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ITAT removes the penalty for the TDS return filing delay brought on by the changeover to the CBS system

ITAT removes the penalty for the TDS return filing delay brought on by the changeover to the CBS system

Fact and issue of the case

Briefly the facts are, based on information received from internal sources that some public sector banks have paid interest on FDRs beyond the threshold limit without deducting tax at source, the Assessing Officer initiated proceeding under section 201(1)/201(1A) of the Act. After calling for necessary details and verifying them, the Assessing Officer, though, passed order under section 201(1)/201(1A) without raising any demand on account of TDS liability, however, noticing that the assessee failed to furnish the quarterly TDS statements within the time prescribed under section 200(3) of the Act, initiated proceeding for imposition of penalty under section 272A(2)(k) of the Act alleging that the assessee failed to file any reply with supporting evidences to establish that there was reasonable cause for late filing of the TDS statements. The Assessing Officer proceeded to impose penalty of Rs.12,27,000/- for different quarters falling in financial year 2008-09. Against the penalty order so passed, assessee preferred an appeal before learned Commissioner (Appeals).

In course of appellate proceeding, learned Commissioner (Appeals) noticed that the appeal filed by the assessee was belated. On perusing the affidavit seeking condonation of delay, he observed, though, the assessee has stated that there was delay of 33 days, but the actual delay was more than 80 days. Therefore, he observed that the assessee, having failed to satisfactorily explain the cause of delay, the appeal cannot be entertained.

Further, he held that the grounds raised by the assessee do not reveal the actual relief sought. Thus, on the reasoning that the grounds raised by the assessee are not clear and the delay was not satisfactorily explained, learned Commissioner (Appeals) dismissed assessee’s appeal in limine without going into the merits.

Observation by the tribunal

The tribunal has considered rival submissions and perused the materials on record. Though, it is not clear from the materials on record, what explanation the assessee filed before the Assessing Officer to explain the delay in filing the TDS statements, however, before learned Commissioner (Appeals), the assessee has furnished detailed submission, explaining the reason for delay in filing the TDS statements. On perusal of the submissions made before learned Commissioner (Appeals), it is noticed that the employees of the assessee were not well acquainted with the procedure of e-filing of TDS return which was made effective from assessment year 2008-09. Assessee had submitted, the employees were still at learning stage, as far as computerized system of filing is concerned, since, the bank in the near past had switched over itself from old system to CBS system and the employees are getting acquainted with the new banking software. In our view, the aforesaid submissions made by the assessee constitute a reasonable explanation under section 273B of the Act. Therefore, there is no justifiable reason for imposing penalty, merely, because there is delay in furnishing the TDS quarterly statements. Moreover, learned Commissioner (Appeals) has not gone into the merits of the issue and dismissed assessee’s appeal in limine. Even, accepting that assessee’s version of delay is not correct and actual delay is of 80 days, in our view, such delay not being fatal should have been condoned as the assessee has made out a case for condonation of delay.

Further, when the appeal filed by the assessee is against the imposition of penalty under section 272A(2)(k), we fail to understand what more clarification was required by learned Commissioner (Appeals) regarding the nature of relief sought by the assessee. In view of the aforesaid, we delete the penalty imposed of Rs.12,27,000/- under section 272A(2)(k) of the Act. Grounds are allowed.

Read the full order from here

tds-d-1

Conclusion

The tribunal has ruled in favour of the assessee and dismiss the appeal.

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For calculating turnover while dealing with derivatives ICAI guidelines is applicable

For calculating turnover while dealing with derivatives ICAI guidelines is applicable

Fact and Issue of the Case

Brief facts are that the assessee is engaged in the business of trading, financing, reality and commodity etc. The assessee filed his return of income dated 04.04.2016, declaring total income of Rs.72,46,410/- for the impugned year. The assessee’s case was selected for scrutiny and assessment order dated 24.11.2017 was passed u/s.143(3) determining total income at Rs.72,46,410/-.

The A.O. observed that the assessee has shown short term capital loss of Rs.3,74,357/- from trading in future and option, which was treated as ‘business loss’ instead of ‘STCL’, as the assessee was trading in future and option and not sale of asset. It is also observed that the assessee has declared total turnover from the impugned transaction in future and option of Rs.30,94,12,449/-. The A.O. levied penalty u/s.271B amounting to Rs.1,50,000/- on the ground that as the turnover of the assessee was beyond the limit prescribed u/s.44AB of the Act and that the assessee has failed to submit the report of the auditors and audited statement of accounts and that the same leads to contravention of provision of section 44AB of the Act.

The assessee was in appeal before the ld. CIT(A) as against the order of the A.O. The ld. CIT(A) confirmed the penalty levied by the A.O. on the ground that the assessee has controverted the provision of section 44AB of the Act. The assessee aggrieved by this was in appeal before ITAT.

Observation of the Tribunal

Having heard the rival submissions and perused the materials on record, it is observed that the assessee has shown STCL of Rs.3,74,357/-, from trading in future and option, which transacts from business of trading in shares and derivates. The A.O. has determined the total turnover from the said transaction as Rs.30,94,12,449/-, which according to the A.O. was beyond the limit prescribed in section 44AB of the Act which stipulates turnover above Rs.1,00,00,000/- for the impugned year (now enhanced to Rs.2,00,00,000/- applicable from A.Y. 2021-22). It is pertinent to analyze the nature of transaction involving shares and derivatives. The most commonly prevalent derivative transaction is future and options commonly known as F & O and in case of calculation of tax for such transaction, the total turnover or gross receipts in the previous year are to be taken into consideration. Section 44AD of the Act prescribes a percentage of such total turnover as gross receipts to be calculated for levying tax. In the common parlance turnover as per Companies Act, 2013 means that aggregate value of the realization amount made from sale, supply or distribution of goods or on account of services rendered or both, by a company during the financial year. This interpretation does not hold good in case of F & O transactions where there are neither physical goods involved nor any delivery of shares or securities involved in the said transaction. The entries in the books of accounts of such transactions are not made on the contracted notes issued, but are made only of the differences. For the said purpose, the Institute of Chartered Accountant of India has prescribed the method of computing the turnover in such cases through ‘Guidance Note on Tax Audit’. The following is the relevant extract for the said purpose: Keeping in view the distinct features of an F and O transaction, the ICAI has prescribed that the turnover in such transactions should be computed as the sum of the following: (i) The total of favourable and unfavourable differences; (ii) Premium received on sale of options; (iii) Difference in respect of any reverse trades entered into Each transaction comprising “buy” and “sell” is to be considered as an independent transaction and the turnover in respect of each such transaction must be computed separately. The total turnover during a financial year would be the turnover of all such independent transactions for that financial year.

