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Showing 101 to 120 of 1528 Records
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2022 (6) TMI 1428
Diversion of income by overriding charge - amount transferred to Statutory Reserve Fund in compliance with the mandatory provisions of Section 45 IC read with Section 45Q of the RBI Act - HELD THAT:- We are of the firm view that when the income by way of profit, as in the present case, is received and then reflected as part of the total income, deduction is not permissible. Therefore, the authorities below were justified in disallowing the deduction claimed by the assessees for the amount transferred to reserve fund in compliance with the mandatory provisions of the RBI Act, which do not call for any interference by this court. Accordingly, the main issue stands answered against the assessees.
MAT Computation - AO added the fund transferred to the statutory reserve to the total income of the assessees, while computing the taxable income under section 115JB, which was also affirmed by the appellate authorities - HELD THAT :- Section 115JB states that for computing the book profit, the amount meeting out the liabilities other than ascertained liabilities, has to be added. The statutory reserve fund based on the RBI guidelines, is not based on any ascertained liabilities and hence, it has to be added for arriving at the book profit under section 115 JB. At this juncture, it would be relevant to refer to the decision of the Delhi High Court in SREI Infrastructure Finance Ltd [2015 (2) TMI 545 - DELHI HIGH COURT] wherein, an identical question of law as raised herein it was clearly stated that the reserve is the amount of profit which is retained for use in business, when difficulty arises and on the basis of our earlier findings and from the very language of section 45 IC, this court comes to a conclusion that the amount transferred by the assessees herein, to the statutory reserve as mandated under the provisions of the RBI Act, is not an allowable deduction in computing the assessable income under the provisions of the Act under the regular computation and computation of book profits under section 115JB, as the case may be and therefore, the orders of the authorities below, do not call for any interference. Accordingly, the consequential issue is also decided against the assessees.
Bad debts written off as deduction u/s 36(1)(vii) - Once the bad debts are written off by debiting the same in the profit and loss account and by giving a corresponding credit in the loans and advances/debtors on the asset side of the balance sheet, the requirement under law is satisfied. It is not necessary to make corresponding entry towards each individual account separately to qualify as a valid write off. The department has not disputed the entries in the profit and loss account and balance sheet.
Tribunal failed to see that once the sums written off in the books maintained for the purpose of Income Tax Act and debited in the profit and loss account and satisfied the other requirement as held in Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT], it is suffice to hold that the assessees are entitled to the allowance. In such view of the matter, we are of the opinion that the Tribunal rightly deleted the disallowances made by the assessing officer - Decided in favour of the assessees.
Nature of expenses - royalty paid to the holding company - whether to be treated as revenue expenses? - AO disallowed the royalty amount and allowed depreciation at 25% by holding that the expenditure incurred is for acquiring intangible asset and would thus amount to capital expenditure - HELD THAT:- Every expenditure incurred to acquire some right over intangible asset, cannot be ipso facto termed as capital expenditure. The nature of the assets, right, information or technical know-how that is transferred, must be such that without which the transferee could never commence the business. As rightly contented by assessees, the benefit granted by the licensor is not enduring in nature in the present cases. The assessing officer without appreciating the terms of the licence agreement and ascertaining the nature of the expenditure incurred by the assessee companies, disallowed the deduction of royalty payment and allowed the depreciation at 25% treating it as capital expenditure. However, the appellate authorities, while deleting the disallowances made by the assessing officer, have rightly treated the royalty payment as revenue expenditure. Once the payment of royalty is treated as revenue expenditure, automatically, it goes without saying that the assessees would be entitled to 100% deduction. Therefore, we need not interfere with the orders passed by appellate authorities. Accordingly, the substantial questions of law relating to royalty, are answered in favour of the assessees.
Employees Stock Option Plan ( ESOP) expenditure - AO disallowed the said claim and added the same back to the total income of the assessee companies - HELD THAT:- This court comes to a conclusion that the Tribunal was correct in holding that the ESOP expenditure is revenue in nature and the assessee is entitled for deduction. Accordingly, the orders passed by the Tribunal in deleting the disallowances of ESOP expenses by the assessing officer, do not require any interference in these appeals. Resultantly, this issue stands answered in favour of the assessees.
Loss on sale of investments / Diminution in value of investments - assessees claimed deduction for the value of investments written off due to fall in their value / loss on sale of investments, which was disallowed by the assessing officer on the ground that it is capital in nature - HELD THAT:- This court is of the opinion that Government securities are only stock-in-trade and not capital investment and the loss, if any, on sale of them cannot be treated as capital loss and hence, the assessees are entitled for deduction of loss on sale of investments / diminution in value of investments. Therefore, the Tribunal was right in deleting the disallowances made by the assessing officer and the same need not be interfered with. Accordingly, the issue raised by the Revenue qua loss on sale of investments/ diminution in value of investments, stands answered in favour of the assessees.
