FROM
MY ARCHIVES-ITAT, KOLKATA UNREPORTED DECISIONS ( Part 4)
1. Brahmaputra Carbon Ltd. vs. CIT, Kolkata-1, ITA No.894/K/2013;
Date of
Order : 01.06.2016
Sec. 263- The view taken by the AO cannot be
considered to be erroneous and prejudicial to the interest of the revenue where
the CIT has exercised the jurisdiction on the ground that the AO had failed to
make proper inquiries when the issues raised by the CIT are covered by the decision of the Hon’ble Supreme Court
inasmuch as such an inquiry by the A.O would be a futile exercise.
The
Assessee company was engaged in the
business of manufacture of calcined petroleum
coke. For A.Y.2008-09 the
assessee filed return of income declaring total income at Rs. Nil. The assessee
was entitled to claim deduction u/s 80IC(2)(a)(iii) of the Act.
While
arriving at the profits on which the aforesaid deduction was claimed by the
assessee, the assessee considered the transport subsidy, Central Insurance
subsidy, power subsidy and interest subsidy as profits derived from the
business of manufacture of article or thing viz., calcined petroleum coke which
was manufactured in a new central unit at Industrial Estate, P.O.and Dist. New
Bongaigaon, Assam. The AO passed order of assessment dated 15.11.2010 u/s
143(3) of the Act accepting the claim of deduction u/s 80IC(2)(a)(iii) of the
Act. The CIT in exercise of his powers
u/s 263 of the Act was of the view that the subsidies that were
considered as profits of the business for allowing deduction u/s 80IC of the
Act cannot be so considered for allowing deduction u/s 80IC of the Act. According to the CIT the aforesaid subsidies
had to be considered as income from other sources and therefore was not
eligible for deduction u/s.80-IC(2)(a)(iii) of the Act. Aggrieved by the order
of CIT, the assessee had preferred the appeal before the Tribunal.
it was brought to the notice of the bench
that the Hon’ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd. (2013) 34 Taxman.com 34 had decided
the issue in favour of the assessee holding that all the above subsidies have
to be considered as profits and gains derived from the business of the assessee
and therefore have to be considered for the purpose of allowing deduction u/s
80IC of the Act. It was also brought to the bench’s notice that the Hon’ble
Supreme Court has confirmed the order of Hon’ble Gauhati High Court in the case
of CIT vs Meghalaya Steels Ltd.(2016) 67
taxmann.com 158(SC).
2. ACIT vs. Durga Krishna
Store, ITA No. 1348/K/200 & C.O. No. 100/K/2008; Order dated 27.01.2015
Sec 145(3) r.w sec 28:
Where the AO found that books of account
were not properly maintained, CIT(A) was right in holding that the A.O should
have rejected the same and estimated the net profit. He could not have picked
up sundry creditors and deposit figures out of the same accounts which were
liable to be rejected and make additions on this account.
The
assessee is a civil contractor. The total turn over of the assessee was
Rs.12,06,81,735/- and Gross profit was Rs.77,13,029/-. On examination of the
books of account AO found that the assessee was not maintaining proper books
which were mostly supported by self made vouchers. The assessee also showed
sundry creditors of Rs.1,47,54,422/- in the name of three persons who happened
to be the employees of the assessee. The assessee had explained that these
persons were employees of the assessee firm and money was transferred to them
to make payments on account of expenses incurred in different work sites. AO
was not satisfied by the explanation submitted in this regard. AO found that the
explanation of the assessee is not satisfactory and AO added an amount of
Rs.1,47,54,222/-. He also noted that the assessee has made security deposit of
Rs.33,08,848/- which were not reflected. He also added the same.
In
appeal the ld. CIT(A) found in the assessee’s submission that by making the
above addition of Rs.1,47,54,422/- and Rs33,08,848/- the income computed by the
AO was 16% of the gross receipts which was excessive and unreasonable. As
regards addition on account of security deposit ld. CIT(A) held as under :-
“I have carefully
considered the submission of the Ld. AR and also gone through the assessment
order. It appears that the ld. AO has made this addition on the ground without
appreciating the facts of the case. On going through the assessment records, it
appears that no clarification was asked, so far as the mode of making the
security deposits and its accounting procedure. It is clear that the deposit
was not made by the assessee, neither it was given by the sub-contractors. One
part of the payment to the assessee was deducted by the contractee and kept as
security deposits. For completion of the work, the amount was returned to the
assessee which, in turn, was adjusted with the sub-contractor. However, the
same was not properly reflected in the books of a/cs of the assessee. For that
reason, the proper course would have been to invoke the provisions of Sec.145(3) of
the Act. Without doing so, the AO has made the addition u/s 69 of the Act. This
addition cannot be sustained subject to the observation given subsequently
against the additional grounds taken by the assessee.”
Further
the ld. CIT(A) was of the opinion that when the AO found that books of account
were not properly maintained he should have rejected the same and estimated the
net profit. The ld. CIT(A) proceeded to hold that in assessee’s case the profit
should have been estimated at 5% of the total receipts. Accordingly the ld.
CIT(A) directed the AO that the addition in this case be restricted to 5% of
the total receipts as taxable income of the assessee.
Against
the above order the revenue and assessee were in cross appeal before the
Hon’ble Tribunal.
