TaxTMI 
TaxTMI 
2021 (5) TMI 515
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..../IT-10229/DC.CC- 6(4)/2018-19 & CIT(A)-54/IT-10236/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10227/DC.CC-6(4)/2018-19 dated 24/01/2019 & 16/10/2019 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/12/2018 & 29/12/2018 respectively by the ld. Dy. Commissioner of Income Tax, Central Circle-6(4), Mumbai (hereinafter referred to as ld. AO). ITA No. 68/Mum/2020 (A.Y.2011-12), 69/Mum/2020 (A.Y.2012- 13), 70/Mum/2020 (A.Y.2014-15), 71/Mum/2020 (A.Y.2015-16), 72/Mum/2020 (A.Y.2016-17) & 152/Mum/2020 (A.Y.2017-18) These appeals in ITA Nos.68/Mum/2020, 69/Mum/2020, 70/Mum/2020, 71/Mum/2020 & 152/Mum/2020 for A.Y. 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, arise out of the order by the ld. Commissioner of Income Tax (Appeals)-54, Mumbai in appeal No. CIT(A)-54/IT-10218/DC.CC-6(4)/2018-19, CIT(A)-54/IT- 10220/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10224/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10227/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10229/DC.CC- 6(4)/2018-19 & CIT(A)-54/IT-10236/DC.CC-6(4)/2018-19 dated 16/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.14....
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....T-10266/DC.CC-6(4)/2018-19 & CIT(A)-54/IT-10265/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10267/DC.CC-6(4)/2018-19 dated 31/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/12/2018 by the ld. Dy. Commissioner of Income Tax, Central Circle-6(4), Mumbai (hereinafter referred to as ld. AO). ITA No.153/Mum/2020 (A.Y.2011-12), 154/Mum/2020 (A.Y.2012-13), 155/Mum/2020 (A.Y.2013-14), 156/Mum/2020 (A.Y.2014-15), 157/Mum/2020 (A.Y.2015-16), 158/Mum/2020 (A.Y.2016-17) & 159/Mum/2020 (A.Y.2017-18) These appeals in ITA Nos. 153/Mum/2020, 154/Mum/2020, 155/Mum/2020, 156/Mum/2020, 158/Mum/2020 & 159/Mum/2020 for A.Y.2011-12, 2012-13, 2013-14 2014-15, 2015-16, 2016-17 & 2017-18 arise out of the order by the ld. Commissioner of Income Tax (Appeals)- 54, Mumbai in appeal Nos. CIT(A)-54/IT-10245/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10246/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10263/DC.CC- 6(4)/2018-19 CIT(A)-54/IT-10264/DC.CC-6(4)/2018-19 & CIT(A)-54/IT-10265/DC.CC-6(4)/2018-19, CIT(A)-54/IT-10266/DC.CC-6(4)/2018-19 & CIT(A)-54/IT-10267/DC.CC-6(4)/2018-19 dated 31/10/2019 (ld. CIT(A) in short) against the....
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....s, advances, loans or through debt instruments such as Optionally Convertible Debentures (OCDs), Compulsorily Convertible Debentures (CCDs), Non- Convertible Debentures (NCDs) etc. 5. In view of innumerable number of issues spread over various assessees and various assessment years, we feel that it would be desirable to proceed with each of the issues involved in all these appeals independently for the sake of convenience. However, due care has been taken by us to make proper reference to the concerned name of the assessee, grounds involved thereon together with the relevant assessment years. 5.1. The various issues involved in all these appeals may be summarized as under:- (A) Whether any addition/ disallowance could be made in an assessment framed u/s 153A of the Act in respect of unabated/ concluded assessments on the date of search in the absence of any incriminating material found during the search relating to such unabated assessment year ? (B) Whether disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules could be made in the facts and circumstances of the case under normal provisions of the Act ? (C ) Whether disallowance u/s 14A of the Act read with Rule 8D....
