ITAT Delhi Judgments — December 2024

The Tribunal, following previous Coordinate Bench decisions, held that the receipts from providing cloud-native machine data analytics solutions did not qualify as FTS under Article 12(4) of the India-US tax treaty, as there was no 'make available' of technology or transfer of expertise, and no human intervention. Therefore, grounds 1 to 6 of the appeal were allowed. Grounds 7 and 9, related to TDS credit and refund, were remitted back to the Assessing Officer for verification, while ground 10 regarding penalty was dismissed as premature.

The Tribunal upheld the CIT(A)'s decision, ruling that the AO's letter to the assessee did not constitute a proper disposal of the objections. It reiterated that the requirement of passing a speaking order on objections before proceeding with assessment, as per GKN Driveshafts, is not a mere procedural formality but goes to the root of jurisdiction. Consequently, the assessment was vitiated and without legal jurisdiction.

The Tribunal partly allowed M/s. Classic Lamps Industries Pvt. Ltd.'s appeals, remanding certain grounds related to the Section 68 addition for re-adjudication by the AO. For Smt. Madhu Gupta and Smt. Veena Gupta, the Tribunal upheld the addition of Rs.4.25 crores (from the "on money" receipt) under Section 292C, to be equally apportioned between them. The Revenue's cross appeal for Smt. Veena Gupta was dismissed due to low tax effect, and another ground by Revenue regarding a Rs.50 lakh unexplained payment was declined.

The Tribunal upheld the CIT(A)'s decision, ruling that the special audit procedure under Sections 142(2A) and 142(2C) suffered from multiple infirmities. These included improper recording of satisfaction for the audit, the CIT wrongly specifying the period for the audit report, and an invalid, time-barred extension for filing the report. Consequently, the assessment order was deemed void ab-initio for AY 2010-11 and applied pari materia to other assessment years.

The Tribunal noted that the assessee maintained audited books of accounts with no defects identified by the AO, and the revision of VAT returns was valid. It found that the cash deposits were adequately explained by cash sales and were interlinked with accepted purchases and stock, concluding that the additions were based on surmises and conjectures.

The Tribunal dismissed several Revenue appeals due to low tax effect, below the CBDT's circular threshold, and rejected related assessee's cross-objections as not pressed. For assessments linked to search (unabated assessments), relying on PCIT Vs. Abhisar Buildwell Pvt. Ltd., the Tribunal quashed them, finding no additions based on incriminating material from the assessee's own search. However, for ITA No. 379/Del/2017, a regular assessment, the Section 14A disallowance computed using Rule 8D was upheld, and the additional ground regarding Section 153D approval was rejected.

The Tribunal dismissed several Revenue appeals for low tax effect and rejected assessee's cross-objections which were not pressed. It quashed the assessments for multiple assessment years (2007-08 to 2011-12) as additions were not based on incriminating material found during the assessee's own search, applying the `Abhisar Buildwell` ruling. For assessment year 2013-14, being a regular assessment, the assessee's additional ground regarding Section 153D approval was rejected, and the Section 14A disallowance, computed under Rule 8D, was upheld on merits.

The Tribunal upheld the CIT(A)'s decisions, dismissing the Revenue's appeals concerning disallowance u/s 14A, amortization of premium on securities, provision for Standard Assets u/s 36(1)(viia), provision for fraud/dacoity, and deduction u/s 80P. However, the issue of disallowance of 'Estab-PNB' expenses was restored to the AO for re-verification due to lack of proper explanation and documentary evidence. The appeals for AY 2017-18 and 2018-19 were dismissed based on identical facts and findings of AY 2016-17.

The Tribunal acknowledged the assessee's submission of the certificate under VSVS Rules and their prayer for withdrawal. Considering these facts, the Tribunal allowed the withdrawal of the appeal.

The Tribunal found that the reassessment was initiated based on belief of escaped income from bank credit entries, but the AO made an addition on a different issue (disallowance of cash purchases). Citing precedents, the Tribunal held that if the original reason for reopening is not addressed and a new issue, unconnected with the reasons recorded, is introduced, it amounts to a roving inquiry beyond the scope of Section 147 and its Explanation 3. Therefore, the reassessment framed by the AO was quashed as bad in law.

