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Income Tax - Case Laws
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2024 (5) TMI 302 - BOMBAY HIGH COURT
Reopening of assessment under old regime - scope of new regime - scope of TOLA - as argued notice has been issued on the basis of the provisions which have ceased to exist and are no longer in the statute - Whether TOLA is applicable for Assessment Year 2015-2016 and whether any notice issued u/s 148 of the Act after 31st March 2021 will travel back to the original date? - HELD THAT:- For Assessment Year 2015-2016 the provisions of TOLA are not applicable. This is a categorical finding in Tata Communications Transformation Services Ltd. [2022 (4) TMI 44 - BOMBAY HIGH COURT] and has been followed by the Siemens Financial Services (P.) Ltd. [2023 (9) TMI 552 - BOMBAY HIGH COURT] Therefore, there is no question of Revenue relying on TOLA to justify the impugned notice under Section 148 of the Act as being within the period of limitation.
Even in New India Assurance [2024 (1) TMI 803 - BOMBAY HIGH COURT] the Court held that reliance by Revenue on Instruction No. 1 of 2022 issued by CBDT is grossly misplaced and neither the provisions of TOLA nor the judgment in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] provide that any notice issued under Section 148 of the Act after 31st March 2021 will travel back to the original date.
Time limit to issue notice - In the present case, in view of the fifth proviso, the period to be excluded would be counted from 25th May 2022, i.e., the date on which the show cause notice was issued under Section 148A (b) of the Act by respondent no. 1 subsequent to the decision of the Hon’ble Apex Court in the case of Ashish Agarwal (Supra) and upto 10th June 2022, which is a period of 16 days.
Further, the time period from 29th June 2022 upto 4th July 2022 cannot be excluded as the same was not based on any extension sought by petitioner, but at the behest of respondent no. 1. Even if the same was to be excluded, still it will mean further exclusion of 5 days.
Considering the said excluded period as well, the impugned notice dated 27th August 2022 is still beyond limitation. The fact that the original notice dated 8th April, 2021 issued under Section 148 of the Act, was stayed by this Court on 3rd August 2021, and its stay came to an end on 29th March 2022 on account of the decision of this Court, will not be relevant for providing extension as per the fifth proviso. The fifth proviso provides for extension for the period during which the proceeding under Section 148A of the Act is stayed. The original stay granted by this Court was not with respect to the proceeding under Section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act. The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd. [2024 (3) TMI 109 - BOMBAY HIGH COURT] In view of the aforesaid, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation.
Validity of assessment order issued without a DIN - The impugned notice dated 27th August 2022 issued under Section 148 of the Act is invalid and bad in law as the same has been issued without a DIN.
Faceless assessment of income escaping assessment - notice being issued by the JAO as the same was not in accordance with Section 151A - There is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148 of the Act.
Automated allocation is defined in paragraph 2(b) of the Scheme to mean an algorithm for randomised allocation of cases by using suitable technological tools including artificial intelligence and machine learning with a view to optimise the use of resources. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under Section 148 of the Act. It is not the case of respondent no. 1 that respondent no. 1 was the random officer who had been allocated jurisdiction.
With respect to the arguments of the Revenue, i.e., the notification dated 29th March 2022 provides that the Scheme so framed is applicable only ‘to the extent’ provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under Section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme -
An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice.
With respect to the Office Memorandum dated 20th February 2023, the said Office Memorandum merely contains the comments of the Revenue issued with the approval of Member (L&S) CBDT and the said Office Memorandum is not in the nature of a guideline or instruction issued under Section 119 of the Act so as to have any binding effect on the Revenue. Moreover, the arguments advanced by the Revenue on the said Office Memorandum dated 20th February 2023 is clearly contrary to the provisions of the Act as well as the Scheme dated 29th March 2022.
Hon’ble Telangana High Court in the case of Kankanala Ravindra Reddy [2023 (9) TMI 951 - TELANGANA HIGH COURT] has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We are also of the same view.
Reason to believe - AO has restricted the escapement of income only with regard on the claim of deduction under Section 80JJAA of the Act and disallowance of excess claim of Forex loss - On the Forex loss, respondent has prima facie accepted the contentions of petitioner that there was a Forex loss. Therefore, the same cannot be justified as an escapement of income. Respondent no. 1 has also accepted that the transactions of Calibre Point Business Solutions Ltd. have been duly incorporated in the accounts of petitioner and that no deduction is claimed in respect of the deduction allowed under Section 10AA of the Act. None of the issues raised in the impugned order show an alleged escapement of income represented in the form of asset as required in Section 149(1) (b) of the Act.
As regards the claim of deduction under Section 80JJAA of the Act, an issue of correctness of claim of deduction under Chapter VI of the Act, in our view, cannot be covered by Section 149(1) (b) of the Act.The term ‘asset’ is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account. The present case does not fall in any of the types of the assets as mentioned above. Further, the alleged claim of disallowance of deduction also can never fall under the category of either clause (b) or clause (c) as it is neither a case of expenditure in relation to an event nor a case of an entry in the books of account as no entries are passed in the books of account for claiming a deduction under the provisions of the Act. On this ground also the impugned notice will be invalid.
