ITAT Bangalore Judgments — February 2024

The Tribunal noted that the CIT(A) had restored a major addition to the AO for fresh consideration in the quantum assessment, making the assessment order effaced. Therefore, the penalty order was considered premature.

The Tribunal held that the bank account belonged to the firm, not the individual assessee, and the linking of the assessee's PAN to the firm's account was incorrect. Therefore, the addition in the hands of the assessee was deleted.

The Tribunal noted that the assessment order was passed on 21/12/2022 and the assessee failed to file the appeal before the CIT(A) within the due date, with the reason for delay being health issues supported by an affidavit. The CIT(A) had not condoned the delay. The assessee's AR submitted that notices were not served. The Tribunal, in the interest of justice, remitted the issue back to the CIT(Appeals) for fresh consideration.

The Tribunal held that the reopening of assessment under Section 148 was invalid because it was done beyond 4 years without any allegation of failure to disclose material facts, constituting a mere change of opinion. The Tribunal further held that the interest income earned by the co-operative society on its investments with a co-operative bank is eligible for deduction under Section 80P(2)(d).

The Tribunal held that the reopening of assessment under Section 148 was invalid because it was done beyond 4 years without any allegation of failure to disclose material facts, constituting a mere change of opinion. The Tribunal further held that the interest income earned by the co-operative society on its investments with a co-operative bank is eligible for deduction under Section 80P(2)(d).

The Tribunal held that the PCIT could not invoke the amended provisions of Section 12AB(4) which were introduced after the relevant assessment year. It also noted that the law applicable is that in force during the assessment year unless otherwise provided.

The Tribunal noted the assessee's contention that notices were not properly served and the AR's undertaking to comply with notices and submit documents. The Tribunal, considering the interest of justice, decided to remit the issue back to the FAA for fresh consideration.

The Tribunal held that the reopening of assessment under Section 148 was invalid because it was done beyond 4 years without any allegation of failure to disclose material facts, constituting a mere change of opinion. The Tribunal further held that the interest income earned by the co-operative society on its investments with a co-operative bank is eligible for deduction under Section 80P(2)(d).

The Tribunal held that the interest income earned from deposits of surplus funds is not eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). However, the assessee is eligible for the cost of funds incurred towards earning this interest.

The tribunal condoned the 22-day delay in filing the appeal. Considering the assessee's explanation for missing the notices and in the interest of justice, the tribunal decided to provide one more opportunity.

The CIT(Appeals) confirmed the AO's order and dismissed the assessee's appeal. However, considering the assessee is a vegetable vendor and in the interest of justice, the Tribunal decided to grant one more opportunity to the assessee.

The Tribunal noted that a coordinate bench in the assessee's own case had decided a similar issue regarding the allocation of common expenses. Following that precedent, the Tribunal remitted the issue back to the AO for a fresh assessment.

The Tribunal decided that the surplus arising from the land transaction was not exigible to tax in the hands of the assessee company as business income. It also considered whether the transaction constituted an 'adventure in the nature of trade' and the classification of the land as agricultural.

The Tribunal found that the CIT(A)'s order was cryptic and required further examination of documents to determine how income was generated. The Tribunal also considered arguments that the transaction was not an 'adventure in the nature of trade' and that the land was agricultural, thus not taxable as capital gains.

The assessee filed an appeal before the CIT(A) against the order passed by the AO. The CIT(A) dismissed the appeal on the grounds that the appellant had not paid the tax due on the returned income, which is mandatory as per Section 249(4) of the Act.

The Tribunal noted that the assessee had complied with AO's notices but not CIT(Appeals) notices. Considering the assessee's request for a fresh opportunity and in the interest of justice, the matter was remitted to CIT(Appeals).

The Tribunal condoned the delay in filing the appeal, citing reasonable cause and relying on the Supreme Court judgment in Collector, Land Acquisition Vs. MST. Katiji. The Tribunal noted that the CIT(A) had issued multiple notices but the assessee did not respond. However, considering the assessee's request for time to produce documents, the Tribunal decided to remit the issue back to the AO for fresh consideration, directing the AO to provide a reasonable opportunity of being heard.

The Tribunal noted a recent Supreme Court judgment that categorized certain co-operative banks as co-operative societies, potentially entitling them to Section 80P deductions. Consequently, the matter was restored to the AO for re-examination in light of this new precedent.

The ITAT noted that the issue of limited scrutiny was raised for the first time before them. Considering the facts and interests of justice, the Tribunal restored the issue to the file of the CIT(A) for fresh consideration. The CIT(A) was directed to provide a reasonable opportunity to the assessee and decide the issue based on law after the assessee produces necessary documents.

The Tribunal found that the CIT(Appeals) had not properly considered the documents submitted by the assessee. Therefore, the matter was remitted back to the CIT(Appeals) for fresh consideration.

The Tribunal noted that the issue pertains to the demonetization period and should be examined in light of CBDT instructions. The Tribunal referred to a coordinate bench decision and decided to remit the issue back to the AO.