The Tribunal condoned the delay in filing appeals for AY 2018-19 and 2019-20, finding the assessee's reason of awaiting rectification orders bona fide. Consequently, for all three appeals (AY 2018-19, 2019-20, and 2021-22), the matters were set aside to the Assessing Officer for fresh verification and adjudication on merits. All appeals were allowed for statistical purposes.

The Income Tax Appellate Tribunal allowed the assessee's request for withdrawal of the appeal. Consequently, the appeal was dismissed as withdrawn, as per the facts presented by the appellant.

The tribunal dismissed three Revenue appeals due to low tax effect as per CBDT Circular 9/2024 and rejected corresponding cross-objections as not pressed. For assessments related to search action (AYs 2007-08 to 2011-12), the tribunal quashed them, holding that additions not based on incriminating material from the assessee's own search were unsustainable, referencing the Supreme Court's *Abhisar Buildwell* decision. For AY 2013-14 (ITA No. 379/Del/2017), a regular assessment, the tribunal upheld the Section 14A disallowance and rejected the assessee's additional ground regarding Section 153D approval.

The tribunal dismissed three of the Revenue's appeals due to the tax effect being below Rs. 60 lakhs as per CBDT Circular 9/2024. For the 'unabated' assessment years, the tribunal quashed the impugned assessments, accepting the assessee's argument that no additions were made based on incriminating material found in the assessee's own search, relying on the Abhisar Buildwell judgment. However, for the regular assessment year 2013-14, the tribunal upheld the Section 14A disallowance, finding that the Assessing Officer correctly applied Rule 8D. Assessee's cross-objections were either rejected as not pressed or allowed.

The Tribunal held that the assessees had discharged their onus by furnishing comprehensive documents to establish the identity and creditworthiness of the investors and the genuineness of the transactions. It was further held that the tax authorities erred in rejecting the DCF valuation reports without providing cogent reasons or contrary material, as the assessee has the option to choose the valuation method under Rule 11UA(2)(b) and the AO cannot arbitrarily disregard a recognized method. The Tribunal sustained the grounds raised by the appellants.

The Tribunal upheld the CIT(A)'s order, stating that the delay of 38 days in filing Audit Report Form 10B was merely a procedural lapse, not a fatal one that should disentitle the assessee from claiming exemption under Section 11 of the Act. Relying on judicial precedents, the Tribunal confirmed that the requirement of furnishing the audit report is mandatory, but its timing is procedural, and substantial compliance (filing it before assessment proceedings) is sufficient.

The Tribunal dismissed three Revenue appeals due to low tax effect as per CBDT Circular 9/2024. It accepted the assessee's additional legal ground, quashing assessments related to search proceedings for multiple years, holding that no additions were based on incriminating material found in the assessee's own search, following the Supreme Court decision in PCIT vs. Abhisar Buildwell Pvt. Ltd. However, the assessee's appeal against Section 14A disallowance for AY 2013-14 was dismissed, upholding the disallowance computed under Rule 8D.

The Tribunal acknowledged the appellant's submission of the certificate under Rule 5 of the VSVS Rules and allowed the withdrawal of the appeal as requested. Consequently, the appeal was dismissed as withdrawn.

The Tribunal remanded the issue of belated PF/ESI contributions back to the Assessing Officer for verification of whether the contributions were deposited within the due dates prescribed by the respective Acts, especially considering the case of contractor employees affecting payment due dates. The issue of TDS credit mismatch was also remanded to the Assessing Officer for verification of TDS certificates and contacting the deductor if necessary.

The Income Tax Appellate Tribunal affirmed the decision of the CIT(A), holding that the same income cannot be taxed twice. Since substantive additions on the same issue were already confirmed in the hands of Shri Ashish Garg, the protective additions made in the assessee's hands were correctly deleted. The Tribunal found no reason to interfere with the CIT(A)'s findings.

