ITAT Weekly Round-Up

This weekly round-up analytically summarises the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from May 20 to 27, 2023.

ESOP is Capital in Nature: ITAT Directs to Delete Income Tax Addition Against Unilever India Export Unilever India Exports Limited vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1071

In the case of Unilever India Exports Limited, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has directed deleted the income tax addition towards ESOP.

The tribunal has rightly held that incurring the expenditure by the assessee entitles him to deduction under Section 37(1) of the Act subject to fulfilment of the condition. The deduction of discount on ESOP over the vesting period is by the accounting in the books of accounts, which has been prepared bythe Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The two-member bench of Amit Shukla (Judicial Member) and Padmavathy S. (Accountant Member) has observed that ESOP expenses are capital in nature.

A Mere Right to Sue Not Subject to Income Tax under Capital Gains, Not Transferable: ITAT Ishvakoo Grand Plaza vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1072

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that a mere right to sue could not be subject to income tax under the head of capital gains and would not be transferable.

The two-member Bench of N. K. Billaiya, (Accountant Member) And Sh. Anubhav Sharma, (Judicial Member) allowed the appeal and referring to the decision in CIT vs. B.C. SrinivasShetty, observed that, “In the present case, AO himself has considered the cost of acquisition of the so called right of preemption to be Nil. Thus, the computation provisions fail, therefore, capital gains could not have been calculated. This too establish that a mere right to sue in regard to immovable property cannot be subject to Income Tax under the head ‘Capital Gains’ as restricted by Section 6(e) of the Transfer of Property Act 1882, laying that a mere right to sue cannot be transferred.”

No Transfer of Asset During year and no Determination of Short-Term Capital Gain and Loss: ITAT allows Depreciation Palco Tex Fab Limited vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1073

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the depreciation as no transfer of asset was taken place during the year under consideration and no determination of The two-member Bench of Saktijit Dey, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeal filed by the assessee holding that since the plant & machinery could not be further used for the purpose of business, the assessee had sought to shift the same from ‘fixed assets’ to ‘current assets’ held for resale and there was absolutely no transfer of assets (plant & machinery) which had taken place during the year in accordance with the provisions of the Act. The Bench held that, since no transfer of assets has taken place during the year, there was no question of determination of short-term capital gain or short-term capital loss in terms of section 50 of the Income Tax Act and consequentially there was no question of rejection of claim of depreciation of the assessee.

Rectification in Revised Return allowable Despite Late Filing of Original Return: ITAT Navneet Dutta vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1074

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that the rectification in revised return would be allowable despite the late filing of original return.

The two-member Bench of Shamim Yahya (Accountant Member) and Astha Chandra (Judicial Member) allowed the appeal filed by the assessee. The Bench referring to the Supreme Court decision in Goetze (India) Ltd. vs. CIT held that their order in that case would not impinge upon the powers of the ITAT to admit the claim otherwise than by revised return. Hence, in the interest of substantial justice, this claim would be admitted and we remit the issue to the file of AO to consider the revised return and pass an order in accordance with law.

Ex-parte Addition of Cash Deposit made in Bank during Demonetisation Period u/s 69A of I-T Act: ITAT directs Readjudication Srimathi Pichara Karimnagar vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1075

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) decided to give opportunity to the assessee to produce all the relevant documents before the Assessing Officer (AO) for fact verification would meet the ends of justice.

The bench noted that the assessee failed to appear before the AO after the assessment order was issued according to Section 144 of the Income Tax Act. Further, the assessee’s justification is that, as a woman and because of personal issues, she was unable to present before the AO and successfully prosecute the procedures. Additionally, Covid Pandemic intervened for a significant amount of time with the proceedings before the first appellate authority. Thus allowed the appeal and directs for readjudication.

Private Religious Trusts not eligible for Registration u/s 12AA of Income Tax Act: ITAT Arulmigu Aathi Karumapuram Sellandiamman Kudipaattukarakal Seva Trust vs Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1076

The Chennai bench of Income Tax Appellate Tribunal (ITAT) has recently held that private religious trusts are not eligible for registration under Section 12AA of the Income Tax Act, 1961.

The tribunal observed that assessee trust has been established exclusively to serve a particular sub sect of the Vellala Gounder community. Therefore, no registration under Section 12AA of the Income Tax Act can be granted. Also, it is very clear that six temples are under the control of the Hindu Religious & Charitable Endowments Department, Tamil Nadu and it is fully maintained by the Government of Tamil Nadu. Therefore, the the argument of the assessee could not be accepted. Thus, assessee trust did not come under the purview of charitable trust or under the purview of public religious trust is only a private religious trust. Therefore, the two-member bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) dismissed the appeal filed by the assessee.

No Tax Levy u/s 115BBE of IT Act on Additional Income offered by assessee during Survey: ITAT quashes Rectification Order Anjanee Vijetha Kasturi vs Asst. Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1077

The Income Tax Appellate Tribunal (ITAT) of Hyderabad bench recently quashed a rectification order filed before it and held that no tax should be levied under Section 115BBE of the Income Tax Act, 1961 on additional income offered by the assessee during survey proceedings.

It was observed by the tribunal that AO did not seek any explanation from the assessee and the assessee did not offer any explanation or that the explanation, if any, offered by the assessee is not to his satisfaction. In such absence, if an order under section 143(3) of the Income Tax Act. is passed accepting the return of income, then it is difficult to presume that such an order was passed in respect of any income determined under section 68, section 69, section 69A, section 69B, section 69C or section 69D of the Act or that the tax has to be levied under section 115BBE of the Income Tax Act. Hence it was determined that unless and until such a compliance is there in the assessment order, it cannot be said that there was any mistake apparent from record or that the proceedings are amenable to the jurisdiction of the learned Assessing Officer under Section 154 of the Income Tax Act. In assessee’s chase AO did not record any such satisfaction as required under law. So, he could not be allowed to contend that the provisions of section 115BBE of the Income Tax Act are applicable to the case of the assessee and, therefore, the error in respect of leviable rates has to be rectified under section 154 of the Income Tax Act. The single-member bench of Narasimha Chary, (Judicial Member) held that the exercise of jurisdiction under Section 154 of the Income Tax Act by the Assessing Officer is bad in law.

DSIR Registration is Sufficient to Claim Deduction u/s 35 (2AB) for Cases Prior to Clause (b) Rule 6(7A) Amendment: ITAT Americhem Polymers India Pvt. Ltd vs The Asst. Commissioner of Income-tax CITATION:   2023 TAXSCAN (ITAT) 1078

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, held that DSIR registration is sufficient to claim deduction under Section 35 (2AB) of the Income Tax Act, for cases prior to amendment of clause (b) of Rule 6(7A) of the Income Tax Rules.

The Pune ITAT observed, “We are of the opinion that once the assessee has been registered, other necessary requirements have been satisfied, the entire amount spent on Research and Development qualifies for weighted deduction under Section 35(2AB) of the Income Tax Act irrespective of the fact that some amount was not approved by the DSIR.” Finally, the ITAT Coram of R.S. Syal, the Vice -President, and S.S. Viswanethra Ravi, the Judicial Member thus held and concluded: “Therefore, the assessment year is being 2016-17, which stands prior to amendment i.e., w.e.f. 01-07-2016, we hold that the assessee is entitled to claim deduction under Section. 35(2AB) of the Income Tax Act. Thus, the order of CIT(A) is not justified and it is set aside.”

No Penalty u/s 271(1)(c) can be Imposed, Without Assistance of Assessee in Prosecuting the Levy of Penalty Proceedings: ITAT Balwant Baburao Vitekar (Late) vs The Income-tax Officer CITATION:   2023 TAXSCAN (ITAT) 1079

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, held that no penalty under Section 271(1)(c) can be imposed, without the assistance of the assessee in prosecuting the levy of penalty proceedings.

Finally, the ITAT Coram of R.S. Syal, the Vice -President, and S.S. Viswanethra Ravi, the Judicial Member thus held and concluded: “As there is no opportunity for the assessee which is established from the impugned order, we deem it appropriate to remand the matter to the file of NFAC, Delhi for its fresh consideration. The assessee is at liberty to file evidences, if any, in support of his contentions. Thus, grounds of appeal raised by the assessee are allowed for statistical purposes.”

Assessee’s Non-Compete Fee Payment for Business Purpose Considered as Revenue Expenditure: ITAT M/s Mahindra Holidays & Resorts Ltd Mahindra Towers vs The DCIT (LTU) CITATION:   2023 TAXSCAN (ITAT) 1080

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that the payment of non-competition fee for business purpose is considered as revenue expenditure.

