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2025 (4) TMI 1224
Availability of an "alternate remedy of appeal under the Income-tax Act, 1961" - HELD THAT:- Strangely, though, it is the procedural requirement, the petitioner has not made any averment in the Writ Petition regards alternate remedy. Paragraph 24 merely states that no similar petition is filed before any other Court including the Hon'ble Supreme Court of India or this Hon’ble Court.
There is no statement about no alternate or efficacious remedy not being available to the petitioner or an admission that such remedy is available but cannot be resorted to because the petition falls within the line of exceptions carved out by Judicial precedents. This suppression, according to us, is material.
That apart from since the petitioner has alternate and efficacious remedy to question impugned assessment order dated 26 February 2024, we see no ground to entertain this petition. The alternate statutory remedy cannot be bypassed so casually and without disclosing full and correct facts. This petition is accordingly dismissed with liberty however to the petitioner to avail of the alternate remedy available under the Income-tax Act.
All contentions of all the parties are left open should the petitioner choose to avail of the alternate remedy.
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2025 (4) TMI 1223
Validity of reopening of assessment - HELD THAT:- We issue Rule in this Petition. Respondents waive service after Rule.
Liberty to the parties to apply after appropriate orders are passed by the Hon’ble Supreme Court and/or final decision of the Hon’ble Supreme Court in the challenge to this Court’s decision in Hexaware Technologies Limited [2024 (5) TMI 302 - BOMBAY HIGH COURT]
As far as interim relief is concerned, we are not inclined to grant the same since we have noticed the delay in approaching this Court after the impugned order was passed and also in the wake of the fact that prior to issuance of the order under Section 148A(d), a show cause notice u/s 148A(b) was issued to which the petitioner has responded. However, pursuant to the assessment notice u/s 142(1) the petitioner once again sought to raise objection to the reassessement proceedings relying upon the decision of this Court in Hexaware Technologies Limited [2024 (5) TMI 302 - BOMBAY HIGH COURT] which is presently pending before the Apex Court.
We may observe that once an order u/s 148A(d) has already been passed deciding the objection raised, it is not permissible for the petitioner to keep on raising the objection. There is no explanation for the delay in approaching this Court after the order u/s 148A(d) was passed.
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2025 (4) TMI 1222
Reopening of assessment - Period of limitation - HELD THAT:- We find that in Union of India v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] the Supreme Court had principally identified three block periods which were liable to be excluded for the purposes of examining a challenge based on the Proviso to Section 149 of the Act. The first of those periods was 20 April 2020 to 30 June 2021 and which essentially was the outcome of Section 3(1) of Taxation and Other Laws [Relaxation and Amendment of Certain Provisions] Act, 2021 [‘TOLA’].
Second period which the Supreme Court took into consideration was the date of the issuance of the original notice upto 04 May 2022, when it came to render judgment in Union of India & Ors. v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] The third period which was identified as being liable to be taken into account was that factored in by the Third Proviso to Section 148 of the Act, and which deals with the exclusion of time which is connected to the opportunity granted to the assessee to file a response to a notice under Section 148A(b).
Even if the period of 14 days and which represented the time within which the petitioner was called upon to furnish a response to the Section 148A(b) notice were to be added, the re-assessment notice which ultimately came to be issued on 23 July 2022, would not be within the period of limitation as prescribed. The aforesaid factual position is conceded to even by the respondents. We allow the instant writ petition and quash the notice under Section 148.
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2025 (4) TMI 1221
Unexplained investment in property - Addition u/s 69C - CIT(A) deleted the said addition made u/s 69 of the Act, and remanded the matter to the AO for verification of certain facts and decision afresh in respect thereof - HELD THAT:- As appellant has not brought to our notice, either by way of any informatory application, or in the course of arguments that the appellant has challenged said assessment order dated 2.4.2024 before the Commissioner of Income Tax(A).
In the given situation, when vide impugned order, Learned CIT(A) deleted the first mentioned addition and remanded the matter to the Assessing Officer, and the Assessing Officer passed fresh order as regards the first addition, present appeal as regards said first addition challenging the impugned order passed by Learned CIT(A) is not maintainable.
Addition on profit on sale of land - Nature of land sold - AO concluded that the said transactions of sale of immovable property were having the element of business transaction and adventure in the nature of trade - HELD THAT:- No merit in the contention of learned AR for the appellant that the period for which land is held by the landowner is not a significant factor. We confirm the decision of the Ld. CIT(A) whereby the view of the Assessing Officer has been confirmed that this is a case of an adventure in the nature of trade and the addition as regards profit on sale of land has been sustained.
