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Income Tax - Case Laws
Showing 341 to 360 of 8298 Records
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2023 (12) TMI 582
Penalty levied u/s 270A - mis-reporting of income - penalty at 200% levied - assessee reply to SCN not accepted - HELD THAT:- In the draft assessment order, the Assessing Officer has proposed additions to be made and the assessee has accepted the proposed addition and paid the taxes. Further, against the show-cause notice issued under section 270A of the Act, the assessee has furnished the reply, which was considered by the Assessing Officer, but was not accepted.
On perusal of the penalty order, we find that the AO has not recorded what the reply was furnished by the assessee against the show-cause notice issued u/s 270A of the Act and why it was not acceptable. Moreover, the Assessing Officer has mentioned any reason for levying penalty at 200%.
AO has simply recorded that 200% of penalty has been levied for the tax payable on mis-reporting of income. When the assessee has furnished his explanation in response to the show-cause notice, it is the duty of the Assessing Officer to consider and record as to why the reply is not acceptable.
However, in the penalty order, the Assessing Officer has not discussed anything and simply stated that “the reply of the assessee is considered and is not acceptable” is not correct. We are of the opinion that the penalty order passed by the Assessing Officer and confirmed by the ld. CIT(A) cannot survive. Thus, the penalty levied under section 270A of the Act stands deleted. Assessee appeal allowed.
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2023 (12) TMI 581
Revision u/s 263 - as per CIT AO did not initiate penalty proceedings u/s 271(1)(c) as the same is prejudicial to the interest of the Revenue, if any, has to be proved with reference to the assessment order only - HELD THAT:- Having regard to the contentions on either side, we find the issue that arises for consideration in these appeals is, whether the PCIT, in exercise of power u/s 263 of the Act, while holding the order of the AO to be erroneous and prejudicial to the interest of the Revenue for AO not initiating penalty proceedings while completing assessment u/s 143(3) of the Act. This issue is no longer res integra.
In the case of Sri Adithya Homes Private Limited [2023 (7) TMI 1330 - ITAT HYDERABAD] a Co-ordinate Bench of the Tribunal having noticed the decision in the case of Rakesh Nain Trivedi [2015 (12) TMI 979 - PUNJAB AND HARYANA HIGH COURT] and also the line of decisions following the view of Indian Pharmaceuticals [1978 (10) TMI 12 - MADHYA PRADESH HIGH COURT] and ACIT vs. Kantilal Jain [1979 (10) TMI 37 - MADHYA PRADESH HIGH COURT] etc., relied on the decision of Vegetable Products Ltd [1973 (1) TMI 1 - SUPREME COURT] held the issue in favour of the assessee, stating that in case of more than one interpretation of taxing statute is possible, then the interpretation which favours the assessee, more particularly when it pertains to penalty, has to be adopted.
Since the facts are identical, respectfully following the view taken by the Co-ordinate Bench of the Tribunal in the case of Sri Adithya Homes Private Limited [2023 (7) TMI 1330 - ITAT HYDERABAD] and the decision of Rakesh Nain Trivedi [2015 (12) TMI 979 - PUNJAB AND HARYANA HIGH COURT] we hold the issue in favour of the assessee.
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2023 (12) TMI 580
Penalty u/s 271C - Non deduction of TDS u/s 195 - payment made for supply of software to two USA companies on which no tax was deductible but Id. AO, by treating it as payment for Royalty, made addition under sec. 40(a)(i) - penalty has been levied after 4 years - as argued payer has no PE and no agency agreement, so the sum paid is not chargeable to tax in India - assessee admitted that they have not deducted TDS under bonafide belief - HELD THAT:- Before levying penalty, the concerned officer is required to find out that even if there was any failure to deduct tax at source, the same was without reasonable cause. The initial burden is on the assessee to show that there exists reasonable cause which was the reason for the failure. Thereafter, the officer has to consider whether the explanation offered by the assessee or other person as regards the reason for failure, was on account of reasonable cause or not. ‘Reasonable cause’ as applied to human action, is that which would constrain a person of average intelligence and ordinary prudence. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, would the prescribed consequences follow.
Thus in the substance of this case after the decision of ITAT, the disallowance was sustained but at the same time the assessee was allowed deduction of that income and therefore, the effect was tax neutral. Therefore, the reasonable cause for the assessee not to deduct the TDS which although was added in the income of the assessee u/s 40(a)(i) - Since the effect was revenue neutral assessee has not disputed the levy or addition further in the Hon’ble High Court.
Based on this fact, we are of the view that the assessee was having reasonable cause for not deducting the tax and ultimately the revenue has chosen it to income of the assessee by adding the same in the income of the assessee u/s. 40(a)(i).
