Preparing the rosters for re-assigning the bench matters to the Members beyond 29th April, 2016 “till the joining of new President CESTAT or until further orders, for smooth functioning of the tribunal - Sections 129(1) and 129C(6) of the Customs Act, 1962, Section 35D of the Excise Act read with Rule 3 and 4 of the CESTAT (Procedure) Rules, 1982 - HELD THAT:- While the Court appreciates the necessity for taking the above step, at the same time, the Court is concerned that since more than two months now no President of the CESTAT has been appointed. In the meanwhile, even the post of the Vice President has fallen vacant. The impugned order can at best be treated as temporary arrangement for a certain period and cannot continue indefinitely.
Consequently, with a view to ensure that there is no unnecessary delay in the filling up of the posts of the President and Vice President of the CESTAT, which as is known, has a large pendency of matters, the Court issues notice in this Petition limited to the above aspect. The Central Government will keep the Court apprised, by way of affidavit, by the next date of hearing as to the steps taken to fill up the posts of President and Vice President of the CESTAT. It is made clear that no interim direction is being issued and the matters will proceed as per the roster prepared by the Member (Judicial) of the CESTAT in the meanwhile.
Declaration u/s 158A(1) - confirming rental income from M/s. Choradia Fashions Pvt. Ltd., in respect of Shiv Sagar Estate particularly when that income was taxed in the hands of Shri J M Shah as the property was already transferred by the assessee to him on 1st Jan. 2005 in pursuance of permission of the appropriate authority under section 269UL(3) of the Act dated 4th March 1995 - Identical question of law is pending before the Hon’ble High Court - HELD THAT:- In view of the admission of substantial question of law on the issue in hand, by the Hon’ble High Court we allow the declaration of the assessee filed u/s. 158A(1) and direct that whatever will be the decision from the Hon’ble Jurisdictional High Court will be binding upon the respective parties. However, since the issue has been decided against the assessee, for the time being (till the outcome from the Hon’ble High Court) the issue is decided against the assessee.
Disallowance of interest on customs duty - whether the interest on delayed payment is allowable expenditure or not? - HELD THAT:- On the issue of interest for delayed payments reference may be made to Triveni Engineering Works Ltd. vs. CIT [1983 (10) TMI 49 - ALLAHABAD HIGH COURT] ; CIT vs. Laxmidevi Sugar Mills Pvt. Ltd. [1999 (3) TMI 41 - ALLAHABAD HIGH COURT] ; Raj Narayan Agarwal vs. CIT [2002 (8) TMI 59 - DELHI HIGH COURT] ; CIT vs. Delhi Automobiles [2004 (5) TMI 16 - DELHI HIGH COURT] wherein interest paid on delay in paying sales tax was held to be deductible. Admittedly, there are contrary decisions also wherein it was held that interest on delayed payments is not an allowable deduction. There are contrary decisions also wherein it was held that interest on delayed payments is not an allowable deduction.
If this issue is analyzed with respect to section 43B of the Act, the scope and effect of the amendment made in the first proviso to section 43B, by the Finance (No.2) Act 1998, have been elaborated in departmental Circular No. 772 dated 23rd December 1998, wherein certain expenses were held to be allowable only on actual payment. There is no dispute, in the present appeal that interest was paid by the assessee. It is different matter that the assessee carried the matter in appeal before the Hon’ble High Court or before the Hon’ble Apex Court and contested a legal battle, though failed, but fact remains that the customs duty as well as interest on delayed payments was made by the assessee. Demand was raised by the department on 18.09.2006 therefore liability arose in the present assessment year. Thus, the deduction has to be allowed either u/s. 37 or u/s. 43B of the Act. Therefore, this ground of the assessee is allowed.
Non disclosure of discount on purchases from 25% to 40% - free distribution of books - AO held that assessee was not declaring true profits and therefore on the basis of discount allowed by suppliers he calculated the margin of assessee and made additions accordingly - HELD THAT:- In the present case, in the case of Revenue’s appeals the Revenue is aggrieved with the deletion made by learned CIT(A) on account of deduction for free distribution of books. However, we find that learned CIT(A) had allowed relief on account of free distribution of books after getting remand report from Assessing Officer and in earlier years we had already dismissed the appeals filed by Revenue on similar grounds and therefore, the appeals filed by Revenue in the present years are also dismissed.
Calculation of taxable income - In the absence of any quantitative details, it is presumed that out of goods valuing at ₹ 99609039/-, the assessee has sold 75.60% of goods on which he got discount and 24.40% of goods on which he did not get any discount. Apeals filed by assessee are partly allowed.
Application for renewal of registration as Merchant Banker ("MB") denied - Order passed by the Respondent - SEBI, declaring that Almondz Global Securities Limited ("Appellant") is not a "Fit and Proper Person" as defined under Schedule II of the SEBI (Intermediaries) Regulations, 2008 ("Intermediaries Regulation") - HELD THAT:- SEBI's aim in imposing punishments upon companies should be to make companies law-compliant so as to ensure that the interests of the securities market are secured. SEBI should not view punishments from a perspective of thinning the herd, rather it should help in fostering a healthy environment where intermediaries act cautiously and responsibly under the overall supervision of the market regulator. The punishment should not only be reasonable but must fit the violation or breach of law for which the entity is sought to be penalized. It is true that neither can a straitjacket formula be prescribed nor can a general pattern of reasonableness be laid down to be invariably applied in all cases.
No consistency in the orders passed by SEBI in terms of the punishment imposed upon Merchant Bankers for their misconduct. The punishments range from just a warning or token punishment for a day to the imposition of a fine of ₹ 1 crore. Further, in cases where there are repeated offences, registration has been denied. However, in the facts of the present case, since the fault of the Appellant is limited in as much as the Appellant has relied upon the Statutory Auditor's reports and the statements issued by the two Issuer Companies, instead of looking into the banks statement, by no stretch of the imagination can it be said that the Appellant is not a fit and proper person for carrying on business as a Merchant Banker.
