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2023 (6) TMI 816 - AT - Income TaxAdmission of additional evidences by CIT(A) - HELD THAT - CIT(A) for admission of additional evidences had relied on the decision rendered in the case of CIT vs. Virgin Securities and Credits P. Ltd. 2011 (2) TMI 207 - DELHI HIGH COURT and concluded that the admission of additional evidences was crucial for the disposal of appeal. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue nor has Revenue pointed that the required procedure was not followed by CIT(A) before admission of additional evidences - no reason to interfere with the order of CIT(A) - Decided against revenue. Addition on account of delayed deposit of PF/ESI - HELD THAT - AR has fairly submitted that the issue in the present ground is covered against the assessee by the decision of Checkmate Services Pvt. Ltd. ( 2022 (10) TMI 617 - SUPREME COURT ) - we uphold the action of AO and set aside the order of CIT(A) on this ground. Disallowance u/s 14A r.w.r. 8D - Mandation of recording satisfaction - assessee had suo moto disallowance - HELD THAT - CIT(A) while deciding the issue has noted that suo moto disallowance made by assessee was not found to be defective by AO and no adequate satisfaction as mandated u/s 14A(2) of the Act was recorded by AO before invoking Rule 8D. Before us, no fallacy in the findings of CIT(A) to the extent of his recording a finding that no proper satisfaction was recorded by AO before invoking Rule 8D has been pointed out by Revenue.Once the procedure prescribed under Section 14A(2) r.w. Rule 8D has not been followed by Revenue then in that case the Revenue cannot proceed to work out the disallowance on ad hoc basis over and above that has been made by assessee. We, therefore, direct the AO to restrict the disallowance u/s 14A as suo-moto made by assessee. Decided against revenue. Compensation received by the assessee - Short Term Capital Gain or income from other sources - HELD THAT - We find that CIT(A) after placing reliance on the decision of Vodafone 2012 (1) TMI 52 - SUPREME COURT has held that the compensation received by the assessee was not merely for transaction of one or more tangible rights but was receipts of bundle of rights as investing partner as the whole profit making process was impaired - assessee was never engaged till date in insurance business with any other party and genuineness of the transaction was beyond the shadow of doubt. As held compensation received by the assessee was akin to liquidated damages and therefore in the nature of capital receipts. He has for the reasons noted in the order and which have been reproduced hereinabove has held the AO s attempt to bring the compensation in the category of assets described u/s 55(2)(a) of the Act for taxation as Short Term Capital Gains was erroneous. No fallacy in the findings of CIT(A) has been pointed out by Revenue. Deduction u/s 80IB - new unit in Jammu (Sambha) backward district - close connection between the assessee and Berger Paints Co. to whom most of the sale were made from Jammu Division and assessee was not generating much profits in the business from other business whereas the return generated from Jammu Division was higher than the total income of the Manufacturing and Processing business - HELD THAT - CIT(A) has held that AO was not justified in invoking the provision of Section 80IB (10) of the Act as the foundational facts were not supplied by the AO and the action of AO was not in accordance of law. He has further given a finding that on verifying the detailed working submitted by assessee, the assessee has demonstrated that the Jammu Unit for which the assessee has claimed deduction was operating at lowest rate of profit and sales made to Berger Paints was at lower price as compared to other unrelated customers. He has further given a finding that the deduction was allowed to the assessee in scrutiny assessment proceedings in earlier years on similar facts. Before us, Revenue has not pointed to any fallacy in the findings of CIT(A) nor has placed any material on record to demonstrate that the observations of CIT(A) while allowing the claim of the assessee is not based on the material on record. Decided against revenue.
Issues Involved:
1. Admission of additional evidence by CIT(A). 2. Deletion of addition on account of delayed deposit of PF/ESI. 3. Disallowance under Section 14A of the Income Tax Act. 4. Deletion of addition on account of Short Term Capital Gain. 5. Denial of deduction under Section 80IB of the Income Tax Act. Summary: Issue 1: Admission of Additional Evidence by CIT(A) The Revenue challenged the CIT(A)'s action in admitting additional evidence. The Tribunal found that CIT(A) had called for two remand reports from the AO before admitting the additional evidence and followed the procedure under Rule 46A. The Tribunal upheld CIT(A)'s decision, finding no fault in the procedure followed. Thus, the ground of Revenue was dismissed. Issue 2: Deletion of Addition on Account of Delayed Deposit of PF/ESIThe AO added Rs. 35,121/- due to delayed deposit of PF/ESI, which CIT(A) deleted based on the Delhi High Court's decision in AIMIL. However, the Tribunal noted that the issue was now covered against the assessee by the Supreme Court's decision in Checkmate Services Pvt. Ltd. Consequently, the Tribunal upheld the AO's action and allowed the Revenue's ground. Issue 3: Disallowance under Section 14A of the Income Tax ActThe AO disallowed Rs. 86,12,120/- under Section 14A, which CIT(A) restricted to Rs. 20,00,000/-. The Tribunal found that the AO had not recorded adequate satisfaction before invoking Rule 8D and that the suo moto disallowance of Rs. 7,50,000/- by the assessee was not defective. The Tribunal directed the AO to restrict the disallowance to Rs. 7,50,000/-, dismissing the Revenue's ground and allowing the assessee's cross-objection. Issue 4: Deletion of Addition on Account of Short Term Capital GainThe AO treated Rs. 4,34,31,471/- received by the assessee as Short Term Capital Gains, which CIT(A) deleted, considering it a capital receipt. The Tribunal upheld CIT(A)'s decision, noting that the compensation received was for the transfer of a bundle of rights and was akin to liquidated damages, thus not taxable as capital gains. The Tribunal found no reason to interfere with CIT(A)'s order and dismissed the Revenue's ground. Issue 5: Denial of Deduction under Section 80IB of the Income Tax ActThe AO reduced the assessee's claim of deduction under Section 80IB from Rs. 1,57,42,128/- to Rs. 38,77,450/-, invoking Section 80IB(10). CIT(A) reversed the AO's decision, finding it based on hunch and suspicion without material evidence. The Tribunal upheld CIT(A)'s order, noting that the AO had not pointed out any defect in the assessee's records and that the sales to related parties were at lower rates. The Tribunal dismissed the Revenue's ground. Combined Result:The appeal of Revenue for A.Y. 2008-09 was partly allowed, the appeal of Revenue for A.Y. 2014-15 was dismissed, and the Cross Objection of the assessee for A.Y. 2008-09 was allowed. Order pronounced in the open court on 16.06.2023.
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