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Income Tax - Case Laws
Showing 161 to 180 of 175810 Records
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2025 (6) TMI 1999
Unexplained sales found from EmmEss- Gold software maintained found during the course of survey action carried out by the investigation wing - as per revenue during the course of search, digital data were found & seized having record of whole accounted as well unaccounted transaction. i.e., Gold purchase/ sale & in/out of Gold bar in the digital form, on which the assessing officer has relied upon - HELD THAT:- As entries written as '1'/'2' against the name of the assessee in the said 'EmmEss-Gold' software represented inward entries (and not quantity) of goods received from the assessee and that the said transactions were recorded in their books of accounts.
Accordingly, the assessee inquired about the matter with the V. K. Group and it is given to understand that the successor A.O., while framing the assessment in case of entities of V. K. Group, examined the 'EmmEss-Gold' software in depth and thereafter, accepted the submission of the V. K. Group that the entries written as '1'/'2' in the 'EmmEss-Gold' software represented inward entries only and the same did not represent any quantity.
Thus, when no addition was made on account of unaccounted purchases in case of V. K. Group who is the author of alleged incriminating material in digital form, there remains no basis whatsoever to sustain any addition on account of alleged unaccounted sales in the hands of the assessee, more particularly, when no incriminating material was found during the search in case of the assessee. Decided against revenue.
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2025 (6) TMI 1998
Addition u/s. 68 r.w.s. 115BBE - unexplained credit - conversion of a private company into a limited liability partnership (LLP) and the treatment of accumulated profits - assessee firm upon conversion to LLP has transferred the share capital and reserves and surplus to the partners’ accounts - AO held that as the assessee has violated the conditions of Section 47(xiiib)(f) of the Act, where it cannot take any amount directly or indirectly to any partner, out of accumulated profit for a period of 3 years from the date of conversion - CIT(A) deleted addition
HELD THAT:- Section 47 pertain only to transfer for the purpose of Section 45 which is for determining the capital gain on profits or gains arising from such transfer of a capital asset. In the present case in hand, though the ld. AO has specifically mentioned that the assessee has violated the conditions u/s. 47(xiiib)(f) of the Act, he has proceeded to make addition u/s. 68 of the Act, which is specifically for credits in the books of the assessee for which the assessee offers no explanation as to the nature and source to the satisfaction of the ld. AO.
In the present case in hand, it is not the issue of credits found in the assessee’s books of accounts rather it is the allegation that the assessee firm upon conversion to LLP has transferred the share capital and reserves and surplus to the partners’ accounts, which is quite evident that the nature and source of the credit is not unexplained.
AO has also erred in making addition in the hands of the assessee, when even assuming that there was transfer, it is the credit in the partners’ account and not in the assessee’s account.
We are not justified in upholding the addition made by the ld. AO u/s. 68 of the Act, were none of the ingredients of the said provision is attracted in present case in hand. The violation of condition prescribed u/s. 47(xiiib)(f) of the Act is only with regard to the computation of capital gain u/s. 45 on certain transfers of a capital asset.
AO has failed to give a finding on the issue of whether the alleged transfer would be liable for capital gain and that to the same has to be in the hands of the transferor. As this issue is not before us and it is also not the case of neither the revenue nor the assessee, we are refraining from giving our view on the same.
The limited scope of the present appeal is pertaining to Section 68 addition which we have given a categorical finding that the same is not attracted in the present case in hand on the abovementioned observation. We therefore find no infirmity in the order of ld. CIT(A) in deleting the impugned addition. Assessee appeal allowed.
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2025 (6) TMI 1997
Assessment u/s 153A - prior approval u/s 153D by the Joint Commissioner of Income Tax (JCIT) or Additional Commissioner of Income Tax (Addl. CIT) - HELD THAT:- For making the assessment under section 153A of the Act the approval u/s 153D by the approving authority is mandatory and cannot be a mere formality and also should not suffer from lack of application of mind based on examination of the relevant material available on record.
