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2022 (7) TMI 1310
Revenue recognition - Accounting method - determination of income on completion of its projects - whether percentage computation method should be followed instead of project completion method followed by the assessee - whether Tribunal was justified in law to accept the accounting method followed by the assessee as accounting standard-9 (AS-9) instead of accounting standard-7 (AS-7) despite the fact that the assessing officer arrived at a conclusion finding that the assessee is a contractor and not a builder after analysing the various aspects of the business of the assessee?
HELD THAT:- After taking note of the decision in Bilahari Investment (P) Ltd. [2008 (2) TMI 23 - SUPREME COURT] and that of Manish Build Well (P) Ltd.. [2011 (11) TMI 35 - DELHI HIGH COURT] held that the assessee has been consistently following one of the recognised methods of accounting that is project completion method for computation of income and in the absence of any prohibition or restriction under the provisions of the Income Tax Act. For doing so it cannot be held that approach of the CIT(A) and the tribunal was erroneous or illegal in any manner so as to call for interference by Court. Accordingly, the appeal filed by the revenue was dismissed.
In the case on hand the CIT(A) as well as the tribunal have noted the aforementioned decision and also the fact that the method of accounting, namely, the project completion method was followed by the assessee and has been accepted by the Department and, thus, by applying the principle of consistency, the appeal of the revenue is dismissed. Thus, we find that there is no error in the order passed by the tribunal nor any substantial question of law arises for consideration in this appeal.
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2022 (7) TMI 1309
Recovery from the directors u/s 179 - Attachment of property - Arrears of taxes other liabilities of private company - whether the petitioner liable to pay a demand alongwith interest under section 220(2) of the Act which was otherwise due and payable by the company, CPML - HELD THAT:- A reading the show cause notice would therefore clearly suggest that there was no satisfaction recorded that the tax cannot be recovered. It needs to be understood that recovery procedure u/s 179 against the directors is not to be resorted to casually and only because it is convenient to do so for affecting recovery of the tax dues.
With a view to show that the respondent No.1 had mechanically resorted to the provisions of section 179 of the Act, the petitioner has relied upon an order of attachment, dated 6th March 2019, whereby the Tax Recovery Offcer-2, Thane has ordered the attachment of land at Village Kalivali, Taluka Panvel, Dist. Raigad to show that if respondent had made an effort, the tax dues could be recovered from the company. An additional affidavit has also been filed by the petitioner.
In response to this additional affidavit, an affidavit in reply has also been filed by the Deputy Commissioner of Income Tax- 1(2)(1), Mumbai in which a stand is taken that steps for sale of the property attached would be initiated after getting the fair market value determined. This statement itself has the effect of nullifying the action initiated under section 179 of the Act against the petitioner rendering the order impugned unsustainable in law.
Writ Petition is allowed. The impugned order dated 13th February 2018 as also the order dated 12th February 2019 passed under section 264 of the Act are quashed. However, in case, the tax dues are not fully satisfied upon sale of the property that has been attached, then the Assistant Commissioner can proceed in the matter afresh in accordance with law, after giving an opportunity of being heard to the petitioner, in the light of the observations made by us in the preceding paragraphs.
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2022 (7) TMI 1308
Disallowance of compensation paid by the appellant and claimed as business expenditure - whether there was nexus between the compensation paid by the assessee to Shri. Mahesh Bhoopathi with the 'NLI project '? - HELD THAT:- In CIT Vs. Dalmia Cement (Bharat) Ltd [2001 (9) TMI 48 - DELHI HIGH COURT] it is held that once it is established that there is nexus between the expenditure and the purpose of business, the Revenue cannot cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximise its profit. The tax authorities must not look at the matter from their viewpoint but that of a prudent businessman.
Whether there was nexus between the compensation paid to Shri. Mahesh Bhoopathi and the construction agreement? - The answer must be in the affirmative firstly, because, in para 3 of the JDA cancellation agreement, it is stated that M/s. ITC had approached the parties to the said cancellation agreement. Thus, assessee, Shri.Mahesh Bhoopathi and ITC were considering the proposal for construction of multi-storied residential Complex. Secondly because, in the Sale deed dated April 1, 2006 executed by Sunrise Realty, assessee is one of the confirming parties. Thirdly, because, the Construction Agreement has been entered into between ITC and the assessee on April 1, 2006, and on the very same day, Sunrise Realty has sold the property to M/s. ITC Ltd. Unless the Construction Agreement was finalized earlier, it would not have been possible to execute the same on the date of purchase of the property. Fourthly because, Shri. Mahesh Bhoopathi had sold his property, which was subject matter of JDA in favour of Sunrise Realty. Shri. Aravind contended that the sale is in the name of individual in the name of Shri. Raghunath Vishwanath Deshpande. Shri. Shankar's reply to this contention is, Sunrise Realty was owned by Deshpande family. Further, fifthly because, the Revenue has allowed the expenditure for the A.Y. 2007-08.
