TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 1792
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....to substantiate as to whether the expenditure was excessive or unreasonable. 2) Whether on the facts and circumstances of the case and in law, the learned CIT (A) is justified in estimating the income @6% without appreciating the fact that the comparison of NP % to disallowance as compared by the Ld. CIT (A) is not substantiated by any provision of the Income-tax Act and which is based on conjectures and surmises. 3) Whether on the facts and circumstances of the case and in law, the learned CIT (A) is justified in estimating the income @6% without appreciating the fact that the assessee has not furnished any cogent documentary evidence before the Assessing Officer to prove that such expenditure is actually incurred and allowable u/s 40A(2)(b) of the Act. 4) Whether on the facts and circumstances of the case and in law, the learned CIT (A) is justified in estimating. the income @6% without appreciating the fact that the assessee has itself reported in the Return of Income that no part of the expenditure covered u/s 40A(2)(b) of the Act is allowable. 5) The appellant craves to leave to add, alter, amend one or more grounds of appeal before the appeal is heard. 2. The as....
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....assessee having returned income of more than Rs. 15 Lakhs, falls under the jurisdiction of ACIT /DCIT and hence the entire additions are bad in law. LEGAL/TECHNICAL GROUNDS 8. For that vide Para 7 of the order u/s 148A(d) dated 29.07.20,2, the Ld A.O had dropped the case by mentioning being NOT A FIT CASEJO ISSUE NOTICE U/S 148. The order u/s 147 dated 31.03.2022 becomes infructuous, the moment the Ld. AO decided to follow judgment of the Apex Court in the case of Ashish Agrawal and proceeded with issuance of notice u/s 148A(b) dated 02.06.2022 and subsequent passing of order u/s 148A(d) dated 29.07.2022. 9. For that non issuance of fresh order u/s 147, even after following the judgment of the Apex Court in the case of Ashish Agrawal and proceeded with issuance of notice u/s 148A(b) dated 02.06.2022 demonstrates acceptance of the case by the department being not a fit case to proceed further and hence no order u/s 147 was issued. Keeping the order u/s 147 alive which has become infructuous, is bad in law. 10. For that provisions of section 40A(2)(b) are not applicable to cooperative societies per se and hence disallowance invoking section 40A(2) (b) is bad in law. ....
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.... was gathered that the assessee has made payments to the related party of Rs. 5,44,88,752/- but no part of such expenditure was disallowed u/s. 40A(2)(b) of the Act in the return of income filed. Based on these information, the AO has recorded the satisfaction and reopened the case by issue of notice u/s. 148 on 31.03.2021. 7. Before us, the ld. AR submitted that in this case the assessment has already been completed u/s. 143(3) of the Act and thereafter the proceedings u/s. 148 of the Act were initiated by issue of notice u/s. 148 of the Act dated 31.03.2021, which were issued after obtaining the necessary approval from JCIT, Range Rourkela. The ld. AR further submitted that since the notice u/s. 148 of the Act was issued after the expiry of the four years from the end of the relevant assessment years, therefore, in terms of Section 151(1) of the Act, necessary approval should have been obtained from the ld. PCCIT or CCIT or PCIT. However, in the present case, the approval was obtained from JCIT, Range Rourkela, which is evident from the notice itself issued u/s. 148 of the Act, placed in the paper book at page 53 which is as under :- 8. Ld. AR accordingly prayed that the n....
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.... of the Act dated 29.07.2022 by holding that it is not a fit case for issue of notice u/s. 148 of the Act as the necessary order has already been passed u/s. 147 of the Act against the notice issued u/s. 148 of the Act dated 31.03.2021. 11. The assessee in another Cross Objection has challenged the reassessment order on the ground that the income declared by the assessee was more than Rs. 15 lakhs and in view of the Instruction No. 1 of 2011 dated 31.01.2011 issued by the CBDT, the jurisdiction over the assessee lies with the JCIT/DCIT, however, in the instant case the reassessment proceedings were initiated by issue of notice u/s. 148 of the Act after recording satisfaction by the ITO Ward-1, Jharsuguda and the reassessment order was passed thereafter by the NFAC. He submitted that since the jurisdiction in terms of Instruction NO.1 of 2011 over the assessee lies with the ACIT/DCIT and not with the AO, therefore, the initiation of reassessment proceedings by the ITO, Ward-1, Jharsuguda is not in accordance with law. He, therefore, prayed that the notice u/s. 148 of the Act and consequent proceedings deserves to be quashed. 12. The assessee has also taken a cross object....
