Income Tax Archives - Taxmann Blog Fri, 21 Jun 2024 10:56:33 +0000 en-US hourly 1 CIT(E) Can’t Reject Trust’s Application Without Serving Hearing Notice as Per Provisions of Sec. 282 | ITAT https://www.taxmann.com/post/blog/cite-cant-reject-trusts-application-without-serving-hearing-notice-as-per-provisions-of-sec-282-itat https://www.taxmann.com/post/blog/cite-cant-reject-trusts-application-without-serving-hearing-notice-as-per-provisions-of-sec-282-itat#respond Fri, 21 Jun 2024 10:56:33 +0000 https://www.taxmann.com/post/?p=72140 Case Details: Idream Social Edtech … Continue reading "CIT(E) Can’t Reject Trust’s Application Without Serving Hearing Notice as Per Provisions of Sec. 282 | ITAT"

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Provisions of Sec. 282

Case Details: Idream Social Edtech Foundation vs. Commissioner of Income-tax (Exemptions) - [2024] 163 taxmann.com 539 (Chandigarh-Trib.)

Judiciary and Counsel Details

    • A.D. Jain, Vice President & Vikram Singh Yadav, Accountant Member
    • Amit ParsadM. Kanda, Advs. for the Appellant.
    • Rohit Sharma, CIT-DR for the Respondent.

Facts of the Case

The assessee trust had filed an application for registration under section 12A(1)(ac)(iii). The Commissioner (Exemptions) issued a questionnaire electronically to verify genuineness of its activities requesting the assessee to furnish relevant documents and details online through e-proceedings on the e-filing portal along with supporting documents or evidences etc.

However, the assessee made no submissions. Thus, the Commissioner (Exemptions) rejected the application for registration under section 12AB on the ground that the assessee failed to furnish the relevant details along with supporting documents or evidence.

Aggrieved by the order, the assessee filed an appeal to the Chandigarh Tribunal.

ITAT Held

The Tribunal held that the notices were uploaded to the e-portal, but the assessee stated that he had not received any notice of hearing. Further, something needed to be on record to prove that the assessee had been served proper notice of hearing to furnish the relevant information or documents, etc. Merely uploading information about the date of hearing on the Income Tax Portal was not an effective service of notice as per the provisions of section 282.

Accordingly, considering the facts and circumstances and in the interest of justice, the file was restored to the file of the Commissioner (Exemptions) to decide the matter afresh in accordance with law after giving reasonable opportunity to be heard by the assessee. The assessee was directed to cooperate in the fresh proceedings before the Commissioner (Exemptions).

As a result, the appeal of the assessee was allowed for statistical purposes.

List of Cases Reviewed

    • Shri Bharat Goyal v. Commissioner of Income Tax (E), Chandigarh in CWP 21028-2023 (O&M), dated 04-03-2024 [para 8] followed.

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[Opinion] Let’s Reassess the Efficacy of New Reassessment Scheme https://www.taxmann.com/post/blog/opinion-lets-reassess-the-efficacy-of-new-reassessment-scheme https://www.taxmann.com/post/blog/opinion-lets-reassess-the-efficacy-of-new-reassessment-scheme#respond Fri, 21 Jun 2024 10:52:04 +0000 https://www.taxmann.com/post/?p=72143 Dr. Rakesh Gupta & Adv … Continue reading "[Opinion] Let’s Reassess the Efficacy of New Reassessment Scheme"

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New Reassessment Scheme

Dr. Rakesh Gupta & Adv (CA) Somil Agarwal – [2024] 163 taxmann.com 499 (Article)

Finance Act, 2021 has brought out sea changes in the scheme of reassessment. Justice Shah termed the new scheme of reassessment in the famous case of Ashish Agrawal as ‘game changer’. Position of law in the matter of reopening which more or less came to be settled over the years by the law expounded & enunciated by Hon’ble Supreme Court, has come back once again in fluid situation because of these wholesale changes made in the scheme of reassessment. Our legislature is known for such kind of ‘adventures’.

One of the most notable changes made by the Finance Act, 2021 in the scheme of reassessment is by way of omission of an important phrase ‘reason to believe’ which used to act as a check & bulwark against the arbitrary use & exercise of the vast powers of the reassessment enjoyed by the assessing officer. Law has always attached great sanctity to the finality of an assessment and therefore, the legislature had ensured that such finality of an assessment should not be allowed to be disturbed by mere whim and fancy of the Assessing Officer. Pursuant to this basic jurisprudential philosophy, the expression ‘reason to believe’ in section 147 had always controlled the powers of the Assessing Officer in the matter of reopening of the concluded assessment. This phrase though has not been defined under the Act but came to be interpreted by Hon’ble Courts to mean that there must be material before the assessing officer before forming the belief of escapement of income and further that, material must have live nexus with the belief of escapement of income. Hon’ble Courts have held that though such material may not be required to be conclusive but, in any case, such material must be more than mere gossip, rumor or hunch. Therefore, whenever the belief of the Assessing Officer based upon which the finality of an assessment was sought to be disturbed by reopening the assessment, Hon’ble Courts, when called upon, used to see based upon the ‘reason’ recorded as to whether there was any material or not and in case there was absence of material, Hon’ble Courts would quash such reopening of the assessment. Even in those cases where material was there, Hon’ble Courts used to examine whether such material had live nexus with the belief of escapement of income. Hon’ble Courts held consistently that the though belief is subjective, but such belief was to be based on objective considerations. To that extent Hon’ble Courts found that the ‘reason to believe’ formed by the Assessing Officer was justiciable to this limited extent.

