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Income Tax - Case Laws
Showing 321 to 340 of 168845 Records
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2024 (11) TMI 247
Unsecured loan received u/s 68 - ignorance to reply filed by the petitioner - HELD THAT:- As it is not in dispute between the parties that the petitioner filed the reply within the time granted by the respondent AO. It is true that the petitioner has sought further time to file the remaining information which was in process of being collected by the petitioner. AO ignoring the reply filed by the petitioner passed the impugned assessment order stating that the petitioner has not complied with the show cause notice. The respondent AO has also not considered the detailed reply filed by the petitioner.
The impugned assessment order is quashed and set aside and the matter is remanded back to the AO to pass a fresh de novo order.
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2024 (11) TMI 246
Addition u/s 68 - sale proceeds of the share on account of accommodation entry - sale of shares off market through a shell company - HELD THAT:- The assessee had sold the part of the shares purchased on 08.02.2010 during the Financial Year 2011-12 and the balance share being 1439 were sold in the assessment year under consideration. It was also observed by the Tribunal that the respondent-assessee did not claim the long term capital loss in the computation of income and therefore, there is no loss of revenue.
The bank statement submitted by the assessee during the course of assessment proceedings reflected that the transactions were carried out by the assessee on payment of STT.
Tribunal taking into consideration the relevant documents such as debit note etc. filed by the assessee before the AO held that the transactions of the shares carried out by the assessee is genuine on the factual position and deleted the addition made by the Assessing Officer. Decided in favour of assessee.
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2024 (11) TMI 245
Validity of assessment order passed - no adequate opportunity of hearing by the respondent-Assessing Officer - denial of principle of natural justice - HELD THAT:- As in the impugned assessment order respondent-Assessing Officer has not even referred to the replies dated 23.03.2022 and 25.03.2022 filed by the petitioner nor he has referred to the show-cause notice dated 27.03.2022 issued by him along with draft assessment order.
Thus, we are of the opinion that the impugned order dated 29.03.2022 of not providing opportunity of hearing results into breach of principle of natural justice. The impugned order is accordingly quashed and set aside. The matter is remanded back to the Assessing Officer to pass a fresh de novo order.
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2024 (11) TMI 244
Qualification as ‘informant’ under the Income Tax Informants Reward Scheme, 2018 - Whether information provided by the petitioner could be said to fall within the meaning of “undisclosed income and wealth”? - violation of the provisions of 269SS and 269T noted - HELD THAT:- Cash deposits as well as the aspect of repayment of deposits in purported violation of Sections 269SS and 269T appear to have been clearly taken note of by the AO in the course of the assessment proceedings itself. This leads us to the inevitable conclusion that the cash deposits and repayment thereof were aspects which were duly noticed and stood disclosed in the assessment proceedings. It would consequently be incorrect to hold that the information provided by the petitioner could be said to fall within the meaning of “undisclosed income and wealth” and which forms the basis for reward under the 2007 Guidelines.
The claim of the petitioner for a reward also fails to satisfy the test of detection of “substantial tax evasion” and which constitutes a sine qua non for a reward being provided under the 2018 Scheme.
Once it is found that the cash deposits, repayment of loans and other cash transactions stood duly reflected in the books of account, were examined in the assessment proceedings and were also scrutinized by the AO, it cannot possibly be said that the information which was proffered by the petitioner was one which was not otherwise available with the respondents.
We consequently find ourselves unable to hold in favour of the writ petitioner bearing in mind the indubitable fact which emerges from the record and establishes that the information proffered was already in the knowledge of the respondents and that the material provided by the petitioner did not pertain to undisclosed income. The material furnished by the petitioner also cannot be viewed as having triggered the discovery of a scheme of substantial tax evasion.
In fact, the findings as rendered by the Tribunal are clearly to the contrary and dispel the allegation of undisclosed income and tax evasion.
