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Income Tax - Case Laws
Showing 61 to 80 of 168831 Records
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2024 (11) TMI 889
Validity of reopening assessment u/s 147 - materials unearthed relating to and belonging to the assessee during the course of search conducted on Third party - HELD THAT:- Keeping in view this particular legal aspect of the matter as certain documents unearthed/found and seized during the course of search in the residential as well as other premises related of Shri Surendra Kumar Jain and Shri Virendra Kumar Jain, on the basis of which the additional income was to be assessed in the hands of the assessee, such addition can only be made taking recourse of the provision of Section 153C and no proceeding can be initiated u/s 147, 148, 153 and 151 of the Act.
In the instant case, therefore, reopening of proceeding u/s 148 has no legs to stand upon particularly when the reason to believe is on the basis of search conducted on a third party and on the basis of documents unearthed during search of the said third party namely Shri Surendra Kumar Jain group of companies.
The initiation of proceeding in the case in hand u/s 148 on the basis of materials unearthed relating to and belonging to the assessee during the course of search conducted on Jain brothers is found to be not sustainable in the eyes of law. The assessment is void-ab-initio and thus, quashed. Assessee’s appeal is allowed.
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2024 (11) TMI 888
Addition on account of accommodation entries - CIT(A) restricting the addition to only 15% instead of 100% - HELD THAT:- The Coordinate Bench in [2024 (6) TMI 1416 - ITAT MUMBAI] for AY 2011- 12, had the occasion to consider an identical issue find merit in the contention advance on the behalf of the Appellant that the Assessing Officer has failed to bring any material on record to establish that the work was not actually performed and therefore, disallowance of 100% payments made to sub-contractors is not warranted in the facts and circumstances of the present case.
We are not inclined to interfere with the order passed by CIT(A) restricting the disallowance to 15% of payments made to sub-contractors. There is nothing on record to persuade us to take a view that disallowance at a higher rate was warranted in the facts and circumstances of the present case. We have already rejected the contention of the Revenue to restore the disallowance at the rate of 100% of payments made to sub-contractors. We also concur with the CIT(A) that in absence of any material to substantiate the allegation that Assessee had paid commission at the rate of 1%, the addition made in respect of commission expenses of INR 8,81,3000/- cannot be sustained merely on assumptions and guess work. Decided against revenue.
Additional deduction u/s 80IA - denial of claim of deduction u/s 80-IA because the said claim was not made in the original return of income - HELD THAT:- CIT(A) called for a remand report from the AO who in his remand report fairly conceded that the claim of deduction has been allowed in all subsequent assessment years. Therefore, the ld. CIT(A) also allowed the claim of deduction u/s 80-IA of the Act correctly. Decided against revenue.
Disallowance u/s 14A - assessee has suo moto disallowed amount being 1% of the average investment as on 31/03/2016 - HELD THAT:- The undisputed fact is that the assessee borrowed funds from Shapoorji Pallonji and Company Ltd., and it is also not in dispute that the said borrowings were interest free and the shares were purchased out of such interest free borrowings. Therefore, no merit in the addition on account of interest payment. Insofar as, administrative expenses are concerned, the AO has disallowed 0.5% but the assessee has disallowed a higher amount of 1% at Rs. 13,69,000/- which is more than the disallowance computed by the AO. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, Ground dismissed.
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2024 (11) TMI 887
Addition on account of difference between the value of closing stock shown in the return of income and in the statement made to the bank - HELD THAT:- We note that the assessee, undoubtedly shown a different value of closing stock to the bank stating to be for availing credit facilities. Admittedly the said value is different from the statement of value of closing stock as annexed to the balance sheet.
Neither the bank authorities nor the AO made any effort to verify the actual stock to prove that there is existence of unaccounted stock. In common parlance, under open loan system, the parties tend to inflate figures of quantity of stock as well as rate merely to enjoy higher cash credit limits.
Hon’ble High Court in N. Swamy [1998 (9) TMI 27 - MADRAS HIGH COURT] held that the AO shall consider the material, which is required to be considered for the purpose of assessment. The Assessing Officer shall not consider any statement that might have given to a 3rd party unless there is any material to corroborate the statement given to a 3rd party. Admittedly, nothing was brought on record by the AO that any existence of corroborating value of closing stock given to the bank.
We find the burden is on the AO to show that the assessee has undisclosed income and the said burden cannot be said to be discharged by merely referring to the statement given by the assessee to the 3rd party, which is not directly related to the assessment, making the sole foundation for finding merely the assessee has deliberately suppressed income.
Thus, we hold the addition made by the Assessing Officer is not justified and the order of the ld. CIT(A) is justified in directing the Assessing officer to consider the value of closing stock of current year as opening stock of subsequent assessment year. Therefore, the Assessing Officer shall consider the value of stock as annexed to balance sheet. Thus, the ground raised by the Revenue fails and are dismissed.
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2024 (11) TMI 886
Chargeability of income earned under the Act / DTAA - Royalty or FTS receipts - Payment receipts for online education of MBA course - jurisdiction of AO by reclassifying the income as FTS instead of "royalty" - HELD THAT:- On careful reading of the Order of the Tribunal it is observed that it was also limited to examine the chargeability of income earned under the Act / DTAA as “royalty”.
The remand to the AO was also limited to examine and follow the judgment of the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd [2021 (3) TMI 138 - SUPREME COURT] - Tribunal did not remand to the AO to examine the applicability of definition of FTS as per the Act / DTAA in respect of the income of the assessee. Only subsequent to the remand proceedings by the Tribunal, it dawns upon the AO after examining the services agreement to tax the same as FTS under section 9(1)(vii) of the Act instead of “royalty” under section 9(1)(vi) of the Act. The AO after examining the agreement ideally ought to have filed a MA before the Tribunal seeking for an ‘open remand’ so that the receipt could have been either taxed under “FTS” or under “royalty”.
On perusal of the above Order of the Tribunal, it is clearly discernible that it is not an open remand but only a limited remand to examine the receipt whether it can be taxed in light of the judgment of Engineering Analysis Centre of Excellence (P.) Ltd., (supra) and other judicial pronouncements relied on by the assessee.
