ITAT Mumbai Judgments — January 2024

The Tribunal held that the addition was made on a wrong premise as the assessee had not claimed exemption under Section 10(38) but offered intra-day trading profits. The entire proceedings were found to be frivolous and without application of mind by the lower authorities.

The Tribunal held that the transactions of sale of shares were genuine and undertaken in the normal course by the assessee, who had knowledge of the stock market and had been investing for many years. The claim for exemption under Section 10(38) was allowed.

The Tribunal held that the assessee had sufficiently proved the nature and source of the unsecured loan from the Director, Shri Hitesh Asrani, by providing his income computation, loan confirmation, and bank statements. The Tribunal also noted that the requirement to prove the 'source of source' for loans was not applicable under Section 68.

The Tribunal acknowledged that the assessee did not appear for hearings, and the CIT(A) dismissed the appeal ex-parte. However, considering the principles of natural justice and the reasons for non-appearance, the Tribunal decided to provide one more opportunity for the assessee to present their case.

The Tribunal followed the decision of the Karnataka High Court in Cisco Systems Services BV, which held that a draft assessment order accompanied by a notice of demand under section 156, issued in violation of section 144C procedures, is bad in law. Accordingly, the draft assessment orders and notices of demand for all assessment years were quashed.

The Tribunal followed the decision of the Karnataka High Court in Cisco Systems Services BV, which held that a draft assessment order accompanied by a notice of demand under section 156, issued in violation of section 144C procedures, is bad in law. Accordingly, the draft assessment orders and notices of demand for all assessment years were quashed.

The Tribunal followed the decision of the Karnataka High Court in Cisco Systems Services BV, which held that a draft assessment order accompanied by a notice of demand under section 156, issued in violation of section 144C procedures, is bad in law. Accordingly, the draft assessment orders and notices of demand for all assessment years were quashed.

The Tribunal followed the decision of the Karnataka High Court in Cisco Systems Services BV, which held that a draft assessment order accompanied by a notice of demand under section 156, issued in violation of section 144C procedures, is bad in law. Accordingly, the draft assessment orders and notices of demand for all assessment years were quashed.

The Tribunal held that the show-cause notice issued for levying the penalty was bad in law because it did not clearly specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The notice presented both options without striking down the inapplicable one, thus leaving the assessee in doubt and handicapped in defending itself.

The Tribunal held that the AO's reasoning that the assessee had no intention to repay was not a valid ground for addition under Section 41(1). The fact that the creditor initiated legal proceedings indicated a dispute, not a remission or cessation of liability, which is a prerequisite for invoking Section 41(1).

The Tribunal decided that disallowance under Section 14A was not warranted when the assessee had sufficient interest-free funds to cover investments in tax-free bonds. Certain transfer pricing adjustments were decided in favour of the assessee based on previous rulings.

The Tribunal, relying on its own previous decisions and the Apex Court's ruling in South Indian Bank Ltd. vs. CIT, deleted the disallowance made under Section 14A. It held that proportionate disallowance of interest is not warranted when interest-free own funds exceed the investment in tax-free bonds.

The Tribunal held that disallowance of expenditure for earning exempt income was not warranted, following its own previous decisions in favour of the assessee. Similarly, the deduction for interest paid by Indian branches to the head office was allowed, also based on prior ITAT rulings.

The Tribunal, relying on its own previous decisions and the Supreme Court's ruling in South Indian Bank Ltd. vs. CIT, held that proportionate disallowance of interest is not warranted under Section 14A when the assessee has sufficient interest-free own funds to cover investments in tax-free bonds.

The Tribunal allowed the assessee's appeal regarding the disallowance of salary paid to expatriate employees, finding that their global income was offered to tax in India and the revenue failed to disprove the facts. The judgment also refers to earlier ITAT decisions in favor of the assessee on other grounds.

The Tribunal decided that the disallowance of expenditure for earning exempt income was not warranted, following its own previous decisions. It also held that interest paid by the Indian branch to its head office was deductible, again relying on prior rulings.

The Tribunal noted that the quantum assessment itself was deleted by a prior order of the Tribunal, wherein it was held that the income was business income and not from house property. Following the legal maxim "Sublato Fundamento credit opus" (where the foundation is removed, the superstructure falls), the Tribunal held that the penalty must also be deleted.

The Tribunal allowed the assessee's appeal regarding the disallowance of expenditure for earning exempt income, following previous ITAT decisions. It also allowed the assessee's appeal concerning the disallowance of expatriate salary, finding that the employees had offered their global income to tax in India.

