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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter January 4, 2021 Case Laws in this Newsletter: GST Income Tax Service Tax Indian Laws Articles SCOPE OF POWERS UNDER RULE 86A OF CGST RULES, 2017 News GST e-invoice system completed journey of 3 months; Enabled more than 37000 tax payers to generate more than 1680 Lakh Invoice Reference Numbers (IRNs) INDIA’S MERCHANDISE TRADE Preliminary Data for December 2020 Notifications GST 01/2021 - dated 1-1-2021 - CGST Central Goods and Services Tax (Amendment) Rules, 2021. GST - States 59/2020 – State Tax - dated 31-12-2020 - Delhi SGST Seeks to amendment in Notification No. 21/2019- State Tax, dated the 17th October, 2019 51/2020-State Tax - dated 31-12-2020 - Delhi SGST Provide relief by lowering of interest rate for a prescribed time for tax periods from February, 2020 to July, 2020 F.12(46)FD/Tax/2017-III-265 - dated 1-1-2021 - Rajasthan SGST Rajasthan Goods and Services Tax (Amendment) Rules, 2021 G.O. (Ms) No. 191 - dated 23-12-2020 - Tamil Nadu SGST Tamil Nadu Goods and Services Tax (Fourteenth Amendment) Rules, 2020. G.O. (Ms) No. 190 - dated 23-12-2020 - Tamil Nadu SGST Tamil Nadu Goods and Services Tax (Second Amendment) Act, 2020 (Tamil Nadu Act No.29 of 2020) - Bringing into force the provisions of sections 3,4,5,6,7,8,9 and 10 of Tamil Nadu Act No.29 of 2020 G.O. (Ms) No.186 - dated 17-12-2020 - Tamil Nadu SGST Amendment in Notification No. II(2)/CTR/348(o-1)/2020, dated 28th May, 2020 G.O. (Ms) No. 173 - dated 16-11-2020 - Tamil Nadu SGST Amendment in Notification No. II(2)/CTR/232(h-5)/2020, dated 13th April, 2020 SEZ S.O. 9 (E) - dated 28-12-2020 - SEZ Central Government de-notifies an area of 4.81 hectares, thereby making resultant area of the SEZ as 5.352 hectares,at Village Nellikode, District Kozikkode in the State of Kerala Highlights / Catch Notes GST Form and manner of furnishing details of outward supplies - Rule 59 of the Central Goods and Services Tax Rules, 2017 as amended Visit to Get Source Validity of assessment order - When it is the categorical stand of the petitioner that they are not liable to pay the demand as claimed by the respondent, the respondent ought to have given sufficient opportunity to the petitioner to raise all objections. However, the respondent has not done so, while passing the impugned assessment orders. - Matter restored back - HC Visit to Get Source Income Tax Addition on account of short deposit of Dividend Distribution Tax (DDT) - we do not find mention of any of the provisions of the income tax act which provides that short payment of dividend distribution tax may be added to the income of the assessee and assessee can further be saddled with payment of tax on such short payment of dividend distribution tax. - AT Visit to Get Source Validity of Reopening of assessment - Service of notice under section 148 of the Act on the assessee is a jurisdictional requirement and must be mandatory complied with and it should be in accordance with section 282(1) of the Act read with Rule Order V Rule 12 CPC and Order III Rule 6 CPC. The onus on the Revenue to show that proper service of notice has been affected on the issue or agent duly empowered by him to accept the notices. - AT Visit to Get Source Disallowance u/s 14A r.w.r. 8D(2)(iii) - while computing disallowance under Rule 8D(2)(iii), only those investments are required to be taken into consideration which yielded exempt income during the year. - AT Visit to Get Source Addition made u/s.56(2)(vii) - difference in value between the value adopted by the stamp duty authority on the date of registration of the flat (i.e in F.Y. 2013.14) and the actual consideration paid by the assessee - Mere registration at later date would not cover a transaction already executed in the earlier years - The pre-amended provisions will thus apply and therefore the Revenue is debarred to cover the transactions where inadequacy in purchase consideration is alleged. - AT Visit to Get Source Deduction u/s 80IB - No infirmity either in the procedure or in passing of intimation u/s 143 (1A) of the act as well as in denying deduction u/s 80 IB of the act to the assessee for non filing of the audit report in electronic manner in time (on or before the due date of filing of the return of income) as prescribed Under income tax rules and having the mandate of the provisions of Section 80 IB(11B)(iv) - AT Visit to Get Source Block assessment - Applicability of Chapter XIV B - addition to the peak of loans - The Assessing Officer cannot indulge in roving enquires regarding the issue that has already been disclosed in the books of accounts and placed before the departments. All such enquiries and investigations should be made by the Assessing Officer in a proceeding known to the Income Tax Law other than the block assessment proceedings. - AT Visit to Get Source Claim of Deduction from Rental Income u/s 23(1)(b) - Income from House Property - the assessee is entitled for claim of deduction of lease rent paid to the Bombay Port Trust(BPT) against the Leave and License fee/rent received from the tenants in determining the annual value of the property. - AT Visit to Get Source Expenditure incurred by the assessee towards earning income from providing consultancy services - it would be appropriate and just to estimate the expenditure and thereafter determine the taxable income of the assessee. Further taking cue from the provisions of section 44ADA of the Act (though it was inserted by finance Act 2016 w.e.f. 1/4/2017). - In the peculiar circumstances in the case of the assessee 50% of the gross consultancy receipts should be treated as the expenditure incurred by the assessee for earning income from consultancy services - AT Visit to Get Source Indian Laws Dishonor of Cheque - acquittal of the accused - When the contract agreement was cancelled, question of enforcing the agreement does not arise. - The Trial judge has committed an error in coming to the conclusion that the complainant has not produced documents to show that there was talks between himself and accused pertaining to calculation of damages after alleged breach of contract for which accused had issued the cheque - the Trial Judge proceeded to pass an acquittal order not based on the presumption as well as on the settled principles of law and the material available on record. - HC Visit to Get Source Service Tax Rejection of declaration under Sabka Vishwas [Legacy Dispute Resolution] Scheme, 2019 - SVLDRS - If there was quantification in terms of the Final Reminder as now asserted by the petitioner, in Form in SVLDRS-1 the petitioner should have mentioned in the relevant column the amount indicated in the Final Reminder dated 15.11.2018. The fact that the petitioner mentions the Tax liability/ Demand in Form SVLDRS-1, an amount which is quantified in terms of the Show Cause Notice dated 9.12.2019, shows that even according to the petitioner there was no quantification as of the prescribed date viz., 30.06.2019. - Petition dismissed - HC Visit to Get Source Case Laws: GST 2021 (1) TMI 59 Violation of principles of Natural Justice - validity of assessment orders - It is the case of the petitioner, that even though the representations given by the petitioner are reflected in the impugned assessment orders, the reason for rejection of the same has not been disclosed in the impugned assessment orders - Section 75 (5) of the Central Goods and Service Act, 2017 - HELD THAT:- It is clear from the Section 75 (5) of CGST Act that the respondent has got the power to grant further time to reply to the show cause notice if sufficient cause is shown by the dealer (assessee). The proviso also makes it clear that the respondent has got the power to grant three extensions to the dealer (assessee) for submission of reply. In the instant case, the reason for seeking extension of time by the petitioner to submit their reply was that they have to consult an Auditor with regard to the defects pointed out by the respondent in the show cause notice. When 33 defects have been pointed by the respondent for the assessment year 2017-18 and 38 defects for the assessment year 2018-19, and that too when spot inspection was conducted by the Enforcement Wing Officials of the respondent for a period of 22 days, this Court is of the considered view that the reason given by the petitioner for seeking extension of time to send reply to the show cause notice is a genuine one and they have shown sufficient cause for seeking extension. Admittedly, the respondent has also not considered, whether the reasons given by the petitioner is a genuine one or not in any of their correspondence or in the impugned assessment orders. As observed earlier, the show cause notice was issued on 11.10.2019 and the impugned assessment orders has been passed on 19.11.2019, within a very short span of time. This Court is of the considered view that principles of natural justice has been violated, as no proper reasons have been given by the respondent for rejecting the petitioner's request for extension of time to send a reply to the show cause notice and as seen from the impugned assessment orders, a fair hearing was also not afforded to the petitioner - the tax demand under the impugned assessment orders almost works out to ₹ 1 Crore. After giving due consideration to the same, this Court is of the considered view that the petitioner must be put on terms before the impugned assessment orders are quashed. The matter remanded back to the respondent for fresh consideration and the respondent shall pass final orders on merits and in accordance with law after affording sufficient opportunity to the petitioner - Petition allowed by way of remand. 