Advanced Search Options
Income Tax - Case Laws
Showing 1 to 20 of 163568 Records
-
2024 (4) TMI 1055
Levy of penalty u/s 271(1)(c) - purchase of agricultural land - assessee could not explain the source of this investment and agreed for an addition - HELD THAT:- This is not a fit case of levy of penalty. The assessee has shown contractual receipts and had also produced copy of cash book, which showed that the assessee was having sufficient cash balance for the purpose of purchasing the aforesaid property. Further, the above agricultural land was also shown by the assessee in the books of accounts as well as in the Audit Report. Penalty under Section 271(1)(c) of the Act cannot be levied simply on the basis that the assessee has agreed to additions / not contested additions made in quantum proceedings. Accordingly, just because the assessee as agreed to the aforesaid addition in quantum proceedings, would itself not justify imposition / levy of penalty. Ground No. 1 of the assessee’s appeal is allowed.
Levy of penalty in respect of addition on account of contractual receipts - mismatch between the Revenue recognized by the assessee and the amount reflecting in Form 26AS - HELD THAT:- As the explanation given by the assessee on account of the possible cause of mismatch between the Revenue recognized by the assessee and the amount reflecting in Form 26AS, looking into the fact that the mismatch was only of a meagre amount of Rs. 1,05,827/- against the total contractual receipts of Rs. 2,14,08,976/- shown by the assessee as his contractual receipts, we are of the considered view that this is not a fit case for levy of penalty u/s 271(1)(c) of the Act
Apparently the assessee has no mala fide intention to conceal the Revenue or furnish inaccurate particulars of his Revenue. In the result, levy of penalty with respect to addition on account of contractual receipts is hereby directed to be deleted. Decided in favour of assessee.
-
2024 (4) TMI 1054
Penalty proceedings u/s 270A - under reporting of the income - allowability of depreciation on acquisition of mining rights treating the same as intangible asset - malafide intentions to under report the income by claiming depreciation - allowability of depreciation so claimed by the assessee was denied by the revenue on account of no activity leading to income from extraction of Iron Ore in the relevant year or in the preceding year - CIT(A) was convinced with the explanations of the assessee, observing that the disallowance of depreciation is a subject matter of debate as in the case of holding company of the assessee i.e., NMDC the mining right has consistently been held as a depreciable asset eligible for depreciation u/s 32
HELD THAT:- Since there were different order of different courts including case of NMDC, the holding company of the assessee before us, wherein, the allowability of depreciation was a debatable issue. Moreover, since the mining right are held as an intangible asset eligible for depreciation u/s 32 of the Act by the ITAT, Hyderabad in the case of NMDC Limited for various assessment years from AY 2008-09 [2014 (3) TMI 682 - ITAT HYDERABAD], AY 2009-10 [2014 (9) TMI 629 - ITAT HYDERABAD], AY 2010-11 [2014 (7) TMI 993 - ITAT HYDERABAD], AY 2011-12 [2015 (3) TMI 928 - ITAT HYDERABAD], AY 2012-13 [2017 (5) TMI 1714 - ITAT HYDERABAD], AY 2013-14, AY 2014-15 [2018 (10) TMI 1120 - ITAT AHMEDABAD] the assessee company has a bonafide belief that depreciation would be allowed on such mining rights to the assessee company.
It is also an admitted fact transpired from the order of Ld. CIT(A) that the assessee appellant had filed an application before the Ld. AO, seeking immunity u/s 270AA of the Act after fulfilling all the pre-requisite conditions of the said section. There was no reason for the Ld. AO to deny grant of immunity to the assessee towards the application submitted u/s 270AA. Considering the facts and circumstances of the case, since there were justifiable reasons supporting the bonafide belief of the assessee in claiming the depreciation on mining rights and since mala-fide intentions of the assessee could not be established by the revenue in terms of any cogent material or explanation.
The decision of Ld. CIT(A) found to be worth concurrence, in absence of any plausible argument, explanation, evidence or decision by the department to extricate the findings the Ld. CIT(A), thus, we uphold the same. Therefore, Ground No. 1 of the appeal of the revenue stands dismissed.
-
2024 (4) TMI 1053
Penalty proceedings u/s. 271(1)(b) - non-compliance of 3 notices u/s. 142(1) - Delay in late response as per date mentioned in notice - nowhere assessee had denied that notices were not served upon him nor there was any plausible explanation for non-compliance of notice - HELD THAT:- Although it is correct that assessee had not complied the date fixed in the notice u/s. 142(1), however, the assessee had filed all the details in response to the said show-cause notice on 24/02/2022 and also on 20/03/2022. Further, in response to show-cause notice also assessee had filed the details and also brought to his knowledge that all the transactions which has been alleged had already been offered to tax and part of profit and loss account. The remarks in the chronology of events clearly justify the compliance made by the assessee before the ld. AO.
Thus, it is not a case of failure to comply with the notice, albeit there is failure to respond on the date mentioned in the notice. Delay in late response have been explained that; firstly, it was an old matter and assessee took time for retrieving the old date; secondly, assessee was having heavy losses due to small scale business operation after Covid and during the Covid period office of the assessee was also not opened. Apart from that, assessee has no employee and director was old and was the only person who was handling the affairs of the assessee company and was not aware of any online technicalities of notices sent through online. It was later on when assessee sought for assistance of a Chartered Accountant; the assessee compiled and filed all the details before the ld. AO which has been duly acknowledged. Thus, it cannot be held that assessee has purposefully defied the compliance of notices u/s. 142(1) and there was sufficient and reasonable cause in filing the details belatedly.
Thus it is not a fit case to levy penalty - Appeals of the assessee are allowed.
