This weekly round-up analytically summarizes the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from October 29 to November 4, 2022
The Non-compliance with the notice issued for hearing, as the assessee is not well versed with electronic gadgets, the Surat Bench of the Income Tax Appellate Tribunal (ITAT) restored the matter for a fair hearing. A Coram of Shri Pawan Singh, judicial member and Dr Arjun Lal Saini, accountant member observed that the order of NFAC/CIT(A) was not by the mandate of Section 250(6) of the Income Tax Act,1961. Section 250(6) of the Act mandates that the CIT(A) while deciding the appeal is required to pass an order on points of determination (grounds of appeals), decision therein on and reasons for such decision. The bench viewed that the assessee deserves a hearing on merit and the grounds of appeal raised by the assessee are restored to the file of NFAC/CIT(A) to adjudicate on merit. The assessee is also directed to appear before NFAC/CIT(A) as and when the date of hearing and to provide all necessary evidence & information without any further delay and not to seek adjournment without any valid reasons. The appeal of the assessee was allowed for statistical purposes.
The New Delhi Bench of IITAT, set aside the assessment order as there was no proper of the Partnership Deed and the Supplementary Deed furnished by the assessee. A Single Bench consisting of Kul Bharat, Judicial Member held that “Considering the facts available on record, I am of the considered view that the authorities below ought to have given clear finding regarding the terms of Partnership Deed and Supplementary Deed as furnished by the assessee. Even, CIT(A) failed to advert the submissions of the assessee. Therefore, the impugned order is set aside and the issue is restored to the file of AO to decide it afresh after giving an adequate opportunity of hearing to the assessee.”
The ITAT of New Delhi Bench deleted addition as cash deposited during the demonetization period does not exceed the threshold limit. A Division Bench consisting of G S Pannu, President and Saktijit Dey, Judicial Member observed that “In the facts of the present appeal, undisputedly, as the assessee is a salaried person having no business income. Further, the cash deposited during the demonetization period does not exceed the threshold limit of Rs.2.50 lacs in terms of the CBDT Instruction noted above. The CBDT instruction being beneficial to the assessee has to be applied. In view of the aforesaid, we delete the addition of Rs.2,23,000 made under Section 69A of the Act.”
The ITAT of New Delhi Bench sets aside disallowance as payment to legal and tax consultants are revenue expenditure. A Division Bench consisting of Shamim Yahya, Accountant Member and Anubhav Sharma, Judicial Member observed that “Redeemable Preferences Shares (RPS) held by the assessee being long term in nature may be capital expenditure but the expenses paid to legal and professionals for an opinion about legal and tax consequences of the prospective investment cannot be considered to be a capital expenditure. The legal expenses were merely to avoid panel provisions and to assure that there is no breach of any regulatory guidelines of investment.”
The ITAT of New Delhi Bench held that penalty under Section 271(1)(c) of the Income Tax Act, 1961 cannot be made for additions made on ad-hoc basis. A Division Bench consisting of G S Pannu, President and Challa Nagendra Prasad, Judicial Member observed that “The notice issued by the Assessing Officer was bad in law if it did not specify under which limb of section 271(1)(c ) of the Income Tax Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income.”
The ITAT of New Delhi bench set aside addition as un-explained investment as there was sole reliance on report of Investigation Wing. A Single Bench consisting of Challa Nagendra Prasad, Judicial Member held that “The Assessing Officer seems to have relied solely on the report of Investigation Wing of the Department without making any further enquiries in treating Rs.20,00,000/- as un-explained investment in the hands of the assessee. In the circumstances, I hold that the Assessing Officer erred in treating Rs.20,00,000/- as un-explained investment in the hands of the assessee.”
Addition under section 68 of the Income Tax Act, 1961 is not allowable when the enquiry and investigation as per CBDT Instructions on cash deposited in post demonetisation period which is necessary to be not done, the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has restored the issue for fresh adjudication. A Coram of Shri Chandra Poojari, AM and Smt. Beena Pillai, JM viewed that the various standard operating procedures laid down by the central board of direct taxes issued from time to time give a hint regarding what kind of investigation, enquiry, and evidence the assessing officer was required to take into consideration to assess such cases. Further observed that it is important to examine whether the case of the assessee falls into any of the above parameters are not and the assesseewas directed to establish all relevant details to substantiate its claim in line with the above application instructions.
The ITAT of Mumbai Bench, has recently in an appeal filed before it, held that factoring charges are not in the nature of interest and hence that TDS u/s 40 (a) (ia) will not be applicable to it. Dismissing the Revenue’s appeal the ITAT ruled: “The Ld.CIT(A) has further stated that the assessee company has submitted the certificate of Chartered Accountant in form 26A enclosed as Annexure I which certifies that the amount of factoring charges paid by the assessee company is considered by M/s SBI Global Factors Ltd while calculating its taxable income and that the same was offered for tax. It is observed that as tax has been paid by the payee, the assessee cannot be treated as an assessee in default under the First Proviso to section 201(1). 7. From the above observation, we are of the view that the factoring charges incurred by the assessee company are not in the nature of interest and that the assessee was not under the obligation to deduct TDS as per the provisions of section 40(a)(ia) of the I.T. Act.”
The Amritsar Bench of ITAT has held that the assessee has no liability to maintain books of account when availed the presumptive scheme under section 44AD of the Income Tax Act,1961. A Coram of Dr M L Meena, accountant member and Sh. Anikesh Banerjee, a judicial member observed that the assesseehad properly submitted through his counsel that the said amount was paid from his business receipt and held that the benefit should be allowed to the assessee for availing section 44AD for non-maintaining the books of account.
