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2022 (7) TMI 1149
Penalty u/s 271(1)(c) - disallowances were made on the ground that since the assessee is following project completion method, these expenses cannot be allowed as revenue expenditure and deserve to be capitalized - HELD THAT:- Reliance on the Hon’ble Supreme Court decision in the case of Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT] is germane and duly supports the case of the assessee. The assessee’s claim cannot be said to ex-facie bogus. Hence, denial of the assessee’s claim cannot lead to the rigors of penalty u/s 271(1)(c). Hence, we do not find any infirmity in the order of ld. CIT (A). Appeal by the Revenue stands dismissed.
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2022 (7) TMI 1148
Rectification of mistake u/s 254 - LTCG - consideration was received by the late father of the assessee or assessee? - assessee before the Tribunal argued that the assessee having not received any consideration, there was no question of any capital gain tax chargeable in her hands - HELD THAT:- As rightly contended by learned DR, a definite view was taken by the Tribunal while rejecting the main contention of the assessee by passing a well reasoned and well discussed order. It is well settled that the scope of rectification under Section 254(2) of the Act is limited to rectify the mistakes which are apparent from the record and it is not permissible to review the decision taken by the Tribunal.
In our view, what the assessee is seeking in the guise of this Miscellaneous Application is the review of the well reasoned and well considered decision taken by the Tribunal which is not permissible under Section 254(2) of the Act. We, therefore, reject the said application being devoid of any merit. Miscellaneous Application is dismissed.
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2022 (7) TMI 1147
TDS u/s 195 - Withholding the tax on payment made to the nonresident/ foreign entity who do not have ‘PE’ in India - HELD THAT:- It is trite to say that the liability to deduct tax under section 195 arises only, when the amount being paid is chargeable to tax under the Income Tax Act of India and if the person or supplier or manufacturer to whom payment made, is a tax resident of a foreign country or non-resident, having no ‘PE’ in India, then such entity can not be subjected to taxation in India and consequently payment made to it not liable to deduct any TDS under Section 195 of the Income Tax Act 1961.
In this case M/s. GSI Engine B.V. from whom the Assessee had taken ‘Aircraft Engine’ on a lease rent basis, admittedly is a tax resident of Netherland, having no ‘PE’ in India and consequently cannot besubjected to taxation in India and thuspayment made to M/s GSI Engine B.V. does not attract the provisions of Act for withholding the tax, hence we are inclined to sustain the impugned order passed by the Ld. Commissioner, as the same does not suffers from any perversity, impropriety and/or illegality.
Consequently, the appeal of the Revenue Department is dismissed.
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2022 (7) TMI 1146
LTCG OR STCG - assessee had entered into joint development agreement with the builder M/s.Siddharth Finance & Housing Ltd. on 19.08.2011 and admitted capital gain on transfer of 73% undivided share of the land in exchange of 27% built up area - HELD THAT:- In this case, there is no doubt with regard to fact that for the impugned assessment year only a sum of Rs.60,17,104/- is received by the assessee from sale of flats. Therefore, we are of the considered view that the Assessing Officer ought to have taxed consideration received during the assessment year 2015-16 only instead of taxing entire consideration received by the assessee, including consideration received for earlier financial years. Therefore, we are of the considered view that the Assessing Officer as well as learned CIT(A) were erred in taxing total consideration received by the assessee amounting to Rs.4,89,35,461/- for the assessment year 2015-16 on the basis of admission of the assessee. Hence, we direct the Assessing Officer to consider amount received for the assessment year 2015-16 alone and compute capital gain from transfer and determine whether it is short term or long term depending upon period of holding of asset by the assessee.
Computation of capital gain on sale of shares of M/s.Akshaya JMB Properties Pvt.Ltd - assessee has sold 41,325 shares for consideration of Rs.4,46,69,825/-. - capital gain on sale of shares - HELD THAT:- Evidences placed by the assessee clearly shows that the assessee has transferred 41,325 equity shares on three dates to different persons and different rates and also received consideration through cheque. The evidences filed by the assessee further strengthened fact that entire consideration has been received through cheque and purchasers have confirmed transactions. The parties have entered into MoU to set out terms & conditions of sale of shares, but nowhere specified manner in which share price is to be determined. Therefore, we are of the considered view that the Assessing Officer has completely erred in replacing full value of consideration of Rs.13,63,10,512/- as against actual consideration received by the assessee at Rs.4,46,69,825/- and computed long term capital gain and hence, we direct the Assessing Officer to adopt consideration as received by the assessee for transfer of 41,325 equity shares of M/s.Akshaya JMB Properties Pvt.Ltd. for consideration of Rs.,4,46,69,825/- and compute long term capital gain in accordance with law.
