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Income Tax - Case Laws
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2022 (1) TMI 1238
Attachment of the land in question -Tax recovery proceedings - title and the ownership of the Non- Agricultural parcel of land situated at Bodakdev, bearing Survey No.177/2 admeasuring 4047 Sq. Mtrs. - HELD THAT:- Let Notice be issued to the respondents returnable on 15.02.2022. Direct service is permitted.
On the returnable date, notify this matter on top of the Board as the controversy involved appears to be in a narrow compass.
We want the respondents Nos.4 and 5 respectively to clarify as regards the title and the ownership of the Non-Agricultural parcel of land situated at Bodakdev, bearing Survey No.177/2 admeasuring 4047 Sq. Mtrs. We would like to understand from the respondents Nos.4 and 5 respectively as to on what basis, the Income Tax Department asserts that the said parcel of land is owned by one Vikas Arvindbhai Shah. We have no idea who is this Vikas Arvindbhai Shah. We would also like to know from the Tax Recovery Officer, Central, Ahmedabad, as to why he has not looked into the various representations filed by the writ applicants so far.
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2022 (1) TMI 1234
Validity of Reopening of assessment u/s 147 - DR submits that the AO while recording the reasons for re-opening the assessment has relied upon two judgments one of Delhi High Court and other of Ahmedabad ITAT and therefore, the Assessing Officer's satisfaction that there has been escapement from assessment cannot be faulted - HELD THAT:- We have to note at the outset that the ITAT order is not binding on this court. Secondly, the judgment/order of the Delhi High Court relied upon for the reasons for re-opening has been reported [2012 (11) TMI 323 - DELHI HIGH COURT]. Therefore, it is a judgment of 2013 or earlier. The assessment order in this case has been passed on 15th December, 2018 and the query on this issue has been raised on 8th October, 2018 and replied by petitioner vide its letter dated 12th November, 2018. Therefore, the Assessing Officer had benefit of the judgment of the Delhi High Court relied upon by the Assessing Officer wanting to re-open the assessment but still did not find anything wrong in the case made out by petitioner and proceeded to pass the assessment order.
In the circumstances, it is quite clear that it is nothing but change of opinion on the part of the Assessing Officer wanting to re-open the assessment. The re-opening of assessment based on change of opinion goes to the root of the matter and as held repeatedly by various courts, is not permissible.
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2022 (1) TMI 1232
Validity of Reopening of assessment u/s 147 - change of opinion - HELD THAT:- The issue raised is regarding the finished stocks which was for unsold flats of two projects at Kandivali and Bandra and according to respondents, petitioner's has not offered tax under the head income from house property. Dr. Shivram states that the same issue was raised during the assessment proceedings as could be seen from Item No.16 in the annexure to notice dated 8th October, 2018, issued under Section 142(1) of the Act and petitioner has replied to, the same vide petitioner's letter dated 8th November, 2021. Dr. Shivram states that this issue has not been discussed in the assessment order but still relying on Aaroni Commercials Ltd. 2014 (2) TMI 659 - BOMBAY HIGH COURT submitted that once a query has been raised and it has been replied to, the Assessing Officer is deemed to have applied his mind and considered the same even if that issue has not been discussed in the assessment order.
Mr. Suresh Kumar requests the matter be taken up after a week so that he can take instructions in the meanwhile.
Stand over to 24th January, 2022.
Respondents in the meanwhile shall not take any further steps pursuant to the order passed on 10th December, 2021, rejecting petitioner's objection.
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2022 (1) TMI 1230
Reopening of assessment u/s 147 - respondent has passed the impugned order disposing/over ruling the objection of the petitioner against reopening of the Assessment under Section 148 - HELD THAT:- In this case, the assessment was made pursuant to returns filed under Section 139 of the IT Act. The scrutiny assessment passed under Section 143 (3) of the Income Tax Act was based on the information in the returns. Whether there was a suppression of facts or not may be decided in the proceedings under Section 148 - The impugned order has merely justified the reasons for reopening of the assessment. It cannot be said that the respondent has come to a definite conclusion as to whether indeed the case made out for recomputing the income based on the reasons given and the observations in the impugned order.
It is still open for the petitioner to give a proper explanation/reason as to why the assumption of Jurisdiction under Section 148 of the IT Act was erroneous both on the facts and on the law.
We are not inclined to interfere with the impugned order over ruling the objection of the petitioner. Liberty is however given to the petitioner to participate in the proceedings before the respondent by filing suitable reply for the respondent to pass appropriate reassessment order in accordance with law and on merits.
