ITAT Jaipur Judgments — May 2017

The Tribunal held that ad-hoc disallowances of expenses without specific evidence of personal use or non-business purpose are not sustainable. It also found that the CIT(A) erred in partly confirming the trading addition by not considering the assessee's submissions regarding yield percentage and expenses.

The Tribunal held that the assessee is entitled to the exemption as the registration under Section 12AA was granted subsequently, and a retrospective amendment to Section 12A(2) by the Finance Act, 2014, covers pending assessments. The CIT(A)'s order allowing the exemption was affirmed.

The Tribunal held that one of the objects of the trust was to oppose laws affecting the Jain community, and other objectives were for safeguarding and benefiting the Jain community. Therefore, the CIT's decision to reject the application was upheld.

The Tribunal upheld the AO's justification for reopening the assessment, stating that substantial income had escaped assessment. It also found that the AO was justified in adopting the DVO's valuation under Section 50C, considering the stamp duty valuation was higher than the declared sale consideration.

The Tribunal found that the assessee had declared better profit rates in the current year compared to preceding years, despite increased turnover. The AO's basis for estimation was not substantiated, and the CIT(A)'s reduction of the addition was considered reasonable.

The tribunal held that the reopening of assessment under Section 147 was valid, but the disallowance of amortization of mining and leasehold land was to be decided afresh. It also held that receipts from the sale of CERs (Carbon Emission Reductions) were capital in nature and not taxable business income, thus disallowing deduction under Section 80IA on such receipts.

The Tribunal held that the assessee was not required to deduct tax at source on interest paid to its members on time deposits, following the decision of the Karnataka High Court and a relevant circular.

The Tribunal found that there was insufficient material on record to definitively decide on the withdrawal of approval. Therefore, the matter was set aside to the file of the CIT(E) for fresh examination with liberty to the assessee to produce further evidence.

The Tribunal held that the AO made generic observations without establishing a reasonable nexus between the expenditure and the dividend income. Following Supreme Court and its own previous decisions, the Tribunal found no reason to interfere with the CIT(A)'s order.

The Tribunal found that the orders of the lower authorities lacked specific reasoning for the disallowances, beyond general observations about cash payments and self-made vouchers. The Tribunal noted that specific evidence supporting the business nature of the expenses was not properly canvassed.

The Tribunal noted that the assessee had provided loan confirmations and agricultural income reports to establish the creditworthiness of the lenders. Since the Assessing Officer had not fully verified these claims, the matter was restored for fresh assessment.

The Tribunal noted that the assessee had provided loan confirmations and agricultural income reports to establish the creditworthiness of the lenders. Since the Assessing Officer had not fully verified these claims, the matter was restored for fresh assessment.

The Tribunal held that the scope of enquiry for approval under Section 10(23C)(vi) is limited to the sole purpose of education, and other compliance issues are to be examined subsequently. The Tribunal found that the Pr. CCIT did not consider the guidelines laid down by the Supreme Court and CBDT.

The Tribunal noted that the assessee had provided loan confirmations and agricultural income reports to establish the creditworthiness of the lenders. Since the Assessing Officer had not fully verified these claims, the matter was restored for fresh assessment.

The Tribunal held that penalty under Section 271(1)(c) cannot be levied when the disallowance is based on an estimation due to peculiar facts and the assessee has provided explanations and supporting documents, even if not fully verifiable during assessment.

The Tribunal upheld the CIT(A)'s deletion of the addition, finding that the interest amount of Rs. 49,77,300/- was actually paid from the assessee's current accounts. The Tribunal also dismissed the assessee's appeal against the reopening of assessment.

The Tribunal admitted the additional evidence submitted by the assessee and remanded the issue back to the Assessing Officer for a fresh decision. The appeal was allowed for statistical purposes.

The Tribunal held that Section 40(a)(ia) applies to both payable and paid amounts without TDS deduction, citing a Supreme Court decision. For VAT, the disallowance was confirmed. However, for service tax, the matter was remanded to the AO to verify if the service tax was collected from customers, as the tax point rules for the relevant year were based on cash basis.

The Tribunal held that the voluntary disclosure made after the search, in light of Explanation 5A to Section 271(1)(c), was a basis for penalty. However, penalty on the estimated interest addition was deleted as it was based on estimation without supporting material.

The Tribunal held that the assessee had a reasonable cause for the delay due to changes in e-TDS filing requirements necessitating collection of 100% valid PANs from numerous scattered deductees. The penalty was deleted.

The Tribunal agreed with the CIT(A)'s reasoning for reducing the trading addition, stating that best judgment assessment should be based on material on record. The Tribunal also upheld the deletion of additions related to interest on borrowed funds used for business purposes, noting the assessee had sufficient interest-free funds.

The CIT(A) was justified in deleting the addition as the list of debtors found during the survey was not complete. The revenue failed to provide contrary material to rebut this finding.

