ITAT Ahmedabad Judgments — October 2018

The Tribunal held that the assessee has the option to choose the initial assessment year for claiming deductions under Section 80IA, and losses prior to that chosen year, if already adjusted against other business profits, cannot be notionally brought forward. Regarding additional depreciation, the Tribunal found it allowable on mining machinery and vehicles used in mining activity, as mining is considered manufacturing.

The Tribunal held that losses from derivative transactions, excluded from speculative business under Section 43(5)(d), cannot be treated as speculative losses under Explanation to Section 73. The disallowance under Section 14A was also found to be excessive and set aside.

The Tribunal held that penalty was not justified on the re-allocated income from the property sale as particulars were furnished. However, penalty was sustained on non-genuine sundry creditors due to lack of substantiation.

The Tribunal held that while purchases might be from bogus parties, the purchases themselves cannot be treated as entirely bogus, especially when sales are not doubted and profits have been declared. The Tribunal directed the AO to restrict the estimated disallowance to 5% of the alleged bogus purchases over and above the profits already declared.

The Tribunal held that the assessee complied with the conditions of the proviso to Section 201, as the recipients had furnished their returns, included the commission as income, and paid the tax due. Therefore, the disallowance was not justified.

The Tribunal upheld the disallowance of Rs. 42,89,912/- for sundry creditors and Rs. 10,00,000/- for advances from customers, finding the assessee failed to prove their genuineness. However, it restricted the disallowance for indirect expenses to Rs. 75,875/- and confirmed the disallowance of Rs. 37,000/- for unsecured loans.

The Tribunal held that the vehicles were used in mining activities as part of plant and machinery and that mining is considered a manufacturing activity, making additional depreciation allowable. The decision of the CIT(A) in favor of the assessee was upheld.

The Tribunal held that penalty was not justified on the re-allocated income from the property sale as particulars were furnished. However, penalty was sustained on non-genuine sundry creditors due to lack of substantiation.

The Tribunal dismissed the ground related to Section 50C as the assessee did not press it before the CIT(A). For the interest expenditure, the Tribunal allowed a portion of the disallowance, finding merit in the assessee's contention regarding own funds used for investment.

The Tribunal upheld the CIT(A)'s deletion of depreciation disallowance, finding it correctly allowed at 40% as per CBDT circular. The Tribunal also upheld the deletion of the Section 68 addition, accepting the explanation of the loan from the mother-in-law.

The Tribunal dismissed the Revenue's appeal. It found that the tax effect was below the threshold prescribed by the CBDT circular and did not fall under any exceptions, making the appeal not maintainable.

The Tribunal held that since the assessee failed to provide evidence for the investment being made by the partnership firm, and the firm itself had not filed returns, the investment was to be treated as unexplained in the hands of the assessee.

The Tribunal accepted the assessee's request to withdraw the appeal. The Revenue did not object to this request.

The Tribunal held that Section 50C, as amended, was not applicable for the assessment year in question. Furthermore, the LTCG on the property had already been assessed in the hands of the subsequent purchaser, Johnson Electric Co. Pvt. Ltd.

The Tribunal held that the power of rectification under Section 154 extends to amending intimations under Section 143(1), even if the original order was processed under that section. It followed High Court and Coordinate Bench decisions that technicalities should not obscure justice, and a mistake can be rectified even if not self-evident.

The Tribunal observed that the assessee was not serious in pursuing the appeal due to non-representation. Therefore, the appeal was dismissed in limine.

The Tribunal accepted the assessee's request to withdraw the appeals. Consequently, both appeals filed by the assessee were dismissed as withdrawn.

The Tribunal restored the issue to the Assessing Officer for de novo assessment. This was to verify whether the expenses were reimbursement or for services rendered, and to determine TDS applicability accordingly.

The Tribunal accepted the assessee's request to withdraw the appeals. Consequently, both appeals filed by the assessee were dismissed as withdrawn.

The Tribunal held that the unutilized MODVAT credit is not to be added to closing stock valuation under Section 145A. Regarding the inflated stock valuation submitted to the bank, the Tribunal found no justification for making additions as it was an estimate to avail credit facilities and not a reflection of actual stock.

The Tribunal held that the Assessing Officer/TPO erred in not applying the TNMM and directed them to compute the ALP on the basis of TNMM. The Tribunal also deleted an ALP adjustment made towards notional interest on receivables outstanding against sales to associated enterprises.

The Tribunal allowed the appeal regarding labour expenditure, finding sufficient evidence of its genuineness and that the recipients had offered the income for tax. For depreciation, the Tribunal remanded the issue to the AO to examine the claim for a higher rate of depreciation on construction vehicles, as the Revenue authorities had misunderstood the assessee's claim.

The Tribunal held that the reopening of assessment was based on a change of opinion by the AO, as the issue of capital gains vs. business income was already examined during the original assessment. The Tribunal agreed with the CIT(A) that the land was held as an investment and not stock-in-trade, thus the income should be treated as capital gains.

The Tribunal held that the accountant's affidavit admitting an inadvertent mistake due to identical sale deeds was credible. Therefore, there was no deliberate act to conceal income or furnish inaccurate particulars.

The Tribunal held that since the same piece of land was already valued by the DVO in the case of a co-owner, the AO should adopt that valuation for the assessee as well. The AO was directed to recompute the capital gains based on the DVO's valuation.

