ITAT Delhi Judgments — January 2024

The Tribunal held that since the claim for long-term capital loss squarely pertained to Assessment Year 2001-02, it should be considered in that specific year. Consequently, the Tribunal found no error in the disallowance of this claim in the Assessment Year 2004-05 under consideration.

The Tribunal remanded the issue of book profit computation under section 115JB to the Assessing Officer for fresh verification. For the Revenue's appeals, the Tribunal upheld the CIT(A)'s decision, confirming that payments to non-residents for repairs carried out abroad were not taxable as Fees for Technical Services (FTS) in India, thus no TDS was required. The Tribunal also dismissed the Revenue's challenge regarding advances written off, affirming their allowability as business loss under section 37.

The Tribunal observed that the three grounds raised by the assessee were general and lacked specificity. In the absence of any specific grievance, the appeal was deemed liable to be dismissed in limine, and was accordingly dismissed.

The tribunal held that the Assessing Officer's failure to implement the specific and binding directions of the DRP, as mandated by Section 144C of the Income Tax Act, renders the final assessment orders wholly without jurisdiction and void-ab-initio. Citing various judicial precedents, the tribunal emphasized that DRP's directions are binding on the AO, and non-compliance vitiates the assessment process. Consequently, the impugned assessment orders were quashed.

The Tribunal restricted the Section 14A disallowance under normal provisions to the assessee's suo moto disallowance of Rs. 2,00,000/- for each year, citing the AO's failure to record objective satisfaction before applying Rule 8D. For book profits under Section 115JB, Rule 8D(2) computation was held inapplicable, with only actual expenditure allowed. The cost of paintings was reclassified as revenue expenditure, and the depreciation claim was dismissed. The issue of currency burnt in fire was remanded to the AO for de-novo adjudication, admitting additional evidence and providing directions to avoid double taxation.

The Tribunal dismissed some grounds as not pressed and allowed others based on previous decisions for the assessee regarding ALV of properties held as stock-in-trade and self-occupied. Issues concerning ALV of properties under litigation and Employees' PF/ESI contributions were remanded to the Assessing Officer for re-adjudication. The CIT(A)'s decision to assess ALV of basement areas at 50% was upheld, and the revenue's appeal on deletion of section 43CA addition was allowed. The addition related to windmill revenue was modified to allow for corresponding expense deductions.

The Tribunal restored the assessee's appeal regarding section 115JB book profit computation to the AO for fresh verification. For the Revenue's appeals concerning payments to non-residents, the Tribunal upheld the CIT(A)'s decision, ruling that the services were not FTS as per DTAA provisions, thus no TDS was required. The Tribunal also upheld the deletion of disallowance for advances written off, affirming it as an allowable business loss under section 37.

The Tribunal held that the AO erred in applying Rule 8D for Section 14A disallowance without first recording objective satisfaction that the assessee's suo moto disallowance was incorrect, restricting the disallowance to Rs. 2 lakhs. The cost of paintings was allowed as revenue expenditure for all assessment years, disallowing the claimed depreciation. The issue of currency burnt in fire was remanded back to the AO for de novo adjudication to consider additional evidence of civil suit proceedings and verify the advance received from the scrap dealer.

The Tribunal restricted the Section 14A disallowance under normal provisions to Rs. 2,00,000/- for AY 2008-09 and 2009-10, and Rs 2,00,000/- (for normal provisions) and Rs 7,68,448/- (for book profits) for AY 2010-11, citing the AO's failure to record objective satisfaction and judicial precedents. The cost of paintings was allowed as revenue expenditure. The disallowance of interest under Rule 8D(2)(ii) was deleted due to sufficient interest-free funds. The issue of loss from currency burnt in fire was remanded to the AO for de-novo adjudication with additional evidence.

The Tribunal held that there was no valid reason to invoke Section 68, as the assessee had demonstrably sold shares of RNB Infrastructure Pvt. Ltd. at the same price they were acquired (Rs. 10 per share), and the transactions were found genuine in the remand report. It distinguished the case from previous precedents cited by the CIT(A), noting different factual circumstances. Consequently, following a coordinate bench's decision, the addition made by the AO and confirmed by the CIT(A) was deleted.

The Tribunal, following a precedent from its Coordinate Bench in similar cases, found no valid reason to invoke Section 68. The AO's remand report confirmed that share purchasers provided verified sources of funds, and the assessee's original investment in the shares in F.Y. 2007-08 was undisputed by the department. Therefore, the Tribunal held that the transaction was a sale of investment and not an unexplained credit, deleting the addition made by the AO and sustained by the CIT(A).