Click Here To Read The Full Article

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Non-service of Order & Its Unsigned Copy Uploaded on ITBA Portal Don’t Make Sec. 263 Proceedings Invalid | ITAT https://www.taxmann.com/post/blog/non-service-of-order-its-unsigned-copy-uploaded-on-itba-portal-dont-make-sec-263-proceedings-invalid-itat https://www.taxmann.com/post/blog/non-service-of-order-its-unsigned-copy-uploaded-on-itba-portal-dont-make-sec-263-proceedings-invalid-itat#respond Thu, 20 Jun 2024 12:32:15 +0000 https://www.taxmann.com/post/?p=72070 Case Details: Ramasamy Sathyan Vs. … Continue reading "Non-service of Order & Its Unsigned Copy Uploaded on ITBA Portal Don’t Make Sec. 263 Proceedings Invalid | ITAT"

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Section 263 Proceedings

Case Details: Ramasamy Sathyan Vs. Assistant Commissioner of Income Tax - [2024] 163 taxmann.com 519 (Chennai-Trib.)

Judiciary and Counsel Details

    • S.S. Viswanethra Ravi, Judicial Member & Jagadish, Accountant Member
    • S. Sridhar, Adv. for the Appellant.
    • R. Clement Ramesh Kumar, CIT for the Respondent.

Facts of the Case

The Assessing Officer (AO) completed the assessment proceedings under section 143(3) read with section 153C. Later, the Principal Commissioner of Income Tax (PCIT), under section 263, passed assessment order on the assessee. The assessee contended that the original assessment order was non-est as it did not contain the signature of AO and was not served upon him. The assessee had furnished his email ID for communication, but he did not receive the order. No demand notice was served to the assessee, and thus, the original assessment order was non-est.

Aggrieved by the order, an appeal was filed to the Chennai Tribunal.

ITAT Held

The Tribunal held that while passing the assessment through the online (ITBA) portal, there is no mandatory requirement to manually send the assessment order to the assessee as it was a duplication of work. The unserved and unsigned order uploaded to the ITBA portal was a mere mistake, and the unsigned and non-service of the order did not vitiate the proceedings under section 263 of the Act.

Under section 263 of the Act, the order from AO is not required to be mandatorily served upon the assessee. The proceedings under section 263 are not invalid in case of non-service of the order and unsigned order of the Assessing Officer. The requirement under section 263, i.e., for initiating revision or assuming jurisdiction by the PCIT, to call for the records and, after examining the same, considers the order passed therein by the AO is erroneous in so far as it is prejudicial to the interests of the revenue having satisfied that it is a fit case for inquiry in enhancing the assessment.

In the instant case, the PCIT held that the AO had omitted to consider the share profits of the assessee in the original assessment proceedings and invoked the jurisdiction under section 263 of the Act. Therefore, the assessee’s contention that the unsigned and non-service of order vitiates the entire proceedings under section 263 is not justified.

List of Cases Referred to

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[Opinion] Reading of Applicability of Provisions of Section 271D of the Income-tax Act by Tribunal Benches https://www.taxmann.com/post/blog/opinion-reading-of-applicability-of-provisions-of-section-271d-of-the-income-tax-act-by-tribunal-benches https://www.taxmann.com/post/blog/opinion-reading-of-applicability-of-provisions-of-section-271d-of-the-income-tax-act-by-tribunal-benches#respond Wed, 19 Jun 2024 11:38:40 +0000 https://www.taxmann.com/post/?p=72023 S. Krishnan – [2024] 163 … Continue reading "[Opinion] Reading of Applicability of Provisions of Section 271D of the Income-tax Act by Tribunal Benches"

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Section 271D

S. Krishnan – [2024] 163 taxmann.com 498 (Article)

1. Introductory Remarks

The Government of India (the Legislature) has been taking lot of measures to curb black money and with this intention has been amending by way of substitution or insertion various provisions of the Income-tax Act(the Act). In fact, there is a separate Chapter (XXB) in the Act under the heading “Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax” In spite of several measures undertaken by the Legislature sometimes the purpose of these amendments gets lost when the definition of the terms as per the Act is put to judicial scrutiny. Probably the intention of the Legislature is not brought out or explained in unambiguous language.

