ITAT Weekly Round Up

This weekly round-up analytically summarizes the key stories related to the Income Tax AppellateTribunal (ITAT) reported at Taxscan.in during the previous week 3rd August 2024 to 9th August 2024. AO cannot Change Valuation of Shares Method Selected u/s 56(2)(viib) r.w. Rule 11UA(2): ITAT Pisces EServices Pvt. Ltd vs The Dy. Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 842 The Bangalore Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that the assessing officer cannot to interfere in the valuation of shares method selected by the assessee under section 56(2)(viib) of the Income Tax Act, 1961 read with Rule 11UA(2) Income Tax Rules, 1962. The division bench of Waseem Ahmed ( Accountant Member ) and Soundararajan K ( Judicial Member ) heard both side’s arguments. The tribunal observed that the assessee adopted the DCF but the revenue adopted the NAV method. According to rule 11UA(2) of Income tax Rule, choosing any DCF or NAV method is optional and it is the assessee’s discretion. Get a Copy of GST Judicial Precedents, Click here The Tribunal ruled that AO cannot interfere in the method for the valuation of the shares but can scrutinize the contents or working adopted by the assessee. By relying on the Bombay HC and ITAT Bangalore judgments, the tribunal ruled in favor of the assessee. Change in Section for Claiming Exemption cannot be considered as Fresh Claim: ITAT allows LTCG Exemption u/s 10(38) to Trust Dy. Commissioner of Income Tax vs Business Excellence Trust CITATION: 2024 TAXSCAN (ITAT) 843 The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ), while granting LTCG ( Long Term Capital Gain) Income tax exemption to the assessee trust under Section 10(38) of the Income Tax Act, 1961 observed that mere change in section for claiming exemption before the first appellate authority cannot be considered as a fresh claim. The tribunal stated that the assessee, a Trust registered as a Venture Capital Fund, claimed “pass-through entity” status under Section 10(23FB), which provides exemption on income earned by the VCF. However, since the claim for exemption was rejected by the tax authorities, the “pass-through entity” status is not accepted for this year, and the provisions of Section 115U do not apply. Get a Copy of GST Judicial Precedents, Click here A coram of Justice (Retd.) C.V. Bhadang (President) and B.R.Baskaran (Accountant Member) have given the views based on the grounds raised by the appellant assessee and partly allowed the appeal. LTCG of Mauritius Company on Sale of Shares of Indian Investment made before 1st April 2017 is not Taxable in India: ITAT M/s. Superb Mind Holdings Ltd vs Assistant Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 844 The Delhi Bench of the Income Tax Appellate Tribunal ruled that the Long term Capital Gain ( LTCG ) of Mauritius Company on the sale of shares of an Indian investment made before the 1st April 2024 is not taxable in India. The Income Tax Tribunal noted that the Bombay High Court, referencing a press release dated 29.08.2016 issued by the Central Board of Direct Taxes ( CBDT ) following the amendment to the Mauritius DTAA effective from 01.04.2017, upheld the grandfathering of capital gains exemption under the erstwhile Mauritius DTAA. Get a Copy of GST Judicial Precedents, Click here Further, the bench added that the Bombay High Court ruled that the protocol mandates source-based taxation of capital gains arising from the alienation of shares acquired on or after 01.04.2017 in a company resident in India for FY 2017-18. Consequently, the court determined that investments made before 01.04.2017 are grandfathered and not subject to capital gains taxation in India. The situation in the present case before us is similar. Therefore, the ITAT ruled in favor of the assessee and allowed the claimed tax exemption. ITAT allows Axis Bank’s Rs. 8.3 Cr Interest Expense Claim u/s 14A citing Previous Ruling Axis Bank Ltd vs Assistant Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 845 The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) allowed the interest expense claim of Rs. 8.3 crore of Axis bank citing both Income tax. The bench ruled in favor of Axis Bank Ltd. on the issue of interest disallowance under Section 14A of Income Tax Act, 1961 for A.Y. 2010-11, citing a previous ITAT decision and the fact that the bank’s own funds exceeded exempt investments. This decision was also applied to A.Y. 2011-12 due to similar issues. The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Annapurna Gupta(Accountant Member) ruled that as the facts and issues are identical for the A.Y. 2011-12, the appeal regarding the disallowance of interest expenses under Section 14A of the Act was allowed. ITAT upholds Deletion of Additions for Unsecured Loans due to Insufficient Evidence u/s 68 and 69C of Income Tax Act The DCIT Ahmedabad vs Tripoli Management Pvt.Ltd CITATION: 2024 TAXSCAN (ITAT) 846 The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has upheld the deletion of additions made under sections 68 and 69C of the Income Tax Act, 1961, citing insufficient evidence to justify the claims of unsecured loans being non-genuine. The ITAT bench, comprising Siddhartha Nautiyal, Judicial Member, and Makarand V. Mahadeokar, Accountant Member, held that the findings of the AO were based on assumptions rather than solid evidence, and the assessee had satisfactorily demonstrated the identity, genuineness, and creditworthiness of the transactions. The ITAT upheld the CIT(A)’s decision to delete the additions, stating that the Revenue’s appeal lacked merit. NBFC Loan to its Sister Concern is for Mere Shift of Funds from One Entity to Another: ITAT rejects Bad Debt Claim Instronics Limited vs ITO CITATION: 2024 TAXSCAN (ITAT) 847 Recently, the Income Tax Appellate Authority ( ITAT ) of Delhi disallowed a bad debt deduction claim upholding the CIT(A)’s decision stating the loan provided by the NBFC to its sister concern was for mere shift of funds and there was no purpose shown for taking loan. The income tax tribunal, after examining the facts of the matter, found no merit in the appeal and agreed with the CIT(A)’s rationale. The bench of Mr Shamim Yahya and Mr Yogesh Kumar US gave emphasis on the importance of substance over