The Tribunal upheld the CIT(A)'s decision to delete the protective additions, affirming that the same income cannot be taxed twice – once substantively in the hands of Shri Ashish Garg and again protectively in the hands of the assessee company. The Tribunal found no reason to interfere with the CIT(A)'s findings, as the substantive addition in Ashish Garg's case had been confirmed by the First Appellate Authority.

The Tribunal condoned the delay in filing all three appeals, finding the assessee's reasons bona fide and reasonable. It held that since the CIT(A) had not adjudicated the issues on merits, the orders of the CIT(A) were set aside, and all matters were restored to the file of the Assessing Officer for fresh verification and adjudication on merits as per law.

The Tribunal condoned the delay in filing the appeals, finding the assessee's reason (hope for relief from rectification applications u/s 154) bona fide. Since the CIT(A) did not decide the issues on merits, the Tribunal set aside the CIT(A)'s orders and remanded all three appeals to the Assessing Officer for fresh verification and passing of orders on merits according to law.

The Tribunal partly allowed the appeals of M/s. Classic Lamps Industries for statistical purposes, remanding some grounds related to Section 68 addition back to the AO for re-adjudication. For Smt. Madhu Gupta and Smt. Veena Gupta, the Tribunal upheld the addition of Rs. 4.25 crores (from Rs. 5.25 crores initially added by AO, and Rs. 1,09,89,285/- by CIT(A)) as 'on money' from property sale, to be equally apportioned between them, based on the presumption under Section 292C. Revenue's appeal regarding a Rs. 50 lakh payment was dismissed, affirming the CIT(A)'s finding that it was a loan repayment.

The Tribunal dismissed three Revenue appeals due to low tax effect. It quashed assessments for several assessment years (2007-08 to 2011-12, and some parts of 2012-13 & 2013-14) that were 'unabated' assessments, holding that no additions were based on incriminating material found during the assessee's own search, following the Abhisar Buildwell Pvt. Ltd. (SC) decision. For AY 2013-14 (ITA No. 379/Del/2017), the Tribunal dismissed the assessee's appeal, rejecting the additional ground on Section 153D approval as it was a regular assessment, and upheld the Section 14A disallowance on merits.

The tribunal dismissed several Revenue appeals due to low tax effect as per CBDT Circular 9/2024. It accepted the assessee's argument, based on PCIT Vs. Abhisar Buildwell Pvt. Ltd. (SC), that search assessments lacking incriminating material found during the assessee's own search were unsustainable, leading to the quashing of several such assessments. However, the tribunal upheld the Section 14A disallowance, finding no infirmity in the AO's computation.

The Tribunal dismissed the Revenue's appeals where the tax effect was below the monetary limit set by CBDT Circular 9/2024. It rejected the assessee's cross-objections related to these dismissed appeals as 'not pressed'. For several assessment years, the Tribunal accepted the assessee's additional legal ground, quashing the impugned assessments, as no additions were found to be based on incriminating material from the assessee's own search, relying on the *Abhisar Buildwell* judgment. However, for AY 2013-14, the Tribunal dismissed the assessee's appeal against Section 14A disallowance, upholding the AO's computation under Rule 8D, and rejected the additional ground regarding Section 153D approval as it was a regular assessment, not an unabated search assessment.

The Tribunal upheld the CIT(A)'s deletion of disallowances related to section 14A, amortization of premium on 'held to maturity' securities, provisions for standard assets (citing the rule of consistency), provisions for fraud, and general establishment expenses. The issue regarding expenses claimed under 'Estab-PNB' was restored to the Assessing Officer for fresh verification. The Tribunal applied the same findings to AY 2017-18 and 2018-19 due to identical facts.