There should also be some indication of the material examined to show that order of the approval is not mechanically granted by the approving authority. It is also the duty of the AO to submit the draft assessment order well in advance so that the approving authority does not face any time constraints before granting of the approval.
In the case on hand, the approving authority on the very same date of submitting draft assessment orders on 29.09.2021 granted the approval and the assessment order was passed on 30.09.2021. The argument of DR could not be accepted that there were involvement between the Approving Authority and the AO and the approving authority has therefore applied his mind and has not granted approval in a mechanical manner. Whereas the facts based on the material available before us display a different scenario.
We are therefore of the considered opinion that in view of the aforesaid discussion based on the facts and circumstances of the instant case, the approval granted by the JCIT is not based on examination of the relevant documents and provisions of the Act and has been acted in time constrained pressure and therefore lacks application of mind and suffers from perversity and consequently cannot be sustained.
Thus, we are of the opinion that the approval cannot be considered as valid in the eyes of law which would entail the assessment order passed under section 143(3) r.w.s. 153A as invalid being void ab-initio. Accordingly, ground raised by the assessee is allowed.
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2025 (6) TMI 1996
Deduction u/s.80P(2)(a)(i) - character of income - interest income earned by the assessee, a cooperative credit society, from deposits with cooperative banks - HELD THAT:- Hon’ble High Court of AP &TS [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] held that Interest Income earned by investing Income derived from Business of providing credit facilities, Loans by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) of the Act.
Kerala High Court in the case of Pr.CIT Vs. Sahyadri Co-operative Credit Society Ltd. [2024 (9) TMI 1278 - KERALA HIGH COURT] has held that the character of income does not change. The Hon’ble Kerala High Court held that interest earned from deposits in permitted banks will be eligible for deduction u/s.80P of the Act. The Hon’ble Kerala High Court’s decision is dated 04.09.2024 means, after the decision of Hon’ble Supreme Court in the case of Totagar’s Co.operative Sales Society Ltd. [2010 (2) TMI 3 - SUPREME COURT]
Accordingly, we hold that assessee is eligible for deduction u/s.80P of the Act, on the interest income earned by the assessee from Co-operative Banks and Nationalized Banks. Assessee appeal allowed.
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2025 (6) TMI 1995
Deduction u/s. 80P(2)(d) - interest income earned by the assessee from investments made with Pune District Central Cooperative Bank Ltd. (PDCC) - revenue denied the deduction as PDCC is not a Cooperative Society.
HELD THAT:- This issue is no longer res integra by virtue of catena of decisions taking consistent view that interest income earned from deposits with Cooperative Banks is eligible for deduction u/s. 80P(2)(d) of the Act. Recently, this Bench in the case of Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal [2025 (6) TMI 963 - ITAT PUNE] wherein allowed the deduction claimed by the assessee u/s. 80P(2)(d).
Deduction claimed by the assessee on the interest income earned from deposits/Investments with Lokmangal Cooperative Bank u/s. 80P(2)(d) deserves to be allowed. Assessee appeal allowed.
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2025 (6) TMI 1994
Validity of reopening of assessment - as argued assessment order passed without serving notice - HELD THAT:- Considering the material placed before us it is clear that that the assessment order has been passed without serving the notice.
Assessment Order has been passed without serving the notice u/s 148 of the Act either to the registered address of the Assessee or to the address mentioned in the PAN data and the address mentioned in the Return filed by the Assessee during the relevant point of time and the Revenue has also not produced any document to prove the same otherwise.
Therefore, the assessment order passed without serving the notice u/s 148 of the Act cannot be sustained. Accordingly, both the assessment order as well as the order of the Ld. CIT(A) are hereby set aside. Assessee appeal allowed.
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2025 (6) TMI 1993
Reopening of assessment - time available/left to issue notice u/s 148 of the Act as per Section 149 of the Act read with TOLA - period of limitation - new regime - HELD THAT:- In the present case, the notice under erstwhile provision of Section 148 of the Act was issued on 23/06/2021 under the provision of Section 148 of the Act i.e.prior to substitution of Section 148 by Finance Act, 2021, w.e.f. 01/04/2021.