Cost of acquisition of shares of M/s.Akshaya JMB Properties - According to the assessee, actual cost of equity shares acquired by the assessee works out to Rs.53.87/- per share, whereas the Assessing Officer has adopted face value of equity shares @ Rs.10/- per share - HELD THAT:- The matter needs further examination from the Assessing Officer. Hence, we set aside the issue to file of the Assessing Officer and direct the A.O to reconsider the issue after considering relevant materials and decide correct amount of cost of acquisition of shares sold by the assessee.
Addition u/s.56(2)(vii)(b)(ii) - AO has made addition towards difference in sale consideration for transfer of UDS in 11 flats devolved to the share of assessee as per MOU and observed that there is difference between sale price and market value of flats - HELD THAT:- We are of the considered view that issue of application of section 56(2)(vii)(b)(ii) of the Act, needs to go back to the file of the Assessing Officer to give one more opportunity of hearing to the assessee to ascertain correct facts with regard to market value of flats sold by the assessee and sale consideration received for transfer of property and thus, we set aside issue to the file of the Assessing Officer and direct the Assessing Officer to re-examine claim of the assessee in accordance with law.
Addition u/s.50C - Addition made towards UDS involved in flats sold by the assessee - as per AO the assessee has registered 440 sq.ft of UDS for consideration of Rs.3,30,000/-, whereas guideline value of 440 sq.ft was at Rs.6,60,000/-.- HELD THAT:- Assessee pleaded for one more opportunity of being heard before the Assessing Officer to justify her case with reference to guideline value of the property and consideration for transfer of UDS. Hence, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to reconsider the issue in accordance with law.
Disallowance of exemption claimed u/s.54 & 54F - AO has disallowed exemption claimed u/s.54 on the ground that the assessee does not qualify for exemption u/s.54 however, allowed deduction for only one flat - HELD THAT:- As assessee pleaded for one more opportunity of being heard before the Assessing Officer to justify her case to verify eligibility of the assessee for claim of exemption u/s.54 & 54F. Therefore, we are of the considered view that the issue needs to go back to the file of the Assessing Officer for further examination of claim of the assessee. Hence, we set aside the issue to file of the Assessing Officer and direct the A.O. to reexamine claim of the assessee in accordance with law and decide the issue.
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2022 (7) TMI 1145
Assessment u/s 153C - Whether no incriminating material was seized? - HELD THAT:- The objections of the assessee regarding assessment u/s 153C of the Act are that the assessment is not based upon any incriminating material recovered during the course of search. AO has not brought any material in support of his allegation regarding higher fair market value of the property. It is stated that both Stamp Valuation Authority as well as the DVO have assessed the fair market value of the property much lower than the value as disclosed in the Sale Deed. Moreover, the Valuation Report pertained to a date much prior to registration of Sale Deed. AO has not brought any material in support except the Valuation report. The Valuation Report is merely an opinion. It cannot be equated with a document as envisaged u/s 153C(b).
In the present case, it is not the case where no material was available with the AO. During the course of search, a valuation report was found at the premises of third party wherein the fair market value of the property was assessed at higher value than what was disclosed by the assessee. There was a reasonable cause for the AO to initiate proceedings u/s 153C of the Act. The assessee stated that adopting of a higher fair market value by the approved valuer was for obtaining a loan from the bank. Moreover, the Stamp Valuation Authority and the DVO assessed fair market value much lower than what assessee has disclosed in the Sale Deed.
AO has not brought on record any other material suggesting that the valuation adopted by the Stamp Valuation Authority or the DVO was not correct. AO has also not brought any other comparative sale instances of similarly situated property to rebut the claim of the assessee. Therefore, there is no material to accept the valuation report by the approved valuer which was obtained much prior to the assessment year under consideration for sustaining the addition. So far the decision of CIT(A) for deleting the addition is justified as the AO has not brought any evidence supporting the valuation report.
We do not see any reason to disturb the conclusion drawn by the Ld.CIT(A) regarding merit of the case. However, we are of the considered view that the AO was justified for initiation the proceedings u/s 153C of the Act when he was in possession of certain valuation report related to the property which was sold during the year under consideration. The appeal of the Revenue is partly allowed.