As noted that there is no deliberate inaction on the part of the assessee. Therefore, in view of decision in the case of CIT vs. Bank of Nova Scotia [2016 (1) TMI 583 - SUPREME COURT] wherein the Hon’ble Apex Court hold that the assessee has deliberately not avoided TDS and there is no contumacious conduct on the part of the assessee. Therefore, considering that aspect of the fact in this case. The bench feels that in this case levy of penalty is not correct as the assessee has reasonable cause for such failure and the revenue has already disregarded and disallowed the claim of the assessee on account of non deduction of tax.
We hold that the levy of penalty is deleted on the ground that there was bona fide and reasonable cause in not deducting TDS. Decided in favour of assessee.
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2023 (12) TMI 579
Addition u/s 56(2)(vii) - Joint property purchased - value determined by the Stamp Duty Authority was more than the agreement value of the property - CIT(A) denying the benefit of Section 56(2)(vii) (b) by stating that Letter of Allotment is not a registered sale deed and thus cannot be considered as date of agreement - assessee has purchased immovable property as a co-owner jointly with her husband - assessee explained that as per the proviso to section 56(2)(vii)where date of agreement fixing amount of consideration for the transfer of immovable property and the date of registration are not the same, the Stamp Duty value on date of agreement may be taken for the purpose of this clause provided that the amount of consideration has been paid by any mode other than cash on or before the date of agreement for the transfer of such immovable property.
HELD THAT:- As per proviso to section 56(2)(vii)(b) where the date of agreement fixing amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of the aforesaid provision, provided on or before a part of the consideration has been paid by any mode other than cash.
As perused the decision of POONAM RAMESH SAHAJWANI [2020 (11) TMI 817 - ITAT MUMBAI] on the similar facts the value of the flat was determined on the date of booking of flat after taking into consideration the payment made by the assessee through banking channel before the registration of the flat as laid down in the proviso to section 56(2)(vii)(b) of the Act.
Also case of Sanjay Dattatraya Dapodikar [2019 (9) TMI 487 - ITAT PUNE] wherein held that where date of agreement for fixing amount of consideration for purchase of a plot of land and date of registration of sale deed were different but assessee, prior to date of agreement, had paid a part of consideration by cheque, provisos to section 56(2)(vii)(b) being fulfilled, stamp value as on date of agreement should be applied for purpose of said section.
We direct the AO that the stamp duty value on the date of allotment in the case of the assessee on 16.10.2010 be taken for the purpose of Section 56(2)(vii)(b) of the Act and not stamp value as on the date of registration of sale deed . No merit in the findings of the Ld. CIT(A) that before the registration of the flat only other co-owner i.e. Ajay Kumar Singh husband of the assessee has made payment. Since, it is joint property owned by assessee and her husband and its immaterial who had made payment before the date of registration of the property. Therefore the grounds of appeals of the assessee are partly allowed.
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2023 (12) TMI 551
Levy of late filing fee u/s 234E - not filing statements in respect of the TDS collected by the petitioner within the time prescribed in Sub Section 3 of Section 200 - petitioner has approached this Court after more than ten years impugning the said intimations - HELD THAT:- This writ petition is liable to be dismissed only on the simple ground of inordinate delay and laches in filing the writ petition impugning the intimations in Exhibits P-1 to P-5 which are issued way back in 2013 and 2016.
Section 234E as inserted by the Finance Act, 2012 w.e.f. 01.07.2012 is specifically provides that for failure to deliver the statement within the time prescribed under Sub-Section (3) of Section 200 or the proviso to Subsection (3) of section 206C to charge the assessee with a late fee, a sum of Rs. 200/- for every day during which the failure continues - When the impugned notices were issued, this was the law in respect of the payment of the late fee. It cannot be denied that what was to be considered when the notices were issued was the law prevailing on the said date. Subsequent amendment, unless it has retrospective effect, cannot be considered. The submission of petitioner that the amendment in Section 200A has been brought into effect w.e.f. 01.06.2015 and, therefore, the impugned notices issued way back in 2013 and 2016 are incorrect is liable to be rejected at the threshold. The law on the date when the impugned notices were issued was as provided under Section 234E which had been inserted by the Finance Act, 2012 w.e.f. 01.07.2012.
This writ petition is to be dismissed on the ground of gross delay and laches as well as on merits.
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2023 (12) TMI 550
Stay of demand - Recovery of outstanding demand - pre-condition for stay of demand - outstanding demand, as determined by the assessment order was disputed before the CIT(A) by taking recourse to appeal - HELD THAT:- AO ought to have granted a stay in the matter, as the outstanding demand, as determined by the assessment order dated 30.12.2019, was disputed before the CIT(A) by taking recourse to appeal
Instruction No. 1914 dated 21-3-1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand.
