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2024 (5) TMI 599 - GAUHATI HIGH COURT
Legality of search and seizure conducted at the residential premises of the petitioner - legality and validity of the notice issued u/s 131 (1A) - petioner submitted that since search has already been conducted, no notice u/s 132 (1A) issued to the petitioner - mandation to state 'Reason to suspect' that any income has been concealed or likely to be concealed - HELD THAT:- A bare perusal of sub-section (1A) of Section 131 of the Act mandates that notice u/s 131 (1A) is issued before the authority, takes action under clauses (i) to (v) of Section 132 (1) of the Act. Pertinent that the designation of officers for exercise of powers are different as mentioned in Section 131 as compared to Section 131 (1A) of the Act. The designation as mentioned in Section 131 are of the Officers of Assessment Wing who makes assessment and those mentioned in Section 131 (1A) are of the Investigation Wing who carries out search & survey and as such both the sections operates in different fields.
Thus before making of a search, a notice under Section 131 (1A) of the Act has to be issued and since the taxing provisions of the statutes are to be interpreted strictly, the issuance of the notice under Section 131 (1A) of the Act in the instant case after conducting of the search is absolutely illegal & without jurisdiction.
Taxing Statutes are to be interpreted strictly - It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment - See Ajmera Housing Corporation & Anr. 2010 (8) TMI 35 - SUPREME COURT]
Ambiguity in the taxing provision - The words of a taxing statute must never be stretched against a tax-payer and if the legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the tax-payer. The Apex Court held that even if there is any doubt as to interpretation, it must be resolved in favor of the subject - See M/s Murarilal Mahabir Prasad [1975 (9) TMI 155 - SUPREME COURT]
The taxing provisions has to be interpreted strictly, and on the strict interpretation of Section 131 (1A) of the Act, it is clear that before making of the search, a notice under Section 131 (1A) is mandatorily required to be issued. When the legislature in clear words under Section 131 (1A) of the Act has provided that notice has to be issued under Section 131 (1A) prior to making of the search, notice under Section 131 (1A) cannot be issued after conducting of the search and thereby, the notice issued under Section 131 (1A) of the Act is illegal and without jurisdiction contrary to the provision of the Section 131 (1A) of the Act.
In the facts of the instant case, there could not have been any material that could be a reason to suspect that any income has been concealed or likely to be concealed by the petitioner. Section 131 (1A) of the Act consist of two conditions which are required to be fulfilled before any action is taken under Section 131 (1A). Both the conditions has to co-exist before any action of search and seizure is undertaken. These conditions are; a) Assessing Officer has reasons to suspect any income that is concealed or likely to be concealed and, (b)Upon existence of such reasons, issues notice for the purpose of making enquiry or investigation relating thereto. After fulfillment of the aforesaid two conditions, the Assessing Officer is empowered to take action under clauses i to v of sub-section 1 of Section 132. It is only after fulfilment of the aforesaid two conditions the Assessing Officer can conduct a search and seizure.
In the present case, the respondent has not placed any materials whatsoever to indicate that Assessing Authority had any materials on the basis of which he has reasons to suspect that the petitioner has concealed or is likely to conceal any income. The affidavit filed on behalf of the authority is absolutely silent in this regard. The very fact that the respondent issued notices under Section 131 (1A) of the Act after the search and seizure operation under Section 132 of the Act was conducted, goes to show that there was neither any reasons to suspect nor materials before the Authorizing Officer on the basis of which search operation could have been conducted under Section 132 of the Act. Thus, the two essential conditions being absent before the impugned search under Section 132 was conducted, the same is without jurisdiction.
Thus the subject search is absolutely illegal inasmuch as it is contrary to the express provisions of Section 131 (1A) of the Act. WP allowed.
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2024 (5) TMI 598 - BOMBAY HIGH COURT
Validity of reopening of assessment - order passed u/s 148A (d), but officer does not deal with any of the submissions made by Petitioner - Non independent application of mind - Directorate General of GST, Mumbai has identified one Curzen Infraprojects Pvt. Ltd was generating fake/bogus invoices for passing of fraudulent Input Tax Credit (ITC) without supply of goods to various companies, and EMI Transmission Ltd. was one of them, because Petitioner dealt with EMI Transmission Ltd., the said transaction is non-genuine - HELD THAT:- AO is only referring to the information received from the Directorate General of GST. There is absolutely nothing to indicate that he independently applied his mind to the material received or that he has analysed the response from Petitioner with the material received, which reflects total non-application of mind.