The bench, consisting of two members, Vice President Mahavir Singh and Accountant Member Arun Khodpia, observed that, “we are of the considered opinion that the depreciation on non-compete fee which was disallowed by the Assessing Officer and upheld by the CIT(A) was an erroneous application of law and bad finding, therefore the same deserves to be reversed and we do so the appeal of the assessee was allowed”. The next issue pertains to the deduction of the non-compete fee paid by the Assessee to prevent competition and safeguard its business. However, since the issue concerning the depreciation on the non-compete fee has already been decided in favor of the Assessee, this issue becomes irrelevant and does not require separate consideration or adjudication. In result, appeal of the assessee partly allowed for statistical purposes.

ESI/PF Contribution made after due Date: ITAT Disallows Deduction u/s 143(1) (a) of IT Act for Late Deposit Vishivkarma Bikes vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1081

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) recently disallowed the deduction under Section 143 B of the Income Tax Act, 1961 due to late deposit and ESI/PF contribution made after the due date.

The bench, consisting of two members, Vice President   Aakash Deep Jain and Accountant Member Vikram Singh Yadav, observed that the CIT(A) was justified in sustaining the adjustment under Section 143(1)(a) of the Income Tax Act by means of disallowance of Rs 154,701/- made for late deposit of employees’ share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts. In the result, ground on ESI/PF contribution made after the due date, raised by assessee in appeal was dismissed. The assessee had challenged the disallowance of Rs. 152,816/- under Section 43B of the Income Tax Act on account of CST payable, stating that it had not claimed the said amount in the first place. Therefore, the question of disallowance does not arise. In the absence of the requisite information available on record, the Tribunal moved the matter to the file of the Assessing Officer to examine the said claim of the assessee and decide as per the law, after providing a reasonable opportunity to the assessee. As a result, the ground on the disallowance under Section 43B of the Income Tax Act on account of CST payable was allowed for statistical purposes. In the result, the appeal of the assessee is partly allowed for statistical purposes.

Reasons for Violating Sections 269SS & 269T of Income Tax Act Genuine and Bonafide: ITAT quashes Penalty Order Delhi State Taxi Operators’s Co-operative Thrift Credit & Services Society Ltd vs JCIT CITATION:   2023 TAXSCAN (ITAT) 1082

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) concurred with the contentions of the assessee and found that there was genuine and bonafide reason for violating sections 269SS and 269T of the Income Tax Act, 1961.

The bench observed that there was no allegation at all against the assessee that by accepting loans/deposits in cash its intention ever was to avoid payment of tax or to defraud Revenue. Further observed the CBDT circular Circular F. No. 415/6/2000-IT (Inv.I) dated 25th March, 2004 acknowledging that it was a widespread belief, even if erroneous that the provisions of section 269SS do not apply to the credit co-operative societies and advised the field officers not to impose penalty under section 271D and 271E indiscriminately and should keep in view the provisions of section 273B of the Income Tax Act. Section 273 of the Income Tax Act ordains that no penalty under Sections 271D and 271E shall be imposed on the person or the assessee if he proves that there was reasonable cause for the failure. Thus, while allowing the appeals, the tribunal cancelled the penalty levied under Section 271D and 271E of the Income Tax Act.

Failure to Prove Authenticity of Loan Transactions: ITAT holds Unsecured Loans as Unexplained Cash Credits u/s 68 of Income Tax Act Santosh Chopra vs The Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1083

The Raipur bench of Income Tax Appellate Tribunal (ITAT) has recently upheld the decision of the lower authority held that unsecured loans are unexplained cash credits under Section 68 of Income Tax Act 1961, if failed to prove authenticity of loan transactions.

 While considering the contentions, the tribunal observed that the assessee had failed to discharge the primary onus that was cast upon him as regards proving the identity and creditworthiness of the aforementioned lenders, as well as genuineness of the transactions under consideration. Hence the single bench of Ravish Sood, (Judicial Member) upheld the decision of the lower authority and dismissed the appeal filed by the assessee.

ITAT Upholds addition made on Mismatch in Sales Turnover Report in Audit Report and ITR Ravindra Arvind Ranade vs ITO CITATION:   2023 TAXSCAN (ITAT) 1084

The Pune bench of The Income Tax Appellate Tribunal (ITAT) has recently upheld the addition made on mismatch in sales turnover reported in audit report and Income Tax Return (ITR).

The tribunal observed that, the assessee’s case was mainly selected on ground of ‘mismatch’ between the figures shown by the assessee in income tax return vis-a-vis others. The AO has made the addition to the turnover of the assessee based on this mismatch only. Further the tribunal noted that “the total receipts of the assessee for financial year 2014-15 are Rs. 1,95,44,540/-. Since the assessee follows a cash system of accounting, the total actual receipts of Rs.1,95,44,540/- will be the actual turnover of the assessee for financial year 2014-15. However, the assessee in the profit and loss account has shown the turnover of Rs.1,75,69,979/- only. Therefore, the AO has added the difference.” Therefore, the two-member bench of the S.S. Godara, (Judicial Member) and Dr. Dipak P. Ripote, (Accountant Member) dismissed the appeal filed by the assessee.

Capital Gain Exemption u/s 54 cannot be Denied Based on Inadvertent and Bonafide Typographical Error: ITAT M M Pandit HUF vs A.C.I.T CITATION:   2023 TAXSCAN (ITAT) 1085

The Lucknow Bench of Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under Section 54 of the Income Tax could not be denied on inadvertent and bonafide typographical error.

The two-member Bench of Sudhanshu Srivasatava (Judicial Member) and Anadee Nath Missra (Accountant Member) observed that, neither assessment order nor the Commissioner of Income tax (CIT(A)), in their respective orders, had  taken the view that on merits the assessee was not eligible for benefit under Section  54 of the Income Tax Act, the bench observed. The Tribunal Bench allowed the appeal holding that the assessee had already made this claim in the return of income, although, in an inadvertent and bonafide typographical mistake, the section under which the benefit was claimed, was erroneously mentioned as Section 54F instead of Section 54 of the Income Tax Act which was the correct section.

Meritorious Case cannot be thrown out at Threshold, When Proper Documents are produced: ITAT Narasimha Rao Venkata Lakshmi Nandury vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1086

The Hyderabed Bench of Income Tax Appellate Tribunal (ITAT) has held that a meritorious case could not be thrown at threshold when proper documents are produced.

The two member Bench of Ramakanta Panda (Accountant Member) and K. Narasimha Chary (Judicial Member) observed that there was no material to contradict the fact that there were insolvency proceedings against DHFL and ultimately PHFL took over the DHFL Company and also that Bank of Baroda entered the shoes of DHFL in respect of this particular loan. The Bench held that, if the assessee’s documents were considered in the assessee would have got a fair chance of winning the matter. The Bench allowed the appeal holding that “A meritorious case cannot be thrown out at the threshold, without giving an opportunity to the assessee that too when the assessee produced the documents from proper custody.”

Depreciation Claim u/s 32 Requires Fixed Assets to be used for Business Purposes: ITAT M/s. LTIMindtree Limited vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1087

The Bench of the Income Tax Appellate Tribunal (ITAT) recently held that the claim for depreciation under Section 32 of the Income Tax Act requires the fixed asset to be used for business purposes.

The single Bench Accountant Member Laxmi Prasad Sahu observed that the CIT (Appeals) had rightly disallowed the depreciation on the assets by observing that the assessee was unable to prove that the assets were used for business purpose with cogent evidence. The ground raised by assessee was dismissed. The disallowance made by the assessing officer regarding the treatment of certain income as business income has not been examined in the context of section 10A of the Income Tax Act. In light of the documents submitted by the assessee, it is necessary to remit this issue back to the assessing officer for a thorough examination considering the provisions of section 10A and making a decision in accordance with the law. The assessee is advised to cooperate and not seek unnecessary adjournments to ensure the timely resolution of the case. The ground was allowed. In result, the appeal filed by assessee was partly allowed for statistical purposes.

AO Justified in Rectification of Apparent Error Instead of Substituting the Same: ITAT Mrs. Vijayaraghavan Lakshmi vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1088

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the AO was justified in rectification of apparent error instead of substituting the same.

