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Income Tax - Case Laws
Showing 41 to 60 of 676 Records
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2022 (1) TMI 1331
Reopening of assessment u/s 147 - addition on account of interest u/s 43D - Assessment reopened beyond the period of 4 years from the end of the relevant assessment year - HELD THAT:- From the material on record, it is clearly indicated that the provision of NPA account was made in accordance with the direction of RBI.
It is settled position of law that the primary duty of the assessee is only to disclose fully and truly all material facts necessary for the purpose of making the assessment and not draw the inferences. Thus, it cannot be said that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of making the assessment. Reliance in this regard can be placed on the decision of Kalpataru Ltd. [2021 (10) TMI 465 - BOMBAY HIGH COURT]
Thus, we are of the considered opinion that there is no satisfaction of the proviso to section 147 of the Act and the Assessing Officer was not entitled to reopen the assessment.
Even otherwise, it is admitted that the basis of reopening the assessment for the assessment years 2010-11 and 2011-12, wherein, similar addition was made by the Assessing Officer which came to be deleted by the Tribunal vide order dated 26.10.2021[2021 (10) TMI 1204 - ITAT PUNE]. Therefore, the very basis of the re-assessment proceedings does not stand, as once the foundation is removed, the superstructure falls (sublato fundmento credit opus). Decided in favour of assessee.
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2022 (1) TMI 1330
On-money received from its business of real estate development - on-money components on the sale of the bungalows - assessee had received on-money on sale of the property in the course of business and there was nothing to demonstrate any expenditure incurred out of the same by the assessee - Assessee plead restricting the addition to the profit element embedded in the same - HELD THAT:- We therefore agree with the ld.counsel for the assessee that making addition of the entire on-money received by the assessee would not be justified. Though we are of the view that the onus is on the assessee to show what expenses have been incurred by it in cash, which have also remained unexplained, but at the same time noting the fact that bungalows sold by the assessee were not hi-end properties, but small sized bungalows the component of the on-money received on the same @ 50% of the booked price is on a palpably very high side.
We are of the view it would be just and reasonable to restrict the addition to the extent of profit element embedded in this transaction only. The AO is directed to restrict the addition by estimating GP on the on money receipts, at the higher of the rate in this line of business or as agreed to by him before us @ 15% thereof. We may add here that our above decision may not be treated as precedent in any other case having been rendered in the peculiar facts and circumstances of the case demonstrated before us by the ld.counsel for the assessee. Appeals of the assessee are partly allowed.
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2022 (1) TMI 1328
Unexplained investment made in the land - seized document itself proves that the assessee had made investment in the purchase of land - CIT-A deleted the addition - HELD THAT:- Cash was received by the assessee from director which would have been utilized for the payment against purchase of land. This presumption also gets strength from the fact that assessee was not having any source of income until July 2013. Further the assessee time and again contended that the cash was paid out of cash received from the directors and directors have offered the cash income in their individual returns.
Therefore considering the fact in totality we are of the view that amount of Rs. 1.98 crore and 1 crore paid in the A.Y. 2012-13 and 2013-14 are made out of the cash received from directors. Hence the source of investment in the hand of the assesse gets explained and no addition can be made in hand of the assessee as it is not the income of the assesse. If at all any addition of cash income is required to be made, that can be made in the individual capacity of the director. Indeed the addition of cash investment has been made in hand of Shri Pravinchandra Patel and therefore, no addition in the present case is warranted. Thus the ground of appeal of the assessee allowed.
Addition being unexplained expenses on basis of seized paper - Whether entire unaccounted receipt should be added or only the profit element after adjusting the expenses against such unaccounted receipt should be added as income in the hands of the assessee? - HELD THAT:- There is no dispute to the fact that the land was acquired by the assessee dated 12th January 2012 and its commercial activities were commenced from July 2013. In other words, there was no activity carried out by the assessee in the year under consideration. Thus the question arises can there be any addition for the unexplained expenditure incurred by the assessee on account of undisclosed income. In the present case, there cannot be any possibility for the assessee for having any unaccounted income in its hands for the year under consideration. It is for the reason that the assessee has not done any commercial activity suggesting that the assessee has earned income which was not disclosed in the books of accounts. If any addition was at all liable to be made, the same could have been done in the hands of the directors of the company. It is for the reason that there were directors who were found to have invested money on behalf of the assessee out of their undisclosed income. Thus, it can be inferred that the directors of the company have incurred the expenses on behalf of the company. As such, the assessee cannot be made subject to addition on account of unexplained expenditure in the year under consideration.
As we have adjudicated the issue raised by the assessee after applying the concept of telescoping, we refrain ourselves from adjudicating the other questions recorded hereinabove for the purpose of the decision. Thus the ground of appeal of the assessee is partly allowed.