Petitioner has submitted various documents to show that the goods purchased from EMI Transmission Ltd. were actually supplied to third parties and we would agree with Petitioner that without purchase there cannot be a sale.
Thus we hereby quash and set aside the impugned order and remand the matter for denovo consideration.
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2024 (5) TMI 597 - ALLAHABAD HIGH COURT
Non delivery of possession of property purchased in auction conducted by the Tax Recovery Officer - Certificate of Sale was issued in his favour on 22.02.1995. Yet the petitioner has remained deprived of possession over the property since then - HELD THAT:- Today, though objection has been raised to the Certificate of Sale not stamped at the same time, learned Additional Chief Standing Counsel would submit, reserving the right to the State to proceed in accordance with law under the Stamp Act, the said authorities would remain obligated to ensure that adequate police force is made available to the Tax Recovery Officer such that possession under the Certificate of Sale may be handed over to the petitioner within reasonable time.
ORDER:- The Tax Recovery Officer/ respondent no.2 shall make proper application to respondent no.3 to make available adequate police force to give effect to the Certificate of Sale dated 22.02.1995. Such application may be made within a period of two weeks from today. Upon that application being received by respondent no.3 he shall make available to respondent no.2 necessary police force and also other arrangements within a further period of four weeks
It is thus expected that due possession would be made over to the petitioner on or before 30.06.2024.
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2024 (5) TMI 596 - DELHI HIGH COURT
Penalty u/s 271C - failure to deduct TDS u/s 194C on External Development Charges - Waiver of penalty u/s 273B - Reasonable cause - HELD THAT:- As decided in Puri Construction Pvt. Ltd [2024 (2) TMI 756 - DELHI HIGH COURT] various airlines were deducting tax at source under section 194H at that time, this does not necessarily mean that the position of law was settled. Rather, it appears to us that while one set of air carriers acted under the assumption that the Supplementary Commission would come within the ambit of the provisions of the Income-tax Act, another set held the opposite view. The assessees before us belong to the latter category. Furthermore, as we have highlighted earlier, there were contradictory pronouncements by different High Courts in the ensuing years which clearly highlights the genuine and bona fide legal conundrum that was raised by the prospect of section 194H being applied to the supplementary commission.
There is nothing on record to show that the assessees have not fulfilled the criteria under section 273B of the Income-tax Act. Though we are not inclined to accept their contentions, there was clearly an arguable and “nascent” legal issue that required resolution by this court and, hence, there was “reasonable cause” for the air carriers to have not deducted tax at source at the relevant period. The logical deduction from this reasoning is that penalty proceedings against the airlines under section 271C of the Income-tax Act stand quashed.
We dispose of the instant writ petition with liberty to the respondent to finalize the show cause notice proceedings bearing in mind the legal position as explained hereinabove.
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2024 (5) TMI 595 - BOMBAY HIGH COURT
Rectification of mistake u/s 254 - Deduction u/s 80IB - Delay in filing of return of income (ITR) - ITAT rejected the application for rectification - HELD THAT:- Though we would agree with the view expressed by the ITAT that in the order dated 4th May 2022 there was no error, the ITAT failed to appreciate the spirit in which the order dated 23rd August 2022 was passed by the Hon’ble High Court. The High Court had very categorically observed that the authority should refrain from over analysis which leads to paralysis of justice.
High Court in its order [2022 (12) TMI 1019 - BOMBAY HIGH COURT], condoned the delay by observing that the Income Tax Authority should consider the claim for deduction u/s 80IB (10) of the Act for AY 2011-12 made by Petitioner in accordance with law, as if there was no delay in filing the return - By an order pronounced [2023 (7) TMI 1405 - ITAT PUNE] the Tribunal rejected the MA by observing that the High Court states the Income Tax Authority and the ITAT is not an authority and there was no apparent mistake in its order as required within the four corners of Section 254 (2) of the Act. It is this order, which is impugned in this Petition
HELD THAT:- Though we would agree with the view expressed by the ITAT that in the order [2020 (5) TMI 718 - ITAT PUNE] there was no error, the ITAT failed to appreciate the spirit in which the order dated 23rd August 2022 was passed by the Hon’ble High Court.