The two-member Bench of Rama Kanta Panda, (Accountant Member) and  K.Narasimha Chary, (Judicial Member) dismissed the appeal filed by the assessee holding that,”when there was an apparent mistake in the order of the AO in accepting the returned income instead of substituting the same with the assessed income there was an apparent error and the AO was fully justified in rectifying the same.”

Addition u/s 50C of Income Tax Act based on SVA’s Overvaluation of Capital Gain Sale Consideration: ITAT directs Readjudication Nirmal Santra vs ITO CITATION:   2023 TAXSCAN (ITAT) 1089

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently directed a readjudication due to an addition under Section 50C of the Income Tax Act, 1961. This addition was based on the overvaluation of capital gain sale consideration by the stamp valuation authority.

The bench, consisting of two members, Judicial Member Sanjay Garg and Accountant Member Manish Borad, observed that the assessee filed his Income Tax Return using Form No. 3. They disclosed a long-term capital gain in the computation of capital gains section. The long-term capital gain was calculated to be Rs. 2,27,852/- based on a sale consideration of Rs. 15 lakh and index cost of acquisition and improvement of Rs. 12,72,148/-. The value of the property as per the Stamp Valuation Authority was Rs. 51,81,810/-, but for the purpose of capital gains, the assessee mentioned only Rs. 15 lakh as the full value of consideration as per Section 50C of the Income Tax Act.

However, when the case was processed under section 143(1)(a) of the Income Tax Act, the computer system automatically took the value of the property as per the Stamp Valuation Authority and computed the long-term capital gain accordingly. The addition made by the Centralized Processing Center (CPC) under Section 143(1) of the Income Tax Act was out of the scope and ambit of provisions of Section 143(1) of the Income Tax Act, the Bench could not find any merit in the said ground since the CPC is equipped with computer software system and it picks up the data available in the income tax return. Since in the respective column appearing in the head ‘capital gain’ the assessee has mentioned the value of consideration adopted as per Section 50C of the Income Tax Act for the purpose of capital gain as stated by the assessee in ITR Form No. 3 i.e. value of property as per Stamp Valuation Authority and processed the return accordingly. Since the assessee had all rights to challenge such intimation under Section 143(1)(a) of the Income Tax Act, the ground raised by the assessee was dismissed. In result, the appeal filed by the assessee was partly allowed for statistical purposes.

Non-Compliance of Notice not Deliberate: ITAT Deletes Penalty u/s 271B Devnadi Advisory Pvt. Limited vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1090

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty under Section 271B of the Income Tax Act 1961 as the non-compliance of notice was not deliberate. 

The two-member Bench of Rajpal Yadav, (Vice-President) and Manish Borad, (Accountant Member) allowed the appeal observing that, the first appellate authority had not considered the fact that the first notice was not served upon the assessee and the second notice was complied with by the assessee. The Bench deleted the penalty and held that the assessee had not knowingly violated the notices issued by the Assessing Officer. There was a reasonable cause for its non-appearance on the first notice, as it was not served upon the assessee. Similarly, the assessee had submitted a reply to the second notice, therefore, it could not be construed that the assessee had failed to comply with the notices.

ITAT deletes Addition and Penalty u/s 271(c) on Estimated Income Mohd. Jawed vs ITO CITATION:   2023 TAXSCAN (ITAT) 1091

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the addition and penalty under section 211(c) of the Income Tax Act 1961, on estimated income.

The bench, consisting of two members, a Judicial Member Yogesh Kumar and an Accountant Member Anil Chaturvedi, observed that the additions were made/sustained by the CIT(A) on the basis of estimation and the penalty cannot be levied on the basis of estimated additions and therefore, the Assessee cannot be subjected to levying penalty. In result, the appeal filed by the assessee was allowed.

No addition can be made on amount debited to “Employees Share Option Scheme” for benefit of Employees of Company: ITAT Unilever India Exports Limited vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1092

The Income Tax Appellate Tribunal (ITAT) of Mumbai  bench recently held that no addition can be made on the amount debited to Employees Share Option Scheme” for the benefit of employees of the company.

The two member  tribuna of Amit Shukla (Judicial Member) and Padmavathy S. (Accountant Member) while considering the contentions of the both parties delete the addition made by the AO and allow the appeal filed by the assessee.

ITAT Orders Re-Adjudication as VAT Liability and EPF Amount Deposited on Time u/s 263 M/s Kaur Cookies (P) Ltd vs Principal Commissioner of Income-tax CITATION:   2023 TAXSCAN (ITAT) 1093

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently ordered for re adjudication as vat liability and EPF amount deposited on time under Section 263 of the Income Tax Act 1961.

The bench, consisting of two members, Judicial Member Kul Bharat and Accountant Member Pradip Kumar Kedia, observed that the payment of VAT before the due date and the self-disallowance of EPF were not refuted by the Deputy Commissioner.  The Bench was concluded that it was not appropriate to exercise powers under Section 263 of the Income Tax Act. The Principal Commissioner did not verify the facts correctly before issuing the notice and initiating the proceedings. As both conditions for revising the assessment were not satisfied, the impugned order was set aside, and the original assessment order passed by the Assessing Officer was restored. Consequently, the grounds raised in the appeal were allowed.

ITAT Invalidates Reassessment as Notice u/s 143(2) Not Issued Within Time Limit” M/s. Vansa Properties Pvt. Ltd vs ITO CITATION:   2023 TAXSCAN (ITAT) 1094

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently invalidated the reassessment proceedings as notice under Section 143(2) not issued within prescribed time limit.

The bench, consisting of two members, Judicial Member Sonjoy Sarma and Accountant Member Girish Agarwal, observed that in the case at hand, no notice under Section 143(2) of the Income Tax Act was issued during the proceedings pending under Section 148 of the Income Tax Act within the prescribed time from the date of filing the return.  It squarely applies to the case, Hotel Blue Moon (supra), held as the reassessment framed without issuing notice under Section 143(2) of the Income Tax Act within the prescribed time limit from the date of filing of return is without jurisdiction. Section 143(2) incorporates the rule of audi alterem partem i.e., no man should be condemned unheard. The words “shall serve on the assessee notice” occurring in section 143(2) imply a duty to be performed and the word “shall” connotes that the provisions are mandatory and non-compliance of the same goes to vitiate the order of assessment itself. In result, the appeal filed by the assessee was allowed.

ITAT upholds Revision Order due to Non-Compliance with ALP Determination Requirement DBS Bank India Limited vs CIT (IT) CITATION:   2023 TAXSCAN (ITAT) 1095

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently upheld the revision order due to non-compliance with the arm’s length price (ALP) determination requirement.

The bench, consisting of two members, Judicial Member Kavitha Rajagopal and Accountant Member,B.R. Baskaran, observed that “the Assessing Officer, in the instant case, did not refer the matter of determination of ALP to the TPO as per the mandatory requirement of Instruction No.3/2016. As per clause (c) of Explanation 2 to Section 263, the order passed without complying with the instruction etc., issued by CBDT under Section 119 of the Income Tax Act would render the order erroneous and prejudicial to the interests of revenue. They further added that there was no infirmity or illegality in the impugned revision order passed by CIT (IT). In result the appeal filed by assessee was dismissed.

Cost of New Property has to be Assessed as per Collaboration Agreement for Exemption u/s 54: ITAT Sh. Ramesh Chandna vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1096

The Income Tax Appellate Tribunal (ITAT) of Delhi bench has held that the cost of new property has to be assessed as per collaboration agreement for exemption under section 54 of the Income Tax Act, 1961.

A two-member bench comprising Shamim Yahya, Accountant and S Anubhav Sharma, Judicial observed that the cost of the new property is not the cost of a share in the plot alone but all the other constructed and covered area received by the assessee. It was held that for Section 54 of the Act, the mere value of 32.5% ownership rights on the proportionate basis of share consideration of Rs. 5,50,00,000/- is not correct and the cost of new property has to be assumed to be Rs. Rs. 3,57,50,000/- being the value of interests and share of the assessee in the new construction, as per the collaboration agreement and the sale deed terms.

Loss of Chit Fund Utilized for Business Purpose allowable as Business Loss: ITAT Nijhawan Travel Services Pvt. Ltd. vs Dy. Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1097

The Income Tax Appellate Tribunal (ITAT) of Delhi bench has held that loss incurred on chit fund is allowable as a business loss if money is utilized for business purposes.

The two bench members, Shri. N.K. Billaiya, (accountant) and Shri. Anubhav Sharma, (judicial) observed that subject to the satisfaction that the Chit Fund money is utilized for business, it can be allowed as an expenditure. The ITAT restored the matter to the files of AO to inquire into the question of the use of the Chit Fund money for business and to allow the same as business expenditure.

