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2025 (7) TMI 311
Correct head of income - Characterization of receipt - assessee is a regularly assessed company engaged in software and networking solutions - business income OR income from other sources - AO doubted the genuineness of this income and recharacterized it as “income from other sources”, alleging that the assessee had no real business activity - HELD THAT:- In the absence of any contrary material brought on record by the AO to establish that the services were not rendered or the receipts were sham, the re-characterisation of this income, as income from other sources is unsustainable in law. The revenue from identifiable clients under valid tax invoices cannot be brushed aside based merely on assumptions unless contradictory / corroborative evidence clinching the issue is collected during the course of search or brought on record by the AO.
Admittedly, no incriminating material was found during the course of search nor any evidence was relied upon by the AO to recharacterize the income as income from other sources. In the light of above we are left with no other option but to allow the ground raised by the assessee.
Accordingly, the action of the AO in treating business income as income from other sources and taxing after estimating expenses ois not supported by facts or law.
Disallowance of Business Expenses - AO disallowed business expenditure, holding that no business was carried out by the assessee - disallowance was confirmed by the CIT(A) on the ground that the rental income was the main activity and the business income was marginal - HELD THAT:- It is an established principle that the quantum of income is not determinative of the genuineness of business or the allowability of business expenditure. The assessee has consistently engaged in the business of IT and networking, as accepted in A.Y. 2016–17, and has placed audited accounts and tax audit reports on record. Though it was vaguely argued that the assessment order for the 2016-17 was passed prior to the search and therefore the same cannot be acted upon. Generally, this argument is permitted to be raised and is a plausible argument. However, in the absence of any material brought to our notice which belie the stand of the assessee cannot be permitted to be raised. AO has not brought on record that the assessee was not carrying the business activities and no positive evidence was brought on record.
CIT(A) also overlooked the fact that the assessee had suo motu disallowed Rs. 25.92 lakhs worth of non-business expenses (e.g., municipal taxes, unrelated depreciation), and the remaining expenses were linked to the operational business.
In the absence of any finding that expenses were either bogus or unrelated to business, the disallowance is unjustified. Hence, the same is directed to be deleted.
Principle of Consistency - The principle of consistency, as upheld in Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] mandates that where the facts remain the same, the treatment accorded in earlier years should ordinarily not be disturbed.
In the assessee’s case, the treatment of business income and expenditure has been accepted in earlier assessments, including under scrutiny u/s 143(3). Without any change in facts, the deviation made by the AO in the impugned year is contrary to settled law.
Jurisdiction u/s 153A - The assessee raised the legal ground that the additions made were not based on any incriminating material found during the course of search, and thus are not sustainable in view of decision in Abhisar Buildwell [2023 (4) TMI 1056 - SUPREME COURT].
CIT(A) has recorded that the assessment for A.Y. 2020–21 was not complete as on the date of search and was therefore an “unabated” assessment year. As such, the applicability of Abhisar Buildwell is disputed, and we deem it unnecessary to adjudicate this issue further, having already allowed the appeal on merits.
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2025 (7) TMI 310
Disallowance of interest expenses u/s 40(a)(ia) - As pointed out that the AO had disallowed an expense which had not been claimed by the assessee for computing its income from business, by invoking provisions of law applicable to computation of income from business and profession - HELD THAT:- The said provision of law is applicable for the purposes of computing income under the head ‘business & profession’. There is no dispute with regard to the same, the impugned Section being included in chapter IV-D of the Act which deals with the computation of income under the head ‘Income from Business & Profession’.
It is also a fact on record that the expense disallowed by the AO was not claimed by the assessee against his business income, which the assessee had returned on presumptive basis u/s 44AD of the Act.
The order of the AO reveals that the impugned expense had been claimed by the assessee against rental income returned to tax separate from the business income of the assessee. Therefore, it is crystal clear that the disallowance made by the AO in the present case is grossly unjustified and is not sustainable in the eyes of law.
Accordingly, we direct deletion of the disallowance of interest expenses.
Penalty u/s 271(1)(c) also deleted made in relation to the disallowance made by the AO u/s. 40(a)(ia).
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2025 (7) TMI 309
Validity of reopening of assessment - Period of limitation - scope of old law - validity of approval for reopening issued by the Principal Commissioner of Income Tax (PCIT) - HELD THAT:- In the present case, the AY 2017-18. The reopening of assessment for the said year was not getting time barred up to 31.03.2021. In fact, under the old provision limitation was expiring on 31.03.2024 so in view of the above said judicial pronouncement sanction is to be given by PCCIT not by PCIT. Accordingly, we find substance in the argument of assessee that the approval for reopening is bad in law. Since, the reapproval of reopening is bad in law hence, entire assessment proceedings are hereby quashed. Accordingly, the appeal of the assessee is allowed.
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2025 (7) TMI 308
Revision u/s 263 - as per CIT AO has not made any disallowance u/s 14A of the Act and certain mismatch of TDS claimed by the assessee - HELD THAT:- Without going into various contentions made by the assessee, we observed that it is settled position of law that during the year under consideration, when the assessee has not received any exempt income during the year no disallowance can be made. This issue under consideration is settled position of law by various Hon’ble High Courts and coordinate Benches.