The issue involved in the present scenario is the legal sanctity of guidance note issued by ICAI, for which we would like to place our reliance on the decision cited by the assessee in the case of Punjab Stainless Industries (supra) and Pact Securities and Financials Ltd. (supra), wherein it was held that the Hon’ble Apex Court has recognized ICAI as an expert body of accountants and the guidance note on tax audit issued by them can be relied upon in the absence of any statutory provision for computation of turnover in such cases.

From the above observation, the tribunal find that the validity of the ICAI guidance for calculating the turnover in case of derivatives has been reiterated by various judicial precedence. Upon consideration of the said method of calculating the turnover in transactions related to future and options, the assessee’s case does not fall under the provisions of section 44AB of the Act which mandates auditing of books of accounts and furnishing audited statement of accounts. From the above cited decisions, and also decisions of the co-ordinate bench in case of Sachin Maratrao Rangari (supra) on identical issue, we find no merit in the order of ld. CIT(A) and we hereby delete the penalty levied u/s. 271B of the Act.

Conclusion

The tribunal ruled in favour of the assessee and directed to delete the penalty levied u/s. 271B of the Act.

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Penalty under Section 271(1)(c) is not sustainable based on just projected additions.

Penalty under Section 271(1)(c) is not sustainable based on just projected additions.

Facts and Issue of the case

Aforesaid appeal by assessee for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income Tax (Appeals), Puducherry Chennai [CIT(A)] dated 14.05.2019 confirming penalty of Rs.6.93 Lacs u/s. 271(1)(c) of the Act as levied by Ld. Assessing Officer [AO] vide order dated 27.02.2018.

The Ld. AR, drawing attention to the factual matrix, assailed the penalty. The Ld. AR also submitted that the penalty notice did not specify exact charge against the assessee and therefore, the penalty would not be sustainable. The Ld. Sr. DR, on the other hand, submitted that the assessee concealed the receipts as evident from survey findings. The Ld. Sr. DR also submitted that clear charges were framed against the assessee. Having heard rival submissions, our adjudication would be as given in succeeding paragraphs.

The assessee being resident firm is stated to be engaged in renting out marriage halls. It was assessed u/s. 143(3) of the Act on 28.02.2013. The assessee was subjected to survey action u/s. 133A on 16.09.2009 wherein a register containing the details of number of marriages and other small functions conducted during financial years 2006-07 to 2009- 10 was found and impounded. Based on the same, it was alleged by Ld. AO that there was suppression of rental receipts to the extent of Rs.47.30 Lacs and accordingly, the same was added to the income of the assessee. The quantum addition was based on estimated rental receipts generated by the assessee by conducting the functions during the year. Upon further appeal, Ld. CIT(A) allowed 50% of the amount as estimated expenditure thus sustaining addition of Rs.23.65 Lacs.

Consequently, penalty proceedings were initiated against the assessee in the assessment order. The assessee defended the same by submitting that the additions were estimated additions without reference to regularly maintained books of accounts. The penalty would not be automatically attracted merely because there were some estimated additions which were made solely on the basis of statement recorded during the course of survey action. However, disregarding the same, Ld. AO levied penalty of Rs.6.93 Lacs u/s 271(1)(c). The Ld. CIT(A) upheld the penalty on the ground that concealment was established with clear material found in the premises of the assessee. Aggrieved, the assessee is in further appeal before us.

Observation of the case

Upon careful consideration of factual matrix, it could be seen that the additions as made by Ld. AO in the quantum order were estimated additions on the basis of a register containing the details of number of functions conducted at assessee’s premises. However, the same are mere estimated additions and there is no corroborative material on record to establish that the assessee actually received receipts of that magnitude. The same is further evident by the fact that Ld. CIT(A) has granted allowance of 50% for estimated expenditure and reduced the quantum addition. In our considered opinion, additions which are mere estimated additions do not attract penalty u/s 271(1)(c) and it is not a fit case of levy of penalty. Our view is duly fortified by the decision of co- ordinate bench of Chennai Tribunal in the case of Sri Saibaba Guest House V/s ITO (ITA No.2784/Chny/2018 dated 04.08.2021) wherein the penalty, on similar factual matrix, has been cancelled. Accordingly, we delete the impugned penalty and allow the appeal of the assessee.

Conclusion

The appeal stand allowed in terms of courts above order.

Saibaba-Swamigal-Thirumana-Mandapam-Vs-ITO-ITAT-Chennai-1

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Deductions are permitted under Section 54 for unfinished construction and consideration received for the construction of a residential home.

Deductions are permitted under Section 54 for unfinished construction and consideration received for the construction of a residential home.

Facts and Issue of the case

The assessee is an individual and filed her return of income for year under consideration on 05.08.2016 declaring total income of Rs. 8,66,860/-.  The said return was selected for scrutiny and statutory notices were issued to assessee. In response to statutory notices, representative of assessee appeared before the Ld.AO and filed requisite details called for.  From the assessment order, the Ld.AO noted that assessee had declared income from other sources of Rs. 8,66,860/- and long term capital gains of Rs. Nil.  We observe   that   assessee   claimed   deduction   u/s.   54F   of Rs.4,64,16,154/- being cost of acquisition of residential property on Site No. 839/21, 37th F Cross, 4th T Block, Jayanagar, Bangalore – 560 011 on 10.2.2011 for an amount of Rs. 1,52,02,905/- and construction of residential house on the same property value of Rs. 3,12,13,249/-.

The Ld.AO observed       that    assessee       also    constructed a residential house on the same property. As per valuation report, the construction cost was Rs.3,12,13,249/-. Therefore, the deduction u/s. 54F was restricted to Rs. 3,12,13,249/-. The difference between the total Capital Gains and Cost of construction Rs. 14,90,260/- (Rs. 3,27,03,509-Rs. 3,12,13,249) was brought to tax and the Long Term Capital Gains was computed at Rs.14,90,260/-. The Ld.AO was of the opinion that the property acquired by assessee on 10.02.2011 was before the transfer of original asset and accordingly the claim u/s. 54F was denied. Aggrieved by the order of Ld.AO, assessee preferred appeal before Ld.CIT(A). Before the Ld.CIT(A), the assessee submitted that, she along with her father, her sister and her brother disposed off a vacant land situated at Ekarajapura Village, Hosakote Taluk and the share of the assessee in the long term capital gain was Rs.3,27,03,509/-. The deed of sale was executed by the assessee, her father, her sister and her brother on 22.08.2015. The assessee had claimed the benefits under Section 54F of the Income tax Act, in view the acquisition of the residential house property and re-construction of the residential house property.