The Tribunal dismissed three Revenue appeals due to low tax effect as per CBDT Circular 9/2024. Six assessee cross-objections were rejected, three as not pressed and three were allowed. For ten cases, including assessee's appeal ITA No.455/Del/2017, five assessee's C.Os (18-21), and four Revenue appeals (ITA Nos. 782-785), the impugned assessments were quashed based on *PCIT vs. Abhisar Buildwell Pvt. Ltd.*, as no additions were made based on incriminating material found in the assessee's own search. Assessee's appeal ITA No. 379/Del/2017 challenging Section 14A disallowance was dismissed on merits, and its additional ground regarding Section 153D approval was rejected as it pertained to a regular assessment and was not pressed earlier.

The Tribunal held that since the original assessment was completed under Section 143(3) and the reopening notice under Section 148 was issued beyond four years, the proviso to Section 147 applies. Finding no failure on the part of the assessee to disclose fully and truly all material facts relevant for its assessment, the Tribunal concluded that the reassessment proceedings were barred by limitation. Consequently, the CIT(A)'s order quashing the reassessment was confirmed.

The Tribunal observed the assessee's consistent history of declaring agricultural income, accepted by the Revenue in previous years, and its partial substantiation of land and sales. While accepting the revised net agricultural income offered by the assessee as a basis (Rs.18,57,925/-), the Tribunal found Rs.8,00,000/- of the claimed expenditure unsubstantiated and treated it as unexplained income, thus effectively determining the taxable agricultural income as Rs.26,57,925/- (Rs.18,57,925/- + Rs.8,00,000/-).

The Tribunal observed that the CIT(A)'s order was practically a dismissal for default and a non-speaking order, even though the assessee had been given multiple opportunities. Finding fault on both sides, the Tribunal set aside the CIT(A)'s order and remanded the matter back for fresh adjudication. The assessee was levied costs of Rs. 25,000/- for the recalling of the order, to be paid to the legal aid authority.

The Tribunal held that the reassessment notices issued to the assessee, particularly the notice under Section 148 for AY 2015-16 on 28/07/2022, were barred by limitation. It was found that these notices fell outside the time limit stipulated by the amended provisions of Section 149(1) of the Income Tax Act and were not saved by the extended periods under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Relying on precedents, the Tribunal quashed all the notices for being time-barred, rendering other grounds of appeal academic.

The Tribunal upheld the CIT(A)'s decision, finding multiple infirmities in the special audit process. It was held that the special audit order u/s 142(2A) was issued at the fag end of the limitation period, the satisfaction for the audit and the specification of the audit report submission period were improperly handled by the CIT instead of the AO, and the extension for the audit report submission was granted beyond jurisdiction and was time-barred. Consequently, the final assessment order was also passed beyond the extended limitation period and was declared void ab-initio.

The Tribunal agreed with the assessee regarding the HDFC Bank account, finding that the cash deposits of Rs. 2,58,000/- were from earlier withdrawals as evidenced by bank records and confirmation, and deleted this addition. However, the Tribunal upheld the addition of Rs. 3,13,000/- related to the SCB Loan Account due to a lack of explanation and evidence from the assessee regarding the source of those deposits.

The Tribunal, while acknowledging the Checkmate Services judgment on belated PF/ESI payments, remanded the issue back to the Assessing Officer to verify if contributions were deposited within the due dates as per respective statutes, considering specific arguments about contractor employees. The issue of TDS credit mismatch was also remanded to the Assessing Officer for verification of TDS certificates and necessary action.

For M/s. Classic Lamps, the tribunal partly allowed the appeals for statistical purposes, remanding certain substantive grounds to the AO due to the CIT(A)'s failure to decide them under section 250(6), while confirming the Rs. 1 crore share capital addition. For Smt. Madhu Gupta and Smt. Veena Gupta, the tribunal dismissed their appeals, upholding the addition of Rs. 4.25 crores as "on-money" from property sales, to be apportioned equally between them (Rs. 2.125 crores each) based on the evidentiary value of the seized receipt under section 292C. Revenue's cross-appeal against Smt. Madhu Gupta was partly allowed, while against Smt. Veena Gupta it was dismissed due to low tax effect.

