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Income Tax - Case Laws
Showing 101 to 120 of 8298 Records
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2023 (12) TMI 1164
Validity of Reopening of assessment - Sanction for issue of notice u/s 151 - whether valid approval was granted in terms with Section 151? - What are the essential requirements for initiation of a reassessment proceedings under Section 147 of the Act of 1961 and to what extent the Court under Article 226 can interfere? - HELD THAT:- First, the power to be exercised by the authority to grant the approval for issuance of the notice under Section 148 is not a mere formality but is an important safeguard against any arbitrary exercise by the Income Tax Officer to reopen reassessment proceedings. The second aspect is that Section 151 of the Act of 1961 specifically mandates who would be the authority inasmuch Sub-Section (1) of Section 151 of the Act of 1961 relates to issuance of notice under Section 148 after the expiry of the period of 4 (four) years from the end of the relevant assessment year and the authority would be the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner who had to arrive at the satisfaction on the reasons recorded by the Assessing Officer for issuance of such notice. On the other hand, in respect to all other cases, i.e. up to four years, the authority would be the Joint Commissioner which is the authority defined in Section 2(28C). It is also pertinent that the Act of 1961 does not stipulate that the power which had been entrusted by the Act to an Officer can be exercised by any superior officer.
Whether the non-communication of the entire satisfaction note would vitiate the reassessment proceedings? - For conferment of jurisdiction, the recording of reasons is no more essential but recording of reasons would only be essential in terms with Sub-Section (2) of Section 148 for the Assessing Officer to issue any notice under Section 148. It is also pertinent herein to take note of that the words ‘he, may, subject to the provisions of Section 148 to 153’ as appearing in Section 147, makes the legislative intent further clear that for assessing or reassessing such income and also any other income chargeable to tax which had escaped assessment, the Assessing Officer has to do so or for that matter exercise the jurisdiction by satisfying the mandate of Section 148 to 153.
This Court also finds it relevant to mention that the provisions of Section 147 as well as the provisions of Section 148 to 153 do not mention that the reasons so recorded prior to issuance of notice under Section 148 is required to be furnished to the assessee. As decided in S. Narayanappa [1966 (9) TMI 36 - SUPREME COURT] there is no requirement in any of the provisions of the Act or any Section laying down as a condition for initiation of proceedings that the reasons which induced to the Commissioner to accord sanction to proceed under Section 34 must also be communicated to the assessee.
Furnishing of the reasons is not required as per the provisions of the Act of 1961 and the said aspect had been judicially also accepted.
Now therefore the question arises as to why the Supreme Court in the case of GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] had observed that the reasons upon being requested has to be furnished which would provide an opportunity to the assessee to file objection against such reasons and further the Assessing Officer has to pass an order on the said objection and thereupon proceed - From a perusal of the said judgment in the case of GKN Driveshafts (India) Ltd. (supra), it would clearly show that the said judgment is not an authority that the reassessment proceedings would be nullified for not furnishing the reasons. It is the opinion of this Court that if an objection is filed on the basis of the reasons so provided and the said objection is rejected, then it may be a good ground for the assessee to assail the assessment/reassessment order in an appeal. However, the reassessment proceedings cannot be nullified by way of writ petition on the ground that the reasons in the entirety was not furnished. The rationale behind the said opinion of this Court is taking into account that it is well settled that the existence of the belief is justiciable whereas the sufficiency of the reasons for forming the belief is not. Therefore, if an assessee has to challenge the existence of the belief, the same can be done so in a proceedings under Article 226 of the Constitution which is also well settled. Further, it is also the opinion of this Court that the existence of the belief cannot be challenged before the Assessing Officer as it touches upon his own jurisdiction. However, as the sufficiency of reasons for forming the belief cannot be challenged in a proceeding under Article 226 of the Constitution, the assessee would have a right to file objections against the sufficiency of the reasons for forming the belief by the Assessing Officer. It is in that context, the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) made the said observations.
Bogus LTCG - exemption u/s10(38) denied - assessee sold shares (penny stocks) as identified by SEBI and Investigation Wing, Kolkata during FY 2010-11 - HELD THAT:- From the reasons so recorded as above noted and reading conjointly with the computation of income with the detail so given in the reasons for issuance of notice under Section 148 of the Act of 1961, it cannot be said that there was no existence of reasons to believe that the income had escaped assessment. Further to that, the reasons so assigned were neither vague nor indefinite. The reasons had a live link for the formation of the requisite belief. This Court during the course of hearing inquired with the learned counsel for the Petitioner as to how certain shares were shown in the computation of the income as purchased at nil value whereas were sold at certain amounts. The learned counsel for the Petitioner submitted that they were bonus shares which had no purchase costs. He however admitted that in the computation of the income, the same were not reflected as bonus shares issued at nil value. Under such circumstances also this Court is of the opinion that there existed reasons to believe for reopening of the assessment.
Non-compliance to Section 151 - The plea of non-compliance of Section 151 of the Act of 1961 is plea challenging the very reassessment proceedings and in the opinion of this Court, the said plea had to raise specifically in the pleadings else entertaining such plea on oral submissions would violate the principles of natural justice.