We are of the considered view that there was nexus between the cancellation of JDA and execution of Construction Agreement. Hence, following the authority in S.A. Builders [2006 (12) TMI 82 - SUPREME COURT] we are of the view that this appeal merits consideration and it is accordingly allowed.
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2022 (7) TMI 1307
Penalty u/s 271(1) - whether defective notice issued? - Unaccounted cash receipts - assessment u/s 153A - as per Tribunal penalty order did not clearly advert to the ground on which the penalty was being levied, that is, for concealment of income or nondisclosure of material particulars in the original return - HELD THAT:- First, the revised return filed pursuant to notice issued u/s 153A would not, by itself, lead to an inference that there has been concealment; the revenue would have to show that there was incriminating evidence available in that behalf before penalty could be imposed.
Second, Section 153A of the Act is a complete code, the provisions of section 139 of the Act, which concerns original returns, would not be applicable. In other words, the so-called revised return filed, would be the original return.
Third, if Explanation 5 to Section 271(1) of the Act were to be relied upon, the revenue would have to establish that the assets, such as money, bullion etc. were seized during the search conducted on the premises of the assessee and that the said assets related to the income of the assessee for the relevant assessment years. Explanation 5, as noted in the said judgement, was inserted in the statute by Taxation Laws (Amendment) Act, 1984, w.e.f. 01.10.1984.
In our opinion, the conclusion reached by the Tribunal in the instant case that the notice for imposition of penalty under Section 271(1) (c) of the Act, did not specify which limb of the said provision the penalty was sought to be levied is covered by various decisions of HC.
We are in agreement with the view taken in SSA’s Emerald [2016 (8) TMI 1145 - SC ORDER] and Manjunatha Cotton [2013 (7) TMI 620 - KARNATAKA HIGH COURT]) and, in any event, are bound by the view taken by the coordinate bench of this court in the Sahara India case.
Insofar as the view taken in the Neeraj Jindal case [2017 (9) TMI 123 - SC ORDER] is concerned, that does not arise from the order of the Tribunal in this case, although, there is much weight in the conclusions reached by a coordinate bench in the said case. Like in the Neeraj Jindal case, in this case as well, search was conducted against the “Bakshi group” which led to the issuance of notice under of the Act. Appeal dismissed.
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2022 (7) TMI 1306
Computation of capital gain u/s 54F - acquisition date of plot/property sold - Assessee claimed that the date of allotment i.e. 30.12.2006 on which date ‘plot buyers agreement dated 30.12.2006 with BPTP Ltd. (the vendor)’ for purchase of the plot/land under consideration was executed, is relevant for consideration as date of acquisition and for the benefit of indexation to claim capital gain or tax u/s 54 and therefore the Assessee is entitled to get benefit of long term capital gain because the Assessee acquired the property under consideration 30.12.2006 and sold the same on 14.10.2015 - HELD THAT:- Considering the peculiar facts and circumstances, we deem it appropriate to set aside the order passed by the ld. Commissioner and to direct the Assessing Officer to recompute the capital gain/loss of the Assessee u/s. 54 of the Act, while considering the date of plot buyer’s agreement dated 31.12.2006 as acquisition date of plot/property sold and for indexation benefit. Ordered accordingly. Assessee appeal stands allowed.
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2022 (7) TMI 1305
Penalty levied u/s 271(1)(c) - LTCG Computation - adoption of adopt the fair market value cost of acquisition as on 01.04.1981 - HELD THAT:- Addition in the assessment was based on mere estimation basis as estimated by different authorities at different times & rates. It is settled position in law that addition based on estimation no penalty is leviable. As the estimation of valuation are not final and may differ on the subjective satisfaction of different authorities. Therefore, we are of the constrained view that in such estimation of valuation no penalty is leviable under section 271(1)(c) of the Act. Even otherwise the addition of LTCG in the assessment order is based on the difference of opinion, which cannot be made basis of the levy of penalty under section 271(1)(c).
Therefore, we direct the Assessing Officer to delete the remaining / entire penalty levied under section 271(1)(c) - Decided in favour of assessee.
