ITAT Bangalore Bench Judgments

The Tribunal condoned the delay in filing the appeal by the Revenue, finding sufficient cause. The Tribunal noted that the grounds raised by the Revenue were confined to the relief granted by the learned CIT(A) under Section 80P. The assessee's claim for deduction on interest earned from the investment of surplus funds and the alternative claim under Section 80P(2)(d) were decided against the assessee by the CIT(A). The surviving relief in favor of the assessee was limited to interest earned on deposits made under statutory compulsion. The Tribunal referred to a Coordinate Bench decision in Shri Shanteshwar Vividoddeshagala Sahakara Sangha Niyamit vs. ITO, which observed that interest from mandatorily maintained fluid resources as statutorily required under the Karnataka Cooperative Societies Act and rules thereunder is eligible for deduction under Section 80P(2)(a)(i), and only the balance interest over and above the mandatory SLR is liable to be charged under Section 56. The Tribunal found that the deposits in question were statutorily mandated, restricting the assessee's ability to use these funds for its business operations without prior approval.

The Tribunal noted that the assessment proceedings were conducted during the Covid-19 pandemic period, and the assessee claimed difficulty in furnishing requisite details due to lockdowns. While the assessee had submitted sample sales bills and purchase confirmations, the lower authorities found them insufficient to substantiate the claim of cash sales amounting to INR 16,69,38,150. The Tribunal acknowledged the assessee's argument regarding the difficulty in collating details during the pandemic and the subsequent submission of additional evidence before the CIT(A). Considering the interest of justice and fair play, the Tribunal decided to grant one more opportunity to the assessee to substantiate his claim. The matter was restored to the file of the Assessing Officer for de novo adjudication, with a direction to the assessee to fully cooperate and furnish all required details. The Tribunal set aside the impugned order for statistical purposes.

The Tribunal dismissed the Revenue's appeal for AY 2016-17 and subsequent years on the issue of interest expenditure under Section 36(1)(iii). It held that investment in SPVs is an integral part of the assessee's business activity, upholding the CIT(A)'s finding that the assessee is engaged in the business of operating, developing, and maintaining airports through its SPVs. The Tribunal also dismissed the Revenue's appeal concerning CSR expenditure, stating that similar issues were adjudicated for AY 2016-17 and the findings would apply mutatis mutandis. Regarding Section 14A, the Tribunal upheld the CIT(A)'s decision to restrict the disallowance to investments that yielded exempt income, following the Special Bench decision in Vireet (P.) Ltd. and the Tribunal's own decision in the assessee's case for AY 2014-15. The assessee's cross-objection was dismissed as not pressed. The operative direction was that the Revenue's appeals were dismissed, and the assessee's cross-objection was dismissed.

The Tribunal dismissed the Revenue's appeal for AY 2016-17 and subsequent years on the issue of interest expenditure under Section 36(1)(iii). It held that investment in SPVs is an integral part of the assessee's business activity, upholding the CIT(A)'s finding that the assessee is engaged in the business of operating, developing, and maintaining airports through its SPVs. The Tribunal also dismissed the Revenue's appeal concerning CSR expenditure, stating that similar issues were adjudicated for AY 2016-17 and the findings would apply mutatis mutandis. Regarding Section 14A, the Tribunal upheld the CIT(A)'s decision to restrict the disallowance to investments that yielded exempt income, following the Special Bench decision in Vireet (P.) Ltd. and the Tribunal's own decision in the assessee's case for AY 2014-15. The assessee's cross-objection was dismissed as not pressed. The operative direction was that the Revenue's appeals were dismissed, and the assessee's cross-objection was dismissed.

The Tribunal allowed the assessee's appeal. Regarding the reopening, it held that while the information from the Investigation Wing constituted tangible material, the reopening rested solely on conjecture and surmise. The AO received complete information only on April 3, 2017, and the reopening was based on a suspicious transaction report concerning the investor without sufficient inquiry into whether the investors were tainted. The Tribunal also noted inconsistencies in the dates of information received by the AO. On merits, the Tribunal found that the assessee had discharged its initial burden under section 68 by providing documents related to the investor's identity, creditworthiness, and transaction genuineness. It noted that the investor's share capital had been accepted in a prior assessment year. Crucially, the Tribunal held that the denial of cross-examination of witnesses whose statements underpinned the addition violated natural justice, citing the Supreme Court's decision in Andaman Timber Industries. Therefore, the addition under section 68 could not stand, and the reopening was also found to be unsustainable.

