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2021 (4) TMI 1016
Revision u/s 263 - claim of deduction under section 54F - non-application of provision of section 50C - HELD THAT:- There is no dispute to the fact that assessee has sold property, which was held in joint names for an amount of ₹ 1 crore and assessee’s share being @30 %, the same has been disclosed in his return of income at jantri value of ₹ 30 lakhs - it also remains undisputed facts that the said property was valued by the Sub Registrar of Rajula (district Amreli) at ₹ 6,22,19,600/- and hence there is a difference of ₹ 5,22,19,600/-, in the value of the property shown by the assessee and as per stamp duty valuation. The assessee’s share in said amount of ₹ 5,22,19,600/- was therefore, required to be considered u/s 50C of the Act in respect of assessee's total income for assessment year under consideration.
Non-consideration of the same by the AO can in no way be considered to be one possible view in the facts of the case, and in view of provisions of section 50C - the omission on the part of the AO to consider such stamp duty valuation of the property at ₹ 6,22,19,600/- and thereby non-application of provision of section 50C of the Act has rendered the assessment order so passed by the AO erroneous, in so far as it is prejudicial to the interest of revenue.
About claim of deduction u/s 54 F of the Act, the assessee seeks to submit that they had given all the details to the AO of the property in question. It was submitted that after sale of original property, new property was purchased by them on 04.04.2015, whereas original property was sold on 17.01.2015. In respect of these aspects, it is a fact not disputed by the assessee that old property sold and the new property purchased have not been reflected in balance sheet of the assessee. Even if, the properties were not to be shown in the balance sheet, as none may have existed in the hands of assessee as on 31.03.2015, still the amount received as sale consideration of old property should have been reflected in the balance sheet in Capital Gain account of the assessee, which assessee has neither contended nor has demonstrated.
AO while completing the assessment has not looked into and examined these factual aspects. Accordingly, in the facts and circumstances, as mentioned above, the assessment order passed by the AO allowing the deduction u/s 54F of the Act without proper verification of the facts has rendered the assessment order erroneous in so far as it is prejudicial to the interest of Revenue. Based on these facts and precedents applicable to these facts, we hold that ld PCIT has rightly exercised his jurisdiction under section 263 of the Act, thus we uphold the order of ld PCIT. Appeal of the assessee is dismissed.
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2021 (4) TMI 1015
Addition as additional income of the Appellant under the normal provision of the income Tax Act and also under section 115JB - interest receivable on delayed payment - whether no addition could have been made u/s 115JB when the accounts have been audited and approved in the AGM? - HELD THAT:- Interest on delayed payment payable by HPL to HPLCL has been offered to tax under the head ‘other income’. This amount is reflected in the annual accounts of the assessee under the head “miscellaneous income”. CIT(A) has, in our opinion, committed a mistake on fact by not considering the fact that the assessee had already offered the said interest income to tax under the head “other income”.
In this case an amount of ₹ 19.71 crores was interest receivable on delayed payment by HPL and an amount of ₹ 4.20 crores was interest payable to HPL on excess corporate tax collected and both were not part of facilitation charges. The reconciliation statement was for the facilitation charges. Interest does not form part of facilitation charge.
The interest transactions were duly accounted for by the assessee. As per the audited accounts of HPLCL, income from facilitation charges was disclosed as ₹ 137,86,20,277/-. ₹ 4,11,39,797/- was an amount of debit notes on fuel savings which was not considered by HPL, while deducted TDS. Further, HPLCL had to pay HPL corporate tax to the tune of ₹ 38.67 crores. This was considered by HPL in the next phase of 2009. Thus these factors are taken into consideration by the ld. CIT(A). Enhancing the income of the assessee by an amount of ₹ 11.40 crores both are normal provisions as well as u/s 115JB of the Act is without proper analysis of the facts and figures is wrong. Hence, we delete this addition to the extent confirmed by the ld. CIT(A).
Disallowance of prior period expenses - Addition on reimbursement of expenses paid to ‘Nuovo Pignone’ on the ground that the invoices do not pertain to March, 2006 and they are prior period expenses - HELD THAT:- We find that certain invoices were raised on the assessee during 06.03.2006 and 16.03.2006. The issue is whether these are prior period expenditure. The assessee is a public sector undertaking. Its accounts are audited by the Comptroller and Auditor General (hereinafter ‘C&AG’). Prior period expenditure is normally classified as ‘Prior Period’ by both the statutory debtor and the C&AG. The assessee submits that these expenditures crystallized during the current assessment year. This fact has been accepted by both the statutory auditor and the C&AG. Keeping the view taken by the statutory auditor and C&AG we hold that this expenditure cannot be classified as prior period expenditure. The bills of March 2006 were received and approved in the next financial year. Thus the disallowance as confirmed by the ld. CIT(A) is hereby deleted and this ground is allowed.
Considering the interest income as “income from business and profession” instead of “income from other sources” - HELD THAT:- CIT(A) has followed the decision of his predecessor for the AY 2006-07 on identical facts and held that the income in question is assessable under the head ‘income from business’ and not under the head ‘income from other sources’. On a query from the Bench the ld. Counsel for the assessee submitted that, this decision of the ld. CIT(A) on this issue for the AY 2006-07 was accepted by the Revenue and no further appeal was filed before the Tribunal. The ld. D/R could not controvert these submissions of the assessee.
