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Income Tax - Case Laws
Showing 21 to 40 of 768 Records
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2022 (6) TMI 1443
Unexplained deposit in the foreign bank account - ownership of the alleged bank account or the alleged disputed deposits - as argued assessee was not a beneficiary of the said account and that assessee’s name was struck off from the account when M/s Soverign Holding Private Ltd became owner of this foreign bank account - HELD THAT:- Since, this account was opened by the Sh. Rajinder Singh Chatha as a main beneficial owner of account and that the name of assessee i.e. Joginder Singh Chatha was struck off from the account 11th April, 2004 then by no stretch of imagination assessee can be held liable to pay tax for the deposit in the above said bank account in the A.Y 2006-07 & 2007-08. Over and above, Sh. Rajinder Singh Chatha has paid all the taxes on the outstanding amount in this impugned bank account to the revenue authority of U.K under Specific Disclosure Facility of all the irregularities in UK as per the certificate of C.A. of Sh. Rajinder Singh Chatha i.e. M/s Stonegate Trinity LLP filed in this regard as above.
We accept the grievance of the assessee as genuine and accordingly, we hereby delete the addition made by the Ld. Assessing Officer and confirmed by CIT appeals. Decided in favour of assessee.
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2022 (6) TMI 1439
Validity of Revision u/s 263 - PCIT held AO had passed the assessment order without making disallowance u/s 40(a)(ia) on payment made to labour contractor and payment made to various person in cash in excess of Rs. 20,000/- - Tribunal allowed the appeal of assessee quashing and setting aside the order passed by PCIT - HELD THAT:- We note that during the assessment proceedings, assessee had submitted before assessing officer (AO), the cash payment register and explained each of the item of proposed addition as per show cause notice of assessing officer. The cash payment register wherein payment has been explained to the assessing officer.
AO having gone through the cash payment register and explanation of each item, did not make the addition. Therefore, we note that assessing officer has examined this issue during the assessment stage and has taken a possible view and therefore, he did not make the addition. Hence, so far this issue is concerned, the order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the Revenue.
Thus in view of settled legal position with regard to invoking of section 263 of the Act, 1961, we are of the opinion that there is no infirmity in the impugned order passed by the Tribunal so as to give rise to any substantial question of law.
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2022 (6) TMI 1435
Validity of reopening of assessment - notice against dead [assessee] - HELD THAT:- Respondents[ revenue] has not controverted the factum of the death of late Smt. Niranjana Kalyanji Tanna and, therefore, we have no hesitation in holding that the notices impugned are invalid and non est in the eyes of law and cannot therefore be upheld. WP allowed.
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2022 (6) TMI 1433
TP Adjustment - determination of ALP in a case of services rendered by an AE and the benchmarking process - evidence for rendering services and demonstrating the benefit that the assessee received from the services rendered by the AE to the assessee - plea of the assessee has been that documentary evidence furnished by it has not been examined by the TPO, who has merely come to the conclusion that the assessee failed to prove the nature of services rendered by the AE for which the assessee made payment.
HELD THAT:- There is force in the arguments of assessee, in as much as the TPO as well as the DRP ignored the documentary evidence filed by the assessee and have proceeded on the assumption that these details were general in nature and did not prove the rendering of services by the AE. It is also equally true that the bulk of evidence filed by the assessee have to be corelated with type of services rendered and it is necessary for the assessee to explain as to how these emails show that services were rendered by the AE. It is only on such analysis being provided by the assessee, can the TPO proceed to examine the rendering of services as well as benefit that the assessee might derive.
In the matter of coming to the conclusion on the benefit that the assessee received, clear evidence cannot be insisted upon and the overall business scenario and type of services rendered have to be looked into. We also notice that similar payment made to the very same AE for similar services under the very same agreement, has been accepted to be at Arm’s Length in AY 2017-18 & 2018-19. We are, therefore, of the view that it would be just and appropriate to set aside the issue with regard to determination of ALP to the AO/TPO for fresh consideration in the light of law as explained above and the other observations in this order. The AO/TPO will afford opportunity of being heard to the assessee in the set aside proceedings, before deciding the issue.
Determination of ALP in respect of international transactions whereby assessee paid a sum for Brand Promotion Expenses - HELD THAT:- We find that the TPO in the impugned assessment year i.e., AY 2013-14, on identical facts has taken a contrary view, which is to the effect that there is an element of indirect control. The DRP has not rendered any finding on this issue. We are of the view that, in the light of order of the TPO for AY 2016-17, the issue requires fresh examination by the TPO. We, therefore, set aside the order of the TPO and direct re-examination of the issue, whether FIFOTL can be considered as an AE?
