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Showing 261 to 280 of 10288 Records

• 2025 (6) TMI 1925
  

  Disallowance of business loss - as per revenue loss on sale of listed scrips as pre-arranged transaction - HELD THAT:- We find that losses incurred by the assessee which the ld. AO has alleged to be bogus are losses incurred by it in the regular course of business considering corroborative material placed on record and the submission made. The said loss so incurred by the assessee deserves to be set off against its regular business profit.

  AO completely overlooked various documents, supporting evidences and explanations furnished by the assessee. He has not analysed all these and merely proceeded to make the addition based on investigation reports. There is nothing brought on record to demonstrate that name of the assessee finds place in the investigation reports to hold that it is involved in price rigging of the alleged two scrips as penny stock.

  Merely because some shareholders/operators colluded in the alleged rigging of share prices and merely because assessee was benefited indirectly, cannot be the reason to disallow the claim of loss by the assessee by alleging that assessee has participated in price rigging of the two scrips. Decided in favour of assessee.

  Addition made on arbitrary basis towards alleged commission paid by the assessee for availing the above stated business loss - Since, we have already allowed the claim of assessee on the claim of business loss in the aforesaid two scrips, the addition made towards commission is in respect of this very business loss and consequently deserved to be deleted. Ground no.3 raised by the assessee is allowed.

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• 2025 (6) TMI 1924
  

  Assessment framed u/s.143(3) by non-jurisdictional officer - Income Tax Officer (ITO), Ward-Mahasamund jurisdiction - HELD THAT:- It is obvious and trite that any action by the revenue authority without jurisdiction is bad in law, void ab initio and hence, liable to be struck down on the said count itself.

  The issue is no more res-integra as per the judicial precedents that any right and liabilities specifically in a case of imposing liability for that matter whether it is income tax or any other financial burden on the assessee through legal dictate, the said action can only be pronounced as legally valid if it is exercised within parameter of correct jurisdiction.

  Reverting to the facts of the present case as examined aforesaid, it is clearly evidenced that the return of income was filed by the assessee above Rs. 10 lacs, for which, the jurisdiction was vested only with the Dy./ACIT-3(1), Raipur and not with ITO, Ward-Mahasamund. That since in the present case, the assessment has been framed u/s. 143(3) of the Act dated 22.12.2018 by the ITO, Ward-Mahasamund who lacked inherent valid jurisdiction, therefore, the same is held invalid, void ab initio, and the order of assessment is quashed.

  Assessment order is quashed. Appeal of the assessee is allowed.

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• 2025 (6) TMI 1923
  

  Addition u/s. 68 - unexplained cash deposited in Specified Banking Notes (SBNs) during the period of demonetizations - AO rejected the books of accounts u/s 145(3) - assessee submitted that the sales were supported by proper documentation, including audited books, purchase and stock registers, cash and bank books, bills, and vouchers - CIT(A) deleted addition as the assessee had maintained proper books of accounts, including stock and purchase registers, and had substantiated the cash sales with sufficient documentation and audited VAT returns - HELD THAT:-Commissioner (Appeals), in our considered view has rightly noted that the amount in question was already recorded as sales in the books and that such sales were supported by supporting documentation.

  Once the sales realization has been duly taxed, making an addition of the same amount u/s 68 would result in double taxation, which is impermissible under law.

  This view is well supported including DCIT v. Damodardas Mohanlal Chokshi [2025 (1) TMI 1572 - ITAT AHMEDABAD] and Radhika Jewellers [2024 (6) TMI 1449 - ITAT AHMEDABAD]

  Genuineness of the sales was supported by various documentary evidence submitted by the assessee, including audited financial statements, VAT returns, month-wise stock details, stock and purchase registers, purchase bills, sales register, cash book, bank statements, and break-up of cash sales. No specific defect was pointed out by the AO in the stock records or purchases corresponding to the sales. The cash deposits were linked to these documented sales, and there was no evidence brought on record by the AO to demonstrate otherwise.

  CIT(A) also observed that the AO failed to substantiate the rejection of books under section 145(3) with any material defect or inconsistency in the accounting records. It was further held by CIT(Appeals) that the purchases were not doubted, the stock register was duly maintained, and the VAT returns were audited and accepted by the relevant authorities.

  Therefore, once the AO accepted the sales as genuine for the purpose of determining profit, he could not invoke section 68 of the Act for taxing the same amount again as unexplained cash credit. Assessee appeal allowed.

