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Income Tax - Case Laws
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2025 (6) TMI 2019
TCS u/s 206C(1C) - compounding fees/fine that was recovered from illegal miners and transporters of minerals - Section 320 of the Code of Criminal Procedure, 1973 - Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) - scope of terms “royalty” and “compounding fee”
HELD THAT:- By virtue of Section 9(1) of the MMDR Act, the holder of a mining lease is obliged to pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral and the Central Government is empowered to amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification.
The State Government in exercise of the powers conferred by Section 15 of the MMDR Act has framed the rules known as the Chhattisgarh Minor Mineral Rules, 2015 (for short, ‘the Rules of 2015’), which shall apply to the grant and regulation of Quarry Leases and other mineral concessions in respect of Minor Minerals and for purposes connected therewith in the State of Chhattisgarh only.
There is no legislative mandate to collect tax at source from the person who is involved in illegal mining or illegal transportation of minerals and similarly, compounding fees/fine is collectable in terms of Section 23A of the MMDR Act read with Rule 71(5) of the Rules of 2015 and the effect of compounding would be that on being compounded u/s 23A(1), no proceeding or further proceeding shall be taken and the offender, if in custody, shall be released forthwith.
Similar provision has been laid down in Section 320 of the Code of Criminal Procedure, 1973, which deals with compounding of offences and sub-section (8) of Section 320 clearly mandates that the compounding of an offence under Section 320 shall have the effect of an acquittal of the accused with whom the offence has been compounded.
As such, compounding fee/ fine cannot be subjected to proceeding under Section 206C(1C) of the IT Act, as there is no legislative mandate to collect tax at source (TCS) on compounding fee/fine collected u/s 23A of the MMDR Act read with Rule 71(5) of the Rules of 2015.
As such, by virtue of the provisions contained in Section 206C(1C) of the IT Act, there is legislative command to collect TCS from the amount of royalty and simultaneously, there is no legislative command to recover TCS from the amount of compounding fee/fine u/s 23A of the MMDR Act read with Rule 71(5) of the Rules of 2015, as the royalty does not include the compounding fee/fine and the terms “royalty” and “compounding fee”, both, are mutually exclusive.
Therefore, the ITAT is completely unjustified in holding that compounding fee/fine (TCS) would be chargeable under Section 206C(1C) of the IT Act by relying upon the definition contained in Section 2(47) of the IT Act. Accordingly, we are unable to uphold the judgment & order passed by the ITAT relying on Section 2(47) of the IT Act. Decided in favour of assessee.
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2025 (6) TMI 2018
Denial of exemption u/s 11 - Petitioner had not e-filed the audit report in Form 10B within the prescribed time i.e. one month prior to the due date of furnishing of return of income - power to condone the delay in filing Form Nos. 9A/10/10B/10BB - condonation of delay in e-verifying / accepting the audit report in Form 10B, was rejected by the 1st Respondent, inter alia, on the ground that no sufficient cause was shown for the aforesaid delay - HELD THAT:- CBDT vide its Circular No. 16/2022 dated 19th July, 2022 authorized the Commissioner of Income Tax for considering and deciding the applications for condonation of delay in filing Form 10B for the Assessment Year 2018-19 or for any subsequent Assessment Years, where there is delay of up t0 365 days.
In the facts of the present case, if one not to apply the decision of the Hon’ble Supreme Court in Cognizance for Extensions of Limitation, In re [2022 (1) TMI 385 - SC ORDER] whereby time was extended due to the Covid-19 pandemic, then the delay would be 254 days. If we are to apply the extension granted by the Hon’ble Supreme Court, then admittedly, the delay is of 101 days. When one takes these facts into consideration, coupled with the fact that serious prejudice and hardship would be caused to the Petitioner if the delay is not condoned, and which was purely out of an inadvertence, we are of the view that the 1st Respondent was wholly unjustified in not condoning the delay.
In fact, the 1st Respondent, in the impugned order, refers to CBDT Circular No. 16/2024 dated 18th November, 2024 under which the CIT has been granted the power to condone the delay in filing Form Nos. 9A/10/10B/10BB for Assessment Year 2018-19 or any subsequent assessment years, in cases where the delay is upto 365 days, and decide on its merits.
The CBDT Circular has further stipulated that the Commissioner of Income Tax, while considering such condonation, shall satisfy himself that the Applicant was prevented by reasonable cause from filing such Form within the stipulated time and that the case is of genuine hardship on merits. In the facts of the present case, if the delay is not condoned, genuine hardship would be faced by the Petitioner inasmuch as the exemption claimed by the Petitioner, and to which it would otherwise be entitled to because it’s a charitable trust, would be denied on this technical ground. In these circumstances, we are of the view that the 1st Respondent ought to have taken a justice oriented approach rather than a pedantic one and condoned the delay. Assessee appeal allowed.