AO cannot go beyond the directions given in the remand order and look into the matters which was not subject matter of appeal before the Tribunal. This proposition was affirmed by the Hon’ble Allahabad High Court in the case of S. P. Kochhar [1982 (5) TMI 3 - ALLAHABAD HIGH COURT] wherein the scope of remand by the Tribunal was explained as when the Tribunal allows the appeal and sets aside the assessment and remands the case for making a fresh assessment, the power of the ITO is confined to such subject-matter only. He cannot take up the questions which were not the subject-matter of appeal before the Tribunal.
The Tribunal in the case of Bhagwandas associates [2007 (9) TMI 333 - ITAT PUNE-B] had held that Revenue has no scope for improving an already assessed income either by way of enhancement or in pretext of rectification while giving effect of an appellate Order. The Tribunal held that the statute does not provide such a wide unlimited and unending power to the AO.
Thus, AO has clearly exceeded his jurisdiction by taxing the income of the assessee as FTS which was not the subject matter of appeal before the Tribunal nor has the Tribunal given an open remand to the AO (in light of the master services agreement being produced before it for the first time). On perusal of the entire Order of the Tribunal, it is clear that the examination is limited to taxability of the receipts only in light of the judgment of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT (supra) and other judicial pronouncements relied on by the assessee which deals with the taxability of the receipt as “royalty” under section 9(1)(vi) of the Act.
Thus, the impugned addition is deleted on technical grounds.
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2024 (11) TMI 885
Disallowance of business expenses - Assessee by filing first appeal before the Ld. Commissioner challenged the disallowance of expenses, however, as it appears from the impugned order the Assessee not responded to the various notices sent by the Ld. Commissioner and therefore in the constrained circumstances having left no option dismissed the appeal of the Assessee - HELD THAT:- We observe that though the Ld. Commissioner has written in the impugned order that multiple opportunities of being heard by way of issuing of hearing notices were given to the Assessee, however, from the order it nowhere appears by which mode and on which dates the notices were sent to the Assessee.
Even otherwise we observe that the Ld. Commissioner did not pass the order on merits, hence for the just decision of the case and for the ends of substantial justice, we are inclined to remand the instant case to the file of the Ld. Commissioner for decision afresh on merits, suffice to say by affording reasonable opportunity to the assessee to substantiate its claim before the Ld. Commissioner.
We also direct the assessee to cooperate with the appellate proceedings and to file the relevant submissions/documents which would be essential and required by the Ld. Commissioner for proper adjudication of the case. We clarify that in case of further default the assessee shall not be entitled for any leniency. Hence, the case is remanded accordingly.
Appeal filed by the assessee stands allowed for statistical purposes.
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2024 (11) TMI 873
Validity of Final Assessment Order passed u/s 143(3) r.w.s. 144C(13) as barred by time limitation - HELD THAT:- In the context of faceless assessment process time and place of dispatch and receipt of electronic document (in this case DRP order) is required to be ascertained by reference to section 13 of Information Technology Act, 2000 which is the basis prescribed under section 144B of Income Tax Act also (refer section 144B (6)(v)).
Hon'ble Supreme Court in case of GS Chatha Rice Mills [2020 (9) TMI 903 - SUPREME COURT] interpreted this very provision. Applying principles laid down by Hon'ble Supreme Court, only relevant fact necessary for deciding additional ground in present appeal relating to time barred assessment, is time of uploading by DRP of DRP order onto ITBA portal. Intimation letter to DRP order unambiguously shows 26.05.2022 as date of uploading of DRP order. This fact cannot be disputed. Except this critical and relevant information everything else (like when order is visible to AO, date of uploading some document by DCIT/ACIT circle 2 (1) (1) Delhi) has been submitted by Respondents.
It is fair to conclude that date of uploading DRP order on ITBA portal is 26.05.2022. As per section 144C(13) of the Act, assessment had to be completed on or before 30.06.2022. In present case the assessment is completed only on 01.07.2022 i.e., it is time barred null and void. Therefore, impugned assessment order dated 30.06.2022 is set aside being barred by limitation.
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2024 (11) TMI 872
Addition u/s 68 - unexplained cash credits - cash deposited into bank account during the demonetization period - Use of theory of human probability - HELD THAT:- As going by the analysis of purchase and sales, there is no abnormality in sales declared by the assessee during the demonetization period.
As undisputedly clear that the AO has conveniently ignored the supporting evidences filed by the assessee to justify the cash sales made during the period October 2016 and upto 08/11/2016, because, if we go by the analysis of purchase and sales, there is no reason for doubting the sales declared by the assessee during the period of October and November, 2016.
AO has not made out any case of discrepancy in the books of accounts maintained by the assessee nor made out a case for any incorrectness in purchase, sales declared during relevant period. In fact, purchases are supported by necessary purchase bills and sales declared by the assessee including cash sales are supported by sale bills. Although the AO made observation with regard to uniform cash sales, in our considered view, only on the basis of uniform pattern of sales, it cannot be held that the sales declared by the assessee is not genuine.
Further in so far as the non-maintenance of phone number and PAN of the buyers, in our considered view, as per Rule 114B of IT Rules, 1962 there is no mandatory requirement of PAN of the buyers in case sales to single customer does not exceed Rs. 2 lakhs. Similarly, in respect of KYC compliances, the same is mandatory, in view of amendment to provisions of Money Laundering Act,2002 w.e.f. 04/05/2022 and the same is not applicable for the impugned assessment year. The observation of the AO on non-maintenance of phone and PAN number of the customer and adverse inference drawn against sales declared by the assessee is devoid of merit and cannot be accepted.
Assessee has furnished all relevant details in respect of cash deposited during demonetization period into bank account when the DDIT(Investigation) Wing has carried out enquiries with regard to source for huge cash deposit into bank account. In fact, the appellant has submitted all relevant information including supporting evidence for sales and cash in hand available as on 08/11/2016 to explain the source for cash deposits.
As undoubtedly clear that the additions made by the Assessing Officer towards cash deposited into bank account u/s 68 of the Act is purely on suspicion and surmises, without there being any contradictory evidence to suggest that the sales declared by the assessee is not genuine.