Loss arising out of Derivatives / hedging transactions in foreign exchange - whether the Tribunal was right in holding that the loss arising out of derivatives / hedging transactions in foreign exchange, is an allowable deduction in computing the business income of the assessees? - HELD THAT:- As per section 2 (7) of the Sale of goods Act, “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;”
No person other than the authorised dealer can deal with foreign currency except with the permission of the RBI under section 8 of the Foreign Exchange Regulations Act, 1973 or Section 3 of the Foreign Exchange Management Act, 1999.
As the foreign currency cannot be called as “commodity” as well, the hedging contracts are not speculative and hence, Section 43(5) is not applicable. Though the assessing officer examined the issue in detail, he erred in treating the transactions done by the assessees as speculative transactions and disallowing the claim made by them. On the other hand, the appellate authorities rendered concurrent findings in favour of the assessees, to the effect that the derivative contracts, foreign exchange swap transactions against fluctuations in interest rate are hedge transactions and the loss arising out of the same is allowable as business loss. Such findings of the appellate authorities cannot be found fault with and therefore, the same are hereby confirmed. Accordingly, this issue stands answered against the Revenue.
Disallowance u/s 14A r/w Rule 8D - mandation of recording satisfaction - HELD THAT:- In the instant cases, the assessing officer made disallowances u/s 14A r/w Rule 8D, but there was no reason recorded by him, as to why he was not satisfied with the claim made by the assessees. Further, there was no examination by the assessing officer about the nature of investment by the assessees in their subsidiary companies and expenditure incurred by them. The CIT(A)/Tribunal pointed out certain errors committed by the assessing officer, accepted the contentions raised by the assessees and directed the assessing officer to modify the disallowances under section 14A, by the orders impugned herein.
Such course adopted by the appellate authorities cannot be countenanced, when the mandatory procedure envisaged under section 14A r/w Rule 8D has not been complied with. Without holding that, in the absence of specific findings and reasons, the question cannot be addressed. Though, it is trite law that any question of law affecting the rights of the parties would not by itself be a substantial question of law, this court is of the opinion that in the absence of specific findings on fact and adherence to the procedure, the substantial questions of law on the issue ought not to be decided. Thus sets aside the orders of the appellate authorities and remands the matter to the assessing officer.
Interest u/s 234D - The Tribunal in [2016 (1) TMI 1433 - ITAT CHENNAI] while rejecting the contentions of the assessees, held that interest under section 234D is on par with the interest charged under section 234A or 234B or 234C of the Act and that, the Government has not advanced any money to the assessees so as to call it as a loan; the interest levied on the assessees is compensatory and it cannot be allowed as a business deduction, while computing the business income.
This court finds no reason much less valid reason to interfere with the findings so rendered by the authorities below, as the interest was levied on the amount refunded to the assessees, which they are not legally entitled to and for the period during which they were holding the same and hence, the same is not eligible for deduction. Therefore, this issue relating to disallowance of interest under section 234D, is decided against the assessees.
Disallowance u/s 40(a)(ia) - Assessee did not adduce any evidence to support their claim and also in view of the settled legal position that the liability to deduct tax at source is mandatory and a person who does not adhere to the said statutory obligation, has to suffer the consequences which are stipulated in the Act itself, this court does not find any reason much less valid reason to disagree with the findings so rendered by the authorities below, qua disallowance u/s 40(a)(ia) of the Act.
Alternative plea that the amount disallowable is only 30% of the expenditure in view of the amendment to section 40(a)(ia) by Finance (No. 2) Act, 2014 - The proviso to section 40(a)(ia) of the Act as inserted by the Finance Act, 2014 does not apply to the case at hand pertaining to the assessment year 2012-13 and hence, the contention of the assessee for curative benefit with reference to the said proviso does not hold good. Having considered the rival contentions, the Tribunal was of the view that the amendment restricting the disallowance to 30% of the expenditure, came into effect only with effect from 01.04.2015 and the assessment year under consideration was 2012-13 and hence, the said amendment was not applicable to the case of the assessee. Accordingly, the alternative plea raised by the assessee was rejected by the Tribunal. The said view of the Tribunal appears to be just and proper and it needs no interference by this court, in the light of the judgment of the Hon'ble Supreme Court in Shree Choudhary Transport Company [2020 (8) TMI 23 - SUPREME COURT] as clearly observed that the amendment to section 40(a)(ia) by the Finance No. 2 Act 2014 with effect from 01.04.2015, is applicable only from the assessment year 2015-16.
