ITAT Mumbai Judgments — June 2017

ITO 21(1)(1), MUMBAI vs ALKA P.AGARWAL, MUMBAI

ITA 2477/MUM/2017[2007-08]Status: Disposed8 Jun 2017AY 2007-08Dismissed

The Tribunal considered the CBDT Circular No. 21/2015, which stipulates that appeals with a tax effect below Rs. 10 lakhs should not be pursued. The Departmental Representative did not dispute the assessee's contention regarding the tax effect.

ITO 19(2)(1), MUMBAI vs LANDS END CO OP HSG SOC LTD, MUMBAI

ITA 2483/MUM/2017[2013-14]Status: Disposed8 Jun 2017AY 2013-14Dismissed

The Tribunal upheld the CIT(A)'s order, finding no infirmity as it was based on consistent decisions of the ITAT and the jurisdictional High Court in the assessee's own cases. The receipts were considered exempt on the principle of mutuality.

UDAY H. SNGHAVI,MUMBAI vs ITO 30(1)(4), MUMBAI

ITA 1839/MUM/2017[2009-10]Status: Disposed7 Jun 2017AY 2009-10Allowed

The Tribunal held that an assessment order passed in the name of a deceased person, after the AO was aware of the death, is bad in law. Consequently, the assessment order was quashed.

MVR GL JOINT VENTURE,MUMBAI vs ITO 25(3)(1), MUMBAI

ITA 6884/MUM/2016[2012-13]Status: Disposed7 Jun 2017AY 2012-13Allowed

The Tribunal held that since the interest income was already disclosed and taxed in the hands of GL Construction, it could not be taxed again in the hands of the assessee. The Tribunal also noted the principle of consistency, as similar income was accepted in the hands of GL Construction in earlier assessment years.

P.K. JOSHUA,NAVI MUMBAI vs ITO 26(2)(3), MUMBAI

ITA 4487/MUM/2014[2001-02]Status: Disposed7 Jun 2017AY 2001-02Allowed

The Tribunal held that the AO's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars in the notice issued under Section 274 read with Section 271(1)(c) was a fatal flaw. This defect was not curable and violated the principles of natural justice.

AMBIKA TRANSPORT SERVICES P.LTD,MUMBAI vs DCIT CIR 4(1)(2), MUMBAI

ITA 1789/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12Remanded

The Tribunal held that the AO's failure to dispose of the assessee's objections before completing the assessment rendered the assessment invalid. The case was set aside, directing the AO to first dispose of the objections.

P.K. JOSHUA,NAVI MUMBAI vs ITO 26(2)(3), MUMBAI

ITA 4488/MUM/2014[2002-03]Status: Disposed7 Jun 2017AY 2002-03Allowed

The Tribunal held that the AO's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars in the notice issued under Section 274 read with Section 271(1)(c) was a fatal flaw. This defect was not curable and violated the principles of natural justice.

P.K. JOSHUA,NAVI MUMBAI vs ITO 26(2)(3), MUMBAI

ITA 4489/MUM/2014[2003-04]Status: Disposed7 Jun 2017AY 2003-04Allowed

The Tribunal held that the AO's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars in the notice issued under Section 274 read with Section 271(1)(c) was a fatal flaw. This defect was not curable and violated the principles of natural justice.

P.K. JOSHUA,NAVI MUMBAI vs ITO 26(2)(3), MUMBAI

ITA 4490/MUM/2014[2004-05]Status: Disposed7 Jun 2017AY 2004-05Allowed

The Tribunal held that the AO's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars in the notice issued under Section 274 read with Section 271(1)(c) was a fatal flaw. This defect was not curable and violated the principles of natural justice.

P.K. JOSHUA,NAVI MUMBAI vs ITO 26(2)(3), MUMBAI

ITA 4491/MUM/2014[2005-06]Status: Disposed7 Jun 2017AY 2005-06Allowed

The Tribunal held that the AO's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars in the notice issued under Section 274 read with Section 271(1)(c) was a fatal flaw. This defect was not curable and violated the principles of natural justice.