It is made clear that the observation in the impugned order is only for disposing the objection of the petitioner against reopening the completed assessment. Ultimately, the issue will have to be decided on merits. It is for the petitioner to file appropriate reply/representation explaining the reason as to why the completed under Section 143(3) of the IT Act on 07.10.2016 deserves to be reconfirmed.
Writ Petition filed by the petitioner is disposed. The respondent is directed to complete the proceedings within a period of three months from the date of receipt of a copy of this order.
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2022 (1) TMI 1228
Reopening of assessment u/s 147 - non application of mind by the officer who passed the order on objections - HELD THAT:- We have satisfied that petitioner’s grievance that there has been non application of mind by the officer who passed the order on objections, cannot be faulted. The order dated 12th August 2021 disposing of petitioner’s objections against issue of notice u/s 148 for A.Y. 2017-2018, is set aside.
The matter is remanded to respondent no.1, who shall once again consider the submissions made by petitioner and grant personal hearing to petitioner before passing the order on objections. The notice regarding the date and time of personal hearing shall be given atleast 7 days in advance. The objections to re-opening shall be disposed of by the concerned officer within 4 weeks of this order being uploaded.
The assessment proceedings may thereafter be continued and disposed in a further period of 8 weeks from the date of order on objections is passed.
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2022 (1) TMI 1227
Reopening of assessment u/s 147 - Eligibility of issuance of approval - HELD THAT:- Since it is the issue of revenue of the State (the question of income alleged to have escaped assessment), we direct the then DCIT, CC-6(2), Mumbai Mr. Trilochan Singh Khalsa, Mr. Ashok Pophare Additional CIT, CR-6, Mumbai and Ms. Irina Garg, Principal CIT, Central-3, Mumbai who are the officers who have signed on the Form for re-opening under Section 151 of the Act, to explain the basis on which re-opening was approved when the form had errors. If these three officers or any of them is not in service, such person need not file the affidavit but the others in that case will mention when this person retired in their respective affidavit.
The affidavits in compliance with the order dated 21st December, 2021, to be filed within three weeks from today.
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2022 (1) TMI 1226
Rectification of mistake u/s 154 - HELD THAT:- Disallowance towards warrant issue expenses claimed u/s. 35D of the Act and as a matter of fact Ground No.5 of the grounds of appeal of the assessee for the A.Y. 2013-14 relates to interest income, whether should be taxed under the head “income from other sources” or as “business income” was the issue and the Tribunal inadvertently did not adjudicate upon this issue. Therefore, the assessee in its petition prays that the Tribunal may recall its order for the A.Y.2013-14 to rectify the typographical error crept in the order of the Tribunal and to dispose off ground No.5 of ground of appeal.
On hearing the rival contentions and perusing the order of the Tribunal, we noticed that there are certain typographical errors crept in the order of the Tribunal especially in Para Nos. 118 and 119 at Page No.75. Thus the same are rectified hereunder.
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2022 (1) TMI 1225
Rectification of mistake u/s 154 - recalling the order of the Tribunal to dispose off additional grounds of appeal of the assessee for the A.Y.2009-10 - HELD THAT:- Tribunal inadvertently omitted to dispose off the additional grounds of appeal in assessee’s appeal.
It is observed from the order of the Tribunal that there is a mistake apparent on record in not disposing off the above additional grounds of appeal of the assessee - To rectify the mistake apparent on record, we recall the appeal of the assessee in [2020 (11) TMI 809 - ITAT MUMBAI] for the limited purpose of disposing off the above additional grounds of appeal of the assessee for the A.Y. 2009-10.
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2022 (1) TMI 1223
Reopening of assessment u/s 147 - rejection of objections filed by petitioner for re-opening under Section 148 - HELD THAT:- We are not inclined to entertain these petitions. At the same time, the AO who will be different from the officer who had pass the order dated 10th October, 2019 rejecting the objections filed by petitioner for re-opening under Section 148 shall permit petitioner to file further documents and case laws if adviced and also grant a personal hearing before passing the assessment order. The assessment order to be passed within 12 weeks from the date this order is uploaded. Petitioner shall be given atleast seven days advance notice about the date and time of the personal hearing.
AO shall deal with all the submissions made by petitioner including those raised in his objections to the re-opening and pass detailed order in accordance with law.
