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Income Tax - Case Laws
Showing 81 to 100 of 8298 Records
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2023 (12) TMI 1229
Disallowance u/s. 14 r.w.s. 8D - sufficiency of own funds - expenditure incurred on earning exempt income - HELD THAT:- The undisputed fact is that the exempt income of the assessee is Rs. 1615/- only, therefore, in the light of the decision of Caraf Builders and Construction [2018 (12) TMI 410 - DELHI HIGH COURT] disallowance should not exceed the exempt income.
Suo-moto disallowance As decided in case of GMR Enterprises Private Limited [2021 (11) TMI 565 - ITAT BANGALORE] following the decision of M/s. Marg Limited [2020 (10) TMI 102 - MADRAS HIGH COURT] disallowance u/s 14A of the 1.T.Act cannot exceed the exempt income earned during the relevant assessment year irrespective whether larger amount was disallowed by the assessee u/s. 14 A of the IT Act while filing the return of income - we direct the AO to delete the disallowance and restrict the same to Rs. 1615/- only. Appeal of the assessee is partly allowed.
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2023 (12) TMI 1228
Addition u/s 69A - taxability at higher rate of tax u/s 115BBE - on-money in respect of 100% of unit is brought on record - HELD THAT:- As incriminating material is not found relating to each and every unit. AO extrapolated the rate in respect of all 384 units. No independent investigation of facts was carried out by AO during assessment proceedings. There is no refinance in the assessment order that the search party while preparing appraisal report suggested collection of on money in respect of all the units. There is no allegation of AO that units were sold below the Jantri rate. No other independent evidence or material to substantiate the on-money in respect of 100% of unit is brought on record.
We find that in CIT Vs Standard Tea Processing Co. Ltd. [2013 (7) TMI 539 - GUJARAT HIGH COURT] held that the addition for undisclosed income on account of inflated purchase price can be made only for the period to which document found during the search is related and not for the entire block period
As in CIT Vs B. Nagendra Baliga [2014 (6) TMI 114 - KARNATAKA HIGH COURT] held that the Assessing Officer has not entitled to extrapolate undisclosed income detected in the course of search for a particular period to entire block period on estimate basis.
The Coordinate Bench of Tribunal in ACIT Vs M/s Amar Corporation Ltd. [2011 (3) TMI 1676 - ITAT AHMEDABAD] and in Sayan Textiles Park Ltd. [2015 (4) TMI 184 - ITAT AHMEDABAD] also held that question of extrapolation can only arise only in a situation when the documents give an indication that it was a regular occurrence in a systematic manner. Thus, in view of aforesaid factual and legal discussion, we uphold the order of ld. CIT(A) on our aforesaid observations. In the result, grounds of appeal raised by revenue as well as assessee are dismissed.
Taxing of addition u/s 115BBE - We find that no such provision was invoked by AO while making addition in the assessment order. We further find that combination this bench in case of Dagina Jewellers ([2023 (4) TMI 1277 - ITAT SURAT] held that when the source of income was explained and is apparently established, hence section 115BBE is not applicable for such business receipts. It was held that the provisions of Sections 68 and 69 are not applicable for trading transactions like deposit of cash out of cash sales and excess closing stock. While giving such finding, we have made reliance on the decision of Shilpa Dyeing & Printing Mills Ltd, [2015 (7) TMI 691 - GUJARAT HIGH COURT] Thus, in view of aforesaid position, the Assessing Officer is directed to tax the addition under normal provision/rate applicable on assessee. In the result, the ground No. 2 of appeal is allowed.
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2023 (12) TMI 1227
TP Adjustment - apportioning the expenses of assessee’s affiliates - HELD THAT:- We note that the Ld.TPO has not considered the agreements between the assessee and its AE and the nature of the transaction entered into, the services rendered by the assessee to its AE and the benchmarking method adopted by the assessee on a consistent basis. In the interest of justice, we remand this issue back to the Ld.AO/TPO to consider the claim of assessee by analysing all the details vis-à-vis the contracts and the functions performed by the assessee in respect of the services rendered.
Also noted that the assessee has received certain services from its AE which has been treated by the Ld.TPO at arms length by the assessee. However, the Ld.TPO has apportioned 1/5th of the expenses once again to the assessee and proposed a TP adjustment which in our view amounts to double addition. Such kind of computation of adjustment is not in accordance to the sound principles of transfer pricing rules. We direct the Ld.AO/TPO to consider the segments of the assessee under the receipt of business development services from its AE denovo in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee.
Grant of depreciation at the rate of 60% on NMS CG/TX Cards, switches, etc., on the ground that these items do not come within the definition of “computers” - HELD THAT:- Identical issue has been considered by Coordinate Bench of this Tribunal for A.Y. 2015-16 [2022 (8) TMI 1343 - ITAT BANGALORE] we direct the Ld.AO to allow the depreciation at 16% on the CG/TX Cards, switches etc.
