ITAT Mumbai Judgments — August 2024

The Tribunal considered the disallowances made under Section 40(a)(i) concerning payments to non-residents for professional services. The core of the dispute revolved around whether these payments constituted 'royalty' or 'independent personal services' under various DTAAs. The Tribunal noted that the CIT(A) had deleted certain disallowances, holding that the services qualified as independent personal services. The Revenue contended that the CIT(A) erred in this classification, arguing that only services by independent contractors, not group entities working closely, would qualify. The Tribunal also addressed specific grounds concerning payments to KPMG Cooperative, Switzerland, and advertisement expenses. The Tribunal acknowledged that some issues were covered by previous ITAT orders concerning the assessee's member firm. The Tribunal's decision on each specific ground is not fully detailed in the provided text, but it appears to have considered the arguments on DTAA interpretation and the nature of services. The operative directions are not explicitly stated for all issues, but the context suggests a review of the CIT(A)'s deletions and disallowances.

The Tribunal noted that the CIT(A) dismissed the appeal ex-parte due to non-compliance and lack of appearance. However, considering the principles of natural justice, the Tribunal decided to provide one more opportunity to the assessee to present their case.

The Tribunal decided on the taxability of professional fees paid to non-residents based on the specific DTAAs and the nature of services. For residents of USA, Saudi Arabia, Australia, UK, and Thailand, the Tribunal held that the Assessee was not required to deduct tax at source. This was because the services were characterized as business profits taxable under Article 7 of the respective DTAAs, and either the non-residents did not have a Permanent Establishment (PE) in India, or the nature of income did not attract withholding tax obligations under the relevant treaty provisions. Consequently, the disallowances made by the Assessing Officer under Section 40(a)(i) were deleted for these countries, upholding the CIT(A)'s order. However, for payments made to tax residents of France, the Tribunal held that the services fell within the ambit of Article 13 of the DTAA, attracting tax withholding provisions under Section 195. Since the Assessee failed to comply, the disallowance under Section 40(a)(i) was upheld, overturning the CIT(A)'s decision for this specific category. Regarding certain professional fees aggregating to INR 39,87,237/-, the Tribunal set aside the CIT(A)'s order remitting the issue to the Assessing Officer and directed the CIT(A) to adjudicate the grounds after calling for a remand report from the Assessing Officer.

The Tribunal held that interest under Section 234C cannot be levied when the payer fails to deduct TDS as per Sections 196D and 194LD, and the assessee has otherwise discharged its full tax liability by paying advance tax. The Tribunal relied on judicial precedents, including a Bombay High Court ruling, stating that the assessee cannot be penalized for the payer's default.

The Tribunal found that the CIT(A) had erred in sustaining the addition without considering the assessee's submissions and evidence regarding the change in business nature (wholesale trade with lower profit margins). The Tribunal decided to provide an opportunity for re-adjudication.

The Tribunal held that the AO's dissatisfaction regarding the assessee's disallowance claims was sufficiently recorded. For AY 2014-15, interest disallowance was deleted as own funds exceeded investments. Expenditure disallowance was to be recomputed considering only investments yielding exempt income. For AY 2017-18, disallowance was limited to the amount voluntarily disallowed by the assessee.

The Tribunal held that the AO's dissatisfaction regarding the assessee's disallowance claims was sufficiently recorded. For AY 2014-15, interest disallowance was deleted as own funds exceeded investments. Expenditure disallowance was to be recomputed considering only investments yielding exempt income. For AY 2017-18, disallowance was limited to the amount voluntarily disallowed by the assessee.

The Tribunal held that the expenditure incurred for property and water tax, though crystallized in AY 2018-19, pertained to the period before the transfer of shares and was incurred exclusively in connection with the transfer of the capital asset. Therefore, it qualifies as a deduction under Section 48 of the Income Tax Act, 1961.

