![itat- annual digest 2023[ Part 33] - TAXSCAN](https://www.taxscan.in/wp-content/uploads/2024/01/annual-digest-2023-Part-33.jpg)
This yearly digest analyzes all the ITAT stories published in the year 2023 at taxscan.in
The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that Land is not a Capital Asset but a ‘Work-in-Progress’ for a Real Estate Company. It was also observed that the Expenses incurred in connection with the same shall be treated as Revenue Expenditure.
The single-member tribunal bench of Shri Laxmi Prasad Sahu (Accountant Member) held that the lower authorities have taken wrong view that no business activities have been done after the purchase of land and the value appearing under the head W-I-P are capital assets. It was thus held that the expenditure incurred by the assessee are revenue expenditure and allowed as deduction under Section 37 of the Income Tax Act, 1961. The appeal of the assessee was partly allowed for statistical purpose.
The Income Tax Appellate Tribunal (ITAT), Cuttack Bench has held that indexation of Cost of Acquisition of property is available for the purpose of computation of Long Term Capital Gain (LTCG) from the assessment year (AY) in which consideration is fully paid by the assessee.
The single bench of Shri. George Mathan (Judicial Member) observed that as per the assessment order itself, the full amount with respect to the cost of acquisition has been paid by the assessee before the year ending 31st March 2007. Once the amount has fully been paid as on the year ending, as per Section 2(47)(v) of the Income Tax Act, 1961, as part performance as required from the side of the assessee, has fully been complied with being the payment of consideration, the indexation would be available to the assessee from the AY 2007-2008 relevant to the FY 2006-2007, the bench further observed. Indexed cost, being the cost of acquisition of the property based on the inflation rate, shall be considered for calculating LTCG on the sale of property under the Act, the bench held. In the result, the appeal of the assessee is partly allowed for statistical purposes.
The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that penalty under Section 271AAA of the Income Tax Act, 1961 shall not be attracted on the income surrendered by the assessee if the department failed to record a statement under Section 132(4) of the Income Tax Act during the proceedings.
The two-member bench consisting of Shri. Shamim Yahya (Accountant Member) and Shri. Anubhav Sharma (Judicial Member) observed that where no statement under Section 132(2) is recorded or specific query is made during assessment, for the purpose of Section 271AAA of the Act, then no inference can be drawn that assessee failed to specify the manner in which such income has been derived or substantiates the manner in which the undisclosed income was derived, so as to levy the penalty. It was held that Surrendered income cannot be termed as undisclosed income for the purpose of Section 271AAA of the Income Tax Act, 1961. The appeal of assessee is allowed.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition on account of cash gifts received from mother through gift deed as no contrary material was found.
A Single Bench of B. R. R. Kumar (Accountant Member) observed that the gift deed had not been disputed by the revenue. The fact of acceptance of the gift had also not been controverted by the (CIT(A)). In the absence of any contrary material by the revenue, the Bench allowed the appeal filed by the assessee and deleted the addition made by the Assessing Officer.
The Income Tax Appellate Tribunal (ITAT), Pune Bench has upheld the deletion of penalty under Section 271(l)(c) of the Income Tax Act, 1961 stating that a change of opinion of assessee or a change in the method of accounting followed by the assessee is not a deemed concealment of income.
The two-member bench comprising Shri S. S. Viswanethra Ravi (Judicial Member) and Dr. Dipak P. Ripote (Accountant Member) agreed with CIT(A) that penalty under Section 271(1)(c) of the Income Tax Act, 1961 is not sustainable. Accordingly, all the grounds of appeal raised by Revenue were dismissed.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty under Section 271(1)(c) of the Income Tax Act could not be imposed when income has been determined on an estimated basis.
