Income Tax Act, 1961 – Sections 92CA, 92B, 144C and 143(3) - The appellant, engaged in providing IT-enabled services to its Associated Enterprises (AEs), faced a transfer pricing adjustment of INR 17,777,133 on outstanding receivables beyond the agreed payment period. The TPO treated these as a separate international transaction, recharacterizing them as loans and applying interest at the SBI PLR rate of 13.27%. The DRP upheld the adjustment in principle. However, the invoices for the receivables were raised in foreign currency, and the appellant argued that the SBI PLR was not applicable, advocating for the use of LIBOR plus a mark-up - Whether outstanding receivables from AEs beyond the agreed period constitute a separate international transaction subject to benchmarking - Applicability of the SBI PLR for determining the arm's length interest on outstanding receivables raised in foreign currency - Determination of an appropriate mark-up on LIBOR for benchmarking the transaction based on risk factors - HELD - The Tribunal affirmed that outstanding receivables beyond the agreed payment period qualify as a separate international transaction. It reasoned that delayed receivables amount to the provision of capital financing, which must be benchmarked independently - The Tribunal held that the application of SBI PLR for receivables in foreign currency was erroneous. It directed the TPO to compute interest based on the prevailing LIBOR rate with an appropriate mark-up, in line with the TPO's own guidelines for foreign currency transactions - The Tribunal directed the appellant to provide evidence of risk factors affecting overdue receivables for determining an appropriate mark-up on LIBOR. The TPO was instructed to verify the invoices, assess the risk, and apply the mark-up accordingly - The appeal was allowed for statistical purposes, with the Tribunal remanding the matter for recalculating the interest on delayed receivables based on LIBOR plus a risk-based mark-up. The TPO was instructed to verify evidence and ensure proper benchmarking
Income Tax Act, 1961 – Sections 40(a)(i), 92CA, 195 and 192 - The appellant, engaged in the manufacture of automotive electronics and distribution of multimedia products, faced two primary adjustments during the assessment for AY 2020-21. These included (1) INR 130,495,777 under Section 92CA for transfer pricing adjustments related to corporate services and secondment employees, and (2) INR 44,516,242 disallowed under Section 40(a)(i) for treating payments to secondment employees as Fees for Technical Services (FTS) instead of salaries, thereby requiring TDS under Section 195 - Whether the payments for corporate services received from the Associated Enterprises (AEs) were justified and supported by sufficient evidence of services rendered - Whether the payments to secondment employees should be classified as FTS requiring TDS under Section 195 instead of salaries under Section 192 - Validity of the application of the "benefit test" for transfer pricing adjustments - HELD - The appellant failed to establish the receipt of services from AEs through sufficient documentary evidence. While email correspondence was provided, no substantive evidence of the use of software/tools in manufacturing was presented. The issue was remanded to the Assessing Officer (AO) for re-examination, granting the appellant an opportunity to furnish detailed evidence - The Tribunal noted that the appellant could not establish itself as the legal and economic employer of the seconded employees. It directed the AO to reassess the classification and determine if the payments truly constituted salaries under Section 192 or FTS under Section 195 - The Tribunal held that failure to prove specific benefits from services rendered does not automatically justify disallowances. This aspect was left open for reassessment - The appeal was allowed for statistical purposes, with directions for the AO to reassess the issues based on additional evidence provided by the appellant. The AO was also directed to recompute any refund due in accordance with law
Income Tax Act, 1961 – Sections 68, 251(1), 57(iii) and 234B - The case involved scrutiny of the assessment for AY 2020-21, where the Assessing Officer (AO) added INR 4,50,05,53,549 to the income under Section 68 for unexplained capital balance and disallowed interest expenditure under Section 57(iii). The CIT(A), while adjudicating, made additional additions of INR 21,60,000 for personal withdrawals and INR 2,74,080 for drawings, and disallowed claims on interest expenditure and tax credit under Section 234B - Whether the CIT(A) exceeded its powers under Section 251(1) by introducing a new source of income for personal withdrawals not assessed by the AO - Validity of the disallowance of interest expenditure under Section 57(iii) - Correctness of the computation of interest liability under Section 234B - HELD - Under Section 251(1), the CIT(A) cannot introduce a new source of income not considered by the AO during assessment. Referring to Supreme Court judgments in Rai Bahadur Hardutroy