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2022 (1) TMI 1222
Reopening of assessment u/s 147 - Rejection of objections filed by petitioner for re-opening under Section 148 - HELD THAT:- AO who will be different from the officer who had pass the order rejecting the objections filed by petitioner for re-opening under Section 148 shall permit petitioner to file further documents and case laws if advised and also grant a personal hearing before passing the assessment order. The assessment order to be passed within 12 weeks from the date this order is uploaded. Petitioner shall be given atleast seven days advance notice about the date and time of the personal hearing.
Assessing Officer shall deal with all the submissions made by petitioner including those raised in his objections to the re-opening and pass detailed order in accordance with law.
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2022 (1) TMI 1221
Depreciation on goodwill - HELD THAT:- As decided in assessee's own case [2019 (12) TMI 370 - ITAT DELHI] the arguments of the DRP on different facets of goodwill acquired in business reconsideration and held that the assessee to be entitled to claim depreciation on goodwill, as per the rates applicable for the year under consideration. Following same parity of reasoning, we allow the claim of the assessee of depreciation on goodwill.
Deduction incurred on account of reimbursement paid to the parent company towards ESOP for granting stock options to the employee of the assessee - HELD THAT:- As relying on assessee own case [2019 (12) TMI 370 - ITAT DELHI] we direct the Assessing officer to delete the impugned disallowance of ESOP.
Non granting deduction of profit on sale of assets - HELD THAT:- We have given a thoughtful consideration to the issue at hand and we remit this issue back to the file of the Assessing officer for rectifying the computation of income after verification of the claim of the assessee.
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2022 (1) TMI 1220
Disallowance of bad debts u/s 36(1)(vii) - assessee had debited the rural bad debts against the Provision for Bad and Doubtful Debts (PBDD) allowed u/s 36(1)(viia) - HELD THAT:- When the proviso to section 36(1)(vii) applies to bad debts written off relating to rural advances, the same cannot be applied for disallowing deduction claimed on account of write off of bad and doubtful debts relating to non-rural/ urban advances. As far as application of explanation to section 36(1)(vii) is concerned, we agree with the AR that its operation will be prospective and will not apply to the impugned AY.
As careful reading of explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount representing actual write off in the books of account of bad debts relating to non-rural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A).
Applicability of sec.115JB - HELD THAT:- Following the decision rendered by the co-ordinate bench of this Tribunal in the case of M/s Canara Bank [2022 (1) TMI 124 - ITAT BANGALORE] we set aside the order passed by the Ld. CIT(A) on this issue and restore the same to his file for deciding it afresh in accordance with law.
Addition made to book profit as per sec. 115JB - whether amount debited to Profit and Loss account under the head “Provision for funded interest term loan” and “Provision for others” are liable to be added to net profit u/s 115JB - Since the issue regarding applicability or otherwise of sec.115JB is restored to the file of Ld CIT(A), this issue is also restored to the file of Ld CIT(A) for examining it afresh.
Addition u/s 14A r.w.r. 8D - HELD THAT:- As held in the case of Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI] that only those investments, which has yielded dividend income should be considered for computing average value of investments. Before us, the Ld A.R also relied on certain decisions in order to contend that the provisions of sec.14A itself are not applicable to banks. Thus, we notice that various contentions are involved in this issue and hence we are of the view that this issue requires fresh examination at the end of AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh.
TDS u/s 194H - disallowance made u/s 40a(ia) - HELD THAT:- This Tribunal in the assessee bank’s own case [2015 (3) TMI 1360 - ITAT BANGALORE], wherein the disallowance was deleted by this Tribunal by holding that the payment made by the assessee company could not be considered as commission/brokerage liable for deduction of tax at source u/s 194H. CIT(A) has decided an identical issue in assessment year 2012-13 in the assessee bank’s own case itself in favour of the assessee bank and it was also upheld by this Tribunal. Accordingly, the Ld CIT(A) deleted the above said disallowance.
Disallowance of claim made u/s 36(1)(viia) - HELD THAT:- We notice that the Ld CIT(A) has rendered his decision on this issue following the decision rendered by co-ordinate bench of ITAT on an identical issue. Accordingly, we do not find any reason to interfere with the decision rendered by Ld CIT(A) on this issue.