REGRIGERATED DISTRIBUTORS P.LTD,MUMBAI vs DCIT 2(3)(1), MUMBAI

ITA 4512/MUM/2016[2007-08]Status: Disposed7 Jun 2017AY 2007-08

NIRMAL N KOTECHA,MUMBAI vs CIT(28), MUMBAI

ITA 3700/MUM/2015[2009-10]Status: Disposed7 Jun 2017AY 2009-10Partly Allowed

The Tribunal held that proportionate disallowance under Section 14A cannot exceed the exempt income and no disallowance for interest expenditure is warranted if interest-free funds are available. It also ruled that stock-in-trade shares should not be considered for Section 14A disallowance. Furthermore, the Tribunal found a violation of natural justice by the FAA for not admitting additional evidence and grounds, restoring the issue for fresh adjudication.

SWEET MARKETING (I) P.LTD ( NOW KNOWN AS GLB FINVEST P. LTD),MUMBAI vs DCIT CEN CIR 20, MUMBAI

ITA 4569/MUM/2013[2004-05]Status: Disposed7 Jun 2017AY 2004-05Allowed

The Tribunal held that while the original return was processed under Section 143(1), requiring only the AO to have reasons to believe that income escaped assessment, it is a settled principle that the AO must possess tangible material to justify reopening. This material must have a live link with the formation of the belief. In this case, the Tribunal found this link to be missing. The assessee had received share application money from B.P. Choudhary and Saroj Choudhary, and the revenue failed to establish any connection between these individuals and G.V.'s group. The sole basis for reopening was G.V.'s statement, but no nexus was found between G.V.'s statement and the assessee's share applicants. Therefore, the primary condition for initiating reassessment proceedings was not fulfilled. The Tribunal relied on its co-ordinate bench's decision in the assessee's own case for AY 2003-04, which quashed reopening due to a lack of nexus between the application money received by the assessee and the alleged accommodation entries provided by G.V. Consequently, the assessment order was set aside for want of valid jurisdiction. Other grounds raised by the assessee were rendered infructuous.

ITO WD 1(1), KALYAN vs ALPESH SURESH JAIN, BHIWANDI

ITA 1063/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12Dismissed

The Tribunal upheld the CIT(A)'s decision to sustain a 15% disallowance on bogus purchases. It was noted that 100% disallowance is not permissible when sales are not doubted, citing jurisdictional High Court decisions.

SAHAYOG MICROFINANCE LTD vs ASST CIT 8(1)(2), MUMBAI

ITA 3720/MUM/2016[2012-13]Status: Disposed7 Jun 2017AY 2012-13Remanded

The Tribunal found that the facts regarding the exact amount of employee's contribution and the timing of payments were not clear. Therefore, the matter was set aside and restored to the Assessing Officer for a fresh examination in light of the Bombay High Court's decision in Ghatge Patil Transports Ltd.

DCIT C.C. 25, MUMBAI vs SKIL INFRASTRUCTURE LTD, MUMBAI

ITA 3092/MUM/2009[2005-06]Status: Disposed7 Jun 2017AY 2005-06Dismissed

The Tribunal held that the Long Term Capital Gains (LTCG) of Rs. 343.97 crores, which were exempt under Section 10(23G) and had been accounted for in the capital reserve account in AY 2002-03 upon conversion of shares from investment to stock-in-trade, could not be included for the computation of book profits under Section 115JB for AY 2005-06. The Tribunal reasoned that the starting point for book profit computation under Section 115JB is the net profit as shown in the Profit & Loss Account for the relevant previous year. Since the LTCG was not credited to the Profit & Loss Account for AY 2005-06 but was recorded in the capital reserve account in AY 2002-03 in accordance with Schedule VI of the Companies Act, 1956, it could not be adjusted. The Tribunal relied on the Supreme Court's decision in Apollo Tyres Ltd. vs. CIT, which held that the AO cannot disturb the profits in the Profit & Loss Account except to the extent provided in the Explanation to Section 115J (and by extension, 115JB). The Tribunal found that the CIT(A) had correctly provided relief to the assessee. Consequently, both adjustments of 'Capital Gains' and 'Business Loss' in the computation of MAT profits under Section 115JB were deleted, and the AO was directed to re-compute the book profit accordingly. The revenue's appeal was dismissed.

ACIT 32(1), MUMBAI vs HIRALAL K. PATEL, MUMBAI

ITA 4726/MUM/2015[2011-12]Status: Disposed7 Jun 2017AY 2011-12Dismissed

The Tribunal upheld the CIT(A)'s decision to restrict the addition to GP at 8% of the alleged bogus purchases. The Tribunal noted that the assessee's GP rate was consistently between 8-9% in preceding and succeeding years and that the AO did not dispute the sales.

