ITAT Kolkata Judgments — November 2023

The Tribunal held that the Pr. CIT cannot assume jurisdiction under Section 263 to revise an assessment on an issue not covered by the limited scrutiny, as the AO was restricted to the specified issue. The revisionary order was quashed.

The Tribunal decided the issues as follows: Regarding Ground No. 2 (Section 14A disallowance): The Tribunal noted that the assessee has its own sufficient funds to earn exempt income during the year, as evidenced by the balance sheet. After considering the submissions, the Tribunal restricted the disallowance of expenditure to Rs. 74,952/- in the hands of the assessee. This means the disallowance was partly allowed, reducing it from the amounts proposed by the AO and CIT(A). The ratio is that if an assessee demonstrates sufficient own funds, disallowance under Section 14A should be limited to the extent of exempt income earned. Regarding Ground No. 3 (Section 2(22)(e) deemed dividend): The Tribunal found that the provisions of Section 2(22)(e) of the Act do not attract in the assessee's case because the assessee has paid sufficient interest to the alleged company and the transactions were part of regular business. Accordingly, the addition made by the Assessing Officer was deleted, and this ground was allowed in full. The ratio is that if a transaction involves payment of interest and is part of regular business, it may not be treated as a deemed dividend under Section 2(22)(e). Grounds 1 and 4 were considered general and not adjudicated. The operative direction is the reduction of the Section 14A disallowance and deletion of the Section 2(22)(e) addition.

The Tribunal held that Section 115JB was not applicable to the assessee for AY 2012-13, following a High Court decision. However, for subsequent assessment years (2016-17, 2017-18, 2018-19), the Tribunal found that the post-amendment provisions of Section 115JB were applicable.

The Tribunal found that the interests of justice would be served by remanding the matter back to the Assessing Officer. The Assessing Officer was directed to re-examine the evidence and details furnished by the assessee regarding investments, deposits, and interest income before passing a fresh assessment order.

The Tribunal held that the PCIT failed to conduct proper inquiry and record clear findings to justify the revision. The Assessing Officer had taken a plausible view after examining the details provided by the assessee.

The Tribunal held that the CIT(Exemption) misconstrued the applications, which were for regular registration and not provisional. The CIT should have adjudicated the applications on merit.

The Tribunal held that no disallowance under Section 14A can be made when there is no exempt income. Regarding car washing expenses, the Tribunal found the disallowance by the AO and partial confirmation by the CIT(A) to be based on hypothetical grounds without evidence, especially since similar expenses were allowed in prior and subsequent years.

The Tribunal held that Section 115JB was not applicable to the assessee for AY 2012-13, following a High Court decision. However, for subsequent assessment years (2016-17, 2017-18, 2018-19), the Tribunal found that the amendment to Section 115JB effective from April 1, 2013, made it applicable to the assessee.

The Tribunal found that the CIT(A) passed an ex-parte order without deciding the appeal on merits, failing to provide reasons for the decision as required by Section 250(6). The order of the CIT(A) was set aside.

The Tribunal held that an assessment order passed in the name of a deceased person, after the Assessing Officer has been informed of the death, is non-est, bad in law, and void ab initio. Therefore, the assessment order is liable to be quashed.

The Tribunal held that corporate membership expenses are pure business expenditures allowable under Section 37 of the Income Tax Act. Since a company is a juridical person, there is no element of personal nature in such expenditures.

The Tribunal held that the AO imposed penalty without demonstrating that the assessee's claim was false, especially since the income was voluntarily disclosed during the survey. The assessment and penalty proceedings are distinct, and the AO's order was cryptic.

The Tribunal held that the assessee had discharged the onus of proving the identity and genuineness of the loan transactions, and that the requirement to prove the 'source of source' for loans was not applicable for the assessment year in question. The Tribunal also found that the assessee had substantiated the expenses for the construction of the residential house.

The Tribunal held that Section 115JB was not applicable to the assessee for AY 2012-13, following a High Court decision. However, for subsequent assessment years (2016-17, 2017-18, 2018-19), the Tribunal found that the amendment to Section 115JB effective from April 1, 2013, made it applicable to the assessee.

The Tribunal dismissed both appeals, upholding the findings of the lower authorities. The Tribunal noted that the AO had conducted thorough inquiries, including issuing notices under section 133(6) and summons under section 131, and deputing an inspector to verify the existence of the suppliers. The assessee failed to provide satisfactory evidence to establish the genuineness of the purchases from these four parties, beyond peripheral documents like audited accounts and quantitative tally. The Tribunal found it highly unreliable that goods would reach the assessee's premises without any contact with the suppliers. The AO's estimation of profit on these purchases, and the subsequent reduction by the CIT(A) to 12.16% based on the assessee's profit in a subsequent year, was considered reasonable. The Tribunal did not find any reason to interfere with the concurrent findings of fact by the revenue authorities.