-
2024 (4) TMI 1052
Validity of reopening of assessment u/s 147 - Reason to believe - as argued AO has failed in giving the exact reason for reopening the assessment and the reasons which the assessee came to the knowledge of the assessee from the assessment order are vague in nature - HELD THAT:- When asked, during hearing, the Ld. Counsel agreed and confirmed that the reasons for reopening were not asked for by the assessee during the course of either assessment proceedings or appellate proceedings.
The Hon’ble Supreme Court in its judgement of GKN Driveshaft (India) Ltd.[2002 (11) TMI 7 - SUPREME COURT] held that when a notice u/s 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order.
Thus as agreed by assessee has not sought for any reason during the course of entire assessment and therefore seeking relief merely on technical ground is not tenable. Therefore, relying on facts and the judgment of Hon. Supreme Court the ground of appeal is dismissed.
Addition u/s 69C on account of the capital introduced by the partner - HELD THAT:- In the present case, the partner (Late Dhaval B. Patel, who is expired on 18.12.2021 and we have taken note of the death certificate placed on record) has explained the source funds towards introduction of the capital. Therefore, if the department was not satisfied with the explanation given by the partners, then it is legitimate for the department to draw inference that these amounts represent undisclosed profits/unexplained credits and to assess them in their hands in their own individual assessment. Thus, the amounts credited to the partners’ bank account cannot be assessed in the hands of the firm. Once the partner has owned that the money deposited in his accounts are of his own, the AO is entitled to and may proceed against the partner and assess the same in his individual hands.
Thus we are of the opinion that Ld.CIT(A) has not taken into consideration, principles to the facts of the judicial pronouncement as referred above in case of CIT Vs. Pankaj Dyestuff Industries (2005 (7) TMI 601 - GUJARAT HIGH COURT]and has erred in confirming the addition. Therefore, the ground of the assessee is allowed.
Addition u/s 69C of the Act on account of unsecured loans - HELD THAT:- Counsel explained with the help of remand report and the facts reproduced by the Ld.CIT(A) in his order, that the assessee has proved the identity and genuineness by providing PAN, bank statement and copy of ITR of the person who lent money to the assessee as unsecured loan. It was also observed by the AO in the remand report that the person who lent money by cheque to the assessee had deposited cash in his account to clear the cheque.
Since the identity, genuineness and creditworthiness of the depositor are proved by the assessee and hence the primary onus cast upon the assessee is discharged and the onus now shifted to the AO to show why the assessee's case could not be accepted and why it must be held that such loans remained unexplained and treating as dubious and doubtful.
In order to arrive at such a conclusion, the AO has to be in possession of sufficient and adequate material. Further the assessee cannot be presumed to have special notice about the source of source or origin of origin. Once the assessee has explained the source of the funds having come from the depositors as an explanation to support the loans received, it is not expected from the assessee to explain the source of the source. Even if it is assumed that the person who lent the money, was unable to explain the nature and source of the funds received by them which were given as loan to the assessee than its unexplained amount could be treated as unexplained investment in the hands of the depositors u/s. 69 of the Act or other section but could not be taxed in the hands of the assessee as unexplained expenditure u/s 69C of the Act in absence of any evidence. Thus CIT(A) is not justified in confirming the addition.
-
2024 (4) TMI 1051
Rejecting registration u/s 12A(1)(ac)(iii) - name mismatch between the certificate of registration issued by the Charity Commissioner, Vadodara and the PAN database - assessee/applicant submitted that the variation in nomenclature arises due to the English translation of the organization's name - HELD THAT:- Name of the assessee/applicant trust has not changed but in translation from Gujarati to English, words in Gujarati "Bhutpurva Vidhyarthi Mandal" is translated in English as "Alumni Association". Instead of "Bhutpurva Vidhyarthi" the word "Alumni" is translated in English and for the word "Mandal", it is translated as "Association". Otherwise, the entity is the same as it is registered under the Bombay Public Trust Act, which is proved from the Trust Registration Number mentioned in Registration Certificate in Gujarati and translated in English. The Counsel for the assessee submitted that the applicant trust has got provisional registration in the name "Parul University Alumni Association" on the basis of legal documents like Trust Registration Certificate and Memorandum of Association. Same documents were also filed with the application form applied in the same name for registration in Form 10AB. Hence, name of the assessee/applicant trust is consistent with it’s legal entity and it has remained the same before all Government Authorities.
In our considered view, the assessee/applicant trust has been able to reasonably explain the mismatch between the name as appearing in the legal documents submitted by the assessee/applicant trust before CIT (Exemptions) and the name as appearing in the PAN database. In view of the detailed explanation in support of the alleged mismatch given by the assessee/applicant trust, we are of the considered view that it is not a fit case where the application filed by the assessee/applicant trust can be summarily rejected only the ground of name mismatch alone.
Accordingly, CIT (exemptions) is directed to examine this issue afresh after taking on record the detailed submissions filed by the assessee/applicant trust in support of this contention/issue.
Objects of the assessee/applicant trust are not for public at large - Looking into the objects of the trust, it cannot be held that the assessee/applicant trust has been formed only for the benefit of a particular community only. Further, we also agree with the Counsel for the assessee that this aspect should be considered at the time of grant of exemption under Section 11 of the Act and the provisions of Section 13 should not be invoked at time of grant of registration under Section 12AA of the Act. In the result, the matter is being restored to the file of CIT (Exemptions) to examine the activities carried out the trust (since we observe that the trust has been recently formed/registered) and to carry out the requisite analysis whether the trust is engaged in carrying out genuine activities, so as to be eligible for grant of registration under Section 12AA of the Act.
Assessee’s appeal is allowed for statistical purposes.
