ITAT Delhi Judgments — February 2024

The Tribunal found that the assessee's husband had already offered the rental income from the properties, and this was accepted by the Settlement Commission. The Tribunal concluded that sustaining the same additions against the assessee would lead to double taxation. Therefore, the additions upheld by the CIT(A) were deleted.

The Tribunal held that tax authorities are bound by law and an assessee is not estopped by an erroneous declaration in their return. It found that the AO erred in denying relief based solely on the assessee's initial declaration. Consequently, the Tribunal remitted the entire issue of taxability of all impugned software sale receipts, including those from Bharti Airtel, back to the AO for fresh determination after allowing the assessee to adduce further evidence.

The Tribunal observed that since the assessee's husband had already offered the rental income to tax and it was accepted by the Settlement Commission, sustaining the same additions against the assessee would result in double taxation. Therefore, the Tribunal deleted the additions confirmed by the Ld. CIT(A).

The Tribunal observed that pharmacies were permitted to accept specified bank notes during demonetization. Since the Assessing Officer had accepted the assessee's stock position and the correctness of its books of accounts, and there was no abnormal increase in cash sales relative to stock, turnover, and gross profit, the addition under Section 68 was not justified.

The Tribunal noted the assessee's non-appearance and lack of representation, and found the appeal to be significantly time-barred. The assessee's claim of a delayed receipt of the impugned order (30.10.2019) was rejected due to lack of supporting evidence and contradiction by records showing the service of a giving-effect order on 04.09.2017. Consequently, the application for condonation of delay, which was not duly supported by an affidavit, was rejected, and the appeal was dismissed as time-barred without adjudication on its merits.

The Tribunal dismissed grounds related to the validity of the CIT(A)'s order and alleged lack of fair opportunity. It restored the additions made under section 68/69A r.w.s. 115BBE for unexplained cash deposits and the disallowance of Chapter VI-A deduction (claimed for PPF u/s 80C) to the AO for fresh verification. The Tribunal deleted the ad-hoc disallowance of business expenditure, finding it based on surmises without clear findings.

The Tribunal condoned the delay in filing the appeal, noted the lack of particulars regarding the mode of service for the PCIT's notice, and held that the assessee deserves an opportunity to contest the matter on merits. The appeal was allowed for statistical purposes, and the issue was restored to the PCIT for a fresh decision after ensuring proper service of notice to the assessee.

The Tribunal upheld the validity of the reassessment jurisdiction under Sections 147/148, finding a 'live link' between the material from the third-party search and the belief of escaped assessment, and ruled that Section 153C was not exclusively applicable in this context. On merits, the Tribunal found no error in the CIT(A)'s decision to restrict the addition to 5% of the disputed bogus purchases, concluding that the CIT(A)'s estimation was reasonable given the questionable bona fides of the supplier and the assessee's transactions.

The Income Tax Appellate Tribunal (ITAT) dismissed both the Revenue's appeals and the assessee's cross-objections. The Tribunal affirmed the validity of the reassessment proceedings under Section 147, ruling that the AO had sufficient material to form a *prima facie* belief of escaped income and was not compelled to invoke Section 153C in this specific context. Furthermore, the ITAT found no error in the CIT(A)'s decision to estimate the addition at 5% of the disputed bogus purchases, concluding that the assessee failed to fully discharge the onus regarding the genuineness of these transactions.

For the foreign bank account addition, the Tribunal noted the assessee's denial of knowledge and operation, her dispute with her husband, and previous findings under the Black Money Act stating she was not the beneficial owner. The Tribunal remanded this issue back to the AO for a fresh decision after allowing the assessee a reasonable opportunity to be heard and verify her claims. For the credit card payments treated as perquisites, the Tribunal found that the assessee proved these expenses were for the company's business, and as the company's assessment had accepted them as genuine business expenses, this addition was deleted.

Referring to a similar case involving the assessee's brother where the matter was remanded, and with no objection from the Revenue, the Tribunal admitted the additional evidence. The case was remanded to the Assessing Officer (AO) to decide the issue afresh after considering the additional evidence and providing the assessee an opportunity of being heard.

The tribunal noted that the assessee's husband had already declared and paid tax on the rental income from the identical properties, which was accepted by the Settlement Commission. Sustaining the same additions against the assessee would amount to double taxation. Therefore, the tribunal deleted the additions confirmed by the CIT(A).