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2022 (1) TMI 1212
Reopening of assessment u/s 147 - Scope of Section 148A as newly inserted - Comparison between old and new provisions for reassessment - Individual identity of Section 148 as prevailing prior to amendment - 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 - Whether after introduction of new provisions for reassessment of income by virtue of the Finance Act, 2021 with effect from 01.04.2021, substituting the then existing provisions, would the substituted provisions survive and could be used for issuing notices for reassessment for the past period? - HELD THAT:- As the first proviso to Section 149(1) provides that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. As per this proviso thus no notice under Section 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 would be in terms of the substituted Section 149(1) but without breaching the upper time limit provided in the original Section 149(1) which stood substituted.
This aspect has also been highlighted in the memorandum explaining the proposed provisions in the Finance Bill. If according to the revenue for past period provisions of section 149 before amendment were applicable, this first proviso to section 149(1) was wholly unnecessary. Looked from both angles, namely, no indication of surviving the past provisions after the substitution and in fact an active indication to the contrary, inescapable conclusion that we must arrive at is that for any action of issuance of notice under Section 148 after 01.04.2021 the newly introduced provisions under the Finance Act, 2021 would apply. Mere extension of time limits for issuing notice under section 148 would not change this position that obtains in law.
Under no circumstances the extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue, can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per the then prevailing provisions, would not be revived by virtue of the application of Section 149(1)(b) effective from 01.04.2021. All the notices issued in the present cases are after 01.04.2021 and have been issued without following the procedure contained in Section 148A of the Act and are therefore invalid.
Whether the explanations contained in the CBDT circulars dated 31.03.2021 and 27.04.2021 are legal and valid? - Subordinate legislation does not enjoy same level of immunity as the law framed by the Parliament or the State Legislature. The law framed by the Parliament or the State Legislature can be challenged only on the grounds of being beyond the legislative competence or being contrary to the fundamental rights or any other constitutional provisions. Third ground of challenge which is now recognized in the judgment in case of Shayara Bano Vs Union of India [2017 (9) TMI 1302 - SUPREME COURT] is of legislation being manifestly arbitrary. A subordinate legislation can be challenged on all these grounds as well as on the grounds that it does not conform to the statute under which it is made or that it is inconsistent with the provisions of the Act or it is contrary to some of the statutes applicable on the subject matter.
As under sub-section (1) of Section 3 of the Relaxation Act, 2020 while extending the time limits for taking action and making compliances in the specified Acts upto 31.12.2020 the power was given to the Central Government to extend the time further by issuing a notification. This was the only power vested in the Central Government. As a piece of delegated legislation the notifications issued in exercise of such powers, had to be within the confines of such powers. In plain terms under sub-section (1) of Section 3 of the Relaxation Act, 2020 the Government of India was authorized to extend the time limits by issuing notifications in this regard. Issuing any explanation touching the provisions of the Income Tax Act was not part of this delegation at all. The CBDT while issuing the notifications dated 31.03.2021 and 27.04.2021 when introduced an explanation which provided by way of clarification that for the purposes of issuance of notice under Section 148 as per the time limits specified in Section 149 or 151, the provisions as they stood as on 31.03.2021 before commencement of the Finance Act, 2021 shall apply, plainly exceeded its jurisdiction as a subordinate legislation. The subordinate legislation could not have travelled beyond the powers vested in the Government of India by the parent Act. Even otherwise it is extremely doubtful whether the explanation in the guise of clarification can change the very basis of the statutory provisions. If the plain meaning of the statutory provision and its interpretation is clear, by adopting a position different in an explanation and describing it to be clarificatory, the subordinate legislature cannot be permitted to amend the provisions of the parent Act. Accordingly, these explanations are unconstitutional and declared as invalid.
We are unable to persuade ourselves to accept this analysis of the situation. In our understanding by virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act, 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021.
In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed.
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2022 (1) TMI 1211
Addition of investments not disclosed in the books of accounts as required under section 69B - addition based on the statement recorded in the course of survey operation under section 133A at the premises of the third party - HELD THAT:- The impugned amount was offered to tax before the settlement commission which was accepted therein. In this regard, we note that the proceedings before the settlement commission were of M/s Phulchan Exports Pvt. Ltd. and M/s Advance Lifestyle Ltd and the assessee was not connected with such proceedings. Thus the decision of the Hon’ble Settlement Commission in the case of a third party cannot bind the assessee - See VINEETA GUPTA AND ANOTHER [2014 (5) TMI 543 - DELHI HIGH COURT]
In the present case, admittedly, the assessee acquired the shares of M/s Advance Life Space Pvt. Ltd from M/s Advance Lifestyle Ltd for certain value. Once the transaction on hand was not connected to M/s Phulchand Export Pvt. Ltd, then there was no reason for it (M/s Phulchand Export Pvt. Ltd.) to offer the income for the same transaction before the settlement commission for the transactions in which it was not party. Thus a doubt arises why Phulchand Export Pvt. Ltd has made a disclosure before the settlement commission in the transaction in which it was not the party even if it was the majority shareholder in the advance lifestyle Ltd. Therefore, we are not convinced with the finding of the AO.