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2025 (6) TMI 2017
Validity of reopening of assessment u/s 147 - period of limitation - issuance of a notice u/s 148A(b) - Period provided less than 7 days - HELD THAT:- As in this case, in terms of the notice issued u/s 148A(b) of the said Act the original period for filing the response was till 13th March 2023 which stood extended till 27th March 2023. Having regard to the third proviso contained in Section 149(1) of the said Act the AO is entitled to the exclusion of the time provided for seeking response including the extended time therefor. Having regard thereto, in our view, the assessing officer was entitled to exclusion of 25 days.
Admittedly, the order impugned has been passed on 6th April 2023 and as such, there was no application of the fourth proviso at all.
Contention raised that the order passed u/s 148A(d) of the said Act is beyond the period of limitation, cannot be sustained. Since, the petitioner otherwise has an alternative remedy to challenge the order passed u/s 147 r/w Section 144 and Section 144B of the said Act, the petitioner shall be at liberty to pursue his remedy before the statutory authority.
The above observations and findings are also in tune with an unreported judgment delivered by a Coordinate Bench of this Court in the case of Giriraj Commercial Private Limited versus Union of India and others [2023 (7) TMI 1523 - CALCUTTA HIGH COURT] though the same pertains to the substituted provisions of Section 149(1) of the said Act as substituted by Finance Act, 2023.
This apart having regard to the fact that the instant writ petition was pending before this Court for sometime and since substantial questions in the form of limitation had been raised, I am of the view that the petitioner should be given an opportunity to pursue its statutory remedy.
Thus, petitioner files an appeal within a period of 4 weeks from the date of receipt of the downloaded copy of this order from the official website of this Court, upon compliance of all formalities by the petitioner, the appellate authority shall hear out and dispose of the appeal on merit.
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2025 (6) TMI 2016
Revision u/s 263 - as per CIT AO completed the assessment u/s 143(3) without carrying out proper verification on various issues like difference in value of assets shown in the balance sheet and the value of assets shown in the computation of income, difference in value of purchases shown in reply dated 07.09.2019 and the value shown in the profit and loss account and nature of cash deposit made after demonetization.
HELD THAT:- AO was required to verify the cash deposit made by the petitioners in the bank account during the demonetization period as per the Annexure to the SOP which contains the details as per the cash deposited out of earlier income or savings, cash out of receipts exempt from tax, cash withdrawn out of bank account, cash received from identifiable persons with PAN and without PAN, cash received from un-identifiable persons and cash disclosed or to be disclosed under PMGKY.
The respondent PCIT has prima facie observed that the Assessing Officer has passed the assessment order without verification which ought to have been made.
We are not inclined to examine the case on merits as these petitions are not required to be entertained in view of the order passed in case of Piyara Lal [2017 (12) TMI 1895 - PUNJAB & HARYANA HIGH COURT] considering the facts of the case and the petitioners if so advised, may submit objections against the show cause notices and if any adverse order is passed, the petitioners shall have alternate remedy to prefer an appeal before the Tribunal in accordance with law.
Petitions are accordingly dismissed as not entertainable. However, with a view to enable the petitioners to submit objections, the respondents shall consider such objections on merits if submitted within a period four weeks from today and decide the impugned notices in accordance with law.
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2025 (6) TMI 2015
Reopening of assessment against company insolvent/dissolved -petitioner having undergone the Corporate Insolvency Resolution Process (CIRP) and the resolution plan having been approved by NCLT - Extinguishment of liabilities post approval of resolution plan - raudulent transactions/purchases noted - HELD THAT:- Reasons for which the reopening of the assessment has been proposed and initiated. Going by the information collected, it was found that the petitioner is said to have undertaken both sale as well as purchase trades from at least eight contracts.
On further scrutiny certain characteristics were reflected and all these characteristics are what have been reflected in the paragraph No.4 of this order. The authorities found that the transactions inter se between all these eight contracts were of similar nature inasmuch as the quantity purchased and sold were identical.
In all the cases, there is huge variation between the purchased price and the sale price. The trades carried out between the same party and the counter party also had similar facts. The time gap between the purchase and sale is very momentary and that it lasts at time for only a few seconds, if not, more than an hour. Likewise, there was insignificant change in the price of the underlying scrip as compared to the changes in buying and selling rates.
