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Showing 241 to 260 of 1442 Records
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2022 (2) TMI 1203 - ITAT AHMEDABAD
Disallowance u/s 80IC - allowance of claim of deduction u/s. 80IC by the Ld. CIT(A) on incomes pertaining to Interest on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off - Claim denied by A.O holding that they were not in the nature of incomes derived from the business of the assessee for the purposes of being eligible to claim deduction of profits thereon - HELD THAT:- The basis on which the Ld. CIT(A) had allowed the assessee’s claim of deduction u/s. 80IC in relation to income being Interest on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off, being the order of the Ld. CIT(A) for Assessment Year 2012-13 & 2013-14. [2019 (10) TMI 119 - ITAT AHMEDABAD] the same has been upheld by the ITAT. We have noted that the ITAT with respect to the very same nature of incomes as in the impugned order had held that such incomes has affirmed the findings of the Ld.CIT(A) that they are derived from the manufacturing activity and therefore were eligible to claim deduction of profits earned thereon u/s. 80IC of the Act.
D.R. was unable to point out any distinguishing fact before us nor was any decision of the higher authorities brought to our notice holding to the contrary. No reason to interfere in the order of the Ld. CIT(A) allowing assessee’s claim of deduction u/s. 80IC of the Act on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off. - Decided against revenue.
Disallowance of foreign commission paid to non-residents - CIT-A deleted the addition - HELD THAT:- CIT(A) deleted the disallowance of commission expenses finding that the issue was identical to that in Assessment Year 2013-14 [2019 (10) TMI 119 - ITAT AHMEDABAD] wherein identical disallowance was deleted and further noting on facts that most of the commission agents were same as in Assessment Year 2013-14, while the new commission agents fulfilled the criteria laid down for non deduction of tax at source on the commission so paid.We have also noted that the ITAT has upheld the order of the Ld. CIT(A) in Assessment Year 2013-14. Since the the Ld. D.R. was unable to point out any distinguishing fact before us nor was any decision of the higher authorities brought to our notice holding to the contrary nor any infirmity pointed out in the findings of the Ld.CIT(A) vis a vis the new commission agents, we see no reason to disagree with the Ld.CIT(A).the deletion of disallowance of commission expenses is accordingly upheld. - Decided against revenue.
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2022 (2) TMI 1202 - ITAT JAIPUR
Disallowance of Employee's contribution of ESI and PF - amount paid to the said funds' accounts late but before the due date of filing of return u/s 139(1) - Scope of amendment - HELD THAT:- In the instant case, admittedly and undisputedly, the employees’ contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. See SHRI GOPALAKRISHNA ASWINI KUMAR [2021 (10) TMI 952 - ITAT BANGALORE].
Thus addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees’s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted - Decided in favour of assessee.
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2022 (2) TMI 1201 - ITAT DELHI
Bogus LTCG - exemption u/s 10(38) - shares of a pre-determined Penny stock company transaction - HELD THAT:- Despite lapse of almost four months from the date of direction given by the Bench, the Revenue could not file any document to substantiate that the Investigation carried out by the Directorate of Investigation of Kolkata or SEBI has any link with the instant transactions of the assessee. We further find the report of the SEBI is of 2015, whereas, in the instant case the assessee has purchased the shares in off market dealing in 2012 and sold the same in 2014 through stock exchange, meaning thereby that the transactions are of a date prior to the date of SEBI Report.
In view of the above decision of the Tribunal in the case of Smt. Karuna Garg cited [2019 (8) TMI 450 - ITAT DELHI] and since the Revenue has failed to comply to the direction of the Bench in furnishing any report from the AO as to in what manner, the investigation carried out by the Directorate of Investigation, Kolkata and report of SEBI has any link with the transactions carried out by the assessee, we allow the claim of Long Term Capital Gain on account of sale of shares of M/s Esteem Bio Organic Food Processing Ltd. and consequently the exemption claimed u/s 10(38) of the Act. The grounds raised by the assessee are accordingly allowed.
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2022 (2) TMI 1200 - ITAT MUMBAI
TDS u/s 195 - payment made for transponder charges - royalty u/s 9 (1) (vi) under the relevant double taxation avoidance agreement - Indo-US DTAA - HELD THAT:- As relying on own case [2022 (1) TMI 939 - ITAT MUMBAI] we are of the view that there is no infirmity in the order of The ld CIT (A) in holding that payment by assessee to a foreign company for utilization of transponder centered on a satellite is not in the nature of Royalty in terms of various Article of above Three DTAAs.
Coming to the argument of the ld DR that relying on Article 3 (2) of The Treaty, term “process” as defined in Explanation [6] to section 9 (1) (vi) of The Act, should be read in to the treaty as the term “process” used in the treaty Article 12 (3) is not defined in Treaty, hence, meaning assigned domestic law should be used. We find that in Article 12 (3) of India Malaysia Treaty it is “ Secret Formula or process” is the term used and not “ process” , therefore meaning of term “ process” cannot be incorporated in the treaty, even otherwise, because then, the meaning of word “secret “ in treaty would become redundant. CIT (A) has also dealt with this argument of ld AO in his order and then order of ld CIT (A) worded identically in the issues decided by coordinate bench has been upheld. Therefore, this argument also deserves to be dismissed. - Decided against revenue.