The High Court had very categorically observed that the authority should refrain from over analysis which leads to paralysis of justice. Therefore, the delay having been condoned by the High Court, we hereby quash and set aside the assessment order and remand the matter to the stage of AO who shall pass fresh assessment order in accordance with law by considering the claim for deduction under Section 80IB (10) of the Act for AY 2011-12 made by Petitioner as if there was no delay in filing the return. In fact, what we understand from paragraph 22 of the order dated 23rd August 2022 of the High Court is that the matter was being remanded to the AO. Instead, Petitioner has approached the ITAT by filing an application under Section 254 (2) of the Act.
AO shall pass fresh assessment order on or before 31st August 2024 and before he passes any order, shall give a personal hearing to Petitioner, notice whereof shall be communicated atleast five working days in advance. The assessment order shall be a reasoned order dealing with all submissions of Petitioner.
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2024 (5) TMI 594 - MADRAS HIGH COURT
Addition of excess jewellery found in search - addition of 1099.96 gms of gold out of 10514.960 gms of gold and 14.05 carats of diamond that was found at the residence of the petitioner at the time of search - HELD THAT:- Circular No.1916 of CBDT, dated 11.05.1994 on Instances of seizure of jewellery of small quantity in the course of operation u/s 132 makes it clear that the Authorized Officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case decide to exclude a larger quantity of jewellery and ornaments from seizure.
Para (iv) makes it clear that a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.
Thus, the purport of the above circular is confined only at the stage of investigation of seizure and not to the stage of assessment. Therefore the complaint of the petitioner that the circular has not been followed cannot be countenanced.
Under these circumstances, no case is made out for interfering with the impugned order. However, liberty is given to the petitioner to pursue the alternate remedy before the Appellate Commissioner in terms of Section 246A of the Income Tax Act, 1961.
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2024 (5) TMI 593 - ITAT PUNE
Addition u/s 41(1) - cessation of liability - HELD THAT:- DR failed to pinpoint any specific material in assessee’s books of account in support of the learned lower authorities impugned action invoking sec. 41(1) of the Act.
Faced with this situation, we quote Sugauli Sugar Works [1999 (2) TMI 5 - SUPREME COURT] that the impugned addition does not get attracted merely because of lapse of long time or in absence of any actual cessation in assessee’s books of account. Thus deem it as a fit case to delete the impugned addition in very terms. Assessee appeal allowed.
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2024 (5) TMI 592 - ITAT PUNE
Validity of reopening of assessment u/s 147 - Cash deposits in bank account - HELD THAT:- DR fails to dispute the clinching fact that the impugned re-assessment dated 26.12.2019 had assessed the assessee’s alleged customer advance(s) in tuition activity(ies) of Rs. 63,52,600/- after deducting 35% thereof as the corresponding expenditure; resulting in the impugned addition of Rs. 41,29,190/- as well as interest of Rs. 1,76,082/- received from fixed deposits with M/s. Baramati Sahakari Bank Ltd.; respectively.
That being the case, there is no addition made regarding the foregoing sole reason of reopening. Faced with this situation, Jet Airways (I) Ltd. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] that the impugned reopening/re-assessment itself is not sustainable in law once the AO had not added the foregoing sum.
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2024 (5) TMI 591 - ITAT PUNE
Reopening of assessment u/s 147 - Disallowance of depreciation on new Honda City car - as per revenue depreciation had been rightly restricted to 50% as per Rule 5 of Income Tax Rules, 1962; New Appendix-1; III Plant & Machinery (3)(via) in very terms - HELD THAT:- No merit in Revenue’s arguments since it clearly appears to be an instance of change of opinion not sustainable in law going by Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT] - It is deemed appropriate to observe herein that the assessment order herein is AY 2010-2011 and the AO had framed his sec. 143(3) assessment on 26.03.2013 followed by his sec. 148 notice issued in the year 2017.
