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Showing 41 to 60 of 1441 Records
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2025 (5) TMI 1401
Addition of brokerage on estimated basis - taxing brokerage income on entire deal value recorded in the documents found during the course of search at assessee's premises - non-response to the notice u/s.133(6) of the Act - HELD THAT:- It is also not clear that out of total transactions of brokerage, to how many parties, notices u/s.133(6) of the Act were issued for this assessment year. Further, the assessment order is silent about the fact when such notices were issued and why other recourse available with the Revenue were not resorted to, for the verification of the deals, whether executed through the assessee as the broker or not.
It was the onus of the Revenue to make proper verification as no evidence of execution of deals through the broker was found during the course of search. When no credible evidences of unaccounted investments/earning of brokerage income was unearthed during the search proceedings, the question of making addition of brokerage on presumptions and assumptions should not survive.
The addition made by the AO is clearly based of nonresponse to the notice u/s.133(6) of the Act which itself shows that no proper enquiry/verification was made by him.
AO as well as the CIT(A) have failed to highlight any instances in their order suggesting earning of brokerage income from the diaries maintained by the assessee.
Assessee has offered commission/brokerage income for this asst. year. This clearly indicates that there is no corroborative evidence found during the search proceedings which could suggest that the assessee had actually earned brokerage income from transaction mentioned in such inquiry register and which was not recorded in the books of account. It is a settled position in law that no additions can be made on conjectures and surmises
Addition u/s. 69A - undisclosed brokerage income calculated at 1% of the total transaction value - CIT(A) deleted addition - HELD THAT:- Any income earned by a real estate broker can be taxed only as unaccounted business receipts of the assessee and not section 69A of the Act.
It is noted that the addition has been made on the basis of instances mentioned at page No.55 of the seized material, Annexure A-3, sr. No. 1 to 9. The items which have been mentioned in the above list do not indicate the name of the property, the details of purchaser - seller and, therefore the question of making any addition based on such loose paper is uncalled for. At most, the notings which have been made are merely instances reproduced in the loose paper and do not indicate or lead to a conclusion that the assessee could have earned unaccounted brokerage income from any of the deals. Accordingly, the Ld CIT(A) has rightly deleted the addition.
Addition of brokerage on the basis of rough jottings found - HELD THAT:- DR could not bring any evidence on record that notings mentioned in seized material has nexus with any corroborative evidence. Therefore, we are inclined with the arguments raised by the assessee that no addition can be made based on loose material found during the course of search unless revenue brings on record corresponding corroborative evidence that the assessee has actually earned brokerage, which the Revenue has failed. Therefore, such loose material found during the course of search is mere dumb document and cannot be relied upon for making addition.
Addition based on excel sheet found from the premise of City Estate Group - HELD THAT:- DR could not bring any evidence on record to justify that any of the unit sold by the SKZ developer LLP are through the assessee as a Broker. We also found that none of the lower authorities could bring evidence of any deal is executed through the assessee. Therefore, based on our extensive finding given supra, we hereby direct Ld. AO to delete the entire addition and therefore this Ground No.4 stands allowed.
Addition of brokerage income - HELD THAT:- There is no evidence that has been brought by authorities that the deal has been executed through the assessee and in the absence of record or evidences that the same been executed through the assessee, brokerage income cannot be stated to have been earned. There is also no evidence that, 80% has been actually received by the assessee as observed in the assessment order or for that matter entire noting. Further in the assessment order, statement of Mr Divyang Vyas has also been referred which again for the reasons stated in the hereinabove, has no value since there is no evidence to substantiate that the brokerage income has been earned. Addition cannot be made merely on the basis of statement without any evidences. Hence, without any evidence that amount represents Brokerage income as well as its actual receipt by the assessee, the addition cannot be made on assumption and conjecture basis. Therefore, this Ground No.3 is hereby allowed and AO is directed to delete the addition.
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2025 (5) TMI 1400
Disallowance of bogus purchases to 50% - HELD THAT:- As following the decision of the coordinate bench of the Tribunal rendered in the case of assessee’s sister concern [2021 (6) TMI 1184 - ITAT MUMBAI] we do not find any infirmity in the findings of the learned CIT(A) in restricting the disallowance on account of bogus purchase to 50%. Accordingly, the same is upheld, and Ground raised in its Revenue’s appeal is dismissed.
Addition made on account of on-money received by the assessee - HELD THAT:- It is evident from the record that in the statement recorded during the search and seizure proceedings, the Director of the assessee admitted that at the time of sale of property, the assessee received on-money in cash. We find that while considering a similar issue in assessee’s own case for the assessment year 2006-07, wherein a similar addition was made by the AO in view of the statement given on oath by the Director of the assessee, the coordinate bench of the Tribunal in M/s Samira Habitats India Ltd. [2022 (11) TMI 239 - ITAT MUMBAI] after considering the statements of the brokers recorded during the search proceedings as restore the issue in dispute involving grounds raised by the assessee to the file of the Learned Assessing Officer for considering the claim of the assessee for making addition for undisclosed income for on-money at the rate of the 10% of the sales after giving set off of the expenses of on money incurred for purchase of the land. The grounds of the appeal of the assessee accordingly allowed for statistical purposes.
