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Income Tax - Case Laws
Showing 81 to 100 of 678 Records
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2016 (2) TMI 1231
Addition on account of difference between gross receipt of profit and loss account and statement of 26AS - HELD THAT:- After going through the relevant documents available on record, we are of the view that assessee has throughout made the contention that AO has not granted adequate opportunity of being heard to the assessee and without considering the submissions / evidences of the assessee, which is in the interest of natural justice, is very essential.
Therefore the issues in dispute are set aside to the file of the AO to decide the same afresh, underthe law, after giving full opportunity to the assessee of being heard. AO is also directed to consider the submissions and evidences, if any, to be submitted by the Assessee, afresh and decide the issue in dispute in accordance with law. Assessee is also directed to produce all the submissions and evidences to the AO, so that AO may consider the same, as per rules. - Appeal filed by the Assessee stands allowed for statistical purposes.
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2016 (2) TMI 1230
Deduction u/s 80IB - scrap sale income of Goa unit - AO excluded scrap sale while computing the deduction holding that the same is not derived from industrial undertaking - HELD THAT:- As in FINOLEX CABLES LTD. AND VICE-VERSA [2011 (7) TMI 1153 - ITAT PUNE] the profit on sale of scrap material since had a direct link or nexus with the industrial undertaking and therefore, it is eligible for deduction u/s 80IB. Considering the similarity in language used in sections 80HH and 80IB we are of the considered opinion that the assessee should succeed in this regard also. Also see PREETAM ENTERPRISES VERSUS JT. CIT RANGE 1, KOLHAPUR [2011 (4) TMI 1230 - ITAT PUNE] - Decided against revenue.
Depreciation on goodwill - HELD THAT:- As decided in SMIFS SECURITIES LTD. [2012 (8) TMI 713 - SUPREME COURT] Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words `any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression `any other business or commercial right of a similar nature' - Decided in favour of assessee.
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2016 (2) TMI 1229
Disallowance u/s 14A read with Rule 8D - ITAT deleted the addition as relying on HOLCIM INDIA P. LTD. [2014 (9) TMI 434 - DELHI HIGH COURT] - revenue submits that the decision of this Court requires reconsideration by a larger Bench particularly in light of Circular No. 5/2014 of CBDT dated 11th February 2014 - HELD THAT:- The judgment in CIT v. Holcim India (P) Ltd. (supra) was delivered on 5th September 2014, the Court is not persuaded to accept the above plea of the Revenue. In any event, the circular of CBDT cannot possibly override a binding decision of the Court. Also the decision in CIT v. Holcim India (P) Ltd. (supra) was not challenged by the Revenue. - No substantial question of law
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2016 (2) TMI 1226
Absence of statutory notice u/s 143(2) - AO holding jurisdiction over the case never issued notice u/s 143(2) - Addition on account of unaccounted sales, difference in closing stock and raw material consumption respectively - assessment proceedings were initiated by the DCIT, Range-1, Jalandhar, whereas the assessment order was passed by the ACIT, Circle-IV, Jalandhar - no objection was raised within the meaning of section 124(3) to reject the assessee’s contention - HELD THAT:- Admittedly, the notice u/s143(2) of the Act was issued by the DCIT, Range-1, Jalandhar, whereas the assessment order was passed by the ACIT, Circle-IV, Jalandhar. Now in “Hotel Blue Moon” [2010 (2) TMI 1 - SUPREME COURT OF INDIA] has held that the Assessing Officer must necessarily issue notice u/s 143(2) of the Act within the time prescribed in the proviso to section 143(2); that the requirement of notice u/s 143(2) cannot be dispensed with. Though “Hotel Blue Moon” (supra) pertains to Block assessment, the jurisdictional issue therein, is the same as that applicable to yearly regular assessment.
In the present case, the AO holding jurisdiction over the case never issued notice u/s 143(2) of the Act to the assessee. As such, the said AO did not have jurisdiction to proceed further and to make assessment. The Hon’ble Supreme Court in “Hotel Blue Moon” (supra), held that the omission on the part of the assessing authority to issue notice u/s 143(2) of the Act cannot be a mere procedural irregularity and the same is not curable.