It is not the case of the AO that the cash sales made prior to 08/11/2016 were not recorded in the books of accounts. It is also admitted fact that the assessee has filed VAT returns and declared sales to VAT authorities. Closing stock of the year is carried forward as opening stock of the next year and even in the subsequent year, scrutiny assessment was made by accepting the opening stock which shows that the sales made in the year under consideration and income earned thereon was never disputed. Although the Assessing Officer doubted purchases made from related parties, the fact remains that there is no evidence with the AO to allege that said purchases are not genuine.
Therefore, in our considered view, merely for the reason of purchase from a related party, genuineness of purchases cannot be doubted in case said purchases are supported by necessary evidence. Further, the assessee has made payment against purchases through proper banking channel - adverse inference drawn by the Assessing Officer is devoid of merit.
AO ignored all evidence filed in support of the claim for cash deposit, which is in favour of the assessee. However, consider only the elements which go against the assessee, which is evident from the discussion of the Assessing Officer in the assessment order to draw adverse inference against the assessee. The Assessing Officer rested his discussion only on the basis of cash in hand maintained by the assessee during demonetization period, prior to demonetization period and post demonetization period.
According to the Assessing Officer, the cash balance held by the assessee is against human tendency. In our considered view, theory of human tendency or probability cannot work in a situation which is an exception to the normal conditions / situations. No one was aware as to what was the right step to move. Further huge amounts cannot be sent at a time through any one employee to avoid the risk of employees running away, theft, snatching money from employees etc. Therefore, the adverse inference drawn by the Assessing Officer considering human probability that no prudent person would carry huge cash in hand is only on suspicion and surmises. Therefore, in our considered view, the Assessing Officer is not justified in giving more weightage to unnecessary factors even though the evidence filed by the assessee clearly shows that the cash deposited in the bank account during demonetization period is out of opening cash in hand available as on 08/11/2016, which is supported by sales declared with supporting evidence.
Merely for the reason of carrying excess cash balance during a particular period when compared to other periods, it cannot be held that the argument of the assessee is against the theory of human probability, more particularly, when evidences clearly suggest that the explanation of the assessee is genuine and supported by necessary evidences - Decided in favour of assessee.
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2024 (11) TMI 871
Denial of exemption u/s 11 - assessee society has violated the provisions of section 13(1)(c) on account of Loans and Advances to related parties and Transportation fees received by M/s. Ashram Educational and Consultancy Pvt Ltd (AECPL) - HELD THAT:- In the present case, it is not disputed that the loans were advanced in earlier years and were not extended during the relevant assessment year. AO failed to demonstrate how any income of the assessee society was used to confer a benefit during A.Y. 2015-16.
Assessee’s claim that the loans were given out of advance received against proposed property sale and do not form income of the assessee, has merit. In our considered view the advances, being liabilities, do not constitute income of the society. Hence, the invocation of Section 13(1)(c) for AY 2015-16 is legally untenable.
‘Transportation Fees’ involving AECPL the assessee drew our attention to the audited financial statements as on 31/03/2015 of the company AECPL showing that after deducting operating expenses and agreed amount of Rs. 40.00 Lakhs to the assessee Trust as vehicle lease charges, the net income of the Company from transportation fees was very nominal i.e. Rs. 2.46 Lakhs for the whole year. There is no evidence that the assessee conferred an undue benefit to AECPL. AO’s conclusion that the lease arrangement was disadvantageous is based purely on a comparison of gross receipts, without considering the associated costs. Hence, the denial of exemption under Section 11 on this ground is not justified.
There is no violation of section 13(1)(c) of the Act, by the assessee, we direct the AO to allow the exemption u/s.11 of the Act and direct the AO to delete the addition made on account of the Corpus donation received. Further, according to the submission of the Ld.AR section 40(a)(ia) is not applicable for the A.Y. 2015-16 to the institutions / funds eligible for exemption U/s.11 of the Act. On perusal of the provisions of section 40(a)(ia), the claim of the assessee is found correct and the disallowance of Rs. 24,95,469/- i.e. 30% of the Rent of Rs. 83,18,230/- is hereby deleted by allowing the grounds of the assessee.
Exemption u/s.11 denied for violation of Section 13(1)(c) along with certain disallowances due to non-furnishing of details during the re-assessment proceedings - We note from the assessment order as well as impugned order, it is established that there was no opportunity for the assessee in prosecuting his case, but, however, on the undertaken given by assessee is ready to prosecute his case before the AO without fail, we deem it proper in the interest of justice to remand the matter back to the file of the AO - The assessee is at liberty to file evidence in support of his claim and the AO shall conduct the assessment proceedings de novo, by allowing the appeal of the assessee.
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2024 (11) TMI 868
Computation of total income in the Computation Sheet attached with the assessment order - HELD THAT:- We notice from the assessment order that the total income was determined by the AO at Rs. 16,82,668/-. However, in the computation sheet, the total income has been taken as Rs. 36,69,410/-. We also find that the AO has not given any explanation for the income so adopted in the computation sheet. Hence, there is some merit in the submission of the Ld.AR that there was an error in adopting the figure of total income by the AO in the computation sheet.
However, we are of the view that this plea of the assessee requires verification at the end of AO. Accordingly, we set aside the order passed by the Ld.CIT(A) on this issue and restore the same to the file of AO for examining this plea of the assessee. If it is an error as pointed out by the assessee, then the AO may correct the same.
Addition made u/s. 14A - assessee had earned share income from partnership firm and claimed same as exempt. However, the assessee did not make any disallowance u/s. 14A - HELD THAT:- We notice that the investment have been made by the assessee in the year 2000-01 and Over Draft facility has been obtained from ICICI Bank in November, 2014. Hence, there is merit in the contentions of the Ld A.R that the assessee could not have utilized loan funds for making investments. It is also stated that the overdraft facility availed from ICICI Bank was used for day to day activities. Hence, as per the decision rendered in the case of Gujarat Narmada Valley Fertilizers Company Ltd. [2014 (3) TMI 847 - GUJARAT HIGH COURT] no disallowance out of interest expenditure is called-for. Accordingly, we set aside the order of the Ld.CIT(A) on this issue and direct the AO to delete the disallowance made under Rule 8D(2)(ii).
Disallowance made under Rule 8D(2)(iii), the Ld.AR submitted that there is an error in computing average value of investment. Since this plea of the assessee requires verification, we restore this issue to the file of the AO for examining the same afresh. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with law. Appeal of the assessee is treated as allowed.
