The stories on the Income Tax Appellate Tribunal (ITAT) that were published at Tax scan December 15, 2023 to December 22, 2023 are summarized in this Round-Up.
Paramjit Gandhi vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2705
The Income Tax Appellate Tribunal (ITAT), Delhi bench has annulled the disallowance of a long-term capital loss arising from the sale of shares of a private company to its initial promoters
Paramjit Gandhi, a director at M/s Progressive Tools and Components Pvt. Ltd, faced an income tax challenge for the AY 2013-14. The assessing officer disallowed a declared long-term capital loss on the sale of shares in M/s. Flexpack Technology Pvt. Ltd (FPTPL), deeming it not genuine. The CIT (A) upheld the decision. In the tribunal’s second appeal, the assessee’s counsel argued the shares were sold to mitigate FPTPL losses, presenting supporting documents. The Revenue’s counsel asserted the transaction’s legitimacy but was ultimately transferred to the initial promoters through Smt. Sunita Jain.
After careful consideration, the two-member bench, consisting of M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member), found that the assessee, facing challenges, had genuinely sold the shares to Sunita Jain at a negotiated price of Rs. 3 per share, considering FPTPL’s significant losses. The tribunal, based on its review of facts and records, deleted the disallowance of the long-term capital loss incurred on the sale of shares to the initial promoters. Consequently, the tribunal allowed the appeal of the assessee
Delhi HC upholds Direction of ITAT to exclude e-Clerx as Comparable
PR. COMMISSIONER OF INCOME TAX-1 vs FUTURE FIRST INFO. SERVICES PVT. LTD CITATION: 2023 TAXSCAN (HC) 1963
The Delhi High Court upheld the direction of the Income Tax Appellate Tribunal (ITAT) to exclude e-Clerx as comparable.
In the case of Future First Info Services Ltd, the Commissioner, Income Tax (Appeals) partially allowed the appeal, directing a re-computation of the average PLI and reviewing rent expenses and Section 40A(2)(b) additions. The Tribunal, in its order dated 10.05.2021, dismissed the revenue’s appeal, deleting the Assessing Officer’s additions for rent expenditure and Section 40A (2)(b) payments, and upheld the exclusion of certain comparable. The appellant argued that e-Clerx should not have been excluded, citing pending legal challenges and asserting that stringent comparability standards weren’t necessary. The respondent emphasized differences in structure and functionality between Future First and e-Clerx.
A Division Bench of Justices Rajiv Shakdher and Girish Kathpalia observed that “In contrast, as detailed above, the respondent/assesse has employed fresh young graduates, engaged in simply punching in the data. Another significant aspect is that e-Clerx carries out its substantial business on outsourcing model, which makes it different from the respondent/assesse. The high end KPO services provider cannot be compared with the ITeS, which fall under the category of BPO services provider.” “
Therefore, as regards rejection of e-Clerx as comparable in the present case, we find no error in the decision of the Tribunal ” the Court noted.
Rekha Singh vs ITO CITATION: 2023 TAXSCAN (ITAT) 2707
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that stamp duty value on the date of allotment is to be taken for the purposes of Section 56(2)(vii)(b) of the Income Tax Act, instead of date of registration.
The assessee declared a total income of ₹5, 93,520, facing limited scrutiny. The assessing officer applied Section 56(2)(vii)(b) of the Income Tax Act, citing a variance between the property’s agreement and stamp duty values. The assessee argued that the agreement date, not the registration date, should be considered. The Tribunal, citing precedents, noted the agreement on 16.12.2010, and partial payment before registration, concluding in favor of the assessee. The revenue representative supported the CIT (A) order. The Tribunal upheld the assessee’s stance, considering the agreement date for Section 56(2)(vii)(b).
The bench, also found that, in the case of Poonam Ramesh Shahjwan wherein on the similar facts the value of the flat was determined on the date of booking of flat after taking into consideration the payment made by the assessee through banking channel before the registration of the flat as laid down in the proviso to Section 56(2)(vii)(b) of the Income Tax Act.
