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Showing 441 to 460 of 1456 Records
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2024 (1) TMI 1016
Public Interest Litigation - Doctrine of Locus Standi - validity of notification dated 19 January 2024 issued by the Government of Maharashtra declaring 22 January 2024 as a public holiday on the occasion of the celebrations of the “Shri Ram-Lalla Pran-Pratishtha Din” - HELD THAT:- The principles of judicial review in considering the legality of the decisions when tested on arbitrariness and procedural impropriety are well settled - it is not satisfying that the petitioners have made out any case to suggest that the State Government has not acted in accordance with law while issuing the impugned notification. This, more particularly, when we find that the State Government has exercised power as entrusted to it under notification dated 8 May 1968 of the Central Government.
The petitioners appear to be completely unmindful of such elementary requirements when the canvass of their petition is likely to have wider ramifications. Thus such petition could not have been moved making unwarranted and untenable statements and raising contentions in such a casual manner, this more particularly despite on pointing out to the petitioners as to whether they would be serious on their contentions in the petition.
There are no manner of doubt that the present proceeding is a patent abuse of process of law. The proceedings cannot be kept pending and are required to be dismissed in limine with exemplary cost.
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2024 (1) TMI 1015
Cancelling / revoking her candidature and recommendation for appointment to the Delhi Judicial Service (DJS) - petitioner’s candidature for appointment to the DJS was cancelled on the ground that she had concealed the fact that a criminal prosecution/criminal complaint was pending against her, in her application form for the Delhi Judicial Service Examination – 2022 (DJS Examination) - HELD THAT:- It is settled law that suppression of material information or making a false statement particularly in respect of queries relating to prosecution and conviction would have a material bearing on the suitability of a candidate. In Kendriya Vidyalaya Sangathan & Ors. v. Ram Ratan Yadav [2003 (2) TMI 559 - SUPREME COURT], the Supreme Court had made it abundantly clear that neither the gravity of the offence nor the fact that the criminal proceedings had ultimately culminated in acquittal of the candidate, would be relevant in considering whether a candidate who has suppressed information while applying for the post was suitable for continuing as a probationer.
In the present case, there is no dispute that the petitioner was being prosecuted at the material time. Thus, the petitioner was required to respond in the affirmative to any query requiring her to disclose whether she was being prosecuted. The petitioner’s defence largely rests on the assertion that the information required under serial no.6 of the application form was not free from ambiguity. It is contended that the query is capable of being interpreted to mean whether the candidate had been arrested, prosecuted, and kept under detention or bound/convicted by a court of law. It is contended that the punctuation marks (commas) between the words arrest, prosecuted, and kept under detention were capable of being construed conjunctively - The suitability of the petitioner’s candidature for being appointed as a DJS is called into question on the premise that the petitioner made a false assertion when she responded in the negative to the information sought at serial no.6 of the application form. Clearly, such measures would be impermissible unless the information sought is in unambiguous terms lending a high degree of certainty to the conclusion that the petitioner’s response to the query in question was false.
Pursuant to the order dated 03.11.2023 passed by this Court, Dr Amit George, learned counsel appearing for DHC had submitted a short note confirming the same. The note indicates that a complaint was also made in regard to the said candidate. However, DHC has not revoked the candidate’s appointment but is awaiting the outcome of the criminal case. Concededly, no proceedings have been initiated against the said candidate for making a false statement in his application form. There is merit in the petitioner’s contention that DHC cannot adopt a pick and choose policy whereby it proceeds against one candidate in similar facts while refraining from doing so in the case of another.
The impugned communication cancelling the petitioner’s candidature and recommendation for appointment to DJS, is set aside - Petition allowed.
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2024 (1) TMI 1014
Validity of Retrospective cancellation of GST registration of the petitioner - non-filing of returns for a continuous period of six months - HELD THAT:- Since the very foundation of entire proceedings i.e. show cause notice and the order of cancellation are vitiated, no purpose would be served in relegating the petitioner to the stage of an appeal.
In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period - a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
The show cause notice does not even state that the registration is liable to be cancelled from a retrospective date - The impugned show cause notice dated 07.04.2022, order of cancellation dated 13.07.2022 and the order in appeal dated 29.12.2023 are accordingly set aside - Petition allowed.
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2024 (1) TMI 1013
Maintainability of writ petition - Demand of GST on Infrastructure Development Cess and Environment Cess - availability of alternate efficacious remedy of appeal under Section 107 of the GST Act - Petitioner contends that adherence to departmental circulars by appellate authorities may prejudice the appeal, violating the principles of natural justice. - HELD THAT:- From bare perusal of the Section it is quite vivid that the person aggrieved by any decision or order under this Act or the State GST Act or Union Territory Goods and Service Tax by an adjudicating authority may appeal to the Appellate Authority as may be prescribed within 3 months from the date on which the said decision or order is communicated to such person. The subclause of 4 also provides further period of 1 month within the aforesaid period of 3 months or 6 months as the case may be.
The petitioner is taking specific stand that there is no nexus of imposing GST liability with regard to Cess. This is a legal issue which can very well be examined and determined by the appellate authority, as such the submission made by the learned counsel for the petitioner that the appellate authority is bound with the circular is not applicable in the present facts in view of specific stand taken by the petitioner in the reply submitted by them before the adjudicating authority.
