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Income Tax - Case Laws
Showing 401 to 420 of 7776 Records
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2021 (12) TMI 704
Disallowance of consultation fees on an adhoc basis - assessee company is engaged in the business of trading in computer hardware, software products and services - This is the second round of proceedings before this Tribunal - In the first round of proceedings, Tribunal had set aside this issue to the file of the AO for denovo consideration - assessee had always pleaded that these technicians had possessed requisite skill sets and the assessee had been using their services on hire basis as and when there is a requirement instead of providing employment on a permanent basis to them - HELD THAT:- Assessee had always pleaded that these technicians had possessed requisite skill sets and the assessee had been using their services on hire basis as and when there is a requirement instead of providing employment on a permanent basis to them.
AO identified eight parties to be produced before him in the remand proceedings and they were all produced by the assessee along with their affidavits before the ld. AO. These parties are listed in page 3 of the ld. CIT(A)’s order. Apart from this, the assessee also furnished the chart showing the details of sales / service charges received, consultancy charges claimed, consultancy charges allowed and consultancy charges disallowed by the ld. AO from A.Yrs. 2003-04 to 2008-09.
AO had sought to disallow the consultancy charges on an estimated basis only during the year under consideration and no disallowance was made either in earlier years or in subsequent years.
Even going by the rule of consistency as upheld in the case of Radhasaomi Satsang [1991 (11) TMI 2 - SUPREME COURT] when there is no change in the facts and circumstances of the case, the Revenue is not bound to take a divergent stand during a particular year alone. Admittedly, the modus operandi practiced by the assessee had not changed in hiring of consultants on need basis and deploying them at the respective client location to render services on behalf of the assessee and remunerate them in the form of consultancy charges.
The books of accounts produced by the assessee had not been rejected by the lower authorities. The assessee had furnished all the relevant documents that could be filed to prove the genuineness of consultancy charges from its side. The ld. AO had not pointed out any defect in the said details or had not found any defect in the books produced by it together with supporting evidences. Hence, there cannot be any justification on the part of the lower authorities to make any disallowance of expenses on an estimated basis. - Decided in favour of assessee.
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2021 (12) TMI 703
Income from house property - combined two flats construed as one residential house - whether two flats purchased by the assessee could be construed as one house in the event of it having one kitchen, among others? - Disallowing the benefit u/s 23(2) to the residential house purchased and used as one residential unit for self use and thereby disallowing the loss from income from self occupied house - HELD THAT:- Undisputedly in the instant case before us, both the Flat Nos.1502 and 1503 have got only one kitchen and there is only one entrance in the entire house. In view of these undisputed facts and respectfully following the aforesaid decision of the Hon’ble Jurisdictional High Court in DEVDAS NAIK [2014 (7) TMI 173 - BOMBAY HIGH COURT], we hold that both flats should be construed as one residential house and annual value of the same should be determined at nil being self-occupied house property. Accordingly, the addition made by the ld. AO is hereby directed to be deleted. The grounds raised by the assessee are allowed.
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2021 (12) TMI 702
Addition on payment of rent to director and wife of director u/s 40A(2)(b) - HELD THAT:- The issue is covered in favour of the assessee as ITAT in assessee’s own case [2017 (3) TMI 1053 - ITAT MUMBAI] has decided the issue in favour of the assessee. It is not the case that order of ITAT has been reversed by Hon’ble Bombay High Court. Hence, respectfully following the precedent, we uphold the order of Ld.CIT(A) - Decided against revenue.
Addition of expenditure on provision for construction cost of various sites in view of mercantile system of accounting - matching concept of accountancy provision - assessee claim is that actually the expenditure is incurred in the next year, however in order to comply with matching principle/concept of accountancy, it has recognized proportionate expenditure during the year - CIT(A) deleted the additions and agreed with the assessee’s contention that in order to comply with the matching concept, the booking of the expenditure as provision was justified - HELD THAT:- As expenditure has to be accounted only when it has been incurred i.e either paid or it is accrued. If the expenditure is not accrued merely on the basis of matching principle any amount cannot be provided. The case laws referred by the Ld.CIT(A) also deal with the expenditures which have actually accrued.
The Hon’ble Courts have held that expenses can be said to have been incurred only if they have accrued. Nowhere, it is provided that without accrual expenditure should be provided merely on matching concept. We note that Ld.CIT(A) has not at all given a finding that the quantum of the expenditure worked by the assessee had actually accrued. Merely because the expenditure is incurred in the next year, on the plank matching principle assessee cannot book a good portion of the expenditure during the year to adjust the profit as per its desire. Expenditure can be provided only, if the expenditure has actually accrued. Since in this case, Ld.CIT(A) has not given any finding that the expenditure has accrued, we deem at appropriate to remit the issue to the file of the Ld.CIT(A). The Ld.CIT(A) shall examine the issue afresh and give a finding whether the expenditure allowed by him can be considered to be the expenditure which is accrued during this year - With these directions, we remit the issue to the file of the Ld.CIT(A) - Appeal by the revenue partly allowed for statistical purpose.
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2021 (12) TMI 701
Unexplained cash credit u/s. 68 - assessee failed to establish any cash credits in the books of accounts - assessee received amount from accommodation entries and converted them from unaccounted money to accounted money - HELD THAT:- In the instant case, the credit is in the form of receipt of share capital from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns.
With regard to the creditworthiness of share applicants, we noted that these Companies are having capital and reserves and the investment made in the assessee company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers. In the facts and circumstances of the case as discussed above, no addition is warranted under Section 68 - Decided in favour of assessee.
