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Income Tax - Case Laws
Showing 321 to 340 of 8298 Records
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2023 (12) TMI 630
Disallowing expenditure on account of gratuity representing amount actual paid to an approved gratuity fund of employer's contribution - assessee’s case is that an amount has been paid as gratuity before the due date in filing of return of income to approved gratuity fund accordingly the said amount was allowable u/s 36(1)(v) r.w.s 43B - HELD THAT:- As per clause (b) of section 40A(7) of the Act allows deduction any provision made by assessee/employees for the purpose of payment of a sum by way of contribution towards and Approved Gratuity Fund. It is noted that assessee’s case is that it has made contribution towards approved gratuity fund and therefore prima-facie the claim of the assessee need to be allowed since there is no fetter u/s 40A(7).
DR brought to our notice that no verification of the fact has been under-taken by AO as to whether the assessee has made the actual payment on or before the due date of filing of return of income as well as whether the assessee has made payment to the approved gratuity fund which need to be verified by the AO. Thus we set aside the impugned order of Ld. CIT(A) and restore this issue back to the file of AO for the limited purpose of verification whether sum paid to the approved gratuity fund on or before the due date of filing of return; and the AO after verification find the claim to be correct to allow it.
Disallowing deduction u/s 80G - CSR expenditure - HELD THAT:- Since the facts have not been verified by the AO (whether donees enjoyed certificate u/s 80G of the Act, the amount of donation etc need to be verified), the AO to do so and after the ratio of the aforesaid judicial precedent (supra) is applied to the facts of the case, to allow the same in accordance to law.
Appeal of the assessee is allowed for statistical purposes.
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2023 (12) TMI 629
Disallowance of Royalty paid u/s 37(1) - assessee is a franchisee bottler for the brand Aquafina owned by the franchisor PepsiCo India Holdings Pvt. Ltd. (erstwhile Pepsi Foods Private Ltd.) - non-compliance of notice issued under section 133(6) of the Act to Pepsi Foods Private Ltd and non-production of the party for verification by the assessee, for proving the genuineness of the transaction - HELD THAT:- It cannot be disputed that Pepsi Foods Private Ltd. now merged with PepsiCo India Holdings Pvt. Ltd. is well-known beverage and soft drink Company, having a presence across the globe. Therefore, mere non-compliance with the notice issued under section 133(6) and non-production of the said entity by the assessee before the AO cannot lead to the conclusion that the said entity is a non-existent entity and the transaction is not genuine.
No material has been brought on record by the Revenue to show that the assessee did not manufacture and sell Aquafina bulk packaged drinking water in Mumbai as agreed under the aforesaid agreement dated 09/06/2003 during the year under consideration and the Royalty was paid to Pepsi Foods Private Ltd without usage of the trademark. It is also relevant to note that usage of the trademark without the consent of the owner is a violation of the provisions of the Trade Marks Act, 1999.
Therefore accepting the submission of the Revenue that there was no agreement during the year under consideration will also lead to the conclusion that the assessee used the trademark of Pepsi Foods Private Ltd without any license, which is not the facts of the present case, as there is no material available on record to show that the assessee has infringed the trademark registered in the name of PepsiCo Inc. No basis in the submissions of the Revenue in denying the claim of deduction of Royalty paid by the assessee to Pepsi Foods Private Ltd during the year under consideration. Accordingly, AO is directed to allow the claim of Royalty paid by the assessee in the year under consideration. Decided in favour of assessee.
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2023 (12) TMI 628
Revision u/s 263 - CIT noticed that AO had not properly examined the issue of suspicious sale transaction in shares and exempt LTCG claimed by the assessee - whether the AO has carried out the required examination and verification of the transaction of sale of shares, yielding long term capital gain claimed as exempt which is one of the reasons for selection of the case of the assessee for scrutiny assessment? - HELD THAT:- From the factual matrix of the issue raised by the ld. PCIT, we find that he has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of the revenue, for passing the impugned order u/s 263 of the Act. We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issue raised through the show cause notice by the PCIT, supporting its contentions by corroborative documentary evidences. It is well settled law that for invoking the provisions of section 263 both the conditions that the order must be erroneous and prejudicial to the interest of revenue, needs to be satisfied.
