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Income Tax - Case Laws
Showing 1 to 20 of 163527 Records
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2024 (4) TMI 942
TP Adjustment - selection of MAM [Most Appropriate Method] - Assessee had adopted Resale Price Method (“RPM”) for import of coal and Transactional Net Margin Method (“TNMM”) for import of pulses from its Associate Enterprise (“AE”) for determining Arms Length Price (“ALP”) - Assessee had also exported rice to its AE and followed TNMM to ascertain ALP - ITAT has held that choice of method is not an unfettered choice of the taxpayer, but has to be exercised on touchstone of principles governing Most Appropriate Method (“MAM”) as prescribed u/s 92C(1) of the Act and the TPO has overriding power of course correction as per Section 92C(3) of the Act.
HELD THAT:- Whenever both methods, i.e., CUP as well as TNMM can be applied, the traditional transaction methods are to be preferred over traditional profit methods. He thereafter proceeded to apply the CUP method and conducted a search on the Bloomberg database to find the sale price of rice. Without ascertaining or explaining in detail whether the rates were for products exported from India or from any other country or specifying whether the rates relate to controlled or uncontrolled transactions or whether it relates to retail or wholesale market, the TPO simply proceeded on the basis of Bloomberg database. In fact Assessee had even provided the rates accepted by the Indian Custom’s Department for export of rice and requested that the same be considered for CUP analysis as the same would be more reliable. Assessee also submitted that it realized more price on exports than the rates quoted by the Custom Authorities. The TPO without explaining as to why he wanted CUP method to be followed and not the TNMM followed by us as Assessee and without clarifying whether the rates applied were for products exported from India or any other country or whether it related to controlled or uncontrolled transactions or retail or wholesale or as to why the Custom’s rates are not acceptable, proceeded to fix the ALP purely relying on the Bloomberg database that was available with them.
DRP also did not accept Assessee’s objections in its entirety. The ITAT accepted that these were the mistakes in the order of TPO, inasmuch as the TPO without realizing the factual aspects, simply rejected the method adopted by Assessee. It is also recorded that Assessee’s contentions that Bloomberg database was not reliable or that Assessee’s export price was more than the Indian Custom’s quoted rate and accordingly, exports are at ALP even under CUP method has not been controverted by the Departmental Representative. No reason to find fault with the conclusion arrived at by the ITAT. No substantial questions of law, therefore, arise. Appeal dismissed.
ITAT justification in stating that CUP is most appropriate method for bench-marking the transaction of import of minerals - HELD THAT:- ITAT accepted the contentions of Assessee that it had compared its import rates of coal imported from a country against the indices published by the agencies of the same country. ITAT also accepted that the rates are generally declared for a particular quality available in that country and the same quality should have been imported by Assessee and hence, it cannot be presumed that the price quoted does not take into account ash & moisture content. The ITAT also rejected the reasons given by the TPO that Assessee has made arbitrary adjustment to the prices quoted by the indices with the intention to bring the same to the tolerance level of +/- 5%. It accepted the scientific calculation given by Assessee to arrive at the prices. The ITAT has arrived at its conclusion on factual basis with valid reasons. No substantial questions of law arise.
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2024 (4) TMI 941
Deemed income u/s 56(2)(x) - Defective Show cause notice - Addition of Unexplained investment u/s 69 - charged to tax u/s 115BBE - stamp duty value of the said flat unexplained - case was selected for scrutiny under CASS to examine “Capital Gains Deduction Claimed - SCN issued why the stamp duty value of the said flat should not be treated as deemed income of petitioner u/s 56(2)(x) and deduction u/s 54F of the Act be denied - order passed in which Respondent No. 3 proposed to treat the entire stamp duty value of the said flat as unexplained investment u/s 69 and charged to tax u/s 115BBE of the Act.
As submitted Development agreement was executed by and between the owner of the building owners of the building agreed to grant development rights in respect of the building and agreed to permit the developer to develop the property on terms and conditions mentioned therein, wherein the developer was required to provide permanent alternate accommodation to the tenants/occupants and as mandated by Maharashtra Housing and Area Development Authority (MHADA), the developer entered into permanent alternate accommodation agreement with the tenants/occupants.
HELD THAT:- Admittedly, no notice has been issued to assessee/petitioner calling upon assessee to show cause whether the entire stamp duty value be treated as unexplained investment under Section 69 of the Act. In the affidavit in reply, the answer given to this allegation of petitioner that no notice was given to show cause under Section 69 of the Act is that the assessment was getting barred by limitation and there was no time for further show cause notice and hence the Faceless Assessing Officer (FAO) has passed the assessment order after considering all the submissions and possible aspect of the case and agreement value of the new purchased property is treated as unexplained investment under Section 69 of the Act and added to the total income of assessee. In the assessment order though there is reference to Section 56(2) (x) of the Act and the reply/objections filed by petitioner in response to the show cause notice, in the operative part there is no reference to Section 56(2)(x) of the Act.
