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2022 (12) TMI 1319 - AT - Income TaxEstimation of income of the assessee at 10% of the administrative expenses and export expenses - HELD THAT - As it is noticed that the issue is squarely covered in the group concern of the assessee being in the case of M/s. Serajuddin Co. 2022 (10) TMI 1139 - ITAT CUTTACK and in the case of Aliza International Pvt Ltd. 2022 (10) TMI 1141 - ITAT CUTTACK respectfully following the decisions of the Co-ordinate Bench of this Tribunal the disallowance as confirmed by the ld CIT(A) at 10% stands reduced to 5%. Disallowance of auxiliary service addition - As it is noticed that this issue has already been considered in 2022 (10) TMI 1141 - ITAT CUTTACK . and we have reduced the said disallowance made from 10% to 5%, Ground No.3 of the revenue stands dismissed. Direction of the ld CIT(A) in adopting the total income before depreciation - HELD THAT - As it is noticed that the ld CIT(A) has reduced the total income assessed by the AO by considering the remand report as filed by the AO and as it is noticed that the said remand report has also been extracted by the ld CIT(A) in his order, we find no reason to interfere with the order of the ld CIT(A) on this issue. Ground Nos.4 5 of the revenue stand dismissed Deemed dividend addition u/s 2(22)(e) - HELD THAT - A perusal of the provisions of section 2(22)(e) clearly shows that the word used is on behalf, or for the individual benefit, of any such shareholder . Thus, the deemed dividend, if at all, can be assessed is to be assessed in the hands of the shareholder on whose behalf or individual benefit, the loan has been given. In the present case, the assessee is not the shareholder of M/s. Aliza International Pvt Ltd., which would attract the provisions of section 2(22)(e) of the Act. In these circumstances, we are of the view that the findings of the ld CIT(A) is on right footing and does not call for any interference. Ground No.6 of the revenue stands dismissed. Addition of other income - As submitted CIT(A) did not add the same on the ground that the net profit as shown by the assessee was inclusive of the said amount of other income - HELD THAT - As it is noticed that the ld CIT(A) has taken into consideration the fact that the said other income has already been considered while determining the net profit as per the accounts which are audited u/s.44AB, we are of the view that no addition of the said amount is called for. Consequently, Ground No.7 of the revenue stands dismissed. Disallowance of peripheral development expenses and maintenance expenses - HELD THAT - Respectfully following the decision of the Co-ordinate Bench in the case of Aliza International Pvt Ltd. 2022 (10) TMI 1141 - ITAT CUTTACK the addition as made by the AO and confirmed by the ld CIT(A) in respect of peripheral development expenses and maintenance expenses stands deleted. Penalty levied u/s.271(1)(c) - As submitted by ld AR that the search in the case of the assessee took place on 28.5.2008 and the assessment year 2009-10 was the specified period and for the purpose of levying the penalty, if at all, was u/s.271AAA and not u/s.271(1)(c) - HELD THAT - The penalty leviable u/s.271AAA is 10% of the concealed income whereas under section 271(1)(c), the penalty is leviable at 100% of the tax sought to be evaded. A perusal of the order of the Assessing officer shows that the AO has levied penalty at 100% of tax sought to be evaded. Consequently, the order passed by the AO cannot be held as typographical error. In regard to levy of penalty u/s.271AAA assessment year 2009-10 is the specified year in respect of the assessee, as the search took place on 28.5.2008. Respectfully following the decision of the Co-ordinate bench of this Tribunal in the case of S.M.Enterprises 2022 (11) TMI 275 - ITAT CUTTACK penalty levied u/s.271(1)(c) by the AO and confirmed by the CIT(A) stands deleted.
