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Income Tax - Case Laws
Showing 1 to 20 of 768 Records
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2022 (6) TMI 1470
Revision u/s 263 by CIT - Addition u/s 56(2)(viib) - PCIT said AO has neither enquired about the claim of the assessee that the property was under litigation during the course of assessment proceedings nor brought to the notice of the Assessing Officer by the assessee - as argued AO has passed order after seeking an approval of the ACIT, u/s 153D - AR had admitted that details of the property were disclosed by the assessee in pursuant to the notice issued u/s 142(1) and the same was duly examined by the AO and no additions were made on the basis of the documents filed by the assessee. Moreover it was submitted that notice u/s 153A r.w.s 143(3), the addition can only be made by the AO in respect of the documents / incriminating material found during the course of search
HELD THAT:- As during the assessment proceeding u/s 153A r.w.s. 143(3), AO is duty bound to make the addition in respect of the incriminating documents found during the course of search or in respect to the additions which are relatable to the material seized during the search. AO is not required to make any addition in respect of the material / document came to its possession on account of post search enquiries, though this issue may be debatable within the jurisdiction of Hon’ble Telangana High court.
CIT in the impugned orders had nowhere stated that the documents were filed by the assessee in response to notice under section 142(1) of the Act and that the documents found during the course of search were incriminating in nature. Unless the requirement of law, namely existence of the incriminating document is fulfilled, the Assessing Officer could not make the addition and therefore, the Assessing Officer has rightly not made any addition.
The reliance on explanation 2 to section 263 of the PCIT was incorrect, as Assessing Officer had made enquiries from the assessee and assessee had provided all information to the Assessing Officer, therefore, PCIT’s finding was factually incorrect, as it was not born out of the record.
Moreover, we agree with the view taken in the case of M/s. Indian Roadways Corporation Ltd. [2018 (10) TMI 1495 - ITAT KOLKATA] wherein the identical view was decided by the Kolkata Tribunal in favour of the assessee. Therefore, on this count alone, the order passed by the ld.PCIT is required to be annulled .
There is another reason for annulling the order passed by the ld.PCIT, as in the present case, the Assessing Officer before passing the assessment order has taken the approval of ld.ACIT under section 153D
Also in the case of Dhariwal Industries Limited, Pune [2017 (1) TMI 260 - ITAT PUNE] on similar facts, had annulled the order passed by ld.PCIT. Therefore, we have no hesitation to take a similar view, more particularly, when one of us (namely Hon’ble A. M.) was a party to the decision.
Another reason to annul the order passed by the ld.PCIT was that the ld.PCIT had directed the Assessing Officer to make the additions after invoking the provisions of section 56(2)(vii)(b) of the Act on the premise that there is difference in consideration for which the property was purchased vis-à-vis the SRO value. In our view, the addition under section 56(2)(vii)(b) is a deeming provision, based on this notional addition can be made.
We hereby hold invocation of jurisdiction section 263 of the Act by ld.PCIT was not correct. In our considered opinion, once all the material including the sale deeds and other litigation documents were available on the record before the PCIT, then it is the duty of the ld.PCIT to give a specific finding as to how the provisions u/s 56(2)(vii)(b) are applicable and why the order of Assessing Officer was passed without proper enquiry. Therefore, PCIT’s finding that the order passed by AO was erroneous and prejudicial to the interest of the Revenue, can not be upheld. Decided in favour of assessee.
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2022 (6) TMI 1469
Revision u/s 263 - Principal CIT held the assessment framed u/s 143(3) as erroneous insofar prejudicial to the interest of Revenue - correct head of income - assessee was liable to declare the income under the head income from house property on notional basis under section 22 read with section 23 of the Act but the assessee has not done so - HELD THAT:- The Finance Bill 2017 seeks to amend section 23 w.e.f. 1st April, 2018 which lays down the determination of annual value in case of house property for the purpose of calculating the Income under the head "House Property" income particularly in case of deemed let out property.
This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years.
A plain reading of the above provisions makes it clear that the amendment for charging the tax on the notional rent with respect to the properties held as stock in trade was applicable from the assessment year 2018-19 and subsequent assessment year. As such, the amended provision is not applicable for the year under consideration. Thus the question of calculating the rental income with respect to the units of the properties held as stock in trade does not arise.
Thus we hold that there was no error in the order of the AO framed u/s 143(3) which is causing prejudice to the interest of revenue. For invoking the provisions of section 263 of the Act, it is necessary that the twin conditions should be satisfied. The order should be erroneous and prejudicial to the interest of revenue. Once there is no error the order of the AO, the same cannot be subject to the provisions of section 263 - In view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO u/s 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.
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2022 (6) TMI 1468
Disallowance u/s 14A in course of the assessment undertaken under Section 153A - disallowance made under Section 14A while computing of Book Profit under Section 115JB - HELD THAT:-The present Tax Appeal is Admitted on the following substantial questions of law.
