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Income Tax - Case Laws
Showing 261 to 280 of 8298 Records
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2023 (12) TMI 763
Revision u/s 263 - partners have contributed capital but the same was not examined by the AO during the assessment proceedings - As per CIT AO did not examine whether the said contribution was from explained sources or not and did not examine the various aspects of the partnership deed - assessee submitted that the return filed by it was selected for scrutiny and various details were sought during the assessment proceedings - HELD THAT:- We find that the assessee not only furnished the copy of the income tax return and the computation of income but also furnished the bank statement of the assessee highlighting the capital contribution made by the partners during the year, the ledger account of the partners in the books of the assessee as well as bank statement of partners highlighting payment made to the assessee. Therefore it is sufficiently evident that the return filed by the assessee was selected for scrutiny, inter-alia, particularly to examine the introduction of large capital or share capital in the year under consideration.
AO also examined this issue by seeking various information from the assessee, which was duly furnished by the assessee to substantiate the flow of funds from the partners’ account in Cimechel Electric Co. to the assessee. As some of the partners in Cimechel Electric Co. and the assessee are common. Therefore, these very partners have transferred their funds from one entity to the assessee which has been duly substantiated with the material placed on record.
Assessee has also furnished a copy of partnership deed dated 26/05/2017 during the assessment proceedings, which clearly highlighted the name of the partners and the share of their profit/loss. Vide impugned order the learned PCIT though agreed that the assessee has explained the capital contribution, however, even then held the assessment order to be erroneous and prejudicial to the interest of the Revenue on the basis that no enquiry in this respect nor any submission was made during the assessment proceedings.
From the record, it is evident that the AO had examined the issue of capital contribution by the partners in the assessee firm, during the assessment proceedings. From the perusal of the notices issued by the AO and the reply filed by the assessee, we find that this issue was specifically raised during the scrutiny assessment proceedings and the same was duly replied to by the assessee. Therefore, it cannot be concluded that this aspect was not examined by the AO.
We find that the Hon’ble jurisdictional High Court in CIT vs Reliance Communication Ltd, [2016 (4) TMI 173 - BOMBAY HIGH COURT] held that the fact that the AO did not make any reference in the assessment order cannot make the order erroneous when the issues were indeed looked into. Thus, in view of the facts and circumstances of the present case, we are of the considered opinion that this issue was duly examined by the AO during the scrutiny assessment proceedings. Therefore, the impugned revision order passed under section 263 of the Act is set aside. Appeal by the assessee is allowed.
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2023 (12) TMI 762
Disallowance of deduction u/s 80P(2)(d) - assessee is a cooperative bank - AO disallowed the deduction and treated interest and dividend income from other sources and added back with the total income of the assessee - HELD THAT:- The status of the cooperative bank where the investment was parked, and the income was generated was never ascertained by the revenue authorities. Here, to determine the taxability of the income of assessee from investment first to ascertain the status of the bank and assessee.
DR was unable to bring any specific observation during the hearing. In our considered view, the appeal of the assessee is remanded back to the file of the ld. CIT(A) to determine the income in the light of discussion indicated above. Needless to say, the assessee should get reasonable opportunity in set aside proceeding. Appeals of the assessee allowed for statistical purpose.
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2023 (12) TMI 761
Addition on account of cash deposit during demonetization period - AO made an addition because there was no sufficient evidence whatsoever on record which according to him proves that the assessee was having cash in hand at ‘’Beawar’’ as against at Kota Head Office. - HELD THAT:- The assessee was not maintaining any separate set of books account at different locations and the argument made by the assessee that the cash in hand was available at ‘’Beawar’’ was not accepted by the AO being no evidence on record.
AO in the absence of required details and documents that the cash was deposited out of the cash in hand available with the assessee was not accepted for want of proper supporting documents/proof. AO on verification of bank statement of Beawar PNB Branch, submitted by the assessee, noted that there is no cash transaction in the said bank account which is further evidence that the assessee was not having any cash in hand in ‘’Beawar’’ PNB Branch. Thus the AO in totality noted that the cash deposit (SBN Notes) during demonetization period cannot be from the explained and disclosed sources and the same is required to be treated as deposited of undisclosed income of the assessee.
Thus the assessee glumly failed to justify the genuineness of the cash on hand viz a viz its use for payment of service tax, if the assessee was having the cash why the government dues are not discharged and kept the cash on hand and not only that the filmy reasons provided by the assessee of shifting the cash on hand from one place to another is also not justified with the corroborative evidence. Thus, we are not inclined to interfere in the order of the ld. CIT(A). Thus Ground No. 2 of the assessee is dismissed.