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2024 (11) TMI 243
Estimation of income - bogus purchases - CIT(A) partly allowed the appeal of the Assessee by restricting the addition to 16.5% of amount disallowed by the A.O. as an additional taxable income without giving any benefit of expenses towards the same - HELD THAT:- In the absence of any evidences or the argument in contravention of the findings and the conclusion of the Ld. CIT(A), we find no error or infirmity in the order of the Ld. CIT(A). Accordingly, finding no merit in the Grounds of appeal of the Assessee, we dismiss the Grounds of Appeal of the Assessee.
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2024 (11) TMI 242
Addition u/s 69C r.w.s. 115BBE - assessee failed to substantiate with evidence to his satisfaction regarding the difference between purchases shown in its Profit and Loss Account and the TCS reflected in Form 26AS - Low income disclosure from receipts (liquor) on which TCS has been deducted - HELD THAT:- A perusal of the sample bills shows that the invoices were raised in the names of the sister concerns of the assessee whereas the PAN of the assessee has been quoted instead of the PAN of the purchasers.
The payments for such invoices are also reflected in some of the invoices which are the bank accounts of the sister concerns. These vital documents were completely ignored by the lower authorities although these were produced before them.
We deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity of being heard to the assessee to substantiate that the purchases are in fact made by the sister concerns of the assessee for which they have made the payments from their bank accounts and that such purchases are reflected in their Trading and Profit and Loss Accounts.
AO if so considers fit, may, ask the assessee to furnish the required details, which according to assessee are voluminous, before the verification unit and call for a report from the verification unit.
Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The assessee is also hereby directed to appear before the Assessing Officer on the appointed date and file the requisite details without seeking any adjournment under any pretext, failing which the Assessing Officer is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2024 (11) TMI 241
Disallowance u/s 43CA - difference between the stamp duty value and the agreement value in respect of Flat - as argued Provisions of Sec. 43CA cannot be made applicable to the present assessment year as no exchange had taken place during year - AO held that on the one hand, the assessee submitted that the flat was allotted to the party in the years 2009 and 2010, while on the contrary, the assessee submitted a copy of the allotment letter, in respect of the same flat, which dates to 05/05/2011, thus contradictions raise doubts on the genuineness of the assessee’s claim - as per CIT(A) in this case, there was only one registered sale agreement that was executed during the year under consideration, therefore the value adopted by the stamp duty authority as on the date of the agreement is to be adopted as deemed sale consideration
HELD THAT:- Agreement for sale executed on 30/04/2011 was the principal agreement honoured by the parties for the sale of Flat no.C-1103. Thus, even though the said agreement was ultimately registered in the year under consideration, in light of the provisions of section 43CA(3) we are of the considered view that the stamp duty value as on the date of the agreement for sale, i.e. 30/04/2011 be considered as the full value of consideration for computation of profits and gains of the assessee from the transfer of Flat.
Further, the provisions of section 43CA(4) of the Act are also satisfied in the present case, as the earnest money of INR 2 lakhs was paid by the purchaser vide cheque No. 272834 dated 26/04/2011. Consequently, we set aside the impugned order and delete the addition made by considering the stamp duty value on the date of registration of the agreement.
We direct the AO to compute the profits and gains from the transfer of the impugned flat in light of the provisions of section 43CA(3) of the Act by considering the stamp duty value as on the date of agreement for sale, i.e. 30/04/2011. We further direct that no order shall be passed without affording reasonable opportunity of being heard to the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.
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2024 (11) TMI 240
Treating the loss arising from Forward Foreign Exchange Contracts (“FCC”) as a short-term capital loss - assessee is registered in India as a Foreign Portfolio Investor and for safeguarding itself from foreign currency fluctuation risk, the assessee entered into FCC with HDFC Bank - HELD THAT:- We find that while considering a similar issue pertaining to the nature of income from settlement of forward cover taken in foreign exchange, the coordinate bench of the Tribunal in Citicorp Investment Bank (Singapore) Ltd [2012 (9) TMI 44 - ITAT MUMBAI] held that profit earned by a Singaporean bank on termination of forward contracts entered into for safeguarding it from foreign exchange fluctuation in respect of debentures purchased in India would be a capital gain exempt under Indo-Singaporean DTAA.'
