ITAT Annual Digest [Part 51]

The Delhi of the Income Tax Appellate Tribunal (ITAT) held that the disallowances of contingent liability shall not be entertained as it does not form part of the profit &loss account. The Two-member bench comprising of (Judicial member) and Pradip Kumar Kedia (Accountant member) remitted the matter back to the file of the Assessing Officer for taking into account the submissions made on behalf of the assessee. The contingent liability in question does not form part of the P/L account and has not been taken into account while determining the income chargeable to tax, it will be incumbent upon Assessing Officer to reverse the disallowance carried out in the intimation under Section 143(1) of the Income Tax Act.

Thus, the appeal of the assessee was allowed for statistical purposes. The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) held that the Assessment Order allowing deduction of commission payments has been passed without verification, which should have been made, and the was well within the jurisdiction to have invoked the revisionary powers under Section 263 of the Income Tax Act,1961. The Bench Comprising of George George K, Vice President and Laxmi Prasad Sahu, Accountant Member observed that f the sales incentive is a payment made on principal-to-principal basis, the same need not be subjected to TDS under Section 194H of the Income Tax Act, and stated that to determine whether the sales incentive which is paid by the assessee to its dealers is in the nature of ‘discount’ or ‘commission’, necessarily the agreement between the assessee and its dealers has to be examined.

The Tribunal held that the Assessing Officer has allowed the impugned expenditure without examining / verifying the agreement entered into between the assessee (the payer) and its dealers (the payees), thus the Principal Commissioner of Income Tax (PCIT) was well within the jurisdiction to have invoked the revisionary powers under Section 263 of the Income Tax Act. Thus the Bench upheld the order of the PCIT and appeal filed by the assessee was dismissed. The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT), held that the claim for the compensation in the case of the co-owner was admitted by the revenue and therefore the revenue has taken contrary stand by disallowing the addition in the hand of the assessee who is also a co-owner.

The Bench comprising of Waseem Ahmed, Accountant Member and Ms. Madhumita Roy, Judicial Member heldthe claim of the assessee cannot be denied for the fact that the claim in the case of co-owner was admitted by the revenue. Accordingly the Tribunal set aside the findings of the CIT(A) and direct the AO to delete the addition made by him.

Hence, the ground of appeal of the assessee is allowed. The Pune Bench of Income Tax Appellate Tribunal (ITAT) condoned delay of 85 days and held that payment of income tax in Assessment Year (AY) 2022-23, considered as complete adjustment of return of income for year under appeal i. e AY 2017-18.

The Bench comprising of R. S. Syal, Vice President and S.

S. Viswanethra Ravi, Judicial Member considered the application for delay of 85 days and observed that a sum of Rs. 69,74,612/- has been adjusted in respect of the assessment year under consideration against the refund for the A.

Y. 2022-2023, which shows that the amount of tax payable by the assessee with reference to the returned income for the year in appeal, was duly paid. The Tribunal referred the case of CIT Vs.

K. Satish Kumar Singh, where it was held, “where tax is paid subsequently, the appeal which was earlier dismissed by the first appellate authority for violation of Section 249(4), gets revived “. Hence, the amount of tax payable by the assessee with reference to the returned income for the year under consideration stands fully adjusted against the refund for the A.

Y. 2022-23. Thus set aside the order of CIT(A) and allowed the appeal of assessee.

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that Commissioner of Income Tax (Exemption) [CIT (E)] failed to comply with the direction of High Court (HC) in rejecting application for registration under Section 10(23C) of Income Tax Act,1961 and thus restored the mater to CIT(E) and directed for fresh adjudication. The tribunal Bench comprising of Amarjit Singh, Accountant Member and Sandeep Singh Karhail, Judicial Member observed that the CIT (E) without examining all the aspects, as directed by the High Court, has reiterated its findings and rejected the application. Since the directions of the High Court had not been complied with by the CIT(E), the appellate tribunal bench deemed it appropriate to restore this issue to the file of the CIT(E) for de novo adjudication as per the directions of the High Court, thus allowing the appeal of the assessee.

The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) has held that National Research & Technologies Consortium (NRTC) was not required to deduct tax at source (TDS) under Section 194C of the Income Tax Act, 1961 as NRTC was not a “specified person” as defined under Section 194C of the Act. The Two member bench comprising Vikram Singh Yadav (Accountant Member) and Aakash Deep Jain (Vice President) allowed the appeals filed by NRTC and held that it was not required to deduct TDS under Section 194C of the Income Tax Act. The Tribunal also held that the Taxing Authorities had erred in charging interest under Section 201(1A) of the Act, as there was no revenue loss to the exchequer and remanded the matter back to the Assessing Officer (AO) for fresh adjudication in accordance with the law.

