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2025 (5) TMI 1421
Maintainability of appeal on low tax effect - appeal before High Court - calculating the tax effect - determination of quantum by which the returned loss is reduced - HELD THAT:- In the present case, the entire returned loss of Rs. 2,80,50,853/- has been wiped out by the additions made by the AO and further the AO has assessed the income at Rs. 1,00,11,906/-. Thus, the total tax effect is to be determined on an amount of Rs. 3,80,62,759/- [Rs. 2,80,50,853/- + Rs. 1,00,11,906/-]. Concededly, the tax effect on the said amount is less than the stipulated limit of Rs. 2 crores.
The contention that the losses assessed in the previous assessment years must also be taken into account as the carry forward of the same has been disallowed is unmerited.
We do not find the machinery to compute the tax effect as stated in paragraph 5.1 of the aforementioned Circular contemplates taking into account the observations made by the AO in regard to the losses assessed in the previous years, which have been carried forward. Thus, although the AO in the present case has noted that the business losses of prior years amounting to Rs. 30,73,03,525/- are also required to be disallowed; the same does not require to be included for the purposes of computing the tax effect in CBDT’s Circular.
The application is accordingly allowed.
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2025 (5) TMI 1420
Maintainability of appeal on low tax effect - appeal before High Court - calculating the tax effect - determination of quantum by which the returned loss is reduced - HELD THAT:- In the present case, the entire returned loss of Rs. 2,80,50,853/- has been wiped out by the additions made by the AO and further the AO has assessed the income at Rs. 1,00,11,906/-. Thus, the total tax effect is to be determined on an amount of Rs. 3,80,62,759/- [Rs. 2,80,50,853/- + Rs. 1,00,11,906/-]. Concededly, the tax effect on the said amount is less than the stipulated limit of Rs. 2 crores.
The contention that the losses assessed in the previous assessment years must also be taken into account as the carry forward of the same has been disallowed is unmerited.
We do not find the machinery to compute the tax effect as stated in paragraph 5.1 of the aforementioned Circular contemplates taking into account the observations made by the AO in regard to the losses assessed in the previous years, which have been carried forward. Thus, although the AO in the present case has noted that the business losses of prior years amounting to Rs. 30,73,03,525/- are also required to be disallowed; the same does not require to be included for the purposes of computing the tax effect in CBDT’s Circular.
The application is accordingly allowed.
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2025 (5) TMI 1419
Reopening of assessment - Bogus capital gain generated in penny stock - tax exemption u/s 10(38) denied - HELD THAT:- Notice u/s 148 for which the assessee was given liberty to submit her reply and after examining the reply as well as the return of income filed by the assessee the AO has pointed out that the assessee has not submitted any documentary evidence regarding the alleged transactions. The nature and source of the receipts/information were not furnished and the assessee having failed to discharge the burden upon him, assessment was completed. Assessee carried the matter on appeal before the National Faceless Appeal Centre (NFAC).
NFAC took note of the grounds raised by the assessee before it, the written submission along with paper book and proceeded to take a decision on each and every ground raised by the assessee in the appeal memo. After elaborate reasoning and after referring to various decisions of the Hon’ble Supreme Court, the appeal was dismissed.
Tribunal, in our view, failed to take into consideration any of the reasoning given either by the AO or by the Appellate Authority and proceeded to allow the assessee’s appeal on only ground that the AO did not apply his mind. This conclusion arrived at by the Tribunal is factually incorrect and therefore, the impugned order has to be termed to be perverse.
Identical issue was considered by this Court in the case of P.L. GOENKA HUF. [2025 (5) TMI 1336 - CALCUTTA HIGH COURT] which held Tribunal has not examined the reasons set out by the appellate authority which has re-examined the factual position, taken note of the grounds raised by the assessee and their oral submissions and has in detail discussed about the lowering of funds and how the funds reached the concerned beneficiaries and has factually found that the assessee is one of the beneficiaries who received accommodation entry which was used to avail bogus LTCG/STCL. The various decisions of the Hon’ble Supreme Court were taken into consideration and the appeal was dismissed. Therefore, we find that the learned Tribunal committed a serious factual error in coming to the conclusion that there was no application of mind of the assessing officer and erroneously elevated the status of CBDT which is meant as a guiding note of the assessing officer to have an effect of regulation. Therefore, the order impugned in this appeal deserves to be quashed.
Accordingly, the appeal filed by the revenue is allowed and the order passed by the learned Tribunal is set aside and the order passed by the Appellate Authority stands restored and the substantial questions of law raised by the revenue are answered in favour of the appellant/revenue.
