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Income Tax - Case Laws
Showing 181 to 200 of 163711 Records
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2024 (4) TMI 801
Levying penalty u/s. 271(1)(c) - as assessee has concealed the income by declaring the remuneration and interest on capital as gross receipts and declared the same u/s. 44AD and claimed to have been earned profit @ 8% - AO noted that the assessee ought to have declared the same as business income instead declared u/s. 44AD of the Act, which he did only to evade tax on interest and remuneration from the firm - AO noted that this issue was detected during assessment proceedings and he has not declared the income on his own but after detection it was declared and paid taxes
HELD THAT:- Admittedly, the assessee has filed information in the return of income in regard to remuneration and interest on capitals received from the partnership firm - This fact is disclosed by assessee in its original return of income and original return of income was processed u/s. 143(1) of the Act but assessee claimed these two items i.e., remuneration received as a partnership firm and interest on capital receipt from partnership firm on presumptive basis u/s. 44AD of the Act and declared net profit @ 8%.
We agree with the argument of ld. Senior DR that the assessee cannot make such claim and this is not allowable and this position has been clarified in the case of Anandkumar [2020 (12) TMI 994 - MADRAS HIGH COURT]. But, we noted that all the facts relating to these two claims made by assessee are available before the AO and even the AO processed the original return and accepted the claim, which may be wrong.
We have gone through the decision of Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein the Hon’ble Supreme Court has propounded “the meaning of the term ‘particulars’ used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate ‘particulars’. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate ‘particulars’”.
Mere fact that the claim of the assessee has been negated by the AO, it does not amount to concealment of income or furnishing of inaccurate particulars of income by the assessee. In the present case before us also, the assessee has disclosed complete particulars of income relating to remuneration received from firm and interest on capital invested with the firm. Once this is a fact, it means that there is no issue as regards to concealment of particulars of income.
Thus in the present case, the particulars are declared by assessee in his return of income and the assessee has only claimed those items as business receipts instead of declaring it as profit on gross basis. Thus this is not a fit case levy of penalty u/s. 271(1)(c) of the Act. There is no concealment of particulars of income or new evidences found by the AO for making any kind of addition. Appeal filed by the assessee is allowed.
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2024 (4) TMI 800
Validity of notice issued u/s 143(2) by the Non-Jurisdictional AO - No objection were filed within one month u/s 124 - Unexplained credits addition u/s 68 r.w.s. 115BBE as amount received on sale of shares unexplained - HELD THAT:- It is nowhere disputed by the Revenue that the notices issued in this regard were from non-jurisdiction AO. Only defence made out by the Revenue is that there was no objection within one month as per section 124 made by the assessee during assessment proceedings, thus section 292BB supports the case of the Revenue.
We are in agreement with the submissions of assessee wherein by placing reliance upon the case of ITO vs. Almak Finance P. Ltd. [2020 (10) TMI 795 - ITAT DELHI] it was held that when authorities have no jurisdiction over the assessee, the act done by such authority is bad in law and void ab initio. Thus, it is the claim of the assessee that by not disputing jurisdiction u/s 124 (3) of the Act, right to challenge the jurisdiction will not be lost forever, thus the defect is not curable u/s 292B & 292BB.
Thus we hold that AO did not have jurisdiction and accordingly, the assessment order is liable to be quashed as such. Therefore, by holding that notices were issued from non-jurisdictional AO, the assessment order is hereby quashed. Appeal of the assessee is allowed.
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2024 (4) TMI 799
Addition u/s 40A(3) - Cash expenditure - assessee has made payments to the land owners exceeding INR 20,000/- - HELD THAT:- Only 20% of the expenditure would be disallowed in the event of any payment of such expenditure made in cash which exceeded INR 20,000/-. The contention of the assessee is that the payments were made out of business expediency, is not supported by any evidences.
Therefore, the case laws relied by assessee, do not help him under the facts of the present case. However, we are in agreement with assessee that the expenditure should have been restricted to the extent of 20% in terms of extant provision of section 40A(3) of the Act. We therefore, direct the AO to restrict the disallowance to the extent of 20% of the total expenditure which was incurred in cash and exceeded the prescribed monetary limit i.e. INR 20,000/- of the same. Grounds raised by the assessee are accordingly, partly allowed.
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2024 (4) TMI 798
Income taxable in India or not - Salary income - incomes deemed to accrue or arise in India as assessee is a non-resident - income earned under head "Salaries" for services rendered in Australia employment - HELD THAT:- In the instant case the assessee neither had any rest period nor leave period which is preceded and succeeded by the services rendered outside India. Since, the assessee has rendered services outside India, the salary cannot be taxable in India.
As per the definition the salary paid or the advances received are to be included in the total income of the person when the salary becomes due.
From the concurrent reading of Section 5 dealing with scope of total income, Section 15 dealing with computation of total income under the head salary and chargeability thereof and Section 9 dealing with income arising or accruing in India with reference to the salaries and the services rendered in India, we hold that no taxability arises on the salary/allowances received by the assessee since the assessee is a non-resident and has rendered services outside India.
Thus, the Assessee is eligible for exemption on his salary for services rendered in Australia employment exercised in Australia during his Australia assignment period. In the result, the appeal of the assessee is allowed.