-
2024 (4) TMI 1050
Denial of benefit u/s 115BAA of reduced rate of tax @22% - Domestic Companies - Condonation of delay in filing of Form No. 10-IC by the assessee - scope of circulars or directions amending provisions of the Act - assessee submitted that CBDT has issued Circular No. 19/2023 for condoning the delay in filing of Form No. 10-IC for Assessment Year 2021-22 as stated that delay in filing of Form No. 10-IC may be condoned, subject to fulfilling of 3 conditions for claiming the concessional rate of tax under Section 115 BAA of the Act.
HELD THAT:- On going to the facts of the instant case, and the conditions as stipulated in Circular No. 19/2023 dated 23.10.2023, we are of the considered view that the assessee has fulfilled all the conditions as mentioned in the aforesaid Circular and the assessee has also filed Form No. 10-IC within the stipulated timelines as specified in the aforesaid Circular, and accordingly is eligible for claim of being taxed under Section 115 BAA of the Act. Appeal of the assessee is allowed.
-
2024 (4) TMI 1029
Scope of challenge to orders passed by the ITSC - Validity of exercising discretion by the ITSC in granting relief to the assessee - Granting immunity from prosecution and certain penalties - Revenue is unhappy with the findings of the ITSC on 8 points, viz., income-Revised percentage of profit, cash loans, bogus purchase from Dwish Enterprise, disallowance under Section 14A, NCDs / shares issued to Cyprus and Mauritius based entities, NCDs issued to Kolkata based entities, claim of marketing expenses and penalty and prosecution.
HELD THAT:- In the case of income revised percentage of profit, data considered are documents/materials that were seized by the department. Considering the evidence and material before them and the submissions made, the ITSC restricted the additional account of on money at 20% of total money receipts and allowed claimed expenditure to the extent of 80%. It is a discretion that the ITSC exercised and there was nothing wrong in that. Whether to examine and how much to examine should be left to the discretion of the ITSC. Similarly for item (ii) cash loans, (iii) Bogus Purchase from Dwish Enterprises and (iv) Penalty and prosecution.
The Apex Court in Jyotendrasinhji Vs. S. I. Tripathi [1993 (4) TMI 1 - SUPREME COURT] held that the order of the ITSC is in the nature of a package deal and that it may not be ordinarily possible to dissect its order and accept what is favourable and reject what is not. Moreover, it is open to the ITSC to accept an amount of tax by way of settlement and to prescribe the manner in which it is to be paid. ITSC has the discretion to condone the defaults, penalties or prosecution, where it thinks appropriate. Thus, the sole limitation upon the ITSC is to act in accordance with the provisions of the Act.
Even if the interpretation placed by the ITSC on documents is not correct, it would not be a ground for interference since a wrong interpretation of documents cannot be said to be a violation of the provisions of the Act. The Apex Court has held that the scope of enquiry by the High Court under Article 226 should be restricted to i) whether the ITSC has acted in accordance to the provisions of the Act and ii) whether the order passed by it has prejudiced assessee apart from the ground of bias, fraud and malice which constitute a separate and independent category.
In N. Krishnan vs. Settlement Commission And Others [1989 (3) TMI 77 - KARNATAKA HIGH COURT] it is held that the ITSC is the forum for self surrender and seeking relief and not a forum for challenging the legality of assessment order or orders passed in any other proceedings. The Karnataka High Court held that the power conferred on the settlement commission is so wide that it can take any view on any questions of law, which it considers appropriate having regard to the facts and circumstances of a case including giving immunity against prosecution or imposition of penalty.
Therefore, in our view, ITSC was entitled to exercise discretion while passing the impugned order and has exercised its discretion. In our view, there is neither violation of any mandatory procedure prescribed under any of the sections of Chapter XIX-A of the Act nor any violation of any of the Rules of natural justice. Further, it cannot be said that the reasons assigned by the ITSC for granting relief sought for by assessee have no nexus to the decision taken.
As held by the Apex Court in Kotak Mahindra Bank Ltd [2023 (9) TMI 1231 - SUPREME COURT] the members of the ITSC have been appointed by Central Government in accordance with Section 245B (3) of the Act for their integrity and outstanding ability and for special knowledge and experience in, problems relating to direct taxes and business accounts. The members of the ITSC, therefore, cannot be questioned for their decision or for exercising their discretion.
In the circumstances, as it is evident from Section 245 of the Act that the Central Government has appointed the members as their representatives to settle the disputes with assessee, which reflects the confidence they had in the members because the persons appointed are of integrity and known for their outstanding ability and expertise and for the special knowledge and experience in problems relating to direct taxes and business accounts. Therefore, these members have been authorised to settle the disputes on behalf of the Government and it does not lie in the mouth of the Government to challenge the decision taken by their own representatives without making allegations of bias or fraud or malice. Rule discharged. Petition dismissed.
-
2024 (4) TMI 1028
Unexplained Cash Credit u/s 68 - Authenticity of the Will - sale consideration claimed to have been received by the appellant from sale of gold ornament and diamonds, which were given to him by his late grandmother by way of a will - onus to prove with regard to creditworthiness and genuineness of the transactions - AO observed that the source of increase in capital of the assessee through the sale of jewellery and diamonds is not verified and explained - THELD THAT:- It is clear from a bare reading of the “Will” that there are several inconsistencies and contradictions in it. Firstly, the age of the testator is stated to be “75 years” in para 1 whereas it is “over 70 years” in para 2. The testator unlikely to make such glaring mistake when she states that she was “mentally fit and healthy” and that she has not executed any other will or testament - Though she had 4 sons and 2 daughters, she has not given anything to her 3 sons and 2 daughters in this “Will” by stating that she had earlier given to all other daughters and sons (except father of the assessee) whatever she and her husband wanted during their hard times as well as on various occasions and festivals. However, no details regarding the gifted assets or their values to other children have been specified, unlike the case of the appellant. She has gifted all her shares and other properties at Sl. Nos.1 and 2 of the “Will” to her son Sevantilal.