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2024 (11) TMI 867
Taxation of long-term capital gains arising on the development agreement u/s 153C r.w.s 144C(3) - assessee, being an NRI, was assessed to have no source of income in India and therefore, was taxable under the residual charge at Delhi, having a PAN number - As argued JDA, based on which the additions were made in the assessment for 2016-17, though registered, did not result in a transfer of possession
Jurisdiction of the AO u/s 153C r.w.s. 144C(3) - challenge the assessment made by the AO without a transfer order u/s 127 - HELD THAT:- In the present case, the documents were found during the course of search belonging to the assessee and notice u/s 153C was issued by the Assessing Officer having the territorial jurisdiction where the property is situated. The contention of the assessee that the notice should have been issued by the AO at Delhi will lead to lot of complications as there is no record available at the AO of Delhi nor the documents were available at the AO of the Delhi. The law is fairly settled that the forum in whose jurisdiction the situs is situated and where the necessary documents / information is available should be the appropriate forum for adjudication.
Section 127 of the Act will only come into play when there is some transfer of jurisdiction from one authority / office to the other. In the present case, the assessee has not filed the return of income and has not assessed at the Delhi ITO / Assessing Officer and therefore, there is no question of transfer of jurisdiction of the Assessing Officer from ITO, Delhi to ITO, Hyderabad. In view of the above, we are of the considered opinion that the jurisdiction invoked by the Assessing Officer at Hyderabad is in accordance with law - this ground is decided against the assessee.
Whether the transfer took place on account of JDA entered on 30.12.2015 or not? - Undoubtedly, as per the JDA, both parties agreed to raise the construction and share the built-up area - CIT(A) had captured the various clauses of the JDA which clearly shows the respective transfer of rights by one party to the other in respect of land share.
Assessee before us, pursuant to the construction was also entitled to receive the built-up flats as per the Annexure to the JDA. We are unable to comprehend as to how the assessee will receive the possession of built-up flats when the assessee has not allegedly transfer the possession. In fact, the ld.CIT(A) has categorically mentioned that no document has been produced by the assessee to separate transfer of possession to the developer.
No error in the decision of ld.CIT(A) on this aspect as the fact speaks for itself. The Developer was under obligation to construct the property after receiving due sanctions from various authorities as per the specification and cost of construction agreed between it and the assessee. For all purposes, there is a transfer of land / capital asset within the meaning of law and for the above said purposes, we may rely upon the decision of Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT] In the light of the above, this ground of the assessee is dismissed.
Year of assessment - assessee has disclosed his capital gains in the assessment year 2019-20 and therefore, it should not have been assessed in A.Y. 2016-17 - The law is settled that the tax has to be levied in the year when it is due and payable. In the present case, the taxable event as per the judgment in the case of Potla Nageswara Rao [2014 (6) TMI 494 - ITAT HYDERABAD] and Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT].happened in the year 2016-17 and therefore, it is to be charged in the said assessment year only. In case, as claimed by the assessee, the income has been offered in 2019-20, then the Assessing Officer may verify and pass rectification order, otherwise, it amounts to double taxation. In view of the above, the argument of the assessee is unsustainable.
Valuation of property - value of Rs. 5,000/- per sq.yd taken by the AO as against Rs. 8,000/- per sq.ft adopted by the registered valuer - The valuation report was required to be given of the property as on the date of its transfer i.e., in the assessment year 2016-17 and not on a the subsequent occasion. The inspection of the property on 08.06.2019 had not thrown the light on the extent and nature of construction. Furthermore, the valuation report cannot be considered as it does not inspire confidence and is therefore required to be rejected. In this regard, the Assessing Officer has relied upon the guidance value of the area in which the property is situated, we do not find any reason to interfere with the same as the assessee failed to point out the peculiarity of the location, status and construction of the property for fetching more price in comparison to the guidance value. In view of the above, this ground of the assessee is dismissed. Accordingly, the appeal of the assessee is dismissed.
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2024 (11) TMI 866
Demand u/s 201(1)/201(14) as barred by limitation - assessee company has failed to deduct tax at source as reflected by Tax Auditor in his report - assessee submitted that the order passed by the AO was time barred by limitation - Scope of amendment - HELD THAT:- Only change which was effected from the earlier provision was the limitation period of four years in case of a deductor not filing TDS statement was extended to six years from four years. Whereas, in case of a person /deductor filing TDS statement, the limitation period of two years remained unchanged.
The aforesaid sub section (3) of section 201 was again amended by Finance Act, 2014 w.e.f 1st October 2014 by substituting the earlier provision and earlier provision with a uniform limitation period of seven years from the end of relevant financial year wherein payments made or credit given was made applicable. If the legislature intended to apply the amendment provision of sub-section (3) retrospective it would definitely have provided such retrospective effect expressing in clear terms while making such amendment.
In the instant case the time limit for passing order u/s 201(1) of the Act pertaining to financial year 2010-11 where a statement u/s 200 of the Act has been filed was two years from the end of the financial year in which such statement was filed. It is evident from the order of the AO that the tax statement in the relevant form i.e. Form 26Q for F.Y. 2010-11 was filed by the assessee on 13-05-2011. The time limit for passing an order u/s 201(1) of the Act was up to 31-03-2014.The assessment order was completed on 28-03-2018 by the AO beyond the prescribed time limit. The sub-section (3) of the Section 201 of the Act does not applicable in this case.
We find that the assessment was made by the AO was time barred has no leg to stand and the Ld. CIT(A) has rightly allowed the appeal. The appeal of the revenue is liable to be dismissed.
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2024 (11) TMI 865
Salary received by non-resident in India - appellant was seconded on overseas assignment to UK - Income taxable in India or not? - number of days stay in India -Taxability of Salary Income under the India-UK DTAA - whether employer-employee relationship existed or not? - assessee is assessed as non-resident in AY 2020-21 as he had spent less than 60 days in India and was an employee of the M/s. Ernst & Young LLP during the previous year 2019-20. During Financial Year 2019-20 the appellant was seconded on overseas assignment to UK by his employer -
Assessee submitted before AO that salary is taxable in India only if it accrues in India and salary is considered to be accrued where the employment is exercised
HELD THAT:- We find substance in the arguments of the Ld.AR that assessee being tax resident of UK, the salary income was taxable in UK only. In fact, salary received for the employment exercised in UK is taxable in UK and in the light of Article 15(1) of the India-UK DTAA it is exempt income.