The Tribunal held that the notice under Section 148 was not served within the prescribed time limit. Consequently, the reassessment proceedings were deemed without jurisdiction and invalid.

The tribunal found that the CIT(A) dismissed the appeal ex-parte without deciding the issue on merit. The AO had made an addition on account of unexplained cash credit after reopening the assessment.

The Tribunal held that the CIT(Exemption) misconstrued the applications, which were for regular registration and not provisional. The CIT should have adjudicated the applications on merit.

The Tribunal held that corporate membership expenses are pure business expenditures allowable under Section 37 of the Income Tax Act. Since a company is a juridical person, there is no element of personal nature in such expenditures.

The Tribunal, following the Supreme Court's decision in Checkmate Services (P.) Ltd., held that strict compliance with Section 36(1)(va) is mandatory for claiming deductions on employees' PF & ESI contributions. Provisions of Section 43B cannot be applied in such cases.

The Tribunal dismissed both appeals, upholding the findings of the lower authorities. The Tribunal noted that the AO had conducted thorough inquiries, including issuing notices under section 133(6) and summons under section 131, and deputing an inspector to verify the existence of the suppliers. The assessee failed to provide satisfactory evidence to establish the genuineness of the purchases from these four parties, beyond peripheral documents like audited accounts and quantitative tally. The Tribunal found it highly unreliable that goods would reach the assessee's premises without any contact with the suppliers. The AO's estimation of profit on these purchases, and the subsequent reduction by the CIT(A) to 12.16% based on the assessee's profit in a subsequent year, was considered reasonable. The Tribunal did not find any reason to interfere with the concurrent findings of fact by the revenue authorities.

The Tribunal held that Section 115JB was not applicable to the assessee for AY 2012-13, following a High Court decision. However, for subsequent assessment years (2016-17, 2017-18, 2018-19), the Tribunal found that the amendment to Section 115JB effective from April 1, 2013, made it applicable to the assessee.

The Tribunal held that the approval for reopening the assessment was granted mechanically without application of mind, rendering it invalid. Consequently, the reassessment proceedings and the consequent assessment order were quashed.

The Tribunal held that since the delay in filing Form 10-IC was condoned, the assessee is eligible for the reduced tax rate of 22%. The revenue authorities were directed to address the technical issue of portal access for filing the form.

The Tribunal, following the Supreme Court's decision in Exide Industries, held that leave encashment is allowable on a payment basis. The case was restored to the AO for verification of actual payments made.

The Tribunal held that the AO's action under Section 154 was valid as it was to rectify an apparent mistake in computing income. However, it also held that sumptuary allowance is exempt from tax based on a CBDT circular and a coordinate bench decision.

The Tribunal held that the assessee had discharged its initial burden by presenting SEBI's finding that it was not involved in price rigging. Relying on a coordinate bench's decision in a similar case involving the same scrip, the Tribunal found the additions unsustainable.

The Tribunal found that the AO's ad-hoc addition of 10% of current liabilities lacked any statutory basis or rationale. The Tribunal noted that the assessee claimed to have provided supporting documents to the CIT(A) and decided to remit the matter back to the AO for proper examination.

The Tribunal allowed the appeal regarding foreign exchange losses and disallowance under Section 14A, holding that MTM losses are real and Section 14A disallowance cannot exceed exempt income. The addition for house property income was deleted as the difference was due to service tax. The issue of interest on IT refunds was remanded for fresh adjudication.

The Tribunal held that an assessment framed on a non-existent entity after amalgamation is not sustainable in law. The assessment order was quashed based on the Supreme Court's decision in Maruti Suzuki India Ltd.

The Tribunal decided that the DVO's valuation was not binding and that the assessee's valuation, supported by a registered valuer, should be considered. The matter was remanded for fresh consideration.

The Tribunal condoned the delays in filing both the appeal and the cross-objection. It held that since Section 92BA(i) was omitted from the statute, the adjustments made by the AO concerning SDTs were invalid.

The Tribunal held that the payments for sales promotion and handling charges were in the nature of reimbursement of expenses incurred by group companies, not works contracts, and thus Section 194C was not applicable. The Tribunal also found that the stock destruction expenses were a normal business practice with adequate records and upheld the deletion of additions.