ELITE INTERNATIONAL P.LTD,MUMBAI vs ACIT CIR 6(2), MUMBAI

ITA 3079/MUM/2014[2009-10]Status: Disposed7 Jun 2017AY 2009-10Dismissed

The Tribunal held that the expenditure, being a mere provision and not crystallized during the assessment year, was not allowable under Section 37(1) of the Income Tax Act. The reliance on Section 36(i)(vii) was also found to be misplaced as it pertains to bad debts written off.

HARISH M AGGARWAL,THANE vs ASST CIT CIR 1, THANE

ITA 4446/MUM/2015[2011-12]Status: Disposed7 Jun 2017AY 2011-12Dismissed

The Tribunal upheld the CIT(A)'s order, agreeing that the deduction under Section 80IB(10) had been decided in favor of the assessee in earlier years on identical facts. The CIT(A)'s decision to allow the appeal was found to be in line with judicial hierarchy.

AXIS CAPITAL LTD,MUMBAI vs DCIT CIR 3(1), MUMBAI

ITA 2958/MUM/2015[2010-11]Status: Disposed7 Jun 2017AY 2010-11Allowed

The Tribunal held that penalty under Section 271(1)(c) cannot be levied with reference to additions made under normal provisions when the tax payable under normal provisions is less than the tax payable under Section 115JB. This is in line with the CBDT circular and the Delhi High Court judgment.

LLOYDS REGISTER QUALITY ASSURANCE LTD.,MUMBAI vs DDIT-INT, RAX.-.4(1), MUMBAI

ITA 389/MUM/2013[2008-09]Status: Disposed7 Jun 2017AY 2008-09Partly Allowed

The Tribunal held that royalty/license fees were not hit by the definition of HO expenditure under Section 44C. For IT recharge, it was held to be technical services not covered by Section 44C. Regarding management fees, a portion was disallowed under Section 44C, while the rest was allowed. The Tribunal also ruled in favor of the assessee on the exchange rate issue.

ITO 32(3)(4), MUMBAI vs SHAITANSINGH M. RATHOD, MUMBAI

ITA 28/MUM/2015[2010-11]Status: Disposed7 Jun 2017AY 2010-11Dismissed

The Tribunal confirmed the relief granted by the CIT(A), stating that while the purchases might be bogus, the sales turnover was not disputed and payments were made through banking channels. Therefore, an addition representing the profit element was justified.

LLOYD'S REGISTER QUALITY ASSURANCE LTD (INDIA BRANCH OFFICE),MUMBAI vs ADIT 4(1), MUMBAI

ITA 390/MUM/2013[2009-10]Status: Disposed7 Jun 2017AY 2009-10Partly Allowed

The Tribunal held that royalty/license fees were not hit by the definition of HO expenditure under Section 44C. For IT recharge, it was held to be technical services not covered by Section 44C. Regarding management fees, a portion was disallowed under Section 44C, while the rest was allowed. The Tribunal also ruled in favor of the assessee on the exchange rate issue.

ARCH IMPEX P.LTD,MUMBAI vs ACIT CEN CIR 32, MUMBAI

ITA 2763/MUM/2015[2011-12]Status: Disposed7 Jun 2017AY 2011-12Partly Allowed

The Tribunal held that once an expenditure is accepted as revenue in nature, it is up to the assessee to claim it in one year or spread it over. The disallowance of 1/5th of the expenditure was unjustified.

KING METAL WORKS,MUMBAI vs ACIT 20(1), MUMBAI

ITA 3904/MUM/2016[2009-10]Status: Disposed7 Jun 2017AY 2009-10Partly Allowed

The Tribunal held that while the purchases were indeed from bogus parties, the addition should be restricted to a profit rate of 12% on the alleged bogus purchases, considering the assessee had already declared a profit of 14%.

KING METAL WORKS,MUMBAI vs ACIT 20(1), MUMBAI

ITA 3905/MUM/2016[2010-11]Status: Disposed7 Jun 2017AY 2010-11Partly Allowed

The Tribunal held that while the purchases were indeed from bogus parties, the addition should be restricted to a profit rate of 12% on the alleged bogus purchases, considering the assessee had already declared a profit of 14%.

KING METAL WORKS,MUMBAI vs ACIT 20(1), MUMBAI

ITA 3906/MUM/2016[2011-12]Status: Disposed7 Jun 2017AY 2011-12Partly Allowed

The Tribunal held that while the purchases were indeed from bogus parties, the addition should be restricted to a profit rate of 12% on the alleged bogus purchases, considering the assessee had already declared a profit of 14%.