This chronology of events makes it clear that the AO had initiated his impugned action beyond a period of four years from the end of the relevant assessment year without even satisfying that assessee had not disclosed the relevant particulars “fully” and “truly” in the foregoing former round. That being the case, we quote Hindustan Lever Ltd. v. R.B. Wadkar [2004 (2) TMI 41 - BOMBAY HIGH COURT] that such reopening reasons have to be read on standalone basis without any scope of improvement or substitution or addition therein; as the case may be.
Revenue’s case hardly carries any merit as well once it is evident that the assessee had duly got it’s vehicle(s) insured on 30.09.2009 which has been treated “put to use” in absence of any evidence to the contrary. Be that as it may, find no merit in the Revenue’s vehement arguments regarding validity of the impugned reopening as well as on merits. It fails in it’s instant appeal in very terms. Decided against revenue.
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2024 (5) TMI 590 - ITAT DELHI
Disallowance u/s 14A r.w.r. 8D - Expenditure incurred on earning exempt income - Sufficiency of own funds/interest free funds - HELD THAT:- The factual finding of learned first appellate authority that the assessee had enough surplus interest free funds to take care of the investments made in exempt income yielding assets could not be controverted by the Revenue. That being the factual position on record, keeping in view the settled legal principles, we do not find any infirmity in the decision of learned first appellate authority in deleting the disallowance made u/r 8D(2)(ii).
TDS u/s 195 - Disallowance u/s 40(a)(i) - assessee has paid an amount in foreign currency towards domain name registration - HELD THAT:- The registrar is merely a facilitator in connecting the applicant to the registry database to check uniqueness of domain name. Once the uniqueness of applied domain name is checked, the registration of domain name is automatic on the payment of requisite fee. He has recorded a factual finding that the user of domain name has not even iota of knowledge about the code piece/computer program. Therefore, there cannot be any question of its usage/exploitation. The assessee has merely got right to use the functionality based on the computer program and not the computer program itself. The assessee has not exploited the code piece in any manner. Thus, he has concluded that the payments made cannot be treated as royalty under section 9(1)(vi) of the Act, nor Fee for Technical Services under Article 12(3) of India – US DTAA.
From the aforesaid observations of learned first appellate authority, it becomes quite clear that the payments made were not for use or right to use of any software, equipment, process etc. The Revenue has failed to bring any cogent evidence on record to controvert the factual finding of learned first appellate authority and establish on record that the payment made is for use or right to use of any computer software/program, equipment/process etc., as defined under section 9(1)(vi) of the Act. That being the case, we concur with the decision of learned first appellate authority on the issue.
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2024 (5) TMI 589 - ITAT AHMEDABAD
TP Adjustment - upward adjustment in respect of “Specified Domestic Transactions” - whether Section 92BA(i) would be applicable, particularly when the said section was omitted from the statute by the Finance Act, 2017 w.e.f. 01.04.2017? - HELD THAT:- It is a settled principle of law that when a particular provision is repealed from the statue, the normal effect would be to obliterate it from the statute book as completely as if it had never been passed and the statute must be considered as a law that never existed.
In a case where a particular provision in a statute is unconditionally omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings, then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue, but fresh proceedings for the same purpose may be initiated under the new provision. If that be so, then since the Clause (i) of Section 92BA was omitted by Finance Act, 2017 w.e.f. 01.04.2017 from the statute, the same cannot be made applicable in the pending proceeding. It is, therefore, to be considered non-est in the concerned statute as if it had never been passed.
Thus once the said clause being omitted w.e.f. 01.04.2017, the decision made by AO/TPO invoking such Section 92BA is without any basis, and/or jurisdiction, invalid and bad in law and thus, the same is liable to be quashed.
No justification in the order passed by the TPO/AO making upward adjustment invoking Section 92BA(i) of the Act, in the present facts and circumstances of the case, particularly when the said section stood omitted w.e.f. 01.04.2017 from the statute itself. Hence, we find that the order passed by the TPO/AO is without any basis, void ab initio and without jurisdiction. We, therefore, uphold the order passed by the CIT(A) deleting the upward adjustment made by the TPO/AO u/s 92BA of the Act in respect of “Specified Domestic Transactions”. Decided against revenue.
