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Income Tax - Case Laws
Showing 301 to 320 of 9304 Records
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2022 (12) TMI 948
Condone the delay in making the third payment under the Income Declaration Scheme, 2016 - Scope amendment to the scheme by Finance (No.2) Act of 2019 - HELD THAT:- In terms of the said amendment, notification dated 13th December, 2019 was issued by the Ministry of Finance by which the payment could be made on or before 31st January, 2020. Since this amendment has been given retrospective effect and the appellant having paid third installment well before the notified date, this Court is of the prima facie view that the benefit of such amendment can be extended to the assessee.
It appears that the representation given by the appellant to the PCIT – 8 (Kolkata) dated 13th January, 2020 was not answered and stated to be still pending before the authority. Even much earlier, AO had completed the assessment. Thus, the assessee is left in a piquant situation and is before this Court for necessary relief.
While upholding the view taken by the learned Single Bench, we are inclined to grant liberty to the appellant to approach the respondent authorities by way of fresh representation in which the amendment made by Finance (No.2) Act of 2019 as well as notification dated 13th December, 2019 can be placed before the concerned authority. Added to the fact that the third installment had been paid by the appellant well before the cut off date together with interest and if such representation is given to the appropriate authority, the same shall be considered and a speaking order be passed on merit and in accordance with law within a period of three weeks from the date of receipt of server copy of this order.
AO is directed not to initiate any coercive step against the appellant for recovery of the tax and penalty pursuant to the assessment, which was framed on 26th December, 2017.
The appellant is directed to enclose a copy of the representation dated 13th January, 2020 along with the said fresh representation, which has been directed to be submitted in terms of the above order.
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2022 (12) TMI 947
Addition u/s 68 - unexplained credit - sale of penny stock company - bogus Long-Term Capital Gain - HELD THAT:- Tribunal via the impugned order has noted, that the assessing officer has not applied his mind, and has merely relied upon the Investigation Report.
According to the Tribunal, as to whether or not the assessee was aware of the fact that the shares of the aforementioned companies which had been bought were through penny stocks, was an issue of fact. It also appears from the record, that SEBI had carried out investigations against 239 persons.
Tribunal records, that the names of the aforementioned companies were not in the list of the said 239 persons. As neither the Assessing Officer conducted any enquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. The report of Investigation Wing is much later than the dates of purchase /sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhere SEBI has declared the transaction transacted at earlier dates as void.
According to us, these being findings of fact, they cannot be interfered by us.
We are also informed, that the appellant/revenue had preferred appeals against the very same order in the case of Ms Karuna Garg and Ms Krishna Devi [2022 (12) TMI 858 - DELHI HIGH COURT] - These appeals was dismissed by a coordinate bench.
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2022 (12) TMI 946
TDS u/s 194J - Non deduction of tax from the payment of Royalty - CIT(A) deleted the addition - DR has submitted that CIT(A) has erred in deleting the disallowance made by the AO u/s 40(a)(ia) without considering th fact that even through the expenditure is amortised under Rule 9A of the Income Tax Rules, disallowance under section 40(a)(ia) of the Act has to be made - HELD THAT:- We have gone through the above order passed by the CIT(A). Without considering the issue properly, CIT(A) has deleted the addition made by the AO. Thus, the order passed by the ld. CIT(A) has to be reversed. Accordingly, we reverse the order passed by the ld. CIT(A) and allow the appeal filed by the Revenue.