Thus the bench directed the AO, that the stamp duty value on the date of allotment in the case of the assessee on 16.10.2010, to be taken for the purpose of Section 56(2)(vii)(b) of the Income Tax Act and not stamp value as on the date of registration of sale deed.
Rekha Singh vs ITO CITATION: 2023 TAXSCAN (ITAT) 2707
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) quashed the confirmation of addition under Section 56(2)(vii)(b) of the Income Tax Act, done solely for payment made by other co-owner before registration.
The assessee, declaring ₹5,93,520 income, faced scrutiny for purchasing property jointly with her husband for ₹84, 15,300. The Stamp Duty Authority valued it at ₹1, 32, and 82,000. The AO invoked Section 56(2)(vii)(b), taxing 50% of the difference. The assessee argued the agreement date’s relevance and cited precedent. The Tribunal, acknowledging the joint ownership, agreed with the assessee’s stance, considering the agreement date for Section 56(2)(vii)(b), and rejected the revenue’s claim.
The Tribunal Bench of Judicial Member Kuldip Singh and Accountant Member Amarjit Singh observed that, “The registration of the purchased property was made on 29.12.1014. However, the property was allotted as per the letter of allotment filed dated 16.12.2010. The first cheque for payment towards the purchase of the property was made on 18.12.2010. The assessee has paid ₹ 27, 73, 980/- before registration of the agreement with the registrar of stamps, Maharashtra.”
Considering the decision in Sanjay Dattatraya Dapodikar wherein it was held that where date of agreement for fixing amount of consideration for purchase of a plot of land and date of registration of sale deed were different the bench noted that, assessee, prior to date of agreement, had paid a part of consideration by cheque, provisos to section 56(2) (vii)(b) being fulfilled, stamp value as on date of agreement should be applied for purpose of said section. The tribunal bench found no merit in the decision of the Commissioner of Income Tax (Appeals) [CIT (A)], that before the registration of the flat only other co-owner i.e. Ajay Kumar Singh, husband of the assessee has made payment. It was thus held that, since, it is joint property owned by assessee and her husband, that it is immaterial who had made payment before the date of registration of the property.
Addition u/s 69A of Income Tax Act when Specific Notes form a part of Gross Sale: ITAT
Puligilla Purnachander vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2708
The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) held that addition under Section 69A of the Income Tax Act, 1961 when the specific notes form a part of the gross sale.
The assessee, operating as Balaji Fertilizers, admitted gross sales of Rs. 1,24,57,139 with a net profit of Rs. 3,39,879. As the return of income was not filed, the AO estimated income at 8% of the gross sales, totaling Rs. 9, 40,811. Additionally, cash deposits of Rs. 40, 27,750, including Rs. 6, 97,000 during demonetization, were treated as ‘unexplained’ under Section 69A. The Authorized Representative argued that the specified notes’ deposit was part of sales, while the Departmental Representative contested this, urging dismissal of the appeal.
The Single-member bench comprising of K. Narasimha Chary (Judicial member) held that there was no reason for the AO to dispute the genuineness of Rs. 6, 97,000/- merely because it was in specified notes. Revenue does not say that there was no cash in hand in the business conducted by the assessee. In these circumstances, having regard to the volume of business and also cash deposits in the entire year and also during the demonetization period relating to such business, the bench was of the considered opinion that there was no reason not to believe that the deposits in specified notes was also part of cash sales. Since the net profit was estimated, this particular deposit cannot be brought to tax separately. Hence, the Assessing Officer was directed to delete the same.
DCIT vs Yograj Arora CITATION: 2023 TAXSCAN (ITAT) 2709
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the addition under Section 69A of the Income Tax Act, 1961 cannot be imposed when the assessee doesn’t hold the ownership of the money and there is no evidence found concerning the cash.