To come to the subject straight away the Chennai Bench of ITAT in the case of ITO v. R. Dhinagharan (HUF) [ITA No.3329 (Chny) of 2019-Assessment Year 2016-17- Date of order 29th December, 2023] has held that 271D penalty cannot be levied when cash is received at the time of registration of immovable property. The ITAT Hyderabad Bench in the case of Ramkumar Reddy Satty v. Asstt. CIT [in ITA NO.488 (Hyd.) of 2023-Assessment Year 2018-19-Date of order 19th March, 2024] following the decision of the Chennai Bench in the case of Shri. R. Dhinagharan (HUF) has echoed the same views and has held likewise.

The relevant sections which deal with accepting loans, deposits and other specified sums have been analyzed in the next paragraph.

2. Analysis of Relevant Sections

Section 269SS of the Act [ only the relevant portions are extracted] under the heading “Mode of taking or accepting certain loans, deposits and specified sum “reads as under-

No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if, —

(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:

Explanation. –For the purposes of this section, —

(iii) “loan or deposit” means loan or deposit of money;

(iv) “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

Section 271D of the Act reads under the heading “Penalty for failure to comply with the provisions of Section 269SS “as under-

3. Penalty for Failure to Comply With the Provisions of Section 269SS

  1. If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.
  2. Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

Section 269SS of the Act was substituted (afresh) with effect from 1st June,2015 by Section 68 of the Finance Act,2015.

By clause 66 of the Finance Bill 2015 it was sought to substitute section 269SS of the Act relating to mode of taking or accepting certain loans and deposits by stating as under-

“The existing provision contained in section 269SS provides that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more.

It is proposed to substitute the said section so as to provide that no person shall take from any person, any loan or deposit or specified sum, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit or specified sum is twenty thousand rupees or more.

It is also proposed to define “specified sum” as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer materialises.

These amendments will take effect from 1st June, 2015.”

The purpose of amendment by way of substitution was explained in the Memorandum to the Finance Bill 2015 under the heading “Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances” through clauses 66,67,69 and 70 of the Finance Bill 2015 in the following words-

Click Here To Read The Full Article

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Name of Concerned AO Can’t Be Reflected in Notice Issued u/s 148 in Faceless Manner | HC https://www.taxmann.com/post/blog/name-of-concerned-ao-cant-be-reflected-in-notice-issued-u-s-148-in-faceless-manner-hc https://www.taxmann.com/post/blog/name-of-concerned-ao-cant-be-reflected-in-notice-issued-u-s-148-in-faceless-manner-hc#respond Wed, 19 Jun 2024 11:30:36 +0000 https://www.taxmann.com/post/?p=72021 Case Details: Ram Narayan Sah … Continue reading "Name of Concerned AO Can’t Be Reflected in Notice Issued u/s 148 in Faceless Manner | HC"

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Section 148

Case Details: Ram Narayan Sah vs. The Union Of India - [2024] 163 taxmann.com 478 (Gauhati)

Judiciary and Counsel Details

  • Soumitra Saikia, J.
  • O.P. Bhati for the Petitioner. 
  • DY.S.G.I. for the Respondent.

Facts of the Case

The petitioner filed the instant writ petition against the notice issued by the Assessing Officer (AO) for reopening the assessment under Section 147 of the Income Tax Act. The petitioner contended that the notice was issued with the name of the AO. This was contrary to the provisions of Section 151A and the schemes framed thereunder, whereby the Income Tax Authority was required to undertake these proceedings in a ‘faceless’ manner.

High Court Held

The High Court held that the scheme’s scope under Section 151A is for assessment, re-assessment, and re-computation under Section 158 and issuance of notices under Section 148. The same shall be by a process through automated allocation in accordance with the risk management strategy formulated as referred to under Section 148 for issuance of the notice and in a faceless manner and to the extent provided under Section 144B reference to make the assessment, re-assessment of total income or loss of the assessee.

The statute, in order to obviate prejudice and bias, has resorted to issuing notices through automated allocation via the risk management strategy. The notices are required to be issued in an automated manner without any interface between the department and the assessee. There is no fundamental right or legal right available to an assessee to demand that the notices, though automated digital allocation, should be issued. If the department issues fresh notices, the petitioner shall also be granted liberty to file their appropriate reply under section 148.

Accordingly, the department is required to follow the procedure prescribed for the scheme. Accordingly, the department will withdraw the notices and thereafter issue fresh notices if permissible under the law as per the scheme read in section 151A.

List of Cases Reviewed

  • W.P.(C) No. 3535/2021 & C.M. Appl. No. 10693/2021 & Ors (Para 9) followed.