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2024 (4) TMI 797
Unexplained cash receipt u/s 69A - Unexplained income found in search - during the course of search, a digital evidence under ID marked was seized which is the mobile data backup of one of the employees of the assessee concern - HELD THAT:- It remains admitted facts that the ld. AO did not make any independent third party enquiry. It prima facie seems to be a transaction for which the assessee may have received advances but finally transaction did not materialize and the accounts may have been settled. There is no evidence to show that the alleged sum is in the nature of unexplained income or unexplained sales of the assessee. Therefore, the finding of the ld. CIT(A) that the impugned addition has been based on conjectures and surmises and not having any reference to tangible/credible material, needs no interference at our end. Accordingly, the sole grievance raised by the revenue is dismissed.
Assessment u/s 153A - incriminating material found as a result of search or not? - HELD THAT:- Assessee has challenged the assumption of jurisdiction u/s 153A of the Act on the ground that it is not based on any incriminating material found as a result of search on the assessee. We fail to find any merit in the grounds of appeal raised in the cross-objection since there was a material, incriminating in nature in the form of digital evidence under ID marked MB/HD/01, which gave jurisdiction to the AO to carry out the assessment proceedings. Thus, all the grounds raised in the cross-objections are dismissed.
Unexplained expenditure u/s. 69C - assesses has failed to explain the transactions mentioned in the incriminating material (MB/HD/01) seized from the assessee's premises during the course of search - HELD THAT:- As per the audited books of accounts for FY 2017-18, the closing balance of M/s. Sati Oil Udyog Limited as on 31/03/2018 cannot be doubted. These audited financial statements were part of the income tax return filed by the assessee much prior to the date of search. Therefore, genuineness of the closing balance of M/s. Sati Oil Udyog Limited is established.
The remaining amount, two fold contentions have been made by the ld. A/R. Firstly, that there is a payment during financial year 2018-19 but it has been wrongly considered by the accountant preparing ledger appearing in the seized documents MB/HD/01 in FY 2017-18, then the alleged balance will be reconciled. Second fold of contentions is that the assessee had already offered additional income and against this additional income, the assessee has urged for telescoping benefit - We find merit in the second fold of contention and agree with the finding of the ld. CIT(A) that the assessee deserves telescoping benefit against the additional income offered to tax. Accordingly, Ground No. 1 raised by the revenue is hereby dismissed.
Set off of unexplained expenditure against the additional income offered in the Income tax return - HELD THAT:- We fail to find any inconsistency in the finding of the ld. CIT(A) in holding that since the additional income offered was not specific and it was open for the assessee to claim telescoping benefit for unexplained expenditure and, therefore, CIT(A) has rightly given the set off against the additional income disclosed in the additional income. Accordingly, Ground No. 2 raised by the revenue is dismissed.
Unexplained expenditure u/s 69C - seized material there were certain entries found in the form of summary of payments - HELD THAT:- We observe that no specific date is appearing in the incriminating material for the alleged transactions. There is no reference of any date which could remotely link the impugned payment to impugned Assessment Year. The presumption of the AO that the alleged sum is adjusted against the sale consideration itself shows that it is part of the sale consideration duly accounted for in the books. Thus, CIT(A) rightly referring to these facts has come to the conclusion that the ld. Assessing Officer erred in making this impugned addition which has been made without any basis and without considering the facts that the alleged sum has been paid through banking channel duly accounted for in the regular books of accounts. Ground No. 1 raised by the revenue is dismissed.
Unexplained cash received back - HELD THAT:- We on perusal of the finding of the ld. CIT(A) and submissions of the assessee take note of the fact that the alleged sum received from M/s. Krishna Udyog were found entered in the regular books of accounts in Tally software. It was just a matter of reconciliation of statements between M/s. Krishna Udyog and ld. CIT(A) for which the ld. CIT(A) had already directed the Assessing Officer to carry out the necessary verification. Thus, no interference is called for in the finding of the ld. CIT(A). Accordingly, Ground No. 2 raised by the revenue is dismissed.
Addition under the head “undisclosed profit” - AO on examining the seized data MB/HD/04 which consists of tally data of the group and on analyzing the tally accounts for FY 2019-20 came to the conclusion that assessee has suppressed two digits while making the accounting - HELD THAT:- On going through the above finding and also observing that the assessee had offered income more than the income as per the seized tally data, there was no room available to estimate higher profit without placing any evidence of suppressed sales or inflated expenditure. We thus, fail to find any infirmity the finding of the ld. CIT(A) and accordingly dismiss Ground No. 3.
Estimation of income - Bogus purchases - CIT(A) on considering the fact that sales of the assessee are not in dispute, work contracts have been executed and even if the purchases are bogus billings, there is actual purchase during the year for effectively completing contract work and only disallowed 5% of the total purchases - HELD THAT:- There is no evidence on record to prove that the assessee has shown bogus sales bills or bogus works contracts as the transactions are carried out through proper banking channels and registered vendors. Turnover declared by the assessee has been accepted by the ld. Assessing Officer. Once it is admitted that the figure of turnover is correct and the works contract/sales have been achieved by supplying material or completing the construction work it has to be accepted that for achieving the sales contract/work contract, expenditure has to be incurred. Thus, the ld. CIT(A) has taken a fair approach and after considering the past profit trend and the books of accounts being regularly maintained and duly audited, has rightly disallowed the purchases @5% sustaining the disallowance and giving part relief to the assessee.
