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2022 (7) TMI 1269
Addition u/s 68 - genuineness of transaction, creditworthiness of the company, nature and source of such sum so credited to the assessee’s account not provided - Tribunal justification on upholding the deletion - HELD THAT:- True nature of a transaction has to be ascertained in the light of the surrounding circumstances and by applying the test of human probabilities.
On going through the order passed by the Tribunal, we find that no independent finding has been recorded by the Tribunal as to how the Tribunal was satisfied that the findings recorded by the CIT(A) do not call for any interference. There is nothing on record to indicate that any concession was permitted by the revenue to be made before the Tribunal. Considering the fact that the revenue has been contesting the matter, in our view, the learned Tribunal being the last fact finding authority, in the fitness of things, should record reasons to support its conclusion. Since we find such course having not been adopted by the learned Tribunal, we are inclined to interfere with the order passed by the learned Tribunal and remand the matter back to the learned Tribunal for fresh consideration.
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2022 (7) TMI 1268
Rectification u/s 154 - credit of Tax deduction at source in the year - whether the assessing officer ought to have exercised his powers under Section 154 of the Act pursuant to an application filed by the assessee for rectification of a mistake? - HELD THAT:- Sub-section (1) of Section 199 states that any deduction made in accordance with the other provisions of Chapter XVII of the Act and paid to the Central Government shall be treated as payment of tax on behalf of the person from whose income the deduction was made and credit shall be given to him for the amount so deducted on production of certificate furnished under Section 203 for the assessment made under the Act for the assessment year for which such income is assessable. It is not in dispute that the income was assessed for the assessment year 2005-06. If such is the case, the question would be whether the assessing officer could have ignored Section 199. If the answer to the said question is in the negative, then the next question would be whether such order of assessment made under Section 143(1) could be rectified by invoking Section 154 of the Act. In CIT Vs. Sundaram Textiles Ltd [1984 (6) TMI 49 - MADRAS HIGH COURT] while considering the provisions of Section 154 of the Act it was held that the application of a wrong provision of the Act or the erroneous application of the same to the facts of the case which do not call for such application, will amount to a mistake apparent from the record for the purposes of Section 154.
In T.S. Balaram ITO V. Volkart Bros. [1971 (8) TMI 3 - SUPREME COURT] the Hon’ble Supreme Court held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points, on which there may be conceivably two opinions.
As the appeal is allowed and the order passed by the learned Tribunal as well as the order passed by the Learned Commissioner of Income Tax (Appeals) dated 18th November, 2013 are set aside and the matter is restored to the file of the first Appellate Authority who shall consider the submissions of the assessee after affording an opportunity of hearing to the authorized representative of the assessee and take a fresh decision on merits in accordance with law.
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2022 (7) TMI 1267
Credit of taxes deposited under the DTVSV Act - the petitioners deposited the taxes, however, the mistake which the petitioners have committed is that they had deposited the taxes under the minor head ‘200’ instead of ‘400’ - HELD THAT:- As the petitioners have paid the taxes, they should be given the credit for the challans paid in Form 3 under the said Act. The order/communication dated 7th April, 2022 rejecting credit of taxes deposited under the DTVSV Act on the hyper-technical ground that challans have been deposited under the minor head ‘200’ instead of ‘400’ is unfair, illegal and contrary to the objective of enacting the DTVSV Act, 2020.
If the only impediment in the way of granting relief sought by the petitioner is the software, the same ought to be suitably modified to accept the applications of the petitioners. One of us, (Manmohan, J) in Shalu Nigam & Anr. Vs. The Regional Passport Officer & Anr. [2016 (5) TMI 1587 - DELHIHIGH COURT] has held, “In any case, technology is intended to ease and facilitate transactions and cannot be the basis for creating and defeating anybody’s legal rights”. After all, the software has to be tailor-made according to the needs, aspirations and legal rights of the tax payers and not that the tax payers’ legal rights have to be tailor-made in accordance with the software being used by the Tax Department.
This Court directs the respondents to correct the payment heads, record the credit of taxes deposited and to issue revised Forms 3 within four weeks. Thereafter, the petitioner shall file Forms 4 within two weeks.
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2022 (7) TMI 1266
Revision u/s 263 by CIT - deduction under Chapter-VIA under section 80IB(10) - HELD THAT:- We note that in the case of Myhome Developers v. ACIT [2021 (3) TMI 345 - GUJARAT HIGH COURT] assessee was a partnership firm engaged in activity of developing housing projects. The assessment in case of assessee was sought to be reopened on ground that assessee had claimed excessive deductions under section 80-IB(10), without providing interest on capital and remunerations to partners for respective years under consideration, which had escaped assessment.
Though clauses of partnership deed provided for interest on partner's capital and remuneration, same was subject to their mutual agreement. Thus, it was noted that mere incorporation of clauses in partnership deed for interest on partner's capital and remuneration, did not signify that, interest and remuneration was to be paid to partners mandatorily.The record indicated that assessee had not provided any remuneration interest on capital payable to partners. Accordingly, the Gujarat High Court held that the impugned reopening noticed issued against assessee was unjustified and same was to be set aside.