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2025 (5) TMI 1418
Search and seizure proceedings initiated by the income tax department, against an office bearer of a political party - as submitted warrant of authorisation for search was issued based on sufficient reasons to believe to issue search warrant under section 132 of the Act and hence the writ petition is without any merit.
HELD THAT:- On a perusal of the satisfaction notes and the order of approval, it is evident that an elaborate note containing several reasons, pointing out the need to conduct a search was prepared and submitted for approval and the Designated Officer had granted his approval after recording reasons. The detailed reasons mentioned in the satisfaction note as well as the order of approval for search and seizure is in tune with the principles laid down in Director General of Income Tax Investigation, Pune and Others v. M/s. Spacewood Furnishers Private Limited and Others [2015 (5) TMI 483 - SUPREME COURT]
Pleadings and the materials placed for consideration do not indicate any malafides and on the other hand Annexure A2 and Annexure A3 letters issued by the bank to the Income Tax Department prima facie indicate that the particular account which was operated by the petitioner, had not been revealed in the returns filed till that date The bank account has not even been linked to the PAN. There were thus materials available with the respondents to prima facie assume that petitioner is in possession of money, which has not been disclosed to the income tax department. Hence, the satisfaction arrived at by the respondents to initiate a search and seizure under section 132 of the Act cannot be held to be perverse or legally untenable. Considering the scope of interference under Article 226 of the Constitution of India with a proceeding under section 132 of the Act, this Court is of the view that the search and seizure proceedings initiated by the respondents do not warrant any interference at this juncture.
Whether the prohibitory orders issued on 05.04.2024 requires any interference? - Sub-section (8A) of Section 132 of the Act states that such an order shall not be in force for a period exceeding 60 days from the date of the order.
By Ext.P1 prohibitory order issued on 05.04.2024 under section 132(3) of the Act, the Chief Manager of The Bank of India, Thrissur Main Branch was directed not to deal with four specified accounts and all other bank accounts of CPI(M), Thrissur District Committee held in that Branch. However, by virtue of sub-section (8A) of section 132 of the Act, such an order cannot remain valid beyond 60 days. Since the said period of 60 days has already expired, the prohibitory order cannot remain valid beyond that period. As the statute itself operates in favour of the petitioner as far as the prohibitory order is concerned, no further declaration is required by this Court, except to observe that the prohibitory order has already expired by operation of law.
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2025 (5) TMI 1417
Computation of deduction u/s 10A and 80HHE and Section 80M - HELD THAT:- The benefit under Section 10A and Section 80HHE of the Act are two independent reliefs which the Appellant/Assessee availed independently. Section 10A of the Act was inserted in 1981. Section 10A of the Act contains a special dispensation for deduction of profit and gains from export sale of “articles” or “things” or “computer software” from the total income of a unit located in Free Trade Zone.
Thus, not only freight, telecommunication charges or insurance attributable to the delivery of “articles” or “things” or “computer software” in Section 10A of the Act and “computer software” in Section 80HHE of the Act but also any expenses incurred in foreign exchange for providing technical services outside India cannot form part of “export turnover”. It is the amount received in foreign exchange for the above purpose alone and not expenses incurred in foreign exchange can be considered for determining the “export turnover” under the respective provisions.
Under Section 80M of the Act, dividend income could be allowed as deduction while computing the total income which is equivalent to so much of the amount of income by way of dividends from another domestic company which does not exceed the amount of dividend distributed by the domestic company to an Assessee company. The dividend income in the hands of the Appellant/Assessee from the other domestic company could be allowed in as much the dividend income incurred by the Assessee is equivalent to the dividend distributed by such domestic company on or before the due date.
The benefit u/s 10A of the Act was initially available for ten consecutive Assessment Years beginning with the Assessment Year relevant to the Previous Year in which such an undertaking began to manufacture or produce such “articles” or “things” or “computer software”.
With effect from 01.04.2003 vide amendment to Section 10A of the Act by the Finance Act, 2002, the deduction under Section 10A of the Act was restricted to 90% of the profits and gains derived by an undertaking located in Free Trade Zone from export of such “articles” or “things” or “computer software”. Thus, during the period in dispute i.e., during the AY 2003-2004, the deduction was restricted to 90% of the profits and gains for the export of “computer software” from the units located in Free Trade Zone.
Deduction u/s 80HHE of the Act is much wider. Section 80HHE of the Act was inserted in the year 1991 vide Finance Act, 1991 with effect from 01.04.1991. As per sub-section (1B) of Section 80HHE of the Act, an Indian Company or such person other than a company resident in India was entitled for deduction in respect of profit derived from,
(i) export out of India of computer software or its transmission from India to a place outside India by any means;
(ii) providing technical services outside India in connection with the development or production of computer software.
