ITAT Delhi Judgments — June 2024

The Tribunal held that the assessee, being a co-operative society, is eligible for deduction under Section 80P(2)(d) for interest and dividend income derived from deposits with Delhi State Co-operative Bank Ltd., which is also a co-operative society. The Tribunal distinguished the *Totgar's* Supreme Court decision, stating it applied to deposits with commercial banks, not co-operative banks. It also directed that expenditure incurred for earning such interest income should be allowed under Section 57, and that the levy of interest under Sections 234B and 234C is consequential.

The Tribunal ruled that while the assessee is not eligible for deduction under Section 80P(2)(a)(i) for interest from commercial banks, it is eligible for deduction under Section 80P(2)(d) for interest and dividend income earned from deposits with other co-operative societies, such as the Delhi State Co-operative Bank Ltd. The Tribunal distinguished the *Totgar's* judgment, asserting it applies to deposits with commercial banks, not co-operative banks, and directed that expenditure incurred under Section 57 for earning interest from commercial banks also be allowed.

The Tribunal found no evidence from the Income Tax Department to contradict the CIT(A)'s findings. The CIT(A) correctly deleted the additions related to property transactions, as the TEP lacked specific details and corroborative evidence, and also validly held that interest from the NRE account was exempt from tax. Therefore, the Tribunal declined to interfere with the order of the Ld. CIT(A).

The Tribunal remitted the matter back to the Assessing Officer for re-examination. The AO is directed to verify the assessee's claim of double offering of interest income and, if found true, provide the necessary relief after granting the assessee an adequate opportunity of being heard.

The Tribunal consistently held that additions based solely on third-party diaries or 'dumb documents' found from the assessee without corroborative evidence cannot be sustained. It emphasized that the onus is on the Department to provide cogent evidence linking such documents to the assessee's undisclosed income. The Tribunal deleted most additions where the assessee provided satisfactory explanations and documentary evidence (such as bank records, ledger accounts, and statements of affairs), or where the additions pertained to a third party or were already assessed in another's hands. One specific issue regarding unexplained jewellery investment was remanded to the AO for de-novo adjudication.

The Tribunal consistently held that additions made solely on the basis of third-party diaries or uncorroborated loose sheets/dumb documents, without independent corroborative evidence or opportunity for cross-examination, cannot be sustained. Additions related to unexplained expenditures for mobile phones, car advances, marriage expenses, and foreign currency purchases were deleted upon satisfactory explanations and documentary evidence of proper recording and banking transactions. The addition for unexplained cash found during the search was also deleted as the assessee provided a reasonable explanation backed by a cash flow statement and family savings. The specific issue concerning unexplained jewellery investment was remanded to the A.O. for fresh adjudication, considering the assessee's reconciliation and explanations.

The ITAT did not delve into the merits of the additions. Instead, it focused on the preliminary objection raised by the assessee regarding the jurisdiction of the AO and CIT(A), as the assessee claimed to be a Non-Resident Indian (NRI). Given the agreement of both parties to remit the jurisdictional issue, the Tribunal set aside the orders and remanded the entire matter back to the AO to first determine the question of jurisdiction and then pass an appropriate order.

The Tribunal held that the assessee had accepted the reassessment order by not appealing against it. The rectification order, which stemmed from an application to delete a penalty, could not be used as an 'escape route' to challenge the quantum addition or interest from the original reassessment order. Therefore, the quantum addition and charging of interest in the reassessment order could not be raised in appellate proceedings against the rectification order.

The Income Tax Appellate Tribunal found no infirmity in the order of the CIT(A) and upheld the confirmation of the addition. The appeal was dismissed as the assessee failed to adduce any fresh material to controvert the CIT(A)'s findings and also did not diligently pursue the appeal before the Tribunal.

The Tribunal dismissed the assessee's appeal, holding that an appeal against a Section 153A assessment is not maintainable if no fresh additions are made by the Assessing Officer based on incriminating material found during the search. It clarified that since the original additions from the Section 143(3) assessment were already set aside and remanded, they would not sustain in the Section 153A proceedings either.

The Tribunal directed the Assessing Officer to recompute the profit on sale of fixed assets and allow depreciation as per the Income Tax Act. However, the ground pertaining to the disallowance of late ESI/PF payment was dismissed, relying on a Supreme Court judgment.

The Income Tax Appellate Tribunal dismissed the appeal filed by the Revenue due to the demise of the assessee. However, the Tribunal granted liberty to the Revenue to file a fresh appeal in the name of the legal heirs of the deceased assessee.

The ITAT held that since the additions made by the AO in the quantum proceedings, which were the basis for initiating penalty proceedings, had been deleted by the ITAT Delhi Bench 'G' in earlier quantum appeals, the penalty levied under Section 271(1)(c) cannot survive. Therefore, the impugned penalty was deleted.