As twin conditions that the order is erroneous and is also prejudicial to interest of revenue are not satisfied in the instant facts. The issue on the claim of excessive deduction under Chapter-VIA under section 80IB(10) of the Act was specifically raised during the course of assessment proceedings and the assessee had filed detailed reply in response thereto during assessment proceedings. Further, as evident from the above judicial precedents, the view taken by the AO is a legally possible view. Therefore, we find no infirmity in the assessment order. Accordingly, we are of the view that Principal CIT has erred in holding that the order passed by the assessing officer is erroneous and prejudicial to the interest of revenue. Appeal of the assessee is allowed.
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2022 (7) TMI 1265
Undisclosed income - diary found during the course of search and statement recorded from the assessee - HELD THAT:- In this case, AO has admitted that what was recorded in the seized document towards debit side is expenditure outside regular books of account, although nature of said expenditure is not known to the assessee as well as the Assessing Officer. Therefore, we are of the considered view that when the AO has taken credit entries as income of the assessee earned from undisclosed source of income, he ought to have considered debit side of entries as expenditure incurred for earning said income. If you consider same analogy, then the AO should have considered income as well as expenditure. If you consider debit entry as expenditure, then only net income from said document needs to be taxed. Since, we have already stated in earlier part of this order, credit entry does not depict any income and debit entry does not show any light on expenditure, then the only possible method to determine undisclosed income for the above period is adoption of peak credit theory and in this case, particularly peak credit theory is best method to determine undisclosed income of the assessee.
The assessee has filed working of peak credit, which is available in paper book filed for relevant period. The assessee has copied entries contained in seized documents relied upon by the AO and recorded date-wise receipts and payments. For the financial year 2015-16 as on 23.03.2015, peak credit works out to Rs.36.25 lakhs, which is net of debit and credit entries recorded in seized document.
Therefore, addition is required to be made to the extent of Rs.36.25 lakhs for the assessment year 2015- 16. Hence, we direct the Assessing Officer to sustain additions to the extent of Rs.36.25 lakhs for the assessment year 2015- 16 towards undisclosed income. The assessee has worked out peak credit of Rs.73.13 lakhs as on 25.03.2016 which is relevant to the assessment year 2016-17, on the basis of net of debit and credit entries from so called diary found during the course of search. Therefore, we direct the Assessing Officer to restrict addition to the extent of Rs.73.13 lakhs for the assessment year 2016-17 - Therefore, addition is required to be made to the extent of Rs.422.00 lakhs for the assessment year 2017-18 and thus, we direct the Assessing Officer to sustain addition to Rs.422 lakhs for the assessment year 2017-18.
Unaccounted cash receipts - Except entry in the name of M/s. Natesh Agencies amounting to Rs.50,40,000/-, the assessee could not explain other entries in the name of P.Palaniswamy for Rs.61,00,000/- M/s.Pearl Transport for Rs.10,00,000/- Mr.TNJ Nadarajan for Rs.49,90,000/- and M/s. M.S.Wines for Rs.45,00,000/- totaling to Rs.1,65,90,000/-, except stating that those entries does not belong to him and persons from whose premises said document is found needs to be explained contents of the document. We do not find any merits in the arguments of the assessee for the simple reason that document pertains to business activities of the assessee and further, persons specified in the document are all associates of the assessee and hence, it is for the assessee to explain contents recorded in the document. Since, the assessee could not explain contents; we are of the considered view that the Assessing Officer has rightly made additions towards entries as unaccounted income in the hands of the assessee. Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the assessee.
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2022 (7) TMI 1264
Deduction claimed u/s.54F - assessee owns more than one houses at the time of transfer of original asset - HELD THAT:- As explanation of the assessee before the AO that although, he had owned more than one houses, but those houses are let out for commercial purposes and if we exclude houses let out for commercial purposes, then the assessee does not have more than one houses, when the original asset was transferred and thus, entitled for exemption u/s 54F - We have considered rival submissions and also decision relied upon by the learned AR for the assessee in the case of Navin Vs, ITO [2020 (6) TMI 514 - KARNATAKA HIGH] and we find that the issue involved in the present appeal is squarely covered by the decision of the Hon’ble Karnataka High Court where it has been held that where two apartments owned by the assessee, even though had been sanctioned for residential purpose, yet same were in fact, being used for commercial purposes as service apartments, then both needs to be excluded for the purpose of deduction u/s.54F.
Assessee is entitled for deduction u/s.54F in respect of amount invested for purchase of another residential property. Hence, we direct the AO to delete additions made towards disallowance of deduction claimed u/s.54F - Decided in favour of assessee.
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2022 (7) TMI 1263
Penalty u/s 271D - Journal entries - urgent need to make payment towards EPF - there was cash deposit in the bank account which is contravention of the provisions of Section 269SS (b) - HELD THAT:- The assessee clearly established that the loan availed by the Director Sivaprasad Patnam is transferred to the assessee company because of its company is urgent need of cash/finance. The same were being availed by way of loan from various banks and directly credited into the account of the assessee company and necessary journal entries have been made in the book of the assessee company. Thus, there is no violation of Section 269SS - Therefore no question of levying penalty u/s. 271D relating to the journal entry - Thus, the finding made by the CIT(A) purely factual in nature, which does not require any interference and the same is hereby upheld. Thus the grounds raised by the Revenue is hereby rejected and the appeal is dismissed.