During the period in dispute which pertains to the AY 2003-2004, the benefit under Section 80HHE of the Act was confined to 50% of the profit derived from export of computer software or its transmission from India to a place outside India or for providing technical services outside India in connection with the development or production of computer software.
To claim deduction both u/s 10A and/or Section 80HHE of the Act, an Assessee is also required to furnish in the prescribed form along with the Return of Income filed by the Assessee, the report, as defined in the Explanation below sub-section (2) of Section 288 of the Act certifying that the deduction has been correctly claimed in accordance with the provisions of Section 10A of the Act.
The expression “computer software” and “export turnover” have been defined similarly in Explanations to Section 10A and Section 80HHE of the Act.
Since there is difference between manufacturing of 'computer software' and providing 'technical services', the Substantial Question of Law has to be answered in favour of the Appellant/Assessee in view of express language in Section 80HHE of the Act.
Therefore, Substantial Questions of Law (ii) and (iii) are answered in favour of the Appellant/Assessee
If the Appellant/Assessee was not exporting “computer software” from its unit located in Free Trade Zone, the benefit of Section 10A of the Act cannot be allowed. Therefore, deduction on balance 10% of “export turnover” which was outside the purview of Section 10A of the Act cannot be claimed separately under Section 80HHE(1)(ii) of the Act. That apart, the benefit is to be restricted to 50% of profit and gains for service provided by a Company.
There is no scope for nixing the income and expenses incurred for computation of deduction under Section 10A of the Act and Section 80HHE of the Act. Therefore, Substantial Questions of Law (v) has to be answered against the Appellant/Assessee.
As far as Substantial Question regarding benefits under Section 80M of the Act is concerned, based on the decision of Commissioner of Income Tax Vs State Bank of India [2003 (3) TMI 88 - BOMBAY HIGH COURT] makes clear that deduction under Section 80M of the Act during the period in dispute deduction was confined to dividend received by a domestic company from another domestic company. This has been remitted back.
If the amount was not realized, benefit cannot be claimed. Therefore, Substantial Question of Law No. (i) is answered against the Appellant/Assessee. With regard to Substantial Question of Law (iv), since the issue has been remitted back as far as Substantial Question of Law (iv) is concerned, we are refraining to answer the same.
In the light of the decisions of this Court in the Appellant's/Assessee’s own case (cited supra) the computation have to be made by the AO after ascertaining whether indeed the Appellant/Assessee had indeed exported computer software as is contemplated in Section 10A/ 80HHE(1)(i) of the Act or had indeed provided technical services outside India under Section 80HHE(1)(ii) of the Act.
ORDER
“Question No. (i):- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the contention of the appellant concerning the computation of deduction under Section 10A and 80HHE?
Answer:- Answered against the Appellant/Assessee
Question No. (ii):- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the exclusion of expenditure incurred in foreign currency in relation to on-site software development from the purview of export turnover for the purpose of computation of deduction under Section 10A and 80HHE of the Income Tax Act?
Answer:- Answered in favour of the Appellant/Assessee
Question No. (iii):- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not noting the distinction between 'manufacture of computer software' and the provision of 'technical services'?
Answer:- Answered in favour of the Appellant/Assessee
Question No. (iv):- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in remitting back to the Assessing Officer without giving its finding on the issue relating to the exclusion of the component of unrealized sale proceeds both from export turnover and total turnover?
Answer:- Answered against the Appellant/Assessee
Question No.(v):- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the order of the Assessing Officer without giving its finding on the issue relating to deduction under Section 80HHE towards the balance 10% of the profits not available as deduction under Section 10A? And
Answer:- Answered against the Appellant/Assessee
Question No.(vi):- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the dividend income from other mutual funds are not akin to dividend income from Unit Trust of India and do not qualify as income received from domestic company for deduction under Section 80M?”
Answer:- Answered against the Appellant/Assessee
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2025 (5) TMI 1416
Validity of assessment order passed in violation of the principles of natural justice - HELD THAT:- The respondents have sent two e-mail communications on 02.01.2025 and 07.01.2025, directing the petitioner to re-send the reply. The petitioner re-sent the reply on 17.01.2025 and thereafter, the petitioner requested for video conferencing on 07.02.2025. However, without considering the request by the petitioner and without providing any opportunity of hearing through video conferencing, the present impugned order came to be passed on 13.03.2025.