The courts have time and again held that issuance of show cause notice is not an empty formality. Its purpose is to give reasonable opportunity to the affected persons to effectively deal with the allegations in the show cause notice. In our view, even the show cause notice dated 23rd August 2022 is defective in as much as even though it had reference to Section 56(2)(x) of the Act, it did not mention whether the AO proposed to treat the stamp duty value as deemed income of assessee under clause (a) or clause (b) of Section 56(2)(x) of the Act.
This is because both are separate provisions and under either of these two clauses the stamp duty value could be treated as deemed income. By not specifying whether Section 56(2)(x)(a) or Section 56(2)(x)(b) of the Act was applicable, the A.O. first of all has not given reasonable opportunity of showing cause to the assessee. Assessee would be totally unaware of the grounds which had prompted the A.O. to arrive at a prima facie conclusion and issue show cause notice. The power that the A.O. had was required to be executed properly. Moreover in the assessment order that is impugned in the petition, the A.O. has chosen to give Section 56(2)(x), a go by and treat the stamp duty value of the flat as from unexplained source under Section 69 of the Act. There is no reference to Section 56(2)(x) of the Act in the operative part of the order.
Thus the impugned order cannot be sustained. The allegations in the affidavit in reply that assessee has claimed tenancy rights as colourable device in order to get an exemption under the provisions of the Act and evade the tax liability also cannot be accepted because if the A.O. had evidence to that effect the same should have been stated in the show cause notice.
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2024 (4) TMI 940
Obligation to pass a draft assessment order u/s 144C (1) - whether on remand the A.O. was obliged to pass a draft assessment order u/s 144C (1)? - HELD THAT:- The Division Bench of this court in Dimension Data Asia Pacific PTE Ltd. [2018 (7) TMI 1256 - BOMBAY HIGH COURT] has considered this issue. The court held that even in partial remand proceedings from the Tribunal, the A.O. is obliged to pass a draft assessment order u/s 144C (1) of the Act.
In our view this is a clear case of jurisdictional error. The assessment order passed by the A.O., i.e., impugned in this petition is vitiated on account of lack of jurisdiction and requires to be quashed and set aside as void ab initio.
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2024 (4) TMI 939
Rejection of application u/s 119(2)(b) for condoning the delay in filing the Form 10B - delay was about 1257 days - assessment of trust - Petitioner/trust explained the cause for delay on the Chartered Accountant/Auditor - According to Petitioner, when it sent Form No. 10B to the Department for submission after filing the return, the Departmental staff refused to acknowledge the manual submission and Petitioner was told to file the same online - HELD THAT:- Admittedly, Petitioner is a charitable trust. Admittedly, Petitioner has been filing its returns and Form 10B for AY 2015-16, for AY 2017-18 to AY 2021-22 within the due dates. On this ground alone, in our view, delay condonation application should have been allowed because the failure to file returns for AY 2016-17 could be only due to human error. Even in the impugned order, there is no allegation of mala fide.
As held in Sarvodaya Charitable Trust [2021 (1) TMI 214 - GUJARAT HIGH COURT] the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, Respondent No. 1 might be justified in denying the exemption by rejecting such condonation application, but an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
Moreover, in our opinion, Petitioner does not appear to have been lethargic or lacking in bona fides in making the claim beyond the period of limitation which should have a relevance to the desirability and expedience for exercising such power. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so to avoid genuine hardship.
Thus delay was not intentional or deliberate. Petitioner cannot be prejudiced on account of an ignorance or error committed by professional engaged by Petitioner. In our view, Respondent No. 1 ought to have exercised the powers conferred. Thus we quash and set aside the impugned order passed under Section 119(2)(b) of the Act dated 25/10/2023 and condone the delay in filing form 10B.
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2024 (4) TMI 938
Validity of Reopening of assessment u/s 147 - reason to believe - Reply of the assessee through reproduced but the contents thereof are not even referred or analyzed prima facie - whether it is a fit case to issue notice u/s 148 of the Act or not - HELD THAT:- AO has reproduced the reply filed by the assessee and the contents thereof are not even referred or analyzed prima facie to come to the conclusion that it is a fit case to reopen the assessment.
Petitioner along with the reply has reproduced the following documentary evidence of purchase, delivery and payment to show the genuineness of the transactions entered into with M/s. S. K. Enterprises.
