ITAT Rajkot Judgments — February 2025

The Tribunal, relying on its own precedent and earlier Gujarat High Court judgments, held that the interest and dividend income from co-operative banks was eligible for deduction under section 80P(2)(d). It distinguished the adverse Gujarat High Court ruling cited by the Revenue, noting its different context, and found that the Assessing Officer's original acceptance of the deduction was a plausible view, hence the PCIT's revisionary action under section 263 was invalid. Consequently, the disallowance was deleted, and the appeal was allowed.

The Tribunal held that the assessee did not have a proper opportunity of being heard before the CIT(A). Therefore, the ex-parte order of the CIT(A) was set aside. The matter was remanded to the Assessing Officer for fresh consideration.

The Tribunal noted that the CIT(A) did not call for a remand report from the Assessing Officer concerning the additional documents submitted by the assessee during the appellate proceedings. This prevented the Assessing Officer from examining the evidence, which violates the principle of natural justice.

The Tribunal noted that the assessee had submitted reply/submissions with supporting material during the appellate proceedings, but the Ld. CIT(A) had not considered them. This led to the case not being adjudicated on merits, thus violating the principle of natural justice.

The Tribunal held that the delay in filing the appeals was sufficiently caused by the COVID-19 pandemic and was covered by the Hon'ble Supreme Court's judgment in Suo Moto Writ Petition, MA No.21 of 2022, which condoned delays up to a certain period and provided an additional grace period.

The Income Tax Appellate Tribunal (ITAT) held that the reassessment proceedings initiated by the AO were invalid ab-initio. The Tribunal noted that the very foundation for the 'reason to believe' (i.e., the Central Excise findings) had been subsequently rejected and reversed by the Customs, Excise and Service Tax Appellate Tribunal in the assessee's own case. Applying the legal maxim 'Sublato fundamento cadit opus', the ITAT concluded that the reassessment lacked a valid basis and was therefore quashed.

The Tribunal held that the assessee had explained sufficient cause for the delay in filing the appeal. The words 'sufficient cause' should be interpreted liberally to advance substantial justice. The Revenue did not object to the condonation of delay. Therefore, the delay was condoned.

The Tribunal held that the disallowance of interest was not justified as the assessee had sufficient interest-free funds and had demonstrated commercial expediency. The court also found that the stock valuation methods used by the assessee were acceptable, and the additions made by the assessing officer on this count were partly deleted by the CIT(A). The grounds of appeal by the Revenue were dismissed, and the assessee's cross-objection was allowed.

The Tribunal noted that in similar cases involving Angadiya transactions, issues were remitted back for fresh examination. The Tribunal also observed a non-cooperation from the assessee during assessment proceedings and that the assessment order was framed in haste. The Tribunal, following a coordinate bench's decision, decided to set aside the CIT(A)'s order and remit the matter back to the CIT(A) for fresh adjudication.

The Tribunal noted that several 'Angadiya' cases, including that of M/s. National Shroff Company, had been remitted for fresh examination. Considering the assessee's case as a beneficiary linked to these transactions, the Tribunal dismissed the assessee's appeals and confirmed the Pr. CIT's order passed under Section 263, which set aside the original assessment and directed a fresh assessment after thorough inquiries.

The Tribunal held that the expression "sufficient cause" for condonation of delay should be construed liberally to advance substantial justice, especially when no negligence or mala fide is imputable to the assessee. Therefore, the delay was condoned.

The Tribunal found that the legal heirs misled the department by not disclosing the assessee's death and by signing documents as the deceased. The Tribunal remitted the matter back to the Pr.CIT with directions for the legal heirs to register on the Income Tax Department portal, inform the Pr.CIT about the death, and participate in fresh revisionary proceedings with due opportunity of being heard.

The Tribunal noted that the CIT(E) did not properly examine the documents submitted by the assessee and failed to furnish the Inspector's report, thereby violating the principles of natural justice. Consequently, the matter was remitted back to the CIT(E) for fresh adjudication, with directions to examine all submitted documents and evidences to grant registration in accordance with law.

The Tribunal noted the assessee's inability to plead their case and submit documents. Applying principles of natural justice, the Tribunal decided to give the assessee another opportunity, remitting the matter back to the Assessing Officer for a de novo adjudication on merits after affording sufficient opportunity of being heard.

The Tribunal held that the Assessing Officer had taken a plausible view based on previous High Court judgments. The latest High Court judgment cited by the revenue was found not to be applicable to the present case in its context. Therefore, the revisional order passed by the Principal CIT was quashed, and the appeals were allowed.

