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Income Tax - Case Laws
Showing 141 to 160 of 163734 Records
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2024 (4) TMI 985
Income deemed to accrue or arise in India - Taxability of income earned from offshore supplies and attribution of profit to the permanent establishment (PE) in India - AO attributing 25% profits to the PE in India - HELD THAT:- The end to end activity covers design, supply, erection, commissioning, performance run of the entire paper mill. Thus, the assessee has to complete a single integrated project in terms of the contract. The agreement further reveals that assessee’s obligation under the contract does not end with the supply of goods and equipments, but would only end with the satisfactory commissioning and performance run of the paper mill. Only after the satisfactory performance run, the assessee can receive full payment qua the supply of goods and equipments.
Thus, supply of goods and equipment from outside India cannot be treated as a standalone activity. On the contrary, as per the scope of work under the agreement, the assessee has to deliver the project of the Security Paper Mill and hand over to the contractee at deliverable stage as a complete package. The contract between the assessee and the contractee is not for purchase of plant and equipments simpliciter, but a complete paper mill to be installed and commissioned at deliverable stage. That being the factual position emerging on record, assessee’s contention that the income received from supply of plants and equipments is not chargeable to tax in India, as the supplies were made from outside India, in our view, is not acceptable.
Not only the assessee has entered into a single contract providing for purchase, installation, commissioning, performance-run of a single unit of 6000 MTs Security Paper Mill, but the assessee is required to ensure proper functioning of the paper mill after commissioning through start-up and test-run. Thus, these facts clearly indicate that the contract is a composite indivisible contract of setting up the paper mill in India. That being the case, it cannot be said that the receipts from offshore supplies of plant and equipments etc. are not taxable in India.
On a careful scrutiny of assessment order and first appellate order, we observe that receipts from offshore supplies are in relation to four projects in India. The departmental authorities have referred only to terms of agreement between the assessee and SPMCIL, Hoshangabad. Whereas, the terms of the agreement with other three parties, viz., J.K. Paper Ltd., Bank Note Paper Mill India Pvt. Ltd., Mysore and Tamil Nadu Newsprint and Papers Ltd., Tamilnadu, to whom the assessee has supplied plant and equipments, have not at all been examined. From the submissions of the assessee, prima facie, it appears that the terms of the contracts in different projects are not identical.
In fact, in case of project at Tamil Nadu, the assessee has entered into two separate contracts, one for supply of material and other for onshore services. Therefore, if offshore supplies of plant and material do not have any relation to onshore services, they cannot be brought to tax in India. These facts have not been verified by going into the terms of the contract by the departmental authorities. Even, to what extent the PE of the assessee, if at all there is one in India, is involved in manufacture and supply of plant and equipments, has not been properly gone into by the departmental authorities. Thus, without properly analysing the role of PE in offshore activities, 25% of the receipts arising out of offshore supplies cannot be attributed to PE, as it is purely on adhoc basis.
AO has attributed profit rate of 10% to the receipts/income of the PE, which has been reduced to 5% by Commissioner (Appeals) - In our view, the estimation of profit is purely on adhoc basis without any rationale. When the assessee has furnished evidence to show that the global profit rate in the paper division is at 3%, there is no justification for adopting the rate at 10% or 5%.
The reasoning of departmental authorities in adopting the estimated profit rate is based on conjectures and surmises. If learned Commissioner (Appeals) was of the view that the activities and obligations of different contracts for different supplies would be different, he should have examined each of the contracts and accordingly decided the profit rate. The departmental authorities have examined only one of the contracts. Whereas, they have not gone through the terms of other contracts.
We cannot accept the estimation of profit at 5% by Commissioner (Appeals). It is further to be noted that assessee’s contention regarding existence or otherwise of PE in terms of paragraph 7, 1(a) and (b) of Protocol to India-Germany DTAA has not at all been considered by learned first appellate authority. Since, various claims and contentions of the assessee have not been considered by the departmental authorities, while attributing part of the receipts from offshore supplies as income of the PE, we are inclined to restore the issue to the AO for de novo adjudication after providing reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.
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2024 (4) TMI 984
Condonation of delay - Delay in filling of an appeal before ITAT - appeal is delayed by 17 days - sufficient and reasonable cause for delay or not? - absence of a bonafide explanation - though the assessee had deposited the fees for filing the appeal before the Tribunal on 27.01.2024 but had kept the filing of the subject appeal in abeyance till 20.02.2024. The assessee has filed an “affidavit” wherein he had stated that as he was taken unwell on 30.01.2024, therefore, he could file the appeal only on 20.02.2024.
HELD THAT:- Though the delay in filing the appeal may not be inordinate, it is the absence of a bonafide explanation of the assessee regarding the reasons that had resulted to delay in filing the appeal; read in the backdrop of his conduct before both the lower authorities, i.e the A.O and CIT(Appeals), who due to non-prosecution of the matter by the assessee before them were constrained to pass ex-parte orders, that we are of firm conviction that the delay in the filing of the present appeal by the assessee does not merit to be condoned.
In case, if the delay is condoned based on an unsubstantiated claim in the case of the present assessee who had not even participated in the proceedings before the A.O. and the CIT(Appeals), then, it would send a wrong message and would lay down a wrong precedent for others to follow.
Thus we are unable to persuade myself to condone the delay involved in the filing of the present appeal by the assessee appellant, who as observed by me hereinabove had consistently as a matter of habit evaded his participation in the proceedings before both the lower authorities and also delayed the filing of the present appeal without any justifiable reason. Thus we decline to condone the delay involved in filing of the appeal before ITAT. Appeal filed by the assessee is dismissed.
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2024 (4) TMI 983
LTCG - Correctness of long-term capital gain /loss from sale of immovable property - FMV determination - assessee is an individual and on the basis of information about sale of immovable property, case of the assessee was reopened u/s 147 after obtaining necessary approval from the Competent Authority - assessee is 50% owner of the immovable property - HELD THAT:- For calculating the long-term capital gain, indexed cost of acquisition is reduced from the sale consideration. AO has merely reduced the cost as on 01.04.1981 and has calculated the impugned addition.