Hon'ble Supreme Court in case of The State of Madhya Pradesh and Another vs M/s Commercial Engineers and Body Building Company Ltd {Civil Appeal No. 7170 of 2022 dated 14.10.2022} [2022 (10) TMI 576 - SUPREME COURT] has considered the alternate remedy of filing of appeal under the M.P. Value Added Tax, 2002 and has held If such an appeal is preferred within a period of four weeks from today, the same be entertained and decided and disposed of on merits without raising an issue with respect to limitation, however, subject to compliance of the statutory requirements, if any, for preferring an appeal under Section 46(1) of the MP VAT Act, 2002.
Thus, it is quite vivid that the petitioner has alternate and efficacious remedy of appeal available as provided under Section 107 of the GST Act, the writ petition is not maintainable - Accordingly this writ petition is disposed off directing the petitioner to take appropriate remedies which are available in terms of Section 107 of the GST Act.
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2024 (1) TMI 1012
Refund amount recovered coercively - Despite paying 20% of the tax in dispute, the tax authorities issued a demand and forcibly recovered the full balance - GST Appellate Tribunal is not constituted - HELD THAT:- In the case of Sita Pandey v. State of Bihar and Ors. [2023 (9) TMI 272 - PATNA HIGH COURT], it was directed to refund the tax recovered and also a cost was imposed on the Assessing Officer, who acted peremptorily that too against the statutory provision.
In the present case, it is also directed that the entire amounts recovered as on 07.01.2023, be refunded to the assessee within a period of two weeks from today, failing which interest shall run at the rate of 12 per cent per annum. If the amounts are satisfied within two weeks, as directed hereinabove, it is made clear that if eventually the demand is confirmed against the assessee, there shall not be any interest claimed under the statute between the date on which the amounts were credited by the bank and the date of refund as directed hereinabove; since the State had the benefit of the amounts in its coffers.
A cost of Rs. 5000/- imposed on the Officer, who issued the demand produced as Annexure-16 and appropriated the money from the bank account of the assessee/petitioner.
Petition allowed.
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2024 (1) TMI 1011
Power of rectification of errors apparent on the face of record - Power to review versus Power to rectify - cancellation of GST registration - HELD THAT:- The Hon’ble Supreme Court in SASI (D) THROUGH L. RS. VERSUS ARAVINDAKSHAN NAIR AND ORS. [2017 (3) TMI 1687 - SUPREME COURT] has held that: “mere erroneous decision is distinguished from decision which could be characterised as vitiated by error apparent.” It was further held that: “review of an order is permissible, if any, grounds mentioned under Order 41 Rule 1 is made out. Review is not appeal in disguise, where erroneous decision re-heard and corrected but lies for patent error. Error which is not self-evident and has to be detected by process of reasoning, can hardly be called as error apparent on the face of record.”
That apart, if the power of rectification as mentioned in Section 161 is to be construed as a power to review an earlier decision, then the statute mandates that the authority should be able to point out the error, which is apparent on the face of the record in a decision taken by him on November 9, 2022. Unfortunately, the order passed by the appellate authority dated 23rd August, 2023 digitally signed on 24th August, 2023 does not point out any error, which is apparent on the face of the record.
The order suffers from illegality inasmuch as the appellate authority has rewritten its earlier order, which is impermissible in exercise of its powers under Section 161 of the Act - Petition allowed.
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2024 (1) TMI 1010
Violation of principles of natural justice - opportunity of hearing not provided - determination of the tax due or short paid or refunded erroneously or input tax credit was wrongly availed or utilised by the petitioner for the financial year 2017-2018 - HELD THAT:- Section 75(4) of CGST Act 2017 mandates that an opportunity of hearing shall be given where a request is received in writing, to the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person, affording such opportunity at the appellate stage cannot substitute the said requirement at the adjudicating level.
The observation of the appellate authority that the appellant was given reasonable opportunity at the adjudicating level does not get support of the records inasmuch as at the adjudicating level, only the case disclosed in the reply to the show-cause has been discussed which obviously is far short of the requirement of Section 75(4) of the said Act of 2017.
The order impugned is not sustainable and is accordingly set aside - Petition allowed.
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2024 (1) TMI 1009
Validity of reopening of assessment - allegation of violation of the provisions of section 50C of the Income Tax Act, 1961 and due to noncompliance, assessee also failed to explain the transaction - HELD THAT:- As petitioner states, and rightly so, that provisions of Section 50C of the Act would apply only to a seller and not the assessee in this case, who is the buyer of the property.
Therefore, it is Mr. Basu’s/petitioner case that there has been total nonapplication of mind while issuing this order under Section 148A(d) of the Act. Mr. Basu states that in the order also it is mentioned that the assessee is buyer of the property and if only the sanctioning authority had read the order, he would not have granted the sanction because Section 50C of the Act does not apply to buyers. We would agree with above
Revenue relies on an affidavit-in-reply filed by one Manish - In our view, the said Manish is incompetent to make the statement because it is not the said Manish, who had passed the impugned order. There is also nothing to indicate in the affidavit that Manish made inquiries with the officer Abhishek Kumar Sinha, who passed the impugned order seeking an explanation for reliance on Section 50C of the Act. Therefore, we shall not accept this explanation of Respondents.