The value of assets given to the father of assessee is also not high. She has ,however, gifted gold ornament weighing about 738 grams and 187 carats of diamonds to her grandson, Milan Sevantilal Seth (appellant herewith). It is beyond the realm of human probability that she gifted/ gave away such high value gold jewellery and diamonds to her grandson but there is no evidence of any such gift to her own children (3 sons & 2 daughters). There are also no supporting documents to prove the source of the aforesaid assets, since she is a housewife with no regular source of income. Also, there is no independent evidence apart from the “Will” which can prove that she was in possession of the impugned assets at the time of creation of the will.
It is also not clear as to why the receipt of gold jewellery and diamonds of such high value was never shown either in the Income-tax returns or the Wealth-tax returns of the assessee for a very long period of 17 years upto AY 2017-18. Neither any evidence of these valuables in the income-tax details of the grandmother has been produced before us. The reasons for not showing such high value of the assets could not be satisfactorily explained by the Ld. AR. No corroborative evidence has been furnished by the Ld. AR to support the case of the appellant. Shares have also been gifted but no details regarding the quantity and value of shares is mentioned. No DMAT account or any evidence from Stock Exchange was produced to support the “Will”.
Another very important fact is absence of “probated will” in this case. On a specific question by the Bench, the Ld. AR fairly admitted that there is no probate in the present case. Probate is a legal process of proving a will in a Court and confirming its validity. In absence of the probate and existence of overwhelming surrounding circumstances discussed above, the explanation of the appellant regarding the nature and source of the impugned gold jewellery and diamonds is not prima facie satisfactory. In view of the facts discussed above, we agree with the concurrent findings of the AO and Ld. CIT(A) that the said will deed is concocted and cannot be relied upon.
A bare reading of section 68 of the Act reposes in the AO the jurisdiction to enquire from the assessee the nature and source of the sum credited in his books of account. If the explanation given by the assessee is found not to be satisfactory, further inquiries can be made by the AO himself, both in regard to the nature and source of the income credited by the assessee in the books of account. The section accords statutory recognition to the principle that cash credits which are not satisfactorily explained, or not at all explained, might be assessed to be tax as income of the assessee.
It is well established that identity of the creditor, creditworthiness or capacity of the creditor to advance the money and genuineness of the transactions are the three ingredients which are required to be cumulatively satisfied by the assessee to escape the mischief, the provisions of section 68 of the Act. The assessee has not been able to properly explain and satisfy the aforesaid conditions so as to discharge the onus cast on it.
The creditworthiness of the will maker and genuineness of the transaction has not been proved for the reasons that assessee’s grandmother was a housewife with no regular sources of income. No evidences have been produced to show that she was in possession of so many assets to give to the appellant and her six children. The Will deed appears to be a concocted story as no specific details/quantification is mentioned in it of the assets given to other children. Shares have also been gifted but no details regarding the quantity and value of shares is mentioned. No DMAT account or any evidence from Stock Exchange was produced to support the Will. There is also inordinate and intentional delay in submission of the details.
As the Will was made in January, 1999 but no Income-tax or Wealth-tax details were furnished for 17 years long upto 2017-18 or for the prior period to prove the existence of the gold jewellery and diamonds. The officially authenticated copy of a probated will is not available with the appellant.
Thus we hold that the onus with regard to creditworthiness and genuineness of the transactions has not been discharged satisfactorily as mandated in section 68 of the Act. Therefore, the addition made by the AO and upheld by the Ld. CIT(A) is sustained and the grounds are dismissed.
-
2024 (4) TMI 1027
Levy of penalty u/s 271(1)(c) - Denial of exemption of capital gains u/s 10(38) on account of sale of shares - company was not doing substantial business and not declaring dividend and accordingly disallowed the claim of exemption - penalty deleted by Ld. CIT(A) on the ground that since the issue in quantum proceedings has been decided in favour of the assessee by Hon’ble ITAT - HELD THAT:- It is a well settled law that once the additions made in quantum proceedings have been deleted, then there is no question of sustaining levy of penalty u/s 271(1)(c) of the Act.
In the case of CIT v Shah Alloys [2012 (9) TMI 957 - GUJARAT HIGH COURT] the Gujarat High Court held that penalty need not be imposed when addition made, which was basis for penalty, was set aside.
Also In the case of CIT v. Shishpal [2001 (9) TMI 41 - RAJASTHAN HIGH COURT] addition was made as unexplained investment under Section 69 and penalty was imposed under Section 271(1)(c).The aforesaid addition was deleted in quantum appeal. The High Court held that since the very foundation for imposition of penalty had become non-existent, penalty would not survive. Also in case of LRs Management. [2023 (5) TMI 351 - ITAT RAJKOT] it was held that Where quantum addition made by AO was deleted by Tribunal, there remained no basis for levy of penalty under Section 271(1)(c) of the Act.
Thus once the quantum proceedings itself have been decided in favour of the assessee, there is no scope of levy of penalty under Section 271(1)(c) of the Act, we are here by dismissing the appeal filed by the Department.
-
2024 (4) TMI 1026
Denial of benefit u/s 115BAA - while filing its return of income as it was unable to upload Form 10-IC due to technical glitches - scope of circulars or directions amending provisions of the Act - DR has argued that the appellant company has not exercised its option for taxation u/s 115BAA of the Act at the time of submitting ROI electronically in accordance with condition 3(ii) of the above CBDT circular - whether the appellant company being a domestic company is entitled to get its tax liability computed in accordance with the provisions of section 115BBA(1) of the Act?
