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Income Tax - Case Laws
Showing 41 to 60 of 173171 Records
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2025 (4) TMI 1555
Revision u/s 263 - denial of exemption u/s 11 - consequential assessment order passed based on the order passed by the CIT(E) u/s. 263 which was set aside by the Tribunal - pendency of appeal taken a ground to attack the order of the CIT(A) - HELD THAT:- There is no dispute with regard to the fact that the assessment unit has made the assessment u/s. 143(3) on 01/03/2023 in which the exemption claimed u/s. 11 was disallowed by relying on the proviso to section 2(15) which was made based on the order passed by the CIT(E) u/s. 263 of the act. The appellate authority viz., the Tribunal, which heard the challenge made to the order passed u/s. 263, set aside the said order and therefore the consequential order passed is not a valid order. When the main order which authorises the AO to make the assessment was not there, the consequential order would not stand by itself.
DR raised the plea that the Tribunal order setting aside the order passed u/s. 263 is under challenge before the Hon’ble High Court of Kerala and therefore the Ld.DR requested the Tribunal to set aside the order of the Ld.CIT(A).
DR had not produced any stay orders of the Hon’ble High Court in support of his argument and only submitted that the matter is under sub-judice before the Hon’ble High Court and therefore find fault with the order of the Ld.CIT(A). We are not accepting the argument advanced by the Ld.DR for the simple reason that as on date, the order of the Tribunal was not set aside and a mere filing of the appeal would not be a reason for terming the order of the CIT(A) as illegal. We also found that the Ld.CIT(A) had explained the reasons in his order for allowing the appeal filed by the assessee which was not disputed by the Ld.DR and in that circumstances, we have no hesitation to dismiss the appeal filed by the revenue and we confirm the finding of the Ld.CIT(A) as a valid one. Appeal filed by the revenue is dismissed.
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2025 (4) TMI 1554
Assessment u/s 153C or 147 - Scope of the phrase "belongs or belong to" versus "pertains or pertain to" in section 153C - HELD THAT:- In the case of the assesse was centralized on 03.07.2012, whereas search was conducted on 02.09.2010 and in case of search conducted on 10.10.2013 in case of Shobha Group the notice was issued on 27.03.2015 after of 17 months. The period for issue of notice under section 153C was not expired. In this case prima-facie appears that the revenue officers have not properly followed the Instruction No, 1927 dated 21.07.1995 specifically in this point (vi) The seized material shall be handed over to the Assessing Officer at the earliest.
AO was the same person for the searched person and the assesse, he could have issue notice under section 153C after following the procedure laid down therein.
AO has choosing to issue notice under section 148 instead of 153C since there were incriminating materials were found and seized. The very basis of reason for reopening the case is on the basis of Seized materials unearthed during the course of searched person. On examination of the documents handed over by the Investigation Wing to the AO has a bearing for determination of total income of such other person for the relevant preceding years. In view of the above the case is covered u/s 153C of the Act but not under section 147/148 of the Act.
Now coming to the case of the assessee the search was conducted on 02/09/2010 & 10/10/2013 in the case of Davanam Jewellers and Sobha Developers and incriminating materials were found and seized and it was marked as A2/DJPL/4 Page No. 13 to 16 and AO has quantified which is clear from the AO's order at Para No. 4.2 to 4.4. noted supra. During the search it was found and seized by the Investigation Wing in respect of transactions carried out for purchase of the Madiwala Commercial Plaza and noted that huge premium have been paid by the assessee and it was not recorded by the assessee.
Consequently, the case of the assessee came to be centralized on 03/07/2012. The AO has received information and perused the seized documents thereafter the AO has issued a notice under section 148 after the date of centralisation. The time limit to initiate proceedings under section 153C for each of the assessment years from Assessment Year 2006-07 to Assessment Year 2010-11 had not expired as on the date on which notice under section 148 was issued for these respective assessment years. Thus, the AO was not precluded from initiating proceedings under section 153C of the Act, since, in the case of the assessee, there were incriminating materials unearthed during the course of search, therefore the AO has to follow the procedure as per sections 153A/153C of the Act.
That the case of the assessee does not fall under section 147 of the Act, since the materials were unearthed and seized during the course of search. In view of this the arguments of the learned Standing Council for the Revenue are not acceptable.
The decision of Tribunal in the case of M/s. Ickon Projects [2023 (10) TMI 1471 - ITAT BANGALORE] where the ITAT held that the decision of Vikram Sujitkumar Bhatia [2023 (4) TMI 296 - SUPREME COURT] clearly mandates that the amended in Section 153C is deemed to have been on the statute since the very inception of that section & thus, if any material which is seized in a search conducted under section 132 of the Act is to be used to assess a person who is not searched, the AO would have to necessarily initiate proceedings under section 153C of the Act, in order to do the same & proceeding initiated under section 147 of the Act to assess the same is bad in law.
