ITAT Mumbai Judgments — January 2024

The Tribunal found that while the assessee failed to prove the genuineness of purchases from the suppliers of bills, the revenue did not doubt the usage of materials for construction work. Therefore, a reasonable disallowance was deemed appropriate to account for potential revenue leakage.

The Tribunal held that the assessee did not have a fixed place PE in India as it did not conduct business operations or have premises in India. The core reinsurance activity of assuming risk was done outside India. The Tribunal also noted that the issue of dependent agent PE was tax-neutral for the assessment year in question.

The Tribunal found that while the assessee failed to prove the genuineness of purchases from the stated suppliers, the usage of materials for construction was not doubted. The Tribunal reasoned that the assessee might have purchased materials elsewhere at a lower cost after arranging for bogus bills.

The Tribunal observed that the AO did not allow cross-examination of the key witness. The witness's statement was later retracted, and the diary entries were not clearly linked to the assessee. The Tribunal found the material insufficient to sustain the additions made.

The Tribunal held that the SPVs are distinct legal entities and are the 'enterprises' executing the infrastructure facility. The assessee, by providing advisory services, was engaged in a works contract and therefore not eligible for deduction under Section 80IA.

The Tribunal held that the late filing of Form No. 67 was a procedural defect, not a substantive one. The Tribunal relied on previous decisions, including 'Sonakshi Sinha' and 'Yogesh Dnyandeo Kinage', which treated such defects as rectifiable.

The Tribunal noted that the assessee failed to provide necessary submissions and documents to substantiate its claim before the lower authorities, leading to ex-parte decisions. However, considering the peculiar facts, the Tribunal remanded the case to the Commissioner for a fresh decision.

The Tribunal found that the Assessing Officer lacked sufficient material to make the addition under Section 68. While the reassessment proceedings were validly initiated based on information from the DGIT, the evidence presented did not conclusively prove that the appellant received an unsecured loan from Sankhala Exports Pvt. Ltd. or that the amount constituted an unexplained cash credit.

The Tribunal held that the service of notice under section 143(2) is a mandatory condition precedent for the validity of assessment proceedings. The Tribunal found that the Revenue Department failed to prove the proper service of the notice.

The Tribunal held that for completed assessments, additions under Section 153A are permissible only if incriminating material is found during the search. The deficiencies in KYC and account opening forms, while violations, were not considered 'incriminating material' as they did not prima facie prove that the assessee's transactions were different from what was recorded, nor did they reveal undisclosed income. Therefore, no additions could be made under Section 153A.

The Tribunal held that the Ld. CIT(A) should have decided the appeal on merit, even without the assessee's representation. Since the appeal was not decided on merit and the assessee's submissions were not considered, the impugned order was set aside.

The Tribunal noted that construction expenses related to pending bills or works for Tower D1, even if incurred after sale, are allowable as they pertain to common areas or unfinished works, which are builder's responsibility. Regarding establishment and interest expenses, the Tribunal found that if the assessee continued its real estate business activities, these expenses are deductible without direct linkage to a specific project.

The Tribunal held that reassessment proceedings under section 147 were validly initiated because the information received was tangible evidence from a search, and the assessee had failed to disclose material facts. However, the addition made under section 69 was deleted as the Assessing Officer failed to establish that the investments were not recorded in the books of accounts.

The Tribunal held that the SPVs, not the assessee, were the 'enterprises' eligible for deduction under Section 80IA as they directly entered into agreements with NHAI and executed the infrastructure projects. The assessee acted as a works contractor for these SPVs.

The Tribunal held that the SPVs, which entered into agreements with NHAI and executed the infrastructure projects, are the 'enterprises' eligible for deduction under Section 80IA. The assessee, by providing advisory services and raising invoices to the SPVs, acted as a contractor and not as the owner of the enterprise. The profit/loss of the SPVs are not reflected in the assessee's profit and loss account, confirming their separate legal entity.

The Tribunal observed that the facts of the present case were similar to previous cases (Krupa Land Ltd. and Lavanya Pvt. Ltd.) where similar additions were deleted. They noted that the Revenue had not provided sufficient material to substantiate the allegations of cash payments. Relying on the decisions of the Co-ordinate Bench of the Tribunal and the Jurisdictional High Court, the Tribunal found no reason to interfere with the CIT(A)'s findings.

The Tribunal noted that the assessee's main contention was that the alleged fraudulent claim was lodged by Mr. Rajesh Tiwari, who was not a competent Chartered Accountant and had no degree. The assessee claimed they never availed of such a fraudulent claim. The Tribunal considered that the AO had made additions under section 68 on the ground of fraudulent refund claims and the assessee's AR had expressed inability to produce documentary evidence. Therefore, a reasonable opportunity was to be provided to the assessee.

