ITAT Delhi Judgments — May 2024

The Income Tax Appellate Tribunal (ITAT) observed that the CIT(A) (NFAC) disposed of the appeal ex-parte. Considering the overall circumstances, including the assessee's claims of not receiving physical notices and business challenges due to Covid, the ITAT decided to remit the matter back to the CIT(A) for fresh adjudication. The CIT(A) is directed to provide a reasonable and sufficient opportunity of being heard to the assessee, who is also directed to cooperate for expeditious disposal.

The ITAT observed that this was the second round of litigation and that the AO had disbelieved the assessee's claims regarding the genuineness of advances. Considering the EOW/CBI investigations, the Orissa High Court's cognizance of the matter, and the Government of Odisha's correspondence regarding depositor identification and refunds, the Tribunal restored the issue of cash credits under section 68 to the Assessing Officer. The AO is directed to conduct a fresh examination and verification of depositor details, providing the assessee a reasonable opportunity to be heard and furnish all necessary evidence.

The Tribunal held that since the assessments were unabated and no incriminating material was found during the search and seizure operation, the additions made by the Assessing Officer and the estimated commission income by the CIT(A) could not be sustained. Relying on the Supreme Court's judgment in *PCIT vs. Abhisar Buildwell (P) Ltd.*, it was concluded that in the absence of incriminating material, no additions can be made in completed/unabated assessments under Section 153A.

The tribunal, noting the ex-parte nature of the CIT(A)'s order, decided to provide the assessee a further opportunity of being heard to prevent a miscarriage of justice. Consequently, the tribunal set aside the CIT(A)'s order and remitted the issue back to the CIT(A) for fresh adjudication, with a clear direction that the assessee must cooperate.

The Tribunal condoned the delay in filing the appeals, accepting the reasons provided by the assessee. It held that the assessment proceedings initiated under Section 153C were not maintainable due to the absence of specific incriminating material seized during the search that could be directly correlated to the additions made for the relevant assessment years. The satisfaction note recorded by the AO was found to be vague and based on mere 'possibility', which does not fulfill the jurisdictional preconditions for proceedings under Section 153C of the Act.

The Revenue's appeal was dismissed due to low tax effect as per CBDT Circular No.17/2019, rendering the assessee's cross-objection infructuous and dismissed. The Tribunal allowed the assessee's appeal, holding that sustaining ad-hoc disallowances on a lump-sum basis by the CIT(A) was unjustified, as additional evidence was admitted and the AO's remand report only noted minor discrepancies without proving falsity or manipulation.

The Tribunal, relying on Supreme Court pronouncements (PCIT vs. Abhisar Buildwell Pvt. Ltd.), held that no additions could be sustained under Section 153A/153C in the absence of incriminating material found during the search, a point undisputed by the revenue. It found the additions in question were not based on such material and also noted that for AY 2010-11, the assessment might have abated. Consequently, the Tribunal set aside the orders of the CIT(A) and allowed the appeals for all three assessment years.

The Tribunal, relying on the Supreme Court's judgment in PCIT vs. Abhisar Buildwell (P) Ltd., held that in cases of unabated/completed assessments, no addition can be made under Section 153A in the absence of incriminating material found during the search. Since neither the AO's additions nor the CIT(A)'s estimated commission income were based on any incriminating material unearthed during the search, all such additions were deemed unsustainable and deleted.

The Tribunal held that the CIT(A) erred in rejecting the additional evidences without proper reasoning, noting the assessee's individual and agriculturist status who initially hadn't filed a return. It found that the additional evidences presented (sale deed, ownership proof, confirmations) strongly supported co-ownership. Consequently, the Tribunal allowed the additional evidences and remanded the entire issue back to the AO for fresh enquiry and consideration of the new evidence.

The Tribunal set aside the case to the Assessing Officer (AO) for fresh adjudication. The AO was directed to provide the assessee a proper opportunity of being heard and pass a reasoned order after considering all evidence.

The Tribunal deleted the interest disallowance, noting that investments were in equity/preference shares funded by own funds and similar issues were previously decided in assessee's favor. Other grounds related to capital losses and tax refund were remanded to the Assessing Officer for fresh adjudication with proper verification of additional evidence. The Revenue's appeal was dismissed, upholding the deletion of disallowances for travel, prior period, and sales promotion expenses due to the Assessing Officer's vague reasoning or the expenses accruing in the current year.

The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, finding no error in the deletion of all four additions. The Tribunal affirmed that the CIT(A) correctly accepted the assessee's explanations regarding interest calculations, the nature of investment in Arambagh Hatcheries Ltd. as a non-performing asset acquisition, and the discharge of onus under Section 68 by providing evidence for identity, genuineness, and creditworthiness of share subscribers.