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Assessment to Be Completed u/s 153A if Assessee Confirmed Info. About Foreign Bank by Filing Revised ITR During Search https://www.taxmann.com/post/blog/assessment-to-be-completed-u-s-153a-if-assessee-confirmed-info-about-foreign-bank-by-filing-revised-itr-during-search https://www.taxmann.com/post/blog/assessment-to-be-completed-u-s-153a-if-assessee-confirmed-info-about-foreign-bank-by-filing-revised-itr-during-search#respond Tue, 18 Jun 2024 10:52:34 +0000 https://www.taxmann.com/post/?p=71923 Case Details: Rajinder Kumar vs. … Continue reading "Assessment to Be Completed u/s 153A if Assessee Confirmed Info. About Foreign Bank by Filing Revised ITR During Search"

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Section 153A

Case Details: Rajinder Kumar vs. ACIT - [2024] 163 taxmann.com 445 (Delhi - Trib.)

Judiciary and Counsel Details

  • S. Rifaur Rahman, Accountant Member & Sudhir Pareek, Judicial Member
  • V. Sridharan, Sr. Adv., Karanjot SinghSnehal Ranjan ShuklaRomit Hotwani & Dinesh Kukreja, Advs. for the Appellant.
  • P.N. Barnwal, CIT DR & Vivek Vardhan, SR. DR for the Respondent.

Facts of the Case

The assessee was searched under section 132. During the search, the Assessing Officer (AO) confronted the assessee with a bank statement from HSBC Bank, London, received from the FT & TR division of the CBDT. The assessee accepted the same and offered the income from such a bank account in the return of income. The AO completed the assessment under section 153A, treating the income as undisclosed income.

The assessee filed an appeal before CIT(A), contending that the search was conducted based on the information obtained from the FT & TR division. The information was not search material as the assessee had disclosed the income voluntarily. However, the CIT(A) confirmed the additions and the assessee filed an instant appeal with the Tribunal.

ITAT Held

The Tribunal held that the search was initiated to verify the information available with the revenue through the FT&TR division of CBDT, and the assessee confirmed the same in the assessment proceedings. Also, the assessee did not retract his statement.

The relevant documents were confronted before the assessee, and after considering the various contents in the bank account received from the foreign bank, no matter how it was acquired, the assessee accepted the same and proceeded to revise the return of income. This shows that the documents collected by the revenue from the foreign authorities were genuine, and there was no need to follow the procedure in section 65B of the Indian Evidence Act.

In the instant case, the assessee had not retracted the acceptance of the contents of the statement of bank account produced before him, nor before revenue authorities in the revision or appellate proceedings. Therefore, the material with the revenue was to be considered proper, and the action of the AO to accept the revised return of income and proceed to complete the assessment would prove that the material with the revenue could be assessable under section 153A.

List of Cases Referred to

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[Opinion] Case Analysis: Hexaware Technologies Limited v. Assistant Commissioner of Income Tax & Ors. https://www.taxmann.com/post/blog/opinion-case-analysis-hexaware-technologies-limited-v-assistant-commissioner-of-income-tax-ors https://www.taxmann.com/post/blog/opinion-case-analysis-hexaware-technologies-limited-v-assistant-commissioner-of-income-tax-ors#respond Mon, 17 Jun 2024 11:55:59 +0000 https://www.taxmann.com/post/?p=71853 CA Piyush Baid – [2024] … Continue reading "[Opinion] Case Analysis: Hexaware Technologies Limited v. Assistant Commissioner of Income Tax & Ors."

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Hexaware Technologies

CA Piyush Baid – [2024] 163 taxmann.com 396 (Article)

Facts

Hexaware Technologies Limited, a prominent entity in the IT consulting and software development sector, duly submitted its income tax return for the Assessment Year 2015-2016, availing itself of deductions as per Sections 10AA and 80JJAA of the Income Tax Act, 1961. The company’s return was processed and accepted by the Jurisdictional Assessing Officer (JAO) in 2017.

However, in a subsequent turn of events in 20211, the JAO initiated reassessment proceedings under Section 148 of the Act, contending that certain components of Hexaware’s income had not been adequately assessed. Hexaware contested this reassessment notice, leading to its eventual annulment due to procedural irregularities.

Following a Supreme Court decision Ashish Agarwal2, the JAO issued a fresh reassessment notice on 25th May 20223, leading to the present writ petition by Hexaware challenging the JAO’s jurisdiction and the validity of the reassessment proceedings.