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....mbalpur on 01.03.2011 as amended on 16.07.2014 and formed by project effected persons (of MCL for Coal Mining) to obtain work from MCL as per rehabilitation policy of the PSU company, during period under appeal were engaged in the business of transportation and other allied activities. The respondent assessee for the AY 2015-16 filed return of income on 29.09.2015 declaring a net income of Rs. 29,01,910.00 (PB page 13-47). The return of income was selected for scrutiny and the income was determined at Rs. 29,92,3801- in the order u/s 143(3) passed by the Assessing Officer on 07.12.2017 (PB page 48-51). B) BACKGROUND OF THE CASE The Finance Act' 2021 revamped the existing reassessment provisions u/s 147 to 151 with effect from 01/04/2021. However, numerous notice u/ s 148 under unamended Act were issued post 31/03/2021. Since then there has been a hue and cry over the validity of re-assessment notices issued u/s 148 under the unamended Act (herein after referred to as the old law) post 01/04/2021. The legal stage was set with the decision of Hon'ble Chhattisgarh High Court (Single Member Bench) upholding the validity of such notices. However, the Hon....
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.... Being aggrieved with the order u/s 147 dated 31.03.2022, the respondent assessee filed an appeal before the CIT (A) on 28.04.2022. The Ld. CIT -A deleted the entire sum of Rs. 5,44,88,752.00 by observing at Para 6.9 as under: It is s affirmed that the Assessing Officer has failed to establish beyond doubt. that the payments made to such persons is excessive and unreasonable. Thus the condition laid down u/s 40A(2)(a) has not been fulfilled by the FAO" (Page 128A of PB). However the Ld. CIT -A went one step ahead and determined the net income of the appellant assessee at Rs. 46,64,000.00 on adhoc basis. While doing so, the Ld. CIT-(A) apparently invoked the powers vested by provisions of section 251(1)(a). Following the judgment of Hon'ble Apex Court .in the case of UOI Vrs Ashish Agarwal, Ld AO issued a show cause notice u/s 148A(b) on 02.06.2022 against which the respondent assessee submitted its reply on 16.06.2022 and after that the Ld. A.O. passed an order u/s 148A(d) on 29.07.2022. The present Cross Objection is directed against the illegal and arbitrary order passed u/s 250 by Ld. CIT (Appeal). OUR SUBMISSION ON JURISDICTIONAL ISSUE LD CIT (A) CA....
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....y matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals)] by the appellant. 4. The powers of the CIT (A) u/s 251(1)(a) of the Act, includes the power to "Enhance the Assessment". Whether such power is absolutely unlimited or the interest of the Assessee has been protected by the statue or court of laws. 5. Hon'ble Delhi High Court in the case of Gurinder Mohan Singh Nindrajog vs [CIT [2012] 18 taxmann.com 176 (Delhi), while considering the issue of power of CIT (A) to enhance, has held that - 14. We have considered the submissions of both the parties. There is no doubt about the fact that while framing the assessment even under Section 143 (3) of the Act, the Assessing Officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income. The Income-Tax Act provides for remedial measures which can be taken under these circumstances. While framing assessment under Section 143 (3) of the Act, any of the following situation may occur:- (a) The A....
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....s a source of income which has not been processed by the Income Tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order and therefore, the appellate Asst. Commissioner cannot travel beyond the subject matter of the assessment. In other words the power of enhancement under section 31 (3) of the Act is restricted to the subject matter of assessment or the source of income which have been considered expressly or by clear implications by the Income Tax Officer from the point of view of the taxability of the assessee". 8. In CIT v. Sardari Lal and Co., the same issue whether the appellate authority has the power under section 251 to discover a new source of income was referred to a Full Bench. After examining the authorities the full bench has held that: "Looking from the aforesaid angles, the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 of the Act and section 263 of the Act if requisite conditions are ....