Reason to believe - Assessing Officer before issuing a notice must have satisfied himself that what he writes makes sense. Even the Principal Commissioner, who granted sanction should have also applied his mind and satisfied himself that the order passed under Section 148A(d) of the Act was being issued correctly by applying mind. It cannot be a mechanical sanction. On these grounds alone, the petition should be allowed.
We also should note that there is nothing in the notice to explain as to how, if the transaction amount is less than the stamp duty value, there can be escapement of any income particularly in the hands of a buyer. Decided in favour of assessee.
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2024 (1) TMI 1008
Accrual of income in India - royalty receipt - income as stated to have been earned from sublicensing of broadcasting ‘non live’ content as per the Master Rights Agreement [“MRA”] - as per assessee submission essentially appears to have been that transmission of ‘live feed’ through satellite would not fall within the ambit of Section 9(1)(vi) and the Explanations appended thereto. Insofar as the bifurcation of the royalty earned in the ratio of 95% and 5% was concerned, the respondent referring to the stipulations forming part of the Novation Agreement had contended that the latter alone was liable to be recognised as revenue generated from ‘non live’ feed.
Whether income derived from transmission of ‘live feed’ would fall within the ambit of royalty? - As reliance appears to have been placed on the decision rendered by a Division Bench of our Court in Commissioner of Income Tax v. Delhi Race Club [2014 (12) TMI 265 - DELHI HIGH COURT]. The attention of the ITAT was additionally drawn to the decisions rendered by M/s Neo Sports Broadcast Private Limited [2011 (11) TMI 23 - ITAT MUMBAI] and Nimbus Communications Limited [2013 (9) TMI 795 - ITAT MUMBAI] wherein the issue had come to be decided and answered in favour of the assessee.
Bifurcation of revenue - We find no merit in the contention of the appellants that the ratio adopted for the purposes of bifurcation of income was either unsubstantiated or arbitrary.
Whether service from which income was generated would clearly fall within the ambit of Explanation 2 as placed in Section 9(1)(vi)? - In light of the unequivocal conclusions as expressed by the Division Bench in Delhi Race Club[2014 (12) TMI 265 - DELHI HIGH COURT] and with which we concur, we find that once the Court came to the conclusion that a live telecast would not fall within the ambit of the expression ‘work’, it would be wholly erroneous to hold that the income derived by the assessee in respect of ‘live feed’ would fall within clause (v) of Explanation 2 to S.9(1)(vi) of the Act.
As in the facts of the present case, it is admitted to the appellant that the actual transmission of content was undertaken by SIPL and not by the respondent. The Explanation, therefore in our considered opinion does not detract from the correctness of the view as ultimately expressed by the ITAT.
ITAT did not commit any error in passing the impugned orders dated 20 March 2020 and 21 February 2023 and that it was completely justified in arriving at the finding that the fees received by the respondents towards live transmission could not be classified as royalty income under Section 9(1)(vi) of the Act. Consequently, no substantial question of law arises in the instant appeals and the appeals stand dismissed on the aforesaid terms.
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2024 (1) TMI 1007
Prosecution Proceedings initiated u/s 276C - Bogus LTCG - guilty mind i.e., mens rea - willful evasion of tax on claims made under the head LTCG/Short Term Capital Loss - allegation of crime invoking Section 200 of the CrPC for offence punishable under Section 276C - infirmities pointed out in the complaints registered independently against all the members of the family and the Companies - defence of the petitioners is that they had sold certain shares of Tuni Textiles and earned long term capital gains amounting to certain amounts all through banking transactions with the stock brokers in relation to the advice the stock brokers had rendered
HELD THAT:- The stocks vary from JMD Telefilm Industries, Splash Media, Essar India and Alpha. Trading is both by the individuals and by the companies. But, the moment it is brought to the notice of all these petitioners, retracing of steps immediately happen by filing of revised returns. Therefore, it is not a case where ipso facto evasion of tax can be laid against these petitioners. The facts in the case are akin to what is considered by the Apex Court and co-ordinate Benches of this Court in the aforesaid cases [SEE RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT], M/S CONFIDENT PROJECTS (INDIA) PRIVATE LIMITED[2021 (2) TMI 75 - KARNATAKA HIGH COURT], M/S. VYALIKAVAL HOUSE BUILDING CO OPERATIVE SOCIETY LTD. [2019 (7) TMI 184 - KARNATAKA HIGH COURT] as held mens rea is an element that is to be present in a proceeding under Section 271 of the Act. The mere fact of not accurate tax, not exact tax or erroneous tax would not lead to the proceedings under Section 276 of the Act.
These cases would become cases where it would amount to delayed payment of tax as revised returns are filed after the search is conducted on the petitioners. The judgments rendered by the co-ordinate Benches in the cases of M/s VYALIKAVAL HOUSE BUILDING CO- OPERATIVE SOCIETY LIMITED and M/s CONFIDENT PROJECTS (INDIA) PRIVATE LIMITED [supra] were tossed by the revenue before the Apex Court and both of which have been dismissed. These are admitted facts. Therefore, in the light of all the issues standing answered by plethora of judgments quoted hereinabove, the proceedings instituted against the petitioners cannot but be termed to be an error in law.