Power of review - We agree with petitioner that there cannot be a reopening based on a change of opinion. The claim of deduction under Section 80JJAA of the Act was made by petitioner in the return of income and petitioner had filed Form 10DA being the report of the Chartered Accountant. In the said Form, a note has been filed alongwith Form 10DA and it has specifically been submitted by petitioner that software development activity constitutes ‘manufacture/ production of article or thing’. The claim of deduction under Section 80JJAA of the Act was also disclosed in the Tax Audit Report filed by petitioner alongwith the return of income. AO has passed the assessment order dated 30th November, 2017 allowing the claim of deduction under Section 80JJAA of the Act. The claim for deduction under Section 80JJAA of the Act was allowed by the Assessing Officer in the previous years as well. Hence, the present case is clearly a case of change of opinion or review of the original assessment order which is not permissible even under the new provisions.
Therefore, the concept of change of opinion being an in-built test to check abuse of power by the Assessing Officer and the Assessing Officer having allowed the claim of deduction under Section 80JJAA of the Act in the assessment order dated 13th November 2017, now to disallow the same is based on a clear change of opinion. Reassessment proceedings initiated on the basis of a mere change of opinion is invalid and without jurisdiction. On this ground also the impugned notice issued under Section 148 of the Act has to be quashed and set aside.
No question of reopening the assessment for the relevant assessment to disallow the deduction under Section 80JJAA of the Act.
Valid approval for passing the order under Section 148A (d) or not? - The approval is invalid and bad in law. We are unable to agree with Mr. Mistri to hold, in the facts and circumstances of the case, there was non application of mind by the approving authority.
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2024 (5) TMI 301 - GAUHATI HIGH COURT
Recovery proceedings - recourse to other provisions/alternate method for recovery of the dues from the petitioner - attaching the property and bringing the property for sale - notice of public auction/proclamation of sale of the property of the petitioner - period of limitation as per provision of Rule 68B of the Schedule II of the Income Tax Act, 1961 - time limit of a period of three years[now seven] for sale of attached immovable property - whether the impugned sale notice dated 27.03.2019 and the attachment is barred by limitation under Rule 68B of the Schedule II of the Income Tax Act, 1961? - HELD THAT:- A bare reading of the provision of Rule 68B of the Schedule II of the Income Tax Act, 1961, clearly shows that no sale of immovable property shall be made after the expiry of seven years (earlier three years) from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.
Sub Rule-(ii) of Rule-68B provides for exclusion of certain periods while computing the period of limitation. Sub Rule-(iii) of Rule-68B provides that special provision for cases where any immovable property has been attached before 01.06.1992 and the order giving rise to a demand of any tax, interest, etc has also become conclusive or final before the said date. In such a situation the period of limitation as referred by Sub-Rule-I would commenced from 01.06.1992, this Sub-Rule (1), thus, makes it clear that limitation provided under Sub Rule-I for sale of immovable property would appear also to be attachment of immovable property and finalisation of tax demand which have occurred where from 01.06.1992.
In such a case, computing the period of limitation would be 01.06.1992, i.e. the date on which the said rule was inserted. Sub-Rule (IV), of Section-68 provides that where the sale of immovable property is not made in accordance with the provisions of sub-rule (1), the attachment order in relation to the said property shall be deemed to have been vacated on the expiry of the time of limitation.
It provides for a time limit of a period of three years for sale of attached immovable property starting from the end of the financial year in which the order giving rise for demand of tax, interest etc. has become conclusive. Sub-Rule-IV of the Rule-68B provides for the consequence of the immovable property not being sold within such time. As per the Sub-Rule-IV, the attachment order in the relation to the said property would be deemed to have been vacated on the expiry of the time limit as provided.
Thus as Rule-68B would apply. The attachment of the said immovable property was made on 20.12 2018 and the notice of proclamation of sale/auction was made on 27.03.2019 from the end of the financial year in which the order giving rise to a demand of tax etc, has become conclusive in the year 2010. Thus, hit by the period of limitation prescribed under the said rule. By virtue of Sub-Rule-(IV) of Rule-68B, upon completion of the period of limitation, the attachment would be deemed to have been vacated.
Thus by virtue of Rule-68B of the schedule II of Income Tax Act, 1961, the impugned notice of proclamation of sale is barred by limitation and as such is deserve to be set aside and quashed. Accordingly, the impugned notice of proclamation of sale is set aside. Consequently, attachment over the immovable property of the petitioner is also set aside.
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2024 (5) TMI 300 - ALLAHABAD HIGH COURT
Validity of Reassessment proceedings - notice issued in the course of the reassessment proceedings not served on the assessee - reassessment notice has been issued in the name of the partnership firm, though business of the erstwhile partnership firm had been taken over by sole proprietor - HELD THAT:- Remarkably, all the notices seen to have been dispatched to the assessee were returned back to the sender i.e. assessing officer. Yet, the assessing officer has made a recital as to notices duly served. AO has not proceeded on deemed service of notice basis rather he has treated the same to have been actually served on the assessee.