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2021 (12) TMI 700
Reopening of assessment u/s 147 - disallowance of excessive depreciation - Depreciation on Electrical installation – casting @ 15% as claimed or @ 10% as allowed by the A.O. - HELD THAT:- As per the mandate of law even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment..
As regards the view taken by the CIT(A) that as the issue in question i.e entitlement of the assessee company for claim of depreciation on electrical installations was not looked into by the A.O in the course of the original assessment proceedings, therefore, in the absence of any formation of a view by the A.O the concept of ‘change of opinion’ could not be brought into play, the same we are afraid does not find favour with us.
As decided in the case of Dell India (P) Ltd. [2021 (2) TMI 37 - KARNATAKA HIGH COURT] an oversight, inadvertence or mistake of assessing officer or error discovered by him on reconsideration of the same material tantamounts to a mere change of opinion and, the same does not give him power to reopen a concluded assessment.
As the A.O for the reasons discussed at length hereinabove had wrongly assumed jurisdiction and reopened the concluded assessment of the assessee company i.e without satisfying the mandate of law as required u/s 147 of the Act, therefore, the reassessment order passed by him u/s 143(3) r.w.s 147, dated 23.09.2013 cannot be sustained and is liable to be struck down. - Decided in favour of assessee.
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2021 (12) TMI 699
Application u/s 154 - grant of interest u/ 244A - credit for the amount self- assessment tax that was omitted to be given in the intimation issued by the department u/s 143(1)(a) - HELD THAT:- Both the lower authorities had proceeded on the basis of misconceived and incorrect facts. As stated by the ld. A.R, and rightly so, the A.O instead of giving effect to the directions that were issued by the CIT(A), wherein he was directed to verify the facts and grant interest u/ 244A as per law, had instead passed an order u/s 154
On a perusal of the order passed by the A.O u/s 154 we find, that he despite having been specifically directed by the CIT(A) to verify the facts and grant the interest u/s 244A as per law, however, had failed to give effect to the said directions by way of a speaking order and had summarily observed that interest under the said statutory provision was only to be calculated on the refund arising out of TDS, TCS and Advance Tax paid by the assessee company. On appeal, we find that the CIT(A), being of the view that the impugned order before him was an order passed by the A.O u/s 154 of the Act declining the assessee’s request for rectification, had thus, proceeded with on the basis of the said misconceived factual position and had dismissed the assessee’s appeal, for the reason, that the claim of the assessee did not fall within the realm of a mistake apparent from the record within the meaning of Sec. 154
We concur with the claim of the ld. A.R that both the lower authorities had proceeded with the matter on the basis of misconceived and incorrect facts. We, thus, in the totality of the facts involved in the case before us restore the issue to the file of the A.O who shall comply with the directions given by the CIT(A) which read as that A.O has not granted interest u/s. 244A on the refund ranted on rectification order passed u/s 154 of the I.T. Act, 1961. It has been pointed that the A.O has passed the rectification order u/s 514 of the I.T. Act, 1961 giving credit of ₹ 50 lacs paid as self assessment tax by the appellant without granting interest u/s 244A
Assessee shall in the course of the set-aside proceedings remain at a liberty to substantiate its entitlement for interest u/s 244A on the amount of the self-assessment tax of ₹ 50 lac. As we have restored the matter to the file of the A.O for re-adjudication, therefore, we refrain from adverting to the contentions advanced by the ld. A.R as regards the merits of the case - Appeal of assessee is allowed for statistical purpose
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2021 (12) TMI 698
Revision u/s 263 by CIT - claim of depreciation on motorcars and interest paid on car loans - HELD THAT:- The depreciation so claimed and the interest expenditure on loan availed for purchasing the motorcars have been allowed in the earlier assessment years. It is a fact on record that in the impugned assessment year, the assessee claimed depreciation on the opening WDV. Therefore, once depreciation on the assets have been allowed in the preceding assessment years, the AO could not have disallowed the depreciation claimed on the opening WDV.
Simply because the motorcars are registered in the name of the Directors of the company the claim of depreciation cannot be disallowed, if it is established that the motorcars are actually owned by the assessee and used in its normal course of business, though, purchased in the name of the Directors. The assessee has also furnished evidence to show that payment for the purchase of motorcars was on assessee’s account and the EMI for loan availed were paid by the assessee from the its bank account. Even, the motorcars have been shown as fixed assets in assessee’s books of account - there was no reason for the AO to disallow assessee’s claim of depreciation. In any case of the matter, the judicial precedents cited before us by learned Counsel for the assessee clearly say that even if vehicles are registered in the name of directors or partners for certain restrictions/conditions under the Motorcar Vehicle Act, however, if such assets, for all intent and purpose, belong to the company and are used for its business, the company would be eligible to claim depreciation.
View taken by the AO in allowing assessee’s claim of depreciation and interest expenses can be considered to be a plausible view. That being the case, assessment order cannot be held as erroneous. Thus, the twin conditions of section 263 of the Act remain unsatisfied. For this reason the impugned order passed by learned PCIT cannot be sustained. - Decided against revenue.