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2022 (6) TMI 1427
Capital gain computation - fair market value of assessee’s capital asset - HELD THAT:- As we note with the able assistance coming from the Departmental side that this taxpayer had neither transferred any “land nor a building” as specified u/s.50C(1) but only its lease hold rights in the ‘CIDCO’ area.
We thus hold that such a leasehold rights are nowhere covered u/s.50C(1) going by specified categories therein as per stricter interpretation recently reiterated in Commissioner of Customs Vs. Dilip Kumar and Co [2018 (7) TMI 1826 - SUPREME COURT] We accordingly reject the Revenue’s instant sole substantive grievance.
Unaccounted cash component - Revenue vehemently argued that both the learned authorities have gone by the seized material as clearly indicating cash “paid to Jai Ganesh Co-operative members” - It further invokes the necessary presumption of correctness given to the such seized documents u/s 292C as well - As no substance in Revenue’s forgoing arguments supporting the impugned addition. This is for the precise reason that the alleged seized document itself rebuts the presumption in assessee’s favour once its members only had received the payment who are separately assessable in their individual capacity(ies). We further make it clear that the learned lower authorities have nowhere quoted any other cogent evidence since they have only gone by above seized document. We accordingly accept the assessee’s sole substantive grievance.
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2022 (6) TMI 1426
Refund of CENVAT Credit - HELD THAT:- Admittedly, the identical issue has been raised by the petitioner for prior periods as well. In fact, for one such prior period, the petitioner had suffered an adverse order before the CESTAT, which order has been followed by the First Appellate Authority for the subsequent period as well. It is as against the order of the First Appellate Authority as aforesaid that the present writ petition has been filed.
Pending writ petition, the order of the CESTAT relied upon by the Appellate Authority has been reversed in CMA. Nos. 1933 to 1935 of 2018 at the petitioner's instance, on 20.08.2019 and, it is this order that holds the field as on date. In such circumstances, the order of first Appellate Authority that takes a contrary view is not liable to be sustained and the same is set aside.
Petition allowed.
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2022 (6) TMI 1425
Unexplained investment - Department was in possession of the incriminating documents in the form of MOU seized during the course of search proceedings which clearly showed the name of the assessee and share of the assessee in the said property - co-owners of the property has admitted the fact of unexplained investment in accordance with his share in the property in the statement recorded on oath - CIT(A) deleted the addition - AO made addition by taking a view that as per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share - HELD THAT:- CIT(A) noted that extrapolation on the basis of part period or part value is not permissible. CIT(A) further noted that no evidence during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. AO made addition without having any documentary or oral evidence.
AO made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the basis of the said observation, the CIT(A) deleted the entire addition. We find that the Ld. CIT(A) on proper appreciation of fact correctly held that the additions made by the assessing officer is not based on evidence on record. No contrary facts or law is brought to our notice to take other view, hence, we affirm the order of Ld. CIT(A). in the result, the grounds of appeal raised by the revenue are dismissed.
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2022 (6) TMI 1424
Bank is a nominee or transferee of the shares or not?
Seeking an injunction restraining defendant nos. 1 and 2 and their servants and agents from participating in an Extraordinary General Meeting (EGM) of the defendant no.3 (Company) scheduled on 24th June, 2022 and from exercising any right including voting rights in respect of the suit shares - seeking permission to exercise voting rights in respect of the suit shares at the said EGM - seeking restraint on defendant nos. 1 and 2 and their servants and agents or nominees from interfering or seeking participation in the management of the affairs of the Company.
HELD THAT:- That interim application was scheduled to be heard by this court but was withdrawn only to pursue a Review Petition in view of certain additional facts that had come to the knowledge of the applicant. The plaint was amended and the Review Petition is pending. There was a controversy whether the Review Petition was moved at all, but today it is pointed out that the Review Petition has been listed on board. There is no reason why the plaintiff/applicant has not moved that court since the issue is sought to be reopened on the basis of additional disclosures and fact thus their application could have been made in the Review.
However, despite pendency of the Review Petition, the attempt of the applicant is now to once again seek relief which was part of IAL 4778 which was withdrawn - no case is made out for ad-interim relief on the basis of the arguments advanced - The Review Petition continues to be pending. Contentious issues have been raised as to the legal capacity of the bank since the applicant has contended that the bank is not a nominee but an alleged transferee. The applicant has not made out a prima facie case nor is the balance of convenience favouring grant of relief. No irreparable harm is likely to be caused to the plaintiff/applicant. There is no occasion to once again consider grant of relief which was part of IAL 4778 which was consciously withdrawn to pursue the Review Petition which is still being pursued.
Ad-interim relief is refused - List per CIS.