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2022 (12) TMI 945
Incorrect depreciation claim - fractional ownership - real ownership - assets are held/ utilized jointly with a sister concern as they share same premises for conducting business operations and accordingly the assets are capitalized in the proportion of ownership and therefore proportionate depreciation has been claimed - HELD THAT:- Assessee does not dispute the fact that only one asset is the subject matter of dispute and the same was purchased by sister concern. The invoice is in the favour of the sister concern thus, the defacto and de-jure owner happens to be the sister concern. Merely because it has allowed to be share it to the sister concern, the assessee/ appellant, that does not give any right, title or interest in the nature of ownership to the assessee so as to be entitled for claim of depreciation u/s 32 of the Act. Said section provides that to claim depreciation assessee should be the owner of the asset and the asset must be used for the purposes of business or profession. Here in the case in hand both the requirements are not fulfilled as assessee is not the owner of the asset and the asset is not used for the purpose of business or profession of the owner, which is the sister concern but was used for the purpose of business of the appellant which was not the owner
Merely entering into an agreement or understanding of user of a asset, a License may be created in favour of user, however, that does not vest the user with the interest of any nature akin to owner for the purpose of Section 32(1) of the Act. So also no claim of depreciation beyond the law is allowable on mutual understanding between the owner and the user. The grounds raised have no substance. The appeal of assessee is dismissed.
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2022 (12) TMI 944
Estimation of profit @5% of the turnover - profit from liquor business - HELD THAT:- As in the instant case, as mentioned by the AO neither the assessee has maintained any books of accounts nor any books of accounts were produced for verification either at the time of search proceedings or during the post search proceedings or assessment proceedings. Therefore, the same decision, in our opinion, is not applicable to the facts of the present case. Even other wise also, the assessee during the course of assessment proceedings as well as appeal proceedings before theCIT(A) had requested to adopt the net profit rate of 5%. We do not find any infirmity in the order of the CIT(A) restricting the profit rate at 5% of the turnover. The ground raised by the assessee on this issue is accordingly dismissed.
Addition as non agricultural income - HELD THAT:- Assessee, during the course of assessment proceedings, had not produced the requisite details as called for by the AO. However, before the ld.CIT(A), the assessee had filed the copy of certificate from the VRO regarding agricultural income along with other documents. Although, during the remand proceedings, the assessee did not appear, however, these documents were very much available with the AO and he could have conducted necessary enquiries. However, the AO was waiting for the assessee to appear and did not conduct any independent enquiry. Since, the agricultural income shown by the assessee is very less and since the assessee had filed a certificate from the VRO regarding the agricultural income along with other documents, therefore, considering the totality of the facts of the case including the smallness of the amount and this being an old matter, we direct the AO to restrict such disallowance to 10% of the income shown. Assessee ground is partly allowed.
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2022 (12) TMI 943
Deduction u/s.80P(2)(a)(i) - interest received on Fixed Deposits kept with Bank - deduction was claimed with reference to interest income earned from banks which was not eligible for deduction u/s.80P - HELD THAT:- The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit [2019 (4) TMI 682 - ITAT PUNE] decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit [2015 (8) TMI 1085 - ITAT PUNE] has allowed similar deduction.
In the said case, the Tribunal discussed the contrary views expressed by Tumkur Merchants Souharda Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] allowing deduction u/s. 80P on interest income and that of the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd.[2014 (9) TMI 833 - DELHI HIGH COURT] not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] - No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit [2015 (8) TMI 1085 - ITAT PUNE] preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). The position continues to remain the same before this Tribunal also.
When we consider the effect of this decision, it turns out that the same is not germane to case under consideration in view of the position that the primary claim of the extant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act. We, therefore, overturn the impugned order on this score and direct to grant deduction u/s.80P(2)(a)(i) of the Act. Assessee appeal is allowed.
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2022 (12) TMI 942
Intimation framed u/s 143(1) - Foreign tax credit denied - assessee had derived salary income from Australia with which Indian Government had entered into DTAA - HELD THAT:- CIT(A) had chosen the convenient method to deny the said benefit to the assessee by going into the technical ground stating that intimation u/s 143(1) had lost its identity pursuant to section 154 order passed by Ld. AO. As per the provisions of the Act, against the intimation u/s 143(1) of the Act, the appeal shall lie to the CIT(A).
CIT(A) need not take cognizance of section 154 proceedings which had happened subsequent to the filing of appeal. Though, the revised return in the instant case had been filed by the assessee beyond the time limit prescribed u/s 139(4) of the Act altogether with the revised Form-67, the grievance of the assessee had to be addressed on merits.