Order of the learned Magistrate taking cognizance of the offence - All that the order reads is complainant present and perused complaint. Sufficient materials are placed to proceed against the accused for offence punishable u/s 276C(1) of the Act. Accordingly, cognizance is taken and a criminal case is directed to be registered. Whether this would be sufficient in law also need not detain this Court for long or delve deep into the matter. The order of cognizance is trite, that it sets the criminal law in motion and brings the accused under the umbrella of crime.
The co-ordinate Bench in the case of M/s. CONFIDENT PROJECTS (INDIA) PVT LTD [2021 (2) TMI 75 - KARNATAKA HIGH COURT] as confirmed by SC [2021 (12) TMI 1461 - SUPREME COURT] has framed a specific issue on an identical order of taking of cognizance as held at the time of taking Cognisance, there must be a proper application of judicial mind to the materials before the said Court either oral or documentary, as well as any other information that might have been submitted or made available to the Court. The test that is required to be applied by the Court while taking Cognisance is as to whether on the basis of the allegations made in the Complaint or on a police report or on information furnished by a person other than a police officer, is there a case made out for initiation of criminal proceedings.
For the above purpose, there is an assessment of the allegations required to be made applying the law to the facts and thereby arriving at a conclusion by a process of reasoning that Cognisance is required to be taken.
An order of Cognisance cannot be abridged, formatted or formulaic. The said order has to make out that there is a judicial application of mind. Since without such application, the same may result in the initiation of criminal proceedings when it was not required to be so done.
When there are multiple accused, the order is required to disclose the application of mind by the Court taking Cognisance as regards each accused. The Court taking Cognisance ought to have referred to and recorded the reasons why the said Court believes that an offence is made out so as to take Cognisance more so on account of the fact that it is on taking Cognisance that the criminal law is set in motion insofar as accused is concerned and there may be several cases and instances where if the Court taking Cognisance were to apply its mind, the Complaint may not even be considered by the said Court taking Cognisance let alone taking Cognisance and issuance of Summons. Thus the order taking Cognisance is not in compliance with applicable law and therefore is set aside.
Proceedings pending before the Special Court (Economic Offences) Bengaluru in these cases stand quashed.
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2024 (1) TMI 1006
Exemption u/s 11 - charitable activity u/s 2(15) or not? - rejection of the application of the assessee for registration u/s. 12AB - HELD THAT:- On perusal of the objects of the society it is apparent that the society has charitable objects and, therefore, the request of the society for grant of registration u/s.12AB cannot be denied on the basis of assessment of the activities, which has actually been carried out by the assessee society. Hon’ble Apex Court in the case of Ananda Social & Educational Trust [2020 (2) TMI 1293 - SUPREME COURT] has even held that the “activities” in the provision includes 'proposed activities'.
As decided in Shri Agrasen Jan Kalyan Trust [2024 (1) TMI 407 - ITAT RAIPUR] since the actual activities of the trust cannot be the deciding factor while granting the registration u/s. 12A but the object of the trust should have been looked into, the activities have to be looked into by the AO at the time of assessment proceedings. It is also a fact that the trust was formed with charitable objects eligible for approval u/s. 12AA of the Act, which is substantiated by the department itself by granting registration u/s. 12AA. In such circumstances we are of the considered opinion that the rejection of application for registration u/s. 12AA of the Act by Ld CIT(E) was an erroneous application of law - Thus we direct to grant registration u/s. 12AB in accordance with law - Decided in favour of assessee.
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2024 (1) TMI 1005
TDS u/s 195 - disallowance u/s. 40(a)(i) for non deduction of TDS on payment to non-resident which is in nature of FTS(Fee for Technical Service) - beneficial provisions of India-Netherland DTAA - Scope of services the AO held that the nature of services contemplated under the Agreement was that of advisory and consultancy services which would be covered within the meaning of 'fee for technical services' ("FTS") both under the Income Tax Act as well as the treaty - CIT(A) deleted addition - HELD THAT:- CIT(A) held that the amount received by NTL Lemnis Holding BV for management and sales marketing support services as non-taxable in view of the beneficial provisions of India-Netherland tax treaty read with the MFN clause and the India Netherland treaty. It has also been submitted that since the subject matter income has been assessed to be non-taxable in the hands of the recipient, there is no question of deducting tax at source under section 195 by the remitter and disallowance under section 40(a)(i).
Having heard the arguments of the ld. DR and the material on record, we hold that the MFN clause of India-Neitherland Tax Treaty has been rightly interpreted by the ld. CIT(A) and hence, we decline to interfere with order of the ld. CIT(A). Appeal of the Revenue is dismissed.
