ITAT Delhi Judgments — July 2024

The Tribunal observed that denying an opportunity of hearing would cause prejudice to the assessee, and providing one would not harm the Revenue. Consequently, the matter was remanded back to the CIT(Exemption) to pass a fresh order after affording the assessee an adequate opportunity to present their case.

The Tribunal observed that no prejudice would be caused to the Revenue if the assessee was given an opportunity of being heard. Consequently, the matter was remanded back to the CIT(Exemption) to pass a fresh order after affording due opportunity of being heard to the assessee.

The Tribunal noted that its Co-ordinate Bench had already quashed the revisional order under Section 263. As a result, the assessment order, being a consequence of the quashed revisional order, and all subsequent appellate proceedings, including the current appeal, were rendered infructuous and non-est by operation of law.

The Tribunal found that the assessment was completed ex-parte and the CIT(A) also decided the issue without a hearing on merits. Therefore, the Tribunal remitted the case back to the Ld. CIT(A) for fresh adjudication on merits, providing proper opportunities of being heard to the assessee, who is directed to cooperate.

The Tribunal upheld the CIT(A)'s decision to delete the additions under Section 68 and Section 69, finding that the assessee had discharged its onus by submitting relevant documentary evidence, including financial statements and Income Tax Returns of the investor companies. The Tribunal distinguished the judgments cited by the revenue, noting that in the present case, the investor companies were regular taxpayers and all details were furnished through banking channels.

The Tribunal, relying on various High Court and its own previous decisions, held that the requirement of filing the audit report in Form 10B is procedural and directory in nature, not mandatory. It directed the Assessing Officer to allow the exemption claim under Sections 11 and 12 of the Act. Grounds 8 and 9, pertaining to other disallowances, were remitted back to the Assessing Officer for fresh consideration.

The Tribunal held that since the assessee had recorded the expenditures in its audited books and provided details of the deductees (including PAN, name, address, and TDS details) to the tax authorities, and the payments were made through banking channels, the source of expenditure was explained. Emphasizing that Section 69C applies to unexplained *source* of expenditure, not the genuineness of the expenditure itself when the source is accounted for, the Tribunal concluded that the AO's disallowance was unjustified. The AO failed to conduct proper verification of the transactions or issue notices to the deductees despite receiving comprehensive details, leading to the deletion of the entire addition.

The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision. It ruled that for an NBFC, whose primary activities include money lending and investment, the interest income derived from these activities constitutes business income, not 'income from other sources'. The ITAT found no infirmity in the CIT(A)'s reasoning.

The Tribunal found that the assessee adequately demonstrated the cash deposits were from recorded cash sales, supported by corresponding purchases, stock reduction, and VAT returns. Since the books of accounts were not rejected under Section 145(3) and no defects were found in the financial declarations, the additions made under Section 68 were unsustainable. The Tribunal ruled that assessment cannot be based on mere suspicion and taxing the same income twice is impermissible.

The Tribunal condoned the delay in filing the assessee's appeal. It remitted the issue of eligibility for exemption under sections 11 & 12 to the Assessing Officer for de novo assessment, holding that GDA's activities are charitable, involve general public utility, and are not hit by the proviso to section 2(15), thus eligible for registration under section 12AA. The Revenue's appeal regarding depreciation was dismissed, as it was a settled issue in favor of the assessee. Issues related to the validity of reassessment were not pressed by the assessee.

The Tribunal ruled that the assessee's activities qualify as charitable for public utility and its business activities are incidental, thus the proviso to Section 2(15) is not attracted, making it eligible for exemptions u/s 11 & 12. Accordingly, the issue of exemption u/s 11 & 12 and related expenditure additions were remitted to the Assessing Officer for fresh consideration. The deletion of the depreciation addition by the CIT(A) was upheld, being a settled issue.

The Tribunal observed that the assessment was ex-parte and the CIT(A) decided without hearing the assessee. To ensure justice, the Tribunal remitted the matter back to the CIT(A) for fresh adjudication on merit, granting the assessee a proper opportunity of being heard, with a direction for cooperation.

