TaxTMI Updates e-Newsletter
Apr 22,2024

Cancellation of registration - absence of reasons / want of application of mind - quashing of non-reasoned orders - opportunity of hearing - de novo adjudication - Article 14 of the Constitution - doctrine of merger

Cancellation of registration - absence of reasons / want of application of mind - Article 14 of the Constitution - quashing of non-reasoned orders - Impugned order cancelling registration was without application of mind and devoid of reasons and is unsustainable. - HELD THAT: - The cancellation order records that a reply was filed by the petitioner yet states the reason for cancellation as "response not received", evidencing a lack of application of mind. Reliance on precedents of this Court establishes that administrative or quasi-judicial orders affecting the right to carry on business must indicate reasons, which are the "heart and soul" of such orders, and absence of such reasons renders the order incompatible with the standards of Article 14. In these circumstances, the original order cancelling registration cannot stand and is required to be set aside. [Paras 3, 6]

Original order dated April 27, 2023 cancelling registration quashed for want of reasons and absence of application of mind.

Doctrine of merger - opportunity of hearing - de novo adjudication - Appellate order is set aside and matter remitted for reconsideration after allowing the petitioner to file reply and after fresh adjudication. - HELD THAT: - Although the appeal was time-barred under the statutory scheme, the Court proceeded by examining the original order and found it non-reasoned. The doctrine of merger was held inapplicable where the original order itself is vitiated for want of reasons. Consequently, both the original and appellate orders are quashed; the petitioner is permitted to file a reply to the show-cause notice within three weeks, and the Adjudicating Authority is directed to proceed de novo, granting opportunity of hearing and considering the defence raised before passing a fresh order. [Paras 6, 7]

Appellate order dated March 12, 2024 set aside; matter remitted for fresh adjudication after the petitioner files reply within three weeks and after hearing.

Final Conclusion: Writ petition allowed: impugned original and appellate orders quashed; petitioner permitted to file reply within three weeks and Adjudicating Authority directed to proceed de novo after granting opportunity of hearing.

Cancellation of registration - application of mind - reasons in quasi judicial/administrative orders - opportunity of hearing - quashing and remand for fresh adjudication

Cancellation of registration - application of mind - reasons in quasi judicial/administrative orders - Validity of the original order cancelling the petitioner's registration insofar as it is alleged to be without application of mind and devoid of reasons. - HELD THAT: - The Court examined the impugned original order dated March 18, 2021 and observed internal inconsistency where the order simultaneously records non appearance and yet states that submissions made at the hearing were examined. Reliance was placed on earlier decisions of this Court emphasizing that reasons are the heart of any judicial or quasi judicial order and that an order affecting the right to carry on business must disclose application of mind. In light of those principles and the factual defects apparent on the face of the order, the original cancellation order was found to be non reasoned and therefore vitiated. [Paras 3, 4]

The original order cancelling registration is quashed for want of application of mind and absence of reasons.

Opportunity of hearing - quashing and remand for fresh adjudication - Consequent remedy to be afforded and validity of the appellate order impugned under Section 107. - HELD THAT: - The Court treated the appellate order dated May 24, 2023 together with the original order and, following the principle that where an original order is non reasoned the appellate result cannot cure the defect, set aside both orders. The petitioner was directed to file a reply to the show cause notice within three weeks and the Adjudicating Authority (Assistant Commissioner) was directed to proceed de novo, giving the petitioner an opportunity of hearing and to pass a fresh reasoned order after considering the defence. [Paras 6, 7]

Both the appellate order and the original order are quashed; matter remitted for fresh adjudication after affording opportunity of hearing and considering the petitioner's reply.

Final Conclusion: Writ petition allowed: the original cancellation order dated March 18, 2021 and the appellate order dated May 24, 2023 are quashed; petitioner to file reply within three weeks and the adjudicating authority to decide afresh after hearing the petitioner.

Classification as Waste to Energy plants/devices - interpretation of 'Waste to Energy' in Entry No. 234 / 201A of Schedule I of Notification No. 01/2017 Central Tax (Rate) - evidentiary burden to substantiate use of non conventional fuel - scope of 'power' as including steam - judicial review of advance ruling decisions under Article 226