Unexplained money - AO based on the seized document MB-06 having reference “Commission Jorhat to Guwahati”, inferred that there is a cash transfer against fixed commission - As per the assessee, this can be entry of discount/commission of Rs. 500/- per tonne of iron and steel from some person or firm - HELD THAT:- Neither any staff has confirmed the analogy drawn by the ld. Assessing Officer nor any document was seized or any reference has been made through regular books. In absence of any plausible explanation given by the Assessing Officer for decoding the entries appearing in page 13 of MB-06, we fail to find any infirmity in the finding of the ld. CIT(A) deleting the addition observing that in absence of any finding of suppression of double-digit in respect of any amount, the impugned amounts have to be taken on the face value. Accordingly, Ground No. 1 raised by the revenue is dismissed.
Addition unexplained cash back received - CIT(A) deleted addition - HELD THAT:- Since the assessee deserves telescoping benefit of the alleged sum against the additional undisclosed income offered in the return of income, we find no infirmity in the finding of the ld. CIT(A).
Estimation of income - bogus purchases - HELD THAT:- After taking into consideration the consistent carrying on of the same business of works contract, turnover not disputed by the revenue authorities, better net profit percentage and the fact that for achieving turnover, purchases are required to be made, we confirm the view taken by the ld. CIT(A) sustaining the disallowance @ 5% of the total bogus purchases.
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2024 (4) TMI 796
Taxability of income in India - Addition of receipt emanating from offshore supplies of escalators and elevators - assessee has claimed that the aforesaid receipt was not taxable in India on the ground that they pertained to off-shore supplies of equipment to DMRCL and MMRCL - AO was of the view that the contract with DMRCL and MMRCL was composite and indivisible and could not be split up into supply and commissioning parts as stated by the assessee and that the said consortium was liable to be assessed as an Associate of Person (AOP) and the income from the transaction was chargeable to tax in India, as no benefit of India-China DTAA could be granted to the association - HELD THAT:- As decided in own case [2023 (3) TMI 319 - ITAT MUMBAI] assessee did not carry out any operations in India in respect of its scope of work, therefore, we are of the considered opinion that the income earned by the assessee from the offshore supply of escalators and elevators to DMRCL and MMRCL is not taxable in India. Accordingly, we direct the Assessing Officer to delete the addition made in the hands of the assessee. As a result, ground No. 1 raised in assessee’s appeal is allowed.
Refund - Non receipt of funds granted by the AO - During the course of appellate proceedings before us the ld. Counsel submitted assessee has not issued refund as determined in the intimation issued u/s 143(1) of the Act - HELD THAT:- After hearing both the sides we direct the AO to determine the refund after verification of the relevant supporting material as claimed by the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purpose.
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2024 (4) TMI 795
Eligibility of Deduction u/s 80P - bank interest earned from cooperative banks - Assessee is a co-operative society primarily engaged into arranging for prompt payment to beneficiaries of diseased employees - HELD THAT:- The income earned by a co-operative society by way of interest derived by from its investment with any other cooperative society, then the whole of such income is deductible. Further the amount of interest received by the assessee from the different cooperative banks; it is not the claim that those banks are also not cooperative societies.
It is agreed that those are also the cooperative bank in terms of The Banking Regulation Act, 1949. Therefore even if it is accepted that bank interest on from cooperative banks by the assessee is not the income from the business of the assessee and therefore the claim of the assessee fails under section 80P(2)(a) of the act, but the claim is still allowable and therefore cannot be denied u/s 80P(2)(d) of the act. This issue is also covered in favour of the assessee by the decision of Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. [2023 (9) TMI 761 - SUPREME COURT] where the deduction was allowable to the state level agricultural and rural development bank, was engaged in providing credit facility to its members .
The case of the assessee is on far better footings that these are society of only the employees of Indian oil Corporation. In view of the above facts, we direct the learned lower authorities to allow the deduction to the assessee on interest income earned from various cooperative banks under section 80P(2)(d) of the act. - Appeals of the assessee are allowed.
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2024 (4) TMI 753
Correct head of income - True character of the income - Income from leasing or letting out the properties in shopping-cum-entertainment Mall - “income from business” or “income from house property” - ITAT held that where the letting out the property is the main object of a company, its income is to be computed under the head “income from business” and it cannot be treated as “income from house property”, affirmed the order passed by the CIT (A)
HELD THAT:- AO did not find any material against the assessee to come to the conclusion that sub-leasing of the premises was only a part of its predominant object of the assessee. The respondent’s right from the construction of mall till the matter was taken into scrutiny had been offering income from the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc., sub-licence by it under the head “profit and gain of business or profession” of the Income Tax Act. Therefore, the CIT (A) as well as ITAT have rightly set aside the order of A.O.
The Apex Court in case of Raj Dadarkar and Associates [2017 (5) TMI 586 - SUPREME COURT] has held that ITAT being a last forum insofar as factual determination is concerned, these findings have attained finality. No material has been produced even before us to show how the aforesaid findings are perverse.