This Court finds it relevant to refer to a judgment of the Supreme Court in the case of S.S. Sharma and Others Vs. Union of India and Others [1980 (11) TMI 171 - SUPREME COURT] wherein the Supreme Court observed that the Court should ordinarily insist on the parties being confined to their specific written pleadings and should not permit deviation from them by way of modification or supplementation except through the well known process of formally applying for amendment. It was further observed that if undue laxity and a too easy informality is permitted to enter the proceedings of a Court, it will not be long before a contemptuous familiarity assails its institutional dignity and ushers in chaos and confusion undermining its effectiveness. It was categorically observed that oral submissions raising new points for the first time tend to do grave injury to a contesting party by depriving it of the opportunity to which the principles of natural justice hold it entitled of adequately preparing its response.
In view of the above settled propositions and the facts that the Petitioners in all the writ petition above have not taken the plea of non-compliance to Section 151 of the Act of 1961, the same cannot be allowed to be raised by way of an oral submissions.
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2023 (12) TMI 1163
LTCG - Deduction u/s 54B - investment in purchase of new agricultural land was made by the assessee not in his own name, but in the name of his wife - interpretation of “exemption clause” - HELD THAT:- It will be apt to refer the decision rendered by the Supreme Court in the matter of Mangalore Chemicals and Fertilisers Limited vs. Deputy Commissioner of Commercial Tax and Others [1991 (8) TMI 83 - SUPREME COURT] wherein it has been observed that the choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language.
Wife of the appellant cannot be termed as an ‘assessee’ as per Section 2 (7) of the IT Act. So enlarging the scope of the assessee as defined under Section 2(7) to envelope the wife of the appellant to envelop the transaction to “exemption” would amount to superseed the legislative requirement and the spirit of the provision.
When the person who claimed “exemption or concession” he has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved.
Plain reading of Section 54B would show that the benefit is available to the assessee and when the exemption is demanded. In absence of any ambiguity the scope of definition of ‘assessee’ cannot be enlarged so as to include the wife of the assessee. In other words, the exemption clause has to be construed strictly.
Applying the well settled principles of law and for the reasons mentioned hereinabove, the ITAT was justified in holding that the deduction under Section 54B of the IT Act cannot be allowed to the assessee as the land was not purchased in his own name. Decided against assessee.
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2023 (12) TMI 1162
TP Adjustment - Comparable selection - ALP for calculating the interest payable on NCDs - assessee’s contention was that the Ld. TPO has selected the comparable companies having secured debentures and / or not in the Solar Power Sector - HELD THAT:- As not disputed by the Revenue that the assessee has issued NCDs as unsecured and had agreed the rate of interest of 13%. The key criteria for determining the interest rate is the risk involved. When the loan given is unsecured, the risk is higher and there would be a higher rate of interest. In our considered view, the relationship of a holding / subsidiary is not the criteria for determining the interest with respect to secured / unsecured debt instruments.
We find from the submissions of the AR that when the filters of secured or guaranteed are applied in the list of comparables, the rate of interest and the 65th percentile worked out to 14.25% which is over above the interest rate paid by the assessee. Further, when the companies in the Wind / Thermal Power Sectors are excluded, the 65th percentile worked to 14.25% which is over and above the interest rate paid by the assessee company.
As relying on V R Surat (P.) Ltd [2023 (8) TMI 631 - ITAT SURAT] and Vena Energy KN Wind Power (P.) Ltd [2022 (12) TMI 712 - ITAT BANGALORE] Revenue has not brought any material / case / any contrary decision before us. Therefore, respectfully following the above decisions, we are of the considered view that the rate of interest charged by the assessee company is at Arm’s Length basis and therefore the ground No. 1 & 2 raised by the assessee are allowed.
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2023 (12) TMI 1161
Revision u/s 263 - Incorrect claim of weighted deduction u/s 35(1)(ii) allowed by AO on donation made - assessee had pointed out that this claim was duly examined during assessment proceedings when the assessee had placed relevant documents proving its eligibility to the claim of and even the genuineness of the claim by furnishing documents pointing out that the donation had been made through banking channels and the donee Institute had furnished receipts and certificates issued by CBDT showing that it was approved for receiving donations u/s. 35(1)(ii) - HELD THAT:- A very important fact which emerges is that the Institute, to which donation was made by the assessee during the impugned year and weighted deduction claimed thereon u/s. 35(1)(ii) of the Act, was not approved for the said purposes for the impugned year.
The fact on record available with the Ld.CIT is that the approval granted to the said Institute expired on 31/03/2006. Impugned year before us is A.Y 2015-16. The Advisory issued by the CBDT in December-2018 brought this fact to the notice of all its Field Officers. Therefore, the fact on record was that the said Institute was not approved for receiving donations u/s. 35(1)(ii) of the Act during the impugned year.
Thus there can be no two views that when the assessment order was passed by the AO, assessees claim to weighted deduction u/s 35(1)(vii) of the Act was impermissible in law. And it is a foregone conclusion therefore that the allowance of the said claim in assessment framed was patently incorrect. The assessment order was obviously in error in having allowed a patently ineligible deduction to the assessee.