The Tribunal held that for completed/unabated assessments, additions under Section 153A cannot be made in the absence of incriminating material found during search. The Tribunal noted that the deficiencies in KYC documents and byelaws, while warranting action under other statutes, did not constitute incriminating material for the purpose of additions under the Income Tax Act in unabated assessments.

The Tribunal held that the AO erred by not referring the matter to the valuation officer as mandated by Section 50(C)(2) when the assessee objected to the stamp duty value. The CIT(A) also erred by dismissing the appeal without considering the merits.

The Tribunal held that the omission of Section 92BA(i) by the Finance Act, 2017, without a saving clause, rendered any transfer pricing adjustment invalid for the assessment year 2016-17, even if the transaction occurred in that year. The disallowances under Section 14A were partly deleted based on the assessee's calculation and Supreme Court rulings. The disallowance for depreciation was also allowed in favor of the assessee. Certain other grounds were academic or not pressed.

The Tribunal held that the Pr.CIT erred in assuming jurisdiction under section 263. The Assessing Officer had applied his mind and accepted a possible view based on the information provided. The Pr.CIT's action was deemed unacceptable as the Assessing Officer's order did not satisfy the twin conditions of being erroneous and prejudicial to the interest of revenue. Consequently, the Pr.CIT's order was set aside.

The Tribunal held that for the Pr. CIT to invoke section 263, the AO's order must be demonstrably erroneous and prejudicial to the revenue. The Pr. CIT must conduct necessary inquiries before assuming jurisdiction. In this case, the AO had applied his mind and considered the information provided. The grounds raised by the Pr. CIT were found to be based on an incorrect appreciation of facts and law, or a mere difference of opinion. The tribunal found that the AO had applied one of the possible views based on the information and that the Pr. CIT's action was not acceptable.

The Tribunal held that the assessee had complied with the provisions of section 270AA(1) by paying the tax and seeking immunity. However, the application in the prescribed form number 68 was delayed due to technical glitches on the IT portal during the Covid-19 pandemic, and the assessee had provided evidence of this. The Tribunal noted that no opportunity of hearing was provided to the assessee before rejecting the immunity application.

The Tribunal held that the material found during the search, such as KYC deficiencies and procedural irregularities, did not constitute 'incriminating material' for making additions in respect of completed assessments under Section 153A of the Act. The deficiencies might warrant action under other statutes but do not inherently lead to additions under the Income Tax Act.

The Tribunal noted that the sale consideration was received by the assessee's son, who had declared it in his return of income. The AO should have reopened the son's assessment for the difference between the sale price and the stamp valuation. The addition in the hands of the assessee was directed to be deleted.

The Tribunal held that disallowances under Section 14A were not warranted to the extent computed by the AO, especially concerning interest expenditure attributable to tonnage tax activities. The foreign exchange gain on cancellation of vessel construction contracts was treated as a capital receipt and not taxable. The transfer pricing adjustment on performance guarantee was partly allowed, considering it was in existence for only one month.

The Tribunal held that the disallowance of interest expenditure pertaining to tonnage tax business should be excluded as it is directly attributable to tonnage tax activities and already excluded from total income. The Tribunal also noted that the assessee had sufficient own funds for investments, thus no disallowance of interest was warranted. Furthermore, the Tribunal found that the exchange difference on cancellation of vessel construction contracts was a capital receipt and not exigible to tax. The issue of transfer pricing adjustment on performance guarantee was partly allowed, with adjustments to be made only for the period the guarantee was in existence.

The Tribunal held that the SPVs, not the assessee, were the enterprises that executed the infrastructure facility and entered into agreements with NHAI. The SPVs were considered separate legal entities, and the assessee's role was that of executing a works contract for the SPVs.

The Tribunal held that the material found during the search was not incriminating in nature as it did not prove that the real transaction was different from what was recorded or that the assessee had undisclosed income. The AO could not make additions under section 153A for concluded assessments in the absence of incriminating material.

The Tribunal held that the assessee is entitled to exemptions under Section 10. The revenue's grounds of appeal were dismissed, and the assessee's appeal was partly allowed. The Tribunal followed its previous decisions and judgments of higher courts regarding the computation of income for insurance businesses and the applicability of exemptions.

The Tribunal noted that the CIT(A) passed an ex-parte order due to the assessee's non-appearance. In the interest of justice, the assessee was granted another opportunity to present their case on merits before the CIT(A). The matter was restored to the CIT(A) for de novo adjudication.

The Tribunal restored the issue of agricultural income back to the AO for re-ascertainment of yield with expert opinion, allowing the ground for statistical purposes. The issue of cash deposits was also restored to the AO for verification of agricultural income from earlier years. The claim for telescoping was rejected.