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Income Tax - Case Laws
Showing 401 to 420 of 168944 Records
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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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2024 (11) TMI 227
Addition made u/s 68 - share capital and share application money received from 13 share applicants - No evidences to prove the identity and creditworthiness of the share applicants and genuineness of the transactions - HELD THAT:- All documents speaks loud enough that identity and creditworthiness of alleged share applicants is established beyond doubt. Genuineness of the transactions is also proved because these companies have sufficient net worth to make the investment and they have applied in a NBFC company for better returns. Once, the assessee has discharged his primary onus, the burden of proof shifts on to Revenue authority and observations of AO that they are not satisfied with these details will not serve the purpose. At some part of the assessment order the AO has even observed that the assessee had filed submissions and some voluminous paper work which was of no use other than to increase the volume of the assessment report of the assessee company.
We fail to find any justification in such observation of AO. Rather than mentioning the documents as voluminous paper work, he/ she should have move ahead to examine the correctness of those documents and should have discussed the same in the assessment order.
General observation that the AO is not satisfied with the documents filed by the assessee cannot meet the requirement of law. We on perusal audited the balance sheet of the alleged share applicant companies notice that they have sufficient net worth in the form of share capital and accumulated reserve and surplus to explain the source of investment made in the assessee company.
Even the provisions which entitles the revenue authorities to examine the case where a company not being a company in which public are substantially interested receive from any person in any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such shares as exceeds the fair market value of the share to be treated as income of other sources u/s 56(2)(VIIB) of the Act has been inserted by the Finance Act, 2012, with effect from 1st April, 2013 and is therefore not applicable for the year under consideration.
We are thus of the considered view that the assessee has successfully explained the nature and source of the alleged share application money by way of proving the identity and creditworthiness of share applicants and genuineness of the transactions.
We find that the assessee has successfully discharged the burden of proof primarily casted upon it to explain the identity and creditworthiness of all the alleged thirteens share applicants / shareholder and genuineness of the share transactions and correctness of such details has not been disputed by the Revenue Authorities except making general observations. Therefore, we are inclined to hold that no addition u/s 68 of the Act, is called for. Assessee appeal allowed.
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2024 (11) TMI 226
Rejection of application for registration u/s 12AB - Invocation of Section 13(1)(b) regarding the trust's objectives - HELD THAT:- In the case of Shah Gulabchandmulchand Shree Parshwanath Trust, Vapi [2024 (9) TMI 197 - ITAT SURAT] ITAT held that where CIT(E) denied registration under Section 12A to assessee-trust due to one objective benefiting only Jain community, invoking Section 13(1)(b), but overlooked broader charitable objectives since provisions of section 13 can be invoked only at time of assessment and not at time of grant of registration under section 12A, matter would be remanded back to CIT(E) for reconsideration
As provisions of Section 13(1)(b) of the Act can be invoked at the time of assessment, on the basis of material that may be brought on record. However, grant of registration under Section 12A of the Act cannot be denied to the assessee by invoking the provisions of Section 13(1)(b) of the Act at the time of grant of registration.
In the result, in view of the above observations, the matter is restored to the file of CIT (Exemptions), for de-novo consideration, after giving due opportunity of being heard and with the direction not to disentitle the assessee for grant of registration only on the grounds as mentioned in its order for rejecting the application filed by the assessee trust. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (11) TMI 225
Delayed deposit of employees share of contribution towards ESIC and EPF - intimation issued u/s. 143(1)(a) - HELD THAT:- Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] had observed that the employee’s share of contributions towards ESI & EPF deposited by the assessee beyond the due dates prescribed under the said respective Acts would by virtue of Section 36(1)(va) r.w.s. 2(24)(x) of the Act constitute income of the assessee.
Whether or not the delayed deposit of employees share of contribution towards ESIC & EPF could have been made by the AO prior to the judgment of Checkmate Services Pvt. Ltd. vide an intimation u/s. 143(1) - As decided in M/s. BPS Infrastructure [2024 (4) TMI 1006 - CHHATTISGARH HIGH COURT] reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non- obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability.
In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law.
They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction.
Accordingly, in the backdrop of the judgment of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] we are unable to concur with the Ld. AR that the A.O/CPC, Bengaluru had erred in rejecting the assessee's application filed u/s. 154 of the Act, wherein the latter had sought for setting aside the disallowance of his claim for deduction of delayed deposit of employees share of contributions towards ESIC & EPF u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act made by the AO/CPC, Bengaluru vide an intimation u/s. 143(1)(a) of the Act prior to the judgment of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (supra) - Ground of assessee dismissed.