Disallowance u/s 40(a)(i) - HELD THAT:- The undisputed fact is that the payment in question is reimbursement of expenditure. The ld. CIT(A) followed the propositions of law laid down by the jurisdictional High Court on this issue and held that no tax needed to be deducted at source, when it is a reimbursement of expenditure. Hence, we find no infirmity in the same.
Estimation of income - income from trading - CIT(A) has followed the order of his predecessor for the AY 2006-07 on identical facts and held that the action of the AO in estimating the profit as earning from credit activity is factually incorrect - HELD THAT:- CIT(A) has verified the copies of the electric bills raised by West Bengal State Electricity Board and factually came to a conclusion that these bills were raised only on HPL. These factual findings could not be controverted by the ld. D/R. It is also submitted before us that the Revenue had accepted this particular finding of the ld. CIT(A) for the AY 2006-07 and has not preferred an appeal before the ITAT. Under these circumstances that finding of fact has become final. The ld. CIT(A) has in the impugned order followed the order and propositions laid down by his predecessor for the AY 2006-07. We find no infirmity in the same. Hence, we uphold the order of the ld. CIT(A) and dismiss ground no. 4 of the Revenue.
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2021 (4) TMI 1014
Bogus LTCG - Addition of 30% alleged commission charges - HELD THAT:- Both the lower authorities have erred in law and on facts in treating assessee’s long term capital gain as bogus ones in absence of any supportive evidence in their support; whatsoever. The impugned addition(s) qua both aspects are directed to be deleted.
Un-explained un accounted cash investment - addition in the nature of on-money paid to Vendor - HELD THAT:- We find no reason to sustain the impugned identical addition of money payment in cash addition in these assessees’ hands. It is an admitted fact that learned lower authorities have gone by the alleged loose sheet only allegedly revealing the impugned payments made out at assessees’ behest over and above the sale price involving M/s.Western Pearl Project sold by M/s.Western Constructions/vendees. DR have treated the latter’s partner’s statement and the alleged ‘Excel’ sheet as the basis of the impugned additions. Learned CIT-DR also quoted Section 132(4) r.w.s.292C of the Act that such an incriminating material found/seized during the course of search carries presumption of correctness as well. He fails to rebut the clinching legislative expression used in Section 292C of the Act carrying presumption inter alia that the specified categories of the incriminating material are presumed to be belonging to ‘such persons’ and their contents are true, validly signed and are executed and are treated to be in the possession; qua the concerned assessee only than in case of any third person as well. The Revenue’s endeavour to this effect seeking to apply 292C r.w.s.132(4) presumptions fails.
We make it clear that hon'ble apex court’s recent landmark decision M/S. DILIP KUMAR AND COMPANY & ORS. [2018 (7) TMI 1826 - SUPREME COURT] has recently settled the law that provisions of a taxing statement have to be interpreted in stricter parlance only.
Revenue has cited statement of M/s.Western Construction’s partner that the same duly proved that the on-money payments had been made in cash by these assessees. This argument also fails inter alia for the reasons that Shri Raju had made it clear during and after search that he was not aware of the company’s business affairs. And that the alleged document never mentioned these assessee’s names at all as it is not only the Assessing Officer in the impugned assessment but even in case of the recipient M/s.Western Construction’s assessment order dt.28-12-2018 as well wherein it had been held that the on money amount was attributable to Shri Narendra Kumar Goyal than these twin assessees. Ld.CIT-DR was fair enough in informing the bench that the department has not initiated any action against Shri Narendra Kumar Goyal. That being the case, the Revenue’s stand of having strictly gone by the contents of the seized document only to this effect itself is self-contradictory since Shri Goyal (assessees’ father) has nowhere been examined till date.
Assessees’ statement had duly admitted the impugned on money payment - We are unable to agree with the instant plea based on mere admission made post search in view of the CBDT’s circular(s) dt.10-03-2003 and 18-02-2011 making it clear that such an admission of undisclosed income made during search or survey does not carry any significance and the same has to be based on evidence collected in the very process only.
Whether the impugned seized material / ‘Excel’ sheet (not mentioning the assessees’ names) forms a dumb document or not.? - We make it clear that the department has failed to corroborate the impugned seized document indicating assessee’s alleged on money payment over and above the sale price itself. All it has done is to rely on their father’s name only. It is nowhere clear as to whether it is an alleged document forming part of the books of account maintained in the regular course of business either by the vendor or vendee side. All it contains therefore is rough notings and jottings only.
As relying on Common Cause, Vs. Union of India[2017 (1) TMI 1164 - SUPREME COURT] and CBI Vs. V.C.Shukla [1998 (3) TMI 675 - SUPREME COURT] holds that such loose sheets deserves to be treated as a dumb documents only since not revealing full details about the dates containing lack of further particulars and therefore, ought not to be made basis of an addition.
We accordingly hold that the impugned addition of on-money payment made in both these assessees’ hands on the basis of a mere dumb document and not corroborated by any other evidence is not sustainable. We thus direct to delete the impugned identical addition forming subject matter of adjudication in both these cases.
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2021 (4) TMI 1013
Denial of natural justice - Unexplained investment u/s. 68 - CIT(A) has dismissed the appeal of the assessee ex-parte without providing proper opportunity to the assessee of being heard - HELD THAT:- On appeal, before the Ld. CIT(A) none appeared on behalf of the assessee on the given dates of hearing. Moreover, there is a long delay in filing the appeal before the Ld. CIT(A) for which the assessee had also not filed a petition seeking condonation of delay stating the reasons. Hence, the Ld. CIT(A) was left with no other option except to dismiss the appeal of the assessee. In this situation, find no much strength in the arguments advanced by the ld. AR.