The two-member Bench of Amit Shukla, (Judicial Member) and Padmavathy S, (Accountant Member) noted that the penalty under Section 271(1)(c) of the Income Tax Act had been levied on estimation of the gross profit on adhoc basis, at the rate of 12% on alleged bogus purchases and assessee’s explanation had not been rebutted by the AO either during the assessment proceedings or penalty proceedings. The Bench dismissed the appeal filed by the revenue holding the explanation of the Assessee and all the evidence filed before the authorities had neither been rebutted nor been found to be incorrect or the assessee had failed to substantiate the explanation.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has disallowed 25% of the alleged bogus purchase on account of inflation of purchase price. The assessee Sumer Chand Jain is an individual who engaged in the business of trading in export handicraft goods and jewellery. For AY 2010-11, the assessee filed his return on 28.09.2010 and it was processed under Section 143(1) of the Income Tax Act. Subsequently, the assessment was reopened.
The two-member bench of Anil Chaturvedi, (Accountant Member) and Astha Chandra, (Judicial Member) observed that the assessee had purchased goods without bills from some other suppliers otherwise sales could not have affected and that he had been benefited by providing margin of grey market. The tribunal following the decision of Vijay Protein Ltd. and Sanjay Oil Cake Industries held that the lower authorities instead of treating the entire impugned purchases as bogus and adding the same to the income of the assessee had rightly restricted the addition to 25% of such purchases.
The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently deleted the addition on account of bad debts claimed in Profit and loss account. The Assessee Navyug Cotton Company filed an appeal before the tribunal against the order of Commissioner of Income Tax (Appeals)[CIT(A)] in National Faceless Appeal Centre under Section 250 of the Income Tax Act, 1961 in relation to the assessment year 2013-14.
The tribunal observed that the amount of debt claimed as bad had been duly debited by the assessee in its Profit and loss account. The AO pointed was that the assessee could not substantiate the debt turning bad. Furthermore, “it is no more relevant in the backdrop of the amendment to Section 36(1)(vii)of Income Tax Act with effect from 01-04-1989 providing for allowing deduction on simple write off dispensing with the requirement of separately proving that the debt actually became bad.” A single member of the tribunal R.S. Syal (Vice President) deleted the addition imposed by the assessing officer.
The Kolkata bench of Income Tax Appellate Tribunal (ITAT) held that the penalty under section 271AAB Income Tax Act, 1961 should not be levied if the search under section 153A Income Tax Act, 1961 is not conducted in premises of assessee. The assessee Jorbagh Tea Company filed an appeal against the order of Commissioner of Income Tax (Appeals) confirming the penalty of Rs.10,01,500 imposed by the Assessing Officer (AO) under the Section 271AAB of the Income Tax Act.
After considering the facts, the bench of Rajpal Yadav (Vice-President) and Manish Borad (Accountant Member) observed that the search had not been conducted upon the assessee, then penalty under Section 271AAB of the Income Tax Act could not be imposed. The assessment in the present case has been framed under the section 153C Income Tax Act, and not under the section 153 Income Tax Act. Therefore, the assessee could not be imposed with penalty under the above provision. Thus the bench allowed the appeal filed by the assessee.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that the income derived from sale of agricultural land is not capital asset under section 2(14)(iii) of Income Tax Act,1961 . Hence not taxable. Assessee Kamlesh Kumar Rathi, was a resident individual. A search and seizure operation under Section 132 of the Income-Tax Act was conducted against the assessee.
Thus, the two member of Saktijit Dey, (Judicial Member) and M. Balaganesh, (Accountant Member) held that “The Assessing Officer has not controverted the nature and character of land sold. Once, nature and character of land sold is established as agricultural land not to be treated as capital asset u/s. 2(14)(iii) of the Act, any income arising out of sale of such land – whether by way of declared sale consideration or on account of on-money, would partake the character of exempt income”. The bench dismissed the appeal filed by the revenue.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that the departmental authorities cannot disallow deduction under section 35(2AB) of the Income Tax Act, 1961 by ignoring Form 3CL issued by the competent authority.
The two-member bench of Saktijit Dey, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeal of the assessee and held that “When the competent authority has issued Form 3CL entitling the assessee to claim a deduction in respect of both capital and revenue expenditure, which is a mandate under section 35(2AB) of the Act, the departmental authorities cannot disentitle the assessee from availing the deduction by ignoring Form 3CL”
The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the estimation of Income by the Assessing Officer as income from other sources as the assessee had failed to produce the evidence as to agricultural income.
