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Income Tax - Case Laws
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2023 (12) TMI 460
Deduction u/s 80-IC - Adjustment u/s 143(1) - claim for eligible unit in Rudrapur, Uttarakhand (8th year of claim) - Claim denied as Appellant did not file the Audit Report in Form 10CCB in respect its Rudrapur unit before the due date of filing the return of income - Determination of due date of filing the Return of Income - HELD THAT:- For a case to fall under clause (aa) of Explanation-2 to section 139(1) of the Act, the assessee is only “required to furnish the report” referred to in section 92E of the Act and there is no requirement under the aforesaid clause that the assessee “has furnished the report” referred to in section 92E of the Act. Therefore, we find no basis in the conclusion of the learned CIT(A) that since the assessee has failed to comply with the provisions of section 92E of the Act, the due date for filing the return of income was 31/10/2015.
Vide Form 10CCB, filed by the assessee on 29/11/2015, the assessee disclosed the name of the related concerns in India, the nature of the transactions undertaken, and the transaction amount. Thus, from the said details not only the nature of specified domestic transactions undertaken by the Rudrapur unit of the assessee is evident but it is also evident that the aggregate of such transactions entered into by the assessee in the previous year exceeded a sum of Rs. 5,00,00,000.
Therefore, we find no basis in the finding of the CIT(A) that there was no information before the AO while processing the return under section 143(1) of the Act, whether the assessee had, inter-alia, specified domestic transactions for which it was required to comply with the provisions of section 92E - Details of international transactions and specified domestic transactions provided in Form 3CEB filed on 18/03/2017 also support the claim of the assessee that the assessee was required to furnish the report referred to in section 92E of the Act. Accordingly, we are of the considered view that the due date for filing the return of income for the year under consideration in the case of the assessee is 30/11/2015 as per clause (aa) of Explanation-2 to section 139(1) of the Act, and thus, the original return filed by the assessee on 29/11/2015 is a valid return of income under section 139(1) of the Act.
Revised return filed by the assessee on 29/03/2017, it is pertinent to note that vide intimation dated 26/11/2016 issued under section 143(1) of the Act, the original return filed by the assessee on 29/11/2015 was processed and thus the revised return, which was filed subsequently, was not under consideration. Accordingly, we are of the considered view that the revised return filed by the assessee on 29/03/2017 was not the subject matter of appeal before the learned CIT(A) and thus the finding vide impugned order that the AO is justified in not accepting the return filed later on 29/03/2017 has no basis.
As the return of income filed by the assessee on 29/11/2015 has been found to have been filed on or before the due date specified under section 139(1) of the Act, therefore the applicability of provisions of section 80-AC for denial of deduction under section 80-IC of the Act is also ruled out in the present case.
AO has made the necessary adjustment while computing the total income as per section 143(1) of the Act by denying the claim of deduction under section 80-IC, as the assessee failed to comply with the provisions laid down in section 80-IC(7) read with section 80-IA(7) of the Act - As evident from the record that the assessee filed Form 10CCB in respect of its claim of deduction under section 80-IC of the Act on 29/11/2015, i.e. on the date of filing the original return of income. CIT(A) also recorded this fact .
Therefore, the claim of deduction u/s 80-IC in its return of income was duly supported with Form 10CCB filed on 29/11/2015. Accordingly, we are of the considered view that the case of the assessee does not fall within the meaning of section 143(1)(a)(ii) read with Explanation (a)(ii). Insofar as the issue whether Form 10CCB filed by the assessee on 29/11/2015 was in terms of provisions of section 80-IC(7) read with section 80-IA(7) of the Act and Rule 18BBB is concerned, we are of the considered view that such an examination is not permissible under the limited scope of section 143(1) as under the said section during the assessment year 2015-16 only prima facie adjustments were permissible.
Accordingly, we find no merits in the aforesaid findings of the learned CIT(A) to support the conclusion of denial of deduction under section 80-IC vide intimation issued under section 143(1) - Impugned order upholding the intimation issued under section 143(1) of the Act is set aside. Accordingly, grounds in assessee’s appeal are allowed.
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2023 (12) TMI 459
TP Adjustment - draft assessment order without making a reference to the Ld. TPO u/s 92 CA(3) and relying upon the findings of the TP Order issued in relation to different assessee [merged with the assessee pursuant to a scheme of merger] - HELD THAT:- Upon careful consideration, we note that assessee was incorporated on 9th March, 2017 i.e. during FY 2016-17. It has not undertaken any business operation during the year. There was no reference to TPO in this case.
AO took the TPO’s order in the case of Boeing Corporation India Ltd. (BCIL) and made an identical addition in this regard in the hands of the assessee. Thus, it is amply clear that there was no reference to TPO in the case of the assessee and the TPO in this case relates to BCIL. The BCIL merged with the assessee pursuant to a scheme of merger on appointed date of 1st April 2017. Thus, since BCIL merged with the assessee in AY 2018-19, it was an independent entity until March 31, 2017.
Hence, any adjustment in the case of BCIL has nothing to do with the assessment of the assessee. The assessee’s submissions has sufficient cogency that impugned international transaction referred to in TP order has not been entered by the assessee for the subject year and thus, does not pertain to the assessee. The said TPO’s order which has been referred in the assessment order is in the case of BCIL, thus, the TP order pertains to BCIL rather than the assessee. In this factual background, when the assessee has not entered said transaction and there was no TPO reference in the case of assessee and the transaction of BCIL, which has merged with the assessee company on 01.04.2017, has been taken as assessee’s transaction, the assessment order in this case is liable to be quashed. Ld. DR for the Revenue could not refute any submission of the assessee. Hence, we set aside the orders of the authorities below and direct that the transfer pricing adjustment is deleted. Appeal of the assessee is allowed.