Similarly another characteristic which was revealed was that of repeated trading in deep in-the-money auctions and deep out-of-the-money auctions on individual stocks which were thinly traded.
Based upon these information collected, the authorities found that there are strong reasons to believe that all these fraudulent transactions reflected the illegalities those are going on and the object behind it is to evade payment of tax and the income chargeable to tax roughly amounts to over Rs.3 crores for the assessment year 2024-15.
Reopening of assessment - This Court is of the firm view that there is no doubt as regards non-sustainability of a recovery initiated subsequent to the Corporate Insolvency Resolution Process having been initiated and approval of the resolution plan, which is otherwise impermissible. Nonetheless, if the Department wants to have reassessment of the assessment order, the same is not barred under law even after the resolution process having been finalized and the resolution plan having been given effect to.
The action of the respondents may be only bad in law in the event if after reopening of the assessment and a fresh assessment is done, the authorities if go in for recovery proceedings. Authorities cannot be found fault with if they intend to do scrutiny of the proceedings to ascertain whether there has been any illegal, fraudulent and fake transactions carried out and, if yes, at least appropriate proceedings can be initiated against the director / directors who were then responsible in managing the affairs of the business. Moreover, nowhere does any judgment bar initiation of the proceedings subsequent to the approval of the resolution plan.
Even otherwise what needs to be appreciated is that the Corporate Insolvency Resolution Process should not be permitted to be used as a mechanism to overcome any misdeeds, misappropriations or illegalities deliberately done with an intention to evade tax.
In the instant case, the suspicion is there appears to be a large number of transactions and reverse transactions made by the petitioner in the name of shell companies. It is this which needs to be verified, scrutinized and enquired. If everything is genuine and in accordance with law, even if there is tax evasion, the order of NCLT approving the resolution plan would come to the rescue of the petitioner.
For all the aforesaid reasons, the present writ petitions in its given form, stand rejected reserving the right of the petitioner to take appropriate remedies that are available under the provisions of the Income Tax Act.
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2025 (6) TMI 2014
Addition u/s 68 and Section 69C - larger scam of tax evasion by way of bogus capital gain generated in penny stock - ITAT deleted addition - whether Assessee is entitled to tax exception u/s 10(38) when the records and materials indicate that the alleged income shown as Long Term Capital Gain is result of manipulation and malpractice of an organized tax evasion?
AO reopened the assessment u/s 147 on specific information from the Investigation Wing at Mumbai that the assessee had claimed an amount exemption u/s 10(38) which arose in the share scrip called ‘VMS Industries Ltd.
HELD THAT:- There is nothing on record to indicate as to where from the Assessing Officer received such information that the assessee had a gain of which, according to the assessee, is a short term capital gain which was offered to tax in the original assessment itself.
Furthermore, it is clear from the records that there has been no long term capital gain by the appellant in the shares of VMS Industries Ltd. as alleged by the Assessing Officer and, therefore, the learned Tribunal was fully justified in holding that the reopening of assessment was not bad in law.
When the assessee has not claimed any exemption under Section 10(38) of the Act, the question of reopening would not arise. Therefore, Tribunal after examining the facts has rightly allowed the appeal filed by the assessee and set aside the order passed by the AO as well as the first appellate authority. No substantial question of law.
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2025 (6) TMI 2013
Denial of exemption from payment of income tax u/s 12A - delay filed under Section 119(2)(b) of the Income Tax Act, 1961 for filing the audit report in Form 10B prescribed under Rule 17B - HELD THAT:- There is no dispute with regard to delay of eight days in submitting the audit report in Form-10B prescribed under Rule 17B of the IT Rules in order to claim benefit u/s 12A of the IT Act for the Assessment Year 2022-23. It is also not fact on record that the petitioner has been availing the benefit of exemption since Assessment Year 2021-22.
This Court is of the considered view that the benefit of exemption should not have been denied merely on account of delay in furnishing audit report, which could be produced at a later stage either before the AO or the Appellate Authority by assigning sufficient cause. This Court also takes cognizance of the fact that at an around 13.03.2022, Covid-19 Pandemic was continuing and it is believed that the contention of the Senior Advocate for the Petitioner that on account of technical glitch the audit report could not be furnished. Such a stance of the petitioner sounds genuine since no objection is raised by the learned Senior Standing Counsel for the CGST against such statement.