Also see D.B. International (Asia) Ltd. [2013 (7) TMI 1109 - ITAT MUMBAI] held that the gain from forward foreign exchange contract has to be treated as capital gain. As a natural corollary the loss arising from such contract has to be treated as capital loss.
Thus, we find no infirmity in the impugned order in considering the loss on rollover/cancellation of FCC to be short-term capital loss eligible for carry forward under the head “capital gains”. Accordingly, grounds raised by the Revenue dismissed.
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2024 (11) TMI 239
Powers of the Commissioner u/s 251 - CIT(A) power in enhancing the income - CIT(A) power to add a new source of income which has not been considered by the AO - CIT(A) disallowed the claim of assessee u/sec.80P and directed the AO to tax the net profit declared by assessee in the Profit and Loss Account - HELD THAT:- As observed that the impugned Profit and Loss account considered by the CIT(A) was not part of the record of Assessment Proceedings as it was never filed before the AO. Therefore, by considering the figure of “Net Profit” mentioned in the impugned Profit and Loss Account the Ld.CIT(A) has travelled beyond the jurisdiction granted by section 251 as the impugned profit and Loss account was never part of the Assessment Record. CIT(A) has erred in giving the directions to the Assessing Officer to assess the “Net Profit”.
We derive support from the Hon’ble Supreme Court’s analysis of Section 31 of the Income Tax Act 1922 in the case of Rai Bahadur Hardutroy Motilal Chamaria [1967 (4) TMI 8 - SUPREME COURT]. The Section 31 of the Income Tax Act 1922 and the Section 251 of the Income Tax Act 1961 are exactly identical except the ‘Explanation’ which is inserted in the Income Tax Act 1961. However, we have already interpreted the effect of the ‘Explanation’ to section 251. Similarly, we find support from case of Vijay Builders [2015 (2) TMI 1122 - ITAT PUNE] wherein the ITAT has followed the Hon’ble Supreme Court’s decision in the case of CIT vs Shapoorji Pallonji Mistry [1962 (2) TMI 12 - SUPREME COURT]
In the case under consideration the impugned source of income which was ‘Net Profit’ shown in the impugned Profit and Loss Account was never before the Assessing Officer. Hence the Assessing Officer had not applied his mind on the Taxability/ non taxability of the impugned ‘Net Profit’, hence the Ld.CIT(A) had no jurisdiction to consider the said amount of ‘Net Profit’ and enhance the income of the Assessee.
CIT(A) has erred in directing the AO to tax the impugned Net Profit and erred in enhancing the income of the assessee. Accordingly, the AO is directed to delete the addition which was directed by Ld.CIT(A). In the result the ground number 1 raised by the Assessee is allowed.
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2024 (11) TMI 238
Reopening of assessment - assessee was not registered u/s. 12A/12AA of the Act, the assessee was not entitled to exemption u/s. 11 of the Act and due to large surplus, the assessee has not applied the same u/s. 11(2) of the Act which was an allowable accumulation - HELD THAT:- There can be no reassessment merely for the reason of non registration of a Trust or Institution. In the present case in hand, there is no iota of doubt that the reassessment was initiated for non registration and the other reasons specified are consequential to such non registration or rather to say for non fulfillment of the conditions due to the non registration. The ld. AR has extensively placed reliance on the decision of Karnataka State Welfare Fund [2022 (1) TMI 654 - KARNATAKA HIGH COURT] which has upheld the order of the Tribunal, quashing the reassessment order for the reason that it is violative of the second and third proviso to section 12A(2) of the Act.
The assessee’s case would not fall under the 3rd proviso to section 12A of the Act where it is not the case of the Revenue that the registration of the assessee Trust was refused or granted and cancelled at any point in time, the assessee ought to get the benefit of the 2nd proviso to section 12A of the Act where reopening merely for non registration is not warranted as per the Act. The ld. AR has also relied on the first proviso to section 12A of the Act where the registration has been granted u/s. 12AA of the Act then the provision of section 11 and 12 of the Act shall apply to the assessment year preceding the assessment year for which the assessment proceedings are pending before the ld. A.O. as on the date of registration along with the cumulative condition that the objects and activities of the Trust remains the same for such preceding assessment year.