TDS u/s 195 - grant of deduction of tax paid outside India in respect of which no foreign tax credit is eligible in India by holding that the same would be outside the scope of Section 40(a)(ii) - HELD THAT:- We direct the Ld.AO to verify the amount of foreign tax credit paid that is attributable to the income accruing / arising in India and to allow the same. Accordingly in the light of the decisions relied by Coordinate Bench of this Tribunal hereinabove in assessee’s own case for A.Ys. 2014-15 and 2015-16 Accordingly, Ground nos. 2-3 raised by revenue is remanded to the Ld.AO to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee.
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2023 (12) TMI 1226
Disallowance of loss in derivative transactions on the platform of National Exchange of India (NSE) - as submitted by the assessee before the CIT(A) that the loss in derivative segment arose as a result of transactions made through registered brokers on the platform of NSE which are duly verifiable from the records and the Assessing Officer has rejected the claim of loss cursorily without any opportunity to the assessee to corroborate its claim - HELD THAT:- The derivative loss claimed by the assessee is supported threadbare by scrip-wise tabular statement. The mis-match between derivative loss claimed qua the working of the CIT(A) is found to be explained and is on account of unilateral omission on part of the CIT(A) to take cognizance of the losses arising on account of open position at the beginning of the year which matured during the year in question and likewise open position which remained unmatured and carried forward in the subsequent financial year. The approach of the assessee to recognize profits/losses in open contracts appears to be prima facie in tune with the accounting practices. The effect of open position if not taken will give rise to totally absurd conclusions.
The profit/loss carried already reported for a part of the period in the preceding accounting year will get accounted for again during the year. Similarly, the profits/losses accounted for covering a part of the financial period during the year will again get accounted for in the subsequent year on termination of derivative contracts at the time of maturity. The action of the CIT(A) is apparently flawed and has lead to manifestly absurd results. The action of the CIT(A) cannot be justified in any manner and thus liable to be set aside. The derivative loss claimed by the assessee appears fully justified and requires to be accepted. The plea on behalf of revenue that such loss from open position has no effect on profit and loss is devoid of any merit. We thus set aside the order of the CIT(A) and direct the Assessing Officer to allow the claim towards derivative losses as business losses of the assessee as claimed.
Penalty u/s 271(1)(c) on the impugned derivative losses disallowed - The imposition of penalty under Section 271(1)(c) has thus lost the very premise to hold its sustainability. The penalty u/s 271(1)(c) in question thus cannot be sustained in law. Besides, the action of the assessee is fully supported by the documentary evidences, the confirmation from the registered SEBI brokers and the audited financial statement showing presence of open interest in derivative scrips both at the beginning of the year as well as at the end of the year. This being so, in the absence of any mistake or culpability in the action of the assessee, the imposition of penalty cannot be justified by any stretch of imaginations. We thus set aside the impugned first appellate order and delete the penalty.
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2023 (12) TMI 1225
Additions u/s 41(1) - Cessation of liability - Freezer Deposit (security deposit) considered as lapsed liability u/s 41(1) - Relevant in which such incomes taxable - assessee-company manufactured ice creams and frozen foods, sold it through distributors from whom it obtained deposits in lieu of installing deep freezers at their premises - HELD THAT:- There is, we observe, no dispute on the primary facts. That is, the refundable deposits, to secure the assessee’s interest, are accepted from it’s dealer by the assessee on provision of equipment to them, which is though subject to depreciation. Though refundable only on termination of the agreement, the amount refundable reduces at a definite rate for each year (or part thereof) of the agreement, corresponding with the rate of depreciation, i.e. @25% p.a. The amount refundable thus reduces at a defined rate each passing year. This ascertained reduction in the amount refundable and, thus, the ceasing of the assessee’s liability qua deposit is regarded as it’s income by Revenue. How, one wonders, being axiomatic, could that be disputed, signify as it does the right to receive, case law on which is legion
The amount having been already received, income arises to that extent; the assessee acquiring a dominion or unqualified right over the same. That the assessee may not have appropriated it as it’s income in it’s accounts is another matter, it being trite that that the passing or, as the case may be, non-passing of accounting entries is not determinative of the matter. Accounting entries do not create income, but only recognize it. Non-booking of income in accounts would be to no consequence Sutlej Cotton Mills Ltd. v. CIT [1978 (9) TMI 1 - SUPREME COURT]. Reliance on case law, de hors the facts and ratio, is of no moment, rendered in fact of no consequence in view of identity of the ratio or the principle of law relied upon.
The assessee’s challenge, in fact, is not based on merits per se, but on precedence, which we have again found to be in agreement with the Revenue’s case, i.e., cessation of liability signifying accrual of income. For the reasons unknown, this cessation has, as it appears, in assessee’s view, coincided with the termination of agreement, which represents the fundamental flaw in assessee’s case. It is not the amount refundable, which is only on the said termination, but that non-refundable, which is independent of termination, which results in accrual of income.
True, termination also signifies the amount refundable, but then that is only the amount not non-refundable, since determined at the expiry of each year. The exercise is to be carried out at each year-end, determining the deposit amounts no longer refundable. There being no dispute on quantum at any stage, we have no hesitation in according our approval to the impugned addition. We are conscious that the said sum or part thereof may have been booked as income in the subsequent years, i.e., on termination of the relevant agreements. It is, however, again trite that income is liable to be taxed for the right year, and it being taxed in another year is no ground for it being not brought to tax for the right year [CIT v. British Paints India Ltd. [1990 (12) TMI 2 - SUPREME COURT]; CIT vs. Chunilal V. Mehta & Sons P. Ltd. [1971 (8) TMI 4 - SUPREME COURT].