This is probably the simplest and most straight forward example /instance of an assessment order being erroneous causing prejudice to the Revenue, for a valid exercise of revisionary jurisdiction.
All arguments of assessee against the revisionary order passed by the Ld.CIT fail and are of no consequence in the backdrop of the fact, as noted above by us, that the assessee was not eligible to claim weighted deduction on the said donation u/s 35(1)(ii) of the Act.
Even if the assessee and the AO had bonafidely claimed and allowed respectively the deduction based on documents furnished by the said Institute, the fact still remains that the claim was not allowable as per law. What is material for claiming deduction is its eligibility as per law and not the intention with which it is claimed, whether bonafidely or malafidely. Even a bonafidely claimed deduction if found ineligible in law, it cannot be allowed to the assessee.
Also on a patently ineligible claim there can be no question of the AO taking a plausible view in allowing assesses claim. As approval was not inexistence after 31/03/2006 and the said Trust was subsequently receiving donations fraudulently. The subsequently issued advisory of the CBDT only reiterates the fact of donations to the said institute being ineligible for deduction to donors u/s. 35(1)(ii) of the Act.
In view of the above, we have no hesitation in upholding the order of the Ld.CIT holding the assessment order erroneous for having allowed a patently ineligible claim of weighted deduction to the assessee. Decided against assessee.
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2023 (12) TMI 1160
Addition in an intimation order u/s 143(1) - AO/CPC jurisdiction to make an adjustment in an Intimation Order u/s. 143(1) - exemption claimed u/s 10 was denied and treated as profits and gains of business or profession.HELD THAT:- According to the provisions of section 143 (1) (a) of the act where the total income or loss is required to be computed adjustment prescribed in clause number (i) to (vi) can be made only after giving an intimation to the assessee for such adjustment either in writing or in electronic mode. We do not find any such intimation is given to the assessee of such adjustment holding that the claim of exemption made by the assessee is incorrect. Therefore, such adjustment is made in contravention of the provision of section 143 (1) of the Act and hence, it is not sustainable.
Even otherwise on the merits of the issue we find that exemptions claimed by the assessee is with respect to dividend from mutual fund which is exempt under section 10 (35) of the income tax act, interest from tax free bond which is exempt under section 10 (15) of the Act and the long-term capital gain on consolidation of mutual funds which is exempt under section 10 (38) of the act. Therefore, even otherwise the impugned income in dispute is exempt which is confirmed by the ld. CIT (A) also.
Therefore, as the impugned adjustment is without intimation to the assessee and further the income is held to be exempt by the CIT (A) , we do not find any reason to sustain the intimation passed u/s 143(1) of The Act . In view of this Ground no 1 is allowed.
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2023 (12) TMI 1135
Validity of reopening of assessment u/s 147 - reasons to believe - change in opinion - Whether the petitioner assessee has failed to “disclose fully and truly all material facts necessary for assessment”? - admissibility of deduction under Section 10A - Whether the petitioner assessee has failed to “disclose fully and truly all material facts necessary for assessment? - HELD THAT:- There has been declaration including of expenditure relating to providing technical services. Once such primary facts have been declared and the assessee had made the declaration and claimed deduction under Section 10A of the I.T. Act, there was no further obligation on the assessee. If the Assessing Officer was of the view that details furnished would fall within Section 80HHE and not under Section 10A of the I.T. Act and accordingly, assessee was not entitled to claim such expenditure under Section 10A of the I.T. Act, the non-drawing of such legal inference by the assessing officer at the relevant point of time cannot result in holding that there is no true and full disclosure of primary facts.
Whether the re-assessment notice u/s 147 r/w Section 148 of the I.T. Act is merely a product of change in opinion and accordingly is impermissible in law? - A perusal of Section 148 of I.T. Act, the notice along with the reasons for reopening make it clear that the tangible material relied upon are the MSA’s, Works contracts/SCW’s, Invoices and other details relating to the deduction claimed under Section 10A of the I.T. Act. All of which is stated to have come to the notice of the Department relating to the Assessment Year 2008-2009.
However, even on a perusal of para-2.10 of the Assessment Order relating to the Assessment Year 2008- 2009, “ the assessee as has been asked on innumerable occasions to submit MSAs and SOWs that it had with its clients the assessee has only been able to provide some of the sample MSAs and SOWs…”. Similar observation is made at para-2.12, which reads as follows, ”the assessee has not been able to submit all the SOWs and MSAs entered for software contract services…”. The finding by the Assessing Authority is by placing the burden on the assessee regarding correlation between the MSA, SOW/ work order vis-a-vis work carried out by STP/SCZ unit.
Thus the tangible material sought to be relied upon itself not being complete, it cannot be held that the MSAs and SCWs would demonstrate that the declaration made by the assessee leads to a conclusion that there has been escapement of income. It is also a settled position that reassessment proceedings cannot be in the nature of review and accordingly, the material as has come to light in the assessment proceedings for the Assessment Year 2008- 2009 cannot be a sufficient ground to resort to reassessment proceedings.
