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2018 (11) TMI 1921 - MADRAS HIGH COURT
Seeking directions to respondent to carry out final assessment for the various bills of entry filed by the petitioner commencing from the month of May 2015 - grievance of the petitioner is that even though the subject matter bills of entry were provisionally assessed by taking bank guarantees from the petitioner, the respondent has not chosen to pass final orders - HELD THAT:- This writ petition is filed for passing final orders on the bills of entry filed by the petitioner from the month of May 2015. At the same time, the petitioner seeks for such final orders, by taking into account of the order passed by the Tribunal dated 01.3.2018. Since it is claimed by the respondent that they are contemplating to file an appeal against the said order of the Tribunal, this Court is not in a position to issue a positive direction to the respondent to pass final orders by taking into account of the order passed by the Tribunal dated 01.03.2018, as it is always open to the respondent to challenge the said order before the next Appellate Forum.
This writ petition is disposed of.
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2018 (11) TMI 1920 - ITAT KOLKATA
Addition of bogus loans as unexplained cash credit - Addition u/s 68 - CIT-A deleted the addition - HELD THAT:- CIT-A held since the three cardinal criteria of identity, creditworthiness of the loan creditor and the genuineness of the transactions are established with cogent evidentiary documentary materials, do not find any merit in the action of the AO in making the impugned addition / disallowance for which the same are directed to be deleted.
In our view the ld. CIT(A) has given cogent reasons as to why he could not sustain the additions. The ld. DR could not controvert these findings. Appeal of the revenue is dismissed.
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2018 (11) TMI 1919 - KARNATAKA HIGH COURT
Renewal of approval u/s 80G - Commissioner held that there is an absence of charitable activity - revenue contends that what is being used by the assessee towards the object of the Trust is very miniscule and most of the income that is used is only as a result of letting-out of the building, for business purposes, thus it is not the object of the Trust at all. - HELD THAT:- The consideration of these factors when an application for renewal has been made cannot be the considerations before the authority. The only condition that requires to be fulfilled for the purposes of seeking renewal are as specified under Section 80-G(5)(ii) and the clauses narrated therein. That none of the clauses in Section 80-G(5)(ii) would be said to be applicable herein. It only postulates that any income derived from the charitable trust may be used for charitable purpose.
Therefore, the rejection of the application is inappropriate. However, we are of the considered view that this consideration can only be made, during the assessment proceedings. The question whether renewal is justified or not, is not necessary to be considered at this stage. The applicability of the income of the assessee whether it is for charitable purposes or not are all questions of fact and necessarily can be gone into by the assessing authority at the time of assessing the income of the assessee.
Therefore, it is needless to state that the assessing authority shall look into all the material placed in order to ensure that the income is used for a charitable purpose in accordance with law.
Substantial question of law is answered by holding that the Tribunal was not right in law in holding that the appellant Trust was not eligible for renewal for approval under Section 80-G - order of the Tribunal is set aside - Decided in favour of assessee.
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2018 (11) TMI 1918 - ITAT SURAT
Claim of deduction on account of Provident Fund - CIT (A) upheld the action of the AO on the ground that the assessee has not got approved the Provident Fund approved from Chief CIT/Pr.CIT, so any approval granted by the Provident Fund Commissioner is not relevance as per provisions of section 36(1)(iv) - HELD THAT:- We find that the perusal of the definition given in section 2(38) of the Act as above shows that a provident fund which has been or continues to be recognized by the Chief Commissioner or the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule is said to be a "recognized provident fund" as per the first limb of the definition given in section 2(38).
As per the second limb of the definition, a recognized provident fund also includes a provident fund established under a scheme framed under the Employees' Provident Fund Act, 1952. The definition given in section 2(38) thus is an inclusive definition and as per the second limb of the said definition which is independent of the first limb, it includes a provident fund established under a scheme framed under the Employees' Provident Fund Act, 1952.
