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Income Tax - Case Laws
Showing 181 to 200 of 9304 Records
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2022 (12) TMI 1224
Reopening of assessment u/s 147 - reason to believe - HELD THAT:- AO bears no nexus with the material available on record and is merely based on suspicion, does not find favor with me. As per the settled position of law, the A.O for taking recourse to proceedings u/s 147 is required to arrive at a bonafide belief on the basis of material available on record that the income of the assessee chargeable to tax had escaped assessment. No obligation is cast upon the A.O at the stage of taking recourse to proceedings u/s 147 to conclusively prove that the income of the assessee chargeable to tax had escaped assessment.
As is discernible from the aforesaid “reasons to believe”, A.O had clearly arrived at a bonafide belief on the basis of the material available with him that the income of the assessee chargeable to tax had escaped assessment. Accordingly, finding no substance in the claim of the ld. A.R that the belief of the AO that the income of the assessee chargeable to tax had escaped assessment has no nexus with the material available on record, and is merely based on a pretence, does not find favor with me, as there was sufficient material available with the A.O for taking recourse to proceedings u/s.147 - Thus, the additional ground of appeal No.1 raised by the assessee is dismissed in terms of the aforesaid observations.
Claim of the Ld. AR that there is no independent application of mind by the A.O, and the proceedings u/s.147 of the Act have been initiated by him on the basis of a borrowed satisfaction - We are unable to subscribe to the same. On a careful perusal of the “reasons to believe”, find that the A.O after referring to the material as was available before him had clearly applied his mind, and had on the basis of a bonafide belief so arrived at by him taken recourse to proceedings u/s.147 of the Act. Quality of the “reasons to believe”, as per the settled position of law, cannot be allowed as a basis for the assessee to assail the validity of jurisdiction assumed by the A.O u/s.147 of the Act. Thus, the additional ground of appeal No.2 raised by the assessee is dismissed in terms of the aforesaid observations.
Claim of the assessee that as the “reasons to believe” was followed by issuance of notice u/s.148 of the Act on the same date, i.e., on 31.03.2017 after obtaining approval of the appropriate authority u/s.151 - On a perusal of the sanction granted by the appropriate authority u/s.151 of the Act, I find that the latter had approved the “reasons to believe” recorded by the A.O with an observation that the case was fit for reopening, and thus, had granted sanction for issuing notice u/s.148 of the Act. I, thus, not finding any merit in the aforesaid claim of the ld. A.R reject the same. Thus, the additional ground of appeal No.3 raised by the assessee is dismissed in terms of the aforesaid observations.
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2022 (12) TMI 1223
Levy of penalty u/s. 271(1)(b) - Non compliance requirement in respect of special audit u/s. 142(2A) - HELD THAT:- relevant ledgers for all the years under consideration were impounded by the Ld. AO in the course of assessment itself which has prevented the assessee in making compliance to the requirements of the special auditors for getting the special audit u/s. 142A of the Act completed.
Reference is also made to the legal maxim ‘impotentia excusat legam’ and ‘lex non cogit ad impossibilia’ in this respect. When there is an invincible disability to perform mandatory part of the law that impotentia excuses. Law does not compel one to do that which one cannot possibly perform. Where the law creates a duty or charge and the party is disabled to perform it, without any default in him and has no remedy over it, there the law will, in general, excuse him. Therefore, when it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the person interested had no control, the circumstances will be taken as a valid excuse.
Assessment proceedings furnished by the Ld. Counsel, it is evidently demonstrated that there exists a reasonable cause within the meaning of section 273B of the Act which prevented the assessee in meeting the compliance requirement in respect of special audit u/s. 142(2A) of the Act. - Levy of penalty directed to be deleted.
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2022 (12) TMI 1222
Assessment u/s. 144C(13) - time limit for completion of the assessment order u/s. 144C(13) - DR submitted that the assessment order has been passed by the AO within the period of limitation as extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) - since the entire proceedings before the DRP and thereafter were carried out during Covid-19 pandemic the relaxation allowed by the Special Act TOLA would apply to the assessment order passed in pursuant to the directions of the DRP? - HELD THAT:- As decided in the case of Shell India Markets (P.) Ltd. [2022 (2) TMI 1149 - BOMBAY HIGH COURT] concluded that the time limit for completion of the assessment order u/s. 144C(13) of the Act was upto 30.04.2021. The relaxation under TOLA would not be applicable to the assessment orders passed in consequence to the DRP directions received by the Assessing Officer on 20.03.2021. The assessment order passed on 30.09.2021 was time barred. Similar are the facts in the present case. Therefore, we have no hesitation in holding that the assessment order dated 30.09.2021 in the present case is barred by limitation and is without jurisdiction. The assessee succeeds on ground of the appeal.