To sum up, going through the arguments advanced by both the sides and considering the case laws noted supra. we find that the learned CIT (A) has done good reasoned order and there is no any infirmity. The AO should not have issued notice under section 148 of the Act. In the result the appeals filed by the Revenue are dismissed in above terms.
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2025 (4) TMI 1553
Rejection of registration u/s 12AA and also not granting approval u/s 80G(5) - ‘Trust do not conclusively prove the genuineness of the activities of the Trust in absence of such documents, it could not be determined whether the applicant is genuinely carrying out activities as per its objects’ - HELD THAT:- We find that the CIT(E) has rejected the application u/s 12AB of the Act cryptically and vaguely that ‘Trust do not conclusively prove the genuineness of the activities of the Trust. In absence of such documents, it could not be determined whether the applicant is genuinely carrying out activities as per its objects’ which is factually incorrect.
CIT(E) has not issued any show-cause notice before passing the order of rejection of assessee’s application which is in violation of the principles of natural justice as per settled law. Revenue could not controvert the factual position brought on record by the assessee’s learned counsel.
Thus, we deem it fit and proper to remand the matter back to the CIT(E) regarding grant of registration u/s 12AB of the Act to the file of the CIT(E) with the directions to examine the issues of genuineness of the activities of the trust in consonance to the objects of the assessee’s trust. CIT(E) is directed to grant reasonable opportunity of being heard to the assessee. Appeals of the assessee are allowed for statistical purpose.
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2025 (4) TMI 1552
Revision u/s 263 - exemption u/s 11 - charitable purposes u/s 2(15) or not? - HELD THAT:- CIT’s findings in the impugned revisional order passed u/s. 263 are highly whimsical and are not conclusive one way or the other. Each of the issue raised on merits are debatable and more than one view is possible in respect of each of the points raised by the CIT(E) to justify the revision of the order passed u/s. 143(3) of the Act. It is not open to the CIT(E) that further verification is needed on certain aspects when the records speak that thorough enquiry was done by the AO after issuing many notices and replies taken on record and it is not a case of no enquiry warranting such observation by the CIT(E).
AO had verified and convinced that, the activities carried out by the assessee is eligible exemption u/s.2(15) of the Act and also respectfully following the decision of the Hon’ble Madras High court [2020 (11) TMI 267 - MADRAS HIGH COURT] in allowing the appeal of the assessee against the cancellation of registration u/s.12AA of the Act, passed an order u/s.143(3) of the Act. This action of the AO, interfered by the Ld.CIT(E) exercising his jurisdiction U/s.263, which according to the ld. AR is wholly without jurisdiction and the issues that have been raked by the Ld.PCIT by treating the application of fund under three heads as not allowable.
According to the CIT(E) the following payments Investment made in M/s. Metronation Chennai Television Pvt Ltd., Corpus donation made to M/s. Aditnar Educational Institution and Advance tax payment as application of income are to be disallowed as fund not utilised for the objects of the assessee trust and taxed at MMR. In the present facts of the case, we do not agree with the assertion laid by the CIT(E), since the AO during the assessment proceedings has considered all the three impugned issues raised by the CIT(E) and concluded the assessment by taking a plausible view permitted under the Act.
The assertion of the CIT(E) that, the AO while scrutinizing the assessment has failed to verify the issue stated (supra) is contrary to the facts revealed from the records and found to be incorrect. From perusal of the SCN for draft assessment order and the assessment order, it reveals that the AO has conducted enquiry on all the impugned three issues and the assessee had furnished all the relevant material during the assessment proceedings (provided in the paper book filed by the assessee) and which have been duly considered and verified by the AO before framing the assessment by accepting the payments made by the assessee as application of funds towards objectives of the trust as claimed by the assessee.
Since, the AO has considered the issues according to the merits and also followed the decision of the hon’ble Madras high court in assessee’s own case wherein their lordship has considered all the impugned issues before reinstating the registration granted u/s.12AA of the Act, the assessment order of the AO cannot be treated as erroneous. Therefore, we do not countenance the impugned action of ld.CIT(E) on the facts and circumstances of the case. Decided in favour of assessee.
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2025 (4) TMI 1497
Rectification of mistake - penalty notice passed u/s 221(1) imposing penalty on account of filing wrong return - As decided by HC [2024 (9) TMI 28 - PUNJAB AND HARYANA HIGH COURT] petitioner was having full knowledge of having filed return in the wrong format. More so, as he had also filed return for the AY 2014-15 in the ITR Form 7, which was later on revised by him and ITR was filed under Form No.5 subsequently. Once he has himself corrected his ITR for the subsequent AY 2014-15, there was no occasion for the petitioner not to correct his ITR for AY 2013-14.
Be that as it may, the petitioner has remedy in terms of Section 154 of the Act as above for seeking necessary rectifications
HELD THAT:- Having heard parties and having gone through the materials on record and more particularly the High Court having reserved the liberty for the petitioner to move an application for rectification u/s 154 of the Act, we find no good reason to interfere with the impugned order.