Thus when the outstanding amount is disputed before the first appellate authority, i.e., the CIT(A), the AO shall grant a stay on demand till disposal of the first appeal on deposit of a certain percentage of the disputed demand with the respondents/revenue. The change that was brought about by the OM dated 31.07.2017 was that the percentage of the disputed demand required to be deposited for a grant of stay was increased from 15% to 20%.
In the instant case, the assessment order dated 30.12.2019 has created an outstanding demand amounting to Rs 36,69,10,379/-. This amount has been disputed before the CIT(A) via appeal dated 27.01.2020. The respondents/revenue already hold refunds due to the petitioner/assessee that exceed 20% of the disputed amount. Therefore, in our opinion, the AO is obligated to stay the demand created by the assessment order dated 30.12.2019.
Thus, the AO is directed to stay the demand captured in the order dated 30.12.2019, while retaining 20% of the disputed demand. A necessary consequence of such direction would be that the petitioner/assessee would be entitled to a refund of the remaining amount.
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2023 (12) TMI 549
Capital gains exemption u/s 54EE - Non-issuance of notification notifying the fund/long term specified asset - expectation for issuing the notification specifying the long term asset/fund for investment of capital gain arising out of transfer of long term capital asset - Capital Gain arising out of slump sale - petitioner had computed capital gains as per Section 50B as the petitioner opted for 'slump sale' and approached this Court for a writ, order or direction in the nature of mandamus commanding Union of India to notify 'long term specified assets' for availing capital gains exemption u/s 54EE - whether the failure to notify the 'long term specified asset' by the Central Government under clause-b of explanation (2) to Section 54EE is arbitrary and in violation of Article 14 of the Constitution of India? - HELD THAT:- As it cannot be said that since Section 54EE though has been kept alive but has not been given effect to by not notifying the 'long term specified asset/fund', the Central Government has acted arbitrarily. We not find much substance in the submission that in not notifying the 'long term specified asset/fund' for investment of proceeds from transfer of long term capital asset, the Government has acted arbitrarily and the decision of the Government is justiciable for issuing a writ of mandamus for notifying the 'long term specified asset'.
If a public authority has a legal duty to do an act and fails to discharge that function, mandamus can be issued to the said authority to perform its duty and it would be within the power of judicial review of an administrative action by the Court. A direction to the Government to issue a notification under Section 54EE of the Income Tax Act, 1961 specifying 'long term asset' would amount to taking a policy decision in a particular manner. Such a direction is impermissible.
Issuance of notification under Section 54EE of the Income Tax Act Act, 1961 is in the nature of sub-ordinate legislation. Where a statute vests a discretionary power in an administrative authority, the Court should not interfere with the exercise of such a discretion unless it is made with an oblique end or extraneous purposes or upon extraneous considerations.
As decided in the case of Mangalam Organics Ltd. v Union of India [2017 (4) TMI 1223 - SUPREME COURT] while considering the nature of duty of the Central Government to issue a notification under Section 11C of the Central Excise Act, 1944 requiring that no duty shall be payable or lesser duty shall be payable on the goods manufactured when condition stipulated in Section 11-C of the Excise Act, is satisfied by the assessee and the Government chooses not to exercise the 'power', held that Court cannot issue a mandamus to the Central Government to issue a notification exercising its power under Section 11-C of the Excise Act.
Thus it is neither a case of discrimination nor the petitioner would have a right under Articles 14 and/or 19 (1)(g) of the Constitution of India which has been violated by non-issuance of notification under section 54EE of the IT Act, and therefore, no writ of mandamus can be issued to the Central Government to issue a notification under Section 54EE of the Income Tax Act, 1961.
Promissory Estoppel - whether the Central Government can be held to be bound by the doctrine of promissory estoppel and direction be issued for notifying the long term specified asset u/s 54EE? - case of the petitioner is that on the faith of solemn assurance given by the Government of India at the time of introduction of the Finance Act, 2016 and subsequent to the press release as well as the answer to a question given by the Hon'ble Minister on the floor of Lok Sabha, the petitioner had arranged its tax liability accordingly and therefore, the Government of India was bound to notify the 'long term specified asset/fund' for investment of proceeds from sale of long term capital asset of the petitioner to an extent of Rs. 50 lakhs - HELD THAT:- Here, it is not a case that the petitioner had made investment on a specified long term asset as notified by the Government, and thereafter the Government had withdrawn the said notification. Therefore, the argument of the learned counsel for the petitioner that the Central Government should be held bound by its promise made for notifying the specified long term asset/fund is not meritorious and is rejected.
In Case of State of Gujarat v Arcelor Mittal Nippon Steel India Ltd. [2022 (1) TMI 1013 - SUPREME COURT] as held that the doctrine of promissory estoppel is an equitable remedy and has to be moulded depending on the facts of each case. It has been held that in tax matters, doctrine of promissory estoppel as such is not applicable. The Revenue cannot be directed to take a decision which is unmandated under the law.
