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Income Tax - Case Laws
Showing 21 to 40 of 163811 Records
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2024 (5) TMI 348 - ITAT DELHI
Deduction u/s 80IAB on the disallowance of depreciation on Water-use Rights (Intangibles Asset) - As per revenue payment cannot be considered to be on account of acquisition of capital asset as right to use water neither diminishes nor enhances by any means. The Government has just given a facility to the assessee to use the same and the assessee has clearly tried to claim the depreciation on the same, this cannot be allowed - HELD THAT:- As decided in assessee own case we agree with the contention of the Id, counsel that such an enhancement of profit by way of disallowance of depreciation would be eligible for deduction u/s. 80IAB and this position is now set at rest by CBDT Circular No. 37/2016 dated November 2, 2016, wherein the CBDT has accepted that if disallowance leading to enhancement in the profits of eligible business, then deduction under Chapter-VIA of the Act is admissible on the profits so enhanced by the disallowance.
Accordingly, we direct the Assessing Officer to allow the deduction u/s. 80IAB on the disallowance of depreciation and gave consequential relief. In view of our aforesaid direction, the issue raised on merits on allowability of depreciation on intangible assets is purely academic - Appeal of the assessee is allowed.
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2024 (5) TMI 347 - ITAT DELHI
Penalty u/s 271(1)(b) - Non-compliance with a notice issued u/s 142(1) - first round of proceedings was deleted by the Tribunal - HELD THAT:- Vide our order of date [2024 (5) TMI 320 - ITAT DELHI] in quantum appeal, we have quashed the orders of the Ld. AO/CIT(A) passed by them in the second round of assessment proceedings. In such a scenario, the present appeal against the orders of penalty under section 271(1)(b) of the Act arising out of quantum assessment proceedings in the second round cannot survive. Appeal of the assessee is allowed.
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2024 (5) TMI 346 - ITAT DELHI
CIT(A) justification of admitting additional evidenced produced - whether the Ld. CIT(A) is right in law in admitting the additional evidence under clause (c) & (d) of Rule 46A(1) of the Rules? - HELD THAT:- In our opinion, the reply is in affirmative. This is because the issue is squarely covered by the decision of Hon’ble Delhi High Court in CIT vs. Virgin Securities and Credits (P) Ltd. [2011 (2) TMI 207 - DELHI HIGH COURT] it could not be disputed that this additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of claim made by the assessee. The plea of the assessee which taken before the AO remained the same. The Assessing Officer had taken adverse note because of non-production of certain documents to support the plea and it was in these circumstances, the additional evidence was submitted before the Commissioner (Appeals). It could not be said nor was it the case of the revenue that additional evidence was not permissible at all before the first appellate authority. On the contrary, rule 46A of the Income-tax Rules permits the Commissioner (Appeals) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. In the facts of the instant case, therefore, no substantial question of law arose
Thus we reject this ground and hold that the Ld. CIT(A) was perfectly justified in admitting the additional evidence produced by the assessee before him.
Unexplained receipts - Addition of receipts as per cash book maintained by the assessee - copy of sale deed of the property sold by the assessee to authenticate the said receipts shown in assessee’s cash book was not submitted - HELD THAT:- Before the Ld. CIT(A) the assessee not only produced sale deed but also sale agreement between assessee and M/s. S.R. Forging Ltd. showing advance given to the assessee and confirmation of M/s. S.R. Forging Ltd. whom the assessee sold the property.
It is quite evident that the source of receipt of the impugned sum been explained. Therefore the Ld. CIT(A) was convinced about the genuineness of the advances of Rs. 1.47 crore received by the assessee. We find no reason to interfere with the findings of the Ld. CIT(A). Only because documentary evidence was not filed at the time of assessment which were filed by way of additional evidence before the Ld. CIT(A) which he admitted after giving full opportunity to the Ld. AO to rebut/offer comments in remand proceeding. In our humble opinion, the impugned addition cannot be sustained. This ground is decided against the Revenue.
Addition u/s 40A(3) - said sum was found debited to the trading account as purchases which according to Ld. AO could not be substantiated by the assessee - HELD THAT:- We found by the Ld. CIT(A) on the basis of evidence validly admitted by him by following the due process of law and recording his finding that during the year the assessee had not, in fact, made any purchases. As ascertained from the sale deed dated 10.05.2011 of the property that the assessee had bought the property, 50% of which was his share. This accounted for payment of Rs. 90 lacs towards purchase of the property. The finding of the Ld. CIT(A) in this regard could not be assailed by the Revenue by bringing on record any adverse material. We, therefore, concur with the view of the Ld. CIT(A) and reject this ground of the Revenue too.
Addition deleted by the Ld. CIT(A) is on account of calculation mistake - HELD THAT:- DR could not explain as to how there was no calculation mistake. In this view of the matter, this ground is without any basis and is rejected.
Disallowance of interest u/s 36(1)(iii) - assessee had paid interest on borrowed funds and claimed deduction thereof whereas he had advanced interest free loans to six parties - CIT(A) sustained the said disallowance - HELD THAT:- There is no finding either of the Ld. AO or of the Ld. CIT(A) that interest has been paid for purposes other than business. The contention of the assessee has been that the interest bearing capital borrowed has been used for the purposes of assessee’s business. This contention of the assessee has not been controverted. The assessee is the best judge of his business needs. Revenue cannot allege that there was no business exigency to borrow interest bearing funds for the purposes of business of the assessee. No direct linkage has been established by the Revenue that interest bearing borrowed funds have been diverted for advancing interest free loans. There is no such allegation at all. The impugned disallowance, in our view, does not rest on any solid legal foundation. In this view of the matter, the alternate plea raised by the assessee that rate of interest has been applied for the whole year and not only for the period of advances given becomes infructuous. We therefore decide the main ground in favour of the assessee.
