ITAT Surat Judgments — May 2019

The Tribunal upheld the Commissioner of Income-Tax (Appeals) decision to delete the additions. The CIT(A) had found that the assessee had provided sufficient evidence, including bank statements and confirmations, to establish the identity, creditworthiness, and genuineness of the loan transactions.

The Tribunal dismissed the department's challenge to the deletion of additions related to gross profit and the rejection of books of accounts. The issue of excess interest payment was restored to the Assessing Officer. The assessee's appeal regarding entertainment tax was also restored to the Assessing Officer for fresh consideration.

The Tribunal held that merely filing an appeal is insufficient; it requires effective pursuit. Citing Supreme Court and High Court judgments, the Tribunal found that the assessee's non-appearance indicated a lack of interest in pursuing the appeal.

The Tribunal noted that the addition was based on the gross profit rate of the sister concern, M/s. Dhru Prints. However, the Tribunal had previously deleted the addition made in the case of M/s. Dhru Prints. Therefore, the basis for the addition in the assessee's case no longer survived.

The Tribunal held that the assessee failed to discharge the onus to prove that the commission expenses were incurred wholly and exclusively for business purposes. The admission by the director that no services were rendered by the commission agent was considered a crucial piece of evidence.

The ITAT held that the CIT(A) failed to follow the mandatory requirement of mentioning points for determination and reasons for decision, even when the assessee was absent. Therefore, the CIT(A)'s order was unsustainable.

The Tribunal held that the assessee failed to produce necessary documents and evidence despite multiple opportunities. The Tribunal found no illegality in the issuance of notices and upheld the additions confirmed by the lower authorities.

The Tribunal noted that the assessee did not appear for the hearing, indicating a lack of interest in prosecuting the appeal. Therefore, the appeal was dismissed for want of prosecution.

The Tribunal held that penalty under Section 271(1)(c) is not leviable when the assessee has furnished all relevant facts and the issue was debatable. The claim of expenditure, even if not accepted by the AO, does not automatically amount to concealment of income.

The Tribunal held that the addition was based on an estimate and that the assessee had disclosed all facts and maintained audited books of accounts. The explanation regarding the nature of business and movement of goods was considered plausible, and the AO and CIT(A) were not definite about the exact nature of the default.

The Tribunal held that the CIT(A) was justified in deleting the disallowance. The partnership deed did not mandate payment of interest or remuneration to partners, and the assessee could not be compelled to charge them.

The tribunal held that delayed payments of employee contributions to PF/ESI are not deductible. This is based on the Gujarat High Court's decision in CIT v. Gujarat State Road Transport Corporation.

The Tribunal held that since the quantum addition on which the penalty was levied has been deleted by the ITAT in a separate appeal, the foundation for the penalty no longer exists. Therefore, the penalty is not justified.

The Tribunal held that since no incriminating material was found during the search, additions under Section 68 could not be made in the assessment under Section 153A, especially when original returns were filed and accepted. Completed assessments can only be interfered with based on incriminating material unearthed during the search.

The Tribunal allowed the deduction for gratuity premiums, finding that the scheme was recognized and had been allowed in the past, and that the Gujarat High Court had quashed similar reopening notices. However, the addition of interest income was upheld as the assessee failed to provide reconciliation.

The Tribunal allowed the deduction for gratuity premiums, finding that the scheme was recognized and had been allowed in the past, and that the Gujarat High Court had quashed similar reopening notices. However, the addition of interest income was upheld as the assessee failed to provide reconciliation.

The ITAT held that the CIT(A)'s order was not sustainable in law because it failed to follow the mandatory requirement of Section 250(6) of the Income Tax Act, which requires the appellate order to contain points for determination and reasons for the decision, even in cases of non-appearance.

The Tribunal held that the CIT(A) failed to follow the mandatory requirement of mentioning points for determination and reasons for decision in the appellate order, even in cases of non-appearance. Therefore, the CIT(A)'s order was set aside.

The Tribunal allowed the deduction for gratuity premiums, finding that the scheme was recognized and had been allowed in the past, and that the Gujarat High Court had quashed similar reopening notices. However, the addition of interest income was upheld as the assessee failed to provide reconciliation.

The Tribunal held that since no incriminating material was found during the search, additions under Section 68 could not be made in the assessment under Section 153A, especially when original returns were filed and accepted. Completed assessments can only be interfered with based on incriminating material unearthed during the search.

The ITAT held that the CIT(A) must pass a reasoned order on merits even if the appeal is dismissed for non-prosecution. The CIT(A)'s order lacked reasons for the decision.