TP adjustment of Specified Domestic Transaction in respect of Sales Promotion Expenses for payment made to United East Bengal Football Pvt Ltd - HELD THAT:- As the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA of the Act.
We notice that the co-ordinate bench in the case of Textport Overseas [2017 (12) TMI 1719 - ITAT BANGALORE] has restored the matter to the file of the A.O. with the direction to examine the claim of expenditure in accordance with the provisions of section 40A(2) of the Act. Following the same, we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act.
Accordingly, following the binding decision rendered by Hon'ble High Court of Karnataka in the case of Texport Overseas P Ltd [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] we hold that the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA.
Depreciation on goodwill - assessee has submitted that it has acquired the brewery from Karnataka Breweries & Distilleries Ltd. through a process of demerger and acquisition and the difference between the cost of acquisition and the fair value of the assets is recognized as goodwill in the books of the assessee - AO disallowed the depreciation stating that the claim was not allowed in the earlier assessment year also - HELD THAT:- The coordinate Bench of this Tribunal in the assessee’s own case for AY 2007-08 [2016 (9) TMI 1527 - ITAT BANGALORE] has held that depreciation on goodwill is not allowable based on the facts of the case of assessee. Respectfully following that decision, we hold that depreciation on goodwill is not allowable. Accordingly, these grounds are dismissed.
Disallowance of expenses u/s. 14A - HELD THAT:- It is settled law that disallowance u/s. 14A cannot exceed the amount of exempt income earned by the assessee. Thus we hold that the disallowance should be restricted to the amount of exempt income earned by the assessee. We direct accordingly.
Disallowance of year end provisions u/s. 40(a)(ia) - AO disallowed the said amount stating that tax ought to have been deducted as of 31.3.2012 and only for remittance the assessee has time till the date of filing of the return which the assessee failed to comply - HELD THAT:- In the present case, we notice that the assessee has furnished the details of subsequent deduction of tax from the year end provisions and the details of payment made before the due date for filing the return of the assessee’s PB. Thus we remand this issue back to the AO to verify the details of payments and tax deducted and allow the expenditure where the TDS is remitted to the Government account on or before the due date for filing the return of income. The assessee may be given a reasonable opportunity of being heard.
Disallowance u/s 43B - disallowing provision of service tax on sponsorship services and penalty on service tax - HELD THAT:- AO while arriving at the difference between the amount mentioned in the tax audit report (as not paid before the due date for filing the return of income) and the amount already disallowed by the assessee i.e., the difference between had arrived at an amount of Rs.3,50,30,965 which is wrong, whereas the correct amount is Rs.3,15,30,965. Further the assessee has already disallowed Rs.1,90,33,176 as penalty on service tax which fact has not been considered by the AO resulting in double disallowance to that extent. We, therefore, direct the AO to recompute the disallowance taking into consideration the above two disallowances already considered by the assessee in the computation and also correct the transposition error while arriving at the disallowance.
Taxing capital receipt - AO has taken the market price of the shares of the assessee company which were allotted as a gain in the hands of the assessee - HELD THAT:- We hold that there is no income arising in the hands of the assessee for the notional profit computed by the AO. Hence the addition is deleted.
Directions to verify and allow the credits for MAT and TDS while recomputing the income of the assessee.
Computing the ALP considering the +/- 5 percent variation from the arm's length price as permitted under Section 92C(2).
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2022 (6) TMI 1432
Addition to income declared - difference in figures between Schedule SI (Income that are subject to a special rate of tax) and Schedule CG (capital gain) and Schedule OS (Other source) - HELD THAT:- AO has ignored schedule BFLA (Brought Forward Loss Adjustment) while making addition. In Schedule CG the STCG on Shares/Units on which STT was paid which is to be taxed only at 15% is shown as Rs.1,41,384 whereas this figure after BFLA of Rs.33,007 is Rs.1,08,733. Similarly in Schedule SI, LTCG on others of Rs.5,52,538 is claimed as taxable at 20% and the corresponding figure in Schedule CG is shown at Rs.7,62,220. This figure after BFLA of Rs.2,09,682 is Rs.5,52,538.