The principle of promissory estoppel is based on equity, it requires a valid promise based on which the promisee had changed its position. Whereas the principle of legitimate expectation is rooted in fundamental ideas like reasonableness, fairness and non-arbitrariness.
Petitioner would have been entitled for exemption on capital gain under Section 54EE only when he would have invested the proceeds from the transfer of capital gain in the notified long term specified asset/fund by the Government. The petitioner should know that unless such an asset is specified and fund is notified, he would not be entitled for exemption on capital gains arising out of transfer of long term capital asset. The Union Government had not issued the notification despite Section 54EE having been incorporated by Finance Act, 2016, and in absence of such a notification for specified long term asset/fund, the petitioner could not make investment for claiming benefit under Section 54EE.
Non-issuance of notification, cannot be said to be arbitrary, unfair or unreasonable. Issuing particular notification under the provisions of the Act lies in the domain of the executive to carry out the object and purpose of the said provision. Issuing the notification is in the exclusive domain of the executive, and a legislative function. This Court is not empowered to go behind the reasons for not issuing the notification under Section 54EE.
No substance that the petitioner has legitimate expectation for issuing the notification specifying the long term asset/fund for investment of capital gain arising out of transfer of long term capital asset by him. In view thereof, I do not find substance in the present writ petition, hence, it is hereby rejected.
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2023 (12) TMI 548
Unexplained cash credit - share application money received from the group companies - Addition made as summons u/s 131 were not complied with - AR submitted that the it’s is not open to the AO to make addition simply on the basis of non-compliances of summons issued u/s 131 of the Act when the assessee has filed all the evidences in respect of money raised and AO has failed to carry out any further verification or point out any defects or deficiencies in those evidences - HELD THAT:- As decided in case of Crystal Networks Pvt. Ltd. [2010 (7) TMI 841 - KOLKATA HIGH COURT] wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un-served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors.
Also see CIT Vs Orchid Industries (P) Ltd [2017 (7) TMI 613 - BOMBAY HIGH COURT] by holding that provisions of section 68 of the Act cannot be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN ,financial and bank statements showing share application money .
In the instant case before us assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Besides the investors have also furnished complete details/evidences before the AO which proved the identity , creditworthiness of investors and genuineness of the transactions. Thus we are inclined to set aside the order of Ld. CIT(A) by allowing the appeal of the assessee.
Disallowance u/s 14A r..w.r. 8D - expenditure incurred on earning income - Whether exempt income was earned or not? - Scope of explanation to Section 14A by Finance Act, 2022 w.e.f 01.04.2022 as added- HELD THAT:- This is a settled position that no disallowance is to be made u/s 14A read with Rule 8D where there is no exempt income as has been decided in the case of PCIT Vs State Bank of Patiala [2018 (11) TMI 1565 - SC ORDER] and CIT Vs Joint Investment Pvt Ltd [2015 (3) TMI 155 - DELHI HIGH COURT].
No disallowance is made u/s 14A prior to AY 2022-23 as the explanation to Section 14A vide Finance Act, 2022 w.e.f 01.04.2022 is prospective and not retrospective. Accordingly we set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the addition. This ground of assessee is allowed.
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2023 (12) TMI 547
Income taxable India - Considering management support services as Fees for Technical services - India-Singapore DTAA - HELD THAT:- On perusal of the final assessment order and also DRP directions we observe that the facts in the current assessment year are identical to the facts for the assessment years 2013-14 to 2015-16. Therefore, as there is no change in the facts respectfully following the decision of the Tribunal for the assessment years 2013- 14 to 2015-16 [2023 (4) TMI 1160 - ITAT DELHI] we hold that the fee for management support services received from Cameron Manufacturing India Pvt. Ltd. is not in the nature of FTS - Decided in favour of assessee.
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2023 (12) TMI 546
Assessment u/s 153A - addition on account of unsecured loan on the ground that the assessee was not in position to prove the creditworthiness and genuineness of loan - Assessee argued these additions are not sustainable as there is no incrimination material found, as a result of search and the assessment attained finality - HELD THAT:- A perusal of the assessment order clearly reveals that these additions are not based upon incriminating material found during the search. This aspect was fairly conceded by the Ld. CIT-DR. Accordingly, these addition made dehors incriminating material found during the search which are liable to be deleted on the touchstone of the decision of the Hon’ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] they are directed to be deleted as such. Thus additions are liable to be deleted on account of lack of incriminating material.