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2022 (2) TMI 1199 - ITAT MUMBAI
Addition u/s 68 - bogus unsecured loans - search and seizure operation conducted on the residential and business premise of the PKJ and on the basis of evidences recovered and statements of various persons recorded, Assessing Officer observed that it was found that PKJ was not doing any genuine business activity and was engaged in the activity of providing accommodation entries - HELD THAT:- The search and seizure operation u/s. 132(1) was conducted in Mangal Group of cases on 01.10.2013 it is relevant to note that Mangal group is owned by Shri Mangal jain and Shri Ajit Jain and family members and they hold major shares and directorship in companies of Mangal group. Assessee is also part of Mangal group which is owned by Shri Mangal Jain and others. In the case of Mangal group, Assessing Officer observed that assessee made additions related to transactions with PKJ group by way unsecured loans/ share application money/bogus purchases. We observed that in the instant case also assessee made similar additions which is relating to unsecured loans and it is pertinent to note that the above said unsecured loans were repaid during the assessment year or in subsequent Assessment Years - Decided in favour of assessee.
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2022 (2) TMI 1198 - ITAT MUMBAI
Addition u/s 68 - unexplained cash credit - HELD THAT:- The return for a negligible taxable income filed by the depositors which creates doubt about the genuineness of the transaction. CIT – A noted a peculiar aspect that the above sum of ₹ 7.86 crores were invested in lot of ₹ 20 lakhs which clearly shows that the initially funds were received as an advance but a letter on treated as preferential capital. The terms and conditions of the preferential capital whether those are redeemable, rate of dividend, nature of cumulative or non-cumulative dividend was not at all forthcoming - uncontroverted findings of the lower authorities and absence of the assessee to produce any further evidence , despite repeated opportunities of hearing , we confirm the finding of the learned CIT- A wherein the addition made by the learned assessing officer under section 68 is made. In view of this, ground No. 1 of the appeal is dismissed.
Set off of unabsorbed business losses and unabsorbed depreciation - HELD THAT:- We fully agree with the findings of the CIT – A that the provisions of section 72 speaks about setting off of brought forward business losses against business income only and as the above sum of ₹ 7.86 crores has been taxed u/s 68 of the act, same cannot be said to be a business income and therefore the brought forward business losses cannot be allowed to be set off against that addition stop similarly is the case for the set off of unabsorbed depreciation under section 32 - In view of this we do not find any infirmity in the order of the CIT- A in confirming the action of the learned assessing officer in not allowing set off of business losses carried forward and unabsorbed depreciation against the above addition. Accordingly ground No. 2 of the appeal is dismissed.
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2022 (2) TMI 1197 - ITAT SURAT
Addition on account of retention money - matter has not been verified whether or not the retention money has been offered in subsequent years - CIT-A deleted the addition - HELD THAT:- We find that CIT(A) while granting relief to the assessee specifically mentioned that Assessing Officer himself has not addition any addition on account of retention money in order giving effect in all cases vide his order dated 19.11.2016.
Despite accepting the contention of the assessee in all earlier in his own order on 19.12.2016, filed present appeal on similar issue on 20.12.2019. Before us Ld. Sr.DR for the Revenue vehemently argued and insisted that principle of consistency should have been followed by ld CIT(A) and now the issue be restored to the file of AO. We are unable to persuade ourselves on the submission of Ld. Sr.DR for the revenue, as the AO himself deleted the similar addition by accepting the contention of assessee on the retention money and again filed the appeal on the same issue. Therefore, we do not find any infirmity in the order passed by Ld. CIT(A). Accordingly, we affirm the same. - Decided against revenue.
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2022 (2) TMI 1196 - ITAT SURAT
Addition of agricultural expense on presumptive basis - AY 2014- 15 - HELD THAT:- We have perused case file as well as paper books furnished by assessee. We find no substance in the arguments of ld AR of the assessee. The ld AR instead of giving proper justification has roamed here and there. We have gone through the findings of ld CIT(A) and observed that Ld CIT(A) after considering the evidences and documents submitted by assessee has deleted part addition and granted appropriate relief to the assessee.
We have gone through the order of ld CIT(A) and noted that Ld. CIT(A) has passed a reasoned and speaking order after considering the submission made by assessee. The ld CIT(A) has examined the assessee`s facts and evidences, and has granted appropriate relief. That being so, we decline to interfere with the order of Id. CIT(A), his order on this issue is, therefore, upheld and the grounds of appeal of the assessee are dismissed.
For A.Y. 2015- 16 - We note that assessee is blowing hot and cold. The assessee as per his own wish showing more agricultural income and when assessee is caught by income tax authorities, then showing less agricultural income! If someone blows hot and cold, they keep changing their attitude towards something, sometimes being very enthusiastic and at other times expressing no interest at all. The assessee under consideration has not explained with cogent evidence that how and why he has reduced agricultural income. We note that in the appellate proceedings, the assessee reiterated that affidavits filed before the AO to claim reduced agriculture income of ₹ 7,81,363/-only as against ₹ 31,42,190/- shown in the ROI filed on 27.03.2016. From the assessment order, it is apparent that the assessee had filed affidavit at the fag end of assessment proceedings as the assessment order is dated 20.09.2017 and the affidavit dated 20.09.2017 appear to be have been filed on the same date. This fact clearly indicates that the assessee was not in a position to explain the agriculture income and as an afterthought, the affidavit could have been filed in response to final show cause notice by the AO.
