ITAT Delhi Judgments — January 2025

The Tribunal held that leasing equipment on a bareboat basis, without master and crew, does not constitute a PE in India. The control of the equipment remained with the Indian lessee, distinguishing it from cases involving wet leasing.

The Tribunal held that the one-time life membership fee received by the assessee should not be treated as a revenue receipt. The consistent practice of the assessee and the principles of real income theory support its treatment as a capital receipt with a portion recognized over time.

The Tribunal held that the addition of Rs. 60,13,252/- as unexplained deposit was unjustified and liable to be deleted. It noted that the impugned credit was not a cash deposit and that the assessee had provided documentary evidence, which was considered by the AO in the remand report.

The Tribunal noted that the CIT(A)/NFAC had sought a remand report regarding additional evidence, but it was not acted upon. Therefore, the appeal was restored to the CIT(A)/NFAC for fresh adjudication.

The Tribunal held that the assessees are entitled to withdraw their appeals as they have opted to settle the issues under the Vivad se Vishwas Scheme, 2024. The Tribunal noted that the assessees had placed on record the copy of Form No. 2 filed under the scheme and that the learned DR had not raised any objection. Consequently, the appeals were dismissed as withdrawn. The Tribunal also granted liberty to the assessees to revive their appeals in case their application under the Vivad se Vishwas Scheme, 2024, fails to mature for any reason. The specific issues that led to the original appeals were not decided as the appeals were withdrawn.

The Tribunal deleted the addition on account of notional interest, finding that the bank statement showed minimal balance and incurred charges, not credited interest. The Tribunal also allowed the assessee's claim regarding jewellery, holding that the total jewellery found was explained through declarations, gifts, purchases with explained cash withdrawals, and the prescribed limit under CBDT instructions.

The Tribunal held that the failure of the Assessing Officer to specify the exact ground for levying the penalty (concealment or inaccurate particulars) vitiated the penalty proceedings. The Tribunal found merit in the assessee's contentions to delete the penalty.

The Tribunal decided to consign the appeals to records and treat them as dismissed as withdrawn, subject to a caveat. If the dispute is not resolved under the Vivad Se Vishwas Act, assessees can seek reinstitution of their appeals.

The Tribunal held that no valid notice under Section 143(2) was served on the assessee within the prescribed time limit. Consequently, the Assessing Officer lacked jurisdiction to make the assessment.

The Tribunal held that the exact nature of services rendered needed to be factually determined to ascertain if they qualified as FIS and if the 'make available' clause was satisfied. The matter was remitted back to the Assessing Officer for this determination.

Citing a Madras High Court decision, the Tribunal dismissed the appeal as withdrawn, granting the assessee liberty to apply for its restoration if the declaration filed under the Vivad Se Viswas Scheme is not accepted by the Revenue.

The Tribunal noted that the issue of license fees was pending before the Supreme Court, and the issue of subscriber verification penalty was covered by previous Tribunal decisions in favor of the assessee. The issue of discounts to distributors was also covered by earlier decisions.

The Tribunal held that additions for AYs 2015-16 to 2017-18 were not supported by incriminating material seized during the search and thus deleted them. For AY 2018-19, the additions were sustained as they were based on incriminating material, but a lumpsum deduction of Rs. 1 lakh was allowed.

The Tribunal noted that its coordinate benches had quashed the quantum assessment orders under Section 153A, finding them to be without any incriminating material. Citing the Supreme Court's ruling in K.C. Builders & Anr vs. ACIT, the Tribunal held that when the additions forming the basis of the penalty are deleted, the penalty cannot survive, and therefore, all appeals are allowed.

The Tribunal noted that the issue of license fees was pending before the Supreme Court, and the issue of subscriber verification penalty was covered by previous Tribunal decisions in favor of the assessee. The issue of discounts to distributors was also covered by earlier decisions.

The Tribunal upheld the deletion of additions for AY 2016-17 due to lack of incriminating material, citing the Supreme Court ruling in Abhishar Buildwell. For other years, undisclosed profits were to be calculated based on seized documents, and farmhouse expenses were allowed as business expenditure.

The Tribunal noted that the lower authorities, including the AO and CIT(A), did not comprehensively analyze the issue of share capital sources. The AO's order lacked findings on the merits, and even during remand, no thorough examination occurred. The Tribunal found merit in the assessee's plea for another chance.

