9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (1) TMI 75 - AT - Income TaxCorrect head of income - profit on sale of Securities (HTM Category) - taxable under the head of Business or Long Term Capital Gains - revised return of income filed - as per AO assessee is a bank and one of the business activities undertaken by it was purchase and sale on various kinds of securities - HELD THAT - We find that identical issue arose in the assessee s own case in A.Y. 2006-07 2019 (1) TMI 689 - ITAT DELHI and the Co-ordinate Bench of Tribunal decided the issue against the assessee and also observed that the assessee has treated these securities as stock-in-trade and claimed deduction of loss arising out of the valuation of securities at the year end on the basis of cost or market price whichever is lower basis from the business income. Thus profit earn on sale of securities which are held to be HTM Category to be on business account. Income from infrastructure project as exempt u/s 10(23G) - HELD THAT - As decided in own case 2019 (1) TMI 689 - ITAT DELHI CIT -A rightly directed the granting of exemption under Section 10(23G) of the Act in respect of interest on such bonds whose certificate of exemption was filed before him. new certificates have also been received after the disposal of the appeal by the CIT(A) and he has sought for rectification of the above in the light of these certificates - after having gone through these submissions and material placed on record think it fit in the interest of justice to set aside this issue to the file of the Assessing Officer with a direction to consider the assessee s claim for exemption under Section 10(23G) on its merits on the basis of the certificates that it may now produce in respect of the addition that was sustained by the learned CIT(A). If the assessee for any reason is not able to produce such certificates when the Assessing Officer is giving effect to the Assessing Officer is free to confirm the addition to that extent. Disallowance of expenses u/s 14A - Assessee has suo moto made addition - We find that CIT(A) by following the orders of first appellate authorities had restricted the disallowance to the extent of 10% of the exempt income - HELD THAT - Revenue has also not placed any material on record to demonstrate that the order of the Tribunal in Assessee s own case cited hereinabove has been set aside/ over ruled or stayed by higher judicial forum. We therefore following the decision of the Co-ordinate bench in assessee s own case 2019 (1) TMI 689 - ITAT DELHI and for similar reasons hold that no disallowance u/s 14A is called for in the present case. We therefore direct the deletion of addition made u/s 14A. Thus the ground of appeal of the assessee is allowed. Depreciation/ loss on investments by holding it to be notional in nature - HELD THAT - As decided in own case DR could not point out any specific error in the order of the learned CIT(A). He also could not bring any material on record to show that the order of the Tribunal for AY 2005-06 2012 (5) TMI 437 - ITAT NEW DELHI was varied in appeal before any higher authorities. Hence we find that no good reasons to interfere with the orders of learned CIT(A) which is confirmed. Disallowance on account of penalty - HELD THAT - It is on inter alia on account of fine by consumer forum penalty by District Consumer Payment on account of deposit of cheque pertaining to saving account treated as NRI account etc. Before us apart from general submissions no material has been placed by the Learned AR to demonstrate that the payments are on account of technical aberration and are not in the nature of fines. Further no fallacy in the finding of CIT(A) has been pointed before us. Considering the totality of the aforesaid facts we find no reason to interfere in the order of CIT(A) and thus the ground of appeal of the assessee is dismissed. Disallowance under section 40A(3) - AO noted that tax auditor in the tax audit report has pointed to a sum of 21, 657/- being paid in contravention of Section 40A(3) and therefore only 20% of payment needs to be disallowed - HELD THAT - Amount of expenditure which has been incurred in contravention of the provisions of s. 40A(3) is very small as compared to the total expenses of the Assessee. The expenditure has not been found to be bogus or not genuine. We find that Hon ble Apex Court in the case of Attar Singh Gurmukh Singh 1991 (8) TMI 5 - SUPREME COURT has observed that the payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. Considering the totality of the facts cited herein above and following the aforesaid decision of Hon ble Apex Court we are of the view that no disallowance of the expenses is called for. Thus the ground of appeal of the assessee is allowed. Levy of penalty u/s 271(1)(c) - denial of claim for exemption u/s 10(23G) and payment of penalty - HELD THAT - AO has not recorded any satisfaction in the assessment order but had levied penalty for concealment of income. Considering the aforesaid facts in the light of the decision of Hon ble Bombay High Court in the case of Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT we are of the view that in the present case the basic condition for levy of penalty has not been fulfilled and that the penalty order suffers from non-exercising of jurisdiction power of AO and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus the grounds of assessee are allowed.