Considering the prayer and the submissions of the Ld. AR, the merger financial resource of the assessee and the nature of issues involved in the appeal, in the interest of justice,hereby condone the delay in filing the appeal before the Ld. CIT(A) and remit the matter back to the file of Ld. AO for de-novo consideration thereby providing one more opportunity to the assessee of being heard. At the same breath, also hereby caution the assessee to promptly co-operate before the Ld. Revenue Authorities in their proceedings failing which the Ld. Revenue Authorities shall be at liberty to pass appropriate Orders in accordance with law and merits based on the materials on the record. Appeal filed by the assessee allowed for statistical purposes
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2021 (4) TMI 1012
Addition u/s 68 - difference in closing balance as per the books of the Appellant and Debtor - HELD THAT:- Documents placed by the assessee before the Revenue authorities sufficiently discharge the onus towards the identity and genuineness of the transaction and creditworthiness of the lender contemplated under s.68 - the statutory discretion available to AO under s. 68 of the Act ought to have been exercised in favour of the assessee. The action of the Revenue authorities thus cannot be countenanced having regard to the extenuating circumstances existing in the case. The addition made under s.68 of the Act on credit received from Rakesh Swadia therefore deserves to be reversed and cancelled.
For another credit of ₹ 1 Lakh from Khemka Udyog, it is the case of the assessee that the relevant confirmation from the lender towards repayment of loan could not be furnished due to strained relations cropped up owing to some dispute. The assessee, however, adverted to the bank statement of the assessee to show that an amount of ₹ 51,070/- was promptly repaid on 30.08. 2012 against the credit received on 03. 08. 2012 which proves the bonafides of the credit received from Khemka Udyog. It is also fairly submitted that additions may, at best, be restricted to the balance amount remaining unpaid.
Having regard to the fact of repayment of credit to the extent of ₹ 51, 070/-, we find merit in the plea of the assessee for claim of bonafide to the extent of at least ₹ 51,070/-. The additions on this score is therefore restricted to ₹ 48, 930/- and the remaining amount of addition of ₹ 51,070/- is reversed.
Reconciliation difference in the closing balance as per the books of account of the assessee and that of debtor M/s. PSL Ltd. -We find the following contentions raised on behalf of the assessee to be noteworthy: (i) no copy of ledger accounts in the books of debtor (PSL Ltd.) was collected by the AO while relying upon the outstanding balance declared by the Chartered Accountant of PSL Ltd. The Chartered Accountant showing confirmation was stated to be mandated by ICICI Bank Ltd. to carry out satisfactory audit of the PSL Ltd.; (ii) no transactions have been carried out during the year with PSL Ltd. and the difference in balance, if any, relates to some earlier year and therefore no event has occurred during the year for taxation purposes; (iii) the excess balance, if any, when received from the party by the assessee would be eventually become taxable in the year of receipt and therefore the entire exercise is, in fact, tax neutral; (iv) the CIT( A) by way of cryptic and non- speaking order confirmed the stand of the AO without taking note of the glaring facts. For the reasons noted above, we find great force in the plea of the assessee for reversal of additions made on account of so called difference in balances.
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2021 (4) TMI 1011
Levy of penalty u/s. 271(1) - assessee has already opted for settlement of dispute for quantum additions as well as penalty under Direct Tax Vivad Se Vishwas Scheme (VVS Scheme), 2020 and already received Form No. 3 from appropriate authority - HELD THAT:- In view the provisions of section 3 of the VSV Act and FAQ No. 8 as extracted above, it is quite discernible that when the tax arrears include penalty levied on such disputed tax, then in such a case only prescribed percentage of disputed tax is required to be paid by the declarant. Upon perusal for Form No. 3, we find that the assessee has filed declaration for both the appeals i.e. disputed tax appeal as well as penalty appeal and paid prescribed percentage as per the scheme. Since the quantum appeal as well as penalty appeal has been settled by the assessee on payment of disputed tax, the captioned appeal which is in relation to penalty u/s. 271(1)(c) does not survive for adjudication and the penalty would stand deleted.
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2021 (4) TMI 1010
Wealth tax assessment - assessee wrongly admitted the value of the land at Baraniputhur as an asset in the AY 2008-09, although, the assessee was not owner of the land in that assessment year- HELD THAT:- As the assessee became owner of the land during the period relevant to the AY 2009-10 only. However, the assessee pleads that when the compliances were made subsequent to the receipt of notices u/s.17B for various AYs in 2016, the assessee committed an error and admitted the value of land in the earlier year return itself i.e. in AY 2008-09. In this regard, the assessee placed reliance on the copies of Sale Deed, Encumbrance Certificate, etc.
We are of the considered view that when the assessee became owner of the impugned land? i.e. whether during the period relevant to the AY 2008-09 or from the AY 2009-10, requires a fresh examination. We deem it fit to remit these issues to the file of the AO for a fresh examination. The assessee shall place relevant material in support of its contentions before the AO and comply with the requirements in accordance with law. The AO on due examination and after affording adequate opportunity to the assessee, shall determine the issues in accordance with law. Appeals filed by the assessee are tread as allowed for statistical purposes.
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2021 (4) TMI 1009
Unexplained cash credit under section 68 - HELD THAT:- As assessee during the assessment proceedings has furnished the necessary details of the fixed assets, along with the name of the suppliers and the breakup of the assets. But the AO has not pointed out any infirmity in such details furnished by the assessee. In fact the assessee has duly discharged its onus by furnishing the requisite details and therefore the onus was shifted upon the AO to reject the contention of the assessee based on the cogent materials. As such the assessee cannot be penalised for non-response of the suppliers, particularly in a situation, where the notices to the suppliers were issued by the AO at the fag end of the assessment.