The Revenue's appeal (ITA No.4700/Del/2019) and the assessee's cross-objection (CO No.81/Del/2022) were dismissed due to low tax effect, as per CBDT Circular No.17/2019. The assessee's appeal (ITA No.1338/Del/2022) against the ad-hoc disallowances sustained by the CIT(A) was allowed. The Tribunal ruled that sustaining disallowances on a lumpsum or ad-hoc basis is not justified when additional evidences, which were admitted and not found to be false or manipulated in the remand report, have been provided by the assessee.

The ITAT found that the CIT(A) summarily dismissed the appeal without considering the merits of the documents or verifying the service of the show-cause notice. Concluding that the assessee did not receive a proper opportunity to explain the additions, the ITAT set aside both the quantum assessment (ITA No.814/Del/2020) and the penalty appeal (ITA No.815/Del/2020). The matters are remanded to the CIT(A) for fresh adjudication after providing the assessee a reasonable opportunity of being heard.

The Tribunal held that the Assessing Officer failed to comply with the specific directions of the Dispute Resolution Panel (DRP) to pass a speaking order after examining the assessee's explanation regarding the investments. Therefore, the matter was remitted back to the AO for fresh adjudication, strictly in accordance with the DRP's instructions.

The Income Tax Appellate Tribunal (ITAT) held that the filing of Form 67 is a procedural and directory requirement, not mandatory. A delay in filing Form 67, when it is eventually filed before the completion of assessment, does not extinguish the substantive right to claim Foreign Tax Credit (FTC). Relying on judicial precedents, the ITAT allowed the assessee's appeal, directing that the FTC should be granted.

The Tribunal set aside the orders of the Ld. CIT(A) and allowed the assessee's appeals, holding that the additions were made without any incriminating material found during the search. Relying on Supreme Court precedents, particularly PCIT vs. Abhisar Buildwell Pvt. Ltd. and CIT vs. Jasjit Singh, the Tribunal concluded that no addition can be made under sections 153A/153C without incriminating material. It also noted that similar disallowances were deleted in the assessee's own case in earlier assessment years.

The Tribunal upheld that leave encashment deduction is allowable only on an actual payment basis, directing the AO to verify payment dates and allow deduction in the relevant assessment year, citing the Supreme Court decision in *Union of India & ors. vs. Exide Industries Limited & Anr.*. On the issue of excise duty subsidy, the Tribunal admitted the additional ground and, following its own previous decision and the Jurisdictional High Court's ruling in the assessee's own case (*PCIT Vs. Crystal Crop Protection (P) Ltd.*), held that the subsidy is capital in nature and therefore not taxable.

The Tribunal, relying on the Supreme Court's ruling in PCIT vs. Abhisar Buildwell (P) Ltd., held that no additions can be made in completed/unabated assessments under section 153A of the Income-tax Act without incriminating material found during the search. As no such material was found or referred to, all additions made by the Assessing Officer and the CIT(A) were deleted.

The Tribunal held that the assessee deserved a reasonable opportunity of being heard to address shortcomings at the AO level. Consequently, the impugned order was set aside, and the matter was remitted back to the AO for a fresh assessment regarding the taxability of the Rs. 14,85,560/- unexplained investment, with both parties required to ensure compliance and provide opportunities.

The Tribunal affirmed that disallowance under section 14A cannot exceed the actual exempt income earned, thereby upholding the first appellate authority's decision. Regarding the section 40A(2)(b) disallowance, the Tribunal held that the Assessing Officer failed to provide comparable instances or material to establish the fair market value of services, justifying the deletion of disallowance by the first appellate authority.

The Tribunal noted that the other appeal was already listed and adjourned sine-die. Considering the instant appeal to be a duplicate for the same assessment year, the Tribunal deemed it appropriate to dismiss it.

The Tribunal observed that the additions were not based on any incriminating material found during the search, a stance undisputed by the Ld. DR. Relying on Supreme Court precedents (PCIT vs. Abhisar Buildwell Pvt. Ltd. and CIT vs. Jasjit Singh), the Tribunal concluded that no addition could be made under section 153A/153C without incriminating material. It also noted similar disallowances in prior years for the assessee had been deleted.

The Tribunal deleted the disallowance of interest expenditure, finding that investments in group companies were made from the assessee's own funds and similar issues were decided in the assessee's favor in earlier years. The issues regarding disallowance of cost of land, long-term capital losses on shares, and taxability of interest on income tax refund were remanded to the Assessing Officer for fresh adjudication to properly consider additional evidence. The Tribunal upheld the deletion of disallowances for foreign/domestic travel, prior period, and sales promotion expenses, dismissing the Revenue's appeal, as the AO's reasons for disallowance were deemed ambiguous or factually incorrect.