Addition commission expenses for want of documentary evidence - disallowance has been maintained by the Ld. CIT(A) with the observation that he was not convinced that the payments were made through accounted money of the assessee - HELD THAT:- The assessee brought on record before the Ld. CIT(A) party-wise details of commission paid by him along with PAN and addresses of the recipients of the impugned commission. Evidence produced before CIT(A) were examined in remand proceedings by the AO and no fault was found by him. The sustenance of the claim of impugned commission expenses by the Ld. CIT(A) is based on conjecture and surmises alone and not on facts. We, therefore, hold that the impugned disallowance is not warranted. We, therefore direct the Ld. AO to delete the same. Decided in favour of assessee.
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2024 (5) TMI 345 - ITAT DELHI
Income taxable in India or not - Business of supplying reservoir simulation software and related services. - Receipts from Indian customers - Finding or allegation of a Permanent Establishment (PE) of the assessee in India - taxability of its impugned receipts from Indian customers - taxing the entire receipts of the assessee by applying the provisions of section 44BB - HELD THAT:- It is an admitted fact that the assessee does not have a PE in India and that being a resident of Canada it is governed by the beneficial provisions of the India-Canada DTAA. The Revenue has not been able to bring anything on record to prove the contrary.
The main grievance of the assessee relates to taxability of its impugned receipts from Indian customers by applying the provisions of section 44BB of the Act despite the fact that the assessee does not have any presence (PE) in India. Section 44BB does not override the provisions of section 90 and therefore, a non-resident assessee can opt to be governed by the applicable treaty if more beneficial to it, which is now a settled position of law.
The impugned receipts of the assessee are not taxable in India under the provisions of section 44BB of the Act for the reason that the assessee does not have a PE in India in the relevant AYs under consideration and that being a resident of Canada, the assessee is governed by the more beneficial provisions under the India-Canada DTAA. It is the claim of the Revenue that the assessee’s case is covered by the decision of the Apex Court in the case of ONGC [2015 (7) TMI 91 - SUPREME COURT] We do not agree with this contention of the Revenue as in our considered view, the assessee’s case is distinguishable on facts as the substantial question of law determined in ONGC’s case was not concerning the eligibility of tax payers to the beneficial provisions of tax treaty but the taxability of income in the nature of FTS whether under the provisions of section 44D or 44BB of the Act. The Revenue has not been able to bring on record anything to establish the existence/ presence of a PE of the assessee in India either before us or before the lower authorities. It is not even the case of the Revenue that the assessee has PE in India in the relevant AYs under consideration. In this view of the matter, non-existence of PE of the assessee in India is unquestionable. Since the assessee does not have a PE in India in the relevant AYs, its business income (impugned receipts) under dispute in the relevant AYs is not taxable under section 44BB of the Act.
Whether the impugned receipts are not in the nature of royalty/ FTS in terms of the provisions of Article 12 of the India-Canada DTAA? - It is not in dispute that the impugned receipts partake the character of business income of the assessee for the relevant AYs under consideration. In this view of the matter, the question of treating the impugned receipts as royalty or FTS is irrelevant and becomes academic in nature. Having said so, as per Article 7 of DTAA, the impugned receipts being the business profit/income of the assessee during the relevant AYs under consideration are not taxable in India in the absence of a PE of the assessee in India.
Levy of interest u/s 234B of the Act on the ground of its inapplicability in case of a non-resident - HELD THAT:- As clarifying the position that proviso to Section 209(1) issued by Finance Act, 2012 was applicable prospectively after FY 2012-13, there was no liability for the assessee to pay interest under Section 234B of the Act for the impugned AYs, since the entire income was tax deductible at source in the hands of the payer.
Respectfully following the decision in the case of Mitsubishi Corporation and Amadeus IT Group SA [2021 (9) TMI 875 - SUPREME COURT] we hold that levy of interest under section 234B of the Act is not called for.
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2024 (5) TMI 344 - ITAT MUMBAI
TP Adjustment - MAM - application of TNMM by TPO as most appropriate method - Addition of proviso for management consultancy services - wherever Internal TNMM is available the same should be given preference over external TNMM analysis? - HELD THAT:- It would be pertinent to understand the setup of a large consultant global firm like that of the assessee, the consultants are not only qualified but many of them are super qualified specialists and super specialists having different years of experiences. For Example, the consultant can be a simple MBA, MBA + IIT Graduate, MBA + CA, though they may be placed in the same category like project leader, or manager but due to their qualification and super specialty their hourly rates may be differ. Therefore, it would be incorrect to say that there is a discrimination in charging of hourly rates. Considering the facts of the case in totality, we are of the considered view that the action of the Transfer Pricing Officer is not only erroneous but also against the facts of the case in hand.
Assuming that the TPO application of TNMM is the most appropriate method, we find that while applying the TNMM, the TPO has computed the profitability of BCG India at a company level and subsequently computed a proportionate profitability to impute the adjustment with respect to the international transaction of provision of management consultancy services.
If the assessee’s segmental profit and loss account is considered wherein the revenue and expenses are allocated between AE and Non-AE on an appropriate basis. Then the profitability arising of the AE segment is 44.02% whereas in case of Non-AE it is 3.77%. On a perusal of the internal TNMM analysis, we find that the assessee has earned significantly higher margins in the AE Segment vis-à-vis Non-AE Segment.
Rule 10B also provides that “the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base”. In our considered opinion the word “comparable” may encompass internal comparable or external comparable. It is because the delegated legislature has firstly referred to the net profit margin realized by the enterprise (internal) from a comparable uncontrolled transaction and, thereafter, it points towards net profit margin realized by an unrelated enterprise (external) from a comparable uncontrolled transaction.