(i) Whether in the facts and circumstances of the case, could it not be said that the Appellate Tribunal committed an error in deleting the additions made on the count of fictitious losses from National Multi Commodity Exchange trading and also the disallowance under Section 14A in course of the assessment undertaken u/s 153A more particularly having regard to the import purport and the language of the said provision, holding that the additions have to be confined to the incriminating material found during the course of search u/s 132(1) even though there is no stipulation of the Section 153A and notwithstanding that there was no assessment u/s143(3) despite the fact that return was processed u/s 143(1) and no scrutiny proceedings were undertaken u/s 143(3) of the Act?
(ii) Whether in the facts and in the circumstances of the case and in law the Appellate Tribunal has erred in holding that disallowance under Section 14A of the Act cannot exceed the exempt income earned by the assesses?
(iii) Whether in the facts and in the circumstances of the case and in law the Appellate Tribunal was justified in excluding the disallowance made under Section 14A while computing of Book Profit under Section 115JB ignoring the clause (f) of Explanation1 to Section 115JB(2)?
(iv) Whether Appellate Tribunal committed an error in deleting the additions in respect of the allowance of losses taken from M/s. Mari Gold Vanijya Private Limited, Kolkata without appreciating the entire set of facts attended to the said aspect, whether the transaction evidenced that it was in the nature of accommodation entry and whether the Tribunal acted perverse on facts on that count?
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2022 (6) TMI 1467
Validity of reopening assessment - order passed u/s 148A(d) pursuant to the notice u/s 148A(b) challenged on the ground of alleged violation of principles of natural justice - HELD THAT:- As the impugned order u/s 148A(d) has been passed after compliance of all the formalities required under the relevant provisions of the Income Tax Act, 1961, and there is no procedural irregularity or violation of principles of natural justice.
It appears from record that, first, notice was issued u/s 148A(b) and in response to the same, the petitioner has filed its objection and thereafter the Assessing Officer concerned has passed order u/s 148A of the Act after considering the objection of the petitioner by giving reason and making elaborate discussion.
This Court in exercise of its Constitutional writ jurisdiction cannot act as an Appellate Authority over the impugned order passed u/s 148A(d) when there is no procedural irregularity or violation of principles of natural justice or the Officer has not acted contrary to any provision of the Statute and reasoning and findings given by the AO in his order u/s 148A(d) should not be substituted by a writ Court. WP dismissed.
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2022 (6) TMI 1466
Assessment against company dissolved/insolvent - proceedings initiated against the corporate debtor/assessee company including income tax proceedings and recovery of demand or giving effect of any order - Addition u/s 68 - HELD THAT:- In the light of the above order by Hon’ble NCLT in the assessee’s own case for its CIRP as per Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules 2016, no proceedings can continue against the corporate debtor i.e. the assessee.
In view of this and drawing further force from the order of coordinate bench in the case of Real Steps Ltd. [2021 (7) TMI 1445 - ITAT AHMEDABAD] all these nine appeals before this Tribunal filed by the assessee/Department are dismissed as infructuous. However, ld. AO is at liberty to make an application for reinstitution of these appeals after the resolution process ends in IBC 2016. Accordingly, the appeals of the assessee and the Department (totaling nine in numbers) are dismissed as infructuous.
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2022 (6) TMI 1465
Assessment against company dissolved/insolvent - Income tax dues - priority to debts to be discharged - Scope of section 238 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- As against the respondent company an application for liquidation has been filed before the National Company Law Tribunal, Kolkata Bench and by order ]the application filed by Chaitanya Alloys Private Limited, the operational creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 has been admitted and a moratorium as provided under Section 14 of the Code has been ordered. There are other directions issued by the NCLT as well.
Thus, in the light of the statutory provision and in the light of the decision of the Hon’ble Supreme Court in PCIT- Vs. -Monnet Ispat and Energy Limited [2018 (8) TMI 1775 - SC ORDER] and also in the light of the overriding provisions of the Code in terms of Section 238 of the Act, the revenue cannot pursue the appeal.
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2022 (6) TMI 1464
Deduction u/s 80P - Claim denied as assessee did not file the return of income for Assessment Year 2017-18 - as contended that since the assessee did not file return of income for Assessment Year 2017-18, there was no question of invoking the provision of section 80A(5) - HELD THAT:- Section 80A(5) of the Act is applicable only when a return of income is filed by an assessee and a deduction under Chapter VI “A” of the Act, is not claimed in such return of income. It will not apply to a case where no return of income is filed. The provisions of section 80AC of the Act, as we have already seen, contemplates denial of deduction in respect of certain provisions of Chapter VI “A” of the Act, if a return of income is not filed by an assessee. Those provisions, as rightly contended by assessee, do not apply to the claim for deduction under section 80P - Revenue authorities were not justified in not entertaining the claim of the assessee for deduction under section 80P of the Act as made by the assessee.
Since neither the AO nor the CIT(A) have examined the other conditions for allowing deduction under section 80P of the Act, we deem it fit and proper to remand the issue of the assessee’s eligibility to claim deduction u/s 80P in the sense with regard to the quantum of deduction and also with regard to the other conditions for allowing deduction u/s 80P for examining afresh by the AO. Allow the appeal of the assessee for statistical purposes.
