessment year 2010-2011, the assessee ought to have taken correctional steps for the assessment concluded for assessment year 2010-2011 and not for the relevant assessment year. There is no statutory provision which provide for claiming amount wrongly shown as income in one year as deduction / expenditure in any subsequent year (unlike first proviso to section 40(a)(ia) whereby the assessee is permitted to claim deduction of the expenditure in the year in which the tax has been deducted on such expenditure and remitted to the Government account). Therefore, we affirm the view taken by the DRP.
Disallowance of expenditure u/s 40(a)(ia) - assessee suo moto had disallowed a sum for non-deduction of tax at source - AO recharacterized the same as a disallowance u/s 37 - HELD THAT:- AO held the expenditure is not an admissible expenditure u/s 37 - DRP has not adjudicated the issue holding that the objection of the assessee does not arise out of the variation in the returned income. The issue whether the impugned expenditure can be disallowed u/s 37 has not been dealt with either by the AO nor by the DRP. AO has authority to hold that expenditure (though provision expenditure) is not an allowable deduction u/s 37 of the Act. Only those expenditure otherwise allowable u/s 30 to 38 of the Act is deductible as per proviso to section 40(a)(ia) - Therefore, any expenditure not for the purpose of business, the A.O. can certainly re-characterize the same as not allowable expenditure u/s 37 - as mentioned earlier, the A.O. nor DRP has not examined whether the said expenditure is allowable business expenditure u/s 37 - A.O. held that provision disallowed by the assessee u/s 40(a)(ia) of the Act cannot be allowed as deduction in the subsequent assessment year, since, the expenditure does not pertain to the subsequent year. DRP did not adjudicate the issue by observing that there is no variation to the returned income on this count. Therefore, the matter needs to be reconsidered by the AO afresh.
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2021 (12) TMI 1166
Late payments towards EPF and ESI u/s 36(1)(va) - payment before furnishing the return of income u/s 139(1) - HELD THAT:- Since the facts involved in the present case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company [2021 (9) TMI 1319 - ITAT JODHPUR] and in the case of Bikaner Ceramics Private Limited, Bikaner[2021 (9) TMI 1319 - ITAT JODHPUR] the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI & PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted - Decided in favour of assessee.
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2021 (12) TMI 1165
Belated payment of employee's contribution to PF invoking provisions of sec. 36(1)(va) - HELD THAT:- We find merits in the submissions of the assessee, that the payment within grace should be allowed. Therefore, total amount to be allowed within grace period comes to ₹ 31,615/- ( ₹ 15,919 + ₹ 15,696) which are paid by the assessee within the grace period, therefore, addition to the extent of ₹ 31,615/- is hereby deleted and we direct the assessing officer to make the disallowance of the balance amount of ₹ 35,496/- (₹ 67,111- ₹ 31,615). Thus, ground no.1 raised by the assessee is partly allowed.
TDS u/s 194C - non-deduction of TDS from payment of labour charges - assessee submitted before us that amendment in section 40(a)(ia) of the Act is retrospective in nature therefore disallowance under section 40(a) (ia) should be restricted to 30% of the impugned amount - HELD THAT:- We note that in subsequent judgment of the Hon'ble Supreme Court in the case of Shree Chaudhury Transport Company[2020 (8) TMI 23 - SUPREME COURT] held that amendment in section 40(a)(ia) of the Act is prospective in nature - Issue clearly in the affirmative i.e., against the assessee and in favour of the revenue that the payments in question have rightly been disallowed from deduction while computing the total income of the assessee-assessee.
Disallowance of interest expenditure u/s 36(1)(iii) - HELD THAT:- As considering all these facts it is crystal clear that assessee has given interest free loan to Mr. Ajay Shah of ₹ 3,00,000/-, out of its interest free funds, therefore addition should not be made. Accordingly, the addition made by A.O. to the tune of ₹ 36,000/- is deleted.