form and fairness in related party transactions. Get a Copy of GST Judicial Precedents, Click here The tribunal upheld the CIT(A)’s decision denying the bad debt deduction, as the assessee failed to demonstrate genuine business purpose for the loan. The relationship between the lending and borrowing entities, who shared a common director, further cast doubt on the legitimacy of the claimed deduction. Accordingly, the appeal was dismissed. ITAT allows Deduction u/s 80P(2)(d) for Interest on Deposits with Co-operative Banks, Condones 9 Days Delay The Khedbrahma Taluka Primary Teachers Co-operative Credit Society Limited vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 848 The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has allowed a deduction under Section 80P(2)(d) of the Income Tax Act, 1961, to Khedbrahma Taluka Primary Teachers Co-operative Credit Society Ltd. for interest earned on deposits with The Sabarkantha District Central Co-operative Bank, Khedbrahma. The Tribunal also condoned a nine-day delay in filing the appeal. The ITAT bench of Ramit Kochar (Accountant Member) and T R Senthil Kumar (Judicial Member), following the Gujarat High Court decisions, allowed the appeal. However, it directed the AO to verify that the Sabarkantha District Central Co-operative Bank, Khedbrahma, is a co-operative society duly registered under the Co-operative Societies Act or the State Act before granting relief to the assessee. Get a Copy of GST Judicial Precedents, Click here The tribunal also condoned the nine-day delay in filing the appeal, stating that the assessee had shown reasonable and sufficient cause for the delay. Non-Adjudication of Jurisdictional Grounds and Failure to State Point of Determination u/s 250(6) of Income Tax Act: ITAT sets Aside Order Suhas Maruti Dhankude vs Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 849 The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has set aside the consolidated order and remanded four appeals back to the Commissioner of Income Tax (Appeals) for fresh adjudication due to non-adjudication of jurisdictional grounds and failure to state point of determination as required under Section 250(6) of the Income Tax Act, 1961. The ITAT bench, comprising G. D. Padmahshali, Accountant Member, and Vinay Bhamore, Judicial Member, observed that the CIT(A) dismissed the legal grounds without adjudicating them on merits, thus failing to comply with the requirements of Section 250(6) of the Act. The tribunal emphasized that the CIT(A) is obligated to make necessary inquiries, deal with each issue on merits, and decide grievances with a well-reasoned order. Get a Copy of GST Judicial Precedents, Click here Citing the ruling of the Supreme Court in Chandra Kishore Jha vs. Mahavir Prasad, the ITAT reiterated that any statutory provision must be followed precisely as prescribed. The tribunal noted that the CIT(A) did not record independent findings while adjudicating the grounds on merits. The ITAT set aside the impugned consolidated order and remanded the appeals to the CIT(A) for de novo adjudication. The CIT(A) has been directed to pass assessment year-wise separate speaking orders in accordance with Section 250(6) of the Act ITAT directs TPO to exclude Companies with Turnover exceeding or below 10 times for Transfer Pricing Comparable Analysis M/s. Benu Networks Packet Switch Private Limited vs The ACIT CITATION: 2024 TAXSCAN (ITAT) 850 The Hyderabad Bench of the Income Tax Appellate Tribunal orders the Transfer pricing officer ( TPO ) to apply the turnover filter to exclude companies with a Turnover of more than 10 times or less than 1/10th of the turnover of the assessee’s company for Transfer Pricing Comparable Analysis The two-member bench of Laliet Kumar (Judicial Member) and G. Manjunatha (Accountant Member) observed both sides’ arguments. It was noted that it always followed the filter ten times x and 1/10th of the assessee’s turnover on both sides. The Income tax appellate tribunal directed the AO/TPO to apply the ten times filter (more than 10 times and less than 1/10th turnover) to exclude the companies from the list of comparables. S. 36(1)(viia) Deduction not allowable without Provision for Bad and Doubtful Debts in Books of Account: ITAT The Andhra Pradesh State Co-operative Bank Limited vs Asst. Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 851 The Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that deduction under Section 36(1)(viia) of Income tax Act, 1961 is not allowed without any provision for Bad and Doubtful Debts in the books of account. The division bench of Laliet Kumar (Judicial Member) and Madhusudan Sawdia (Accountant Member) observed both side’s arguments and went through sections 36(1)(vii), 36(1)(viia), and 36(2)(v). The Tribunal in the earlier round of litigation directed to examine whether the assessee was entitled to the benefit of section 36 (1) (viia) r.w.s. 36(2)(v) of the Act or not. Get a Copy of GST Judicial Precedents, Click here The lower authorities found that the assessee had not made any provision in the books of account for bad and doubtful debt so they have disallowed the claim. Upon reading the provision it is abundantly clear that to invoke the provisions of Section 36 (1) (viia), it is essential to make a provision in the books to account for bad and doubtful debts. The Tribunal dismissed the appeal. Income Tax Department cannot make Additions based on Statements Retracted during Search without Incriminating Material: ITAT Saketkumar Rugnath vs The D.C.I.T CITATION: 2024 TAXSCAN (ITAT) 852 The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that the Income Tax Department cannot make additions to an assessee’s income based solely on statements made during a search operation under Section 132 of the Income Tax Act, 1961, if those statements are subsequently retracted and no incriminating material is found during the search. The ITAT bench, comprising Accountant Member Annapurna Gupta and Judicial Member T.R. Senthil Kumar, relied on several judicial precedents, including the judgements in DCIT vs. Narendra Garg & Ashok Garg (AOP) and Abhisar Buildwell Pvt. Ltd. vs. PCIT. The Tribunal held that disclosures or admissions made under Section 132(4) of the Act during search proceedings