Deemed dividend u/s 2(22)(e) - AO contended that Assessee is a common director and substantial shareholder in both the companies and therefore the provisions of section 2(22)(e) of the Act get attracted and made addition - Assessee submitted that the assessee was not a registered shareholder in the concerned company from which the loan was obtained - HELD THAT:- Assessee referred to the decision of Madhur Housing and Development Company [2017 (10) TMI 1279 - SUPREME COURT] and Ankitech (P) Ltd.[2011 (5) TMI 325 - DELHI HIGH COURT] for the proposition that addition for deemed dividend made u/s 2(22)(e) of the Act can be done in the hands of the shareholder only. Since, the assessee is not registered shareholder in the loan given company, the addition on the touchstone of above case laws is not sustainable. Hence, we delete the same.
Advance payment without TDS - CIT(A) correctly deleted addition as AO has not looked into nature of the payments made by the appellant and has made the addition in a mechanical manner, without application of mind.
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2023 (12) TMI 545
Revision u/s 263 - share capital and share premium undisclosed - second round of revision u/s 263 on the ground that the AO has not conducted any enquiry into the issues as pointed out by the ld. Pr. CIT - HELD THAT:- This is not a case of no enquiry or lack of enquiry as the AO has made in enquiry and taken a view on the basis of examination of the evidences furnished by the assessee as well as by the subscribers. In our opinion, the PCIT cannot exercise the revisionary jurisdiction to set aside the assessment where the AO has conducted enquiries and taken a plausible view accepting the contentions of the assessee.
Where the PCIT was of the view that AO has not conducted enquiry to come to the conclusion on the issue, then the ld. PCIT is duty bound to make an enquiry and reach a conclusion that order is erroneous and prejudicial to the interest of the revenue. The case of the assessee is squarely covered by the decision of Hon’ble Delhi High Court in the case of D G Housing Projects Ltd. [2012 (3) TMI 227 - DELHI HIGH COURT]
Twin conditions have to be satisfied as envisaged in section 263 of the Act in absence of which the revisionary jurisdiction is not available to the Pr. CIT . Even if one of the two condition is satisfied the jurisdiction is not available.
However in the present case the twin conditions were not satisfied as the order is neither erroneous nor prejudicial to the interest of the revenue as all the facts were examined by the AO on the basis of details and explanation of the assessee before the AO and he has taken a correct view based on his examination of records furnished by the assessee as well as by the subscribers. The case of the assessee squarely covered by the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd [2000 (2) TMI 10 - SUPREME COURT] wherein it has been held that the jurisdiction is not available to the Pr. CIT where the twin conditions as envisaged by section 263 of the Act were not satisfied. The Hon’ble Court has even held that where one of the two conditions are satisfied, the provisions of section 263 of the Act cannot be invoked.
We also find merit in the second plea of the assessee that revisionary jurisdiction u/s 263 of the Act is not available on the same issue for the second time and this has been held in a series of decisions of Bhagwati Vintrade Pvt Ltd. [2022 (11) TMI 1324 - CALCUTTA HIGH COURT] and PCIT Vs M/S Intent Dealers Pvt Ltd[2022 (11) TMI 1432 - CALCUTTA HIGH COURT] - Appeal of assessee allowed.
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2023 (12) TMI 544
Assessment order passed in the name of the company (assessee) as struck off by MCA - dissolution of the company - name of the assessee company has been struck off from the register and the company was dissolved from that date - HELD THAT:- Appellant entity is not in existence since 18th March, 2011, as per the certificate issued by the Registrar of Companies, Maharashtra, Mumbai as its name has been struck off under Section 560 (5) of the Companies Act, 1986, in easy exist Scheme, 2010.
The co-ordinate Benches in assessee’s own case [2022 (7) TMI 1485 - ITAT MUMBAI] for A.Y. 2011-12 and [2018 (2) TMI 1936 - ITAT MUMBAI] for A.Y. 2007-08 has already quashed the assessment orders. The issue is now also squarely covered by the decision of Hon'ble Jammu and Kashmir and Ladakh High Court M/S. RAINAWARI FINANCE & INVESTMENT COMPANY PVT. LTD. [2023 (11) TMI 812 - JAMMU AND KASHMIR AND LADAKH HIGH COURT] wherein it has been categorically held that once a company is dissolved under Section 560(5) of the Companies Act, it ceases to exist and therefore, no order of assessment could be validly passed against it under the Income Tax Act and if it is so passed, it would be a nullity.
Thus assessment orders passed in the name of non existing company are not sustainable and correctly quashed by ld CIT (A). Decided against revenue.