If any application is preferred by the petitioner in terms of Section 154 of the Act, the same shall be decided at the earliest in accordance with law.
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2025 (4) TMI 1496
Income escaping assessment u/s 147 - proceedings were initiated after the expiry of four years - Bogus loan transaction of debentures - information is received through FT & TR that the loan received from Flirasca Holding Private Limited is located in Cyprus and Mauritius, tax havens countries and on an analysis of the bank statement of these entities it is observed that funds have been transferred through circuitous route to the Petitioner-Company by way of loan.
HELD THAT:- Admittedly, in the reasons recorded and reproduced above, there is no statement alleging failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. However, merely because this statement is not there in the reasons recorded, it does not mean that this condition is not satisfied if on a perusal of the reasons recorded it can be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment.
On a perusal of the reasons recorded and reproduced above, the failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment can be culled out even in the absence of any statement to that effect in the reasons recorded.
In the reasons recorded it is stated that information is received through FT & TR that the loan received from Flirasca Holding Private Limited is located in Cyprus and Mauritius, tax havens countries and on an analysis of the bank statement of these entities it is observed that funds have been transferred through circuitous route to the Petitioner-Company by way of loan.
The money is received by the Petitioner through the layering of various offshore entities, and based on the intelligence available, these tax haven entities have an intimate connection with the Petitioner and its Director, and undisclosed funds have been routed by the Petitioner itself through layering via various offshore entities in tax haven countries.
In our view, based on these reasons, which are recorded, it can very well be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. The circuitous movement of funds through various companies located in tax havens have not been disclosed in the course of the original assessment proceedings. Therefore, in our view, even though there is no statement of any allegation of failure to disclose fully and truly all material facts necessary for the assessment, same can be culled out on a reading of the reasons recorded. Therefore, the contention raised by the Petitioner that in the absence of any statement in the reasons recorded that there is any failure to disclose fully and truly all material facts necessary for the assessment the impugned proceedings are bad is to be rejected.
In the extraordinary jurisdiction under Article 226 of the Constitution of India, the Court is not required to examine the sufficiency of the reasons but whether the reasons prima facie indicate that any income has escaped assessment. In our view, based on the reasons as recorded, which in turn, is based on information received post conclusion of the original assessment proceedings as reproduced above, it cannot be said that no prudent person could have formed a belief that any income has escaped assessment by failure on the part of the Assessee to disclose fully and truly material facts necessary for the assessment.
Since the petitioner had questioned the compliance with the jurisdictional parameters for reopening, we directed the Respondents to place on record the precise information based on which the reopening was proposed. Therefore, in our view, no prejudice was caused to the Petitioner by our directions. In any case, this direction was limited to ascertain whether the same was available at the time of the original assessment proceedings or was it post-conclusion of the original assessment proceedings. Merely because the date of receipt of information is not noted in the reasons recorded, the assumption of jurisdiction cannot be faulted.
The reopening as evident from the reasons recorded is initiated after conclusion of the assessment proceedings wherein the revenue has the information about unexplained money of the petitioner being routed through various companies located in tax haven countries. This information was not available at the time of the assessment proceedings and, therefore, was not examined during the original assessment proceedings. In the original assessment proceedings, what was perhaps examined was only receipt of money from Flirasca Holding Company Limited and not the routing of the said money through various layered companies which, according to the information received, is the unexplained money of the Petitioner. Further, it is important to note that this information was received post conclusion of the assessment proceedings, as evident from the letter dated 28 March 2016.
Condition specified in first proviso to Section 147 of the Act would not be applicable in a case where subsequently it is found that the transaction which was examined is non-genuine or bogus. For the purpose of assumption of jurisdiction, certainly the submission made by the Petitioner cannot be accepted. This is more so, looking at the purport and objective of the reassessment proceedings to bring to tax income which has escaped assessment and any interpretation which would be contrary to such an objective is required to be rejected in the facts of the present case.
Based on the objection raised by the Petitioner, a feeble attempt was also made before this Court that in the proceedings before the Income-tax Settlement Commission (ITSC), the said authority had observed that no further enquiry is needed on the loan transaction of Rs. 403 crore from Flirasca Holding Company Limited. In the objection, the Petitioner had admitted that the application before the ITSC was not for AY 2009-2010. The present proceedings impugned in the petition relate to AY 2009-2010. Therefore, the objection raised by the Petitioner on the basis of the ITSC order cannot prevent the revenue from initiating reassessment proceedings for AY 2009-2010. In any case, we have not been shown any such order of ITSC and in what context the observations were made. Therefore, based on such argument we cannot nip the proceedings at the threshold.
Therefore, in our view, based on the above analysis and reasoning, the present petition, challenging the reassessment proceedings initiated by notice dated 30 March 2016, is required to be dismissed, and is hereby dismissed.