The Tribunal upheld the CIT(A)'s decision, stating that the impugned sums were merely 'to be paid' and did not represent actual receipts or payments. Therefore, the additions lacked supportive material.

The Tribunal held that CAM charges are contractual payments for maintenance services and not rent for premises. Therefore, TDS was deductible under Section 194C, not Section 1941. The Delhi High Court's decision on this matter was considered settled.

The Tribunal held that the block period for assessment under Section 153C of the Income-tax Act, 1961, is to be calculated from the date of receipt of seized books of accounts, documents, or assets by the jurisdictional Assessing Officer, not from the date of the search. Consequently, the assessments for AY 2011-12 and AY 2012-13 were found to be beyond the ten-year block period and thus invalid.

The Tribunal held that the assessee deserved a reasonable opportunity to rectify its shortcomings and make complete compliances. The CIT(E) should have focused on the objectives of the society for registration rather than solely on the genuineness of expenses.

The Tribunal allowed the appeal of the assessee. The primary issue before the Tribunal was the validity of the block assessment proceedings initiated under Section 158BD of the Income Tax Act, 1961, due to the alleged absence of a mandatory satisfaction note by the Assessing Officer (AO) of the searched person. The assessee's counsel argued that the AO initiated proceedings without recording a satisfaction note, which is a jurisdictional prerequisite, and that the revenue failed to produce this note despite requests. The revenue acknowledged the difficulty in tracing old records. The Tribunal, respectfully following the judgment of the Hon'ble Jurisdictional Delhi High Court in the case of Haryana Paneer Bhandar vs. CIT (ITA No. 537/2015), held that the absence of a satisfaction note, which is a mandatory requirement under Section 158BD, renders the entire block assessment proceedings bad in law. The court cited Supreme Court decisions emphasizing the sine qua non nature of the satisfaction note. Consequently, the Tribunal found that the block assessment proceedings were unsustainable. The appeal was allowed on this ground, and the other grounds were not adjudicated upon.

The Tribunal held that the PCIT's order under Section 263 was unsustainable. It found that the Assessing Officer (AO) had conducted necessary inquiries and verified the claims during the original and reassessment proceedings, and the assessment order was not erroneous or prejudicial to the revenue.

The Tribunal remitted the issue of LTCG exemption under Section 10(38) back to the AO for fresh adjudication, stating that the nature of all transferred assets needs to be examined. However, the Tribunal upheld the deletion of the notional interest addition, relying on previous decisions in the assessee's own case by the High Court and ITAT Special Bench.

The Tribunal held that since cash was seized during a search, the assessment should have been framed under Section 153C(1)(a) and not under Section 143(3). The assessment framed under Section 143(3) was therefore invalid.

The Tribunal held that since the assessment was based on material found during a search on a third party, it should have been completed under Section 153C, not Section 143(3). The assessment framed under Section 143(3) was deemed void ab initio.

The ITAT found the assessee's explanation for not submitting details before the AO reasonable and noted that the CIT(A) had not decided the matter on merits. Therefore, the ITAT set aside both the assessment order and the penalty order, restoring the matters to the Assessing Officer for de novo assessment and adjudication with proper opportunity to the assessee.

The Tribunal noted that the assessee had opted for the Vivad Se Vishwas Scheme. Since the dispute was being settled under this scheme, the appeal was dismissed as withdrawn.

The Tribunal found that the activities of segregation and rework, as explained by the assessee, were routine and did not involve specialized technical skill. The AO had fundamentally misunderstood the processes carried out by third parties. The Tribunal concurred with the CIT(A)'s findings.

The ITAT found the assessee's explanation for not submitting details before the AO reasonable and noted that the CIT(A) had not decided the matter on merits. Therefore, the ITAT set aside both the assessment order and the penalty order, restoring the matters to the Assessing Officer for de novo assessment and adjudication with proper opportunity to the assessee.

The Tribunal held that the notice under Section 148 was issued without the proper approval from the appropriate authority as required by Section 151(ii) of the Act, given that the assessment year was beyond three years. Therefore, the notice and the consequent assessment were quashed.

The Tribunal held that the assessee had received share investments through banking channels and the Assessing Officer had not produced documentary evidence to disprove the genuineness of these transactions. The Revenue also failed to provide supporting evidence for its grounds of appeal.