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2022 (12) TMI 1221
Addition on substantive basis treating the same as unaccounted income of the appellant - Whether any corroborative seized material found? - rejected the claim of the assessee that he has acted as Middleman only - HELD THAT:- It is pertinent to note that the affidavit filed by the Manager of the assessee though was rejected has been taken into account by the CIT(A) in consonance that the excel sheet found and seized from the office premises of the assessee and thus the data shown in the said computer belongs to the assessee.
Assessee at no point of time has proved that the excel sheet was not of assessee’s and the staff is also not aware of the said excel sheet. The theory of assessee that he is a middleman acting in real estate in certain transactions and earns brokerage also is not been established by the assessee through any documents. It is only oral submissions of the assessee before the CIT(A).
CIT(A) has categorically mentioned that only real income has to be taxed and not the gross income of the assessee and, therefore, addition to the extent of Rs.74,50,000/- was taken into consideration on the basis of promissory note. CIT(A) further observed that all the payments as per the promissory notes are made after the date of receipts as reflected in P3 tab, therefore, accepted the assessee’s contention. CIT(A) has given a table calculating the cash to the extent of Rs.2,05,50,000/- which was received in cash. Thus, the addition made by the CIT(A) is justifiable. There is no need to interfere with the same.
Unaccounted expenses against unaccounted income declared under PMGKY 2016 - HELD THAT:- CIT(A) has taken cognisance of Circular No.43 of 2016 dated 27.12.2016, the same declaration of set off was already filed and taxes were paid. The Assessing Officer cannot tax the same amount by invoking provisions of Section 69A of the Act. Thus, the CIT(A) was correct in deleting the said addition. Ground no.3 of Revenue’s appeal is dismissed.
Undisclosed income - DR submitted that the CIT(A) erred in admitting additional evidences during appellate proceedings and never called for remand report which is violation of Rule 46A of the Income Tax Rules - HELD THAT:- It is pertinent to note that from the perusal of the Assessment Order, it can be seen that the said Banakat deed and relevant documents were before the Assessing Officer during the assessment proceedings. CIT(A) has rightly taken cognisance of these documents and the same cannot be treated as additional evidences on merit. CIT(A) has categorically mentioned that the assessee sold certain lands and the sum of Rs.1 crore was already given to the assessee and the balance was to be given as per the schedule in Banakat/agreement. Thus, the transaction was declared as genuine transaction by the CIT(A). There is no need to interfere with the same and hence ground of Revenue’s appeal is dismissed.
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2022 (12) TMI 1220
Maintainability of appeal by the revenue on low tax effect - Monetary limit for filing the appeal of the revenue before the Tribunal - AO made an addition on account of Long Term Capital Gain arising on receipt of compensation for acquisition of agricultural land of the assessee - HELD THAT:- Monetary limit prescribed for filing of appeal by the department have been revised by CBDT vide its Circular No. 3 of 2018 dated 11.07.2018 and para no. 10 of the said circular has carved certain exception on the issues which should be contested on merits notwithstanding that the tax effect entailed is less than the specified monetary or where there is no tax effect.
AO had made an enquiry from the land acquisition officer who had settled the relevant information based on which a view was taken by the ld. AO to complete the assessment. It is not a case where the land acquisition officer was conducting any investigation or enquiry as law enforcement agency within the meaning of exception noted in para 10e of the CBDT’s Circular (supra). Also it is a case where information was sought from land acquisition officer by ld. AO to supply the information which was used for purpose of making the assessment in question. In fact the grounds taken by the revenue is not in conformity with the stated exceptions in CBDT Circular. Therefore, in our considered view the present appeal filed by the revenue does not fall in the exception noted in para 10e in the said circular. Accordingly, the appeal filed by the revenue is dismissed on the threshold in terms of CBDT’s Circular since the tax is below the monetary limit of Rs. 50 lakhs as prescribed in the said circular. Appeal filed by the revenue is dismissed.