The order passed by A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT (A) and also do not find any substantial question of law involve in these appeals.
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2024 (4) TMI 752
Validity of reopening of assessment - appeals for Assessment Years 2011-2012, 2013-2014 and 2014-2015 were pending before the ITAT and as the assessment was getting time barred and to safeguard the interest of the Revenue, the assessment was reopened on 3 issues i.e., 8% profit treating contractor, Proportionate income and Capital gain - HELD THAT:- Admittedly, the ITAT has now held against the Revenue. Therefore, the entire basis for reopening has collapsed. The Revenue’s case that an appeal has been filed in this Court challenging the orders passed by the ITAT for Assessment Years 2011-2012, 2013-2014 and 2014-2015 will not be of any help because admittedly there is no stay.
As held in Union of India v/s. Kamlakshi Finance Corporation Ltd. [1991 (9) TMI 72 - SUPREME COURT] the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities and the order is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. Admittedly, the order of the ITAT, which is challenged in appeal in this Court, has not been suspended. Therefore, the order of the ITAT is certainly binding on the Revenue.
Respondents also submitted that assessment can be opened on the basis of order passed in another assessment year which is a settled position in law. Though we will not enter into a debate with him/Respondents on this aspect, still to issue notice itself the Revenue has to, in the facts of the case, cross the first hurdle of the proviso u/s 147 of the Act and if they do not, as we have observed above, the reopening will be bad in law.
We hereby quash and set aside the impugned notice. Consequently the order on objections also is hereby quashed and set aside.
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2024 (4) TMI 751
Addition u/s 68 on account of share capital and premium - addition made on absence of identity of the creditors, genuineness and creditworthiness of the entire transaction - ITAT deleted addition - HELD THAT:- Findings recorded by the Tribunal, is not supported by facts. AO has held that the assessee was a Private Limited company which cannot issue shares in the same manner in which Public Limited company does and in so far as creditworthiness of the share subscribers is concerned, there must be positive evidence to show the nature and source of resources of the share subscribers and if the assessee was serious enough to establish his case, it ought to have complied with the notices/letters issued by the Assessing Officer and ought to have produced the directors of the subscribing companies before the AO so that they could explain the sources from which the share subscription was made.
As stated that there is no complaints either from the end of the assessee company or from the end of the alleged subscriber company. This finding recorded by the AO as affirmed by the CIT(A), if required to be set aside by the Tribunal, reasons have to be assigned. Therefore, we find that the conclusion arrived at by Tribunal is insufficient to support its ultimate conclusion in allowing the assessee’s appeal. Therefore, we are of the view that the matter has to be remanded back to the Tribunal for fresh consideration.
Revenue appeal is allowed. The order passed by the learned Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision.
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2024 (4) TMI 750
Revision u/s 263 - CSR expenses admissibility as the deduction u/s 37(1) - assessee is public sector undertaking - Tribunal on fact concluded that it is not a case of no enquiry and nor it is a case of non-application of mind - HELD THAT:- ITAT's factual finding cannot be dislodged in an appeal filed u/s 260A where we are required to answer substantial questions of law for consideration.
With regard to the admissibility of the expenses u/s 37(1) Tribunal has taken note of the decision in the case of Hindustan Copper Limited. [2020 (1) TMI 1324 - ITAT KOLKATA] the facts of the said case is also on the similar line as in the said case the assessee was a public sector undertaking and certain directives issued by the Government of India was followed by the assessee. There are two notifications issued by the Government of India, the first of which is by Office Memorandum dated 21.06.2011, wherein the expenses incurred by public sector undertakings in the form of fee charged for participation in CSR Training Programme/Workshops or for sponsorship of Workshops/programmes organized by Tata Institute of Social Sciences etc. will be allowed to be included under the CSR Budgets of Central Public Sector Enterprises. The other notification is dated 1st November, 2011 which stipulates the guidelines on Corporate Social Responsibility for Central Public Sector Enterprises. Admittedly, the respondent assessee has complied with the said directives issued by the Government of India.
Identical issue was considered by this Court in the case of Ramesh Prasad Sao [2023 (10) TMI 405 - CALCUTTA HIGH COURT] wherein the assessee company was engaged in iron ore mining and it incurred periphery development expenses for territorial welfare as well as welfare of local people in the area in which mines were operating as per the direction of the local administration and such CSR expenses incurred by the assessee prior to the assessment year 2015-16 were held to be liable as business expenditure as same was wholly and exclusively incurred for the purpose of business.
Thus on facts we are convinced that the expenses were allowable more so, when the respondent assessee is a public sector undertaking and they had carried out a notification and they had implemented the notifications issued by the Government of India. The specific case of the assessee was that they incurred the expenditure for facilitating the business of construction and repair of ships mainly for Indian Navy and they were required to take up certain activity for the benefit of people residing in the said locality. Matter is entirely factual and no substantial question of law arises.