CIT(A) observed that there are various decisions of Hon'ble ITAT Benches and courts whereby disallowance in the range of 30% to 40% of the net agriculture income shown in the return of income was considered fair and reasonable. Accordingly, net agriculture income of ₹ 31,42,190/- was reduced by ₹ 9,42,657/-(30% of ₹ 31,42,190/-) to account for agriculture expenses. Hence, ld CIT(A) restricted the addition from ₹ 25,03,302/-, to ₹ 9,42,657/- (30% of ₹ 31,42,190/-), only. Therefore, we note that a reasonable relief has already been provided by the ld CIT(A). Hence, we do not find any infirmity in the order of ld CIT(A) - Decided against assessee.
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2022 (2) TMI 1195 - ITAT AMRITSAR
Reopening of assessment u /s 147 - validity of the jurisdiction assumed by the A.O, viz. ITO, Ward-1(3), Bathinda for reopening the assessee’s case u/s 147 - requisite sanction u/s 151 obtained from PCIT or not? - HELD THAT:- A.O in the present case before us had failed to obtain the approval of the prescribed authority as contemplated u/s 151 of the Act, i.e, qua the ‘reasons to believe’ recorded by him on 14.03.2017, that it is a fit case for issuance of Notice u/s 148 therefore, he had wrongly assumed jurisdiction and de hors satisfaction of the aforesaid statutory requirement issued Notice u/s 148, dated 24.03.2017 and framed the assessment u/s 143(3) r.w.s 147, dated 22.11.2017. We, thus, in terms of our aforesaid observations hold the Notice u/s 148, dated 24.03.2017 issued by the A.O, i.e, ITO, Ward-1(3), Bathinda as invalid in the eyes of law and quash the assessment framed by him u/s 143(3) r.w.s 147, dated 22.11.2017. Accordingly, the order passed by the CIT(A) is set-aside and, the assessment framed by the A.O u/s 143(3) r.w.s 147 of the Act, dated 22.11.2017 is quashed for want of valid assumption of jurisdiction by him.
As we quashed the assessment framed by the A.O u/s 143(3) r.w.s 147, dated 22.11.2017, for want of jurisdiction on his part, therefore, we refrain from adverting to and therein adjudicating the other contentions so raised by him as regards the validity of the jurisdiction assumed by the A.O for framing the impugned assessment, as well as those advanced by him as regards the sustainability of the addition on the merits of the case, which, thus, are left open. Appeal of assessee allowed.
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2022 (2) TMI 1194 - ITAT DELHI
Income accrued In India - receipts for design and drawing - Permanent Establishment [PE] in India in the nature of Dependent Agent PE [DAPE] as per the provisions of Article 5(4) of the India - USA DTAA - Whether DRP erred in holding that the receipts for design and drawing should be taxed u/s. 44DA of the Act instead of FTS u/s. 9(1)(vi) of the Act? - appellant company is an entity incorporated in the United States of America and is engaged in manufacturing and selling of products and equipments primarily for the North American Steel Industry - HELD THAT:- A perusal of the entire contract with RIC shows that RIC is an independent consultant having no rights to conclude contract on behalf of the assessee so as to construe as a permanent establishment in India. Since, in its independent professional capacity it provides similar services to other clients as mentioned elsewhere.
Further probe of facts show that one Shri Anand Mathur runs a consultancy business in the name and style of M/s. Rajlaxmi International Corporation and the assessee seeks his service to represent it in India for its project in India. The assessee executes projects i.e. supply, erection and commission of desulphurization plant on turnkey basis through international competitive bidding process.
The role of the RIC Shri Anand Mathur, representative, was by and large to find a project partner for the assessee to undertake the supply and erection of indigenous components. Besides, RIC is engaged for the liasoning service of the project on behalf of the assessee who neither intended nor empowered to conclude a project on behalf of the assessee.
On careful appreciation of facts, we are of the considered view that RIC is an independent consultant to provide certain liasoning service. In fact, the project is executed jointly by the assessee and its consortium partner in India M/s. Beekay Engineering Corporation
In the case of RINL, consortium partner M/s. Beekay Engineering Corporation is 78% of the contract value and in the case of the contract with SAIL [Bhilai Steel Plant], the value of supply services and erection done by the consortium partner is 69%.
Considering agreement with RIC, we are of the considered opinion that RIC does not constitute DAPE of the assessee under the relevant article of the India - USA DTAA.
The consortium partner M/s. Beekay Engineering Corporation has done its work by way of a separate contract and, therefore, the same cannot be held as installation PE of the assessee. There is no dispute that the assessee has supplied only engineering design, that too, from abroad and consideration in view thereof has also been received from outside India and since we have held that RIC is not DAPE within the meaning of Article 5 of the India - USA DTAA, there is no question of any attribution to the assessee. In light of the afore-mentioned discussion, the appeal of the assessee is allowed and that of the Revenue is dismissed.
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2022 (2) TMI 1193 - ITAT RAIPUR
Addition u/s 40(a)(ia) - assessee had failed to deduct tax at source on the interest/finance charges that was paid/credited by it to M/s Magna Fincorp Limited - default u/s 201(1) - HELD THAT:- We find that the aforementioned payee, viz. M/s Magna Fincorp Limited (supra) had duly accounted for the aforesaid interest/finance charges received from the assessee in its return of income for the year under consideration and had paid the corresponding taxes on the same. The aforesaid factual position can safely be gathered from the certificate of the Chartered Accountant, dated 19.12.2014(supra) that has been filed by the assessee before us
In our considered view, now when the aforesaid payee, viz. M/s Magna Fincorp Limited(supra) had duly accounted for the interest/finances charges in its return of income and had paid the corresponding taxes, therefore, as per the “2nd proviso” to Sec.40(a)(ia) of the Act the aforementioned amount could not have been brought within the realm of the disallowance contemplated under the said statutory provision. Apart from that, as stated by the Ld. AR, and rightly so, we find that the Hon'ble Supreme Court in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. [2007 (8) TMI 12 - SUPREME COURT] had observed, that in case the payee of the amount in question had paid the taxes on the same, then, the payer cannot be held as an “assessee-in-default” as regards the said amount for the purpose of enforcing the recovery of the corresponding tax liability u/s. 201(1) - Decided in favour of assessee.