The Pune Bench of ITAT has granted relief to Serum Institute of India by allowing the expense incurred on foreign travel of the director and his wife of the company for purpose of running the business as revenue expenditure. In light of precedents, the Tribunal held that “it cannot be said that the expenditure incurred on foreign travel of the director of the respondent-assessee company and his wife cannot be said to be personal in nature. ”The bench upheld the findings of CIT(A) in allowing foreign travel expenses as revenue expenditure. The appeal filed by the Revenue got dismissed.
The ITAT of Delhi Bench, has recently in an appeal filed before it, held that bonus/commission payable to employees are deductible from business income. The assessee’s claim the Tribunal ruled: “In the aforesaid case the Bench had held that the disabling provision of section 36(1)(ii), which provides that “if the sum so paid is in lieu of profit or dividend”, applies only to employees who are partners or shareholders. In the facts of the present appeal, there is no finding that the employees are either partners or shareholders of the assesse, and that being the case, the assessee’s claim has to be allowed.”
The Banglore Bench of ITAT comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari has recently held that the consideration received by the assessee on relinquishment of property rights to his father is taxable as Long Term Capital Gain under Section 45 of the Income Tax Act. It was observed, “It cannot be said that AO precluded in bringing the said amount into taxation on the simple reason that cash deposit was from the sale of property and assessee received his share on the relinquishment in favour of his father and the same has to be brought into tax” and held that, “that lower authorities is justified in bringing to tax the capital gain in the hands of the assessee”, denying the relief to assessee.
JICE Academy for Excellence Pvt. Ltd vs NFAC – 2022 TAXSCAN (ITAT) 1587
The ITAT of Bangalore deleted penalty as the cash loan under Section 269SS of the Income Tax Act, 1961 given by Executive Directors to meet urgent financial needs of company. A Coram Consisting of N V Vasudevan, Vice President and Chandra Poojari, Accountant Member observed that “the transaction between assessee company and its Executive Directors is on account to meet the urgent financial requirements of the company. Accordingly, it cannot be considered and there exist reasonable causes for accepting the money in cash from the Executive Directors of the company who are responsible for day-to-day affairs of the company. In our opinion, in this case, levy of penalty u/s 271D of the is unwarranted.”
The ITAT of Delhi Bench held that there can be two initial assessment years and the year in which there was substantial expansion that year is the initial assessment year within the period of 10 years for the purpose of claiming deduction under section 80-IC of the Income Tax Act, 1961. A Coram consisting of Challa Nagendra Prasad, Judicial Member and Pradip Kumar Kedia, Accountant Member observed that “Thus respectfully following the decision of the Hon’ble Supreme Court we hold that the assessee is entitled for deduction under section 80-IC of the Act for the assessment years 2012-13 and 2015-16 which are under consideration. We reverse the order of the CIT (Appeals) and direct the Assessing Officer to allow the claim of the assessee under section 80-IC of the Act.”
The ITAT of Mumbai Bench, has recently, in an appeal filed before it, held that service expenses incurred towards abandoned film shall not be disallowed.Allowing the assessee’s appeal, the Bench ruled: “The entire project has turned out to be a dud project, and has come to an unsuccessful end. In this situation, and bearing in mind the fact that interest expenses have been incurred wholly and exclusively for the purpose of business, we deem it fit and proper to delete this disallowance of Rs. 1,57,50,000”.
The ITAT of Mumbai Bench, has recently in an appeal filed before it, held that the benefit given for sick company u/s 115 JB will not available when net worth of the company has turned positive.Dismissing the assessee’s appeal of ITAT ruled: “In view of this, we do not find any infirmity in the orders of the lower authorities. We hold that learned assessing officer is correct in not excluding the book profit earned by the assessee from the provisions of 115 JB of the income tax act as the assessee’s net worth turned positive during the year. There is no infirmity in the order of the learned CIT – A in confirming the same. Solitary ground of appeal of the assessee is dismissed.”
The ITAT of New Delhi Bench deleted disallowance under Section 40(a)(i) of the Income Tax Act, 1961 as Management fee not taxable in India under India-USA Double Taxation Avoidance Agreement (DTAA). A Division Bench consisting of G S Pannu, President and Saktijit Dey, Judicial Member observed that “Since, the management fee paid by assessee is not chargeable to tax in India in terms with Article 12(4) of India-USA DTAA, as held by the Co-ordinate Bench in case of the payee, the assessee was not required to deduct tax at source while making such payment. Therefore, we hold that the disallowance made under Section 40(a)(i) of the Act in the assessment years under dispute are unsustainable, hence, deleted.”
The Bangalore Bench of ITAT Bangalore directed fresh adjudication on depreciation on networking equipment, and thereby granting relief to NXP India Pvt Ltd. A Division Bench consisting of N V Vasudevan, Vice President and Padmavathy S, Accountant Member observed that “We remand the issue back to the file of the Assessing Officer for fresh consideration with a direction to take into account the decision of the special bench in the case of Datacraft India Ltd, after affording the assessee adequate opportunity of being heard and to file details / submissions required. It is ordered accordingly.”