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2022 (7) TMI 1144
Reopening of assessment u/s 147 - application u/section 7 of the Insolvency and Bankruptcy Code filled - as argued notice under section 143(2) of the Act was not served within the prescribed period - Assessee also challenged the addition made by AO/CIT(A) on account of unexplained money under section 69A - HELD THAT:- Since proceedings under I&B code have already been initiated/decided and moratorium has been declared by prohibiting all the proceedings against the corporate debtors including execution of any judgment, decree or order of any court of law, tribunal, arbitration panel or other authority, present appeals in the present format are not maintainable having not been filed by the Interim Resolution Professionals (IRP) who can file appeal with approval of committee of creditors. Moreover, none has come present on behalf of IRP to assist the Bench to proceed further in these appeals, hence aforesaid appeals are liable to be dismissed being not maintainable at this stage.
Resultantly, aforesaid appeals filed by the assessee companies are disposed of with liberty to file fresh appeal in the proper format, duly verified by the person authorized to file the return of income or to get the present appeal restored by moving an application. However, nothing expressed herein shall affect the aforesaid appeals on merits.
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2022 (7) TMI 1143
Estimation of GP - unaccounted sales - estimation of unaccounted cash sales - HELD THAT:- Both sides are in agreement that declared gross profit rate of 1.69% may be applied on estimated unaccounted cash sales from 01.04.2013 to 30.09.2013 to compute the unaccounted income of the assessee and that the same may be confirmed. Consistent with this, both sides are in agreement that out of the aforesaid addition of Rs.30,43,343/-; the aforesaid amount of Rs.11,03,177/- may be confirmed, and the remaining amount of Rs.19,40,168/- may be deleted. In view of the foregoing, and as representatives of both sides were in agreement with this at the time of hearing before us, we direct the AO, in the specific facts and circumstances of the present case before us, to restrict the addition to Rs.11,03,177 and to delete the remaining amount of Rs.19,40,168/- out of the total addition of Rs.30,43,345/-.
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2022 (7) TMI 1142
Deemed dividend addition u/s 2(22)(e) - undisclosed income admitted by the assessee in search proceedings has been considered the financial statements of VEIL and included as part of reserves and surplus of the company - DR contended that the company had sufficient accumulated profits and therefore the provisions of section 2(22)(e) of the Act are attracted - HELD THAT:- As noted that the accumulated profits to the extent available in the books of account shall be considered for the purpose of determining the deemed dividend U/s. 2(22)(e) - The reliance placed by the Ld. AR in the case of Promod Kumar Dang [2005 (11) TMI 193 - ITAT DELHI-A] has been rightly distinguished by the Ld. CIT(A) and cannot be applied to the instant case. However, we also find that the assessee has included the undisclosed income in its books of account resulting an increase in the accumulated profits of the company.
CIT(A) has rightly computed the accumulated profits for the purpose of section 2(22)(e) of the Act subject to verification of certain tax challans as detailed in para 5.7 and 5.8 of the CIT(A)‟s order. We also note that the Ld. AO has rightly considered the directions of the Ld. CIT(A) and passed the consequential order revising the order passed U/s. 143(3) r.w.s 254 of the Act. In view of the above discussions, we find that there is no infirmity in the order of the Ld. CIT(A) as well as the Ld. AO while passing the consequential order. This ground of the assessee is therefore dismissed.
Additional grounds of appeal regarding reopening of the case u/s. 148 - We find from the record that the Ld. AO has rightly given the reasons for such reopening and reopening is well within the period as prescribed under the Act. Therefore, this ground raised by the assessee is dismissed.
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2022 (7) TMI 1141
Reopening of assessment u/s 147 - Penalty levied u/s. 271(1)(c) - sale of shares to be treated as "capital gain" or "income from business" - Valid sanction by authority u/s. 151 - HELD THAT:- Sub-section (1) of Section 151 deals with the cases of reopening of assessment within four years wherein the respective Joint Commissioner is the sanctioning authority for reopening of such assessment. The reopening of assessment after the expiry of four years period, the sanctioning authority are either Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner only. In this case no doubt for the Assessment Year 2005-06 and reopening of notice was issued in 2012 which is beyond four years period but however Joint Commissioner of Income Tax, Range-7 by his letter dated 9.3.2012 sanctioned for the reopening proceedings, which is clearly against the provisions of Section 151.
