ITAT Bangalore Judgments — March 2024

The Tribunal held that the assessee's failure to appear before the NFAC was due to a lack of familiarity with the ITBA portal, which constitutes a valid reason. Therefore, the matter was remitted back to the NFAC for a fresh hearing.

The Tribunal held that the AO can scrutinize the valuation report but must follow the DCF method adopted by the assessee and cannot change it. The AO should determine a fresh valuation if necessary, but based on the DCF method. The actual future results cannot be used to dispute past projections.

The Tribunal noted that a coordinate bench had previously quashed the revision order passed by the CIT under Section 263 of the Act. Consequently, the subsequent proceedings giving effect to the revision order by the AO and CIT(A) were deemed non est in law and unsustainable. The Tribunal quashed the impugned order of the CIT(Appeals).

The Tribunal noted that the AO correctly invoked Section 154 as the omission to offer global income was a factual mistake and not a debatable issue. The assessee had claimed foreign tax credit without offering the global income, which was rectified by the AO. The CIT(A) had directed the AO to consider the tax credit claim. The Tribunal directed the AO to follow the CIT(A)'s direction for giving effect to the order considering DTAA provisions.

The Tribunal noted that the assessee had not filed Form 10-IC within the prescribed time for Assessment Years 2020-21 and 2021-22. For AY 2020-21, the application for condonation of delay was pending before the CBDT, and for AY 2021-22, the CBDT had disposed of the application without specific directions. The Tribunal restored the matters to the AO to examine the conditions for condonation.

The Tribunal held that Section 36(1)(va) and Section 43B(b) of the Income Tax Act operate differently regarding due dates for employee and employer contributions. Failure to deposit employee contributions by the prescribed due date results in permanent negation of deduction, as per the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT.

The Tribunal noted that the issue of determining the due date for remittance of employee contributions (ESI/PF) is critical. The assessee argued that the due date should be calculated from the actual date of salary disbursement, while the revenue contended it should be based on the statutory due date. Several court decisions were cited by both sides.

The Tribunal noted that the assessee did not file Form 10-IC within the prescribed time for both assessment years. For AY 2020-21, the application for condonation was pending before the CBDT, and for AY 2021-22, the CBDT had disposed of the application without specific directions.

The Tribunal clarified that the appeal should be remitted to the Assessing Officer for fresh consideration and decision, subject to the assessee paying costs of Rs. 10,000/- and producing necessary documents. The assessee is to be given a reasonable opportunity of hearing.

The Tribunal held that the CIT(A)'s directions to the AO to compute the loss considering the lower of brought forward loss or depreciation on a cumulative basis were in line with the dictum laid down by the jurisdictional Tribunal in the case of DCIT Vs. BIAL and the Mumbai Bench of the Tribunal in the case of Amline Textiles Pvt. Ltd.

The Tribunal noted that the assessee, as a co-operative society, had accepted cash deposits from its members. While the AO added Rs. 14,32,000 to the income under section 69A and taxed it under section 115BBE, the Tribunal remitted the issue of verification of cash deposit details back to the AO. Regarding the deduction u/s 80P, the Tribunal held that it is not allowable without filing a return of income, citing relevant High Court judgments.

The Tribunal held that the payments made by GIPL to GIL were not in the nature of royalty or FTS under the Act and the India-Ireland DTAA. They were considered business profits and not taxable in India as GIL did not have a Permanent Establishment (PE) in India. The Tribunal relied on various High Court and Supreme Court decisions, including the Engineering Analysis Centre of Excellence (P) Ltd. case, to conclude that the use of software and brand features did not amount to royalty.

The Tribunal noted that the due date for remittance of ESI/PF is a contentious issue, particularly regarding whether it should be calculated from the end of the month to which salary relates or the month of actual disbursement. Relying on previous decisions and the need for proper examination, the Tribunal remitted the issue back to the Assessing Officer.

The Tribunal held that the payments made by GIPL to GIL cannot be characterized as royalty under the India-Ireland DTAA. The issue was covered by previous decisions of the Tribunal in the assessee's own case and in the payer's case (GIPL). The Tribunal also noted that the definition of royalty in Article 12 of the India-Ireland DTAA is more beneficial to the assessee than Section 9(1)(vi) of the Income-tax Act. The Tribunal relied on the Supreme Court's decision in Engineering Analysis Centre of Excellence (P) Ltd v. CIT.