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2025 (4) TMI 1495
Validity of reopening of assessment - Reason to believe - whether the AO was justified in proposing to reopen the search assessments earlier made beyond the period of four years? - HELD THAT:- What is to be answered is whether the assessee by furnishing the Information had disclosed all the primary facts before the assessing officer and whether the assessee's duty stood discharged. At the first blush, it looks as if the assessee had nothing more to do and that it was for the assessing officer to arrive at the requisite inferences.
The statutory provision does not stipulate that at the stage of issuing notice u/s 148 of the Act, the authority must point out the default on the part of the assessee. If such were to be the requirement, the Hon'ble Supreme Court would not have held that the assessee can demand furnishing of reasons. In the case on hand, pursuant to the request made by the assessee, reasons were furnished. The assessee offered its objections. The objections were rejected. All these steps had to be taken before proceeding with the reassessment.
Challenging the rejection order, writ petitions were filed. When the course of action adopted by the assessee as well as the assessing officer are in consonance with GKN Driveshafts [2002 (11) TMI 7 - SUPREME COURT] decision, the question of quashing the impugned proceedings on the basis of Fenner [1998 (11) TMI 66 - MADRAS HIGH COURT] decision by the Madras High Court which was rendered in 2000 does not arise at all.
Single Judge extracted the rival contentions and the decision of Asianet Star Communications Pvt. Limited [2019 (6) TMI 356 - MADRAS HIGH COURT] dealing with the issue of change of opinion was cited.
With due respect, we have to observe that the order allowing the writ petitions is non-speaking. It is vulnerable on that sole ground. Probably, that was why, the erudite Senior Counsel appearing for the assessee trained his guns on the notices and the rejection orders passed by the assessing officer instead of supporting the order passed by the learned Single Judge.
For the foregoing reasons, the orders impugned in the writ petitions are sustained.
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2025 (4) TMI 1494
Calculation of block periods for assessment u/s 153C - AO dropped the proceedings initiated against the Assessee u/s 153A under the process of initiating fresh proceedings u/s 153C - ITAT, following the decision of this Court in Ojjus Medicare Pvt. Ltd [2024 (4) TMI 268 - DELHI HIGH COURT] held that AY 2012-13 falls outside the block of ten assessment years, which could be reopened pursuant to a notice issued under Section 153C of the Act.
HELD THAT:- Concededly, in terms of the said decision, the block of ten years for which assessments could be reopened is required to be construed from the end of the assessment year relevant to the financial year in which the satisfaction note under Section 153C of the Act was recorded by the AO. As noted above, in the present case, the AO had recorded its satisfaction note under Section 153C of the Act on 29.09.2021 and therefore, the period of ten years for which the assessments could be reopened under Section 153C of the Act read with Section 153A of the Act are required to be reckoned from the end of the AY 2022-23.
Concededly, AY 2012-13 falls beyond the block of ten years that are required to be reckoned from the end of the AY 2022-23.
No infirmity with the view of learned ITAT in finding that the AO’s assumption of jurisdiction under Section 153C of the Act in respect of AY 2012-13 is invalid. Decided against revenue.
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2025 (4) TMI 1493
Reopening of assessment u/s 147 - petitioner had not furnished confirmation from the shareholders subscribing the capital in the ongoing assessment - HELD THAT:- The assessment of the petitioner was finalized u/s 143 (3). Thereafter the petitioner filed revised return correcting the clerical error in claiming the depreciation. On the basis of the revised return the assessment proceedings were initiated but dropped on 19.03.2015, considering that there cannot be two assessment for an assessment year and the issues on merit were not gone into.
The objection that while dropping the assessment proceedings vide order dated 19.03.2015 the AO had not taken cognizance of the information given by DGIT was rightly rejected. There was no occasion for AO to go into any other issue after holding that the proceedings cannot continue in view of assessment having already been completed.
The contention that the proceedings were initiated merely on receipt of information from the investigation wing and without application of mind, lacks merit.
On receipt of material from the investigation wing a preliminary enquiry was held by the AO. Issuance of notice under Section 133 (6) revealed that the transaction pertained to Assessment Year 2012-13 and not to 2013-14. There is a tangible material available with the AO to make basis for having reasons to believe that there is escaped assessment. The AO is not required to finally concluded on the relevancy of the material and to hold that it is sufficient and ultimately would result in making an addition.
In case of Micro Marbles Private Limited [2023 (1) TMI 282 - RAJASTHAN HIGH COURT] the notice under Section 148 and the proceedings consequent thereto were quashed for failure of the department to supply the information received from the investigation wing and documents being relied upon.
In case of Kohinoor Hatcheries Pvt. Ltd [2016 (9) TMI 208 - ANDHRA PRADESH HIGH COURT] from the questionnaire issued during the assessment proceedings it was evident that there was full and true disclosure of the material facts by the assessee. In the case in hand the claim of the petitioner that during assessment the confirmation from the shareholder and subscribers was produced and considered has been factually found wrong. Decided against assessee.