The Income Tax Appellate Tribunal found that the penalty notice was an 'omnibus notice' that did not specify the charge against the assessee. Following judicial precedents from the Hon'ble Bombay High Court and the jurisdictional High Court, the Tribunal ruled that such a defective and vague notice is fatal to the penalty proceedings. Consequently, the Tribunal set aside the orders of the lower authorities and deleted the penalty.

The Tribunal held that the assessee was not afforded sufficient opportunity to contest the matter on merits. To ensure justice, the issue on merits was restored to the file of the learned Commissioner (Appeals). The CIT(A) was directed to serve fresh notice to the assessee by postal means, simultaneously with an ITBA notice, and then dispose of the appeal on merits.

The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, concluding that the reopening of assessment under Section 147/148 was invalid as it was based on wrong facts recorded by the Assessing Officer. The Tribunal noted that the AO failed to establish any failure on the part of the assessee to disclose material facts, which is a prerequisite for reopening an assessment after four years. Consequently, the reopening was deemed incorrect and the assessment order passed thereunder was quashed.

The Tribunal held that the transaction of interest on outstanding receivables is not an 'Eligible International Transaction' under Rule 10TC, thus the ALP adjustment is not subsumed by the Safe Harbour markup. However, following Tribunal precedents, the interest rate for imputing interest on outstanding receivables should be LIBOR + 200 basis points, not LIBOR + 400 basis points.

The Tribunal observed that the amounts were small and there is no presumption that individuals with low income cannot have small savings. Consequently, the Tribunal set aside the orders of the lower authorities and decided the issue concerning the additions for unexplained deposits in favour of the assessee.

The Tribunal upheld the assessee's Cross Objection, finding the reassessment proceedings invalid because the "reason to believe" was based on the factually incorrect premise that the assessee had not filed her ITR. Consequently, the Section 148 notice and the resulting assessment order were quashed. The Revenue's appeal was dismissed, also noting that the enhanced compensation, if taxable, per Section 45(5)(b) and Supreme Court precedent, should have been taxed in AY 2008-09, not 2010-11.

The Tribunal, after verifying the records, found the total interest income to be Rs. 4.15 crores and dividend income Rs. 75.57 crores. It directed that in accordance with the provisions of the Act, a 25% surcharge be levied on interest income and a 15% surcharge on the dividend received.

The Tribunal noted that the amounts involved were small and held that there is no presumption that individuals with low income cannot have small savings. Consequently, the orders of the lower authorities sustaining the additions were set aside, and the issue was decided in favor of the assessee.

The Tribunal found that the assessee was not given a proper opportunity to represent its case before the CIT(A). Consequently, the matter was remanded back to the CIT(A) for fresh adjudication of the issues after providing due notice and a proper opportunity of being heard to the assessee.

The Tribunal held that under Section 72 of the Income Tax Act, unadjusted business losses can be carried forward for 8 subsequent assessment years. Since the set-off of the Rs 12,53,378/- loss from AY 2005-06 against the business income of AY 2010-11 fell within this 8-year statutory limit, the lower authorities erred in denying the legitimate deduction. The AO was directed to allow the set-off, and the assessee's grounds on merits were allowed.

The Tribunal verified that the notice was indeed dispatched to a wrong address, which caused the assessee's non-compliance. Consequently, in the interest of justice, the matter was remanded back to the CIT(E) for a fresh order after providing the assessee with an adequate opportunity of being heard.

For intra-group management fees, the Tribunal dismissed the assessee's appeal, holding that each assessment year is distinct and the assessee failed to prove the actual rendition and benefit of services for the years under appeal. For interest on outstanding receivables, the Tribunal allowed the assessee's appeal, reaffirming its consistent position in earlier years based on High Court precedents that such receivables do not automatically constitute a separate international transaction requiring benchmarking if working capital adjustments already account for it, and directing the deletion of the interest adjustment.

The Tribunal found that there was a communication gap, not non-compliance, as the assessee had indeed filed a reply on 23.09.2023. The matter was restored to the file of the Ld. CIT(E) with a direction to decide it afresh, considering the assessee's reply and providing an adequate opportunity of hearing.