The Tribunal upheld that the Ghaziabad Development Authority is eligible for exemption under sections 11 and 12, citing prior High Court and ITAT rulings that its activities for public utility are not commercial. The issues concerning exemptions under sections 11 & 12 and certain additions were remitted back to the Assessing Officer for a de novo assessment. The issue of depreciation as capital expenditure was dismissed for the Revenue, being a settled matter in favor of the assessee.

The Tribunal noted that while the assessee had not fully utilized opportunities at lower levels, in the interest of justice, another opportunity should be granted. The matter was restored to the file of the Jurisdictional Assessing Officer for de novo verification and assessment, with directions to provide adequate opportunity to the assessee. The appeal was allowed for statistical purposes.

The tribunal condoned the 66-day delay in filing the appeal, noting that the object of law is to ensure complete justice. Without discussing the merits, the tribunal remitted the matter back to the CIT(E) with a direction to provide the assessee with a meaningful and effective opportunity of being heard and to decide the matter afresh.

The tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of the addition related to undisclosed income from agricultural land sale, as the land was not a capital asset and additions based on uncross-examined third-party statements were invalid. For the assessee's appeal challenging the unexplained investment of Rs. 1,07,00,000/-, the tribunal accepted the principle of telescoping of prior additions against this investment and remanded the issue back to the AO for verification and re-adjudication.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the addition related to agricultural land sale, confirming it was exempt under Section 2(14)(iii) and that third-party statements were not confronted to the assessee. Regarding the assessee's appeal on the Rs. 1,07,00,000/- unexplained investment, the Tribunal allowed it for statistical purposes, remanding the issue back to the AO for re-verification and to provide the assessee an opportunity to be heard regarding telescoping against additional declared receipts from land sales.

The Tribunal noted the discrepancy between the exemption claimed by the assessee (Section 10(21)) and the sections considered by the CIT(A) (10(23A), 12A, 10(23C)(iiiad)). It also observed that the assessee's Section 12A registration was effective from 19.06.2020, making it potentially inapplicable to A.Y. 2019-20. Finding the CIT(A)'s order cryptic and non-speaking, the Tribunal remitted the matter back to the CIT(A) for a speaking order after considering all relevant facts and providing the assessee an opportunity to present its case.

The tribunal noted that the appeal was dismissed due to non-prosecution and held that justice required providing a proper opportunity of hearing. It remitted the case back to the CIT(A) for a fresh decision after affording the assessee an effective and sufficient opportunity of being heard, with the expectation that the assessee would cooperate and avoid unnecessary adjournments.

The Tribunal held that the issue was squarely covered by its earlier decision for AY 2014-15 (ITA No. 507/Del/2019), where the assessee was found entitled to the deduction under section 80IC. It affirmed the first appellate authority's decision that the reopening of assessment under section 147 for AY 2010-11 was invalid due to a mere change of opinion. Consequently, the assessee is entitled to the deduction, and all disallowances of deduction claimed under section 80IC for the disputed assessment years are to be deleted.

The tribunal found no evidence of proper service of notices under Section 142(1) on the assessee. It noted that the assessee had changed her address and updated it on the NSDL portal, filing returns from the new address for subsequent years. The tribunal concluded that without proper service of notice, deliberate non-compliance cannot be presumed, rendering the penalty imposed under Section 271(1)(b) unsustainable and deleted it.

Following its previous decision for AY 2014-15, the Tribunal held that the assessee was entitled to the deduction under section 80IC for all assessment years. The reopening of assessment for AY 2010-11 under section 147 was also found invalid by the first appellate authority, being based on a mere change of opinion. The Assessing Officer was directed to delete the disallowances.

The tribunal held that for the interest of justice, the matter should be remitted back to the CIT(A). The CIT(A) is directed to provide the assessee with a fair and reasonable opportunity of being heard and thereafter decide the matter afresh according to law.