The Hon'ble Supreme Court vide its Judgment in the case of Union of India Vs. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] deeming the notice issued under the erstwhile Section 148 of the Act as Notice under Section 148A(b) of new Law as amended by Finance Act, 2021 and directing that material/information be given in 30 days from date of the said order and Assessee's shall reply within two weeks thereafter.
A.O. issued a letter u/s 148A(b) of the Act on 25/05/2022 pursuant to the Judgment of Hon'ble Supreme Court in the case of Ashish Agarwal (supra). The time limit to file reply was till 10/06/2022 and the Assessee filed reply on the same day. The time excluded as per third proviso to Section 149(1) of the Act as per Hon'ble Supreme Court decision in Rajeev Bansal’s case is from 23/06/2021 to 10/06/2022 i.e. from the date of original 148 notice which was deemed as show cause notice u/s 148A(b) of the Act till the supply of the material and time allowed to the Assessee to file the reply. The time available/left to issue notice u/s 148 of the Act as per Section 149 of the Act read with TOLA was 7 days i.e: from 23/06/2021 to 30/06/2021. However, in the present case, notice under Section 148 of the Act was issued on 23/07/2022, which is barred by limitation.
Also applying the ratio laid down by the Hon'ble Supreme Court in the case of Union of India Vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] we are of the opinion that notice issued u/s 148 of the Act dated 23/07/2022 is barred by the period specified u/s 149 of the Act. Consequently, the re-assessment proceedings initiated thereupon is hereby quashed.
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2025 (6) TMI 1992
Reopening of assessment u/s 147 - Unexplained cash credit - assessee is one of the beneficiary as indulged in the purchase and sale of penny stock associated by racket for generating bogus LTCG/ bogus STCG/bogus Loss - AR submitted that, the assessee did not take any benefit of the loss earned from sale of alleged stock and offered only commission income earned from financial and brokerage activities under 44AD.
HELD THAT:- AO made ad hoc disallowance 3% towards commission u/s.69C in respect of the sale proceeds received from sale of Diamant Infrastructure Ltd.
And 5% of the total sale purchase transaction under taken by the assessee was disallowed due to non filling of the quantitative details and the period of holding of the other scripts.
In the interest of the justice we deem it appropriate to remit this issue back to the Ld.AO for denovo consideration to verify the transaction of sale and purchase undertaken by the assessee in various scripts at BSE-NSE floors.
Merely because Diamant Infrastructure Ltd. is alleged to be a penny stock, unless correlation is made in respect of the phenomenal price rise with a transaction under taken by the assessee addition cannot be made in the hands of the assessee unless the AO makes out a case of unaccounted money through impugned shares in the hands of the assessee no disallowance can be made in respect of the same.
We remit this issue back to the Ld.AO to considerate afresh in accordance with law.
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2025 (6) TMI 1991
TP Adjustment - assessee gave loan to its AE in Dubai against which interest at the rate of 1 year LIBOR + 2.5% p.a. being 3.8% on the outstanding at the end of the each financial year was charged - CIT directing the assessing officer to refer the international transaction reported by the assessee in form 3CEB of the transfer pricing officer for computing arms length price.
Whether the interest rate prevailing in India should apply because the lender is in India, or the lending rent prevailing in US$ is to be apply though the receiver of the loan is a resident of Dubai? - HELD THAT:- It is relevant to note the observation of Cotton nature India Pvt. Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT] wherein as categorically observed that, the currency in which the loan is to be repaid, determines the rate of return on the money lent.
In the present facts of the case it is not clear from the documents placed on record, as to what is currency in which the loan will be repaid, or is agreed to be repaid by the AE in Dubai. The assessee is therefore directed to furnish relevant documents in support to established the currency in which the repayment of loan is to take place. Based on such evidences the Ld.AO/TPO shall consider the manner in which the interest attributable to such is loan is to be computed.