are admissible evidence but not conclusive. The bench ruled that in cases of completed or unabated assessments, the Income Tax Department cannot make additions based solely on retracted statements made during the search without any incriminating material being unearthed. Get a Copy of GST Judicial Precedents, Click here The Tribunal partially allowed the appeals of the assessees. Additions made based on loose sheets found during the search regarding investments in shares were upheld, while additions based on other grounds without any seized material to support them were deleted. Cash Deposit out of Gold Loan during Demonetization, duly Explained: ITAT deletes Addition Ashok Ravsaheb Tambe vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 853 The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has set aside the appellate order and deleted the addition made by the Assessing Officer(AO) of considering gold loan amount as unexplained Income under Section 69A of the Income Tax Act, 1961. The Bench was of the opinion that Though the period of cash deposits coincided with a period of demonetization, the assessee has clearly and sufficiently explained the source available to him to both of the tax authorities listed below. Get a Copy of GST Judicial Precedents, Click here The bench also considered the case of Shashi Garg Vs PCIT, in which the Supreme Court held that when the source of income was satisfactorily explained by the assessee, the revenue is not entitled to treat the same as unexplained income under Section69 A of the Act. The bench consists of G. D. Padmahshali (Accountant Member) and Shri Vinay Bhamore (Judicial Member), reversed the order of AO’s addition of considering gold loan amount as unexplained Income under Section 69A of the Income Tax Act. The bench thus set aside the impugned order and directed the AO to delete the additions made. Failure to Issue Income Tax Notice u/s 143(2) Fatal and not Curable u/s 292B: ITAT Syeda Mariam vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 854 The Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) ruled in favour of the assessee, observing that the assessment order is invalid due to AO’s failure to issue a mandatory Income tax notice under Section 143(2), therefore, this is a procedural lapse which is not rectifiable under Section 292B of the Act. The two-member bench of Soundararajan K ( Judicial Member ) and Waseem Ahmed ( Accountant Member ) concluded that the assessment order is illegal and must be set aside due to the lack of a Section 143(2) notice after considering the assessee’s return. The income tax appellate tribunal accepted the legal issue and determined that the assessment order dated August 30, 2019, and the CIT(A) order dated December 28, 2023, were not sustainable. Consequently, the tribunal allowed the assessee’s appeal. No Sufficient Cause Shown: ITAT dismisses Income Tax Appeal due to Inordinate Delay in Filing M/s Bhujbal Construction Company vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 855 The Pune bench of the Income Tax Appellate Tribunal (ITAT) dismissed an appeal due to an inordinate delay in filing without sufficient cause being shown by the appellant. The ITAT bench, comprising G. D. Padmahshali (Accountant Member) and Vinay Bhamore (Judicial Member), noted that even after excluding the COVID-19 relaxation period, the delay remained substantial and unexplained. The assessee failed to demonstrate any sufficient cause for the delay and did not submit any affidavit or corroborative evidence. The tribunal highlighted that the acceptability of the explanation is the primary criterion, and the assessee’s lack of action for over five years indicated negligence. Get a Copy of GST Judicial Precedents, Click here The tribunal upheld the decision of the CIT(A), finding no merit in condoning the inordinate delay. The appeal was dismissed on grounds of limitation. Delay in Filing Appeal due to Service of FAA Notice to Old CA’s Mail ID: ITAT remands Matter Bhadra Sahakari Sakkare vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 856 The Bangalore bench of Income Tax Appellate Tribunal(ITAT) remanded the case back to CIT(A) for a fresh review due to improper service and a delayed appeal, directing a fair hearing for the assessee.The delay was found to be non-intentional. The two member bench comprising Prakash Chand Yadav (Judicial Member)and Laxmi Prasad Sahu (Accountant Member) considered the given submissions and noted that the AO added the amount due to lack of evidence showing payment and non-compliance with section 43B for provisions in the Profit & Loss account. The FAA’s notices were not responded to by the assessee. Therefore, in the interest of justice, the matter is remanded to the CIT(A) for fresh consideration. Get a Copy of GST Judicial Precedents, Click here The tribunal contended that the assessee must update their email, communication address, and other details, and provide necessary documents and instructed the CIT(A) to give the assessee a reasonable opportunity to be heard. Addition u/s 69 of Income Tax Act Reduced without Considering Proper Evidences : ITAT Remands Matter Back to CIT(A) Income Tax Officer vs Rajeshkumar Theophilbhai Christie CITATION: 2024 TAXSCAN (ITAT) 857 The Ahmedabad bench of The Income Tax Appellate Tribunal ( ITAT ) recently allowed an appeal preferred by the Revenue against the decision made by Commissioner of Income Tax (Appeals) without considering the proper evidence in a case concerning unexplained cash deposits made during the demonetization period. After examining the appellant’s arguments, the bench comprising Mr Siddhartha Nautiyal and Mr Narendra Prasad Sinha observed that no compliance was made by the assessee in the course of assessment proceeding in spite of numerous opportunities provided by the AO. At the same time, the addition of Rs.7,30,32,566/- as made by the AO in respect of the entire credit transactions appearing in the bank account of the assessee was held not correct , as evidence gathered by AO through independent inquiries found the assessee made a payment of Rs.83,76,698/- in respect of purchase of Board CNG Steel Cylinders, which made it apparent that the assessee was engaged in certain purchase and sale transactions. Get a