The Tribunal held that the income disclosed in the return filed in response to the notice under section 148 is excluded from under-reported income under section 270A(6)(a) of the Income-tax Act. The Tribunal found the assessee's explanation for not filing the return under section 139(1) to be bona fide, citing the abrupt departure from India due to the COVID-19 pandemic and urgent family obligations. The Tribunal noted that the salary income was subject to TDS, and the remaining income, primarily bank interest, was insignificant. The Tribunal also observed that the penalty under section 270A is discretionary, as indicated by the word "may" in section 270A(1). Given the assessee's circumstances and the bona fide explanation, the Tribunal found no justification for levying the penalty. Accordingly, the Tribunal reversed the orders of the lower authorities and directed the Assessing Officer to delete the penalty of Rs. 29,74,189.

The Tribunal held that the learned CIT(A)'s order was not infirm and that the assessee was entitled to the full deduction of Rs. 5,95,11,403 claimed under section 11(1)(a) of the Act. The Tribunal found no basis to hold that the remuneration of Rs. 87,48,000 paid to Mr. Atul Satija for the year, compared to Rs. 57,48,000 in the last year, was excessive or unreasonable. This conclusion was based on Mr. Satija's qualifications, extensive professional experience with major corporations, MBA from ISB, service on advisory boards, prior remuneration of Rs. 3 crore from a corporate position, recognition received by the trust under his leadership, and his recognition as a top impact leader. The Board had approved his remuneration and bonuses after evaluating his performance, and performance-based bonuses were paid across the organization. The Tribunal noted that his remuneration represented a small percentage of the trust's total donation receipts. Therefore, section 13(1)(c) of the Income-tax Act was not applicable. The Assessing Officer's grounds lacked merit and were dismissed. The issue of accumulation under section 11(1)(a) was implicitly decided by upholding the CIT(A)'s direction to allow the deduction claimed under section 11(1)(a).

The Tribunal condoned the delay of 78 days in filing the appeal before the CIT(A)/NFAC, finding the assessee's explanation of the director's severe medical crisis to be plausible and a sufficient cause. The Tribunal acknowledged that the assessee could not represent its case properly before the AO, leading to an ex-parte order. Consequently, the Tribunal decided to remit the quantum appeal (ITA No. 698/Bang/2026) back to the AO for a fresh adjudication on merits, granting the assessee a reasonable opportunity of being heard. The Tribunal also remitted penalty proceedings under Section 270A (ITA No. 700/Bang/2026) to the AO for fresh consideration, as penalty proceedings based on an assessment order that is set aside cannot sustain. Regarding the penalty under Section 271DA (ITA No. 699/Bang/2026), the Tribunal found good and sufficient reason to delete the penalty. The Tribunal reasoned that the assessee had no control over its customer, a farmer from a remote location, who deposited cash directly into the assessee's bank account without the assessee's consent or direction, and this was against a total sales volume of Rs. 9,48,23,828/-. Therefore, the penalty was deleted. The issue of the AO rejecting books of accounts, additions on unaccounted purchases, unexplained expenditure, ad hoc additions, and unexplained credits were implicitly remitted to the AO for fresh adjudication.

The Tribunal held that the assessee was not afforded an effective opportunity of hearing before either the Assessing Officer or the NFAC. The assessment order was passed ex parte, and the NFAC dismissed the appeal without a proper hearing, even though the assessee sought an adjournment. The NFAC should have fixed another hearing date or cautioned the assessee. Furthermore, the NFAC did not exercise its powers under section 250(4) to obtain relevant material or make enquiries, especially since the assessment was ex parte. The Tribunal noted that the assessee has now filed a comprehensive paper book addressing all issues and claims the gift from the mother is exempt. Therefore, the Tribunal restored the entire appeal to the file of the Assessing Officer. The assessee is directed to file the paper book and any further information within 90 days. The Assessing Officer is to examine the material, decide the issues in accordance with law, and grant an adequate opportunity of hearing. All grounds of appeal are allowed for statistical purposes. The operative direction is to restore the appeal to the Assessing Officer for fresh adjudication.

