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Showing 441 to 460 of 1393 Records
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2021 (2) TMI 955
Penalty u/s.271(1)( c) - additional income offered to tax by the assessee pursuant to survey and which was also disclosed by him in the return of income filed - HELD THAT:- As factual paper book filed by the assessee comprising of the profit and loss account for the year ended 31/03/2009 and the schedule for the other income thereon, the sum of ₹ 3 Crores has been disclosed by the assessee exclusively as income declared under survey under the head ‘other income’. This itself goes to prove that the assessee had duly recorded that income offered in the survey in its books of accounts.
We find that this sum of ₹ 3 crores was also duly offered to tax by the assessee in the return of income filed. Moreover, we find that similar issue had been the subject matter of adjudication by the Hon’ble Delhi High Court in the case of CIT vs. SAS Pharmaceuticals [2011 (4) TMI 888 - DELHI HIGH COURT] wherein it was held that for the purpose of imposing penalty u/s.271(1)(c) of the Act, concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be in the income tax return filed by the assessee.
The Hon’ble Delhi High Court held that no penalty would be exigible in such scenario. The facts of the case before us are exactly similar and identical to the facts before the Hon’ble Delhi High Court. In the instant case also there is no dispute that assessee had indeed disclosed ₹ 3 Crores additional income in the income tax return filed by it.
As decided in Shree Sai Developers [2019 (8) TMI 59 - GUJARAT HIGH COURT] since there was no concealment in the return of income filed by the assessee which was ultimately accepted by the Revenue, there cannot be any levy of penalty u/s.271(1)(c) of the Act. Thus we hold that no penalty u/s.271(1)(c) would be exigible thereof in the hands of the assessee. Accordingly, the grounds raised by the assessee are allowed.
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2021 (2) TMI 954
Disallowance made u/s.14A of the Act r.w.Rule 8D(2) of the Rules both under normal provisions of the Act as well as in the computation of book profits u/s.115JB - HELD THAT:- As far as the disallowance of indirect expenses under third limb of Rule 8D(2) of the Rules, the only those investments which had actually yielded exempt income need to be considered for working out the disallowance thereon. This has been held by the Special Bench of Delhi Tribunal in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI]. However, if adoption of such computation mechanism results in absurdity, then the proportionate income theory is to be adopted for working out the disallowance as we hold that Rule 8D computation mechanism should be considered as the last resort and is not automatic in its application.
In this regard, the ld. AR placed reliance in the case of Future Retail Ltd. [2020 (11) TMI 64 - ITAT MUMBAI]wherein under similar facts and circumstances, where investments were made only within the group companies predominantly vis a vis incurring of expenses for the purpose of earning dividend income
We direct the ld. AO to compute the disallowance in accordance with the ratio laid in para 12 of the aforesaid order u/s.14A of the Act for the purpose of computing income under normal provisions of the Act. The same figure shall be utilized for making disallowance under clause –f of Explanation to section 115JB of the Act while computing the book profits as they are actual expenses incurred on proportionate basis for the purpose of earning exempt income. Accordingly, the grounds raised by the assessee in cross objections and ground Nos.1-4 raised by the Revenue are disposed off in the aforesaid manner.
Allowing ESOP discount as a deduction - as per AO the said expenditure is only incurred on a contingent basis and the same has not been incurred by the assessee and accordingly disallowed the same while completing the assessment - HELD THAT:- We find that the ld. CIT(A) had placed reliance on the Special Bench of Bangalore Tribunal in the case of Biocon Ltd.[2013 (8) TMI 629 - ITAT BANGALORE], M/S KOTAK MAHINDRA BANK LTD. [2018 (1) TMI 320 - ITAT MUMBAI] AND M/S. PVP VENTURES LIMITED [2012 (7) TMI 696 - MADRAS HIGH COURT] deleted the disallowance of ESOP expenses - e Special Bench of Bangalore Tribunal in the case of Biocon Ltd., has been subsequently approved by the Hon’ble Karnataka High Court in the case of CIT vs. Biocon Ltd., [2020 (11) TMI 779 - KARNATAKA HIGH COURT] wherein it was held that discount on issue of ESOP was allowable as deduction u/s.37(1) of the Act as primary object was not to vest capital but to earn profits by securing consistent services of employees. Respectfully following the said decision, we hold no infirmity in the order of ld. CIT(A) granting relief to the assessee. Accordingly, the ground raised by the Revenue are dismissed.
Claiming deduction towards education cess and secondary higher education cess paid - HELD THAT:- We find that this issue is covered in favour of the assessee in the case of Sesa Goa Ltd [2020 (3) TMI 347 - BOMBAY HIGH COURT] held that education cess paid by the assessee is entitled for deduction. We find that the additional ground raised by the assessee goes to the root of the matter and does not involve any verification of facts and hence, we are inclined to admit the same and allow the same by respectfully following the decision of the Hon’ble Jurisdictional High Court referred to supra.