The entire thrust of the learned DR was based on the documents/informations collected in the course of search proceedings under section 132 of the Act which was conducted on 2 May 2013. As per the learned DR the information gathered during the search proceedings should also be considered while adjudicating the issue on hand. The learned DR further submitted that the matter of the assessee for the year under consideration against the search proceedings is pending before the learned CIT (A). Accordingly the learned DR contended that the matter on hand can also be restored to the file of the learned CIT (A) for fresh adjudication along with the search proceedings. However, we are not convinced with the argument of the learned DR for the reason that both the proceedings are separate and independent to each other.
The assessments in the search proceedings are special assessments to be carried out under the provisions of section 153A of the Act which begins with non-obstante clause. As a result of search, the proceedings under section 153A of the Act have already begun which are based on the search materials. Furthermore, the issue before us is arising against the assessment order framed under section 143(3) of the Act and we are not adjudicating the appeal/matter arising against the assessment framed under section 153A of the Act. It might be quite possible that search material has a bearing on the income to be determined for the year under consideration but for that purpose the proceedings have already been initiated and the same will be taken care by the revenue authorities in the respective proceedings. Accordingly, we are not convinced with the argument of the learned DR.
The cash credit received by the assessee during the year remains no longer unexplained as provided under section 68 of the Act for the reasons as discussed above - Decided against revenue.
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2021 (4) TMI 1008
Unexplained investment - AR submitted before us that the assessee had obtained loan from his partner for which he has given the confirmation statement - HELD THAT:- Having considered the rival submission, we are of the view that to meet the ends of justice, the matter needs to be remitted back to the file of the Ld. AO for de-novo consideration. Accordingly, we hereby remit the matter back to the file of the Ld. AO with directions to admit any additional evidence filed by the assessee and after examining the same pass appropriate order afresh in accordance with merit and law. Appeal of the assessee is allowed for statistical purposes
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2021 (4) TMI 1007
Addition on account of unexplained investment - A.O. has rightly calculated the purchase amount of the property as per the valuation of the stamp duty Authority as per provision of Section 56(2)(vii)(b) of the Act as applicable w.e.f. A.Y. 2014-15 - HELD THAT:- As observed from perusal of the impugned order that the ld. CIT(A) had held in the impugned order that the A.O. has rightly calculated the purchase amount of the property as per the valuation of the stamp duty Authority as per provision of Section 56(2)(vii)(b) of the Act as applicable w.e.f. A.Y. 2014-15. Accordingly, we do not find any reason to interfere or deviate from the findings so recorded by the ld. CIT(A) and hence, we uphold the same. Appeal of the assessee is dismissed.
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2021 (4) TMI 1006
Non issue of mandatory notice u/s 143(2) - HELD THAT:- As relying on Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] and LAXMAN DAS KHANDELWAL [2019 (8) TMI 660 - SUPREME COURT] the passing of assessment order u/s 143(3) of the Act, without issuing notice u/s 143(2) of the Act, by the ITO, ward-9(2), Kolkata, is bad in law and has to be quashed.
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2021 (4) TMI 1005
Capital Gains chargeable to tax - Land transferred in favour of M/s. Sai Gokul Builders in the scheme of JDA - non consider the cost of construction of 7 flats while computing the capital gain from the sale - HELD THAT:- In this case, the A.O. denied the cost of construction incurred on 7 flats while computing the capital gain on the reason that assessee has not incurred this expenditure but it was incurred by developer. However, it has to be noted that the assessee has considered cost of these 7 flats as a consideration while computing the capital gain on entering into JDA. Once the assessee includes the cost of these 7 flats as sale consideration while determining capital gain on entering into JDA, the corresponding benefit shall be given on sale of these 7 flats. Now the issue is only with regard to the sale consideration adopted by assessee towards these 7 flats while offering the capital gain. The A.O. cannot overlook the computation of capital gain offered by assessee on entering into the JDA. Once the assessee adopted the cost of these 7 flats for the purpose of offering the capital gain, same to be considered as cost of construction on sale of these 7 flats - This has been supported by the order ofSMT. JEEVA VADIVELU, VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6 (1) , BANGALORE. [2012 (9) TMI 961 - ITAT BANGALORE]
Being so, we direct the A.O. to consider the cost of construction of 7 flats while computing the capital gain from the sale of these 7 flats. This ground of assessee is allowed.
Determining the value of land transferred to Sai Gokul Builders under JDA at ₹ 800/- p. sq.ft. instead of ₹ 500/- p.sq.ft. as guidance value notified by the Government of Karnataka - As carefully gone through the market guidance value published by the Government of Karnataka w.e.f. 19.4.2017 as per which, the impugned property bearing No.40B/3 & 40B Sai Gokula Builders situated at Hoodi’s village, Bengaluru, East Taluk (erstwhile South Taluk), Mahadevapura, CMC Limits, Ward No.12, K.R. Puram Main Road, Hubli, Bengaluru and it is also noted that the property was converted for non-agricultural residential purposes vide sanction order ALN-SR-1175/1981-82 issued by the Tahsildar, South Taluk, situated at Hoodi’s village, Bengaluru, East Taluk (erstwhile South Taluk), Mahadevapura, CMC Limits, Ward No.12, K.R. Puram Main Road, Hubli, Bengaluru. As such notified value was ₹ 550/- per sq.ft. which can be seen from entry No.19
As such in our opinion, the value to be adopted at ₹ 550/- per sq.ft. instead of ₹ 800/- p.sq.ft valued by the A.O. This ground of assessee is allowed.
