This annual digest analyzes all the ITAT stories published in 2023 at taxscan.in2
The AO, without conducting an independent investigation, unilaterally concluded that the transactions were not genuine, adding short-term capital gains as unexplained cash credit under Section 68. The Commissioner of Income Tax (Appeal) [CIT(A)] partially allowed the assesseeās appeal, deleting the addition. The ITAT upheld the CIT(A)ās decision, emphasizing the AOās failure to conduct an independent investigation and reliance on presumptions.
The tribunal noted that the assessee had not claimed exemption under Section 10(38) and offered the profit on share sales as business income, setting off losses from other trades. The decision highlights the importance of a thorough and evidence-based approach by tax authorities in making additions under Section 68, rather than relying on assumptions, preserving the principle of fair and diligent assessment. The appeal of the revenue was ultimately dismissed.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has provided relief to IDBI Bank, stating that interest under Section 244A of the Income Tax Act, 1961, should be calculated by first adjusting the refund towards the interest component and then the remaining balance towards the tax component. The case originated with the filing of the original return of income by the assessee, IDBI Bank, declaring a total income.
Subsequently, a revised return was filed, and after scrutiny, the assessed income was revised. The issue arose when the Assessing Officer (AO) incorrectly granted interest under Section 244A in the order giving effect to the Tribunalās decision.
The Commissioner of Income Tax (Appeal) [CIT(A)] relied on a decision in a similar case involving Bank of Baroda and granted relief to IDBI Bank. The ITAT upheld the CIT(A)ās decision, rejecting the departmentās argument that interest on refunds should not be granted to the assessee. The tribunal emphasized that interest under Section 244A should be calculated by adjusting the refund towards the interest component first. The AO was directed to recompute the interest, adhering to this principle after providing the assessee with a proper opportunity to be heard. This decision establishes a clear methodology for calculating interest under Section 244A, benefiting the assessee.
The Pune bench of the Income Tax Appellate Tribunal (ITAT) held that the depreciation under Section 32(1) (ii) of the Income Tax Act, 1961 cannot be allowed when no goodwill has been acquired by a subsidiary company nor by any purchase.
The tribunal held that the subsidiary had no recorded goodwill, and the company failed to prove excess purchase consideration. The claim was denied as the acquisition lacked factual basis, rendering any depreciation request baseless.
The Pune ITAT bench, with members S.S. Viswanethra Ravi and G.D. Padmahshali, dismissed the appellantās claim for depreciation. The tribunal ruled that no goodwill was acquired or excess payment made, warranting the disallowance of the appeal.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted fresh adjudication for the failure of the Assessing Officer (AO) to examine the additional evidence relating to the disallowance of sales promotion expenses.
The appellant argued that most expenses were not for gifts to doctors, violating Medical Council regulations, and sought admission of newly furnished evidence for a fair decision. The Departmental Representative countered that the AO had not examined the additional evidence.
The two-member ITAT bench, including B.R. Baskaran and Narendra Kumar Choudhry, admitted additional evidence, setting aside the CIT(A) order. The case was returned to the AO for a fresh examination, considering the furnished or potential additional evidence for accurate computation of the assesseeās total income.
The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT), quashed assessment order and observed that non-issuance of notice under Section 143(2) of the Income Tax Act, 1961 is not a curable defect.
The case involved a film production partnership firm that erroneously claimed Rs.1.5 crores. The reassessment, initiated after four years without evidence of non-disclosure, was deemed invalid.
Since the law is well settled that non-issuance of notice under Section 143(2) of the Act is not a curable defect and since in the instant case, the Assessing Officer has failed to issue the notice under Section 143(2) prior to finalizing the re-assessment order, therefore, the impugned assessment order suffers from patent illegality and therefore, deserves to be quashedā the Bench noted.
The Pune bench of the Income Tax Appellate Tribunal (ITAT) sustained the addition and held that the failure of the assesse to offer income on the sale of the residential house neither in the original Income Tax Return (ITR) nor the return filed in response to notice under Section 148 of the Income Tax Act, 1961.
