ITAT Bangalore Judgments — August 2024

The Tribunal noted that the crucial issue was whether the cost of the assets on which depreciation was claimed had previously been allowed as an application of funds. This factual aspect needed examination by the Assessing Officer (AO).

The tribunal held that the disallowance related to scientific research expenses under Section 35(2AB) should be restricted to the amount not approved by DSIR, and the remaining expenses could be allowed as business expenses. The disallowance for guest house rent paid to directors was remitted to the AO for fresh examination. The disallowance under Section 14A was deleted as there was no exempt income. The disallowance for non-deduction of TDS on communication expenses was deleted as TDS was not applicable on expenses below the threshold limit.

The Tribunal condoned the delay of 39 days, citing the circumstances and the principles laid down by the Supreme Court in Collector, Land Acquisition vs. MST Katiji & Ors, prioritizing substantial justice over technicalities. The Tribunal also noted that the ADDL/JCIT(A) had not adjudicated the issue on merits and had confirmed the AO's order based on non-response to email notices, despite the assessee having indicated they preferred physical notices. Therefore, the case was remitted back to the ADDL/JCIT(A) for fresh adjudication.

The Tribunal acknowledged the assessee's genuine difficulties and the mental agony caused by the circumstances, finding a reasonable cause for her non-appearance. It granted one more opportunity for the assessee to appear before the AO and present her case.

The Tribunal acknowledged the peculiar facts and circumstances, including the financial distress and health issues faced by the assessee and her family, which caused significant mental agony and prevented her from appearing before the lower authorities. The Tribunal found that the assessee had a reasonable cause for her non-appearance and delays.

The Tribunal addressed several grounds of appeal. Grounds related to custom duty adjustment and base cost adjustment in the manufacturing segment were dismissed as the assessee could not substantiate their claims and had not received such adjustments in previous years. The issue of provision for warranty was restored to the TPO for further examination. The grounds related to the applicability of TNMM vs. RPM method for the trading segment, comparability analysis, and working capital adjustment were largely allowed for statistical purposes, remitting them to the TPO for fresh consideration. The payments made to headquarters for services were allowed.

The Tribunal noted that the reason for denial was that the cost of assets on which depreciation was claimed had been allowed as an application of funds in earlier years. This required examination by the AO.

The Tribunal held that the issue of repayment of loan as application of income needs to be examined afresh by the AO. If the cost of assets acquired from loan funds was already allowed as application of income, then repayment of the loan should not be allowed. Conversely, if the cost was not allowed, then repayment could be.

The Tribunal held that there was no malafide intention on the part of the assessee and that a reasonable cause for the delay had been established. Relying on Supreme Court judgments, the Tribunal found sufficient cause to condone the delay in filing the appeals. On merits, for A.Y. 2017-18, the issue of commission paid to pigmy agents was remitted to the AO for verification. For A.Y. 2020-21, the issue of interest income was allowed with directions to the AO to recompute the income.

The Tribunal noted the assessee's representative's plea of unforeseen personal challenges and a change in consultant. Considering these circumstances, the Tribunal decided to remit the issue back to the CIT(A) to provide the assessee with a fair opportunity for hearing and submission of documents. The CIT(A) was also given liberty to pass an order in accordance with law if the assessee failed to cooperate in the second round.

The Tribunal acknowledged the genuine difficulties faced by the assessee and the reasonable cause for her non-appearance before the lower authorities. It recognized that the issues raised with respect to unexplained investments and remittances warranted a proper hearing.

The Tribunal condoned the delay in filing the appeals for both assessment years, finding sufficient cause and no malafide intention on the part of the assessee. On merits, the issue of disallowance of commission paid to pigmy agents for AY 2017-18 was remitted to the AO for verification. For AY 2020-21, the issue of interest income and allowing the cost of funds was decided in favor of the assessee.

The Tribunal held that the CIT(A) was correct in deleting the addition as the assessee had provided details and evidence showing the income was already declared in their financial statements and ITR-6. The Revenue failed to produce contra-evidence to challenge the CIT(A)'s order.

The Tribunal held that an intimation under section 143(1)(a) cannot be processed when a notice under section 143(2) has already been issued, and an assessment order under section 143(3) has been passed. Amendments to Section 143(1D) and insertion of Section 241A by the Finance Act, 2017, support this view.