The Tribunal noted that the cash sales constituted a very small percentage of the total turnover and were supported by audited books of accounts, sales invoices, and VAT returns, which were accepted by the VAT department. The AO did not reject the books of accounts under section 145(3) of the Act. The Tribunal also considered the specific context of demonetization and the surge in cash sales during that period, relying on various judicial precedents. Consequently, the addition was restricted to Rs. 3,00,000/-, to be taxed under normal rates of income tax, not under section 115BBE.

The Tribunal held that the assessing officer's view was plausible and sustainable in law, based on older judgments of the jurisdictional High Court which were not overruled or distinguished by later judgments. The Tribunal found that the recent judgment in Katlary Karayana was in a different context and not binding on the current case. Therefore, the order of the Principal CIT was quashed, and the appeals were allowed.

The Tribunal held that the Assessing Officer had taken a plausible view based on older judgments of the jurisdictional High Court, which were not overruled or distinguished by the latest judgment. The Tribunal found that the latest judgment in the case of Katlary Karayana was in a different context and thus not binding. Therefore, the Assessing Officer's view was considered sustainable in law, and the revisional order passed by the Principal CIT under Section 263 was quashed.

The Tribunal noted that the assessee prayed for withdrawal of the appeal and the Ld. DR did not raise any objection. Therefore, the appeal was treated as withdrawn.

The Tribunal noted that the assessee could not plead their case effectively before the Ld. CIT(A) and that the Ld. CIT(A) had not passed an order on merits as per Section 250(6) of the Act. Therefore, the Tribunal decided to set aside the order of the Ld. CIT(A) and remand the matter back for fresh adjudication.

The Tribunal noted that the Assessing Officer failed to conduct adequate inquiries into the cash transactions with M/s. National Shroff. The CIT(A)'s revision order was also questioned for not properly examining the assessee's explanations and for essentially substituting its own view. The Tribunal found that the assessment order was framed in haste and remitted the matter back to the assessing officer for fresh adjudication, emphasizing the need for proper investigation into the cash transactions and the nature of the assessee's business (Angadiya or businessman).

The Tribunal considered the request of the assessee for withdrawal of the appeal, which was not objected to by the Revenue. The Tribunal allowed the assessee to withdraw the appeal.

The Tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the cash sales. However, to prevent potential revenue leakage due to cash transactions, a disallowance of 8% of the disputed amount was made and taxed at the normal income tax rate. The addition pertaining to the amount receivable was remanded back to the Assessing Officer for de novo adjudication.

The Tribunal acknowledged the NCLT-approved demerger and the complexity of the tax credit claim. It held that the assessee deserved an opportunity to present its case and evidence before the lower authority. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the Assessing Officer for fresh adjudication on merits.

The Tribunal observed that the AO failed to conduct a detailed inquiry into the cash transactions with M/s National Shroff. The PCIT's order under section 263 was considered justified as the AO's assessment was deemed erroneous for lack of proper investigation. The Tribunal found that the issue was covered by a previous judgment of the coordinate bench. Consequently, the appeals were remitted back to the file of the CIT(A) for fresh adjudication.

The Tribunal held that the AO had conducted adequate inquiry and had taken a plausible view, which cannot be termed as erroneous or prejudicial to the interest of the revenue. The Tribunal relied on the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, emphasizing that the twin conditions of the AO's order being erroneous and prejudicial to the revenue must be satisfied for invoking revisional jurisdiction under section 263.

The Tribunal condoned the delay in filing the appeal, acknowledging the assessee's illiteracy, reliance on a consultant who failed to represent the case, and the ex-parte nature of the CIT(A)'s order. The Tribunal noted that notices from the CIT(A) may not have been properly served and the assessee deserves an opportunity to be heard.

The Tribunal noted that the issue of maintainability of an appeal filed by a struck-off company had been decided in favor of the assessee by previous judgments. While the CIT(A) had dismissed the appeal ex-parte without proper examination, the Tribunal decided to set aside the CIT(A)'s order and remit the matter back for fresh adjudication.

The Tribunal noted that the appellant claimed the transactions were genuine, recorded in books, and reported under SFT. They also argued for a lack of mens rea and no revenue loss. The Tribunal found that the CIT(A) decided the appeal without a remand report and set aside the order.

The tribunal noted that no opportunity of being heard was provided to the assessee before the CPC made adjustments. Relying on a High Court decision, it was held that an opportunity must be given before any adjustments are made. The issue of whether the assessee, as a contractor, falls under Section 194C and whether the disallowance under Section 40a(ia) was correctly applied, was not adjudicated by the AO or CIT(A).

The Tribunal noted that there was a delay of 234 days in filing the appeal, which was attributed to the assessee being a senior citizen, less educated, and unaware of online compliance systems, relying on an accountant who left the job. The Tribunal condoned the delay, holding that the circumstances were beyond the assessee's control and there was no mala fide intention. The Tribunal also noted that the assessee was not given a proper opportunity to be heard before the CIT(E).

