ITAT Mumbai Judgments — January 2020

The Tribunal held that while the assessee failed to conclusively prove the genuineness of purchases, the AO also did not carry out sufficient investigation. Therefore, only the profit element embedded in the alleged bogus purchases should be taxed.

The Tribunal upheld the disallowance of expenses under Section 14A read with Rule 8D. It followed the Supreme Court's decision in Maxopp Investment Ltd. v. CIT, which clarified the application of these provisions.

The Tribunal affirmed the CIT(A)'s decision to delete the disallowance under Rule 8D(2)(ii) based on surplus interest-free funds. It also upheld the restricted disallowance under Rule 8D(2)(iii) and the deletion of disallowance for book profit under Section 115JB.

The Tribunal held that leasehold refurbishment expenses were revenue in nature, similar to a prior year's decision. Regarding Section 14A disallowance, the Assessing Officer was directed to recompute it by considering only investments yielding exempt income.

The Tribunal held that while an addition could be justified due to the assessee's failure to substantiate purchases, a penalty under Section 271(1)(c) could not be imposed solely on an estimated addition. The revenue failed to disprove the genuineness of the purchases with clinching evidence.

The Tribunal held that the share premium was not taxable as income from other sources under Section 56(1) of the Income Tax Act. It also found that the assessee did not violate Section 78 of the Companies Act, 1956, as the utilization of share premium was justified by business relationships and future plans.

The Tribunal held that the additions made by the AO under Section 68 of the Income Tax Act, 1961, towards share capital and premium were not sustainable. The Tribunal noted that while the assessees had filed all documentary evidence, including confirmations, the AO's independent inquiries through Section 133(6) notices did not yield a response from the subscribers, with some notices being returned unserved. However, the Tribunal found that the AO erred in jumping to conclusions based solely on the financial statements of the subscribers without further inquiry. The Tribunal, respectfully following a co-ordinate bench decision in an assessee group company's case, concluded that the identity, genuineness of transactions, and creditworthiness of the subscribers were proven as required under Section 68. Consequently, the additions towards share capital and the consequential additions towards probable commission payment were directed to be deleted. Regarding the disallowance under Section 14A read with Rule 8D, the Tribunal relied on its own decision in the case of M/s Asha Leasing and Finance Pvt. Ltd., where it was held that in assessments framed under Section 143(3) r.w.s. 153A, additions can only be made if supported by incriminating material found during the search. Since no such material was found concerning the disallowance under Section 14A, these additions were also directed to be deleted. The Tribunal expressly left undecided any issue not covered by the above findings.

The Tribunal found the GP rate applied by the lower authorities to be excessive. It directed the AO to apply a GP rate of 5% on the alleged bogus purchases, considering the assessee's business nature and declared margin.

The Tribunal held that the Commissioner of Income Tax (Appeals) erred in deleting the addition made by the Assessing Officer. The CIT(A) had allowed the deduction based on additional evidence, but the Tribunal found that the AO had sufficient grounds to disallow the claim.

The Tribunal held that since the assessment years were unabated, additions could only be made on the basis of incriminating materials found during the search. As no such material was found for the cash credits, the additions were not sustainable.

The Tribunal found no justifiable reasons to decline the assessee's claim for rent expenses. It noted that lease agreements were in place and employee/partner visits were apparent. Consequently, the disallowance was set aside.

The Tribunal held that for computing the disallowance under Section 14A read with Rule 8D(2)(iii), only those investments yielding exempt income should be considered for calculating the average value of investments. The AO and CIT(A) erred by including investments that did not yield exempt income.

The Tribunal upheld the CIT(A)'s order, agreeing that no disallowance under Rule 8D(2)(ii) was required as the assessee's own funds exceeded the investments yielding exempt income, following the jurisdictional High Court's decision.

The Tribunal noted that a similar issue was decided in favor of the assessee in the case of Ms. Kavita Singh, relying on documentary evidence. The Tribunal restored the matter to the AO to re-appreciate the evidence in light of the earlier decision.

The Tribunal dismissed the Revenue's appeal, respectfully following its own prior decision in the assessee's own case for the same assessment year. This prior decision had upheld the CIT(A)'s estimation of profit at 3% on bogus purchases.

The CIT(A) reduced the addition to 12.5% by following a precedent. The Tribunal upheld the CIT(A)'s order, finding it to be reasoned and speaking.