Disallowance of the depreciation on account of excess value of the building - statement furnished on oath under section 131 of the Act that the contractor has raised the bills at the higher value and the payment was accordingly made to the contractor at the higher value which was received back in cash by the assessee - HELD THAT:- It seems that the conclusion has been drawn by the revenue solely based on the statement furnished during the assessment proceedings. We find that the CBDT in instruction no 286/2/2003-IT(Inv.II)has instructed the revenue authority to make addition in search proceeding only in the basis of material found instead of mere admission.
Admittedly, the information gathered during the search proceedings can be vital piece of input/material but the same cannot substitute the evidence. It was expected by the revenue to carry out necessary investigation based on the seized document and the statement obtained during the search proceedings to find out the truth after conducting the enquiries from the contractors. But no enquiry from the 3rd party has been conducted by the revenue. Accordingly, we are not inclined to uphold the finding of the authorities below. Thus we set aside the finding of the learned CIT(A) with the direction to the AO to allow the claim of the assessee for the depreciation - Hence the ground of appeal of the assessee is allowed.
Unexplained cash credit u/s 68 - lack of creditworthiness of the parties - HELD THAT:- The assessee has discharged its onus by furnishing the necessary details such as a copy of PAN, bank details, and ITR etc. in support of identity of the parties, genuineness of transaction and creditworthiness of the parties. Admittedly the AO has accepted the identity and genuineness of transaction but doubted the credit worthiness of the parties. However the learned CIT(A) held that the assessee has discharged the primary onus cast under section 68 of the Act and onus shifted on the AO to prove otherwise based on contrary materials on record.
Third condition, i.e. creditworthiness of the parties, regarding this we note that the assessee has refunded the amount through banking channel to all the parties.The repayment of the loan amount by the assessee was duly accepted by the Revenue.
Thus there remains no doubt that the transaction of the advance received by the assessee from the parties was genuine. In our considered view, once the assessee is able to prove that the money received by it was returned in the subsequent assessment year in the account of the party, then there remains no doubt that the advances received by the assessee were unexplained cash credit. Similarly, we also note that the assessee in respect of all the parties out of the parties as discussed above has furnished the sufficient documentary pieces of evidence including the details of the income of the parties. Therefore in our considered view, the assessee has discharged its onus imposed under section 68. - Decided in favour of assessee.
Assessment u/s 153A - disallowance of deduction under Chapter VI-A - Whether no incriminating material was found during search for A.Y,2009-10 and hence the proceeding for A.Y.2009-10 remained unabated? - HELD THAT:-There was no incriminating document found/seized during the search proceedings and therefore the concluded/unabated assessment years cannot be disturbed.
Assessee was the man of means and capable of making the investments. The assessee in support of his contention has also filed the cash flow statement i.e. showing the source of money invested in the impugned property. It was submitted by the assessee that the investment was made out of the drawing from the bank and this contention of the assessee was not controverted by the learned DR appearing for the Revenue at the time of hearing. In view of the above and after considering the facts in totality, we do not find any reason to interfere in the finding of the learned CIT-A and thus we uphold the same. Thus the grounds of appeal of the revenue are dismissed.
Addition u/s 50C - difference in sale consideration and stamp value under section 50C - HELD THAT:- The proceedings before us are special proceeding under section 153A and assessment is also unabated/completed. Therefore, addition can only be restricted to the extent of incriminating material found during search as discussed above. As there was no material found in search suggesting that the assessee has received any amount over and above what have been already disclosed by the assessee in the income tax return, we are also of the view that the AIR information cannot be held as incriminating material as there is no evidence that assessee has received excess sale consideration. Therefore, the addition under section 50C in A.Y. 2012-13 being unabated/completed assessment also cannot be sustained. Thus the grounds of appeal of the Revenue are dismissed.
Unexplained investment was made on substantive basis in the hands of M/s Neotech Education Foundation and protective basis in the hands of directors - HELD THAT:- Once the addition on substantive basis representing the investment in cash by the another director namely Shri Pravin C Patel has been made by us in the AY 2014-15, there cannot be any other addition either in the hands of M/s Neotech Education Foundation or other directors on substantive/protective basis. Payment of ₹ 1 and 1.98 crores represents the application of the income added in the hands of Shri Pravin Patel. As such, the investment of Rs. 1 crores and 1.98 crores has been made out of the addition made in the hands of Shri Pravin Patel for Rs.3,97,37,485/. Thus if any addition is sustained in the hands of any other party, that would lead to the double addition which is not desirable under the provisions of law - Decided in favour of assessee.