Whether the re-assessment notice u/s 147 r/w Section 148 amounts to borrowed satisfaction as it places reliance on findings recorded in the assessment proceedings recorded in the Assessment Year 2008-2009? - The jurisdictional requirement under Section 147 of the I.T. Act for re-assessment requires “the assessing officer to entertain reasons to believe that income chargeable to tax has escaped assessment”. It is clear that the reason to believe has to be entertained by the Assessing Officer by forming an opinion himself.
Clearly, reasons for reopening rests on the satisfaction of the Assessing Officer who has passed an Assessment Order for the Assessment Year 2008-09 which would amount to substitution of the assessment orders of reasons to believe by borrowed satisfaction of the Assessing Officer who has passed an order for the year 2008-09 which is impermissible in law.
Whether the bar under third Proviso to Section 147 of the I.T. Act is a legal impediment insofar as the present re-assessment notice is concerned? - In the above context and looking into the bar under the third proviso to Section 147, the object being to prohibit proceedings u/s 148, when appeal/revision/reference is pending, in the present case, taking note of the details in the Table above, more particularly, noticing pendency of appeals in Column No.(4) as on the date of Section 148 notice, clearly, notice under Section 148 was hit by the bar under third proviso to Section 147 of I.T. Act.
Computation of deduction u/s 10A - Assessment Year 2006-2007 - HELD THAT:- The nexus between the technical services rendered and the STP which is necessary for an allowable deduction u/s 10A is a legal requirement and existence of such nexus is a conclusion to be arrived at by the AO. Once the primary facts regarding providing of technical services outside India is made out, there would end the duty of the assessee and the question of nexus is a matter that the Assessing Officer ought to have clarified by further investigation.
The reliance on documents that has come out as regards the proceedings for the Assessment Year 2008-2009 by way of MSAs, Work Contracts, SCWs and Invoices cannot be sufficient by itself to initiate proceedings for deduction under Section 10A of the I.T. Act in light of absence of nexus. If that were to be so, as the reliance on such documents for the purpose of reducing Section 10A of I.T. Act, the deduction for Assessment Year 2008-2009, itself has not attained finality and is subject to appeal as averred by the petitioner in the pleadings which remains uncontroverted. If that were to be so, the material relied upon in assessment proceedings for the Assessment Year 2008-2009 not having been finally adjudicated so as to indicate requirement to reduce Section 10A deduction, the same cannot be made use of for reassessment proceedings. The requirement that there must be true and full disclosure cannot be stated to have been breached by taking recourse to the material produced during the Assessment Year 2008-2009 as such conclusion for the Assessment Year 2008-2009 leading to reduction in Section 10A deduction itself is a subject matter of further adjudication.
Implication of Circular No. 1/2013 [F.No.178/84/2012 - ITA.I - Government of India, Ministry of Finance, Department of Revenue, CBDT dated 17.01.2013.] - It is clear that the clarification stipulates that the benefits under Section 10A deductions can be availed of, if there exists a direct and intimate nexus or connection between the development of software abroad with the eligible units setup in India. Though the clarification is issued on 17.01.2013, whereas the said circular is only clarificatory and does not confer any new benefit and hence can be made use of to interpret the scope of deduction under Section 10A of the I.T.
The conclusion arrived at by the Assessing Officer for the Assessment Years 2005-2006, 2006-2007 and 2007-2008, when examined from the point of view of the Circular would strengthen the case of upholding deduction under Section 10A of the I.T. Act and would indicate that the resort to a review by recourse to Section 148 of the I.T. Act in the guise of reassessment would be a futile exercise.
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2023 (12) TMI 1134
Reopening of assessment u/s 147 - constitutional validity of Section 115BBE questioned - HELD THAT:- It is settled law that Statutory Acts and their provisions are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is an apprehension of misuse of Statutory Provision or possibility of abuse of power. It must be presumed, unless the contrary is proved, that administration and application of a particular law would be done “not with an evil eye and unequal hand”.
Consequently, at this stage, Section 115BBE of the Act cannot be held unconstitutional on the ground that there is an apprehension of misuse of the said provision.
Further, it is settled law that the Act provides a complete machinery for assessment/re-assessment of tax and the assessee is not permitted to abandon that machinery to invoke jurisdiction of the High Court under Article 226 of the Constitution [See Commissioner of Income Tax & Ors. vs. Chhabil Dass Agarwal,[2013 (8) TMI 458 - SUPREME COURT].
Consequently, the present writ petitions and pending applications are dismissed.
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2023 (12) TMI 1133
TP Adjustment - comparable selection - HELD THAT:- Rejection of comparables as functional dissimilar as covered against the appellant/revenue by the decision rendered by this Court in the matter of Principal Commissioner of Income Tax vs. ST Microelectronics Private Limited [2017 (11) TMI 266 - DELHI HIGH COURT]
Nature of expenses - purchasing software licenses - revenue or capital expenditure - HELD THAT:- There is no dispute that the respondent/assessee had purchased licensed software, of which, it did not have ownership or title. It is also not in dispute that the license had a duration that did not exceed one (1) year.
