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Income Tax - Case Laws
Showing 421 to 440 of 173343 Records
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2025 (4) TMI 986
Disallowance of Lease Equalization Reserve - whether the difference between the actual rent paid and the equated rent is allowable as expenditure? - HELD THAT:- There is no bar in claiming the actual rent in the Profit & Loss account but the assessee, following the principle of consistency and Accounting Standard-19, has claimed the same rent as expenditure for the entire period of lease spanning over more than one year. The quantum of increase in the rent as per the lease agreement has been claimed separately under the head ‘rent/lease equalization reserve’ in the computation of the income.
This method of accounting is being followed consistently over the years and the Revenue is accepting it in some preceding and subsequent years. In principle, the same has to be allowed as business expenditure irrespective of nomenclature under which such expenditure is put into. The said head ‘lease/rent equalization reserve’ is not the contingent liability and a reserve. We are of the considered view that the said disallowance of Lease Equalization Reserve made by the AO and sustained by the Ld. CIT(A) is not genuine. Hence, the same is deleted.
Disallowance of bad debts written off u/s 36(2) - The said claim as bad debts is nothing but the business loss allowable u/s 37. We are of the considered view that the said disallowance of Lease Equalization Reserve made by the AO and sustained by the Ld. CIT(A) is not genuine. Hence, the same is deleted.
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2025 (4) TMI 985
Rectification u/s 154 - Mistakes apparent from the original assessment order - Deduction u/s 80IA in respect of seven units transferred after 01.10.2009 from the demerged company - HELD THAT:- We can conclude that the issue of allowability of the deduction u/s 80IA(12A) is not an issue which could be considered a case of prima facie mistake apparent from the records. The issue under consideration was examined by the CIT(A) in appeal to the extent of partial disallowance due to reallocation of head office expenses.
CIT(A) having co-terminus powers of the Assessing officer and also having powers of enhancement, however, did not consider it appropriate to modify the claim of the assessee in any other manner or for that matter invoking the provisions of above sub-section which was very much open even before him having partly considered it. Moreover, the detailed discussion and analysis in the case of Ultratech [2023 (2) TMI 916 - ITAT MUMBAI] in itself makes it evidently clear that the issue could not be decided by invoking the provisions of section 154 of the Act. We dismiss the grounds of appeal in this regard.
Deduction u/s 80IA in respect of TPP - AO was not justified in invoking the provisions of section 80IA(2A) for withdrawing the claim of the assessee even on merits. The provisions of rectification u/s 154 of the Act, in any case could not have been applied on the facts and the circumstances of the case. Therefore, both on legal grounds and merits of the case, we do not find any substance in the grounds of the Revenue which are accordingly dismissed.
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2025 (4) TMI 984
Short-term capital gains tax u/s 45(4) - HELD THAT:- A perusal of section 45(4) clearly shows that distribution of capital asset as a result of dissolution of a firm or otherwise the fair market value of the asset on the date of such transfer shall be deemed to be the full value of consideration received.
In this case there is no dispute about the amount of fair market value of consideration, i.e. Rs. 7.4 crores. AO shall compute the capital gain u/s. 45(4). Hence, we remit the matter back to the file of the AO to compute the amount of capital gain u/s. 45(4) of the Act by adopting the sale consideration received from Shri Poonghat Srinivas of Rs. 7.4 crores as sale consideration by reducing the WDV of the asset as per the provisions of the Income Tax Act.
Applicability of section 48 and section 50 - The provisions of section 48 provides for the method of computation of income chargeable under the head capital gains. Provisions of section 48 stipulates that the income chargeable under the head ‘capital gains’ shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, viz. expenditure incurred wholly and exclusively in such transfer and the cost of acquisition of asset and cost of any improvement thereto, whereas the provisions of section 45 are charging provision and section 48 provided for basis of computation. It is also settled law that the provisions of section 45 must be read with section 48 of the Act. If the computation cannot be effected for any reason the, charging provision u/s. 45 fails.
In the present case, by virtue of the dictum laid down by the Hon'ble High Court that provisions of section 45(4) are applicable and capital gains u/s. 48 r.w.s. 45(4) are computed. As applicability of section 50, on mere perusal of section 50 it is clear that the object behind enacting the provisions of section 50 is to compute the short term capital loss or the gains on sale of depreciable assets, sale of an asset when the asset is sold on which depreciation has been allowed in the earlier years as per the Income Tax Act and Rules. The actual amount of depreciation in fact becomes known, which would call for an adjustment to be made to the depreciation which had been earlier allowed as per the provisions of Income Tax Act and Rules made thereunder. This adjustment is called for in the year of sale by way of short term capital gains or loss.