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2022 (6) TMI 1462
TP Adjustment - MAM determination - determination of ALP of an international transaction between the assessee and its Associate Enterprises (AE) u/s 92 - application of residual PSM OR TNMM - HELD THAT:- The facts in the present asst. year are identical with issue covered by the decision of coordinate bench in the assessee’s own case in [2020 (3) TMI 947 - ITAT BANGALORE] for the assessment year 2013-14 thus we set aside the question of determination of ALP to the TPO afresh applying TNMM as the most appropriate method as was done in Assessment Years 2013-14 and 2014-15 & 2015-16 in the order referred to above. Needless to say the assessee shall be given reasonable opportunity of hearing. Assessee does not make any unique contribution to the transaction, hence PSM in this case cannot be applied.
Appeal of the assessee is allowed for statistical purposes.
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2022 (6) TMI 1460
Disallowance u/s 35(2AB) - research and development expenditure - assessee had itself admitted that there was a difference in the claim of Research & Development expenditure and that the assessee had claimed excess deduction u/s. 35 (2AB) - As per CIT contentions put forth by the appellant were not disposed off by the AO, thus AO is directed to restrict the disallowance after necessary verification as specifically brought out in the contentions of the appellant - HELD THAT:- AR has filed the working of disallowance U/sec. 35(2AB) of the Act which explains the nature of expenditure, actual expenses debited to profit &loss account, claim made in the return of income and the assessee claim before the DSIR and the revised claim. The workings tally with the net disallowance restriction directed by the CIT(A) to A.O. DR could not controvert the above findings of restoration to the file of A.O. and we do not find merit in this ground of appeal of the revenue and is dismissed.
Depreciation on computer software - HELD THAT:- ITAT in the Assessee own case in A.Y. 2010-11 [2020 (1) TMI 1200 - ITAT MUMBAI] has observed that the computer software is eligible for depreciation @60%. We find there is nothing remains in the ground of appeal as it become in fructuous due to grant of higher depreciation on software and the ground of appeal of the revenue is dismissed.
Grant of depreciation on assets transfer in the merger and the said companies have not claimed depreciation on the assets held by them - HELD THAT:- We find the Hon’ble Tribunal In [2020 (1) TMI 1200 - ITAT MUMBAI] has considered the facts, provisions of the Act and judicial decisions and directed the A.O. to allow the depreciation. In the present case the facts are identical and CIT(A) has relied on the earlier years decision and granted the relief. We up held the same as decided in favour of the assessee.
Addition u/s 145A of the Act with respect to modvat credit - HELD THAT:- The Honble Tribunal in [2021 (10) TMI 505 - ITAT MUMBAI] as perused Tax Audit report of the assessee and find that it is the claim of the assessee that the impact of grossing up of tax, duty, cess etc. by restating the values of purchases and inventories by inter alia including the effect of CENVAT credit will be Nil, subject to Sec. 43B that the duty, taxes, cess etc. is paid before the "due date" of filing of the return of income. As the ld. D.R had submitted that the aforesaid working of the assessee would require to be verified, we therefore, in all fairness restore the matter to the file of the A.O for readjudication.
Allowance of consultancy charges as revenue expenditure and allow deduction u/s 35DD - HELD THAT:- We find that the similar issue has been decided in the assessee favour by the Honble Tribunal in [2021 (10) TMI 505 - ITAT MUMBAI] for A.Y.2003-04 dated 510-2021 as held that it is a clear case of simple professional services rendered by Accenture to the assessee which at any cost cannot be considered as a capital in nature. We find that the said expenditure has to be considered as wholly and exclusively as deduction u/s. 37(1) - We hold that the provisions of Section 35DD of the Act as alleged by the ld. CIT(A) cannot be made applicable in the instant case as admittedly the same only refers to expenses incurred pursuant to amalgamation. Hence, we direct the ld. AO to grant deduction of the said expenditure u/s. 37(1) - Decided in favour of assessee.
Correct head of income - Treating rental income from RP House and centre point under the head IFHP OR IFOS - HELD THAT:- We find the Honble Tribunal [2021 (10) TMI 505 - ITAT MUMBA] has held that the transfer of ownership has to be completed over a period of 4 years and therefore the assessee continues to remain the owner of part property of the RP House. Further it was decided that the income from RP House and Centre Point is assessable as Income From House Property.
CIT(A) has considered the factual aspects and made a reasonable observations and granted the relief. We find the revenue could controvert on the findings of the CIT(A) on this disputed issue. Accordingly, we follow the judicial precedence of ratio of the ITAT decision and dismiss the ground of appeal of the revenue.
Deduction of eligible profits u/s 80HHC of the Act while calculating the book profits u/s 115JB - HELD THAT:- We find that in the assessee’s own case for the A.Y 2003-04, the Hon’ble Tribunal has allowed the assessee’s ground of appeal in [2021 (10) TMI 505 - ITAT MUMBA] as held that deduction u/s. 80HHE had to be worked out on the basis of adjusted book profit u/s. 115JA of the Act and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. - Decided against revenue.
Allowance of set off of losses /depreciation of tools division on account of demerger - HELD THAT:- As relying on own case [2021 (10) TMI 505 - ITAT MUMBAI] to hold that the ld. CIT(A) had rightly directed the ld. AO to allow set off of losses of amalgamating company in the hands of the assessee - Decided against revenue.
