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2022 (7) TMI 1169
Dishonor of Cheque - Territorial Jurisdiction - Maintainability of the criminal proceeding and issuance of notice - cause of action vis-a-vis the alleged transactions between the parties arose within the State of Orissa - Notice pending in the file of learned Chief Metropolitan Magistrate, Vishakhapatnam - whether this Court exercising power under Section 482 Cr.P.C. can set aside or quash a criminal proceeding pending before the court of the Chief Metropolitan Magistrate, Vishakhapatnam in the peculiar facts and circumstances of the case? - HELD THAT:- In the present case, as it appears from Annexure-1 series, the alleged cheque stated to have been presented at Vishakhapatnam, if at all the averments therein are to be believed and accepted at its face value. If such is the case, then OP No. 1 can be said to have rightly filed the complaint at Vishakhapatnam where his banker is situated. The transactions might have taken place in Orissa and for that, civil litigations could have been brought before any court situated at such places where a part of cause of action arose but for the purpose of a criminal action under Section 138 of the N.I. Act, in view of Section 142(2), it has to be at a place where the cheque was presented and dishonoured.
In the instant case, the transactions stated to have taken place within the State but the alleged cheque as claimed by OP No. 1 stood dishonoured at Vishakhapatnam, whereafter, the complaint was filed in the court of Chief Metropolitan situated there.
The Court is of the considered view that the petitioner would have to respond to the notice in question which has been received under Annexure-2 or if so advised, may also question the maintainability of the complaint on merits by approaching the High Court of Andhra Pradesh since above is the prima facie view of this Court which is based on the available materials.
Petition dismissed.
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2022 (7) TMI 1168
Cancellation of the petitioner’s registration - non-existent report dated 23/07/2020 - HELD THAT:- Although counter-affidavit has been filed, the following has not been disputed by the respondents/revenue:
(i) Firstly, no notice of inspection was served on the petitioner, as is required under Section 25 of the CGST Rules 2017.
(ii) Secondly, the inspection report dated 23.07.2020, which forms the basis of the impugned order dated 30.03.2021, was not furnished to the petitioner.
(iii) Several other reasons have been mentioned in the counter-affidavit by the respondent/revenue, which find no reflection in the impugned order dated 30.03.2021.
The writ petition is thus, disposed of, with the direction that the petitioner’s revocation application will be dealt with in the next two weeks.
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2022 (7) TMI 1167
Violation of principles of natural justice - petitioner was afforded an opportunity of personal hearing in terms of the proviso to Section 29 (2) of the Karnataka Goods and Services Tax Act or not - HELD THAT:- The proviso to Section 29 (2) of the Karnataka Goods and Services Tax Act specifically observes that there shall be no cancellation of registration without giving an opportunity of being heard. Accordingly, during the course of proceedings relating to cancellation of registration, there is a statutory mandate that the assessee should be given an opportunity of personal hearing. The authorities concerned in such proceedings is required to specifically state the time and date as regards personal hearing provided to the assessee. In light of the absence of such reference in the order at Annexure-B, the order at Annexure-B deserves to be set aside and the matter be remitted for fresh consideration before the Authority.
The matter is remitted for fresh consideration before the Authority to be disposed off in terms of the observations made above and the proceedings are directed to be commenced from the stage after issuance of notice dated 06.02.2019 - Petition allowed by way of remand.
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2022 (7) TMI 1166
Condonation of delay in filing appeal - Taxability - Appellant is a society registered under the Societies Registration Act, 1860 - client-service provider relationship - Induction and in-service training to Indian Corporate Law Service (ICLS) officers - Capacity building and training programs in the field of competition law, market regulations, finance, corporate governance and public policies - Policy advisory functions, public outreach and stakeholder consultations through seminars, conferences and forums - management consultancy services or not - HELD THAT:- In terms of Section 100 of the CGST Act, 2017 an appeal should be filed within 30 days from the date of communication of the advance ruling order that is sought to be challenged. However, the Appellate Authority is empowered to allow the appeal to be presented within a further period not exceeding 30 days if it is satisfied that the Appellant was prevented by sufficient cause from presenting the appeal within the initial period of 30 days. In the Form ARA-02, the Appellant has stated that the date of communication of the advance ruling order is 28.06.2019 Clearly the appeal has not been filed within the prescribed time period of thirty days from the date of communication of the order.