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2025 (6) TMI 1990
Addition of ‘on-money’ - CIT(A) restricted addition to 25% - AO made addition by taking reference prices from the website 99 acres.com for the corresponding period and of his own reduced 20% to compensate all odds that it preferred location charges floor rise etc, and worked out the alleged-on money figure - HELD THAT:- We find that the ld CIT(A) restricted the addition to the extent of 25% thereof by following the order of previous assessment year. We find that the assessing officer has not made addition on the basis of any evidence in his possession. Thus, on independent examination of facts of the present case, we do not find any justification for making addition on the basis of extrapolation, hence, we uphold the order of ld CIT(Appeals) with our additional observation. In the result, this ground of appeal is dismissed.
TP Adjustment - Disallowance of interest on debenture and Disallowance of various expenses - HELD THAT:- We find that the addition is not based on any evidence found during search action. Rather, the assessing officer while making reference recorded that assessment in this case has become time barred on 31.12.2017. Still on the basis of report in Form-3CEB, he made reference to TPO for determination of ALP of alleged international transaction - CIT(Appeals) deleted both the additions by taking view that on identical issue in assesses own case for AY 2012-13, the assessing officer made similar addition of Rs. 137 crore in respect of amount received on account of issuance of CCD from Thirdscroll Holding Limited and equity shares to Azapel Holding Private Limited.
On appeal before learned CIT(Appeals), the additions were deleted and no further appeal is filed by revenue before Tribunal. It was also held that firstly; transaction of issuance of CCD was a quasi-capital in nature, secondly TPO has not determined ALP by following any of the method prescribed under section 92C(1) read with Rule 10AB to determine ALP.
Addition on account of interest paid on debenture is concern, interest paid to CCD is consequential to the grounds related to the amount received for issuance of CCD to Thirdscroll Holding Limited - Since the main ground of appeal was allowed in favour of assessee therefore, charging of interest is consequential. On independent consideration of facts, we further find that TPO has not adopted any of the method prescribed in section 92C(1) of Income Tax Act read with Rule 10AB of Income Tax Rules 1962. Thus, the adjustment suggested by TPO is not as per the mandate of law.
In Shell India Markets (P) ltd [2014 (11) TMI 897 - BOMBAY HIGH COURT] it was held by High Court that on issuance of shares by an Indian entity to its non-resident AEs, no income arise, hence, transfer pricing provisions under Chapter X would not be applicable. Hence, in view of factual and legal discussions, we affirm the order of ld CIT (Appeals) on our additional observations. In the result, the ground No. 2 & 3 of the appeal is dismissed.
Disallowance of various expenses - AO made disallowance of of-site expenses, miscellaneous expenses, travelling and convince expenses, sale promotion expenses - All expenses were disallowed by taking view that such expenditure is not incurred wholly and exclusively for the purpose of business - CIT(Appeals) allowed relief to the assessee by holding that all these expenses were incurred wholly and exclusively for the purpose of business. Further, none of the expenses is capital or personal in nature. Before us, no contrary facts or law is brought to our notice to reverse the finding of first appellate authority. Hence, we do not find any reasons to interfere with the order of learned CIT(Appeals). In the result, this ground of appeal is also dismissed.
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2025 (6) TMI 1989
TP adjustment - international transaction of the guarantee commission - MAM [Most Appropriate Method] - benchmarking technique - TPO noted that the assessee charged corporate guarantee fee of 0.5% for international transactions in relation to Associated Enterprise (AE) namely ‘OGDSHIL’ and NIL in respect of another AE namely ‘Varada’, applying ‘other method’ as ‘most appropriate method’ for benchmarking - HELD THAT:- We find that in the case of Foursoft P Ltd [2014 (4) TMI 285 - ITAT HYDERABAD] held that the guarantee given to associated enterprises located abroad is in the nature of international transactions.
In the case of Avanta India ltd [2015 (12) TMI 1406 - ITAT BANGALORE] Tribunal after considering the decision of Bahrti Airtel ltd [2014 (3) TMI 495 - ITAT DELHI] upheld the transactions of guarantee to associated enterprises as in the nature of international transactions. Thus, no error in the finding of the Ld. DRP that providing corporate guarantee to associated enterprises in relation to borrowing is an international transaction. We uphold accordingly.