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2022 (7) TMI 1262
Disallowance of deduction u/s 57(iii) - claim of deduction / set off of interest expenditure against the interest income - AO observed that, assessee had failed to establish that the unsecured loans were raised for earning of interest income - HELD THAT:- Dynasty Tradelink Pvt. Ltd. - We are of the considered view that as the assessee had raised interest bearing loans from M/s. Dynasty Tradelink Pvt. Ltd. wholly and exclusively for the purpose of earning interest income on the loans/deposits given to GDR Educational Society, therefore, his claim for deduction of the corresponding interest expenditure is well in order and had wrongly been disallowed by the lower authorities. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct him to allow the assessee’s claim for deduction under Sec. 57(iii) of the interest expenditure corresponding to the interest bearing that was raised from M/s Dynasty Tradelink Pvt. Ltd.
Hill Queen Investment Pvt. Ltd., Sonal Kumar Rungta & Tanishq Export Pvt. Ltd. - We find that neither the complete facts which would prove to the hilt the existence of an inextricable nexus between the aforesaid interest bearing loans and the interest generating advances is discernible from the records, nor any such claim of deduction of interest is found to have been raised by the assessee in its return of income for the immediately preceding year i.e AY 2012-13. Be that as it may, as the issue as regards the allowability of the assessee’s claim for deduction under Sec. 57(iii) of the interest paid on the loans raised from the aforementioned three parties cannot be adjudicated in the absence of complete set of facts before us, therefore, in all fairness we restore the matter to the file of the A.O with a direction to re-adjudicate the same in the backdrop of our aforesaid observations. In case the assessee in the course of the set-aside proceedings is able to substantiate that the interest bearing loans raised by him from the aforementioned three parties, viz. (i) Hill Queen Investment Pvt. Ltd.; (ii) Sonal Kumar Rungta; and (iii) Tanishq Export Pvt. Ltd. were advanced for the purpose of earning of interest income in question, then, the A.O shall allow his claim for deduction qua the same under Sec. 57(iii).
Assessee had paid interest on the old interest bearing loans that were raised in the earlier years from the aforementioned four parties, viz. (i) Mary Mithai; (ii) V.K Satija HUF; (iii) Jaya Solanki ; and (iv) Yashwant Rao Kavre for advancing of interest bearing amounts - We find substance in the claim of the ld. AR as regards the allowability of his claim for deduction of the interest expenditure on the old loans which were utilized for earning of interest income by advancing the same as interest bearing loans/deposits. Our aforesaid conviction is supported by the fact that the assessee’s claim for deduction of interest paid on the loans raised from the aforesaid four parties in his return of income for the immediately preceding year, i.e, AY 2012-13 had been accepted by the department and had not been dislodged, Page 11 of APB. Nothing to the contrary has been brought to our notice by the DR to rebut the aforesaid factual position as had been canvassed by the ld. AR before us.
We are of the considered view, that as the fact situation during the year under consideration remains the same except for that the outstanding loans of the aforesaid four parties were squared up by the assessee by raising a bank loan i.e, a temporary OD from OBC bank, therefore, going by the principle of consistency we find no reason to take a different view and thus allow the assessee’s claim for deduction of interest on aforesaid loans.
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2022 (7) TMI 1261
Deduction u/s 80P - interest on bank deposits - HELD THAT:- As stated by the ld. AR, and rightly so, the Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit & Ors [2022 (3) TMI 75 - ITAT RAIPUR] had after drawing support from the judgment in the case of Tumkur Merchants Souharda Cooperative Ltd.[2015 (2) TMI 995 - KARNATAKA HIGH COURT] had after exhaustive deliberations concluded, that interest income earned on the surplus funds which were parked as deposits by the co-operative society in the normal course of the business of providing credit facilities to its members, i.e., at a point of time when there were no takers for the said funds was duly entitled for deduction under Sec. 80P(2)(a)(i).
We, thus, in terms of our aforesaid observations direct the AO to allow the assessee’s claim for deduction under Sec. 80P(2)(a)(i).
Deduction of the income from paddy procurement business u/s 80P(2)(a)(iii) - HELD THAT:- As decided in GRAMIN SEWA SAHAKARI SAMITI MARYADIT, SEWA SAHAKARI SAMITI MARYADIT RAJNANDGAON [2022 (3) TMI 75 - ITAT RAIPUR] we are of the considered view that as the compilation of the paddy procurement by the assessee-society has been filed before us as additional documentary evidence, and the same was not there before the lower authorities, therefore, the matter in all fairness requires to be revisited by the AO. We, thus, in terms of the aforesaid observation set-aside the matter to the file of the Assessing Officer, with a direction to re-adjudicate the same after considering the additional documentary evidence that had been filed by the asssessee before us. A.O shall after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, therein, restrict the assessee’s claim for deduction u/s. 80P(2)(a)(iii) of the Act only to the extent of the profit relatable thereto.