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• 2025 (6) TMI 1922
  

  Addition u/s 69A - cash deposited in bank account as unexplained - Onus to prove - quantum cash deposited by the assesse during the different periods of the year i.e. pre- demonetization and post demonetization - assessee did not maintain any books of accounts and filed return of income as per the presumptive scheme of taxation provided u/s.44AD - HELD THAT:- Assesse was a small trader in kirana items, with its customers mainly being small hawkers to whom undoubtedly all sales are made in cash, the preponderance of probability undoubtedly in the present case is that the majority sales made by the assessee or in fact entire sales made by the assesse during the impugned year was in cash. The assessee, we have noted also, explained that the entire sales made during the year was out of the old stock remaining since the business was originally run by her husband who had since deceased and she had taken over the business which ultimately was wound up in succeeding years

  Having accepted the fact that the assesse was not required to maintain books of accounts as per law that and having accepted the turnover on which profits were returned by the assesse as per law and the facts demonstrating that the assessee's business was small and entirely done in cash and the cash deposited by the assesse in the bank account was less than the turnover of the assesse, there could not have been any adverse inference reached on the basis of the above facts so as to treat the cash deposits as being out of unexplained sources. On the contrary, the only reasonable conclusion that could have been drawn was that the cash deposits were out of the business receipts of the assessee. Appeal filed by the assessee is allowed.

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• 2025 (6) TMI 1921
  

  Delay of 100 days in filing of present appeal by the revenue before the ITAT - “sufficient cause” of delay - HELD THAT:- The reasons given by the AO would not constitute the “sufficient cause”, the averments made by the AO are general in nature. This reminds us to the judgement of Living Media India Ltd., wherein [2012 (4) TMI 341 - SUPREME COURT] held Condonation of delay is an exception and should not be used as an anticipated benefit for government departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few. Considering the fact that there was no proper explanation offered by the Department for the delay except mentioning of various dates, according to us, the Department has miserably failed to give any acceptable and cogent reasons sufficient to condone such a huge delay.

  Recently, the apex court in the case of Mool Chandra Vs. UOI [2024 (8) TMI 1528 - SUPREME COURT] has held that it is not the length of the delay, rather the cause behind the delay, which is to be seen while condoning the delay. In view of these observations of the apex court, we are constrained to dismiss the present appeal of the revenue as barred by limitation.

  Since we have already dismissed the appeal of the revenue.

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• 2025 (6) TMI 1920
  

  Income from sale of REC (carbon credits) - deduction claimed u/s. 80IA - whether capital in nature and hence, the same are not taxable? - HELD THAT:- Similar issue came before the ITAT in the case of Satia Industries Ltd. [2023 (6) TMI 1025 - ITAT AMRITSAR] in which the Tribunal held that income earned from sale of RECs/ESCs (carbon credits) is a “capital receipt” and not business income since carbon credit is an offshoot from environmental concern and not an offshoot from business, thus, it will not be taxable.

  Section 115BBG, which specifically taxes sale of carbon credits, was introduced in the Act w.e.f. 01.04.2018, we are of the considered view that the income from sale of REC is not taxable since the same qualifies as “capital receipt” for the impugned year under consideration.

  Disallowance of partner’s remuneration - AO observed that the assessee had not claimed any expenditure against income earned from sale of power, on which deduction u/s 80-IA of the Act was claimed by the assessee - HELD THAT:- We observe that the assessee did not claim any expenses against the receipts from the sale of power, while claiming deductions on the entire income from these receipts. We are unable to accept the argument of the assessee that there was no requirement for the partners to dedicate any time and effort to the income-generating activities of the business on which exemption was being claimed.

  Additionally, we are of the view that the AO / Ld. CIT(Appeals) have correctly observed that remuneration to the partners is payable as working partners in relation to the business as a whole and it cannot be accepted that such remuneration is not payable with respect to exempt income. AO observed that no portion of the remuneration had been allocated toward the exempt income, which seemed intentional to inflate the exempt income and reduce the taxable income.

  In our view the AO is correct in taking the view that it is unreasonable to assume that the unit would generate income entirely on it’s own without any involvement of the partners. In our view, the AO has correctly held that given that the ratio of the total turnover to power income was 0.10%, this proportion was correctly treated as remuneration related to the power unit and was disallowed, thereby resulting in a disallowance to the total income of the assessee.

  Disallowance of depreciation on solar building and machinery - AO was of the view that the income from solar power generation should have been allocated appropriately to the solar power business - HELD THAT:- CIT(A) did not adjudicate on this issue. We observe that since CIT(A) has not given any finding with respect to this addition made by the AO, despite the assessee taking a specific ground in the appeal filed before him, the matter is hereby restored to the file of the Ld. CIT(A), to adjudicate on this matter.

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• 2025 (6) TMI 1919
  

  Order passed against a dead person - proceedings and assessments conducted against a deceased individual without bringing the legal representatives - Admission of additional evidence submitted by the legal representatives

  HELD THAT:- CIT(A) issued all the 4 notices after the death of assessee at the email address given in Form 35. The AO was informed by the L/R as per letter dated 18.6.2018. The L/R went to the AO in response to letter written by the AO to Corporation Bank on 14.2.2019 intimating the outstanding demand.