During a Section 132(1) search at the Chartered Accountant assessee’s residence, with an initially declared income of Rs. 12,16,68,990, a subsequent notice under Section 153A was issued. The AO added Rs. 1.45 crores as actual cash arranged/paid by the assessee to HKA, making a total income addition of Rs. 1,45,00,000 under Section 69A in the assessment order under Section 153A/143(3) of the Income Tax Act.
The Two-member bench comprising of BRR Kumar (Accountant member) and Astha Chandra (Judicial member) held that it was not a case in which the assessee was found to be in possession of the cash of Rs. 1.45 crore in the search operation. Therefore, it cannot be presumed that the assessee was the owner of the said cash. To attract the provisions of Section 69A of the Income Tax Act sine qua non was “ownership” of money etc. which has not been recorded in the books of account. The AO has made only the presumption that the said cash was ‘available with the assessee’ without bringing on record any material in support thereof. Thus, the appeal of the revenue was dismissed.
Smt. Jothi Narayanan vs The Addl.CIT CITATION: 2023 TAXSCAN (ITAT) 2706
The Income Tax Appellate Tribunal (ITAT), Chennai bench upheld the disallowance made by the Income Tax Department, stating that the assessee failed to produce supporting documents for the helper allowance claimed as a deduction under Section 10(14)(i) of the Income Tax Act, 1961.
The Director of Annai Builders Real Estate Pvt. Ltd., Thanushkodi Narayanan, initially filed her income tax return for AY 2012-13. Later, in the return filed under Section 153A for AY 2017-18, she claimed a helper allowance of Rs.4,80,000, not present in the original return. The AO disallowed it as no additional salary income was offered. Despite special audit, no supporting documents were provided. The Tribunal upheld the disallowance. The assessee, represented by B. Ramakrishnan, argued expenses were incurred, while N.B. Som, representing the Revenue, supported the Commissioner (Appeals) observations.
The tribunal observed that the assessee could not provide any evidence or file documents related to the claim of the helper allowance paid to them. After reviewing the facts and records, the two-member bench of Rajesh Kumar (Accountant member) and Mahavir Singh (Vice President) concluded that the assessee failed to produce supporting documents for the expenditure on the helper allowance claimed as a deduction under Section 10(14)(i) of the Income Tax Act, 1961. Consequently, the bench dismissed the appeal of the assessee.
The Deputy Commissioner of Income Tax vs Santha Build Tech India Pvt Ltd CITATION: 2023 TAXSCAN (ITAT) 2710
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the reopening of the assessment under Section 147 of the Income Tax Act, 1961 cannot be initiated after the expiry of 4 years based on the failure of the assessee in deducting the Tax Deducted at Source (TDS) on interest payment.
The assessee, involved in residential construction, faced scrutiny under Section 143(3). The assessment was later reopened under Section 147, with the reason that the assessee didn’t deduct TDS on interest payments to Reliance Home Finance. The Commissioner (Appeals) deemed the reassessment, initiated after four years, unjustified, finding no failure to disclose material facts. Consequently, the reassessment under Section 147 and Section 148 was quashed.
The Two-member bench comprising of Mahavir Singh (Vice-President) and Manjunatha G (Accountant member) held that reopening was beyond 4 years and as the original assessment was framed under Section 143(3) of the Income Tax Act, the Revenue could not establish any failure on the part of the assessee to disclose any material facts necessary for its assessment, the reopening in the present case was bad in law. Hence, the bench found no infirmity in the order of CIT(A), and the same was confirmed. Therefore, the appeal of the Revenue was dismissed.
Shadawal Enterprises vs Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 2711
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted another opportunity to the assessee and held that the addition as unexplained purchase expenses shall be made on failure to establish any evidence for eviction of encroacher.