AO has not made any efforts to get the information about the Circle rate of the immovable property as on 01.04.1981. Under these given facts and circumstances, where fair market value of the property as on 01.04.1981 as calculated by the Registered Valuer has been accepted by the AO and there being no other evidence of the fair market value of property as on 01.04.1981, we are inclined to hold in favour of the assessee observing that considering the cost of acquisition as on 01.04.1981 at Rs. 5,00,370/- (adopted by AO), the indexed cost of acquisition would be Rs. 54,09,000/-, and since it is higher than the sale consideration, it would result into a long-term capital loss. Therefore, we set aside the finding of CIT(Appeals) and delete the impugned addition made in the hands of assessee. Grounds of appeal of the assessee are allowed.
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2024 (4) TMI 982
Rejection of application for registration u/s 12AA(1)(ac)(iii) and application of the assessee for final approval as per the provisions of section 80G(5)(iii) - CIT(E) observed that the assessee earlier was granted provisional registration in Form 10AC which was valid till A.Y 2026-27, he, therefore, held that the present application of the assessee being premature was not maintainable and rejected the same
HELD THAT:- The assessee-trust has been granted registration u/s 12AB(1)(a) of the Act for five years vide order dated 31.05.2021 which is valid from A.Y 2022-23 to A.Y 2026-27. As per the provisions of section 12A(1)(ac)(iii) of the Act, the assessee-institution is supposed to apply for final registration after grant of provisional registration u/s 12AB of the Act.
A perusal of the aforesaid provisions of section 12A(1)(ac)(iii) of the Act would reveal that where the trust or the institution was provisionally registered u/s 12AB of the Act, the application for final registration can be made at least six months prior to the expiry of the period of provisional registration or within six months of the commencement of its activity, whichever is earlier, which means that the application for final registration has to be made at the earliest possible event i.e. either within six months of the commencement of the activities or at least six months prior to the expiry of the provisional registration. The aforesaid provision does not mean that there is any bar on the applicant to move an application before the period of six months from the expiry of the provisional registration. What has been provided is that the application must be made before the expiry of six months from the date of expiry of final registration. There is no bar in moving the application at the earliest possible event, rather, it is expected from the assessee-trust to do so. The impugned order of the CIT(E) is set aside and the matter is restored to the ld. CIT(E) to consider the application of the assessee for final registration and grant the same if the same is otherwise so admissible to the assessee.
Approval u/s 80G(5) - CIT (Exemption) rejected the application of the assessee observing that the time limit prescribed for making an application for final approval u/s 80G of the Act was at least six months prior to the expiry of the period of the provisional approval or within six months of the commencement of its activities, whichever is earlier and fresh application by the assessee was filed on 02.07.2023 which was after the extended date of 30.09.2022. - HELD THAT:- The issue is squarely covered by the decision of the Coordinate Kolkata Bench of the Tribunal in the case of “Tomorrow’s Foundation vs. CIT(Exemption) [2024 (3) TMI 941 - ITAT KOLKATA] wherein as held after grant of provisional approval, the application cannot be rejected on the ground that the institution had already commenced its activities even prior to grant of provisional registration. Under such circumstances, the date of commencement of activity will be counted when an activity is undertaken after the grant of provisional registration either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act.
We grant provisional approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act, if the assessee is otherwise found eligible. It is directed that the ld. CIT(E) will decide the application of the assessee for final approval as expeditiously as possible but not later than two months from the receipt of this order. It is further directed that, if the assessee is granted final approval by the ld. CIT(E) then, the benefit of approval u/s 80G of the Act, available to the assessee prior to the Amendment brought vide Amending Act of 2020, will be deemed to be continued without any break. The assessee will not be deprived of the benefit during the time period falling between 31/03/2021 and the date of grant of provisional approval under clause (iv) i.e., 28/05/2021, due to technical errors occurred in making the application under the relevant provisions of the Act because of the confusion and misunderstanding on part of the assessee as well as on part of the ld. CIT(E) in properly interpreting the relevant provisions.
Both the appeals of the assessee are treated as allowed for statistical purposes.
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2024 (4) TMI 981
Estimation of income - bogus purchases - CIT-A made the addition differently by considering the rate of the carrots purchased from one bogus supplier with the rates of another bogus supplier and the difference amount is confirmed and addition on account of bogus purchases
HELD THAT:- We do not agree with the approach of the CIT- A because when both the suppliers are allegedly bogus, rates paid to one party cannot be compared with rates paid to another bogus party for the reason that both are tainted transactions. We find that in the present case the decision of Mohd haji Adam [2019 (2) TMI 1632 - BOMBAY HIGH COURT] also does not apply for the reason that honourable High Court held that where there was no discrepancy between purchases shown by assessee and sales declared, no question of law or on form Tribunals order restricting addition made by AO on account of bogus purchase by bringing gross profit rate on purchases at same rate as applied in other genuine purchases. In this case there are no genuine purchases.
The other judicial precedents relied upon by the assessee are also considered where varying rates of additions are confirmed depending on the facts and circumstances of the case of each of the assessee in the range of 1%- 12.5 % . Therefore, in absence of similar facts, those cannot be applied blindly.
As stated above the facts in the case of the assessee are unique where only alleged bogus purchases of diamonds are exported in the same quantity and there are no other genuine purchase transactions. Therefore, only the facts in the case of the assessee in earlier years could be a guiding factor. In the case of the assessee in earlier years assessment year 2008 – 09 and 2007 – 08 CIT – A has restricted the addition to the extent of 3% of the bogus purchases which is not disputed by the revenue, therefore, we also find it reasonable to retain the addition to the extent of 3% of the bogus purchases. Accordingly, appeal of the assessee is partly allowed.