The Tribunal found that the Delhi Bench lacked jurisdiction because the Assessing Officer was located in Mumbai. Consequently, the appeal was dismissed on jurisdictional grounds, with the revenue granted the opportunity to refile the appeal before the appropriate Mumbai Bench.

The Tribunal restored the issue for AY 2009-10 to the Assessing Officer (AO) with a direction to allow full TDS credit for the corresponding income reflected in the return. For AY 2019-20 and 2020-21, the Tribunal remanded the issues to the AO with a direction to allow deductions for PF and ESI contributions made within the due dates specified by the respective Acts. All appeals were allowed for statistical purposes.

For AY 2009-10, the tribunal restored the TDS credit issue to the Assessing Officer (AO) to allow credit for TDS on the income reflected in the return of income. For AY 2019-20 and 2020-21, the tribunal restored the PF and ESI disallowance issue to the AO with a direction to allow deductions for contributions made within the due dates specified under the respective Acts.

The Tribunal observed that the CIT(A) dismissed the appeal without adjudicating on its merits. Consequently, to ensure justice, the Tribunal restored the appeal to the file of the CIT(A) for fresh adjudication in accordance with law, granting the assessee an adequate opportunity to be heard.

The CIT(A) deleted both additions, finding that no incriminating material was seized during the search and that the additions were based on the examination of regular books of account, relying on the decisions in Kabul Chawla and Abhisar Buildwell. The ITAT upheld the CIT(A)'s order, concluding that the additions regarding TDR valuation and EDC payments lacked incriminating material from the search and were merely based on entries in the books of account.

The Tribunal held that the non-compete fee and profit on cancellation of own debentures were capital receipts and not taxable, directing the AO to delete these additions. The provision for debenture premium was found to be a deductible expenditure under Section 37. The payment for loss of business opportunity was deemed capital expenditure and the disallowance was upheld. For capital gains on business transfers, the AO was directed to recompute by allowing indexation benefit on cost of improvement and to provide the assessee an opportunity to furnish previous owner's cost for hard metal business. The additional ground regarding capital loss on land surrender to DDA was not entertained.

The Income Tax Appellate Tribunal held that the Assessing Officer failed to implement the binding directions of the DRP by substantively taxing the receipts as FTS/FIS instead of business income attributable to PE. Relying on Section 144C of the Income Tax Act and judicial precedents, the Tribunal concluded that such non-implementation renders the final assessment orders wholly without jurisdiction and void-ab-initio, as the AO is duty-bound to implement DRP directions in letter and spirit.

The Tribunal noted the consistent non-appearance of the assessee on all scheduled hearing dates, even after notices were duly served. Consequently, the Tribunal had no option but to dismiss the appeal for non-prosecution. The decision was announced in open court on January 31, 2024.

The Tribunal followed a co-ordinate bench decision in similar cases involving other members of the Bajaj family. It was observed that the Department had not disputed the assessee's investment in shares of RNB Infrastructure Pvt. Ltd. in an earlier assessment year. The Tribunal found no valid reason to invoke Section 68, as the transaction pertained to the sale of shares at their acquisition price, confirmed by additional evidence and replies from purchasers.

The Tribunal held that the final assessment orders were without jurisdiction and void-ab-initio due to the Assessing Officer's failure to implement the specific and binding directions of the DRP, as mandated by Section 144C of the Income Tax Act. Citing various precedents, the Tribunal reaffirmed that DRP directions are binding on the AO, and non-compliance invalidates the assessment process.

Regarding the assessee's appeal, the Tribunal remanded the issue of book profit computation under section 115JB back to the Assessing Officer for fresh verification. For the Revenue's appeals concerning section 40(a)(i) disallowances, the Tribunal upheld the CIT(A)'s decision, finding that the payments to non-residents for repair/maintenance were not taxable in India as FTS (due to unfulfilled 'make available' conditions or no FTS provision in DTAAs, or absence of PE), hence no TDS was required. On the issue of advances written off, the Tribunal upheld the CIT(A)'s finding that these represented business losses allowable under section 37.

