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Showing 21 to 40 of 324 Records
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2025 (3) TMI 304
Procedure of faceless assessment u/s 144B - absence of show cause notice - HELD THAT:- The entire faceless assessment scheme provides for an opportunity to be given to the assessee whenever there is a proposed variation from the earlier determination of assessment prejudicial to the interest of the assessee. Therefore, the absence of such a show cause notice would clearly be a violation of the principles of natural justice, rendering the Assessment Order passed as void.
In the present case, the perusal of the e-proceeding sheet clearly indicates that, after having issued notice u/s 148, the Respondent issued only two notices; one u/s 143(2) dated 21.05.2021 and another issued on 15.02.2022 u/s 142(1), which simply called for the details, and as such, the same were pre-assessment notices as envisaged in clause (vi) of Section 144B(1).
The entire procedure subsequent to obtaining further information, documents or evidence has not been gone through in case of the Petitioner, and straightaway, the impugned assessment has been finalized. Thus, there has been a blatant violation of the mandatory procedure prescribed under the Faceless Assessment Scheme as stipulated u/s.144B of the Act as held in case of Akashganga Infraventures Indi Ltd. Vs. National Faceless Assessment Centre [2021 (8) TMI 1343 - DELHI HIGH COURT]
Thus, the present petition succeeds and is accordingly allowed. The matter is remanded back to the AO by quashing and setting aside the impugned assessment order as well as demand notice u/s 156 of the Act, as well as the notice for penalty u/s 271(1)(C) read with Section 274.
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2025 (3) TMI 303
Penalty u/s 271(1)(c) - AO denying the exemption u/s 11 of the Act and disallowing the expenses towards the object of the assessee trust - HELD THAT:- Expenses claimed by the assessee was disallowed by the AO which neither falls under the realm of concealment of income nor filing of inaccurate particulars of income and hence under these facts and circumstances, penalty cannot be levied u/s 271(1)(c) of the Act. Consequently, we hereby cancel the levy of penalty imposed by the AO and confirmed by the learned CIT(A). Accordingly, grounds raised by the assessee are allowed.
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2025 (3) TMI 302
Addition u/s 69B for the purchase of immovable property - difference in the Loan amount and consideration for the purchase of immovable property - HELD THAT:- CIT(A) considered the loan amount as received from ICICI Bank. However, the assessee contended that the actual loan amount was Rs. 30,00,000/-. Upon review, we find that there is a factual discrepancy in this regard. Therefore, we remit the matter to the file of the Ld. AO for verification of the addition granting the assessee an opportunity to furnish any relevant evidence or documents during the set-aside assessment proceedings.
Addition u/s 56(2)(x) - assessee purchased the property less than stamp duty valuation - HELD THAT:- As assessee had already requested before the CIT(A) that the valuation be considered in accordance with the Third Proviso to Section 56(2)(x) of the Act. However, we find that the CIT(A) passed the order without considering this aspect. Accordingly, we remit the matter to the file of the Ld. AO for reconsideration of the issue. AO is directed to refer the valuation of the property to the DVO, taking into account the provisions of the Third Proviso to Section 56(2)(x) of the Act.
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2025 (3) TMI 301
Reopening of assessment u/s 147 - reasons to believe - notice after the expiry of 4 years - denying the claim made u/s 90 - HELD THAT:- There is no dispute that a return of income was filed by the assessee u/s 139(1) - from the perusal of the reasons recorded for reopening the assessment, as noted above, we find that there is not even an allegation by the AO that income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts.
From the perusal of the order disposing the assessee’s objections against the reopening of assessment, we find that it was for the first time there was any whisper of the allegation that there was gross failure on the part of the assessee to disclose all the material facts fully and truly. Therefore, it is ostensible that the reasons recorded while initiating the re-assessment proceedings were completely silent as regards the allegation that income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts, and vide order disposing the assessee’s objections, the AO tried to improve upon the reasons by making the allegation, which is completely impermissible.
From the perusal of the reasons recorded there is not even a mention of any new or tangible material which formed the basis to believe that income chargeable to tax has escaped assessment during the year under consideration. We find that the entire edifice of the impugned re-assessment proceedings is based on the perusal of case records which were already considered during the scrutiny assessment proceedings concluded u/s 143(3) of the Act.
This aspect is further evident from order passed u/s 143(3) r/w section 147, wherein the AO completely denied the claim made under section 90, after noting that partial relief was granted to the assessee vide order dated 16/03/2015 passed u/s 143(3) of the Act.
Thus re-assessment proceedings initiated by the AO, in the present case, are bad in law on more than one count and are not in conformity with the provisions of section 147 - Decided in favour of assessee.
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2025 (3) TMI 300
Reduction in the current year loss eligible to be carried forward - addition made in the intimation passed u/s 143(1) of the Act by CPC, Bangalore - HELD THAT:- We find that the assessee has shown refund of value added tax which was admitted by the authority concerned. In the tax auditors report same was duly reported.