Unexplained cash expenditure - AO treated the interest payment in cash to be disallowable under the provisions of section 40A(3) - HELD THAT:- From the perusal of the assessment order, we find that the addition of INR 7,25,000 was a separate addition made by the AO in para-20 of the assessment order under section 40A(3) of the Act. Therefore, we do not find any merit in the aforesaid submission of the learned AR. Since there is no material contrary to the findings of the AO that the interest expenditure incurred in cash was in excess of the limit provided in the provision of section 40A(3) of the Act, we are of the considered view that the AO righty made the addition amounting to INR 1,39,24,500 to the total income of the assessee. Accordingly, the said addition is upheld, and Ground No. (vi) raised in Revenue’s appeal is allowed.
Unexplained cash deposits as per the ITS data - HELD THAT:- There is no material available on record contrary to the claim of the assessee that it had a sufficient cash balance for making the cash deposits during the year under consideration. As a result, we do not find any infirmity in the findings of the learned CIT(A) on this issue, and accordingly, the same are upheld. Consequently, Ground No. (vii) raised in Revenue’s appeal is dismissed.
Addition made on account of the sale of property as reported in the ITS data -HELD THAT:- Addition had been made on the basis of ITS data where the allegation was regarding non-reporting of sales, which is not borne out by facts. Moreover, the ledger account and sale agreements had been duly provided to the AO and show that the amount in question has already been offered as income for tax purposes. Also, it is not the case that the AO has rejected the books of accounts. Therefore, there is again no basis for the addition made by the AO. Hence, the addition based on ITS data is deleted.
Unexplained expenditure as per the ITS data - HELD THAT:- We find that the learned CIT(A), on the basis that the expenditure totalling was duly recorded in the books of account in the sales promotion ledger and the bank statement has also shown the payments made, deleted the addition to that extent. As per the assessee, the said payment was made in the nature of sales promotion expenses and was incurred for meeting the various business needs. In the absence of any material contrary to the findings of the learned CIT(A), we do not find any infirmity in the impugned order on this issue.
Disallowance of interest on delayed payment/short deduction of TDS - HELD THAT:- We find in Ferro Alloys Corporation Ltd. [1991 (12) TMI 39 - BOMBAY HIGH COURT] held that the interest levied for delayed payment of TDS is not an allowable business expenditure.
We do not find any merits in the claim of the assessee in seeking deduction under section 37(1) of the Act in respect of interest on delayed payment/short deduction of TDS. Accordingly, the impugned order on this issue is set aside, and the disallowance made by the AO is upheld.
Disallowance under section 14A read with Rule 8D - HELD THAT:- We find that this issue is no longer res integra and has been decided in favour of the taxpayer. We find that the Hon’ble Supreme Court in Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] upheld the disallowance under section 14A of the Act to the extent of exempt income earned by the taxpayer. We further find that in Nirved Traders Pvt. Ltd. [2019 (4) TMI 1738 - BOMBAY HIGH COURT] held that the disallowance under section 14A of the Act cannot be more than the exempt income. Thus, the disallowance under section 14A of the Act is to be restricted to the amount of exempt income earned by the assessee during the year under consideration.
Unexplained expenditure as per the ITS data - HELD THAT:- The learned CIT(A), after perusal of the details submitted by the assessee during the remand proceedings, noticed that the expenditure to an extent of INR 10,17,890 was duly recorded in the books of account in the sales promotion ledger and the bank statement shows the payments made. It was further noticed that payments in respect of two bills, i.e. Bill No. 54301 dated 16/06/2010 amounting to INR 6,06,650 and Bill No. 35517 dated 14/12/2010 amounting to INR 1,26,439, are not recorded in the books of accounts. Accordingly, the learned CIT(A) confirmed the addition to the extent of INR 7,43,089. During the hearing, the learned AR, apart from merely submitting that the addition is only based on the ITS data without any further enquiry, did not bring any material on record to prove the genuineness of the aforesaid expenditure. Accordingly, we do not find any infirmity in the findings of the learned CIT(A) in upholding the disallowance.
Disallowance on account of the salary paid to the Director’s wife - HELD THAT:- We find that it is an admitted position that the wife of the Director did not render any service to the company nor does any activity in the company. Therefore, there is no material available on record to show that the expenditure in terms of salary paid to the Director’s wife was for the purpose of the business of the assessee. Accordingly, we do not find any infirmity in the findings of the learned CIT(A) in upholding the disallowance made by the AO. As a result, the impugned order on this issue is upheld, and Ground raised in assessee’s cross-objection is dismissed.
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2025 (5) TMI 1399
Enhancement income - Addition treating the same as contingent liability debited to the Profit and Loss Account based on disclosure under clause 21(g) of the tax audit report - HELD THAT:- The copy of the Auditor’s certificate indicating the facts that the amount was inadvertently reported in the original tax audit report and the same is rectified in the revised form 3CD – annexure to the tax audit report in form 3CB.