The Tribunal held that the CIT should not have rejected the applications solely on the ground that charitable activities had not yet commenced. The focus at the initial stage should be on the genuineness of the objects.

The Tribunal held that the CIT(Exemptions) erred in rejecting the application solely based on the non-commencement of activities, especially since the assessee already had registration under Section 12AA, indicating charitable objects. The case relied upon by the CIT was overruled by the High Court.

The Tribunal held that the CIT should not have rejected the applications solely on the ground that charitable activities had not yet commenced. The focus at the initial stage should be on the genuineness of the objects.

The Tribunal dismissed the appeal as not pressed, citing a CBDT circular that prohibits filing appeals with a tax effect below Rs. 20 lakhs. The circular was also stated to be applicable retrospectively.

The Tribunal noted that Ground No. 1, challenging the assumption of jurisdiction under Section 147, was not pressed and was dismissed. Regarding Ground No. 2, the Tribunal found no apparent contradictions between the sale agreement and the sale deed concerning the quantum of consideration. It was noted that the sale deed acknowledged the prior agreement and the receipt of Rs. 1,14,00,000/- as part payment. The Department did not allege receipt of any amount exceeding the agreed sale consideration. The core issue was the applicability of the provisos to Section 50C. While the amendment was effective from 01.04.2017, the Tribunal, following the consistent view of the ITAT Ahmedabad Benches in cases like Dharamshibhai Sonani, held that these provisos were retrospective in nature, effective from 01.04.2003. As the Revenue did not present contrary orders, the Tribunal held that the assessee was entitled to relief. Consequently, the issue was restored to the AO to verify the execution of the sale agreement on 06.09.2011 and the receipt of partial consideration through banking channels. If verified, the AO was directed to adopt the stamp duty valuation as on 06.09.2011 for capital gains computation. Ground No. 2 was allowed for statistical purposes.

The Tribunal allowed the disallowance on purchases from the sister concern, finding a direct linkage between purchases and profitable exports. It partly allowed the disallowance on vehicle expenses, confirming the disallowance for running expenses but allowing depreciation.

The Tribunal allowed the disallowance on purchases from the sister concern, finding a direct linkage between purchases and profitable exports. It partly allowed the disallowance on vehicle expenses, confirming the disallowance for running expenses but allowing depreciation.

The Tribunal held that the case of the assessee is covered against him and in favour of the Revenue by the order of the Ahmedabad Special Bench in the case of Vijay Sinh R.Rathod Vs. ITO. The Special Bench had held that occupancy rights in the lands in question amounted to a capital asset within the meaning of Section 2(14) of the Act, the sale whereof is liable to be taxed as capital gain under Section 45 of the Act. It was further held that the assessees had sold the capital asset as owners of the land, and the cost of acquisition, though ascertainable, was to be substituted by the fair market value as on 1-4-1981. Even if the Alwara rights and Occupancy rights were considered the same, the cost of acquisition in the hands of the assessees would be that of the forefathers by virtue of Section 49(1)(ii)(a), and they would have the option to substitute the fair market value as on 1-4-1981 under Section 55(2). In the present appeal, both parties accepted that the facts were identical to the Special Bench case, and the lower authorities relied on this order. The Learned AR also fairly accepted that the issue was covered in favour of the Revenue. Therefore, respectfully following the Special Bench order, the appeal of the assessee was dismissed.

The Tribunal noted that the registration under section 12AA was granted to the assessee. Consequently, the appeal was dismissed as withdrawn upon the assessee's request.

The Tribunal found that the ex-parte order passed by the CIT(A) was not in accordance with the principles of natural justice and was an erroneous approach. The case was not decided on merits.

The Tribunal found that the ex-parte order was not in accordance with the principles of natural justice and was an erroneous approach. The case should have been decided on merits, which the CIT(A) failed to do.

The Tribunal held that for the first issue regarding the cost of acquisition, the sale instances considered by the DVO were not for the same survey number, and the DVO himself noted the impugned land's more appropriate location. The CIT(A) also pointed out the unscientific methods used by the registered valuer and the DVO's failure to consider costs like stamp duty. Therefore, the Tribunal found merit in the assessee's argument for an average value. It calculated the average FMV as Rs. 210 per sq. mtr. ( (162 + 290 + 178) / 3 ) and directed the AO to rework the indexed cost of acquisition accordingly. This ground was partly allowed. For the second issue concerning Section 50C, the Tribunal noted that the difference between the stamp duty valuation (Rs. 5.60 crore) and the sale consideration (Rs. 5.11 crore) was Rs. 3,06,250/-, which was less than 10% of the stamp duty valuation. Respectfully following the decisions of the coordinate benches in Rahul Construction and Smt. Sita Bai Ketan, which held that a difference of less than 10% should be ignored, the Tribunal directed the AO to adopt the value declared by the assessee. The addition made by the AO under Section 50C was deleted. This ground was allowed.