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2021 (2) TMI 953
CENVAT Credit - duty paid on re-exportation of the capital goods - denial of Cenvat credit on the ground that as per Rule 3(5A) there is no provision to clear the capital goods without payment of duty for export - HELD THAT:- Though there is no mention about export of capital goods in rule 3(5A) but in general any export of goods does not attract duty as the export goods can be cleared either under bond or under claim for rebate. The appellant has relied upon the various judgment wherein the issue of payment of duty in terms of Rule 3(5A) has been dealt with in respect of export goods. However both the lower authority have not dealt this situation in detail, after considering the relevant judgment on the issue. The appellant also vehemently argued that even if Cenvat credit is not available, since the goods have been exported the appellant are entitled for rebate claim.
It is found that this is a vital issue raised by the appellant before the Adjudicating authority as well as the Commissioner (Appeals) .The same should have been considered in detail and proper finding should have been given however, both the authorities failed to properly consider the issue of rebate claim in accordance with law.
Both the authorities have not considered the overall issue on the basis of the legal provision and also on the various judgments based on this issue therefore, in the interest of justice the only option left for us is to remit the matter back to the Adjudicating Authority for considering all the issues and pass a reasoned order - Appeal allowed by way of remand.
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2021 (2) TMI 952
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - payment / recovery of their dues such as remuneration / wages, other perquisites including terminal benefits, if any - existence of debt and dispute or not - HELD THAT:- Regulation 9 of the CIRP Regulations lays down the procedure for the workmen and employees to submit their claims before the IRP. IRP / RP is then to verify and determine the amount of the claim. The workers and employees thus are operational creditors. They are not members of the CoC of the Corporate Debtor. Regulation 22 of the IP Regulations mandates that an Insolvency Professional must ensure that the confidentiality of the information relating to insolvency resolution process, liquidation or bankruptcy process is maintained at all times. The exception to this disclosure can only be made to the relevant parties as required under the CIRP Regulations or the Code or for any other law for the time being in force. Therefore, reluctance and refusal of the Respondent in sharing the copy of the Resolution Plan with the Applicants cannot be faulted.
It would not be appropriate or permissible for this Authority to do anything otherwise than what is expressly provided under the Code. Section 30 of the Code provides detailed procedure for submission of the Resolution Plan to the Resolution Professional, presentation of the Plan to the CoC for its approval and approval of the Plan by the CoC by a vote of not less than 66% of the voting share after considering its feasibility and viability, the manner of distribution proposed which would take into account the order of priority among creditors as laid down in sub-section 1 of Section 53 including priority and value of the security interest of Secured Creditors. The Committee shall also examine the viability or otherwise of the Plan in terms of the conditions provided under Section 30. Upon its approval by the CoC the Resolution Plan would have to be submitted to the Adjudicating Authority for its satisfaction and approval.
In view of such express provisions in relation to the Resolution Plan it is clear that the statutory mandate requires that the Resolution Plan can only be presented to the CoC for its approval and presented before the Adjudicating Authority for its satisfaction in approving the same. The Code or the Regulations there under do not contemplate presentation or supply of the Resolution Plan or a copy thereof to any other body or entity - Workmen of the Corporate Debtor who stand on a different footing than other employees under Section 53 may have a prerogative in satisfaction of their claims under Section 53, but they certainly do not have any other privilege beyond that. To say that workmen being at par with the secured creditors are also entitled to privileges of a member of CoC would be fallacious and would go against the grain of the intent and purpose of the Code.
The role of the Operational Creditors in the Resolution Process is very limited and is essentially confined to the satisfaction of their claims. Taking the facts of the case at hand and the law as it stands today into consideration we are of the humble view that the Applicants cannot be found entitled to a copy of the Resolution Plan or any portion thereof. They would also not be eligible to be heard or intervene during the process of consideration of the Resolution Plan by this Authority. The payments as to their wages and gratuity and other terminal benefits shall be in accordance with the law and in terms of the Resolution Plan guided by the provisions under the Code.
Application dismissed.
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2021 (2) TMI 951
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditor - availability of alternative remedy - existence of debt and dispute or not - HELD THAT:- The Adjudicating Authority should have, in absence of any dispute contemplated under Section 8(2) having been raised by the Respondent – Corporate Debtor as a pre-existing dispute or that the claim of Appellant – Operational Creditor had been satisfied, proceeded to admit the Application, as no dispute had been raised before it, justifying its disinclination to admit the Application. Instead, the Adjudicating Authority proceeded to make out a case for the Respondent-Corporate Debtor on the premise that the Appellant-Operational Creditor has not invoked other remedies available under law. We cannot understand as to how the availability of alternate remedy would render the debt and default disputed. In absence of pre-existing dispute having been raised by the Corporate Debtor or it being demonstrated that a suit or arbitration was pending in respect of the operational debt, in respect whereof Corporate Debtor was alleged to have committed default, the Adjudicating Authority would not be justified in drawing a conclusion in respect of there being dispute as regards debt and default merely on the strength of an Agreement relied upon by the Appellant – Operational Creditor, notwithstanding the fact that such Agreement provided for reference of a dispute arising between the parties in relation to a claim through arbitration. Even otherwise, Section 238 of the I&B Code, which has an overriding effect over the existing laws or any other law or contract, would not admit of the alternative remedy being a disabling provision for Operational Creditor to seek resolution of a dispute in regard to operational debt claimed against the Corporate Debtor by triggering the Corporate Insolvency Resolution Process.