Therefore, the entire reopening assessment itself is vitiated and against the provisions of Section 151 of the Act. Therefore the entire reopening of assessment vis-à-vis quashed. Though there is merits in the arguments of the assessee that the reasons recorded by the Assessing Officer is also not clear relating to which assessment year the income is said to be escaped or taxation. As we have quashed the entire assessment proceedings on the point of sanctioning authority u/s. 151. We are not addressing the other aspects of the reopening of assessment. Furthermore this has attained finality by the Jurisdictional High Court in the assessee's own case for the A.Y. 2006-07 holding that the sale of shares to be treated as "Long Term Capital Gains only "and not as Business Income".
In the result, the appeals filed by the Assessees are allowed consequently the Revenue appeals are dismissed.
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2022 (7) TMI 1140
Capital gain on transfer of shares - capital gains arising from the transfer of shares because of family arrangement - appellant claimed that no tax should be levied on a sum being long term capital gains arising from the transfer of shares out or family arrangement as per CLB order - HELD THAT:- Since the assessee has transferred the shares only on the direction of the CLB. As per the direction of CLB, the assessee has to either transfer the shares to ANP Group or to the company whichever is acceptable to the ANP Group. As far as assessee is concerned, he has agreed to transfer the shares, it is irrelevant for him how the shares to being transferred, as long as he receives the compensation as set out by the CLB. In this case, the ANP Group has decided to buy back the shares in the NPCL itself. Therefore, it is not proper on the part of the tax authorities to take divergent view without their being proper reasons.
We observe that in the case under consideration, there is no doubt that there is a family arrangement and based the condition specified in the order passed by CLB, the shares were transferred to the company on the buyback terms. In the given case, the transferor is an individual whereas in the case relied by the CIT(A) in which the transferor is the legal entity. As held in the case of R Nagaraja Rao [2012 (5) TMI 184 - KARNATAKA HIGH COURT] observed that Partition or family settlement is not transfer. When there is no transfer there is no capital gain and consequently no tax on capital gain is liable to be paid. Therefore, in the given case, the assessee has transferred the shares based on the family settlement as per the direction of CLB, which the Ld CIT(A) has accepted in his order.
Therefore, we are incline to accept that the assessee has transferred the shares under family arrangements only. Therefore, we direct the Assessing Officer to allow the claim of the assessee even though the assessee has paid the tax by calculating the capital gain under mistaken belief that this transaction is taxable. The appellate authorities can direct the Assessing Officer to allow the legal claim of the assessee as held in the case of Goetze India [2006 (3) TMI 75 - SUPREME COURT] - Appeal of assessee allowed.
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2022 (7) TMI 1139
Addition under the head ‘Income from House Property’ - AR submitted that annual letting value determined by the Assessing Officer is contrary to the provisions of sections 22 and 23 - HELD THAT:- In the present case, it is evident that the lower authorities have determined the annual letting value by applying 8% of capital cost and not considered the provisions of rent control legislation, despite the fact that the aforesaid properties are subjected to the said legislation. Thus, we remand this issue to the file of the Assessing Officer for determination of annual letting value in terms of the applicable rent control legislation. Accordingly, ground no. 2 raised in assessee’s appeal is allowed for statistical purpose.
Deduction claimed u/s 54F - joint ownership of the assessee - divergent views of the Courts are available as regards the meaning of the term ‘own’ - HELD THAT:- As respectfully following the decisions passed by the Hon’ble Madras High Court in Dr. Smt. P.K. Vasanthi Rangarajan (2012 (7) TMI 563 - MADRAS HIGH COURT] and Kapil Nagpal [2015 (9) TMI 613 - DELHI HIGH COURT] which view has also been taken by the coordinate bench of Tribunal in Ashok G. Chauhan (2019 (4) TMI 1024 - ITAT MUMBAI] we are of the considered view that joint ownership of the assessee, in the present case, in 2 residential Flats, namely, Flat No. A–408 and B–504 on the date of transfer of original capital asset will not disentitled the assessee from claiming relief under section 54F.
As the expression ‘a residential house’ in section 54F, prior to its amendment vide Finance (No. 2) Act, 2014, w.e.f. 01/04/2015, includes more than one residential house purchased/constructed by the assessee, within the prescribed time. In the present case, as the properties were purchased by the assessee pursuant to transfer of long-term capital asset (‘original asset’), the same will fall within the category of ‘a residential house’ (or as referred in the section as ‘new asset’) for the purpose of section 54F of the Act. As the aforesaid properties, fall within the category of ‘new asset’, same cannot be considered as ‘residential house’ for the purpose of proviso to section 54F of the Act, which, as stated earlier, is other than the ‘new asset’. The proviso only carves out exceptional situation in which the provisions of section 54F will not be applicable.