The Tribunal, acknowledging the NCLT's moratorium, decided to consign the revenue's appeal to records. It granted liberty to the revenue to revive the appeal after the NCLT proceedings are completed, as the continuation of proceedings against the respondent is prohibited.

The Tribunal held that the issue was squarely covered by its prior decision for AY 2014-15 (ITA No. 507/Del/2019), which had allowed the assessee's claim for 80IC deduction. It noted that the reopening for AY 2010-11 was based on the AO's decision for AY 2014-15. Therefore, the assessee is entitled to the deduction, and the Assessing Officer is directed to delete the 80IC disallowances for all assessment years.

The Tribunal found that the CIT(A) had dismissed the appeal for non-prosecution without deciding on merits and without providing adequate opportunity of being heard. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for a de-novo consideration, directing the AO to provide reasonable opportunities to the assessee.

The tribunal noted that the assessee did not produce all sales invoices/memos to the AO for verification. To provide a reasonable opportunity, the matter was remitted back to the AO for de-novo consideration, including verification of sales and purchases, and to provide the assessee a fair hearing.

The Tribunal observed that the CIT(A) dismissed the appeal for non-prosecution. Considering the principles of natural justice and the need for a fair opportunity, the Tribunal remitted the entire matter back to the Ld. Assessing Officer. The AO is directed to re-adjudicate the case afresh after examining all relevant materials and providing the assessee with an effective opportunity of being heard, with the expectation of cooperation from the assessee.

The tribunal, relying on the Delhi High Court's decision in CIT vs. Relcom, held that the assessee is entitled to the TDS credit. It ruled that credit should not be denied merely because the corresponding income was declared by a sister concern, provided the sister concern has not claimed the same TDS. The AO was directed to allow the credit after verification.

The Tribunal observed that a Coordinate Bench had previously allowed the assessee's claim for deduction under section 80IC for AY 2014-15. Since the disallowances in the present appeals stemmed from the AO's stance in AY 2014-15, and the CIT(A) had also ruled the reopening for AY 2010-11 as invalid, the Tribunal considered the issue to be covered. Respectfully following the Coordinate Bench's decision, the Tribunal held the assessee is entitled to the deduction under section 80IC and directed the AO to delete all disallowances.

The Tribunal reviewed the assessee's opening cash balance, cash withdrawals, and cash sales, noting that the total cash available (Rs. 81,38,920/-) exceeded the cash deposits made (Rs. 66,36,000/-). It concluded that the cash deposits could be adequately explained by these financial movements and, therefore, could not be considered unexplained income of the assessee for the year under consideration.

The Tribunal allowed the appeal, holding that the disallowance of Director's remuneration was not justified as the matter was revenue neutral and the amount was offered to tax in the subsequent year, preventing double taxation. Regarding capital gains, it found that no effective 'transfer' occurred under Section 2(47) as the share purchase agreement was conditional on full payment, which never materialized, and the transaction was subsequently cancelled, applying the real income theory.

The Tribunal held that the issue of ESI/PF payment is squarely covered by the Supreme Court's judgment in `Checkmate Services Pvt. Ltd. vs. CIT-I`. The Supreme Court ruled that employers must deposit employee contributions towards EPF/ESI on or before the due date for deduction to be allowed, and such amounts, deemed income under Section 2(24)(x), cannot be deducted if paid beyond the due date. Consequently, the Tribunal upheld the disallowance.

Given that the quantum addition, which formed the basis for the penalty, was remanded by the ITAT, the tribunal held that the penalty order also warrants reconsideration. Consequently, the penalty order is remanded to the Assessing Officer to follow the procedure for levy of penalty as per Section 275(1A).

The Tribunal allowed the assessee's appeal on membership fees, noting that the entire amount had been offered to tax over various years and the Revenue had accepted this accounting methodology in subsequent assessment years. It ruled that no disallowance under Section 14A was applicable as no exempt income was earned. Ad-hoc disallowance of expenses without rationale was deemed impermissible. The capitalization of interest paid to NOIDA for property acquisition was upheld. Finally, the non-deduction of TDS on credit card transaction charges was held valid based on Delhi High Court judgments and CBDT notifications.