Thus wherever Internal TNMM is available the same should be given preference over external TNMM analysis. Even on this point the assessee is in a better footing, However, as mentioned elsewhere, we are of the considered view that the CUP applied by the assessee does not have any flaw or error and the same should be accepted. We accordingly direct the Assessing Officer to delete the TP Adjustment in relation to proviso for management consultancy services. Ground No. 1 is allowed.
T.P Adjustment in relation to payment of licence fees for time and billing software - HELD THAT:- As decided in assessee own case [2024 (2) TMI 1377 - ITAT MUMBAI] for the A.Y. 2010-11 TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation, thus we direct the Assessing Officer / Transfer Pricing Officer to delete the TP Adjustment in relation to payment of licence fees for time and billing software. Decided in favour of assessee.
TP adjustment on provision of regional coordination services - selection of comparables companies - Before us, it has been argued that the TPO has grossly erred in excluding Vatika Marketing Limited - as emphatically pointed out that Lancor Maintenance & Services Ltd., included in the final determination of Arm’s Length Price has similar services and therefore, either Vatika Marketing Limited should be included or Lancor Maintenance & Services Ltd. should also be excluded - HELD THAT:- The reasons given by the Transfer Pricing Officer for excluding Vatika Marketing Limited are mentioned elsewhere. Let us now see the business of Lancor Maintenance & Services Ltd.,. The income shown by this company is “income from Maintenance operations” and in its segment information “the company is engaged in the business of maintenance and management of properties and there is no separately identifiable business or geographical segments”. In the light of the above, we are of the considered view that the Transfer Pricing Officer has erred in excluding Vatika Marketing Limited which is also engaged in the similar business as that of the Lancor Maintenance & Services Ltd.,. We accordingly direct the TPO / AO to include Vatika Marketing Limited for the determination of Arm’s Length Price of the impugned transaction. Ground No. 3 is Accordingly, allowed.
TP Adjustment on payment of information technology cost allocation - HELD THAT:- As decided in own case A.Y. 2008-09 [2020 (8) TMI 172 - ITAT MUMBAI] TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation. We are of the considered view that the ratio laid down in Lever India Exports Ltd. [2017 (2) TMI 120 - BOMBAY HIGH COURT] Merck Ltd. [2016 (8) TMI 561 - BOMBAY HIGH COURT]; Johnson & Johnson Ltd. [2017 (4) TMI 1281 - BOMBAY HIGH COURT] and Kodak India Pvt .Ltd. [2016 (7) TMI 677 - BOMBAY HIGH COURT] is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal.
Short granting interest u/s 244A - HELD THAT:- As decided in asseessee own case A.Y. 2010-11 [2024 (2) TMI 1377 - ITAT MUMBAI] issue raised by the assessee is allowed with the direction that the AO may consider extending the benefit to the assessee upto the date of actual receipt of refund.
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2024 (5) TMI 343 - ITAT PUNE
Income from Other Sources u/s 56(2) - interest received u/Sec. 28 of the Land Acquisition Act, 1894 granted by the learned Reference Court - HELD THAT:- As decided in Raghunath Budhaji Patil, Uran [2023 (4) TMI 1323 - ITAT PUNE] has already settled the issue in assessee’s favour and against the department wherein as held that taxability of the assessee’s interest income received under section 28 of the Act is covered in assessee’s favour as per the hon’ble high court’s Bombay bench [2019 (8) TMI 518 - BOMBAY HIGH COURT] holding that the same is not taxable under section 56(2)(viii) of the Act as against the Revenue’s contentions that the Aurangabad bench of the very hon’ble jurisdictional high court has taken a divergent view against the taxpayer in Shivajirao and Others [2013 (8) TMI 1160 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2024 (5) TMI 342 - ITAT DELHI
Loss on valuation of foreign exchange contract on M2M basis - addition has been made with regard to loss in the forward contract for foreign currency due to the fall in value on the date of balance sheet i.e. 31/03/2009 - AO while making the addition observed that claim of deduction on account of losses computed on Mark to Market basis cannot be allowed as the losses have not crystallized - CIT(A) deleted the above said disallowance - HELD THAT:- In the case of VS Dempo & Co. Pvt. Ltd [1993 (7) TMI 63 - BOMBAY HIGH COURT] held that loss arising in the process of conversion of foreign currency is a trading loss. As the case of the assessee before the authorities that the assessee booked forward contracts to hedge against the foreign currency fluctuation risk to business transaction viz export orders undertaken by the assessee and hence the taking of the aforesaid hedge cover was incidental to the business. Forward contracts were related to the exports proceeds expected to be received in the course of the business and not for acquisition for any capital asset and hence the loss is arising on revenue account, thus the same is allowable. Contracts entered by the assessee are binding and enforceable in law and hence the loss incurred on the date of balance sheet, due to the adverse exchange fluctuations would be allowable under the mercantile system of accounting entered that the same had not been actually paid, thus the same cannot be termed as notional loss in view of the decisions of Woodward Governor [2009 (4) TMI 4 - SUPREME COURT]
Thus we find no error in the order of the CIT(A) in deleting the subject addition and find no merit in the Ground No. 1 of the Revenue.