Hon’ble Supreme Court in the case of Malabar Industries [2000 (2) TMI 10 - SUPREME COURT] held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law.
Examination and verification of the audited financial statements i.e. Balance Sheet and Profit & Loss account of the assessee, copies of contract notes, DEMAT account and order sheet entries reveal the correct state of affairs in respect of the issue raised in the impugned revisionary proceedings for which both, ld. PCIT and the ld. CIT, DR could not bring any material on record to controvert the verifiable factual position.
In cases where there is inadequate enquiry but not lack of enquiry, again the Ld. Pr.CIT must give and record a finding that the order/enquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Ld. Pr. CIT and he is able to establish and show the error or mistake made by the AO, making the order unsustainable in law.
The matter cannot be remitted for a fresh decision to the AO to conduct further enquiries without a finding that the order is erroneous, the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the AO would imply and mean that the Ld. Pr. CIT has not examined and decided whether or not the order is erroneous but has simply directed the AO to decide the aspect/question. Assessee appeal allowed.
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2023 (12) TMI 627
Addition u/s. 69B r.w.s. 115BBE - difference of value of stock of Gold and Silver - assessee has not shown the correct figures of opening and closing stock and suppressed the figure in audited balance sheet or auditor has failed to do audit correctly and truly - HELD THAT:- AO ought to have considered the data filed by the assessee before GST Authorities namely the monthly return in Form 3B and Annual return in Form 9 and 9C.
As claimed that the AO failed to appreciate that the valuation of the stock has a cascading effect, the assessee will get higher value on carry forward of stock as opening stock in the succeeding year. Thus, it is claimed that the addition made by the A.O.is against the provisions of law.
As observed that the tax-audit report filed by the assessee does not carry the details of purchases as well sale of Gold and Silver. The assessee was asked by the authorities below to file revised tax-audit report, but the assessee failed to file the same. The purpose and purport of tax- audit report is to assist the authorities to compute correct tax liabilities in framing assessment. The tax-audit report is certified by qualified Chartered Accountant, and if any discrepancies are found in the tax-audit report, it is incumbent on the assessee to obtain and file Revised Tax-Audit Report. AO also asked assessee to file documents for preceding years, which the assessee did not file. We have observed that the assessee has filed voluminous paper book containing 688 pages, and the claim made by the assessee requires verification by the authorities below.
Thus, it will be appropriate, if the matter is restored to the file of the AO for consideration of the claim of the assessee afresh and frame denovo assessment. The assessee is directed to co-operate with AO and file all necessary and relevant details called for by the AO during set aside/remand assessment proceedings - AO shall give proper opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law.
Estimating profit @ 0.15% being the difference of STR report and turnover wherein the STR report was not provided to the assessee - We deem it fit to set aside the matter back to the file of the Assessing Officer with a direction to pass fresh assessment order by giving adequate opportunity to the assessee to explain its case. Needless to say, the assessee should cooperate with the Ld. A.O. in completing the fresh assessment.
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2023 (12) TMI 626
Addition u/s 41 - cessation of liability - as alleged by assessee AO not discharged preliminary onus before making addition - HELD THAT:- As canvassed before the CIT(A) by the assessee that the Assessee was having running accounts with the above parties and has furnished the ledger accounts for previous and subsequent years to prove the transactions with those parties. A.O. did not confront anything to the assessee after preliminary details were furnished and A.O. has also not made any independent enquiry.
The assessee had filed copies of the assessment orders for Assessment Years 2013-14 to 2015-16 in which the transactions with all the parties have been duly accepted, further in the absence of the A.O. bringing any material or reasons before making any addition, simply added back the opening balances of the trade payables without making any verification from the parties.
A.O. has also ignored the fact that part of the payment have been made in current/subsequent year and there is a running account with these parties held by the assessee. CIT(A) has relied on various decisions of Apex Court as well as various High Courts and ultimately deleted the above addition. Considering the fact that the A.O. has failed to discharge the preliminary onus and has made the addition in summary manners, in our considered opinion, the CIT(A) has committed no error in deleting the addition of Rs. 20,00,37,558/- made u/s 41 of the Act. Accordingly, we dismiss the Ground No. 1 of the Revenue.