This Court, taking note of such identical plea and taking cognizance of Covid-19 Pandemic situation at and around the date of filing of audit report in 2022, has elaborately discussed the factors of consideration of petition for condonation of delay in the case of Action Research for Health and Socio-economic Development vs. Central Board of Direct Taxes (CBDT) and others [2025 (5) TMI 1500 - ORISSA HIGH COURT]
Thus, this Court is of the opinion that the Commissioner of Income Tax (Exemption), Hyderabad has not applied his conscientious mind in proper perspective. The matter is remitted to the said authority concerned to consider audit report in Form 10B furnished under Rule 17B of the Income Tax Rules to claim exemption under Section 12A of the Income Tax Act and in consequence thereof, the Commissioner of Income Tax (Exemptions)-opposite party No.1 is directed to grant all consequential relief to the petitioner.
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2025 (6) TMI 2012
Revision u/s 263 - disallowance of deduction claimed u/s 80P on interest received from PGVCL and interest received on refund - as submitted section 80P(2)(d) does not contain the work "Bank" and its scope is limited to only "Cooperative Societies" - HELD THAT:- Main issue regarding taxability of the interest earned by the respondent-assessee from the investment made with the Co-operative bank to be eligible for deduction under section 80P(2) (d) of the Act, is no more res-integra pursuant to the decision rendered by this Court in the case of Principal Commissioner of Income-Tax v. Ashwinkumar Arban Cooperative Society Ltd.[2024 (11) TMI 971 - GUJARAT HIGH COURT]
We are of the opinion that the provisions of section 80P(2)(d) is applicable in the facts of the case and the Principal Commissioner of Income-Tax, Rajkot was not justified in invoking revisional powers under section 263 of the Act which was rightly reversed by the Tribunal holding that the Cooperative bank is a Cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of Section 80P(2)(d) of the Act which is in consonance with the various decisions of the Court as the twin condition invoking Section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. Decided in favour of assessee.
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2025 (6) TMI 2011
Rectification u/s 154 - Intimation under Section 143 (1) income under the head of “Profit and Gains from the Business or Profession” at Rs. 35,09,675/- has wrongly been shown instead of 'Nil', which is an apparent error on the face of the record - AO Rejected the application u/s 154 simply by observing that the assessee himself has filed the return and the mistake is not apparent from the record - HELD THAT:- CIT (Appeals) as well as the ITAT have also committed the same error as like AO. In our considered opinion, the Assessing Officer ought to have considered the application under Section 154 of the IT Act on merits after properly appreciating the points raised on behalf of the appellant/assessee.
The order passed by the Assessing Officer is set-aside. The subsequent order passed by the CIT (Appeals) as well as the order passed by the ITAT is also set-aside. Application under Section 154 of the IT Act is restored to the file of Assessing Officer for hearing and disposal in accordance with law, expeditiously.
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2025 (6) TMI 2010
Transfer of case u/s 127(1) from one AO to other AO - transfer of assessment proceedings from one Assessing Officer (Income Tax Officer Ward No. 4(1) Raipur) to another Assessing Officer (Income Tax Officer Ward No. 3(1) Raipur) by in competant authority? - HELD THAT:- Though the order transferring the case from one AO to other AO was not passed by the Principal Commissioner of Income Tax/Competent Authority u/s 127 (1) however, the said order was also not challenged by the appellant/assessee right in time.
When the assessee questioned the order u/s 263 passed by the PCIT before the ITAT, the said order was allowed to become final, as he failed to avail the opportunity to challenge the order branding the same to be void and without jurisdiction.
Thus, the said order is binding on the appellant/assessee and he was required to challenge the order dated 08.08.2019 before the competent Authority which he has failed to do so.
According to the principles laid down in Sultan Sadik [2004 (1) TMI 674 - SUPREME COURT] an invalid order necessarily need not be non est, in a given situation it has to be declared by the competent Court. As such, the appellant/assessee did not question the above order in accordance with law and allowed it to become final. Therefore, in the second round of litigation, the appellant cannot be allowed to contend that the order dated 08.08.2019 transferring the case from one Assessing Officer to the other Assessing Officer by the incompetent Authority is void non est, therefore, the entire proceeding would lapse.
Substantial question of law No. 1 is answered against the Appellant/Assessee and in favour of the Respondent/Revenue.
Taxability of Compensation against the acquisition of land by NHAI - ITAT has not considered the issue on merits and dismissed the appeal by observing that earlier the Tribunal has already dismissed the appeal of the appellant, while affirming the order of CIT (Appeals) under Section 263 of the Act of 1961. In our considered opinion, the order passed by the ITAT is contrary to the facts and law available on record.