Loss on forward contracts - As per the assessee, the losses suffered by the assessee are normal business losses and therefore deductable - speculative loss - - AO made addition on the ground that since the transaction entered into Forex Directive by the assessee Company do not fall in the exclusionary clauses of Section 43(5) - CIT(A) deleted addition - HELD THAT:- The assessee is not a dealer of Foreign Exchange and contract in foreign exchange were to safeguard the business interest of the assessee and conducted in regular course of business, therefore, it cannot be termed as speculative in nature as no motive or action in this regard is in exist. It is not in dispute that there has been no delivery of foreign exchange, but the Forex Company being not a traded commodity as held in the case of Munjal Showa Ltd. [2003 (6) TMI 188 - ITAT DELHI-E] and Soorajmull Nagarmull [1980 (9) TMI 69 - CALCUTTA HIGH COURT] - CIT(A) while deleting the addition has relied on the above judicial precedents. In the absence of any contrary facts or the ratio brought to the notice of the Bench, we find no error or infirmity in the order of the Ld. CIT(A) in deleting the addition, accordingly we dismiss the Ground No. 2 of the Revenue.
Deduction under the forward premium account which represents the amortized loss, computed as the difference between the forward rate and the spot rate at the date of the inspection of the forward exchange contract - A.O. disallowed the same holding that expenditure claimed by the assessee is speculative in nature and hence not allowable as business expenditure - HELD THAT:- We have already dealt with the issue in Ground No. 2 and held that the CIT(A) has committed no error in deleting the addition observing that the forward mark contracts on foreign currency is incurred during the normal course of business and the losses incurred are the part and parcel of the business activity of the assessee, which are allowable as business expenditure and not speculative in nature, thus any expenditure incurred for such premium account computed as difference between the forward rate and the spot rate in such contract is also to be treated as business expenditure incurred in the course of business by the assessee. We find no error in the order of the Ld. CIT(A) in deleting the addition.
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2024 (5) TMI 341 - ITAT AHMEDABAD
Disallowance being 25% of Material Purchase and Indirect Expenses - assessee could not submit any documentary evidence except for the ledger, which can prove the genuineness of the purchase of Material - HELD THAT:- We find that the assessee had not produced the complete books of accounts along with bills and vouchers and other documentary evidence to substantiate the claim of the assessee before the AO. It is quite evident that the material referred by the assessee is relevant to determine the total income and tax liability of the Assessee correctly.
Since the Assessee has produced the documents before the Tribunal in support of his claim, in the facts and circumstances of the case and as the lower authorities had no opportunity to verify the documents produced before us, without commenting anything on the merit of the case, we admit the additional documents produced by the Assessee and in the interest of justice, restore the matter to the file of the AO with a direction to consider the documents produced by the assessee and adjudicate the issues, after giving due opportunity of being heard to the assessee. Accordingly, we partly allow the appeal filed by the assessee. Appeal filed by the assessee is treated as allowed for statistical purposes.
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2024 (5) TMI 340 - ITAT BANGALORE
Validity of reassessment proceedings - Reason to believe - sworn statement recorded from the partner in view of the bogus purchase as later retracted - as per assessee statement recorded u/s 132(4) of the Act which was retracted cannot be relied upon to reopen the assessment u/s 148 of the Act when the department has accepted the retraction - HELD THAT:- As in the present case, the department never accepted the retraction statement filed by the assessee. Being so, at the stage of reopening of assessment by the AO, it is not necessary to have conclusive opinion of escapement of income. On the other hand, he must have prima facie of the opinion that income has escaped from the assessment in these assessment years. To that extent, in our opinion, at the time of reopening of assessment, the AO has reason to believe that income has escaped from assessment on the basis of the sworn statement recorded from the partner in view of the bogus purchase said to be recorded by the assessee in its books of accounts. Being so, we do not find any merit in this ground of the assessee raised before us. This ground of assessee is rejected.
Addition towards bogus purchase - sworn statement recorded in survey proceedings from the partner as later retracted - HELD THAT:- Once a statement is retracted, the contents stated in the retracted statement must be substantially corroborated by other independent and cogent evidence. It has been consistently held by various courts that a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments.
In view of the above, in our opinion, the lower authority erred in holding that the assessee has inserted bogus purchase into his accounts without bringing on any evidence to hold that entire transactions are not genuine and they relied upon only the statement of one of the partner Shri Uday Kumar Salian recorded on 8.2.2018, which was later retracted by all partners vide letter dated 14.2.2018 within short date of 6 days. This has been filed by assessee with department on 15.2.2018, which is not at all considered by the AO.
It is noted that the ld. AO/CIT(A), never mentioned about this retraction statement in their order and this action of lower authorities cannot be appreciated. It is the duty of ld. AO to consider the letter in true perspective and to comment on it which he failed to do so.
For statement recorded from employee of the assessee, who has confirmed bogus purchase from 1.4.2017 to 31.1.2018 for the financial year 2017-18 relevant to assessment year 2018-19 and not for the all-assessment years involved herein - Being so, it cannot be considered that Ms. Amitha given any statement related to bogus purchases relating to all assessment years. This being the position, framing assessment by AO without considering the retraction of statement filed by the assessee, in our opinion, the addition cannot be sustained.
Only argument of D.R. is that assessee has accepted the bogus purchase in the assessment year 2018-19 and settled the issue by VSV Scheme 2020 and also accepted the bogus purchase in the assessment year 2016-17, the addition to be sustained - In our opinion, the acceptance by assessee in one assessment year cannot lead to conclusion that in all these assessment years, the assessee has inserted bogus purchases in a similar way. It cannot be said that the principle of estoppel to be applied. In our opinion, the case of assessee is to be examined in the light of evidence brought on record and in the present case, there was no evidence brought on record with regard to bogus purchase or creation of any undisclosed assets by the assessee in all these assessment years.
Addition could be made only when it is shown by the evidence brought on record that the books of accounts are not reliable as there are material errors and omissions existed therein. In order to support this proposition, we place reliance on the judgment of Umacharan Shaw and Brothers [1959 (5) TMI 11 - SUPREME COURT] wherein it was held that “there was no material on which the ITO could come to the conclusion that the firm was not genuine. There were many surmise and conjectures and if the conclusion is the result of suspicion, which cannot take place of proof in this matter.”