Expenses incurred on repair and maintenance of building and tubewell - capital expenditure OR revenue expenditure - HELD THAT:- Whether a particular repair is really needed or not or what amount to be spent, the matter is to be decided by the assessee as it is the prerogative of the assessee to take appropriate repair at appropriate time. The repairs may be major repairs, spending considerable amount of money, which amount would not take away character of repair. In our opinion, the quantum of expenditure cannot be the deciding factor as to whether the expenditure is capital or revenue in nature. There is no material on record that the assessee has created any new asset so that they could be of a lasting or enduring benefit to the enterprise in issue.
CIT (Appeals) has observed that an amount spent on repairs of cabin - as observed that the assessee must have got changed everything in the cabin, which amounts to replacement of the old cabin and expenditure has to be treated as capital in nature. The findings of the learned CIT (Appeals) are based on presumptions and assumptions. He has not given any cogent reason in this regard. Thus, considering the entire facts and circumstances of the present case, we are of the view that the authorities below have not correctly appreciated the facts of the present case and also settled legal position. Accordingly, we set aside the findings of the authorities below on this issue and allow the ground raised by the assessee. Accordingly, we direct the AO to allow the entire expenditure claimed by the assessee under the head repairs and maintenance of the building (old shed), tubewell and cabin. We also direct the Assessing Officer to withdraw the amount of depreciation, if any, allowed to the assessee on the amount spent on repair of tubewell.
Addition u/s 14A - HELD THAT:- Assessee had invested a sum of ₹ 10,87,172/- in the shares of various companies. The contention of the assessee is that the investments in shares had been made out of the capital and outstanding reserves of the company and that no separate amount had been borrowed for making the said investments. The assessee further claimed that no substantial expenditure was incurred for earning dividend income. Revenue Authorities have not given any finding that the assessee had earned any exempt income in this year. AO has not recorded any satisfaction to the effect that the interest bearing funds have been used to earn tax free income. There is no finding that the interest bearing funds were used for making the investments in the shares. Thus, in view of the judgment of the Hon'ble Jurisdictional in the case of Kapsons Associates [2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT] we direct the Assessing Officer to delete the addition of ₹ 76,075/- made under section 14A of the Act. This ground of appeal raised by the assessee is allowed.
Disallowance u/s 36(1)(iii) - HELD THAT:- The proviso to section 36(1)(iii) of the Act provides that where any amount of interest was paid in respect of capital borrowed for acquisition of assets, then such interest which is relatable to the period beginning from the date on which capital was borrowed for acquisition of asset till the date on which asset was put to use, shall not be allowed as a deduction. In the instant case, the assessee had not borrowed any capital for the purposes of investments in capital assets for extension of exiting business. It is also not the case of the Revenue that the assessee had diverted the funds borrowed on interest for the purpose of advancing the same to the aforesaid company. It is evident from the record that there were sufficient free funds and reserves available with the assessee to advance the money to the aforesaid company. Recently, the Hon'ble Supreme Court in the case of Hero Cycles P. Ltd. Vs. CIT [2015 (11) TMI 1314 - SUPREME COURT] held that no disallowance of interest under section 36(1)(iii) can be made if the advances are out of own funds. In this view of the matter also, the disallowance made by the Assessing Officer and confirmed by the learned CIT (Appeals) is uncalled for. This ground of appeal raised by the assessee is allowed.
Addition u/s 69/69B - unexplained investment - Assessee has taken a plea that even such investment was made by the assessee on behalf of his various investors by receiving funds either directly from the investors themselves or from various persons as borrowing on behalf of the investors - HELD THAT:- At various places AO himself has given clear finding that the assessee had borrowed funds from Shri Manish Kedia, Shri Sushil Golecha, Shri Rohit Sethi, etc. Therefore, once the borrowing of the funds by the assessee is admitted by the revenue itself, its availability for making investment by the assessee in various assets cannot be ruled out.
The assessee as contended that in the BS-8 diary, the receipt of funds by the assessee from various persons have clearly been reflected and the authenticity of such diary was duly accepted in so many words by the AO himself, in the body of the assessment order itself, therefore, following the principle of complete reliance on one document, due weightage deserves to be given to the sources of funds mentioned in such diary. - for verifying the claim of the assessee as regard to the sources of aforesaid ₹ 1,33,37,500/-, we restore the matter to the file of the AO with a specific direction that he would correlate the investment of ₹ 1,33,37,500/- with the funds shown to have been received by the assessee from various persons, either as borrowing or as custodian, as per the diary BS-8. If the sources of such investments are not found correlated, the addition to that extent, subject to maximum of ₹ 1,33,37,500/- shall be maintained in respect of unexplained investment in land at Bhaurasla. Accordingly, the grounds of appeal of the assessee 1(a) and 1(b) are partly allowed and ground No.6 of the Revenue is dismissed.
Addition based on loose sheets found in search - HELD THAT:- The various documentary evidences furnished by assessee have not been contravend by the CIT DR. The remaining sum of ₹ 62,41,650/- was paid by the assessee in cash to Shri Mohan Chugh for which, no corroborative evidence was found available with the assessee. The assessee had paid only a sum of ₹ 11,00,000/- to Shri Kamal Kumar. We find that out of sum of ₹ 18,42,50,000/- shown to have been paid to Shri Mohan Chugh at page No.25 of LPS-A/3, a sum of ₹ 8,00,00,000/- and ₹ 2,62,50,000/- were respectively purported to have been given in the form of plot in Dubai and flats in the projects. For such purported payments in kind, no case of unexplained investment can be made against the assessee.
The assessee had paid only a sum of ₹ 7,80,00,000/-, in form of cash/ cheque, out of which a sum of ₹ 2,30,00,000/- was paid through explained sources i.e. through cheques of the companies and the remaining ₹ 5,50,00,000/- was paid in form of cash. Again out of ₹ 5,50,00,000/- a sum of ₹ 4,87,58,350/- was made out of the on-money received against booking of flats in the project Phoenix Green for which separate additions have already been made by the AO in the hands of M/s. Phoenix Leisure & Lifestyle Pvt. Ltd. For remaining ₹ 62,41,650/- paid to Shri Mohan Chugh, the assessee has no concrete evidence or explanation. Finally, the assessee could be said to have made unexplained investment to the extent of ₹ 73,41,650/- only [i.e. ₹ 11,00,000 + ₹ 62,41,650] equally in two assessment years and to this extent only, addition is sustained. The remaining addition so made by the AO and confirmed by the CIT(A) is deleted.