  AO was also submitted a copy of death certificate and Will of the assessee. It appears that the AO despite these, did not inform the ld. CIT(A) also about the death of assessee. CIT(A) passed an order in the name of assessee, Sri Madaiah Manjunath on 8.6.2023, when he has already passed away on 8.9.2018. Therefore, the order of the ld. CIT(A) passed on the dead person cannot be sustained. Further the notices issued are also after the death of assessee, therefore apparently the L/R of the assessee did not get an opportunity to present his case before the ld. CIT(A).

  Before us the assessee has submitted an application under Rule 29 for admission of additional evidences, wherein the bank statement of the assessee, copies of sale deed, copies of the Will, etc. are furnished as additional evidence. In these peculiar circumstances, we admit the additional evidence as the ld. CIT(A) has decided the appeal holding that assessee does not want to prosecute the appeal and on merits nothing is presented before him, we restore the appeal back to the file of ld. CIT(A) with a direction to consider the additional evidence placed before us and to decide the issue afresh after giving reasonable opportunity of hearing to the L/R of the assessee. Appeal of the assessee is allowed for statistical purpose.

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• 2025 (6) TMI 1918
  

  Taxability as income - amount credited to profit and loss account on prepayment of deferred sales tax liability at Net Present Value (NPV) by invoking section 2(24)(xviii) - appellant’s main argument is that the amendment to the section vide Finance Act 2015 does not in any way effect the non-taxability of the same on extinguishment of sales tax liability on prepayment at NPV and hence the action of Ld. AO treating the same as “income” and as confirmed by Ld. CIT(A) is contrary to the provisions of law

  HELD THAT:- In the present case, there is a ‘benefit’ because the appellant company is paying the reduced amount to the Government as compared to the actual sales tax collected from its customers over a period of 10 years. Thus the waiver amount of Rs. 90,22,491/- comes within the ambit of section 28(iv) of the Act, to be brought under the head ‘profits and gains of business or profession’ which says that the value of benefit/perquisite/whether convertible into money or not, arising from business.

  Appellant has filed a copy of Government of Maharashtra Industries Energy, and Labour Department Resolution No. IDL- 1088/6603/Ind-8 during the hearing before the ITAT and the same is perused. On the top of it, it is mentioned as “Dispersal of Industries – Package of “Scheme of Incentives”, which means the reduced amount paid by appellant is nothing but an “incentive” to come within the ambit of section 2(24)(viii). At page 12, this package scheme, Explanation (i) says, “where an ‘Eligible Certificate’ is issued in favour of a SSI Unit by Regional Department Corporation concerned, the eligible unit will continue to remain, for the purpose of ‘incentive’ (emphasis supplied) and the other connected matters, with the RDC even though after grant of eligibility certificate the eligible unit ceases to be as SSI Unit. Thus, the scheme which is applicable to appellant company also used word ‘incentive’ relating to the ‘eligibility certificate’ based on which appellant company paid reduced amount. Hence, invoking provisions of section 2(24)(xiii) is correct.

  As noted that the appellant company’s audited accounts treats it as part of “Miscellaneous Income” under the head “other income” schedule-19 of profit and loss account with a narration of “during the year ended March 31, 2017, the company had paid an amount equal to the present value amounting to Rs. 93,37,509/- in lieu of the deferred sales tax liability amounting to Rs. 1,83,60,000/-. The resulting gain of Rs. 90,22,491/- on waiver of Deferred Sales Tax liability has been included under the head “miscellaneous income” and in the petrochemical segment.

  In the present facts, it is noted that the waiver of differed sales tax liability is a benefit accrued to the assessee arising out of its business. Furthermore, such a waiver holds the character of revenue, as per the definition of income under Section 2(24)(xviii), effective from April 1st, 2015. Thus, said waiver amounts to a benefit in the hands of the assessee and the sum waived is taxable under section 28(iv) of the Act. We thus direct the Ld.AO to disallow the said waiver, under section 28(iv) of the Act. Decided against assessee.

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• 2025 (6) TMI 1917
  

  Reopening of assessment - Period of limitation - AO had received an information that the assessee was beneficiary of accommodation entry in the form of fictitious short term capital loss in equity/derivative trading in penny scrip - HELD THAT:- As the notice u/s 148 was issued on 29.07.2022. In view of the principles laid down in the case of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] as well as in the case of Deepak Steel and Power Limited [2025 (4) TMI 1367 - SC ORDER] it is held that the notice issued on 29.07.2022 under Section 148 in this case for the A.Y. 2015-16 was void ab initio and bad in law. As the notice was barred by limitation, accordingly, the entire reassessment proceeding and the assessment order passed u/s 147 read with Section 144B of the Act, is quashed. Appeal of the assessee is allowed.