Thus there should be concrete evidence for considering the purchase entries in the books of accounts as bogus. In the present case, sales and purchase shown by the assessee leading to profit and that the profit declared by assessee is progressively increasing from year to year and it cannot be said that purchases were bogus without having any material to suggest that it is a bogus.
Thus once the statement recorded u/s 131 or 131(1A) or 133A of the Act or 133A of the Act is retracted by assessee, AO without rejecting the books of accounts cannot make any additions towards bogus purchases. Accordingly, the addition made on the premise of bogus purchase in all these assessment years is deleted and we allow the ground taken by the assessee in all these appeals.
Addition of personal expenses of partners - Since we have already held that there was no corroborative material to support this addition and the statement has already been retracted, this addition based on no supporting evidence cannot be made.
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2024 (5) TMI 321 - DELHI HIGH COURT
Reopening of assessment - reason to believe - onus to prove - Reassess v/s review the income - waiver of loans granted by the BIFR - remission of liability was not even remitted in the tax audit report i.e., Form 3CD - HELD THAT:- The courts have taken a consistent view that once the assessee has disclosed all the material and primary facts, truly and fully before the AO, it is for the AO to draw the requisite inferences from those primary facts. The onus on the assessee cannot be extended beyond the true and full disclosure of such facts.
Also, the power of the AO to reassess an income chargeable to tax which has escaped assessment is strikingly different from the authority to review the decision taken during the original proceedings. While the former is permissible in light of the pith and substance enshrined in Section 147 of the Act, allowing the latter would be a violence with the mandate of the said Section
Applying the principles laid down in Usha International Ltd. (2012 (9) TMI 767 - DELHI HIGH COURT] in the instant case, it is clearly seen that not only the aspects relating to the issue at hand had been fully disclosed by the petitioner before the AO but by recording the submissions and comments in the assessment order, it can be reasonably inferred that the AO has formed an opinion on the said issues. Thus, allowing the reassessment proceedings to continue in the present case would be contrary to the mandate expounded in Usha International Ltd. (supra).
We are also mindful of the note of caution as articulated in the case of Techspan India P. Ltd. v. Income-tax Officer [2006 (2) TMI 88 - DELHI HIGH COURT] whereby, this Court, while relying upon Gruh Finance Ltd. v. [2000 (2) TMI 86 - GUJARAT HIGH COURT] has held that every attempt to bring to tax income that has escaped assessment cannot be aborted by judicial intervention on an assumed change of opinion.
Thus non-disclosure of full material cannot be attributed to the petitioner in the instant case. Rather, the AO had omitted to make any addition qua the issue at hand, despite noting the submissions and forming an opinion on the same. Reopening notice set aside - Decided in favour of assessee.
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2024 (5) TMI 320 - ITAT DELHI
Assessment completed u/s 153A - addition on account of peak balance maintained by the assessee with HSBC Bank, Geneva - validity of second round of the quantum proceedings - HELD THAT:- As the original assessment order made in the first round stands quashed by the Hon’ble Delhi High Court [2024 (2) TMI 401 - DELHI HIGH COURT] wherein as held no incriminating material was found during the course of search carried out on the assessee and further that the Revenue was unable to place on record any reliable material to establish that the assessee was indeed the owner of alleged foreign bank account in HSBC Bank, Geneva.
Therefore, the orders of Ld. AO/CIT(A) do not have any legs to stand. Accordingly, the orders of Ld. AO/CIT(A) made by them in the second round of proceedings are hereby quashed as a consequence. Appeal of the assessee is allowed.
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2024 (5) TMI 302 - BOMBAY HIGH COURT
Reopening of assessment under old regime - scope of new regime - scope of TOLA - as argued notice has been issued on the basis of the provisions which have ceased to exist and are no longer in the statute - Whether TOLA is applicable for Assessment Year 2015-2016 and whether any notice issued u/s 148 of the Act after 31st March 2021 will travel back to the original date? - HELD THAT:- For Assessment Year 2015-2016 the provisions of TOLA are not applicable. This is a categorical finding in Tata Communications Transformation Services Ltd. [2022 (4) TMI 44 - BOMBAY HIGH COURT] and has been followed by the Siemens Financial Services (P.) Ltd. [2023 (9) TMI 552 - BOMBAY HIGH COURT] Therefore, there is no question of Revenue relying on TOLA to justify the impugned notice under Section 148 of the Act as being within the period of limitation.
Even in New India Assurance [2024 (1) TMI 803 - BOMBAY HIGH COURT] the Court held that reliance by Revenue on Instruction No. 1 of 2022 issued by CBDT is grossly misplaced and neither the provisions of TOLA nor the judgment in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] provide that any notice issued under Section 148 of the Act after 31st March 2021 will travel back to the original date.
Time limit to issue notice - In the present case, in view of the fifth proviso, the period to be excluded would be counted from 25th May 2022, i.e., the date on which the show cause notice was issued under Section 148A (b) of the Act by respondent no. 1 subsequent to the decision of the Hon’ble Apex Court in the case of Ashish Agarwal (Supra) and upto 10th June 2022, which is a period of 16 days.
Further, the time period from 29th June 2022 upto 4th July 2022 cannot be excluded as the same was not based on any extension sought by petitioner, but at the behest of respondent no. 1. Even if the same was to be excluded, still it will mean further exclusion of 5 days.