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2025 (4) TMI 1220
Revision u/s 263 - Addition u/s 68 - as per CIT after perusal of the assessment records noticed that there are huge unsecured loans standing in the books. However, ld. AO has not called for the necessary details to verify the Identity and Creditworthiness of the unsecured loans and genuineness of the transaction
HELD THAT:- The assessee in the instant case has furnished the details of unsecured loans which mainly contains balance of unsecured loans brought forward from preceding years as well as loans taken during the year from the old parties as well as new parties and the interest charged thereon. The assessee has also furnished the confirmation letters which contain the names and addresses of the cash creditors along with their PAN Numbers. Now after receiving these details, there is no further inquiry carried out by the AO. In the assessment order also, the discussion is only with regard to the on-money transactions found during the course of search.
At this juncture, we would like to take note of case of Kale Khan Mohd. Hanif [1963 (2) TMI 33 - SUPREME COURT] where laid down the proposition with regard to examination of nature and source of cash credit u/s. 68 and held that three limbs needs to be examined, namely Identity of the cash creditor, creditworthiness of the cash creditor and genuineness of the transaction.
Now in the instant case, merely confirmation letters have been filed which can at most give the details of Identity of the cash creditor. So far as credit worthiness and genuineness of the transaction is concerned, ld. AO has to call for the details from the assessee about the financial statements including income-tax return and bank statement of the cash creditor and also the nature of transaction as to whether it is in the regular course of business and also to verify that it is a genuine transaction.
In the instant case, from perusal of the assessment order, we find that no such enquiry has been initiated by the AO. Rather it seems that the confirmation letters from the assessee have been treated as full compliance for the explanation of nature and source. It can be rather inferred that only ld. AO has called for the details of unsecured loans but his actual work of investigation and carrying out the enquiry along with issuing of notice u/s. 133(6) or 131 of the Act (if considered necessary) starts only once the information about unsecured loans has been received. But ld. AO in the instant case has not moved a bit and only accepted the details filed by the assessee as complete compliance to discharging of burden by the assessee as contemplated in section 68 of the Act. These facts have been rightly observed by the ld. PCIT and he has therefore exercised the revisionary powers vested u/s. 263 correctly.
Contentions of assessee that assessment order has been framed after taking due approval u/s. 153D of the Act and without revoking the order u/s. 153D of the Act, ld. PCIT erred in invoking section 263 - As gone through the assessment order and notice that ld. AO has nowhere dealt with the issue of unsecured loans. He has only dealt with the issues arising out of the search action and the on-money received by the assessee and therefore we are of the considered view that approval u/s. 153D of the Act has been taken only with regard to the observation of the AO about the issues arising out of the search but since there is no discussion about the unsecured loans issue nor any specific enquiry has been carried out by the AO during the course of assessment proceedings, we find that the approval order u/s. 153D has been issued without taking into consideration the issue of unsecured loans and therefore this contention of the assessee that section 263 of the Act cannot be invoked in case of assessment order passed after approval u/s. 153D of the Act has not merit considering the facts and circumstances of the case.
We accordingly confirm the finding of ld.PCIT directing the AO to examine the issue of unsecured loans in the set-aside proceedings - Appeal of the assessee is dismissed.
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2025 (4) TMI 1219
Unexplained receipts and withdrawals from the bank account - assessee had opted his income u/s 44AD - assessee has declared income under the Income Tax Declaration Scheme, 2016 - HELD THAT:- These amounts in our opinion cannot be considered as business receipts. Since the assessee in the instant case has opted his income u/s 44AD has declared income under the Income Tax Declaration Scheme, 2016 for assessment year 2013-14, therefore, we find some force in the arguments of assessee that the AO was not justified in making the addition and the Ld. CIT(A) / NFAC is not justified in sustaining the addition.
We find in the instant case when the AO is analyzing the bank account of each deposit and the withdrawal, it is not understood as to how he has made the addition of Rs. 9 lakhs received from the assessee himself.
Assessee has already declared the income under the Income Tax Declaration Scheme, 2016 for assessment year 2013-14 - the amount of Rs. 9 lakhs received by the assessee from himself from loan against FD cannot be considered as business income.
The assessee has declared his income u/s 44AD of the Act by estimating the same and this being a very old appeal relating to assessment year 2013-14, we are of the considered opinion that there is no point in restoring the issue to the file of the AO for adjudication of the issue afresh as argued by the Ld. DR since the figures are crystal clear from the bank statement filed by the assessee in the paper book.
Addition made by the Assessing Officer in our opinion is not justified. Accordingly, the order of the Ld. CIT(A) / NFAC is set aside and the AO is directed to delete the addition. Appeal filed by the assessee is allowed.