If the realisation of sale proceeds is more than the opening WD value of the asset as increased by the value of addition made in the asset during the year, it would result in short term capital gains under the provisions of section 50 of the Act. Of course, the amount of value of addition should be adjusted in terms of the provisions of section 50 of the Act. However, these provisions of section 50 have no application to the facts of the present case as the same amount was assessed to capital gain u/s. 45(4) of the Act.
Provisions of both section 45(4) and section 50 cannot be applied to the same amount. In this regard reliance is placed on the decision of Urmila Ramesh [1998 (1) TMI 2 - SUPREME COURT] rendered in the context of provisions of section 41(2) read with provisions of section 2(22)(c) of the Act. Appeal filed by Revenue stands partly allowed.
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2025 (4) TMI 983
Rejecting the application for approval u/s 80G - HELD THAT:- It is an admitted fact that on the basis of submissions made by the assessee the CIT(E) noticed certain discrepancies for which he issued notices to the assessee on various dates. Although the assessee has clarified certain issues, however, the last notice issued by the CIT(E) was not properly complied with and the documents were not submitted to the satisfaction of the CIT(E) for which he rejected the application filed for approval of deduction u/s 80G.
It is the submission of assessee that given an opportunity, the assessee is in a position to substantiate its case by filing the requisite details. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Ld. CIT(E) with a direction to grant one more opportunity to the assessee to substantiate its case by filing the requisite details to his satisfaction and decide the issue as per fact and law.
Assessee is also hereby directed to submit the details as called for by the Ld. CIT(E) on the appointed date without seeking any adjournment under any pretext, failing which the CIT(E) is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2025 (4) TMI 982
Addition u/s 56(2)(vii)(b) - difference between the market value and the deed value, as "Income from Other Sources" - HELD THAT:- As decided in Sri Anala Anjibabu, [2020 (8) TMI 597 - ITAT VISAKHAPATNAM] As per the provisions the Act from the A.Y.2014-15 sub clause (ii) has been introduced so as to enable the AO to tax the difference consideration if the consideration paid is less than the stamp duty value. The AO is not permitted to invoke the provisions of section 56(2)(vii)(b)(ii) in the absence of sub clause (ii) in the Act as on the date of agreement.
The department has not made out any case of application of 56(2)(vii)(b) and since the provisions of section 56(2)(vii)(b)(ii) were not available in the statute as on the date of entering into the agreement, following the reasoning given in the case of M. Siva Parvathi & Others (supra), the same cannot be made applicable to the assessee. The department has not brought any evidence to show that there was extra consideration paid by the assessee over and above the sale agreement or sale deed. No other case law of any high court supporting the contention of the department was brought to our notice by the DR. Therefore, we hold that the Ld.CIT(A) has rightly applied the decision of this Tribunal in the assessee's case and deleted the addition - Decided in favour of assessee.
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2025 (4) TMI 981
Rejection of registration u/s 12A(1)(ac)(iii) and approval u/s 80G(5) - non-submission of audited financial statements, and due to certain religious objects in the original trust deed respectively - HELD THAT:- Assessee has now placed on record the audited financial statements for FYs 2021-22, 2022- 23, and 2023-24 and a revised trust deed where the religious objects have been amended.
The delay in filing the appeal is only 8 days, and considering the bona fide reasons stated in the affidavit, we condone the delay in the interest of justice.
Since the additional documents (financial statements and modified trust deed) were not before the CIT(E) at the time of passing the orders, and the CIT(E) has not examined these crucial documents, we deem it appropriate to set aside the orders of the CIT(E) and restore the matter back to his file for fresh adjudication after considering the additional documents.
Departmental Representative has not raised any objection in restoring both the matters back to the file of CIT(E) for want of verification of additional documents placed before us. Appeals of the assessee are allowed for statistical purposes.
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2025 (4) TMI 980
Rejecting the application filed in Form No.10AB for registration u/sec. 80G - HELD THAT:- The assessee has explained the reasons for not appearing before the CIT(E) and argued that if one more opportunity has been given, the relevant details in support of it’s application filed in Form No.10AB will be furnished to the satisfaction to the CIT(E).
When the assessee is a Trust or Society registered u/sec. 12A of the Act, the application filed for grant of exemption u/sec. 80G of the Act needs to be considered on merits.
In the present case, the CIT(E) rejected the application filed by the assessee for want of information. Since the assessee has explained the reasons for not filing the details as called for, in our considered view, one more opportunity of hearing needs to be given to the assessee to justify it’s application filed in Form No.10AB.
Thus, we set aside the order of the CIT(E) and restore the issue back to the file of CIT(E) for re-consideration of the issue. The assessee is directed to file relevant information in support of it’s application filed in Form No.10AB seeking for registration u/sec. 80G of the Act without seeking any adjournment under any pretext. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
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2025 (4) TMI 979
TP Adjustment - Comparability analysis of the companies sought for inclusion/exclusion by the assessee - HELD THAT:- Cybage Software Pvt.Ltd, Nihilent Ltd. and Techwava Infotech Pvt.Ltd be rejected as functionally dissimilar with that of assessee.