Copy of GST Judicial Precedents, Click here It was further observed that the total cash deposit in the bank account of the assessee was to the extent of Rs.23,78,505/- only and addition to this extent was sustained by the CIT(A). So, there is no dispute so far as this addition was concerned. On the balance turnover/ credit in the bank account of Rs.7,06,54,061/-, the CIT(A) estimated commission income at 2% and sustained the addition to the extent of Rs.14,13,081/- only. This action of the CIT(A) was also held incorrect, as the assessee’s claim that the assessee was providing accommodation entries, rather than engaging in purchase and sale transactions as suggested by the AO, was not verified. Thereby the CIT(A) was incorrect in estimating the income at 2% only. By virtue of the observations made, The tribunal remanded the case to the CIT(A) for a fresh decision after calling for a remand report from the AO, and by considering all the evidence and findings properly. In the result, appeal preferred by the Revenue was allowed for statistical purposes. No Physical Notice of Hearing served by Income Tax First Appellate: ITAT sets aside CIT (A)’s Ex Parte Order M/s K & S Fincon Pvt. Ltd. vs Income-tax Officer CITATION: 2024 TAXSCAN (ITAT) 858 In a recent case, The Income Tax Appellate Authority (ITAT) of Delhi set aside the Ex Parte order given by the Commissioner of Income Tax (Appeals) After hearing the arguments of both the appellant and respondent, The Bench of Mr. Khul Bharat and Mr Avdhesh Kumar Mishra observed that the assessee’s case was dismissed ex parte without affording the assessee an adequate opportunity of hearing. The bench considered the totality of the facts of the case and concluded that to serve the interests of natural justice, the CIT(A)’s order should be set aside. In light of the observation made, the tribunal directed to restore the matter to file of First Appellate Authority for fresh decision after affording adequate opportunity of being heard to the assessee. AO cannot Reject DCF Method For CCPS Valuation if it is made under Rule 11UA: ITAT deletes Addition The JCIT vs M/s. Magnet Buildtech Pvt.Ltd CITATION: 2024 TAXSCAN (ITAT) 859 Recently, The Income Tax Appellate Tribunal (ITAT) of Ahmedabad dismissed an appeal moved by the Revenue department against a decision made in favor of the assessee in a matter regarding deletion of addition. The tribunal observed that the AO’s reliance on the company’s subsequent financial losses to question the valuation is misplaced, as projections must be assessed based on the facts and data available at the time of valuation, not on future outcomes, as held in various judicial pronouncements. The issuance of CCPS to the holding company does not align with the legislative intent of Section 56(2)(viib) of the ITA, which is to prevent the generation and use of unaccounted money. Get a Copy of GST Judicial Precedents, Click here It was also noted that the transaction between a wholly owned subsidiary and its holding company does not create any unaccounted income or inflated share value for tax evasion purposes unless it is specifically proved. In light of the observations made, the appeal was dismissed. Failure to Deposit Advance Tax u/s 249(4)(b) of Income Tax Act due to Loss: ITAT remands Matter back to CIT(A) SPR Infrastructure India Limited vs The Deputy Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 860 Recently, the Income Tax Appellate Authority ( ITAT ) of Hyderabad remanded a case back to the Commissioner of Income Tax (Appeals) in a matter concerning non-payment of advance tax under Section 249(4)(b) of the Income Tax Act, 1961 due to financial loss. The bench comprising Mr. Laliet Kumar and Mr. Manjunatha remanded the case back to the CIT(A) for re-evaluation, while directing the appellant to file an application explaining the non-payment of advance tax and also to provide necessary documentation to prove the same. Get a Copy of GST Judicial Precedents, Click here The CIT(A) was directed to decide the issue in accordance with the law after considering the appellant’s submissions. If the CIT(A) rules against the appellant, the appellant will be given 30 days to deposit the self-assessment tax, after which the appeal will be decided on its merits. AO’s Order must be Erroneous and Prejudicial to invoke Section 263: ITAT sets aside Revision Order Dee Are Texfab Pvt.Ltd. 149 vs The PCIT Ahmedabad-1 CITATION: 2024 TAXSCAN (ITAT) 861 The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) orders that the assessing officer’s assessment order must be erroneous and prejudicial to invoke Section 263 of the Income Tax Act, 1961, and sets aside the Principal Commissioner of Income Tax’s revisional order. The bench of Siddhartha Nautiyal (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that the fundamental issue is whether the PCIT was justified in invoking the jurisdiction under Section 263 of the Income tax law. Get a Copy of GST Judicial Precedents, Click here The Tribunal noted that the AO issued multiple notices to the assessee and conducted sufficient inquiries. The tribunal observed that the assessee provided an explanation and evidence to show that the transaction was not conducted by the assessee but by the proprietorship firm Divyaraj Madanlal Gupta. It was observed that mere information on the insight portal cannot be considered evidence and the AO’ order must be erroneous and prejudicial to the interest of the revenue to invoke section 263 of the act which is not satisfied in this case. The tribunal set aside the PCIT order and upheld the reassessment order passed by the AO under Section 147 read with Section 144B of the Act. Income from Agricultural Land is not subject to Capital Gains Tax u/s 2(14) Income Tax Act : ITAT Rajendra Kumar Meena vs ITO CITATION: 2024 TAXSCAN (ITAT) 862 In a recent case the Income Tax Appellate Tribunal ( ITAT ) of Jaipur ruled in favor of appellant seeking deletion of addition made to his income. The bench also noted while making the addition the AO did not mention any section under which that income is made chargeable to tax in the hands of the assessee. Therefore, even on that account also, the addition made by the AO is not sustainable. Get a Copy of GST Judicial Precedents, Click here