During a Section 133A search at the Assessee’s business premises, a voluntary declaration of Rs. 1,10,06,000 was made by Shri Rajaram Ganpat Vichare, a partner. The AO summoned Shri Ganesh Vithal Indore, but he neither appeared nor responded. The AO, considering the Assessee’s failure to provide evidence of eviction efforts or legal actions, questioned a transaction of Rs. 1,30,00,000 allegedly paid to Shri Ganesh Vithal Indore. The Commissioner affirmed the addition due to doubts surrounding the transaction.
The Two-member bench comprising Prashant Maharishi (Accountant member) and N.K. Choudhry (Judicial member) held that Shri Ganesh Vithal Indore was also the appropriate person to establish his possession over the encroached property/land by submitting the relevant documents and/or other direct or indirect evidence
To ensure a fair decision and uncover the truth, the issue is deemed appropriate for remand to the AO. The AO is directed to summon Shri Ganesh Vithal Indore, taking necessary measures if he doesn’t appear. The assessee is granted another opportunity to substantiate its stance on the encroached land and establish the transaction’s genuineness with evidence. The issue is remanded for a de-novo decision by the AO.
M/s. PVR Ltd vs Addl. CIT Range-14 CITATION: 2023 TAXSCAN (ITAT) 2712
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) granted relief to PVR and held that the subsidy given by the state government on account of the development of multiplexes in the state is a capital receipt.
The counsel for the assessee stated that the issue is no more resintegra as it has been decided by this Tribunal in favor of the assessee and against the revenue in A.Y. 2006-07 in ITA No.1897/Del/2010.
The Two-member bench comprising N.K. Billaiya (Accountant member) and Astha Chandra (Judicial member) by referring to the direct judgments of the Bombay High Court in M/s Chapalkar Brothers and that of the Supreme Court judgment in the case of Ponni Sugars & Chemicals Ltd., which has approved many such judgments cited in the body of the order, held that the subsidy received by the assessee was capital in nature. Thus, the appeal of the assessee was allowed.
Failure of CA to Register EMail ID on Income Tax Portal: ITAT grants another Opportunity to Assessee
The Maheshwar Niketan Co-operative Housing Society Limited vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2714
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted another opportunity to the assessee due to the failure of the Chartered Accountant (CA) to register the email ID on the income tax portal.
The cooperative society declared rental income of Rs.61,56,782, claiming a Section 24(a) deduction of Rs.18,23,010. It also sought deductions of Rs.69,746 for insurance premium and Rs.10,337 for land revenue tax, resulting in a total house property income of Rs.42,53,689. The AO added Rs.12,25,000 for hoarding rental income and Rs.69,746 for unexplained expenditure under Section 69C, framing the assessment under Section 143(3). The assessee was notified through email and RPAD, but did not appear for the appeal.
The Two-member bench comprising of Kuldip Singh (Judicial member) and Amarjit Singh (Accountant member) held that when the assessee brought on record the fact that due to a lapse on the part of his newly engaged CA who could not update his email ID on the income tax portal the notice was not received, the assessee was required to be given another opportunity to pursue its appeal before the Commissioner of Income Tax (Appeal) [CIT(A)] to comply with the rule of natural justice. Therefore, the order of the CIT(A) was set aside and the appeal of the assessee was allowed.
Peerless Hotels Limited VS Assistant Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 2713
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the disallowance under Section 14A of the Income Tax Act, 1961 shall not be made when no demonstrable evidence has been shown against the expenditure related to earning of tax-free income.
The assessee revised the income to Rs.1,99,51,420. In the scrutiny assessment, a notice under Section 143(2) was issued. The assessee voluntarily disallowed Rs.9,134 under Section 14A. The AO, considering Section 14A with Rule 8D and citing the Supreme Court’s Maxopp Investment Limited vs. CIT, made a 1% disallowance based on Rule 8D(2), considering annual averages of monthly opening and closing balances of investment values. The counsel argued the investment in Mutual Funds mandated dividend reinvestment.