Motilal Chamaria and Shapoorji Pallonji Mistry, the addition of INR 21,60,000 was deemed void ab initio as it fell beyond the subject matter of the original assessment - The disallowance of INR 1,25,73,937 under Section 57(iii) was overturned. The Tribunal cited earlier decisions in the assessee's own and related cases, confirming that indirect nexus between the expenditure and income suffices for deductibility under Section 57(iii) - The Tribunal directed recalculation of interest liability, taking into account the tax deductible at source, aligning with its earlier decisions and consistent judicial precedents - The appeal was partly allowed. Additions for personal withdrawals and disallowed interest expenditure were quashed. The interest liability under Section 234B was remanded to the AO for recalculation. Grounds related to drawings and other adjustments were dismissed or resolved statistically
Income Tax Act, 1961 – Sections 132, 153A, 153D and 68 - A search under Section 132 was conducted on a group of companies, including the appellant, leading to assessments under Section 153A for the years 2010-11 to 2013-14. Additions were made for unexplained unsecured loans, cash credits, and other entries. The appellant argued that the assessments were invalid as no incriminating material was found during the search, and the approval under Section 153D was mechanical - Whether additions under Section 153A can be made without incriminating material for unabated assessments - Whether approval under Section 153D was valid and separate for each year – HELD - Relying on the Supreme Court decision in Abhisar Buildwell, the Tribunal held that in the absence of incriminating material, the Assessing Officer cannot make additions for unabated assessments under Section 153A. The Tribunal clarified that the provision aims to tax undisclosed income unearthed during the search and does not permit reassessment based solely on records available before the search - The Tribunal noted that approval must be specific and demonstrate independent application of mind. However, since the assessments under Section 153A were quashed due to lack of incriminating material, this issue was deemed academic and not adjudicated - The assessments for all four years under Section 153A were quashed, and the orders of the CIT(A) were set aside. The appeals were allowed in favor of the appellant
Income Tax Act, 1961 – Sections 147, 148, 195 and 40(a)(i) - The appellant made payments to non-resident vendors for annual maintenance contracts (AMC) and maintenance charges without deducting tax at source. The Assessing Officer (AO) reopened the assessments under Section 147, alleging that the payments constituted fees for technical services under Section 9(1)(vii) and were liable for TDS under Section 195. Consequently, the AO disallowed the expenses under Section 40(a)(i) and added the amounts to the appellant’s income - Was the reopening of assessment under Section 147 valid, particularly when more than four years had elapsed and no failure on the part of the appellant to disclose material facts was alleged - Were the payments for AMC and maintenance charges taxable in India as fees for technical services, thereby attracting TDS under Section 195 – HELD - Reopening the assessment beyond four years required a specific allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Since the reasons recorded by the AO lacked such an allegation, the reopening was deemed invalid. Judicial precedents, including decisions from the Karnataka High Court (CIT v. Canara Bank) and the Bombay High Court (Hindustan Lever Ltd. v. ACIT), were relied upon to substantiate this position - The payments made to non-residents were argued to be outside the ambit of fees for technical services, particularly under the Double Taxation Avoidance Agreements (DTAA). The appellant demonstrated that the "make available" condition was not satisfied, and the vendors lacked a permanent establishment in India. Consequently, the Tribunal found that these payments were not chargeable to tax in India under the Act or DTAA and, therefore, not liable for TDS under Section 195 - The reassessment proceedings under Section 147 were quashed as invalid. All other grounds of appeal, including the disallowance under Section 40(a)(i), were rendered infructuous due to the decision on the validity of reopening. Appeals for both assessment years were allowed in favor of the appellant
