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Income Tax - Case Laws
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2024 (10) TMI 1558
LTCG - Exemption u/s 54F - transaction of the flat related to sale and purchase was done in his wife’s name and assessee was not holding any property - Income of individual to include income of spouse, minor child, etc - AR stated that the assessee’s wife is dependent, and the spouse’s income is declared in the husband’s return filed under section 139(1) and assessee is the beneficial owner of the property - whether the assessee can declare the income of capital gain of his wife in his return u/s 64? - HELD THAT:- The section 64(1) prevails that the inclusion of the dependent’s income u/s 64 of the Act is justified.
In other issue the investment of new assets in the name of the wife is fully covered by the order of Simran Bagga [2024 (1) TMI 271 - ITAT DELHI] We respectfully follow the order of Simran Bagga (supra).
Contravention of section 54F relating to investment of capital gain in two flats not in single flat - As related to investment in two flats, which contravened the provisions of section 54F the said amendment of “one house” is implemented with effect from 01/04/2015, so the relevant section 54F is not application for the A.Y. 2014-15. AR placed purchase deeds of two flats, wherefrom it is clear that both the flats are adjacent flats and not in the open sky. So, both the units are taken as a single unit which is not contrary to section 54F of the Act.
We respectfully relied on the order of D. Ananda Basappa [2008 (10) TMI 99 - KARNATAKA HIGH COURT] We find that the assessee is eligible for deduction u/s 54F for purchasing two new flats in the name of his wife. We note that the sale and purchase of the flats are executed in the name of assessee’s wife. DR has not pointed out any contrary decision against the proposition laid down above. We find no justification in rejection of claim u/s 54F - addition amount is deleted.
Assessee appeal allowed.
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2024 (10) TMI 1557
Assessment of trust - Claim of depreciation of assets - HELD THAT:- AR wants a direction to the AO to allow depreciation as application of income. After analysing the entire facts and circumstances and particular facts of the present case more particularly taking into consideration the documents in the shape of balance sheet, income and expenditure account and depreciation chart, it was found that the huge amount has been spent by the Appellant trust in previous year with effect from financial year 2009-10 to 2011-12, but these documents were neither having signatures of auditors nor chairman or Accountant of appellant trust.
Since the issue of claim of depreciation is a factual issue and requires verification and checking of the records which are filed and available with the AO, therefore in the fitness of things, it is appropriate to restore this issue to the file of AO with a direction to verify from the records as to whether such assets have been taken into account while determining the application of such assets in the income earned or not. Accordingly the Appellant trust should be given the benefit as per the provisions of section 11 - As further directed that the AO while doing this check and verification of the records would also grant reasonable opportunity of hearing to the Appellant before taking any decision. Accordingly this ground No. 1 raised by the appellant stands allowed for statistical purposes.
Payment of Specified person - There is no provision under the Act which provides that if advance is given to the specified person it would be added to the income. Reliance in this connection is placed on the decision of Vels Institute of Science, Technology & Advanced Studies [2015 (11) TMI 857 - ITAT CHENNAI] - In this case assessee, a charitable educational institution, was registered u/s 12AA. It intended to establish a medical college. It entered into an agreement with managing trustee for purchase of his land and paid certain amount to him in advance. Subsequently said agreement was cancelled and managing trustee returned principal amount along with interest. Assessee claimed exemption u/s 11.
AO denied exemption holding that payment of advance to managing trustee was in excess of market value of land and money was advanced without any adequate security and therefore, there was violation of section 13(1)(c). It was held that since it was nobody’s case that the price agreed between the managing trustee and assessee was not actually the agreed price, observation of the AO that the value of the land was much less than what was agreed between the parties cannot stand in the eye of law. When money was advanced to managing trustee in pursuance of agreement for sale and after cancellation of agreement entire principal amount along with interest was returned, it could not be said that money was diverted for interest of managing trustee. Therefore, there was no violation of section 13(1)(c). Hence, in this view of the matter, the Ground No. 2 raised by the assessee stands allowed.
Additions on account of interest free advances given to the various persons were confirmed - Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that, effect might,, incineration circumstances, have been made in the books of, account. The agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account - A mere book-keeping entry cannot be income, unless income has actually resulted, and in the present case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. This was not a. gift by the assessee firm to the manager companies. The reduction was a part of the agreement entered into by the assessee firm to secure a long-term managing agency arrangement for the two companies which it had floated. Therefore considering the entire facts and circumstances as well as discussion made in the above Paras and also taking into consideration the legal preposition.
