ITAT Bangalore Judgments — June 2024

The Tribunal admitted additional evidences submitted by the assessee, finding them necessary for proper adjudication. These included Seychelles income tax returns, bank confirmations of RTGS transfers from Barclays Bank, Seychelles, and a CA certificate confirming tax residency. The Tribunal decided to remit the issue to the AO/TPO for re-examination.

The Tribunal held that the disallowance of employee contributions to PF and ESI made under Section 36(1)(va) of the IT Act in the intimation passed under Section 143(1) is to be upheld. The arguments regarding the due date for payment being linked to the salary disbursement month were rejected, and the Supreme Court's decision in Checkmate Services Pvt Ltd was relied upon.

The Tribunal held that at the stage of granting registration under Section 12A, the authorities should primarily assess whether the assessee's objectives are for General Public Utility and if its proposed activities are genuine. The DIT(E) incorrectly stepped into the shoes of the Assessing Officer by discussing issues pertaining to assessment of income, which should be examined at the assessment stage (u/s 143(3)).

The Tribunal held that interest income earned from investments in co-operative societies/banks is eligible for deduction under Section 80P(2)(d) if the assessee is a co-operative society and not a co-operative bank. However, interest earned from fixed deposits in banks is to be considered income from other sources, with relief available under Section 57. The Tribunal also directed the AO to verify if the interest income was from investments with co-operative societies and to allow proportionate deduction under Section 80P(2)(a)(i) on increased profits.

The tribunal held that the disallowance was justified as the employees' contribution to PF/ESI must be deposited within the due date prescribed by the relevant Acts to be eligible for deduction under Section 36(1)(va). The Supreme Court's decision in Checkmate Services (P.) Ltd. was relied upon, stating that this contribution is treated as income under Section 2(24)(x) unless deposited by the due date.

The Tribunal found that the assessee's contention regarding the non-receipt of notices and the issue with the original email ID was genuine. The Tribunal noted that the assessment was made ex-parte and the assessee did not have an opportunity to present their case.

The Tribunal condoned the delay in filing the appeal before the CIT(A), opining that the delay was not due to malafide intention but an inadvertent mistake. The Tribunal also noted that the assessee took prompt steps once the mistake was realized.

The Tribunal noted a gross violation of the principles of natural justice regarding grounds III to VII, due to inadequate opportunity provided to the assessee. Consequently, these issues were remanded back to the AO for fresh consideration. Regarding the departmental appeal, the issue concerned the disallowance under Section 14A. The Tribunal, following the High Court's decision in Essilor India Pvt. Ltd., found no infirmity in the CIT(A)'s view and upheld it.

The Tribunal held that for TDS statements filed for the period prior to 01.06.2015, no late fee under Section 234E could be levied as the enabling provision under Section 200A was inserted only w.e.f. 01.06.2015. The Tribunal relied on the jurisdictional High Court's decision in Fatehraj Singhvi & Ors.

The Tribunal noted that the notice u/s 143(2) was issued by ITO, Ward-7(2)(1) for the original return, but no such notice was issued for the revised return. The revised return was processed despite being belated. The Tribunal held that the issue of notice u/s 143(2) for the revised return needs to be decided by the CIT(A) based on admitted facts.

The Tribunal noted a gross violation of natural justice concerning grounds III to VII, as the assessee was not provided with adequate opportunity to be heard. Therefore, these issues were remanded to the Assessing Officer for fresh consideration. Regarding Ground No. II, it was not pressed and thus dismissed. For Ground No. I, the Departmental appeal contested the restriction of disallowance under Section 14A. The Tribunal upheld the CIT(A)'s view, following the decision in Essilor India Pvt. Ltd., and dismissed the revenue's grounds.

LTC is meant for travel within India. Any travel involving a foreign leg or not following the shortest route is not eligible for exemption under Section 10(5). The employer has a statutory duty to deduct TDS on such reimbursements.

The Tribunal noted a CBDT circular extending the due date for filing renewal applications under sections 12A and 80G. Both parties acknowledged this circular, and the Tribunal decided to restore the matter to the CIT(E) for a decision on merits.

The Tribunal noted that the assessee is a cooperative society registered under the Karnataka Co-operative Societies Act. The primary issue was whether the interest income earned on investments made from surplus funds is eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). The Tribunal considered various judicial precedents and concluded that interest income not attributable to the main business operations of the assessee is not eligible for deduction. However, the Tribunal directed the AO to allow the cost of funds for earning the interest income.