It is submitted before the Ld.CIT(A), that the assessee has not submitted the details of Sale Deed dated 29.01.2015. The assessee submitted that no Sale Deed executed on 29.01.2015 by or in favour of the assessee and that there has been a Gift of the property given out of natural love and affection by the assessee’s father to the assessee and her husband under a document titled as Release Deed executed by the father on 03.12.2014. The assessee submits that by virtue of the Gift Deed termed as Release Deed dated 03.12.2014 the assessee’s father gifted and renounced his undivided rights, interest in the property in favor of his daughter i.e., the assessee.

The Ld.CIT(A) relying on the decision of Hon’ble Supreme Court in case of Dilip Kumar & Company reported in 95 taxmann.com 327 held that the provision giving benefit to assessee needs to be interpreted strictly and in case there is an ambiguity in the provision, the same is subject to strict interpretation. He thus upheld that disallowance of the claim by the Ld.AO.

Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.

The Ld.AR contended that all the issues alleged in the present appeal relates to disallowance of claim u/s. 54F of the Act. He submitted that the land in which the investment was made is jointly held by assessee and her husband and the total cost of construction was incurred by assessee alone. He thus relied on following decisions in support of the claim that assessee is entitled to deduction u/s. 54F even though she is a co-owner.

On the contrary, the Ld.Sr.DR submitted that assessee has claimed u/s. 54F toward purchase of land 4 years prior to sale of original asset along with cost of construction of residential house. He also submitted that the disallowance is justified as assessee is co-owner of the said new asset along with her husband. The Ld.Sr.DR vehemently supported the orders passed by the authorities below.

Observation of the case

Court has perused the submissions advanced by both sides in the light of records placed before court. Assessee purchased a property in 2011 along with her father and husband being a land located at BDA Site No. 839/21, 37th F Cross, 4th T Block, Jayanagar, Bangalore – 560 011. Subsequently, assessee’s father released his rights in favour of assessee with respect to his 1/3rd share vide release deed dated 03.12.2014.  Thus from December 2014, the property was jointly owned by assessee and her husband Shri K.C. Narayanaswamy. From the records it is clear that during Financial Year 2015-16, relevant to Assessment Year under consideration, assessee sold land situated at 34/1, Ekkarajapura Village, Sulibele Hobli, Hoskote Taluk wherein, assessee was 1/3rd co-owner of the property.  The other co-owners were their family members.  Assessee’s share of capital gains on sale of such 1/3rd share was Rs. 3,27,03,500/-.  Out of the said capital gains earned by the assessee, she spent sum of Rs.3,12,13,249/- towards construction of new house in the Jayanagar property being BDA Site No. 839/21, 37th F Cross, 4th T Block, Jayanagar, Bangalore – 560 011.

Court note that assessee claimed the cost of land of Jayanagar property and cost of construction incurred by her u/s. 54F being the subject matter of the present appeal. From the facts and references,  it is clear that assessee invested the capital gains earned from sale of her 1/3rd share in 34/1, Ekkarajapura property for the purpose of construction of residential house on the land jointly owned by her and her husband at BDA Site No. 839/21, 37th F Cross, 4th T Block, Jayanagar, Bangalore – 560 011.

The authorities allege that, deduction under section 54F will be available to assessee only if the assessee has within a period of one year before or two year after the date on which transfer took place or, has within a period of three years after the date of transfer constructed a residential house. The revenue contends that as the assessee acquired the property with respect to which the deduction under section 54 F was claimed was acquired on 10/02/2011, i.e., 4 years prior to the transfer of original asset and that the assessee constructed the residential house on the same property which is valued at Rs.3,12,13,249/-, the Capital gain was restricted to Rs.14,90,260/-.

In the present facts of the case, there is no dispute that assessee is the owner of the property, in respect of which the deduction is claimed. The assessee started construction on the land owned by the assessee and he husband in the year 2015. The original asset was sold in which assessee had 1/3rd share in the financial year relevant to assessment year under consideration i.e, August 2015.

In decision relied by Hon’ble Madras High Court in case of Ms.Moturi Luxmi vs ITO in ITA No.181 of 2019 by order dated 17/08/2020, decisions referred by Ld.CIT(A) was considered.  Court also refer to Full Bench decision of Hon’ble Supreme Court in case of Commissioner of Customs (Import) Vs. M/s Dilip Kumar & Sons & Ors. (Supra). This decision was relied by Ld. CIT(A) to deny exemption claimed by assessee u/s 54F. 

Now coming to the decision of Hon’ble Madras High Court in case of C Aryama Sundaram (Supra) relied in case of M/s Moturi Laxmi Vs. ITO (Supra). Hon’ble Court first analysed the conditions assessee fulfilled to enter exemption clause and thereafter applicability was liberally interpreted. Similar is the analysis by Hon’ble Madras High Court in other decisions referred to in M/s Moturi Laxmi Vs. ITO (Supra). Hon’ble Delhi High Court in case of CIT Vs. Bharti Mishra reported in (2014) 41 taxmann.com 50, decisions of Hon’ble Karnataka High Court in case of CIT Vs J.R Subramnya Bhat reported in (1986) 28 Taxman 578 and CIT Vs. K Ramachandra Rao reported in (2015) 56 taxmann.com 163, all principally allowed exemption u/s 54/54F, only on substantial satisfaction of required conditions therein. Hon’ble Karnataka High Court and Hon’ble Madras High Court in decisions relied by Ld.AR widely interpreted the provision, consequent to strict satisfaction of conditions therein.

The passport to derive benefit under sec.54F(1) is investment in construction of property within the period required u/s 54(1)F or to invest in residential property within the stipulated time for enabling deduction under section 5 4F of the Act. Hon’ble Karnataka High Court in decision of CIT vs.Sambandam Udaykumar reported in 251 CTR 371 took the view that, under provisions of section 54F of the Act, the condition preceded is that, capital gains realised from sale of capital asset should have been parted by assessee and invested or constructed a residential house, as the case may be. Hon’ble court also observed that, the essence of the purpose of section 54F, is whether, the assessee who received the capital gain has invested in a house. Once it is demonstrated that the consideration received on transfer of capital asset has been invested in or construction of residential house, even though the construction is not complete in all respect as required under law, assessee cannot be denied benefit under section 54F. Further on a plain reading of decision of Hon’ble Karnataka High Court in case of CIT Vs. Sambandam (Supra) reveals that, there is no particular stage of completion of construction, that is contemplated. Ld. AR submitted that, the construction was later on completed and the sale deed was registered in favour of assessee on 05/07/2019 in respect of transfer of ownership of residential property. There is nothing placed by revenue on record to demonstrate any other violation in support of their arguments.

