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2024 (8) TMI 1084
Validity of Faceless assessment of income escaping assessment - Challenge to notice u/s 148 as non-compliance with Section 151A of the Act - notices issued by JAO instead of FAO - HELD THAT:- JAO would not have jurisdiction to issue the impugned notices more particularly in view of the clear provisions of Section 151A read with notification dated 29 March, 2022 issued by the Central Government.
As fairly conceded on behalf of the revenue, the challenge in the proceedings would stand covered by the decision of this Court in Hexaware Technologies Ltd. (2024 (5) TMI 302 - BOMBAY HIGH COURT]. The impugned notices would be required to be held to be illegal and invalid as and there is no dispute that the JAO had no jurisdiction to issue the impugned notice. We, accordingly, allow this petition in favour of assessee.
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2024 (8) TMI 1083
Reopening of assessment u/s 147 - claim of the petitioner for depreciation on tippers at the higher rate of 30% is not allowable as the petitioner is engaged in the business of mining and excavation of contractors and not in the business of running the tippers/ motor lorries on hire - HELD THAT:- It is not in dispute that the issue with regard to the claiming of depreciation at the rate of 30% on tippers is already decided by this Court vide Judgment and Order in Pr. Commissioner of Income Tax, Rajkot-1 Versus Durga Construction Company [2018 (5) TMI 1172 - GUJARAT HIGH COURT] rendered in the Tax Appeal referred to herein above. The said decision is binding upon the respondent AO and therefore, the information in possession of the respondent AO cannot be said to result in escapement of the income on the same facts of the petitioner. It is pertinent to note that the petitioner has already provided all the material information during the course of the regular assessment and after considering the same, the assessment order u/s 143 (3) of the Act was passed.
Thus, when the issue which is sought to be kept alive is already decided by this Court, the respondent AO cannot be said to have assumed the jurisdiction to reopen the assessment on the same facts which have achieved finality for disallowing the excess claim of the depreciation. Petitioner has disclosed fully and truly all the material facts relevant for the assessment and there is no failure on the part of the petitioner for the same. The respondent AO has also failed to point out any tangible material other than what is available on the record and as such the entire exercise of reopening is nothing but a change of opinion on the part of the AO. Appeal of assessee allowed.
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2024 (8) TMI 1082
Tax liability of the transaction now become the property of the decree holder by virtue of the said consent decree u/s 50C - sale of the property at at the instance of judgement debtor - Respondents has submitted that income tax implication is beyond the scope of the execution case because the decree itself does not provide any such condition as argued by the decree holder/petitioner - HELD THAT:- Judgement-debtors have harped on the point that what they did, they did in accordance with the terms of agreement and further, the sale of the property at Park Street at the instance of judgement debtor no. 1 in favour of judgement debtor no. 2 is in accordance with terms of consent decree.
If we go through the said terms of consent decree dated 18.05.2018 we shall find that in condition no. 9 it has been mentioned that the property having an office space admeasuring approximately 1314 sq.ft. of 113 Park Street is transferred/allotted to the judgement-debtor no. 2 Smt. Manju Agarwal with the condition that she shall be entitled to use, enjoy and deal with the said premises as owner thereof without any hindrance/objection from any of the parties including deed of partition.
All expenses incurred in the above process shall be exclusively borne by Smt. Manju Agarwal. From the condition no. 10 it further appears that neither the plaintiff nor the other defendants shall claim any right, title and interest over the said property in any manner whatsoever and Smt. Manju Agarwal shall be entitled to use, enjoy and/or deal with the same as owner thereof and in the manner as she likes.
Therefore, from the above conditions it is revealed that by virtue of the said consent decree the plaintiff, the defendant no. 2 i.e. the decree holder and defendant no. 4 had relinquished their right in connection with the property as mentioned hereinabove and they had given absolute right to Smt. Manju Agarwal to use, enjoy and deal with the said office premises admeasuring 1314 sq.ft as owner thereof without any hindrance and objection, and further she has been given authority to deal with the said property as owner thereof and in the manner as she likes.
The relevant deed of conveyance shows that the property was sold by the Nav Technology Pvt. Ltd. being represented by one of its directors, namely, Anmol Agarwal. There is no whisper that the other directors have given such authority to Ms. Anmol Agarwal to transfer the same on her own.