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2022 (12) TMI 1219
Initiation of re-assessment proceedings - Reasons to believe - cash deposits unexplained in the bank and also withdrawals made therefrom - HELD THAT:- AO initiated re-assessment proceedings just to verify the transactions of deposits and withdrawals in/from the bank account.
Section 147 of the Act, dealing with the reassessment, opens with the words “If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income ”. It is ostensible that the action u/s 147 can be taken when the AO has formed reasons to believe that some income chargeable to tax has escaped assessment. Ex consequenti, belief of the AO about any income escaping assessment is sine qua non for initiating re-assessment. No jurisdiction can be assumed for framing assessment u/s 147 of the Act absent such reasons to believe about the escapement of income.
On going through the reasons, as reproduced above, it is palpable that the AO initiated re-assessment proceedings just to verify the deposits and withdrawals from the bank account of the assessee. There is no whisper in the reasons as to reason to doubt, much less the reason to believe, about the escapement of income. In view of the fact that the re-assessment has been initiated simply to verify the transactions in the assessee’s bank account, which does not fulfill the jurisdictional condition of belief about the escapement of any income, we are satisfied that action of the AO lacks validity. We, therefore, set aside the initiation of reassessment and the consequential order passed u/s 147. Assessee appeal is allowed.
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2022 (12) TMI 1218
Reopening of assessment u/s 147 - notice to be issued by the non-jurisdictional ITO - transfer of case from ITO to the other - HELD THAT:- The concerned jurisdictional ITO, before framing the assessment did not issue notice u/s 148 which was sine qua non to assume jurisdiction to proceed with the assessment proceedings. thus case has not been transferred with the sanction of the Competent Authority as provided u/s 127 of the Act .
Concerned ITO, Ward-4(5) without getting sanction from the competent authority himself transferred it to ITO Ward-3(5) and since the ITO, Ward-3(5) neither recorded reasons to believe that the income of the assessee has escaped assessment nor he issued notice u/s 148 therefore, the assessment framed by him was bad in law. Reliance in this respect can be placed on the decision in the case of Pankajbhai Jay Sukh Lal Shah [2019 (6) TMI 799 - GUJARAT HIGH COURT] . In view of this, the assessment order framed by the ITO, Ward-4(5) being bad in law is hereby quashed. Appeal of the assessee stands allowed.
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2022 (12) TMI 1217
Levy of penalty u/s 271(1)(c) - None appeared on behalf of the assessee, even in the previous hearings none appeared in spite of service of notice to the assessee - HELD THAT:- We have given our thoughtful consideration and perused the materials available on record. As it is seen from the quantum appeal order [2017 (11) TMI 2014 - ITAT AHMEDABAD] in assessee's own case for the very same Assessment Year 2010-11, the appeal was dismissed for non-prosecution.
In spite of as many as 22 opportunities given to the assessee by this Tribunal, the assessee has not come forward to conduct the appeal. There is no other material placed before us, the Grounds of Appeal raised by the assessee are also general in nature. In the absence of any material, we have no hesitation in confirming the concurrent findings of the Lower Authorities and thereby confirming the levy of penalty under section 271(1)(c) of the Act. Appeal filed by the Assessee is dismissed.
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2022 (12) TMI 1216
Disallowance of provision for slow moving obsolete stock - assessee is making provision in respect of unsold stock of cassettes and compact discs in accordance with AS-2 - principle of resjudicata - As submitted assessee is consistently following the same method of accounting since its inception and the same has been accepted by the Department for the last two decades - HELD THAT:- The assessment year under appeal is the only assessment year when disallowance has been made in respect of provision for slow moving and obsolete inventories. It is true that the principle of resjudicata does not apply in Income Tax proceedings, but at the same time rule of consistency cannot be ignored especially when the accounting method followed by assessee is in accordance with approved Accounting Standards.
Revenue has not brought on record any material to show the reasons for deviation in not accepting provision for slow moving and obsolete inventories in the impugned assessment year.
