ITAT Delhi Judgments — August 2024

The Tribunal acknowledged the genuine difficulties faced by the assessee, which prevented them from proper compliance and prosecution of their appeal before the CIT(A). Finding that the CIT(A) had dismissed the appeal for non-prosecution without a merits-based adjudication, the Tribunal decided to restore the appeal to the file of the CIT(A) for a de novo adjudication, ensuring the assessee a reasonable opportunity to be heard and present fresh evidence.

The Tribunal, relying on its own precedents, held that the disallowance of CSR expenditure under Section 37(1) does not bar a claim for deduction under Section 80G. It clarified that while CSR expenditure is an application of income and not for business purposes, it remains part of the total income, thus qualifying for Section 80G deduction if all other conditions of that section are met.

The Tribunal remanded the matter back to the CIT(A) for adjudication on merits, finding that no prejudice would be caused to the revenue by granting the assessee an opportunity to file submissions. The department was granted liberty to initiate proceedings under the Income Tax Act for non-compliance if necessary.

The Tribunal, noting the assessee's medical condition and the ex-parte nature of the CIT(A) orders, restored the penalty appeals to the file of the Assessing Officer for fresh adjudication. It emphasized that assessment and penalty proceedings are distinct, and upholding quantum additions does not automatically warrant penalty. The AO is directed to provide a reasonable opportunity of hearing to the assessee.

The Tribunal held that the AO's addition was not justified as the assessee had provided sufficient documentary evidence for the share transactions. The Tribunal relied on a previous decision involving the assessee's husband on identical facts and circumstances.

The Tribunal observed that the CIT(Appeals) affirmed the AO's action without giving the assessee adequate opportunity to adduce supporting material. To ensure natural justice and verify the veracity of the assessee's claim, the Tribunal set aside the orders of the lower authorities and restored the matter back to the Assessing Officer for a de novo assessment, after affording the assessee a proper opportunity of being heard.

The Tribunal held that the royalty income received from non-resident OEMs, where the patents are used in manufacturing outside India, is not taxable in India. The Tribunal followed its own previous decisions on identical issues for earlier assessment years.

The Tribunal held that the royalty income received from non-resident OEMs was not taxable in India, following its own previous decisions. The AO's additions were based on assessment orders that had been reversed by the Tribunal in earlier years.

Citing the Supreme Court's decision in *Checkmate Services Pvt. Ltd Vs. CIT*, the Tribunal held that employee contributions to PF & ESI, if deposited beyond the statutory due dates, are not allowable as a deduction, even if deposited before the income tax return filing date. The claim for deduction by the assessee was deemed an incorrect claim warranting a prima facie adjustment under Section 143(1) of the Act.

The Tribunal held that the purchases were not bogus, as there was a complete trail and correlation between purchases and sales, and the suppliers' statements were unreliable. The addition sustained by the CIT(A) was deleted.

Citing the Supreme Court's decision in *Checkmate Services Pvt. Ltd Vs. CIT*, the Tribunal held that employee contributions to PF & ESI, if deposited beyond the statutory due dates, are not allowable as a deduction, even if deposited before the income tax return filing date. The claim for deduction by the assessee was deemed an incorrect claim warranting a prima facie adjustment under Section 143(1) of the Act.

The Tribunal held that the AO could not apply Rule 8D(2) without recording objective satisfaction on why the assessee's suo moto disallowance under Section 14A was incorrect; thus, only the suo moto disallowance of Rs. 36,54,208/- was sustained for normal computation. For book profits under Section 115JB, Rule 8D(2) cannot be imputed, but direct expenses of Rs. 36,54,208/- were to be disallowed. The painting expenditure was treated as revenue expenditure based on prior decisions for the assessee.

The Tribunal found that the PCIT's order under Section 263 was passed on 25.03.2021, while the assessment order was on 28.12.2017. Applying the two-year limitation period specified in Section 263(2), the Tribunal held that the PCIT's order was barred by limitation.