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2025 (4) TMI 1218
Rejections books of account u/s 145(3) after detecting some discrepancies in the books - addition on GP rate of 12.5% on receipts as appearing in Form 26AS - HELD THAT:- The assessee has in the regular business of contract and all along he has declared the income at GP of 10.64% and net profit of about 5% in the past. Therefore, if there are any discrepancies in the information contained in the Form 26AS, it has to be dealt properly instead of rejecting the books. Further, if there are cash payments, it has to be dealt as per law and not estimate the income. This is not the first year of operation to adopt such pattern of estimation. In our view, the findings of ld. CIT(A) to the extent of estimate the income @ 12.5% of the gross receipt is not proper and it should be based on the past performance and reasonable basis.
We observed that the assessee had declared the net profit @ 5.09% in the previous AY, therefore, it should be 5% and ld. CIT(A) has observed that the books are not complete, so he proceeded to add 2% for that purpose. If that be the case, the proper income estimation should have been at 7% of the gross receipts after reconciliation of books receipt and Form 26AS. Therefore, we are inclined to direct the AO to estimate the income of the assessee @ 7% of the reconciled gross receipt for the year under consideration. Accordingly, the ground no.1 raised by the department is dismissed and ground no 3 raised by the assessee in CO is partly allowed.
Separate addition on account of disallowance of sundry creditor on estimate basis - HELD THAT:- We observed that the tax authorities have rejected the books of account and estimated the income of the assessee. As held by the Hon’ble Allahabad High Court in Banwarilal Basheshwar [1997 (5) TMI 37 - ALLAHABAD HIGH COURT] once the books are rejected and resorted to estimate the income, no further disallowance can be made. Therefore, we do not see any reason to disturb the findings of CIT(A). In the result, ground no.2 raised by the revenue is dismissed.
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2025 (4) TMI 1217
Reopening of assessment u/s 147 - assessee is a non-filer and had sold immovable property, but the capital gain derived on the same is not offered to tax - HELD THAT:- From the reasons recorded by the AO for reopening of the assessment and the facts brought on record by the AO, we find that the very basis for reopening of the assessment is that, the assessee has not filed any return of income disclosing the capital gains arising from sale of immovable property, whereas, the assessee has submitted before the AO that, he has fired his return of income on 22.12.2015 disclosing capital gains arising from sale of property.
Therefore, is undisputedly clear that, the very foundation for which the reopening is based in the reasons recorded by the AO for the reopening of the assessment collapses, therefore, in our considered view, the AO has reopened the assessment on an incorrect assumption of facts even though, the assessee has filed his return of income for the impugned assessment year.
AO went on to record reasons on the fact that, the assessee has not filed his return of income disclosing relevant capital gains. Since the very foundation of reopening of the assessment is collapsed, in our considered view, the subsequent issue of notice u/s 148 and consequent final assessment order passed by the AO u/s 144 rws 144C(13) cannot survive under Law. This legal principle is supported by the decision in the case of Vijay Harishchandra Patel [2017 (12) TMI 865 - GUJARAT HIGH COURT].
AO based his reopening on the sole premise that, assessee has not filed his return of income and disclosed relevant capital gain arising out of transfer of immovable property, whereas, the fact remains that, the assessee had already filed his return of income and disclosed the relevant capital gains arising out of transfer of property.
Therefore, there is no application of mind by the AO to the relevant material before arriving at a conclusion that, there is escapement of income as per the provisions of section 147. Therefore, reopening of the assessment in light of an “invalid reasons” recorded by the AO cannot be sustained in law and thus, we quash the notice issued by the AO u/s 148 - Decided in favour of assessee.
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2025 (4) TMI 1216
Reopening of assessment u/s 147 - As alleged approval was not taken prior to the issuance of the notice u/s 148 - Addition u/s 69A r.w.s. 115BBE - assessee has failed to disclose details of cash deposits during demonetization in its return of income
Assessee submitted that notice is barred by limitation - HELD THAT:- We find that assessment order passed by the assessing officer, should be quashed as the notice under section 148 of the Act, is barred by limitation. That is, on the basis of illegal notice, assessment order should be quashed.
We also note that procedure laid down u/s 148A of the Act is not followed by the assessing officer. The law for reopening of assessment u/s 147/148 of the I.T. Act has been amended w.e.f. 01/04/2021. Since, the notice u/s 148 of the Act, is issued on 01/04/2021, the new provisions are applicable for reopening of assessment as directed by Hon’ble Supreme Court in the case of Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT]
However, the assessment order u/s 143(3) of the Act has been passed under the old law by following the procedure as stated under the old provisions prior to amendments in the year 2021. Therefore, the AO is failed to follow the procedure as laid down under the new regime of proceedings u/s 148.