Income Tax Act, 1961 – Section 194H, 194J and 201(1A) - The appellant, a telecommunication service provider, sold recharge vouchers and starter kits to distributors at a discounted rate without deducting Tax Deducted at Source (TDS) under Section 194H. Additionally, no TDS was deducted on interconnect usage charges (IUC) paid to other telecom operators under Section 194J. The Assessing Officer deemed the appellant as an “assessee in default” under Section 201(1) and levied interest under Section 201(1A). On appeal, the CIT(A) upheld the assessment, and the matter proceeded to the ITAT - Whether the discounts provided to distributors on the sale of recharge vouchers and starter kits constitute commission, attracting TDS under Section 194H - Whether the interconnect usage charges paid to other telecom operators qualify as fees for technical services, thereby requiring TDS deduction under Section 194J - Validity of interest levied under Section 201(1A) for non-compliance with TDS provisions – HELD - The ITAT, relying on judicial precedents, including the Supreme Court's decision in Bharti Cellular Ltd. and the Delhi High Court's interpretation of distributor relationships, held that the arrangement did not constitute a principal-agent relationship. Consequently, the discounts were not commission and did not attract TDS under Section 194H - Referring to the decisions of the Karnataka High Court in Vodafone South Ltd. and the Delhi High Court, it was held that IUC payments are automated processes with no human intervention. Such payments do not fall under the definition of fees for technical services under Section 194J, and therefore, no TDS was required - The tribunal held that interest levied under Section 201(1A) for IUC payments was invalid as there was no TDS obligation under Section 194J. The issue of interest on discounts was remanded to the Assessing Officer for re-evaluation based on judicial principles - The appeal was allowed. It was held that neither discounts provided to distributors nor interconnect usage charges paid to other operators attracted TDS obligations under Sections 194H and 194J, respectively. Interest under Section 201(1A) was partially set aside, with further directions for re-evaluation
Income Tax Act, 1961 – Sections 148, 148A, 149 and 151 - For AY 2015-16 and 2016-17, the Assessing Officer (AO) issued reassessment notices under Section 148 citing non-genuine derivative losses and bogus capital gains. The assessee challenged the notices, claiming they were time-barred and issued without appropriate approvals as mandated under the amended provisions of Section 151 - Whether the notice under Section 148 for AY 2015-16, issued on 29.07.2022, is time-barred under the old and new provisions of Section 149 - Whether the notice under Section 148 for AY 2016-17, issued beyond three years, complied with the approval requirements under Section 151 - HELD - AY 2015-16: The notice was barred by limitation. As per the old regime under Section 149(1)(b), the six-year period expired on 31.03.2022. Under the new regime effective from 01.04.2021, the ten-year period applies prospectively, and the first proviso to Section 149(1)(b) restricts reopening to cases where the time limit under the old regime was still valid. The notice issued on 29.07.2022 was thus invalid - AY 2016-17: The ITAT found that the notice issued on 30.07.2022 required prior approval under the amended Section 151(ii) from the Principal Chief Commissioner or equivalent authority, as more than three years had elapsed since the relevant assessment year. However, the approval was granted by the Principal Commissioner, rendering the notice and consequent reassessment invalid - The ITAT quashed the reassessment proceedings for AY 2015-16 and 2016-17. The notices were held invalid for being time-barred (AY 2015-16) and issued without proper approvals (AY 2016-17). The revenue’s appeals were dismissed, and the assessee’s cross-objections were partly allowed
Income Tax Act, 1961 – Section 80P(2)(d) - The assessee, claimed deductions under Section 80P(2)(d) for interest and dividend income from investments in cooperative banks. The AO denied the deductions, citing that such income does not qualify under Section 80P(2)(d) based on the decision in Totgar’s Cooperative Society Ltd. The CIT(A), however, allowed the deductions, relying on judicial precedents in the assessee’s favor, including decisions for earlier assessment years - Whether interest and dividend income from cooperative banks qualify for deduction under Section 80P(2)(d) - Whether the distinction between a cooperative society and a cooperative bank is relevant under Section 80P(2)(d) – HELD - The ITAT upheld the CIT(A)'s decision, emphasizing that cooperative banks are registered under cooperative society laws and qualify as cooperative societies for the purposes of Section 80P(2)(d) - It distinguished the facts from the Supreme Court’s ruling in Totgar’s Cooperative Society Ltd., holding that the income in this case was from surplus funds deposited in cooperative banks, not unrelated investments - The ITAT relied on consistent judicial precedents, including its own rulings in earlier years for the same assessee and other cooperative societies, which held that interest and dividend income from cooperative banks are deductible under Section 80P(2)(d) - The appeals filed by the Revenue for AY 2017-18, 2018-19, and 2020-21 were dismissed. The ITAT confirmed that interest and dividend income from cooperative banks qualify for deductions under Section 80P(2)(d)