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2022 (7) TMI 1260
Reopening of assessment u/s 147 - reasons recorded by the learned assessing officer shows that there was a tax evasion petition received by the income tax Officer - HELD THAT:- As central bureau of investigation has investigated and come to the conclusion that the assessee’s books of accounts are manipulated and fabricated to suit the personal purposes and diversion of funds for the personal purposes of the chief promoter of Reliable group of companies Mr. Nemchand Gala. There were also finding with respect to the investigation made by the Department of Central investigation bureau stating that all books of accounts maintained by the assessee are fabricated and are not reliable, as not maintained day to day. There was also an allegation of diversion of funds of the banks and the company used for the personal purpose of the directors. On the receipt of this letter from the ITO 1 (2) 4), Mumbai, AO found that assessee has not filed return of income for assessment year 2009 – 10 and therefore he has reason to believe that income has escaped assessment.
No infirmity in the order of the learned CIT – An in upholding the validity of the reopening of the assessment. Accordingly, ground number 1 of the appeal of the assessee is dismissed.
Estimation of income - bogus purchases - HELD THAT:- As it is a case of the circular trading entered into by the assessee along with its related parties where there is no evidence whether the rates charged by the parties in the circular rate were at market rate and further when the goods are sold without any physical movement of the goods, the sales and the purchases are not at all reliable. The transactions are also rooted through journal entries. The quantity of goods involved in the circular trading is also not ascertained that how much is involved in circular trading and what is the actual sale and purchase of the assessee. The assessee has purchased 2,44,29,155 KG and sold the same quantity and there is no opening stock and closing stock during the year. Therefore, the explanation of the assessee becomes unreliable with respect to the gross profit shown by the assessee. No infirmity in the order of the CIT – A in upholding disallowance of expenditure estimating income at the rate of 12.5% of such bogus purchases. Accordingly, ground number 3 of the appeal is dismissed.
Addition u/s 68 - HELD THAT:- Merely because a person is a promoter/director of the group, the genuineness of the transaction and creditworthiness of that person requires to be proved independently. Even before us, no evidence is produced except the copy of reply of the assessee dated 28/9/2017 wherein the bank statement of Mekan Gala for the month of March 2009 was produced. CIT – A also did not care to identify whether the amount of credit is in the name of Mr. Nemchand J gala or Mekan J Gala, whether these are different persons or one person, and if they are different, what is the relationship. Thus, assessee has failed to show the genuineness of the transaction with respect to this party also as far as the credit received during the year in that account are concerned.
The findings of the learned CIT – A cannot be sustained. Accordingly, the amount credited in the account of global Impex paper private limited and Mr. NJ Gala are required to be added u/s 68 of the income tax act as assessee has failed to prove the genuineness of the transaction. In view of this ground number, 3 and 4 of the appeal of the learned assessing officer are allowed.
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2022 (7) TMI 1259
TP Adjustment - income earned by the assessee from its associated enterprises for rendering of engineering, tendering and IT support services - selection of Desein Pvt. Ltd as comparability - HELD THAT:- Desein Pvt. Ltd. is operating in a completely different segment insofar as its revenue from operation and maintenance is concerned and the aforesaid services, in our considered view, cannot be said to be comparable to the assessee.
Desein Pvt. Ltd. also earns income from consultancy fees and same has been declared separately in its financials at Note No. 18 to Accounts. However, in the present case, lower authorities didn’t examine whether functions performed, assets employed and risks assumed for earning the income from consultancy fees is comparable to the assessee. Further, the segmental information regarding the income from consultancy fees was also not examined by any of the lower authorities and the company was excluded on one or the other reason as mentioned above. Therefore, we deem to appropriate to remand the issue of comparability of relevant segment of Desein Pvt. Ltd. with assessee to the file of TPO for de novo adjudication after necessary examination of all the data. Further, the assessee is directed to file all the information regarding functions performed, assets employed and risks assumed by Desein Pvt. Ltd. for earning the income from consultancy fees before the TPO for the purpose of examination of comparability of relevant segment of Desein Pvt. Ltd. with the assessee. - Ground of assessee’s appeal are allowed for statistical purpose.
Adjustment in respect of international transaction of ‘Payment of Corporate IT Support Services’ - HELD THAT:- From the perusal of invoices, it is evident that same also describe the services provided under the head IT services by the third-party. To prove the rendition of service, the assessee has also filed sample extracts of email communication between the employees of the assessee and the associated enterprise as well as screenshots and IT tickets raised mentioning the description of various IT services received. From careful perusal of all the details filed by the assessee, we are of the considered view that lower authorities were not justified in holding that no services were rendered by the associated enterprise in respect of which payments were made by the assessee. We are further of the view that none of the basis for rejecting these details by the learned DRP is arising from the record.
As per the provisions of aforesaid Rule, the ‘other method’ shall be the method which takes into account the price which has been or would have been charged or paid for the same or similar uncontrolled transaction between non-associated enterprises. However, in the present case, the lower authorities without searching for similar uncontrolled transaction between non-associated enterprises, straightaway treated the value of the international transaction to be at NIL.
As noted above, in the present case, no search was conducted to find out the independent entity in a comparable transaction and the arm’s length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the Assessing Officer under section 37 of the Act. Further, accrual of benefit to assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by Hon’ble Delhi High Court in the case of EKL Appliances Ltd [2012 (4) TMI 346 - DELHI HIGH COURT]
Thus we are of the considered opinion that TPO as well as learned DRP were not justified in treating the value of international transaction of ‘Payment of Corporate IT Support Services’ to be NIL, in the present case. Accordingly, ground No. 2, including grounds no. 2.1 to 2.3, raised in assessee’s appeal are allowed.