Thus, in keeping with “Hotel Blue Moon” (supra), since the assessment order was passed in the absence of statutory notice u/s 143(2) of the Act by the AO by holding jurisdiction over the case, the said assessment order is invalid in law.
Regarding the CIT(A)’s objection to the assessee not having raised any objection u/s 124(3) of the Act within 30 days of the service of notice u/s 143(2) firstly, nowhere has the assessee challenged the jurisdiction of the AO who passed the assessment order, i.e., ACIT, Circle-IV, Jalandhar. This has also not been disputed by the Department. The grievance of the assessee, rather, is that the notice issued u/s 143(2) was not issued by the AO passing the assessment order, and so, the assessment order is bad in law.
This being the case, section 124(3) does not come into play at all, and the observations of the CIT(A) in this regard is incorrect. In “MI Builders (P) Ltd. vs. ITO”, [2007 (9) TMI 324 - ITAT LUCKNOW-B] dealing with sections 124(2) & (3)/148, it has been held reassessment proceedings having been initiated by the AO who did not have jurisdiction over the case, completion of reassessment in continuation of such initiation by AO having jurisdiction was invalid in law. In the present case, assessment proceedings were initiated by the DCIT, Range-1, Jalandhar, whereas the assessment order was passed by the ACIT, Circle-IV, Jalandhar which completion of the assessment was invalid in law. As such, there was no occasion for the provisions of section 124 to come into play.
CIT(A) has also objected that no prejudice was caused to the assessee in this matter. Here, again, since initiation of the assessment proceeding is bad in law, the assessment order passed cannot be held to be legally valid. Therefore, all prejudice stands caused to the assessee. - Decided against revenue.
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2016 (2) TMI 1221
Deduction u/s 35AB - whether expenditure in question was of capital in nature? - assessee incurred expenditure for the purpose of acquiring technical know how or not? - HELD THAT:- Neither the AO nor the ld. CIT(A) has brought out any allegation against the assessee that the assessee incurred expenditure for the purpose of acquiring technical know how.
In the light of the principles laid down by the Hon'ble Supreme Court in the case of Swaraj Engines [2008 (5) TMI 257 - SUPREME COURT] then we find that it is pre condition for invocation of provisions of section 35AB of the Act that the AO has to bring out this allegation that the expenditure in question was of capital in nature and unless and until this fact brought out on record and established by cogent material, provisions of section 35AB of the Act cannot be invoked. In view of the above, we are inclined to hold that the AO made disallowance without any justified reason and basis and the ld. CIT(A) upheld part disallowance by observing incorrect facts and without bringing out any material to establish the fact that the expenditure was incurred by the assessee for acquiring technical know how.
CIT(A) himself noted that the assessee has not incurred expenditure in question for the purpose of technical know how but the claimed expenditure was incurred for consultancy services which is obviously allowable u/s 37 of the Act as being incurred for the purpose of business of the assessee. Accordingly addition to be deleted - Decided in favour of assessee
MAT computation - enhance book profit by depreciation in revalued assets for the purpose of section 115JA(2) - HELD THAT;- as per the claim of the assessee, the assessee transferred similar amount to the profit and loss account from revaluation account and thereafter, the assessee claimed reduction from the book profits of the same amount representing transfer from revaluation reserve. In this situation, the assessee was rightly held as eligible for reduction of book profits by the amount which was transferred from revaluation to profit and loss account. However, the CIT-DR has raised his dispute regarding above noted treatment claimed to have been made by the assessee. Therefore, firstly, we uphold that the assessee is eligible for reduction of amount of revaluation reserve which was transferred from revaluation account to profit and loss account. The AO is directed to verify the said claim of the assessee in the light of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Apollo Tyres Ltd [2002 (5) TMI 5 - SUPREME COURT] and Indo Rama Synthetics [2011 (1) TMI 1 - SUPREME COURT OF INDIA] Ground of the Revenue are deemed to be allowed for statistical purposes for limited purposes of examination and verification of the entries made by the assessee in this regard and in the manner as indicated above.