ITO 32(1)(5), MUMBAI vs HIREN C PAREKH, MUMBAI

ITA 1/MUM/2015[2010-11]Status: Disposed7 Jun 2017AY 2010-11Partly Allowed

The Tribunal directed the AO to apply a Gross Profit (GP) of 8% on the bogus purchases instead of 12% sustained by the CIT(A). The revenue's appeal was dismissed.

ASST CIT 24(2), MUMBAI vs KING METAL WORKS, MUMBAI

ITA 3964/MUM/2016[2009-10]Status: Disposed7 Jun 2017AY 2009-10Partly Allowed

The Tribunal held that while the purchases were indeed from bogus parties, the addition should be restricted to a profit rate of 12% on the alleged bogus purchases, considering the assessee had already declared a profit of 14%.

BUNIYAD CHEMICALS LTD,MUMBAI vs DCIT 10(1), MUMBAI

ITA 2410/MUM/2015[2006-07]Status: Disposed7 Jun 2017AY 2006-07Partly Allowed

The Tribunal held that the commission income from accommodation entries should be assessed at 0.15% of the total turnover, following its previous decisions in similar group cases. The Assessing Officer's appeal was dismissed, and the assessee's appeal was partly allowed.

ASST CIT 24(2), MUMBAI vs KING METAL WORKS, MUMBAI

ITA 3965/MUM/2016[2010-11]Status: Disposed7 Jun 2017AY 2010-11Partly Allowed

The Tribunal held that while the purchases were indeed from bogus parties, the addition should be restricted to a profit rate of 12% on the alleged bogus purchases, considering the assessee had already declared a profit of 14%.

VASWANI TRUST,MUMBAI vs ITO 17(3)(5), MUMBAI

ITA 2404/MUM/2017[2012-13]Status: Disposed7 Jun 2017AY 2012-13Remanded

The Tribunal noted that the assessee raised a new contention regarding the applicability of Section 23(1)(c) for the first time. Since the tax authorities had not examined this claim, the matter was restored to the AO for fresh examination.

ITO 32(1)(1), MUMBAI vs ALKA N MADHANI, MUMBAI

ITA 2397/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12Dismissed

The Tribunal upheld the CIT(A)'s decision, agreeing that the entire purchases could not be disallowed as the assessee could not have sold materials without purchasing them. The Tribunal found no reason to disbelieve the entire purchases, especially when payments were made through banking channels.

KANTABEN CHANDULAL VOHERA,MUMBAI vs ITO 32(1)(2),

ITA 2383/MUM/2017[2009-10]Status: Disposed7 Jun 2017AY 2009-10Dismissed

The Tribunal upheld the CIT(A)'s decision, finding that the AO had not proven the purchases were not sold and the assessee had not provided sufficient material to prove genuineness. Therefore, restricting the disallowance was justified.

ASST CIT 24(2), MUMBAI vs KING METAL WORKS, MUMBAI

ITA 3966/MUM/2016[2011-12]Status: Disposed7 Jun 2017AY 2011-12Partly Allowed

The Tribunal held that while the purchases were indeed from bogus parties, the addition should be restricted to a profit rate of 12% on the alleged bogus purchases, considering the assessee had already declared a profit of 14%.

DCIT CC 6(2), MUMBAI vs SHABINAA KHAN, MUMBAI

ITA 405/MUM/2017[2006-07]Status: Disposed7 Jun 2017AY 2006-07Dismissed

The Tribunal considered the CBDT circular and the fact that the tax effect was below the threshold. The Departmental Representative did not dispute these facts.

KIRAN WAMANRAO BHADANGE,MUMBAI vs ITO WD 26(2)(4), MUMBAI

ITA 7400/MUM/2016[2011-12]Status: Disposed7 Jun 2017AY 2011-12Partly Allowed

The Tribunal found that the assessee could not substantiate the source of deposits. While the CIT(A) allowed some credit for withdrawals, the Tribunal reduced the confirmed addition further, sustaining an addition of Rs. 3 lakhs.

KRISHNA JEWELLERS,MUMBAI vs ITO 32(2)(2), MUMBAI

ITA 7398/MUM/2016[2012-13]Status: Disposed7 Jun 2017AY 2012-13Remanded

The Tribunal found that the lower authorities had not examined the assessee's detailed explanation and evidence regarding gold exchange. Therefore, the matter was set aside to the AO for fresh examination.