In the case of CIT vs. Santram Mangatram [2005 (1) TMI 57 - PUNJAB AND HARYANA HIGH COURT] has held that where from the inception of its business, the assessee had continuously adopted the same method of valuation of closing stock and no objection was raised by the Department in any of the previous years, there was no valid ground to hold that method adopted by the assessee for valuation of stock was legally impermissible. In the case of United Commercial Bank [1999 (9) TMI 4 - SUPREME COURT] has held that where the assessee bank was valuing stock-in-trade at cost for the purpose of statutory balance sheet and for the Income Tax purpose valuation was at cost or market value, whichever is lower and that was accepted by the Department in the preceding assessment years, there is no justifiable reason for the Revenue for not accepting same in the impugned assessment year.
Thus held if the provision is accounted in accordance with the statutory requirements and the method of accounting has been consistently followed by the assessee over a period of time and accepted by the Department, the same should not be disturbed. In the instant case no contrary material has been brought on record by the Department to show that the assessee was not consistently following accounting policy and provision for slow moving and obsolete inventory in preceding or succeeding assessment years. We find no valid reason to uphold the findings of the CIT(A) confirming the addition. Consequently, findings of CIT(A) are reversed and ground No.3 of appeal is allowed.
Disallowance of publicity expenses, wrongly considered as bad debts and advances written off by the Assessing Officer - A perusal of Schedule-17 shows that against bad debts and advances written off no amount is mentioned either in the year ended 31/03/2011 or for the year ended 31/03/2010. The Assessing Officer has disallowed bad debts and advances written off to the extent of Rs.5,97,35,213/-. The aforesaid amount is mentioned in Schedule -17 against the “Publicity Expenses”. The Assessing Officer patently erred in mentioning the amount of “Publicity Expenses” against “Bad Debts and advances written off ”. Disallowance has been made by the AO on wrong appreciation of facts. We further observe that the assessee’s submissions dated 20/01/2014 made before the AO had categorically mentioned “Nil” against Details of Bad Debts and Advances written off during the year. After examining the facts and documents on record, we find merit in ground No.4 of the appeal. Hence, the assessee succeeds on same. AO is directed to delete the disallowance made in respect of Bad Debts and Advances written off. The ground of appeal No.4 is thus, allowed.
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2022 (12) TMI 1215
Determination of undisclosed business turnover, arbitrary application of net profit rate at 8% - HELD THAT:- As assessee has stated to be a commission agent for selling fish imported from M/s. Babul Enterprises of Bangladesh and copy of consignment agreement has also been filed before the ld. CIT(A). Assessee was to get commission at 1% of the sale value. Application of net profit rate at 8% on the total undisclosed business turnover would be excessive and higher, which will hit the assessee. We, therefore, in order to bring an end the controversy and also in the interest of justice and being fair to both the parties and also considering the fact that there was undisclosed sales prior to 1.8.2014, the assessee himself has offered the N.P rate at 2.03% on the disclosed turnover also, estimating the net profit @ 4% will meet the end of justice. Thus, the estimated net profit on undisclosed business turnover, will works out at Rs.50,56,562/- and the same stands confirmed and remaining addition stands deleted. Thus, ground nos. 2 to 5 are partly allowed.
Addition for undisclosed interest - HELD THAT:- We are of the considered view that since we have already estimated the business income of assessee for the year under consideration, we do not find any merit in the action of the ld. AO making the said addition. The same stands deleted. Ground no. 7 is allowed.
Unexplained investment - HELD THAT:- We find that in the undisclosed bank account held with Axis Bank the initial funding towards investment was made. Considering the returned income and additions confirmed by us we are of the view that assessee has sufficient creditworthiness to explain the source of Rs.49,999/- and therefore, no addition is called for. Thus, finding of the ld. CIT(A) is reversed and ground no.8 is allowed.
Credit of tax, which has been deducted at source from the assessee - HELD THAT:- We find merit in this ground of assessee and thus, restore this issue to the ld. AO, who shall examine the veracity of claim of assessee and if credit is not given for the tax deducted at source, the same should be allowed. Thus, ground no. 9 of assessee’s appeal is allowed for statistical purpose.
Not allowing proper opportunity of bearing heard - HELD THAT:- We fail to find any merit in this submission of assessee as S/Shri Deb Roy & Sudeb Roy appeared and filed written submissions/explanation, which has been duly considered by the ld. CIT(A). Therefore, there is no merit in ground no. 6 raised by the assessee.