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2021 (4) TMI 1004
CENVAT Credit - rendering free service and warranty labour charges - appellant has not paid any service tax on the said taxable service and the appellant has also not maintained separate accounts of input services utilized for providing exempted services - HELD THAT:- The cost of these services are included in the cost of the product accounted at sales showroom and VAT has been paid at the time of sale of the vehicle which is cleared from the cenvat reversal at sales showroom under Rule 6(3A) - learned Commissioner neglected the facts that the income accounted in the Books of Account are through notional entries and these costs are included in the cost of product as confirmed in the refund order.
The confirmation of demand of ₹ 23,725/- under Rule 6(3)(i) of Cenvat Credit Rules, 2004 is not sustainable in law - appeal allowed - decided in favor of appellant.
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2021 (4) TMI 1003
Disallowance of dividend income as exempt in “Schedule BP” relating to computation of business income - inadvertent error committed by the assessee while filling up the return of income filed through electronic mode - details of exempt income were mentioned in the schedule EI of the return of income - HELD THAT:- An identical issue was examined by the Mumbai bench of Tribunal in the case of Suman Chandra G. Mehta [2013 (12) TMI 358 - ITAT MUMBAI]
The facts in the present case are identical. The assessee, out of ignorance or inadvertence has omitted to mention the details of exempt income in the relevant “Schedule EI”. So, the ignorance of the assessee or inadvertent mistake committed by the assessee should not come in his way in claiming exemption, which is otherwise allowable under the Act. It is also not a case that the assessee did not respond to the notice issued by CPC. The assessee has duly responded to the same, but it is the submission of revenue that the assessee should have filed a revised return of income. There is no dispute with regard to the fact that the assessee is entitled for exemption of dividend income. The object of assessment is to determine correct total income of the assessee. Accordingly, I am of the view that the right of the assessee could not be denied merely on accounting of technical errors. Hence there is a mistake apparent from record in not granting exemption claimed by the assessee.
Accordingly, the said mistake deserves to be rectified. We set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to allow the exemption claimed by the assessee.
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2021 (4) TMI 1002
Reopening of assessment u/s 147 - reasons for issue of notice u/s 148 were not supplied to the assessee - HELD THAT:- We observe from perusal of the record that the A.O. in his remand report admitted that the assessee has demanded the reasons for issue of notice u/s 148 vide letter dated 24.05.2019, but since there was request in one line, therefore skipped from supply the same. The A.O. also submitted in his remand report that the letter dated 17.10.2019 is not served on to the A.O
CIT(A) is of the opinion that mere mentioning a line is not a sufficient demand and about the letter dated 17.10.2019 he completely relied on the submission of the A.O.
A.O. in his remand report stated that the letter dated 17.10.2019 was not served on him. In this connection it has been submitted by the ld AR that this letter was served on to the A.O., which is very well evident from the proof of service provided by the Courier agency, the copy of the same was also submitted by the assessee to the Ld. CIT(A) but the same was not appreciated. From the perusal of the courier record, the samw as served upon the A.O., we are of the view that the findings of the Ld. CIT(A) are unjustified and also not in accordance with the law as well as various judicial pronouncements. CIT(A) had not considered the evidences submitted by the assessee during the course of hearing. The assessee submitted the proof of receipt of the letter sent in by placing on record the copy of receipts provided by the courier company, but the Ld. CIT(A) has completely brushed aside the evidences so submitted by the assessee and ld. CIT(A) also approved the act of the A.O., which is unjustified and contrary to the law.
A.O. has failed to provide the reasons despite the specific request of the assessee made to the A.O. twice, first just after filing of return u/s 148 and again during the course of assessment. It is needless to mention that without supply of reasons the entire assessment proceedings should be liable to be declared as illegal and bad in the eyes of law.
Mandate of Section 151 - As the sanction was accorded by the ld. CIT in a purely mechanical manner without application of judicious mind, therefore, the sanction so accorded cannot be held to be a proper and valid sanction within the meaning of Section 151 of the Act and for this reason also, the impugned notice U/s 148 of the Act falls to the ground and proceedings for reopening of the assessee in absence of valid sanction of CIT cannot be initiated, therefore, in the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we are of the considered view that proceedings initiated by invoking the provisions of Section 147 of the Act by the AO and upheld by the Ld. CIT(A) are nonest in law and without jurisdiction, hence, the re-assessment is quashed.
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2021 (4) TMI 1001
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - time limitation - HELD THAT:- It is seen from the invoices which are filed by the Operational Creditor are all raised in the months of April and June 2017 and the present Application is being filed on 16.12.2019 and as such the present Application under Section 9 of IBC, 2016 falls well within the period of limitation, as Annexure II(6) at Page No. 37 of the typed set statement of account maintained of the Corporate Debtor in its ledger has also been filed by the Operational Creditor showing the principal sum as outstanding. Further, it is also seen that the Corporate Debtor has not replied to the Demand Notice sent by the Operational Creditor and has also not brought to the notice of the Operational Creditor any dispute which is pending in relation to the said transaction.