Here in this case, the assessment proceeding commenced on issuance of the notice u/s. 148 of the Act dated 28.09.2018 and the date of registration was the next day, i.e., 29.09.2018, which implies that the assessment proceeding for earlier years were pending before the ld. A.O. as on the date of such registration, thereby concluding that the provisions of section 11 and 12 of the Act shall apply to income held by the assessee Trust of any assessment year, preceding the assessment year in which the registration was granted. The ld. AR has also placed reliance on the decision of Shree Shyam Mandir Committee [2017 (10) TMI 1450 - RAJASTHAN HIGH COURT] which held that the proviso to section 12A(2) of the Act inserted from 01.10.2014 has retrospective effect.
On a conjoint reading of the provisions, the CBDT Circular No.1/2015 and the decisions relied upon the assessee, we deem it fit to hold that the reassessment proceeding is bad in law as it is contrary to the proviso to section 12A(2) of the Act and, therefore, liable to be quashed. Ground no. 3 raised by the assessee is hereby allowed.
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2024 (11) TMI 237
Disallowance of provision for foreign exchange fluctuations and loss on forward contract - Applicability of Section 43(5) regarding speculative transactions - HELD THAT:- The Forward Contracts (Regulation) Act, 1952 ('FCRA') defines 'goods' as "every kind of movable property other than actionable claims, money and securities." Since the provisions of section 43(5) of the Act apply only to transactions in 'commodity', it is respectfully submitted that the provisions of the said section are not at all applicable in the present case for the simple reason that foreign currency is not a trading commodity.
We note that in order to be a 'speculative transaction', there should be a contract for purchase or sale of a commodity, including stocks and shares and such contract should be settled otherwise than by actual delivery or transfer of the commodity. In other words, the transaction must be settled on a net-net basis, whereby the difference between the price prevailing on the settlement date and the contracted price is paid/ received by the parties to the contract.
In the instant case of the assessee the contracts are settled by actual delivery and not on a net-to-net basis and hence the same does not fall within the meaning of 'speculative transaction' as mentioned in section 43(5) of the Act.
As respectfully following the decision of Woodward Governor India (P.) Ltd [2009 (4) TMI 4 - SUPREME COURT] we do not find fault in the order of the CIT(A) in deleting the disallowance made by the AO in the reassessment order. Therefore, we are of the considered view that both the provision for foreign exchange fluctuations and loss on forward contract are allowable as expenditure in the impugned year and hence we uphold the order of the CIT(A) and dismiss the appeal of the revenue.
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2024 (11) TMI 236
Addition made u/s 69C - unexplained expenditure - reliability of the digital images found from the phone of partner of the assessee-firm - according to Ld A.R, they are dumb documents and hence no credence should have been given to them - HELD THAT:- We are of the view the documents, being loose papers, should be classified as dumb documents only and the AO could not have placed reliance on these documents in order to make the impugned additions in both the years under consideration. In the case of Common Cause vs. UOI [2017 (1) TMI 1164 - SUPREME COURT] the entries in loose papers/sheets are irrelevant and inadmissible as evidence. It was further held that “such loose papers” are not books of account and the entries therein are not sufficient to charge a person with liability.
In the case of CIT vs. Lavanya Land (P) Ltd [2017 (7) TMI 141 - BOMBAY HIGH COURT] it was held that where entire decision is based on huge amounts revealed from seized documents but not supported by actual cash passing hands, no addition can be made.
In the instant case also, the AO has drawn presumptions that the image files and Excel sheets represent import of goods by the assessee. However, the said presumption is not supported by any other evidence to prove that the assessee has actually imported the goods mentioned in the above said files.