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2022 (7) TMI 1304
Capital gain computation - Adoption of the Stamp Duty Valuation as full value consideration as per section 50C - AO has made an addition u/s 50C to the short term capital gain by adopting the Stamp Duty Valuation as full value consideration as against the sale consideration shown by the assessee - HELD THAT:- It is a matter of fact that the Stamp Duty authority has valued the property in question at Rs. 16,88,000/- on 27th February, 2015 and then within a period of one month, 10% of the said land was valued by the Stamp Duty authority at Rs. 28,05,000/- which shows that there is a steep hike in the valuation for the purpose of Stamp Duty and that too within a period of one month. Thus, such an enhancement / increase in the Stamp Duty Valuation is possible only when some abnormal or inordinary event happened.
All these facts explained by the assessee before the Assessing Officer which lead to the fair inference that the assessee has seriously objected to the adoption of Stamp Duty Valuation as full value consideration in terms of section 50C(2) of the Income Tax Act and consequently the AO is duty bound to refer the valuation of the property in question to the DVO for determination of fair market value of the property. Only after getting the fair market value determined by the DVO, the Assessing Officer ought to have computed the capital gain and consequential addition, if any.
Thus the impugned order is set aside and the matter is remanded to the record of the Assessing Officer to redo computation of the capital gain after referring valuation of the property to the DVO for determination of the fair market value, as per section 50C(2) of the Income Tax Act. Needless to say, the assessee be given an appropriate opportunity of hearing before passing the fresh order. Appeal of the assessee is allowed for statistical purposes
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2022 (7) TMI 1303
Revision u/s 263 by CIT - disallowance of deduction u/s 54F - CIT observed that the assessment order was passed without making inquiries or verification, and without following the directions of the Pr.CIT in the order u/s 263 which should have been followed with regard to the issue of deduction u/s 54F for which the Pr.CIT had made a specific direction - HELD THAT:- Admittedly, CIT has passed an order u/s 263 dated 06.03.2018 with a direction to examine whether the assessee is entitled for claiming exemption u/s 54F, since the assessee is having two residential properties and also offered rental income for the relevant assessment year. After issuance of notice and on physical verification of the residential properties, the AO opined that the property is not residential house and it is a small portion of construction and the assessee has let out the same and offered the income.
Accordingly, the AO has completed the assessment dated 143(3) dated r.w.s. 263 - Therefore, we are of the view that initiation of proceedings u/s 263 is incorrect and not permissible under law. Therefore, we hold that the assessment order passed u/s 143(3) r.w.s. 263 dated 16.08.2018 holds good and thus quash the order passed u/s 263 dated 24.03.2021. Therefore, the grounds raised by the assessee are allowed.
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2022 (7) TMI 1302
Income accrued in India - addition towards intra-group services fees received by the assessee, having been claimed as Managerial services fees not chargeable to tax but treated AO as `fees for technical services' - Whether the receipt is FTS under the Act? - HELD THAT:- As e-mails exchanges between the assessee and the Indian entity read in conjunction with the services as described in the Agreement, it becomes overt that the services mainly envisage i) formulating the global policies in the spheres of the business, including, Administration, Purchases, and Human resources so as to have world-wide uniformity in compliance; ii) ensuring application of the such policies by all the global entities including the Indian AE; and iii) evaluating their compliance. The services also cater to giving expert advice on certain matters to the Indian entity, such as, Legal services (falling within the domain of consultancy services) and also giving expert technical opinion on Quality and environment, Research and I.T. Support (falling within the domain of technical services). Thus consideration received by the assessee is partly for the managerial and partly for the consultancy or technical services. Ergo, it satisfies the requirement of taxability under the Act.
Whether the receipt is FTS under the DTAA? - AO held that the consideration for the services is FTS under the DTAA between India and Spain - Though the assessee, in principle, can seek the benefit of the India-USA DTAA, but the consideration for the `development and transfer of a technical plan or technical design’ in the terms discussed above, falling under the second part of the Article 12(4)(b) of the India- USA DTAA, would qualify for taxation. Since such amount is not readily ascertainable from the material on record, we set aside the impugned order pro tanto and direct the AO to work out such taxable amount on some rational basis, after allowing a reasonable opportunity of hearing to the assessee.
CIT(A), after holding the amount falling under FTS and hence chargeable tax in India, did not examine the alternate viewpoints of the AO of taxing the same as Dividend under Article 11 or `Other income’ as per Article 23(3) of the DTAA. He held that: `Since I have confirmed the learned AO’s decision to tax the services, I do not discuss the Appellant’s arguments on the learned AO’s decision to tax the receipt on an alternative basis as either `dividend’ or as `other income’ under the relevant article of the DTAA.
