Income Tax Act, 1961 – Sections 80IB, 80A(2), 80AB, 80B(5) - The appellant, a pharmaceutical company, claimed deductions under Section 80IB for profits derived from its Daman Units. During appellate proceedings, the CIT(A) enhanced the income by Rs.15.89 lakh, disallowing the claim on the grounds that losses from one unit (Daman Unit-I) were not adjusted against the profits of other units (Daman Units II and III). The CIT(A) relied on the Supreme Court ruling in Synco Industries Ltd. to hold that losses from one unit must be adjusted before claiming deductions for profits from another. The appellant contended that each unit should be treated independently, as per Section 80IB(6) and precedents like Dewan Kraft Systems (P.) Ltd. - Whether losses from one eligible unit must be mandatorily adjusted against the profits of other eligible units under Section 80IB - Whether the CIT(A)’s reliance on the Supreme Court’s decision in Synco Industries Ltd. was justified in the context of independent units - HELD - The Tribunal held that under Section 80IB(6), the profits of an eligible undertaking must be computed as if it were the only source of income, independent of other units. Losses from one unit cannot reduce the profits of another for computing deductions - The CIT(A)’s reliance on Synco Industries Ltd. was misplaced, as the Supreme Court in that case addressed situations where gross total income was nil, which was not applicable here since the appellant had positive gross total income - The Tribunal emphasized the Delhi High Court's ruling in Dewan Kraft Systems (P.) Ltd., which clarified that deductions under Section 80IB must be computed separately for each unit without inter-unit adjustments - The Tribunal quashed the enhancement by the CIT(A), holding that deductions under Section 80IB should be computed for each unit independently, without set-off of inter-unit losses. The appeals were allowed, and the Assessing Officer was directed to delete the additions
Income Tax Act, 1961 – Sections 9(1)(vii), 44BB, 195, 270A, 234A, 234B and 234D - India-USA DTAA - The appellant, a US-based company, challenged the assessment order treating its Indian subsidiary, SanDisk India, as a Dependent Agency Permanent Establishment (DAPE) under the India-USA DTAA. The assessment attributed Rs.194.44 crore as taxable income in India under Section 44BB, based on findings from a survey under Section 133A. The survey revealed SanDisk India's involvement in marketing, sales, and customer support for the appellant. Separately, salary reimbursements to the appellant by SanDisk India for seconded employees were classified as Fees for Technical Services (FTS) under Section 9(1)(vii), invoking the "make available" clause of the DTAA - Whether SanDisk India constitutes a DAPE of the appellant under the India-USA DTAA, making the appellant's income taxable in India - Whether salary reimbursements for seconded employees qualify as FTS under the DTAA and are subject to tax in India - HELD - The Tribunal ruled that SanDisk India's activities for its affiliate, SanDisk Ireland, did not establish a DAPE relationship with the appellant under the DTAA. No evidence showed that SanDisk India had authority to conclude contracts or habitually exercised such authority on behalf of the appellant - For salary reimbursements, the Tribunal noted that payments were cost-to-cost reimbursements, with TDS already deducted under Section 192 by SanDisk India. The absence of a "make available" clause in the agreement between the appellant and SanDisk India meant that technical knowledge was not transferred for independent use. Therefore, the payments did not constitute FTS under the DTAA - The Tribunal emphasized that tax treaties override domestic provisions unless specifically stated otherwise, and the reliance on survey findings alone was insufficient to establish a DAPE or FTS - The Tribunal set aside the findings of the AO and DRP, holding that SanDisk India was not a DAPE of the appellant, and the appellant's income was not taxable under the DTAA. Similarly, salary reimbursements were not taxable as FTS. The appeal was partly allowed, with certain issues remanded for fresh adjudication