Issues Involved:
1. Addition of Rs. 50,000/- on an estimate basis. 2. Estimation of income at 10% of administrative and export expenses. 3. Deletion of auxiliary service addition. 4. Disallowance of administrative and other expenses. 5. Adoption of total income before depreciation. 6. Deletion of addition on account of deemed dividend. 7. Treatment of other income of Rs. 1,03,19,594/-. 8. Violation of Rule 46A of IT Rules. 9. Peripheral development expenses and maintenance expenses. 10. Confirmation of penalty levied u/s.271(1)(c) of the Act. Detailed Analysis: 1. Addition of Rs. 50,000/- on Estimate Basis: The assessee challenged the addition of Rs. 50,000/- made on an estimate basis. However, during the hearing, the assessee's representative did not wish to press this ground, leading to its dismissal as withdrawn. Consequently, the appeal of the assessee stands dismissed. 2. Estimation of Income at 10% of Administrative and Export Expenses: The assessee contested the CIT(A)'s action of estimating income at 10% of administrative and export expenses. The assessee's representative argued that this issue was covered by a previous decision of the Tribunal, which reduced such disallowance to 5%. The Tribunal, following its earlier decision, reduced the disallowance from 10% to 5%, thereby partly allowing the assessee's appeal. 3. Deletion of Auxiliary Service Addition: The revenue challenged the CIT(A)'s deletion of the auxiliary service addition. The CIT(A) had considered higher sales shown by the assessee and the inability of the Assessing Officer to provide the basis for the income adopted. The Tribunal found no reason to interfere with the CIT(A)'s findings, thereby dismissing the revenue's ground. 4. Disallowance of Administrative and Other Expenses: The revenue argued that the CIT(A) erred in reducing the disallowance to 10%. The Tribunal noted that this issue was already adjudicated in the assessee's appeal, where the disallowance was reduced to 5%. Consequently, the Tribunal dismissed the revenue's ground. 5. Adoption of Total Income Before Depreciation: The revenue contested the CIT(A)'s adoption of total income at Rs. 1,54,98,904/- before depreciation, reduced from the Assessing Officer's assessment of Rs. 15,39,73,507/-. The Tribunal upheld the CIT(A)'s decision, noting that the reduction was based on the remand report and the audit report, and dismissed the revenue's grounds. 6. Deletion of Addition on Account of Deemed Dividend: The revenue challenged the deletion of the addition made by the Assessing Officer on account of deemed dividend. The CIT(A) had deleted the addition on the ground that the assessee was not a shareholder in the lending company. The Tribunal upheld the CIT(A)'s decision, noting that the provisions of section 2(22)(e) apply only to shareholders, thereby dismissing the revenue's ground. 7. Treatment of Other Income of Rs. 1,03,19,594/-: The revenue argued that the CIT(A) should have added the other income of Rs. 1,03,19,594/- separately. The Tribunal found that this amount was already considered in the net profit as per the audited accounts and dismissed the revenue's ground. 8. Violation of Rule 46A of IT Rules: The Tribunal noted that multiple remand reports were obtained from the Assessing Officer, and there was no violation of Rule 46A of IT Rules. Consequently, the revenue's appeal was dismissed. 9. Peripheral Development Expenses and Maintenance Expenses: The assessee challenged the CIT(A)'s confirmation of peripheral development expenses and maintenance expenses. The Tribunal found that the issue was covered by a previous decision in favor of the assessee, where such expenses were considered business expenses and allowable. Therefore, the Tribunal deleted the additions, allowing the assessee's appeal. 10. Confirmation of Penalty Levied u/s.271(1)(c) of the Act: The assessee contested the penalty levied u/s.271(1)(c), arguing that the correct section for penalty should be 271AAA due to the timing of the search. The Tribunal agreed, noting that the specified period for penalty was under section 271AAA, not 271(1)(c). Consequently, the penalty was deleted, and the assessee's appeal was allowed. Conclusion: The Tribunal delivered a comprehensive judgment addressing each issue raised by the assessee and the revenue. The appeals were decided based on precedents, remand reports, and the specific provisions of the Income Tax Act, resulting in a mix of dismissals and allowances of various grounds.
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