There is no reference in the deed regarding any resolution by the other directors or majority of the directors authorising the respondent no. 1 to execute the same on their behalf. There is no signature of other directors confirming/ratifying such transfer. The question is whether a director can convey the property of the company without having such resolution or without confirmation of other directors. No answer to such a question is forthcoming from the side of the judgement-debtors.
Whether an executing court can direct the person other than the vendor of a registered deed to shoulder the tax responsibility in connection with a transaction where sale value of the property is lesser than the value of the adopted or assessed by the Authority for the purpose of payment of stamp duty in respect of such transfer? - As per consent decree the Nav Technology Pvt. Ltd. along with other defendants are to execute transfer deed in respect of the office space as aforesaid in favour of Manju Agarwal. As the name of Nav Technology Pvt. Ltd. has been shown as the vendor and as the relevant provisions of the Income Tax Act direct the vendor to shoulder the tax responsibility, we cannot direct the then director or the vendee to shoulder the tax responsibility personally.
As the law does not authorise an executing court to say anything palpably against the provisions of Income Tax Act, 1961 the executing court cannot pass such a direction. The undertaking given by the concerned lawyer shows that such undertaking was given against the provisions of law, and even if such undertaking is not respected, this court cannot direct the concerned party to shoulder the tax responsibility since if it does so it would go against the provisions of Income Tax Act, 1961 and also against the intention of the legislature.
Therefore, though found that the judgement-debtors did not respect the underlying intention of the parties to the consent decree, the prayer for asking the judgement-debtor no. 2 to shoulder the tax responsibility cannot be allowed at this stage.
So far as the other prayers of the instant petition are concerned it appears that evidence is required to prove such factual aspects particularly, the factum of surrender or the quantum of surrender value and so on in respect of the property at the third and fourth floor of P-161, VIP Road, Scheme VII M, Kolkata 700054.
Without going through the evidence this court cannot allow the relevant prayers of the decree holder at this stage. Moreover, during the pendency of the execution proceeding admittedly some obligations of the consent decree as imposed upon the judgement-debtors have been complied with, and as the court is not apprised of specifically which portions of the obligations have been complied with by the judgement-debtors, from the side of the decree holder, the other prayers of the GA also cannot be allowed.
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2024 (8) TMI 1081
Reopening of assessment u/s 147 - Capital gain on sale of land - Apportionment of income between spouses governed by Portuguese Civil Code - as argued petitioner only had a 50% share in the properties since the original petitioner and her late husband were governed by the Portuguese Civil Code applicable to the residents of Goa - HELD THAT:- The husband of the original petitioner had already passed away in the year 1986 and hence there was no question of the original petitioner being governed by Section 5A of the IT Act which is applicable only to the division of incomes between the spouses who are governed by the Portuguese Civil Code. Section 5A does not deal with the division of assets. Hence, the question of stating that the original petitioner was governed by the provisions of Section 5A of the IT Act does not arise. In our view, therefore, the original petitioner could not be governed by the provisions of Section 5A of the IT Act.
We find that the substantive rights of the original petitioner were governed by the provisions of the Portuguese Civil Code. The fact that the original petitioner is governed by the Portuguese Civil Code has been duly brought before the respondents. In our opinion, mere non-mention of the same in the return of income would not give rise to a situation where the tax on the sale of property beyond the share of the original petitioner could be taxed in her hands.
The respondents do not appear to have disputed that the original petitioner was indeed governed by the provisions of the Portuguese Civil Code and this was already on record of the Revenue (Exhibit E/97). Moreover, the petitioner's husband had passed away way back in the year 1986 and the share of her husband had devolved from the date of his demise equally on his children. This position was also known to the Revenue when their return of income was filed.
Reason cited by the Revenue for rejecting the explanation is, “Copy of the Sale Deed was not available at the time of recording of reasons”- We find that even such reasoning is fallacious and not tenable in law. The information from the office of the Sub-Registrar's for any registration is duly transmitted to the respondents. The execution of such Sale Deed was already on record. In such a case if the respondents fail to take note of the document which was available for transmission to the respondents from the Sub-Registrar's office, in our view, the assumption of jurisdiction will have to be regarded as erroneous. In any case, we find that at the time of passing of the order dated 16.07.2021, the Sale Deeds (which were available) ought to have been taken into consideration. Reopening notice quashed - Decided in favour of assessee.
