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Income Tax - Case Laws
Showing 361 to 380 of 9304 Records
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2022 (12) TMI 849
Guilty u/s 12 of Contempt of Courts Act, 1971 - Deputy Commissioner of Income Tax - deliberate and willful disobedience - Power to issue notice u/s 124 - DCIT jurisdiction to assess the petitioner at Lucknow - petitioner - applicant had been filing his returns at New Delhi - as argued local address was inserted deliberately to create jurisdiction, which, in fact, legally was not vested with the opposite party No.2. - contempt application under Section 12 of the Contempt of Courts Act, 1971 has been filed alleging willful and deliberate disobedience of judgment and order [2015 (3) TMI 1229 - ALLAHABAD HIGH COURT] passed by a Division Bench of this Court in Writ Petition - Whether changing the principal place of profession or residential address in PAN does not automatically change the jurisdiction of the AO - HELD THAT:- AO in spite of direction issued for consequential action, permitted to continue the outstanding amount for a period of seven months on the web portal and when this Court made query in the present contempt application in regard to consequential benefits granted to the applicant - petitioner, only then it was deleted from the web portal. This fact has been admitted by the opposite party in his affidavit dated 05.12.2022. This clearly amounts violation of the judgment and order passed by the division bench of this Court on 31.03.2015.
Civil contempt is punishable with imprisonment as well as fine. In a given case, the court may also penalise the party in contempt by ordering him to pay the costs of the application and a fine can also be imposed upon the contemnor.
Disobedience of this Court's order strikes at the very root of the rule of law on which the judicial system rests. The rule of law is the foundation of a democratic society. Judiciary is the guardian of the rule of law. Hence, it is not only the third pillar but also the central pillar of the democratic State.
On perusal of judgment and order dated 31.03.2015, it is crystal clear that notice issued by the Assessing Officer was quashed on the ground of jurisdiction as well as consequential orders were also directed to be set-aside. Meaning thereby, the Assessing Officer has to take care that the entry existing on the web portal was to be deleted immediately after passing of the judgment and order dated 31.03.2015 but deliberately and intentionally the outstanding of notice of assessment year 2011- 12 became operative on the web portal till seven months, which ruined the reputation of the applicant and this act of the Income Tax authority was in deliberate and willful disobedience of the judgment and order dated 31.03.2015.
Here, in the present case, as per own admission of Sri Manish Mishra, learned counsel for opposite party, the outstanding amount was deleted from the web portal after seven months, which amounts deliberate and willful disobedience of the judgment and order dated 31.03.2015, for which the opposite party is liable to be punished with imprisonment as well as fine.
Here, in the present case, this Court has set aside the notice dated 11.09.2013 on the ground of jurisdiction with further direction that as the notice has already been quashed, consequential order, if any, are also quashed. Meaning thereby, the outstanding showing on the web portal against the applicant was to be deleted immediately after the judgment but the authorities have permitted to continue the outstanding amount on the web portal for a period of seven months, which clearly violates the judgment and order dated 31.03.2015 and this act and action of the opposite party is deliberate in nature, for which he is liable to be punished.
The action of the opposite party is not only contemptuous but is also malicious. He took care with the money of the applicant in spite of clear direction of this Court and there is no justifiable reason for the said action. If the action of Mr. Harish Gidwani, Deputy Commissioner of Income Tax, Range -2, Lucknow is considered in the background by the allegations made against him, it was his purposeful act to harass the applicant in spite of order of the writ Court. Unnecessarily mens rea is not required to be proved in a case of contempt but in the present case the violation is willful, deliberate and coupled with intention and motive to harass the applicant.
This Court finds the opposite party - Mr. Harish Gidwani, Deputy Commissioner of Income Tax, Range-2, Lucknow to be guilty under Section 12 of Contempt of Courts Act, 1971.
A fine of Rs.25,000/- along with simple imprisonment for a period of one week is awarded to the contemnor - opposite parity i.e. Mr. Harish Gidwani, Deputy Commissioner of Income Tax, Range-2, Lucknow. In case of default, he would suffer one day's further simple imprisonment.
The contemnor - opposite parity Mr. Harish Gidwani, Deputy Commissioner of Income Tax, Range-2, Lucknow will surrender before the Senior Registrar of this Court at 03.00 p.m. on 16.12.2022, who will send him jail to serve out the sentence.
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2022 (12) TMI 848
Exemption u/s.11(1)(d) - Assessment of trust - corpus donations - Addition made towards anonymous donations and taxing the same u/s.115BBC of the Act - HELD THAT:- AO issued notices/summons to 10/5 donors and 9/4 responded by admitting the making of corpus donations. He, however, made addition even qua those donors who he had not issued any notice even though the assessee had given their address. This approach is not proper. If the AO chose to issue notice u/s.133(6) and summons u/s.131 in respect of a few of them, he cannot draw an adverse inference in respect of others who he did not issue any notice.