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• 2025 (6) TMI 1916
  

  Denial of deduction u/s 54 - said claim was not made either in the original return of income or by way of a revised return of income - HELD THAT:- As per provisions of sections 54 it does not mandate that for claiming deduction u/s 54 of the Act filing of the claim in the return is a mandatory condition. Further, without going into the controversy as to whether the above transaction regarding Long Term Capital Gain in respect of Lucknow property and the investment in Delhi property for claiming deduction u/s 54 of the Act was intentional or unintentional, the fact remains that as per the provisions of section 45 of the Act, the capital gains arising on the sale of Lucknow property shall inter alia be effected in the previous year save as otherwise provided in sections 54 of the Act.

  Denial of deduction u/s 54 by the AO for the reasons as stated above and the finding of the CIT(A) that the Delhi property was acquired as purchased on 21.02.2005 is not correct.

  As noted above that in the respect of the Long Term Capital Gains in respect of sale of property a sum of Rs.22,30,000/- was paid by the assessee for the purchase of the new property beingN-1, Kailash Colony, Delhi as per the requirement u/s 54 of the Act.

  Therefore, as per the provision of section 45(1) and section 54(1)(ii) of the Act, the assessee will be entitled for deduction of Rs.17,13,015/- u/s 54 as claimed by him since the amount of Long Term Capital Gain of Rs.17,13,015/- is less than the purchase cost of Rs.22,30,000/- paid by the assessee for the new property being N-1, Kailash Colony, Delhi, which was paid one year prior to the purchase of the property being D-4, 1st Floor, Vivekanand puri, Lucknow, as required under the said provisions.

  Accordingly, we hold that the assessee is entitled for deduction of Long Term Capital Gain u/s 54 and therefore the addition made by the AO and confirmed by the Ld. CIT(A) is deleted. Accordingly, grounds no.1 and 2 of the appeal is allowed.

  Addition u/s 56(2)(vii)(b) - difference of stamp value and actual sale consideration - date of agreement for sale of the property at N-1 Kailash Colony, New Delhi i.e. 21.02.2005 and date of transfer i.e. 23.12.2013 are different - As agreement to sell the Delhi property in 2005 was admitted/confirmed by the Hon’ble Delhi High Court while delivering decision on specific performance of the contract is not correct. Further, the relief of Rs.86,66,666/- granted as above on the basis of available facts will be subject to the outcome of the decision of the Hon’ble Court, wherein, as noted by the Hon’ble Delhi High Court in the case no.CS(0S) No.193 of 2008, the merits of the case and/or the legality/validity of the Agreement to Sell dated 21.02.2005, relied upon by the plaintiff (assessee) and disputed by the defendant No.1(Shri R.N. Banerjee, S/o- Late Shri Shayam Pada Banerjee) is pending. The Assessing Officer will be at liberty to take necessary action as per law upon the receipt of the outcome of the Hon’ble Court on the legality/validity of the Agreement dated 21.02.2005 - Ground no.3 of the appeal is allowed with the above observations.

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• 2025 (6) TMI 1915
  

  Gain on sale of land - nature of land sold - land sold was capital asset within the meaning of Section 2(14) or agricultural land - HELD THAT:- As on the date when the assessee had sold his land at Village: Manchirevula, vide sale deed dt.07.09.2007, the same was in “Gandipet Mandal” which was not a separate municipality (i.e unlike Rajendranagar), but an area falling in the periphery of GHMC i.e. erstwhile Hyderabad Municipal Corporation (HMC) – a Municipality notified by the Central Government vide its “Notification No. So.,dt. January, 06, 1994” for purpose of Section 2(14)(iii)(b) of the Act, therefore, no infirmity arises from the view taken by the CIT(A), who had rightly concluded that the subject agricultural land is to be held as a “capital asset” if the same was located within 8 Kms radius from the municipal limits of GHMC.

  We are of the view that as the distance of the subject agricultural land at Village: Manchirevula from the municipal limits of GHMC is neither discernible from the record; nor any details establishing the same was there before the CIT(A), therefore, the matter requires to be restored to the file of A.O.

  A.O. is directed to verify the distance of the subject agricultural land at Village: Manchirevula from the municipal limits of GHMC on the date of sale i.e. on 07.09.2007. In case, the agricultural land is found to be within the notified area limit of 8 Kms. from the municipal limits of Hyderabad Municipality (now known as GHMC), then the view taken by the CIT(A) that the same is a “capital asset” under Section 2(14)(iii)(b) of the Act will stand approved.