Disallowance u/s 14A - expenditure incurred on earning exempt income - HELD THAT:- Until and unless there is diversion of funds, of which there is no whisper, the term loan, as indeed working capital loan/advance, are for business purposes, would not stand to be allocated, which is only qua common expenses. The assessee has also claimed that it has sufficient funds of it’s own, i.e. vis-a-vis the investment yielding non-taxable income, being at an average of Rs. 305 lakhs and Rs. 19 lakhs respectively, and that therefore no part of the tax-free investment could be regarded as financed from interest bearing borrowings. The matter is completely factual. It is only in the absence of the assessee exhibiting it’s case with reference to facts and figures that the average formula prescribed u/r. 8D comes into play.
The comparison as made is misplaced. The term loan, for example, does not finance the fixed assets to the extent of 100%, so that the balance is by own capital, as indeed the repayment of the term loan, increasing the share self-financed to that extent. Similarly, for the working capital borrowing, which also entails margin money. Money has no bones and, therefore, it is only the fund flow statement (or Balance Sheets as at the end of the year/s) that would clarify the financing pattern of the taxable assets and, by implication, of the non-taxable or the tax-free investment. No such exercise has been done at any stage for us to issue any finding in the matter. No interference, therefore, apart from the exclusion of the term loan aforesaid is warranted in computing disallowance u/s. 14A.
Assessee’s appeal is partly allowed.
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2023 (12) TMI 1224
Eligibility of exemption u/s 11 - main grievance of the revenue is that the relevant year under consideration is AY 2018-19; and the Parliament had substituted the first and second proviso of section 2(15) of the Act by Finance Act, 2015 w.e.f 01.04.2016 which is applicable for the year under consideration - whether the assessee’s case falls under mischief of proviso to section 2(15)? - HELD THAT:- We note that the relevant year under consideration is AY 2018-19 and the Parliament had substituted the first and second proviso of section 2(15) of the Act by Finance Act, 2015 w.e.f 01.04.2016 which is applicable for the year under consideration.
And the Hon’ble Supreme Court had laid the law on the issue regarding claim of exemption by similar assessee’s in the case of Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT] [as well as in the case of Servants of People Society [2023 (2) TMI 535 - SUPREME COURT]] which was decided after considering the proviso to section 2(15) of the Act, which admittedly the Ld. CIT(A) did not consider, before he passed the impugned order.
n the light of the recent decision of the Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) as well as Servants of People Society (supra), we are of the opinion that Ld. CIT(A) erred in merely following the order of the Tribunal in assessee’s own case for AY. 2011-12 to AY. 2013-14 passed on 06.09.2022. And that AO has framed the assessment only discussing the ‘Principle of Mutuality’ and did not consider the application of proviso to section 2(15) of the Act. And since the ratio laid by the Hon’ble Supreme Court (supra) is applicable in the case of assessee for assessment [regarding claim of exemption] for the relevant year under consideration, in the interest of justice and fair play, we are inclined to set aside the impugned order and restore the assessment back to the file of AO for denovo assessment.
AO to decide the issues [claim of exemption] involved in assessment for AY. 2018-19 after giving proper opportunity to assessee and assessee is directed to file relevant/details/written submission and request for video conference as per rules. Appeal of the revenue stands allowed for statistical purpose.
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2023 (12) TMI 1223
Addition of share premium - AO has treated the amount received by the assessee from its holding company as unexplained cash credit u/s 68 on the ground that source of funds has not been explained - CIT(A) deleted addition admitting of additional evidence as provided in sub-rule (2) of Rule 46A of the Income Tax Rule 1962 - HELD THAT:- We find that assessee has explained before the ld. CIT(A) that it has submitted the relevant details as sought by the assessing officer during the course of assessment proceedings and no further any notice was received for calling any other details. Therefore, the assessee has further submitted the following details before the ld. CIT(A) as additional evidences under Rule 46A of the Income Tax Rule. Under the aforesaid circumstances the ld. CIT(A) has rightly admitted the same as additional evidences. We find that the assessing officer has not contrary disproved the genuineness of the various documents as discussed in the finding of the ld. CIT(A).
CIT(A) has elaborated in his finding the relevant supporting document furnished by the assessee which categorically established the identity, genuineness and creditworthiness of the transactions. CIT(A) has also referred the CBDT instruction 2/2015 dated 29.01.2015 that premium on share issue was on account of capital account transaction and does not give rise to income and, hence not liable to transfer pricing adjustment as held in the case of M/s Vodaphone Services Pvt. Ltd. Vs. Union of India & Others [2014 (10) TMI 278 - BOMBAY HIGH COURT]
During the course of appellate proceedings the ld. Counsel has also referred the decision of ITAT in the case of ITO 6(2)(4) Vs. Chiripal Poly Films Ltd. [2019 (4) TMI 1422 - ITAT MUMBAI] wherein held that the assessee complied with the requirements of RBI guidelines by filing FIRC with RBI and also filed Unique Identification number received from RBI. Further it had also filed FCGPR with RBI that the assessee was having sufficient authorised share capital to issue shares to investor then no addition could be made u/s 68 of the Act. In view of the above facts and finding we don’t find any error in the decision of ld. CIT(A). Therefore, these ground of appeal of the revenue stand dismissed.