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2024 (8) TMI 1080
Accrual of income - receipts from Indian customers - chargeable to tax as Royalty / FTS/FIS or not? - Amount received for sale of online or hard copy journals - assessee did not have a Permanent Establishment (‘PE’) in India - HELD THAT:- As providing access to online database / journals is nothing but providing access to copyrighted article which does not amount to royalty. In this regard, reliance is placed on following decisions, wherein difference between a Copyright and a copyrighted article has been brought out very clearly in Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT], ZTE Corporation [2021 (7) TMI 1336 - SC ORDER].
Even as per Explanation 2 to the Section 9(1)(vi) of the Act, the impugned receipts from Indian customers do not constitute consideration for grant of any rights in the copyright, hence are not taxable as royalty. Thus, receipts from Indian customers for offshore sales of books / journals or providing access to online journals / online library do not qualify as Royalties under the Act as well as under the Treaty. The services are also do not fall under FIS as the services do not satisfy the clause ‘make available’ as required for the provisions of Article 12 of DTAA. Assessee appeal allowed.
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2024 (8) TMI 1079
Correct head of income - rental income earned - house property income or business income - principle of consistency - HELD THAT:- AO has not highlighted any aspect, which goad him to say that rental income earned by the assessee is to be assessed as a business income. He simply reproduced some of the activities mentioned in the Memorandum of Association and shown 98% income of the assessee as rental income, therefore, it is to be construed as if, such income earned as a business income.
It is not necessary that every time assessee will show profit, only then his business will be accepted separately - he has not highlighted the aspect as to how earning of rental income is being carried out by the assessee in an organized manner and not highlighted that apart from giving the property on rent, assessee has provided certain other facilities.
As far as collection of service charges is concerned, i.e. part of statutory requirement, but the assessee has not declared any income for providing additional facilities to the occupiers of the premises and those aspects have not been considered by AO in the impugned assessment order. Therefore, the rental income declared by the assessee deserves to be assessed as a house property income and not as a business income.
The rental income declared by the assessee has been accepted as a house property income in two scrutiny assessments, i.e. A.Ys. 2012-13 & 2013-14. In subsequent years, such income has been accepted under section 143(1). It suggests that in the earlier years as well as in subsequent years, the stand of the assessee has been accepted. It was accepted by AO in the present A.Y. also, in the first round but in the second round of proceeding on the strength of the order passed under section 263, ld. Assessing Officer did not accept. The principle of consistency is fully applicable in the present case.
Thus, we are of the view that rental income declared by the assessee deserves to be assessed as an income from house property. The finding of the ld. Assessing Officer that such income is to be assessed as a business income is vacated - AO is directed to treat such income as an income from house property and determine the taxable income of the assessee. Appeal of the assessee is allowed.
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2024 (8) TMI 1078
Addition u/s 68 - sale of shares of penny stock treating it as bogus and estimated expenses - denial of exemption u/s. 10(38) - reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkatta in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature.
HELD THAT:- We notice that the investigation report prepared by Investigation Wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people, who were involved in the alleged rigging of prices. We notice that the promoters and their associations of M/s. Pine Animation Ltd., were initially debarred from accessing stock market, but the same has been revoked by the SEBI.
We noticed earlier that the assessee has sold the shares during the period from June 05, 2014 to September 15, 2014. Thus, the transactions of purchase and sale of shares by the assessee have happened prior to the passing of initial order by SEBI, which has been later revoked. Hence, we are of the view that the transactions of purchase and sale of shares of M/s. Pine Animation Ltd., by the assessee would not be affected by the above said orders of the SEBI.
In the statement recorded from the assessee, she has stated that she was guided by her husband in making the investment, who is a Chartered Accountant by profession.
Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group, which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee.
CIT(A) was justified in deleting the addition of value of sale consideration arising on sale of shares of M/s. Pine Animation Ltd. Since we have confirmed the decision of Ld CIT(A) in holding that the sale transactions of shares cannot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to be deleted - Decided in favour of assessee.