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2022 (7) TMI 1258
Penalty u/s 271(1)(b) - default / non-compliance of notice issued under section 142(1) - reasonable cause for non-compliance of the notice under section 142(1) - HELD THAT:- The assessee has clearly pointed out before the CIT(A) that the Assessing Officer has completed all the proceedings including the assessment within a period of less than four months from the date of issuing notice under section 148 without giving the assessee proper opportunity and supplying the copies of the impounded material. It is also pointed out that the AO failed in providing copies of certain documents as mentioned by the assessee in the request filed before the AO - CIT(A) though reproduced the submissions of the assessee in the impugned order however, not appreciated this crucial fact that the assessee has explained the reasonable cause for failure to comply with the notice issued u/s 142(1) by way of making the repeated requests to the Assessing Officer to supply the copies of the impounded material.
AO has completely ignored the request of the assessee then the question of paying the copying charges or specifying the documents does not arise. The contention of Ld. DR on this point is devoid of merits. Therefore, the case of the assessee falls in the ambit of section 273B as the assessee has proved that there was a reasonable cause for failure to comply with the notice issued under section 142(1) - The decisions relied upon by the learned DR would not help the case of the Revenue in the specific facts of the present case. Accordingly, the penalty levied u/s 271(1)(b) is deleted. Appeal of assessee allowed.
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2022 (7) TMI 1257
Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance made by assessee - HELD THAT:- The solitary issue involved in this appeal of the assessee is squarely covered by the decision of Coordinate Bench of this Tribunal rendered in the case of DCIT Vs. Greenland Infracon [2018 (11) TMI 1415 - ITAT AHMEDABAD] mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. The Revenue authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed in correctly owing to its own mistake.
So viewed, we do not see any potency in the argument laid on behalf of the Revenue that the CIT(A) allegedly committed error in granting total relief in the matter of disallowance under s.14A of the Act. In our considered view, the action of the CIT(A) in granting relief under s.14A of the Act on account suo moto disallowance by the assessee and thereby granting relief higher than claimed in the return of income cannot be faulted in law. - Decided in favour of assesse.
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2022 (7) TMI 1256
TDS u/s 194J OR 194C - TDS on repair and maintenance of aircraft - nature of technical fees and not payment of fees for works contract - AR stated that the recipient of the payment has duly offered these payments as its income, accordingly, he made an alternative submission that the benefit of proviso to sec. 201(1) may kindly be given to the assessee - HELD THAT:- When it was pointed out by the bench that the assessee is required to furnish a certificate from an accountant in order to avail the benefit of the proviso, the Ld A.R submitted that the assessee shall submit the same before the AO.
We are of the view that, in the interest of natural justice, the alternative contention of the assessee may be accepted. However, the claim of the assessee requires verification at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) and restore the alternative contention in all the years under consideration to the file of the AO for examining it in accordance with law. Since the alternative contention is accepted, we are not adjudicating the main grounds of appeal urged by the assessee.
After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with the law.
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2022 (7) TMI 1255
Gain on sale of shares - business income or capital gain - HELD THAT:- We note that the shares are always valued at cost and assessee never took any benefit of valuation loss for invested shares, even if the market value had fallen below the cost. We note that this accounting practice has been consistently followed by the assessee for several years and is a deciding factor in such matters as held in the case of CIT VS. Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - Considering the aforesaid facts as well as taking into consideration the CBDT Circular No.04/2007 dated 15.06.2007, we find that the assessee’s intention of buying and selling of shares was that of an investor and therefore, the action of the AO to treat the consideration from sale of shares as business income has been rightly not agreed upon by the CIT(A). We find that there was no new facts before the AO to upset the earlier actions taken by the department to treat the assessee as an investor. So on the principle of consistency also the assessee has made out a case in her favour. Therefore, we are inclined to uphold the order of the Ld. CIT(A) and dismiss the ground of appeal raised by the revenue.
Long Term Capital Loss (LTCL) from the off-market share transactions - whether the LTCL claim of the assessee on sale of seven scrips in the off-market transactions can be allowed to be set off and carried forwarded as per the provisions of the Act? - allegation of the AO was that the De-mat accounts of certain buyers of these seven scrips were handled by the share broking company of which the assessee was one of the Director - HELD THAT:- DR could not point out how this allegation of AO has any material bearing in this case. Moreover, it was brought to our notice that the AO in the assessment year for A.Y.2014-15 has accepted the same transaction in the scrutiny assessment u/s 143(2) (except in-respect of three scrips, where the reasons given by AO was that same were executed at a price more than the prevailing market price on the relevant date). We note that the AO has accepted the other transaction carried out by the assessee in the off-market transaction where the price was as per the prevalent market prices. Thus we note that the AO had no objection to off-market transactions per-se for A.Y.2014-15, when the same was transacted off-market. Coming back to the relevant AY 2013-14, it was brought to our notice that all the transactions (except) the scrip of Baroda Rayon where shares were not traded for long and hence market price was not available. Considering the aforesaid facts as well as the case laws in similar case wherein the Tribunal has accepted the off-market transaction of an assessee who had also made the claim of set off of or carried forward, as the case may be was allowed by the Tribunal. - Decided against revenue.