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2024 (10) TMI 1488
Penalty imposed u/s 270A when the rectification application itself was pending - while computing the tax liability of the petitioner, the AO did not give credit of the TDS and charged interest for alleged non-payment of taxes - case of the petitioner is that since non-grant of the TDS was a “mistake apparent on a face of the record”, the petitioner made an application under Section 154 seeking correction of this apparent mistake - due to Technical difficulties delayed the uploading of the application, but it was eventually filed on 27 April 2022
HELD THAT:- The petitioner would be correct in his contention that in view of the subsequent developments and in pursuance of the orders passed by this Court, a rectification order was passed. Also the demand raised under the rectification order, which was for payment of tax of Rs. 303/- was complied by the petitioner.
In this view of the matter, the penalty proceedings are also rendered inconsequential as the very foundation of such penalty proceedings stood extinguished in view of rectification order being passed. Admittedly, the demand and penalty proceedings under the Assessment Order dated 30 March 2022 would lose their sanctity, in view of the rectification order dated 3 January 2023, as necessarily, the assessment order has merged into the rectification order dated 3 January 2023.
In view of the clear position which was brought about from the compliance of the rectification order 3 January 2023, the application of the petitioner under Section 270AA of the Act although was filed on 7 January 2023, need not be taken forward. This for the reason that in view of the order dated 3 January 2023, passed on the rectification application of the petitioner, the issue in regard to the demands as also the penalty or any other issue which would possibly arise under the Assessment Order dated 30 March 2022, which was apparently held to be not correct, was accordingly interfered in the rectification proceedings. Thus, the assessment order as originally passed cannot continue to prejudice the petitioner for any actions to be taken thereunder. In the aforesaid circumstances, we are inclined to allow the petition. The order passed u/s 270A is quashed and set aside.
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2024 (10) TMI 1487
Penalty u/s 270AA - assessee’s case was one of “under-reporting of income in consequence of mis-reporting” - HELD THAT:- The controversy relates to the income and expenditure booked on account of interest accrued and payable. The petitioner had availed certain interest-bearing loans, and at the same time, had also advanced unsecured loans.
AO found that the interest payable in respect of certain loans advanced by the assessee was higher than the interest at which the funds were arranged. For the aforesaid reason, the assessee had made an addition being on account of the negative spread of interest.
Prima facie, this case would not be one of mis-reporting as the facts on the basis of which additions have been made appear to be disclosed by the assessee.
AO had issued the Show Cause Notice dated 17.09.2024 to the assessee calling upon him to show cause as to why his application for immunity from imposition of the penalty not be rejected on the ground that the petitioner’s case was of under reporting of income on account of mis-reporting. The petitioner claims that he had attempted to seek an adjournment online, however, he faced with certain technical difficulties and was not able to do so.
As noted that consequently, the impugned order has been passed without considering the contentions of the petitioner, as sought to be advanced before this Court.
Revenue fairly states that in the given circumstances, the matter may be remanded to the AO to consider the request of the petitioner for immunity from imposition of the penalty u/s 270AA afresh. This course commends to this Court.
We, accordingly, set aside the impugned order passed by the AO u/s 270AA of the Act and remand the matter to the AO to consider afresh.
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2024 (10) TMI 1486
Jurisdiction of Assessment Unit, Income Tax to impose penalty u/s 271 (1) (c) - whether Petitioner has concealed its income? - TP adjustment in respect of payment of royalty - payment of management fees afresh in the light of the compliance report, modified income-tax return, and the APA.
HELD THAT:- We find substance in the contention of the Petitioner that, in the facts and circumstances of the case, the Respondents have no jurisdiction to initiate the impugned penalty proceedings and more particularly considering the fact that although the final Assessment Order was passed on 30 August 2018 for the Assessment Year 2013-2014, the Petitioner, on the next day, had filed the modified return of income, which was within the prescribed period of limitation from the date of the APA, as permissible in law, and therefore there could not have been any event of concealment of income by the Petitioner. Let the Respondents respond to this Petition by filing a Reply Affidavit on such contentions raised by the Petitioner. The same shall be served on the Petitioner well in advance.
Stand over to 26 November 2024. Till the adjourned date of hearing, order passed under Section 271 (1) (c) of the Act, shall remain stayed.