Genuineness of such other donors having made corpus donations has to be accepted. Going with the prescription of section 115BBC r.w.s.11(1)(d), only such corpus donations fall for consideration u/s 115BBC for which the assessee did not maintain and furnish address of the donors to the AO through the list. Therefore, set-aside the impugned order and remit the matter to the file of the AO for examining the list of corpus donors as given at page 350 onwards of the paper book and make addition only in respect of such donors whose addresses are not given. In carrying out this exercise, the AO will give adequate opportunity of hearing to the assessee.
Only the donations as per page 350 onwards of the paper books, where address of the donors were not given, fall within the domain of section 115BBC and the rest are eligible for exemption u/s.11(1)(d) of the Act. Assessee appeal is allowed for statistical purposes.
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2022 (12) TMI 847
Revision u/s 263 by CIT - disallowance of claim of deduction u/s 80P of the Act with respect to interest income accrued / received on the fixed deposits made with State Bank of India - HELD THAT:- As undisputed fact that the assessee society’s case for the Asst.Year 2017-18 was selected for limited scrutiny only with the reason to verify deduction under Chapter VIA of the I.T.Act and such verification was done by the then AO in the scrutiny assessment proceedings and assessment order dated 10.12.2019 u/s 143(3) was passed by accepting the claim of deduction u/s 80P and by accepting the income returned by the assessee society.
As AR contended that the assessee society invested in fixed deposits with State Bank of India only as stopgap arrangement to earn some income on the then surplus funds and it was clearly incidental income, eligible for deduction u/s 80P and one more opportunity may be given to the assessee to furnish it’s explanation before the Ld.PCIT for which the Ld.DR has not raised any objection.
Considering all we are of the view that it is a fit case to grant one more opportunity of being heard to the assessee - we direct the Ld.PCIT to pass order after giving opportunity of being heard to the assessee and the assessee is also directed to cooperate with the Ld.PCIT - Appeal of the assessee is allowed for statistical purpose.
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2022 (12) TMI 846
TP Adjustment - provisions of section 92BA(i) relating to expenditure referred in section 40A(2)(b) - As argued since clause (i) of section 92BA of the Act was omitted, payments made by the assessee U/s. 40A(2)(b) of the Act cannot be considered as specified domestic transaction - As stated since the provisions of clause(i) to section 92BA of the Act has been omitted by the Finance Act, 2017 w.e.f 1/4/2017 and hence it would be deemed that clause (i) of section 92BA of the Act was never in the statute - HELD THAT:- Where a particular provision in a statute is omitted with a saving clause in favour of the pending proceedings, then it can be reasonably inferred that the intention of the Legislature is that pending proceedings shall not continue. Therefore, the omission of clause (i) of section 92BA w.e.f 1/42017 shall render the pending proceedings invalid. However, in this case, the assessment was completed on 27/12/2016 much before the amendment came into effect by the Finance Act, 2017. We therefore find no merit in the argument of the Ld. AR and hereby dismiss the additional ground raised by the assessee.
TPO while considering the comparables have not considered the entrepreneurial companies which are engaged in the Palm Tree Plantation as well as production - HELD THAT:- As on perusal of the GOs submitted by the Ld. AR that 3F Oil Palm sells at a price lower than the notified rates to the assessee and hence we are of the considered view that there is no over-charging of price of the Oil Palm by 3F Oil Palm to the assessee. Similarly, we also note that the price charged to third parties ie., Non-Associated Enterprises is more than the price charged to the assessee by 3F Oil Palm. Further, from the financials submitted by the Ld. AR, we find that 3F Oil Palm has sold Rs. 7.68 Crs worth goods / services to the assessee as against the total sales of goods by 3F Oil Palm aggregating to Rs. 88.51 Crs. From the above, we find that the sales made by 3F Oil Palm to the assessee by less than 10% of the total sales of 3F Oil Palm.
We are inclined to remit the matter back to the file of the Ld. TPO to verify the claim made by the assessee-company with respect to price chart to third parties vis-à-vis price supplied to the assessee. Similarly, the Ld. TPO may also verify the price charged by 3F Oil Palm to the assessee as against the notified rates by the Government of Andhra Pradesh vide its Government Orders on Monthly basis. We therefore, direct the Ld. TPO to compare the rates and decide the matter in accordance with law after affording a reasonable opportunity of being heard to the assessee.
Disallowance of Miscellaneous Expenditure - HELD THAT:- As we could not accept the arguments of the Ld. AR that it is wholly and exclusively for the purpose of business or profession. The Ld. CIT(A) in his order in para 6.1 has considered this issue and has disallowed the gift expenses and Vaastu expenses which do not constitute as wholly and exclusively for the purpose of business or profession. In our considered view, since the Ld. CIT(A) has rightly considered the issue we find no infirmity in the order of the Ld. CIT(A) and hence this ground raised by the assessee is dismissed.
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2022 (12) TMI 845
Revenue recognition - Income in respect of the plots/villas - AO was of the view that substantial work has been executed and hence the revenue have to be recognised as per AS-7 - Considering 20% profit margin on projected cost, the AO worked out the net profit - CIT(Appeals) partly allowed assessee’s appeal and restricted the addition by holding that the net profit of the assessee has to be taken at 15% - HELD THAT:- It is on completion of the transaction of purchase and sale culminating into an extinguishment of the title of the vendor and simultaneous creation of the title of the vendee that the assessee earns profit or suffers loss. Receipt of Rs. 2,13,772 would, therefore, assume the character of income or profit only when sale transaction was completed in accordance with law.