The Income Tax Appellate Tribunal (ITAT) allowed the appeal for statistical purposes and remanded the matter back to the CIT(Appeals). The ITAT directed the CIT(Appeals) to serve proper notice to the assessee and pass a fresh order on merits, emphasizing that the mode of notice service and the assessee's actual knowledge were not clear from the CIT(Appeals)'s order.

The Tribunal consistently held that additions based solely on third-party diaries or 'dumb documents' (loose sheets) without corroborative evidence or opportunity for cross-examination were unsustainable and deleted such additions across multiple assessment years. It also deleted additions related to unexplained expenditure for mobile, loans, and marriage expenses where proper explanations and documentary evidence were provided or where the additions were based on presumption without material support. The issue of unexplained investment in jewellery was remanded back to the AO for de-novo adjudication to consider the assessee's reconciliation and explanation.

The Income Tax Appellate Tribunal remitted both appeals back to the Assessing Officer (AO) for a fresh examination. The AO is directed to verify the assessee's claim of double-counted interest income and provide necessary relief if the claim is substantiated, ensuring the assessee is given an adequate opportunity to be heard.

The Tribunal primarily deleted additions based on uncorroborated entries in diaries/loose sheets seized from a third party or the assessee, emphasizing the lack of corroborative evidence and denial of cross-examination for third-party documents, and the "dumb document" nature of loose sheets from the assessee. It also deleted additions for unexplained mobile purchase, car advance, interest income, marriage expenses, and cash found during search, accepting the assessee's detailed explanations and financial records. However, the issue of unexplained investment in jewellery was remanded to the Assessing Officer for fresh consideration.

The Tribunal consistently held that additions based on third-party diaries or 'dumb documents' (loose sheets) without corroborative evidence could not be sustained. Specific additions for unexplained mobile purchase, vehicle expenditures pertaining to separate assessees or properly explained, and presumptive interest income were deleted. Additions for unexplained investments, expenditures (spectacles, mobile, marriage, construction, foreign currency), and cash found during search were also deleted as the assessee provided satisfactory explanations and supporting documents. The issue of unexplained jewellery was remanded to the AO for fresh adjudication.

The Tribunal consistently held that additions based on third-party documents or unsubstantiated loose papers without corroborative evidence or opportunity for cross-examination cannot be sustained and were deleted. Additions for unexplained expenditures on mobile, vehicles, and marriage expenses were deleted where the assessee provided satisfactory explanations, supporting documents, and bank records. An addition for presumptive interest income was deleted due to lack of material support for the rate and evidence of declared interest. The addition for unexplained cash found during the search was deleted as the assessee provided a reconciled cash flow statement and explained sources. The issue of unexplained investment in jewellery was remanded to the AO for de-novo adjudication.

The tribunal, to prevent a miscarriage of justice, remitted the issue back to the CIT(A) for fresh consideration. The CIT(A) is directed to consider the assessee's plea of financial hardship and inability to pay tax. If the plea is found acceptable, the appeal should be admitted and decided on merit after providing an opportunity of being heard and considering all evidence.

The Tribunal consistently deleted additions made solely based on third-party diaries/loose sheets without corroborative evidence, reaffirming that presumption under Section 132(4A) applies only to the person from whom material is seized. Additions related to unexplained expenditure for mobile purchase, vehicle advance, and presumptive interest income were also deleted where the assessee provided adequate explanations or documentation. The addition for unexplained marriage expenses and cash found were deleted. However, the issue of unexplained investment in jewellery was remanded to the AO for fresh adjudication.

The Income Tax Appellate Tribunal upheld the decision of the CIT(Exemptions), finding no flaw or infirmity in the order. The Tribunal concurred that the assessee's objects did not qualify as charitable, the absence of activities made genuineness unverifiable, and the incorrect ITR filing further supported the denial of 12AA registration.

The Tribunal ruled that an order passed under Section 263 in the name of a deceased person, when the tax authority was aware of the death, is non-est (non-existent) and without jurisdiction. Consequently, any subsequent assessment order framed in pursuance of such a void order is also vitiated and must be set aside. The additional legal ground was admitted as it goes to the root of the matter.

The Tribunal noted that the adverse Inspector's report, heavily relied upon by the lower authorities, was not confronted to the assessee. Furthermore, the authorities did not independently verify the assessee's evidence of sales or inquire with customers despite a claimed change in business composition. Therefore, the Tribunal restored the matter to the Assessing Officer to provide the assessee a proper opportunity of hearing and pass a fresh order in accordance with law.

The ITAT upheld the CIT(A)'s decision, confirming the disallowance of rent expenses under Section 37(1) as the premises were used for residential purposes and not exclusively for business. It also confirmed the disallowance of project expenses, treating them as capital expenditure and noting the assessee's failure to provide supporting evidence during any stage of the proceedings.