The Tribunal upheld the CIT(A)'s decision, agreeing that the assessee correctly applied the percentage completion method and recognized the loss. The AO's addition was deleted as the CIT(A)'s order was reasoned and followed recognized accounting practices.

The Tribunal found the GP rate applied by the lower authorities to be excessive. It directed the AO to apply a GP rate of 5% on the alleged bogus purchases, considering the assessee's business nature and declared margin.

The Tribunal allowed the assessee's request to withdraw the appeal. The department had no objection to the withdrawal. The appeal was dismissed as withdrawn.

The Tribunal held that leasehold refurbishment expenses were revenue in nature, similar to a prior year's decision. Regarding Section 14A disallowance, the Assessing Officer was directed to recompute it by considering only investments yielding exempt income.

The Tribunal upheld the order of the CIT(A) which had restricted the addition to 25% of the bogus purchases, finding that the CIT(A)'s sustained addition was on the higher side but not appealed by the assessee.

The Tribunal upheld the CIT(A)'s order, finding it reasonable to restrict the disallowance on bogus purchases to 12.5% by following High Court decisions. The appeal of the Revenue was dismissed.

The Tribunal held that the AO did not conduct further investigation to verify the suppliers, and the CIT(A)'s confirmation of the addition based on low GP rate was unsustainable. The Tribunal directed the AO to apply a profit rate of 6% to the alleged bogus purchases.

The Tribunal held that the additions made by the AO under Section 68 of the Income Tax Act, 1961, towards share capital and premium were not sustainable. The Tribunal noted that while the assessees had filed all documentary evidence, including confirmations, the AO's independent inquiries through Section 133(6) notices did not yield a response from the subscribers, with some notices being returned unserved. However, the Tribunal found that the AO erred in jumping to conclusions based solely on the financial statements of the subscribers without further inquiry. The Tribunal, respectfully following a co-ordinate bench decision in an assessee group company's case, concluded that the identity, genuineness of transactions, and creditworthiness of the subscribers were proven as required under Section 68. Consequently, the additions towards share capital and the consequential additions towards probable commission payment were directed to be deleted. Regarding the disallowance under Section 14A read with Rule 8D, the Tribunal relied on its own decision in the case of M/s Asha Leasing and Finance Pvt. Ltd., where it was held that in assessments framed under Section 143(3) r.w.s. 153A, additions can only be made if supported by incriminating material found during the search. Since no such material was found concerning the disallowance under Section 14A, these additions were also directed to be deleted. The Tribunal expressly left undecided any issue not covered by the above findings.

The Tribunal affirmed the CIT(A)'s decision to delete the disallowance under Rule 8D(2)(ii) based on surplus interest-free funds. It also upheld the restricted disallowance under Rule 8D(2)(iii) and the deletion of disallowance for book profit under Section 115JB.

The Tribunal held that the penalty notice issued by the AO was invalid as it did not specify the limb under which the penalty was being levied and suffered from non-application of mind. The Tribunal also noted that disallowance of Section 54 exemption does not automatically attract penalty.

The Tribunal held that the additions made by the AO under Section 68 of the Income Tax Act, 1961, towards share capital and premium were not sustainable. The Tribunal noted that while the assessees had filed all documentary evidence, including confirmations, the AO's independent inquiries through Section 133(6) notices did not yield a response from the subscribers, with some notices being returned unserved. However, the Tribunal found that the AO erred in jumping to conclusions based solely on the financial statements of the subscribers without further inquiry. The Tribunal, respectfully following a co-ordinate bench decision in an assessee group company's case, concluded that the identity, genuineness of transactions, and creditworthiness of the subscribers were proven as required under Section 68. Consequently, the additions towards share capital and the consequential additions towards probable commission payment were directed to be deleted. Regarding the disallowance under Section 14A read with Rule 8D, the Tribunal relied on its own decision in the case of M/s Asha Leasing and Finance Pvt. Ltd., where it was held that in assessments framed under Section 143(3) r.w.s. 153A, additions can only be made if supported by incriminating material found during the search. Since no such material was found concerning the disallowance under Section 14A, these additions were also directed to be deleted. The Tribunal expressly left undecided any issue not covered by the above findings.

The Tribunal noted that the assessee had furnished Form 26A and that the second proviso to Section 40(a)(ia) allows for relief if the payee has offered the income to tax. The issue was restored to the Assessing Officer for re-examination of the documents.