The Tribunal upheld the deletion of disallowance made under Section 14A for earning exempt income, citing previous decisions in the assessee's own case. It also dismissed the revenue's ground regarding the applicability of Section 115A to interest income from foreign currency loans, following coordinate bench decisions.

The Tribunal decided several grounds of appeal in favor of the assessee, particularly concerning transfer pricing adjustments for correspondent banking services and inter-bank indemnity services. Some grounds were dismissed as not pressed or conceded by the revenue.

The Tribunal held that the assessee had entered into genuine transactions of sale and purchase of shares and therefore satisfied the conditions of Section 10(38) of the Income Tax Act. The Tribunal found that the SEBI order relied upon by the AO and CIT(A) was not applicable to the transactions under consideration as it was passed in 2015, while the shares were purchased in 2011 and 2013 and sold in 2014. Furthermore, the Tribunal noted that SEBI's subsequent decisions had absolved many companies, including those with suspicious scrips, as they were not found to be rigging prices. The Tribunal also addressed objections regarding cash purchases and dematerialization, stating there is no law prohibiting cash purchases and that dematerializing shares at a later stage does not warrant adverse inference. The Tribunal found that the documentary evidence filed by the assessee was not disputed, there was no rebuttal to the assessee's explanation, and no other adverse material was brought on record. The Tribunal concluded that no proper inquiry was conducted by the AO, and statements referred to were general in nature. Consequently, the Tribunal set aside the orders of the authorities below and deleted the addition of Rs. 41,85,762/-. The Tribunal also deleted the consequential addition relating to commission paid on alleged bogus share transactions. The appeals for both AY 2013-14 and AY 2014-15 were allowed.

The Tribunal held that the addition of the entire purchase amount was not sustainable. It directed that the addition should be restricted to the profit element embedded in the alleged bogus purchases, adopting a rate of 6% after considering the assessee's declared gross profit margins.

The Tribunal held that the addition under Section 68 was not sustainable as the assessee, a Chartered Accountant and regular investor, had provided documentary evidence for the transaction's genuineness. The Tribunal relied on a Bombay High Court decision with similar facts.

The Tribunal held that the PCIT had correctly assumed jurisdiction and found the Assessing Officer's order erroneous and prejudicial to the revenue in certain aspects, particularly regarding the allowance of deductions under Section 36(1)(viia) and Section 36(1)(viii) due to lack of proper inquiry and adherence to Supreme Court decisions. However, the appeal was partly allowed, indicating that not all issues raised by the PCIT were upheld.

The Tribunal held that filing Form No. 67 is a procedural and directory requirement, not mandatory, and its delayed filing should not lead to the disallowance of FTC. The provisions of the DTAA and section 90 of the Act override procedural rules.

The Tribunal noted that the Assessee's failure to respond to notices before the CIT was due to the untimely death of his wife, which was considered a reasonable cause. Therefore, the Tribunal decided to remand the case back to the Ld. Commissioner for proper adjudication.

The Tribunal deleted the disallowance of Rs. 14,96,706/- for alleged bogus expenses, following its own prior decision. For disallowance of purchases, the matter was restored to the AO for fresh examination. The Tribunal also restored issues related to R&D expenses and ESOP expenses to the AO for verification, while upholding relief on pre-commencement expenses.

The Tribunal held that the addition was unsustainable as it was based solely on a third-party statement and computer data without corroborative evidence. The assessee's denial and claim of being a non-resident with no taxable income were not adequately disproven.

The Tribunal held that the assessee had entered into genuine transactions of sale and purchase of shares and therefore satisfied the conditions of Section 10(38) of the Income Tax Act. The Tribunal found that the SEBI order relied upon by the AO and CIT(A) was not applicable to the transactions under consideration as it was passed in 2015, while the shares were purchased in 2011 and 2013 and sold in 2014. Furthermore, the Tribunal noted that SEBI's subsequent decisions had absolved many companies, including those with suspicious scrips, as they were not found to be rigging prices. The Tribunal also addressed objections regarding cash purchases and dematerialization, stating there is no law prohibiting cash purchases and that dematerializing shares at a later stage does not warrant adverse inference. The Tribunal found that the documentary evidence filed by the assessee was not disputed, there was no rebuttal to the assessee's explanation, and no other adverse material was brought on record. The Tribunal concluded that no proper inquiry was conducted by the AO, and statements referred to were general in nature. Consequently, the Tribunal set aside the orders of the authorities below and deleted the addition of Rs. 41,85,762/-. The Tribunal also deleted the consequential addition relating to commission paid on alleged bogus share transactions. The appeals for both AY 2013-14 and AY 2014-15 were allowed.

