Income Tax Act - Unexplained cash credit u/s 68 - disallowance of proportionate interest - The assessee is a private limited company and engaged in business of processing of man-made fabrics (MMF) on job work basis – whether CIT(A) is justified in deleting the addition made by the AO on account of unexplained cash credit u/s 68 of the Act – the disallowance of proportionate interest on account of interest free advances made to a sister concern - HELD - during the appellate proceedings CIT(A) has observed that share applicant company is holding more than 50% of shares of Assessee-company - CIT(A) held that the assessee has discharged its onus by furnishing contra confirmation, source of funds and the nexus between the share applicant and the company – In order to examine three ingredients of section 68, namely identity, creditworthiness and genuineness, the assessee need to submit basic documents before the AO such as bank statement, return of income, PAN and ROC details etc of the share applicant company as well as assessee-company - In addition to this, the assessee should explain, with help of these evidences about the genuineness, identity and creditworthiness, of the share applicant-company, which the assessee has failed to do so – Therefore, the three ingredients of section 68 have not been satisfied by the assessee - one more opportunity should be given to the assessee to furnish basic documents as required by AO - the order of CIT(A) is set aside and matter remitted to the file of the AO - As regards the disallowance of proportionate interest on account of interest free advances made to a sister concern, it is settled principle of law that when the assessee has adequate interest free funds to make interest free advances to sister concerns, then no disallowance of interest expenses can be made – the assessee was having sufficient interest free funds available with him to lend interest free advances, the CIT(A) was justified in deleting disallowance of interest in relation to such interest free advances – appeal is partly allowed
Income Tax Act - Section 63 – whether the assessee is entitled to the deprecation at the rate of 60% - assessee is a company engaged in the business of manufacturing of fertilizer chemicals and paints - whether the depreciation is allowable to the assessee on software ERP SAP at the rate of 60% as claimed by the assessee considering the same as computer or @ 25% as claimed by the AO considering the software as intangible asset – HELD – Part B of New Appendix I is a general entry whereas Entry 5 of Part A of New Appendix I is a specific entry read with Note 7 - if a particular article would fall within the description by the force of the words used it is impermissible to ignore the specific entry in contra distinction with the general entry - software license acquired by the assessee was in nature of application software and is eligible for deprecation at the rate of 60% - AO is directed to delete the disallowance of deprecation on computer software - appeal is allowed
Income Tax Act –Section 143(2), 147, 148 - reopening of assessment – grounds raised by assessee that reopening of assessment is illegal – assessee was not providing opportunity of being heard before transfer of case - notice u/s 143(2) was issued before filing of return of income in response to the notice u/s 148 - AO failed in determining actual date of sale of shares for working of capital gains - HELD – with regard to reopening of the assessment - DR supported the orders of the authorities below and submitted that the assessment was reopened on the basis of the information available with the AO regarding concealment of income by the assessee - He submitted that reopening is justified under the facts and circumstances of the present case - The assessee has not provided any supporting evidence in respect of the ground taken by the assessee - Therefore, in the absence of any supporting evidence, there is no reason to interfere in the finding of learned CIT(A) - Ground of appeal is dismissed - Regarding not providing opportunity of being heard, the assessee has not filed any evidence in support of the allegation that he was not given opportunity before transfer of jurisdiction u/s 127 of the Act - In the absence of such evidence there is no merit in the ground raised by the assessee - Accordingly, ground is dismissed - Against issuance of notice u/s 143(2) before filing of return of income in response to the notice u/s 148, the AO in the assessment order has categorically stated that AR of the assessee attended the assessment proceedings and filed copy of ITR and thereafter statutory notice u/s 143(2) of the Act was issued after filing of return against notice U/s 148 - Hence, this ground is devoid of any merit and stands rejected -With regard to the ground that the AO failed in determining actual date of sale of shares for working of capital gains, finding of fact by the learned CIT(A) is not controverted by the assessee by placing any adverse material on record - Therefore, this ground of the assessee is rejected - assessee’s appeal is dismissed