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....se of search with respect to the disallowances/ additions made by the ld AO in the various Asst Years which are not abated and had become final in as much as the period for issue of notice u/s 143(2) of the Act had already elapsed for the respective assessment years and/ or that the assessment orders u/s. 143(3) of the Act had already been passed.We find that Section 153A of the Act provides that where a search is initiated u/s 132 of the Act the ld AO shall "assess or reassess the total income of six assessment years immediately preceding the assessment year" relevant to the previous year in which the search is conducted or requisition is made. The 1st Proviso states that the ld AO shall "assess or reassess the total income in respect of each assessment year falling within such six assessment years", while the 2nd Proviso states that the assessment or reassessment relating to the said six assessment years "pending" on the date of initiation of the search u/s 132 of the Act shall "abate". It thus follows that assessments or reassessments which are not pending on the date of initiation of search shall not abate. We find that the ld AR placed reliance on the following chart at the ti....
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....the revenue before us as they are borne out from the records available before us. At the cost of repetition, we find that the ld CIT(A) had deleted all the disallowances and additions made in the assessments framed u/s 153A of the Act for the Asst Years 2011-12, 2012-13 and 2013-14 in the case of IIC Limited ; Asst Years 2011-12 & 2012-13 in the case of Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited) and Asst Years 2012-13 and 2013-14 in the case of Rattanindia Power Limited, by giving a categorical finding that these assessments are concluded assessments and no incriminating materials relatable to such assessment years were found during the course of search. The ld DR before us was not able to bring any contrary evidence in this regard before us. We find that the ld DR before us vehemently argued that the provisions of section 153A of the Act does not mandate finding of incriminating materials during the course of search and hence they are not relevant for the purpose of framing assessment u/s 153A of the Act. He also stated that section 153A of the Act speaks about determination of total income and hence the ld AO has got every right to determine ....
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....sment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words "search" and "requisition" appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro Products Ltd. (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question. 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the re....
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....re. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. 49. Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under sub-section (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of c....
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....tion is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall re....
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....o not note the reliance placed by Mr. Pinto on the judgments rendered by the High Court of Delhi at New Delhi and the High Court of Karnataka. Mr. Pinto would submit that the above observations and conclusions of the Special Bench and reproduced by us are specifically disapproved in CIT v. Anil Kumar Bhatia [2012] 24 taxmann.com 98/211 taxman 453 (Delhi) by the Delhi High Court. We do not find this argument to be accurate. In Anil Kumar Bhatia (supra) as well the assessment involved the years 2000-01, 2002-03 and 2005-06. One of the questions and which was termed as substantial question of law was the correctness of the Tribunal's order holding that the Assessing Officer wrongly invoked section 153A of the IT Act. The facts as noted were that in the case of an individual assessee and who was carrying on business in the name and style of M/s. A.K. Traders, there was a search of his residence and business premises on 13th December, 2005 under section 132 of the Act. Pursuant to the search, the Assessing Officer issued notice under section 153A of the IT Act and called upon the assessee to file the return of income for the six years as envisaged in that section. Notices under sect....
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....urt's judgment must be seen in the context of the essential controversy before it. Pertinently, that controversy arose because of a search being conducted at the residence and business premises of the assessee. Foundation of the action under section 153A being the search that the High Court of Delhi was required to consider the ambit and scope of the powers. Further, pertinently the Delhi High Court did not ignore any of the provisions. Those are correctly understood by the Delhi High Court. We do not see how and where the Delhi High Court disapproves the view taken by the Tribunal that its observations can be read torn from the context. Once these observations and noted by us from the paragraphs cited by Mr. Pinto are read as a whole and in entirety, it is not possible to agree with Mr. Pinto that the High Court of Delhi reached a conclusion different than the view taken by our Division Bench. 36. Similar is the case with the Division Bench judgment of the High Court of Karnataka at Bangalore. There as well a real estate firm was the assessee. A return of income was filed and when an order under section 143(3) of the Act came to be passed on 31st December, 2010, for asse....
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....ction 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any u....
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....e the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. The Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the "total income" of six assessment years which means the said to....
