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2019 (12) TMI 1247
Review petition - request for presence of an advocate at visible, but not audible, distance, during the course of recording of the statement of the petitioner - Misdeclaration of value of imported goods - RO membrane - disobedience of the summons by petitioner - HELD THAT:- In the first place, this request cannot be made in a review petition, as it does not satisfy any of the grounds, on which review can be sought, as contemplated by Order XLVII Rule 1 of the Code of Civil Procedure, 1908 - Also, it is a settled position, in law, that the third ground for review, i.e. “any other sufficient reason” has to be read ejusdem generis to the first two grounds.
No doubt, if a litigant, in a particular case, is able to produce credible material to indicate a real and live apprehension, of the possibility of coercive methods being employed, while recording of his statement under Section 108 of the Act, the court can always permit the presence of an advocate, at visible, but not audible, distance, during the course of recording of the statement - The apprehension of coercive measure being employed is, however, required to be real and live, so that the grant of permission to have the presence of an advocate, at visible, but not audible, distance, which is an exception, does not become the rule.
In order to satisfy ourselves, regarding the reasonableness of the petitioner’s request, we queried, of Ms. Manish, in that regard, whereupon she submits that, during the course of proceedings before the learned Metropolitan Magistrate, her client was surrounded by several officers of the DRI, who served, on him, summons to appear, so that his statement could be recorded. This, she submits, has created apprehensions, in her client’s mind, of possible coercion, if and when he appears in response to the summons - To our mind, this can hardly constitute a reasonable basis for the petitioner to apprehend coercion, during the recording of his statement, so as to justify a prayer for being permitted for the presence of an advocate at visible, though not audible, distance, during the course of recording of his statement.
Review petition dismissed.
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2019 (12) TMI 1246
Principles of 'Substantial Compliance' or 'Substantial Justice' - Benefit of compounded rate of tax - works contract - allegation that the assessee not filed the formal application to the assessing authority along with the first monthly return in prescribed Form No.'L' as required under Section 6(2) of the Tamil Nadu Value Added Tax Act, 2006 - however, Assessee had filed the regular monthly returns in Form 'L' and had satisfied the condition of Section 6 of the Act to the effect that it had not made any purchase of the goods from outside the State of Tamil Nadu - HELD THAT:- The Assessee had complied with the substantial conditions for availing the benefit of payment of tax at the compounded rates under Section 6 of the Act. The substantial condition to be satisfied in the said provision of Section 6(2) of the TNVAT Act was that the Assessee does not effect any purchases of goods from outside the State (or) imports the goods from outside the State and therefore, he can opt to pay the tax at the Compounding Rates under Section 6(2) of the Act and also file the monthly return in Form 'L' as prescribed under the Rules.
In the impugned Assessment Order passed, the Assessing Authority himself has admitted this position of compliance of the substantial condition by the Assessee - there is no dispute that the Assessee also filed monthly returns in terms of Section 6 in prescribed Form 'L' and not in Form 'I' applicable to the payment of regular tax under Section 5 of the Act.
The terms of Sub-section (2) to Section 6, which employs the terms "may apply to the assessing authority" prima facie indicates that the said requirement is of a directory nature and not mandatory. The words used are not "shall" but "may". The words "may' usually would render compliance of the provision directory and not mandatory - Therefore, the said requirement of exercise of option by way of application cannot be said to be a condition precedent for availing the benefit of payment of compounded rate of tax under Section 6 of the Act. The substantial compliance with the provisions of the Act in the form of not making any purchases from outside the State and payment of tax under monthly returns under Form 'L' has been satisfied by the Assessee.
Merely lapse of making a formal application, though no such form is prescribed under the Rules, cannot be said to be fatal to apply Section 6 of the Act to the Assessee in the present case - the learned Single Judge had rightly allowed the benefit of Section 6 to the Assessee in the present case and the present appeal filed by the Revenue, assailing the said order of the learned Single Judge deserves to be dismissed.
Appeal dismissed.
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2019 (12) TMI 1245
Fraudulent income tax refunds - charge of conspiracy / connivance against the person claiming the refund and ITO - income tax officer, who is responsible for verification and process of Income tax returns came - competent authority having power to remove the public servant accused No.9 at the time of commission of offence. The sanction was accorded in the year 2000. At that time accused was under his control. The competent authority is not working at any point of time or during the relevant period as competent authority of the office of ITO - forgery, cheating and criminal conspiracy - offence punishable under Section 120B of Indian Penal Code,1860, 420, 467, 468 and 471 r/w 120B of Indian Penal Code, 1860 - It is to the noted that in his oral testimony he has not made any whisper that he is the authority having power to remove the public servant from his services at the time, when offence was alleged to have been committed?
HELD THAT:- The evidence of two prosecution witnesses out of one is hostile, is not wholly reliable to prove the guilt against accused No.9 to connect him that he obtained income tax returns from accused No.2 directly. As the crucial link is missing then how the income tax officer, who is responsible for verification and process of Income tax returns came in the possession of those unauthenticate accepted Income tax returns. When the assignment of acceptance of income tax returns was not with accused No.9. So in these circumstances, there is no satisfactory evidence on record to prove the charges against accused No.9 for the offence punishable under Section 120B, 420, 467, 468 and 471 r/w 120B of IPC.