There were certain loose papers/diary found during the survey operation containing certain date wise amount. On confrontation, one Shri Pradeep Aggarwal son of Shri Phulchand Aggarwal who was neither director in M/s Phulchand Export Pvt. Ltd or in M/s Advance Lifestyle Ltd stated that noting represent cash received from the assessee on hand against sale of the property at New Manik Mills. However, the name of the assessee, signature and address of the assessee was not appearing therein i.e. on the seized documents. Accordingly, we are of the view that such documents in the absence of other corroborative materials cannot substitute the evidence.
Hon’ble Supreme Court in case of Common Cause (A registered society) vs. Union of India[ 2017 (1) TMI 1164 - SUPREME COURT] held that noting on loose sheet/diary does carry any evidentiary value under the provision of section 34 of the Evidence Act - Also find that Hon’ble Supreme Court in CBI vs. V.C. Shukla [1998 (3) TMI 675 - SUPREME COURT] held that entry can be made by any person against the name of any other person in any sheet, paper or computer, but the same cannot be the basis of making charges against the person whose name noted on sheet without corroborating the same. - Decided against revenue.
Addition u/s 68 - unexplained cash credit - assessee has not filed any confirmation, addresses, PAN of the debtors except a list containing the name of the debtors/members - HELD THAT:- Assessee has also furnished the booking receipts and service tax paid on such booking advance. It is also not out of place to mention that in majority of the cases the PAN of the sundry debtors representing the advance booking were available on record. As far as the details as discussed aforesaid, there is no dispute. DR at the time of hearing has also not brought anything on record contrary to the impugned details placed in the paper book. Thus, it appears that the assessee has discharged its primary onus imposed under section 68 of the Act. Thus the onus has been shifted upon the revenue to disprove the contention of the assessee and that too based on the cogent materials. It is also pertinent to note that the AO has not carried out any exercise by resorting to the provisions of section 133(6) and 131 of the Act in order to dig out the truth from the submissions filed by the assessee. As such, all the details furnished by the assessee cannot be brushed aside without assigning any reason. Accordingly, the provisions of section 68 of the Act cannot be invoked in the given facts and circumstances - Decided in favour of assessee.
Addition consequent to survey proceedings - loose sheets found - Addition to sum as admitted by the assessee during survey - HELD THAT:- We are of the view that there cannot be any addition merely on the basis of loose papers found during the survey operation until and unless there were some corroborating evidences found.
The revenue is authorized record the statement under section 133A(3)(iii) of the Act during the survey operation. There is no provision for recording the statement under section 131(1) in survey operation except the circumstances provided under subsection 6 to the section 133A of the Act - revenue can resort to the provisions of section 131 of the Act if the assessee doesn’t co-operate during the survey proceedings or tries to evade the relevant formations. However in the case on hand, we note that there is no such allegation that the assessee was not cooperating during the assessment proceedings. Thus we hold that the revenue has acted beyond the jurisdiction by recording the statement under section 131 of the Act. Accordingly, no reference can be made to such statements.
There was a loose paper containing the figure of construction cost which the assessee had made for the purpose of the bank loan. Such information was improperly written on a piece of paper which is nothing but a dumb documents. Therefore, it cannot be said that such information was furnished to the bank - we disagree with the order of the authorities below. Accordingly we set aside the finding of the Ld. CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed whereas the ground of appeal of the Revenue is dismissed.
Income recognition - sales valuation - assessee has shown revenue in the financial statements based on percentage completion method - HELD THAT:- There is no reference to be made to the value of the sales - under percentage completion method, income of the assessee is computed based on cost incurred to date in proportionate with total estimated cost and total estimated revenue. This method of recognizing the profit is very well accepted by the industries engaged in the business of construction of the projects. There was no defect pointed out by the AO in the method adopted by the assessee.