TAT by its earlier order dated 17.08.2023 has only affirmed the legality, validity and correctness of the order passed under Section 263 of the Act of 1961, consequent to which, the AO has passed a fresh order of assessment on 26.02.2024. Therefore, the ITAT was required to decide the issue as to whether addition received as compensation against the acquisition of land by NHAI is liable to tax or not, however, the ITAT has not considered the same and wrongly relied on the earlier decisions, which had no nexus with the issue involved in the appeal preferred before the Tribunal.
Accordingly, the order passed by the ITAT is set-aside to the aforesaid extent. The matter is remitted to the ITAT to decide the issue as to whether addition received as compensation against the acquisition of land by NHAI is liable to tax, after affording an opportunity of hearing to both the sides.
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2025 (6) TMI 2009
Revision u/s 263 - Validity of Assessment was completed u/s 153A read with Section 143(3) wherein, the unsecured loan received by the assessee company were sought to be treated as unexplained cash credit u/s 68 - HELD THAT:- We find that the issue of addition made on account of unsecured loan treating the same to be bogus was subject matter of dispute before the ld CIT(A). Even if the interest paid on such alleged bogus unsecured loans was allowed as deduction by the AO, the same could be subjected to disallowance by the CIT(A) itself using his enhancement powers as the issue of interest disallowance emanates out of issue which is in dispute before the ld CIT(A).
Hence, the disallowance of interest was well within the enhancement powers available to CIT(A) and the same cannot be construed as a new source of income. Had it been a new source of income, then the CIT(A) cannot make such disallowance using his enhancement powers.
In that scenario, the ld PCIT would be justified in invoking revision jurisdiction u/s 263 of the Act for taking care of the omission made by the ld AO. But that is not the case in the present appeal. As stated earlier, the principal portion of the unsecured loans was already subject matter of dispute before the ld CIT(A) and interest portion could have been very well dealt by the ld CIT(A) himself using his enhancement powers. Accordingly, the same cannot be subject matter of revision proceedings u/s 263 of the Act by the ld PCIT.
We hold that the invocation of revision jurisdiction by the ld PCIT u/s 263 of the Act is wrong and hence revision order is to be quashed. Decided in favour of assessee.
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2025 (6) TMI 2008
Denial of deduction u/s. 80P - information about cash deposit in the bank account of assessee held with bank during the demonetization period - invocation of section 80A(5) to deny the deduction under section 80P - CIT(A)'s co-terminus powers with that of the AO to allow deduction - HELD THAT:- Where the conditions of section 80A(5) stands fulfilled and a valid claim of deduction u/s. 80P of the Act has been made in the return, even ld. AO could have allowed the claim but then CIT(A) who is having co-terminus powers with that of the ld. AO was very much having the necessary details and could have allowed the claim of assessee because section 80A(5) of the Act has no pre-condition that return of income has to be filed u/s. 139(1) of the Act.
As going through the provisions of section 80A(5) and also observing that ld. AO has examined the details filed by the assessee accepting the source of cash deposit as well as activity of Cooperative Society and having not disputed the quantum of deduction except for the technical ground, inclined to hold that assessee is eligible for deduction u/s. 80P - Appeal of the assessee is allowed.
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2025 (6) TMI 2007
Denial of exemption u/s 11 - non-submission of Audit Report in Form 10B within the prescribed time limit - procedural lapses - main reason for delay given was on account of covid-19 pandemic outbreak restrictions - HELD THAT:- It is not in dispute that before the due date prescribed u/s.139(4) of the Act Audit Report in Form 10B has been uploaded.
As decided in the case of Anjana Foundation [2024 (10) TMI 664 - GUJARAT HIGH COURT] has held that Audit Report in Form 10B thought not furnished prior to the filing of the income-tax return but later prepared and filed before ld.CIT(A), has held that filing of Audit Report is a procedural requirement and therefore Assessing Officer was directed to decide the claim of the assessee u/s.11 of the Act after accepting Form 10B filed by the assessee.
We also notice that in the case of Bangarh Educational Welfare Trust [2023 (1) TMI 1456 - ITAT KOLKATA] under similar set of facts and circumstances where a belated return has been filed u/s.139(4) of the Act and Audit Report has been furnished before the due date of filing return u/s.139(4), has examined the issue in detail and granted relief to the assessee. Assessee appeal allowed.