Doctrine of “part performance” embodied in section 52A of the Transfer of Property Act could not also be brought into aid to treat the said receipt as trading receipt. The agreement in writing to sell, coupled with parting of possession, would not confer any legal title on the purchaser, i.e., the society and take the land out of the assessee's stock-in-trade. The assessee's method of accounting has no relevance in determining whether receipt of the above nature was trading receipt or income. The method of accounting, whether cash method or mercantile method, would have bearing only in respect of completed business transaction.
Thus, the impugned receipt would not constitute the assessee's taxable business income in the assessment year 1971-72. In the case of Shah Doshi & Co [1981 (3) TMI 56 - GUJARAT HIGH COURT] the Assessee firm, dealing in land, agreed to sale of land, which it agreed to purchase from original owner, to a third party though no sale deed had been executed in assessee's favour by original owner. The Gujarat High Court held that assessee could not treat part of profit arising from such transaction as value of its stock-in-trade in assessment year prior to execution of sale deed in favour of third party by original owner. Further, High Court held that profits arising from impugned transaction accrued to assessee only in assessment year in which sale deed was executed in favour of third party.
The judicial precedents on the subject as discussed above, in our considered view, the amounts received as interest free deposits by the assessee from the allottees could not be subject to tax as income in its hands during the year under consideration.
TDS u/s 195 - Disallowance of commission income - AO made disallowance in respect of commission income paid for marketing services to three parties based out of UK on account of not deduction of tax at source - HELD THAT:- In the case of Inox India (P.) Ltd [2021 (1) TMI 1283 - ITAT AHMEDABAD] held that where since services in respect of commission expenses were stated to be rendered outside India as well as utilized outside India, income arising by way of commission against rendition of agency services could not be deemed to accrue or arise in India in hands of recipients of such commission payments.
ITAT held that where income arising to non-resident commission agents is not found to be chargeable in India under section 4 read with section 5(2), obligation under section 195 for deduction of tax at source cannot be fastened upon assessee and in absence of statutory obligation arising under section 195 for deduction of tax in absence of chargeability of remittances, corresponding disallowance under section 40(a)(i) is without any merit and, thus, uncalled for.
In our considered view, there was no requirement for the assessee to deduct tax at source on such payments made to non-resident agents based out of UK, without anything to substantiate that such agents had a permanent establishment in India or that the services were rendered India or that the agents had visited India in connection with providing such services. Accordingly, in our view, the assessee was not required to deduct tax at source u/s 195 of the Act in respect of such payments. Ground of the assessee’s appeal is allowed.
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2022 (12) TMI 844
Nature of expenditure - expenditure on account of repairs - revenue or capital expenditure in nature - application of principles of commercial trading - HELD THAT:- Assessee has evidently demonstrated from the documents placed on record by referring to the inspection report for the inspection carried out in the year 2007 & 2008 as well as the terms of license agreement and the work order placed on Portek and a separate work order placed on Nextgen for upgradation of new automation system. Assessee has also categorically demarcated the expenses incurred on account of repairs of revenue in nature and of capital in nature which have been duly accounted and reported in the audited financial statements. It is thus axiomatic that the expenditure incurred by the assessee in the facts of the case are on revenue account which have been rightfully allowed by the ld. CIT(A). We thus, find no reason to interfere with the findings given by the ld. CIT(A) in this respect. Accordingly, Ground Nos. 1 to 5 by the Revenue in this respect are dismissed.
TDS u/s 194C - non-deduction of tax at source on railway siding charges and demurrage charges - HELD THAT:- It is an admitted fact that assessee is contractually bound by SAIL to act as a handling contractor for imported coking coal and there is an agreement between the two parties to the effect that any incidental charges relating to handling job were to be deducted from the payments made to assessee by SAIL. In pursuance of this activity of handling contractor for SAIL, assessee had received the payments from SAIL after deduction of the two impugned expenses. Assessee has claimed these two expenses as admissible expenses in its Profit & Loss account.
Reference is 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.
In the present case before us, Haldia Dock Complex, Kolkata Port Trust levied charges on SAIL who in turn deducted the same from the payments made by SAIL to the assessee. AO has raised his doubts whether SAIL has made payments for these levies to Haldia Dock Complex, Kolkata Port Trust after deduction of applicable tax at source which is separate from of the contractual arrangement between SAIL and assessee for the handling job of imported coking coal. Considering the factual matrix of the case and the two legal maxims dealt above, we do not find any reason to interfere with the finding given by ld. CIT(A) in this respect. Accordingly, Ground Nos. 6 to 8 by the Revenue in this respect are dismissed.
