ITAT Jaipur Judgments — November 2024

The Tribunal condoned the delay of 9 days, considering it to be for sufficient cause. The appeals were restored to the file of the CIT(E) with a direction to grant the assessee an opportunity of being heard and to adjudicate the matter afresh.

The Tribunal condoned the 6-day delay in filing the appeals, citing sufficient cause. For the appeals concerning Section 12AB, the Tribunal noted that the CIT(E) passed an ex-parte order without proper inquiry. The assessee provided a certificate for registration under the Rajasthan Public Trust Act, 1959, and requested an opportunity to establish the genuineness of activities. The matter was restored to the CIT(E) for fresh adjudication.

The Tribunal condoned the delay of 9 days, stating that the assessee was prevented by sufficient cause. The Tribunal decided not to go into the merits of the case but directed the CIT(E) to grant the assessee an opportunity of being heard for both applications. The matter was restored to the file of the CIT(E) for fresh adjudication.

The Tribunal noted that the CIT(E) had issued notices in a short span of time, not giving sufficient opportunity to the assessee. The reasons for rejection were found to be curable, and the assessee argued that the delay was due to engagement of a counsel and ongoing consideration of RPT registration. Considering these factors and in the interest of justice, the Tribunal decided to restore the matter to the file of the CIT(E) for fresh adjudication after providing adequate opportunity of being heard.

The Tribunal condoned the delay of 9 days, finding sufficient cause. The Tribunal decided not to go into the merits of the case but directed the matter back to the CIT(E) to grant the assessee an adequate opportunity to be heard for both applications (registration and approval).

The tribunal noted that the transactions were circular and did not involve actual movement of cash. The assessee failed to prove the genuineness of the purchases and sales. However, following the precedent of ITO Vs. V. R. Global Energy P. Ltd., the circular transactions not involving cash movement could not be considered for addition as unexplained income. Therefore, the disallowance of purchases and addition for sales were deleted.

The Tribunal noted that the SEBI order itself stated it was not possible to quantify the gain or loss, and the Assessing Officer had not conducted independent inquiries. The loss claimed, being a very small percentage of the total turnover and attributed to trading on an online portal with random parties, was not considered significant enough to be treated as non-genuine. The Tribunal also noted the lack of opportunity for cross-examination.

The Tribunal held that the assessee failed to establish the genuineness of the impugned purchases from M/s Sweekar Udyog and M/s Shiv Agro Sales. The Tribunal noted that the GST authorities were concerned only with GST and not the genuineness of purchases, and that the two entities did not respond to notices. The Tribunal also observed that mere payment by cheque does not prove the purpose of purchases.

The Tribunal, referring to the Apex Court's decision in Apex Laboratories (P.) Ltd. v. DCIT, held that the activities of the assessee, in facilitating pharmaceutical companies to provide freebies to doctors, were prohibited by law. These activities were found to be in violation of Medical Council of India (MCI) regulations and, by extension, fell under the prohibition of Section 37(1) of the Income Tax Act. The Tribunal applied the principle of 'substance over form', concluding that the assessee was essentially acting as a conduit for activities prohibited for pharmaceutical companies.

The Tribunal held that since no incriminating material was found relating to the assessee, the invocation of Section 153C was not justified. The protective assessments, which were based on the substantive assessments, therefore, could not be sustained.

The assessee sought to withdraw the appeal to avail benefits under the Vivad Se Vishwas Scheme, 2024, as required by the scheme's provisions. The Department had no objection to the withdrawal.

The Tribunal held that the reopening of assessment was bad in law due to various procedural irregularities, including the lack of proper application of mind by the AO, reliance on borrowed satisfaction, and issuance of notices by the wrong authority. Furthermore, the additions were not substantiated with cogent evidence and were made without providing the assessee with an opportunity for cross-examination. The Tribunal noted that the AO's stand on the nature of the transactions and the applicable sections also shifted.

The Tribunal noted that the assessee had multiple opportunities before the CIT(A) but failed to appear or submit responses. There was a discrepancy in the email communication regarding representation. The Tribunal restored the matter to the CIT(A) for a fresh hearing.

The Tribunal held that the provisions of Section 68 are only attracted where any sum is found credited in the books of a person and the assessee offers no satisfactory explanation about its nature and source. The assessee's cash sales were supported by documents and delivery of goods, and there was no evidence of bogus sales or purchases. The addition was made on assumption and presumption without tangible evidence. The Tribunal also noted that the tax rate of 60% under Section 115BBE was applicable from 01.04.2017, and the deposits were made before this date.

The Tribunal observed that the assessment orders and the CIT(A) order were passed ex-parte without examining the issues on merits. The grounds raised by the assessee were technical, challenging the reopening and assessment. Therefore, the Tribunal restored the matter to the AO for de-novo adjudication.

The Tribunal observed that the assessment orders and the CIT(A) order were passed ex-parte and the issues were not examined on merits. Therefore, the matter was restored to the AO for de-novo examination after giving the assessee a fresh opportunity of being heard.

The Tribunal held that the addition on account of alleged unaccounted purchases of Guar Gum was unjustified, and the disallowance of interest paid u/s 36(1)(iii) was restricted. The appeal of the revenue was dismissed, and the cross-objection was allowed.