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2024 (5) TMI 588 - ITAT DELHI
Mismatch in receipts between Profit and Loss Account and Form 26AS - whether the corresponding receipts attributable to TDS claim had been offered to tax by the assessee during the year under consideration? - HELD THAT:- As and when payment is realized from the party, it makes respective entries in subsequent year in the books. It was submitted that the payments were received from the clients in the month of April 2014 and accordingly accounted for in the SAP software in AY 2015-16. But since the corresponding TDS is reflected in Form 26AS, the same was claimed by the assessee in the return for AY 2014-15.
As submitted that in SAP software, there is no scope for passing any backdated entries by the assessee. It was also submitted that as far as the income offered to tax is concerned, the assessee had only considered the receipts reflected in Form 26AS while filing the return.
As explained that domestic sales eligible for tax deduction as per Form 26AS was Rs 22.32 crores against which TDS was done for Rs 1.40 crores. This has been considered in the return of income by the assessee. TDS reconciliation for the same as per Form 26AS and TDS receivable as per books was filed by the assessee. AO however ignored the contentions of the assessee and extrapolated the receipts based on TDS mismatch and arrived at the income and made addition to that extent in the assessment. This action of the ld. AO was upheld by the CIT(A).
AR before us drew our attention to the complete reconciliation of party wise receipts together with TDS thereon - assessee had filed additional evidences under Rule 29 of the Income Tax Appellate Tribunal Rules 1963 furnishing further details party wise. These additional evidences, in our considered opinion, are crucial for adjudication of the issue in dispute before us but these details were admittedly not filed before the ld. AO. The same requires factual verification.
We deem it fit and appropriate to restore this issue to the file of AO for denovo adjudication in accordance with law and in the light of the additional evidences filed by the assessee before us. With these directions, the ground raised by the assessee is allowed for statistical purposes.
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2024 (5) TMI 587 - ITAT HYDERABAD
TP Adjustment - comparable selection - Cera Sanitary Ware Limited and HSIL Limited - HELD THAT:- As decided in own case [2023 (9) TMI 543 - ITAT HYDERABAD] the terms used are generic in nature giving an impression that the company is engaged in diversified activities, the core activity of both the entities is dealing in tiles and sanitaryware. One shall not lose sight of the fact that information contained in the websites of any entity and sometimes in the annual report would be intended to give a very attractive picture of such company and its areas of activity will be mentioned in usually general and widespread terms to attract the customers and the same cannot be given much weight. In these circumstances, we agree with the findings of the learned DRP and decline to exclude HSIL Ltd., from the list of comparables.
Cera Sanitary Ware Limited - The perusal of Rule 10(B)(1)(e) clearly mentioned that the net profit margin realized by the assessee from the international transactions is required to be compared in relation to the cost incurred or the assets employed by enterprise (assessee). In the present case, as noted by the Tribunal in its finding in para 25 the functions performed by the assessee and that of the Cera Sanitaryware Limited are comparable and what was distinguished by the Tribunal in its earlier order is that with the consumption of raw material used by the company (Cera) for different activities is not relatable to the proportion of the revenue by the said activities. In our understanding, once the assessee company is broadly compared with the Cera Sanitaryware Limited, then what is required to be seen is the net profit margin earned by the company (Cera Sanitaryware Limited) with that of the assessee.
In the present case, the DRP has considered the submission of the assessee and thereafter, in para 2.2.2 reproduced hereinabove, had concluded that this company is comparable with the assessee and accordingly, the Assessing Officer based on the direction of the DRP has made the assessment in the hands of the assessee.
Since this company was excluded by the Tribunal in the case of the assessee for A.Y. 2015-16 [2023 (9) TMI 543 - ITAT HYDERABAD], therefore, respectfully following the decision of the co-ordinate Bench of the Tribunal, we direct the learned Assessing Officer/TPO to exclude this comparable from the list of comparables.
Crystalizing tax demand by ignoring the MAT credit carried forward from previous assessment years - HELD THAT:- We grant the MAT credit as admissible in law.