This Court is of the view that the impugned order is passed in violation of principles of natural justice and the same is liable to be set aside. Accordingly, this Court passes the following directions/orders:-
(i) The impugned order dated 13.03.2025 is set aside and the matter is remanded to the authority concerned for fresh consideration.
(ii) The first respondent is directed to provide an opportunity of hearing through video conferencing by issuing 14 days clear notice with proper communication and thereafter, the first respondent is directed to pass a fresh assessment order in accordance with law.
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2025 (5) TMI 1415
CIT (A) dismissing the appellant's appeal on non-appearance and non-support by the appellant - allegation of non compliance of Sections 250(4) and 250(6) - addition of unexplained money u/s 69A
HELD THAT:- As after filing the appeal before the CIT (Appeals), the appellant, admittedly, did not respond to the notices issued by the CIT (Appeals) for his appearance.
CIT (Appeals), while observing that the appellant has not pursued the appeal despite being granted several opportunities and he failed to substantiate the source of credit in his bank account either by oral or documentary evidence, upheld the order passed by the assessing officer in making the addition of Rs. 2,47,65,369/- holding it to be unexplained money u/s 69A of the Act and dismissed the appeal of the appellant.
The said order of the CIT (Appeals) has been affirmed by the ITAT. However, from perusal of the order of CIT (Appeals), it nowhere appears that any inquiry has been made as contemplated under Section 250(4) and 250(6) of the Act. Even if the appellant did not make his appearance, the points for determination ought to have been formulated, but the same has not been done as provided under Section 250(6) of the Act. As such, order of the CIT (Appeals) is completely vitiated on account of non compliance of Sections 250(4) and 250(6) of the Act, which the ITAT was supposed to take note of and rectify the defects by directing the CIT (Appeals) to decide the appeal on merits after complying the provisions contained in Section 250(4) and (6) of the Act, however, the ITAT has perpetuated the said illegality by affirming the order of the CIT (Appeals).
Thus, the order passed by the CIT (Appeals) is hereby set aside and, subsequently, the order passed by the ITAT [2023 (12) TMI 1198 - ITAT RAIPUR] is also set aside. The matter is restored to the file of the CIT (Appeals) for hearing and disposal afresh in accordance with law after making inquiry, as stipulated u/s 250(4) - Decided in favour of assessee.
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2025 (5) TMI 1414
Adjustment of amount in excess of 20% being adjusted by the respondents despite pendency of an appeal and pendency of the application for Stay filed by the petitioner - HELD THAT:- In the instant case, it is an undisputed fact that the petitioner has already deposited 20% of the total demand and the application of stay is still pending consideration before the Assessing Officer. In these circumstances, we deem it appropriate to allow and dispose of the same.
The petition is hereby allowed and disposed of in terms of M/s. Price Waterhouse, Bengaluru [2024 (9) TMI 1734 - KARNATAKA HIGH COURT]
The concerned respondents are directed to refund the entire amount in excess of 20% for the assessment year 2023-2024 together with interest, if applicable, back to the petitioner after due verification within a period of six weeks from the date of receipt of copy of this order.
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2025 (5) TMI 1413
Claim made through additional grounds of appeal for the first time before the First Appellate Authority - HELD THAT:- As gone through the order of the First Appellate Authority; there is no finding of the First Appellate Authority in context of additional grounds of appeal raised by appellant before him. Thus, having heard the ld. Counsels appearing for the parties and having regard to the facts and circumstances of the case, we dispose of this ground of appeal by remitting the issue to the Ld. CIT(A), to deal with the same afresh along with the main issue having relevance with the additional ground and to pass orders accordingly, upon granting an opportunity of being heard to the assessee and upon considering the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter. In the result ground of appeal is allowed for statistical purpose.
Computation of tax payable in view of the facts that the order of assessment has been concluded at an assessed loss - In the facts of the appellant company has returned loss of Rs. 2,65,21,112/-, which after making the disallowance by ld. AO has been reduced to Rs. 53,55,148, thus, we are inclined to accept the contention of appellant that computation of tax payable of Rs. 51,31,916/- is invalid and therefore, the same is directed to be deleted and in the result, ground of appeal is allowed.
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2025 (5) TMI 1412
Nature of expenses - payment made towards transponder fees - capital expenditure OR revenue expenditure - Operation of telecommunication services - HELD THAT:- Lower Authorities by relying upon the judgment in case of Bharti Hexacom Ltd.[2023 (10) TMI 786 - SUPREME COURT] was rendered subsequent to filing of return of income by the appellant, has held that the Transponder Fees is akin to the license obtained by the appellant- which the Apex Court deemed capital in nature, despite being paid in instalments, the Transponder Fees constitutes payment towards the acquisition of a right essential for the operation of telecommunication services, thereby qualifying as capital expenditure. However, according to assessee expenditure of transponder fees has always been allowed as a revenue expenditure since inception.