The Tribunal considered the assessee's request for withdrawal and noted that the Ld. Sr. DR for the Revenue had no objection to the withdrawal. Accordingly, the Tribunal allowed the assessee to withdraw the appeal.

The assessee requested withdrawal of the appeal as they had opted for the "Direct Tax Vivad Se Vishwas Scheme, 2024". The Revenue had no objection to the withdrawal.

The Tribunal held that the penalty paid for late filing of a bill of entry was compensatory in nature and thus allowable as a business expenditure under section 37(1) of the Act. Regarding commission expenses paid to foreign agents, it was held that since no part of the income accrued or arose in India and the agents had no business connection in India, TDS was not required, and the expenses were allowable. For unaccounted cash receipts, the Tribunal found that the assessee had not received such cash, and the additions made by the Assessing Officer were based on surmises and guesswork, hence not sustainable.

The Tribunal held that the penalty paid for late filing of the bill of entry was compensatory in nature and thus allowable as per Section 37 of the Act. The commission paid to foreign agents was not taxable in India as it did not accrue or arise in India, and hence no TDS was required. The addition for unaccounted cash receipts was deleted as the assessee had not received such cash and the evidence was not conclusive. The appeal of the assessee regarding provision for leave salary was dismissed following a Supreme Court judgment.

The Tribunal held that the penalty paid for late filing of bill of entry was compensatory and allowable. It also held that commission paid to foreign agents was not taxable in India as income did not accrue or arise in India, hence no TDS was required. The addition for unaccounted cash receipts was deleted based on the Settlement Commission's order. The provision for leave salary was held to be deductible in the year of provision, not just payment.

The Tribunal held that the penalty paid for delay in filing bills of entry was compensatory and thus allowable as a business expenditure. The disallowance of commission expenses paid to foreign agents was deleted, as the income did not accrue or arise in India. The addition on account of unaccounted cash receipts was deleted, as the assessee had produced evidence and the Settlement Commission had accepted the explanation. The appeal concerning the provision for leave salary was dismissed, following the Supreme Court's decision in the case of Union of India Vs. Exide Industries Limited.

The Tribunal noted that the assessee had provided substantial documentary evidence, including affidavits from purchasers, land records, and sale deeds, to support the cash deposits. The Tribunal also considered the assessee's status as a senior citizen, which allows for certain amounts to be treated as explained per CBDT circulars. While some documents were self-serving, the overall evidence suggested a plausible explanation for the deposits.

The Tribunal noted that the assessee had provided documentary evidence, including cash book, bank book, and PF withdrawal slips, to explain the source of the cash deposits. The deposits were explained as being from previous savings, PF withdrawals for house construction (which was postponed), and a medical emergency. While the evidence was considered sufficient, a detailed reconciliation for personal expenditure was missing.

The Tribunal noted that while the CIT(E) correctly identified the trust's charitable nature and its benefit to a specific community, it failed to consider Explanation 2 to section 13, which exempts trusts benefiting Scheduled Castes, backward classes, etc., from the restriction. A government notification dated 21/09/2000 listed 'Sathwara' as a backward class in Gujarat.

The Tribunal noted that the CIT(E) did not adequately consider Section 13, Explanation 2, which excludes benefits to Scheduled Castes and backward classes from the restriction under Section 13(1)(b). Given the government notification identifying the 'Satvara Community' as a backward class, the Tribunal restored the matter to the CIT(E) for fresh adjudication.

The Tribunal found that adjustments were made under section 143(1) without providing the assessee an opportunity of being heard, violating the first proviso to section 143(1) and principles of natural justice. Citing a High Court judgment, the Tribunal set aside the CIT(A)'s order and restored the matter for de novo adjudication to the CIT(A), with a directive to afford the assessee a proper opportunity of hearing.

The Tribunal noted that the assessment and penalty orders were ex-parte and the assessee's counsel requested another opportunity before the lower authority. Although the assessee did not comply with notices and showed a non-responsible attitude, the Tribunal, in the interest of justice, decided to grant one more opportunity.

The Tribunal noted that the transactions in the bank accounts were disclosed by Shri Pintu Ratilal Gopani under the IDS 2016 scheme, and tax was paid on the profit element thereof. The Tribunal found that the assessing officer had conducted necessary inquiries and investigations and applied his mind to the issue. The Tribunal concluded that the PCIT's order was not sustainable as the twin conditions for invoking revisional jurisdiction under Section 263 (erroneous and prejudicial to the interest of revenue) were not met.

The Tribunal held that the transaction was a current account entry between a closely related party and not a loan or advance, therefore not violating Section 269T. The Tribunal also noted the disclosure of the transaction in audited statements and the absence of tax evasion allegations.