The Tribunal noted that there was a delay in filing the appeal, which was condoned. Regarding the issues raised by the Pr.CIT, the Tribunal found that the AO had not adequately examined them. Specifically, the club expenditure of Rs. 8,27,747 was disallowed by the AO as personal, and another club expenditure of Rs. 1,25,134 was not enquired into. For prior period expenses of Rs. 10,03,716, the assessee's AR accepted it as disallowed.

The Tribunal noted that the CIT(Appeals) order referenced the rectification order, indicating no delay in filing the appeal. Therefore, the appeal was remitted back to the CIT(Appeals) for fresh consideration on merits.

The CIT(Appeals) dismissed the assessee's appeal, noting the assessee repeatedly sought adjournments without furnishing necessary documents. The Tribunal, considering the submissions, decided to grant the assessee one more opportunity to substantiate their case and remitted the appeal to the CIT(Appeals) for fresh consideration.

The Tribunal restored the issue to the Assessing Officer to examine if the investments were made due to compulsion under the Karnataka Co-operative Societies Act. If so, the interest income would be considered business income eligible for deduction under Section 80P(2)(a)(i).

The Tribunal restored the issue to the Assessing Officer to examine if the investments were made due to statutory compulsions under the Karnataka Co-operative Societies Act. If so, the interest income would be considered business income eligible for deduction under Section 80P(2)(a)(i).

The Tribunal noted that the Assessee claimed the deposits were made between 08.11.2016 and 14.11.2016, similar to a previous case where relief was granted. However, the Assessee failed to provide detailed working or evidence to substantiate this claim.

The Tribunal held that since the assessment order was ex-parte and the documents provided by the assessee were not properly considered due to procedural issues (like not filing under Rule 46A), the issue needs to be re-examined. The Tribunal decided to remit the entire issue back to the Assessing Officer for a fresh consideration.

The CIT(A) dismissed the Assessee's appeal for not providing satisfactory evidence. However, the Tribunal observed that due to the lack of Assessee's submissions, the issue was not decided in its right perspective and remanded the case back to the CIT(A) for a fresh decision.

The Tribunal noted that the Assessee made efforts to submit documents and evidence via email due to website issues, but the AO passed the assessment order without waiting for the reply. The Commissioner also did not entertain the additional evidence. The Tribunal found the authorities' findings lacking in reasonability and decided to remand the case.

The Tribunal noted that the Assessee failed to provide necessary submissions and documents despite opportunities. However, considering the peculiar facts, the Tribunal decided to remand the case back to the Ld. Commissioner for a fresh decision.

The Tribunal observed that the Commissioner (Appeals) could not decide the issues on merits due to the assessee's lack of response. Therefore, the case was remanded to the Commissioner (Appeals) to provide the assessee with another opportunity to present their case.

The Tribunal decided the issues as follows: Regarding Ground No. 7 (Software Expenses): The Tribunal noted that software expenses are generally revenue expenditure if the license period is less than two years, citing CIT v. Toyota Kirloskar Motor (P) Ltd. The Tribunal found that the assessee incurred expenses throughout the year and debited them to the profit and loss account. It held that if the two-year period has not expired in the assessment year, the balance amount should be treated as payment in advance and accounted for over the software's life. The issue was remitted back to the AO for verification, with the assessee directed to provide details of software/license fee expenses incurred. The AO is to decide the issue as per law, allowing proportionate expenditure as revenue expenditure and treating the rest as payment in advance. Regarding Ground No. 8 (Leave Encashment Provision): The Tribunal noted that the assessee paid Rs. 3,48,34,348 and Rs. 1,62,71,769 on or before the due date for filing the return, totaling Rs. 5,11,06,117. The AO made an addition of Rs. 7,61,46,593. The assessee explained the difference as Rs. 3,27,97,471 due to Ind AS adjustment and Rs. 4,33,49,222 as a difference in brought forward opening balance. Citing the Apex Court's decision in UOI v. Exide Industries Ltd., which holds that leave encashment is allowed only on a payment basis, the Tribunal remitted this issue back to the AO for decision in accordance with the Apex Court's judgment. The assessee is directed to produce necessary documents for substantiation. The Tribunal expressly left undecided the specific amounts of Ind AS adjustment and brought forward balance, focusing on the payment basis principle.

The Tribunal held that the CIT(A) erred in dismissing the appeal on technical grounds under section 249(4) as the assessee's total income was Rs. 13,296/-, and thus, there was no admitted tax payable. The Tribunal also noted that the assessment proceedings were ex-parte and the notices were not served as prescribed, and considering the assessee's age and health, the ex-parte order was condoned. The matter was restored to the AO for fresh examination.

The Tribunal noted that both the assessment order and the NFAC order were ex-parte due to the assessee's non-cooperation. Consequently, the entire issue in dispute was remitted to the file of the AO for fresh consideration, with a direction for the assessee to provide necessary details to support the investment claims.

