ITAT Delhi Judgments — October 2024

The Tribunal held that interest income derived from business activities is eligible for deduction under Section 10A/10AA, following its own prior decisions. It also ruled that foreign exchange gains offered to tax should not be disallowed and that cost recoveries should be allowed to be set off against expenses with a 5% disallowance. Furthermore, telecommunication expenses and expense recoveries related to migration/training should be excluded from both export and total turnover.

The Tribunal held that interest income derived from business activities is eligible for deduction under Section 10A/10AA, following its own prior decisions. It also ruled that foreign exchange gains offered to tax should not be disallowed and that cost recoveries should be allowed to be set off against expenses with a 5% disallowance. Furthermore, telecommunication expenses and expense recoveries related to migration/training should be excluded from both export and total turnover.

The Tribunal allowed the deletion of the notional interest addition, finding that the assessee had sufficient surplus funds. For the share capital addition, the Tribunal found that the assessee failed to prove the capacity of the investors and directed the Assessing Officer to consider the addition as genuine unless the assessee provides details of share allotment within three months.

The Tribunal ruled that the AO's failure to strike off the irrelevant portion in the penalty notice, thereby not specifying whether the penalty was for concealment or furnishing inaccurate particulars, was a fatal flaw. Citing various High Court and Supreme Court precedents, the Tribunal concluded that this indicated non-application of mind and an infraction of mandatory procedure. Consequently, the penalty levied under Section 271(1)(c) was ordered to be deleted.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the protective addition of Rs. 2,44,68,000/-. It reiterated the principle that a protective addition cannot survive if the corresponding substantive addition has been deleted or cannot be made, noting that even the substantive additions made in the hands of the other entity, Rajyog Buildtech Pvt. Ltd., for subsequent assessment years were deleted by appellate authorities.

The Tribunal held that the addition made by the Assessing Officer was not sustainable as a substantial portion of the deposit was declared under the PMGKY scheme and taxes were paid. The Tribunal directed the Assessing Officer to delete the impugned addition.

The Tribunal found that NFAC's assertion of non-submission of details was factually incorrect, as the assessee had furnished them. Consequently, the appeals were restored to the NFAC for *de novo* adjudication, with directions to provide the assessee a reasonable opportunity of being heard and to allow the submission of fresh evidence.

The Tribunal condoned a 284-day delay in filing the appeal, accepting the assessee's explanation as a housewife with a communication gap with her husband. It admitted additional evidences, including the husband's bank statements and builder payment receipts, finding them relevant but requiring verification. The assessment order was set aside, and the issue on merits was restored to the file of the Ld. AO for fresh adjudication after considering the newly admitted additional evidences.

The Tribunal determined that the foundation for the penalty proceedings, being the quantum addition, had already been set aside and remanded for re-assessment. Consequently, the impugned penalty order and the CIT(A)'s order were deemed unsustainable and were deleted. The A.O. was granted the liberty to initiate fresh penalty proceedings contingent on the outcome of the de-novo assessment.

The Tribunal held that the assessee is entitled to the foreign tax credit of Rs. 98,852/- as the tax was paid in the USA and there was no dispute by the revenue. It directed the AO to delete the double addition of Rs. 29,37,294/-, concluding that the AO's action reflected a complete non-application of mind.

The Tribunal held that since the Assessing Officer had already rectified the assessment under section 154, reclassifying the capital gain from long-term to short-term, and the issue was further addressed and finalized in re-assessment proceedings under section 147/148 with tax duly paid, there was no prejudice to the revenue. Therefore, the PCIT's invocation of section 263 was erroneous and not justified.

The Tribunal, relying on various High Court decisions, including the Full Bench decision of the Hon'ble Bombay High Court in Mohd. Farhan A Shaikh vs DCIT, held that the failure to strike off irrelevant portions in a penalty notice, thereby not specifying the exact offence, is a fundamental flaw. Such an omnibus notice indicates non-application of mind and renders the penalty proceedings fatal. Consequently, the Tribunal directed the deletion of the penalty levied under section 271(1)(c) of the Act.

The Tribunal held that the sundry creditors could not be treated as cessation of liability as the debt was acknowledged and discharged in the succeeding year. Regarding the unsecured loan, the Tribunal found that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the lender.

The Tribunal admitted additional evidence filed by the assessee under Rule 29 of the ITAT Rules, acknowledging that family issues prevented earlier submission. In the interest of justice and fair play, the Tribunal remitted the entire matter back to the Assessing Officer. The AO is directed to examine the newly furnished evidence and decide the issue afresh, after providing the assessee a reasonable opportunity of being heard.

During the hearing, the assessee's counsel informed the Tribunal that the grievances had been resolved, as both the registration under section 12AB and the approval under section 80G had since been granted. Consequently, the counsel sought to withdraw the appeals, which the Tribunal allowed, dismissing them as withdrawn.