Based on these observations, the tribunal directed the AO to delete the addition of Rs. 46,00,000/- made in the hands of the assessee. In the result, the appeal of the assessee was allowed. TDS Applicability on Accounting Provisions made towards Unfinished Work: ITAT restores Case back to CIT (A) Ajay Enterprises Pvt vs DCIT, Central Circle-1 CITATION: 2024 TAXSCAN (ITAT) 864 Delhi bench “A” of the Income Tax Appellate Authority (ITAT) recently ruled on a case involving Tax Deducted at Source (TDS) applicability on accounting provisions made towards unfinished work. The bench of ITAT comprising Mr GS Pannu and Mr Abhinav Sharma after hearing contentions from both sides, observed that there was no error in the findings of the CIT (A) in regard to both the counts of disallowances under Section 40A(ia) and section 40B of the ITA. Get a Copy of GST Judicial Precedents, Click here It was noted that once the assessee claims that while following POCM at 100% of the revenue of the project has been recognized, it was incumbent to also account expenditures by deducting TDS instead of making provisions. However, as complete details of payment after the close of the accounts and TDS deducted and deposited there from in subsequent years was filed before the CIT (A) on 25.04.2022 and which have not been taken into consideration, it was found appropriate to restore the issue to that extent before the CIT (A). It was also observed that the AO made a disallowance under Section 14A without considering the fact that there was no exempt income during the year and since it is a settled proposition of law that in the absence of exempt income, no disallowance can be made. In light of the observations made, the appeal of assessee was partly allowed. Appeal delay over Mail ID Access issue and Late Discovery of CIT(A) Order: ITAT condones 601 Days Shri Devendragouda vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 866 The Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) has condoned the delay of 601 days on filing income tax appeal citing there is no malafide intention on behalf of assessee for not filing the appeal. The bench of members Chandra Poojari (Accountant) and Beena Pillai (Judicial), after reviewing the affidavit filed by the assessee, found no evidence of malafide intention. It acknowledged the assessee’s lack of awareness about the ex-parte appellate order and deemed the reason for the delay as reasonable. Get a Copy of GST Judicial Precedents, Click here It mentioned that “In any event, though the procedural law pertaining to the limitation has been drafted to construe it strictly, the fact remains that, considering such technicalities will not advance the cause of justice.” Citing the Supreme Court’s decision in the case Collector Land Acquisition Vs. Mst. Katiji & Ors, the tribunal found sufficient cause to condone the delay. The income tax tribunal noted that procedural technicalities should not impede the cause of justice. Consequently, the bench condoned the delay in filing the appeal. Balram R. Rao, Advocate and Ganesh R. Ghale, Advocate, Standing Counsel for Dept. appeared for the appellants and respondents respectively. Non Diligence in Filing Appeal: ITAT imposes Cost on Appellant, directs to Deposit on PMRF Premi Bai Uderani vs The ITO CITATION: 2024 TAXSCAN (ITAT) 867 The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, recently imposed a cost on an appellant and directed her to deposit the same on Prime Minister’s Relief Fund (PMRF), owing to the appellant’s lack of diligence in filing appeal. The tribunal observed that the CIT(A) had dismissed the appeal without fully considering the material produced by the assessee or the reasons for her non-appearance. The tribunal however also imposed a cost of Rs. 8,000 on the assessee to be deposited in the Prime Minister’s Relief Fund for her lack of due diligence in filing the appeal, as there was no evidence to suggest that she put effort to communicate with her advocate regarding the matter. The appeal was accordingly disposed of. CIT(A) fails to Address Key issue on Adjustment of Actual Expenditure against Provisions: ITAT remands matterm ACIT vs Vijay Electricals Ltd CITATION: 2024 TAXSCAN (ITAT) 868 The Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT ) remands the issue back to the Commissioner of Income Tax (Appeals) which failed to address the key issue of on adjustment of the actual expenditure against the provisions for the earlier years or the current year and issued an order without proper examination. The bench of Laliet Kumar (Judicial Member) and Manjunatha (Accountant Member) observed both sides’ arguments. The Tribunal noted that the CIT(A) failed to address the issue of whether the actual expenditure can be adjusted against the available provision or if it is to be restricted to the provision made for that year. The tribunal pointed out that the decision of the tribunal was on different facts and was not applicable in this case. Get a Copy of GST Judicial Precedents, Click here The tribunal observed that the CIT(A) passed the order without examining the historical/empirical data of expenditure incurred by the assessee for the rectification/repair of transformers and had approved the provisions made during the year. The tribunal directed the CIT(A) to reexamine this issue. The tribunal allowed the appeal filed by the revenue and the assessee for statistical purposes ITAT sets aside PCIT’s Revision Order for Failing to provide Adequate Hearing Opportunity and ignoring Submissions of Taxpayer Akash Petroleum Private Limited vs The Principal Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 869 The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) set aside the Principal Commissioner of Income Tax’s ( PCIT ) revision order for failing to give adequate opportunity for the assessee and ignoring the submission before issuing the order. The tribunal remanded the matter back on the file of the PCIT. The division bench of Ramit Kochar ( Accountant Member ) and T. R Senthil Kumar ( Judicial Member ) heard both sides’ arguments and observed that the PCIT gave only one notice of hearing before passing the revisionorder. The Tribunal noted that the PCIT breached the natural justice and prejudice had been caused to the