Rate applied in an earlier assessment year relied for determining the arm’s length price in a subsequent year - TPO has adopted a methodology consistent with the provisions of the Income Tax Act and the Rules framed thereunder for computing the arm’s length price. Assessee was unable to demonstrate any infirmity either in the method of computation employed by the TPO or in the selection of comparables. It is pertinent to note that while bank guarantees issued by financial institutions to third-party independent entities are distinct in terms of risk profile from corporate guarantees issued between related parties, they are nonetheless functionally comparable, albeit with certain differentiating factors on the risk front. Corporate guarantees, though not identical, share substantial functional similarity with bank guarantees, necessitating suitable adjustments for risk differentials.
In the case at hand, the TPO has relied upon the bank guarantee commission rates charged by various banks during the relevant financial year as a comparable uncontrolled price (CUP), and has prudently applied a downward adjustment of 0.5% to account for differences in risk and other qualitative factors.
Hon’ble Tribunal in Glenmark Pharmaceuticals Ltd [2013 (11) TMI 1583 - ITAT MUMBAI] has endorsed the approach of considering the average bank guarantee commission rates as a valid CUP, subject to appropriate adjustments for the unique features of corporate guarantees.
We find no reason to depart from the said reasoning. Transfer pricing adjustment made by the learned TPO is in accordance with law and is, therefore, upheld. The ground No. 1 of the appeal of the assessee is accordingly dismissed.
Interest from income-tax refund under the head business income as against considered by the AO under the head ‘income from other sources’ - DRP has rightly rejected the assessee’s contention and has correctly held that interest received on income-tax refund is to be assessed under the head “Income from Other Sources.” In our considered view, the interest received on income-tax refund is not derived from any commercial or business activity undertaken by the assessee, but is a statutory accretion arising solely as a consequence of excess payment of tax to the revenue. Such interest bears no proximate or real nexus with the business operations of the assessee and is, in essence, a statutory compensation granted by law for the delay in the refund of monies legitimately due.
It does not partake the character of business income, nor can it be construed as arising in the normal course of the assessee’s business or trade. While it may be contended that classification under different heads is tax neutral in certain situations, such neutrality does not hold in cases where the assessee is claiming losses or deductions against business income.
Assessee appeal dismissed.
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2025 (6) TMI 1988
Rate of tax on Income offered during the course of survey u/s 133A - Additional income offered by the assessee on account of unexplained stock - Whether be taxed under the head business income OR u/s 69 / 69C r.w.s. 115BBE? - HELD THAT:- Tribunal in the case of Vijay Shriram Gundale [2023 (8) TMI 1643 - ITAT PUNE] following the decision of Bajargan Traders [2017 (11) TMI 388 - RAJASTHAN HIGH COURT] reversed the order of the Ld. CIT(A) and directed the AO to consider the excess stock found during the course of survey as normal business income instead of attracting the provisions of section 69B r.w.s. 115BBE of the Act.
Considering the fact that the only source of income of the assessee is from retail shoe trading and no other business activity has been found by the Revenue either during survey action or subsequently, therefore, the additional income so declared during the course of survey action has to be considered as business income to be taxed at normal rate instead of applying the provisions of section 69 / 69A / 69B / 69C r.w.s. 115BBE of the Act. We, therefore, uphold the order of the Ld. CIT(A) / NFAC and dismiss the grounds raised by the Revenue.
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2025 (6) TMI 1987
Reopening of assessment u/s 147 - notice after the expiry of four years - period of limitation - assessment has been made u/s 153A - HELD THAT:- First proviso to Section 148 of the Act as applicable at the relevant period, where an assessment under sub-section (3) of section 143 or 148 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
Thus if two conditions, first assessment has been made u/s 143(3)/148 of the Act and second, four years from the relevant assessment year expired then action u/s 148 can be taken only on failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
Now in the instant case four years has been expired and an assessment has been made u/s 153A of the Act, thus action u/s 148 can only be taken if there is failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year, which is not even mentioned in the reasons recorded by the AO and such failure renders the entire proceeding vitiated. The same is thus, quashed.