Treating the agriculture income as income from other sources - HELD THAT:- Admittedly, if the assessee is showing the agricultural income, then it is the onus upon him to produce the necessary evidences to justify such income. Indeed, the assessee has furnished the certificate from the Gram Panchayat. But to our considered view such certificate cannot replace the primary documents such as the details for the cultivation of the crop, details of the sales and the expenses incurred for the production of the crop. Such certificate is secondary piece of evidence.
Considering the size of the agricultural land and interest of justice and fair play we are of the view that justice will be served to the revenue and the assessee if 50% of the total agriculture income is treated as income from the agricultural activity and the remaining 50% is treated as income from other sources in the given facts and circumstances. Hence the ground of appeal of the assessee is partly allowed.
Unexplained cash credit - HELD THAT:- Assessee failed to discharge the onus imposed upon him under the provisions of section 68 of the Act. Hence, we are not inclined to interfere in the order of learned CIT-A.
Unexplained loans/investments in M/s Neotech Education foundation - HELD THAT:- In the absence of necessary information, we can safely presume that this income was earned by the assessee over the period of time which was invested in M/s Neotech Education Foundation over the period. We are presuming so for the reason that there is no other information available on record except that the cash income was invested in M/s Neotech Education Foundation.
After considering the facts in totality, we direct the AO to allow the adjustments against the addition made by him for the investment in cash in M/s Neotech Education Foundation - The adjustment is subject to verification. Effectively, if the availability of cash is found based on the documentary evidence, there cannot be addition of any income in the hands of the assessee. Hence the ground of appeal of the assessee is partly allowed in terms of the above.
Payment from the unaccounted sources for the purchase of the property along with his wife - share of the assessee was 50% in such investment of land - HELD THAT:- It was the onus upon the revenue to establish based on cogent material that the payment has been made by the assessee from some other sources. But the revenue has not brought anything on record. Moreover, we also note that there is a confirmation from the side of the vendor that he has not received the full payment from the assessee, rather he has accepted to have received postdate cheque for the dispute arose in the impugned land. Confirmation of the vendor cannot be brushed aside until and unless other documentary evidences are brought on record. In view of the above we do not incline to uphold the finding of the authorities below. Accordingly we set aside the order of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
Unexplained investment - AR before us submitted that the payment of Rs.5.11 Lacs was paid to the banking channel and therefore no addition is warranted - HELD THAT:- We note that the assessee failed to provide the details of bank or cheque from where fund was transferred. Indeed, the primary onus lies upon the assessee to produce the necessary evidences in support of amount paid. The assessee was afforded enough opportunities to bring the necessary details on record during the assessment and remand proceedings.Thus, in view of the above we hold that the assessee failed to discharge the onus imposed upon him under the provisions of section 69B of the Act. Hence, we are not inclined to interfere in the order of learned CIT-A., thus the ground of appeal of the assessee is dismissed.
Deposits in the ICICI bank account of the assessee - HELD THAT:- The revenue has not brought anything on record suggesting that the loan party was having any taxable income in India. Thus in the absence of return of income in the given facts and circumstances no adverse inference can be drawn against the assessee. Furthermore, the assessee has produced the bank statement of the party maintained with ICICI bank, Vadodra wherein sufficient balance was available for advancing loan to the assessee. Thus, the identity and the genuineness of transactions viz a viz the creditworthiness is established from the impugned statement. Thus, there cannot be any addition to the total income of the assessee merely on the reasoning that the assessee failed to file the confirmation and the ITR of the loan party.
Deposits in the HDFC Bank account of the assessee - Once the assessee has discharged the onus by furnishing the necessary details then the onus is shifted upon the revenue to reject the submission of the assessee based on the cogent reasons. But we note that the AO failed to exercise the powers conferred under the provisions of section 133(6)/131 of the Act by issuing notices upon the loan parties for taking the confirmation. The learned DR at the time of hearing has also not brought anything on record contrary to the finding of the learned CIT-A. Hence, we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the Revenue is hereby dismissed.
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2022 (1) TMI 1327
Disallowance of interest on delayed payment of TDS - assessee has claimed expenses on account of interest on TDS which is not an allowable expense under the provisions of the Income-tax Act, 1961 - HELD THAT:- We may refer to the decision of Lachmandas Mathuradas [1997 (12) TMI 16 - SUPREME COURT] wherein it was held that interest on arrears or on outstanding balance of sales tax is compensatory in nature and would be allowable as deduction in computing profits of a business.
Referring to the same decision, ITAT in the case of Narayani Ispat (P) Ltd. [2017 (10) TMI 67 - ITAT KOLKATA] has held that interest expenses on account of delayed payment of service tax as well as TDS is an allowable expenditure. Similar proposition has been laid down in other case laws that such interest is compensatory in nature and is allowable expenditure. Appeal of the assessee stands allowed.