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2022 (12) TMI 843
Addition u/s 68 - Bogus LTCG - proximity of the time between the buy and sale operations - addition being 0.5% as alleged cost of arrangement of accommodation entry by treating it as unexplained expenditure u/s. 69C - HELD THAT:- The test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, the methodology adopted by the revenue cannot be faulted.
Test of preponderance of probabilities have to be applied and while doing so, the court cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. The assessee was not named in the report and when the assessee makes the claim for exemption, the onus of proof is on the assessee to prove the genuinity.
It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity.
The assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time - The assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee.Assessing Officers as well as the Commissioner (Appeals) have adopted an inferential process which is found to be a process which would be followed by a reasonable and prudent person.
Thus in the context of factual matrix of the present appeal before us narrated above, the position of law as enunciated in Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] carrying force of binding nature on the issue under consideration for us, we note that issue involved in this appeal is covered against the assessee by the said decision as the fact pattern is similar to that which were before the Hon’ble High Court. Since none appeared before us on behalf of the assessee, the relevant factual matrix was captured with the assistance of Ld. Sr. DR.
After taking into consideration the factual matrix of the case before us vis-à-vis the decision of Hon’ble jurisdictional High Court of Calcutta in Swati Bajaj & others (supra), we respectfully following the said decision carrying the force of binding nature, being the jurisdictional High Court, dismiss the appeal of the assessee and confirm the action of the Ld. CIT(A). Appeal of the assessee is dismissed.
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2022 (12) TMI 842
Addition treating cash deposit in bank accounts as income from undisclosed sources u/s 68 - assessee was selected for limited scrutiny through CASS for verification of cash deposits during demonetization period - whether addition has been made on surmises and conjectures without there being any direct material on record? - HELD THAT:- Undisputedly, the assessee had withdrawn the amount of Rs. 13,59,000/- and out of this the assessee has stated that a sum of Rs. 3,09,000/- was utilized for domestic needs and rest of the amount was deposited in the bank account. As find that the authorities below have not given any cogent reason for not accepting the explanation offered by the assessee.
In the absence of any evidence by the assessing authority that the amount which was available in the form of withdrawals from bank was utilized by the assessee for any other purpose, the addition cannot be sustained. Therefore, hereby direct the Assessing Officer to delete the addition. Grounds raised by the assessee are allowed.
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2022 (12) TMI 841
Prima facie adjustments - while processing the return u/s 143(1) - Disallowance of employees contribution to Provident Fund - Addition made based on the statement made in the Tax Audit Report while processing the return u/s 143(1) - HELD THAT:- It is not in dispute that assessee had remitted the employees contribution to Provident Fund beyond the due date prescribed under the Provident Fund Act, but had duly remitted the same before the due date of filing the return of income u/s 139(1) - This fact of remittance made by the assessee with delay had been reported by the Tax Auditor in the Tax Audit Report.
Tax Auditor had not even contemplated to disallow the employees’ contribution to Provident Fund wherever it is remitted beyond the due date prescribed under the Provident Fund Act. It is merely recording of facts and a mere statement made by the Tax Auditor in his audit report. CPC Bangalore had taken up this data from tax audit report and sought to disallow the same while processing the return u/s 143(1) of the Act, apparently by applying the provisions of section 143(1)(a)(iv) of the Act.
The tax auditor had not stated in the instant case to disallow Employees Contribution to Provident Fund wherever it is remitted beyond the due date under the respective Act. Hence, the said action of the Ld.CPC Bangalore in disallowing the employees’ contribution to Provident Fund while processing the return u/s 143(1) of the Act is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. Our view is further fortified by the co-ordinate bench decision of this Tribunal in the case of Kalpesh Synthetics Pvt Ltd. [2022 (5) TMI 461 - ITAT MUMBAI] - Decided in favour of assessee.
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2022 (12) TMI 840
Revision u/s 263 by CIT - Unabsorbed Depreciation or unabsorbed Business Loss - The limitation for carrying forward of business loss do not apply to carrying forward the unabsorbed Depreciation - HELD THAT:- Once the AO has considered the issue and has accepted the explanation of the assessee, then there is no scope for the PCIT to take up said issue for revision proceedings on the guise of inadequate enquiry. We further noted that the PCIT may assume jurisdiction to revise assessment order, in a case, where there is no enquiry at all. However, he does not have power to revise the assessment order, in a case, where enquiry has been made and according to the PCIT, enquiry is inadequate and this principle is supported by the decision of CIT v. Gabriel India Ltd. [1993 (4) TMI 55 - BOMBAY HIGH COURT]
As regards unabsorbed depreciation to be carry forward to subsequent years, the PCIT was of the opinion that although, the assessee has furnished return of income for the AYs 2012-13 to 2014-15 beyond due date specified u/s.139(1) of the Act, but the AO has allowed to carry forward unabsorbed depreciation. We find that once again the reasons given by the PCIT to revise the assessment order on this issue is devoid of merits for simple reason that the issue before the AO is AY 2015-16 and for this assessment year, the assessee has returned ‘nil’ total income.