The Tribunal noted that the trust deed was subsequently produced. Therefore, the matter was remitted back to the DIT(E) to verify the activities and grant registration if satisfied, with the condition that the assessee provides annual reports for the last three years.

The Tribunal held that the Assessing Officer/TPO erred in not applying the TNMM and directed them to compute the ALP on the basis of TNMM. The Tribunal also deleted an ALP adjustment made towards notional interest on receivables outstanding against sales to associated enterprises.

The Tribunal held that the assessee had discharged its onus by submitting ledger accounts and payment vouchers. Therefore, there was no reason to disallow the expenses.

The Tribunal held that the reopening of assessment was based on a change of opinion by the AO, as the issue of capital gains vs. business income was already examined during the original assessment. The Tribunal agreed with the CIT(A) that the land was held as an investment and not stock-in-trade, thus the income should be treated as capital gains.

The Tribunal condoned the delay in filing the appeal before the CIT(A) and set aside the CIT(A)'s order. The matter was remanded back to the CIT(A) to decide the appeal on its merits after providing an opportunity of hearing to the assessee.

The Tribunal held that the Assessing Officer/TPO erred in not applying the TNMM and directed them to compute the ALP on the basis of TNMM. The Tribunal also deleted an ALP adjustment made towards notional interest on receivables outstanding against sales to associated enterprises.

The Tribunal noted that the trust deed was subsequently produced. Therefore, the matter was remitted back to the DIT(E) to verify the activities and grant registration if satisfied, with the condition that the assessee provides annual reports for the last three years.

The Tribunal condoned the delay in filing the appeal before the CIT(A). Since the quantum of the addition itself was pending reconsideration before the CIT(A), the penalty proceedings under section 271(1)(c) were also set aside to be decided based on the outcome of the quantum addition.

The Tribunal held that the AO's reliance on a previous case for estimation was irrelevant as the facts were different. The assessee's predominant activity was property rental, and the sale transaction and related profit were accounted for in the subsequent year.

The Tribunal held that foreign exchange gains should be included in operating profits and that a specific comparable company was wrongly excluded. It also directed re-adjudication of the PF/ESIC contribution issue based on payment dates and the Section 14A disallowance based on investments yielding tax-exempt income.

The Tribunal held that the penalty under Section 271(1)(c) could not be levied solely on the inability of the assessee to produce parties for verification, especially after a long period. There was no conclusive evidence of concealment or mens rea on the part of the assessee.

The Tribunal upheld the deletion of additions related to unexplained expenditure and disallowances under Section 40(a)(i), citing judicial precedents. However, it restored a portion of the disallowance under Section 14A related to administrative expenses.

The Tribunal allowed the appeal regarding the disallowance of interest, finding that the assessee had provided sufficient evidence and that the lower authorities had not properly considered it. However, the Tribunal confirmed the disallowance made under Section 14A.

The Tribunal held that the addition made by the AO under Section 50C was erroneous as the property was sold at a price less than the stamp duty value, and the AO failed to refer the matter to the Valuation Officer. The Tribunal also noted the lack of a show cause notice.

The Tribunal held that the addition was made without providing the assessee an opportunity to cross-examine the deponent of the statement, which amounts to injustice. Therefore, the appeal was allowed.

The Tribunal held that the date of registration of the purchase deed, not the date of entering into the purchase deed, should be considered for indexation. It also directed the CIT(A) to re-examine the claim for cost of improvement.

The Tribunal held that the Assessing Officer had made a specific query regarding Section 145A and had applied his mind to the assessee's response. Following a co-ordinate bench decision, the Tribunal found that the AO's order was neither erroneous nor prejudicial to the revenue, as the method of accounting did not lead to an understatement of closing stock.

The Tribunal found that the lender had sold a property for Rs. 8,40,000 and the deposit was likely from the advance received for this transaction. The Tribunal held that it is normal practice to receive part of the sale consideration as advance and rejected the CIT(A)'s reasoning for disbelieving the lender's means.

The Tribunal held that the AO initiated penalty proceedings for 'concealment of income' but imposed penalty for 'furnishing inaccurate particulars of income'. This shift in the basis for penalty imposition is not permissible in law, as per binding High Court and Tribunal decisions.

The Tribunal held that the assessee's explanation, based on information from his deceased father, could not be rejected for the purpose of imposing a penalty. Therefore, the penalty was deleted.

The Tribunal held that the CIT(A)'s action violated the principle of natural justice by not allowing the assessee an opportunity to be heard or to file a condonation petition. The matter was remitted back to the CIT(A) for fresh adjudication.

The Tribunal held that the AO made the disallowance without referring to the assessee's books of accounts, which is a mandatory requirement under Section 14A. However, a small amount related to Demat charges was sustained.

The Tribunal dismissed the appeal for non-prosecution, inferring that the assessee was not serious about pursuing the case. This decision was based on precedents where appeals were dismissed for lack of effective pursuit.

The Tribunal held that the provision for warranty expenses was based on past experience and that the unutilized CENVAT credit could not be treated as income. The Tribunal relied on previous judgments and the order of the CIT(A).

The Tribunal found that the assessee failed to substantiate the sources of cash credits with adequate evidence. However, considering the claim of agricultural income, a portion of the addition was treated as explained.