Classification as Waste to Energy plants/devices - interpretation of 'Waste to Energy' in Entry No. 234 / 201A of Schedule I of Notification No. 01/2017 Central Tax (Rate) - scope of 'power' as including steam - evidentiary burden to substantiate use of non conventional fuel - Biomass Fired (Steam) Boilers and Agro Waste Thermic Fluid Heaters manufactured by the petitioner do not qualify as 'Waste to Energy plants/devices' under Entry No. 234 / 201A for the purpose of concessional GST. - HELD THAT: - The Court accepted the factual finding that the Advance Ruling Authority relied upon technical specifications on the petitioner's website and other material showing fuels such as imported coal, lignite, rice husk and similar fuels for the listed products, and that the petitioner had not placed on record contemporaneous documentary evidence before the Authority to establish exclusive use of non conventional agro waste. The Appellate Authority construed the phrase 'Waste to Energy Plants/devices' in Entry No. 234 as denoting plants/devices for recovery of energy specifically in forms identified in government policy and rules (for example Biogas / Bio CNG / Electricity) and declined to expand the Entry to cover boilers/heaters whose output is steam or heat alone. Although this Court's earlier decision referred to steam as a form of 'power' in a different statutory context, the Appellate Authority's narrower construction of 'Waste to Energy' within the Entry was a permissible interpretation in the factual matrix and in light of government notifications and policy references relied upon by the Authority. Given the petitioner's failure to establish by adequate documentary proof that the products exclusively generate energy from 'waste' as contemplated by the Entry, the denial of concessional rates was upheld. [Paras 14, 15, 16, 17]

The claim that the petitioner's biomass/agro boilers and thermic fluid heaters fall within 'Waste to Energy plants/devices' under Entry No. 234 / 201A is rejected and the benefit of the concessional GST rates is denied.

Judicial review of advance ruling decisions under Article 226 - evidentiary burden to substantiate use of non conventional fuel - Whether the High Court should exercise its extraordinary jurisdiction under Article 226 to interfere with the Advance Ruling and Appellate Authority orders. - HELD THAT: - The Court noted the limited scope of judicial review of advance ruling decisions under Article 226: review is confined to the decision making process and not to substitute the court's judgment for that of the Authority where no procedural or legal infirmity is shown. The petition pointed to no flaw in the Authorities' decision making process; rather, the Authorities considered the material before them and reached conclusions on classification and interpretation. The petitioner's belated production of third party inspection certificates does not demonstrate that the Authorities acted contrary to law or without material consideration such as to warrant interference. [Paras 18, 19]

No interference under Article 226; the writ petition is dismissed for lack of merit.

Final Conclusion: The petition is dismissed. The Advance Ruling and the Appellate Authority's orders denying the concessional GST classification to the petitioner's Biomass Fired (Steam) Boilers and Agro Waste Thermic Fluid Heaters are upheld; no grounds for judicial interference under Article 226 are found.

Time-barred assessment - applicability of Section 153(3)(ii) of the Income Tax Act, 1961 - applicability of Section 153(2A) of the Income Tax Act, 1961 - substantial question of law under Section 260A - restoration of assessment - delay of 340 days in filing the present special leave petition

HC [2023 (1) TMI 1368 - CALCUTTA HIGH COURT] held provisions of Section 153(3)(ii) of the Act are not attracted in the facts and circumstances of the case on hand - HELD THAT:- We are not satisfied with the reasons given for the delay.

Accordingly, the application for condonation of delay, as well as, the special leave petition are dismissed.

Charitable purpose u/ss 11 and 12 - incidental commercial activity not defeating charitable status - application of precedent in India Trade Promotion Organisation v. DGIT (E)[2015 (1) TMI 928 - DELHI HIGH COURT] - gross delay of 597 days in filing the special leave petition

HELD THAT:- There is a gross delay of 597 days in filing the special leave petition. The explanation offered is not to our satisfaction as no sufficient cause to condone the delay has been made out. Hence, the application seeking condonation of delay is dismissed. Consequently, the Special Leave Petition is dismissed on the ground of delay keeping open the question of law, if any, which arises in this matter.

Allowability of education cess as business expenditure - deductibility of tax or cess as expenditure - remand for verification of claimed quantum

Allowability of education cess as business expenditure - deductibility of tax or cess as expenditure - Education Cess cannot be allowed as an expenditure. - HELD THAT: - Counsel for the respondent conceded that, in view of subsequent amendments in the Income Tax Act, 1961, the Education Cess is not allowable as an expenditure. The Court accepted this concession, set aside the impugned judgment and allowed the appeal to the extent of declaring that Education Cess cannot be claimed as a deductible expenditure.

Appeal allowed holding that Education Cess is not allowable as an expenditure.

Remand for verification of claimed quantum - Question of the quantum/amount of Education Cess claimed as expenditure to be examined by the assessing officer. - HELD THAT: - While directing that Education Cess is not allowable as an expenditure, the Court left it to the assessing officer, in implementing this order, to examine and determine the quantum/amount, if any, of Education Cess claimed by the respondent in returns or in the proceedings. This constitutes a remand for verification and computation of the claimed amount rather than an adjudication of quantum by this Court.

Matter remanded to the assessing officer to examine and determine the quantum of Education Cess, if any, claimed by the respondent.

Final Conclusion: The impugned judgment is set aside; appeal is allowed holding that Education Cess cannot be allowed as an expenditure, with a remand to the assessing officer to examine and determine the quantum of any Education Cess claimed.