The Tribunal condoned the delay in filing the appeals before the CIT(A) finding that the assessee had 'sufficient cause' for the delay due to medical reasons and travel. The Tribunal cited Apex Court decisions emphasizing a liberal and justice-oriented approach in condoning delays when sufficient cause is shown. The appeals were remanded back to the CIT(A) for adjudication on merits.

The assessee, through their counsel, requested the withdrawal of the current appeal, as the issue had already been decided in their favor in a previously filed and disposed of appeal for the same assessment year. The Tribunal acknowledged the assessee's request for withdrawal.

The Tribunal held that the reassessment proceedings initiated under Section 147/148 of the Act were void ab initio. The Tribunal reasoned that when incriminating material is found during a search under Section 132, and this material pertains to the assessee, the AO must have recourse to Section 153A or 153C, not Section 147. The Tribunal noted that the Finance Act, 2015, amended Section 153C to clarify that information found in a search pertaining to a person other than the searched person should be handled under Section 153C. The Tribunal found that the AO should have proceeded under Section 153C, as per the decision in ITO vs Vikram Sujitkumar Bhatia (SC). Consequently, the additions made under Section 68 and Section 69C, which were part of the reassessment under Section 147/153A, could not be sustained. The Tribunal allowed the additional grounds and Ground No. 1 raised by the assessee. Ground No. 2 was not pressed. Grounds No. 3 and 4, concerning the merits of the additions under Section 68 and 69C, were also allowed, applying the findings from the assessment year 2011-12. The operative direction was to delete the additions.

The Tribunal noted that the appeal was filed with a delay of 6 days, which was condoned. While the assessee had missed multiple hearing dates before the CIT(A), the Tribunal, in the interest of justice, decided to remit the matter back to the CIT(A) for denovo adjudication. The assessee was directed to be diligent and cooperative in future proceedings.

The CIT(A) erred in confirming the AO's action. The Tribunal noted that the valuation report was obtained after the assessment order was passed and the case was time-barred at the time of assessment. The Tribunal decided to provide the assessee another opportunity to present their case.

The Tribunal condoned the delay in filing the appeals before the CIT(A) finding that the assessee had 'sufficient cause' for the delay due to medical reasons and travel. The Tribunal cited Apex Court decisions emphasizing a liberal and justice-oriented approach in condoning delays when sufficient cause is shown. The appeals were remanded back to the CIT(A) for adjudication on merits.

The Tribunal condoned the delay in filing the appeals before the CIT(A) finding that the assessee had 'sufficient cause' for the delay due to medical reasons and travel. The Tribunal cited Apex Court decisions emphasizing a liberal and justice-oriented approach in condoning delays when sufficient cause is shown. The appeals were remanded back to the CIT(A) for adjudication on merits.

The Tribunal held that the reassessment proceedings initiated under Section 147/148 of the Act were void ab initio. The Tribunal reasoned that when incriminating material is found during a search under Section 132, and this material pertains to the assessee, the AO must have recourse to Section 153A or 153C, not Section 147. The Tribunal noted that the Finance Act, 2015, amended Section 153C to clarify that information found in a search pertaining to a person other than the searched person should be handled under Section 153C. The Tribunal found that the AO should have proceeded under Section 153C, as per the decision in ITO vs Vikram Sujitkumar Bhatia (SC). Consequently, the additions made under Section 68 and Section 69C, which were part of the reassessment under Section 147/153A, could not be sustained. The Tribunal allowed the additional grounds and Ground No. 1 raised by the assessee. Ground No. 2 was not pressed. Grounds No. 3 and 4, concerning the merits of the additions under Section 68 and 69C, were also allowed, applying the findings from the assessment year 2011-12. The operative direction was to delete the additions.

The Tribunal held that the disallowance of Rs. 3,47,267 was incorrect. It noted that the amended rules required the expenditure to be quantified by the Approving Authority. The Tribunal restricted the disallowance to Rs. 67,756, which was the amount the Assessing Officer had himself considered.