In view of the above fact, it loses relevance that the impugned assessment order was received by the petitioner when dispatched at the same address at which he had been earlier issued notices in the course of the reassessment proceedings. The fact that the assessment order may have been served may not be read with as evidence of due service of preceding jurisdictional and procedural notices. That essential compliance may not be inferred considering subsequent service on the assessment order. Rather, that survived to be established, independently. Unless the jurisdictional notice was served and unless the procedural notice were duly served, the assessee may have been effectively prevented from participating in the assessment proceedings and obtaining consideration on its say.
Seen in that light, no useful purpose would be served in keeping the present petition or calling for counter affidavit, at this stage. Also, we are unable to sustain the objection raised by learned counsel for the revenue that the petitioner may avail statutory alternative remedy of appeal. At present, that remedy may only allow this appeal authority to either annull or confirm or modify the assessment order but may not allow the appeal authority to set aside the same and remit the matter to the assessing authority in view of the amended powers of the appeal authority u/s 251(1)(a) of the Act.
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2024 (5) TMI 299 - BOMBAY HIGH COURT
Reopening of assessment u/s 147 against non-existing entity - scheme of the amalgamation and arrangement approved - HELD THAT:- As things stand, the reopening notices issued u/s 148 of the Act impugned in the Petitions are in the name of a non-existing entity. In the affidavit in reply filed also, the stand taken is of the pendency of the SLP. The reassessment orders impugned in the Petitions have been passed u/s 144 of the Act on best assessment basis.
The notices were issued on the email of a consultant of the SEL and, therefore, the notices sent have bounced. Infact in the reassessment orders, it is also mentioned that notices were sent by the AO to DVU for service but the DVU did not respond and in view of this situation, there was no way except to complete the assessment on the basis of material available on record.
We are satisfied that the reassessment orders issued u/s 148 cannot be sustained and the same are hereby quashed and set aside. Consequently, the recovery notices also stand quashed and set aside.
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2024 (5) TMI 298 - ITAT MUMBAI
Levy of penalty u/s 271(1)(c) - concealment of income - assessee while filing the original return of income claimed an incorrect deduction u/s 80GGA in order to reduce his taxable income - it was only after an investigation was carried out by the Department which revealed that Navjeevan Charitable Trust, to whom a donation was made by the assessee, was involved in providing bogus accommodation entries the assessee offered to not claim deduction u/s 80GGA while filing its return in response to the notice issued u/s 148 - as per assessee much before the issuance of notice u/s 148 assessee had withdrawn its claim of deduction in respect of the donation made to Navjeevan Charitable Trust and paid the necessary taxes - HELD THAT:- We find no basis in the findings of the lower authorities that it is only after the issuance of notice u/s 148 of the Act that a fresh return of income withdrawing the claim of deduction u/s 80GGA of the Act was filed and necessary taxes were paid. Accordingly, there is also no basis in the findings of the lower authorities that if notice u/s 148 of the Act had not been issued, the income would have escaped assessment in respect of deduction claimed u/s 80GGA of the Act. Since in the present case, the assessee voluntarily offered the deduction claimed u/s 80GGA of the Act to income tax much before the initiation of proceeding u/s 147 of the Act which resulted in the impugned penalty, we are of the considered view that there is no concealment of income on the part of the assessee justifying levy of penalty u/s 271(1)(c) of the Act. Hence, we delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
Levy of penalty u/s 271(1)(c) - weighted deduction u/s 35(1)(ii) claimed - HELD THAT:- As before the issuance of notice u/s 148 of the Act, the assessee had withdrawn his claim of weighted deduction in respect of donations made to Rural Development Society and paid the necessary taxes along with interest on 25.03.2019. Thus, we do not find any basis in the findings of the lower authorities that income chargeable to tax has escaped assessment and the assessee has concealed the income to reduce his tax liability. Accordingly, we find no basis in the levy of penalty u/s 271(1)(c) of the Act, and therefore, the same is deleted. - Decided in favour of assessee.
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2024 (5) TMI 297 - ITAT MUMBAI
Estimation of income - bogus purchases - whether the AO is justified in making 100% addition of the bogus purchase amount or he should have added only the profit margin earned by the assessee? - HELD THAT:- The Hon’ble Gujarat High Court in the case of N.K. Industries Ltd.[2016 (6) TMI 1139 - GUJARAT HIGH COURT] has held that once it comes to a categorical finding that the amount represents alleged bogus purchases from bogus suppliers it is not incumbent to restrict the disallowance and thereby directed to make addition of 100% of the alleged bogus purchases. The SLP preferred by the assessee against this decision of the Hon’ble High Court has been dismissed by the Hon’ble Supreme Court[2017 (1) TMI 1090 - SC ORDER].