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2024 (10) TMI 1485
Notice u/s 143(2) - Jurisdiction of AO to issue notices - Authority to issue notices u/s 143(2) - notice u/s 143 (2) of the Act has been issued by the ACIT/ DCIT (International Taxation), Circle-1(1)(1), Delhi
HELD THAT:- A plain reading of Section 143 (2) of the Act clearly indicates that either of the two authorities – either the ‘AO’ or ‘the prescribed income-tax authority’ – can issue a notice u/s 143 (2) of the Act. The expression ‘as the case may be’ also indicates the same.
Revenue also referred to Section 12E of the Income-Tax Rules, 1962 (hereafter the Rules) which expressly provides that the Central Board of Direct Taxes (hereafter the CBDT) can authorise an Income-tax Officer to act as a ‘prescribed authority’ under Section 143 (2) of the Act.
In the present case, the CBDT had issued a notification dated 12.05.2022 and 28.05.2022, in exercise of powers under Rule 12E of the Rules, and had authorised the Assistant Commissioner of Income Tax/ Deputy Commissioner of Income Tax (International Taxation), Circle-1(1)(1) Delhi to act as the ‘prescribed income-tax authority’ for the purpose of issuance of notice u/s 143 (2) of the Act.
In the present case, the impugned notice under Section 143 (2) of the Act has been issued by the ACIT/ DCIT(International Taxation), Circle-1(1)(1), Delhi. In view of the above, the contention that the said Income Tax Officer did not have the jurisdiction to issue a notice u/s 143 (2) of the Act, is devoid of any merit.
The contention that other than the Assessing Officer, only the authorised Income Tax Officers of the National Faceless Assessment Centre (NaFAC) can issue a notice under Section 143 (2) of the Act as the same would be in furtherance of automation of such process, is also unmerited. This proposition is not supported by the plain language of Section 143 (2) of the Act or Rule 12E of the Rules. Rule 12E of the Rules does not confine the power of the CBDT to authorise only the Income Tax Officers of the NaFAC as the prescribed authority for the purposes of Section 142 (1) of the Act.
The contention that the prescribed income tax authority can only serve a notice under Section 143 (2) of the Act but cannot issue it, is insubstantial.
We are unable to accept that the AO did not have the jurisdiction to issue the impugned notices dated 10.07.2024 and 06.09.2024 under Section 142 (1) of the Act or that the same are beyond the period of limitation. Once it is accepted that the AO has the jurisdiction to issue a notice under Section 143 (2) of the Act – which is also the contention of the petitioner in this case – the AO cannot be faulted for proceeding to complete the assessment.
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2024 (10) TMI 1484
Writ petition filled beyond the statutory limitation period - violation of principles of natural justice as the personal hearing had not been given to the appellant dealer - HELD THAT:- Today when the matter is taken up for hearing Additional Government Pleader appearing for the respondent Revenue has produced the original file, where we were able to find that, the notice of personal hearing dated 11.02.2019 had been issued by the Revenue which was received by the appellant dealer on 13.02.2019 by putting the seal as well as signature of the appellant dealer.
That apart, on 19.02.2019, a manuscript reply also had been sent by the appellant dealer to the said notice dated 11.02.2019. When that being so, it cannot be stated that, no opportunity of personal hearing had been given to the appellant dealer, therefore, on that ground, the writ petition cannot be entertained.
Even though arguments were advanced to some extent counsel appearing for the appellant, on the merits of the case, we are not impressed with the same, the reason being that, since the learned Judge through the impugned order had permitted the writ petitioner to file the statutory appeal within four weeks time, where further direction also had been given by the writ Court to entertain such an appeal without reference to the limitation, however by ensuring the compliance of all other statutory conditions, including pre-deposit, the question of canvassing the merits of the case before this Court at this juncture does not arise.
As against the order impugned dated 17.10.2022, as we stated, the appeal has been presented on 22.12.2022, but has been filed only on 14.09.2024, therefore, unnecessarily the appellant dealer has delayed the matter instead of filing appeal by filing the present intra Court appeal, therefore, for all these reasons, we are not inclined to entertain this appeal and the order passed by the learned Judge which is impugned herein dated 17.10.2022 since is to be sustained by giving two weeks time to the appellant to file a statutory appeal before the appellate forum. Accordingly, this Writ Appeal is dismissed.