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2022 (6) TMI 1423
Validity of revision notice of assessment - refund alongwith interest on delayed refund - no personal hearing granted - violation of principles of natural justice - HELD THAT:- This court in KIRBY BUILDING SYSTEMS INDIA LIMITED VERSUS DEPUTY COMMISSIONER (CT), CHARMINAR DIVISION, HYDERABAD AND OTHERS [2011 (8) TMI 1049 - ANDHRA PRADESH HIGH COURT] allowed the writ petition and set aside the revisional order dated July 29, 2011. The matter was remanded back to the revisional authority to pass fresh orders in accordance with law. Though respondent No. 2 had issued notices dated November 10, 2011 and March 24, 2012 for hearing, which was attended to by the petitioner, no order of revision came to be passed.
When the revisional order was set aside by this court, the consequence was that the original assessment order stood restored and continues till date since no fresh order of revision has been passed on remand - it is evident that when an order of assessment, re- assessment, rectification or revision of an assessment is made following an order of any court, the same is required to be made within three years from the date of receipt of such order by the prescribed or revising authority.
The respondent No. 2 directed to refund Rs. 40,00,000/- to the petitioner with interest at 6% per cent. per annum to be computed from June 21,2017 when the petitioner first raised the demand for refund. Let the refund along with interest be paid by respondent No. 2 to the petitioner within a period of three (03) months from the date of receipt of a copy of this order.
Petition disposed off.
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2022 (6) TMI 1422
Revision u/s 263 - distinction between lack of inquiry and inadequate inquiry - Second revision orders - As per CIT AO failed to make an enquiry as to why the assessee has offered net income and not the gross income - HELD THAT:- Action at the end of the ld. Pr. CIT is not justifiable. He has exercised the powers without analytically examining the report. The reason for taking the first two reasons together was for appreciating this factual aspect. On reason no. 2, the ld. Pr. CIT did not go through the record that earlier 263 proceedings were initiated against the assessee and those were dropped. What made him to again initiate the proceedings, is not discernable. There was no fresh information about this aspect and the same aspect has already been considered by his predecessor. It suggests that there was no application of mind at the end of the ld. Pr. CIT.
Enquiry was initiated on the premises that the assessee has not included in its disclosed income. When the assessee has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms.
CIT wanted to verify the inclusion of the income. The assessee has demonstrated that it has offered tax on net basis and income has to be offered on net basis only. Nothing remains to be explored on the ground that as to how the gross income was not offered. It is not the case of the revenue that the assessee has claimed excessive expenditure or the expenditure were not to be granted to the assessee. Therefore, to our mind the impugned order is not sustainable because the ld Pr. CIT failed to make a complete analysis of the record. Nothing is available on the record which authorizes the ld. Pr. CIT to take action u/s 263 of the Act
Commission payment - AO has made an enquiry during the assessment proceedings. The cognizance of the letter written by the DDIT Mumbai was taken up and it was explained by the assessee in its reply. The reference of this letter in the reply of the assessee would suggest that it must have been brought to the knowledge of the AO.
There could not be any occasion of the assessee to make reference of this letter in his reply which suggest that these details were discussed by the AO and thereafter he exercised his discretion. The grievance of the ld. Pr. CIT is that the AO has accepted this stand of the assessee without any verification or enquiry. This reasoning is factually incorrect as the case on hand does not reflect inadequate/non-enquiry at the behest of the AO. The assessment order cannot be set aside on this reasoning by invoking Section 263.
Appeal of the assessee is allowed.
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2022 (6) TMI 1421
Revision u/s 263 - second round of litigation - non-service of notice as agitated in first round of litigation - HC earlier [2018 (5) TMI 701 - CALCUTTA HIGH COURT] allowed the appeal on the ground that the contention advanced by the assessee with regard to non-service of notice was not specifically considered by the tribunal and order passed by the tribunal was set aside and the matter was remanded to the tribunal to re-consider the issue - HELD THAT:- On remand, the tribunal has taken up the matter and we find that factual exercise had been done by the tribunal and all the records placed by the department were considered and the tribunal was satisfied that there has been gross violation of principles of natural justice. Accordingly, the appeal filed by the assessee was allowed.
The revenue has challenged this order by filing the present appeal and from the memorandum of grounds, we find that the revenue seeks to convert this Court as if it is a second appellate Court over the findings of the tribunal. The present appeal, being one under Section 260A of the Act, what is required to be seen is as to whether any substantial question of law arises for consideration and the jurisdiction of this Court is not to reappreciate the factual conclusion arrived at by the tribunal. As pointed out earlier, the tribunal, after the matter was remanded, has done an elaborate factual exercise and decided in favour of the assessee. Thus, we find that there is no question of law much less substantial question of law arises for consideration in this appeal. Decided against revenue.