Thus it is clear that if schedule BFLA is considered then there will not be any discrepancy. Assessee did not participate in the proceedings before CIT(A) and could not explain this aspect. This aspect requires examination by the AO and therefore the issue has to be set aside to the AO for fresh consideration. AO will look into the schedule BFLA also and thereafter decide the issue afresh after affording the assessee opportunity of being heard.
Credit for taxes paid in US - As one of the requirements is that the assessee has to file Form 67 which was filed before the AO only after the date of intimation u/s 143(1). Filing of Form No.67 is only a procedural requirement and therefore that cannot be the basis to deny credit for taxes paid in US. AO shall consider the claim of the assessee for credit for taxes paid in USA also in the set aside proceedings. AO will afford opportunity of being heard to the assessee in the set aside proceedings. Allow appeal of the assessee for statistical purposes.
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2022 (6) TMI 1431
Reopening of assessment u/s 147 - procedure laid down u/s 148A - scope of new provisions substituted by the Finance Act, 2021 - section 148 notice issued on or after 1st April, 2021 - eligibility of reasons to believe that income chargeable to tax had escaped assessment - HELD THAT:- As decided by Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] case the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.
The present batch of writ petitions would stand disposed of in terms of the judgment of the Supreme Court in Ashish Agarwal (supra). However, there shall be no order as to costs.
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2022 (6) TMI 1428
Diversion of income by overriding charge - amount transferred to Statutory Reserve Fund in compliance with the mandatory provisions of Section 45 IC read with Section 45Q of the RBI Act - HELD THAT:- We are of the firm view that when the income by way of profit, as in the present case, is received and then reflected as part of the total income, deduction is not permissible. Therefore, the authorities below were justified in disallowing the deduction claimed by the assessees for the amount transferred to reserve fund in compliance with the mandatory provisions of the RBI Act, which do not call for any interference by this court. Accordingly, the main issue stands answered against the assessees.
MAT Computation - AO added the fund transferred to the statutory reserve to the total income of the assessees, while computing the taxable income under section 115JB, which was also affirmed by the appellate authorities - HELD THAT :- Section 115JB states that for computing the book profit, the amount meeting out the liabilities other than ascertained liabilities, has to be added. The statutory reserve fund based on the RBI guidelines, is not based on any ascertained liabilities and hence, it has to be added for arriving at the book profit under section 115 JB. At this juncture, it would be relevant to refer to the decision of the Delhi High Court in SREI Infrastructure Finance Ltd [2015 (2) TMI 545 - DELHI HIGH COURT] wherein, an identical question of law as raised herein it was clearly stated that the reserve is the amount of profit which is retained for use in business, when difficulty arises and on the basis of our earlier findings and from the very language of section 45 IC, this court comes to a conclusion that the amount transferred by the assessees herein, to the statutory reserve as mandated under the provisions of the RBI Act, is not an allowable deduction in computing the assessable income under the provisions of the Act under the regular computation and computation of book profits under section 115JB, as the case may be and therefore, the orders of the authorities below, do not call for any interference. Accordingly, the consequential issue is also decided against the assessees.
Bad debts written off as deduction u/s 36(1)(vii) - Once the bad debts are written off by debiting the same in the profit and loss account and by giving a corresponding credit in the loans and advances/debtors on the asset side of the balance sheet, the requirement under law is satisfied. It is not necessary to make corresponding entry towards each individual account separately to qualify as a valid write off. The department has not disputed the entries in the profit and loss account and balance sheet.
Tribunal failed to see that once the sums written off in the books maintained for the purpose of Income Tax Act and debited in the profit and loss account and satisfied the other requirement as held in Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT], it is suffice to hold that the assessees are entitled to the allowance. In such view of the matter, we are of the opinion that the Tribunal rightly deleted the disallowances made by the assessing officer - Decided in favour of the assessees.
Nature of expenses - royalty paid to the holding company - whether to be treated as revenue expenses? - AO disallowed the royalty amount and allowed depreciation at 25% by holding that the expenditure incurred is for acquiring intangible asset and would thus amount to capital expenditure - HELD THAT:- Every expenditure incurred to acquire some right over intangible asset, cannot be ipso facto termed as capital expenditure. The nature of the assets, right, information or technical know-how that is transferred, must be such that without which the transferee could never commence the business. As rightly contented by assessees, the benefit granted by the licensor is not enduring in nature in the present cases. The assessing officer without appreciating the terms of the licence agreement and ascertaining the nature of the expenditure incurred by the assessee companies, disallowed the deduction of royalty payment and allowed the depreciation at 25% treating it as capital expenditure. However, the appellate authorities, while deleting the disallowances made by the assessing officer, have rightly treated the royalty payment as revenue expenditure. Once the payment of royalty is treated as revenue expenditure, automatically, it goes without saying that the assessees would be entitled to 100% deduction. Therefore, we need not interfere with the orders passed by appellate authorities. Accordingly, the substantial questions of law relating to royalty, are answered in favour of the assessees.