The Tribunal held that interest earned by the assessee society from deposits made with co-operative banks as per the Karnataka State Cooperative Rules 1960 is eligible for deduction under Section 80P(2)(a)(i) as it constitutes business income. The disallowance of Rs. 33,52,411 by the AO for provisions made for interest expenses was considered tax neutral, and the CIT(A)'s directions for calculating tax under MAT were found to be without infirmity.

The Tribunal held that the amendment to Section 115BBE, enhancing the tax rate from 30% to 60% effective from 1.4.2017, is applicable for AY 2017-18. The Tribunal noted that this amendment enhanced the rate rather than creating a new liability, and thus applies from the commencement of the assessment year.

The Tribunal, relying on the Supreme Court's judgment in Collector, Land Acquisition Vs. MST Katiji, held that substantial justice should be preferred over technical considerations. The Tribunal condoned the 34-day delay, considering the reasons provided by the assessee as sufficient.

The Tribunal held that since the CIT(A)'s order was ex-parte, an opportunity should be given to the assessee. The issue of addition under Section 69A r.w.s. 115BBE was restored to the AO for examination of the genuineness of cash deposits, with a clarification that the addition should not be reiterated solely on the ground that the assessee is not a specified person to accept demonetized currency.

The Tribunal held that for income tax matters, the law applicable is that in force for the relevant assessment year. The assessee was a resident for AY 2016-17. The revenue authorities incorrectly considered the assessee's status as non-resident at the time of issuing the notice u/s 148, which was not correct. Therefore, the assessee was not an eligible assessee as per section 144C(15)(ii) of the Act for the impugned assessment year.

The Tribunal held that in cases where substantial justice and technical considerations are pitted against each other, substantial justice should be preferred. Condoning the delay would prevent unjust enrichment to the state and uphold the principle that government cannot retain tax not authorized by law. The Tribunal relied on the Supreme Court's judgment in Collector, Land Acquisition v. Mst. Katiji and Ors.

The Tribunal admitted additional evidence filed by the assessee and decided to send the issue back to the Assessing Officer for fresh consideration. The Tribunal noted that the assessee is a no-profit-no-loss organization and the government provided grants to cover the guarantee commission. The assessee was given the liberty to file further documents, and a reasonable opportunity for a hearing was to be provided.

The Tribunal condoned the delay of 28 days in filing the present appeals, considering the reasons provided were not willful. However, the Tribunal noted the significant delay in filing before the CIT(A) and the reasons cited for that delay were not convincing. Despite this, the Tribunal decided to remand the appeals to the CIT(A) for fresh consideration on merits after imposing costs.

The Tribunal held that notices were sent to the assessee's email despite his explicit instruction not to do so, leading to a lack of knowledge about hearing dates. Therefore, the principles of natural justice were violated.

The Tribunal noted that the AO did not specify under which limb of Section 270A the penalty was being imposed, nor did they provide sufficient reasons for invoking Section 270A(9). Citing relevant High Court judgments, the Tribunal held that the penalty order was arbitrary and that the assessee's actions did not constitute misreporting of income warranting penalty under Section 270A.

The CIT(A) dismissed the assessee's claim, stating that the original cause of action arose at the stage of proceedings under Section 143(1), not Section 154, and therefore the appeal against the Section 154 order was not maintainable. The Tribunal disagreed, opining that the CIT(A) should have considered the assessee's claims on merits.

The Tribunal observed that for some creditors, confirmations were available but lacked PAN. It noted that the names and addresses of creditors were available, and authorities could have verified them further. The Tribunal also noted that for a subsequent assessment year, similar opening balances of creditors were not disputed. Therefore, the Tribunal deleted the addition of Rs. 90,79,528 and Rs. 29,60,099.

The Tribunal found that notices were sent to an incorrect email ID, and the assessee's email ID was available in the profile. The assessee also explained that the assessment order came to their knowledge late due to unfamiliarity with e-filing. Therefore, there was sufficient reason for the assessee's non-appearance.