Further instruction of CBDT No.5 dated 11.02.2014 was heavily relied by ld. PCIT. However, we observed that the Courts have already held that the CBDT Circular have no application when the assessee has not received any exempt income. Since it is settled position of law and Assessing Officer has taken a possible view, PCIT cannot impose his another possible view. Therefore, the issue under consideration is decided in favour of the assessee.
Excess amount of TDS claimed by the assessee due to mismatch of turnover reported in Form 26AS with regard to above - We observed that assessee has filed tax audit report and the method adopted by the assessee for recording the gross income in the case of housing project by regularly following the method of POCM. The assessee is following the said method consistently and the assessee has filed reconciliation of turnover before the AO during assessment proceedings. Since the assessee follows the method of POCM, there will be always a mismatch of TDS amount and the turnover declared by the assessee. The income declared by the assessee based on the percentage of completion, the assessee will declare the revenue on the basis of abovesaid method. The customers may remit the payment and deduct TDS which may not match the income declared by the assessee.
Considering the method adopted regularly by it. In our considered view, ld. PCIT could have asked the assessee to submit the reconciliation of the above and decide the issue by himself instead of remanding the matter back to the AO. By merely remitting these issues back to the AO, the ld. PCIT has failed in his duty and mere initiation of proceedings u/s 263 is not enough, he has to give clear finding on the basis of prejudicial to the interest of Revenue.
Thus, sec 263 order passed by the ld. PCIT is bad in law and further, even though, the assessment order is silent but the submissions of the assessee shows that the Assessing Officer has accepted the submissions and taken a possible view. Accordingly the order passed u/s 263 is quashed. Assessee appeal allowed.
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2025 (7) TMI 307
Correctness of lower authorities action assessing the assessee’s interest component of land acquisition compensation u/s 28 of the Land Acquisition Act, 1894, while invoking section 57(iv) r.w.s. 56(1)(a) r.w.s. 145A(b) - HELD THAT:- It emerges that this tribunal’s recent decision in Pawan Kumar [2024 (1) TMI 1077 - ITAT DELHI] wherein held record reveals that the order of the Ld. PCIT was prompted solely by the audit objection. As held in Sohana Woollen Mills [2006 (9) TMI 157 - PUNJAB AND HARYANA HIGH COURT] that mere audit objection cannot lead to an inference that the order of the Ld. AO is erroneous or prejudicial to the interest of the Revenue.
Since the order of the Ld. AO is based on the decision of the Hon'ble Supreme Court in Ghanshyam HUF [2009 (7) TMI 12 - SUPREME COURT] on the issue of taxability of interest received by the assessee under section 28 of Land Acquisition Act, it can at best be said to be a debatable issue on which two views are possible and the Ld. AO accepts one of the views. In this view of the matter too, the Ld. PCIT cannot assume revisional jurisdiction as held by the Hon'ble Delhi High Court in CIT vs. Hindustan Coca Cola Beverages P Ltd. [2011 (1) TMI 138 - DELHI HIGH COURT].
Accordingly, on the facts and in the circumstances of the case as set out above, we hold that the order of the Ld. PCIT is not sustainable. Accordingly, we allow the appeal of the assessee
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2025 (7) TMI 306
Penalty u/s 271(1)(c) - whether assessee has concealed particulars of his income and furnished incorrect particulars of income? - Expenses claimed on strength of audit report by CA - HELD THAT:- It is crystal clear that penalty order under Section 271(1)(c) of the Act is in pursuance to assessment order [2024 (5) TMI 1589 - ITAT DELHI] wherein deleted all the additions made in assessment order. Moreover, penalty cannot be imposed as expenses were claimed on strength of audit report by CA, as per ratio of judgment in CIT vs. Reliance Petro products’s case [2010 (3) TMI 80 - SUPREME COURT]. Therefore, the penalty order being unsustainable in the eyes of law is set aside. Appeal of appellant/assessee is allowed.
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2025 (7) TMI 305
Addition u/s. 68 - cash deposits made out from cash sales during the demonetization period - applicability of section 115BBE - Assessee argued that where cash deposited in bank by assessee during demonetization period was out of cash sales which was duly shown in books of account and AO did not point out any specific defect in books of account maintained by assessee and no inflated purchases or suppressed sales were found - CIT(A) deleted addition
HELD THAT:- Addition made solely on the basis of suspicion and surmises is liable to be quashed as 'suspicion no matter how strong cannot take the place of proof.
Merely because demonetization was in progress cannot be the basis to suspect the genuine business transactions. Hence, the addition so made is without any merit and thus, is liable to be quashed.
Secondly, it is also to be noted that the addition has been made u/s 68, without considering that source of the cash deposits, ie the alleged unexplained cash credits, was duly recorded in the books as Sales and has also not been controverted.
There is no iota of evidence to justify the application of the deeming fiction, as no material to even prima-facie dispute the cash sales has been brought on record, nor has it been alleged that any sales / purchases etc. were made outside the books. Therefore. in these circumstances, there remains no basis on which the illegal addition so made, can be sustained.
