ITAT Jaipur Judgments — February 2017

The Tribunal held that material supplied directly by the party or adjustments for raw materials should be excluded from the contractor's turnover for profit estimation. The CIT(A)'s decision to exclude the cost of steel, cement, and supplier bills from the gross bills was affirmed.

The Tribunal decided on various grounds of appeal related to additions made by the AO. In one instance, the Tribunal noted contradictions in the AO's findings between the assessment order and remand reports regarding the sale of agricultural land and payments made to sellers.

The Tribunal held that the AO cannot reject the assessee's accounts unless notified accounting standards have not been regularly followed. Since the assessee followed the project completion method, which is a recognized method, the order of the CIT(A) was upheld.

The Tribunal followed its earlier decisions in the assessee's own case, which had allowed the deduction under Section 10AA. Despite the Revenue's appeals being admitted by the High Court, no stay was granted on the Tribunal's earlier orders.

The Tribunal held that the rejection of the assessee's books of accounts was not justified as the explanations provided were reasonable and supported by facts. The Tribunal also found no reasonable basis for estimating the GP rate and deleted the addition made by the lower authorities. The disallowances made on account of various expenses were also deleted for lack of specific evidence.

The tribunal upheld the CIT(A)'s decision to delete an addition related to purchases from M/s. Aditya Gems, finding the party to be genuine. The assessee's grounds challenging the special audit and assessment order were dismissed, while the revenue's appeal regarding trading additions was also dismissed.

The Tribunal upheld the CIT(A)'s order, finding no infirmity. The rejection of books was justified due to the non-production of the stock register and unvouched direct expenditures. The disallowance of expenses was also sustained as the assessee failed to prove their business necessity.

The Tribunal, respectfully following Supreme Court judgments on condoning delay, condoned the delay in filing the appeals. The matters were restored to the CIT(A) for a decision on merits.

The Tribunal noted that the assessee's grounds of appeal were primarily related to the classification of the capital asset as long-term versus short-term, the application of Section 50C, and the eligibility for deduction under Section 54F. Since the core issue of whether the asset was long-term or short-term had not been definitively decided and was central to the other grounds, the Tribunal restored these issues to the Assessing Officer for fresh consideration. Specifically, Ground No. 1(i) & (ii) concerning the holding period and classification of the asset was restored. Consequently, Ground No. 1(iv) regarding the benefit of indexation for cost of improvement and Ground No. 1(v) concerning the exemption under Section 54F were also restored to the AO for fresh adjudication after the primary issue of asset classification was resolved. Ground No. 1(iii) related to Section 50C was allowed for statistical purposes, implying it would be reconsidered in light of the AO's fresh findings. The Tribunal did not decide the substantive merits of the Section 50C claim or the Section 54F claim, leaving them for the AO's fresh determination.

The Tribunal upheld the CIT(A)'s decision, finding that the reopening of assessment was justified. It also agreed that the assessee failed to substantiate the opening cash balance and the creditworthiness of creditors, thus confirming the additions.

The Tribunal held that the disallowance under Section 14A cannot exceed the actual expenses incurred by the assessee. Since the total incurred expenses were Rs. 1,24,984/-, the disallowance was restricted to this amount.

The Tribunal held that for Section 50C, the assessee failed to make a claim before the AO that the stamp duty value exceeded the fair market value. For Section 40A(3), the Tribunal accepted that the investment was in the nature of capital expenditure, making the section inapplicable.

The Tribunal held that the arbitration receipts were conditional and the assessee did not have an absolute right to them until the proceedings attained finality. Following a coordinate bench's decision, the Tribunal confirmed the deletion of the addition made by the AO.

The Tribunal noted that the quantum addition, which formed the basis for the penalty, was set aside by a coordinate bench. Consequently, the penalty proceedings were also set aside.

The Tribunal held that the estimation of net profit should be restricted to contract activity as the rejection of books of accounts was related to contract work. The matter was set aside to the AO to examine segmental profit/loss accounts.

The Tribunal found that the CIT(A) had passed an ex parte order and that the additions were substantially reduced. Therefore, in the interest of justice, the matter was restored to the CIT(A) for a fresh hearing.

