ITAT Chennai Judgments — January 2023

The Tribunal held that non-compete fees constitute an 'intangible asset' falling under 'any other business or commercial rights of similar nature' as per Section 32(1)(ii), eligible for depreciation. It also applied the rule of consistency, noting that the claim was accepted in previous assessment years, and relied on Supreme Court and High Court precedents.

The ITAT set aside the CIT(A)'s order and remitted the matter back to the Assessing Officer. The AO is directed to verify if the PF & ESI amounts were remitted as per relevant Acts, considering the assessee's claim of delays due to the COVID-19 lockdown.

The Tribunal, relying on the Madras High Court, ruled that the Assessing Officer's failure to furnish reasons for reopening and dispose of objections by a speaking order, as mandated by GKN Driveshafts, is not a mere procedural irregularity but renders the reassessment order void ab initio. The CIT(A)'s finding that reasons were known and objections dealt with was not supported by the assessment order.

The Tribunal condoned a 74-day delay in filing the appeal. It remitted the issue of disallowance of ₹5,35,500 back to the CIT(A) for fresh adjudication, considering the nature of transactions in the hotel business where 'pucca' bills may not always be available, and directed the assessee to provide suitable explanations.

The Tribunal held that the Assessing Officer correctly confined the examination to the specific 'limited scrutiny' issue of cash deposits. As per CBDT circulars, the AO could not expand the scope of inquiry to other issues like interest disallowance without specific information and prior administrative approval. Therefore, the AO's order was neither erroneous nor prejudicial to the interest of the revenue.