Whether the appeal filed on 14.02. 2020 is within the condonable period of another 30 days? - HELD THAT:- The Appellate Authority is not a “Court” and hence the power to condone beyond the prescribed period does not arise - Furthermore, the provisions of Limitation Act, 1963 does not apply to the appeal proceedings before the appellate authority.
Since the appeal cannot be allowed to proceed on account of time limitation, the question of discussing the merits of the issue in appeal does not arise - Appeal dismissed.
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2022 (7) TMI 1165
Export of goods or not - sales effected from the Security Hold Area of the IGI Airport, T-3, New Delhi - supply of sunglasses from the retail outlet of the applicant at Terminal-3, IGI Airport (International Departure), New Delhi, to outbound international passengers against the international boarding pass - liable to SGST under the DGST Act, 2017 and CGST under the CGST Act, 2017 or is it a zero rated “export” supply within the meaning of Section 2(23) r/w Section 2(5) of the IGST Act, 2017? - HELD THAT:- As per Section 2(5) of the Integrated Goods and Services Tax Act, 2017, “export of goods” with its grammatical variations and cognate expressions, means taking out of India to a place outside India. Further, as per Section 2(56) of CGST Act, 2017 “India” means the territory of India as referred to in article 1 of the Constitution of India, its Territorial Waters, Seabed and Sub-oil underlying such waters, Continental Shelf, Exclusive Economic Zone (EEZ) or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters. For the purpose of CGST Act, India extends upto the Exclusive Economic Zone upto 200 nautical miles measured from the appropriate baseline.
On going through the definition of “customs frontiers of India” under s2(4) of the IGST Act, 2017, we find that it has reference to the “customs area” as defined in section 2 of the Customs Act, 1962. In terms of s2(11) of the Customs Act, 1962 “customs area” means the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities - Notwithstanding the aforesaid, Section 15 of the IGST Act, 2017 is applicable to tourists leaving India and any supply of goods taken out of India by him shall be refunded in the manner prescribed. As per Explanation appended to Section 15 of the IGST Act, 2017 “tourist” means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes. This section is yet to be operationalized and the payment of IGST will be refunded to the tourist as per the procedure to be prescribed.
Thus, the transactions i.e. supply of goods to outbound international travellers fall within the definition of “taxable territory” and when read in conjunction with section 7 of the CGST Act, 2017 forms “supply” and attracts the applicable GST on the date of supply of the goods - appeal dismissed.
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2022 (7) TMI 1164
Applicable rate of GST - activity of appellant of supplying food/ beverages - supply of food through the food plaza on the railway platform (with A/C)/food stalls on the railway platform (without A/C) - supply of foods on board the Rajdhani Trains - Supply of food on board the Mail/Express train - taxability of supply of newspaper - rate of tax on supply of newspaper - applicability of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017 vide N/N. 46/2017 - Central Tax (Rate) dated 14.11.2017; amendment made in N/N. 8/2017- Integrated Tax (Rate) dated 28.06.2017 vide N/N. 48/2017 Integrated Tax (Rate) dated 14.11.17; amendment made in N/N. 11/2017 - State Tax (Rate) dated 30.06.2017 vide N/N. 46/2017 - State Tax (Rate) dated 28.11.17 in the NCT of Delhi - HELD THAT:- The clarification issued by CBIC vide letter F.No. 354/03/2018-TRU dated 23.03.2018 given in the letter ibid is squarely applicable to the facts of the case, where it was held that With a view to remove any doubt or uncertainty in the matter and bring uniformity in the rate of GST applicable for all kinds of supply of food and drinks made available in trains, platforms or stations, it is clarified with the approval of GST Implementation Committee, that the GST rate on supply of food and/or drinks by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms (static units), will be 5% without ITC.
The GST rate on supply of food and/or drinks by the appellant whether in trains or at platforms (static units), will be 5% without ITC. Advance Authority's Order stands overruled to this extent.
Taxability - Supply of newspaper - rate of tax - HELD THAT:- The same is exempt vide Entry at S. No. 120 of Notification No. 2/2017 - Central Tax (Rate) dated 28.06.2017, Entry at S. No. 120 of Notification No. 2/2017 - Integrated Tax (Rate) dated 28.06.2017 and Entry at S. No. 120 of Notification No. 2/2017 - State Tax (Rate) dated 30.06.2017. Hence no tax is payable on the supply of newspapers on the trains.