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2024 (4) TMI 980
Addition u/s 68 - unexplained cash deposit - as per assessee, he has duly explained the source of cash deposit as cash in hand as built up from cash withdrawals from the bank account of the assessee and also submitted evidences such as copy of cash book, copy of bank statements, copy of response filed on Income Tax Portal in response to cash transaction queries and information related to cash transaction, but the same has not considered/believed by the AO - CIT(A) deleted addition - HELD THAT:- It is seen from the record that during the course of assessment proceedings, in order to explain the source of cash deposit as cash in hand the assessee produced evidences such as copy of cash books, copy of bank statement, copy of response filed on income tax portal in response to the cash transaction queries and information related to cash transaction in the format prescribed by the AO.
Assessee has also explained the source as well as the reason of withdrawing cash along with the supporting evidence. Further in response to the show cause notice, the assessee has also explained that in the impounded documents contains cash balance as on 08.11.2016 of certain sites only and cash balance as on 08.11.2016 of New Imprest - Real Estate MCB, Imprest Bhogal Godown and Imprest Sandeep Mangla were not mentioned and in support of said contention the assessee submitted summary of all the cash books which shown the cash balance as on 08.11.2016.
Also the books of the assessee are audited, AO has not pointed any defect in the cash book of the assessee nor he rejected its book of account and only on the basis of assumption that the cash withdrawal have been utilized without corroborating the same.
CIT(A) has considered all the documents produced by the assessee and proceeded to delete the addition after countering each and every allegation made by the A.O. by appreciating material available on record. In the case of group companies involving identical issue arising out of same impounded documents and survey of same flagship company, the Co-ordinate Bench of the Tribunal decided the issue in the favor of the Assessee.
CIT(A) has committed no error in deleting the additions made by the A.O. We find no merit in the Grounds of appeal of the Revenue, accordingly, we dismiss the Grounds of Appeal of the Revenue.
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2024 (4) TMI 979
Penalty u/s 270A - allegation of misreporting as per section 270A(9) - Penalty@ 200% in respect of excess claim of depreciation - HELD THAT:- During the course of assessment proceedings, AO accepted the claim related to depreciation, however, as regards quantum of depreciation is concerned, he was of the view that depreciation should be charged on WDV as computed in accordance with explanation to section 43(1). AO thus partly disallowed the claim of depreciation, against which appeal was preferred by the assessee.
Based on that pretext the return of income for A.Y. 2017-18 was filed by the assessee by claiming depreciation as was done in earlier years in normal course on 29.10.2017 before the due date of 31.10.2017 as till then the assessee was not advised and was able to decide the course of action in relation to the issue raised for A.Y. 2013-14 in respect of depreciation disallowed. In the scrutiny assessment proceedings for A.Y. 2017-18 i.e. the year under consideration, the revised calculation of depreciation was submitted before ld. AO as per the CIT(A)’s order as by that time it was already finalized for not to agitate the matter of depreciation before the income tax tribunal against the order of CIT(A) of A.Y. 2013-14.
Thus, with that back ground as argued by assessee has disclosed all the facts in return of income and also revised the depreciation claimed at the very first opportunity i.e. during assessment proceedings and therefore this act cannot be treated as “misreporting” by any stretch of imagination, more particularly when the issue on which disallowance has been made was debatable.
For disallowance of interest paid on TDS amounting it is submitted that interest on TDS is paid for the duration for which payment of TDS is delayed and is thus basically compensatory in nature and not penal in nature and therefore same is allowable u/s 37(1) - It was also submitted by the AR that there is no allegation about suppression of some facts or misrepresentation of some facts by the assessee and moreover this claim was also based on certain judicial pronouncements in favour of assessee at the time of making the claim.
Thus, the claim of depreciation and interest on TDS was made accordingly. It is also submitted that it is not the case that the claimed any bogus or excessive or unrelated expenses or has misrepresented the facts. On this issue our attention was invited to the decision of the apex court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] and M/s Price Waterhouse Coopers Pvt. Ltd [2012 (9) TMI 775 - SUPREME COURT] which are though decided in respect of penalty u/s 271(1)(c), but the ratio related to furnishing of inaccurate particulars of income is pari materia with provisions of section 270A dealing with misreporting of income.
In addition asseseee also invited our attention to the the latest case laws related to penalty u/s 270A namely Chambal Fertilizers & Chemicals Ltd. [2024 (1) TMI 316 - RAJASTHAN HIGH COURT] wherein Hon’ble Court has confirmed the requirement of clearly specifying the sub-clause of section 270A(9) prior to concluding that assessee has misreported the particulars of income.
Similarly, in the case of GR Infraproject Ltd. [2024 (1) TMI 163 - RAJASTHAN HIGH COURT] as observed that neither in the assessment order nor in the subsequent show cause notice, the AO has specified that the assessee is covered by section 270A(9) of the Act. Even in the order imposing penalty, it is not specified which part of sub-section (9) of section 270A is attracted in this case. The bench noted from the evidence placed on record that the assessee neither in the show cause notice nor in penalty order, it was specified as to under which particular clause of section 270A(9), the case of assessee is covered. Thus, the levy of penalty for misreporting of income is not justified on the facts as mentioned and discussed herein above and respectfully following the binding judicial decision.
Depreciation on certain house property was claimed by assessee first time in A.Y. 2013-14 on showing the rental income under the head “Business Income” which was hitherto shown under the head “Income from House Property” - In the case of Schneider Electric South East Asia (HQ) PTE Ltd., [2022 (3) TMI 1295 - DELHI HIGH COURT] considering that in the penalty order there was no mention about which limb of section 270A is attracted and how ingredients of section 270A(9) are satisfied and in absence of such particulars the mere reference to the word “misreporting” makes the impugned penalty order manifestly arbitrary. Considering the facts of the case under consideration and the various case laws as discussed as above, we are of the considered view that penalty so imposed by ld. AO does not stand on merits and is therefore directed to be quashed. Decided in favour of assessee.
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2024 (4) TMI 978
Delay in filling an appeal before ITAT - delay of 105 days - as a fact NFAC has delivered the order through online system and that appellant Society is working in remote area and its office bearers are not in the habit of checking their mails on regular basis - HELD THAT:- In view of N Balakrishnan vs. M. Krishnamurthy [1998 (9) TMI 602 - SUPREME COURT] we find that the intention of the assessee is not malafide and the circumstances stated appears to be bonafide which cannot be ignored in order to impart justice. In view of the above facts, circumstances of the case and the judgment of Hon’ble Supreme Court (supra), the delay in filing appeal by the appellant Society is condoned and appeal is admitted for the decision on merits.