The prosecution has satisfactorily proved the circumstances by satisfactory evidence that the TDS certificates on the basis of which ITR forms and documents were prepared by accused No.1 are forged one. Further though we assume that TDS certificates are genuine one but the proprietor of firms cited in the TDS Certificates are the fictitious persons. The role played by accused No.1 is that accused No.1 has prepared forged balance sheet and documents and cited false information thereto. The substantial amount of crime proceeds is credited to the account of accused No.2, who is the assistant of accused No.1. Furthermore, an amount of ₹ 1,000/ is credited to the account of accused No.1 from the account of accused No.3. Further one circumstance is forthcoming on record that accused No.3 has credited ₹ 50,000/ in the bank account of accused No.1 and his wife on 04.11.1997.
On perusal of the ingredients of offence punishable under Section 420, the prosecution has proved that the Income Tax Department complainant parted with his property i.e. refund amount acting on a representation, which was false to the knowledge of accused. The accused had dishonest intention from the outset that the refund amount in the hands of Income Tax office must have passed on them. Thus, there is a satisfactory evidence on record to prove that accused No.1 to 4 and 6 to 8 cheated Income Tax Department by dishonestly inducing the said department to deliver the refund orders to the tune of ₹ 3,00,000/-.
The evidence on record clear cut indicates that the TDS certificates attached to the ITR are forged by the accused with dishonest intention to cheat the Income Tax Department. The evidence further indicates that accused No.1, 2 and 4 did the act of forgery in respect of TDS Certificates as well as Income Statement, Balance Sheet attached to the ITR Forms. The Income Tax Returns were prepared and submitted in the name of accused No.3, 6 to 8 and Haresh Dhameja. The income tax refund amount is credited in the account of accused. TDS Certificates and documents attached to Income Tax Returns are forged one, used for the purpose of cheating and used those documents as a genuine, which they knew that at the time when used by them to be a forged documents - the ingredients to constitute offence punishable under Section 120B of IPC, 420, 467, 468, 471 r/w 120B of IPC are made out against accused No.1 to 4 and 6 to 8.
The evidence led on behalf of prosecution is consistent and sufficient to prove the ingredients of offence punishable under Section 120B of IPC, 420, 467, 498 and 471 r/w 120B of IPC against accused No.1 to 4 and 6 to 8. So they are liable to be convicted for the said offences. The prosecution failed to prove the guilt of the accused No.9, so he is liable to be acquitted. At this stage, it is required to take pause and proposed to give hearing against accused on the point of sentence.
In the instant case, accused No.1 being the chartered accountant with the aid and assistance of accused No.2 committed the offence in league with accused No.3, 4, 6 to 8 as an instrumental and thereby cheated to the Income Tax Department. It is also to be mentioned that accused No.3, 4, and 6 to 8 having minimal beneficiary of the fraud amount, but the fact remains that the entire conspiracy hatched by accused No.1 and accused No.2 and they are the ultimate beneficiary of crime proceeds.
The substantive sentences of accused be run concurrently.
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2019 (12) TMI 1244
Valuation - works contract - lump-sum amount stood credited to its account on that date as mobilisation advance - whether the unadjusted part of the advance received by the appellant can be considered for taxation under the GST Act on 01.07.2017 itself. - design, supply, installation, testing and commissioning of the power supply and distribution system, third rail system and SCADA system for the entire line and depot of the Kolkata East-West Metro Rail Project - time of supply of services - challenge to AAR decision.
HELD THAT:- Even by the wildest imagination, the observations made by Tribunals in the pre-GST regime cannot be made applicable in this case. Moreover, in the transitional provisions of the GST Act, no such provision has been included whereby, the advance outstanding as on 01.07.2017 can be allowed to be subjected to GST only as and when the bills are raised against supply of goods and services.
Immediately upon introduction of GST Act, that is with effect from the 1st day of July, 2017, the erstwhile Finance Act, 1994 and the notifications issued there under ceased to exist. In the instant matter the only applicable law is the GST Act, 2017. Accordingly, the time of supply of services is to be guided by section 13(2) of the GST Act - Hence, the remaining unadjusted amount of ₹ 13,80.74,549/- as on 01.07.2017 has to be construed as if it was credited into the account of the appellant on the date of 01.07.2017 only, which will attract GST on such amount on that date itself. Hence, there are no force in the argument of the appellant that section 13 (2) of the GST Act, 2017 will not be applicable in the instant case.
In respect of the goods and services provided by the appellant to KMRCL post introduction of GST, the amount of ₹ 13,80,74,549/- can only be considered as advance paid as on 01.07.2017, and in the absence of any exemption of mobilization advance from tax under GST regime, the entire amount of ₹ 13,80,74,549/- becomes taxable on the said date.
There are no infirmity in the ruling pronounced by the WBAAR - appeal dismissed.
