ITAT Ahmedabad Judgments — January 2023

The Tribunal condoned the delay of 82 days in filing the cross-objections by the assessee, citing the principles laid down in Collector, Land Acquisition v. Mst. Katiji and Ors., emphasizing that substantial justice should be preferred over technical defects, especially when there was no allegation of deliberate delay. The Tribunal decided the appeals by applying the findings from the lead case of Smt. Giraben Atulbhai Shah for AY 2010-11 to other identical issues and assessment years. For Smt. Giraben Atulbhai Shah, the Revenue's appeals were dismissed in part, and cross-objections were partly allowed or dismissed. For Smt. Swatiben Anilbhai Shah, the Revenue's appeals were dismissed, and cross-objections were partly allowed. For Smt. Kusumben Hiralal Shah and Smt. Amiben Jigneshkumar Shah, both the Revenue's appeals and the assessees' cross-objections were dismissed. The Tribunal noted that the issue regarding the validity of assessment under Section 153A due to JCIT's approval was not pressed by the assessee in one instance and was decided against the assessee in another. The issue regarding material found from third parties requiring notice under Section 153C was also decided against the assessee, following the lead case.

The Tribunal held that the Commissioner of Income-Tax(A) was correct in deleting the addition made on account of unaccounted cash receipt of Rs. 5,00,00,000/- by quashing the notice under section 153C of the Income Tax Act, 1961. The reasoning was that the addition was based on a diary found during a search in the case of Barter Group, which did not belong to the assessee. The Tribunal relied on the decision of the jurisdictional High Court in Anilkumar Gopikishan Agrawal & Others Vs. ACIT, which held that prior to the amendment of section 153C effective from 01.06.2015, jurisdiction under section 153C could only be assumed if the seized material belonged to the assessee. The amendment making the provision applicable to documents that 'pertained' to the assessee was held to be prospective. Since the search was conducted on 04.12.2014 and the notice under section 153C was issued based on this pre-amendment search, the notice was considered invalid. The Revenue could not provide any distinguishing facts or contrary legal precedents. Therefore, the assessment order was quashed as invalidly initiated, and the appeal of the Revenue was rejected.

The Tribunal held that the assumption of jurisdiction under Section 153A of the Income Tax Act, 1961, was illegal for both assessment years 2007-08 and 2008-09. It was noted that the assessments for these years were completed and unabated at the time of the search. The Tribunal relied on the principle that for unabated assessment years, additions under Section 153A can only be made if they are based on incriminating material found during the search. Since no such material was found, the assessment proceedings initiated under Section 153A were quashed. Consequently, the Tribunal did not delve into the merits of the grounds of appeal concerning the disallowances, interest, and penalty proceedings. The assessee's grounds of appeal challenging the jurisdiction were allowed, and the Department's appeals were dismissed. The ratio decidendi is that Section 153A proceedings are invalid for unabated assessment years if no incriminating material is found during the search.

The Tribunal held that the assumption of jurisdiction under Section 153A of the Income Tax Act, 1961, was illegal for both assessment years 2007-08 and 2008-09. It was noted that the assessments for these years were completed and unabated at the time of the search. The Tribunal relied on the principle that for unabated assessment years, additions under Section 153A can only be made if they are based on incriminating material found during the search. Since no such material was found, the assessment proceedings initiated under Section 153A were quashed. Consequently, the Tribunal did not delve into the merits of the grounds of appeal concerning the disallowances, interest, and penalty proceedings. The assessee's grounds of appeal challenging the jurisdiction were allowed, and the Department's appeals were dismissed. The ratio decidendi is that Section 153A proceedings are invalid for unabated assessment years if no incriminating material is found during the search.

The Tribunal held that the assumption of jurisdiction under Section 153A of the Income Tax Act, 1961, was illegal for both assessment years 2007-08 and 2008-09. It was noted that the assessments for these years were completed and unabated at the time of the search. The Tribunal relied on the principle that for unabated assessment years, additions under Section 153A can only be made if they are based on incriminating material found during the search. Since no such material was found, the assessment proceedings initiated under Section 153A were quashed. Consequently, the Tribunal did not delve into the merits of the grounds of appeal concerning the disallowances, interest, and penalty proceedings. The assessee's grounds of appeal challenging the jurisdiction were allowed, and the Department's appeals were dismissed. The ratio decidendi is that Section 153A proceedings are invalid for unabated assessment years if no incriminating material is found during the search.