This Court, by order [2024 (4) TMI 891 - GUJARAT HIGH COURT] has directed the Respondent to place on record the original papers containing the documents which are supplied by the petitioner in reply to the notice u/s 148A(d) of the Act. Respondent as stated that the documents have been placed on record by the petitioner, as referred hereinabove.
Thus we are of the opinion that the impugned order and the notice are required to be quashed and set aside remanding the matter back to the Assessing Officer to pass a fresh order under Section 148A(d) of the Act within a period of four weeks from the date of receipt of the copy.
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2024 (4) TMI 937
Reassessment proceedings against company insolvent/dissolved - whether the demand raised pursuant to the assessment order passed after the resolution plan approved by the NCLT on 1st July, 2022 would extinguish or not? - HELD THAT:- The Hon’ble Apex Court in case of Ghanshyam Mishra & Sons (P) Ltd [2021 (4) TMI 613 - SUPREME COURT] has held that once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of section 31 of IBC, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors [including the Central Government, any State Government or any local authority, guarantors and other stake holders. On the date of approval of the resolution plan by the adjudicating authority all such claims which are not part of the resolution plan shall stand extinguished and no person is entitled to initiate or continue any proceeding in respect to a claim which is not part of the resolution plan.
In view of the above conclusion arrived at by the Apex Court after considering the entire Scheme of the IBC, the demand which was raised pursuant to the order by issuing the demand notice cannot be said to be in respect to a claim which is part of the resolution plan.
The proceedings which were continued under section 147 r.w.s. 144 by the respondent, was also not a proceeding in respect to a claim which is not part of the resolution plan. In such circumstances, the notices issued by the CIT (A) and reference for the hearing of the appeals filed by the petitioner challenging the assessment order would extinguish on 01.07.2022 as no demand would remain in existence in absence of any claim raised before the RP by the respondent authority - so far as the framing of the reassessment pertaining to the Assessment Year 2018-19 in absence of any demand pending as on 01.07.2022 and as such demand raised subsequently would not be a part of the claim to be made before the RP. As no demand to be claimed was in existence when the NLCT passed the order on 01.07.2022 and therefore, the demand which has arisen pursuant to the assessment order dated 13.03.2022 cannot be said to have been extinguished. Therefore, so far as notices issued by the CIT (Appeals) are accordingly quashed and set aside.
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2024 (4) TMI 936
Delay in filling of an appeal before ITAT - delay of eight years, eighty-eight days - HELD THAT:- Assessee does not have sufficient reason for such a huge delay of eight years eighty-eight days. In this case, assessee failed to file Return of Income for A.Y. 2015-16, therefore, Department issued notice u/s 148 on 30.03.2022. One of the issues in the re-assessment proceedings was non-availability of registration under section 12AA of the Act. Assessee in the affidavit had admitted that at that point of time, assessee realized about rejection of 12AA application in 2014.
Even after that assessee had filed appeal before this Tribunal on 09.03.2023 i.e. after a gap of one year. Thus, even after realizing the fact, assessee delayed filing of appeal by one year. The procedure for registration u/s 12AA was amended by Finance Act, 2020. Accordingly, assessee had applied for provisional registration and it was granted to assessee on 24.09.2021 for A.Y. 2022-23 to A.Y. 2024-25. Thus, even at the time of applying for provisional registration under the amended scheme, assessee failed to realize that assessee’s application for registration under 12AA was rejected on 11.11.2014. Chronology of these events explain that assessee was callous and not serious towards the registration.
As assessee’s application for condonation of delay is rejected. Accordingly, appeal is dismissed on the ground of delay.
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2024 (4) TMI 935
Exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) - appellant is a cooperative society engaged in the business of providing credit facilities - HELD THAT:- It is an admitted fact that the appellant is a cooperative society engaged in the business of providing credit facilities. It does not enjoy any license to carry on the business of banking from Reserve Bank of India. Therefore, as held in the case of PCIT vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023 (5) TMI 372 - SC ORDER] that the assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act. Reliance in this regard can also be placed on the decision of Quepem Urban Co-operative Credit Society Ltd [2021 (5) TMI 406 - BOMBAY HIGH COURT].
Allowability of exemption under the provisions of section 80P(2)(a)(i) in respect of interest income earned by a cooperative society from the scheduled banks - The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit [2018 (12) TMI 1926 - ITAT PUNE] taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT]
The interest income earned on fixed deposits with cooperative bank/scheduled bank partakes character of the business income, which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Therefore, direct the Assessing Officer to allow the exemption u/s. 80P(2)(a)(i) of the Act. Thus, the grounds of appeal filed by the assessee stand allowed.