The Tribunal condoned the delay in filing the appeal. It noted that the CIT(A) erred in dismissing the appeal on technical grounds (non-compliance with Section 249(4)(b)). The Tribunal found that the issue of cash deposits and disallowance of expenses needed fresh examination by the AO.

The CIT(A) upheld the AO's order, stating that since the assessee did not maintain books of account and the turnover exceeded Rs. 2 crores, the AO was justified in estimating the profit. The CIT(A) noted that in the subsequent assessment year, the assessee declared a profit of 10.45%. Therefore, estimating the profit at 10% based on the subsequent year was considered logical. However, the Tribunal found that the estimation should be based on the assessee's declared profit in preceding years and the subsequent year. Considering the average of these, the profit rate should not exceed 8%. The Tribunal directed the net profit to be computed at 6.5% of the gross receipt.

The Tribunal noted that the assessee claimed that notices were not served by the First Appellate Authority (FAA), leading to an ex-parte order. Considering the submissions and in the interest of justice, the Tribunal decided to remit the matter back to the CIT(Appeals) for a fresh consideration on merits after providing the assessee an opportunity of being heard.

The Tribunal considered a CBDT Circular extending the due date for filing renewal applications under sections 12A and 80G. Acknowledging this circular, the Tribunal restored the matter to the CIT(E) for a decision on merits.

The Tribunal acknowledged that both the assessment order and the CIT(A)'s order were ex-parte. The assessee's counsel explained the absence was due to a communication gap and requested another opportunity. Considering the interest of justice and the paper book filed, the Tribunal decided to remit the issue back to the AO for fresh consideration.

The Tribunal held that since the OD and loan taken by the assessee for investment were disclosed and cross-verified, the provisions of Section 69 of the Income Tax Act could not be invoked for addition. Regarding interest expenses, a proportionate disallowance of Rs. 5 Lakhs was upheld as the assessee could not justify the expenditure under Section 28.

The Tribunal held that as per the proviso to Section 143(1)(a) of the IT Act, no adjustment can be made without intimating the assessee in writing or electronically. The assessee did not receive such intimation for the adjustments made. Relying on previous decisions, the Tribunal found that the adjustments were made contrary to the law.

The Tribunal considered the rival submissions and the facts on record. It was of the view that the present appeal should also be restored to the file of the CIT(A) for deciding afresh.

The Tribunal held that the length of the delay is not material, but the reasons adduced must be properly pleaded, convincing, and acceptable. Considering the ongoing litigation between the present and erstwhile committees and the civil court's order restraining the erstwhile committee members, the non-cooperation could not be considered a made-up situation. The Tribunal relied on the Supreme Court's decision in Collector Land Acquisition Vs. Mst. Katiji & Ors. to condone the delay.

The Tribunal held that the deduction under Section 80JJAA, once fulfilled in the first year for additional employees who meet the 300-day employment criteria, is available for three subsequent assessment years. The proviso to the section and subsequent amendments clarify that continuous hiring or an increase in workforce every year is not a prerequisite for claiming the deduction in subsequent years.

The Tribunal found merit in the assessee's contention that notices were sent to an incorrect email ID, leading to their non-appearance. The delay in filing the appeal was condoned. The CIT(A)'s ex-parte order was set aside.

The Tribunal agreed with the Ld.DR that the appeal should have been filed against the original assessment order u/s 143(3) and not the rectification order u/s 154. However, considering the delay and the assessee's desire to argue on merits, the Tribunal condoned the delay in filing the appeal against the assessment order.

The Tribunal found that the filing of Form 67 is a procedural aspect and not mandatory. Given that the delay might be only 64 days after excluding the COVID period and in the interest of justice, the matter was restored to the CIT(A).

The Tribunal noted that the Karnataka High Court in Swabhimani Souharda Credit Co-operative Ltd. vs. Govt. of India had held that entities registered under the Karnataka Souharda Sahakari Act, 1997, fit the definition of a 'co-operative society' under Section 2(19) of the Income Tax Act, 1961, and are thus eligible for Section 80P benefits. The Tribunal also referred to the Supreme Court decision in Mavilayi Service Co-operative Bank Ltd. v. CIT, which held that deduction under Section 80P cannot be denied for extending credit facilities to nominal or associate members.