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2025 (6) TMI 2006
Disallowance of deduction claimed u/s 80P(2)(d) - interest earned on fixed deposits and deposits in savings bank accounts maintained with Co-operative Banks - assessee is a Co-operative Housing Society collecting money from its members for the maintenance of the society and spending the same on the maintenance of the society - HELD THAT:- We find that similar issue came up for consideration before the Co-ordinate Bench of the Tribunal in assessee’s own case in preceding assessment years and it has been consistently held that the assessee is entitled to claim deduction u/s 80P(2)(d) of the Act in respect of interest income received from deposits maintained with Co-operative Banks.
As decided in The Salsette Catholic Co-operative Housing Ltd. [2021 (5) TMI 635 - ITAT MUMBAI] while deciding the similar issue in favour of the assessee stating that the assessee is a Co-operative Society is entitled for claiming deduction under section 80P(2)(d) of the Act in respect of the interest income earned from either from Co-operative Bank or from Co-operative Society whatsoever that may be - Decided in favour of assessee.
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2025 (6) TMI 2005
Reopening of assessment u/s 147 - reasons to believe for initiating reopening proceedings - Change of opinion - original assessment proceedings u/s.143(3) - conceptual difference between power to review and power to reassess
HELD THAT:- The exercise undertaken by the Ld. AO by recording the stated reasons to believe for initiating reopening proceedings u/s.147 of the Act, it is nothing, but a mere change of opinion.
It is a settled position in law that the change of opinion cannot be per-sea reason to reopen. There is conceptual difference between power to review and power to reassesseee. AO has no power to review. Reassessment has to be based on fulfilment of certain conditions and the concept of change of opinion is an inbuilt test to check abuse of power by the Ld. AO. He has the power to reopen provided there is tangible material, to come to conclusion that there is escapement of income from assessment. Assessee had made all the appropriate disclosures and complied with reporting requirement in its audited financial statements in terms of mandatory accounting standards which have not been controverted.
On this aspect of position of law, in the case of CIT vs. Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT] had examined the question whether change of opinion can justify reopening of an assessment. Hon’ble Court concluded that after 01.04.1989, Ld. AO has power to reopen provided there is tangible material to come to conclusion that there is escapement of income from assessment. Reasons must have live link with the formation of belief and that concept of change of opinion must be treated as inbuilt test to check abuse of power by AO.
Accordingly, in the present case, since there is no new tangible material brought on record by the Ld. AO for the purpose of invoking the reassessment proceedings and passing the reassessment order thereafter, such an exercise tantamount to change of opinion, making the entire proceedings as well as the impugned reassessment order liable to be quashed. Appeal of the assessee is allowed.
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2025 (6) TMI 2004
Addition u/s 69C treating the purchases as bogus - addition of estimated profit element - HELD THAT:- While upholding the fundamental legal proposition that when sales are not doubted, entire purchases cannot be disallowed merely on the ground that suppliers were non-genuine, we deem it appropriate to restore the matter back to the file of the AO for carrying out limited verification as under:
i. AO shall obtain the bank account details of M/s. Mahadev Trading Co. (or any other relevant bank account connected to the transaction), and verify whether there exists any cash trail i.e., whether the payments made by the assessee through banking channels were withdrawn in cash by the supplier or its associates after deposit of cheques received from the assessee.
ii. If such cash withdrawals are established, and the Revenue is able to demonstrate that the payments were routed back to the assessee or utilized as part of accommodation transactions, the Assessing Officer shall proceed to make disallowance in accordance with law, considering the full or partial disallowance as warranted.
iii. However, if no such cash-back trail is established upon verification, and payments are found to have remained within the banking system, then in that event, the addition shall be restricted only to the embedded profit element, for which the profit estimation of 5% as adopted by the CIT(A) may be applied as reasonable and fair estimation, considering the segmental profit declared by the assessee and judicial precedents discussed above.
iv. On perusal of the ledger extract placed on record it is observed that while total purchases recorded from Mahadev Trading Co. aggregate to Rs. 1,40,03,670.00, total payment made to the said party stands at Rs. 1,24,94,654.00, leaving an outstanding balance of Rs. 15,09,016.00 unpaid, which represents approximately 10.78% of the total purchase value. This aspect has not been specifically dealt with or examined by the CIT(A) in the impugned order. The Assessing Officer shall specifically verify whether the said balance payment has been subsequently made by the assessee. If the assessee establishes that the entire unpaid amount has been fully discharged, no adverse inference shall be drawn. However, if the outstanding amount or any part thereof remains unpaid, the Assessing Officer shall examine the nature, status and reasons of such unpaid amount in the context of the overall factual matrix of the transaction, and after affording due opportunity to the assessee to explain the same, shall factor such aspect appropriately while determining the addition on account of bogus purchases in accordance with the directions contained herein above.
v. The assessee is directed to fully cooperate and provide all necessary evidences to facilitate the bank trail verification by the Assessing Officer.
vi. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee and shall complete the verification and fresh assessment strictly within the limited scope as defined hereinabove.