The coordinate benches in Dwarkadish Spinners Ltd. [2013 (12) TMI 1768 - ITAT NEW DELHI] and Kay Bee Industrial Alloys Pvt. Ltd [2011 (12) TMI 798 - ITAT KOLKATA] have held that contingent liabilities which are not debited to the profit and loss account cannot be added merely on the basis of disclosure in the audit report.
As u/s 143(1)(a), the scope of adjustment is limited to arithmetical errors, incorrect claims apparent from any information in the return, or disallowance of loss claimed without required return. The adjustment made in the present case does not fall under any of these categories, as it requires verification beyond the return itself.
Disallowance on account of late payment of employees’ contribution to PF, which the assessee contended was added twice - once by itself and again by CPC - We have noted from the statement of total income placed on the record that the said amount is added to the total income by the assessee as disallowable u/s 36 of the Act. CPC’s duplication of the same disallowance is clearly apparent from the intimation. CIT(A)’s finding is based on correct appreciation of facts and supported by the revised tax audit report and auditor's certificate.
No infirmity in the order passed by the CIT(A). Both the adjustments made by the CPC under section 143(1)(a) were erroneous and rightly deleted by the first appellate authority. Appeal filed by the Revenue is dismissed.
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2025 (5) TMI 1398
TP Adjustment - Comparable selection - it is the assessee’s consistent submission that many of the companies included by the TPO are functionally not comparable or fail key filters such as RPT, absence of segmental data, supernormal profits, or engagement in diversified activities, as supported by decisions of various coordinate benches of ITAT.
HELD THAT:- We find merit in the contentions of the assessee with respect to the following comparables:-
MPS Ltd is engaged in activities involving significant R&D and has developed proprietary cloud-based platforms. It does not provide segmental data for its various streams of revenue. Respectfully following the order of the coordinate bench in assessee’s own case in ITA No. 5919/Mum/2024 dated 17.03.2025, we direct its exclusion.
IRIS Business Services Ltd. earns revenue from multiple service lines such as advertisement, software development, data conversion, hosting, and subscriptions, without furnishing segmental revenue bifurcation. In absence of segmental information, and following judicial precedent in assessee’s own case, it is liable to be excluded.
Omega Healthcare Management Services Pvt. Ltd. derives the entirety of its revenue from related parties, thereby failing the RPT filter of 25%. The coordinate bench in assessee’s own case has already directed its exclusion.
ICRA Techno Analytics Ltd., now Nihilent Analytics Ltd., has related party transactions exceeding 25% of total revenue. Moreover, it is engaged in multiple service lines with limited segmental information. Therefore, following settled judicial precedent, we direct its exclusion.
eClerx Services Ltd. is engaged in KPO, functionally distinct from the assessee’s routine ITES profile. The ITAT-Mumbai benches have consistently held this to be not comparable to low-end ITES providers. We accordingly direct its exclusion.
Infobeans Technologies Ltd. which derives income from both software product sales and development services without providing segmental bifurcation. The ITAT-Pune Bench in Pubmatic India Pvt. Ltd [2018 (4) TMI 437 - ITAT PUNE] and Emerson Electric Company (India) Pvt Ltd. [2019 (6) TMI 1444 - ITAT MUMBAI] have directed exclusion of this company. We concur.
Thirdware Solutions Ltd. engaged in high-end software development and sale of software products and IPs, is functionally distinct. Following the coordinate bench ruling in Lionbridge Technologies Pvt. Ltd. [2019 (8) TMI 1868 - ITAT MUMBAI] we direct its exclusion.
Upon exclusion of the above comparables, the operating profit margins of the remaining comparables align with the margins declared by the assessee, thereby demonstrating that the international transactions undertaken by the assessee were at arm’s length. The ruling of the ITAT, Mumbai, in the assessee’s own case was not available at the time of preparation of the Transfer Pricing Study or during the proceedings before the Ld. CIT(A).
The issues concerning the exclusion of comparables now stand well settled. Accordingly, the transfer pricing adjustments under the ITES segment and under the IT segment are unsustainable.
We direct the Ld. AO to recompute the ALP after excluding the above-mentioned comparables. Consequently, the additions made under Section 92CA(3) and confirmed by the Ld. CIT(A) stand deleted.
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2025 (5) TMI 1397
Black Money - Undisclosed investment in shares of company in Hong kong - AO took a view that since the assessee was beneficial owner of the Hong Kong Company it is incumbent on assessee - HELD THAT:- It is a matter of fact that the assessee has disclosed the share holding in M/s Innovation Worldwide Limited, Hong Kong in the return of income filed for AY 2007-08. Copy of the same is there. This factual finding has also been affirmed by the Ld. prosecution court in the case of assessee.
It has been observed that the appeal of the revenue against the order of the prosecution court has also been dismissed by the Ld Session Court vide its order dated 8th December 2023, considering all these facts and circumstances we are of the view that there is no error in the observations of the Ld. CIT(A) in holding that the assessee has duly disclosed the share holding with the Income Tax Department.
So far as the amount involved in debit note is concerned, it is also a matter of fact that this debit note pertains to transaction entered into between two corporate entities and even after search, nothing has been found from the premises of the assessee which would show that in fact the assessee has received this amount in cash or kind. Therefore, there is no error in the order of the ld. CIT(A) in deleting the addition. We affirm the same.