As stated that the amount falling within the scope of Section 28 was ₹ Nil. We also note that assessee has stated that the goods and service tax was not rooted through the profit and loss account.
Considering these facts, we find merit in the contention of the ld. AR that the information furnished by the assessee in the tax report qua the refund of GST admitted by the authority concerned has been mistook and misunderstood by the CPC, Bangalore to be item falling under Para 16a which is qua the item falling within the scope of 28 of the Act.
Since, this is a factual mistake committed by the CPC, Bangalore at the time of processing which the CIT (A) failed to appreciate and rectify during the appellate proceedings. The order passed by the ld. CIT (A) is incorrect and accordingly, set aside order and the AO is directed to delete the adjustment made by the AO. The appeal of the assessee is allowed.
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2025 (3) TMI 299
Reopening of assessment u/s 147 - reasons to believe - addition u/s 68 - HELD THAT:- On perusal of the above reasons, we observe that the ld. AO has not completely mentioned the details of transactions which the assessee has entered into during the impugned year as accommodation entries such as the particulars as to person from whom/ entity from whom the money was received and when it was received etc.
AO merely reproduced the information available with the department and recorded his so-called satisfaction in one line that on the basis of information available, the assessee has taken accommodation entry which in our opinion is wrong and against the provisions of the Act.
The reasons are sanctity, unambiguous and vague and the ld. AO acted merely on the basis of borrowed satisfaction without any independent application of mind. Therefore, we are of the view that the case of the assessee was invalidly reopened u/s 148 of the Act.
Addition u/s 68 - Even on merit, we note that the loans raised by the assessee were fully repaid and assessee has filed all the information/ evidences before the ld. AO but the ld. AO has not done any independent verification and so much so that that the notice u/s 133(6) of the Act were not issued and he merely relied on the statement recorded during the course of search u/s 132(4) of the Act that Mr Banks and his associate concerns were engaged in providing accommodation entries. Even the cross examination requested by the assessee was not granted and the ld. CIT (A) after taking int account all the facts allowed the appeal of the assessee by directing the ld. AO to delete the addition. Decided in favour of assessee.
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2025 (3) TMI 298
Reopening of assessment u/s 147 - Addition u/s 68 - Reason to believe or suspect - HELD THAT:- Assessee filed all the details before the AO during the assessment proceedings and similarly, the loan creditor responded to the notice issued u/s 133(6) and acknowledged that the assessee has been given an unsecured loan.
The transaction of loan was examined in the original assessment proceedings. Now, the reasons recorded by the AO has not stated as to how the assessee failed to disclose the fully and truly all material facts qua the said loan which has resulted into escapement of income. Therefore, the issue at hand is squarely covered in the case of CEAT Ltd. [2023 (1) TMI 73 - SC ORDER] and accordingly we quash the reopening of assessment made by the AO. Appeal of the assessee is allowed
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2025 (3) TMI 297
Addition u/s 68 - as alleged that the assessee firm has introduced its undisclosed income in the process and has failed to prove the genuineness of the transaction for which he invoked provisions of section 68 - CIT (A) held that Section 68 is not applicable because here in this case AOP had re-valued its assets and accordingly, credited into creditor’s profit and loss account - HELD THAT:- The amount credited to the assessee’s account in the books of AOP was recorded by the assessee by debiting the investment in AOP and crediting the capital account of individual partners in their respective shares which has been as highlighted above.
AO without understanding the true nature of transaction has held that during this process, the development rights in line is getting transferred from one partner to other without getting registered through instrument and that it is some kind of accounting gimmick to reduce the tax liability by transferring entries by denying the real income.
First of all, we are unable to understand how any income has arisen on account of such revaluation by the joint venture M/s. DD Associates in assessee’s hand. The revaluation has been done by M/s. DD Associates who is independently assessed to tax as an AOP. The assessee was only entitled to receive share debt surplus from AOP because any such tax incidence would be only in the hands of the AOP only. The AOP i.e. M/s.DD Associates have members having determined share therefore, liable to pay tax in its own hands. Even otherwise also there is no sale or transfer of any assets warranting liability to tax as it is only a revaluation of stock in trade to recognize in the books of accounts and the present value does not trigger in tax liability either in the hands of joint venture AOP from any of its members.
It has also been brought on record and also noted in the CIT(A) order that credit of small share of re-valuation of stock-in-trade in the books of the other member i.e. Friends Development Corporation, no adverse view has been taken by the department in their case.
Here in this case, the total re-valuation of project land was Rs. 125.72 Crores as per the audited financial statement of M/s. DD Associates-AOP and the share of the assessee till 31/03/2017 was Rs. 46.50 which was brought down to 5% at the year ending 31/03/2018. The gain equivalent to 41.50% to which assessee was entitled to is recognized by AOP by crediting to the capital account by such amount and pressing equivalent debit to the capital account of the other member of the AOP. It was for this reason that the profit and loss share alleged was increased by 41.1%. There is no sale consideration as inferred by the ld. AO or any kind of transfer of property to trigger capital gain and stamp duty or to reduce any tax liability. There is no provision or law which has been referred by the ld. AO that form of partner cannot revalue assets or is there any procedure to moderate such exercise. Accordingly, we do not find any reason to uphold the addition as stated by the ld. AO and order of the ld. CIT(A) is confirmed. Decided in favour of assessee.
