ITAT Mumbai Judgments — June 2024

The Tribunal noted that the assessee failed to provide confirmation letters or a reconciliation statement regarding the bad debts written off. While the assessee did not deserve leniency, the Tribunal decided to grant one more opportunity for the assessee to substantiate the liability and the payment of the amount. The assessee was also directed to file a reconciliation statement with documentary evidence.

The Tribunal condoned the delay in filing the appeals for both assessment years, considering the affidavit submitted by the assessee explaining the reasons for the delay. The matters were restored to the file of the CIT(A) for deciding them on merits.

The Tribunal noted that the assessee's reason for delay was not supported by documentary evidence, and the delay was substantial. However, considering the assessee was out of India, the Tribunal remanded the case to the Commissioner to give one more opportunity to the assessee to substantiate the delay.

The Tribunal observed that in previous assessment years and in similar cases decided by co-ordinate benches, interest earned from investments in co-operative banks has been allowed as a deduction under Section 80P(2)(d). Following these precedents, the Tribunal held that the assessee is entitled to claim the deduction for interest income earned from co-operative banks.

The Tribunal held that the primary adjustment made by the AO was invalid as the assessee had filed its return and audit report by the due date, fulfilling the conditions for claiming the deduction. The delay in filing the appeal before the CIT(A) was considered reasonable due to the Chartered Accountant's medical condition.

The Tribunal noted that the Commissioner rejected the application without providing an opportunity to the assessee to substantiate its case or expressing an opinion on the rejection. Therefore, the case is remanded to the Commissioner for a fresh decision on merits.

The Tribunal noted that the issue of double deduction arises when the cost of a capital asset is claimed as an application of income, and then depreciation is also claimed on the same asset. However, it was observed that the assessee claimed depreciation on a capital asset which was never claimed as a deduction for application of income. This aspect was not properly examined.

The Tribunal held that penalty proceedings initiated under Section 271D and 271E cannot survive if the underlying reassessment proceedings are quashed as void ab initio. Relying on the Supreme Court's decision in CIT vs. M/S Jayalakshmi Rice Mills, the Tribunal found that the penalty order loses its basis when the assessment order it was based upon is annulled.

The Tribunal noted that while penalty proceedings were initiated for concealment of income, the AO ultimately levied the penalty for furnishing inaccurate particulars of income. The Tribunal held that the AO did not record any satisfaction for initiating penalty proceedings for furnishing inaccurate particulars, and the penalty cannot be levied on a limb for which no satisfaction was recorded.

The Tribunal, following previous judgments of co-ordinate benches, held that interest income earned by a cooperative society from its investment in a cooperative bank is allowable for deduction under section 80P(2)(d) of the Act, even after the insertion of sub-section (4) of Section 80P.

The Tribunal held that since the assessee had already credited the amount of Rs.60,19,934/- to its P&L account and computed its total income by including this sum, the further addition made by CPC under section 41(1) resulted in impermissible double taxation. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition.

The Tribunal held that the Assessing Officer (AO) failed to record his dissatisfaction with the assessee's suo motu disallowance, which is a prerequisite for invoking Rule 8D. Therefore, the disallowance made by the AO under Section 14A and the enhancement by the CIT(A) were deleted.

The Tribunal held that since the AO estimated net profit for cash deposits made before and after the demonetization period, the same logic should apply to deposits made during the demonetization period. The Tribunal directed that a 10% net profit rate should be applied to the entire cash deposits across all three periods.

The Tribunal condoned the delay in filing the appeals for both assessment years, citing the reasons provided in the assessee's affidavit. The matter was restored to the file of the CIT(A) for a decision on merits after providing the assessee with an opportunity of being heard.

The Tribunal noted that the CIT(A) passed the order ex-parte without adjudicating on merits due to the assessee's non-response. In the interest of natural justice, the Tribunal set aside the CIT(A)'s order and restored the issues to the CIT(A)'s file for fresh adjudication after providing an adequate opportunity of being heard to the assessee.

The Tribunal held that interest income derived by a co-operative society from investments with another co-operative bank is eligible for deduction under Section 80P(2)(d) of the Act. The Tribunal relied on various High Court decisions and observed that even though co-operative banks may not be entitled to deduction under Section 80P(4) after the insertion of the sub-section, they continue to be co-operative societies, and thus, income derived from their investments by another co-operative society is eligible for deduction.