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....riod of four year approval ought to have been obtained from Pr. Chief Commissioner /Chief Commissioner /Pr. Commissioner as per section 151 and thus, impugned notice was to be quashed. 16. Since in the case of the respondent assessee four years had already expired from the end of relevant assessment year as provided u/s 151 (1) of the Act (pre-amended), therefore, only the Pr. Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner could have accorded the sanction and not the Joint Commissioner of Income Tax. Therefore, the notice issued u/s 148 of the Act is bad in law. Consequently the impugned notice and subsequent assessment order passed on the basis of the said impugned notice needs to be quashed. 17. Valid sanction under section 15 I, an inbuilt check on the wanton exercise of power under section 147, cannot be reduced to mere formality. Sanction must be proper. [Ref: United Electrical Co. Pvt. Ltd 258 ITR 317 (Del); Arjun Singh vs. ADIT 246 ITR 363 (MP); S.P. Agarwalla alias Sukhdeo Prasad Agarwalla vs. ITO 140 ITR 1010 (Cal)]. 18. As the Ld. AO has not obtained mandatory prior approval from the appropriate sanctioning authority, as mandat....
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....ormer France (2003) 264 ITR 566 (SC) Tata Business Support Services Ltd. v. Dy. CIT (2015) 232 Taxman 702 (Bom.)(HC). G) ILLEGAL ASSUMPTION OF JURISDICTION OWING TO DELAY G) ILLEGAL ASSUMPTION OF JURISDICTION OWING TO DELAY IN ISSUANCE OF NOTICE U/S. 148 23. Notice under Section 148 of the Act, 1961 for the Assessment Year 2015-16 was digitally signed by the Assessing Officer on 31.3.2021. It was sent to the respondent assessee through e- mail and e-mail was undisputedly received by the respondent assessee on his registered e-mail on 01.04.2021 at 5.29 AM {Page 531 24. There is no dispute that the notice must be issued by the Assessing Officer within the time limit as provided in Section 149 of the Act, 1961. Section 282 of the Act, 1961 provides for mode of service of notices. Section 282A provides for authentication of notices and other documents by signing it. Sub- Section 1 of Section 282 A uses the word "Signed" and "issued in paper form" "or "communicated in electronic form by that authority in accordance with such procedure as may be prescribed", Thus, signing of notice and issuance or communication thereof has been recognized as different acts. 25. Section 13 of....
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....provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator. Thus, the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e. the assessing authority that shall the date and time of issuance of notice under section 148 read with Section 149 of the Act, 1961". 29. In the case on hand the notice u/s 148 dated 31.03.2021 was digitally signed by the Ld AO on 31.03.2021, but entered the computer resources outside the control of the originator on 01.04.2021 at 5.29 AM. Hence the date 01.04.2021 should be considered as the point of issue of the said notice. Further. the Ld AO has himself admitted vide Para 3 (Page 64) of the order u/s 148A(.d) dated 29.07.2022 that notice u/s 148 dated 31.03.2021 was actually delivered after 31.03.2021 and termed the said notice as 'extended reassessment notice'. Reliance is further placed on the decision of the Delhi High Court in the case of Suman feet Agrawal Vrs ITO WPC 10/2022 dated 27.09.2022. 30. Since the notice-u/s 148 was Issued on 01.0....
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....x Tribunals: (a) ITO Vs. Arti Securities & Services Ltd (Lkw Trib.) (b) Bhagyalaxmi Conclave Pvt Ltd Vs. DCIT (Kol Trib.) (c) Soma Ray Vs. ACIT (Kol Trib.) (d) Krishendu Chowdhury Vs. ITA (Kol Trib.) OUR SUBMISSION ON LEGAL/ TECHNICAL ISSUE: I) ORDER U/S 147 ISSUED UNDER OLD LAW BECOMES INFRUCTUOUS AFTER INITIATING THE PROCESS OF 148A FOLLOWING SC JUDGMENT 37. That after following the judgment of honourable Supreme Court in the case of Ashish Agrawal, the Ld AO proceeded with issuance of 148A(b) notice dated 02.06.2022 (Page 58) and subsequent issuance of order u/s 148A(d) dated 29.07.2022 (Page 62). 38. After following the procedure laid down by the Supreme Court in the case of Ashish Agrawal, the Ld AO vide Para 7 (Page 66) of the Order u/s 148A(d) dated 29.07.2022 decided to drop the case by coming to the conclusion that it is NOT A FIT CASE FOR ISSUANCE OF 148 NOTICE. 39. Thus, the order u/s 147 dated 31.03.2022 which was issued, basing upon the old provisions of law and subsequent following the procedure laid down by the Supreme Court in the case of Ashish Agrawal in issuance of order u/ s 148A( d) and non- issuance of fresh notice u/s 148, becomes infructuous. ....