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2024 (4) TMI 749
Acquittal of charge u/s 276CC - respondent has failed to comply with the provisions contained u/s 139(1) and he has submitted the income tax returns after a delay of 28 months - “intention”, “motive” and “knowledge” - “culpable mental state” on the part of the accused - HELD THAT:- Apex Court in the case of Prem Das [1999 (2) TMI 6 - SUPREME COURT] held that for holding an accused guilty u/s 276CC ‘mens rea’ is a necessary ingredient. Hence, in absence of proof of ‘mens rea’ and on the basis of mere presumption u/s 132(4-A), the conviction cannot be sustained.
In the above case, the Hon’ble Apex Court has clearly held that the complainant in order to bring home the guilt of the accused for the offence punishable u/s 276C has to prove the mens rea of the accused for non-payment of tax or attempt to evade the tax. But in the present case, the accused respondent has explained the reasons, in detail, about the delay in filing the income tax returns and depositing the entire tax amount with penalty subsequently. Therefore, the complainant/ appellant has failed to prove that the respondent had mens rea to evade the payment of tax. Accordingly, the Income Tax Department has failed to prove the guilt of the accused respondent beyond all the reasonable doubts.
The trial Judge came to the conclusion that even no notice was given to the respondent prior to filing of the complaint against him. Hence, it was found that the offence u/s 276CC was not found to be proved against the respondent.
It is the settled principle of law that while appreciating the evidence, in an appeal against acquittal, if the appellate Court finds that two views are plausible, then the view favouring the innocence of an accused must be taken into consideration.
This Court does not find any perversity in the findings arrived at by the trial Court in acquitting the accused under the aforesaid offences. Accordingly, the instant Criminal Appeal is dismissed. The judgment of acquittal of the accused respondent, passed by the Court below, is upheld.
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2024 (4) TMI 748
Denial of specific request for personal hearing - petitioner expressing his difficulty in availing the opportunity of personal hearing through video conference, personal hearing was not granted, on the premise that the petitioner had not clicked on the Assessee Request Button/Icon and also not filled up the “Box of agenda of VC” - HELD THAT:- We find there is merit in the submissions of the learned counsel for the petitioner, since under identical circumstances, this Court has already held that personal hearing ought to have been extended, though the petitioner assessee might have failed in clicking on the appropriate button.
In view of the same, the impugned order is set aside. The assessment order shall be passed after affording the petitioner reasonable opportunity and personal hearing through video conference. The above exercise shall be carried out within a period of twelve weeks from the date of receipt of copy of this order.
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2024 (4) TMI 747
Unexplained credit u/s 68 - unexplained bogus share applications - HELD HAT:- As observed once the respondent-Company furnished all the relevant and requisite documents, and in the assessment order, there is nothing which could show that the respondent-Company introduced its own income from undisclosed sources in the form of shares; the assessment order was passed only on the basis of suspicion and doubt, which is not permissible under the law, as has rightly been held by the learned CIT in its order, which in turn has rightly been upheld by the Appellate Tribunal vide the impugned order.
CIT as well as Appellate Tribunal have rightly ordered deletion of the above-said amounts, because the respondent-Company had furnished all the required the details, and further held that it cannot be said to be an unexplained credit under Section 68 of the Act of 1961. Therefore, the impugned order passed by the Appellate Tribunal is justified in law.
Disallowance of various expenses - The said disallowing is on a higher side and the same was considered by the learned CIT, and that the disallowance was restricted to Rs. 75,000/- and the respondent-Company got the relief of Rs. 75,000/-, which is completely justified in law.
Disallowance of employees contribution to ESI - CIT directed the AO to verify the contention of the respondent-Company that the employees’ contribution towards PF and ESI was deposited on or before the due date of filing the return u/s 139 (1) the same was upheld by the learned Appellate Tribunal. Therefore, now the same does not require any reconsideration by this Court.
This Court further observes that there are concurrent findings arrived at by the learned CIT as well as learned Appellate Tribunal, which are well reasoned and have been arrived at after taking into due consideration the overall facts and circumstances of the case and upon duly analyzing the material available on record before them.
This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal. This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal.
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2024 (4) TMI 746
Deduction u/s 80P - interest income(s) derived from such nationalized/other bank(s) - HELD THAT:- The issue is no more res integra in light of this tribunal’s recent coordinate bench’s order in The Rena Sahakari Sakhar Karkhana Ltd [2022 (1) TMI 419 - ITAT PUNE] allowed the assessee’s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative bank.
Even the latter limb of interest income derived from investments made in nationalized/other bank(s), the Revenue could hardly dispute that case law The Vaveru Cooperative Rural Bank Ltd. [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT ] that interest income(s) derived from such nationalized/other bank(s) also qualifies for Sec. 80P deduction and thereby declined it’s very stand. Thus accept the assessee’s Sec. 80P(2)(a)(i)/80P(2)(d) deduction claim(s) in very terms - Decided in favour of assessee.
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2024 (4) TMI 745
Validity of exercise of jurisdiction u/s 153A and 153C - Addition based on manual cash book found at the premises of the Company - scope of incriminating material for the purpose of Section 153A of the Act to make addition in hands of assessee as a searched person - HELD THAT:- Manual cash book contained entries related to cash withdrawals and expenses of Company which were duly recorded and reconciled with its books of account, as also cash introduced, withdrawn and expenses on behalf of the appellant. Thus we are of the considered view that once CIT(A) has endorsed the findings of AO that based on this manual cash book, of the Company, no substantive addition is required to be made in the hands of Company and as the cash inwards and outwards are found to be from known sources and existing books, which have been considered final in the assessment of Company, then same set of books of the Company, including the manual cash book found at the premises of the Company, cannot be considered to be incriminating material for the purpose of Section 153A of the Act to make addition in hands of assessee as a searched person, as the two AYs before us are of concluded assessments.
