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2018 (5) TMI 501
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....he entire assessment order when as per the show cause notice the order passed by the AO was erroneous and prejudicial to the interest of Revenue only in respect of two issues viz. with regard to the claim of the assessee in the profit and loss account in respect of legal charges and finance charges. 3. For that the Ld. Pr. CIT erred in invoking the provisions of sec. 263 when the assessment was completed by the AO after calling for the details and applying his mind to the issues involved. 4. For that the Ld. Pr. CIT erred in drawing the inferences by misinterpretation the agreement in respect of the recovery services giving rise to the expenses incurred by the assessee and as such the order passed under sec. 263 was bad in law. 5. For that on the fact and circumstances of the case the Ld. Pr. CIT erred in passing the order u/s. 263 when the order was not erroneous and prejudicial to the interest of Revenue. 6. For that on the facts and circumstances of the case the order of the Pr. CIT(A) be modified and the assessee be given the relief prayed for. 7. For that the assessee craves leave to add, alter or amend y ground before or at the tim....
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.... Kochers. Thus, the assessee has incurred an expense of Rs. 15 Lacs by way of payment to the legal heirs of late Mohan Lal Kochers during the year which was claimed in its profit and loss account as the finance charges. 2. Similarly, the assessee has also claimed an expense of Rs. 18,47,700/- under the head legal charges. The assessee claimed to have incurred the litigation expenses in relation to the disputed properties which are pending in the court of law. The ld. CIT u/s 263 of the Act was of the view that the above expenditures incurred by the assessee are capital in nature as these relate to the immovable properties. As per the Ld CIT the assessee was interested to purchase the aforesaid properties in future. Therefore, the aforesaid expenditures being capital in nature cannot be allowed as deduction while computing the business income of the assessee. 3. There was brought forward business loss of Rs. 33,271.00 pertaining to the assessment year 2011-12 which was eligible for set off against the future income of the assessee as per the provisions of law. However, the assessee has set off the loss of Rs. 89,438.00 only against the income pertaining to the y....
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....e charges Legal expenses 2010-11 1,000,001 2011-12 1,500,000 1,499,407 2012-13 1,500,000 1,847,701 2013-14 1,5000,000 1,499,407 2014-15 1,500,000 1,971,449 2015-16 1,500,000 2,496,625 2016-17 791,666 96,182 As per the assessee, the financial charges were paid in pursuance to the agreement dated 09.08-2009. Similarly, the legal charges incurred by the assessee represent the cost paid to the most senior advocates to appear before the Hon'ble High Court and Supreme Court. It was also submitted that the assessee has been in the business of investment banker and strategic management consultant for more than 30 years. The assessee was incurring the litigation expenses on behalf of the clients and he was eligible for the fees from the clients only if he succeeds in the cases pending in the Courts of Law. Thus, there was no outcome of any capital assets out of such expenditures. Therefore there is no question of treating the above expenses as capital in nature. The amount was paid to M/s Star Consortium Pte Ltd, Singapore (for short SCPL) against the services provided by it in terms of the man....
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....nditions to the successful implementation of the services; a) Advisors to have the liberty to appoint outside professionals at such terms and conditions that may be negotiated by the Advisors (terms to be pre fact approved by Mandator) - lawyers / experts / accountants / advisors / etc. b) Advisors to have the liberty to enter into negotiations / build relationships with key potential Investors. 4. Fee. 4.1.1. Mandator will pay to the Advisors a total Advisory fee of 0.75% of the amount of funding raised under the Transactions. The Advisory fee shall be payable by the Mandator to the Advisors immediately on the date of draw down of the funds raised under the Transaction in tranches till the complete Euro 30 million or equivalent as envisaged under the Transaction is raised. 4.2 The above payments will be subject to Tax Deduction at Source as applicable. Service tax and other taxes as applicable to the above fees in clauses 4.1.1 & 4.1.2 will be to the account of the Mandator over and above the Advisory fee." The assessee also submitted that SCPL does not have any PE in India. It does not provide any services through its employees. Sim....
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....uld be treated as PE of SCPL. The assessee was holding 50% shares of SCPL but the above facts were not verified by the AO during the assessment proceedings under section 143(3) of the Act. 4. There was no enquiry on account of the loss claimed by the assessee due to the difference in the currency rate for Rs. 11,10,854.00 only. 5. There was no discussion during the assessment proceedings about the reimbursement of travelling expenses to be claimed from M/s Darjeeling Organic Tea Estates Pvt. Limited whereas the assessee has claimed travelling expenses of Rs. 1,52,104 only. 6. There was no verification carried out by the AO with regard to the gifts received by the assessee as discussed above. In view of above the Ld CIT u/s 263 held the order of the AO as erroneous and prejudicial to the interest of Revenue by observing as under:- "34. The Assessing Officer has passed the assessment order without taking all the documents on record, conducting enquiry, examining the legal issues involved & interpretation, examination of material on record etc. The Explanation 2 to sub- section 1 of section 263 of Income Tax Act, 1961 has been amended w.e.f. 1st ....