The Tribunal held that the assumption of jurisdiction under Section 153A of the Income Tax Act, 1961, was illegal for both assessment years 2007-08 and 2008-09. It was noted that the assessments for these years were completed and unabated at the time of the search. The Tribunal relied on the principle that for unabated assessment years, additions under Section 153A can only be made if they are based on incriminating material found during the search. Since no such material was found, the assessment proceedings initiated under Section 153A were quashed. Consequently, the Tribunal did not delve into the merits of the grounds of appeal concerning the disallowances, interest, and penalty proceedings. The assessee's grounds of appeal challenging the jurisdiction were allowed, and the Department's appeals were dismissed. The ratio decidendi is that Section 153A proceedings are invalid for unabated assessment years if no incriminating material is found during the search.

The Tribunal held that the penalty under section 271(1)(c) could not be levied. Firstly, the income disclosed voluntarily during the search and declared in the return filed under section 153A was accepted by the AO without any variation in the assessment proceedings. The Tribunal relied on precedents like PCIT v. Rajkumar Gulab Badgujar (SC), Salasar Stock Broking Ltd. (Kolkata - Trib.), Muninaga Reddy (Bangalore - Trib.), Neeraj Jindal (Delhi HC), and Atlanta Electricals (P.) Ltd. (Ahmedabad - Trib.), which held that penalty cannot be imposed when the returned income is accepted without addition. Secondly, the Tribunal found that the amended Explanation 5A to section 271(1)(c) was not applicable. The amended Explanation was introduced by the Finance Act, 2009, with retrospective effect from 01-06-2007. However, at the time of filing the original return of income (17-09-2008) and the return in response to the section 153A notice, the amended provision was not in force. The Tribunal followed the principle that the law prevailing at the time of filing the return should be the basis for penalty levy, not subsequent amendments, even if retrospective. Therefore, the penalty levied was not sustainable. The Tribunal allowed the appeals and directed the deletion of the penalty.

The Tribunal held that the penalty under section 271(1)(c) could not be levied. Firstly, the income disclosed voluntarily during the search and declared in the return filed under section 153A was accepted by the AO without any variation in the assessment proceedings. The Tribunal relied on precedents like PCIT v. Rajkumar Gulab Badgujar (SC), Salasar Stock Broking Ltd. (Kolkata - Trib.), Muninaga Reddy (Bangalore - Trib.), Neeraj Jindal (Delhi HC), and Atlanta Electricals (P.) Ltd. (Ahmedabad - Trib.), which held that penalty cannot be imposed when the returned income is accepted without addition. Secondly, the Tribunal found that the amended Explanation 5A to section 271(1)(c) was not applicable. The amended Explanation was introduced by the Finance Act, 2009, with retrospective effect from 01-06-2007. However, at the time of filing the original return of income (17-09-2008) and the return in response to the section 153A notice, the amended provision was not in force. The Tribunal followed the principle that the law prevailing at the time of filing the return should be the basis for penalty levy, not subsequent amendments, even if retrospective. Therefore, the penalty levied was not sustainable. The Tribunal allowed the appeals and directed the deletion of the penalty.

The Tribunal held that the Ld. CIT(A) has not erred in facts and in law in allowing the assessee's appeal and directing that interest be granted to the assessee in terms of Section 244A(1)(b) of the Act. The reasoning is based on a consistent position taken by various courts and tribunals. The Tribunal referred to the Supreme Court's decision in CIT v H.E.G. Ltd. [2010] 189 Taxman 335 (SC), which held that an assessee is entitled to interest under Section 244A when a refund arises on account of payment of self-assessment tax. The judgment also cited decisions from the Kolkata ITAT, Punjab & Haryana High Court, Bombay High Court, Mumbai ITAT, and Delhi High Court, all affirming that an assessee is entitled to interest under Section 244A(1)(b) on refunds arising from excess payment of self-assessment tax or tax paid on regular assessment. The Delhi High Court in Sutlej Industries Ltd. [2010] 190 Taxman 136 (Delhi) observed that where self-assessment tax paid under Section 140A is refunded, the assessee is entitled to interest thereon, computed under Section 244A(1)(b) from the date of payment up to the date of refund. The Tribunal concluded that the tax paid on regular assessment falls within the expression 'refund of any amount' and is thus eligible for interest under Section 244A(1)(b). The AO had not provided any reasons for not granting this interest. Therefore, the AO is directed to grant the interest on refund to the appellant as per the provisions of Section 244A(1)(b).