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....on the legality of making additions in the absence of incriminating material in the assessments u/s 153A of the Act. This is the main contention raised by the revenue in its appeals for various Asst Years as listed above as far as this legal issue is concerned.We find that the ld AR rightly brought to our notice that (SLP No. 18506/2015) Civil Appeal No. 8546 of 2012 in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd was directed to be listed along with Civil Appeal No. 8900 of 2012. We find that the Civil Appeal No. 8900 of 2012 was disposed of by the Hon'ble Supreme Court in the case of CIT vs Container Corporation of India Ltd reported in 93 taxmann.com 31 (SC) wherein only the issue of claim of deduction u/s 80IA of the Act on merits was subject matter of adjudication. Hence the decision of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd in 374 ITR 645 on the aspect of necessity of incriminating material for making additions in concluded assessments u/s 153A of the Act was not even challenged by the revenue before the Hon'ble Supreme Court and accordingly the decision of Hon'ble Bombay High Court in 374 ITR....
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....4 respectively in the case of IIC Limited, are dismissed. Accordingly, the issue framed in para 5.1. (A) above is decided in favour of the assessee. 8. Disallowance u/s 14A of the Act read with Rule 8D(2) of the Income Tax Rules (in short 'Rules') under normal provisions of the Act We find that the ld AO had resorted to make disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules in the case of IIC Limited in the Asst Years 2013-14 to 2017-18 ; in the case of Sinnar Thermal Power Limited (formerly known as Rattanindia Nasik Power Ltd.) in the Asst Years 2011-12, 2012-13, 2015-16 to 2017-18 and in the case of Rattanindia Power Ltd. in the Asst Years 2012-13 to 2017-18. We find that the assessee companies have earned exempt income during the assessment years under consideration. We find that the claim of the assessee companies is that they have not incurred any direct or indirect expenditure for earning the aforesaid income. However, despite the same, the assessee companies had suo-moto made disallowance u/s. 14A by identifying certain expenses that could be made attributable for the purpose of earning exempt income, in the returns of income filed by them for various asse....
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....d) and Asst Year 2013-14 in the case of IIC Ltd, as it has already been held hereinabove that they being unabated assessments and there is no incriminating material found during the course of search. Hence our finding with regard to the issue of disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules under normal provisions of the Act is confined to other remaining assessment years only. 8.2. We find that the main plea of the ld AR before us was that the ld AO had not recorded any satisfaction as to how the suo moto disallowance made by the assessee companies voluntarily in the return of income was incorrect by pointing out certain defects thereon. It was argued that the ld AO ought to have arrived at the satisfaction having regard to the books of accounts of the assessee companies which is a clear mandate of law provided in Section 14A(2) of the Act read with Rule 8D(1) of the Rules. It was vehemently argued that without recording such objective satisfaction with cogent reasons, the ld AO cannot resort to proceed directly with the computation mechanism provided in Rule 8D(2) of the Rules. Reliance in this regard was placed on the decision of Hon'ble Supreme Court in th....
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....e are in complete agreement with the arguments advanced by the ld AR that the ld AO had not recorded any objective satisfaction with cogent reasons for rejecting the suo moto disallowance made by the assessee companies. The basis of suo moto disallowance of expenses u/s 14A of the Act was duly submitted before the lower authorities by the assessee companies. We find tha the ld AO had rejected the same and had simply stated that he is not satisfied with the suo moto disallowance made by the assessee, without adducing any reasons. Hence the decision of Hon'ble Supreme Court in the case of Maxopp Investment reported in 402 ITR 640 (SC) clearly supports the case of the assessee, wherein it was held that :- 41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to re....
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....tributable to earning of exempt income. The Hon'ble Delhi High Court in case of Maxopp Investment Ltd. vs. CIT ITA No. 687 of 2009 has also expressed similar view. Undisputedly, in the facts of the present case, the AO has not recorded any satisfaction as per the mandate of s. 14A(2) r/w r. 8D(1). ............ That being the case, the AO could not have done any further disallowance under s. 14A r/w r. 8D." 8.6. We also find from the perusal of the aforesaid factual chart that the disallowance u/s 14A of the Act had been made in excess of the exempt income itself for the various Asst Years for all the assessees, except in the case of Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited) for the Asst Years 2012-13 and 2015-16 and in the case of Rattanindia Power Limited for the Asst Year 2012-13, which is in gross violation of the principles laid down by the Hon'ble Apex Court in the case of Maxopp Investment reported in 402 ITR 640 (SC). Further we find that the assessee companies are also having sufficient interest free funds in its kitty which would source the investments made by the assessee and hence in any case, there could be no disallowance of inte....