The Tribunal found that NFAC's assertion of non-submission of details was factually incorrect, as the assessee had furnished them. Consequently, the appeals were restored to the NFAC for *de novo* adjudication, with directions to provide the assessee a reasonable opportunity of being heard and to allow the submission of fresh evidence.

The CIT(A) deleted the additions after examining the evidence provided by the assessees, finding that the three ingredients of Section 68 were satisfied. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the relief granted.

The Tribunal held that only credit entries appearing in the books of account for the relevant previous year can be treated as unexplained cash credit under Section 68. It explicitly stated that the opening balance of an account cannot be added under Section 68 of the Act. The issue was remanded to the AO to re-examine the credit entries for the relevant previous year and recompute the income, ensuring that opening balances are not included in the addition under Section 68.

During the hearing, the assessee's counsel informed the Tribunal that the grievances had been resolved, as both the registration under section 12AB and the approval under section 80G had since been granted. Consequently, the counsel sought to withdraw the appeals, which the Tribunal allowed, dismissing them as withdrawn.

The CIT(A) deleted the additions after examining the evidence provided by the assessees, finding that the three ingredients of Section 68 were satisfied. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the relief granted.

The CIT(A) deleted the additions after examining the evidence provided by the assessees, finding that the three ingredients of Section 68 were satisfied. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the relief granted.

The Tribunal held that the assessee is eligible for deduction of interest paid to Allahabad Bank under Section 57(iii). Since the nexus between borrowed funds and their utilization was already proven and accepted by the AO in AY 2016-17, there is no requirement to prove it again for the current assessment year.

The ITAT upheld the CIT(A)'s deletion of the addition, noting that the Revenue failed to present the investigation report's substantial content or demonstrate the AO's reliance on it to rebut the assessee's evidence. The ITAT found that the CIT(A) had properly considered documentary evidence, including lender confirmations, bank accounts, and banking transactions. It also observed that two of the three lenders were NBFCs, for whom significant credit/debit transactions were normal, and their statutory existence indicated they were operational.

The CIT(A) deleted the additions after examining the evidence provided by the assessees, finding that the three ingredients of Section 68 were satisfied. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the relief granted.

The Tribunal found that the lower authorities failed to provide the necessary workings for the stock valuation, rendering the addition based solely on the survey statement unreliable and not conclusive evidence. Citing precedents from the Madras High Court and the Supreme Court, it emphasized that an admission during a survey is not conclusive without proper corroboration and opportunity for the assessee to explain. The appeal was therefore restored to the AO with a direction to provide the stock workings; if these are not available, no addition for excess stock should be made.

The CIT(A) deleted the additions after examining the evidence provided by the assessees, finding that the three ingredients of Section 68 were satisfied. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the relief granted.

The Tribunal upheld the CIT(A)'s decision, stating that Section 14A disallowance is not applicable when no exempt income is earned. It also affirmed that expenses and depreciation are allowable if the assessee consistently follows recognized accounting principles, and depreciation is a statutory allowance.

The Tribunal condoned the 464-day delay, acknowledging the assessee's death and finding no malafide intent from the legal heir. It ruled that the CIT(A)'s ex-parte dismissal, especially given the assessee's death, amounted to a miscarriage of justice. Therefore, the Tribunal allowed the appeal for statistical purposes and remanded the case back to the CIT(A) for a fresh decision on merits.

The Tribunal held that bandwidth charges cannot be treated as royalty based on the jurisdictional High Court's decision in CIT vs. Telstra Singapore Pte. Ltd. The Tribunal also restored the issue of whether services qualify as technical services to the Assessing Officer for factual verification.

The Tribunal upheld the CIT(A)'s decision, finding that the expenses under Section 57(iii) were incurred due to a genuine legal dispute with a foreign financial advisor and were necessary for earning income. The disallowance under Section 37 was deleted as it was ad-hoc and not supported by evidence of personal nature.

The Tribunal allowed the M to M losses, following Delhi High Court decisions which held such losses as hedging transactions and not speculative. The Tribunal also remitted the Section 35(2AB) deduction claim back to the Assessing Officer for verification, citing the principle that appellate authorities can entertain such claims.

The Tribunal allowed the M to M losses, following Delhi High Court decisions which held such losses as hedging transactions and not speculative. The Tribunal also remitted the Section 35(2AB) deduction claim back to the Assessing Officer for verification, citing the principle that appellate authorities can entertain such claims.

The Tribunal allowed the M to M losses, following Delhi High Court decisions which held such losses as hedging transactions and not speculative. The Tribunal also remitted the Section 35(2AB) deduction claim back to the Assessing Officer for verification, citing the principle that appellate authorities can entertain such claims.