Income Tax Act – Addition under section 69B of the Act – AO entertained the view that the assessee had purchased land below the circle rate - the Assessing Officer referred the issue of valuation to the Valuation Officer - DVO estimated the value of the land less than the stamp valuation less than 10% of the value adopted by the Stamp Valuation Authority - AO proceeded to treat the difference as unexplained expenditure u/s 69C of the Act – assessee submitted that the Assessing Officer was not empowered to refer the matter to DVO, where the assessment was being made u/s 69C of the Act – validity of action of the CIT(Appeals) to treat the reference to DVO u/s 142A for the purpose of Section 69B – HELD - reference u/s 142A was not made regarding ascertaining the correct market value of the investment in property but it was in fact for the purpose of ascertaining expenditure which the assessee made on the purchases – there is merit in the contention of the assessee that the reference to DVO u/s 142A for the purpose of Section 69C is not valid – further, ld. CIT (Appeals) could not have treated the addition made u/s 69C as the addition made u/s 69B and the same is contrary to the spirit of the Act - in treating the addition made by the Assessing Officer u/s 69C as have been made u/s 69B is contrary to the law laid down by the Hon’ble Jurisdictional High Court - the impugned order is therefore set aside - The addition made u/s 69C on the basis of the report of the DVO by the Assessing Officer is deleted - assessee appeal is allowed
Income Tax Act - India and Ireland DTAA - liability to deduct tax on payments made for online advertisement services to foreign enterprise having no PE in India - Addition u/s 68 – Addition on account of non-deduction of TDS – Revenue appeal against deletion of additions on account of trade creditors outstanding for payment and on account of non-deduction of TDS qua payment to Facebook Ireland Inc. of marketing expenses – HELD - the creditors could not be treated as unexplained where payments had been made by account payee cheque which were duly debited to the assessee's bank account, and where the purchases and sales had been accepted by the department, including the purchases made on credit - the addition made of amount which includes provisions for expenses and ascertained liabilities in addition to trade creditors, cannot be sustained. Accordingly, the revenue ground of appeal no. 1 is dismissed - With regard to the addition on account of non-deduction of TDS, after analyzing the claim and provisions of section 9 & 195 of the Act, the Commissioner held that the DTAA between India and Ireland provides that the profits of the foreign enterprise shall be taxable only if it had carried on business in India through a permanent establishment situated therein – the Facebook Ireland Inc. has certified that it has no permanent establishment in India and is a resident of Ireland for taxation purposes - in the absence of any permanent establishment of the deductor, the deductee is not liable to deduct the tax at source from the payments made for online advertisement services - the payments made to it for advertisement services were not chargeable to tax in India in view of the Article 7 of DTAA between India and Ireland - there was no liability of tax on payments made for advertising services to FII – the ground no. 2 of Revenue appeal stands dismissed
Income Tax Act, 1961 - section 143(1) - assessee being a trust registered under section 12A of the Act - whether the AO and CIT(A) have erred in not granting the exemption under section 11(2) of the Act despite satisfying the conditions by the assessee while processing the return of the income under section 143(1) of the Act – HELD – the deduction claimed by the assessee under section 11(2) of the Act was denied merely on the ground that the assessee has not filed form No.10 online along with return - When it is undisputed fact on record that the assessee has filed form No.10 physically before the AO, which has been duly acknowledged by the AO, there is no ground to deny the deductions otherwise available to the assessee under the Act while processing the return of income under section 143(1) of the Act - as per Rule 17 of Income Tax Rules, for the year under assessment, form No.10 was only required to be filed manually not online - When the assessee has submitted form No.10 within time in compliance to Rule 17, the AO has erred in denying the benefits claimed by the assessee under section 11(2) of the Act – further, the CIT(A) has also erred in dismissing the appeal filed by the assessee challenging the order under section 154 of the Act passed by the AO - rectification application filed by the assessee before the AO and the appeal filed before the Ld. CIT(A) were liable to be allowed - AO is directed to rectify the order by allowing the claim admissible to the assessee under section 11(2) of the Act after due verification of the facts claimed by the assessee - appeal filed by the assessee is allowed
