ITAT Annual Digest [Part-28]

This analyzes all the ITAT stories published in the year 2023 at taxscan. in The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has granted relief to Finesse global company holding that the business promotion expenses for improving visibility of the brand should not be treated as personal. The two member Bench of SaktijitDey, (Judicial Member) and , (Accountant Member) allowed the appeal filed by the assessee and deleted the disallowance made on account of business promotion holding that the employees and directors of the assessee company would incur the expenditure in their credit cards and later on the same had been reimbursed by the assessee company to the Directors and employees.

The Bench further observed that, “Numerous entries entered by the assessee on account of business promotion and these are to be incurred by the assessee for improving the visibility of its brand and sale of its products, to the various customers / clients and business associates for the business purposes and also for entertaining the customers /clients in various restaurants and clubs and these are routine expenses incurred by the assessee in the normal course of business. The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the depreciation to plant and machinery installed for pilot projects which were added to existing blocks. The two member Bench of SaktijitDey, (Judicial Member) and M.

Balaganesh, (Accountant Member) allowed the appeals holding that in subsequent assessment years, the Assessing Officer had allowed assessee’s claim of depreciation on the capitalised plant and machinery of the pilot project. On a reading of section 43(6)(c) of the Act, the Bench found that as per the definition of block of assets therein, there was no condition that the plant and machinery must have been put to use. The only condition was that the assets must have been acquired during the relevant year.

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has disallowed the proprietary business loss since sham transactions were found between associated enterprises. The two-member Bench of Chandra Mohan Garg, (Judicial Member) and Pradip Kumar Kedia, (Accountant Member) dismissed the appeal filed by the assesseehilding that both the assessee and the SAL were family controlled with common shareholding and therefore were privy to the exact affairs and It was not a case where a third party had been caught unaware resulting in unintended losses. “The basis of calculation of security deposit, the proof of production of specialised glass, cost involved thereon is not available on record.

The agreement with the AE is also not available in original. Except for the transfer of funds to SAL, no other substantive evidence is available to enable us to appreciate the facts in its perspective,” the Bench further observed. The Chennai bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the assessing officer and held that consideration received towards sale of agricultural land should not be taxable under the head of capital gain.

It was observed by the tribunal that certificate issued by the Additional Tahsildar and Village Officer at Manarcad Village and copy of receipt issued by the Kerala Government evidencing payment of basic land tax contribution towards Agricultural Workers Welfare Fund Board also clearly showed that said land was agricultural land. As per evidence filed by the assesseeincluding revenue records, it is very clear that the land was an agricultural land when it was purchased in the year 2006 and remained agricultural land when it was sold in the year 2015. Therefore, the land sold by the assessee was held to be agricultural land and outside the scope of definition of capital asset as defined under Section 2(14) of the Income Tax Act.

The two member benches of the tribunal Mahavir Singh, (Vice President) and Manjunatha. G, (Accountant Member) after considering the facts and materials produced by the both parties allowed the appeal filed by the assessee. The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) recently quashed the assessment order passed under Section 144A of the Income Tax Act due to lack Opportunity to be heard for assessee.

Although the assessment order did not explicitly mention the directions issued by the joint Commissioner of Income Tax (JCIT), a comparison between the directions and the assessment order reveals that the assessment was carried out based on the directions. Consequently, the assessment made without providing the assessee an opportunity to be heard, as required by Section 144A, is illegal and void. As a result, the assessment order passed by the Assessment Officer under Section 143(3) of Income Tax was quashed.

In result, the appeal filed by revenue was quashed. The Income Tax Appellate Tribunal (ITAT), Surat Bench, has recently, in an appeal filed before it, held that section 56(2) (vii) is not applicable to individual receiving sum from HUF as its member. The Surat ITAT observed, “The Karta of the ‘HUF’, even can gift the ‘HUF’ property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property.

” Finally, the ITAT coram of Pawan Singh, the Judicial Member, thus held: “Thus, in view of the above factual and legal discussion and respectfully following the decision in PankilGargVs ITO, I direct the assessing officer to delete the addition of Rs. 18. 00 lacs under section 56(2)(vii).

In the result, the ground of appeal raised by the assessee is allowed. ” The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) recently disallowed the exemption under Section 54B property purchased in the name of the wife of assessee. The tribunal bench, consisting of two members, Vice President A.

D. Jain and Accountant Member Vikram Singh Yadav, observed that exemption under Section 54B of the Income Tax Act was not allowable to the assessee on the ground that the land was not purchased by the assessee in his own name; that the CIT(A) as well as the Tribunal, both dismissed the appeals filed by the assessee and that since the issue stood already concluded against the assessee by the Punjab & Haryana High Court in Jai Narain’s case (supra) and the Tribunal had also followed the said judgment. In result, appeal filed by the assessee was dismissed.

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, on the assessee’s failure to substantiate enhanced cost of acquisition with cogent evidence, upheld the disallowance of excess cost. The Pune ITAT observed, “the excess payment (if any) made by the appellant to the parties from whom the pieces of and were acquired does not ispo-facto sufficient it to attribute towards the cost of acquisition of transferred assets. This is so because, there is a complete absence of lawful contractual obligation or a document creating any additional liability upon the appellant purchaser or acquirer for any payment in addition to or over & above the agreed consideration of 26,30,000/- in relation to execution of registered POA.

” Finally, the coram of S. S Godara, the Judicial Member, and G. D Padmahshali, the Accountant Member, thus concluded and held: “Therefore, we do not find any infirmity with the orders of both the tax authorities below in disallowing the excess cost while computing the profits in the hands of appellant.

For the reason we find the grounds of appeal meritless. ” 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 . 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 by the 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.

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 , (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. ” 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. 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. 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. 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. 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.

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. ” 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. ” 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.

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.

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. 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. 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. 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. 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. ” 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.

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.

” 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. 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. 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. 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. 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. © 2020 Taxscan © 2020 Taxscan.