Employees Stock Option Plan ( ESOP) expenditure - AO disallowed the said claim and added the same back to the total income of the assessee companies - HELD THAT:- This court comes to a conclusion that the Tribunal was correct in holding that the ESOP expenditure is revenue in nature and the assessee is entitled for deduction. Accordingly, the orders passed by the Tribunal in deleting the disallowances of ESOP expenses by the assessing officer, do not require any interference in these appeals. Resultantly, this issue stands answered in favour of the assessees.
Loss on sale of investments / Diminution in value of investments - assessees claimed deduction for the value of investments written off due to fall in their value / loss on sale of investments, which was disallowed by the assessing officer on the ground that it is capital in nature - HELD THAT:- This court is of the opinion that Government securities are only stock-in-trade and not capital investment and the loss, if any, on sale of them cannot be treated as capital loss and hence, the assessees are entitled for deduction of loss on sale of investments / diminution in value of investments. Therefore, the Tribunal was right in deleting the disallowances made by the assessing officer and the same need not be interfered with. Accordingly, the issue raised by the Revenue qua loss on sale of investments/ diminution in value of investments, stands answered in favour of the assessees.
Loss arising out of Derivatives / hedging transactions in foreign exchange - whether the Tribunal was right in holding that the loss arising out of derivatives / hedging transactions in foreign exchange, is an allowable deduction in computing the business income of the assessees? - HELD THAT:- As per section 2 (7) of the Sale of goods Act, “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;”
No person other than the authorised dealer can deal with foreign currency except with the permission of the RBI under section 8 of the Foreign Exchange Regulations Act, 1973 or Section 3 of the Foreign Exchange Management Act, 1999.
As the foreign currency cannot be called as “commodity” as well, the hedging contracts are not speculative and hence, Section 43(5) is not applicable. Though the assessing officer examined the issue in detail, he erred in treating the transactions done by the assessees as speculative transactions and disallowing the claim made by them. On the other hand, the appellate authorities rendered concurrent findings in favour of the assessees, to the effect that the derivative contracts, foreign exchange swap transactions against fluctuations in interest rate are hedge transactions and the loss arising out of the same is allowable as business loss. Such findings of the appellate authorities cannot be found fault with and therefore, the same are hereby confirmed. Accordingly, this issue stands answered against the Revenue.
Disallowance u/s 14A r/w Rule 8D - mandation of recording satisfaction - HELD THAT:- In the instant cases, the assessing officer made disallowances u/s 14A r/w Rule 8D, but there was no reason recorded by him, as to why he was not satisfied with the claim made by the assessees. Further, there was no examination by the assessing officer about the nature of investment by the assessees in their subsidiary companies and expenditure incurred by them. The CIT(A)/Tribunal pointed out certain errors committed by the assessing officer, accepted the contentions raised by the assessees and directed the assessing officer to modify the disallowances under section 14A, by the orders impugned herein.
Such course adopted by the appellate authorities cannot be countenanced, when the mandatory procedure envisaged under section 14A r/w Rule 8D has not been complied with. Without holding that, in the absence of specific findings and reasons, the question cannot be addressed. Though, it is trite law that any question of law affecting the rights of the parties would not by itself be a substantial question of law, this court is of the opinion that in the absence of specific findings on fact and adherence to the procedure, the substantial questions of law on the issue ought not to be decided. Thus sets aside the orders of the appellate authorities and remands the matter to the assessing officer.
Interest u/s 234D - The Tribunal in [2016 (1) TMI 1433 - ITAT CHENNAI] while rejecting the contentions of the assessees, held that interest under section 234D is on par with the interest charged under section 234A or 234B or 234C of the Act and that, the Government has not advanced any money to the assessees so as to call it as a loan; the interest levied on the assessees is compensatory and it cannot be allowed as a business deduction, while computing the business income.
This court finds no reason much less valid reason to interfere with the findings so rendered by the authorities below, as the interest was levied on the amount refunded to the assessees, which they are not legally entitled to and for the period during which they were holding the same and hence, the same is not eligible for deduction. Therefore, this issue relating to disallowance of interest under section 234D, is decided against the assessees.