The Tribunal condoned the delay of 78 days in filing the appeal before the CIT(A)/NFAC, finding the assessee's explanation of the director's severe medical crisis to be plausible and a sufficient cause. The Tribunal acknowledged that the assessee could not represent its case properly before the AO, leading to an ex-parte order. Consequently, the Tribunal decided to remit the quantum appeal (ITA No. 698/Bang/2026) back to the AO for a fresh adjudication on merits, granting the assessee a reasonable opportunity of being heard. The Tribunal also remitted penalty proceedings under Section 270A (ITA No. 700/Bang/2026) to the AO for fresh consideration, as penalty proceedings based on an assessment order that is set aside cannot sustain. Regarding the penalty under Section 271DA (ITA No. 699/Bang/2026), the Tribunal found good and sufficient reason to delete the penalty. The Tribunal reasoned that the assessee had no control over its customer, a farmer from a remote location, who deposited cash directly into the assessee's bank account without the assessee's consent or direction, and this was against a total sales volume of Rs. 9,48,23,828/-. Therefore, the penalty was deleted. The issue of the AO rejecting books of accounts, additions on unaccounted purchases, unexplained expenditure, ad hoc additions, and unexplained credits were implicitly remitted to the AO for fresh adjudication.

The Tribunal dismissed the Revenue's appeal for AY 2016-17 and subsequent years on the issue of interest expenditure under Section 36(1)(iii). It held that investment in SPVs is an integral part of the assessee's business activity, upholding the CIT(A)'s finding that the assessee is engaged in the business of operating, developing, and maintaining airports through its SPVs. The Tribunal also dismissed the Revenue's appeal concerning CSR expenditure, stating that similar issues were adjudicated for AY 2016-17 and the findings would apply mutatis mutandis. Regarding Section 14A, the Tribunal upheld the CIT(A)'s decision to restrict the disallowance to investments that yielded exempt income, following the Special Bench decision in Vireet (P.) Ltd. and the Tribunal's own decision in the assessee's case for AY 2014-15. The assessee's cross-objection was dismissed as not pressed. The operative direction was that the Revenue's appeals were dismissed, and the assessee's cross-objection was dismissed.

The Tribunal condoned the delay of 78 days in filing the appeal before the CIT(A)/NFAC, finding the assessee's explanation of the director's severe medical crisis to be plausible and a sufficient cause. The Tribunal acknowledged that the assessee could not represent its case properly before the AO, leading to an ex-parte order. Consequently, the Tribunal decided to remit the quantum appeal (ITA No. 698/Bang/2026) back to the AO for a fresh adjudication on merits, granting the assessee a reasonable opportunity of being heard. The Tribunal also remitted penalty proceedings under Section 270A (ITA No. 700/Bang/2026) to the AO for fresh consideration, as penalty proceedings based on an assessment order that is set aside cannot sustain. Regarding the penalty under Section 271DA (ITA No. 699/Bang/2026), the Tribunal found good and sufficient reason to delete the penalty. The Tribunal reasoned that the assessee had no control over its customer, a farmer from a remote location, who deposited cash directly into the assessee's bank account without the assessee's consent or direction, and this was against a total sales volume of Rs. 9,48,23,828/-. Therefore, the penalty was deleted. The issue of the AO rejecting books of accounts, additions on unaccounted purchases, unexplained expenditure, ad hoc additions, and unexplained credits were implicitly remitted to the AO for fresh adjudication.

The Tribunal dismissed the Revenue's appeal for AY 2016-17 and subsequent years on the issue of interest expenditure under Section 36(1)(iii). It held that investment in SPVs is an integral part of the assessee's business activity, upholding the CIT(A)'s finding that the assessee is engaged in the business of operating, developing, and maintaining airports through its SPVs. The Tribunal also dismissed the Revenue's appeal concerning CSR expenditure, stating that similar issues were adjudicated for AY 2016-17 and the findings would apply mutatis mutandis. Regarding Section 14A, the Tribunal upheld the CIT(A)'s decision to restrict the disallowance to investments that yielded exempt income, following the Special Bench decision in Vireet (P.) Ltd. and the Tribunal's own decision in the assessee's case for AY 2014-15. The assessee's cross-objection was dismissed as not pressed. The operative direction was that the Revenue's appeals were dismissed, and the assessee's cross-objection was dismissed.

The Tribunal held that the revisionary order passed by the PCIT under section 263 is quashed and the assessee's appeal is allowed. The Tribunal found that it is undisputed that donations qualifying under section 80G are deductible even when they form part of CSR expenditure, as section 80G does not prohibit such a deduction if prescribed conditions are met. The Act contains no bar to allowing a deduction under Chapter VI-A for eligible donations made towards CSR activities. Although CSR expenditure is not allowable as business expenditure under section 37(1), this restriction does not preclude a deduction under section 80G. The Tribunal noted that Explanation 2 to section 37(1) merely disallows CSR expenditure when computing income under the head 'Profits and gains of business or profession' and does not restrict deductions under Chapter VI-A. The Tribunal acknowledged divergent views on the eligibility of CSR expenditure for deduction under section 80G but emphasized that where the Assessing Officer adopts one of the plausible views, the mere fact that the Commissioner prefers an alternative view does not render the assessment erroneous. Citing *CIT (Central) v. Max India Ltd.*, the Tribunal stated that where two views are reasonably possible, and the AO has taken one such view, the Commissioner's preference for an alternative interpretation does not justify invoking revisionary jurisdiction under section 263. Therefore, the assessment order was not erroneous, and the PCIT could not exercise jurisdiction under section 263.