Even, assuming for a moment, the PCIT is right on his observation, but fact remains that brought forward unabsorbed depreciation can very well be examined by the AO when the assessee has claimed set off of unabsorbed depreciation against current year income in subsequent assessment years. Since, there is no positive income for the impugned assessment year and the assessee has not claimed set off of unabsorbed depreciation there is no prejudice is caused to the Revenue for the impugned assessment year and thus, the question of revision of assessment order on this issue does not arise. PCIT is erred in revising the assessment order passed by the AO u/s.143(3) - order passed by the PCIT u/s.263 quashed - Decided in favour of assessee.
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2022 (12) TMI 839
Unexplained cash credit u/s. 68 - cash deposits found in the bank account of the assessee - assessee could not submit any evidence in support of his claim that source for cash deposit is out of known source of income - HELD THAT:- Although the assessee could not justify cash deposit in his bank account with valid evidence, but in our considered view the CIT(A) should not have summarily rejected affidavit filed by nine persons who claimed to be closed relatives of the assessee.
When the assessee has filed affidavit from certain persons, it is the duty of the authorities below to verify the claim of the assessee and summon the persons from whom the assessee claims to have received cash. In this case, CIT(A) summarily rejected affidavit filed by the assessee to justify source for cash deposit without carrying out further enquiries to ascertain the claim of the assessee, in light of affidavit filed by various persons.
Neither the assessee justified source for cash deposit with necessary evidence, nor the CIT(A) reached a the conclusion that cash deposits with bank account is unexplained income of the assessee, which can be assessed u/s. 68.
Thus to settle dispute between the parties by restoring some sought of estimation of income towards cash deposits found in the bank account of the assessee. Therefore, we deem it appropriate to direct the AO to estimate 20% profit on total cash deposits found in the bank account of the assessee. Hence, we direct the AO to sustain 20% profit on total cash deposits and delete balance amount of addition made u/s. 68 of the Act. Appeal filed by the assessee is partly allowed.
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2022 (12) TMI 838
Assessment u/s 153A /153C - Necessity to record satisfaction - As argued satisfaction as required u/s. 153C was not recorded by the Ld. AO. - incriminating material found and seized at the time of search and seizure operations U/s. 132 - HELD THAT:- Since there is no representation by the assessee before us, based on the material available on record, we are of the considered view that the CIT(A) has rightly examined the facts in the present case and has rejected the legal ground raised by the assessee and therefore we found no infirmity in the order of the Ld. CIT(A) and hence no interference is required in the order of the Ld. CIT(A) on this issue.
Commencement of six preceding assessment years - We are of the considered view that the Ld. CIT(A) has rightly examined and adjudicated the issue that construction of provision leads to distortion and antivirus to the letter and spirit of the law. Therefore as unable to find any reason to agree with the argument of the appellant that the AY 2006-07 is beyond six preceding AYs. Accordingly, the legal grounds and the additional grounds raised by the appellant are rejected being illogical and such situation amounts to ‘putting the cart before the horse" - no interference is required on this issue.
Additions of the opening balance of capital and loans and advances appearing on the assets side of the balance sheet - The overall impression conveyed by the details is that the appellant is having taxable income but deliberately not filed the returns of income. He has confirmed the fact of non-filing the returns of income during the appellant proceedings but reasons were not made known except stating that the appellant did not understand the gravity of non-filing the return of income as he was illiterate and not aware of the consequences of non-filing. This plea of the appellant may look reasonable before conducting survey U/s. 133A of the Act. The same plea holds no water subsequent to survey operation due to the fact that the appellant appeared before lower authorities, filed details with the aid and service of professional, deposed statements and he was made aware of the consequences. Hence, the plea of ignorance is rejected and the conduct is contumacious to the authority - no interference is required on this ground.
Restricting the agricultural income - We find from the order of the Ld. CIT(A) that the assessee has disclosed an agricultural income in the capital account filed before the Ld. AO. Revenue Authorities has considered the amount of Rs. 1.50 lakhs which is recorded in the books of accounts as agricultural income of the assessee for the relevant AY and accordingly allowed the same. Since there is no representation and no evidence submitted before us with respect to earning of the agricultural income of Rs. 3 lakhs, we are inclined to uphold the findings of the Ld. CIT(A) on this ground and hence this ground raised by the assessee is dismissed.
Addition for purchase of Venkateswara Nagar Plot - HELD THAT:- We find from the order of the Ld. CIT(A) the assessee has submitted that the assessee has earned agricultural income for Rs. 3 lakhs and other income of Rs. 3 lakhs being interest income. However, while filing the return of income the assessee has disclosed Rs. 1.50 lakhs as agricultural income in the capital account and Rs. 50,000/- profit from real estate business. It is seen from the order of the Ld. CIT (A) that no details are filed before the Ld. Revenue Authorities for the balance of Rs. 4 lakhs.
Assessee also not represented before us nor filed any evidence regarding the interest income and agricultural income which the assessee claims to have purchased the plot at Venkateswara Nagar for Rs. 6 lakhs. In the absence of any cogent evidence, the Ld. CIT(A) has confirmed the amount of Rs. 4 lakhs and therefore we are of the considered view that there is no infirmity in the order of the Ld. CIT(A) and hence we hereby dismiss the ground raised by the assessee.