AO has applied the provision of 115BBE which came into effect only on 15.12.2016 and hence was not applicable to the additions made herein.
Cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department. Further, the sale were not doubted upon by the Assessing Officer. Further, there is no adverse observation of the AO that the assessee was not having the stock with him to effectuate the corresponding sales. Also, the fact that sales were made in the period during which there was festive season cannot be lost sight of. Accordingly, we affirm the action of the ld. CIT(A) in deleting the addition in dispute and reject the ground raised by the Revenue.
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2025 (7) TMI 304
Denial of exemption claimed u/s 11 - AO considering the assessee as non-charitable trust - return of income was mistakenly filed in ITR-7 instead of ITR-5 applicable in case of AOP - Effect of technical mistake - HELD THAT:- AR has demonstrated that the audit report was duly furnished before the Ld. Addl./JCIT along with other relevant documents such as receipt & payment account, computation of total income, bank statement etc, however, these were not taken into consideration by the Ld. Addl./JCIT(A) while passing the impugned order.
Addl./JCIT(A) has also observed that the contention of the assessee would have been accepted, if the assessee had filed its return as applicable to AOP.
In our view this reasoning of the Ld. Addl./JCIT(A) is not justifiable as the assessee cannot be deprived of its rightful claim merely on account of technical mistake committed by the assessee. Also, it is a well settled principle of law that only net income should be taxed after allowing claim of the expenditure as per the relevant provisions of the Act. However, it is noted that both the Ld. JAO as well as the Addl./JCIT(A) have not examined and verified the said claim of the assessee.
Considering the totality of the facts and in the circumstances of the case enumerated above, we deem it fit, in the interest of justice, to set aside the order of the Ld. Addl./JCIT(A) and restore the issue back to his file with a direction to decide the issue afresh on merits after verification of the expenses claimed by the assessee as per fact and law and reassess the income of the assessee on net basis as a result of such verification thereof.
Grounds of appeal raised by the assessee are therefore allowed for statistical purposes.
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2025 (7) TMI 303
Treating the appeal filed by the appellant as withdrawn for the second time - penalty order was passed and the assessee had opted for Direct Tax Vivad se Vishwas Scheme, 2024 (VSVS) against the penalty order only - HELD THAT:- CIT(A) has decided and dismissed the appeal as withdrawn erroneously considering that the assessee had opted for VSV Scheme for the assessment order as well. The Tribunal had earlier remanded the matter to the Ld. CIT(A) who has again dismissed the appeal on the same ground. It was submitted that the addition was made on the basis of Form 26AS filed and the income was not received.
CIT(A) has mentioned that Form No. 5 has been issued on 03.01.2022 and the assessee is allowed to withdraw the appeal. The assessee is an Alternate Investment Fund of Category-II and registered under SEBI and follows the cash system of accounting and as the income shown in Form No. 26AS was not received, hence, the same was not accounted for.
DR did not raise any serious objection to the request made by the Ld. AR to remand the appeal to the Ld. CIT(A) for adjudication on merits.
Whether the TDS claimed had been considered in the impugned assessment year? - Assessee had considered a part of the income equivalent to the TDS made in the impugned assessment year and the rest of the income has been considered in the subsequent assessment year in the year of receipt. This approach is not correct as the entire income had to be given the same treatment. However, as the Ld. CIT(A) has not adjudicated the appeal on merits, therefore, as requested by the Ld. AR, we set aside both the orders of the Ld. CIT(A) as well as of the Ld. AO and remit the matter back to the Ld. AO to consider the submission of the assessee as per law and if permissible, grant the requisite relief and make the addition only after affording adequate opportunity of being heard to the assessee and as per law.
Appeal filed by the assessee is allowed for statistical purposes.
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2025 (7) TMI 302
Assessment u/s 153C w/o approval u/s 153D - jurisdictional requirements to assess any other person u/s 153C - HELD THAT:-Despite no search action has taken place in the case of the assessee and only a survey u/s 133A of the Act had taken place, the Assessing Officer not only issued notice u/s 153A but has also mentioned in paragraph 1 of the assessment order of each of the above assessment years that the case of the assessee was covered under search action.
Therefore, it is not understood as to how the Assessing Officer has passed the order with the prior approval of the Joint Commissioner of Income Tax, Central Range, Nashik who vide his letter has given his approval u/s 153D of the Act for such order. This shows that the same was approved u/s 153D without application of mind.
As per the provisions of section 153C of the Act, the Assessing Officer should satisfy himself and record a satisfaction note before issuing notice u/s 153C of the Act to the person other than the searched person. In other words one satisfaction is to be recorded by the Assessing Officer of the "searched person that the material found belongs to other person" and the second satisfaction is of the Assessing officer of that "other person” to the effect that the material belongs to him.
There is also a requirement that the relevant material should be handed over to the AO having jurisdiction over such "other person". However, when the Assessing officer of the searched person and "other person" is the same, in such a situation, a single satisfaction note may be recorded incorporating both the subject matters and a dual satisfaction note may not be required. However, the fact that the material does belong to such "other person" is required to be recorded in the satisfaction note.