The Two-member bench comprising of Rajpal Yadav (Vice-President) and Girish Agarwal (Accountant member) held that subsection (2) of Section 14A contemplates that expenditures relatable to earning of tax-free income are required to be worked out for making disallowance. In the present case, there are expenditures, but the expenditures relatable to exempt income could not be demonstrable. The AO had to take the help of the formula under Rule 8D and work out the disallowance.
Therefore, the assessee could not buttress its case on the strength of the above decisions. The bench did not find any merit in the grounds of appeal. They were rejected.
M/s. O Clock Software Private vs The ACIT, CPC, Bengaluru CITATION: 2023 TAXSCAN (ITAT) 2716
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) confirmed the addition under Section 2(24)(x) of the Income Tax Act, 1961 and held that the deduction cannot be claimed when there is a delay in the payment of the employee’s contribution to Provident Fund (PF) and Employee State Insurance (ESI).
O Software Pvt. Ltd. reported a total income of ₹14,17,790 in its income tax return. The Income Tax Department CPC, Bengaluru, assessed it under section 143(1), disallowing ₹1,57,008 for delayed PF/ESI payments. The CIT(A) upheld the disallowance despite the company’s claim of timely EPF payment. Citing M/s. Checkmate Services P. Ltd. v. CIT, the Supreme Court clarified that timely remittance is crucial for deductions under Section 36(1)(va) and Section 43B. Delayed payments are considered income under Section 2(24)(x) of the Income Tax Act.
The Two-member bench comprising of V. Durga Rao (Judicial member) and G. Manjunatha (Accountant member) held that there was no error in the reasons given by the CIT(A) to sustain the addition made towards disallowance of the employee’s contribution to PF & ESI under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, and thus, the order of the CIT(A) was upheld and the appeal filed by the assessee was dismissed.
ITAT deletes addition made u/s 69 of Income Tax Act on account of difference of excess stock of 22 Kt Gold and Polki jewellery
Chawla Jewellers vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2717
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, deleted the addition made under Section 69 of the Income Tax Act, 1961, on account of the difference in excess stock of 222Kt Gold and Polki Jewellery. The assessee, Chawla Jewellers, is a corporate entity engaged in the business of gold and diamond jewellery.
Following an income tax return filing, a survey at the assessee’s premises resulted in an addition to income by the Assessing Officer, based on a discrepancy in the weight of 22kt Gold Jewellery and 20kt Polki Studded Gold Jewellery. The CIT(A) upheld the decision, leading to a second appeal. The appellant argued that the 113.50-gram difference (0.32%) was due to estimation errors, emphasizing they maintain a single account for both types of jewelry. The Tribunal concurred, noting the negligible difference in a substantial quantity of jewelry, dismissing adverse inferences.
After reviewing the facts and records, the two-member bench of Dr. B. R. R. Kumar (Accountant Member) and Astha Chandra (Judicial Member) deleted the addition made under Section 69 of the Income Tax Act, 1961, on account of the difference in the excess stock of 222Kt Gold and Polki Jewellery. Therefore, the bench allowed the appeal filed by the assessee
Chawla Jewellers vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2718
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) quashed disallowance of deduction under Section 54 of the Income Tax Act, 1961 merely based on non-deposit of capital gains in capital gain account scheme
The Delhi ITAT overturned the disallowance of Section 54 deduction, emphasizing the non-deposit of capital gains in the Capital Gain Account Scheme. The case involved a reassessment triggered by a property sale. The assessee, responding promptly, claimed exemption under Section 54, having reinvested the entire gain. The Assessing Officer accepted the return after thorough verification. However, the PCIT later deemed it erroneous due to non-deposit in the specified scheme. The ITAT deemed the respondent’s stance excessively technical, maintaining the assessee’s right to the deduction if Section 54(1) conditions are met.
The two member bench of the tribunal comprising M. Bala Ganesh (Accountant) member and Sakthi Jith Ray (Vice president) concluded that the utilization of authority under Section 263 of the Income Tax Act to review the assessment order in this case is deemed invalid. Consequently, the bench nullified the order issued under Section 263 of the Income Tax Act and reinstated the original assessment order. In conclusion, the appeal was granted.