The Income Tax Appellate Tribunal, relying on the Hon'ble Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT-I, held that employers are required to deposit employees' contributions to EPF/ESI on or before the due dates specified in the relevant welfare enactments. Failure to do so means these amounts cannot be allowed as deductions under Section 36(1)(va) read with Section 2(24)(x) of the IT Act, irrespective of whether the payment was made before the Income Tax Return filing date. Therefore, the disallowance was upheld.

The Tribunal ruled that the consultancy services did not satisfy the 'make available' condition under Article 12(4)(b) of the India-USA DTAA, as no technical knowledge or know-how was permanently transferred. Furthermore, the general management charges were deemed pure reimbursements for third-party subscription services procured for affiliates, not involving the transfer of knowledge/know-how, and thus not taxable as FIS. Therefore, the appeal of the assessee on both grounds was allowed.

The Tribunal found no change in the factual matrix and legal proposition compared to the precedent. It held that the addition made on account of disallowance of expenses was beyond the purview of limited scrutiny, lacking prior PCIT approval for conversion to complete scrutiny. Consequently, the addition by the AO was directed to be deleted, and the appeal was allowed.

The Tribunal found that the appeal filed before the CIT(A) was not barred by limitation, referencing a Supreme Court order that extended limitation periods. Therefore, the CIT(A) was not justified in dismissing the appeal on this ground. The case was set aside and remanded to the CIT(A) for a fresh decision on merits after re-examining the limitation issue.

The tribunal ruled that the interest income from ICDs and FDs should be treated as 'Profits & Gains of Business or Profession' as the assessee's Memorandum of Association explicitly included leasing and finance, and this classification was consistently accepted in other assessment years. The tribunal also directed the AO to allow the amortization of preliminary expenses, emphasizing the rule of consistency given their acceptance in prior and subsequent years. Both grounds of appeal were allowed.

The Tribunal remanded the matter back to the Assessing Officer to re-examine the issues on merits and pass a de-novo order. The AO was also granted the liberty to initiate penalty proceedings under the Income Tax Act for the assessee's non-compliance with notices.

The Tribunal held that the CIT(A) erred in passing an ex parte order without providing adequate opportunity of hearing, especially considering the passing of the assessee's legal consultant. To ensure natural justice, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) for fresh adjudication on merits after affording proper opportunity of being heard to the assessee.

The Tribunal found that the assessee made every possible attempt to make timely payments but was prevented by technical glitches in the Provident Fund Department's online platform. Applying the "doctrine of impossibility," the Tribunal concluded that the assessee could not be penalized for system failures beyond their control. Therefore, the CIT(A)'s order was set aside, and the Assessing Officer was directed to cancel the disallowance of Rs.16,59,659/-.

The Income Tax Appellate Tribunal (ITAT) remitted the matter back to the CIT (Appeals) for a fresh hearing. This decision was based on the assessee's plea that their previous counsel could not present the case properly due to old age and illness, a proposition that the Departmental Representative did not object to. The ITAT concluded that granting an opportunity of being heard to the assessee would serve the interest of justice.

The Tribunal upheld the taxing of the entire membership fee in the year of receipt, citing the assessee's vested right to non-refundable income and a lack of justification for changing the accounting policy. It ruled that no disallowance under Section 14A is applicable in the absence of exempt income and that ad-hoc disallowances for business expenses are not permissible without rationale. However, interest paid on plot installments was confirmed as capital expenditure, and no TDS was required on credit card transaction charges.

The Tribunal found that the assessee had a reasonable cause for non-compliance, as the statutory notices were issued with a defective/old PAN despite the assessee regularly filing returns with a new PAN and having informed the AO of the defective PAN. Citing Section 273B, the Tribunal concluded that such circumstances constitute a 'reasonable cause' for failure to comply. Consequently, the penalties imposed under Section 271(1)(b) were deleted.