Notional interest computed by the Ld.AO/TPO on outstanding receivables - TPO treated the outstanding receivables from AE as advancement of loan and computed the arm's length interest adopting 6-month LIBOR plus 400 basis points - as submitted TPO did not consider the outstanding payables which were less that 20 days in respect of some AE's - HELD THAT:- No doubt there should be TP adjustment on this count after making proper TP study by the Ld.TPO by considering the period of credit enjoyed by the comparables and also applicable LIBOR rate in the place of AE's, for benchmarking the rate of interest to arrive at the ALP. As per the RBI Master Circular no. 8/2010-11 dated 1-7-2010, for average maturity period upto 3 years, the maximum cost ceiling is LIBOR plus 200 basis points.
In view of the above, we deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down in case of CIT v. Cotton Naturals (I) (P.) Ltd [2015 (3) TMI 1031 - DELHI HIGH COURT] considering a credit of 90 days.
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2025 (4) TMI 978
Validity of reopening of assessment - reason to believe -allegation of borrowed satisfaction - no enquiry/investigation on receipt of information from the Investigation Wing - GDR receipts - HELD THAT:- Firstly, the AO must have reason to believe that income chargeable to tax has escaped assessment; and secondly, he must also have a reason to believe that such escapement of income has occurred by reason of failure on the part of the assessee either to make a return of income under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148; or to disclose fully and truly all material facts necessary for his assessment for that purpose.
In the instant case, it is a not a case where the assessee has not filed a return of income, therefore, the first limb of the proviso is not relevant. What needs to be examined is the satisfaction of the second limb of the proviso as to whether there is a failure on part of the assessee to disclose fully and truly all material facts necessary for its assessment. The aforementioned requirements of law are held to be conditions precedent for invoking the jurisdiction of the AO to reopen the assessment under section 147 of the Act and both the conditions are cumulative and must co-exist and in event of any of the conditions not been satisfied, the very initiation of proceedings under section 147 of the Act shall be wholly without jurisdiction.
Second part of the reasons so recorded, the Assessing officer has talked about the information collected/received by him and basis which, he has recorded the reasons of income having escaped assessment.
General modus operandi involved whereby the proprietary concerns receive payments from the beneficiary companies through various modes like RTGS /CHEQUES /BANK TRASNFERS/ and the amount is immediately withdrawn as cash and returned to the beneficiaries after charging certain commission from the beneficiaries. The so called modus operandi where so found and adopted by the assessee has not been specified –mode and manner of payments by the assessee, the particulars of the bank account where the payment is remitted/transferred by the assessee, the quantum of payment and the factum of withdrawal and hand over of cash to the assessee has not been specified as so found by the DDIT Investigation.
It is not that the whole of the investigation report has to be reproduced in the reasons so recorded, at the same time, relevant portion thereof and how the information so found and reported in the said report and linkage thereof with the assessee should be specified in order to hold the said information as a tangible piece of information in possession of the Assessing officer. However, nothing has been specified in the reasons so recorded. We find that these are general descriptions and how the same are relevant and tangible in the case of the assessee is not borne out from the reasons so recorded.
CIT(A) has held that the Assessing officer was in possession of tangible material in form of a report from the Investigation Wing and has thus tried to support the reasons so recorded by way of supplementing the same. It is a settled position that the reasons are required to be read as they were recorded by the Assessing officer and no substitution or that matter, supplementation is possible. It may be that the Assessing officer was in receipt of the report of the Investigation Wing, however, just having the report in his possession is not sufficient unless he brings out the relevant facts and bearing thereof in the hands of the assessee in the reasons so recorded which has evidently not happened in the instant case.
Third part of the reasons so recorded, the Assessing officer has claimed to have carried out the analysis of the information so collected/received by him and all that he has stated was that the assessee had received many bogus entries from Rohit Trading and has made payment.
There is nothing in the reasons so recorded that he has carried out any such enquiry/investigation on receipt of information from the Investigation Wing and the answer to all these questions is therefore not in affirmative. Thereafter, in part five of the reasons so recorded where he says that the assessment records, 360 degree report and financial statements are the basis for arriving at the belief that income has escaped assessment is merely a generic statement without any substance and corroboration. We therefore find that there is nothing on record that the Assessing officer has actually carried out any analysis/verification of the information so received and it is case of mechanical recording of reasons to believe that income has escaped assessment without due application of mind. We therefore find merit in the contention advanced by the ld AR that the reasons have been recorded merely basis receipt of information (even the same is not discernable from the reasons so recorded) from the Investigation Wing without any independent examination and application of mind by the Assessing officer and the same clearly lacks the jurisdictional requirements as so provided in the statute which requires the satisfaction of the Assessing officer and the reasons to believe that income has escaped assessment in the hands of the assessee.