We find that the First Appellate Authority has followed this decision of the Hon’ble Gujarat High Court. As no distinguishing decision has been brought to our notice in favour of assessee, we do not find any reason to interfere with the findings of the Ld. CIT(A). Appeal filed by the assessee is dismissed.
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2024 (5) TMI 296 - ITAT MUMBAI
Reopening of assessment - Reasons to believe - ACIT jurisdiction to issue the notice u/s 148 - notice was issued by another officer (i.e. ACIT) while jurisdiction over the case was with ITO - HELD THAT:- AO had recorded the reasons to believe based on the specific and credible information received from the Investigation Wing of the department which prima facie showed escapement of income. Reasons recorded were duly furnished to the appellant. Since the return of income u/s. 139(1) was filed at an income of Rs. 53,77,300/-. (well above the prescribed monetary limits) the ACIT had jurisdiction to issue the notice u/s. 148 of the I.T. Act. Necessary approval has also been taken from the Competent authority. Subsequently, the case was transferred u/s. 127 from ACIT Circle 1(1), Mumbai to ITO Ward (1)(1), Mumbai. As such the grounds of appeal relating to reopening of assessment and the procedure followed are found to be without merit and hence rejected.
Estimation of income - bogus purchases - HELD THAT:- AO has rightly held that books of accounts are not reliable and, after rejecting the same, made as addition of 30% of the disputed purchase amount. The CIT(A) has sustained the addition to the extent of 12.5% of total disputed purchases. The same is considered reasonable and is therefore upheld.
Assessee appeal dismissed.
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2024 (5) TMI 295 - ITAT MUMBAI
Disallowance of depreciation claimed on the “Goodwill” - Scheme of amalgamation sanctioned - method of accounting for the amalgamation - HELD THAT:- As decided in M/S. KEVA FRAGRANCES P. LTD. [2021 (8) TMI 286 - ITAT MUMBAI] 5th proviso to section 32 of the Act, which is now the 6th proviso to section 32 of the Act, is not applicable to the present case as the amalgamating company did not claim any depreciation on “Goodwill”
Thus the assessee is entitled to claim the depreciation in the year under consideration on “Goodwill”, which is arising on account of the aforesaid amalgamation. In any case, since the year under consideration is the second year of the claim of depreciation on “Goodwill” by the assessee, which has already been allowed to the assessee in the first year of its claim, therefore the entire exercise of determining the eligibility of claim in the year under consideration is merely academic, as in this year the depreciation on “Goodwill” is to be calculated on its opening WDV. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A), and the same is upheld. As a result, the grounds raised by the Revenue are dismissed.
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2024 (5) TMI 294 - ITAT MUMBAI
LTCG - denial of a claim of exemption u/s 54 - new residential house property was purchased only after the lapse of two years from the sale of original property - assessee was a co-owner, having 80% of shares, in an immovable property - assessee deposited the consideration from the sale of the original asset in the Capital Gains Scheme Account - HELD THAT:- As we find that the original return of income filed by the assessee on 01.10.2013 is within the due date prescribed u/s 139(1) of the Act. Further, since in the present case, it is undisputed that the entire sale consideration was deposited by the assessee in Capital Gains Scheme Account on 26.09.2013, therefore, we are of the considered view that the assessee has duly complied with the provisions of section 54(2) of the Act. Thus, we find no basis in the findings of the learned CIT(A) in concluding that the assessee has not filed his return of income u/s 139(1) of the Act and has not deposited the sale consideration in the Capital Gains Scheme Account before the due date of filing return of income u/s 139(1) of the Act.
New house property was not purchased within the period of two years from the date of transfer of the original assetThe process of obtaining the occupation certificate was in process and the developer agreed to procure the occupation certificate at the earliest. Therefore, it needs to be determined whether the residential property purchased by the assessee on 29.09.2014 is a ready-to-move-in flat or an under-construction flat.
As evident that this aspect of the matter was neither examined nor any documentary evidence verified in this regard. Since the examination of the aforesaid aspect is necessary for determining the availability of the benefit u/s 54 of the Act to the assessee, we deem it appropriate to restore this issue to the file of the jurisdictional AO for examination and adjudication of the aforesaid aspect as noted by us. We also direct the assessee to furnish all the necessary documents in support of his claim of entitlement to exemption from capital gains u/s 54 of the Act. The assessee is also directed to furnish all the documents as may be required by the AO for complete adjudication of this issue - Assessee appeal allowed for statistical purposes.
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2024 (5) TMI 293 - ITAT DELHI
Penalty u/s 271(1)(c) - disallowance of cash business expenses by invoking provisions of Sec 40(A)(3) - HELD THAT:- We find that in this case, assessee does not deserve to be visited with the rigours of penalty u/s 271(1)(c) of the Act. The case laws cited above duly supports the case of the assessee [MSK CONSTRUCTIONS P. LTD. [2007 (3) TMI 181 - MADRAS HIGH COURT] and RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT]. Furthermore, the conduct of the assessee is not contumacious. Accordingly, relying on the precedent as above, we delete the penalty. Appeal filed by the assessee is allowed.