The condition of recognition of the fund by the Chief Commissioner or Commissioner as stipulated in the first limb is consciously absent in the second limb which clearly depicts that such recognition is not a condition precedent for a provident fund established under a scheme framed under the Employees' Provident Fund Act. 1952 to be a "recognized provident fund" within the meaning of section 2(38) - We, therefore, observe that Section 2 (38) of the Act, itself specifically provides a Provident Fund established under a Scheme framed under the Employees' Provident Fund Act, 1952 to be a recognized Provident fund there is no reason for the claim of the assessee to be denied. In view of this matter, respectfully following the above decision and decision cited therein of Hon`ble High Courts, this grounds of appeal is allowed in favour of the assessee.
Addition of interest received from other than co-operative societies and thereby not granting the proportionate deduction of expenses as claimed by the assessee - HELD THAT:- We find that that CIT (A) viewed that interest expenses has been claimed against business income and same stands allowed is not logical as the said business income is exempt under section 80P of the Act. Therefore, on the logic of disallowance of interest expenses u/s. 14A as against exempt income the expenses for income from other source as shown under the head interest income is also required to be allowed. We find that in case Shree Dhansobhavak Co-operative Credit Society Ltd. [2018 (8) TMI 2098 - ITAT AHMEDABAD] have held that proportionate interest expenses are allowable from interest income. In view of this matter, we delete the addition in which interest expenses component is also included. Accordingly, Ground No. 2 of appeal is allowed.
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2018 (11) TMI 1917 - ITAT SURAT
Validity of reopening of assessment u/s 147 - Valid approval u/s 151 required from the Additional Commissioner of Income Tax - HELD THAT:- For assuming proper jurisdiction while reopening of the assessment it was incumbent upon the AO to take approval from the competent authority as contemplated under section 151 of the Act. If such procedure was not followed, then the AO would have acted without jurisdiction. This issue would ultimately go to the root of the dispute because this is a jurisdictional issue. It does not require any discovery of new facts, because if approval is taken, then it must be on the assessment record. There would be no requirement of fresh investigation of facts. Therefore, we admit this ground of appeal and proceed to adjudicate the grounds on merit.
We have perused every approval. We find that the ld.Additional Commissioner has neither written “yes” nor “no” against the column, what to talk of his satisfaction for authorizing the AO to reopen the assessment. The Hon’ble Gujarat High Court in the case of Adani Port 2013 (5) TMI 660 - GUJARAT HIGH COURT has observed that sub-section (1) of section 151 of the Act is an important procedural safeguard against arbitrary exercise of power of issuing notice for reopening of the assessment previously framed. Now, the approval nowhere exhibits the satisfaction of the ld.Additional Commissioner. We deem it appropriate to take note of the finding of the Hon’ble Madhya Pradesh High Court in the case of CIT Vs. Goyanka Lime & Chemical Ltd. 2015 (5) TMI 217 - MADHYA PRADESH HIGH COURT. wherein the Hon’ble Court has observed that expression “yes, I am satisfied” also did not fulfill the requirement of section 151(1) because this does not spell out application of mind objectively
We are satisfied that no proper approval was accorded by the ld.Additional Commissioner and the assessment orders are not sustainable. All the assessment orders are quashed in the cases of all the assesses - Assessee appeal allowed.
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2018 (11) TMI 1916 - BOMBAY HIGH COURT
Production of documents under leave of the court - it is alleged that a particular document was not referred to a Forensic Laboratory, for seeking an expert opinion, as regards the age of the ink appearing in the signature of the petitioner - case of the defendant is that he has signed on a blank document, which was tendered as a surety to the plaintiff - HELD THAT:- Reliance placed in the case of VIJAY S/O ACHYUT ASHTIKAR, REKHA W/O VIJAY ASHTIKAR VERSUS VINAYAK S/O ACHYUT ASHTIKAR [2018 (2) TMI 2084 - BOMBAY HIGH COURT] where it was held that the technology is now available to consider the age of the ink appearing on a document. If the original copy of the document containing the writing is available, the Nutron Activation Analysis, BABC, Mumbai has the facility to find out the approximate range of the time during which the writings would have been made. The said Institution is a Central Government Organization. This Court, therefore, ruled in favour of referring the document for the purposes of seeking an expert opinion upon the approximate age of the ink.