Disallowance of property paid for loan - disallowance of brokerage expenses claimed against unsecured loans - CIT(A) deleted addition - HELD THAT:- On perusal of the facts and material brought on record, once there is a finding of the fact that the brokerage has been paid for the specific purpose and the amounts have been paid through cheques and TDS has been deducted and without any adverse material, we do not find any infirmity in the order of the ld. CIT (A) deleting the addition. Accordingly, this ground raised by the Revenue is dismissed.
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2025 (3) TMI 296
Addition u/s 69A on account of unexplained deposit in Bank A/c during demonetization period - HELD THAT:- Assessee claimed before AO that the sales of business was the source for accumulation of cash which was deposited in bank a/c. The assessee has filed contemporary details/documents of purchases, sales, cash-book, VAT return and the AO has examined those details/documents as is clearly acknowledged by him.
Nowhere in the assessment-order, the AO has pointed out any fallacy or flaw in the books of account of assessee or the transactions of purchases and sales made by assessee. The sole reason of taking adverse view against assessee is the non-response of notices sent by AO u/s 133(6) to customers. This, in our considered view, is not a valid reason to make addition. Accordingly, we direct the AO to delete the impugned addition.
Addition on account of difference in value of opening stock - HELD THAT:- AR successfully demonstrated that in AY 2016-17, the assessee was engaged only in job work, commission and brokerage, therefore the assessee declared “Sunari Work Gold Investment under the heading “Fixed Assets” in the Balance-Sheet as on 31.03.2016 and there was no closing stock shown. It is when the assessee started trading of jewellery from 17.08.2016 during current year after obtaining registration under VAT that the same jewellery held by assessee in the list of fixed assets as on 31.03.2016 became part of business stock of assessee and was declared as opening stock as on 01.04.2016 in Trading and P&L A/c.
Thus factum of purchases made by assessee in preceding AY 2016-17 which has given rise to holding of impugned closing stock as on 31.03.2016 / opening stock as on 01.04.2016. Even the AO has also mentioned in assessment-order that the assessee filed purchase bills. Ld. DR for revenue though relied upon orders of lower-authorities yet could not controvert the submissions made Ld. AR with are fully supported by documentary evidences. No justification in the addition made by AO. Accordingly, the AO is directed to delete this addition also. The assessee succeeds in this issue.
Assessee appeal is allowed.
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2025 (3) TMI 295
Disallowance u/s 80P - assessee has earned the alleged sum towards the interest earned from the scheduled banks - CIT(A) confirming the action of Ld. AO in treating the interest received from bank as Income From Other Sources and denying the benefit of deduction u/s 80P
HELD THAT:- We find assessee argument have no merits because in the judgment of Nawanshahar Central Cooperative Bank Ltd [2005 (8) TMI 28 - SC ORDER] the assessee was a cooperative bank having banking licensing whereas in the instant case the assessee is not cooperative bank and it does not have any banking license but is merely a cooperative society engaged in providing credit facility to its members. Therefore the ratio laid down in the case of Nawanshahar Central Cooperative Bank Ltd (supra) is not applicable on the facts of the instant case.
Even the CBDT circular No.18/2015 is not applicable on the assessee society because this circular has been given referring to the judgment of Nawanshahar Central Cooperative Bank Ltd (supra) and it was only with regard to bank/commercial bank to which banking license applies. Since the assessee is not registered under banking Act 1949 and is merely a cooperative society CBDT Circular No.18/2015 (supra) will not apply on it.
We fail to find any merit in the grounds of appeal raised by the assessee and thus no infirmity is called for in the finding of Ld. CIT(A). Appeal of the assessee is dismissed.
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2025 (3) TMI 294
Disallowance of interest u/s 36(1)(iii) - assessee had made interest free advance out of interest bearing funds - CIT(A) deleted addition - HELD THAT:- We find that the provisions of section 36 (1) (iii) of the Act, are enabling provisions, whereby interest claimed is required to be allowed, as a deduction to the assessee, provided the claim is genuine.
AO made unverified and wrong statement that "no interest-free funds were available with the assessee" and irrelevant statement that "the assessee has also not furnished any details or evidence to establish that impugned advances were given for business expediency".
AO has failed to realize that the obligation to establish business expediency would arise on the part of the assessee only when the assessing officer has discharged his obligation to show ( provided the assessee has filed all documents and evidences, as required by the assessing officer, to explain the interest free funds) that any part of interest-bearing loans have been diverted for non-business purposes.