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2022 (7) TMI 1163
Deduction on account of bad debts - amounts claimed as bad debts had been taken into account in computing the income of the Assessee in the previous year and offered for taxation and the unrecovered amounts had been written off in the books of account - HELD THAT:- This Court is of the view that Section 36(1)(vii) r/w Section 36(2) of the Act provides that in order to claim deduction on account of bad debts, two conditions have to be met by the Assessee i.e. (i) the bad debts must have been taken into account in computing the income of the Assessee of previous year or of an earlier/previous year and; (ii) the bad debts should have been written off in the accounts of the Assessee. In the present case, CIT(A) has given a finding of fact that the amounts claimed as bad debts had been taken into account in computing the income of the Assessee in the previous year and offered for taxation and the unrecovered amounts had been written off in the books of account and, consequently, the claim of the Assessee was duly allowable.
This Court is also in agreement with the contention of learned counsel for the Respondent that as M/s Max New York Life Insurance Company had considered Respondent’s invoices as ‘not payable’, the amount claimed as bad debts by the Appellant was legal and justified. In any event, in the appeal filed by the Department, it has not been averred that the Respondent has received any payment from M/s Max New York Life Insurance Company against the alleged bad debts in the last seven Assessment Years.
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2022 (7) TMI 1162
Disallowance u/s14A read with Rule 8D(iii) - ITAT made deletion of the disallowance made under Section 14A of the Act by relying upon circular no. 5/2014 dated 11th February, 2014 - HELD THAT:- The said challenge of the department cannot be accepted in view of the judgment of this Court in Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT wherein Court answers the questions framed by holding that the expression ‘does not form part of the total income’ in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.
The aforesaid judgment has held field since 2015 and has been consistently applied by the ITAT and followed by this Court in all subsequent matters.
ITAT admitting additional ground raised by the assessee regarding the treatment of subsidy - HELD THAT:- No error was committed by the ITAT by permitting the assessee to raise the additional ground at the stage of the appeal because there is no dispute raised by the department to the fact that the said subsidy given by State of Jammu & Kashmir to the assessee is liable to be treated as a capital receipt in view of the judgment of Shri Balaji Alloys [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT]
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2022 (7) TMI 1161
Validity of re-assessment orders issued u/s 143(3)/ 147 r.w.s.144B - as argued impugned orders have been passed in violation of the principles of natural justice, as the Respondents have not taken into consideration the material on record and the replies and documents filed by the Petitioner - Petitioner did not come to know of the show cause notice, as she did not get the real time alert, as is mandatorily required under Section 144B(7)(ii) - HELD THAT:- A perusal of the impugned assessment order reveals that though the mutual funds are held in the joint name of the assessee and her husband, yet the payments of the same have been made from the bank accounts held jointly by the assessee and her husband in one of bank accounts the first name is that of the petitioner-assessee. It is also alleged in the impugned order that, “the source of deposit in all these bank accounts does not indicate whether such deposits has been made by her husband or by the assessee, out of their independent source of income”. Consequently, the dispute involved in the present matters is essentially factual in nature.
Moreover, appeals against the impugned assessment orders have already been filed under Section 246A by the Petitioner before the appropriate Authority. Consequently, this Court is of the view that it would be appropriate if the petitioner raises all her contentions and submissions before the Appellate Authority.
Accordingly, the present writ petitions along with applications stand disposed of with liberty to the petitioner to raise all her contentions and submissions before the Assessing Officer.
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2022 (7) TMI 1160
Stay of demand - disputed demand has arisen on account of the failure of the petitioner to deduct tax at source on the interest payments made to China Development Bank (hereinafter referred to as ‘CDB’), which as per the petitioner was a bank wholly owned by the Government of China - HELD THAT:- We find force in the submissions of the counsel for the respondents that this Court cannot at this stage cannot arrive at any conclusion, prima facie or otherwise with respect to ownership of the CDB, which will be determined in the present appeal after due consideration of the documents relied upon by both the parties. The respondents do not admit the inference of ownership drawn by the petitioner on the basis of the documents placed on record by the petitioner being the annual reports of the CDB. The ownership of the CDB being a disputed question of fact cannot be decided by this Court and it cannot be a matter of prima facie determination as it is the material fact to be determined in the appeal filed by the petitioner.