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2019 (12) TMI 1243
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment - whether a default has occurred or not? - HELD THAT:- The default in the repayment of the loans/cash credit facility is stated to have occurred from 30.11.2016 onwards when quarterly instalments and monthly interest became due. The computation of the overdues and default is given in Annexure V (colly). A letter dated 02.02.2017 is stated to have been issued by the financial creditor informing the corporate debtor that its account maintained with the financial creditor was declared as a Non-Performing Asset as on 31.12.2016 in terms of the guidelines of the RBI. A loan recall notice is stated to be issued on 05.01.2018 and notice under Section 13(2) of SARFAESI Act, 2002 on 18.01.2018. The facts sufficiently evidence the occurrence of the default.
t has been held by the Hon'ble Supreme Court in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT] that in the case of a corporate debtor, who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred and it is of no matter that the debt is disputed so long as the debt is "due" that is payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date - In the present case, the evidence produced by the financial creditor has been discussed above and it has been concluded that a default has occurred. The debt is also due since it is not interdicted by any law.
The occurrence of default is proved in the present case - application filed in the prescribed Form No.I is found to be complete - Application admitted - moratorium declared.
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2019 (12) TMI 1242
Condonation of delay of 77 days - Period of Limitation for filing of appeal against the decision of AAR - Levy of GST - partially constructed flats whose construction commenced before the implementation of GST but customers for the flats were identified only after the implementation of GST - challenge to AAR decision - delay in filing appeal - HELD THAT:- Section 100 mandates that an appeal should be filed within 30 days from the date of communication of the advance ruling order that is sought to be challenged. However, in view of the proviso thereto. the Appellate Authority is empowered to allow the appeal to he presented within a further period of 30 days if it is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the initial period of 30 days. Thus, the Appellate Authority is empowered to extend the period for filing an appeal for a further period of 30 days and no more.
In the instant case, the appeal filed against the Advance Ruling order dated 25.07.2019 is evidently belated by 77 days. The appellant, however, has not explained the reason for the delay in filing the appeal - Notwithstanding this fact, the question whether this Appellate Authority can entertain an appeal under Section 100 of the CGST Act beyond the period of 60 days does not require much debate and has been answered in the negative by the Supreme Court in the case of Singh Enterprises vs CCE [2007 (12) TMI 11 - SUPREME COURT] - The Supreme Court in the said case interpreted Section 35 of the Central Excise Act, 1944 which is similar to Section 100 of the CGST Act and examined the question whether the Commissioner (Appeals) has the power to condone the delay beyond the period of 30 days from the date of expiry of the period of 60 days prescribed for filing the statutory appeal and also whether the High Court, in exercise of the power conferred under Article 226 of the Constitution of India, can condone the delay.
This Appellate Authority being a creature of the statue is empowered to condone a delay of only a period of 30 days after the expiry of the initial period for filing appeal - As far as the language of Section 100 of the CGST Act is concerned, the crucial words are “not exceeding thirty days” used in the proviso to sub-section (2) - Since the appeal cannot be allowed to be presented on account of time limitation, the question of discussing the merits of the issue in appeal which is the eligibility to GST on partially constructed flats whose construction commenced before the implementation of GST but customers for the flats were identified only after the implementation of GST, does not arise.
Appeal filed by the appellant M/s. Durga Projects & Infrastructure Pvt. Ltd. dismissed on grounds of time limitation.
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2019 (12) TMI 1241
Reopening of assessment u/s 147 - notice in the company name being amalgamated - HELD THAT:- In the present case the notice under section 148 of the Act has been issued to Gayatri Integrated Services Private Limited which, as aforesaid, had long back got amalgamated with the petitioner vide order dated 18th June, 2015 passed by this court and thus, it had ceased to have its own existence so as to render it amenable for the reassessment proceedings under the provisions of section 147 of the Act. Moreover, the respondent and the department were duly informed by the petitioner about the amalgamation and despite the said factum having been brought to the notice of the respondent, statutory notice under section 148 came to be issued to Gayatri Integrated Services Private Limited for reopening the assessment on the ground that the respondent has reason to believe that income chargeable to tax for the assessment year 2012-13 has escaped the assessment within the meaning of section 147 of the Act.
The controversy in the present petition, is no longer res integra. The Apex Court in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited [2019 (7) TMI 1449 - SUPREME COURT] in paragraph 33, has categorically held that if the company has ceased to exist as a result of the approved scheme of amalgamation then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon the amalgamating entity ceasing to exist, it cannot be regarded as a person under subsection (31) of section 2 of the Act; against whom assessment proceedings can be initiated. Participation by the amalgamated company in the proceedings would be of no effect as there is no estoppel against law. the notice dated 25th March, 2019 issued by the respondent under the provisions of section 148 of the Act for the assessment year 2012-13, being without jurisdiction, is not sustainable. - Decided in favour of assessee.
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2019 (12) TMI 1240
Transfer of jurisdiction u/s 127 - respondent no.1 has transferred the jurisdiction of the petitioner to DCIT/ACIT, Central Circle-2(3), Bengaluru - HELD THAT:- On a bare perusal of the notice of transfer and the impugned order, it is palpably clear that no specific reason has been provided and neither has any specific link been shown between the petitioner company and the other company on which search has been carried out.