Assessee’s stand that the licensed software was used for business operations was also not disputed by the appellant/revenue. That said, the test employed by the AO and the DRP, that is “enduring benefit” is not, in our view, a conclusive test to determine the nature of the expense [See Empire Jute Company Limited vs. Commissioner of Income Tax 1980 (5) TMI 1 - SUPREME COURT].
The ratio of the judgment rendered in the Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] as held that the expenditure which is incurred, which enables the profit-making structure to work more efficiently leaving the source of the profit-making structure untouched, would in our view be an expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage would thus collapse in such like cases. It would in our view be only truer in cases which deal with technology and software application, which do not in any manner supplant the source of income or added to the fixed capital of the assessee
In our view, would apply to the facts of this case, and therefore, no substantial question of law arises with regard to the said issue.
Amount expended on training its employees - capital or revenue expenses - ITAT Ruled in favour of the respondent/assessee - HELD THAT:- In our view, qua this issue as well, the test employed, i.e., the advantage of “enduring nature” is not the correct one. Training accorded to employees, which may have a lasting impact, is not determinative of the fact that the expenditure should be treated as one incurred on the ‘capital’ account.
In determining the treatment to be given to expenses, it has to be seen whether the profit structure of the assessee is altered. It is well established that if the profit structure is left undisturbed, such an expense is to be treated as one incurred on the revenue account. The mere fact that employees' efficiency improves with learnings acquired through seminars, conferences, and other forms of training, cannot be the reason to treat such expenses as ‘capital’ expenditure.
As noted by the Tribunal, it is not as if the employees stay with the employer (in this case, the respondent/assessee) for all times to come. It is quite possible that the employees may shift to another employer.no substantial question of law arises.
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2023 (12) TMI 1132
Exemption u/s 11 denied - sum offered for tax and Form No. 10 was filed during the reassessment proceedings as conditions provided in Section 11(2) of the Act, for accumulation of income, had not been fulfilled - as stated that due to an inadvertent error, the respondent/assessee had failed to show this in its original ROI - CIT(A) also held that the AO had not returned a finding that the conditions provided in Section 11(2) of the Act, for accumulation of income, had not been fulfilled - whether a revised Form No. 10 could have been filed by the respondent/assessee during the reassessment proceedings? - HELD THAT:- To claim the benefit of the provisions of sub-Section (2) of Section 11, the respondent/assessee had to file a statement in the prescribed form, i.e., Form No. 10. The Tribunal has noted that there is no adverse finding by the AO concerning the fulfillment of conditions subject to which the accumulation of income was allowed under Section 11(2).
Insofar as the issue concerning the timing of the filing of Form No. 10 is concerned, i.e., in the course of reassessment proceedings, this stands covered by a decision of a coordinate Bench of this court rendered in Association of Corporation & Apex Societies of Handlooms case [2013 (1) TMI 317 - DELHI HIGH COURT] Clearly, the respondent/assessee is not precluded from filing a revised Form No. 10 during reassessment proceedings.
The record also shows that the appellant/revenue had carried the judgment rendered in Association of Corporation & Apex Societies of Handlooms in appeal to the Supreme Court. The appeal preferred by the appellant/revenue, i.e., Civil Appeal 2020 (1) TMI 1664 - SUPREME COURT] was dismissed as withdrawn, on account of low tax effect.
Given this position, according to us, no substantial question of law arises for our consideration.
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2023 (12) TMI 1131
Validity of reopening of assessment - denial of natural justice - order passed on last date for exercising power of reassessment without supplying the reasons pursuant to notice u/s 148 despite request by the petitioner to furnish reasons for reopening - HELD THAT:- Division Bench of this Court in SHRI JANAK SHANTILAL MEHTA [2020 (12) TMI 991 - MADRAS HIGH COURT] wherein while examining as to whether failure to furnish the reasons for reopening on a request made would vitiate the assessment proceedings, it was held that it was mandatory for the Assessing Authority to furnish reasons and if the Assessing Authority fails to do so, the re-assessment proceedings is liable to be set aside. Further, after referring to the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] it was held that non-furnishing of reasons would cause serious prejudice and would vitiate the proceedings, resultantly the impugned proceeding was quashed
The impugned order under Section 147 of the Act is made contrary to and in gross disregard/ non-compliance with the procedure laid down for reassessment by the Hon'ble Supreme Court inasmuch as the assessment order is passed without furnishing the reason for reassessment despite a specific request. The impugned order stands vitiated and is thus set aside. Decided in favour of assessee.
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2023 (12) TMI 1130
Revision u/s 263 - Tribunal upheld the order passed by the Principal Commissioner of Income Tax, in directing the Assessing Officer to recompute the taxable capital gain u/s 54F and pass revised assessment order, after providing opportunity to the assessee - as submitted on the side of the appellant / assessee that the appeal filed against the order of assessment passed by the Assessing Officer is pending adjudication before the appellate authority - HELD THAT:- This court is of the view that the parties need not agitate the factual matrix in this appeal and it would be appropriate to raise all the grounds raised herein before the appellate authority, with whom the appeal is pending, in order to avoid multiplicity of proceedings.