Income Tax Act – Section271(1)(c), 143(3) – condonation of delay in filing appeal - CIT(A) erred in sustaining the addition u/s. 143(3) of the Act and penalty levied u/s. 271(1)(c) of the Act – there was a delay of 1118 days in filing the appeal - HELD - due to some reasons appeal papers along with the payment challan were kept in plastic bag and forgotten by the assessee to deliver the same in the office of the Chartered Accountants for onward filing on the next day - Assessee came to know only when the AO issued arrear notice and then it realized that the appeal for this AY was not filed, appeal was filed before the CIT(A) with the inordinate delay - there was intention of the assessee to file the appeal, however, due to the negligence it could not file the appeal in time, even though it has paid the respective fees diligently - Supreme Court while allowing the condonation of delay of 1754 days had observed that unless fact is not refuted by the respondent the question of disbelieving the stand taken by the Applicant cannot arise thus Hon’ble High Court should have shown leniency to the appellant(s) by condoning the delay in filing the concerned appeal - by following the same decision accepting the reasons recorded in affidavit as reasonable cause to condone the above said delay - Therefore, issue is remitted back to the file of the CIT(A) to decide the issue on merit - appeal filed by the assessee is allowed by remand
Income Tax Act, 1961 - Section 206AA - Whether the Tribunal is right in holding that the TDS provisions have to be read along with DTAA for computing the tax liability and therefore when the recipient is eligible for benefit of DTAA then there is no scope for deduction of tax @ 20% under Section 206AA of the Act – HELD - the assessee has made payment towards technical services to various recipients in different countries as per DTAA with different countries - In the case of Danisco, the Delhi High Court has held that Section 206AA cannot be understood to override the charging Sections 4 and 5 of the Act - It was further held that the provision in Section 206-AA has to be read down to mean that where the deductee i.e., the overseas resident business concern conducts its operation from a territory, whose Government has entered into a DTAA with India, the rate of taxation would be as dictated by the provisions of the treaty - the maximum deduction shall not exceed 10% which the assessee has deducted. Any other interpretation to permit the taxing authority to raise a demand beyond 10% would be incongruous – Revenue contention that if the law laid down in Danisco is to be applied, Section 206-AA of the Act would be rendered redundant, is untenable in the facts of this case because there exists DTAA and tax deduction has been made at source as mandated by the said agreement - question of law is answered in favour of the assessee and against the revenue – revenue appeal is dismissed
Income Tax Act, 1961 – Sections 37(1) and 43(5) – Hedging transactions – Deduction of loss – Respondent/assessee is engaged in business of providing engineering consultancy services – Assessee filed its income tax return for relevant assessment year – Assessee claimed a sum as loss against Forward Contract entered into to hedge risk against foreign exchange fluctuations to cover exports and imports – Assessing Officer disallowed loss claimed by assessee by holding that loss on Forward Contracts was a speculative loss and was liable to be disallowed in terms of Central Board of Direct Taxes Instruction no.3/2010 – CIT(A) accepted assessee’s appeal and deleted said disallowance – Tribunal affirmed decision of CIT(A) – Whether Tribunal was right in allowing foreign exchange fluctuations loss on unmatured, matured and cancelled forward contracts – HELD– There is no dispute that Forward Contracts were entered into by assessee to hedge against foreign exchange fluctuations resulting from inflows/outflows in respect of underlying contracts for provisions of consultancy and project management – Assessee has reinstated its debits and credits from underlying transactions on value of foreign exchange on due date – Corresponding losses/gains under Forward Contracts were also required to be accounted for to arrive at real profits – Forward Contracts are hedging transactions, thus, fall within exceptions of proviso (a) to Section 43(5) of the Act – Loss on account of Forward Cover Purchase Contracts for foreign exchange is allowable as a deduction under Section 37(1) of the Act from income chargeable to tax – CBDT Instruction no.3/2010 was not applicable, as transaction could not be considered as a speculative transaction – CIT(A) as well as Tribunal have not erred in holding that loss, on account of Forward Contracts, cannot be considered as speculative – Impugned order passed by Tribunal affirmed – Appeal is dismissed