Waiver of interest under Section 234A - interest under Sections 234B and 234C - CBCT Circular No.400/129/2002-IT(B) dated 26.06.2006 - delay in filing attributable to receipt of statutory audit report

Waiver of interest under Section 234A - delay in filing attributable to receipt of statutory audit report - CBCT Circular No.400/129/2002-IT(B) dated 26.06.2006 - Waiver of interest under Section 234A for Assessment Years 2008-2009 and 2009-2010 - HELD THAT: - The Court accepted the petitioner's submission that the returns for 2008-2009 and 2009-2010 were filed shortly after receipt of the statutory Audit Reports (received on 22.03.2011 and 31.01.2012 respectively) and that the delay was therefore marginal. Having regard to the reasons applied by the first respondent in allowing waiver for earlier years and to the CBCT Circular dated 26.06.2006, the Court held that the same considerations justify interference with the impugned order insofar as denial of waiver under Section 234A is concerned. The Court thus concluded that interest under Section 234A for the specified assessment years deserved to be waived and ordered relief accordingly. [Paras 15]

Interest under Section 234A is waived for Assessment Years 2008-2009 and 2009-2010.

Interest under Sections 234B and 234C - CBCT Circular No.400/129/2002-IT(B) dated 26.06.2006 - Claim for waiver of interest under Sections 234B and 234C for the same assessment years - HELD THAT: - The Court held that interest under Sections 234B and 234C relates to belated payment of advance tax and that the Circular dated 26.06.2006 does not specifically make such interest amenable to waiver under the circumstances pleaded. The petitioner's asserted financial difficulties and other contentions did not establish a legal impediment to payment of advance tax within the statutory time; equitable considerations and the Circular did not permit waiver of these mandatory interest obligations. Reliance on precedent including the Sanmac decision did not warrant complete relief on Sections 234B/234C and, consequently, no waiver was directed. [Paras 16, 18]

No waiver of interest under Sections 234B and 234C is granted.

Final Conclusion: The writ petition is partly allowed: interest under Section 234A is waived for Assessment Years 2008-2009 and 2009-2010; requests for waiver of interest under Sections 234B and 234C are rejected. No costs.

Principles of natural justice - opportunity of hearing - quashing of assessment order - remand for fresh assessment - addition under Section 68 - enable portal for receiving reply

Principles of natural justice - opportunity of hearing - addition under Section 68 - Assessment order dated 13.09.2021 for the assessment year 2018-19 was passed without affording the petitioner an opportunity to reply to the show cause notice and therefore violated principles of natural justice. - HELD THAT: - The assessee received a show cause notice proposing certain additions and was given deadlines to respond. The petitioner sought an adjournment because it could not file objections within the portal constraints and expressly requested time to submit objections. Notwithstanding this request, the assessment order was passed adding amounts under Section 68. The Court found that passing the order without granting the petitioner a reasonable opportunity to file objections amounted to a breach of the principles of natural justice and rendered the assessment order unsustainable. Consequently, the Court exercised its supervisory jurisdiction under Article 226 to quash the impugned order and direct fresh consideration. [Paras 4, 5]

Impugned assessment order quashed for breach of natural justice and remitted for fresh assessment.

Remand for fresh assessment - enable portal for receiving reply - read compendiously - Directions for fresh proceedings following quashing: time frames for filing reply, enabling of portal, and period for passing fresh order. - HELD THAT: - The Court directed that the show cause notice and the impugned order be read compendiously and permitted the petitioner to file a consolidated reply within 30 days of receipt of the order. The respondents were directed to enable the portal to receive the petitioner's reply. The matter was remitted to the assessing authority to pass a fresh order after granting reasonable opportunity, within 90 days from receipt of a copy of the judgment. These directions were framed to ensure the petitioner is afforded a fair opportunity to be heard before any fresh assessment is completed. [Paras 5]

Remitted for fresh assessment with directions to accept reply within 30 days, enable portal, and decide afresh within 90 days.

Final Conclusion: Writ petition allowed: the assessment order dated 13.09.2021 for assessment year 2018-19 is quashed for breach of natural justice and the matter is remitted for fresh consideration with specific directions to permit filing of reply within 30 days, enable the portal, and decide the fresh assessment within 90 days.

Validity of notice under Section 143(2) and jurisdiction to frame scrutiny assessment - Rejection of books of account under Section 145(3) and treatment of unsubstantiated purchases as bogus - Onus on assessee to prove genuineness of purchases - Quantification of income from bogus purchases by aligning gross profit rate with genuine purchases - Remand for verification and computation by Assessing Officer

Validity of notice under Section 143(2) and jurisdiction to frame scrutiny assessment - Validity of the notice issued under Section 143(2) and consequent jurisdiction of the Assessing Officer to frame assessment - HELD THAT: - The assessee contended that the notice dated 25.09.2017 under Section 143(2) was unsigned and therefore non existent, vitiating the jurisdiction of the Assessing Officer. The Tribunal obtained and examined the record and found the notice duly signed by the concerned ITO. On this factual examination the challenge to jurisdiction failed and the contention that the assessment framed under Section 143(3) was invalid for want of a valid Section 143(2) notice was rejected. [Paras 4]

Ground of appeal challenging jurisdiction based on an alleged unsigned notice is dismissed.