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2022 (1) TMI 1325
NCDEX Trading Loss - Speculation Loss - addition treating the claim of loss of the assessee as speculative loss but allowed to set off against the speculative profits in future as has been done by the AO - HELD THAT:- In this case, it is noted that the AO during the course of assessment proceedings treated the transaction made prior to the notification out of total transaction as speculation by giving prospective effects to the said notification dated 27-11-2013 which has been confirmed by the ld. CIT(A). It is not imperative to repeat the facts as narrated by the ld.CIT(A) in his appellate order but the Bench noted that the issue in question is directly covered by the decision in the case of P.D. Sekharia Trading Company Pvt. Ltd.[2019 (3) TMI 2011 - ITAT AMRITSAR]
Bench has also been apprised that Revenue has not challenged the order of ITAT Amritsar Bench (supra) at higher forum and even no material has been placed on record by the Revenue to counter the said fact. Hence, in view of the above decision of ITAT Amritsar Bench dated 19-03-2019, the Bench does not concur with the findings of the ld. CIT(A) and thus the ground of appeal No. 1 of the assessee is allowed.
Disallowance of total expenses comprising of car expenses, shop expenses, Staff tea expenses and telephone and mobile expenses claimed by the assessee - HELD THAT:- During the course of hearing, the ld.AR of the assessee has not filed any written submission controverting the findings of the ld. CIT(A). Hence, Ground No. 2 of the assessee is dismissed.
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2022 (1) TMI 1322
Maintainability of appeal before ITAT - low tax effect - HELD THAT:- In the present case it is an admitted fact that the CBDT vide Circular No. 17/2019 enhanced the monetary limit to Rs. 50,00,000/- for not filing the appeal by the department before the ITAT, earlier this limit was specified at Rs. 20,00,000/- in the original Circular no. 03/2018 dt. 11/07/2018. Now vide the new Circular no. 17/2019 dt. 08/08/2019 the Tax Effect limit has been enhanced and this new Circular dt. 08/08/2019.
From the contents of the aforesaid Circular it is crystal clear that the anomaly in the earlier Circular no. 3 of 2018 dt. 11/07/2018 at page 5 has been removed and the limit specified in para 3 of the earlier Circular has been enhanced.
Now the CBDT simply enhanced the monitory limit and the directions given earlier vide para nos. 12 & 13 of the Circular no. 3 / 2018 dt. 11/07/2018 are still intact which is crystal clear from the language of the Circular no. 17/2019 wherein it has been mentioned that there is enhancement of monetary limit and amendment to Circular no. 3 /2018 for reducing the litigation. We therefore are of the confirmed view that the amended Circular No. 17/2019 now issued by the CBDT is also applicable to the pending appeals as has been specified in para 13 of the original Circular no. 3/2018 dt. 11/07/2018 and that the Department ought not have filed the appeals before the ITAT where the tax effect is Rs. 50 Lacs or less. - Appeal of revenue dismissed.
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2022 (1) TMI 1321
Exemption u/s 11 - requirement of filing of audit report and income tax return by the trust or institutions registered u/s 12A - CPC while processing u/s 143(1)(a) denied the said exemption on account of two reasons; firstly the return of income was not filed before due date as prescribed u/s 139(4) of the Act and secondly audit report on Form 10B not uploaded before due date prescribed under the Act - HELD THAT:- As per Circular issued by CBDT on 23.04.2019 giving clarification with regard to time allowed for filing of return of income subsequent to insertion of clause (ba) in sub-section 1 of section 12A CBDT has issued and while dealing with this issue, the returns filed within the time allowed u/s 139 of the Act have been directed to be accepted for the purpose of considering benefit of deduction u/s 11 of the Act. Now, since only section 139 of the Act has been mentioned and does not specify whether it is about u/s 139(1) of the Act or section 139(5) of the Act, the view beneficial to the assessee needs to be accepted and, since section 139(1) and section 139(5) are part of section 139 only and in this section 139 and sub-section (5) provides the mechanism to file a belated return, therefore, for A.Y 2018-19, even if the assessee files the return before the last date of filing of belated return the same should be treated as due compliance to section 12A(1)(ba) of the Act.
For the year under appeal, the belated return could have been filed before 31.03.2019, and since the assessee has filed the return on 15.11.2018, therefore, considering the directions of CBDT Circular dated 23.04.2019, which are binding on the Revenue authorities, we are of the view that the assessee has fulfilled the conditions provided under sub-clause (ba) of section 12A(1) of the Act and has filed the return of income within the time allowed.