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2022 (2) TMI 1192 - ITAT RAIPUR
Reopening of assessment u/s 147 - Eligibility of reasons to believe - independent application of mind by AO - Scope of borrowed satisfaction - information received from CIB that the assessee had during the year under consideration booked bogus purchases - HELD THAT:- Though there was material/information with the AO on the basis of which he could have arrived at a bonafide belief that the income of the assessee chargeable to tax has escaped assessment, however, we find that he had failed to apply his mind to the material/information before him and had reopened the case of the assessee by merely referring to the information that was received by him from CIB. As per the settled position of law, the reopening of a concluded assessment presupposes application of mind by the Assessing Officer to the material/information before him, on the basis of which he arrives at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment.
In the case before us, the Assessing Officer had merely acted in a mechanical manner on the information that was received by him from the CIB, and without applying his mind to the said information/material had reopened the case of the assessee u/s.147 of the Act. In our considered view, the Assessing Officer by reopening the case of the assessee on the basis of a borrowed satisfaction, had thus, wrongly assumed jurisdiction u/s.147 of the Act, which, thus, on the said count itself on the said count itself cannot be upheld and is liable to be quashed -
Addition made by the Assessing Officer has no plausible nexus with the reasons on the basis of which the case of the assessee was reopened. On the one hand, the Assessing Officer had alleged that the assessee had booked bogus purchases to suppress his real income, however, on the contrary, he had made the addition in his hands on the ground that the purchases in question were in the nature of unexplained investment. In our considered view, as the very addition made in the hands of the assessee militates against the very reason on the basis of which the case of the assessee was reopened, therefore, the addition on the said count also is liable to be struck down. - Decided in favour of assessee.
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2022 (2) TMI 1191 - ITAT RAIPUR
Disallowance of wages and salary expenses - Gross profit/Net profit ratio of the assessee had declined in comparison to preceding year; and that the vouchers in support of the salary and wages expenses did not contain the requisite details - HELD THAT:- Admittedly, the Gross profit/Net profit ratio of the assessee had declined as in comparison to the preceding years - perusal of the details culled out by the AO, therein, at the very face of it does not instill any confidence as regards the view taken by him that the assessee had inflated certain expenses for suppressing his income - though there can be multiple reasons for fluctuation in the Gross profit/Net profit ratio and fall in the same, but the said fact on a standalone basis can by no means justifiably lead to the conclusion that the assessee had inflated expenses for facilitating suppression of his business income.
In case the assessee's claim for deduction of expenses is not supported by the requisite documentary evidences, then, the same would be liable to be disallowed by the A.O. However, we cannot remain oblivious of the fact that the Assessing Officer before drawing adverse inferences as regards the assessee's claim of expenses is obligated to specifically point out those expenses which as per him are not supported by the requisite corroborating documentary evidences.
AO in the case before us had though pointed out that vouchers produced by the assessee did not contain requisite details, i.e., working hours, duration of work, bifurcation of skilled/semi-skilled labour etc., but then, we cannot be oblivion of the fact that there is no whisper of any single instance of expenditure in the body of the assessment order which as per the AO could not be verified. In our considered view, a generalized observation as regards the non-verification of the assessee's claim for deduction of any expenditure cannot, on the said standalone basis, justify the disallowance of the said expenditure - AO had not uttered a word as regards the basis for determination of the ad-hoc disallowance of the salary and wages expenses at ₹ 2.50 lac. Backed by our aforesaid observations, we not being able to persuade ourselves to subscribe to the ad-hoc disallowance of ₹ 2.50 lac(out of salary and wages expenses), thus, vacate the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and vacate the disallowance of ₹ 2.5 lac (supra) made by the Assessing Officer. The Ground of appeal No. 1 is allowed.
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2022 (2) TMI 1190 - ITAT RAIPUR
Addition u/s. 40(a)(ia) - interest/finance charges received from the assessee firm in its return of income - HELD THAT:- As matter of fact borne from the record that the assessee firm had failed to deduct tax at source on the interest/finance charges that was paid/credited by it to M/s. Magna Finance Ltd.. However, we find that the aforementioned payee M/s. Magna Finance Ltd. (supra.) had duly accounted for the aforesaid interest/finance charges received from the assessee firm in its return of income for the year under consideration and had paid the corresponding taxes on the same. The aforesaid factual position can safely be gathered from the Certificate of Chartered Accountant, dated 09.06.2016(supra.) that has been filed by the assessee before us.
Now when the aforesaid payee, viz. M/s. Magna Finance Ltd. (supra.) had duly accounted for the interest/finance charges in its return of income and had paid the corresponding taxes on the same, therefore, as per the '2nd proviso' to section 40(a)(ia) of the Act, the aforementioned amount could not have been brought within the realm of disallowance as contemplated under the aforesaid statutory provision. Apart from that, as stated by the Ld. AR, and rightly so, we find that in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT[2007 (8) TMI 12 - SUPREME COURT] had observed, that in case if the payee of the amount in question had paid the taxes on the same, then, the payer i.e. the assessee cannot be held as an assessee-in-default as regards the said amount for the purpose of enforcing the recovery of the corresponding tax liability u/s. 201(1) of the Act.