Income Tax Act, 1961 – Sections 9(1)(vi), 44BB, 90(2), 197 - India-Singapore DTAA - The assessee, a Singapore-based entity, earned revenue by providing a diving support vessel for offshore services to an Indian company. The revenue was subjected to scrutiny to determine whether it constituted "royalty" under Section 9(1)(vi) or taxable as business income under Section 44BB of the Income Tax Act. The assessee argued that it had no Permanent Establishment (PE) in India and was entitled to treaty benefits under the India-Singapore DTAA. Despite no finding of a PE, the AO taxed the income under Section 44BB based on a withholding tax certificate issued under Section 197, treating the receipts as taxable in India - Whether the income derived from providing a vessel for offshore services is taxable under Section 44BB of the Income Tax Act or under the provisions of the India-Singapore DTAA - Whether the issuance of a Section 197 certificate for withholding tax precludes the assessee from claiming treaty benefits - HELD - The assessee, a tax resident of Singapore, was entitled to treaty benefits under the India-Singapore DTAA. The income constituted "business income" and was not taxable in India due to the absence of a PE, as established under Articles 5 and 7 of the treaty - Section 44BB does not override the provisions of Sections 4, 5, 9, or 90 of the Income Tax Act. In the absence of a PE, the presumptive taxation regime under Section 44BB was inapplicable - The reliance on the withholding tax certificate issued under Section 197 to determine taxability was misplaced, as such certificates are provisional and cannot override substantive provisions of law or treaty benefits - Citing various judicial precedents, the Tribunal concluded that merely providing a vessel under a time charter agreement does not constitute royalty under Article 12 of the DTAA or Section 9(1)(vi) of the Income Tax Act - The Tribunal quashed the addition made under Section 44BB and allowed the appeal, ruling that the assessee's income was not taxable in India in the absence of a PE and that DTAA benefits were fully applicable
Income Tax Act, 1961 – Sections 143(3), 153A, 263, 270A(9)(e) - The appellant, a tile and sanitaryware manufacturer, underwent a search under Section 132, resulting in a revised return under Section 153A, declaring Rs.17.39 crore, up from Rs.9.85 crore in the original return. The AO assessed additional income of Rs.32.25 lakh as undisclosed and initiated a penalty under Section 270A for underreporting. The Principal Commissioner (PCIT) invoked Section 263, alleging failure to initiate penalty for underreporting in consequence of misreporting on the entire suppressed income of Rs.7.41 crore. The PCIT directed the AO to revise the assessment and invoke penalties under Section 270A(9)(e) - Whether the PCIT was justified in invoking Section 263 to direct initiation of penalty under Section 270A(9)(e) for misreporting of income - Whether the alleged underreporting satisfied the conditions under Section 270A(2) - HELD - The Tribunal held that Section 270A requires strict compliance with its provisions. Underreporting must meet the definitions in Section 270A(2), none of which applied in the appellant's case since no intimation was issued under Section 143(1)(a), and the reassessed income was not greater than assessed income - Misreporting penalties under Section 270A(9)(e) presuppose valid identification of underreported income. The machinery provisions for penalty computation failed as the foundational conditions under Section 270A(2) were not met - The Tribunal rejected the PCIT’s reliance on Section 263, noting that the AO’s assessment did not omit any mandatory provisions and the penalty direction lacked legal grounding - The Tribunal quashed the PCIT’s order under Section 263, holding the direction to initiate penalty under Section 270A(9)(e) as legally untenable. The appeal was allowed in favor of the appellant
Income Tax Act, 1961 – Sections 10(37), 56(2)(viii), 145B, 263 - The appellant received interest on enhanced compensation for the compulsory acquisition of agricultural land under Section 28 of the Land Acquisition Act. The Assessing Officer treated the interest as exempt under Section 10(37) following precedents, including the Supreme Court decision in CIT v. Ghanshyam (HUF). The Principal Commissioner of Income Tax (PCIT) invoked Section 263, set aside the assessment order, and directed fresh consideration, arguing the AO ignored amendments under Section 56(2)(viii) and related jurisprudence - Whether the interest on enhanced compensation qualifies as exempt income under Section 10(37) or taxable under Section 56(2)(viii) as "Income from Other Sources" - Whether the PCIT’s invocation of Section 263 was justified in treating the assessment order as erroneous and prejudicial to the Revenue - HELD - The Tribunal noted that the amendments by Finance (No. 2) Act, 2009, introduced Section 56(2)(viii) and Section 145B, making interest on compensation or enhanced compensation taxable under "Income from Other Sources" - The Jurisdictional High Court in Inderjit Singh Sodhi (HUF) clarified that such interest is no longer exempt under Section 10(37) post-amendment and is taxable under Section 56(2)(viii), rendering the reliance on Ghanshyam (HUF) outdated in this context - The PCIT rightly invoked Section 263 as the AO failed to consider these amendments and binding judicial precedents. The Tribunal dismissed the argument of a "plausible view" since the AO’s approach ignored prevailing law as interpreted by the Jurisdictional High Court - The Tribunal upheld the PCIT’s order under Section 263 and dismissed the appeal, directing the Assessing Officer to reassess the income in line with the amended provisions and judicial precedents