In view of the law that has evolved in the judgments delivered in Vijay Achyut Ashtikar, the Trial Court should have taken a pragmatic view rather than taking a pedantic view in the matter. The endevour of the court is to ensure that the truth surfaces. If the ends of justice are to be met and especially in view of the peculiar facts of this case when the Trial Court was directed to decide the suit afresh, the rejection of Exh.44 would not come in way of the petitioner/ defendant.
This petition is partly allowed.
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2018 (11) TMI 1915 - SUPREME COURT
Rape or consensual sex? - appellant failed to marry as promised, and married some other woman - Section 482 of the Code of Criminal Procedure - HELD THAT:- It is well settled that exercise of powers Under Section 482 of the Code of Criminal Procedure is the exception and not the rule. Under this section, the High Court has inherent powers to make such orders as may be necessary to give effect to any order under the Code or to prevent the abuse of process of any court or otherwise to secure the ends of justice. But the expressions "abuse of process of law" or "to secure the ends of justice" do not confer unlimited jurisdiction on the High Court and the alleged abuse of process of law or the ends of justice could only be secured in accordance with law, including procedural law and not otherwise.
In the instant case, FIR was registered against the Appellant and the co-accused Under Sections 376(2)(b), 420 read with Section 34 of the Indian Penal Code and Under Section 3(1)(x) of the SC/ST Act. Section 376(2)(b) prescribes punishment for the offence of rape committed by a public servant taking advantage of his official position on a woman in his custody as such public servant or in the custody of a public servant subordinate to him.
There is a clear distinction between rape and consensual sex. The court, in such cases, must very carefully examine whether the complainant had actually wanted to marry the victim or had mala fide motives and had made a false promise to this effect only to satisfy his lust, as the later falls within the ambit of cheating or deception. There is also a distinction between mere breach of a promise and not fulfilling a false promise. If the Accused has not made the promise with the sole intention to seduce the prosecutrix to indulge in sexual acts, such an act would not amount to rape - If the complainant had any mala fide intention and if he had clandestine motives, it is a clear case of rape. The acknowledged consensual physical relationship between the parties would not constitute an offence Under Section 376 of the Indian Penal Code.
In the instant case, it is an admitted position that the Appellant was serving as a Medical Officer in the Primary Health Centre and the complainant was working as an Assistant Nurse in the same health centre and that the is a widow. It was alleged by her that the Appellant informed her that he is a married man and that he has differences with his wife. Admittedly, they belong to different communities. It is also alleged that the Accused/Appellant needed a month's time to get their marriage registered. The complainant further states that she had fallen in love with the Appellant and that she needed a companion as she was a widow - since complainant has failed to prima facie show the commission of rape, the complaint registered Under Section 376(2)(b) cannot be sustained.
The impugned order of the High Court is hereby set aside - Appeal allowed.
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2018 (11) TMI 1914 - SC ORDER
Maintainability of Transfer petitions - HELD THAT:- Issue notice.
Status quo, as of today, shall be maintained in the meantime.
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2018 (11) TMI 1913 - TELANGANA HIGH COURT
Dishonor of Cheque - averment made in the complaint explain the nature of the duty that the petitioners have been performing in the company or not - it is also contended that the petitioners have submitted resignation prior to the date of issuance of cheque and they no longer continue to be the directors of A1 company - Section 138 of the Negotiable Instruments Act - HELD THAT:- There was an averment in the complaint therein that the appellant was responsible for the day-to-day affairs of the company, despite the said averment the Court quashed the complaint taking into consideration the resolution passed by the company wherein it was reflected that the appellant therein had resigned from the post of Director much prior to the issuance of cheque.
In GUNMALA SALES PRIVATE LTD. [2014 (12) TMI 1116 - SUPREME COURT] the Supreme Court referred to its earlier decision in HARSHENDRA KUMAR D. VERSUS REBATILATA KOLEY [2011 (2) TMI 1278 - SUPREME COURT] in which also a similar issue came up for consideration. There was an averment in the complaint therein that the appellant was responsible for the day-to-day affairs of the company, despite the said averment the Court quashed the complaint taking into consideration the resolution passed by the company wherein it was reflected that the appellant therein had resigned from the post of Director much prior to the issuance of cheque - The Supreme Court opined that the said observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstances, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code.