With respect to the plea of hardship, it is noted from the petitioner’s standalone statement of profit & loss that its earnings before interest, tax, depreciation and amortisation for the year ended 31st March, 2021 is Rs. 330.76 crores. It is further noted that the revenue from operations of the petitioner for the same year stand at Rs. 1604.66 crores. So also the current assets of the petitioner are reported as Rs. 4,930.34 crores. With respect to the contention of the petitioner as regards brought forward losses of Rs. 9,671.83 crores as reported in its ITR for AY 2021-22, it is noted that out of the same, Rs. 7167 crores have been set off in the AY 2021-22. The petitioner has not suffered any operational losses in the relevant financial year. In these circumstances, the plea of hardship as raised by the petitioner is not made out.
Accordingly, the impugned order dated 2nd June, 2022 does not call for any interference. We, however, direct the Commissioner (Appeals) to dispose of the appeal within a period of 12 weeks from today.
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2022 (7) TMI 1159
Addition u/s 68 - approved scheme of Amalgamation - whether the scheme of amalgamation which was approved by this Court could be stated to be a scheme which was floated by the assessee with the sole object of avoidance of income tax - HELD THAT:- As confirmed in Vodafone Essar Gujarat Ltd. [2012 (9) TMI 100 - GUJARAT HIGH COURT] in case the Scheme is sanctioned, it may result into tax avoidance on the part of the appellant, but it is required to be noted that even if the ultimate effect of the Scheme may result into some tax benefit or even if it is framed with an object of saving tax or it may result into tax avoidance, it cannot be said that the only object of the Scheme is ‘tax avoidance’. Considering the various clauses of the Scheme, it is not possible for us to come to a conclusion that the Scheme is floated with the sole object of tax avoidance. - Decided against revenue.
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2022 (7) TMI 1158
Addition u/s 68 - identity, creditworthiness and genuineness not proved - HELD THAT:- There was no compliance of this notice also by the assessee. Then AO issued notice u/s 133(6) to the investor who had paid share application money to the assessee company towards share capital and share premium. However, the investor did not file details before the assessing officer. Therefore, we note that three ingredients of section 68, namely identity, creditworthiness and genuineness, have not been satisfied by the assessee. Hence, we are of the view that one more opportunity should be given to the assessee to furnish basic documents, as required by assessing officer before the assessing officer. Therefore, we set aside the order of CIT(A) and remit this issue back to the file of the assessing officer for denovo adjudication in accordance with law.
Disallowance of interest expenses @ 12% on interest free advances given to its sister concern M/s Jay Bharat Fin stock Private Limited, when interest was incurred at the same rate by the assessee on its borrowed funds - HELD THAT:- It is settled principle of law that when the assessee has adequate interest free funds to make interest free advances to sister concerns, then no disallowance of interest expenses can be made. For this, reliance can be placed on the judgment of Hon`ble Gujarat High Court in the case of Commissioner of Income-tax, Gandhinagar vs. Rajendra Brother [2014 (9) TMI 885 - GUJARAT HIGH COURT].
We note that where the assessee was having sufficient interest free funds available with him to lend interest free advances, the ld CIT(A) was justified in deleting disallowance of interest in relation to such interest free advances.
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2022 (7) TMI 1157
Estimation of income - bogus purchases - HELD THAT:- We note that issue under consideration is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in case of Pankaj K. Choudhary & others [2021 (10) TMI 653 - ITAT SURAT]. This Tribunal has taken a constant view and made disallowance @ 6% of bogus purchases.
As the issue is squarely covered by the decision of the Coordinate Bench, in the case of Pankaj Choudhary(supra), and there is no change in facts and law and the ld DR for the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench(supra), hence respectfully following the binding precedent, we allow Revenue`s appeal partly.
