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Income Tax - Case Laws
Showing 21 to 40 of 741 Records
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2023 (3) TMI 1432 - CALCUTTA HIGH COURT
Validity of scrutiny assessment - Jurisdiction of authority who issued notice - whether there is valid notice issued u/s 143(2) for commencing the scrutiny assessment? - HELD THAT:- As on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was more than Rs.30 lakhs and the same was lying with the DCs/Acs but the notice u/s. 143(2) of the Act has been issued by ITO, Ward-9(4), Kolkata.
Tribunal has noted the facts and rendered a finding that on the date when the case was selected for scrutiny, the authority who issued the notice namely, the Income Tax Officer, Ward No.9(4), Kolkata did not have jurisdiction and the jurisdiction was with the Deputy Commissioner of Income Tax.
The above factual position recorded by the Tribunal is not in dispute. Therefore, we are of the clear view that the Tribunal rightly allowed the assessee’s appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter.
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2023 (3) TMI 1431 - ITAT MUMBAI
Addition u/s 68 - bogus LTCG - whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham? - CIT(A) deleted the additions appreciating the contentions of the assessee together with the documentary evidences thereon, especially the final SEBI order wherein the assessee was duly discharged by SEBI as not to be involved in the price manipulation of scrip of Pine Animation Ltd. - HELD THAT:- The transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so , when there is no dispute regarding the purchase price and sale price of shares. Our view is further fortified by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal [2010 (9) TMI 81 - BOMBAY HIGH COURT]
We find that independent enquiries were conducted by SEBI and SEBI had passed an interim order dated 08.05.2015 in the case of Pine Animation Ltd, wherein the assessee and Pine Animation Ltd together with some others, were restrained from accessing the securities market, either directly or indirectly in any manner whatsoever, till the final investigation by SEBI is completed. After completion of the final investigation, SEBI had passed a final order dated 19.09.2017 in the case of Pine Animation Ltd clearly acquitting 114 persons which admittedly included the assessee on the plea that they were not involved in artificial price rigging of shares. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries together with exit providers. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices.
We find that the Hon’ble Calcutta High Court in the case of CIT vs Shreyashi Ganguli [2012 (9) TMI 1113 - CALCUTTA HIGH COURT] had observed that in that case, the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. We find that the assessee’s case before us is in a much stronger footing as no action has been initiated on the Broker by SEBI and even the action initiated on the assessee by SEBI vide Interim order dated 08.05.2015 were finally revoked by SEBI in its final order dated 19.09.2017.
In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of Pine Animation Ltd within the meaning of section 68 of the Act. The sale proceeds have been received by the assessee from the stock exchange through the SEBI registered share broker by account payee cheques through regular banking channels. We find that the three ingredients of section 68 of the Act are duly fulfilled by the assessee in the instant case. Hence there is no question of making any addition as unexplained cash credit u/s 68 of the Act in the instant case.
No infirmity in the order of the ld. CIT(A) granting relief to the assessee by deleting the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 6% against the same. Accordingly, the grounds raised by the revenue are dismissed.
Validity of reopening of assessment - reason to belive - huge LTCG claimed as exempt on sale of shares - HELD THAT:- Admittedly the ld. AO had indeed received information from the investigation wing unit of Mumbai that assessee had earned huge LTCG claimed as exempt on sale of shares of Pine Animation Ltd, which has been categorized as a Penny Stock by the Income Tax Department, based on the various enquiries conducted by them. These facts are also supported by searches conducted on various persons and statements recorded from various entry operators and promotes that the prices of certain scrips had been artificially rigged by certain manipulators.
This information, definitely , in our considered opinion, constitutes primafacie information, which enables the ld. AO to constitute a primafacie belief that income of the assessee had escaped assessment as admittedly, the assessee had also dealt in the said scrip. Moreover, SEBI had also passed an interim order dated 08.05.2015 wherein the assessee’s name is included as one of the beneficiary and was suspended from entering the capital market in any manner whatsoever, till the completion of investigation by SEBI. In view of this, we are not inclined to accept the arguments advanced by the ld. AR challenging the validity of reopening of assessment. Hence we hold that the assessment had been validly reopened as the ld. AO had indeed primafacie material before him to form a belief that income of the assessee had escaped assessment within the meaning of section 147 - Decided against assessee.
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2023 (3) TMI 1429 - ITAT BANGALORE
TP Adjustment - comparable selection - Micro Therapeutic Research Labs Limited - HELD THAT:- The contention of the ld. A.R. is that Micro Therapeutic Labs Ltd. is not having persistent loss in 2 years out of 3 years, if we consider the operating profit by applying the formal Operating Profit/Operating Cost (OP/OC). On the other hand, the AO has considered the published accounts and observed that it has been suffering loss in 2 years out of last 3 years. Accordingly, she submitted that the issue may be remitted to the file of AO/TPO to examine whether there is operating profit in 1 out of 3 immediate preceding years. We accede to the request of the ld. A.R. We remit this issue to the file of AO/TPO to examine whether there is operating profit in 1 year out of immediate last 3 previous years and if there is any operating profit in any 1 year out of 3 immediate previous years, it should be considered as a comparable. Ordered accordingly.
Non-granting of working capital adjustment - DRP observed that Rule 10B provides for making reasonably accurate adjustment to the uncontrolled comparable transaction to eliminate the material effects of differences on the price, cost or profit - HELD THAT:- We are of the opinion that similar issue came for consideration before this Tribunal in assessee’s own case as held there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the Assessee should be allowed.