The phraseology of amended section 148 makes in unmistakable terms clear that there should be concrete information as defined in Explanation 1 to section 148 of the Act. Such information should be suggestive of income escaping assessment and such information should be objective in nature. In other words, the arguable subjectivity in the pre-amendment provision is given a go-by. For conducting assessment u/s 147 of the Act, there should be not only escapement but also the reason to believe that there is such escapement, the reason being the information itself. Hence, a plausible view could be taken that post-amendment of the provision; the escapement has to be established with concrete information.
Now coming to the assessee`s case under consideration, taking into account above provisions of the Act, we note that books of accounts of firm are duly audited and firm is maintaining regular books of accounts. The reopening is carried out on account of cash deposit in bank. It is established principle that merely because cash is deposited in bank does not lead to escapement of income. The cash deposits are duly recorded in the books of accounts and income from such deposits is duly considered at the time of filing of return of income. Therefore, reopening is conducted merely on account of reason to believe, as against escapement of income with concrete information on hand. The AO has failed to establish with concrete information that there is escapement of income.
Non complaince to procedure mandated under the amended provisions of section 148A - The notice u/s 148 of the Act has been issued after obtaining the approval from JCIT Range 1, Jamnagar. The said fact is stated in notice u/s 148 of the Act. The AO is required to follow the procedure under new law and required to follow the approval as per Section 148A(d) of the I.T. Act, 1961. Therefore, the notice has been issued without obtaining the approval as prescribed under amended provision of section 151 of the Act.
Thus we quash the reassessment order itself, and allow the appeal of the assessee.
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2025 (4) TMI 1215
Addition u/s 68 - subscription received during the year from members of Tree Plantation Scheme namely “Kuber Dhanvarsha" - HELD THAT:- We noticed that assessee has collected various deposits from small time depositors ranging from Rs. 1,250/- to Rs. 10,000/- in various denomination and the addresses were recorded also in very cryptic and in our view, it is very difficult to trace back most of the depositors and from the decision of Additional Sessions Judge, 03/Special Judge Companies Act, Dwarka Courts, New Delhi, they have clearly held that assessee has no intention to return back the funds and from the attitude and behaviour of the assessee, they are not demonstrated that they are inclined to return any deposit.
The assessee nowhere in a position to return any of the deposits with due returns. Therefore, the behavior of the assessee clearly shows that assessee will not return any of the funds to the depositors, therefore, the assessee has taken the deposits with the intention to defraud the innocent depositors and looking at the various small deposits with improper addresses it may lead to suspect that some of the deposits are assessee’s own deposits which were brought into the books.
The whole scheme is to defraud the depositors and the attitude of the assessee clearly shows that the intention is to earn the ill gotten income by fraud means. Therefore, in our view, the whole collection of deposit is nothing but income of the assessee u/s 28 of the Act not under section 68 (since the assessee has submitted the details of the depositors but not proved the genuineness. It is debatable issue.) The ill gotten money also taxable under the Act. Therefore, we are inclined to sustain the additions proposed by the tax authorities and we do not see any reason to disturb the findings of the ld. CIT (A). Appeal filed by the assessee is dismissed.
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2025 (4) TMI 1214
Disallowance of loss booked through trading in penny scrips and commission paid to the broker - As during search and survey proceedings it was established that the penny stocks in which the assessee traded and booked losses have been used for providing bogus LTCG/STCL - CIT(A) deleted addition - HELD THAT:- As the documentary evidences put forth by the assessee could not be rejected without bringing on record any substantial contrary piece of evidence. Moreover, the jurisdictional High Court decisions and as also plethora of co-ordinate benches of Mumbai tribunal support the above observations. We have no hesitation in deleting both the additions. The AO is therefore, directed to allow the business loss claimed by the assessee. Also the addition made u/s 69C w.r.t alleged commission paid being devoid of any basis is also deleted. Accordingly, ground nos. 1 to 3 are dismissed.
Addition made in respect being the amount receivable from National Spot Exchange Limited (NSEL) written off and claimed as Bad Debt - AO observed that as per the information received by from NSEL, the NSEL exchange platform was misused and exploited by unscrupulous brokers and traders to lend huge sums of black money - HELD THAT:- The provisions of law in the matter and find no infirmity in the conclusion drawn by the CIT(A). The disallowance has been made by the AO without any basis and against the well laid down provisions of the Act and also in contraventions of the Board Circular. Similar claim of Bad debt written off has been allowed by the department on similar facts and the circumstances in other assessment years.
Therefore, there is no justification for disallowing the same in the year under consideration. Though the principles of res judicata are not attracted to income tax proceedings since each assessment year is separate in itself, there ought to be uniformity in treatment and consistency when the facts and the circumstances are identical. Order of the AO is silent on this important aspect of the deduction as there is no finding on record showing any justification for adopting divergent approach for the year under consideration. Accordingly, the AO is directed to delete the addition made. The ground of appeal no. 4 above is therefore dismissed.