Substantial questions of law involved herein are left open to be decided by the appellate authority with whom the appeal against the assessment order passed under section 144 is pending. Accordingly, the appellate authority shall consider the same along with the grounds raised in the appeal and pass appropriate orders, on merits and in accordance with law, after providing due opportunity of personal hearing to the appellant / assessee, without being influenced by any of the observations made by the Tribunal, within a period of twelve (12) weeks from the date of receipt of a copy of this judgment. The appellant / assessee is at liberty to raise all the grounds before the appellate authority with supportive materials, at the time of personal hearing.
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2023 (12) TMI 1129
Reopening of assessment u/s 147 - petitioner has failed to support documentary evidence regarding the purchase of immovable property and the post office deposit - HELD THAT:- Petitioner is categorical that he has not participated in any sale transaction or availed the benefit of the deposit with the Post Office in the subject assessment year to be served with notice under Section 148A[b] of the IT Act. Secondly, the petitioner asserts that because of his peculiar circumstances he had no knowledge of the notice and as such, he has not filed any response to the notice issued u/s148A[b]. Thirdly, when a show cause notice under Section 142[1] of the IT Act is issued, the petitioner has responded asking for details and an opportunity of hearing. This Court must further observe that the necessary details will be provided when notice under Section 148A[b] of the IT Act is issued, but the notice under Section 148A[b] of the IT Act in the present case does not contain all the necessary details, and it could be that such information could not be sought for at the stage of Section 144B of the IT Act but an opportunity of hearing is contemplated at this stage under these provisions.
The petitioner has not received the notice under Section 148A[b] of the IT Act and an opportunity of personal hearing is not extended before the impugned assessment order, and therefore, this Court must opine that there is a definite lack of opportunity and failure to comply with the requirements of putting the assessee on notice for reasons to commence proceedings under Section 148 of the IT Act.
As such, there must be interference quashing the assessment order dated 13.03.2023 and the adjudication order dated 28.03.2022 u/s 148A[d] and restoring the proceedings to the stage where the petitioner could show cause against adjudication under Section 148A[d] - Further, the second respondent must be called upon to furnish to the petitioner information such as the details of the sale deed and the deposits with the postal department upon receipt of a certified copy of this order with due opportunity to the petitioner to file a response.
The petition is allowed in part. The impugned assessment order and the consequential computation, demand and penalty notices are quashed. The adjudication order under Section 148A[d] of the IT Act is also quashed and the proceedings restored for reconsideration.The second respondent shall furnish the reasons recorded for initiation of proceedings under Section 148 of the IT Act before proceeding further consequent to this order.
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2023 (12) TMI 1128
Scope of limited scrutiny - Addition u/s. 69A - Addition towards Interest paid to Bank of Baroda - HELD THAT:- It is a fact that the assessee maintains a cash credit account with Bank of Baroda which is in the nature of current account. From the bank statement we observe that the opening balance as on 1/4/2017 is Rs. 9,67,51,144.25 and the closing balance as on 31/3/2018 is Rs. 8,28,19,048.25. It is also noticed that the amount debited for Rs. 4,52,58,180/- on 29/12/2017 and even after such debit, the balance is within the limits which indicates that the assessee has serviced the interest portion.
It is also seen from the paper book submissions of the Ld. AR that the bank has issued a Certificate dated 27/5/2022 regarding the receipt of interest from the CC Account. In view of the above facts of the case, we have no hesitation to delete the addition made by the Ld. Revenue Authorities u/s. 43B of the Act. We therefore allow this ground raised by the assessee.
Limited scrutiny proceedings for examining “business loss” - In case, if the Ld. AO wants to take up the case for complete scrutiny, first the Ld. AO has to convert the limited scrutiny into complete scrutiny case and then he may take up the case for complete scrutiny with the prior approval of the Ld. Pr. CIT / CIT concerned after being satisfied about the issue of converting it into a complete scrutiny. In the instant case, we find that no such approval has been granted to the Ld. AO. We therefore find that the Ld. AO has travelled beyond his jurisdiction in treating the cash deposits u/s. 69A of the Act which is not valid in law and therefore we are inclined to delete the addition made by the Ld. Revenue Authorities and allow the ground raised by the assessee.
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2023 (12) TMI 1127
Treatment of advance received in respect of sale of agricultural land jointly executed with co-owner - Treating partial advance received against agreement to sell of an ancestral joint agricultural land as sale consideration - Whether no transfer of possession of land in the year under consideration? - only argument of the assessee is that the land in question was only advance and it could not be treated as sale consideration and since no possession of land was given, therefore, there was no transfer - HELD THAT:- AO did not discard completely the contention regarding source of deposit being advance/sale consideration. However, he made addition on the basis that no capital gain was offered by the assessee.
We find merit into the contention of learned counsel for the assessee that the amount was merely advance payment and the transfer was completed in the year 2020. Our attention was drawn towards sale deed and settlement agreement executed. As per these documents the possession was handed over on 15.02.2020.
Therefore, hereby direct the AO to delete the impugned addition. The AO would be at liberty for taxing the capital gain arising out of sale of capital asset in the relevant year in accordance with law, Grounds of appeal are allowed.