Deduction u/s 80P on income earned from providing credit facilities to its members and profit from trading activity of fertilizers sale and income from other related activities - assessee is a Society registered under the West Bengal Co-Operative Societies Act, 2006 and is a Primary Agricultural Credit Society (“PACS” in short) and engaged in providing financial assistance to its members for agricultural activities - HELD THAT:- Section 80P(2)(i) of the Act, provides that where co-operative Society is engaged in providing credit facilities to its members, the whole of the amount is entitled for the deduction u/s 80P. In the present case though the assessee has provided the list of persons to whom the credit facilities were provided but failed to establish to the satisfaction of the ld. AO that all such persons are its members. Further from the perusal of the financial statements also it appears that appellant Society has income from trading activity and some other income also.
In view of the facts of the case also by respectfully following the judgement of Mavilayi Services Coperative bank ltd. [2021 (1) TMI 488 - SUPREME COURT] where the hon’ble court opined that even if the credit facilities were provided for non-agricultural purposes to its members, the Society is entitled for the benefit us/ 80P(2)(i) of the Act. Accordingly, we are of the view that the appellant Society is eligible for deduction u/s 80P(2)(i) of the Act but to the extent of the income which has been earned from the facilities extended to its members only.
As the appellant Society has failed to satisfy the lower authorities whether those credit facilities were provided to its members only and not to non-members, therefore, assessee is directed to file the necessary details to the AO and the AO is directed to allow deduction u/s 80P(2)(i) to the assessee for the income earned through/from its members as per the directions given hereinabove but needless to mention that assessee should be provided reasonable and proper opportunity of being heard. Assessee appeal is allowed for statistical purposes.
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2024 (4) TMI 977
Survey operations u/s 133A - evidentiary value of statement recorded u/s 131 - retraction letter given for statement made in survey proceedings - retraction to be made on an immediate basis - HELD THAT:- Firstly the retraction letter has been filed within a short span of two weeks from conclusion of the survey proceedings duly supported by an affidavit of the assessee which has been filed before the AO as well as copy thereof has been filed before the senior authority i.e; Addl. CIT, Sangrur. As far as the intervening period is concerned, the assessee duly explained that being a senior citizen, he was under great shock and mental agony and once he was able to recover from the shock of the survey proceedings, he has written the letter to the AO retracting from the surrender so made.
Therefore as far as period within which the retraction has been made, we find that the same has been made within a reasonable period of two weeks of close of the survey proceedings and therefore it is not a case where the assessee has filed the return of income retracting from the surrender so made and/or waited for issuance of the show cause by the AO and thereafter, he has retracted from the surrender so made.
We are therefore unable to subscribe to the view of the ld CIT(A) where he says that where the retraction is not made on an immediate basis, the same loose relevance after a course of time and appear to be an afterthought to evade the due taxes. The decision of the Hon’ble Delhi High Court in case of Avinash Satia [2017 (5) TMI 172 - DELHI HIGH COURT] doesn’t support the case of the Revenue as in that case, the retraction was made after a gap of two years. Similarly, the decision of MAC Public Charitable Trust [2022 (11) TMI 137 - MADRAS HIGH COURT] doesn’t support the case of the Revenue as in that case, the retraction was made after a period of eight months. In our considered view, given the fact that the retraction has been made within a short period of two weeks of conclusion of the survey proceedings and even for intervening period of two weeks, the assessee has provided the necessary explanation which we find reasonable given the facts and circumstances of the present case, the retraction so made doesn’t loses its significance and clearly cannot be held as an afterthought.
Basis of retraction of the surrender so made by the assessee, we find that the surrender was originally made in respect of alleged excess stock, alleged excess cash and alleged unexplained advances. Regarding excess stock, we find that the assessee has duly demonstrated before the AO as well as during the appellate proceedings that the surrender towards excess stock has been wrongly taken by the survey team and the same is evident from the findings of the Ld. CIT(A).
Therefore, where the AO during the assessment proceedings has accepted that as against the value of stock as per books of account taken at the time of survey amounting to Rs. 1,05,94,990/-, the actual stock as per the books of account was Rs. 65,74,354/- the same supports the contention advanced by the assessee that the surrender has been wrongly taken by survey team based on the incorrect facts.
Both the value of stock as per books of account and stock physically found, the survey team has completely faltered in determining and seeking surrender and therefore where the assessee in the retraction letter claims that there was no excess stock found during the course of survey and surrender taken under coercion and threat, we have no hesitation in accepting the said contention advanced by the assessee. Therefore, the retraction towards excess stock is concerned, the assessee has duly demonstrated that the statement initially recorded during the course of survey was factually incorrect and was therefore recorded under coercion and threat by the survey team.
Alleged advances - As gone through the seven pages of the diary marked as “Prince” seized during the course of survey and find that there are certain names and the amounts which have been written against these names. There are no dates, no description in terms of whether the amount written against the respective names are received by the assessee or paid by the assessee and the date of receipts / payments and falling under which financial year. No other documentary material has been found during the course of survey which corroborates such entries /contains complete identity details of these persons so found mention in the said diary and the nature of transaction so referred therein - no hesitation in accepting the contention advanced by the assessee that such notings have no link or connection with the business of the assessee and even the identity of those alleged persons was not verified and therefore there was no material in possession of the survey team to seek surrender and the surrender so taken was therefore a surrender under coercion and threat and which cannot be sustained in the eyes of law. Therefore, the retraction as far as alleged advances is concerned, we again find that the assessee has duly demonstrated that the statement initially recorded in this regard during the course of survey was factually incorrect and was therefore recorded under coercion and threat by the survey team.