The Tribunal upheld the CIT(A)'s deletion of disallowances related to u/s 14A, amortization of premium, provisions for standard assets u/s 36(1)(viia), fraud/dacoity, and the deduction u/s 80P for AY 2016-17, citing settled legal positions and consistency. However, the issue of 'Estab-PNB' expenditure for AY 2016-17 was remanded to the AO for re-verification. For AY 2017-18 and 2018-19, the Tribunal dismissed the Revenue's appeals as the facts and issues were identical to AY 2016-17.

The Tribunal found that the DRP and AO erred in concluding that the GIS services provided an enduring benefit or enabled the Indian AE to apply embedded technology. It was noted that the AO and DRP did not properly examine the detailed invoices and supporting documentation for the GIS services. Consequently, the matter was restored to the file of the AO for a fresh decision in accordance with law.

The Tribunal partly allowed the appeals of M/s. Classic Lamps for statistical purposes, remanding the share capital addition for reconsideration by the AO on merits. The appeals of Smt. Madhu Gupta and Smt. Veena Gupta were dismissed, upholding the addition of Rs.4.25 crores as "on-money" from property sale, to be split equally between them. The Revenue's cross-appeal against Smt. Veena Gupta was dismissed due to a low tax effect, and its cross-appeal against Smt. Madhu Gupta was partly allowed.

The Tribunal partly allowed Classic Lamps' lead appeals for statistical purposes, remanding specific arguments on merits for re-adjudication by the AO. For Smt. Madhu Gupta and Smt. Veena Gupta, the Tribunal upheld the addition of "on money" based on a seized receipt for Rs. 4.25 crores (correcting the AO's Rs. 5.25 crores), to be apportioned equally (50% each) between them, thereby dismissing their appeals. Revenue's cross-appeal against Smt. Veena Gupta was dismissed due to low tax effect, while Revenue's cross-appeal against Smt. Madhu Gupta was partly allowed to the extent of the revised 'on money' quantification. The Revenue's ground regarding the deletion of an unexplained payment of Rs. 50 lakhs was dismissed, affirming the CIT(A)'s finding that it was a loan repayment.

The Tribunal, relying on the Delhi High Court's decision in Ranbaxy Laboratories Ltd. and the Bombay High Court's decision in Jet Airways (I) Ltd., held that the reassessment proceedings were bad in law. It ruled that while Explanation 3 to Section 147 allows assessing other escaped income found during proceedings, it does not grant blanket powers for a roving inquiry into issues not connected with the initial reasons for reopening without issuing a fresh notice.

The Tribunal admitted the additional evidence, acknowledging its critical relevance to the core issue, despite its belated submission. It remanded the case back to the Assessing Officer for a fresh factual verification. The assessee was granted three effective opportunities to present and prove all relevant facts during these consequential proceedings.

The Tribunal held that the CIT(A) does not possess the power to dismiss an appeal for non-prosecution, emphasizing that Sections 250 and 251 of the Income Tax Act mandate the disposal of appeals on merits. The case was restored to the CIT(A) for a de novo adjudication, with directions to provide the assessee a reasonable opportunity to present their submissions.

The Tribunal held that the property transfer was a bona fide family settlement, which does not amount to a 'transfer', and therefore, Section 56(2)(vii)(b) was not applicable. Further, for the second aspect, the Tribunal, relying on a previous judgment, determined that Section 50C does not apply to the transfer of leasehold rights. Consequently, both additions made by the AO were deleted.

The Tribunal remanded the issue of belated PF & ESI contributions back to the Assessing Officer for verification of whether deposits were made within the due dates as per respective Acts. The TDS credit mismatch issue was also remanded for verification of TDS certificates and to call the deductor if necessary, with directions for the assessee to provide all TDS certificates.

The tribunal upheld the AO's determination of Long Term Capital Gains, finding that the assessee failed to provide evidence to rebut the calculation of the cost of acquisition or establish eligibility for exemption u/s 54F. Given the assessee's continuous non-compliance and lack of participation in the proceedings, the tribunal affirmed the validity of the ex-parte assessment and the initiation of proceedings u/s 148.