Receipt of on-money if excess funds are available with the company - HELD THAT:- It is a settled law that if a transaction is considered to be genuine in the hands of the payer then it also deserves to be accepted in the hands of the payee as well. So, the receipt of payment of ₹ 5,00,00,000/- by the assessee from M/s. Phoenix Devcons Pvt. Ltd. and its subsequent utilization towards payment of on-money for purchase of land at Bhopal cannot be brushed aside abruptly. The assessee while rendering the account to M/s. Phoenix Devcons Pvt. Ltd. had shown the purpose of retention of sum of ₹ 5,00,00,000/- for making some investment in properties in Dubai through his one other company namely M/s. Phoenix Leisure & Lifestyle Pvt. Ltd. but due to non-approval of the necessary government permissions, the same could not be made and eventually such funds were utilized by the assessee for making investment in purchase of land at Bhopal.
Even from perusal of assessee’s BS-8 diary, it may be found that the assessee had made payment for purchase of land in Bhopal but no single evidence can be found as regard to making of any investment by the assessee in any property in Dubai. In our country any remittance, out of India, other than through banking channel is an offence and it is not the case of the Revenue that any Enforcement Agency has taken any action against the assessee on allegation of any Hawala transaction. There cannot be two views for the preposition that the funds of ₹ 5,00,00,000/- were very well available with the assessee for making investment in Bhopal land. Thus, there cannot be said to be any infirmity in the CIT(A)’s action in granting set-off of a sum of ₹ 4,93,73,000/- to the assessee against the investment in Bhopal Land.
In respect of addition of ₹ 2,86,00,000/-, it is the contention of the assessee that a sum of Rs. ₹ 1,00,00,000/- was directly paid by one company named and titled as M/s. MoneyCare Finance & Leasing Pvt. Ltd. to the sellers of the land. In support of the above assertion, assessee has filed a copy of audited financial statements as of 31-03- 2008 of the above named company as PB-198. In such balance sheet, two advances of ₹ 87,50,000/- and of ₹ 12,50,000/- have been shown respectively by such company in the name of Shri Irshad Ali Khan and Shri Iqbal Siddiqui. A copy of such financial statements were also filed by the assessee before the CIT(A) but for the technical reason of not filing an application for admission of such additional evidence under Rule 46A of the I.T. Rules, 1962 the learned CIT(A) has not admitted such financial statements.We are of the view that this evidence goes to the root of the matter, therefore, we admit such financial statements and restore this issue of receipt of ₹ 1 crore back to the file of the AO to decide the matter afresh after verifying the financial statements of the company Money Care Finance & Leasing Co. Thus, the issue is allowed for statistical purposes.
Sum paid by the assessee to the sellers of the Bhopal land, from time to time, by procuring funds from Shri Nitish Doshi and others - HELD THAT:- veracity and authenticity of the transactions recorded in such BS-8 have been relied upon by the Revenue for making various additions in the assessee’s case and therefore, the assertion of the assessee as regard to receipt of funds from Shri N. Doshi and others gets self established from such BS-8. In view of the above facts and circumstances, we find that the AO has not verified this transaction in light of the transaction recorded in diary BS-8, therefore, on the issue of ₹ 1,70,00,000/-, we restore the matter back to the file of the AO with direction to verify the various notings made in BS-8 diary and other loose papers which suggest receipts of certain funds by the assessee from investors and others. For the remaining sum of ₹ 16,00,000/- paid by the assessee for purchase of Bhopal land through its company, the AO is directed to verify the balance-sheet of the assessee’s such co. namely Phoenix Leisure & Life Style and decide the issue afresh. In the result, the departmental ground no.4 is dismissed and ground no. 3(a) and 3(b) of the assessee are allowed for statistical purposes.
Unexplained deposits of cash on different dates in bank accounts - HELD THAT:- We find from the order of the CIT(A) that assessee tried to prove the source of deposit from current year income as disclosed by the assessee as per return u/s 153A of the Act. The CIT(A) has held that the assessee did not prove the source of cash deposit, therefore, assessee did not prove the source of investor money, therefore, this contention of the assessee was rejected by the CIT(A). We hereby modify the direction of the CIT(A) to the extent that the assessee should be given full credit for cash withdrawn by him from his saving bank accounts for explaining the sources of cash deposits made in such accounts. Thus, the grounds of the assessee are partly allowed and that of the Revenue are dismissed.
Unexplained investment in the hands of the assessee either under s. 69 or 69B - CIT(A) has held that the document was found from the third party but assessee is director of the said company and as per the submission, ₹ 2 crores were received from Money Care Finance Leasing Ltd. and ₹ 25 lacs from Smt. Roshni Doshi - HELD THAT:- CIT(A) has treated 2 crores as explained deposit, we find that before the CIT(A), the assessee could be able to explain the genuineness of deposit of ₹ 2 crores made by M/s. Money Care Leasing and Finance P. Ltd. by producing all the necessary documentary evidences. We also find that the CIT(A) has directed the AO to inform the concerned AO in respect of introduction of ₹ 2 crores for necessary action. Therefore, on the issue of ₹ 2 crores, our interference is not required. In respect of ₹ 25 lacs, the assessee did not produce any evidence but assessee has taken the contention that in respect of this ₹ 25 lacs, CIT(A) has already made enhancement in the hands of M/s. Phoenix Devcon P. Ltd., therefore, addition cannot be made in the hands of the assessee. We reverse the finding of the CIT(A) and restore this issue to the file of the AO to verity whether ₹ 25 lacs given by Smt. Roshni Doshi to Phoenix Devcon P. Ltd. has been assessed or satisfactorily explained in the hands of the company i.e. Phoenix Devcon P. Ltd. The AO is directed to verify accordingly.