Non granting risk adjustment - DRP stated in his report that he did not agree with the assessee's plea that it does not bear any significant risk and was of the view that the assessee bears single customer risk, as its entire business activity and survival depends on the AEs.- HELD THAT:- We are of the opinion that similar issue came for consideration before this Tribunal in assessee own case though the assessee in the TP report has stated that the assessee being captive contract service provider having lesser economic and business risk, nothing has been brought on record to show that the comparables are functioning with higher risk. The assessee need to substantiate the statement that the comparable companies are realizing higher profits as there are having higher risk in terms of market, product, technology etc.
We of the considered view that the assessee should be given an opportunity to bring on record the facts that will substantiate its claim based on which a reasonably accurate adjustment could be computed. We notice that the TPO and DRP have not called for any details evidence the risk adjustments and have decided the issue merely based on submissions made the assessee justifying the adjustments. We therefore remit this issue back to the TPO/AO to consider this issue on facts / data available with regard to the comparable companies and decide as per the provisions of Rule 10B(3) after giving reasonable opportunity of being heard to the assessee. The assessee is directed cooperate with the TPO/AO for producing the details as may be called for. This issue is allowed in favour of the assessee for statistical purposes.
Treating recovery of pass-through costs as operating in nature - whether AO/TPO disregarding the fact that the Assessee merely acted as a co- ordinator and facilitator for the performance of clinical trials and considering that the reimbursement of investigator fees is a value- added service which mandates mark-up - HELD THAT:- Tribunal in assessment year 2013-14 in assessee’s own case [2021 (10) TMI 908 - ITAT BANGALORE] new word ‘pass through cost’ was introduced to show the amount incurred by the assessee to be reimbursed by the parent company and called the investigation fees as part of pass through cost. The ld. AR argued that there is no investigation fees payable to assessee for the work done on behalf of parent company. In our opinion, the Addendum is w.e.f. 1.4.2012 wherein no date of execution is mentioned therein. The Addendum was solely made with an intention to evade payment of taxes and this is only a self-serving document by the assessee with the sole intention to evade taxes. Since both the parties were in a position to enter into this agreement being interrelated companies, that agreement cannot be given any credence which is a nongenuine and make believe story and it cannot be recognized as a true agreement and no benefit can be given on the basis of this agreement. Therefore, the lower authorities are justified in not giving any credence to this Addendum entered into by the assessee on the basis of which assessee has claimed that assessee is not entitled to receive any consideration for facilitating investigations.
We have to proceed on the basis of the professed intention and the AO is justified in finding out the real intention of the parties by ignoring the apparent and the conceded intention was to evade the tax liability. The lower authorities merely removed the facade to expose the real intention of the parties cleverly cloaked and discovered the real intention was to evade the taxes and Addendum cannot be given effect and the overall arrangement made by the assessee was to evade the taxes. We are well aware that all commercial arrangements and documents or transactions have to be given effect even though they result in avoidance of tax liability, provided that they are genuine, bonafide and not colourable transaction.
In the immediate earlier AY 2012-13, the assessee has shown investigator payment with mark-up and in this year on the basis of Addendum entered by the parties as discussed earlier, made the investigator payment as ‘pass through costs’ and claimed as reimbursement without any profit element, which is against the agreed norms in the earlier years which cannot be effected and accepted as genuine agreement. Accordingly, we are of the opinion that this intra-group services rendered by the assessee to the parent company cannot be considered as reimbursement of expenses or pass through costs. It is separate services in itself for which the assessee needs to determine the ALP which the assessee failed to do so. The assessee has provided services for which the TPO is justified in marking up the services so as to make TP adjustment. The various case laws relied on by the ld. AR are different on its own facts, which cannot be applied to the facts of the present case. Hence the TPO/AO correctly ascertained the ALP of this transaction and made adjustment on this count. The same is sustained. This ground of the assessee is dismissed.
TP Adjustment towards interest on outstanding receivables - HELD THAT:- In our opinion, this issue has been decided by Hon’ble Bombay High Court in the case of Aurionpro Solutions Ltd [2017 (6) TMI 1087 - BOMBAY HIGH COURT] wherein held that in case of interest on receivables, which is notional, the same should be restricted to LIBOR+2%. Accordingly, the issue is remitted to the file of AO/TPO to determine the ALP after considering the above.
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2023 (3) TMI 1428 - MADHYA PRADESH HIGH COURT
Validity and propriety of final order passed by ITAT - allegation of passing non- speaking order - ITAT sustaining the order of CIT(A) who has deleted the addition on account of profit of sale of 23 Duplex Houses, profit on sale of land, unaccounted investment in plot/land and concluding loose papers were not found and seized from the assessee - HELD THAT:- Tribunal in fact has not recorded any independent finding/reasons in respect of both the grounds raised by the assessee and thus, order of Tribunal to the extent it relates to assessment year 2004-05 is violative of principle of natural justice being non speaking.
A non speaking order not only prevents the adversely affected persons to know the exact reasons behind the conclusion arrived at but also disables the aggrieved person from effectively availing remedy before the Higher Forum.
This Court frames following new substantial question of law:-
“Whether the Tribunal fell in grave error of law in failing to record reasons and findings in regard to assessment year 2004- 05.”