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2022 (6) TMI 1420
Maintainability of writ petition under Article 226 of the Constitution - Seeking forbearance from investigating under PMLA on the premise that the investigation is without jurisdiction - round tripping transactions between the Indian and the overseas entities - HELD THAT:- The jurisdiction of this Court under Article 226 of the Constitution is a basic feature of the Constitution of India and cannot be taken away even by a constitutional amendment - In that view of the matter, it cannot be contended, with any degree of seriousness, that a High Court does not possess the inherent jurisdiction to issue a writ in an appropriate case. It is also well settled that the High Court can issue a writ of mandamus to stop an investigation where it is found that the investigating officer was misusing his powers of investigation.
Nevertheless, the existence of jurisdiction is one aspect, and the manner of its exercise is quite another. The power of a High Court to issue high prerogative writs like a mandamus, certiorari, etc., flows from its plenary power under Article 226 of the Constitution of India and is discretionary in nature. Therefore, it does not imply that because the High Court is vested with jurisdiction to issue an appropriate writ, it must necessarily follow that a writ must issue in all cases. The remedy is discretionary in nature and must be exercised in consonance with sound judicial principles.
On perusing the order in MANOHAR LAL SHARMA VERSUS THE PRINCIPAL SECRETARY & OTHERS [2014 (7) TMI 1380 - SUPREME COURT] passed by the Supreme Court. What is discernable is that the CBI is conducting a Courtmonitored investigation into the coal block allocations, by issuing various directions from time to time. The Court had taken note of the fact that a Special Judge had been notified by the Chief Justice of the Delhi High Court to try the coal block allocation cases.
It is noticed that the CBI and the Enforcement Directorate have been periodically filing detailed status reports of the various prosecutions conducted by them.
Coming to the allegation of “round tripping” which was strenuously pursued by the learned Additional Solicitor General, it is necessary to briefly notice the import of this expression. “Round tripping” can be defined as a practice by which funds are transferred from one country to another and transferred back to the origin country for purposes like black money laundering or to get the benefit of tax concession/evasion/avoidance from countries like Mauritius, which enjoy low taxes, etc. - even according to the Enforcement Directorate, no mining was carried out and on the other hand, RKM Company had expended funds from its coffers on mine development activities. Once it is held that RKM Company had not derived any benefit from the allocation of the coal block, it follows that the corpus delicti of the offence viz., the proceeds of crime, does not exist.
The allegation of round-tripping, even assuming there is one, as alleged by the Enforcement Directorate, is a criminal activity, falling within the domain of Foreign Exchange Management Act (FEMA), there is no arrest provision under the provisions of FEMA, whereas, threat of arrest looms large in an investigation under the PML Act with bail conditions being very stringent.
The Enforcement Directorate cannot exercise its powers of investigation to discover the existence of a predicate offence under the FEMA or the Customs Act.
Thus, in the absence of there being any predicate offence under the Customs Act, 1962, for the present, and the fact that the alleged offence under the FEMA, 1999, is not a predicate offence under the PML Act, 2002, it follows that there cannot be any offence of money laundering under Section 3 of the PML Act, 2002 qua these offences.
A writ of mandamus is issued restraining the Enforcement Directorate from exercising its powers under the PML Act, 2002, qua the investigation of alleged money-laundering in respect of these offences alone - Petition disposed off.
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2022 (6) TMI 1419
Accrual of income - reliance on documents seized in search - as contented documents seized during the course of search and seizure proceedings and marked as A/1/MKP from the assessee reflected the amount collected on behalf of the co-operative societies and the said amount is not an income in the hands of the assessee.
HELD THAT:- To a pointed question of this Court, with regard to the above finding recorded by this Court, Shri Seshachala, in his usual fairness, did not deny that the judgment in [2016 (6) TMI 644 - KARNATAKA HIGH COURT] and connected case, has attained finality. In view of the admitted facts, the Assessing Officer, the First Appellate Authority and ITAT having concurrently recorded findings of the fact against the assessee, the question of law framed in this appeal are answered in favour of the revenue and this appeal is dismissed.
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2022 (6) TMI 1418
Penalty u/s. 271B - Delay in submitting the audit report - HELD THAT:- AO shows that the delay in submitting the audit report was on account of delay in obtaining audit report from the statutory auditors. It is fairly admitted that the statutory auditors is appointed by the Registrar of Co-operative Societies and not by the assessee.
Assessee has sufficient and reasonable cause for delay in obtaining the audit report. It is also an admitted fact that the audit report was available before the AO, when the assessment was done. This being so, we are of the view that it is a fit case for deletion of penalty u/s. 271B - As penalty levied by the AO u/s 271B of the Act and confirmed by the ld CIT(A) stands deleted. Decided in favour of assessee.
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2022 (6) TMI 1417
Professional Misconduct - Compliance with SAs and Maintenance of Audit Quality - Promotion of Public and Investor confidence and Effectiveness in Deterring Auditors and Audit Firms from violating the applicable Accounting and Auditing Standards - sanctions and penalties.