Income Tax Act, 1961 – Sections 28(iv), 36(1)(xii) and 14A – The assessee a government entity, acting as a nodal agency for various government schemes, claimed interest-related deductions for funds like RIDF, WIF, and FPF and promotional expenses under Section 36(1)(xii). The AO disallowed claims for interest on funds credited to specific accounts and additional disallowance under Section 14A for exempt income-related expenses - Whether interest credited to funds like FIF, WDF, and TDF qualifies as income of the assessee or is diverted at the source by overriding title - Whether expenses incurred for promotional activities under PODF are deductible under Section 36(1)(xii) or need further examination - Whether the additional disallowance under Section 14A for future exempt income investments is justified - HELD - The funds credited under the direction of RBI for implementing government schemes do not belong to the assessee but are held in a fiduciary capacity. The income from these funds was diverted at source by overriding title. This principle was supported by prior judicial precedents, including those for similar funds, and the AO's addition was deleted - Promotional expenses linked to PODF were restored to the AO for a fresh examination to determine if these were incurred wholly and exclusively for the assessee's business purposes or on behalf of the government. Guidelines were provided to classify expenses based on fund ownership - Additional disallowance was deleted as the AO failed to record specific satisfaction regarding the inadequacy of the assessee's suo moto disallowance. The ITAT noted that Section 14A could not apply retrospectively to income not earned during the assessment year - The ITAT dismissed the Revenue's appeal and partially allowed the assessee's appeal, affirming that funds held in fiduciary capacity were not taxable, and expenses required a detailed review under specific principles. The additional disallowance under Section 14A was deemed unjustified
Income Tax Act, 1961 – Sections 28(iv), 40(a)(i) and 195 - The assessee, engaged in software development, received assets free of cost from its Associated Enterprises (AEs) for testing purposes and re-exported them upon completion. Additionally, it paid professional fees to a non-resident service provider without deducting TDS, relying on Article 14 of the India-Singapore DTAA. The AO taxed the assets under Section 28(iv) and disallowed professional fees under Section 40(a)(i) for non-compliance with TDS requirements under Section 195 - Whether the receipt of assets from AEs on a returnable basis constitutes a taxable benefit under Section 28(iv) - Whether the training fees paid to a non-resident service provider were subject to TDS under Section 195, thereby attracting disallowance under Section 40(a)(i) – HELD - Regarding Section 28(iv) - that assets received from AEs for testing purposes did not result in any enduring benefit to the assessee. The assets were used solely for service delivery, subsequently returned or destroyed, and depreciation costs were accounted for in the assessee's cost base under the Advance Pricing Agreement (APA). Taxing these assets would result in double taxation, as depreciation was already included in the Arm’s Length Price computation - On Section 40(a)(i), the ITAT accepted the assessee's contention that the payment for training services was not taxable in India as per Article 14 (Independent Personal Services) of the India-Singapore DTAA. The service provider had no fixed base or significant presence in India, and the services rendered did not qualify as technical, managerial, or consultancy services under the Act - The ITAT dismissed the Revenue's appeal, confirming that the additions under Sections 28(iv) and 40(a)(i) were unwarranted. It upheld the CIT(A)'s decision to delete the additions and allowed the assessee's cross-objections
Income Tax Act, 1961 – Section 263 – The assessee, a financial intermediary, filed a return declaring income of Rs.43,48,860 for AY 2018-19. The case was selected for scrutiny under the Centralized Assessment Processing System (CASS) due to discrepancies in loan advances compared to gross income. The Assessing Officer (AO) passed an order under Section 143(3) r.w.s. 144B, accepting the returned income. Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked Section 263, citing inadequacies in the AO's assessment regarding unexplained funds and interest-free loans - Whether the AO erred in failing to scrutinize the source of Rs.28,88,62,523 advanced as loans by the assessee - Whether the AO properly examined Rs.6,16,18,018 of interest-free loans advanced and received back - Whether the AO’s assessment order was erroneous and prejudicial to the interest of revenue, justifying revision under Section 263 – HELD - The ITAT found that the AO had raised specific queries during the scrutiny proceedings, and the assessee provided satisfactory responses with supporting documentation - The AO adopted a plausible view after considering the submissions, demonstrating due application of mind - The absence of detailed reasoning in the AO’s order does not necessarily indicate non-application of mind or lack of inquiry, as upheld in the rulings of Malabar Industrial Co. Ltd. and Max India Ltd - The PCIT failed to substantiate how the AO's order was unsustainable in law or caused prejudice to revenue - Inadequate inquiry does not empower the PCIT to invoke Section 263 unless the original order was patently erroneous or prejudicial to revenue interests, as clarified in Clix Finance India Pvt. Ltd - The ITAT quashed the revisionary order under Section 263, holding that the AO’s order was neither erroneous nor prejudicial to the interests of revenue. The assessee's appeal was allowed