The Tribunal made the following decisions: 1. **Expenditure on transfer (Issue 1):** The Tribunal remanded this matter back to the AO for a fresh examination of the expenditure incurred in connection with the transfer, amounting to Rs. 1,58,983/-, which the assessee claimed related to commissions and other expenses. The Tribunal noted that the necessary evidence was on record and directed the AO to examine it as per law. 2. **Fair market value as on 01.04.1981 (Issue 2):** The Tribunal remanded this issue back to the AO. It noted that the property was acquired by the assessee via a family distribution deed at nil consideration, making Section 49(1)(iii) applicable, where the cost to the previous owner is considered. The assessee had submitted a valuation report for the fair market value as on 01.04.1981. The AO had relied on a partition deed dated 23.04.1988. The Tribunal found no specific finding by the AO explaining why the assessee's valuation report was unacceptable and directed a fresh examination of the report by the AO. 3. **Cost of Improvement under Section 54 (Issue 3):** This ground was dismissed in limine. The Tribunal found that there was no specific contention taken by the assessee either before the AO or the CIT(A) regarding the cost of improvement of Rs. 3,50,000/- claimed under Section 54. As there was nothing on record to adjudicate this matter, it was dismissed. 4. **Income from pan shop (Issue 4):** This ground was dismissed. The Tribunal noted that the AO observed the assessee declared income from other sources and later brought up the story of running a pan shop without substantiating it with any evidence. These findings remained uncontroverted during the appeal proceedings before the CIT(A) and the Tribunal. Therefore, the Tribunal found no reason to dispute the AO's findings. **Ratio:** The Tribunal emphasized the need for proper examination of evidence by the AO, especially when dealing with claims for expenditure and fair market value. It also highlighted that issues not properly raised before lower authorities or lacking substantiation would be dismissed. The Tribunal also acknowledged the principle that if a property is acquired through inheritance or partition, the cost to the previous owner or the fair market value as on 01.04.1981 is relevant for capital gains computation. The Tribunal also noted that claims for improvement costs require specific substantiation.

The Tribunal restored the issue of unexplained cash to the AO for fresh verification, including summoning the alleged seller. For the commission paid to foreigners, the Tribunal also restored the issue to the AO for fresh decision due to lack of evidence regarding the nature of services rendered outside India.

The Tribunal held that the penalty could not be levied as the issue of whether the profit was capital gain or business income was debatable. The final decision in the quantum proceedings treated the income as capital gains, albeit bifurcated into long-term and short-term.

The Tribunal noted that the assessee was created on 16/01/1999 and was registered. The appeal was filed by the assessee against the CIT(A)'s order which had disallowed exemption under Section 11 and treated income as taxable.

The Tribunal held that the capital gain was correctly assessable in AY 2006-07, as previously decided by the CIT(A) for that year and in a similar case of the assessee's husband. The Tribunal also upheld the availability of Section 54F benefit.

The Tribunal upheld the CIT(A)'s order, finding that the Revenue failed to provide specific instances or contrary material to justify the disallowances and additions. The assessee had provided sufficient evidence to demonstrate the genuineness of transactions and the correctness of their claims.

The Tribunal held that the assessee's appeal was without grievance as the CIT(A) had quashed the assessment made in the incorrect status of 'Company' and directed a fresh assessment in the correct status of 'Firm'. The change in PAN alone does not invalidate the assessment proceedings.

The Tribunal held that once books of account are rejected and a trading addition is made, no further disallowances should be made from expenses like sales commission, sales promotion, or other expenses. However, additions under Section 40A(3) can be made even if books are rejected.

The Tribunal held that the issue of excess salary payment required further examination due to insufficient material. Therefore, this specific ground was allowed for statistical purposes, remitting the matter back to the AO for fresh examination.

The Tribunal held that since the interest income was not taxable in the hands of the assessee or the State Government, the TDS deducted should be refunded to the assessee. The assessee was directed to return the refunded TDS to the State Government.

The Tribunal held that the assessee had complied with the conditions of Section 271AAA(2) by admitting undisclosed income and specifying the manner in which it was derived during the search. The authorized officer's failure to explicitly ask for substantiation of the manner of derivation was also considered.

The Tribunal affirmed the order of the CIT(A), holding that the land in question was agricultural land and not converted into stock-in-trade, and that the agricultural income claimed was supported by evidence and had been accepted in previous assessments.

The Tribunal held that the assessee's claim for business loss on account of short/excess recovery from banks was not allowable as it related to fraudulent transactions. However, the Tribunal found no infirmity in the deletion of addition on account of packing material by the CIT(A) based on the evidence provided.

The Tribunal restored the issue to the Assessing Officer for fresh adjudication, directing verification of whether the land was agricultural, its location relative to municipal limits, and if the acquisition was compulsory. The appeals were allowed for statistical purposes.

The Tribunal found that the matter required a deeper examination by the authorities to determine if the assessee was the owner of the money or merely a facilitator. The case was set aside to the CIT(A) for a fresh examination with specific directions.

The Tribunal recalled its previous order, acknowledging that Section 153(2A) was not brought to its notice. It directed the matter to be fixed for fresh hearing to decide on merits, considering the time limitations for fresh assessments.