The Adjudicating Authority was concerned with the insolvency resolution qua the operational debt, which the Corporate Debtor owed to the Operational Creditor. It was immaterial whether it was solvent or insolvent qua other creditors. The I&B Code would not permit the Adjudicating Authority to make a roving enquiry into the aspect of solvency or insolvency of the Corporate Debtor except to the extent of the Financial Creditors or the Operational Creditors, who sought triggering of Corporate Insolvency Resolution Process - The Adjudicating Authority clearly landed in error by observing that the course adopted by it was warranted on the principle of ease of doing business, ignoring the fact that such course was not available to it, ease of doing business only being an objective of the legislation viz. I&B Code along with other objectives specified in the preamble, which are sought to be achieved through CIRP process.
The Adjudicating Authority is directed to pass an order of admission in respect of the Application filed by the Appellant-Operational Creditor under Section 9 of the I&B Code within two weeks of communication of this order - appeal allowed - decided in favor of appellant.
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2021 (2) TMI 950
Validity of reopening of assessment - notice u/s 148 has been issued on a dead person - AO has not taken any steps to serve the notice u/s 148 on the legal heir but has proceeded to complete the assessment on the legal heir - HELD THAT:- Factum of the death of the assessee was brought to the notice of the AO during the re-assessment proceedings pursuant to issuance of notice u/s 148 but the AO has not taken any steps to bring Legal Heir on record and to issue notices u/s 148 of the Act to the L/Rs. In fact, the notice u/s 148 has been issued on a dead person and therefore, it is an invalid notice and the consequent assessment on the LRs without issuing the notice u/s 148 to the LRs is not sustainable - See SRI AEMALA VENKATESWARA RAO VERSUS INCOME TAX OFFICER, WARD-2 (1) , GUNTUR [2019 (5) TMI 767 - ITAT VISAKHAPATNAM] - Decided in favour of assessee.
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2021 (2) TMI 949
Validity of proceeding u/s. 153C - assessee has submitted that the AO has invoked the provisions of Section 153C but he has made only protective assessment for the AYs 2005-06 to 2008-09 ( part period) and therefore the action of the Assessing Officer is not sustainable in law to tax in the hands of the assessee based on the material found and seized during the search and seizure action - HELD THAT:- Documents found and seized during the search and seizure action belongs to Meja Filing Station including ledger accounts of assessee in the books of Hotel Ajay International as well as certain vouchers in the name of Shri Ajay Kumar and Vijay Kumar, who were running the filing station as per the authorization at the relevant point of time. The documents found and seized pertains to the Financial Year 2007 and there is no ambiguity in the details as found recorded in the seized material that the assessee was doing the business of running filing station being retail dealership of sale of petrol and high speed diesel.
Since there was no return of income filed by the assessee up to the AY 2008-09 till 07.12.2007 therefore, the seized material constitute incriminating material disclosing undisclosed income of the assessee. The seized material leads to the satisfaction that it has a bearing on the determining of the total income of the assessee at least for the assessment years for which the assessee did not file any return of income. Accordingly, do not find any substance or merit in this contention of the assessee and Grounds No. 1 to 5 of the assessee’s appeal are dismissed.
Estimation of income by applying NP @ 1% of gross sales being excessive - HELD THAT:- Except the contention of excessiveness, the ld. AR of the assessee has not brought any material to show that the actual income of the assessee for these years is very less than 1%. Since the assessee has not produced any books of account as well as other supporting documents therefore, the N.P. applied by the ld. CIT(A) at 1% is very reasonable and proper and does not required any interference. Accordingly, appeals of the assessee dismissed.
Assessment on substantive basis by AO by applying N.P. at 2% which was restricted by the ld. CIT(A) to 1% - AO rejected the books of account of the assessee due to non production of the relevant details - HELD THAT:- AO was justified however it is pertinent to note that for the AY 2008-09 (from 07.12.2007 to 31.03.2008) to AY 2010-11 the assessee firm filed return of income u/s. 139(1) of the Act disclosing the income from the business of retails outlet of selling petrol and high speed diesel and therefore, the material found and seized during the search and seizure action pertaining to the F.Y. 2007 shall have no bearing on determination of the total income of the assessee when the assessee has already declared the income from such business.
AO has passed an identical order by applying the N.P. @ 2% after rejecting the books of account but the seized material which was found during search and seizure action reveals that the assessee is engaged in the business and once the assessee has already declared the income from said business in the return of income filed u/s.139(1) then the said seized material which reveals the details of the transaction of the FY 2007 up to 07.12.2007 would not be considered as incriminating material to have any effect on determination of the total income of the assessee for these years. Therefore, the addition made by the Assessing Officer in the proceeding u/s. 153C for the Assessment year 2008-09 from 07.12.2007 to 31.03.2008 to AY 2010-11 are not based on any material revealing undisclosed income. Accordingly, the additions made by the Assessing Officer for these years is liable to be deleted.