The corollary to aforesaid being that to consider the said seized document of transactions of appellant reflected in manual cash book in the hands of appellant, provisions of Section 153C should have been invoked at the first instance. Thus the change of head of the addition by Ld. CIT(A), has resulted in vitiating the exercise of jurisdiction u/s 153A of the Act and 153C of the Act.
Additions u/s 69C against Cash Expenditure - Disclosure were made by appellant in IDS - Even otherwise, if Ld. CIT(A) has given benefit to the appellant of having cash in hand subsequent to the disclosure in IDS, then the source of impugned expenditures incurred by Mr Vasudevan, on behalf of the appellant should also be accepted. Restricting the benefit to opening balance in AY 2015- 16 has no basis except being based on presumption. Thus, there was no justification with CIT(A) to hold that the said expenditure by Mr. Vasudevan, were the benefit or perquisites given by the company to its director which is chargeable to tax u/s 2(24)(iv) of the Act. Admittedly, these expenditures were not even claimed as deduction in the hands of the company.
The most excruciating fact is that Mr. Vasudevan could not have accounted the amount given by appellant to him as a receipt in the manual cash book as the dates reflected in the said cash book are prior to the date of declaration in IDS made by appellant. Hence, it could be safely concluded, to offset the negative cash balance reflected in manual Cash Book qua the transactions of appellant, the disclosure of Rs. 50 lacs was made by appellant in IDS. Hence, there is no scope for making any addition at all in the hands of the appellant as appellant would be entitled for telescoping benefit. Assessee appeal allowed.
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2024 (4) TMI 744
Validity of order passed u/s 154 - Amount to a review of the original assessment order or not - investment in the property was not properly explained by the assessee during the year under consideration, there is a mistake apparent from record rectifiable u/s 154 - whether question is not a mistake apparent from record? - as argued addition u/s. 68 made despite the assessee having explained the source of investment with proper documentary evidences - HELD THAT:- As per well established law it is not in dispute that the source of the investment which was accepted by AO in his original assessment order cannot be revised in an order u/s 154 as it cannot be said to be a mistake apparent from record. We find that AO wants to change his view in the garb of rectification of mistake u/s 154 which is not permissible under the law. We find that the impugned order of the AO was passed u/s 154 and Section 154 of the IT Act mandates rectification of mistake apparent from record.
The Hon’ble Apex Court in the case of ITO vs. Volkart Brothers and others [1971 (8) TMI 3 - SUPREME COURT] has held that “a mistake apparent on record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning, on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.
Thus, respectfully following the aforesaid binding principle rendered in ITO vs. Volkart Brothers [1971 (8) TMI 3 - SUPREME COURT], we hold that the impugned order passed u/s. 154 of the Act of the Assessing Officer is invalid and liable to be quashed. Appeal of the assessee is allowed.
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2024 (4) TMI 743
Disallowance u/s. 36(1)(iii) - interest paid alleging diversion of interest bearing borrowals to the appellant's Group Companies - AO was of the opinion that the loan was diverted for non-business purposes and accordingly, he proceeded to make interest disallowance u/s 36(1)(iii) - HELD THAT:- Assessee uses mixed funds for the purpose of its business. The Share capital and free reserves are Rs. 217.20 Crores whereas loan funds are to the extent of Rs. 135.61 Crores. It is also seen that the secured loans are for specific purposes i.e., project loans, vehicle loans etc. only and the same could not be diverted for other purposes. In such a situation, unless the nexus of borrowed funds vis-à-vis the loans advanced by the assessee is established by Ld. AO, a presumption could be drawn in assessee’s favour that the advances were funded out of own funds and not out of borrowed funds.
We find that no such exercise has been carried out by Ld. AO and therefore, it was to be presumed that funds were advanced first out of interest free funds available with the assessee. This is as per the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] The decision of Savera [1997 (11) TMI 37 - MADRAS HIGH COURT] also supports this view. Therefore, we delete the impugned disallowance and allow corresponding grounds raised by the assessee. This issue arises in assessee’s appeal for AY 2011-12 also. Facts being pari-materia the same, the corresponding grounds raised in AY 2011-12 also stand allowed accordingly.
Nature of expenses - Relaunch expenses - deferred revenue expenditure claimed to the extent of 1/3rd in each of the year - HELD THAT:- Assessee has undertaken publicity campaign and incurred relaunch expenses, such an activity has not enlarged the profit making apparatus of the assessee. The assessee has not ventured into any new line of business rather it is seeking growth in the existing line of business. Further, the nature of the expenditure would show that it is substantially in the nature of revenue expenditure though the benefit of the same may have accrued to the assessee over several years. Nevertheless the said expenditure could not be branded as capital expenditure merely on account of the fact that the benefit would flow in more than one year.
