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Rahul R. Sarda, Advocate

1. S. 68: Cash credit – Public listed company – Filing with Ministry of Corporate Affairs – Payment through bank – Information from investigation wing

Assessee, a public listed company, was engaged in the business of building and developing various projects. It received share application money in respect of which the AO made addition on the ground that onus cast upon the assessee was not discharged and the necessary details were not filed.

Held, the assessee filed details of share application money including names of allottees with the Ministry of Corporate Affairs. Bank statements of allottees were also submitted which showed payments were made by cheque. The AO merely relied upon the information received from the investigation wing and did not make any independent enquiry. AO failed to file any evidence on record that the amounts received. Hence, the addition was liable to be deleted.

Arceli Realty Ltd. vs. ITO, ITA No. 6492/M/2016 dt. 21/4/2017, (ITAT Mumbai)

Arceli Realty Ltd.

2. S. 147: Reassessment – Beyond four years – All facts disclosed in original assessment proceedings – No new materiales.

The assessment of the assessee, a civil contractor/builder/developer, was reopened after four years when the original assessment was completed u/s. 143(3) of the Act.

During assessment proceedings, the assessee duly furnished the capital account of the firms, statement of affairs, income and expenditure account, statement of dividend and interest, bank statement and cash flow statement, etc. The assessee made full disclosure of the material facts, for making the assessment, and no new material can be said to have come to the possession/knowledge of the AO evidencing that income has escaped assessment. Hence, reopening of assessment was bad in law.

Crescent Construction Co. vs. ACIT, ITA No. 658/M/2014 dated 26/5/2017 (ITAT Mumbai)

Crescent Construction Co.

3. S. 194H – Commission – Credit card service charges – Normal banking charges

The AO disallowed credit card charges paid by the assessee to banks on account of service fee charged by banks for processing assessee’s receipts payment in respect of which is made by assessee’s customers by credit cards on the ground that TDS was deducted u/s. 194H.

Held, credit card charges paid to the collecting banks would not fall within the meaning of the expressions ‘commission or brokerage’ as understood for the purposes of section 194H, and therefore, no amount of tax was deductible at source on such payments under section 194H since the commission retained by the credit card company was in the nature of normal bank charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment.

DCIT vs. Future Value Retail Ltd., ITA No. 3968/Mum/2015 dt. 31/5/2017 (ITAT Mumbai)

Future Value Retail Ltd.

4. S. 154: Rectification – Meaning of “record” – Apparent from the record

During the course of assessment proceedings, the assessee filed a revised return and claimed therein that the capital gains shall not be assessable in AY 2002-03, i.e., the year under consideration, but assessable in A.Y. 2006-07 to 2008-09, i.e., the year in which sale consideration was received. The assessee was entitled (a) to receive a sum of ₹ 6.00 crores; (b) 40% of the sale proceeds from sale of units to be constructed by the developer and (c) 6 flats that were going to be constructed. The assessee, however, declared long-term capital gain by adopting the sale consideration as ₹ 14.01 crores, being the consideration shown in the certificate dated 26-11-2001 issued u/s. 269UL(3) of the Act.

In the assessment proceedings, since the AO has proposed to assess the capital gains arising on transfer of development rights during the year under consideration, he proceeded to ascertain the present value of the sale consideration received in subsequent years by applying the provisions of sec. 269UA(2) of the Act, which provides for determining the net present value of future payments by applying a discounting rate of 8% as provided in Rule 48I of the IT Rules. Accordingly, the present value of consideration was computed at ₹ 34.02 crores as against the receipts (including future year receipts and value of flats) of ₹ 43.88 crores.

Thereafter, the AO initiated rectification proceedings u/s. 154 of the Act, since the total amount payable to the assessee was shown by the developer M/s. Mythri Associates in its books of account at ₹ 54.22 crores, whereas the AO had taken the sale consideration as ₹ 43.88 crores. The AO explained the reasons for the difference and inter alia contended that the records of the developer could not be taken as assessee’s records and since the view taken by the AO in the original assessment proceedings was a possible view, the same could not be considered as a mistake apparent from record.

Held, reference to outside documents would not be permissible for invocation of jurisdiction u/s. 154 of the Act. The AO could not go beyond the records and look into fresh evidence or materials which were not on record at the time of the order sought to be rectified was passed. Hence, the rectification was not justified.

Metal Rolling Works Ltd. vs. DCIT, ITA No. 1857/Mum/2015 dt. 31/5/2017 (ITAT Mumbai)

Metal Rolling Works Ltd.

Note: The Whole Decisions can be downloaded from the CTC Website www.ctconline.org under Knowledge Centre.

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