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2025 (4) TMI 1492
Delay in filing the revised return of income - Condonation of Delay u/s 119(2)(b) - Petitioner was awarded the compensation for compulsory acquisition of the land in question by the Surat Municipal Corporation as per the award passed by the Civil Judge, Senior Division under the provisions of the Land Acquisition Act, 1894 -
HELD THAT:- Petitioner received the compensation in the month of September 2021 after the order of determining the share of the Petitioner passed by the Court on 04.09.2021. The Petitioner therefore could not show the amount of compensation in the original return filed on 04.01.2021. The Petitioner therefore was prevented by sufficient cause to claim the refund of the amount of tax deducted at source by the Surat Municipal Corporation at the time of deposit of the compensation with the Court.
The reasoning given by the Respondents authorities while rejecting the application do not commensurate with the facts of the case inasmuch as the Respondents have failed to consider that the compensation received by the Petitioner was exempted from tax and therefore, the Petitioner is entitled to get the refund of the TDS which was deposited by the acquiring body with the Government and for that purpose, the Petitioner is required to file the revised return which can be possible only if the delay in filing such revised return is condoned by exercising the powers vested in Section 119 of the Act. The objection of Section 119 of the Act is to see that the Assessee are even not put to any unnecessary hardships to claim any refund which otherwise is eligible to get.
Respondents-authorities were required to consider the facts of the case more particularly when the Petitioner admittedly has not received the compensation till the due date of filing of return on 31.05.2021 and when the Petitioner received such compensation, the delay in filing the revised return is required to be condoned so that the Petitioner gets the refund of the TDS deposited by the acquiring body in the Government, as such compensation received by the Petitioner is not taxable under the provisions of the Act.
Order passed by the Respondents u/s 119 (2) (b) of the Act is hereby quashed and set aside and the Respondents are directed to pass the fresh order to condone the delay in filing the revised return by the Petitioner so as to process the same in accordance with law by the AO.
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2025 (4) TMI 1491
Release of Seized Jewellery - Assessment was completed - Outstanding Demand of subsequent year - Seeking directing the respondents to released the seized jewellery - HELD THAT:- Respondent is required to release jewellery which is retained by order in absence of any outstanding liability to be paid by petitioner no.3 regarding AY 2014-2015 and therefore, such jewellery could not have been retained for recovery of any outstanding demand for any subsequent assessment years of the petitioner no.3.
Retention of jewellery is therefore, without any authority and jurisdiction and is required to be released forthwith in favour of petitioner no.2.
The contentions raised on behalf of the respondents to retain the jewellery for recovery of outstanding tax dues of the petitioner no.3 is not tenable as the section 132B was amended to include the amount of the liabilities determined on “completion of the assessment or reassessment or re computation” with effect from 01.04.2022 by Finance Act, 2022 and prior thereto the provision existed as reproduced herein above qua completion of assessment under section 153A only.
Therefore, respondents are not justified in retaining the jewellery for recovery of outstanding liability of subsequent assessment year other than the A. Y. 2014-15 as there is no outstanding liability to be discharged by the petitioner no. for A.Y. 2014-15.
The respondents are directed to release the seized jewellery forthwith which is retained by the respondents illegally and without jurisdiction in favour of petitioner no.2.
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2025 (4) TMI 1490
Reopening of assessment u/s 147 - AO has jurisdiction to undertake assessment for the year 2020-21 before 01.04.2024 or not? - HELD THAT:- Perusal of the dates and event it is evident that AO had issued notice u/s 148A Clause (b) on 28.03.2024 which is much earlier to the time-limit stipulated, i.e. within three years. Petitioner’s contention that for the purpose of limitation number of days is required to be counted from the date of notice dated 22.04.2024. It is to be noted that notice dated 22.04.2024 was issued pursuant to the petitioner’s reply to the notice dated 28.03.2024, i.e. reply dated 31.03.2024.
There was no occasion for the Revenue to issue notice on 22.04.2024, if the petitioner’s contention in reply to the notice dated 31.03.2024, in particularly, therefore, proceedings have been initiated by issuing notice on 28.03.2024.
If proceedings commenced on 28.03.2024 insofar as issuing notice u/s 148A Clause (b) which is the relevant and crucial date for the purpose of taking note of limitation period.
Combined reading of 5th and 6th Proviso, it is crystal clear that delay is required to be taken note of with reference to notice. In the present case notice means first notice issued on 28.03.2024 and it is within the time-limit stipulated and AO has jurisdiction.
The present writ petition is pre-mature. Accordingly, the present writ petition stands disposed of reserving liberty to the petitioner to participate in the process undertaken by the Revenue in the light of impugned order and notice and co-operate.