Penalty for Inaccurate Particular Not Imposable when Assessee Paid Tax before Issue of Reassessment notice under Income Tax Act: ITAT Pooja Upadhyay vs ITO CITATION:   2023 TAXSCAN (ITAT) 1098

The Income Tax Appellate Tribunal (ITAT) of Jaipur bench has held that the penalty for inaccurate particular is not imposable when the assessee paid tax before the issue of reassessment notice under the Income Tax Act, 1961.

A two-member bench comprising Shri Sandeep Gosain, JM & Shri Rathod Kamlesh Jayantbhai, AM observed that the assessee participated in the assessment proceeding, paid the tax, and filed the computation of income before the issue of notice under section 148 of the Income Tax Act.  The ITAT held that levy of penalty is not sustainable and the same was quashed. The appeal of the assessee was allowed.

AO not bound to Make Enquiry unless Assessee has Discharged Initial Onus u/s 68: ITAT Upholds Addition ITO vs M/s. Sri Endarsh Investment & Finance Pvt. Ltd CITATION:   2023 TAXSCAN (ITAT) 1099

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has upheld the additional holding that the Assessing officer (AO) was not bound to make enquiry unless the assessee had discharged the initial onus under Section 68 of the Income Tax Act, 1961.

The two-member Bench of N. K. Billaiya, (Accountant Member) and Astha Chandra, (Judicial Member) observed that the first appellate authority had grossly erred in deleting the addition solely on the ground that identities of the share applicant companies had been established by the assessee. The Bench allowed the appeal filed by the revenue holding that the initial onus would be upon the assessee under Section 68 of the Income Tax Act and unless this initial onus had been discharged the AO would not be bound to make any enquiry. It would be only when the assessee had discharged the initial burden; the AO had to bring cogent material on record to demolish the submissions of the assessee.

S.56(2)(vii) cannot be Invoked if Property is Purchased for more than Circle Rate: ITAT Vinit Kumar vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1100

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that Section 56(2)(vii) of the Income Tax Act, 1961 could not be invoked if the property was purchased more than the circle rate.

The appeal filed by the assessee was granted by the two-member Bench of Shamim Yahaya, (accountant member) and Anubhav Sharma,(accountant member) holding that “We find ourselves in agreement with the proposition that the sanguine provision of the concerned section duly mandates that the value of property purchased has to be less than the circle rate for the difference to be added.”

Corpus Donations Received by Unregistered Trusts are not Taxable unless Verified: ITAT Guru Govind Singh Educational Society vs ITO CITATION:   2023 TAXSCAN (ITAT) 1101

The Amrtsar Bench of Income Tax Appellate Tribunal (ITAT) has held that the corpus donations received by an unregistered trust would not be taxable unless it is verified.

The two-member Bench of M. L. Meena, (Accountant Member) and S.H Anikesh Banerjee, (Judicial Member) allowed the appeal filed by the assessee and directed verification of the corpus donation holding that  the grievance of the revenue was related to unverified corpus donation. The entire corpus donation was taken in the total income and was taxed accordingly. Further there was no point that the assessee could not take the corpus donation without availing the registration under Section 12AA of the Income Tax Act, 1961. As the unverified corpus donation was the moot point of the grievance of the revenue the Bench directed for reverification.

ITAT deletes Addition of Government Grants Which can’t Be Treated as Corpus or Income Howrah Improvement Trust vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1102

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the addition of Government grants which cannot be treated as corpus or income.

The bench, consisting of two members, Judicial Member Sanjay Garg and Accountant Member Manish borad observed that the grants were given to the assessee for implementation of various infrastructure schemes. It was further observed that the grants received by the assessee/state agency did not belong to the assessee.

In view of this, the grants received by the assessee for specific infrastructure projects which has also been utilized for those specific purposes only and since the assessee was not authorized to use the said grants for any other purpose and further that the unused funds have been returned to the Government, therefore, the aforesaid grants, in our view, do not constitute the income of the assessee. The appeal filed by the assessee was allowed in result.

Violation of Procedural Norm does not Extinguish Substantive Right to Claim FTC: ITAT Sri.Sandeep Patwari vs Deputy Commissioner of Income-tax CITATION:   2023 TAXSCAN (ITAT) 1103

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that the violation of procedural norm would not extinguish the substantive right of claiming the Foreign Tax Credit (FTC).

The two-member Bench of George George K, (Judicial Member) and Laxmi Prasad Sahu, (Accountant Member) allowed the appeal filed by the assessee referring to the decision in Brinda Ramakrishna v. ITO held that filing of Form 67 was a procedural / directory requirement and not a mandatory requirement. It was held that violation of the procedural norm would not extinguish the substantive right of claiming the credit of FTC.

Late Deposit of Employees’ Share of PF/ESI Contribution to Relevant Fund: ITAT Upholds Disallowance u/s 143(1)(a) Sushil Kumar Gupta & co vs The ITO CITATION:   2023 TAXSCAN (ITAT) 1104

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the disallowance under Section 143 (1)(a) of the Income Tax Act because of the late deposit of the employee’s share of PF/ESI contribution to the relevant fund.

The two-member Bench of A.D. Jain, (Vice President) and Vikram Singh Yadav, (Accountant Member) dismissed the appeal filed by the assessee referring to the decision in ‘Emson Tools Mfg. Corp. Ltd. vs. DCIT, Ludhiana. The bench further held that the Commissioner of Income Tax Appeals was justified in sustaining the adjustment under Section 143(1)(a) of the Income Tax Act by means of disallowance made for late deposit of employees’ share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts.

ITAT deletes Addition u/s 69 on Amount Validly Explained as Professional Income Ramchandra Kanu Mendadkar vs CIT CITATION:   2023 TAXSCAN (ITAT) 1105

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted addition under Section 69 on amount that had been validly explained as professional income.

The tribunal Bench consisting of a Judicial Member Amit Shukla and an Accountant Member Padmavathy observed that the assessee had recorded the impugned amount in the books of account and had also offered the same to tax by including it as professional fees. Therefore the amount cannot be treated as unexplained and therefore the addition under Section 69A of the Income Tax Act was deleted. In result, the appeal filed by assessee was allowed.

Deduction u/s 80P(2)(d) available to Income of Co-operative Society: ITAT Rethal Dudh Utpadak Sahkari Mandali Ltd vs. The Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1106

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that deduction under Section 80P(2)(d) of the Income Tax Act, is available to the income derived by co-operative society.

The ITAT coram comprising of Suchitra Kamble, the Judicial Member thus held: “The Hon’ble Gujarat High Court in case of Surat VankarSahkari Sangh Limited categorically mentioned provision of Section 80P(2)(d) of the Act does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a Co-operative Society. The Ahmedabad District Co-operative Bank is also a registered Co-operative Society and, therefore, the assessee is eligible for claiming deduction under Section 80P(2)(d) of the Act.”

Additional Income Disclosed Originated Out of Seized Material:  ITAT Upholds Penalty Levied u/s 271(1)(c) Rahul Shamrao Mahajan vs Asstt. Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1107

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, on finding the additional income disclosed and returned in ITR filed under Section 153A, to be established to have originated out of seized material, upheld the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Finally, the coram of S.S Godara, the Judicial Member, and G.D Padmahshali, the Accountant Member, by relying upon the decision of the Bombay High Court in Dr. Nitin Laxmikant Lad Vs ACIT, thus held: “Therefore, in the light of settled legal position the action of tax authorities in invoking the penal provisions for levy of penalty under Section 271(1)(c) on such account is well within the law and cannot be faulted with in view of decision of Hon’ble Jurisdictional Bombay High Court.”

Consideration From Sale of Jointly Owned Property cannot be Treated as Long Term Capital Gain of a Co-owner Alone: ITAT Sureshbhai Ashwinbhai Patel vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1108

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that consideration from sale of jointly owned property cannot be treated as long term capital gain of a co- owner alone.

Finally, the Coram of Suchitra Kamble, thus concluded: “As the Assessing Officer also passed ex-parte order, it will be appropriate to remand back the issues contested by the assessee in the appeal filed before the CIT(A) to the file of the CIT(A) for adjudicating the same on merit. The assessee be given opportunity of hearing by following the principles of natural justice and the CIT(A) should take all the cognisance of the evidences filed by the assessee.”