The assessee has shown revenue in the financial statements based on percentage completion method despite the fact that there was no actual sales made by the assessee in the year under consideration. The question of making the sale arises when the project/the property is handed over to the prospective buyer and the conveyance deed is registered in favour of the party. But no such conveyance deed has been registered in the year under consideration. This fact was brought to the notice of the AO in response to the notice issued under section 142(1)
There is no whisper about the sales of the area as alleged by the AO. At the time of hearing, the learned DR has also not brought anything in support of the order of the AO. Accordingly we are not convinced with the finding of the AO. In view of the above and after considering the facts in totality, we set aside the finding of the authorities below and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
Addition of expenses incurred for getting the property vacated from the occupants/shopkeepers - AO was not satisfied with the contention of the assessee on the reasoning that as per the agreement between the assessee and the vendor, it was the duty of the vendor to incur such expenses, as proposed by the AO that the assessee has not incurred such expenses in the course of the business - HELD THAT:- From the above discussion, it also appears that the assessee was not under the obligation to incur such expenses. As such it was the duty of the other party to handover the land to the assessee free from all encumbrances. We note that the other party failed to do so. Under the situation the assessee has to incur the expenses which was supposed to be borne by the other party. Provisions of section 37 Act deals for the admissibility of the expenses which have been incurred for the purpose of the business. The expenses which are personal and capital in nature, and not incurred for the purpose of the business cannot be allowed as deduction under section 37 the Act.
In such facts and circumstances, the assessee at the best of his wisdom has decided to incur the expenses which are purely for the purpose of commercial expediency.
We are inclined to hold that the expenses incurred by the assessee are in course of the business and therefore the same are eligible for deduction under section 37 of the Act. Hence, we set aside the finding of the learned CIT-A, and direct the AO to delete the addition made by him. Hence the ground of appeal raised by the assessee is allowed.
Addition u/s 68 of the Act on account of low creditworthiness of the loan 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 learned CIT-A has not doubted on the identity and genuineness of transaction but doubted the credit worthiness of the all parties. Hence the learned CIT(A) sustained the addition made by the AO by holding that the assessee has not discharged the primary onus cast under section 68 .
Now coming to the third condition, i.e. creditworthiness of the parties, regarding this we note that the assessee has submitted that the fund was received through the through banking channel from all the parties. In support, the assessee has submitted their bank accounts, copy of retunred and annual accounts.
Once the assessee has filed primary details evidecing the identity of the party, genuineness of transaction and credit worthiness of the party, the authorities should have made enquiry from the parties who have advanced the loan to find out the sources of funds in their respective hands. As such, the assessee has explained the sources of fund in its hands by producing the identity and bank statement demonstrating that the funds were received through banking channel, which means that at the time of advancing the the laon there was suffient amount in their banks accounts. If the revenue authorities have doubt with respect to the capacity of lender then it should have carried out necessary investigation as provided under the provision of the Act. The assessee on hand is only libale to explain the sources of credit in its hand only but not labile to explain the sources of source. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 - Decided in favour of assessee.
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2022 (1) TMI 1210
Validity of Reopening of assessment u/s 147 - jurisdictional notice u/s. 148 as issued to a dead person - addition of Long Term Capital Gain [LTCG] in as much as the fair market value as on 01-04-1981 should have been adopted as per Registered Valuer Report - HELD THAT:- In the present case the defect in not confined to notice not being issued in the name of the legal heirs only but has also not been served or received by them. The legal heirs are in fact not even aware of the proceedings being undertaken on them. The question of waiver of notice u/s 148 therefore cannot arise where the person concerned has no knowledge of the proceeding initiated. Being a jurisdictional notice, these defects cannot be termed as mere irregularities which can be cured by participation of the assesses/legal heirs,.
The Hon’ble jurisdictional High Court in the case of P.V Doshi vs Commissioner of Income Tax [1977 (8) TMI 29 - GUJARAT HIGH COURT] has held that provisions conferring jurisdiction cannot be conferred on the authority by mere consent.
The jurisdictional notice u/s 148 of the Act having been issued to a dead assessee and the defect therein being not curable by waiver or consent of the legal heirs, the said notice is an invalid notice and the proceedings conducted in pursuance thereof are not sustainable in the eyes of law. The assessment order passed therefore, we hold, is null and void and thus set aside. - Decided in favour of assessee.
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2022 (1) TMI 1209
Addition u/s 68 - unexplained Cash Credit - CIT- A deleted the addition - HELD THAT:- With respect to the identity of the party, we find that the AO in his order has given categorical finding that the assessee has furnished the details such as copy of ledger account, bank statements, income tax return, balance sheet etc. It is also pertinent to note that based on such information notice under Section 133(6) of the Act was issued to the above parties which was duly responded by them. From the above, there remains no doubt that the identity of the loan parties is not in disputed, as it has been proved beyond doubt.