Therefore, as the aforesaid properties are not in the nature of ‘residential house’, for the purpose of proviso, none of the conditions as mentioned in proviso are applicable to the present case. Further, as it is not disputed that the aforesaid properties were purchased by the assessee within the prescribed time, therefore, we are of the considered view that assessee is entitled to claim benefit under section 54F of the Act. Accordingly, ground No. 6 raised in assessee’s appeal is allowed.
Addition as income from other sources - It is the claim of the assessee as wrongly declared as income under an anticipation of refund of investment in property which was made and cancelled during the year - HELD THAT:- As per the assessee, revised return also could not be filed as the time limit for filing the same was expired. Further, as per the assessee, the aforesaid amount was never realised and the investee with whom the investment was made refused to entertain any claim. It is well established that assessment proceedings before the taxing authority is to assess the correct tax liability and therefore no hypothetical income / profit could be brought to tax. In the present case, addition was made by the Assessing Officer and same was upheld vide impugned order without examining the submission of the assessee. Therefore, we deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication after consideration of all the aspects. Accordingly, ground no. 7 raised in assessee’s appeal is allowed for statistical purpose.
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2022 (7) TMI 1138
Deduction u/s 54F - AO disallowed the exemption claimed u/s 54 and Sec 54F - additional evidences in support of assessee’s claim towards completion of the construction of the residential house within the time specified u/s. 54 was admitted without calling for a remand report by the Ld.CIT(A) - HELD THAT:- As details in respect of allowability of the claim were furnished before the CIT(A) by the assessee and the Ld.AO has not got any opportunity to verify these details. The Ld.DR thus prayed for the issue to be remanded to the Ld.AO. AR did not object for the remand to the Ld.AO. Considering the submissions, we remand this issue to the Ld.AO keeping all the contentions open. The Ld.AO is directed to consider the claim in accordance with law.
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2022 (7) TMI 1137
Addition u/s 68 - cash deposited by the assessee in his bank account which is fully explained - HELD THAT:- As perused the material available on record and decisions relied upon by the assessee. Respectfully following the decision of the coordinate bench and in the absence of any contra judgment produced by the DR following the cited co-ordinate bench decision we hold that benefit of the ratio decided in those judgement be given to the assessee but as the assessee unable to substantiate the whole deposit and taking the turnover is not correct. Therefore, the assessee should pay the tax considering the whole amount of cash deposited as turnover and on that 8% amount be added as income of the assessee which would end the justice - In terms of these observations, we partly allowed the ground no. 1 of the assessee.
Addition on account of capital introduced in firm without considering the submission of the assessee - HELD THAT:- The assessee however placed a general plea that the introduction of the capital is sourced from this account. There is no force in the argument assessee as he failed to place on record any cogent evidence as stated by the ld. DR. Not only that it has been observed that the income which is arising and offered in the return of income by the assessee is far less then this amount introduced in the firm.
Therefore, the argument of the ld. AR is incorrect on fact and in the absence of any evidence and income being offered as arise from these unaccounted transactions as alleged and decided by us should be considered to substantiate the introduction of cash in the firm to the extent of that income and therefore, this ground of appeal is partly allowed and therefore, the AO is directed to reduce the addition to that extent of income decided as per Ground No. 1 above. In the result, Ground No. 2 is partly allowed.
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2022 (7) TMI 1136
Reopening of assessment u/s 147 - Addition u/s 68 - unsecured loans treated as unexplained cash credits - HELD THAT:- The basis of reopening is the statement of Shri Praveen Kumar Jain albeit the said statement was retracted by him subsequently. In this background, we are of the view that the AO at the same time of issue of notice under section 148 of the Act was having fresh tangible material in the form of information supplied by investigation wing which is sufficient to form a reasonable belief of escapement of income.
AO need not prove the escapement of income at the time of initiation of reassessment of proceedings and instead what is required is some tangible material which suggest escapement of income. The information received from investigating wing constitutes a fresh material which is sufficient to form a basis for escapement of income. Therefore, we are of the considered view that reopening as done by the AO is legally tenable and accordingly dismiss the ground taken by the Appellant challenging the reopening of the assessment as well as proceedings as completed under section 147 of the Act.
Addition u/s 68 - Appellant has duly proved the genuineness of the transactions by submitting various details as also mentioned at Page 12 and 13 of Ld. CIT (Appeals) order. Taking it into consideration entire facts and circumstances of the case and the ratio of the decision relied upon by the Ld. AR, we set aside the order passed by the Ld. CIT (Appeals) and direct the AO to delete the additions so made under section 68 of the Act in both the assessment years in the impugned appeals.