We deem it fit and proper to remand this appeal to the file of AO to verify the veracity of the claim made by the assessee in the revised return and revised Form-67 in the interest of substantial justice to the assessee. We hold that the substantial justice would prevail over technical considerations. Accordingly, the ground raised by the assessee is allowed for statistical purposes.
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2022 (12) TMI 941
Revision u/s 263 - As per CIT no enquiry which has been made by the AO on the applicability of provisions of section 115 BBE - HELD THAT:- The order passed by the AO is not erroneous and prejudicial to the interests of the Revenue. The issue which was the subject matter of 263 proceedings has been specifically discussed by the AO during the course of assessment and therefore it is not a case where there has been no enquiry which has been made by the AO on the applicability of provisions of section 115 BBE in the instant facts or that there has been a non-application of mind by the AO during the course of assessment proceedings.
As observed that the amendment to provisions of section 115 BBE of the Act came into effect after survey was conducted on the assessee, and consequently, in the light of judicial precedents highlighted above, this is not a fit case for invoking the provisions of section 263 of the Act. Appeal of the assessee is allowed.
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2022 (12) TMI 940
Excess deduction claimed u/s 80U - unexplained money u/s 69A - A.O. was silent about the section under which the addition was made - AO has calculated tax u/s 115BBE - HELD THAT:- Assessee has not challenged the additions made by the AO u/s 80U and 80G of the Act, but has only challenged the computation of tax liability by the AO u/s 115BBE - With respect to the first contention of the assessee that unless there is a specific finding that addition under section 80U is made u/s 68 or 69 then tax cannot be imposed under section 115BBE of the Act, we are in agreement with the contention of the assessee that once the AO has not invoked the provisions of section 68 to 69 tax cannot be imposed under a deeming provisions of section 115BBE - In the instant case, AO made disallowance of deduction claimed u/s. 80U (permanent disability) of the Act but did not do any discussion as to how the case of the assessee is covered by the provisions of section 68 or 69 of the Act so as as to compute tax liability u/s. 155BBE.
Non production of receipt as Unexplained money u/s 69A - Whether ncorrect claim of donation under section 80G cannot be made under section 69A? - HELD THAT:- As we observe that section 69A of the Act can be invoked only in case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of account and the assessee offers no explanation about the nature and source of acquisition of such money, bullion, jewellery or other valuable articles.
Therefore, AO has erred in facts and in law in invoking the provisions of section 69A in respect of incorrect claim of deduction under section 80G - Accordingly, since provisions of section 69A cannot be invoked in respect of disallowance made under section 80G and without a specific finding that the assessee is in possession of any unexplained money, bullion, jewellery or other valuable article in his possession, accordingly, AO cannot compute tax liability under section 115BBE with respect to disallowance for incorrect claim u/s 80G.
Appeal of the assessee is allowed.
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2022 (12) TMI 939
Deemed dividend u/s 2(22)(e) - receipt of amount from the lender co. where the assessee holds substantial interest is in question - credibility of explanation offered by the assessee to support its claim of business transaction qua a loan transaction of ordinary nature - assessee has inter alia undertaken certain related party transactions - as found that the assessee has received loans from a company wherein the assessee holds 20% equity shares and thus a holds substantial interest - HELD THAT:- The assessee claimed to have entered into an MOU dated 2nd April, 2012 with the lender company seeking to part with 50% right therein in favour of Landspace. As claimed, the MOU was acted upon and the money was transferred by the lender to the assessee in consideration of acquisition of rights in the property allotted in favour of the assessee by the builder. An Agreement to Sale (ATS) dated 13.07.2015 was thereafter was entered into jointly with Landspace (confirming party) as proposed sellers with the proposed buyer M/s. Garrison Developer. MOU was duly acted upon at a later point of time. The resultant profit were also claimed to have been shared equally as provided in MOU to support the inherent character of money received from Landspace.