On perusal of order of the ld. First Appellate Authority it is evident that there is no observations in this context. In these circumstances in the interest of natural justice we remit this issue to the First Appellate Authority to deal with this issue afresh.
Non-waiver of interest levied u/s 234B - We have gone through the judgment of Hon’ble Apex Court in Bharti Hexacom [2024 (5) TMI 1246 - SC ORDER] direct the ld. AO to waive of the interest. In the result this ground of appeal is allowed.
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2025 (5) TMI 1411
Addition towards cash deposits into bank account u/sec.68 r.w.s.115BBE - HELD THAT:- Since the appellant company has failed to file relevant evidences, in our considered view, the explanation of the appellant company with regard to source of cash deposit cannot be accepted.
Since the CIT(A) has given a finding that, the amount received towards sale of scrap is part of regular books of accounts, in our considered view, these aspects needs to be examined by the AO, more particularly, in light of the fact that, the appellant company could not furnish relevant bank statements for re-verification. Thus, we set-aside the order of the learned CIT(A) on this issue and restore the issue back to the file of the AO.
AO is directed to verify the relevant books of accounts and financial statements to ascertain the fact that with regard accounting the amount received towards sale of scrap under the head “Direct Income”. In case, the appellant company is able to prove the amount received from sale of scrap is part of their regular books of accounts and the same is source for cash deposit into bank account, then, the Assessing Officer is directed to delete addition made towards cash deposit of Rs. 1.43 crores u/sec.68 r.w.s.115BBE of the Income Tax Act, 1961.
Addition of cash payment - On verification of the relevant show cause notice dated 07.05.2023, the AO has discussed the issue in light of variation proposed on the issue of addition towards cash deposit and also towards cash payment to M/s. Analogics Tech India Ltd., and from the above it is undisputedly clear that, Assessing Officer has discussed the issue in light of relevant materials and also gave an opportunity to the appellant company to explain it’s case. Therefore reasoning given by the CIT(A) to delete the addition made by the Assessing Officer towards alleged cash payment is contrary to material on record and cannot be accepted.
When it comes the issue of cash payment, it was explanation of appellant company that, since there was change in the management of the company, there were no details as regards cash payment of Rs. 43 lakhs to above company viz., M/s. Analogics Tech India Ltd.
It is for the appellant company to explain it’s case with relevant details to prove to the satisfaction of the AO that, the said transaction is neither carried-out by the appellant company nor belongs to the appellant company. Since the appellant company could not explain the transactions and merely stated that it does not belongs to the appellant company, in our considered view, the matter needs to be set-aside to the file of AO for further verification in light of relevant evidences which is basis for making addition.
AO is directed to re-consider the issue and also provide relevant evidences to the appellant company for it’s rebuttal and explanation and also decide the issue in accordance with law.
Appeal of the Revenue is allowed for statistical purposes.
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2025 (5) TMI 1410
Assessment order passed by the AO u/sec.147 r.w.s.144 in old PAN - appellant company has been allotted PAN in the status of ‘Firm’, although, the appellant company is a Private Limited Company incorporated under the Companies Act, 1956.
HELD THAT:- Appellant company has surrendered the old PAN and has obtained the new PAN from assessment year 2007-2008 which is evident from PAN card issued by the Department by new PAN. Further, it is also not in dispute that, the appellant company has filed it’s return of income right from assessment year 2007-2008 under new PAN in the status of ‘Company’ and the Department has assessed the appellant as a company, which is evident from the assessment order passed by the AO for the assessment years 2015-2016 and 2017-2018 where the AO has assessed the appellant company in the status of a ‘Company’ under PAN .
Therefore, the impugned assessment order passed by the Assessing Officer under old PAN needs to be examined in light of facts brought on record to ascertain whether it is duplicate assessment or the transactions reported in the said PAN recorded in the regular books of accounts of the appellant company reported in the relevant bank statement filed for the assessment years 2015-2016 and 2017-2018. Going by the evidences placed on record, including relevant assessment order passed by the Assessing Officer for the assessment year 2016-2017 u/sec.148A(d) of the Act dated 30.03.2023, it is an undisputed fact that, there are two Pan nos. in the name of the appellant company i.e., one in the status of ‘Firm’ and the other in the status of ‘Company’.