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2025 (4) TMI 1213
Unexplained money u/s 69A - cash deposit made out of sale proceeds of bullion, gold and silver ornaments, and other precious metals in the bank account - HELD THAT:- Referring to conduct of business by the assessee in peculiar circumstances, reflecting upon pre-ponderance of human probabilities by keeping in juxtaposition, the logistic and operational activities relating to transactions undertaken by the assessee within a short span of 25 days immediately preceding the announcement of demonetisation to justify the deposit of cash in various bank accounts of the assessee in the period of demonetisation. The thoughtful analysis done at both the levels of AO and CIT(A), based on corroborative documentary evidences and financial data furnished by the assessee from its own books of accounts, evidently demonstrates the façade created by the assessee and has been pierced to bring out the true intent and purpose of explaining unaccounted money of the assessee.
Having perused orders of the authorities below, coupled with corroborative documentary evidences placed on record in the paper book, we do not find any reason to interfere with the conclusion drawn by the CIT(A) in respect of deposit of cash in the various bank accounts of the assessee. Accordingly, the addition made u/s. 69A is sustained. Grounds raised by the assessee in this respect are dismissed.
Disallowance of claim of bad debts written off during the year - claim of the assessee is that sales on this account has been duly reported forming part of his total sales turnover for AY 2015-16 - HELD THAT:- We find that claim of any bad debts is to be allowed in terms of section 36(1)(vii) in the year in which such bad debts have actually been written off as irrecoverable in the accounts of the assessee. In this respect, we find support from the decision of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT] Thus, we delete the addition so made by ld. Assessing Officer in this respect. Accordingly, grounds raised by the assessee in this respect are allowed.
Rejection of book of accounts u/s. 145 - While dealing with issue relating to cash deposits in various bank accounts for which the addition has been sustained, as well as keeping in view the elaborate analysis made by the authorities below, we do not find any reason to interfere with their observations and findings to draw the conclusion for rejection of books of accounts.
GP percentage of 4.76% as taken from the reported GP percentage of the assessee and was reduced by ld. CIT(A) to 0.1%, granting substantia relief - Considering nature of business reported by the assessee, we do not find any reason to interfere with the conclusion drawn by ld. CIT(A) in this respect and therefore uphold the profit estimation by applying percentage of 0.1% as done by ld. CIT(A) on the sales turnover excluding the sales relating to deposit of cash in various bank accounts during the demonetisation period.
Notional commission computed by CIT(A) on both purchases as well as sales - Once the books have been rejected and net profit estimation have been applied, we do not find any justification for the enhancement made by CIT(A) by presuming commission without any corroborative material on record. The enhancement so made by ld. CIT(A) is solely on presumption and assumption, more importantly when net profit estimation has already been sustained in the hands of the assessee. Accordingly, notional commission added in the hands of the assessee is deleted. Grounds taken by the assessee in this respect are allowed.
Applicability of provisions of section 115BBE - Alleged transaction of deposit of cash in the bank account of the assessee is during the period from 09.11.2016 to 30.12.2016. This issue of imposition of increased rate of tax from 30% to 60% by way of applying provisions of section 115BBE is addressed in the case of S.M.I.L.E Microfinance Ltd. [2024 (11) TMI 1444 - MADRAS HIGH COURT] whereby it is held that Revenue is empowered to impose 60% rate of tax on transactions from 01.04.2017 onwards and not prior to the said date and for prior transaction, Revenue is empowered to impose only 30% tax. Accordingly, ground of appeal raised by the assessee on the issue of section 115BBE is allowed.
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2025 (4) TMI 1212
Denying exemption u/s 11 - assessee has not filed details of registration obtained u/s 12AB - The registration application in Form 10A was filed on 26/03/2022, whereas as per the provisions of Section 12A(1)(ac)(i) of the Act, the assessee was supposed to apply within three months from the 1st day of April, 2024. Since the application was not made in time, the approval was given only from 05/04/2022
HELD THAT:- We find that the CBDT, vide Circular No. 16/2021 has extended the date for filing Form 10A to 31/03/2022 and as the application was filed on 26/03/2022, the same was within time as per Circular of the CBDT.
In our considered view, by not considering the extended date, the order processing the return of income had a rectifiable error which was denied u/s 154 of the Act and the NFAC also fell into the same error in not considering the Circular of the CBDT extracted elsewhere. Since the assessee has filed the application on or before the extended date as per the CBDT Circular, the AO is directed to allow the exemption for AY 2021-22 also. Appeal of the assessee is allowed.
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2025 (4) TMI 1211
Rejecting the registration u/s 12A - CIT(E) rejected the application due to "non- compliance" of the notice - Denial of principles of natural justice rejecting the application for registration u/s 12AA.