A similar view, has also been taken in the case of Nanthakumar Murugesan [2024 (6) TMI 815 - ITAT CHENNAI]. We find that identical fact exists before us in the present appeals. The proportionate salary for services rendered in India has already been offered to tax in India whereas the balance salary has already been offered to tax in UK. The assessee has not claimed any foreign tax credit in any of the jurisdiction. The UK tax has been paid. Therefore, ld. CIT(A) has rightly deleted the addition - Decided in favour of assessee.
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2024 (11) TMI 864
Assessment u/s 153A - Addition u/s 69 - assessee had availed of unsecured loan - HELD THAT:- It is true that the AO observed that the assessee had deposited a sum in the account of M/s Mohan Broker Agency, and credit was also shown by M/s Mohan Broker Agency and the assessee did not disclose in her Income tax return about said transaction, once said credit dated 7.1.2017 had been depicited in said statement of M/s Mohan Broker Agency, and no action was taken as regards the Income tax return furnished by the husband of the appellant in the relevant Assessment Year, it cannot be said that this is a case of discovery of any incriminating material only on search and seizure action on 29.3.2018.
Therefore, this addition made by resorting to provisions of section 69 of the Act deserved to be set aside. We order accordingly.
Sale of immovable property - Other addition, the only submission on behalf of the appellant is that having regard to the income declared by the assessee for the year under consideration and income declared in the previous 3 years, it cannot be said that the assessee had not the capacity to make payment of Rs. 92,700/-, and as such, this addition deserves to be set aside.
Sale consideration in respect of the immovable property was Rs. 12,48,000/-, and the assessee admittedly paid Rs. 12,28,000/-by way of cheque. As such, the assessee was required to disclose source of payment of remaining sale consideration and stamp duty charges, total amounting to Rs. 92,700/-, as submitted by Learned DR.
But having regard to the income of the assessee during the last 3 years, and the income of the year under consideration as shown in the ITR, it cannot be said that payment of this much amount remained unexplained. As is established from the documentary evidence, which was also made available before the AO and Learned CIT(A), we find that said addition also deserves to be set aside.
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2024 (11) TMI 863
Undisclosed investments u/s 69 and undisclosed investment in purchase of agriculture land - no explanation regarding the source of this investment provided - HELD THAT:- Firstly, it may be mentioned that payment of the sale consideration in cash to the vendors for purchase of immovable property was clearly in violation of provisions of the Act.
Secondly, there is no evidence from the assessee-appellant to suggest that she had received cash from her mother in law and paid the said cash amount to the vendors.
Contrary to it, the submission put forth by AR for the appellant is that Smt. Yashoda Devi had withdrawn the abovesaid amount and paid the same in cash to the co-owners. This version was never put forth by the assessee at any stage of the proceedings before the AO or before Learned CIT(A).
Thirdly, the assessee did not disclose said income in the Income tax return for the year under consideration. Same adversely affects the case of the assessee, particularly, when, admittedly, she has not been maintaining any books of accounts.
In the given situation, self serving confirmation by Smt. Yashoda Devi, mother in law of the appellant, does not come to the help of the assessee-appellant.
Nowever, taking into consideration income of the assessee during the F.Y. 2016-17 i.e. of Rs. 3,66,224.00 - Rs. 54,000.00 paid to Mohan Broker Agency during said year, we restrict the addition to Rs. 9,08,376 (i.e. Rs. 12,20,600.00 - Rs. 3,12,224.00, source of which she failed to establish, despite reasonable opportunity, before the Assessing Officer and before Ld. CIT(A).
Validity of impugned assessment order as no DIN Number was generated as regards the assessment order - Record reveals that while challenging the impugned assessment order before Learned CIT(A), no such ground/objection on behalf of the assessee-appellant was raised.
Even though this is a legal ground and can be raised before the Appellate Tribunal, it was for the assessee-appellant to prove to the satisfaction of this Tribunal if any prejudice has been caused to the assessee-appellant due to non mentioning of DIN number.
Instructions issued by Central Board of Direct Taxes are meant for compliance by the Income Tax Authorities. When the instructions were issued that such communications without DIN number shall be treated as ‘non-est’, and shall be deemed to have never been issued, can safely be said to have been issued to ensure and lay emphasis on their compliance by the Income tax authorities, without fail.
It is not the allegation of the appellant that no assessment proceedings were conducted by the Assessing Officer or that the impugned assessment order is a made up or forged and fabricated document.
In absence of any such plea or material to suggest that any prejudice was caused to the assessee-appellant, we do not find any merit in the contention raised on behalf of the assessee-appellant that because of non mentioning of DIN number. in the impugned assessment order, the same deserves to be set aside.
Impugned assessment order not digitally signed-its impact - Instruction No.1/18 dated 12.2.2018 issued by Central Board of Direct Taxes has also been relied on in the written submissions to submit that all departmental orders/notices/communications issued to the assessee through ‘e-proceedings’ are to be digitally signed by the AO.
As already noticed above, instructions issued by Central Board of Direct Taxes are meant for compliance by the Income Tax Authorities. Same can safely be said to have been issued to ensure compliance and lay emphasis on their compliance by the Income tax authorities, without fail.
It is not the allegation of the appellant that no assessment proceedings were conducted by the Assessing Officer or that the impugned assessment order is a made up or forged and fabricated document. Ld. AR for the appellant has not been able to satisfy if any prejudice was caused to the assessee-appellant for want of digital signatures on the impugned assessment order. Accordingly, we do not find any merit in the contention raised on behalf of the appellant.
Prior approval u/s 153D of the Act, whether the same was granted mechanically? - Significant to note that after having raised abovesaid inconsistent grounds as regards the approval, in the common paper book-II dated 29.08.2024 presented on behalf of the assessee-appellant on 17.09.2024, the very first document made available at page No. 23 (as assigned by the Ld. AR for the appellant), is the copy of approval u/s 153D of the Act, accorded by Additional Commissioner of Income Tax, Central Range, Udaipur, vide its letter dated 31.12.2019.The impugned assessment order is dated 30.12.2019.