HELD THAT:- In view of rule 21AE, the appellant assessee domestic company was to exercise its option for the benefit of computation of its tax liability u/s 115BAA(1) in accordance with the provision of sub-section 5 of section 115BAA for the relevant assessment year 2020-21 by furnishing prescribed form No. 10-IC electronically. It is not disputed that there was a technical problem in uploading the form 10-IC. This fact is substantiated by the referred CBDT circular dated 17.03.2022. CBDT circular condoned the delay in filing form 10-IC for the relevant A.Y. 2020-21. According to Para 2 of the circular, it is understood that the delay was condoned upon receiving representations stating that form 10-IC could not be filed along with the ROI for A.Y. 2020-21, which was the first year of filing the form.
As far as the compliance of condition No. (ii) of CBDT circular by the appellant domestic company is concerned, the option by the appellant could be exercised only by uploading from 10-IC prescribed under Rule 21AE of the rules on 02.05.2021, the delay in uploading this form 10-IC was already condoned by the CBDT. It is well established precedent that a circular of CBDT, no doubt, has the force of law, can even supplant the law in cases where it is beneficial to the assessee and can mitigate or relax the rigors of the law. The powers of the CBDT in issuing circular for general guidance are subject to two important conditions. One is that it does not entitle the income tax authority including the Board to issue instructions or circulars contrary to the substantive provision of law or curtailing the relief to which the assessee is otherwise entitled under law.
It is also settled law that circulars are not binding on assessee. The circular cannot therefore curtail the benefit conferred on assessee or be contradictory to the Act.
Hon’ble Apex Court in Union of India V/s Wood Paper Ltd. [1990 (4) TMI 55 - SUPREME COURT] has held that the condition regulating the computation of benefit should be interpreted liberally. We are of the consistent view that the appellant assessee, as a domestic company, was free to opt for the beneficial part of the relevant law. The appellant company having exercised its option in consonance with aforesaid provision of law and having opted as per the procedure prescribed under the aforestated rule, is entitled to the benefit of section 115BAA(1) for the purpose of computation of income at the rate mentioned thereunder. The condition No. (ii) of CBDT dated 17.03.2022, thus, cannot be interpreted to take away the statutory right vested in the appellant assessee under the Act.
CIT(A) has failed to rationally appreciate and diligently apply the relevant law on the facts of the present cast. We therefore set aside the order passed by CIT(A) along with assessment order to the aforestated extent. The aforesaid point related to the grounds of appeal, is accordingly determined positively in favour of the appellant assessee.
AO is thus directed to compute the tax liability of the appellant assessee, a domestic company in accordance with the mandate of Section 115BAA(1) of the Act. The matter is restored to the file of AO for the statistical purposes.
-
2024 (4) TMI 1025
Assessment order passed u/s 153A - valid approval granted u/s 153D or not? - as submitted by assessee combined/consolidated approval issued u/s 153D by the Additional CIT/Central Range-7 Delhi without any reference on the order sheet and the same is mechanical one
HELD THAT:- As referring to approval accorded makes it evident that such approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect of any of 5 assessment years. Apparently, the approval has been granted on a dotted line without any availability of reasonable time which firms up the belief towards non application of mind.
Besides, the approval has been granted in a consolidated manner for all assessment years for which voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record as no such draft Assessment order has been referred while according the approval u/s 153D of the Act.
The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard.
Thus in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that the above approval letter issued by the Addl. Commissioner says that the approval has been granted subject to certain conditions.
Plain reading of the letter of approval granted by the Addl. Commissioner, clearly depicts that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of letter of the Ld. A.O. without any application of mind. From the said approval, it can be easily inferred that the approved has been accorded with certain conditions. Thus, the sanctioning authority had in effect abdicated its statutory functions and delightfully relegated its statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The said approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be sustained in the eyes of law.
Thus approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D of the Act. Such perfunctory approval has no legal sanctity in the eyes of the law. See SMT. SHREELEKHA DAMANI [2018 (11) TMI 1563 - BOMBAY HIGH COURT]
Thus the approvals so granted under the shelter of section 153D of the Act does not pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments orders in the captioned appeals are non-est and a nullity and hence the same are quashed. Appeals filed by the Assessee allowed.
-
2024 (4) TMI 1024
Computation of short term capital gain - allowable expenditure u/s. 48 - disallowance of claim of management fees on the ground that it is not an allowable expenditure u/s. 48 as it is not wholly and exclusively incurred in connection with transfer of asset - HELD THAT:- Section 48 of the Act gives the mode of computation of income chargeable under the head ‘Capital Gains’. The section allows deduction in respect of expenditure incurred wholly and exclusively in connection with transfer of capital asset and the cost of acquisition and cost of improvement, if any. The contention of the assessee is that the management fee paid by the assessee to BNP Paribhas is linked to earning of short term capital gain arising from transfer of securities.
We find that similar issue had come up before in the case of KRA Holdings & Trading Investments Pvt. Ltd. [2013 (9) TMI 1013 - ITAT PUNE] Revenue rejected assessee’s claim of deduction of Portfolio Management Fee for similar reasons as has been expressed in the instant impugned order and ITAT allowed the claim of the Portfolio Management fees as an allowable expenditure.
Similar view has been taken by the Tribunal in the case of Nadir A Modi [2017 (4) TMI 567 - ITAT MUMBAI]. In the aforesaid case payment of management fee was allowed to the assessee by placing reliance on the decision in the case of KRA Holdings & Trading Investments Pvt. Ltd [2013 (9) TMI 1013 - ITAT PUNE].
There are contrary decisions of the Tribunal on allowability of Management Fee u/s. 48 of the Act. It is a well settled proposition that when two views are possible, the view in favour of assessee should be preferred [Re. CIT vs. Vegetable Products Ltd [1973 (1) TMI 1 - SUPREME COURT]. Thus, in the facts of the case and the decisions referred above, ground No.1 of appeal is allowed.