We find that the issue of disallowance u/s.36 (1) (iii) out of the claim of interest, arose in the assessment proceedings, on account of the report of the Special Auditor, who had only mentioned that the assessee has taken loans from Banks/Financial institutions and has paid interest.When the Spl. Auditor was able to provide such information/ledger accounts from the books of account, obviously he had scanned through the entire ledger meticulously and thoroughly. However, while he could find the accounts listed by him, his discerning eye failed him to find accounts reflecting huge interest-free receipts by assessee from sister concerns, despite there being ledger accounts of sister concerns, reflecting interest free funds provided to the assessee.
As noticed that as a matter of fact, considering the amount due to these two parties in trading accounts, interest payable to them worked out to more Rs. 62,46,112/-, than the interest disallowed by the AO. Therefore, even on facts, the disallowance of Rs. 40,49,780/- is the result of lack of inquiry by the assessing officer.
Further, scanning of the entire ledger and picking up and choosing only such accounts (of interest-free advances) by the Spl. Auditor, again failed him to notice the accounts of other sister concerns providing huge interest-free funds to assessee.
It is also a settled-principle that ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his business. As decided in the case of Sassoon J David and Co. (P) Ltd [1979 (5) TMI 3 - SUPREME COURT] expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction for the same.
It is not the case of the assessing officer that the interest free advances given by the assessee were withdrawn by the sister concern and utilized for personal purpose such as buying of property by the directors or making donations or gifts, as is the case, in many of the decisions cited by the assessing officer. In fact, short term advances to meet with urgent requirements of sister concerns with whom regular business is also transacted on daily basis, is squarely covered under the phrase "for the purpose of business” occurring in section 36(1)(iii) as well as 37(i) of the Act. Thus, there is no tax-avoidance angle also, there can be no justification for assessing officer to have made a disallowance when firstly advance is made out of interest free funds and secondly the interest-bearing loans are deployed for the purposes for which the funds are borrowed and also there is manifest business expediency, and assessing officer has not demonstrated the personal or non-business or purely charitable use by the recipient - Decided in favour of assessee.
Disallowance of claim for the interest - It is a settled principle of law that business or commercial expediency has to be judged from the perspective of the businessman and not of the Revenue, since it is the businessman who is being benefited from the services rendered and also it is he who knows to what extent the benefit ensures to him. Based on these facts and circumstances, we allow the ground pressed by the assessee.
Disallowance of under valuation of stock of Rapeseeds DOC and salt - there were some errors in valuation of closing stock on FIFO basis - CIT(A) deleted addition partly - HELD THAT:- while the assessee submitted before the assessing officer that the valuation is based on the average cost price of opening stock plus purchases, the same could not be substantiated by the assessee, in a proper way. Moreover, ld CIT(A) noticed that the method of valuation for the year under reference adopted is not consistent with the method adopted for preceding and the subsequent years. Even by assessee's own submission, the valuation for the year under reference would need to be revised upwards by Rs. 24 per,mt. though it is also submitted by the assessee that such an action is uncalled for in view of the fact that in subsequent year also, the tax rate is same. Therefore, ld CIT(A) made an addition of Rs. 50,63,472/- @ of Rs. 24 per,mt. The ld CIT(A) noticed that this addition is obviously called for, so as to, maintain the consistency, as also the matching principle. Thus, out of the total addition of Rs. 4,46,25,539/-, on account of valuation of closing stock, an amount of Rs. 50,63,472/- was upheld while the balance amount of Rs. 3,95,62,067/- ( Rs. 4,46,25,539- Rs. 50,63,472) was deleted, by ld. CIT(A). Therefore, after having regard to the given facts and circumstances of the case, in our considered view, the action of the ld.CIT(A) does not warrant any interference. Accordingly, the ground of appeal of Revenue is dismissed.
Disallowance of handling/ spillage/wastage loss - HELD THAT:-We find that it is a natural phenomenon that due to loading, unloading wind, washing, rain and even inaccuracy in quantification of purchase and sale, a reasonable claim of wastage/spillage is bound to be there and cannot be disputed without any adverse material brought on record.
Considering the fact that the stock of salt is kept in open and obviously there are spillages and wastages on account of loading, unloading wind, washing, rain and even inaccuracy in quantification of purchase and sale, a reasonable claim of wastage/spillage is bound to be there and cannot be disputed without any adverse material brought on record. Similarly, the ld CIT(A) also found favour with the submission of the assessee that during the course of the search, no discrepancy in the stock or evidences with regard to wrong claim of wastage/spillage or of unaccounted sales have been found or seized. Moreover, no such disallowance has even been considered by the assessing officer in any of the other years, that is, in previous years or subsequent years. In view of this, the assessee was right in his submission that the rejection of claim is arbitrary and not justified in law. Accordingly, it was held by ld. CIT(A) that there is no merit in the action of the assessing officer and therefore the addition was correctly deleted by ld CIT(A).