Filing the belated audit report on form 10B - As in the given facts and circumstances and respectfully following the judgment of Sarvodaya Charitable Trust [2021 (1) TMI 214 - GUJARAT HIGH COURT] we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos.1 to 4 of the assessee are allowed.
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2022 (1) TMI 1320
TP adjustment - assessment on account of notional interest on outstanding payments of receivables from associated enterprises (AE) - HELD THAT:- Sole adjustment proposed by the TPO is with regard to the outstanding receivables on the delayed payment beyond 15 days from its AE holding it to be in the nature of un-secured loan and thereby proposing adjustment of Rs.46,07,661/- for assessment year 2012-13, wherein the AO has taken SBI PLR rate of 12.60%; whereas in assessment year 2013-14 the Assessing Officer has made adjustmen by taking average LIBOR rate plus 400 basis point which was arrived at 4.37% treating it to be separate international transaction. Also an un-disputed fact that before the authorities below the assessee had submitted the working capital adjustment vis-à-vis the comparable companies before the TPO / AO which if factored into then no adjustment on account of receivables form AE is required. This working capital adjustment has not been accepted.
If the working capital adjustment is accepted, then the differential impact of working capital of the Assessee vis-à-vis the comparables stands already factored in the pricing/profitability, which herein this appears to have been done and it has been stated that the working capital adjusted margin of the comparables is around 4% whereas assessee’s margin is around 9% and thus, no further adjustment is required.
Before the AO the assessee has up-dated the comparable companies and has filed the working capital adjustment margin which was in response to the show cause notice. From the perusal of the working it is seen that, in assessment year 2012-13 the working capital adjusted on the comparable company was arrived at 4.50% of net profit operating margin as against the net operating margin earned by the assessee at 9.36% and in the assessment year 2013-14, the working capital adjustment of the comparable companies was arrived at 4.02%, whereas the net operating margin earned by the assessee was at 9% which is much higher than adjusted margin earned by the comparable companies. Though we find that in the assessment year 2011-12 the Tribunal has confirmed the said adjustment due to lack of any such computation filed by the assessee at any stage. However, in this year it is already part of the record.
Therefore, we direct the TPO to examine the working capital adjustment and if the working given by the assessee is found to be correct then in the light of the decision of the Hon’ble jurisdictional High Court in the case of Pr. CIT Vs. Kusum Healthcare Private Limited [2017 (4) TMI 1254 - DELHI HIGH COURT ] no adjustment should be made on the proposed notional interest on the outstanding receivables. With this direction the appeal of the assessee is treated as partly allowed for statistical purposes.
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2022 (1) TMI 1319
Judgment and order passed by the High Court - Petitioner says he has not been served a copy of affidavit in reply - HELD THAT:- Notwithstanding that considering the petition itself we are not inclined to exercise our jurisdiction under Article 226 of the Constitution of India.
Petition dismissed.
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2022 (1) TMI 1318
Completion of the assessment in the name of the deceased assessee without bringing on record his legal heirs - HELD THAT:- Scrutiny proceedings in the case of the assessee were initiated vide notice dated 01/08/2012, issued under section 143(2) of the Act. Thereafter, notice under section 142(1) of the Act was issued along with the questionnaire. In response thereto, assessee’s wife vide letter dated 26/06/2013, informed the AO that the assessee expired on 17/04/2013, due to renal failure. Assessee’s wife also expressed her inability to respond to queries and produce the documents as required vide aforesaid notice.
It is evident from the record that thereafter neither the legal heir of the assessee was brought on record nor the AO issued statutory notices on the legal heir seeking any information. The above aspect becomes more evident from the fact that the assessment was concluded ex parte under section 144 of the Act and in column 11 at page 1 of the assessment order ‘no attendance’ is mentioned against the date(s) of hearing.
AO also proceeded to pass the assessment order dated 14/03/2014, under section 144 of the Act in the name of the deceased assessee, despite being informed vide letter dated 26/06/2013, about the fact that the assessee expired on 17/04/2013. Thus, the very fact that the assessment has been concluded in the name of a deceased person renders the assessment order to be null and void - It cannot be disputed that the assessee died before the proceedings for assessment were completed. Therefore, it was incumbent u/s 159(2) of the Act on the AO to bring the legal heir of the deceased assessee on record and proceed further. Since the same was not done by the AO, therefore the assessment order is void ab initio. Accordingly, the assessment order passed in the name of the deceased assessee is set aside.
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2022 (1) TMI 1317
Assessment in the name of company non existent - scheme of amalgamation concluded - HELD THAT:- As assessment order passed by the assessing officer in the name of a non existing company, despite having prior information provided by the assessee and such facts recorded in the draft assessment order as well as the final assessment order, suffers from jurisdictional defect and, therefore, same is set aside. Accordingly, we hold that the assessment order passed by the learned assessing officer is without jurisdiction and hence, quashed.