Disallowance u/s. 14A - assessee has earned income exempt from tax u/s. 10 - No suo-moto disallowance was made by the assessee for earning of exempt income - HELD THAT:- AO has straight away invoked the provisions of Rule 8D without recording dissatisfaction with regard to assessee’s claim of no disallowance of expenditure u/s. 14A of the Act. The provisions of section 14A(2) of the Act envisage that the Assessing Officer having regard to the accounts of assessee, if not satisfied with the correctness of the claim of assessee in respect of expenditure in relation to earning exempt income, then the AO shall determine the amount of expenditure incurred in relation to exempt income in connection with Rule 8D(2).
Where the assessee has made any suo-moto disallowance or no disallowance u/s. 14A of the Act the provisions of Rule 8D are not attracted automatically. AO has to record his dissatisfaction having regard to the accounts of the assessee, with reference to the correctness of the claim of assessee u/s. 14A of the Act. Though no specific proforma or the manner of recording such dissatisfaction has been prescribed, nevertheless the dissatisfaction of the AO should be objective and emanate from his observations in the assessment order. In the instant case, we find that the Assessing Officer has simply recorded the submissions of the assessee and thereafter invoked the provisions of Rule 8D by referring to the decision in the case of Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] However, the AO while referring to the aforesaid decision failed to take note of the manner in which dissatisfaction has to be recorded u/s. 14A of the Act, as explained by the Hon’ble High Court.
Since, the AO has failed to record dissatisfaction as mandated u/s. 14A(2) of the Act, disallowance u/s. 14A of the Act in the instant case is unsustainable - Decided in favour of assessee.
-
2024 (4) TMI 1023
Disallowance u/s 36(1)(vii) - bad debt claim in respect of identified debts - HELD THAT:- The assessee has brought on record a chart containing party-wise details of accounts which have been claimed as bad debts i.e. identified debts u/s 36(1)(vii) which, according to the assessee has never been claimed u/s 36(1)(viia).
As pointed out by the Ld. AR, the appeals of the Revenue filed against the decision of the Tribunal on the impugned issue for AY 2013-14 to 2015- 16 stand dismissed by the decision of Hon’ble Delhi High Court [2023 (10) TMI 1244 - DELHI HIGH COURT] Revenue had also gone in appeal before the Hon’ble Delhi High Court against the order of the Tribunal on this issue for AY 2016-17 as well but the Hon’ble Delhi High Court following its decisions for AY 2013-14 to 2015- 16 held that ‘no substantial question of law arises for consideration by this court’. Appeal of the assessee is allowed.
-
2024 (4) TMI 1022
Validity of assessment / adjustment u/s 143(1) without prior intimation u/s 143(1) - Denial of exemption u/s 11 and Claim of Expenses by the CPC - HELD THAT:- Assessing Officer CPC, before making any adjustment/disallowance to the returned income as per the return of income filed by the assessee is duty bound to intimate the same to the assessee either in writing or in the electronic mode. However, we find that no such intimation has been given to the assessee before making the said adjustment or disallowance either in writing or in electronic mode.
We have also examined the records of assessment proceedings on e-portal relating to the assessee as placed before us and observe that the ld. AO, CPC has not followed the mandate of first proviso of section 143(1)(a) of the Act and consequently , the order passed under section 143(1) of the Act is not as per the mandate of provisions of the Act and has to be quashed.
In the instant case as the adjustment has been made by the ld. Assessing Officer, CPC to the income of the assessee without even giving any intimation in terms of proviso to section 143(1)(a) of the Act and, therefore, the said order is quashed as invalid and nullity in the eyes of law. In the result, the additional ground is allowed.
Denial of exemption u/s 11 - Disallowing the capital expense and revenue expense - return of income and Form 10B was not filed by the assessee on time - HELD THAT:- We find that admittedly the return of income was filed in Form 7 and Form 10B on 31.03.2021 and 30.03.2021 while the extended due date for filing the return of income in relevant assessment year was 15.02.2021. We note that the COVID 19 pandemic was spread all over the country and the entire country rather the entire globe were completely brought to standstill. And so was the condition so far as the assessee trust is concerned. So considering all these practical difficulties for making compliances, Hon’ble Apex Court has extended the period of limitation with respect to judicial or quasi-judicial proceedings.
So as per Hon’ble Apex Court [2022 (1) TMI 385 - SC ORDER] vide its order dated 10.01.2022 there is no delay in filing the return of income as well as Form 10B and, therefore, the order of the ld. CIT(Appeals) upholding the order of ld. Assessing Officer, wherein the exemption claimed under section 11 of the Act by the assessee-Trust has been rejected resulting into disallowance of capital expenditure, revenue expenditure and also statutory exemption exemption of 15% of total receipts u/s 11(1)(a) which is incorrect and against the ratio laid down by the Hon’ble Supreme Court. Accordingly we set aside the order of ld. CIT(Appeals) on this issue and direct the AO allow the exemption claimed u/s 11.
Appeal of the assessee is allowed.
-
2024 (4) TMI 1006
Delay of 690 days in filling appeal before HC - Dealy due to procedural issues in the new faceless appeal scheme - Intimation u/s 143(1) - disallowance of assessee's claim for deduction of delayed deposit of employees share of contribution towards ESI/PF u/s 36(1) (va) - HELD THAT:- The reason that the delay in filing of the present appeal can by no means be held to be justified for the reason that partners of the assessee firm had remained unaware about the order passed by the CIT (A) which was dropped in the e-mail account of his accountant, viz. Shri Amitabh Paul. As the reason given by the assessee firm regarding the inordinate delay involved in filing of the present appeal does not inspire any confidence, and in fact reveals a lackadaisical conduct of the partners of the assessee firm, therefore, the same cannot be summarily accepted on the very face of it. Considering the callous and lackadaisical conduct of the partners of the assessee firm who ought to have remained vigilant about their income tax matter was held by the ITAT.