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2022 (7) TMI 1156
Validity of the initiation of proceedings u/s 153C - HELD THAT:- Admittedly, the impugned A.Y falls within the period of six years as envisaged in the provisions of section 153C of the Act and the AO has completed the assessment u/s 143(3) r.w.s. 153C - The basis of initiation of proceedings u/s 153C is the documents being provisional balance sheet of the assessee seized from the premises of Shri I. Shyam Prasad Reddy during the course of search at his premises on 18.7.2012. The satisfaction note was duly received by the Assessing Officer of the assessee from the AO of the searched person. Therefore, in our opinion, there is no infirmity or illegality in the order of the Assessing Officer in initiating the proceedings u/s 153C and the order of the learned CIT (A) in upholding the order u/s 153C. Accordingly, grounds raised by the assessee on this issue including the additional grounds are dismissed.
Disallowance u/s 14A r.w. r. 8D - HELD THAT:- We find the Finance Act, 2022 has drastically amended the provisions of section 14A w.e.f. 1.4.2022 and one of the Coordinate Bench of the Tribunal has held such amendment to be retrospective in nature. Therefore, considering the totality of the fact of the case and in the interest of justice, we deem it fit and proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds raised by the assessee on the issue of addition 14A are accordingly allowed for statistical purposes.
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2022 (7) TMI 1155
Revision u/s 263 - As during the assessment not only examined the issue of capital gain - HELD THAT:- The view adopted by the assessing officer was in accordance of the decision in CIT Vs Siddharth J. Desai (1981 (9) TMI 48 - GUJARAT HIGH COURT] and Madhabhai Patel (1993 (7) TMI 28 - GUJARAT HIGH COURT] so such assessment order cannot be branded as erroneous.
Thus, the twin conditions as enunciated in section 263 cannot be said to be fulfilled in the present case. Again retreating the principal as laid down in Malabar Industrial Company Ltd (2000 (2) TMI 10 - SUPREME COURT] that when an assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law.
Thus, in view of the aforesaid factual and legal discussion, we are of the considered opinion that the revision order passed by ld. PCIT under section is not legally sustainable as the same is based on mere change of opinion, which we set aside. In the result, the substantial ground of appeal raised by the assessee is allowed. No contrary facts or law is brought to our notice to take other view. - Decided in favour of assessee.
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2022 (7) TMI 1154
Addition on account of past savings of the assessee - assessee has submitted that the assessee is in legal practice as an Advocate since 1976-77 and also having a substantial income from agricultural operations. - AO has estimated the past savings at Rs. 6,00,000/- instead of the claim of the assessee at Rs. 8,03,900/- - HELD THAT:- AO has accepted that the assessee is in the profession of law since last so many years and also has an agricultural income and therefore, it cannot be denied that he is having no savings. Assessing Officer then observed that in the absence of any credible evidence, the past savings was accepted at Rs. 6,00,000/-. It is pertinent to note that the AO has not given any basis for acceptance of past savings at Rs. 6,00,000/- when the assessee in in the legal profession for last more than 40 years as well as having the agricultural land holding and agricultural income. Therefore, the estimation of the AO without any basis at Rs. 6,00,000/- as against the claim of Rs. 9,03,900/- is arbitrary and unjustified. Even otherwise the savings of Rs. 8,00,000/- in the legal profession of more than 40 years as well as the proof of agricultural land holding of the assessee is not an excessive claim and therefore, in the absence of any contrary material or fact brought by the Assessing Officer, the denial of this claim of past savings and restricting the same to Rs. 6,00,000/- as against Rs. 8,03,900/- is not justified
Thus ignoring the facts and circumstances of legal practice of the assessee for such a long period as well as evidence produced for agricultural land holding, the additions sustained by the CIT(A) on the ground that no evidence could be furnished, is not justified. Accordingly, the addition made by the Assessing Officer and confirmed by the CIT(A) is deleted.
Addition denying the claim of loan taken from the relatives as source of deposits in the bank account of the son - HELD THAT:- As in the facts and circumstances of the case as well as the settled proposition of law, the addition sustained by the CIT(A) ignoring the evidence produced by the assessee to prove the identity, creditworthiness of the creditors and genuineness of the transaction by furnishing their identity proof, their source of income and confirmation is not justified and highly arbitrary. All these evidence produced by the assessee except the confirmation were independent evidences and cannot be fabricated or manufactured and consequently, the same cannot be doubted on the ground of afterthought. Accordingly, the impugned orders of the CIT(A) on this issue is set aside and the addition made on this account is deleted.
Appeal of assessee allowed.