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2023 (12) TMI 1126
Estimation of income - unaccounted purchases - grievance of the Revenue is that since the assessee has not properly explained the sources for the cash purchases the decision of the Ld. AO by making an addition u/s. 69A of the Act treating it as unexplained cash holds good and therefore the same may be sustained - HELD THAT:- We are of the opinion that the entire unaccounted purchases cannot be treated as income of the assessee and only the profit element should be considered as income for the purpose of computing the tax on sales. Hence, we are inclined to allow 8% on the sales made by the assessee as income of the assessee. Accordingly, the Ld. AO is directed to work out the income of the assessee and tax the same in accordance with law.
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2023 (12) TMI 1125
Penalty u/s. 270A - under reporting of income by not reducing the insurance claim received by the assessee from the block of assets which has in fact resulted in excess claim of depreciation - assessee in the present case has stated that it was not in an advantageous position to claim higher depreciation as it was adverse for the assessee in subsequent years and that there was no question of reducing the tax liability where the assessee’s return of income declared a huge loss during the year under consideration - CIT(A) deleted penalty levy - HELD THAT:- CIT(A) had relied on the decision of Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] where it has held that furnishing inaccurate claim of expenditure would not amount to giving inaccurate particulars of such income.
Assessee has relied on various other decisions which have reiterated the proposition that the claim of higher depreciation would not amount to concealment of income. It is also observed that the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Somany Evergreen Knits Ltd. [2013 (4) TMI 154 - BOMBAY HIGH COURT] has held that excess claim of depreciation was a bona fide mistake on the part of the assessee which attracts no levy of penalty.
By respectfully following the above said decision, we deem it fit to hold that there is no infirmity in the order of the ld. CIT(A) in deleting the penalty levied by the ld. A.O. Decided in favour of assessee.
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2023 (12) TMI 1124
Assessment against deceased/non existent assessee - Whether any proceedings which could have been taken against the deceased if he had survived may be taken against the legal representative in terms of section 159(2)(b)? - HELD THAT:- As seen that the AO despite having knowledge of the deceased assessee, except mentioning in the show cause notice, the name of the Legal Heir has not incorporated the deceased assessee either in the Assessment Order or in the subsequent demand notice or show cause notice for imposing/ proposing to impose penalty u/s 271AAC(1) of the Act.
In the decision of Hon’ble Punjab And Haryana High Court in the case of Swaran Kanta [1988 (11) TMI 91 - PUNJAB AND HARYANA HIGH COURT] AO therein has acknowledged the Legal Heir of the deceased assessee and, therefore High Court has held that the title of the Assessment Order which was not correctly worded would not make the Assessment Order invalid as was sought to be declared by the Revenue Authorities and the Tribunal was fully justified in restoring the order of assessment in exercising power under Section 292B of the Act. But in the present case, the Assessing Officer, despite having knowledge, has not recognised the Legal Heir while passing the final order as well as the subsequent demand order/notice and notices relied to imposing of penalty.
From the perusal of records, it can be seen that the AO has passed the Assessment Order in the name of deceased person which is non-existent person and when the order passed on the non-existent person despite represented by the Legal Heir, the same cannot be curable under Section 292B.
AO has consciously chose the name of the deceased assessee. In the eyes of law, if the assessee is deceased and Assessing Officer is very well aware about the same, then order has to be passed in the name of the Legal Heir of the deceased assessee. But the AO chose otherwise and, therefore, this defect is not curable as later on notices for demand as well as for imposing of penalty was issued in the name of the deceased assessee and thus the Assessment Order itself becomes void-ab-initio. CIT(A) has taken proper cognisance of the same and allowed the plea of the assessee and held the Assessment Order invalid. Appeal filed by the Revenue is dismissed.
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2023 (12) TMI 1123
Allowability of Employee Stock Option Plan [ESOP] expenses - allowable revenue expenses or not? - AO who was of the firm belief that there is no specific section under which ESOP expenditure is allowable under the Income tax Act, 1961 and the only section under which the said claim can be made is section 37, but even u/s 37 of the Act, claim of ESOP expenses cannot be allowed and added the same - HELD THAT:- It is the say of assessee that now this issue is no more res integra as the same has been decided in the case of Lemon Tree Hotels [2015 (11) TMI 404 - DELHI HIGH COURT] similar question was answered in favour of the Assessee by holding that the cost of ESOP could be debited to the profit and loss account of the Assessee. This Court has also in its decision in Oswal Agro Mills Ltd.[2015 (11) TMI 301 - DELHI HIGH COURT] held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure. Decided in favour of assessee.
Disallowance u/s 40a(ia) - non deduction of TDS on reimbursement of circuit expenses - During the course of scrutiny assessment proceedings, AO noticed that the assessee has reimbursed to Ameriprise Financial Services Inc [AFSI] on behalf of the assessee but assessee has not deducted - HELD THAT:- As considered the invoice and find that though the AT&T has raised invoice on AFSI, but it is for the service provided to the assessee at Gurgaon. The said notice for an amount and AFSI has raised the invoice of the same amount on the assessee and this amount has been reimbursed to the assessee. Thus we are convinced that the amount reimbursed by the assessee is towards circuit expenses to which provisions of section 40a(ia) do not apply. We, therefore, decline to interfere with the findings of the ld. CIT(A). Ground No. 2 is also dismissed.
