Income Tax Act, 1961 – Sections 12A, 80G and 263 - The assessee, a Public Charitable Trust, applied for registration under Section 12A(1) for tax exemption benefits. It was granted provisional registration in Form 10AC on 27-05-2021. Subsequently, the assessee applied for permanent registration in Form 10AB on 22-09-2023. The Principal Commissioner of Income Tax (Exemptions) [PCIT(E)] rejected the application under Form 10AD on 23-03-2024, citing lack of evidence to establish the genuineness of charitable activities. The PCIT(E) also denied renewal of approval under Section 80G, citing the delay in applying beyond the statutory deadline and the non-registration under Section 12AB. The assessee appealed against both orders, with an additional application for condonation of 50 days’ delay in filing the appeals - Whether the rejection of Section 12A registration was justified in the absence of concrete findings against the genuineness of the trust’s activities - Whether the delay in filing for approval under Section 80G warranted rejection, despite the extended timelines granted by the CBDT Circular No. 6/2023 and Circular No. 7/2024 - Whether the PCIT(E) erred in rejecting the application solely based on technical non-compliance without considering the trust’s substantive compliance efforts – HELD - For rejection under Section 12A, the PCIT(E) must provide a reasoned order substantiating doubts regarding the genuineness of the trust’s activities. In this case, the assessee had commenced construction of the trust’s infrastructure, which was integral to its charitable objectives. The PCIT(E) failed to furnish specific reasons demonstrating how the activities were not genuine or inconsistent with charitable purposes. Furthermore, the Tribunal observed that denial of 80G registration was based on technical non-compliance rather than substantive deficiencies. The CBDT Circulars Nos. 6/2023 and 7/2024 extended timelines for filing Form 10AB, and the Tribunal noted that such extensions must be liberally construed to avoid undue hardship to charitable institutions. The Tribunal relied on Teddy Trust v. CIT (Exemptions), holding that an extended timeline for Section 12A registration should also apply to 80G approvals, ensuring continuity in tax benefits for donors. Consequently, the rejection under Section 80G for delay in filing was unsustainable in law - The Tribunal condoned the delay in filing the appeal and set aside both orders of the PCIT(E). The matter was remanded for fresh verification and adjudication, directing the PCIT(E) to reconsider the trust’s eligibility under Sections 12A and 80G while applying CBDT’s extended timelines and verifying the bona fide activities of the trust
Income Tax Act, 1961 – Section 263 - The assessee, engaged in the manufacturing of vegetable oil and related products, filed its return of income for AY 2017-18 declaring a taxable income of Rs. 9,56,12,530. The case was reopened under Section 147 based on information regarding alleged bogus transactions and accommodation entries involving another entity. The reassessment resulted in the addition of Rs. 6,93,32,499 under Section 68 as unexplained cash credit, and the total income was assessed at Rs. 16,49,44,849. Subsequently, the Principal Commissioner of Income Tax (PCIT), exercising jurisdiction under Section 263, held that the assessment order was erroneous and prejudicial to the interests of revenue due to lack of proper inquiry into issues related to: (a) late payment of PF/ESI contributions, (b) disallowance of interest payable on bank loans under Section 43B(e), (c) disallowance of interest on delayed TDS payment under Section 36(1)(iii), and (d) unverified new loans amounting to Rs. 6.35 crores. The PCIT set aside the assessment order partially and directed fresh assessment - Whether the PCIT was justified in invoking Section 263 when the Assessing Officer (AO) had already examined and taken a view on the issues during reassessment - Whether the issues raised by the PCIT fell within the permissible scope of Section 263, given that the reassessment was conducted under Section 147 for specific reasons – HELD - For an order to be revised under Section 263, the PCIT must establish that it is both erroneous and prejudicial to the interests of revenue. The AO had specifically reopened the assessment for examining alleged bogus transactions and had made necessary inquiries into the matter. The Tribunal found that the issues raised by the PCIT, such as late PF/ESI payments, bank interest disallowance, and new loans