Disallowance of 20% of advertisement and Sales promotion expenses and 25% of travelling expenses - CIT(A) deleted the addition - HELD THAT:- AO has disallowed the expenditure on estimated basis without considering the aforesaid details furnished by the assessee. The assessee explained that advertisement and sale promotion expenditure were related to the marketing of Carlisle Brand of products which had global presence and this expenditure incurred on year to year basis and such expenditure constitutes only of small proportion of the revenue of the assessee.
Travelling expenses the assessee submitted that it has reimbursed the claim of its employee for incurring expenses for business travel and such expenses comprised incidental expenses towards meals refreshment and travel expenses for which it is not feasible to furnish invoices and vouchers for all such expenses CIT(A) has elaborated in his finding that assessing officer has not brought on record any cogent basis for disallowing such expenditure without considering the percentage of expenditure compared to the revenue generated by the assessee company.
During the course of appellate proceedings before us the ld. Counsel has also referred decision of R.G. Buildwell Engineers Ltd. [2018 (10) TMI 252 - SC ORDER] wherein the decision of Hon’ble High Court was upheld for not making adhoc disallowance of expenses without rejecting the books of account. No infirmity in the decision of ld. CIT(A), therefore all these grounds of appeal of the revenue are dismissed.
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2023 (12) TMI 1200
Validity of AO’s order with no DIN number mentioned - Communications emanating from the revenue - HELD THAT:- A perusal of the AO’s order shows that it is clear in the body of AO’s order, no DIN number is mentioned nor there is any reason of not mentioning the DIN number in order of the AO. In such a situation, the AO order will lose its validity. Subsequent separate communication of DIN is a superfluous exercise.
As regards, reference to the decision of Hon’ble Madras High Court by the ld. DR for the Revenue, we find that Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME COURT] has held that if two views are possible one in favour of the assessee is to be adopted. In this regard, we are referring to the decision of the Hon’ble Delhi High Court in the case of CIT vs Brandix Mauritius Holdings Ltd. [2023 (4) TMI 579 - DELHI HIGH COURT] as held that no communication shall be issued by any income tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etcetera, to the assessee or any other person, on or after 01.10.2019 unless it is allotted a computer-generated DIN. Decided against revenue.
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2023 (12) TMI 1199
Gain on sale of land - nature of land - assessment order passed by treating the land as capital asset as it falls in the City limit - HELD THAT:- We find that Assessing Officer made reference for DVO for valuation of assets on the date of transfer however, report of DVO was not received, the Assessing Officer brought the surplus earn to taxation under the head “short term capital gains”. The Ld.CIT(A) on filing detailed written submission, though called the remand report on various submissions and evidences of the assessee, however, still the action of the Assessing Officer was confirmed. We find that the main contention of assessee right from the beginning is that the impugned land situated in rural area of village Lajpore, which does not fall within the limit Surat Municipal Corporation. Merely, State Government declared the area of village Lalpore for industrial use would not if so facto will not bring the area in a Municipal limit.
Assessee before us has explained that the AO picked up the word ““shehri sankul aavali chhe”, the real meaning of such words is that land falls in urban development area. On appreciation of such contention, we find merit in the submission of Ld. AR for the assessee that mere falling of land within the urban development area or notified area for industrial development of said area would not automatically bring the area in municipal limit unless and until a separate notification is not issued by State Government for including a particular area within municipal limit.
No such material was brought on record by AO and he simply assume the jurisdiction on the basis of certain recital in the sale deed and formed his opinion that the impugned land falls in city limit.
Assessee has filed sufficient evidence in the form of Land Revenue Record that said land was used for agricultural purposes by the certificate of Land Revenue Authority. Further, the assessee has filed certificate of Gram Panchyat that village Lajpore is not under the area of Surat Municipal Corporation. The assessee has also filed notification of State Government about extension of limit of municipality from time to time, copy of which is available at page No.72 to 81 of paper book, wherein the village Lajpore is not included in Surat Municipal Corporation. The assessee has also filed extract / details from the website of Home Department of Government of Gujarat, wherein the village Lajpore is administered under Panchayat Raj Act and administered by Sarpanch, meaning thereby the provision of Village Panchayat is not ceased to exist. The population of village is less than 10,000 as per Population Census,2011, copy of such details are available on page No.82 to 84 of the paper book. The assessee has also filed notification of Revenue Department of State Government, wherein the land of village Lajpore (Lajpore) is declared as reserve for non-agricultural and industrial development. As recorded above, that by mere declaration of area under industrial development, it would not be automatically include in municipal limit. For bringing the area in municipal limit a separate notification of State Government is required. In the notification placed on record about extension of Municipal limit of Surat Municipal Corporation, the area of village Lajpore is not included in municipal limit.