Disallowance of 50% of handling charges - Since the opening outstanding was added by the A.O., he was of the opinion that the amount is not being paid to party expenses during the year are also treated as not genuine and 50% of the same has been disallowed - CIT(A) deleted addition - HELD THAT:- Since, the Assessee was following Mercantile System of Accounting and not on cash basis, the expenses cannot be disallowed merely on the basis of nonpayment to the vendors. It has been observed by the CIT(A) that the A.O. has not brought on record any material or evidence to show that the expenses claimed are not genuine or the expenses have not been incurred for the purpose of business. Further, the A.O. has not made any enquiry also from the assessee on this regard. The A.O. without rejecting the books of account which was duly audited made the above disallowance of 50% of handling charges which has been rightly deleted by the CIT(A). We dismiss the Ground No. 2 of the Revenue.
Addition u/s 68 on account of unsecured loans - DR relying on the assessment order, submitted that the assessee has only submitted the acknowledgement of return and confirmation of amount outstanding at the yearend but not submitted the copy of the bank account to prove that the said amount has been repaid - CIT(A) deleted addition - HELD THAT:- It is the case of the assessee that the bank statement has been duly uploaded on the e-portal and also furnished the copy to the A.O. which has not been considered by the A.O. during the assessment proceedings. It is not clear as to whether the CIT(A) while deleting the addition has actually verified the bank statement or not, the order of the CIT(A) is non speaking and the same is cryptic. We restore the issues to the file of the A.O. for de-novo adjudication with a direction to the assessee to submit the bank statement of Shri Naveen Rao to substantiate the claim of the assessee. Accordingly, we partly allow the Ground No. 3 of the Revenue for statistical purpose.
Disallowance of PMS fees and interest on TDS - HELD THAT:- As disallowance has been correctly deleted by the CIT(A) on the ground that the assessee shown the shares in the balance sheet as stock-in-trade, therefore, the expenses are allowable as business expenses. The interest on TDS is also compensatory in nature and is not penal and therefore, the same is allowable - Thus order of the CIT(A) in granting the relief to the assessee by deleting the addition accordingly confirmed , we dismiss the Ground No. 4 of the Revenue.
Disallowance u/s 14A - HELD THAT:- The assessee earned exempt income of Rs. 2,52,128/- in the form of dividend income and the amount of disallowance u/s 14A cannot exceed the total exempt income, therefore, we find no error or infirmity in restricting the disallowance u/s 14A of the Act to the amount of dividend income i.e. Rs. 2,52,128/- and the balance disallowance has been rightly deleted by the CIT(A). Thus, we find no merit in Ground No. 5 of the Revenue, accordingly Ground No. 5 of the Revenue is dismissed.
Addition u/s 40A(2)(b) - increase of Director’s remuneration - A.O. on perusal of employees benefit expenses found that there is increase in expenses from Rs. 4,72,44,155/- to Rs. 5,15,49,744/- while there was a reduction in total revenue of the assessee from 71.09 crore to 45.39 crore - HELD THAT:- It is found that the assessee had given no explanation before the A.O. regarding increasing the remuneration of Directors but during the first appellate proceedings, the assessee made elaborate submission and the CIT(A) observed that there is an increase of Directors’ remuneration as the Directors have been given rent free accommodation and the landlord has increased the rent during the year and the perquisite value of the land free accommodation has been duly shown in ITR filed by the Directors. The said fact has not been brought to the notice of the A.O. and the same has been left without examining by the A.O. Therefore, we remand the issue involved in Ground No. 6 to the file of the A.O. for fresh adjudication with a direction to the assessee to substantiate its claim by providing the evidence.
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2023 (12) TMI 625
Unexplained investment - scribbling/notings/jottings on loose papers found during the course of search relied concluding assessee has made expenditure out of books for purchase of land and construction of the factory thereon - HELD THAT:- The Hon'ble Delhi High Court in the case of Praveen Juneja [2017 (7) TMI 1102 - DELHI HIGH COURT] held that addition cannot be made on the basis of a document which is silent as to the payer and payee of the amount in question and does not disclose that the payment was made by cheque or cash nor it is proved that the document is in the handwriting of the assessee or at least bears his signature.