Issues

  • Applicability of TOLA and the Concept of “Travel Back”4: Whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) applies to the assessment year 2015-2016, and whether a notice issued under Section 148 after March 31, 2021, can be considered valid retrospectively.
  • Limitation Period for Reassessment: Whether the reassessment notice issued on August 27, 20225, is barred by limitation under the first proviso to Section 149 of the Act.
  • Validity of Notice without DIN: Whether the reassessment notice is invalid due to the absence of a Document Identification Number (DIN).
  • Jurisdiction of the JAO: Whether the JAO has the authority to issue the reassessment notice under Section 151A of the Act.
  • Nature of Escaped Income: Whether the issues raised in the reassessment order constitute “escaped income” as defined under Section 149(1)(b) of the Act.
  • Reopening Based on Change of Opinion: Whether the reassessment is permissible if it is based on a mere change of opinion by the JAO.
  • Consistent Allowance of Deduction: Whether the JAO can reassess a deduction consistently allowed in previous years.
  • Validity of Sanctioning Authority’s Approval: Whether the approval granted by the sanctioning authority for the reassessment is valid.

Arguments

Petitioner (Hexaware)

  • TOLA is not applicable to AY 2015-2016, and the reassessment notice is time-barred.
  • The notice is invalid due to the absence of a DIN.
  • The JAO lacks jurisdiction to issue the notice under the faceless assessment scheme.
  • The issues raised do not constitute “escaped income” as defined in the Act.
  • The reassessment is based on a change of opinion, which is not permissible.
  • The deduction under Section 80JJAA was consistently allowed in earlier years and cannot be reassessed.

Respondents (Revenue)

  • TOLA is applicable, and the notice is within the limitation period.
  • The absence of DIN does not invalidate the notice.
  • Both JAO and FAO have concurrent jurisdiction.
  • The issues raised constitute “escaped income.”
  • Reassessment based on a change of opinion is permissible.
  • The consistent allowance of deduction in earlier years does not bar reassessment.
Click Here To Read The Full Article 

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AO Can’t Deny Sec. 11 Exemption if Diff. Between Rent Received From Specified Persons & Rental Value is Less Than 10% https://www.taxmann.com/post/blog/ao-cant-deny-sec-11-exemption-if-diff-between-rent-received-from-specified-persons-rental-value-is-less-than-10 https://www.taxmann.com/post/blog/ao-cant-deny-sec-11-exemption-if-diff-between-rent-received-from-specified-persons-rental-value-is-less-than-10#respond Mon, 17 Jun 2024 11:55:19 +0000 https://www.taxmann.com/post/?p=71850 Case Details: DCIT vs. Indian … Continue reading "AO Can’t Deny Sec. 11 Exemption if Diff. Between Rent Received From Specified Persons & Rental Value is Less Than 10%"

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Section 11 Exemption

Case Details: DCIT vs. Indian Grameen Services - [2024] 163 taxmann.com 409 (Delhi - Trib.)

Judiciary and Counsel Details

  • Madhumita Roy, Judicial Member & Naveen Chandra, Accountant Member
  • Sandeep Kumar Mishra, Sr. DR for the Appellant.
  • Arvind Kumar, Adv. for the Respondent.

Facts of the Case

Assessee, a company registered under Section 25 of the Companies Act, 1956, filed its return of income for the relevant assessment year. During the assessment proceedings, the Assessing Officer (AO) found that the assessee rented out its premises to a related person, i.e., a specified person, under section 13(3) of the Income Tax Act. It was noticed that the rent charged by the assessee was substantially lower than the prevailing rental market rates.

AO contended that the assessee violated the provisions of Section 13(2)(b) and denied the exemption under Sections 11 and 12 to the assessee.

On appeal, CIT(A) upheld the order of AO. Aggrieved by the order, the assessee preferred an appeal to the Delhi Tribunal.

ITAT Held

The Tribunal, relying on the judgment of the Hon’ble Delhi High Court in the case of Hamdard National Foundation [India] [2022] 135 taxmann.com 348 (Delhi), held that the AO failed to bring on record any cogent evidence to show that the rent received by the assessee was inadequate. It was held that the material collected from the internet and the estate agents could not be termed a corroborative piece of evidence. It was further held that the rent received by the assessee exceeds the valuation adopted by the Municipal Corporation of Delhi to levy house tax.

The AO must show that the property has been made available for the use of any person referred to in Section 13 other than for adequate consideration. In order to determine the same, the context of the facts of the particular case needs to be appreciated. For determining “Adequate” consideration/rent, however, market rent or rate is not the sole yardstick; other circumstances of the case also need to be considered.

In the instant case, the AO had assumed that the fair market value is the sole yardstick for the determination of ‘adequate rent’. However, the difference between the rental value adopted by the assessee and the rental value adopted by the AO was less than 10%. Therefore, the same cannot be termed as inadequate. Accordingly, the assessee’s appeal was allowed.

List of Cases Reviewed

  • Hamdard National Foundation [India] in ITA 142/2021, dated 16-2-2022 followed.

List of Cases Referred to

  • SHREE RAM VAIKUNTHA TRUST v. ITO [1986] 15 ITD 1 (Bombay) (para 10).