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2022 (7) TMI 1254
Disallowance of foreign exchange loss treating the same as capital loss - Assessee invested in bonds of Lodha Developers International (Netherlands) B.V. which were redeemed incurring a loss due to change in foreign exchange rate of Rupees to GBP - whether the investment made by the assessee in the bonds, do we need to treat the investment as capital investment and any expenditure incurred in such investment to be treated as business expenditure or not.? - HELD THAT:- As investments were made in the name of the company and any related expenditure has to be charged to the business except to the extent of any exempt income earned through these investments. However, in the given case, the investments made in bond are interest bearing bonds and it is chargeable to tax, therefore, any income chargeable to tax, any related expenditure either related to earning of such income or relating to investments are business expenditures. In this case, the assessee has incurred loss while redeeming the bonds, hence it is deductible expenditure.
It is also fact on record that in the subsequent AY, these bonds were redeemed and the actual loss incurred due to exchange fluctuations. The assessee normally would have claimed the loss in the subsequent AY, since it has anticipated the loss by monitoring rate fluctuations (the Mark to Market), it predicted possible loss and it booked the loss prudently. We observe that the courts have held that the Mark to Market losses are revenue in nature and it should be treated as such. In the given case, the assessee has booked the loss in two parts and once part claimed in the present AY and balance part of actual loss was claimed in the subsequent AY. It is needless to say that the loss was allowed by the Assessing Officer in the subsequent AY as revenue. Therefore, the loss claimed by the assessee is part of actual loss and it may look as claimed on the basis of provision but it is part of actual loss. Therefore, in our considered view, the loss claimed by the assessee in this AY is claimable u/s 37 - Hence, we direct the AO to allow the foreign exchange loss claimed by the assessee. Accordingly, the ground raised by the assessee is allowed.
Disallowance being 50% of payment of marketing expenses paid to Lodha Developers UK Limited (“LD UK”) for lack of evidence - HELD THAT:- Respectfully following the above said decision in assessee’s own case for the A.Y. 2013-14 [2022 (6) TMI 18 - ITAT MUMBAI] we restore this ground to the file of the Assessing Officer for denovo consideration and after due verification of the evidences submitted the expenses may be allowed, it is needless to say that proper opportunity of being heard to the assessee. We allow this ground of the assessee for statistical purpose.
Disallowance of regularization charges by treating the same as penalty towards infringement of law - HELD THAT:- e observe that assessee paid regularization charges in order to regularize certain deviations in the construction projects. In the similar situation, the Hyderabad Bench decided the exactly similar compounding charges in favour of the assessee in the case of Keerthi Estates (P.) ltd. [2017 (8) TMI 1672 - ITAT HYDERABAD]. Thus we are directing the Assessing Officer to allow the compounding fees claimed by the assessee, accordingly, ground raised by the assessee.
Disallowance in respect of writing off of non-refundable security deposits for electric connections as revenue expenditure - Assessee had paid non-refundable security deposits for electricity connections for the constructions projects undertaken - AO made addition on the ground that no documentary evidence was submitted to substantiate the claim of payment of non-refundable deposits - HELD THAT:- We observe that the assessee had paid certain amount as initial deposit for the purpose of obtaining new electricity connection in the new projects it undertakes. Since assessee did not submit the relevant supporting documents before tax authorities, now, these documents were filed before us an additional evidence. We are inclined to admit these evidence and remitting this issue also to the file of Assessing Officer to verify the claim of the assessee, we direct him to allow the claim as per law after providing reasonable opportunity of being heard to the assessee. Accordingly, ground raised by the assessee is allowed for statistical purpose.
Reversal of provision made in respect of Transferable Development Rights - HELD THAT:- We observe from the submissions of the assessee that in the earlier AY, Assessing Officer rejected the claim of the assessee relating to the provision made in respect of TDR. We understand that assessee preferred an appeal before appellate authorities in the AY 2013-14, we direct Assessing Officer to verify the outcome of the appellate proceedings, in case it is rejected by the appellate authorities, the assessee may be given due benefit. In case assessee prefers to drop the proceedings initiated before the appellate authorities, then the Assessing Officer may pass the necessary benefit to the assessee and entertain the claim of the assessee. Accordingly, additional ground raised by the assessee is allowed for statistical purpose.
Education cess deductible u/s. 37(1) - HELD THAT:- After considering the submissions and the latest amendments in the Finance Act, this issue is already reached finality. Accordingly, additional ground raised by the assessee is dismissed.
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2022 (7) TMI 1253
Reopening of assessment u/s 147 - As argued reopening initiated without obtaining of Approval or the Approval is not in accordance with law - Cheque issue business - Genuineness of activity - onus to prove in case of No-account case - unexplained deposit in Bank account - income estimated @8% on the transactions reported in the Bank account - HELD THAT:- No wonder that the assessee’s claim before the ld. CIT(A) is ambivalent, stating that the proceedings had been initiated without obtaining of Approval or the Approval is not in accordance with law, clearly indicating of the assessee being not aware of or, in the least, not sure of the actual facts of the case. Rather, the assessee’s request dated 11/11/2016 to the AO cannot be regarded as a valid request in law as the assessee had till then admittedly not furnished any return in response to the notice u/s. 148(1), which was filed only on 18/11/2016.