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....n. We find that the claim of the assessee companies is that they have not incurred any direct or indirect expenditure for earning the aforesaid income. However, despite the same, the assessee companies had suo- moto made disallowance u/s. 14A by identifying certain expenses that could be made attributable for the purpose of earning exempt income, in the returns of income filed by them for various assessment years. 9.1. We find that the ld CITA had deleted the disallowance u/s 14A of the Act while computing book profits u/s 115JB of the Act by following the order of the Special Bench of Delhi Tribunal in the case of ACIT vs Vireet Investments Pvt Ltd reported in 165 ITD 27. Pursuant to the relief granted by the ld CITA, the revenue is in appeal before us for various assessment years for various companies. We are any way not concerned with the disallowance made for the Asst Years 2012-13 & 2013-14 in the case of Rattanindia Power Ltd ; Asst Years 2011-12 & 2012-13 in the case of Sinnar Thermal Power Limited (formerly known as Rattanindia Nasik Power Ltd) and Asst Year 2013-14 in the case of IIC Ltd, as it has already been held hereinabove that they being unabated assessments and th....
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....uring the course of search u/s 69A of the Act We find that this addition towards cash found during the course of search was made in the hands of IIC Limited for the Asst Year 2017-18. Admittedly this addition has been made u/s 69A of the Act by the ld AO. The brief facts of this addition are that during the course of search conducted on the assessee, cash amounting to Rs. 1,81,18,710/- was found at the office premises '5th Floor, East Wing, Tower-B, Worlmark -1, Aerocity, New Delhi' of the assessee and various other group companies. It was submitted by the assessee company that the said premises was shared by 100 other group companies and the admitted position of cash in hand combined was of Rs. 3,66,94,809/- which was in excess of the cash found at the said premises. That cash amounting to Rs. 33,39,000/- was also found at the residence of Mr. Hitendar Rana, who is a director is various entities of Rattanindia Group. He was responsible for handling the finance, taxation and other administration in the group. The cash amounting to Rs. 33,00,000/- was kept at his residence for safe keeping and the balance amount of Rs. 39,000/- belonged to him. Further, with respect to the same....
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.... the Aerocity office had staples on them while RBI directives prohibited banks from stapling notes and thus the money was not earned through regular banking channels. He had also contended that the bundles were wrapped in slips on which certain notings were made. These are absolutely irrelevant observations for the purpose of assessment of income under the Act. The department is not here to sermonise how a taxpayershould keep its currency.What is relevant is whether the cash found during the course of search has been duly accounted by the assessee and its group companies sharing the common office. 10.3. We find that the ld CITA had rightly appreciated the contentions of the assessee and granted relief to the assessee in respect of addition made u/s 69A of the Act in respect of cash found during the course of search. The observations of the ld CITA could be summarised as under:- i. A sum of Rs. 1,81,18,710/- was found from the Aerocity premises of the appellant company, which is also shared & used by over 100 other group companies. ii. Admittedly, the cash position of the group companies across all premises was Rs. 3,66,94,809/- which is in excess of the cash found at the Aero....
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.... the Asst Year 2014-15 was considered to be irrecoverable and written off by the assessee company. We find that the assessee had submitted that it had provided a business advance to its subsidiary company for expansion of its business through the subsidiary by setting up of a thermal power plant in Chhattisgarh. In this regard, the assessee company drew the attention of the ld AO in drawing reference to its Memorandum of Association, wherein it has been clearly stated in the 'Main Objects' that the company is to undertake or carry out on its own or through any other entity the business of generating, developing, transmitting, distributing, trading and supplying all forms of electrical power, energy from any source whatsoever. Hence, the act of the assessee company of granting advance to the subsidiary for setting up a thermal power plant through the said subsidiary was within the objects for which the assessee company was incorporated. Accordingly, the assessee pleaded that the advance was given by it in its normal course of business. The relevant portion of the Memorandum of Association is reproduced hereunder for ready reference: "The main objects to be pursued by the company o....