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an appeal filed by the Income Tax Department (ITD) against an order of the Commissioner of Income Tax (Appeals) (CIT(A)) quashing reassessment proceedings initiated against an assessee as it was not in accordance with the mandatory requirement of Section 151 of the Income Tax Act, 1961. The Two member bench comprising Chandra Mohan Garg (Judicial Member) and M. Balaganesh (Accountant Member) dismissed the appeal of the revenue and upheld the order of the CIT(A) and found that the approving authority had not recorded proper satisfaction and had granted approval without application of mind in a mechanical manner.

This was not in accordance with the mandatory requirement of Section 151 of the Act. The Tribunal mandates that the approving authority must confirm the case’s suitability for reopening, alleging income concealment or tax evasion, and issue the reassessment order within the prescribed time frame under Section 148 of the Act The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the registration under Section 12 of the Income Tax Act 1961 could not be denied without providing a reasonable opportunity of being heard to the assessee. The two- Member Bench of B R Baskaran, (Accountant Member) and N.

K. Choudhry, (Judicial Member) observed that the Commissioner before deciding the application filed by the Appellant, though given appropriate opportunity to the appellant to substantiate its case, however failed to decide the same in the absence of supported material and/ or non-production and non- explaining of documents and activities carried out by the appellant. The Bench allowed the appeal filed by the assessee remanding the instant case to the file of the Commissioner for denovo adjudication, affording a reasonable opportunity of being heard to the Appellant.

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the addition could not be made and sustained by invoking the deeming provision of Section 68 of the Income Tax Act 1961. The two-member Bench of C. M.

Garg, (Judicial Member) and M. Balaganesh, (Accountant Member) noted that despite the several opportunities the assessee filed only a copy of the account in the assessee’s books which showed only the receipt of amount on 01. 03.

2007 and in the absence of other details and confirmation of the said amount of Rs. 15 lakhs remained unexplained; therefore, it was rightly added to the income of the assessment. The Bench allowed the appeal filed by the assessee holding that no addition could be made and sustained in the hands of the assessee by invoking the deeming provision of Section 68 of the Income Tax Act and by alleging and considering the same as unexplained in the hands of the assessee.

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the deduction under Section 54 of the Income Tax Act holding that the restrictions on AO in accepting new claims otherwise than through the return of income or revised return of income would not be applicable to higher appellate authorities. The two-member Bench of G. S.

Pannu, (President) and Saktijit Dey, (Vice-President) observed that the only reason, based on which, the Assessing Officer had rejected assessee’s claim of deduction under Section 54 of the Income Tax Act was that such claim could not be entertained as it was not made either in the original return of income or through revised return of income. The Bench further referred to the decision of Supreme Court in case of Goetze (India) Ltd. which held that the restriction imposed on the Assessing Officer in accepting new claims made by the assessee otherwise than through the return of income or revised return of income was not applicable to higher appellate authorities.

And the DRP, being in the status of a higher appellate authority, was empowered to entertain the assessee’s claim. The Bench allowed the appeal filed by the assessee holding that the assessee was entitled to claim deduction under Section 54 of the Income Tax Act. The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that It is not in dispute that the Assessing Officer proceeded to initiate action under Section 154 of the Income Tax Act, 1961 on the basis of shortfall in TDS (Tax deducted at source) on year end provisions reported in Form 3CD of the assessee for FY(Financial Year) 2012-13 and restored the case to the AO and directed to freshly adjudicate the issue in accordance of law.

The Bench comprising of G. S. Pannu, President and Ms.

Astha Chandra, Judicial Member held that It is not in dispute that the AO proceeded to initiate action under Section 154 of the Income Tax Act on the basis of shortfall in TDS on year end provisions reported in Form 3CD of the assessee for FY 2012-13. If that be so, we are of the view that action of the AO to resort to the provisions of Section 154 of the Income Tax Act cannot be faulted. It is further observed by the Tribunal that no finding on merits of the case has been recorded by the CIT (A).