We are unable to subscribe to the disallowance made by the Assessing Officer u/s. 40(a)(ia) of the Act. Accordingly, we herein set-aside the order of the CIT(Appeals) and vacate the disallowance of ₹ 3,95,301/- made by the Assessing Officer. The Ground of appeal No. 1 is allowed.
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2022 (2) TMI 1189 - ITAT AMRITSAR
Reopening of assessment u/s 147 - unexplained bank deposits - valid approval from the appropriate authority as contemplated u/s 151 or not? - non application of mind by the approving authority, viz. Additional CIT-Range VI, Pathankot - HELD THAT:- As in case of the assessee before us the prescribed authority, viz. Additional CIT-Range VI, Pathankot had granted the approval u/s 151 of the Act in a mechanical manner, i.e, without application of mind to the facts of the case as were there before him, therefore, the assessment framed by the AO u/ss. 147/143(3) of the Act, dated 24.02.2014 cannot be sustained and is liable to be vacated on the said count itself. Accordingly, for want of valid assumption of jurisdiction by the AO the assessment framed by him u/s 147/143(3) of the Act, dated 24.02.2014 is herein quashed. - Decided in favour of assessee.
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2022 (2) TMI 1188 - ITAT DELHI
Assessment u/s 153A/143 - Difference between assessments under section 143(3) and 144 - HELD THAT:- Consequences of assessments under section 143(3) and 144 are distinct and different. Assessment under section 143(3) is made after perusal of return of income and seeking evidences in respect of the incomes and expenditure disclosed in such return of income. A best judgment assessment u/s 144 is made without the benefit of return of income and the AO can resort to a rejection of books of account and estimation of income. In a best judgement assessment, the interest is calculated under section 234A of the Act till the date of completion of the assessment whereas in assessment under section 143(3), the terminal date of calculating interest is the date of filing of return. Under section 246A of the Act, separate appeal is provided for the assessment made under section 144 of the Act.
In the case of a best judgment assessment, as per the provision of section 142(3), there is no requirement of any opportunity of being heard to the assessee in respect of the material gathered by the AO whereas in an assessment under section 143(3) whatever evidence is being gathered has necessarily to be confronted. Thus, very different consequences flow from an assessment under section 144 of the Act.
Mention of nature of the order as section 153A r.w.s. 143(3) was not a technical mistake or an error which can be cured by resorting to the provisions of section 292B of the Act. AO even though recording that no return had been filed and no notice under section 143(2) had been issued, continued to proceed as if he was making an assessment under section 143(3) - Hence, the order made under section 153A/ 143(3) is not legally tenable and ought to have been made under section 144 of the Act. There is a clear distinction between the two forms of orders i.e. section 143(3) and section 144 and therefore, in the present case, the orders ought to have been passed under section 144 of the Act. Hence the orders so passed by the AO u/s 143(3) for the A.Y 2012-13 and under section 153A read with section 143(3) for the A.Ys 2011-12 and 2009-10 suffer from an incurable jurisdictional defect and cannot be upheld. On this count alone the assessment orders in respect of A.Ys 2012-13, 2011-12 and 2009-10 do not survive and are liable to be quashed.
Assessment orders for the AY’s 2009-10, 2011-12 and 2012-13 are invalid and we are not required to go into the merits of the case. However, in respect of the AY 2010-11, the return of income was filed and the assessment was correctly framed u/s 153A read with section 143(3) of the Act.
Seized diaries and the income arising therefrom do not belong to the assessee - assessee has stated that the income that has been assessed in the hands of the assessee does not belong to him - It is trite that income has necessarily to be assessed in the hands of the correct person i.e. person who has earned it. This is manifest from the section 4(1) of the Income-tax Act which states that the income tax is to be levied on the total income of every person who is liable to pay tax on the same - correct person who is liable to pay income-tax on the income has to be assessed and if for any reason a wrong person has been taxed, it does not preclude the AO from taxing the right person. This judgment is the guiding force for the principle that the Assessing Officer has to tax the right person and the right person alone who is liable to pay income tax in accordance with law and has no option to tax in accordance with his belief or notion or discretion.
Whether the income belongs to the assessee or not, is a jurisdictional/ foundational issue which can be adjudicated upon at any stage of the proceedings based on the facts available on record. AO cannot assess any person simply because it is more convenient to do so or it is in the interest of revenue. Similarly, just because the assessee claims that income may be taxed in his hands which he retracts later, he can’t be assessed in respect of the said income if the overwhelming facts establish that the income does not belong to him.
The expenses in the profit-loss account are on account of sales expenses, commission on sales, purchase for waste sales from J Polymer, factory wages, office wages, interest, telephone charges, water charges transport outward etc. There is a statement of affairs drawn which shows unsecured loans and its utilization on the asset side - unsecured loans that have been taken have been used for building construction, land purchase and to fund the business activities as stated in the seized diary A/OPJ/03. The names of J Polysacks, J Polyfibre, Chinnaswami Godown, G Prakash and chit funds as current assets, loans and advances and investment also feature in the said statement of affairs. The CIT(Appeals) besides computing gross profit on undisclosed trading receipts has also computed undisclosed income of ₹ 4,10,58,508/- on account of cash receipts from debtors and other advances, chit funds and cash loans as per the seized diary in the A.Y 2012-13. Then facts are clearly indicatives of business activities of the companies and not the assessee.