Addition u/s 68 - HELD THAT:- We note that assessee had furnished the details which would discharge the onus which lay on the assessee. It is not the case of the revenue that the partners of the assessee firm are fictitious. Therefore, addition sustained by ld CIT(A) is hereby deleted.
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2021 (12) TMI 1164
Computation of capital gain - determination of deemed sale consideration under section 50C - Change in circle rate in-between the date of agreement and date of registration - CIT(A) accepted contentions of the assessee - HELD THAT:- Section 50C of the Act provides that where the consideration received or accruing as a result of transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purposes of section 48, be deemed to be the full value of the consideration.
There is no dispute with regard to the fact that stamp valuation authority has determined value of the property for charging stamp duty at ₹ 5,82,39,975/-, but referring to the fact brought the notice of the ld.Revenue authorities is that the assessee has purchased this property on 17.9.2010 for a consideration of ₹ 24 lakhs. Thereafter, it was converted to non-agriculture land. The assessee has sold the same on 28.9.2011. The assessee had entered into an agreement with M/s.Ashwal Infracon P.Ltd. on 23.12.2010 and sale consideration was settled at ₹ 80.00 lakhs. The assessee has received part payment through account payee cheque. Stamp duty valuation authority have revised their valuation on 1.4.2011, and thereafter vendee was required to pay additional stamp duty of ₹ 24,58,000/-
In the present case, we find that there are two different dates. One is 23.12.2010 when the assessee entered into an agreement for sale of this property and another 29.9.2011 when the sale deed was ultimately registered. At the time of agreement and prior to that the assessee has received part payments through negotiation. Such payments have been received through account payee cheque. He received ₹ 25 lakhs on 26.2.2011 and ₹ 10.00 lakhs on 13.10.2010. This part payment makes it clear that a valid agreement to sell was executed. Between the date of agreement vis-à-vis ultimate registration of sale deed, the State Government has revised valuation of the property for the purpose of charging stamp duty. This case of the assessee do fall within the first proviso of section 50C of the Act, and this aspect has been dealt with by the ld.CIT(A) elaborately in the finding extracted (supra), therefore, no interference from our side is called in the impugned order on the issue.
Reopening of assessment u/s 147 - We find that the AO got concrete information about the sale of the property and therefore he has a reason to believe that income has escaped assessment, and has rightly reopened. The ld.CIT(A) has examined this issue elaborately, and has rightly rejected the contentions of the assessee. We do not find any merit in this CO of the assessee
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2021 (12) TMI 1163
Revision u/s 263 by CIT - undisclosed income and interest and remuneration paid to the partners - HELD THAT:- We note that Assessing Officer has raised the question during the assessment stage and assessee has replied to the assessing officer along with relevant documents. Thereafter, assessing officer has applied his mind and examined both the issues, viz: undisclosed income and interest and remuneration paid to the partners. Therefore, it cannot be said that the issue has not been examined by the Assessing Officer. Considering this factual position, we note that order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue
Revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 was not in tune with the facts and evidences on record duly explained to the Assessing Officer and verified by him and that being so the order passed u/s 263 of the Act on such erroneous stand is liable to be quashed. Therefore, we quash the order of the ld. PCIT u/s 263 - Appeal of assessee allowed.
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2021 (12) TMI 1141
Benefit of DTVSV Act with respect to certain pending income tax litigations before various appellate levels - HELD THAT:- As here is a clear purpose and intent to the provisions of Section 9(c) of the DTVSV Act which is to ensure that revenue which has been clogged and the income which is being offered to tax is not shadowed by a likelihood of the same having arisen from socio-economic crimes for which prosecution has been instituted. The DTVSV Act does not and cannot be read as providing a window to “regularise” tainted money.
As at this point, noted that the pendency of criminal proceedings against petitioner is an admitted position. The petition itself provides which are the pending criminal proceedings against petitioner. There are two criminal proceedings pending against petitioner wherein petitioner is charged for having conspired (Section 120B of IPC) to commit offences of Cheating (Section 420 of IPC) as also offences under Section 13(1)(d) and Section 13(2) of the IPC Act. The charge against petitioner would have to be read as composite whole as framed and cannot be segregated, as read by Shri Nankani.