Jurisdictional requirements to assess any other person u/s 153C of the Act based on material or documents seized during the search of a third party - We find the provisions of section 153C of the Act were amended vide the Finance Act, 2015. Prior to the said amendment, where search was conducted on a person and undisclosed assets/documents indicating undisclosed income are found as belonging to the "other person" other than, searched person", then in that case, proceedings u/s 153C would be undertaken against the "other person". The Finance Act, 2015 made certain amendments by widening the scope of the section by replacing the word “pertain to” instead of “belongs to”. The said amendment was applicable from 01.06.2015 i.e. with prospective effect.
The Hon’ble Supreme Court in the case of ITO Vs. Vikram Sujitkumar Bhati [2023 (4) TMI 296 - SUPREME COURT] has held that the amended provisions of 153C of the Act would apply where both the satisfaction note and assumption of jurisdiction were after 01.06.2015, even though the search was conducted prior to the amendment.
Since in the instant case the search was conducted on 17.09.2012, the order sheet copy containing the satisfaction note is dated 17.09.2012 and the notice u/s 153A was also issued on 17.09.2012, therefore, the amendment to provisions of section 153C in our opinion is not applicable to the facts of the present case and therefore, the recording of satisfaction note u/s 153C by the AO in the instant case on the basis of the seized work order, which does not belong to the assessee but may pertain to the assessee or any information contained therein relates to the assessee is not in accordance with law. Since it is held that the seized document i.e. copy of the work order which is the basis for recording the satisfaction u/s 153C does not belong to the assessee although it may pertain to the assessee or any information contained therein relates to the assessee and since the search as well as recording of the satisfaction note and notices issued u/s 153C are all prior to 01.06.2015, therefore, the issue of notice u/s 153C in our opinion is not in accordance with law since such an amendment is not applicable to the assessee for the impugned assessment years.
We, therefore, quash the assessment proceedings for all the 4 years being not in accordance with law for want of jurisdiction.
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2025 (7) TMI 301
Disallowance of short-term capital loss on the sale of shares - Onus to prove - HELD THAT:- The claim cannot be doubted unless otherwise any of the parties has disputed the same. An oral agreement between the family members reflected in the transactions should be given equal credibility. Only on the basis of certain deficiencies found in the information maintained by the ROC drawing inferences that transaction has not taken place at all is not justified when the movement of consideration even if by way of book entry is accepted by the tax authorities.
If such discrepancy in the record maintained by the ROC is made basis for doubting the whole transaction of sale of shares as a sham transaction, then, that would result into casting an onus on the assessee to prove that what is apparent by way of execution of necessary documents of sale of shares and movement of consideration, in the past or present, while actually the onus should be on the Revenue to prove that apparent is not real.
Suspicion howsoever strong cannot taken place of evidence which support the claim of the assessee. Thus ground no 1 to 8 on merits and other being consequential are sustained. The appeal is allowed.
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2025 (7) TMI 300
Deduction u/s.54F - amount spent in the construction of house -assessee commenced construction before transfer of original asset - CIT(A) directed the AO to examine as to whether the assessee has completed the new residential house within three years - As argued assessee commenced the construction of the new asset two months before the date of transfer of original asset which event gave rise to capital gains, still the assessee didn’t get any relief -
HELD THAT:- Assessee had commenced making payment to the builder two months prior to the transfer of shares on 02.04.2019 by making payment on 14.02.2019 and on 13.03.2019, which was disallowed only because the assessee commenced making payment before the date of transfer of original asset/shares which gave rise to capital gains i.e. 02.04.2019.
Such an action as we have found supra has been rightly reversed by the Ld.CIT(A) in the light of the judicial precedents especially the decision in the case of C. Aryama Sundaram [2018 (8) TMI 864 - MADRAS HIGH COURT]. Therefore, we concur with the findings of the CIT(A) that the AO erred in disallowing on the sole reason that assessee commenced construction before transfer of original asset.
Directions given by the CIT(A) to the AO to verify as to whether the assessee has completed the construction of new asset within three (3) years of transfer of shares - period of limitation to file appeals etc during Covid-19 period - Assessee has made substantial payment to the builder by 25.02.2020 to the builder for construction of building and three years would be over by February, 2022; In this regard, it was brought to our notice that building (new asset constructed by assessee) received notice from Greater Chennai Corporation on 18.03.2022 to pay building tax(meaning the building was completed by that date) and the delay caused was because of spread of Covid-19, which event we take judicial notice that Covid-19 pandemic spreading was from 20.03.2020 onwards which disrupted the construction activities and therefore, there was a delay in completion of the building, for which, the assessee can’t be faulted. In this regard, the architect has given completion certificate as on 28.11.2023 and finally the builder handed over constructed new asset to the assessee on 08.01.2024, the delay need to be attributed due to disruption in construction activities for more than a year and half and therefore, assessee can’t be denied the benefit of exemption u/s.54F of the Act in the peculiar facts and circumstances of the case and we order accordingly.