The Delhi High Court in the case of Era Infrastructure (India) Ltd. held that disallowance under section 14A is not required if no exempt income is earned. The amendment making it mandatory even without exempt income was held to be prospective. Following this precedent, the tribunal found the disallowance not justified.

The Tribunal held that the AO's dissatisfaction regarding the assessee's disallowance claims was sufficiently recorded. For AY 2014-15, interest disallowance was deleted as own funds exceeded investments. Expenditure disallowance was to be recomputed considering only investments yielding exempt income. For AY 2017-18, disallowance was limited to the amount voluntarily disallowed by the assessee.

The Tribunal noted that the assessee had failed to appear on multiple hearing dates, leading to the dismissal of the appeal by the CIT(A). However, considering the facts and the explanation for the delay, the Tribunal decided to remit the matter back to the CIT(A) for a fresh adjudication.

The Tribunal condoned the delay in filing the appeals before the CIT(A) finding that the assessee had 'sufficient cause' for the delay due to medical reasons and travel. The Tribunal cited Apex Court decisions emphasizing a liberal and justice-oriented approach in condoning delays when sufficient cause is shown. The appeals were remanded back to the CIT(A) for adjudication on merits.

The Tribunal held that the AO's dissatisfaction regarding the assessee's disallowance claims was sufficiently recorded. For AY 2014-15, interest disallowance was deleted as own funds exceeded investments. Expenditure disallowance was to be recomputed considering only investments yielding exempt income. For AY 2017-18, disallowance was limited to the amount voluntarily disallowed by the assessee.

The Tribunal noted that the CIT(A) had passed an ex-parte order without considering the merits of the case. The Tribunal condoned the delay in filing the appeal and found it appropriate to remit the matter back to the CIT(A) for a denovo adjudication.

The tribunal upheld the CIT(A)'s decision to delete the penalty. It held that a mere disallowance of a claim, especially when it has no impact on tax liability due to carried forward losses, does not amount to furnishing inaccurate particulars or concealment of income. The revenue failed to prove the assessee's intention to evade tax.

The Tribunal held that since the trust's 12A registration was cancelled effective March 20, 2015, tax should be calculated at slab rates, not MMR. Surcharge and cess should also be calculated accordingly. The issue of refund adjustment was deemed premature pending tax recalculation.

The Tribunal held that it is proper to remand the matter back to the AO. The AO is directed to confirm if the valuation report has been received from the District Valuation Officer and if so, consider the report to work out the LTCG. The AO is also directed to provide a reasonable opportunity of being heard to the appellant.

The Tribunal noted that the assessee did not appear before the CIT(A) despite multiple notices, leading to dismissal in default. However, in the interest of justice and fair play, the Tribunal decided to remit the matter back to the CIT(A) for denovo adjudication on merit.

The Tribunal held that one of the bank accounts did not belong to the assessee, upholding the CIT(A)'s deletion of the addition related to that account. Regarding the other account, the Tribunal found it difficult to distinguish between sales transactions and other transactions like loans. Therefore, the issue of the difference of Rs. 67,76,993 was remitted back to the AO for verification.

The Tribunal noted that while the CIT(A) does not have the power to condone delay, the power is vested with the CIT under Section 119(2)(b) of the Act, and CBDT circulars empower CITs to condone delays under specific conditions. The Tribunal also referenced judicial precedents emphasizing that filing of the audit report is directory and not mandatory, and the benefit of exemption should not be denied for marginal delays.

The Tribunal, relying on precedents, held that the provisions of section 44AB are not applicable when the assessee has no income falling under 'profits and gains of business or profession' after claiming exemption under section 10. Since the assessee's only income was exempt dividend income, the penalty imposed under section 271B for failure to get accounts audited was not leviable. Therefore, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty.