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2024 (4) TMI 934
Penalty u/s 271(1)(c) - CIT(A) deleted addition made u/s 69C based on the Remand Report filed by the AO - as argued quantum proceedings were subjudiced and it was requested by the appellant to keep the penalty proceedings in abeyance till the disposal of quantum appeal - HELD THAT:- The present appeal is against penalty order under section 271(1)(c) of the Act levied on the basis addition made u/s 69C of the Act for A.Y. 2010-11 and A.Y. 2012-13. Since the ld.CIT(A) has deleted the addition under section 69C of the Act, the penalty does not have any limbs to stand. In these facts and circumstances of the case, we direct the AO to delete the penalty levied under section 271(1)(c) of the Act. Accordingly, grounds of appeal filed by the assessee are allowed.
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2024 (4) TMI 933
Assessment of trust - Rate of Tax - Maximum Marginal Rate (MMR) - Charging the assessee as per the provisions of section 164(1) or 164(2) - rate as applicable to Individual and AOP - issue raised by the assessee that the trust has not issued any exemption u/s 12A of the Act. Though the assessee’s income can be charged to tax at maximum marginal rate or as per the normal provisions of the Income Tax Act
Assessee argued that beneficiary are the general public so there is no share of beneficiaries whether known or unknown as the assessee is trust so charging the assessee as per the provisions of section 164(1) as held by the CIT(A) is incorrect and the relevant facts has not been appreciated - HELD THAT:- On going through the trust deed it is apparent that there is no share of beneficiary whether no one or unknown as the assessee trust is so charging the assessee as per provisions of Section 164(1) is incorrect and the relevant provisions of section 164(2) of the Act which is specific charging of section for a trust. Thus, when the specific provisions of charging tax, the general provisions cannot be made applicable in this case. The ld. AR of the assessee also submitted that similar issue has been dealt with by the Revenue for assessment years 2015-16, 2016-17 & 2018-19 as per provisions of Section 164(2) of the Act.
As decided in SHRI DIGAMBAR JAIN MANDIR TRUST CHARANWAS VERSUS AO, MAKRANA, ITO, WARD-1, MAKRANA [2024 (4) TMI 661 - ITAT JODHPUR] assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individual and AOP - decision of the ld. CIT(A) to charge the assessee u/s. 164(1) is not correct it should be charged based on the specific provision of the Act u/s. 164(2) of the Act and the tax rate as applicable to that 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee.
Thus we direct the ld. Assessing Officer to charge the assessee as per provisions of Section 164(2). Appeal of the assessee is allowed.
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2024 (4) TMI 932
Addition u/s 69A - amount received in cash from persons for online fund transfer through novapay online portal and deposited in Bank - as per AO assessee has not produced / furnished the details showing from whom cash was collected and for which purpose - HELD THAT:- As during the two months of demonetization only the assessee carried both types of work viz. deposit of utility bills and Hotel and Ticket bookings. The assessee had executed an Agreement with Novapay which is a portal for money transfer mainly.
The assessee was working for this portal earlier also, but the quantum of commission was very low as is evident from the entries appearing in form 26AS. It is apparent from TDS made by above named Novapay that during the months of December 2016 to March 2017 the quantum of commission has recorded growth as compared to commissions in the months of April, 16 to November, 2016. The bank statements of the assessee evidences that the amount deposited by the assessee in the bank accounts during these two months of demonetization was transferred to other accounts as is apparent from the transactions appearing therein.
Thus, when the assessee has is not directly benefit for cash deposit by making any personal investment but has transferred the money for services he rendered to the party whose service are availed and the commission arising out of that activity was already taxed in the hands of the assessee. The bench also noted that the activities of the assessee are genuine based on the fact that during the period of two months of demonetization the assessee had deposited only Rs. 27,500 as SBN out of total deposit of more than 56 Lacs and there is no allegation against the assessee that the assessee had deposited amount in SBN. Based on the discussion so recorded and evidences in the form of form no. 26AS bank statement and TDS deducted on commission the cash deposited by the assessee cannot be taxed u/s. 69A of the Act. Appeal of the assessee is allowed.
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2024 (4) TMI 931
Disallowance of bonus paid to directors u/s 36(1)(ii) - assessee paid a bonus in addition to the remuneration to two of its directors - it is the plea of the assessee that both the directors are promoter directors of the company having a diploma in electronic engineering with 35 years of experience in the IT Industry and that both the directors are actively involved in the day-to-day affairs of the company and a bonus of Rs. 96 lakh each was paid for the services rendered by them and also because during the year under consideration, total turnover and sales turnover increased by 44% and 55%, respectively, as compared to the preceding year
HELD THAT:- As directors had declared a salary of Rs. 60 lakh and a bonus of Rs. 35 lakh received by them. Thus, it is not a case wherein the bonus was received by the directors only in one year. Accordingly, we are of the considered view that the decision of the Special Bench of the Tribunal in Dalal Broacha Stock Broking (P.) Ltd.[2011 (6) TMI 251 - ITAT, MUMBAI] has been rendered in its own set of facts, which are completely different from the facts of the present case.