In the peculiar facts of the case, as per extended the period of limitation to file appeals etc during Covid-19 period from March 2020 to February 2022, AO to grant the claim of deduction u/s.54F of the Act to the assessee especially because assessee has made reinvestment to builder by making payment of Rs. 4.52 cr by 25.02.2020 and that assessee cannot be faulted for the delay in completion of house due to Covid; and coming to disallowance of Rs. 16,10,800/-, we are of the view that in case if the assessee is able to produce evidence before JAO, in respect of the expenses claimed for payment made to the architect of Rs. 16,10,800/-, the same may be allowed to the assessee.
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2025 (7) TMI 299
Validity of assessment order passed by the AO in light of multiple DINs and assessment order passed as barred by limitation - HELD THAT:- As per Instruction 144 dated 25.10.2019, the assessment order up-to assessment year 2014-2015 was allowed to be passed in ITD/AST system and only from assessment year 2015-2016 it was directed to be passed on ITBA-Portal.
Since the Assessing Officer passed assessment order on ITD/AST system and generated DIN on 31.12.2019, while migrating to ITBA-portfolio, he had once again by an inadvertent error has generated a separate DIN and because of this, there are 02 DIN nos for one assessment order i.e., one generated on 31.12.2019 and another was generated on 24.01.2020. Further, in respect of third DIN no., it is the DIN which has been generated for intimation letter for intimating the assessment order passed by the AO to the assessee.
Therefore, there is no delay in order passed by the Assessing Officer as alleged by Assessee in light of subsequent two DIN nos. that, the assessment order has been passed beyond due date specified i.e., 31.12.2019 and further it has been backdated by referring a handwritten DIN no. in the first page of the assessment order and thus, it is devoid of merit and cannot be accepted. Therefore, we reject the grounds taken by the assessee challenging the validity of the assessment order in light of multiple DIN nos. and the argument that assessment order is barred by limitation.
Addition towards privilege fee, special privilege fee, additional privilege fee and contribution to C.M. Relief Fund - as argued AO has made additions twice i.e., one towards income and another towards remittances, thereby, made double additions on one income - HELD THAT:- Assessee in light of sale bills issued by the appellant-corporation and subsequent realisation of proceeds into the PD account, in our considered view, it is only a manner and method of carrying-out the trade by the appellant- corporation according to it’s requirements, but, on the basis of said evidences, it cannot be concluded that, the trade has been carried-out by the Government of Andhra Pradesh. Therefore, we are the considered view, that the argument of Assessee that, the Government of Andhra Pradesh has carried-out the wholesale trade in the State of Andhra Pradesh and the appellant-corporation is only a Nodal Agency or as an Agent carrying-out trade for the Government of Andhra Pradesh, cannot be accepted and thus, rejected.
Addition made towards privilege fee, special privilege fee, additional privilege fee and contribution to CM Relief Fund under sec.40(a)(iib) - It is a clear case of diversion of income by overriding title, which is clearly evident from the fact that the appellant-corporation has been authorised to collect privilege fee, special privilege fee, additional privilege fee and contribution to CM Relief Fund in terms of section 4-A, 4-B and 4-C of the Act, and, therefore, the amount collected by the appellant-corporation from the holders of the license cannot be treated as “Income” which has been accrued for the year under consideration.
Since the income has been diverted by overriding title, the same cannot be treated as “Income” and consequently, the apportionment of the said amount from the PD account, cannot be treated as payment of privilege fee, special privilege fee, additional privilege fee and contribution to CM Relief Fund directly or indirectly from a State Government undertaking by the State Government as defined u/s 40(a)(iib) of the Act.
AO and CIT(A) without appreciating the relevant facts, erred in making additions towards privilege fee, special privilege fee, additional privilege fee and contribution to CM Relief Fund under sec.40(a)(iib) of the Income Tax Act, 1961.
Thus, we set aside the order of the learned CIT(A) on this issue and direct the AO to delete the addition made towards privilege fee, special privilege fee, additional privilege fee and contribution to CM Relief Fund under sec.40(a)(iib) of the Income Tax Act, 1961.
Addition towards disallowance of privilege fee, special privilege fee, contribution to CM Relief Fund which is debited into the P & L A/c and further, he had also made addition towards additional privilege fee which is credited to P & L A/c by the appellant-corporation - From the above, it is undisputedly clear that, Assessing Officer has made additions twice in respect of one receipt i.e., one at the time of receipt which has been credited to P & L A/c and second at the time of payment out of appropriation to various accounts. Therefore, on this account also, the additions made by the Assessing officer towards additional privilege fee cannot be sustained. Thus, we direct the AO to delete the addition made towards additional privilege fee.
Disallowance of leave encashment and disallowance of PF, superannuation, gratuity and other amounts - We find that, even during the course of appellate proceedings before the Tribunal, since there was no documentary evidence filed by the appellant-corporation to substantiate it’s claims and in absence of such documentary evidence, we uphold the order of the learned CIT(A) on this issue.
Interest u/s 234B and 234C be recomputed on the total income determined in accordance with Law.
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2025 (7) TMI 298
LTCG computation - determining the indexation benefit of the capital gains - whether the indexation benefit of the long term capital gain on the asset will be from the letter of intent dated 14th Feb 2011 which being claimed date of allotment of the capital asset by the assessee or from 20.12.2017, the date of registration of the property as has been allowed by the Ld. AO?