The Tribunal dismissed the Assessee's appeals, upholding the disallowance of intra-group management fees, concluding that the Assessee failed to provide sufficient evidence of service rendition and tangible benefit. Conversely, the Tribunal dismissed the Revenue's appeals regarding the imputation of interest on outstanding receivables, thereby upholding the CIT(A)'s deletion of this adjustment, consistent with previous High Court decisions that each assessment year is distinct for factual evidence and the working capital adjustment implicitly covers outstanding receivables.

Regarding intra-group management fees, the Tribunal dismissed the assessee's appeals, holding that each assessment year is distinct and requires fresh evidence for service rendition and benefit, rejecting the applicability of *res judicata*. It found the assessee failed to provide convincing evidence to prove the actual receipt and benefit of services. For the issue of imputed interest on outstanding receivables, the Tribunal, following the ratio of prior Tribunal decisions and the Delhi High Court in *Kusum Healthcare Pvt. Ltd.*, ruled in favor of the assessee, dismissing the Revenue's appeals, as outstanding receivables are not automatically an international transaction requiring separate benchmarking if working capital adjustments are already accounted for.

The Tribunal held that the penalty levied under section 271(1)(c) was invalid and obliterated. This was because the notice issued by the Assessing Officer under section 274 failed to specifically state whether the penalty was for concealment of income or furnishing inaccurate particulars, a requirement supported by various High Court judgments.

The Tribunal found that the assessee had discharged its onus by submitting comprehensive documents for the share application money, demonstrating transactions via banking channels and sufficient financial reserves of the investors. Following a precedent set by a co-ordinate bench in the assessee's own case on identical facts, the Tribunal directed the deletion of the addition under Section 68, and consequently, the addition under Section 69C.

The Tribunal determined that due to the notice being sent to a wrong address, the matter should be remanded back to the file of the CIT(E). The CIT(E) is directed to pass a fresh order after providing the assessee a proper opportunity of being heard.

The tribunal held that, under the faceless assessment regime and the Information Technology Act, 2000, electronic DRP directions are deemed received by the AO upon upload to the ITBA portal. As the directions were uploaded on April 7, 2022, the AO was required to pass the final assessment order by May 31, 2022. The order passed on June 30, 2022, is therefore barred by limitation and the entire assessment is quashed.

The ITAT upheld the order of the Ld. CIT(A), agreeing that the assessee had successfully discharged its initial burden of proof regarding the identity, creditworthiness, and genuineness of the loan transactions by furnishing confirmation letters, ITRs, audited accounts, and bank statements of the creditors. The Tribunal further noted that the loans were returned to the creditors via banking channels in the relevant assessment year, making the AO's generalized observations unsustainable. Consequently, the Revenue's appeal was dismissed.

The Tribunal confirmed the additions, finding that the assessee failed to prove the identity, creditworthiness, and genuineness of the share applicants. It also upheld the validity of the reassessment proceedings, concluding that the AO had established a proper link between the information received and the reason to believe income had escaped assessment.

The Tribunal dismissed the assessee's appeals, thereby upholding the disallowance of intra-group management fees, stating that the assessee failed to provide sufficient evidence of actual service rendition or demonstrable benefit, and affirmed that the principle of *res judicata* does not apply to transfer pricing issues in different assessment years due to year-specific facts. However, the Tribunal dismissed the Revenue's appeals regarding the imputed interest on outstanding receivables, upholding the CIT(A)'s decision to delete this adjustment, relying on previous High Court decisions that questioned treating outstanding receivables as a separate international transaction requiring benchmarking if working capital adjustments were already considered.

The tribunal held that the Assessing Officer erred by applying Rule 8D without first recording proper satisfaction regarding the correctness of the assessee's suo motu disallowance, as required by Section 14A(2). The AO did not examine the assessee's accounts or provide reasons for dissatisfaction, which is a prerequisite before invoking Rule 8D.

The tribunal dismissed the appeal as infructuous because the assessee had opted for the Vivad se Vishwas scheme. Furthermore, the tribunal directed the revenue authorities to immediately refund any amount paid in excess of tax due, acknowledging that the refund was still pending.

The Tribunal observed that the CIT(A) failed to adjudicate the issue on merits and confirmed the disallowance due to the assessee's non-attendance. Finding no prejudice to the revenue in granting an opportunity, the Tribunal remanded the matter back to the CIT(A) for fresh adjudication on merits, with the department retaining the liberty to initiate proceedings for non-compliance if necessary.