Unaccounted receipts of the assessee - HELD THAT:- Undisputed fact that a sum of ₹ 1 crore was received by the assessee from its co. through account payee cheque drawn on HDFC Bank. Assessee has submitted the copy of the account of the assessee in the books of the company. As per the ledger account after debiting the account of assessee with the aforesaid payment of ₹ 1 crore, the closing debit balance as on 31.3.2008 in the name of the assessee is getting appeared which fully tallied with amount shown under head “directors advance” in the audited balance sheet of Phoenix Devcon P. Ltd. which is on page 195 of the paper book. It is the contention of the assessee that once the assessee received this amount from the company as advnace, it is capital receipt only, therefore, in our opinion, this requires verification at the end of the Assessing Officer. AO is directed to verify the payment of ₹ 1 crore by the company to the assessee through account payee cheque on HDFC Bank. The Assessing Officer should also verify that whether or not the payment is shown under the head “director advance” in the books of Phoenix Devcon P. Ltd. The AO is directed to verify the claim of the assessee as per law
Denial of natural justice - appeal against the action of the CIT(A) in deciding the appeal against the principles of natural justice, without affording any opportunity to the AO or remanding it back in violation of the departmental instruction - HELD THAT:- We find that in the instant case, the notice was issued to the concerned AO. AO did not remain present before ld. CIT(A) during assessment proceedings. The CIT(A)has called for the remand report and AO has not made any compliance. The ld. CIT(A) has directed to make the further inquiry which ld. CIT(A) has no powers but looking into the facts and circumstances of the case, we feel it appropriate to direct the AO to make further inquiry as per the directions given elsewhere in this order which powers are well within the jurisdiction of the Tribunal. Therefore, in our opinion, the departmental ground is deserved to be dismissed and hence, it is dismissed.
Addition u/s. 68 - whether AO has not established that the assessee has borrowed such loans on Hundi and no Hundi, either live or discharged, was found and seized from any business premises of the group? - HELD THAT:- Provisions of s. 68 cannot be invoked. Even otherwise, The AO himself at various places in the body of the assessment order has firmly stated that the assessee had borrowed funds from various persons and, therefore, having given such finding of genuineness of the borrowing there does not remain any scope for the AO to make any addition in the assessee’s hands by regarding the same as his undisclosed income. For such proposition, we rely on the decision of Hon’ble ITAT Jodhpur Bench in the case of Sunil Rathi Alias Jitendra Rathi vs. ACIT [2007 (9) TMI 314 - ITAT JODHPUR] holding that receipt of a loan cannot be regarded as an income of an assessee. In view of above discussion, we dismiss this issue of the departmental appeal.
Unexplained cash deposits in the Citibank Account - HELD THAT:- We find that the assessee has received cash from various investors who were willing to make investment in the certain property around the Indore through assessee. We find that the assessee has also received ₹ 5 lacs from Shri Manish Kediya. The assessee has not given any evidence before the AO and ld. CIT(A) for establishing the nexus of cash deposits of ₹ 5,00,000/- with City Bank out of funds received from Shri Manish Kediya. The assessee is directed to give the evidence before the AO and AO is directed to verify the claim of ₹ 5,00,000/- with reference to BS-8 diary and documents seized during course of search. Rest of the addition is confirmed
Unexplained cash deposit in the bank of Rajasthan - HELD THAT:- Restore the matter to the file of the Assessing Officer with a specific direction that the full credit should be given to the assessee in respect of cash withdrawals made by him, from time to time, from his saving bank accounts in which cash deposits were found made by the Assessing Officer, as the Revenue Authorities could not establish that cash withdrawn by the assessee was utilized by the assessee for some other purposes and it was not available with him for making subject cash deposits. As regards availability of cash out of income of ₹ 30,00,000/- shown by the assessee in his return of income, for the assessment year under appeal, we find substance in the arguments of ld. Counsel of the assessee that tax on such income was paid by the assessee in subsequent years and not during the relevant year. Considering the fact that the assessee might have spent a sum of ₹ 5,00,000/- towards his household expenses, credit for remaining ₹ 25 lacs also deserves to be given to the assessee for explaining sources of cash deposits. Thus, the Assessing Officer is directed to verify the claim of the assessee
Addition under the head Dubai Hawala - CIT-A deleted the addition observing that the AO could not adduce any evidence other than the papers seized - HELD THAT:- As during the course of search, a loose paper inventorised was seized. CIT(A) has held that these documents are dumb documents. These documents do not contain any date or period. These documents also do not contain details that whether these are of nature of receipt or payment. AO has not made any inquiry after loose paper found. The AO has held that some companies like, M/s. Neel I Ltd. and M/s. CS Developers has made investment in their property. We find that ld. CIT(A) has held that the AO has not made any inquiry whether the assessee has made investment in the Dubai property or in M/s. Neel 1 Ltd. or CS Developers who have allegedly made investment in the property. The ld. CIT(A) has further held that if alleged Dubai hawala is made by the assessee, no action has been taken by the other govt. agencies as Enforcement Director, Fema Authorities. CIT(A) has also given the direction to the AO that if the E.D. or Fema Authorities or any authorities regulating the remittance of money from India gives any conclusive finding as regard making of hawala transaction by the assessee then the AO would be free to take action against the assessee in accordance with the provisions of law. We find that when ld. CIT(A) has given the specific direction and the Department is not bringing any evidence that assessee has made any investment in the property, no addition can be made on the basis of simple documents found from the possession of the assessee. CIT(A) is justified in his action for giving the direction and deleting the addition
Addition on account of real estate trading in Dubai - HELD THAT:- AO has not brought any evidence to show that assessee is connected with Wealthcare Investment Ltd. The assessee, during the course of search, has categorically denied that he and his wife has any business connection in Dubai. The AO has not made any inquiry that assessee had any interest in Wealthcare Investment Ltd. Therefore, we are of the view that no addition can be made without bringing the evidence on record. Moreover, the assessee is assessed to tax in India and he has not shown any income from outside India. Therefore, we are of the view that unless and until, the Department brings the concrete evidence that assessee has any interest in Wealthcare Investment Ltd., no addition can be made in the hands of the assessee. In the result, the departmental appeal on this issue is dismissed.