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2024 (8) TMI 1077
Ex-parte order without affording a proper opportunity of hearing which is against the Principles of Natural Justice and as such the order passed is arbitrary and unjustified - non-compliance on the part of the assessee, but infact, no email/notice or SMS was received by the assessee to check the Portal - HELD THAT:- The matter now stands covered by the decision of ‘Munjal BSU Centre of Innovation and Entrepreneurship, Ludhiana through its authorized signatory Shri Bharat Goyal Vs Commissioner of Income Tax (E), Chandigarh’ [2024 (3) TMI 479 - PUNJAB & HARYANA HIGH COURT] held that the provisions of Section 282(1) of the Income Tax Act and Rule 127(1) of the Income Tax Rules, 1962, envisage that it is essential that before any action is taken, a communication of the notice must be in terms of these provisions; that these provisions do not make mention of communication to be “deemed” by placing the notice on the e-portal of the Department; that an pragmatic view has always to be adopted in these circumstances; that an individual or a company is not expected to keep the e-portal of the Department open all the times so as to have knowledge of what the Department is supposed to be doing with regard to the submissions of forms, etc.; and that the principles of natural justice are inherent in the Income Tax provisions and the same are required to be necessarily followed. The impugned order of the CIT(A) is, therefore, not sustainable in the eyes of law. Assessee is treated as allowed for statistical purposes.
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2024 (8) TMI 1076
Deduction u/s. 80P(2)(a)(i)/80P(2)(d) - interest income earned by a Cooperative Society formed with the object of accepting deposits from Members and lending money to its Members - HELD THAT:- On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society.
Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society.
This issue was considered of CIT vs. Totagars Cooperative Sale Society, [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] wherein the Hon’ble High Court after referring to the decision of Totgar’s Co-operative Sale Society Ltd [2010 (2) TMI 3 - SUPREME COURT] held that the ratio of decision of the Hon’ble Supreme Court is not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act.
Interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks qualifies for deduction under the provisions of section 80P(2)(d) of the Act. Therefore, the grounds of appeal raised by the appellant stand allowed.
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2024 (8) TMI 1075
Addition of cash deposits by invoking the provisions of Section 68 - assessees could not explain their cases with credible source - HELD THAT:- An order [2024 (2) TMI 550 - JHARKHAND HIGH COURT] passed by Hon'ble Jharkhand High Court was placed on record.
It is seen that appeal was filed by both the assessees against the order of the ITAT Ranchi Bench before the Hon'ble Court. The contentions as made before lower authorities were reiterated. The Hon'ble Court which dealt with the matter at length held that both the assessees failed to prove identity, creditworthiness and genuineness of the creditors. The contention of the assessee regarding addition made u/s 68 of the Act on the ground that the amounts were not credited in the bank account, the Hon'ble Court has held that there was no error committed by and /or the tax authorities.Both the appeals were, consequently dismissed by the court.
Interest charge u/s 234A and 234B - Departmental Miscellaneous applications on deletion of interest charge - HELD THAT:- Interest u/s 234AB could be charged on the returned income and not on the assessed income. ITAT has not even considered the provisions of Section 234B, as applicable during the period of AY 2015-16, which is relevant to the instant appeal. The said finding of the Ld. ITAT is totally contrary to the provisions of Section 234B as amended by the Finance Act, 2001 and the Finance Act,2006. Decided in favour of revenue
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2024 (8) TMI 1074
TDS u/s 195 - disallowance u/s 40(a)(i) assessee failed to deduct tax on professional fee paid to various non-residents - as per AO professional fee paid to various non-residents was liable to tax in India in the hands of such non-residents in terms of the provisions of the Act read with the applicable articles of the corresponding DTAA
CIT(A) deleted substantial amount of disallowance made by the AO u/s 40(a)(i) in respect of professional fee and allowed deduction as claimed by the Assessee holding that the professional fee paid to most of the non-residents was not liable to tax in India as FTS or Other Income - CIT(A) accepted the contention of the Assessee that the professional fee was in the nature of Business Profits or income from Independent Personal Services (IPS); and in absence of a Permanent Establishment (PE) or fixed base in India, respectively, the same was not liable to tax in India - HELD THAT:- We do not find merit in the contention advanced on behalf of the Revenue and concur with the conclusion drawn by the CIT(A) that the professional fee paid/payable to tax resident of UK was not liable to tax in India and therefore, Assessee was not required to withhold tax from the payments made to tax residents of UK. There is nothing on record to persuade us to take a different view. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made u/s 40(a)(i) of the Act by the Assessing Officer in respect of the aforesaid professional fee paid/payable to tax residents of UK.