Held
In
analogical situation in assessee’s own case the Tribunal vide ITA
No.704/Kol/2009 for A.Yr.2004-05 vide order dated 28.08.2009 has considered
similar additions. In that case the assessee had similarly not maintained
proper books of account on a total turnover of Rs.18,73,50,356/- and the income
was shown at Rs.50,09,320/-. The assessee had also shown five sundry creditors
for Rs.1,62,87,188/-. The AO had rejected the books of account u/s 145 of the
IT Act and estimated the net profit at 5% of the gross receipts. The assessee
appealed before the ld. CIT(A) and ITAT held that estimation of net profit at
5% was justified.
Finally
the Tribunal held as under –
“As rightly found by the ld. CIT(A) the best course available for the AO
to reject the books of account and making an estimation of profit . AO cannot
pick up sundry creditors and deposit figures out of the same accounts which
were liable to be rejected and make additions on this account. Hence we
find that the ld. CIT(A) is correct in holding that AO should have invoked the
provision of section 145(3) of the Act to reject the books of account and
estimate the profit of 5% in assessee’s own case this approach justified.
Accordingly we note that the ld. CIT(A) has passed a reasonable order. He has
elaborately dealt with the issues and found that on the facts and circumstances
of the case AO should have rejected the books of account and rejected the
additions and added profit @5% of the net profit. This estimation of profit has
also been accepted by the Tribunal in assessee’s own case for another order in
similar situations. In this view of the matter respectfully following the
precedent as above we do not find any infirmity in the order of the ld. CIT(A).”
3. M/s Mangilal Estates
(P) Ltd. vs. DCIT, Central Circle-1(3) , ITA No. 156/K/2015,Order dated : 21.02.2018
Issue 1:
The assessee being a
body corporate has to incur the expenses for its existence despite of no
business activity as held by the Hon’ble Calcutta High Court in the case of
Ganga Properties Limited (Supra). Therefore the disallowance of the entire
expenses cannot be made.
Issue 2:
Capital gains is to be taxed in the year of entering into agreement for
sale when the assessee got part payment and assessee also parted with the
possession of the property as per the provision of sec 2(47)(v) r.w sec 53A
0f Transfer of property Act and not in
the year of its registration.
Issue 1
The
assessee was engaged in business of
letting out of immovable property. There was no income shown by the assessee
from the business activity but the assessee claimed certain expenses to
maintain the status of the company active.
During the instant year the assessee had suffered business loss of Rs. (-)
4,73,950/- which was disallowed the AO on the ground that no business activity
was carried on the assessee. Being aggrieved
the assessee preferred an appeal before CIT(A),
who has confirmed the addition made by the AO.
In
further appeal filed by the assessee before the Tribunal, Hon’ble partly
allowed the appeal holding as under –
“Indeed, the assessee
being a body corporate has to incur the expenses for its existence despite of
no business activity as held by the Hon’ble Calcutta High Court in the case of
Ganga Properties Limited (Supra). Therefore the disallowance of the entire
expenses cannot be made. But at the same time the amount of expenditure
necessary for the sustenance of the company and which has nexus with the
business activity of the assessee is eligible for deduction.
However the expenses
incurred in connection with the rental income cannot be allowed as deduction.
It is because the assessee for the rental income entitled for the deduction as
per the provisions of section 24(a) of the Act which it has already
claimed.
Thus in the absence of
the information we are of the view that all the expenses incurred by the
assessee cannot be treated as business expenses. Therefore in our view after
considering the entire facts of the case the justice shall be served if the
disallowance made by the AO is restricted to the reasonable extent. Hence, in
the interest of justice & fair play we are inclined to restrict the
disallowance of the expenses to the tune of 10% of the expenses claimed by the
assessee.”
Cases referred to :
Hon'ble
Calcutta High Court in the case of CIT vs. Ganga Properties Ltd. reported
in 199 ITR 94 (Cal)
Issue 2:
During the instant year i.e, AY: 2012-13, the
assessee had transferred immovable property by a registered deed of conveyance,
whose stamp duty was valued by the District Registrar, Chaibasa at
Rs. 1,90,83,227/-. The assessee did not offer any amount to taxation.
Earlier, vide an agreement dated 22.03.1992, the
assessee received an advance of Rs. 19,000/- and handed over the possession of
the property on the said date. But the
registration could not be executed due to some problem relating to the title of
the property.
The AO observed that the assessee transferred the
property during the instant year: i.e, AY: 2012-13 and such transfer is liable
to be taxed for the year under consideration. Accordingly the AO treated the
stamp duty of Rs. 1,90,83,227/- as sale consideration u/s 50C and determined
the capital gains income and added Rs.
18,91,170/- to the total income of the assessee .
Being aggrieved the assessee preferred an appeal
before CIT(A), where the CIT(A) confirmed the addition of the AO.
In the instant appeal filed by the assessee, the
Hon’ble Tribunal held that the capital gains is to be taxed in the year of entering
into agreement for sale when the assessee got part payment and assessee also
parted with the possession of the property as per the provision of sec 2(47)
r.w sec 53A 0f Transfer of property Act and
not in the year of its registration. Therefore, the
taxability of capital gains at the hands of the assessee did not fall in the
assessment year 2012-2013.
Following:
·
Hon’ble Bombay High
Court in the case of Chaturbhuj Dwarkads
Kapadia Vs. CIT reported in 260 ITR 491
·
Bombay Tribunal in the
case of Ms. Rubab M. Kazerani Vs. JCIT,
reported in 91 ITD 429
Distinguished:
·
Bagri Impex (P)
Ltd. vs. ACIT (2013) 31 taxmann.com 39 (Cal)