Compliance with SAs and Maintenance of Audit Quality - HELD THAT:- CA Gulshan Jham is a qualified professional but the serious non-compliances of the Companies Act and Standards on Auditing on his part have been not what was expected from him as the Auditor. The primary function of the Auditor is to achieve the necessary audit quality and compliance with SAs. The charges proved have shown the failure of the CA to discharge this duty. A critical, questioning attitude, an unwillingness to be satisfied by merely superficial explanations, not concluding on material matters without rigorous verification from more than one angle, diligent and methodical cross verification, proper planning and the meticulous execution of the audit plan etc are fundamental to audit quality. The audit of this listed Company has been done by the CA most casually with no regard to the law, and professional and ethical standards. The CA has failed in his duties as the auditor.
Promotion of Public and Investor confidence and Effectiveness in Deterring Auditors and Audit Firms from violating the applicable Accounting and Auditing Standards - HELD THAT:- Audited financial statements are the basic inputs for innumerable transactions in the economy. A breakdown, or severe damage, to the trust and confidence that the public and investors have in financial statements, would have ramifications that go far beyond the limited activities of an auditee company. As professionals, auditors are expected to judge the significance of the operations of the entity they audit for the larger financial and economic sectors and accordingly calibrate their approach and procedures. The auditor's duty of exercising due diligence is owed to the users of the financial statements - Where the auditors have shown to be not diligent in considering these factors, appropriate penalties would follow that should be effective, proportionate and dissuasive. It is also essential that the penalty imposed has a suitable deterrent effect on other auditors and, at the same time, sends out a message to the Public and the Investor Community that such misconduct will not be allowed to escape lightly.
Nature and size of the Audit Firm - HELD THAT:- The CA in this case is a very small proprietorship firm not having any other listed company audit. Based on the principle of proportionality, the sanctions are being made keeping in mind the nature and size of the audit firm and the fact that he has accepted all the charges.
Penalties and Sanctions - HELD THAT:- Considering the fact that professional misconduct has been proved and considering the nature of violations and principles of proportionality, the NFRA, in the exercise of its powers under Section 132(4)(c) of the Companies Act, 2013 orders:
(i) Imposition of a monetary penalty of Rs. 100,000 (One Lakh only) upon CA Gulshan Jagdish Jham.
(ii) In addition, CA Gulshan Jadish Jham is debarred for one year from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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2022 (6) TMI 1416
Revision u/s 263 - anonymous donations receipts - as submitted there was a survey in the premises of the assessee on notice did not contain any query in regard to anonymous donations received by the assessee much less the donation - HELD THAT:- CIT (E) in his order u/s.263 of the Act had directed the AO to examine the donors and make proper enquiry and redo the assessment but the AO instead of doing the verification has practically rejected the assessee’s contention and has made addition representing 30% of the donations received treating the same as anonymous donations.
We are not going into the merits of the consequential order passed u/s.143(3) r.w. 263 r.w.s 144B - However, a perusal of the original assessment order clearly shows that no examination of the issues has been done. This being so, the ld CIT (E) is very much in his powers to direct the AO to examine the same. No error in the order of the ld CIT (E) has been pointed out by assessee. This being so, the order of ld CIT(E) passed u/s.263 stands upheld.
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2022 (6) TMI 1415
Non-inclusion of GST amount in the tender - main contention against the impugned judgment is that Clause 3.3.3 of notice inviting tender is incorrectly and erroneously interpreted - HELD THAT:- In this intra court appeal the respondent/corporation demonstrates how the findings in the judgment are erroneous warranting an interference. The respondent/corporation is the maker of the tender conditions. Clause 3.3.3 in clear terms excludes GST component. Inviting the GST component while interpreting subsequent clauses is impermissible. Being the maker, in the event of arguable ambiguity, the benefit of ambiguity is extended not to the maker but the other party.
The learned single judge has judiciously used his discretion and allowed the writ petition declaring that the terms and conditions in Ext.P1 shall govern the contract and that respondents 2 and 3 have to pay the GST component against the bill raised by the petitioner. The decision cited by the counsel for the appellant only prohibits the writ court from interfering in any contractual matter and the interference in the auction procedure when the decision making process is arbitrary and for any extraneous consideration. In this case, the learned single judge has not gone into the complexities of the clauses in the notice inviting tender nor substituted any interpretation other than those explicitly provided in the clause.
The learned single judge was right in declaring that the GST component was not to be included as per clause 3.3.3 of Ext.P1 and the direction to pay the GST component by respondents 2 and 3 is in tune with the clauses of Ext.P1 and hence there are no grounds to interfere with the judgment of the learned single judge, and hence the writ appeal is dismissed.