Considering the said excluded period as well, the impugned notice dated 27th August 2022 is still beyond limitation. The fact that the original notice dated 8th April, 2021 issued under Section 148 of the Act, was stayed by this Court on 3rd August 2021, and its stay came to an end on 29th March 2022 on account of the decision of this Court, will not be relevant for providing extension as per the fifth proviso. The fifth proviso provides for extension for the period during which the proceeding under Section 148A of the Act is stayed. The original stay granted by this Court was not with respect to the proceeding under Section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act. The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd. [2024 (3) TMI 109 - BOMBAY HIGH COURT] In view of the aforesaid, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation.
Validity of assessment order issued without a DIN - The impugned notice dated 27th August 2022 issued under Section 148 of the Act is invalid and bad in law as the same has been issued without a DIN.
Faceless assessment of income escaping assessment - notice being issued by the JAO as the same was not in accordance with Section 151A - There is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148 of the Act.
Automated allocation is defined in paragraph 2(b) of the Scheme to mean an algorithm for randomised allocation of cases by using suitable technological tools including artificial intelligence and machine learning with a view to optimise the use of resources. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under Section 148 of the Act. It is not the case of respondent no. 1 that respondent no. 1 was the random officer who had been allocated jurisdiction.
With respect to the arguments of the Revenue, i.e., the notification dated 29th March 2022 provides that the Scheme so framed is applicable only ‘to the extent’ provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under Section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme -
An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice.
With respect to the Office Memorandum dated 20th February 2023, the said Office Memorandum merely contains the comments of the Revenue issued with the approval of Member (L&S) CBDT and the said Office Memorandum is not in the nature of a guideline or instruction issued under Section 119 of the Act so as to have any binding effect on the Revenue. Moreover, the arguments advanced by the Revenue on the said Office Memorandum dated 20th February 2023 is clearly contrary to the provisions of the Act as well as the Scheme dated 29th March 2022.
Hon’ble Telangana High Court in the case of Kankanala Ravindra Reddy [2023 (9) TMI 951 - TELANGANA HIGH COURT] has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We are also of the same view.
Reason to believe - AO has restricted the escapement of income only with regard on the claim of deduction under Section 80JJAA of the Act and disallowance of excess claim of Forex loss - On the Forex loss, respondent has prima facie accepted the contentions of petitioner that there was a Forex loss. Therefore, the same cannot be justified as an escapement of income. Respondent no. 1 has also accepted that the transactions of Calibre Point Business Solutions Ltd. have been duly incorporated in the accounts of petitioner and that no deduction is claimed in respect of the deduction allowed under Section 10AA of the Act. None of the issues raised in the impugned order show an alleged escapement of income represented in the form of asset as required in Section 149(1) (b) of the Act.
As regards the claim of deduction under Section 80JJAA of the Act, an issue of correctness of claim of deduction under Chapter VI of the Act, in our view, cannot be covered by Section 149(1) (b) of the Act.The term ‘asset’ is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account. The present case does not fall in any of the types of the assets as mentioned above. Further, the alleged claim of disallowance of deduction also can never fall under the category of either clause (b) or clause (c) as it is neither a case of expenditure in relation to an event nor a case of an entry in the books of account as no entries are passed in the books of account for claiming a deduction under the provisions of the Act. On this ground also the impugned notice will be invalid.
Power of review - We agree with petitioner that there cannot be a reopening based on a change of opinion. The claim of deduction under Section 80JJAA of the Act was made by petitioner in the return of income and petitioner had filed Form 10DA being the report of the Chartered Accountant. In the said Form, a note has been filed alongwith Form 10DA and it has specifically been submitted by petitioner that software development activity constitutes ‘manufacture/ production of article or thing’. The claim of deduction under Section 80JJAA of the Act was also disclosed in the Tax Audit Report filed by petitioner alongwith the return of income. AO has passed the assessment order dated 30th November, 2017 allowing the claim of deduction under Section 80JJAA of the Act. The claim for deduction under Section 80JJAA of the Act was allowed by the Assessing Officer in the previous years as well. Hence, the present case is clearly a case of change of opinion or review of the original assessment order which is not permissible even under the new provisions.
Therefore, the concept of change of opinion being an in-built test to check abuse of power by the Assessing Officer and the Assessing Officer having allowed the claim of deduction under Section 80JJAA of the Act in the assessment order dated 13th November 2017, now to disallow the same is based on a clear change of opinion. Reassessment proceedings initiated on the basis of a mere change of opinion is invalid and without jurisdiction. On this ground also the impugned notice issued under Section 148 of the Act has to be quashed and set aside.
No question of reopening the assessment for the relevant assessment to disallow the deduction under Section 80JJAA of the Act.
Valid approval for passing the order under Section 148A (d) or not? - The approval is invalid and bad in law. We are unable to agree with Mr. Mistri to hold, in the facts and circumstances of the case, there was non application of mind by the approving authority.
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2024 (5) TMI 301 - GAUHATI HIGH COURT
Recovery proceedings - recourse to other provisions/alternate method for recovery of the dues from the petitioner - attaching the property and bringing the property for sale - notice of public auction/proclamation of sale of the property of the petitioner - period of limitation as per provision of Rule 68B of the Schedule II of the Income Tax Act, 1961 - time limit of a period of three years[now seven] for sale of attached immovable property - whether the impugned sale notice dated 27.03.2019 and the attachment is barred by limitation under Rule 68B of the Schedule II of the Income Tax Act, 1961? - HELD THAT:- A bare reading of the provision of Rule 68B of the Schedule II of the Income Tax Act, 1961, clearly shows that no sale of immovable property shall be made after the expiry of seven years (earlier three years) from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX.
Sub Rule-(ii) of Rule-68B provides for exclusion of certain periods while computing the period of limitation. Sub Rule-(iii) of Rule-68B provides that special provision for cases where any immovable property has been attached before 01.06.1992 and the order giving rise to a demand of any tax, interest, etc has also become conclusive or final before the said date. In such a situation the period of limitation as referred by Sub-Rule-I would commenced from 01.06.1992, this Sub-Rule (1), thus, makes it clear that limitation provided under Sub Rule-I for sale of immovable property would appear also to be attachment of immovable property and finalisation of tax demand which have occurred where from 01.06.1992.