It is, however, the case of petitioner that despite the pendency of these two criminal proceedings, it would not fall within the ambit of Section 9(c) of the DTVSV Act since in the first proceeding prosecution has not yet been instituted and in the second proceeding, it is not punishable for offences under the PC Act. In our view, both these contentions are misconceived and baseless.
At the outset, with respect to the plea of prosecution not having been instituted, this issue stands squarely covered by Sashi Balasubramaniam [2006 (10) TMI 147 - SUPREME COURT]wherein the Hon’ble Apex Court, whilst considering the provisions of the KVSS and the provisions of Clause 95(iii) thereof, after raising a specific issue as to when is a prosecution said to be instituted, answered the same stating that word "prosecution" assumes significance. The term "prosecution" would include institution or commencement of a criminal proceeding. It may include also an inquiry or investigation. The terms "prosecution" and "cognizance" are not interchangeable. They carry different meanings. Different statutes provide for grant of sanction at different stages - The term "prosecution has been instituted" would not mean when charge-sheet has been filed and cognizance has been taken. It must be given its ordinary meaning
Both the proceedings are cases where prosecution was instituted since in both cases an FIR had been duly lodged, thus casting a shadow on the monies sought to be offered to tax. Also held that benefit of the KVSS 1998 scheme is not to be extended to those against whom a complaint is pending, therefore, this condition cannot be held to be arbitrary.
In any event, the submission of petitioner that prosecution can be said to be instituted only upon cognizance being taken is of no use to petitioner as even then cognizance was taken in the second proceeding where chargesheet has been filed. Hence, the said issue would not arise.
With respect to the second contention of petitioner, viz., that petitioner is not punishable for offences under the PC Act, the same also is faulty.
Therefore, not only would this enquiry arise before the Tax Authority but even assuming such an enquiry were to arise, the same require consideration.
Any finding by the Tax Authority on this issue, would amount to deciding on merits the two proceedings under the PC Act referred earlier.
In light of the above, both the proceedings are cases where prosecution was instituted since in both cases an FIR had been duly lodged. Both cases charge petitioner as having conspired to commit offences under the PC Act, thus casting a shadow on the monies sought to be offered to tax.
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2021 (12) TMI 1140
Reopening of assessment u/s 147 - Whether the reasons to believe has rational connection with the formation of the belief? - live link between the material connecting the notice of the Assessing Officer and the formation of belief regarding escapement of income - HELD THAT:- The reasons as made available to Petitioner merely indicates information received from the DDIT (Investigation), about certain entity entering into suspicious / questionable transactions. The entire information received has been reproduced in the reasons. In the information so reproduced, there is no mention or even a cursory reference to Petitioner. There is no link between the information received from the DDIT and Petitioner. The information / material received is not further linked by any reason to come to the conclusion that Petitioner has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped assessment.
Recorded reasons even does not indicate the amount which according to the Assessing Officer has escaped assessment. In our view, this is evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. Moreover, AO alleges that substantial income (specified as above) chargeable to tax has escaped assessment for AY 2014-15 and accordingly notice under Section 148 of the Act for AY 2014-15 has been issued for the purpose of re-assessment. This shows non-application of mind not only by the Assessing Officer but also the sanctioning authority. If both these persons had read the reasons before putting their signatures, they would have found the error in the assessment year.
There is nothing new in the reasons provided on 23/10/2019 save and except the assessment year has been corrected to reflect the correct assessment year in the last paragraph; but at the same time, our view expressed earlier that if only the sanctioning authority has read the reasons and applied his mind to the same, it would have indicated the error in the assessment year and that there is absolutely no link or nexus between the information received from DDIT and Petitioner. Therefore, in our view, the notice u/s 148 issued is set aside - Decided in favour of assessee.