These facts clearly vindicates the claim of the assessee that the amount received was in consideration of transfer of rights in the property allotted and thus cannot be regarded as a loan transaction of ordinary nature.
To support the nature of money received from Landspace, the assessee claims that such MOU has been acted upon. Where the rights in the property was sold and profits have been shared as business receipt by Landspace, the other considerations fades into insignificance. CIT(A), has examined the issue threadbare and has rightly concluded that the amount obtained from Landspace is in the nature of business transaction outside the purview of Section 2(22)(e). Mere declaration in the financial statement of amount received as inter corporate loan is neither here nor there.
The nature of amount received is vouched by the subsequent actions. Thus, propriety of such explanation can hardly be questioned. Hence, without further delineation of factual matrix, we see no perceptible justification in the allegations made by the Revenue seeking to displace the character of transaction. We thus endorse the view taken by the CIT(A) and hence decline to interfere. Appeal of the Revenue is dismissed.
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2022 (12) TMI 938
Rectification of mistake u/s 154 - seeking amendment in the Intimation u/s. 143(1)(a) in respect of the income claimed as wrongly returned, i.e., by way of a mistake - HELD THAT:- AO in the instant case would be required to decide as to whether the mistake in the return furnished by the assessee is, or lies, as claimed by him, in disclosing mistakenly additional income (Rs. 14.05 lacs) or, as inferred by the Revenue, in computing his tax liability incorrectly, i.e., corresponding to the additional tax liability on the said additional income. That the tax amount computed agrees with the income claimed as returned incorrectly, makes it an either or situation, so that, as afore-stated, either could be correct, and the same has to be determined in the conspectus of the case.
The insistence of the Revenue on one, in preference to the other, without in any manner stating as to why it considers it as so, cannot be sustained. In fine, the same, i.e., the decision one way or the other ought to be a result of a considered opinion based on material on record, per a speaking order. The assessee in this regard, claims that the impugned income is of a non-existent business, “returned” by mistake, with his balance-sheet for the current year being in continuation of the closing balance-sheet for the immediately preceding year and, further, and similarly, the balance-sheet for the succeeding year also in agreement with that for that current year, so that all the three represent a continuum, even as additional income is only for the current year. This argument, surely valid and corroborative of his claim, made per submissions before the ld. CIT(A) do not find any mention in the impugned order.
The matter, in view of the foregoing, is restored back to the file of the AO for adjudication afresh on merits and in accordance with law per a speaking order, after hearing the assessee, being also the mandate of sec. 154. Needless to add, the AO shall require the assessee to file all the required documents, which must be contemporaneous and proven, in support of his return of income. In this context we find on record (PB-1, pg. 9) a return for the current year reflecting the income claimed as correct, filed on 14/11/2018. How has the same been filed is not clear. Further, it may be, in view of our stating of either of the two mistakes as possible, both of which though simultaneously cannot be, does not make the issue contentious or debatable.
We may clarify that we are conscious that the Intimation in the instant case was passed on 09/5/2013, while the rectification application under appeal is that filed on 27/11/2018, so that it is apparently outside the time limit u/s. 154(7).
In Hind Wire Industries Ltd. v. CIT [1995 (1) TMI 2 - SUPREME COURT] it stood explained that the expression “from the date of the order sought to be amended” in section 154(7) was not qualified in any way, and it did not necessarily mean the original order: it could be any order including the amended or rectified order. The assessee has in the instant case, as afore-noted, made several applications, the first being on 07/7/2013, with the first responded to by the Revenue being dated 03/12/2015. The proceedings, accordingly, are valid.
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2022 (12) TMI 937
Revision u/s 263 by CIT - treating the order of assessment passed u/s.143(3) r.w.s 153A as erroneous - HELD THAT:- The scope of making assessment of total income u/s.153A of the Act in an unabated assessment proceedings is limited and can be only of assessing income that is not disclosed which is detected or which emanates from material found in the course of search of the Assessee, as has been held by M/S. Delhi International Airport Ltd.[2021 (11) TMI 928 - KARNATAKA HIGH COURT]
In assessee’s case the assessment is completed u/s.143(3) r.w.s. 153A and as per the ratio laid down by the Hon’ble High Court the scope of making additions by the AO is restricted only to income that is not disclosed which is detected or which emanates from material found in the course of search which are incriminating. The impugned issue of assets written off and the expenditure claimed without TDS for which the PCIT has invoked the revisionary power are not arising out of incriminating material and have already been disclosed in the financials of the assessee.