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2025 (6) TMI 1986
Revision u/s 263 - whether assessment order passed is erroneous and prejudicial to the interests of revenue? - Applicability of section 40(a)(iib) of the Act in respect of the payment of guarantee commission fees paid by the appellant company to the State Government of Kerala - HELD THAT:- In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] and Max India Ltd. [2007 (11) TMI 12 - SUPREME COURT] The error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”.
In the present case, it is an admitted fact that the AO had not examined the applicability or otherwise of the provisions of sec.40(a)(iib) of the Act in respect of the payment of guarantee commission fees paid by the appellant company to the State Government of Kerala. Non-examination of the issue is clearly palpable and falls within the meaning of an error, and therefore, amenable to the jurisdiction u/s.263 of the Act. See COCHIN INTERNATIONAL AIRPORT LTD [2025 (2) TMI 986 - KERALA HIGH COURT] wherein held that the order sought to be revised contained error for lack of reasoning;
(b) the order sought to be revised proceeds on incorrect assumption of facts and applies the law incorrectly, and
(c) stereotype orders passed by the assessing officer simply accepting the version of the assessee.
Coming to the facts of the instant case, perusal of the assessment order, it would show that the AO did not show any application of mind and mechanically accepted the claim for allowability of guarantee commission fees paid to the State Government of Kerala. Therefore, we do not find any fault with the PCIT for exercising his jurisdiction u/s.263 of the Act. Decided against assessee.
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2025 (6) TMI 1985
Reopning of assessment u/s 147 - reasons to believe - notice issued after expiry of a period of 4 years - disallowance of interest and disallowance on account of excess wastage and depreciation, etc. - what allegation are there that the appellant had failed to disclose relevant material facts necessary for assessment purposes? - HELD THAT:- Admittedly the reassessment proceedings was sought to be reopened after expiry of a period of 4 years. Proviso to section 149 of the Act, as it stood at the relevant point of time, provides that no assessment shall be reopened after the expiry of a period of 4 years from the end of the relevant assessment year, unless there is failure of the assessee to disclose all relevant material facts necessary for completion of assessment proceedings.
From the reasons recorded as extracted there was no allegation by the AO that there is failure on the part of the assessee to disclose relevant material facts necessary for completion of assessment. The Hon'ble Delhi High Court in the case of CIT v. Suren International P. Ltd.[2013 (5) TMI 414 - DELHI HIGH COURT] as held it would not be open for the Assessing Officer to reopen the assessment already done beyond the period of four years unless the income has escaped assessment on account of failure, on the part of the assessee, to disclose all the material facts
Thus, we are of the considered opinion that the necessary conditions prescribed u/s. 149 of the Act does not stand satisfied. Therefore, the reassessment proceedings initiated are bad in law. Hence, the reassessment proceedings are quashed. Assessee appeal allowed.
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2025 (6) TMI 1984
Denial of exemption u/s.11 - appellant had failed to fill up Part B3 of Schedule Part BTI - CIT(A) confirmed the adjustment by holding that the appellant had filed Form 10B instead of Form 10BB - HELD THAT:-CIT(A) is not empowered to confirm the addition for a different reason. The CBDT vide order dated 7th October, 2021, had condoned the delay in filing Form 10BB up to the period of 31st March, 2024. Therefore, the reasoning of the CIT(A) is not valid in law, and also the CIT(A) had failed to examine the reasons assigned by the CPC while processing the return of income. Therefore, the matter is restored to the file of the CIT(A) for denovo disposal of the appeal, after affording an opportunity of being heard to the appellant.
Appeal filed by the assessee stands partly allowed.