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2021 (2) TMI 948
CENVAT Credit - trading activities - non-maintenance of separate records for taxable as well as exempt activities - Rule 6(3A) of CENVAT Credit Rules, 2004 - Interpretation of the term “CENVAT Credit taken on input services during the financial year” appearing in clause ( c) (iii) of sub-Rule 3A of Rule 6 of CENVAT Credit Rules, 2004 as they were prior to amendment on March 01, 2016 - HELD THAT:- The appellants have been from time to time submitting intimation under Rule 6(3A) of CENVAT Credit Rules, 2004 showing full calculation of the manner in which they have arrived at the reversal of CENVAT Credit. In these circumstances, it is apparent that there was no suppression or mis-declaration on the part of the appellant and, therefore, the extended period of limitation could not have been invoked.
It is also seen that with effect from March 01, 2016, the law has been amended clearly specifying that reversal of CENVAT Credit only on common inputs service is required. While clarifying the said issue, at the time of issue of said amendment, the Government of India vide DOF No. 334/8/2016-TRU dated February 29, 2016 clarified that Rule 6 of Cenvat Credit Rules which provides for reversal of credit in respect of inputs and input services used in manufacture of exempted goods or for provision of exempted services, is being redrafted with the objective of simplifying and rationalizing the same without altering the established principles of reversal of such credit.
Thus, it is apparent that the amendment made is of clarificatory nature and the principles of reversal of credit remains the same.
In the instant case, it is seen that Rule 6 of CENVAT Credit Rules, 2004 deals solely with the situation of CENVAT Credit resulting from exempted services and exempted products. The rule itself is clearly designed to deny partial credit of CENVAT credit taken on inputs/input services used in exempted goods and services. The CENVAT credit of other kind has no relevance in this rule. In these circumstances, it is obvious that reference to CENVAT Credit in the said Rule would be reference to CENVAT Credit on common input services which are used for exempted products and services as well as for dutiable products and services.
Appeal allowed - decided in favor of appellant.
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2021 (2) TMI 947
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT:- The demand notice dated 06.12.2018 was sent at the address mentioned in the master data of the corporate debtor as well as at the email address. The postal receipt along with tracking report and email sent to the corporate debtor are at Annexures-8 and 9 respectively. A compliance affidavit filed vide Diary No.862 dated 20.02.2019 showing the postal envelope vide which the demand notice was sent to the corporate debtor and same was returned with remarks “left” is at Annexure A-1.
Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The respondent-corporate debtor has neither filed any reply to the petition nor disputed the liability towards the operational creditor. Thus, there is no dispute regarding the liability between the corporate debtor and the operational creditor. It is also observed that till the last date of hearing, there has been no representation from the respondent-corporate debtor.
There is a total unpaid operational debt (in default) of ₹ 21,57,659.69. It is stated that the demand notice dated 06.12.2018 was sent for an amount of ₹ 21,57,659.69. Copy of ledger account of corporate debtor in the books of operational creditor for the period 17.04.2018 to 26.09.2018 is appended as Annexure-4. As a statutory requirement under Section 9(3)(b) of the Code, an affidavit dated 18.01.2019 (page Nos.17A to 18) stating that despite service of the demand notice dated 06.12.2018, the corporate debtor did not raise any dispute qua the outstanding payment and even no dispute was pending with or arose from the corporate debtor prior to sending of the statutory demand notice.
Debt and default or not - HELD THAT:- It has been shown that the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. It is also observed that the conditions under Section 9 of the Code stand satisfied. The operational creditorpetitioner states that from the above mentioned fact it is clear that the liability of the respondent-corporate debtor is undisputed. Accordingly, the petitioner has proved the debt and the default, which is more than ₹ 1 lac by the respondent-corporate debtor.
The present petition being complete and having established the default in payment of the Operational Debt for the default amount being above ₹ 1,00,000/-, the petition is admitted in terms of Section 9(5)(i) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code - Application admitted.
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2021 (2) TMI 946
Taxability of Amounts paid to the non-resident assessees /foreign companies for providing various services in connection with prospecting, extraction or production of mineral oil - Fee for technical services covered u/s 115A or it is inextricably connected with processing, extraction or production of mineral oil u/s 44BB - Payment for rendering services for microseismic acquisition, processing and interpretation of micro-seismic data in two observation wells during hydro-fracturing operations carried out in the wells at Bakrol oil field - Short deduction of tax deducted u/s 44BB - short deduction has been determined by the CPC-TDS in respect of deductees by treating that the tax was deductible at 10% u/s 115A - HELD THAT:- Following the decision rendered in Oil & Natural Gas Corporation Ltd. [2015 (7) TMI 91 - SUPREME COURT] we are of the considered view that ld. CIT (A) has erred in treating the services rendered by M/s. ESG Solutions to the assessee in the nature of technical services to be covered u/s 115A of the Act rather these services are inextricably connected with prospecting, extraction or production of mineral oil petroleum products and these services are to achieve dominant purpose by rendering services for micro seismic acquisition, processing and interpretation of micro-seismic data in two observation wells during hydro-fracturing operations carried out in wells at Bakrol oil fields.