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2025 (5) TMI 1396
CIT(A) jurisdiction u/s 251(2) - Enhancing the income of the appellant in respect of the matter not considered and determined by the AO during the course of assessment proceedings - CIT(A) enhanced income on account of provision for contract loss - HELD THAT:- In our considered opinion, the learned CIT(A) cannot invoke his enhancement powers in terms of section 251(2) of the Act and make addition on account of a new source of income. Reliance in this regard is rightly placed on the decision of Gurinder Mohan Singh Nindrajog [2011 (9) TMI 755 - DELHI HIGH COURT] which is directly on the issue
We allow the Original Ground No. 1 and Additional Ground raised by the assessee on technical ground for want of jurisdiction for the learned CIT(A) to consider a new source of income by using his enhancement powers. No decision is rendered herein on the merits of the addition proposed by the learned CIT(A) and it is left open.
Disallowance of balances written off - HELD THAT:- As submitted that the advances were given in the regular course of its business and the same becoming irrecoverable, the assessee had no choice but to write off the same during the year under consideration and claim the same as deduction.AR however fairly agreed for restoring this issue back to the file of AO for this factual verification. No objection was raised by DR before us for the same. Accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to restore this issue to the file of learned AO for de novo adjudication in accordance with law only for the limited extent. The assessee is at liberty to furnish fresh evidences, if any, in support of its contentions. Accordingly, the Ground No. 2 raised by the assessee is allowed for statistical purposes.
Disallowance made u/s 14A - HELD THAT:- It is not in dispute that there was no exempt income claimed by the assessee during the year under consideration. Hence in view of the decision of Era Infrastructure (India) Ltd [2022 (7) TMI 1093 - DELHI HIGH COURT] no disallowance under section 14A of the Act could be pressed into service. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
Delayed Employees contribution to PF and ESI - HELD THAT:- AR drew our attention to the table containing the due dates and date of actual remittance of employees contribution to PF and ESI, which in our considered opinion, requires factual verification. Hence we deem it fit and appropriate, in the interest of justice and fair play, to restore this issue to the file of learned AO for denovo adjudication in accordance with law and in the light of the decision of Checkmate Services Pvt Ltd [2022 (10) TMI 617 - SUPREME COURT (LB)]. We make it clear that the due date for the purpose of PF and ESI Act is to be determined based on the date of disbursement of salary to the employees. Accordingly, the Ground No. 3 raised by the revenue is allowed for statistical purposes.
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2025 (5) TMI 1395
TP Adjustment - external TNMM resulting adjustment on account of ALP of international transactions - HELD THAT:- We find merit in the argument of the Ld. Counsel that no adjustment on account of ALP of international transactions of INR 30,264,835/- is called for. We have given a thoughtful consideration to the entire facts of the case and submissions/contentions/arguments of both parties and are of the considered view that this issue is squarely covered by the decision of the Hon’ble Delhi High Court in case of the assessee [2024 (9) TMI 739 - DELHI HIGH COURT] as held a comparable can be rejected on the basis of its size per se.
In this view of the matter, the authorities below were clearly in error in rejecting the internal comparable, i.e. profitability of assessee's transactions with Non AEs, on the ground that the volume of business with non AEs was too small vis-a-vis business with AEs. As also bearing in mind entirety of the case, the assessee was quite justified in adopting internal TNMM and comparing the profit earned on its transactions with AEs with profit earned with Non AEs. Accordingly, the ALP adjustment deserves to be deleted. We find no justification to interfere with the view as expressed.
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2025 (5) TMI 1394
Disallowance on account of deemed dividend u/s 2(22)(e) - HELD THAT:- We are in agreement with the Ld. Sr. Dr. that the Ld. CIT(A) has considered the submissions of the assessee. Ld. CIT(A) has recorded findings on fact on each issue. The assessee was required to rebut the same. But the assessee chose not to make any rebuttal and remained absent from the proceedings.
In the absence of specific rebuttal by the assessee by way of supporting evidences, we do not see any reason to disturb the finding of Ld. CIT(A). Moreover, despite having given multiple opportunities, the assessee failed to attend the proceedings, that goes to demonstrate that the assessee is not interested for prosecuting the present appeal. We, therefore, dismiss the grounds of appeal of the assessee.
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2025 (5) TMI 1393
Rejection of applications for regular registration u/s.12AB(1)((b)(ii) and approval u/s.80G(5) - CIT(E) rejected both the applications on being not satisfied with the genuineness of the activities of the appellant trust and also for not having the sanction of the Charity Commissioner for the loans taken from the trustee during the year - as argued proper opportunity of hearing was not afforded to the appellant for furnishing any clarification on the issue of loan taken by it.
HELD THAT:- We deem it proper to remit the issue of regular registration u/s.12AB as well as approval u/s.80G(5) of the Act for denovo adjudication by CIT(E) who shall afford reasonable opportunity to the appellant to prove the genuineness of the activities and CIT(E) shall also deal with the issue on temporary loan taken from the trustee in light of the decision of Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha [2024 (7) TMI 1638 - ITAT NAGPUR] and decide in accordance with law. Effective grounds raised by the appellant in both the appeals are allowed for statistical purposes.