Rejection of books of account under Section 145(3) and treatment of unsubstantiated purchases as bogus - Onus on assessee to prove genuineness of purchases - Whether purchases from five specified parties were genuine or liable to be treated as bogus and whether books could be rejected under Section 145(3) - HELD THAT: - The authorities recorded survey and statements indicating a modus operandi of bogus billing by certain brokers/entry operators and rice millers. The assessee failed to produce corroborative documentary evidence (confirmations, delivery documents), and supplier notices under Section 133(6) were returned unserved; bank evidence indicated immediate cash withdrawals by the suppliers. Given the absence of necessary material to discharge the burden of proof, the Tribunal found no infirmity in the concurrent conclusion of the lower authorities that purchases from the five parties were not genuine and upheld the rejection of accounts to the extent relevant. [Paras 15, 16]

Findings of the Revenue that the impugned purchases were bogus are affirmed; books rejection sustained to that extent.

Quantification of income from bogus purchases by aligning gross profit rate with genuine purchases - Remand for verification and computation by Assessing Officer - Quantification of addition in respect of bogus/unverified purchases and the method of computing the profit element to be added - HELD THAT: - While agreeing that the purchases were not genuine, the Tribunal held that the addition should be limited to the profit the assessee would have earned by procuring goods at discounted open/grey market rates rather than by adding the entire purchase value. The Tribunal found the AO's flat application of a 25% disallowance unsupported by material or reasoning and instead followed the approach of equating the gross profit rate on bogus purchases to the gross profit rate on other genuine purchases. In view of this, the matter is set aside and remitted to the Assessing Officer to verify available bifurcated purchase rate details filed before the Tribunal, compute the profit element in accordance with the stated principle, and afford the assessee a reasonable opportunity of being heard. [Paras 18, 20, 21, 22]

Addition quantified only to the extent of profit derived by procuring goods at discounted open/grey market rates; matter remitted to AO for computation by bringing GP rate of bogus purchases in line with genuine purchases.

Abandonment / not pressed of ground - Whether the adhoc disallowance in respect of fuel expenses was pressed before the Tribunal - HELD THAT: - The Tribunal noted absence of any contention in written submissions on the ground relating to disallowance of fuel expenses and recorded that the ground was not pressed by the assessee. [Paras 23]

Ground relating to disallowance from 'Fuel Expenses' dismissed as not pressed.

Final Conclusion: The challenge to jurisdiction for want of a signed Section 143(2) notice is rejected; the Tribunal affirms that the purchases from the specified parties were bogus given the assessee's failure to discharge the onus of proof, but sets aside the quantification made by the authorities and remits the matter to the Assessing Officer to compute the addition by aligning the gross profit rate on bogus purchases with that of genuine purchases after necessary verification and affording the assessee an opportunity of being heard; the fuel expense ground is dismissed as not pressed.

Reopening of assessment under section 147 read with section 148 - notice under section 148/148A and its validity under the amended limitation regime - operation of amended section 149 and limitation for issuance of fresh notice - CBDT instruction for implementation of Supreme Court decision in Ashish Agarwal

Reopening of assessment under section 147 read with section 148 - operation of amended section 149 and limitation for issuance of fresh notice - CBDT instruction for implementation of Supreme Court decision in Ashish Agarwal - validity of notice where escaped income is below fifty lakh rupees - Validity of the notice issued under section 148/148A for Assessment Year 2013-14 where the alleged income escaping assessment was Rs. 29,20,000 and whether the reopening was barred under the clarified law post-Ashish Agarwal and CBDT instruction. - HELD THAT: - The Tribunal examined the factual position that the income alleged to have escaped assessment for AY 2013-14 amounted to Rs. 29,20,000. It considered the effect of the Supreme Court decision in Ashish Agarwal and the subsequent CBDT Instruction clarifying the operation of the amended section 149, which, as explained by the CBDT, precludes issuance of fresh notices under section 148 for assessment years 2013-14 to 2015-16 where the income escaping assessment is less than fifty lakh rupees. The Tribunal observed that whether the notice was dated 19.03.2021 (extended period) or 13.04.2021 (fresh issuance) was immaterial for adjudication because, on the clarified legal position, notices cannot be validly issued in cases where the escaped income is below the fifty lakh rupee threshold for the specified assessment years. Applying that legal position to the admitted escaped income in the present case, the Tribunal concluded that the AO lacked jurisdiction to reopen the assessment and that the notice(s) issued under section 148/148A were without jurisdiction and therefore liable to be quashed. Having quashed the reopening and notice, the Tribunal did not decide the other grounds raised on merits. [Paras 6, 7]

Notice issued under section 148/148A for AY 2013-14 quashed as without jurisdiction; reassessment set aside.