Issues Involved:
1. Treatment of profit on sale of HTM securities as Business Income vs. Capital Gain. 2. Carry forward of capital loss. 3. Exemption of income from infrastructure projects under section 10(23G). 4. Disallowance of expenses under section 14A. 5. Disallowance of loss on investment. 6. Disallowance of penalty expenses. 7. Disallowance under section 40A(3). 8. Levy of penalty under section 271(1)(c). Detailed Analysis: 1. Treatment of Profit on Sale of HTM Securities as Business Income vs. Capital Gain: The assessee, a bank, treated the profit on sale of HTM securities as Long Term Capital Gains in its revised return. The AO reclassified it as Business Income, noting the bank's history of treating such transactions as business activities. The CIT(A) upheld this reclassification. The Tribunal found no new material to overrule the previous decision in the assessee's own case for AY 2006-07, which supported the AO's classification. Thus, the Tribunal dismissed the assessee's appeal on this issue. 2. Carry Forward of Capital Loss: Since the Tribunal upheld the treatment of profit on HTM securities as Business Income, the assessee's claim for carrying forward the capital loss was also dismissed. The Tribunal noted that the carry forward of capital loss was contingent on the profits being treated as capital gains, which was not the case. 3. Exemption of Income from Infrastructure Projects under Section 10(23G): The AO denied exemption for certain income under section 10(23G) due to lack of evidence. The CIT(A) granted partial relief for projects with valid notifications but upheld the denial for others. The Tribunal remitted the issue back to the AO for verification of additional notifications received post-CIT(A) order, following the precedent set in the assessee's own case for AY 2005-06. 4. Disallowance of Expenses under Section 14A: The AO disallowed a significant amount as expenses attributable to exempt income under section 14A. The CIT(A) reduced this disallowance to 10% of the exempt income, following previous appellate orders. The Tribunal, referencing the Supreme Court's decision in Maxopp Investment Ltd. vs. CIT and its own earlier decisions, ruled that no disallowance under section 14A was warranted for the bank's tax-free earnings from securities held as stock-in-trade. Thus, the Tribunal directed the deletion of the disallowance. 5. Disallowance of Loss on Investment: The AO disallowed the claimed loss on investment, considering it notional. The CIT(A) upheld this view. However, the Tribunal found that similar disallowances in earlier years had been overturned in the assessee's favor, citing the Supreme Court's ruling in UCO Bank vs. CIT. The Tribunal directed the AO to allow the claimed loss, following the consistent precedent in the assessee's own cases. 6. Disallowance of Penalty Expenses: The AO disallowed expenses labeled as penalties, which the assessee claimed were incurred in the normal course of business. The CIT(A) upheld this disallowance. The Tribunal found no material evidence from the assessee to demonstrate that these were technical aberrations rather than fines. Thus, the Tribunal upheld the CIT(A)'s order. 7. Disallowance under Section 40A(3): The AO disallowed 20% of a payment made in cash, citing section 40A(3). The CIT(A) upheld this disallowance. The Tribunal, considering the business exigencies and the small amount relative to the total expenses, ruled that no disallowance was warranted. The Tribunal referenced the Supreme Court's decision in Attar Singh Gurmukh Singh vs. ITO, emphasizing the genuine and bona fide nature of the transaction. 8. Levy of Penalty under Section 271(1)(c): The AO levied a penalty for furnishing inaccurate particulars of income, which the CIT(A) partially upheld. The Tribunal noted the absence of clear satisfaction in the assessment order regarding the nature of the default. Citing the Bombay High Court's decision in CIT vs. Shri Samson Perinchery, the Tribunal ruled that the penalty order was invalid due to the lack of proper jurisdictional exercise by the AO. Thus, the Tribunal set aside the penalty order. Conclusion: The Tribunal's decision resulted in a mixed outcome for the assessee. While it upheld several disallowances and reclassifications by the AO and CIT(A), it also provided relief by directing the deletion of certain disallowances and setting aside the penalty order. The Tribunal's rulings were heavily influenced by precedents in the assessee's own cases and higher judicial decisions.
|