AO therefore could not have made any addition towards the same. We therefore are of the considered view that treating the order of assessment passed u/s.143(3) r.w.s 153A as erroneous on this ground is not tenable and that the PCIT is not correct in invoking the revisionary powers u/s.263. Accordingly the order passed u/s.263 by the PCIT is quashed.
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2022 (12) TMI 936
Unexplained investment u/s 69 - Reliance on un-signed, unstamped, Satakhat, which has not been registered and is found from CD of computer of a person not connected with the assessee - violation of principle of natural justice - additions made in absence of providing opportunity of cross-examination of the persons - HELD THAT:- Hon'ble Supreme Court of India, in the case of Krishnachand Chelaram [1980 (9) TMI 3 - SUPREME COURT] and Andaman Timber Industries Vs. Commissioner of Central Excise[2015 (10) TMI 442 - SUPREME COURT] has held that additions without providing the opportunity of cross examination is in violation of natural justice. We note that additions made in absence of providing opportunity of cross-examination of the persons, whose statement has been relied upon for making the additions is violation of principle of natural justice.
We also note that not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witness were made the basis of the impugned order is a serious flaw which makes the order nullity. We note that same view was expressed in the case of Eastern Commercial Enterprises [1993 (12) TMI 26 - CALCUTTA HIGH COURT] wherein it was held that it is a trite law that cross examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against the party unless the party is put on notice of the case made out against him.
The documents, which were found in the possession of other person, does not bear the name of the assessee, that is, the name of the assessee is not mentioned in the statement of another person. No addition can be made, if documents impounded during survey are unsigned and incomplete. No addition of unaccounted investment can be sustained when Assessing Officer had not made any further investigation.
No statement recorded of land owners or purchasers as mentioned in the sale deed by AO to corroborate contents of impounded Satakhat. No specific query raised in respect of impounded Satakhat or the assessee to Turmish or Meera Kama by investing wing or AO.
No addition can be made in respect of un-signed, unstamped, Satakhat, which has not been registered and is found from CD of computer of a person who is not connected with the assessee. In view of these facts and circumstances and in law, the addition so made by the AO is without any basis, without any corroborating evidences and without allowing due opportunity of cross-examination to the assessee and is therefore, unsustainable in law. Therefore, we delete these additions. Appeals filed by the assessee are allowed.
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2022 (12) TMI 935
Addition u/s 68 - difference in share premium amount - as per AO instead of following method of Fair Market Value of shares as prescribed under Rule 11UA of the Income Tax Rules, 1962, the assessee has worked out the value of shares based on the NAV method - HELD THAT:- All the Five investing companies are shell/conduit companies having no business of its own , and are merely created to launder money in order to convert unaccounted money of the investing companies under the garb of share capital/share premium to bring it into the books of the invested company under the farce shell of legitimate share capital and share premium , with an intent and view to defraud revenue and evade taxes. Thus, what is apparent is not real.
We hold that the share capital including share premium raised by the assessee company, to the tune of Rs. 1,51,20,000/- from these five investing companies based at Kolkatta , is infact the undisclosed income of the assessee which was inducted by way of share capital and share premium in the assessee company by laundering through these five investing companies based at Kolkatta, and the assessee company fails to prove the creditworthiness of these five investing companies as well genuineness of these transactions, and the requirements of Section 68 read with newly inserted proviso are not fulfilled/satisfied, and hence we uphold the appellate order passed by ld. CIT(A) which in turn confirmed the addition made by the AO in the assessment order, to the tune of Rs. 1,51,20,000/- u/s 68 read with Section 115BBE of the 1961 Act.