It is made clear that, within two weeks from the date of receipt of a copy of this order, if no appeal is filed, it is open to the Revenue / Assessing Authority to proceed in accordance with law pursuant to the order impugned before the writ Court.
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2024 (10) TMI 1483
Foreign Tax Credit [FTC] claim r/w Article 24 of India-UK Tax Treaty (“DTAA”) - HELD THAT:- This Court, by following the judgment of G.M. Knitting Industries (P.) Ltd. [2015 (11) TMI 397 - SC ORDER] held that filing of foreign tax credit in terms of Rule 128 is only directory in nature and not mandatory.
In the present case the petitioner was working in United Kingdom. The petitioner filed return of income in India for the assessment year 2020-2021 on 21.09.2020 showing the income earned in the foreign country, in which he claimed being TDS credit before United Kingdom, as FTC u/s 90. But the petitioner uploaded Form 67 with delay, which he suppose to upload while filing the return of income. As noted that Section 90, Section 90A and Section 91 of the Income Tax Act of 1961 have been drafted specifically to avoid the burden of double taxation.
In the present case, even though the petitioner had not uploaded Form-67 while filing return of tax, later he uploaded the same with delay and that too due to Covid out break he was not able to get necessary documents from the foreign country, which appears to be genuine. Therefore this Court is inclined to condone the delay in filing Form 67 and the impugned order is liable to be set aside.
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2024 (10) TMI 1482
Validity of reopening of assessment - notice issued after expiry of normal period of limitation that is four (4) years - change of opinion - tangible materials material found or not? - HELD THAT:- Petitioner had furnished all the documents required for completing the assessment u/s 143(3) of the Income Tax Act, 1961.
In the returns that was filed by the Petitioner on 15.09.2013, the Petitioner has disclosed the entire amount received under the aforesaid Agreement but claimed as capital gains instead of treating them as business income. Since the assessment was completed after furnishing all the documents including the two mentioned agreement, it has to be construed that the Impugned Order is inspired from change of opinion and therefore, it has to be quashed in the light of the decision of Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT]
Since the notice itself has been issued after expiry of four (4) years, the Department could have invoked Section 147 only if tangible materials were available and that there was failure on the part of the Petitioner to disclose materials/documents and informations which were required for completing the assessment u/s 143(3) of the Income Tax Act, 1961. Decided in favour of assessee.
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2024 (10) TMI 1481
Transfer of case u/s 127 - sufficient material for transfer or not? - transfer from the Office of Income Tax, Corporate Ward-2(3), Chennai to the Office of the DCIT, Circle- 4(4), Kolkata ('Central Circle') - transfer order has been passed to centralize the case of the petitioner for effective and co-ordinated investigation along with other cases - HELD THAT:- Though petitioner contended that the petitioner is having their registered office at Chennai and no business activities were carried out at Kolkata, but upon search and seizure carried out u/s 132 on 12.10.2023 by the Authorised Officer under the control of the Principal Director of Income Tax (Investigation), Kolkata, number of incriminating documents and materials came to be seized, which were directly connecting with the involvement of the petitioner in the business operation of Lottery in the state of West Bengal in different capacities such as Sub-distributors, Stockist, Printing press, etc.
Since all the materials have been collected in Kolkata Central Circle, the 1st respondents, taking into consideration of the reply filed by the petitioner, decided to transfer the petitioner's case to the Central Circle, Kolkata. It is pertinent to note that apart from the petitioner case, there were eight other cases, which were found indulging similar activities as that of the petitioner in conducting the business operations of lottery, the 1st respondent ordered transfer of all cases to the Central Circle of Kolkata for the purpose of coordinated investigation in Lottery Group.
No substance in the contentions raised by petitioner that the respondents failed either to provide an opportunity or lack of sufficient materials to transfer the case from ITO, Corporate Ward 2(3), Chennai to DCIT, Central Circle 4(4), Kolkata. Accordingly, the Issue Nos. 1 and 2 are answered.
Whether the respondents have provided an opportunity for filing a reply and personal hearing before passing the impugned Notification? - The paramount consideration for transfer should be the public interest and the power is to be guided and controlled to serve the purpose of the Act. If the transfer is being made for the purpose of co-ordinated investigation for the purpose of assessment and collection of tax in a more convenient or efficient way, then it will be a good ground for transfer. In the present case, this Court does not find any irregularity or infirmity in passing the impugned Notification by the 1st respondent ordering transfer of the case of the petitioner to DCIT, Central Circle, Kolkata along with other cases only for the purpose of co-ordinated investigation in Lottery Group. No doubt, transfer of a case from the place where the assessee has its place of residence or business to another place causes inconvenience but if it is necessary in the public interest then the transfer on the ground of proper and co-ordinated investigation cannot be held to be impermissible in law.