The Tribunal held that additions cannot be made solely based on a retracted statement without corroborating evidence. Since the CESTAT also dropped proceedings against the assessee, the additions made by the AO were not sustainable.

The Tribunal held that for the first issue concerning the FMV of the land, the assessee's submission that the land was situated at a more appropriate location compared to the sale instances considered by the DVO held merit. The Tribunal also noted the CIT(A)'s observation that the valuer's method was unscientific and ad-hoc, and the DVO did not consider costs like stamp duty. Considering the entirety of the facts and taking a holistic view, the Tribunal agreed with the assessee's counsel that an average of the values determined by the Registrar Valuer (assessee), DVO, and considered by the CIT(A) would be more reasonable. The average rate was calculated as Rs. 210 per sq. mtr. ((162 + 290 + 178) / 3). The AO was directed to rework the index cost of acquisition using this FMV. This ground was partly allowed. For the second issue regarding the addition under Section 50C, the Tribunal found merit in the assessee's submissions. The difference between the stamp duty valuation (Rs. 5.60 crore) and the sale consideration (Rs. 5.11 crore) was Rs. 3,06,250, which was less than 10% of the stamp duty valuation. Respectfully following the decisions of coordinate benches, including the Pune ITAT in Rahul Constructions and the Jaipur Bench in Smt. Sita Bai Ketan, which held that a difference of less than 10% should be ignored, the Tribunal directed the AO to adopt the value declared by the assessee. The addition made under Section 50C was deleted. This ground was allowed.

The Tribunal held that the genuineness of the cash credit was established as the AO had accepted similar loans as genuine in a subsequent assessment year. The assessee had also provided PAN, bank statements, and returns of income for the lenders, demonstrating their identity, creditworthiness, and the source of the loans.

The Tribunal held that the amended Section 194C(1)(k) was applicable for AY 2008-09, and the assessee failed to establish that individual payments did not exceed Rs. 20,000 or aggregate payments did not exceed Rs. 50,000 to any single person. Therefore, the disallowance was upheld.

The Tribunal held that the addition was not sustainable because the AO did not allow the assessee an opportunity for cross-examination and relied solely on the findings from another assessment. The Tribunal noted that the assessee had provided evidence of the company's genuineness and repayment of the loan.

The Tribunal held that the assessee had sufficient interest-free funds to cover the interest-free advances. Therefore, the disallowance of interest was deleted.

The Tribunal held that the DVO's valuation was not reliable as it considered a sale instance higher than its own determined rate and that the building was valued after demolition. The difference in valuation was also within the 15% limit where the AO should not have referred to the DVO.

The Tribunal found that the ex-parte order was not in accordance with the principles of natural justice and was an erroneous approach. The case should have been decided on merits.

The Tribunal found that the CIT(A) passed ex-parte orders without affording a reasonable opportunity of hearing. It also held that the estimated profit rate of 10% was on the higher side.

The Tribunal found that the CIT(A) passed ex-parte orders without affording a reasonable opportunity of hearing. It also held that the estimated profit rate of 10% was on the higher side.

The Tribunal deleted the addition related to unaccounted sales, finding the memorandum records unreliable. For the additions related to grey cloth, the Tribunal accepted the assessee's alternative plea to apply the previous year's gross profit rate to the confirmed additions, thereby partly allowing the appeal.

The Tribunal upheld the order of the CIT(A), stating that the penalty under Section 271(1)(c) was not attracted due to the existence of two conflicting views on the allowability of the deduction. Therefore, the Assessing Officer was not justified in levying the penalty.

The Tribunal noted that the issue in the present appeal was identical to one previously decided by the ITAT in the assessee's own case for AY 2006-07. Following that precedent, the Tribunal dismissed the assessee's appeal.

The Tribunal held that the assessees failed to provide plausible reasons for the significant delay and did not submit original affidavits or supporting evidence. Therefore, the delay could not be condoned.

The Tribunal admitted the additional ground, noting that the ex-parte order by the CIT(A) was not in accordance with natural justice. The case should be decided on merits, which the CIT(A) had not done.

The Tribunal held that reopening based on third-party statements without allowing cross-examination violates natural justice. Therefore, additions made on such basis are unsustainable.

The Tribunal held that reopening assessments based on third-party statements without providing an opportunity for cross-examination violates the principles of natural justice. The addition made on such basis is unsustainable in law.