Consequently, services rendered by the non-resident company fall within the purview of presumptive provision of section 44BB of the Act and the addition made by the AO and confirmed by the ld. CIT (A) is not sustainable, hence ordered to be deleted. Consequently, the appeal filed by the assessee is allowed.
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2021 (2) TMI 945
Income accrued in India - taxable income left in the hands of the PE - commission paid to Indian agent - Whether foreign entity having a permanent establishment in India shall be liable to income tax only to the extent as is reasonably attributable to the operations carried out in India? - commission/remuneration paid to RIPL from the profits attributed to the PE - India and UK DTAA - HELD THAT:- When we deduct commission/remuneration from the RIPL from the profits attributed to the PE, no taxable income left in the hands of PE. Consequently, addition made by the AO/CIT (A) is not sustainable in the eyes of law.
Decision rendered by the coordinate Bench of the Tribunal in case of Amadeus Global Travel Distribution S.A [2007 (11) TMI 330 - ITAT DELHI-B] affirmed by the Hon’ble Delhi High Court [2011 (4) TMI 1520 - DELHI HIGH COURT] and [2011 (5) TMI 1114 - DELHI HIGH COURT] by relying upon the decision in case of DIT vs. Galileo International Inc [2009 (2) TMI 497 - DELHI HIGH COURT] has been further followed by the coordinate Bench of the Tribunal in assessee’s own case [2020 (11) TMI 206 - ITAT DELHI]
We are of the considered view that when RIPL, a domestic subsidiary company, has already been remunerated at arm’s length, no further attribution of profit to PE would be warranted. Even otherwise, by following the order passed by the coordinate Bench of the Tribunal in assessee’s own case for AY 2007-08 [2020 (11) TMI 206 - ITAT DELHI], when we deduct the remuneration/commission paid to RIPL from the amounts of profit attributed to the PE no taxable income left in the hands of the PE. Consequently, additions made by the AO and confirmed by ld. CIT (A) are ordered to be deleted being not sustainable in the eyes of law. Consequently, all the appeals filed by the assessee are hereby allowed.
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2021 (2) TMI 944
Seeking for withdrawal of the Company Petition - whether the IRP is duty bound to file the Form-FA before the Adjudicating Authority within 3 days of receiving the settlement agreement? - whether the adjudicated authority can allow the withdrawal of CIRP in view of pending claims of other creditors and whether IRP has followed the letter and spirit of law as enunciated under Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
HELD THAT:- It is an undisputed fact that the Corporate Debtor settled the dues of the original Operational Creditor soon after initiation of admission of CIRP on 23.10.219 against Corporate Debtor. The IRP upon receipt of Form FA immediately within 3 days filed an application to withdraw the CIRP against the Corporate Debtor - It is a trite law that Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, mandates the IRP that upon the receipt of Form FA, has to file an application for withdrawal with adjudicating authority within 3 days of receipt of the same.
It is clear that once a code gets triggered by admission of CIRP against the Corporate Debtor, it is necessary that the body which is to oversee the resolution process must be consulted before any individual Corporate Debtor is allowed to settle his claims. This being a collective action is a proceeding in rem. The moot question now remains to be answered is whether the Adjudicating Authority can allow a withdrawal of CIRP against Corporate Debtor before constitution of COC - it is irrelevant whether the last date for receiving claims is still open or lapsed as per the public notice, upon receiving Form FA, it is bounded duty of IRP to file the application for withdrawal within 3 days under Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. It is an undisputed fact that the IRP has filed the application within 3 days and has acted in letter and spirit of law.
This Adjudicating Authority is not vested with any powers under the Insolvency and Bankruptcy Code to direct settlement of parties while allowing withdrawal of CIRP against Corporate Debtor - further there are no misconduct of the IRP in filing application for withdrawal, within 3 days of receiving Form FA. The Cost of ₹ 10 lakhs on the Corporate Debtor is set aside - application allowed.
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2021 (2) TMI 943
Addition u/s 68 - Cash deposits in bank account as undisclosed income - Non reply to summons by debtors - HELD THAT:- As total cash deposits of ₹ 45,50,000/- appearing in the bank statement, as stated above, ₹ 15,00,000/- was explained as received from Shri Hanuman. The assessee had paid this amount to him as an advance against purchase of his land in FY 2004-05. Later due to some disputes with the title of the said land the deal could not materialize, and the advance paid, remained receivable from Shri Hanuman. This amount duly appeared in the assessee’s balance sheet as on 31.03.2005 - This transaction was further substantiated by filing the duly notarized ‘sale agreement’, entered into between the assessee and Shri Hanuman. The said amount was recovered in the year under appeal and the same was explained as being deposited in cash by the assessee.