The tribunal restored the book profit computation issue under section 115JB to the Assessing Officer for fresh verification based on the assessee's detailed chart, allowing it for statistical purposes. It upheld the CIT(A)'s deletion of disallowances under section 40(a)(i), ruling that payments for offshore helicopter part repairs were not FTS, as 'make available' conditions in DTAAs were not met or DTAAs lacked FTS provisions, and no Permanent Establishment existed in India. The deletion of disallowance for advances written off as a business loss under Section 37 was also confirmed, as the Revenue provided no contrary evidence.

For the assessee's 115JB appeal, the Tribunal remanded the issue to the AO for fresh verification, allowing it for statistical purposes. For the Revenue's appeals regarding Section 40(a)(i), the Tribunal upheld the CIT(A)'s decision, finding that payments to non-residents for repair and maintenance of helicopter parts were not taxable in India under relevant DTAAs (due to "make available" condition not met or absence of FTS provision/PE), thus no TDS obligation arose. The Tribunal also dismissed the Revenue's appeal regarding advances written off, confirming it as an allowable business loss under section 37.

The Income Tax Appellate Tribunal (ITAT) found that the AO had, in fact, made specific inquiries regarding the large squared-up loans and the assessee had provided detailed replies and documentary evidence. The ITAT concluded that the PCIT's assumption of jurisdiction was bad in law because the AO had conducted proper inquiries and the assessment order was neither erroneous nor prejudicial to the revenue. Citing precedents, the ITAT emphasized that revisionary powers cannot be exercised if an inquiry was made, even if deemed inadequate by the PCIT, or merely because the PCIT holds a different opinion.

The Tribunal noted that A.Y. 2015-16 was an unabated assessment year where assessment was already completed u/s 143(3) prior to the search. Relying on the Supreme Court's decision in Abhisar Buildwell, the Tribunal held that a completed assessment can only be reopened and reassessed based on incriminating material relevant to that A.Y. Since the addition was not based on any incriminating material found during the search, the Tribunal upheld the CIT(A)'s decision to delete the addition.

The Assessing Officer failed to implement the specific and binding directions of the DRP in the final assessment orders, merely reproducing the draft order and adding back receipts as FTS/FIS on a substantive basis. Relying on High Court precedents, the tribunal held that the AO is duty-bound to implement DRP directions. Consequently, the assessment orders, being passed in disregard of binding DRP directions, were deemed wholly without jurisdiction and void-ab-initio.

The Tribunal, relying on decisions from the Hon'ble Delhi High Court and Bombay High Court (Full Bench), held that an omnibus penalty notice issued under section 271(1)(c) which fails to strike off the irrelevant limb is bad in law for vagueness and non-application of mind. Consequently, the penalty orders passed by the Assessing Officer for both assessment years were quashed.

The Tribunal deleted the disallowance under Rule 8D(2)(ii) of Section 14A, directing recomputation for Rule 8D(2)(iii) to apply only to investments yielding exempt income. The addition for unexplained investment under Section 69 was deleted due to lack of corroborative evidence and no opportunity for cross-examination. Education cess was held not to be an allowable business expenditure, citing Supreme Court precedent and a retrospective amendment to Section 40(a)(ii). All challenged subsidies (FPS/FMS, TUFS, RIPS, SHIS) were deemed capital receipts and non-taxable, relying on High Court and Supreme Court judgments.

The Tribunal, relying on decisions from the Hon'ble Delhi High Court and a full bench of the Bombay High Court, held that an omnibus penalty notice under section 271(1)(c) that fails to strike off the irrelevant limb indicates non-application of mind and suffers from vagueness, rendering it bad in law. Consequently, the penalty orders passed by the Assessing Officer for both assessment years were quashed.

The Tribunal upheld the CIT(A)'s decision to delete the additions, concluding that no incriminating material was found during the search. The additions were based solely on the examination of regular books of account, such as the difference between DVO valuation and book value for TDR, and entries related to EDC payments, which do not qualify as incriminating material.

The Tribunal observed that the assessee was not granted an adequate opportunity to present its case, particularly considering the Supreme Court's extensions of time limits during the COVID period. To ensure justice and fair play, the Tribunal restored the appeal to the files of the CIT(A), directing a fresh decision after providing the assessee a reasonable and adequate opportunity of being heard.

The Tribunal found that the assessee was denied a proper opportunity to explain their case. Therefore, in the interest of justice and fair play, the appeals were restored to the file of the Assessing Officer. The AO was directed to provide a reasonable and adequate opportunity of being heard, along with all material intended to be used against the assessee.

The Tribunal found that the assessee was denied a proper opportunity to be heard. Consequently, the Tribunal restored the appeals to the file of the Assessing Officer (AO), directing the AO to provide the assessee with a reasonable and adequate opportunity of being heard and to furnish all relevant material intended for use against them.

