ITAT Bangalore Judgments — October 2019

The Tribunal held that no addition was justified regarding unexplained loans as the seized material lacked dates and narration, making it unclear if they pertained to loans given. Regarding jewellery, the Tribunal held it could not be treated as unexplained solely due to the non-filing of wealth tax returns by the assessee's mother, especially when a valuation report from 1975 was available.

The Tribunal held that companies with significantly higher turnover than the assessee should be excluded as comparables. It also directed the exclusion of companies that were functionally not comparable due to diversified business activities.

The Tribunal held that the assessee had provided sufficient evidence, including PAN, TIN, TDS certificates, and proof of payment through banking channels, to establish the identity and genuineness of creditors. The non-receipt of confirmation letters alone was not sufficient to disallow the creditors.

The Tribunal held that no addition was justified regarding unexplained loans as the seized material lacked dates and narration, making it unclear if they pertained to loans given. Regarding jewellery, the Tribunal held it could not be treated as unexplained solely due to the non-filing of wealth tax returns by the assessee's mother, especially when a valuation report from 1975 was available.

The Tribunal confirmed the addition in the hands of Shri Manoj Tharian as substantive addition, following a Special Bench decision. However, it deleted the addition in the hands of the company, M/s MicroGenesis Techsoft Pvt. Ltd., to avoid double taxation.

The Tribunal condoned the delay in filing the appeal before the CIT(Appeals) as the reasons provided were bonafide and not disputed. The CIT(Appeals)'s order was set aside, and the case was remanded for a decision on merits.

The Tribunal held that the CIT(A) should not have declared the appeal defective. Instead, the CIT(A) should have decided grounds arising from the assessment order under Section 143(3) and rejected other grounds not pertaining to that order.

The Tribunal found that the applicability of the Totgars judgment depends on whether the interest-earning funds were out of liability or own funds. The case was remanded to the CIT(A) for a fresh decision after examining this aspect in light of both the Totgars and Tumkur Merchants judgments.

The Tribunal set aside the orders of the CIT(A) and restored the matter to the AO for a fresh decision. The AO was directed to confront the assessee with the statement of Mr. Mukesh Choksi and allow cross-examination.

The Tribunal followed a previous order which was based on a Karnataka High Court judgment. The Tribunal held that the assessee was denied a fair hearing and restored the matter to the AO for a fresh decision with directions for a fair opportunity.

The Tribunal confirmed the addition in the hands of Shri Manoj Tharian as substantive addition, following a Special Bench decision. However, it deleted the addition in the hands of the company, M/s MicroGenesis Techsoft Pvt. Ltd., to avoid double taxation.

The Tribunal held that Section 271AAB is applicable only to persons subjected to a search under Section 132. Since the assessee was not searched directly, the penalty under Section 271AAB could not be imposed.

The Tribunal held that Section 271AAB is applicable only to persons subjected to a search under Section 132. Since the assessee was not searched directly, the penalty under Section 271AAB could not be imposed.

The Tribunal held that the AO's reliance on the City Corporation's letter was irrelevant as it pertained to different financial years. The Tribunal also found the gunny bag objection invalid, as the assessee had explained sales in loose form. Consequently, the assessee's claim for bio-compost sales was accepted.

The Tribunal held that Section 271AAB is applicable only to persons subjected to a search under Section 132. Since the assessee was not searched directly, the penalty under Section 271AAB could not be imposed.

The Tribunal held that Section 271AAB is applicable only to persons subjected to a search under Section 132. Since the assessee was not searched directly, the penalty under Section 271AAB could not be imposed.

The Tribunal held that Section 271AAB is applicable only to persons subjected to a search under Section 132. Since the assessee was not searched directly, the penalty under Section 271AAB could not be imposed.

The Tribunal held that Section 271AAB is applicable only to persons subjected to a search under Section 132. Since the assessee was not searched directly, the penalty under Section 271AAB could not be imposed.

The Tribunal held that the assessment order suffered from a violation of the principles of natural justice due to the lack of opportunity for the assessee to cross-examine persons whose statements were relied upon by the AO. Therefore, the matter was restored to the AO for fresh consideration.

The Tribunal held that the transfer of land occurred in Financial Year 1991-92 or at the latest by 1992-93, based on the agreement to sell, full consideration payment, and handover of possession. Therefore, the additions made by the AO under Section 50C for the current assessment year were not justified.

The Tribunal held that the AO's reliance on the City Corporation's letter was irrelevant as it pertained to different financial years. The Tribunal also found the gunny bag objection invalid, as the assessee had explained sales in loose form. Consequently, the assessee's claim for bio-compost sales was accepted.

The Tribunal held that the CIT(A) erred in allowing the assessee's appeal. The Tribunal found that the JDA indicated the assessee was the owner and that possession was handed over for construction, constituting a transfer under the Act.

The Tribunal held that Jindal Intellicom Ltd. was rightly excluded by the DRP as a comparable due to material differences in market conditions. The TPO was directed to recompute the ALP after considering the Tribunal's directions and affording the assessee an opportunity to be heard.

The Tribunal dismissed the Revenue's appeal based on the tax effect threshold. For the assessee's appeal, the Tribunal held that the payment for intellectual property rights was not royalty and the disallowance of depreciation was not justified. The issue of write-off of miscellaneous expenses was remanded for fresh examination.