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2025 (5) TMI 1392
TP Adjustment - benchmarking based on the comparable set of companies engaged in providing administrative support services - treating Appellant's transaction as a highend service misapplying the law pertaining to TP and by adopting faulty processes/ methodologies to finalize the adjustment, such as but not limited to, applying filters, functional analysis selection of comparable companies, computation of profit margin of Appellant and comparable companies and undertaking economic adjustment
Deputation of Personnel - HELD THAT:- Employees deputed are operational level employees. These employees are involved in the execution of projects and providing operational assistance including support functions such as finance. These employees are not supposed to do the action or process of making important decisions. We also note that there is/was no adjustment made during the previous and subsequent Assessment Years. Therefore we direct the AO to follow the judicial consistency and accept the detailed benchmarking based on the comparable set of companies engaged in providing administrative support services as submitted by the assessee in appeals for AYs 2013-14 & 2014-15. Hence, this ground of appeal is allowed for statistical purposes.
Downward adjustment for payment of royalty to AEs for availing technical services - In the present case the TPO has compared the rate of FTS paid by the Appellant with assessee’s own agreed price during a prior year, which is not an uncontrolled transaction and cannot be used as a CUP.
As held in the case of Cabot India Ltd [2011 (5) TMI 365 - ITAT, MUMBAI] that "where no data was available in respect of uncontrolled transactions which were similar to transactions of assessee with its foreign associated enterprise, CUP method could not be considered as most appropriate method to determine arm's length price (ALP) of royalty paid by assesse to its AE for technology collaboration".
Similarly, as held in the case of Flakt (India) Ltd. [2016 (6) TMI 557 - ITAT CHENNAI] that "Without identifying comparable uncontrolled transactions, TPO could not simply come to conclusion that quality and volume of services received by assesse were not commensurate with payment made by assessee".
Hence, in the light of above discussion and orders of the Tribunal, we are of the considered view that the reasoning given by the TPO is not sound. Commercial expediency of the assessee cannot be questioned by the TPO.
Hence in the light of the above factual and legal matrix, we direct the AO to adopt the transfer methodology adopted in its TP documentation and accept the FTS payment at arm’s length. Hence, this ground of appeal is allowed for statistical purposes.
Disallowance in relation to provision for expected loss on contracts - AO has disallowed the provision for expected loss on contract u/s 37 while computing the total income of the assessee - HELD THAT:- As decided in own case AY 2016-17 [2024 (9) TMI 479 - ITAT CHENNAI] that the provision is an ascertained liability that has been created based on the estimated cost and revenue has been recognised on percentage of Completion method. Further, the co-ordinate bench of Tribunal also noted that the provision created has been reversed in subsequent years and ordered to tax in the future years. Thus we delete this addition. Hence, this ground of appeal is allowed.
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2025 (5) TMI 1391
Denial of deduction u/s. 80GGC - donations purportedly given to certain political parties - HELD THAT:- AO has clearly brought out facts that bank accounts of above political parties have been used by the accommodation entry provider, where the donation received by cheques were layered through various bank accounts and ultimately cash was returned back. The same is not disputed by the assessee with relevant materials.
AO made a detailed enquiry of RSP and its Bank accounts and transfer of funds to one Shri Mukesh Mehta proprietor of two firms and he transferred it to Waheguru Enterprise and Sapan Traders, which is clearly a systematic financial maneuver to legitimate illicit moneys and evade taxes. In the absence of any fresh materials in support of the assessee’s claim. The Grounds raised by the assessee is devoid of merits and liable to be dismissed.
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2025 (5) TMI 1390
Penalty levied u/s 271(1)(c) - addition of interest income reflected in Foreign Bank Account and interest income in respect of interest income from Standard Chartered Bank Mumbai - On the basis of information received by the Revenue about the existence of the Foreign Account, reassessment proceedings were initiated in the case of JSY, BSY and Assessee for the relevant assessment years - HELD THAT:- There cannot be protective initiation/levy of penalty in case where addition is made on protective basis. It has been observed that the charge of concealment or furnishing inaccurate particulars of income can be made against a person in whose hands income taxed on substantive basis.
We further note that in the present case the Revenue has not disputed the position that the income was taxed in the hands of the father of the Assessee (JSY) and that penalty u/s 271(1)(c) has also been levied in respect of the same. Therefore, in the facts and circumstances of the present case penalty levied u/s 271(1)(c) of the Act in respect of interest income pertaining to the Foreign Bank Account [added in hands of the Assessee on a protective basis] could not have been sustained and was, therefore, rightly deleted by the CIT(A).
Interest income from Standard Chartered Bank, Fort, Mumbai - We find that no finding has been returned by the CIT(A). However, we have already noted that the Revenue has disputed that the above interest income has been brought to tax in the hands of the father of the Assessee. In case the same is excluded, the interest income would fall below that taxable limit leading to no adverse tax impact. Therefore, the question of levy of penalty under Section 271(1)(c) of the Act would not arise.
Decided in favour of assessee.