Income Tax Act, 1961 – Sections 69A, 40A(3), 40(a)(ia), 143(3), 133A - The appellant, a textile manufacturer, deposited Rs.19.02 crores in cash during the demonetization period, claiming the source to be cash sales and opening stock. The Assessing Officer (AO) rejected the claim, adding the amount as unexplained money under Section 69A, citing discrepancies in cash sales and revised VAT returns. Disallowances were also made for knitting charges under Section 40A(3), and set-off of brought forward losses was denied. The CIT(A) upheld the major additions, leading to the present appeal - Whether cash deposits during demonetization can be treated as unexplained money under Section 69A despite being attributed to recorded cash sales and opening stock - Whether disallowance of knitting charges under Section 40A(3) was justified - Whether the denial of set-off of brought forward losses was lawful - HELD - The cash deposits were sourced from recorded cash sales and adequately supported by VAT returns, audited financials, and stock records. The AO failed to disprove the genuineness of cash sales with contrary evidence. Invoking Section 69A was erroneous as the cash deposits were recorded in the books, negating the element of "unexplained money" - On knitting charges, the Tribunal partly upheld the disallowance under Section 40A(3) to the extent of actual cash payments exceeding the prescribed limit while deleting duplicative disallowances under Section 40(a)(ia) - Directed the AO to grant the set-off of brought forward losses after verification in accordance with law - The appeal was partly allowed. The Tribunal deleted the addition under Section 69A, restricted the disallowance under Section 40A(3), and remanded the matter of brought forward losses for verification and set-off
Income Tax Act, 1961 – Sections 80P(2)(a), 80P(2)(d) - The appellant, a cooperative housing society, claimed a deduction of Rs.6,62,116 under Section 80P(2)(d) for interest received from a nationalized bank. The Assessing Officer disallowed the claim, stating that the interest income did not qualify for deduction. On appeal, the Commissioner (Appeals) upheld the disallowance, leading to the current appeal before the Tribunal - Whether interest income received from a nationalized bank qualifies for deduction under Section 80P(2)(d) of the Income Tax Act - HELD - The Tribunal analyzed Section 80P(2)(d), which provides for a deduction on interest or dividends derived by a cooperative society from investments made in other cooperative societies - It observed that the interest income in question was received from a nationalized bank and not from a cooperative society, making the claim under Section 80P(2)(d) inapplicable - Relying on the Hon'ble Supreme Court's decision in Totgars Co-operative Sale Society Ltd. and distinguishing the decision of the Andhra Pradesh High Court in The Vavveru Co-operative Rural Bank Ltd., the Tribunal clarified that interest earned from nationalized banks does not qualify under Section 80P(2)(d) - The Tribunal further held that the funds deposited in the nationalized bank were not sourced from the activities listed under Section 80P(2)(a), disqualifying the income under that provision as well - The appeal was dismissed, and the disallowance of Rs.6,62,116 under Section 80P(2)(d) was upheld. The Tribunal concluded that the interest income from nationalized banks does not qualify for deduction under the Income Tax Act
Income Tax Act, 1961 – Sections 244A(1) and 244A(2) - The assessee, engaged in pharmaceuticals, sought refund along with interest under Section 244A for tax paid during AYs 1999-2000 and 2000-01. The Assessing Officer (AO) computed interest from June 2013, post a Tribunal order allowing deductions related to Drug Pricing Equalization Account (DPEA) liability and price differentials. The assessee claimed interest from the first day of the assessment year, asserting no delay attributable to it. The CIT(A) held that the delay issue must be decided under Section 244A(2) by the Chief Commissioner or Commissioner, and declined jurisdiction - Whether interest under Section 244A should be computed from the first day of the assessment year or a later date - Whether the delay in processing the refund was attributable to the assessee under Section 244A(2) – HELD - Interest under Section 244A(1) must be computed from the first day of the assessment year unless the delay in refund proceedings is attributable to the assessee, as per Section 244A(2). It relied on rulings from the Bombay High Court in CIT v. Melstar Information Technologies Ltd. and Pr. CIT v. State Bank of India - The Tribunal found no evidence that the delay was due to the assessee. Raising claims for deductions during appeals, allowed by higher authorities, does not amount to attributing delay to the taxpayer. Therefore, interest should accrue from the first day of the relevant assessment year - The appeals were allowed. The AO was directed to compute interest under Section 244A(1) from the first day of the assessment years 1999-2000 and 2000-01 without excluding any period, as the delay was not attributable to the assessee