It is available from the abovesaid letter dated 31.12.2019 that on receipt of letter dated 30.12.2019 from the office of DCIT, Central Circle, forwarding therewith draft assessment orders, mentioned therein, for approval u/s 153D of the Act, Additional Commissioner of Income Tax went through the contents of draft assessment orders and accorded approval u/s 153D of the Act.
In view of the said document submitted by the appellant, there is no merit in the contention raised on behalf of the assessee-appellant.
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2024 (11) TMI 862
Revision u/s 263 - assessment framed u/s 143(3) as erroneous in so far prejudicial to the interest of Revenue - HELD THAT:- It is settled law that for initiating the proceedings u/s 263 it is compulsory to reach to the conclusion that the assessment framed by the AO is not only erroneous but also prejudicial to the interest of Revenue.
On a perusal of the order of the learned PCIT, we note that the learned PCIT has observed that the expenses in dispute have already been capitalized by the assessee in the books of account. Since this fact has already been observed by the learned PCIT in his order, there remains no ambiguity that the assessee has not claimed the benefit of deduction of the impugned expenses in its P&L Account.
Thus, we hold that once no deduction has been claimed by the assessee of the impugned expenses in the P&L Account, then we are of the view that even the order is held as erroneous for any reason, the same cannot be held as prejudicial to the interest of Revenue.
Accordingly, we are of the considered view that the twins conditions being erroneous in so far prejudicial to the interest of Revenue have not been satisfied which was mandatory for invoking the provisions of section 263. Accordingly, we hold that the order framed by the learned PCIT u/s 263 is not sustainable and hence we quash the same. Assessee appeal allowed.
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2024 (11) TMI 861
Addition u/s 69A - sales declared by the assessee were treated as bogus - HELD THAT:- CIT(A) has given clear finding that the AO has not rejected the books of account and accepted the purchases and inventory declared by the assessee, proceeded to make the addition. We are also in agreement with the above findings that the basis of financials submitted by the assessee is the sales and the same was accepted. The net profit declared by the assessee was accepted by the revenue. The AO has taken a presumption that the assessee must have rerouted his own funds. This presumptions is not backed by any material and ld CIT(A) has rightly observed that the assessee must have purchased the gold in grey market and the revenue has not found any discrepancy in the financial result. No reason to take a different view considering the relevant facts on record. Therefore, we are inclined to dismiss the grounds raised by the revenue.
Validity of reassessment proceedings - Invalid approval granted u/s 151 - In this case, the approval was granted from the assessment of another person and merely recorded the reason as ‘yes’, proceeded to approve the same mechanically. Hence we are inclined to allow the ground raised by the assessee and held to be initiation of proceeding itself is bad in law and accordingly, the assessment made in the case of the assessee is set aside. In the result, appeal filed by the assessee is allowed.
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2024 (11) TMI 860
Revision u/s 263 - As per CIT AO had failed to carry out necessary inquiries and verification on the issue of verification of apportionment of expenses between eligible unit claiming deduction u/s 80IA(4)(iv) and non-eligible unit - HELD THAT:- It is evident that the appellant maintains separate records for Unit I and Unit II. Additionally, proper records were submitted to both the TPO and the AO. The appellant utilizes SAP for its accounting, ensuring a complete demarcation of each unit. Furthermore, the appellant has been granted deductions under Section 80IA in previous years, and thus, it cannot be alleged for the year under consideration that separate books of accounts were not maintained for eligible units, especially given that the same SAP software was used in those prior years. Accordingly, the ground raised by the appellant is hereby allowed.
AR argued that the assessment u/s 143(3) was completed after detailed enquiry and examination of books of account - The assessments for the earlier assessment years—specifically, AY 2012-13, 2013-14, 2014-15, and 2015-16—were conducted by the department with the acceptance of the fact that the assessee maintained separate books of accounts for both the Units. It is noted that these separate books of accounts were submitted during the assessment proceedings and also before the Principal Commissioner of Income Tax (PCIT) concerning the specified Unit II. Additionally, Form 10CCB, in conjunction with Rule 18BBB as per Section 80IA(7), along with a standalone balance sheet, was also submitted to the Assessing Officer (AO). Moreover, separate disallowances required as per income tax for the specified unit for the year ending March 31, 2017.
The cost sheets, along with the standalone profit and loss statements submitted before the Transfer Pricing Officer (TPO) demonstrate the bona fides of the assessee in maintaining separate books of accounts. Again, it is necessary to upload a consolidated balance sheet on the Income Tax portal; however, this requirement does not negate the fact that separate books of accounts were maintained, especially given that the appellant has submitted all relevant documents to substantiate this assertion.
Assessee has in fact maintained separate books of accounts. Therefore, the ground raised by the Appellant is allowed.
Jurisdiction u/s 263 was invoked solely based on audit objections and the proposal from the AO and without any independent application of mind by the Principal Commissioner of Income Tax (PCIT) - As we find that while partially accepting the audit objections, the AO stated in the concluding paragraph of the letter dated February 9, 2024, that the objections raised would be settled by invoking the provisions of Section 263. This statement underscores the reliance on audit findings, despite the AO's prior acknowledgment of the separate books of accounts maintained by the assessee.
In view of the above discussion referring the facts and circumstances of the present case, it is evident that the proceedings u/s 263 were culminated on the basis of audit objections without application of mind.
As decided in the case of Sohana Woollen Mills [2006 (9) TMI 157 - PUNJAB AND HARYANA HIGH COURT] held that invocation of section 263 merely based upon audit objection is bad in law.
As whole case has been framed based on audit objections without application of mind by the Ld. PCIT. In our view, the AO has undertaken complete enquiry and as such, the subsequent cause of action of invocation of section 263 is held to be without jurisdiction.