Despite her husband filing an allegedly invalid return claiming full ownership, the tribunal affirmed her 50% ownership, leading to a Long-term capital gain of Rs.3, 78,420.
The Single member bench comprising of R.S. Syal (Vice-President) held that the addition had been rightly made and sustained and therefore, the appeal of the assesse was dismissed.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the floor bed area open to the sky and balcony area below the floor level doesnāt form part of the constructed area and shall be allowed as a deduction under Section 80IB(10) of the Income Tax Act, 1961.
The assesse, a construction developer, claimed deductions totaling Rs.1,16,16,45,271. The AO disallowed part of it, but the CIT (A) reversed the decision. The revenue appealed to the tribunal.
The Two-member bench upheld that open-to-sky floor bed area and balcony space below floor level are excluded from the constructed area for Section 80IB (10) deductions. The tribunal found no issues in CIT (A)ās decision, dismissing the revenueās appeal.
The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assesse by treating the Income Tax return (ITR) as valid and held that there is no need to audit the accounts when the gross business receipts are less than the threshold limit of Rs.1.00 Crore as prescribed under Section 44AB of the Income Tax Act, 1961
The AO invalidated the return based on a CPC order, stating defects were unrectified. The tribunal found a legal mistake and accepted the appeal.
The Two-member bench clarified that the assesseeās rectification application wasnāt related to the invalid return, and the gross business receipts were below Rs.1.00 crore, exempting audit under Section 44AB. The bench deemed the return valid, directing the AO/CPC to process it accordingly. The assesseeās appeal was allowed.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted relief to HDFC Life Insurance Company and held that when the life insurance business prepares the financial statement as per the Insurance Regulatory and Development Authority Act (IRDA) regulations, then for the purpose of taxation the provision of Section 44 of the Income Tax Act, 1961 can apply.
The AOās adjustments to the assesseeās income were rejected by the CIT (A), relying on a precedent. The bench upheld the decision, citing identical facts and previous relief granted to the assesse in similar assessments.
The bench acknowledged the merit in the assesseeās argument, citing a coordinate benchās decision that recommended computing income under Section 44 of the Income Tax Act. Consequently, the bench upheld the CIT (A)ās decision to tax the income under Section 115B of the Income Tax Act.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition made on the corpus fund and held that the receipt of compensation for hardship is in the nature of capital receipt and shall not be liable to tax.
Compensation for hardship in a housing society redevelopment, totaling ā¹52,88,045, was deemed a capital receipt, not subject to tax. The AOās argument of it being a commercial activity resembling dividends was rejected, and the income was not taxed under āincome from other sources.ā
The assesse received multiple compensations, including a ā¹21, 77,069 corpus amount, ā¹9, 50,000 for individual membersā shifting expenses, and ā¹21, 60,976 for temporary transit accommodation during construction, lasting for an initial 24-month period. These details were presented in the submission for consideration.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has tax deductions under section 80G of the Income Tax Act, 1961 allowable on donations received by public trusts for recycling plastic waste.
The Huhtamaki Foundation challenged the rejection of its application for approval under section 80G of the Income Tax Act. The Commissioner of Income Tax cited the commercial nature of the foundationās recycling activities. The foundation argued its environmental preservation goals met charitable criteria. The bench ruled in favor, noting the absence of objections or doubts about the foundationās activities.
The Tribunal held that the assesse satisfies all the conditions for the grant of approval under section 80G of the Act and set aside the denying of the grant of approval under section 80G of the Act. The ITAT allowed the appeal.
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) observed that Initiation of revision proceedings by issuing Show Cause Notice (SCN) without DIN is invalid.
The validity of Revision proceedings against Nova Properties Pvt. Ltd. was questioned due to the absence of Document Identification Number (DIN) in the Show Cause Notice and Revision order. The company faced scrutiny for sales turnover disparities. The assesse cited CBDT Circular No. 19/2019, but the Revenue argued DIN exceptions and regularization procedures were in place, maintaining the proceedingsā validity.
