ITAT Delhi Judgments — February 2024

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 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 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 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 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 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.

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 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.

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.

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.

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 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 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 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 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, 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 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 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, 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 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 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 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 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 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 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 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.

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 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 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 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 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 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.

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, agreeing with the assessee and referencing a Gujarat High Court decision, held that the Pr.CIT's exercise of jurisdiction under Section 263 was invalid. It concluded that an assessment order already settled under VSVS cannot be subsequently reopened for revision under Section 263 of the Act.

The tribunal, relying on the Hon'ble Supreme Court's decision in SBI Vs. ACIT (Civil Appeal No.8181 of 2022), held that the assessee was liable to deduct tax at source on the LTC payments made to its employees. The Supreme Court had clarified that LTC exemption applies only to travel within India via the shortest route, and thus foreign travel or circuitous routes violate the statutory provisions, making the payments not exempt and requiring TDS.

The tribunal, relying on the Supreme Court's decision in SBI Vs. ACIT (Civil Appeal No.8181 of 2022), affirmed that the assessee (SBI) was in default for not deducting tax at source on LTC payments. The Supreme Court had upheld the Delhi High Court's decision that LTC is not exempt for foreign travel and that the employer should have deducted tax at source, as the travel was in violation of statutory provisions.

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 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 Income Tax Appellate Tribunal (ITAT), relying on the Hon'ble Supreme Court's decision in the assessee's own case, affirmed that the assessee-bank was liable to deduct tax at source. The Supreme Court had previously held that LTC exemption is strictly for domestic travel between designated places within India via the shortest route, and any foreign leg or non-shortest route travel violates the statutory provisions.

The Tribunal, respectfully following the Hon'ble Supreme Court's decision in SBI Vs. ACIT, affirmed that the assessee-employer was obligated to deduct tax at source on such LTC payments. The Supreme Court had ruled that LTC is specifically for domestic travel by the shortest route, and thus, travel involving a foreign leg is not eligible for exemption under Section 10(5), rendering the bank an "assessee in default" for non-deduction of tax.

The Tribunal held that the entire cash deposit of Rs. 15,73,000/-, consisting of Rs. 1,23,000/- from personal savings and Rs. 14,50,000/- from prior withdrawals between 27.10.2016 and 08.11.2016, was adequately explained and supported by bank statements and a bank certificate. Thus, the Tribunal concluded that no addition under section 69A was warranted for any portion of the cash deposits.

The Tribunal noted that the original order under section 263, which formed the basis of the CIT(A) order, had already been quashed by the Tribunal in an earlier case (ITA No.4651/Del/2019, dated 06.07.2022). Consequently, the consequential CIT(A) order did not survive. Therefore, the appeal filed by the assessee was allowed.

The ITAT observed that the assessee maintained audited books which were not rejected, and the sales were not disturbed. It found that the CIT(A) had not provided valid reasons to sustain the addition of Rs. 8,00,000/-. Consequently, the ITAT deleted the entire addition sustained by the CIT(A).

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 Income Tax Appellate Tribunal (ITAT) dismissed SBI's appeals, affirming that the bank was an "assessee in default" under Section 201(1)/201(1A) of the Income Tax Act for not deducting TDS. This decision was based on a binding Supreme Court ruling in SBI Vs. ACIT (Civil Appeal No.8181 of 2022), which held that LTC claims involving foreign travel or non-shortest routes are not exempt and require TDS.