PRANAVA ELECTRONICS PRIVATE LIMITED,BANGALORE vs. ACIT, CIRCLE 5(1)(2) BANGALORE, BANGALORE

ITA 575/BANG/2026Status: DisposedITAT Bangalore28 September 2026AY 2017-187 pages
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What did the Tribunal hold?

The Tribunal decided as follows: 1. Regarding the addition of ₹946,032 (Ground No. 4), the Tribunal found that the difference arose from erroneous invoices, while actual receipts were supported by agreement, conduct, and books of account. Since the assessee did not receive the disputed amount, only real income is taxable. The addition was directed to be deleted. Ground No. 4 was allowed. 2. Regarding the disallowance under Section 14A (Ground No. 5), the Tribunal noted that the AO failed to record the necessary satisfaction under Section 14A(2) before invoking Rule 8D. The assessee had claimed only ₹11,956 as expenditure for earning exempt income, and the AO neither examined the correctness of this claim nor recorded dissatisfaction. The disallowance was held contrary to Section 14A(2) and directed to be deleted, retaining the assessee's suo motu disallowance of ₹11,956. Ground No. 5 was allowed. 3. Regarding the addition to book profit under Section 115JB (Ground No. 7), the Tribunal found no corresponding addition in the assessee's book profit computation and dismissed this ground as unfounded. Ground No. 7 was dismissed. The Tribunal also dismissed general grounds and consequential grounds not pressed by the assessee.

What were the facts?

The assessee, Pranava Electronics Private Limited, filed an appeal for Assessment Year 2017-18 against an order by the National Faceless Appeal Centre (NFAC), Delhi. The NFAC had upheld assessment orders from the Assistant Commissioner of Income Tax (ACIT), Circle 5(1)(2), Bangalore. The dispute involved a disallowance of ₹2,567,780 under Section 14A read with Rule 8D, applied to both normal income computation and book profit for Minimum Alternate Tax (MAT) under Section 115JB. Additionally, a disallowance of ₹946,032 was upheld, representing the difference between actual rental income received and that reported in the service tax return. The assessee's return declared a total income of ₹44,227,260. The ACIT's assessment order was dated 27 December 2019, and the NFAC's appellate order was dated 27 August 2024.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the addition of ₹946,032, representing the difference between rental income reported in income-tax and service tax returns, is legally sustainable, under Section 143(3) of the Income-tax Act, 1961 (the Act). 2. Whether the disallowance of ₹2,587,780 under Section 14A read with Rule 8D of the Act is legally sustainable, under Section 14A(2) of the Act. 3. Whether the disallowance/addition made under Section 14A was erroneously added to the book profit under Section 115JB of the Act. Assessee's contentions: - Regarding the rental income difference, the assessee argued it was an invoicing error, the actual rent received was lower, and the CIT(A) failed to consider the explanation. The addition should be deleted. - Regarding Section 14A disallowance, the assessee relied on a coordinate bench decision in its own case and argued that the Assessing Officer (AO) had not recorded dissatisfaction with the assessee's suo motu disallowance of ₹11,956, thus the entire addition should be deleted. Revenue's contentions: The Revenue's representative strongly supported the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3),Section 115JB,Section 144B,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDRARAJAN K.

PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

1.

Pranava Electronics Private Limited (the assessee/appellant/company) has filed this appeal for Assessment Year 2017–18 against the appellate order dated 27 August 2024 passed by the National Faceless Appeal Centre (NFAC), Delhi (the learned CIT(A)). That order disposed of the assessee’s appeal against the assessment order dated 27 December 2019, passed under section

The order continues below.

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