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Reassessment Justified if AO Ignored Provisions of Sec. 14A and Circular No. 5/2014 While Completing Assessment https://www.taxmann.com/post/blog/reassessment-justified-if-ao-ignored-provisions-of-sec-14a-and-circular-no-5-2014-while-completing-assessment https://www.taxmann.com/post/blog/reassessment-justified-if-ao-ignored-provisions-of-sec-14a-and-circular-no-5-2014-while-completing-assessment#respond Sat, 15 Jun 2024 12:18:10 +0000 https://www.taxmann.com/post/?p=71768 Case Details: T.K.Salim vs. Union … Continue reading "Reassessment Justified if AO Ignored Provisions of Sec. 14A and Circular No. 5/2014 While Completing Assessment"

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Section 14A

Case Details: T.K.Salim vs. Union Of India - [2024] 163 taxmann.com 385 (Kerala)

Judiciary and Counsel Details

  • Dinesh Kumar Singh, J.
  • M. Gopikrishnan NambiarK. John MathaiJoson ManavalanKuryan ThomasPaulose C. Abraham & Raja Kannan, Advs. for the Petitioner.
  • P.K. Ravindranatha Menon, (SR.), Jose Joseph, SC, Income Tax Department, Kerala, Navaneeth N. Nath, CGC, Susie B. Varghese, Adv. for the Respondent.

Facts of the Case

The petitioner was the proprietor of M/s. Greenland Condiments. He was also the managing director of a limited company that was involved in manufacturing wood, cork, straw, and plaiting materials. The petitioner filed returns of his income for the relevant assessment years.

Subsequently, the case was reopened under Section 147, and the assessment was completed by disallowing the interest paid on the loan availed for investment in the company in which the petitioner was the Managing Director. Such disallowance was made by the Assessing Officer (AO) by invoking Section 14A.

Aggrieved by the order, the petitioner filed a writ petition to the Kerala High Court.

High Court Held

The High Court held that section 14A had been amended with effect from 01.04.2022 by the Finance Act 2022. Before the amendment was incorporated, Circular No. 5/2014 clarified the position that in certain cases, where no income has been earned by an assessee who has been claimed as exempt during the financial year under Section 14A, the said expenditure would be disallowed even when the taxpayer in a particular year had not earned any income.

Section 14A was added by the Finance Act, 2001, with retrospective effect from April 1, 1962, and was amended in 2007 and again in 2022 by introducing a non-obstante clause for clarification. Subsections (2) and (3) were added by the Finance Act, 2006, effective from April 1, 2007, requiring that if the Assessing Officer (AO) is not satisfied with the accuracy of the assessee’s claim regarding expenses related to income that does not form part of the total income under the Act, AO shall determine the amount of such expenditure using a prescribed method.

Further, rule 8D of the Income Tax Rules, 1962, prescribing the methodology for determining the amount of the expenditure in addition to income not includible in total income, was inserted with effect from 24-3-2008 to implement sub-sections (2) and (3) of section 14A. It is a clear indicator that a new method for computing the expenditure was brought in by the Rules, which was to be utilised for computing the expenditure for the assessment years 2007-08 and onwards.

In the instant case, the AO had disallowed the interest the assessee paid on loans from Banks as business expenditure. The assessee had claimed a deduction of interest paid to the Bank on property loan. The said amount also included the interest paid on the loan availed for investment in the petitioner’s other business concern.

If the assessments concluded are not in accordance with the law, it is not a change of opinion but a valid reason for reopening the assessments. The AO had ignored the mandatory provision of Section 14A and Circular No. 5/2014 while completing the assessments, which were reopened.

Therefore, the AO had not committed an error of law or jurisdiction, and accordingly, the writ petition was dismissed.

List of Cases Referred to

  • CIT v. Usha International Ltd. [2012] 25 taxmann.com 200/253 CTR 113/348 ITR 485/210 Taxman 188 (Delhi) (para 8),
  • Income Tax v. Usha International Ltd. 2012 SCC OnLine Del 5645 (para 8),
  • Others v. Marico Limited 190 DTR 0190 (para 8),
  • M/s.Phool Chand Bajrang Lal and Another v. ITO and Another 4 SCC 77 (para 9)
  • CIT v. Essar Teleholdings Ltd. [2018] 90 taxmann.com 2/300 CTR 561/401 ITR 445/253 Taxman 321 (SC) (para 17).

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Income Tax Returns (ITR) | New Tax Regime vs. Old Tax Regime https://www.taxmann.com/post/blog/income-tax-returns-itr-new-tax-regime-vs-old-tax-regime https://www.taxmann.com/post/blog/income-tax-returns-itr-new-tax-regime-vs-old-tax-regime#respond Fri, 14 Jun 2024 12:25:48 +0000 https://www.taxmann.com/post/?p=71692 The choice between the new … Continue reading "Income Tax Returns (ITR) | New Tax Regime vs. Old Tax Regime"

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New Tax Regime vs Old Tax Regime

The choice between the new and old tax regimes depends on your eligible deductions and exemptions.
New Tax Regime – Beneficial if you have minimal deductions. Features lower tax rates but disallows most exemptions and deductions.
Old Tax Regime – Favourable if you claim significant deductions like Section 80C, 80D, and home loan interest under Section 24.