Since Shri Hanuman was not co-operating, the assessee had filed an affidavit of one of the witnesses to the sale agreement, who had confirmed on oath that, the said sum of ₹ 15,00,000/- was received from Shri Hanuman, by the assessee.
In the case of the assessee, (i) the identity of Shri Hanuman remains undisputed, as the summons issued by the AO was duly served upon him, (ii) genuineness of the transaction is also proved (from books of accounts) beyond doubt, as amount paid as advance to him, duly appeared in the balance sheet of the assessee since FY 2004-05, as also the agreement to sale, that duly substantiates the transaction was available on records. As far as the third condition is concerned, it is submitted, that the assessee had not received any loan/ advance from him, but had only recovered his own money, thus, capacity is not the issue involved. Thus, all the conditions envisaged above are completely satisfied by the assessee.
Section 68 makes it clear that in respect of a cash credit entry the explanation offered by the assessee can be rejected by the Income tax Officer only on cogent grounds, that is, only if such grounds are not based upon any evidence and the assessee has filed complete evidences for the explanation offered by it, and the sole reason to reject the assessee’s explanation, was that the persons did not appear in person for the assessment proceedings. Your honors would appreciate the fact in such kind of land deals, normally advance paid is never returned and Sh. Hanuman was also not willing to repay advance taken by him and assessee had to put continuous efforts and follow up to persuade him to pay back money (which was eventually received in installments) and he was not in good terms with assessee for this reason. In such circumstances, it was not accepted from him to cooperate with Income Tax department in the case of assessee.
In the case of CIT v. U.M. Shah, Proprietor, Shrenik Trading Co. [1972 (6) TMI 16 - BOMBAY HIGH COURT] has held that, if the parties had received the summons but did not appear, the assessee could not be blamed. In view of the above facts and circumstances, cash deposit of appearing in the bank statement also stands fully explained and substantiated, therefore, we direct the A.O. to delete the addition made. - Decided in favour of assessee.
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2021 (2) TMI 942
Invocation of Extended period of limitation by third SCN - Imposition of penalty on Directors - Cleaning Activity - services to government hospitals, educational institutes and non-commercial organizations, though a sizable portion of the revenue was generated from Sanjay Gandhi Post Graduate Medical Institute, Lucknow [SGPGMI] - HELD THAT:- The Department was aware of the facts when the first show cause notice was issued and, therefore, the extended period of limitation could not have been invoked in the third show cause notice.
The Additional Director General has ignored the order passed by the Tribunal on November 20, 2018 on the first and the second show cause notices for the reason that the said notices or the order of the Tribunal had not been submitted by the Appellant. The Appellant in reply to the show cause notice had made a specific reference to the two show cause notices by giving the number and the dates and the order passed by the Tribunal. Even if it is assumed that the Appellant had not placed the two show cause notices and the order passed by the Tribunal, nothing prevented the Additional Director General from perusing the records of the Department for examining the two show cause notices and the order passed by the Tribunal. The Additional Director General could have even asked the Appellant to produce the two show cause notices and the order passed by the Tribunal. The important documents referred to by the Appellant that went to the root of the matter could not have been ignored in this manner.
What also needs to be noted is that the amount charged for the exempted service that were provided by the Appellant was being repeatedly shown by the Appellant in the ST-3 returns filed in 2014 and 2015, and it is not a case where the Appellant had suppressed any information from the Department regarding the amount it had charged for the exempted services. It cannot, therefore, be urged that the Appellant had suppressed information or facts from the Department - What is further important to note is that on July 05, 2016, the Department also issued a notice to the Appellant for conducting an audit for the period 2012-13 to 2015-16. The Appellant was required to furnish all the relevant documents, including documents relating to details of the exempted services. The audit report does not mention that the Appellant had provided any service which was not exempted under the various Notifications and the audit report was also approved by the Deputy Commissioner (Audit).
A Division Bench of the Tribunal in TRANS ENGINEERS INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [2015 (9) TMI 787 - CESTAT MUMBAI] also examined whether the extended period of limitation could have been invoked when the audit report did not raise any query in respect of the payment of the service tax as alleged in the show cause notice where it was held that Revenue authority cannot invoke the extended period of limitation, when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has miss-stated (sic) or suppressed the facts from the departments.
The Additional Director General has also observed that the Appellant had collected the service tax from most of the service recipients, but had mentioned in the ST-3 return that they were exempted services. This finding is also not based on the basis of records as nothing has been brought on the record to indicate that the Appellant had actually collected service tax for the exempted services. Merely because the Appellant collected an amount inclusive of taxes does not mean that service tax was included because there are many other taxes that are required to be paid - thus, it is not possible to sustain the demand of service tax raised against the Appellant as the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not have been invoked.
In this view of the matter, penalty could also not have been imposed upon the two Directors of the Appellant.
Appeal allowed - decided in favor of appellant.
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2021 (2) TMI 941
Validity of reopening of assessment - Short Term Capital Gain (STCG) on sale of asset - property owned by co-owners - addition is made by invoking of deeming provision of section 50C - AO made addition solely on the basis of information received from Sub-Registrar Office for charging the additional stamp value for transfer of land as per Jantri rate of Stamp Valuation Authority - HELD THAT:- We accept the contention of ld. AR for the assessee that once, the similar STCG offered by the co-owner has been accepted by the revenue, and the assessee is also entitled for similar relief. We find convincing force in the submissions learned AR for the assessee.