M/s. Shree Swami Samarth Seva Kendra vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2714
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the benefit of accumulation of income under Section 11(2) of the Income Tax Act, 1961 shall be allowed when the audit report in form 10 is filed along with the Income Tax Return (ITR).
The assessee trust is registered under Section 12A of the Income Tax Act and with the Charity Commissioner of Bombay filed its return of income with income and expenditure account, balance sheet, and audit report in form No.10B declaring total income at Nil, which was subjected to scrutiny. The Assessing Officer (AO) proceeded to assess the income at Rs.31,84,320/- on the ground that the assessee is not entitled to benefit of the accumulation of income under Section 11(2) of the Income Tax Act to the tune of Rs.31,84,320/- because form No.10 was furnished by the assessee beyond the due date of filing of income tax return as per Section 139(1) of the Income Tax Act
The Two-member bench comprising of Kuldip Singh (Judicial member) and Amarjit Singh (Accountant member) held that filing of audit report in form No.10 by the assessee during the assessment proceedings was a valid compliance and as such seeking benefit of Section 11 of Income Tax Act based on audit report was admissible under the law.
The bench directed the AO to extend the benefit claimed by the assessee under Section 11(2) of the Income Tax Act based on the audit report in form 10 filed during the assessment proceedings subject to verification. Thus, the appeal of the assessee was allowed.
Pan Emami Cosmed Limited vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2715
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the exemption under Section 10(38) of the Income Tax Act, 1961 shall be allowed where the purchase and sale of shares on which long-term capital gain (LTCG) is earned has been genuinely effected.
The assessee claimed a loss on equity shares in their income tax return, treated as exempt. However, the processing disallowed the loss, adding it to the income without proper categorization. The Section 143(1) intimation lacked opportunity for the assessee, and rectification was summarily rejected. The CIT(A) directed the AO to verify the loss’s genuineness and allow set-off against business income and capital gains as per the law. The LTCG of Rs. 2,66,49,388/- was legitimately claimed as exempt under Section 10(38).
The Two-member bench comprising of Rajesh Kumar (Accountant member) and Sonjoy Sarma (Judicial member) held that the AO had wrongly computed the income from business and profession at Rs. 58,67,024/- instead of a loss of Rs. 2,00,50,550/- as filed in the return of income by the assessee.
Therefore, the issue needs to be examined at the level of the AO as this involves the verification of facts and issues concerning the business income and loss on the sale of shares. Accordingly, the bench restored to the file of the AO with the direction to examine and allow the exemption under Section 10(38) of the Income Tax Act in respect of LTCG. Thus, the order of CIT(A) was set aside and the appeal of the assessee was allowed.
Writ Petition against ITAT order not Heard Due to Retirement of Presiding Judge: Supreme Court directs HC to Re Hear
MANESH DAYASHANKAR MADEKA vs ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1) & ANR CITATION: 2023 TAXSCAN (SC) 320
The Supreme Court directed the High Court to Rehear the Writ Petition against the order of the Income Tax Appellate Tribunal (ITAT) the presiding judge was retired. It was also pointed out that the paucity of the time was not dictated.
Manesh Dayashankar Madeka, the petitioner has prayed for the issue of a writ of certiorari and a writ of mandamus and any other writ direction or order to quash and set aside the impugned notices dated 29/9/2020 u/s 153C of the Income Tax Act, 1961. It was found that the writ petition was not entertained by the High Court for reasons to be followed which due to paucity of time was not dictated on 27.9.2021 on which the matter was disposed of. However, no reasons were dictated at all. It is also brought to our notice that the Presiding Judge of the Division Bench has also retired.
In the circumstances, the two-judge bench comprising Justice B V Nagarathna and Justice Ujjal Bhuyanheld that the writ petition would have to be reheard. Consequently, the impugned order is set aside. The matter is remanded to the High Court. The writ petition is restored on the file of the High Court to be re-heard and an order to be passed by law along with reasons.