The Tribunal held that the assessment years in question were outside the scope of Section 153C as the six-year period should be counted from the date of receipt of documents by the assessee's AO, not the date of the original search. Therefore, the AO lacked jurisdiction.

The Tribunal held that the assessment years in question were outside the scope of Section 153C as the six-year period should be counted from the date of receipt of documents by the assessee's AO, not the date of the original search. Therefore, the AO lacked jurisdiction.

The Tribunal held that the AO could not apply Rule 8D(2) without recording objective satisfaction on why the assessee's suo moto disallowance under Section 14A was incorrect; thus, only the suo moto disallowance of Rs. 36,54,208/- was sustained for normal computation. For book profits under Section 115JB, Rule 8D(2) cannot be imputed, but direct expenses of Rs. 36,54,208/- were to be disallowed. The painting expenditure was treated as revenue expenditure based on prior decisions for the assessee.

The tribunal held that the factum of rendering of services by the Associated Enterprises (AEs) was proved, and the principle of consistency was violated as the AO deviated from previous years' orders without proper justification. The tribunal also found merit in the assessee's contention regarding the incorrect computation of the Arm's Length Price (ALP) for royalty payments.

The Tribunal held that Section 115QA was not applicable as the buy-back consideration was less than the issue price, meaning there was no 'distributed income', and consequently, Section 10(34A) also did not apply. Thus, the denial of long-term capital loss was legally incorrect, and the assessee's claim was an incorrect interpretation of law, not furnishing inaccurate particulars, rendering the penalty under Section 271(1)(c) unsustainable. The penalty was directed to be deleted.

The Tribunal found that the Assessing Officer had indeed requested and considered the share valuation report, and the AO's note sheet confirmed satisfaction with the premium charged. The PCIT, despite the assessee producing the report, failed to verify it or find fault in the valuation method before quashing the assessment order, thus erroneously invoking Section 263. The PCIT's order was quashed.

The Tribunal condoned the delay in filing the appeal, allowed the ground regarding the jewellery sale by holding that the AO erred in treating it as short-term capital gain without referring to the DVO. It also allowed the ground regarding Section 54 exemption, stating that the wife's name on the property deed does not invalidate the deduction if the assessee made the entire investment.

The Tribunal held that the royalty income received from non-resident OEMs was not taxable in India, following its own previous decisions. The AO's additions were based on assessment orders that had been reversed by the Tribunal in earlier years.

Relying on the Full Bench decision of the Hon'ble Bombay High Court in Mohd. Farhan A Shaikh vs DCIT and the Delhi High Court in PCIT Vs. Sahara India Life Insurance Co. Ltd, the Tribunal held that an omnibus show cause notice, where irrelevant portions are not struck off, indicates non-application of mind and is fatal to penalty proceedings. Therefore, the penalty levied under section 271(1)(c) was directed to be deleted.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. It held that deemed dividend under Section 2(22)(e) is taxable in the hands of the shareholder, not the loan recipient company, citing Delhi High Court and Supreme Court precedents. For deemed interest under Section 56(1), the Tribunal ruled that there is no statutory provision to tax notional interest savings on interest-free loans as income in the borrower's hands.

The Tribunal quashed the reassessment proceedings, holding that the reasons recorded for reopening lacked tangible material to infer escapement of income. The Tribunal found no evidence that CCM was done with malafide intent for tax evasion.

The Tribunal ruled that the Explanation to Section 14A(2), inserted by the Finance Act 2022, is prospective and not applicable to AY 2018-19. Citing Delhi High Court precedent, it held that no disallowance under Section 14A is warranted where no exempt income is earned. The challenge to penalty proceedings u/s 274 r.w.s 270A was dismissed as premature.

The Tribunal found that lower authorities failed to record factual findings regarding the actual gratuity payments. Consequently, the issue is restored to the Assessing Officer (AO) to verify the evidence and allow the deduction for the gratuity payments actually made during the year.