Sixth and seventh/concluding part of the reasons so recorded, the Assessing officer has recorded his findings on the applicability of requirement of true and full disclosure of material facts in terms of proviso to section 147 of the Act as fours years have elapsed from the end of the relevant assessment year. It has been stated by the Assessing officer that he has carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment/reassessment proceedings and have noted that the assessee has not fully and truly disclosed the material facts necessary for his assessment for the year under consideration. It has been further stated by the Assessing officer that it is true that the assessee has filed a copy of annual report and audited P&L A/c and balance sheet along with return of income where various information/ material were disclosed, however, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above.
Thus, in the instant case, AO has simply relied upon the report of Investigation Wing without carrying out any preliminary enquiry and investigation and establishing the necessary nexus between material and formation of belief that income has escaped assessment.
There is clearly no tangible material in possession of the Assessing officer and no independent application of mind by the Assessing officer. There is no specific failure in terms of material facts not truly and fully disclosed as can be discernable from the reasons so recorded. The whole exercise thus shows a mechanical approach on part of the Assessing officer to issue notice u/s 148 of the Act merely on receipt of information from the Investigation Wing on 26/03/2018 and issue of notice on last date of the limitation period i.e, 31/03/2018 without carrying out any further examination/verification.
AO doesn’t have the legal basis to acquire jurisdiction for reassessment u/s 147 and thus, the notice so issued under section 148 is hereby quashed and consequent reassessment proceedings are thus liable to be set-aside. Decided in favour of assessee.
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2025 (4) TMI 977
Stay on recovery of the outstanding demand - HELD THAT:- Despite earlier directions given by ITAT while granting conditional part stay of outstanding demand of income-tax and interest to recover and adjustment of Rs. 39 crores from the refund due to the assessee against outstanding demand of income-tax and interest due thereon, the said recovery and adjustment of Rs. 39 crores has not been done by the Revenue. The AO shall take immediate steps to recover and adjust Rs. 39 crores from the refund due to the assessee, otherwise the assessee is directed to deposit the said amount of Rs. 39 crores if no refund is due and payable to the assessee. The AO shall adjust the same against the outstanding demand of income-tax and interest thereon. The assessee on its part shall also co-operate with the AO to submit relevant information w.r.t. adjustment of refunds claimed to be due to the assessee to the tune of Rs. 39 crores, or otherwise the assessee shall make payment/deposit of Rs. 39 crores with Revenue/Government if no refund is found to be due and payable to the assessee
We stay recovery of remaining outstanding demand towards income-tax and interest thereon of Rs. 230.97 crores vide this order in stay application, for a period of 180 days or till the disposal of the appeal which ever is earlier, with the condition that Rs. 39 crores be adjusted/deposited towards the outstanding demand. The stay on recovery of aforesaid outstanding demand will become effectively operational on recovery and adjustment of Rs. 39 crores, either by adjustment of refund or deposit by assessee, as directed by us as above.
AO will take immediate steps towards the same. The appeal was adjourned sine-die as the issue involved in this appeal concerns issue of DIN, and the same shall continue to be so, till application for fixation of hearing is moved.
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2025 (4) TMI 976
Rejection of books of accounts - Estimating of net profit - CIT(A) directed to estimate profit before depreciation @ 10.32% subject to depreciation, except depreciation on fixed assets claimed to be added during the year under consideration - Disallowance made u/s 40a(ia) by appellant as the TDS amount was deposited delayed and based on the provisions of law, the same would have to be disallowed while making the computation of income and would be claimed only in the year of payment - HELD THAT:- Since the said amount stands already included in the income while making the computation of income there is hardly any need to make any comment on the same and to draw any adverse inference on the basis of the same.
If the books of accounts are rejected, and net profit is estimated by application of net profit rate, there cannot be again addition on account of any disallowance based on the same set of books of accounts. Here we note that the books of accounts were rejected, and net profit rate was applied. Thus, having accepted the fact of rejection of book results making separate addition from the same set of books is incorrect. The issue raised in this year also prevailed in the earlier year wherein no separate addition were made in relation to payments for default of section 40a(ia) while estimating the income, even by the AO himself. Thus, taking a different stand in the current year is not only bad in law but is also unjustified on the facts.
As is available from the above, finding that while allowing the grounds of appeal of the assessee, ld. CIT(A) has considered the decision of the ITAT in the case of the assessee's case and has accordingly allowed the grounds of appeal. The ld. DR did not demonstrate any contrary decision having binding precedent and therefore, we do not find any merit in the grounds of appeal raised by the revenue and therefore, ground no. 2 & 3 raised by revenue has no merit and therefore, dismissed.