Also in Common Cause & Others Vs. UOI [2017 (1) TMI 1164 - SUPREME COURT] has held that loose sheet of papers are wholly irrelevant as such evidence is not admissible u/s 34 of the Act. These transactions mentioned therein have no evidentiary value.
If we consider the entire factual matrix relating to the impugned additions apart from the impugned loose sheets, there is no further corroborative evidence suggesting undisclosed investment was available on record.
As A.Y 2014-15 is the first year of incorporation. Therefore, by no stretch of imagination it can be said that the assessee company has brought in its own unaccounted funds for making the unaccounted purchases. Since the business has not even commenced in the subsequent A.Y. i.e. 2015-16 also, the assessee company had no funds on its own, whether accounted or unaccounted from revenue operation. There is nothing on record to suggest that the Assessing Officer has taken any action against the promoters/directors of the assessee company.
Similar view was taken by the Hon'ble High Court of Allahabad in the case of Lal Mohar [2017 (12) TMI 133 - ALLAHABAD HIGH COURT] wherein as held that since it was the first year of business of the AOP, and no business activity having shown to have been conducted by it that could lead to generation of unaccounted income on the first day of relevant accounting period itself, the Tribunal has not committed any error in deleting the impugned addition. No merit in the additions made by the Assessing Officer. Appeal of assessee allowed.
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2023 (12) TMI 624
Netting of interest income - Interest Income earned from the Investment made in the sister concern - real income concept - Earning of interest income out of borrowed funds - nexus as established between Interest paid and Interest earned - assessee that assessee follows ‘Project Completion Method’ for recognition of revenue and has not recognized any revenue for taxation during the year - HELD THAT:- As in the present case the question is not whether the Interest Income is to be taxed Under the Head Income from Other Sources or Income from Business and Profession - The fundamental question is of netting off. In the earlier paragraphs we have elaborately discussed and observed that the Interest Earned by the assessee has direct nexus to the Interest paid by the assessee.
Once this fact is established that the Interest earned have Direct Nexus to Interest Paid, then applying the concept of Real Income and applying the proposition of law laid down by Hon’ble Delhi High Court Triumph Reality Pvt. Ltd. [2022 (4) TMI 1233 - DELHI HIGH COURT] we agree with the assessee that Only Net Interest shall be capitalised. Therefore, we direct the AO to delete the addition - grounds of appeal raised by the assessee are allowed.
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2023 (12) TMI 623
Unexplained investment in two watches - same were not included in the valuation report taken at the time of opting for VDIS Scheme - CIT(A) deleted addition as agreed to the submissions of assessee that said two watches being part of declared watches in the Wealth Tax Return cannot be taken as unexplained investment of assessee - HELD THAT:- CIT(DR) could not rather did not controvert a factual position discernable from the document submitted by the assessee which is reconciliation statement of watches during the course of search with the watches declared in the Wealth Tax Return show that the watches at serial no. 1 & 6 were part of valuation report as on 31.03.2013 and these were listed at item no. 48 & 50 respectively in the valuation report no. 1 and the watches at serial no. 1 & 6 were taken in exchange of these two watches already shown in the Wealth Tax Return.
In such a factual position we are of the view that the ld. CIT(A) has granted relief to the assessee on the basis of correct appreciation of facts and circumstances and by considering the Wealth Tax Return, valuation report and reconciliation statement which clearly reveals that the watches at serial no. 48 & 50 declared in the wealth tax return were exchanged and listed at serial no. 1 & 6 of reconciliation statements with the all details of exchanged watches. Therefore the ld. CIT(A) was right in granting relief to the assessee. Accordingly ground no. 1 & 2 of revenue are dismissed.
Unexplained Jewellery found from the locker - CIT(A) deleted addition - HELD THAT:- The locker was last operative on 28.06.2012 and thereafter it was operative on 21.01.2020 during course of search & seizure operation which was conducted on 19.01.2020 on Bharat Hotels Group including the assessee. From the date of search i.e. 19.01.2020 the block period of six years is AY 2014-15 to 2019-20 and the subsequent year 2020-21 is the year of search. Thus the jewellery purchased or acquired before 28.06.2012 cannot be stretched and taken into consideration as unexplained jewellery in the hands of assessee neither in the year of search i.e. present AY 2020-21 nor even in the six block assessment years. We are unable to see valid reason to interfere with the findings arrived by the ld. CIT(A) and thus we uphold the same. Our conclusion also gets support from various judgment of CIT vs. Vivek Kumar Aggarwal [2015 (2) TMI 590 - DELHI HIGH COURT].Therefore ground no. 3 of Revenue is also dismissed.