There is a sum of ₹ 15 lakhs as cash loan given by Om Prakash Jakhotia. This shows that Om Prakash Jakhotia had given a loan of ₹ 15 lakhs which also is indicative of the fact that all the entries contained in the seized diary A/OPJ/03 do not belong to him. Why would Om Prakash Jakhotia give loan to himself and record the same. This is also a reflection that the books do not pertain to Om Prakash Jakhotia but perhaps belong to the companies.
Books for the earlier period were not found during the course of search. From the statement of affairs drawn by the assessee on the basis of seized diary A/OPJ/03, it clearly comes out that the money was used for the business of the companies and the land and other investments were made also for the companies. It is also a fact that the assessee in his individual capacity did not have any registration under VAT, PF, ESI which is required to do any business for running a company. He is only a director, promoter, shareholder or partner in these companies and these companies are having robust business of manufacturing of PPE woven sacks.
We have already stated the legal principle propounded by the Hon’ble Supreme Court in the case of CH. Atchaiah [1995 (12) TMI 1 - SUPREME COURT] and also the provision of section 4(1) of the Income-tax Act which says that the person who has earned the income and is liable to incometax, can only be assessed.
We are also bound by the settled law laid down by the Hon’ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] that the income can be accessed only in the case of incriminating documents belonging to the person. In this case from the facts as is apparent from the seized diary A/OPJ/03 and also from the orders of the authorities below i.e. AO and the Ld. CIT (Appeals), it clearly comes out that the diary does not pertain to the assessee and income does not belong to him in his individual capacity. Since it does not belong to him, it cannot be taxed in his hands.Therefore, the income confirmed by the CIT (Appeals) in the hands of the assessee based on the seized diary A/OPJ/03 in the AY2009-10 to AY 2012-13 cannot be upheld.
Addition on account of cash found during the course of search - HELD THAT:- Order of the Settlement Commission has been quashed by the Hon’ble Delhi High Court. The assessee also retracted the statement. We have already held that the seized diary A/OPJ/03 belong to the companies and not the assessee in his individual capacity. There are numerous cash transactions that appear in the seized diary. There is no evidence that the cash belongs to the assessee in his individual capacity since he only derives passive income. The conclusion therefore, is inescapable, that the cash belongs to the companies and hence, cannot be assessed in the hands of the assessee.
Additions of unexplained investment in immovable property and cash deposit in saving bank account made on the basis of AIR - HELD THAT:- We find that these two additions were made by the Assessing Officer on the basis of AIR information which was not confronted to the assessee at the stage of assessment proceedings and also at the first appeal stage. Also, as per the Form 26AS enclosed as Annexure-I to the synopsis, the Form does not contain any such information. Hence, the additions deserve to be deleted.
Unexplained investment of share capital - AO has added this amount based on the statement given by the assessee during the course of search u/s 132(4) - HELD THAT:- The assessee has already retracted from the statement made during the course of search giving cogent reasons for the same vide his affidavit dated 29.10.2013. Besides, there is nothing to show that it is the assessee’s money which has come in by way of the share capital in M/s Jakhotia Plastics Private Limited which is a separate legal entity and has robust business activities. The share capital was received by M/s Jakhotia Plastics Pvt. Ltd. from M/s Varad Vinayak Properties Pvt. Ltd through account payee cheques and the seized documents do not contain anything that suggest that any cash was given by the assessee in lieu of the share capital. We fail to understand how addition of the share capital and share premium can be made in the hands of the assessee especially when there is no evidence of any unexplained investment having been made by the assessee or any credit having been received by the assessee in his books of account. The cash credit has been received by M/s Jakhotia Plastics Pvt. Ltd. from a source which is completely distinct from the assessee i.e. M/s Varad Vinayak Properties Pvt. Ltd. and as there is nothing to show that it is the assessee’s money which has found place in the company. Under these circumstances this addition cannot be sustained in the hands of the assessee and is therefore, deleted.
Addition on account of kick-backs paid to Dalmia Cement - HELD THAT: We have already held that the seized books of accounts or diaries do not belong to the assessee but to the companies in which assessee was a director or partner and the assessee was not doing any business in his individual capacity. The dealings with Dalmia Cement are business dealings and do not pertain to the assessee in his individual capacity. Hence, the addition ought to be deleted in the hands of the assessee.
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2022 (2) TMI 1187 - ITAT DELHI
Validity of Reassessment proceedings - mandation of servicing notice - HELD THAT:- In the instant case, although a notice has been issued by the AO, however, the same has not been served on the assessee since the notice issued by the AO through speed post was returned by the Postal Authorities unserved and there is no other evidence on record to show that the AO has made any other effort such as sending the Ward Inspector to serve the notice personally or through affixture - the reassessment proceedings finalised by the AO without serving the notice u/s. 148, in our opinion, is invalid. Therefore, set aside the order of the CIT(A) on this issue and allow the jurisdictional ground raised by the assessee challenging the validity of the reassessment proceedings. Since the assessee succeeds on this legal ground, the ground challenging the addition on merit becomes academic - Appeal of assessee allowed.