The Assessing Officer after considering the relevant facts and also evidences placed by the appellant company has accepted the fact that, there is a duplicate PAN in the status of ‘Firm’ and transactions reported in the old PAN no. are already considered by the appellant company in the new PAN and, therefore, there is no need of fresh assessment.
Since the appellant company has already filed return of income under new PAN for both the assessment years and further for both the assessment years, the Department has passed assessment orders u/sec.143(3) of the Income Tax Act, 1961, under new PAN, in our considered view, the assessment order passed by the Assessing Officer u/sec.147 r.w.s.144 of the Act in old PAN for both the assessment years cannot survive, provided, the transactions reported by the DGFT in old PAN are already considered and accounted by the appellant company in their books of accounts. Since the appellant company was not aware of the proceedings initiated by the Department u/sec.148A of the Act and it came to know only during the proceedings for the assessment year 2016-2017 before the Assessing Officer, in our considered view, the delay in filing of the appeal before the learned CIT(A) needs to be condoned for both the assessment years because, there is ‘sufficient and reasonable cause’ for the appellant company for not filing the appeals on or before the “due date” provided under the Act. Thus, we condone the delay in filing of the appeals before the learned CIT(A) for both the assessment years.
Since there are two PAN nos. in the name of the appellant company, in our considered view, the matter needs to be verified by the jurisdictional Assessing Officer in light of our discussion hereinabove to ascertain the fact with regard to the transactions reported by the DGFT under old PAN, whether the said transactions are already accounted by the appellant company in their books of accounts or not ?
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2025 (5) TMI 1409
TDS u/s 195 - Disallowance u/s 40(a)(i) in respect of payment made to non-resident - Managerial Services or not - Income Taxable in India or not - HELD THAT:- We observed that the service agreement submitted before us indicate that the functions performed by the dash enterprises involves correspondence services, maintaining client database and review of the communications daily and reply daily. It also involves payment follow up from its customers. In our considered view there is merit in the submissions of the assessee that these services too not partake the nature of managerial services. This submission is supported by the decision of Panalfa Autoelektrik Ltd [2014 (9) TMI 706 - DELHI HIGH COURT] and Springer Nature Customer Services Centre GmbH [2023 (7) TMI 618 - DELHI HIGH COURT]
Findings of ld. CIT (A) relating to DTAA - As observed that the services rendered by Dash Enterprises outside India and compensation paid to them for the services rendered outside India. It is fact on record that the compensation paid to Dash Enterprises is not taxable in India, hence, the provisions relating to TDS are not applicable. Therefore, the case laws relied upon by CIT (A) are distinguishable. Hence, we are inclined to allow the grounds raised by the assessee. Accordingly, the appeal filed by the assessee is allowed.
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2025 (5) TMI 1408
Unverifiable/in-genuine purchases - addition u/s 69C - HELD THAT:- GST Department has carried out a survey at the business premises of M/s. Krishna Traders and it was found that no tax was deposited by Krishna Traders on the goods sold by it and subsequently, the assessee has deposited the tax alongwith interest on the purchases made from Krishna Traders. Assessee has filed the copies of the invoices, e-way bills and further claimed that the payments were made to these parties through banking channels.
However, merely by following these details, it cannot be stated that the purchases made from these parties are genuine more particularly, in the light of admission of the proprietor of M/s. Krishan Traders. We are inclined to interfere in the observations made by the lower authorities that purchases made of INR 26,47,92,365/- from three parities remained unverified.
As seen that the claim of the assessee that the goods purchased from these parties were sold and due profits were offered for tax which has not been doubted by the AO. Neither the provision of section 145(3) were invoked nor the turnover of the assessee was doubted.
As in the case of N.K. Proteins [2016 (6) TMI 1139 - GUJARAT HIGH COURT] has held that in case of unverifiable purchase, the profit element embedded should be taxed and not the entire amount of purchases. It is also seen that if the entire purchases is added that would give absurd results thus in our considered view, the action of the Ld.CIT(A) in applying the profit rate on such unverifiable purchases is correct and such action is hereby upheld.
GP estimation - It is settled proposition of law in case of the estimation of profits, past history of the assessee is to be considered and also certain amount of estimation could be done looking to the facts of the case. In the instant case admittedly, the assessee has shown better results as compared to preceding years and is engaged in the business of wholesale supply of building material and also worked as civil contractor where the profit rate is comparatively high as against 2.39% applied by the Ld.CIT(A).
Thus, in our considered opinion, G.P rate of 5% on the in-gunine purchase owould be reasonable to meet the end of justice.