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....f law. This case was selected for Complete Scrutiny through CASS. The various points discussed supra shows that the Assessing Officer has failed in its duty and has passed an erroneous order which is also prejudicial to the interest of revenue. 36. The Assessing Officer is directed to analyse all the documents, conduct enquiries on various issues as discussed above, do verification of facts and conduct necessary investigation, apply the law, examine the various contracts, expenditure, status of M/s. STAR Consortium Pte Limited, Singapore vis a vis India for PE/AE, deduction of TDS, if required from M/s. STAR Consortium Pte Limited as the CEO is in India too frequently and having 50% shares in the Company etc. In view of facts and legal position stated above, it is hereby held that the assessment order u/s 143(3) of Income tax Act, 1961 on 17.03.2015 by the Deputy Commissioner of Income Tax (International taxation), Circle 1 (1), Kolkata for Assessment Year 2012-13 in the case of Sh. Hartaj Sewa Singh is erroneous in so far as it is prejudicial to the interest of revenue. Consequently, in exercise of the power conferred in the Sec. 263 of the Income Tax Act, 1961 on the und....
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....lso found the order erroneous and prejudicial to interest of revenue with regard to the details asked for during the proceedings. Finally entire assessment set aside to be completed de-novo. Reply by the assessee to first show cause notice dated 10.3.2017:- (a) The AO specifically called for the agreement with Kochars which was filed on 20.8.2014 vide page 97 and 164 including all the details of expenses for legal charges paid. (b) Specific query was raised about finance charges and legal expenses which were replied vide paper book page 240 at page 241 explaining the payment made. Therefore all the enquiries were made by the AO and the AO allowed the expenses as revenue expenses. The expenses were also revenue expenses since the assessee was not the owner of the property, nor there was any intention to purchase the property, the expenses were not recoverable. If the assessee failed to recover the property for the owners, the property on recovery shall belong to the owners and not to the assessee and the assessee was entitled to recover only his fee equivalent to the 50% of the value of property and reimbursement of expenses. The fee when recovered shall be t....
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....he considered the order erroneous and prejudicial to the interest of revenue. Hence on those issues assessment cannot be set aside or for that matter the entire assessment cannot be set aside. Moreover, even the details also were not asked for with regard to the issues in Para 20(d)(e) 20(g), 20(i) 20(k) 20(i) and 29(m) . This shows that the order u/s 263 is not maintainable for setting aside the assessment to be made de novo. Moreover, on all the issues the Ld AO made enquiries vide paper book page 97, 141, 165, 16, 193 and 204. The proceedings were also taken as a result of audit objection on the interpretation given on law by the audit party that the expenses on account of finance charges and legal expenses were capital expenses. On the other hand, the ld. DR submitted that the order of the AO is silent and non- speaking. The assessee has filed certain details before the AO during the assessment proceedings but there is no evidence suggesting that the AO has applied his mind on the submissions of the assessee. Moreover, the details filed by the assessee were not relevant to the issues raised by the Ld CIT u/s 263 of the Act. The case law relied by the Ld. AR in the c....
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....has acquired interest from Smt. Indu Kocher & others along with the litigation in the firm BICC. Consequently, the assessee acquired the interest in the properties in respect of which the court proceedings were pending. The relevant extract of the agreement is reproduced below:- "AND WHREAS:- The assignors are ready and willing to assign all and any of their subsisting and future interest and rights in the Assignors' hare along with all their interest in the litigations and the Assignee is ready and willing to adopt all such interests and rights in the Assignors' Share along with all the interests in all the litigations. NOW TDHIS INDENTURE WITNESSETH AS UNDER: That in reference to the instant Agreement it is agreed and settled between the parties that: "1(a) "Transaction Costs" would mean all litigation and other costs with regard to pursing the litigations and the pursuit of legal and other avenues available to ensure that the Asignors' share is restored back to the Assignors and will also include the payent of upto Rs. 15 lacs (Rupees Fifteen lacs only) by the Assignee to Anaita Kocher and Sharan Kocher (the expression shall include t....
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...., make efforts to arrive at a settlement for relinquishment of rights and share by Anita Kocher and Sharma Kocher in the Firm and in the event of such relinquishment of rights and share by Anita Kocher and Sharan Kocher the rights and share of Anita Kocher and Sharan Kocher will be deemed to vest with the Assignee who would then hold 25% share in said 50% share of MLK in the Firm on which the Assignee would have full rights and interests as per the instant indenture/Assignment. However, in the event of failure of the instant agreement, the said 25% share so vesting in the Assignee will be reassigned by the Assignee to the Assignor. 5. The Assignee shall first adjust the amounts paid as Transaction costs above from the final recovery amount after monetization of the Assignors share or sale of such Assignors share in physical form; the balance mount after such adjustments shall be divided equally between the Assignors and Assignee.(Emphasis supplied) 6. In the event of n award/settlement in reference to the share and interest in the firm held by the Assignors, which is now with the Assignee, the Assignors shall retain 50% of such share, after reduction of the Transa....