For promotion of justice or to prevent injustice or abuse of process, the High Court may look into the material which has significant bearing on the matter at prima facie stage. It also observed that criminal prosecution is a serious matter which affects the liberty of a person and no greater damage can be done to the reputation of a person than dragging him in a criminal case. It held that the High Court therein fell into grave error in not taking into consideration the uncontroverted documents relating to the appellants resignation from the post of Director of the company and had these documents been considered by the High court, it would have been apparent that the appellant has resigned much before the cheques were issued by the company.
The proceedings against the petitioners on the file of the V Additional Chief Metropolitan Magistrate – cum – Juvenile Court, Nampally, are hereby quashed - Petition allowed.
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2018 (11) TMI 1912 - DELHI HIGH COURT
Lack of jurisdiction of the Assessing Officer in exceeding the remand - adjudication of the case further - service of notice on the Special Commissioner on 03.08.2018 - OHA could have validly decided the appeal on or before 18.08.2018 - HELD THAT:- This Court is of the opinion that the reasons adduced by the Special Commissioner in the circumstances of the case are persuasive and reasonable given that at the stage when the OHA received the notice, he does not appear to have been delegated with the powers under Section 68 of the DVAT Act. However, on the merits of the impugned order, the court is of the opinion that the Special Commissioner has not applied her mind to the limited scope of the remand which the first OHA order had required.
The Special Commissioner is directed to decide the issue as expeditiously as possible having regard to the scope of the remand, made by the order of 13.11.2013, by the Special Commissioner while deciding the objection in the first instance against the first assessment order.
Petition allowed in part.
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2018 (11) TMI 1911 - DELHI HIGH COURT
Right of the Department to file written statement - Plaintiff Submitted that complete paper book has been supplied to these defendants in the first week of September. Till date no written statement has been filed by defendant no.3 and defendant no.4.
Right of these defendants to file written statement is hereby closed. Admission / denial of documents already conducted. Even issues were framed on 27.10.2016. Put up before the Hon’ble Court for further directions on 03.12.2018.
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2018 (11) TMI 1910 - ITAT MUMBAI
Estimation of commission income @ 0.1% of the sales turnover - HELD THAT:- CIT(A) has decided the matter of the controversy on the basis of the decision of Hon’ble ITAT in the assessees’ own case for the immediate proceeding A.Y. 2012-13 [2018 (6) TMI 1811 - ITAT MUMBAI] wherein CIT (Appeal) has mentioned the case of Smt. Kalawati Negi, who was also an employee of the same group and showed similar transaction to jack up the turnover, wherein, the Ld. Assessing Officer itself made the addition on such account @ 0.1%. No contrary decision was brought to our notice. Thus, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, the appeal of the Revenue is dismissed.
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2018 (11) TMI 1909 - ITAT MUMBAI
Estimation of income - Bogus purchases - HELD THAT:- Assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expenses of the exchequer. In such situation in my considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases meets the end of justice - As assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase.
We modify the order of Ld. CIT-A and direct that the disallowance in this case be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. Needless to add that if the gross profit rate already declared covers the above rate no disallowance is required. Ld. counsel of the assessee fairly accepted this proposition.- Decided partly in favour of assessee.
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2018 (11) TMI 1908 - ITAT SURAT
Penalty u/s 271(1)(c) - whether such penalty is being imposed for concealment of income or furnishing of inaccurate particulars of income? - AO has to record a specific finding exhibiting the fact that penalty is being imposed for furnishing inaccurate particulars or concealment of income - HELD THAT:- A perusal of the above finding would indicate that in the first two lines, he wished to impose penalty for furnishing inaccurate particulars of income. Thereafter, he invoked Explanation 1 to section 271(1)(c) which provides that if any addition is being made to the total income of the assessee, for which the assessee failed to give any explanation or his explanation was found to be false, then qua that addition it will be deemed that the assessee has concealed income.