Disallowance in respect of remittance made by the Assessee to KPMG International Cooperative, Switzerland (KPMGI) without deduction of tax at source which was deleted by the CIT(A) - We find that the coordinate bench in assessee’s own case for assessment year 2001 – 02 [2017 (4) TMI 869 - ITAT MUMBAI] has already held that contribution paid by the assessee to KPMG cooperative, Switzerland is covered by Mutuality concept i.e. mutual Association on its receipts would not constitute income chargeable to tax. The learned departmental representative could not controvert the above decision of the coordinate bench in assessee’s own case, therefore, respectfully following the decision of the coordinate bench in assessee’s own case for assessment year 2001 – 02, which has been followed by the learned CIT – A, we do not find any infirmity in the order of the learned CIT – (A) thus, the disallowance for non-deduction of tax at source is correctly deleted.
Disallowance of ad-hoc basis, 25% of the total advertisement and publicity expenses - CIT(A) deleted addition - HELD THAT:- There is no basis for the ad-hoc disallowance made by the Assessing Officer. Also decided in Seagram Manufacturing Private Limited [2016 (12) TMI 1284 - DELHI HIGH COURT] as confirmed the order passed by the Tribunal deleting ad-hoc disallowance of 10% brand enhancement expenses made by the AO observing that disallowance made on an entirely artificial and notional basis from the expense otherwise deductible was not justified.
We do not find any infirmity in the order passed by the CIT(A) deleting the disallowance being ad-hoc disallowance of 25% of advertisement expenses.
Professional fee paid/payable to firm of individuals being tax residents of Australia - On perusal of Article 14 of the India–Australia DTAA it becomes clear that the benefit of the said article is available to an individual and firm of individuals. Thus, the income from professional services derived by an enterprise carried on by a firm of individual in India shall be governed by the provisions contained in Article 14 of the India-Australia DTAA. The Revenue has failed to set up a case that tax resident of Australia has a fixed base or physical presence in India in terms of Article 14(1)(a) and 14(1)(b) of the India-Australia DTAA, respectively, and therefore, such income would not be liable to tax in India. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents of Australia. Therefore, we concur with the conclusion drawn by the CIT(A), that the disallowance made by the AO in respect of payments made to tax residents of France by invoking provisions of Section 40(a)(i) of the Act cannot be sustained.
Foreign Exchange Fluctuation - AO disallowed loss in account of foreign exchange fluctuation which was deleted by the CIT(A) as being consequential in nature - HELD THAT:- As per the chart furnished by the Assessee that the foreign exchange fluctuation loss pertains to professional fee paid/payable to tax residents of UK, Sweden, Indonesia and Bangladesh. Since we have confirmed the order passed by the CIT(A) in respect of the professional fee paid to the tax residents aforesaid countries. The order passed by CIT(A) deleting the disallowance of the aforesaid loss on account of foreign exchange fluctuation is confirmed.
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2024 (8) TMI 1073
Deduction u/s 80P/80P(2)(d) - Interest income received from Co-operative Banks - alternative claim of the assessee that it is entitled to deduction of proportionate expenditure for earning interest income - HELD THAT:- On identical facts, the Bangalore Bench of the Tribunal in the case of Canara Bank Staff Credit Co-operative Societies Ltd. [2023 (10) TMI 1350 - ITAT BANGALORE] had restored the matter to the AO to examine whether the amounts invested with the Co-operative Banks are out of compulsion under the Karnataka Co-operative Societies Act and the relevant Rules. It was further held by the Tribunal that if the investments are out of compulsion under the Act and the relevant Rules, the interest income received out of the investment made under such compulsion would be liable to be taxed as ‘income from business’ which would entail the benefit of deduction u/s 80P(2)(a)(i) of the Act.
In the event it is found that assessee is not entitled to get the benefit under section 80P(2)(a)(i) of the Act, the AO shall also examine whether it is entitled to deduction under section 80P(2)(d) of the Act in light of the recent judgment of the Hon’ble Apex Court in the case of Kerala State Co-operative Agricultural Rural Development [2023 (9) TMI 761 - SUPREME COURT] Appeal filed by the assessee is allowed for statistical purposes.
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2024 (8) TMI 1072
LTCG - deduction u/s 54F - investment in three flats - HELD THAT:- Admittedly, the appellant made investment of the sale consideration from plot of land in three flats comprising of two flats 1 BHK and the third one 2 BHK which were located on same floor, side by side in one building, to be joined to make a joint living. As seen that the assessee was running under time constraint to make the investment otherwise he would have altogether lost the deduction.