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2025 (5) TMI 1407
Reopening of the assessment u/s 148A - addition on cash deposit - HELD THAT:- We find that in the case of CIT vs. Jet Airways [2010 (4) TMI 431 - BOMBAY HIGH COURT] and Ranbaxy Laboratories Ltd [2011 (6) TMI 4 - DELHI HIGH COURT] has held that when no addition was made on the basis of reasons recorded for reopening of the assessment, it was not open for the AO to bring some other income to tax in the course of assessment proceedings.
As in Ranbaxy Laboratories Ltd [2011 (6) TMI 4 - DELHI HIGH COURT] held that since the AO had not made any disallowance in respect of items which were the reasons for initiation of assessment proceedings. There was no justification in making the disallowance of other item in reducing the claim of deduction u/s 80HH or 80IG of the Act.
Similar view was taken in Monarch Educational Society [2016 (2) TMI 971 - DELHI HIGH COURT] that if no addition is made on the basis of reason to believe recorded by AO for reopening of the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 to make an addition on any other issue not included in the reasons to believe for reopening of the assessment.
In the case in hand, admittedly, no addition has been made by the AO on the items which were basis of reasons recorded, therefore, we are of the considered view that the AO was not justified in making the addition on cash deposit, which was not included in reasons recorded. Thus, the reassessment order passed under section 147 read with section 144B is bad in law and same is quashed. Appeal is accordingly allowed.
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2025 (5) TMI 1406
Addition u/s. 68 - loans received from three parties - CIT(A) deleted addition - HELD THAT:- CIT(A) narrating the complete details which remain uncontroverted at the end of ld. Departmental Representative, we fail to find any infirmity in the finding of ld.CIT(A) deleting the impugned addition
Disallowance of purchase - Net profit of 9.34% is declared by the assessee and the turnover of the assessee has reached to the extent of Rs. 4.64 crore during the year as against 0.30 crore in the preceding year - HELD THAT:- Where the alleged expenditure is duly supported with Invoices, payment made through banking channel, Tax deducted at Source, Sales/Gross Receipts quantum not in dispute, we also observe that assessee has declared net profit of 9.34% along with increase in the turnover during the year by almost 15 times. Even for sake of argument it is assumed that the alleged purchases are non genuine, then also, last resort will be to estimate the profits on the total turnover.
There has been plethora of cases where such estimation of profit has been made to the extent of 8% applying Presumptive Rate of Taxation u/s. 44AD of the Act where the assessee has not maintained proper/ no books of account. Therefore, since the net profit declared by the assessee is higher than 8%, we fail to find any merit in the ground No.2 raised by the Revenue. Even though ld. CIT(A) has given a finding accepting the genuineness of purchases, we uphold the same on the ground that assessee has offered better net profit rate of 9.34% which is above 8% provided u/s. 44AD.
Appeal of the Revenue is dismissed.
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2025 (5) TMI 1405
TP Adjustment - addition towards interest of lease loan from qualifying assets to its AE - assessee’s contention that the ships are qualifying asset for which no adjustment ought to have been made for the reason that the assessee has offered the income under tonnage tax scheme - HELD THAT:- Where the coordinate benches have held that transfer pricing provisions does not apply to in assessee’s case for the operations carried out through qualifying ships when income arising out of the said activities are liable to be taxed under the tonnage tax scheme. Further, in A.Y. 2011-12, the adjustments were made on the similar grounds in the case of Essar Ports Ltd. in which the assessee got demerged w.e.f. 01.10.2010, where the coordinate bench has categorically held that no adjustments could be made under the TP provisions for transactions carried through qualifying ships which has been covered by the tonnage tax scheme.
The provisions of Section 115VA overrides Section 23 to 43C of the Act, for computation of business profits while determining the allowable expenses as per Arm’s Length Price enumerated u/s. 92(1) of the Act. It also held that the tonnage income is determined on the basis of the weight of the vessel and not on the ALP and further the methods prescribed u/s. 92C does not have any application for computation of the tonnage income.
As relying on Trans Asian Shipping Private Limited [2016 (7) TMI 341 - SUPREME COURT] where the purpose of the tonnage tax scheme which is a preferential regime of taxation as per CBDT circular dated 05/2005 was to ensure that the Indian Shipping companies sustained the competition based on the vis-à-vis foreign shipping lines by providing easy accessibility, fixed rate and low tax regime on the basis of the recommendation of the Rakesh Mohan committee. The Tribunal following the said decision had given relief to the assessee for the earlier years and the same has been accepted by the Hon'ble DRP. On identical facts, we do not find any justification to deviate from the view taken by the coordinate bench in assessee’s own case for earlier years and we therefore deem it fit to allow ground no. 1 to 3 raised by the assessee.