The Tribunal condoned the 28-day delay in filing the appeals, considering the explanation to be reasonable and not willful, especially in light of the COVID-19 pandemic's impact. The appeals were remitted back to the CIT(A) for adjudication on merits, subject to the assessee paying a cost of Rs. 5,000/- per year.

The Tribunal held that the Assessing Officer (AO) was not justified in making additions without any incriminating material found during the search. The assessee had filed his return under section 139(1) before the search, and no assessment was pending. The time limit for issuing a notice under section 143(2) had also expired.

The Tribunal condoned the delay, acknowledging the bona fide reasons presented by the assessee's counsel. The Tribunal observed that the CIT(A) failed to establish the service of hearing notices, and the assessee's demise contributed to the non-compliance.

The FAA dismissed the appeal due to the delay without considering the merits. The Tribunal noted that the assessee had reasonable cause for the delay and condoned it. The Tribunal decided to send the matter back to the AO for fresh consideration.

The Tribunal modified the direction of the PCIT for a de-novo assessment. The AO was directed to frame the assessment without being influenced by the PCIT's direction and to consider the assessee's contentions based on documentary evidence.

Regarding the TDS issue, the Tribunal held that Section 194J has a threshold limit of Rs. 30,000, and the audit fee of Rs. 14,100 was below this limit, thus no disallowance was warranted. Concerning the demonetization period cash deposit, the Tribunal noted that while SBNs were demonetized, they could still be exchanged until the appointed date, provided a source was established.

The Tribunal noted that the reasons for the delay in filing the appeal before the FAA were submitted for the first time before the ITAT. Therefore, the Tribunal decided to remit the issue of delay to the FAA for fresh consideration. The FAA is directed to dispose of the appeal within six months after providing the assessee with a reasonable opportunity to be heard.

The Tribunal noted that the assessee failed to comply with notices from the AO and CIT(A), resulting in ex-parte decisions. However, considering the assessee's undertaking to cooperate and the reason for non-appearance, the Tribunal decided to provide one more opportunity.

The Tribunal held that societies registered under the Karnataka Souharda Sahakari Act, 1997, are at par with those registered under the Karnataka Cooperative Societies Act, 1959, and are eligible for deduction under Section 80P. Regarding SBNs, the Tribunal noted that while transactions were restricted after a certain date, they were not entirely illegal before the appointed date if the source could be established. The issue was remitted to the AO for fresh adjudication.

The Tribunal noted that the land acquisition was done by BMRCL through KIADB for a metro rail project as per the KIAD Act and the award was fixed by mutual consent. The Tribunal referred to the judgment in Bangalore Metro Rail Corporation Ltd. v. M/s. Sri Balaji Corporate Services and Others and other High Court judgments, holding that compensation received under mutual agreement is not liable for income tax.

The Tribunal noted that although the assessee was aware of the proceedings, the notices were sent to an email ID where communication was explicitly prohibited. Given the circumstances and the request of the AR, the Tribunal decided to provide one more opportunity to the assessee.

The Tribunal, through this corrigendum, has corrected Para 8 of the original order. The corrected statement now clearly mentions that the appeal by the revenue is allowed for statistical purposes.

The Tribunal noted that the assessee's explanation for the delay, though potentially influenced by wrong advice from a tax consultant and cash shortage due to seizure, was not entirely unreliable. The Tribunal found sufficient cause for the delay.

The Tribunal held that the assessee's non-appearance was not due to their default, as notices were sent contrary to their explicit instruction. Therefore, the assessee was granted one more opportunity to represent their case before the CIT-A.

The Tribunal held that interest from compulsory deposits with a cooperative bank is eligible for deduction under Section 80P(2)(a)(i), citing a Supreme Court judgment. Interest from surplus funds does not qualify for deduction under Section 80P(2)(d) and is taxable under Section 56. Dividend and bonus from KMF are eligible for deduction under Section 80P(2)(d). The appeal regarding Section 80G deduction was dismissed as no grievance was pointed out.

The Tribunal noted that the delay was unintentional and due to circumstances beyond the assessee's control. Citing the Supreme Court's decision in Collector Land Acquisition Vs. Mst. Katiji & Ors., the Tribunal emphasized a liberal approach to condoning delays when there is sufficient cause. The Tribunal found reasonable cause for the delay.