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2025 (5) TMI 1389
Application of provisions of section 43CA - addition towards the difference between the stamp duty value and sale consideration - whether the tolerance band introduced under section 43CA of the Act i.e. 5% w.e.f. 01.04.2019 and 10% w.e.f. 01.04.2021 are applicable to assessee's case for AY 2017-18? - HELD THAT:- As in Macrotech Developers Ltd [2023 (5) TMI 153 - ITAT MUMBAI] held that the proviso to section 43CA providing relief to the assessee to the extent of the difference being less than 10% is applicable retrospectively for the reason that it is a beneficial provision as has been held in the case Vatika Township Pvt. Ltd. [2014 (9) TMI 576 - SUPREME COURT (LB)] It is relevant to notice here that the coordinate bench has distinguished the decision relied on by the ld DR in the case of welfare properties private limited [2020 (1) TMI 853 - ITAT MUMBAI]
We also notice in the case of Maria Fernandes Cheryl [2021 (1) TMI 620 - ITAT MUMBAI] in the context of section 50C has elaborated the legislative intent of introducing the tolerance band and held that the amendment providing the tolerance band is retrospective in nature and relates back to the date of insertion of statutory section to the Act.
Thus, rational for holding newly inserted proviso to sub-section (1) to section 50C of the Act as curative in nature, hence, having retrospective application.
In our considered view the same analogy would apply to the provisions of Section 43CA of the Act also since both the sections are similarly worded with the difference being that section 50C is applicable in case of transfer of capital asset being land or building or both and section 43CA is for the transfer of asset (other than capital asset) being land or building or both.
Circular 8 of 2018 dated 26.12.2018 containing Explanatory Notes to the provisions of Finance Act 2018 in Para 16 for ‘Rationalization of Sections 43CA and 50C’ it is stated that the proviso containing the tolerance band is inserted in order to minimize hardship in case of genuine transactions in the real estate sector. When the reason behind the introduction of the proviso is read with the ratio laid down by the judicial precedence as discussed here in above on the retrospective applicability of beneficial provision, we have no hesitation in holding that the tolerance band of 10% is applicable in assessee's case for AY 2017-18.
In assessee's case the difference between the DVO valuation that is considered for making addition under section 43CA and the sale consideration is less than the tolerance band as per the proviso to the said section. Accordingly we hold that in assessee's case no addition under section 43CA of the Act is warranted for the year under consideration. Appeal of the assessee is allowed.
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2025 (5) TMI 1388
TP Adjustment on AMP expenses - constitutes an international transaction or not? - whether AMP expenditure does not constitute an international transaction under Chapter-X of Income Tax Act in absence of any agreement/arrangement for incurring AMP expenditure on behalf of Associated Enterprises (AE).? - HELD THAT:- As consistently held that application of Bright Line (BLT) was invalid under the India Transfer Pricing regulations. In the current assessment year, the TPO relied on his predecessor’s order and made/suggested adjustment on account of AMP expenditure, without bringing anything on record to distinguish the fact from earlier years.
CIT(A) while allowing relief followed the decisions of earlier years and deleted the Transfer Pricing adjustment/addition. There is no variation in facts in the year under consideration, thus, this issue is squarely covered in favor of the assessee and against the revenue by the decisions of Tribunal in assesses own case for AY 2009-10 to 2014-14 and 2018-19, copy of all such decisions are placed on record.
Addition made by classifying the assessee as software Development Company - HELD THAT:- We find that learned CIT(A) deleted the adjustment on the basis of decision of Tribunal in assessee’s own case for A.Ys. 2009-10 to 2014-15. We further find that by following the order of A.Y. 2009-10, similar relief was allowed to assessee in appeal for A.Ys. 2011-12 and 2012-13.
We find that consistently similar addition on account of AMP expenditure is deleted in a series of decision. Thus, respectfully following the decisions of Coordinate Bench, we do not find any merit in the grounds of appeal raised by Revenue. In the result, Ground Nos. 1 to 3 of appeal by revenue are dismissed.
TP adjustment on account of IT support services - HELD THAT:- TPO in his order has accepted functions performed by assessee despite recording such fact TPO inadvertently characterized assessee as company engaged in software development services and wrongly selected companies engaged in software development activities to arrive at the ALP.
CIT(A) on perusal of TP study report and order of TPO held that TPO is incorrectly characterized services of assessee. The assessee has rightly selected company engaged in IT enable services or BPO services. Thus, no adjustment to ALP was required to on the basis of such observation the CIT(A) deleted the addition/adjustment.
We have independently examined the facts of the case and find that once the nature of services rendered by assessee to its group company was accepted by TPO, as of IT support services, then comparison of assessee with software development services would not justify. We also find that a similar IT support service rendered by assessee’s company in AY 2020-21 was reported by matter was referred to TPO. However, no adjustments on IT support services were made/ suggested. Thus, no merit in the grounds of appeal raised by Revenue.