Addition on account of difference in turnover as per financials and Form 26AS - HELD THAT:- Assessee had claimed TDS on basis of Form 26 AS and at the same time has shown less receipt from M/s Sanghi Industries. Hence, there is a substantial difference in the receipts shown as per Form 26AS. Decided against assessee.
Disallowance of temporary labour charges - disallowance u/s 37(1) - HELD THAT:- Assessee as show caused on 01-12-2019 for which the assessee did not comply with this show cause. Since the assessee did not any reply on this issue which shows that the assessee has nothing to say on payment of wages made and according to the AO, the expenses appeared relating to previous year and the same could not be allowed in the year under assessment. AO made disallowance u/s 37(1) and added to the total income of the assessee and the ld. CIT(A) has confirmed the action of the AO holding that the AO had sought certain specific details pertaining to temporary labour wages and the details were not supplied by the assessee which were disallowed. The Bench feels that in the interest of equity and justice, the Ground No. 4 of the assessee is restored to the file of the AO to decide it afresh for which the assessee will produce the documents relating to labour payments (supra) and if it is found correct then the relief may be granted to the assessee. The assessee is also directed to produce the relevant bills, vouchers, and other concerning papers in order to settle the issue in question. Thus Ground No. 4 of the assessee is allowed for statistical purposes.
Addition u/s 43B - Payments in respect of taxes and Government dues - HELD THAT:- As per the provisions of section 43B. Payments in respect of taxes and Government dues can be claimed as expenditure only on actual payment on or before the due date of return.
This section has been enacted to enforce that taxes and Government dues are actually paid when the same is claimed as expenditure, including in respect of Assessee who maintain accounts on mercantile basis. The AO has disallowed the amount by noting that Government dues have remained unpaid hence the same was disallowed. On the other hand, the appellant has applied for Dispute Resolution Scheme under Sabka Vishwas Scheme of CBIC. In these circumstance, what is pertinent is how much expenditure has been debited in the account of the appellant. If it has debited and claimed Service Tax payment as expenditure, then the same would be allowed only if paid before the due date of filing of return. However, if the same has not been claimed in the P&L account/return, then no such disallowance is required to be made. The AO may call for a reconciliation statement from the appellant and restrict the disallowance to the amount of Service Tax showed as expenditure in the P & L Account, which remained unpaid before the due date of return.
Bench does feel to interfere in the order of the ld. CIT(A) above as the decision of the ld. CIT(A) is based on the fact that the assessee has not placed the relevant details on record and he has already directed the ld. AO to call for the details and considered the addition accordingly. Hence, this additional ground of the assessee is dismissed.
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2023 (12) TMI 760
Rectification of mistake u/s 154 - deduction u/s. 10A denied on the component of refund of service tax received by the assessee - scope of debatable issue - as contended that the issue whether service tax refund would be considered as ‘profits/gains derived from the eligible undertaking’ is a subject matter of debate, in respect of which two views are possible, therefore, refund of service tax could not be a subject matter of rectification u/s 154 for the purpose of disallowing claim u/s. 10A - whether there is a mistake apparent from record in respect of refund of service tax? - HELD THAT:- From the perusal of the assessment order passed u/s. 143(3) and the queries raised by the Ld. AO and submissions made by the assessee thereon vis-à-vis refund of service tax forming part of claim u/s. 10A, we note that Ld. AO had passed the original assessment order after examining the details furnished by the assessee. He did not dispute the computation made by the assessee which included refund of service tax in the claim made u/s. 10A.
From the perusal of the impugned order passed u/s. 154 read with sec. 143(3) of the Act, we note that Ld. AO has formed a view after a long drawn process of reasoning passed on the decision of Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] and Sterling Foods [1999 (4) TMI 1 - SUPREME COURT] to dislodge the claim of the assessee in respect of refund of service tax.
View taken by the Ld. AO in the proceedings initiated u/s. 154 tantamount to a change in view resulting into review of his own order which is not permissible under the provisions of section 154 of the Act. When the Ld. AO has consciously taken a view to frame the original assessment by making certain additions/disallowances, he is not empowered to take contrary view by adopting a review process for the assessment already completed.
We are in agreement with the submissions made on the restricted powers available u/s. 154 to rectify a mistake which is apparent from record, which cannot be otherwise resorted to under the garb of review or reconsideration of the order already passed. It is well settled law that a power to rectify a mistake does not include a power to review which can be exercised only where the statute itself grant such power. In the absence of grant of such power of review under the said section, it is not possible for the Ld. AO to review his own order.
Thus, AO is not justified in adopting provisions of section 154 which deals with rectification of a mistake apparent from record which in the present case is on a technical issue i.e. allowability of exemption u/s. 10A in respect of receipt of refund of service tax. To buttress our decision, we find force from the decision of Saurashtra Kutch Stock Exchange Ltd. [2003 (3) TMI 70 - GUJARAT HIGH COURT]
We hold that Ld. AO is not justified in resorting to rectification u/s. 154 on a debatable issue. Decided in favour of assessee.