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2023 (12) TMI 458
Unexplained Sundry Creditors - Cessation of liability in respect of some creditors - HELD THAT:- The assessee filed primary details before the AO. Subsequently, the AO issued notices u/s 133(6) to creditors to confirm transactions with documentary evidence through e-mail ID. The notices were issued through ITBA Portal. The confirmation/reply were not received from all the parties regarding outstanding balances as on 31.03.2016. It was submitted that the AO had not issued any show cause notice before making any addition or intimation to the assessee for non-reply from the various parties and made addition without confronting the assessee about the non-receipt of the replies by the Assessing Officer. Absence of reply from the creditors do not entitle the Assessing Officer to treat the creditors as bogus without bringing any evidence on record to prove the payable are not indeed not required to be paid.
Thus considering applicability of provisions of section 41(1) and the judgments in CIT v. Vardhman Overseas Ltd [2011 (12) TMI 77 - DELHI HIGH COURT] referring to the judgment in the case of Jay Engineering Works Ltd.[2007 (9) TMI 263 - DELHI HIGH COURT] and applying the ratio laid down the case of CIT v. T. V. Sundaram Iyengar & Sons Ltd[1996 (9) TMI 1 - SUPREME COURT] under sec. 28 of the IT Act, considered the applicability of clause (a) of subsection (1) of section 41 as to what constitute remissions or cessation of trading liability, we decline to interfere with the order of the ld. CIT(A). Appeal of the Revenue is dismissed.
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2023 (12) TMI 457
Registration u/s. 80G denied - belated filing of Form no. 10AB u/s. 80G(5) - Assessee argued as Provisional Registration granted u/s. 80G(5) on 01-10-2021 is the sufficient registration and not aware of the Final Registration which is required to be applied within six months of the provisional registration or six months of the commencement of the activities of the Trust - HELD THAT:- As time is extended up till 30-09-2023, whereas the assessee filed belated application on 28-02-2023. The above circular also clarified that even in case, where the application in Form No. 10AB was rejected by the CIT(E) on or before issuance of this circular dated 24-05- 2023, the assessee trust can make fresh application in Form 10AB on or before 30-09-2023.
CIT(E) has not considered the clause 7 of the Circular no. 6 of 2023 thereby rejected the application which is in our considered view is against the circular issued by the CBDT. Therefore, we hereby set aside the impugned order passed by CIT(E) with a direction to reconsider the From No.10AB for final registration u/s. 80G of the Act by giving proper opportunity of being heard to the assessee trust. Needless to say the assessee trust should co-operate by furnishing all the required details as mandated under the law for granting final registration u/s. 80G of the Act.
Appeal of the assessee is allowed for statistical purposes.
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2023 (12) TMI 456
Reopening of assessment u/s 147 - deduction u/s 10A disallowed - reason to believe that issue of escapement is established in the A.Y 2009-10 - As argued software development expenses including cost incurred outside India were fully disclosed and the computation of deduction u/s.10A was one of the subject matter of scrutiny before the AO who after analysing the details has even made disallowance out of claim of such deduction - HELD THAT:- The case of the AO is that, the issue of escapement is established in the A.Y 2009-10 when the fact came to light that the assessee is not eligible for deduction u/s 10A to the extent and in view of the same it was found that the assessee has been allowed excess deduction for the A.Y. 2006-07. There is no whisper that any material or information has come on record that assessee was not incurring expenditure for software development outside India, but doing body shopping by deputing the personnel for the outside clients, albeit, from same set of facts a different view has been taken in A.Y. 2009-10 that revenue generated from such employees and branches cannot be considered as export services from India and derived from STPI located in India, which inference of the AO on same fact ultimately has been found to be incorrect by Tribunal.
Consequently the whole premise of reopening gets vitiated. Thus, reopening has been done merely on the basis of inference drawn by the AO on same facts and is not based on any material coming on record which can prove that there was failure on part of the assessee in so far as disclosure of correct facts are concerned.
A different view taken on same set of facts which was part of the record in subsequent years does not tantamount to failure on part of the assessee. Accordingly, we hold that, there is no failure on the part of the assessee to disclose truly and fully material facts required for the assessment and the reopening has been done simply on the basis of a different view taken by the Assessing Officer in A.Y. 2009-10 and there is nothing tangible material which has been found in A.Y. 2009-10 pertaining to A.Y. 2006-07 or 2007-08.
Otherwise, on merits also, the Tribunal has reversed finding of the DRP/AO in A.Y. 2009-10 which is the entire basis of reopening and addition in these years. This itself goes to show that there was no failure on the part of the assessee albeit, the claim of the assessee itself was allowable - Decided in favour of assessee.
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2023 (12) TMI 455
Revision u/s 263 - Validity of order passed under section 92CA (3) of the act by the transfer pricing officer question - as per CIT AO failed to examine the arm’s-length price of international transaction of export sales - As argued revision u/s 263 for TP Adjustment can be taken only with effect from 1/4/2022 - HELD THAT:- As per provisions of section 263 of the income tax act several authorities are authorized to "call for and examine" the "record of any proceedings" under the income tax act and if they consider that any order passed therein by the respective authorities including the learned transfer pricing officer is erroneous insofar as it is prejudicial to the interest of the revenue, such authority may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as deems necessary, passed such order thereon as the circumstances of the case justify.