Final Conclusion: The appeal is allowed: the reassessment proceedings and the notice under section 148/148A for Assessment Year 2013-14 are quashed on the ground that issuance of notice was barred under the clarified operation of section 149 (as explained by the Supreme Court decision in Ashish Agarwal and the subsequent CBDT instruction) where the income escaping assessment is less than fifty lakh rupees.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Presumptive taxation under section 44AD - Disclosure of particulars in the return - Incorrect claim versus furnishing inaccurate particulars

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Disclosure of particulars in the return - Incorrect claim versus furnishing inaccurate particulars - Whether penalty under section 271(1)(c) is leviable where the assessee disclosed remuneration and interest from a partnership in the original return but claimed those amounts under the presumptive scheme of section 44AD - HELD THAT: - The Tribunal found as a fact that the assessee had disclosed the receipt of remuneration and interest from the partnership in the original return and that the return was processed under section 143(1). Although the claim to treat those receipts as gross receipts under section 44AD was held to be incorrect by reference to authoritative precedent, all particulars relating to the receipts were available to the Assessing Officer in the return. Applying the principle in CIT v. Reliance Petroproducts Ltd., the Tribunal held that making an incorrect claim does not, by itself, amount to furnishing inaccurate particulars or concealment for the purposes of section 271(1)(c), unless the case falls strictly within the penal provision. The Tribunal also relied on the reasoning that disclosure of complete particulars negates concealment (as reflected in the cited authority), and observed that there was no new evidence unearthed by the AO nor any concealment of the fact of receipt. On these findings and legal principles, the Tribunal concluded that invocation of penalty was not warranted and therefore deleted the penalty. [Paras 7]

Penalty under section 271(1)(c) deleted as the particulars were disclosed in the return and an incorrect claim does not amount to concealment or furnishing inaccurate particulars.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271(1)(c) is deleted.

Jurisdiction of assessing officer - void ab initio - quashing of assessment order - non-curability of jurisdictional defect despite non-objection under section 124 - reliance on precedent on lack of jurisdiction - declining to adjudicate merits as academic

Jurisdiction of assessing officer - void ab initio - non-curability of jurisdictional defect despite non-objection under section 124 - Assessment order passed by a non-jurisdictional Assessing Officer is void and liable to be quashed. - HELD THAT: - The Tribunal found on the record that the notices in question were issued by an Assessing Officer who did not have jurisdiction over the assessee, a fact not disputed by the Revenue. The Revenue's sole defence was that the assessee did not object within one month under section 124 during assessment proceedings and that section 292BB therefore supported the validity of the proceedings. The Tribunal accepted the assessee's reliance on precedent holding that actions by authorities lacking jurisdiction are void ab initio and that the right to challenge jurisdiction is not lost forever by failure to object under section 124(3). Applying that principle, the Tribunal held the defect to be incurable in the circumstances and concluded that the assessment order must be quashed. Having quashed the assessment on jurisdictional grounds, the Tribunal declined to examine the merits as academic. [Paras 6, 7]

Assessment order quashed for lack of jurisdiction; merits not adjudicated.

Final Conclusion: The Tribunal allowed the appeal, quashed the assessment order for the assessment year 2015-16 on the ground that the Assessing Officer lacked jurisdiction, and did not decide the substantive merits of the assessment.

Disallowance under section 40A(3) of the Income Tax Act - 20% disallowance rule under section 40A(3) - payments exceeding Rs. 20,000 in cash - business expediency - applicability of Finance Act, 2007 amendment to section 40A(3)

Disallowance under section 40A(3) of the Income Tax Act - 20% disallowance rule under section 40A(3) - business expediency - applicability of Finance Act, 2007 amendment to section 40A(3) - payments exceeding Rs. 20,000 in cash - Validity and quantum of disallowance under section 40A(3) for cash payments exceeding Rs. 20,000 for assessment year 2007-08 - HELD THAT: - The Assessing Officer disallowed the entire expenditure incurred in cash exceeding the prescribed monetary limit by invoking section 40A(3). The Tribunal observed that the statutory provision in force for the assessment year 2007-08 mandated only a 20% disallowance where payment in cash exceeded Rs. 20,000 and that the Finance Act, 2007 amendment (which broadened the disallowance) was effective from 01.04.2008 and hence not applicable to the year under appeal. The assessee's contention that payments were justified by business expediency was not supported by evidence and did not bring the case within exceptions or Rule 6DD. For these reasons the Tribunal held that the disallowance must be restricted to 20% of the cash payments exceeding the prescribed limit. [Paras 10, 11]

Disallowance under section 40A(3) restricted to 20% of the cash expenditure exceeding Rs. 20,000; appeal partly allowed.