The Tribunal allowed the M to M losses, following Delhi High Court decisions which held such losses as hedging transactions and not speculative. The Tribunal also remitted the Section 35(2AB) deduction claim back to the Assessing Officer for verification, citing the principle that appellate authorities can entertain such claims.

The Tribunal observed that the assessee was prevented by reasonable and sufficient cause from attending the assessment and appellate proceedings. In the interest of justice and fair play, the issues were restored to the Assessing Officer for fresh adjudication after providing the assessee with a reasonable and sufficient opportunity of being heard.

The ITAT admitted the additional ground, holding that the penalty notice issued under section 274 read with 271(1)(c) was defective as it failed to specify whether the proceedings were for concealment of income or furnishing inaccurate particulars. Citing High Court precedents, the tribunal concluded that such an omnibus notice is fatally defective, and thus, the penalty levied by the authorities below was directed to be deleted.

The Tribunal held that the jurisdiction assumed under Section 147 was not sustainable due to multiple critical defects, including the incorrect naming of the assessee, approval based on an extinct statutory provision, and non-application of mind by authorities. Consequently, the reassessment order was quashed. The penalty imposed under Section 271(1)(c) flowing from the quashed reassessment order was also automatically vacated.

The Tribunal held that the jurisdiction assumed under Section 147 was not sustainable due to multiple critical defects, including the incorrect naming of the assessee, approval based on an extinct statutory provision, and non-application of mind by authorities. Consequently, the reassessment order was quashed. The penalty imposed under Section 271(1)(c) flowing from the quashed reassessment order was also automatically vacated.

The Tribunal condoned the delay in filing the appeal due to the assessee's death and the lack of knowledge of proceedings. It held that the CIT(A) erred in dismissing the appeal without hearing the assessee, violating the principles of natural justice.

The Tribunal, noting that the tax effect in the appeal was below Rs. 60 lakhs and with no opposition from the CIT(DR), dismissed the Revenue's appeal as not maintainable. This decision was based on the latest CBDT Circular No. 09/2024 dated 17.09.2024.

The Tribunal noted the ex-parte orders passed by both the AO and CIT(A) without providing adequate opportunity of hearing, despite the assessee's claim of existing 12A/12AA registration. With the Ld. DR's agreement, the Tribunal decided to remit the case back to the AO for fresh adjudication, directing the AO to provide proper opportunity to the assessee, who in turn must produce all necessary documents and evidence.

The Tribunal held that the CIT(A) failed to appreciate the facts, including the tax auditor's clarification that the contingent liability was not debited to the profit and loss account. The Tribunal decided not to dismiss the appeal on technical grounds.

The Tribunal found that the AO did not conduct independent verification of the investment despite the assessee's denial. It was also noted that the same amount was added in the hands of the assessee's brother-in-law under Section 153A, indicating a double addition. Consequently, the CIT(A)'s order was set aside, and the matter was remanded for fresh adjudication by the CIT(A) after providing a reasonable opportunity of being heard to the assessee.

The Tribunal held that the reopening of assessment was not permissible as the assessee had disclosed all material facts during the original assessment and there was no new material with the AO. The AO wrongly made the assessment under Section 148.

The Tribunal held that the assessment was wrongly initiated under Section 147 when the case involved a search in a third party's premises, and thus Section 153C should have been invoked. The penalty notice was also found to be omnibus and unsustainable.

The Income Tax Appellate Tribunal (ITAT) upheld the final assessment order, concluding that the assessee failed to furnish authentic documentary evidence to establish that its vessel 'Ocean 303' did not stay in India's territorial jurisdiction for more than 183 days, both before the lower authorities and the tribunal. Consequently, the tribunal found no valid reason to interfere with the departmental authorities' decision.

The Tribunal held that bandwidth charges cannot be treated as royalty based on the jurisdictional High Court's decision in CIT vs. Telstra Singapore Pte. Ltd. The Tribunal also restored the issue of whether services qualify as technical services to the Assessing Officer for factual verification.

The Tribunal observed that the assessee was not granted a proper opportunity to substantiate her case before the lower authorities and that the addition was made relying on third-party information without adequate investigation. To ensure complete justice, the Tribunal decided to remit the disputed issues back to the Jurisdictional Assessing Officer (JAO) for a fresh hearing, directing that the assessee be given adequate opportunity.

The Tribunal found that the CIT(A) passed the ex-parte order without discussing the case on its merits or deciding the grounds of appeal, which violated the principles of natural justice. Therefore, the Tribunal remanded the matter back to the Ld. CIT(A) for a fresh, de-novo adjudication on the merits of the appeal.

The Tribunal condoned the delay in filing the appeal before the CIT(A) based on the plausible explanation provided by the assessee. The case was restored to the CIT(A) for adjudication on merits.