Disallowance u/s 40(a)(ia) - Assessee did not adduce any evidence to support their claim and also in view of the settled legal position that the liability to deduct tax at source is mandatory and a person who does not adhere to the said statutory obligation, has to suffer the consequences which are stipulated in the Act itself, this court does not find any reason much less valid reason to disagree with the findings so rendered by the authorities below, qua disallowance u/s 40(a)(ia) of the Act.
Alternative plea that the amount disallowable is only 30% of the expenditure in view of the amendment to section 40(a)(ia) by Finance (No. 2) Act, 2014 - The proviso to section 40(a)(ia) of the Act as inserted by the Finance Act, 2014 does not apply to the case at hand pertaining to the assessment year 2012-13 and hence, the contention of the assessee for curative benefit with reference to the said proviso does not hold good. Having considered the rival contentions, the Tribunal was of the view that the amendment restricting the disallowance to 30% of the expenditure, came into effect only with effect from 01.04.2015 and the assessment year under consideration was 2012-13 and hence, the said amendment was not applicable to the case of the assessee. Accordingly, the alternative plea raised by the assessee was rejected by the Tribunal. The said view of the Tribunal appears to be just and proper and it needs no interference by this court, in the light of the judgment of the Hon'ble Supreme Court in Shree Choudhary Transport Company [2020 (8) TMI 23 - SUPREME COURT] as clearly observed that the amendment to section 40(a)(ia) by the Finance No. 2 Act 2014 with effect from 01.04.2015, is applicable only from the assessment year 2015-16.
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2022 (6) TMI 1427
Capital gain computation - fair market value of assessee’s capital asset - HELD THAT:- As we note with the able assistance coming from the Departmental side that this taxpayer had neither transferred any “land nor a building” as specified u/s.50C(1) but only its lease hold rights in the ‘CIDCO’ area.
We thus hold that such a leasehold rights are nowhere covered u/s.50C(1) going by specified categories therein as per stricter interpretation recently reiterated in Commissioner of Customs Vs. Dilip Kumar and Co [2018 (7) TMI 1826 - SUPREME COURT] We accordingly reject the Revenue’s instant sole substantive grievance.
Unaccounted cash component - Revenue vehemently argued that both the learned authorities have gone by the seized material as clearly indicating cash “paid to Jai Ganesh Co-operative members” - It further invokes the necessary presumption of correctness given to the such seized documents u/s 292C as well - As no substance in Revenue’s forgoing arguments supporting the impugned addition. This is for the precise reason that the alleged seized document itself rebuts the presumption in assessee’s favour once its members only had received the payment who are separately assessable in their individual capacity(ies). We further make it clear that the learned lower authorities have nowhere quoted any other cogent evidence since they have only gone by above seized document. We accordingly accept the assessee’s sole substantive grievance.
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2022 (6) TMI 1425
Unexplained investment - Department was in possession of the incriminating documents in the form of MOU seized during the course of search proceedings which clearly showed the name of the assessee and share of the assessee in the said property - co-owners of the property has admitted the fact of unexplained investment in accordance with his share in the property in the statement recorded on oath - CIT(A) deleted the addition - AO made addition by taking a view that as per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share - HELD THAT:- CIT(A) noted that extrapolation on the basis of part period or part value is not permissible. CIT(A) further noted that no evidence during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. AO made addition without having any documentary or oral evidence.
AO made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the basis of the said observation, the CIT(A) deleted the entire addition. We find that the Ld. CIT(A) on proper appreciation of fact correctly held that the additions made by the assessing officer is not based on evidence on record. No contrary facts or law is brought to our notice to take other view, hence, we affirm the order of Ld. CIT(A). in the result, the grounds of appeal raised by the revenue are dismissed.
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2022 (6) TMI 1422
Revision u/s 263 - distinction between lack of inquiry and inadequate inquiry - Second revision orders - As per CIT AO failed to make an enquiry as to why the assessee has offered net income and not the gross income - HELD THAT:- Action at the end of the ld. Pr. CIT is not justifiable. He has exercised the powers without analytically examining the report. The reason for taking the first two reasons together was for appreciating this factual aspect. On reason no. 2, the ld. Pr. CIT did not go through the record that earlier 263 proceedings were initiated against the assessee and those were dropped. What made him to again initiate the proceedings, is not discernable. There was no fresh information about this aspect and the same aspect has already been considered by his predecessor. It suggests that there was no application of mind at the end of the ld. Pr. CIT.