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2021 (12) TMI 1139
Reopening of assessment u/s 147 - eligibility of reason to believe - change of opinion - HELD THAT:- Petitioner is correct in its submissions that it is nothing but change of opinion. It is pertinent to note that there was scrutiny assessment under Section 143(3) of the Act. In the reasons recorded indicate the grounds on which re-assessment is sought to be initiated.
Paragraph 3.1 starts with the words, “During the year, in the submissions furnished by the assessee, it is found that the assessee company had shown 7 outlets but the company showed sales only from 2 outlets, i.e., one at Bandra and other at Colaba, debited expenses on account of 7 outlets. ” The new Assessing Officer has problem with the earlier Assessing Officer having allowed expenditure relating to all the 7 outlets when sales was shown only from 2 outlets. Paragraph 3.1 ends with the words, “…. therefore, the said expenditure cannot be allowable as business expenditure during the relevant AY 20120-13 being expenditure not related to the period under consideration”. This is certainly change of opinion.
Paragraph 3.2 also relates to payment of rent for 5 outlets and repairs and renovation for all the outlets and that paragraph ends as, “….. The Assessing Officer has not examined these issues …..”. Therefore, it is nothing but change of opinion based on which assessment cannot be re-opened. - Decided in favour of assessee.
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2021 (12) TMI 1138
Specified date under the Direct Tax Vivad Se Vishwas Act, 2020 - procedure for the purpose of determination of the tax liability or a declaration which has been made - AA had declined to accept and extent the said benefit vide communication dated 25th January, 2021, on the ground, that as on the “specified date”, i.e. on 31.01.2020, the Appeal itself was not pending, as it was contemplated under the Act of 2020 - Contention of petitioners was that, since the Appeal was itself pending consideration as per the Act, their claim for determination of the tax liability will fall to be under Sections 3 and 4 of the Act - HELD THAT:- As pendency of a case or an appeal or a petition, as provided under Section 2 of the Act of 2020, has to be rationally considered to be pending, irrespective even if the appeal is pending along with the delay condonation application, and also in league and in agreement with the opinion expressed by the Division Bench that the Gujarat High Court, while dealing with such type of contingency or a situation as it cannot enlarge, the scope by widening its determination of consideration of an appellate jurisdiction by barging into its jurisdiction, to determine the question; as to whether at all the appeal itself was pending consideration at the time when, it was instituted when the Act was enforced w.e.f. 17th March, 2020.
So far the argument of the learned counsel for the respondents in the light of the provisions contained under Section 2 (1) (a) (i) is concerned, the said provision would not be attracted in the present case, for the reason being that the said exception, which has been carved out was only on those cases, where the Assessing Officer or an order, which has been passed by the Commissioner Appeals or the Income Tax Appellate Tribunal; in an appeal and the appeal or revision was not pending at the relevant time, but since, in the instant case, no such situation has arrived at because the appeal itself was pending consideration since 2017, along with the delay condonation application, the provisions of (ii) of Section 2 (1) (a) of the Act, would not be applicable.
In that view of the matter and for the reasons based on the principles consistently assigned by the law Courts, as already referred above, the Writ Petitions are allowed. The matter is remitted back to respondent No.1 to reconsider the application of declaration under Sections 3 and 4 of the Act of 2020 of the petitioner afresh exclusively on its own merits.
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2021 (12) TMI 1137
Penalty u/s. 271(1)(b) - assessee failed to give reasons for non-compliance of statutory notice u/s. 142(1) - HELD THAT:- We note that as rightly pointed by the ld. DR under scrutiny assessment proceedings the AO is required to issue notice u/s. 142(1) of the Act along with questionnaire seeking information regarding the subjects notified under scrutiny. The assessee has to comply the same, failing with the AO has power to exercise its jurisdiction to impose penalty u/s. 271(1)(b) of the Act for failure to furnish returns, comply with notices, concealment of income etc.