2021 (1) TMI 58 Principles of Natural Justice - validity of assessment order - assessment order challenged on the ground that no sufficient opportunity was granted by the respondent to the petitioner before passing of the impugned assessment orders and the principles of natural justice has been violated - HELD THAT:- Admittedly, the show cause notices were issued on 03.08.2020 and the impugned assessment orders have been issued on 31.10.2020, within a short period of three months. When the petitioner has been seeking for sufficient time for sending a detailed reply and that too when he has sought for documents, which was furnished only on 20.10.2020, the respondent ought to have given some more time to the petitioner to place all his objections with regard to the demand made by the respondent as per the show cause notices, dated 03.08.2020. However, as seen from the impugned assessment orders, sufficient time has not been granted to the petitioner to raise all objections available to them under law. When it is the categorical stand of the petitioner that they are not liable to pay the demand as claimed by the respondent, the respondent ought to have given sufficient opportunity to the petitioner to raise all objections. However, the respondent has not done so, while passing the impugned assessment orders. However, this Court considering the huge amount of taxes payable as seen from the impugned assessment orders, this Court will have to put the petitioner on terms, before the impugned orders are quashed and remanded back to the respondent for fresh consideration on merits and in accordance with law - this court is of the considered view that the petitioner will have to pay a sum of ₹ 3,00,000/- in respect of each of the impugned assessment order on or before 05.01.2021 and on such payment, the impugned assessment orders shall stand quashed. The matter remanded back to the respondent for fresh consideration and the respondent shall pass final orders on merits and in accordance with law, after giving adequate opportunity to the petitioner - petition allowed by way of remand. Income Tax 2021 (1) TMI 60 Disallowance of prior period expenses - HELD THAT:- Coordinate bench in assessee's own case for assessment year 2008-09 [ 2019 (6) TMI 1288 - ITAT DELHI] reliance of the ld. AR on the decision of Hon'ble Delhi High Court in CIT vs. Modipan Ltd.[ 2010 (12) TMI 836 - DELHI HIGH COURT] is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowability of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition on account of prior period expenditure. Addition on account of deduction u/s. 80 IA B - HELD THAT:- This issue is squarely covered for assessment year 2008-09 [ 2019 (6) TMI 1288 - ITAT DELHI] Addition on account of estimated IDC charges and revenue recognition as per percentage completion method cost of the construction - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for earlier years. The latest order with respect to the above issue is covered in the decision of the coordinate bench for assessment year 2008-09 - We dismiss ground number 3 of the appeal of the learned assessing officer and confirm the order of the learned CIT-A in deleting the disallowance on account of estimated IDC charges and commencement of construction cost. Disallowance on account of brokerage and commission expenses relating to leased out properties - in the alternative, if same is attributable to lease income, adjustment is required to be made while working out rental income as per provisions of section 23(1) - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessment year 2006-07 and assessment year 2008-09 [ 2019 (6) TMI 1288 - ITAT DELHI] in favour of the assessee stating that expenditure towards brokerage and commission paid to brokers for booking and sale of certain properties is allowable firstly in view of the facts that assessee's treatment of such expenditure has been decided in favour of the assessee and revenue has not challenged it and secondly such expenditure are allowable. In view of the above facts and following the decision of coordinate Bench as facts are not distinguished by revenue, we confirm the order of CIT (A) in deleting the addition. Capitalisation of the interest expenditure - HELD THAT:- As relying on own case we are of the view that presumption is to be assumed in favour of the assessee and not against assessee. Hence, we reject the formulae adopted by CIT (A) of working out proportionate disallowance by adopting artificial formulae. Therefore respectfully following decisions of Honourable Bombay High court in CIT vs. Lokhandwala Constructions Industries Ltd. [ 2003 (1) TMI 93 - BOMBAY HIGH COURT] and CIT V. Reliance Utilities Power limited. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - We reverse the order of the CIT (A) confirming the disallowance of expenditure and direct the AO to allow this interest expenditure u/s. 36(1) (iii) . Disallowance of late construction charges received from the customers - HELD THAT:- As decided in own case Assessee as following a prudent and consistent accounting policy which was necessitated by the order of Honourable Punjab And Haryana High court. The assessee offered the entire amount as its income on settlement of disputes by the Honourable Supreme Court. Therefore, we hold that the assessee was acting on prudent and consistent accounting policy. Going by this accounting policy, the income cannot be recognised unless it is free from impending and binding litigation which in this case was clarified in A.Y. 2011-12 only Accounting standard 9 issued by ICAI on revenue Recognition also satisfies the accounting policy of the company that when the revenue is saddled with uncertainties same should not be recognised till the uncertainties are resolved. Therefore following the decision of coordinate bench as well as the accounting standard 9 of ICAI we are of the view that assessee has correctly recognised revenue in the year the issue attained certainty. Therefore on perusal of the decision of CIT (A) we are of the view that there is no infirmity in the order. Hence we confirm the order of CIT (A) Addition on account of the contingency deposit - HELD THAT:- Respectfully following the decision of the coordinate bench in assessee's own case for earlier years, we confirm the order of the learned CIT-A and dismiss ground of the appeal of the assessing officer. Addition on account of net interest free security deposit, disallowance on account of net registration charges - HELD THAT:- It is noted that this is the amount which is collected by the buyers with specific object of getting exclusion of conveyance deed in favour of the buyer. In fact, it is an advance collected by the assessee from the buyer towards registration charges with the office of the Registrar for conveyance deed registration. At the time of registration, assessee incurs this expenditure by debiting to this account of that particular customer. The total receipt of registration charges is identified with respect to each of the buyer and there are movement in respective accounts. In fact, it is a past through cost collected by the assessee from the buyer to be incurred by assessee on behalf of the buyer. These receipts cannot partake character of the revenue in the hands of the assessee. It is also not the case of the AO that the depositors are not identified and despite the conveyance deed executed by the assessee, the amount has not been incurred. In absence of this finding, it is not possible to confirm the disallowance. Therefore, we confirm the order of the CIT (A) in deleting the addition being credit balance of registration charges received from the customers. Addition on account of expenses towards non allocation of overheads to group companies - HELD THAT:- On perusal of the expenditure and the orders of the lower authorities, it is apparent that the director's salary is being paid to the directors of the company including a commission thereof is for the purpose of managing the business of the DLF-assessee. Further, for the protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders' activity. Furthermore, the advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all pertaining to the business of the company. No evidence/instances have been cited by AO that any of this expenditure has not been incurred by the company and they are not related to the business of the assessee. It may happen that by incurring certain expenditure by the assessee for the purpose of his business may result into some indirect benefit to the group companies but that cannot be the ground for disallowance of that expenditure in the hands of the assessee. The CIT (A) relying upon the decision in the case of Nestle India Ltd. [ 2007 (4) TMI 299 - ITAT DELHI-F] has deleted the addition. No infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with instances that these are not incurred by the assessee wholly and exclusively for the purposes of the business of the assessee. Respectfully following the decision of the coordinate bench in assessee's own case for earlier years and also for the reason that this decision has been accepted by the revenue by not preferring an appeal on this issue before the honourable High Court and also for the reason that the learned assessing officer himself has not made these additions from assessment year 2012-13 onwards, we dismiss ground number 10 of the appeal. Disallowance of expenses u/s. 14A - assessee has earned dividend from mutual fund - HELD THAT:- Respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2008-09 [ 2019 (6) TMI 1288 - ITAT DELHI] we confirm the order of the learned CIT-A to the extent of deletion of the disallowance of interest expenditure u/s. 14 A read with rule 8D (2) of the act. Coming to the ground number 2 of the appeal of the assessee wherein the confirmation of disallowance of administrative expenditure is challenged, respectfully following paragraph number 11.1 of the order of the coordinate bench for assessment year 2008-09, we set aside the whole issue of administrative expenses with similar direction back to the file of the learned assessing officer. Assessee may raise any ground with respect to above disallowance. Disallowance on account of expenses on commercial projects which are not commenced - HELD THAT:- The assessee has incurred this expenditure on proportionate and feasibility of various construction