AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 1049
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.... "1. Under the facts and circumstances of the case the learned CIT(A) erred in sustaining the addition of Rs. 1,60,18,918/- u/s 40(b) of the Income Tax Act, 1961 on account of interest payment to partners without considering the reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern. 2. Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 10,72,932/- u/s 43CA of the Income Tax Act, 1961 without considering the reply of the assessee and without referring to the DVO. (3) Under the facts and circumstances of the case the learned CIT(A) erred in sustaining the addition of Rs. 1,18,807/- u/s 37 of the Income Tax Act 1961 by disallowing various expenditure on account of interest payment on statutory liabilities. 4. Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 3,25,000/- on account of VAT composition provision. 5. Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 3,33,358/- on account of foreign trav....
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....penditure amounting to Rs. 8,29,39,802/-. The above financial expenditure includes interest paid to partners at Rs. 5,16,95,795/- as appearing in Schedule-20 of the above accounts. In other words, while claiming the expenditure, the appellant has considered full amount of interest payment to the partners at Rs. 5,16,95,795/- without giving any consideration on account of excess interest payment. Had the working of interest at 12% rate been considered, then the above figure would have been Rs. 3,56,76,877/-in profit and loss account. of Rs. 5,16,95,795/-. Thus, excess interest has been claimed in (xiv) The appellant's contention that the excess interest has been considered while working out the stock is also examined. It is seen that in the profit and loss account, the difference in stock in trade has been taken at Rs. 11,30,27,413/- as per Schedule-18 of the accounts. In the Schedule-18, the closing stock has been taken at Rs. 42,41,06,440/-. The above figure is coming from the working of closing stock computed as per percentage completion method. In the above working, the total cost of the project has been taken at Rs. 83,80,44,851/- which is coming from total cost in....
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....mes into play only when the assessee claims before the AO that the value adopted or assessed by the stamp valuation authority exceeds the fair market value of the property. However, in the case of the appellant, no such claim was made before the AO. The provision of section 43CA of the Act specifically deals with the situation where in calculating profit from business on account of sale of land/building, the value adopted by the stamp valuation authority is considered as full value of sale consideration. In the case of the appellant, the value adopted by the stamp valuation authority was Rs. 91,11,432/-, while the appellant has taken value at Rs. 80,38,500/- in its computation of income. Thus, the AO was justified in making addition of Rs. 10,72,932/- as per provisions of section 43CA of the Act. Hence, the addition made by the AO is upheld and the ground is dismissed." 6. During the course of hearing the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below in respect of the above ground taken by assessee: "The assessee is a LLP and is engaged in the business of real estate. Return of income for the year under consid....
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....nterest paid Suresh Kumar sawalka 1562770 17876649 19439419 Vinod Kumar sawalka 1488176 18414360 19902536 Vimla Sawalka 466262 7030257 7496519 Urmila Sawalka 15041 3932905 3947946 Umang Sawalka 106792 802583 909375 Total 3639041 48056754 51695795 Calculation Sheet of Interest in respect of each partner on day to day bases is available on paper book page number cited supra. (iv) During the course of assessment proceedings the learned assessing officer noticed that claim of interest in excess of 12% was not allowable with reference to the provisions of section 40(b) of the Income Tax Act, 1961 and hence interest amounting to Rs. 2,73,79,564/- has been disallowed out of total claim of interest of Rs. 5,16,95,795/-. (v) It is submitted that the addition made by the learned Assessing Officer on account of disallowance of interest is unlawful and unjust. The learned Assessing Officer has made the addition as he failed to appreciate the facts of the case in proper perspective. During the course of assessment proceeding the assessee made a detailed submission under letters dated 01.11.2018. C....
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....fits in the same ratio in the books of accounts so maintained. Considering the aforesaid position when the assessee suo-moto has disallowed the interest by reducing the cost of construction, there was no case with the learned Assessing Officer for disallowing interest and making addition of Rs. 2,73,79,654/- (correctly works out to Rs. 1,60,18,918/-. (ix) It is further submitted the interest in excess of @12% on current account comes to Rs. 16,018,918/- and the assesse has reduced the cost of construction by this amount. This means reducing of the value of stock to same extent. It directly results in profits in the hand of the assesse to the same extent and there is no loss to the revenue by adopting of this method by the assessee. The action of the leaned Assessing Officer in making addition of Rs. 2,73,79,654/- by disallowing interest in excess of 12% has resulted in double addition because the assessee had already had carried the fact of disallowance by way of reducing the cost of construction. (x) It is further submitted for the purposes of clarification that interest has been paid to partners @18% on current account so that the balances in the hands of the pa....