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.... shows that under the Income-tax Act, Co-operative Society is different from A.O.P. Thirdly, co-operative societies are distinctly referred to in various sections of the Act e.g., [sections 2(18)(ad), 2(24) (vii), 27(iii), 36(1)(ia), 40(ba), 45(3), 80L(1) (ii]. (vi), (via), (viii), (ix), 80P, Explanation 1 (b)(i) to section 139(1) prior to Finance Act, 2001] 193 (iib), 194A (3)(i), (v), 269T and 269 (V A). In these circumstances, it was held that under the Income-tax Act 'Cooperative Society' is distinct from 'association of persons' and since the word 'co-operative society' does not appear in section 40A(2) of the Act, disallowance under section 40(A)(2) cannot be made in the case of a co-operative society. 12. Accordingly, in the light of the decision of this Court in the case of Shivamrut Doodh Utpadak Sahakari Sangh Maryadit (supra), we answer the first question in favour of the assessee and against the revenue." L) EXISTENCE OF CLEARCUT DISTINCTION BETWEEN REPORTING REQUIREMENT IN FORM 3CD BY AUDITOR AND DISALLOWANCE BY THE ASSESSING OFFICER Clause 23 of Tax Audit Report in Form 3CD requires reporting of 'Particulars of payments made to per....
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....e made on such payment. 50. The reasonableness of any expenditure is to be judged having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession or the benefit derived by, or accruing to, the taxpayer from the expenditure. Such portion of the expenditure which, in the opinion of the Income-tax Officer, is excessive or unreasonable according to these criteria is to be disallowed in computing the profits of the business or profession. 51. The onus is on the Revenue to prove that the assessee has made excessive and unreasonable payment to the sister concern for making the disallowance u/s 40A(2)(b) [DCIT v Computer Graphics Ltd. 285 ITR 84 (Mad)). 52. Even though assessee had made payments to related parties} if there was no material on record to demonstrate that payment made was excessive and unreasonable having regard to market rate} disallowance under section 40A(2) by AO cannot be made. [Motilal Laxmichand Sanghavi Vs ACIT (ITA Nos. 3110 to 3112 012018) [Mum-Trib.] PRAYER In view of the above particular facts & circumstances} the appeal order passed u/s 250 emanating ....
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.... the instant case, as is clear from the notice u/s. 148 of the Act itself that the approval was obtained/granted by the JCIT Rourkela, who is not competent for making such approval as in this case four years have elapsed from the end of the relevant year, therefore, notice issued u/s. 148 is without proper sanction and is liable to be quashed. The Hon'ble Jurisdictional High Court in the case of M/s Ambika Iron and Steel Pvt Ltd. Vs. Pr.CIT & Ors. passed in W.P.(C) No. 20919 of 2021, dated 24.01.2022 along with other connected cases, has held as under :- 6. Indeed in the notice issued under Section 148 of the IT Act on 31st March, 2021 which has been challenged in W.P.(C) No. 41826 of 2021 it has been stated that the notices had been issued after obtaining "necessary satisfaction of the Jt. CIT Range-I, Cuttack" whereas the Officer authorized to record the necessary satisfaction had to be the Chief Commissioner of Income Tax / Commissioner of Income Tax. 7. For all the aforesaid reasons, in each of the above cases, the impugned notice under Section 148 of the IT Act is hereby quashed. The writ petitions are allowed, but in the circumstances, with no order as to costs....
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.... issued specific instruction in regard to pecuniary jurisdiction. If the Sub-ordinate Officer was not competent to issue notice u/s. 148 of the Act, it has to be issued by a higher authority, then there was no reason for CBDT to issue such instruction. It is possible that a Senior Officer assumed the jurisdiction of a Sub-ordinate Officer but the reverse is not possible and should that argument is accepted, nothing could stop the Income Tax officer for assuming the duty from a Senior Officer also. Now coming to the issue of Section 292BB, a perusal of the same would clearly show that, that was a case where a valid notice has been issued and the assessee has cooperated in such proceedings. That is a provision to protect the issuance of notice more so service on the AO, it does not protect invalid issuance of notice on account of jurisdiction. Section 292 B is for the invalidation for reasons of any mistake, defect or omission to protect a notice which has been issued without jurisdiction. In the present case, admittedly, the Assessing Officer who has issued the notice u/s. 148 of the Act, did not have the pecuniary jurisdiction in view of the instruction issued by CBDT (supra). This....