Income Tax Act, 1961 - Sections 69A, 69C, 40(a)(ia) and 271(1)(c) - The assessee, engaged in construction and land development, faced additions during scrutiny assessments for AY 2007-08 and AY 2008-09 based on impounded documents during a survey. The additions included unexplained cash payments for two projects (Silver and Shantidoot Co-operative Housing Societies), totaling Rs.1.35 crore under Section 69C, unexplained money under Section 69A, and penalties under Section 271(1)(c). The assessee argued that the amounts were part of income declared during the survey and offered to tax in AY 2009-10. The lower authorities dismissed these claims due to lack of evidence, leading to appeals - Whether the additions of Rs.1.35 crore under Section 69C and other amounts under Sections 69A and 40(a)(ia) were sustainable - Whether the amounts declared during the survey for AY 2009-10 could be linked to the additions made in earlier years - Whether penalties under Section 271(1)(c) were valid for the quantum of additions sustained - HELD - The Tribunal found the assessee failed to substantiate its claims regarding cash payments made for projects with documentary evidence. The explanation of diversion of funds between projects was unsupported, and cash book entries lacked corroboration. Additions were upheld but remitted for verification of overlaps with declared income in AY 2009-10 - Additions for cash transactions recorded in impounded documents were sustained due to the absence of evidence on the source and nature of payments. The Tribunal noted deficiencies in proving the genuineness and identity of creditors - Penalties were remanded for reassessment in light of the outcome of quantum appeals, as their imposition depends on the substantiation or deletion of additions - The Tribunal partly allowed the appeals, remanding the matter to the AO for examining the linkage of additions to the income declared in AY 2009-10 and reassessment of penalties. Additions unsupported by evidence were upheld. Appeals on penalties were allowed for statistical purposes
Income Tax Act, 1961 – Sections 43D and 145 - The assessee, reversed Rs.2,91,38,000 as overdue interest on Non-Performing Assets (NPAs) in its profit and loss account for AY 2011-12. This amount, previously added as income in earlier years when the provision was created, was claimed as a deduction upon reversal. The Assessing Officer disallowed the deduction, treating the interest as accrued income. The CIT(A) deleted the disallowance, and the Revenue appealed to the Tribunal - Whether the reversal of overdue interest on NPAs previously added as income in earlier years qualifies as a deduction upon reversal - Whether interest on NPAs can be taxed on an accrual basis under Section 145 despite non-realization – HELD - The overdue interest was earlier added to the assessee's income in compliance with the accrual system. Upon reversal due to non-receipt, the amount became eligible for deduction to avoid double taxation. This treatment aligns with earlier Tribunal decisions in the assessee's case and other co-operative banks - Interest on NPAs does not accrue as income under prudential norms issued by the RBI. The Tribunal referenced judicial precedents, including CIT v. Deogiri Nagari Sahakari Bank Ltd. and ACIT v. Arvind Sahakari Bank Ltd., which confirm that unrealized interest on NPAs cannot be taxed as income - Although Section 43D specifically applies from AY 2017-18, its principles reflect established jurisprudence permitting interest on bad and doubtful debts to be taxable only upon realization - The Tribunal upheld the CIT(A)’s order, allowing the deduction of Rs.2,91,38,000 and rejecting the Revenue's appeal. It emphasized that taxing unrealized interest on NPAs contravenes the principles of income recognition under the RBI guidelines and settled jurisprudence. The appeal was dismissed