The ITAT set aside the CIT(A)'s order, noting it was a non-speaking order passed for default. The matter was remanded back to the CIT(A) to provide the assessee with a reasonable opportunity of being heard and to pass a speaking order on merits.

The Tribunal held that while the purchases might not be entirely bogus, the profit element embedded in them should be taxed. The AO's estimation of 12.5% profit on alleged bogus purchases was confirmed.

The Tribunal held that the Assessing Officer cannot reopen an assessment under Section 147 when original assessment proceedings are already pending. The reopening notice was therefore invalid.

The Tribunal found that the assessee's non-appearance before the CIT(A) was not deliberate. Therefore, the case was remanded back to the CIT(A) to provide the assessee with another opportunity to present their case with evidence.

The Tribunal held that the AO failed to record objective satisfaction before invoking Rule 8D for disallowance under Section 14A. It also held that the loss on valuation of securities held as stock-in-trade is allowable, following its own prior decisions.

The Tribunal held that the assessee had discharged the onus to prove the genuineness of the loan transactions by providing bank statements and other documentary evidence. Since the loans were repaid through banking channels and no adverse inference was drawn, the addition was unsustainable.

The Tribunal held that only the profit embedded in the bogus purchases should be brought to tax. The CIT(A) had rightly restricted the disallowance to 12.5% of the bogus purchases, which the Tribunal confirmed.

The Tribunal held that discounts offered to distributors are on a principal-to-principal basis and not commission under Section 194H. It also held that installation charges paid to service providers constitute a works contract, correctly covered under Section 194C, not Section 194J.

The Tribunal held that the assessee had discharged the onus to prove the genuineness of the loan transactions by providing bank statements and other documentary evidence. Since the loans were repaid through banking channels and no adverse inference was drawn, the addition was unsustainable.

The Tribunal upheld the CIT(A)'s decision to estimate profit at 12.5% of the bogus purchases, considering the assessee's failure to prove genuineness and the inability to serve notice on the entry provider.

The Tribunal upheld the decision of the CIT(A) in estimating 6% gross profit on alleged non-genuine purchases and allowing deductions for the gross profit already declared by the assessee. The Tribunal found that the CIT(A)'s findings were supported by evidence and recommendations.

The Tribunal held that the appeal should not be dismissed on technical grounds during a transition period, especially when the assessee's reasons for manual filing were bonafide and the appeal was filed within the due date. Substantial justice should prevail over technicalities.

The Tribunal set aside the order of the CIT(A) and restored the appeal to the Assessing Officer for re-examination. This re-examination is to be done in light of the jurisdictional High Court's decision in the case of PCIT vs M. Haji Adam & Co.

The Tribunal found the 12.5% addition to be excessive and unreasonable. It directed the AO to apply a rate of 6% on the alleged purchases to assess the embedded profit.

The Tribunal upheld the decision of the CIT(A) and dismissed the assessee's appeal. It was held that depreciation on intangibles could only be claimed to the extent of the cost recorded in the partnership firm or the actual cost incurred, and not on intangibles created without consideration at the time of succession.

The Tribunal held that the appeal filed by the Revenue was not maintainable due to the tax effect being below the prescribed monetary limit. The Tribunal dismissed the appeal but kept open the option for the Revenue to file a miscellaneous application if the issue fell under exceptions in the circular.

The Tribunal held that the share premium was not taxable as income from other sources under Section 56(1) of the Income Tax Act. It also found that the assessee did not violate Section 78 of the Companies Act, 1956, as the utilization of share premium was justified by business relationships and future plans.

The Tribunal upheld the CIT(A)'s decision to restrict the addition to 12.5% of the bogus purchases, considering it a reasonable estimation of profit. The Tribunal noted that both parties failed to conclusively prove their case with evidence.

The Tribunal held that Letters of Comfort do not constitute an international transaction under Section 92B of the Income Tax Act as they are not legally enforceable guarantees. Consequently, the transfer pricing adjustment made by the AO was deleted.

The Tribunal held that procedural rules are subservient to justice and should not deny a litigant their right to be heard. Technicalities like e-filing should not overshadow substantial justice, especially when the appeal was already filed in paper form.

The Tribunal held that penalty under Section 271(1)(c) cannot be imposed solely on the basis of an estimated addition, especially when the revenue has not conclusively disproven the genuineness of the purchases with concrete evidence. The CIT(A)'s deletion of the penalty was upheld.