Unexplained foreign currency found during the search - CIT(A) has granted relief to the assessee - HELD THAT:- we note that the Assessing Officer made addition by observing that the foreign currency found & seized during the course of search & seizure operation whereas the ld. CIT(A) after considering the explanation of assessee concluded that the foreign currency was found & seized from the resident of Mrs. Ritu Suri and she signed the inventory of seized material including the foreign currency. It is also pertinent to mention that the ld. CIT(A) further noted that on conclusion of assessment proceedings Mrs. Ritu Suri filed an application u/s. 132B of the Act before the authorities concerned requesting the returned the seized movable properties including the foreign currency. This factual position has not been controverted neither by the Assessing Officer nor by the ld. CIT(DR) before us. Revenue ground no. 4 & 5 of revenue are also dismissed.
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2023 (12) TMI 622
Revision u/s 263 - exemption u/s 11(2) - as per CIT purpose of accumulation u/s 11(2) not mentioned - HELD THAT:- It is observed that issue relating to accumulation under section 11(2) of the Act has been specifically enquired by the Assessing Officer and duly responded by the assessee also. We do not see any lack of enquiry at the end of the Assessing Officer and justification of the same at the end of the assessee. The only objection of the learned Commissioner of Income-tax (Exemptions) is with regard to this accumulation is that "exact purpose" not specified. The assessee has placed on record form 10 furnished before the AO specifying the purpose, amount and period of accumulation. The purpose for accumulation has been specified as "charitable purpose". In any case, the purpose of accumulation cannot be beyond the objects of the assessee. In this regard, the legal position is in favour of the assessee, i. e., the assessee is not suppose to mention the "exact purpose" of accumulation.
Thus it can be safely concluded that all the technical requirements were duly fulfilled by the assessee along with satisfactory response to the queries raised through notice under section 142(1). The only objection raised by the learned Commissioner of Income-tax (Exemptions) through notice issued u/s 263 was that the assessee has not specifically mentioned the purpose of accumulation, is not a valid objection for which proceedings u/s 263 cannot be carried out. As the facts discussed above and considering various judicial pronouncements, we find the merits in contentions of the assessee. We find no error in order passed under section 143(3) of the Act. In view of this ground Nos. 2 and 3 raised by the assessee are allowed and order passed under section 263 of the Act is set aside. Decided in favour of assessee.
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2023 (12) TMI 593
Income taxable in India - receipts earned from supply of software - whether taxable in India under Section 9(1)(vi) of the Income Tax Act, 1961, read with Article 12 of the India-USA Double Tax Avoidance Agreement (DTAA) - As petitioner submitted that there is a delay of 334 days in filing and further the issues which arise in this petition are covered by the judgment of this Court in the case of Engineering Analysis Centre of Excellence Private Ltd. [2021 (3) TMI 138 - SUPREME COURT] against the Department.
HELD THAT:- Following the aforesaid judgment, the special leave petition is dismissed both on the ground of delay as well as on merits.
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2023 (12) TMI 592
Assessment u/s 153A - mandate of satisfaction recorded by the assessing officer of the searched person (153A) - date with reference to which the proceedings for assessment or reassessment of any assessment year - HELD THAT:- In view of the order GALI JANARDHANA REDDY [2023 (12) TMI 464 - SC ORDER] and similar issues being raised in the present Special Leave Petition also, following the aforesaid order as well as the judgment of this Court in the case of Commissioner of Income Tax 14 v/s vs. Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] this special leave petition is also dismissed.
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2023 (12) TMI 591
Condonation of delay of 2139 days in filing the Appeal against the order of ITAT - HELD THAT:- Without going into the observations made by the High Court in considering the case(s) seeking condonation of delay of 2139 days in filing the petitions, we find that there was a huge delay which is not condonable.
Hence, there is no merit in the special leave petitions.
Questions of law, if any, which arise in the matter(s) are kept open.