No prejudice that would be caused due to the present notification to the petitioner because no final assessment order adverse to the petitioner was passed, except the transfer of the petitioner's case by invoking Section 127 of the Act from ITO, Corporate Ward-2(3) to DCIT, Central Circle, Kolkata. Income Tax Act, being a taxing statute, very strict interpretation has to be given and in the absence of any prejudice caused to the petitioner, the challenge to the impugned notification has to be rejected. WP dismissed.
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2024 (10) TMI 1480
Validity of the Section 234E - processing TDS statements u/s 200A - HELD THAT:- In the present case, the respondent had imposed the late fee only u/s 234E of the Act. However, Section 200A of the Act was not introduced during the said assessment years and it was introduced only with effect from 01.06.2015.
Therefore, in the absence of any provisions under Section 200A the respondents ought not to have imposed late fee under Section 234E while processing the applications for TDS u/s 200A. Hence, in such view of the matter, this Court is of the opinion that the impugned Demand Intimation Letters are liable to be set aside. Decided in favour of assessee.
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2024 (10) TMI 1479
Penalty u/s 271(1)(c) - Violation of principles of natural justice in passing penalty orders without granting reasonable opportunity to the petitioner.
HELD THAT:- When the ITAT passed orders as early as on 09.01.2024 and 10.01.2024, it is not known as to what prevented the respondent from acting in consequent to the order passed by ITAT immediately, rather than to wait till the fag end of six months' expiry time and to issue notice on one fine day, i.e., 19.07.2024, by quantifying the penalty amount and calling upon the petitioner to pay the penalty amount, the petitioner, who has issued with such notice all of a sudden, sought for two weeks' time to putforth their contention and to file supportive documents, which the respondent refused to grant citing the expiry of time period as reason for such refusal.
Thus, it is clear that the respondent remained a mute spectator for nearly five months, right from the date, on which, the orders were passed by ITAT i.e. on 09.01.2024 and 10.01.2024 and at the eleventh hour, the respondent issued notice dated 19.07.2024 and called upon the petitioner to show cause to why, penalty should not be imposed and though the petitioner appeared in person and sought time on two occasions, the respondent, without acceding to any of such request made by the petitioner, proceeded to pass orders, thereby, giving effect order to the directions issued by CIT (Appeals) and ITAT on 30.07.2024, by rejecting the submission filed by the petitioner and very next date, i.e. on 31.07.2024 passed the impugned orders imposing penalty under Section 271 (1) (c) which is in violation of principles of natural justice. Hence, this Court is inclined to set aside the impugned orders.
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2024 (10) TMI 1478
Rejection of Condonation of delay in filing income tax returns - as per petitioner reasons such as the impact of Covid-19 on operations, loss leading to non-payment of electricity charges, and corruption of computer data lead to delay - HELD THAT:- On perusal of records, it is seen that due to outbreak of Covid-19 and lock down throughout the Country since March 2020, the petitioner- Company's operations were stopped abruptly, therefore, the petitioner- Company faced with a huge loss, resulting in non-payment of the electricity charges, due to which, power connections were also cut in the Factory, apart from the same, due to non-usage of the Computer, the server of the Computer, where, the petitioner used to maintain accounts got corrupt and hence, all the Computer data backups were lost, hence, the petitioner was not in a position to file Income Tax Returns in time, however, as and when, the petitioner was able to reconstruct the lost records, they filed returns for the AY 2021-22 and that since there happened to be delay of nine months in filing the returns, (as the due date for filing the returns was on or before 15.03.2022), the petitioner has rightly taken out an Application for condonation of the delay, clearly setting out the reasons for the delay.
Thus, the delay on the part of the petitioner in filing the returns is neither willful nor wanton, but, purely owing to unforeseen circumstances, therefore, the respondent before rejecting the application ought to have taken into consideration of all the aforesaid aspects.
Respondent also failed to consider the vital factor that the petitioner is not a habitual offender, to file returns with a delay and that excluding the subject AY (i.e. 2020-21) the petitioner has been prompt in filing the returns in respect of the past Assessment Years and subsequent Assessment Years. Hence, this Court is of the considered view that the reasons assigned by the petitioner for the delay is genuine and reasonable, and is inclined to condone the delay, however, subject to payment of costs, as agreed by the petitioner.