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....We find that the assessee submitted that the write off ought to be allowed as an expenditure since the debt given to the subsidiary was in the nature of business debt. It was an act in furtherance of its set object and accordingly considered as an advance in the routine course of business of the assessee company. Accordingly these sums were written off in the books of accounts as irrecoverable business advance in the respective assessment years and claimed as business loss by the assessee company in the return of income. 11.3. Before the ldAO, it was prayed by the assessee company that factually the assessee company had suffered a loss and the same ought to be allowed as a 'loss allowable under the head business or profession' or alternatively as a capital loss. We find that the ld AO disallowed the business loss claimed by the assessee company for the Asst Years 2013- 14 and 2014-15 and did not allow the same as capital loss as well.The said disallowance was challenged by the assessee company before the Ld. CIT(A). We find that the ld CIT(A) had granted relief to the assessee on merits of the case for the Asst Year 2014-15 by duly appreciating the aforesaid contentions of the ass....
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....d disallowance of depreciation on alleged bogus expenditure capitalised on substantive basis We find that an addition has been made in the hands of IIC Limited with respect to alleged bogus expenditure on protective basis and in the case of RattanindiaPower Limited, addition has been made on substantive basis by disallowing the depreciation component thereon on the alleged bogus expenditure. 12.1. Infact similar disallowances were also made in the case of IIC Limited for the Asst Years 2011-12, 2012-13 & 2013-14 on alleged bogus expenditure on protective basis. However, the same need not be adjudicated herein as we have already held that the Asst Years 2011-12, 2012-13 & 2013-14, being concluded assessments on the date of search, in the absence of any incriminating material found during search, no disallowance/ addition could be made relatable to those assessment years in the assessments framed u/s 153A of the Act. Hence our findings and observations are given only for other remaining assessment years before us. 12.2. We find that the ld AO had made the aforesaid disallowance on account of bogus expenditure by alleging that the transactions had by the assessee company i.e. IIC L....
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....t payee cheques. 12.3.2. During the course of post search inquiries, the investigation wing had conducted independent verification of various vendors that were spread over various parts of the country. While most of the vendors were verified and were categorised as genuine or bogus, 5 vendors who were still undergoing independent verification were categorised as Suspicious Purchase Transactions. The assessee was given to understand that each of such 5 vendors had also duly responded to the queries of the investigation wing. Infact, the largest of such contractors being M/s Shree Infra had duly appeared before the jurisdictional authorities in Jodhpur and presented incontrovertible evidence before the investigation wing, which was resultantly accepted by the investigation wing. 12.3.3. The materials purchased from these five vendors were duly consumed in the construction of the power project undertaken by the assessee companies. It was specifically brought to the notice of the ld AO that but for the consumption of the materials bought from the aforesaid five vendors, it was not possible to complete the work undertaken. Further the assessee companies furnished all the documentary e....
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....f independent customers about the said contractor v. Copy of ledger account of M/s Varun Earth Movers in the books of IIC Limited along with narrations vi. Relevant extracts of bank statement of IIC Limited showing payments made to M/s Varun Earth Movers 4. J K Constructions i. Copy of invoice raised by M/s J K Constructions on IIC Limited showing its service tax registration details, VAT registration details, address, contact details, PAN etc. 1279-1280 1281-1282 1283-1286 1287 1288-1289 ii. Details of jurisdictional AO of M/s J K Constructions iii. Contact information of the M/s J K Constructions available in the public domain on websites such as Justdial, showing the existence, current contact details and reviews of independent customers about the said contractor iv. Copy of ledger account of M/s J K Constructions in the books of IIC Limited along with narrations v. Relevant extracts of bank statement of IIC Limited showing payments made to M/s J K Constructions 5. Shree Ram Builder i. Copy of invoice raised by M/s Shri Ram Builders on IIC Limited showing its service tax registration details, VAT registration details, address, contact details, PAN etc. 1290-129....