HELD THAT:- The Ld. Coordinate Bench in AY 2019-20 has already decided the same issue in favour of the assessee with respect to Flat no. C-161, C-162, C-163 and C-164 at Kalpatru Sparkals, Bandra East and the present case pertains to Flat no. C-165 in the same property and the concerned AY is 2022-23. The Ld. Coordinate Bench had decided the ground in favour of the assessee observing “ Thus, we hold that date of acquisition for the purpose of computation of capital gain for the impugned immovable property /flats has to be reckoned in FY 2010-11 i.e. from the date of the letter 14.02.2011”. Therefore, we respectfully follow the decision of Ld. Coordinate Bench and accordingly decide the ground no. 1 and 2 in favour of the assessee.
We accordingly direct the AO to consider the date of acquisition for the purpose of computation of capital gain as the date of letter of intent i.e. 14.02.2022 and compute the capital gains accordingly for the concerned AY 2022-23.
Miscellaneous charges incurred on acquisition of property and transfer charges incurred on the sale of the property - It is stated that the AO has not considered the said charges while determining the capital gain chargeable to tax u/s 45 of the Act. We accordingly direct the AO to consider the above request /plea of the assessee in accordance with law and ground no. 3 and 4 also restored to the file of Ld. AO for statistical purposes.
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2025 (7) TMI 297
Nature of expenditure - cost of moulds and dies put to use during the year - In previous years, such expenditure was treated as capital in nature and depreciation was claimed and in the current year, the company has treated it as revenue expenditure - HELD THAT:- We are of the considered opinion that the assessee is entitled to claim the expenditure incurred on dyes and moulds as a revenue expenditure as these have to be replaced frequently, and accordingly, the disallowance made by the AO is not justified. Moreover, as pointed out by the Ld. AR, the department has itself accepted the changed method and allowed deduction for the moulds and dyes as a revenue expenditure in all the subsequent years. Accordingly, this ground is allowed and the disallowance is directed to be deleted.
Reduction of capital investment subsidy from the cost of the assets purchased - assessee received capital investment subsidy from the Jammu & Kashmir Government during the year - amount was directly credited to the capital reserve instead of reducing the same from wdv or cost of the assets for the purpose of calculating depreciation under the Act - AO invoked the provisions of Explanation 10 to Section 43(1) and reduced the amount of subsidy from the cost of the assets for the purpose of calculating depreciation, resulting in the disallowance - HELD THAT:- Finance Act 2015 has enlarged the definition of income given u/s 2(24)(xviii) w.e.f. 01.04.2016. However, the same being prospective in nature is not applicable for the year under consideration, i.e. AY 2011-12. The same view has been taken by the coordinate bench Sasi Shri Extraction Ltd. [2008 (1) TMI 485 - ITAT VISAKHAPATNAM] wherein it has been held that investment subsidy granted at a percentage of fixed capital investment could not be reduced from the cost of a capital asset, if the scheme in question was intended to accelerate industrial development of the state and was not specifically intended to subsidise cost of the capital asset.
Thus, we are of the opinion that the amount of capital investment is not subsidy for purchase of any asset, and therefore, could not be reduced from the cost of plant and machinery for the purpose of calculating the claim of depreciation. This ground of appeal of the assessee is, accordingly, allowed.
Taxability of excise duty refund - revenue or capital receipt - HELD THAT:- We are of the view that in light of the decision in the case of Shri Balaji Alloys [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] which has been upheld by the Hon’ble Apex Court, the excise duty refund has to be treated as a capital receipt.
Disallowance u/s 14A in respect of expenditure attributable to earning exempt income - HELD THAT:- We find that on the issue of disallowance u/s 14A in respect of dividend income, the assessee’s claim that the same is subject to dividend distribution tax, and hence, no disallowance ought to be made is not tenable as the issue is covered by the decision of the Hon’ble Apex Court against the assessee in the case of Godrej and Boyce Manufacturing Company Ltd. [2010 (9) TMI 291 - ITAT, MUMBAI]
Assessee’s contention that where no exempt income had been earned from the investments, no disallowance ought to have been made u/s 14A of the Act by the Ld. AO, we note that the issue is decided in favour of the assessee in numerous decisions of the coordinate benches.
In case no exempt income has been earned during the year under consideration by the assessee, no disallowance could be made u/s 14A of the Act in the light of the judicial pronouncements on the issue. In view of the above, we deem it appropriate to restore the issue to the Ld. AO for the limited purpose of verification to ascertain whether any exempt income, including dividend income, has been earned by the assessee during the year and recompute the disallowance accordingly.
Disallowance u/s 14A for the purpose of computing book profit u/s 115JB - Disallowance u/s 14A should not be taken into account while computing the book profit u/s 115JB as held in Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI]
Disallowance of deduction u/s 80-IB in respect of the profit earned by the Jammu Unit - AO is not justified in disturbing the method of allocation of expenses adopted by the assessee, especially in the immediately preceding year, the method of computation has been examined and upheld by the Ld. PCIT vide order u/s 263 of the Act. Accordingly, this ground of appeal is allowed in favour of the assessee.