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2023 (12) TMI 759
Addition u/s 69B - unexplained investment - HELD THAT:- We find that in the share purchase agreement there is no reference of “Escrow agreement” and assessee has not made any compliance of the said Escrow agreement , which is under litigation before the Hon’ble Bombay High Court. In such circumstances, it cannot be held that assessee has paid additional consideration for purchase of the shares.
In absence of any proof of payment of additional sale consideration, particularly when owner(s) of the flat i.e M/s Starlight Systems LLP has declined request of the three shareholders for allotment of flats to them. Further documents relating to allotment of those flats to three shareholders have been observed to be defective by the Ld. CIT(A) and this fact has not been controverted by the Ld. DR.
Be that as it may be, it is evident that those three flats belonging to the M/s Starlight security LLP mentioned in the Escrow agreement has ultimately not been given to those three shareholders by the assessee on anyone on behalf of the assessee and matter being under litigation before the Hon’ble Bombay High Court, no addition for unexplained investment could survive in the hands of the assessee company. In our opinion order of the Ld. CIT(A) on the issue in dispute is well reasoned and accordingly, we uphold the same. In the result, the ground Nos. 1 and 2 of the appeal of the Revenue are dismissed.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We have noted that Hon’ble Delhi High Court in the case of M/s Joint investment [2015 (3) TMI 155 - DELHI HIGH COURT] has already held that disallowance u/s 14A of the Act cannot exceed dividend income. Also no disallowance u/s 14A of the Act can be made if the assessee had not earned any exempt income during the year under consideration. Since in the case assessee has already made disallowance to the extent of exempted income, therefore, respectfully following the finding of the Hon’ble Delhi High Court Era Infrastructure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT], we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition made by the Assessing Officer. The arguments of the ld counsel for the assessee for restricting the disallowance under rule 8D to the extent of interest corresponding to the investment in mutual funds, are rendered academic only.
Revised computation of the income of the assessee in compliance of the amalgamation order - CIT(A) upholding the stand of the AO of not considering the revised computation of the income filed in compliance to the amalgamation of the order of the Hon’ble High Court passed on 12.12.2012 - HELD THAT:- We find that that the Ld. CIT(A) upheld the decision of the Assessing Officer in view of the decision of Goetze (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] but the Ld. CIT(A) however has mentioned that direction given and the date specified in the original order dated 17.08.2012 as well as revised order dated 10.12.2012 of Hon’ble High Court will have to be complied with by the AO. Accordingly, following the finding of the Hon’ble supreme court in the case of Dalmiya Power Ltd. [2019 (12) TMI 991 - SUPREME COURT] .we uphold the direction of ld CIT(A) to the Assessing Officer to take into consideration revised computation of the income of the assessee in compliance of the amalgamation order approved by the Hon’ble Bombay High Court vide order dated 12.12.2012. The ground No. 5 of the appeal of the assessee is accordingly allowed.
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2023 (12) TMI 758
Assessment u/s 153A - disallowance of bogus Long Term Capital Gain - whether any incriminating documents is available with department to make the addition? - as per DR entry operator and the directors of shell companies themselves have accepted under Oath that they are involved in providing accommodation entries during various departmental investigations which is incriminating in itself - HELD THAT:- Ideally when we explore the scope of section 153A and addition is not sustainable on legal ground, then, the inquiry on factual aspect is not required to be made. In case, a specific ground is being raised in an appeal or C.O. that has to be adjudicated. Earlier this approach was being taken on the ground that Higher Appellate Authority may concur or not with the view of the ITAT on the legal ground and in that situation, adjudication of the issue on merit would be required. But now the Hon’ble Supreme Court has silenced the controversy in the case of PCIT vs. Abhisar Buildwell Pvt. Limited [2023 (4) TMI 1056 - SUPREME COURT] and there is no scope of disagreement on the scope of section 153A in further appeal unless Hon’ble Supreme Court took a different view later on.
In five scrutiny cases of the sale of shares, i.e. TFCIL, gain earned by the assessee was accepted as a genuine by the Department itself. Out of these five cases, two are in the re-assessment u/s 147 and these assessment orders have been framed after more than one year of the search. Therefore, Department was not doubting the genuineness of the transactions. It is also obsesrved that apart from Hon’ble Calcutta High Court in the case of Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] the other Hon’ble High Courts have accepted the claim of these alleged bogus long-term capital gains and assessee drew our attention towards the decision of Smt. Pushpa Malpani [2010 (11) TMI 799 - RAJASTHAN HIGH COURT], Krishna Devi [2021 (1) TMI 1008 - DELHI HIGH COURT]
The ld. Counsel for the assessee has also drew our attention on the tabulated details submitted in his submission and pointed out how certain companies have performed so well and the change was 449% to 312%, whereas certain companies has performed very badly. Therefore, we have made analysis of these break-up in the light of the large number of decisions, namely 21 in number compiled in the written submission. We are of the view that the Department was not possessing any details, which authorize it to doubt the claim made by the assessee. Therefore, even otherwise on merit also, no addition is sustainable. - Decided in favour of assessee.