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....owance of depreciation @ 15% in the hands of M/s. Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Ltd)[after 25% markup] on the expenditure incurred on substantive basis. Parallely, the ld AO in the hands of IIC Limited,made disallowance of 100% of the aforesaid expenses on protective basis on the pretext that the transactions between IIC Limited and Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited) were not genuine. 12.6. We find that the Ld. CIT(A) has granted relief to the assessee company by deleting the aforesaid additions, both protective in the hands of IIC Limited and substantive in the hands of Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited). Aggrieved, the revenue has filed an appeal before us for the respective assessment years in the hands of IIC Limited and Sinner Thermal Power Limited (formerly known as Rattanindia Nasik Power Limited). We find that the ld AO had not conducted any enquiry in any manner whatsoever with those five vendors to examine the veracity of the transactions carried out by the assessee companies with them. We find that the various documents were submitte....
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....his regard is factually incorrect and legally unsustainable in the eyes of law. We further find that the assessee had also requested the ld AO to carry out a site inspection to understand the veracity of the transactions. This was not acted upon by the ld AO. We find that the vendors had duly deposed either in person or by replying directly before the investigation wing in respect of post search enquiries conducted by the investigation wing on the various vendors through out the country which admittedly included these 5 disputed vendors. The ld AR stated before us that the investigation wing had concluded that the transactions of these five vendors with the assessee companies were genuine and though these replies and statements had been reportedly forwarded to the ld AO, the same were neither furnished to the assessee companies by the ld AO nor considered by the ld AO while framing the assessments. The ld AR stated that the assessee companies had sought for those replies given u/s 133(6) of the Act that were reportedly forwarded by the investigation wing to the ld AO. The ld AR vehemently argued that the ld AO neither provided the copies of such responses to notice u/s 133(6) of t....
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....ufficient proof of genuineness of a transaction and of the work done. With regard to the absence of provisions such as liquidated damages and defect liability alleged by the ldAO, we find that the assessee had met this allegation before the ld CIT(A) by stating that the underlying work done by the contractor was in the nature of excavation/ earthwork and not in the nature of development of a tangible product. Further these provisions are enabled only in case of defects or deficiency in the work done and thus come into action only if the work is insufficient/ unsatisfactory or incomplete. Yet another allegation levelled by the ld AO in his assessment order was that the alleged inability of an employee of IIC Limited to furnish documentary evidence before the investigation wing. In this regard, we find that the assessee had met this allegation before the ld CIT(A) by stating that the ld AO did not provide a copy of the report received from the investigation wing to the assessee to verify the said allegation. Without prejudice to the same, IIC Limited had duly submitted all the invoices and proof of payment to the said contractor before the ld AO which have not been disregarded by th....
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.... find that when the transactions had been carried out with Ruby Constructions only in Asst Years 2014-15 and 2015-16, there is nothing wrong in the reply given by Ruby Constructions that no business had been carried out during financial years 2009-10 to 2011-12.Infact the ld AO specifically records in his assessment order that no comment was offered by the said party for financial year 2013-14 under consideration relevant to Asst Year 2014-15. Where is the reason to draw a negative or adverse inference against the assessee companies in this regard ? We find that the said party i.e Ruby Constructions did not say that they never had any transactions with the assessee companies. It is well settled that the party deposing before an authority either in person or replying to query raised by the ld AO or by the investigation wing u/s 133(6) of the Act, is expected to answer only to those specific questions that were put before him. 12.11. We find that the ld AR time and again pleaded that independent enquiry was conducted by the Investigation Wing, with respect to various vendors including the five vendor parties and that these five vendors had duly responded to the queries of the Inves....