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2023 (12) TMI 590
Reopening of assessment u/s 147 - non-independent application of mind by AO - information which has been provided to the petitioner under the Right to Information Act relied upon - claim of CSR expenses made by the petitioner - as decided by HC [2023 (6) TMI 286 - GUJARAT HIGH COURT] action of issuance of notice u/s 148 of the Act in the background of present facts as erroneous, reflects no subjective satisfaction nor any application of mind - HELD THAT:- SLP dismissed.
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2023 (12) TMI 589
Reopening of assessment u/s 147 - capital reduction and financial statements highlighting the capital reduction in the balance sheet - capital gain transactions filed under Schedule C.G. - Capital Gains - purchase and sale of shares and the conversion of amounts in foreign currency - petitioner categorically mentioned that it had not carried on any business activity since the liquidation/bankruptcy application and also mentioned about the capital reduction - petitioner had incorrectly characterized the transaction and consequently contended that it was not covered under Section 112(1)(c)(iii) and claimed the benefit of computation under Section 48 - as decided by HC [2023 (3) TMI 485 - BOMBAY HIGH COURT] as at the time of filing the return of income for the A.Y. 2015-16, the petitioner was not covered by Section 112(1)(c)(iii) as it had transferred the shares of the private limited company, thus assessment is being sought to be reopened in contravention of the law as it stood during the previous year 2014-15 and A.Y. 2015-16 in which the petitioner filed its tax return - a retrospective amendment cannot be the basis for reopening of assessment. In any case, it may be noted that for the A.Y. 2015-16, the four years period has expired on 31st March 2020, and absence any failure to disclose facts by the assessee or any tangible new material, the reopening of assessment proceedings by the respondent is bad in law. The reopening of the assessment based on a different method of computation or application of the section is nothing else but a change of opinion, which is impermissible in law and allowed assessee appeal -
HELD THAT:- SLP dismissed.
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2023 (12) TMI 588
Validity of assessment proceeding u/s 153A - as argued no incriminating document or materials have been found in course of search and seizure and impugned assessment proceeding relating to assessment year 2010-11 is barred by limitation on the basis of search and seizure held on 13th April, 2019 - HELD THAT:- Income Tax Authority could not satisfy with his submission or from record that any incriminating documents or materials were found against the petitioner in course of search and seizure in question or that the impugned assessment proceeding has been initiated before the expiry of limitation as provided under Section 153A explanation 1 of the Income Tax Act, 1961 and he also could not distinguish both the aforesaid judgments upon which Mr. Mazumder has relied either on facts or law.
Considering the facts and circumstances of the case as appears from record and submission of the parties the impugned proceeding under Section 153A of the Act and all subsequent proceedings relating to assessment year 2010-11 on the basis of search and seizure dated 13th April, 2019 is not sustainable in law and accordingly the same were quashed.
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2023 (12) TMI 587
Reopening of assessment against deceased person - HELD THAT:- Looking to the material available on record, the notice issued by the Assessing Officer (for re-opening of the assessment is invalid on account of fact that same was addressed to a deceased person.
Interestingly, another appellate order dated 22.09.2020 is on record and in Form No.35, the factum of death of the deceased assessee on 01.11.2009, is mentioned and it is also stated that the notice issued by the AO was not received by the Legal Heir of the Late assessee.
Both of the authorities below did not deal with the issue regarding notice u/s 148 was issued against the dead person and also the impugned assessment order was passed against a dead person. Therefore, in view of these undisputed facts i.e. Late Smt. Kushal Kachwaha had expired on 01.11.2009 itself and the factum of death was duly brought to the notice of the Revenue Authority as stated by the Ld. Counsel for the assessee. Therefore, respectfully following the judgment of Davinder Singh Thapar [2022 (6) TMI 695 - DELHI HIGH COURT]. The notice issued u/s 148 are held to be bad in law hence, quashed.
Appeal of the assessee is allowed.