The Tribunal found that no incriminating material was discovered during the search, and no assessment proceedings were pending at the time of the search. The additions were solely based on cash deposits. Following the ratio laid down by the Hon'ble Supreme Court in Abhisar Build Well, the Tribunal deleted all additions made by the A.O. for the Assessment Years 2012-13 to 2014-15.

The Tribunal noted that the assessee provided evidence (Mother Dairy accounts, concessionaire agreement, bank statements) to justify the bank deposits as business turnover. Since the AO did not have the opportunity to examine these evidences, the issue on merits was restored to the file of the Assessing Officer to consider the new evidences and decide the issue afresh.

The Tribunal observed that no incriminating material was found during the search and no assessment proceedings were pending at the time of the search. Relying on the Hon'ble Supreme Court's decision in Abhisar Build Well, the Tribunal ruled that additions made on account of cash deposits without incriminating material should be deleted.

Following the Supreme Court's decision in SBI vs. ACIT (Civil Appeal No.8181 of 2022), the Tribunal held that travel involving a foreign leg or not following the shortest route does not qualify for LTC exemption under Section 10(5) and Rule 2B. Therefore, the assessee bank was in default for not deducting tax at source under Section 192(1) on such reimbursements, as it was its statutory duty. The appeals filed by the assessee were dismissed.

The Income Tax Appellate Tribunal (ITAT) dismissed the appeals, relying on the Supreme Court's decision in SBI Vs. ACIT (Civil Appeal No.8181 of 2022). The Supreme Court affirmed that the assessee was liable to deduct tax at source on LTC payments where travel involved a foreign leg or did not adhere to the shortest route within India, as such travel violates the conditions for exemption under Section 10(5). The ITAT concluded that the assessee was in default for non-deduction of tax under Section 192 of the Act.

Following the Supreme Court's decision in the assessee's own case (SBI Vs. ACIT, Civil Appeal No.8181 of 2022), the Tribunal affirmed that the bank was liable to deduct tax at source on LTC payments where employees' travel did not meet the prescribed exemption conditions. The Supreme Court had established that LTC is strictly for travel within India by the shortest route, and any foreign leg or circuitous route disqualifies the exemption. Consequently, the Tribunal held the assessee in default for non-deduction of tax.

The Tribunal noted the assessee's business as wholesale trading of raw meat and animal waste, where individual cash purchases were below Rs. 20,000 and vendors often lacked bank accounts. Relying on the Supreme Court's decision in Pr. CIT Vs. Gee Square Exports, the Tribunal held that CBDT circulars cannot impose additional conditions not stipulated in the Act or Rules. Consequently, the cash purchases were found to be fully covered under Rule 6DD(e)(ii) of the Income Tax Rules, and the disallowances were deleted.

The Tribunal restored the issues regarding delayed deposit of employee contributions (PF/ESI), taxability of grants in aid, and the non-allowance of DDT credit with interest under section 115P, back to the file of the Assessing Officer for re-examination and verification of factual aspects. Specific reasons for delays in some PF/ESI deposits were noted, requiring re-examination. The appeal was allowed for statistical purposes, indicating a remand.

The Tribunal held that the AO was not empowered to make additions in the final assessment order that were not initially proposed in the draft assessment order, especially after the DRP had issued directions and provided complete relief. The provisions of Section 144C(13) mandate that the AO must complete the assessment in conformity with the DRP's directions, implying no further additions not previously proposed.

The Tribunal found that the Ld.CIT(A) had overlooked the assessee's submissions. Consequently, the Tribunal set aside the appeal for fresh adjudication by the Ld.CIT(A) to properly consider the assessee's contentions regarding reasonable cause for non-compliance, which could lead to the deletion of the penalty.

The Tribunal remanded the issue of long-term capital loss to the AO for fresh examination due to inadequate inquiry. It affirmed the CIT(A)'s partial disallowance for prior period expenses, but allowed the entire expenditure for gifts and miscellaneous expenses as the disallowances were ad hoc. For advisory fees, upfront fees, and royalty payments, the Tribunal upheld the CIT(A)'s decision to delete the disallowances, classifying them as revenue expenditures without sufficient justification for disallowance by the AO.