Excluding amount from turnover of the assessee for determining GP 29.29% whereas the above amount was shown by assessee itself in its ITR under the had "other income" in P&L account so it is part of business receipts along with amount from revenue from operations shown by assessee and holding that this amount as un- accrued income when the assessee itself has shown the same as part of income in its ITR - When the book results were rejected while estimating the profit only the real income be taxed and not the notional income. While deciding this issue the ld. CIT(A) has considered the issue that there is no finality about the income and the estimated income is accrued at once subject to correction when the amount is agreed upon. If the amount is litigated, however, even though liability is admitted it has been held that income does not accrue until the litigation is finally terminated. But if liability is not admitted income does not arise from mere accrual of a cause of action. The income may not be accrued until a settlement is made or if the claim is litigated until all possible appeals have been taken or the liability has become final by the expiration of time to appeal from a judgement for the taxpayer and that too when book results are rejected and at that point of time only the real income be taxed and not the litigated income be considered while estimating the income. In the light of this observation we do not find any infirmity in the finding of the ld. CIT(A) and therefore ground no. 4 raised by the revenue stands dismissed.
CIT(A) in excluding amount from turnover of the assessee for determining GP @ 29.29% when the assessee failed in the appellate proceedings to explain the difference in amount shown in form 26AS and amount credited in books of accounts - As is evident from the finding of the CIT(A) has favored the assessee on two reasons one the similar issue was raised in the A.Y. 2016-17 and the ld. AO accepted the explanation of the assessee, and the matter has reached to finality as the appeal before the High Court was not considered. Secondly CIT(A) has considered the explanation of the assessee and hold that difference stands explained, and no adverse inference drawn. Before us the ld. DR did not demonstrate any perversity in the explanation of the assessee and finding of the ld. CIT(A) and therefore, we do not find any merits in the ground raised by the revenue and the same stands dismissed.
Estimating net profit @0.11% - AO has categorically held that 70% of expenses not subject to TDS are not genuine and this disallowance (70%) was included in the estimated addition by applying N.P. rate of 10.32% - As is evident from the above order of the ld. CIT(A) that he has followed the order of the co-ordinated bench which ultimately reached finality when challenged before our Jurisdictional High Court and therefore, when the ld. DR did not demonstrate before us as to how we can deviate from the binding precedent, when the ld. CIT(A) has compared the finding of the earlier year with that of the current year comes to loss and in that year of A. Y. 2016-17 being loss and based on the order of the co-ordinate bench applied the profit rate @ 0.11%. Thus, as discussed in the order of the ld. CIT(A) and no contrary material before us to take a difference view of the matter we do not find any infirmity in the finding of the ld CIT(A). Based on these observation ground no. 1 raised by the revenue stands dismissed.
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2025 (4) TMI 975
Disallowance of Assessee's claim of deduction u/s 54F - CIT(A) who has confirmed the addition made by the AO on the ground that the sale consideration should have been deposited before the due date of filing of the return u/s. 139(1) of the Act in specified Capital Gains Account Scheme (CGAS) bank account with authorized banks and utilized in the manner prescribed under the Act - HELD THAT:- It is clear from the bank statement filed by the assessee, the assessee received sale consideration on 10-05-2016 and the entire sale consideration was reinvested in a residential flat on 17-05-2016 by transferring it to the Builder. However the assessee has not declared the sale transaction in the original Return of Income but claimed for the first time the claim of exemption u/s. 54F of the Act in the reassessment proceedings. Since the assessee has made reinvestment of the entire sale consideration within seven days from the date of sale of the original Asset, the question of depositing the sale consideration/Capital Gain amount is specified CGAS account does not arise.
As perused the statutory provision contemplated u/s 54F and are of the considered view that the same does not cast any statutory obligation on the part of assessee to file his return of income within the stipulated time period as contemplated u/s 139 or 148 of the 'Act', as a precondition for entitling him to claim exemption under the said statutory provision.
Therefore, we are of the considered view that the reference to the term 'due date' for furnishing of return of income u/s, 139 as contemplated in section 54F(4) is in context of the time limit within which the amount which had not been appropriated by the assessee towards making of investment in the purchase and/or construction of the new residential house is permitted to be deposited in the 'Capital Gains Account Scheme, 1988. Which thereafter is to be withdrawn and utilized as per the terms contemplated in the said statutory provision.
Section 54F, neither provides as a pre-condition the requirement of filing of the 'return of income' by the assessee within the stipulated time period, nor places any embargo as regards the claim of such exemption in a case the 'return of income' filed by the assessee involves some delay.