The Tribunal held that the impugned Section 153C assessments were not sustainable in law because the satisfaction recorded by the Assessing Officer was based on seized material pertaining to assessment years 2013-14 and 2014-15, not the assessment years under appeal (2017-18 to 2020-21).

The Tribunal determined that the assessee had indeed rectified the defects, leading to the allowance of the miscellaneous application and the revival of the original appeal. Furthermore, noting that a similar quantum appeal had been remanded, the Tribunal also allowed ITA No.18/Del/2020 for statistical purposes and remanded it to the CIT(A) for de novo adjudication on merits, ensuring the assessee is given an opportunity of being heard.

The Tribunal held that leasing equipment on a bareboat basis, without master and crew, does not constitute a PE in India. The control over the equipment remained with the Indian company, distinguishing it from cases involving wet leasing.

The Tribunal held that the approval process under Section 153D of the Act was mechanical and lacked application of mind, rendering the assessment orders illegal and liable to be quashed. Similar issues were adjudicated by coordinate benches, upholding the assessee's grounds.

The Tribunal held that the provisions of Section 1941 of the Act were not applicable to the EDC charges paid to HUDA, citing a Delhi High Court decision. It also noted that the department cannot benefit from citing multiple provisions without finally invoking them.

The Tribunal held that the appeals should be remitted to the file of the Ld. CIT(E) for passing reasoned orders. The reasoning was that the assessee had existing registration certificates under Section 12A(a) and Section 80G, which were statutory orders not requiring extensive time for deep diving. The Tribunal found that sending the matter back to the CIT(E) at this stage would serve the ends of justice by granting an opportunity to the assessee to be heard and to consider the evidences on record or any other evidence the assessee may choose to file. The CIT(E) was directed to pass a reasoned order. The Tribunal rejected the Revenue's submission that extensive hearing was required, deeming it outlandish. The appeals were allowed for statistical purposes.

The Tribunal held that the assessee is entitled to claim depreciation on road construction as an intangible asset, following judicial precedents. It also held that the 'negative grant' is an ascertained liability and part of the project cost, allowing its inclusion. Consequently, the PCIT's orders were set aside.

The Tribunal held that the penalty proceedings are vitiated because the Assessing Officer's show-cause notice under Section 271(1)(c) did not specify the limb under which the penalty was being proposed. This failure renders the penalty invalid.

The Tribunal held that the reference to Hong Kong for information was not in accordance with the DTAA provisions for the period prior to its effective date. Consequently, the extension of the limitation period was invalid, making the assessment orders barred by limitation.

The Tribunal dismissed the appeal as the assessee failed to attend hearings and the new entity taking over the company did not join the proceedings. The Tribunal found no reason to differ from the CIT(A)'s decision.

The Tribunal held that the satisfaction note recorded by the AO was vague and lacked specificity regarding incriminating material belonging to the assessee for the relevant assessment year. The documents relied upon were found to be collaboration agreements from 2006, not incriminating for AY 2014-15, and some were in the name of another entity.

The Tribunal accepted the assessee's request for withdrawal of the appeal. The appeal was dismissed as withdrawn.

The Tribunal held that the Revenue failed to demonstrate tangible material showing an international transaction involving AMP expenses between the assessee and its foreign AE. Consequently, the adjustment on account of AMP expenses was not sustained.

The Tribunal noted that its coordinate benches had quashed the quantum assessment orders under Section 153A, finding them to be without any incriminating material. Citing the Supreme Court's ruling in K.C. Builders & Anr vs. ACIT, the Tribunal held that when the additions forming the basis of the penalty are deleted, the penalty cannot survive, and therefore, all appeals are allowed.

The Tribunal held that it is sufficient for a bad debt to be written off as irrecoverable in the assessee's accounts, citing Supreme Court precedent. The loss incurred from business advances, even if related to commodity trading, is deductible if it has a direct nexus with business operations.

The Tribunal held that the excise duty refund received by the assessee is in the nature of a capital receipt and not chargeable to tax. This decision was based on the purpose of the incentive scheme, which was to promote industrial development in a disaster-affected region.

The Tribunal condoned the delay and, considering the possibility of communication gaps, restored the appeals back to the CIT(A) for fresh adjudication. The assessee was granted three effective opportunities of hearing at their risk.

The Tribunal held that the PCIT failed to establish that the assessment order was erroneous and prejudicial to the revenue. The issues of FDR interest and Section 14A disallowance were found to have been duly examined by the AO during original assessment proceedings.