The Tribunal restricted the disallowance u/s 14A (normal provisions) to the assessee's suo moto amount of Rs 2,00,000/-, emphasizing the AO's mandatory satisfaction recording under Rule 8D(1) before applying Rule 8D(2) and excluding strategic investments yielding no exempt income. For book profits u/s 115JB, the disallowance u/s 14A was limited to the actual expenditure identified by the assessee (Rs 2,00,000/- for AYs 2008-09, 2009-10 and Rs 7,68,448/- for AY 2010-11), clarifying Rule 8D(2) cannot be imputed in Section 115JB(2) Explanation 1(f). Expenditure on paintings was allowed as revenue expenditure, and the issue of currency burnt in fire was remanded to the AO for de novo adjudication with additional evidence, potentially allowable as a business loss u/s 28.

The Tribunal allowed the assessee's grounds on notional ALV for properties held as stock-in-trade and self-occupied, based on previous ITAT orders. Issues regarding ALV for properties under litigation and employee contributions to PF/ESI were remanded to the AO for re-adjudication and factual verification. The revenue's challenge to the 50% ALV for basement areas was dismissed, upholding the CIT(A)'s estimation. The CIT(A)'s order on windmill income was modified to allow a deduction for expenses incurred during the initial three-month period, and the revenue's appeal regarding the deletion of section 43CA addition was allowed.

The Tribunal held that Section 28(ii)(e) was not applicable as the assessee was a freelance journalist, not an employee, and the event was a non-renewal of contract, not a termination of an ongoing contract related to a 'business' in the sense intended by the section. Similarly, Section 56(2)(xi) was found inapplicable as it pertains to 'termination of employment', which did not exist in this freelance arrangement. Therefore, the compensation was treated as a capital receipt and the addition made by the AO was directed to be deleted.

The Tribunal observed that the CIT(A) had failed to consider a significant remand report dated 22/27.09.2016 and the assessee's rejoinder. With no objection from either party, the matter was restored to the file of the CIT(A) for fresh adjudication. The CIT(A) is directed to consider the overlooked remand report and provide the assessee with an adequate opportunity of being heard.

The tribunal, relying on jurisdictional High Court precedents, affirmed that the power to extend time for a special audit under Section 142(2C) is non-delegable and solely vested with the Assessing Officer. It found that the extensions were procedurally flawed, specifically noting involvement of the Pr. CIT beyond statutory powers, which rendered the entire special audit process defective and the subsequent assessment order void ab-initio.

The Income Tax Appellate Tribunal found no valid reason to interfere with the order of the learned CIT(A). The ITAT sustained the additions made by the lower authorities, affirming that the assessee failed to substantiate the genuineness of the Long Term Capital Gain and the related exemption claim. Consequently, the grounds raised by the assessee were rejected.

The Tribunal, following a precedent set in a co-owner's case with an identical issue, held that the Ld.CIT(A) erred in determining short-term capital gains. The matter is remanded to the Assessing Officer to re-compute the capital gains as long-term by properly considering the approval date of the Delhi Nagar Nigam and providing an adequate opportunity of being heard to the assessee.

The Tribunal observed that the CIT(A) did not adequately consider the assessee's arguments, including the applicability of Section 194C, relevant case laws, CBDT circulars, and the submission that the payees had already accounted for the income and paid taxes. Citing the Supreme Court's decision in Hindustan Coca Cola Beverage Pvt. Ltd., the Tribunal restored the matter to the file of the Assessing Officer for fresh adjudication, allowing the assessee to present further evidence.

The Income Tax Appellate Tribunal (ITAT) upheld the decision of the CIT(A), finding no infirmity in the order. It was held that the Revenue failed to follow the due procedure for service of notice under Section 282 of the Act, particularly concerning service by affixture, as no proper inquiry was conducted, nor was an affidavit from the serving officer obtained. Consequently, the service of notice under Section 148 was deemed invalid, rendering the subsequent reassessment bad in law.

The Tribunal found that the reasons recorded for reopening contained factual inconsistencies, specifically that the assessee had indeed filed a return for the relevant year, contrary to the AO's belief. It concluded that the AO acted without independent application of mind, merely relying on a bald statement from the DDIT report without establishing a 'live link' between the material and the belief that income had escaped assessment. Consequently, the reassessment proceedings were deemed bad in law and quashed.