Further from the financial statement of the assessee, we find that the turnover from the sale of products increased from Rs. 39.77 crore in the assessment year 2014-15 to Rs. 61.61 crore in the assessment year 2015-16. The aforesaid facts also distinguish the present case from the facts in Dalal Broacha Stock Broking (P.) Ltd. (supra), as in that case, it was noted by the Special Bench that the steady rise in performance was due to improved market conditions as the taxpayer was a stockbroker who was getting commission on sale/purchase of shares by the investor/traders.
However, in the line of business of the assessee, wherein it is engaged in dealing in computers, networking solutions, and providing maintenance and facility management services, it cannot be denied that without the dedicated efforts turnover from sales and services cannot increase. Thus, aforesaid factors also support the case of the assessee that the bonus was a reward for the work of the promoter directors, who were actively involved in the day-to-day affairs of the company, in addition to the salary paid to them. Accordingly, in view of the aforesaid facts and circumstances, we are of the considered view that the assessee is entitled to claim deduction u/s 36(1)(ii) of the Act in respect of payment of bonus to its directors. Therefore, the impugned disallowance u/s 36(1)(ii) of the Act is deleted. As a result, ground no.1 raised in assessee’s appeal is allowed.
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2024 (4) TMI 930
Revision u/s 263 - Order of AO is erroneous in so far as prejudicial to the interest of revenue - Addition u/s 68 as receipt of cash from depositors unexplained - lack of enquiry on the part of AO - HELD THAT:- It is settled position of law that while framing an assessment, the AO has dual role, i.e., he is an investigator and also an adjudicator of the matter. If the AO failed to carry out the investigation, vis-a-vis, the facts of the case, then such is a case of lack of enquiry and the order of the AO can be termed as erroneous.
While acting as an adjudicator, if the AO took some view which is contrary to law or the AO failed to consider the provisions of law of income tax, then also such an order is erroneous. If the assessment proceedings are erroneously conducted and the revenue is suffering loss then such an order falls under the ambit of the provisions of section 263. Similarly, if the AO failed to consider the provisions of Income-tax or formed a view which is contrary to law, then such an order also falls under the ambit of section 263.
When we analyse the facts of the present case in the light of above principles of law, then we are of the firm view that it is a case where the order of AO is erroneous in so far as prejudicial to the interest of revenue.
In the present case, certain facts are very strange such as the assessee does not even know the name and contact details of the persons who have deposited cash in his saving bank account. The assessee has also denied about the details of goods purchased for customers and sent to customers. Assessee has shown his inability to provide the details such as invoices of goods, transport bilties etc. Therefore, it is a clear cut case of lack of enquiry. There was complete inaction on the part of the AO and hence, the order of assessment is erroneous in so far as prejudicial to the interest of revenue.
In this era of digitalization, where even a vegetable vender is using digital mode of payment, huge cash transaction creates doubt in the mind of a person of common prudence. However, a suspicion, howsoever, is strong, cannot partake the character of evidence and hence, solely on the basis of suspicion, an action cannot be justified. But in the circumstances of the present case, the AO has failed to conduct any enquiry to dislodge the suspicious cash transactions.
AO is duty bound to carry out proper investigation of facts and then to form a plausible view on such facts. Moreover, the assessee would get full opportunity in set aside assessment proceedings to justify the receipt of cash from depositors in the light of provisions of section 68.
So far as the contention of the assessee that for the assessment year 2014-15, the assessee was also assessed u/s. 143(3) and no revision has been made in that case by the Revenue, though the modus operandi of the assessee in that year was the same, is concerned, this contention of the assessee is of no relevance because it is settled position of law that principle of res judicata is not applicable to the Income-tax proceedings and each year is a separate year. Hon’ble Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. [1985 (7) TMI 1 - SUPREME COURT] has held that to perpetuate an error is not heroism.
We are of the firm view that it is a case of lack of enquiry on the part of the AO and hence, PCIT has correctly exercised his jurisdiction u/s. 263 of the Act. Decided against assessee.
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2024 (4) TMI 929
Exemption u/s 11 - Charitable activity u/s 2(15) - denial of claim as activities of the assessee involve rendering of services in relation to carrying on of a trade, commerce or business - as submitted assessee is engaged in activities for upliftment of the poor, providing training and skill development of the poor in the rural areas, in the backward districts of the State like Bihar, Jharkhand, Orissa, Madhya Pradesh, Chhattisgarh and West Bengal etc. The assessee gets grants from Central and State Government and also donation from the various organizations like, GATES Foundation etc.