assessee. The tribunal set aside the revisionorder dated 21.03.2024 and directed the PCIT to give adequate opportunity to the assessee before issuing the fresh order. The tribunal remanded the matter back on the file of the PCIT and allowed the appeal for statistical purposes. Insufficient Evidence to Prove Improvement Costs of Property: ITAT disallows Expense Claims Shri Bhagwanbhai R. Makwana vs The ITO CITATION: 2024 TAXSCAN (ITAT) 870 Income Tax Appellate Tribunal (ITAT), Ahmedabad “C” Bench, recently disallowed expense claims put forward by the appellant noting lack of proper evidence to support claims of cost incurred for improvement of property. After hearing contentions of both sides, the bench of Mr Siddhartha Nautiyal and Mr Makarand V Mahadeokar noted that the payment lacked documentary evidence apart from affidavits, which were deemed insufficient. Get a Copy of GST Judicial Precedents, Click here Accordingly, the tribunal upheld the disallowance made by lower authorities. Along with that, the tribunal also allowed certain expenses related to payment for vacating tenants and non-agricultural conversion fees, as the assessee provided sufficient details and evidence to support the same. Section 263 Proceedings cannot Address issues Beyond Limited Scrutiny Under CASS: ITAT set aside Pr.CIT order M/s. Avinash Chalana and Company vs Pr. CIT CITATION: 2024 TAXSCAN (ITAT) 871 The Indore bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the Principal Commissioner of Income Tax’s ( Pr. CIT ) order under section 263 of the Income Tax Act, 1961, which had annulled the Assessing Officer’s ( AO ) assessment and mandated a new assessment, was not justified. The two member bench comprising Vijay Pal Rao ( Judicial Member ) and B.M Biyani ( Accountant Member ) contended that an issue not part of the limited scrutiny under CASS cannot be raised in section 263 proceedings. The correct steps would have been for the Assessing Officer AO to expand the scrutiny or use sections 147/148. Thus, the Pr. CIT order is not valid and is set aside. Initiation of Legal Proceedings against Mercator Ltd during Moratorium: ITAT upholds IBC Provision against Deputy Commissioner of Income Tax Dy. Commissioner of Income Tax vs M/s. Mercator Ltd CITATION: 2024 TAXSCAN (ITAT) 872 The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) adjudicated two cross appeals filed by the Deputy Commissioner of Income Taxes, Mumbai against Mercator Ltd., Mumbai undergoing Liquidation and vice versa. The Company had been under the cross-fire of the department regarding the records of various Assessment Years from A.Y. 2008-2009 to A.Y. 2014-2015. The Mumbai Bench of the Income Tax Appellate Tribunal, consisting of Amit Shukla, Judicial Member and Padmavathy S, Accountant Member while pronouncing its order laid made reference to Section 33(5) of the IBC which provides that: “Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority.” Get a Copy of GST Judicial Precedents, Click here In closing, the Bench reaffirmed its stance confirming that there is an inherent bar in initiating legal proceedings against a corporate debtor while the debtor is undergoing moratorium. The Bench, while dismissing the appeals, also gave guidelines confirming that the parties are at “liberty to restitute the appeal once the committee of corporate creditors directs the Liquidator or corporate creditors to pursue the appeal”. Further, the liquidator was also given the option to approach the Bench to get the appeal disposed after revised Form 36 is filed. Cash Transaction for Property Registration: ITAT deletes Section 269SS Income Tax Penalty against Women with Elementary Knowledge Smt. Pushpalatha vs ITO CITATION: 2024 TAXSCAN (ITAT) 873 The Bangalore bench of Income Tax Appellate Authority ( ITAT ) deleted the penalty imposed on the assessee, who is a woman with elementary knowledge. The bench held that the assessee did not intend to generate unaccounted or black money, as they reported the receipt of all cash in the registered sale deed and stated it in their ITR. The bench accepted the contention of the AR that there was no agreement to sell executed between the parties, and it was evident from the sale deed. Get a Copy of GST Judicial Precedents, Click here The ITAT bench, consisting of George George K and Waseem Ahmed, held that the assessee, being a woman with elementary education and little knowledge of tax regulations, would not have been aware of the amendment effected by the Finance Act, 2015, to Section 269SS of the Income Tax Act, which had laid a restriction for receiving cash for transfer of immovable property. The bench thus held that the penalty under Section 271D of the Act, was not warranted and deleted the same. Fails to Provide Evidence to Discharge Onus u/s 68 of Income Tax Act: ITAT Restores Assessment Order ACIT vs Prasanna Purple Mobility Solutions Private Limited CITATION: 2024 TAXSCAN (ITAT) 874 In a recent judgment, the Pune bench of the Income Tax Appellate Tribunal ( ITAT ) restored the assessment order, stating that the taxpayer failed to provide evidence to discharge the onus under Section 68 of the Income Tax Act, 1961. In this case, the AO’s suspicion was heightened by the fact that the assessee received a large amount of share capital/share premium from a loss-making company, Rainbow Ventures Limited. The AO concluded that it was unaccounted money of the assessee, an allegation the company did not refute with evidence. Get a Copy of GST Judicial Precedents, Click here Consequently, the bench found the CIT (A)’s order lacking in factual discussion. The assessee did not provide any material to discharge its onus under Section 68 of the Income Tax Act. Therefore, Astha Chandra (Judicial Member) and Inturi Rama (Accountant Member) reversed the CIT (A)’s decision to delete the addition. Without sufficient material on record, they restored the assessment order and allowed the revenue’s appeal. India-Italy DTAA Not Applicable When Domestic Company Pays DDT u/s 115O of Income Tax Act: ITAT Piaggio Vehicles Private Limited vs Assistant Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 875 The Pune bench of the Income Tax Appellate Tribunal (ITAT) ruled that the India-Italy Double Taxation Avoidance Agreement (DTAA) is not