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2022 (12) TMI 1214
Disallowance of employees’ contribution to Provident Fund as well as ESIC - HELD THAT:- When the money is given by the employees, the employer is holding that money on behalf of the employees in the manner of good faith and trust. They are not part of the employers’ income, nor are they heads of deduction per se in the form of statutory pay out. In fact, they are others income, money, only deemed to be income with the object of ensuring that they are paid within the due date specified in that particular statute. Therefore, they have to be deposited in terms of such welfare enactment. It is open to deposit in terms of those statutes on or before the due date as mandated by such concerned law that the amount which is otherwise retained and is deemed income in the hands of the employer is therefore, treated as a deduction.
Essentially the condition precedent for deduction is that therefore, such amounts which are held in trust for the employees should be deposited by the employer on or before the due date as prescribed under the relevant Statutes. The Hon'ble Supreme Court further held that if this approach and reasoning is adopted then the non-obstante clause u/s 43B or anything contained in that provision would never absolve the assessee-employer from its liability to deposit employees’ contribution on or before the due date as mentioned in the respective enactments as a condition for deduction.
Reverting to the facts of the present case, it is an admitted fact that the payment of employees’ contribution to the provident fund was made before the due date of filing of return of income u/s 139(1) of the Act but beyond the due date as provided in the respective Statutes.
Respectfully following the judgment of Hon'ble Supreme Court[2022 (10) TMI 617 - SUPREME COURT] we hold that the assessee-employer was duty bound to deposit the employees’ contribution to provident fund within the due date as mentioned in the respective Statutes. Since this was not done the assessee is not entitled for deduction u/s 36(1)(va) read with section 43B of the Act and the said amount has to be construed as deemed income of the assessee and added to his total income. We do not find therefore, any infirmity with the findings of the Revenue authorities and the appeal of the assessee is dismissed.
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2022 (12) TMI 1213
Late fee charged u/s 234E - time limit defined under rule 31A read with section 200(3) - Delay filling quarterly TDS statements - HELD THAT:- After hearing the Ld. DR, perusal of records and the impugned order, it is noted that by Board's Notification in 35/2020 dated 24-06-2020, the time limit for filing of 4th quarter TDS statements was extended only upto 31-07-2020 in view of COVID situation. Admittedly, it is not disputed that the CPC(TDS) had levied this fees for the delay beyond 31-07- 2020 only.
CIT(A) has been justified in not accepting the argument that she was not a person responsible for deduction of tax. As per the provisions of sec 200(3), any person deducting tax in accordance with provisions of Chapter-XVII, shall after paying the tax deducted to the credit of the Central Government, required to submit the TDS statement within prescribed time. Thus, the appellant having deducted the tax has the obligation to file the quarterly TDS statements within the prescribed time limit which she failed to fulfill by filing the such statement with some delay as above. Therefore, CIT(A) was justified in confirming the finding of the CPC(TDS) in levying late fee u/s 234E as per law. Assessee’s appeal is dismissed.
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2022 (12) TMI 1212
Addition made on account of payment of labour charges paid - AO found that the assessee inflated expenditure without obtaining bills - HELD THAT:- Admittedly, the assessee is a Civil Contractor and undertaken contract work from PWD, Zila Parishad, Municipalities, MIDC and State transport during the year under consideration, it is not disputed by both the authorities below as it was stated before the CIT(A) as well as the AO. We note that both the authorities below disallowed the said amounts only on the ground that they disbelieved the contention of the assessee.
Admittedly, all the details relating to the said payments pertaining to the assessee, Malati V. Deshpande and Sumati D. Patil were not furnished before the assessment proceedings as well as in the First Appellate proceedings, even actual performance of road construction work for Government Department. It is also not disputed that furnishing of PAN, copies of Income Tax Return of Malati V. Deshpande before the AO.
Both the authorities below examined all the said details but however rejected the same for not having sufficient evidences. Admittedly, the Malati V. Deshpande did not appear before the AO and the AO held that she did not offer the labour payment receipt in her return of income. There was no evidence to show the same has been recognized in the account of Malati V. Deshpande brought on record by the assessee. No infirmity in the order of CIT(A) in confirming the additions made by the AO on account of labour charges paid to labour contractors - Thus, ground Nos. 2 and 3 raised by the assessee are dismissed.