In present facts court is of the view that assessee has substantially fulfilled all necessary conditions to be entitled for liberal interpretation of sec.54F.In courts view, F.B decision relied by Ld.Sr.DR and Ld.CIT(A) of Hon’ble Supreme Court in case of M/s Dilip Kumar (Supra) needs to be applied after analysing the facts in each case. In Courts opinion, in present facts decision by Hon’ble Supreme Court support the case of assessee. Respectfully applying ration of Hon’ble Karnataka High Court in case of CIT Vs. Sambandam (Supra), we hold that assesse is eligible for exemption of Rs.65 lakhs u/s 54F.

Conclusion

In the result, the appeal filed by assessee was allowed by the court.

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There is no presumption that everyone is the condones of the law; the ITAT admits a 41-month delay.

There is no presumption that everyone is the condones of the law; the ITAT admits a 41-month delay.

Facts and Issue of the Case

This appeal has been filed by the assessee against the order dated 09/03/2020 passed by the Commissioner of Income-tax (Appeals)-1, Mumbai [hereafter, CITA)] for the assessment year 2013-14.

The assessee has taken the following grounds of appeal:

  • The Ld.CIT (Appeals) erred in declining to condone the delay in filing the appeal.
  • The Ld.CIT(A) failed to appreciate that, in the facts & circumstances, the assessee-school’s claim u/s. 11 ought not to have been disallowed, in an order passed u/s. 143(1)
  • The Ld.CIT (A) erred in ignoring the merits of the assessee’s case. It is submitted that the Assessee was entitled for the exemption u/s. 11 & 12, by virtue of section 12A (2) r/w the proviso thereto.”

By Ground No. 1 raised by assessee court is taking and adjudicating as of prime importance in the present matter. Ground Nos. 2 and 3 being on merits of the case will take their on course depending on the outcome of Ground No.1.

“1.     The Ld.CIT (Appeals) erred in declining to condone the delay in filing the appeal.

It is clearly emanates from the order of Ld. CIT(A), that no opportunity was being provided to assessee by CPC, Bangalore while processing return u/s. 143(1) of the Income Tax Act, 1961 (Hereinafter referred to as “Act”). About the scope of section 143(1) of the Act, need not discuss here as we are dealing with the matter of condonation of delay and merits has to be decided by the office of Ld. CIT (A).

Now court needs to understand the nature of intimation u/s. 143(1) of the Act being issued and received by the assessee in due course of their return filing process and consequently processing of the same by the CPC, Bangalore. It’s a routine exercise which is being carried out by the CPC, Bangalore and usually in most of the cases returned income is the only figure they process and accept. It rarely happens where they deviate from this usual practice but that is subject to opportunity is being provided to assessee in addition to the power inherit in section 143(1) of the Act to CPC. In the instant case, according to the assessee, it could not realize the effect and consequence of the order passed under section 143(1). This, according to us, is a convincing reason. A section under which only a prima facie arithmetical adjustments can be done, but assessee’s entitlement/disentitlement u/s. 11 and 12 can’t be settled through section 143(1). As there is no authority to CPC to ask for complete books of accounts and other relevant documents to decide assessee’s entitlement/disentitlement u/s. 11 and 12. If assessee did not realise the importance of this order, there is no abnormality into this. Human preponderance about the situation and customs has to be kept in mind.

While deciding the issue of condonation of delay it is well settled legal principles that the expression ‘sufficient cause’ should receive liberal consideration so as to advance the cause of justice may be taken note of for the purpose of reference: “The words “sufficient cause”, as appearing in Section 5 of Limitation Act, should receive a liberal construction when the delay is not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the applicant/appellant, in order to advance substantial justice. The words “sufficient cause for not making the application within the period of limitation” should be understood and applied in a reasonable, pragmatic, practical and liberal manner, depending upon the facts and circumstances of the case. The decisive factor in condonation of delay is not the length of delay but sufficiency of a satisfactory explanation.

Observation of the Case

Court has noted that in the Hon’ble Supreme Court in B. Madhuri Goud B. Damodar Reddy (2012) 12 SCC 693, by referring various earlier decisions of Superior Courts and held that the following principal must be kept in mind while considering the application for condonation of delay;

  • There should be a liberal, pragmatic, justice oriented, non- pedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove injustice.
  • The terms “sufficient cause” should be understood in their proper spirit, philosophy and purpose regard being had to the fact that these terms are basically elastic and are to be applied in proper perspective to the obtaining fact-situation.
  • Substantial justice being paramount and pivotal the technical considerations should not be given undue and uncalled for emphasis.
  • No presumption can be attached to deliberate cause of delay but, gross negligence on the part of the counsel or litigant is to be taken note of.
  • Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact.
  • It is to be kept in mind that adherence to strict proof should not affect public justice and cause public mischief because the courts are required to be vigilant so that in the ultimate eventuate there is no real failure of justice.
  • The concept of liberal approach has to encapsulate the conception of reasonableness and it cannot be allowed a totally unfettered free play.
  • There is a distinction between inordinate delay and a delay of short duration or few days, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation.
  • The conduct, behaviour and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties and the said principle cannot be given a total go by in the name of liberal approach.
  • If the explanation offered is concocted or the grounds urged in the application are fanciful, the courts should be vigilant not to expose the other side unnecessarily to face such litigation.
  • It is to be borne in mind that no one gets away with fraud, is representation or interpolation by taking recourse to the technicalities of law of limitation.
  • The entire gamut of facts are to be carefully scrutinized and the approach should be based on the paradigm of judicial discretion which is founded on objective reasoning and not on individual perception.
  • The State or a public body or an entity representing a collective cause should be given some acceptable latitude.”

On a perusal of order of Ld.CIT (A) this court finds that the Ld.CIT (A) dismissed the appeal of the assessee, as un-admitted being not satisfied with the reasons adduced by the assessee for delay of 41 months in filing the appeal. The assessee explained that “It is submitted that the delay occurred since the effect of consequence of the intimation under sub section 1 of section 143 was not realized immediately, that is to say that it was not clear to the assessee as to what was the nature of the disallowance resulting to a higher demand and the assessed income getting higher than the returned income.” Upon hearing the parties, we find that this is a harsh decision as there is no supposition that everybody is the custodian of law, though ignorance of law is not an excuse for any wrong action. But in the instant case, according to the assessee, it could not realize the effect and consequence of the order passed under section 143(1). This, according to us, is a convincing reason.

Conclusion

The court directed Ld.CIT (A) to condone the delay of 41 months, admit the appeal and then, adjudicate the matter on merits after providing reasonable opportunity to the assesse.

In the result, appeal filed by the assessee is treated as allowed, for statistical purpose.