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2024 (10) TMI 1477
Bogus purchases - information received from the Sales Tax Department, Maharashtra - CIT(A) deleted part addition - HELD THAT:- As regards the submission of the DR that the amount continues to represent unsubstantiated and non-genuine purchases which remain unexplained and unverifiable, it is pertinent to note that the assessee furnished detailed documents, as noted in the foregoing paragraph and also taken note of by CIT(A) of its order, which as evident from the record were neither been controverted by the AO nor stated to be false and bogus.
The fact that the assessee failed to furnish the information in the format required by the AO cannot be the sole basis for treating the purchases as bogus. We agree with the findings of the CIT(A) in deleting the addition of the balance amount. As a result, the impugned order on the issue under consideration in the present appeal before us is upheld and the ground raised by the Revenue is dismissed.
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2024 (10) TMI 1476
Estimation of income - bogus purchases - AO has only estimated the profit from the alleged bogus purchases @ 12.50% - contention of the assessee that it has furnished the details relating to purchases, payments made to the supplier, confirmation from the supplier and also the details of sale of products to various persons - HELD THAT:- The assessee herein has furnished all details evidencing the purchases, confirmation from the suppliers, the details of sales made out of those purchases. There is no evidence to show that the money given towards purchases was flown back to the assessee. AO has accepted the sales. Accordingly, we are of the view that the impugned addition cannot be sustained, in the facts and circumstances of the case.
Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to alleged bogus purchases. Appeal filed by the assessee is allowed.
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2024 (10) TMI 1475
FTS/FIS/Royalty receipt - Taxability of the amounts received by the assessee from the Indian customers towards supply of software updates and patches and on-call support services - Fee for Technical Services (FTS)/Fee for Included Services (FIS) under the Income Tax Act as well as under India – USA Double Taxation Avoidance Agreement (DTAA) - as submitted by the assessee that on-call support services cannot be treated as FIS either u/Article 12(4)(a) of India – USA tax treaty as it is not ancillary to any royalty income or u/Article 12(4)(b) as no technical knowledge, know-how, skill etc. was made available to the service recipient while providing on-call support services.
HELD THAT:- Being conscious of the fact that the receipts can no more be treated as royalty income in view of change in legal position due to the ratio laid down in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] and secondly, it cannot be treated as FIS under Article 12(4)(a) of India – USA DTAA, the AO has taken a conscious decision not to invoke Article 12(3) and Article 12(4)(a) of India – USA DTAA to tax the receipts.
Thus, the only course left open with the AO to rope in the receipts within tax net is to invoke Article 12(4)(b) of India – USA DTAA. However, the said provision requires fulfillment of the ‘make available’ condition.
A reading of the assessment orders should reveal that except making general observations that while rendering services the assessee has made available technical knowledge, know-how, skill etc. to the recipient of services, the Assessing Officer has not brought on record any cogent material/ evidence to establish such fact. Even, same is the position with learned DRP as no effort has been made by learned DRP to establish that ‘make available’ condition stands satisfied.
Now, it is fairly well settled that technical knowledge, knowhow, experience, skill etc. are made available to a service recipient when the service recipient is capable of performing such services independently on its own without requiring the aid and assistance of the service provider. No material has been brought on record by the Revenue Authorities to establish that the service recipients, while availing service from the assessee, have also acquired technical knowledge, know-how, skill etc. concerning such services, which enabled them to perform such services independently in future.
Assessee continues to provide on-call support services year-after-year goes to prove that the technical knowledge, know-how, skill etc. relating to such services have not been transferred to service recipients. It appears that being conscious of the fact that the receipts cannot be made taxable as royalty income under Article 12(3) or as FIS under Article 12(4)(a) of India – USA treaty, the Assessing Officer has made a futile attempt to make the receipts taxable under Article 12(4)(b) by adopting trial and error method.
In view of the aforesaid, we hold that the receipts are not taxable as FIS under Article 12(4)(b) of India – USA DTAA.
Computation of interest on refund u/s 244A - it is the contention of the assessee that interest u/s 244A of the Act has to be computed up to the date of issuance of refund voucher - HELD THAT:- Having considered rival submissions, we direct the Assessing to verify assessee’s claim and compute interest in accordance with law.