Excess cash - We find that there was cash physically found at the time of survey and cash inventory was duly prepared by the survey team. As per copy of the cash inventory available at page 77 of APB, there was cash amounting to Rs 982,579/- which was found, counted in presence of the assessee and subsequently handed over to him. It is also not in dispute that cash as per books of accounts as on the date of survey was Rs 57,579/-. Therefore, as far as retraction regarding differential cash over and above recorded in the books of accounts of Rs 9,25,000/- is concerned, we find that the retraction so made by the assessee is not factually correct and the same therefore cannot be accepted. The action of the AO in bringing to tax excess cash of Rs 925,000/- so found during the course of survey and upheld by ld CIT(A) is hereby confirmed and the contentions advanced in this regard on behalf of the assessee are rejected.
As far as excess stock and alleged advances there is no basis to make the addition solely basis the statement so made by the assessee as the assessee has duly demonstrated that the surrender so made was factually incorrect and taken under coercion and threat and the same deserve to be set-aside.
GP estimation - Coming back to the findings of the CIT(A), we find that the ld CIT(A) while deleting the addition towards the excess stock had recorded a finding that there was in fact shortage of stock - We have no hesitation in confirming the same as the same has been arrived at basis material provided by the assessee during the assessment and appellate proceedings, duly verified by the AO during the remand proceedings and thus basis material available on record and therefore, cannot be in dispute. Therefore, the various contentions so raised by the assessee which are more in the context of survey proceedings cannot be accepted. The ld CIT(A) has considered the shortage of stock as out of books sales and directed to apply gross profit rate of 10% which is hereby restricted to 8.02% as per accepted gross profit rate for the year under consideration and to this limited extent, the alternate contention of the assessee is accepted.
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2024 (4) TMI 976
Validity of the assessment framed u/s 153A - validity of statement recorded of the assessee u/s 132(4) - whether authorized officer could not go beyond the seized papers u/s 132 in the case of an assessee for recording statement u/s 132(4)? - HELD THAT:- In the case in hand, the assessee was not found in possession or control of any books of account or other document or any assets as mentioned under the provisions of section 132(4) of the Act. Even no incriminating material was found during the search action at the residential premises of the assessee. Even the statement of the assessee has not been recorded during the search action carried out in his case in individual capacity at his residential premises.
As per the record, the statement of his wife, namely Chitra Badalia, who was also covered in the search action, was recorded, but nothing adverse was found recorded in her statement. The statement of assessee Ravi Badalia was recorded u/s 132(4) during the search action at the business premises of Badalia Gems Pvt. Ltd., however, even there, he was not found in possession or control of any books of account, other documents or assets relevant to the assessment of his income. Even no incriminating material either in the shape of books of accounts/ other documents or in the form of assets representing his any undisclosed income was found during the course of search.
Such a statement of his, having recorded in contravention of the statutory provisions and without the mandate of the law, would not have any evidentiary value and cannot be made basis for the impugned additions. Even the admission, if any, made during such an statement, which is recorded against the mandate of the statute, cannot be relied upon. The impugned additions are liable to be set aside on this score.
Whether the loose sheet recovered in an unconnected earlier search action from the premises of third party can be brought in and used to confront the assessee during the course of search action? - We find force in the above submissions of assessee. The search party has not been empowered either under the Act or under the Rules to bring any document, article, or any other thing along with them to the premises to be searched under the warrant of authorization. Rather a right has been given to the person whose premises has to be searched to have personal search of all the members of the search party before the start of the search and even after the conclusion of the search.
Even in the Performa warrant of authorisation in Form 45, no such powers have been given to the search party to bring the outside material to the searched premises. In our view, the search party was not justified, rather, has acted in defilement of their jurisdiction to bring the seized material in the case of Kasera Group lying in their office record, to the premises of M/s Badalia Gems Pvt. Ltd in separate and subsequent search action carried out u/s 132 of the Act and confront the assessee on the said material especially when no incriminating material was found in relating to the search action in the case of the assessee carried out his residential premises and even no incriminating material was found during the search action carried out in the case of M/s Badalia Gems Pvt. Ltd. at their business premises. Thus the search conducted by the search party is vitiated and no reliance can be placed on the search and seizure reported or even statement recorded of any person during such a vitiated search action, as it fails the mandate of law.
Reliance upon the material seized during the search in case of third party without adhering to the provisions of section 153C - As per the special provisions u/s 153C of the Act, in case of any incriminating material is found during the course of a search action which is relating to a person other than the searched person, then the procedure as laid down u/s 153C of the Act is to be followed for making assessment/reassessment of such other person. In that case, if the AO of the searched person is satisfied that the assets/material found during the search action relates to other person, then the AO of the searched person is supposed to handover/send that material to the AO having jurisdiction over such other person and further that the jurisdictional AO of the said other person will have to record a satisfaction that such material has a bearing on the determination of income of such other person and the six assessment years preceding the date of receipt of such material/books of account gets reopened and the AO of such other person is required to make assessment in accordance with the provisions of section 153C of the Act. It is not open to the Assessing Officer of such other person to use that material in a subsequent assessment carried out u/s 153A of the Act in case of such other person unless the proceedings u/s 153C are pending against such other person on the date of search.
Time limit for completion of assessment u/s 153A - The special provisions of sections 153A, 153C and 153D of the Act prevail over the general provisions and if the AO/Income Tax Authorities have failed to proceed upon an assessee under such provisions in respect of search cases and the limitation to proceed in such cases against an assessee has expired, then the search material, in our view, cannot be used in any other assessment proceedings as holding to the contrary will make the provisions of section 153C r.w.s. 153B as otiose and redundant.
As no incriminating material whatsoever was found during the course of search action in the case of the assessee. The alleged incriminating material found in the case of a past search action in the case of third party i.e. Kasera Group was not acted upon and no proceedings u/s 153C of the Act were initiated or even contemplated and then, in our view, the AO cannot make basis of such dead material in the subsequent assessment proceedings carried out in the case of the assessee u/s 153A of the Act to make the impugned additions, when the limitation to proceed u/s 153C on the basis of said looses sheets/incriminating material has already expired in terms of the provisions of section 153B of the Act.