  Exemption u/s 54B and 54F - investment made by the assessee in the new house property up to the date of filing of the delayed return of income under sub-section (4) of Section 139 - HELD THAT:- We find no infirmity in the view taken by the CIT(A) who had based on the documentary evidence as was available before him, viz. (i). registered sale deed and unregistered construction agreement had after observing that the assessee had invested an amount in the new house, allowed his claim of exemption under Section 54F of the Act to the said extent. At the same time, we are unable to concur with the CIT(A), who had observed that the payments made by the assessee towards investment in the new house property were to be allowed only to the extent the same were made by him before the “due date” for filing of his return of income. We say so, for the reason that Section 54F of the Act, inter alia, contemplates the utilization of the “net consideration” towards the purchase or construction of the new house before the “date of furnishing the return of income under section 139”, and does not mandate the utilization of the same before the “due date” for furnishing the return of income under Section 139 of the Act. Therefore, it can safely or rather inescapably be inferred that the same takes within its meaning the time available with the assessee for filing a delayed return of income under sub-section (4) of Section 139 of the Act.

  Period available to the assessee for making the investment u/s 54 of the Act will be available up to the period contemplated under sub-section (4) of Section 139 of the Act. We thus, in terms of our aforesaid observations, direct the A.O. to allow the investment made by the assessee in the new house property up to the date of filing of the delayed return of income under sub-section (4) of Section 139 of the Act applicable in his case.

  Exemption under Section 54B - No infirmity arises from the observation of the CIT(A). Although the CIT(A) had observed that as per the “agreements to sell” it was an established fact that the payments/investments made by the assessee in agricultural lands were higher than the sale consideration reflected in the sale deeds, but the value reflected in the registered sale deeds which were executed subsequent to the “agreements to sell” was only to be considered. Accordingly, we are of the view that the CIT(A) had adopted a fair approach and allowed the assessee’s claim for exemption under Section 54B viz.(i). agricultural lands purchased by the assessee in his own name (as per the value stated in the registered sale deed) and (ii). agricultural lands that were though purchased by the assessee from his own sources but the registered sale deeds were executed in the name of his wife. We thus, in terms of our aforesaid observations, uphold the view taken by the CIT(A), wherein he had restricted the assessee’s claim for exemption under Section 54B of the Act.

  CIT(A) declining his claim for deduction of the Indexed cost of improvement - Although, the assessee had as per his computation of income claimed to have incurred expenditure towards the improvement of the subject lands, viz. (i) Financial Year 2001-02: Rs. 39,20,100/-; and (ii). Financial Year 2002-03: Rs. 15,80,000/-, but he had failed to place on record any material that would substantiate his aforesaid claim for deduction. As the assessee had raised the aforesaid claim based on the notings in his rough note book, therefore, the authorities below had declined to consider the same while computing the capital gain.

  As thoughtfully considered the observations of the CIT(A) and find no infirmity in the same. Ostensibly, in the absence of any material based on which the authenticity of the aforesaid claim of the assessee of having incurred the subject expenditure towards the improvement of subject lands could be established, the authorities below could not have allowed the same. We thus, uphold the order of the CIT(A) on the aforesaid issue.

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• 2025 (6) TMI 1914
  

  Additions u/s 68 - unexplained capital account difference and sale proceeds of diamonds - CIT(A) deleted addition - HELD THAT:- In the capital addition we find that the assessee had submitted a valid gift deed executed by her husband on the occasion of the first birthday of her son, whose PAN card was annexed to show the proof of date of birth. Thus, there was no dispute about the identity of the donor and the AO did not doubted about the creditworthiness or occasion for the gift.

  Addition on the ground that the diamonds were not recorded in earlier balance sheet - Assessee has explained the omission as inadvertent, since the diamonds received as gift valuing to the extent of Rs. 1.15 crores were sold during the year [5440.2 carats] and the balance Rs. 1.35 crores [6359.8 carats] were still lying with the assessee as at the end of the year which is evident from the copy of the balance sheet as on 31-03-2016 which was submitted during the course of assessment proceedings.

  Assessee also substantiated the claim by offering LTCG on their sale. The Ld AO neither doubted about the credit worthiness, identity of the donor nor the occasion for the gift, thus the assessee discharged its primary onus cast upon it clearly. Therefore, CIT[A] was correct in deleting the addition made u/s.68 of the Act on account of unexplained capital account difference.

  Unaccounted sale proceeds - Assessee submitted a coherent reconciliation of buyerwise payments with matching bank entries and confirmation of Account with PAN details. The number of buyers was clarified to be 49 parties and not 56 parties as mentioned by the Ld AO.

  Further their PAN, confirmation letters and banking trails were all submitted by the assessee. AO did not point to a single buyer who was found to be non-genuine or whose payment was found to be bogus. Assessee furnished the copy of the Valuation Report namely date of valuation on 15-04-2015 and the Rates prevailing as on 23-08-1988 which was not questioned by the Ld AO. It is the case of the assessee who offered the entire capital gain to tax.

  The action of the Ld AO in rejecting the evidences without proper verification is against the principles laid down in CIT v. Orissa Corporation (P) Ltd [1986 (3) TMI 3 - SUPREME COURT] and reiterated in Mohanakala [2007 (5) TMI 192 - SUPREME COURT] Once the assessee has offered a satisfactory explanation with supporting evidences, the burden shifts on the Department to rebut the same with cogent materials, which has not been done in the present case by the Ld AO. Appeal of revenue dismissed.