Enquiry was initiated on the premises that the assessee has not included in its disclosed income. When the assessee has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms.
CIT wanted to verify the inclusion of the income. The assessee has demonstrated that it has offered tax on net basis and income has to be offered on net basis only. Nothing remains to be explored on the ground that as to how the gross income was not offered. It is not the case of the revenue that the assessee has claimed excessive expenditure or the expenditure were not to be granted to the assessee. Therefore, to our mind the impugned order is not sustainable because the ld Pr. CIT failed to make a complete analysis of the record. Nothing is available on the record which authorizes the ld. Pr. CIT to take action u/s 263 of the Act
Commission payment - AO has made an enquiry during the assessment proceedings. The cognizance of the letter written by the DDIT Mumbai was taken up and it was explained by the assessee in its reply. The reference of this letter in the reply of the assessee would suggest that it must have been brought to the knowledge of the AO.
There could not be any occasion of the assessee to make reference of this letter in his reply which suggest that these details were discussed by the AO and thereafter he exercised his discretion. The grievance of the ld. Pr. CIT is that the AO has accepted this stand of the assessee without any verification or enquiry. This reasoning is factually incorrect as the case on hand does not reflect inadequate/non-enquiry at the behest of the AO. The assessment order cannot be set aside on this reasoning by invoking Section 263.
Appeal of the assessee is allowed.
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2022 (6) TMI 1421
Revision u/s 263 - second round of litigation - non-service of notice as agitated in first round of litigation - HC earlier [2018 (5) TMI 701 - CALCUTTA HIGH COURT] allowed the appeal on the ground that the contention advanced by the assessee with regard to non-service of notice was not specifically considered by the tribunal and order passed by the tribunal was set aside and the matter was remanded to the tribunal to re-consider the issue - HELD THAT:- On remand, the tribunal has taken up the matter and we find that factual exercise had been done by the tribunal and all the records placed by the department were considered and the tribunal was satisfied that there has been gross violation of principles of natural justice. Accordingly, the appeal filed by the assessee was allowed.
The revenue has challenged this order by filing the present appeal and from the memorandum of grounds, we find that the revenue seeks to convert this Court as if it is a second appellate Court over the findings of the tribunal. The present appeal, being one under Section 260A of the Act, what is required to be seen is as to whether any substantial question of law arises for consideration and the jurisdiction of this Court is not to reappreciate the factual conclusion arrived at by the tribunal. As pointed out earlier, the tribunal, after the matter was remanded, has done an elaborate factual exercise and decided in favour of the assessee. Thus, we find that there is no question of law much less substantial question of law arises for consideration in this appeal. Decided against revenue.
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2022 (6) TMI 1419
Accrual of income - reliance on documents seized in search - as contented documents seized during the course of search and seizure proceedings and marked as A/1/MKP from the assessee reflected the amount collected on behalf of the co-operative societies and the said amount is not an income in the hands of the assessee.
HELD THAT:- To a pointed question of this Court, with regard to the above finding recorded by this Court, Shri Seshachala, in his usual fairness, did not deny that the judgment in [2016 (6) TMI 644 - KARNATAKA HIGH COURT] and connected case, has attained finality. In view of the admitted facts, the Assessing Officer, the First Appellate Authority and ITAT having concurrently recorded findings of the fact against the assessee, the question of law framed in this appeal are answered in favour of the revenue and this appeal is dismissed.
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2022 (6) TMI 1418
Penalty u/s. 271B - Delay in submitting the audit report - HELD THAT:- AO shows that the delay in submitting the audit report was on account of delay in obtaining audit report from the statutory auditors. It is fairly admitted that the statutory auditors is appointed by the Registrar of Co-operative Societies and not by the assessee.
Assessee has sufficient and reasonable cause for delay in obtaining the audit report. It is also an admitted fact that the audit report was available before the AO, when the assessment was done. This being so, we are of the view that it is a fit case for deletion of penalty u/s. 271B - As penalty levied by the AO u/s 271B of the Act and confirmed by the ld CIT(A) stands deleted. Decided in favour of assessee.
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2022 (6) TMI 1416
Revision u/s 263 - anonymous donations receipts - as submitted there was a survey in the premises of the assessee on notice did not contain any query in regard to anonymous donations received by the assessee much less the donation - HELD THAT:- CIT (E) in his order u/s.263 of the Act had directed the AO to examine the donors and make proper enquiry and redo the assessment but the AO instead of doing the verification has practically rejected the assessee’s contention and has made addition representing 30% of the donations received treating the same as anonymous donations.