The Bench noted that the income shown from agriculture was astronomical but there was no evidence of purchase of seeds/fertilisers. There was no evidence regarding receipt of amounts pertaining to sales of paddy and teak wood also. Such evidence was neither produced during the assessment proceedings nor during the appellate proceedings. The two-member Bench of R.K. Panda, (Accountant Member) Laliet Kumar, (Judicial Member) upheld the decision of treating some income under the head of other sources.
The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently quashed reassessment based on vague information received from the investigation wing regarding transactions in National Multi Commodity Exchange (NMCE).
The two member bench of the tribunal comprising Chandra Mohan Garg, (Judicial Member) and M. Balaganesh, (Accountant Member) held that reassessment proceedings are initiated based on vague information received from the Investigation Wing, Kolkata which only gives reasons to suspect and not reason to believe. Thus the bench allowed the appeal filed by the assesee. Sashi Tulsiyan, counsel appeared for the assessee. Maimum Alam, counsel appeared for the revenue.
The Ranchi bench of the Income Tax Appellate Tribunal (ITAT) directed re-adjudication since the claim of exemption under section 10(23C)(iiiad) of the Income Tax Act,1961 was rejected without proper verification.
The two-member bench comprising of Shri Sonjoy Sarma (Judicial) and Shri Girish Agrawal(Accountant) for the purpose of proper verification of documents and materials placed on record in respect of anonymous donations as well as the explanation for receipt of hall rent and accommodation so as to allow the claim of exemption under Section10(23C)(iiiad) of the Income Tax Act,1961 while allowing the appeal filed by the assessee.
The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty under Section 271(1)(c) of the Income Tax Act 1961, as the assessee had the bonafide belief of interest income on the bank deposit was eligible for deduction under Section 80P of the Income Tax Act.
A Single Bench of Suchitra Kamble, (Judicial Member) relied upon the Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. deleted the penalty under Section 271(1)(c) of the Income Tax Act on failure of furnishing inaccurate particulars of income as the assessee was under bonafide belief that interest income earned on bank deposits was also coming under the purview of claim for deduction under Section 80P of the Income Tax Act.
The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty could be imposed when the income surrendered during the survey had shown in the regular income-tax return which was filed within the prescribed time.
The two-member Bench of Annapurna Gupta, (Accountant Member) and T.R. Senthil Kumar, (Judicial Member) dismissed the appeal filed by the revenue citing the decision of Delhi High Court in CIT vs. SAS Pharmaceuticals wherein it was held where income surrendered by assessee during survey had been shown by it in its regular income-tax return filed within prescribed time, penalty could be imposed. The Bench upheld the decision of CIT(A), who partly deleted the penalty levied under Section 271(1)(c) of the Income Tax Act.
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench has held that the Cooperative society involved in Banking Business is not eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.
The single bench of Shri Laxmi Prasad Sahu (Accountant Member) remitted back the issue to the CIT(A) for fresh consideration. The assessee is given the liberty to give necessary documents for substantiating its case and the CIT(A) is also directed to give a reasonable opportunity of being heard. The appeal of the assessee is allowed for statistical purposes.
The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently held that interest income earned from deposits kept with nationalized banks is allowable as deduction under Section 80p(2)(a)(i) of Income Tax Act 1961. The Section 80p(2)(a)(i) of Income Tax Act deals with deduction provided to cooperative societies upon certain specified income engaged in specific activities such income including the gross total income of society. In the said case, the Tribunal discussed the contrary views expressed by the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO allows deduction under Section 80P of Income Tax Act on interest income. After considering the precedents laid down in the Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit case, the single-member bench of R.S. Syal, (Vice President) allowed the appeal filed by the assessee.
The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held that foreign traveling expenses of the company employees spouses accompanied on an official tour should not be disallowed. Therefore the bench granted relief to Hindustan Unilever.