In view of above discussion, aforesaid newly framed substantial question of law is answered in affirmative that the Tribunal failed to record reasons and findings in respect of assessment year 2004-05.
Thus Impugned order of Income Tax Appellate Tribunal Jabalpur Bench, Jabalpur is set aside for being non speaking in respect of assessment year 2004-05 and remanded to Income Tax Appellate Tribunal Jabalpur Bench, Jabalpur for passing speaking order.
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2023 (3) TMI 1425 - ITAT NEW DLEHI
Disallowance u/s. 14A r.w.r. 8D(2)(iii) - HELD THAT:- As decided in assessee own case [2022 (4) TMI 147 - ITAT DELHI] where shares were held as stock-in-trade and therefore it becomes business activity of assessee - as shares and securities held by a bank are stock in trade, and all income received on such shares and securities must be considered to be business income. That is why Section 14A would not be attracted to such income.
Disallowance of 100% depreciation claimed by the Assessee on temporary erections - HELD THAT:- As in Assessee’s own case for A.Y.2015-16 [2022 (4) TMI 147 - ITAT DELHI] additions are temporary wooden structures, internal partitions, cabin formation, flooring and ceiling wiring etc. for computer, false ceiling, glass windows, interiors etc. as noted by the AO. These are not in the nature of construction of any structures or renovation or extension or improvement to the building. Assessee appeal allowed.
Nature of expenses - software expenses - revenue or capital expenditure - HELD THAT:- This issue is covered in favour of the assessee in its own case by the Hon’ble Delhi High Court for Assessment Years 2008- 09 to 2011-12 [2018 (4) TMI 1534 - DELHI HIGH COURT] it is nobody’s case that assessee is dealing with computer softwares or is in the business of any related services. Rather it uses specific customized software, which is specific to its banking activities. But for the use of such software, the nature of expenditure otherwise incurred for streamlining its functions i.e. towards fee payable to the consultants for systems and employment of special professionals to carry on the tasks that the software in fact performs, would have fallen undoubtedly in the revenue stream. Taking these into account and the further circumstance that the software itself would have run its course or life span as it were, given that the earlier assessment year in question is 2008-09, we are of the opinion that the question of law framed is to be answered in favour of the assessee.
Disallowance of Assessee’s claim of amortization of premium on HTM securities - Assessee claimed that amortization of this premium is allowable as relying on case of CIT vs. HDFC Bank Ltd., [2014 (8) TMI 119 - BOMBAY HIGH COURT] HELD THAT:- As decided in assessee own case [2022 (4) TMI 147 - ITAT DELHI] as held where the assessee maintains the accounts in terms of the Reserve Bank of India Regulations, the assessee is entitled to deductions and it cannot be denied by the authorities under the pretext that it was showing as investment in the balance-sheet. Accordingly, the common questions of law are answered in favour of the assessee.
Addition as bad debt u/s. 36(1)(vii) - assessee argued complete details of all the loan accounts were furnished and the condition of write off was claimed to be duly satisfied by the Assessee - HELD THAT:- Issue stands decided by the Coordinate Bench of Tribunal in favour of the Assessee in its case for A.Y. 2015-16 [2022 (4) TMI 147 - ITAT DELHI] as decided in the case of Vithaldas H. Dhanjibhai Bardanwala [1980 (8) TMI 40 - GUJARAT HIGH COURT] a mere debit to the P&L a/c was sufficient to constitute actual write off whereas, after the Explanation, the assessee(s) is now required not only to debit the P&L a/c but simultaneously also reduce loans and advances or the debtors from the asset side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/ debtors is shown as net of provisions for impugned bad debt. This aspect is lost sight of by the High Court in its impugned judgment. In the circumstances, we hold, on the first question, that the assessee was entitled to the benefit of deduction under s. 36(1)(vii) of 1961 Act as there was an actual write off by the assessee in its books.
Applicability of MAT provision - MAT provision u/s 115JB will not apply to a Banking Company.
Addition under MAT in respect of provision for bad and doubtful debt - HELD THAT:- As assessee being a banking company; even there are specific provisions in the Income Tax Act, 1961 u/s 36(1)(viia) which allows deduction to the banks in respect of provisions made for bad and doubtful debts. The Income Tax Act has considered this peculiarity in the case of banking industry and has allowed deduction on the basis of provision whereas under normal circumstances, any provision made in the books is not allowed as deduction. The fact that the provisions of Section 115JB are now allowing the profit & loss account to be prepared in accordance with the regulatory act under which the bank operates, all provisions as mandated by RBI and duly recorded in the books should be allowed. Also when in the Income Tax Act itself the deduction is allowed to the assessee, it cannot be held that the computation under book profit provisions contemplated addition of such claim under the garb of provision for diminution in the value of assets.
Addition being loss on amortization of permanent investment alleging the same to be notional loss - HELD THAT:- The amortized value of the investment is reflected in the accounts. This is also clearly mentioned in note to the annual report.
The loss on amortization is neither a provision nor a reserve and does not fall under any of the items from (a) to (j) of the above explanation to section 115JB. AO has wrongly considered the same as falling within the preview of Clause (i) to the Explanation 1 to Sec. 115JB(2) whereas the same is not a provision for diminution in the value of assets. It is the actual loss on amortization of investments and the same is allowed under the Income Tax Act, 1961 under normal provisions also as held in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] as detailed explained while dealing with the grounds on allowing the amortization of HTM investment as allowable business deduction u/s, 37(1) of the Income Tax Act.