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2022 (7) TMI 1153
Rectification of mistake u/s 154 - allowing less credit on account of tax deducted at source - Assessee submitted that assessee has not been granted benefit of Tax Deducted at Sources (TDS), which was deducted by the National Insurance Corporation Ltd (“NICL” for short) from the commission amount paid to the assessee. HELD THAT:- We note that difference in TDS appears to be on account of TDS certificate issued to assessee by National Insurance Co. Ltd. from the commission amount paid to assessee and the amount of TDS reflected in Form No.26AS. It is possible that later on, NICL might have revised its TDS returns and reduced TDS credit of assessee. We note that assessee has fully offered commission income for taxation, as received by him from NICL and he had also received valid TDS certificates from NICL against the commission income so offered by him. Thus, assessee is justified in claiming TDS credit as assessee has offered income for the same.
However, at this stage we cannot ascertain the fact that why the TDS credit was not allowed to the assessee, as we have pointed out that NICL might have revised its TDS return, that is way, the exact amount of TDS is not getting reflected in Form No.26AS. However, without verifying the real facts, such disallowance of TDS credit must not be made, as income has been duly offered by the assessee, and if TDS credit is disallowed in that case the corresponding income shown by assessee also ought to have been reduced by passing rectification order u/s 154 of the Act. That is, the right income should be taxable in the hands of the assessee.
Alternatively, the assessing officer should examine Form No. 26AS and TDS certificate of assessee and revised TDS return of TDS of NICL and adjudicate the issue afresh in accordance with law. In this alternative also, we make it clear that if TDS credit is disallowed in that circumstances the corresponding income offered by the assessee for taxation also ought to have been reduced by passing rectification order u/s 154 of the Act by the assessing officer. Assessee’s appeal is allowed for statistical purposes.
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2022 (7) TMI 1152
Interest disallowance computed at 12% in respect of financial transactions with M/s Om Kailash Cotton - HELD THAT:- As correctly noted by the Ld. CIT(A) in the appellate proceedings, the assessee has not been able to demonstrate that interest-free funds were available with the assessee during the year under consideration out of which interest-free advances had been given to M/s Om Kailash Cotton. Also, we note that Ld. CIT(Appeals) also observed specifically that the interest disallowance on account of financial transactions with M/s Om Kailash Cotton offered for taxation by the assessee is also not reliable for the reason that it has taken the opening balance of ₹ 5,24,388/- instead of ₹ 3,07,80,727/- for which no justification has been given.
The argument of the assessee that the opening balance of ₹ 3,07,80,727/-should not be considered for disallowance of interest is also not acceptable since firstly, the assessee has been unable to demonstrate that a part of this relates to trading transactions with M/s Om Kailash Cotton despite being given several opportunities and secondly, since assessee has been unable to demonstrate with any supporting evidence that interest-free funds were utilised for giving advances to M/s Om Kailash Cotton, and since the assessee has claimed deduction of interest on the aforementioned interest bearing funds made available to M/s Om Kailash Cotton during the impugned assessment year, interest on the same is liable to disallowed. In the result, we are of the view, that in the instant set of facts, the assessee’s appeal is liable to be dismissed.
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2022 (7) TMI 1151
Loss from other source [wrongly shown as interest] and set off u/s.71 - assessee had opted for the deeming provision contemplated u/s.44AD of the Act but had separately raised a claim for deduction of certain business expenses - HELD THAT:- As we find substance in the view taken by the A.O that now when the assessee had opted to disclose his income under the deeming provisions of section 44AD of the Act, then, it was not permissible on his part to have separately claimed set-off of the aforesaid expenses as the same were to be deemed to have been already given full effect while computing his income under the aforesaid deeming provision. The mandate of law to the said effect can safely be gathered from a perusal of sub-section (2) of Section 44AD any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.
We, thus, in terms of our aforesaid observations uphold the view taken by the CIT(Appeals) who had rightly sustained the disallowance made by the A.O. Thus, the Ground of appeal No.1 raised by the assessee is dismissed
Estimation of assessee’s income from business as that of civil contractor a/w. a consequential disallowance of interest on loans raised from bank u/s.43B(e) - HELD THAT:- CIT(Appeals) had rightly concluded that now when the A.O had not placed on record any material which would substantiate his conviction that the assessee had generated contract receipts of Rs.1,15,73,522/-, therefore, there was no justification on his part in estimating the income of the assessee at Rs.6,93,488/- i.e. @8% of the said impugned receipts. At this stage, we may herein observe that the Department had accepted the aforesaid view of the CIT(Appeals) and had not carried the matter any further in appeal before us.