In this case as per the order of the learned transfer pricing officer under section 92CA (3) of the act dated 27/1/2021 says that reference u/s 92C (1) was received from the learned assessing officer on 31/12/2019 - Thereafter the learned transfer-pricing officer noted that assessee has not submitted form number 3CEB for the year under consideration. There was no reference that how transactions of export sales, import were benchmarked by the assessee by adopting which method, and how ALP of such transactions was determined.
Thus, it is correctly held by CIT that the TPO has passed the order without taking any cognizance of making any inquiries with respect to transaction of export and import. Therefore, such an order is erroneous and prejudicial to the interest of revenue.
It is also the fact that the CIT (TP) did not invoke the provisions of explanation 2 of section 263 of The Income Tax Act because of the reason that the order passed is without making any enquiry and therefore such an order is erroneous and prejudicial to the interest of revenue as there was no case to consider it under the deeming fiction of explanation 2 of that section. It is a case complete absence of inquiry in any manner. Therefore, it is erroneous and prejudicial to the interest of revenue u/s 263(1) itself.
The income tax act authorizes the authority to revise the order if at the time of examination, such orders are on record. Thus, the date of passing of the order, which is subject to revision, is irrelevant but what is relevant is the date of examination of such record. If on the date of examination of such record. The revisionary authority is vested with powers to revise such orders [i.e. after 1/4/2022] the date on which such order subject to revision is passed is immaterial.
Further if we take a view as canvassed by the learned authorized representative that any order passed by the learned transfer pricing officer on or after 1/4/2022 only can be revised, perhaps it will tantamount to putting the powers given to the revisionary authority in abeyance till that time. If we agree to such a view than, we are putting the powers of the revisionary authority in abeyance for further, at least 11 months. Therefore, such a view deserves to be rejected at threshold.
No hesitation in holding that the learned PCIT (TP) is correct in holding that the order of the learned transfer pricing officer passed on 27/1/2021 is erroneous and prejudicial to the interest of the revenue as it was made without making any enquiry with respect to the export sales and import purchases from associated enterprises qua their arm’s-length price. Decided Against assessee.
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2023 (12) TMI 454
Leave encashment u/s 10(10AA) - Benefit of full exemption - assessee joined the Department of Telecom in the year 1981 which was corporatized by the Govt.of India in the year 2000 - Presidential Order thereby absorbing the assessee permanently into BSNL with effect from 01.10.2000 was passed and the leave at the credit of the assessee was transferred to BSNL on the date of absorption as provided for under Sub Rule 24(b) of Rule 37-A of the CCS(Pension) Rules - HELD THAT:- As per provisions of section 10(10AA(i)) of the Act, the assessee is entitled for exemption on the amount of leave encashment of 280 days leave earned during the period before absorption into BSNL to the tune of Rs. 8,60,776/- and 20 days of leave to the tune of Rs. 61,484/- as per provisions of sub section 2 of section (10AA) - Coordinate Bench of the Ahmedabad Tribunal on similar facts and circumstances allowed the appeal of the assessee in the case of Pradipkumar Bhogilal Modi Vs. ADIT(CPC) Bengaluru [2023 (7) TMI 1328 - ITAT AHMEDABAD] - Appeal of assessee allowed.
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2023 (12) TMI 453
Income taxable in India - Addition of receipts from Industrial Liaison program (ILP) - Fees for Included Service (FIS), under Article 12 of the Double Taxation Avoidance Agreement between India and USA ('Treaty') - Appellant is a non-resident company and tax resident in United States of America, educational institution incorporated as a non-profit organization under the laws of the State of Massachusetts imparting knowledge and educate students in science, technology and related areas of scholarships - HELD THAT:- Tribunal has in identical facts and circumstances in the case of Massachusetts Institute of Technology Ne Versus Deputy Commissioner Of Income Tax Intl Tax Circle 3 (2) (1) Mumbai [2023 (10) TMI 1186 - ITAT MUMBAI] held that receipts from Industrial Liaison Program and receipt from Coordination Membership Agreement are not liable to tax in India in terms of Article 12 of DTAA as the same are not in the nature of ‘Fee for Included Services’. Whereas the Tribunal has confirmed the addition of receipts from Sponsorship Assignments holding the same to be Fee for Included Services taxable in India in terms of Article 12 of DTAA.
Receipts from Industrial Liaison Program - As examining the scope of services provided by the Appellant under Industrial Liaison Program concluded that the Appellant provides factual information related to the research projects and the same does not involve rendering of any technical services or making available any technical knowledge or experience or skill. Therefore, the receipts from Industrial Liaison Program are not liable to tax in India in terms of Article 12 of the DTAA. Facts and circumstances being identical, respectfully following the above decision of the Tribunal in the case of the Appellant for the immediately preceding Assessment Year 2018-19, we hold that receipt from Industrial Liaison Program do not qualify as ‘Fee for Included Services’ in terms of Article 12 of the DTAA and are, therefore, not taxable in India.
Receipt from Sponsorship Assignment qualify as ‘Fee for Included Services’ in terms of Article 12 of the DTAA and are, therefore, taxable in India.
