ITAT Mumbai Judgments — October 2018

The Tribunal found that the CIT(A) had not properly rebutted the AO's findings of interlinked companies and a structured arrangement for routing funds. The Tribunal noted similarities in names, addresses, and directorships among the applicant companies.

The Tribunal confirmed the order of the CIT(A), upholding the disallowance of 12.5% of the bogus purchases. The Tribunal noted that while higher disallowances were upheld in other cases, it was not appropriate to increase the disallowance as the appeal was filed by the assessee, not the Revenue.

The Tribunal found that the CIT(A) deleted the addition without examining the details of share applicants, which was unsustainable. The Tribunal also noted that the issue of reopening was not adjudicated. Therefore, the matter was remitted back to the CIT(A) for a fresh speaking order.

The Tribunal held that the CIT's revisionary power under Section 263 was not valid for software support charges, shared service costs, and SAP license fees as these were part of the reassessment. However, the direction for further examination of legal and professional charges was quashed as the AO had already made a disallowance based on a possible view.

The Tribunal followed its own precedent and directed the AO to estimate profit on the bogus purchases at 6% of the purchase value. The disallowance of the entire purchase amount was modified.

The Tribunal followed its own precedent and directed the AO to estimate profit on the bogus purchases at 6% of the purchase value. The disallowance of the entire purchase amount was modified.

The Tribunal held that Section 56(2)(viib) is not applicable to companies in which the public are substantially interested, a fact accepted by the CIT. Therefore, the CIT's direction for further inquiry into share valuation under this section was considered futile and contradictory.

The Tribunal held that the provision for warranty and maintenance expenses, when made in accordance with AS-29 and based on past experience, represents an ascertained liability. Therefore, it should not be added back to the total income or book profit.

The Tribunal upheld the order of the CIT(A) who deleted the addition. The Tribunal found that the assessee had discharged its onus by proving the identity, capacity, and genuineness of the transaction, and the AO failed to find fault with the evidence presented.

The Tribunal agreed that the Assessing Officer (AO) failed to make proper inquiries regarding the assessee's eligibility for deduction under Section 80IB(10), especially concerning ownership and project approval. Therefore, the Pr. CIT's order invoking Section 263 was upheld.

The Tribunal deleted the addition made by the AO and confirmed by the CIT(A), following a previous order of the Tribunal in the assessee's group cases, which was also confirmed by the Hon'ble High Court. The penalty imposed under Section 271AAA was also deleted.

The Tribunal upheld the decision of the lower authorities, finding that the assessee failed to prove a direct nexus between the interest expenditure incurred and the interest income earned on fixed deposits.

The Tribunal dismissed the applications for condonation of delay as the explanation provided was vague and did not sufficiently account for the entire period of delay. Consequently, the appeals were dismissed as not admitted.

The Tribunal held that the assessee's explanation for the delay lacked sufficient particularity and failed to demonstrate due diligence. The Tribunal noted that the assessee did not disclose the name of his friend's son or specific dates, which precluded verification.

The Tribunal dismissed the applications for condonation of delay as the explanation provided was vague and did not sufficiently account for the entire period of delay. Consequently, the appeals were dismissed as not admitted.

The Tribunal upheld the CIT(A)'s decision, following its own precedents in the assessee's own case. It was held that payments for hoarding charges are in the nature of advertising contracts covered by Section 194C, not rent under Section 194I.

The Tribunal held that the reopening of the assessment was bad in law as it was based on an audit objection that the Assessing Officer (AO) had already considered and rejected. The AO's subsequent reopening on the same grounds, after concluding no income had escaped assessment, was found to be unsustainable.

The Tribunal upheld the order of the CIT(A) as it found the order to be reasonable and lacking any material to take a different view. The appeal filed by the assessee was dismissed.

The Tribunal held that the AO was incorrect in making the addition under Section 68 as the assessee had provided sufficient evidence for the identity, genuineness, and creditworthiness of the investor. Furthermore, amendments to Section 68 and Section 56(2)(viib) making share premium taxable were prospective and not applicable to the assessment year in question.

The Tribunal held that the loss incurred was wholly and exclusively in connection with the assessee's business, as the loan was borrowed for business purposes and the shares of subsidiary companies were pledged as security. However, the computation of the loss needed to be re-examined by the AO.

