ITAT Kolkata Judgments — June 2023

The Tribunal held that the assessee failed to discharge its onus under Section 68 by not providing evidence for the identity, creditworthiness, and genuineness of the loan. Therefore, the order of the CIT(A) was set aside, and the AO's addition was sustained.

The Tribunal allowed the assessee to withdraw the appeal based on the payment made under the Vivad Se Viswas Scheme. The assessee was granted liberty to seek recall of the order if the scheme application was not accepted.

The Tribunal upheld the order of the CIT(A) as the assessee failed to appear and provide any submissions or evidence before the lower authorities and the Tribunal. No infirmity was found in the CIT(A)'s order.

The Tribunal held that the deposit of Rs. 2,40,000/- was not attributable to the assessee as the bank account belonged to another individual. For the remaining Rs. 5,90,000/-, considering the assessee's high cash sales and overall cash flow, the deposit was considered explained.

The Tribunal set aside the orders of the CIT(A) and restored the appeals to the file of the CIT(A) for fresh adjudication. The assessee was directed to diligently participate in the proceedings, and the CIT(A) was instructed to provide a reasonable opportunity of being heard.

The Tribunal held that deemed dividend under Section 2(22)(e) can only be taxed in the hands of the beneficial shareholder and not the recipient company, unless the recipient is also a shareholder. Relying on the jurisdictional High Court's decision, the addition was found unsustainable.

The Tribunal held that Section 44AD of the Income-tax Act was applicable as the assessee's turnover was Rs. 24,00,000/- and the net profit declared was 9.8%, which is above the 8% threshold. Therefore, the disallowance and addition were uncalled for.

The Tribunal upheld the CIT(A)'s decision, finding that the advances were genuine business transactions and not deemed dividends. The Tribunal also relied on previous decisions regarding disallowances under Section 40(a)(ia) and statutory deductions, noting that these additions were not based on incriminating material found during search.

The Tribunal held that the transactions were bogus, following the jurisdictional High Court's decision in similar cases involving penny stocks. The additions made by the revenue authorities were upheld.

The Tribunal condoned the delay in filing the appeal. The order of the CIT(Exemption) was set aside as it was non-speaking and lacked application of mind, directing the CIT to call for a report from the AO and adjudicate on merits.

The Tribunal held that the appeals filed by the Revenue were to be dismissed. Regarding the addition on account of deemed dividend under Section 2(22)(e), the Tribunal concurred with the CIT(A)'s findings. For advances from Safari Retreats Pvt. Ltd. and Forum Ventures Pvt. Ltd., the CIT(A) had correctly observed that these were business transactions. In the case of Safari Retreats, the lending of money was a substantial part of its business, and interest was paid at a commercial rate. For Forum Ventures, the advance was pursuant to an agreement for property purchase, which was later cancelled, and the amount refunded. The Tribunal also noted that the addition was not based on any incriminating material found during the search action. Similarly, for the addition related to Forum Riviera Construction Pvt. Ltd., the assessee's shareholding was negligible (0.40%), and interest was paid at 12%, and this addition was also not based on search material. Concerning the disallowance under Section 40(a)(ia), the Tribunal noted that the issue was covered by a coordinate bench's decision in the assessee's own case, which allowed the appeal by holding that payments to non-residents without a permanent establishment in India, for services not constituting royalty or fees for technical services, did not warrant disallowance. The Tribunal also reiterated that this addition was not based on incriminating material found during the search. For the disallowance of statutory deduction under Section 24(i), the Tribunal found no infirmity in the CIT(A)'s order and noted that this addition was also not based on incriminating material found during the search, and thus could not have been made in an assessment under Section 153A. Therefore, all grounds of appeal were dismissed.

The tribunal dismissed the ground related to PF & ESI disallowance, citing Supreme Court precedent. However, it restored the issue of Section 43B disallowance to the Assessing Officer for verification of payment proof and auditor's certificate.

The Tribunal held that the appeals filed by the Revenue were to be dismissed. Regarding the addition on account of deemed dividend under Section 2(22)(e), the Tribunal concurred with the CIT(A)'s findings. For advances from Safari Retreats Pvt. Ltd. and Forum Ventures Pvt. Ltd., the CIT(A) had correctly observed that these were business transactions. In the case of Safari Retreats, the lending of money was a substantial part of its business, and interest was paid at a commercial rate. For Forum Ventures, the advance was pursuant to an agreement for property purchase, which was later cancelled, and the amount refunded. The Tribunal also noted that the addition was not based on any incriminating material found during the search action. Similarly, for the addition related to Forum Riviera Construction Pvt. Ltd., the assessee's shareholding was negligible (0.40%), and interest was paid at 12%, and this addition was also not based on search material. Concerning the disallowance under Section 40(a)(ia), the Tribunal noted that the issue was covered by a coordinate bench's decision in the assessee's own case, which allowed the appeal by holding that payments to non-residents without a permanent establishment in India, for services not constituting royalty or fees for technical services, did not warrant disallowance. The Tribunal also reiterated that this addition was not based on incriminating material found during the search. For the disallowance of statutory deduction under Section 24(i), the Tribunal found no infirmity in the CIT(A)'s order and noted that this addition was also not based on incriminating material found during the search, and thus could not have been made in an assessment under Section 153A. Therefore, all grounds of appeal were dismissed.

The Tribunal condoned the delay and found that the CIT(A) had passed an ex-parte order. Therefore, the case was remanded back to the CIT(A) for de novo adjudication to provide a more effective opportunity to the assessee.

The Tribunal held that capacity utilization adjustment is a permissible adjustment for transfer pricing benchmarking, especially for companies in their start-up phase. The CIT(A)'s reasoning on the commercial aspect, judicial precedents, and regulatory provisions supporting such adjustments was upheld.

The Tribunal found that the CIT(Appeals) did not provide sufficient reasoning for rejecting the assessee's contention. The Tribunal allowed the appeal, deleting the disallowance.

The Tribunal held that the CIT(Appeals) erred by introducing a new issue regarding lottery winnings and a different tax regime, without addressing the original dispute of the interest income addition. The CIT(Appeals) also lacked jurisdiction to consider this new issue without issuing a notice for enhancement.

The Tribunal found merit in the assessee's alternative plea. It noted that the addition of Rs. 2,28,160/-, which was an ad-hoc disallowance of 25% on business promotion, transportation, and travelling expenses, had already been deleted by the CIT(A) in its order dated 18.04.2019. The Tribunal observed that the CIT(A) had examined the issue in detail and rightly deleted the disallowance on merits. Therefore, since the impugned addition deserved to be deleted on its own merits as an ad-hoc disallowance, the Tribunal allowed the assessee's grievance and deleted the addition of Rs. 2,28,160/-. Other grievances were not adjudicated as they became academic in nature due to the deletion of the main addition. The ratio decidendi is that an addition already deleted by the first appellate authority on merits cannot be sustained in a subsequent proceeding, especially when it is an ad-hoc disallowance.