The Pune Bench of ITAT has allowed the depreciation at 15 % to Serum Institute of India Ltd on products like Stainless steel tables, Stools, etc which are used for the production of vaccines. A Coram of Shri Inturi Rama Rao, AM and Shri S SViswanethra Ravi, JM observed that the stainless steel tables, stools, and trollies were used in the laboratory i.e. for production and processing of chemical tests. The Tribunal viewed that the Bombay High Court in the case of CIT vs. Parke Devis, 214 ITR 587 (Bom.)held that “if the scientists or lab technicians used the said stainless steel tables, stools, trollies, racks as part of the production of vaccine and other should be classified as plant and machinery, accordingly, the depreciation should be allowed at the rate applicable to plant and machinery.” The bench found no reason to interfere with the order of the CIT(A) and the appeal filed by the Revenue was dismissed.
The ITAT of Bangalore directed to apply MAP rate on transactions, thereby granting relief to M/s Conduent Business Services India LLP. A Division Bench consisting of N V Vasudevan, President and Laxmi Prasad Sahu, Accountant Member observed that “We accept the prayer of the assessee and MAP rate shall be applied by the AO/TPO for the rest of the transitions of Rs.25,09,87,512 which is 4.42% of the total transactions. Accordingly, the AO is directed to apply the MAP rate on the rest of the transactions for determination of the margin on the international transactions.”
Form No.67 is not mandatory but a directory requirement, the Bangalore Bench of ITAT has held that disallowance of FTC due to delay in filing the same is not valid. A Coram of Shri N V Vasudevan, vice president and Shri Chandra Poojari, Accountant Member observed that non-furnishing of Form No.67 before the due date u/s 139(1) of the Act is not fatal to the claim for FTC. By following the case of Sanjay Patil Vs Assessing Officer Order dated 18/05/2022, the Tribunal held that the Assessee is entitled to FTC and the AO is directed to allow the claim.
The Kolkata Bench of ITAT has held that once goodwill is accounted for in the books of account, goodwill arising upon amalgamation is eligible for depreciation under section 32 of the Income Tax Act,1961. It was noted by the Tribunal that the revenue failed to object when an opportunity was given and held that the claim of the depreciation on goodwill which has resulted from the scheme which was duly approved by the Calcutta High Court cannot be rejected. A Coram of Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member observed that once the scheme of amalgamation is approved by the High Court after giving notice to the stakeholders including the income tax department to state its objections, if any, to the proposed amalgamation scheme. The order of the CIT(A) upholding the order of AO cannot be sustained and was set aside by the Tribunal. The AO was directed to allow the depreciation of goodwill.
The ITAT of New Delhi Bench directed to capitalize under project expenses as there was Penal Interest due to delay in payment of lease amount. The CIT(A) observed that the interest although penal in nature is not out of any offence or any prohibition under law but relates to delay in payment of lease amount. Also interest has been capitalized as work in progress, therefore, deleted the disallowances and directed the same to be capitalized under the project expenses. A Division Bench consisting of N K Billaiya, Accountant Member and Anubhav Sharma, Judicial Member observed that “The CIT(A) was correct in observations that this interest is not payable on account of any offences or any prohibition in law or any infraction of law but relates to delay in payment of the lease amount as per the agreement.”
Every deposit during demonetization period Not amounts to unaccounted cash , the Bangalore Bench of ITAT has held that the addition u/s 68 not allowable. A Coram Smt. Beena Pillai, judicial member and Shri Laxmi Prasad Sahu, accountant member viewed that the instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of backdating of cash and is or fictitious sales. The instruction also suggested some indicators for suspicion of backdating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to the earlier year.
The ITAT of Mumbai Bench held that no change in ownership and character of transaction made in individual capacity by making entries in accounts of partnership firm. The CIT(A) observed that in the agreement to sale, seller parties were appearing as ‘Ayaz Hassanali Naseer’ and ‘the assessee’ only and there was no reference of firm M/s Alliance International Tours and Travels. The CIT(A) held that documentation prepared by the assessee was post facto and an attempt to circumvent section 50C of the Income Tax Act. However, the Commissioner sustained the addition to the extent of the 50%, as assessee being co-owner in the property.
The Ahmedabad Bench of ITAT directed to Compute Capital gain and Exemption u/s 54 F based on Details of expenses incurred on the construction of house. It was viewed that the provisions of section 52(2) that was existing at the relevant point of time did not apply to an honest and bona fide transaction where the consideration received by the assessee was correctly declared or disclosed by him and there was no concealment or suppression of the consideration.
The Mumbai Bench of ITAT has held that losses of clients cannot be shifted by ABML to the assessee merely because those clients had been sourced or referred by the assessee, Claim under the Options Maxima Scheme is not allowable. The Tribunal held that the loss of clients incurred under the Options Maxima Scheme claimed by the assessee in its return is not allowable and reversed the findings of the CIT(A).
The ITAT of Mumbai Bench, has recently held that interest on fixed deposits being attributable and incidental to the trading business, exemption under section 10AA of the Income Tax Act, 1961, is claimable. ITAT ruled that : “In the result, the results declared by the assessee after netting off the FDR Interest with interest paid and Forex loss are eligible to be adjusted against Business Profit”.
Bangalore of ITAT has held that the disallowance u/s 14 A rws 8D of the Income Tax Act,1961 is not permissible when the assessee does not have exempt Income. Shri N V Vasudevan, vice president and Ms Padmavathy S, accountant member observed that when there is no exempt income, no disallowance can be made u/s. 14A and deleted the addition made by the AO u/s. 14A for both assessment years while dismissing the appeal of the revenue.