Disallowance on account of supervision charges - According to the AO that the assessee conveniently paid supervision charges to each person below Rs.20,000/- and the said payment made to various persons i.e. 36 persons - HELD THAT:- We note that the assessee did not file any evidences rebutting the finding of AO and the CIT(A) before this Tribunal. The assessee filed written submissions before the CIT(A) inter alia stating that the receipts under the contract works is of Rs.9,00,00,000/- and supervision charges paid to 36 persons on different sites required to be allowed on the basis of above said work done involving Rs.9,00,00,000/-. AO and the CIT(A) was of the opinion that the assessee made these payments only to avoid TDS as well as rigors of the provisions u/s. 40A(3) of the Act and no evidences showing establishing the assessee paid such amount to 36 persons on different locations. Therefore, as discussed above, we find no evidences in respect of the contention raised by the assessee before the AO and the CIT(A) even before in support of grounds raised in Form No. 36. Therefore, we find no infirmity in the order of CIT(A) in confirming the addition made on account of supervision charges. Thus, ground No. 4 raised by the assessee fails and it is dismissed.
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2022 (12) TMI 1211
Addition u/s 69A - receipt of credible information that the assessee and another were indulged in illegal storage and selling of banned noxious tobacco products at the premises of assessee, police authorities reached spot and found certain tobacco in the racks of shop and also cash - assessee did not respond to any of the notices and hence, the AO completed the assessment inter-alia by making an addition - HELD THAT:- On categorical enquiry by the Bench from the ld.AR whether he had appeared on behalf the assessee or any other counsel appeared on behalf of the assessee to pursue the matter before the ld.CIT(A). To which, the ld.AR replied that he was not the person who appeared before the ld.CIT(A) and some other counsel represented the matter before the ld.CIT(A). Though, the earlier AR was not the counsel before us, however, no reasons were brought on record, substantiating his absence during the appellate proceedings before the ld.CIT(A).
It is a serious misconduct on the part of the earlier ld.AR for which necessary remedial action should be taken by the concerned authority. However, on account of the fault of authorised representative / chartered accountant / advocate of assessee, the assessee should not be made to suffer and more particularly, when the assessee happened to be a senior citizen and is not conversant with the digital communication.
Therefore, we deem it appropriate to restore the appeal for afresh adjudication before the ld.CIT(A) and hereby direct the ld.CIT(A) to grant one opportunity only to the assessee. Assessee is also directed to appear for the hearing in time before the ld.CIT(A) for afresh adjudication. The assessee shall file all the documents at the first instance and shall not any adjournment before the ld.CIT(A). In light of the above, the appeal of the assessee is allowed for statistical purposes.
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2022 (12) TMI 1210
Reopening of assessment u/s 147 - new material and evidences available with the assessing officer to arrive at the reason indicating escapement of income - independent application of mind v/s borrowed satisfaction - addition made by the AO u/s 68 - As argued income has escaped assessment in the case of the assessee by trading in the bogus penny stocks of Splash Media was based entirely on the satisfaction of the Directorate of Investigation, Kolkata, and there was no independent application of mind on the part of the AO - HELD THAT:- In the present case, it is pertinent to note that no scrutiny assessment was conducted in the case of the assessee and therefore the only data available with the AO was the data provided along with the income tax return and the report/information received subsequently from the office of Directorate of Investigation, Kolkata. The said information constitutes new and tangible material for initiating the reassessment proceedings in the case of the assessee.
Though this information was received from Investigation Wing, Kolkata but the AO applying his mind extracted the relevant details pertaining to the assessee. In the first paragraph of the reasons, information of penny stock was noted. Based on this in second paragraph, relevant details about the alleged bogus transaction of the assessee were identified. In the third paragraph, the AO has clearly identified the escapement of income and in the last paragraph, the satisfaction of the AO is recorded. Thus, there was a ‘tangible material’ on which the AO applied his mind independently. Hence, it is not correct to state that reopening has been made on the basis of borrowed satisfaction.
Also undisputed that the assessee has transacted in shares of Splash Media and earned Rs. 14,91,646.90 and has declared an amount of Rs. 13,93,293 as a long-term capital gain on the sale of shares in its return of income. Thus when new and tangible material in form of a report from the Directorate of Investigation, Kolkata was received, reassessment proceedings were initiated.