Thus on the basis of the various evidence filed thus concluded the assessee has sold agriculture land which cannot be considered as capital asset and the surplus earned on its sale would not be taxable. So far as reliance by ld CIT(A) on the case law of Sarifa Bibi Mohamed Ibrahim & Other (supra) is concerned, we find that the facts of said case are different with the facts of the case in hand. Thus, the ground of the appeal is allowed.
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2023 (12) TMI 1198
Best judgment assessment u/s 144 - treating cash deposits in the assessee’s bank account as its unexplained money u/s.69A r.w.s.115BBE - HELD THAT:- We find that it is not a case where the CIT(Appeals) had discarded any material available on the record and summarily dismissed the assessee's appeal in limine for want of prosecution. Instead, it is a case where in the absence of any evidence whatsoever, whether documentary or otherwise, which would substantiate that the A.O was unjustified in treating the cash deposits in the assessee’s bank account as its unexplained money u/s.69A of the Act, the CIT(Appeals) had sustained the addition made by the A.O u/s 144 of the Act, dated 11.12.2019.
Now, when the assessee society, as per its volition, had not filed any return of income for the year under consideration A.Y 2017-18, i.e., either u/s 139 or in compliance to notice u/s 148 of the Act; or appeared before the A.O during the assessment proceedings or placed on his record any written submission or filed replies to the queries that were raised vide notice(s) issued u/s.142(1) of the Act; nor despite sufficient opportunities participated in the proceedings before the CIT(Appeals), then, in the absence of any evidence whatsoever, whether documentary or otherwise, which would reveal that there was no justification for treating the cash deposits in the assessee’s bank account as its unexplained money u/s.69A of the Act, we are of a firm conviction that no infirmity emerges from the order of the CIT(Appeals) who had rightly approved the order passed by the A.O u/s 144.
Although Section 253 of the Act, inter alia, vests with an assessee a statutory right to assail before the Income-Tax Appellate Tribunal an order passed by the Commissioner (Appeals), but a careful perusal of the aforesaid statutory provision reveals that the same can be triggered only where the assessee appellant is, inter alia, aggrieved with “ any order of assessment”. Thus, considering the scope of Sec. 253 of the Act, it transpires that the same lays down as a pre-condition a grievance of the assessee appellant arising from the order passed by the Commissioner (Appeals).
Apropos, the claim of the Ld. A.R. that the matter in all fairness be restored to the file of the A.O. for fresh adjudication, the same does not favor us. As observed by us herein above, the grounds based on which the order of the CIT(Appeals) has been assailed before us are devoid and bereft of any merit; therefore, the appeal is liable to be dismissed on the said count itself. Apart from that, we are of a firm conviction that the right vested with an appellant to approach the tribunal by preferring an appeal before it is for a limited purpose, i.e. a grievance that the assessment framed by the AO, or for that matter, order of the CIT(Appeal) were not according to law.
In no case can the Tribunal be taken as a forum for an appellant who, as per his volition, had either adopted an evasive or lackadaisical approach before the lower authorities and not participated in the assessment or appellate proceedings to come up with its case for the first time before the Tribunal and, as a matter of right seek restoring of the impugned order to the file of the lower authorities for fresh adjudication. Assessee appeal dismissed.
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2023 (12) TMI 1190
Income taxable in India - Fees for Technical Services (FTS) and hence exigible to tax u/s 44DA and Section 115Aof the Income Tax Act, 1961 - PE in India - whether Section 44BB of the Act would be applicable to the respondent/assessee, who is a second line contractor? - HELD THAT:- Delay condoned. We are not inclined to interfere in the matter. The Special Leave Petition stands dismissed.
However, liberty is reserved to the petitioner to raise the issue which arises in this Special Leave Petition, in the event any adverse final order is passed by the High Court against the petitioner herein.
Pending application(s) shall stand disposed of.
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2023 (12) TMI 1189
Compounding of case u/s 279 (2) - alleged offences under Sections 276C and 277 of the Act - Ld' Judge after finding that the Contempt Petition had no merits, proceeded to direct the authority to re-examine the application filed by the respondent herein, in the light of the fresh circular dated 14.06.2019, which provides for a more liberal policy - HELD THAT:- The order of the learned Single Judge insofar as it remits the matter back to the 4th appellant to compound the case by fixing the compound fee, does not warrant interference. We say so, inasmuch as we find that the learned Judge [2019 (9) TMI 59 - MADRAS HIGH COURT] even while remanding the matter, had made it clear that the judgment in Prem Dass case [1999 (2) TMI 6 - SUPREME COURT] would apply to the respondent, and further, the respondent herein is entitled to the benefit of Section 279 (1A) of the Act. The revenue having failed to challenge the above order is bound by it.
Ld' Judge had found that the Respondent herein was entitled to compound in terms of Section 279(1A) of the Act, which provides that the assessee would be entitled to compound if the penalty stood reduced or waived under Section 273A of the Act. Importantly, the Supreme Court in Prem Dass case [1999 (2) TMI 6 - SUPREME COURT] while construing Section 279(2) of the, Act had rejected the argument that the reduction of penalty by an appellate authority not being an order under Section 273A of the Act, the assessee/applicant would not be entitled to the benefit of Section 279(1A) of the Act and it was held that it may not be appropriate to adopt a literal construction of provisions of Section 279(1A) of the Act.