DCIT vs M/s CMI FPE Ltd – 2022 TAXSCAN (ITAT) 1581
The ITAT of Mumbai Bench, has recently, in an appeal filed before it, held that genuineness of purchase cannot be suspected merely because the seller is not traceable. Dismissing the Revenue’s appeal, the Tribunal held: “Respectfully following the above judicial precedent, we hold that there is no infirmity in the order of Ld.CIT(A). And hence the grounds of appeal filed by the Revenue are dismissed”.
The ITAT of Rajkot Bench, has recently, in an appeal filed before it, held that when non- participation of the firm in the assessment proceedings is due to dispute between the partners, penalty u/s 271(1)(b) of the Income Tax Act, 1961 shall not be imposed. “The main submission of the assessee is that the assessing officer has given only 15 days’ time to respond to the notices which is inadequate, and therefore that the penalty for non-compliance should not be levied. The assessee also claims that the disputes between the partners prevented it from not participating in the assessment proceedings and therefore requests to delete the penalty”. “In fact the Ld. CIT(A) has confined the levy of penalty u/s. 271(1)(b) very particularly to the notices which was issued and served on the assessee, wherein the assessee failed to comply/reply to the notices. Thus, the ld. CIT(A) partially deleted the penalty levied against the assessee, wherein notices have been served to the assessee beyond the date of hearing or service of notices is not proved by the ld. A.O”, the Bench added.
Violation u/s. 40A(3) of the Income Tax Act, 1961 will not be attracted when cash payment is made for the purchases exceeds the prescribed limit, the Kolkata Bench of ITAT has quashed the revisional order. It was observed that the assessee is in the course of its business of selling old gold jewellery and occasionally receives oldgold jewellery in exchange from the customers. The value of such old gold jewellery is calculated by the assessee as per rates of the gold/silver/diamond or other precious stones as on the date of the transaction and the same is reduced from the sale value of new jewellery purchased by such customers.
The Delhi Bench of ITAT has held that, principle of natural justice should be given due consideration while adjudicating the tax dispute and directed re-adjudication of appeal filed without impugned order or appeal fee. It was also observed that the assessment order was passed ex parte to the assessee and the appeal so preferred was also dismissed by the learned CIT(Appeals) on the ground that the assessee had not complied with the provisions of Section 249(4)(b) of the income tax Act.
The ITAT of Pune Bench held that reassessment on mere change of opinion is invalid. The appeal has been preferred by the Revenue against the order passed by the Commissioner of Income Tax (Appeals). The CIT(A) observed that “The A.O in the reopening order has not brought out any fact on record which was not disclosed by the assessee during the original proceedings. That, as per the proviso to sec. 147 of the Act, when there is no failure on the part of the assessee either to file return of income or to disclose fully and truly all material facts necessary for assessment in such scenario reopening of assessment done beyond four years is invalid and bad in law.”
Athenahealth Technology Pvt. Ltd. vs Dy. Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1595
The ITAT of Chennai Bench, has recently in an appeal filed before it, held that gratuity is entitled for deduction under section 36(1) (va) of the Income tax Act. Allowing the assessee’s appeal, the Tribunal ruled: “In view of the above, we are of the view that the deduction of gratuity is available in substantive law and it cannot be disallowed merely by the reference of inconsistent entries in explanation of s. 143(1)(a) of the income tax Act being a procedural provision swhich shall not take away the right confirmed in s. 37 r/w s. 40A(7) and s. 36(1)(v) of the income tax Act. We direct the A.O to delete this disallowance.”
The ITAT of Chennai Bench, has recently in an appeal filed before it, held that retention money is to be offered to tax in the year of receipt. “It could be seen that the nature of assessee’s work is such that a part of the contract amount is retained by the customers and the same is released on satisfactory performance of the project. Therefore, the assessee, following consistent method of accounting, defer the same and recognizes these revenues on receipts basis. So far as the expenditure is concerned, the same is claimed on accrual basis.”
The ITAT of Chennai upheld the deletion of addition on proof of source of money and identity of creditors by assessee. A Division Bench consisting of V Durga Rao, Judicial Member and G Manjunatha, Accountant Member observed that “It is very clear that source of money has been explained by the assessee, including identity of the creditors and further said amount has been transferred through proper banking channel only. The learned Commissioner of Income Tax (A), after considering relevant facts held that the assessee has identified creditors and hence, deleted additions made by the Assessing Officer towards amount received from M/s. Cheran Holdings Pvt Ltd. as unexplained income of the assessee.”
Capital gain exemption u/s 54 of the Income Tax Act,1961 is allowable to more than one Residential house, the Chennai Bench of ITAT held as above. The Tribunal held that the assessee is entitled to claim of deduction u/s. 54 or 54F of the Act as the assessee has been allotted 4 residential Flats against the sale of her ancestral land or instead of development of her ancestral land and directed the A.O to allow the claim of deduction u/s. 54 of the Act. The appeal of the assessee was allowed.
The ITAT of New Delhi deleted addition on unexplained cash on the cash found in locker belongs to mother of assessee, Komal Nagpal. A Bench consisting of observed that “We hold that the assessee is not liable to be assessed with regard to the cash found in the locker of Nirmal Bhandari.”
Leadership training receipts are not chargeable to tax as per Article 12(4)(b) of the DTAA between India and Portuguese, the Pune Bench of ITAT has held as above. A Coram of Shri R S Syal, vice president and Shri S S Viswanethra Ravi, judicial member observed that for the year under consideration some is overlapping in the receipts from HR services and Leadership Training and the assesseehave placed on record certain additional evidence which, inter alia, is required to be examined afresh to precisely determine the nature of HR services.