With respect to the genuineness of transaction, we note that the assessee has submitted that all the transaction are carried out through banking channel and in support has furnished the copy of bank statement showing the transaction and the same were transferred out of fund received by those company as share capital. However, it is important to highlight that in the assessment of the loan parties, genuineness of the fund received by them were not established. As such these companies were acting as a conduit to convert the unaccounted money into accounting form. In the given facts and circumstances the genuineness of the transactions is not free from doubts.
Once the genuineness of the transaction is not free from doubt, it is implied that the creditworthiness of the parties was not satisfactory so as to advance the loan to the assessee.
The undisputed fact that the amount of loan received by the assessee was refunded to the loan parties. It implies that the assessee was not the beneficiary of the loan received by it as alleged by the AO. Though the loan has been repaid by the assessee in the subsequent year, but it is difficult to hold that the assessee was the ultimate beneficiary of the impugned amount. Thus, we can assume that the impugned transaction was the business transactions between the assessee and the loan parties.
There was a response from the loan parties in response to the notice issued under Section 133(6) of the Act wherein it was confirmed that these companies have advanced loan to the assessee. This reply of the loan parties cannot be brushed aside merely on the ground that the directors were not produced by the assessee during the assessment proceedings. It was the revenue which wanted to verify the directors of the loan companies. For this purpose, lot of powers were available with the revenue such as issuing notice under Section 131 of the Act for inviting the personal attendance of the directors. But the AO has not exercised such power in the given facts and circumstances.
Though the transactions of the loan received by the assessee are not free from any doubt but in either of the case, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. - Decided in favour of assessee.
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2022 (1) TMI 1208
Penalty u/s. 271(1)(c) - disallowance of expenses - Proof of bonafied error - as per DR non-striking off the irrelevant portion in the notice u/s. 274 r.w.s. 271(1)(c) of the Act dated 03.03.2015 does not create any ambiguity as the assessee was well aware that the proceedings have been initiated for furnishing inaccurate particulars of income - HELD THAT:- It is not disputed that the assessee is eligible for the claim of the expenses but it was disallowed to the extent of ₹ 91,96,966/- out of the total claim of the assessee. We have also considered that the Ld. CIT(A) has observed that the assessee realized the mistake and filed revised statement of income at para 5.2 in quantum appeal. Therefore, the claim made by the assessee was not wrongfully but was on account of bona fide error to the extent for which the amount is added in the total income. This error in making the claim of expenses cannot be equated with the furnishing of inaccurate particular of income.
Considering, the above finding and observations made by the lower authorities and following the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] - thus we hold that there cannot be a penalty where there was bond fide error in the claim.
We hold that there was wrong claim in the return of income filed by the assessee which cannot partake the characteristics of furnishing in-accurate particular of income. Therefore, we delete the levy of penalty considering it as bona fide error. Hence, the ground of appeal of the assessee is allowed.
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2022 (1) TMI 1207
Revision u/s 263 by CIT - As per CIT AO has neither questioned nor examined nor verified qua the issue of depreciation claim made by the assessee on spectrum fee and as such depreciation claim allowed by the AO is incorrect being not examined in accordance with provisions contained under section 35ABB - PCIT sought to amortize spectrum fee on pro-rata basis over the period of license under section 35AB of the Act and held the assessment order erroneous insofar as prejudicial to the interest of the revenue - HELD THAT:- AO has allowed the depreciation @ 25% claimed by the assessee company on spectrum fees by treating the same as ‘intangible assets’ under section 32 of the Act by making a discreet enquiry and as such it is neither a case of non application of mind on the part of the AO nor a case of inadequate enquiry. Hence, invoking revisionary jurisdiction by the Ld. PCIT under section 263 of the Act is not sustainable in the eyes of law and the question No.I framed in the preceding para is answered in favour of the assessee, that the assessment order passed by the AO under section 143(3) of the Act allowing depreciation claimed by the assessee @ 25% on “spectrum fee” under section 32 of the Act was not erroneous in so far as prejudicial to the interest of revenue
the issue as to the allowability of depreciation on spectrum fee as claimed by the assessee under section 32 of the Act and the provisions contained under section 35ABB are not applicable has already been decided in favour of the assessee by the Tribunal, the order of the Tribunal cannot be allowed to be disobeyed by Ld. PCIT merely on the pretext that the department has not accepted the said decision and appeal has already been filed before the Hon’ble High Court. In order to maintain judicial discipline Ld. PCIT had no option but to follow the order.