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2024 (5) TMI 292 - ITAT COCHIN
Levy of interest u/s 234A and 234B - Interest for defaults in furnishing return of income - Determination of ‘date of regular assessment’ - obliteration of demand consequent to an assessment being set aside - original assessment stands set aside in the appellate proceedings for fresh assessment - as original demand surviving no longer, the Revenue claims the subsequent assessment as the regular assessment, while the assessee claims it to be the first one
HELD THAT:- As explained in CIT vs. Prakash Chand Lunia [2023 (4) TMI 1057 - SUPREME COURT] for a precedent to be binding there has to be a conscious consideration of an issue involved (Also see - Hussain Bhai & Ors. v. [1971 (4) TMI 1 - SUPREME COURT].
The decision in Modi Industries Ltd. [1995 (9) TMI 324 - SUPREME COURT] settles the issue qua the ‘date of regular assessment’, clarifying it to be for the purpose of determination of interest payable to or, as the case may be, by the assessee, i.e., ss. 214, 215, also adverting to ss. 243 and 244 - The said provisions are no longer operative, with, further, there being legislative changes, the legal import of which is to be judicially determined.
The decision in Mahesh Investments . [2020 (10) TMI 428 - KARNATAKA HIGH COURT] and by the Tribunal in Santhimadom Herbal City Trust [2013 (7) TMI 1219 - ITAT COCHIN] stand rendered de hors the same. There being no consideration of the changed legal scenario, we only consider it fit and proper to restore this issue, i.e., computation of interest u/ss. 234A & 234B, back to the file of the ld. CIT(A) for a consideration afresh, who shall adjudicate thereon per a speaking order after allowing adequate opportunity of hearing to the parties before him, in accordance with law, considering all the decisions that may be relied upon by them, or that he may wish to rely upon, confronting them therewith. All contentions qua this issue, whether raised and considered in this order or not, are, without reservation, open to both the sides. We may not be construed as having expressed any final view in the matter, save as to the instant appeals, as indeed the assessments from which they arise, as being maintainable.
Two, we may clarify that the nature of levy as mandatory, as well as compensatory, and of the default being a continuing one, is not in dispute, so that demand, where paid, would automatically close the interest, even as found in CIT v. Pranoy Roy [2008 (9) TMI 150 - SUPREME COURT] - The compensatory aspect, which also prevailed with the Apex Court in Modi Industries Ltd. [1995 (9) TMI 324 - SUPREME COURT] stands met by the extant law providing for interest up to the date of grant of interest; a statutory confirmation of the interest being compensatory. The dispute concerns only the aspect of ‘date of regular assessment’ in the given facts and circumstances of the case, and the law in the matter. Assessee’s appeals are allowed for statistical purposes.
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2024 (5) TMI 291 - ITAT KOLKATA
Registration applied u/s 80G - denial of registration as application in Form 10AB u/s 80G(5)(iii) was not filed in time - HELD THAT:- In the present case in hand that the assessee is a registered Society under the Registrar of Firms, Societies & Non-Trading Corporations, West Bengal, exemption u/s 80G(5) of the Act on 19.08.2008, application for provisional approval u/s 80G(5)(iv) was filed on 29.04.2021, Order for provisional approval exemption u/s 80G(5)(iv) of the Act passed on 28.05.2021, and assessee filed application for regular exemption u/s 80G(5)(iii) of the Act on 01.06.2023.
The present case is squarely covered with the aforesaid cited decisions. Therefore, the impugned order is set aside. The appeal of the assessee is allowed and CIT (E) is directed to grant provisional approval to the assessee u/s 80G(5)(iii) of the Act if the assessee is otherwise found eligible. CIT (E) will decide the application for final registration within three months of the receipt of this order. Appeal filed by the assessee is allowed.
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2024 (5) TMI 290 - ITAT JODHPUR
Undisclosed income of the assessee - bogus sale of agricultural produce - preponderance of probability theory - as per revenue assessee has coloured the story of sale of agricultural produced - AR vehemently argued before us that based on the information placed on record, it is not under dispute that the assessee is having the only source of income and that is agricultural income. Even on the same set of evidence the ld. AO has partly considered as income of the assessee - While making the addition the ld. AO recorded statement of Mr. Pappu, who handles the affairs of his agricultural land on sharing basis
HELD THAT:- During the course of assessment proceedings, it is very much clear that the assessee has his son and his relative (Buwa) holding 50 bighas of agricultural land and the assessee is having facility for storage of agricultural produce. Even the Krushi Upaj Mandli based on the set of facts placed on record has not lodged any compliant for enquiry. Considering all these set of facts merely invoices which are not of registered firm or a person and having not paid agricultural cess, the same cannot be considered as non genuine. In support of the contention our attention was invited to the various judgement of Co-ordinate Bench cited by ld. AR of the assessee.