In such a case, computing the period of limitation would be 01.06.1992, i.e. the date on which the said rule was inserted. Sub-Rule (IV), of Section-68 provides that where the sale of immovable property is not made in accordance with the provisions of sub-rule (1), the attachment order in relation to the said property shall be deemed to have been vacated on the expiry of the time of limitation.
It provides for a time limit of a period of three years for sale of attached immovable property starting from the end of the financial year in which the order giving rise for demand of tax, interest etc. has become conclusive. Sub-Rule-IV of the Rule-68B provides for the consequence of the immovable property not being sold within such time. As per the Sub-Rule-IV, the attachment order in the relation to the said property would be deemed to have been vacated on the expiry of the time limit as provided.
Thus as Rule-68B would apply. The attachment of the said immovable property was made on 20.12 2018 and the notice of proclamation of sale/auction was made on 27.03.2019 from the end of the financial year in which the order giving rise to a demand of tax etc, has become conclusive in the year 2010. Thus, hit by the period of limitation prescribed under the said rule. By virtue of Sub-Rule-(IV) of Rule-68B, upon completion of the period of limitation, the attachment would be deemed to have been vacated.
Thus by virtue of Rule-68B of the schedule II of Income Tax Act, 1961, the impugned notice of proclamation of sale is barred by limitation and as such is deserve to be set aside and quashed. Accordingly, the impugned notice of proclamation of sale is set aside. Consequently, attachment over the immovable property of the petitioner is also set aside.
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2024 (5) TMI 300 - ALLAHABAD HIGH COURT
Validity of Reassessment proceedings - notice issued in the course of the reassessment proceedings not served on the assessee - reassessment notice has been issued in the name of the partnership firm, though business of the erstwhile partnership firm had been taken over by sole proprietor - HELD THAT:- Remarkably, all the notices seen to have been dispatched to the assessee were returned back to the sender i.e. assessing officer. Yet, the assessing officer has made a recital as to notices duly served. AO has not proceeded on deemed service of notice basis rather he has treated the same to have been actually served on the assessee.
In view of the above fact, it loses relevance that the impugned assessment order was received by the petitioner when dispatched at the same address at which he had been earlier issued notices in the course of the reassessment proceedings. The fact that the assessment order may have been served may not be read with as evidence of due service of preceding jurisdictional and procedural notices. That essential compliance may not be inferred considering subsequent service on the assessment order. Rather, that survived to be established, independently. Unless the jurisdictional notice was served and unless the procedural notice were duly served, the assessee may have been effectively prevented from participating in the assessment proceedings and obtaining consideration on its say.
Seen in that light, no useful purpose would be served in keeping the present petition or calling for counter affidavit, at this stage. Also, we are unable to sustain the objection raised by learned counsel for the revenue that the petitioner may avail statutory alternative remedy of appeal. At present, that remedy may only allow this appeal authority to either annull or confirm or modify the assessment order but may not allow the appeal authority to set aside the same and remit the matter to the assessing authority in view of the amended powers of the appeal authority u/s 251(1)(a) of the Act.
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2024 (5) TMI 299 - BOMBAY HIGH COURT
Reopening of assessment u/s 147 against non-existing entity - scheme of the amalgamation and arrangement approved - HELD THAT:- As things stand, the reopening notices issued u/s 148 of the Act impugned in the Petitions are in the name of a non-existing entity. In the affidavit in reply filed also, the stand taken is of the pendency of the SLP. The reassessment orders impugned in the Petitions have been passed u/s 144 of the Act on best assessment basis.
The notices were issued on the email of a consultant of the SEL and, therefore, the notices sent have bounced. Infact in the reassessment orders, it is also mentioned that notices were sent by the AO to DVU for service but the DVU did not respond and in view of this situation, there was no way except to complete the assessment on the basis of material available on record.
We are satisfied that the reassessment orders issued u/s 148 cannot be sustained and the same are hereby quashed and set aside. Consequently, the recovery notices also stand quashed and set aside.
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2024 (5) TMI 298 - ITAT MUMBAI
Levy of penalty u/s 271(1)(c) - concealment of income - assessee while filing the original return of income claimed an incorrect deduction u/s 80GGA in order to reduce his taxable income - it was only after an investigation was carried out by the Department which revealed that Navjeevan Charitable Trust, to whom a donation was made by the assessee, was involved in providing bogus accommodation entries the assessee offered to not claim deduction u/s 80GGA while filing its return in response to the notice issued u/s 148 - as per assessee much before the issuance of notice u/s 148 assessee had withdrawn its claim of deduction in respect of the donation made to Navjeevan Charitable Trust and paid the necessary taxes - HELD THAT:- We find no basis in the findings of the lower authorities that it is only after the issuance of notice u/s 148 of the Act that a fresh return of income withdrawing the claim of deduction u/s 80GGA of the Act was filed and necessary taxes were paid. Accordingly, there is also no basis in the findings of the lower authorities that if notice u/s 148 of the Act had not been issued, the income would have escaped assessment in respect of deduction claimed u/s 80GGA of the Act. Since in the present case, the assessee voluntarily offered the deduction claimed u/s 80GGA of the Act to income tax much before the initiation of proceeding u/s 147 of the Act which resulted in the impugned penalty, we are of the considered view that there is no concealment of income on the part of the assessee justifying levy of penalty u/s 271(1)(c) of the Act. Hence, we delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
Levy of penalty u/s 271(1)(c) - weighted deduction u/s 35(1)(ii) claimed - HELD THAT:- As before the issuance of notice u/s 148 of the Act, the assessee had withdrawn his claim of weighted deduction in respect of donations made to Rural Development Society and paid the necessary taxes along with interest on 25.03.2019. Thus, we do not find any basis in the findings of the lower authorities that income chargeable to tax has escaped assessment and the assessee has concealed the income to reduce his tax liability. Accordingly, we find no basis in the levy of penalty u/s 271(1)(c) of the Act, and therefore, the same is deleted. - Decided in favour of assessee.