projects in which business the assessee is engaged into. Before embarking on to any of the projects, it is a common practice to obtain a feasibility and economic viability of construction projects at different geographical location. These expenses are for facilitating the existing business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or unrelated to the business of the assessee. Therefore, in our view, this expenditure are wholly and exclusively incurred for the purposes of the business of the assessee. Hence, we confirm the order of CIT (A) and delete this ground of revenue's appeal. Classification of income from income from house property to income from business or profession - HELD THAT:- Assessee company is a developer and hence, the decision of Hon'ble Supreme Court in the case of Chennai Properties [ 2015 (5) TMI 46 - SUPREME COURT] is rendered in the context of the company which is formed with the main object of renting up of the properties. In view of the above, respectfully following the decision of coordinate Bench of the ITAT in the case of assessee for AY [ 2019 (6) TMI 1288 - ITAT DELHI] we confirm the order of CIT(A) in taxing the rental income as income from house property. Addition on account of notional rent, additional annual letting value in respect of the vacant and lease of properties - HELD THAT:- As decided in the case of assessee for AY [ 2019 (6) TMI 1288 - ITAT DELHI] notional addition made by the Assessing Officer under the head income from house property on account of notional income u/s. 23(1) (a) of the Income Tax Act is deleted. Disallowance of depreciation claimed on DLF Centre building - HELD THAT:- As decided in own case [ 2017 (11) TMI 381 - ITAT DELHI] CIT(A) has observed that this very issue arose in the preceding year and relief allowed at the first appellate stage was accepted by the revenue as no appeal was filed against the same before ITAT. In the light of above position and as per the decision of Hon'ble Supreme Court in the case of CIT v. J.K. Charitable Trust [ 2008 (11) TMI 8 - SUPREME COURT] the revenue could not be permitted to agitate the very same issue in the year under reference. Disallowance on account of expenses were bills are not in the name of the company - HELD THAT:- As the bulk of expenses are in the nature of electricity and water expenses for which the name of erstwhile tenant has been mentioned. Similar issue was involved in the earlier year also, therefore, respectfully following the precedence this issue is decided in favour of the assessee and against the Revenue. Disallowance on account of excess payment of rent - HELD THAT:- In the present case the learned assessing officer has disallowed the sum merely on the basis of increase in the earlier year compared to the increase in the current year. Increase in the earlier year was more than 50% whereas increase in the current year is merely 19%. The learned assessing officer has not brought on record any material to show that what was the market rate of the rent of the flat. In absence of such information it cannot be said that what is paid by the assessee to a related party is excessive. All these exercised by the learned assessing officer are missing in this case. In view of this we do not find any infirmity in the order of the learned CIT-A in deleting the addition. Addition on account on notional rent where security deposits were received but no rental was shown - HELD THAT:- No justification for addition as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted. Disallowance on account of interest on late deposit of tax deduction at source - HELD THAT:- We hold that such an interest on late payment of deposit of TDS cannot be allowed as expenditure u/s. 37. Consequently, this issue is decided against the assessee. Addition on account of short deposit of Dividend Distribution Tax - HELD THAT:- According to Section 220 when assessee is deemed in default, an amount of such tax in default can be determined, the notice of demand u/s. 156 can be issued, and such tax shall be paid within 30 days of service of the notice. The consequence of such non-payment of tax may result into, recovery of tax, penalty payable on such tax and also prosecution u/s. 276B of the income tax act. However on reading of the order of the lower authorities we do not find mention of any of the provisions of the income tax act which provides that short payment of dividend distribution tax may be added to the income of the assessee and assessee can further be saddled with payment of tax on such short payment of dividend distribution tax. The learned departmental representative also could not show us any such provision in the income tax act. Therefore, we are unable to uphold such an addition made by the lower authorities. 2021 (1) TMI 57 Stay petition - Pre- deposit - HELD THAT:- Admittedly, it is the case of the petitioner that the stay application filed for seeking of the stay of the assessment order dated 21.12.2019 passed by the third respondent has already been returned on the ground that the petitioner will have to pay 20% of the disputed tax amount. In such circumstances, there is merit in the grievance raised by the petitioner in this Writ Petition. This Court directs the second respondent to dispose of the statutory appeal filed by the petitioner on 08.01.2020 aggrieved by the assessment order dated 21.12.2019 passed by the third respondent within a period of six weeks from the date of receipt of a copy of this order, after affording sufficient opportunity to the petitioner in the said proceedings on merits and in accordance with law. 2021 (1) TMI 56 Validity of Reopening of assessment - no notice under section 148 of the Act has been served upon the assessee - HELD THAT:- As clear from the assessment records, the notice under section 148 of the Act was issued on 31.01.2017 are received back as unserved with postal remarks no such person . AO has not made any attempt to serve the assessee by affixture or any other manner as prescribed under the aforesaid provision of law in my view that no notice under section 148 of the Act has been served upon the assessee and the assessment framed in absence of this notice is illegal in contrary to provision of law and not sustainable in the eye of law therefore, cancel the assessment order and impugned order passed by the Ld. CIT(A). Service of notice under section 148 of the Act on the assessee is a jurisdictional requirement and must be mandatory complied with and it should be in accordance with section 282(1) of the Act read with Rule Order V Rule 12 CPC and Order III Rule 6 CPC. The onus on the Revenue to show that proper service of notice has been affected on the issue or agent duly empowered by him to accept the notices. As not seen any evidence on record regarding service of notice issued u/s 148 of the I.T. Act. - Decided in favour of assessee. 2021 (1) TMI 55 Unexplained income relating to deposits in the account with ICICI Bank - HELD THAT:- On careful perusal of the assessment order passed Under the wealth tax act by the income tax officer Ward 54 (2), New Delhi for assessment year 2008 09 the argument of the learned authorised representative is found correct. The assessee has been charged wealth tax on this sum of ₹ 5,598,734 being cash in hand as on 31st of March 2008. Therefore, for the purpose of making addition in assessment year 2009 10 assessee must be granted credit of utilisation of the above sum of ₹ 5,598,734/ . AO has made the addition of ₹ 6,055,367/ for not showing the source of the investment made by the assessee. Therefore, we direct the learned assessing officer to restrict the addition to the extent of only the difference between the unexplained investment of ₹ 6,055,003 and and 67 and the cash available as on the first day of the accounting year to the assessee of ₹ 5,598,734/-. Thus the learned AO is directed to retain the addition of only ₹ 456,633/ out of the total addition made of ₹ 6,055,367/ . Thus assessee gets relief of ₹ 5,598,734/ . Enhancement made by the learned CIT A - HELD THAT:- CIT A must first issue a notice to the assessee proposing the reasons and the amount of enhancement of the income of the assessee. In the present case the learned CIT A has enhanced the income of the assessee without issuing any show cause notice. Therefore it is clearly in violation of the provisions of Section 251 (2) of the income tax act and therefore it cannot be sustained. Even otherwise the learned CIT A has provided 24 opportunities to the assessee to hear him on the merits of the addition made by the learned assessing officer. However, for the purpose of making enhancement he did not issue a single notice as provided u/s 251 (2) of the act which clearly shows that enhancement cannot be sustained. Addition for non-deduction of tax at source as well as for making payment in violation of the provisions of Section 40 A (3) - HELD THT:- AO has rejected the books of accounts of the assessee, which is been upheld by the learned CIT A. Even otherwise when books of accounts have been rejected in toto by the learned assessing officer and same has been confirmed by the learned CIT A also, the income of the assessee has been assessed on the basis of total investment made compared with the amount of funds available with the assessee for making such investment, no disallowance u/s 40 (a) (ia) or u/s 40 A (3) of the act can be made. Even after granting the assessee the credit of the opening cash on hand available at the beginning of the year, the addition sustained by us also remains on the same basis. Therefore, assessee has not claimed any expenditure but is assessed on the basis of the amount available with him for making an investment during the year. Therefore, even otherwise the enhancement made by the learned CIT A is not sustainable. - Appeal of the assessee is partly allowed. 