HELD THAT:- CIT(E) after considering the preliminary submission had called for an additional evidence and complying documents inter-alia, copy of MOA, purpose of collecting fees from the students, financial statement for F.Y. 2022-23 along with annexures, copies of bills, invoices etc. which the appellant meritoriously failed to make good by the due date, consequent to which, the CIT(E) without further opportunity rejected to grant 12A registration to the appellant trust.
Hon’ble Supreme Court in its landmark decision rendered in “Maneka Gandhi Vs UOI” [1978 (1) TMI 161 - SUPREME COURT] has laid down that, the rule of fair hearing is necessary before passing any order, the opportunity of being heard should be real, reasonable and effective and same should not be for namesake, it should not be a paper opportunity, the doctrine of natural justice is a facet of fair play in action and no person shall be saddled with a liability without being heard.
Ostensibly, the preliminary submission of the appellant did not productively prove its eligibility and claim for grant of approval for 12AA, as a consequence the Ld. CIT(E) requisitioned additional documents by a notice dated 15.01.2024 and in the event of failure, without further opportunity to the appellant, rejected the application in violation of principle of natural justice as commanded by proviso to section 12AA(1)(b)(ii) of the Act. Thus action of the Ld. CIT(E) suffered from sufficiency of reasonable opportunity to the appellant to refute the rejection vis-à-vis to comply with the requirements sought.
Thus for the reason, without commenting on the merits of the case, we deem fit to remand the matter back to the file of Ld. CIT(E) for denovo adjudication according reasonable opportunity to refute the rejection vis-à-vis to comply with the requirements sought. Appellant is also directed to remain vigilant and make satisfactory compliance to the notice(s) of hearing issued by ld.CIT(E) and it should refrain from taking adjournments unless otherwise required for reasonable cause. Effective grounds of appeal raised by the appellant are allowed for statistical purposes.
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2025 (4) TMI 1210
Addition made u/s 56(2)(x) - variance between the Stamp Duty Value of the Property purchase and Purchase consideration - AO regarding the assessee’s half-share, calculated as 5% of the consideration - whether the assessee is entitled to the benefit of the tolerance limit of 6.56%? - HELD THAT:- We find that the amendment in question is curative in nature and is retrospectively applicable for impugned assessment year. Consequently, the assessee is eligible for the 10% tolerance limit under section 56(2)(x)(b)(B) of the Act and the impugned addition is deleted.
Furthermore, AO has adopted a view that limits the tolerance threshold to 5% of the total consideration. This view is wholly unjustified and contrary to the correct interpretation of section 56(2)(x)(b)(B) of the Act. Therefore, the addition made on this account is directed to be deleted.
Appeals filed by the assessee are allowed.
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2025 (4) TMI 1209
Exemption u/s 54 - Long Term Capital Gain arising on the sale of his old residential house - claim denied as sale consideration of the old residential house was deposited in the assessee’s bank account was neither utilized/used by him for purchase of the new residential property nor deposited by him till the end of the financial year relevant to AY 2016-17 in the “Capital Gains Account Scheme” (CGAS) as was required per the mandate of law to claim exemption of the LTCG arising on sale of the old residential house
HELD THAT:- As the assessee had within the specified time period made an investment in the aforesaid new residential property, viz. Villa No. 53 much in excess of the sale consideration of Rs. 72.54 lacs of his old residential house, therefore, we find no reason for declining of his claim of exemption under Section 54 of the Act by both the lower authorities.
Alternatively, even if the CIT(A)’s view that the assessee had made investment in construction of the new residential property i.e., Villa No. 53 (supra) is to be accepted, then also there could have been no justification in declining his claim for exemption under Section 54 of the Act. Ostensibly, the CIT(A) had declined to consider the investment that was made by the assessee in the new residential property, viz. Villa No. 53 (supra), but we are unable to concur with the same.
As decided in H.K. Kapoor [1997 (8) TMI 44 - ALLAHABAD HIGH COURT] exemption of capital gains could not be refused to the assessee simply on the ground that the construction of the new residential house had begun before the sale of the old residential property.
Second issue i.e., for availing the benefits under Section 54 of the Act, is it necessary that the sale proceeds of the old residential house must be used in the purchase or construction of the new residential house, we do not find any substance in the view taken by the AO which thereafter had impliedly been approved by the CIT(A). On a perusal of Sec. 54 of the Act, it transpires that the same contemplates appropriation of the ‘capital gain’ arising on the sale of the old residential property towards purchase or construction of the new residential property. However, nothing can be gathered therefrom that it is necessary that the sale proceeds of the old residential house must be utilized by the assessee for the purchase or construction of the new residential house. Our aforesaid view is fortified by the judgment of Moturi Lakshmi (Ms.) [2020 (9) TMI 416 - MADRAS HIGH COURT] as observed, that Section 54F of the Act nowhere envisages that the sale consideration obtained by the assessee from the original capital asset is mandatorily required to be utilized for the purchase or construction of a house property.