Maintenance charges derived from letting out services taxable under the head “income from other sources”, the Chennai Bench of ITAT held as above. The Tribunal held that “once, these maintenance charges are attributable to the services provided, the same derived from providing services is to be considered under the head “income from other sources” as claimed by the assessee.”The bench reversed the findings of the lower authorities and allowed the appeal of the assessee.
The ITAT of Mumbai Bench, has recently, in an appeal filed before it, held that interest expenditure is not to be treated as capital expenditure and hence that the same is entitled for the claim of allowance.Dismissing the Revenue’s appeal, the ITAT ruled that: “In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee. Accordingly, the grounds raised by the revenue are dismissed for ITA No. 1891/Mum/2022”.
The ITAT of Kolkata Bench, has recently in an appeal filed before it, held that income tax authorities are bound to follow CBDT circulars. “In view of above stated position, the appeal of the Revenue is dismissed because of low tax effect than the prescribed limits as per CBDT Circular No.17/2019”.
The Chennai Bench of ITAT has held that addition on deemed letting value not permissible when the property was not let out and deleted the addition. A Coram of Shri Manoj Kumar Aggarwal, AM observed that the documents would show that the four sites were vacant land only which could not be deemed to be let out and the lower authorities have failed to consider these documents. While allowing the appeal of the assessee the Tribunal deleted the impugned addition.
TPO failed to provide details of comparables obtained u/s 133(6), restores the issue for providing information, as a relief to HSBC Professional Services. The Mumbai Bench of ITAT restored the issue for providing information. A Coram of Shri Aby T Varkey (judicial member) and Shri Om Prakash Kant (accountant member) found that the TPO has gathered financial and functional details of the company by way of using his authority under section 133(6) of the Act. Since the said information has not been provided to the assessee.
The ITAT Chennai deleted addition as no incriminating material found in respect of on-money receipt. A Division Bench consisting of V. Durga Rao, Judicial Member and G. Manjunatha, Accountant Member observed that “The only documentary evidence available with the Assessing Officer is that after conducting search, the purchaser has accepted in her sworn statement in respect of on-money payment. Therefore, the Assessing Officer has made addition in the hands of the purchaser, Pramila. Simply because the purchaser has admitted on-money payment is not sufficient. Particularly, in this case, a search was conducted and no incriminating material has been found in respect of on-money receipt. Therefore, in our opinion, addition cannot be made in the hands of the assessee.”
The ITAT of Chennai Bench, has recently in an appeal filed before it, held that the value of goods declared for central excise purpose shall be considered before concluding upon under- invoicing of products. “If you consider total cost incurred for the product supplied from Puducherry unit to total cost incurred for products purchased from third party supplier, there is minor difference of Rs.0.02 per unit and said difference may arise for various reasons and thus, in our considered view, the Assessing Officer has completely erred in making additions towards suppression of income.” “The learned CIT(A), without considering the above facts, has simply sustained additions made by the Assessing Officer, and hence, we reverse the findings of the learned CIT(A) and direct the Assessing Officer to delete the additions made towards suppression of income on account of under valuation of stock supplied to Guwahati unit for the assessment years 2008-09 to 2012-13”, allowing the assessee’s appeal, the Bench ruled.
The ITAT of Chandigarh Bench, has recently, in an appeal filed before it, held that registered society’s revenue which belongs to the consolidated fund of Govt., is eligible for 10(23C) (iiiab)exemption.
The Chennai Bench of ITAT has held that the CUP method can be applied for benchmarking international transactions when no change occurred in the previous year. A Coram of Shri V Durga Rao, judicial member and Shri G Manjunatha, accountant member observed that the DRP without appreciating the above facts has simply upheld TNMM as the most appropriate method and upheld the TP adjustment as suggested by the TPO. The Tribunal reversed the findings of the DRP and directed the TPO to consider CUP as the most appropriate method to benchmark international transactions with its AEs. Further directed the TPO to delete the addition made towards TP adjustment made towards AE sales.
The Mumbai Bench ITAT has held that Rules cannot override the Act, relief allowable u/s 90 of the Income Tax Act,1961 in respect of the Foreign Tax Credit (FTC). A Coram of Shri Baskaran B R, accountant member& Shri Pavan Kumar Gadale, the judicial member held that there is no amendment on these aspects in Section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form. No 67 is not mandatory but it is a directory. The Tribunal restored the issue to the file of the CIT(A) to adjudicate afresh on merits and allowed the grounds of appeal of the assessee for statistical purposes.
The ITAT of Mumbai Bench, has recently held that imported goods re-exported by a unit duly approved by the development commissioner of the concerned SEZ, are allowable for exemption u/s 10aa of the Income Tax Act, 1961.
The ITAT of Chennai sustained addition on cash deposits into bank account as there was no evidence of rental receipt from property. A Single Bench consisting of G Manjunatha, Accountant Member observed that “In absence of details regarding rental receipt from property, the explanation of the assessee is that cash deposits into bank account is out of rental income, cannot be accepted. Therefore, we are of the considered view that there is no error in the reasons given by the CIT(A) to sustain the addition made towards cash deposits into bank account.”