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2023 (3) TMI 1423 - ITAT RAIPUR
Addition u/s. 43B on “VAT payable” - addition towards VAT tax liability not paid on or before “due date” for furnishing of his return of income for the year under consideration u/s. 139(1) - assessee who was accounting for his sales/turnover by following an “exclusive method” had not claimed deduction of the said amount in the profit and loss account for the year under consideration - HELD THAT:- Hon’ble High Court of Chhattisgarh in the case of Assistant Commissioner of Income Tax-1, Bhilai, Dist. Durg (C.G.) Vs. M/s. Ganapati Motors, Tax Case [2017 (4) TMI 1613 - CHHATTISGARH HIGH COURT] had held that in a case where the assessee had not charged VAT to its profit and loss account, then, despite the fact that the liability may still be unpaid it could not have been added u/s. 43B of the Act as the same was not claimed as a deduction in the books of accounts.
No addition can be made of an assessee’s unpaid VAT tax liability that was not charged to the profit and loss account, there is substance in the claim of the Ld. AR that there was no justification for the A.O to have made an addition u/s. 43B of the amount of VAT payable as the same was not charged to the latters profit and loss account.
Thus for the reason that as the aforesaid claim of the assessee was in conformity with the aforesaid judgment of M/s. Ganapati Motors (supra), therefore, the same by no means could have been dubbed as an incorrect claim and brought within the realm of the adjustments contemplated in clause (a) of Section 143(1) of the Act. Accordingly, the order of the CIT(Appeals) is set-aside and the addition made by the A.O of VAT payable is vacated.
Addition towards GST not paid on or before “due date” for furnishing of his return of income for the year under consideration u/s. 139(1) - As argued assessee was accounting for his sales/turnover by following an “exclusive method” had not claimed deduction of the said amount in the profit and loss account for the year under consideration - HELD THAT:- As relying on own case A.Y.2017- 18 order of the CIT(Appeals) is set-aside and the addition made by the A.O on account of GST payable is vacated. Thus, the Ground of appeal No. 1 raised by the assessee is allowed in terms of my aforesaid observations.
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2023 (3) TMI 1421 - ITAT DELHI
Rectification u/s 254 - while passing the consolidated order for various assessment years including Assessment Year 2004-05 in question, the Tribunal has omitted to adjudicate the grounds raised in [2019 (12) TMI 1221 - ITAT DELHI] filed by the Revenue a HELD THAT:- DR for the Revenue does not offer any comment on the error of non-adjudication pointed out on behalf of the assessee.
In the light of the submissions made and on appraisal of the appellate order, we find merit in the plea of the assessee. Hence, the Misc. Application is allowed.
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2023 (3) TMI 1418 - ITAT MUMBAI
Validity of assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT:- As in case of this assessee the addition if any to be made up to A.Y. 2013-14 shall be based on incriminating material found during the course of search. For A.Y. 2014-15, the assessment would be made under Section 143(3) read with section 153A of the Act on the basis of information contained in the return of income as well as any information available with the learned Assessing Officer during the course of search. In nutshell, for A.Y. 2014-15, there is no requirement of any incriminating material found during the course of search.
The fact also clearly shows that assessee has originally made a statement during the course of search about providing accommodation entries. This statement was also recorded in case of other assessees. The statement originally made by the assessee was retracted.
Whether on the basis of statement made by the assessee any absence of any other incriminating material, addition can be made or not in concluded assessment years? - The answer has been given by the Hon'ble Delhi HC in case of PCIT vs. Best Infrastructure (India) (P.) Ltd.[2017 (8) TMI 250 - DELHI HIGH COURT] wherein the question of law framed held that the addition made under Section 68 of the Act on account of statement made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT. Having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the Assessee, the assumption of jurisdiction under Section 153A of the Act and the consequent additions made by the AO are not justified.
Statements under Section 132(4) of the Act do not by themselves constitute incriminating material. See CIT v. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd [2015 (5) TMI 656 - BOMBAY HIGH COURT].
The co-ordinate Bench in M/s Kuber Khadyan Pvt. Ltd [2021 (3) TMI 1159 - ITAT DELHI] deleted the addition based upon the admission under Section 132(4) of the Act, holding that mere statement is not a incriminating material. Based on which addition can be made in the hands of the assessee.
Thus we find that the addition has been made in the hands of the assessee from A.Y. 2008-09 to A.Y. 2013-14 which based on retracted statements. In these circumstances, merely a statement of the assessee where there is no admission of the income cannot be said to be incriminating evidence. Consequent to that the additions made by the learned Assessing Officer and by the learned CIT (A) are not sustainable. Hence, they are directed to be deleted.
With respect to A.Y. 2014-15 when the search took place, there was no material found at the premises where the business of the assessee was stated to be carried on supporting the books of accounts of the assessee. No evidences, except the books of accounts, purchase and sales invoices and bank statement was produced before the learned that lower authorities. Merely producing documentary evidences without actually supporting that in fact such transactions have taken place in ordinary course of business, the books of accounts of the assessee cannot be stated to be showing the correct picture.