Moreover, no incriminating material was found during the search action in the case of the assessee. The assessee was not found in possession or control of any incriminating material or books of accounts. Under the circumstances, as per the provisions of section 132 of the Act read with provisions of section 153B of the Act, firstly the search party exceeded its jurisdiction in recording of statement of the assessee u/s 132(4) secondly by bringing the documents from its record and thereby confronting the assessee in respect of the said document during the recording of the statement would not infuse life in such dead documents. The assessee succeeds on this legal ground.
Abated vs Non-abated Assessment - whether the proposition that no addition can be made in case no incriminating material is found during the course of search action in case of unabated (not pending) assessments for the relevant assessment year would be applicable in this case? - Only those assessments or reassessments shall abate which are pending on the date of initiation of search u/s 132. The term ‘pending’ means something/some action which has commenced but not concluded.
Different interpretation of the term “pending” cannot be given in relation to “assessment” and “reassessment”. Since, the word ‘pending’ has been used in context to both ‘assessment’ and ‘reassessment’, therefore, it has to be read in the same context for ‘assessment’ and ‘reassessment’. Under the circumstances, in our view, the word pending would mean those assessments or reassessments, which have been initiated but not concluded on the date of search. If no assessment or reassessment has been initiated by issuing the notice u/s 143(2) or u/s 148 of the Act, as the case may be, then the same cannot be said to be pending on the date of search.
In the case in hand, neither any assessment proceedings u/s 153C were initiated nor pending on the date of search. Even no other assessment proceedings were initiated, hence not pending on the date of search. Since, no assessment was pending on the date of search, therefore, no assessment stood abated on the date of the said search. Since, no assessment stood abated, hence the assessment year under consideration would fall within the scope of unabated assessment year. Therefore, as per law laid down in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] AO was not justified to make the impugned additions in the absence of any incriminating material found during the course of the search action. Decided against revenue.
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2024 (4) TMI 942
TP Adjustment - selection of MAM [Most Appropriate Method] - Assessee had adopted Resale Price Method (“RPM”) for import of coal and Transactional Net Margin Method (“TNMM”) for import of pulses from its Associate Enterprise (“AE”) for determining Arms Length Price (“ALP”) - Assessee had also exported rice to its AE and followed TNMM to ascertain ALP - ITAT has held that choice of method is not an unfettered choice of the taxpayer, but has to be exercised on touchstone of principles governing Most Appropriate Method (“MAM”) as prescribed u/s 92C(1) of the Act and the TPO has overriding power of course correction as per Section 92C(3) of the Act.
HELD THAT:- Whenever both methods, i.e., CUP as well as TNMM can be applied, the traditional transaction methods are to be preferred over traditional profit methods. He thereafter proceeded to apply the CUP method and conducted a search on the Bloomberg database to find the sale price of rice. Without ascertaining or explaining in detail whether the rates were for products exported from India or from any other country or specifying whether the rates relate to controlled or uncontrolled transactions or whether it relates to retail or wholesale market, the TPO simply proceeded on the basis of Bloomberg database. In fact Assessee had even provided the rates accepted by the Indian Custom’s Department for export of rice and requested that the same be considered for CUP analysis as the same would be more reliable. Assessee also submitted that it realized more price on exports than the rates quoted by the Custom Authorities. The TPO without explaining as to why he wanted CUP method to be followed and not the TNMM followed by us as Assessee and without clarifying whether the rates applied were for products exported from India or any other country or whether it related to controlled or uncontrolled transactions or retail or wholesale or as to why the Custom’s rates are not acceptable, proceeded to fix the ALP purely relying on the Bloomberg database that was available with them.
DRP also did not accept Assessee’s objections in its entirety. The ITAT accepted that these were the mistakes in the order of TPO, inasmuch as the TPO without realizing the factual aspects, simply rejected the method adopted by Assessee. It is also recorded that Assessee’s contentions that Bloomberg database was not reliable or that Assessee’s export price was more than the Indian Custom’s quoted rate and accordingly, exports are at ALP even under CUP method has not been controverted by the Departmental Representative. No reason to find fault with the conclusion arrived at by the ITAT. No substantial questions of law, therefore, arise. Appeal dismissed.
ITAT justification in stating that CUP is most appropriate method for bench-marking the transaction of import of minerals - HELD THAT:- ITAT accepted the contentions of Assessee that it had compared its import rates of coal imported from a country against the indices published by the agencies of the same country. ITAT also accepted that the rates are generally declared for a particular quality available in that country and the same quality should have been imported by Assessee and hence, it cannot be presumed that the price quoted does not take into account ash & moisture content. The ITAT also rejected the reasons given by the TPO that Assessee has made arbitrary adjustment to the prices quoted by the indices with the intention to bring the same to the tolerance level of +/- 5%. It accepted the scientific calculation given by Assessee to arrive at the prices. The ITAT has arrived at its conclusion on factual basis with valid reasons. No substantial questions of law arise.
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2024 (4) TMI 941
Deemed income u/s 56(2)(x) - Defective Show cause notice - Addition of Unexplained investment u/s 69 - charged to tax u/s 115BBE - stamp duty value of the said flat unexplained - case was selected for scrutiny under CASS to examine “Capital Gains Deduction Claimed - SCN issued why the stamp duty value of the said flat should not be treated as deemed income of petitioner u/s 56(2)(x) and deduction u/s 54F of the Act be denied - order passed in which Respondent No. 3 proposed to treat the entire stamp duty value of the said flat as unexplained investment u/s 69 and charged to tax u/s 115BBE of the Act.
As submitted Development agreement was executed by and between the owner of the building owners of the building agreed to grant development rights in respect of the building and agreed to permit the developer to develop the property on terms and conditions mentioned therein, wherein the developer was required to provide permanent alternate accommodation to the tenants/occupants and as mandated by Maharashtra Housing and Area Development Authority (MHADA), the developer entered into permanent alternate accommodation agreement with the tenants/occupants.