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2021 (12) TMI 697
Income accrued/taxable in India - Tax Resident - Taxability of investment of unexplained income in specific residential properties in India - taxability of income arising from immovable property - scope of Indo UAE tax treaty - assessee is an Indian national fiscally domiciled in, and tax resident of, the United Arab Emirates for over three decades - whether unexplained investments, even if that be so, can be taxed in India upon investment in India, even when he is not carrying out any income generating activities in India ? - whether CIT(A) erred in considering the interest income to be taxable under article 22 of India-UAE DTAA not under article 11 of the treaty? - HELD THAT:- The plea that the India- UAE treaty provides for taxability of income arising from immovable property, this plea is contextually irrelevant inasmuch as what we are dealing with right now is not an income from the immovable property, but an income said to have been invested in an immovable property. The plea is thus devoid of any legally sustainable merits. As for article 23(1), which refers to taxation of capital represented by immovable property, the said article refers to taxation of capital but does not provide, as learned Departmental Representative seem to suggest, for taxation by virtue of investment in the immovable property.
The assessee before us is certainly an Indian national, but he is admittedly resident in the UAE so far as his residential status, under the Indo UAE tax treaty is concerned, is of the UAE tax resident. The residuary taxation rights, in terms of the treaty provisions, belong to the residence jurisdiction, but even if that was not to be so, the residence rights can at best go to the source jurisdiction, which in turn refers to a jurisdiction in which the income is earned, rather than a jurisdiction in which the income is invested. By no stretch of logic, therefore, such an income could be taxed in India, which is neither residence nor source jurisdiction; it is at best investment jurisdiction. However, the scheme of tax treaties limits the rights of taxation either to residence or to source jurisdiction.
As for the alleged interest income, there is no finding whatsoever to suggest that there was indeed any interest income inasmuch as even the Assessing Officer is tentative when he states that the related entry “probably” refers to interest receipt. The taxability of interest is, even by the standards of the revenue authorities, also thus far from established. There is no evidence whatsoever, or even a serious allegation, that there is an interest income.
The assessee before us is a tax resident of the United Arab Emirates and is thus entitled to the benefits of the Indo UAE tax treaty. When the rights to tax the income in question, under the applicable tax treaty provisions, are allocated to the residence jurisdiction, it is wholly immaterial whether or not the source jurisdiction has the right to tax that income, and, in any event, India is not even a source jurisdiction for the income in question as no economic activities have been carried out in India- it is at best the jurisdiction in which earnings are invested. That cannot anyway have any bearing on the taxation of income. In our considered view, therefore, since, under the terms of the Indo UAE tax treaty, the right to tax the amounts in question, even if that be of income nature in the hands of the present assessee, does not belong to India, all these issues being raised by the learned counsel are wholly academic as of now, and do not call for our adjudication. Having said that, however, in due deference to the legitimate rights of the assessee, we make it clear that, if so necessary in future, the assessee will be at liberty to raise these issues.
We approve the well-reasoned conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
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2021 (12) TMI 696
Addition of interest paid as expenditure in connection with business activities with certain suppliers of goods, job workers for manufacturing of goods of the appellant and added in the returned income - A.O. had not allowed deduction as business expenditure of interest paid on borrowings which had been given to other companies as well as firms in connection with the continuation of business i.e business expediency - HELD THAT:- Three ingredients are required for allowing interest paid which are as there should be borrowing of funds, borrowing should be for business purpose, and there should be payment of interest.
The assessee fulfills all the above three conditions, as the assessee borrowed the funds from the bank as well as other, the borrowing was for the business purposes only and interest thereon was paid to the Bank as well as to others also.
As all are the business transactions either of purchases/sale/Job work as well as payments/receipts through banks as the case may be in the business/Commercial expediency. In the business transaction neither the assessee paid any interest on delay payments against consideration to the above suppliers on their sale/Job Works, if any, nor charged any interest from them on delay payments received either as sale consideration or advances in connection with the commercial expediency.
Considering the totality of facts and circumstances of the case, mater placed on record and the case laws relied upon by the ld. AR, we found merit in the contentions raised by the assessee and the ld. DR has not brought on record any new material to rebut or controvert the submissions and documents placed before us, therefore, we direct to delete the disallowances confirmed by the ld. CIT(A) - Decided in favour of assessee.
Disallowance of interest to Bajaj Finance Ltd. - HELD THAT:- Assessee has taken finance from Baja] Finance Limited in 2011. The repayment was made accordingly to the monthly installment. As per the provisions, the assessee has debited TDS deducted on the interest paid in the account of the company. The assessee time and again required M/s Bajaj Finance Limited to reimburse the same. However, in spite of the repeated request no such reimbursement of the tax deducted at source was made. Accordingly during the year claimed the amount of TDS as interest in the profit & loss account. As the non recovery of the same is decided during the year, the same is current year expenditure and allowable during the year. However, the interest was deposited in the year under consideration, it must be allowed in any one of the years either the year under consideration on account of payment or in the preceding year being the relevant year, if the expenditure is allowed in this year under consideration even though there would be no any loss of revenue to the department because the rate of tax is one and the same for both the assessment years. Considering the totality of facts and circumstances of the case, we direct to delete the disallowance confirmed by the ld. CIT(A) - Decided in favour of assessee.
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2021 (12) TMI 695
Levy of late fee u/s. 234E - Fee for default in furnishing statements - delay in filing statement of TDS within the prescribed time - conflicting views - HELD THAT:- It is not in dispute that if the ratio laid down in the case of Fateeraj Singhvi [2016 (9) TMI 964 - KARNATAKA HIGH COURT] is applied then the levy of interest u/s.234-E of the Act would be illegal for returns of TDS in respect of the period prior to 1.6.2015. The present appeals of the Assessee relate to TDS returns filed prior to 1.6.2015 and therefore levy of interest u/s.234E of the Act would not be valid, following the ratio laid down by the Hon’ble Karnataka High Court.