No Penalty u/s 271(1)(b) of Income Tax Act for  Failure to Sign on “Consent Letter” not Authorized by the Government: ITAT Sh. Krishan Kumar Modi vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1109

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no penalty should be levied under Section 271(1)(b) of the Income Tax Act, 1961 for failure to sign a consent letter which was not authorized by the government.

During the proceedings tribunal observed that assessee involving the deposits in the foreign bank account of HSBC bank also similar issue of levy of penalty under Section 271(1)(b) Income Tax Act for not signing the concerned form has been deleted by the Coordinate Bench of Tribunal in the case of Shyam Sunder Jindal. It was further observed that penalty could not be levied if there is a reasonable cause. The two member bench of C. M. Garg, (Judicial Member) and Dr. B. R. R. Kumar, (Accountant Member) after verifying the facts, deleted the penalty imposed by the lower authorities.

Educational Institution is Eligible for Exemption u/s 10(23C) (iiiab) of Income Tax Act: ITAT Sarvoday Shikshan Prasarak Mandal Shirol vs ITO CITATION:   2023 TAXSCAN (ITAT) 1110

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, held that educational institution is eligible for exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961.

Finally, the Coram of S.S Godara, the Judicial Member, and Dr Dipak P. Ripote, the Accountant Member, thus held: “Since the assessee is substantially financed and it is an educational institution, the assessee is eligible for exemption under Section 10(23C) (iiiab). Therefore, we allow the appeal of the assessee.

Ownership of Equipment in Bandwidth Selling Business: ITAT upholds Reduction in Profit eligible for Deduction in Revenue Sharing Gujarat Info Petro Ltd vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1111

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the reduction in profit eligible for deduction in revenue sharing as the assessee had the ownership of equipment in bandwidth selling business.
The two-member Bench of Annapurna Gupta, (Accountant Member) and Senthil Kumar, (Judicial Member) dismissed the appeal filed by the assessee and uphold the decision of Commissioner of Income Tax Appeals  (CIT(A)) reducing profits of the assessee by directing the Revenue from selling of bandwidth business of the assessee to be shared between the assessee and its parent company in the ratio of 30:70 for the satellite and 15:85 ratio from the optic fibre business; thus reducing the profits eligible to deduction under section 80IA(4)(ii) of the Income Tax Act.

No Cogent and Satisfactory Explanation u/s 5 of Limitation Act: ITAT Refuses to Condone Delay of 781 Days Sh. Nitin Sehgal vs Deputy Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1112

The Amritsar Bench of Income Tax Appellate Tribunal (ITAT) has refused to condone a delay of 781 days holding that cogent and satisfactory explanation were not furnished by the assessee as per Section 5 of the Limitation Act, 1963.

The two-member Bench of M. L. Meena, (Accountant Member) and S.H Anikesh Banerjee, (Judicial Member) following the decision of Punjab & Haryana High Court Shakuntla Thukral vs. Commissioner of Income-Tax dismissed the appeal holding that the explanation furnished by the assessee in its application for condonation of delay, as noticed in the earlier part of the order had not satisfied the test of sufficient ground as contemplated under section 5 of the Limitation Act, 1963. The tribunal Bench further held that, there was No cogent and satisfactory explanation has been furnished by either the appellant or the learned counsel for the appellant assessee even before this Tribunal for inordinately long delay of 781 days in filing the appeal before the Tribunal in spite of being given five opportunities of being heard.

ITAT allows Deduction as Amendment in Section 36(1) (va) only Applicable from April 1st Onwards Mahindra and Mahindra Financial Services Limited vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1113

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently allowed the deduction due to amendment in Section 36(1)(va) of Income Tax Act, 1961 is only applicable from April 1st onwards.
The bench, consisting of two members, Judicial Member Pavan Kumar Gadale and Accountant Member Rifaur Rahman, observed that the amendment was brought in the Finance Act, 2021 with effect from 01.04.2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. The amendment to Section 36(1)(va) of the Income Tax Act would not be applicable to Assessment Year 2019-20. The assessee has deposited the employee’s contribution of provident fund before the due date under Section 139(1) of the Income Tax Act. Accordingly, the Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the disallowance. In result, the appeal filed by the assessee was allowed.

AO cannot change DCF Method for Determining FMV of Unquoted Shares under Rule 11UA of IT Rules: ITAT ACIT vs M/s Gamma Pizzakraft (Overseas) Pvt. Ltd. CITATION:   2023 TAXSCAN (ITAT) 1114

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the DCF method for determining FMV of unquoted shares could not be changed by the assessing officer under Rule 11UA of Income Tax Rules.
The two members of the tribunal comprising C.M Garg, (Judicial Member) and Dr B. R. R. Kumar, (Accountant Member) held that DCF is correct method of determining the FMV of the unquoted shares, the assessee has option to determine the method of valuation and the AO has no power to reject the method resorted by the assessee.

ITAT deletes Addition due to Time-Barred Issuance of Notice u/s 143(2) M/s Osian Stock Broking Pvt. Ltd vs ITO CITATION:   2023 TAXSCAN (ITAT) 1115

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the addition due to time-barred issuance of notice under Section 143(2) of the Income Tax Act.

The bench, consisting of two members, Judicial Member Sanjay Garg and Accountant Member Manish Borad, observed that signing of the notice would not constitute the issuance of notice. The date of issuance of notice will be when it is set in motion for delivery to the assessee. The Bench further added that the issuance of notice within the specified period under Section 143(2) of the Income Tax Act is mandatory and that the Assessing Officer cannot assume jurisdiction under Section 143(3) of the Income Tax Act without the issuance of notice under Section 143(2) of the Income Tax Act and this defect cannot be cured by taking recourse to the deeming fiction provided under Section 292BB of the Income Tax Act. Since the Assessing Officer did not issue a notice under Section 143(2) of the Income Tax Act within the specified time period, therefore, the Assessing Officer could not have assumed jurisdiction to frame the assessment under Section 143(3) of the Income Tax Act and, therefore, the impugned assessment order was bad in law and the same was accordingly held to be non-est.  As a result, the appeal of the assessee was allowed.

Enforceability of Agreement to Sale cannot be denied Unless Fresh Affidavits are Verified: ITAT deletes Addition u/s 69 Mr. Hari Krishan Thaman vs The ITO CITATION:   2023 TAXSCAN (ITAT) 1116

The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition under Section 69 of the Income Tax Act, 1961 holding that the enforceability of agreement to sale could not be denied unless fresh affidavits are verified.

A Single Member Bench of Vikram Singh Yadav, (Accountant Member) allowed the appeal filed by the assessee holding that in the interest of justice, it would be relevant to allow an opportunity to the assessee and consider his submissions and it would be appropriate that the matter to be set-aside to the file of the AO to examine the same after providing reasonable opportunity to the assessee. Further, the tribunal Bench held that the affidavit of the buyer was already available on record and a fresh affidavit of the witness Shri Naveen Goyal had been filed. Hence the AO was also directed to consider these affidavits while examining the enforceability of the agreement to sell.

TDS Late Fees u/s 234E Leviable only Prospectively, Not Before 01/06//2015: ITAT deletes Penalty Envision Landmarks LLP vs TDS CITATION:   2023 TAXSCAN (ITAT) 1117

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty holding that the late fee under Section 234E of the Income Tax Act 1961 regarding Tax Deducted at Source (TDS) could only be levied prospectively and not before 1/06/2015.
The two-member Bench of Inturi Rama Rao, (Accountant Member) and S. S. Viswanethra Ravi, (Judicial Member) observed that amendment which was made under Section 200A of the Income Tax Act providing that fee under Section 234E could be computed at the time of processing of the return of income and intimation could be issued specifying the same payable by the deductor as fee under Section 234E of the Income Tax Act was only enforceable from 01.06.2015. The Bench further referred to the relevant observation of the Karnataka High Court in the case of Fatheraj Singhvi which held that the provisions of section 234E of the Income Tax Act were substantive in nature and the mechanism for computing the late fee was provided by the Parliament only with effect from 01.06.2015. The Bench allowed the appeal filed by the assessee and deleted the penalty under Section 234E of the Act holding that late fees under Section 234E of the Income Tax Act could be levied only prospectively with effect from 01.06.2015.