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2025 (6) TMI 2003
TDS u/s 194IA - assessee in default u/s 201(1)/ 201(1A) - non deduction of TDS on payment to four persons towards acquisition of immovable property- scope of amended provision of Section 194IA(2) - HELD THAT:- The undisputed facts of the case are that the total consideration paid by the assessee for the purchase of immovable property was Rs. 1,61,00,000/-. However, the payment made to four co-owners was Rs. 40,25,000/- each, which was less than Rs. 50 Lakhs.
The Co-ordinate Bench of this Tribunal in the case of Bhikhabhai Hirabhai Patel [2020 (2) TMI 1032 - ITAT AHMEDABAD] has held that where share of consideration paid by the assessee to each transferor for acquisition of immovable property was less than Rs. 50 Lakhs, the assessee was not under obligation under Section 194IA to deduct TDS on such consideration on behalf of the transferor/seller. An identical view was taken in the case of Archanaben Rajendrasingh Deval [2025 (4) TMI 215 - ITAT AHMEDABAD].
Proviso to Section 194IA(2) of the Act was introduced w.e.f. 01.10.2024 vide Finance (No.2) Act 2024 which stipulates that where there is more than one transferor or transferee in respect of any immovable property, then the aggregate amount of consideration paid by the transferee to all the transferors is required to be considered for the purpose of Section 194IA(2) of the Act. However, this amended clause is applicable w.e.f. 01.10.2024 only.
In the present case, the payment was made by the assessee much earlier on 30.01.2018 and, therefore, this amended provision cannot be applied to these transactions.
Thus, we are of the considered opinion that the assessee was not required to deduct TDS u/s 194IA of the Act in the current year where the consideration paid to each of the transferor was less than Rs. 50 Lakhs. Accordingly, the demand raised by the AO u/s 201(1)/201(1A) of the Act in respect of the payment of Rs. 40,25,000/- to the four co-owners for purchase of property is deleted. The ground of the assessee is allowed.
Demand raised u/s 201(1)/201(1A) in respect of purchase of another property - AR submitted that since the total payment made in this case was less than Rs. 50 lakhs, provision of Section 194IA of the Act was not applicable at all - HELD THAT:- No deduction was required to be made under Section 194IA(1) of the Act in the case where the consideration for transfer of immovable property and the stamp duty value of the property, both, was less than Rs. 50 lakhs. Prior to 01.04.2022, there was no requirement to take into account the stamp duty value of the property for applicability of provision of Section 194IA of the Act.
In the present case, the transaction was made by the assessee much earlier on 30.08.2017, when there was no requirement to take into account the stamp duty value of the property. Therefore, the AO was not correct in considering the stamp duty value of the property to invoke the provisions of Section 194IA of the Act. Since the consideration paid by the assessee for this property was less than Rs. 50 Lakhs, there was no requirement to deduct TDS under Section 194IA of the Act. Accordingly, the demand raised by the AO under Section 201(1)/201(1A) of the Act in respect of this transaction is cancelled. This ground of the assessee is allowed.
Non-deduction of TDS u/s 194J - audit fee and consequent liability under Section 201(1)/201(1A) - AR submitted that as per the 4th proviso to Section 201(1A) of the Act, the interest was to be computed from the date on which the tax was deducted to the date of furnishing return of income by the payee - HELD THAT:- Since there was default of non-deduction of TDS under Section 194J in respect of audit fee payment the assessee was rightly treated as “assessee in default” under Section 201(1) of the Act. As regards interest u/s 201(1A) of the Act, the AO is directed to verify the payment of tax on this amount by the recipient and, thereafter, restrict the interest chargeable for the period from date on which tax was deductible under Section 194J of the Act to the date of furnishing of return of income by the recipient. The matter is set aside to the file of the jurisdictional TDS AO for this limited purpose. The assessee is also directed to produce the relevant evidences in this respect before the AO in the course of set aside proceeding.