Nature of expenditure - installation expenses of software system - revenue or capital expenditure - HELD THAT:- AO has noted that the necessary circulars requiring modernization and improvement of productivity of existing business of the assessee were filed during assessment proceedings. At this juncture, it is relevant to take respectful cognizance of the decision of DCIT Vs. Core Health Care Limited [2008 (2) TMI 8 - SUPREME COURT OF INDIA] wherein it was held that the assessee was entitled to deduction u/s 36(1)(iii) of the Act prior to its amendment by the Finance Act, 2003 in relation to money borrowed for the purchase of machinery even though the assessee had not utilized the machinery in the year of borrowing - proviso inserted in section 36(1)(iii) w.e.f. 1.4.2004 will operate prospectively and the present case in hand before us is pertaining to A.Y 1998-99. Therefore - decided against revenue
Disallowance of expense incurred on books and journals - Revenue or capital expenditure - Whether books are tools for its business activities? - HELD THAT:- the monthly and other journals cannot be equated with the books having long life and which are used for the purpose of business of the assessee for several years to come. Therefore, we are of the considered opinion that this issue needs to be examined and verified afresh at the end of the AO and the AO is directed to examine the same in the light of the observations as noted above and therefore, Ground of the Revenue are deemed to be allowed for statistical purposes.
Allowance of legal and consultancy expenses - allowable expense u/s 37 - HELD THAT:- Undisputedly, this amount was not incurred for the purpose of acquiring technical know how and from para 11 of the assessment order it is clear that the expenses were incurred for legal and consultancy charges. Therefore, the same was allowable u/s 37 of the Act.
Deduction u/s 80HH, 80I and 80IA on interest income - AR submitted that interest received on fixed deposits kept in bank as margin money is taxable under the head ‘business income’ and is consequently eligible for deduction - and not income from other sources as per revenue - DR vehemently contended that the income from other sources was not derived from industrial undertaking therefore, the same was not eligible for deduction - HELD THAT:- CIT(A) has treated the sum of ₹ 3,85,17,571/- as business income and directed the AO to allow deductions u/s 80HH, 80I and 80IA of the Act by following the decision in assessee’s own case for A.Y 1996-97. We find no infirmity in the order of the ld. CIT(A) - revenue appeal dismissed.
Disallowance u/s 40A(2) on account of excessive interest paid - HELD THAT:- We find substance in the contention of the ld. AR that interest has been paid on the borrowings which have been utilized for the purpose of assessee’s business. Further the assessee has borrowed funds from several other unrelated concerns on which interest @ 20-21% was paid. Thus, interest @ 24% cannot be termed as excessive to attract the provisions of section 40A(2) of the Act. This fact has not been controverted by the ld. DR. Accordingly, we uphold the first appellate order on this issue - Decided against revenue
Computing the profits eligible for deduction u/s 80HH, 80I and 80IA - income and expenditure accounts of different units were filed alongwith the return of income while they were not based on individual books of accounts of different units but expenses were allocated on proportional basis of sales - HELD THAT:- We find that the ld. CIT(A) has followed its order in assessee’s own case for the A.Y 1996-97. In the case of CIT Vs. Bongaigon Refinery and Petrochemical Ltd [2012 (9) TMI 371 - SUPREME COURT] relied upon by the ld. AR, we find that there is no requirement to maintain separate books of account. We find substance in the contention of the ld. AR that in any case, the formula/method applied by the AO for computing the profits eligible for deduction u/s 80HH, 80I and 80IA is the same as that followed by the assessee viz. profits of the undertaking are apportioned in the ratio of the gross total income as per the I.T. Act to the book profits of the assessee company. This fact has not been controverted by the ld. DR. - Decided against revenue
Deduction u/s 80HH, 80IA and 80I on gross total income - non reducing the same by the amount of deduction u/s 80HHC as it will amount to double deduction - HELD THAT:- We find that following its own order for A.Y 1996-97, the ld. CIT(A) has directed to allow deduction u/s 80HH, 80I and 80IA of the Act. We find no infirmity in the order of the ld. CIT(A) in view of the fact that there is no basis in law for reducing deduction admissible u/s 80HHC for the purpose of computing deduction u/s 80HH, 80I and 80IA of the Act. Accordingly, we decline to interfere with the order of the ld. CIT(A) - Decided against revenue
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2016 (2) TMI 1220
Addition u/s 14A read with rule 8D(2)(iii) - Disallowance of administrative expenses - investment in shares claiming the entire administrative expenses was incurred by the assessee for the purpose of investment in shares - HELD THAT:- As decided in CAPE TRADING P. LTD. VERSUS ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE – 29, MUMBAI [2015 (8) TMI 211 - ITAT MUMBAI] from the details of the expenses, we find that the printing and stationary expenses and bank charges & commission are only two items which could have direct or proximate nexus with the investment and exempt income. Therefore, the disallowance u/s 14A r.w. Rule 8D(2)(iii) cannot exceed to the allocable expenses incurred by the assessee for a composite activity resulting taxable and exempt income.