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2024 (1) TMI 1004
Accrual of in Income in India - assessee is a company incorporated in Thailand rendered services to its group entities in India - taxability of FTS - whether Fees for Technical Services is taxable in India as per the India-Thailand Treaty or not? - taxability will be covered under article 5 read with article 7 of DTAA with Thailand or not? - HELD THAT:- It is an undisputed fact that the assessee is a non-resident and the amounts received fall under the Fee For Technical Services (FTS) and the India-Thailand DTAA do not have a provision of taxing of FTS under any of the Articles of the treaty and also cannot be treated as miscellaneous income under any residual clause. Hence, the assessee cannot be made liable tax in India. Similar, proposition laid down by the Hon’ble High Court of Madras in the case of Bangkok Glass Industry Co. Ltd. [2015 (4) TMI 503 - MADRAS HIGH COURT]
The Co-ordinate Bench of Tribunal in the case of Paradigm Geophysical Pvt. Ltd. [2008 (6) TMI 238 - ITAT DELHI-G] held that where the business profits of the non-resident include items of income for which specific or separate provisions have been made in other articles of the tax treaty, then those provisions would apply to the items. However, in case it is found that those provisions are not applicable then the items of income would have to be considered in Article 7.
Co-ordinate Bench of Tribunal in the case of Bharti Airtel Ltd. [2016 (3) TMI 680 - ITAT DELHI] held that where there is no FTS clause available in the treaty with a country, then the income in question would be assessable as business income and it can be taxed in India only if there is a permanent establishment in India and the income is attributable to activities or functions performed by such permanent establishment.
The aforesaid expositions are fully applicable here. The assessee company has no Permanent Establishment (PE) in India. The income which has been earned in this case in absence of FTS clause in DTAA would fall as business income. Their nature would not change to be that of other income. Hence the same cannot be taxed in India in absence of a PE.
Hence, keeping in view, the provisions of the Act, Articles of India-Thailand DTAA and the history of the assessee, the appeal of the assessee is hereby allowed.
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2024 (1) TMI 1003
Addition u/s 56(2)(x) - stamp duty valuation of the property - addition made as assessee has purchased one immovable property for a consideration less than value as assessed by the Stamp Valuation Authority - as per assessee flat was booked by the assessee in FY 2014-15 and all payments were made through banking channel - HELD THAT:- Section 56(2)(x) provides that if the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause. The value determined by the valuation authority for the purpose of charging stamp duty as the value of the property and after deducting the purchase consideration shown by the assessee the remaining part is being considered as a deemed gift within the meaning of this Section. But in this case it is hit by the proviso. Assessee has booked the flat in 2015 and the AO has not taken the stamp duty valuation on 11.05.2015 which is less than the value considered by the AO.
Thus the orders of both the lower authorities are not sustainable because the assessee has demonstrated that it has made payment for purchase of this property through account payee cheque in instalments on different dates. Therefore, as far as Rs. 32,93,730/- is concerned, it cannot be added and this addition is deleted. What the AO can add with the help of Section 56(2)(x) of the Act is the amount which is the difference between Rs. 32,93,730/- vis-à-vis stamp duty value for the purpose of charging stamp duty on 11.05.2015.
We deem it appropriate to set aside this issue to the file of the AO with the following directions:
a) The ld. AO first find out the stamp duty valuation of the property as on 11.05.2015 and if it is more than Rs. 32,93,730/- then that amount is to be worked out for the purpose of considering it as deemed fit.
b) In case a positive difference is found which is required to be considered as deemed gift in the hands of the assessee then ld. AO shall call for the report of DVO for determining the fair market value of the flat as on 11.05.2015.
c) The AO shall consider the fair market value determined by the DVO as well as the value of Stamp Valuation Authority and whichever is the lower is to be adopted for considering the value of the property as on 11.05.2015. From that amount sum of Rs. 32,93,730/- is to be debited and the balance could be considered as deemed gift in the hands of the assessee.
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2024 (1) TMI 1002
Addition u/s. 69A - receipt of unaccounted money on sale of property based on the material seized in the search from third party - AO opined that the assessee itself agreed that the actual sale value is much more than the guideline value of the property, which indirectly confirms the possibility of receiving on-money payment - HELD THAT:- As sworn statement recorded during the course of search also do not reveal receipt of on-money of the assessee and they do not facilitate drawing any adverse inference against the assessee. Despite, absence of any incriminating evidences in the seized materials or any admission of on-money in the sworn statement, the AO arrived at his findings regarding receipt of on-money for sale of property only on the basis of proximity of ‘9’ days between the date of registration of property and date of sending cash to Bangalore, without any other material/evidences to show that the said cash was utilized for the purpose of payment of on-money. In our considered view, the findings of the AO regarding payment of on-money based on a ‘dumb document’ is purely on suspicion, conjecture and surmise manner, but not based on any evidences.
In this regard, it is pertinent to refer to the decision CIT v. Daulatram Rawatmull [1964 (3) TMI 14 - SUPREME COURT] where it has been clearly held that suspicion however so strong, but suspicion cannot take the place of evidence. Therefore, we are of the considered view that the AO is erred in making additions towards on-money u/s. 69A of the Act, without reference to any material which suggest payment of on-money merely on the basis of suspicion and surmise.
Legal presumption u/s. 132(4A) &s.292C - whether cannot be given restrictive interpretation so as to consider applicable only to the searched person and not to other person? - As the impugned excel sheet representing cash book containing the entry regarding carrying of cash to Bangalore was found and seized during the course of search of a third party i.e. M/s.Polisetty Somasundaram. Further, said incriminating material was not seized during the course of search in the case of the assessee. Therefore, provisions of Sec.132(4A) & s.292C of the Act, cannot be pressed into service in the case of the assessee with respect to the contents of the said seized material so as to draw a rebuttal presumption that the transaction of carrying of cash noted in the impugned documents is relating to the assessee and that the same is true and correct, since said provision operates only against the searched person in whose position the relevant materials were found .