The Tribunal held that the current appeal filed by the assessee for AY 2006-2007 was superfluous and redundant. The reasoning was that the CIT(A) had already adjudicated upon the assessee's appeal against the Assessing Officer's order under Section 143(3) r.w.s. 153A(b) of the Act dated 28.03.2014 for AY 2006-07, vide an order dated 18.03.2016. Despite being provided an opportunity to respond and confirm the nature of the current appeal, the assessee failed to do so. The Tribunal found that the difference in the sections (143(3) versus 143(3) r.w.s. 153A(b)) did not alter the fact that the appeal was against the same Assessing Officer's order and had already been decided. Therefore, the current appeal was treated as superfluous and dismissed for statistical purposes. The assessee was granted liberty to pursue appropriate remedies.

The Tribunal held that the addition of Rs. 13.15 lakhs was not justified and directed its deletion. The Tribunal noted that the search dated 17.01.2018 led to the discovery of the bank passbooks of the assessee's family members/account holders, and the contents of these passbooks are presumed to be correct under Section 292C of the Act. However, the Tribunal found no reason to conclude that the assessee had opened all these bank accounts and made the deposits in his relatives' names. The Revenue's representative could not pinpoint any specific material, including deposit slips, to support the assessee's involvement in depositing the sums into his family members' accounts. Therefore, the Tribunal found no reason to sustain the addition. The appeal was allowed.

The Tribunal dismissed the Revenue's appeal. Regarding the condonation of delay, the Tribunal noted that the delay was only 22 days, which was inconsequential. The Tribunal held that the CIT(A)'s order noting the condonation of delay was deemed compliance with the ITAT's directions, especially since the Revenue could not point to any facts prompting a contrary stand. Therefore, no infirmity was found in the CIT(A)'s order condoning the delay. On the merits, the Tribunal found no infirmity in the CIT(A)'s order. The Tribunal agreed with the assessee that the documents at page 96 of Annexure-2 represented interest paid/payable, not principal loan amounts. The assessee had substantiated with evidence that the interest rate paid was between 2% and 2.5%. The Tribunal noted that the AO applied a 1.5% interest rate based on a single instance from a subsequent year (January 2004). The assessee demonstrated that during the impugned year, interest was paid at 2.5%. Therefore, the Tribunal held that the CIT(A) was correct in rejecting the cash loans computed by the AO based on a 1.5% interest rate and restricting the addition to the admitted cash loan amount of Rs. 1.25 crores. The Revenue's grounds of appeal were dismissed.

The Tribunal acknowledged that the assessee's factual contentions regarding the on-money received appeared correct. The table presented showed that the on-money component approximated more than 50% of the booked price of bungalows, which were small (approx. 160 sq. meters). The Tribunal agreed that it was highly improbable to make profits up to 50% or more of the turnover on the sale of such small properties. The Tribunal noted that the Revenue's representative could not provide statistics to counter this. Therefore, the Tribunal agreed that adding the entire on-money received would not be justified. While acknowledging the onus on the assessee to explain cash expenses, the Tribunal considered the small size of the bungalows and the high percentage of on-money received. The Tribunal directed that the addition be restricted to the profit element embedded in the transaction, estimating the Gross Profit (GP) on the on-money receipts at 15%. The Tribunal clarified that this decision should not be treated as a precedent due to the peculiar facts and circumstances of the case. The appeals were partly allowed.

The Tribunal acknowledged that the assessee's factual contentions regarding the on-money received appeared correct. The table presented showed that the on-money component approximated more than 50% of the booked price of bungalows, which were small (approx. 160 sq. meters). The Tribunal agreed that it was highly improbable to make profits up to 50% or more of the turnover on the sale of such small properties. The Tribunal noted that the Revenue's representative could not provide statistics to counter this. Therefore, the Tribunal agreed that adding the entire on-money received would not be justified. While acknowledging the onus on the assessee to explain cash expenses, the Tribunal considered the small size of the bungalows and the high percentage of on-money received. The Tribunal directed that the addition be restricted to the profit element embedded in the transaction, estimating the Gross Profit (GP) on the on-money receipts at 15%. The Tribunal clarified that this decision should not be treated as a precedent due to the peculiar facts and circumstances of the case. The appeals were partly allowed.