The working of disallowance under Rule 8D(2)(iii) by the AO clearly shows that it exceeds not only the expenses debited and claimed by the assessee which could have a proximate nexus with the earning of exempt income but also to the total expenditure debited by the assessee in the P&L account under the head administrative and other expenses. It turns out to be contradictory to the actual facts and gives absured results in complete disregard to the scheme of disallowance u/s 14A. Accordingly, we delete the disallowance made by the Assessing Officer. - Decided in favour of assessee.
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2016 (2) TMI 1219
Reopening of assessment - assessment u/s 144 - HELD THAT:- We find that in these cases the AO has made the assessments u/s 144. Before the CIT(A) also there was no representation on behalf of the assessee. CIT(A), therefore, decided the appeals without hearing the assessee.
We are, therefore, of the view that since both the authorities below have decided the matter without hearing the assessee, in view of principle of natural justice and fair play, these appeals need to be restored to the file of the AO for deciding the same after providing due opportunity of being heard to the assessee. We, therefore, restore these appeals to the file of the AO to make fresh assessments after providing the assessee due opportunity of being heard. All the appeals of the assessee are allowed for statistical purposes.
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2016 (2) TMI 1218
Assessment u/s 153C - HELD THAT:- There can hardly be any dispute that once the search action itself stands quashed, the instant proceedings have no legs to stand. We find that co-ordinate bench has accepted Revenue’s submission for alternate remedy to be exercised as per law after providing due opportunity of hearing to assessee. We also grant liberty to the department to proceed in the same terms. The impugned assessment proceedings initiated against the assessee are quashed. The Revenue’s pleadings on merits have been rendered infructuous. The assessee’s cross objections raising legal ground are accepted. Its other pleadings on merits and consequential action of penalty and interest have become academic.
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2016 (2) TMI 1217
Setting off of unabsorbed depreciation or prior period against Long Term Capital Gain - Held that:- The assessee had sold the land along with the building thereon referred to as SEML property. The assessee had valued the land and the building separately and claimed depreciation on the constructed property. The sale consideration of ₹ 51.18 Lacs attributed to the building was offered to tax, but at the same time the assessee also claimed depreciation on the constructed property. The Tribunal accepted such depreciation, however subject to rider of revaluation of the another property referred as Ambaturr which also forms part of the block of depreciable assets.
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2016 (2) TMI 1216
Addition towards deduction claimed on account of payment of brokerage - neither the assessee could prove the genuineness of such payment, nor any of the parties to whom such brokerage payments was made responded to the notices issued under section 133(6) - Held that:- When the assessee was not only assisted by a professional well acquainted with provisions of the Act, not only before the AO in the course of remand proceeding but also before the first appellate authority. Assessee has not retracted her statement given under section 131 at any stage. In these circumstances, we are unable to accept assessee’s claim with regard to dismissal of its ground against brokerage payment by the learned Commissioner (Appeals).
When the assessee was not only assisted by a professional well acquainted with provisions of the Act, not only before the Assessing Officer in the course of remand proceeding but also before the first appellate authority. Assessee has not retracted her statement given under section 131 at any stage. In these circumstances, we are unable to accept assessee’s claim with regard to dismissal of its ground against brokerage payment by the Commissioner (Appeals).