It is the duty of the assessee to substantiate the transactions of purchases and sales of diamond with proving the chain of the business transaction with proper evidences. The learned AO has also rejected the books of accounts merely on the basis of the statement as well as absence of evidence of carrying on of the business actually by the assessee at the time of search. In view of this facts, we set-aside the issue of determination of the fact of actually carrying on of business by the assessee of purchase and sale of diamonds to the file of the learned assessing officer with direction to the assessee to substantiate that in fact assessee is carrying on the business and not merely an accommodation entry provider. AO is directed to examine the purchase and sales invoices as well as other evidences of each part of the chain of the trading and then decide whether the assessee is engaged in the business or is merely an accommodation entry provider. Appeal of assessee allowed for statistical purposes.
Validity of reopening of assessment - AY 2007-08 - HELD THAT:- Reopening has been made on the basis of reasons recorded by the learned assessing officer wherein the information is received from the investigation wing . Further search was carried out in case of Shri Gautam Jain and others in his group. It was found that assessee is part of that group. We find that there is a tangible material available with the learned assessing officer to reopen the assessment in case of the assessee. In view of this, we do not find any infirmity in the order of the learned assessing officer in reopening the case by issuing notice under section 148 of the act. The learned CIT-A has also confirmed the same for the reason that the learned assessing officer has tangible material. Therefore, all the grounds challenging the reassessment proceedings are dismissed.
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2023 (3) TMI 1417 - ITAT CHENNAI
Deduction u/s. 80P(2)(d) - interest earned received from deposits made with Chennai Central Cooperative Bank - HELD THAT:- Admittedly, Chennai Central Co-operative Bank is a co-operative society and registered under Co-operative Society’s Act of Tamil Nadu. This issue has been settled by the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] Also see The Tiruchengode Agricultural Producers Co-operative Marketing Society Ltd. [2022 (7) TMI 679 - ITAT CHENNAI] as relying on S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd. [2019 (1) TMI 116 - MADRAS HIGH COURT] held that t the provision of Section 80P(4) of the Act is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in the banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the Reserve Bank of India. Clearly, therefore, the Assessee’s case is out of the provisions of Section 80P(4) of the Act
In relation to the Associate members, we are of the view that the provisions of Section 22 read with Rule 32 of the Tamil Nadu Co-operative Societies Act, 1983 and Tamil Nadu Co-operative Societies Rules clearly determine the procedure to admit Associate members and accordingly in the present case, the Assessee’s Co-operative Society has admitted the same. In view of the above finding, we hold that the Assessee is entitled for the claim of deduction u/s. 80P(2)(a)(i) of the Act. Decided in favour of assessee.
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2023 (3) TMI 1416 - ITAT KOLKATA
Scope of Limited scrutiny assessment - AO jurisdiction in enquiring into issues beyond the scope of limited scrutiny - CIT(A) in confirming the action of AO in making additions in respect of issues not mentioned in limited scrutiny - HELD THAT:- As notice u/s 143(2) issued for limited scrutiny covering four issues namely Receipt of large values foreign remittance, Mismatch in amount paid to related persons u/s 40A(2)(b), Unsecured loans from persons who have not filed their return of income and Loss from currency fluctuations and also subsequent notice issued u/s 142(1) called for further information.
In our view this is incomplete disregard of the Instruction No. 5/2016 issued by CBDT on 14.07.2016 which provides that while proposing to take up complete scrutiny which was fixed for limited scrutiny, the AO shall form a reasonable view that there is a possibility of under-assessment of income if the case is not examined under complete scrutiny and that plea has to be on the existence of the credible material not merely on suspicion and conjecture or unreliable sources. We note that the instruction provide that there has to be a direct nexus between the available material and formation of such view.
AO has exceeded his jurisdiction in enquiring into those issues beyond the scope of limited scrutiny which is in clear violation of mandate given by CBDT in the said Circular and has been held by the Co-ordinate Bench in the case of Shri Vijay Kumar [2019 (10) TMI 13 - ITAT CHANDIGARH] to be bad in law.
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2023 (3) TMI 1415 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - reasons to believe - as per the information received, the petitioner was engaged in reversal trade resulting in non-genuine business loss or gains - As argued the reasons recorded for re-opening were scanty and non-specific and not indicated that the transactions allegedly referred to resulted into loss or profit - HELD THAT:- When it comes to exercise of powers u/s 147 and 148 there has to be a greater thrust for necessity of recording reasons. The entire exercise of reopening hinges on the reasons recorded by the AO. It is the ‘reasons’ which weigh with him.
When the concluded assessment is to be revisited with by the AO recording of reasons for exercise of such powers has to be viewed as vested rights for the assessee. While exercising powers under the Act to reopen the assessment, the AO would harbour reasons to believe that on particular set of facts, the income had escaped assessment and tax was not paid in relation to the year under consideration.
All the reasons which hold good in the eye of and with the AO must be made known to the assessee. Assessee has right to refute the reasons for reassessment by filling objections. Unless the AO appropriately delineates and communicates the reasons for reassessment, right of the assessee to file objections would remain an eye-wash.
Whether the reassessment powers are adverted to on objective basis, whether the element of assessment of income is noticed from the facts and whether formation of opinion by the AO is based on some relevant facts or not, could be judged provided the reasons are properly recorded and the details are given with regard to reopening of assessment that the reasons to believe with the AO must be reflected in recording of such reasons to be communicated to the assessee.
The cryptic way of recording of reasons like found in the instant case, would render the exercise of powers vitiated. With such vague reasons the respondent could be said to have failed to demonstrate that there was any escapement of income chargeable to tax. He could demonstrate such element, if he gives reasons for the same.