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2022 (6) TMI 1414
Condonation of delay filing return - petitioner was required to upload a Form 10B alongwith return whereas because of an error on the part of Chartered Accountant erroneously Form 10BB was uploaded - whether mistake committed by CA should not be treated as a bonafide mistake? - HELD THAT:- Even assuming that pursuant to certain communications filed with the return and the petition, the petitioner had an opportunity to avail alternative remedy, fact remains that application for condonation of delay was indeed maintainable. This is not a case of respondent that said application was not maintainable because petitioner did not avail the alternative remedy. The application for condonation of delay was also not dismissed on this ground and for this reason.
This is trite that validity of an order of statutory authority must be seen on the basis of grounds mentioned therein and not for any other reason.
A Constitution Bench of Supreme Court in the case of Mohinder Singh Gill and another Vs. The Chief Election Commissioner, New Delhi and others [1977 (12) TMI 138 - SUPREME COURT] opined that when validity of an order of the statutory authority is called in question, the validity of order needs to be examined on the basis of grounds mentioned therein. The orders cannot be validated on the basis of counter affidavit or supplementary counter affidavit.
The reasons assigned in the order dated 15/09/2020 alone is to be seen for the purpose of condonation of delay. We find substance in the argument of learned counsel for the petitioner that the delay or mistake is on the part of Chartered Accountant was not taken into account at all in the said order.
Thus, we deem it proper to set aside the impugned order and remit the matter back before the CIT (Exemption), Bhopal to reconsider and decide the matter afresh in accordance with law.
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2022 (6) TMI 1413
Addition u/s 69A r.w.s.115BBE - assessee has not been able to explain any source qua the excess-cash - HELD THAT:- The assessee was found to be owner of money i.e. excess cash, the excess cash was not recorded in the books of account of any source (i.e. books of business in present case) maintained by the assessee and the assessee has himself admitted that the excess cash found from his premise is earned from undisclosed sources, therefore he is unable to give explanation of its source. Thus, we find that all ingredients of section 69A are satisfied from the material held on record i.e. the statement of assessee. Being so we do not have iota of doubt in the application of section 69A.
The impugned excess cash found by the revenue during survey proceeding attracted section 69A as well as section 115BBE of the act. Therefore, we agree that the lower authorities have rightly invoked / confirmed that the excess cash is taxable u/s 69A read with section 115BBE. The conclusions taken by lower authorities do not require our interference. Decided against assessee.
Unexplained stock - physical stock was found to be short - AO treated this short-stock as unaccounted sales out of books of account, estimated profit @ 10% and thereby made an addition - HELD THAT:- We observe that the difference is very nominal and it can happen despite of all care in carrying out physical verification as well as preparation of books. We observe that the tax effect on Rs. 9,962/- shall be very negligible. Hence in order to impart a justice and taking a holistic and practical view, the addition deserves to be deleted. Decided in favour of assessee.
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2022 (6) TMI 1412
Belated payment of employees’ contribution to ESI and PF - assessee deposited the said contribution before due date for filing of return of income under Income Tax Act - Due date of payment - Scope of amendment - HELD THAT:- While processing the return u/s 143(1) of the Act no disallowance towards contribution to employees’ PF and ESI is warranted as this issue is highly debatable in nature. Even otherwise we find that the issue in appeals is squarely covered by the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] Ratio of this decision squarely applies to the facts of the assessee’s cases. Also see case of CIT Vs. M/s. Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT]
Hon’ble Supreme Court in the case of M.M. Aqua Technologies Ltd. [2021 (8) TMI 520 - SUPREME COURT] held that retrospective provision in a Tax Act which is for the removal of doubts cannot be presumed to be retrospective even where such language is used if it alters or changes the law as it earlier stood. The Amendments made to Section 36 and Section 43B by insertion of Explanations 2 and 5 respectively. In these Sections it is clarified that for the removal of doubts the provisions of these Sections were amended.
Tribunals in the cases of Raj Kumar [2022 (2) TMI 1224 - ITAT DELHI] held that the amendment brought in by Finance Act, 20 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees’ contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act
Thus we direct the Assessing Officer / CPC to delete the disallowance of employees’ contribution to EPF and ESI in all these cases as the contributions were remitted before the due date for filing of return of income. Grounds raised by the assessee are allowed.
