ITAT Mumbai Judgments — August 2024

The Tribunal acknowledged the Assessee's non-compliance but noted that the FAA also failed to decide the issue on merit. To ensure a just decision and substantial justice, the case is remanded to the AO for a fresh decision, allowing the Assessee a reasonable opportunity to substantiate their claim.

The Tribunal found that the CIT(A)'s observation regarding the valuation reports was not specific and lacked reasoning. The Tribunal noted that the valuation reports were exhaustive and considered various factors. Therefore, the Tribunal restored the matter to the AO for re-examination of the valuation reports and to pass a speaking order after giving the assessee an opportunity of hearing.

The Tribunal held that the additions made were not based on incriminating documents found or seized during search proceedings, and the section 153C proceedings were initiated without adhering to the required procedures. Therefore, the additions were deleted for AY 2016-17, 2017-18, and 2019-20.

The Tribunal held that the Assessing Officer failed to dispose of the assessee's objections to the reopening of assessment by passing a speaking order, which is a mandatory procedure as per Supreme Court and High Court judgments. This procedural lapse rendered the assessment order without jurisdiction.

The Tribunal condoned the delay of 186 days, considering it unintentional and based on a bonafide belief. The Tribunal also noted that the lower authorities had failed to decide the appeal on merits due to a lack of adequate submissions.

The Tribunal noted that the assessee had filed Form 10-B with a delay of 31 days. The issue was primarily about the condonation of this delay. The Tribunal referred to CBDT Circular No. 16/2022, which delegates the power to condone such delays to the Pr. Chief Commissioner/Chief Commissioner or Commissioner of Income-tax. The application for condonation filed by the assessee was still pending.

The Tribunal noted the Assessee's non-compliance and the consequent affirmation of the addition and reopening by the lower authorities. Despite this, considering the facts and for substantial justice, the Tribunal decided to remand the case.

The Tribunal considered that the current appeal was a duplicate of an already filed online appeal. The assessee was allowed to withdraw the present appeal, with the liberty to continue with the previously filed online appeal as prayed.

The Tribunal noted that the assessee had not furnished relevant documents to support their claims before the lower authorities. For the addition under section 2(22)(e), the Tribunal, in the interest of natural justice, granted one more opportunity to the assessee to present documents, setting aside the CIT(A)'s order and restoring it for fresh adjudication. For the addition under section 14A, the Tribunal also felt the issue required fresh examination by the CIT(A).

The Tribunal acknowledged the principle of natural justice and noted that the assessee was prevented by sufficient cause from appearing before the CIT(A). Consequently, the impugned ex-parte order was set aside.

The CIT(A) erred in not allowing the set off of a brought forward capital loss against the current year's capital gains, erroneously treating it as a business loss. The Tribunal observed that the core dispute is the characterization of the loss. If the assessee's claim of it being a capital loss is correct, it should be allowed as per Section 74 of the Act.

The assessee sought to withdraw the present appeal as it was found to be a duplicate filing. The Tribunal allowed the withdrawal and dismissed the appeal as infructuous.

The Tribunal noted that the Assessee had inadvertently filed two simultaneous appeals challenging the same order. One of these appeals had already been decided by the Tribunal, setting aside the impugned order. Therefore, the current appeal was rendered infructuous.

The Tribunal noted that the issue is whether the addition should be 100% or a lesser percentage when purchases are established as bogus. The Tribunal also outlined a procedure for verification, including checking stock registers, sales, and potentially restoring the issue to the AO for further examination if certain aspects were not properly considered.

The Tribunal held that the PCIT's action under Section 263 was not justifiable as the Assessing Officer (AO) had properly examined the issue of commission income. The AO had accepted the offered income and had not made further additions, though they initiated penalty proceedings for misreporting. The Tribunal relied on judicial precedents, including the Supreme Court's decision in Malabar Industrial Co. Ltd., stating that an order cannot be deemed erroneous and prejudicial to the revenue merely because the CIT disagrees with the AO's view, especially when the AO has considered the facts and applied the law.

The Tribunal found that the CIT(E) had not properly considered all the details submitted by the assessee, particularly those submitted on 12.01.2024. The Tribunal restored the matter back to the CIT(E) for a fresh decision.

The Tribunal noted that a co-ordinate bench had previously allowed the assessee's appeal and deleted the additions, collapsing the foundation for the penalty. Therefore, the penalty could not survive.

The Tribunal held that for deduction under Section 80P(2)(d), it must be verified whether the interest/dividend income is business income and whether the banks are registered under Section 5(b) of the Banking Regulation Act. The Tribunal restored the issue of Section 80P(2)(c) deduction to the Assessing Officer for fresh verification and also restored the issue of Section 80P(2)(d) deduction for verification of the nature of the co-operative banks.