Income Tax Act, 1961 – Sections 68, 133(6), 147 and 148 - The assessee filed a return declaring NIL income for AY 2012-13. The original assessment under Section 143(3) added disallowances for donation and depreciation but accepted unsecured loans from M/s Santoshima Tradelink Ltd. Subsequently, based on an investigation indicating that M/s Santoshima Tradelink Ltd. provided accommodation entries, the AO reopened the assessment under Section 147, adding Rs.1 crore as unexplained cash credit under Section 68. The assessee argued that reopening was based on a change of opinion and challenged the addition for lack of opportunity to cross-examine key witnesses and insufficient grounds - Whether reopening of assessment under Section 147 was justified or constituted a mere change of opinion - Whether the addition under Section 68 was valid despite non-compliance by M/s Santoshima Tradelink Ltd. to notices under Section 133(6) - Whether denial of cross-examination of witnesses violated principles of natural justice – HELD - The Tribunal dismissed the assessee's challenge to reopening, holding that information from the investigation wing provided specific and reliable grounds, distinct from the original scrutiny, justifying reassessment. Reopening within six years was valid under Section 149 as the income exceeding Rs.1 lakh had escaped assessment - The Tribunal observed that the lower authorities made the addition primarily because notices to M/s Santoshima Tradelink Ltd. under Section 133(6) went unserved. However, the assessee argued that the party had eventually responded after the assessment’s conclusion. The Tribunal deemed it necessary to verify this response, remanding the matter to the AO for fresh examination and allowing the assessee to provide an updated address for issuing a fresh notice - The Tribunal noted that the assessee was not afforded an opportunity to cross-examine witnesses, particularly Shri Vipul Vidur Bhatt, whose statements formed the basis of the addition. It directed the AO to provide such an opportunity during reassessment - The appeal was partly allowed for statistical purposes. The Tribunal upheld the reopening but remanded the Section 68 addition for re-examination, ensuring adherence to principles of natural justice and due verification
Income Tax Act, 1961 – Sections 234C and 115JB - The appellant, a subsidiary engaged in financial holdings, filed its income return for AY 2019-20, declaring income under both normal provisions and Minimum Alternate Tax (MAT) under Section 115JB, with the latter being higher. The Centralized Processing Centre (CPC) enhanced the interest under Section 234C from Rs.29,51,188 to Rs.1,48,04,175, citing shortfall in advance tax payments. The appellant contended that the shortfall arose due to capital gains on investment sales, which occurred in the fourth quarter (March 28, 2019), and promptly paid the advance tax for the same on March 31, 2019 - Whether interest under Section 234C for deferment of advance tax is chargeable when the income from capital gains arises only in the fourth quarter - Whether the appellant's computation and payment of advance tax for capital gains by March 31, 2019, suffices to avoid additional interest liability – HELD - The Tribunal observed that liability under Section 234C applies to deferment in advance tax payments but includes a proviso exempting capital gains arising after the due dates for earlier installments, provided the entire tax is paid by March 31 of the financial year - The Tribunal referred to prior decisions, emphasizing that for capital gains arising late in the fiscal year, taxpayers cannot be held liable for advance tax shortfalls before the gain's realization - It was held that the CPC erred in computing interest under Section 234C by treating the capital gains as part of earlier quarter liabilities, ignoring the specific exemption in the proviso - The Tribunal directed the deletion of the additional interest of Rs.1,18,52,988 levied under Section 234C. The appeal was partly allowed, with other grounds deemed consequential and dismissed accordingly