The Tribunal held that the correct revenue receipt figure for AY 2020-21 is Rs.6,01,48,473/-. Consequently, the corrigendum directed that this correct figure be read in place of the incorrect amount previously mentioned in paras 2 and 13 of the original order.

The tribunal held that filing Form 67 is a procedural and directory requirement, not mandatory, and its belated filing does not extinguish the substantive right to claim FTC. Relying on past decisions, it affirmed that DTAA provisions override the general provisions of the Income Tax Act when more beneficial to the taxpayer. The tribunal set aside the orders of the lower authorities and remanded the matter to the AO, directing them to admit and accept Form 67 and decide the FTC claim in accordance with the law.

The Departmental Representative had no objection to the withdrawal of the appeal. Consequently, the Tribunal permitted the assessee to withdraw the appeal, and it was dismissed as withdrawn.

The Tribunal held that the satisfaction note for initiating Section 153C proceedings was vague and failed to specify any incriminating material directly linking the seized documents to the unexplained cash deposits for the relevant assessment years. As no specific incriminating documents or undisclosed assets were found during the search to justify the addition, the precondition for initiating proceedings under Section 153C was not met, rendering the entire assessment invalid and quashed the orders.

The Tribunal, relying on the Supreme Court's decision in PCIT vs. Abhisar Buildwell (P) Ltd., held that no additions can be made in completed/unabated assessments under Section 153A if no incriminating material is unearthed during a search. Since no incriminating material was found in this case, all additions made by the AO and the estimated commission income by the CIT(A) were deleted.

The tribunal found that no incriminating material was unearthed during the search, nor was any relied upon by the AO in the assessment order or panchnama. Relying on the Supreme Court's decision in PCIT vs. Abhisar Buildwell (P) Ltd., the tribunal ruled that no additions can be made in unabated assessments under Section 153A without incriminating material. Consequently, both the AO's additions and the CIT(A)'s estimated commission income were deleted.

The ITAT found that the CIT(A) had failed to adequately inquire into the new facts pleaded by the assessee regarding the correct due dates for EPF/ESI deposits and erroneously dismissed the appeal by solely relying on the Checkmate Services Pvt. Ltd. judgment. The tribunal remanded the matter back to the CIT(A) for a fresh examination, considering the assessee's submissions and conducting further necessary inquiries.

The Income Tax Appellate Tribunal found that the Assessing Officer failed to follow the Dispute Resolution Panel's specific directions to pass a speaking order. Consequently, the Tribunal remitted the case back to the AO for a fresh assessment, instructing them to comply with the DRP's earlier guidance.

The Tribunal held that a penalty under section 271D cannot be levied without the Assessing Officer recording explicit satisfaction for initiating such proceedings in the assessment order under section 143(3). Relying on the Supreme Court's decision in Jai Laxmi Rice Mills, the Tribunal noted that the AO had only recorded satisfaction for initiating penalty under section 271(1)(c) but not for section 271D. Consequently, the Tribunal deleted the penalties, finding them to be without authority of law.

The Tribunal observed that while the Assessing Officer's assessment order recorded satisfaction for initiating penalty proceedings under Section 271(1)(c), there was no explicit satisfaction recorded for initiating penalty under Section 271D of the Act. Citing the Supreme Court's decision in Jai Laxmi Rice Mills, the Tribunal held that a penalty under Section 271D cannot be sustained without a valid satisfaction recorded in the assessment order itself. Consequently, the Tribunal deleted the penalties for both assessment years.

The Tribunal held that since the assessee's mercantile system of accounting was established and accepted in a previous related order, the disallowance of mobilization advance needed to be re-examined by the AO under this accounting method. Similarly, the disallowance for iron purchases was not sustainable, as payment was made in the relevant financial year, and under mercantile accounting, the timing of stock receipt (whether same or next year) does not invalidate the expense. The appeal was partly allowed.

The Tribunal held that the additional evidence, a now certified segmental financial statement, has a direct and important bearing on deciding the appropriate method to determine the Arm's Length Price for the specified domestic transaction. Citing judicial precedents, the Tribunal found that admitting the evidence was necessary for proper adjudication and in the interest of natural justice, as rejecting it would not adhere to the principles of natural justice.

The Tribunal found that the satisfaction note recorded by the AO was vague and failed to establish a direct correlation between any incriminating material seized during the search and the additions made for the relevant assessment years. Citing several judgments, the Tribunal held that without specific incriminating material related to the assessee and proper satisfaction, the proceedings initiated under Section 153C were invalid and legally unsustainable.