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2023 (12) TMI 740
Special audit of accounts u/s 142A for the purpose of assessment u/s 153A - Power (Jurisdiction) to grant Extension lies with AO or CIT - Extension given for submission of the audit report to Chartered Accountant appointed u/s 142(2A) - HELD THAT:- It was the respondent/assessee's stand that both cooperation and information was furnished as sought by the concerned auditor. Regarding the interconnection of transactions, two separate auditors appointed in the matter had enough time to coordinate. That said, according to the respondent/assessee, without prejudice to the contention made on its behalf, one way or the other, the AO had to decide as to whether the extension of time for conducting the audit was mandated. The letter dated 08.04.2010, the extract of which was embedded in the letter dated 11.02.2020, needed to demonstrate that there was good and sufficient cause for extending the timeframe.
Having noted the diametrically opposite assertions made on the aspect of delay, in our opinion, the legal tenability of the decision taken in the matter depends on which specified authority was invested with the power to extend the timeframe. As discussed above, since the legislature vested the discretion to extend the timeframe solely in the AO, he could not have abdicated that function and confined his role to only making a recommendation to the CIT. CIT had no role in extending the timeframe as the AO was in seisin of the assessment proceedings.
As has been correctly submitted on behalf of the respondent/assessee, the decision taken to get an audit conducted u/s 142(2A) of the Act is a step in the process of assessment proceedings and, therefore, is clearly not an administrative power; as the appointment of a special auditor entails civil consequences.
We may note that the decision relied upon on behalf of the appellant/revenue in the matter of Yum Restaurant [2005 (5) TMI 55 - DELHI HIGH COURT] has been disapproved in Rajesh Kumar’s case [2006 (11) TMI 135 - SUPREME COURT]. Furthermore, the judgment in Rajesh Kumar’s case has been reaffirmed by the Supreme Court in the Sahara India Firm case [2008 (4) TMI 4 - SUPREME COURT] with some moderation with regard to the Court’s exposition concerning the scope and impact of Section 136 of the Act.
Given that the initial exercise of the power has been explicated as one that is not administrative, the CIT(A) could not have extended the time based on the recommendation of the AO. However, the enunciation of this legal principle does not derogate from our observation above that since the discretionary power was vested in the AO (which was non-delegable), it could not have been exercised by the CIT, irrespective of the nature of the power. Decided in favour of assessee.
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2023 (12) TMI 721
TP Adjustment - whether the reimbursement of advertising, marketing and promotion expenses (AMP), incurred by assessee on behalf of its AE was at arm’s length - whether any upward adjustment was required to be carried out in the amount received by assessee from its AE? - Whether TPO ought to have used the bright line test (BLT) in computing the arm’s length price (ALP) concerning AMP activities carried out by the respondent/assessee? - whether the respondent/assessee was adequately compensated for expenses incurred for AMP activities carried out in India? - HELD THAT:- As in the period in issue, the respondent/assessee was only in the business of import and distribution of Sony products. The amount spent on AMP activities by the respondent/assessee in the relevant FY was Rs. 119,54,43,600/-.The compensation for this expense was, according to the Tribunal, received by the respondent/assessee in terms of higher profitability for the product sold.
Even according to the TPO, the AMP expenditure incurred by the respondent/assessee resulted in increased sales in India for products, albeit developed by the AE but sold by the respondent/assessee.
The fact that the comparables chosen by the TPO had a net margin lower than that registered by the respondent/assessee would persuade us to hold that no upward adjustment concerning AMP expenses ought to have been made.
Lastly, the application of the BLT tool, by the TPO, in determining ALP, injected the order issued by him, which was incidentally approved by the DRP, with a legal error. [See Sony Ericsson Mobile Communications India case [2015 (3) TMI 580 - DELHI HIGH COURT]].
We are not inclined to interfere with the impugned order passed by the Tribunal, as no substantial question of law arises for our consideration.
Thus, for the foregoing reasons, we are not inclined to interfere with the impugned order passed by the Tribunal, as no substantial question of law arises for our consideration.