Income Tax Act, 1961 – Sections 139(1), 143(3), 147, 148 and 148A – Escaped assessment – Initiation of reassessment proceedings – Petitioner/company is engaged in execution of civil construction works – Petitioner filed return of income tax under Section 139(1) of the Act for AY 2018-2019 – Assessing Officer completed assessment under Section 143(3) of the Act by determining total income as per return – On basis of information which suggests that income chargeable to tax for AY 2018-2019 has escaped assessment within meaning of Section 147 of the Act, AO reopened assessment and passed order under Section 148A of the Act and also issued notice under Section 148 of the Act – Single Judge dismissed writ petition filed by Petitioner challenging order passed by AO under Section 148-A of the Act and notice issued under Section 148 of the Act – Petitioner filed appeal against order passed by Single Judge dismissing writ petition – HELD – Relevant information was clearly indicated in SCN under Section 148A(b) of the Act to effect that Panveen Trading was found indulging in generating and selling tax invoices to Petitioner/Appellant without physical supply of underlying goods/services for passing irregular Input Tax Credit – Petitioner was a beneficiary of transaction in form of bogus purchase from Panveer Trading who are involved in providing of accommodation entries in form of bogus sale/purchase for commission – In reply to show cause notice issued under Section 148A(b) of the Act, no material has been produced by Petitioner to counter the allegations – There is, prima facie, some material on basis of which Department could reopen the case – Petitioner had not even made an attempt to assert that material facts relied on in SCN is erroneous – No interference is called for with order of Single Judge dismissing writ petition – Appeal is dismissed
Income Tax Act, 1961 – Section 115JA - Deemed income relating to certain companies - Provision for doubtful advance - Commissioner of Income Tax, directed AO to add back the provision for doubtful advance to the book profits of the appellant under Section 115 JA – whether Tribunal rightly relied on Supreme Court decision in CIT vs. HCL Comnet systems and Services Ltd. to hold that the provisions of bad and doubtful debt cannot be added while computing book profit under Section 115JA of the Income Tax Act, 1961, especially in view of the retrospective amendment to the explanation to Section 115 JA of the Act, with effect from 01.04.1998 substituted by Finance Act, No.2, 2009 – HELD - Clause (g) to sub-section (2) to Section 115JA of the Act was inserted by Finance (No.2) Act, 2009, with effect from 01.04.1998 - The above amendment was not considered by the Hon’ble Supreme Court when it gave its verdict in Commissioner of Income Tax vs. HCL Comnet Systems & Services Ltd. for the Assessment Year 1997-98 - The above amendment vide Finance (No.2) Act, 2009 was not relevant for the Assessment year 1997-1998 which fell for consideration before Apex Court. The above decision is therefore not relevant - The Tribunal ought to have examined the issue in the light of the inserted Clause (g) to Explanation Sub-Section 2 to Section 115JA of the Act with effect from 1.4.1998 vide Finance (No.2) Act, 2009 which was relevant for the present case – matter remitted back to the Tribunal to re-examine the issue fresh in the light of the above amendment brought to the definition of” Book Profit” by Finance (No.2) Act, 2009 with effect from 01.04.1998 - the impugned order is set aside and the Tax Case Appeal stands disposed of
Income Tax Act, 1961 - Section 281B – Petitioner challenge provisional attachment of fixed deposits account – Attachment of account on the ground of likely addition to be made in estimated additional income of the assessee – HELD - except for stating that there is likely addition of the amount mentioned in the order, no reasons, much less valid or cogent reasons are assigned by the 1st respondent as to how and why he has formed an opinion that it was necessary to provisionally attach the fixed deposits of the petitioner for the purpose of protecting the interest of the revenue - the impugned order is arbitrary and reflects premeditated conclusion without recording either an opinion or necessary to attach the property - mere apprehension that huge tax demands are likely to be raised on completion of assessment is not sufficient