Since the A.O. has no occasion to have deliberated upon the satisfaction of the requisite conditions as contemplated u/s 54F of the Act as claimed by the assessee. Therefore, in all fairness we restore the matter to the file of J.A.O for making the necessary verifications and allow the claim in accordance with law. Appeal filed by the Assessee is allowed for statistical purpose.
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2025 (4) TMI 974
Validity of Reassessment proceedings - Assessee argued the proceedings were completed without jurisdiction i.e without issue of notice u/s.143(2) of the Act as prescribed under law - HELD THAT:-Admittedly, in this case, no notice u/s.143(2) of the Act was issued through e-filing portal. As per CBDT Instruction No.1 dated 12th February, 2018, it has become mandatory that except for search related assessments, proceedings in other pending scrutiny assessment cases shall be conducted only through the “E-Proceedings” functionality in ITBA/Efiling.
CBDT has mandated that after the issue of this instruction, all the notices should be sent through ‘E-Proceedings’ functionality in ITBA/E-filing. However, in the instant case, the Assessing Officer has not sent notice u/s.143(2) in E-Proceedings functionality/ITBA/E-filing but sent the same through physical mode via Speed Post. Therefore, there was no valid issuance of notice u/s.143(2) of the Act. Once the notice u/s.143(2) is not validly issued, consequent proceedings cannot be held as valid.
As decided in the case of Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] wherein as held that the issue of notice u/s. 143(2) of the I.T. Act is mandatory and not procedural and if the notice is not served within the prescribed period, the assessment order is invalid. Thus reassessment order quashed. Decided in favour of assessee.
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2025 (4) TMI 943
Territorial jurisdiction of the Bombay High Court to entertain this petition - HELD THAT:- In this case, even if we proceed on the basis that the minuscule part of the cause of action may have arisen in Mumbai, that will not be a determinative or compelling factor to exercise the discretion under Article 226 for entertaining this petition.
In Wills India Insurance Brokers (P.) Ltd. [2011 (3) TMI 1807 - BOMBAY HIGH COURT] the court found that a part of the cause of action had significantly arisen in Bombay, and based on that finding, the petition was considered. Kusum Ingots [2004 (4) TMI 342 - SUPREME COURT] has been clarified by the Full Bench of the Delhi High Court. Kusum Ingots (supra) itself discusses the principles of forum conveniens, which is applicable in the present case.
In the context of appeals under Section 260A of the Income-tax Act, the Hon'ble Supreme Court, in the case of ABC Papers ltd. [2022 (8) TMI 863 - SUPREME COURT] has held that the appellate jurisdiction of the High Court is exercisable by the High Court within whose territorial jurisdiction the assessing officer is located. Thus, even the location of ITAT is held not to be determinative. The location of the assessing officer is crucial. However, this was the decision in the context of an appeal u/s 260A and not a Writ petition under Articles 226 and 227 of the Constitution. Still, for all the above reasons, we are satisfied that the interest of justice will be met if the petitioner is relegated to avail of the remedies at Kolkata.
Accordingly, we decline to entertain this petition but leave the petitioner free to avail of the remedies at Kolkata. All parties' contentions on merits are left open.
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2025 (4) TMI 942
Validity of proceedings u/s 154 as barred by limitation - proceedings issued after a lapse of four months from the date on which the reassessment order was passed along with the notice of demand - HELD THAT:- Any amendment to Form ITNS-150 would clearly fall within the scope of an amendment as contemplated under Section 154 (1)(a) of the Act. Thus, in terms of sub-section (7) of Section 154 of the Act, no amendment of such an order can be made after expiry of four years from the date of the said order.
The record also does not support the contention that the impugned order has not been passed under Section 154 of the Act. This is so because the impugned order was passed pursuant to a show cause notice issued in respect of proceedings under Section 154 of the Act and the impugned order expressly indicates that it has been passed under Section 154 of the Act read with Section 143 (3) /147 of the Act.
We are also not persuaded to accept that the figure of interest under Section 234A of the Act, which is sought to be corrected, was a clerical error. As noted above, the reassessment order dated 11.12.2018 expressly stated that the “interest under Section 234A, 234B, 234C and 234D, if any, has been charged”.
AO had signed the assessment order. Thus, confirming that the interest chargeable under any of the aforesaid Sections, had been charged. The Form ITNS-150 was also signed by the AO and the same indicated that the interest amounting Rs. 6,92,90,301/- was determined as payable u/s 234B of the Act; an amount of Rs. 5,682/- was determined as payable under Section 234C of the Act; and the interest under Section 234A of the Act was determined as “0”. It follows that the AO was of the view that no interest under Section 234A of the Act was chargeable. This is not a case where the AO had directed the levy of interest under Section 234A of the Act and by an inadvertent error, the same was not mentioned in the computation of tax payable (in Form ITNS-150). The assessment order itself clearly specified that the interest if any had been charged. It must follow that the AO was aware of the interest that was determined as payable in the income tax computation form (Form ITNS-150).