We are not going into the merits of the consequential order passed u/s.143(3) r.w. 263 r.w.s 144B - However, a perusal of the original assessment order clearly shows that no examination of the issues has been done. This being so, the ld CIT (E) is very much in his powers to direct the AO to examine the same. No error in the order of the ld CIT (E) has been pointed out by assessee. This being so, the order of ld CIT(E) passed u/s.263 stands upheld.
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2022 (6) TMI 1414
Condonation of delay filing return - petitioner was required to upload a Form 10B alongwith return whereas because of an error on the part of Chartered Accountant erroneously Form 10BB was uploaded - whether mistake committed by CA should not be treated as a bonafide mistake? - HELD THAT:- Even assuming that pursuant to certain communications filed with the return and the petition, the petitioner had an opportunity to avail alternative remedy, fact remains that application for condonation of delay was indeed maintainable. This is not a case of respondent that said application was not maintainable because petitioner did not avail the alternative remedy. The application for condonation of delay was also not dismissed on this ground and for this reason.
This is trite that validity of an order of statutory authority must be seen on the basis of grounds mentioned therein and not for any other reason.
A Constitution Bench of Supreme Court in the case of Mohinder Singh Gill and another Vs. The Chief Election Commissioner, New Delhi and others [1977 (12) TMI 138 - SUPREME COURT] opined that when validity of an order of the statutory authority is called in question, the validity of order needs to be examined on the basis of grounds mentioned therein. The orders cannot be validated on the basis of counter affidavit or supplementary counter affidavit.
The reasons assigned in the order dated 15/09/2020 alone is to be seen for the purpose of condonation of delay. We find substance in the argument of learned counsel for the petitioner that the delay or mistake is on the part of Chartered Accountant was not taken into account at all in the said order.
Thus, we deem it proper to set aside the impugned order and remit the matter back before the CIT (Exemption), Bhopal to reconsider and decide the matter afresh in accordance with law.
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2022 (6) TMI 1413
Addition u/s 69A r.w.s.115BBE - assessee has not been able to explain any source qua the excess-cash - HELD THAT:- The assessee was found to be owner of money i.e. excess cash, the excess cash was not recorded in the books of account of any source (i.e. books of business in present case) maintained by the assessee and the assessee has himself admitted that the excess cash found from his premise is earned from undisclosed sources, therefore he is unable to give explanation of its source. Thus, we find that all ingredients of section 69A are satisfied from the material held on record i.e. the statement of assessee. Being so we do not have iota of doubt in the application of section 69A.
The impugned excess cash found by the revenue during survey proceeding attracted section 69A as well as section 115BBE of the act. Therefore, we agree that the lower authorities have rightly invoked / confirmed that the excess cash is taxable u/s 69A read with section 115BBE. The conclusions taken by lower authorities do not require our interference. Decided against assessee.
Unexplained stock - physical stock was found to be short - AO treated this short-stock as unaccounted sales out of books of account, estimated profit @ 10% and thereby made an addition - HELD THAT:- We observe that the difference is very nominal and it can happen despite of all care in carrying out physical verification as well as preparation of books. We observe that the tax effect on Rs. 9,962/- shall be very negligible. Hence in order to impart a justice and taking a holistic and practical view, the addition deserves to be deleted. Decided in favour of assessee.
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2022 (6) TMI 1412
Belated payment of employees’ contribution to ESI and PF - assessee deposited the said contribution before due date for filing of return of income under Income Tax Act - Due date of payment - Scope of amendment - HELD THAT:- While processing the return u/s 143(1) of the Act no disallowance towards contribution to employees’ PF and ESI is warranted as this issue is highly debatable in nature. Even otherwise we find that the issue in appeals is squarely covered by the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] Ratio of this decision squarely applies to the facts of the assessee’s cases. Also see case of CIT Vs. M/s. Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT]
Hon’ble Supreme Court in the case of M.M. Aqua Technologies Ltd. [2021 (8) TMI 520 - SUPREME COURT] held that retrospective provision in a Tax Act which is for the removal of doubts cannot be presumed to be retrospective even where such language is used if it alters or changes the law as it earlier stood. The Amendments made to Section 36 and Section 43B by insertion of Explanations 2 and 5 respectively. In these Sections it is clarified that for the removal of doubts the provisions of these Sections were amended.