for the purpose of passing a provisional attachment order and the exercise of the same must necessarily be preceded by the formation of an opinion that it was necessary to do so for the purpose of protecting the interest of Government revenue, that too on the basis of tangible material that the petitioner was not likely to fulfil the demand and on the other hand, was likely to defeat the demand, which is conspicuously missing and absent in the impugned order - in the light of existence of a legal mandatory pre-requirement and precondition of recording of formation of opinion which is in pari materia with “reasons to believe” in Section 281B of the I.T. Act, it was incumbent upon the first respondent to arrive at his own satisfaction and not borrowed satisfaction by proper application of mind and consequently, the impugned order which is bald, vague, cryptic, laconic, unreasoned and non-speaking order - The impugned provisional attachment order is quashed and set aside – However, under the facts and circumstances of the instant case and in the light of the specific contention of the respondents that the petitioner has been diverting profits outside India under the guise of payment of royalty coupled with the undisputed fact that this Court have not permitted the petitioner to make payment of royalty to foreign entities in any of the proceedings till today, in the interest of justice, it would be just and appropriate to direct the petitioner not to make payment in the form of royalty or any other form to any entities outside India till conclusion of assessment proceedings by the respondents - interest of justice would also be met if the petitioner is reserved liberty to obtain overdrafts on the subject fixed deposits and make payments from such overdrafts from the respective banks to foreign entities in accordance with law - Petition is partly allowed
Income Tax – Global net loss – Non attribution of profits – Tax liability – Appellant-revenue challenged order passed by Tribunal in favour of Respondent/assessee – Whether Tribunal has erred in holding that no profits are attributable to Permanent Establishment (PE) of assessee? – Held – Plain reading of Article 7(1) of India-Finland Double Taxation Avoidance Agreement make it clear that question of attributing profits to PE arises only if foreign enterprise is making a profit – Issue of taxability would arise qua assessee only if profits accrue to assessee, and that too only to extent they can be attributed to its PE in India – As assessee has global net loss as per its audited accounts, no profit or income can be attributed to assessee in India – Tribunal has rightly rendered its finding that assessee recorded a ‘global net loss’ in relevant assessment year, therefore, no profit could have possibly been attributed to it – Appeal is dismissed
Income Tax Act, 1961 – Section 132(9B) – Tax evasion – Attachment of bank accounts – Petitioner/company is engaged in business of manufacturing of Injection Molding Machines – Petitioner is a wholly owned subsidiary of company incorporated in Taiwan – Pursuant to search and seizure action conducted at premises of Petitioner, competent authority attached Bank accounts of Petitioner under Section 132(9B) of the Act in interest of revenue – Whether attachment of Bank accounts of Petitioner under Section 132(9B) of the Act under guise of securing interest of revenue is sustainable – HELD – At end of search and seizure, authorized person, after being satisfied for reasons recording in writing, has attached bank accounts belonging to assessee provisionally for protecting interest of Revenue – During course of search, it was found that Petitioner was involved in various methods of tax evasion like unaccounted cash sales, purchase through shell companies, diversion of funds to tax havens etc. – All funds received by shell companies were transferred to holding companies in Taiwan – Interest of Revenue can be safeguarded by directing a particular amount to be furnished by way of a bank guarantee to authority concerned – Indian Director along with Taiwan Directors are required to give undertaking that if assessment is more than the amount which is permitted to be provisionally attached, they shall fulfil obligations even from their own personal funds – On furnishing above aspect, attachment of bank accounts shall be released – Petition disposed of