Notice issued to the petitioner u/s 148 is liable to be set aside on the aforesaid ground alone. Decided in favour of assessee.
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2023 (3) TMI 1413 - PATNA HIGH COURT
Reopening of assessment u/s 147 - mandation of serving information as contemplated u/s 148A(b) - As argued by assessee providing an opportunity u/s 148A(b) of the Act for the purpose of issuance of notice u/s 148 must be based on an information(which must be tangible information) capable of suggesting that the income chargeable to tax had escaped attention for the relevant financial year - argument on behalf of the Income Tax Department that not only the petitioner was given information as contemplated u/s 148A(b) petitioner had also responded to the same and therefore the challenge set up by the petitioner is untenable - HELD THAT:- As conduct of inquiry as contemplated u/s148A(b) is apparently in respect of information/material suggesting that the income chargeable to tax had escaped assessment. The information, as contemplated u/s 148A(a) must contain clear basis cannot be in abstract for the reason that Section 148A(b) of the Act requires notice to be issued under the said section i.e. 148A(b) as to why notice u/s 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment.
We find in the present case that only information which was supplied to the petitioner while issuing notice u/s 148A(b) of the Act was that as per the information received from 'other Income Tax authority' the petitioner's capital gain during the previous relevant Assessment Year-2018-19, was not shown properly in the Income Tax Return. The said Annexure with the notice u/s 148A(b) of the Act did not at all disclose as to what information was in fact there with Assessing Officer suggesting that the said capital gain during the Assessment Year-2018-19 was not shown in the ITR.
In our view, it was incumbent upon the AO to disclose the nature of information received by it for due compliance of the requisite condition prescribed u/s 148A(b) - The submission that this writ application is premature having been filed against issuance of notice u/s 148 is not acceptable to this Court in the admitted facts and circumstances of this case. The power of re-assessment/re-computation vested in the AP u/s 148 cannot be undertaken lightly or casually as it amounts to reopening of closed transactions. Apparently, with a view to streamline and simplify the procedure of exercise of jurisdiction u/s 147 of the Act; detailed procedure has been laid down under Section 148A of the Act.
We do not find substance in the submission made on behalf of the Income Tax Department that in response to the notice issued u/s 148 of the Act, the petitioner can raise the issue of correctness of the notice itself on the ground of non compliance of Section 148A(b) of the Act. AO's decision to issue a notice for re-assessment u/s 148 of the Act attains finality after passing of the order under Section 148A(d) of the Act, which aspect he cannot revisit while exercising his jurisdiction under Section 147 of the Act.
Considering the nature of information as furnished to the petitioner with notice under Section 148A(b) of the Act, in our view, the challenge to the notice dated 14.03.2022 is sustainable. Situated thus, the petitioner’s challenge to the order dated 31.03.2022 passed under Section 148A(b) of the Act is also sustainable. As a consequence thereof, the notice dated 31.03.2022 issued under Section 148 of the Act cannot be sustained.
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2023 (3) TMI 1412 - ITAT BANGALORE
TP Adjustment - comparable selection - HELD THAT:- Companies under SWD & ITeS segment are directed to be excluded for failing turnover filter.
Comparability analysis under MSS segment - Axience Consulting Pvt. Ltd. - All the revenue earned by this company from consultancy and advisory charges in the field of market research, business administration and finance are clubbed together. The assessee before us is only providing marketing services to its AEs in respect of the presales activities as per the functions reproduced hereinabove which has not been disputed by the Ld.TPO as observed - DRP included this comparable by observing that assessee also undertakes similar services in advertising, marketing, consulting in creating awareness of the product and therefore is functionally similar with the company. This observation of the DRP is contrary to the functions described as carried out by assessee under the marketing support service segment. We therefore hold this comparable to be not functionally similar with that of assessee.
Dun & Bradstreet Information Services India Pvt. Ltd. - As description of the project or services provided by this company is mentioned to be credit reporting services - we note that this company is engaged primarily in the business of providing risk management and sales and marketing solutions. The background of the company also describes to be providing learning and economic insight services. The company offers a wide suite of information solutions and its services are used extensively by banks, financial institutions, multi nationals, corporate entities, public sector undertaking, exporters and importers. It also describes itself to be in the field of market analysis, locate prospects and incurs revenue from new and existing customers. The sales and marketing solutions offered by this company also include sale of data and related services. In our considered opinion, these functions cannot be compared with the limited services rendered by assessee to its AEs.
Pressman Advertising Ltd. - As the company’s business activity falls within a single business segment i.e. advertising, selling of space for advertisement in print media and public relations and hence no additional disclosure other than those made in the financial statements are required under indas 108 “operating segments”. Thus it is clear that under the advertising services, this company also earns revenue from selling of space for advertisement in print media and public relations for which no bifurcation has been provided. In any event, advertisement services provided by this company also cannot be compared to the services rendered by assessee to its AE under the marketing support services which is limited to presale support activities.
Lintas India Pvt. Ltd. company is providing advertising services and the principle business activity has been described at page 4868 of the paper book in the annual report to be advertising and marketing communications. The revenue recognition by this company has been mentioned to be an advertising agency catering services to much number of clientele. We therefore do not find this comparable to be functionally similar with that of assessee who is a captive service provider.