The expression "sufficient cause will always have relevancy to reasonableness. The action which can be condoned by the court should fall within the realm of normal human conduct or normal conduct of a litigant. However, as the appellant/ assessee in the present case is acting in defiance of law, therefore there can be no reason to allow its application and condone the substantial delay of 690 days involved in preferring of the captioned appeal.
Hon'ble Supreme Court in Ramlal, Motilal and Chotelal v. Rewa Coalfields Ltd. [1961 (5) TMI 54 - SUPREME COURT] that seeker of justice must come with clean hands, therefore, now when in the present appeal the assessee appellant had failed to come forth with any good and sufficient reason that would justify condonation of the delay involved in preferring of the captioned appeal, the ITAT declined to condone the delay of 690 days, without adverting to the merits of the case and hence dismissed the captioned appeal of the assessee as barred by limitation.
As far as the issue involved pertaining to claiming of deduction under section 36 (1) (va) of the IT Act 1961 on delayed payment of employees share of contribution towards ESI/PF in the instant case is concerned is no more res integra. The Hon’ble Supreme Court has decided the legal issue on merits in the matter of Checkmate Services P. Ltd [2022 (10) TMI 617 - SUPREME COURT]
Thus the present appeal filed by the appellant is not only devoid of merits but also barred by limitation as provided under Section 253 of the Act. The learned ITAT has rightly dismissed the appeal of the assessee.
-
2024 (4) TMI 991
Reopening of assessment u/s 147 - new notice issued rather than orders to be passed u/s 148A(d) - validity of the AO’s action in issuing the notice dated 23rd June 2022 - Whether contents of notice dated 23rd June, 2022 is distinct from the ‘reasons to believe’ dated 27th March, 2021? - As decided by HC [2022 (9) TMI 105 - DELHI HIGH COURT] a perusal of the notice dated 23rdJune, 2022 and impugned order dated 22nd July, 2022 shows that as per the AO the details of the transaction which form the basis of the notices dated 19th April, 2021 and 23rd June, 2021 are same. Pertinently, the petitioner has not offered any explanation for the transaction(s) entered with M/s Subhshree Financial Management Pvt. Ltd. Limited in the relevant financial year in her reply dated 27th June, 2022. In the absence of any explanation offered in her reply, we do not find any error in the impugned order issued by the AO.
HELD THAT:- The learned counsel for the petitioner submits that the prayer in the petition is not pressed at this stage since relief has already been obtained by the petitioner. The question of law, if any, is however left open for consideration.
The special leave petition and applications, if any, are accordingly disposed of as infructuous.
-
2024 (4) TMI 990
Validity of Reassessment notices issued unsigned - maintainability of writ petition against this issue in HC - According to petitioner, absence of a signature on the impugned notice is a substantial defect and afflicts the impugned notice with manifest illegality and this defect is incurable - HELD THAT:- It is true that without the reasons to believe escapement of income, petitioner would not be able to file its objections to the notice issued under Section 148 of the Act. It is also true that this stand of illegality of the notice has been taken for the first time in the petition. In the two communications sent by petitioners' Chartered Accountant this stand has not been taken. We would hasten to add we are not giving any decision on waiver or estoppel.
We are only saying that against the notice petitioner has straight away approached this Court without even complying with the requirements stated by the Hon’ble Apex Court in GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT]. In our view, petitioner should have, on the basis of the ratio laid down by the Hon’ble Apex Court in GKN Driveshafts (India) Ltd. (Supra), filed return of income and then sought reasons for issuing the notice. In response, the Assessing Officer was bound to provide the reasons within a reasonable time. On receipt of reasons, petitioner was entitled to file objections and the Assessing Officer was bound to dispose the same by passing a speaking order. Therefore, in our view, this is not a fit case to exercise our jurisdiction under Article 226 of the Constitution of India in view of petitioner not complying with the ratio laid down by the Hon’ble Apex Court in GKN Driveshafts (India) Ltd. (Supra).
Petitioner may file objections to the impugned notice dated 26th March 2012 together with the return of income within four weeks from today. In the objections to be filed, petitioner may raise all defences including those raised in this petition. The Assessing Officer shall dispose the objections but before disposing the same, shall give a personal hearing to petitioners, notice whereof shall be communicated atleast five working days in advance. The order disposing objections shall be a reasoned order dealing with all objections and if the Assessing Officer intends to rely on any judgments/orders of any Court or Tribunal, a list thereof shall be made available with the notice for personal hearing so that petitioner will be able to deal with/distinguish the same. Thus without expressing any view on the merits of the matter, petition dismissed.
-
2024 (4) TMI 989
Unexplained cash credit u/s 68 - non-establishment to prove the creditworthiness or the genuineness of a transaction - all investor companies are group companies - ITAT deleted the additions - HELD THAT:- CIT(A) has made an elaborate exercise to assess the creditworthiness of the investor companies as well as the genuineness. All the investor companies are group companies and the directors are closely related to the director of the assessee company and the director Mr. Agarwala himself is one of the directors in one of the investor companies, therefore, on a deeper scrutiny of the factual position would show that the investor company did not have a genuine creditworthiness and consequently the transaction has to be held to be not genuine. - As held earlier certificate of incorporation of the companies, payment by banking channel etc. cannot tantamount to satisfactory discharge of onus and the facts of the case on hand speaks for itself as it is obvious. Thus, the principle of Preponderance of Probabilities applies with full force to the case on hand which leads to the irresistible conclusion that the finding rendered by the CIT(A) is legal and valid.
The assessee in their submission contended that their business activity has increased considerably and for the purpose of expansion funds were required and therefore the assessee raised funds from various means, increment in share capital from associates being one of them. The fact clearly demonstrates that the source of the funds which have flown into the account of the assessee have substantially come from one company namely Gainwell Textrade Private Limited and the said company had contributed to the other companies and the funds transferred to those companies were transferred to the assessee company invariably on the same day leaving a bank balance which was almost negligible and the bank statements reveal that the prior to the inflow of the funds into those investing companies, the bank balance was negligible and after the transfer it was also negligible.