The Tribunal decided the issues as follows: Issue 1 (SBC, Depreciation, Amortization): The Tribunal held this issue in favour of the assessee, respectfully following a coordinate bench's decision in the case of Amazon Development Centre (India) Pvt. Ltd. (IT(TP)A No. 417/Bang/2023). The Tribunal noted that the exclusion of SBC as non-operating cost while calculating OP/OC was covered in favour of the assessee. Regarding depreciation and amortization, while the CIT(TP) noted their exclusion from operating cost, the Tribunal observed that even if these expenses were included as operating cost, the assessee's operating margin would still remain within the +/-3% range prescribed by the provisions. Therefore, no addition was called for, and the TPO's order was not erroneous on this issue. The assessee succeeded on this issue. Issue 2 (Delivery and Warranty Expenses): The Tribunal held this issue in favour of the assessee. It noted that the TPO had made detailed inquiries on these issues and did not consider them part of AMP expenditure. The Tribunal agreed with the assessee's submission that these expenditures, incurred post-sales and as part of sales expenditure, cannot be regarded as having been incurred for brand development. It was also not a case of lack of inquiry. Therefore, the CIT(TP) was not justified in revising the order on this issue under Section 263. The assessee succeeded on this issue. Issue 3 (Overall Erroneous Order): Based on the findings on the first two issues, the Tribunal concluded that the CIT(TP) was not justified in revising the order. The other legal issues raised by the assessee were left undecided. The operative direction was that the appeal of the assessee is partly allowed.

The Tribunal held that no disallowance under Section 14A can be made in the case of banks, following the jurisdictional High Court's decision which was based on Supreme Court pronouncements. The disallowance sustained by the CIT(Appeals) was therefore directed to be deleted.

The Tribunal held that no disallowance under Section 14A can be made in the case of banks, especially if the investments are considered stock-in-trade, following Supreme Court and jurisdictional High Court decisions.

The Tribunal held that the issue of disallowance under Section 14A in the case of banks has been settled by the jurisdictional High Court in the assessee's own case and by the Supreme Court. The Tribunal noted that the Hon'ble Supreme Court in South India Bank Ltd. (supra) held that no disallowance under Section 14A can be made in the case of banks. This was followed by the Karnataka High Court in Canara Bank (ITA No.258/2020 dated 8.2.2021). The Tribunal further observed that the Tribunal in Canara Bank (erstwhile Syndicate Bank) had held that no disallowance under Section 14A can be made if the investments are stock-in-trade. The Tribunal also referred to the Supreme Court judgment in PCIT v. PNB Housing Finance Ltd. (supra). Consequently, the Tribunal directed the deletion of the disallowance sustained by the CIT(Appeals) under Section 14A. The appeals of the assessee and the revenue were allowed for statistical purposes.

The Tribunal held that no disallowance under Section 14A can be made in the case of banks, following the Supreme Court's decision in South Indian Bank Ltd. and subsequent High Court and Tribunal rulings. The Tribunal also noted that the issue of bad debts and their adjustment against provisions for bad and doubtful debts was clarified by Explanation 2 to Section 36(1)(vii) to bring certain assessees within the ambit of the proviso.

The Tribunal condoned the delay in filing the appeal due to reasonable cause (medical condition). It was noted that the NFAC had dismissed the appeal ex-parte, and while deprecating the assessee's non-cooperation, the Tribunal, in the interest of justice, decided to provide another opportunity.

The ITAT found the assessee's request for an opportunity to present documentary evidence for the delay reasonable. The Tribunal decided to remit the issue back to the NFAC with a direction to consider an appropriate condonation petition.

The CIT(A) held that penalty under section 271(1)(c) cannot be imposed when the addition in assessment proceedings was on an estimation basis, as concealment of income or inaccurate particulars were not established. The Tribunal, while noting that the quantum assessment was sustained, found that the assessee claimed no tax liability due to Section 10AA benefits. Therefore, the Tribunal restored the matter to the AO to re-examine the issue after providing the assessee an opportunity of hearing.

The Tribunal noted the assessee's non-cooperative attitude but, in the interest of justice, decided to provide another opportunity. The issue was remitted to the NFAC for fresh consideration after providing the assessee with a proper opportunity of being heard.

The Tribunal condoned the delay, finding sufficient reason for the belated filing due to a fraud committed by earlier employees and subsequent scattering of records. The issue regarding the disallowance of deduction under section 80P(2)(a)(i) was remitted back to the NFAC for fresh consideration.

The Tribunal noted that the appeal was decided ex-parte. Considering the possibility of notices being missed, and in the interest of justice, the assessee was granted one more opportunity to represent their case before the CIT(A).

The Tribunal, while deprecating the assessee's nonchalant attitude, decided to provide one more opportunity in the interest of justice and equity. The issues were restored to the files of the CIT(A) with a direction for the assessee to cooperate and avoid unnecessary adjournments.

While deprecating the assessee's nonchalant attitude, the Tribunal, in the interest of justice and equity, decided to provide one more opportunity to the assessee to represent their case.

The Tribunal, relying on the jurisdictional High Court's decision in PCIT vs. Karnataka State Co-operative Federation Ltd., held that the Appellate Authority has the power to consider a fresh claim even if it was not made in the original or revised return. The High Court had distinguished the Goetze case, affirming that appellate authorities can entertain such claims.