The Tribunal held that the issue of jurisdiction under section 147 versus section 153C was a substantial question of law. It noted that the assessee's grounds of appeal, particularly ground No. 2, raised a serious contention regarding the invocation of section 147 when the entire proceedings were based on seized material from a third party, suggesting section 153C should have been applied. The Tribunal observed that the CIT(A) had not dealt with this specific legal ground, rendering the appellate order non-speaking on this crucial aspect. Consequently, the Tribunal found it necessary to set aside the order of the CIT(A) and restore the matter to the file of the CIT(A) for fresh adjudication on all grounds of appeal, including the jurisdictional issue. The Tribunal explicitly stated that it was not venturing into the merits of the addition at this stage. The operative direction was to remand the matter back to the CIT(A) for a fresh decision.

The Tribunal held that the reassessment proceedings were not bad in law on the grounds of procedural infirmities, as the assessee had not provided sufficient evidence to substantiate these claims. Regarding the addition of Rs. 12,18,000 for cash deposits, the Tribunal found no merit in the assessee's arguments, as no documentary evidence was produced to support the claim of business receipts from friends and relatives. The Tribunal, however, disagreed with the authorities below regarding the disallowance of exemption under Section 54, loss from house property, and TDS credit. Citing the Supreme Court's decision in Commissioner of Income-tax v. Sun Engineering Works (P.) Ltd., the Tribunal clarified that while reassessment proceedings are generally for the benefit of the Revenue, the return filed under Section 148 is to be treated as a return under Section 139. The Tribunal reasoned that the Section 54 exemption is part of computing capital gains, the house property loss can be set off under Section 71(3A), and TDS credit follows the year of income assessment. Therefore, the AO should have verified these claims based on their respective provisions rather than outright rejection. The Tribunal directed the AO to verify the eligibility for Section 54 exemption, house property loss, and TDS credit, and grant them if the conditions are met, after providing the assessee with a reasonable opportunity of being heard. The Tribunal expressly left undecided the grounds related to procedural infirmities in reassessment proceedings.

The Tribunal held that the CIT(A) had fundamentally misconstrued the issue, treating the demand as a late-filing fee under section 234E instead of interest for delayed remittance of TDS under section 201(1A). The CIT(A)'s order was therefore unsustainable. The Tribunal noted that the assessee had initiated the payment process well before the due date of 7 January 2025, with final approval recorded on that date. Although the assessee's bank account was debited on 8 January 2025, the Tribunal, following precedents such as Standard Chartered Bank v. Dy. CIT and Kumudam Publications (P.) Ltd. v. CIT, held that payment is deemed to be made on the date the instruction is tendered to the bank, provided sufficient funds are available and the delay in actual credit is attributable to the bank or clearing house. The Tribunal found no delay on the part of the assessee in tendering the payment. Accordingly, the Tribunal directed the Assessing Officer to delete the interest charged of ₹1,81,79,890.

The Tribunal acknowledged the assessee's claim of exempt agricultural income and the subsequent ex parte assessment and appellate orders due to the assessee's failure to respond to notices. The Tribunal found that the assessee's inability to attend to tax matters due to his father's serious illness constituted sufficient cause for non-compliance, warranting a fresh opportunity in the interest of justice. The Tribunal noted that the burden of proving agricultural income rests on the assessee. Since the assessee did not appear before the lower authorities, the Tribunal restored the entire issue to the Assessing Officer. The assessee is directed to furnish detailed particulars of agricultural landholding, crops, cultivation methods, seeds, expenditure, sales records (including parties and places), and supporting third-party evidence from agricultural departments and sellers. The Assessing Officer is to verify these details, re-examine the issue after providing a hearing opportunity, and assess the income accordingly. Ground No. 3 was allowed, and the matter was remanded to the Assessing Officer without expressing any view on the merits.