The assessee has not enlarged its profit making apparatus and it seeks improvement in the existing line of business only. It could not be said that the assessee has acquired enduring advantage in capital field. Therefore, we direct Ld. AO to accept the claim of the assessee. In other words, the expenditure claimed by the assessee to the extent of 1/3rd would be allowable to the assessee. The depreciation as allowed to the assessee shall stand reversed. The corresponding ground stand allowed accordingly.
Short Credit of TDS - HELD THAT:- We direct Ld. AO to allow correct TDS credit in accordance with law. This ground stand allowed for statistical purposes.
Disallowance u/s 14A - no exempt income has been earned by the assessee - HELD THAT:- We find that this issue is covered in assessee’s favor by the decision of Chettinad Logistics P. Ltd [2017 (4) TMI 298 - MADRAS HIGH COURT] holding that Section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. Respectfully following the same, we direct Ld. AO to verify the same. If no exempt income has been earned by the assessee, the impugned disallowance shall stand deleted. The Explanation to Sec.14A, as referred to by Ld. CIT(A), in our considered opinion, is prospective in nature and the same is not applicable in this year. The corresponding grounds raised by the assessee stand allowed for statistical purposes.
Disallowance of prior period items - HELD THAT:- From assessee’s submissions, it emerges that various expenditure, though pertaining to earlier years, have been ascertained during this year only. The same would be claimed and allowable only upon crystallization. It is also not the case that the assessee has claimed deduction of the same in earlier years. Therefore, the impugned expenditure, in our considered opinion, is allowable to the assessee in this year only. We order so. The corresponding grounds raised by the assessee stand allowed.
Disallowance of late payment of Employee’s contribution to PF / ESI - HELD THAT:- Admittedly, this issue stand covered against the assessee by the decision of Checkmate Services P. Ltd [2022 (10) TMI 617 - SUPREME COURT] Respectfully following the same, we dismiss the corresponding grounds raised by the assessee.
TDS u/s 195 - Disallowance u/s 40(a)(i) on account of payment made to foreign agencies - PE in India or not? - impugned disallowance was deleted by CIT(A) as held that Fees for Technical Services means managerial, technical and consultancy services but do not include payments considered as salary by the recipient of such income. Journalism is the process of collection, analyzing and disseminating information in public interest - HELD THAT:- Admittedly, none of the payee has permanent establishment in India. As noted by Ld. CIT(A), Fees for Technical Services means managerial, technical and consultancy services. The process of gathering information is nothing but a profession and these kind of services are covered under specific Article-5, Article-7 and Article-15 of India-USA DTAA and India-UK DTAA which are applicable to the facts of the present case. These articles exempt such payment from taxation in the absence of any permanent establishment. The provisions of DTAA, being more beneficial to the assessee, would apply in preference to the provisions of the Act. Decided in favour of assessee.
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2024 (4) TMI 742
Addition of bogus sales - difference in opinion between learned Members constituting the bench - matter referred to third member - Accountant Member has given a clear cut finding that no addition u/s 68, whereas, Judicial Member has returned a finding that the addition has to be made u/s. 69 - whether, the ingredients of section 68 of the Act are satisfied to sustain the disputed additions? and whether additions in dispute can alternatively made u/s. 69? - assessee is a resident partnership firm stated to be engaged in the business of trading in bullion, jewellery etc.
HELD THAT:- As far as the salesalleged to have been made to bogus entities controlled by entry operator Shri Sonu Punjabi, it is observed that in course of assessment proceeding as well as before the First Appellate Authority the assessee has furnished various documentary evidences, such as, party wise details of purchase and sale for the entire year, VAT returns and VAT assessment orders, item wise stock register and purchase invoices, confirmation from the suppliers, audited books of accounts, quantitative tally of purchase and sale etc.
It is also a fact that the suppliers from whom the assessee purchases gold/bullion confirmed the transactions in response to notices issued u/s. 133(6) of the Act. Pertinently, no deficiency or discrepancy was found either in the books of accounts maintained by the assessee or the documentary evidences furnished. This is so because, neither the AO nor the FAA have returned any adverse inference, either in relation to the books of accounts maintained by the assessee or the documentary evidences furnished. Merely, because the notices issued u/s. 133(6) and summons issued u/s. 131 returned unserved or remained unanswered, cannot lead to the conclusion that sales are bogus, when there are overwhelming documentary evidences brought on record in the form of audited books of accounts, stock register, item wise purchase and sales, VAT return, VAT assessment order accepting the sale transactions to demonstrate that the assessee indeed has effected the sales.
In respect of sales made to M/s. RBPL the addition in our view was made purely on conjectures and surmises - Admittedly, the AO has not found any discrepancy or deficiency in the books of accounts and stock register maintained by the assessee. Thus, when the assessee has maintained item wise purchase and sale details as well as stock register and, moreover neither in course of survey any stock discrepancy was found nor any unaccounted cash was found, certain sales cannot be treated as bogus.