Income Tax Act, 1961 – Section 43B – Interest accrued on non-performing assets – Tax liability – During course of assessment proceedings, AO noticed that assessee/non-scheduled bank had not credited interest on non-performing assets (NPAs) – AO observed that assessee was required to show interest on NPAs as income – AO recomputed income of assessee by including interest – Commissioner (Appeals) allowed appeals filed by assessee/Respondent and deleted addition made by AO on account of interest accrued on NPA – Tribunal affirmed order of Commissioner (Appeals) and dismissed appeals filed by Appellant/Revenue – Whether assessee was liable to pay tax on interest accrued on loans categorized as NPA/sticky loans on receipt basis as claimed by assessee or on accrual basis as calculated by Revenue – HELD – Amended Section 43B of the Act provides that any sum payable by assessee as interest on any loan or advances from a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank shall be allowed as deduction, if it is actually paid on or before due date of furnishing return of income of relevant previous year – When any addition is made in a provision to remedy unintended consequence and to make it workable, reasonable interpretation would be that said amendment is made retrospective in operation – Although amendment was sought to be made effective w.e.f. 1-4-2018, but it was liable to be treated as retrospective in nature – It serves no purpose that assessee should include NPAs/sticky loans in relevant assessment year and then claim it as a bad debt in next assessment year – View taken by Tribunal that assessee was required to tax the interest on sticky loans/NPAs on receipt basis, is liable to be upheld – Revenue appeals are dismissed Purpose of Amendment to Section 43D - A perusal of the objects of amending the existing provisions of Section 43D of the Act vide Finance Bill 2017, reveals that the benefit of the existing provision was available to scheduled bank or a public financial institution etc. With a view to provide level playing field to co-operative banks vis-à-vis scheduled banks and to rationalize the scope of Section 43D, it was proposed to introduce the amendment to Section 43D of the Act so as to include co-operative banks other then a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The omission was sought to be corrected by bringing at par the scheduled banks and non-scheduled banks. Thus, it is evident that the amendment was brought in force with a view to cure the omission in Section 43D. Although, the amendment was sought to be made effective w.e.f. 1st April, 2018, but it was liable to be treated as retrospective in nature.
Income Tax Act, 1961 – Sections 143(1) and 148 – Reopening of assessment – Petitioner filed his return of income for Assessment Year 2015-16 – Assessing Officer processed return under Section 143(1) of the Act – Subsequently, AO reopened assessment vide notice issued under Section 148 of the Act – Respondent rejected objections of Petitioner against reopening of assessment – Whether notice issued by AO under Section 148 of the Act seeking to reopen assessment in relation to AY 2015-16 is sustainable – HELD – Completed assessment was sought to reopened by Respondent on ground that Petitioner had entered into a development agreement with land owners and received cash, but said cash component was unreported in tax return for AY 2015-16 – Transfer had not taken place in year of receipt – When sale deed was executed in subsequent year, transfer took place at that point of time – Assessee had offered amount of capital gains to tax in next corresponding assessment year, that is, 2016-17 – Opinion formed by AO that he had reasons to believe about escapement of income in Assessment Year 2015-16 was misconceived and without foundation of facts and without foundation in law – Notice issued by Respondent under Section 148 of the Act set aside – Petition is allowed
Income Tax Act, 1961 – Section 40A(3) – Income Tax Rules, 1962 – Rule 6DD(f)(ii) – Purchase of dairy product – Cash payment exceeding Rs.20,000.00 – Denial of benefit of exemption – Appellant/assessee is engaged in business of sale of butter and ghee – Assessee had made cash payments to two companies for procurement of cream and sought exemption by applying Rule 6DD(f)(ii) of the Rules – Assessing Officer denied benefit of exemption and added payments to total income of assessee – Commissioner (Appeals) as well as Tribunal affirmed action of AO – Whether Tribunal is justified in confirming disallowance of deduction of cash payments – HELD – Section 40A(3) of the Act says that where an assessee incurs any expenditure in respect of any payment in a sum exceeding permissible limit, such expenditure shall not be allowed as a deduction – As per Rule 6DD(f)(ii) of the Rules, where payment is made for purchase of dairy products to cultivator, grower or producer of such products, restrictions or disallowance under Section 40A(3) of the Act would not be attracted – To avail benefit of Rule 6DD(f)(ii) of the Rules, payment would have to be made to a cultivator or to a grower or to a producer of dairy products – Assessee purchased cream from two companies, who in turn purchased milk from cattle farmers – Payment made to two companies would not be a payment made to a cultivator or grower or producer of a dairy product so as to bring cash transaction within mischief of Rule 6DD(f)(ii) of the Rules – No fault can be found with view taken by Tribunal in affirming disallowance made by AO as confirmed by CIT(A) – Appeal is dismissed