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2025 (6) TMI 1983
Denial of deduction u/s.80P(2)(d) - interest income earned from deposits/investments with Cooperative Banks - HELD THAT:- The issue under consideration is no more res integra by virtue of series of decisions by this Tribunal holding that interest income from Cooperative Banks which are basically Cooperative Societies are allowable as deduction to the assessee u/s.80P(2)(d). See Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal [2025 (3) TMI 1224 - ITAT PUNE] as held assessee is eligible for deduction u/s.80P(2)(d) of the Act for the interest income earned from Cooperative Banks - Decided in favour of assesee.
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2025 (6) TMI 1982
Addition on account of loan u/s. 68 - genuineness of the transaction - onus to prove the genuineness of the loan - identity and the creditworthiness of lender - HELD THAT:- The pattern of ledger account goes to show that there are regular transactions with the said party. Thus, in such a situation it cannot be held that it is a case of some kind of an entry provider as alleged by the ld. AO.
AO has mostly relied upon the extraneous information received to him of the lender parties without even examining the nature of transaction, bank statements and the position of funds in the balance sheet to see the creditworthiness. The net income shown in the return of income cannot be the criteria for judging the source of income, albeit one has to see overall availability of the funds disclosed in the balance sheet, bank statement and the nature of transaction. If the AO has to inquire upon the source of funds in the hands of lender companies then he has to inquire from these companies. Assessee as the law prevalent at that point of time was required to prove the source of the source. It is only when some material has been found that assessee is beneficiary and assessee has unaccounted money routed through these companies, then ostensibly sources of funds can be inquired upon.
Here in this case there were regular transactions and assessee has also advance loan to these companies which was repaid back. Under these facts, once identity and the creditworthiness is proved from the records and genuineness of the transaction has not been disproved as noticed from the entries in the bank statement and copy of ledger account, then it cannot be deemed to be unaccounted money or credit from undisclosed sources. Ld. AO has not verified the ledger account properly the overall nature of debit and credit entries for all the three parties. If the parties have shown enough sources to advance the loan and in most of the cases, it was repayment of loan given by the assessee and being a NBFC company, it has to receive the funds and give loans on interest to these parties. Therefore, to treat even the repayment of loan given by the assessee to these parties as ‘unexplained loan’ received cannot be sustained.
AO has drawn inferences by the fact that in the case of M/s Carron Investments Pvt. Ltd., and M/s Naurus Tradestar Pvt. Ltd., that the Directors of this company was one residing in a small flat in Bhayender (E), whether that person was examined about the transaction undertaken by the assessee and the lender company has not been brought on record. The ld. AO based on this information should have been at least carried out some enquiry to find out the genuineness of the transaction and the source of the funds from these companies. As stated above, here in this case there is a huge transaction between two companies i.e. assessee and the lender companies as assessee had advanced loan in the earlier years which had been repaid back and further assessee is also received loan which again has been repaid during the year or in the subsequent year. Such a running account of transactions cannot be held to be that these companies were providing accommodation entry. Thus, on these facts, we do not find any infirmity in the order of the ld. CIT(A) in deleting the said additions qua all the three companies. Thus, the grounds raised by the Revenue are dismissed.
Addition of commission expenses - Once the assessee has given the details and invoices in respect of commission expenses, then ld. AO should have verified the same from the parties. However, in these facts, we feel that this issue needs to be restored back to the file of the ld. AO to examine the evidences and carry out necessary inquiry and assessee has to substantiate the payment of commission to these parties that it relates to its business of financial dealings of borrowing and lending. Accordingly, ground No.5 is allowed for statistical purposes.
Addition made as assessee had not been able to discharge the onus - HELD THAT:- Counsel pointed out that ld. AO has confirmed the addition that assessee has not filed the PAN, therefore, now the PAN is available which was filed before us as additional evidence. Further, he submitted that the loan has been repaid back to the said person Shri Gaurishankar Deora. On the facts of the case, we feel that this matter should be restored back to the file of the ld. AO to examine the genuineness of the loan given by the said party of Rs. 30,00,000/- and assessee has to substantiate the said loan within the parameters of Section 68.