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2024 (11) TMI 224
Denial of benefits of Section 11 - Appellant did not furnish Audit Report in Form 10-B within the prescribed time - extended due date of e-filing of Form No. 10B being audit report u/s 12A(1)(b) of the Act for the assessment year 2022-23 was 07.10.2022 and the assessee had e-filed Form No. 10B issued by the Chartered Accountant as on 07.11.2022, which is delayed by 31 days.
HELD THAT:- We find that the AO CPC has made adjustment for the amount of expenditure claimed, amount accumulated and set apart for exemption u/s 11(2) of the Act for the sole reason that the AO did not file the audit report prescribed in Form No. 10B of the Act on or before the due date. The said due date in the case of the assessee under the provisions of section 12A(1)(b) of the Act was 07.10.2022 however, the assessee has e-filed the said Form No. 10B on 07.11.2022 and thus, there was a delay of 31 days in filing such form on the Income-tax Portal. Therefore, the issue is merely for the condonation of the delay of the 31 days. We find that the Ld. CIT(A) has referred to Circular No. 16/2022 dated 19.07.2022 issued by the CBDT, where in the CBDT invoking powers u/s 119(2)(b) of the Act delegated the power for condoning the delay to the Pr. Chief Commissioner/Chief Commissioner or Commissioner of Income-tax as the case may be.
The assessee stated that application for condonation of delay in filing Form No. 10B for the year under consideration was filed before the Commissioner of Income-tax (Exemption), Mumbai on 16.03.2023 and said application is still pending for disposal till date. However, we find that under the CBDT circular No. 16/2022 dated 19.07.2022 the concerned Commissioner of Income-tax is preferably required to dispose off the application within the three month of receipt of this application. Before us, assessee expressed ignorance regarding disposal of the application of the assessee. We feel it appropriate to set aside the order of lower authorities and restore the matter back to the file of the Assessing Officer for deciding afresh.
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2024 (11) TMI 223
Rejecting the application u/s 12A for approval of the Appellant Trust - Charitable activity - Trust Deed copy submitted was not self- certified Rule 17A(2)(a) by the trustee, which is an inadvertent error, Details of date & place of each activity were not furnished by the Trust and Details of donation received were not supported by complete postal address/ PAN of the donors
HELD THAT:- We find that the assessee is a trust carried on charitable activities like arrangement of food for conducting pooja and relief to poverty. The activities are for the benefit of public at large - There is no reference of the information submitted on that date in the order of the ld CIT (E) , thus, it is true that the learned CIT(E) has issued the show cause notice on 01.02.2024 but there is no reference of the details submitted on 12.01.2024 and how same is dealt with by the learned CIT(E).
The observation of the CIT(E) has raised seven points which was not stated to have been replied by the assessee and, therefore, it was held that the learned CIT(E) was not able to draw any satisfactory conclusion about the genuineness of the activities and compliance of requirement of any other law.
Regarding the genuineness of the activities the assessee has provided the details of various expenditure of various activities for the year ended on 31.03.2022 wherein the total expenditure of Rs. 15,75,738/- were spent. The assessee has also spent sum of Rs. 12,74,626/- for the year ended on 31.03.2023 on the object of the trust. There is no comment by the learned CIT(E) on the activities of the assessee stated in these documents.
We restore the matter back to the file of the learned CIT(E) to decide the issue afresh. Appeal of the assessee is allowed for statistical purposes.
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2024 (11) TMI 222
Ex- parte appellate order passed by CIT(A) based on the material on record mainly statement of fact (SOF) filed by the assessee - second round of litigation - whether the assessee firm stood dissolved or the business stood discontinued? - Disallowance of freight expenses u/s 40(a)(ia) - HELD THAT:- It could be seen that the assessee did not participated at all in the appellate proceedings conducted before ld. CIT(A), for the reasons cited in SOF. This is second round of litigation. Huge additions were made by the AO even in second round of litigation and huge demand of tax and interest was raised by Revenue against the assessee. The assessee filed its appeal before ld. CIT(A) challenging the additions as were made by the AO in second round of litigation, and it is for the assessee to have remained vigilant once the appeal was filed by it before ld. CIT(A).
The assessee and/or its partners (or legal representative) acted negligent during the course of appellate proceedings before ld. CIT(A) in the second round of litigation and their act is deprecated. The assessee should not be allowed to take benefit of its own wrong as it acted in complete defiance of law on both the counts.
Assessee has now filed paper book before the ITAT and has raised challenge to the additions both on merits as well on law. It is equally true that the ld. CIT(A) passed an ex-parte appellate order based on material on record including SOF. The assessee did not comply with any of the eight notices issued by ld. CIT(A). It is also equally true that the Act of the Court should not prejudice anybody. The mandate of the 1961 Act is to compute and collect correct taxes from correct assessee and for the correct assessment year. The assessee has now come forward to argue against the additions as were made by authorities below, and paper book containing as many as 225 pages are filed before ITAT. The assessee has also stated the reasons for its non compliances before ld. CIT(A), which have been cited by us in the preceding part of this order. The true, complete and correct facts are to be brought on record and the onus is on the assessee to bring the same on record. Even before us contradictory statements are made with respect to dissolution of the assessee firm vis-à-vis discontinuance of the business of the assessee firm. Under these facts and circumstances, and in the interest of justice as well now the inquiries are to be conducted.