Final Conclusion: The Tribunal partly allowed the appeal for AY 2007-08 by directing that the disallowance under section 40A(3) be limited to 20% of the cash payments exceeding Rs. 20,000, rejecting the assessee's unsupported claim of business expediency.

Exemption under Article 15(1) of DTAA - Residence under Article 4(1) of DTAA - Taxability of salary under Section 9(1)(ii) and Section 5 - Acceptance of foreign tax returns and Tax Residency Certificate as proof of residency and tax payment - Application of Section 90 to give effect to DTAA benefits

Residence under Article 4(1) of DTAA - Assessee's residence status for the relevant period - HELD THAT: - The Tribunal found that the assessee qualified as a non-resident of India under Section 6(1) for F.Y. 2019-20 and, having been a tax resident of Australia under Australian domestic law for TY 2018-19 and TY 2019-20, was a resident of Australia for purposes of the India-Australia DTAA under Article 4(1). The Tribunal treated the Australian tax residency determination and filings as establishing residence within the meaning of the DTAA and so concluded residency in Australia for the year under consideration. [Paras 5, 6]

Assessee held to be resident of Australia for F.Y. 2019-20 for purposes of the DTAA.

Exemption under Article 15(1) of DTAA - Application of Section 90 to give effect to DTAA benefits - Entitlement to exemption of salary under Article 15(1) read with Section 90 - HELD THAT: - Applying Article 15(1) of the India-Australia DTAA, the Tribunal held that where a resident of one Contracting State (Australia) derives salary in respect of employment exercised in the other Contracting State (Australia), such remuneration is taxable in the State where the employment is exercised. The assessee rendered services and exercised employment in Australia during F.Y. 2019-20; accordingly, the salary received in India for those services was covered by the treaty and exempt from Indian tax under Article 15(1) read with Section 90(2), which requires application of the more beneficial provision. [Paras 7, 21, 23, 27]

Salary received in India for services exercised in Australia allowed as exempt under Article 15(1) of the DTAA read with Section 90.

Taxability of salary under Section 9(1)(ii) and Section 5 - Whether salary paid by Indian employer was taxable in India under domestic provisions - HELD THAT: - The Tribunal construed Sections 5, 9(1)(ii) and 15 together and held that income under the head 'Salaries' is taxable in India only if it is earned in India. As the assessee rendered services outside India throughout the relevant period and had no qualifying rest/leave periods that would attract the Explanation, the salary could not be treated as earned in India and hence was not taxable under Sections 5 and 9 in the hands of the non-resident assessee. [Paras 29, 30, 31, 34]

Domestic provisions do not render the salary taxable in India where services were rendered outside India; exemption under DTAA upheld.

Acceptance of foreign tax returns and Tax Residency Certificate as proof of residency and tax payment - Evidentiary sufficiency of Australian tax returns and TRC for claiming treaty relief - HELD THAT: - The Tribunal rejected the Assessing Officer's insistence on production of a TRC during assessment when alternative credible evidence-Australian tax returns showing residency and payment of tax-had been filed, and noted that the TRC was produced before the DRP as additional evidence. It held that the AO erred in denying the treaty exemption solely because the TRC was not furnished at an earlier stage when other evidentiary material establishing Australian residency and tax payment was on record. [Paras 15, 17, 24, 27, 28]

Australian tax returns and the subsequently tendered TRC were sufficient to establish residency and payment of tax; denial of exemption on ground of non-production of TRC alone was erroneous.

Final Conclusion: The Tribunal allowed the assessee's appeal: holding him a resident of Australia for F.Y. 2019-20, treating salary for services exercised in Australia as exempt under Article 15(1) of the India-Australia DTAA read with Section 90, and finding that domestic provisions did not render the salary taxable in India; the Tribunal further held that the Australian tax returns and the TRC furnished before the DRP sufficed as evidence of residency and tax payment and that the AO erred in denying treaty relief solely for want of earlier production of the TRC.

Unexplained cash receipt under Unexplained expenditure and Telescoping of unexplained expenditure against additional undisclosed income - Jurisdiction to initiate assessment after search based on incriminating seized digital evidence (MB/HD/01) - Use and reliability of seized tally data for detection of undisclosed profit - Bogus purchases - disallowance limited to proportionate adjustment (5%) having regard to business nature and net profit trends - Income to be taxed in the year in which it is earned - correct year principle

