ITAT Bangalore Judgments — September 2024

The Tribunal noted that while the assessee claimed to have provided details of members and their transactions, it was also stated that only a random sample of members' details were uploaded due to their large number. The Tribunal found it necessary to decide the issue afresh.

The Tribunal condoned the 43-day delay in filing the appeal due to sufficient cause. The Tribunal admitted additional evidence filed by the assessee and decided to restore the matter to the AO for examination of this evidence, as the original assessment was made on a best judgment basis.

The Tribunal noted a discrepancy in the amounts reported by the assessee and the submissions made. The assessee claimed transactions of Rs. 33,19,760, while the AO made an addition of Rs. 54,52,400. The Tribunal found that the assessee failed to prove that cross-examination was requested from the AO. Hence, the issue was remitted back to the AO for de novo reassessment.

The Tribunal held that the cash deposits were primarily from sale proceeds and unsecured loans, and thus derived from the assessee's business turnover on which profit was already declared. Treating these deposits as unexplained investment under Section 69A resulted in double taxation. The authorities failed to substantiate that the bank deposits exceeded the declared turnover.

The Tribunal condoned the 3-day delay in filing the appeal, acknowledging the technical difficulties faced by the assessee in submitting documents online. While deprecating the assessee's non-cooperation, the Tribunal decided to give the assessee another opportunity to present its case before the CIT(A)/NFAC.

The Tribunal held that the delay in filing the appeal was not intentional and was due to a misunderstanding by the assessee and their tax consultant, compounded by a search proceeding. Relying on various High Court and Supreme Court decisions, the Tribunal condoned the delay.

The Tribunal observed that the cash deposits were from earlier withdrawals made by the assessee, which were lying with him. The Tribunal noted that these transactions occurred before the demonetisation period, contrary to the AO's observation.

The Tribunal held that there was a sufficient cause for the delay in filing the appeal before the CIT(A), considering factors like waiting for a response from the JAO and the COVID-19 period. It condoned the delay and directed the CIT(A) to decide the appeal afresh on its merits, granting the assessee a reasonable opportunity of being heard.

The Tribunal noted that the assessee had relied on a previous order for earlier assessment years with identical facts, where similar disallowances were deleted. The Tribunal found that the cash payments were made due to business expediency and were genuine transactions. Regarding the on-money addition, the Tribunal held that the loose sheets alone were not sufficient evidence and lacked corroboration.

The Tribunal held that the payments made to subcontractors were for business expediency and fell under the exceptions provided in Rule 6DD, thus disallowance under Section 40A(3) was not justified. Regarding the 'on money' addition, the Tribunal found that the loose sheets were 'dumb documents' without corroborative evidence, and mere presumption or suspicion is not sufficient for making additions.

The Tribunal held that the cash payments to subcontractors were made under circumstances covered by Rule 6DD, considering business expediency and the nature of payments to migrating laborers. Regarding the 'on money' allegation, the Tribunal found that the loose sheets lacked corroborative evidence and were not sufficient to prove the actual collection of unaccounted income from flat sales.

The ITAT observed that the CIT(A) had inadvertently recorded facts and findings not emanating from the assessment order. Therefore, the Tribunal restored the issue to the file of the CIT(A) for fresh adjudication after considering the assessment order.

The Tribunal admitted additional evidence filed by the assessee, including land ownership documents. The Tribunal noted the assessee's non-compliance with notices from the AO and CIT(A) but decided to restore the matter for fresh assessment.

The Tribunal, relying on previous judgments including the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, held that the reimbursements for computer and hardware maintenance are not Fees for Technical Services (FTS) or FIS. The Tribunal also found that the payments for software maintenance and subscription charges do not constitute royalty.

The Tribunal noted that the CIT(A) had inadvertently recorded facts and findings not originating from the assessment order. The Departmental Representative (DR) could not controvert the assessee's arguments. Therefore, the Tribunal deemed it fit to restore the issue to the file of the CIT(A) for fresh adjudication.