The Hon’ble Bombay High Court in the case of Subramaniam -vs.- Siemens India Ltd.[1983 (4) TMI 3 - BOMBAY HIGH COURT ] held that in the case where there is conflict of views between different High Courts, authorities must follow the decision of the High Court within whose jurisdiction he is functioning. The Court further added that in cases where there is a conflict between the decisions of non-jurisdictional High Courts, the ITO must take the view which is in favour of the assessee and not against him.
Relief should not be refused to the taxpayer merely because there was a conflicting decision of a non-jurisdictional high court - we are of the view that the levy of interest u/s.234E of the Act in the present case cannot be sustained and the same is directed to be deleted and the appeals of the Assessee are allowed.
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2021 (12) TMI 694
Addition u/s 41(1) - as assessee has not written off the outstanding liability in the books of account and are still in existence. Therefore, it was contended that the assessee has acknowledged his liabilities as per the books of account - HELD THAT:- In the instant case, admittedly, it is loan creditors and not a trading liability. So, the assessee has not obtained allowance or deduction in computing the profits and gains of business or profession in respect of assessment of any year. Therefore, the first condition enumerated u/s 41(1) of the I.T.Act does not have application to the facts of the instant case. Hence, the addition made by the A.O. and sustained by the CIT(A) is deleted. - Decided in favour of assessee.
Disallowance of depreciation on motor car and revolver - Disallowance of interest on car loan - business v/s personal expenses - claims made by the assessee was disallowed by the A.O. by holding that these are personal in nature - HELD THAT:- AR during the course of hearing had fairly submitted that the assessee did not place necessary evidences for claiming depreciation and interest before the Income Tax Authorities. Even before the ITAT, no evidence are placed on record for claiming deduction / disallowance. Hence, the claim of deduction of depreciation and interest is sustained. - Decided against assessee.
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2021 (12) TMI 693
Delayed employee’s share of contribution to PF and ESI - scope of amendment to the provisions of Sec.36(1)(va) and Sec.43B of the Act, by the Finance Act, 2021 - HELD THAT:- Hon’ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd.,[2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee’s contribution u/s 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction.Therefore, the issue is covered by the decision of the Hon’ble Karnataka High Court.
Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - We find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act in both the Assessment Years deserves to be deleted. Appeal of assessee allowed.
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2021 (12) TMI 692
Delayed Employees share of contribution to Provident Fund (PF) - contribution not paid on or before the due date as mentioned in Sec 36(1)(va) - Scope of amendment to section 36(1)(va) and Sec.43B of the Act, by the Finance Act, 2021 - HELD THAT:- Hon’ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd.,[2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee’s contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction.Therefore, the issue is covered by the decision of the Hon’ble Karnataka High Court. T
Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - We find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act in both the Assessment Years deserves to be deleted. Appeal of assessee allowed.
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2021 (12) TMI 691
Late remittance of employees’ contribution to PF and ESI - difference between the returned income and the assessed income u/s 143(1) - HELD THAT:- 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.Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to ESI since the assessee has made payment before the due date of filing of the return of income u/s 139(1) - Decided in favour of assessee.
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2021 (12) TMI 690
Additional depreciation claimed by the assessee company @ 10% in respect on new plant & machinery acquired by it after September 30, 2012 (AY 2013-14) - Number of days asset is used - quantum of additional depreciation allowable in respect of these assets was restricted to 50 percent of 20 percent of the actual cost of machinery in assessment year 2013-14 in view of the restrictive provision provided under the Act (i.e. as per the second proviso to section 32(1) - HELD THAT:- It is pertinent to note that this issue is already considered by the Hon’ble Madras High Court in case of Brakes India Pvt. Ltd. [2017 (4) TMI 511 - MADRAS HIGH COURT] and M/s Aztec Auto Pvt. Ltd. . [2020 (9) TMI 541 - MADRAS HIGH COURT] and further the additional depreciation claimed was already imbibed in Section 32(1) (iia) of the Act.
Thus, the additional depreciation is allowable depreciation and the amendment is not applicable in present assessment year i.e. A.Y. 2014-15 in assessee’s case. Further, no distinguishing facts were presented before us by the Ld. DR. Therefore, Ground Nos. 1 and 2 are allowed.
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2021 (12) TMI 689
Revision u/s 263 by CIT - Eligibility of claim of deduction u/s 54B - CIT directing assessing officer to make fresh investigations with regard to claim of deduction u/s 54B - HELD THAT:- We note that in assessee`s case under consideration, the assessee has received part payment in advance in the financial year 2011-12, and the said part payment so received in advance, was utilized by the assessee in purchasing another agricultural land therefore assessee is entitled to claim exemption under section 54B - These facts were examined by the assessing officer while making the assessment under section 143(3) of the Act, therefore, assessment framed by the assessing officer should not be erroneous.
We are very much conscious of landmark decision of Malabar Industries Ltd. [2000 (2) TMI 10 - SUPREME COURT] wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 - it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law.
We are of the view that none of the reasons set out by the ld PCIT for invoking the jurisdiction u/s 263 of the Act are sustainable. The impugned order of the ld PCIT has to be quashed for the reason that order of the Assessing Officer sought to be revised in the impugned order was neither erroneous nor prejudicial to the interest of the revenue for the reason of any lack of inquiry that the Assessing Officer ought to have made in the given facts and circumstances of the case - Decided in favour of assessee.