We hold that the AO could not have made the impugned additions in both the years on the basis of image and Excel files, which were not supported by the corroborating materials. Documents found in the phone of the partner of the assessee-firm cannot be considered to be credible evidence which would support the addition made by the AO. Decided in favour of assessee.
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2024 (11) TMI 235
Assessment made u/s 153A - approval granted u/s 153D - HELD THAT:- From the assessment order under appeal for AY 2015-16 it can be noticed that the approval has been granted by the JCIT through common communication - all the approvals have been granted through a common approval for at least 7 cases in one go were provided by the Ld. JCIT through a common communication. The approval provided through communication has been found to be mechanical and without application of mind.
We hold that the approval granted by the JCIT u/s 153D for the AY 2015-16 is bad in law and consequently the assessment made u/s 153A pursuant to the approval granted u/s 153D of the Act is also bad in law. Thus, the assessment framed by the AO u/s 153A/143(3) dated 30.12.2016 for the AY 2015-16 is hereby quashed.
Addition made u/s 10(38) - We observe that the Ld.CIT(A) rejected the request on the ground that the denial of opportunity of cross examination of the witness does not amount to violation of principles of natural justice. The assessee is aggrieved from above stands taken by the CIT(A) as the orders relied upon in support thereof are not applicable to the case as the sole evidence against assessee is the statement of the Managing Director of the broker entity.
It is a primary evidence used against the assessee and in view of the decision of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] the assessment framed without providing opportunity to cross examine the witness whose statement the AO is relied on is bad in law.
In the case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] the Hon’ble Supreme Court held that failure to give the assessee the right to cross examine witnesses whose statements are relied upon results in breach of principles of natural justice and it is a serious flaw which renders the order in nullity. We further observe that the assessment for AY 2015-16 was also framed without providing cross examination of the broker whose statement was relied on and even the CIT(A) also did not provide for cross examination for AY 2015-16 and 2016-17 in spite of the assessee’s request.
We, therefore, observe that the ratio of the decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries (supra) squarely applies. Thus, we hold that the addition made by the AO based on the statement of the Managing Director of the Broker Company which was relied on without providing cross examination despite the request of the assessee is certainly in violation of principles of natural justice and consequently the addition based on such statement cannot be sustained. Therefore, the AO is directed to delete the addition made u/s 10(38) of the Act for the assessment years 2015-16 and 2016-17.
Addition made on account of commission at 0.2% is also directed to be deleted.
Disallowance of expenses incurred on account of business promotion expenses which have been disallowed by the AO for failure to produce bills and vouchers - We observe that the assessee has submitted the copy of ledger account of expenses and produce complete books of account. However, the AO without finding any defect in the books of account disallowed the expenses merely for non production of bills and vouchers. We observe that the Hon’ble Delhi High Court in the case of PCIT Vs. R.G. Buildwell Engineers Ltd. [2017 (12) TMI 1614 - DELHI HIGH COURT] which was approved by the Hon’ble Apex Court [2018 (10) TMI 252 - SC ORDER] held that no disallowances can be made without rejecting the books of account. Following the decision, we delete the disallowance made by the AO.
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2024 (11) TMI 234
Addition as income from house property - estimation of rent for the purpose of let-out - case of the AO that the assessee is receiving lower rent from one party when compared to rental income received from other two parties - as per assessee property is leased out for a continuous long period for the occupation of tenants and therefore no deemed rent can be invoked as per section 23(1)(a) - HELD THAT:- On similar facts, in assessee’s own case [2020 (11) TMI 1124 - ITAT VISAKHAPATNAM] for the A.Y. 2015-16 this bench has dismissed the appeal of the revenue by relying on the decision of Oberoi Hotels Pvt., Ltd [2016 (1) TMI 169 - ITAT KOLKATA]
The case relied on the Ld. DR could not be applied to the instant case as the co-owners themselves are the Directors of the lessee company and hence related.