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2025 (3) TMI 293
Disallowance on account sponsoring of education expenses for persons specified u/s 40A(2)(b) - AO observed that the amount incurred towards education of son and daughter of the Director of the assessee company was not incurred wholly and exclusive for the purpose of business and there was no any nexus between foreign education incurred on behalf of the children of the Director of the assessee company and the business of the company and disallowed u/s 37
HELD THAT:- AR relied upon judgment passed in the case of Ras Information Technologies (P) Ltd. [2010 (7) TMI 670 - KARNATAKA HIGH COURT] in which held that once the expenses incurred is not a capital expenditure or an expenditure incurred for personal expenses of the assessee or the said expenditure is for which is not an offence or is not prohibited by law and was not spent in adventuring in any souvenir, brochure, tract, pamphlet or like published by a political party, the assessee is entitled to the benefit of deduction u/s 37 of the Act. In other words, the money spent by an assessee either in sponsoring a student or towards educational expenses of a student, in a discipline, in which the assessee is carrying on its business, is a valid expenditure and is entitled to deduction.
On the basis of foregoing discussion and established principle of law, this ground deserves to be allowed in the favour of assessee.
Disallowance on account of write-off of advances for the purpose of lease hold improvements - In similar facts, said issue already been decided in the favour of assessee in assessee / appellant’s case for the AY 2004-05 position in law is well as settled as far as the provisions of section 36(1)(vii) read with section 36(2) of the Act is concerned. After 1/4/1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrevocable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee, subject to the provisions of section 36(2) that such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year.
Disallowance u/s 14A - AO computed disallowance u/s 14A applying Rule 8D of the Rules - CIT(A) rejected the same and recomputed disallowance applying proportionate method was submitted back to the Ld. AO for re-computation of disallowance with a direction to not to apply Rule 8D and in compliance thereof, the Ld. AO vide order recomputed the disallowance as per the proportionate method and on the grounds of consistency, the proportionate method should be accepted as the correct method for computation of disallowance u/s 14A of the Act.
CIT(A) upheld the computation of AO but granted partial relief by excluding interest expenditure exclusively incurred by the Appellant on loans, which were specifically availed for acquisition of aircraft on which taxable income was earned and accordingly, restricted the disallowance.
AR contended that the disallowance u/s 14A r/w rule 8D is required to be recomputed by taking into account in the “Average Value of investments - as submitted that disallowance should have been restricted to amount of dividend income earned during the relevant previous year - HELD THAT:- Fact situation mentioned hereinbefore and by following binding judicial precedents in order to resolve dispute in proper perspective remitting this issue back in the file of the AO for the consideration afresh in accordance with the prevailing laws and passed order as per law after providing effective opportunity of being heard to the assessee.
Disallowing the excess depreciation of computer peripherals - @ 15% OR @ 60% - HELD THAT:- Hon’ble High Court while deciding appeal preferred by Revenue in the case of CIT vs. Birala Soft Ltd. [2011 (12) TMI 608 - DELHI HIGH COURT] observed that the question raised in the present appeal is whether the computer peripherals like CD writer, Printer, Network, Cable, Switches, Isolators etc. has decided against Revenue and in favour of the assessee in view of the decision in CIT vs. BSES Rajdhani Powever Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] Revenue assails above order before Hon’ble Apex Court by way of Special Leave to appeal, which came to be dismissed [2014 (2) TMI 1343 - SC ORDER] On the basis of fact situation, mentioned hereinbefore that UPS is integaral part of computer and so entitled to depreciation @ 60% and we do not see any infirmity in the order of the Ld. CIT(A) on this issued and hence ground rasied by Revenue is liable to be dismissed.
Addition as made on account of duty credit scripts but not utilized ignoring the material fact that the duty credit was offered for taxation by the assessee - HELD THAT:- Fact situation emerged from above discussion leads us to conclude that ground raised by Revenue is liable to dismissed as no anything contrary brought on record by Revenue to deviate from the observation and findings expressed by the Ld. CIT(A) and hence we inclined to dismiss this ground.
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2025 (3) TMI 292
Addition u/s 68 - unexplained unsecured loans received - HELD THAT:- Before the AO, the assessee filed all the details at the very fag end of the assessment proceedings in the month of March when the time barring limit was about to expire and the AO has to complete the assessment on 31.03.2016.
In the instant case, to establish the creditworthiness certain details were asked by the AO since October 2015 however, after expiry of almost 5 months, part of these details were filed before the ld AO leaving no time to AO to examine all the details to find out the creditworthiness of the creditors.
AO was not provided sufficient opportunity to examine the details filed by the assessee before him nor the additional details filed before the ld CIT(A) were confronted by the CIT(A) before reaching to the conclusion that all lender companies have creditworthiness and deleted the addition.
Therefore, in the interest of justice, the matter is set aside to the file of the AO with a direction that all the documents be examined and decide the matter in accordance with law. Appeal of the revenue is allowed for statistical purposes.