Addition u/s 56(2)(viib) with respect to 170000 equity shares of Rs. 10 face value issued by the assessee company at an issue price of Rs. 90 per share including share premium of Rs. 80 per share , issued by the assessee company during the year under consideration to thirteen investors - In a case of closely held company in which public is not substantially interested , which receives in any previous year , from any person resident any consideration for issue of shares that exceeds the FMV of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares, shall be treated as income from other sources and brought to tax.
There are certain exceptions provided in Section 56(2)(viib). The Explanation to Section 56(2)(viib) provide the manner of computation of Fair Market Value. The method prescribed as is provided under Section 56(2)(viib) are provided in Rule 11UA of Income-tax Rules , 1962. There was amendment in Rule 11UA by Income-tax(Fifteenth Amendment Rules, 2012, w.e.f. 29.11.2012. The assessee has received consideration for issue of shares in May/June, 2012, but the date of allotment of shares is not furnished by the assessee .
AO has computed Fair Market Value of shares at Rs. 25.29 per equity shares, but the AO has not furnished any details/break-up of the working to arrive at FMV of Rs. 25.29 per equity shares. The assessee has worked out FMV of Rs. 87 per equity share. No valuation report is furnished by the assessee. The valuation as determined by the assessee of Rs. 87 is on NAV basis. The assessee raised in the year 2009-10 ( date of incorporation of the assessee 23.06.2009) share capital by issuing equity shares of Rs. 10 each at share premium of Rs. 65 per share , to three Kolkatta based investing companies, which held more than 80% of share capital of the assessee, but while submitting the list of shareholders as at 31.03.2011 , these three companies are not reflected as shareholders. The assessee has not given any explanation for the same. The assessee’s valuation of Rs. 87 per share as FMV vis-à-vis face value of Rs. 10 per share , is mainly/majorly attributable to share premium received from these three investing companies based at Kolkatta in the year 2009-10.
Three investing companies are untraceable - The issue has not been comprehensively dealt with by the authorities below. In our considered view, this matter need to be restored back to the file of the AO for fresh determination of income chargeable to tax u/s 56(2)(viib), after giving opportunity of being heard to the assessee. Thus, this issue is restored to the file of the AO for fresh denovo adjudication, after giving proper opportunity to the assessee. The assessee shall be allowed by AO to submit evidences/explanation in its defence, which shall be adjudicated by AO on merits in accordance with law.
Appeal filed by assessee partly allowed for statistical purposes.
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2022 (12) TMI 934
Addition was based on a statement u/s 132(4) - Capital gain computation - cost of construction at Rs.2200/- per sq.ft - assessee argued addition cannot be made solely on the basis of 132(4) statement without bringing any corroborative material - HELD THAT:- As held in various decisions that though the admission u/s 132(4) is an extremely important piece of evidence, but it cannot be said to be conclusive and it is open to the person who made it to show it that the impugned statement has been incorrectly made and the person making the statement should be given proper opportunity to show that it does not show the correct state of facts.
In the instant case, we find the assessee during the course of his statement recorded during the course of search u/s 132(4) in reply to question No.12 had stated that “the approximate cost of construction is Rs.2500/-. Further, during the course of P.O operation dated 22.01.2018, the M.D of the assessee had categorically stated that the cost of construction as per the agreement entered between Shri M. Satchidananda Rao with the Developer M/s. Namishree Infratech Project was Rs.1600/-.
During the course of assessment proceedings; the assessee had furnished a confirmation letter from the developer M/s. Namishree Infratech Project vide letter dated 21.10.2019 that the estimated cost of construction was likely to be Rs.1600/- for the total project. AO had completely disregarded the same although he is also the Assessing Officer of the Developer. In the instant case, we find the addition was based solely on the basis of the statement of the Director of the assessee company at the time of search in the statement recorded u/s 132(4) but not backed by any other tangible or cogent evidence.