Thus restored the case to the file of the AO with direction to decide the issue under consideration afresh in accordance with law after allowing reasonable opportunity to the assessee to explain its case. Hence the appeal of the Revenue is treated as allowed for statistical purposes. The Pune Bench of Income Tax Appellate Tribunal (ITAT) held that failure of Assessing Officer (AO) in non-consideration of sale of scrap in the total revenue is erroneous and prejudicial to interest of revenue and thus the Tribunal allowed the Principal Commissioner of Income Tax (PCIT) to exercise revisionary power under Section 263 of Income Tax Act, 1961.

The Bench comprising of R. S. Syal, Vice President and S.

S. Viswanethra Ravi, Judicial Member observed that the AO did not enquire into this aspect of the matter and simply passed a five-lined assessment order observing that the case was selected for complete scrutiny assessment on the issue of “Non furnishing of quantitative details”. The Tribunal considered this action of the AO rendered the assessment order erroneous and prejudicial to the interest of the Revenue, thus PCIT was right in exercising revisionary power under Section 263 of Income Tax Act.

The Indore bench of the Income Tax Appellate Tribunal (ITAT) has quashed a penalty imposed under section 271D of the Income Tax Act, 1961 for the absence of assessment proceedings as the assessee in this case had not filed a return of income for the assessment year under consideration and the AO had initiated penalty proceedings under section 271D, but the ITAT held that the penalty was not valid because there were no assessment proceedings. The Two-member bench comprising B. M.

Biyani (Accountant Member) and Vijay Pal Rao (Judicial Member) quashed the penalty order and held that the penalty was not valid because it was imposed without the completion of assessment proceedings and the recording of satisfaction by the AO. The Tribunal also held that the penalty was imposed without giving the assessee an opportunity to be heard and that it was disproportionate to the assessee’s failure to file a return of income. The Income Tax Appellate Tribunal (ITAT), Delhi bench has quashed the rejection of books of accounts of the assessee and the Gross Profit (GP) Ratio application on Gross Receipts in the absence of suppression or discrepancy in the accounts, but upheld the addition of Unexplained Expenditure under Section 69C of Income Tax Act, 1961 as negotiations were not proved by the assessee.

The Bench upheld the addition of Rs. 54,514/- as unexplained expenditure under section 69C of the Income Tax Act, 1961 citing insufficient evidence to substantiate the appellant’s claims of negotiations leading to reduced payments. In result, the two-member bench comprising Shri Kul Bharat (Judicial Member) and Shri M.

Balaganesh (Accountant Member) partly allowed the appeal for statistical purposes. The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has levied the cost of Rs 5000 to be paid towards Prime Minister’s relief fund for callous attitude of ignoring notices of Commissioner of Income Tax Act (CIT(A) (NFAC) National Faceless Assessment Centre The two-member Bench R. K.

Panda, (Vice-President) and K. Narasimha Chary, (Judicial Member) observed that the CIT (A) NFAC had sustained the addition made by the Assessing Officer in absence of any submission or documentary evidence filed by the assessee despite 3 opportunities granted. It was the submission of the Counsel for the assessee that had given an opportunity, the assessee was in a position to substantiate his case by explaining the source with documentary evidence to the satisfaction of the CIT (A) NFAC.

The CIT (A) NFAC with a direction to grant one last opportunity to the assessee to substantiate his case and decided the issue as per fact and law. The assessee was also hereby directed to appear before the CIT (A) NFAC on the appointed date without seeking any adjournment under any pretext failing which the learned CIT (A) NFAC was at liberty to pass appropriate order as per law. The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has quashed an assessment under Section 153C of the Income Tax Act, 1961, against an assessee due to lack of valid grounds and corroborative evidence and section 153C allows the Income Tax Department to assess an assessee other than the person searched, if incriminating material is found during the course of a search of that person.

The Two member bench comprising Chandra Mohan Garug (Judicial Member) and M. Balaganesh (Accountant Member) ruled that the Assessing Officer failed to prove that the incriminating material found during the search belonged to the assessee. The assessee denied wrongdoing and provided an explanation for its possession.

The Assessing Officer also failed to provide evidence to support the assessment, stating that the incriminating material was circumstantial and did not prove beyond a reasonable doubt that the assessee had evaded taxes. The Income Tax Appellate Tribunal (ITAT) Delhi bench has directed to file separate rectification application for several intimation pertaining to different financial years for charging late fee on account of belatedly filed Tax Deduction at Source (TDS) return. It was observed by the tribunal that Jurisdictional A.

O. is having the jurisdiction to entertain the application filed by the Assessee under Section 154 of the Income Tax Act. Further, assessee had filed a single rectification application before the A.