FAQ 1. What is the New Tax Regime under Section 115BAC?

Section 115BAC of the Income Tax Act introduces an alternative tax regime for Individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and Artificial Juridical Persons (AJPs), collectively referred to as ‘eligible assesses.’ Under this regime, eligible assesses can opt to be taxed at reduced rates based on their income brackets.

The tax rates under the new regime are as follows:

Total Income (Rs)

Tax Rate

Up to 3,00,000

Nil

From 3,00,001 to 6,00,000

5%

From 6,00,001 to 9,00,000

10%

From 9,00,001 to 12,00,000

15%

From 12,00,001 to 15,00,000

20%

Above 15,00,000

30%

To qualify for the new tax regime, an assessee must adhere to the following conditions:

  • The total income must be computed without claiming specified exemptions and deductions
  • The total income must be computed without setting off losses or depreciation carried forward from previous years if these are attributable to specified exemptions and deductions
  • The total income must be computed without setting off any loss under the head “Income from house property” against any other head of income
  • The total income must be calculated after claiming depreciation in the prescribed manner. If the depreciation rate for any block of assets exceeds 40%, it is restricted to 40%
  • The total income must be computed without claiming any exemptions or deductions for allowances or perquisites provided under any other law currently in force
Read More
New Tax Regime for Individuals, HUFs, AOPs, BOIs or AJPs on Taxmann.com/Practice

FAQ 2. How to Choose Between the Old and New Tax Regime?

Choosing between the old and new tax regimes depends on the amount of exemptions and deductions available to the assessee. If an individual has no deductions or exemptions to claim, it is generally beneficial to opt for the new tax regime. However, if an individual can claim deductions or exemptions such as those under Section 80C, Section 80D, House Rent Allowance, or interest on a housing loan under Section 24, it is advisable to calculate taxes under both regimes to determine which option is more advantageous.

To calculate the tax under both regimes, you may use ‘Tax Calculator – Old Regime Vis-À-Vis New Regime’ available on the Income-tax Dept. website.

Taxmann.com | Practice | Income-tax

FAQ 3. What Are the Exemptions and Deductions Not Available in the New Tax Regime?

Opting for the lower tax rates under the new tax regime requires computing the total income without claiming the following exemptions and deductions:

  • Leave Travel Concession [Section 10(5)]
  • House Rent Allowance [Section 10(13A)]
  • Official and Personal Allowances (other than those prescribed) [Section 10(14)]
  • Allowances to MPs/MLAs [Section 10(17)]
  • Exemption for Income of Minor [Section 10(32)]
  • Deduction for Units in Special Economic Zones (SEZ) [Section 10AA]
  • Entertainment Allowance [Section 16(ii)]
  • Professional Tax [Section 16(iii)]
  • Interest on Housing Loan (for self-occupied house property) [Section 24(b)]
  • Additional Depreciation for New Plant and Machinery [Section 32(1)(iia)]
  • Deduction for Investment in New Plant and Machinery in Notified Backward Areas [Section 32AD]
  • Deduction for Tea, Coffee, or Rubber Business [Section 33AB]
  • Deduction for Prospecting, Extraction, or Production of Petroleum or Natural Gas in India [Section 33ABA]
  • Deduction for Donations to Approved Scientific Research Associations, Universities, Colleges, or Institutes [Section 35(1)(ii)]
  • Deduction for Payments to Indian Companies for Scientific Research [Section 35(1)(iia)]
  • Deduction for Donations to Universities, Colleges, or Institutions for Social Science or Statistical Research [Section 35(1)(iii)]
  • Deduction for Donations for Scientific Research or Expenditure on Scientific Research [Section 35(2AA)]
  • Deduction for Capital Expenditure on Specified Businesses (e.g., cold chain facility, warehousing facility) [Section 35AD]
  • Deduction for Expenditure on Agriculture Extension Projects [Section 35CCC]
  • Deductions under Sections 80C to 80U pexcept those under Section 80JJAA, Section 80CCD(2), Section 80CCH(2), and Section 80LA(1A)) [Chapter VI-A]
Read More
New Tax Regime for Individuals, HUFs, AOPs, BOIs or AJPs on Taxmann.com/Practice

FAQ 4. What are the Break-Even Points for Deductions at Different Income Levels?

The following table shows the break-even points for deductions at various income levels, indicating where the tax liability is the same under both the old and new tax regimes.