As decided in Shri Chaudhary Mange Ram Panwar [2023 (6) TMI 1129 - ITAT DEHRADUN] preponderance of probability theory would go in favour of the assessee in the instant case. The predominant income available with the assessee is only the agricultural income. No other source of income is brought on record by learned Assessing officer and it is not in dispute that the assessee is not engaged in any business or profession. The source of income in any manner whatsoever could only emanate from agricultural income. Hence, the overall explanation given by the assessee for explaining the cash deposits as emanating out of the sale of car and agricultural receipts need to be accepted. No other source available with the assessee which would have enabled him to earn income.
Thus we are of the considered view that the addition made by the ld. AO in the case of the assessee is directed to be deleted. Appeal of the assessee is allowed.
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2024 (5) TMI 289 - ITAT SURAT
Cash deposit in bank account treated as unexplained income - Agricultural income or not? - appellant is an agriculturist and there is nothing on record to show that assessee had earned income from any other source except from agricultural activities - whether the quantum of agricultural income claimed by the assessee is justifiable? - HELD THAT:- It is a fact that there are 6 other members in the family of assessee. Therefore, it cannot be said that the assessee was the owner of all the agricultural land of 38 binghas and the entire agricultural income belonged to him. Assessee stated that uncles and cousins of the assessee are staying in USA and only the assessee and his father carried out agricultural activities. Even if uncles and cousins are staying in USA, then also it cannot be accepted that the entire agricultural income was earned only by the assessee and he retained the same.
No confirmation or affidavit of his uncles and cousins staying in USA has been given to support the claim of appellant that agricultural income legally earned by them was given up in favour of the appellant. The assessee has also not furnished any details of the ITR and other supporting evidences to show that the income of his father was diverted to him. He has not even given the affidavit or confirmation of his father in support of such claim. Therefore, the explanation of the assessee that the entire agricultural income belongs to him and to none others is not acceptable. Be that as it may, the fact that assessee is an agriculturist and that he was not having any other source of income cannot be denied in the face of various details and evidences given by him.
It has accepted the contention of the assessee that he had deposited cash in the bank account out of agricultural income and out of earlier cash withdrawals from the bank (i.e., unused cash out of the cash withdrawn from bank of assessee). The ratio of above decision is applicable to the present case. We have already held that explanation regarding agricultural income of Rs. 2,24,000/- out of claim of Rs. 9,24,000/- is not acceptable. Therefore, addition to the extent of Rs. 2,24,00/- is sustained and remaining amount of Rs. 14,85,000/- is deleted. Accordingly, this ground is partly allowed.
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2024 (5) TMI 234 - SC ORDER
Validity of order passed by the Settlement Commission - Revenue submits that the Settlement Commission has wrongly allowed deductions u/s 80-IA (4) as the returns were filed after the period prescribed by law - As decided by HC [2019 (7) TMI 2019 - MADHYA PRADESH HIGH COURT] contention of petitioner that the Settlement Commission has wrongly allowed deductions under Section 80- IA (4) of the Act, without taking into consideration the aspect of delay, has no merit and does not survive for either being raised or adjudicated.
HELD THAT:- We are not inclined to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petition is dismissed.
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2024 (5) TMI 233 - DELHI HIGH COURT
Addition u/s 68 - unexplained share application money - genuineness and creditworthiness of the share capital subscription challenged - ITAT deleted addition - Revenue has challenged the order of the ITAT as it failed to appreciate that the Director, Tushar Kumar, had clearly admitted the receipt of the accommodation entries by the respondent-assessee and the respondent-assessee had failed to substantiate genuineness and creditworthiness of the share capital subscription - HELD THAT:- With regard to the first contention relating to the genuineness and creditworthiness of the share capital subscription, the ITAT has noticed that the CIT(A) had duly recorded its satisfaction relating to identity, genuineness and creditworthiness of the amounts received along with confirmations, address, cheque number and PAN and therefore, the ITAT declined to interfere with the order of CIT(A) in deleting the addition.
We may allude to the order of ITAT, wherein, while affirming the deletion of additions carried out by CIT(A) towards unexplained share application money under Section 68 held that CIT (A) has duly satisfied himself as the assessee and the parties could provide documents relating to identity, genuineness and creditworthiness of the amounts received along with confirmations, address, cheque number and PAN. Hence, we decline to interfere with the order of the ld. CIT (A).
Finance received from M/s Arha Buildcon Pvt. Ltd., the ITAT, in our view, has correctly delved into the facts to come to the conclusion that there have been direct finance arrangements between M/s Arha Buildcon Pvt. Ltd. and the respondent-assessee. ITAT had rendered a finding of fact with respect to the statement and held it to be factually incorrect observing that the bank statement of the assessee reflects the amounts received and paid with regard to M/s Arha Buildcon Pvt. Ltd.
Receipt from each of 48 flats concerning Bhagwanti CGHS ITAT has made a categorical finding that the addition was made on theoretical premise on the basis of presumptions and there was no evidence gathered, collected or investigated by the Revenue to support the addition.
ITAT has examined the facts in great detail. It may be noted that the ITAT is the final arbiter of the facts and appeal can be entertained by the High Court only if any substantial question of law arises. A conspectus of the proposed substantial questions of law signify that they only relate to the findings of fact and the order of the ITAT cannot be construed in any manner to be ex-facie perverse. Thus no substantial question(s) of law arises for our consideration.