Keeping in view Section 189(1), 189(3) 189(4) read with Section 176(3)(owing to failure on the part of the assessee to intimate Revenue in stipulated time about discontinued business), it is considered fit and appropriate that in accordance with principles of natural justice, one more opportunity is required to be given to the assessee and hence the appellate order passed by ld. CIT(A) dated 25.09.2023 is set aside and the matter can go back to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee on merit in accordance with law after giving opportunities to both the parties.
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2024 (11) TMI 221
Assessment order u/s 143(3) passed against assessee trust v/s individual beneficiary - determination of primary assessee whose income is liable to be brought to tax in the hands of the representative assessee - Unexplained money u/s. 69A - no source of the cash deposits in the bank account provided
HELD THAT:- We are unable to subscribe to the explanation of the Ld. AR as regards the reason as to why the appeal was filed by "Kajal Deepak Trust", despite the fact that the impugned assessment order u/s. 143(3) was passed in the case of the beneficiary, viz. Ms. Kajal Jadwani.
Although we principally concur with the Ld. AR that the discretionary trust, viz. Kajal Deepal Trust is the primary assessee whose income is liable to be brought to tax in the hands of the representative assessee, i.e. the trustee or trustees u/s. 160(1)(iv) of the Act, but at the same time, may herein observe, that as per Section 166 of the Act there is no bar on the department to frame direct assessment of a person on whose behalf or for whose benefit income therein referred to is receivable. Accordingly, now when the A.O had proceeded with and framed the assessment u/s. 166 of the Act, i.e. in the hands of the individual beneficiary, then, in case if the said assessment order was not to be accepted, it was for the said assessee to have carried the same by way of an appeal before the CIT(Appeals). Accordingly, the Ld. AR's claim that as the trust viz, Kajal Deepak Trust is the primary assessee, therefore, no infirmity arises from the fact that the latter had filed the appeal before the CIT(Appeals) against the assessment order which was never passed in its case cannot be accepted.
As the assessee, viz. Ms. Kajal Jadwani had for the aforesaid misconception failed to carry the impugned order of the A.O passed u/s. 143(3) by way of a proper appeal before the CIT(Appeals), therefore, she shall remain at a liberty to assail the impugned assessment order before the first appellate authority, who is directed to adopt a liberal approach regarding the reasons leading to the delay in preferring of the appeal before him. Appeal of the assessee trust is dismissed.
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2024 (11) TMI 220
Denial of application u/s 80G - provisional certificate u/s 10 AC has been issued on 25.10.2022 and application in Form 10AB has not been filed within statutory time limit - HELD THAT:- There is substance in the submission of AR that in the instant case provisional approval u/s 80G of the Act had been granted to the appellant from 25.10.2022 to AY 2025-26, so period for which provisional approval had been granted was to expire only on 31.03.2025 and not before and further that the second limb of the aforesaid clause was inapplicable in appellant case.
We are of the considered opinion that rule of procedure are just to handmaid to administration of justice and not to penalise anybody and object of procedure only for interest of justice and the time limit prescribed in aforementioned provisions and clauses in question is quite directory in nature, not mandatory and such a provision / clause should be dealt which in above manner in order to fulfil the End’s of justice.
Consequently, the impugned order of the Ld. CIT(E) is hereby set aside and quashed on this point and matter be remitted back to file of the Ld. CIT(E) with the direction to decide expeditiously afresh.
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2024 (11) TMI 219
Levy of interest u/s 234C - failure on part of the payer to deduct TDS u/s 196D and 194LD - HELD THAT:- Tax due on returned income means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.
As seen that the advance tax is reduced by any tax deductible or collectible which means that even the legislators have taken care of liability of the payer to deduct tax at source on payments and to that extent, assessee is not required to pay any advance tax.
In the case on hand, since the payers faulted in deducting tax at source, the assessee discharged its liability by paying the full tax. Therefore, in our considered opinion, the assessee cannot be levied with interest u/s 234C of the Act for the fault of the payers.
As decided in Ngc Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] wherein the Hon’ble High Court held that when a duty is cast on the payer to deduct and pay the tax at source, on payer's failure to do so, no interest under section 234B can be imposed on the payee assessee. We are of the considered view that it is not case of deferment in payment of advance tax on income as envisaged in Section 234C of the Act. Since the assessee has discharged the tax liability, no interest is leviable u/s 234C - Thus direct the AO to delete the impugned addition. Decided in favour of assessee.
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