Accordingly, the impugned order is stayed till March 31, 2020. The respondents are directed to file the affidavit in opposition within four weeks from date. Reply thereto, may be filed within two weeks thereafter. Let the mater be placed under the heading “For Hearing” in the Monthly List of February, 2020.
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2019 (12) TMI 1239
Nature of activity - Capital Gains/loss or income from business - sale of flats - stock in trade or investment - AO observed that sale of property has been done in a systematic, repetitive manner - HELD THAT:- We find merit in the contentions of the assessee that if the intentions were to deal on a systematic and repetitive manner, then no businessmen will lock its funds for three years for his trading activities.
Assessee, after selling these flats has not acquired any additional flats by re-investing the sale proceeds of these sold flats.
Also the fact remains that the above assets are appearing under ‘investments’ in the balance sheet of the assessee.
The principle underlying the distinction between a capital sale and an adventure in the nature of trade were examined in Venkataswami Naidu & Co (G) v. CIT [1958 (11) TMI 5 - SUPREME COURT] where it was held that the character of a transaction cannot be determined solely on the application of any abstract rule, principle or test but must depend upon all the facts and circumstances of the case. Also in Janki Ram Bhadur Ram v. CIT [1965 (3) TMI 19 - SUPREME COURT] held that if the assessee, even at the time of acquisition had a clear intention to resell it, that would be material but not a decisive consideration.
We are inclined to agree with the treatment given by the assessee in his return of income as gains/loss from sale of such flats under the head ‘Capital Gains’. - Appeal filed by the assessee is allowed.
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2019 (12) TMI 1238
TP Adjustment - TPO rejected the TNMM in respect of management fees paid/payable by the assessee to its AE - HELD THAT:- TPO should not have summarily rejected the TNMM in respect of management fees paid/payable by the assessee to its AE and proposed an adjustment under the CUP method, without benchmarking with comparable uncontrolled transactions. TPO has resorted to an ad-hoc unilateral pricing of management fees, disregarding the facts and circumstances of the case.
In the instant case, the TPO has summarily rejected the TNMM followed by the assessee in respect of management fees paid/payable by it to its AE and proposing an adjustment under CUP without benchmarking with comparable uncontrolled transactions. Also the TPO has resorted to an ad-hoc unilateral pricing of management fees, disregarding the facts of the case.
In view of the above factual scenario and position of law, we delete the addition made by the AO as adjustment on account of transfer pricing. - Decided in favour of assessee.
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2019 (12) TMI 1237
Addition being the difference in the amount surrendered during the survey and the income offered for tax while filing the return of income - survey action u/s 133A - HELD THAT:- Addition of ₹ 3,78,150/- in respect of the difference in the amount surrendered during the course of survey and income offered for filing of return of income. As gone through the evidence filed by the assessee. The amount was retracted even filing of the return of income.
In respect of amount of ₹ 1,58,600/-, the assessee has demonstrated that the amount was given during the assessment year 2003-04. Therefore, the amount was required to be added in that year. The assessing officer is directed accordingly. Regarding the amount of ₹ 1,19,550/-, it is stated that the amount outstanding was received back before the date of survey. In support of this, the assessee has drawn my attention to the written submissions. However, no supporting evidence has been filed. Therefore, I sustain this addition. Regarding amount of ₹ 1 lakh, it is stated that the Ld. CIT(A) has wrongly confirmed the addition of ₹ 2 lakhs. In fact, the land was jointly owned by two persons, therefore, the addition should have been restricted to ₹ 1 lakh. As perused the agreement. As per this agreement, the land is jointly owned. Therefore, the assessing officer should have made addition of ₹ 1 lakh only. I find merit into the contention of the assessee. Therefore, the A.O. is directed to delete this addition. Ground No.1 is partly allowed.
Addition u/s 68 - entire amount of cheques/cash deposited by the appellant in current account with bank - HELD THAT:- As stated that detailed explanation was submitted along with the documentary evidences for each and every credit entry. It is submitted that a sum of ₹ 6,56,500/- was deposited by way of cheques. The narration of such deposits is given in respect of the cash deposit. It is stated that ₹ 46,500/- was surrendered during the survey and deposit of ₹ 2 lakhs was out of the cash surrendered during the survey. Further, it is contended that a sum of ₹ 75,000/-, ₹ 1 lakh and ₹ 35,000/- were realised from the debtors. So far the cheque deposit in bank account, the assessee has given supporting evidences, therefore, the A.O. is directed to delete this addition. However, in respect of the cash deposit of ₹ 6.66 lakhs, it is stated that ₹ 4,46,500/- is out of voluntary surrender made by the assessee during the course of survey. Hence, the A.O. is directed to delete this addition. In respect of the remaining amount of ₹ 2,10,000/-, it is stated to have been received from the realisation of sale proceeds. The assessee has not filed any confirmation from the debtors. Hence, the addition of ₹ 2,10,000/- is sustained. This ground of assessee’s appeal is partly allowed.