The Tribunal held that the satisfaction note recorded by the AO was vague, failed to specify incriminating material, and did not establish a correlation between seized documents and the additions for the relevant assessment years. Citing various judgments, including from the Supreme Court and High Courts, the Tribunal concluded that assessment proceedings under Section 153C are invalid without direct incriminating material and a proper satisfaction note. Consequently, the proceedings were deemed void ab-initio.

Relying on the Supreme Court's decision in PCIT vs. Abhisar Buildwell (P) Ltd., the Tribunal held that in unabated assessments, no additions can be made under Section 153A without incriminating material. Since it was established that neither the AO's additions nor the CIT(A)'s estimated commission income were based on any such material, they were deemed unsustainable and deleted.

The Income Tax Appellate Tribunal (ITAT), relying on the Supreme Court's decision in PCIT vs. Abhisar Buildwell (P) Ltd., ruled that no additions can be made in unabated assessments under Section 153A without any incriminating material found during the search. As neither the AO nor the CIT(A) relied on incriminating material, all additions made by the AO and the estimated commission income by the CIT(A) were deleted.

The Tribunal dismissed the appeal due to the consistent non-appearance of the assessee and the absence of essential case records, particularly the assessment and appellate orders. This lack of information prevented the Tribunal from adjudicating the appeal on its merits.

The Tribunal found that no incriminating material was unearthed during the search and neither the assessment order nor the panchnama referred to any such material. Citing the Supreme Court's decision in PCIT vs. Abhisar Buildwell (P) Ltd., the Tribunal ruled that no additions can be made in unabated assessments under section 153A without incriminating material. Consequently, both the additions by the AO and the estimated commission income by the CIT(A) were deleted.

The Income Tax Appellate Tribunal set aside the CIT(A)'s orders for both the quantum appeal (ITA No. 814/DEL/2020) and the consequential penalty appeal (ITA No. 815/DEL/2020). The matter was restored to the file of the CIT(A) for fresh adjudication on merit, after providing the assessee a reasonable opportunity of being heard, emphasizing the need to subserve principles of natural justice.

The Tribunal observed that the CIT(A) upheld additions for certain management services based on alleged non-submission of complete details by the assessee, which the assessee disputed. The Tribunal decided to remand the matter back to the CIT(A) for re-examination of the documents already on record and any further submissions, instructing the CIT(A) to pass a speaking order on the taxability of these services.

The Tribunal admitted the legal issue regarding additions in unabated assessments without incriminating material. It confirmed that neither the assessment order nor the panchnama referred to any incriminating material. Relying on the Supreme Court's decision in PCIT vs. Abhisar Buildwell (P) Ltd., the Tribunal held that no additions can be made under Section 153A in unabated assessments without incriminating material found during the search. Therefore, both the additions made by the AO and the estimated commission income by the CIT(A) were deleted.

The Tribunal identified a 'technical error' where the appellant's PAN (ABFFA0879F) was utilized to file the ITR of Akhil Mittal & Co., leading to a mismatch between the taxpayer name and the PAN. The Tribunal held that the CPC-ITR cannot process an ITR without a valid filing and, refraining from commenting on the merits of taxability, restored the matter to the Assessing Officer for fresh adjudication. The AO is directed to pass a fresh order after granting the appellant a reasonable opportunity of being heard and collecting necessary details from the CPC-ITR.

The ITAT, noting the ongoing EOW/CBI investigation and relevant Orissa High Court orders concerning depositor identification and refund, found that further examination and verification of depositor details were necessary. Consequently, the tribunal restored the issue to the Assessing Officer for fresh adjudication, directing the AO to properly examine and verify the details in the context of section 68, after giving the assessee a reasonable opportunity of being heard.

The Tribunal found no infirmity in the CIT(A)'s order, affirming the additions made by the AO and confirmed by the CIT(A). The Tribunal concluded that the assessee's appeal lacked merit due to the absence of assistance from the assessee and the consistent findings by lower authorities.

The Tribunal observed that the CIT(A) dismissed the appeal without granting the assessee a fair and meaningful opportunity to present evidence, thereby denying natural justice. To achieve the goal of justice, the Tribunal decided to remit the matter back to the Assessing Officer for fresh adjudication, directing the AO to provide sufficient opportunity to the assessee, who is also required to cooperate.

The Tribunal held that the approval granted by the Additional CIT under Section 153D was a common, consolidated order for several assessment years, lacking specific reasoning for each year and demonstrating a non-application of mind. Citing various judicial precedents, the Tribunal concluded that such a mechanical and perfunctory approval vitiates the entire assessment proceedings initiated under Section 153C read with Section 153A, rendering the assessment orders non-est and a nullity.