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2022 (1) TMI 1316
Addition u/s 56(2)(viib) - difference between the FMV of shares at which shares were allotted by the assessee and FMV determined per share thereby making aggregate addition u/s 56(2)(viib) - Whether FMV of shares for the purpose of section 56(2)(viia) r.w.r. 11UA determined on the basis of ‘Balance-Sheet’ drawn on the date of allotment and audited subsequently, can be accepted? - HELD THAT:- Where the Balance Sheet is not drawn on the date of valuation, the Balance Sheet drawn on a date preceding the date of valuation which has been approved and adopted in the Annual General Meeting of the shareholders should be considered. The definition has two limbs: The first limb applies in a situation where the Balance sheet is drawn on the date of valuation and the second limb of definition applies in a situation where no Balance Sheet is drawn on the date of valuation.
In the instant case undisputedly on the date of allotment of shares i.e. 31.3.2016, a balance-sheet was drawn by the assessee albeit the said balance sheet was unaudited on that date. The FMV of the shares was determined on the basis of said balance-sheet. The said Balance-sheet was subsequently audited by the Auditors of the company and ostensibly, there was no difference in the financials of tentative balance-sheet drawn on 31.03.2016 after audit by the Auditors. Since, the balance sheet was drawn on the date of valuation the case of assessee is covered by first limb of the definition of ‘Balance Sheet’. In so far as the condition that the Balance Sheet should be audited by the Auditor of the company, the said condition is also satisfied as the Balance sheet drawn on 31.3.2016 was subsequently audited with purportedly no change in financials.
We hold that the balance sheet on the basis of which FMV of shares allotted on 31.3.2016 was determined by the assessee falls within the meaning of ‘Balance Sheet’ as envisaged under Rule 11U. Hence, we find no error in the FMV of shares determined by the assessee on the basis of balance sheet drawn on 31.3.2016 - Appeal of the assessee is allowed.
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2022 (1) TMI 1315
Reopening of assessment u/s 147 - Scope of section u/s 148A - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia w.e.f. 1.4.2021 - identity of Section 148 as prevailing prior to amendment and insertion of section 148A - Covid 19 Effect - Validity of re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Scope of Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 - HELD THAT:- In view of the ratio propounded in cases MON MOHAN KOHLI VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ANR. [2021 (12) TMI 664 - DELHI HIGH COURT] 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 nonobstante clause in Section 3(1) of the Relaxation Act, ‘legal fiction’ and ‘stop the clock provision’ are contrary to facts and untenable in law.
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.”
Keeping in view the aforesaid, 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.
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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2022 (1) TMI 1314
TDS u/s 195 - amount paid towards refurbishment / reconstruction charges - non-deduction of TDS - addition u/s 40(a)(i) - As argued amount paid towards refurbishment / reconstruction is not in the nature of fee for technical services covered u/s.9(1)(vii) of the Act as refurbishment activity is in the nature of reconstruction / repair and accordingly no TDS is deductible on this expenditure - HELD THAT:- As evident that the assessee company is in the business of generation and sale of electricity. The assessee owns and operates a 330.5MW combined cycle power plant. To run this cycle power plant, the necessary machinery like gas turbine including spare parts viz., HGPS consisting of Combustor Baskets, Transition pieces, Fuel Nozzles, Turbine Static Blades and Turbine Moving Blades with each component having a pre- defined standard life based on Equivalent Operating Hours (EOH) is purchased.
The process as explained above including the details of machinery, there is service agreement for refurbishment / repair of these machines entered with Marubeni Corporation, Japan. This refurbishment from the above facts is clear that is only repairs and services of machinery.
Thus where discussion of AR as well as ld.senior DR, we are of the belief that payments for repairs are outside the scope of FTS and such payment do not constitute FTS u/s.9(1)(vii) of the Act. These are simple refurbishment or repairs and payment made for these do not attract TDS provision u/s.195 of the Act. Accordingly, we are of the view that this issue stands covered in favour of the assessee. Hence, the CIT(A) has rightly deleted the addition and we confirm the same. Therefore, the Revenue’s appeal is dismissed.
Disallowing deduction u/s.80IA in respect of interest on bank deposits - interest on TRA deposits placed with the bank, as the same was a requirement of the financing document - HELD THAT:- We find that this issue is squarely covered by the Tribunal’s order in assessee’s own case for earlier assessment years 2006-07 to 2008-09 [2015 (5) TMI 1244 - ITAT CHENNAI] Therefore, taking a consistent view, we confirm the order of lower authorities and dismiss the cross objection filed by the assessee.