Both these situations are contradictory to each other in the above order. Therefore, this order is not sustainable in view of decision of Hon’ble Gujarat High Court [2012 (12) TMI 981 - HIGH COURT OF GUJARAT] Similar finding in para-6 are being recorded in the cases of other two assesses. In view of the above discussion, penalties in the case of each assessee are not sustainable. We allow all three appeals, and delete penalty imposed by the AO. Decided in favour of assessee.
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2018 (11) TMI 1907 - ITAT MUMBAI
Additional depreciation for wind mills u/s. 32(1)(iia) - additional depreciation was claimed u/s. 32(1)(iia) of the Act for the reason that the assessee is engaged in manufacturing/production of any article or thing and this new Plant & Machinery was acquired before and installed before 31-03-2010 - CIT(A) allowed the claim of assessee by stating that this Plant & Machinery was installed in AY. 2010-11 i.e., wind mill having capacity of 1,800 KV and this was commissioned and put to use on or before 31-03-2011. Assessee claimed the additional depreciation @ 10% in claimed depreciation in AY. 2011-12 - HELD THAT:- As decided in assessee own case [2016 (8) TMI 1574 - ITAT MUMBAI] following the ratio of VMT Ltd.(2009 (9) TMI 35 - MADRAS HIGH COURT] issue has been decided in favour of assessee with regard to addition depreciation u/s.32(1)(iia) of the Act. Hon’ble Supreme Court in case of CST vs. M.P. Electricity Board (1968 (11) TMI 85 - SUPREME COURT] held that the electricity generated by an assessee is an article or goods. The explanation to amendments (memorandum) as inserted by Finance Act, 2012 as relied upon by CIT(A) cannot be said to overrule and earlier decision of Hon’ble High Court.
An amendment that has prospective application cannot be said to retrospectively take away the rights of an assessee qua it’s explanatory notes. Where there is no ambiguity in the Section, there is no warrant for resort to external aids of interpretation namely the notes on clauses and the memorandum explaining its provisions. In the light of decision of VTM Ltd.(supra) with regard to claim of additional depreciation u/s.32(1)(iia) for setting up a windmill, wherein material being sole decision by Hon’ble High Court on the matter, we hold that additional depreciation should be allowed. - Decided against revenue.
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2018 (11) TMI 1906 - MADHYA PRADESH HIGH COURT
Dishonor of Cheque - service of notice - proceedings have been challenged mainly on the ground that statutory notice as provided under Section 138 (1) of the Negotiable Instruments Act has not been duly served on the petitioner - HELD THAT:- From perusal of the complaint, it reveals that the legal notice was issued by the respondent through registered post dated 22.01.2018. However, the petitioner avoided the notice since 25.01.2018 to 30/01/2018. and, therefore, the said notice was returned unserved to the petitioner - Thus, the receipt of acknowledgment card which is filed by the respondent along with the notice does not bear any signature or acknowledgment of the petitioner or anyone else on the same. Further, the postal remarks on the envelope of such registered post also does not show that it is served on the petitioner.
So far as remark of “kindly contact drawer/drawee bank and please present again” is concerned the same would not be a ground for dishonouring of cheque.
The contention of the learned counsel for the respondent that Section 482 of Cr.P.C. is not maintainable is also not sustainable in the light of judgment passed by the Apex Court in the case of PRABHU CHAWLA VERSUS STATE OF RAJASTHAN AND ORS. [2016 (9) TMI 1595 - SUPREME COURT]. In the said judgment the Apex Court has held that the alternative remedy of revision under Section 397 of Cr.P.C. cannot by itself be a ground to dismiss the petition under section 482 of Cr.P.C.
Application disposed off.
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2018 (11) TMI 1905 - ITAT MUMBAI
Estimation of income - Bogus purchases - HELD THAT:- The assessee has produced copies of purchase bills and also filed payment proof to prove that payment for the said purchases have been made through proper banking channels. Under these circumstances, the only inference that could be drawn towards purchases from the said parties are are not totally bogus, but the assessee could not substantiate with necessary evidence. Under these circumstances, various Courts and Tribunals have taken a consistent view that when the purchases are considered as bogus, only profit element embedded in those purchases could be added as income of the assessee, but not total purchases from the said parties.