verification, were not part of the original reasons recorded for reopening under Section 147. It was held that the PCIT exceeded jurisdiction by considering issues beyond the scope of reassessment, as established by Supreme Court precedents in CIT v. Alagendran Finance Ltd. and CIT v. Max India Ltd. Moreover, regarding PF/ESI contributions, the Tribunal observed that payments were made before the due date of filing the return, in line with the decisions of the Rajasthan High Court in CIT v. SBBJ and CIT v. Jaipur Vidyut Vitran Nigam Ltd. Similarly, interest on delayed TDS payment was compensatory and not penal, making it allowable under Section 37 as per jurisprudence - The Tribunal quashed the Section 263 order, holding that the reassessment was conducted within the permissible scope of Section 147, and the PCIT lacked jurisdiction to expand the reassessment beyond its original purpose. The additions proposed by the PCIT were held to be beyond the scope of reassessment proceedings, rendering the Section 263 order unsustainable
Income Tax Act, 1961 – Sections 153A, 153C, 132, 69C and 143(3) - A search and seizure operation was conducted under Section 132 on a real estate company as part of a larger investigation into a business group. During the search, incriminating documents were found at the assessee's premises and at the premises of a key employee, indicating unaccounted "on-money" receipts and unexplained cash expenses. The Assessing Officer (AO) completed assessments under Section 153A, making additions based on the seized materials. The Commissioner of Income Tax (Appeals) [CIT(A)] partly deleted the additions, holding that only materials found at the assessee’s premises could be relied upon and that documents found at a third party’s premises required separate proceedings under Section 153C. The Revenue appealed, arguing that Section 153A allowed the use of all relevant material, including that found at third-party premises, without requiring separate 153C proceedings - Whether the AO can rely on incriminating materials found at the premises of a third party in a Section 153A assessment, or whether such materials must be assessed separately under Section 153C - Whether additions under Section 69C (unexplained expenditure) could be made based on the notings of unaccounted cash transactions found at the key employee’s premises - Whether only the profit element of unaccounted receipts should be taxed, rather than the entire amount - Whether separate additions for unaccounted receipts and unaccounted expenses were justified, or whether a telescoping benefit (netting off) should be allowed – HELD - The ITAT, ruled in favor of the Revenue, holding that - The Tribunal held that where a search is conducted on both the assessee and a third party, incriminating materials found at either location can be used in a Section 153A assessment. The Tribunal relied on PCIT v. Abhisar Buildwell to hold that Section 153C applies only where a search is conducted on a third party without any search on the assessee. Hence, the CIT(A) was incorrect in holding that materials from the employee’s premises could not be used in the assessee’s 153A assessment - The Tribunal upheld the additions under Section 69C, ruling that unaccounted expenses recorded in seized documents were unexplained and thus taxable - The Tribunal followed CIT v. President Industries and held that only the profit component of unaccounted receipts is taxable, not the entire amount. The CIT(A)’s approach of applying a 10% profit rate was upheld - The Tribunal ruled that when unaccounted receipts and unaccounted expenses arise from the same business activity, set-off should be granted to ensure only the real income is taxed. The CIT(A)’s method of peak credit adjustment was partially upheld, but remanded to the AO for reworking in light of the total materials, including those from the third party’s premises - The Revenue’s appeal was partly allowed. The CIT(A)’s deletion of additions based on third-party materials was reversed, allowing the AO to include all seized documents in the reassessment. The profit-based taxation of on-money receipts was upheld, and the matter was remanded for recalculating peak credit adjustments