The Tribunal condoned the delay of two weeks in filing the appeal. It held that given the appellant was a milk distributor with a small commission income and was unaware of the audit requirements, the imposition of penalty under Section 271B for non-filing of the audit report was not just, fair, or reasonable. Consequently, the impugned penalty order was set aside.

The Tribunal upheld the CIT(A)'s order, stating that no addition can be made based solely on a retracted statement without corroborating incriminating material. Since the AO failed to provide any such material and the substantive addition in the son's case was also deleted, the protective addition against the assessee could not be sustained.

The Tribunal held that the DRP erred in classifying the income as royalty under Section 9(1)(vi) and 115A. It clarified that the leasing of equipment for mineral oil operations falls under Section 44BB, and the Explanation 2 to Section 9(1)(vi)(iva) explicitly excludes amounts covered by Section 44BB from the definition of royalty. Relying on its own previous order, which was upheld by the Delhi High Court for identical facts in earlier assessment years, the Tribunal directed the AO to compute the income for the impugned assessment years (AY 2013-14, 2014-15 & 2015-16) under Section 44BB.

The Tribunal held that a retracted statement, without any corroborating incriminating material found during the search, cannot be the sole basis for making an addition. The CIT(A) had rightly deleted the addition of Rs. 6.25 crores.

The Tribunal held that the CIT(E)'s order was bad in law and facts, as it failed to provide a reasonable opportunity of being heard and did not refer to the documents submitted by the assessee demonstrating its charitable activities. Citing Supreme Court precedent, the Tribunal reiterated that the genuineness of the trust's objects and proposed activities must be considered. Consequently, the Tribunal remitted the case back to the CIT(E) for fresh consideration.

The Tribunal held that substantial justice should be preferred over technicalities. It found the purpose mentioned in Form 10 for AY 2016-17 to be specific and categorical, and for AY 2017-18, it followed the Gujarat High Court's decision that a lack of full declaration in Form 10 is not fatal if the purpose is clarified during assessment.

The Tribunal held that the DRP erred in classifying the income as royalty under Section 9(1)(vi) and 115A. It clarified that the leasing of equipment for mineral oil operations falls under Section 44BB, and the Explanation 2 to Section 9(1)(vi)(iva) explicitly excludes amounts covered by Section 44BB from the definition of royalty. Relying on its own previous order, which was upheld by the Delhi High Court for identical facts in earlier assessment years, the Tribunal directed the AO to compute the income for the impugned assessment years (AY 2013-14, 2014-15 & 2015-16) under Section 44BB.

The Tribunal observed that the CIT(E)'s order did not acknowledge the replies and documentary evidence submitted by the assessee. Consequently, the Tribunal decided that the assessee should be granted another opportunity to be heard, restoring the matter to the CIT(E) for fresh consideration of the Form 10AB application and registration under law.

The tribunal, following a Bombay High Court judgment, ruled that the Assessing Officer lacked jurisdiction to issue the Section 148 notice manually, as it ought to have been issued in a faceless manner consistent with Section 144B and the e-Assessment Scheme. Consequently, both the notice and the resulting assessment order were declared invalid.

The Tribunal held that a retracted statement, without any corroborating incriminating material found during the search, cannot be the sole basis for making an addition. The CIT(A) had rightly deleted the addition of Rs. 6.25 crores.

The Tribunal held that the AO failed to rebut the assessee's submissions and did not point out any defects in the audited books of accounts. The cash deposits were found to be sufficiently explained by cash sales made in the preceding period, attracting the doctrine of preponderance of probabilities in favor of the assessee.

The Tribunal held that even after considering the confirmed addition of Rs.2,00,000 as income, the assessee's total income of Rs.3,18,313/- remained below the taxable limit. Consequently, the appeal became infructuous and was dismissed.

The Tribunal held that while the damages received were a capital receipt and not taxable, the interest awarded on those damages was a revenue receipt and taxable in India as per the India-USA DTAA and Section 9(1)(v)(b) of the Income Tax Act.