The Tribunal held that the assessee failed to establish a "sufficient cause" for the inordinate delay. The explanation provided was considered a bald and general statement, lacking in bona fides and not supported by evidence. Therefore, the delay could not be condoned, and the appeal was dismissed in limine.

The Tribunal, relying on the decision of the Hon'ble Karnataka High Court in the case of Swabhimani Souharda Credit Co-operative Ltd. vs. Govt. of India, held that entities registered under the Karnataka Souharda Sahakari Act, 1997, fit the definition of a 'co-operative society' under Section 2(19) of the Income-tax Act, 1961. Consequently, they are entitled to the benefit of Section 80P. The issue regarding interest from statutory deposits was remitted to the AO for fresh consideration.

The Tribunal condoned the 16-day delay in filing the appeal, citing the principles laid down by the Supreme Court regarding 'sufficient cause' and the importance of substantial justice. The Tribunal found that the delay was unintentional and not attributable to the assessee.

The Tribunal noted that the issues in the appeal and the rectification order were interlinked. It was deemed necessary for the CIT(A) to consider the appeal against the rectification order along with the present appeal. Therefore, the appeal was remitted back to the CIT(A) for a consolidated consideration of both orders.

The Tribunal held that expenses attributable to income taxable under the head 'income from other sources' are allowable. It further held that depreciation is a statutory allowance and cannot be disallowed by invoking Section 14A. The case was restored to the AO for quantification.

The Tribunal noted that the assessee deposited cash of Rs. 1,22,78,125 in the bank account. However, it also noted from the statement of facts that only Rs. 58,18,200 was deposited. The assessee could not comply with the notices issued by the AO during the assessment proceedings.

The Tribunal held that the assessee's activity of providing credit facilities to its members, including nominal members, should not lead to the denial of deduction under section 80P(2)(a)(i). The Tribunal referred to Supreme Court decisions stating that such denial is not justified, especially if the society is not a bank and does not have a banking license. Any interest or dividend from investments should be considered under section 80P(2)(d).

The Tribunal held that the reasons adduced for the delay were reasonable, considering the litigation between the present and erstwhile committee members and the civil court's order restraining the erstwhile members. The Tribunal referred to the Supreme Court's observations in Collector Land Acquisition Vs. Mst. Katiji & Ors. regarding condonation of delay.

The Assessing Officer made an addition of Rs. 32,00,500/- under section 69A of the Act. The CIT(A) upheld this addition without verification. The Tribunal noted that the AO did not conduct necessary verification for the cash deposits, despite documentary evidence provided by the assessee.

The Tribunal held that an HUF ceases to exist when it is reduced to a single member. Consequently, no assessment order can be passed against a non-existent entity, as there is no machinery under the Income Tax Act for assessing an erstwhile HUF. The reassessment proceedings were initiated after the death of one of the members, and thus, the HUF was not in existence at the time of the assessment.

The Tribunal held that the overseas commission agents were non-residents and did not have a permanent establishment in India, nor were the services rendered in India. Therefore, the commission income was not chargeable to tax in India. Consequently, the requirement to deduct TDS under section 195 did not arise.

The Tribunal held that the third proviso to Section 50C, which provides a tolerance limit for variations between sale consideration and stamp duty value, is curative in nature and applies retrospectively. Therefore, if the difference is within the 10% tolerance limit, the stamp duty value should not be substituted for the sale consideration for computing capital gains.

The Tribunal noted that the assessee did not appear before the lower authorities. While the Assessing Officer (AO) invoked Section 68, the CIT(A) invoked Section 69. The Tribunal held that the AO quoting a wrong section is not fatal and the issue is regarding payment of cash outside books. The addition of Rs. 8,58,515/- was considered as unexplained investment.

The Tribunal held that for deduction under Section 80P(2)(a)(i), the income must be attributable to the main business of providing credit facilities. Investments in banks, even if compulsory, do not fall under this category. Regarding Section 80P(2)(d), the eligibility for deduction on interest from cooperative banks is dependent on whether the payer bank is governed by the Banking Regulation Act, 1949, and holds an RBI license; this aspect was remitted to the AO. The issue of computing the cost of funds for investment income was also remitted to the AO for fresh computation.

The Tribunal noted that the AO did not conduct necessary verification regarding cash deposits made during and outside the demonetization period. Considering the business activity, the issue requires re-examination based on CBDT instructions.