Penalty u/s. 271(1)(c) - assessee is a regular non-filer of the return of income which tantamounts to concealment of income, even though the return of income was filed after the issue of notice U/s. 153C of the Act - HELD THAT:- As seen from the order of the Ld. CIT(A) the assessee has pleaded ignorance as he is an illiterate and not conversant with the tax matters and also not aware of the consequences of non-filing of returns of income. CIT(A) observed that the assessee has engaged a qualified Tax Consultant for reply to the final show cause notice. CIT(A) has held that the assessee has wilfully failed to file his return of income or to substantiate the investments and the additions.
CIT(A) has also observed that the assessee was subject to tax audit u/s. 44AB of the Act for some years however has not produced any tax audit report before the Ld. Revenue Authorities. CIT(A) has therefore concluded that since the assessee neither substantiated nor explained the case with cogent evidences, it is deemed concealment of income and hence penalty order needs to be confirmed. Even before us, the assessee as not represented his case substantiating the reasons for non-filing of return of income. We therefore are inclined to uphold the order of the Ld. CIT(A) considering the facts and circumstances of the case and we hereby dismiss the grounds raised by the assessee.
Appeals filed by the assessee are dismissed.
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2022 (12) TMI 837
Revision u/s 263 - Disallowance u/s 14A r.w.r. 8D - PCIT noted that no inquiry in this regard has been made by the assessing officer in the course of assessment proceedings and order was passed without application of his mind - HELD THAT:- As share received from Joint Venture is exempt income therefore disallowance under section 14A of the Act would attract. After getting the details and information from the assessee, the assessing officer has failed to compute the disallowance under section 14A of the Act, therefore jurisdiction exercised by ld PCIT under section 263 of the Act is valid in law.
As noted investments were not examined by the assessing officer. There is no discussion in the assessment order framed by the assessing officer under section 143(3) in respect of these investments. There is no reference in the assessment order that these investments did not earn any exempt income nor assessee has filed details before the assessing officer. Therefore, assessment order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue.
The reliance can be placed on the decision in the case of Indian Textiles [1985 (2) TMI 23 - MADRAS HIGH COURT] wherein it was held that provisions of section 263 can be invoked even where full facts are disclosed but the AO has not examined these details as per correct provisions of law. Therefore, considering the facts and circumstances, as narrated above, we uphold the order passed by ld PCIT under section 263 of the Act and dismiss the appeal of the assessee.
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2022 (12) TMI 836
Rectification of mistake u/s 154 - debatable issue - set off of brought forward losses and unabsorbed depreciation u/s - 79 - change in shareholding - HELD THAT:- We are of the opinion that the AO could not have invoked jurisdiction u/s 154 of the Act which power is only for rectification of mistake which is apparent on the face of record. According to Ld. AR, the AO in the appellant's case has made assessment u/s 154 by invoking the provisions of section 79 - section 79 of the Act clearly excludes the company in which public are substantially interested, now in order to check the applicability of section 79, we need to see the definition of the company in which public are substantially interested, which is defined u/s 2(18) of the Act. Section 3 of Companies Act, 1956 defines the company, Private company and public company, thus the issue in the appellant's case require interpretation of various sections, in order to see whether the provisions of section 79 is applicable on the appellant or not, and it indeed involves interpretation of various provisions of law.
As noted that there are various judicial precedents on the issue of applicability of provisions of Section 79 of the Act on change in shareholding within the Group and when there is no change in ultimate holding or management.
There are also various judicial precedents in which authorities tried to establish whether the company is a company in which public is substantially interested or not and thus provisions of section 79 is not applicable. In every decision, whether it is in favour or against the appellant, appellate authorities has made the decisions after satisfying itself as to the applicability and interpretation of various provisions and laws. Thus, it cannot be said that it is a mistake apparent from records, when the issue involves interpretation of relevant laws and sections.
Thus, it can be safely concluded that set-off of losses when there is a change in shareholding is not a mistake apparent from record, and is debatable issue in the facts and circumstances discussed supra and it is not a case rectification.
Thus, it can be safely concluded that set-off of losses when there is a change in shareholding is not a mistake apparent from record, and is debatable issue in the facts and circumstances discussed supra and it is not a case rectification
AO erred in invoking Section 154 of the Act to disallow the losses u/s 79 of the Act which in any case can be termed to be mistake apparent on record. From the discussion (supra) it can be seen that not only provisions of Income Tax Act but also Companies Act need to be considered for adjudicating the issue on which several judicial precedents are there on the issue and which is mixed question of fact and law and therefore, certainly it cannot be rectified by AO u/s 154 - Appeal of the assessee is allowed.
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2022 (12) TMI 835
TP Adjustment - ALP determined in respect of the international transactions pertaining to the Manufacturing Segment and related activities - Working Capital Adjustment - HELD THAT:- As relying on Mobis India Ltd. [2014 (2) TMI 36 - ITAT CHENNAI] the issue is remanded back to the file of this AO/TPO with the directions to grant suitable Working Capital Adjustment.