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2024 (5) TMI 297 - ITAT MUMBAI
Estimation of income - bogus purchases - whether the AO is justified in making 100% addition of the bogus purchase amount or he should have added only the profit margin earned by the assessee? - HELD THAT:- The Hon’ble Gujarat High Court in the case of N.K. Industries Ltd.[2016 (6) TMI 1139 - GUJARAT HIGH COURT] has held that once it comes to a categorical finding that the amount represents alleged bogus purchases from bogus suppliers it is not incumbent to restrict the disallowance and thereby directed to make addition of 100% of the alleged bogus purchases. The SLP preferred by the assessee against this decision of the Hon’ble High Court has been dismissed by the Hon’ble Supreme Court[2017 (1) TMI 1090 - SC ORDER].
We find that the First Appellate Authority has followed this decision of the Hon’ble Gujarat High Court. As no distinguishing decision has been brought to our notice in favour of assessee, we do not find any reason to interfere with the findings of the Ld. CIT(A). Appeal filed by the assessee is dismissed.
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2024 (5) TMI 296 - ITAT MUMBAI
Reopening of assessment - Reasons to believe - ACIT jurisdiction to issue the notice u/s 148 - notice was issued by another officer (i.e. ACIT) while jurisdiction over the case was with ITO - HELD THAT:- AO had recorded the reasons to believe based on the specific and credible information received from the Investigation Wing of the department which prima facie showed escapement of income. Reasons recorded were duly furnished to the appellant. Since the return of income u/s. 139(1) was filed at an income of Rs. 53,77,300/-. (well above the prescribed monetary limits) the ACIT had jurisdiction to issue the notice u/s. 148 of the I.T. Act. Necessary approval has also been taken from the Competent authority. Subsequently, the case was transferred u/s. 127 from ACIT Circle 1(1), Mumbai to ITO Ward (1)(1), Mumbai. As such the grounds of appeal relating to reopening of assessment and the procedure followed are found to be without merit and hence rejected.
Estimation of income - bogus purchases - HELD THAT:- AO has rightly held that books of accounts are not reliable and, after rejecting the same, made as addition of 30% of the disputed purchase amount. The CIT(A) has sustained the addition to the extent of 12.5% of total disputed purchases. The same is considered reasonable and is therefore upheld.
Assessee appeal dismissed.
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2024 (5) TMI 295 - ITAT MUMBAI
Disallowance of depreciation claimed on the “Goodwill” - Scheme of amalgamation sanctioned - method of accounting for the amalgamation - HELD THAT:- As decided in M/S. KEVA FRAGRANCES P. LTD. [2021 (8) TMI 286 - ITAT MUMBAI] 5th proviso to section 32 of the Act, which is now the 6th proviso to section 32 of the Act, is not applicable to the present case as the amalgamating company did not claim any depreciation on “Goodwill”
Thus the assessee is entitled to claim the depreciation in the year under consideration on “Goodwill”, which is arising on account of the aforesaid amalgamation. In any case, since the year under consideration is the second year of the claim of depreciation on “Goodwill” by the assessee, which has already been allowed to the assessee in the first year of its claim, therefore the entire exercise of determining the eligibility of claim in the year under consideration is merely academic, as in this year the depreciation on “Goodwill” is to be calculated on its opening WDV. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A), and the same is upheld. As a result, the grounds raised by the Revenue are dismissed.
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2024 (5) TMI 294 - ITAT MUMBAI
LTCG - denial of a claim of exemption u/s 54 - new residential house property was purchased only after the lapse of two years from the sale of original property - assessee was a co-owner, having 80% of shares, in an immovable property - assessee deposited the consideration from the sale of the original asset in the Capital Gains Scheme Account - HELD THAT:- As we find that the original return of income filed by the assessee on 01.10.2013 is within the due date prescribed u/s 139(1) of the Act. Further, since in the present case, it is undisputed that the entire sale consideration was deposited by the assessee in Capital Gains Scheme Account on 26.09.2013, therefore, we are of the considered view that the assessee has duly complied with the provisions of section 54(2) of the Act. Thus, we find no basis in the findings of the learned CIT(A) in concluding that the assessee has not filed his return of income u/s 139(1) of the Act and has not deposited the sale consideration in the Capital Gains Scheme Account before the due date of filing return of income u/s 139(1) of the Act.
New house property was not purchased within the period of two years from the date of transfer of the original assetThe process of obtaining the occupation certificate was in process and the developer agreed to procure the occupation certificate at the earliest. Therefore, it needs to be determined whether the residential property purchased by the assessee on 29.09.2014 is a ready-to-move-in flat or an under-construction flat.
As evident that this aspect of the matter was neither examined nor any documentary evidence verified in this regard. Since the examination of the aforesaid aspect is necessary for determining the availability of the benefit u/s 54 of the Act to the assessee, we deem it appropriate to restore this issue to the file of the jurisdictional AO for examination and adjudication of the aforesaid aspect as noted by us. We also direct the assessee to furnish all the necessary documents in support of his claim of entitlement to exemption from capital gains u/s 54 of the Act. The assessee is also directed to furnish all the documents as may be required by the AO for complete adjudication of this issue - Assessee appeal allowed for statistical purposes.
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