2021 (1) TMI 54 Reopening of assessment u/s 147 - addition u/s 68/69 - assessee has taken an accommodation entries from eight companies - non disposal of objection filed to the notice under section 148 by assessee - HELD THAT:- In absence of disposal of objection filed to the notice under section 148 of the Act through speaking order, the entire reassessment proceedings is in disregard to the principle laid down by Hon'ble Supreme Court of India in the case of G.K.N. vs. Driveshafts (India) [ 2002 (11) TMI 7 - SUPREME COURT] - Therefore, we declare the notice under section 148 of the Act is contrary to the law, null and void and assessment subsequently framed is also cancelled similarly the impugned order passed by the learned First Appellate Authority is also sustainable in the eyes of law, we cancel the orders passed by the Revenue authorities by deleting the addition in dispute and accepting the appeal filed by the assessee. Approval in terms of section 151 - As perused that the notice under section 148 of the Act is dated 27.03.2015 whereas the Joint Commissioner of Income Tax, Range-23, New Delhi has given the approval on 28.03.2015 as per page 5 of the paper book. We declare this approval is also not as per law and the AO issued notice under section 148 of the Act prior to the approval by the competent authority, same is also not valid. Addition under section 69 being purchases made by the assessee even though same is quoted from relevant documents which the assessee has produced in the shape of paper book and has also all the necessary documentary evidence before the Assessing Officer including ledger account, bill and bank statement and payment made by cheque reflected in the books of accounts of the assessee and Assessing Officer on the same has not brought on record any negative evidence and wrongly said that the bogus transaction which is contrary to the evidence filed by the assessee and the addition in dispute is also liable to be cancelled and we cancel the same. Appeal filed by the assessee is allowed. 2021 (1) TMI 53 Taxability of amount received as common cost recharge as Royalty and fees for technical services (FTS) - Taxability of Consulting Engineering Services - DRP considering common cost recharge as royalty and Fees for technical services (FTS) as per Article 13 of the India-UK Double Taxation Avoidance Agreement ( DTAA ) - HELD THAT:- As relying on assessee s own case for A.Y.2014-15 the amount received by the assessee on account of consulting engineering services were to be treated as business profit and in the absence of assessee's PE in India, it could not be brought to tax. Consequently, the cost recharge which was considered to be ancillary and incidental to consulting engineering services, was also held to be not taxable in the absence of assessee's PE in India. However, in the year before us, the assessee has already offered the consulting engineering fees to tax which has been accepted by the revenue. Since we have admitted additional ground of appeal on this point, the issue of taxability of consulting engineering services would go back to Ld. AO for adjudication. Logically, the issue of taxability of cost recharge, which has been treated as ancillary and incidental to consulting engineering services, would also go back to Ld. AO for re-adjudication in the light of stand taken qua consulting engineering services. Therefore, we deem it fit to restore both the grounds to the file of Ld. AO for re-adjudication de-novo after affording reasonable opportunity of hearing to the assessee, who, in turn, is directed to substantiate his claim and demonstrate that the facts in AY 2012-13 and in the year consideration was identical Levy of surcharge and Education Cess on tax calculated at special rates under the DTAA - HELD THAT:- The issue in dispute is squarely allowed in favour of the assessee by the Co-ordinate Bench decision of Hyderabad Tribunal in the case of RAK Ceramics UAE vs. DCIT International Taxation (2), [ 2019 (4) TMI 667 - ITAT HYDERABAD] wherein it was categorically held that surcharge and education cess could not be added to connotation tax when the same is calculated as per DTAA. We find that the Hyderabad Tribunal while rendering this judgment had inturn placed reliance on the co-ordinate Bench decision of Kolkata Tribunal in the case of DIC Asia Pacific (Pte) Ltd., vs. Asst. DIT [ 2012 (6) TMI 686 - ITAT, KOLKATA] . No contrary decision was cited before us by the ld. DR in this regard and accordingly by respectfully following the aforesaid judicial president, the ground No.2 raised by the assessee is allowed. 2021 (1) TMI 52 TP adjustment - business facilitation service provided to AE by the assessee - Comparable selection - assessee had selected itself as the tested party for benchmarking the international transaction of provision of business facilitation services - assessee in its transfer pricing study report applied Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) for benchmarking the business facilitation services transaction with its AE - AR submitted before us that if Icra Onine Ltd alone is included in the final list of comparables chosen by the ld. TPO, the assessee would be well within +/- 5% tolerance range permitted in the statute and hence no adjustment would be required to be made to international transaction of the assessee - HELD THAT:- We find that this Tribunal in assessee s own case for A.Y.2011-12 [ 2018 (12) TMI 1853 - ITAT MUMBAI] had directed the ld. TPO to include Icra Online Ltd., in the final list of comparables, among others. Respectfully following the aforesaid judicial precedents in assessee s own case and considering the argument of the assessee that it would be well within the +/-5% tolerance range after inclusion of Icra Online Ltd., in the final list of comparables, we direct the ld. TPO to include the same in the final list of comparables and in view of this decision, the adjudication of other grounds would become academic and infructuous. Hence, no opinion is given hereunder in respect of other grounds raised by the assessee and they are left open. Accordingly, the grounds raised by the assessee are allowed. 2021 (1) TMI 51 Unsecured loan creditors - AR submitted before us that the Ld. AO has not offered proper opportunity to the assessee and passed ex-parte Order - As submitted that assessee-company had incurred huge losses and is under the process of closing down its business and the assessee is now in possession of the confirmation letters from the unsecured loan creditors - HELD THAT:- Neither the assessee nor its Authorised Representative appeared before the Ld. CIT(A) during the proceedings before him, though several opportunities were provided. Therefore, the argument advanced by the Ld. AR that proper opportunity of being heard was not provided to the assessee by the Ld. CIT(A), does not have any merit. CIT(A) has remitted back the issue with respect to unsecured creditors to the file of Ld. AO for verification which is erroneous because the Ld. CIT(A) does not have such powers under the Act. Further, considering the submissions of the Ld. AR that additional evidence is required to be produced before the Ld. Revenue Authorities, we hereby set aside the order of the Ld. CIT(A) and remit the entire appeal back to the Ld. AO for fresh consideration. Needless to mention that the assessee shall be provided with fair opportunity of being heard admitting the additional evidence if any - Appeal of the assessee is treated as allowed for statistical purposes. 2021 (1) TMI 50 TP Adjustment - addition of working capital advances - funds transferred by the assessee to its subsidiaries - HELD THAT:- We find that the assessee, not only in its T.P. documentation, but also in its reply to notice of the TPO, has clearly stated that these are working capital advances, though at para 2.5 of its submissions before the TPO, assessee had stated that it had invested in its sister concerns. However, neither the TPO nor the DRP have gone into this aspect, nor has the assessee filed any evidence in this context before the authorities below. The board resolutions and the evidence that assessee has been allotted equity shares in the subsequent year were never put before the authorities below. In view of these facts, we deem it fit and proper to set aside the issue to the file of AO/TPO with a direction to consider the evidence filed by assessee to the effect that assessee had invested money in equity shares of its subsidiaries and has not given working capital advances. Corporate guarantee fee - international transaction or not? - HELD THAT:- We find that the A.Y. before us is 2011-12, i.e. prior to the amendment of Sec. 92B of the Act, while in the decisions relied upon by the DR, it has been held that even prior to the amendment, the Corporate Guarantee is an international transaction, in the decisions relied upon by the ld Counsel for the assessee, it has been held otherwise. We find that in the assessee's own case for the AY 2010-11, this Tribunal has held the issue in favour of the assessee. Therefore, following the principle of uniformity and consistency, we hold that corporate guarantee is not international transaction prior to amendment of S. 92B w.e.f. 1.4.2012. Therefore, grounds of appeal no. 4 and 5 are allowed. Disallowance u/s. 14A - HELD THAT:- We find that the issue of disallowance u/s. 14A where there is no exempt income earned during the relevant financial year, is covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of CIT (Central)1 vs. Chettinad Logistics (P) Ltd. [ 2018 (7) TMI 567 - SC ORDER] wherein it was confirmed that where there is no exempt income earned by the assessee, no disallowance u/s. 14A shall be made. Computation of income u/s. 115JB of the Act and addition of disallowance u/s. 14A to the said income - We find that this issue also is covered in favour of the assessee by the decision of the Special Bench of the ITAT at Delhi in the case of Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] which has been followed by us in our orders in other cases cited Supra. Respectfully following the same, we hold that no addition of the disallowance u/s. 14A is called for while computing the income u/s. 115JB of the Act. 2021 (1) TMI 49 Disallowance