St.-Francis-De-Sales-Church-Trust-Vs-ACIT-ITAT-Mumbai

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Cost on Assessee for not cooperating during remand proceedings imposed by ITAT

Cost on Assessee for not cooperating during remand proceedings imposed by ITAT

Facts and issue of the case

The assessee has filed this appeal challenging the order dated 22.5.2020 passed by Ld. CIT(A), Manguluru and it relates to the assessment year 2007-08.

None appeared on behalf of the  assessee,  even  though  the case was adjourned on an earlier occasion, at the request of the A.R. of the assessee. However, I find that no power of attorney has been filed by the counsel who represented earlier.   Hence, I proceed to dispose of the appeal ex-parte, without presence of the assesse.

Court heard Ld. D.R. and perused the record. The grounds of appeal filed by the assessee relate to the following 3 issues:-

  1. Addition of advance from Directors – Rs.2,77,566/-
  2. Addition of Sundry creditors – Rs.6,57,336/-
  3. Addition of advance received from Director – Rs. 1,00,000/-

Observation of the court

Court heard Ld. D.R. and perused the record. The assessee  is engaged in the business of trading in business. Before formation of the assessee company, the business was carried on by a partnership firm with Dot Network. The business was continued in the partnership firm up to  31.10.2006. From  1.11.2006  onwards, the business of the partnership firm was taken over by the assessee company along with the assets and liabilities.

In respect of all these issues, Court notices that  the  assessee  has filed additional documents before Ld. CIT(A) and hence  the  Ld. CIT(A) called for a remand report from the A.O. However, it appears that the assessee did not respond in the remand proceedings and hence he could not furnish any credible remand report. Accordingly, the Ld. CIT(A) confirmed the additions rejecting the explanations furnished by the assessee before him.

The Ld. D.R. submitted that one  of  the reasons  cited  by  the Ld. CIT(A) is that the documentary evidence furnished by  the assessee was not signed by the concerned parties. Court notices that the assessee has filed a paper book wherein the ledger account of creditors has been signed by the concerned parties. When this was pointed out, the Ld. D.R. submitted that all these issues may be restored to the file of the Ld. CIT(A) for adjudicating  the  issues afresh. He also submitted that the assessee should also be directed to cooperate with the Ld. CIT(A), if remand report is called for by Ld. CIT(A). He also submitted that the assessee should be imposed cost for not cooperating with the A.O. during remand proceedings.

Conclusion

Court heard Ld. D.R. and perused the record. Having regard to the discussions made (supra), in the interest of natural justice, court is of the view that the assessee may be provided with one more opportunity to explain its case before Ld. CIT(A). Since the assessee has not cooperated before the A.O. during remand proceedings, I impose a cost of Rs.1,000/- upon the assessee, which shall be paid to the credit of Income Tax department as “other fees” within 2 months from the date of receipt of this order.

Accordingly, subject to the payment of above said cost, court sets aside the order passed by Ld. CIT(A) and restore all the issues to his file for examining them afresh. Court also direct the assessee to fully cooperate with the Ld. CIT(A) for expeditious disposal of the appeal.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Dot-I-Network-Pvt.-Ltd.-Vs-ITO-ITAT-Bangalore-1

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ITAT Delhi: Depreciation on non compete fee not allowable

ITAT Delhi: Depreciation on non compete fee not allowable

Facts and issue of the court

This is an appeal by assessee against the order dated 23.07.2018 of learned Commissioner of Income-Tax (Appeals)-8, New Delhi for assessment year 2014-15.

When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case.

Considering the nature of dispute and the fact that the issue is covered by the decision of the Hon’ble jurisdictional High Court, we proceed to dispose of the appeal ex parte qua the assessee after hearing the learned Departmental Representative and based on material available on record.

Observation of the court

Court has heard learned Departmental Representative and perused the material on record.

Briefly, the facts are that assessee is a resident-company. For the assessment year under dispute, assessee filed its return of income on 29.11.2014 declaring loss of Rs.23,12,53,397. In course of assessment proceedings, assessing officer, while verifying the return of income filed by the assessee, noticed that the assessee has claimed deduction of Rs.1,94,33,166, being depreciation on none complete fee. Being of the view that depreciation on non complete fee is not in the nature of an intangible asset as per Section 32(1)(ii) and explanation to the said section, the assessing officer called upon the assessee to show cause why the depreciation claimed should not be disallowed. Ultimately, the assessing officer completed the assessment disallowing the claim of depreciation by following the ratio laid down by the Hon’ble Delhi High Court in case of Sharp Business System Vs. CIT (2012) 211 Taxman 576 (Del). Assessee contested the aforesaid disallowance before learned Commissioner (Appeals). However, relying upon the aforementioned decision of the Hon’ble Delhi High Court, learned Commissioner (Appeals) upheld the disallowance.

It is evident, by virtue of an agreement entered in June 2011, assessee acquired a restaurant in the name and style of Sagar Ratna. As per the terms of the agreement, the transferor had transferred all its rights, copyrights, trademarks etc. in respect of the restaurant Sagar Ratna. It appears from record, assessee treated the payment made towards non compete fee to the transferor as capital expenditure in the year of acquisition and assessee’s claim of depreciation on such expenditure in assessment years 2012-13 and 2013-14 was allowed. To justify its claim of depreciation, in course of proceedings before the departmental authorities, assessee has submitted that since depreciation was allowed in preceding assessment years, the same cannot be disallowed in the impugned assessment year as Rule of Consistency would apply. However, we are unable to agree with the aforesaid submission made by the assessee before the departmental authorities. It appears, at the time of allowing depreciation in assessment years 2012-13 and 2013-14, the departmental authorities did not have the benefit of the ratio laid down by the Hon’ble jurisdictional High Court in case of Sharp Business System Vs. CIT (supra). In the aforesaid decision, the Hon’ble jurisdictional High Court, while dealing with identical dispute relating to allowability of depreciation on non compete fee, has held that non compete fee though is an intangible asset, however, it is not similar to know how, patent, copy right, their trademark, licenses, franchises or any other business or commercial right of similar nature. The reasoning of the Hon’ble jurisdictional High Court for coming to such conclusion is, unlike the rights mentioned in Section 32(1)(ii) which an owner can exercise against the world at large and can be traded or transferred, in case of non compete fee, the advantage is restricted only against the seller. Therefore, it is not a right in rem but in personem. We are conscious of the fact that some other non-jurisdictional High Courts have held that non compete fee is an intangible asset coming within the ambit of Section 32(1)(ii) of the Act and have allowed depreciation. However, since, we are bound by the decision of the Hon’ble jurisdictional High Court rendered in case of Sharp Business System Vs. CIT(supra), respectfully, following the ratio laid down in case of Sharp Business System (supra), we hold that assessee’s claim of depreciation on non compete fee is unacceptable. Accordingly, we uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised.