The Tribunal held that the issue was squarely covered in favour of the assessee by the full bench decision of the Honourable Karnataka High Court in Commissioner of Income Tax vs. Hewlett Packard Global Soft Ltd. [2017] 87 taxmann.com 182 (Karnataka) (FB). This decision held that assessees covered under Section 10A or 10B are entitled to 100% exemption or deduction in respect of interest income earned on deposits made in the ordinary course of business, including interest from staff loans. Such interest income would not be taxable as 'Income from other Sources' under Section 56. The Tribunal reasoned that the incidental activity of parking surplus funds or advancing staff loans is an integral part of their export business activity, a commercial expediency, and the interest income cannot be de-linked from the profits and gains derived by the undertaking engaged in the export of articles as envisaged under Section 10A or Section 10B. Therefore, the appeal filed by the Assessing Officer did not survive on both grounds and was dismissed.

The Tribunal addressed the grounds raised by the assessee. Regarding the legality of the search and assessment under section 153A, the judgment does not explicitly record the Tribunal's finding on this issue, implying it was not the primary focus or was implicitly accepted by proceeding to the merits. On the issue of additions based on seized document A/IY/03 (unexplained expenditure), the Tribunal allowed the assessee's appeal for AY 2010-11 concerning the addition of ₹3,12,84,800. The Tribunal found that the seized documents did not adequately support the addition, as the figures were not explained, did not represent monetary transactions, and the aggregation of figures for other individuals did not correspond to the addition made. The Tribunal noted that the assessee's contention was not considered by the CIT(A). Similarly, the addition of ₹2,20,955 for AY 2010-11 was also directed to be deleted for similar reasons. For AY 2006-07, the addition of ₹1,05,79,000 based on A/IY/03 was upheld by the lower authorities, but the Tribunal's specific finding on this is not detailed in the provided excerpt, though it is mentioned that Ground No. 4 (challenging addition of ₹3,12,84,800) was allowed. The Tribunal confirmed the business profit at 60% as estimated by the AO for AY 2010-11, dismissing Ground No. 3. The issue of interest under sections 234A, 234B, and 234C was not explicitly decided in the provided excerpt. The appeals for AY 2010-11 were partly allowed.

The Tribunal addressed the grounds raised by the assessee. Regarding the legality of the search and assessment under section 153A, the judgment does not explicitly record the Tribunal's finding on this issue, implying it was not the primary focus or was implicitly accepted by proceeding to the merits. On the issue of additions based on seized document A/IY/03 (unexplained expenditure), the Tribunal allowed the assessee's appeal for AY 2010-11 concerning the addition of ₹3,12,84,800. The Tribunal found that the seized documents did not adequately support the addition, as the figures were not explained, did not represent monetary transactions, and the aggregation of figures for other individuals did not correspond to the addition made. The Tribunal noted that the assessee's contention was not considered by the CIT(A). Similarly, the addition of ₹2,20,955 for AY 2010-11 was also directed to be deleted for similar reasons. For AY 2006-07, the addition of ₹1,05,79,000 based on A/IY/03 was upheld by the lower authorities, but the Tribunal's specific finding on this is not detailed in the provided excerpt, though it is mentioned that Ground No. 4 (challenging addition of ₹3,12,84,800) was allowed. The Tribunal confirmed the business profit at 60% as estimated by the AO for AY 2010-11, dismissing Ground No. 3. The issue of interest under sections 234A, 234B, and 234C was not explicitly decided in the provided excerpt. The appeals for AY 2010-11 were partly allowed.

The Tribunal addressed the grounds raised by the assessee. Regarding the legality of the search and assessment under section 153A, the judgment does not explicitly record the Tribunal's finding on this issue, implying it was not the primary focus or was implicitly accepted by proceeding to the merits. On the issue of additions based on seized document A/IY/03 (unexplained expenditure), the Tribunal allowed the assessee's appeal for AY 2010-11 concerning the addition of ₹3,12,84,800. The Tribunal found that the seized documents did not adequately support the addition, as the figures were not explained, did not represent monetary transactions, and the aggregation of figures for other individuals did not correspond to the addition made. The Tribunal noted that the assessee's contention was not considered by the CIT(A). Similarly, the addition of ₹2,20,955 for AY 2010-11 was also directed to be deleted for similar reasons. For AY 2006-07, the addition of ₹1,05,79,000 based on A/IY/03 was upheld by the lower authorities, but the Tribunal's specific finding on this is not detailed in the provided excerpt, though it is mentioned that Ground No. 4 (challenging addition of ₹3,12,84,800) was allowed. The Tribunal confirmed the business profit at 60% as estimated by the AO for AY 2010-11, dismissing Ground No. 3. The issue of interest under sections 234A, 234B, and 234C was not explicitly decided in the provided excerpt. The appeals for AY 2010-11 were partly allowed.