Claim for Ideal Capacity Adjustment & Exclusion of Extra-Ordinary Expenses - DRP had rejected claim for Idle Capacity Adjustment, and Exclusion of Extraordinary Expenses made by the Appellant on the ground that no such adjustments were made in the Transfer Pricing Study, however, the same were claimed by the Appellant only during the course of assessment proceedings - HELD THAT:- From documentary evidence, it is clear that the Appellant had shifted the manufacturing facility which resulted in incurring one-time extra ordinary expenditure and capacity under-utilization during the relevant previous year on account of shifting of manufacturing facility. Accordingly, we direct the AO/TPO to recomputed operational margins of the Appellant after excluding the one-time extra ordinary expenditure after verification of the same. Further, the AO/ TPO is also directed to grant suitable capacity under-utilization adjustment to the Appellant after necessary verification and after providing the Appellant an opportunity of being heard.
Foreign Exchange Fluctuation Adjustment - We direct the Assessing Officer/TPO to provide suitable foreign exchange fluctuation adjustment after verification and after providing the Appellant opportunity of being heard.
Comparable selection - Exclusion of Nitin Fiber Protection Industries Limited (NFPIL) from list of Comparables - HELD THAT:- We note that the Tribunal has, while deciding the appeal filed by the Appellant for immediately preceding Assessment Year 2012-2013 [2017 (4) TMI 1552 - ITAT CHENNAI] directed the AO to exclude NFPIL after coming to a conclusion that major income of NFPIL was from project related activities and therefore, could not be compared to the Appellant. In view of the aforesaid, we direct the AO to exclude NFPIL from the list of comparables.
Selection of Comparables and Computation of Margins - HELD THAT:- As the authorities below have failed to appreciate the correct facts and take into account the financial data as reflected in the annual accounts of the comparables placed on record by the Ld. Authorised Representative for the Appellant. We find merit in the contentions advanced on behalf of the Appellant in this regards - subject to the directions given by us hereinabove, since there are a number of factual discrepancies leading to incorrect selection/rejection of comparables and computation of margins, we deem it appropriate to remit all issues related to inclusion/exclusion of comparables and computation of the margins thereof back to the file of AO/TPO for fresh adjudication after giving appellant opportunity of being heard.
Rejection of claim of carry forward of unabsorbed depreciation by setting off of the unabsorbed depreciation before allowing set off of the brought forward losses while computing taxable income of the relevant previous year - HELD THAT:- As relying on SPEL Semi Conductors Ltd [2012 (12) TMI 81 - MADRAS HIGH COURT]. we direct the Assessing Officer to allow the set off of the brought forward business loss with current year business income as claimed by the Appellant and allow carry forward of the unabsorbed depreciation. Accordingly, Ground is allowed.
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2022 (12) TMI 834
Revision u/s 263 by CIT - order prejudicial to the interests of the revenue' - Bogus Expenses - HELD THAT:- It is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of the bogus bill issued by the above mention two parties. It is not the case of that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee.
PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. As attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue.
We make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. PCIT erred in taking the re-course of such provisions while deciding the issue against the assessee. Secondly, PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act.
In view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO under section 143(3) of the Act, causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable - Appeal of assessee allowed.
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2022 (12) TMI 833
TP adjsutment - “AE” investment banking activities - comparable selection - comparable were selected by the TPO on basis of business activities KPO which is summarily rejected by the ld. CIT(A) - HELD THAT:- Rejection of KJMC Global Market (India Limited and Kinetic Trust Limited - The persistence loss- making company are normally excluded as comparable. As per the submission of assessee both the companies are made profit in relevant years. DR did not strongly object on the plea of assessee. No objection was made by the ld DR in factual position. So, these companies should not be excluded on the ground of loss-making company. It is to be directed to the ld. TPO that KJMC Global Market (India) Limited and Kinetic Trust Limited be included in the set of comparable. Accordingly, the Ground no-1 of the assessee is allowed.
Erroneous acceptance of Khandwala Securities Ltd and Keynote Corporate Services Ltd. - As submitted that the principle that companies making abnormally high profit margin are required to be excluded - DR did not make any strong objection in this issue. No contrary judgment was produced by ld DR during hearing. We are directing that M/s Khandwala Securities Ltd & M/s Keynote Corporate Services Ltd be excluded from the set of comparable. Accordingly, the Ground no-2 of the assessee is allowed.
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2022 (12) TMI 832
Exemption u/s 11 - donation received by the Dalai Lama Charitable Trust - amount deposited in the bank account - addition which includes some of the amounts deposited in the bank account of the assessee from the sale of books as well as advance received for University work - HELD THAT:- When the AO has not even verified how much of the amount deposited in the bank account of the assessee represents the donation and how much is the assessee’s own amount from the sale of books and other resources, the addition made by the AO of the entire amount is not justified.