The Tribunal noted that the issues in the appeals were similar and could be disposed of by a consolidated order. The peak credit theory, which allows for the netting of transactions to determine the actual income, was discussed extensively. The Tribunal considered various judgments and decided to allow the benefit of peak credit in certain cases, while disallowing it in others where the evidence was insufficient or the transactions were not properly explained. The appeals were partly allowed.

The Tribunal noted that the assessee was engaged in money lending activities and the seized documents pertained to these transactions. The peak credit theory was applied to determine the taxable income. The Tribunal observed that the assessee failed to provide satisfactory explanation and details regarding the source of funds and parties involved, and therefore, the additions were partially upheld.

The Tribunal held that the PCIT's order was bad in law due to a violation of the principle of natural justice, as the assessee did not receive proper notice and the proceedings were ex-parte. The Tribunal further observed that the issue was whether the surrendered income could be taxed under Section 69B read with Section 115BBE of the Act. Based on various judicial pronouncements, it was held that if the surrendered income is from business operations and properly explained, it cannot be taxed under these deeming provisions.

The Tribunal noted that the appellant trust has now been registered under the Rajasthan Public Trust Act, 1959, and has obtained regular registration under Section 12AB of the Income Tax Act, 1961. In view of these developments and the appellant's prayer for dismissal of the appeal as withdrawn, the Tribunal agreed with the submission.

The tribunal held that the peak credit theory is applicable in certain circumstances for determining undisclosed income, but it needs to be applied carefully and with regard to the facts of each case. The tribunal also noted that the onus is on the assessee to prove the genuineness and creditworthiness of the transactions. The tribunal decided to remand some of the issues for further verification.

The Tribunal noted that the peak credit theory is applicable in cases where there are unexplained credit and debit entries in the same account, or in different accounts if the persons are shell entities of the assessee. It is applied to avoid double taxation and bring to tax only the actual income. The Tribunal found that the assessee's claim of peak calculation was partly acceptable and directed the AO to rework the income accordingly.

The Tribunal noted that the "peak credit" theory, which aims to avoid double taxation, could be applied to transactions where the inflows and outflows of funds could be traced. However, it emphasized that the burden of proof lies with the assessee to establish the genuineness, identity, and creditworthiness of the parties involved. The Tribunal also clarified that the peak credit theory is not applicable to fictitious entries or when the source of funds remains unexplained.

The Tribunal held that the addition by way of NP rate enhancement could not be made without rejecting the books of accounts and without following the provisions of Section 145 of the Act. The AO had not issued any show cause notice for the application of Section 145, nor pointed out any specific defects in the assessee's books of accounts.

The tribunal noted that the appellant had filed an application for withdrawal of the appeal. This was due to the trust obtaining regular registration under Section 12A(1)(ac)(i)/12AB(1)(a) of the Act, taking advantage of a CBDT circular extending timelines. The order of registration dated 05-07-2024 was not disputed by the Revenue.

The Tribunal held that the excess stock, offered by the assessee as business income, should be taxed as normal business income under section 28 of the Act, not as unexplained investment under section 69B and taxed at the special rate under section 115BBE. The AO was directed to re-calculate the tax accordingly.

The appellant later filed an application to withdraw the appeal. During the pendency of the appeal, the appellant obtained regular registration from A.Y. 2022-23 to 2026-27. The Revenue did not dispute the order of registration.

The Tribunal noted that while the applicant had since registered under the Rajasthan Public Trust Act, concerns remained about the genuineness of activities and the inadvertent incorrect statement regarding the campus takeover. The Tribunal also observed that the CIT(E) did not specifically requisition details related to the campus takeover in the show-cause notices.

The Tribunal noted that the appellant failed to provide a registration certificate under the Rajasthan Public Trust Act, and offered insufficient explanation regarding the non-genuineness of activities and application of income. The Tribunal found the appellant's approach to be casual.

The Tribunal held that the PCIT's order under section 263 was not sustainable. The assessment order was found to be passed after due application of mind by the Assessing Officer, and the PCIT's view was merely a change of opinion. The Tribunal also noted that the assessment order was passed after obtaining necessary approvals, which could not be revised under section 263 without vitiating the prior approval.

The Tribunal noted that the assessee's death was brought to the CIT(A)'s notice. While the legal heir claimed to have registered herself, specific proof was lacking. The assessment order was passed ex-parte.

The Tribunal noted that the assessee is a co-owner of the property and the share is not disputed. The dispute primarily concerns the computation of capital gain and the non-allowance of the cost of acquisition by the lower authorities. The Tribunal found it fit to remand the matter back to the AO.

The Tribunal noted that the dispute primarily concerned the cost of acquisition and improvement of the property sold. The assessee claimed that the AO and CIT(A) had not properly considered the cost of acquisition. While the assessee admitted not furnishing complete details to avoid confusion, they requested the matter be remanded to the AO to verify the cost of acquisition.

The Assessing Officer (AO) added Rs. 8,10,362/- as undisclosed long-term capital gain for AY 2015-16. The CIT(A) dismissed the assessee's appeal. The Tribunal found that the AO had not considered the sale documents as incriminating, but rather focused on the capital gain and not the cost of acquisition. The Tribunal also noted that the assessee had consistently filed returns and balance sheets, and no prior queries were raised regarding the cost of acquisition.