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2023 (12) TMI 543
Unexplained cash deposits u/s 68 - Addition made invoking provisions of Section 115BBE - time gap between the withdrawal and the deposit of cash withdrawal - addition made during demonetization period - contention of assessee that the assessee was regularly making withdrawal from bank for incurring some expenses so they will not keep such huge cash in safe from October, 2012 and to deposit during demonetization period only - HELD THAT:- The only basis for doubting is the long period, therefore, keeping in view the return of income offered by assessee and the cash deposit during demonetization period, the assessee is given benefit of doubt to the extent of 50% of cash deposit made available with the assessee as no adverse material is brought on record by the AO - also explanation offered by the assessee is also not cogent and does not find suitable space in human probabilities. Therefore, keeping in view the entire fact and circumstances, the addition to the extent of 50% is deleted and rest of the addition is confirmed/upheld. In the result, ground No.1 of the appeal is partly allowed.
Addition under amended provisions of Section 115BBE - Division Bench of this Tribunal in Samir Shantilal Mehta [2023 (5) TMI 1279 - ITAT SURAT], Arjunsinh Harisinh Thakor [2023 (6) TMI 770 - ITAT SURAT] and in Jitendra Nemichand Gupta [2023 (6) TMI 1338 - ITAT SURAT] and Punjab Retail Pvt. Ltd [2021 (11) TMI 405 - ITAT INDORE] and Sandesh Kumar Jain [2022 (11) TMI 126 - ITAT JABALPUR] held that applicability of amended provision of section 115BBE is not retrospective. Thus, the Assessing Officer is directed to tax the remaining addition @ 30% and applicable surcharges if any. In the result, the ground of appeal raised by the assessee is partly allowed.
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2023 (12) TMI 542
Penalty u/s 271D - acceptance of in cash in contravention to the provision of section 269SS - whether without satisfaction being recorded in the assessment order, penalty can be levied under section 271D of the Act? - HELD THAT:- This question has directly and substantially been dealt with by the Hon’ble jurisdictional High Court in the case of Srinivasa Reddy Reddeppagari [2022 (12) TMI 1446 - TELANGANA HIGH COURT] wherein as referring to the decision of Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT] held that the provisions under section 271E and 271D of the Act are in pari materia and since in terms of the decision in Jai Laxmi Rice Mills (supra), satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under section 271E of the Act, the same is equally applicable for initiation of penalty proceedings under section 271D of the Act. Hon’ble High Court further observed that when there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be in an income tax authority or any other civil authority or for that matter any court in the country, to comply with the decision of the Supreme Court - Penalty deleted - Decided in favour of assessee.
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2023 (12) TMI 541
Disallowance u/s 14A - suo-moto addition made by assessee - CIT(A) upheld the contention of assessee that disallowance under Rule 8D(2)(iii) of the Rules should be made only on investment which yielded exempt income by referring to case law of Vireet Investment (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] and further directed AO to re-compute the disallowance u/s 14A of the Act by taking the average investment of those investment that have yielded the exempt income - HELD THAT:- We agree with the action of Ld. CIT(A), firstly because he has followed the ratio laid in Vireet Investment (supra) wherein it was held that for computing the average investment for the purpose of Rule 8D(2)(iii) of the Rules, the investment that yielded exempt income during the year only have to be considered and not the investment which did not yield any exempt income. And for such a preposition, we also rely on the decisions of ACB India Ltd. [2015 (4) TMI 224 - DELHI HIGH COURT] and we find nothing wrong in the direction given by the Ld. CIT(A) and therefore, reiterate the direction of Ld. CIT(A) to assessee to submit before AO the value of investment which yielded exempt income and then the AO to compute disallowance u/s 14A of the Act taking average investment of those investment that have yielded the exempt income.
And if the assessee is able to demonstrate that suo-motto disallowance made by assessee is in consonance with the aforesaid discussion, then no more disallowance is warranted. With the aforesaid observation, AO is directed to re-compute disallowance in accordance to law. For completeness, we do not find any merit in the contention of Ld. DR that in the light of amendment/explanation inserted by Finance Act, 2022, the disallowance made by AO is justified. We find that this issue is also no longer res-integra. The explanation inserted by Finance Act, 2022 w.e.f. 01.04.2022 is applicable from AY. 2022-23 onwards as held by Hon’ble Delhi High Court in Era Infra Structure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] Therefore, this contention of Ld. DR is also rejected.
Nature of expenses - ESOP expenses - Revenue or capital expenditure - as decided by CIT(A) ESOP is allowable deduction u/s 37(1) - HELD THAT:- We note that Ld. CIT(A) has allowed the ESOP expenses by relying on the decision of his predecessor in assessee’s own case as well as the decision of Tribunal dated 31.10.2022 in assessee’s own case for AY. 2013-14 [2022 (11) TMI 1164 - ITAT MUMBAI] In such a scenario, we will be able to interfere only if the revenue is able to show that there is change in facts or law which warrant interference. Since revenue could not point out any change in facts or law vis-à-vis the decision of ours in assessee’s own case for earlier years, we have no other alternative but to uphold the impugned action of Ld. CIT(A).
Revenue appeal dismissed.