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• 2025 (6) TMI 1913
  

  Deduction u/s.80P(2)(d) or u/s.80P(2)(a)(i) - interest income earned from the scheduled banks - AO was of the view that the deposits made by the assessee was out of surplus funds and hence the assessee is not entitled for the deduction

  HELD THAT:- We observe that similar issue has been decided by us in the case of Wadakkancherry Service Cooperative Bank Ltd. [2025 (4) TMI 1656 - ITAT COCHIN] as held court found that the interest earned by the Society through deposit of such receipts with banks in fact ought to have accrued to the benefit of the individual members and not to the Society itself; that in relation to the Society, it was to be treated as income from other sources since the interest income had lost its nexus with the principal income earned by the Society.

  The facts in the instant cases are entirely different and the investment concerned was of amounts that had already attained the character of surplus profits in the hands of the assessee. On this issue, therefore, we find ourselves in agreement with the view taken in The Vavveru Cooperative Rural Bank Ltd. .[2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] and Tumkur Merchants Souharda Credit Co-operative Limited [2015 (2) TMI 995 - KARNATAKA HIGH COURT]. Appeal filed by the assessee is allowed.

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• 2025 (6) TMI 1912
  

  Revision u/s 263 - CIT(E) was of the view that the AO has erred in treating the repayment of loan as application of income - "application of income" under sections 11 and 12 - HELD THAT:- It is an admitted position of fact that the assessee has borrowed some loan in assessment year 2013-2014, which was used by the assessee for acquiring the assets for carrying out the charitable activities. On this asset, the assessee has claimed depreciation u/s.32. Thereafter the assessee has repaid the loan in the impugned year, i.e., assessment year 2017-2018 and claimed that repayment of loan is application of income.

  The claim of the assessee is fully justifiable in view of the judgment of Govindu Naicker Estate [2009 (1) TMI 114 - MADRAS HIGH COURT] Therefore, we are of the view that the order of the AO is neither erroneous nor prejudicial to the interest of revenue and the CIT(E) has erred in assuming the jurisdiction u/s.263 of the Act. Hence, we restore the order of the AO and quash the order of the CIT(E). Appeal filed by the assessee is allowed.

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• 2025 (6) TMI 1911
  

  Addition u/s 115BBC - anonymous donations received by an assessee society registered u/s 12A - CIT(A) deleted addition - Revenue is aggrieved by the action of the CIT(A), admitting additional evidence for the first time before him without confronting to the AO - HELD THAT:- As in our view the matter requires fresh consideration at the end of the AO for examining the veracity of these documents filed by the assessee before the CIT(A).

  DR also placed on record the judgment of Everest Education Society [2024 (6) TMI 822 - BOMBAY HIGH COURT] wherein under similar circumstances the Hon’ble Bombay High Court has affirmed the addition of anonymous donation received from 7145 donors.

  Therefore, we direct the AO to examine the present case de novo in the light of the judgment of the Hon’ble Bombay High Court, cited supra. Needless to say, the AO shall afford meaningful opportunity of being heard to the assessee before passing any order. Appeal filed by the Revenue is allowed for statistical purposes.

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• 2025 (6) TMI 1910
  

  Correct head of income - “interest income” and “miscellaneous income” earned by the assessee - to be taxed under the head “income from business and profession” or “income from other sources” - HELD THAT:- As in view of Tribunal’s observation in assessee’s own case for A.Y. 2015-16 [2023 (8) TMI 1438 - ITAT AHMEDABAD] wherein it has been held that such income qualifies as “business income”, it is held that such “interest income” and “miscellaneous income” earned by the assessee is liable to be taxed under the head “income from business and profession” instead of “income from other sources”.

  Accordingly, on this issue the earlier order passed by the Tribunal [2024 (3) TMI 199 - ITAT AHMEDABAD] shall stand replaced with our above observations with regards to taxability of interest income, and miscellaneous income. Decided against revenue.

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• 2025 (6) TMI 1909
  

  Validity of reassessment proceedings - Reasons to believe - determining the ALV of the house properties is not backed on plausible reasoning - HELD THAT:- We observed that the issue is squarely covered in favour of the assessee by decision of ITAT in assessee’s husband case [2022 (1) TMI 421 - ITAT DELHI] as held non-recording of the reasons prior to issue of notice u/s 148 flouts the provisions of law and clearly depicts non-application of mind on the part of the ld. Assessing Officer.