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2025 (3) TMI 291
Revision u/s 263 - validity of the reassessment proceedings - reopening the case by directing the AD to make fresh assessment against the provisions of law and natural justice - Addition u/s 68 as long term of capital gain received in the form of accommodation entries of the companies - HELD THAT:- From the perusal of the reasons recorded it is found that the Assessing Officer has not given the details of transactions of capital gain alleged as the accommodation entry in the shape of penny stock. AO further observed that the assessee has obtained bogus accommodation entries whereas the assessee has declared long term capital gain from the sale of two companies.
It appears that AO has recorded the reasons in mechanical manner without any independent application of mind and without making any enquiry nor making any other of verification the information received by him with the information available on record.
Also found that from the face of the reasons, it is clear that they are incomplete and vague, therefore, in our considered opinion, the notice issued u/s 148 in the case of the assessee is bad in law and consequently order passed u/s 147 r.w. s 144B is invalid. Since the order passed u/s. 144 r.w.s.144B of the Act is an invalid order, any further proceedings originated from the said order cannot be held as valid proceedings which includes the revisionary proceedings initiated by the ld. Pr. CIT, Sambalpur u/s. 263 of the Act.
Thus as relying on Westlife Development Ltd. [2016 (6) TMI 1208 - ITAT MUMBAI] we quash the revisionary order passed u/s 263 as the re-assessment order passed u/s 144/143(3) is already held as invalid. Thus, the additional grounds of appeal allowed.
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2025 (3) TMI 290
Addition u/s. 69A r.w.s. 115BBE - cash deposits made during demonetization period into various bank accounts in the form of Specified Bank Notes - CIT(A) deleted addition as held that the assessee’s submissions with regard to cash deposits during demonetization period is supported with documents and evidence
HELD THAT:- When the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law. The cash sales made by the assessee have been credited in the books of accounts and the same form part of the assessee’s cash book. On these facts, it could be very well said that the assessee’s claim was backed up by relevant evidences.
Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the AO failed to rebut the same.
The allegations/statistics of entire sales made from 01.11.2016 to 08.11.2016 by accepting the SBNs relied upon by the AO to take an adverse view is not backed up by relevant evidence/material and therefore the action of AO, which has been rightly set aside by the ld.CIT(A) and hence cannot be interfered.
The finding of the AO that such abnormal sales could not be achieved before the announcement of demonetization by the Government, is bereft of any concrete evidence to prove otherwise on record. The reliance on the decision of the Hon’ble supreme court in the case of Durga Prasad More, is not applicable to the present facts of the case, as the assessee has furnished the documents and records which are submitted to the statutory authority like TNVAT department and discharged the taxes on monthly basis, apart from the books of accounts audited by a Chartered accountant.
No addition could be made merely on the basis of suspicion, conjectures and surmises. Since cash generated out of sales has been credited in the books of accounts, the provisions of section 69A could not be invoked in the present case.
The impugned additions are not sustainable in the eyes of law and hence, we are of the considered view that the action of the CIT(A) in deleting the addition need not be interfered - Decided in favour of assessee.
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2025 (3) TMI 289
Levy of capital gains u/s 45 considering demerger of the treasury undertaking as non-qualifying demerger - HELD THAT:- Provisions of Section 2(19AA)(ii) which mandates that all the liabilities relatable to the undertaking are also to be transferred to the demerged company, and considering the explanation of the Counsel that the existing liabilities of Rs. 37.15 crores were knocked off against the transfer of assets of Rs. 39.23 crores is against the provisions of the Section 2(19AA)(ii). Thus, it can be found that the assessee has only transferred the assets while keeping the liabilities with them. The explanation of the assessee that the liability belonging to other segments whereas assets belong to the Treasury Segment cannot be accepted. Hence, it can be held that the Revenue Authorities have rightly treated the demerger as transfer of capital assets.
The process of demerger generally consists of following transactions - Transfer of assets and liabilities by the transferor company to the resulting transferee company, Transfer/ extinguishment of shares of the transferor company and Issuance of shares of resulting transferee company to the shareholders of the transferor company.
All the abovementioned transactions have been specifically exempted from the levy of capital gains tax by virtue of various clauses forming a part of Section 47 of the IT Act subjected to the applications of provisions of Section 2(19AA) of the Act. It is also settled position of law that the scheme of demerger once approved by the Hon’ble Jurisdictional High Court, it cannot be re-visited by any statutory authority. At the same time, the provisions of Income-tax Act had prescribed the conditions under which the benefits can be accorded in the case of demerger which means that mere fact that ipso facto does not entitle an assessee to claim benefit.
The harmonious interpretation of the Corporate Law and Income-tax Law and the Orders of the Hon’ble High Court is sine qua non for the benefit of the tax payer as well as for the interest of the exchequer. The vary purpose of demerger which is for better conducting of the business cannot be curtailed by the Income-tax Department and the assessee would be eligible for business in accordance with the provisions of Section 2(19AA) Section 2(22)(a) & Section 47. In the instant case, the assessee failed to comply with the provisions of Section 2(19AA) (ii) & (iii). Hence, the order of the Ld. CIT(A) on these grounds are affirmed. Decided against assessee.