The Tribunal held that a negative working capital adjustment should not be made when the assessee is a captive service provider and does not bear working capital risk. Following its own previous decisions, the Tribunal directed the AO not to make such negative adjustment.

The Tribunal held that brokerage expenses incurred for rental premises, where the main rental expenditure is treated as revenue, should also be considered revenue in nature. The Tribunal found that the lower authorities erred in classifying these expenses as capital.

The Tribunal held that the notice under section 143(2) was mandatory and had to be issued within the period of limitation, even in reassessment proceedings. Since the notice was issued beyond the limitation period, the assessment order was void ab initio.

The Tribunal noted that a similar issue in the assessee's own case was remanded by the Tribunal to the AO for fresh consideration. Therefore, the Tribunal decided to follow the same course of action for the Revenue's appeal.

The Tribunal partly allowed the appeal. It dismissed the ground regarding unbilled revenue for Section 10A deduction, allowed the ground for royalty disallowance for statistical purposes, and allowed the ground for including telecommunication expenses in Section 10A computation. The donation expense ground was also allowed for statistical purposes.

The Tribunal held that expenses reduced from Export Turnover must also be reduced from Total Turnover for Section 10A deduction, following High Court precedents. The Tribunal also restored the issue of miscellaneous income to the CIT(A) for adjudication.

The Tribunal upheld the CIT(A)'s decision, following its own prior rulings and High Court judgments. It ruled that surplus from the shareholder's account is part of the life insurance business and allowed the set-off of losses from the exempt pension account.

The Tribunal held that the penalty order was invalid because the show cause notice issued under Section 274 of the Income Tax Act did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars of income, failing to strike out the irrelevant portion.

The Tribunal found a gross violation of the principles of natural justice as no show cause notice was issued before passing the orders. The appeals were set aside and remanded to the CIT(A) to decide the legal ground regarding the non-issuance of the notice.

The Tribunal held that software development activities can be considered as 'manufacture or production' for the purpose of Section 80JJAA, and employees in the software industry can qualify as 'workmen'. The distinction between 'salary' and 'wages' made by the revenue authorities was deemed unsustainable.

The Tribunal found that the tax effect in all three assessment years was below the threshold of Rs. 50 Lakhs. Therefore, the appeals filed by the revenue were dismissed as not maintainable.

The Tribunal admitted additional evidence and remanded the issue of Section 35(2AB) deduction to the AO for verification, considering a pending High Court writ petition. The disallowance of prior period expenses and employee gifts were upheld.

The Tribunal found that the tax effect in all three assessment years was below the threshold of Rs. 50 Lakhs. Therefore, the appeals filed by the revenue were dismissed as not maintainable.

The Tribunal allowed the provision for warranty claim, stating that the scientific method of accounting used by the assessee was consistent and not doubted. It also allowed the pre-operative expenses, holding that they were incurred for expansion of existing business and not for a new venture, following High Court precedents.

For AY 2016-17, the tribunal dismissed the appeal, holding that the assessee intentionally violated the Karnataka Cooperative Societies Act by admitting a large number of associate members, making the deduction under Section 80P inadmissible. For AY 2015-16, the matter was remanded to the CIT(A) for a fresh decision as the violation was not clearly established.

The Tribunal found that the tax effect in all three assessment years was below the threshold of Rs. 50 Lakhs. Therefore, the appeals filed by the revenue were dismissed as not maintainable.

The Tribunal held that while the demand raised was technically correct, it should not be enforced coercively against the assessee due to the employer's default, as per CBDT instructions and High Court rulings. The issue was restored to the AO for verification of TDS deducted.

The Tribunal held that the assessee failed to explain the source of funds as cash entries in the books preceded actual bank withdrawals, indicating prior possession of cash. Therefore, taxing the peak credit was justified.

The Tribunal restored the transfer pricing and R&D expenditure issues to the Assessing Officer (AO) for fresh examination, citing identical issues in a prior assessment year. The provision for warranty issue was also restored to the AO for fresh examination due to lack of clarity on accounting practices.

The Tribunal held that Persistent Systems Ltd. should be excluded from the list of comparable companies due to functional dissimilarity. The Tribunal also found the Revenue's grounds of appeal to be vague and lacking substance.

The Tribunal admitted additional evidence regarding a payment to Internet Systems Consortium and remanded the issue to the AO for further examination. The issue of leave encashment provision was also remanded to the AO pending a Supreme Court decision.

The Tribunal held that Persistent Systems Ltd. should be excluded from the list of comparable companies due to functional dissimilarity. The Tribunal also found the Revenue's grounds of appeal to be vague and lacking substance.

The Tribunal directed the exclusion of Infosys BPO Limited and TCS E-Serve Ltd. from the list of comparable companies, citing functional dissimilarity and brand value. BNR Udyog Ltd. was also excluded due to failing the RPT criteria and functional dissimilarity.

The Tribunal dismissed the assessee's appeal as infructuous since the AO had given effect to the CIT(A)'s order by excluding telecommunication charges from both export and total turnover. The Tribunal also dismissed the revenue's appeal, upholding the CIT(A)'s direction to re-examine royalty income as per the ITAT's previous order.

The Tribunal held that disallowance of vehicle maintenance expenses without notice of enhancement was not justified. For depreciation, it allowed 75% of the claim, considering the business nature and turnover, estimating personal use at 25%.