According to the analysis of a two-member bench of the Tribunal- Anupama Gupta (Accountant member) and T.r. Senthil Kumar (Judicial member), commencing Revision proceedings by issuing a Show Cause Notice without a Document Identification Number (DIN) and issuing a Revision order dated 30.03.2022 without DIN is legally invalid. Consequently, the appeal filed by the Assesse was granted.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that, income tax authorities cannot determine how much expenditure should have been incurred for the purpose of business.
Serco India Pvt. Ltd., a subsidiary of Serco Group PLC, faced increased charges in assessments, including sundry creditors and disallowances. The Commissioner of Income Tax (Appeals) upheld and increased these additions, leading to an appeal. The tribunal observed that non-allocable expenses, like those for exploring new business opportunities, should not be arbitrarily disallowed. It emphasized the entityās business judgment and deemed the debited expenses genuine and necessary for overall business operations, overturning the CIT(A)ās decision.
The tribunal highlighted that trade payables were nominal, indicating the genuineness of sundry creditors, and thus, held that the impugned addition under Section 68 was unwarranted.
The Income Tax Appellate Tribunal (ITAT), Mumbai bench, directed the Assessing Officer (AO) to consider the stamp duty value on the date of the letter of allotment for making additions under section 56(vii) (b) of the Income Tax Act, 1961.
Assesse Rekha Singh faced scrutiny for a jointly purchased property, with the AO adding ā¹24, 33,350 under section 56(vii) (b) due to a variance between the declared and Stamp Duty values. The CIT (A) upheld the addition. Rekha Singh appealed, arguing that the Stamp Duty value on the agreement date should apply, citing the proviso to section 56(2) (vii). The tribunal will now assess the appeal, considering the paymentās timing and joint ownership.
The Tribunal, after reviewing the facts, directed the AO to consider the stamp duty value on the date of allotment (16.10.2010) for section 56(2) (vii) (b) purposes, not the value on the registration date.
The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) observed that availability of cash with different companies is sufficient to explain cash found at time of search.
Cross-appeals were filed by the Revenue and the assesse regarding unexplained cash found during a 2017 search in the SMC group. The CIT (A) upheld the addition under section 69A, considering the Accountantās failure to explain the cash fully. The assesse argued that the cash belonged to various SMC group companies, recorded in their books. The tribunal dismissed the Revenueās appeal, acknowledging the recorded cash in hand, and rejected returning the matter for unnecessary re-verification, considering prior acceptance by the Assessing Officer.
The two member bench of the tribunal comprising Astha Chandra, member (Judicial) and N K Billaiya, member (Accountant) concluded that in the result, the appeal of the assesse is partly allowed whereas the appeal of the Revenue is dismissed.
The Jodhpur Bench of the Income Tax Appellate Tribunal (ITAT) has remanded an appeal to CIT(A) for fresh adjudication for failure to consider fresh evidence as per Rule 46A of the Income Tax Rules.
The ITAT remanded an appeal to CIT(A)[NFAC] as the CIT(A), Bikaner, failed to consider fresh evidence submitted under Rule 46A of the Income Tax Rules. The assesse, in response to an assessment order, appealed to CIT(A), providing additional evidence. Suresh O jha represented the assesse, arguing for the evidenceās acceptance. The tribunal noted that the CIT(A)[NFAC] didnāt discuss the additional evidence and inferred its admission when forwarded to the ACIT, Sriganganagar, highlighting procedural lapses in the Faceless Appeal Scheme transition.
In these facts and circumstances of the case, as the Faceless Appeal was a new concept to CIT (A) as well as Assesse, the error which has crept is a possible human error, the tribunal bench observed.
In these facts and circumstances of the case, we deem it appropriate to set-aside the order of CIT (A) [NFAC] to CIT (A) for denovo adjudication, the Tribunal Bench of Pavan Kumar Gadale, Judicial Member and Dr. Dipak P. Ripote, Accountant Member held.
The Income Tax Appellate Tribunal (ITAT), Mumbai bench, upheld the deletion of disallowance of the deduction claimed under Section 80G of the Income Tax Act, 1961, in respect of Corporate Social Responsibility (CSR) expenses.