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2025 (7) TMI 296
Reopening of assessment u/s 147 - reassessment beyond four years - reasons to believe - conditions precedent for reopening assessments - Addition of inflated purchase of Actor Rights of Sh. Amitabh Bachchan - HELD THAT:- As perused the reasons recorded by the AO for reopening the assessment beyond four years. The reason recorded by the AO for reopening the case, nowhere, mentions that there is any failure on the part of the assessee to truly and fully disclose all material facts necessary for the assessment though the case has been reopened after four years.
AO has not demonstrated that how the income has escaped the assessment particularly when the said expenditure of Rs. 60 Crores is found debited as expenditure as well as credited as the stock-in-trade in the Profit & Loss Account. Such contra entries are therefore revenue neutral.
Thus, we find that the prime conditions for reopening of the case have not been met. The escapement of income has not been demonstrated having taken place by the AO and thus the issue of "escapement of income" is squarely covered by the decision of Givaudan Flavours India (P) Ltd [2011 (3) TMI 619 - ITAT, MUMBAI] In order to justify the initiation of reassessment it is sine qua non that there must be some income which escaped assessment.
Since two basic conditions; viz, failure on the part of the assessee to truly and fully disclose all material facts necessary for the assessment after the expiry of four years and quantification of escapement of income have not been clearly spelt out in the reasons recorded for reopening the assessment in this case. We therefore, do not find any infirmity in the order of the Ld. CIT(A) in quashing the reopening of the assessment on jurisdictional grounds. Assessee appeal allowed.
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2025 (7) TMI 295
Validity of assessment framed u/s 143(3) OR u/s 153C - HELD THAT:- We fail to understand that when the AO himself has drawn of satisfaction note clearly pointing out that the assessment should be completed u/s 153C of the Act, then why at the time of passing of assessment order, he did not resort to that provision.
This is a clear fundamental lapse on the part of the AO which cannot be condoned. By placing reliance on the various legal propositions and the acceptable judicial precedence, the assessment order is not sustainable as it has been passed without following the due rigours of law. Appeal of the assessee is allowed.
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2025 (7) TMI 294
Denial of claim of the assessee regarding option u/s 115BAC - Assessee opted to avail of the lower regime of tax as per section 115BAC and did not claim deduction under chapter VIA - said claim was rejected on the ground that the assessee himself had withdrawn the option referred in subsection (5) of section 115BAC for the previous assessment year i.e 2022-23 and subsequent years - HELD THAT:- Each assessment year is separate and the intention to opt for the lower new tax regime as per section 115BAC of the assessee is from day one as even during the previous assessment year, the assessee had opted for lower new text regime, however, the said claim of the assessee was rejected on technical consideration, holding that the return was not filed within time, which was also challenged by filing rectification application.
Now so far as the facts of the present assessment year is concerned, the assessee was always ready and willing to opt for the lower new tax regime and is still ready and willing to opt for lower new tax regime as per section 115BAC since the assessee has not challenged the decision of the previous assessment year that alone should not deprive the assessee of the benefit of the scheme, as at the time of filing return for the assessment year 2023-24, no option for any scheme had attained any finality.
Even from the computation to the return of income filed by the appellant for the year under appeal it is clear that the appellant did not claim any deduction under chapter VIA and has opted for the option by saying YES in view of the fact that the appellant had not been given the benefit of the option in the previous assessment year and this was the first assessment, year for the purpose of S. 115BAC.
Lower new tax regime u/s 115BAC of the Act is a beneficial legislation and generally such provisions aims to benefit all members of the society and are designed to provide assistance and protect individuals from heavy burden of taxes. Therefore principle of ‘beneficial construction’ suggest that courts should interpret these provisions liberally, giving them the widest possible meaning to ensure their objectives are met.
In this way, if the claim of the assessee for the previous assessment year was rejected on account of delay, then in that eventuality the same should not affect the claim for the current assessment year, when the assessee has not only made the claim and also filed return of income in time. Hence allow the grounds raised by the assessee by quashing the order of CIT(A). AO is therefore directed to pass afresh orders considering the return filed by the assessee u/s 115BAC of the Act and act accordingly. Assessee appeal allowed.
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2025 (7) TMI 293
Scope of limited scrutiny - allegation of Violation of limited scrutiny instruction - Addition on account inadmissible interest u/s 36(1)(iii)
DR argued that item ‘c’ extracted by the ld AO on first page of this order qua reasons of limited scrutiny refers to reason “high interest expenditure against new capital added in work in progress or addition made to the fixed asset.” It was argued that the impugned reason covered AO’s action of enquiring and making addition u/s 36(1)(iii) of the Act - HELD THAT:- The justification given by the ld DR has been found to be far from satisfactory and highly unconvincing. It is trite law that words and phrases used in judicial proceedings cannot be understood in isolation and have to be understood in complete contextual environment. We have noted that the ld DR basically is pressing on the word “high interest expenditure” so as to justify the addition of the ld AO. The same is not correct because the phrase “high interest expenditure” is to be understood only in the light of expenses qua new capital added or any additions to fixed assets.
No such factual fact is found to be existing in the controversy of addition u/s 36(1)(iii) of the Act raised by the ld AO. We, therefore, cannot subscribe to the reasoning put forth by the revenue.