Foundation for levy of penalty is on addition made of concealment of income, the Kolkata Bench of ITAT has held that no penalty u/s 271(1)(c) of the Income Tax Act,1961 imposable in the absence of addition. A Coram of Shri Rajpal Yadav, Vice-President (KZ) & Shri Rajesh Kumar, Accountant Member observed that the moment additions are being deleted the computation of penalty would fail. Since the additions have been deleted, the very foundation to visit the assessee with the penalty does not survive and while allowing the appeal of the assessee, the Tribunal deleted the penalty.
The ITAT of Ahmedabad dismissed appeal as proper consideration of raising funds though FCCB into convertible bond of ordinary equity shares. A Division Bench consisting of Suchitra Kamble, Judicial Member and Waseem Ahmed, Accountant Member observed that “The assessee has given details as regards to computation of income for expenses on issue of FCCB, security premium on redemption of FCCB and interest booked under FCCB expenses and initial conversion price of Rs.130 per share from the issue date and until 14.10.2012 was defined by the assessee.” “Therefore, mere reference on the decision by the CIT(A) cannot be called as not deciding the case on merit. The CIT(A) has taken proper cognisance related to various terms offered for raising funds though FCCB into convertible bond of ordinary equity shares and thus ratio of Secure Meters squarely applied in assessee’s case by the CIT(A). Thus, appeal of the Revenue is dismissed.”
ESOP expenses are not allowable when the shares/ ESOP are granted by the Parent company the Delhi Bench of ITAT held that can’t allow without factual verification and restored the issue for verification. A Coram of Shri Shamim Yahya, accountant member and Shri Anubhav Sharma, Judicial Member has directed the AO to verify the factual aspects that there were employees deputed by ITC Ltd. for working for the assessee and that expenditure was paid during the next year but it related to current year and financials of the current year were duly recast.
The Banglore Bench of ITAT comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari upheld the order of the Principal Commissioner of Income Tax (Pr. CIT) which had set aside the order of the Assessing Officer (AO) with a direction, to carry out fresh examination of the claim of agricultural income claimed to be exempt by the assessee under section 10 (1) of the Income tax Act. It was observed by the Tribunal that, “From the materials placed before the AO it is prima facie inferred that the no details are filed by the assessee and the AO has not verified the exemption claimed by the assessee under section 10(1) of the income tax Act. Thus, in our view, the original assessment is completed without proper enquiries” and the order passed by the Principal Commissioner of Income Tax was upheld.
The Mumbai Bench of ITAT has held that disallowance of loss on trading in shares and Communities based on fictitious transactions is not permissible when the evidence is adduced.
A Coram of Shri B.R. Baskaran (AM) & Shri Pavan Kumar Gadale (JM) observed that the claim of the assessee is duly supported by various pieces of evidence and further the code modifications carried out by the stock broker should not affect the claim of the assessee unless it is proved that the assessee has colluded with the stock broker in modifying.
Interest received on enhanced compensation u/s 28 of Land Acquisition Act is part of compensation, the Delhi Bench of ITAT grants an exemption under section 10(37) of the Income Tax Act,1961.
A Coram of single member Shri C M Garg, judicial member viewed that in the case of Ram Kishan (supra) the coordinate Bench of the Tribunal held that “the interest received by the assessee u/s 28 of the Land Acquisition Act, 1984 on enhanced compensation is part and parcel of the compensation, if the agricultural land of the assessee has been acquired under compulsory acquisition and, thus, the same is exempt income u/s 10(37) of the Act.”
Notice u/s 148 of the Income Tax Act,1961 issued based on incomplete information without any verification, the Delhi Bench of ITAT quashed the assessment order.
A Coram of single member Shri C M Garg, judicial member viewed that the AO has proceeded to initiate reassessment proceedings u/s 147 of the Act and issued notice u/s 148 on incorrect facts without application of mind. The Tribunal quashed the assessment order while allowing the appeal and held that the reassessment proceedings u/s 147 of the Act and notice u/s 148 of the Act has been issued without application of mind by the AO based on incomplete information without any verification of the facts, without complying with the mandatory requirement of section 147 and 148 of the Act.
The ITAT of Indore Bench confirmed Income Tax Addition on Long Term Capital Gain (LTCG), as sale deed was completed by proper registration. The CIT(A), held that “Therefore, considering the above stated facts and the entirety of the circumstances and relevant documents, the AO has been found justified in assessing the capital gains in the A.Y. 2010-11 when the sale deed pertaining to the land belonging to as many as 22 persons was completed by way of proper registration. The same has been worked out by the AO at Rs.5,33,255/- on the basis of deemed sale consideration of Rs.5,96,315/- under section 50C of the Income Tax Act, 1961. The addition is therefore confirmed.”
While considering a bunch of appeals, the Mumbai Bench of ITAT has held that the revisional order cannot be invoked when AO revised TDS credit after due verification of the reconciliation statement.
A Coram of Shri M Balaganesh, accountant member & Shri Rahul Chaudhary, a judicial member observed that irrespective of the fact that proper examination and enquiries had already been conducted by the AO in that assessment proceedings and irrespective of the fact that the assessee had already filed a detailed reconciliation statement for mismatch in gross receipts as well as for mismatch in TDS, the PCIT invoked the jurisdiction.
As a relief to the serum institute of India, the Pune Bench of the ITAT has ruled that corporate guarantees cannot be treated on par with Bank Guarantees and upheld the order of CIT(A). The Tribunal upheld the order of CIT(A) and dismissed the appeal for the Revenue. Shri J. P. Chadraker appeared for the revenue and Shri Percy Pardiwalla & Shri Sukh Sagar Syal Counsels appeared for the assessee.