applicable when a domestic company pays Dividend Distribution Tax (DDT) under Section 115O of the Income Tax Act, 1961. The tribunal ruled that when a domestic company declares, distributes, or pays dividends to non-resident shareholders, the Additional Income Tax (Tax on Distributed Profits) as per Section 115-O of the Act applies at the prescribed rate, rather than the rate specified in the DTAA for the non-resident shareholders. The tribunal recognized the sovereign’s right to extend treaty protection to domestic companies through DTAAs, but noted that such benefits could only be claimed if explicitly stated within the treaty. Get a Copy of GST Judicial Precedents, Click here Therefore, the two-member bench, comprising Dr. Dipak P. Ripote (Accountant Member) and Astha Chandra (Judicial Member), concluded that the DTAA does not apply when a domestic company pays DDT under Section 115-O. Following the precedent set by the Special Bench in Total Oil India (P.) Ltd.’s case, and finding no contrary evidence presented, the ITAT upheld the CIT (A)’s order, rejecting the assessee’s claim. Payment made to Foreign Firms for Services Rendered outside India cannot be Subject to TDS u/s 195: ITAT M/s QAI India Ltd. vs DCIT CITATION: 2024 TAXSCAN (ITAT) 876 The two member bench of the Income Tax Appellate Tribunal ( ITAT ), Delhi, has ruled that payments made to foreign firms for services rendered outside India cannot be subject to Tax Deducted at Source ( TDS ) under Section 195 of the Income Tax Act, 1961. According to Section 195 of Income Tax Act, 1961 is concerned with TDS deductions on payments or income of non-resident Indians. This section enumerates provisions that help avoid double taxation and further focus on tax deductions and accompanying rates applicable to business transactions concerning NRIs. TDS on non-residents is deducted either when crediting the concerned party or on the actual payment date. The coram of Madumitha Roy (Judicial Member) and Dr. B.R.R Kumar ( Accountant Member ) concluded that the disallowance made by the AO and CIT (A) under Section 40(a)(i) of the Income Tax Act is unwarranted and liable to be deleted. Failure To Appear And Produce Evidence before CIT(A) Due To COVID and Hotel Fire: ITAT remits Matter Back To CIT(A) Metro Heritage Pvt.Ltd vs The Dy.CIT CITATION: 2024 TAXSCAN (ITAT) 877 The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) set aside the Commissioner of Income Tax’s Order for not granting adequate opportunity to present necessary evidence and explanation. The two-member bench of Siddhartha Nautiyal (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed arguments of both sides. The tribunal noted that the CIT(A) did not grant fair opportunity for the assessee. Get a Copy of GST Judicial Precedents, Click here The tribunal observed that the Assessee’s Affidavit and the paper book containing supporting documents need proper verification to ensure fair adjudication. Hence the tribunal directed the CIT(A) to allow the presentation of the evidence and restored the matter on the file. The tribunal allowed the appeal for statistical purposes. Society’s Secretary Resigned when notice issued: ITAT directs CIT(E) to reconsider Application u/s 12AB Idam Braahmam Society vs Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 878 The Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT )directed the Commissioner of Income Tax (Exemptions) to reconsider the application filed under Section 12AB of the Income Tax Act, 1961 by the assessee which was rejected due to non-compliance. The two-member bench of K. Narasimha Chary (Judicial Member) and Madhusudan Sawdia (Accountant Member) heard the arguments from both sides. Get a Copy of GST Judicial Precedents, Click here The tribunal highlighted that the assessee could not submit the required documents due to the resignation of the society’s secretary around that time which does not appear to be suspicious. The tribunal also noted that the assessee was not aware of the notices. The tribunal decided to give an opportunity to the assessee by setting aside the impugned order of the CIT(E). The tribunal thus directed the CIT(E) to restore the matter back on the file. It was made it clear that no further opportunity would be given to the assessee and it should co-operate with the CIT(E) throughout the proceedings. The appeal was thereby allowed for statistical purposes. Consultancy Services Not Taxable as FIS under Article 12 of India-US DTAA: ITAT Korn Ferry (US) vs ACIT CITATION: 2024 TAXSCAN (ITAT) 879 The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) reversed the decisions of the Assessing Officer (AO) and Dispute Resolution Panel ( DRP ), ruling that consultancy services are not taxable as Fees for Included Services ( FIS ) under Article 12 of the India-USA Double Taxation Avoidance Agreement ( DTAA ). The two member bench comprising Anubhav Sharma (Judicial Member) and Dr.B.B.R Kumar (Accountant Member) based on the agreements and conduct, contended that the “make available” requirement was not met. Therefore, the services do not qualify as FIS under Article 12(4)(b) of the India-USA DTAA. Sale of Flat Classified as Long-Term Capital Gain Based on Previous Owner’s Holding Period: ITAT Overturns CIT(A) Order Ashish vs ACIT CITATION: 2024 TAXSCAN (ITAT) 880 In the recent case, the Delhi bench of Income Tax Appellate Tribunal(ITAT) overturned the Commissioner Of Income Tax (Appeals)’s ruling, classifying the sale of the Faridabad flat as a long-term capital gain. The tribunal made this decision by using the previous owner’s holding period and cost, in line with established rules for gifted assets. The Tribunal contended that a gift is not a transfer for tax purposes under section 45. Instead, capital gains are taxed when the asset is later transferred by the recipient, using the previous owner’s acquisition date and cost. The tribunal cited a Special Bench ruling in Manjula J. Shah (supra) which states that indexed cost should be based on the previous owner’s acquisition. The two member bench comprising Anubhav Sharma (Judicial Member) and G.S Pannu (Vice President) allowed the assessee’s appeal . Taxpayer Rectifies Excess Salary Income Declaration with Revised Return: ITAT deletes Penalty u/s 271(1)(c) Rohit