In the present case, the AO initiated proceedings under clause (b) of sub-section (1) of section 271 of the Act for failure to comply with a notice issued u/s. 142(1) of the Act. As discussed above and also born out from the orders of both the authorities below, we note that till the disposal of appeal by the CIT(A) the assessee failed to furnish required evidences, information, documents, vouchers, etc. before the authorities below and in penalty proceedings no reasonable cause was shown for non-compliance of notice issued u/s. 142(1) - Therefore, we find support in the arguments of the ld. DR that the CIT(A) rightly confirmed the penalty imposed by the AO u/s. 271(1)(b) of the Act for non-compliance on the part of the assessee. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Accordingly, the sole ground raised by the assessee is dismissed.
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2021 (12) TMI 1136
Disallowance u/s.14A with rule 8D of Income Tax Rule - HELD THAT:- Admittedly, there was no exempted dividend income received by the assessee and therefore there cannot be any disallowance under the provisions of section 14A read with rule 8D of Income Tax Rule. In holding so we draw support and guidance from the judgment of Corrtech Energy Pvt. Ltd.[2014 (3) TMI 856 - GUJARAT HIGH COURT] - we hold that there cannot be any disallowance under the provisions of section 14A read with rule 8D of Income Tax Rule. Accordingly, we do not find any infirmity in the order of learned CIT (A) and thus we uphold the same. Hence the ground of appeal of the Revenue is dismissed.
Interest attributable on the amount diverted to non-commercial activities - HELD THAT:- Admittedly, the advance was given by the assessee in the earlier year. Before we touch the issue whether such advance was given for the purpose of the business or not, it is sufficient to note that the own fund being capital and reserve of the assessee at the beginning of the financial year in which amount was advanced stands which is much more than the capital advance as discussed above and this fact is undisputed. Thus it can be safely be presumed that the amount has been advanced by the assessee out of its own fund without involving any borrowed fund. Accordingly, the question of making the disallowance of the proportionate amount of interest on such capital advance does not arise. Hence, we do not find any reason to interfere in the order of the learned CIT (A). Thus we uphold the same. Hence the ground of appeal of the revenue is dismissed.
Deduction claimed under the provisions of section 80IA - Initial assessment year - whether the unabsorbed depreciation pertaining to the period prior to the initial assessment year should be first set off against the against the profit of the eligible undertaking for the year under consideration? - HELD THAT:- In the case on hand, the commercial activity started from the assessment year 2009-10. However, the assessee has not chosen the assessment year 2009-10 as the initial assessment year. As such the assessee has chosen the initial assessment year 2012-13 which is within the provisions of law. The issue with respect to the selection of the initial assessment year has been resolved by the CBDT in its circular No. 1 of 2016 dated 15th February 2016.From the above there remains no ambiguity that it is the option of the assessee to choose the initial assessment year. Admittedly, the assessee has chosen the assessment year as the initial assessment year 2012-13 for claiming the deduction under the provisions of section 80 IA.
The provisions of subsection 5 of section 80IA of the Act provides that the deduction shall be computed treating the eligible undertaking as the only eligible source of business. Thus, the provision itself provides that the deduction shall be computed without setting off the unabsorbed depreciation of earlier year when undertaking was not eligible. Indeed, the unabsorbed depreciation pertains to the eligible undertaking for the period post commencement of the commercial activities but before the initial assessment year when the units becomes eligible for deduction. This controversy has been answered by the Hon’ble Madras High Court in case of Velayudhaswamy Spining Mills (P.) Ltd[2010 (3) TMI 860 - MADRAS HIGH COURT].
Thus we hold that the assessee is eligible for deduction under section 80IA of the Act without setting of/adjusting the unabsorbed depreciation of earlier years as alleged by the AO. Hence, we do not find any infirmity in the order of learned CIT (A) and thus we decline to interfere in his order. Thus the ground of appeal of the Revenue is dismissed.