Both the appeals of the assessee are allowed.
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2022 (7) TMI 1135
Exemption u/s 11 - Trust is registered u/s. 12A - HELD THAT:- Appellant is holding Registration u/s. 12A of IT. Act 1961 and no violation of any of the provisions of section 13 is alleged in the assessment order. In view of there being application of income at more than 85% of receipts of trust no income is exigible to tax at the hands of appellant. In view of above it held that trust is assessable entity and income of trust is to be assessed/determined at the hands of appellant itself. Income of appellant is determined at Rs. NIL as shown in the return considering provisions of section 11 - Order of CIT(A) is reversed/modified in terms of discussion made hereinabove. Grounds of appeal of appellant are allowed.
Revision u/s 263 - income assessed in the case of appellant assessment framed is on protective basis and income computed is assessed on substantive basis in the case of Shri Vasantrao Ghonge by same A.O. - HELD THAT:- The income assessed on substantive basis at the hands of Late Shri Vasantrao Ghonge is after deducting the expenditure incurred and shown in Income and expenditure account of trust from the gross receipts. CIT Central has found no fault with allowability of same expenditure in the case of Shri Vasantrao Ghonge where income has been determined on substantive basis even though case of Shri Vasantrao Ghonge was under his charge. It is also noted that the income determined on substantive basis in the case of Shri Vasantrao Ghonge has been settled under Vivad se Vishwas Scheme by Shri Vasantrao Ghonge for Asstt. Years 2009-10 and 2010-11 and form No. 5 has been issued in the case of Shri Vasantrao Ghonge for Asstt. Years 2009-10 and 2010-11 on 25/11/2020 which is placed on record.
The CBDT Circular No. 7 dated 04/03/2020 issued clarification on provisions of Direct Tax Vivad se Vishwas Bill 2020, Answer to Question No. 35 it has been clarified that on settlement of dispute relate to substantive addition A.O. shall pass rectification order deleting protective addition. In view of discussion made hereinabove the order passed by A.O. in no manner of consideration can be considered as erroneous or prejudicial to the interest of revenue. The order passed by A.O. not being erroneous or prejudicial to the interest of revenue Learned CIT Central ought not to have set aside the assessment framed u/s. 143 r.w.s. 153C in case of appellant by his order u/s. 263 - We are of the view that order passed u/s. 263 is bad in law.
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2022 (7) TMI 1134
Deduction u/s 80-IC - assessee received consideration from sale of Focus Scrip/ License received under “Focus Products Scheme” under the Foreign Trade Policy - AO denied deduction of income received from sale of FPS on the ground that such income is not related to manufacture or sale of the products of the undertaking and is only related to a post manufacturing event, which is not eligible for deduction - HELD THAT:- As applying the ‘purpose test’ laid down by the Hon’ble Supreme Court in various decisions, particularly Sahney Steel [1997 (9) TMI 3 - SUPREME COURT] and Ponni Sugars [2008 (9) TMI 14 - SUPREME COURT] and also the direct judicial precedents referred supra, we hold that Focus Products Incentive in the nature of capital receipt not liable to tax under the provisions of the Income Tax Act, 1961.
Duty Draw Back - AO held that the profits of the industrial undertaking included the amount of duty drawback, which is not eligible for deduction under section 80-IC - HELD THAT:- In the instant case by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Hence, the same could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not relate to manufacture or sale of the products of the undertaking, but related only to an event which was post-manufacture namely, export.
The judgment of Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] wherein it was held that subsidy by way of customs duty draw back could not be treated as a profit derived from the industrial undertaking is very specific to the issue of duty draw back. The judgment of the Apex Court in the case of Liberty India (supra) was in relation to the subsidy arising out of customs draw back and duty Entitlement Pass-book Scheme (DEPB) similar to the facts of the instant case. Hence, keeping in view the judgment of the Hon’ble Apex Court, we hereby affirm the order of the ld. CIT(A).
Interest on KDR - HELD THAT:- We hold that interest earned out of the fixed deposit made from the surplus funds being not connected to the manufacturing activity and do not form an integral part of the profits derived from industrial unit is not eligible for deduction. Interest is an unearned passive income derived out of non manufacturing activity.
Judgment in the case of Pandian Chemicals Ltd. [2003 (4) TMI 3 - SUPREME COURT] held that although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking.