Receipts from Coordination Membership Agreements - The Appellant does not undertake any research nor does it describe any method or process involved in carrying out such research. Appellant merely provides help for accessing and dissemination of the consortium research to its members. The role of the Appellant is that of a coordinator between all the consortium members. Thus, the Appellant is only providing administrative support to the members and not rendering any technical services. It cannot be said that the Appellant is making available any technical know-how, experience, etc., or technical plan/design to the members as enumerated in Article 12 of the DTAA. Both the sides agreed that there is no change in the facts and circumstances of the case.
Therefore, respectfully following the above decision of the Tribunal in the case of the Assessee for the immediately preceding Assessment Year 2018-19, we hold that receipt from Coordination Membership Agreement do not qualify as ‘Fee for Included Services’ in terms of Article 12 of the DTAA and are not taxable in India.
Denial of credit of TDS - We direct the Assessing Officer to verify the records and grant credit of tax deducted at source to the Appellant as per law.
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2023 (12) TMI 452
Disallowance of expenditure - compensation paid to principal for non-fulfilment of contractual obligation - allowable business expenditure or not? - according to the assessee, the amount of rubber required to be used for production of one item was short and, therefore, the factory was shut down - how a business expenditure incurred by an assessee would be categorised as penal in nature with the application of Explanation 1 to Section 37? - HELD THAT:- In the present case, the assessee entered into with an agreement with M/s. JK Tyre & Industries Limited for carrying out the manufacturing activity of J.K. Tyres on job work basis. It failed to produce the end product qualitatively according to the parameters of J.K. Tyres and dispute arose between the parties. In order to resolve the dispute, the assessee has to pay something to M/s. JK Tyre &Industries Limited so that it can continue to work on behalf of M/s. JK Tyre & Industries Limited for job work basis.
Therefore, the expenditure was not incurred for any infringement of law rather, it is a by- product of commercial activity. For example, the assessee was required to manufacture a tyre by using 10Kg. of rubber, but it had used 11 Kg. or 9 Kg., tyre will not be to the specification of the principal and that would spoil the market of the principal and users will raise complaint. The principal would have to replace them that would lead to some expenditure as well as bad name in the market, so the compensation given by the assessee was on account of these commercial transactions. Therefore, both the authorities are incorrect in categorizing the expenditure as hit by Explanation 1 to Section 37. We delete the addition and allow the appeal of the assessee.
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2023 (12) TMI 417
Deduction u/s 80IA - quantum of profits and gains of the eligible business - Scope of expression “market value” in relation to any goods - profits of eligible business of captive power generation plants - Re-computation of amount of deduction - revenue contended that the profits of eligible business of captive power generation plants of the assessees were inflated by adopting an excessive sale rate per unit for power supply to the assessees own industrial units for captive consumption as opposed to the rate per unit at which power was supplied by the assessees to the power distributing companies i.e. the State Electricity Boards which is contended to be the market rate. - High Court has decided the issue in favor of assessee.
HELD THAT:- Being in a dominant position, the State Electricity Board could fix the price to which the assessee really had little or no scope to either oppose or negotiate. Therefore, it is evident that determination of tariff between the assessee and the State Electricity Board cannot be said to be an exercise between a buyer and a seller in a competitive environment or in the ordinary course of trade and business i.e., in the open market. Such a price cannot be said to be the price which is determined in the normal course of trade and competition.
Thus, market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an industrial consumer could have purchased power in the open market.
It is clear that the rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under Section 80 IA of the Act.
We hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the revenue.
Before parting with this issue, we may mention that reliance placed by Mr. Rupesh Kumar, learned counsel for the revenue on the definition of the expression “market value” as defined in the explanation below sub-section (6) of Section 80 A of the Act is totally misplaced inasmuch as sub-section (6) was inserted in the statute with effect from 01.04.2009 whereas in the present case we are dealing with the assessment year 2001-2002 when this provision was note even borne.
That being the position, we have no hesitation in answering this issue in favour of the assessee and against the revenue.
Depreciation - Determination of WDV - Exercise of option to Adopt written down value method - Rule 5 provides for the method of calculation of depreciation allowed under Section 32 (1) of the Act. It says that such depreciation of any block of assets shall be allowed, subject to provisions of sub-rule (2), as per the specified percentage mentioned in the second column of the table in Appendix-I to the Rules on the WDV of such block of assets as are used for the purposes of the business or profession of the assessee during the relevant previous year. In so far the present case is concerned, it is not in dispute that sub-rule (2) has no application.
From a conjoint reading of Rules 5(1) and (1A) of the Rules read with Appendix-1 and Appendix-1A, it is evident that while subrule (1) provides for allowance of depreciation in respect of any block of assets in terms of the second column of the table in Appendix 1, sub-rule (1A) enables an assessee to seek allowance of depreciation of assets acquired on or after the 1st day of April, 1997 as per the percentage specified in the second column of the table in Appendix-1A on actual cost basis. However, the second proviso to sub-rule (1A) clarifies that an assessee may opt for depreciation under Appendix-1 instead of Appendix-1A but such option has to be exercised before the due date for furnishing the return of income under sub-section (1) of Section 139 of the Act.
In the instant case, there is no dispute that the assessee had claimed depreciation in accordance with sub-rule (1) read with Appendix-I before the due date of furnishing the return of income. The view taken by the assessing officer as affirmed by the first appellate authority that the assessee should opt for one of the two methods is not a statutory requirement. Therefore, the revenue was not justified in reducing the claim of depreciation of the assessee on the ground that the assessee had not specifically opted for the WDV method.