  It is a settled position that even where an assessment has been only processed under Section 143(1) of the Act, the reopening notice must satisfy the test of having reason to believe that the income chargeable to tax has escaped assessment. The reason to believe has to be arrived at after applying one's mind to the material available and to reach a prima facie view that income chargeable to tax has escaped assessment. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessment. AR has submitted that the property from which the deemed rental income the Revenue proposes to 11 add does not belong to the assessee. When the property does not belong to the assessee, the question of taxing the deemed rental income does not arise. Revenue has not placed any material on record to demonstrate that the submission of the assessee of it not being the owner of the aforesaid properties is false/ incorrect. In the present case the AO prima facie has not done the bare necessary enquiry into the material received before he concluded that income chargeable to tax has escaped assessment.

  Assessee appeal allowed.

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• 2025 (6) TMI 1908
  

  Ex parte order passed by CIT(A) - Assessee submitted that since the assessee did not have access to the Income Tax Portal, therefore, he had no knowledge about any of these notices being issued by CIT(A) - HELD THAT:- It is evident that the CIT(A), while passing the impugned order, has not considered any of the submissions as filed by the assessee before migration of the appeal to the National Faceless Appeal Centre.

  It is further evident from the perusal of the impugned order that there is no reference to the notices issued during the physical hearing and the submissions filed by the assessee.

  CIT(A) in limine dismissed the appeal filed by the assessee, placing reliance upon the decision of B.N.Bhattacharjee [1979 (5) TMI 4 - SUPREME COURT] merely on the basis of non-compliance with notices by the assessee without adjudicating the grounds raised by the assessee on merits, as required u/s 250(6) of the Act.

  From the perusal of the record, it is further evident that the assessment was also concluded on a best judgment basis u/s 144 of the Act in the absence of a response/details being filed by the assessee.

  Assessee should be granted one more opportunity to represent its case on merits before the AO. Consequently, we deem it fit and proper to set aside the impugned order and restore the matter to the file of the AO for de novo adjudication with a direction to the assessee to furnish all the details/submissions in support of its claim. Appeal by the assessee is allowed for statistical purposes

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• 2025 (6) TMI 1907
  

  Penalty u/s. 271(1)(c) - defective notice u/s 274 - Allegation of no specific charge, i.e. either for concealment of income or for furnishing of inaccurate particulars of income - disallowance of expenditure on account of “Magazine and Journal” - estimation of income - HELD THAT:- Upon careful consideration, we find considerable cogency in the contention of the ld. AR that penalty u/s. 271(1)(c) of the Act is not leviable, since there is no specific charge, either for concealment of income or for furnishing inaccurate particulars of income have been made while passing the assessment order passed u/s. 143(3) of the Act dated 28.3.2013, hence, on the anvil of settled law on this issue, as referred above, the penalty in dispute does not survive and hence, the same is deleted on this point of view.

  Further, it could be seen from the assessment order that the Assessing Officer has made addition on ad hoc basis by disallowing 10% of the total expenses in the head Magazine and Journals treating the same unjustified and excessive and unreasonable. Ultimately the said addition was made on adhoc/estimate basis, however, the AO has tried to justify the same by comparing the similarly placed concern, but the facts of that case has not been discussed at all.

  We noted that this issue is now covered by the decision of Technip Italy Spa [2015 (3) TMI 975 - ITAT DELHI] wherein held penalty cannot be levied on an estimated income. Merely because books of the assessee were rejected and income was assessed on estimate basis, it could not be held that the assessee was guilty of fraud or gross or wilful neglect for the purpose of levy of penalty u/s 271(1)(c).

  Also in Sangrur Vanaspati Mills Ltd. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] wherein, it has been held that when addition has been made on the basis of estimate and not on account of any concrete evidence of concealment, then penalty u/s 271(1) (c) cannot be levied

  Decided in favour of assessee.

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• 2025 (6) TMI 1906
  

  TP Adjustment - recharacterization of the services rendered by the assessee as knowledge process outsource or KPO services - HELD THAT:- Appellant is providing engineering design services to its AEs on the basis of concept provided by the AE as per requirement of the customers. The services include in-depth understanding of the clients business process, existing systems etc. However, on careful examination of various design services provided by the assessee which includes 3D modelling and 2D Drawings from 3D modelling, clean room technical specification, 3D visualization (for Architecture), 3D Modelling and 2D Drawings from 3D Modelling of process plant equipment (pipes, ducts, cable tray, pipe racks etc.,) Staad analysis, connections design for (civil/structural) etc. For rendering the above services, the appellant company has employed various categories of technical staff including Diploma Holders, Engineering Graduates, PG Graduates and from the above, it is undisputedly clear that the services rendered by the appellant to its AEs in EDS segment is not a simple design services in the category of BPO services but it is a highly technical work in the category of Knowledge Process Outsourcing (KPO) and therefore, there is no error in the reasons given by the TPO to recharacterize the services of the appellant company as KPO services and thus, we reject the ground taken by the assessee.