Having held so, we proceed to examine assessee’s alternative claim, if at all, any disallowance is to be made it should be restricted to ₹ 61,71,082. As far as the quantum of disallowance is concerned, we find merit in the submissions of the learned counsel. As could be seen in the remand report, the Assessing Officer on the basis of statement recorded from the parties as well as other information had accepted that brokerage payment to the tune of ₹ 61,71,082 to be non–genuine and recommended for addition of the said amount. On a perusal of the impugned order of the learned Commissioner (Appeals), it is noticed that in letter dated 29th August 2013, filed by the assessee, she had accepted that brokerage payment to the tune of ₹ 61,71,082 are actually accommodation entries. In view of the aforesaid factual position, which is also accepted by the Assessing Officer in the remand report, we are of the considered opinion that out of the total brokerage payment of ₹ 89,19,677, an amount of ₹ 61,71,082 deserves to be disallowed being non–genuine as per the facts and material available on record. Thus, assessee gets relief of ₹ 27,48,595. - decided partly in favour of assessee.
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2016 (2) TMI 1215
Penalty levied u/s 271(1)(c) - non specification of charge - defective notice - Held that:- Notice issued by the Assessing Officer under Section 274 r.w.s. 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Also see SHRI HAFEEZ S CONTRACTOR VERSUS ASSTT. COMMISSIONER OF INCOME TAX –CENTRAL CIRCLE-44, MUMBAI [2015 (9) TMI 1169 - ITAT MUMBAI] - Decided in favour of assessee.
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2016 (2) TMI 1214
Assessment u/s 148 v/s 153C - search operation conducted - sale of bus after expiry of bus route permit - Held that:- This is the second round of search conducted by the Revenue authorities subsequent to the material found in the case relatable to the assessee. In the first round of litigation, the search was conducted in the premises of Velmurugan group of companies where the material relating to the assessee was found. Therefore, assessment u/s 153C was completed on 31.12.2008.
Since the block assessment was already completed, AO, on the basis of material found during the search operation on 18.03.2010 in the case of Shri K. Paneerselvam, reopened the block assessment completed on 31.12.2008 by issuing notice under Section 148. Therefore, by issuing notice under Section 148 AO reopened the block assessment which was completed on 31.12.2008 under Section 153C of the Act. In fact, after reopening, the block assessment was made only under Section 153C of the Act. In view of the above factual situation, this Tribunal do not find any reason to interfere with the order of the lower authority.
On merit of the addition the agreement for sale of bus is a composite one, including the route permit. Merely because there was a time gap for renewal of the route permit, this Tribunal is of the considered opinion that it cannot be construed as what was sold by the assessee is only the bus and not route permit. Though renewal was initially rejected by the Regional Transport Authority, the same was subsequently renewed by the Appellate authority. Therefore, the legal presumption is that the route permit continues without any interruption. Tribunal is of the considered opinion that the assessee sold the bus along with route permit for a sale consideration of ₹ 70,75,000/-. It may be a case of the assessee that the entire sum of ₹ 70,75,000/- was not received and what was received was only ₹ 50,00,000/- as per the receipt found during the search operation. As rightly observed by the CIT(Appeals), the assessee followed mercantile system of accounting, therefore, the right to receive the balance amount out of ₹ 70,75,000/- is accrued to the assessee, therefore, the same has to be taken as income for computation. Accordingly, after deducting ₹ 3,50,000/- declared by the assessee, AO has rightly added ₹ 67,25,000/- which was confirmed by the CIT(Appeals) - Decided against assessee
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2016 (2) TMI 1213
Disallowance u/s 14A r.w. Rule 8D - sufficiency of own funds - Held that:- We find it is not in dispute that assessee has not earned any dividend income or any kind of exempt income from the investments made. The Hon’ble Delhi High Court in the case of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] after discussing the entire law on this point including the decision of Hon’ble Supreme Court in the case of CIT vs Rajendra Prasad Moody [1978 (10) TMI 133 - SUPREME COURT].
Thus we hold that, no disallowance u/s 14A is called for, once there is no exempt income received or receivable by the assessee during the relevant previous year. Accordingly, the ground raised by the assessee is treated as allowed.