Majestic Research Services & Solutions Ltd. company is engaged in digital marketing research - this company deliver critical media and marketing information, analytics. Further, it is noted that this company is also doing significant investments in resource and associates all over India supported by strength of Majestic MRSS. In the notes forming part to financial statements under the head corporate information, this company is said to be first Indian market research company to be listed on BSE on SME platform and is engaged in providing market research services offering a wide range of qualitative and quantitative research services. The only segment under which the revenue is revealed is under sale of services in note 17 at page 5409 of the paper book. In our view this company cannot be held to be functionally similar with that of assessee.
Cheil India Pvt. Ltd. company is described to be a full-fledged advertising service company. It is only the entire revenue earned by this company is from advertising services as observed at page 5485. The general information provided at page 5582 of the paper book reveals that this company is engaged in the business of advertising, communication, publicity and merchandising including undertaking market research, planning and providing consultancy services and training in the same field. There is no segmental details available and the entire revenue is disclosed as revenue from sale of services. In light of the above, we do not find this company to be functionally similar with that of assessee
Interest on receivables - HELD THAT:- We deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down by Hon’ble Delhi High Court in case of CIT vs. Cotton Naturals (I) Pvt. Ltd., [2015 (3) TMI 1031 - DELHI HIGH COURT] by considering a credit of 90 days.
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2023 (3) TMI 1410 - ALLAHABAD HIGH COURT
Reassessment proceedings initiated u/s 148A(d) - satisfaction of the Assessing Authority to initiate the reassessment proceedings arose solely on the basis of that sale deed only - HELD THAT:- The revenue authorities have initiated reassessment proceedings against the petitioner on a wrong assumption of fact that the petitioner had sold certain valuable immovable property - That being an unfounded fact assumption, no satisfaction may have ever arisen with the Assessing Authority to initiate reassessment proceedings against the petitioner for Assessment Year 2015-16.
Despite realisation of their mistake, the authorities are reluctant to offer correction, inasmuch as instead of dropping the reassessment proceedings, they have chosen to conclude those proceedings on merits. Thus, grave apprehension has been expressed by the petitioner, a petty farmer, that she would be unnecessarily drawn into cumbersome, time taking and expensive legal proceedings.
Upon such pleadings, by a last order we required, learned counsel for the revenue to obtain clear instructions as to correct facts.
The revenue authorities fairly understand their fault. They do realize that no satisfaction may have been formed as to escapement of any income at the hands of the petitioner for the assessment year 2015-16 in absence of jurisdictional fact.
The revenue authorities having realized that mistake, we do not see any purpose to allow the present petitioner to suffer the full course of reassessment proceedings, any further. She is found entitled to discretionary relief under Article 226 of the Constitution of India. Notwithstanding other facts stated by the revenue, the petition is allowed. The reassessment proceedings initiated against the petitioner for Assessment Year 2015-16 under Income Tax Act, 1961 are quashed.
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2023 (3) TMI 1408 - ALLAHABAD HIGH COURT
Assessment u/s 153C - Period of limitation in issuing notice - Search conducted at third party - HELD THAT:- As the impugned show-cause notice was issued to the petitioner on 04.02.2022, one year has already passed whereafter the present petition came to be filed.
In absence of any plausable explanation as to delay and also in face of statutory remedy of objection available to the petitioner, which objection has also been filed, we do not consider it a fit case to offer any interference in exercise of extraordinary jurisdiction of this Court under Article 226 of the Constitution of India.
Without adjudicating the merits of the objection raised by learned counsel for the petitioner and leaving it open to the petitioner to press those objections first before the Assessing Authority, whereafter the matter may be entertained on merits, present writ petition is disposed of with a direction upon respondent no.1 to deal with the assessment proceedings strictly in accordance with law, keeping in mind the observations made above.
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2023 (3) TMI 1403 - ITAT BANGALORE
Validity of assessment - Limitation of passing the assessment order u/s. 144 r.w.s. 147 - HELD THAT:- In any event, there is nothing brought in record by the assessee to establish that the assessment order has been “made” after 31.12.2019 thereby making a time bar. We, therefore reject the first legal plea raised by assessee in Ground No.2
Non generation of DIN number in the body of the assessment order passed u/s. 144 r.w.s. 147 - As no communication shall be issued by the revenue authorities without allotting a DIN number that is necessary to be quoted in any correspondence issued by the revenue authorities. Except under exceptional circumstances as referred by the circular in para ‘3’, the procedure has to be strictly followed.
As per para ‘3’ in, the event the DIN number is not mentioned in any of the communication issued by the assessing authorities, should be with the written approval of Chief Commissioner/Director General of Income Tax and such details must be mentioned in the manual communication by the assessing authorities to the assessee. Para ‘4’ of the circular clearly states that, any communication issued manually which is not in conformity with para ‘2’ and para ‘3’ of the circular shall be treated as invalid and shall be deemed to have never been issued.
The above view has been taken by the decisions that has relied by the ld.AR referred to hereinabove and also the decision of M/s. Brandix Mauritius Holdings Ltd. [2022 (11) TMI 34 - ITAT DELHI]
This Tribunal in the above referred decisions, we hold that, the order passed by the Ld.AO u/s. 144 r.w.s. 147 is invalid and shall be deemed to have never been issued as per para ‘4’ of the CBDT circular, since it is not in conformity with the requirements mentioned in para ‘3’.