PRINCIPAL COMMISSIONER OF INCOME TAX VS BINAY KUMAR JINDAL HUF CITATION: 2023 TAXSCAN (SC) 328
The Supreme Court has allowed the application seeking exemption in filing a verified copy of the Income Tax Appellate Tribunal Order (ITAT) wherein it was held that the reassessment order is Invalid as a Mismatch in Reason Recorded in Reopening and Reason Supplied to the assessee. The Special Leave Petition (SLP) arose out of the impugned final judgment and order passed by the High Court of Orissa.
Binay Kumar Jindal HUF claimed LTCG under Section 10(38) for shares of TTML. The AO, suspecting bogus LTCG and TTML as a sham company, reopened the assessment. The ITAT deemed the reassessment invalid due to discrepancies in the reasons recorded and supplied. The Revenue argued the validity couldn’t be challenged in the appeal against the revisional order under Section 263, but the ITAT upheld the assessee’s position.
A two-judge bench of Justice Abhay S Oka and Justice Pankaj Mithal allowed the application seeking exemption from filing a certified copy of the impugned order.
The JCIT vs Shri Vijay Kumar Saini CITATION: 2023 TAXSCAN (ITAT) 2719
The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty proceedings under Section 271AAB(1A) of the Income Tax Act, 1961 is not mandatory and cannot be initiated by the Assessing Officer (AO) without specifying the default of the assessee.
The assessee, involved in various income sources, faced a search and seizure under Section 132. The original return declared a total income of Rs. 3,34,40,150/-. In assessment proceedings, a revised computation was submitted without a revised ROI on the portal. An addition of Rs. 2,87,50,000/- for undisclosed business income resulted in a total income of Rs. 6,21,90,150/-. The AO initiated penalty proceedings under Section 271AAB(1A) without specifying the default.
The Two-member bench comprising of Sandeep Gosain (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that the entries in the seized documents representing the commission sales in the absence of the real transactions do not constitute the undisclosed income of the assessee as defined in the explanation to Section 271AAB(1A) of the Income Tax Act.
Accordingly, the penalty levied under Section 271AAB(1A) of the Income Tax Act in respect of the said amount was not sustainable and liable to be set aside. Accordingly, the penalty levied by the AO under Section 271AAB(1A) of the Income Tax Act was deleted. Thus, the appeal of the assessee was allowed.
Madhuban Dealers Pvt. Ltd vs Commissioner of Income-tax CITATION: 2023 TAXSCAN (ITAT) 2721
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the revisionary order passed under Section 263 of the Income Tax Act, 1961 in the name of a non-existent entity is void ab initio and cannot give rise to any valid collateral proceeding
The assessee initially declared a loss of Rs.6,04,635/-. After the case was reopened due to information about Rs.4,95,00,000/- received, the entity converted to an LLP. The CIT issued a notice under Section 263 in the name of the non-existent entity, alleging errors in assessing the money received. The representative argued the notice and subsequent order were void as they referred to a non-existent entity. The plea sought the quashing of the order under Section 263 of the Income Tax Act.
The Two-member bench comprising of Rajesh Kumar (Accountant member) and Sonjoy Sarma (Judicial member) held that the revisionary proceedings under Section 263 of the Income Tax Act were initiated by the CIT, Kolkata, and the revisionary order was framed in the name of non-existent entity despite the fact having been brought to the knowledge of the AO and the fact was very much available in the assessment records. Therefore, the original revisionary order passed under Section 263 of the Income Tax Act was itself void ab initio and invalid. Thus, the appeal of the assessee was allowed.
Vishal Pachisia vs ITO CITATION: 2023 TAXSCAN (ITAT) 2722
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that once Tax Deducted at Source (TDS) is deducted then liability for non-deposit of TDS by deductor cannot be fastened on the deductee.