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2022 (1) TMI 1310
Revision u/s 263 - Owing to non-addition of the amount adjusted by the TPO in his order passed u/s 92CA by the Assessing Officer PCIT passed order u/s 263 - HELD THAT:- The reference to the TPO to determine the Arm’s Length Price is not an empty exercise to be undertaken by the revenue but to bring to tax the difference determined by the TPO with regard to the Arm’s Length Price. While the TPO order passed u/s 92CA determine upward adjustment we find that the AO has erred in holding that the adjustment by the TPO in respect of international taxation with the AE is Nil.
Thus, the order passed by AO is erroneous insofar as it is prejudicial to the interest of revenue. Hence, the ld. PCIT in accordance with the provisions of the Act has given an opportunity of being heard to the assessee, determined the amount of the adjustment made by the TPO that was not brought to tax and set aside the order of the AO directing him to rectify the order to the extent of the adjustment made by the TPO. Since, the order of the PCIT has been rightly based on the order of the TPO which has been ignored by the Assessing Officer, we hold that the order of the AO is erroneous and prejudicial to the interest of the revenue and hence decline to interfere with the order of the ld. PCIT. Appeal of the assessee is dismissed.
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2022 (1) TMI 1309
Reopening of assessment u/s 147 - deduction u/s 80P - Assessement reopened within a period of 4 years - scope of change of opinion - HELD THAT:- It is true that the AO has drawn inference from the examination of the record that the original order of assessment is erroneous which has probably resulted due to the failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment. We have consciously applied our mind to the relevant facts and material available. We find that it is true that the once assessment made on material available or existing at the relevant point of time while making assessment and again on same material, if different or divergent view is sought, it would tantamount to “change of opinion’’, but at the same time even in the case of existing material, if no conscious attempt has been made by the AO, it would at the most tantamount to mistake in not considering the relevant point or proposition and it would not certainly not fall in category of “change of opinion”.
On bare appreciation of the audit report, one cannot overlook sight of the fact that the assessee has very conveniently mentioned under the head of deduction by referring to Section 80P and the reply which was submitted on record at the stage of scrutiny assessment. At first instance, it gives an impression that the writ applicant assessee has derived interest from it’s own members. This Court finds that the writ applicant had failed to disclose ‘fully and truly’ all material facts necessary for assessment, more particularly, to examine the nature of transaction vis-a-vis the deduction under Section 80P (a)(i) and Section 80P(2)(d). The Court further finds that in fact it was the duty of the assessee to make fully and truly material disclosure at the time of assessment.
Mere production of the audit report without further reference of the interest derived from other than Cooperative Societies would not fall in the category of material evidence which the Assessing Officer with due diligence could have discovered and therefore, the Assessing Officer has rightly invoked proviso to Section 147 of the Act having satisfied for formation of belief which has bearing on the question of escape of income of the assessee from the assessment because of his failure or omission to disclose fully and truly all material facts.
In the given case, the assessment has been reopened within a period of 4 years and therefore, the proviso to Section 147 has no application. This Court finds that the reasons recorded by the Assessing Officer which led to the formation of the belief contemplated by the proviso to Section 147 of the Act has material bearing on the question of escapement of income of the assessee from the assessment because of failure of the assessee or omission to disclose the fully and truly all material facts. We are of the view that though the material was available on record, at the time of first assessment, when no conscious consideration of the material is made and a mistake has been committed, it would not, in any case create an embargo on the power of the Assessing Officer to exercise powers under amended section 147 of the Income Tax act, 1961, as there could not be “change of opinion”, in the factual scenario. The only requirement is to see that the escapement of income which the Court finds in the given case and therefore, we hold that the notice issued under Section 148 is a valid notice. - Decided against assessee.
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2022 (1) TMI 1306
TP Adjustment - downward adjustment to the value of international Transaction of Finance & General administration related service charges - Reference to threshold of business needs / requirements of the assessee - HELD THAT:- Assessee has availed bundle of services from its AE and made payment pursuant to the terms of the agreement. These payments are recurring in nature and are determined by applying specific allocation keys.
TPO, while accepting that all the other services benefitted the assessee, termed the services of finance / general management to be in the nature of stewardship services and alleged that the assessee did not submit any evidence of the receipt of services disregarding the fact that these services were emanating from the same agreement.
The rendering of services was duly evidenced by the agreement as well as debit notes issued against the assessee. The copies of email / correspondences to support the receipt of services were duly furnished (43 to 88 of paperbook). Another observation of TPO is that the assessee may not be requiring these services in the normal course of business. The same, in our opinion, is not correct approach since the role of Ld. TPO was limited to determine the ALP of the transactions and not to adjudge the same at the threshold of business needs / requirements of the assessee.