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2025 (4) TMI 1489
Addition being 8.0% of the turnover of contract Receipts - admittedly there was non-compliance on the part of the assessee in not maintaining the books of accounts in respect of it’s contractual business - HELD THAT:- We observe that this is the first year of the assessee’s contractual business, in which he has earned income from carrying out contractual work and also rental income on account of hiring of Plant and Machinery.
For this year, the assessee did not file return of income and has not maintained any books of accounts, being the assessee’s first year of business.
For the succeeding assessment years, the assessee has been regularly filing return of income and also maintaining duly audited books of accounts.
For A.Y. 2012-13, the assessee has declared net profit rate of 2% approximately on total turnover of 5.65 crores. For A.Y. 2013-14 the assessee has declared approximately 2% net profit rate on total turnover of Rs. 7.01 crores approximately. For A.Y. 2013-14, there was a regular assessment in the case of the assessee, wherein the aforesaid return of income was accepted by the Tax Department, though there were some minor disallowances on account of certain expenditures, for which the assessee was unable to provide supporting documentation.
Accordingly, in the interest of justice, the net profit rate is directed to be restricted to 5% of the total turnover declared by the assessee, for the impugned assessment year. Appeal of the assessee is partly allowed.
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2025 (4) TMI 1488
Addition of long term capital gain - CIT(A) deleted addition - whether CIT(A) was violative of Rule 46A of the Income Tax Rules because the additional evidence had been admitted without giving an opportunity to the ld. AO?
HELD THAT:- It does appear from the order or the ld. CIT(A), that before acting upon the additional evidences presented before him i.e. the copy of the Khatauni and a certificate dated 29.09.2016, the ld. CIT(A) did not offer an opportunity to the ld. AO to consider these evidences in remand proceedings. Therefore, his actions appear to be in violation of the Rule 46A.
However, in our opinion, this will not materially impact the fate of the case because these evidences were only supporting evidences with regard to facts that had already been placed before the ld. AO in the form of the sale deed.
That sale deed showed that the land in question, which formed part of the auctioned assets, belonged to Smt. Shakuntla Devi, the partner of the firm and not to the firm. In view of the same, the firm could not be charged long term capital gain on alienation of an asset which did not belong to it.
The only gains attributable to the firm could be on account of building structure and plant and machinery which were owned by the firm and depicted in its schedule of fixed assets. For the same, the ld. AO was required to arrive at the figures of amounts realized on sale of building structure and plant and machinery and compute the profits on the sale of the same after deducting the written down value as it stood in the books of the assessee. No other amount could be taxed in the hands of the assessee as capital gains, for assets which did not belong to it.
In the circumstances, we are inclined to agree with the ultimate decision of the ld. CIT(A) in granting relief to the assessee. Therefore, the appeal of the Revenue on the actual grant of relief i.e. ground no. 1 is dismissed.
Appeals on ground nos. 2 and 3 with regard to the entertaining of additional evidences in violation of Rule 46A of the Income Tax Rules are upheld. Thus, the appeal of the Revenue is partly allowed.
Reopening of assessment - Information that was available with the ld. AO, coupled with the fact that the assessee had not filed a return of income earlier gave rise to a valid, “reason to believe” that the income had escaped assessment - In considering the material available before the ld. AO and subsequently before the Addl CIT, Range-1, Bareilly, and considering that at that point of time, the amendments to the act that provided for seeking the explanation of the assessee before issuance of notice under section 148, had not yet come into play, we see no infirmity in the initiation of the assessment proceedings or the approval given to the said assessment proceedings by the Addl CIT, Range-1, Bareilly.
Thus, it cannot be said that the assessment proceedings were void ab initio or that the approvals were given mechanically. Assessee has appeared before the ld. AO in response to the notice issued by him. Therefore, in view of the provisions of secton 292B and 292BB, the notice cannot be said to be invalid or the proceedings vitiated on account of service of an incomplete notice. We, therefore, also cannot conclude that the assessment proceedings were illegal, bad in law or without jurisdiction. Therefore, even while we have held that the addition was not sustainable in the hands of the assessee, the grounds raised in the Cross Objection are not found to be maintainable
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2025 (4) TMI 1487
Addition on account of oil and fuel expenses - addition only on the ground that there was certain differences between the original return and the revised return filed by the assessee, wherein the amount of depreciation claimed in revised return of income and original return of income and a similar difference was there in the oil and fuel expenses i.e. as per the revised return of income and as per the original return of income, there was an increase in the fuel and oil expenses - HELD THAT:- Though the assessee furnished before the AO the bills and vouchers supporting the said expenses and also the reasons for difference in the amount of depreciation, however, the AO without going into those evidences, made an adhoc disallowance out of the total oil and fuel expenses as claimed by the assessee in the profit and loss account by bench marking the same on the basis of previous year’s percentage of oil and fuel expenses to the turnover and also considered the increase of 3% in the cost of diesel surcharge.