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2023 (12) TMI 720
Disallowance of contributions to temple/panchayat - ITAT deleted the addition - whether the CIT (A) erred by admitting the additional evidence in violation to Rule 46A(3) of the Income Tax Rules, 1962? - HELD THAT:- We find that no additional evidence was allowed to be produced. AO had made the addition based upon the evaluation of the material before the AO. Commissioner (Appeals) on evaluating the very same material disagreed with the AO. The ITAT agreed with the Commissioner of Appeals. Therefore, this is not a case of any violation of Rule 46A(3), and the first question of law now sought to be raised does not arise in this appeal.
Respondent pointed out that the addition was based upon misconstruing the Assessee's case. He pointed out that merely because some contributions had been made to temples, etc., the Assessee had not claimed any exemption under Section 80-G of the Income Tax Act. He pointed out that these were routine revenue expenditures incurred by the Assessee after explaining the factual background in which such contributions were made. This explanation was accepted by the Commissioner (Appeals), and the ITAT upheld the Commissioner's view. Accordingly, the first question, as proposed, does not arise in this appeal.
Addition u/sec. 28(iv) - benefits in some form other than money or cash - ITAT deleted the addition - whether CIT (A) erred in admitting the additional evidence in violation of Rule 46A(3) of Income Tax Rules, 1962? - HELD THAT:- We are not too sure whether this was a case of admission of any additional evidence. However, even assuming that this was so, the Tribunal has decided the matter based upon the decision of this Court in Mahindra And Mahindra Ltd [2018 (5) TMI 358 - SUPREME COURT] wherein held that the benefit as contemplated by Section 28(iv) of the Income Tax Act has to be some benefit other than a benefit in the shape of money or cash.
In the present case, there is no dispute that there was no benefit other than in the form of money alleged to be received by the Assessee. Even the case of the Revenue was that the Assessee had accepted certain advances for which no proper explanation was furnished. Therefore, the issue of admission or non-admission of additional evidence is quite irrelevant since Section 28(iv) contemplates benefits in some form other than money or cash. Therefore, even if the additional evidence or the new documents allegedly admitted at the appellate stage were to be completely excluded from consideration, there would be no difference, and the Assessee’s case would have to be accepted based upon the interpretation of Section 28(iv) in Mahindra and Mahindra (Supra).
No substantial question of law arises.
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2023 (12) TMI 719
Application for settlement filed by the petitioner rejected - application came to be rejected by the first respondent/Interim Board for Settlement II for the reason that the petitioner had filed the application without payment of tax and interest on the income disclosed as mandated under the provisions of section 245 C (1) - petitioner submitted that the entire tax liability along with interest has been discharged and no further amount is liable to be paid by the petitioner towards tax as well as interest - HELD THAT:- A mere perusal of the order impugned herein as well as the application made by the petitioner for third occasion, dated 10.3.2021, it is seen that the petitioner has clearly furnished the details with regard to the discharge of entire tax liability along with interest, however, the application came to be rejected, without stating as to why, the application is rejected and further, in the impugned order, there is not even a reference made with regard to the payment details made by the petitioner towards tax and interest and mechanically, the first respondent rejected the application for settlement filed by the petitioner.
Hence, this Court is inclined to direct the 1st respondent to take up the application of the petitioner on record and dispose of the same on merits and in accordance with law within a specified time.
Writ Petition is disposed of by directing the 1st respondent to take the application of the petitioner on record and dispose of the same on merits and in accordance with law on or before 31.12.2023.
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2023 (12) TMI 718
Income accrued in India - Royalty receipts - income received by the appellant as a consideration for providing domain name registration services - Appellant/assessee is a US-based company and is an accredited registrar for the Internet Corporation for Assigned Names and Numbers (ICANN) - HELD THAT:- What is agreed between the appellant/assessee and its customers is that mere registration of a domain name does not create any proprietorship rights in the name used as the domain name or in the domain name registration either in the appellant/assessee or the customers or even any other third party.
Therefore, the submission advanced on behalf of the appellant/assessee, i.e., that since it is not the domain name's owner, it cannot confer the right to use or transfer the right to use the domain name to another person/entity, deserves acceptance.
We are also of the view that passing off and injunction actions are entertained by the courts where domain name registrations are brought about in bad faith or to perpetuate fraud. The courts tend to grant injunctive relief where the defendant, in such actions, is seen to be feeding off the plaintiff's goodwill and causing confusion amongst its customers regarding the origin of the subject goods and services. Such reliefs are granted on the basis that the definition of the expression “mark” includes a “name”, and in turn, the expression “trademark” so defined to include a mark, distinguishes the goods and services of one person from those of others. Therefore it is possible in a given situation that a domain name may have the attributes of a trademark. [See Section 2m read with Section 2zb of Trademarks Act, 1999 ].
The Supreme Court, in Satyam Infoway [2004 (5) TMI 529 - SUPREME COURT] held that it is the registrant (and not the Registrar) who owns the domain name, and can protect its goodwill by initiating passing off action against a subsequent registrant of the same domain name/a deceptively similar domain name. SC was concerned only with the rights of the domain name owner and not the Registrar, while determining whether passing off action can be initiated in relation to domain names. Given this position, the Tribunal’s reliance on this judgment is misconceived.