O. as against several intimations. After considering the facts submitted by both parties, the two member bench of Shamim Yahya, (Accountant Member) and Anubhav Sharma, (Judicial Member) directed to file separate rectification applications against each intimation.

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an addition made by the tax authorities to the tax liability of Standard Tele Towers P. Ltd. The ITAT held that the addition was not sustainable as the assessee had not claimed any expenditure on account of job charges in the year under consideration.

The Two member bench comprising N. K. Billaiya (Accountant Member) and Anubhav Sharma (Judicial Member) has dismissed the tax authorities’ addition stating it was unsustainable as the assessee had not claimed any job charges expenditure in the year under consideration.

The ITAT deemed this an error on the part of the tax authorities and urged the assessee to cross-examine the individuals involved. The Income Tax Appellate Tribunal (ITAT) Delhi bench held that no penalty should be levied under Section 271B of Income Tax Act, 1961 on account of delay in filing the audit report due to proceedings under Insolvency and Bankruptcy Code (IBC). The tribunal, after hearing the both sides observed that delay was caused due to reasonable cause as it is stated that evidence from the holding company could not be collected due to proceedings under IBC.

After considering the facts submitted by both parties, the single member bench of Kul Bharat, (Judicial Member) directed to delete the penalty imposed by the assessing officer. The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the tax incidence for joint development agreements differs from the tax incidence for subsequent flat sales and observed that the Assessing Officer had made a fundamental mistake in computing capital gains for assessment year 2013-14 based on the date of sale of flats, even though the date of joint development agreement and supplementary agreement falls under assessment year 2011-12 & 2012-13. The Two member bench comprising V.

Durga Rao (Judicial Member) and Manjunatha. G (Accountant Member) upheld the assessee’s appeal and remanded the matter to the Assessing Officer for recalculating capital gains for the joint development agreement and subsequent flat sale. The ITAT ruled that the tax incidence for the joint development agreement differed from the subsequent flat sale.

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has directed the Commissioner of Income Tax Appeals (CIT(A)) denovo adjudication as the non-reply to the notice was due to some miscommunication between assessee and the tax consultant. A Single Bench of Vikas Awasthy, (Judicial Member) observed that the assessee had appeared before the CIT(A) on 17/02/2023 and sought adjournment. The case was adjourned to 06/03/2023.

On the said date, there was no response from the assessee. Consequently, the CIT(A) decided the appeal in an ex-parte proceeding. The Bench allowed the appeal filed by the assessee restoring the matter to the file of CIT(A) for denovo adjudication, pointing out that the reply to be furnished on 06/03/2023 was ready but could not be upload on portal due to some communication gap between the assessee and the Tax Consultant.

The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench while quashing the revision order passed by the Principal Commissioner of Income-Tax assessment order held that the same was not erroneous but found that it was the mistake of the Tax Auditor using incorrect words in the Tax Audit Report towards purchase of granules After considering the facts submitted by both parties, the two member bench of Annapurna Gupta (Accountant Member) and Madhumita Roy (Judicial Member) observed that PCIT was misguided by the incorrect words used by the Tax Auditor in the Tax Audit Report mentioning expenses incurred by the assessee with its related party Anand Synthetic in the nature of granules work instead of granules purchased. The Income Tax Appellate Tribunal (ITAT) Bangalore bench directs re-adjudication due to failure to comply with notice issued by the First Appellate Authority (FAA) to E-mail of assessee by reason of lack of knowledge in operation of online computer Service . It was observed by the tribunal that assessee is a retired employee and is not well versed in operation of computers and failed to open emails to which notices were sent by the FAA.

By this reason assessee could not respond to the notice issued by the FAA. After considering the facts submitted by both parties, the two member bench of Laxmi Prasad Sahu (Accountant Member), George George K (Vice President) and Anubhav Sharma (Judicial Member) the matter was restored to the file of the CIT(A). The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition based on adhoc disallowance out of staff welfare expenses holding that the AO should not resort to adhoc disallowance.

The two-member Bench of Kul Bharat, (Judicial Member) and M. Balaganesh, (Accountant Member) noted that the CIT(A) had partly confirmed the action of AO, treating the expenditure for non-business purpose and it was clear that he did not advert to other expenses. He merely affirmed the action of AO without pointing out as to how the remaining expenses are not for business purposes.