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of suo-moto disallowance offered by the assessee for strategic investments. It also held that the revised claim for deduction under Section 36(1)(viia) was allowable as it was a re-computation based on new data, not a fresh claim. ESOP expenses were also allowed as a deduction.

The Tribunal held that the interest expenses incurred on the loan for purchasing shares should be treated as a cost of investment, not as business expenditure. Consequently, the short-term capital gain should be recomputed. The Tribunal also directed to consider the claim of set-off of short-term capital loss.

The Tribunal held that the DRI report, which formed the basis for the AO's addition, was not finalized and was still at the show-cause notice stage. Furthermore, subsequent judicial pronouncements, including by the Bombay High Court and CESTAT, had set aside similar findings, rendering the AO's addition unsustainable.

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of suo-moto disallowance offered by the assessee for strategic investments. It also held that the revised claim for deduction under Section 36(1)(viia) was allowable as it was a re-computation based on new data, not a fresh claim. ESOP expenses were also allowed as a deduction.

The Tribunal held that the AO failed to establish that the expenditure on coal purchases was not genuine or that the payments to PATH and Geet Exim were not for business purposes. The assessee had provided supporting documents for the coal purchases, and the cost-plus nature of the electricity business meant that fuel costs were passed through to tariffs.

The Tribunal deleted the disallowance of drug analysis expenses by following its own prior decision for the same assessee. The ground related to penalty charges was dismissed as not pressed.

The Tribunal held that the penalty levied was bad in law due to an invalid notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. Consequently, the penalty was deleted.

The Tribunal held that the Assessing Officer could not make an addition on a new issue (unexplained expenditure under Section 69C) without issuing a fresh notice under Section 148, especially when the original reason for reopening (Section 40A(3) violation) was not pursued.

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of suo-moto disallowance offered by the assessee for strategic investments. It also held that the revised claim for deduction under Section 36(1)(viia) was allowable as it was a re-computation based on new data, not a fresh claim. ESOP expenses were also allowed as a deduction.

The Tribunal held that the penalty notice issued by the Assessing Officer was flawed because it failed to strike off the irrelevant limb, making it unclear whether the penalty was for concealment of income or furnishing inaccurate particulars. This defect is not curable.

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of suo-moto disallowance offered by the assessee for strategic investments. It also held that the revised claim for deduction under Section 36(1)(viia) was allowable as it was a re-computation based on new data, not a fresh claim. ESOP expenses were also allowed as a deduction.

The Tribunal found merit in the assessee's contention that the AO had misread the financial statements and made an addition of Rs. 66,00,000/- instead of Rs. 55,00,000/-. The Tribunal directed the AO to restrict the addition under Section 68 to the unpaid balance of Rs. 21,00,000/-.

The Tribunal held that the penalty levied was bad in law due to an invalid notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. Consequently, the penalty was deleted.

The Tribunal held that the addition should be restricted to the extent of the gross profit on the alleged bogus purchases, following the ratio of the Bombay High Court in the case of Principal CIT vs Mohammed Haji Adam & Co. The AO was directed to recompute the liability by applying a 5% GP ratio on the alleged bogus purchases.

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of suo-moto disallowance offered by the assessee for strategic investments. It also held that the revised claim for deduction under Section 36(1)(viia) was allowable as it was a re-computation based on new data, not a fresh claim. ESOP expenses were also allowed as a deduction.

The Tribunal held that the disallowance of employees' contribution to PF paid after the due date specified under the relevant Act is an invalid claim. The Supreme Court's decision in Checkmate Services Pvt. Ltd. was relied upon, making the issue no longer debatable.

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of suo-moto disallowance offered by the assessee for strategic investments. It also held that the revised claim for deduction under Section 36(1)(viia) was allowable as it was a re-computation based on new data, not a fresh claim. ESOP expenses were also allowed as a deduction.

The Tribunal held that the DRI report, which formed the basis for the AO's addition, was not finalized and was still at the show-cause notice stage. Furthermore, subsequent judicial pronouncements, including by the Bombay High Court and CESTAT, had set aside similar findings, rendering the AO's addition unsustainable.

The Tribunal held that the CIT(A) was correct in deleting the addition. The assessee had consistently declared cash sales as revenue, offered them to tax, and provided supporting documents like sales, VAT, and stock registers. The AO failed to prove defects in the purchase, sales, or stock registers to disbelieve the sales.

The Tribunal held that the CIT(A) erred in upholding the AO's addition. Following jurisdictional High Court judgments, the Tribunal found that the share transactions were supported by documentary evidence, passed through banking channels, and occurred on the stock exchange.