In this case, however, we need not travel down this path, as the appellant/assessee is only acting as a Registrar and thus offering its services to its customers for having their domain names registered.The aforementioned principle may have been attracted if the appellant/assessee had granted rights in or transferred the right to use its domain name, i.e., Godaddy.com, to a third person. Therefore, the fee received by the appellant/assessee for registration of domain names of third parties, i.e., its customers, cannot be treated as royalty.
We are of the view that the question of law has to be answered in favour of the appellant/assessee and against the respondent/revenue.
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2023 (12) TMI 717
Income taxable in India - revenue earned from distribution rights transferred by assessee in favour of BBC Worldwide (India) Pvt. Ltd. [“BWIPL”] concerning the distribution of the subject channel to cable operators, DTH operators, hotels, etc - HELD THAT:- Tribunal has concluded that the distribution fee could not be construed as royalty and hence was not taxable.
Received of distribution fee - whether in the period in issue i.e., AY 2008-09, it had received any distribution fee? - A finding of fact has been returned, which is that in the period in issue i.e., AY 2008-09, the assessee did not receive any distribution fee and therefore, no profit could be attributed to it.
In our view, if one were to take into account the finding of fact returned qua the second issue, clearly, no case for interference with the impugned order is made out by the appellant/revenue. No substantial question of law arises for our consideration.
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2023 (12) TMI 716
Revision u/s 263 - course of survey proceedings at the assessee’s business premises, certain discrepancy were observed and confronted to the assessee and in response, the assessee offered a sum towards unexplained misc. advances - CIT stated that the assessee in his return of income has disclosed the surrendered income in the profit/loss account and paid taxes at the rates applicable to normal business income which need to be taxed u/s 115BBE making assessment erroneous so far as prejudicial to the interest of the Revenue - HELD THAT:- Assessee has been asked specific questions not just regarding the discrepancy found during the course of survey but the nature and source thereof during the course of survey and it is clearly emerging that nature of such advances is unaccounted business advances and the source of such income so surrendered is assessee’s share of diagnostic lab fees received from Shri Sandeep Singh who was running the diagnostic lab from business premises of the assessee and sharing 70% of lab fees with the assessee which remain unaccounted and undisclosed at the time of survey.
No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee’s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn’t satisfy the second condition for invoking the deeming provisions of section 69-69B - AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the Shri Sandeep Singh, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income.
We are of the considered view that the order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction u/s 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. Appeal of assessee allowed.
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2023 (12) TMI 715
Nature of receipt - “capital receipt” or “income from other sources - Investment made in fixed deposits, out of the funds received for setting up a power transmission system in the state of Himachal Pradesh - whether the interest earned on the fixed deposit is dependent on whether the invested funds were inextricably linked with setting up of the power transmission system? - AO concluded interest earned on funds invested in the fixed deposit was taxable under the head “income from other sources” - HELD THAT:- Sub-clause (ii) of Clause 15.2 indicates that the title documents and other documentary evidence establishing ownership of the permitted investments made using the sub-accounts regulated by the TRA were to be held in custody for the benefit of the borrower/lender.
Similarly, sub-clause (iii) of Clause 15.2 broadly casts an obligation that the maturity value of the permitted investments is related to the payment or transfer obligations under the TRA. In this regard, what is underscored in the said sub-clause is that the permitted investments had to be readily marketable.
Clause 15.3 obliges the respondent/assessee to ensure that the money which was realized through investments shall be immediately credited to the relevant account by the account bank or invested in another permitted investment, in accordance with the lender/borrower’s instruction.
It is in the same vein that Clause 15.6 of the TRA provided that any interest or other income paid qua permitted investments would have to be paid to the relevant account as determined by the facility agent, which broadly meant that it would enure to the benefit of the borrowers/lenders.
A holistic reading of the aforementioned Clauses would show that there was indeed an inextricable link between the investment of the surplus funds and the setting up of the power transmission system. Therefore, clearly, the interest earned thereon could only be categorized as “capital receipt.”
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2023 (12) TMI 714
Penalty u/s 271(1)(c) - defective notice - non specification of clear charge - Tribunal, had set aside the findings of CIT (Appeals) and directed the AO to delete the penalty as AO, while initiating penalty proceedings under Section 271(1)(c) of the Act, should have alluded to the limb under which penalty is proposed to be levied - HELD THAT:- AO should have stipulated as to whether the penalty was proposed to be imposed on the respondent/assessee for concealment of particulars of its income, or furnishing inaccurate particulars. Tribunal notes that a lack of clarity was apparent upon perusal of paragraph four (4) of the penalty order.