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2016 (2) TMI 1212
Reopening of assessment - correctness of the "Reasons to believe" - addition on account of notional foreign exchange gain - Held that:- There was full discloser on the part of the assessee in accounts filed with the return of income. The AO recorded the ‘Reasons’ on the basis of information disclosed by the assessee in his return, accounts and audit report. Thus, the reopening is clearly barred by limitation and beyond the provisions of law in view of aforesaid proviso to section 147.
no fresh tangible material has come into the possession of the AO, at the time of the recording of the ‘Reasons’. It is settled law that in absence of a fresh tangible material coming into the possession of the AO, no belief can be formed about escapement of income. It is further noted by us that ‘Reasons’ have been recorded on the ground that foreign exchange fluctuation gain was taxable on notional basis.
The belief of escapement of income is without any legal basis the AO has not even analysed the facts properly before recording the ‘Reasons’. It has not been mentioned in the ‘Reasons’ whether the impugned foreign exchange fluctuation gain, sought to be taxed on notional basis, was on account of revenue or capital transactions. It could be brought to tax as income, if at all it was feasible under the law, only when the resultant gain was on account of revenue transactions. If underlying transactions leading to foreign exchange fluctuation gain were on capital account, then it could not be treated as income. Thus, in our considered view the impugned ‘Reasons’ are factually and legally invalid in the eye of law - Decided in favour of assessee
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2016 (2) TMI 1211
Reopening of assessment - as per the lease agreement there does not exist any building on the land leased out - Held that:- As per the letters of 05.09.2015 and 10.11.2015 of Lafarge India Pvt. Ltd., (erstwhile Larson and Toubro Limited, the tenant of the assessee) and the assessee’s AO, it now stands admitted by the assessee’s tenant that there does exist a building on the land in question and thus, it is this building alongwith the land, which was leased out to the said tenant by the assessee, though the lease agreement was qua the land. The building is used for cement storage as per mutual understanding. M/s. Lafarge India Pvt. Limited has also admitted that the photographs of the building are correct.
Since these documents and photographs go to the root of the dispute, they are necessary to be taken into consideration. Accordingly, these documents are admitted in evidence. Now, since the orders of the taxing authorities found as their basis, the fact that as per lease agreement, there was no building in existence on the land and the erstwhile M/s. Larson and Toubro Limited, now, M/s. Lafarge India Pvt. Limited, have admitted of the building existing on the land in question, we remit this matter to the file of the AO to be decided afresh - Decided in favour of assessee for statistical purposes.
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2016 (2) TMI 1210
Correct head of income - bogus LTCG - income from sale of shares - income from other sources OR long term capital gains - Held that:- In the case of the assessee as well as in the case of Jagdish H. Shah(2012 (9) TMI 1154 - ITAT MUMBAI) the shares were purchased from the same broker namely DPS Shares and Securities Pvt. Ltd.
AO carried out a verification exercise which involved recording of statement of one Shri Raj Kumar Masalia, Principal Officer of DPS Shares & Securities Ltd.; similar action was taken in the case of Jagdish H. Shah (supra) also. It is quite clear that the stand of the Revenue as well as the assessee in the present case is on similar footing to their respective stands in the case of Jagdish H. Shah (supra).
Having regard to the aforesaid similarities, which are not controverted by the Revenue, we deem it fit and proper to rely upon the reasoning taken by the Co-ordinate Bench in the case of Jagdish H. Shah(supra) and hold that the income tax authorities have erred in treating the sale consideration on the sale of shares of Robinson Worldwide Trade Ltd. as an income from undisclosed sources - decided in favour of assessee.
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2016 (2) TMI 1208
Assessment u/s 153C - non recording of reasons - Held that:- Proceedings initiated under S.153C of the Act for the two years deserve to be quashed in as much as the concerned Assessing Officer has admittedly not recorded any satisfaction before forwarding the files to the Assessing Officer in whose charge, the assessee herein is assessed. The assessments made under S.153C of the Act are hereby quashed. In this view of the matter, the other grounds urged by the Revenue as well as the assessee have no legs stand, since the assessments for both the years are quashed. - decided in favour of assessee.