Revenue in the present case has failed to demonstrate how the order passed by the Assessing Officer (AO) was erroneous or prejudicial to the interests of the revenue. The Principal Commissioner of Income Tax (PCIT) has not substantiated any claims of non-application of mind by the AO, particularly given that the appellant submitted all requisite documents, including standalone profit and loss statements, cost sheets for Unit I and Unit II, turbine bills, invoices, and other relevant materials to the Assistant Commissioner of Income Tax (ACIT), Transfer Pricing Officer (TPO), and the PCIT. All submitted documents have been verified by the respective authorities, and, in our view, mere allegations that the AO issued the order without proper consideration are insufficient to justify the setting aside of the assessment order through the invocation of Section 263 - Decided in favour of assessee.
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2024 (11) TMI 859
Disallowance of deduction u/s 80IB/80IE in respect of interest on staff advances & statutory/bank deposit - AO observed that the Assessee is not entitled for deduction on loan to employees and bank deposits as such interest income is not income derived from industrial undertaking - HELD THAT:- Identical issue has been decided against the Assessee by the Co-ordinate Benches in A.Yrs. 2011-12 to 2014-15 [2022 (8) TMI 1444 - ITAT AHMEDABAD] disallowed the assessee's claim of deductions in respect of interest on staff advances & statutory/bank deposits.
Disallowance of expenditure incurred for doctors towards business promotion and accommodation - HELD THAT:- We find that since the Senior Counsel appearing for the assessee has not pressed this ground of appeal for the year under consideration, the Ground no.2 raised by assessee becomes infructuous and dismissed. However, this finding should not be considered as a binding precedent for all the subsequent years and it goes without saying that the assessee company has the right to bring out relevant facts so as to allow claim of expenditure u/s. 37(1) of the Act. So far as alternate claim of the assessee that it is entitled for higher deduction u/s. 80- IB/80-IE on the above disallowance is concerned, claim of assessee is allowable as per CBDT Circular No. 37 of 2016, dated 2nd November, 2016. Thus the Ld. AO is directed to verify that if above referred expenditure is part of profit & loss account for Unit eligible for deduction under Section 80-IB/80-IE, the assessee would be entitled for higher deduction and re-compute the same accordingly. Thus, Ground of Appeal no.2 raised by assessee is dismissed and relevant ground no.4 in Revenue’s appeal is allowed.
Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- So far as proportionate interest disallowance is concerned, the Ld Senior Counsel contended that it is evident from audited financial statements that the assessee has sufficient interest-free funds, whereas the CIT(A) has given adverse findings in this regard. Considering these facts, we set aside this issue to the file of AO and direct him to verify whether the assessee has sufficient interest-free funds or not and workout the disallowance in accordance with law.
Disallowance under Rule 8D(2)(iii) is concerned, considering the principle of natural justice, we direct the AO to verify the disallowance on the basis of facts of the case and provisions of the law. Thus, the ground no.3 raised by the assessee is hereby allowed for statistical purpose.
Addition of the amortization of Intangibles while computing book profits under section 115JB - HELD THAT:- As recording of Assets at Fair Value pursuant to Scheme of Arrangement and at time of initial recognition cannot be regarded as Revaluation of Assets and consequently no adjustment is required to made to book profit u/s. 115JB of the Act.
There is no change in the facts of the present case with that of the earlier asst years 2013-14 and 2014-15 [2023 (10) TMI 652 - ITAT AHMEDABAD] the Co-ordinate Bench considered various judgements, Accounting Standard AS- 14, AS-10 and also provision of section 115JB of the Act and held that adjustment made by the Ld AO in the Book profit is liable to be deleted.
Disallowance of Stamp Duty charges being capital in nature on the share expenses pursuant to the terms of Court sanctioned Scheme of Arrangement - HELD THAT:- The expenditure incurred by the assessee is directly connected with such increase in authorized capital and such expenditure cannot be allowed in view of judgements of Punjab State Industrial Development Corporation [1996 (12) TMI 6 - SUPREME COURT] and Brooke Bond India Limited [1997 (2) TMI 11 - SUPREME COURT] Thus, the addition made by the Ld.AO of Rs. 28,00,000 is confirmed. This Ground raised by the of assessee is dismissed.
Disallowance made u/s. 36[1][va] rws 2[24][x] for delayed payment of employees contribution to ESIC - HELD THAT:- This issue is held against the assessee by the Hon’ble Supreme Court in Checkmate Services Pvt Ltd [2022 (10) TMI 617 - SUPREME COURT].
Disallowance of long term loss on sale of land - Assessee neither claimed it in the original RoI nor in the Revised RoI filed by the assessee - During the assessment proceedings the assessee requested the AO to consider the inadvertent omission and allow LTCL - AO instead of allowing the loss, added back the amount of loss to the income of the assessee - HELD THAT:- The judgements relied by the assessee are not applicable to the present case, since the LTCL is neither claimed by the assessee in the original return nor in the revised return, but claimed during the course of assessment proceedings. The judgements referred above deals with fresh claim namely 80IA, depreciation made for the first time during the appellate proceedings and not on a LTCL/loss. Section 139[3] makes it mandatory to claim business loss or capital loss in the return filed u/s. 139[1] and as per Rule 12 of Income Rules. Thus we do not find any infirmity in the order passed by Ld CIT[A] and the Ground raised by the assessee is devoid of merits and the same is liable to be dismissed.
Disallowance of deduction u/s 80IE in respect to Sikkim Unit - HELD THAT:- . Since the eligibility of deduction was upheld in the first year of claim being AY 2010-11, the same cannot be disputed in the subsequent year of claim on the same ground of ineligibility. More particularly when the AO himself has observed that there is no change in facts and circumstances of the case during the year under consideration. Before us, no material has been brought on record by the Revenue to demonstrate the above decision of the Co-ordinate bench in earlier year has been reversed or set aside by the higher Judicial Forums.
Deduction u/s 80-IB/80-IE in respect of receipt of interest allowed.
Disallowance of business/conference fee and sponsorship expenses under the gift and freebies to doctors - HELD THAT:- Vide paragraph 6.2. of this order the above disallowance was confirmed and the Ld. AO is directed to verify that if above referred expenditure is part of profit & loss account for Unit eligible for deduction under Section 80-IB/80-IE, the assessee would be entitled for higher deduction and re-compute the same accordingly. Thus, Ground no. 4 in Revenue’s appeal is partly allowed.
Disallowance made towards care protection plan for Apple i-pads as valid for more than 12 to 24 months - HELD THAT:- The expenses incurred by the assessee towards care protection plan for Apple i-pads is allowable as Revenue expenditure u/s. 37(1) of the Act.