of bad debt claimed as deduction u/s 36(1)(vii) r.w.s 36(2) - amount advanced to M/s Indessa Infotech Pvt Ltd., the contention of the Ld. AR that the loan has become bad, therefore the assessee has claimed deduction of bad debts u/s 36(1)(vii) r.w.s 36(2) - HELD THAT:- We find that the assessee has advanced the loan to its sister concerns and the loan is not recoverable and as per the decision of the Hon ble Supreme Court in the case of TRF Ltd [ 2010 (2) TMI 211 - SUPREME COURT] the assessee has to establish that the debt has become bad and was written off. We find that the assessee could not substantiate the efforts made in respect of recovery of loan and further more in the case of sister concern, it will be easy for the assessee considering the advance given in the normal course of trade and place of business is the same. Further, no material was filed before the A.O. or before us to establish that the assessee has made efforts for recovery of debt or correspondence with barrower for non-payment. Even in the assessment order the A.O has only referred to the fact that it is a related concern but could not establish that the verification and enquiry has been conducted. We considering the nature of transactions with the related concern and the assessee could not establish the efforts under taken for the recovery. We set aside the order of the CIT(A) and restore the entire disputed to the file of the A.O for the limited purpose to verify the claim made by the assessee and the efforts made by the assessee in recovery of the loan. Characterization of income - interest income of the appellant - under the head income from other sources as against income from business offered by the appellant - HELD THAT:- Since the assessee has consistently follow the method of disclosing as income from business and in the earlier year also the revenue has accepted. We direct the A.O to treat the income as business income and allow the additional ground of appeal. 2021 (1) TMI 48 Reopening of assessment u/s 147 - As argued that requirement of section 151(2) of the Act was not complied with before issue of notice u/s.148 - addition made towards differential value of sale consideration by invoking the provisions of section 50C - HELD THAT:- Although, the learned CIT(A) has stated in para 5 of his order that necessary sanction as envisaged u/s.151(2) was taken from the competent authority, but he has neither brought on record any evidence available in the assessment records in support of his claim nor stated the date on which the competent authority, if he had granted the approval and recorded his satisfaction in accordance with the requirement of section 151(2) - In the absence of any clear findings from the learned CIT(A) along with date of approval, if any, as required u/s 151(2) of the Act, it is very difficult to concur with the findings recorded by the learned CIT(A) that requirement of section 151(2) of the Act has been complied with before issue of notice. In this case, neither notice issued u/s.148 specifies the requirement of section 151(2) of the Act, nor the learned CIT(A) has brought on record the evidence available on assessment records. In the absence of evidence, the findings of the learned CIT(A) that necessary sanction as envisaged under 151(2) of the Act was taken from the competent authority is perverse and not sustainable in law. Therefore, we are of the considered view that notice issued u/s.148 of the Act, without complying the requirement of section 151(2) of the Act is bad in law and liable to be quashed. - Decided in favour of assessee. 2021 (1) TMI 47 Disallowance u/s.14A read with Rule 8D - HELD THAT:- It is a well settled principles of law that disallowance computed u/s.14A read with Rule 8D shall not swallow entire income earned for the year. This principle is supported by the decision of Hon ble Delhi High Court in the case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] where it was clearly held that disallowance of expenditure u/s 14A shall not exceed exempt income earned for the year. Thus we direct the Assessing Officer to restrict the disallowance computed u/s.14A read with Rule 8D of I.T.Rules, 1962 to the extent of exempt income earned for the year. Computation of book profit u/s.115JB of the Act towards disallowance of expenditure in relation to exempt income u/s.14A read with Rule 8D - This issue is also covered in the case of Vireet Investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI] wherein held computation under clause (f) of Explanation 1 to section 115JB(ii) of the Act is to be made without resorting to computation as contemplated u/s.14A read with Rule 8D of I.T. Rules, 1962. Therefore, we are of the considered view that Assessing Officer cannot make additions towards computation of disallowance u/s.14A read with Rule 8D of I.T. Rules, 1962, to the book profit computed u/s.115JB. Appeal filed by the assessee is allowed. 2021 (1) TMI 46 Exemption u/s 11 - interest payment u/s 11 (1) to 13 (1)(c) r. w. s 13 (3) - treat the amount paid to persons covered u/s 13(3) as excessive by treating the rate of interest of unsecured loan (liabilities) with rate of interest of deposits (assets) - assessee s interest derived from fixed deposits @ 7. 5 % to 7. 75 % with the interest paid in issue @ 10 % - HELD THAT:- We find no reason to sustain either of the twin limbs of excessive as well as unjustified interest on aspects in favour of the Revenue. Paper Books suggest that the assessee had 17 fixed deposit accounts with the bank(s) out of which the first one was in the nature of margin money security in favour of the Dental Council of India whereas accounts 2 to 14 thereof are fund security(ies) of Nursing College(s) in favour of the Baba Farid University of Health Sciences. Meaning thereby that the said fixed deposit accounts are deposits are in the name(s) of affiliating/regulatory bodies than fixed deposit investment per se. We observe that these facts that it was very much justifiable on assessee s part to maintain all the said fixed deposits for the purpose of carrying out the trust s medical education activities. Excessive interest payments @ 10 % to its trustee Shri Grewal - As come on record that the department has itself accepted interest paid to the lender banks @ 14. 75 % in case of secured loans are against unsecured loans availed from Shri Grewal. That itself suggests that the impugned interest rate @ 10 % is not excessive so as to attract the impugned disallowance/addition. We are dealing with this assessee paying market rate of interest to the trustee. We go by all this elaborate reasoning to conclude that the assessing authority had erred in disallowing assessee s interest payment followed by the CIT(A) s enhancement action under challenge which is also not sustainable. The same stand reversed therefore. Assessee s appeal is allowed. 2021 (1) TMI 45 Disallowance u/s 14A r.w.r. 8D(2)(iii) - as per assessee CIT (A) has erred in upholding the action of AO to disallow expenses incurred towards earning exempt income in accordance with Rule 8D(2) (iii) of the Income Tax Rules (the Rules) and the disallowance made should have been restricted to the suo moto disallowance made by the assessee or the same should have been appropriately reduced - HELD THAT:- CIT (A) has directed the AO to recompute the disallowance under rule 8D(2)(iii) after excluding investment in growth schemes of Mutual Funds, which are not capable of generating any exempt income - In our considered view, the findings of the Ld. CIT(A) are based on the law laid down by the Hon ble Supreme court and the various High Courts. Hence, we are of the considered view that the authorities below have rightly invoked Rule 8D(2)(iii) of the Rules for determining the disallowance. Average investment for the purpose of calculating disallowance under rule 8D(2)(iii) should include only those investments from which the assessee has earned exempt income during the year - CIT (A) has rejected the plea of the assessee holding that the same cannot be accepted in view of the decision of the Special Bench of the ITAT, Delhi in the case of ACIT and another vs. Vireet Investments Pvt [2017 (6) TMI 1124 - ITAT DELHI] - Under rule 8D(2)(iii) disallowance is made equal to one-half percent of the average of the value of investment, income from which does not or shall not form part of total income as appearing in the balance sheet of the assessee on the first day and the last day of the previous year - AO has brought on record the fact that the assessee has worked out 20% of the time of two employees out of total strength of 90 employees of head office only as expenses attributable to investment activity and has not provided any justification for such allocation. Hence since the AO had computed the disallowance under rule 8D(2)(iii), the Ld. CIT(A) has rightly upheld the action of AO in applying Rule 8D(2)(iii) of the Rules, for determining disallowance. However, the Ld. CIT(A) has rejected the contention of the assessee that only those investments from which exempt income has been earned during the year may be included for the purpose of determining disallowance under rule 8D(2)(iii) of the Rules by following the decision of the special Bench in the case of ACIT vs. Vireet Investments Pvt. Ltd. (supra) CIT (A) has decided this issue contrary to the decision of the Special Bench of the Delhi Tribunal. The Special Bench has categorically held in the said case that while computing disallowance under Rule 8D(2)(iii), only those investments are required to be taken into consideration which yielded exempt income during the year. Accordingly, we set aside the order passed by the Ld. CIT(A) and direct the AO to recomputed the disallowance u/s 14A r.w.r 8D(2)(iii). Disallowance u/s 14A r.w.r. 8D from the book profit u/s 115JB - HELD THAT:- As pointed out by the Ld. counsel, this issue is covered in favour of the assessee by the judgment of the Hon ble jurisdictional High Court and the decision of the Special Bench of the Delhi Tribunal in Vireet Investments Pvt [ 2017 (6) TMI 1124 - ITAT DELHI] . Since, the findings of the Ld. CIT (A) are in accordance with the ratio laid down by the Hon ble Bombay High Court and the decision of the Special Bench, we do not find any reason to interfere with the same. Hence, we dismiss this ground of appeal of the revenue. Allowing loss claim on sale of Mutual Funds and equity shares on the basis of revised statements by CIT-A - HELD THAT:- CIT (A) has decided this issue in favour of the assessee following the ratio laid down by the Hon ble Bombay High Court in the case of M/s Pruthvi Brokers and shareholder Pvt. Ltd . [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] - So far as the judgment of the Hon ble Supreme Court in the case of Goetze (India) [ 2006 (3) TMI 75 - SUPREME COURT] is concerned the issue involved in the said case was the power of assessing authority an not the powers of appellate authorities. Since the decision of the Ld. CIT(A) is in accordance with the judgment of the Hon ble jurisdictional High Court, we do not find any infirmity in the order passed by the Ld. CIT (A) to interfere with. 2021 (1) TMI 44 Applying the percentage criteria for disallowing the provision for expenditure - HELD THAT:- As pursued material on record including the decision of the co-ordinate bench of the Tribunal in [ 2019 (9) TMI 1134 - ITAT MUMBAI] A.Y. 2005-06 ors. There is no dispute between the parties with regard to the basic facts relating to the disputed addition. Since the issue before us is identical to one as decided by the co-ordinate bench of the Tribunal as stated hereinabove, we are therefore inclined to hold that part disallowance sustained by the Ld. CIT(A) is also to be deleted. Accordingly, this ground of appeal is allowed. Disallowance of renovation expenses for office premises - HELD THAT:- As decided in own case [ 2019 (9) TMI 1134 - ITAT MUMBAI] the nature of expenditure incurred by the assessee in respect of the leased premises and more particularly the premises at Hyderabad and Bangalore are not of the nature of constructing new structure, extension or improvement of building. Therefore, Explanation 1 to section 32(1) of the Act would not be applicable to the facts of the present case.the nature of expenditure incurred by the assessee with reference to facts of each case would decide whether it is capital or revenue in nature. In the facts of the present case, after examining the details of expenditure incurred by the assessee, we are of the view that it is of revenue nature, hence, has to be allowed. Addition on account of change in revenue recognition policy - HELD THAT:- As decided in own case [ 2019 (9) TMI 1134 - ITAT MUMBAI] issue requires further examination by the Assessing Officer as the assessee needs to establish with cogent material and evidence that the change in revenue recognition policy is for bona fide reasons and necessary for carrying on its business activities in a more efficient manner - assessee has to establish that the change in revenue recognition policy is in conformity with the provisions contained under section 145(1) and (2). We are inclined to restore the issue to the Assessing Officer for de novo adjudication. Addition of dividend distribution tax - HELD THAT:- CIT(A) has given a direction to the AO to verify the computation of dividend distribution tax after verifying the claim of the assessee from records. It appears that AO has not complied with the direction. Therefore we direct the AO to verify the claim of the assessee and compute the dividend distribution tax payable applying the correct rate of surcharge thereon. The ground is allowed for statistical purpose. Short credit of TDS deducted at source - HELD THAT:- We are of the considered view that the issue is required to be examined at the level of AO. Accordingly, the same is restored to the file of the AO with the direction to verify the records of the assessee and take a decision as per the facts and law. 2021 (1) TMI 43 Deduction u/s 80P(2)(d) - interest income derived from deposits with cooperative bank - assessee is a Cooperative Housing Society - Diversified views - HELD THAT:- No judgement from Hon'ble Jurisdictional High court on the issue of eligibility of deduction under section 80P(2)(d) of the Act on interest income derived by a Co-operative Society from a Cooperative Bank has been brought to our notice. The Hon'ble Bombay High Court in the case of K. Subramanian Vs. Siemens India Ltd. [ 1983 (4) TMI 3 - BOMBAY HIGH COURT] has held that when two conflicting decisions of non-jurisdictional High Courts are available, the view that favours the assessee is to be preferred. Accordingly, following the decision of Totagars Co-operative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and the decision in the case of Hon'ble Gujarat High Court in the case of Vankar Sahakari Sangh . [ 2016 (7) TMI 1217 - GUJARAT HIGH COURT] the deduction claimed by the assessee under section 80P(2)(d) of the Act in respect interest derived from investments with the cooperative banks is allowed. Appeal of the assessee is allowed. 2021 (1) TMI 42 Addition made u/s.56(2)(vii) - difference in value between the value adopted by the stamp duty authority on the date of registration of the flat (i.e in F.Y. 2013.14) and the actual consideration paid by the assessee - Assessee pleaded that the addition was made by the ld. AO for want of sufficient documentary evidences from the side of the builder - assessee pleaded that since the provision to purchase the flats being flat Nos.1101 1102 were made way back in the year 2007-08 respectively, for which advance payment was indeed made by the assessee by way of booking advance, which is also supported by a stamp receipt from the side of the builder together with letter of allotment given by the builder to the assessee - HELD THAT:- As decided in the case of Bajrang Lal Naredi 2020 (1) TMI 1359 - ITAT, RANCHI find merit in such plea advanced on behalf of the assessee. It is not in dispute that purchase transactions of immovable property were carried out in FY 2011-12 for which full consideration was also parted with the seller. Mere registration at later date would not cover a transaction already executed in the earlier years and substantial obligations have already been discharged and a substantive right has accrued to the assessee therefrom. The pre-amended provisions will thus apply and therefore the Revenue is debarred to cover the transactions where inadequacy in purchase consideration is alleged. We thus find merit in the issue raised on behalf of the assessee. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the additions made under s. 56(2)(vii)(b) of the Act and restore the position claimed by the assessee. No hesitation to hold that provisions of Section 56(2)(vii)(b) of the Act could not be made applicable in the hands of the assessee for the assessment year under appeal in the peculiar facts and circumstances of the case before us. Accordingly, the ground Nos. 1 2 raised by the assessee are allowed. 2021 (1) TMI 41 Estimation of income - Bogus purchases - CIT-A restricted addition to 12.5% as against 100% addition made by the Assessing Officer - HELD THAT:- As decided in SIMIT P SHETH [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] when the total sale is accepted by the Assessing Officer then entire purchases cannot be added to the income of the assessee. Therefore, only the profit element embedded in such purchases could be added to the income of the assessee. Since, the Ld. CIT (A) has restricted the addition to 12.5% by following the ratio laid down by the Hon ble Gujarat High Court discussed above, we do not find any reason to interfere with the findings of the Ld. CIT (A). In our considered view, the addition of 12.5% is reasonable to meet the ends of justice. Penalty u/s 271 (1) (c) - HELD THAT:- CIT (A) has correctly deleted the penalty levied u/s 271 (1) (c) of the Act, by following the ratio laid down by the Hon ble Allahabad High Court in the case of Nareshchand Agarwal [ 2013 (6) TMI 68 - ALLAHABAD HIGH COURT] wherein the Hon ble Court has held that where the addition is made on estimate basis, penalty u/s 271 (1) (c) cannot be imposed. - Decided in favour of assessee. 2021 (1) TMI 40 Deduction u/s 80IB - denying deduction u/s 80 IB for non filing of the audit report in electronic manner in time (on or before the due date of filing of the return of income) - HELD THAT:- As perused the communication of the proposed adjustment u/s 143 (1) (a) of the income tax act issued by the central processing centre, Bangalore on 24/9/2018 wherein it is intimated to assessee that there is an incorrect claim Under Chapter VIA of the income tax act of ₹ 271,654 for non filing of the audit report u/s 80 IB in form number 10 CCB within due date of the filing of the return of income. The facts clearly shows that the due date of filing of the return of income was 7/11/2017 whereas the assessee filed his return of income on 6 November 2017 however according to his own version he uploaded that form on 6/11/2017 the income tax return and all other attachments however found number 10CCB was accepted by the assessee only on 12 December 2017 which is much beyond the due date of the filing of the return of income i.e. 7/11/2017. Therefore it is apparent that as on the due date of filing of the return assessee did not file audit report in form number 10 CCB for claiming deduction u/s 80 IB (11B), therefore we do not find any infirmity in denying deduction to the assessee. Assessee is also aware about the same because it is filed the audit report on 6/11/2017 but did not care to accept the same till 12 December 2017. Therefore even without any intimation the assessee approved the form 10 CCB uploaded by the accountant on 6/11/2017 on 12th/12/2017. Therefore it is not the correct explanation of the assessee that assessee was unaware about the procedure of filing of the audit report. According to us, after introduction of the electronic filing of the return of income as well as all other documents, there is no debate available that even if the audit report is filed before the assessment is made, same is acceptable and the deduction cannot be denied to the assessee. When selection of the cases for further scrutiny, processing of the return of income, claim of the refunds of the assessee or all determined based on the return filed by the assessee and when the provisions of the law and the relevant rules strictly provides that all necessary documents must be filed and approved along with the return of income or prior to that, subsequent filing of any document cannot be considered for processing of the return and intimation u/s 143 (1A) of the act. No infirmity either in the procedure or in passing of intimation u/s 143 (1A) of the act as well as in denying deduction u/s 80 IB of the act to the assessee for non filing of the audit report in electronic manner in time (on or before the due date of filing of the return of income) as prescribed Under income tax rules and having the mandate of the provisions of Section 80 IB(11B)(iv) - Decided against assessee. 