HELD THAT:- As decided in own case [2021 (9) TMI 1094 - ITAT DELHI] assessee is apparently not involved in any trade, commerce or business and as such the proviso to section 2(15) is not applicable. Exemption under section 11(1) is allowed to the assessee. Accordingly, the Assessing Officer is directed to allow exemption under section 11, with all the consequential benefits. Ground of the appeal are allowed.
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2024 (4) TMI 928
Validity of Revision u/s 263 - AO accepted the reply of the assessee on three items/issues whereas only two items/issues were added to the income of the assessee as mentioned in para 2(i) and 2(v) of the revisionary order - HELD THAT:- We note that during the assessment proceedings, the AO has specifically called for information after issuing notice u/s 142(1) of the Act dated 30.06.2016 and assessee specifically replied the issues raised and offered its explanation as to why these items did not warrant disallowance or addition which was accepted by the AO. In our opinion, the AO has taken a plausible view which also appears to be correct and therefore the ld. PCIT cannot invoke jurisdiction u/s 263 of the Act to substitute his view for that of the AO. The case of the assessee finds support from the decision of Gabreal India Ltd. [1993 (4) TMI 55 - BOMBAY HIGH COURT]
PCIT has simply exercised jurisdiction by giving directions to the AO without pointing out as to how the view taken by the AO was wrong thereby rendering the assessment passed him his as erroneous and prejudicial to the interest of the revenue. The case of assessee finds support from the decision of D. G. Housing [2012 (3) TMI 227 - DELHI HIGH COURT] wherein has held that it is incumbent upon the PCIT to record an objective findings as to how the issues raised in the revisionary proceedings has rendered the assessment as erroneous. Appeal of the assessee is allowed.
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2024 (4) TMI 927
Addition u/s. 68 - cash deposits in the bank account of the lenders which was the immediate source of credit for the lender - unsecured loan received during the year from lender firm - lender firm which had advanced loan to the assessee is not a Non-Banking Finance Company (NBFC) and is engaged in the business of trading of pulses, while the assessee is a trader in cotton cloth.
HELD THAT:- The primary undisputed facts are that assessee had to invest a sum towards share capital in a company proposed to be set up at Nagpur to produce Denim cloth, in the capacity of the promoter of the company. For that purpose, the assessee obtained financial support from lender firm [M/s Banwari Lal Naresh Kumar], with whom the assessee has close relationship for over 40 years. The proposed investment in the company was a step in forward integration of the business interests of the assessee.
With regard to cash deposits made in the bank account of the lender firm, it is pertinent to note that partner of the lender firm was examined by the ld. AO u/s. 131(1A) who duly explained the sources of cash deposits made in the bank account of his partnership firm and confirmed the fact of advancing loan to the assessee. Since the statement was recorded on 28.12.2018 i.e. during the fag end of the proceedings, partner sought to answer all the questions that were posed by the ld. AO to him and also sought time for replying to certain questions to produce further evidence to support his statement.
Since no details were called for in the summons issued u/s. 131(1A) of the Act by the ld. AO , partner of lender firm had admittedly not carried any material with him while giving the deposition before the ld. AO. So he had to sought time obviously to furnish further evidences in support of his statement. We find that the ld. AO had merely overlooked all the relevant materials submitted by the assessee which also stood confirmed by the lender in the statement u/s. 131(1A) of the Act and proceeded to treat the loan received as unexplained cash credit u/s. 68 of the Act and disallowed consequential interest thereon.
Once the cash deposits made in the bank account of the lender firm had been accepted as coming from explained sources by the revenue under scrutiny assessment of the lender, the revenue cannot take a divergent stand in the case of the assessee that those cash deposits had emanated out of undisclosed sources of the assessee which had been deposited in the lender’s bank account and monies received by assessee in the form of unsecured loan.
We find that Shri Naresh Goel in his statement u/s. 131(1A) of the Act had categorically explained the modus operandi of the business of the lender firm and had duly replied that the firm generates cash on a daily basis out of its sales. Hence the said cash sales were deposited by the lender firm in its bank account in cash. That’s why no additions were made in the hands of the firm by the ACIT, Circle 47(1), Delhi. Even though the case of the assessee was selected only for “Limited Scrutiny” in the hands of the lender, still if the Assessing Officer had found anything alarming, he could have converted the Limited Scrutiny into Complete Scrutiny by seeking permission from the competent authority in the manner known to law.