The Tribunal observed that the assessee failed to demonstrate why they did not regularly check their ITBA portal and on what date they actually saw the impugned order. In the absence of sufficient cause and any supportive material for the delay, the application for condonation of delay was rejected.

The Ld. Commissioner (Appeals) restricted the addition for bogus purchases to 12.5% of Rs. 2,25,04,993/-. The Revenue appealed against this reduction, seeking a 100% addition. The Tribunal, relying on the Hon'ble Jurisdictional High Court's dictum in PCIT vs. Ashwin Puruthotam Bajaj (ITA No.576 of 2018), affirmed the CIT(A)'s decision to sustain the addition at 12.5%, finding no reason to deviate from the established precedent.

The Tribunal held that interest income earned by a cooperative society from its investments with other cooperative societies is deductible under section 80 P (2) (d) of the Income Tax Act. The provisions of section 80 P (4) are not applicable as the assessee is not a cooperative bank.

The Tribunal noted that the CIT(A) had passed an ex-parte order without providing the assessee an opportunity to substantiate their case. The Tribunal also noted that the Ld. DR had no objection.

The Tribunal took on record additional evidence submitted by the assessee. It was observed that most expenses were paid via account payee cheques, through banking channels, and with TDS deducted where applicable. However, for 'other sundry expenses', a portion was incurred in cash and deemed unverifiable.

The Tribunal, relying on the Supreme Court's decision in CIT vs. M/S Jayalakshmi Rice Mills and a Co-ordinate Bench decision in DCIT vs. Karan Empire Pvt. Ltd., held that when the underlying assessment proceedings (reassessment u/s 147) are quashed as void ab initio, the penalty proceedings initiated therefrom, specifically under sections 271D and 271E, cannot survive. The Tribunal reasoned that the satisfaction recorded for initiating penalty proceedings becomes invalid once the assessment order itself is set aside. Consequently, the levy of penalty amounting to ₹11,40,000/- under section 271E was deleted, and all three appeals were allowed.

The Tribunal held that in cases where sales are undisputed and purchases are made through account payee cheques with disclosed sources, the addition should be restricted to the gross profit rate. The Tribunal applied a 5% GP rate over and above the GP disclosed by the assessee on the impugned purchases.

The Tribunal held that the AO and CIT(A) rejected the assessee's explanation and supporting documents without proper opportunity for examination or cross-examination of the family members. The addition of Rs. 15,00,000/- made under OCM was deemed not justified as the deposit was made before demonetization and the assessee provided evidence of its source.

The Tribunal, citing the Bombay High Court's decision in *Principal Commissioner of Income Tax-17 v. Mohommad Haji Adam & Co (2019)*, ruled that only the profit element embedded in such bogus purchases should be added, as the assessee demonstrated corresponding sales and banking channel payments. Consequently, the AO was directed to restrict the addition to 11.58% of the alleged bogus purchases for both assessment years.

The Tribunal held that the appeal filed by the Revenue was in contravention of Section 14 of the Insolvency and Bankruptcy Code, 2016, as it was filed after the moratorium period began. The Learned DR did not refute this claim.

The tribunal held that the assessee had claimed interest expenditure under the head 'business income' which could not be allowed as such. However, the AO disallowed the excess interest expenditure of Rs. 4,01,576/- without assigning a valid reason and without establishing a lack of nexus between borrowed funds and funds advanced. Therefore, the addition was deleted.

The Tribunal held that the addition of Rs.98,93,046/- was based on incorrect reporting by Avas Evam Vikas Parishad, a UP State Government authority with whom the assessee had no transaction. The assessee had proactively informed the party to rectify their returns and had also denied any such transaction. The Tribunal emphasized that the onus was on the Revenue to prove the income, and in the absence of such proof, the assessee could not be penalized for incorrect reporting by another entity. The adjustment made by the CPC was deleted.

The Tribunal ruled that the disallowance under section 143(1) was impermissible as the claim for deduction under section 80P(2)(d) was not an 'incorrect claim' as defined. It clarified that cooperative banks are indeed cooperative societies, making interest from them eligible for section 80P(2)(d) deduction. However, interest from a non-cooperative bank (Bank of India) was not allowed.

The Tribunal noted that the CIT(A) had passed an ex-parte order. However, in the interest of natural justice, the Tribunal set aside the CIT(A)'s order and restored the appeal to the CIT(A)'s file for fresh examination after affording adequate opportunity to the assessee.