The Tribunal held that Section 40A(3) is not applicable when income is computed under Section 44AD, as Section 44AD has a non-obstante clause overriding Sections 28 to 43C. This decision was based on previous judgments in the assessee's own case.

The Tribunal upheld the applicability of Section 80IA(10) due to the close connection and arranged business between the assessee and its sister concern, which resulted in profit manipulation. The CIT(A)'s decision to restrict the profit rate was considered fair.

The Tribunal noted that similar grounds were raised in previous appeals by the revenue, which were dismissed by a Coordinate Bench. Following the consistent view, the Tribunal upheld the CIT(A)'s order.

The Tribunal upheld the deletion of the addition made by the AO. It followed the consistent view of the Coordinate Bench in earlier assessment years, finding no change in facts or circumstances.

The Tribunal held that the assessee had not discharged the initial onus placed upon it under Section 68 of the Income Tax Act, 1961, to prove the identity, creditworthiness, and genuineness of the share transactions. While the assessee provided documentary evidence and received funds through banking channels, the investigations by the AO revealed significant doubts. Specifically, two Mumbai-based companies were not found at their addresses, and one Kolkata-based company could not be located. Furthermore, the investee companies, such as Gawarja Merchants and Melbright Suppliers, had meagre returned incomes, and their sources of funds for investment were also questionable (e.g., share application money from other entities with low incomes). The Tribunal noted that merely receiving funds through banking channels does not automatically discharge the onus. The AO's doubts about the legitimacy of the share subscriptions were valid, and the exercise to verify these credits should have been taken to a logical end. Although the time given to the assessee was short and directors resided out of Jaipur, the Tribunal found that the initial burden of proof was not discharged. Therefore, the matter was set aside to the AO for fresh examination. The appeal filed by the Revenue was allowed for statistical purposes.

The Tribunal held that commencement of actual charitable activities is not a condition precedent for granting registration under Section 12AA. The focus should be on the genuineness of the objects of the trust.

The Tribunal held that the disallowance of job work expenses was made on a lump sum basis without specific adverse material. Regarding interest, the Tribunal found that the comparison of unsecured borrowing with secured borrowing was not appropriate and allowed the ground.

The Tribunal found conflicting reports regarding the distance of the land from municipal limits. It held that the distance should be considered as of the date of transfer and directed the AO to determine this fact afresh.

The Tribunal held that the appeal was time-barred and not maintainable. Therefore, the appeal filed by the assessee was dismissed.

The Tribunal held that the assessee's claim of being pressured was not supported by facts, and the addition of Rs. 1,76,000/- was rightly made. However, the Tribunal found sufficient evidence to support the gift of Rs. 1,01,000/-, directing its deletion.

The Tribunal held that employee's contribution to PF & ESI, if paid before the due date of filing the return of income, is allowable as a deduction. The disallowance made by the AO was therefore incorrect.

The Tribunal upheld the CIT(A)'s order deleting the penalty on commission and brokerage as the additions were deleted in quantum appeal. The Tribunal dismissed the assessee's appeal regarding penalty on 80G donation, stating the assessee failed to provide material evidence of payment to a registered institution.

The Tribunal upheld the CIT(A)'s decision, following previous rulings. It held that civil construction and plant/machinery are integral to windmills and eligible for 80% depreciation. It also held that employee's PF contribution deposited before the due date for filing the return is allowable.

The Tribunal concurred with the CIT(A)'s decision, upholding the addition made by the Assessing Officer. The assessee failed to provide any submissions or reconciliation to controvert the lower authorities' orders.

The Tribunal restored the issue to the Assessing Officer for fresh adjudication. The assessee was directed to produce necessary evidence, and the AO was to consider the case laws cited by the assessee regarding the unavailability of bonds.

The Tribunal confirmed the CIT(A)'s order, finding that the AO's disallowances were ad-hoc and lacked logical reasoning. The Tribunal also upheld the deletion of the addition for late PF contributions based on High Court precedent.

The Tribunal held that exchange rate fluctuations are directly profits derived from exports and are eligible for deduction under Section 10AA. Consequently, the penalty imposed on the disallowed amount was also deleted.