Conclusion

    In the result, the court dismissed appeal.

Sagar-Ratna-Restaurants-Pvt.-Ltd.-Vs-ACIT-ITAT-Delhi

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Penny Stock Cases: Vivad Se Vishwas scheme not confers any vested right on assesse: ITAT Condones delay in Appeal Filing

Penny Stock Cases: Vivad Se Vishwas scheme not confers any vested right on assesse: ITAT Condones delay in Appeal Filing

Facts and issue of the court

The Court : In all the applications the revenue has sought for condonation of delay in filing the appeals before this Court  under  Section 260A of the Income Tax Act, 1961 (the Act, in brevity) challenging the orders passed by the Income Tax Appellate Tribunal, Kolkata (the Tribunal).

For the purpose of disposal of the applications filed under Section 5 of the Limitation Act, it may not be necessary to go into the factual aspects nor as to what would be the relevant assessment year which was subject matter before the Tribunal. Equally the length of delay may also not be very relevant factor as the submissions have been made on either side on the issue as to whether the Court should exercise discretion in condoning the delay in filing the appeals before this Court. There are cases where delay is only 90 days, there are also cases where delay is more than 300 days. As has been settled in various decisions, length of delay is always not a very relevant factor as even a meagre delay if shown to be on account of certain mala fide reasons, the Court will refuse to exercise discretion and will dismiss the applications. In other cases, where delay is substantial, the Court  finds  that  sufficient  cause has been shown and for reasons to be assigned will exercise discretion and condone the delay.

The case of the revenue is that the matters which are subject matter of the appeal are popularly known as ‘Penny Stock Cases’ and the Tribunal   has granted certain relief to the assessee largely following the decision  in  Swati Bajaj and in the case of Manju Agarwal vs. ITO in ITA No. 2662/Kol/2018 and other similar cases. In some of the impugned  orders,  there has been findings rendered by the Tribunal on the facts of the particular case but we find in most of the cases the Tribunal has merely extracted its earlier decisions and granted relief to the assessee. As we are considering the applications filed under Section 5 of the Limitation Act, we refrain from going into the merits of the decision taken by the Tribunal and we shall enter into the merits only, if we are satisfied that the delay in filing the appeal has to be condoned.

The learned standing counsel appearing for the revenue contends that the cases on hand expose a large financial scam which is not only confined to Kolkata but it is spread over throughout the country. In this  regard, learned standing counsel places reliance on the report of the Principal Director of Income Tax (Investigation), Kolkata dated 27.04.2015. This report is pressed into service to show that large scale financial scam had taken place and SEBI has also suspended the scripts of various companies in which the assessees had effected transactions and by providing bogus accommodation entries of long term capital gain/short term capital gain, substantial loss has been caused to the revenue which is as of now is conservatively estimated as more than Rs.38,000 crores. Therefore, it is submitted that the Court should take all these factors and exercise discretion and condone the delay. Further it is submitted that the Hon’ble Supreme Court in miscellaneous application No.21 of 2022 in Suo Motu Writ Petition (C) No. 3 of 2020 by order dated January 10, 2022 clarified that the period from 15.03.2020 till 28.02.2022 shall stand excluded in computing the period of limitation prescribed under various enactments for the purpose of instituting proceedings before various forum. It is submitted by learned standing counsel that though in some of the cases the benefit of the order passed by the Hon’ble Supreme Court may not  be directly applicable, yet the Court can take into consideration that on  account of the pandemic situation, the Hon’ble Supreme Court has excluded the period from 15.03.2020 till 28.02.2022 for the purpose of computing limitation for filing petitions or appeals etc. Therefore, it is submitted that a broader view may be taken in the matter, considering the sensitivity of the issue and wide ramification which has been brought out on account of the investigation, which is still in progress.

The learned standing counsel places reliance on the decision of the Hon’ble Supreme Court in McDowell & Company Limited vs. Commercial Tax Officer reported in AIR 1986 SC 649 for the proposition that tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. Further it is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.

The learned standing counsel has also placed reliance on the decision  of the High Court of Madras in the case of The Commissioner of Income Tax, Chennai vs. Manish D. Jain (Huf) in TCA  No.  223  of  2020  dated  16.12.2020. Therefore, it is submitted that the Court should exercise  discretion in  the  cases  on  hand  and  condone the delay.

Mr. Subash Agarwal, learned counsel appearing for the respondent/assessee submitted that the delay though may be 90  days  or  more than 300 days may not be relevant as the  assessees  have  been  precluded from exercising their rights under the provisions of the Direct Tax Vivad Se Vishwas Act, 2020 and such right could have been exercised by the assessee, had the revenue filed appeal within the period of limitation or within the period when the scheme under the Act was in vogue i.e.  up  to  31st  January, 2020. Therefore, it is submitted that such valuable right of the assessee has been taken away resulting in prejudice to the assessee and this factor needs to be borne in mind by this Court while considering the application for condonation of delay. Learned counsel placed reliance on the decision of the Hon’ble Supreme Court in the case of Balwant Singh vs. Jagdish Singh and others reported in AIR 2010 SC 3043 for the proposition that once a valuable right has accrued in favour of the party as a result of the failure of the other party to explain the  delay by showing sufficient  cause it  will be unreasonable to take away that right on the mere asking of the applicant particularly when the delay is directly a result of negligence, default or inaction of that party. Further learned counsel submitted that though the revenue has produced a report of the investigation being of the Department, there is nothing to indicate that the assessees have been shown to be scamsters or involved in the process of defrauding revenue and therefore, the said investigation report is of little significance so far as the assessees are concerned who are generally medicore persons who have made small investments and probably might have earned little or negligible profits and therefore, the Court may not exercise discretion in condoning the delay in filing these appeals.

Observation of the court

Court has elaborately heard learned counsels for the parties and perused the materials placed on record. The celebrated decision of the Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag and another vs. Mst. Katiji and others reported in AIR 1987 SC 1153 is one of the earliest decisions where the expression ‘sufficient cause’ was explained. In the said decision, the principles have been enumerated. The sum and substance of the principles  laid down is that, refusing to condone the delay can result in meritorious matter being thrown out at the very threshold and cause of justice will be defeated. Every day’s delay must be explained does not mean that a pedantic approach should be made. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. There is no presumption that delay is occasioned deliberately. The judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. The Courts have taken note of these decisions and have consistently adopted the same approach and the bottom line of the decisions is that the facts of each case has to be considered before either condoning or refusing to condone the delay.