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2023 (12) TMI 586
Revision u/s 263 - "lack of inquiry" v/s "inadequate inquiry" - assessee has failed to deduct TDS on the expenditure on contract payments and the same is in contravention to the provisions of Sec.40(a)(ia) - as per CIT 30% of the above expenditure was required to be disallowed and added to the total income of the assessee, which the Assessing Officer failed to do so - HELD THAT:- Hon’ble Supreme Court in the case of Malabar Industries (2000 (2) TMI 10 - SUPREME COURT) held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”. Therefore, we are of the considered opinion that AO’s order cannot be termed as erroneous as well as prejudicial to the interest of the revenue and therefore, jurisdictional condition precedent as prescribed by statute for invoking revisional jurisdiction is absent and therefore, we are inclined to quash the impugned order passed by ld PCIT under section 263 of the Act
One has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Therefore, in the assessee`s case, it cannot be said that it is a case of 'lack of inquiry'.
In view of the facts of the case and judicial pronouncements relied upon, it is well established that the impugned order passed u/s 143(3) of the Act, was passed by assessing officer, after calling for relevant information and after detailed examination of the same. The Assessing Officer has passed the assessment order after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT’s finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Assessee appeal allowed.
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2023 (12) TMI 585
Debt/Corporate guarantee fees taxed in India - DTAA between India and Japan - income chargeable to tax according income tax act, as per distributive rule whether as per "Article-7: Business Profits" of DTAA between India and Japan, in the absence of PE in India, debt/corporate guarantee fees charged to Indian AE are taxable only in Japan.? - whether the income of the assessee is classified as interest under article 11 or under article 22 of the double taxation avoidance agreement - HELD THAT:- On careful consideration of the decision of learned AO, learned dispute resolution panel and the coordinate bench, we do not find that it gives an answer that whether the income chargeable to tax in the hands of the assessee under which head of income. Whether it is an interest or other income according to the double taxation avoidance agreement, for computation of taxation as per the provisions of the income tax act, it has to fall basically within one of the heads of the income as per section 14 of the act.
It may be the case that income may either be chargeable to tax under article 11 or under article 22, according to section 14 of The Income Tax Act such income is chargeable to tax under the head ‘income from other sources”. Purpose of Double Taxation Avoidance Agreement is to distribute the tax between the source country and the country of residence whereas the purpose of the domestic tax law is to compute the income under the various heads as prescribed under section 14 of the act.
The distributive rule of the Double Taxation Avoidance Agreement only classifies income into various types. This is not relevant for determining the head of income according to section 14 of the act in spite of similarity in terminology. The purpose of both is quite different. However, as for assessment year 2014 – 15 the issue has been set-aside to the file of the learned assessing officer to first determine whether the income of the assessee is classified as interest under article 11 or under article 22 of the double taxation avoidance agreement. The issue is still not decided. Therefore in the interest of justice, we also set-aside issue back to the file of the learned assessing officer to 1st decide how the income is chargeable to tax according income tax act, as per distributive rule what is the classification of income on what is the tax rate as per the double taxation avoidance agreement, and then compute tax according to income tax act. Ground allowed for statistical purposes.
TP Adjustment in respect of interest on external commercial borrowings - arm’s-length price of interest charged on external commercial borrowing lent to associated enterprises in India - assessee has advanced a loan to Nipro tube glass India private limited in Indian rupees wherein the assessee has received total interest wherein the assessee receives such interested the rate of 10.50% of the loan amount - HELD THAT:- For determination of the arm’s-length price of an international transaction the reserve bank of India guidelines does not have any role to play. However, when the external commercial borrowing is provided by the assessee to its Indian associated enterprises in Japanese yen, adoption of SBI PLR is not relevant. The Transaction is to be benchmarked by taking in to consideration whether any third party would give loan to Indian entity at those interest rates and on those conditions for that tenure.
Therefore, taking Foreign AE as tested party is irrelevant. Even otherwise it is not a profit based method applied. It is the borrower whose condition and financial health needs to be ascertained first. That is Indian entity. Further, for determination of Arm’s length price of interest received it is necessary to determine the credit rating of borrower. Thereafter the External comparables for benchmarking can be searched on publicly available financial databases, by applying appropriate filters to find comparable loan transactions with the same characteristics such as [1] Currency type, [2] Tenure, [3] Purpose of loan General/Working Capital/Capital Expansion/Re-financing, etc. [4] Tranche Type such as Term Loan/Revolving Credit, [5] Covenants , and [6] Credit Rating.