Respondent would be entitled to the benefit of Section 279(1A) of the Act and the judgment of Supreme Court in Prem Dass case in view of reduction of penalty from 300% to 100% by the appellate authority, the failure of the appellant to challenge, in our view, would prove fatal, to any attempt by the revenue to contend to the contrary.
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2023 (12) TMI 1188
TP Adjustment - International transaction or not? - AMP expenses - HELD THAT:- As we had taken recourse to the decision rendered in Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT ([2015 (3) TMI 580 - DELHI HIGH COURT] and Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT]
Thus, having regard to the aforesaid position, the appeal is closed.
We are told that the appellant/revenue has preferred an appeal against the decision rendered in Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT. [2015 (3) TMI 580 - DELHI HIGH COURT]
Thus as made clear that if the appellant/revenue were to succeed in the pending Special Leave Petition, it would have liberty to approach the court for revival of the instant appeal. Registry will dispatch the copy of the order passed today to the respondent/assessee via all modes, including email.
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2023 (12) TMI 1187
CIT(A) admitting additional evidence and deleted addition - Best judgment assessment - addition were made u/s 69B based on unexplained investment in time deposits - CIT(A) carried out an inquiry in the matter by exercising his powers under Section 250(4) of the Act and evidence was sought with regard to remittances made to the NRE Account maintained with the Canara Bank - Tribunal dismissed the appeal preferred by the appellant/revenue and CIT(A) had exercised his powers u/s 250(4) of the Act which was co-equal to that of the AO. It also took note of the fact that notice was issued to the concerned branch of Canara Bank under Section 133(6) of the Act and it was only after information was received from Canara Bank and material evidence furnished by assessee, that the addition was deleted
HELD THAT:- According to us, the Tribunal has reached the correct conclusion. Appellant cannot but accept that the CIT(A) has co-equal powers as that of the AO. The enquiry carried out by the CIT(A) revealed a grave factual error committed by the AO, in noting the figure with regard to the time deposits.
In our opinion, since the CIT(A) has returned a finding of fact with regard to the source of funds that were found deposited in the period in issue, i.e., Rs. 9.50 crores, no interference is called for as these findings have been affirmed by the Tribunal as well. Thus, according to us, no substantial question of law arises for our consideration. No substantial question of law arises for our consideration.
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2023 (12) TMI 1186
Exemption u/s 11 - Application for condonation of delay in filing Form 10B u/s 119(2)(b) rejected - non-filing of the audit report in Form 10B would not be so fatal requiring initiation of proceedings so far as denial of exemption u/s 11 - contention of petitioner all along was that filing of the audit report in Form 10B is only a directory and not mandatory in nature and non-filing of the same cannot be fatal to the exemption which the petitioner is otherwise entitled under Section 11 - HELD THAT:- A plain reading of Section 119(2)(b) clearly indicate that the intention of the framers of the law was to provide a liberal approach where there is a delay occurred. What is necessary to be considered at this juncture also is the fact that the petitioner is a registered establishment u/s 12A - Section 12A of the Act provides tax exemption to charitable trust that is registered with the Income Tax Department. So far as registration is concerned, there no quarrel on the same. The dispute in the present case is only in respect of the assessment order for the Assessment Year 2017-18.
The admitted factual matrix from the facts of the case is that the return of income was filed by the petitioner for the Assessment Year 2017-18 on 02.11.2017. Before filing of the said return itself, the accounts of the petitioner were got audited and the audit report was prepared well in time on 20.09.2017. The due date for filing of the return was on or before 31.10.2017 and the petitioner herein did file his return on 31.10.2017. However, on account of certain defects detected, the same was returned and revised return was filed on 02.11.2017. Thus, the return stands submitted within the time. However, there was a requirement for uploading of the audit report. The audit report meanwhile was uploaded though at a belated stage on 21.02.2019, nonetheless the uploading of the audit report was much before (before 2.5 years) the assessment order dated 24.09.2021 was passed. It is in this factual backdrop that the application for condonation of delay filed by the petitioner ought to have been decided by the authority concerned.
Now if we look into the statutory provisions, what is reflected is that the provisions under Section 119(2)(b) has been enacted with a specific purpose empowering the authorities concerned to condone the delay on the part of the assessee in furnishing or in submitting of the returns or an appropriate application within a reasonable period of time. The said provision of law does not provide for any specific period of time within which the application for condonation of delay needs to be filed. The said provision has also been enacted to ensure that genuine hardship which an assessee may face can be avoided by condoning the delay if any that has occurred and an appropriate application seeking for condonation of delay is filed.
We are inclined to allow the writ petition setting aside the impugned order - consequential order passed subsequent to the rejection of the application under Section 119(2)(b) of the Act would also get automatically quashed and the application of the petitioner for condonation of delay stands allowed. Wherefore the respondent No. 3 would be required to pass an appropriate consequential order in accordance with law.
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2023 (12) TMI 1185
Validity of reopening of assessment u/s 147 - Shorter period to reply notice - it is the contention of the petitioner that the notice issued under Section 148 A (b) dated 23.03.2022 by post was received by the petitioner only on 28.03.2022 i.e. one day, prior to the time fixed for filing reply/objection and therefore, according to the petitioner, in terms of the said provision, notice granting 7 days' time has not been provided - HELD THAT:- Unable to accept the contention of respondent, for, the terms '‘Notice has been Issued'' attains finality only when the notice has been issued/served on the assessee.