Even on merits the assessee’s claim for depreciation on “spectrum fee” is allowable under section 32 of the Act as the provisions contained under section 35ABB of the Act being not applicable to the issue at hand. Hence, the order passed by the AO is not erroneous. So we are of the considered view that the AO has rightly allowed the claim by virtue of the assessment order framed under section 143 of the Act. So the question No.II framed is also decided in favour of the assessee and against the Revenue.
Impugned order passed by the Ld. PCIT under section 263 of the Act by invoking revisionary jurisdiction is not sustainable in the eyes of law, hence hereby quashed. Resultantly, appeal filed by the assessee is allowed.
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2022 (1) TMI 1206
Income from house property - deduction under section 24 denied - HELD THAT:- We note that the learned CIT (A) had confirmed the order of the AO denying the deduction under section 24 of the Act after placing reliance on the order of Chennai tribunal in case of of Anjuman-E Himayath- E-Islam [2021 (4) TMI 1176 - MADRAS HIGH COURT] for A.Y.2009-10. However we find that the order which has been relied upon by the learned CIT (A) has been challenged before the Hon’ble Madras High Court, [2021 (4) TMI 1176 - MADRAS HIGH COURT]where Hon’ble bench reversed the order of the Tribunal.
Thus deduction u/s 24(a) is allowable to the assessee. Hence, the ground of appeal of the assessee is allowed.
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2022 (1) TMI 1205
Reopening of assessment u/s 147 - taxability of transfer of immovable property - HELD THAT:- The provisions of Section 50 C of the income tax act clearly provides that fair market value of the property is required to be substituted as consideration received or accruing as a result of the transfer of a capital asset by the assessee where the actual sale consideration received or accruing is less than the value adopted or assessed by an authority of state government for the purpose of payment of stamp duty in respect of such transfer. The value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for the purposes of computation of capital gain u/s 48. Accordingly for computation of capital gain according to the provisions of Section 48 of the income tax act which is chargeable according to the provisions of Section 45 of the act, the difference between the actual sale consideration and fair market value of the property as described u/s 50C of the income tax act is required to be used.
In the present case for assessment year 2005 - 06 there is no transfer of asset, and therefore, there is no chargeability of capital gain u/s 45 of the act. Thus the provisions of Section 48 are also not triggered for this year. Therefore for assessment year 2005 – 06 there is no implication of provisions of Section 50C.
The learned dispute resolution panel in paragraph number 2.5 has noted that assessee has failed to provide evidence to substantiate its claim of transfer of possession and final receipt of money in assessment year 2004 – 05 and as the property was registered on 23/4/2000 for i.e. during assessment year 2005 – 06, therefore, it confirmed the action of the learned assessing officer to tax capital gain in the assessment year 2005 – 06.
DRP ignored the agreement to sell entered into by the assessee. Further if the learned DRP was of the view that capital gain is chargeable to tax in assessment year 2005 – 06, they should have directed the learned assessing officer to make the total addition of the capital gain in assessment year 2005 – 06. Even for ld AO and ld DRP it cannot act as deterring fact that capital gain is offered by assessee in AY 2004-05, those authorities are required to tax correct income in right hands for right assessment year. Therefore, there is a contradiction in the direction of the learned dispute resolution panel.
No reason to uphold the reopening of the assessment as well as addition on merits for the reason that:-
i. there was no transfer of any capital asset during assessment year 2005 – 06 but in assessment year 2004 – 05.
j. The capital gain has already been charged to tax by the learned assessing officer by passing an order u/s 143 (3) of the act for assessment year 2004 – 05.
k. The provisions of Section 50 C can be applied in the year in which provisions of Section 45, 48 read with Section 2 (47) of the act are triggered. In this case the provisions of Section 45, 48 and 2 (47) of the act are triggered in assessment year 2004 – 05 whereas the learned assessing officer has invoked the provisions of Section 50 C of the act for assessment year 2005 – 06.
l. There was no failure on part of the assessee at least for AY 2005-06, in disclosing fully and truly all material facts, as there was no Transfer u/s 2 (47), nothing was chargeable u/s 45 and therefore no computation was to be made u/s 48 and therefore there is no applicability of section 50C in the year which is reopened by AO.
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