Income Tax Act, 1961 – Sections 12AB, 80G(5), 2(15), 11(4A) and 13(8) - The assessee a charitable organization registered under Section 8 of the Companies Act, 2013, applied for final registration under Section 12AB and final approval under Section 80G after receiving provisional approvals. The Commissioner of Income Tax (Exemptions) [CIT(E)] rejected both applications, alleging that certain objects of the trust were commercial in nature, and canceled the provisional approvals. The trust contended that the objects were charitable and aligned with the activities benefiting weaker sections of society - Whether the trust's objects (including providing employment and selling products developed by disadvantaged groups) disqualify it from registration under Section 12AB as "commercial" rather than "charitable" - Whether the CIT(E) was justified in canceling provisional registration and denying final approval under Sections 12AB and 80G due to the trust's alleged delay in application filing and perceived non-charitable activities – HELD - The trust's objects, including facilitating employment and selling products made by economically weaker sections, were inherently charitable and did not aim to generate profit but to uplift marginalized groups. Even if a commercial element existed, the Income Tax Act allows certain commercial activities under Section 2(15) within a ceiling of 20% of total income, with exemptions governed by Sections 11(4A) and 13(8) - The delay in filing for final approval under Section 80G was addressed by a CBDT Circular extending the timeline, enabling the trust to file a fresh application. The Tribunal observed that administrative timing issues should not prejudice the trust's substantive eligibility - The Tribunal noted that the CIT(E) erred in equating objects aimed at supporting disadvantaged groups with commercial intent. It emphasized that registration under Section 12AB is based on the trust's overall objectives, not speculative assessments of future activities - The Tribunal directed the CIT(E) to grant registration under Section 12AB, as the trust's objects aligned with charitable purposes. Regarding Section 80G approval, the matter was remanded to the CIT(E) for fresh consideration in light of the extended timeline and pending application. ITA No. 398/Ind/2024 was allowed, and ITA No. 399/Ind/2024 was allowed for statistical purposes
Income Tax Act, 1961 – Section 80G(5)(vi) - The assessee, a public charitable trust managing temples and conducting charitable activities such as "annadanam" (free food distribution), applied for approval under Section 80G(5)(vi) for donations to qualify for tax exemption. The Commissioner of Income Tax (Exemptions) rejected the application, holding that the trust's activities were substantially religious in nature and primarily benefited a particular religious community. The trust contested this decision, arguing that its activities were open to all without religious or community restrictions, making it a charitable entity under the Act - Whether the trust qualifies for approval under Section 80G(5)(vi) despite managing temples and conducting activities that may have religious aspects - Whether the trust’s activities predominantly benefit a specific religious community, disqualifying it under Section 80G - HELD - The trust’s activities, including temple management and "annadanam", were open to the public regardless of caste, creed, or religion, satisfying the requirement of general public utility under Section 2(15) - There was no evidence that the trust’s activities were exclusively for the benefit of a particular religious community. The temples managed by the trust were accessible to all, and no restrictions were imposed - The Tribunal referred to decisions in similar cases, including Nagpur Bench ITA No. 223/Nag/2009 and Dawoodi Bohra Jamat v. CIT, where mixed charitable and religious trusts were held eligible for approval under Section 80G when their activities did not solely promote a particular religion - The CIT(E) failed to provide specific evidence that the trust’s activities were predominantly religious or restricted to a specific community. The Tribunal emphasized that Hinduism, being a way of life rather than a religion, cannot disqualify the trust based on temple-related activities alone - The Tribunal set aside the order of the CIT(E) and directed approval under Section 80G(5)(vi), allowing the trust to qualify for tax-exempt donations. The appeal was allowed
Income Tax Act, 1961 – Sections 143(3), 147, 148 and 151 - The assessee, filed its original and revised returns for AY 2012-13. The return was scrutinized under Section 143(3), and income was assessed. Subsequently, the AO issued a notice under Section 148 for reassessment beyond four years, alleging understatement of Long-Term Capital Gains (LTCG) and business income related to the conversion of land to stock-in-trade. The assessee disclosed all relevant details during the original assessment. The reassessment was completed, adding Rs.71,432 to LTCG and Rs.14,07,064 to business income. The CIT(A) upheld the additions - Whether the notice under Section 148 and the reassessment beyond four years were valid - Whether the reassessment additions were based on new material or merely a change of opinion - Whether the CIT(A) erred in confirming the reassessment additions - HELD - The reopening of assessment beyond four years violated the proviso to Section 147, which permits reassessment only if there is a failure on the part of the assessee to disclose fully and truly all material facts. The AO relied on existing records already scrutinized during the original assessment under Section 143(3). There was no new material brought on record to justify the reopening - Reassessment was based on the same material considered during the original assessment, amounting to a mere change of opinion, which is impermissible under law as per the Supreme Court's decision in Kelvinator of India Ltd. and other precedents - The approval under Section 151 by the Principal Commissioner of Income Tax (Pr.CIT) was mechanical and lacked independent application of mind. This further invalidated the reassessment proceedings - The Tribunal quashed the reassessment proceedings, set aside the order of the CIT(A), and directed the AO to delete the additions made under LTCG and business income. The appeal was partly allowed, rendering the merits of the additions academic