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2022 (2) TMI 1186 - ITAT PUNE
TP Adjustment - International transaction under consideration is 'Receipt of commission' from sale of products of its AEs in India - Other method applied as MAM - TPO adopted 'other method' under Rule 10AB for determining the ALP of this international transaction - HELD THAT:- TPO ought to have considered Material cost and Depreciation contributing to the generation of income from manufacturing activity in the same way as he considered the Manufacturing and Marketing costs. If all the four costs are considered as generating the overall profit from the Manufacturing segment of the assessee, then the percentage of Marketing profit to sales comes to 0.59% as against 2.55% computed by the TPO, as has been depicted. When such percentage of Marketing profit to sales is applied to the sale value of the products of the AEs sold in India through the assessee's endeavour, then the amount of profit pertaining to Marketing effort comes to ₹ 3.14 crore. If the expenses incurred by the assessee on sale of the AEs products at ₹ 39.24 crore are added, the resultant gross amount which should have been received by the assessee as commission comes to ₹ 42.38 crore. As against that, the assessee actually received Commission income of ₹ 44.30 crore, which is explicitly at ALP. We, therefore, approve the conclusion of the Ld. CIT(A) in deleting the addition
TPO applied `other method' as the most appropriate method for determining the ALP of the international transaction, which method came into vogue, as per Rule 10AB, only from the A.Y. 2012-13 under consideration and the assessee has not objected to the application of this method. This method obviously could not have been nor has actually been applied by the assessee or the TPO in any of the earlier years. There can be no denial that different amounts of the ALP emerge under different methods. Secondly, for the earlier years, the amount of Sale considered by the Revenue for determining the ALP consisted of sale of manufactured goods; sale of traded goods and commission. Au contraire, the amount of sale at ₹ 2075.81 crore considered in the entire exercise for the year under consideration is only of manufactured goods and has no components of traded goods or commission. In that view of the matter, the findings given by the Tribunal for such earlier years do not per se apply to the year under consideration. However, in view of our discussion made above pointing out infirmities in the TPO's ALP determination, we hold that the transfer pricing addition under `other method' as per rule 10AB was not justified, which has been rightly deleted in the first appeal.
Deduction towards Education Cess - HELD THAT:- It is seen as an admitted position that the Tribunal in the assessee's own case for earlier years has allowed such additional ground by relying on the judgment of Hon'ble jurisdictional High Court in Sesa Goa Ltd.[2020 (3) TMI 347 - BOMBAY HIGH COURT] - However, it is pertinent to note that the Finance Bill, 2022 has proposed an amendment to section 40(a)(ii) by insertion of Explanation 3 w.e.f. 01-04-2005 as clarified that for the purposes of this sub-clause, the term 'tax' shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax.
For proposed amendment, it is manifest that the legislature has proposed to neutralize the effect of the above referred judgments granting deducting towards Education Cess. As the proposal mooted through the Finance Bill, 2022 is likely to be passed shortly, the deduction which was otherwise eligible and granted in earlier years, would become non-eligible retrospectively with effect from the assessment year 2005-06. Allowing such deduction now and then shortly thereafter recalling the order in the light of the Finance Act, 2022 will be an exercise in futility. We are thus not inclined to grant such deduction. The ld. AR fairly accepted the position. However, a liberty is given to the assessee to move rectification application in case the proposed amendment in the Finance Bill is either not enacted or enacted prospectively so as to align our decision with the resultant modification. This additional ground is, therefore, not allowed in the above terms.
Claim of depreciation on the expenditure of premises - AR submitted that consequent to the decision of the Tribunal for the assessment year 2004-05 in relation to disallowance of expenditure on premises to the extent of 40% of such expenses being held as capital in nature, the assessee deserves to get the consequential depreciation on the same - HELD THAT:- We deem it proper to remit the matter to the file of the AO for carrying out necessary verification in this regard and then decide the issue accordingly. To clarify, if the AO, after capitalizing 80% of repairs cost for the assessment year 2004-05, continued with the enhanced value of block in the subsequent years as well, then the amount of depreciation on the excess 40%, [as the capitalization reduced by the CIT(A)], should be disallowed. If, on the other hand, the AO had not increased the value of block of assets in succeeding years by 80% of capitalization done by him for the assessment year 2004-05, then further depreciation should be allowed on 40% of the capitalization as upheld by the Tribunal in its order for the assessment year 2004-05. Needless to say, the assessee will be allowed reasonable opportunity of hearing to the assessee
Additional ground of consequential claim of depreciation on the expenditure of software - HELD THAT:- We find that the additional ground of the assessee cannot survive if the AO, after capitalizing the software expenditure for the assessment year 2007-08, continued with the enhanced value of block of assets for the purpose of depreciation in succeeding years. It is only if the enhancement in the value of block of such assets made for the assessment year 2007-08 was not carried out in the later assessment years that the additional ground of the assessee would get accepted. The AO is directed to carry out necessary verification of this issue in the same way as directed for the second additional ground and then pass the order.
Addition u/s.14A - HELD THAT:- The first component of disallowance is of interest expenditure treated as relatable to investments which yielded exempt income. Our attention has been drawn towards the fact that as against such investments amounting to ₹ 32.00 crore, the assessee had share capital of ₹ 22.56 crore and Reserves and Surplus at ₹ 802.78 crore. Thus, it can be seen that the shareholders fund of the company is far in excess of the investment yielding exempt income.