It is also material to note that the Assessee disputes that any interest under Section 234A of the Act is payable. It is the Assessee’s contention that the return filed pursuant to the notice under Section 148 of the Act, was a mere reiteration of return that was originally filed. Therefore, it could not be faulted for the delay in filing its return of income. It is not necessary to examine the merits of the said contention in this proceeding, however, it is clear that the issue involved is a contentious one and the Assessee’s claim in this regard cannot be considered as unsubstantial which merits no consideration.
It is clear that the impugned order and the impugned demand notice had been issued beyond the prescribed period and are thus set aside. WP allowed.
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2025 (4) TMI 941
Undisclosed investments - addition was premised on the estimated value of certain works of arts which were found at the Assessee’s residential premises during the search proceedings and which the Assessee claimed were gifted to him - HELD THAT:- Quantum of addition made by the AO and as upheld by the learned CIT(A) in respect of works of art found during the search proceedings, is not based on any valuation or cogent evidence as to their market value. Neither the AO nor any other authority had made any reference to the Valuation Officer or obtained the value of the said artworks from any independent valuer. On this ground alone, the additions made by the AO and as upheld by other authorities is unsustainable. It is well settled that additions cannot be made on unfounded surmises.
Whether the Assessee had established the genuineness of the transaction? - Assessee had stated that he knew the artists in question for several years and some of them are also his friends/ acquaintances of his mother. There is no material to controvert this assertion as well.
In the given circumstances, where the donors have confirmed that they have gifted the works of art to the Assessee and that they are the friends and acquaintances of the Assessee; there is also no reason to doubt the genuineness of the transactions.
Any addition to the income of the Assessee is required to be based on cogent material and not on mere surmises and conjectures. It is also material to record that Assessee is a constituent partner of a firm that is engaged in running an art gallery. This also clearly establishes that the Assessee would be acquainted with the artists in question. There is no reason to suspect that they have not given their personal works of art as gifts to the Assessee. We find that the finding of the AO, learned CIT(A) and ITAT are based on surmises and completely unjustified and thus are liable to be set aside - Decided in favour of assessee.
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2025 (4) TMI 940
Apparent mistake regarding the PAN number of the assessee - HELD THAT:- We find that there is indeed an apparent mistake in the Tribunal’s order in respect of PAN of the assessee and HUF. Accordingly, the error is rectified and the correct PAN of the HUF is replaced in place of incorrect PAN.
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2025 (4) TMI 939
Reopening of assessment u/s 147 - reasons to believe- non-compliance of strict conditions of jurisdictional provision of sec 147 r.w.s. 151 - HELD THAT:- There is no reference or particulars about the date on which the information was received by the AO. There is also no reference of any objective particulars which led the AO to believe towards escapement of chargeable income. AO has merely quoted the entries routed through banking channels from various parties which were alleged to be accommodation entries. No basis has been referred to show his application of mind on the material if any, to implicate the assessee with such vicious allegation.
A plain reading of reasons would clearly show that re-opening proceedings have been initiated based on some generalized and uncorroborated information. There does not appear any application of mind on the so-called information (contents not available) collected by the AO. The circumstances narrated in the reasons recorded would show that the AO has proceeded on dotted lines as dictated in the information received.
The reasons recorded apparently vouches for the fact that no immediate nexus or live link is reflected between any tangible material and the corresponding ‘belief’ thereon towards escapement.
In the instant case, there is not even a line of reason which may justify the formation of belief. The AO in the instant case observes that the name of the assessee figures in the list of beneficiaries on share capital premium/loan.
AO is not privy to even the nature of transaction whether the assessee is a beneficiary towards share capital premium or towards loan. Besides, in the absence of any specific information of reliable character referred in the reasons, the reasons are required to be construed as vague, indefinite, far-fetched and remote. The AO has also not bothered to take cognizance of basic facts such as income reported, date of return filed or any assessment carried out earlier. The reasons recorded are apparently stereo-typed without any emphasis on the relevant facts.
We thus find potency in the plea of the assessee that the reasons recorded and approval granted thereon u/s 151 do not meet the requirement of law at all and thus the issuance of notice u/s 148 based on cryptic and non-descript reasons combined with a mechanical approval thereon under s. 151 do not pass the test of judicial scrutiny.
CIT(A), in our view, has committed blatant error in endorsing the reasons recorded which are clearly plagued by the vice of being vague, indefinite, non-descript and distant and that too without providing an iota of sound reasoning. A solitary observation that the re-opening has been carried in the light of Investigation Report can be no basis to fasten the jurisdiction for re-assessment of completed assessment. Such findings of the CIT(A) against the assessee on the jurisdictional aspect cannot be countenanced in law.