Unexplained cash receipt under Unexplained cash receipt under - Jurisdiction to initiate assessment after search based on incriminating seized digital evidence (MB/HD/01) - Deletion of addition of Rs. 2,41,28,500 treated as unexplained cash receipt and validity of jurisdiction under search-based assessment - HELD THAT: - Seized digital material (MB/HD/01) contained a ledger alleging receipt of cash from M.L. Kayal for a purported land sale, but revenue produced no independent third party evidence (for example, enquiry with land revenue authority) to prove that the sale had materialized or that the cash constituted unexplained income. The CIT(A) found the Assessing Officer acted on conjecture and surmise without tangible/credible material and deleted the addition. The Tribunal noted the admitted absence of independent enquiry and that the transaction appeared to be advances for an uncompleted deal or amounts available to be repaid, not demonstrated unexplained income; accordingly the deletion was sustained. Separately, the assessee's challenge to the assumption of jurisdiction under the search provisions was rejected because incriminating seized digital evidence (MB/HD/01) existed and therefore the AO had jurisdiction to proceed under the search framework. [Paras 7, 8, 10]

Addition of Rs. 2,41,28,500 deleted; jurisdiction under search upheld and cross-objection on jurisdiction dismissed.

Unexplained expenditure and Telescoping of unexplained expenditure against additional undisclosed income - Use and reliability of seized digital evidence (MB/HD/01) for ledger reconciliation - Deletion/adjustment of addition of Rs. 4,71,13,264 treated as unexplained expenditure and entitlement to set off/telescoping - HELD THAT: - Seized ledger entries relating to balances in the names of related parties were reconciled against audited financial statements of those parties and voluntary disclosures by the assessee. The CIT(A) accepted that a significant portion of the alleged entry (Rs. 4,09,27,220) was substantiated by audited accounts and allowed telescoping/set off of Rs. 61,86,044 against disclosed additional income; further, an amount of Rs. 49,70,000 was allowed to be set off given the nonspecific nature of the assessee's disclosure and absence of contrary material. The Tribunal found no infirmity in the CIT(A)'s reconciliation and telescoping approach and dismissed the revenue's grounds. [Paras 11, 14, 15, 17]

Addition up to Rs. 4,71,13,264 was adjusted by allowing telescoping/set off (including Rs. 61,86,044 and Rs. 49,70,000); revenue appeal dismissed and cross objection on jurisdiction dismissed.

Use and reliability of seized tally data for detection of undisclosed profit - Unexplained expenditure - Bogus purchases - disallowance limited to proportionate adjustment (5%) having regard to business nature and net profit trends - Telescoping of unexplained items against additional undisclosed income - Multiple deletions and adjustments in AY 2020-21: (a) deletion of unexplained expenditure entry of Rs. 25,00,000; (b) deletion of unexplained cash receipt Rs. 90,748 subject to verification; (c) deletion of addition for alleged undisclosed profit (Rs. 2,34,36,359) based on seized tally data; and (d) partial disallowance of alleged bogus purchases limited to 5% - HELD THAT: - (a) The Rs. 25,00,000 entry lacked date and any link to the assessment year and was paid through banking channels; AO's presumption it related to the year was unfounded-deletion upheld. (b) The Rs. 90,748 receipt appeared in regular books (Tally) and required reconciliation; CIT(A) directed verification and deleted the addition-upheld. (c) The AO's attempt to add the difference by treating seized tally balance as entirely attributable to the impugned year ignored the balance sheet composition, the admitted current period profit in the seized data, and the principle that income is taxable in the year earned; CIT(A) found the assessee's declared and audited figures exceeded the seized data current period profit and deleted the addition-Tribunal found no infirmity. (d) On bogus purchases, the CIT(A) applied a proportional approach-sustaining disallowance at 5% after considering the admitted turnover, nature of work contracts, past and subsequent net profit rates and the need for purchases to effect contract performance; Tribunal approved this approach and sustained 5% disallowance. [Paras 23, 24, 25, 26, 28]

Grounds attacking deletions/adjustments dismissed; additions deleted or reduced as per CIT(A): Rs.25,00,000 and Rs.90,748 deletions upheld; undisclosed profit addition deleted; bogus purchases disallowance limited to 5% sustained. Cross objection dismissed.

Unexplained money and unexplained cash back (book entries) - Telescoping of unexplained items against additional undisclosed income - Bogus purchases - disallowance limited to proportionate adjustment (5%) having regard to business nature and net profit trends - Deletions and adjustments in AY 2021-22: (a) deletion of unexplained money entry (Rs.7,96,000), (b) deletion of unexplained cash back (Rs.76,55,931) by treating it as included in additional undisclosed income, and (c) confirmation of 5% disallowance on alleged bogus purchases - HELD THAT: - (a) The AO's characterization of the MB 06 entries as cash transfers lacked basis; no corroborative evidence or staff confirmation supported AO's decoding, and entries had to be taken at face value-CIT(A) deletion sustained. (b) The CIT(A) accepted the assessee's alternative contention that the cash back entries were part of the additional undisclosed income admitted by the assessee and, in absence of AO's inquiry into the computation or utilization of that admitted sum, deletion was warranted to avoid double taxation-Tribunal upheld this telescoping. (c) Applying the consistent approach from other years, considering admitted turnover, nature of contracts and net profit ratios, the CIT(A)'s limited disallowance at 5% was reasonable and confirmed. [Paras 30, 31, 32, 33, 35]

Revenue's grounds dismissed; deletions and set offs upheld and bogus purchase disallowance confined to 5% as sustained by CIT(A).