Income Tax Act, 1961 – Sections 147, 148 and 154 - The assessee filed returns for AYs 2014-15 and 2017-18, which were scrutinized under Section 143(3), and assessments were completed. Later, reassessment proceedings under Section 147 were initiated, citing discrepancies in disallowance under Section 14A and lack of documentation for claims under Section 35(2AB). The assessee contested the reopening, claiming it was based on a mere change of opinion. The CIT(A) initially upheld the reopening but later allowed the assessee’s rectification application under Section 154, referencing the Supreme Court decision in Techspan India Pvt. Ltd. without thorough factual analysis. The Revenue challenged the rectification order - Whether the reassessment proceedings initiated under Section 147 were valid or constituted a mere change of opinion - Whether the CIT(A)’s rectification order under Section 154 was justified without proper factual analysis – HELD - The Tribunal observed that reopening under Section 147 based on the same facts already scrutinized in the original assessment constitutes a mere change of opinion. As per the Supreme Court in Techspan India Pvt. Ltd., reassessment cannot be initiated if the original assessment considered the issues explicitly or by implication - However, the rectification order under Section 154 lacked necessary factual analysis and reasoning, as required by the Techspan precedent. Rectification must involve careful consideration of whether reassessment was truly based on new material or simply a re-evaluation of existing facts - The Tribunal set aside the rectification order under Section 154 and remanded the matter to the CIT(A) for fresh adjudication. The CIT(A) was directed to re-evaluate the case facts in light of Techspan and afford both parties a reasonable opportunity of hearing. Appeals by the Revenue were allowed for statistical purposes
Income Tax Act, 1961 – Sections 36(1)(iii), 36(1)(va), 37 and 68 - The appellant engaged in real estate filed its return of income for AY 2015-16, declaring a total income of Rs.2.22 crores. Additions were made by the Assessing Officer (AO), including disallowance of travel expenses, delay in depositing employees' PF/ESI contributions, and interest expenses on loans, as well as an addition under Section 68 for unexplained cash credits - Whether foreign travel expenses can be wholly allowed under Section 37(1) when a personal element is present - Whether unexplained cash credits under Section 68 were properly substantiated - Whether employees’ PF/ESI contributions paid after the statutory due date but before filing the return can be allowed - Whether interest expenses under Section 36(1)(iii) on funds diverted to related parties and cash withdrawals are allowable when sufficient interest-free funds are available – HELD - Foreign travel expenses must be "wholly and exclusively" for business purposes. While no substantial evidence was provided to justify the business nexus of all expenses, a 30% disallowance was deemed reasonable for personal elements - The appellant failed to establish the identity, creditworthiness, and genuineness of a cash credit transaction of Rs.9.06 lakhs. The absence of corroborative evidence led to the addition being upheld - Following the Supreme Court decision in Checkmate Services (P.) Ltd., employees' contributions deposited after statutory due dates but before filing the return were disallowed - The Tribunal noted that the appellant had sufficient interest-free funds to cover advances given to related parties. Following the principle in Reliance Industries Ltd., no disallowance was warranted, and the addition of Rs.27.83 lakhs was deleted - The appeal was partly allowed. Additions under Sections 68 and 36(1)(va) were upheld, travel expenses were partly disallowed, and the disallowance under Section 36(1)(iii) was deleted
Income Tax Act, 1961 – Sections 147, 148 and 292B - A company was merged with another entity pursuant to an order by the National Company Law Tribunal (NCLT) in 2017. The merger was duly intimated to the Income Tax Department, with a request to deactivate the PAN of the amalgamated entity. However, a notice under Section 148 of the Act was issued to the non-existent merged entity in 2021, and reassessment proceedings culminated in an order under Section 147 in the name of the surviving entity. The first appellate authority quashed the reassessment proceedings, deeming them void ab initio - Whether issuance of a notice under Section 148 to a non-existent entity renders the entire reassessment proceedings invalid, even if the final assessment order is passed in the name of the correct entity – HELD - The Tribunal upheld the decision of the first appellate authority, holding that a notice under Section 148 issued to a non-existent entity is void ab initio and invalidates the entire reassessment proceedings. Relying on the Supreme Court judgment in PCIT v. Maruti Suzuki India Ltd., the Tribunal emphasized that jurisdictional notices must be addressed to a legally existent entity. The Tribunal also distinguished the case from earlier decisions where errors were clerical or where amalgamation was undisclosed. It clarified that Section 292B does not cure such jurisdictional defects - The appeal was dismissed, and the reassessment proceedings were held to be void ab initio