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2023 (12) TMI 540
Income taxable in India - taxability of certain amounts received by the assessee towards offshore supplies of goods and equipment - existence or otherwise of permanent establishment (PE) and attribution of profits to the PE - assessee is a non-resident corporate entity incorporated in China involved in offshore supply of goods/equipments to the Indian contractees - HELD THAT:- Merely because there is crossfall breach clause in some of the contracts, it will not tantamount to making distinct and separate contracts composite contract and to tax the income accruing outside India taxable in India. When, there is no dispute over the fact that transfer of title over the goods have passed outside India, which in fact has passed, the receipts certainly cannot be taxed in India.
Mode and manner in which the receipts from offshore supplies are brought to tax - AO has attributed 60% of the receipts towards FTS and 40% towards price of goods/materials. This, in our view, is totally irrational and perfunctory. On what basis, AO has bifurcated the receipts between FTS and business income is unknown. When the price payable by the contractee is for design, manufacture, testing and CIF supply and is a consolidated price, the basis for allocation of 60% towards FTS is not understood.
In fact, AO has not given any reason for quantifying 60% of the receipts towards FTS, as no such bifurcation has been provided in the contract documents. In any case of the matter, the price paid by the contractee for supply of goods and equipments, design and testing etc. is certainly part of the manufacturing activities and cannot be considered de hors such activity. Thus, in our view, the artificial segregation of receipts between supply of goods and FTS is without any basis, hence, unacceptable.
Though, AO has made an attempt to link the supply of goods to the alleged PE in the form of ZTT India Private Limited, however, such inference drawn by the AO is not based on any evidence at all. There is nothing on record to suggest that ZTT India Private Limited has undertaken or was in any way involved with the design, manufacturing and testing of supplied goods. Thus, even assuming that ZTT India Private Limited constitutes a PE, however, in our view, it is in no way involved with the supply of goods and equipments from China.
Receipts from onshore contracts - There is no dispute that they have been taxed in India at the hands of ZTT India Private Limited. Thus, in our considered opinion, the sale incident in respect of supply of goods having completed outside India and the transfer of title over the goods, having passed from the assessee to the contractees outside India in terms with the contract, the receipts from such supply of goods and equipments cannot be made taxable in India. Accordingly, we direct the Assessing Officer to delete the additions.
Assessee appeals are allowed.
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2023 (12) TMI 539
Condonation of delay in filing of appeal before CIT(A) - Assessment order passed ex-parte u/s 144 r.w.s. 147 - delay of approximately 33 months in filing the appeal before the Ld. Commissioner - Assessee mainly claimed that its director, who was mainly operating the business of the Assessee company was in fact detained by the Police in the jurisdiction of United Kingdom - HELD THAT:- Considering as the Assessee’s main Director/shareholder who was operating the Assessee company, in fact, was entangled in various litigations including detention in the jurisdiction of United Kingdom from March, 2018 to October, 2021 and, therefore, could not pursue the assessment proceedings, which resulted into passing the assessment order dated 27/12/2019 as ex-parte u/s 144 r.w.s. 147 of the Act.
As the director, was in detention during the year 2019, 2020 & 2021 upto October, therefore, could not file the appeal before the Ld. Commissioner upto October, 2021. Further, after coming to India, took stock of the various proceedings and started pursuing the legal remedies and consequently on 22/12/2022 filed the appeal electronically before the Ld. Commissioner. Though there is gap of one year as the Assessee’s director returned back to India in the month of October, 2021, but the appeal was filed only on 22/12/2022, therefore, the Assessee through tried to demonstrate the reasons for not filing the appeal in time before the Ld. Commissioner, however, something is lacking in the said claim of the Assessee, as the gap of one year is not convincing.
If one consider the facts and circumstances in its entirety, then the claim of the Assessee seems to be genuine which requires lenient view; hence we, by considering the peculiar facts and circumstances as the assessment order dated 27/12/2019 was passed as ex-parte U/s 144 read with section 147 of the Act and thereafter from March 2020 onwards Covid-19 period was started and the Hon’ble Apex Court excluded the period from March 15, 2020 to February 28, 2022 while computing the period of limitation for filing of any suit, appeal, application, or proceeding ; Ld. Commissioner decided the appeal filed by the Assessee in limine but not on merit; even otherwise no prejudice shall be caused to the Revenue Department if the case is directed to be decided on merit; substantial justice also demands that proper adjudication of the case is required to be done; hence, we are inclined to set aside the ex-parte order passed by the Ld. Commissioner and consequently, remanding the instant case to the file of the Ld. Commissioner or decision on merit, but subject to deposit of Rs. 51,000/- in the Prime Minister’s National Relief Fund (PMNRF) within 30 days of receipt of this order
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2023 (12) TMI 538
Validity of order framed u/s 144/147 as barred by limitation - HELD THAT:- After going through the proposition of law laid down by the Hon’ble High Court in the case of Smt. Parveen Amin Bhathara (2022 (6) TMI 1283 - MADRAS HIGH COURT] the case is similar to the present case before us and it is clearly covered in favour of the assessee. Therefore, the impugned notice in the present case u/s 148 of the Act in relation to A.Y. 2009-10 is beyond permissible time limit as prescribed under the Act. Therefore, the notice in the present case is liable to be treated as illegal and without any jurisdiction. Appeal of the assessee is allowed.