Thus not being able to persuade ourselves to concur with the view taken by the lower authorities, we set-aside the order of the CIT(A) and direct the A.O to allow the assessee’s claim for exemption under Sec. 54.
We are of the affirm conviction that as the assessee had based on sale of his old residential property, viz. House No. 10-3-734/3 situated at Vijaynagar Colony, Malleapally, Hyderabad had made an investment towards purchase of the new residential house property, viz. Villa No. 53 (supra), therefore, no infirmity arises from the claim of exemption that was raised by him under Section 54 - Decided in favour of assessee.
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2025 (4) TMI 1208
Bogus purchases - AO concluded that the assessee firm has indulged in inflating the purchases through bogus bills - AO has made the impugned addition by placing reliance entirely on the report given by the investigation wing - HELD THAT:- AO merely placed reliance on the report prepared by the Investigation wing. He did not find fault with any of the documents furnished by the assessee to prove the purchases. He also did not bring any material on record to prove that these purchases were bogus in nature.
Report of the investigation wing will trigger further probe and it alone cannot be the basis for making addition. Admittedly, in the instant case, the AO did not carry out any enquiry in this case.
As held in Ashok Kumar Rungta [2024 (10) TMI 766 - BOMBAY HIGH COURT] “merely on suspicion based on information received from another authority, the assessing officer ought not to have made the additions without carrying out independent enquiry and without affording due opportunity to the respondent - assessee to controvert the statements made by the sellers before the other authority”. Hence,we are of the view that the AO was not justified in disallowing the entire purchases treating them as bogus on the basis of his suspicion and surmises. Decided in favour of assessee.
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2025 (4) TMI 1207
Rejection of bad debts claimed - AO took the view the write off of loans as bad debts is a colourable device/sham transaction adopted by the assessee to create loss with the purpose of setting off the same against the Long term capital gains earned by it - HELD THAT:- The first reason cited by the assessee is that the son-in-law of the main director of the assessee company is one of the common directors in both the borrower companies referred above. We notice that the assessee has explained that the above said son-in-law is not a share holder in both the borrower companies. Hence, it cannot be said that the son-in-law had any interest in the borrower companies. Hence, in our view, this reason cannot be a ground to suspect the claim of the assessee.
Next reason cited by the AO is related to assignment agreements found during the course of survey operations - AO has also referred to an opinion given by a legal consultant, wherein he has expressed the view that the transfer of shares has taken place on 1.4.2015 and hence the capital gains will be taxable in AY 2016-17. It so happened that the agreement for sale of shares was entered in March, 2015, but the actual transfer took place on 1.4.2015. Hence, the assessee obtained a legal opinion. We notice that the AO has linked the Assignment agreements with the legal opinion given by the legal consultant and accordingly took the view that the writing off of bad debts was purposely shifted to AY 2016-17 in order to set off the same against the capital gains. However, we notice that the AO has rejected explanations given by the assessee without examining it at all, i.e., the AO could have conducted enquiry with the Assignees in order to find out the veracity of the explanations given by the assessee, which is not justified. Accordingly, we are of the view that the AO has come to such a conclusion only on presumptions and surmises.
In our view, the above said observations of the AO are not required to be considered, since the claim of bad debts is allowed u/s 36(1)(vii) of the Act, wherein the requirement is that the debt should be written off as bad in the books of accounts and further the conditions prescribed in sec.36(2) should be fulfilled, i.e., there was no necessity for the assessee to establish that the debt has really become bad.
Thus, we are of the view that the various reasoning given by the AO in support of his view that the writing off bad debts was a colourable device or sham transaction are based upon sound reasoning, but based upon on surmises and conjectures. Further, the AO has arrived at such a conclusion without conducting enquiry of any type or bringing any material on record to support his view. We noticed that the various reasoning given by the AO will not be relevant for allowing deduction u/s 36(1)(vii) of the Act. We have also seen that the assessee is eligible to claim deduction of bad debts u/s 36(1)(vii) of the Act and also fulfilled the conditions prescribed u/s 36(2) of the Act.
Accordingly, we hold that the bad debts claimed by the assessee cannot be rejected. Accordingly, we set aside the order passed by the Ld CIT(A) on this issue and direct the AO to delete the disallowance of bad debts claimed by the assessee. Appeal filed by the assessee is allowed.