Income Tax Act, 1961 – Sections 147 and 148 – Re-opening of assessment – Validity – Assessing Officer issued notice under Section 148 of the Act seeking to re-open assessment for AY 2012-13 – Upon receipt of impugned notice, Petitioner sought reasons and filed objections after obtaining reasons – AO rejected objections filed by Petitioner – Petitioner challenged re-opening of assessment on ground that since there was no failure on part of Petitioner to disclose fully and truly all material facts necessary for its assessment, no notice for re-opening assessment could have been issued after expiry of four years from end of relevant assessment year – HELD – For re-opening of assessment, AO must disclose in reasons as to which fact or material was not disclosed by assessee fully and truly necessary for assessment – AO simply proceeded to state that Petitioner had not truly and fully disclosed material facts necessary for its assessment for year under consideration thereby necessitating re-opening under Section 147 of the Act – In reasons furnished to Petitioner, AO had not disclosed which material facts, according to him, were not fully or truly disclosed by Petitioner – Such non-disclosure suggests that there was no failure on Petitioner's part to fully and truly disclose all material facts necessary for assessment for AY 2012-13 – Amount which AO claims has escaped assessment during AY 2012-13 was eventually received by Petitioner in subsequent year and same was offered to tax in AY 2013-14 – Impugned notice issued by AO under Section 148 of the Act quashed – Petition allowed
Income Tax Act, 1961 – Sections 56, 143(3), 144B, 156 and 270 – Order of assessment – Violation of principles of natural justice – Petitioner filed her return of income for Assessment Year 2020-21 – Respondent/Assessing Officer passed order of assessment after disallowing Petitioner’s claim of exemption of agriculture income and added same to income of assessee under head ‘income from other sources’ under Section 56 of the Act –Petitioner challenged assessment order, notice of demand and show-cause notice initiating penalty proceedings – HELD – Primary ground for invoking writ jurisdiction is that Respondent had not given Petitioner an adequate opportunity for filing her reply, or for a hearing through video conferencing as is required to be done under provisions of Section 144B of the Act – Petitioner attempted to upload her reply and found that e-portal was closed – Having not given to Petitioner an opportunity of personal hearing as was required to be done under provisions of Section 144B of the Act, Respondents have acted in arbitrary manner – Order of assessment passed under Section 143(3)/144B of the Act, notice of demand under Section 156 of the Act and show-cause notice initiated penalty proceedings under Section 270 of the Act set aside – Assessing Officer is directed to give an opportunity of personal hearing to Petitioner through video conferencing and pass fresh order after considering her response – Petition disposed of
Income Tax Act, 1961 – Sections 143(3) and 147 – Assessment of income – Deduction of revenue expenditure – Respondent/assessee is engaged in business of software development solution and management – Assessee claimed deduction of expenditure incurred in connection with development of a new product by claiming said expenditure as revenue expenditure – Assessing Officer completed assessment under Section 143(3) read with Section 147 of the Act after making addition of expenditure in question by treating said expenditure as capital expenditure – CIT(A) allowed appeal filed by assessee – Tribunal affirmed views expressed by CIT(A) – Whether Tribunal was right in allowing capital expenditure in connection with development of new products as revenue expenditure – HELD – If expenditure incurred was in respect of same business, which was already carried on by assessee, even if it was for expansion of business, then such expense was to be treated as business expenditure – Respondent is in business of development of software solution and management, therefore, it’s endeavour to develop a new software was nothing but an endeavour in its existing line of business of developing software solutions – Admittedly, product which was sought to be developed never came into existence and same was abandoned – No new asset came into existence which would be of an enduring benefit to assessee, and therefore, in these circumstances, expenditure could only be said to be revenue in nature – View expressed by Tribunal in order impugned requires no interference – Appeal is dismissed