Addition being the amount of credit entries during the whole year in savings bank account of the wife of the assessee - HELD THAT:- Amount of credit entries during the whole year in the savings bank account of wife of the assessee Smt. Jyotibala Jain, who is assessed to tax and the amount was properly reflected in the books of accounts has been added. In support of this, the assessee has filed her return of income of the current and earlier years were filed and as per the balance sheet, as on 31.3.2005 & 31.3.2004, accumulated capital was ₹ 3,40,578/- and ₹ 4,08,721/-. Looking to the evidences submitted and more particularly, the amount which has been credited in the account of the wife of the assessee who herself is assessed to tax, it is also informed that no action has been taken in her hands. I therefore, under these facts cannot sustain these additions.
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2019 (12) TMI 1236
Disallowance u/s 40(a)(ia) - non-deduction of TDS - HELD THAT:- CIT(A) in view of the above binding precedent ought to have deleted the addition but he misdirected himself. When the issue has been decided by the higher forum after considering the law and issue in question, he is under statutory obligation to follow it. Any deviation there from would tantamount the contempt of lawful authority and against the judicial discipline. Therefore, respectfully following the judgement of the Hon'ble apex court rendered in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (2007 (8) TMI 12 - SUPREME COURT) and the decision of coordinate bench in the case of Rajiv Kumar Agrawal Vs. Addl. CIT [2014 (6) TMI 79 - ITAT AGRA] direct the A.O. to delete this addition
Addition in lumpsum on the ground that some of the vouchers were not produced - A.O. has not stated as to what were the vouchers, which were not produced - HELD THAT:- As perused the materials available on record and gone through the orders of the authorities below. The assessee claimed certain expenditure, which was required to be substantiated by supporting evidences. Non-furnishing of such evidences would certainly result into disallowance of the expenditure. Ld. A.R. could not point out that what were the evidences placed before the assessing authority, which was sufficient to infer that the expenditure is duly supported by the evidences. Moreover, Ld. CIT(A) has further reduced the disallowance by taking a reasonable view. This ground of the assessee’s appeal is dismissed. Appeal of the assessee is partly allowed.
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2019 (12) TMI 1235
Deduction u/s 80P - Deduction u/s 80P of the Act is not allowed on the ground that the expenses claimed by the assessee are not allowable - HELD THAT:- The coordinate bench of this Tribunal has decided the issue related to allowance of deduction u/s 80P of the Act and the expenditure disallowed by the A.O. whether this would qualify for deduction u/s 80P of the Act. A bare reading of provision of section 80P(2) of the Act makes it clear that the deduction would be available in respect of the profit & gains of business attributable to any one or more of search activities, which is prescribed u/s 80P(2) of the Act.
As per the assessee, the assessee is providing credit facilities to its members. Therefore, it would qualify for claim of deduction u/s 80P of the Act. The coordinate bench under the identical facts has allowed deduction u/s 80P of the Act in respect of the activity similar or same, which is being undertaken by the assessee society.
Now the issue would be whether the disallowances made in respect of bad debts and commission payment claimed by the assessee would qualify for deduction u/s 80P of the Act or not? In respect of the bad debt, the assessee is required to demonstrate that the debt which is claimed is in the nature of profit & gains and business attributable to such activity.
In the present case, the assessee had made provision for bad debt. If the assessee had not done this provision, this amount would have not been deducted from the profit & loss account. Therefore, in my considered view, this amount is certainly attributable to the profit & gains of the assessee society. Further, disallowance of payment of commission. The commission is claimed as business expenditure, deducted from the profit & gains account.
Therefore, this would also be in the nature of profit & gains of the assessee society. Therefore, in the light of the decision of the coordinate bench rendered in the case of ACIT Circle-4 Vs. Buldana Urban Co-operative Credit Society Ltd. [2013 (12) TMI 237 - ITAT NAGPUR] the assessee is entitled for benefit of deduction u/s 80P of the Act. I therefore, direct the A.O. to grant deduction u/s 80P of the Act to the assessee.
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2019 (12) TMI 1234
Addition of prior period expenses crystalised - HELD THAT:- The assessee has not brought any other material other than submitting that the expenditure was approved by the board subsequently, therefore, the expenditure crystalised in the year under appeal. In my considered view, the assessee ought to have claimed such expenditure in the year when the expenditure was incurred. Undisputedly, the assessee has deducted tax on such expenditure.
Moreover, the revenue has not doubted about genuineness of the expenditure. However, agreement with the view expressed by the CIT(A) that mere approval by the board in subsequent year would not be sufficient to hold that the expenditure was crystalised in the year under consideration. In fact, there is no dispute about the quantum of expenditure nor any dispute was pending.
The assessee submitted that the A.O. should be directed to allow such expenditure when the expenditure was incurred as the tax has already been deducted by the assessee. Therefore, direct the A.O. to allow expenditure in the year when such expenditure was incurred, if law so permits at this belated stage. Ground of the assessee’s appeal is disposed of in the terms indicated herein above.
Disallowance of electricity expenses - HELD THAT:- As perused the materials available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the property was given on rent from October, 2012 at a monthly rent of ₹ 13,15,000/- and a rent of ₹ 81 lakhs has been credited in the profit & loss account.