The co-ordinate bench of ITAT, Mumbai in a number of decisions, by following the judgement of Hon’ble Gujarat High Court in the case of Simit P Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] has directed the AO to sustain addition to the extent of 12.5% of bogus purchases. In this case, facts are identical to the facts which have already been considered by the co-ordinate bench in a number of cases. Therefore, consistent with the view taken by the co-ordinate bench, we direct the AO to sustain addition to the extent of 12.5% of alleged bogus purchases. - Decided partly in favour of assessee.
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2018 (11) TMI 1904 - ITAT SURAT
Short term capital loss on transfer of right in leasehold property in a shop owned by a state government body namely Rajmata Viajyaraje Sindhia Krishi Upaj Mandi Samiti, Jodhpur - Applicability of provisions of section 50C - HELD THAT:- The perusal of section 50C manifest that it applies only to the land or building or both. Section 50C can come into play only in a situation where the consideration received or accrue as a result of transfer by a appellant of a capital asset being land or building or both is less than the value adopted or assessed or assessable for the purpose of payment of stamp duty in respect of such transfer. It is settled legal position that deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of this section. Therefore, it is essential for application of section 50C that transfer may not be of a capital asset being land or building or both.
The assessee has transferred is lease holding rights in land and building. The ld.Counsel further relied in the case of Atul Puranik Vs ITO [2011 (5) TMI 576 - ITAT, MUMBAI] wherein it was held that section 50C applies only to a capital asset being land or building or both it cannot be made applicable to lease holding rights in a land as the assessee transferred leasing right for 60 years in the plot and not land itself, the provisions of section 50C cannot be invoked. Further, the decision of Hon'ble Bombay High Court in the case of Green Field Hotels & Estate (P) Ltd. [2016 (12) TMI 353 - BOMBAY HIGH COURT] Smt Devindraben I.Barot [2016 (7) TMI 275 - ITAT AHMEDABAD] also applicable to present case.
Thus we hold that provisions of section 50C are deeming provisions and same were applicable only in this situation where a capital asset being a land or building or both is transferred. Therefore, we hold that the Lower Authorities were not justified in taxing short term capital gain in respect of transfer of leasehold rights, hence, same is therefore deleted. Appeal of assessee allowed.
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2018 (11) TMI 1903 - ITAT CHANDIGARH
Revision u/s 263 by CIT - minimal enquiries to show that the conclusion of the AO is erroneous and prejudicial to the interests of the Revenue - how the error can be said to be prejudicial to the interests of the Revenue? - HELD THAT:- As it is eminently borne out from the record that on each of the issues flagged by the Pr. CIT the AO has more than adequately enquired into these at length in the course of the assessment proceedings. The said fact evident on record was specifically brought to the notice of the Pr. CIT on behalf of the assessee. The arguments, we find were supported by relevant documents and evidences to demonstrate its claim. The fact that the submissions as advanced on the questionnaires and queries as raised by the A.O have been replied to by the assessee is not disputed by the Pr. CIT. The presumptions made in the peculiar facts and circumstances that it was not enquired into is unsupported by any contrary fact or evidence. Thus, to seek to discard the assessee's explanation in the absence of fact or evidence cannot be supported. Once all necessary facts and evidences were available before the Pr. CIT then even in terms of Explanation-2 to Section 263, it was incumbent upon the Pr. CIT to demonstrate that the order passed is erroneous and prejudicial to the interests of the Revenue. In order to demonstrate that it was incumbent upon him to atleast attempt to make a semblance of same minimalistic enquiry to assail the facts and evidences available on record to show that the A.O has just sat on the replies and not considered them.