Bearing such legal principle in mind, we proceed to examine as to whether the delay in filing the appeals by the revenue has to be condoned or not. Undoubtedly, investigation has been commenced by the Income Tax Department and a report has been drawn during April, 2015. We are informed that the investigation is still in progress. Parallelly the assessing officers throughout the country have been making assessments on the assessees who had effected transactions. In these penny stock companies, some of the assessments have attained finality, some are pending as appeals before the appellate authority or the Tribunal or the respective High Courts.

In the background of these facts, we have to take note of not only  the length of the delay, but the overall facts and  circumstances  leading  to such delay. In many of the matters before us, the tax effect may be less than the threshold limit fixed by the CBDT for pursuing appeals by  the  Department. The Department initially, applying the Circular, did not prefer appeals. It is much later CBDT clarified and issued further instruction that insofar as the penny stock matters irrespective of tax effect appeals have to be preferred. The object underlying such decision cannot be ignored as it is represented before us that investigation reveals large scale financial scam throughout the country. If such is the fact situation, the Court cannot be put under shackles on technical grounds. The case of the assessee as submitted by learned counsel for the respondent is that had the appeal been preferred within the period of limitation, the assessee would have exercised their right under the Vivad Se Vishwas scheme and would have purchased peace by remitting the tax as quantified. This having not been done, the assessee would submit that a valuable right or in other words vested right has been impinged.

The settlement scheme was introduced pursuant to an Act of Parliament called the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020). It was an Act to provide for resolution or disputed taxes and for matters connected therewith or incidental thereto. The assessee seeks to bring  his case under proviso to Section 3 of the Act which provides that in a case where an appeal or writ petition or special leave petition is filed by the income tax authority or any issue before the appellate forum, the amount payable shall   be one-half of the amount in the Table mentioned in Section 3, in  such  manner as may be prescribed. It is submitted that the scheme came to close   as on 31.01.2020 and thereafter the assessee cannot avail the benefit of the scheme. Thus, it is submitted that by filing the above appeal belatedly, this valuable/vested right of the assessee has been taken away.

In our considered view, the first question would be as to whether a right to avail the benefit of settlement scheme is a valuable or vested right. Undoubtedly, the scheme has been brought about bearing in mind various factors. There is no compulsion on the assessee to avail the benefit of the scheme as it is purely optional. Therefore, an assessee may choose or may not choose to avail the benefit of the scheme. The assessee has filed an affidavit stating that she was advised to avail the benefit of scheme in the event the revenue prefers an appeal before this Court against the decision of the Tribunal which was in favour of the assessee. Court cannot examine the case on abstract propositions or what would have been the intention of the assessee.  On careful reading of all the provisions of Act 3 of 2020, it is clear that the benefit provided is optional, an assessee exercising such option is not automatically entitled to the benefit under the scheme and the authority is empowered to consider and refuse to entertain the application for reasons to  be assigned. Section 9 has also enumerated the cases where the Act will not apply. Thus, on a complete reading of Act 3 of 2020 it is clear that the scheme propounded therein not only is optional but can never construed to be  a  vested or a valuable right. Therefore, on the assessee contemplating of going under the scheme cannot be said to have suffered prejudice only because the revenue preferred the appeal belatedly as we find the scheme does not confer any vested right on the assessee.

The learned counsel for the assessee placed reliance on the order passed by this Court in the case of Nitu Agarwal (supra). In the said decision, the revenue had not placed any submission as to the effect of the provisions of Act 3 of 2020 nor there was any dispute raised on the submission of the  assessee that they wanted to avail the benefit of the scheme. In any event it is an order passed in a miscellaneous application refusing to exercise discretion and the same cannot be treated as precedent as each case has  to  be considered on the facts and circumstances contained therein.

Upon going through the affidavits filed in support of the applications and bearing in mind the facts and circumstances set out above, we  are  satisfied that the revenue has shown sufficient cause for not being able to  prefer the appeal within the period of limitation.

Thus, court is of the considered view that cause of justice would be served if the delay in filing the appeal is condoned and the appeals are heard  on merits so that the Court can consider as to whether any substantial  question of law arises for consideration.

Conclusion

For all the above reasons, the applications are allowed and the delay in filing the appeal is condoned.

PCIT-Vs-Dinesh-Kumar-Bansal-HUF-Calcutta-High-Court

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ITAT eliminates the Section 271E penalty since the assessee is deceased and the transaction’s legitimacy cannot be established.

ITAT eliminates the Section 271E penalty since the assessee is deceased and the transaction’s legitimacy cannot be established.

Fact and Issue of the case

The captioned appeals have been filed at the instance of the assessee against both the orders of  the  Commissioner of  Income Tax (Appeals, Hisar [‘CIT(A)’ in short], dated 10.03.2018 arising from even orders dated  27.03.2014  passed  by  the  Assessing Officer (AO) under Section 271E and  271D  of  the  Income  Tax Act, 1961 (the Act) concerning AYs 2010-11 and 2011-12, respectively.

The assessee has challenged the action of Assessing Officer towards imposition of penalty to Rs.2  lac  levied  under  Section 271E on the ground that assessee has repaid  loan  of  Rs.2  lac  in cash during the year under consideration in violation of Section 269T of the Act.

When the matter was called for hearing, ld. counsel for the assessee submitted that the penalty under Section  271E  in the hands of the deceased-assessee is not justified for the reason that allegations of Assessing Officer are not corroborated from  the record. It was pointed out that the basis for imposition of penalty is ‘loose paper no.98’ impounded during  the  course  of  survey, copy of  which is placed on  record. It was pointed out that paper was hand written by somebody other than assessee as self evident from loose paper. The paper is neither  signed  by  assessee  nor acted upon. It is not known from whom the money  has  come  nor the amount of Rs.2 lac is mentioned anywhere in the loose paper. It was further pointed out that the  assessee  has  since  died therefore such vague and nondescript document should not be used against the deceased assessee on the basis  of  suspicion  and surmises. It was further pointed out  that  the  Assessing  Officer itself in paragraph no.7 of  assessment  order  dated  27.03.2014 stated that no addition is required to be made towards cash loans in Assessment Year  2011-12  as the  alleged  amount  was  received in Assessment Year 2010-11. It was thus submitted that the action of the Joint Commissioner of Income Tax imposing  penalty  is marred with non application of mind. Consequently, the penalty is required to be struck down.

Ld. DR for the Revenue, on the other hand, relied upon the orders of the lower authorities and submitted that the loose papers found during the survey operation evidences the factum of repayment of loan in cash by the assessee which attracts the provisions of Section 269T and in turn Section 271E without any further requirements in law. Ld. DR thus submitted that no interference with the order of the CIT(A) is called for.