In our opinion, the said estimation of disallowance by the AO is based on the presumption and surmises without there being any valid basis. We note that the total turnover of the assessee during the impugned assessment year.
We further note that there was escalation in the prices of diesel as on 01.04.2011 from Rs. 37.75 to Rs. 48.63 as on 01.04.2013, which is approximately around 28%. Thus, the basis adopted by the AO is devoid of appropriate basis and accordingly sustenance of addition by the ld. CIT(A) is also wrong and cannot be accepted.
Disallowance on account of truck running expenses - HELD THAT:- We note that the AO has not made any objective examination of the expenses when the assessee has not produced the bills and vouchers as claimed by the AO. We find merit in the contention of the assessee that the increase in toll tax and other road expenses which have enhanced these expenses during the year considerably whereas the disallowance by the AO was totally on incorrect basis by merely comparing with the current year’s expenses with the preceding year expenses.
AO disallowed on account of finance charges paid for acquisition of self-occupied property - HELD THAT:- We find that the interest incurred in the acquisition of flat which is under self-occupation has to be dealt with in accordance with the provisions of Section 24(b) of the Act. Undisputedly, the assessee has paid interest on house loan to HDFC bank. Therefore, we set aside the order of the ld. CIT(A) and direct the AO to allow the interest paid to HDFC Bank on house loan u/s.24(b) of the Act, subject to ceiling as has been prescribed under the Act. Accordingly, ground NO.3 is allowed.
TDS u/s 194A - Disallowance on account of non-deduction of tax u/s.40(a)(ia) - AO disallowed Interest paid to STF Co. Ltd - HELD THAT:- We find merit in the contention of the assessee that the amount was paid on account of interest charges to the listed companies who offered to tax by them and, therefore, no disallowance is called for u/s.40(a)(ia). In our opinion, this issue needs to be verified at the end of the AO as to whether these companies have offered the tax in their income tax returns. Accordingly, the issue is restored to the file of the AO. The assessee shall be provided sufficient opportunity of hearing by the AO while deciding the issue. This ground of appeal of the assessee is allowed for statistical purposes.
Disallowance on the basis of list of secured loan takens from various banks - there was a difference in the statement of unsecured loan taken from Kotak Mahindra Bank which the assessee could not explain and accordingly the same was added by the AO to the income of the assessee and also confirmed by the CIT(A) - HELD THAT:- After considering the rival submissions of the parties and perusing the material available on record, we find that the assessee has filed a letter dated 28.03.2016 along with supporting evidences reconciling the said amount. The same requires verification at the end of the AO and accordingly we restore this issue also to the file of the AO with direction to decide the same after providing sufficient opportunity of hearing to the assessee.
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2025 (4) TMI 1486
Limited scrutiny - Unexplained investments on account of sundry debtors - HELD THAT:- As entire business transactions including trading and investments in shares are bogus/non-genuine. Therefore, such finding, being broad, is held falling within the following parameters of limited scrutiny:
i. Low income in comparison to very high investments.
ii. Low income in comparison to high loans/advances/investment in shares
iii. Large increase in investment in unlisted equities during the year
Therefore, the issue raising scope of limited scrutiny is decided against the assessee and in the favour of the Revenue.
Unexplained investments on account of sundry debtors being fictitious - AO in the assessment order passed in this case, has held that the entire business transactions including trading and investments in shares are bogus/non-genuine. Therefore; in such circumstances, the AO should have taken pains to gather various details of real beneficiaries for passing such information to the AOs of beneficiaries for remedial measure. Once the AO has held the assessee’s business as non-genuine, then the accommodation entry, if any, given through the Profit & Loss account and Balance Sheet should have been taxed in the hands of the beneficiaries as per the law. We find merit in the arguments of the Ld. Counsel as the anomalies/ contradictions/factual inconsistencies pointed out by him, prima-facie, are convincing.
When the AO had not held the sundry debtors existing as on 31.03.2014 as bogus/fictitious in the scrutiny assessment order of the AY 2014-15 even after questioning the same cannot be held as bogus/fictitious in subsequent order of the relevant year.
AO has not given specific finding pointing out any bogus transaction in the relevant year with the help of any corroboratory evidence.
We find that the AO on one hand has held that the entire business transactions including trading and investments in shares are bogus/nongenuine, then no addition on account of purchases and sales treating then real and genuine can be made in the hands of the assessee.
We are not able to persuade ourselves that how such contradictions will go together. As far as the addition on account of sundry debtors is concerned, we are of the considered view that the same cannot be taxed in the relevant year even if it is fictitious in nature.
The current year sale of the shares has not resulted any sundry debtor. The assessment order does not pin-point say any adverse material regarding the sale of shares.
Revenue has not brought any material on the record to demonstrate that the trading of shares is non-genuine. Therefore, the addition cannot be sustained. Accordingly, the addition is deleted.