The Tribunal held that the delay in filing the appeal was bonafide and condoned it. The CIT(A)'s order was set aside as it was passed in the name of a deceased assessee and without addressing the merits. The assessment order was also set aside due to insufficient time granted to the assessee and lack of proper opportunity, restoring the issue to the AO for fresh adjudication.

The Tribunal held that the purchases were indeed bogus. However, the extent of addition needs to be examined based on whether the purchase quantity corresponds to the stock register and if the sales corresponding to these purchases are genuine. If sales are verified, the addition should be restricted to the benefit obtained by the assessee, like a cash discount. The issue of unexplained cash purchases was also restored to the Assessing Officer.

The Tribunal held that Section 249(4)(b) of the Income Tax Act was not attracted in this case. The assessee claimed no income and a loss in the relevant year, thus no advance tax was payable. The Tribunal also noted that crucial documents supporting the assessee's claim were not before the Assessing Officer.

The Tribunal held that the Assessing Officer's method of adjusting refunds was incorrect. Following the principle of consistency and relying on various judicial precedents, the Tribunal directed the Assessing Officer to compute the interest under Section 244A by first adjusting the refund against the interest component and then the balance towards the tax component. The assessee was to be given a reasonable opportunity of being heard.

The Tribunal held that Section 80P(4) of the Act is a proviso that excludes co-operative banks which possess a license from the RBI and conduct business like commercial banks. However, for the purpose of Section 80P(2)(d), a co-operative bank is still considered a co-operative society. The interest earned from investments with a co-operative bank is deductible under Section 80P(2)(d) if the assessee is a co-operative society.

The Tribunal observed that both the AO's and the Ld. Commissioner's orders were ex-parte. Despite the assessee's failure to provide reasons for non-compliance, the Tribunal, considering the circumstances and to ensure substantial justice, decided to remand the case to the AO.

The Tribunal noted the Assessee's non-compliance but also observed that the Ld. Addl./Joint Commissioner decided the appeal ex-parte without properly considering the issue. Therefore, the Tribunal decided to grant one more opportunity to the Assessee.

The Tribunal noted that the assessee had initially applied for the Vivad Se Vishwas Scheme but failed to deposit the full tax due to financial constraints. The Tribunal also observed that the Commissioner (Appeals) had not issued a hearing notice, and the assessee's non-compliance during the Covid-19 pandemic led to issues. Therefore, the Tribunal decided to remand the case back to the Commissioner (Appeals) for a fresh decision.

The Tribunal held that Section 80P(2)(d) of the Income Tax Act allows deduction for interest income earned by a co-operative society from its investments in any other co-operative society. It further clarified that even though co-operative banks might be excluded from deduction under Section 80P(4) if they function like commercial banks, the interest earned by a co-operative society from a co-operative bank is still eligible for deduction under Section 80P(2)(d).

The Tribunal observed that the Joitabhai Trust acknowledged the debt of Rs. 5.34 crores to the assessee as of April 1, 2011, and the transactions of repayment and receipt of money were duly recorded in the books of accounts. Realisation of an outstanding amount cannot be characterised as income. Similarly, the receipt from the proprietary concern was considered a receipt of the assessee's own money.

For AYs 2016-17, 2017-18 & 2019-20, the Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s deletion of additions related to ABN Tradelink, finding no incriminating material. For AY 2018-19, disallowances for two subcontractors (High Ground Enterprises and Oxford Infracon) were deleted as they were not in the satisfaction note. The disallowance for Great Unison Contractors and alleged bogus purchases (Flyjoy Distributors) were restricted to a 14.24% Gross Profit rate. The addition for written-off debtors/balances was sustained as the assessee could not corroborate the claim. The validity of 153C proceedings was upheld against the assessee's challenge.

The Tribunal found that the Assessee was not effectively heard on the issue of maintainability and that the order did not discuss their submissions. Therefore, in the interest of justice, the Tribunal decided to grant another opportunity to the Assessee.

The Tribunal held that consistent judicial precedent supports adjusting refunds first against interest payable and then against the principal tax amount for the purpose of calculating interest under Section 244A. The Tribunal found the Assessing Officer's method of adjustment incorrect.

The Tribunal held that the PCIT cannot substitute his opinion for that of the Assessing Officer (AO) when the AO has taken a plausible view. For invoking Section 263, the PCIT must show that the AO's order was both erroneous and prejudicial to the revenue, which was not sufficiently demonstrated in this case.

The Tribunal dismissed the revenue's appeals for AY 2016-17, 2017-18, and 2019-20, upholding the CIT(A)'s deletion of purchase disallowances due to lack of incriminating material with nexus to the additions, citing the Supreme Court's Abhisar Buildwell judgment. For AY 2018-19 (under 153C), disallowances for two subcontractors were deleted, while for Great Unison, it was restricted to 14.24% (GP rate). The assessee's legal challenge to 153C initiation was dismissed, and an addition for written-off amounts was sustained. For AY 2018-19 (under 143(3)), the disallowance for alleged bogus purchases from Flyjoy Distributors was restricted to 14.24% (GP rate).