Ad-hoc basis on account of alleged profit on sale of Bhopal Land - HELD THAT:- there might have taken place some transaction of receipt of on-money on sales of the land and since, it was only the assessee, who had paid the on-money at the time of the purchase of the land, as a natural corollary, the presumption has to be made that such on-money was received by the assessee only. Undisputedly, in the instant case, through the estimation of the AO as regard to the sales consideration of ₹ 1000 lacs is not based upon any material, but taking note of escalation of property prices. Even we find that the appellant has not given any basis for determining the sale price at ₹ 110.50 lacs only. In view of the same, as the assessee has actively participated and made the payment of sale consideration of ₹ 851.58 lacs in the purchase of Bhopal Land. In view of the same and also on the basis of reasons assigned by A.O. given in para-7.13.1 to 7.14 of the order for such estimation for determining the profit out of sale of Bhopal Land is correct and justified. Accordingly the addition so made by A.O. is held to be justified and correct. Accordingly the addition so made by the A.O. is confirmed. The appeal of the assessee on this issue is dismissed.
Unexplained payment allegedly made by the assessee to Shri Chirag Shah - HELD THAT:- As the details enumerated by A.O. clearly evident that payment of ₹ 50,00,000/- was made by assessee, which was duly vouched as detailed by A.O. in the order, hence by no circumstances such duly acknowledged vouchers can be held to be wrong. In view of the same, we consider it proper and appropriate to hold that the addition made by AO of ₹ 50,00,000/- is completely justified and correct. Accordingly the addition so made by A.O. is confirmed. However, we are in agreement with the direction of the ld. CIT(A) that the assessee has already offered additional income of ₹ 1,45,00,000/- as per return filed u/s 153A of the Act, hence, we direct the A.O. to give telescopic credit of such additional income offered against the aforesaid addition
Addition u/s 40A - cash payments for the purchase of immovable properties (held as stock-in-trade) exceeding limits - HELD THAT:- Respectfully following the order of the Hon’ble High Court in the assessee’s own case for the assessment year 2009-10 [2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT] the addition is deleted as held Tribunal has not disbelieved the transactions or the genuineness thereof. Nor has it disbelieved the fact of payments having been made. More important, the reasons furnished by the appellant for having made the cash payments, which we have already adverted to, have not been disbelieved. In our view, assuming these reasons to be correct, they clearly make out a case of business expediency.
The order of the ld. CIT(A) is set aside and the grounds raised by the assessee are accepted.
Addition on receiving on-money - cash payment received from CCCPL - unaccounted investment for the purchase of land - taxability in the hands of individual assessee or company HELD THAT:- Addition has been made on the allegation that the assessee-group has received ₹ 15.07 crores as discussed above as on-money from sale of land in question from CCPL. As discussed above, in the case of Dr. Keyur Parikh and others [2013 (11) TMI 1242 - ITAT AHMEDABAD] it has been held by the ITAT that there was no evidence in possession of Revenue to hold that the assessee made unexplained investments towards the purchase of land in question.
Nothing contrary was brought to our knowledge on behalf of the Revenue. Since the assessee is a recipient in respect of the same property and it has been held by ITAT that in case of purchaser no unexplained investment has been made in respect of said property as discussed above. So, the addition on receiving on-money in question in the hands of the assesseegroup are not justified unless there is evidence on the issue in favour of revenue which is missing in this case. Moreover, revenue authorities ignored the fact that one of common directors of assessee companies, namely –Mr. Shekhar Patel had categorically denied having received cash amount on the sale of land in question. Revenue has ignored the same which is not justified. Assessees have not been provided cross examination of person who is alleged to have made payment of cash of ₹ 15.07 crores. to the assessees which is again not justified. Taking all the facts and circumstances of the case, the addition made by the Revenue in all these groups alleged to be received from CCPL does not survive and same is directed to be deleted. This take care of main issue of on money in land deal in cases of all these assessees of this group.
Disallowance of compensation paid - According to CIT(A) the assessee companies have not discharged the onus of proving the credit amount under the guise of compensation to Frontline Financial Services Ltd. - HELD THAT:- Disallowance in question has been made mainly on account of denial by Tushar Shah as discussed above. The facts remain that main focus of revenue is on statement of Tushar Shah before ADIT (investigation). Irrespective of peculiar background of case assessees had right to cross examine Tushar Shah whose statement recorded by concern ADIT (investigation) has been mainly relied by revenue while making disallowance in question denial. Denial of opportunity of cross examination of said Tushar Shah is violation of principle of natural justice which is not justified. Taking all facts and circumstances into consideration, we set aside this issue to CIT(A) with direction to decide the issue as per fact and law after providing due opportunity of hearing to both parties including cross examination of said Turshar Shah of FFSL by assessees as discussed above. Thus the second issue in all these appeals is allowed for statistical purposes.
TDS u/s 194C OR 194J - payment made by the assessee on account of data storage charges, processing charges, call centre operation and business services - default u/s 201(1) - DR argued that that since these services involved special managerial skills to carry out the work in specialised manner - HELD THAT:- CIT(A) after having examined and perused agreements with the service providers and after going into the various services provided reached a conclusion that the outsourced services do not require any kind of technical and professional expertise and are just simple and repetitive nature of work such as document storage, documents delivery and collection services and documents management services. CIT(A) examined the contract with Writer Information Management Services and found that very basic services were contracted and rendered by the said party involving no special technical skill or professional qualification.
On the basis of the rival arguments and perusal of the various records as placed before us we find that the work assigned to the service provider was not a technical or professional work which required special skills but simple, basic and repetitive nature of work and we are inclined to opine that the order of CIT(A) is correct and deserved to be upheld. We dismiss the ground no 1 raised by the revenue by upholding the order of FAA on this point.