In a recent ruling, the Bangalore Bench of the ITAT has held that, the Commissioner of Income Tax (Appeals) [CIT(A)] has erred in rejecting an appeal without due consideration of the facts and merits of the case as only a part of the case was settled through the Vivad Se Vishwas Scheme 2020. The CIT(A) was thus directed to adjudicate on the grounds raised before him regarding the merits of imposition of penalty under Section 271D of the Income Tax Act, 1961.
In other words, the penalty proceedings under Section 271D is unconnected with the assessment order passed under Section 143(3), as the said penalty has been imposed under Section 269SS of the Income Tax Act.
The ITAT, held that Delay in appointment of Auditor and finalization of annual accounts are not valid ground for imposing penalty.
A Bench consisting of Madhumita Roy, Judicial Member and Bhagirath Mal Biyani, Accountant Member held that “In this particular case, the penalty was deleted on the ground that delay in appointment of Auditor and consequent delay in finalization of annual accounts cannot be attributable to the assessee. The impugned penalty, in our considered opinion, is not sustainable in the eye of law and thus, the same is hereby deleted.”
The ITAT, Hyderabad Bench held that FCCD (Fully Compulsorily Convertible Debentures) are debt and confirmed the benchmarking done by applying LIBOR plus 200 points.
A Bench consisting of Rama Kanta Panda, Accountant Member and Laliet Kumar, Judicial Member held that “We hold that FCCDs are debt, therefore, the benchmarking done by the learned lower authorities are correct by applying LIBOR plus 200 points, which is in consonance with the RBI guidelines issued for the purposes of FDI.” CA Raghunathan Kannan and Akshay Surna Siddharth Surna appeared for the assessee and M. Narmada and N. Swapna appeared for the Revenue.
The ITAT, Indore Bench allowed additional depreciation as Purchase of raw material and making packing material is manufacture. A Division Bench consisting of Madhumita Roy, Judicial Member and BM Milani, Accountant Member observed that “The process undertaken by the assessee have been treated as manufacture under Excise Act and allied tax laws. These factors clearly indicate that the assessee’s case falls within the scope of “manufacture” as defined in sub-clause (b) of section 2(29BA). This vital fact, which is not disputed by revenue, that the assessee is purchasing plastic granule/raw material and manufacturing packing material therefrom such as jar/pouches/bottles make the assessee fully eligible for “additional depreciation”.
The Banglore Bench of the ITAT has recently held that the amount already offered to tax by assessee cannot be added to assessment by the Assessing Officer(AO) under the direction of Principal Commissioner of Income Tax (PCIT). It was observed that “In the present facts of the case, the order passed by the AO may be prejudicial however, it cannot be held to be erroneous and the Ld.AO had adopted one of the possible views” and held that the revisionary proceedings initiated in the present facts to be bad in law and quashed the consequential order passed.
The ITAT, Delhi Bench deleted penalty as there was no objection on the disallowance under Section 14A of the Income Tax Act, 1961. A Division Bench consisting of Anil Chaturvedi, Accountant Member and Astha Chandra, Judicial Member observed that “The issue in the present appeal is with respect to levy of penalty by the A.O. under section 271(1)(c) of the I.T. Act, 1961 under three heads i.e., disallowance under section 14A. As far as the first issue of disallowance under section 14A is concerned, the CIT(A) deleted the penalty and the Revenue did not appeal before us. Therefore, we uphold the order of CIT(A) on this issue in absence of any appeal and in absence of any objection from the side of the Departmental Representative and delete the penalty levied by the A.O. on this issue.”
Maharashtra Hybrid Seeds Company Private Limited vs Principal CIT – 2022 TAXSCAN (ITAT) 1629
The Mumbai ITAT, confirmed the Revision Order as there was no examination of weighted deduction claim under Section 35(2AB) of the Income Tax Act, 1961. A Bench consisting of B.R. Baskaran, Accountant Member and Pavan Kumar Gadale, Judicial Member observed that “The Principal Commissioner of Income Tax has passed the revision order for the reason that the AO has not properly examined the weighted deduction claimed u/s 35(2AB) of the income tax Act by virtue of Form 3CL. However, the AO has reopened the assessment and has examined the above said Form 3CL, but he has restricted the examination with respect to Capital Expenditure. Thus, the claim of the assessee towards revenue expenditure remained unverified.”
The Bangalore Bench of the ITATS, restored matter to the Assessing Officer (AO), as there was no proof that assessee has not earned any exempt income for relevant assessment year.
A Division Bench consisting of George George K, Judicial Member and Laxmi prasad Sahu, Accountant Member observed that “As mentioned earlier, there is nothing on record to suggest that the assessee has not earned any exempt income for the relevant assessment year. For the limited purpose of examination of the same, the matter is restored to the files of the AO.” “The AO on examination finds that there is no exempt income earned during the relevant assessment year, there shall be no disallowance u/s 14A of the IT Act. The AO shall decide the issue as per law laid down by the Era Infrastructure India Ltd” the Tribunal said.