As the decision of the ld. CIT(A) on the intra-group services, being, in the nature of FTS stands partly modified, we need to examine if the amount can be considered as Dividend or Other income under the India Spain DTAA. Non-adjudication by the ld. CIT(A) on this issue has to be considered as determining the issue against the assessee and requiring adjudication by the Tribunal in the hue of CIT Vs. India Cements Ltd. [2019 (8) TMI 1485 - MADRAS HIGH COURT] which has been invoked by the ld. AR requesting our adjudication on the issue of Protocol to the DTAA, which was also not decided by the ld. CIT(A) and we have dealt with the same supra. On both the scores – Protocol; and taxability as Dividend/Other sources - the AO has returned the findings against the assessee. It is not a case in which such issues are being raked up for the first time and no discussion on them is available in the orders of the authorities below. We, thus, espouse these issues also for consideration and decision.
Whether the receipt is Dividend under Article 11 of the DTAA? - Testing the facts of the case on the touchstone of the definition of the term `dividend’, it transpires that the consideration received by the assessee is for rendition of intra group services and not either as income from shares etc. or income from other corporate rights or from any participation in profits. Thus, the amount under consideration cannot be characterized as `dividend’ income falling under Article 11 so as to magnetize taxability.
Whether the receipt is `Other income’ under Article 23(3) of the DTAA? - Para 3 of Article 23 starts with a non obstante clause qua paras 1 and 2 and states that the items of income of a resident of Spain not dealt with in the foregoing articles of this convention and arising in India may be taxed in India. The crucial words used in para 3 are the items of income “not dealt with in the foregoing articles of this Convention”. To put it simply, if a particular item of income is covered in an earlier Article of the DTAA, that cannot find place under Article 23(3). The item of income under view is consideration for rendition of services. If it is in the nature of FTS, then it falls under Article 12, otherwise it assumes the character of `Business profits’ under Article 7 of the DTAA. As the income from intra-group services falls either under Article 13 or Article 7, it cannot be covered within the purview of Article 23(3).
The consideration of Rs.3.99 crore and odd is chargeable to tax u/s 9(1)(vii) of the Act, but the India USA DTAA will restrict the chargeable amount as discussed. It is neither dividend nor other sources income as per the DTAA.
Addition of reimbursement on leased line charges amounting as Royalty u/s.9(1)(vi) of the Act and also under Article 13 of the DTAA - Is it covered under clause (iva) of Expl.2 to sec. 9(1)(vi)? - HELD THAT:- The facility of Telefonica does not process the data but simply facilitates its free flow between the group companies through its leased lines. Neither the processing of information is warranted nor is the essence of the transaction. The assessee and the group companies are not paying for using any industrial, commercial or scientific equipment of Telefonica but simply for getting the leased line provided by it with the help of its facility. As such, Explanation 2 (via) is not applicable to the facts of the instant case.
Is it covered under Expls. 2/6 of sec. 9(1)(vi)? - On a perusal of the above definition under the DTAA, it can be seen that it has certain features of the definition of the term `royalty’ as given in section 9(1)(vi) of the Act. The term `process’ has been used in the definitions - both under the Act as well as the DTAA. However, the important point to accentuate here is that unlike the definition of the term ‘process’ as given in Explanation 6 amplifying the scope of the term `process’, applying to the Explanation 2 to section 9(1)(vi), there is no similar definition of the term `process’ as given in Article 13(3) of the DTAA.
Coming to the Indo-Spain DTAA, it is axiomatic that the domestic law has not been linked with the definition of the term `royalties’ as given in the Article. The definition in the Article simply stops at receipt, inter alia, for use or right to use any ‘process’. In that view of the matter, we cannot read Explanation 6 to section 9(1)(vi) of the Act in the definition of the term `royalties’ under the Article. Though the term ‘process’ under the Act also includes payment for leased line charges in the light of Explanation 6, but absence of any analogous provision in para 3 of Article 13 of the DTAA, does not commend us to read the extended scope of the term `process’ in the DTAA. The contrary view espoused by the ld. CIT(A), ergo, cannot be accorded imprimatur.