It is pointed out by the CIT(A) that the assessee could not furnish any evidence regarding occupation of the property in December, 2012. The assessee has admittedly received rent for the relevant period. Therefore, it cannot be inferred that the property in question was used wholly and exclusively for business purpose. Hence, the expenditure has rightly been disallowed. This ground of the assessee’s appeal is dismissed.
Deduction u/s 24(a) - HELD THAT:- Admittedly, the assessee has offered rental income and claimed deduction u/s 24 of the Act. Therefore, since the expenditure is related to the property, which has been let out by the assessee, this expenditure cannot be treated as business expenditure as claimed by the assessee.
Disallowance of travelling expenses - authorities below have disallowed the claim on the basis that no supporting evidence regarding travelling being for business purpose has been given. It is undisputed fact that the assessee is a subsidiary of Japanese company - HELD THAT:- Such evidences could not be filed. I find that the Ld. CIT(A) has dismissed the ground purely on the basis that no evidence related to convening of meeting, purpose of meeting and minutes of meeting was furnished.
Therefore, set aside the impugned order and restore the issue to the A.O. for verification of purpose and minutes of meeting. The assessee is hereby directed to furnish the minutes of meeting held at Japan with the parent company. If such minutes are produced by the assessee demonstrating the nature and purpose of journey to Japan, the A.O. would delete the addition. Ground of the assessee is allowed for statistical purposes.
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2019 (12) TMI 1233
Reopening of assessment u/s 147 - disallowance made on account of outstanding municipal tax liability invoking the provision of section 43B - HELD THAT:- In the present facts, we find that the assessee had disclosed all the items which were considered as reasons for re-opening the assessment, in its audited accounts and even the auditor had given a report of the same. In such a scenario, we hold that there is no merit in the re-assessment proceedings carried out against the assessee where the AO refers to the facts disclosed by the assessee and then record the reasons for re-opening the assessment, such an action cannot be upheld under the provision of section 147 of the Act, in case where four years have lapsed from the end of the assessment year. Accordingly, we find no merit in the re-assessment proceedings carried out u/s 147 of the Act against the assessee.
The assessee after collecting the amount had not debited it to the P & L Account and whatever amount was not collected, was shown as receivable and contra entry was passed as payable to the State. Once the amount had been debited to the P&L Account of the assessee, then the provision of section 43B of the Act were not attracted. In any case, the assessee was only a collecting agent on behalf of the State and it was the amount which was not collected, which was shown as receivable and also on the other side shown as payable to the State. The liability if any, would arise after the amount is collected and that also of the State. In such circumstances, the provision of section 43B of the Act could not be applied and the amount could not be disallowed in the hands of the assessee.
Similar accounting has been carried out by the assessee in its books of accounts from Assessment Year 1999-2000 and no disallowance has been made in any of the year.
Hon’ble Calcutta High Court in the case of CESC Ltd. vs CIT [2015 (5) TMI 795 - CALCUTTA HIGH COURT] has held that where the assessee merely acts as Collecting agent for the State Government and pays the same to the State Government on collection, then, the licencee merely acts as a conduit and the electricity duty was not chargeable to the licencee. It was concluded by holding that electricity duty not being a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee, then provisions of section 43B of the Act were not attracted to the licencee/assessee in respect of the electricity duty collected by it for being passed on to the State Government.
Applying the said proposition to the issue before us, we hold that there is no merit in the orders of the authorities below in making the aforesaid disallowance u/s 43B.
Addition on account of prior period expenses of fixed assets - Revenue is aggrieved that where the fixed assets were capital in nature, the said expenditure could not be allowed in the hands of the assessee - AO denied the claim of the assessee on the grounds that it had claimed depreciation on the said assets, as against the plea of the assessee, it had never claimed any depreciation on such assets - HELD THAT:- CIT(A) accepted the plea of the assessee as the original cost as well as the net book value was the same. CIT(A) also perused the fixed assets register in this regard as on 31.03.2005. The statutory auditor had also reported that the assessee had not claimed any depreciation on the fixed assets of ₹ 5.88 crores till the Financial Year 2004-05. In such scenario, the claim of the assessee was allowed.
Revenue has failed to rebut the findings of the CIT(A). In the absence of the same and where the assessee in the audited account had not claimed any depreciation on such assets, the order of the Assessing Officer cannot be upheld. The assessee has written off the assets which were not found/traceable and as the assets were scattered over different areas, the entire exercise of listing of such fixed assets got crystallized during the year and hence, the booking of the expenditure under head prior period expenses of fixed assets, merits to be allowed in the hands of the assessee. We confirm the order of CIT(A) and dismiss Ground of appeal No.1 raised by the Revenue.