We are in agreement with the view expressed by the Tribunal and the High Court that there is no requirement under the second proviso to sub-rule (1A) of Rule 5 of the Rules that any particular mode of computing the claim of depreciation has to be opted for before the due date of filing of the return. All that is required is that the assessee has to opt before filing of the return or at the time of filing the return that it seeks to avail the depreciation provided in Section 32 (1) under subrule (1) of Rule 5 read with Appendix-I instead of the depreciation specified in Appendix-1A in terms of sub-rule (1A) of Rule 5 which the assessee has done. If that be the position, we find no merit in the question proposed by the revenue. The same is therefore answered in favour of the assessee and against the revenue.
Genuineness of Professional expenses - Payment made by the assessee to Shri SK Gupta and his group of companies - From the materials on record, we find that the assessing officer had solely relied upon the statements made by Shri S.K. Gupta on 12.12.2006 and 23.12.2006 during the course of the search. However, the assessing officer overlooked the fact that within a short span of time, Shri S.K. Gupta had retracted from the said statements by filing an affidavit on 05.02.2007. Thereafter, he reiterated the statements made by him in the affidavit dated 05.02.2007 in a statement recorded on 08.02.2007.
We find that in the later statements, Shri S.K. Gupta had categorically stated that he had rendered services to the assessee. He also mentioned that the name of the assessee was not referred to as one of the beneficiaries of the accommodation bills in his earlier statement. He had categorically stated that he had rendered service to the assessee and that the assessee had not obtained any bogus accommodation bills from him. Assessing officer had dis-believed the affidavit as well as the subsequent statement of Shri S.K. Gupta without any justifiable and cogent reason. That apart when the revenue had relied upon the retracted statement of Shri S.K. Gupta, it ought to have provided an opportunity to the assessee to cross-examine Shri S.K. Gupta which was however denied. Thus, revenue was not justified in disallowing the claim of professional expenses of the assessee on account of payment to Shri S.K. Gupta and his group of companies.
Therefore, we agree with the view taken by the High Court. As noted by the High Court, the entire issue is based on appreciation of the materials on record. Tribunal had scrutinized the materials on record and thereafter had recorded a finding of fact that there were sufficient evidence to justify payment made by the assessee to Shri SK Gupta, a consultant of the assessee, and that the assessing officer had wholly relied upon the statement of Shri Gupta recorded during the search operation which was retracted by him within a reasonable period. There is no admissible material to deny the claim of expenditure made by the assessee. Accordingly, this issue is answered in favour of the assessee and against the revenue.
Nature of receipts - carbon credit - capital or revenue receipt - HELD THAT:- As the issue relating to carbon credit was not raised or urged by the revenue. If that be the position, revenue would be estopped from raising the said issue before this Court at the stage of final hearing. That apart, there is no decision of the High Court on this issue against which the revenue can be said to be aggrieved and which can be assailed. In the circumstances, we decline to answer this question raised by the revenue and leave the question open to be decided in an appropriate proceeding.
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2023 (12) TMI 416
Offence punishable u/s 276CC - assessee failure to file return of income - willful attempt or not? - As decided by HC 2022 (11) TMI 590 - MADRAS HIGH COURT] there is no evasion of tax. It is not the case that no return has been filed, thus there is no willful failure on the part of the petitioner to file return - HELD THAT:- No good ground to interfere with the impugned order passed by the High Court. The Special Leave Petition is dismissed.
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2023 (12) TMI 415
Validity of Assessment u/s 153A - fresh material/information received after the date of search - HELD THAT:- Supreme Court in the case of Abhisar Buildwell [2023 (4) TMI 1056 - SUPREME COURT] approved of the view taken by this court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] as held no addition can be made in respect of the completed assessments in absence of any incriminating material.
Admittedly, the assessment for the Assessment Year 2011-12 was finalized on 20.01.2012 and no notice under Section 143(2) of the Act was issued, as such no assessment was pending on the date of search action i.e. 29.10.2013. Also admittedly, in the present case, during the search action against the respondent/assessee no incriminating material was found and the material in the form of statement of Shri B.P. Singh now sought to be relied upon by the appellant/revenue was recorded subsequent to the search action. Therefore, the proposed question of law cannot be admitted as substantial question of law.
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2023 (12) TMI 414
Reopening of assessment - Exemption u/s 11 denied - notice after 4 years from the end of the relevant assessment year - revenue rejected the objections raised by the petitioner primarily on the ground that Form-10 was not submitted by the petitioner before the due date of filing of return u/s 139 (1) - whether factual aspect of late receiving of Form-10 came to the knowledge of the Assessing Officer on a later date and accordingly amounts to new material? - HELD THAT:- Form-10 under Rule 17 of the Rules is required to be filed before the Assessing Officer before he completes the assessment. In a case, where Form-10 is filed late but is filed before the Assessing Officer completes the assessment, benefit of Section 11(2) of the Act shall be available to the assessee.
From a reading of impugned notice, and assessment order it appears that the Assessing Officer has paid no heed to the ratio laid down in the judgment of the Supreme Court Nagpur Hotel Owners’ Association [2000 (12) TMI 99 - SUPREME COURT] and various High Courts . Moti Ram Gopi Chand Charitable Trust, Sakal Relief Fund [2013 (12) TMI 609 - ALLAHABAD HIGH COURT].