Disallowance of expenditure u/s. 35D(2) - assessee has increased its authorised share capital during the financial year under consideration and incurred expenses - HELD THAT:- The additional share capital was raised by issue of bonus shares in the ratio of 1:1. Once authorised share capital has been increased to issue bonus shares which have been issued by capitalizing free reserves, it tantamount to re-allocation of the company’s funds. There is no inflow of fresh funds or increase in the capital, as it remained the same. The issue of bonus shares has not resulted in extension of capital base of the company. The aforesaid observation and the principle laid down in the case of CIT vs. General Insurance Corporation [2006 (9) TMI 116 - SUPREME COURT] as highlighted above by the ld. CIT(A) is clearly applicable on these facts and therefore, order of the ld. CIT(A) following judgments of the Hon’ble Supreme Court is upheld. Accordingly, ground Nos. 1 & 2 raised by the Revenue are dismissed.
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2025 (6) TMI 1951
Ad-hoc disallowance of expenses - addition being 5% of various expenses debited to the profit and loss account as not incurred wholly and exclusively for business purposes - ground on which these expenses were disallowed is basically that not only these expenses have a certain personal element but also no log book was maintained of the the above expenditure - HELD THAT:- We find that the findings of the Assessing Officer, CIT (Appeals) or ITAT on this aspect are purely factual in nature and therefore do not give rise to any substantial Question of Law which needs to be answered by this Court.
Disallowance of commission paid by the Assessee to two individuals - AO as well as the CIT (Appeals) came to the conclusion that these persons could never have rendered the alleged services to the Assessee for the kind of business that the Assessee is engaged in, because they have absolutely no knowledge of the said business - HELD THAT:- After perusing the said order, we find that even on the issue of disallowance of the commission paid to two individuals the findings given by the Authorities below are purely factual in nature and this disallowance has been made after recording the statements of these individuals, and examining all the facts and circumstances of the case. Hence even this issue does not give rise to any substantial Question of Law that needs to be answered by this Court.
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2025 (6) TMI 1950
Rejecting the books of accounts u/s 145(3) - non-maintenance of stock register leads to rejection of books - determination of nature of business - AO noted that the assessee had shown low GP rate as compared to the last two years - HELD THAT:- It is to be noted that the nature of the business of the assessee is of construction and maintenances of roads, rail, bridges, tunnels, ports, habour, runways etc. The raw-material consumed in such project is bricks, stones, sand and other construction material. The project is carried out in many places, and in such type of nature of business, it is very difficult to maintain day-to-day stock register of the raw-material. The books of accounts of the assessee have been audited and the audit report duly furnished along with return of income. The AO did not point out any defect in the said audit report.
Low GP rate for the year under consideration - The case of the assessee is not of trader of movable stock, rather the assessee is in the business of construction of infra projects on contract basis. It is not a case of undisclosed sales, whereby the assessee can be doubted of showing the GP rate by making out of books sales. The receipts of the assessee, as explained, and mostly from the Government Authorities and have been routed through the bank channels and the TDS duly deducted on the expenditure.
AO has not pointed any defect or infirmity in the books of accounts of the assessee nor about the sales and expenditure recorded by the assessee. Merely because, the GP rate for the under consideration is low as compared to the earlier years, that itself, cannot be the ground to reject the books of accounts.
The reliance in this respect can be placed on the decision of Smt.Poonam Rani [2010 (5) TMI 57 - DELHI HIGH COURT] as held that in the absence of any finding that the assessee has inflated the cost of raw-material or the cost of processing or that he has made out of books sales of finished goods and suppressed sales, the AO could not have increased GP rate, merely because it was low as compared to the GP rate of the preceding year.
Identical view has been taken in the case of Asian Granito India Ltd.[2019 (10) TMI 1193 - ITAT AHMEDABAD] wherein as held that the books of accounts cannot be rejected if the assessee does not maintain stock register unless and until, it was coupled with other defects, such as, sales and purchase out-of-the books of accounts.
Assessee appeal allowed.
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