Even if it is considered for any reason that the provisions of Sec.132(4A) & s.292C of the Act are applicable to the assessee, the same has no bearing on the issue under consideration, because, in the said document there is no reference to the name of the assessee or the concerned property at Bangalore in the relevant entry in the seized cash book. Therefore, we are of the considered view that provisions of Sec.132(4A) & s.292C of the Act, at best lead to a rebuttal presumption that carrying of cash to the said extent by M/s.Polisetty Somasundaram is true and correct. But, the rebuttal presumption cannot extend to the receipt of such cash by the assessee in absence of any reference to the name of the assessee or the concerned property at Bangalore in the relevant document. Thus, we reject the ground taken by the Revenue.
We are of the considered view that the AO is erred in making additions towards alleged on-money received by the assessee towards transfer of property as unexplained money u/s. 69A of the Act. The Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the AO - Decided against revenue.
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2024 (1) TMI 1001
Reopening of assessment u/s 147 - incorrect declaration of capital gain by the assessee - as argued reopening was on the basis of audit objection only - as per AO property received by way of gift was not a capital asset within the meaning of section 2(14) of the Act and section 48 is applicable only to capital asset and indexed cost of acquisition has to be allowed from the previous year in which the land was converted to residential purpose - HELD THAT:- We have gone through the order of the AO u/s. 143(3) of the Act and the documents submitted as produced by the ld. AR and note that there was no specific query raised by the AO in the original assessment proceedings and there was no submission on the part of assessee.
As decided in Subodh Agarwal v. State of U.P. [2023 (2) TMI 211 - ALLAHABAD HIGH COURT] has held that Explanation 1, clause (ii) to second proviso of section 148 clearly provides that any audit objection to effect that assessment in case of assessee for relevant assessment year has not been made in accordance with provisions of Act is included in term 'information regarding escaped assessment'. Therefore, it cannot be said that the reopening was on the basis of audit objection only.
Legality of the property - As observed that the constructed property sold was different from the property received on gift in the opinion of the AO and the sale of the property did not arise out of the gifted property. The term reason to believe can be gathered and available from the information, leading the Assessing Officer to reopen the assessment. The term itself is suggestive of its prima facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer's prima facie belief, of course, derived from the some material/information, etc. leading him to reopen the assessment.. It is clear from the reasons recorded that the AO had the belief that there was escapement of income. Therefore, we reject the arguments advanced by the ld. AR on the legal issue and dismiss the same.
Mode of computation of capital gain - As the donor of the gift obtained the property in the year 1960 before 01.04.1981 which is not in dispute and it was gifted to the assessee in the FY 2002-03 after converting it from agricultural to residential purpose in the year 1988-89. The assessee has claimed cost of acquisition of the said land as on 01.04.1981 of 1,073 sq.ft. @ Rs. 84 / sq.ft. and after cost indexation the value has been arrived at Rs. 8,46,339 and claimed as cost of acquisition by the assessee.
Cost of acquisition of the asset shall be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee. Previous owner of the property has been explained in the Explanation. Accordingly, it is clear that the property was originally purchased before 01.04.1981 and the assessee is eligible to get the cost of acquisition of the land as on 01.04.1981 and cost of indexation shall also be considered from 01.04.1981. In support of our view, we rely on the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Ramaiah Reddy, (1984 (12) TMI 56 - KARNATAKA HIGH COURT). Respectfully following the judgment of jurisdictional High Court, we delete the addition.
Indexed cost of construction of penthouse for the reason that there was no proof of payment of cost of construction and the said apartment was outside the purview of sanctioned plan and holding that it is not a capital assets - It is clear from the confirmation of the developer that the penthouse P2 construction was completed in the year 2006 and this portion was additionally built which was outside the sanctioned plan and the assessee was required to pay for 2505 sq.ft. @ 750/sq.ft and the owner has paid the same to the M/s. BSR Developers. The developer has acknowledged receipt of the same. Nowhere the lower authorities have disputed this confirmation from BSR Developers. Accordingly, the assessee has paid for construction of the pent house. We note that on the date of sale, it was a capital asset and the assessee completed all the formalities and regularised it with BBMP and produced all the documents . Therefore, it cannot be said that the property is illegal on the date of sale.
Accordingly the assessee is eligible for indexed cost of construction as claimed in the computation of income. The case law relied by the ld. DR in the case of ITO vs. Bhagwan T. Fatnani [2015 (7) TMI 173 - ITAT MUMBAI] is not applicable to the present facts of the case since on the date of sale the property was regularised in the municipal/Govt. records and is covered under the definition of capital asset as defined in section 2(14) of the Act which is evident from the documents submitted by the ld. AR of the assessee. We therefore delete the disallowance of indexed cost of construction.
Appeal of assessee partly allowed.
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2024 (1) TMI 1000
Correct head of income - income earned out of sale of property - business income or capital gains - DR has submitted that the assessee has not filed any details as to when the asset was converted into stock-in-trade, therefore, AO has treated income as business income - HELD THAT:- We find that the assessee has not filed any details before the Assessing Officer or ld. CIT(A) or even before the Tribunal as to when the asset was converted into stock-in-trade. Therefore, the assessee has furnish the details, such as how long the asset was treated as long term capital gain and when the assessee has converted the property into stock-in-trade and accordingly up to conversion of the property, the AO has to treat it as capital asset and after conversion of the property, it has to be treated as business asset.