The assessee had contended before the tribunal that the amount was credited through proper banking channels and the investing companies are body corporate registered with the Registrar of Companies and individually assessed to income tax and therefore the genuineness of the parties is beyond doubt. However, this is not the litmus test to discharge the burden on the assessee to establish creditworthiness of the investing companies as well as the genuineness of the transaction. Thus, we have no hesitation to hold that the explanation offered by the assessee is neither proper, reasonable or acceptable.
In Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] the court held that based on the foundational facts the department has adopted the concept of “working backward” leading to the assessee. The department would be well justified in considering the surrounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over and then arrive at a decision.
Thus the CIT(A) was right in adopting a logical process of reasoning considering the totality of the facts and circumstances surrounding the allegations made against the assessee taking note of the minimum and proximate facts and circumstances surrounding the events on which charges are founded so as to reach a reasonable conclusion and rightly applied the test that a reasonable/prudent man would apply to arrive at a conclusion.
On facts we are convinced to hold that the assessee has not established the capacity of the investors to advance moneys for purchase of above shares at a high premium. The credit worthiness of those investors companies is questionable and the explanation offered by the assessee, at any stretch of imagination cannot be construed to be a satisfactory explanation of the nature of the source. The assessee has miserably failed to establish genuineness of the transaction by cogent and credible evidence and that the investments made in its share capital were genuine. As noted above merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or the credit worthiness has not been established.
Thus we hold that the assessee has failed to discharge legal obligation to prove the genuineness of the transaction and the credit worthiness of the investor which has shown to be so by a “round tripping” of funds. For all the above reasons, the revenue succeeds.
-
2024 (4) TMI 988
LTCG - Receipt of additional amount towards Transferable Development Rights (TDR) - treatment to receipt of consideration the appellant ceased to be the owner of the property - compensation received for settlement of dispute in respect of allotment of Flat - HELD THAT:- If the Revenue had serious doubts on the genuineness of the letter or the understanding as reflected in the letter or the intention of the parties, it should have summoned the developer to confirm the same. It does not appear that the Revenue had summoned the developer or tried to find the veracity of the letter. We should also note that admittedly the letter is signed by the developer. The genuineness of the letter is also confirmed by the fact that a substantial amount has also been paid to assessee
. As per the letter, the developer committed to assessee that if in future the developer was able to obtain additional TDR and load it on the property being developed, an extra compensation at Rs. 1000/- per sq. ft. of the TDR utilised for additional construction of floors will be paid to assessee. In our view, the development agreement dated 29th September 1992 and the commitment letter also dated 29th September 1992 should be read as one agreement. The amount paid should be considered as payment under the development agreement itself.
Assessee’s arguments that even the Government records showed assessee to be the owner of the property and there has been no transfer of the capital asset has been dismissed by the ITAT by saying that it takes time to get names changed due to which owner continued in such official records or simply the name of assessee might have continued. The agreement reflects the intention of the parties to the agreement. Neither the developer has come forward and told the Assessing Officer nor was he called to come and depose that the intentions of the parties were different from what assessee informed the Income Tax Department. Therefore, in our view, the ITAT was not correct in confirming the view of the Assessing Officer that this amount of should be treated as income from other sources.
This amount should also be treated as consideration being paid for the developmental rights entered into on 29th September 1992 and treated as LTCG to be assessed in the year the amount was received. Assessee, we are informed, has paid LTCG on this amount in Assessment Year 1997-1998.
-
2024 (4) TMI 987
Validity of Assessment order u/s 147 r.w.s. 144B - Assessment challenged being in violative of the principles of natural justice - HELD THAT:- Admittedly the petitioner was initially served with a notice on 12.11.2021 asking for the books of accounts and other documents mentioned in the annexure to the said notice. Another notice was served in this regard on 20.12.2021 giving reasons for re-opening of the assessment in the case of the petitioner for the year 2014-2015 u/s 147 - However, there has not been much of the developments till 17.03.2022 when the show cause notice was abruptly issued and the entire proceedings stood concluded within a period of less than fifteen (15) days time.
From the pleadings and documents and also the submissions made by Standing Counsel for the Income Tax Department, what also is not very clear is, whether after the reply which the petitioner had submitted on 19.03.2022, the respondent authorities did they ever issue any show cause notice to the assessee for any further proceedings drawn beyond the reply to the show cause notice which the petitioner had already filed. There is no proof of any notice of personal hearing or any other hearing calling upon the petitioner to personally make his submissions.
The presumption drawn by the petitioner for it to be a notice u/s 144C cannot be doubted. Another aspect which needs to be considered is that for the assessment year 2014-2015, the show cause notice was issued on 17.03.2022 and the time limit for response was up till 20.03.2022. This duration was too short a period, particularly, when the explanation and details have been sought of an assessment year about seven to eight years old. Thereafter, vide notice dated 21.03.2022 the authority concerned extended the period by another two days. Now there is no proof when these notices issued on 21.03.2022 extending the period from 21.03.2022 to 23.03.2022 have been effectively served upon the petitioner or not. Meanwhile, the petitioner did gave his reply on 19.03.2022 before the authority concerned.
No hesitation in reaching to the conclusion that the proceedings drawn by the respondent authorities apparently seems to be in a hasty manner without a reasonable opportunity being given to the petitioner. Thus, the impugned order therefore to the aforesaid extent is set aside/quashed. Since the impugned order is being quashed on the technical ground of fair opportunity not being provided, the matter stands remitted back to the authority concerned who in turn after hearing the petitioner may proceed and decide strictly in accordance with law without any further delay. WP stands allowed.
........
|