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2025 (4) TMI 1485
Reopening of assessment u/s 147 - Addition u/s 69A - genuine sale consideration received as unexplained money and declared as Long Term Capital Gain in return - HELD THAT:- Reasons recorded by the AO is without application of mind and without verification of his own records, whether the assessee filed the Return of Income or not. Thus the basis of recoding reason to believe of escapement assessment is nothing but the reproduction of the Investigation Wing report of the department and independent application of mind and verification of record by the AO.
There is no failure on the part of the assessee in declaring the LTCG and claim of exemption u/s 10[38] in the original Return of Income filed by the assessee. The very reopening of assessment itself is invalid in law based on the “borrowed satisfaction” from investigation wing of the department.
As relying on Mumtaz Haji Mohmad Memon [2018 (10) TMI 366 - GUJARAT HIGH COURT] we have no hesitation in quashing the reassessment notice issued by the AO as invalid in law for not recording independent reason for escapement of income after verification of the facts of the assessee’s case. Consequently, the reassessment order is hereby quashed. Appeal filed by the assessee is hereby allowed.
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2025 (4) TMI 1484
Deduction u/s 80G - donations made as part of its Corporate Social Responsibility (CSR) obligations - HELD THAT:- We are of the view that the CIT(A)'s conclusion - though acknowledging the inapplicability of clauses (iiihk)/(iiihl) - is contrary to the legislative structure and fails to appreciate the scope and autonomy of section 80G within Chapter VI-A.
In light of the legislative intent behind Explanation 2 to section 37(1), of the Act the structure and operation of Chapter VI-A, judicial consensus from Co-ordinate Benches and full compliance by the assessee with the conditions of section 80G, we hold that the assessee is entitled to deduction u/s 80G. The disallowance made by the AO and sustained by the CIT(A) is hereby directed to be deleted. Appeal of the assessee is allowed.
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2025 (4) TMI 1483
Disallowance u/s 80P(2)(d) - interest income from Co-operative banks - HELD THAT:- It is pertinent to note that only the Sabarkantha District Central Co-operative Bank Ltd. is a registered co-operative society and therefore the component which is an interest received on deposits are allowable as deduction u/s. 80P(2)(d).
As regards, the Dena Gujarat Gramin Bank, AR could not point out whether this was registered cooperative society or not and after taking into account the submission of the AR. It is found that the said Dena Gujarat Gramin Bank is not co-operative society, question of the interest received from the said Dena Gujarat Gramin Bank will not be eligible for deduction u/s. 80P(2)(d). Appeal of the assessee is partly allowed.
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2025 (4) TMI 1482
Addition on account of Club Expenses - HELD THAT:- We find merit in the submissions/arguments/contentions of the AR. AO had not demonstrated the club expenditure as non-business expenditure. It seemed that the AO had disallowed this expenditure by nomenclature of the expenditure only. We do not see any justification therein. Therefore, the same is allowed as business expenditure.
Disallowance of exchange rate difference - HELD THAT:- The tax treatment of foreign exchange gains or losses differs from its accounting treatment. For tax purposes, the revenue transactions resulting foreign exchange gains/losses are taxable/deductible being revenue in nature.
Here, in the present case, the expenditure was allowed in the preceding AY as per the claim but not the exchange rate fluctuation in the relevant year though the same was crystalized/materialized in the relevant year.
AO has not raised any doubt on the claim of expenditure of US $ 39,000/- in the preceding year. The encashment of said cheque, which happened in the relevant year resulting further expenditure due to the exchange rate difference was not allowed on the reasoning that it pertained to the prior period. We are of the considered view that this expenditure is held to have crystalized in the relevant year and thus, it has to be allowed as business expenditure. We therefore, delete the disallowance on this score.
Loss on closure of the stores - HELD THAT:- The only requirement which has to be seen is that the expenditure is of revenue nature and not capital nature. There are series of decisions wherein the Hon’ble High Courts and Hon’ble Supreme Court that has laid down the principle that if an expenditure is incurred for doing the business in a more convenient and profitable manner and has not resulted in brining any new asset into existence then such expenditure is allowable business expenditure. It is also pertinent to note that in the case in hand, the expenditure has been incurred; prima-facie, for assets in respect of the existing business and are capital in nature. However, this issue is restored back to the AO for verification and doing needful.
If the expenditure is of revenue in nature, then the same has to be allowed as business expenditure u/s 37(1) and if new assets have come into existence on which depreciation have been claimed in preceding year(s), then this loss has to be dealt through the Block of assets (WDV) showing sale value of the abandoned assets as NIL and allowing depreciation on the reduced WDV as per the law. In view of the above observations, the issue is being remitted to the AO for deciding it afresh as per the law.
Taxability of interest on the income tax refund - The dispute before us is confined to the quantum of interest and not the taxability of it per se. Therefore, this issue is remitted back to the AO for verification and taxing the actual amount of interest paid by the income tax Department on the refund u/s 244A of the Act during the relevant year.
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