TP adjustment as corporate guarantee commission computed at the rate of 1.75% and without prejudice the assessee claims 0.25% as per the Tribunal order for earlier years in assessee’s own case - There is iota of doubt that the ALP of corporate guarantee has to be determined by adopting any one of the prescribed methods and cannot be on an adhoc basis. In view of the same, we deem it fit remand this issue back to the file of the TPO/AO for determination of the ALP of the international transaction of corporate guarantee in accordance with provisions of the Act by adopting most appropriate method prescribed by the Act.
Characterization of receipt - interest income from income tax refund - ‘Income from other sources’ OR ‘business income’ - HELD THAT:- The Tribunal as well as the Hon'ble DRP has already held that interest received from bank FDs are to be treated as business income. The Hon'ble DRP has consciously held only that interest received from bank to be treated as business income and the remaining interest received from income tax refund are consciously excluded from treating the same to be a business income.
It is observed that Section 244A of the Act provides that the revenue shall pay simple interest on the refund amount. The interest received out of the same is treated as income under the head ‘Income from other sources’. We do not find any justification in treating the same as business income as the same is paid by the Revenue to the assessee for the delay caused due to refund of excess tax paid by the assessee. The same will not come under the preview of business income. We therefore are inclined to dismiss this ground of appeal raised by the assessee as there is no merit in the same.
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2025 (5) TMI 1404
Assessment u/s 153A - no incriminating material to support the addition - HELD THAT:- Hon’ble Apex Court in the case of Abhisar Buildwel [2023 (4) TMI 1056 - SUPREME COURT] affirming decision in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] have held that no addition can be made in respect of unabated assessments unless there is seizure of incriminating documents qua the impugned additions.
Consequently, we are of the considered view that no intervention is required to be made to the order of the CIT(A) at this stage as the same is based upon correct understanding of facts of the case, contemporary statute as well as binding judicial precedents. Accordingly, we uphold the order of the CIT(A) and dismiss all the grounds of appeal raised by the Revenue.
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2025 (5) TMI 1403
Addition of variation in respect of unexplained income from undisclosed source - onus to prove - assessee submitted the details of sale invoices, copy of the account and the VAT return to justify that sales were made. Thus, the primary onus was discharged by the assessee - applicability of principles against double taxation where sales were recorded in audited books and payments received through banking channels.
HELD THAT:- AO has not questioned the sales declaration. Purchases were not doubted by the AO. The decisions of Vishal Exports Overseas Ltd. [2012 (7) TMI 1110 - GUJARAT HIGH COURT] was relied by the assessee that of Hon’ble Gujarat High Court as held that when the income is already offered for taxation, the same cannot be taxed again as an unexplained cash credit as it would amount to double taxation.
It is pertinent to note that in the present assessee’s case, the AO did not reject the books of account or questioned the quantitative details of stocks. The assessee during the assessment proceedings has given the details of credit and debit entries in the bank account of M/s. Akshar Corporation and at the same time has provided the purchase details along with the sale details.
A.R. pointed out the valuation of closing stock as well as month-wise purchase register with summary sales register and retail invoice sales register during assessment proceedings. The various details of purchase ledger also supported the case of the assessee which was totally ignored by the AO as well by the CIT(A). The payments received against the sales were duly reflected in the banking channel as well as in the books of account.
Assessee is dealing in trading of gold, silver, bullion ornaments in the name of M/s. Krupa Jewellers and is regularly tax audit report along with the details of profit and loss account and balance sheet for various years including that of the present assessment year.
AO merely on the basis of information of Shripal Pravinchandra Shah has made the addition without taking into account the purchase/stock of the assessee as well as the details filed in support of the sales of the assessee. Therefore, the additions made by the AO and confirmed by the CIT(A) u/s. 68 as relates to unexplained cash credit is not justified.
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2025 (5) TMI 1402
Surcharge on the dividend income - assessee has paid surcharge @10% BUT CPC calculated the surcharge @37% - HELD THAT:- We notice that the surcharge is to be levied based on the slab rates referred in First Schedule, Paragraph A of Part 1 and surcharge on Dividend Income cannot exceed 15%.
From going through above schedule for rate of surcharge we find that in the instant case the income is only from dividend and is between the slab rate of Rs. 50.00 lakh to Rs. 1 crore and therefore surcharge is leviable @10% and therefore CPC erred in charging surcharge @37%. Thus, finding of CIT(A) is reversed and grounds of appeal raised by the assessee are allowed.
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