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2016 (2) TMI 1207
Assessment u/s.153A - what is the scope of assessment or reassessment of total income under section 153A(1)(b) and the first proviso? - Held that:- When the original assessment for the assessment years 2005-06 & 2006-2007 has already been completed or time limit to complete the assessment has been lapsed and no incriminating material found during search operation, the assessment u/s.153A to be made only as per the original assessment which was made u/s.143(1) or u/s.143(3). It is an admitted fact that in these assessment years there was no incriminating material discovered in the course of search action. There was also no allegation that the assessee has failed to produce books of accounts and documents in the course of original assessment. Being so, the assessments for the assessment years 2005-06 and 2006-07 are bad in law. This also finds support from the decision of Special Bench in the case of All Cargo Global Logistics Ltd. v. Dy. CIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] - decided in favour of assessee.
Addition invoking the provisions of sec.40A(3) - cash credits in excess of ₹ 20,000/- otherwise than by cross cheque and demand draft - assessee is in the business of land aggregation - Held that:- The payment between the assessee and the vendors which are reflected in the sale deed executed by the vendors in favour of the assessee for which the assessee made a payment in excess of ₹ 20,000/- otherwise by issue of cheque or demand draft, these payments cannot be considered for invoking the provisions of sec.40A(3). To that extent the assessee gets relief, over and above relief granted in earlier para 10.1, as the exceptions contained in Rule 6DD are not exhaustive and that the said rule must be interpreted liberally as held by the Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] - Where the payment made by the assessee to the vendors in a village or town, which on the date of such payment is not served by any bank, to any person, who ordinarily resides, or is carrying on his business therein that village or town and that payment should be excluded by invoking the provisions of sec.40A(3) in view of Rule 6DD(j). See case of Dy. CIT v. Abhinandan Housing (P.) Ltd.[2014 (12) TMI 251 - ITAT HYDERABAD] and Sahitya Housing (P.) Ltd. v. Dy. CIT [2014 (2) TMI 811 - ITAT HYDERABAD]. Accordingly, this ground of appeal of the assessee is partly allowed with direction to A.O. to decide afresh.
Addition towards inflated purchase cost of land - main contention of the ld. AR is that notice for enhancement was given only to enhance the purchase cost of land at ₹ 5,07,95,250/- however, additional income was made on the higher side at ₹ 21,77,33,047/- - Held that:- to the extent of confirmation filed by the respective intermediaries who transacted the purchase of land, cannot be considered for enhancement in the hands of the assessee. In respect of other agents who have not appeared before the AO and the assessee has filed affidavits from them, which are not examined by the AO, the same are required to be examined by the Assessing Officer and without examination, it cannot be rejected as held by the Supreme Court in the case of Mehta Parikh & Co. v. CIT [1956 (5) TMI 4 - SUPREME COURT] - the amounts considered as receipts in the hands of recipients, cannot be doubted in the hands of the assessee so as to enhance the cost of land as bogus. Accordingly, with this observation, we direct the Assessing Officer only to consider the payments for enhancement which are not confirmed/disclosed by the recipients in their return of income. The enhancement of income for the assessment years 2005-06 and 2006-07 does not survive in view of quashing of assessment for these two assessment years. Thus, the assessee gets relief out of ₹ 5,07,95,250/- as above and the balance amount only to be considered as directed above
Addition invoking the provisions of sec. 40(a)(ia) / 40A(2)(b) / 37 - technical/consultancy paid to assessee's group concerns stating that the following payments have been made without compensating service being received - AO held that the payments are unreasonable and excessive in nature and hence the provisions of sec.40A(2)(b) are attracted - Held that:- The payment is not outstanding at the end of the close of the financial year and therefore, the disallowance cannot be warranted as held in the case of N. Palanivelu v. ITO [2015 (10) TMI 1415 - ITAT CHENNAI].