The expression ‘reason to believe’ imports the cumulative presence of the following four elements viz. some tangible material or materials to establish that income has escaped assessment; nexus between such material and the belief of escapement of income from assessment as envisaged under Section 147; application of mind by the Assessing Officer to such material; and an inference, based on reason, drawn tentatively by the officer that income has escaped assessment. The application of mind by the AO to the new and tangible material has to be discerned from the reasons recorded in each case and from the perusal of the reasons recorded for reopening the assessment in the present case, we are of the considered view that all the aforesaid conditions are fulfilled and the AO has rightly initiated the reassessment proceedings under section 147 - Decided in favour of revenue.
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2022 (12) TMI 1209
Taxability of search fees - DRP/AO held that a sum received by the appellant towards executive search fees is taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and under Articles 12(5)(a) and / or 12(5)(b) of the India-Netherlands tax treaty - AR submitted that in preceding assessment years Advance Pricing Agreement (“APA”) was entered by the Indian subsidiary of the assessee company, which covered the transactions with assessee - HELD THAT:- The year under consideration is not covered by the APA. From the perusal of aforesaid order passed by the coordinate bench of the Tribunal in assessee‟s own case for preceding assessment year, we find that the issue of taxability of search fees was decided in favour of assessee in assessment year 2011–12 also and the coordinate bench, in aforesaid decision, supported the findings rendered in preceding year as well as its conclusions, by reference to benchmarking agreed between Indian subsidiary and CBDT vide APA dated 30/08/2016.
Therefore, we are of the considered view that findings rendered in preceding assessment year are equally applicable to the year under consideration even though it is not covered by the aforesaid APA. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee‟s own case cited supra, we uphold the plea of the assessee and direct the AO to delete the addition on account of search fees. As a result, grounds No. 1 – 9 raised in assessee‟s appeal are allowed.
Taxability of management fees - AO treated management service fees as “fee for technical services‟ under Article 12(5)(b) / 12(5)(a) of India Netherlands DTAA, in line with its findings rendered in respect of taxability of search fees - HELD THAT:- As is evident from the record, lower authorities have not examined any of the services and by following its findings rendered in respect of search fees taxed management service fees also as “fee for technical services‟ under Article 12 of India Netherlands DTAA. Thus, in view of above, we deem it appropriate to remand the issue of taxability of management service fees to the file of AO for de novo adjudication, as per law, after necessary examination of relevant agreement. The AO is also directed to examine each and every service in respect of which assessee has received management service fees, while deciding this issue. The assessee shall be at liberty to furnish all the evidences in support of its claim. Needless to mention that no order shall be passed without affording reasonable opportunity of being heard to the assessee. As a result, grounds No. 10 – 17 are allowed for statistical purpose.
Taxability of reimbursement of expenses - HELD THAT:- This issue is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of Tribunal for preceding assessment years. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee's own case [2022 (9) TMI 1403 - ITAT MUMBAI] we uphold the plea of the assessee and direct the AO to delete the addition on account of reimbursement of expenses. As a result, grounds No. 18 – 20 raised in assessee's appeal are allowed.
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2022 (12) TMI 1208
Re-opening assessment u/s 147 by issuing notice u/s 148 - disallowance on account of bogus purchase - HELD THAT:- A three Judges bench of Hon'ble Gujarat High Court in the case of A.L.A. Firm [1991 (2) TMI 1 - SUPREME COURT] after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to re-assess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied.
As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. Therefore, we dismiss ground no.1 and 3 raised by the assessee.
Estimation of income on bogus purchases - We notice that the issue is squarely covered by the decision of the Coordinate Bench of Surat in the case of Pankaj K. Choudhary [2021 (10) TMI 653 - ITAT SURAT] and there is no change in facts and law, therefore respectfully following the binding precedent, we direct the Assessing Officer to sustain the addition at the rate of 6% of bogus purchases.