Addition towards reimbursement of software charges - HELD THAT:- As seen that there is no disputation on the nature of transaction, which is crystal clear inasmuch as the assessee purchased Norton Antivirus software for its entire group. The cost of such software, having been provided to Indian entity, was recovered as such without any mark-up. What the assessee procured from Norton was a software product and not any copyright in the software. Recently, the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd.[ 2021 (3) TMI 138 - SUPREME COURT] has reversed the decision in Samsung Electronics Pvt. Ltd.(2011 (10) TMI 195 - KARNATAKA HIGH COURT] by holding that payment for use of a software product does not constitute Royalty. This position was fairly admitted by the ld. DR as well. In view of the binding precedent available on this issue, we delete the addition.
Charging of interest u/s.234B - levying interest for default in payment of advance tax - HELD THAT:- As an amendment has been carried out to section 209(1) by insertion of proviso w.e.f. 1.4.2012 providing, inter alia, that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not be reduced by the aforesaid amount of incometax which would be deductible during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax. The essence of the amendment is that the earlier position of non-levy of interest u/s.234B where the income in question is otherwise liable for deduction of tax at source, irrespective of the fact that whether the tax was actually deducted or not, has been dispensed with. As the amendment is applicable from 1.4.2012, it will not administer the instant assessment year 2010-11 under consideration. We, therefore, direct not to charge interest u/s.234B.
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2022 (7) TMI 1301
Penalty u/s 271(1)(c) - AO without recoding any satisfaction, initiated the penalty proceedings under section 271(1)(c) - HELD THAT:- The penalty provisions of section 271(1)(c) are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) carry different meanings. Therefore, it is imperative for the AO to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him so that he can respond accordingly.
Having regard to the manner in which the AO has issued the notice dated 28.03.2013 u/s 274 r.w.s. 271(1)(c) without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) and therefore we are of the penalty is not leviable we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. Commissioner - Assessee appeal allowed.
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2022 (7) TMI 1300
LTCG - Deduction u/s. 54 - scope of amendment - "one" versus "a" - investment of capital gain into more than one residential units - HELD THAT:- It is a fact that section 54 has been amended by Finance Act (2) 2014 w.e.f. 01.04.2015 applicable from 2015-16 onwards, wherein the legislature amended the word “one” residential house in place of “a” residential and the said amendment is applicable to the instant case as well.
Commissioner though referred the latest provisions of section 54 of the Act, however without giving any definite finding qua applicability of the latest provisions of section 54 as applicable to the case in hand, decided the appeal of the Assessee, while referringsome decisions which admittedly pertains to period prior to amended provisions of section 54 of the Act, as applicable to AY 2015-16 involved in this case.
Hence, in our considered view, substantial justice would be met by setting aside the impugned order and remanding the case to the file of Commissioner to decide the issue involved de nova in its right perspective, while taking into consideration the provisions of section 54 as amended by Finance Act 2014 and applicable to AY 2015-16 which is relevant in this case.
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2022 (7) TMI 1299
Additions towards unexplained investment in land - as per assessee sources for the same is out of earlier period savings in salary derived from Yugaandhar Housing Private Limited and also current year salary - HELD THAT:- Admitted facts are that the assessee’s sources of income from salary Rs. 18 lakhs was not disputed by the AO and the Ld. AO has considered Rs. 13 lakhs as surplus available for investment made by the assessee. It is observed that the AO has not given any credit for the savings made by the assessee out of the salary income earned during the earlier years. We find merit in the argument of the AR that the amount is met out of the own savings of the assessee and cannot be treated as unexplained investment. AO has merely stated that the savings from salary earned in the previous years is not acceptable and hence could not be treated as investment in the immovable properties.
AO has considered a surplus balance available with the assessee Rs. 13 lakhs out of the salary income of Rs. 18 lakhs earned during the current Financial Year but has failed to appreciate the fact that the similar savings shall be available with the assessee for the earlier assessment years. We are of the considered view that the mere assumption of the AO that the assessee was not having sufficient accumulated cash balances out of the salary income earned during the earlier years is not acceptable and therefore we hereby quash the orders of the Ld. Revenue Authorities and allow the appeal of the assessee.
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2022 (7) TMI 1298
Revision u/s 263 - unexplained cash credit u/s.68 - addition towards share capital and share premium - addition of share premium of Re. 1/- per share contemplated by the ld. PCIT by assuming revision jurisdiction u/s.263 on the premise that assessee had not furnished any details either before the ld. AO or before him - HELD THAT:- Addition in respect of face value of Rs.10/- per share on account of share capital has already been made by the ld. AO and the same is the subject matter of appeal before the ld.CIT(A) and it is pending. Hence, we do not want to give any finding or opinion on the veracity of the addition made u/s.68 of the Act in respect of face value of Rs.10/- per share.