The Tribunal held that the Assessing Officer erred in estimating income without rejecting the assessee's books of accounts, which is a prerequisite under Section 145(3) of the Income Tax Act. The additions were found to be based on surmises and conjectures.

The Tribunal decided on the grounds as follows: Regarding Ground No. 2 (Section 14A disallowance): The Tribunal, after considering the assessee's submission that it had its own funds to earn exempt income and examining the balance sheet, restricted the disallowance of expenditure to Rs. 74,946/-. This was partly allowed. Regarding Ground No. 3 (Deemed dividend u/s 2(22)(e)): The Tribunal found that the provisions of Section 2(22)(e) were not attracted in the assessee's case because the assessee had paid sufficient interest to the company. Accordingly, the addition was deleted, and the ground was allowed. Regarding Ground No. 4 (Chapter VIA deductions): The Tribunal found the assessee's claim to be correct and allowed the deductions of Rs. 1,50,000/- under Section 80C and Rs. 15,000/- under Section 80D. This ground was allowed. Regarding Ground No. 5 (Double addition of Rs. 50,00,000/-): The Tribunal, considering the assessee's prayer and the lack of objection from the revenue, remanded the issue back to the Assessing Officer to examine it afresh and make necessary corrections if a double addition was indeed found. This issue was allowed for statistical purposes. The Tribunal noted that Ground No. 1 and Ground No. 6 were general in nature and did not require separate adjudication. The overall result was that the appeal was partly allowed.

The Tribunal upheld the CIT(A)'s order, finding no reason to interfere. The assessee was allowed to claim the losses of the amalgamated company.

The Tribunal, following the Supreme Court's decision in Exide Industries, held that leave encashment is allowable on a payment basis. The case was restored to the AO for verification of actual payments made.

The Tribunal held that the assessee had provided sufficient documentary evidence, including income tax returns and audited financial statements of the share applicants, to establish their identity and creditworthiness. The Tribunal found the transactions to be genuine investments in an NBFC.

The Tribunal held that the addition was made by invoking Section 56(2)(vii) of the Income-tax Act, 1961, which deals with income from other sources. The issue revolves around the applicability of this section to the difference between the purchase consideration and the stamp duty valuation.

The Tribunal held that the assessee had not furnished inaccurate particulars of income as the claim for carry forward of losses was based on a position taken from AY 2010-11, and the matter for that year was still pending. Therefore, the penalty was not imposable.

The Tribunal upheld the CIT(A)'s order, finding it well-reasoned. The Tribunal agreed that the AO's estimation of commission income at 2% was not based on material evidence and was inconsistent with the statement recorded during the survey.

The Tribunal noted that the proceedings for the assessment year related to the MAT credit (AY 2012-13) were not finalized. Therefore, the matter was remitted back to the Assessing Officer to verify the claim and allow it in accordance with law.

The Tribunal held that the assessee had provided sufficient evidence to establish the identity, creditworthiness of the subscribers, and genuineness of the transactions. The lower authorities failed to consider the submitted documents.

The Tribunal acknowledged the assessee's reasons for non-compliance but also noted some negligence. In the interest of justice, the case was restored to the Assessing Officer for a fresh assessment, subject to the assessee paying costs.

The Tribunal found that the interests of justice would be served by allowing the assessee an opportunity to present their case. Therefore, the CIT(A)'s ex parte order was set aside.

The Tribunal noted that the issue was squarely covered in favour of the assessee by the decision of a co-ordinate bench in the assessee's own case for AY 2014-15 (ITA No. 2149/K/2017). The Tribunal further observed that the Revenue's appeal against that decision to the Hon'ble Calcutta High Court (in ITA No. 26/2022) was dismissed on 25.07.2022, with the High Court sustaining the Tribunal's order. Consequently, following the judgment of the Hon'ble Calcutta High Court, the Tribunal sustained the order passed by the CIT(A) and dismissed the grounds raised by the Revenue. The retention money was thus treated as deferred payment and deductible. No issue was expressly left undecided.

The Tribunal held that the lower authorities acted mechanically and did not consider the assessee's claim on merits. It was emphasized that assessees should not be punished for bona fide mistakes.

The Tribunal held that tax authorities should assist assessees in determining correct tax liability and not take advantage of mistakes. The disallowance under Section 14A should be calculated on the net interest expenditure.

The Tribunal held that the lower authorities acted mechanically and did not consider the assessee's claim on merits. It was emphasized that assessees should not be punished for bona fide mistakes.

The CIT(A) directed the AO to verify if the TCS amount was paid to the government and if the corresponding income was offered. If confirmed, the AO was to grant the credit. The Tribunal found no infirmity in this direction.