Unexplained investment in properties - Cash component of the consideration paid by assessee for Two projects - ITAT deleted addition - HELD THAT:- ITAT has held that there was no scope to treat the amount as paid in cash to be brought under unexplained investment under Section 69 of the Act and came to a conclusion that there was no material to corroborate the addition as made by the AO.
Addition of unexplained investment in Kashipur land for the project designated as GTM Kashipur-II, the ITAT, in our view, has correctly delved into the facts to come to the conclusion that the nature and contents of the seized material do not reflect any unexplained investment in the land purchased at Kashipur and the addition has been made on a presumptive basis.
Amounts received from Haryana CGHS and the alleged illegal link between the respondent-assessee and Haryana CGHS, the ITAT, after analysing the facts has held that there was no link between the respondent-assessee and Haryana CGHS and it was not a benami concern of the respondent-assessee company.
Undisclosed investment in Wings CGHS for taking its control via an MoU, the ITAT, after carefully analysing the facts, held that the MoU cannot be treated as executed since during the search itself, it was conveyed that Tushar Kumar did not want to enter into an agreement with Ajay Jain as per the MoU and the said MoU was also not signed by Tushar Kumar.
Unexplained investment in the shares of M/s. Sargam Estate Pvt. Ltd., the ITAT concurred with the findings as returned by the CIT(A) in deleting the additions as share capital remained constant as at 31.03.2007 and as at 31.03.2006. The share application money as at 31.03.2006 was Rs. 32,18,000/- which was refunded to the assessee company after receipt of fresh share application money of Rs. 53,86,000/- by M/s Sargam Estate Pvt. Ltd. Instead of enquiring, the source of application money, the AO brought to tax the amount of share application money refunded to the assessee by M/s Sargam Estate Pvt. Ltd. Hence, the addition made has been rightly deleted by the ld. CIT (A).
Unexplained advertisement expenditure, ITAT again concurred with the findings rendered by the CIT(A) in deleting the additions as the total expenditure debited on account of advertisement was Rs. 3.19 Cr. as against Rs. 2.85 Cr. alleged by the Assessing Officer.
Undisclosed investment in the stock of jewellery ITAT held that since there is a panchnama drawn in the case of M/s GTM Jewellery Mart Pvt. Ltd., stock inventory was made in the said company and keeping in view the fact that M/s GTM Jewellery Mart Pvt. Ltd. is a separate assessable entity, keeping in view the fact that the difference is due to difference in price but not in quantity, we hold that the addition cannot be made in the hands of the assessee in the instant year.
Thus ITAT has minutely examined and marshaled the facts. It cannot be gainsaid that the proposed substantial questions of law are merely based on the findings of fact by the ITAT. The order of the ITAT on the concerned issues which stand raised before us, in our opinion, does not suffer from any perversity as claimed by the Revenue. Revenue appeal dismissed.
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2024 (5) TMI 232 - ALLAHABAD HIGH COURT
Gross profit determination - addition of undisclosed profit in the hands of the assessee while framing the assessment u/s 143(3) - credibility of books of accounts of the assessee - substantial question of law or fact - Addition u/s 40-A(3) as the assessee had made cash payments of expenses exceeding Rs. 20,000/- under different heads - disallowance relating to unverified consignment sales expenses - Tribunal has dismissed the appeal filed by the revenue - HELD THAT:- There no finding was recorded by the AO to doubt the credibility or correctness or completeness of the books of accounts of the assessee. Yet, since the books of accounts of the assessee came to be rejected the Assessing Officer further proceeded to disturb the gross profit rate for the assessment year in question. Relying on gross profit rate achieved by the assessee in the previous three years, addition of about Rs. 3 crores was made.
We find no error on part of the Tribunal in recording either of the above findings. Once the CIT (Appeals) looked into the vouchers of cash expenses and recorded a clear finding that those were duly vouched except for two expenditures, in absence of any material shown to establish that that finding was perverse, there survives no room to interfere with the confirmation of such finding by the Tribunal (the last fact finding authority). As to the issue of ad hoc disallowance of expenditure of consignment sale the Tribunal has rightly concluded the same to be an academic issue.
Seen in that light, in absence of any other objection found in the books of accounts of the assessee as may have been pressed before the Tribunal, there survives no room to reject the books of accounts of the assessee. Consequently, there is no intrinsic evidence to enhance the gross profit rate. Once the books of accounts of an assessee are found accepted the Assessing Officer may have remained within the confines of his powers ad not disturbed the gross profit rate as that would remain in the nature of the result of the book entries and not an original entry by itself.
Settled principle in this regard being that the assessing officer may never step into the shoes of the assessee to infer more profit than may have been derived by the assessee and further his jurisdiction being confined to examine the correctness and completeness of the books of account, it never became open to the Assessing Officer to reject the gross profit rate disclosed by the assessee. It is also shown, the finding on acceptance of books of accounts of the assessee recorded to by the CIT (Appeals) was not even specifically challenged. Tribunal has not erred in confirming the order of the CIT (Appeals) - Decided against revenue.