At the same time going by the documents filed by the assessee both before the ld. AO and before the ld. PCIT, which fact had been duly acknowledged by both the parties in their respective orders, we find that the ld. PCIT had erred in assuming revision jurisdiction u/s.263 in the instant case as it is based on the mistaken premise that assessee had not furnished any documents to prove the three ingredients of Section 68 and further on another mistaken premise that the AO had made addition after considering all the submissions of the assessee. Hence, it could be safely concluded that the entire assumption of jurisdiction by the ld. PCIT u/s.263 of the Act is based on incorrect assumption of fact. On this primary ground itself revision order u/s.263 passed by the ld. PCIT deserves to be quashed and is hereby quashed. - Decided in favour of assessee.
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2022 (7) TMI 1297
Rejection of books of accounts - addition to the gross profit - HELD THAT:- The books of accounts of the assessee have been rejected mainly in absence of books of accounts, bills vouchers etc. produced before the AO and on the allegation of accommodation entry transactions carried out with M/s Mirah Décor group entities. Before us, the assessee has submitted that during the year under consideration there was no transaction with M/s Mirah Group entities. This fact of vital importance, has not been verified by the AO in absence of books of accounts and bills and vouchers etc. produced by the assessee.
Now before us, in written submissions, the assessee has expressed willingness to produce books of accounts, bills vouchers etc. for verification by the AO. We feel it appropriate to restore the issue-in-dispute to the file of the Assessing Officer for deciding afresh. The ground No. one of the appeal is accordingly allowed for statistical purposes.
Addition in respect of loans which have been held as cash credit u/s 68 - AO held that assessee failed to establish (i) identity of the loan provider (ii) creditworthiness of loan providers and (iii) genuineness of the transactions, and therefore he held those loans as unexplained cash credit in terms of section 68 - assessee filed a letter before the CIT(A) wherein the assessee had requested for filing additional evidences, because those evidences could not be filed before the Assessing Officer.HELD THAT:- We find that in the case of M/s Sunrise Associate [2022 (7) TMI 934 - ITAT MUMBAI] in view of retraction of statement by Sh. Gautam Bhanwarlal Jain, has restored the matter of addition u/s 68 , back to the Assessing Officer for re-examination.
DR could not controvert that there was limited time frame in which the assessee was asked to provide the information and before the assessee could file the said information, the assessment order was passed on 22/12/2017. In our opinion, the assessee fulfils the circumstances under Rule 46A(1)(d) i.e. no sufficient opportunity, therefore additional evidences are eligible for admission. Since in respect of the ground No. 1 of the appeal, we have already restored the issue-in-dispute to the file of the Assessing Officer and therefore, for avoiding multiplicity of simultaneous proceedings, instead of restoring the matter to the file of Ld. CIT(A), we feel it appropriate to restore the issue
GP Estimation - estimation of the brokerage income - HELD THAT:- Assessee has declared gross profit @ 5.12% on the transactions recorded in the books of account - AO has treated those very transactions related to M/s M/s Mirah Group as transaction of providing accommodation entry without any real business but has not excluded the income offered by the assessee from said transactions of business. AO has separately made addition @ 2% on the very same transaction on which the AO has declared gross profit rate of 5.12%. In our opinion, a separate addition for the brokerage or commission is not required in the facts of the case. The commission or brokerage @ 2% can be considered as generated from accommodation entry transactions, which subsumes in the gross profit @ 5.12% already declared by the assessee. The only difference is of characterization of the source of the income which according to the AO is from the issuing accommodation entry bills whereas according to the assessee profit has been earned from business activity recorded in books of account. Thus lower authorities are not justified in making addition over and above the income @ 5.12% offered by the assessee from business transaction
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2022 (7) TMI 1296
Reopening of assessment u/s 147 - Bogus purchases - accommodation entries - failure to explain the consumption by way of production register or stock register - whether there is a live link between the material coming to the notice and formation of the belief regarding escapement of income? - HELD THAT:- in the instant case assessment year involved is 2010-11 and the assessment has been reopened on 19/03/2015, which is within four years from the end of the relevant assessment year. Thus, the reliance placed by the Ld. counsel of the assessee on the decision of the Hon’ble Bombay High Court in the case of Hindustan Lever Ltd [2004 (2) TMI 41 - BOMBAY HIGH COURT] is of no assistance being distinguishable on facts.
Bogus purchase - accommodation entries - HELD THAT:- AO issued notice under 133(6) of the Act for verification of the purchase parties however those notices were returned un-served with the remark by the postal authorities as parties ‘left’ or ‘not known’. The Assessing Officer made effort to serve notice on those purchase parties through inspector of his office, however those parties could not be located at the given address.