Disallowance u/s 14A - AO was not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does not form part of total income - HELD THAT:- Respectfully following the decision of the Tribunal in assessee’s own case for AY 2008-09 [2018 (8) TMI 2167 - ITAT AHMEDABAD] the disallowance made by the Assessing Officer u/s. 14A to the extent of interest expenses is hereby deleted.
Nature of expenses - Product registration expenses - AO held that the Marketing Intangibles are created by these product registration expenses and hence, it is a capital expenditure not allowable u/s 37(1) - HELD THAT:- As decided in own case [2018 (8) TMI 2167 - ITAT AHMEDABAD] for AY 2008-09 assessee has incurred these expenses for registering its product in various countries to enable the assessee to sell the product in such counties. We observed that in absence of registration, the assessee would not be able to sell the product in the foreign countries as per the regulatory requirement of different countries, it is mandatory to get the product of the assessee registered in respect of counties for the purpose of selling in the overseas markets. Therefore, the finding of the assessing officer that assessee is getting benefit of enduring nature of registration of product has no merit.
Reduction of claim u/s 80IC to Baddi Unit - as per AO since the Baddi unit of the assessee-company only possesses manufacturing assets and is engaged solely in manufacturing activities, the profits of the Baddi unit should be restricted to those derived from manufacturing alone - HELD THAT:- We find that this issue stands covered in assessee's own case [2018 (8) TMI 2167 - ITAT AHMEDABAD] provisions of section 80IC do not require assessee to split the activities and contribute the profit attributable to separale activities which constitute one business. Also considered the decision Cadila Healthcare Ltd. [2012 (6) TMI 13 - ITAT AHMEDABAD] wherein on identical facts on claim of deduction from eligible profits derived by a Baddi unit of a pharmaceutical company it is held that that eligible profits should not be artificially segregated in to manufacturing, marketing and brand profits.
Scrap Sale Income - assessee had earned miscellaneous income comprises of scrap income from Baddi unit - HELD THAT:- We find that the issue stands covered by the decision of Tribunal in assessee’s own case for AY 2009-10 [2022 (3) TMI 919 - ITAT AHMEDABAD] as held that compensation received by industrial undertaking from insurance companies on account of loss raw materials and finished products in fire, would be eligible for deduction u/s. 80IA of the Act. In view of the above, we do not find any infirmity on the order of ld. CIT(A) in allowing the claim of deduction u/s. 80IC of the Act on scrap income.
Deduction u/s 80IC on the disallowance made under section 40(a)(ia) was disallowed - DR argued that the enhancement of profit on account of disallowance u/s 40(a)(ia) cannot increase the deduction u/s 80IC - HELD THAT:- AO has erred in disallowing the deduction and we uphold the order of the Ld. CIT(A) on this issue.
Disallowance on account of provision for expiry of goods - AO held that this is not an expenditure, but a future expectation of incurring certain expenditure which may be more or less than for what provision is made - HELD THAT:- CIT(A) correctly deleted the addition on the ground that the assessee has recognized the provisions for sales return based on scientific basis and past experience and hence the same was alloawable expenditure.
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2025 (3) TMI 288
Application of provisions of Section 44AD - Net profit estimation - assessee firm is earning income only from IPD services, room rent, X- ray charges, etc. - HELD THAT:- We find that the activity carried out by the assessee firm are in the nature of business and not profession as per provisions of section 44AD (6) and section 44AA(1) of the Act.
A combined reading of the above two sections clearly establishes that the provisions of Section 44AD do not apply to individuals engaged in the medical profession. However, it is submitted that the assessee is a partnership firm providing services such as patient room rentals, X-ray facilities, and other ancillary inpatient department (IPD) services.
The income generated from doctors' fees is separately declared by the respective doctors in their individual tax returns. Therefore, the assessee cannot be classified as a ‘person’ engaged in the ‘medical profession.’
We respectfully rely on the rulings in Dr. K. K. Shah [1981 (7) TMI 39 - GUJARAT HIGH COURT] and Shalini Hospitals [2006 (5) TMI 138 - ITAT HYDERABAD-B] which support this position.
Accordingly, the turnover of the assessee firm should not be considered as professional income. The addition based solely on the partner’s statement, is unwarranted, particularly when the remaining receipts have been treated as business income and the net profit rate has been accepted by the Ld. AO. See S. Khader Khan Son [2013 (6) TMI 305 - SC ORDER]. The assessee has consistently maintained a net profit ratio ranging between 6% and 11% on its turnover in preceding and succeeding years, which has been accepted by the revenue authorities. Assessee appeal allowed.