Addition on account of prior period expenses - case of the AO was that where the assessee was following Mercantile System of accounting, no such expenditure on account of prior period expenditure could be allowed in the hands of the assessee - HELD THAT:- The first fact is that as against the prior period expenses of ₹ 7.66 crores, the assessee has also shown the prior period income of ₹ 7.74 crores and the net amount which is credited to the P&L A/c was ₹ 8,79,015/-. Secondly, due to power purchase of prior period, the sum involved was ₹ 1.64 crores which was paid because there was difference in quantity as recorded by DHBVN and HPGCL from the total purchase 2227 crores. The reconciliation error amounts to only 0.07%, which is acceptable, when the quantity purchased is so high. The assessee had shown this Contingent liability in its balance sheet and since the liabilities crystallized during the year under consideration, the said prior period expenses was allowable in the year under appeal. Further, expenditure booked by the assessee was arrear paid of ₹ 7,15,062/-, interest of ₹ 20,160/- and refund of ₹ 1,61,915/-. All these amounts as per the findings of CIT(A) crystallized during the year. The Revenue has failed to controvert the findings of the CIT(A) in this regard; upholding the same, we dismiss Ground of appeal No.2 raised by the Revenue.
Expenditure booked on loss of sale of assets - case of the AO was that no such loss could be debited to the P&L A/c - HELD THAT:- The explanation of the assessee on the other hand was that the aforesaid losses were on account of flood, cyclone, fire etc. and it was a case of repairs and replacement and not the case of loss of fixed assets per se. We find merit in the plea of the assessee and the nomenclature of the expenditure cannot decide the nature of expenses. What is to be seen is the nature of expenditure and since the same was in the field of Revenue expenditure, the same merits to be allowed in the hands of the assessee. Ground of Appeal No.3 raised by the Revenue is thus dismissed.
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2019 (12) TMI 1232
Cost of acquisition of shares released against cancellation of Global Depository Receipts (GDRs) - HELD THAT:- What ideally should have been taken as the cost of acquisition/FMV of shares of Bajaj Hindustan Ltd., for computing the Short term capital gain/loss is the aforesaid price. However, considering the fact that the revenue authorities have agreed with the assessee with regard to the applicable date for cost of acquisition as 12.04.2006, we do not want to indulge much into that aspect of the issue. Therefore, considering all relevant factors, we are of the view that share opening price of ₹ 523.95 as considered by the assessee is closest to the closing price of the very same shares as on 10.04.2006, wherein, the shares were last traded prior to 12.04.2006. Therefore, in our view, the assessee was justified in adopting the cost of acquisition of shares at ₹ 523.95.
The allegation of the revenue authorities that the assessee has chosen the price of share which is more suitable to him, in our view, is not a correct finding of fact as the assessee has not taken the highest price of the share quoted during the date at ₹ 525. After considering pros and cons of the issue, we hold that adoption of share opening price of ₹ 523.95 as cost of acquisition is the most appropriate and rational in the given facts and circumstances of the case. Accordingly, we direct the Assessing Officer to accept the short term capital loss computed by the assessee. Consequently, the addition made in this regard is deleted.
Setting off Long term capital loss against Long term capital gain - whether long term capital loss arising on sale of shares can be set off against long term capital gain arising on sale of shares claimed to be exempt u/s. 10(38) ? - HELD THAT:- Following the consistent view expressed by different Benches of the Tribunal on identical issue, we hold that long term capital loss arising out of sale of shares cannot be set off against long term capital gain from shares subjected to STT and claimed exempt u/s. 10(38) of the Act. Accordingly, we direct the Assessing Officer to allow carry forward of long term capital loss as claimed by the assessee.
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2019 (12) TMI 1231
Penalty u/s 271(1)(c) - as alleged notice issued by the AO u/s 274 r.w.s 271(1) ( c) of the Act is defective for not mentioning the specific charge - HELD THAT:- We find the notice issued u/s. 274 r.w.s 271(1)(c ) of the Act, does not specify the charge of offence committed by the assessee viz. whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. Case followed DR. MURARI MOHAN KOLEY [2018 (9) TMI 1 - CALCUTTA HIGH COURT] - Decided in favour of assessee.
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2019 (12) TMI 1230
Income accrued in India - PE in India - applicability of section 44BB - non-resident assessee - Receipts earned from provision of services through various vessels - DTAA - computing profits and gains in connection with the business of exploration of mineral oil. - HELD THAT:- The word ‘services’ followed by expansive phrase ‘in connection with’ are relatable to prospecting for and exploration of mineral oil. That means, all services associated with prospecting for and exploration activities are brought within the scope and reach of section 44BB. Another category of assessees governed by section 44BB are those supplying plant and machinery on hire.
In the instant case, we find that neither the AO nor the DRP has examined the applicability of section 44BB by looking into whether the pith and substance of each of the contract/agreement entered by the assessee is inextricably connected with prospecting, extraction or production of mineral oil. This is evident from the order of the DRP dated 29.08.2018 passed u/s 144C(5) and the assessment order dated 19.09.2018 passed by the AO u/s 143(3) r.w.s. 144C(5) and 144C(13) of the Act.
Therefore, we set aside the order of the AO and restore the matter to him to make an order afresh after examining each of the contract/agreement and by following the ratio laid down by the Hon’ble Supreme Court in ONGC [2015 (7) TMI 91 - SUPREME COURT] . - Thus the 2nd to 8th ground of appeal are allowed for statistical purposes.