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2024 (10) TMI 1474
Revision u/s 263 - as per CIT assessment order passed by AO u/s 143(3) r.w.s 153A is found to be erroneous in so far as it is prejudicial to the interest of the revenue - addition made by AO towards the undisclosed cash sales should be taxed as unexplained money u/s 69A r/w section 115BBE - HELD THAT:- PCIT did not find error or prejudiced with the quantum and the manner the assessment proceeding is carried out by the ld. AO. PCIT merely initiated proceeding just to amend the rate of tax to be charged on the disputed addition. As we note that the addition has been made by making the extrapolation and no clear finding on facts of undisclosed amount. As there is no clear material which is to be charged at special rate merely the inference about the sales based on the those seized record taking weighted average will not suggest that the amount as unexplained money.
It is not the case of the revenue that the assessee is found in possession of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the AO satisfactory.
As is not disputed about the source of money wherein the revenue contended that the same whatsapp chat suggest part of the money reflected in the books and part not. Thus, the source of addition made is explained by the assessee and ld. AO has taken a plausible view on the matter.
Not only that the amount of addition is disputed and as supported by the seized material it is merely mathematical calculation which is disputed by the assessee and therefore, the case of the assessee is squarely covered by the decision of our High Court in the case of Manna Trust [2022 (1) TMI 693 - RAJASTHAN HIGH COURT]
Not only that as regard the chargeability of disclosed income the Gujarat High Court in the case of PCIT Vs. Dharti Estate [2024 (1) TMI 1197 - GUJARAT HIGH COURT] has held that when the assessing officer has made sufficient inquiry and as such during the course of assessment included. The Hon’ble Gujarat High Court also held that there was nothing stated in either pre-amended or post amended provisions of section 115BBE that when the assessee surrendered undisclosed income during the search action for the relevant years, higher tax rate is required to be charged.
When the order passed by the ld. AO is perfectly dealing with the issue and there is no error or prejudice as such ld. PCIT cannot invoke the provision of section 263 just to say different rate of levy of the tax when ld. AO was already aware about the issue on hand of cash sales.
Provisions of explanation 2 of section 263 PCIT should have at list satisfied herself before invoking the provisions, that in fact the assessee is found to be the owner of any money, bullion, jewellery or other valuable article the answer is no even the quantification of cash sales is on extrapolation of taking weighted average of sales based on the instances found at the time of search and the assessee challenged the finding of the ld. AO. Thus, the addition made by the ld. AO being under disputed and while making the addition the ld. AO has not discussed or referred the section 69A of the Act the ld. PCIT cannot hold here view when that of the view of the ld. AO when the ld. AO has consciously added the said sum as business income.
AO made the addition after giving a specific show-cause notice to the assessee wherein the ld. AO based on the seized material extrapolated the income on weighted average and considered the cash sales. Thus, it was not the case of revenue for undisclosed income apparen and evident. The assessee challenged that addition before the ld. CIT(A) and therefore, the matter is under dispute. On that disputed addition ld. CIT(A) intend to levy the rate of addition for section 68, 69, 69A,B, C&D of the Act. When the addition is under dispute and while making that addition ld. AO did not invoke those provisions consequent thereupon, ld. PCIT cannot impose upon her view on the ld. AO when the ld. AO with his open eyes considered the addition as unrecorded cash sales as business income of the assessee. On that pages it is apparent that he intend to tax cash sales which was in part cheque and part in cash so one transaction cannot be considered for separate two treatment under the Act.
We also note that it was not the case of the revenue on the variation in stock was found, variation in the investment in the assets, no loan taken or given out of books were found and no proof of unaccounted purchase were found. Thus, merely on sum slip found in the whatsapp, addition were made and that cannot be considered as unexplained credit in the hands of the assessee company. It is not a cash of revenue that ld. AO was not aware about the provision of section 115BBE, AO was conscious about the provision of section 115BBE of the Act, because while dealing with the addition of unaccounted cash found for an amount was added and while doing so he invoked the provision of section 115BBE of the Act while dealing with the subsequent year case. Here also while invoking the provision of section 263 there is no variation was proposed in the computation of income of the assessee, but only for rate of tax and that with the facts already on record being disputed and not crystallized the order is neither erroneous nor prejudicial to the interest of the revenue.