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....ld AO had merely relied upon the report of the investigation wing (which was not even provided to the assessee despite written requests for its rebuttal, if any) to classify transactions with 5 vendors as bogus transactions. We find that the assessee had furnished all the necessary documentary evidences in this regard with regard to these 5 vendors which were not subjected to any examination by the ld AO. As stated earlier, no independent examination or enquiry in any manner whatsoever was carried out by the ld AO to test the evidences submitted by the assessee, in the manner known to law. Moreover, the report of the investigation wing, which was relied upon by the ld AO for drawing adverse inference against the assessee, were never furnished to the assessee for its rebuttal and cross -examination, if found necessary. This violates the basic principle of natural justice. We find that the Hon'ble Supreme Court in the case of CIT vs Odeon Builders Pvt Ltd reported in 110 taxmann.com 64 (SC) had observed as under:- 3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third par....
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....s been violated by the ld AO in the instant case. 12.13. We find that the ld AR also placed reliance on the Co-ordinate Bench of Kolkata Tribunal in the case of SPML Infra Ltd vs DCIT in ITA No. 1228 & 1211/Kol/2018 dated 17.1.2020 in support of its contentions with regard to the issue raised in para 5.1. (F) above. We find that the ld AR placed reliance on the decision of Kolkata Tribunal to drive home the point the statutory provisions contained in section 142(1), 142(2) and 142(3) of the Act which had been given a complete go by in the instant case by the revenue while framing the assessment. We find that a query was raised by the ld AO in terms of section 142(1) of the Act, which was duly replied by the assessee by filing voluminous documents with supporting evidences thereon. Thereafter the ld AO is bound to carry out inquiries on the said documents and evidences in terms of section 142(2) of the Act, which was admittedly not carried out in the instant case. Hence the applicability of provisions of section 142(3) of the Act does not arise in the instant case since no enquiries were conducted by the ld AO to test the documentary evidences submitted by the assessee. Therefore....
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....s. The copy of financial statements of M/s. Yantra Energetics Pvt. Ltd. for the financial years ending 31.03.2015 and 31.03.2016 are enclosed in pages 806 to 836 of the Paper Book I B filed before us. The status of shareholder funds of Yantra Energetics Pvt Ltd from 31.03.2015 to 31.03.2016 is tabulated below: Particulars 31.03.2015 31.03.2016 Share Capital 100,000 100,000 Reserves and Surplus (226,01,52,788) (239,40,86,259) Total Net Worth (226,00,52,788) (239,39,86,259) Net Worth per share (22,600.52) (23,939.86) 13.1.1. These were also duly disclosed by Yantra Energetics in its return of income for Asst Years 2015-16 and 2016-17, copies of which are enclosed in Page Nos. 837 to 906 of the Paper Book I B filed before us. Herein, it is pertinent to note that the books of accounts and return of income of Yantra Energetics were duly scrutinized by the ITO Ward 27(4) Delhi and after thorough verification of books of accounts and return of income, the returned income/ loss was duly accepted by the AO for each of these years. Copies of orders u/s 143(3) of the Act for Asst Year 2015-16 dated 22.09.2017 and for Asst Year 2016-17 dated 10.12.2018 are enclosed in Page Nos....
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....3.2017 for Rs. 24,35,00,000/- which resulted in a business loss of Rs. 61,00,40,000/- ( 85,35,40,000 - 24,35,00,000) which was duly disclosed in the profit and loss account of the assessee in the audited financial statements. 13.4. The ld AO observed that when the assessee was pointed out regarding the non-availability of set off of brought forward losses to the extent of available business income of Rs. 61,34,25,335/- for the year having regard to the provisions of section 79 of the Act as there was a change in the shareholding pattern of the assessee company during the financial year 2014-15 relevant to Asst Year 2015-16, the assessee has, with an intention to set off its loss incurred on sale of OCDs during the year amounting to Rs. 61,00,40,000/- against its business income of Rs. 61,34,25,335/-, has revised its computation of income during the assessment proceedings on 27.12.2018, wherein the assessee has withdrawn its claim of set off of brought forward losses amounting to Rs. 61,34,25,335/- and then set off its loss of Rs. 61,00,40,000/- incurred on sale of OCDs under the garb of conversion of investment into stock in trade resulting into net income from business of Rs. 33,....