Event management expenses attract the provisions of section 194C or 194J - HELD THAT:- As is seen from the nature of services availed, we do not find any sort of professional or technical or consultancy but rather routine services which are provided by the travel agents in the normal course of business which were purely of contractual nature. It can be seen from nature of reimbursement for the services availed that these are in the nature of simple contractual case where only the provisions of 194C could be applied to deduct and deposit TDS and not 194J which deals with the deduction and deposit of TDS in case of technical, professional and consultancy services. Looking to the facts in the light of provisions of section 194C vis a vis 194J we find that the order of FAA is correct and needs to be upheld. Accordingly we dismiss the ground as raised by the revenue.
Applicability of TDS provisions u/s 194D on Service Tax element in respect of ‘insurance commission' - HELD THAT:- TDS is required to be deducted and paid to the Govt Treasury on the income payable only which means that certainly the service tax component on the commission is not liable to TDS as the same is not an income of the assessee. The provisions of section 194D and 194I have to be seen in the light of the two circulars no 4/2008 dated 28.04.2008 and circular no 1/2014 [F.No. 275/59/2012-IT(B)] dated 13.1.2014. In circulars no. 4/2008 dated 28.04.2008 CBDT has clarified that TDS is not required to be deducted on service tax on rent u/s 194I.
Similarly in circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014 the CBDT has clarified that TDS is required to be deducted on the amount paid/payable under an agreement/contract between the payer and the payee without including the service tax amount.
In the case of CIT(TDS) V Rajasthan Urban Infrastructure [2013 (8) TMI 12 - RAJASTHAN HIGH COURT] has held that service tax is not subject to deduction of tax at source and the circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014 has been brought by the CBDT after the above decision of the high court and also referred to in para no 2 of the circular. After considering the facts of the case before us in the light of circulars as referred to above and decision of the Rajasthan High Court and also the relevant provisions of the Finance Act which provides for ―Reverse Charge Mechanism‖, we are of the opinion that the order of CIT(A) is correct and does not suffer from any infirmities and we,therefore, uphold the same. In result, the appeal of the revenue is dismissed.
Disallowance u/s 14A - expenses incurred to earn the exempt income - HELD THAT:- The balance sheet of both the years are on the file as annexure -1 and 2 which speaks that the assessee was having sufficient surplus amount in comparison to the investment made in mutual fund to earn the exempt income. Therefore, the said circumstances and in view of the above mentioned law settled in case of Bombay Commissioner of Income Tax Vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] . We are of the view that the claim of the assessee is required to be examined a fresh in accordance with law. Therefore the finding of the learned CIT(A) on this account has been ordered to be set aside and learned Assessing Officer is hereby directed to decided the matter afresh in accordance with law. This issue is decided in favour of the Assessee against the Revenue
Depreciation on capital asset transferred by a holding company to its subsidiary company - exemption under section 47(iv) applicability of provisions of explanation 6 to sub-section (1) of section 43 - plant and machinery is transferred from the holding company to subsidiary company - HELD THAT:- It is clear that the finding of the CIT(A) is based upon the observations made in Essar Oil Limited Vs. Deputy Commissioner of Income Tax, Special Range [2007 (1) TMI 278 - ITAT MUMBAI] wherein held that A.O. is directed to take the cost of acquisition of such assets as have been acquired at the cost at which they have been acquired means the actual consideration paid by the assessee company and accordingly allow the depreciation claimed by the assessee.
Considering the facts of the case before us we agree that the case of the assessee is duly covered by the case of Essar Oil Ltd. (Supra). Therefore, we do not find any infirmity and illegality in the finding given by the learned CIT(A), hence we dismissed the appeal filed by the revenue.
TP Adjustment - comparable selection - functional similarity - application of turnover limit of ₹ 200 crores - HELD THAT:- Assessee engaged in providing software development services, design and support, primarily developing software and providing support to its principal.
Turnover of Tata Elxsi Ltd was ₹ 378.43 crores, that of Sasken Communication Technologies Ltd, came to ₹ 405.31 crores, that of Persistent Systems Ltd, was ₹ 519.69 crores, that of Zylog Systems Ltd was ₹ 734.9 crores, that of Mindtree Ltd (seg) was ₹ 793.22 crores, that of L & T Infotech Ltd, was ₹ 1,950.83 crores and that of Infosys Ltd, was ₹ 20,264 crores. Turnover of the assessee was only ₹ 22.72 crores. Obviously the volume of activity of the above mentioned companies were much higher to that of the assessee. It was more than ten times that of the assessee.
Even if we say that applying turnover limit of ₹ 200 crores may not be a wise and prudent one, the turnover of the comparables mentioned above would clearly show that these were much beyond that of the assessee taking them out of the reasonable realm of comparability. Just because the matter was not adjudicated by the CIT (A) may not be a reason for sending it back to him when the facts are clearly on record. There can be no dispute on the position of facts as mentioned above. In such a situation it would be fruitless exercise to remit the issue of application of turnover filter back to the CIT (A). We therefore direct exclusion of Tata Elxsi Ltd, Sasken Communication Technologies Ltd (seg), Persistent Systems Ltd, Zylog Systems Ltd, Mindtree Ltd (seg), L & T Infotech Ltd, and Infosys Ltd, from the list of comparables.
Bodhtree Consulting Ltd. cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should not be the basis on which the said company should be retained as a comparable, when factually it is shown that the said company is a software product company and not a software development services company
CG-VAK can be considered as a good comparable as if all the employee costs are properly considered, then this company can pass the filter applied by the TPO for excluding it.
Working of operating margin of the comparables - HELD THAT:- Foreign exchange adjustment once allowed as operational in nature should also be considered while working out the operating margin of the comparables is acceptable - This is because comparability should be done based on equal footing and if foreign exchange gains / losses are considered as part of operational income / loss of the assessee, then such items of expenditure , are also to be considered as operational in nature in the case of comparables also. TPO is therefore directed to work out the margin of the comparables that are left in the list after considering foreign exchange gains / losses as operational in nature.