The New Delhi Bench of the ITAT, quashed the assessment order as void ab initio as there was no variation in income returned by assessee, Super Brands Ltd [UK]. A Division Bench consisting of Saktijit Dey, Judicial Member and N K Billaiya, Accountant Member observed that “In our understanding of the provisions of section 144C of the Income Tax Act mentioned hereinabove, we are of the considered view that the Assessing Officer wrongly assumed jurisdiction u/s 144C of the Income Tax Act when there is no variation in the income returned by the assessee.” “We hold that the Assessing Officer wrongly assumed jurisdiction u/s 144C of the Income Tax Act, and therefore, the final assessment order framed in Assessment Years 2007-08 and 2010-11 to 2015-16 are barred by limitation and accordingly, the impugned assessment orders are liable to be quashed as void ab initio” the Tribunal ruled.
The ITAT Delhi Bench, has recently, in an appeal filed before it, held that mere suspicion without valid reason is not sufficient to initiate reassessment. By allowing the assessee’s appeal he concluded: “Considering the totality of the facts and circumstances of the case and respectfully following the ratio laid down by various pronouncements including the order of ITAT Chandigarh Bench in the case of Gurdish Kaur Khullar, I am of the view that the reassessment proceedings initiated by the AO on the basis of suspicion without having valid reason and on the basis of prima facie belief that income has escaped assessment for AY 2010-11 are not valid. Thus, the CIT(A) was not justified in sustaining the same”.
The ITAT Delhi Bench, has recently, in an appeal filed before it, held that mere suspicion without valid reason is not sufficient to initiate reassessment. A Coram of Shri Inturi Rama Rao, AM and Shri S S Viswanethra Ravi, JM observed that merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those can be incurred outside would not be sufficient to deny the benefit to the assessee under section 35(2AB) of the Act. The appeal for the Revenue got dismissed. Shri J. P. Chadraker appeared for the revenue and Shri Percy Pardiwalla & Shri Sukh Sagar Syal Counsels appeared for the assessee.
The ITAT, Delhi bench ruled that agreement which goes to root of matter cannot be brushed aside lightly and directed the Assessing Officer to consider Trade Mark Licence Agreement. A Division Bench consisting of Saktijit Dey, Judicial Member and N K Billaiya, Accountant Member held that “Such an agreement which goes to the root of the matter cannot be brushed aside lightly. The Assessing Officer is directed to consider the agreement dated April 04, 2013 and decide the issue afresh after giving reasonable and adequate opportunity of being heard to the assessee.”
Adopting the circle rate of the property is a violation of 56(2)(viib), the Delhi Bench of the ITAT has upheld the order of CIT(A)which deleted the addition of Rs.2,95,23,400/ made by the AO.
A Coram of Sh. N K Billaiya, accountant member and Sh. Anubhav Sharma, a judicial member observed that as per the explanation to section 56 (2)(viib) of the Act, the fair market value of the shares shall be based on (1) the value determined under rule 11UA or (2) fair market value of the underlying assets whichever is higher. The Tribunal observed that the AO erred in adopting the circle rate of the property and upheld the findings of the CIT(A). The appeal filed by the revenue got dismissed.
The ITAT has held that Penalty u/s 271(1)(c) was not leviable when the Revised computation was filed to correct the Bonafide Mistake committed in furnishing inaccurate amount of capital gain. The Tribunal viewed that it cannot be held that the assessee has concealed the income or furnished inaccurate particular of income and the penalty provisions under section 271(1)(c) of the Act cannot be attracted. The bench set aside the finding of the CIT (A) and directed the AO to delete the penalty levied by him under section 271(1)(c) of the Act. The appeal filed by the assessee is allowed.
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench comprising Judicial Member Suchitra Kamble and Accountant Member Waseem Ahmed has recently held that no order can be passed by the Principal Commissioner of Income Tax (PCIT) when the grounds have already been examined by the Assessing Officer (AO). The matter pertained to addition already made to the extent of Rs.18,63,319/- on account of short working of Long Term Capital Gains (LTCG) by the AO. It was observed by the tribunal that “In fact, the Assessing Officer in reopening has categorically made finding and made addition to the extent of Rs.18,63,319/- on account of short working of LTCG” and consequently the order passed by PCIT was quashed, allowing the appeal of the assessee.
The Amritsar Bench of the ITAT has held that a reassessment proceeding is not valid when there is no connection between recorded reason and addition of the income. It was held that if after issuing a notice under section 148, the AO accepts the contention of the assessee, it is not open to him to independently assess some other income. If the AO intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in event of a challenge by the assessee.
In the case of Aditya Birla Money Mart Limited, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that a claim of Loss made by the branch employee is not allowable when it is not clear about the loss occurred due to embezzlement by employees. A Coram of Shri Vikas Awasthy, JM & Shri M Balaganesh, AM observed that the assessee had duly furnished the details of embezzlement loss before the CIT(A). Since it is not clear whether the losses had occurred due to embezzlement carried out by employees of the assessee or employees of AB
CIT(A) order accepting Additional evidence in violation of rule 46A of Income Tax Rules not valid, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT)set aside the order. A Coram of Shri Kuldip Singh, judicial member and Shri Om Prakash Kant, accountant member observed that when additional evidence is entertained by theCIT(A) has not been brought on record in accordance with Rule 46A subsequent findings on the same are vitiated because there is not even a remand report admittedly submitted by the AO.
The Delhi Bench of the ITAT has recently held that, business promotion expenses by the assessee as Proprietor of SJM Enterprises cannot be disallowed without examination of vouchers. The Tribunal Bench of Shamim Yahya, Accountant Member and Anubhav Sharma, Judicial Member observed that, no other specific defect apart from the absence of vouchers could be pointed out in the assessee’s case and held that the total ad-hoc disallowance is not sustainable.
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