Disallowance of interest - CIT[A] after considering the facts on the penal interest paid and contractual agreement between the parties which is well within Arm’s Length pricing deleted the above addition - HELD THAT:- Perusal of the facts, the assessee paid interest to M/s. Neetnav Real Estate Pvt Ltd. though being a related party u/s. 40A[2][b] of the Act, but the interest was subject to domestic transfer pricing provisions u/s. 92BA - as per FAR analysis of the transaction, it has been found that the rate of 9% p.a. paid by the Assessee company is in conformity with the Arm's Length Pricing and also much lesser than the prevailing interest rates in the market. It is undisputed fact that based on contractual obligation the late payment of 232 days has attracted the penal interest which is to be allowed u/s. 37(1) of the Act. Thus the addition made by the Ld AO on this account is against the provisions of law and was rightly deleted by Ld. CIT(A).
Nature of expenses - software upgradation and support expenses - assessee claimed that these expenditures were mainly on account of data migration charges, online support services, improve its accounting software so as to effectively manage its day-to-day operation and also includes expenditure for regular maintenance of the software - AO held that the said software expenses gives benefit which would be available for more than one year i.e. enduring in nature and held as capital expenditure - HELD THAT:- The disallowance made on this account by the AO was rightly deleted by the Ld CIT[A] which does not require and interference.
MAT - addition of Wealth Tax to book profit for computation u/s. 115JB - CIT(A) following his predecessor’s order held that Wealth-tax paid cannot be treated on par with Income-tax and accordingly the payment of Wealth-tax was not required to be added to the book profit u/s. 115JB - HELD THAT:- Clause (a) of Section 115JB of the Act clearly talks on the Income Tax paid or payable only liable to be included for the purpose of book profit u/s. 115JB of the Act. Thus the addition made by the AO to Wealth Tax paid is liable to be deleted. Ground raised by the Revenue is devoid of merits and is hereby dismissed.
Disallowance of management consultancy charges paid to Mckinsey & Company - Addition made as payment was incurred for the benefit of the parent company namely, SPIL and not that of the assessee and the consultancy fees will benefit the assessee for indefinite period being capital in nature, therefore not allowable u/s 37(1) - HELD THAT:- No hesitation in upholding the order passed by Ld. CIT(A) deleting the addition made on account of consultancy service charges paid to Mckinsey & Company.
Consultancy charges paid to Makov Associates for availing strategic consulting services especially with respect to strategy building, business development, management of mergers and acquisitions etc. - HELD THAT:- AO failed to consider that the consultancy services rendered by Makov Associates enabled the assessee company to effectively undertake its operation and at the same time focus on the growth aspects of the company. Thus the above expenses is directly have nexus with the business of the assessee company and liable to be allowed as revenue expenditure u/s. 37(1) - CIT[A] also observed that in the case of SPIL the concerned AO after going through various documents, allowed the claim of Consultancy Service expenses paid to Makov Associates as allowable expenses u/s. 37[1] of the Act. Thus Ground raised by the Revenue is devoid of merit and the same is liable to be dismissed.
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2024 (11) TMI 858
Income taxable in India or not - income from licensing of software - Royalty receipts u/s 9(1)(vi) of the Act and Article 12 of India- Singapore DTAA - HELD THAT:- Assessee is a non-resident company incorporated under the laws of Singapore and did not have PE in India. During the assessment year the assessee has received an order for supply, installation, testing, commission and AMC of Video Management Software and Video Analytics Software for Vizag Smart city project from M/s. L&T Ltd.
Warranty/AMC should also be provided by the supplier up to December, 2022 by the assessee to M/s. L&T Ltd. On perusal of EULA entered between the assessee and M/s.L&T Ltd, it clearly mentions that ‘no title or ownership of the software’ or its documentation is transferred to the buyer (M/s. L&T Ltd) and also the ownership of the software and its modification rights shall remain at all times with the assessee only.
Considering the present facts and circumstances, supply of software sale made by the assessee to M/s.L&T Ltd, of India cannot be treated as royalty u/s. 9(1)(vi) of the Act and hence, the action of the Assessing Officer cannot be accepted. Further, the assessee’s claim of software is only a sale of software but not the copyright of the software and treated as royalty by relying on decision in the case of Engineering Analysis and Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT]
Further, the decision of Hon’ble Supreme Court is considered in the case of CIT vs. Microsoft Corporation [2022 (5) TMI 1070 - DELHI HIGH COURT] and also in EY Global Services Ltd. [2021 (12) TMI 571 - DELHI HIGH COURT] and held that mere supply of software without a sale of copyright cannot be treated as royalty to bring it to tax u/s. 9(1)(vi) of the Act. The same analogy has been following with reference to India-Singapore DTAA in the following cases and decided in favour of the assessee by excluding the supply of software without any copyright as non-taxable under Income-tax Act, 1961.
Thus, the supply of software by the assessee cannot be brought to tax either u/s. 9(1)(vi) of the Act or under the India-Singapore DTAA and hence, we set aside the order of the Assessing Officer/DRP by allowing the ground raised by the assessee.
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2024 (11) TMI 857
Denial of exemption u/s. 10(23C)(iiiab) - late filing of the income tax return i.e. beyond time specified u/s. 139(1) - also if the return is required to be mandatorily filed then whether, the filing of the return u/s. 139(4D) instead of section 139(4C) of the Act disentitles the assessee from claiming the exemption u/s. 10(23C)(iiiab) - HELD THAT:- DR could not point out any relevant provision or section under the Income Tax Act which disentitles the assessee from claiming exemption u/s. 10(23C)(iiiab) of the Act for non-filing/late filing of the income tax return. Therefore, the action of the lower authorities in denying the exemption to the assessee on this ground is not sustainable.
Second issue as to whether the filing of the return in wrong form i.e. Form u/s. 139(4D) instead of Form u/s. 139(4C) becomes irrelevant.
Action of the lower authorities in denying exemption to the assessee cannot be held to be justified. The impugned order of the Ld. CIT(A) is set aside and the AO is directed to grant exemption to the assessee as claimed u/s. 10(23C)(iiiab) of the Act - Appeal of the assessee stands allowed.
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