Once the amount is owned by the Dalai Lama Charitable Trust and also reflected from the material available on record that the said amount was received as donation by the Dalai Lama Charitable Trust during the visit of Dalai Lama at Varanasi to deliver the teachings from 8th January, to 14th January, 2009, then without verifying these facts about the said amount which was transferred by the assessee to the Dalai Lama Charitable Trust which is also declared as income by the Dalai Lama Charitable Trust the addition made by the Assessing Officer and sustained by the CIT(A) is not justified.
Accordingly, the matter is remanded to the record of the Assessing Officer to re-adjudicate the same after considering all these details and evidence to verify the fact that this amount being donation received by the Dalai Lama Charitable Trust is owned and declared by the said trust as its income. If the said amount was owned and declared by the Dalai Lama Charitable Trust then the same is required to be considered in the assessment of Dalai Lama Charitable Trust and not in the assessment of the assessee. Needless to say, the assessee be given an appropriate opportunity of hearing before passing the fresh order. Appeal of the assessee is allowed for statistical purposes.
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2022 (12) TMI 831
TP Adjustment - ALP determination - calculation of Profit Level Indicator (PLI) including the depreciation as operating cost - first contention of the Ld. AR is the depreciation should not form part of the operating cost since the assessee has incurred huge capital additions and the depreciation should be considered as an extraordinary item and cannot form part of the computation in the determination of ALP - HELD THAT:- CIT(A) in his order observed that the addition to the assets were made to the assessee’s export unit at Bhogapuram and the depreciation claimed was relating to that unit only. The Bhogapuram unit is exclusively used for the software development and is a self-contained unit. Admitted facts are that the assessee has not rejected the comparables adopted by the TPO but only objected to the inclusion of the depreciation in the operating cost.
Rule 10B of the IT Rules, 1962 specifies that the comparability of international transaction in an uncontrolled transactions shall be adjusted with the functions performed taking into account the assets employed or to be employed and there is assumption by the respective parties to the transactions. Hence, as rightly pointed by the Ld. CIT(A) that the unit situated at was exclusively engaged in the export activities and only reported export transactions relating to the services to Associated Enterprises (AEs). Therefore, the assets deployed in Bhogapuram Unit for the provision of such services to the AE and their corresponding cost therefore would be an important component of the operating cost for the services rendered.
The assessee has also claimed depreciation while computing the total income in the relevant assessment year. We are also of the considered view that since the assets are used by the assessee with respect to the services provided to AE and hence the depreciation of such assets of Bhogapuram Unit should necessarily form part of the operating cost and should be considered in the computation of ALP of the assessee. CIT(A) has rightly considered the extraordinary depreciation and has recomputed the PLI of the assessee - In view of the above, we find no infirmity in the order of the Ld. CIT(A) and Ground No.2 raised by the assessee is dismissed.
Working capital adjustment made in the ALP margin - We find from the observations of the Ld. CIT(A) that the Ld. CIT(A) has rejected the working capital adjustment of (-)2.07% arrived by the Ld. TPO but has not considered any working capital adjustments as submitted by the Ld. AR before the Ld. CIT(A). The Ld. CIT(A) has also not rejected the working capital adjustment of (+)3.76% arrived at by the assessee.
AR therefore pleaded that when the negative working capital adjustment was added back to the PLI a similar treatment should also be given for the positive working capital adjustment while arriving at the computation of ALP. We find merit in the argument of the AR and direct the AO to give effect to the positive working capital adjustment of (+)3.76% after verifying the same while arriving at the ALP margin of the assessee.
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2022 (12) TMI 804
Stay of demand - Addition u/s 68 - Petitioner vehemently urged that the CIT(A) could not have refused to extend the stay order which was earlier granted by the AO - HELD THAT:- It transpires that the proviso contained in paragraph 2 of the Instruction No. 96 dated 21st August, 1969, which envisages that there should be no lapses on the part of the assessee for purposes of claiming the tax in dispute to be held in abeyance was conspicuously missing from Instruction No. 1914, dated 02nd February, 1993.
CIT(A), it appears, while rejecting the prayer of the Petitioner for grant of stay, relied upon the instruction which appears had since been superseded.
Also noticed that the Petitioner had all along been making desperate attempts for placing on record documents as additional evidence in terms of Rule 46A of the Rules, which application ought to have been decided inasmuch as there was sufficient time with the Appellate Authority to pass orders in that regard. Only thereafter a view then could have been taken as regards their genuineness or veracity.
In the present case it appears that the Appellate Authority did not even deem it appropriate to decide the said application even when the Petitioner claims that a prayer was made for such a decision in that regard. We accordingly find prima facie case in favour of the Petitioner as it appears that the assessment was high pitched as was claimed who stated that as against the returned income of Rs.68,33,07,140/-, the income has been assessed at Rs.461,72,35,403/-.
We stay the recovery based upon the impugned demand notices. Notwithstanding the fact that we have passed an interim order today, we direct the Appellate Authority to decide the application under Rule 46A, which is pending before it, as also the appeal within three months from today, Notwithstanding the pendency of the present petition before this Court.
The directions passed today shall be liable to be vacated, in case it is reported that any deliberate attempt has been made before the Appellate Authority to delay the final decision in the appeal. Objections be fled to the writ petition within six weeks.
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