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2024 (5) TMI 586 - ITAT DELHI
Penalty u/s 271(1)(b) - non-compliance of notice issued u/s 142(1) - assessee had requested the AO to adjourn the hearing as her Authorised Representative was out of Delhi - HELD THAT:- When the reasonable cause for non-compliance with the notice is crystal clear, assessee need not to be visited with the rigours of penalty u/s 271(1)(b) - we note that in the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] has held that assessee may not be visited with rigours of penalty if the assessee’s conduct is not found to be contumacious. In our considered opinion, the conduct of the assessee in this case is not contumacious - Appeal of the assessee is allowed.
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2024 (5) TMI 585 - ITAT DELHI
Addition u/s 56(2)(viia) - purchase of shares at price more than its fair market value - HELD THAT:- The value-weightage of the assets belonging to the entity issuing capital, has to be duly incorporated and the appellant cannot hide behind the facade of some ns which are themselves subject to litigation and some kind of loan restructuring. The hypothecation of prime real estate assets in this case does not obviate the robustness of asset, hence financial heft of the company. In such a scenario the prime real estate as in the case of the appellant has to be weighed in to determine proper share valuation. Such shares will not be at throw away prices by any entity just like that unless there is some mechanism of consideration.
This is more so, when the appellant has not entered into a distress fransaction also though the same is not recognized in the extant schema of section 56(2) read with rule 11UA. Thus, the AO was well within his rights to question the valuation reports as they were not in line with the method of valuation adopted basis the assets valuation owned by the concerned entity, as detailed above. The addition by the AO on share issued valuation basis on account of share premium component is confirmed as upheld based on the position of the law and relevant rule in this regard on basis of recognition of the receipts in particular specific head. Appeal of assessee dismissed.
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2024 (5) TMI 584 - ITAT KOLKATA
Validity of Revision u/s 263 - Improper enquiries made by AO - bogus long term capital gain through share transaction of a penny stock company - CIT noted discrepancies in assessment proceedings u/s 147 r.w.s 144B - opinion of the Commissioner that the AO had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order - HELD THAT:- CIT, taking shelter in Explanation 2 to Section 263(1) of the Act, held that the order of the AO was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee.
Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment.
The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assessee.
As per ‘Narayan Tatu Rane [2016 (5) TMI 1162 - ITAT MUMBAI] as held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications.
As decided in the case of ‘PCIT vs. Usha Polychem India (P) Ltd’ [2023 (5) TMI 419 - CALCUTTA HIGH COURT] where Principal Commissioner involved revision jurisdiction under section 263 in case of assessee on basis of an information received from Dy. Director (Investigation) regarding huge amount of unaccounted funds received in bank account of assessee, since a reassessment proceeding was already invoked and completed on basis of same information, impugned revision was unjustified - Decided in favour of assessee.
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2024 (5) TMI 583 - ITAT VISAKHAPATNAM
Deduction us/ 80P(2)(a) or u/s 80P(2)(d) - income received on investment made with co-operative banks - HELD THAT:- On similar set of facts, coordinate Bench of this Tribunal in the case of The Andaluru Large Size Co-operative Society [2024 (5) TMI 516 - ITAT VISAKHAPATNAM] held in favour of the assessee, relying of the decision of Kakateeya Mutually Aided Thrift and Credit Co-op Society [2023 (9) TMI 211 - ITAT VISAKHAPATNAM] wherein as held assessee has invested surplus funds out of the activities carried out as per the provisions of section 80P(2)(a) of the Act. We therefore by respectfully following the jurisdictional High Court are of the view that interest income should be allowed as deduction u/s. 80P(2)(a)(i) of the Act and thereby the Ld. CIT(A)-NFAC has rightly held by deleting the addition made by the Ld. AO and hence we find no infirmity in the order of the Ld. CIT(A)-NFAC. Appeal of assessee allowed.
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2024 (5) TMI 582 - ITAT SURAT
Reopening of assessment - reason to believe - bogus purchases - HELD THAT:- A three Judges bench of Hon'ble Apex Court in the case of A.L.A. Firm v. CIT [1991 (2) TMI 1 - SUPREME COURT] after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has, in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe that income chargeable to tax had escaped assessment - even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied.
As observed earlier by us, not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, clearly meaning that what was disclosed was not true and false. The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening was validly initiated. See Pankaj K. Choudhary [2021 (10) TMI 653 - ITAT SURAT] as clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Decided against assessee.