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....9;ble Bombay High Court was based on the expenses incurred by the assessee over and above the lease consideration by way of making payment to the villagers to evict the properties was held as capital in nature. But in the case on hand, there is no relationship between the assessee and Smt. Indu Kocher and others as of the lessor and lessee. Therefore, no reliance in our considered view can be placed on the judgment of Hon'ble Bombay High Court in the case of Hardiallia chemicals Ltd. (supra). 6.2 The Ld AR also submitted that the necessary verification was made by the AO during the assessment proceedings as evident from the submission of the assessee which is placed on pages 97 to 140 of the paper book. The remaining issues raised by the Ld CIT u/s 263 vide notice number CIT/IT& TP/Kol/263/2016- 17/4776 dated 15.3.2017 are detailed as under : 1. Set off brought forward loss in excess by Rs. 56,167.00 only. 2. Capital contribution of Rs. 30 Lacs by the assessee in his proprietorship firm. 3. No disallowance as per the provisions of section 14A of the Act was offered though the assessee had exempted income. 4. The assessee has shown negative ban....
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....-700 017 Dear Sir, Ref. PAN No.ABHPS 9122R Sub: Documents for the AY 2012-2013 With reference to above, we would like to submit the following documents and explanation relating to financial year 2011-2012- 1. Details of Last 3 years income/Assessed Income/Appeal Filed as per annexure- XVII 2. Current Ye Issues: During the Financial Year, I had two proprietorship concern in India namely "The Safe Consortium" and "Sharp Business Services". The Safe Consortium was providing Management Consultancy Services to its clients and there was no business activity in the other proprietorship concern Sharp Business Services. The Safe Consortium had received Success fees of Rs. 93,37,500.00 from M.s Darjeeling Organic Tea Estates Private Limited as per Mandate Letter dated 20.01.2009 signed between the parties. The Safe consortium had paid a sum of Rs. 80,43,954.00 as Advisory Fees to M/s Star Consortium Pte. Ltd. (Singapore) as per mandate letter dated 09.02.2011. 3. Details of Last 3 years Income in India and Income Outside India - as r annexure- XVIII. 4. During the financial year no Capital Assets acquired from Income earned in In....
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....n that year for a period or periods amounting in all to one hundred and eighty-two days or more; or (b) ,...., (c) Having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty five days or more, is in India for a period or period amounting in all to sixty days or more in that year. Explanation: In the case of an individual,- (a) Being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India, the pres of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted; HARTAJ SEWA SINGH MEWS III, TIVOLI COURT, 1C BALLYGUNGE CIRCULAR ROAD KOLKATA-70019 10th February, 2015 To Deputy Commissioner of Income Tax International Taxation, Circle 1(1) Ayakar Bhawan Poorva 110, Shanti Pally Kolkata-700 017 Dear Sir, Ref. PAN No.AB....
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....es to ensure that the Kocher's share is restored back to the Kocher's. these legal expense of Rs. 18,47,700.93 (Rupees eighteen lacs forty seven thousand seven hundred and paise ninety three only) has been incurred as per the agreement only, on which tax has been deducted (Details of TDS has been already submitted to you as per annexure-X) and paid to the Central Government within due dates where ever applicable. From the above, it is clear that order was passed by the AO under section 143(3) of the Act after conducting necessary enquiries and considering the submission filed by the assessee during the assessment proceedings. It is undisputed fact that the order the AO was nonspeaking and returned income was accepted under the assessment proceedings but in our considered view non discussion of the issues in the assessment order cannot render the order as erroneous and prejudicial to the interest of Revenue on account of non-verification of the issues. In this regard we find support and guidance from the order of Hon'ble ITAT the in the case of Sethia Finance Trading Co. Vs. ACIT in ITA number 783/Kol/ 2013 vide order dated 7.8.2017 wherein it was held as under :- "... .....
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....rent ground-After finalization of the re-assessment proceedings, a show-cause notice was served upon assessee by CIT on the ground that the order passed by AO was erroneous and prejudicial to the interest of revenue because AO did not assess the amount of Rs. 55,00,000 received by assessee as repairs of machinery charges and he did not assess a sums of Rs. 2,41,81,436 being contract receipts for assessment year 2002-03, while in the revision order, CIT merely directed AO to call for the original vouchers as well as the original ledger containing the sales account as well other sub-accounts in which assessee claims to have made entries regarding such income. assessee challenged the revision order. Held: where the revision order was passed on the ground other than the grounds for which revision proceedings were initiated the same could not be sustainable in law. Since there was a shirt in the stand of the commissioner as to whether it was a case for revision on the ground that income on account of repairs of machinery and contract receipts was required to be added to the income assessed in the hands of assessee or whether it was a case for revision on the ground that AO did not make ....