In this case, neither the assessee nor the AO properly computed the property of the assessee. Thus, we set aside the orders of the ld. CIT(A) on this issue and remit the matter back to the file of the Assessing Officer to examine and compute the property u/s 45(2) of the Act keeping in view of the above observation and decide the issue afresh in accordance with law after affording reasonable opportunity of being heard to the assessee. Thus, the ground raised by assessee is allowed for statistical purposes for all the assessment years under appeal.
Disallowance u/s 14A - contention of the assessee is that the disallowance made u/s 14A should not be in excess of the exempted income of the relevant assessment years - HELD THAT:- By referring to various case law including the decision in the case of Joint Investments Private Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT], the decision in the case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] the Hon’ble Madras High Court has held that the disallowance u/s 14A of the Act should be restricted to the extent of exempt income earned during the previous year. Respectfully following the judgement of Envestor Venture Ltd. [2021 (1) TMI 922 - MADRAS HIGH COURT] we direct the Assessing Officer to restrict the disallowance to the extent of exempted income earned by the assessee. Thus, the ground raised by the assessee is allowed.
Disallowance made u/s 14A of the Act when the assessee has not earned any dividend income from investments made in earlier years - In this circumstances, in the case of CIT v. Chettinad Logistics (P) Ltd. [2017 (4) TMI 298 - MADRAS HIGH COURT] the Hon’ble Jurisdictional High Court has observed and held that when there was no dividend income earned in the relevant assessment year, the disallowance made by the Assessing Officer in view of the provisions of section 14A of the Act read with Rule 8D was completely contrary to the provisions of that section as Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of total income of the assessee. Against the decision of the Hon’ble High Court, the Department preferred Special leave Petition, which was dismissed by the Hon’ble Supreme Court M/S CHETTINAD LOGISTICS PVT. LTD. [2018 (7) TMI 567 - SC ORDER]. In view of the above decision in the case of CIT v. Chettinad Logistics (P) Ltd. (supra), the disallowance made by the Assessing Officer stands deleted.
Nature of expenses - Disallowance of fee paid to ROC - whether the fees paid to Registrar of Companies for enhancing the working capital of the company should be treated as revenue expenditure or capital expenditure? - HELD THAT:- We have perused the order of Punjab State Industrial Development Corporation Limited [1996 (12) TMI 6 - SUPREME COURT] wherein, as held that “the fee paid to the Registrar for expansion of the capital base of the company was directly related to capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure was directly related to the expansion of capital base of the company and thus it was not an expense in the nature of revenue”. Respectfully following the above CIT(A) has rightly confirmed the disallowance made by the AO and dismissed the ground raised by the assessee. Thus, we find no infirmity in the order passed by the ld. CIT(A). The ground raised by the assessee is dismissed.
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2024 (1) TMI 999
Validity of the assessment order issued in the absence of issuance of notice u/s 143(2) - protection u/s 292BB eligible or not? - HELD THAT:- It is imperative from the record that the assessee has not been issued with the notice u/s 143(2) of the Act. The said fact of non-issuance of notice u/s 143(2) of the Act has been admitted by CIT(A) in its order. We have also gone through the assessment order and other materials and found that no notice u/s 143(2) of the Act was issued to the assessee.
It is now well settled law that if the notice u/s 143(2) of the Act is not issued to the assessee before completion of the assessment, then the assessment is not sustainable in the eyes of law and deserve to be cancelled - See Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] Society For Worldwide Interbank Financial Telecommunications [2010 (4) TMI 43 - DELHI HIGH COURT], M/s Panorama Builders Pvt. Ltd [2012 (8) TMI 955 - GUJARAT HIGH COURT].
Eligibility of protection u/s 292BB - The said Section 292BB of the Act deals with (a) non service of notice (b) non service of notice in time (c) service of notice in an improper manner- but in the present case the issue is regarding non-issuance of notice itself and there is nothing on record to prove that the notice u/s 143(2) of the Act has been issued by the Assessing Officer. Therefore, in our considered opinion, the protection under section 292BB of the Act is not available to the Department in the case on hand.
Thus as Department has not produced any evidence to show that the notice u/s 143(2) of the Act has been issued to the assessee, the assessment orders passed for the assessment years 2009-10 to 2012-13 are hereby quashed.
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2024 (1) TMI 998
Exemption u/s 11 - cancelling registration granted u/s 12AA/12AB of the Act by invoking the provisions of section 12AB(4)(ii) of the Act with retrospective effect - main contention of the ld. A.R. is that the ld. PCIT has cancelled the registration granted to the assessee w.e.f. the previous year i.e. 2020-21 relevant to assessment year 2021-22 by applying the provisions as stood on 12.5.2023, which cannot be applied for the violations of the provisions of section 12AA or 12AB of the Act - HELD THAT:- In the present case, the ld. PCIT invoked the provisions of section 12AB(4)(a)(ii) of the Act as stood in the assessment year 2022-23.