In the instant case, the lease has been done to the third non-related parties based on commercial consideration. The portion let out to M/s. A.S. Raja Trust which is a non-profit organisation is meagre and incidental to the hospital activities of M/s. Visakha Hospitals & Diagnostics Limited. It was explained that M/s. A.S. Raja Trust operates a blood bank as a non-profit organisation which is incidental to the hospital run by M/s. Visakha Hospitals & Diagnostics Limited which occupies major portion of the let-out area.
As submitted by the Ld.DR the decision of the Tribunal for the earlier assessment year is pending before Hon’ble High Court of Andhra Pradesh for adjudication. The order of the Tribunal, Visakhapatnam is neither stayed nor reversed by the Hon’ble High Court, therefore, we place reliance on the decision of the Tribunal, Visakhapatnam Bench while allowing the ground raised by the assessee in the appeal. Appeal of the assessee is allowed.
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2024 (11) TMI 233
Surcharge levied where the total income is less than Rs. 50 lacs - CIT(A) has contended that since the assessee’s tax liability would fall under the maximum marginal rate, surcharge would be applicable in the case of assessee as per section 2(29) - assessee’s contention that as per the Finance Bill, 2022 surcharge could be applicable only when the assessee in case of Individual, Hindu Undivided Family or Association of Person or Body of individuals having a total income, exceeding Rs. 50 lacs of such income tax - HELD THAT:- Only when the total income exceeds Rs. 50 lacs then surcharge is leviable, where the rate of surcharge is fixed according to the slab of income. During the year under consideration, the income of the appellate was assessed by the ld. A.O./CPC at Rs. 6,73,590/- which is less than Rs. 50 lacs and, therefore, levying of surcharge would not be applicable for the same. We, therefore, direct the ld. A.O. to delete the surcharge levied in the hands of the assessee Trust. Ground no. 2 raised by the assessee is hereby allowed.
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2024 (11) TMI 232
CIT(A) dismissing the appeal of the assessee ex-parte - there was non compliance on the part of the assessee to the various notices issued by him - HELD THAT:- It is a fact that there was a non-compliance before the CIT(A). However, there was a reasonable sufficient cause for non-compliance. Also, as per Section 250(6) of the Act, CIT(A) has to state the points for determination and the reasons for his decision, meaning thereby CIT(A) has to discuss the merits of the addition. In this case, assessee has raised the issue that Specified Domestic Transactions u/sec.92BA were excluded by Finance Act, 2017. Admittedly, TPA are only with reference to Specified Domestic Transactions. This issue has not been discussed by the ld.CIT(A).
As held in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra[2016 (5) TMI 290 - BOMBAY HIGH COURT] as noticed that the powers of the CIT(A) is coterminous with that of the AO i.e. he can do all that AO could do. Therefore just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.
The order of the CIT(A)[NFAC] is set-aside to CIT(A) for denovo adjudication. The ld.CIT(A) shall provide opportunity of hearing to the assessee. Accordingly, grounds of appeal raised by the assessee are allowed for statistical purpose.
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2024 (11) TMI 231
Gross profit estimation on undisclosed turnover - enhancement of assessment by estimating higher amount of gross profit u/s 251(1)(a) - CIT(A) justification in enhancing the gross profit ratio from 8% as estimated by the AO to 25% - HELD THAT:- Since the facts lie in a narrow compass, with the able assistance of the learned Departmental Representative on our own, the issues are being delved into. We find that the AO estimated the gross profit @ 8% on unrecorded turnover and such profit rate was enhanced by the CIT(A) to 25% on his own without bringing on record any notice for enhancement as required under section 251(2) of the Act and thus such action is unsustainable and hence quashed to the extent of increase in the rate of gross profit.
Accordingly, we uphold the order passed by the AO whereby he has estimated profit @ 8%. Since no other ground except than that of enhancement is taken before us, it is not required to comment on the reasonableness of estimation or any other addition perpetrated by the AO. Thus, all the grounds raised by the assessee are allowed.