We, accordingly, have no hesitation in holding that the entire process of reassessment that has been initiated by the Department holds no water and is without any legal basis whatsoever. We quash the notice issued under Section 148 - Decided in favour of assessee.
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2023 (12) TMI 413
Cash seized by the Election Officer from the vehicle owned by the petitioner - cash was in demonitized currency notes of Rs. 500/- and Rs. 1000/- - scope Code of Conduct with regard to the elections of the Nagar Panchayat was in force and hence it was impermissible to carry cash of such value in the vehicle - RBI refused to accept Notes as its liabilities with regard to such notes ceased on 31/12/2016 and the notes of the said denominations were no longer a legal tender - petitioner received a communication from the Deputy Director of Income Tax (Inv.), Unit – II, Nagpur in which it was stated that the specified bank notes (SBNs) could not be accepted for deposit without any Court orders
HELD THAT:- Income Tax Authorities while acting under the Act of 1961 had seized the amount of Rs. 30,00,000/-. The procedure prescribed by Section 131 of the Act of 1961 was duly followed. The amount seized was thereafter declared as an additional income of the petitioner followed by payment of requisite income tax and interest. There does not appear any justifiable reason to preclude the petitioner from receiving the aforesaid amount in lieu of the seized SBNs. Much prior to the appointed day, the seizure had been effected and requisite formalities had been completed. The provisions of Chapter XIII of the Act of 1961 and especially Sections 131, 132 and 132B indicate that seizure of the SBNs in the present circumstances been undertaken by a Law Enforcement Agency referred to in the proviso to Section 5 of the Act of 2017 and hence the petitioner is entitled to return of the aforesaid amount. The interests of justice and fairplay warrant issuing of such direction to the RBI, which direction would be an order envisaged by proviso (d) to Section 5 of the Act of 2017.
For the aforesaid reasons, it is held that the petitioner is entitled to return of the amount of Rs. 30,00,000/- that was seized by the Election Officer on 17/11/2016. To facilitate refund of the said amount, the Reserve Bank of India is directed to accept the SBNs valued at Rs. 30,00,000/- and thereafter deposit the same in the PD account of the Principal Commissioner of Income Tax (Central), Nagpur. On such deposit, the Assistant Director of Income Tax (Inv.) – II, Nagpur shall take necessary steps to ensure that the said amount is refunded to the petitioner on completion of the requisite formalities. The entire exercise be completed within a period of six weeks from today.
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2023 (12) TMI 412
Validity of reopening of assessment - correctness of order u/s 148A (d) challenged - notice has been issued under Section 148 - object behind insertion of Section 148A - steps/procedure have been followed by AO prior to issuance of notice u/s 148A(d) - scope of amendment by the Finance Act, 2021 - petitioner seeks to challenge the legality, validity and propriety of the notice issued u/s 148 of the Act seeking to reopen the assessment for the Assessment Year 2016-17 which is based on the order under Section 148(A)(d) - HELD THAT:- This Court has culled out the foundational prerequisite of Section 148A of the Act, as aforesaid, to emphasize that if the inquiry contemplated in Section 148A is interpreted to mean a detailed inquiry where both sides can seek and adduce evidence/material (documentary/ocular), then the entire object behind Section 148A would stand defeated.
The object behind Section 148A as is evident from the findings in the fountainhead decision of GKN Driveshafts (India) Ltd.[2002 (11) TMI 7 - SUPREME COURT] is to enable the assessee to be informed of the reasons and information suggesting that income chargeable to tax has escaped assessment and, therefore, in turn to empower the assessee to prepare and file an effective reply and thereafter the Assessing Officer to pass an order under Section 148A(d), followed by issuance of notice under Section 148 of IT Act.
The object behind insertion of Section 148A by the Legislature w.e.f. 01.04.2021 inter alia appears as follows:-
(a) to prevent rampant and casual issuance of notice u/S. 148 by the Revenue;
(b) to save unnecessary harassment to the assessee of being subjected to reopening a case under Section 148;
(c) to save the Revenue of the time and energy which may be vested pursuing frivolous and fruitless proceedings u/S 148
Considering the aforesaid, normally, the writ Court should not interfere at such premature stage when the proceedings initiated against the assessee are yet to be concluded by the statutory authorities.
This Court refrains to interfere with the order(s)/notice(s) impugned. Pertinently, the question of going into the veracity and genuineness of the material/evidence forming the opinion of the AO suggesting that income of petitioner/assessee has escaped assessment ought not to be gone into while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution of India.
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2023 (12) TMI 411
Revision u/s 263 - unexplained gold jewellery found in search - unexplained investment u/s. 69/69B - scope of Board Instruction 1916 dated 11.05.1994 (BI 1916) for Streedhan applied by AO - Pr. CIT found the same as erroneous and prejudicial to the interest of the Revenue inasmuch as BI 1916 only seeks to regulate seizure by providing uniform parameters, to be applied across the country, to avoid arbitrariness in seizure and indeed harassment to tax payers, limited in its application to seizure, and its understanding by AO to imply a concession qua gold jewellery found though not seized in view of these norms, i.e., in the matter of assessment, is misplaced. The same is to be subject to assessment as per law.
HELD THAT:- AO’s, who claims to be in making the impugned assessment guided by the said BI, understanding thereof is, much less a reasonable construction, as contended, a disregard thereof; rather, contrary thereto. The argument is in fact misconceived inasmuch as a possible view, precluding revision, is only qua a provision of law, conspicuous by its absence.