The two member bench of Vikas Awasthy, (Judicial Member) and Amarjit Singh, (Accountant Member) allowed the appeal filed by the assessee and observed that identical issue on similar fact has been adjudicated in favour of the assessee in the Assessment Years 1985-86 to 1997-98.
The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has granted relief to TATA Power deleting the adjustment made towards technical know-how fees despite accepting the entity-level margins.
The two-member Bench of George George K, (Judicial Member) and Laxmi Prasad Sahu, (Accountant Member) observed that t the TPO had accepted the entity-level margins earned by the assessee but proceeded to make TP adjustment on payment towards technical know-how. The Bench referred to the decision of the Delhi High Court in Sony Ericsson Mobile Communications India (P.) Ltd. Vs. CIT which held that once the revenue accepts the entity-level margins as per the most appropriate method, it would be inappropriate to treat a particular expenditure as a separate international transaction. It was held that such an exercise would lead to unusual and absurd results. In view of the aforesaid judicial pronouncement, the Bench deleted the adjustment made by the TPO towards technical know-how fees despite accepting the entity-level margins.
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has recently upheld that penalty levied under section 271D of the Income Tax Act 1961 for contravention of Section 269SS of Income Tax Act 1961 for accepting a loan and advances other than by way of account payee cheques.
The tribunal after hearing both sides relied upon the decision of the Mumbai Bench in the case of Deepak Sales & Properties (P) Ltd. observed that “for escaping from the rigours from the Section 269SS of the Act, establishing genuineness or bona fides of the transactions is not sufficient” Further, any amount received by modes other than cheques, as loans or advances, results in a violation of the provisions of Section 269SS of the Act. There is no question of genuineness or bona fides of the transactions coming into the picture. After considering the precedents laid down in the Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit case the two-member bench of Accountant Member Annapurna Gupta and Judicial Member Siddhartha Nautiyal dismissed the appeal filed by the assessee and held that the assessee was unable to establish any reasonable cause for taking cash loans also so as to escape from the levy of penalty under Section 271D of the Income Tax Act in view of Section 273B of the Income Tax Act.
The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT), quashed assessment notice on the ground that it was not issued by the jurisdictional Assessing Officer (AO). The assessee, Ballu Singh, has raised question of jurisdiction of proceedings which goes to the root of any proceedings.
The Single Member Bench of the Tribunal comprising Kul Bharat, Judicil Member noted that it can be safely inferred that notice under Section 148 of the Income Tax Act was issued by the Authority which has no jurisdiction for the assessee. The Revenue has not brought any order by the Competent Authority whereby the jurisdiction was conferred on the Authority who issued notice under Section 148 of the Income Tax Act. “In the absence of such order, I hold that assessment order passed by the Assessing Officer was based on invalid notice hence, it also vitiated the assessment order in the light of binding precedents as cited by the assessee. The assessment order is hereby, quashed” the Tribunal opined.
The New Delhi bench of the Income Tax Appellate Tribunal(ITAT) held that no penalty shall be imposed for non-submission of audit reports due to reasonable cause under section 273B of the Income Tax Act, 1961.
The Bench observed that no penalty shall be imposable on the person if he proves that there was reasonable cause for the failure to submit the audit report as provided under section 273B of the Income Tax Act 1961. The two-member bench comprising of Ms Astha Chandra( Judicial) and Shri Shamim Yahya(Accountant) held that the penalty imposed under section 273B of the Income Tax Act, 1961 was not sustained and was liable to be deleted while allowing the appeal filed by the assessee.
The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) deleted the late filing fee under section 234E of the Income Tax Act,1961on the ground of limitation. Motor Magic Auto Zone, the appellant assessee had filed two appeals against the order passed by the Commissioner, New Delhi, relating to assessment years 2013-15.
The two-member bench comprising of Shri Chandra Mohan Garg (Judicial) and Shri M. Balaganesh (Accountant) held that the posting of a late filing fee was against the provision of law and it was liable to be deleted under section 234E of the Income Tax Act,1961. The appeal filed by the assessee was allowed.