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2021 (12) TMI 665
Disallowance on account of late payments towards EPF and ESI u/s 36(1)(va) - scope of amendment - HELD THAT:- Since the facts of the present cases are identical to the facts involved in RAJA RAM [2021 (11) TMI 370 - ITAT CHANDIGARH] therefore respectfully following the earlier orders as referred to herein above of the different Benches of the ITAT, 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 664
Reopening of assessment u/s 147 - scope of mandatory procedure prescribed u/s 148A - relation between Relaxation Act, 2020 and Finance Act, 2021 - enhanced/reduced time limit specified in Section 149 - initiation of reassessment proceedings prior to coming into force of the Finance Act, 2021 - substitution made by the Finance Act, 2021 - legality and validity of only the Explanations to the two Notifications, being Notification No.20/2021 dated 31st March, 2021 and Notification No.38/2021 dated 27th April, 2021, issued by Central Government in exercise of powers vested under Section 3(1) of Relaxation Act, 2020 - reformative changes to Sections 147 to 151 - income escaping assessment - onset of Covid-19 pandemic followed by nationwide lockdown in March, 2020 - Relaxation of certain provision of specified Act - scope of declaration declaring Explanations A(a)(ii)/A(b) to the Notification No.20 [S.O.1432(E)] dated 31st March, 2021 and Notification No.38 [S.O.1703(E)] dated 27th April, 2021 to the extent that the same extend the a0pplicability of the “provisions of Section 148, Section 149 and Section 151 of the Act, as the case may be, as they stood as on the 31st day of March, 2021, before the commencement of the Finance Act, 2021” to the period beyond 31st March, 2021 - whether the Government/Executive can make or change law of the land by way of Explanations to Notifications without specific Authority from the Legislature to do so and whether the Government/Executive can impede the implementation of law made by the Legislature -
HELD THAT:- By virtue of Section 1(2)(a) of the Finance Act, 2021, the substituted Sections 147, 148, 149 and 151 of the Income Tax Act, 1961 pertaining to reopening of assessments came into force on 1st April, 2021. The significance of the expression ‘shall’ in Section 1(2)(a) of the Finance Act, 2021 cannot be lost sight of. This is in contrast to the language under Section 1(2)(b) which states that Sections 108 to 123 of the Finance Act, 2021 shall come into force on such date, as the Central Government may, by Notification in the Official Gazette, appoint. The Memorandum to the Finance Bill, 2021, too, clarifies that its Sections 2 to 88 which included the substituted Sections 147 to 151 of the Income Tax Act, 1961 will take effect from 1st April, 2021. There is also no power with the Executive/Respondents/Revenue to defer/postpone the implementation of Sections 2 to 88 of the Finance Act, 2021 which includes the substituted Sections 147 to 151 of the Income Tax Act, 1961.
Applicability of law as amended - It is settled law that the law prevailing on the date of issuance of the notice under Section 148 has to be applied.
This Court is of the view that had the intention of the Legislature been to keep the erstwhile provisions alive, it would have introduced the new provisions with effect from 1st July, 2021, which has not been done. Accordingly, the notices relating to any assessment year issued under Section 148 on or after 1st April, 2021 have to comply with the provisions of Sections 147, 148, 148A, 149 and 151 of the Income Tax Act, 1961 as specifically substituted by the Finance Act, 2021 with effect from 1st April, 2021.
Consequently, this Court is of the opinion that as the Legislature has permitted re-assessment to be made in this manner only, it can be done in this manner, or not at all.
Relaxation Act, 2020 and Notifications issued thereunder can only change the time-lines applicable to the issuance of a Section 148 notice, but they cannot change the statutory provisions applicable thereto which are required to be strictly complied with. Further, just as the Executive cannot legislate, it cannot impede the implementation of law made by the Legislature.
Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are ultra vires the Relaxation Act, 2020 and are therefore, bad in law and null and void - As the impugned Explanation is not only beyond the power delegated to the Government, but also in conflict with the provisions of the Income Tax Act, 1961 which had specifically made the new reassessment scheme applicable from 1st April, 2021. It is settled law that the delegation of authority must be express. There is no scope for any implied delegation of authority. The delegated authority must act strictly within the parameters of the authority delegated to it. The delegated authority cannot override the Act either by exceeding the authority or by making provisions inconsistent with the Act. The distinction between conditional legislation or delegated legislation is irrelevant to the controversy at hand, as the person to whom the power is entrusted in either situation can do nothing beyond the limits which circumscribe the power. Subordinate legislation cannot be contrary to the parent statute.
With the coming into force of the Finance Act, 2021 w.e.f. 1st April, 2021, there has been no curtailing or taking away the power of the Revenue. It has merely changed the procedure of issuing notice. Consequently, the “power” as per Hohfeld’s theory that existed prior to 31st March, 2021 continues to exist even thereafter.
Ignorance of legislative intent of Finance Act - It is pertinent to mention that the Legislature had even prior to Finance Act, 2021 enhanced/reduced time limit specified in Section 149 of the Income Tax Act, 1961, by way of Finance Acts, 1961, 1989, 2001, 2012 and pertinently such enhancement/reduction to the time limit was made effective from different dates of the relevant financial year - In the present cases to ignore the legislative intent of Finance Act, 2021 would neither be legal nor reasonable.