The Tribunal noted the ex-parte dismissals by lower authorities due to the assessee's non-representation. Considering the exceptional circumstances, including the MD's death, the company's unrepresented status, and the non-receipt of notices, the Tribunal decided to restore the entire matter to the file of the Assessing Officer for fresh adjudication on all issues, including the validity of the reopening proceedings under Section 148. The assessee was directed to cooperate and substantiate its case before the authorities.

The Tribunal upheld the decision of the lower authorities, confirming the taxation of the assessee at the higher rate of 40%. It held that Explanation 1 to Section 90, retrospectively inserted, clarifies that a higher tax rate for foreign companies (not declaring/paying dividends in India) is not considered less favorable. The Tribunal dismissed the reliance on a Calcutta High Court judgment, stating it was not a binding precedent as it did not consider Explanation 1 to Section 90.

The Tribunal held that the CIT(A) should have condoned the delay, considering the assessee's bonafide belief that the rectification would be processed. Furthermore, the adjustment made under section 143(1) for AY 2014-15 was not permissible as there was no provision for disallowing deduction u/s 80P at that time.

The Tribunal largely upheld the decisions of the CIT(A) by following earlier Coordinate Bench rulings. Transfer pricing adjustments for correspondent banking activities, marketing and support services for ECB, marketing of derivatives, and interest from overseas HSBC offices were deleted in favour of the assessee. Employee separation expenditure, interchange income from offshore branches, employee share scheme costs, and Nostro account maintenance charges were also decided in favour of the assessee. The disallowance related to tax-free income was partly allowed, restricting it to 1% of the total exempt income. The Tribunal dismissed the revenue's appeals on most grounds, while the assessee's ground regarding mark-up on Transition Support Services was dismissed.

The assessee sought withdrawal of the appeal on the grounds that registration under section 80G of the Act was granted on 13.05.2024. The revenue did not raise any objection to the withdrawal.

The Tribunal held that the holding period for computing capital gains should commence from the date of the allotment letter, making the gain long-term. Consequently, the assessee is eligible for deduction under Section 54F.

The Tribunal affirmed the CIT(A)'s decision, ruling that the TPO order dated 01.11.2019 was indeed barred by limitation. Citing the Madras High Court judgment in Pfizer Healthcare, the Tribunal reiterated that the TPO order should have been passed on or before 31.10.2019 (60 days prior to 31.12.2019, the last day for assessment). Consequently, since the TPO order was non-est due to being time-barred, the subsequent final assessment order was also deemed barred by limitation.

The Tribunal noted that while the assessee was out of India, the lower authorities dismissed the appeals for non-prosecution without deciding on merits. Therefore, the Tribunal decided to grant one more opportunity to the assessee.

The Tribunal noted that the assessee failed to establish the genuineness of the loan amount and its utilization for business purposes, as well as the genuineness of the interest paid on the loan. The Tribunal found no reason to contradict the findings of the CIT(A) and upheld the additions.

The Tribunal held that a cooperative bank is a species of a cooperative society and therefore, interest income earned from it is eligible for deduction under Section 80P(2)(d). The judgments relied upon by the revenue were distinguished as dealing with different sections or facts.

The Tribunal affirmed the CIT(A)'s finding that the administrative support services do not 'make available' technical knowledge, experience, skill, know-how, or processes to JIPL, thereby not meeting the criteria for FTS/FIS under Article 12(4)(b) of the India-USA DTAA. Relying on prior judgments and its own decisions, the Tribunal concluded that these services, including reimbursements, are not taxable in India and consequently deleted the additions made by the AO.

The Tribunal held that cooperative banks are also considered cooperative societies, and interest income earned from them is eligible for deduction under Section 80P(2)(d). The disallowance made under Section 143(1) was not sustainable.

The Tribunal noted that the Commissioner rejected the application without affording the assessee an opportunity to be heard and on a hyper-technical ground, sidelining the provisional certificate. For substantial justice, the case was remanded.

The Tribunal noted that the unsecured loan was received in A.Y. 2012-13, and the department had not questioned its genuineness or made any addition regarding this loan in that year, with the returned income being accepted. Consequently, the Tribunal ruled that the disallowance of interest on the loan in the current year (A.Y. 2013-14) is not justified since the loan was not treated as bogus/non-genuine in the preceding year. The addition of Rs. 2,15,014/- was therefore deleted.