Income (Rs)

Deductions Required for Break Even (Rs) Tax Liability under New Regime (Rs) Tax Liability under Old Regime (Rs)

Comments

8,00,000

1,87,500 36,400

36,400

The new regime is beneficial if the assessee claims deductions less than Rs. 1,87,500

9,00,000

2,37,500 46,800 46,800

The new regime is beneficial if the assessee claims deductions less than Rs. 2,37,500

10,00,000 2,62,500 62,400 62,400

The new regime is beneficial if the assessee claims deductions less than Rs. 2,62,500

12,50,000

3,12,500 1,04,000 1,04,000

The new regime is beneficial if the assessee claims deductions less than Rs. 3,12,500

15,00,000 3,75,000 1,56,000 1,56,000

The new regime is beneficial if the assessee claims deductions less than Rs. 3,75,000

FAQ 5. Which Tax Regime Should I Choose if I Earn a Salary of Rs. 14 Lakhs?

For the financial year 2023-24, if you have a salary of Rs. 14 lakhs and paid Rs. 4 lakhs to repay the principal of a home loan, Rs. 50,000 for health insurance, and Rs. 1.5 lakh towards the interest on the home loan; the following comparison will help determine the best tax regime for you.

Here’s a comparison in a table format for an individual under 60 years of age:

Particulars

Old Tax Regime (Rs.)

New Tax Regime (Rs.)

Salary Income [A]

14,00,000

14,00,000

Eligible Deductions    
• Standard Deduction

50,000

50,000

• Section 80C (Repayment of Home Loan)

1,50,000

• Section 80D (Health Insurance Premium)

50,000

• Section 24(b) (Interest on Home Loan for Self-Occupied House)

1,50,000

Total Deductions [B]

4,00,000

50,000

Net Taxable Income after Deductions [C = A – B]

10,00,000

13,50,000

Tax Payable [D]

1,12,500

1,20,000

Add: Health and Education Cess (4%) [E = D * 4%]

4,500

4,800

Total Tax Liability [F = D + E]

1,17,000

1,24,800

In this example, the old tax regime results in a lower tax liability (Rs. 1,17,000) compared to the new tax regime (Rs. 1,24,800). Therefore, you should opt for the old tax regime.

FAQ 6. How to Opt for the New Tax Regime under Section 115BAC?

Effective from the Assessment Year 2024-25, the new tax regime will be the default option for Individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and Artificial Juridical Persons (AJPs). If an assessee prefers the old tax regime, they must explicitly opt out of the new tax regime.

For those with income from a business or profession, opting out of the new tax regime and switching to the old tax regime requires furnishing Form No. 10-IEA on or before the due date for filing the income return under Section 139(1). Once this option is exercised, it applies to the year it is chosen and the subsequent assessment year.

Form No. 10-IEA can be filed online at Income Tax e-Filing Portal by navigating to: e-file > Income Tax forms > file Income Tax Forms.

For those with income other than from a business or profession, the choice of the tax regime can be indicated in the Income Tax Return (ITR) while filing the income return.

Read More
New Tax Regime for Individuals, HUFs, AOPs, BOIs or AJPs on Taxmann.com/Practice

FAQ 7. What Lower Tax Regimes Are Available to Other Assessees under the Income Tax Act?

The Income Tax Act provides alternative tax regimes for various types of assessees, as outlined in the table below. These regimes are not default options, so taxpayers wishing to opt for an alternative tax regime must file a specified form on or before the due date for filing an income tax return (ITR).

Alternative Tax Regime

Applicable to Filing of Form
Section 115BA Domestic Company

Form 10-IB

Section 115BAA

Domestic Company Form 10-IC
Section 115BAB Domestic Company

Form 10-ID

Section 115BAD

Co-operative Society Form 10-IF
Section 115BAE Co-operative Society

Form 10-IFA

These forms can be filed online at the Income Tax e-Filing Portal by navigating to: e-file > Income Tax forms > file Income Tax Forms.

Dive Deeper:
Income Tax Returns (ITR) | Which ITR Form is to be filed for AY 2024-25
[FAQs] Income Tax Returns (ITR) | Requirement to File ITR
[FAQs] Income Tax Returns (ITR) | Updated Returns
[FAQs] Income Tax Returns (ITR) | Reporting in Schedules in ITR
[FAQs] Income Tax Returns (ITR) | e-Filing of ITR
[FAQs] Income Tax Returns (ITR) | Annual Information Statement (AIS)
[FAQs] Income Tax Returns (ITR) | Capital Gains
[FAQs] Income Tax Return | Tax Payment | TDS | TCS | Refunds
[FAQs] Income Tax Returns (ITR) | Deductions & Rebates
[FAQs] Income Tax Returns (ITR) | Set-off of Losses
[FAQs] Income Tax Returns (ITR) | Clubbing of Income

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