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2022 (6) TMI 1411
Taxability of Consultancy Services as FTS - pre-requisites for deriving the benefit of the MFN clause in the Protocol to India’s DTAAs with certain countries - Issue decided in favour of assessee in its own earlier AY's - DR referring to CBDT Circular No.3/2022 has disputed the applicability of earlier orders of the Tribunal in the impugned assessment year - HELD THAT:- We find that in the case of GRI Renewal Industries SL [2022 (2) TMI 769 - ITAT PUNE] Tribunal considered the impact of CBDT Circular No.3/2022 held requirement contained in the CBDT circular No.03/2022 cannot primarily be applied to the period anterior to the date of its issuance as it is in the nature of an additional detrimental stipulation mandated for taking benefit conferred by the DTAA. It is a settled legal position that a piece of legislation which imposes a new obligation or attaches a new disability is considered prospective unless the legislative intent is clearly to give it a retrospective effect - it is ambiguously clear that there is no requirement of separate notification for importing the beneficial treatment from the agreement. Hence, in the facts of the case and the decision referred above, we find no merit in the arguments forwarded by the ld. Departmental Representative. The conditions set out in CBDT Circular 3/2022 would not apply in the impugned assessment year. Consequently, ground No.1 of the appeal is allowed.
Taxability of SAP Licence charges as royalty - HELD THAT:- We find that this issue is recurring. On identical set of facts, the Tribunal deleted the addition in preceding assessment years. The Tribunal in assessment year 2016-17 following the order in assessee’s own case in [2021 (1) TMI 323 - ITAT MUMBAI] deleted the addition as held receipt of software licence fees by the assessee, from its Indian subsidiary, is reimbursement of software licence fees paid by the assessee to a third party, and, therefore, it cannot constitute income taxable in the hands of the assessee. Decided in favour of assessee.
Taxability of IT Support Services as FTS/Royalty - HELD THAT:- The Tribunal in assessment year 2016-17 following the order of Co-ordinate Bench in assessment year 2015-16 deleted the addition as held the taxation under article 12 in the present case can come into play only when the "make available" clause is satisfied, but then the Assessing Officer's justification for the satisfaction of 'make available' clause, for the detailed reasons set out earlier in this paragraph, does not meet our judicial approval - we uphold the plea of the assessee on this point as well - income on account of Information Technology Services is also not taxable under article 12. Decided in favour of assessee.
Taxability of reimbursement expenses treated as FTS/royalty - HELD THAT:- Both sides are unanimous in stating that the DRP has not given any directions on this issue. DRP while considering objections of the assessee on Taxability of reimbursement of expenses as FTS/Royalty has dealt with the issue the directions. DRP has given finding without referring to the reimbursed expenses. Consequently, the issue raised allowed for statistical purpose.
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2022 (6) TMI 1410
Penalty u/s 271(1)(c) - unsecured loans received during the F.Y. 2003-04 - HELD THAT:- As decided in Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law.
In Mr. Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] - Penalty-Concealment-Non-striking off of the irrelevant part while issuing notice u/s 271(1)(c) of the Income Tax Act, order is bad in law. Assessee must be informed of the ground of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.
In the case of PCIT vs. Sahara India Life Insurance Co. Ltd.[2019 (8) TMI 409 - DELHI HIGH COURT]reiterated that notice under section 274 should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically.
The aforesaid principle has been reiterated in the in the case of CIT vs. SSA'S Emerald Meadows [2016 (8) TMI 1145 - SC ORDER]
Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, the penalty levied is hereby obliterated.
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2022 (6) TMI 1409
Seeking grant of Anticipatory Bail - FIR registered beyond the jurisdiction of this Court - whether this Court, in exercise of its powers under Section 438 of the Cr. P. C, is vested with jurisdiction to grant bail in a case that has been registered beyond its local limits of jurisdiction?
HELD THAT:- The above issue came up for consideration before this Court in the case of Mohan Singh Parihar vs. Commission of Police and Ors. [1982 (11) TMI 184 - JAMMU AND KASHMIR HIGH COURT]. This Court, after noticing the provisions contained in Section 497-A of the Jammu and Kashmir Cr. P. C, which is in pari materia with Section 438 of the Central Cr. P. C, as also the provisions contained in Section 6 of the J&K Cr. P. C, which is in pari materia with Section 6 of the Central Cr. P. C, observed that On the parity of the reasoning, the High Court and a Court of Session of which Section 497-A speak, must also mean the High Court and the Court of Session competent to try the accused seeking enlargement on bail.
On the basis of the aforequoted reasoning, the Court came to the conclusion that the High Court has no jurisdiction to grant anticipatory bail to a person against whom a case has been registered with a police station which is situated outside the local limits of its jurisdiction under the Code.
This Court does not have jurisdiction to entertain and decide the bail application which relates to an FIR that has been registered beyond the local limits of this Court even though the accused/petitioner may be residing within the jurisdiction of this Court - The petitioners in the instant case are not seeking transit bail but are seeking bail in anticipation of their arrest on a permanent basis, regarding which this Court lacks jurisdiction in view of the ratio laid down in the aforequoted judgment.
The petition is held to be not maintainable and the same is dismissed accordingly.
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