Allow depreciation on computer software @ 60% rate after due verification and recomputed the computer and computer software as on block &WDV and allow ground of appeal for statistical purpose.
Disallowance of interest on loan taken for purchase of a capital asset(Shares of RPIL) - AR submits that if the barrowed funds are used for investment in shares held for controlling interest, interest is allowable U/sec 36(1)(iii) of the Act and such expenditure is incurred out of commercial expediency - HELD THAT:- We find the CIT(A) has followed the assessee own case for A.Y.2002-03 &2003-04 and confirmed the disallowance of interest. Further on appeal by the assessee to the Honble Tribunal, for both the assessment years ITAT has decided in favour of the assessee as per the observations discussed in the above paragraphs. The Ld.DR has accepted the decisions of the Honble Tribunal. Accordingly, we set aside the decision of the CIT(A) on this disputed issue and direct the assessing officer to delete the disallowance of interest and allow the ground of appeal.
Capital gains on sale of RP house to be taxed over 4 years.
Grant the depreciation on the block of building - HELD THAT:- As decided in [2021 (10) TMI 505 - ITAT MUMBAI] block of building continued, depreciation thereon should be eligible to the assessee. Accordingly, we direct the ld. AO to grant depreciation.
Nature of receipts - treatment of sales tax deferral loan - revenue receipt or capital receipt - HELD THAT:- We are of the opinion that the Assessing officer should also be provided an opportunity to verify and examine the facts in the additional ground raised by the assessee. Hence to meet the ends of justice with out going in to merits of the case restore this disputed issue for limited purpose to the file of the Assessing officer to decide on merits and allow the ground of appeal for statistical purposes.
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2022 (6) TMI 1459
Exemption u/s 10(23C) denied - AO observed that the total receipts of assessee were approximately Rs. 109 crores, out of which the grant received from Govt. was just Rs. 3.90 crores, thus exemption disallowed since the assessee does not meet the condition of “wholly or substantially financed by the Govt.” as prescribed in section 10(23C)(iiiab) - as submitted assessee is a University established under M.P. Vishwavidhalaya Adhiniyam,1973, an Act of the State Govt. of Madhya Pradesh, established to provide education, supervision and maintenance to various colleges and educational institutions as per regulations of the Govt. and to establish, maintain and manage colleges, teaching departments, school of studies, center of studies, to institute degree diplomas, certificates and other academic distinctions, etc.
AO concluded that the receipts from government-grant are much less and therefore the assessee does not satisfy the requirement of “substantially financed by Govt.” - HELD THAT:- The component of government-grant received by the assessee is just 3.50% of the total receipts which is so less that by no stretch of understanding, the assessee can be said to be “substantially financed by the Govt”.
Also looking at submission of Ld. AR that out of the total receipt of Rs. 109 crore, there is a receipt of examination fee of Rs. 58 crore from affiliated institutions and colleges who had in turn received grants from the Govt. as also from certain categories of students who have received grants and scholarships from the Govt. The Ld. AR submitted that the receipt of Rs. 58 crore should also be considered as receipt from Govt. We are afraid to accept this argument of Ld. AO. If the affiliated colleges / institutions / students have received grant or scholarship from Govt., it is those colleges / institutions / students who have been financed by the Govt. and not the assessee. Even otherwise although the Ld. AR has raised this point but there is no material or evidence produced before us to prove that such state of affairs actually exist. Therefore, we are not impressed by this argument of Ld. AR. Thus, assessee is not substantially financed by the Govt. and therefore not entitled to exemption u/s 10(23C)(iiiab).
Alternative claim of exemption u/s 11 / 12 demanded by the assessee - can we entertain this new claim made by assessee for the first time before us? - HELD THAT:- A fresh claim before appellate authorities is not barred. It is constantly held in several decisions that a legal claim can be made by the assessee before appellate authorities even if the same was not claimed during assessment proceedings. We also observe that the provisions of section 11 / 12 grant exemption to the assessee and such exemption, if not allowed, would result in illegal collection of tax from the assessee, which is never an objective of the Income-tax Act, 1961. In view of this position of law, we do not find any difficulty in accepting the alternative claim of assessee to allow exemption u/s 11 / 12. However, the claim of exemption u/s 11 / 12 involves a different type of working based on application and accumulation of income. Therefore, we feel that it would be more appropriate to refer this matter back to Ld. AO who shall give an opportunity to the assessee to provide the necessary information for computation of exemption u/s 11 / 12.
Appeal of assessee is allowed for statistical purpose.
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2022 (6) TMI 1458
Validity of assessment order framed by non-jurisdictional officer - competent officer to proceed with the assessment by way of issue of notice u/s 143(2) - when notice u/s 143(2) was issued by an officer who did not have jurisdiction to proceed with the assessment - as submitted that the jurisdiction to pass the assessment order in this case laid with the ACIT/DCIT as the income declared by the assessee was more than Rs. 20 lacs
HELD THAT: - Jurisdiction of Income Tax Authorities may be fixed not only in respect of territorial area but also having regard to a person or classes of persons and income or classes of income also. Therefore, the CBDT having regard to the income as per return has fixed the jurisdiction of the Assessing Officers.