2021 (1) TMI 39 Block assessment - Applicability of Chapter XIV B - addition to the peak of loans - AO treating the transactions disclosed in the regular books of accounts as covered by the block assessment by making additions in respect of the transactions as undisclosed income of the appellant under the provisions of Chapter XIV B - HELD THAT:- No material were collected in the course of search so as to show that the loans accounted by the assessee in his books of accounts were otherwise unexplained or bogus. In the course of block assessment proceedings, in spite of all his legal arguments, the assessee has filed the details to prove the genuineness of the loans. Whether those explanations are acceptable or not is a different issue. In the light of those explanations and details furnished by the assessee, it is not possible to come to an irrefutable conclusion as far as the impugned block assessment is concerned that the loans amounts were unexplained. Therefore, it is to be seen that no material were available in the hands of the assessing authority so as to discredit the earlier disclosure already made by the assessee. It is not necessary to repeat the plethora of case laws which consistently held that what has been already disclosed cannot be a matter of block assessment. The Assessing Officer cannot indulge in roving enquires regarding the issue that has already been disclosed in the books of accounts and placed before the departments. All such enquiries and investigations should be made by the Assessing Officer in a proceeding known to the Income Tax Law other than the block assessment proceedings. Therefore, we are inclined to accept to the substantive ground raised by the assessee on the question of law that whether the loans treated by the Assessing Officer as unexplained could be treated by the Assessing Officer as unexplained could be treated as forming part of the undisclosed income. We hold that the loan amount cannot be made a subject matter of a block assessment on the basis of the review made by the assessing authority. See RAKESH N. DUTT VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS [ 2007 (10) TMI 285 - BOMBAY HIGH COURT] - Appeal filed by the assessee is allowed. 2021 (1) TMI 38 Claim of Deduction from Rental Income u/s 23(1)(b) - Addition towards BPT lease [Bombay Port Trust ] rent while computing the income under the head Income from House Property - assessee firm has claimed the lease rent paid as deduction from the rental income/licence fee received from its tenants - whether CIT(A) erred in upholding the annual value of the property determined by the A.O without considering the lease rent paid by the Appellant firm to BPT? - HELD THAT:- Assessee firm has to pay the lease rent of building to its owner Bombay Port Trust (BPT) and also the assessee has entered into the leave and license agreement with tenants and receiving the rent. Referring to the factual aspects and provisions of Section 23(1)(b) of the Act are of the view that the assessee is entitled for claim of deduction of lease rent paid to the Bombay Port Trust(BPT) against the Leave and License fee/rent received from the tenants in determining the annual value of the property. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal of the Assessee. 2021 (1) TMI 37 Disallowing 50% of payments as consultancy fees - HELD THAT:- As decided in favour of assessee [ 2020 (8) TMI 833 - ITAT MUMBAI ] applying the principle of consistency as has been held by the Hon ble Supreme Court in the case of Radhasaomi Satsang [ 1991 (11) TMI 2 - SUPREME COURT ] , in allowing such claim to the assessee in earlier as well as in subsequent years, we hold that there is absolutely no case made out by the revenue for disallowing this sum during the year under appeal. 2021 (1) TMI 36 Order u/s.154 - AO has disallowed the entire prior paid expenditure - disallowance was made in the first rectification order dated 19.02.2015 wherein the Assessing Officer has made disallowance of prior paid expenditure - Two rectification applications filed - HELD THAT:- In so far as second rectification order dated 28.07.2015, no disallowance has been made; and in fact whatever relief was sought by the assessee in its application has been allowed. Ld. counsel has also informed that assessee has even filed second set of rectification application before the Assessing Officer against order dated 09.02.2015, wherein it has challenged the entire disallowance of prior period expenditure which has not been disposed off; and secondly, it has also been prayed before us that liberty should be given to file the appeal before the first appellate authority against the first rectification order passed u/s.154 dated 19.02.2015. These pleas have been taken only by way of alternative contention, otherwise the main contention of the ld. counsel is that the first rectification order has been merged with the second rectification order, and therefore, all these issues arising in the first rectification order are open and can be challenged by the assessee. However, we are unable to accept this contention of the ld. counsel, because the right course of remedy would have been that assessee should have filed the appeal before the appellate forum against the first rectification order dated 19.02.2015 and/ or had filed an application for rectification against the said order. Since right to appeal is a substantial right and if any disallowance has been made which otherwise is not sustainable in law and on facts, then such a legal remedy is always available to the assessee in the interest of substantial justice. We are granting liberty to the assessee to file appeal before the first appellate authority against the first rectification order dated 19.02.2015 along with petition for condonation of delay where it can challenge such disallowance in the said appeal. Assessing Officer is also directed to dispose of the rectification application if the assessee has filed such an application against first rectification order dated 19.02.2015 expeditiously. 2021 (1) TMI 35 Difference of receipts as per Form 26AS - Addition of income - HELD THAT:- When the ld. AO had examined the particulars filed by the assessee and was satisfied that the addition is not warranted because the amount stands reconciled then the Ld. CIT(A) ought to have granted relief to that extent unless there is a contrary finding. But, under the pretext that the assessee has not raised the ground before him the Ld. CIT(A) has unjustly confirmed the entire addition. Therefore, we hereby direct the Ld. AO to delete the addition made on this count and further we remit the matter back to the file of Ld. AO with respect to the balance unreconciled amount thereby giving the assessee one more opportunity to reconcile the difference before the Ld. AO. It is ordered accordingly. Addition made towards Salaries and other benefits to the employees, Managing Director and Vice President of the assessee company - Since the assessee did not furnish the details of the salaries paid to the individual employees such as the name, designation, PAN, amount of salary paid to each individual, details of TDS made thereon, the ld. AO opined that 10% of the aggregate amount should be disallowed on estimate basis - CIT(A) enhanced the disallowance from 10% to 50% - HELD THAT:- It is a relevant fact that the entire business operation of the assessee company has been technically operated and controlled by the Professionally Qualified Managing Director and Vice President of the assessee company. Therefore, we are of the considered view that the salary paid to the Managing Direction and the Vice President is commensurate with the professional qualification, experience and job executed by them on behalf of the assessee Company. Further, the assessee has furnished all the particulars of the salary and other benefits paid to the other employees of the assessee company which was verified and accepted by the Ld. AO. The Ld. CIT(A) could also not find any fault with the same. Therefore, We are of the view that the expenditure incurred by the assessee Company is justified and hence hereby direct the ld. AO to delete the entire addition made on this count. Addition being 10% of the expenditure claimed towards Travelling Conveyance, Internet Telephone charges, office maintenance, Petrol Diesel expenditure because the assessee could not produce proper bills and vouchers - HELD THAT:- AO observed that bills vouchers were not available only with respect to Petrol Diesel expenses amounting to ₹ 1,32,692/-. However, it appears that the Ld. CIT(A) failed to adjudicate the issue. Since, the issue is a petty issue, We are of the considered view only to the extent of 1/3rd of the expenditure incurred towards petrol diesel is required to be disallowed keeping in view of the facts and circumstances of the case. Difference in cash book and Bank Statement - AO added the difference to the income of the assessee - HELD THAT:- CIT(A) failed to adjudicate the issue. Since the amount of ₹ 1,33,132/- is reconciled and verified by the Ld. AO, We are of the considered view that the addition is not sustainable. Therefore, in the interest of justice, We hereby direct the Ld. AO to delete the addition. 