Income Tax Act, 1961 – Sections 32, 43(1), 69, 92C, 92D, 143(3), 144B and 144C - The appellant, filed its income return for the AY 2020-21. The TPO made adjustments, including recharacterizing interest on Compulsory Convertible Debentures (CCDs) as equity, resulting in a TP adjustment of Rs.9,58,98,001. Additionally, the AO disallowed depreciation of Rs.15,98,76,563 on goodwill from a slump sale, referencing prior years' disallowances. The DRP upheld these actions. The appellant contested the final assessment before the Tribunal - Whether CCDs can be recharacterized as equity, justifying a TP adjustment of interest to NIL - Whether goodwill arising from a slump sale qualifies as an intangible asset eligible for depreciation under Section 32 – HELD - CCDs are debt instruments until converted into equity. The TPO exceeded jurisdiction by recharacterizing them as equity, ignoring the TP study and benchmarking analysis that justified the 11% coupon rate as being at ALP. Judicial precedents support the deductibility of interest on CCDs as revenue expenditure. The TPO’s failure to benchmark comparables invalidated the adjustment - Goodwill arising from a slump sale qualifies as an intangible asset under Section 32, as upheld by the Supreme Court in Smifs Securities. The Tribunal rejected the DRP's reliance on Explanations 3 and 7 to Section 43(1), noting they are inapplicable to slump sales. The amendment introduced by Finance Act 2021 denying depreciation on goodwill is prospective, applying from AY 2021-22 - The appeal was partly allowed. The TP adjustment on CCD interest was invalidated, and depreciation on goodwill for AY 2020-21 was directed to be allowed. The matter of CCD interest exceeding Section 94B limits was remanded to the AO for verification
Income Tax Act, 1961 – Sections 32, 36(1)(va), 55(2)(a)(ii), 143(3), 144B and 144C - The appellant, filed its income return for the Assessment Year 2020-21, which was selected for scrutiny. The Transfer Pricing Officer (TPO) made adjustments regarding intra-group services and trade receivables. The Assessing Officer (AO) made further additions for delayed provident fund (PF) deposits and disallowed depreciation on goodwill created post-demerger. The Dispute Resolution Panel (DRP) confirmed most adjustments except the intra-group services adjustment. The final assessment order retained contentious disallowances - Whether the disallowance of employees’ contribution to PF for an alleged delayed deposit is justified despite evidence of timely payment - Whether depreciation on goodwill arising from a demerger qualifies as an intangible asset eligible under Section 32 - Whether TDS and TCS credit claimed by the assessee was properly considered – HELD - The Tribunal observed evidence (bank statements and challans) indicating timely payment of employees’ PF contributions, despite an erroneous audit report entry. The AO was directed to verify and allow the deduction if payments were within statutory deadlines - The Tribunal held that goodwill arising from demerger qualifies as an intangible asset under Section 32, as supported by the Supreme Court’s decision in Smifs Securities Ltd. Goodwill constituted a bundle of business rights acquired by the appellant, justifying depreciation. The invocation of the sixth proviso to Section 32(1) was deemed misplaced as it applies to pre-existing assets, not those arising post-demerger. Furthermore, the demerger was genuine, with commercial rationale validated by the National Company Law Tribunal (NCLT) - The AO was instructed to verify and grant the correct TDS and TCS credits as per records - The appeal was partly allowed. Adjustments regarding PF contributions and depreciation on goodwill were directed to be reassessed favorably. TDS/TCS credit discrepancies were ordered to be corrected