Estimation of income - Bogus purchases - As decided in Pankaj K. Choudhary [2021 (10) TMI 653 - ITAT SURAT] it is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage.
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2024 (5) TMI 581 - ITAT KOLKATA
Unexplained cash credit being share capital and premium u/s 68 - director of the subscriber company did not appear in response to the summons issued u/s 131 - Burden of proof - HELD THAT:- AO did not examine any of the documents furnished by the assessee to prove the identity, creditworthiness of the share-subscribers and genuineness of the transaction. AO in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies.
Even if the directors of the subscriber companies have not come personally in response to the summons issued by the Assessing Officer, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the Assessing Officer.
Assessee has rightly placed reliance upon the decision of Paradise Inland Shipping Pvt. Ltd. [2017 (11) TMI 1554 - BOMBAY HIGH COURT] as held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case.
Thus no justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted. Decided in favour of assessee.
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2024 (5) TMI 580 - ITAT MUMBAI
Income deemed to accrue or arise in India - reinsurance premium earned by the Appellant from its Indian cedents - Permanent Establishment (PE) in India or not - scope of India-Singapore tax treaty - AO rejected the contention of the Appellant that the fee received was not liable to tax in India and held that payments as received by the Appellant for providing specialized, technical inputs and services and the same were taxable in India as Fees for Technical Services u/s 9(1)(vii) of the Act and also under Article 12(4)(b) of the DTAA.
HELD THAT:- On perusal of order [2015 (4) TMI 905 - ITAT MUMBAI] passed in the case of SRCL in appeal pertaining to Assessment Year 2010-11 we find that in similar facts and circumstances and the Tribunal had, overturning the findings of the AO, held that (a) SRCL did not have a business connection in India, and (b) SRIPL, as wholly owned subsidiary of SRCL, did not constitute a PE of the SRCL in India in terms of Article 5 of the Indo-Swiss Tax Treaty.
The reasoning given by the Assessing Officer, which is identical to the reasoning given by the Assessing Officer in the present case, did not appeal to the Tribunal and was, therefore, rejected. The Tribunal concluded that the SRCL undertaking reinsurance business did not have any business connection in India in terms of Explanation 2 to Section 9 of the Act, and that Indian subsidiary of SRCL did not constitute Fixed Place, Service or Agency PE of SRCL in India.
The finding returned by the DRP is binding upon the Assessment Officer in terms of Section 144C(13) of the Act. The case now set up by the Learned Departmental Representative, even if assumed to be meriting consideration, is contrary to the finding returned by the DRP. The Revenue is not in appeal against the order passed by the DRP as after omission of Section 253(2A) of the Act by the Finance Act, 2016 with effect from 01/06/2016, no appeal can be filed by the Assessing Officer against the order passed by DRP giving directions under Section 144C(5) of the Act. Since for the Assessment Year 2018-19 Assessing Officer is not permitted to challenge the findings returned by the DRP in appeal before the Tribunal, the Revenue cannot be permitted to set up a case against the directions passed by the DRP. Decided in favour of assessee.
Taxability fee received by the Appellant from SRCL- IB/SGB - As on perusal of the Assessment Order, we find that the Assessing Officer has brought nothing on record to show that the services rendered made available any technical knowledge, know- how, skill, expertise to SRCL-IB/SGB which enables SRCL-IB/SGB to independently perform their function without support of the Appellant in the future. The findings returned by the Assessing Officer that the services provided by the Appellant enable SRCL-IB/SGB to provide onwards services cannot lead to an automatic conclusion/inference that some technical knowledge, skill or experience was made available by the Appellant to SRCL-IB/SGB.
Conclusion drawn by the AO that the services under consideration qualify as fee for technical services in terms of Article 12 of the DTAA cannot be sustained. During the course of hearing, the Appellant had placed reliance on the decision of the Tribunal in the case of Jefferies LLC v. DCIT [2023 (3) TMI 1485 - ITAT MUMBAI] wherein it was held by the Tribunal that services provided by the group entities or holding companies to its subsidiaries as day to day management and support services to run their business would not be regarded as fees for technical services in case, such services do not make available technical knowledge, skill or experience.
Thus addition held by the AO to be business income and addition held to be Fee for Technical Services are deleted. Assessee appeal allowed.
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