Lack of Jurisdiction u/s 153C owing to Absence of Incriminating Materials: ITAT dismisses Revenue’s Appeal ACIT vs Cogent Realtors Pvt. Ltd CITATION:   2023 TAXSCAN (ITAT) 1118

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, dismissed the revenue’s appeal, on finding that there is lack of jurisdiction under Section 153C of the Income Tax Act owing to the absence of incriminating materials.
“Having regard to the view expressed in AY 2012-13 by the Coordinate Bench, there is hardly any merit in the disallowance carried out by the Assessing Officer as held by CIT(A). Besides, we find merit in the findings rendered by the CIT(A) for lack of jurisdiction under Section 153C owing to absence of any incriminating material. We thus no perceptible reason to interfere with the order of the CIT(A). In the result, the appeal of the Revenue is dismissed”.

Lessor entitled to Claim Depreciation on  Leased Assets under Finance Lease: ITAT DCIT vs M/s Religare Finvest Ltd CITATION:   2023 TAXSCAN (ITAT) 1119

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that the lessor should be entitled to claim depreciation on leased assets under finance lease. T Kipgen, counsel appeared for the revenue. Rohit Jain, counsel appeared for assessee. 

During the proceedings the tribunal observed that, as per the circular issued by the CBDT vide Circular No. 2/2001  the owner is entitled to depreciation, whether he is lessee or lessor, depending upon the terms of the contract. Thereafter the two member bench of Shamim Yahya, (Accountant Member) and Anubhav Sharma, (Judicial Member) dismissed the appeal filed by the revenue and held that in a leasing transaction it is the lessor and not the lessee, who was entitled to claim depreciation on the leased assets.

Matters Pending Before CIT(A) for Adjudication cannot be Disputed in Proceedings u/s 263: ITAT M/s Lexico Ceramics vs Principal Commissioner of Income-tax-1 CITATION:   2023 TAXSCAN (ITAT) 1120

The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, has recently, in an appeal filed before it, held that matters pending before the CIT(A) for adjudication cannot be disputed in the proceedings under Section 263 of the Income Tax Act.

The ITAT coram of Siddhartha Nautiyal, the Judicial Member, and Waseem Ahmed, the Accountant Member, thus held: “Once the issue is pending before the learned CIT(A), the same cannot be made subject matter of revision under the provisions of Section 263 of the Act.”

Rectification Application for Exempted Allowance Claim: ITAT upholds Claim Rejection u/s 143(1)(a) of Income Tax Act Shilpa Prabhakar Kulkarni vs DCIT Centralized Processing Centre CITATION:   2023 TAXSCAN (ITAT) 1121

The Mumbai bench of  Income Tax Appellate Tribunal (ITAT) has recently held that the assessee did not claim the amount of exempted allowance in return of income therefore the bench upheld the rejecting claim of rectification of order under Section 143(1)(a) of Income Tax Act, 1961. Chandni Shah & Kinjal Patel   counsels appeared for the assessee and A.N. Bhalekar, counsel appeared for the revenue.

The CIT(A)  observed that the provisions of Section 154 of the Income Tax Act  are enacted for the purpose of any mistake apparent from record. This section is not meant for rectification of mistakes made by the appellant while filing return of income, the CIT(A) further noted. It was also observed that the assessee did not revise its return of income and after processing of the return of income filed a rectification application wherein the assessee filed the details of the income from the salary in the schedule V. Hence the assessee did not claim for exempted allowance in the return of the income. The omission on the part of the assessee and therefore, there was no mistake in the order passed under Section 143(1) Income Tax Act by the CPC. After that the two member bench of the Om Prakash Kant (Accountant Member) and Kavitha Rajagopal (Judicial Member) upheld the finding of the  CIT(A), rejecting the claim of rectification of order under Section 143(1)(a) of the  Income Tax Act.

Common Interest received on Deposits with Co-Operative Bank  as Income is not Eligible for Deduction u/s.80P(2)(d): ITAT Sangam Coop. Credit Society Ltd vs The Assessing Officer CITATION:   2023 TAXSCAN (ITAT) 1122

The Bangalore bench of Income Tax Appellate Tribunal (ITAT) held that the common interest received on deposits with co-operative Bank as income is not eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961. Sangam Coop. Credit Society Ltd.,the Appellant assessee is a co-operative society registered with Karnataka Co-operative Societies Act, 1959. It was engaged in providing credit facilities to its members only.

The Single member bench of Shri Laxmi Prasad Sahu (Accountant Member) observed that  On various highcourt decisions it is clear that the  assessee is not eligible for deduction under sections 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act on the interest received. So, the grounds raised by the assessee were dismissed. The ITAT also directed the Assessing officer to examine whether the assessee has incurred any expenditure for earning interest income and to decide if the assessee is eligible for setting off of loss suffered from the business while allowing the Appeals.

Deletion of Unexplained Income without a Remand Report is Invalid: ITAT quashes Order ITO vs Shri Bhavesh Sureshchandra Shah CITATION:   2023 TAXSCAN (ITAT) 1123

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) held that deletion of unexplained income without calling for a remand report is against the provision of Rule 64A of Income Tax Rules 1962.

The two-member bench comprising of T.R. Senthil Kumar (Judicial) and Annapurna Gupta (Accountant), observed that in the Interest of Natural Justice, the matter should be remanded back to the file of the Assessing Officer for proper verification. Due to the lack of evidence or Paper Book the ITAT remand the matter back to the file of the Assessing Officer to verify the submissions of the assessee with proper records, bank statements and any other relevant evidences and allowed the Appeals.

Assessment Completed u/s 143(3) after Condonation of Delay due to Covid: ITAT deletes Penalty u/s 271(1)(b) Ramabhai Kanjibhai Patel vs The DCIT CITATION:   2023 TAXSCAN (ITAT) 1124

The Surat Bench of Income Tax Appellate Tribunal ( ITAT) held that the penalty under Section 271(1)(b) of the Income Tax Act could not be levied after condonation of delay when an assessment has been completed under Section 143(3) of the Income Tax Act 1961.

The two-member bench of Pawan Singh (Judicial Member) and Dr A.L. Saini (Accountant Member) observed that in light of Ganesh B Pokhriyal vs ACIT, Globus Infocom Ltd. vs. DCIT, and Akhil Bharatiya Prathmik Shamshak Sangh Bhawan Trust vs. ADIT, the Assessing officer condoned the delay of assessee’s absence due to Covid- 19 pandemic. The ITAT held that the Reasonable cause is a belief that would constrain a person of average intelligence and ordinary prudence. The assessee has made sufficient compliance of notices issued by the assessing officer, and no penalty under Section 271(1)(b) of the Income Tax Act can be levied when an assessment has been completed under Section 143(3) of the Income Tax Act. While allowing the Appeals the Court directed the Assessing Officer to delete the penalty which was levied under Section 271(1)(b) of the Income Tax Act, 1961.

Deduction u/s 80IC of IT Act shall not be denied if Assessee forms New Firm in same Name at same Premises: ITAT Sharda Exports vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1125

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that deduction under Section 80IC of Income Tax Act 1961 should not be denied if assessee form a new firm in the same name at same premises.
Rajkumar Gupta, counsel for the assessee submitted that the firm came into existence on 01 .01.2009 and it began to manufacture articles from 01.04.2009 and hence the assessment year 2010-11 is the initial assessment year for claiming of deduction under Section 80IC Income Tax Act at 100% which has been wrongly allowed by the AO at 25% treating it as 6th year of the old firm. After verifying the document, the tribunal observed that there is no legal infirmity in conducting business by the firm consisting of family members as partners. The name of the old firm and the new firm being the same is not a determinative factor to hold that it is a case of the same firm. The two member bench of B. R. R. Kumar, (Accountant Member) and Yogesh Kumar US, (Judicial Member)  dismissed the appeal filed by the revenue.

Revision u/s 263 can be Invoked When the Assessment was Completed without Proper Enquiry: ITAT M/s. Kute Sons Dairys Ltd. vs PCIT-3 CITATION:   2023 TAXSCAN (ITAT) 1126

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that the revisional jurisdiction conferred under Section 263 of the Income Tax Act could be invoked even when the assessment order was completed without proper enquiry.

The two-member Bench of Inturi Rama Rao, (Accountant Member) and S. S. Viswanethra Ravi, (Judicial Member) held that the error in the assessment order should be one which was not debatable or plausible. The Bench observed that the Assessing Officer had not enquired into the genuineness of the sundry creditors and eligibility of the assessee to additional depreciation. It was the settled position of law that where the assessment was completed without proper enquiry, it would competent to invoke the revisional jurisdiction, the bench added.