This was admittedly not done in the case of the lender, which goes to prove that the ACIT, Circle 47(1), Delhi did not find anything alarming with regard to cash deposits made in the bank account of the lender firm and did not doubt about its sources. The scrutiny assessment proceedings of the lender firm for the very same assessment year itself explains the creditworthiness of the lender and genuineness of the loan transaction with the assessee. Hence we have no hesitation to hold that assessee had duly proved the three necessary ingredients of section 68 of the Act in respect of unsecured loan received during the year from Banwari Lal Naresh Kumar (lender firm). Consequentially the interest paid thereon would also be allowable as deduction u/s. 36(1)(iii) of the Act as it is not the case of the revenue that the borrowed funds were not used by the assessee for business purposes. Accordingly, the grounds raised by the assessee are allowed.
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2024 (4) TMI 926
Addition of the suppressed gross receipts as were disclosed by the assessee company during the survey proceedings u/s. 133A - discrepancy noticed w.r.t. undisclosed income found & duly admitted under oath during the survey as against corresponding disclosure in the return - Suppression of gross receipts - whether it is the profit element of the aforesaid unaccounted cash receipts that was liable to be credited in the profit and loss account (as offered by the assessee company); or it was the entire amount of the unaccounted receipts which that was to be credited to the profit and loss account while computing the income of the assessee company, as had been so done by the A.O?
HELD THAT:- Adverse inferences drawn by the A.O as regards crediting of the profit element embedded in the unaccounted banquet booking receipts of Rs. 3.39 crore (approx.) in the profit and loss account of the assessee company, had rightly been dealt with and vacated by the first appellate authority. To sum up, the view taken by the A.O that the expenses corresponding to the unaccounted receipts of Rs. 5.18 crore (approx.) already formed part of the expenses claimed by the assessee company in its books of accounts had rightly been found to be incorrect and dislodged by the first appellate authority.
We concur with the CIT(Appeals) that now when the assessee company had credited the profit element embedded in the unaccounted banquet booking receipts in its profit and loss account for the immediately succeeding year, i.e., A.Y 2018-19, which thereafter had been accepted by the A.O vide his order passed u/s 143(3) for the said succeeding year, therefore, an inconsistent approach could not have been adopted for rejecting the claim raised by the assessee company on the same lines during the subject year, i.e., A.Y. 2017-18.
Once the A.O while scrutinizing the case of the assessee company for the immediately succeeding year, i.e. A.Y. 2018-19 had approved the credit of the profit element embedded in the unaccounted banquet booking receipts of Rs. 99.21 lacs (supra) in the profit and loss account by the assessee company, therefore, it is incomprehensible that by adopting an inconsistent approach a similar offer of the profit element by the assessee company pertaining to its unaccounted banquet booking receipts for the year under consideration was not be accepted. It is not the claim of the department that the facts and circumstances leading to credit of the profit element of the unaccounted banquet booking receipts by the assessee company in its profit & loss account for A.Y 2018-19 was distinguishable as against those for the subject year, i.e., A.Y 2017-18. Our aforesaid view that the department cannot be allowed to adopt an inconsistent approach based on the same set of facts is supported by the judgment of the Hon'ble Supreme Court in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT]
We concur with the CIT(Appeals) that there was no justification for the A.O to have held the entire amount of unaccounted banquet booking receipts as the income of the assessee company, as it was only the profit element attributable to the said receipts which was rightly credited by the assessee company in its profit & loss account for the subject year. Our aforesaid view is fortified by the judgments of President Industries [1999 (4) TMI 8 - GUJARAT HIGH COURT] and DCIT Vs. Panna Corporation [2014 (11) TMI 797 - GUJARAT HIGH COURT]. Also, a similar view had been taken in the case of CIT Vs. Balchand Ajit Kumar [2003 (4) TMI 76 - MADHYA PRADESH HIGH COURT]. Accordingly, finding no infirmity in the well-reasoned order of the CIT(Appeals), we herein approve the same to the extent he had vacated the addition. Decided in favour of assessee.
Disallowance of 10% of expenditure, on ad-hoc basis - HELD THAT:- AO while working out the aforesaid disallowance of the assessee’s claim for expenses (on an ad-hoc basis), had neither pointed out any infirmity in the assessee's claim for deduction of the aforesaid expenses; nor brought on record any such observation which would reveal that its claim for deduction of expenses was not as per the mandate of Section 37 - As observed by the CIT(Appeals), the expenditure incurred by the assessee company during the year under consideration was found to be in the same ratio as those incurred in the immediately preceding year.
As observed by the CIT(Appeals), and rightly so, the comparative decline in the assessee’s claim of expenditure vis-à-vis its total receipts in the immediately succeeding year, i.e., A.Y. 2018-19 was for justifiable reasons. Also, the reasonableness of the assessee's claim for deduction of expenses can safely be gathered from a comparative analysis of those booked by him in the immediately last two preceding years.