Hon'ble Dehi High Court in CIT vs. Tin Box Company [2002 (11) TMI 75 - DELHI HIGH COURT] holding that when the capital and interest free unsecured loan with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. More recently, the Hon'ble Supreme Court in CIT(LTU) VS. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] has reiterated the same view. When we examine the amount of Investments at ₹ 32.00 crore as against the availability of Share Capital and Reserves at ₹ 802.78 crore, it becomes evident that the amount of such Investments is much less than the amount of Shareholders' fund. We, therefore, order to delete the first component of disallowance on account of interest amounting to ₹ 8,61,647/-.
Second component of disallowance towards administrative expenses, which was computed by applying 0.50% of the average value of the investments in terms of Rule 8D(2)(iii). Such disallowance made and sustained in the first appeal is strictly in conformity with the said rule and, therefore, does not require any interference. We, therefore, sustain the addition at ₹ 8.00 lakh as against ₹ 16.71 lakh made by the AO and approved in the first appeal.
Assessee appeal partly allowed.
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2022 (2) TMI 1185 - ITAT DELHI
Income earned as taxable in India - Services fall within the meaning of 'make available' under the tax treaty - Business support services provided/rendered by the Appellant - fees for technical services as per the India - Belgium tax treaty (read with India- Portugal tax treaty) - Whether services fall within the meaning of 'make available' under the tax treaty? - HELD THAT:- On perusal of the services clearly show that these are routine in nature and definitely do not make available experience, know-how to the recipient MIPL. In fact, the DRP itself has accepted at Para 6.2 of its order that as per the service agreement, the services provided by the assessee are in the nature of routine support services which are not very complex in nature.
Considering the protocol to the India Belgium Tax treaty, tax treaty between India and Portugal has to be considered for most favourable nation clause. Under the India Portugal Trade Tax Treaty, fees for included services is defined as consideration for rendering of any technical or consultancy services if such services are ancillary and subsidiary to the application or enjoyment of the right, property or information of which royalty payment, as defined under Article 12(b) is received or make available technical knowledge, experience, skill, know how or processes or consist of the development and transfer of a technical plan or technical design which enables the person acquiring the services to apply the technology contained therein.
Services received by MIPL do not make available technology, skill know how etc and such services cannot be considered to be in the nature of managerial, technical or consultancy in nature.
Considering the facts of the case in light of the service agreement, we are of the considered view that the business support services rendered by the assessee from Belgium do not qualify the test of make available under the tax treat. Therefore, we direct the Assessing Officer to delete the impugned addition. Ground Nos. 2, 3 and 4 are accordingly allowed.
Charging of surcharge and cess on the gross treaty rate - HELD THAT:- We are of the considered view that when tax rate is prescribed under DTAA, education cess is not leviable. Our view is fortified by the decision of the co-ordinate bench in the case of MFAR Hotels Ltd. [2013 (4) TMI 339 - ITAT COCHIN] which has been followed by this Tribunal in the case of JC Decaux SA [2020 (3) TMI 1075 - ITAT DELHI]. Following the decision of the co-ordinate benches, we direct the Assessing Officer to apply DTAA rate without applying surcharge and cess. This ground is accordingly allowed.
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2022 (2) TMI 1184 - ITAT MUMBAI
Disallowance of proportionate interest expenditure - capital attributable to project ‘B’ i.e. unfinished project - AO held that interest part on borrowing as well as partners capital attributable to project ‘B’ i.e. unfinished project , cannot be allowed as an expense in respect of the profits derived from project ‘A’ and same should be allowed to be capitalized to the work in progress (WIP) of project ‘B - As per AO substantial amount of newly acquired unsecured loans and capital was used for the purchase of plot of land for project ‘B’, no income or revenue from said project has been credited, and therefore, he was of the view that interest on borrowings by way of capital and unsecured loans was required to be allocated project –wise - Whether project completion method or percentage completion method for offering profit from the said projects for the purpose of the Income-tax? - HELD THAT:- The assessee has not clarified before the lower authorities that whether it was following project completion method or percentage completion method for crediting income to profit and loss account. Before us, the assessee has filed a copy of submission dated 23/12/2019 before the Assessing Officer in respect of assessment year 2017-18 i.e. subsequent assessment year. In the said submission, the authorised representative of the assessee has clearly mentioned that the assessee is following percentage completion method. It is also mentioned that in the earlier year also the revenue was recognized following the percentage completion method. The learned authorised representative has also mentioned that interest expense was not claimed in computation of taxable income for A.Y.2017-18
We find that under percentage completion of method the revenue from booking or sales is credited to the profit and loss account in proportion to the expenditure incurred on the project as compared to the total cost of the project. In the assessment year under consideration, the assessee has not credited any amount of revenue on the ground that no substantial construction work was executed in the year under consideration. In such circumstances, even under the percentage completion method also the interest expenditure which is specifically related to project ‘B’ cannot be allowed and it shall be eligible for deduction in percentage terms of cost of construction debited following the percentage completion method.
In the instant case interest which was specifically related to project B and neither expenditure on said project was claimed nor any revenue from said project was offered in the profit and loss account. The interest corresponding to the project ‘A’ has already been allowed by the Assessing Officer and only part pertaining to project B has been disallowed. This interest expenditure disallowed was not related to borrowing for maintaining business infrastructure but it was related to specific real estate project. As no significant risks and rewards of ownership of the project ‘B’ were transferred by the assessee to prospective buyer, no revenue from said buyer was recognized following principle of percentage completion method. Thus, no liability in respect of interest expenses pertaining to project ‘B’ was accrued, hence it is not allowable in the year under consideration. - Decided against assessee.
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