Price Incurred in Excess of FRP by Sugar Cooperatives for Sugar Cane Purchased Allowable as per Latest Amendment u/s 155(19): ITAT Padmashri Dr. D.Y. Patil Sahakari Sakhar Karkhana Ltd vs The ACIT CITATION:   2023 TAXSCAN (ITAT) 1127

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that price incurred in excess of   fair and remunerative price (FRP) by sugar cooperatives for the sugarcane purchased is allowable as per the latest amendments under Section 155(19) of the Income Tax Act.

The two member Bench of Satbeer Singh Godara, (Judicial Member) and Dipak P. Ripote, (Accountant Member) allowed the appeal considering the latest amendment in clause (19) in Section 155 of the Income Tax Act.

ITAT deletes Penalty u/s 271(1)(c) for Unfair Representation During Liquidation Process Freeplay Energy India Pvt. Ltd vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1128

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the penalty under Section 271(1)(c) of the Income Tax Act, considering the unfair representation of the assessee during liquidation process.

The tribunal Bench of Judicial Member Saktijit Dey and Accountant Member M.Balaganesh observed that the company was under the process of liquidation, hence, the Official Liquidator was in-charge of the company during the liquidation proceeding, which disabled the assessee from accessing the online portal of the Income Tax Department. Therefore the Bench condoned the delay in filing the appeal. The Tribunal further noted that the disposal of the appeal by the first appellate tribunal was ex-parte order. Subsequently the liquidation process had ended and the status of the company had been restored and, as on date, the company’s status was active in the portal of the Ministry of Corporate Affairs. The bench held that the assessee did not get fair opportunity of representing its case before the first appellate authority, for circumstances beyond its control. The case set aside for re-adjudication and appeal filed by the assessee was allowed in result.

Failure to file Audit Report through a Qualified CA: ITAT upholds Penalty u/s 271B of Income Tax Act Santosh Swarupchand Bhandari vs ITO CITATION:   2023 TAXSCAN (ITAT) 1129

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has recently upheld a penalty under Section 271B of the Income Tax Act, 1961 as the assessee had failed to file the audit report through a qualified Chartered Accountant (CA) within the stipulated time limit.

The bench noted that the assessee had not given books to a qualified CA. It was further noted by the Judicial Member S S Godara and the Accountant Member Dr. Deepak P Ripote that “We do not know, the exact qualification of Mr.Kadam, who calls himself Accountant. However, as per Section 288 “Explanation.—In this section, “accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 who holds a valid certificate of practice under sub-section (1) of section 6 of that Act”.” The tribunal bench observed that, Only a qualified CA is permitted to Audit books of account. In the affidavit it is claimed by Mr.Kadam, that he had not given data to CA. Thus, in the affidavit he is not referring to books. However, for Audit, books of account are required. Therefore, the claims made in the affidavit are contradictory and hence not reliable. In these facts and circumstances, the bench expressed the opinion that there was no valid reason for not filing the Audit report. Hence, upholding the Penalty under Section 271B of the Income Tax Act, the bench dismissed the appeal of the assessee.

Reassessment Proceedings Without Issuance of Notice u/s 143(2) is Bad in Law: ITAT quashes Assessment Order Rajiv Gandhi University of Health Sciences vs Assistant Commissioner of Income-tax CITATION:   2023 TAXSCAN (ITAT) 1130

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that reassessment proceedings without the issuance of notice under section 143(2) of the Income Tax Act, 1961 is bad in law.

A two-member bench comprising Shri George George K, JM & Shri Laxmi Prasad Sahu, AM   observed that there was no noting for the issuance of notice under section 143(2) of the Income Tax Act, 1961. The ITAT accepted the assessee’s contention that there is no service of mandatory notice under section 143(2) of the Income Tax Act, 1961, and therefore, the assessment order is to be set aside on this ground alone. While allowing the appeal, the Tribunal set aside the assessment order, since there is no valid service of mandatory notice under section 143(2) of the Income Tax Act, 1961.

ITAT confirms Addition of Unexplained Income for SBN Deposits during Demonetization Period in Absence of Legitimate Source Pankaj Gupta vs ITO CITATION:   2023 TAXSCAN (ITAT) 1131

The Cuttack Bench of the Income Tax Appellate Tribunal (ITAT) recently confirmed the addition of unexplained income for SBN deposits during the demonetization period in the absence of legitimate source documentation.

The Single Bench tribunal of Judicial Member George Mathan observed that if the assessee desired to take the stand that the SBNs were the currency received between 08.11.2016 to 12.11.2016, it would be incumbent upon the assessee to prove to the revenue as to from whom he had received the SBNs. In the absence of such proof, the deposit of SBN to the extent of Rs.28 lakhs will have to be treated as the unexplained investment of the assessee, the bench noted. In result, the appeal of the assessee was dismissed.

ITAT quashes Penalty Order as Non-Filing of Income Tax Return and Concealing Particulars Cannot be Levied u/s 271(1)(c) Pushpa Jadhav vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1132

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently quashed the penalty order as the non-filing of income return and concealing particulars cannot be levied under Section 271(1)(c) of Income Tax Act 1961.

The Bench consisting of a Judicial Member Vikas Awasthy and an Accountant Member Amarjit Singh observed that the penalty provisions under Section 271(1)(c) of the Income Tax  Act had been invoked for non-filing of return of income. Penalty for non-filing of return of income cannot be levied under Section 271(1)(c) of the Income Tax Act. The Assessing Officer vide order dated 13.06.2019, levied penalty under Section 271(1)(c) for concealing particulars of income. Whereas, while recording satisfaction, no such reason was mentioned by the Assessing Officer for initiating a penalty. Thus, recording of satisfaction for initiating penalty under Section 271(1)(c) of the Income Tax Act was not in accordance with the provisions of the Income Tax Act. Therefore, the penalty proceedings under Section 271(1)(c) of the Income Tax Act were quashed and appeal of the assessee was  allowed.

Relief to Bajaj Finance: Interest Income on NPAs Cannot be Taxed on Accrual Basis, rules ITAT Bajaj Finance Limited vs PCIT-3 CITATION:   2023 TAXSCAN (ITAT) 1134

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has granted relief to Bajaj Finance holding that the interest income on non-performing assets (NPA) could not be taxed on accrual basis.

The two member Bench of Satbeer Singh Godara,(Judicial Member) and GD Padmahshali, (Accountant Member) allowed the appeal filed by the assessee observing that, “This is indeed coupled with the clinching fact that a perusal of Income Computation and Disclosure Standards “ICDS No.IV” dealing with “Revenue Recognition” itself makes it clear that ,in case of conflict between the provisions of Income tax Act, 1961 and this Income Computation and Disclosure Standards “ICDS”; the provisions of the Act shall prevail to that extent.” The Bench further held that the CBDT’s circular issued in tune with the foregoing Income Computation and Disclosure Standards (ICDS) also would not apply once the assessee was not required to recognize its accrued interest on NPAs as income on accrual basis.

Once existence of Goodwill established, Depreciation on such goodwill cannot be questioned: ITAT Dy. Commissioner of Income Tax vs Blujay Solutions (India) Private Limited CITATION:   2023 TAXSCAN (ITAT) 1135

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has held that depreciation on goodwill could not be questioned once the existence of goodwill had been established.

The two-member Bench of R.K. Panda, (Accountant Member) AND K. Narasimha Chary, (Judicial Member) observed that the net balance of purchase consideration paid, and the value of net assets acquired was goodwill and the transfer of IP to BluJay UK could not affect the value of goodwill as the Goodwill was rightly attributed to all the assets acquired from Four Soft and benefits accrued to BluJay India The Income Tax Appellate Tribunal Bench allowed the appeal, holding that once the existence of Goodwill has been established, Depreciation on such goodwill could not be questioned further.

ITAT Quashes Reassessment Proceedings Initiated Solely Based on Vague Information from Investigation Wing M/s. Gulshan Investment Co. Ltd vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1136

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has quashed the reassessment proceedings initiated solely based on the vague information received from the investigation wing.

The two-member Bench Of Chandra Mohan Garg, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeal filed by the assessee and quashed the reassessment order holding that, the reassessment proceedings were initiated based on vague information received from Investigation Wing, Kolkata which only gave reasons to suspect and not reason to believe.

Source of Cash Deposit During Demonetization Cannot be Brushed Aside without Evidence to Contrary: ITAT deletes Addition Mahendra Kumar Parakh vs ITO CITATION:   2023 TAXSCAN (ITAT) 1137

The Kolkata bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition holding that the source of cash deposit during demonetization could not be brushed aside without evidence to the contrary.