Rustomjee Realty Private Limited faced scrutiny for claiming a Section 80G deduction on Corporate Social Responsibility (CSR) expenditure of Rs. 11, 00,000. The Assessing Officer disallowed it, citing non-voluntary payment under Section 135 of the Companies Act, 2013. The CIT (A) overturned the decision, but the revenue appealed. The tribunal ruled in favor, noting that while CSR expenses arenāt allowed under Section 37, they are deductible under Section 80G of the Income Tax Act.
After reviewing the facts and records, the two-member bench of Om Prakash Kant (Accountant Member) and Sandeep Singh Karhail (Judicial Member) upheld the deletion of disallowance of the deduction claimed under Section 80G of the Income Tax Act in respect of CSR expenses. Therefore, the bench dismissed the revenue appeal. Sanyogita Nagpal, Counsel, appeared for Revenue, and Naresh Kumar, Counsel, appeared for the assesse.
The Income Tax Appellate Tribunal (ITAT), Raipur bench, directed re adjudication in respect of the mismatch between 26AS and contract receipt of the assesse.
Sandeep Surendran Nair, a mechanical contractor, faced scrutiny for a Rs.28, 62,702 mismatch between 26AS and contract receipts in his 2014-15 return. The CIT(A) upheld the Assessing Officerās addition. The assesseeās counsels argued that the discrepancies with Vasavadatta Cement and Ultra Tech Cement (Birla White) arose from accounting practices, supported by additional evidence. The tribunal accepted the evidence, noting no objection from the Revenue, and ruled in favor of the assesse.
After reviewing the facts and records, the two-member bench of Arun Khodpia (Accountant Member) and Ravish Sood (Judicial Member) restored the file to the AO, with a direction to verify the claim of the assesse, considering the additional evidence. The bench allowed the ground raised by the assesse.
The Income Tax Appellate Tribunal (ITAT), Raipur bench, directed the assesse, Sandeep Surendran Nair, a mechanical contractor in the cement industry, to produce a Chartered Accountant certificate in prescribed Form 26 for the re-adjudication of the disallowance made under Section 40(a) (ia) of the Income Tax Act, 1961.
Sandeep Surendran Nairās scrutiny assessment for the 2014-15 tax year resulted in the disallowance of Rs.1, 54,827 under Sec. 40(a)(ia) for interest paid to NBFC. The CIT(A) upheld the decision, but the assesseeās counsels argued that the CA certificate, filed under Rule 29 of the ITAT Rules, showed inclusion of interest charges in Religare Finvest Ltd.ās return for the same assessment year, presenting evidence to support their case.
Despite the CA certificate mentioning interest charges inclusion, the tribunal found inaccuracies due to the non-use of the prescribed āForm 26A.ā The bench directed the production of the Chartered Accountant certificate in Form 26 for re-adjudication of the disallowance under Section 40(a)(ia) of the Income Tax Act, recognizing the technical error in the provided certificateās format. The two-member bench comprised Arun Khodpia (Accountant Member) and Ravish Sood (Judicial Member)
The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that the guarantee fee charged by the trust for providing third-party guarantees to small-scale industries did not amount to a profit motive.
The Credit Guarantee Fund Trust for Micro and Small Enterprises faced scrutiny, with the Assessing Officer rejecting its exemption claim under section 11. Disallowances were made on the provision for guarantee claims. The CIT (A) partly allowed the claim, leading to a second appeal. The tribunal ruled in favor, emphasizing the trustās non-profit motive and charitable activities, rejecting the Revenueās contention of commercial thriving. The deficit in the trustās financials reflected its role in facilitating inclusive growth for small and micro enterprises.
After reviewing the facts and records, the two-member bench concluded that the assesse trust, established by the Government of India, pursued the activity of advancing general public utility without engaging in trade, commerce, or business. Therefore, the guarantee fee charged by the trust for providing third-party guarantees to small-scale industries did not amount to a profit motive.