Similar is the factual position qua the sales effected to M/s. Olivia Tradelinks India P. Ltd., and M/s. S.S Overseas, as, the assessee has furnished all documentary evidences to prove the identity, creditworthiness and genuineness of transaction. Thus, the assessee has sufficiently discharged the initial burden cast upon it to prove the credit entries appearing in the books of account. Once it is established that the initial burden cast upon the assessee has been discharged, the burden shifts to the Assessing Officer to conclusively prove that the credit entries appearing in the books of accounts are unexplained in terms with section 68 of the Act. In the facts of the present appeal, the Assessing Officer has failed to do so.
As rightly observed by Accountant Member, since the Assessing Officer has started the computation of income with the returned income of the assessee, it goes to prove that the entire trading account shown in the financial statement filed with the return of income has been accepted by the Assessing Officer.
Also agree with learned Accountant Member that once the sales made by the assessee are supported by stock register, sale bills, payments through banking channel and sales have not only been disclosed in VAT returns but stand duly verified and accepted by VAT Department, such sales cannot be treated as bogus, so as to enable the Assessing Officer to invoke the provisions of section 68 of the Act. Thus, addition made u/s. 68 of the Act was rightly deleted.
Addition u/s 68 v/s 69 - In the facts of the present appeal, it is an admitted factual position that the disputed transactions are duly recorded in the books of accounts of the assessee. Therefore, at the very threshold the provisions of section 69 will not get attracted. In fact, Revenue fairly accepted aforesaid factual and legal position. In any case of the matter, both the Assessing Officer and learned First Appellate Authority have proceeded on the premise that the credit entries appearing in the books of account are unexplained cash credit u/s. 68 - It is quite patent and obvious that provisions contained u/s. 68 and 69 of the Act operate in different situations and conditions therein are also different. Therefore, when it was never the case of the Department that the disputed addition has to be treated as unexplained investment u/s. 69 of the Act, at the second appellate stage, a new dimension cannot be given to the disputed issue by converting the addition from section 68 to section 69, that too, without providing an opportunity of being heard to the assessee. More so, when applicability of section 69 was never within the purview of the Tribunal and not even the case of the Department.
Revenue, though, had fairly agreed that provisions of section 69 cannot get attracted, however, he urged and pleaded that the addition made u/s. 68 of the Act should be sustained - aforesaid contention of learned Standing Counsel is unacceptable considering the fact that the mandate given to me as Third Member is very limited in its scope and I have to agree with the view expressed by one of the Members. In the facts of the present appeal, learned Accountant Member has given a clear cut finding that no addition u/s 68 of the Act can be made. Whereas, learned Judicial Member has returned a finding that the addition has to be made u/s. 69 of the Act. In other words, learned Judicial Member impliedly agrees that the addition could not have been made u/s. 68 of the Act. Thus, in third member view, there is no disagreement between the learned Members with regard to applicability of section 68 of the Act to the disputed addition.
Ratio laid down in the decisions referred to by learned Accountant Members clinches the issue in favour of the assessee. Thus, additions made u/s. 68 of the Act are unsustainable as agreeing with the view expressed by learned Accountant Member.
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2024 (4) TMI 741
Bogus unsecured loans and bogus share capital money - not providing cross-examination of maker of the statement on which AO relies upon to take adverse view against an assessee - CIT(A) deleted addition - HELD THAT:- Merely because the lenders did not appear before the AO, cannot be the sole reason for drawing adverse view against the assessee/transaction in question. Since the assessee filed the aforesaid relevant documents by the assessee, we find it had discharged the burden to prove the identity and creditworthiness of the lenders parties and genuineness of the loan given to assessee
We rely on the decision of Andaman Timber Industries Vs. CCE [2015 (10) TMI 442 - SUPREME COURT] wherein it was held that not providing cross-examination of maker of the statement on which AO relies upon to take adverse view against an assessee is a serious flaw which render the action of AO a nullity. Same view was reiterated in the decision of CIT v Odeon Builders Pvt. Ltd. (2019 (8) TMI 1072 - SUPREME COURT).
Further, we note that the assessee has shown the nature of the receipt as unsecured loan, and has discharged the burden casted upon it u/s 68 of the Act by providing proof of creditors i.e. identity of the lender by furnishing their PAN details, their ITR acknowledgment for AY. 2009-10; and from a perusal of the relevant financials of share subscribers, we note that they had sufficient creditworthiness to make investment in assessee company; and from perusal of the bank statement it reveals that loan was given and repaid through banking channel. We further note that AO has not been able to find any infirmity in the aforesaid evidence furnished by the assessee. In such a scenario, we agree with the impugned action of the Ld. CIT(A) deleting the addition - Therefore, we uphold the action of Ld. CIT(A) the deleting the addition.
Investment in the form of share capital in earlier years - Merely on the basis of information given by Investigation Wing and the statement recorded by Shri Pravin Kumar Jain (accommodation entries provider) the AO without applying the mind made an addition of Rs. 80 Lakhs, despite the fact that the assessee has infused share capital of only Rs. 50,000/- in the year AY. 2009-10, and thus erred in making an addition of Rs. 80 Lakhs which action of the AO cannot be countenanced and the Ld. CIT(A) rightly noted that the impugned share capital of Rs. 80 Lakhs has not been infused in the relevant year under consideration from the companies named by AO as noted (supra). In such a scenario, we do not find any infirmity in the action of the Ld. CIT(A) deleting the addition which we confirm.
Appeal of the revenue stands dismissed.
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