The Operational Creditor has proved the existence of an 'Operational debt' and its 'default' on the part of the Corporate Debtor and in the absence of any objection being raised by the Corporate Debtor, the Corporate Debtor has committed 'default' in the repayment of the 'Operational debt' to the Operational Creditor and in the said circumstances we are constrained to initiate the CIRP in relation to the Corporate Debtor.
Monetary limit for initiation of CIRP - HELD THAT:- In relation to the pecuniary jurisdiction enhanced from ₹ 1 lakh to ₹ 1 crore on and from 24.03.2020, it is seen the present Application was filed before this Tribunal on 16.12.2019 and as such this Tribunal has got pecuniary jurisdiction to entertain the present Application.
The Petition, as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016 - Petition admitted - moratorium declared.
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2021 (4) TMI 1000
Revision u/s 263 - exemption under section 54 was granted to the assessee without verifying the facts - cost of improvement inclusion/ exclusion - HELD THAT:- It is not discernible from where the ld. Commissioner has brought report of ₹ 8/- per sq.ft representing the value of the land as on 1.4.1981. He has not made reference to any documentary evidence or sale instance. On the other hand, he has ignored the report of the registered valuer by observing that registered valuer has not assigned any sale instance for arriving at a value of ₹ 196/- per sq.ft. The report of registered valuer has been placed on record by the assessee and justification for value of 1981 worked out by the registered valuer.
The registered valuer has made a reference to a sale instance, and thereafter worked out the value of the property as on 1.4.1981. Apart from this aspect, the copy of the agreement dated 7.2.1981 has been placed on record. By way of this agreement, the assessee and others have purchased the suit property from the seller viz. Maganbhai Gordhabhai Patel. In the Schedule-A attached with this agreement, the rate prescribed was ₹ 180/- per sq.feet. The assessee has placed on record true copy of translation of the alleged banakhat- If we look into this agreement, which is very closure to 1.4.1981 along with working of the registered valuer, then it would reveal that in support of her working in indexation cost, the assessee has evidence. On the contrary, the ld. Commissioner did not refer to any sale instance for directing the AO to adopt ₹ 8/- per sq.ft. as on 1.4.1981 for working the cost of acquisition.
Commissioner has observed that the assessee failed to show any documentary evidence about the improvement cost claimed at ₹ 11,22,325/-. The AO has not examined this aspect and allowed the claim. Though the assessee has demonstrated the facts as to how she has claimed the improvement cost, and it was a very old claim, the expenditure was incurred in the year 1993-94. It was duly recognized in the return of income for Asstt. Year 2006-07.
AO has called for details regarding working of capital gain/loss. He has also called for investment made during the year. According to the assessee, she has submitted all the details and discussed it with the AO. Thereafter, he was satisfied and passed the assessment order under section 143(3) of the Act. It is a different matter that he has not elaborately discussed each and every aspect. But details are available in the record, therefore, it cannot be said that the AO had not applied his mind while allowing the claim of the assessee, and such order cannot be said to be erroneous and prejudicial to the interests of the Revenue. The ld. Commissioner ought to have looked into those details and ought to have arrived at a firm conclusion as to how the assessment order is erroneous. He cannot relegate this aspect to the AO to find as to how his order is erroneous.
As in the case of DG Housing Projects Ltd. [2012 (3) TMI 227 - DELHI HIGH COURT] has held that the ld. Commissioner should have not relegated the point that assessment order is erroneous to the AO himself. The ld. Commissioner, after analyzing the record, ought to have recorded a categorical finding and provided valid reasons as to how the assessment order is erroneous. In other words, the CIT has to examine the order of the Assessing Officer on merits and then form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the absence of the same, original assessment order of the AO cannot be said to be erroneous and prejudicial to the interest of the Revenue. Accordingly, we do not find any reason for invoking provisions of section 263 by the ld. CIT, more so when relevant details and explanations were already available on the assessment record and based on which assessment order was passed by the AO. We quash the impugned order passed under section 263 restore that the original assessment order passed under section 143(3) - Decided in favour of assessee.
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2021 (4) TMI 999
Directions to the Resolution Professional to effectively handover the unit of the Corporate Debtor for carrying business as per the lease agreement dated 29.09.2020 and release of goods belonging to applicant - Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the present case, it is not in dispute that Corporate Debtor was a going concern at the time of commencement of CIRP. Hence, it was the obligation on the part of RP to keep it as a going concern subject to difficulties/lockdown being imposed on account of Covid-19 pandemic. It is again reiterated that the MoU dated 02.01.2020 was in operation and had a balance period of almost three years, when the Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP). There was a lock-in-period of two years. The goods worth of ₹ 4.00 Crores and more belonging to the Applicant was also lying at the plants, hence, on the removal of lockdown or lifting of restrictions, the Applicant could start the operations without any difficulties. In this situation, we are not able to appreciate as to what prompted RP to not to continue with this arrangement, particularly when the Applicant was already having such arrangement since 2017 and had all the competency and all the resources to continue with the same arrangement and MoU dated 02.01.2020 was still valid.
There are two clauses in the definition of claim as per Section 3(6) of the Code. Clause (a) covers right to receive payment. It is important to note that this right is defined in very wide manner and covers various kinds of rights which may arise out of contract or judgment or even disputed. Thus, if claims of applicant are disputed by the RP still it would fall under the definition of claims. Assuming for a moment that it is claimed that payment of old dues was made by applicant and, there is no provision for refund of that, either in MoU dated 02.01.2020 or lease agreement dated 30.09.2020, hence, not admissible. Our answer to this possibility is that first of all these dues were no payable by Applicant under both these agreements and, secondly, lease agreement has not been performed, hence, having regard to the term "equitable" used in clause (a), the applicant is entitled to get refund of the same on equitable considerations which squarely apply to the facts of the case. Further, provisions of clause (b) can be applied for payment of compensation for breach of MoU on account of premature termination of such MoU (refer clause 12 of MoU). In addition to this, this clause can also be applied to get suitable remedy for breach of lease agreement even if it is disputed by Corporate Debtor.