The Tribunal consistently held that additions made solely on the basis of third-party seized documents (diaries, loose sheets) or 'dumb documents' without independent corroborative evidence were unsustainable, especially when the assessee was not given an opportunity for cross-examination. Most additions for unexplained investments, loans (including presumptive interest), cash, construction expenses, foreign currency purchases, and marriage expenses were deleted. The Tribunal found that the assessee had provided sufficient explanations, or the issues pertained to separate proceedings for related parties. The addition related to unexplained jewellery was remanded to the Assessing Officer for de-novo adjudication.

The Tribunal condoned the significant delay in filing the appeal, accepting the reasons related to Covid-19 and farmer's agitation as sufficient cause. It found that the AO made mechanical additions without proper inquiry and that the assessee was not afforded adequate opportunity during the assessment and first appellate proceedings. The Tribunal set aside the impugned order and restored the matter to the AO for fresh assessment after providing a proper opportunity of being heard to the assessee.

The Tribunal upheld the PCIT's order, ruling that interest on enhanced compensation from compulsory acquisition of land is taxable as "income from other sources" under Section 56(2)(viii) of the Income Tax Act, effective from 01.10.2010. The Tribunal distinguished the Supreme Court's Ghanshyam HUF decision as not applicable post-amendment, relying on later Supreme Court decisions (Sham Lal Narula) and High Court pronouncements (Mahender Pal Narang, Puneet Singh, Inderjit Singh Sodhi). The AO's failure to tax this income, in light of these binding precedents and statutory amendments, rendered the original assessment erroneous and prejudicial to the revenue.

The Tribunal, relying on its own prior decision in the assessee's case for an earlier assessment year, held that salary income earned by a non-resident for services rendered outside India is exempt from tax in India under Article 15(1) of the India-Korea DTAA. It confirmed that the services were rendered outside India and thus the income could not be deemed to accrue or arise in India under Section 9(1)(ii) of the Income Tax Act.

The Tribunal held that, in light of the moratorium imposed by the NCLT under Section 14 of the IBC Code 2016, both the appeal filed by the Revenue and the cross-objection filed by the Assessee would not survive. Consequently, both were dismissed, with liberty granted to recall the order after the conclusion of the IBC proceedings.

The ITAT upheld the decision of the CIT(A) to delete the additions. The Tribunal found no infirmity in the CIT(A)'s reasoned findings, as the Revenue failed to controvert them. The AO's own remand report had largely substantiated the assessee's submissions, indicating that the additions were erroneous, double-counted, or belonged to a different assessment year.

The ITAT remitted the issue back to the CIT(A) for fresh consideration. The CIT(A) is directed to consider the assessee's plea regarding its inability to pay tax and, if found acceptable, admit the appeal and dispose of it on merit after providing an opportunity of being heard and considering all evidence.

The Tribunal consistently deleted additions made solely on uncorroborated entries in third-party diaries or loose documents, emphasizing that Section 132(4A) presumption applies only to the person from whom material is seized. It also deleted additions for expenses and investments where the assessee provided satisfactory explanations, bank statements, and cash flow statements, which lower authorities failed to consider. The addition regarding unexplained jewellery for AY 2019-20 was remanded to the AO for fresh adjudication to consider the assessee's detailed reconciliation and explanations.

The Tribunal found that the NFAC's order was based on an erroneous assumption of fact regarding the Vivad Se Vishwas Scheme settlement. Consequently, the issues on merits pertaining to the reassessment were restored to the file of the CIT(Appeals) for a fresh order, ensuring the assessee is provided an opportunity of hearing.

The Tribunal held that the issue was covered by a previous coordinate bench decision in the case of M/s. VRP Landbase Pvt. Ltd., where an identical addition for cash receipt was dismissed due to lack of corroborative evidence. Following this, the Tribunal upheld the CIT(A)'s deletion of the addition against the present assessee, finding no infirmity in the order.

The Tribunal deleted additions made solely on the basis of third-party diaries or 'dumb' loose sheets without corroborative evidence. It also deleted additions for unexplained expenditure on mobile phones, cars, marriage expenses, and interest income where the assessee provided satisfactory explanations or where the amounts pertained to other assessees. The matter of unexplained jewellery investment was remanded to the AO for fresh adjudication due to discrepancies in calculation and the need to consider the assessee's reconciliation.

The Tribunal set aside the disallowance of interest on unsecured loans to the Assessing Officer for re-computation, directing consideration of all loans and production of bank statements by the assessee. For issues related to securities/advances and stock/profit arising from a Central Excise search, the assessee was directed to produce relevant bank statements and orders from Central Excise authorities, respectively, for the AO's re-adjudication. The appeal was allowed for statistical purposes.