According to us the view taken by the Tribunal is correct. The respondent/assessee was entitled to know, clearly, the charge levelled against it.
As adverted to in the Unitech Reliable Projects Pvt. Ltd. [2023 (6) TMI 1219 - DELHI HIGH COURT] case, the imposition of a penalty entails several consequences. The AO is required to apply his mind to the material and indicate, clearly, to the assessee what is being put against him. In other words, which limb of Section 271(1)(c) of the Act is attracted in the given facts and circumstances of the case.
It is our view, that this clarity would be necessary as the pecuniary burden that the assessee may be mulct with could vary, depending on the infraction committed by him. Thus, in the given case, where concealment has taken place, a heavier burden may be imposed, as compared to the situation where the assessee furnishes inaccurate particulars. We may also make it clear that there may be circumstances where both limbs are attracted. If that is the situation, the notice should allude to this aspect.No substantial question of law arises for our consideration.
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2023 (12) TMI 713
Disallowance u/s 14A r.w.r. 8D - expenditure incurred on earning exempt income - mandation of recording satisfaction by AO - ITAT deleted addition on the basis that relevant investments are out of assessee's old and own interest free funds, which exceeded tax free investments - HELD THAT:- The language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the Assessing Officer is obliged to indicate that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income under the Act. To put it in other words, the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to Rule 8. In such circumstances we are not impressed by the submission canvassed on behalf of the Revenue that once there are mixed funds, Rule 8 would be attracted automatically.
We are of the view that the ITAT rightly relied on the decision of the Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]
Whether Tribunal is justified in upholding that the disallowance made under section 14A read with Rule 8D cannot exceed the exempt income, in the absence of any such restriction being there in the relevant section or rule? - The aforesaid second question is squarely covered by the decision of this Court in the case of Correctch Energy Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] In our opinion, no error not to speak of any error of law could be said to have been committed by the ITAT in this regard
MAT adjustment on account of disallowance u/s.14A - HEDL THAT:- We hold that no addition in the book profit would be made on the basis of calculations worked out under section 14A of the Act. We allow this ground of appeal in both the years and delete the additions
Deduction u/s.80IA(4) - GEB supplied power to its consumers - Tribunal was of the opinion that the market value of the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the consumers - HELD THAT:- Under sub-Section(8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture.
Characterization of income - income from realization of carbon credits - revenue or capital in nature - realization from carbon credits has been treated by the assessee itself as revenue income and offered to tax and in fact in actualities they are revenue receipt - HELD THAT:- This issue is squarely covered by decision M/s. Alembic Ltd. [2017 (9) TMI 189 - GUJARAT HIGH COURT] held as decided in Subhash Kabini Power Corporation Ltd. [2016 (5) TMI 793 - KARNATAKA HIGH COURT] and My Home Power Limited [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] that receipts of carbon credit are in nature of revenue receipts. Following the decision of said two High Courts, this question is also not considered.
Having considered the question of law and in light of the decision of the coordinate bench of this court which has been relied upon by the tribunal in the order under challenge, no substantial question of law arises for the consideration of this court - Revenue appeal dismissed.
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2023 (12) TMI 712
Estimation of net profit - assessee is a civil contractor has declared the net profit @5.79% - AO had made additions under various heads but the ld. CIT(A) has observed that the books of accounts of the assessee deserves to be rejected and profits to be estimated @8% - HELD THAT:- We also notice that this Tribunal in the assessee’s own case for Assessment Year 2011-12 & 2014-15 has decided the similar issue and sustained the addition @6.75%.
Since the net profit @6.75% has been estimated by the Tribunal in the assessee’s own case, we, therefore, respectfully following the same, uphold the finding of the ld. CIT(A) of rejecting the books results and estimate the net profit rate @ 6.75% for the year under appeal on the gross turnover and the addition is sustained only to the extent of the difference between the net profit rate of 6.75% estimated by us as against the net profit declared by the assessee in its income tax return. Accordingly, the assessee’s appeal is partly allowed and the that of the revenue is dismissed for Assessment Year 2013-14.
As far as Assessment Year 2015-16 is concerned, only the assessee is in appeal and the issue remains the same regarding the estimation of net profit where the assessee has challenged that the ld. CIT(A) has erred in estimating the net profit @8%. We considering our decision for Assessment Year 2013-14 as well as the decision of this Tribunal in the assessee’s own case for Assessment Year 2011-12 and 2014-15, estimate the net profit for Assessment Year 2015-16 @6.75% and partly allow the appeal of the assessee.