Hence, the appeal of the assessee is allowed. So far as the objection of learned DR for the Revenue is that the case of co-owner of Shri Dipakbhai Dalpatbhai Rana, no scrutiny assessment was initiated, is concern, we find that this fact was brought by assessee at the earliest possible action. The Revenue has not taken any action for reopening the case of co-owner and thereby accepted the similar STCG on same transaction, therefore, in our view, the assessee cannot be treated indifferently for similar transaction. Thus, the objection raised by the learned DR for the revenue is not acceptable to us.
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2021 (2) TMI 940
Disallowance of commission expenses paid to other referral agents - non admission of additional evidence of assessee - assessee is an individual engaged in the business of a direct selling agent (DSA) for various Financial Institutions / Banks in the name and style of SSBS Financial Corp who gets various loans processed for his customers and earns commission from concerned financial institutions / banks -- HELD THAT:- CIT(A) has rejected the additional documents filed by the assessee on the ground that a formal petition was not filed. Following the Board Circular, the CIT(A) should have given an opportunity to the assessee to file the formal petition. The Hon’ble Supreme court in the case of Sambhaji and Others v. Gangabai and Others [2008 (11) TMI 393 - SUPREME COURT] has held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice.
The Hon’ble High Court of Punjab and Haryana in the case of Principal CIT v. Daljit Singh Sra [2017 (3) TMI 1258 - PUNJAB AND HARYANA HIGH COURT] has held that although the assessee did not co-operate with the Assessing Officer in completion of assessment proceedings but for delivery of justice, the real income of assessee has to be assessed and that too after hearing the assessee. The Court upheld the decision of Tribunal in directing the lower authorities to admit additional evidence and decide the case afresh after affording reasonable opportunity of being heard to the assessee.
Additional evidences now sought to be admitted goes to the root of the issue raised in this appeal. Therefore, for a proper adjudication of the case and for substantial cause, admit the above additional evidence and the same is taken on record in light of aforesaid judicial pronouncement. Since I have admitted the additional evidence, the matter needs to be restored to the Assessing Officer de novo consideration. The A.O. shall take into consideration the additional evidences now admitted by the Tribunal. Appeal filed by the assessee is allowed for statistical purposes.
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2021 (2) TMI 939
Bogus purchases - certain names were appearing who had been considered as entities not dealing in actual business but only issuing bills to accommodate various parties like the assessee company - HELD THAT:- As gone through the items purchases by these parties and found that the items consists of hard discs, air span antennas, alberain bmax CPE –IDU 10, CD writers, Cisco port switches, Cisco port Ethernet modules, delink ports switches and modem, DVD drive writer, infinite wireless systems. As gone through the quantitative details of the purchased and sale of the sale of goods in quantity and item wise. We find that the goods have been duly purchased and sold to Tulip Telecom Ltd. We have also examined the value of the total purchases made and also the receipts of sale out of such purchases and the profit earned thereof.
Entire purchase from these parties is to the tune of ₹ 37,52,68,800/- whereas the sale receipts from that sales which have been duly accounted were to the tune of ₹ 38,27,42,200/-. We find that a profit of ₹ 74,37,422/- has been earned by the assessee from these transactions and duly offered to tax. Under these circumstances, it cannot be said that the purchase have been bogus especially when the quantitative details have been tallied item wise and the sale proceeds have been taken into P&L account and the profit earned on such transaction is offered to tax. They could not have been any sales without purchase of the items. Hence, we are unable to accept the contention of the revenue. The appeal of the assessee on this ground is allowed.
Disallowance of interest on advance to Sister concerns - whether in relation to disallowance of interest made u/s.36(1)(iii) of the Act, the action of the AO is correct or not? - HELD THAT:- The issue of disallowance of interest has reached finality with the judgment of Hon’ble Supreme Court in the case of Hero Cycles (P.) Ltd. Vs. CIT, Ludhiana[2015 (11) TMI 1314 - SUPREME COURT] is that where the assessee had sufficient own interest free funds along with interest bearing funds and had made or advanced sums for non business purposes without charging any interest, the presumption that would arise is that the investment had been made out of interest free funds generated or available with the assessee, is still a good law in the light of the decision of the Hon’ble Apex Court in the case of Hero Cycles Ltd. (supra). - Decided in favour of assessee.
Undisclosed rental income - as argued that no show-cause notice has been given with regard to the addition made - HELD THAT:-As revenue could not dispute the contentions of the assessed by the way of production of any show cause notice issued. Hence the addition made by the AO is hereby directed to be deleted for failure to follow the principles of natural justice. The appeal of the assessee on this ground is allowed.