Apart from maximization of value of assets of Corporate Debtor there are three more objects which are relevant for our purposes and are of equal importance. These objects are (1) to promote entrepreneurship (2) availability of credit and (3) balance the interest of all the stakeholders. If we pose a question to ourselves whether Applicant's claims fall under all the three above objects. Even a layman can answer it so. Having arrived at such conclusion, we also state that preamble of any statute is not only a guiding force to find the legislative intent and policy in enacting a statute but such preamble is also equivalent to provisions of law which can be resorted to decide issues arising under that statute.
It is absolutely clear that the issues raised in this application can be said both as in relation to or arising out of insolvency resolution and a claim against the Corporate Debtor. Therefore, even if some financial obligation becomes payable by the Corporate Debtor, in our view, the same needs to be met by the Corporate Debtor. Further, CoC is involved and such actions have taken place under their knowledge after certain stage i.e. after publication of advertisement dated 31.07.2017 and resolution for termination of MoU as well as for execution of lease agreement has been approved by CoC and thereafter, these problems have happened, hence, in case the Corporate Debtor does not have resources to meet such obligations, the members of CoC are liable to pay the same.
Application allowed.
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2021 (4) TMI 998
Contribution to Ranbaxy Community Healthcare Society (RCHS) u/s. 37(1) and disallowing on the ground of non-deduction of TDS u/s. 40(a)(ia) - HELD THAT:- As identical issue on similar fact has been adjudicated in the case of the assessee itself in its favour by the Co-ordinate Bench of the ITAT Ahmedabad for assessment year 2009-10 [2019 (9) TMI 438 - ITAT DELHI] - The ld. Departmental Representative is fair enough not to controvert these undisputed facts that the instant issue in this ground of appeal is covered by the aforesaid cited decision of the ITAT wherein direct to delete the disallowance of contribution made by appellant to Ranbaxy Community Healthcare Society and Ranbaxy Science Foundation. Furthermore regarding failure to deduct tax on this sum, Ld. DR. could not point out particular section, which warrants deduction of tax at sources on this payment.
Therefore, we also hold that in absence of specific section under which the tax is required to be deducted on such contribution without their being any service rendered by the recipient of the contribution disallowance u/s 40a(ia) also cannot be made
TP Adjustment - Erred in not considering overseas associated enterprise as tested party being the least complex of the transacting entities and instead considering assessee as tested party thus violating basic principles of transfer pricing - HELD THAT:- As relying on own case [2019 (9) TMI 438 - ITAT DELHI] we restore this issue to the file of the TPO for fresh adjudication considering A.E’s. as tested party. Therefore, this ground of appeal of the assessee is allowed for statistical purposes.
Disallowance u/s 14A - HELD THAT:- Respectfully following the decision of the Hon’ble High Court of Gujarat in the case of Corrtech Energy Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] wherein held that in case no dividend income is claimed as exempt no disallowance is to be made u/s. 14A of the Act. Therefore, following the decision of Hon’ble Gujarat High Court as cited above, this ground of appeal of the assessee is allowed.
Disallowance of deduction claimed u/s. 80IB and 80IC - assessee claimed these deductions in respect of undertakings located in backward area for deduction u/s. 80IB (Goa Unit) and for deduction u/s. 80IC (Paontashahib, Himachal Pradesh) - Assessing Officer stated that no separate books of account have been maintained in respect of the eligible undertaking and concluded that as held in the earlier assessment year the assessee was not eligible for deduction u/s. 80IB/80IC - HELD THAT:- In view of the discussion and following the order of the ITAT Delhi [2019 (9) TMI 438 - ITAT DELHI]in which the deduction claimed by the assessee under section 80IB/80IC was completely allowed.
Market to market gain as taxable income - disallowance of market to market loss made while completing assessment year 2009-10 - why these expenditure should not be added back to income for the relevant accounting period? - HELD THAT:- Following the decision of ITAT on the identical issue [2019 (9) TMI 438 - ITAT DELHI] we hold that the amount written back by the assessee cannot be subject to tax either under normal computation of income tax act or under section 115JB of the Act in the year under consideration. Therefore, following the decision of the ITAT as supra reversal of amount is not taxable under the normal provision and ₹ 1534.16 Mn under section 115JB of the Act as the same was already suffered to tax in the preceding assessment year 2009-10. Therefore, following the decision of the ITAT as supra, this ground of appeal of the assessee is partly allowed.
Disallowance on premium paid on FCCB - HELD THAT:- There is clear distinction between bonds and share capital because a bond does not represent ownership of equity capital. Bonds are interest bearing instrument which represents a loan. Therefore, FCCB issued by the assessee company were debt instrument issued by assessee company engaging its liability to pay the debt amount. These bonds are distinguishable from shares since bonds forms part of the loan and does not represent ownership in share capital.