Addition of employees contribution to the Provident Fund deposited beyond the due date - HELD THAT:- This issue is now well settled in favour of the Revenue and against the assessee in the case of Checkmate Services [2022 (10) TMI 617 - SUPREME COURT]
Disallowance u/s 14A - as been strongly contended that during the year under consideration, the assessee did not earn exempt income. Therefore, no disallowance is called for u/s 14A - HELD THAT:- We are of the considered view that if no exempt income is earned by the assessee, no disallowance can be made u/s 14A r.w.r 8D of the Rules as held in the case of Cheminvest Ltd [2009 (8) TMI 126 - ITAT DELHI-B] affirmed in CORRTECH ENERGY PVT. LTD. [2014 (3) TMI 856 - GUJARAT HIGH COURT]
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2023 (12) TMI 1122
Income taxable in India - interconnectivity utility charges (IUC) received by the assessee as Royalty / FTS in India - HELD THAT:- On perusal of the agreement between the assessee and the end users, it is noted that the installation and operation of sophisticated equipments are with the view to earn income by allowing the users to avail the benefits of such equipments or facility and does not tantamount to granting the use or the right to use the equipment or process so as to be considered as royalty within the definition of "royalty" as contained in clause 3 of Article 13 of India-France DTAA.
We note that the issue has now been settled pursuant to the decision of in a group of cases between M/s. Vodafone Idea Ltd. (Formerly known as M/s. Vodafone Mobile Services Ltd. vs. DDIT(IT) & Ors. [2023 (7) TMI 1164 - KARNATAKA HIGH COURT]
In case of Vodafone Idea Ltd [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] also observed that the equipments and submarine cables are situated overseas and that Vodafone Idea Ltd. had availed certain services from the non-resident telecom operators and that such agreements would not create a permanent establishment of such non-resident telecom operators in India.
Thereafter Hon'ble High Court after verifying the facts of the case having regards to the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd [2021 (3) TMI 138 - SUPREME COURT].
We hold that payments received by assessee towards interconnectivity utility charges from Indian customers/end users cannot be considered as Royalty/FTS to be brought to tax in India under section 9(1)(vi)/(vii) of the Act and also as per DTAA.
We also note that in the present facts of the case, at no point of time, any possession or physical custody, control or management over any equipment is received by the end users/customers. It is also noted that the process involved in providing the services to the end users/customers is not "secret" but a standard commercial process followed by the industry players. Therefore the said process also cannot be classified as a "secret process", as is required by the definition of "royalty" mentioned in clause 3 of Article 13 of India-France DTAA.
The receipt of IUC charges cannot be taxed as Royalty under Article 13 in India of India-France DTAA. The payment received by the non-resident assessee amounts to be the business profits of the assessee which is taxable in the resident country and is not taxable in India under Article 5 of the DTAA as there is no case of permanent establishment of the assessee that has been made out by the revenue in India. Even Hon'ble High Court has in para 25, held that the non-resident service providers do not have any presence in India. Appeal filed by the revenue stands dismissed.
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2023 (12) TMI 1121
Assessment order passed on an non- existent entity - status of assessee - Pvt Ltd. Company or LLP - appellant company has been converted from the existing private limited company into a Limited Liability Partnership ('LLP') in accordance with the provisions of Limited Liability Partnership Act - say of the ld. DR that the facts of the present case is neither of amalgamation nor of merger/demerger, but a simple case of change in the status of the assessee from a private limited company to a limited liability partnership, therefore, assessment cannot be quashed as the status of the assessee continued for the year under consideration.
HELD THAT:- The undisputed fact is that the status of the assessee changed from private limited company to a limited liability partnership on 22.04.2019. It is also not in dispute that immediately the assessee informed not only the jurisdictional Assessing Officer but also the PCIT.
Also undisputed fact that subsequent to the change of status, all the notices were replied by the assessee in the name of LLP. Therefore, it can be stated that the change of status was brought to the knowledge of the Assessing Officer in all possible ways. Yet, the Assessing Officer chose to frame the final assessment order in the name of a no-existent entity. The ratio laid down by the Hon'ble Supreme Court in the case of Maruti Suzuki Ltd [2019 (7) TMI 1449 - SUPREME COURT] squarely applies and has been rightly followed by the NFAC.
In the case of Mahagun Realtors [2022 (4) TMI 347 - SUPREME COURT] , no intimation about merger was brought to the notice of the Assessing Officer and the return filed after amalgamation was still in the name of the amalgamated company and fact of amalgamation was not disclosed in the business/organization column and the assessment order indicated the name of both the amalgamation and the amalgamating company and during the assessment proceedings, the assessee made the Assessing Officer believe that the amalgamating company was still in existence. All these facts before the Hon'ble Supreme Court are in favour of the assessee which facts are completely absent in the case in hand. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A).
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