Addition cannot be made solely on the basis of statement recorded u/s 132(4) without any corroborative evidence to substantiate the same especially when the assessee has retracted from his earlier statement by producing cogent evidence which has not been rebutted by the Assessing Officer in any manner - Appeal filed by the Revenue is dismissed.
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2022 (12) TMI 933
Assessment u/s 144 - Whether AO ought to have invoked the provisions of Section 145(3) before framing the assessment u/s 144? - HELD THAT:- Only when the AO proposed to frame the assessment on best judgment basis the estimation of income is required to be made but when the AO has made specific disallowance of the claim then this proposition of estimation of income does not apply. In any case, the AO while framing the assessment cannot take an arbitrary decision or make improper additions but the AO being an adjudicating authority is supposed to assess the real income of the assessee. We do not subscribe to this reasoning of the CIT(A) that the AO ought to have invoked the provisions of Section 145(3) before framing the assessment u/s 144 of the Act.
CIT(A) duly acknowledged the fact that the assessee did not produce the books of account, bills and vouchers as well as other relevant records before the AO despite the notices issued u/s 142(1) of the Income Tax Act and thereby, the assessee has failed to prove its claim on account of current liabilities as well as the expenditures and particularly to establish that these expenses are incurred wholly and exclusively for the business of the assessee. Therefore, instead of allowing the assessee to discharge its primary onus in support of these claims, the CIT(A) on its own ask the assessee to produce the complete books of accounts, relevant vouchers and supporting documents including the copy of sale-deeds/agreements.
Once the books of accounts and other relevant records was produced by the assessee first time during the appellate proceedings before the CIT(A), the principles of natural justice demands that the other party should be given an opportunity to verify the evidence first time produced at the appellate stage. CIT(A) without giving any reason in the impugned order as to why the books of accounts and other relevant material produced by the assessee was not referred to the AO for his examination and report has passed the impugned order. Both the parties have fairly agreed before us that the matter can be restored to the file of AO for de novo assessment. This in our considered opinion is a clear violation of principles of natural justice, as the AO was not even given an opportunity to verify this material/evidence and give his comments/report.
As in the facts and circumstances of the case and in the interest of justice we set aside the impugned order of the CIT(A) and the matter is remanded to the record of the AO for passing the assessment order afresh after verification and examination of the relevant record, books of accounts to be produced by the assessee as well as affording a proper opportunity of hearing to the assessee.
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2022 (12) TMI 932
Addition u/s 68 - “on money receipts” - unexplained credit - Addition being the amount received in cash on booking of flat as per their seized diary - HELD THAT:- AO has not investigated the facts if the assessee returned part of cash component to Bhajiyawala Group or not nor verified if remaining of Rs. 21 lacs were offered in the subsequent year or not. AO has brought the entire amount to tax under section 68. So far as other alternative submissions of the assessee before assessing officer as well as submissions made before me, is that only the income component of such alleged on money may be considered for making additions and not the entire money.
As find that division bench of this Tribunal while considering the similar issue for taxing the income component of on money in Enn Enn Corporation[2022 (4) TMI 1481 - ITAT SURAT] by following the decisions of Tribunal in other case sustained/ upheld the addition of 20% of alleged ‘on money’. However, no straight jacket formula can be applied in such case, therefore, direct the assessing officer to restrict the addition to the extent of 25% of Rs. 48 lacs. Ground of the appeal is partly allowed.
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2022 (12) TMI 931
Determining the income of the assessee as against Nil income - Non existence of business of assessee - commencement of business - Disallowance of carry forward and set off of Depreciation, Establishment and General Expenses and Interest on Loan - assessee is a Co-operative Society (AOP) and derives income from rent and other income - HELD THAT:- We note that before the CIT(A), it was claimed that the assessee still intends to continue the business of distribution of electricity, but however, there was no evidences were shown before the CIT(A) as the assessee has every chance in continuing its business operations.