Therefore, the premium paid on redemption of FCCB is interest eligible for deduction. The liability to pay premium is contingent upon the right of redemption being exercised by the assessee company. The liability to pay premium is further contingent upon the right of conversion of FCCB to equity share not being exercised by the holders of the FCCB. Therefore, payment of interest in the form of premium which is incurred wholly and exclusively for the purpose of business is to be allowed in the year in which it is incurred. Therefore we consider that premium on redemption of debenture is in the nature of interest allowable as deduction under the provision of the act, therefore, this ground of appeal of the assessee is allowed.
Disallowing weighted deduction u/s. 35(2AB) merely on account of failure to produce form 3CL - HELD THAT:- As relying on own case 2016 (12) TMI 1539 - ITAT AHMEDABAD] we direct the Assessing Officer to allow the claim of the assessee after verification of the necessary particulars as directed in the above decision of the ITAT. Therefore, this ground of appeal of the assessee is allowed.
Weighted deduction u/s. 35(2AB) on cost of assets provided to employees working in approved R & D facilities and engaged in execution of R &D activities) - HELD THAT:- The ground raised before us is identical to the issue raised before Delhi ITAT in the case no. [2016 (5) TMI 157 - ITAT DELHI]. Hence taking the same view on such issue, we set aside the order of ld. CIT-A to the AO for fresh adjudication. Hence the ground of appeal of the assessee is allowed for statistical purposes.
Claim towards investment made by company in overseas subsidiaries expenses) on account of Adjustment of hedging charges - HELD THAT:- Following the decision of the ITAT in the case of the assessee itself [2019 (9) TMI 438 - ITAT DELHI] this ground of appeal of the assessee is allowed with direction to the Assessing Officer to adjudicate this issue de-novo as per the direction laid down in the findings of the ITAT as cited above.
Deduction for the cess paid by the assessee - Whether the said cess is revenue expenditure (ii) the said cess is not rate or tax debarred by seciton40(a)(ia) of the act.? - HELD THAT:- The similar issue on identical facts was adjudicated by the Co-ordinate Bench of the ITAT Ahmedabad in the case of Jindal Worldwide Ltd. [2020 (12) TMI 439 - ITAT AHMEDABAD] and the matter was restored to the A.O. for deciding afresh in view of the judicial pronouncement and the circular of the CBDT as referred above. Therefore after taking into consideration the circular of the CBDT and decisions of M/S. CHAMBAL FERTILIZERS AND CHEMICALS LTD., GADEPAN, DISTT. KOTA. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] and SESA GOA LIMITED, [2020 (3) TMI 347 - BOMBAY HIGH COURT]we restore this issue to the file of the Assessing Officer for deciding afresh after taking into consideration the direction laid down in the aforesaid decisions of the Hon’ble High Court and the Circular of the CBDT.
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2021 (4) TMI 997
Delayed payments of employees contribution to PF as u/s.36(1)(va) r.w.s 2(24)(x) or u/s 43B - HELD THAT:- Considering the submissions of the parties that the issue raised in present appeal is covered by the decisions of Hon'ble Jurisdictional High Court in CIT Vs GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein it was held that sec. 43B of the Act is not applicable for the delayed payments of employees contribution to PF as under section 36(1)(va) r.w.s 2(24)(x) of the Act. In the light of above discussion and facts and circumstances and judicial decision Hon`ble High Court we upheld the addition made by the ld.AO, accordingly appeal of the assessee is dismissed. In the result, Ground No.1 of the appeal is dismissed.
Interest paid to NBFC Kotak Mahindra Pvt. Ltd - assessee submits that the recipient of the interest has paid tax on the interest, therefore this ground of appeal may be restored to the file of the Assessing Officer (AO) for verification of facts, if the recipient has paid tax on the interest received by them than the AO be directed not to made the addition against the assessee - HELD THAT:- Considering the submissions by both the parties and the fact the ld.AR of the assessee submitted that recipient has already paid tax on the interest received, therefore, we restore the issue to the file of the AO to verify the facts if the recipient had paid the tax on the interest paid by the assessee, no disallowance be made against the assessee. Therefore, the A.O. is directed to verify the facts and pass the order afresh in accordance with Law. The assessee is directed to provide all necessary information and documents to the AO, accordingly this ground no.2 is allowed for statistical purpose.
Disallowance of interest paid on TDS - assessee submits that the interest paid by the assessee is not a penalty and compensatory in nature and is allowable deduction under section 37 - HELD THAT:- Hon’ble Apex Court in Prakash Cotton Mills Vs CIT [1993 (4) TMI 3 - SUPREME COURT] held that whenever any statutory impost paid by an assessee by way of damages or penalty or interest is claimed as an allowable expenditure under section 37(1), the assessing authority is required to examine the scheme of the provisions of the relevant statute providing for the payment of such impost notwithstanding the nomenclature of the impost as given by the statute, to find whether it is compensatory or penal in nature. The authority has to allow deduction under section 37(1) wherever such examination reveals the concerned impost to be purely compensatory in nature. Considering the fact that the assessee has paid interest of TDS, which is statutory impost, paid by the assessee and is compensatory in nature and thus is allowable deduction. Hence, we direct the AO to allow the interest paid by assessee on TDS. In the result, the ground No. 3 is allowed.
Disallowance u/s.14A - assessee submits that during the financial year relevant to the assessment period under consideration, the assessee has not shown any exempt income, therefore there should not be any disallowance under section 14A - HELD THAT:- As relying on Cheminvest Ltd. [2009 (8) TMI 126 - ITAT DELHI-B] considering the fact the A.O. has not identified any exempt income earned by the assessee during the year, thus the A.O. was not justified in making disallowance under section 14A. Ground No. 4 of the appeal is allowed.
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