AO asked the assessee to provide the current address of those parties, however the assessee failed to provide the address from where an independent verification of existence of those parties could have been done and also asked the assessee to produce those parties, however the assessee also failed in compliance.
AO then ask the assessee to substantiate the purchases from those parties by way of evidence in support of the delivery or payment for transport of the goods, but the assessee failed on this account also and no evidence were filed by the assessee in this regard. In view of failure on the part of the assessee in substantiating the purchases from those two parties, the Assessing Officer in background of the information in investigation report, interalia, those parties were engaged in providing accommodation entries, without physical delivery of goods, held the purchases from those two parties as bogus purchases.
Finding of the Ld. CIT(A) on the issue in dispute are justified, according to which first category of cases, where a percentage of profit could be added in cases where sales corresponding to the bogus purchases are verifiable from the day-to-day inventory tally or from the stock register and sales have been made to government bodies or export sales , then in such cases an assumption can be drawn that actual purchases were made from unknown parties whereas only bills were taken from bogus billers. In such case, unexplained investment made for purchases made from the unknown parties may also be considered. But in second category of cases, where purchases have been claimed as consumed in manufacturing or non-trading activity and the assessee fails to explain the consumption by way of production register or stock register, then in those cases purchases clearly goes to reduce the profit earned by the assessee and therefore in such cases 100% percent purchases are liable for disallowance. The case of the assessee falls under second category of the cases and therefore, we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground of the appeal of the assessee.
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2022 (7) TMI 1295
Addition u/s 68 - unexplained cash credit - unsecured loan - HELD THAT:- Pune ITAT in the case of Sanjay Waman & Co. [2001 (11) TMI 273 - ITAT PUNE] held that it is part of the duty of the assessee to furnish evidence regarding the creditworthiness of the creditors.
Delhi ITAT in the case of Anandtex international (P.) Ltd. [2022 (3) TMI 831 - ITAT DELHI] held that where assessee received share application money and claimed that same was invested by its director by taking advance from a company P, however assessee failed to establish creditworthiness of share applicant or genuineness of transaction, AO was justified in making additions under section 68 and concluding that assessee routed its own money in books of account through conduit of investor companies.
In the instant facts, in our view, the assessee has not been able to establish the creditworthiness of lender nor has he been able to establish the genuineness of transaction. A perusal of the statement taken on record of the creditor raises serious doubt both on the creditworthiness of the party and genuineness of the transaction.
Therefore since the assessee has failed to establish both the genuineness of transaction and creditworthiness of party, in our view, he has not been able to discharge the onus cast upon him u/s 68 - Therefore, we are of the considered view that Ld. CIT(A) has not erred both in law and on the facts of the case in confirming the action of AO of making an addition as unexplained cash credit u/s.68 in respect of loan taken from lender. - Decided against assessee.
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2022 (7) TMI 1294
TP Adjustment - Comparable selection - CG-VAK Software and Exports Ltd., as a good comparable - HELD THAT:- CG-VAK Software and Exports Ltd., had earned profit in A.Y.2007-08 and 2009-10 and had incurred loss only in A.Y.2008-09. Hence, it has earned profit in two out of three past consecutive financial years. In view of the same and in view of our aforesaid judicial precedents, we hold that CG-VAK Software and Exports Ltd., should be included as a good comparable with that of the assessee company. AR Stated that once this comparable is included in the final list of comparables, it would be well within the +/-5% tolerance band and hence, no transfer pricing adjustment would be required to be made in respect of ITES segment of the assessee. In view of this, inclusion and exclusion of other comparables challenged by the assessee are not adjudicated by this Tribunal and they are left open. Accordingly, ground No. 1&2 raised by the assessee are allowed.
Addition on account of un-reconciled receipts with Form 26AS in respect of unit eligible for deduction u/s.10A - HELD THAT:- It is not in dispute that assessee is eligible for deduction u/s.10A of the Act. It is not in dispute that the said un-reconciled receipts from sister concern also pertains to 10A unit of the assessee. The deduction u/s.10A of the Act as directed by the ld. DRP was not granted to the assessee on the ground that the said un-reconciled receipt of Rs.10,33,974/- was not included in Form No.56F issued by the Chartered Accountant for claiming deduction u/s.10A of the Act. We hold that once the receipt whether reconciled with AIR data or not reconciled with AIR data, pertains to 10A Unit, then the whole of the profits of the said undertaking / eligible unit would be eligible for deduction u/s.10A of the Act. This is the mandate provided in the provisions of Section 10A of the Act itself. Accordingly, any addition made which goes to increase the profits of the 10A Unit would only result in consequential increase in grant of deduction u/s.10A - we direct the ld. AO to grant deduction u/s.10A of the Act for unreconciled receipt of Rs.10,33,974/-. Accordingly, the ground No.3 raised by the assessee is allowed.