The Tribunal dismissed all appeals filed by the Revenue and allowed all appeals and cross-objections filed by the Assessee. For AY 2016-17, the Tribunal found that the issue of bad debts and provisions on standard assets was recurring and that coordinate benches had consistently ruled in favour of the assessee. The Revenue's grounds concerning the validity of re-opening were dismissed by following previous decisions. Similarly, for AY 2017-18 and 2018-19, the Revenue's grounds were dismissed by applying the findings from AY 2016-17 mutatis mutandis, as the facts and law were similar. The Assessee's grounds were allowed by following the same reasoning. The Tribunal noted that for AY 2018-19, one of the Assessee's grounds was infructuous as the substantive claim had already been allowed. The Tribunal did not expressly leave any issue undecided.

The Tribunal held that substantial justice should not be denied on technical grounds and that provisions for condonation of delay should be interpreted liberally. The 45-day delay in filing the appeal before the CIT(A) was therefore condoned.

The Tribunal held that the learned CIT(A) erred in dismissing the assessee's appeal ex-parte without considering the submissions and documentary evidence filed by the assessee. The Tribunal noted that the assessee had filed various submissions and supporting documentary evidence before the CIT(A). However, after the transition to the Faceless Appeal process, the CIT(A) passed the impugned order without considering these. The Tribunal also found that the CIT(A) did not examine the merits of the issues raised by the assessee, which is contrary to the provisions of section 250(6) of the Act. Consequently, the Tribunal deemed it appropriate to restore the appeal to the file of the learned CIT(A) for de novo adjudication after considering the submissions filed by the assessee. The assessee was granted liberty to furnish further submissions. The Tribunal directed that no order shall be passed without affording a reasonable opportunity of hearing and that the assessee must appear on all hearing dates. The other grievances raised by the assessee were not adjudicated at this stage as the matter was restored for consideration on merits. The grounds raised by the assessee were allowed for statistical purposes.

The Tribunal noted that the CIT(A) was expected to provide the points for determination and reasons for the decision as per section 250(6) of the Act, even in the absence of the assessee. While acknowledging the assessee's non-appearance, the Tribunal deemed it appropriate, in the interest of justice and fair play, to remit the matter back to the CIT(A) for adjudication on merit, ensuring the observance of natural justice.

The Tribunal held that while the assessee did not respond to the notices issued by the first appellate authority on various occasions, and the CIT(A) observed that the assessee was not interested in proceeding with the appeal, the CIT(A) was expected to state the points for determination, the decision thereon, and the reasons for the decision as provided under Section 250(6) of the Act, even when passing an ex-parte order. In the interest of justice and fair play, the Tribunal deemed it appropriate to remit the matter back to the file of the learned CIT(A) for denovo adjudication on merit. The Tribunal directed the assessee to be diligent and cooperative in attending hearings and making submissions before the CIT(A) for expeditious disposal and to refrain from seeking adjournments except for compelling reasons. The CIT(A) was also directed to ensure observance of the principles of natural justice. The Tribunal explicitly stated that no observations were made on the merits of the case. The appeal was allowed, and the impugned order was set aside, with the case restored to the file of the learned CIT(A) for statistical purposes.

The Tribunal upheld the CIT(A)'s decision, deleting the additions made under Section 68 and Section 69C. The Tribunal found that the assessee had provided sufficient documentary evidence to establish the genuineness of the share transactions and followed the jurisdictional High Court's precedents.

The Tribunal held that the CIT(A) erred in dismissing the appeal as infructuous without adjudicating on merits, especially for issues not covered by the rectification petition. The principle of natural justice was not followed.

The Tribunal held that the remittance was a transfer of funds by the assessee to itself, and therefore, Section 195 of the Income Tax Act, which applies to payments made to any other person, was not applicable. Since the transaction was not chargeable to tax, the assessee could not be treated as an assessee in default under Section 201.

The ITAT held that the CIT(A) passed the order in the absence of details from the assessee. In the interest of justice and fair play, the assessee was granted one more opportunity to represent its case on merits before the CIT(A). The impugned order was set aside, and the matter was restored to the CIT(A) for de novo adjudication on merits.