There is no claim and nothing on record to exhibit that a request was made after the filing of the return. Further still, even though this aspect is stated to form part of the assessee’s objection (to the issue of notice u/s. 148(1)) to the AO dated 29/11/2016, submitted on 30/11/2016, the same stands disposed of by the AO vide his communication dated 01/12/2016. Neither the said objection nor the disposal thereof is made part of the Tribunal’s record, for us to be informed of the actual state of affairs or the legal consequences flowing therefrom.
Besides, a non-satisfactory disposal of the objections by the AO ought to have prompted the assesse to challenge the same, which is the sole purpose of the prescription in GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] to the AO to meet the tax payer’s objection/s (to the issue of notice u/s. 148(1)) per a speaking order, and only whereupon he could proceed to make the assessment. Why, the assessee’s Ground, even before us, continues to be vague and non-specific. We are, in view of the aforesaid reasons, not persuaded to call for the assessment record, or otherwise direct the AO to produce the approval u/s. 151.
Cheque issue business - Unexplained bank deposits - HELD THAT:- In fact, the AO correctly observes that even in a ‘no accounts’ case, the assessee is supposed to furnish evidences in support of his claim/s. A finding of fact by the assessing or an appellate authority could, after all, only be on the basis of material on record (refer, inter alia, CIT v. Radha Kishan Nandlal [1975 (3) TMI 2 - SUPREME COURT].
The very fact of it being a part of such racket implies it to be an organized business. As such, it caters to some persons, even if unidentified, outside the assessee. A business implies an exchange. The two facts, i.e., the money laundering and financial accommodation business, on one hand, and the money in his bank account/s belonging entirely to the assessee, on the other, are inconsistent with each other, so that the latter, an inferential fact, which is under dispute, cannot hold. Even if therefore the assessee is unable to establish the source of the moneys deposited in his bank accounts, given the fact of such business being undertaken, only the peak balance in his bank accounts could be added as unexplained money u/s. 69/69A. The second aspect of the matter would be the income earned through such business, which the assessee admits at Rs. 1.51 lacs, albeit, sans any evidence.
The only material on record in this respect, i.e., income arising from business, is the stated consideration of 0.15% - 0.2% on turnover, also admitted by the assessee. It is inconceivable though that such a meagre commission is charged for assuming such a high risk; the illegality factor alone (i.e., even ignoring the service component of the activity undertaken, which involves transmission of liquid cash, which itself involves high risk) scaling up the risk factor inordinately, while, as simple economic theory and plain common sense advocate, there is a positive correlation between the risk & return. Further, it also doesn’t explain cash deposit of Rs. 6 lacs in Bank Account # 2, against which there are, as afore-stated, no corresponding debits, i.e., on the basis of the material on record, including the explanation furnished.
The peak balance of the two bank accounts for the relevant year is not on record. Also, we are conscious that it may be that there are business transactions subsequent to the date of the peak balance/s, so that the income attributable to those transactions, though not manifesting in the form of bank balance/s (or, more aptly, a higher bank balance/s), would warrant being assessed as income, i.e., in addition to the peak balance/s. We are also, in view of the unsatisfactory factual determination (for which it is the assessee, being in the know of his financial affairs and obliged by law to explain the same, who, having failed to, is principally responsible), and the long period that has since lapsed, disinclined to restore the matter back, and consider it proper to, under the given facts and circumstances, adjudicate the matter on the basis of the material on record.
The assessee shall thus stand to be assessed for a total income of Rs. 6,45,200, as business income, as against the returned income of Rs.1,51,000. This is as there is nothing on record to suggest the assessee, who did not file any return u/s. 139, but only (on 18/11/2016) after being served the notice u/s. 148(1) on 02/04/2016, carrying on any other business or vocation during the year.
We have, on the contrary, in the conspectus of the case, accepted the financial accommodation entries as a business, stating our reasons for the same. And, further, allowed the assessee the benefit of doubt in not directing addition for the peak balance, i.e., in addition to the normative profit earned since, in computing his income, even as, as it appears, the gross income of Rs. 2,51,662 (against which no evidence of expenditure stands produced) stands collected in addition to that deposited in bank for the purpose of issuing cheques. The assessee has, accordingly, without showing, been allowed the telescoping benefit. Appeal partly allowed in favour of assesse.
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2022 (7) TMI 1252
Conduct of the Resolution Professional (RP) - prayer to expunge the said observations on the ground, that being adverse, it has the effect of damaging the reputation and dignity of the Appellant as Insolvency Professional. - Whether serious efforts were made by the Appellant/Resolution Professional in properly verifying the claim submitted before him by the Financial Creditor including classifying the debts into financial and operational debts? - Whether the Appellant/Resolution Professional had failed in his duty to analyse the evidence placed before him regarding the nature of transactions made by the Financial Creditor reflected in the books of Corporate Debtor and presenting the complete facts before the CoC on the admissibility of the claims of the Financial Creditor?