Section 54/54F uses the expression 'a residential house' and that the expression used is not 'a residential unit'. In our view, the AO was wrong in interpretating the statute and so sustained by Ld. CIT (A) without appreciating the facts of the case in the light of provisions of statute applicable for the assessment year under consideration.
As per statute, the Section 54/54F requires the assessee to acquire a 'residential house' and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. We hold that the only requirement for claim of deduction u/s 54F of the Act is that the house or Flats should be for the residential use and not for commercial use.
CIT(A) order is infirm and perverse to the facts on record in confirming the addition. Accordingly, we accept the grievance of the appellant as genuine. Thus, the appellant is legally qualify for the claim of deduction u/s 54F and as such, the addition is deleted.
Disallowance of deduction of amount kept in bank for registration as not eligible for deduction as the money has not been deposited in CGAS - AR submitted that booking of a flat with builder is akin to construction. If the assessee goes for construction, then he has full three years to complete the construction and obviously money will be invested as construction progresses - HELD THAT:- In the present case, the appellant assessee has booked flats which were going to be constructed by a builder had to be considered as a case of "construction of flat", and not a case of purchase of flat. Since, registry was effected only after completion of construction and hence the appellant cannot be denied deduction is respect of the amount kept for registration in its bank account. Accordingly, we hold that the observation of the Ld. CIT(A) is perverse to the facts on record of the present case. In our view, that the appellant was lawfully eligible for the deduction for the said amount kept for registration of flats, in its bank account and utilized for the registration purpose.
In the present case, since the disputed amount was utilized for the purposes of registration in turn construction of new house within the stipulated time and hence, we hold the same as part of allowable deduction u/s 54F of the Act. Accordingly, addition on account of denial of registration and stamp duty is deleted.
Appeal of the assessee is allowed.
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2024 (8) TMI 1071
Estimation of income - Rejection of duly audited books of accounts of the assessee firm u/s.145(3) - Estimation of gross profit - HELD THAT:- Admittedly, the A.O after rejecting the books of account of the assessee firm u/s. 145(3) of the Act ought to have estimated its income on some logical basis. As the income of the assessee firm for the aforementioned five preceding and succeeding years had been framed u/s. 143(3) of the Act, therefore, we are of the view that the average NP rate of the aforementioned years can safely be adopted as a yardstick for estimating its income for the year under consideration.
Our aforesaid view is supported by Dr. Prabhu Dayal Yadav case [2017 (12) TMI 680 - ALLAHABAD HIGH COURT]. The Hon’ble High Court while disposing off the appeal for A.Y.2003-04 of the assessee before them, had observed, that as income disclosed by the assessee during the year before them was similar or comparable to the income which the department had assessed in his hands five years later, the same could safely be adopted as a yardstick while estimating his income for the year before them after rejection of the books of accounts.
Admittedly, as income disclosed by the assessee firm during the year under consideration is higher as in comparison to that disclosed in the aforementioned preceding years/succeeding years (i.e. average NP rate), and it is not a case that any addition/disallowance had been made by the A.O during the year under consideration by acting upon any incriminating material found in the course of survey proceedings, therefore, we are of a strong conviction that the average NP rate of 2.56% (supra) can safely be taken as a yardstick for estimating the income of the assessee firm for the year under consideration. As the assessee firm had disclosed NP rate of 2.93% during the year, i.e. A.Y.2015-16, which is higher than the average NP rate of 2.56% for the aforementioned preceding years/succeeding years, therefore, we are of the view that no adverse inferences as regards its returned income was liable to be drawn. However, as the aforesaid NP rates of the aforementioned five preceding years/succeeding years are not discernible from record; nor anything has been placed before us which would prove to the hilt the veracity of the same, therefore, the A.O is directed to verify the same while giving effect to our aforesaid observations.
We, thus, in terms of our aforesaid observations, though set aside the order of the CIT(Appeals) to the extent he had concurred with the claim of the assessee firm that its books of account in absence of pointing out of any specific defect were not liable to be rejected by the A.O u/s.145(3) but at the same time, in terms of our aforesaid observations, principally concur with him to the extent he had vacated the addition made by the A.O and accepted the latter’s returned income. Appeal of the revenue is partly allowed.