The Tribunal noted that the assessee had submitted details on 03.04.2024, but the CIT(A) passed the order on 13.04.2024 without considering them and without providing a proper opportunity of hearing. Therefore, the Tribunal set aside the order of the CIT(A) and restored the matter for de novo adjudication.

The Tribunal condoned the delay of 4 days in filing the appeal. It was held that the addition made by the AO was not sustainable as it was based solely on a statement recorded in a previous year, without corroborating evidence and despite submission of financial documents by the assessee. Similar additions were made for different assessment years.

The Ld.CIT(A) accepted the assessee's contention that no disallowance under Section 14A is required if no exempt income is earned, relying on High Court decisions. The amendment to Section 14A, making disallowance mandatory even without exempt income, was held to be prospective.

The Tribunal dismissed all appeals filed by the Revenue and allowed all appeals and cross-objections filed by the Assessee. For AY 2016-17, the Tribunal found that the issue of bad debts and provisions on standard assets was recurring and that coordinate benches had consistently ruled in favour of the assessee. The Revenue's grounds concerning the validity of re-opening were dismissed by following previous decisions. Similarly, for AY 2017-18 and 2018-19, the Revenue's grounds were dismissed by applying the findings from AY 2016-17 mutatis mutandis, as the facts and law were similar. The Assessee's grounds were allowed by following the same reasoning. The Tribunal noted that for AY 2018-19, one of the Assessee's grounds was infructuous as the substantive claim had already been allowed. The Tribunal did not expressly leave any issue undecided.

The Tribunal observed that the assessee had continuously raised grievances regarding a deduction claim and was under the bonafide belief that they would be resolved through the income tax portal. Citing the principle that substantial justice should not be denied on technicalities and that provisions for condonation of delay should be interpreted liberally, the Tribunal decided to condone the delay.

The Tribunal held that one of the bank accounts did not belong to the assessee, upholding the CIT(A)'s deletion of the addition related to that account. Regarding the other account, the Tribunal found it difficult to distinguish between sales transactions and other transactions like loans. Therefore, the issue of the difference of Rs. 67,76,993 was remitted back to the AO for verification.

The Tribunal noted that while the statutory period for appeal is 30 days, Section 249(3) allows for condonation of delay if sufficient cause is shown. The Tribunal found the assessee's belief that portal grievances would be resolved to be bonafide, leading to the delay.

The Tribunal held that the delay in filing Form 10B was for a short period and occurred due to genuine operational difficulties. It further noted that the assessee had filed its return of income within the stipulated time.

The Tribunal held that the CIT(A) was not justified in dismissing the appeals being barred by limitation. The Tribunal considered the rival submissions and examined the record, noting that the reasons for delay cited by the assessee, including the impact of the COVID-19 pandemic, were sufficient. The Tribunal referred to the Supreme Court's suo motu order in Writ Petition (Civil) No. 3 of 2020, which extended limitation periods due to the pandemic, and also cited the Supreme Court's decision in Collector, Land Acquisition Vs. MST. Katiji & Ors. The Tribunal found that the delay of 1390 days, 1010 days, 437 days, and 137 days for AY 2018-19, 2019-20, 2020-21, and 2021-22, respectively, was sufficiently explained by the pandemic's effects. Consequently, the impugned orders of the CIT(A) were set aside, and the cases were restored to the file of the CIT(A) for disposal on merits. The assessee was directed to present its case before the CIT(A) within 90 days of the order.

The Tribunal held that the assessee society does not fall under the definition of a co-operative bank or primary co-operative bank as its principal business is not banking and its membership is restricted. Therefore, it is eligible for deduction under Section 80P.

The Tribunal held that the assessee society does not fall under the definition of a co-operative bank or primary co-operative bank as its principal business is not banking and its membership is restricted. Therefore, it is eligible for deduction under Section 80P.