The Bench allowed the appeal filed by the assessee deleting the addition and held that, “It is well settled that the AO should not resort to adhoc disallowance. If the expenditure is not incurred for business purposes, there has to be a specific finding in this regard unless expenditure for personal use and business purpose are mixed and cannot be segregated. ” The Chennai Bench of Income Tax Appellate Tribunal (ITAT) held that the Commissioner of Income Tax (Appeals) [CIT (A)] has not adjudicated the issues on merits thus restored the matter to the CIT(A) to decide all the issues afresh in accordance with law by affording an opportunity of being heard to the assessee.

The Bench comprising of V. Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member observed that the assessee has raised various grounds including legal issue of reopening of assessment under Section 147 of the Income Tax Act and the CIT (A) has not adjudicated the issues on merits. The Tribunal set aside the CIT (A) order and remitted the matter back to the file of the CIT (A) to decide all the issues afresh in accordance with law by affording an opportunity of being heard to the assessee.

The assessee is also directed to furnish complete details with material evidences and convincing explanations before the CIT (A) for consideration. Thus the appeal of the assessee was allowed for statistical purposes. The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the assessee was not aware of the new faceless system and was dependent upon the authorised representative who could not follow up the matter.

The two member bench of Amarjit Singh (Accountant member) and Amit Shukla (Judicial member) restored the matter back to the file of the AO to decide the issue afresh after giving due opportunity of hearing to the assessee and assessee was also directed to comply with the notices and substantiate its case. Thus the appeal was allowed. The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) held that no steps has been taken by the Assessing Officer (AO) to convert the limited scrutiny into complete scrutiny and hence has overstepped his jurisdiction, therefore directed the AO to delete the disallowance made under Section 54F of the Income Tax Act,1961.

The Bench comprising of Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member observed that CASS is a system driven identification of returns for limited scrutiny. The picking up of a return under CASS for scrutiny must be restricted only to the selected reason.

The Tribunal further observed that in the above notice, the details in respect of sale deed / purchase deed, the exemption claimed by the assessee in the return of income were also called for along with the details of large cash deposits. However it was noted that no steps has been taken to convert the limited scrutiny into complete scrutiny. The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) held that the assessee has not provided any details as to the source of such cash deposited for the relevant financial year except for stating that these are business receipts, thus The Tribunal remanded this issue back to the AO for necessary verification.

The Bench comprising of Chandra Poojari, Accountant Member and Beena Pillai, Judicial Member observed that cash was deposited to the account of the assessee for which no explanation was offered by assessee regarding the source before the authorities. The Tribunal remanded this issue back to the AO for necessary verification in accordance with law, and directed the assessee to file all relevant details in respect of the source of actual cash deposited into the bank accounts in order to exonerate himself from the rigour of Section 69A read with Section 115BBE of the Income Tax Act. Hence the appeal of the assessee was allowed for statistical purposes.

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that although prima facie, the issue goes in favour of the assessee in view of the various judgements rendered by the Supreme Court as well as High Court, those aspects were never examined by the authorities below as the assessee did not file any appeal against the order dated 24. 06. 2020 passed under Section 143(3) of the Income Tax Act.

The two member bench consisting of Manish Borad (Accountant member) and Sonjoy Sarma (Judicial member) held that they were inclined to sustain the order passed by the authorities below. However, the assessee may prefer an appeal before the CIT(A) against the assessment order dated 24. 06.

2020 passed by the AO along with an appropriate petition for condonation of delay and in by specifying the reason for such delay that event CIT(A) may sympathetically consider such application filed by the assessee and decide such issues on the merits of the case. Thus the appeal was dismissed. The Income Tax Appellate Tribunal (ITAT) Chennai bench held that the Income Tax Department had no power to scrutinize Sales Tax Returns accepted by the commercial tax department .

Therefore the bench deleted the addition made by the assessing officer on account of valuation of stock. After analysing the material facts the two member bench of Manoj Kumar Aggarwal, (Accountant Member) and Mahavir Singh,( Vice-President) observed that, unless the competent authority under the Sales Tax Act differs with the closing stock of the assessee, the return accepted by the Commercial Tax Department is binding on the income-tax authorities. Therefore the Assessing Officer has no power to scrutinize the return submitted by the assessee to the commercial tax department which has been accepted.

The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench held that disallowance under Section 14A of the Income Tax Act, 1961 should not be made ,if assessee not earned any exempt income during financial year. Therefore, the bench quashed the revision order passed by the Principle commissioner of Income Tax. After considering the facts submitted by both parties, the two member bench of Annapurna Gupta, (Accountant Member) and Madhumita Roy, (Judicial Member) quashed the revision order passed by the PCIT allowing the appeal filed by the assessee.

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