The Tribunal noted that while the Hon'ble Supreme Court has emphasized the mandatory nature of filing Form No. 10 before the due date for claiming exemption under Section 11(2), it also acknowledged CBDT circulars allowing condonation of delay under certain circumstances. The assessee's delay was within the period specified for condonation due to technical glitches.

The Tribunal held that for deduction under Section 80P(2)(c), the issue needs verification by the Assessing Officer. For Section 80P(2)(d), the Tribunal noted that the eligibility depends on whether the co-operative banks are functioning as banks under the Banking Regulation Act. Evidence regarding the registration of investee banks was filed, and the matter was restored to the Assessing Officer for verification.

The Tribunal held that for deduction under Section 80P(2)(c), the issue needed verification by the Assessing Officer. For Section 80P(2)(d), the eligibility depends on whether the co-operative banks are functioning as banks under the Banking Regulation Act. The Tribunal restored the issue of verifying the registration of the investee co-operative banks to the Assessing Officer.

The Tribunal dismissed the Revenue's appeals for AYs 2016-17, 2017-18, and 2019-20, affirming that additions under Section 153C cannot be sustained without incriminating material found during search. For AY 2018-19, the validity of 153C proceedings was upheld; disallowances for two sub-contractors were deleted, while the addition for Great Unison Contractors was sustained at a 14.24% GP rate. The addition for debtors/creditors write-off was sustained, and the disallowance for bogus purchases was restricted to a 14.24% GP rate.

The Tribunal restored the claim for deduction under Section 80P(2)(c) to the Assessing Officer for fresh verification. For claims under Section 80P(2)(d), the Tribunal held that eligibility depends on whether the investee cooperative banks are carrying on banking business as defined under Section 5(b) of the Banking Regulation Act, and whether the income is business income, remanding this issue also to the Assessing Officer for verification.

The Tribunal held that the brokerage of Rs. 50,00,000/- was a lumpsum payment made wholly and exclusively for recovering both the principal and interest, and its genuineness was not disputed. Citing judicial precedents, the Tribunal stated that the AO could not arbitrarily dissect a single transaction into multiple parts to disallow a portion of the expenditure. Since the expense was incurred for earning income, the entire amount was deductible under Section 57(iii) of the Act.

The Income Tax Appellate Tribunal (ITAT) observed that the CIT(A) did not consider or adjudicate the assessee's prayer for admission of additional evidence, which was critical for the grounds of appeal. Finding that non-consideration of relevant additional evidence leads to a miscarriage of justice, the ITAT set aside the CIT(A)'s order. The matter was remanded back to the CIT(A) for fresh adjudication after properly considering the application for additional evidence under Rule 46A.

The CIT(A) dismissed the appeal, holding that it was delayed. However, the Tribunal found that the appeal was filed within the prescribed limitation period from the date of service of the assessment order. The Tribunal also noted that the CIT(A) failed to consider the submissions and documents filed by the assessee.

The Tribunal held that the assessee's business commenced on June 1, 2008, as evidenced by the hiring of employees, commencement of services, and raising invoices, even before the transfer of all tangible assets. Therefore, expenses incurred from June 1, 2008, onwards were considered legitimate business expenditures.

The Tribunal upheld the Commissioner's decision to reject the Section 80G application, confirming that such registration requires prior registration under Section 12A or 10(23C). However, the Tribunal dismissed the appeal with liberty, allowing the assessee to file a fresh Section 80G application once they secure the necessary Section 12A or 10(23C) registration.

The Tribunal deleted the penalty in its entirety. For additions where quantum proceedings were restored to the AO (insurance claim, R&D expenditure, and depreciation), the penalty cannot survive as its basis is unsettled. For the compensation received, the Tribunal ruled that since the assessee had disclosed all relevant particulars and the dispute pertained to the characterization of income (capital gain vs. business income), penalty under section 271(1)(c) is not attracted, relying on precedents from the Supreme Court and High Courts.

The Tribunal noted that a co-ordinate Bench had already allowed the assessee's appeal and deleted the primary additions. Since the foundation for imposing the penalty had collapsed, the penalty could not survive.

The Tribunal found the assessee's reasons for non-compliance, including personal circumstances and issues with email communication regarding notices, to be genuine and unintentional. The Tribunal noted that the Commissioner issued notices to an incorrect email address despite the assessee's explicit instruction not to send communications via email.

The Tribunal noted that the CIT(A) had not properly examined the appellant's submissions and evidence regarding the delivery of goods and warehousing charges. Therefore, the Tribunal set aside the CIT(A)'s order and restored the appeal to the CIT(A) for a fresh decision.