Thus in this case, the competent officer to proceed with the assessment by way of issue of notice u/s 143(2) of the Act was DCIT/ACIT, whereas, the notice u/s 143(2) has been issued by the ITO, Ward-1(1), Kolkata who did not have any jurisdiction to issue the aforesaid notice.
As has been held by the various courts of the country including the Apex Court, the issuance of notice u/s 143(2) by the concerned Assessing Officer of a competent jurisdiction is mandatory to assume jurisdiction to proceed to frame assessment u/s 143(3) of the Act. The identical issue also came into consideration in the case of Bhagyalaxmi Conclave (P) Ltd. v. DCIT [2021 (2) TMI 181 - ITAT KOLKATA] wherein the Tribunal further relying upon various other decisions of the Co-ordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that when the notice u/s 143(2) was issued by an officer who did not have jurisdiction to proceed with the assessment and the assessment was framed by the other officer who did not issue the notice u/s 143(2) before proceeding to frame the assessment, then such an assessment order was bad in law.
Thus assessment order passed by the Assessing Officer (ACIT) was bad in law for want of issuance of notice u/s 143(2). Decided in favour of assessee.
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2022 (6) TMI 1455
Disallowance u/s 37(1) - expenditure on account of group management fee paid to associate enterprises - no evidences regarding actual occurrence of the management service fees for which the foreign parent company has charged - HELD THAT:- What can be concluded is that assessee has failed to produce any cogent evidence before the Ld. AO or Ld. First Appellate Authority to indicate that the expenditure incurred was for the purposes of the business.
Assessee company is a advertising agency in Gurgaon and engaged in providing advertising communication and marketing solutions to its clients both domestic and international. The company is closely held company with 99.76% of the shares being held by the Holding Company . Thus, certainly the assessee must be in possession of quite relevant commercial and accounting documents which may indicate that there was valid expenditure on as many as ten heads, which were claimed to be the areas of expert services. However, no evidence to that effect was led.
AO has rightly relied the judgment of Cushman and Wakefield Indian (P.) Ltd. [2014 (5) TMI 897 - DELHI HIGH COURT] to hold that in spite of the case of assessee being covered by transfer pricing provision that does not restrict or in any way by pass the functions of the TPO when AO goes for determining u/s 37(1) of the Act, that whether the business expenditure claimed is expended wholly and exclusively for the purposes of business or not. Decided against assessee.
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2022 (6) TMI 1452
Assessment u/s 153A - bogus purchases - whether ‘satisfaction’ has not been recorded by AO of the searched person and when there was no incriminating document was found? - books of accounts of the company were rejected u/s 145(2) and a substantive addition was made in the hands of M/s. Orient Craft Ltd. and a Protective Assessment was made in the hands of assessee - addition @ 5% on account of alleged commission/brokerage as business income - HELD THAT:- Appreciating the matter on record it can be observed that in ITAT order [2021 (9) TMI 1408 - ITAT DELHI] dated 24.09.2021 in ITA No. 3312/Del/2019 for assessment year 2015- 16 and [2021 (10) TMI 86 - ITAT DELHI] ITA No. 3311/Del./2019 for assessment year 2014-15 the substantive additions in the hands of M/s. Orient Craft Ltd. have been deleted.
It can be observed that as been held that M/s. Orient Craft Ltd. has proved that the material was purchased from vendors involved and payments have been made through banking channel. It was further held that the voluminous documentary evidences filed by M/s. Orient Craft Ltd. clearly established the genuineness of purchase of fabric from the present assessee / appellant.
That being so there is no force in the contention of the Ld. DR that if substantive additions are deleted then as per orders of ld. CIT(A) the protective assessment in the hands of present assessee / appellant will still revive. In fact the findings arrived by the Tribunal in case of M/s. Orient Craft Ltd. are to the effect that the purchases made from the present assessee were genuine therefore, the Bench is of firm view that protective additions in the hands of the assessee/ appellant was never sustainable.
In the light of aforesaid facts and circumstances the order of Ld. CIT(A) making additions on account of alleged commission / brokerage as business income is not sustainable.
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2022 (6) TMI 1451
Unexplained cash credit u/s 68 - onus to prove - share subscription monies received by the assessee alleging that the source of source companies were name lenders having no creditworthiness and the Directors of such companies had not attended the summons - HELD THAT:- The phraseology of Section 68 of the Act is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income tax as the income of the assessee of that previous year. In this case, the Legislative mandate is not in terms of the word 'shall' be charged to income-tax as the income of the assessee of that previous year. The Supreme Court while interpreting similar phraseology used in Section 69 of the Act has held that in creating the legal fiction, the phraseology used therein employs the word "may" and not "shall". Thus, the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as also held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1997 (1) TMI 6 - SUPREME COURT]
Onus to prove - Although the summons issued u/s 131 of the Act remained unserved/non-complied, the assessee had furnished all documentary evidences including copies of confirmations, PAN Card, IT Acknowledgement, financial statements and bank statements of all these shareholders. Having regard to these documents and taking into account the judgments rendered in the cases of Ami Industries (I) Pvt. Ltd. [2020 (2) TMI 269 - BOMBAY HIGH COURT] and PCIT vs NRA Iron & Steel Pvt. Ltd. [2019 (3) TMI 323 - SUPREME COURT] the Tribunal held that the assessee had discharged its primary onus of establishing the identity of the investors, proving their creditworthiness and establishing the genuineness of the transactions - thus we thus hold that the assessee had discharged the burden cast upon it under the substantive Section 68 of the Act.