In the case of Isthmian Steamship Lines [1951 (11) TMI 1 - SUPREME COURT] wherein the Hon’ble Supreme Court held that “it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication”.
Being so, we find force in the argument of ld. A.R. that in income-tax matters, law to be applied is the law in force in the assessment year unless otherwise stated or implied. In the present case, ld. PCIT is cancelling the registration granted u/s 12AA/12AB of the Act w.e.f. previous year 2020-21 relevant to assessment year 2021-22. In our opinion, the law as stated in the assessment year 2021-22 is to be applied and not the law as stood in the assessment year 2022-23.
Thus we are of the view that no retrospective cancellation could be made u/s 12AB(4)(ii) of the Act as it has been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made.
PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previous year and all subsequent previous years, which makes it clear that the cancellation cannot be retrospective, therefore, in view of the above discussion, we are of the opinion that cancellation of registration with retrospective effect is invalid in these cases.
Since the ld. PCIT invoked the provisions of section 12AB(4)(ii) of the Act, which has been introduced by the Finance Act, 2022 w.e.f. 1.4.2022 so as to cancel the registration with retrospective effect from assessment year 2021-22, which is bad in law. We also note that same view has been taken by Coordinate bench of Mumbai in the case of Heard Foundation of India in ITA No.1524/Mum/2023 vide order dated 27.7.2023, wherein held that registration granted u/s 12A of the Act dated 21.7.1989 cannot be cancelled by ld. PCIT (Central) vide order dated 6.3.2023 w.e.f. assessment year 2016-17, by invoking the provisions of section 12AB(4)(ii) of the Act. Accordingly, we allow the primary ground and order of ld. PCIT passed u/s 12AB(4)(ii) of the Act is quashed. Appeals of the assessee are allowed.
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2024 (1) TMI 997
TP Adjustment - MAM - Considering brokerage rate of all Non-AEs for the comparability purposes - Arm's Length Price (ALP) of broking commissions - assessee has rendered broking services both to the associate enterprise and non-associate enterprises in different geographical locations and used TNMM as most appropriate method for benchmarking the broking services - TPO has rejected the TNMM method since the assesse has provided broking services to non- associate enterprise along with its associate enterprises, therefore, CUP method was selected to be the most appropriate method - HELD THAT:- We have perused the decision of ITAT for assessment year 2003-04 [2023 (6) TMI 1357 - ITAT MUMBAI] wherein the ITAT held that to consider both overseas and domestic independent clients while applying CUP method in the case the assessee.
Accordingly we direct the TPO to consider both overseas and domestic clients while applying CUP method as directed in the above referred decision in the case of the assesse itself. Therefore, this ground of appeal of the assessee is allowed for statistical purposes.
No adjustment of marketing cost while applying CUP method & not granting adjustment of research cost and 50% of volume while applying CUP method - We have perused the decision of ITAT in the case of the assessee itself for assessment year 2003-04 [2023 (6) TMI 1357 - ITAT MUMBAI] wherein the ITAT held that adjustment of 40% will be allowed on marketing cost adjustments and research cost.
Thus we direct TPO to give adjustment of 40% to the assessee while determining the arm’s length of international transactions of brokerage and commission as directed in the finding of the ITAT referred supra, therefore these ground of appeal the assessee are partly allowed.
Computing upward adjustment by considering addition instead of rectified amount - HELD THAT:- The assessee submitted that TPO had suo moto rectified the addition vide Rectification order therefore, we restore this issue to the file of the assessing officer for giving effect to the claim of the assessee after verification as per the Rectification order passed by the TPO. This ground of appeal of the assessee is allowed for statistical purposes.
Disallowance of net loss incurred on error trading transactions - HELD THAT:- Assessee had submitted the details like client name, reason for error trades, date of transactions, script name internal e-mail etc. The assessee also explained that error trades are the clerical & other errors of the assessee in execution of the transactions for the clients. The error trades are basically trades generated by the clients, however, due to error inter alia in punching of the trade, etc. these trades are not executed as per the trading order of the clients. The error could be in the name of wrong punching of quantity, rate, security, system error and error in punching the type of order etc.
As decided in CLSA India Pvt. Ltd. [2020 (12) TMI 815 - ITAT MUMBAI] certain client for whom the assessee was working as a broker had not owned up certain share transactions then the assessee had no other alternative but to accept those transactions as its own transactions because of its relation with the clients from whom it was accepting good earnings. After considering the volume of transactions undertaken by the assessee company as broker for various clients we observe that such marginal error in share trading is incidental to the business of the assessee, therefore, we don’t find any reason to that assessee has wrongly claimed such loss, therefore, AO is directed to allow the claim of the assessee.
Disallowance u/s 14A - expenditure incurred in relation to earning of exempt income - assessee has received dividend and also had made investment which yielded exempt income - HELD THAT:- With the assistance of ld. Representative we have perused the decision of ITAT, Mumbai in the case of the assessee itself for assessment year [2023 (6) TMI 1357 - ITAT MUMBAI] wherein on identical issue and similar facts the issue was remanded back to the file of the assessing officer to examine the disallowance u/s 14A and assessee was also direct to substantiate its claim as to why no disallowance should be made. Thus we restore this issue to the file of the AO for deciding afresh.
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