On the payment made to Santha Build tech India Pvt. Ltd., the A.O. also invoked the provisions of sec.40A(2)(b) of the Act. The CIT(Appeals) deleted this addition by observing that the A.O. has not made out a case that the payments made to group concerns are excessive. Hence, he observed that application of sec.40A(2)(b) of the Act is not correct. We do not find any infirmity in the order of the CIT(Appeals) on the deletion of the addition made u/s.40A(2)(b)
Disallowance of expenses incurred relating to registration of the property - Held that:- As it is clearly mentioned that the purchaser would bear the cost of registration and therefore, the assessee is not supposed to incur the abovesaid expenditure, if the land is registered in favour of other parties. Further, the expenses incurred for facilitating registration and these expenses are reimbursed by principal and shown as income of the assessee, then there cannot be any further addition on this count. Otherwise, it amounts to double addition. However, if the assessee purchases the land in its own name, then the expenditure incurred by the assessee should be part of the cost of land, which is the value of closing stock and due credit to be given to the assessee. With this observation, we remit this issue to the file of the A.O to examine, whether the expenditure is incurred by the assessee for registration and whether the assessee is purchased the land in its own name and decide the issue accordingly. This ground of appeal is allowed for statistical purposes.
Disallowance on capital expenditure - Held that:- This expenditure was disallowed on the reason that they are capital in nature and the assessee has not produced any details for the same. In our opinion, neither the AO nor the CIT(Appeals) have gone through the nature of expenditure specifically, Therefore, it is appropriate to remit the issue to the file of the AO for fresh consideration and the assessee is directed to place necessary bills and vouchers/receipts to show that this expenditure is not in the nature of capital and this expenditure was incurred wholly and exclusively for the business expediency.
Enhancing the income towards difference between income admitted and income returned - Held that:- A.R pleaded before us that an opportunity be given to reconcile the differences. Considering the request, we remit this issue to the Assessing Officer with a direction to reconsider the issue afresh after giving an opportunity of hearing to the assessee.
Levy of interest u/s.234A & 234B - Held that:- The interest u/s 234A is chargeable from the date of expiry of the notice period given u/s 153A to the date of completing the assessment u/s 143(3) r.w.s 153A as held by the Tribunal in the case of Asstt. CIT v. V.N. Devadoss [2013 (2) TMI 871 - ITAT CHENNAI]. The interest u/s 234B is to be levied only on the additional tax levied on the enhanced income determined u/s 143(3) r.w.s 153A. Therefore, the period of charging of interest should be from the date of determination of income u/s 143(3) or 143(3) to the determination of enhanced income u/s 143(3) r.w.s 153A of the Act.
Addition u/s 40A(2)(b) - applicable to the technical/consultancy charges paid to the group concern on the ground that the AO had made out a clear case for the same - Held that:- CIT(Appeals) deleted this addition by observing that the A.O. has not made out a case that the payments made to group concerns are excessive. Hence, he observed that application of sec.40A(2)(b) of the Act is not correct while disposing of the assessee's appeal. We do not find any infirmity in the order of the CIT(Appeals) on the deletion of the addition made u/s.40A(2)(b).
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2016 (2) TMI 1206
Levy of penalty u/s 271E and 271D - non recording of satisfaction - Held that:- It is imperative for satisfaction to be recorded in the assessment order for initiation of penalty u/s 271E of the Act. Proceedings u/s 271D of the IT Act, also in our opinion will stand on the very same footing. If satisfaction has to be recorded with respect to proceedings u/s 271E of the IT Act, similar satisfaction has to be recorded for the proceedings u/s 271D of the IT Act, 1961 also. These have not been done in the case before us. Accordingly, by virtue of judgment of the Hon’ble Apex Court in the case of CIT Vs Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT] we are of the opinion, that the levy of penalty u/s 271D & 271E of the IT Act, 1961 cannot survive. Such orders are set aside and the appeals of the assessee are allowed
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2016 (2) TMI 1205
Penalty u/sec. 271(1)(c) - non-deduction of tds - disallowance of commission/professional charges and accountancy charges u/s 40(a)(ia) for default of non-payment of TDS - Held that:- As consider the dicta the preposition rendered by ITAT Delhi SMC-1 Bench in the case of M/s Syndicate Labels Vs. ACIT [2015 (10) TMI 2745 - ITAT DELHI] it is ample clear that in a situation when disallowance has been made under section 40(a)(ia) for non deduction of tax at source from payments made or credited to the respective payees and the assessee made a proper disclosure about the expenses claimed by it as deduction which was neither bogus nor otherwise non deductible then penalty under section 271(1)(c) of the Act is not validly imposable - AO is directed to delete the impugned penalty imposed under section 271(1)(c) - decided in favour of assessee.
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