The assessee, a salaried employee of M/s. Falcon Tyres Ltd., received a salary of Rs. 17,40,264/- with TDS deducted at Rs. 3,96,700/-. The employer failed to deposit this amount in the Government treasury. The assessee claimed credit for the TDS in their income tax return, but the AO, CPC allowed only Rs. 13,592/-, denying the credit for the undeposited amount. The CIT(A) upheld this decision, stating that the unremitted TDS was ineligible for credit.
The Two-member bench comprising of Rajesh Kumar (Accountant member) and Sonjoy Sarma (Judicial member) held that since the TDS deducted at source has not been deposited in the Government treasury by the employer, the assessee was not entitled to claim the credit thereof.
Where the TDS has been deducted at source from the salary which has not been deposited with the Government treasury, then the assessee cannot be called upon to deposit the demand arising out of non-credit of the said TDS by the Revenue. Therefore, it was concluded that the issue of non-deposit of TDS by the deductor has been allowed in favor of the assessee by holding that once the TDS was deducted then the liability resulting from the non-deposit of TDS by the deductor cannot be fastened on the deductee. Thus, the appeal of the assessee was allowed.
M/s. Aban Offshore Limited vs Deputy Commissioner of income tax CITATION: 2023 TAXSCAN (ITAT) 2720
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the forex loss/liabilities used for the working capital purpose of the assessee is a revenue expenditure and shall be allowed as a deduction under Section 37(1) of the Income Tax Act, 1961.
The Public Ltd Company, engaged in offshore drilling, faced reassessment under Section 147. The total income was determined at Rs. 455,28,83,672/-, disallowing amounts under Sections 40(a)(ia) and 37(1) of the Income Tax Act. The CIT(A) partly allowed the appeal, deleting additions for non-deduction of TDS but confirming disallowance of forex loss related to a loan borrowed for acquiring fixed assets. The counsel argued against capitalizing forex loss as it pertains to business loans.
The Two-member bench comprising of Durga Rao (Judicial member) and Manjunatha G. (Accountant member) held that the AO disallowed forex loss mainly on the ground that said loss was on account of fluctuation in foreign currency loan/liabilities borrowed for the purpose of acquisition of capital assets.
A similar issue has been considered by the coordinate bench of ITAT in the assessee’s own case, where the Tribunal under an identical set of facts, the issue has been set aside to the file of the AO for further verification. Therefore, consistent with the view taken by the coordinate bench, the bench set aside the order passed by the CIT(A) and restored the issue to the file of the AO, and directed the AO to re-examine the claim of the assessee and decide the issue in light of our reasons given in assessee’s own case.
DPT notifies Appointment of 40 New ITAT Members, comprising 18 Judicial and 22 Accountant Members
In a significant development, the Government, via Notification No.14/7/2023–EO(SM-II) dated December 19, 2023, has officially disclosed the appointment of 18 Judicial Members and 22 Accountant Members for the esteemed Income Tax Appellate Tribunal (ITAT).
The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the addition shall be made in respect of the employee’s contribution to Employee State Insurance (ESI) and Provident Fund (PF) which has not been deposited within the stipulated date.
An intimation under Section 143(1) disallowed deductions for unpaid PF & ESI of Rs. 41,89,576/- and service tax of Rs. 1,07,621/-. The Departmental Representative cited the apex court’s judgment in CIT-1 vs. Checkmate Service Pvt. Ltd. to support the disallowance of PF & ESI. For service tax, they argued that recent amendments include it in turnover, making it part of the profit and loss account, thus subject to Section 43B of the Income Tax Act.
The Two-member bench comprising of S. Seethalakshmi (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that the Commissioner of Income Tax (Appeal) [CIT (A)] has followed the judgment of CIT-1 vs. Checkmate Service Pvt. Ltd. and disallowance so made was in accordance with law clarified by the Apex Court. Therefore, the appeal of the assessee was dismissed.
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