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2023 (12) TMI 711
Exemption u/s 11 - Claim denied on non-filing of Form 10B prior to furnishing return of income - assessee could not attend the communication due to IT-website technical glitches - HELD THAT:- Hon`ble Gujarat High Court in the case of Gujarat Oil & Allied Industries,[1992 (9) TMI 67 - GUJARAT HIGH COURT] held that where an assessee could not file audit report along with return of income but filed it later before completion of assessment before the Assessing Officer, the assessee was entitled to claim deduction.
We note that the law in this regard is settled that benefit of exemption under section 11 and 12 should not be denied merely on account of delay in furnishing the audit report, and it would be sufficient compliance, if the audit report is furnished at a later stage either before the assessing officer during the assessment proceedings or before the ld.CIT(A) in the appellate proceedings.
Therefore, we state that assessee has filed Form No. 10B on 04.08.2022 (after filing return of income) but before the assessment/ intimation u/s 143(1) was made by the Department. The intimation/assessment order was framed under section 143(1) of the Act, on 23.08.2022, hence Form No. 10B was available before the AO/CPC, at the time making the assessment/processing the return of income of the assessee.
The assessee could not attend the communication due to IT-website technical glitches, however has eventually filed the audit report in Form No 10B on 04.08.2022 and complied with the condition laid in section 12A(1)(b) so as to entitle for a claim of exemption envisaged under sections 11 and 12 of the Act, hence we delete the disallowances made by the AO and allow the appeal of the assessee.
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2023 (12) TMI 710
Assessment of trust - Rejecting the claim of the appellant society u/s 11 and 12 as claimed in the return of income - Rectification of income tax return rejected - AR was candid enough to accept that mistake did occur in the ITR filed by the assessee in as much as the entire gross receipt was shown under the head ‘income from business or profession’ but it was an inadvertent mistake committed by the ex-CA of the assessee -None-the-less it is also a fact which cannot be denied by the Revenue that it was shown in the return that the said gross receipt was also the aggregate of income referred to in section 11 and 12 and that the entire said amount was applied to charitable purposes in India during the previous year.
HELD THAT:- Intimation under section 143(1) clearly reveals that the CPC ignored all other relevant information and proceeded to process the case by adopting the entire gross receipt as income of the assessee. We are of the view that even assuming that the case of the assessee falls u/s 143(1)(a)(ii) which is the view of the Ld. CIT(A), the provision of the First proviso to section 143(1)(a) has altogether been ignored by the CPC/AO/CIT(A) which provides that no such adjustment shall be made unless an intimation is given to the assessee of such adjustment either in writing or in electronic mode.
It is not a matter of dispute that the assessee which is registered u/s 12AA of the Act has been enjoying the benefit of section 11 of the Act in preceding AYs 2011-12, 2012-13 and 2014-15 as also in succeeding AYs 2016-17, 2017-18 and 2018-19 which is obvious from the chart giving the status of scrutiny assessment under section 143(3) of the Act appearing at page 52 of the Paper Book. There is thus material on record indicative of the fact that the assessee is eligible for exemption of its income in the AY 2015-16 as well but its claim of exemption for the AY 2015-16 presently under consideration has not been examined by the Ld. AO/CIT(A).
On the facts and in the circumstances of the assessee’s case both the Ld. AR and the Ld. CIT-DR conceded that the matter be sent to the Ld. AO to verify the assessee’s claim of exemption under section 11 and 12 based on its past history and the material on records and to decide the matter afresh. We, therefore, restore the matter back to the file of the Ld. AO for verification of the assessee’s claim of exemption under section 11 and disposal afresh in accordance with law after allowing reasonable opportunity to the assessee to explain its case. Appeal of the assessee is treated as allowed for statistical purposes.
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2023 (12) TMI 709
Order u/s 154 whereby interest granted u/s 244A reduced - reasons attributable to the assessee or not? - HELD THAT:- It is not in dispute that originally the return was processed by CPC and refund of Rs. 6,01,280/- including interest of Rs. 1,00,195/- was generated. The rectification order has been passed u/s 154 of the Act by the AO/CPC by reducing the interest amount to Rs. 47,595/-.
It is the case of the Revenue that the delay of issuing of refund is due to the reason attributable to the deductor of the assessee, therefore, as per section 244A(2) assessee is not entitled for such period of 19 months. The amendment to the provisions of section 244A(2) of the Act has been carried out by inserting the word “or the deductor, as the case may be” on 01/04/2017 vide Finance Act, 2017, therefore, the said provisions of section 244A(2) of the Act is not applicable in the present case being A.Y 2013-14 and the ld. CIT(A) committed an error in observing that the Section 244A(2) of the Act is applicable to the case of the assessee.
We deem it fit to restore the issue to the file of the AO to re-compute and grant interest in accordance with law by keeping in the mind that the amendment to the Section 244A (2) of the Act is not applicable for the year under consideration. Appeal filed by the assessee is partly allowed for statistical purposes.
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