  Comparable selection - exclusion of Mahindra Consulting Engineers Ltd. -Services rendered by the assessee to the AE are comparable to services rendered by Mahindra Consulting Engineers Ltd. Further, although the appellant contended that it fails the RPT filter, but in our considered view, the method of computation of related party transaction by the assessee is contrary, because related party transactions should be computed to revenue or expenses separately but there is no question of aggregating both the transactions and computing the percentage. Since related party transaction of the appellant company with related party is less than 25% in respect of income and expenditure separately, in our considered view, it passes the RPT filter applied by the TPO. Standing in the business of number of years does not matter for the margin earned by the company, but all depends upon the nature of services rendered by the company. Therefore, the argument of the learned Counsel for the assessee that Mahindra Consulting Engineers Ltd is in the business of almost 37 years and cannot be compared with the appellant company being in the first year operation does not hold water. Thus, we reject the argument of the assessee and upholds the inclusion of Mahindra Consulting Engineers Ltd.

  M/s Genesys International Corporation Ltd is predominantly into the services of geographical information system services comprising of photogrammetry, remote sensing, car topography, data conversion, state of the art terrestrial and 3D geo-content including location and other computer related services, whereas the assessee is into simple activities of engineering design services of EPC contractors and cannot be compared to each other. TPO/DRP without considering the relevant facts simply included the above company in the list of final set of comparables. Thus, we direct the TPO/Assessing Officer to exclude it.

  L&T Technologies Services Ltd is not a comparable company to the appellant company which is providing engineering design services to its AEs for EPC Contractor.

  Inclusion of exceptional item being consultancy charges paid as part of operating cost - Since the assessee itself has taken over the agreement in a slump sale and further the entire amount of consultancy charges has been paid by the assessee, in our considered view, unless the assessee derived benefit from the agreement, it may not have taken over agreement and agreed to make payment to Cyient Ltd. Therefore, from the above, it is undisputedly clear that the benefits of agreement from Cyient Ltd is furthering the business of the assessee in subsequent years and for this purpose, the assessee agreed to make payment. Therefore, once the expenditure is related to the business operations of the assessee, then it should be definitely part of the business expenditure do the assessee and partakes the nature of operating cost. The TPO/DRP has rightly considered exceptional item, being service charges paid to Cyient Ltd as operating in nature. Thus, we are inclined to uphold the findings of the TPO/DRP and reject the ground taken by the assessee.

  Considering Amortization of Good Will as part of operating cost - The excess of liabilities over assets has been treated as goodwill. Since it is one time extra ordinary expenses arise on account of acquisition of global design services division from another company and a difference between the asset and liabilities of the transferor company, in our considered view, said asset being goodwill cannot be included as asset employed in the business of the assessee to be considered as operating in nature. Further, the learned DRP has itself given a finding that goodwill acquired on account of amalgamation or business transfer agreement is not eligible for depreciation. Once the assessee is not eligible for depreciation on goodwill, then the same cannot be considered as operating in nature for the purpose of computing margin. Therefore, we are of the considered view that the TPO is erred in including amortization of goodwill as part of operating cost. Thus, we direct the TPO to exclude amortization of goodwill from operating cost.

  Considering management fee and value fee as part of operating cost - The assessee has considered the very same expenditure in Ground No.10 and seeks to exclude the amount as part of operating cost. Since we have already held that consultancy/management fees paid to Cyient Ltd is part of operating cost, in our considered view, Ground No.10 taken by the assessee challenging the exclusion of management fee and value fee is devoid of any merit and thus, we reject the ground No.10 taken by the assessee.

  Rejecting capacity utilization adjustment sought by the assessee - There is no basis for adopting the total available hours and further, the assessee has not submitted any details for the number of hours utilized for the under utilization and therefore, on this ground itself, capacity utilization computed by the assessee should be rejected. However, the case of the assessee is that it has utilized 86.87% whereas the comparables which utilized 100% of their capacity.

  In our considered view, once again the assessee is making a claim without there being any evidence. We do not know whether the comparables are operating with full capacity to say that they are operating with 100% capacity. In absence of any evidence, it cannot be said that the comparables are operating at 100% capacity. Since the appellant has failed to file any evidences to support its claim, in our considered view, there is no reason to deviate from the reasons given by the DRP to reject allow adjustment towards capacity utilization. Thus, we reject ground No.11 taken by the assessee.

  Inclusion of Code Ploy Engg. Ltd and E2G Engineering & Design Services (P) Ltd in the list of comparables - There is no dispute with regard to the fact that the assessee has not taken any ground before the TPO raising inclusion of above 2 companies in the list of final set of comparables. Further, the assessee has also not taken any ground before the DRP on this issue. Therefore, the argument that the TPO/DRP not allowing the assessee to take an additional ground for inclusion of the above two companies is devoid of any merit and cannot be accepted. Further, the assessee has not placed relevant material before the TPO to examine the FAR analysis of the 2 companies to consider for inclusion or exclusion for the purpose of computing the ALP.

  Appeal filed by the assessee is partly allowed.

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