HELD THAT:- It is an undisputed fact that the Financial Creditor submitted his claims under Rule 8 of CIRP Regulations in Form C well within the prescribed time limit in terms of the public announcement made by Appellant/Resolution Professional on 13.04.2019. The last date of submission of claims, as provided in the public announcement was 26.04.2019 and the Financial Creditor had submitted on 26.04.2019 his claim details along with supporting documents as also found in the Appeal Paper Book.
Invoking CIRP Regulation 10, the Appellant/Resolution Professional sent an email on 01.05.2019 seeking additional information with respect to account statements spanning over a period of 12 years from 2007 to 2019 from the Financial Creditor - What, however, merits consideration is the reasonability on the part of the Appellant/Resolution Professional to have allowed only just twenty-four hours to the Financial Creditor to submit additional information spanning order a period of 12 years (2007-2019) and the propriety of his action of rejecting the claim of the Financial Creditor soon thereafter on 02.05.2019 after having allowed only one day’s time to furnish such additional information which entailed voluminous documentation.
Section 18 of the IBC lays down the various duties of the IRP in respect of handling claim proposals. Section 18(1)(b) lays down that IRP shall “receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under Sections 13 and 15.” As regards the role of the Resolution Professional in this regard, Section 25(e) of the IBC lays down that he shall “maintain an updated list of claims.” The Resolution Professional while examining claims is therefore expected to act in a manner which inspires confidence in the Financial Creditor so as to ensure the credibility of the insolvency process. In the present matter, therefore, the question before us is therefore whether a Resolution Professional is competent to decide or reject the claims of the Financial Creditor by himself without presenting the complete facts before the CoC on the admissibility of the claims.
The Resolution Professional is an important instrumentality in the insolvency resolution process and his role is crucial and critical to fulfill the objective of the IBC. It is therefore incumbent upon him to discharge his responsibilities with the highest standards of professional excellence, dexterity, integrity, rectitude, and good faith. The Adjudicating Authority based on the facts and documents presented before it, found lack of professionalism on part of the Appellant/Resolution Professional in analyzing the admissibility of claims before him. There are no reasons to disagree with the Adjudicating Authority and affirm the findings that there has been failure of duties on the part of the Appellant/Resolution Professional.
There are no convincing reasons to interfere with the Impugned Order - Appeal dismissed.
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2022 (7) TMI 1251
Approval of resolution plan - Rejection of the claim of the appellant as Financial Creditors - payment of Earnest Money - disbursement is against the consideration for the time value of money - Appellant submitted that, the CoC by approving the plan has not taken into account the interest of all the stakeholders. - HELD THAT:- There is nothing on record to indicate that proposal submitted by the Appellant by letter dated 14.09.2018 was accepted or agreed by the Corporate Debtor. Earnest Money was paid by the Appellant after submitting a proposal by the Appellant himself without their being any acceptance. There is neither any agreement between the parties nor any agreement has been brought on record. It is true that contract between the parties can be oral as well as in writing however, there is no foundation in the Application filed by the Appellant or materials brought by him to indicate that there was even an oral agreement with the Corporate Debtor for sale of the land to the Appellant - The Adjudicating Authority has even observed that there is no proof that this letter dated 14.09.2018 was served on the Corporate Debtor.
Time value of money thus means the price received for the length of time for the money for which the money has been disbursed - The law as laid down by the Hon’ble Supreme Court in [2020 (2) TMI 1259 - SUPREME COURT] clearly lays down that root requirement is disbursement against the consideration for the time value of money which is an essential condition to be proved to accept debt to be financial debt.
Whether the payment of Earnest Money even if it is accepted as disbursement whether disbursement is against the consideration for the time value of money? - HELD THAT:- The disbursement made by the Appellant to the Corporate Debtor was only a payment of Earnest Money which was to be adjusted in sale of the land. The disbursement was not in consideration for the time value of money - Essential condition for accepting a debt to be financial debt being absent, we are of the view that Adjudicating Authority has not committed any error in rejecting the claim of the Appellant as Financial Creditor. The claim of the Appellant of Earnest Money of Rs. 7 Crores has been admitted by the Resolution Professional as under the category of other creditors.
The Resolution Plan envisages that amount for other Creditors is Nil. Thus the submissions that all stakeholders have not been dealt with in the plan cannot be accepted. CoC in his commercial decision has decided not to allocate any amount to the other creditors which cannot be questioned since Appellant has not been able to prove violation of any provision of code in the Resolution Plan - the Resolution Plan which has been approved by the Adjudicating Authority on 27th May, 2020 does not require any interference.
Present is not a case where any interest free loan has been advanced to the Corporate Debtor. Present is the case where Earnest Money was paid by the Appellant to the Corporate Debtor - Appeal dismissed.
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2022 (7) TMI 1250
Dissolution of the Corporate Person - Section 59(7) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- On perusal of the documents annexed to the Petition, it appears that the affairs of the Corporate Person have been completely wound up and its assets have been completely liquidated. It is also satisfied from the documents on record that the voluntary liquidation is not with intent to defraud any person and that the bank account for the purpose of Liquidation has been closed.
In view of the facts and circumstances and the submissions made by the Applicant, the Corporate Person deserves to be dissolved - application allowed.
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