Retrospective operation - It is a cardinal principle of construction that every statute is prima facie prospective, unless it is expressly or by necessary implication made to have retrospective operation - In contrast to statutes dealing with substantive rights, statutes dealing with merely matters of procedure are presumed to be retrospective, unless such a construction is textually inadmissible
Determining whether Amendment is procedural or substantive - This Court is of the view that the Finance Act, 2021 introduces a new regime regarding the procedure to be complied with in respect of the re-opening of an Income-tax assessment and accordingly, the benefit of the new provisions must necessarily be made available even in respect of proceedings relating to past Assessment Years provided, of course, Section 148 notice has been issued on or after 1st April, 2021.
Concept of vested rights - Admittedly, time limit to issue notices for re-assessment under the Income Tax Act, 1961 stood expired long time ago. The Legislature by virtue of the Relaxation Act, 2020 had extended the time limit till 31st December, 2020 and had given discretion to the executive to issue Notification to extend the timeline alone. However, extending the time limit or giving power to issue Notification to extend the time cannot be taken to be a vested right of the respondents. Consequently, this Court is of the view that vested right in favour of the Revenue stood exhausted/expired long ago and no vested right of the respondents has been infringed leave alone violated.
Substitution made as applicable to past assessment - On the one hand, the Respondents are contending that the amendment made by the Finance Act, 2021 shall not be applicable to past assessment years, while on the other hand, they are contending that from 1st July, 2021, the amendments made by the Finance Act, 2021 will be applicable. This is contradictory inasmuch as for three months starting on or after 1st April, 2021, the amendment made by the Finance Act, 2021 shall be considered as substantive in nature and hence applicable prospectively, while from 1st July, 2021, the amendment made by the Finance Act, 2021 will be considered as procedural and hence will be applicable retrospectively for any assessment year including earlier years. Keeping in view its own submission and past precedent to treat Sections 147 to 152 of the Income Tax Act, 1961 as procedural, the respondents are estopped from contending to the contrary.
Explanation in Notification No. 20 dated 31st March, 2021 extended the applicability of old procedure of reassessment beyond 31st March, 2021 - As per Sections 153A and 153C, the provisions of these two sections will not apply where search/survey is done after 1st April, 2021. Department contends that the erstwhile law continues to apply from 1st April, 2021 to 30th June, 2021. The erstwhile law on reopening did not cover search/survey cases. Consequently, for the search/survey done from 1st April to 30th June, there can neither be an assessment under sections 153A/153C or under 147, which cannot be the case. Further, Sections 148, 148A and 149 specifically cover cases where search/survey is done after 1st April, 2021. If department’s interpretation is accepted, this specific date in all three Sections will have to be changed and read as 1st July, 2021, which cannot be done. Moreover, as the new provisions seek to bring uniformity between regular reassessments and search/survey cases, it follows that the cut off date for initiation of reassessment proceedings even for regular reassessment is 1st April, 2021.
Covid -19 effect - When Finance Minister moved the Finance Bill, 2021 in Parliament on 1st February, 2021 and the Finance Act, 2021 was enacted in March, 2021, COVID-19 was widely prevalent and Parliament was fully aware of the same. Nevertheless, with the objective of promoting ease of doing business and reducing litigation, Parliament specifically enacted that the new reassessment provisions would come into operation on 1st April, 2021. The Revenue cannot, therefore, rely on COVID-19 for contending that the new provisions should not operate during the period 1st April, 2021 to 30th June, 2021 or that Relaxation Act, 2020 deals with the situation arising out of Covid-19 and the Finance Act, 2021 was passed being oblivious of the Covid-19 Pandemic.
Non - obstante clause in Section 3(1) of Relaxation Act, 2020 - To get over this inherent conflict between Section 3 of Relaxation Act, 2020 and various timelines provided in provisions prescribed in the specified Acts, the legislature has carefully incorporated the non-obstante clause in the said Section. Consequently, this non-obstante provision only operates to prevail over the time lines laid down in the specified Act. Apart from these timelines, no other provision of any specified Act is suspended or overridden. This non-obstante clause cannot, therefore, possibly be relied upon by the Revenue to contend that a Notification issued under Section 3 of Relaxation Act, 2020 overrides any provision of the Income-tax Act, 1961 other than the applicable time-lines. Any Notification issued under Relaxation Act, 2020 cannot possibly have a reach and ambit wider than the Relaxation Act, 2020 itself for that would be contrary to the settled canons of construction of statutes.
Relaxation Act, 2020 was enacted long before the Finance Act, 2021. Consequently, it cannot possibly be contended that any provision of Relaxation Act, much less of any Notification issued thereunder, can be so construed as amending or modifying or excluding the applicability of the yet to be enacted Finance Act, 2021. Further, as the Petitioners are not questioning any of the time extensions made by or under Relaxation Act, 2020, the said non-obstante clause is totally irrelevant to controversy at hand.
Selectively chosen and picked up two terms viz. “such action” & “stand extended” - To substantiate its stand that the impugned notices are not barred by limitation, the Revenue without even considering the pre-condition prescribed by Section 3 of Relaxation Act, 2020 has selectively chosen and picked up two terms viz. “such action” & “stand extended” to put forward an interpretation which could not have been contemplated by the Legislature at the time of enactment of the said provision, namely, that notices under Section 148 will relate back and be governed by old law. In the opinion of this Court, the submission of the Revenue is completely flawed, as the same is contrary to basic principles of interpretations, which prohibits selectively choosing/ignoring words from the statutory language. It is settled law that when the words of a statute are clear and unambiguous, it is not permissible for the Court to read words into the statute. Relaxation Act, 2020 received the President’s assent on 29th September, 2020, whereas the Finance Act, 2021 received the assent on 31st March, 2021. Consequently, it cannot be contended that any provision of the Relaxation Act, 2020, much less of any Notification issued thereunder, should be so construed as amending or modifying or excluding the applicability of the yet to be enacted Finance Act, 2021.