Chatterji vs DCIT CITATION: 2024 TAXSCAN (ITAT) 881 In a significant ruling, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the penalty under Section 271(1)(c) of the Income Tax Act,1961, after the taxpayer rectified the excess salary income declaration by filing a revised return, concluding that there was no willful intent to conceal income by the assessee and that all necessary corrections were made through the revised return. The two-member tribunal, consisting of Rahul Choudhary and M.S. Pathmavathy, determined that the penalty under Section 271(1) (c) was unjustified. The tribunal directed the AO to delete the penalty levied, concluding that there was no willful intent to conceal income by the assessee, and that all necessary corrections were made through the revised return. CIT(A) Fails to Verify Correct Date of Filing Income Tax Return: ITAT Restores Case to CIT(A) Income Tax Officer vs Emerlad Mining Private Limited CITATION: 2024 TAXSCAN (ITAT) 882 A two-member bench of the Income Tax Appellate Tribunal (ITAT) in Cuttack has restored a case to the Commissioner of Income Tax Appeals (CIT (A)) after finding that the CIT (A) failed to verify the correct date of filing the return. The bench observed that the CIT(A) failed to appreciate the statement of facts filed by the assessee, where it was clearly stated that the return was filed on November 27, 2016, not November 25, 2015. The bench concluded that the CIT(A)’s action of treating the notice issued under Section 143(2) as barred by limitation was incorrect. The appeal of the revenue on this issue was allowed. However, since the CIT (A) did not decide the appeal filed by the assessee on merits, the tribunal restored the issues raised in this appeal to the file of the CIT (A) for a decision on the merits of the case. Hearing Notices Sent to Registered E-mail ID went Unnoticed leading to Non-appearance: ITAT Remands file to CIT (A) for Fresh Adjudication Krunal Kailash Kapoor vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 883 The two member bench of the Income Tax Appellate Tribunal , ( ITAT) ,Pune has remanded the file to the Commissioner of Income Tax Appeals (CIT(A) for fresh adjudication after finding that the hearing notices sent to the registered email ID went unnoticed, resulting in non-appearance. The assessee, Krunal Kailash Kapoor, an individual employed with SUD Life Insurance Company Ltd, his salary income was duly offered for taxation. For the relevant assessment year, Kapoor filed his income tax return (ITR) declaring a total income of ₹1, 69,070/-. The bench, consisting of Judicial Member Vinay Bhamore and Accountant Member G.D. Pathmashali, carefully reviewed the case facts. It was acknowledged that the appellant failed to appear before the first appellate authority, resulting in the ex-parte dismissal of the appeal by the CIT (A)/NFAC. However, the appellant submitted an affidavit dated July 24, 2024, claiming that the hearing notices sent to his registered email went unnoticed and were only acknowledged upon receiving the impugned order. Get a Copy of GST Judicial Precedents, Click here In light of these circumstances, the bench determined that the appellant was prevented from pursuing the appeal for valid reasons. Consequently, in the interest of justice, the bench remitted the file to the CIT (A)/NFAC for de-novo adjudication in accordance with the law, ensuring that the appellant was granted a fair opportunity to present his case. The appeal was thus allowed. NFAC fails to Examine Nature of Unsecured Loan Transactions: ITAT restores Assessment Order Splice Biotech Pvt. Ltd vs ITO CITATION: 2024 TAXSCAN (ITAT) 884 In a recent judgment, the Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has restored the assessment order, highlighting that the National Faceless Appeal Centre ( NFAC ), failed to examine the nature of the unsecured loan transactions and passed the order in a perfunctory manner. The tribunal observed that the transactions involving the unsecured loans were void ab initio, characterizing them as sham arrangements designed to introduce undisclosed income into the books of account. The tribunal referenced the Bombay High Court‘s ruling in the case of PCIT vs. Indravadan Jain, HUF, noting its irrelevance to the current case as it pertained to shares purchased on a listed exchange rather than through private preferential allotment. Get a Copy of GST Judicial Precedents, Click here Additionally, the High Court had dismissed the revenue’s appeal without establishing any question of law, thus lacking precedential value. The tribunal pointed out that the NFAC failed to examine the nature of the transaction and passed the order in a perfunctory manner. Consequently, the two-member bench of the tribunal, comprising Vinay Bhamore (Judicial Member) and Inturi Rama Rao, (Accountant Member) reinstated the assessment order and allowed the Revenue’s appeal. ITAT deletes Revision order passed u/s 263 based on Presumption Shri Jangpal Singh Tanwar vs Pr. CIT-1 CITATION: 2022 TAXSCAN (ITAT) 885 The Chandigarh Bench Income Tax Appellate Tribunal (ITAT), has deleted the revision order passed u/s 263 based on presumption. The Coram of Smt. Diva Singh, Judicial Member,andMr. Vikram Singh Yadav, Accountant Member have observed that the entire Long Term Capital Gain from the sale of the property has been applied to the new property. Documents substantiating the claim are available on record and have not been upset, thus the revisionary power u/s 263 of the Act cannot be allowed to be exercised in a casual arbitrary manner.The presumption that the assessee’s wife and son had 1/3rd share each is an inference based on no facts. The PCIT has to point out the error in the order and that too such an error can be said to be prejudicial to the interests of the Revenue. The Tribunal has held that “we find no evidence for supporting the conclusion that only 1/3rd share belonged to the assessee. The exercise of power by the PCIT in these peculiar facts cannot be upheld”. Advocate Mr.Tej Mohan Singh appeared for the appellant and Mr. Vivek Nangia appeared for the revenue. Get a Copy of GST Judicial Precedents, Click here Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

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