Working capital adjustment - HELD THAT:- Working capital adjustment has been made at (-) 5,12% . In such a situation, we cannot say that risk adjustment directed by the CIT (A) was incorrect. TPO having not restricted himself to a working capital adjustment of 1.71% as mentioned by him at para 3.7 of his order ought have considered assessee’s plea for a risk-adjustment, if found reasonable. In such circumstances, we find that direction given by the CIT (A) was justified and we do not find any reason to interfere. Ground of the Revenue stands dismissed.
Operating revenue computation - inclusion of Forex gain / loss incidental to the operating activity of the assessee - HELD THAT:- Just because it was not critical to the operating activity, we cannot say that these had to be excluded. This Tribunal in the case of Triology E Business Software India P. Ltd v. DCIT [2013 (1) TMI 672 - ITAT BANGALORE] had held that forex gains / loss are required to be added to the operating revenue relying on another coordinate bench decision in SAP Labs India (P) Ltd, [2010 (8) TMI 676 - ITAT, BANGALORE] . We therefore do not find any error in the directions given by the CIT (A) Decided against revenue
The Supreme Court ordered that both respondents have filed counter affidavit and there is deficiency in court fee. The registry will process the matter for listing before the Hon'ble Court as per rules.
Exemption u/s 11 - grant of registration u/s 12A denied - trust deed had not provided for a dissolution clause for use of net assets of the trust for its objects in case of dissolution - HELD THAT:- Referring to clause 14 of trust deed we see that the mandate of the said clause is to transfer the remaining assets and liabilities of the assessee to a similar trust at the time of dissolution. There is no intention of giving benefit to a specific person out of whatever remains in the hands of the assessee trust. Therefore, we see no reason for doubting the said clause.
School is run by one family headed by father as Settler-cum-President and two sons as trustees - we find no relevance of the fact that the trust is being headed by the members of only one family. Even if a trust is run by only one family, there is no bar on such trust to be registered u/s 12A. At the time of granting registration what the CIT has to see is that the objects of the trust are charitable in nature and the activities of the same are genuine. The fact whether some benefit directly or indirectly is being diverted to one family, can be taken care of by the AO at the time of making the assessment and granting exemption under section 11 of the Act. Section 13 of the Act provides for refusing exemption under section 11 of the Act in such cases which the Assessing Officer can examine on yearly basis in every assessment year.
Trust is not registered under the new Haryana Registration & Regulation of Societies Registration Act, 2012 - we find ourselves in agreement with the arguments of the learned counsel for the assessee that the provisions of Haryana Registration & Regulation of Societies Registration Act, 2012 are applicable to the society only. The assessee is a trust formed under the Indian Trust 1882 and has been duly registered with Sub-Registrar, Bilaspur. There is no bar under the Income Tax Act to give registration under section 12A of the Act to a trust. There is no provision which says that only societies can be registered under section 12A of the Act. Therefore, we do not find this objection raised by the Commissioner of Income Tax being as per law.
Right to Education Act 2010 is not implemented by the school - the issue is covered by the order of the I.T.A.T., Chandigarh Bench in the case of Kids-R-Kids International Educational & Social Welfare Trust [2016 (3) TMI 1083 - ITAT CHANDIGARH] whereby it has been very categorically held that the issue of school complying with the provisions of the RTE Act is not a relevant consideration to be taken care of by the Commissioner of Income Tax at the time of registration under section 12A of the Act. - Decided in favour of assessee.
Penalty u/s 271(1)(c) - failure to comply with the notice issues under section 142(1) - HELD THAT:- It is not comprehensible to us as to how the assessee could have complied with the notice under section 142(1) of the Act and the questionnaire enclosed thereto by filing such voluminous data called for on 26 items, some in prescribed format etc. by 10.30 a.m. on 17.10.2013 when the said notice/questionnaire had been received by the assessee only on 17.10.2013.
It was impossible for the assessee to have complied with the requirements of filing the aforesaid details by 10.30 a.m. on 17.10.2013 required by the notice under section 142(1) of the Act, as there was no time available to the assessee to do so.
Inspite of this, the assessee vide letter dated 18.10.2013 has filed part details of purchases for A.Y. 2006-07 before the AO. In this factual matrix of the case, we are of the considered opinion that since compliance with the requirements of the notice under section 142(1) of the Act dated 11.10.2013/ questionnaire annexed thereto was not humanly possible, this constituted and established that the assessee had reasonable cause, as envisaged in section 273B r.w.s. 271(1)(b) of the Act for failure to comply with the requirements called for by the notice under section 142(1) dated 11.10.2013 and the questionnaire attached thereto. we delete the penalty levied on the assessee under section 271(1)(b) - Decided in favour of assessee.
Exemption u/s 11 - Application of income outside the taxable territories - expenses incurred by the Respondent Assessee outside India on account of foreign travel as application of income as per the proviso to Section 11 (l) (c).
HELD THAT:- The ITAT examined the Articles of Associations of the Respondent Assessee and came to the conclusion that foreign travel expenses incurred by it cannot be termed as application of income outside the taxable territories of the Assessee. The Court does not find any legal infirmity in the view taken by the ITAT. No substantial question of law arises. The appeal is dismissed.
Whether the power of the State to acquire land for a public purpose has been used in the present case to facilitate transfer of title of the land of original owners to a private builder to advance the business interest of the said builder which is not legally permissible?
Held that:- There is no reason whatsoever to disagree with the finding recorded by the High Court that present case is a gross abuse of law on account of unholy nexus of the concerned authorities and the builder to enable the builder to profiteer. The land could either be taken by State for a compelling public purpose or returned to the land owners and not to the builder - There could be no objection to acquisition of land for a compelling public purpose nor to regulated development of colonies, but entertaining an application for releasing of land in favour of the builder who comes into picture after acquisition notification and release of land to such builder tantamounts to acquisition for a private purpose. It amounts to transfer of resources of poor for the benefit of the rich. It amounts to permitting profiteering at the cost of livelihood and existence of a farmer. This is against the philosophy of the Constitution and in violation of guaranteed fundamental rights of equality and right to property and to life. What cannot be done directly cannot be done indirectly also.