The Tribunal held that the seized materials were not conclusive evidence and lacked corroboration. The tribunal noted that the addition was based on loose sheets and statements that were not properly substantiated, and the assessee was not given adequate opportunity for cross-examination in some instances. The tribunal found that the AO's assessment relied on suspicion and conjecture rather than concrete evidence.

The Tribunal noted that the NFAC/CIT(A) had not considered recent Supreme Court decisions regarding section 80P(2)(d) deductions, specifically in the cases of Mavilayi Service Co-operative Bank Ltd. and Kerala State Co-operative Agricultural and Rural Development Bank Ltd. Therefore, the Tribunal decided to remand the case.

The Tribunal held that the additions made by the AO were based on loose slips and third-party statements without sufficient corroborative evidence. It also noted that the assessee was not provided adequate opportunity for cross-examination of key witnesses. The Tribunal observed that such documents, not being speaking documents and lacking authenticity, could not form the sole basis for assessment. Therefore, the additions and the penalty were deleted.

The Tribunal noted that the NFAC/CIT(A) did not consider the directions of the Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. v. CIT and a subsequent decision in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. v. The Assessing Officer. The Tribunal held that the applicability of section 80P(2)(d) deduction for interest/dividend income earned from deposits needs detailed analysis.

The Tribunal noted that while the assessee did not appear before the CIT(A), the period was affected by the COVID-19 pandemic, suggesting a possibility of oversight. The Tribunal emphasized the assessee's right to be heard and stated that the CIT(A) should have considered the issues on merits regardless of non-appearance.

The Tribunal noted that Section 38 of the Employees Provident Fund Scheme, 1952, requires deposits within 15 days of the salary becoming due. The assessee's argument of shifting the salary payment date to justify delayed deposits was not accepted, especially in light of the Supreme Court's decision in CHECKMATE SERVICES PVT LTD VS CIT-1. The Tribunal directed the AO to verify details and restrict disallowance to payments deposited beyond the statutory due date.

The Tribunal noted that Form 10B was uploaded by the auditor before the return processing and approved by the assessee before the return of income was processed. Due to the absence of a regular Executive Officer, there was a delay in approval. Therefore, the rectification order was deemed incorrect, and the CIT(Appeals) had rightly allowed the assessee's appeal.

The Tribunal held that loose sheets and scribbled note pads, without any corroborative evidence or signatures, do not constitute valid documents to sustain additions. The AO failed to establish a nexus between the seized material and the alleged undisclosed income. The tribunal cited several High Court and Supreme Court judgments emphasizing that such documents are inadmissible as evidence and cannot form the sole basis for assessment.

The Tribunal noted that the assessee made cash deposits during demonetisation, and while the AO made additions under section 69A, the lower authorities did not sufficiently verify the evidence. The Tribunal directed the assessee to provide details of depositors for loan repayments and ordered the AO to verify these with proper opportunity for the assessee to be heard.

The Tribunal acknowledged that the appeal was decided ex parte and that the assessee claimed non-receipt of hearing notices from NFAC. In the interest of justice and equity, the Tribunal decided to provide the assessee with another opportunity.

The Tribunal noted that the assessee accepted cash deposits from its members in ordinary course of business. The Tribunal relied on a coordinate bench decision, which held that if the assessee has produced a list of depositors and the amounts deposited, and the AO has not provided further opportunity to explain, then section 68 may not apply. The Tribunal also directed the assessee to provide further details regarding the cash deposits.

The Tribunal held that the addition was made on the basis of uncorroborated loose slips and statements lacking evidentiary value. The Tribunal noted that the seized material did not contain specific details like dates, names, or signatures. The Tribunal also observed that the assessee was not provided with proper cross-examination opportunities. Consequently, the Tribunal deleted the additions.