Income Tax Act, 1961 – Sections 263, 147, 143(3), 68 and 69C - The assessee, filed its return of income declaring a loss, which was later revised. The return was subjected to scrutiny, and the case was reopened under Section 147. Subsequently, under Section 263, the Principal Commissioner of Income Tax directed the Assessing Officer (AO) to verify the loan transactions with M/s. Shalini Holdings Ltd. The AO assessed an unexplained cash credit of Rs.1,00,00,000 under Section 68 and an unexplained expenditure of Rs.1,80,000 under Section 69C. The Ld. CIT(A) upheld these additions. The assessee appealed to the Tribunal, raising both substantive and procedural objections - Whether the additions made under Sections 68 and 69C were sustainable on facts and in law - Whether the reassessment proceedings initiated under Section 147, leading to Section 263 orders, were legally valid - Whether principles of natural justice were violated by denying cross-examination and not confronting the assessee with adverse material – HELD - The additions were unsustainable for the following reasons - The receipt of Rs.1,00,00,000 was repayment of a loan previously advanced to M/s. Shalini Holdings Ltd., not a new loan requiring scrutiny under Section 68. Judicial precedents establish that repayment of loans does not mandate proving the creditworthiness of the payer. Similarly, the unexplained expenditure addition under Section 69C lacked a factual basis - The AO violated principles of natural justice by relying on statements and seized materials without providing the assessee a chance for cross-examination or confronting them with the documents - The reassessment proceedings were flawed due to multiple legal infirmities, including issuing two notices under Section 148 for the same assessment year and basing the reassessment on a withdrawn notice, rendering the foundation of the subsequent Section 263 order void - The Tribunal set aside the order of the Ld. CIT(A) and directed the AO to delete the additions under Sections 68 and 69C, allowing the appeal in favor of the assessee
Income Tax Act, 1961 – Sections - 147, 148, 40(a)(ia) and 194C - The assessee a sales promoter for Jagjit Industries Ltd. (JIL), received Rs.8,35,59,810 as commission and reimbursement of expenses during AY 2016-17. The firm claimed Rs.16,70,639 as TDS but failed to deduct tax on payments made to retailers and vendors. Following an initial scrutiny assessment under Section 143(3), the AO reopened the case under Section 147, alleging that Rs.2,50,67,943 (30% of the reimbursement expenses) should be disallowed under Section 40(a)(ia) for non-compliance with TDS provisions. The reassessment was completed ex parte under Section 147 r.w.s. 144, adding Rs.2,50,67,943 to taxable income and initiating penalties under Sections 270A and 271(1)(b) - Whether reopening of assessment under Sections 147 and 148 was valid in light of non-communication of reasons for reopening - Whether the disallowance under Section 40(a)(ia) for non-deduction of TDS on reimbursement expenses was justified - Whether the procedural deficiencies in serving notice impacted the legality of the assessment - HELD - Failure to provide reasons for reopening constituted a clear violation of the principles laid down in G.K.N. Drive Shafts (India) Ltd. v. ITO. As the reassessment proceedings were based on non-communication of reasons and notices sent to incorrect email addresses, the process was procedurally flawed - The tribunal observed that payments made by the assessee to retailers and vendors may have embedded profit or income requiring TDS compliance under Section 194C. However, the mere clssification of such payments as reimbursement did not exempt the assessee from TDS obligations - The ITAT emphasized that when expenditures are claimed in books of accounts, both the assessee and the AO must verify whether the recipients of payments had discharged their tax liabilities. Since this verification was not conducted, the case was remanded to the CIT(A) for fresh adjudication, with directions to call for a remand report from the AO to establish whether the recipients had paid taxes on the amounts received - The appeal was allowed for statistical purposes. The ITAT remanded the matter to the CIT(A) to reassess the disallowance under Section 40(a)(ia) after verifying the tax compliance of payment recipients and ensuring procedural adherence to reopening requirements