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2024 (8) TMI 1070
Summoning order passed in Criminal Complaint Case u/s 53 and 3 of the Prohibition of Benami Property Transaction Act, 1988 - Acting upon the assumption that the cash was the beneficial property of the applicant, who accumulated cash out of illegal gratification by misuse of official possession, it was attached under Section 24(4) of the PBPT Act
HELD THAT:- Hon'ble Supreme Court of India in the case of Lalankumar Singh [2022 (10) TMI 1135 - SUPREME COURT] has specifically held that the order of issuance of process is not an empty formality. The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not.
Hon'ble Supreme Court of India in the case of Pepsi Foods Ltd. [1997 (11) TMI 518 - SUPREME COURT] has held that summoning of an accused in a criminal case is a serious matter and criminal law cannot be set into motion as a matter of course
Ld' court below has simply summarized the contents of the complaint, fact that sanction order was passed and the court had jurisdiction to entertain the matter and thereafter without recording any reason or without examining the nature of allegation made in the complaint the evidence regarding truthfulness of the allegation or any reason whatsoever as to why the cognizance is being taken and the accused is summoned has straightaway passed the cognizance and summoning order, even prima facie satisfaction or reasons for taking cognizance or proceedings against the petitioner has not been recorded while passing the impugned order dated 27.2.2024, thus, the impugned summoning order dated 27.2.2024 is contrary to the law laid down by Hon'ble Supreme Court of India in the cases of Lalankumar Singh, Pepsi Foods Ltd. [supra] and Mehmood UL Rehman [2015 (3) TMI 1349 - SUPREME COURT]
Considering the above, the application is disposed of.
The impugned summoning order passed by learned IXth Additional Sessions Judge, Lucknow in Criminal Complaint Case is set aside.
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2024 (8) TMI 1069
Seeking for setting aside the inventory cum seizure list as also the summons - seeking direction upon the appellant to unconditionally release the goods being 200 bags containing five metric tonnes of areca nuts which were seized by the customs authorities under the impugned seizure memo - HELD THAT:- Section 110 of the Customs Act, 1962 deals with seizure of goods, documents and things. Sub-section (1) states that if the proper officer has reason to believe that any goods are liable to confiscation under the Act, he may seize such goods.
The Hon’ble Supreme Court in INDRU RAMCHAND BHARVANI VERSUS UNION OF INDIA [1988 (7) TMI 78 - SUPREME COURT], held that the conclusions arrived at by the fact-finding bodies, the tribunal or the statutory authorities, on the facts found that the cumulative effect or pre-ponderance of evidence cannot be interfered where the fact-finding body or authority has acted reasonably upon the view which can be taken by any reasonable man, courts will be reluctant to interfere in such a situation. As has been seen from the impugned order, affidavits were not called for from the department, nonetheless in the appeal the authority has stated that the two summons were sent to the suppliers/traders at Imphal, Manipur from whom the writ petitioner is said to have purchased the goods and both the summons were returned undelivered with the postal endorsement “addressee not known”.
Whether the appellant authority namely the authority of the Preventive Wing of the customs department had jurisdiction to seize the goods from the domestic cargo complex in the Netaji Subhas Chandra International Airport? - HELD THAT:- There is no aspect of customs functioning with which the preventive service is not directly or indirectly associated. The mannual states that the preventive officer of customs is the first to greet any visitor arriving in India and the last he has to see departure from India and in the process, he has to shoulder dual responsibility. On the one hand, he has conduct himself to the visitor as an ambassador of India. On the other, being a soldier in the economic front, he has to ensure the proper observance of the laws of the land by the visitor. Further a separate sub-heading has been devoted for “Proper officers under the Customs Act, 1962” and a tabulated format has been given giving the relevant sections of the Customs Act and the subject to be dealt with by the officer in brief - the preventive officer has overall jurisdiction to discharge various duties and responsibilities with the main function of the preventing, smuggling of dutiable, prohibited and restricted goods.
The cardinal principle of interpretation would be to read the notification as such and the interpretation if to be given should be to give effect to the notification in its letter and spirit and not to thawart the purpose for which it has being issued. In any event, the notification issued in exercise of powers under Section 4 (1) of the Act is for administrative convenience and the court should seldom step into the realm of administration and make a hair-splitting exercise when the scope of the notification is called in question.