On merits, as explained, the Board cannot, as per settled law, travel outside its bounds under law or usurp the power of adjudication by the assessing authority. It has, as a matter of fact, not, so that questions of competence or reasonability of construction are academic, stated only to meet the arguments made during hearing. No reason for such construction, needless to add, stands furnished before us. The impugned assessment is a clear case of misapplication of law, liable for revision qua the relevant aspect. That some other authority may have read BI1916 likewise, i.e., contrary to what it says, is immaterial (Escorts Ltd. v. UoI [1992 (10) TMI 1 - SUPREME COURT] The same can, under the circumstances, only be regarded as it’s view in the matter, not supported by any cannon of interpretation of statutes – which the BI is in fact not, drawing inference from the fact of non-seizure advocated thereby, to thus travel outside its scope and purpose. Assessee’s appeal is dismissed
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2023 (12) TMI 410
Addition u/s 56(2)(viib) - assessee had issued shares at a value far exceeding its Fair Market Value - difference in the fair market value of the shares, as estimated by the AO and the premium at which the shares were issued to the assessee, was added to the income of the assessee - primary objection to the valuation report submitted by the assessee was the unusually enhanced value given to the asset of the assessee i.e. the land, which was noted to be valued at 10 times more than its purchase price.
HELD THAT:- The assessee submitted a valuation report of the valuer for the valuation of piece of land at Rs. 87,62,200/- as against its purchase price of Rs. 8,74,460/-, but we have noted that the ld. CIT(A) found that while the asset was purchased in the same year at a fair lesser price and its jantri value was also fair less, the valuer had given no basis at all for valuing it at 10 times its actual cost at which it was acquired. The assessee has not been able to controvert this finding of the ld. CIT(A); therefore, the contention of the assessee that there was no basis given for rejecting the valuation report is found to be incorrect on facts and is accordingly rejected.
No other arguments having been made by the assessee opposing or against the invocation of Section 56(2)(viib) of the Act in the present case, Ground raised by the assessee challenging the invocation of Section 56(2)(viib) of the Act in the present case is, therefore, dismissed.
Addition enhanced by CIT(A) treating the difference in FMV of shares and their consideration as a whole, including face value of shares and premium , as liable to tax u/s 56(2)(viib) - While the section specifies that it would be invoked only when the consideration received exceeds the face value of shares, i.e. the assessee receives premium on issue of shares, the addition is to be made of the difference between fair market value of shares and the aggregate consideration received. Therefore, a plain reading of the section would reveal that the premium on issue of shares is relevant only for the purpose of invocation of section; while for the purpose of making addition to the income of the assessee, the difference between the consideration and the fair market value is to be taken. We are, therefore, in complete agreement with the ld. CIT(A) that the entire amount of consideration received falls within the scope of consideration of Section 56(2)(viib) of the Act. The contention of the assessee is accordingly rejected. Ground No.4 of the appeal is rejected.
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2023 (12) TMI 409
Validity of reopening of assessment u/s 147 - as alleged no compliance of mandatory requirement of law to issue notice u/s 143(2) against return of income filed makes the impugned Assessment Order null and void - addition u/s 68 - HELD THAT:- It is to be noted that the A.O. had already issued notice u/s 143(2) of the Act to the assessee on 12/09/2017 which was issued to the assessee after the lapse of time limit given to the assessee to file the return of income in response to notice issued u/s 148 of the Act on 30/03/2017. Now, the assessee wants to do the things indirectly which cannot be done directly. In our opinion, there is no credential to the letter filed by the assessee dated 02/11/2017 requesting the A.O. to treat the original return filed on 16/03/2011 as return field in response to notice u/s 148 of the Act.
The law assists the person who is vigilant and not to the person who sleep over the matter. It is a well settled principle that a person having done wrong cannot take advantage of his own wrong and plead for bar of any law to frustrate the lawful trial by a Competent Court. The principle of Latin Maxim ‘Nullus Commodum Capera Potest De Injuria Sua Propria’ applies to the assessee.
Thus, the notice issued u/s 143(2) of the Act issued on 12/09/2017 is a valid notice given to the assessee so as to frame the assessment u/s 143(3) read with Section 147 of the Act. Decided against assessee.
Application of independent mind on the material or not? - Relevant assessment year as escaped assessment. In the present case, the A.O. has cause or justification to know that the income had escaped assessment. After going through the facts and circumstances of the case, and the reasons recorded by the A.O., found that the income had been escaped from the assessment and at the stage of reopening, the final outcome of the proceedings is irrelevant. At the initiation stage, what is required is reason to believe but not the established facts of escapement of income. At the stage of issuance of notice u/s 148 of the Act, the only question is whether there was relevant materials on record on which reasonable person could frame a requisite belief whether the material conclusively proved the escapement or not is the concerned at that stage. Because at that point of time the formation of belief by the A.O. is within the realm of subjective satisfaction. Being so, we do not find merit in the Ground No. 3 of the assessee, accordingly, Ground No. 3 of the assessee is dismissed.
Sanction u/s 151 of IT Act as provided with the copy of the reason recorded shows mechanical satisfaction by sanctioning authority - There is no application for admission of additional grounds. Without prejudice to the same, u/s 151(1) of the Act no notice u/s 148 of the Act shall be issued by the A.O. after expiry of four years from the end of the relevant Assessment Year unless the PCIT or Chief Commissioner or Principal Commissioner or Commissioner is satisfied on the reasons recorded by the A.O, that it is fit case for issuance of such notice. No infirmity in the order of the authority prescribed u/s 151 (1) of the Act. Thus, the Ground No. 4 is dismissed.