Jurisdiction of AO to issue notice - Transfer of case u/s 127 - In the present case, admittedly no notice u/s.143(2) was issued by the AO who had jurisdiction over the assessee at all material point of time. The assessee filed return of income on, with the 28/12/2019. A notice u/s.143(2) of the Act, dated 28/09/2018 was issued by ITO Ward 4(3)(4), who never had jurisdiction over the assessee. Thereafter, notice u/s.142(1) dated 05/11/2019 was issued by ITO Ward-1(1), International Taxation, and assessment order dated 28/12/2019 was passed u/s.144 r.w.s.147 of the Act by the ITO Ward-1(1), International Taxation, who had jurisdiction over the assessee.
In such circumstances, the decision of Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] and Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] will be clearly applicable to the facts of the present case. We also find that in a recent decision in case of CIT vs. S.K. Industries [2022 (7) TMI 1345 - SC ORDER] has taken identical view that where an Assessing Officer, passed an assessment order under section 143(3) without issuing notice under section 143(2) and only in pursuance with notice issued by another assessing officer under section 143(2), who had no jurisdiction over assessee at relevant time, such assessment order was liable to be set aside.
Assessee appeal allowed.
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2023 (3) TMI 1402 - GUJARAT HIGH COURT
Estimation of income - bogus purchases - CIT(A) sustained addition at 12.5% of the purchase - Tribunal restricted the addition to 6% of the disputed purchases shown by the assessee - HELD THAT:- The view taken and the conclusion arrived at by the appellant Tribunal are based on material before it and after analysing the facts and figure available before it. When the Tribunal has thought it fit to reduce the disallowance at 6% from 12.5%, the Tribunal had before it the facts which were duly analysed by it. No interference is called for in the said conclusion and findings of the Tribunal in the present appeal by this court.
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2023 (3) TMI 1395 - ITAT DELHI
Addition u/s 68 - undisclosed income which has been introduced in the garb of share capital/share premium - CIT(A) deleted addition - HELD THAT:- As going through the entire contents of the paper book and after perusing the facts on record, we do not find any strength in the ratio given by the ld. CIT(A), hence, owing to the absence of the pertinent facts, we deem it proper to remand the matter to the file of the Assessing Officer to inquire into the issue afresh and pass a speaking order after affording due opportunity to the assessee. Appeal of the assessee is Revenue for statistical purpose.
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2023 (3) TMI 1392 - ITAT HYDERABAD
TP Adjustment - comparable selection - HELD THAT:- We respectfully, following the decision of the Coordinate Bench in assessee’s own case for the A.Y 2013-14 [2022 (12) TMI 1431 - ITAT HYDERABAD] to exclude M/s. Infosys BPO and M/s. Eclerx Services Ltd from the list of comparables. The TPO is directed to pass the order giving effect in accordance with the law.
Inclusion of ACE BPO Services Pvt. Ltd, and Jindal Intellicom (P) Ltd - Respectfully following our decision in the case of assessee for the assessment year 2013-14 [2022 (12) TMI 1431 - ITAT HYDERABAD] we also remand back the inclusion of these two comparables to the file of TPO to pass appropriate order after considering the directions issued by us and also after affording the opportunity to the assessee.
M/s. MPS Ltd - CIT(A) have directed the TPO to exclude this comparable, but the order passed by the ld.CIT(A) is lacking in reasoning and basis for arriving at the above said finding. In our view, the objection raised by the Revenue, needs to be allowed and the exclusion of M/s. MPS Ltd. is required to be sent back to the file of the ld.CIT(A) with a direction to pass afresh order considering the rival contentions of the parties.
M/s. Datamatics Financial Services Ltd - Contention of the ld.DR that the order passed by the ld.CIT(A) was a cryptic and non-speaking order, and therefore, the issue of inclusion of Datamatics is required to be reconsidered by the ld.CIT(A) after giving the opportunity to the Assessing Officer / TPO acceptable.
Interest on outstanding trade receivables - whether assessee has not furnished any inter company agreement to prove the credit period is 90 days and the Ld.CIT(A) erred in adjudicating credit period without remanding to the file of TPO? - HELD THAT:- As no documentary evidence has been brought on record before us so that we can infer that 120 days credit period is a reasonable period. In our view, the approach of ld.CIT(A) cannot be faulted with. Hence, we direct the TPO / Assessing Officer to charge interest at LIBOR + 200 points. Further, we direct the Assessing Officer / TPO to allow the credit period and charge interest over and above the outstanding period of 60 days - we direct the TPO / Assessing Officer to decide the issue afresh after considering our directions reproduced hereinabove at para 9.1. for the current assessment year as well.
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2023 (3) TMI 1389 - ITAT MUMBAI
Interest paid on late payment of service tax - allowable business expenditure u/s 37(1) or not? - whether interest paid on late payment of service tax is compensatory in nature and cannot be held it to be penal in nature? - HELD THAT:- It is noted that the assessee has claimed as expense the interest incurred which was due to belated payment of service tax which has been disallowed by the AO holding it to be penal in nature, whereas it is noted that the interest paid by the assessee on delayed payment of service tax is compensatory in nature and is allowable expenditure u/s 37(1).
It is noted that the Service Tax Act itself provide for payment of interest to the Government-Treasury if there is delay in payment of Service Tax. And since the Service Tax Act itself allowed belated payment of the Tax along with interest, the Explanation-1 to 37 of the Act is not attracted. And therefore, ground is allowed.
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