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2019 (12) TMI 1229
Addition on account of Unexplained paintings - Source of Investment made in the painting - HELD THAT:- In the case before us, the view taken by the lower authorities has to fail on two grounds viz (i). that, the assessee had duly evidenced the source of investment made by him for purchase of the aforesaid two paintings; and (ii). that, even otherwise as the aforesaid paintings were purchased by the assessee on 17.06.2006 i.e in the period relevant to the immediately preceding year i.e A.Y 2007-08, therefore, it was impermissible on the part of the revenue to draw any adverse inferences in the hands of the assessee during the year under consideration viz. A.Y 2008-09. Be that as it may, as the revenue had failed to place on record any ‘material’ which would irrefutably prove to the hilt that the investment in the aforesaid “two paintings” was made by the assessee during the year under consideration i.e A.Y 2008-09, therefore, the same on the said count also by no means could have been treated as an unexplained investment in his hands for the said year.
Accordingly, in the backdrop of our aforesaid observations we are unable to persuade ourselves to subscribe to the view taken by the lower authorities. Resultantly, the order of the CIT(A) is ‘set aside’ and the addition under Sec. 69 made by the A.O is vacated. - Decided in favour of assessee.
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2019 (12) TMI 1228
Reopening of assessment u/s 147- estimate of diversion of profits due to modifications - HELD THAT:- AO was in possession of the relevant information and material germane to the allegation to enable him to hold prima facie belief towards escapement of income. The report of the investigation wing would constitute relevant material unless such report or information is absolutely vague or based on unspecific information. However, whether material available before AO would conclusively prove the escapement is not the concern at the stage of reopening. The information available with the AO in the instant case provides specific estimate of diversion of profits due to modifications and is thus reliable in character. Such specific nature of information is capable to grant cause or justification or a supposition that income has escaped assessment and consequently would confer jurisdiction on the AO to reopen assessment.
AO has acted upon credible information coupled with underlying material to initiate the action under s.147 of the Act. The reasons recorded were based on prima facie material which, in turn, clearly indicated the relationship between the formation of belief and the reasons for such belief. The belief entertained by AO is, in our view, not arbitrary or irrational. We thus see no error on the part of the AO to exercise the powers under s.147 of the Act. Ground No.1 of assessee’s appeal concerning validity of jurisdiction under s.147 of the Act is accordingly dismissed.
Additions made on account of losses shifted in/ profit shifted out from the hands of the assessee owing to modification carried out by the broker in the client code assigned to assessee and other corresponding client - HELD THAT:- Modifications within the relatives were also regarded as genuine errors by SEBI as per the aforesaid circular. The shifting of trade in the correct client code falling in the ‘Distance 1’ category, thus, cannot be regarded as any kind of alleged misuse of CCM facility. We find considerable force in the aforesaid plea of the assessee. It is quite plausible that error of such type by way of wrong punch of client code could occur as normal incident of business while entering the orders on behalf of the client by the broker. Such errors are to be recognized as genuine error even in the light of SEBI Circular. Such error in punching of trade does not call for any adverse inference. Consequently, the AO is directed to delete the losses shifted in or profits shifted out owing to modifications in client code falling in ‘Distance 1’ category as tabulated above with regard to all captioned assessees.
Shifting in of losses or shifting out of profits falling in ‘Distance 2’ category - Having regard to the peculiar facts that losses have not been purchased in last few months of financial year (December 2010 to March 2011) but the losses have arisen in the very beginning of the financial year, benefit of doubt, if any, would surely lean towards the assessee in such facts.
AO is thus directed to delete the adjustment in the assessed income to the extent of amount attributable to trade transactions falling in ‘Distance 2’ category of CCM.
Losses arising due to CCM falling in ‘Distance 3’ category - Market Regulator SEBI has also frowned hard on such modifications. Such substantial modification in client code would naturally involve some indulgence of mind with set purpose to shift in losses/shift out profit in the hands of an interested client. Such modifications in client code, in our view, do not fall within the league of bonafide error when seen on the touchstone of preponderance of probabilities. The concerted and systematic modification in client code to the advantage of assessee is an orchestrated affair to suppress profits generated on trades. We thus decline to interfere with the action of AO with reference to losses falling in ‘Distance 3’ category.
Losses resulting from client code modification falling in ‘Distance 4’ category would automatically fall in highly doubtful category as a near impossibility. The client code of one client stands substituted by an altogether modified client code. Losses resulting in the hands of the assessee from such revamp in the client code, if permitted, will obfuscate ground reality of tax escapement arising from such modifications. Such fundamental modification in the client code lacks any tangible purpose but to accommodate a willing client by the broker in wrongful indulgence. Thus, the plea of the assessee in respect of losses from modification calling in ‘Distance 4’category requires to be rejected outrightly. We thus decline to interfere with the action of Revenue in respect of losses falling in ‘Distance 4’ category.
Having analysed the extent of modification distance-wise, the AO is directed to grant relief to the assessee in all captioned appeals in respect of losses attributable to ‘Distance 1’ and ‘Distance 2’ category.
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