Sustainability of the impugned disallowance of bank interest u/s.43B(e) - we are unable to find favour with the same. In our considered view, now when the assessee had disclosed his income u/s.44AD of the Act, therefore, no disallowance of the aforesaid amount was called for in his hands.
As the disallowance u/s.43B presupposes raising of a claim for deduction, therefore, now when in the case before us the assessee had not sought any deduction of bank interest of Rs.23,21,099/-, there could have been no justification in disallowing the same. We, are unable to sustain the disallowance of bank interest made by the A.O u/s.43B(e) of the Act. Accordingly, the order of the CIT(Appeals) qua the aforesaid issue in hand is set-aside with a direction to the A.O to vacate the disallowance made by him u/s.43B(e) - Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations.
Addition of interest on FDR/deposits held by the assessee with bank - HELD THAT:- As transpires from a perusal of the records that the assessee had sought to telescope/include the same in his deemed income that was disclosed u/s.44AD of the Act. As the aforesaid interest income by no means would fall within the domain of the deemed income of the assessee worked out under Section 44AD of the Act, therefore, we concur with the view taken by the A.O who had separately made an addition of Rs.25,914/- under the head “Other sources” in the hands of the assessee. We, thus, in terms of our aforesaid observations uphold the aforesaid addition made by the A.O. Thus, the Ground of appeal No.3 raised by the assessee is dismissed.
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2022 (7) TMI 1150
Revision u/s 263 - Addition u/s 56(2)(x)(b)(A) - difference in the purchase price of property as per the consideration recorded in the sale deed and value fixed as per guideline of sub registrar of the registration department to be added as per the provisions of section 56(2)(viib)(ii) - HELD THAT:- We noted that the Co-ordinate bench of this Tribunal, Mumbai Bench in the case of Maria Fernandes Cheryl [2021 (1) TMI 620 - ITAT MUMBAI] has considered this issue in detail and further considered the Finance Act, 2018 inserting second proviso to section 50C of the Act, whereby the tolerance limit of 5% was introduced and similarly in the provisions of section 56(2)(x)(b)(A) tolerance limit of 5% is increased, which was increased subsequently by the Finance Act, 2020 to 10%.
Hon’ble Supreme Court in the case of C.B. Gautum [1992 (11) TMI 1 - SUPREME COURT] held the provisions of chapter XX-C can be resorted to only where there is a significant under valuation of the property to the extent of 15% or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15% or more. It is pertinent to note that although the observations of Supreme Court that pre-requisite for passing the order of compulsory acquisition of property by Central Government, viz., where, in an agreement to sell an immovable property in an urban area, there is significant under valuation of the property by 15% is not incorporated in the amended provision of section 269UD of the Act but the law declared by Supreme Court is the law of the land in view of Article 141 of the constitution and the Central Government while resorting to compulsory acquisition of immovable property had adhered to test laid by Hon’ble Supreme Court.
Hon’ble Supreme Court finally laid down the principle that where there is a significant under valuation of the property to the extent of 15% or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15% or more, in that case only the provisions of chapter XX-C can be resorted to.
As in the present case before us, the issue is whether assessment framed by the AO is erroneous and prejudicial to the interest of Revenue for the reason that there is difference of Rs.25 lakhs between the guideline value as per stamp valuation which is Rs.3.50 crores. However, as per registered sale deed the actual consideration is Rs.3.25 crores. The assessee has disclosed the investment as per consideration declared in sale deed at Rs.3.25 crores but the PCIT was of the view that the difference of Rs.25 lakhs in view of the guideline value fixed by Stamp Valuation Authority at Rs.3.50 crores is to be accepted and added to the return of income of the assessee. We are of the view that this is highly debatable issue and even the tolerance limit of 10% is to be considered or not is again a debate. Once there is a debate, the order cannot be held as erroneous in view of the decision in the case of Malabar Industrial Co. Ltd.,[2000 (2) TMI 10 - SUPREME COURT]. Appeal of assessee allowed.
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