Whether the additional burden cast upon the assessee under proviso to Section 68 of the Act was discharged or not? - CIT(A) had examined the details and documents concerning RGIL and thereafter arrived at a conclusion that the source of source viz., RGIL was an actual and existing company which was engaged in active business of import and export having substantial turnover and overdraft facilities, packing credit etc. from the Bank. Hence, with regard to the amounts mentioned in Column (B) above, the Ld. CIT(A) found that the ‘source of source’ of this share capital originated from the coffers of RGIL which had paid these amounts to the shareholders from its Overdraft/Packing Credit Accounts or proceeds received from sale of goods or maturity of fixed deposits; and therefore the Ld. CIT(A) held that these amounts could not be treated as unexplained monies of the assessee company which we concur on the basis of the uncontroverted facts as noted by Ld. CIT(A). Before us, the Ld. CIT-DR was unable to point out any infirmity in these findings of facts as decided by the Ld. CIT(A) and therefore we do not see any reason to interfere with the order of the Ld. CIT(A) deleting addition made u/s 68 Partly.
Balance amount mentioned in Column (C) of the above Table, the Ld. CIT(A) had held that the bodies corporate from whom the shareholders had received monies, out of which they had subscribed to the share capital of the assessee, were paper companies engaged in the business of providing accommodation entries - The general yardstick adopted by the Ld. CIT(A) across all the twelve (12) shareholders mentioned in Column (C) above was that, the source of source of the remaining sum also received from two group entities did not emanate from the coffers of RGIL but was received from unrelated bodies corporate, and therefore he treated it to be bogus, alleging the source of source to be paper companies is found to be on erroneous assumption/basis in as much as it is found to be not based on any material or evidence. As we have noted earlier in Paras 15(i) to (xvi) above, the documents placed on record evidenced the “source of source” of the investment made by the share subscribers in the assessee’s share capital viz., the PAN, Certificate of Incorporation, bank statements of the ‘source of source’ etc. It is thus noted that source of money from which these share subscribers could subscribe in assessee was clearly discernible. AR has therefore rightly pointed out that the assessee had discharged its initial burden of substantiating the “source of source” of funds, and no specific infirmity had been pointed out therein by the lower authorities. At the time of hearing, even the Ld. CIT-DR was unable to pin-point any defect in these evidences placed on record in support of source of source of funds in the paper book.
After the assessee had discharged its burden by furnishing the above documents in support of the source of source of funds, in compliance with proviso to Section 68 of the Act, then the onus of disproving or finding defects in these documents shifted to the Revenue. It was then the duty of the Revenue to bring on record cogent material/evidence, which would show that the source of source of funds was unreliable or not genuine, which we find has not been done by them.
CIT(A) could not have abdicated from his duty, if he harbored a suspicion that, what was apparent was not real. It is further noted that the Ld. CIT(A) was unable to point out any defect in the documents furnished by the assessee to discharge the burden to prove the “source of source” as required as per proviso to Section 68 of the Act and that of the shareholders. Therefore, his conclusion that the source of source of funds qua Rs. 6,22,05,000/- were unexplained or represented unaccounted monies of the assessee cannot be sustained
Thus unable to find any fault in the conduct of the assessee, who had not only discharged its burden of substantiating the identity, genuineness and creditworthiness of the shareholders, but also the source of source of funds in accordance with proviso to Section 68 of the Act. Thereafter, it was for the Revenue to bring on record cogent/credible evidence to show that the evidences/material furnished by assessee in support of nature & source and even the source of source of funds of share subscribers were defective/colourable. We however note that the lower authorities failed to undertake any such exercise, except for casting aspirations’ by airing their suspicion based on conjectures and surmises. Hence, as the source of source, is found to be flowing through regular banking channel from various remittances by corporate entities in the course of their business dealings, the additional burden laid upon the assessee/share-subscribers under the proviso to section 68 of the Act is held to have been discharged/satisfied. Decided in favour of assessee.