The New Delhi bench of Income Tax Appellate Tribunal (ITAT) directed re-adjudication to assessing officer for the rejection of claim of depreciation on fixed assets under Section 32 of Income Tax Act, 1961 due to improper filing of depreciation report.
The tribunal Bench observed that the action of the lower authorities invoked the provisions of Section 69 of the Income Tax Act read with Section 115BBE of the Income Tax Act for the purpose of disallowance of claim of depreciation of the assessee, without even understanding and appreciating the fact that the provisions of law. The two member bench comprising of Saktijit Dey (Judicial) and M. Balaganesh (Accountant) directed the assessing officer for re-adjudication to grant the claim of depreciation under Section 32 of Income Tax Act.
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) deleted the demand of Tax deducted at source (TDS) on the amount already paid tax under sections 201(1) and 201(1A) of the Income Tax Act,1961 leading to double taxation.
The bench observed that the transferor of the land had paid taxes on the amount received from the assessee, but the receipt had not been disclosed in the income tax returnwhich raised the demand for non-deduction of TDS. A single-member bench comprising of Shri Waseem Ahmed( Accountant) held that no demand can be raised under section 201(1) of the Income Tax Act,1961 while allowing the appeal filed by the assessee.
The Amritsar Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the penalty under Sections 271(1)(b) and 272A(1)(b) of the Income Tax Act due to improper procedure in issuance of notice.
The Bench, consisting of Judicial Member Anikesh Benerjee and Accountant Member M L Meena observed that the case was squarely applicable to the decision in case of Navjeevan Charitable Society V. DCIT Central Circle-1, Jalandhar, that held as the Assessing Officer had written a letter to Surendra Mahajan and Associates for special audit of four case including the appellants but, the Assessing Officer had never issue a specific notice with points of special audit to the appellant assessee under Section 142(2A) of the Income Tax Act with the Approval of the PCIT. The Assessing Officer had never issued a specific notice with points of special audit to the appellant assessee under Section 142(2A) of the Income Tax Act with the Approval of the PCIT. Therefore, the order of the CIT (A) confirming levy of penalty under Section 271(1)(b) and 272A(1)(b) by observing non-compliance to direction under Section 142(2A) of the Income Tax Act is perverse to the fact on record. On parity of facts, following the Coordinate Bench’s decision in “Navjeevan Charitable Society”, the Bench held that the impugned orders were infirm and perverse to facts on record. Accordingly, the impugned orders were set aside and the penalties levied under Sections 271(1)(b) and 272A(1)(b) of the Income Tax Act were deleted. In result, the appeals filed by assessee were allowed.
The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the penalty under Section 271 A for estimation-based addition with a lack of reference to the Assessee’s books.
The Single Bench consisting of a Judicial Member K Narasimha Chari observed that clause (b) of sub-Section (6) of Section 270A of the Income Tax Act refers to the amount of under-reported income determined on the basis of an estimate of the accounts is correct and complete to the satisfaction of the Assessing Officer. The Bench further added that the addition made in this case, without reference to the books of the assessee, but on the basis of estimation, therefore, cannot provide the foundation for under-reported income for the purpose of levy of penalty under Section 270A of the Income Tax Act. It was squarely similar to the case, Jaibalaji Business Corporation (P.) Ltd. vs. ACIT [2023]. As a result, the appeal of the assessee was allowed.
The New Delhi bench of Income Tax Appellate Tribunal (ITAT) held that no addition can be made under Section 69A of Income Tax Act, 1961 when the source of cash deposit was duly explained during the assessment.
The Bench observed that the assessee had successfully demonstrated with supporting evidence source of cash deposit to his bank account under consideration and no addition was required to be made in the hands of assessee and therefore the addition was liable to be deleted. A single member bench comprising of Chandra Mohan Garg (Judicial Member) held that the addition made under Section 69A of Income Tax Act, 1961 was against provisions of law while allowing the appeal filed by the assessee.
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