ITAT Annual Digest [Part-30]

This analyzes all the ITAT stories published in the year 2023 at taxscan. in 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 , (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.

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. 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. 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. 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. 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. 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. 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”. 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. 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.

” 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. 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.

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. 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.

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.

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.

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.

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. 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. 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.

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.

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.

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. 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.

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.

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. 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.

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. 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.

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