Income Tax Act, 1961 - Section 271AAB(1), 132(4), 153A and 143(3) - During a search under Section 132, The Assessee, engaged in construction, admitted to fictitious liabilities amounting to Rs.52 crores reflected as bogus creditors in the books. This amount was disclosed and included in the return filed under Section 153A, and taxes were paid. The AO imposed a penalty under Section 271AAB(1)(c) at 30% for non-disclosure. The CIT(A) reduced the penalty to 10%, applying Section 271AAB(1)(a), citing the assessee's cooperation. The Revenue appealed for restoration of the higher penalty, arguing the assessee failed to substantiate the "manner" of generating undisclosed income. The assessee cross-appealed, challenging the penalty and notice sufficiency - Whether the penalty under Section 271AAB was validly imposed and quantified - Whether the AO’s failure to specify the exact clause of Section 271AAB(1) in the show cause notice invalidates the penalty proceedings - Whether the assessee fulfilled the conditions of Section 271AAB(1)(a) by cooperating and substantiating the "manner" of earning undisclosed income - HELD - The Tribunal upheld the penalty under Section 271AAB, noting that undisclosed income was admitted during the search and later included in the ROI. The existence of fictitious liabilities qualified as "undisclosed income" under the section - The Tribunal rejected the argument that failure to specify the clause in the notice invalidated the penalty, distinguishing it from Section 271(1)(c), which requires such specification. Section 271AAB only mandates reasonable opportunity to respond - The Tribunal found that the CIT(A) erred in applying Section 271AAB(1)(a). The assessee's failure to demonstrate the "manner" of deriving the undisclosed income or substantiate the same disqualified him from a lower penalty rate. Consequently, the AO’s imposition of 30% penalty under Section 271AAB(1)(c) was restored - The Revenue’s appeal was allowed, reinstating the penalty rate at 30%, and the assessee’s appeal and cross-objection were dismissed
Income Tax Act, 1961 - Section 263, 80IA, 147 and 143(3) - The Assessee engaged in power generation, claimed a deduction under Section 80IA for AY 2014-15 while applying depreciation at 15% on high-efficiency boilers instead of the eligible 80%, citing their classification as non-energy-saving devices. The AO reopened the assessment under Section 147 and accepted the assessee's explanation regarding depreciation while disallowing another claim related to building depreciation. Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked Section 263, asserting that the AO’s acceptance of the 15% depreciation claim without applying the higher 80% rate caused prejudice to the Revenue - Whether the PCIT's invocation of Section 263 was justified in revising the AO’s order, alleging that it was erroneous and prejudicial to the Revenue - Whether the AO had appropriately discharged his duty of inquiry into the claim of depreciation on high-efficiency boilers – HELD - The Tribunal referred to the principles laid down by the Supreme Court in Malabar Industrial Co. Ltd. v. CIT, stating that an order can be revised under Section 263 only if it is both erroneous and prejudicial to the Revenue - The AO had duly examined the issue of depreciation during reassessment proceedings, accepted the assessee’s explanation that the boilers were not energy-saving devices under the relevant tax rules, and took a plausible view - The Tribunal emphasized that the PCIT could not invoke Section 263 merely to substitute his opinion with that of the AO unless the AO’s view was shown to be unsustainable in law - The Tribunal also cited jurisprudence that distinguishes between lack of inquiry and inadequate inquiry, ruling that the latter does not warrant interference under Section 263 if the AO’s decision is reasonable and based on evidence - The Tribunal quashed the PCIT’s order under Section 263, holding that the reassessment order passed by the AO was neither erroneous nor prejudicial to the Revenue. The appeal by the assessee was allowed
Income Tax Act, 1961 - Section 40(a)(i), 195, 143(3) and 251 - The Assessee was selected for limited scrutiny for AY 2015-16 to examine specific issues, including the high ratio of refund to TDS, higher depreciation claimed, and mismatch in related party transactions. During assessment, the AO sought to expand the scope of scrutiny by examining disallowance under Section 40(a)(i) for payments to a foreign associated enterprise without converting the scrutiny to full scrutiny as per CBDT instructions. The CIT(A) refused to entertain the issue raised by the AO on the grounds that it was beyond the scope of limited scrutiny. The Revenue appealed against the CIT(A)’s decision - Whether the AO could expand the scope of limited scrutiny to include additional issues without following the prescribed process for conversion to complete scrutiny - Whether the CIT(A) was justified in refusing to adjudicate on the additional issue raised by the AO during appellate proceedings – HELD - The Tribunal observed that CBDT Instruction No. 5 of 2016 clearly mandates that cases selected for limited scrutiny can only be expanded to complete scrutiny after obtaining necessary approvals from higher authorities. The AO failed to follow this procedure - The Tribunal held that the CIT(A)’s powers