The derivation of profits on the deposit made with the Electricity Board could not be said to flow directly from the industrial undertaking itself. Captivating the same analogy of the Hon’ble Apex Court in the case of the assessee, the interest on the fixed deposits kept with the bank though may be required for the purpose of obtaining over draft facility, it can be said that it is a step removed from the business of the industrial undertaking. Hence, we hereby affirm the action of the ld. CIT(A).
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2022 (7) TMI 1133
Difference in stock - Discrepancy in closing & opening stock - CIT-A deleted the addition - HELD THAT:- We do not find any infirmity in the order of the Ld.CIT(A) who has given a categorical finding of fact after due verification that there was no such discrepancy in the figures of stock of the preceding and impugned year in the audited financial statements of the assessee., that the discrepancy in the return filed therefore was a mere typographical error. The Revenue being unable to controvert the finding of the Ld.CIT(A) before us, we see no reason to interfere in the order of the Ld.CIT(A) deleting the addition made on account of alleged difference in stock.
Late payment of employees contribution u/s 36(1)(va)/43B - HELD THAT:- We have no hesitation in upholding the order of the AO disallowing employees contribution to ESI deposited delayed, u/s 36(1)(va) of the Act, in view of the decision of the jurisdictional High Court in Gujarat State Transport [2014 (1) TMI 502 - GUJARAT HIGH COURT] categorically holding that the deposit of the same before the due date of filing of return of income will not suffice to escape from the provisions of section 36(1)(va) of the Act. Since it is a fact on record that the employees contribution was deposited delayed as per the applicable provisions of law, the issue stands covered against the assessee. The disallowance on account of delayed deposit of employee’s contribution to ESI is accordingly upheld.
Disallowance u/s 14A - disallowance of expenses incurred for the purposes of earning incomes - CIT-A deleted the addition - HELD THAT:- We see no reason to interfere in the order of the Ld.CIT(A) who deleted the disallowance finding sufficient interest free funds available with the assessee for the purpose of making the investments. This fact has remained uncontroverted before us. It is a settled position of law that where sufficient own funds are available, the presumption is that the investments have been made out of the same calling for no disallowance of interest u/s 14A of the Act - we uphold the order of the Ld.CIT(A) deleting the disallowance made u/s 14A.
Disallowance u/s 40(a)(ia) interest on late payment - non deduction of tax at source - said interest expenses pertained to that paid to the creditor of the assessee M/s Hero Moto Corp. Ltd for delay in payments against various purchases - CIT(A) deleted the disallowance finding that interest paid to creditors is not in the nature of interest as envisaged in the definition of interest u/s 2(28A) of the Act and hence the said interest was not covered u/s 40(a)(ia) - HELD THAT:- Before us Ld.DR was unable to controvert the finding of the LD.CIT(A) that interest paid to creditors on account of delayed payment did not qualify as interest as defined u/s 2(28A) - we see no reason to interfere in the order of the Ld.CIT(A) deleting the disallowance of interest.
Disallowance u/s 40(a)(ia) freight expenses - Addition pertained to transportation/freight charges paid/credited by the assessee without deduction of tax at source - CIT(A) deleted the disallowance on finding that the transportation charges were included in the Bills of the Creditors/Suppliers and was therefore part of purchase cost paid to them and not in the nature of transportation expenses - HELD THAT:- DR was unable to controvert the factual contentions of the assessee and the factual findings of the Ld.CIT(A) that the freight payments were part of the bill of suppliers nor was he able to bring to our notice any decision of the jurisdictional High Court or the Hon’ble apex court holding to the contrary to what was held by the Hon’ble Punjab and Haryana High Court in the case of Bhagwati Steels [2010 (1) TMI 411 - PUNJAB & HARYANA HIGH COURT] - no reason to interfere in the order of the Ld.CIT(A) deleting the disallowance of freight expenses.
Addition on account of travelling expenses - CIT-A held that the foreign traveling was not justified by the explanation and accordingly while he upheld the disallowance of foreign travelling expenses, the domestic travelling expenses were allowed - HELD THAT:- DR though relied on the order of the AO was unable to controvert the fact that the assessee had business transactions with the Hero Moto Corp Group ,nor was he able to point any infirmity in the findings of the Ld.CIT(A) that domestic travelling could not be ruled out completely in the aforestated backdrop of facts - we see no reason to interfere in the order of the Ld.CIT(A) deleting the disallowance.