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.... made in OCDs of Yantra Energetics Private Limited was made for the furtherance of the assessee company's business objects. 13.7. We find that the assessee company had invested Rs. 85,35,40,000 in Optionally Convertible Debentures ("OCD") of Yantra Energetics Private Limited in earlier years, which was disclosed under the category of Investments. As on 01.04.2016 the appellant had reclassified the said amount as Inventory (being stock-in-trade) at par in its books of accounts. This was duly documented by way of a board resolution passed by the Board of Directors of the assessee company, and relevant journal entries were also passed in the assessee company's books of accounts. Admittedly these entries in the books of accounts were passed way back on 1.4.2016 and that the assessment proceedings commenced later, at which point in time only the assessee company was informed by the ld AO about the violation of provisions of section 79 of the Act and thereby making it ineligible for set off of the brought forward business losses with available business income. Obviously the assessee could not have pre- empted the mind of the ld AO as on 1.4.2016 while passing entries in its books of ac....
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....s before the ld AO. No defect or deficiency has been identified by the ld AO on the same.Hence this main contention of the assessee which has been one of the main reason for the ld CITA to grant relief to the assessee does not warrant any interference. 13.9. We further find that the ld AO had contended that upon him pointing out non-allowability of set off of brought forward loss, the assessee company with an intention to set off its loss incurred on sale of OCDs, revised its return of income. In this regard, we find that once the ld AO pointed out the non-allowability of the losses to the assessee company, immediately the assessee company realized the discrepancy in the return of income submitted for Asst Year 2017-18 in terms of loss on sale of OCDs. Immediately upon realizing the said error, the assessee company,with a view to present a true and fair status of its transactions for determining its tax liability, submitted a revised return of income u/s 139(5). As per provisions of section 139(5) as applicable for Asst Year 2017-18, a revised return could have been submitted either before one year from the end of the assessment year or before the end of completion of assessment p....
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....business loss in the hands of the assessee company and considered the same as capital loss. We find that the various evidences submitted by the assessee company in this regard were not controverted by the ld AO or by the ld DR before us. It was argued vehemently that once the first step in the transaction of conversion of investment into stock in trade resulting in long term capital loss of Rs. 51,40,86,582/- has been accepted by the ld AO by duly appreciating the evidences in that regard, the ld AO cannot take a divergent stand in the second step of the transaction when it comes to allowability of business loss arising on actual sale of stock in trade (i.e OCDs). Had there been business income on actual sale of stock in trade (i.e OCDs), whether the ld AO would have treated the same as long term capital gains and not tax the same as business income which would be taxable at the rate of 30%. When one event has been accepted as long term capital loss and the capital asset (i.e investment in OCDs) had already been converted into stock in trade, hence any gain or loss arising on actual sale of such converted OCDs in the second step would only result in business income or business loss....
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....r by the assessee company. We find that the assessee company had filed the chart showing details of preliminary expenses incurred together with its supporting evidences in pages 1433 to 1435 of the paper book IC filed before us. We find that preliminary expenses are incurred by the assessee company solely as fees for registering the company under the provisions of the Companies Act, 1956. We find that the law is amended after 31.3.1998 in the proviso to section 35D(1) of the Act which stipulates grant of deduction at the rate of 1/5th of expenditure incurred thereon. We find that this has been set right by the ld CITA by granting deduction in accordance with the amended law. Hence we do not find any infirmity in the said order of the ld CITA granting relief in this regard. Accordingly, the issue framed in para 5.1 (H) above is decided in favour of the assessee. 15. To sum up, In the case of Rattanindia Power Limited Asst Year ITA No. Appeal By Result 2012-13 62/M/2020 Revenue Dismissed 2013-14 63/M/2020 Revenue Dismissed 2014-15 64/M/2020 Revenue Partly allowed 2015-16 65/M/2020 Revenue Partly allowed 2016-17 66/M/2020 Revenue Partly allowed 2017-18 67....