Not mentioning substituted section 147 in impugned explanation - Even if it is assumed that the impugned Explanations in the two Notifications are valid, still the impugned notices are bad in law, as the impugned Explanations only seek to effectuate the erstwhile Sections 148, 149 and 151 and they do not cover Section 147. However, the conditions provided for in the substituted Section 147 were not considered while issuing notices by the Assessing Officer. In fact, the said Section 147 is itself subject to Sections 148 to 153, which would include Section 148A.
“Legal fiction” argument is without any foundation. A statute can be said to enact a legal fiction when it assumes the existence of something which is known not to exist. The extension of time for completing an assessment or issuing a Section 148 notice has no element of legal fiction in it. The only effect and consequence of this extension of the time limit is that if the act in question is performed within the extended time limit, it will be considered to be legally compliant. However, there is no assumption that the act in question is deemed to have been performed within the original time limit, as wrongly contended by the learned counsel for the Respondents. For achieving that result, clear and unequivocal language was required in the Relaxation Act, 2020 – which is missing.
Provision to be termed as a Stop the clock provision - Section 3 of the Relaxation Act, 2020 is not a ‘stop the clock’ provision, as it only relaxes the time limit, so as to facilitate the cases in which the Revenue/assessee has not been able to take the specified action within the statutory timelines. The essential condition for a provision to be termed as stop the clock provision is that the time during which such clock is stopped, such period has to be excluded. In the present instance, time limit is extended, not excluded or stopped.
Fiction created only for reassessment and not for faceless penalty scheme - Wherever the Legislature intended that the old procedure is to be followed in respect of any assessment year as against the new procedure post the amendment, then it has specifically provided so. For instance, the Direct Laws (Amendment) Act, 1987 had introduced a new scheme for best judgment assessment (ex parte) under Section 144 w.e.f. 1st April 1989. However, in order to ensure that the assessments for years before coming into force of the new law is done under the old law, a specific sub-Section (2) was inserted in Section 144 to provide that the provisions of this Section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987, shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year.
Overriding of special Act - It is equally well-settled law that a special Act overrides a general Act. But this principle has no application whatsoever in the present case because Relaxation Act, 2021 and the Finance Act, 2021 operate in their distinct and separate spheres. Consequently, the question whether one prevails over and supersedes the other does not arise at all.
Equality principles under Article 14 of the Constitution - The argument of the Respondents that Relaxation Act, 2020, promotes the equality principles under Article 14 of the Constitution and that if Petitioner’s arguments are accepted, it would lead to unreasonable classification with those assessees who could not be issued notices earlier is untenable in law. If this is taken to the logical end, then any amendment in the procedural law will create inequality since procedural law will be applicable for all pending assessments as on that date.
Substitution’ has to be distinguished from ‘suppression’ or a mere repeal of an existing provision. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision.
Consequently, the submission of the revenue that Section 6 of the General Clauses Act saves notices issued under Section 148 of the Income Tax Act, 1961 is untenable in law, as in the present case, the repeal is followed by a fresh legislation on the same subject and the new Act manifests an intention to destroy the old procedure.
Conclusion - As the Legislature has introduced the new provisions, Sections 147 to 151 of the Income Tax Act, 1961 by way of the Finance Act, 2021 with effect from 1st April, 2021 and as the said Section 147 is not even mentioned in the impugned Explanations, the reassessment notices relating to any Assessment Year issued under Section 148 after 31st March, 2021 had to comply with the substituted Sections.
As clarified that the power of reassessment that existed prior to 31st March, 2021 continued to exist till the extended period i.e. till 30th June, 2021; however, the Finance Act, 2021 has merely changed the procedure to be followed prior to issuance of notice with effect from 1st April, 2021.
This Court is of the opinion that Section 3(1) of Relaxation Act empowers the Government/Executive to extend only the time limits and it does not delegate the power to legislate on provisions to be followed for initiation of reassessment proceedings. In fact, the Relaxation Act does not give power to Government to extend the erstwhile Sections 147 to 151 beyond 31st March, 2021 and/or defer the operation of substituted provisions enacted by the Finance Act, 2021. Consequently, the impugned Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 are not conditional legislation and are beyond the power delegated to the Government as well as ultra vires the parent statute i.e. the Relaxation Act. Accordingly, this Court is respectfully not in agreement with the view of the Chhattisgarh High Court in Palak Khatuja [2021 (9) TMI 199 - CHHATTISGARH HIGH COURT] but with the views of Ashok Kumar Agarwal [2021 (10) TMI 517 - ALLAHABAD HIGH COURT] and Bpip Infra Private Limited. [2021 (12) TMI 207 - RAJASTHAN HIGH COURT]
The argument of the respondents that the substitution made by the Finance Act, 2021 is not applicable to past Assessment Years, as it is substantial in nature is contradicted by Respondents’ own Circular 549 of 1989 and its own submission that from 1st July, 2021, the substitution made by the Finance Act, 2021 will be applicable.