The Tribunal held that filing Form 67 is a procedural and directory requirement, not mandatory. The delay in filing was condoned due to the assessee's medical issues. The Tribunal referenced Supreme Court judgments stating that procedural laws are aids to justice and should not extinguish substantive rights. The Double Taxation Avoidance Agreement (DTAA) provisions override the Income Tax Act, and the assessee has a vested right to claim FTC.

The assessee's representative argued that they did not receive the notices from the FAA and requested a chance to represent the case. Considering the rival submissions and in the interest of justice, the Tribunal decided to remit the issue back to the AO for fresh consideration.

The Tribunal noted that the NFAC had not considered relevant Supreme Court decisions. The Tribunal also observed that the Supreme Court, in a subsequent decision, analyzed the applicability of Section 80P(2)(d) for interest income from deposits. Therefore, the Tribunal remanded the case back to the NFAC/CIT(A).

The Tribunal noted that the authorities below had not verified documents to explain the cash deposits and made the addition. The Tribunal referred to CBDT circulars concerning the verification of cash deposits and instructed the assessee to establish the genuineness of the deposits by providing details of depositors. The AO was directed to verify these details.

The CIT(A) dismissed the appeal, agreeing with the AO that the explanation of debt recovery was an afterthought and that the assessee failed to substantiate the claim. The Tribunal noted that the authorities below had not verified documents to explain the cash deposits and that this needed verification in light of CBDT circulars.

The Assessing Officer initiated penalty proceedings for furnishing inaccurate particulars of income but admittedly imposed penalty for concealment of income, on which no separate proceedings were initiated. Therefore, the penalty is not sustainable.

The Tribunal held that the loose sheets and statements relied upon by the AO lacked evidentiary value and were not substantiated by corroborative evidence. The assessment orders were based on surmises and conjectures, and the opportunity for cross-examination was not provided, violating principles of natural justice. Therefore, the additions were deleted.

The Tribunal noted that the assessment was completed under section 143(3). It was also observed that the first appellate authority issued notices on different dates, but according to the assessee, these notices were not served. Considering the interest of justice, the Tribunal decided to remit the matter back to the CIT(Appeals) for fresh consideration.

The Tribunal noted that the NFAC did not consider relevant Supreme Court decisions, particularly regarding the applicability of Section 80P(2)(a)(i) and 80P(2)(d) concerning interest income from deposits. The Tribunal decided to remand the appeals back to the NFAC/CIT(A) for readjudication.

The Tribunal noted that the details submitted by the assessee regarding the cash deposits were not doubted or examined by the lower authorities. Therefore, the issue was remitted back to the AO for verification of these details.

The ITAT held that loose sheets and unsigned note-pads, without any corroborative evidence or links to other incriminating materials, do not constitute valid evidence to sustain additions. The Tribunal emphasized that additions cannot be made on mere assumptions or presumptions and that the AO failed to establish a nexus between the seized materials and the undisclosed income. The court also noted inconsistencies in the AO's application of different sections of the Income Tax Act.

The Tribunal held that the loose sheets and scribbled note pads seized during the search did not qualify as books of accounts or other documents. The presumption under Section 292C of the Act could not be applied, and the onus was on the AO to prove the ownership of these materials. The AO failed to provide cogent evidence to corroborate the notations on these papers.

The tribunal acknowledged that ignorance is not an excuse but emphasized that justice requires no party to be unheard. It was noted that there was no proper representation before the NFAC. The tribunal opined that the assessee had not benefited from non-representation and had suffered due to prolonged litigation.

The Tribunal held that the filing of Form 67 is a procedural, directory requirement and not mandatory. Relying on Supreme Court judgments, it was stated that procedural delays should not extinguish a substantive right, especially when there is sufficient cause and no malafide intention. The DTAA provisions override the Act, and the assessee has a vested right to claim FTC.

The Tribunal noted that the Assessee failed to substantiate its appeal before the Commissioner despite opportunities. However, considering the peculiar facts and the need for substantial justice, the case was remanded to the Commissioner for a decision on merits, with a direction for the Assessee to provide necessary documents.

The Tribunal noted that the impugned order was ex-parte and lacked relevant submissions. The issue of unexplained cash deposits under Section 69A of the Act needed proper adjudication. Therefore, the Tribunal inclined to remand the case to the Commissioner for a fresh decision.