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2025 (4) TMI 1206
Reopening of assessment u/s 147 - approval of the authority specified under section 151 accorded or not? - scope of New Regime - HELD THAT:- From the observations made by the Hon’ble Apex Court in Rajeev Bansal’s case [2024 (10) TMI 264 - SUPREME COURT (LB)] it transpires that though prior approval u/s 148A(b) and 148(d) was waived in terms of decision in the case of Ashish Agarwal case, for issuance of notice u/s 148A(a) and 148 on or after 1-04-2021, prior approval was required to be obtained from the appropriate authority specified u/s 151 of the New Regime.
As per report from the AO, the assessee was issued notice under section 148 of the Act after obtaining sanction under section 151 from the JCIT, Range-4, Jaipur; that subsequently, an opportunity of being heard as per provisions of section 148A(b) of the Income Tax Act, 1961 was provided to the assessee with prior approval from the competent authority vide DIN and Notice dated 25.5.2022.
In said report, the Assessing Officer has further reported that the competent authority for approving the proposal order u/s 148A(d) was Pr.CIT-2, Jaipur. In this way, the Assessing Officer has admitted the case of the assessee that for the relevant Assessment Year 2016-17, Pr. CIT-2 Jaipur was the competent authority for the purposes of sanction under section 151 of the Act.
Copy of approval for passing order under section 148A(d), dated 22/25.7.2022, as per directions of Hon’ble Apex Court would reveal that said order was passed with the approval of the Principal Commissioner of Income tax-2, Jaipur. This fact also finds mention in Order under section 148A(d) of the Act issued on 27.7.2022.
Thus, we hold that the notice under section 148 of the Act is invalid in the eye of law. Decided in favour of assessee.
Reopening of assessment on bogus share transaction - company-YICL had weak financial statement; that the movement of the share price was not correlated and not supported by its financial statement, which revealed that the prices were rigged and manipulated by way pre arranged or artificial transaction to book bogus LTCS, and that the LTCG claimed by the assessee from the said scrip was only in order to evade taxation, on the basis of accommodation entries made by the above said company - HELD THAT:- AO had already called upon the assessee from time to time to furnish information, documents and details in respect of said transactions with YICL, before passing the previous assessment order dated 11-12-2018.
It is well settled that where during assessment proceedings, the assessee company furnished entire material related to purchase and sale of shares and capital gains/ loss made therein and the AO having considered the details, took a conclusive view, reassessment proceedings which are initiated u/s 147 by way of reconsideration of the material already available at the time of original assessment proceedings, would amount to change of opinion.
Thus, we find that NFAC vide impugned order was fully justified in allowing Ground No.7 raised by the assessee in the appeal challenging assessment order while concluding that reopening in subsequent reassessment u/s 147 read with Section 144B of the Act was not valid. Decided against revenue.
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2025 (4) TMI 1205
Assessment order passed u/s 153A - incriminating material discovered in the course of search or not? - HELD THAT:- As observed that there does not appear to be any reference to any incriminating material found in the course of search of the assessee per se. The alleged incriminating material referred are primarily in the nature of statement of third person prior or subsequent to search/survey proceedings. Guided by the principles laid down by the Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] Anand Kumar Jain (HUF) [2021 (3) TMI 8 - DELHI HIGH COURT] and Vikram Dhirani [2024 (8) TMI 1503 - DELHI HIGH COURT] we find force in the legal plea placed on behalf of the assessee. Hence, in the absence of any incriminating material in an unabated assessment, additions/ disallowances made by the AO in all captioned appeals requires to be quashed.
Propriety of approval u/s 153D to the respective draft assessment orders placed before him by the AO - The approving authority has granted a mere 'technical approval' by his own express admission in departure to a substantive approval expected in law. Curiously, the Addl.CIT has recorded that he has granted approval on the basis of submission of the AO that proper opportunity has been provided to the Assessee; all the issues have been examined by him i.e. the AO and relevant copies of seized documents have been verified by him i.e. the AO before passing the draft order. The Addl. CIT thus effectively claimed that he has not pursued the relevant underlying material and proceeded on dotted line. Such an act cannot be regarded as effective discharge of duty of supervisory nature.
Manifestly, the Addl. CIT, without any consideration of factual and legal position in proposed additions and without the availability of incriminating material collected in search etc. has buckled under statutory compulsion and proceeded to grant a symbolic approval to meet the statutory requirement. This approach of the Addl. CIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and is thus incapable of being sustainable in law.
The cryptic conclusion drawn by the CIT(A) is bereft of any plausible reasons whatsoever and thus cannot be reckoned to be a judicial finding on the point. The observations so made are not tenable in law.
We are unhesitatingly disposed to hold that the integrity and propriety of impugned assessments under captioned appeals based on such combined approval memo u/s 153D in question cannot be countenanced in law. Assessee appeal allowed.
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