under Section 251 to enhance assessment are co-terminous with that of the AO but do not extend to issues outside the limited scrutiny scope unless proper procedural requirements for expanding scrutiny are met - The Tribunal relied on its earlier decisions in Shri Amit Kumar Dey v. DCIT and M/s Arjun Transport Company Pvt. Ltd. v. ITO, which held that enhancement in limited scrutiny cases is restricted to the issues originally selected - The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s appeal. It ruled that the AO’s attempt to include disallowance under Section 40(a)(i) was impermissible under limited scrutiny and affirmed that the CIT(A) acted correctly by not adjudicating the issue. The appeal by the Revenue was dismissed
Income Tax Act, 1961 - Section 80IA(4), 143(3) and 263 - The Assessee was engaged in the collection and transportation of municipal solid waste under a concession agreement with the Chennai Corporation. The assessee claimed deductions under Section 80IA(4) for AYs 2004-05 to 2007-08, asserting that its activities qualified as operating and maintaining an infrastructure facility. The Assessing Officer (AO), supported by the CIT(A), disallowed the deductions, holding that the assessee was merely a contractor involved in partial activities of solid waste management, such as collection and transportation, without engaging in comprehensive solid waste management as defined under relevant laws - Whether the assessee's activities of collecting and transporting municipal solid waste qualify as operating and maintaining an infrastructure facility under Section 80IA(4) - Whether the scope of activities carried out by the assessee under the concession agreement fulfilled the conditions of Section 80IA(4) for claiming deductions – HELD - The Tribunal noted that under Section 80IA(4), solid waste management qualifies as an infrastructure facility. However, the provision requires the entity to operate and maintain the entire system, including segregation, storage, transportation, processing, and disposal of waste - The Tribunal found that the assessee was engaged only in the collection and transportation of waste, which constitutes partial activities under the solid waste management system. It concluded that the assessee’s role was akin to that of a contractor executing a work contract, as per the Municipal Solid Waste (Management and Handling) Rules, 2000, and not an enterprise operating and maintaining an infrastructure facility - The Tribunal distinguished the cited precedents as factually irrelevant, emphasizing that the assessee’s activities did not meet the statutory conditions under Section 80IA(4) - The appeals for AYs 2004-05 to 2007-08 were dismissed. The Tribunal upheld the CIT(A)’s order, disallowing the deduction claimed under Section 80IA(4)
Income Tax Act, 1961 - Section 144C(1), 92CA, 143(3) and 144C(13) - The Assessee, an Indian subsidiary of Armstrong Global Holdings, USA, engaged in energy-saving solutions, had its international transactions scrutinized under transfer pricing provisions. Following an initial round of assessments involving Transfer Pricing Officer (TPO) adjustments, the Income Tax Appellate Tribunal (ITAT) remitted the matter back to the Assessing Officer (AO) for de novo consideration for AYs 2010-11 and 2011-12. However, during the second round of assessment, the AO bypassed the statutory requirement under Section 144C(1) to issue a draft assessment order before passing the final assessment order. This deprived the assessee of an opportunity to object before the Dispute Resolution Panel (DRP) - Whether the failure of the AO to issue a draft assessment order under Section 144C(1) during the second round of assessment rendered the final assessment order invalid - Whether the AO's omission infringed the principle of natural justice by denying the assessee the right to raise objections before the DRP - HELD - Under Section 144C(1), issuing a draft assessment order is mandatory, even in cases of remand by the ITAT for de novo assessment. The omission violated the procedure prescribed by law and deprived the assessee of substantive rights - The Tribunal rejected the Revenue’s argument that issuing a draft order is required only during the first instance of assessment, citing precedents from various High Courts, including Zuari Cement Ltd. v. ACIT and Vijay Television (P) Ltd. v. DRP, which held that non-compliance with Section 144C renders the final assessment order null and void - The failure to follow statutory procedure infringed upon the principle of "Rule of Law," enshrined in Article 14 of the Constitution, and vitiated the assessment process - The Tribunal quashed the final assessment orders for AYs 2010-11 and 2011-12 as invalid. All other grounds raised became academic. The appeals by the assessee were allowed