Income Tax Act, 1961 – Sections 92CA(3), 92BA and 40A(3) - the assessee filed its return for AY 2014-15, declaring a total income of Rs.3,78,47,420. During scrutiny, the Assessing Officer (AO) referred specified domestic transactions (SDT) to the Transfer Pricing Officer (TPO) for benchmarking. The TPO, rejecting the Comparable Uncontrolled Price (CUP) method applied by the assessee, proposed an upward adjustment of Rs.80,06,666 by limiting the interest rate on loans to a related party to 15%, down from 18%. Additionally, cash payments for land purchases worth Rs.8,00,000 were disallowed under Section 40A(3), and an ad hoc disallowance of Rs.6,14,622 was made for administrative expenses lacking proper documentation. The CIT(A) partly upheld the AO’s disallowances but reduced the ad hoc expense disallowance to 5% - Whether the upward adjustment by the TPO under Section 92CA(3) was valid post-omission of Section 92BA(i) - Whether cash payments for land purchases could be disallowed under Section 40A(3) despite being treated as part of the closing stock - Whether an ad hoc disallowance for administrative expenses was justified based on incomplete documentation – HELD - The omission of Section 92BA(i) by the Finance Act, 2017, with effect from April 1, 2017, rendered related party transactions ineligible as SDT for AY 2014-15. Applying the principle in PCIT v. Texport Overseas Pvt. Ltd. (2020), the tribunal ruled that the omission must be treated as if the provision never existed. Consequently, the TPO’s adjustment of Rs.80,06,666 was invalid and deleted - Payments for land purchase were added to the closing stock as work-in-progress and not claimed as an expense. Citing PCIT v. Prosperous Buildcon Pvt. Ltd. (2024), the ITAT clarified that Section 40A(3) applies only to claimed expenses. The matter was remanded to the AO to verify if the payments were excluded from profit and loss statements and decide accordingly - Given the self-made vouchers and absence of proper bills, the ITAT upheld the CIT(A)’s decision to restrict the disallowance to 5% of Rs.61,46,226, amounting to Rs.3,07,311, considering the likelihood of personal expenses - The appeal was partly allowed. The upward adjustment under Section 92CA(3) was quashed, and the disallowance under Section 40A(3) was remanded for verification. The ad hoc disallowance for administrative expenses was upheld as reasonable
Income Tax Act, 1961 – Sections 14A, 115JB and 72A(4) - The assessee, engaged in rental income and business center operations, faced disallowances and adjustments across multiple issues for the assessment years 2017-18 and 2018-19. Key issues included disallowances under Section 14A for expenses linked to exempt income, denial of set-off for accumulated loss and unabsorbed depreciation from a demerged undertaking under a composite amalgamation scheme, and adjustments to Book Profits under Section 115JB. The Revenue's appeals included challenges to deletions of deemed annual letting value (ALV) for vacant properties and disallowance under Section 14A for computing Book Profits - Whether the disallowance under Section 14A read with Rule 8D was valid despite the assessee's detailed allocation of expenses - Whether set-off of accumulated loss and unabsorbed depreciation of the demerged undertaking under Section 72A(4) was permissible - Whether adjustments to Book Profits under Section 115JB were valid, including the treatment of disallowances under Section 14A and other computational matters – HELD - Disallowances under Section 14A require the AO to record dissatisfaction with the taxpayer's allocation of expenses. The AO’s invocation of Rule 8D lacked proper application of mind and dissatisfaction as mandated by precedents such as PCIT vs. Bombay Stock Exchange Ltd. - The ITAT also directed exclusion of investments that did not yield exempt income (e.g., growth funds, subsidiary holdings) from the computation under Rule 8D, consistent with the Special Bench ruling in Vireet Investments Pvt. Ltd - The ITAT rejected the Revenue’s reliance on Section 72A(2)(b), applicable to amalgamations, clarifying that demergers are governed by Section 72A(4). The ITAT directed the AO to reevaluate the set-off of accumulated losses and unabsorbed depreciation related to the demerged undertaking as per Section 72A(4) - Adjustments under Section 14A were disallowed for computing Book Profits, in line with Vireet Investments Pvt. Ltd. and other judicial precedents - The issue of other Book Profit adjustments was deemed academic since the assessee was assessed under normal provisions where tax liability was higher - The ITAT partly allowed the assessee's appeals and dismissed the Revenue's appeals. It upheld the assessee’s claims regarding the exclusion of non-revenue-yielding investments from Section 14A calculations, allowed reconsideration of accumulated losses under Section 72A(4), and directed exclusion of Section 14A disallowances from Book Profit computation under Section 115JB. Adjustments to deemed ALV and other Book Profit issues were dismissed as academic or invalid