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2025 (3) TMI 287
Validity of the jurisdiction - Validity of assessment made u/s 143(3) by ITO-4(1), Raipur in absence of order u/s 127 - whether or not the assessment order passed by the ITO-4(1), Raipur u/s. 143(3) dated 31.03.2015 can be sustained in absence of any order of transfer u/s. 127 of the Act passed by the Pr. CIT, Kolkata? - HELD THAT:- We are of a firm conviction that in terms of Section 120 pursuant to a CBDT direction, it though might have been possible for the CIT, Kolkata-2, Kolkata to have authorized vesting the exercise of powers and performance of functions of one Income- tax authority subordinate to him to another Income-tax authority subordinate to him, but are afraid that there was no power vested with him u/s. 120 of the Act to have transferred the jurisdiction to an A.O who was not sub-ordinate to him.
Accordingly, we are of the view that the claim of DR which in turn, is based on the “order sheet” noting dated 08.09.2014that the case of the assessee company had been transferred to ITO-1(1), Raipur from ITO-4(1), Kolkata pursuant to the order passed u/s.120 dated 08.08.2014 of the CIT, Kolkata- 2, Kolkata cannot be accepted and thus, fails.
Whether transfer of the case of the assessee company from ITO-4(1), Kolkata to ITO-1(1), Raipur i.e. inter se the A.O’s who were not sub-ordinate to the same CIT could have been carried out without passing an order as required under sub-section (2) of Section 127 of the Act.? - As the assessee company had not called in question the jurisdiction assumed by the A.O, based on, viz. (i) territorial area; (ii) persons or classes of persons; (iii) income or classes of income; or (iv) cases or classes of cases, but had rather assailed the validity of the assessment order passed by the ITO-4(1), Raipur in absence of an order of transfer that was statutorily required to have been passed by the CIT-2, Kolkata u/s. 127 of the Act, therefore, it would not be circumscribed by the restriction contemplated under sub-section (3) of Section 124 of the Act. Accordingly, we are of a firm conviction that the judgment of Kalinga Institute of Industrial Technology [2019 (3) TMI 1996 - ORISSA HIGH COURT] is distinguishable qua the issue involved in the present case of the assessee company before us.
Thus, in absence of any order of transfer passed by the CIT, Kolkata-2, Kolkata u/s.127(2) of the Act, which was the very foundation for transferring the case of the assessee company from ITO-4(1), Kolkata to ITO-1(1), Raipur and finally to ITO-4(1), Raipur, the latter had invalidly assumed jurisdiction and framed the assessment vide his order u/s.143(3) of the Act, dated 31.03.2015. Accordingly, the assessment framed by the ITO-4(1), Raipur vide his order passed u/s.143(3) of the Act, dated 31.03.2015 in absence of an order of transfer u/s.127 of the Act having been passed by the CIT, Kolkata is quashed for want of valid assumption of jurisdiction.
Assessment order quashed for want of valid assumption of jurisdiction by the ITO-4(1), Raipur i.e. in absence of an order of transfer u/s. 127 of the Act. Decided against revenue.
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2025 (3) TMI 286
Exemption u/s 11 - Whether assessee is not covered within the meaning of proviso to section 2(15) as assessee carrying on objects of the, General Public Utility’ (GPU)? - HELD THAT:- We noted that neither the AO nor the CIT(A), in the present case, has not considered the activities of the assessee as elaborated in Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT], whether aim of the trust or GPU is charitable or not? To consider the principle lay down by Hon’ble Supreme Court in the above case, we set aside the order of CIT(A) and that of the AO, and, remand the matter back to the file of the AO.
In terms of the above, the matter is restored back to the file of the AO, and the appeal of the revenue is allowed for statistical purposes.
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2025 (3) TMI 285
Penalty u/s 271AAB - during the course of Search & Seizure proceedings, the Director of the company had declared the undisclosed income - CIT(A) has deleted the penalty on the ground that show cause notice issued by AO are vague and are silent about the default of the appellant - HELD THAT:- AO has categorically specified the charge of the penalty in the assessment order. Then, in the penalty order the AO has again discussed 271AAB(1A) of the Act. Thus, at the time of assessment, the Assessee was made aware that penalty proceedings under section 271AAB(1A) of the Act, has been initiated for undisclosed income. In the assessment order, the AO has specifically mentioned the amount of undisclosed income also.
Therefore, the Assessee was categorically made aware about the amount of undisclosed income for which penalty under section 271AAB(1A) of the Act was initiated. As far as notice dated 05.06.2021 is concerned, these are computer generated notices and the Assessing Officer do not have any scope to make changes other than putting the dates, PAN, Assessment Year etc.
Respectfully following case of Sandeep Chandak [2017 (12) TMI 70 - ALLAHABAD HIGH COURT] and Smt. Taradevi R. Bafna [2023 (7) TMI 894 - ITAT PUNE] we hold that the order passed by ld.CIT(A) is not sustainable. Hence, for all the reasons discussed, we set aside the order of ld.CIT(A). Accordingly, Ground raised by the Revenue is allowed.
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