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2024 (11) TMI 230
Validity of Reopening Proceedings u/s 147 - information was received from investigation wing, Ahmedabad that the assessee has booked tax loss trade in share - HELD THAT:- Reopening in this particular case cannot be held as change of opinion and the reopening u/s. 147 is valid. The contention of the ld. A.R. that the objections filed by the assessee company suffers from factual and legal infirmities also cannot be tenable as the Assessing Officer has given the independent finding in respect of trading in shares particularly that of M/s. Radhe Developers Ltd.
Therefore, the decision of NDTV [2020 (4) TMI 133 - SUPREME COURT] is not applicable in assessee’s case as though the assessee has disclosed the trading, it has not specifically given the details such as bifurcation of the scrip trading in respect of M/s. Radhe Developers Ltd. at the earlier reopening stage. Thus, the reopening is valid.
As regards relates to the contention that prosecution in question was duly recorded in books of account cannot the sole criteria for quashing the reopening as the reopening u/s. 147 is invoked in respect of investigation report as well as the independent finding/reasons given by the AO in respect of escapement of income as per AO’s belief. The contention of the ld. A.R. is that he was not given cross-examination of the persons whose statement was recorded and relied upon is also does not stand as the Assessing Officer issued the notice u/s. 148 and initiated proceedings u/s. 147 and given independent findings which was not wholly and solely based on the statements.
The decisions in case of NDTV [2020 (4) TMI 133 - SUPREME COURT], Calcutta Discount [1960 (11) TMI 8 - SUPREME COURT] as well as Parshuram Potteries [1976 (11) TMI 1 - SUPREME COURT] and Bombay Stock Exchange [2014 (6) TMI 444 - BOMBAY HIGH COURT] will not be relevant in assessee’s case as the reopening u/s. 147 was on the issue of trading in scrip of M/s. Radhe Developers India Ltd. which is more specific centric and cannot be said that the reopening was just a second opinion or afterthought of the Assessing Officer. Thus, the Assessing Officer is justified in reopening the assessment. Decided against assessee.
Disallowance of Loss in Trading of Shares - AO has not co-related with the trading as well as the price fluctuation of M/s. Radhe Developers Ltd. as any connection with the assessee’s syncronised manner of trading and the link which establishes the assessee’s involvement in the fluctuation of the price has not been categorically mentioned in the assessment order. The CIT(A) has also not given any independent finding after verifying that whether there is an actual syncronised trading between the assessee and that of company scrip i.e. M/s. Radhe Developers Ltd. which has a variation/fluctuation in its pricing at the time of purchase as well as at the time of sale. The details given by the assessee before us was also before the CIT(A) as well as before the Assessing Officer. From the perusal of these orders, it can be seen that the Assessing Officer as well as CIT(A) has not given any detailed finding as to whether the assessee has actively involved in the price manipulation during the assessment year 2011-12. The SEBI report as well as the suspension of the Bombay Stock Exchange is in the year 2015 giving the details of 2012. The involvement of assessee’s transaction has not been specifically pointed out either in the assessment order or in the order of the CIT(A). Thus, on merit the disallowance made by the Assessing Officer does not sustain. Decided against revenue.
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2024 (11) TMI 229
Disallowance u/s. 40(a)(i) of the depreciation claim by the assessee on computer software - HELD THAT:- Disallowance of the depreciation claimed by the assessee u/s. 40(a)(i) for the reason that the assessee has failed to deduct tax at source on the capitalised software. These facts being identical to the facts pertaining to AY 2014-15 [2024 (6) TMI 876 - ITAT BANGALORE] we are of the considered view that the ratio laid down in the above decision of the coordinate bench is applicable for the year under consideration also. Accordingly, respectfully following the said decision of the coordinate bench we hold that no disallowance u/s. 40(a)(i) can be made towards depreciation on computer software on the ground that no TDS was deducted on the payments made towards computer software. The grounds raised by the assessee in this regard are thus allowed.
Addition made u/s. 28(iv) - AO noticed that the assessee has received assets free of cost from AEs located outside India to whom the assessee is providing software development services - HELD THAT:- From the plain reading of the section 28(iv) it is clear that if a benefit in the nature of income is arising from business the same shall be taxable under the head profits and gains from business or profession. Therefore the limited question before us is whether import of assets free of cost for testing purposes is a benefit in the nature of income arising from the business of software development to the assessee.