In the present case, though the show cause notice calling forth petitioner's reply within 29.03.2022 was dated 23.03.2022, unfortunately, the said notice was received by the petitioner/assessee only on 28.03.2022. Therefore, from 28.03.2022, the period of 7 days has to be reckoned, whereas, in the present case, the respondent has not considered the said aspect and proceeded to pass orders by stating that the petitioner failed to respond to the notice dated 23.03.2022 and hence, the proposals contained in the show cause notice dated 23.03.2023 is confirmed.
Therefore, as rightly pointed out by petitioner, the impugned order suffers from violation of principles of natural justice, since it blatantly violates the provisions of Section 148 (b), AO has to give time not less than seven days but not more than 30 days to the assessee for furnishing his explanation and further, the respondent, despite knowing fully well that the notice served on the petitioner by post was received by him only 28.03.2022, ought to have granted further time, in terms of Section 148 (b) of the Act of not exceeding 30 days, and waited for the petitioner's reply and before passing the impugned order, heard the petitioner and in the absence of same having been failed to be done by the respondent, not only the impugned Notice dated 23.03.2022 has to be quashed and entire proceedings, initiated in furtherance of the same are also to be quashed.
Therefore, the contention of respondent that notice served on the petitioner through e-portal on 23.03.2022, and the same has to be deemed to be sufficient service and the period of 7 days has to be reckoned from such date of issuance has to be brushed aside, since, in terms of Section 282 (1) notice can be served only by adopting the mode of service by post or such other courier service and notice sent by adopting the mode of service by e-mail or e-portal and the same can be considered and adopted in addition to the service effected by physical mode.
This Court is of the view that the show cause notice issued u/s 148 A (b) is not sustainable. So far as the sustainability of the impugned order on the limitation aspect is concerned, since the petitioner/assessee has taken steps to file returns by showing the source of income and the manner of utilization of sale proceeds of agricultural land, as the said issue pertains to the AY 2015-16, obviously, the period of limitation for the said assessment year has come to an end even for service of notice u/s 148A of the Act on 31st March, 2021, this Court is of the view that the impugned proceedings are not sustainable on limitation aspect as well, inasmuch, as the Department failed to take appropriate action at the appropriate time within the limitation period of six years, which is not directory in nature but mandatory, and the respondent-Department having failed to do so, they cannot, all of sudden, on one fine day, attack the petitioner/assessee.
This Court would like observe herein that the Income Tax Department cannot always have the sword of Damocle's dangling over an assessee all the time.
Accordingly, this Writ Petition is allowed, the impugned order dated 23.03.2022 is quashed
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2023 (12) TMI 1184
Reopening of assessment u/s 147 - bogus purchases - case reopened after four years - competent jurisdictional Assessing Officer to issue notice - AO received information from DDIT(Inv.) Mumbai as well as DDIT(Inv), Unit-VI, Jhandewalan, New Delhi and thus made his belief that income of assessee as “escaped assessment” as recorded above.
HELD THAT:- We find merit in the submission of assessee that all the material relating to assessment was available with the Assessing Officer in the original assessment completed u/s 143(3) - AO has nowhere recorded that he obtained any sanction/ approval from Joint-Commissioner of Income-tax as mandated u/s 151(2).
We further find merit in the submission of assessee that jurisdictional AO in case of assessee lies with Assessing Officer at Surat. However, notice under section 148 was issued by AO i.e., ITO Ward-33(2), New Delhi. Thus, the reopening is not only suffering by “satisfaction” from proper approval by competent person as well as the notice under section 148 was not issued by a competent jurisdictional Assessing Officer. Therefore, the reopening as well as issuance of notice under section 148 is bad-in-law. Since the re-opening u/s 147 and issuance of notice under section 148 is bad-in-law, subsequent action initiated thereto have become ab initio.
Considering the fact that we have held the validity of re-opening and issuance of notice under section 148 had invalid, therefore, subsequent action has become ab initio and the ground of assessee succeeds on primary contention raised - Appeal of assessee is allowed.
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2023 (12) TMI 1183
Exemption u/s 11 and 12 - exemption denied as assessee is not engaged in charitable activities - CIT(A) held that the Assessee is a facilitator for arranging funds for charitable organisations, and that the assessee receives fees from the donors as well as the donees - assessee submitted that the activity of the assessee is that it acts as a bridge between the donor and the donee i.e. the activity of the assessee is that on receipt of donation, the assessee identifies suitable recipients, who are not the direct beneficiaries of such donation but are usually other trusts who are engaged in conducting charitable activities. The role of the assessee is to identify such genuine organizations / trusts which are engaged in carrying out charitable activities in the form of giving relief to the poor etc.