Such Interest rate is further required to be adjusted to meet the economic conditions of the tested loan transaction to Interest Swap Adjustment, Tenor Adjustment and Country Risk Adjustment to factor in the geographical difference. The Assessee or the TPO / ld DRP has not looked in to these basic aspects. Therefore, we remit this issue back to the file of the ld AO with direction to assessee to benchmark interest on loan transaction taking all these issues in consideration.
Appeal of the assessee is partly allowed as indicated above for statistical purposes.
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2023 (12) TMI 584
Addition u/s 68 - unexplained cash credit in the form of share capital with premium - main allegation is that, out of 15 parties, 8 of the companies to whom shares were issued were controlled / managed by Shri Praveen Kumar Jain, who was engaged in providing accommodation entries - reason to belief was entertained that amount of Rs. 2 Crores from such parties were subscribed optionally convertible non-cumulative preference shares had escaped assessment - HELD THAT:- Even though some of the parties may not have responded to notice u/s. 133(6) that does not prove that the entire transactions are bogus especially when all other documents to prove the identity and creditworthiness of the parties have been submitted and same has not been examined or enquired by the AO. We also tried to enquire upon the funds available with these parties which we have already incorporated above, and found that all the parties had huge funds including profit and they continue their operations and activities till date. How such corporate entities which are still existing and running their business activities and complying with the statutory requirements can be said to be bogus.
Once these parties were allotted redeemable preference shares and have been redeemed much before any search taken place in the case of Shri Pravin Kumar Jain, then we are unable to agree with the contention of the department that simply because, some of the entities belong to Shri Praveen Kumar Jain, the transaction itself is bogus. Is there any evidence or material found qua this transaction showing that right from subscription to redemption something has been found to mere paper formality or some kind of bogus or accommodation entry. At the time of redemption, these parties have redeemed at Rs. 100 + Rs. 10/- and in such case it cannot be held that there was any manipulation at the investment stage by these companies that preference shares were issued with premium by taking cash then assessee bought back by paying extra Rs. 10 which is otherwise taxable in the hands of the investors.
Thus, in the peculiar facts when all these corporate entities are still existing and doing business and have credentials till date, then it cannot be held that they are sham and bogus entities. Here it is a case of issuance of preference shares which has been redeemed on premium by the subscribers and it is not that any kind of share application received and shares have not been allotted or after allotment shares have been sold at face value or less price.
Thus, CIT (A) rightly held that the identity and creditworthiness has been established and genuineness of the transaction cannot be doubted, simply based on information from Praveen Jain Group unless something specific material has been found. Accordingly, the order of the CIT (A) in so far as merits are concerned as incorporated above is confirmed. In so far as his observation and finding that premium is capital hence not taxable is not accepted as here the issue is taxability of entire credit received including premium. But his findings on merits are confirmed and consequently the appeal of the Revenue is dismissed.
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2023 (12) TMI 583
Addition u/s 68 - Gift received from the brother treated as undisclosed income - creditworthiness for the gift was not proved based on financial capacity of the donor - assessee in response to such gift has filed the copy of PAN of his brother, copy of computation of income and freshly made gift letters - AO found that the income of the brother is not sufficient to grant such a huge amount of gift to the assessee - HELD THAT:- We note that the assessee has furnished details such as copy of gift letter, capital account, bank statement, PAN and return of income of the donor and cash book and bank statement of the assessee which are available on record. On perusal of the cash book of the assessee, we note that there was sufficient cash available with the assessee which was arising out of withdrawal from the bank account. Thus, it can be safely concluded that there was sufficient cash available with the assessee to advance the gift to his brother. This fact has also not been disputed by the authorities below.
It is equally important to note that the assessee first has received part of the gift before giving any gift to his brother in cash but what we find is this that there was sufficient fund available in the bank account of the brother and therefore it cannot be said that such gift could be given to the assessee out of unaccounted income.
Admittedly, the cross transaction between the brothers can create a suspicious but that doubt cannot be treated as gospel truth. As such, it is the onus upon the revenue to prove the allegation framed by it against the assessee. But, from the preceding discussion, we note that the assessee has furnished the necessary evidence, discussed above, to justify the gift received from the brother, therefore, no addition in the given case is warranted. We direct the AO to delete the addition made by him. Ground of appeal of the assessee is allowed.
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