The Income Tax Appellate Tribunal (ITAT) Mumbai bench directed the allowance of a deduction for the claim of guarantee provided by the Credit Guarantee Fund Trust for Micro and Small Enterprises, an irrevocable trust settled by the President of India through the Ministry of Small Scale Industry (SSI) & Average Rate Index (ARI), Government of India, and Small Industries Development Bank of India (SIDBI).
The Credit Guarantee Fund Trust for Micro and Small Enterprises, providing credit guarantees to MSMEs, faced scrutiny with the AO disallowing a deduction for guarantee provisions. The CIT (A) upheld the disallowance. The tribunal, considering the mercantile system and citing the Supreme Courtās decision in Rotrock Control India Pvt. Ltd. vs. CIT, recognized provision for warranty as a legitimate deduction, overturning the lower authoritiesā decision.
After reviewing the facts, the two-member bench directed the allowance of the deduction for the guarantee provided by the trust to lending institutions, supporting the ground raised by the assesse.
The Kerala High Court directed the petitioner to file a stay application as the Income-tax appeal is pending before the Income Tax Appellate Tribunal (ITAT) on Income Tax Recovery
Appellants Puliyammakkal Mathai Sebastian and Punathil Nishriya contested an order by the 1st respondent, requiring 20% payment of the demand to be treated as non-defaulters in Income Tax Act assessments. The Single Judge, after hearing both sides, dismissed the writ petitions. The appellants were advised to file stay applications before the Appellate Authority, as their appeals against assessment orders were pending. Sri. S. Ananthakrishnan represented the appellants, and Sri. Christopher Abraham represented the income tax department.
The Single Judge has granted one week to the appellants to file the stay applications. While dismissing the petition, the division bench of Dr Justice A K Jayasankaran Nambiar & Dr Justice Kauser Edappagath held that āif the appellants prefer stay applications before the Commissioner of Income Tax (Appeals) within one week from today, he shall consider and dispose of either the stay applications or the appeals itself within three weeks after the receipt of the stay applications after hearing both sides.
An estimated addition of 10% (Rs.48,53,306/-) to the assesseeās income was made due to lacking account books and vouchers. The Commissioner of Income Tax (Appeals) examined and deleted the addition upon the assesseeās appeal.
The Revenue appealed against additions, while the assesse filed a Rule 27 petition, contending unsustainability without incriminating post-search material and finalized assessment. The counsel argued against a deemed dividend addition, highlighting the assesseeās non-registration as a shareholder, resulting in deletion of the addition and dismissal of the Revenueās appeal. The Rule 27 petition emphasized the absence of incriminating material and finalized assessment. The Commissioner of Income Tax (Appeals) reviewed facts, obtained a remand report, and deleted the addition for advance payment without TDS, criticizing the Assessing Officerās mechanical approach.
After hearing both parties and reviewing the records, the two-member bench of the tribunal comprising Yogesh Kumar (Judicial) member and Shamim Yahya (accountant) member concluded that the Commissioner of Income Tax (Appeals) did not contest the proposition. The reasons presented by the Appellate Authority are deemed cogent, and we affirm them. Consequently, the Revenueās appeal stands dismissed. In conclusion, all three appeals filed by the Revenue were dismissed.
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the salary received by a Non-Resident of India (NRI) in India by offering employment in Singapore shall not be taxed in India.
The assesse, employed by M/s. Master Card India Service Pvt Limited, received a salary of Rs. 445.88 Lacs during a long-term assignment in Singapore. Claiming the salary was taxed in Singapore, the assessee didnāt offer it to tax in India. The AO, citing Articles 15 and 25 of the Double Taxation Avoidance Agreement, ruled that as a Singapore resident, the assessee wasnāt eligible for relief under Article 15, and the salary was taxed in India.
The two-member bench, consisting of V. Durga Rao (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member), ruled in favor of the assessee, stating theyāre entitled to Article 15 benefits under the relevant Double Taxation Avoidance Agreement. Verification is required to ensure the income was already taxed in Singapore, and no credit for Indian taxes was claimed there. The appeal was allowed.
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