Not only that as argued by assessee their case is also covered with the decision of M. P. High Court in the case of PCIT Vs. Prakhar Developers P. Ltd. [2024 (4) TMI 498 - MADHYA PRADESH HIGH COURT] as held that once order has been passed taking prior approval then again invoking the provision of section 263 was not correct. Similar view was taken by Patna High Court in Gyan Infrabuild P. Ltd. [2024 (5) TMI 732 - ITAT PATNA]
Ld. PCIT on the same very issue out of other year selected only for two year and other order on the same very issue could not found the order erroneous and has not proposed any action when the nature of addition being same. AO has already invoked the provision of section 11BBE for A. Y. 2020-21 while dealing with the addition and while making cash sales addition he has taken a conscious decision not to invoke that provision. Even the view and the addition being debatable and the matter was under dispute before ld. CIT(A) ld. PCIT should not considered merely on the charge of rate of tax order as prejudicial and that too without proving that it was in fact erroneous or prejudicial to the interest of the revenue. In the search no corresponding assets was found and the addition was made merely on slip found to be recorded in the iphone and the working of sales made based on the weighted average. Ld. AO consciously not invoked the deemed provision and not charged the income under the other income head and has added cash sales.
Thus, we do not agree with PCIT as the order has been passed without proving that order of the ld. AO is erroneous and prejudicial to the interest of revenue and therefore we see not reasons to sustain the same. Assessee appeal allowed.
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2024 (10) TMI 1473
Ex parte order of CIT(A) - denial of principle of natural justice - Penalty u/s 271B imposed - As argued that assessee could not get reasonable opportunity of being heard from the CIT (A) -
HELD THAT:- As first notice was given to the assessee in the month of December, 2020 which was complied with by the assessee, but thereafter there were long gap of almost 22 months when another notice on 3rd November, 2022 was issued for enablement of Window, which did not require any response neither there was any such option. Again, thereafter there was complete silence for around 19 months before issuing notices on 11.06.2024, 28.06.2024 and 09.07.2024 which shows that within a short span of time three notices were issued to the assessee but was not sufficient to collect all the documents and other required information for furnishing before Ld. CIT (A).
Thus, the opportunity of hearing means opportunity of proper hearing and a reasonable time is to be granted to the respective party and even otherwise, CIT (A) has passed an ex parte order - Therefore, without commenting anything on merits, we feel it proper and appropriate to restore the matter back to the file of ld. CIT (A) for afresh decision.
Appeal of the assessee is restored back to the file of the ld. CIT(A) for afresh decision.
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2024 (10) TMI 1417
Unexplained investments/ amounts deposited in the foreign bank account - delay filing SLP - Whether no concrete evidence to establish either the ownership of the alleged bank account or the alleged disputed deposits in those accounts to be belonging to the assessee - HC decided [2023 (11) TMI 759 - PUNJAB AND HARYANA HIGH COURT] assessee being an agriculturist and only having a small holding of land apparently could not be in possession of such huge amounts, which were also in foreign currency. Nothing as such was produced on record that the same was transferred from India where he was doing some business. It is neither the case of the revenue that the amounts were credited from his income while doing business at abroad and neither he was based abroad for such long periods to generate that kind of income, thus decided against revenue.
HELD THAT:- There is gross delay of 233 days in filing this Special Leave Petition. The reasons assigned for seeking condonation of delay are neither satisfactory nor sufficient in law to be condoned.
Hence, the application seeking condonation of delay is dismissed. Consequently, the Special Leave Petition also stands dismissed.
Even otherwise, we find that the High Court has noted that no substantial question of law arose in the case.
In passing the aforesaid order, we have followed the earlier order of this Court in Joginder Singh Chatha [2024 (10) TMI 874 - SC ORDER]
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2024 (10) TMI 1416
Maintainability of appeal on low tax effect - Liability to pay interest u/s 234B - non payment of tax in respect of Assessment Year 2005-06 and 2006-07 - as decided by HC [2020 (9) TMI 873 - KARNATAKA HIGH COURT] legal position as it existed for the relevant Assessment Years prior to insertion of proviso to Section 209(1) of the Act, it is clear that if payer who was required to make payments to non resident had defaulted in deducting the tax at source from such payments, the non resident is not absolved from payment of taxes thereupon and non resident is liable to pay tax and the question of payment of advance tax would not arise.
HELD THAT:- The special leave is disposed of owing to low tax effect.Question of law, if any, is kept open.
Pending application(s), if any, shall stand disposed of.
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