It is for the Pr. CIT to show that had any further queries been made by the A.O then the order passed could not have been passed as it would have been erroneous and prejudicial to the interests of the Revenue. Without assailing the facts and evidences the presumption based on mere suspicions that no enquiries or verification was made, does not clothe the Pr. CIT with the powers to exercise his Revisionary Powers. In the absence of the same it is an attempt at fishing and roving enquiries by the Pr. CIT invoking Explanation-2(a) or 2(b) of Section 263 which presumably has been invoked as in order to demonstrate that Explanation 2(c) or 2(d) of Section 263 was invoked, nothing has been placed on record by the Pr. CIT. So it is presumed that the Pr. CIT sought to invoke either Explanation 2(a) or 2(b) of Section 263. The Revisionary Power vested in the Pr. CIT, it is expected, would be exercised in a careful and responsible manner. Admittedly on each of the issues flagged by the Pr. CIT, the assessee's replies made available have been carelessly and arbitrarily brushed aside by stating that AO has not made any verification or enquiry. In order to demonstrate that there was an error, in terms of the judicial precedent available, the Pr. CIT should have carried the issue to its logical conclusion and not remanded the order with the bland direction directing that the assessment be made afresh
Notwithstanding the fact that the writing of the order is not in the hands of the assessee, the assessee at best can rely on the questionnaires issued by the A.O requiring the assessee to address and explain the flagged issue. The fact remains that having raised various issues by way of questionnaires, the AO further raised questionnaires and order-sheet entries etc. The assessee is well justified in relying upon the presumption that the AO was satisfied by the explanation of the assessee. It is well accepted that it is not necessary for the A.O to refer and include in his order the discussion on issues on which he is satisfied by the explanation offered. The said legal position is well settled. The Pr. CIT in the circumstances needs to demonstrate the error and such an error which is also prejudicial to the interests of the Revenue. He is not expected to sit over the explanation and evidences on record. We may refer to the decision of CIT Vs M/s Fine Jewellery India [2015 (2) TMI 732 - BOMBAY HIGH COURT] wherein reliance has been placed upon Idea Cellular Ltd [2008 (2) TMI 146 - BOMBAY HIGH COURT] wherein Court has held; “if a query is raised during the assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the assessment order would not lead to a conclusion that no mind had been applied to it”.
In the facts of the present case, the Pr. CIT has exercised the power by merely flagging certain issues extracting the Show Cause Notice, extracting part of the reply of the assessee and without caring to address the same has summarily arrived at the conclusion ignoring the facts, evidences and plethora of jurisprudence available on the issue which casts responsibility on the Pr. CIT to point being out the error and not any and every error but such an error which is prejudicial to the interests of the Revenue. The twin requirements and the sine-qua-non for exercising the Revisionary Power cannot be left at the mercy of whims and fancies of Revisionary Authority the same should be brought out on record mere suspicions are not enough.
Accordingly, on a consideration of material available on record alongwith the arguments of the parties and the judicial precedent available for the detailed reasons set out hereinabove we hold that the order passed by the Pr. CIT being devoid of merit deserves to be quashed. - Decided in favour of assessee.
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2018 (11) TMI 1902 - ITAT KOLKATA
Disallowance of commission and annual maintenance expenses - AO issued notices u/s 133(6) to the two commission agents as well as the three service providers, who were appointed by the assessee and the notices went uncomplied - as notices went un-served, the AO disbelieved the genuineness of the payments made by the assessee and accordingly disallowed the commission expenditure and annual maintenance expenses - HELD THAT:- As the nature of services being provided by the service providers is abundantly clear. The fact that the services were indeed provided is evident from the fact that the assessee was able to generate corresponding revenues in the form of annual maintenance service fees from their customers. We note that before the lower authorities the assessee had sufficiently demonstrated the linkage between the revenues earned and the payments made to the service providers. On these facts and circumstances, we find that even in respect of the payments made to the service providers, the assessee had duly substantiated the commercial as well as business expediency of such expenses before the lower authorities. We thus agree with assessee that when the revenues derived in the form of income from sale of telecommunication equipments and annual maintenance fees were accepted and not disputed by the Revenue then it was unjustified on their part to disbelieve the corresponding expenses incurred to derive such income.
When the entire sequence of transactions starting from importing of telecommunication equipment, soliciting of orders, tendering process, delivering products, after sales support provided to customers, annual maintenance services provided to the customers, realization of payments etc. has not been disputed nor disbelieved by the lower authorities, then they could not disbelieve or doubt the genuineness of the commission and service fees paid to the agents & service providers respectively and treat it as bogus expenses only because the notices issued to the payees went un-served.