The Tribunal held that the cash withdrawal from the bank prior to demonetization, and the explanation for holding it, was plausible given the circumstances, and thus the cash could not be treated as unexplained. Regarding the gold jewelry, the Tribunal found that the assessee was entitled to the benefit of CBDT Instruction No. 1916 for family members and that the remaining amount was covered by the disclosed income of the family members.

The Tribunal held that the filing of the audit report in Form 10B is a procedural lapse and not a mandatory requirement that would vitiate the assessee's entitlement to exemption under Section 11. The Tribunal relied on previous High Court and ITAT decisions.

The Tribunal held that Rule 128(9) of the Income Tax Rules does not mandate the disallowance of FTC for delayed filing of Form 67. It was further held that filing Form 67 is a directory, not mandatory, requirement and that the provisions of the Double Taxation Avoidance Agreement (DTAA) override the Act and Rules when they are more beneficial to the assessee. Therefore, the assessee is entitled to the FTC.

The Tribunal noted that while cash deposits themselves are not unexplained money, the assessee has the onus to prove the source. The assessee failed to do so, and the CIT(A) confirmed the addition without a scientific approach. The Tribunal, in the interest of justice, decided to give the assessee one more opportunity to present their case before the AO.

The Tribunal held that the assessee had substantially complied with the conditions for Section 54 exemption by investing in a new residential property within the stipulated time, even though the return was filed belatedly under Section 139(4). The non-deposit of unutilized capital gains in the Capital Gain Account Scheme was not considered fatal. Regarding the interest on the housing loan, the Tribunal directed the AO to verify if the interest was claimed as a deduction under Section 24(b) and, if so, not to allow it as part of the cost of acquisition under Section 48, to avoid double deduction. The third issue regarding unexplained investment was restored to the AO for fresh determination.

The Tribunal held that for section 41(1) to apply, there must be an expenditure/liability and subsequent receipt of cash or benefit by way of remission/cessation. In this case, the purchases were made, and payment was remitted via cheque, which was encashed. There was no evidence of remission or cessation of liability. The reopening under section 147 was also flawed due to the lack of an opportunity for the assessee to cross-examine the third-party deponent.

The Tribunal noted that the reassessment was completed ex-parte and the appeal was filed with a significant delay. However, considering the assessee's bona fide belief regarding the service of the assessment order and following the Apex Court's judgment in MST. Katiji, the delay was condoned. The matter was remitted to the CIT(Appeals) for decision on merits.

The Tribunal found that the CIT(A) had failed to consider the additional ground raised by the assessee. Therefore, the Tribunal decided to remit the issue back to the CIT(A) to consider the additional ground on its merits.

The Tribunal noted that the issue of taxability of software sales and installation/support services is covered by previous decisions of the Tribunal, High Court, and Supreme Court, including the case of Engineering Analysis Centre of Excellence P. Ltd. The Tribunal held that payments for software sales do not constitute royalty and are not taxable. Similarly, reimbursements for computer and hardware maintenance cannot be considered FTS/FIS.

The Tribunal held that receipts from the sale of software and related services, including maintenance, installation, and support, are not taxable as royalty or fees for technical services. Similarly, cost reimbursements were found to be in the nature of cost-to-cost charges without any income element. The Tribunal relied on previous decisions by the Supreme Court, High Court, and its own bench in similar cases concerning the assessee.

The Tribunal held that receipts from the sale of software are not royalty. Similarly, receipts from installation and support services are not taxable as Fees for Included Services (FIS). Reimbursements of computer and hardware maintenance from an Indian entity were also held not to be Fees for Technical Services (FTS)/FIS. The Tribunal relied on the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. and other consistent High Court and Tribunal rulings.

The Tribunal noted that the assessee's staff received the penalty order and demand notice but did not bring it to the assessee's notice, leading to the delay. The CIT(A) had dismissed the appeal due to the delay without condonation. The Tribunal, considering the principles laid down by the Apex Court regarding condonation of delay, found that the delay was not deliberate or mala fide. The Tribunal condoned the delay of 270 days before the CIT(A) and 73 days before the Tribunal.