Thus, it is held that the seizure by the Preventive Department of the Customs is valid and the seizure is not vitiated for the reasons contended by the writ petitioner and consequently the order passed in the writ petition is set aside - appeal is allowed.
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2024 (8) TMI 1068
Classification of three devices - Echo Dot (5th Gen) - Echo Dot (5th Gen) with Clock - Echo Pop - whether the devices in question are classifiable under Customs Tariff Heading [CTH] 8517 62 90 or under CTH 8518? - HELD THAT:- The inclusion of the expression “wireless” would have to be read alongside the principal commodities which are covered by and fall within the expanse of CTH 8518. The word ‘wireless’ would thus have to be read alongside ‘loudspeakers’, ‘headphones’ and ‘earphones’. Merely because the subject devices are also enabled to perform and operate in a wireless environment, they would not be liable to be placed under CTH 8518.
The impugned orders dated 12 July 2023 and 27 September 2023 set aside - the three subject devices would be liable to be classified under CTH 8517 62 90 - appeal allowed.
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2024 (8) TMI 1067
Seeking grant of bail - Applications filed u/s 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 - offences punishable under Sections 132 and 135 of the Customs Act, 1962 - conscious possession of 1875.91 grams of gold paste concealed in five capsules - HELD THAT:- In the instant case, as the petitioners have been in judicial custody for the last 61 days, the investigation in the case is not complete, all the offences alleged against the petitioners are punishable for a period up to ten years, and the Investigating Officer has not laid the complaint till date. Hence, the petitioners are entitled to be released on compulsive bail, since it is their indefeasible right under Section 167(2) of the Code.
The applications are allowed, by directing the petitioners to be released on bail on them executing a bond for Rs.1,00,000/- with two solvent sureties each for the like sum, to the satisfaction of the court having jurisdiction, which shall be subject to the fulfilment of conditions imposed - bail application allowed.
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2024 (8) TMI 1066
Time limitation for issuance of SCN - whether the Show Cause Notice was issued within the period of time prescribed under section 110 (2) of the Customs Act, 1962 and what will be the consequence if the SCN was not issued within the limited period prescribed under the aforesaid Act?
HELD THAT:- Section 110 (1) of the Customs Act, 1962 empowers a proper officer of the Customs to seize any goods if he has reason to believe that any such goods are liable to confiscation under the Act. Under section 110 (2) of the said Act, it is, inter alia, provided that where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.
In the present case, it is an admitted fact that gold jewelleries were seized from the petitioners on 23-02-2024 and the Show Cause Notice under section 124 of the Customs Act was dispatched only on 25-08-2023 through speed post for delivery to the petitioners. If the period of six months as provided under section 110 (2) of the Act is to be reckoned from 23-02-2023, the period of six months will lapsed on 22/23-08-2023 - this court has no hesitation to hold that the Show Cause Notice dated 17-08-2023 was not given within the period of six months prescribed under section 110 (2) of the Customs Act, 1962 and consequently, this court is of the considered view that the retention of the seized gold jewelleries by the Customs officials is illegal as being violative of the provisions of section 110 (2) of the Customs Act.
This court held that the objection raised by the learned counsel appearing for the respondents is misconceived and not tenable - the present writ petition is allowed by directing the respondents to release forthwith the seized gold jewelleries to the concerned petitioners.
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2024 (8) TMI 1065
Levy of penalty u/s 112(b) of CA - existence of proper evidence or not - appellant had obtained PNR movement documents from the steamer agent for movement of the subject cargo from the port to the concerned CFS and that the imported cargo was moved using the trailers owned by the importer/CHA - HELD THAT:- The charges made by revenue are not substantiated by the statements recorded in this case. The appellant had in his statement dated 13.3.2001 and 20.02.2001 stated that the consignments were moved to various CFSs by the steamer agent M/s. JVP Container Lines Pvt. Ltd. His statement was also corroborated by the Accountant of M/s.JVP Container Lines Pvt. Ltd, who has mentioned in his statement dated 14.2.2002 that the delivery order and PNR movement copies for seven containers were issued as per the instructions of M/s.Blue Bay Logistics and M/s.Vantec Systems.
The penalty imposed on the appellant cannot be sustained. Similarly, the prayer of revenue to set aside and the appellants CHA licence is also not maintainable.
The penalty imposed on the CHA by the impugned order be set aside and he may be permitted to operate the CHA licence. The impugned order is partly modified accordingly.
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