HELD THAT:- Admittedly, no notice has been issued to assessee/petitioner calling upon assessee to show cause whether the entire stamp duty value be treated as unexplained investment under Section 69 of the Act. In the affidavit in reply, the answer given to this allegation of petitioner that no notice was given to show cause under Section 69 of the Act is that the assessment was getting barred by limitation and there was no time for further show cause notice and hence the Faceless Assessing Officer (FAO) has passed the assessment order after considering all the submissions and possible aspect of the case and agreement value of the new purchased property is treated as unexplained investment under Section 69 of the Act and added to the total income of assessee. In the assessment order though there is reference to Section 56(2) (x) of the Act and the reply/objections filed by petitioner in response to the show cause notice, in the operative part there is no reference to Section 56(2)(x) of the Act.
The courts have time and again held that issuance of show cause notice is not an empty formality. Its purpose is to give reasonable opportunity to the affected persons to effectively deal with the allegations in the show cause notice. In our view, even the show cause notice dated 23rd August 2022 is defective in as much as even though it had reference to Section 56(2)(x) of the Act, it did not mention whether the AO proposed to treat the stamp duty value as deemed income of assessee under clause (a) or clause (b) of Section 56(2)(x) of the Act.
This is because both are separate provisions and under either of these two clauses the stamp duty value could be treated as deemed income. By not specifying whether Section 56(2)(x)(a) or Section 56(2)(x)(b) of the Act was applicable, the A.O. first of all has not given reasonable opportunity of showing cause to the assessee. Assessee would be totally unaware of the grounds which had prompted the A.O. to arrive at a prima facie conclusion and issue show cause notice. The power that the A.O. had was required to be executed properly. Moreover in the assessment order that is impugned in the petition, the A.O. has chosen to give Section 56(2)(x), a go by and treat the stamp duty value of the flat as from unexplained source under Section 69 of the Act. There is no reference to Section 56(2)(x) of the Act in the operative part of the order.
Thus the impugned order cannot be sustained. The allegations in the affidavit in reply that assessee has claimed tenancy rights as colourable device in order to get an exemption under the provisions of the Act and evade the tax liability also cannot be accepted because if the A.O. had evidence to that effect the same should have been stated in the show cause notice.
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2024 (4) TMI 940
Obligation to pass a draft assessment order u/s 144C (1) - whether on remand the A.O. was obliged to pass a draft assessment order u/s 144C (1)? - HELD THAT:- The Division Bench of this court in Dimension Data Asia Pacific PTE Ltd. [2018 (7) TMI 1256 - BOMBAY HIGH COURT] has considered this issue. The court held that even in partial remand proceedings from the Tribunal, the A.O. is obliged to pass a draft assessment order u/s 144C (1) of the Act.
In our view this is a clear case of jurisdictional error. The assessment order passed by the A.O., i.e., impugned in this petition is vitiated on account of lack of jurisdiction and requires to be quashed and set aside as void ab initio.
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2024 (4) TMI 939
Rejection of application u/s 119(2)(b) for condoning the delay in filing the Form 10B - delay was about 1257 days - assessment of trust - Petitioner/trust explained the cause for delay on the Chartered Accountant/Auditor - According to Petitioner, when it sent Form No. 10B to the Department for submission after filing the return, the Departmental staff refused to acknowledge the manual submission and Petitioner was told to file the same online - HELD THAT:- Admittedly, Petitioner is a charitable trust. Admittedly, Petitioner has been filing its returns and Form 10B for AY 2015-16, for AY 2017-18 to AY 2021-22 within the due dates. On this ground alone, in our view, delay condonation application should have been allowed because the failure to file returns for AY 2016-17 could be only due to human error. Even in the impugned order, there is no allegation of mala fide.
As held in Sarvodaya Charitable Trust [2021 (1) TMI 214 - GUJARAT HIGH COURT] the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, Respondent No. 1 might be justified in denying the exemption by rejecting such condonation application, but an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
Moreover, in our opinion, Petitioner does not appear to have been lethargic or lacking in bona fides in making the claim beyond the period of limitation which should have a relevance to the desirability and expedience for exercising such power. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so to avoid genuine hardship.
Thus delay was not intentional or deliberate. Petitioner cannot be prejudiced on account of an ignorance or error committed by professional engaged by Petitioner. In our view, Respondent No. 1 ought to have exercised the powers conferred. Thus we quash and set aside the impugned order passed under Section 119(2)(b) of the Act dated 25/10/2023 and condone the delay in filing form 10B.
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2024 (4) TMI 938
Validity of Reopening of assessment u/s 147 - reason to believe - Reply of the assessee through reproduced but the contents thereof are not even referred or analyzed prima facie - whether it is a fit case to issue notice u/s 148 of the Act or not - HELD THAT:- AO has reproduced the reply filed by the assessee and the contents thereof are not even referred or analyzed prima facie to come to the conclusion that it is a fit case to reopen the assessment.
Petitioner along with the reply has reproduced the following documentary evidence of purchase, delivery and payment to show the genuineness of the transactions entered into with M/s. S. K. Enterprises.
This Court, by order [2024 (4) TMI 891 - GUJARAT HIGH COURT] has directed the Respondent to place on record the original papers containing the documents which are supplied by the petitioner in reply to the notice u/s 148A(d) of the Act. Respondent as stated that the documents have been placed on record by the petitioner, as referred hereinabove.
Thus we are of the opinion that the impugned order and the notice are required to be quashed and set aside remanding the matter back to the Assessing Officer to pass a fresh order under Section 148A(d) of the Act within a period of four weeks from the date of receipt of the copy.
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2024 (4) TMI 937
Reassessment proceedings against company insolvent/dissolved - whether the demand raised pursuant to the assessment order passed after the resolution plan approved by the NCLT on 1st July, 2022 would extinguish or not? - HELD THAT:- The Hon’ble Apex Court in case of Ghanshyam Mishra & Sons (P) Ltd [2021 (4) TMI 613 - SUPREME COURT] has held that once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of section 31 of IBC, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors [including the Central Government, any State Government or any local authority, guarantors and other stake holders. On the date of approval of the resolution plan by the adjudicating authority all such claims which are not part of the resolution plan shall stand extinguished and no person is entitled to initiate or continue any proceeding in respect to a claim which is not part of the resolution plan.