Assessee had discharged the onus cast by law in proving identity and creditworthiness of the payees as well as the genuineness of the agreements entered into with them - assessee has placed all the relevant details & documents, which the assessee was required to maintain in the ordinary course of its business. Like any other item of expense, the relevant details such as copies of the agreements, tax invoices, service tax registration certificates, confirmation of accounts, details of payments, details of tax deducted along with the lower withholding tax certificates provided by the payees etc. were furnished before the lower authorities, which sufficiently proved the genuineness of the payments made. It is further noted that the assessee had also demonstrated the linkage between the revenues earned from the customers and the commission paid to the agents as well as service fees paid to annual maintenance service providers. The extracts of bank statement of the assessee and the confirmation furnished by the payeesare also available on record. Furthermore, we note that the parties to whom the payments were made were not associates or related enterprises of the assessee. Nothing has been brought on record that the payments made by the assessee had come back to it. In the circumstances even the creditworthiness of the customer and the genuineness of the transaction was duly established by the appellant.
Commission was paid to for procuring sales orders and the service fees was paid towards the annual maintenance contracts obtained from telecom companies sub-contracted to the payees. We note that the copies of invoices provide the complete details of orders for which the payments were made. The payees had also set out its PAN & STRN in the invoices, which was duly signed & stamped. The service tax registration certificate of M/s Bhumi ConsultantsPvt Ltd established that they were in the business of providing business auxillary services, and therefore it had charged service tax @ 12.36% on the commission as well as service fees billed to the assessee. We note that similar information about the nature of business is also discernible from the service tax registration certificates of other payees which corresponded with the services rendered by them to the assessee. The service tax liability charged by the payees was also duly paid & discharged by the assessee. We further find that the assessee has furnished its relevant bank statements which substantiate the actual payment of commission& service fees was received by the payees through normal banking channel.
We particularly note that the assessee deducted & deposited TDS in accordance with withholding tax certificates provided to the payees u/s 197 of the Act by ITO (TDS) at Kolkata. The correctness and/or genuineness of the certificates issued by the Department u/s 197 of the Act has not been denied or disputed by any of the lower authorities. We understand that the payees had made the applications u/s 197 of the Act.It is after due examination of their accounts, estimate of income, past history etc. that the lower withholding tax certificates were issued by the TDS Department. This certificate is therefore an important piece of evidence, which clearly substantiated the identity, and creditworthiness of the payees.
In the instant case, the assessee had made commission payments to certain North Eastern Indian residents. In the course of assessment the AO had issued notices u/s 133(6) to the brokers, which were returned unserved. The AO thus observed that the assessee could not establish the identity of the brokers and accordingly disallowed the commission payments. On appeal the High Court held that mere fact that the broker were not found at the address furnished by the assessee did not prove the fact that the payments were ingenuine. The Court observed that in this modern era it may not be possible for the assessee to know the brokers personally or be aware about their whereabouts. The High Court noted that whatever addresses was furnished to the assessee by the brokers, had been disclosed to the Income-tax Department. The Court noted that the payments were admittedly made by cheque after deduction of tax. In this background the Court rejected the Revenue’s case and held that when the payment of commission is properly recorded in the books maintained by the assessee in the ordinary course of business, the payments are made by account payee cheques after deduction of tax, then such commission payments could not be disallowed.
The assessee has furnished complete details of payees including copies of invoices, PAN, ST certificate, confirmation and certificate u/s 197 of the Act. We note that the AO was unable to point out any specific defect or infirmity in the details furnished by the assessee. In our considered view, mere non-service of notice u/s 133(6) does not make an assessee bogus or an entry operator. Further the fact that the correctness & genuineness of the certificate u/s 197 has not been doubted by the AO, it cannot be said that certificate u/s 197 was issued by the Department to bogus or non-existent entities. Instead it went on to establish the identity of the payees, and that they were regular income-tax assessees. We therefore note that the assessee had duly discharged its onus of substantiating the genuineness and business expediency behind the payments as well as the identity & creditworthiness of the payees.
We therefore hold that the lower authorities were not justified in disallowing the expenses incurred towards commission and annual maintenance fees - Decided in favour of assessee.
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