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2023 (12) TMI 537
Payment of interest in cash - Addition relying on the order passed by the Income Tax Settlement Commission in the case of unrelated third party - HELD THAT:- We find the AO considering the proceedings before the Income Tax Settlement Commission made addition in the hands of the assessee on account of interest payment in cash. In view of the same, we directed the ld. DR to furnish a copy of order of the Income Tax Settlement Commission regarding M/s. Wellbuild Merchants Pvt. Ltd. of the Damale Group[unrelated third party].
DR furnished the same which is on record by way of covering letter and we note that the said Damale Group representing 04 applicants filed applications u/sec. 245C before the ITSC. In turn, the ITSC sought reports from PCIT as required u/sec. 245D (2B) of the Act and also under Rule 9 of the Income Tax Settlement Commission Procedure Rule 1997.
On perusal of the statement of CIT-DR representing Pr. CIT before the Income Tax Settlement Commission of the said order argued taking reference to Question that the cash expenses out of which already claimed and allowed at the time of search action were claimed on estimation basis without any supporting evidence or documents. He submitted the claim of cash expenses is a pure imaginary figure without any basis and argued to reject the claim in the case of M/s. Wellbuild Merchants Pvt. Ltd..
Further, taking reference to seized document concerning the assessee before us as referred by the AO in his order, we note that the CIT–DR argued that the applicant furnished a common reply regarding evidences of cash receipts in seized documents stating that entry pertain to cash loan/ repayment. Further, he vehemently argued that the claim of interest payment of Rs. 7,80,00,000/- out of Rs. 8,00,62,029/- is not verifiable in the absence of mention of its payment and also in absence of conformity of nature of funds which is evident from para 5A(ii) of Page No. 25 of Income Tax Settlement Commission order.
However, the assessee therein got relief towards business expenditure. Therefore, in our opinion, that the information by way of a seized loose papers in the case of third party cannot be said to be tangible material without a further enquiry falling which the addition made in the hands of the assessee fails and, is not justified. Thus, the order of CIT(A) in confirming the order of AO is not maintainable and set aside. Thus, the grounds raised by the assessee are allowed.
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2023 (12) TMI 536
Methods of accounting for recognizing the revenue - assessee has been following “Project Completion Method” adopted by the assessee BUT in search admitted that company will adopt “Percentage Completion Method” then-onwards - AO applied the percentage completion method on the ground that the appellant firm through its managing partner had agreed to follow the said method during search operation and had filed its return of income for A.Y. 2016-17 by following percentage completion method - HELD THAT:- As decided in Bilahari Investment (P) Ltd [2008 (2) TMI 23 - SUPREME COURT] the rule of law in adopting the accounting standard in case of builder and developer is absolutely clear and precise, so that it is only in those case where the Department records a finding that the method adopted by the assessee results in distortion of profit, the Department can insist on substitution of the existing method.
Reverting to the facts of the present case before us there is no reason recorded by the AO nor the ld. CIT(A) that the Project Completion Method which the assessee has adopted for recognition of revenue and the profit elements distorts the profits for the year under consideration. In absence of any such finding either by the AO or by the ld. CIT(A), the Department therefore cannot insist the assessee to substitute the Percentage Completion Method in place of Project Completion Method which the assessee has adopted for the year under consideration.
There is another decision in M/s. Prestige Estate Projects Pvt. Ltd. [2020 (5) TMI 239 - KARNATAKA HIGH COURT] where their Lordships have observed when the Department has accepted in the previous years, in the light of guidance note applicable to developers a certain method of accounting and the profit arrived at is revenue neutral, then in such scenario, the substantive question of law has to be answered in favour of the assessee and against the Revenue.
Therefore, in the case of the assessee for A.Y. 2015-16 when the Department has not pointed out any distortion in the profit arrived at for the year under consideration by adopting Project Completion Method, then the Revenue arrived at has to be revenue neutral and the Department cannot insist on the assessee to adopt Percentage Completion Method. More so, because the Revenue has already accepted Project Completion Method for the assessee for the previous consecutive A.Ys. 2013-14 & 2014-15.
Thus addition made in the case of the assessee is unjustified unwarranted and invalid in the eyes of law. Decided in favour of assessee.
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