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2025 (5) TMI 1387
Assessment u/s 153A - Addition u/s 68 r.w.s. 115BBE - unsecured loans received by the appellant treated as unexplained cash credits - No documentary evidences to prove identity and creditworthiness of the lender company and genuineness of the transactions - HELD THAT:- The Hon’ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] held that in case of unabated assessments, no additions could have been made without the aid of the incriminating material. In the case of the assessee search was conducted on 27.11.2019. The original return of income in the case for year under consideration was filed on 15.10.2016 and therefore, notice u/s 143(2) of the Act for selection of the case could have been issued up to 30.09.2017 and since no such notice was issued therefore, limitation for issue of notice u/s 143(2) of the Act had already expired before the date of execution of search, hence there was no pendency of the scrutiny assessment on the date of search. Therefore, the assessment year is in the category of the unabated assessment. The ratio in the case of Kabul Chawla (supra) has been upheld in the case of Abhisar Buildwell Pvt. Ltd.[2023 (4) TMI 1056 - SUPREME COURT] therefore, in the unabated assessment year only addition could be made on the basis of incriminating material found from the premises of the assessee.
We set aside the finding of the Ld. CIT(A) on the issue in dispute and hold that no addition in respect of unsecured loan could be made in the hands of the assessee without aid of any incriminating material found from the premises of the assessee. The ground of the appeal of the assessee is accordingly allowed.
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2025 (5) TMI 1386
TDS u/s 195 - Disallowance u/s. 40(a)(i) - assessee was found to have paid commission to foreign agents as sales commission and also by way of purchases commission - HELD THAT:- In a case of payment of commission, provisions of section 40(a)(i) of the Act would come into application only where such sum is chargeable to tax under the Act.
In view of provisions of section 5(2) of the Act, amount of commission paid to a non resident outside India for the services rendered outside India will not fall in the category of income, and as such would not be chargeable to tax. So, the assessee was not liable to deduct TDS on the commission. Consequently, provisions of section 40(a)(i) of the Act were not attracted for the purposes of disallowance of said amount.
Thus, addition made by the AO and upheld by Ld. CIT (A) deserves to be deleted. It is ordered accordingly.
Addition u/s 14A - appellant submitted that said addition, due to disallowance, is not inconsonance with settled law, as provisions of section 14A of the Act apply to earnings of actual exempt income, and not to notional income - HELD THAT:- As per section 14A of the Act, for the purposes of computing total income, no deduction is allowable in respect of expenditure said to have been incurred by the assessee in relation to income which does not form part of the total income under the Act.
In PCIT v. GVK Project and Technical Services Ltd., 2019 (5) TMI 725 - SUPREME COURT
Therein, reference was made to decision in Cheminvest Limited [2015 (9) TMI 238 - DELHI HIGH COURT] which was to the effect that section 14A would not apply where no exempt income is received or receivable during the relevant previous year. Where there is no exempt income earned by an assessee in the previous year, no question of disallowance of expenditure incurred to earn exempt income would arise.
Herein, it is not case of the department that the appellant earned any exempt income due to investments in equities. Rather, as rightly submitted on behalf of the appellant, the Assessing Officer observed in the assessment order that the investments made by the appellant in equities would not generate exempt income.
In the given facts and circumstances, no such disallowance attracting provisions of section 14A read with Rule 8D was permissible. As a result, addition made in this regard deserves to be set aside. It is ordered accordingly.
Allowability of business expenses as Corporate Social Responsibility (CSR) expenses - HELD THAT:- While referring to provisions of section 37(1) of the Act, the Assessing Officer observed that the assessee was asked to justify expenditure incurred for the purposes of business and their relation to the business expenses for being allowed under said provision of law, but the assessee did not furnish any reply, and as such he presumed that the assessee had no objection towards disallowance of said amount debited in Profit & Loss Account.
AO also observed that Corporate Social Responsibility expenses are not in the nature of expenses incurred wholly and exclusively for the purposes of business -only contention raised by AR for the appellant is that such expenditure is allowable to be deducted u/s 80G - At no point of time, the assessee claimed said deduction under section 80G of the Act.
As regards section 37(1) of the Act, onus to prove that said expenses were incurred exclusively for the purposes of business, and that same were not of the form of personal expenses or capital expenses, was on the assessee. Since the assessee did not produce any material in this regard before the authorities below, and even before us nothing of the sort has been produced, so as to attract provisions of section 37(1) of the Act.
Therefore, we see no merit in this ground raised by the appellant or to delete said addition. As a result, the disallowance relating to Corporate Social Responsibility expenses is upheld.
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2025 (5) TMI 1385
Delay in filing the appeal before the CIT(A) - Addl/JCIT(A) dismiss the appeal as the same is filed beyond the time limit permitted u/s 249 - HELD THAT:- On going through the facts of the case, we find force in the assessee’s contention that on an honest & bonafide belief that that the outcome of the rectification would address the discrepancies & prima facie there is no need to file appeal for the mistakes which were apparent on the face of the record which resulted in delay filing of appeal. In our opinion, it cannot be said that assessee is very callous in its approach in filing the appeal belatedly before the ld. ADDL/JCIT(A). Being so, when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay.
We are of the opinion that If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto.
Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay of in filing the appeal before ld. Addl/JCIT(A) has to be condoned.
Thus, we are condoning the delay in filing the appeal before the ld. Addl/JCIT(A) belatedly and accordingly remit the entire issues in dispute to the file of ld. Addl/JCIT(A) with the above observations.