HELD THAT:- The assessee had further given the donation to other trusts for the purpose of carrying out charitable work itself would not disentitle the assessee from denial of exemption. Before us, we observe that it is not the case of the Department that the trusts / organisations to whom the assessee had given the donations for carrying out charitable activities had not in fact carried out any charitable activities in the first instance. Secondly, it would be useful to reproduce the relevant extracts of the decision rendered by Hon’ble Supreme Court in the case of the Ahmedabad Urban Development Authority[2022 (10) TMI 948 - SUPREME COURT] as held that while carrying out charitable activities, the assessee trust may also collect nominal cost / consideration with the objective to effectuate the carrying out of the charitable activities. However, this is subject to the condition that such charge is only confined to the extent the same is required for the purpose of carrying out charitable activities and should not take the colour of professional fees / business income.
Thus in interest of justice, the matter is being restored to the file of the AO to analyse the impact of the observations made by the Hon’ble Supreme Court in the decision of AUDA [supra] more specifically on the observations made by the Hon’ble Supreme Court with regards to incidental earning of income, in the light of the assessee’s set of facts.
AO after considering of the facts of the assessee’s case may then decide whether, looking into the assessee’s facts, the assessee is engaged primarily in rendering of services for consideration (retained earnings) or whether looking into the totality of facts of the assessee’s case, it could be inferred that such retained earnings are only kept by the assessee to the extent of facilitating the above activities.
Assessing Officer may also analyse the impact of decisions which have held that the assessee acts as a bridge between the donor and the recipient, even then, looking into the particular facts of assessee’s case, it may be inferred that the assessee is carrying out charitable activities within the meaning of Section 2(15) - Accordingly, looking into the totality of facts of the assessee’s case, the Assessing Officer may also analyse whether the aforesaid decisions have a bearing on the assessee’s set of facts. In the result, the primary matter involved in all the Assessment Years under consideration before us is restored to the file of the Assessing Officer for carrying out the analysis as directed above. Issue raised by the assessee is allowed for statistical purposes.
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2023 (12) TMI 1182
TP adjustment - royalty paid by the assessee to its AE - selection of MAM - Whether CUP is the most appropriate method for benchmarking the royalty payment made by the assessee to its AE; Or “Other Method” can be treated as MAM on the facts of the present case? - HELD THAT:- The method of the assessee can be pigeonholed in the “other method” provided in Rule 10AB r.w.s. 92C (1) and in our opinion this is the MAM in the peculiar facts of the Assessee. Accordingly, we hold that “other method” would be a good substitute for CUP as there is lack of reliable comparables and looking to the fact that the royalty payments have been made for unique intangibles, therefore, we direct the ld. TPO to adopt “other method” as the Most Appropriate Method. However, the working given by the assessee before us as incorporated above needs to be examined afresh by identifying the costs and profits attributable to manufacture and sales to the non-AE and to find out appropriate allocation of the costs and what could be the profits on account of royalty which can be stated to be attributable on account of royalty. The assessee is directed to substitute the working on the basis of “other method”.
The method of the assessee can be pigeonholed in the “other method” provided in Rule 10AB r.w.s. 92C (1) and in our opinion this is the MAM in the peculiar facts of the Assessee. Accordingly, we hold that “other method” would be a good substitute for CUP as there is lack of reliable comparables and looking to the fact that the royalty payments have been made for unique intangibles, therefore, we direct the ld. TPO to adopt “other method” as the Most Appropriate Method.
However, the working given by the assessee before us as incorporated above needs to be examined afresh by identifying the costs and profits attributable to manufacture and sales to the non-AE and to find out appropriate allocation of the costs and what could be the profits on account of royalty which can be stated to be attributable on account of royalty. The assessee is directed to substitute the working on the basis of “other method”. With this direction, all the grounds raised by the assessee are allowed for statistical purposes.
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2023 (12) TMI 1165
Interest on the claim of the refund - petitioners could not file the return of income claiming refund in time and such return was filed after condoning delay by the respondent under section 119(2)(b) - interest on the compensation amount is paid for acquisition of the agricultural land of the petitioners - TDS deducted under wrong section as correct section for deduction of tax at source is section 194A and not section 194C - HELD THAT:- It is not in dispute that the amount of refund is already paid to the petitioners and therefore, as a natural corollary, the petitioners are entitled to have the right to get interest on such amount of refund claim.
Even as per sub-section(2) of section 244A of the Act, 1961, as it existed during the relevant AY 2013-2014, when the proceedings resulting in the refund are not delayed for reasons attributable to the assessee whether wholly or in part, the period of the delay so attributable only can be excluded from the period for which interest is payable under subsections (1) or (1A)or (1B) to section 244A of the Act, 1961.
In the facts of the case, the words "or the deductor, as the case may be," which is inserted with effect from 01.04.2017 would not be applicable as the petitioners have been permitted to file the refund claim for the AY 2013-2014 after condonation of delay and such delay in claiming the refund cannot be said to be attributable to the petitioners as the petitioners were not made aware about the deduction of tax at source by the deductor in absence of issuance of Form No. 16-A which was mandatorily required as per Rule 31(3) of the Rules.
In view of the foregoing reasons, the petitions succeed and are accordingly allowed. The respondent is directed to grant interest on the refund claim from the date of deposit of the TDS till the date of refund as per the provisions of section 244A of the Act, 1961. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order. Rule is made absolute to the aforesaid extent.
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