The Tribunal, in a majority decision, held that the assessee had provided satisfactory explanations for the decline in GP/NP ratios due to increased raw material costs and the introduction of a new product. The rejection of books of account under Section 145(3) was deemed unjustified.

The Tribunal upheld the rejection of the assessee's books of account under Section 145(3) due to similar defects as in a prior assessment year and the unsubstantiated fall in gross profit rate. The addition made by the AO was also confirmed as reasonable.

The Tribunal held that the penalty notice was not specific, failing to mention whether it was for concealment of particulars or furnishing inaccurate particulars of income. Consequently, the penalty order was quashed.

The Tribunal held that for disallowance under Section 14A, there must be income that does not form part of the total income. Since no tax-free income was earned from the investments in the relevant year, the disallowance was not justified.

The Tribunal restored the application to the CIT (Exemptions) for fresh decision, considering that the assessee had amended its objects. The grounds raised in the appeal were allowed for statistical purposes.

The Tribunal held that Section 50C of the Income Tax Act, 1961, is a deeming provision that applies only to capital assets being land or building or both. It cannot be extended to the transfer of a right to acquire a property. The Tribunal noted that the agreement of conveyance dated 06.04.2007, by which the assessee acquired the asset, referred to an 'allotment' and the 'demised premises' being a flat, indicating a right to acquire the flat. Similarly, the sale agreement also pertained to the transfer of this right. The Tribunal found that the distinction between 'land or building' and 'any right in land or building' is well-recognized under the Income Tax Act, as evidenced by Section 54D. Therefore, since what was transferred was a right of allotment and not the actual property itself, the deeming provisions of Section 50C were not applicable. The Tribunal relied on the Coordinate Bench decision in Atul G. Puranik (supra) which squarely supported the assessee's case. The ground taken by the assessee was allowed.

The Tribunal upheld the estimated NP rate of 6% based on past precedents. However, the issue of allowing interest paid to third parties was set aside to the CIT(A) for fresh verification. The addition of interest income and disallowance under Section 40(a)(ia) were confirmed.

The Tribunal held that the CIT(A) erred by making an addition for unexplained expenditure without proper opportunity to the assessee and by enhancing the income. The Tribunal also found that the source of investment in a shop was partly explained by the assessee's own savings and partly through explained loans.

The Tribunal held that the AO was not justified in levying penalty on income that was duly disclosed in the return, even if it was disclosed after a survey. However, for certain additions sustained by the Tribunal and where the issue was debatable, the penalty was upheld.

The Tribunal held that loss due to embezzlement by employees should be treated as incidental to business and allowed in the year of discovery, even without an FIR or legal action, especially when the fact of loss is admitted and recovery prospects are not established. The Tribunal relied on various High Court and Supreme Court judgments and a CBDT circular.

The Tribunal held that the reassessment proceedings were validly initiated. Regarding the indexed cost of acquisition, the assessee's claim was accepted. For the Section 54B deduction, the issue was remanded to the AO to ascertain the availability of funds with the assessee for the purchase.

The Tribunal upheld the orders of the lower authorities, agreeing that the payment was in the nature of rent and the assessee was liable for TDS deduction and interest. The assessee's contention that it was an advance for equipment was rejected.

The Tribunal held that Section 40(a)(ia) cannot be invoked if TDS was deducted under a bona fide belief, even if it was under the wrong provision. For interest payments, the issue of recipient paying tax requires verification.

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of customer refunds, finding no merit in the AO's grounds. The Tribunal also confirmed the deletion of an addition made on account of presumed commission on the sale of implements.

The Tribunal noted that the quantum addition was decided in favor of the assessee by a Coordinate Bench. Consequently, the penalty imposed based on that addition was directed to be deleted.

The Tribunal held that the admission made by the assessee's husband during the search was reliable evidence. The cancellation agreement was found to be fabricated as it lacked independent witnesses and was not on stamp paper.

The Third Member, concurring with the Accountant Member, held that the disallowance under Section 40A(3) was not warranted due to the nature of the assessee's business and business expediency. The assessee also provided an undertaking for future compliance.