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2022 (7) TMI 1293
TP Adjustment to the licence fees paid for time and billing software - assessee has adopted CUP method to benchmark this transaction by taking AE as tested party - HELD THAT:- It is admitted that in the transfer pricing study report, where all the international transactions of the assessee have been aggregated and have been benchmarked applying CUP as the most appropriate method. AO/TPO has rejected the benchmarking made by the assessee in the transfer pricing study report for the reason that the assessee has not provided complete details of the cost incurred by the AE for the impugned transactions. We are of the considered opinion that the TPO should have determined the ALP of the impugned international transactions by applying anyone of the prescribed methods, but the TPO has failed to do so.
Determination of arm's length price at Nil in grounds 1 & 2 and at Rs. 50 lakhs on ad hoc basis in ground 3 is contrary to the provisions of the Act. Resultantly, the benchmarking done by the assessee is more acceptable and the transactions of the assessee with its AE for the services availed is held to be at arm's length.
Disallowance of foreign travel expenses - HELD THAT:- As evident that the foreign travel expenses for the family of the employees disallowed by the Assessing Officer pertains to the family members of the employees, who are other than the employees of the assessee. Admittedly, the assessee had no supporting evidences to substantiate its claim. Following the decision of the co-ordinate bench of this Tribunal, we direct the AO to verify the claim of the assessee that if fringe benefit tax has been paid by the assessee, in order to allow the claim and thereby pass consequential orders as per the provisions of the Act.
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2022 (7) TMI 1292
Rectification u/s 254 - entitled for the deduction u/s 80IC and violation of sub rule (4) of Rule 18BBB - HELD THAT:- On going to the page 9 at para 4, we find that the issue of section 80IA(7) and 80IC(7) have been examined and dealt by the Co-ordinate Bench of the Tribunal. The Tribunal has also examined the remand report of the AO and also the applicability of Rule 18BBB and provision of section 80IA(8) and 80IA(12). Further, the Tribunal has also examined the application of section 80IA(8) and 80IA(10) and considered the decision has been taken to restore the issue back to the file of the AO. Placing reliance on the judgment of Hon’ble Apex Court in the case of CIT (Intl. Taxation-4), Mumbai Vs. M/s Reliance Telecom Ltd. [2021 (12) TMI 211 - SUPREME COURT] and CIT (Intl. Taxation-4), Mumbai Vs. M/s Reliance Communications Ltd. [2021 (12) TMI 211 - SUPREME COURT] we hold that the MA filed before the Tribunal beyond the provision of section 254(2) and hence being dismissed herewith. MAs of the assessee are dismissed.
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2022 (7) TMI 1291
Validity of assessment u/s 147 - Non-issuance of the notice u/s 143(2) - Whether curable defect u/s 292BB or not? - HELD THAT:- This additional ground is first time taken by the assessee before the ITAT. Considering the gravity of the fact, this issue should be reconsidered by the Ld. CIT(A) for adjudication. The respectful observation of apex court in the case of Commissioner of Income Tax v. Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] the non-issuance of the notice u/s 143(2) of the Act is not curable u/s 292BB of the Act. We directed for further adjudication of the issue before the Ld. CIT(A). Accordingly, we accept the additional ground of the assessee. The Additional Ground numbers 10 & 11 are setting aside before the Ld. CIT(A) for further adjudication related to issuance of notice u/s 143(2) of the Act. The assessee, in turn, is directed to substantiate its case.
Assessee made payments in cash to use the unaccounted money for business transactions - As from the record of the assessee, M/s Shivam Communication is dubious in nature. As per the Ld. counsel, the assessee had not entered anything of all the transaction with the party during the financial year. In fact, any of the Revenue Authorities had not made any cross examination in between the assessee and the party. The documents relied on the Ld. AO was not properly verified through the cross examination. The reasonable opportunity of the assessee should not be denied. We decide that the matter should be returned back to the CIT(A) for further adjudication. Accordingly, we are setting aside the ground of appeal before the Ld. CIT(A) for further adjudication. On the other hand, the assessee should get a reasonable opportunity for redressal the grievance.
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