In view of the above conclusion arrived at by the Apex Court after considering the entire Scheme of the IBC, the demand which was raised pursuant to the order by issuing the demand notice cannot be said to be in respect to a claim which is part of the resolution plan.
The proceedings which were continued under section 147 r.w.s. 144 by the respondent, was also not a proceeding in respect to a claim which is not part of the resolution plan. In such circumstances, the notices issued by the CIT (A) and reference for the hearing of the appeals filed by the petitioner challenging the assessment order would extinguish on 01.07.2022 as no demand would remain in existence in absence of any claim raised before the RP by the respondent authority - so far as the framing of the reassessment pertaining to the Assessment Year 2018-19 in absence of any demand pending as on 01.07.2022 and as such demand raised subsequently would not be a part of the claim to be made before the RP. As no demand to be claimed was in existence when the NLCT passed the order on 01.07.2022 and therefore, the demand which has arisen pursuant to the assessment order dated 13.03.2022 cannot be said to have been extinguished. Therefore, so far as notices issued by the CIT (Appeals) are accordingly quashed and set aside.
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2024 (4) TMI 936
Delay in filling of an appeal before ITAT - delay of eight years, eighty-eight days - HELD THAT:- Assessee does not have sufficient reason for such a huge delay of eight years eighty-eight days. In this case, assessee failed to file Return of Income for A.Y. 2015-16, therefore, Department issued notice u/s 148 on 30.03.2022. One of the issues in the re-assessment proceedings was non-availability of registration under section 12AA of the Act. Assessee in the affidavit had admitted that at that point of time, assessee realized about rejection of 12AA application in 2014.
Even after that assessee had filed appeal before this Tribunal on 09.03.2023 i.e. after a gap of one year. Thus, even after realizing the fact, assessee delayed filing of appeal by one year. The procedure for registration u/s 12AA was amended by Finance Act, 2020. Accordingly, assessee had applied for provisional registration and it was granted to assessee on 24.09.2021 for A.Y. 2022-23 to A.Y. 2024-25. Thus, even at the time of applying for provisional registration under the amended scheme, assessee failed to realize that assessee’s application for registration under 12AA was rejected on 11.11.2014. Chronology of these events explain that assessee was callous and not serious towards the registration.
As assessee’s application for condonation of delay is rejected. Accordingly, appeal is dismissed on the ground of delay.
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2024 (4) TMI 935
Exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) - appellant is a cooperative society engaged in the business of providing credit facilities - HELD THAT:- It is an admitted fact that the appellant is a cooperative society engaged in the business of providing credit facilities. It does not enjoy any license to carry on the business of banking from Reserve Bank of India. Therefore, as held in the case of PCIT vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023 (5) TMI 372 - SC ORDER] that the assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act. Reliance in this regard can also be placed on the decision of Quepem Urban Co-operative Credit Society Ltd [2021 (5) TMI 406 - BOMBAY HIGH COURT].
Allowability of exemption under the provisions of section 80P(2)(a)(i) in respect of interest income earned by a cooperative society from the scheduled banks - The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit [2018 (12) TMI 1926 - ITAT PUNE] taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT]
The interest income earned on fixed deposits with cooperative bank/scheduled bank partakes character of the business income, which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Therefore, direct the Assessing Officer to allow the exemption u/s. 80P(2)(a)(i) of the Act. Thus, the grounds of appeal filed by the assessee stand allowed.
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2024 (4) TMI 934
Penalty u/s 271(1)(c) - CIT(A) deleted addition made u/s 69C based on the Remand Report filed by the AO - as argued quantum proceedings were subjudiced and it was requested by the appellant to keep the penalty proceedings in abeyance till the disposal of quantum appeal - HELD THAT:- The present appeal is against penalty order under section 271(1)(c) of the Act levied on the basis addition made u/s 69C of the Act for A.Y. 2010-11 and A.Y. 2012-13. Since the ld.CIT(A) has deleted the addition under section 69C of the Act, the penalty does not have any limbs to stand. In these facts and circumstances of the case, we direct the AO to delete the penalty levied under section 271(1)(c) of the Act. Accordingly, grounds of appeal filed by the assessee are allowed.
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2024 (4) TMI 933
Assessment of trust - Rate of Tax - Maximum Marginal Rate (MMR) - Charging the assessee as per the provisions of section 164(1) or 164(2) - rate as applicable to Individual and AOP - issue raised by the assessee that the trust has not issued any exemption u/s 12A of the Act. Though the assessee’s income can be charged to tax at maximum marginal rate or as per the normal provisions of the Income Tax Act
Assessee argued that beneficiary are the general public so there is no share of beneficiaries whether known or unknown as the assessee is trust so charging the assessee as per the provisions of section 164(1) as held by the CIT(A) is incorrect and the relevant facts has not been appreciated - HELD THAT:- On going through the trust deed it is apparent that there is no share of beneficiary whether no one or unknown as the assessee trust is so charging the assessee as per provisions of Section 164(1) is incorrect and the relevant provisions of section 164(2) of the Act which is specific charging of section for a trust. Thus, when the specific provisions of charging tax, the general provisions cannot be made applicable in this case. The ld. AR of the assessee also submitted that similar issue has been dealt with by the Revenue for assessment years 2015-16, 2016-17 & 2018-19 as per provisions of Section 164(2) of the Act.
As decided in SHRI DIGAMBAR JAIN MANDIR TRUST CHARANWAS VERSUS AO, MAKRANA, ITO, WARD-1, MAKRANA [2024 (4) TMI 661 - ITAT JODHPUR] assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individual and AOP - decision of the ld. CIT(A) to charge the assessee u/s. 164(1) is not correct it should be charged based on the specific provision of the Act u/s. 164(2) of the Act and the tax rate as applicable to that 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee.
Thus we direct the ld. Assessing Officer to charge the assessee as per provisions of Section 164(2). Appeal of the assessee is allowed.
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