The Tribunal held that as per CBDT Circular No. 3/2018, appeals with a tax effect below Rs. 20 lakhs are not to be filed. Therefore, the appeal filed by the Revenue was dismissed on this ground.

The ITAT held that the CIT(A) should have decided the appeal on merits rather than dismissing it for non-prosecution. The case was remitted back to the CIT(A) for a fresh decision.

The Tribunal upheld the order of the CIT(A) and dismissed the assessee's appeal. The Tribunal found no reason to deviate from the CIT(A)'s findings after considering the available material.

The Tribunal upheld the validity of the reopening of assessment, finding that the AO had received tangible and cogent incriminating material. The Tribunal also confirmed the CIT(A)'s order sustaining the disallowance of 12.5% of the bogus purchases.

The Tribunal found the 12.5% profit rate to be too high for the steel trading business. It directed the AO to recompute the income by applying a profit rate of 5% on the bogus purchases.

The Tribunal held that when sales are not doubted, 100% disallowance for bogus purchases is not permissible. However, considering purchases were made from the grey market, a 12.5% disallowance was deemed appropriate to meet the ends of justice.

The Tribunal upheld the CIT(A)'s deletion of estimated income, following its own prior decisions and the principle that income should be recognized as per the method consistently followed by the assessee. The Tribunal also directed that interest income from customer advances be treated as business income.

The Tribunal noted that a co-ordinate bench had dealt with an identical issue and restored the matter to the AO for de novo assessment. Following this precedent, the Tribunal set aside the CIT(A)'s order and restored the issue to the AO.

The ITAT set aside the ex-parte order of the CIT(A) and restored the matter back to the CIT(A)'s file. The CIT(A) was directed to provide an opportunity of hearing to both parties and decide the issue afresh.

The Tribunal noted that the tax effect was below the Rs. 20 lakh limit as per CBDT Circular No. 3 of 2018. Therefore, the Revenue's appeal was not maintainable.

The Tribunal held that while the purchases were bogus, a 100% disallowance was not justified when sales were not doubted. A partial disallowance was deemed appropriate to meet the ends of justice.

The Tribunal followed the decision of the coordinate bench in the assessee's own case for AY 2011-12. The additions for alleged bogus purchases were restricted to 12.5% of the disputed amount.

The Tribunal held that as per CBDT Circular No. 3/2018, appeals with a tax effect below Rs. 20 lakhs are not maintainable. The appeals were dismissed on this ground.

The Tribunal found merit in the assessee's prayer for another opportunity. The CIT(A)'s ex-parte order was set aside and the issues were restored for fresh examination.

The Tribunal held that when sales are not doubted, 100% disallowance for bogus purchases is not permissible. However, considering purchases were made from the grey market, a 12.5% disallowance was deemed to meet the ends of justice.

The Tribunal found that both parties had not acted with due diligence. To ensure justice and provide an opportunity for a hearing on merits, the Tribunal set aside the ex-parte order of the CIT(A). The matter was restored to the CIT(A) for a fresh decision after hearing both parties.

The Tribunal held that 100% disallowance for bogus purchases is not sustainable when sales are not doubted. However, considering purchases were made from the grey market, a 12.5% disallowance was deemed appropriate.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The ITAT noted that the CIT(A) passed an ex-parte order without giving sufficient opportunity to the assessee. Therefore, the appeal was restored to the file of the CIT(A) for a decision on merits.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The Tribunal held that no tax was outstanding in the assessee's case for AY 2003-04, and therefore, the levy of interest under Section 220(2) was incorrect. The provisions of Section 143(4)(b) were also found to be not applicable.

The Tribunal held that penalty under Section 271(1)(c) is not leviable on ad hoc or estimated additions. Relying on a co-ordinate bench decision, the penalty was deleted.

The Tribunal condoned the delay in filing the appeal, citing reasons beyond the assessee's control and precedent in similar group cases. The Tribunal then restored the issue of interest expenditure disallowance and book profit calculation to the AO for verification and appropriate relief, and directed recomputation of interest under sections 234A, 234B, and 234C after considering TDS.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The Tribunal held that the holding period should be computed from the date of the allotment letter, considering relevant High Court decisions and CBDT circulars. Consequently, the gain was treated as long-term capital gain, and exemption under Section 54 was allowed.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal noted that the Commissioner (Appeals) passed an ex-parte order without proper representation from the assessee. Considering the principle of natural justice, the appeal was restored to the file of the Commissioner (Appeals) for fresh adjudication.