Consequently, the notice under s. 148 to re-open the assessment is held to be void ab-initio and thus consequential re-assessment order is bad in law and therefore stands quashed.
We notice that material collected from the Investigation Wing if any, was never confronted to the assessee at any stage of the assessment. The assessment in the instant case was earlier carried out under s. 143(3) of the Act. As per the reasons recorded, the AO has alleged that tangible material showing ‘escapement of income’ seeks to dislodge the position taken by the assessee as per the return of income. However, having not disclosed the information collected, the onus continued to remain on the Revenue and was never discharged and therefore, never shifted on the assessee.
The process of reasoning adopted by the CIT(A) while affirming the stance of the assessee and reversing the additions appear to be on sound principles. We do not see any infirmity in the process of reasoning so adopted. Decided in favour of assessee.
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2025 (4) TMI 938
Deduction u/s 80P - denial of claim as assessee is carrying on the activity in violation of provisions of cooperative society and thereby the concept of mutuality is missing - CIT(A) disallowed the deduction of interest income earned from surplus funds invested in banks and government securities - HELD THAT:- We find that this statutory requirement imposes a legal obligation on the assessee society to maintain such deposits, thereby restricting its ability to freely use or withdraw these funds for its business operations without prior approval from the Registrar of Co- operative Societies.
Given this statutory compulsion, we find that the interest income arising from these deposits cannot be equated with interest income derived from surplus funds voluntarily parked in banks for earning a return. Therefore, we hold that the interest income earned from such statutory deposits should be considered as operational income derived in the course of the assessee’s business and consequently qualifies for deduction u/s 80P(2)(a)(i).
We in the interest of justice and fair play, are inclined to set aside the issue to the file of the AO with direction to compute the required quantum of amount needs to be deposited as per statutory requirement and allow the claim of the deduction under section 80P(2)(a)(i) of corresponding interest income.
We are also inclined to consider the alternative plea raised by the assessee. In the event that the AO found that the any amount of investment over and above the required statutory limit and classify the interest income from such deposits as "Income from Other Sources," then it is imperative that the corresponding cost incurred in earning such income must be deducted while computing taxable income. It is a well-established principle of taxation that only net income should be brought to tax, and any expenditure directly attributable to the earning of such income should be allowed as a deduction. Therefore, we direct the AO to grant a proportionate deduction of the corresponding cost, if any, while assessing the interest income under the head "Income from Other Sources."
We hold that the assessee is entitled to deduction u/s 80P(2)(a)(i) on the interest income earned from deposits made in compliance with statutory requirements. AO is directed to re-examine the taxability of such interest income in accordance with this finding, as per law and grant appropriate relief to the assessee. Appeal of the assessee is allowed for statistical purposes.
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2025 (4) TMI 937
Nature of expenditure/payment - “Commercial rights acquired under an agreement” for providing commercialisation services across the globe for underlying Intellectual Property Rights (IPR) for technologies identified - asset eligible for depreciation u/s. 32 or as revenue expenditure eligible for deduction u/s. 37(1) - HELD THAT:- Assessee has capitalized the consideration under this agreement payable to EADS as an ’Intangible asset’ claiming depreciation on the same which the AO as disallowed. Recognition of “business or commercial rights of similar nature” as its peculiar nuances. In the present case, facts of undertaking business transaction by the assessee with EADS in terms of aforesaid agreement is not in dispute.
As already analysed the contents of the agreement entered by the assessee with EADS for rendering commercialisation services cooperation in technology licensing initiative for specified time period upto 31.12.2021, commencing from 28.07.2011. Assessee has demonstrated generation of revenue under this agreement over the period from 01.04.2010 to 31.03.2017, tabulated above. In terms of section 37(1), assessee has incurred the expenditure which is laid out wholly and exclusively for the purposes of the business. Keeping the above terms and conditions in the agreement in perspective with the alternate claim made by the assessee of treating the amount payable under the aforesaid agreement as a “revenue expenditure” allowable u/s. 37(1) of the Act, we find it proper to allow the said alternate claim. Ld. Assessing Officer is directed to recompute the total income while giving effect to the aforesaid finding of considering the claim allowable u/s 37(1). Accordingly, ground no. 3(e) raised by the assessee is allowed.
Alternative claim towards foreign exchange loss actually paid as revenue expenditure which it has considered as part of cost of intangible - This ground is covered by our above stated observations and finding since it stems from the same transaction of impugned agreement under which assessee had recognized it as an intangible asset, having consequential effect. Accordingly, in terms of our aforesaid finding, ground no. 4(c) is allowed. AO is directed to give appropriate effect in computing the total income.
Appeal of the assessee is allowed.
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