Assessment u/s 153A - HELD THAT:- The assessment is not an abated assessment. There is no dispute that the additions made were not based on any seized material. Hence, in view of the judgment of the Hon’ble Delhi High Court in the case CIT vs. Kabul Chawla ([2015 (9) TMI 80 - DELHI HIGH COURT] the appeal of the department is treated dismissed.
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2021 (2) TMI 938
TP Adjustment - calculation of the amount of transfer pricing adjustment - ALP of AE transactions computed by the TPO by reducing non-AE sales from the figure of total arm's length costs of the assessee - HELD THAT:- On one hand, the TPO took arm's length cost of the entity at ₹ 6364.17 lakh and on the other, he reduced the figure of non-AE sales of ₹ 4566.96 lakhs, which also contains the profit element apart from cost. What ought to have been done was to first compute the total cost in relation to the AE transactions and then increase it with the PLI of comparables for ascertaining the arm's length sale price. The resultant total cost in relation to the AE transactions, under this mechanism, comes to ₹ 1369.23 lakh, which is obtained by multiplying total cost of ₹ 5453.68 lakh with AE sales of ₹ 1530.98 lakh as divided by total sales of ₹ 6097.94 lakh. It is this cost of the transactions with AE which needs to be loaded with the margin of the comparables at 16.64% to find out ALP of the AE transactions at ₹ 1597.06 lakh (₹ 1369.23 lakh x 1.1664 lakhs), calling for further action.
TPO erred in computing the assessee's PLI and that of the comparables by treating foreign exchange fluctuation gain as non-operating revenue, which also got echoed at the level of the DRP - No discussion in the TPO's order on the exclusion of the foreign exchange fluctuation gain from the operating revenue in computation of the assessee's operating profit margin. The DRP has held at para 3.4 of its direction that foreign exchange fluctuation gain cannot be considered as operating income by mainly relying on Rule 10TA(k) of the Safe Harbour Rules.
Determination of the ALP shall be done in accordance with the safe harbour rules in terms of section 92CB of the Act and ex consequenti, the application of other rules will be ousted. The sequitur is that where such an option is not availed, neither section 92CB gets triggered nor the relevant rules including 10TA(k). In that scenario, determination of the ALP is done de hors the safe harbour rules. Once these rules are kept out of compass, the otherwise settled position by virtue of the judgment of the Hon'ble Delhi High Court in B.C. Management Services Pvt. Ltd. [2017 (12) TMI 255 - DELHI HIGH COURT] and various Benches of the Tribunal across the country holding foreign exchange gain/loss as operating revenue/loss in the ALP determination, comes to the fore.
Thus foreign exchange gain/loss earned/incurred by the assessee and the other comparables needs to be considered as a part of operating revenue/cost not only for the reason that the assessment year under consideration is prior to the applicability of the safe harbour rules but also that there can be no question of applying Rule 10TA(k) in the absence of the assessee having or exercising option to be subjected to the safe harbour Rules.
We set aside the impugned order on this issue and send the matter back to the file of AO/TPO for fresh determination of the ALP of the international transactions under consideration in accordance with the above directions.
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2021 (2) TMI 937
Validity of reopening of assessment - Assessee argued that AO eopened the assessment by issuing notice u/s. 148 and passed the ex-parte order u/s. 144 r.w.s. 147 - unexplained investment in mutual fund - HELD THAT:- AO has recorded in the assessment order that assessee filed his reply dated 12.05.2014 explaining the circumstances under which the assessee received the money it was initially invested into the fixed deposit and thereafter the maturity amount was invested into mutual fund. These facts were recorded by the Assessing Officer of the assessment order.
AO has also recorded this fact that the notice issued through post was received back with the postal remark that the addressee has shifted to Delhi and not residing at Mirzapur. Therefore, these facts were in the knowledge of the Assessing Officer that the assessee has shifted to Delhi. Since the assessment order was passed ex parte and the Ld. CIT(A) has also not verified the relevant record therefore, in the interest of justice, the matter is set aside to the record of the AO for proper verification of the evidences, bank statement of the assessee as well as the other evidences to be filed by the assessee along with the explanation of the source of investment in the mutual fund - Appeal filed by the assessee is allowed for statistical purposes.
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2021 (2) TMI 936
Addition of low drawings for household expenses - Assessee submitted that the AO has made an addition without any basis but merely on estimation, which is a purely a guess work - Also addition restricted by the Ld. CIT(A) on ad hoc basis - HELD THAT:- CIT(A) has noted that aggregate of cash withdrawal during the year under consideration comes to ₹ 3,52,500/- and after considering this amount of withdrawal the addition made by the Assessing Officer was restricted to ₹ 1.00 lacs as against ₹ 3.00 lacs. Thus, it is clear that more than ₹ 3,50,000/- was withdrawn from the bank account during the year under consideration and it is not the case of NIL withdrawal by the assessee for household expenditure.
Thus once the assessee has shown reasonable amount of cash withdrawals from the bank and the income of the other family members of the assessee is also not ruled out then the addition confirmed by Ld. CIT(A) of ₹ 1.00 lacs on account of short withdrawal for household expenditure is not justified and the same is deleted. - Decided in favour of assessee.
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