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2024 (5) TMI 231 - BOMBAY HIGH COURT
Validity of reopening of assessment - Petitioner had not filed its ROI and no reply also has been filed against notice under Section 148A (a) - Valid approval u/s 151 provided or not? - another notice was issued u/s 148A (b) stating that the submissions made were not satisfactory and Petitioner failed to reconcile each and every entry in the notice with ITR filed by it - HELD THAT:- We agree with Petitioner contractual receipts and interest earned on securities have been raised for the first time in the impugned order passed under Section 148A (d) of the Act. Also, Petitioner, in the letter dated 14th April 2023, has explained the rent receipt and source and nature of foreign remittances and if the AO was not satisfied with the explanation, he ought to have, in the impugned order dated 20th April 2023, made out a case as to why he does not agree with the explanation given by Petitioner than making a bald and incorrect statement that Assessee has failed to demonstrate that these items have been disclosed.
In the circumstance, in our view, the impugned order under Section 148A (d) of the Act has been passed without application of mind. It is obvious that even the sanction that is accorded under Section 151 of the Act, has been issued without application of mind. We say this because if only the Range Head or the PCIT had bothered to read the file together with the notices issued under Section 148A (b) of the Act, they would have not recommended or approved issuance of the notice under Section 148 of the Act.
In our view, the impugned order cannot be sustained. The same is hereby quashed and set aside. Decided in favour of assessee.
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2024 (5) TMI 230 - HIMACHAL PRADESH HIGH COURT
Condonation of delay of 1085 days in filing the appeal u/s 260-A - application seeking condonation of delay filed u/s 5 of the Limitation Act, 1963, the applicant/appellant contended that the appeal has to be treated as one within time from 28.06.2022, when Income Tax Appeal [2022 (8) TMI 1506 - HIMACHAL PRADESH HIGH COURT] was disposed of as infructuous by this Court and also contended that the delay is neither willful nor intentional.
HELD THAT:- We may point out that Income [2022 (8) TMI 1506 - HIMACHAL PRADESH HIGH COURT] had no doubt become infructuous in view of modification of the order challenged therein [2019 (1) TMI 421 - ITAT CHANDIGARH] by the Income Tax Appellate Tribunal by passing a fresh order on 11.10.2019.
The appellant had a right to question the order passed on 11.10.2019, by filing appeal under Section 260-A of the Act, within the period of 120 days prescribed under the Income Tax Act.
The said period ended on 08th February, 2020. Thereafter from around 15th March, 2020 the Covid Pandemic started, and in view of the same, the Hon’ble Supreme Court titled Re: Cognizance for Extension of Limitation [2022 (1) TMI 385 - SC ORDER] directed that the period from 15.03.2020 till 28.02.2022 would stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. It further stated that if limitation had expired during the period between 15.03.2020 till 28.02.2022 notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022.
In the instant case, the limitation having expired prior to 15.03.2020 on 08.02.2020 itself, the applicant cannot get the benefit of the said period of 90 days on 28.02.2022.
Admittedly, the instant appeal has been preferred on 12.10.2022, 224 days after 28.02.2022. No valid explanation for this period of delay is mentioned in the application. We are also of the opinion that the date on which Income Tax Appeal No. 10/2019 was disposed of as infructuous on 28.06.2022 had no relevance, since the order impugned in that ITA and in the instant ITA would be different orders.
Since we are satisfied that there has been negligence on the part of the applicant/appellant in filing the appeal within the time prescribed by law, this application is dismissed.
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2024 (5) TMI 229 - GUJARAT HIGH COURT
TDS u/s 194H - assessee is a cellular mobile service providers - discount offered by assessee to its distributors on the payment made by the distributors towards pre-paid sim-cards/recharge coupons - - whether appellant assessee and its distributors enjoy legal relationship of principal and agent and not of principal to principal basis? - HELD THAT:- As decided in [2024 (3) TMI 41 - SUPREME COURT] the term ‘agent’ denotes a relationship that is very different from that existing between a master and his servant, or between a principal and principal, or between an employer and his independent contractor. Although servants and independent contractors are parties to relationships in which one person acts for another, and thereby possesses the capacity to involve them in liability, yet the nature of the relationship and the kind of acts in question are sufficiently different to justify the exclusion of servants and independent contractors from the law relating to agency.
The term ‘agent’ should be restricted to one who has the power of affecting the legal position of his principal by the making of contracts, or the disposition of the principal’s property; viz. an independent contractor who may, incidentally, also affect the legal position of his principal in other ways. This can be ascertained by referring to and examining the indicia mentioned in clauses (a) to (d) in paragraph 8 of this judgment. It is in the restricted sense in which the term agent is used in Explanation (i) to Section 194-H of the Act.
We hold that the assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H is not applicable to the facts and circumstances of this case. Decided in favour of assessee.
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