Observation of the Court

Court has carefully considered the rival submissions.  As pointed out on behalf of the assessee, an assessment under Section 143(3) r.w. Section 147  was  completed  in the  instant  case, wherein the Assessing Officer has not observed any repayment of loan in cash as alleged in the  penalty  order.  On  perusal  of  the loose paper no.98, we find that no  such  amount  of  Rs.2  lac  is borne out in the loose paper, insofar as Financial Year 2010-11 relevant to Assessment Year  2011-12 in question is concern. We also find traction in  the plea of the  assessee that the loose paper in the instant case are neither signed by the deceased-assessee nor prepared by him and also simultaneously vague and  non-descript. The loose paper was purportedly prepared by some nephew of the assessee who was neither identified nor cross-examined. The loose paper no.98 also does not spell out as to with whom the alleged cash transactions as entered into the loose paper has  been  carried out, i.e., the corresponding party to the transaction is not known. The assessee is since deceased and thus the authenticity of the transaction cannot vouched. Under these mitigating circumstances, we find that plausible cause exists to question the propriety of allegations. The assessee thus deserves to be exonerated from the clutches of Section 269T r.w. Section 271E of the Act.

The order of the CIT(A) is accordingly  set  aside  and  the order of the Assessing Officer  reversed.  The  penalty  imposed under Section 271E stands cancelled.

In the result, the appeal of the  assessee in ITA No.90/Del/2019 is allowed.

The assessee has challenged the imposition of penalty of Rs.22,50,000/- allegedly received in cash by way of loans  or deposits in contravention of  Section  269SS r.w.  Section 271D  of the Act.

Ld. counsel for the assessee submitted that the basis of imposition of penalty under Section 271D is a ‘loose paper marked page no.94’ impounded in the course of survey from the business premises of the  assessee. The  Ld.  Counsel thereafter adverted to the copy of loose paper no.94 and submitted that a bare reading of loose paper, if it were to be believed, would show that Rs.15 lac (page 94 of loose paper)  was  purportedly  received  21  months back, i.e., somewhere in July, 2008 and does not concern the Assessment Year 2011-12 in question. Likewise, another sum of Rs.7,50,000 (page 98 of loose paper) is stated to be received on 12.09.2009 i.e. in the F.Y. 2009-10 relevant to A.Y. 2010-11. The assessment order framed under Section 143(3) r.w. Section 147 for AY 2011-12 is also silent on  Rs.7.50 lakhs. It was next submitted that the assessee is since deceased, and therefore, in the absence of any signature from the assessee and in the absence of  any particular of the person from whom the money was  allegedly received etc., the document i.e., loose paper cannot be conceived more than a flippant or dumb document and thus cannot be relied upon for the purposes of. Ld. counsel thus urged for cancellation of penalty under Section 271D of the Act.

The Ld. DR relied on the action of revenue authorities.

Court has  carefully  considered  the  rival  submission.  The imposition of penalty under Section 271D for purportedly contravention of Section 269SS is in issue. It is alleged  in the penalty order that the assessee has controverted the provisions of Section 269SS of the Act having raised  cash  loan  of  Rs.15  lakh and Rs.7.5 lakh  in aggregate during the  Assessment Year  2011-12 in question. In this regard, we  observe that there was  some  figures of Rs.15 lac at  page no.94 and figure of Rs.7,50,000/- at page 98 of the loose paper, which is basis for alleging violation of Section 269SS of the  Act  and  income escaped assessment under  Section 147 of the Act on the other hand. While recording the reasons for reopening of the assessment, it is noticed that, as per paragraph 7 of the  assessment order under Section 143(3) r.w.  Section 147  of the Act, the Assessing Officer himself has held that no addition is required to be made on the basis of document no.98 concerning Rs.7.50 lakhs as the loan was received by the  assessee  on 12.09.2009, i.e., in the Financial Year  2009-10. Thus,  the imposition of penalty on alleged cash loan of Rs.7,50,000/- arising out of loose paper no.98 does  not  arise in Assessment Year  2011- 12 in question.

Adverting to loose paper no.94 giving rise to imposition of penalty of Rs.15 lac, it is self-evident from the calculation of the interest shown in the loose paper that the alleged cash loan was not received in the Financial Year 2010-11 in question  but  the alleged cash loan relates back to Financial Year 2008-09 relevant to Assessment Year 2009-10. The  calculation of  interest vouches that the loan of Rs.15 lac in question was received about 21 month back, i.e., in July 2008, if such loose papers are to be believed at its face value. On this ground alone,  the  jurisdiction  of  the Revenue to imposition of penalty under Section 271D r.w. Section 296SS is ousted, insofar as Assessment Year 2011-12 in question is concerned. We therefore find prima facie merit in the plea on behalf of the assessee for its exoneration from the  clutches  of Section 271D of the Act.

Consequently, the order of CIT(A) is set aside and the Assessing Officer is directed to cancel the penalty.

Conclusion

In the result, the court allowed the appeal of the assesse.

Mohit-Singh-LH-of-Late-Shri-Balwant-Singh-Vs-Joint-Commissioner-of-Income-Tax-ITAT-Delhi

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Provision for Faceless Proceedings before the Income-tax Appellate Tribunal (ITAT) in a jurisdiction less manner: Budget 2021

Provision for Faceless Proceedings before the Income-tax Appellate Tribunal (ITAT) in a jurisdiction less manner : Budget 2021

In order to impart greater efficiency, transparency and accountability to the
assessment process, appeal process and penalty process under the Act a new faceless assessment scheme, faceless appeal scheme and faceless penalty scheme have already been introduced. Further, vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 the Central Government has been empowered to notify similar schemes in respect of many other processes under the Act that require a physical interface with the taxpayers.

In order to ensure that the reforms initiated by the Department to reduce human interface from the system reaches the next level, it is imperative that a faceless scheme be launched for ITAT proceedings on the same line as faceless appeal scheme. This will not only reduce cost of compliance for taxpayers, increase transparency in disposal of appeals but will also help in achieving even work distribution in different benches resulting in best utilisation of resources.

Therefore, it is proposed to insert new sub-sections in the section 255 of the Act so as to provide that the Central Government may notify a scheme for the purposes of disposal of appeal by the ITAT so as to impart greater efficiency, transparency and accountability by,—

(a) eliminating the interface between the ITAT and parties to the appeal in the course of proceedings to the extent technologically feasible;

(b) optimising utilisation of the resources through economies of scale and
functional specialisation;

(c) introducing an appellate system with dynamic jurisdiction. It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, for issuing notification in the Official Gazette, to direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March, 2023. It is proposed that every notification issued shall, as soon as may be after the notification is issued, be laid before each House of Parliament..

This amendment will take effect from 1st April, 2021.

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