Disallowance on account of depreciation claimed on the cost incurred in relation to the land being non depreciable asset - AO during the assessment proceedings found that amount of depreciation claimed by the assessee on the windmill was inclusive of the depreciation on the cost incurred by the assessee for keeping the land open/ vacant near the area where the windmill was located - HELD THAT:- There is no dispute to the fact that the cost/expense was incurred by the assessee to keep the surrounding land where the windmill was installed as open and vacant. It was incurred for the effective functioning and maximum output of the windmill. Admittedly, the cost was incurred by the assessee for the purpose of the business and this fact was not doubted by the authorities below. The assessee has treated such cost as part of the cost of the windmill and therefore, the assessee has claimed the depreciation thereon. To our understanding, the impugned expenses were not incurred by the assessee for the acquisition of the land rather cost was incurred for effective functioning of the windmills. Therefore, such cost was directly connected with the functioning of windmill. Thus there was commercial expediency to incur the expenses hence assessee was eligible to claim such expenses. However we find that the assessee instead of claiming such expenditure separately added the same to the cost of windmill and claiming depreciation on the same which was accepted in the earlier years.- Decided against revenue.
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2021 (12) TMI 1135
Addition u/s 56(2)(vii)(b) - difference in the purchase value of the properties as compared to the value fitted by Stamp Duty Authority - applicability of amendment brought to Section 56(2)(vii)(b) of the Act vide Finance Act, 2013 w.e.f. 01.04.2014 - HELD THAT:- The said Act was brought at theeginning of the FY-2013-14 and received assent by the President of India on 10.05.2013 which shows that the Finance Act, 2013 was enacted at the beginning of FY-2013-14 which will be applicable to the AY-2014-15. Therefore, the plea of the ld. Counsel for the assessee that the amended provisions would be applicable for AY-2015-16, in our view, is not correct, hence not tenable. However, the ld. CIT(A) under the wrong presumption went on to hold that the said provisions of Section 56(2)(vii)(b) of the Act were explanatory and hence retrospectively applicable. Though we agree with that, the amended provisions of Section 56(2)(vii)(b) of the Act would be applicable for the assessment year under consideration however, the reasoning given by the ld. CIT(A) in our view, was not correct, rather it was a simple case where the amended provisions of Section 56(2)(vii)(b) of the Act were directly applicable for the assessment year under consideration. In view of the above observations, we do not find merit in these grounds raised by the assessee/appellant and the same are accordingly decided against the assessee.
Unexplained investment on purchase of the property - AO noticed that the assessee paid cash amount of ₹6,04,968/- in relation to the purchase of the aforementioned properties - HELD THAT:- During the appellate proceedings before the ld. CIT(A), the assessee argued that no such cash payment has been made for the purchase of the property. However, the assessee failed to submit any explanation regarding the source of the amount paid for the purchase of the property. In view of this, the ld. CIT(A) confirmed the additions made by the AO.
Before us, neither anyone appeared nor any document filed to show the source of the cash payment made for the purchase of the property. In view of this, we do not find merit on this issue also. Hence these grounds are also decided against the assessee.
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2021 (12) TMI 1134
Assessment u/s 153A - Proof of incriminating material found during the course of search - addition in the hands of the assessee which has been received by the assessee from employer - HELD THAT:- In the instant case, assessment was framed u/s 153A and it is an unabated assessment and no assessments were pending on the date of search initiated upon the assessee. While perusing the assessment order, we find that nowhere the AO has referred any incriminating material found during the course of search relating to the receipt of ₹ 10 lakhs by the assessee and, therefore, it clearly shows that no incriminating material found during the course of search conducted u/s 132 of the Act on 09/11/2017 in respect of receipt from employer.
As held by the Hon’ble High Court of Delhi in the case of Kabul Chawla, [2015 (9) TMI 80 - DELHI HIGH COURT] that if no incriminating material found during the course of search for making addition in the unabated assessment, addition cannot be made. We, therefore, following the above judgment, set aside the order of the CIT(A) and direct the AO to delete the addition of ₹ 10 lakhs received by the assessee from his employer - Decided in favour of assessee.
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