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2025 (5) TMI 1384
Unexplained share capital u/s 68 - addition made as assessee had not produced the investor and failed to furnish any documentary evidence regarding existence of such investors and further observed that mere filing of confirmations from the parties does not discharge the onus of the assessee - CIT(A) deleted the addition - HELD THAT:- Assessee furnished all the necessary documents to prove the identity, creditworthiness and genuineness of the shareholders and the Ld. CIT(Appeals) after analyzing the evidences held that there cannot be any addition u/s 68 of the Act. We do not find any good reason to reverse the findings of the Ld. CIT(Appeals) as none of these findings of the CIT(A) were rebutted with evidences by the authorities below. Grounds raised by the Revenue are rejected.
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2025 (5) TMI 1383
TP Orders issued on a non-existent entity - order issued in the name of a amalgamating company - HELD THAT:- It is pertinent to note that the assessee’s case was transferred to JAO from NFAC consequent to merger intimation for scrutiny assessment proceedings.
Further on perusal of documents we note that inspite of the intimation given by the assessee, the Jurisdictional Assessing Officer issued notice u/s. 142(1) of the Act on the name and PAN of the non-existing entity i.e., 20Cube Logistics Pvt Ltd. requesting the assessee to provide details regarding recent mergers / amalgamation.
We find that the TP order dated 19.09.2024, and the draft assessment order dated 29.12.2023 are issued in the name and PAN of the non-existent entity, whereas the final assessment order has been issued on the name of the existing entity. Therefore, issuance of the final assessment order in the name of the existing entity (i.e., amalgamated entity) does not lead to a conclusion that the TP order and the draft assessment order issued on a non-existing entity would be deemed valid. We are concurring with the ld.AR argument that the existence of a valid TP order and a draft assessment order are the foundational cornerstones for a valid assessment and accordingly absence of the same will invalidate the entire assessment proceeding.
Our above view is supported by the decisions of Maruti Suzuki India Ltd [2019 (7) TMI 1449 - SUPREME COURT] wherein their lordship held that any order issued in the name or PAN of the non-existent entity would be illegal, invalid and without jurisdiction accordingly liable to be quashed.
Hon’ble Apex court also establishes that mentioning the name and PAN of the non-existent entity on the orders or notices is not a clerical error that can be cured by Section 292B of the Act, rather an erroneous assumption of jurisdiction which makes such an order illegal, invalid and liable to be quashed.
As we note that the principle laid down in the above decision of the Hon’ble Apex court has been followed in the decision of Pharmazell India Pvt Ltd [2024 (7) TMI 1436 - MADRAS HIGH COURT] and also L&T Infrastructure Development Projects Ltd [2022 (3) TMI 1641 - ITAT CHENNAI] and Biocon Biologics Ltd [2022 (9) TMI 1113 - ITAT BANGALORE] respectively.
In the present case, our view of that the existence of a valid TP order and a draft assessment order are the foundational cornerstones for a valid assessment and accordingly absence of the same will invalidate the entire assessment proceeding is affirmed by the decision of Fed ExExpress Transportation and Supply Chain Services India Pvt Ltd [2019 (7) TMI 1554 - ITAT MUMBAI] wherein has held that all proceedings subsequent to an invalid draft assessment order would be deemed illegal.
We are of the considered view that the order passed by the TPO and Draft assessment order passed by the AO in the name of the non-existent company is void ab initio - Assessee appeal allowed.
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2025 (5) TMI 1382
Reopening of assessment - reasons to believe or suspect - addition by treating the Long Term Capital Gain (LTCG) earned by the assessee on sale of shares as bogus - HELD THAT:- The reasons pointed out by the AO did not constitute valid reasons for reopening of the assessment. The only information available to the AO was that the assessee had traded in shares of Appu Marketing & Manufacturing Ltd./Ejecta Marketing Ltd. This information was already on record. No new tangible information has come to the possession of the AO that the LTCG declared by the assessee was bogus.
AO, in this case, formed the belief of escapement of income by way of reappreciation of the facts, that too by merely examining the financials of the said Appu Marketing & Manufacturing Ltd. This action of the AO was not valid for the purpose of reopening of the assessment. No doubt the AO could have examined the aforesaid issue including financials of the said Appu Marketing & Manufacturing Ltd. during the original assessment proceedings. Once the limitation period to issue notice u/s. 143(2) of the Act after filing of the return of income on 25.01.2015 had expired, the AO was not supposed to revisit the facts of the case and change his opinion.
No tangible material had come to the possession of the AO to form the belief that income of the assessee has escaped assessment. As observed above, the only information that the assessee had traded in certain scrip would not constitute a reliable and sufficient information to form the belief that the income of the assessee has escaped assessment.
A perusal of the reasons recorded would show that there was no information to the AO that the LTCG shown by the assessee in the return of income was bogus. Even in the reasons recorded, the observations of the AO are based on preponderance of probabilities.
Thus, the reasons pointed out by the Assessing Officer cannot be said to be the “reasons to believe " that income of the assessee had escaped assessment. Therefore, the reopening of assessment was bad in law and consequential assessment order is not sustainable - Decided in favour of assessee.
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