We concur with the CIT(Appeals) that the comparative analysis carried out by the A.O of the expenses incurred by the assessee company during the whole year vis-a-vis those incurred by him for two months, i.e. April, 2017 and May, 2017 could by no means be held to be a feasible comparison. We are also persuaded to concur with the CIT(Appeals) that certain expenses incurred by the assessee company in the aforementioned two months, viz. April, 2017 and May, 2017 (which were adopted as a yardstick) would have been booked after the aforesaid months, therefore, no proper comparison of the expenses incurred by the assessee company during the whole year could have been carried out as against those incurred during the aforesaid two months.
Thus in the absence of any material having been placed on record by the A.O which would substantiate that the assessee’s claim for deduction of the aforesaid expenditure, i.e. to the extent of 10% of its claim was not in order; or did not satisfy the provisions of Section 37 of the Act, we find no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the said disallowance to the said extent based on his well reasoned observations. Thus, Grounds of appeal No.2 and 3 raised by the revenue are dismissed.
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2024 (4) TMI 925
Validity of Assessment order as time barred - delay dispatching assessment order - as submitted assessment order was required to be passed on or before 31/12/2016 i.e. within 21 months of the end of Assessment Year in which the income was first assessable - HELD THAT:- Though in the body of the assessment order, the date of passing of the order has been mentioned as 28/12/2016, the assessment order has been dispatched only on 02/01/2017 as per the postal track consignment produced. Thus, keeping in view of the order of the coordinate bench of the Tribunal in the case of Pankaj Sharma (2019 (2) TMI 789 - ITAT DELHI] we are of the considered opinion that the assessment in dispute is time barred and accordingly we set aside the assessment order by allowing the Ground No. 1 of the assessee.
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2024 (4) TMI 924
Addition in assessment u/s 153C - Addition u/s 69 - addition on basis of loose papers on which name of the appellant was mentioned along with some other parties - HELD THAT:- The appellant agreed to purchase plot having size of 300 sq. meters for a total consideration of Rs. 27,00,000/-. Out of the total consideration of Rs. 27,00,000, a payment of Rs. 24,30,000 was already made by the appellant.
Annexure LP-2 is a sheet which mentioned name of those farmers who have sold the land/plots to certain individuals (including the appellant) along with the plot size purchased. This page also has information of amount but there is no evidence to show what is the context for mentioning these amounts. In the impugned assessment order, the addition is made by the assessing officer solely based on this loose sheet. The AO had inferred that amount of Rs. 9,00,000 mentioned against the name of Sh. Vipul Gupta actually represents 10% of the total consideration i.e. Rs. 90,00,000/-.
Against the said alleged value, the assessing officer held that amount of Rs. 27 lacs has been paid by the appellant through banking channel and the balance amount was alleged to have been paid in cash merely on the basis of surmises and conjectures and but same is mere work of speculation.
As observed in the case of Sh. Rishi Aggarwal [2023 (12) TMI 1304 - ITAT DELHI] there is no corroborative evidence. AO did not consider the need to summon the seller or the person searched, or to record the statement of the author/searched person/seller by giving an opportunity to assessee to cross examine the said person.
AO has not even made any enquiry about the value of the property purchased by the assessee. Since the document relied as incriminating material to make addition in assessment u/s 153C of the Act, is not one which is kept in ordinary course of business, and the author of the document is not identified and disclosed to the assessee and the transaction is not verified by any enquiry, then only on the content of the documents the addition is not justified. Thus after taking into consideration, the decision of Sh. Rishi Aggarwal (supra) as such nothing is required to be determined on first principle basis. Thus, the grounds raised by the assessee are sustained. The appeal of the assessee is allowed.
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2024 (4) TMI 923
Nature of receipts - interest earned on FDs during the year was prior to commencement of business of the assessee-company - Objection of the Department is that the assessee had not shown any nexus between the funds borrowed and the specific investment made by it, is not found relevant as such nexus has to be examined in the year in which the investments were made for the first time - HELD THAT:- In the present case, the investments were made in the earlier years that is continuing in the current year and the assessee-company is deriving interest income on the Fixed Deposits made by it in the earlier years.
Respectfully following the decision of the Co-ordinate Bench in the AYs 2013-14 & 2014-15 [2020 (3) TMI 1194 - ITAT AHMEDABAD] we hold that the interest income earned on Fixed Deposits pertaining to the prior period commencement of business was in the nature of “capital receipt”. As held in that year the preoperative expenses of the assessee has to be adjusted with this “capital receipt” and only the balance expense, if any, need to be amortized as per provisions of Section 35D of the Act. Accordingly, the CIT(A) had rightly allowed the claim of the assessee. Appeal filed by the Department is dismissed.
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