The Tribunal acknowledged the assessee's failure to explain the genuineness of the 'idle/unaltered/static' sundry creditors to the authorities below. However, to ensure a reasonable opportunity of being heard and in the interest of justice, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for de-novo consideration, instructing both parties to ensure compliance and fair hearing.

The Tribunal determined that remanding the case to the Assessing Officer would not prejudice the revenue, allowing the assessee a fresh opportunity to present evidence and be heard. The matter was thus sent back to the AO for a de novo assessment.

The Tribunal found that the CIT(E) rejected the application without providing a reasonable and proper opportunity of hearing, leading to a miscarriage of justice. Citing the Supreme Court's decision in *Ananda Social & Educational Trust*, it emphasized that registration under Section 12AA pertains to the genuineness of the trust's objects and proposed activities, not past actions. The matter was restored to the CIT(E) for fresh consideration.

The Income Tax Appellate Tribunal observed that the assessee failed to comply with the CIT(A)'s requests for information and payment. To ensure natural justice and a proper opportunity of being heard, the Tribunal decided to remand the case back to the CIT(A) for fresh adjudication. The assessee is granted another opportunity to present their case, provided they do not misuse it and comply with future notices.

The Tribunal held that substantial justice should be preferred over technicalities. It found the purpose mentioned in Form 10 for AY 2016-17 to be specific and categorical, and for AY 2017-18, it followed the Gujarat High Court's decision that a lack of full declaration in Form 10 is not fatal if the purpose is clarified during assessment.

The tribunal upheld the CIT(A)'s decision, finding that the assessee had not diverted interest-bearing funds for investments in debentures and thus Section 14A read with Rule 8D was not applicable. It also affirmed that amendments to Section 14A introduced by the Finance Act, 2022, are prospective, as per the Delhi High Court's ruling. Consequently, with no disallowance under Section 14A, the ground related to book profit u/s 115JB was also dismissed.

The tribunal held that the Income Tax Officer who issued the notice lacked the requisite pecuniary jurisdiction according to CBDT instructions. It ruled that jurisdiction cannot be waived or conferred by consent, and a notice issued under section 148 by an authority without proper jurisdiction is a fundamental flaw, not merely procedural, thus rendering the entire assessment order void ab initio.

The Tribunal held that the DRP erred in classifying the income as royalty under Section 9(1)(vi) and 115A. It clarified that the leasing of equipment for mineral oil operations falls under Section 44BB, and the Explanation 2 to Section 9(1)(vi)(iva) explicitly excludes amounts covered by Section 44BB from the definition of royalty. Relying on its own previous order, which was upheld by the Delhi High Court for identical facts in earlier assessment years, the Tribunal directed the AO to compute the income for the impugned assessment years (AY 2013-14, 2014-15 & 2015-16) under Section 44BB.

The ITAT, citing multiple coordinate bench decisions, held that CAM charges, being for separate and distinguishable services with separate quantification and invoicing, are contractual payments subject to TDS under Section 194C (2%) and not rent under Section 194-I (10%). Therefore, the assessee was not an assessee-in-default.

The Tribunal found merit in the assessee's plea, concluding that the CIT(A) failed to consider the electronic submissions and did not provide perceptible reasons for its decision. Consequently, the first appellate order was set aside, and the matter was restored to the CIT(A) for fresh determination, ensuring proper opportunity for the assessee to adduce evidence and for the CIT(A) to pass a speaking order.

The tribunal dismissed general grounds and those related to late deposit of ESI/PF and interest on late TDS as not pressed. It allowed the ground concerning the disallowance of penalty on service tax, finding that it was debited to the partners' capital account and not claimed as a deduction. The tribunal also allowed the disallowance of interest on late deposit of service tax, holding it to be compensatory and an allowable business expenditure under Section 37(1) of the Income Tax Act, citing Supreme Court precedent.