In the present case assessee received certain equipments free of cost for the purpose of testing the compatibility of the software developed by the assessee in those equipments. It is an undisputed fact that these equipments are either returned or destroyed once the testing is completed (refer relevant observations of the CIT(A) in this regard). Accordingly there is no dispute that the impugned assets are not made available to the assessee permanently to give any benefit of enduring nature as the assets are either returned or destroyed. Further considering the nature of asset and the purpose for which it is imported, there is merit in the contention that these assets in isolation cannot be used for any purpose to derive any benefit since these are testing equipments or prototypes. Now coming to the issue of whether the import of assets free of cost is resulting in a benefit in the nature of income to the assessee, it is relevant to check if the impugned transaction would have otherwise resulted in a benefit in the nature of income to the assessee.
The assessee is in the business of providing software development services to its AEs only. The arm's length pricing of the said services have already been tested by the TPO and the dispute on the pricing is resolved through MAP with the competent authorities of India and Korea wherein the cost of indirect benefits received by the assessee should have been embedded while arriving at the margin. Therefore it cannot be alleged that the price charged towards the software development services is reduced/adjusted by the assessee against the benefit of assets imported free of cost to justify addition under section 28(iv) and that the revenue has not brought anything on record to substantiate such a contention. Even assuming that there is nexus between the price charged towards rendering of services and import of assets free of cost the addition in our view could be done through a TP adjustment towards price charged for software development and in assessee's case the price is already agreed under MAP. Therefore there is no justification for making the addition under section 28(iv) again on the ground that had there been a cost paid towards import of these assets the same would have resulted in increased income to the assessee since the billing is done on cost plus basis.
AO is not correct in making addition under section 28(iv) of the Act given that the assets imported free of cost for testing purposes are either returned or destroyed by the assessee and that the pricing towards software development services rendered are agreed under MAP. Decided against revenue.
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2024 (11) TMI 228
Reopening u/s 147/148 - notice after the expiry of 4 years - allegation regarding the failure on the part of assessee was noted by the AO qua the deposits in bank accounts of the assessee - HELD THAT:- As present case was earlier assessed u/s 143(3) and during the original proceedings, there was no allegation of non-compliance on the assessee.
There were observations by the AO in the original assessment proceedings regarding turnover of the assessee certain disallowance on account of low GP rate and lump sum addition towards certain expenses have been carried out, therefore, it is evident that the books of accounts and relevant material was undergone the scrutiny by the AO. In such a situation, it cannot be said that the requisite information was not furnished by the assessee in the original assessment and there was any failure on this count on the part of assessee.
Herein, we may take support from the order in the case of New Delhi Television Ltd. [2020 (4) TMI 133 - SUPREME COURT] wherein it is held that the assessee is obligated to dislodge the primary facts, it is neither required to disclose the secondary facts nor required to give any assistance to the AO by discloser of other facts, it is for the AO to decide what inference are to be drawn from the facts before him.
We are of the considered opinion that in present case the revenue, though have alleged so in the reasons to believe, but unable to substantiate any failure on the part of assessee to disclose fully & truly all material facts necessary for his assessment.
We, thus, find force in the contentions raised by the Ld. AR through the first ground of the present appeal, that the reopening proceedings have been initiated against the assessee beyond a period of 4 years, wherein an assessment u/s 143(3) was already completed on 19.11.2016, therefore, the instant case is squarely falls withing the scope of the provisions of first proviso to section 147, but the action of Ld. AO was not in harmony with the said provision, accordingly, the jurisdiction assumed by the Ld. AO was not tenable in the eyes of law, therefore, the assessment order passed u/s 147 r.w.s. 144 r.w.s. 144B dated 26.03.2022 on the foundation of such invalid jurisdiction has not sanctity, thus, unsustainable and is liable to be annulled. Assessee appeal allowed.
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