Revenue cannot rely on Covid-19 for contending that the new provisions Sections 147 to 151 of the Income Tax Act, 1961 should not operate during the period 1st April, 2021 to 30th June, 2021 as Parliament was fully aware of Covid-19 Pandemic when it passed the Finance Act, 2021. Also, the arguments of the respondents qua non-obstante clause in Section 3(1) of the Relaxation Act, ‘legal fiction’ and ‘stop the clock provision’ are contrary to facts and untenable in law.
Consequently, this Court is of the view that the Executive/Respondents/Revenue cannot use the administrative power to issue Notifications under Section 3(1) of the Relaxation Act, 2020 to undermine the expression of Parliamentary supremacy in the form of an Act of Parliament, namely, the Finance Act, 2021. This Court is also of the opinion that the Executive/Respondents/Revenue cannot frustrate the purpose of substituted statutory provisions, like Sections 147 to 151 of Income Tax Act, 1961 in the present instance, by emptying it of content or impeding or postponing their effectual operation.
Relief - Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void.Consequently, the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 are quashed and the present writ petitions are allowed.
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2021 (12) TMI 663
Advantage of Kar Vivad Samadhan Scheme, 1998 (KVSS) - Petitioners’ case as submitted that Respondent No.2 concluded that amount payable would be covered under Clause (iv) of Section 88 (A) of the said Act because the tax payable by Petitioner had already been adjusted against refund to be given by the Revenue to one of the partners of Petitioner No.1 firm - HELD THAT:- The reason why we are not going into details is because Respondents, in its reply opposing the Petition, have averred that Petitioners’ Chartered Accountant, by a letter dated 5th August, 1998, has informed the Revenue that refund of ₹ 2,21,995/- that was due to a partner of the Firm – late Shri Kanhaiyalal Jain be adjusted against demand for Assessment Year 1987-88 against M/s. Anand Nagar & Company, i.e., Petitioner No.1. A copy of the said letter is also annexed at Ex. ‘C’ to the affidavit in reply. In the rejoinder, there is no denial of addressing this letter.
Even in the Petition, Petitioner is totally silent about having addressed the said communication dated 5th August, 1998. Petitioner No.2 is a partner of Petitioner No.1-Firm and he ought to have disclosed to the Court and been truthful to the Court and not suppressed that such a communication was so addressed and the adjustment was made at the request of Petitioner No.1 firm. That was a material fact that has been suppressed. Courts have consistently deprecated parties or litigants who are economical with truth and who resort to falsehood and unethical means for achieving their goals.
If clever drafting has created the illusion of a cause of action, the Court must nip it in the bud at the first hearing by examining the party searchingly
In Dalip Singh V/s. State of Uttar Pradesh [2009 (12) TMI 847 - SUPREME COURT] the Court bemoaned that a new creed of litigants has cropped up who do not have any respect for truth and they shamelessly resort to falsehood and unethical means for achieving their goals. Such a litigant who attempts to pollute the stream of justice or who touches the pure fountain of justice with tainted hands, is not entitled to any relief.
The Apex Court and this Court have, on many occasions, stated that if a party comes to the Court with unclean hands, which in this case petitioner have, the party should be dealt with very strongly and substantial costs also should be imposed on the party. The conduct of petitioner in suppressing a material fact intends to impede and prejudice the administration of justice. Judiciary is the bedrock and handmaid of orderly life and civilized society - In the circumstances, we are not inclined to entertain the Petition.
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2021 (12) TMI 662
Acquiring Unn Sugar Complex - Determination of cost of asset - AO satisfied that the main purpose of transfer of such assets was for reducing the tax liability by the assessee by claiming depreciation with reference to enhanced cost - Submissions of the Ld. AR that for determination of cost of each asset separately, freehold land was valued as per circle rate prescribed by the UP Government, while the building and plant as well as machinery were valued as per report submitted by registered-valuer - HELD THAT:- As from the records, it can be seen that the leasehold land valued as per market value prescribed by UP Government was substantially lower than the value assigned by stamp authority. There is no basis for adopting this value. The CIT(A) has categorically observed that the assessee adopted this value as balancing figure by allocating higher value to building. The total sale consideration as per the sale deed and as recorded in the books of accounts of the assessee are appears to be similar. The assessee allocated higher value to building and lower value to leasehold land. But there is no justification for the same given by the assessee The CIT(A) has given a detailed finding and there is no need to interfere with the findings of the CIT(A).
Addition on account of provision of expenses - Assessee has paid State Advised Price (SAP) of ₹ 18.64 crores as per the Court order. The CIT(A) has rightly held that the same has to be allowed as a deduction during the assessment year under consideration. Therefore, the CIT(A) rightly directed the AO to verify whether this amount has been claimed during the assessment year 2013-14 and if not AO was directed to allow its deduction in the present assessment year. There is no need to interfere with the findings of the CIT(A)
Addition made u/s 43B on account of interest on levy of sugar price for the season 1982-83 - HELD THAT:- Since the Supreme Court order came in 2012, the claim is admissible in the Assessment Year under consideration as the same was a liability in A.Y. 2008-09. Therefore, there is no need to interfere with the findings of the CIT(A). Ground No. 2 of Revenue’s appeal is dismissed
CIT-A allowing the depreciation on boilers (a 80% rather than the allowed depreciation @ 15% by AO - HELD THAT:- CIT(A) has given categorical finding based on the evidences produced before the CIT(A) as well as Assessing Officer. Ground No. 3 and additional ground are dismissed.
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