Whether the instructions of CBDT are binding upon assessing authorities or not? - Instruction No. 5 of 2016 dated 14.07.2016 of CBDT mandating adherence to only limited scrutiny condition by the ld AOs of the department is mandatory and binding. The impugned instruction postulates that an AO may travel beyond the reasons given in the limited scrutiny parameters, provided he obtains necessary approval from his Pr. Commissioner and proceeds to convert the case into a complete scrutiny case. We have also noted that there exists a catena of cases stipulating that an AO is to restrict his enquiry and consequent addition only to the issues for which a case was selected for limited scrutiny assessment and cannot travel beyond. Such view has, interalia, been held in the case of Crystal Phosphates Ltd[2023 (4) TMI 817 - PUNJAB AND HARYANA HIGH COURT] and Weilburger Coatings (India) (P.) Ltd. [2023 (10) TMI 921 - CALCUTTA HIGH COURT]
We have noted that it is an evident fact on record that the ld AO has travelled beyond the limited scrutiny parameters for which the case was selected by making the impugned addition u/s 36(1)(iii) of the Act. We have noted that in respectful compliance to the decision of the Hon’ble High Courts discussed supra the said addition was not legally permissible. Accordingly, we direct the ld AO to delete the impugned addition u/s 36(1)(iii) - Assessee appeal allowed.
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2025 (7) TMI 292
Reopening of assessment - notice beyond four years - new tangible material to reopen - independent satisfaction of AO or borrowed satisfaction - primary contention of the AR is that the addition made in the hands of the assessee is merely based on the information received by the AO from the investigation wing and that the AO has not carried out any independent enquiry or applied his mind - a sum received in cash in the capacity as partner of the assessee added as undisclosed income.
HELD THAT:- We notice from the perusal of the materials received from the Investigation wind with regard to the seized material such as the statement recorded, ledger copy etc., there is no clear indication that the impugned cash transaction is entered into with the assessee and there is no mention of assessee's name in any of the materials relied on.
We further notice from the details of TDR Purchase containing the Ledger A/c also does not contain the assessee's name. We also notice that the primary reliance placed by the AO on the seized material a noting named "Mehfus Bhai TDR A/c" also does not contain the assessee's name.
It is also an accepted position by the revenue that the TDR sold is not in the name of the assessee but in the name of M/s. M.K. Shelters-JV having a PAN- AAMFM2671H.
From the perusal of the details relied as mentioned herein above, it is not coming out clearly as to how the AO has come to the conclusion that the assessee firm which is not in operation from 2003, without even a bank account is being used for routing the cash. The letters received from the investigation wing as well the Central Circle mentions that the Mr. Mehfusbhai has allegedly received cash but no evidence is brought on record to evidence that the cash is received in his capacity as partner in the assessee firm and that the cash is routed through assessee.
AO in the order of assessment has merely relied on the statement of Shri Akshay Doshi director of M/s.Bhoomi group, and the seized documents received. AO in our considered view has not carried out any independent enquiry or has not brought any material on record in support of the addition made in the hands of the assessee.
The finding of the AO that the assessee firm is in existence for routing the cash transaction on sale of TDR is not substantiated by any evidence. It is relevant to note that the Memorandum of Understanding for the sale of TDR is entered into with M K Shelters-JV.
It is a settled position that an addition made merely based on a third party statement u/s 131 of the Act without bringing any corroborative evidence cannot be sustained. Considering the merits of the case, we are of the view that the addition made by the AO merely by relying on the statement recorded u/s 131, without conducting or recording any independent findings or evidences is not sustainable. Hence we hold that the addition made in the hands of the assessee alleging that the cash transactions are routed through the assessee without any material evidence on record is liable to deleted. Ground No. 7 & 8 raised by the assessee is allowed.
AO made the protective assessment in the hands of the assessee for the reason that the substantive addition is made in the hands of M/s. M.K. Shelters-JV - We have while deciding the issue for AY 2009-10 on merits, have held that the AO for the purpose of making the addition did not bring any evidence on record in support of the contention that the assessee firm has been used to route the cash transaction. We further held that the addition merely based on the statement recorded without recording any independent finding is not sustainable. We notice that there is no change to the facts or the basis of making the addition for the years under consideration except that the addition is made on protective basis. Therefore in our considered view our decision on merits for AY 2009-10 is mutatis mutandis applicable for AY 2011-12, AY 2012-13 & AY 2015-16 also.
Whether AO has passed the assessment order without disposing of the objections raised by the assessee? - From the perusal of records we notice that the assessee has raised objections for reopening the assessment and that the AO in the order has not stated anything with regard to the objections disposing the said objections. In this regard we notice that in the case of M/s.Kesar Terminal & Infrastructure Ltd [2025 (2) TMI 51 - BOMBAY HIGH COURT] has considered similar issue of AO passing an order of reassessment without disposing off the objections raised by the assessee wherein held neither were the assessee's objections disposed of by a separate order, nor was the assessee granted any reasonable opportunity of questioning the order disposing of the objections. In such circumstances, the Court, quashed the combined order on the ground of want of compliance with jurisdictional parameters.
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