Addition u/s 56(2)(viib) - valuation methodology - assessee had furnished a valuation report from a Chartered Accountant, as per which value per share was Rs. 51,135/- and as per assessee since the premium of Rs. 49,900/- was lower than the FMV, no addition was warranted u/s 56(2)(viib) - whether the AO could have legally rejected the valuation methodology followed by the assessee and changed it to some other method? - HELD THAT:- The option to choose the valuation method is with the issuer company and there is no enabling provision empowering the AO to reject and change the valuation method adopted by a company. Having held so, it is necessary to clarify that the AO however can indeed verify the manner of application of the valuation method pursued by the issuer company, and point out any mistakes, errors or infirmities therein. In the present case at hand, the Ld. CIT-DR was unable to point out any mistake in the manner of application of valuation method followed by the Chartered Accountant. We thus countenance the action of the Ld. CIT(A) in disagreeing with the action of the AO and upholding the valuation method followed by the assessee and thereby deleting the protective addition made by the AO u/s 56(2)(viib) of the Act. Where the assessee adopts a certain valuation methodology under the Act and rules thereunder, the AO cannot subsequently change the valuation method adopted by the assessee. See Vodafone M-Pesa Ltd. v. Principal Commissioner of Income Tax [2018 (3) TMI 530 - BOMBAY HIGH COURT]
Advances/deposits received by the assessee - The facts available on record shows that, the first source of the entire deposits/advances had been established in as much as the identity of the lenders, their creditworthiness and genuineness of the transaction was proved by the assessee as per the requirement of law as discussed. Hence, if the Ld. CIT(A) doubted the respective sources of these creditors [i.e. to extent of Rs. 79,00,000/-], then the correct course of action was to proceed against the creditors rather than the assessee because the assessee has discharged the burden as required by law [ section 68 of the Act] and the assessee cannot be expected to do more than what the law prescribed -the assessee was not required as per the law in force at that time, to explain the source of monies of the creditors. Consequently, the basis on which the addition was sustained partly u/s 68 of the Act by Ld. CIT(A) is held to be unsustainable.
As decided in Rohini Builders [2001 (3) TMI 9 - GUJARAT HIGH COURT] wherein the Court has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor).
When when full particulars, inclusive of the confirmation with name, address, PAN, IT returns, balance sheet & profit and loss account in respect of all the lenders were furnished and that it has been found that the loans were received through cheques then the AO was not justified in making addition u/s 68 - See Apex Therm Packaging (P) Ltd. [2013 (12) TMI 1541 - GUJARAT HIGH COURT]
We are of the considered view that the addition made by the AO u/s 68 of the Act was untenable both in law and on facts. Assessee appeal allowed.
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2022 (6) TMI 1450
Faceless appeals procedures - Validity of order passed by the National Faceless Appeals Centre (NFAC) with no oppourtnity provided to present case - whether NFAC has erred in not granting an opportunity to the appellant bank to present the case through the video conferencing as specified under the Faceless Appeals Scheme 2020, provided u/s 250 (6B) of the Income Tax Act? - HELD THAT:- In the Hon'ble Supreme Court's five-judge constitutional bench's landmark judgment, in the case of CIT v. Vatika Townships Pvt Ltd. [2014 (9) TMI 576 - SUPREME COURT] the legal position in this regard has been very succinctly summed up by observing that "(i)f a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect"
Hon'ble Supreme Court has observed that "This (the foregoing analysis) exactly is the justification to treat procedural provisions as retrospective", that, "In Government of India & Ors. v. Indian Tobacco Association [2005 (8) TMI 113 - SUPREME COURT] the doctrine of fairness was held to be a relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation" and that "The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. [2006 (7) TMI 648 - SUPREME COURT] - It was held that where a law is enacted for the benefit of the community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature." Their Lordships also noted that this retrospectively being attached to benefit the persons, is in sharp contrast with the provision imposing some burden or liability where the presumption attaches towards prospectivity. What logically follows from the law so settled by a constitutional bench of the Hon'ble Supreme Court, is that when an opportunity of presenting the case, through the video conferring in the faceless appeal proceedings, is now available to every taxpayer, on-demand, the same must also be held to be admissible in the proceedings, if so demanded by the assessee, in the old rules as well.
Thus we deem it fit and proper to remit the matter to the first appellate authority after giving an opportunity for a personal hearing, in terms of rule 12 of the Faceless Appeals Rules 2021, for adjudication de novo in accordance with the law and by way of a speaking order. Ordered, accordingly.
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2022 (6) TMI 1449
Jurisdiction of Additional CIT or JCIT without any independent order u/s. 120(4)(b) u/s. 127 - Jurisdiction of the Addl. CIT/JCIT for conducting the assessment proceedings and passing the draft / final assessment order in the absence of an order issued in writing u/s. 120(4)(b) pursuing the Addl. CIT/JCIT with the powers to perform the functions of “the Assessing Officer” -
HELD THAT:- We find that in the instant case while the assessment proceedings u/s. 143(3) of the Act was initiated by issue of notice u/s. 143(2) of the Act by the ACIT, the draft and final assessment orders for both A.Yrs. 2009-10 and 2010-11 were passed by the Addl. CIT / JCIT without any independent order u/s. 120(4)(b) u/s. 127 of the Act.
From the chronology of events, we find that assessee had repeatedly asked the ld. AO to produce such orders passed u/s. 120(4)(b) and u/s. 127 of the Act passed, if any. Despite giving sufficient time to the ld. DR to produce those orders, no such orders were produced by the ld. DR before us for both the assessment years.