Addition on account of personal nature expenses out of car loan, interest , car depreciation, car insurance and car fuel expenses - AO disallowed 1/3rd of the total expenses incurred by the assessee on cars on various accounts attributing personal use to them noting that all of them were luxurious, expensive and the least fuel efficient cars, the assessee has used more than one car for business purpose during the year under consideration and the assessee did not furnish any log book relating the usage of above cars to distinguish business & personal uses - HELD THAT:- Both the AO and the Ld.CIT(A) have resorted to estimation for the purposes of disallowing car expenses on account of non-business user. We see no reason to interfere in the order of the Ld.CIT(A) whose disallowance of 20% of the fuel expenses we find is justified considering that there is no basis with the Revenue also for justifying disallowance of 1/3rd of entire car expenses which definitely is in our considered view on the higher side - we uphold the order of the Ld.CIT(A) deleting disallowance of car expenses.
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2022 (7) TMI 1132
TDS u/s 194H - payment of the discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers - Addition u/s 40(a)(ia) - HELD THAT:- As in the case of the appellant [2020 (3) TMI 1187 - ITAT MUMBAI] which are in favour of the appellant, it is held that the appellant was not required to deduct tax at source u/s 194H in respect of the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers. Therefore, disallowance made by the AO under section 40(a)(ia) of the IT Act is directed to be deleted. - Decided in favour of assessee.
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2022 (7) TMI 1131
Adhoc addition of 10% of labour charges - HELD THAT:- It is a very difficult task to obtain the all the details where the labour payments are made to the persons and not to the firms and for various reasons the assessee could not produce certain details due to non collection of information and non availability of concerned persons. Therefore, the A.O has not doubted the labour charges but considering the fact that there is discrepancy in respect of the maintaining of the records and the labour charges are paid without any proper verification and made an adhoc addition @ 10%.
A.O has made addition without any proper verification or enquiry. We are of the opinion that the addition @ 10% on the adhoc basis is without primary evidence and cannot be sustained but the fact remains that the assessee should fallow the minimum necessary norms and maintain such records necessary for authentication of the claims before the appropriate authorities and the assessee shall be bound to maintain the records at least in future. Accordingly, we modify the order of the CIT(A) on this disputed issue and restrict the disallowance to the extent @ 3% instead of @10% and partly allow this ground of appeal of the assessee.
Unexplained purchases - addition of 30% alleged bogus purchases sustained by the CIT(A) - HELD THAT:- We are of the opinion if any addition has to be made it should be based on the profit element and it was rightly pointed out by the Ld. AR that the GP worked out by the assessee is around 7.22%. Considering the factual aspects, nature of the business and the assessee could not produce the proper evidence with the records are of the considered view that the assessee has to be taxed on the profit element if the purchases are treated as a alleged bogus purchases as the assessee could not completely produce evidences of the genuineness of the transactions. We are of the view that the addition made by the CIT(A) @ 30% is on the higher side considering the GP rate @ 7.22% offered by the assessee. Accordingly, we restrict the addition of the CIT(A) to the extent @ 4%, and partly allow the ground of appeal of the assessee.
Addition of outstanding current liabilities being labour charges payable in respect of two parties - addition was sustained by the CIT(A) as the parties have not complied with the notice issued u/s 133(6) - HELD THAT:- We considering the facts and the information are of the opinion that the assessee is engaged in the business of subcontracts and working at various sites and has to depend on the various parties in respect of execution of works. The assessee has substantiated the closing balance of liabilities as on 31.03.2011 in respect of two parties before the appellate authorities. The A.O has not doubted the genuineness of expenses claimed in the profit and loss account filed in the course of the assessment proceedings but disbelieved the outstanding liability of labour charges payable as on 31-02-2011 reflected in the balance sheet. Accordingly, we set aside the order of the CIT(A) on this ground of appeal and direct the A.O to delete the addition and allow the ground of appeal in favour of the assessee
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2022 (7) TMI 1130
Assessment u/s 153C - Genuineness of job work charges - HELD THAT:- As on appraisal of the facts carried out in the case of the recipient, has rendered a favourable finding. Hence, the basis for additions made in the hands of the assessee and later modified by the CIT(A) is inconsistent with the order of Co-ordinate Bench and thus cannot be countenanced. The additions were made by the AO to the extent of the job work receipt billed to Orient Craft Ltd. which were reduced to 5% thereof by the CIT(A). Hence, no case was made out on the nature of expenses incurred by the assessee herein. Consequently, the plea of the Revenue for restoration of the matter to the Assessing Officer for examination of corresponding expenses does not emanate from the assessment order and therefore cannot be entertained.
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