Final Conclusion: The Tribunal dismissed all revenue appeals for Assessment Years 2017-18, 2018-19, 2020-21 and 2021-22 and dismissed the assessee's cross objections; the CIT(A)'s deletions, telescoping/set offs, and the limited (5%) disallowances of alleged bogus purchases were sustained for the reasons recorded.

Offshore supply - composite contract - permanent establishment - taxability of profits attributable to permanent establishment - transfer of title under CIF - consortium with member-specific scope of work - business connection - remand for verification of refund

Offshore supply - composite contract - permanent establishment - transfer of title under CIF - consortium with member-specific scope of work - Whether receipts from supply of escalators/elevators to DMRCL and MMRCL are taxable in India or are exempt as offshore supplies - HELD THAT: - The Tribunal examined the contracts, the memorandum of understanding and invoices and applied the coordinate-bench decision in the assessee's own earlier appeals. It accepted that the consortium arrangement delineated distinct, member-specific scopes of work, that separate invoices and currencies were envisaged and that the MOU formed part of the contract known to DMRCL/MMRCL. Applying the principle that title passes to the buyer at the port of shipment under CIF terms, the Tribunal held that the transfer of property and receipt of payment occurred outside India. In view of the absence of a permanent establishment in India and no onshore operations by the assessee in respect of its scope, the profits arising from the offshore supply are not chargeable to tax in India. Following the coordinate-bench precedent, the Tribunal directed deletion of the addition made by the AO. [Paras 5, 6]

Addition made by the AO in respect of the offshore supplies is deleted; the assessee's appeal on this issue is allowed.

Remand for verification of refund - Determination and payment of refund claimed in intimation under section 143(1) - HELD THAT: - The Tribunal noted the assessee's claim for a refund as per the intimation and directed the Assessing Officer to determine the refund after verification of the relevant supporting material produced by the assessee. The matter was not decided on merits by the Tribunal but remitted for verification and quantification by the AO. [Paras 8, 9]

Refund claim is remitted to the AO for determination after verification of supporting documents; this ground is allowed for statistical purpose.

Final Conclusion: The appeal is partly allowed: the addition in respect of offshore supplies to DMRCL/MMRCL is deleted (taxes not chargeable in India), and the refund claim is remitted to the Assessing Officer for verification and determination.

Deduction under section 80P(2)(d) for cooperative society on interest from cooperative banks - Deduction under section 80P(2)(a) as profits and gains of business attributable to banking activity - Exclusion of cooperative banks from section 80P under subsection (4)

Deduction under section 80P(2)(d) for cooperative society on interest from cooperative banks - Exclusion of cooperative banks from section 80P under subsection (4) - Assessee entitled to deduction under section 80P(2)(d) in respect of interest received from cooperative banks - HELD THAT: - The Tribunal found it uncontested that the appellant is a registered cooperative society and that interest income arose from investments made with cooperative banks which are themselves cooperative societies. While subsection (4) excludes cooperative banks from claiming section 80P, that exclusion does not deprive a non-bank cooperative society of the benefit of subsection (2)(d). Subsection (2)(d) expressly allows deduction of income earned by way of interest or dividends received by a cooperative society from its investment with any other cooperative society. Applying that provision to the facts, the Tribunal held that interest earned by the assessee from cooperative banks is deductible under section 80P(2)(d), irrespective of whether such interest qualifies as business income under subsection (2)(a). The Tribunal noted supportive authority at the Supreme Court level on analogous facts and recorded that the assessee's position is stronger because it is a welfare society for employees. Accordingly the lower authorities were directed to allow the claimed deduction. [Paras 19]

Deduction under section 80P(2)(d) allowed in respect of interest from cooperative banks

Deduction under section 80P(2)(a) as profits and gains of business attributable to banking activity - Interest income need not be characterised as business income under section 80P(2)(a) to be deductible under section 80P(2)(d) - HELD THAT: - The Revenue contended that interest income did not arise from the assessee's banking business and therefore could not qualify as 'profits and gains of business' under subsection (2)(a). The Tribunal accepted that characterization may not attract subsection (2)(a), but held that even if subsection (2)(a) is inapplicable, subsection (2)(d) separately entitles a cooperative society to deduct interest earned from investments with other cooperative societies. Thus the possible non-application of subsection (2)(a) does not defeat the claim under subsection (2)(d). [Paras 14, 19]

Section 80P(2)(a) objection does not preclude allowance under section 80P(2)(d)

Final Conclusion: Both appeals for assessment years 2013-14 and 2017-18 allowed: the Tribunal directed the lower authorities to permit the deduction of interest income earned from cooperative banks under section 80P(2)(d).