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2022 (12) TMI 1207
Revision u/s 263 - LTCG - Nature of land sold - distance of the land in question from the outer limit of the Indore Municipal Corporation - assessee sold the land jointly with a co-owner - assessee claimed exemption of half share of long term capital gain claiming that the said land was an agricultural one and situated outside the definition of capital asset under Section 2(14) - whether SDM is not a competent authority for the distance certificate rather than PWD department is authorized for the same? - HELD THAT:- We find that the original assessment order has been passed under Section 143(3) of the Act by the Ld.AO after due verification of the issue raised in the order impugned passed under Section 263 of the Act and that too upon causing exhaustive enquiry and finalising the same after taking a possible view, the invocation of provision of Section 263 of the Act on the basis of change of opinion is, thus, not found to be sustainable. We have also found substance in the arguments advanced by the Ld. AR that the original order needs not to give detailed reason. Further that when one possible view has been taken by the Ld AO the said cannot be treated as erroneous and prejudicial to the interest of the Revenue.
In this regard, we are also inspired by the ratios laid down in the judgment passed in the matter of CIT vs. Nirma Chemicals Works (P.) Ltd [2008 (2) TMI 373 - GUJARAT HIGH COURT] and CIT vs. Kamal Galani [2018 (6) TMI 1052 - GUJARAT HIGH COURT] Under this circumstance, we find the order passed by the Ld PCIT under Section 263 of the Act is not sustainable and thus quashed.
Interest amount as received by the assessee from Gujarati Samaj, Indore - PCIT was of the view that the assessee has unaccounted money and out of books the same has been given to Gujarati Samaj - Since, the buyer could not make payment in due time as agreed upon the interest on delayed payment was made to the assessee. Therefore, such interest has been paid not on any amount of money borrowed from the assessee by the said party rather for non-fulfilment of the commitment of making timely payment in respect of sale of agricultural land. In view of the matter, there was no disclosure of any advance in the financial statement when the source of interest amount was asked by the Ld.AO. The above narrated facts were duly placed by the assessee to him and finally the Ld. AO accepted the said interest income made by the AO.. No contrary document, however, is forthcoming from the Revenue which could justify that the order passed by the Ld. AO in this count is erroneous so far as it is prejudicial to the interest of the Revenue. Hence, the condition prescribed under Section 263 of the Act has not been fulfilled in issuing the order under Section 263 of the Act by Ld. PCIT as impugned before us. Hence, the same is found to be not sustainable and thus quashed.
Assessee’s appeal is allowed.
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2022 (12) TMI 1206
Rectification of mistake u/s 154 - Delayed Employees’ contribution to the Employee Provident Fund and Employee State Insurance Fund - addition u/s 2(24)(x) r/w s. 36(1)(va) - amount being deposited before the due date of filing the return of income u/s. 139 (1) - scope of amendment - HELD THAT:- In view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon'ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified. See SAURASHTRA KUTCH STOCK EXCHANGE LTD [2008 (9) TMI 11 - SUPREME COURT] and SMT. ARUNA LUTHRA. [2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT]
No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine [2021 (11) TMI 927 - ITAT JABALPUR] any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee.
The impugned additions, therefore, could not have been made under the given facts and circumstances of the case, and are directed for deletion. Decided in favour of assessee.
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2022 (12) TMI 1205
TP Adjustment - unauthorized reference to TPO u/s 92CA(3) - HELD THAT:- AO in the instant case, made a reference to the TPO for computation of Arms Length Price with reference to the impugned domestic transactions entered into by the assessee as defined u/s 92BA - An order from the TPO was obtained u/s 92A(3) of the Act in pursuance of such reference.
It is the case of the assessee that reference made to the TPO in the instant case without fulfilling the conditions of threshold of Rs.5 crore monetary limit is without the sanction of law in view of the Section 92BA - This being so, the assessee is not entitled for extension of time limit provided u/s 153(4) by extended period of another one year which is applicable only where the reference to the TPO has been validly made within the frame work of law.
We find palpable merit in the plea expounded on behalf of the assessee. It has been demonstrated in the instant case that the threshold monetary limit of Rs.5 crore was not available to the Assessing Officer to characterize the transactions with AE as SDT to enable him to make a reference to the TPO. The order of the TPO u/s 92CA(3) is thus a nonest and a nullity in the eyes of law. Consequently, the extension of time under erstwhile provisions of Section 153 for passing the assessment order based on such nonest order from TPO is not available to the AO in the instant case. AO thus could not legitimise the assessment order passed beyond the ordinary time limit of 31.12.2016 available under Section 153 of the Act. The impugned assessment order passed is barred by limitation and hence bad in law and thus requires to be quashed - Appeal of the assessee is allowed.
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