CIT(A) clearly held that the assessee is not entitled to claim depreciation, establishment and general expenses and interest on loan as the assessee handed over electricity distribution and power system including all electrical system, sub-stations, overhead lines, service lines, office and associated facilities like lands, building, works, material, stores and plants in the area of its operation to MSEDCL w.e.f. 01-02-2011 which means the assessee has no business existed as on the end of F.Y. 2011 itself. The only contention has been made from 2011 to the year under consideration i.e. 2015-16, even before us, that the assessee’s renewal application is pending before the competent appellate authority. When there is no business existed, in our opinion, the assessee is not entitled to claim deduction under the head “Depreciation, Establishment and General Expenses and Interest on Loan” and resultantly, carrying forward losses.
We totally agree with the finding of CIT(A) in confirming the order of AO in denying deduction claimed by the assessee. Therefore, we do not find any infirmity in the order of CIT(A) and it is justified. Thus, the grounds raised by the assessee are dismissed.
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2022 (12) TMI 930
Disallowance @ 10% out of foreign currency and credit expenses - HELD THAT:- The disallowance @ 10% out of foreign currency and credit expenses has no such specific finding. The assessee in its submission mentioned that the turnover of the assessee 177.64 crores out of which exports amounting to Rs. 70.94 crores. The appellant exported goods to various countries including Italy, Brazil, Germany, China, France, Sweden, Switzerland and Turkey. The appellant claimed foreign traveling expenses Rs. 84,22,581/-. In this reference, the assessee enclosed complete details of expenses so the partial disallowance in relation to the expenses was uncalled for as per the assessee.
Here, we find that the 10% addition in the accountant of foreign currency and credit card expenses is liable to be deleted.
Staff and welfare gift shagun expenses - To encourage the efficiency working mobility the amount was paid to staff in different occasions. All the payments are vouched and details of the payments are enclosed in APB pages 8 to 56 by the assessee. The expenses are related to this business. So, we find no specific findings in relation to this disallowance of Rs. 4 lac by the Ld. CIT(A) and the expenses are fully connected with the business income of the assessee. Accordingly, the addition amount of Rs. 4 lac is liable to be deleted.
Disallowance of depreciation - In the observation of the revenue there is no under valuation of the assets. The assessee booked the expenses in capital account and reason of difference is explained before the revenue authorities. Also a copy of the valuation report from registered valuer of assessee is enclosed on which the clear reflection of assessee's own claim. The report of valuer Mr. V.K. Singhal is duly enclosed - Considering this, the depreciation cannot be rejected on basis of this valuation report. So, the addition is liable to be deleted.
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2022 (12) TMI 929
Correct head of income - treatment of profit on transfer of immovable properties as business profit instead of long term capital gains - HELD THAT:- The consideration was settled partly by cheques and partly by transfer of certain vacant parcels of land in favor of the assessee which were under litigation and finally, sold in this year. Assessee, the receivables constitute business debt and any loss / gains arising in settlement thereof would be business income / loss for the assessee. Assessee has claimed losses on re-possessed assets as business loss in this year which has been allowed also.
The assignment of debt in favour of another entity partly in exchange of land was integral part of the business activities of the assessee and any gain / loss arising on such an asset should be viewed as business profits only. The situation is no different from a situation wherein the assessee in exchange of loan debts, repossesses the assets of the borrower and sell the same subsequently in discharge of loan assets. Any resultant gains / losses arising therefrom would be part of normal business activities of the assessee.
As clear that origin of the parcels of land so acquired is business asset only and therefore, the resultants gains would be business income of the assessee. The said proposition is duly supported by the decision of Hon’ble Supreme Court as referred to in the impugned order. The case law of Pune Tribunal has rightly been distinguished [1991 (1) TMI 242 - ITAT PUNE] by CIT(A) and we concur with the same. We also concur with the findings that the land was received in lieu of a business loan foregone. The assets so received by the assessee would assume the character of same business assets irrespective of its treatment by the assessee in the books of accounts.
AR has averred that the land has been shown as part of fixed asset and therefore, the same should be taken as capital asset. However, it is settled position that entries in the books of accounts would not be determinative of nature of income of the assessee.
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