The two-member Bench of Manish Board (Accountant Member) and Sonjoy Sarma, (Judicial Member) allowed the appeal filed by the assessee holding that the explanation of the assessee about the source of cash deposit could not be brushed aside without any evidence to the contrary.

Mistake not Apparent and Known to AO without In-Depth Analysis: ITAT upholds Rejection of Rectification Application Income Tax Officer vs Shri Krishna Kumar D Shah CITATION:   2023 TAXSCAN (ITAT) 1138

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the rejection of rectification application holding that the mistake was not apparent and known to Assessing Officer (AO) without in-depth analysis.
The two-member Bench of Rama Kanta Panda, (Accountant Member) and Laliet Kumar, (Judicial Member) observed that, the apparent mistake was one which could be found out without any efforts and reasoning or for which no detailed reason or enquiry was required. “In the present case, neither the substantial proceedings nor the collateral proceedings were pending before the Assessing Officer and therefore, the Assessing Officer was right in not entertaining the application for rectification filed by the assessee and had rightly dismissed the same,” the Bench further observed. The Bench allowed the appeal filed by the revenue and dismissed the rectification application holding that a mistake which could be rectified required to be apparent and should be known to the Assessing Officer without any in-depth analysis.

Citizenship & Taxability of NRI cannot be determined by TDS Deduction by Overseas Companies in India: ITAT Pralay Pradyotkanti Gosh vs ITO CITATION:   2023 TAXSCAN (ITAT) 1139

The Income Tax Appellate Tribunal (ITAT), Ahmedabad “D” bench has held that the Citizenship & Taxability of an NRI cannot be determined by Tax Deducted at Source (TDS) by an Overseas Company in India.

The two-member bench consisting of Shri Waseem Ahmed (Accountant Member) and Shri Siddhartha Nautiyal (Judicial Member) held that the fact that TDS was deducted by the project office of the overseas company in India, using TAN registered at Mumbai, India is not a determinant factor in ascertaining whether the assessee was a non-resident or not and whether his income was exempt “from Taxation in India”. The order passed by the assessing officer is not erroneous and prejudicial to the interests of the Revenue, the bench observed. The appeal was allowed setting aside the order passed by the CIT passed under Section 263 of the Income Tax Act, 1961.

Income Earned by NRI outside India Exempted even if Paid into NRE Account in India: ITAT Pralay Pradyotkanti Gosh vs ITO CITATION:   2023 TAXSCAN (ITAT) 1139

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the income earned by a Non-Resident Indian outside India is exempted from tax even if the same was paid into the Non-Resident External (NRE) account of the assessee in India.

The two-member bench consisting of Shri Waseem Ahmed (Accountant Member) and Shri Siddhartha Nautiyal (Judicial Member) allowed the appeal, setting aside the order passed by CIT.

Cash Payment of Defaulted EMI Instalment to Financier after Cheque Bounce is “Reasonable Cause”: ITAT deletes Penalty u/s 273B Shri Sankaranarayanan R. Sundar Raj vs ITO CITATION:   2023 TAXSCAN (ITAT) 1140

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty imposed under Section 273B of the Income Tax Act holding that the cash payment of defaulted EMI instalment to financier after cheque bounce was a reasonable cause.

The two-member Bench of Mahavir Singh, (Vice President) and And Manoj Kumar Aggarwal, (Accountant Member) allowed the appeal filed by the assessee and held that once the assessee defaulted in EMI payment, the financier would insist on cash payment only and would refuse to accept the cheques from the assessee was a reasonable cause under Section 273B of the Income Tax Act. In view of the above, the tribunal bench deleted the penalty imposed.

Income Arising from Sold Land Established as Agricultural Land cannot be Treated as Capital Asset: ITAT ACIT vs Kamlesh Kumar Rathi CITATION:   2023 TAXSCAN (ITAT) 1142

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that income arising from land could not be treated as capital asset once the nature of the land sold had established as agricultural land.

The two-member Bench of SaktijitDey, (Judicial Member) and M. Balaganesh, (Accountant Member) dismissed the appeal filed by the revenue holding that “Once, nature and character of land sold is established as agricultural land not to be treated as capital asset u/s. 2(14)(iii) of the Act, any income arising out of sale of such land – whether by way of declared sale consideration or on account of on-money, would partake the character of exempt income, as the source of both the declared sale consideration and the on-money received is the same, viz., sale of agricultural land.” The Bench deleted the addition holding that the income derived from sale of agricultural land, which was not a capital asset, could not be made taxable.

Deduction u/s 35(2AB) of Income Tax Act cannot be Denied Ignoring Form 3CL: ITAT Indian Tonners and evelopers Ltd vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1145

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that deduction under Section 35(2AB) of the Income Tax Act could not be denied by ignoring Form 3CL.

The Bench deleted the disallowance and allowed the appeal filed by the assessee holding that when the competent authority had issued Form 3CL entitling the assessee to claim deduction in respect of both capital and revenue expenditure, which was a mandate under section 35(2AB) of the Income Tax Act, the departmental authorities could not disentitle the assessee from availing the deduction by ignoring Form 3CL.

Grants from West Bengal State Government to Co-operative Society not Income from other source: ITAT directs to allow Deduction u/s 80P Udyan Large Size Multipurpose Cooperative Society Limited vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1146

The Income Tax Appellate Tribunal (ITAT) of Kolkata bench has held that grants from West Bengal State Government to cooperative societies are not income from other sources and directed to allow deduction under section 80P of the Income Tax Act, 1961.

A two-member bench comprising Shri Rajpal Yadav, (Vice-President) & Dr Manish Borad (Accountant Member) observed that since the alleged sum of Rs.9,92,664/- is the income earned by the Society for its objects, the same is eligible for deduction under section 80P of the Income Tax  Act. The tribunal allowed the appeal in result.

Delayed Deposit of Employees Contribution to PF and ESI cannot be Claimed Even when Deposited Within Due Date of Filing Return: ITAT Drishti Apparels vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1149

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the delayed deposit of employee’s contribution to Provident Fund (PF) and Employees’ State Insurance (ESI) could not be claimed even if it was deposited within the due date of filing return.

The two-member Bench of G.S. Pannu, (President) and Saktijit Dey, (Judicial Member)  dismissed the appeal filed by the assessee holding that the assessee had not deposited the employees contribution to PF and ESI within the due date prescribed under the statutes governing such payments. The submission of the assessee that “payments were made within the due date of filing of return of income under section 139(1) of the Income Tax Act, Hence, deduction claimed was allowable” were held to be not acceptable by the Bench, referring to the Supreme Court decision in case of Checkmate Services Pvt. Ltd. Vs CIT.

Relief to Reliance Infra: ITAT Allows TDS Credit of Rs. 40.43 Crore as Deducted by Tata Power on Payment to Adani Electricity on Transfer of Business DCIT vs M/s. Reliance Infrastructure Limited CITATION:   2023 TAXSCAN (ITAT) 1150

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has granted relief to Reliance Infrastructure by allowing the Tax Deducted at Source (TDS) credit of Rs 40.43 crore deducted by Tata Power on payment to Adani Electricity, on transfer business.

The Bench observed that, “It is not even disputed by the department that the assessee is entitled for credit for TDS. Either some mechanism should be devised by the department to address such grievances in such circumstances or authorised the Assessing Officer to examine it and allow; or the strict conditions provided in Rule 37BA should be read in the provisions of Section 199(1) to make it workable in genuine cases where department is sure no double credit is allowed or claimed. Because Rules should not frustrate the main provisions of the Act.”

ITAT Deletes Late Filing Fee u/s 234E for TDS Return Due to Human Error and Absence of Malafide Intention Kanta Govind Singh vs Asstt. Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1151

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the late filing fee under Section 234E of the Income Tax Act for TDS return due to human error and absence of malafide intention. The Bench consisting of a Judicial Member Suchitra Kamble, and an Accountant Member Annapurna Gupta observed that the assessee being senior citizen had deposited TDS amount immediately after sale consideration was received and there was no lapse on the part of the assessee while depositing the TDS amount to the Treasury of Government of India. It was further noted that, “Due to the circumstances, the assessee could not file form 27Q within the time frame, but the assessee’s intention is clear as the assessee filed the same in January 2021. Thus, merely on the ground that the assessee had not filed Form 27Q and thus late filing cannot be the criteria for levying fees under Section 234E of the Income Tax Act.” In result, the appeal of the assessee was allowed.

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