Tribunals in the cases of Raj Kumar [2022 (2) TMI 1224 - ITAT DELHI] held that the amendment brought in by Finance Act, 20 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees’ contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act
Thus we direct the Assessing Officer / CPC to delete the disallowance of employees’ contribution to EPF and ESI in all these cases as the contributions were remitted before the due date for filing of return of income. Grounds raised by the assessee are allowed.
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2022 (6) TMI 1411
Taxability of Consultancy Services as FTS - pre-requisites for deriving the benefit of the MFN clause in the Protocol to India’s DTAAs with certain countries - Issue decided in favour of assessee in its own earlier AY's - DR referring to CBDT Circular No.3/2022 has disputed the applicability of earlier orders of the Tribunal in the impugned assessment year - HELD THAT:- We find that in the case of GRI Renewal Industries SL [2022 (2) TMI 769 - ITAT PUNE] Tribunal considered the impact of CBDT Circular No.3/2022 held requirement contained in the CBDT circular No.03/2022 cannot primarily be applied to the period anterior to the date of its issuance as it is in the nature of an additional detrimental stipulation mandated for taking benefit conferred by the DTAA. It is a settled legal position that a piece of legislation which imposes a new obligation or attaches a new disability is considered prospective unless the legislative intent is clearly to give it a retrospective effect - it is ambiguously clear that there is no requirement of separate notification for importing the beneficial treatment from the agreement. Hence, in the facts of the case and the decision referred above, we find no merit in the arguments forwarded by the ld. Departmental Representative. The conditions set out in CBDT Circular 3/2022 would not apply in the impugned assessment year. Consequently, ground No.1 of the appeal is allowed.
Taxability of SAP Licence charges as royalty - HELD THAT:- We find that this issue is recurring. On identical set of facts, the Tribunal deleted the addition in preceding assessment years. The Tribunal in assessment year 2016-17 following the order in assessee’s own case in [2021 (1) TMI 323 - ITAT MUMBAI] deleted the addition as held receipt of software licence fees by the assessee, from its Indian subsidiary, is reimbursement of software licence fees paid by the assessee to a third party, and, therefore, it cannot constitute income taxable in the hands of the assessee. Decided in favour of assessee.
Taxability of IT Support Services as FTS/Royalty - HELD THAT:- The Tribunal in assessment year 2016-17 following the order of Co-ordinate Bench in assessment year 2015-16 deleted the addition as held the taxation under article 12 in the present case can come into play only when the "make available" clause is satisfied, but then the Assessing Officer's justification for the satisfaction of 'make available' clause, for the detailed reasons set out earlier in this paragraph, does not meet our judicial approval - we uphold the plea of the assessee on this point as well - income on account of Information Technology Services is also not taxable under article 12. Decided in favour of assessee.
Taxability of reimbursement expenses treated as FTS/royalty - HELD THAT:- Both sides are unanimous in stating that the DRP has not given any directions on this issue. DRP while considering objections of the assessee on Taxability of reimbursement of expenses as FTS/Royalty has dealt with the issue the directions. DRP has given finding without referring to the reimbursed expenses. Consequently, the issue raised allowed for statistical purpose.
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2022 (6) TMI 1410
Penalty u/s 271(1)(c) - unsecured loans received during the F.Y. 2003-04 - HELD THAT:- As decided in Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law.
In Mr. Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] - Penalty-Concealment-Non-striking off of the irrelevant part while issuing notice u/s 271(1)(c) of the Income Tax Act, order is bad in law. Assessee must be informed of the ground of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.
In the case of PCIT vs. Sahara India Life Insurance Co. Ltd.[2019 (8) TMI 409 - DELHI HIGH COURT]reiterated that notice under section 274 should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically.
The aforesaid principle has been reiterated in the in the case of CIT vs. SSA'S Emerald Meadows [2016 (8) TMI 1145 - SC ORDER]
Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, the penalty levied is hereby obliterated.
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2022 (6) TMI 1407
Revision u/s 263 - No enquiry v/s inadequate enquiry - suspicious Share transactions - HELD THAT:- In present case AO had not only made sufficient enquiries, but after satisfying himself, assessment was framed u/s 143(3). After receiving information relating to share transfer proper enquiries were made which is also evident from the office note exhibited elsewhere.
It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the AO is erroneous and prejudicial to the interest of the Revenue.
Thus, where there are two possible views and the AO has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous.
This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry.
Thus the order framed u/s 263 of the Act deserves to be set aside and that of the AO deserves to be restored. Decided in favour of assessee.
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