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2025 (6) TMI 2002
Nature of the loss and year of the allowability of the claim of the said loss - loss resulted due to frauds committed by some of employees -Harshad Mehta scam - Expenditure on account of loss on security transactions - relevant assessment year - HELD THAT:- The assessee had paid the sum of Rs. 707.56 Crores to State Bank of India for entering into back-to-back transactions for purchase of certain securities for an aggregate amount of Rs. 707.56 Crores during FY 1991-92. However, the Cheques aggregating to Rs. 707.56 Crores issued by the assessee in favour of State Bank of India (SBI) for securities transactions were credited to the account of Share Broker, Shri Harshad Mehta, by SBI after collecting proceeds of the cheques and no securities against the sum Rs. 707.56 Crores was made available to the assessee.
Thus, the assessee lost the said sum of Rs. 707.56 Crores without acquiring/getting/receiving any security in lieu thereof in Harshad Mehta Scam. From the above, it can be inferred that the assessee lost the said sum of Rs. 707.56 Crores without acquiring/getting/receiving any security in lieu thereof. In view of the above facts and the decision of the Tribunal in the assessee’s own case [2017 (2) TMI 1501 - ITAT DELHI] we are of the considered view that the said loss is nothing but the business loss as the same had happened due to fraudulent activities carried out by employees of the assessee, etc.
Whether the claimed loss is allowable in the relevant year? - As respectfully following the decision of J & K Bank Ltd. [2017 (9) TMI 318 - JAMMU & KASHMIR HIGH COURT] we hold that the said claim of expenditure on account of loss is allowable in the relevant year. Accordingly, we delete the disallowance/addition - grounds raised by the assessee stand allowed
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2025 (6) TMI 2001
TP Adjustment - selection of MAM - change of method from CUP to TNMM - HELD THAT:- We find CUP is inapplicable due to fundamental differences not reasonably adjustable and that TNMM is more appropriate under Rule 10C(2) read with Rule 10B(1)(e).
ASPL has obtained license from international breeder i.e., Stet Holand B.V. (Netherland based entity) to multiply seeds and produce potatoes of a specified variety for manufacturing of frozen french fries and other allied products for which it pays royalty. ASPL also provides guidance and support for the purpose of harvesting good quality potatoes and also extends support for co- ordination with the farmers for efficient contract farming by HAPL and it co-ordinates with the farmers for contract farming based on support and guidance received from ASPL.
Accordingly, it could be concluded that ASPL is the one who has obtained license and possesses the know-how for harvesting the specialized potatoes and HAPL merely co-ordinates with the farmers for producing required quality potatoes. Thus, ASPL could be considered as a complex entity as against HAPL, which is a mere trader and does not own any intangible. Hence, HAPL can be considered as a "tested party" for the purpose of application of TNMM method.
Accordingly, once HAPL is considered as tested party and also a trader, the net profit margin earned by HAPL can be compared with net profit margins earned by comparable companies engaged in trading activities as identified from third party database. Thus, we find CUP is inapplicable due to fundamental differences not reasonably adjustable and that TNMM is most appropriate method.
These margins were computed from reliable public domain databases (Capitaline and Prowess). The Ld TPO did not dispute these margins except rejecting TNMM methodology, which we have already held as permissible. Thus, the assessee’s purchase of potatoes from HAPL at cost plus markup stands at arm’s length, and no adjustment is warranted.
Computation of Book Profits u/s 115JB - assessee claims that the AO wrongly computed book profits and failed to grant MAT credit is a verifiable factual matter. Therefore we direct the JAO to examine the revised working and allow appropriate relief after due verification.
Penalty Proceedings - As the transfer pricing adjustment is deleted, the penalty proceedings under section 270A and 271AA become infructuous and unsustainable.
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2025 (6) TMI 2000
Estimation of income - bogus purchases - rejection of books of account - CIT(A) found it fair and reasonable to estimate profit by applying a 5% GP rate (for A.Y. 2018-19) on the aggregate purchases from the five flagged suppliers and accordingly restricted the addition to that extent - HELD THAT:- CIT(A), while sustaining the rejection of books of account under section 145(3), has correctly applied a fair and industry-consistent gross profit (GP) rate after appreciating the nature of the assessee’s business, the consistency in profitability ratios over the years, and the evidentiary material placed on record.
CIT(A) has also drawn support from multiple binding judicial precedents, to hold that full disallowance of purchases is not justified when corresponding sales are accepted and no discrepancy is found in the stock records or turnover. We further note that the additions sustained by the CIT(A) at 5% (for A.Y. 2018–19) and 6% (for A.Ys. 2020–21 and 2021–22) are in line with past adjudications in similar cases and take into account the profit element embedded in disputed purchases. The application of an inflated GP rate of 12.5% by the AO, in our considered view, lacks justification and fails to account for business realities and past profit margins of the assessee.
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