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....is issue. Thus the action of the learned Assessing Officer is against the principles of equity and justice. No addition could have been made without providing adequate opportunity to the assesse. The following case laws are quoted in support: - (i) Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All.). Principles of natural justice are applicable - The principles of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it - (ii) Tin Box Co. v. CIT [2001] 116 Taxman 491 (SC). When opportunity of hearing was not properly given - Where the Tribunal had recorded that it agreed with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard, the Tribunal would not be justified in not setting aside the assessment order and remanding the matter to the assessing authority for fresh consideration after giving opportunity of hearing to the assessee. (iii) Dwijendra Kumar Bhattacharjee V Superintendent of Taxes (1990) 78 STC 393 (Ga....
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....onsideration received or accruing as a result of such transfer: ^56a[Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration.] (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1). (3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. (4) The provisions of sub-section (3) shall apply only in a case....
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....not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of subsection (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.-For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authori....
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....fficer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. (ii) CHANDRA NARAIN CHAUDHRI VS CIT (2014) 99 DTR (ALL) 0105 It is mandatory on the part of the AO to make reference to Valuation Officer as per provisions of section 50C where the assessee contended that valuation as done by Stamp Valuation Authority is not acceptable to him. The decision of the AO was not correct where he held that reference to....
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....-Finding of Tribunal based on an earlier judgment and also on the fact that consideration received by assessee was fair and reasonable-No referable question arises. (iv) COMMISSIONER OF GIFT-TAX vs. R. DAMODARAN (HIGH COURT OF MADRAS) (2001) 247 ITR 0698 Valuation for stamp duty purposes by the Sub-registrar of the Properties cannot be the guiding factor for determining the value of gifted immovable property..... The re-opening of the assessment was therefore invalid. The Learned CIT(A) has rejected the grounds of appeal of the assessee by mentioning that the assesses has not raised any objection for the same during the assessment proceedings. In this regard we would like to submit that during the assessment proceedings the Learned AO has not provided any opportunity to the assessee or issued any show cause notice prior to the making of addition on this account. The Learned AO has collected and gathered the information from the data and details submitted by the assessee and state away made the addition without providing any opportunity or giving any show cause notice, which is gross violation of principal of natural justice. Therefore relying on the judge....
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....ld. CIT(A) and thus, the same is in accordance with the contentions of the assessee and the addition sustained has no basis and required to be delted. 7. Per Contra, the ld. DR has argued that as regards the excess claim of interest @ 6 % he relied on the findings given in the orders of the lower authorities. As regards the addition made u/s. 43CA the ld. DR submitted that the assessee was given an opportunity during the assessment proceeding and show cause notice was issued to the assessee and he has chosen to remain silent at that point of time and now once the assessment is completed the assessee cannot take a plea that they have not been given an opportunity of being heard in the matter. Thus, he has submitted that the contentions of the ld. AR are not tenable on this ground and he has heavily relied upon the orders of the lower authorities on this issue too. 8. We have heard the rival contentions, perused the material available on record and case laws cited by both the parties. It is not disputed that the assessee is regularly assessed to tax and the method of capitalizing interest in the cost of construction is not even not disputed in the earlier years. The assessee ha....
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....ed the excess interest paid to the partners and worked out the closing stock correctly but this has not impacted the excess expenditure claimed in the profit and loss account under the head 'expenditure on construction'. Para (xv) page 24 of ld. CIT(A) order "(xv) From the above discussion, it can be seen that in profit and loss account, the appellant has taken the closing stock correctly, however, effect of excess interest expenses has not been given in total expenditure claimed in profit and loss account. ......." Thus, it is clearly that the contention of the assessee that the excess interest is adjusted while working out the closing inventory is confirmed by the ld. CIT(A) and is not disputed before us by ther revenue. The ld. AR of the assessee also cited the Annexure C (Page 47 & 48 of assessee paper book ) of the Tax Audit report annexure carried out as per provision of section 44AB of the act, where in the tax auditor has also confirmed this treatment that the excess interest claim has been corresponding reduction in cost of construction. This has not been challenged or discussed by the lower authorities. Merely the said adjustment not done in t....
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....ion 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.-For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. Thus, it is clear from the above provision of the law that the assessee has to claim that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In the present case the ld. AR of ....