We find under similar facts and circumstances, this Tribunal had indeed admitted the additional grounds raised by the assessee after a long gap of 10 years or 15 years, as the case may be, and adjudicated those additional grounds and allowed the assessee’s appeal by quashing the assessments framed for want of orders u/s. 120(4)(b) and u/s. 127 in cases TATA SONS LTD. VERSUS ACIT CIR. 2 (3) , MUMBAI [2016 (10) TMI 1228 - ITAT MUMBAI], M/S. TATA COMMUNICATIONS LTD [2019 (8) TMI 1446 - ITAT MUMBAI], TATA COMMUNICATIONS LTD. [2022 (3) TMI 218 - ITAT MUMBAI].
We find that all the oral and written arguments of the ld. DR have been met in detail by the ld. AR before us as detailed supra. The issue in dispute is already addressed by the various decisions of the Tribunal which are reproduced in the ld. AR's rebuttal referred to supra. The same are not reiterated herein for the sake of brevity. As stated earlier, the issue is already settled by various decisions of the Tribunal in favour of the assessee.
We hold that in the absence of separate order passed u/s. 120(4)(b) and order u/s. 127 of the Act, the Additional CIT / JCIT had no power to perform the functions of an Assessing Officer u/s. 2(7A) of the Act for both the years under consideration. Accordingly, the assessment orders framed by them are hereby quashed. Assessee appeal allowed.
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2022 (6) TMI 1447
Validity of reassessment proceedings - mandation of giving period being “not less than” seven days - as argued petitioner was not afforded adequate opportunity inasmuch as no opportunity of filing reply within seven days, as contemplated u/s 148A - HELD THAT:- We notice that in the instant case, notice was issued on 23rd of March, 2022, directing the petitioner to respond on or before 30th of March, 2022. No doubt, petitioner did respond but then the obligation cast upon the officer to afford “7 clear days”, as is so stipulated in the section was never afforded to the petitioner. The language of the section is unambiguously clear. There is a mandate to the officer to provide opportunity to the petitioner of filing response and such period being “not less than” seven days.
We notice that the respondent authority passed the order on 31st of March, 2022, which also only exhibits undue haste in passing the order against the assessee.
Accounting for all the attending facts and circumstances, the order dated 31.03.2022, passed by respondent no.2, namely, the Deputy/Assistant Commissioner of Income Tax, Circle-1, Patna is set aside with the authority to issue a fresh notice within 15 days in terms of Section 148 of the Income Tax Act, 1961 and complete the appropriate proceedings in accordance with law.
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2022 (6) TMI 1446
Maintainability of appeal by the Revenue before the tribunal - Monetary limit - rejection on low tax effect - HELD THAT:- As we find from the records that the tax effect in the instant appeal is Rs. 44,50,978/- only as per the relevant column in Form 36 herein. We thus quote the CBDT’s circular No. 17/2019 dated 08-08-2019 revising upward the monetary limits for filing of appeals by the department in Income-tax cases before various appellate forums.
The earlier circular No. 03/2018 dated 11-07-2018 had fixed monetary limit for filing of appeals by the Revenue before the tribunal at Rs. 20.00 lakhs which stands enhanced in the Circular dated 08-08-2019 to Rs.50.00 lakhs qua all pending appeals as well. All these facts have gone unrebutted from the Revenue side. We accordingly reject it’s instant appeal.
Revenue’s appeal is dismissed for involving lower than the prescribed tax effect in above terms.
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2022 (6) TMI 1445
Validity of assessment post insolvency - Application filed by the Financial Creditor u/s 7 of the Insolvency And Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal, Kolkata was admitted for initiating the Corporate Resolution Process in respect of the assessee company. The NCLT by an order dated March 13, 2019 declared moratorium for the purposes referred to in Section 14 of the IBC.
Since the moratorium has already been declared the instant appeal becomes infructuous and the same stands accordingly dismissed without, however, any order as to costs.
The substantial questions of law raised in the instant appeal in respect of these appeals are left open.
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2022 (6) TMI 1444
Exemption u/s 10(23C) - Violation of provisions of sections 13(1)(c), 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) - assessee trust made advances [interest free] to two persons who were trustees and settlers - HELD THAT:- In instant case the assessee is imparting education and has set up a College for Bachelor in Education and is duly recognized by the Jammu University. All its income is routed through the said University where the students are allotted by the said University. All the expenses have been incurred on the objects of the institution for education and no part thereof has been incurred on any other object whatsoever.
In the present case, the AO while rejecting the exemption claimed by the trust u/s 10(23C) (iiiad) has invoked the provisions of sections 13(1)(c), 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) of the Act. In this connection it is pertinent mention that section 13 starts with the words, ‘Nothing contained in section 11 or section 12 shall operate as to’.
This shows and makes it clear that the provisions contained in section 13 govern section 11 and section 12 of the Act and not section 10. These provisions are contradictory to each other. Section 13(1)(c) applies to application of income and property to specified persons. Sections 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) govern the provisions of lending, property made available for use, any service is made available and if any income is diverted respectively. The AO and the Ld. CIT(A) has not come to any conclusive finding as to what particular clause has been violated and as to how the same has been violated. In the absence of any such findings by the AO, the withdrawing of exemption was not in accordance with law.
In the above view, we hold that the Ld. CIT (Appeals), was not justified, in confirming the finding of the AO against law, regarding rejecting the exemption claimed of the Assessee Trust under section u/s 10(23C) (iiiad) - Decided in favour of assessee.
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