Addition u/s 68 - Assessee had failed to prove the three conditions wiz:- (i) The identity of the creditor, (ii) The capacity such creditor to additions the amount & (iii) The genuineness of the transaction, in our considered opinion, the CIT(A) committed no error in confirming the addition made by the A.O. u/s 68.
Assessee appeal dismissed.
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2023 (12) TMI 408
Revision u/s 263 - Deemed dividend u/s 2(22)(e) - loans received from another company - beneficial ownership - HELD THAT:- Since as per the finding of the CIT himself, the assessee’s beneficial ownership of the shares in MAP Ltd. alongwith voting power fall below the criteria specified for invocation of section 2(22)(e) of the Act, the said section was not applicable to the facts of the present case. Therefore, finding of error by the CIT in the assessment order for non-invocation of section 2(22)(e) of the Act on the loans received by the assessee from MAP Ltd. palpably fails on facts recorded by the Ld.PCIT himself. Accordingly, we hold that considering the facts noted by the ld.Pr.CIT himself, provisions of section 2(22)(e) of the Act were not attracted to the transaction of amounts/loan received by the assessee from MAP Ltd, and finding of the error by the ld.PCIT in this regard is, therefore, held to be not sustainable.
Finding of error by the ld.Pr.CIT with regard to the loans received from MAP Cotton P.Ltd. qualifying as deemed dividend under section 2(22)(e) of the Act is against the principles of natural justice enshrined in section 263 of the Act itself, which categorically requires the assessee to be heard on the errors noted by the ld.Pr.CIT in the assessment orders for valid exercise of revisionary jurisdiction u/s 263 of the Act. Section 263(1) of the Act requiring powers of revision to be exercised by PCIT’s/CIT’s after giving opportunity of hearing to the assessee is reproduced - the finding of the error by the ld.Pr.CIT of non-invocation of section 2(22)(e) of the Act to the transaction of loan received by the assessee from MAP Cotton Ltd.is also held not sustainable in law. Assessee appeal allowed.
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2023 (12) TMI 407
Maintainability of the reassessment proceedings - deduction u/s. 35(2AB) - non furnishing Form 3CL quantifying eligible expenditure u/s. 35(2AB) regarded in law as non-disclosure within the meaning of proviso to section 147 r/w Explanation 1 thereto - Notice issued beyond 4 years - HELD THAT:- The procedure of communication of Form 3CL direct by the prescribed authority to the Revenue giving rise to the presumption that the same would stand communicated to the AO, is, as afore-noted, not supported by the rule. The presumption, nevertheless, fails on facts, i.e., on the assessee receiving Form 3CL approving a reduced deduction u/s. 35(2AB) (w.r.t. that claimed) on which the assessee is not questioned during assessment. And which ought to have impelled the assessee to, in discharge of it’s primary obligation, furnishing Form 3CL, either revise it’s claim downward, or state it’s reasons for persisting with it’s claim, or both, i.e., in case of partial scaling down of it’s claim. Why, in a given case, the AO may himself question the assessee on it’s higher claim, implying knowledge of Form 3CL with the AO, validating the presumption afore-said, which would entitle the assessee to proceed accordingly. The assessee’s disclosure obligation undergoes a qualitative change in light of this fact.
Again, could the assessee’s conduct be faulted where Form 3CL reports deduction in the same sum as claimed by the assessee? We say so to emphasizes the need to calibrate the conduct toward true and full disclosure with the facts & circumstances of the case, which cannot be held as a constant or absolute.
Tribunal in assessee’s own case for AY 2012-13 [2017 (8) TMI 841 - ITAT COCHIN] being in fact undisputed, particularly considering that the claim for deduction made was much higher than that on the basis of expenditure approved thus by the prescribed authority. It is this variance, and not F/3CLper se, that is the undisclosed primary, material fact.
The plea of presumption of the said Form being in the knowledge of the AOis not supported by the rule, i.e., not available legally and, besides, falls flat on facts, i.e.,in view of a complete absence of any enquiry or reference thereto in the original assessment and, therefore, a false plea by the assessee, who is obliged by law to disclose, fully and truly, all material facts necessary for assessment to the AO. Why, the knowledge of Form 3CL being at a variance with the assessee’s claim with the AO, i.e., at the time of original assessment, may, where so, eschew reassessment proceedings even for AY 2011-12, rendering the same as a change of opinion.
The two aspects are inter-related, with there being decisions, as in Ganga Saran & Sons P. Ltd. v. ITO [1981 (4) TMI 5 - SUPREME COURT] wherein the Hon'ble Apex Court found no failure on the part of the assessee to disclose material facts, holding, on that basis, the AO could not have a reason to believe that any part of income had escaped assessment.
The matter is to be examined from the stand-point of the obligation on the assessee to disclose all material facts necessary for assessment, fully and truly, i.e. as mandated by law, and which, a positive requirement, we have, giving our reasons, found as not discharged. We are supported in our view by the decisions cited here-in-above, as well as that relied upon by the parties before us. The matter, as for AY 2011-12, shall travel to the file of the ld. CIT(A) for adjudicating the quantum adjustments in assessment under appeal before him after hearing the parties per a speaking order.
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