2021 (1) TMI 34 Nature of land sold - capital asset or agricultural land - HELD THAT:- We find that there was no representation of assessee before the assessing authority and before the CIT(A), the assessee pleaded that the land sold is agricultural land. However, the assessee has not produced any evidence before the CIT(A) to prove the exact nature of the agricultural land and also has not raised any objection as to why the sale consideration should not be adopted at ₹ 1,04,63,238/-. Since the assessee pleaded that proper opportunity was not given to the assessee and only in the interest of justice to give an opportunity to the assessee to furnish all the relevant material in support of her claim, we deem it fit and proper to set aside the order of the CIT(A) and remand the issue to the file of AO for Denovo consideration in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing and shall also be permitted to furnish relevant material to prove her case. Appeal of assessee is treated as allowed for statistical purposes. 2021 (1) TMI 33 Nature of amount received after quitting the job - consultancy service or salary- difference in income disclosed in his return and form 26AS - expenditure incurred by the assessee towards earning income from providing consultancy services - HELD THAT:- It is not in dispute that the amount received by the assessee of ₹ 35,31,392/- is from consultancy services. For rendering such services, it is obvious that the assessee would have definitely incurred expenditure. Therefore it would be appropriate and just to estimate the expenditure and thereafter determine the taxable income of the assessee. Further taking cue from the provisions of section 44ADA of the Act (though it was inserted by finance Act 2016 w.e.f. 1/4/2017). In the peculiar circumstances in the case of the assessee 50% of the gross consultancy receipts should be treated as the expenditure incurred by the assessee for earning income from consultancy services. Accordingly, we hereby direct the Ld. AO to grant deduction of ₹ 17,65,696/- ( of ₹ 35,31,392/-) towards the expenditure incurred by the assessee towards earning income from providing consultancy services while computing the income of the assessee under the head income from profession and treat the balance amount of ₹ 40,42,376/- as income under the head salary . It is ordered accordingly. Service Tax 2021 (1) TMI 32 Rejection of declaration under Sabka Vishwas [Legacy Dispute Resolution] Scheme, 2019 - rejection of declaration on the ground of quantification of the liability before the prescribed date - HELD THAT:- It is seen from the declaration filed by the petitioner in Form SVLDRS-1 that the petitioner has indicated the liability/duty is in a sum of ₹ 95,94,517/-. This figure comes about after scrutiny of records and in terms of the Show Cause Notice dated 9.12.2019. If there was quantification in terms of the Final Reminder as now asserted by the petitioner, in Form in SVLDRS-1 the petitioner should have mentioned in the relevant column the amount indicated in the Final Reminder dated 15.11.2018. The fact that the petitioner mentions the Tax liability/ Demand in Form SVLDRS-1 as ₹ 95,94,517/-, an amount which is quantified in terms of the Show Cause Notice dated 9.12.2019, shows that even according to the petitioner there was no quantification as of the prescribed date viz., 30.06.2019. This Court is not persuaded to conclude that there is any error in the impugned order rejecting the petitioner s form in Form SVLDRS-1 - Petition dismissed. Indian Laws 2021 (1) TMI 31 Dishonor of Cheque - Section 138 of Negotiable Instruments Act, 1881 - whether a direction for deposit of a part compensation before the Appellate Court is a discretion or as to whether it is in the nature of a mandate, the provisions of the Section 148 of the Act (as amended in the year 2018) need to be borne in mind? - HELD THAT:- Section 374 Cr.P.C. does not prescribe any condition for admission of an appeal. In other words, the provisions of the statute which vests a convict with a valuable right to challenge his conviction are not circumscribed by any conditions. Nor does any provision of the Negotiable Instruments Act, 1881 refer to any pre-condition for availing a valuable right of first appeal. Section 148 of the Act just vests the Appellate Court with the power to direct the appellant to deposit an amount not less than 20% of the compensation amount but under no circumstances the same can be interpreted to be a condition pre-requisite for availing the right of appeal. Imposition of any condition at the time of suspending of sentence may be a different matter and the trial Court may in its wisdom, impose such a condition failing which the order suspending sentence may be vacated. In other words, his bail during the pendency of appeal may be cancelled upon failure of the appellant to comply with the direction of deposit of such amount as may have been directed by the Appellate Court. The right to appeal against conviction is an invaluable statutory right vested upon a convict by Cr.P.C. which cannot be allowed to be defeated by imposing any condition for availing such right. In fact, while giving a wider connotation to Article 21 of Constitution of India, it can even be said that depriving a convict of his right to appeal by imposing any pre-requisite for availing his statutory right to challenge conviction in a higher Court would amount to depriving his liberty without adhering to the established procedure of law - Even though the Negotiable Instruments Act, 1881 is a special Act and could override provisions of Cr.P.C., but there is no such specific provision in the Act which could be interpreted to mean that availing of right to appeal by a person convicted for an offence under the Act, has been made subject to some conditions. The submission, thus, made in this regard on behalf of the petitioner carries weight and deserves to be accepted. The condition made in the impugned orders wherein the admission of appeal has been made subject to deposit of 20% of the compensation amount is set aside and it is ordered that the appeals shall stand admitted before the lower Appellate Court. The petitioners are, however, directed to deposit an amount equivalent to 20% of the amount of compensation awarded by the trial Court within 60 days from today - In case the aforesaid amount is deposited within 60 days from today, the bail already granted vide order dated 28.2.2020 by lower Appellate Court shall continue subject to any such fresh conditions as may be imposed by lower Appellate Court. Petition accepted. 2021 (1) TMI 30 Dishonor of Cheque - acquittal of the accused - Section 138 of the NI Act - main grounds urged in the respective appeals are that the trial Judge has committed an error in acquitting the accused and not properly appreciated the evidence in a proper perspective - HELD THAT:- Having perused the evidence available on record issuance of cheque is not in dispute and also notice has been given to the accused is also not in dispute. There is no dispute with regard to the fact that those notices are served on him and notice was served on him and he did not choose to give any reply. When the cheques are admitted and not given any reply, the Judgment of Rangappa's case is aptly applicable to the case on hand. No doubt, on perusal of the agreement, there is a recital to enforce the agreement for specific performance and also to claim the damages. But, in the case on hand, the claim of the complainant is that the contract did not take place between the parties. Hence, the accused has issued the cheque for return of the amount what has been received. The very conclusion of the Trial Court is that the complainant ought to have approached the Civil Court is erroneous and there is a clause in the agreement itself in the event of failure on the part of the first party to perform this agreement he shall refund the advance amount. The other reason given by the Trial Court is that the cheques are issued towards security is also not based on any record - First of all, the accused has not given any reply to the notice and also he did not dispute the issuance of notice. When such being the case, it is mandate on the part of the Trial Court to draw the presumption under Section 139 of the NI Act. Apart from that, the accused counsel himself suggested that the agreement was cancelled. When the same was cancelled, question of enforcing the agreement does not arise. Having perused the reasoning of the The Trial Court that the same is a civil remedy and cheques might have issued for security is erroneous and the very approach of the Trial Court is not in consonance with the provisions of Section 138 of the NI Act and so also not under Section 139 of the NI Act and not drawn presumption. The Trial judge has committed an error in paragraph No.10 in coming to the conclusion that the complainant has not produced documents to show that there was talks between himself and accused pertaining to calculation of damages after alleged breach of contract for which accused had issued the cheque - the Trial Judge proceeded to pass an acquittal order not based on the presumption as well as on the settled principles of law and the material available on record. In the case on hand, the accused has not rebutted the case of the complainant and there is no effective cross- examination and nothing is elicited from the mouth of P.W.1 with regard to the transaction and apart from that the accused himself has admitted the MOU between the complainant and accused. When such being the case, the Trial Judge ought not to have acquitted the accused - impugned Judgments of acquittal are hereby set aside - accused is convicted for the offence punishable under Section 138 of the NI Act - Appeal allowed.
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