TPO observed that the transaction was to be benchmarked applying CUP method, however, no effort has been made to determine the ALP of the transaction using CUP method. Simply determining the ALP to be nil on the basis that the services were not required to be availed and not determining ALP without applying any of the prescribed method is not in accordance with statutory mandate.
TP provisions mandate application of any of the prescribed method to arrive at Arm’s Length Price of the international transactions.
See case Flakt (India) Ltd. [2016 (6) TMI 557 - ITAT CHENNAI] wherein it was held that in the absence of any comparison of the transaction with transaction carried out in uncontrolled market, Ld. TPO could not independently come to conclusion that volume and quality of services was disproportionate to the payment made by the assessee. The estimation of the services rendered and costs of such service was outside the scope of transfer pricing adjustment.
CIT-DR has referred to the decision Bombardier Transportation India Pvt. Ltd. [2015 (11) TMI 1527 - ITAT DELHI] which is factually distinguishable since in that case the assessee could not file sufficient documentary evidences and the adjustment was partially confirmed.
Lastly, it is an uncontroverted fact that the assessee has paid for these services in earlier years also which has been accepted by the revenue and this is the first year in which such an adjustment has been proposed. Therefore, the value of impugned transactions, in our considered opinion, could not be taken to be nil in this year.
We would hold that the TP adjustment as made by Ld. AO in the final assessment order could not be upheld in the eyes of law. By deleting the same, we allow the appeal.
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2022 (1) TMI 1304
TP Adjustment - segment reporting in the financial of the taxpayer that established its action of distributing of revenue between foreign AE and non-AE as genuine allocation - HELD THAT:- The assessee has enclosed the export segment results, indicating that the assessee has made operating prof it in its export sales. A duly certified segment accounts by a Chartered Accountant is enclosed as an annexure to this submission, which proves that the assessee has earned margin of 0.74% on overall export sales to AE segment as against the margin of 0.39% on export sales to non-AE segment.
CIT(A), in view of the above submission, relying on the judgment in the case of Birla Soft India Ltd. [2013 (11) TMI 417 - ITAT DELHI] as directed the TPO/AO to determine the ALP of the international transactions with the AE by making internal comparison of the net margins earned by the appellant from international transaction with AE and margin earned by the AE from international transactions with unrelated parties. AO/TPO was further directed to calculate the costs of the segments on the basis of the certificate of the CA which has not been objected by the TPO on the remand report. Appeal of the revenue is dismissed.
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2022 (1) TMI 1301
TP Adjustment - Comparability - exclusion of one comparable entity i.e., M/s Cosmic Global Limited from final set of comparable entities as adopted by Transfer Pricing Officer (TPO) - HELD THAT:- Upon perusal of Tribunal’s order in assessee’s own case for AY 2010-11 [2018 (4) TMI 1934 - ITAT CHENNAI] we find that the assessee sought exclusion of this entity and the matter was remitted back to the file of Ld. TPO/ AO for fresh examination.
Pursuant to this order, TPO has passed an order on 25.10.2019 wherein this entity has been excluded. Therefore, finding strength in the argument of Ld. AR, we remit the matter back to the file of Ld. TPO / AO on similar lines as done by co-ordinate bench in AY 2010-11 for the limited purpose of examining assessee’s claim for exclusion of M/s Cosmic Global Ltd. The grounds raised thus stand partly allowed for statistical purposes.
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2022 (1) TMI 1297
Revision u/s 263 by CIT - PCIT has called for proposal from the JCIT/Assessing Officer to exercise jurisdiction under Section 263 - HELD THAT:- After noting the said decision the Tribunal points out that the appellant department has not controverted the contents of the letter of the Joint Commissioner of Income Tax dated 18th August, 2016 and has recorded that the said letter clearly brings out that the PCIT has called for proposal from the JCIT/AO to exercise jurisdiction u/s 263 - Therefore, Tribunal concluded that the PCIT has not exercised jurisdiction u/s 263 of the Act himself, but he exercised jurisdiction at the instance of the Assessing Officer/JCIT, which is against the provisions of law.
The argument made by the learned Standing Counsel is that it is the PCIT who has exercised jurisdiction under Section 263 of the Act. From the order passed by the Tribunal we find that the department could not controvert the contents of the letter dated 18th August, 2016. If, according to the department, the contents of the letter were otherwise, then it is for the department to approach the Tribunal for necessary rectification or clarification and the correctness of the order of the Tribunal cannot be decided by us in an appeal under Section 260A of the Act by bringing certain submissions which were never made before the Tribunal. Therefore, we are not inclined to interfere with the order passed by the Tribunal and accordingly, the appeal is dismissed. However, we leave it open to the appellant/department to approach the Tribunal for clarification or rectification of the order, if they are so advised.
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