The policy is applicable only to release of such land from acquisition as is owned/ purchased by the developers before the issue of notification under Section 4 of the Land Acquisition Act, 1894. This condition was required to be strictly complied with and no person other than original owners prior to acquisition could directly or indirectly avail of the said policy. Even a bona fide error could not justify a patent illegality. In the present case, it is undisputed case of the builder itself that it did not have even an inch of land before the notification in question.
It is well settled that use of power for a purpose different from the one for which power is conferred is colourable exercise of power. Statutory and public power is trust and the authority on whom such power is conferred is accountable for its exercise.
There is no ground to interfere with the finding recorded by the High Court that there was an abuse of power in releasing the land in favor of the builder. Once it is found that action of the State and the builder resulting in transfer of land from land owners to the builder was without any authority of law and by colourable exercise of power, none of the contentions raised by the builder could accepted.
Notifications dated 11th April, 2002, 8th April, 2003 and awards dated 6th April, 2005 are upheld. The land covered thereby vests in HUDA free from all encumbrances. HUDA may forthwith take possession thereof - All release orders in favour of the builder in respect of land covered by the Award in exercise of powers under Section 48 are quashed.
Exemption claimed u/s 54 - new house is purchased from borrowed funds - diversification of sources of the funds for purchase of new house - out of sale proceeds of old assets only ₹ 6 lacs was invested in the new asset and remaining ₹ 19 lacs was arranged as loan from ICICI Bank and therefore exemption u/s 54 to be restricted to ₹ 6 lacs and remaining were charged to tax as long term capital gain - HELD THAT:- Respectfully following the decision of CIT V Dr Parsicha [2009 (10) TMI 898 - BOMBAY HIGH COURT] as approved that sources of funds are irrelevant for claiming exemption u/s 54 of the act. If a new house is purchased from borrowed funds even then the deduction u/s 54 of the act is allowable
We also hold that despite assessee has borrowed funds from ICICI bank for purchase of new House property , she is entitled to deduction u/s 54 of the income tax act on capital gain of ₹ 1268494/-. - Decided in favour of assessee.
TP adjustment - comparable selection - emphasis on product comparability - HELD THAT:- It would have been better if the TPO had dealt the issue raised by the DRP rather than challenging the jurisdiction of the DRP. It is a fact that the two comparable companies were not dealing in the same product as that of the assessee. Therefore, they were at par with the other four comparables. In the TNMM what is to be seen is functional comparability and not the product comparability. If the TPO wanted to emphasis on product comparability, then he should not have accepted the remaining two comparables. Considering the above, we are of the opinion that the order of the DRP does not suffer from any infirmity. First effective Ground (GOA 1 & 2) is decided against the AO.
Allowance of claim of bad debts - HELD THAT:- Assessee had written off ₹ 39,056/- only in the books of account during the year under consideration, whereas an amount of 12.40 lakhs was written back. It appears that the TPO without understanding the difference between the writing back of balance and writing off the balance had made the adjustment. The balance written back was offered for taxation by the assessee. Therefore, we fail to understand that how the TPO proposed the adjustment. DRP had rightly deleted the addition but we are surprised to notice that in such a straight case the department has decided to file an appeal. It shows lack of judicial discretion on part of the officers who have recommended/approved the appeal. Such frivolous appeal not only waste the time of the Tribunal, but also increase the burden of the DRs unnecessarily. In our opinion, there is no need to interfere with the order of DRP. So confirming its order we decide second effective ground against revenue.
Working capital adjustment - HELD THAT:- As far as the request of the assessee to consider ₹ 39,056/- as working capital adjustment, we would like to state that same could be granted as it has already suffered taxation.
Disallowance of commission expenses paid against sale of plot - bonafides of the commission payment - credibility of expenditure - exorbitant amount commission - absence of proof of service provided in sale of land - HELD THAT:- There is no corroboration for involvement of the middlemen in the deal except the MOU which is found to be illusory and lacks in material features. The buyer has also not vouched the deal. Payment of such astounding sum to a person having as little understanding of the subject as possible neither accords with any business practice nor is corroborated by any direct or circumstantial evidences.
It only militates against any logic. Which are those other parties who were contacted or what other efforts were carried out prior to and in the course of deal are not borne out from records. It is difficult to believe the credibility of expenditure stated to be incurred by the Assessee on the face of such sordid facts. Thus, viewed from any perspective, the propriety of payment of staggering amount of ₹ 90 lacs purportedly made against obtaining services for sale of property based on some symbolic MOU deserves to discredited.
The genuineness of the expenditure incurred is not at all proved. The initial examination of Shri B.S. Agarwal clearly shows that Shri B.S. Agarwal did not play any role in the land deal. Thus, payment of exorbitant amount of ₹ 90,00,000/- towards commission on some mundane MOU without exhibition of services is an utter improbability and does not stand to any reason.
The assessee has not discharged initial burden of proof which squarely lies upon him to reasonably establish receipt of services. The receipt by payee can be for variety of reasons both gratuitous and non-gratuitous.
The payment of taxes paid by the recipient though a mitigating factor, by itself will not render the corresponding expenses as sacrosanct. The assessee is under obligation to discharge the burden to reasonably prove the bonafides of expenses claimed. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT] has held that the taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in the documents. - Decided against assessee.
Reopening of assessment - addition on account of personal drawings and interest expenses - HELD THAT:- As decided in assessee's own case Bench restricted the addition to 50% of the addition sustained by the CIT(A).
Addition on account of interest expense - HELD THAT:- An identical issue has been considered by the coordinate Bench in assessee's own case thus we restore this issue to the file of the Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee. Accordingly, this ground of appeal is treated as allowed for statistical purpose.
Interest u/s 234A, 234B and 243C is consequential - we allow the appeal of the revenue for statistical purpose and direct the AO to re-compute the interest liability after reducing the amount of tax deductible at source and decide as per the provisions of law.
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