DHOLAN KUKREJA (HUF),ULHASNAGAR vs ITO WD 2(1), KALYAN

ITA 1276/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12Partly Allowed

The Tribunal held that a 100% disallowance of bogus purchases is not justified when sales are not doubted. However, purchases made through the 'grey market' warrant a disallowance to meet the ends of justice.

RELIANCE ENTERPRISES,AMBERNATH vs JT CIT RG 2, KALYAN

ITA 950/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12

ITO 4(3)(1), MUMBAI vs PAYAL GOLD P.LTD, MUMBAI

ITA 1522/MUM/2017[2012-13]Status: Disposed7 Jun 2017AY 2012-13Partly Allowed

The Tribunal held that if the receipts were already taxed as sales in a subsequent year, taxing them again as unexplained cash credit in the current year would amount to double taxation. However, for verification purposes, the matter was remanded back to the AO.

NARENDRA CHOUDHARY,MUMBAI vs ITO 19(2)(4), MUMBAI

ITA 1639/MUM/2017[2010-11]Status: Disposed7 Jun 2017AY 2010-11Partly Allowed

The Tribunal acknowledged that the purchases were bogus but noted the assessee had already declared a profit rate of 5.05%. Therefore, the profit rate on bogus purchases was estimated at 7.45% (12.5% - 5.05%).

NAVIN HIRANANDANI KARMIANI,MUMBAI vs ITO 24(3)(1), MUMBAI

ITA 1649/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12Partly Allowed

The Tribunal found that while the purchases might not be entirely genuine, the profit element should be considered. It directed the AO to re-compute the income by applying a profit rate of 9% on the disputed purchases.

NAVIN HIRANANDANI KARMIANI,MUMBAI vs ITO 24(3)(1), MUMBAI

ITA 1658/MUM/2017[2010-11]Status: Disposed7 Jun 2017AY 2010-11Partly Allowed

The Tribunal found that while the purchases might not be entirely genuine, the profit element should be considered. It directed the AO to re-compute the income by applying a profit rate of 9% on the disputed purchases.

CHANDRAKANT T. GORADIA,MUMBAI vs ITO 25(2)(2), MUMBAI

ITA 1704/MUM/2017[2009-10]Status: Disposed7 Jun 2017AY 2009-10Partly Allowed

The Tribunal found that while the purchases were from bogus parties, the assessee had already declared a profit of 2% on sales made from these purchases. Therefore, a profit rate of 10% on bogus purchases would meet the ends of justice.

JAI SAI TRADERS,THANE vs ITO WD 2(2), KALYAN

ITA 1123/MUM/2017[2009-10]Status: Disposed7 Jun 2017AY 2009-10Partly Allowed

The Tribunal held that a 100% disallowance of bogus purchases is not permissible when sales are not doubted. It restricted the disallowance to 12.5% of the bogus purchases, considering purchases from the grey market.

RAKESH DHIRAJLAL GANDHI,MUMBAI vs ITO 22(2)-2, NAVI MUMBAI

ITA 1092/MUM/2017[2011-12]Status: Disposed7 Jun 2017AY 2011-12

VISHAL RAVINDRA MUKANE,MUMBAI vs ITO WD 5, PALGHAR

ITA 6354/MUM/2016[2011-12]Status: Disposed6 Jun 2017AY 2011-12Partly Allowed

The Tribunal held that when sales are not doubted, a 100% disallowance for bogus purchases is not permissible. A disallowance of 12.5% of the bogus purchase was considered to meet the ends of justice, and the assessee's counsel agreed to this.

ACIT CC 6(4), MUMBAI vs SHANTILAL C. SHETH, MUMBAI

ITA 2966/MUM/2015[2011-12]Status: Disposed6 Jun 2017AY 2011-12Dismissed

The Tribunal held that the AO failed to establish a link between the loose papers and the assessee, and lacked corroborative evidence for the alleged cash transactions. The First Appellate Authority's deletion of the addition was upheld.

SIGMA PRINTERS P.LTD,MUMBAI vs ITO 8(2)(2), MUMBAI

ITA 1143/MUM/2017[2009-10]Status: Disposed6 Jun 2017AY 2009-10Partly Allowed

The Tribunal held that a 100% disallowance for bogus purchases cannot be made when sales are not doubted. A disallowance of 12.5% of the bogus purchase was deemed appropriate to meet the ends of justice.