The Tribunal consistently held that additions made solely on the basis of third-party diaries or 'dumb documents' (loose sheets) without corroborative evidence could not be sustained, emphasizing that the presumption under Section 132(4A) applies only to material found in the assessee's possession. It deleted additions for unexplained investments, expenditure, and interest income where the assessee provided explanations, records, or where transactions pertained to other assessees. The Tribunal also deleted additions for unexplained cash found during the search and marriage expenses, noting lower authorities failed to consider the assessee's explanations and supporting documents. However, the matter of unexplained jewellery was remanded to the AO for de-novo adjudication.

The Tribunal upheld the CIT(A)'s deletion of both additions. For the share capital and premium, it found that genuineness was established with evidence and that the investors were related companies/promoters, negating suspicion based on poor financials. For customer advances, it noted that sales against these advances were made in subsequent financial years, thus confirming the transactions were not unexplained cash credits.

The Tribunal confirmed that the interest charged by the assessee on the loan to its AE (1 month LIBOR + 300 basis points) was at arm's length. For corporate guarantees, the Tribunal ruled that the commission should be charged at 0.5%, distinguishing corporate guarantees from bank guarantees.

The tribunal held that the reassessment proceedings initiated under Section 148 were void ab initio. It observed that the Assessing Officer resorted to Section 148 only after the time limit for assessment under Section 153C (which was initially considered for the assessee's brother based on the same search) had expired. Citing the Supreme Court's decision in PCIT vs. Abhisar Builwell Pvt. Ltd., the tribunal ruled that assessments based on incriminating material found during a search must be conducted under the search assessment provisions (Sections 153A/153C), and not Section 148, especially when the time limit for 153C has elapsed.

The Tribunal found the AO was not justified in rejecting the books without proper verification and remanded the issues of rejection of books, estimation of profit, and addition under Section 41(1) back to the AO for fresh adjudication. Other grounds related to disallowances already deleted by the CIT(A) were rejected as not sustainable.

The Tribunal held that offshore design and engineering services, being inextricably linked to non-taxable offshore plant/equipment supply in composite contracts, are not taxable as FTS. Onshore supervisory services connected to the assessee's PE in India are taxable as business profits under Article 7 of the DTAA on a net basis, not as FTS under Article 12(4) on a gross basis, with a direction to verify if income was already offered in a subsequent year. Other onshore supervisory/commissioning services were held taxable as FTS at 10% on a gross basis under Article 12(4), irrespective of PE. Reimbursement of expenses under a cost contribution arrangement, without markup, was not taxable as FTS. Issues concerning interest under Sections 234D and 244A were remanded for factual verification, and the Revenue's appeal regarding interest under Section 234B was dismissed.

The Tribunal ruled that offshore design and engineering inextricably linked to non-taxable offshore plant/equipment supply is not taxable as FTS. It held that onshore supervisory services connected to a PE should be taxed as business profits on a net basis under DTAA Article 7, remanding for verification of prior tax payment. Other onshore supervisory/commissioning services were taxed as FTS irrespective of PE presence. Reimbursements of expenses without markup were deemed not taxable FTS, and interest-related issues were remanded for factual verification, while interest under Section 234B in the Revenue's appeal was dismissed.

The Tribunal held that while Section 14 of the IBC prohibits proceedings *against* the corporate debtor, the appeals were filed by the assessee. However, upon initiation of insolvency, the original directors become functus officio, and only the Interim Resolution Professional or Resolution Professional, in consultation with the Committee of Creditors, can pursue such appeals. The appeals were dismissed with liberty for the IRP/RP to seek recall and fresh hearing on merits.

The Tribunal found that the assessee had indeed sought an adjournment in response to the Section 142(1) notice and subsequently complied by making submissions, which were considered by the AO. As the AO did not controvert these facts, the imposition of penalty was deemed unjustified. The reliance by the CIT(A) on the order sheet was also held to be not justified.

The Tribunal ruled that offshore design/engineering was not taxable as FTS as it was inextricably linked to non-taxable offshore equipment supply. Onshore supervisory services attributable to a PE were taxable as business profits on a net basis under DTAA Article 7, with a remand for verification to avoid double taxation. Other specific onshore supervisory/commissioning fees were taxable as FTS under DTAA Article 12(4). Reimbursement of expenses without markup was not taxable as FTS. Interest issues under Sections 234D/244A were remanded for factual verification, and the Revenue's appeal on Section 234B interest was dismissed.

The Tribunal found that the AO's reopening was based on incorrect findings and lacked material information regarding the date and mode of receipt of the alleged accommodation entry, which the assessee claimed was received in a subsequent year. The Tribunal set aside the impugned order and remanded the case back to the AO to conduct a fresh assessment, verifying the assessee's claim about the year of receipt and taking necessary action.