Income Tax Act, 1961 – Sections 263, 153A, 143(3), 37(1) and 132 - The assessee, engaged in the hotel business, filed a return declaring a loss. A search under Section 132 was conducted, and the case was centralized under Section 127. The Assessing Officer (AO) completed the assessment under Section 153A r.w.s. 143(3), accepting the returned loss. The Principal Commissioner of Income Tax (PCIT) invoked Section 263, alleging that the AO failed to examine the allowability of ROC legal fees (Rs. 5,54,581/-) under Section 37(1), which the PCIT held to be capital expenditure. The PCIT set aside the assessment, directing the AO to re-examine the issue. The assessee appealed, arguing that (i) the assessment was completed and not open for revision, (ii) the expenditure was already examined by the AO, and (iii) the PCIT merely held a different opinion rather than proving the order was erroneous and prejudicial to Revenue - Whether the PCIT was justified in invoking Section 263, despite the AO’s acceptance of the legal fee deduction under Section 37(1) - Whether an assessment completed under Section 153A can be revised under Section 263, in the absence of incriminating material - Whether the legal fee for ROC filing qualifies as revenue or capital expenditure – HELD - The ITAT, upheld the PCIT’s revisionary order under Section 263, ruling that - The AO did not specifically question or verify the allowability of ROC legal fees under Section 37(1). Since the AO failed to conduct necessary inquiries, the assessment order was erroneous and prejudicial to the interest of Revenue, as per Explanation 2(a) to Section 263 - The ITAT relied on Brooke Bond India Ltd. v. CIT, holding that expenses for increasing authorized capital are capital in nature, even if they aid business expansion. Hence, the ROC legal fee was not allowable under Section 37(1) - The Tribunal rejected the assessee’s claim that no addition could be made in a completed assessment under Section 153A without incriminating material, ruling that the case was still open for verification at the time of search and thus, the PCIT could revise the order under Section 263 - The ITAT clarified that Section 263 is applicable when the AO fails to conduct proper inquiries, even if an alternate view exists. The mere non-recording of an issue in the assessment order does not imply it was examined - The assessee’s appeal was dismissed, and the PCIT’s order under Section 263 was upheld, directing a fresh examination of the ROC legal fee deduction as capital expenditure
Income Tax Act, 1961 – Sections 271(1)(c), 32(1)(iia), 40(a)(ii), 143(3) and 263 - The assessee filed a return of income declaring a loss, which was accepted in the original assessment under Section 143(3). Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked Section 263, directing reassessment, leading to disallowances of Rs. 32,31,505/- on additional depreciation and Rs. 6,00,000/- on income tax expenditure. The AO then imposed a penalty of Rs. 12,00,000/- under Section 271(1)(c) for alleged furnishing of inaccurate particulars. The first appellate authority upheld the penalty, leading to the present appeal before the ITAT - Whether the disallowance of additional depreciation under Section 32(1)(iia) can attract penalty under Section 271(1)(c) when the same claim was allowed in the preceding assessment year - Whether disallowance of income tax expenditure under Section 40(a)(ii) constitutes furnishing of inaccurate particulars, justifying penalty – HELD - The ITAT ruled partly in favor of the assessee, holding that - Since the same depreciation claim was allowed in the preceding assessment year (AY 2014-15) by the Jurisdictional AO, its disallowance in the current year (AY 2015-16) does not amount to furnishing of inaccurate particulars. The ITAT held that a mere difference in opinion between assessing authorities does not justify a penalty under Section 271(1)(c) - The ITAT upheld the penalty on the disallowance of Rs. 6,00,000/- under Section 40(a)(ii), noting that income tax is expressly non-deductible under the Act. The ITAT relied on N.G. Technologies v. CIT and Hamirpur District Cooperative Bank Ltd. v. CIT, holding that the erroneous claim of a non-deductible expense, if not detected, would have resulted in undue tax benefits, thus attracting penalty under Section 271(1)(c) - The appeal was partly allowed. The penalty related to additional depreciation was deleted, while the penalty on disallowance of income tax expenditure was upheld
Income Tax Act, 1961 – Sections 263, 143(3), 147, 153 and 271(1)(c) - The assessee filed its return of income, which was initially processed under Section 143(1). Subsequently, the assessment was reopened under Section 147, and an assessment order was passed under Section 143(3) r.w.s. 147. Later, the Principal Commissioner of Income Tax (PCIT) invoked Section 263, holding that the order was erroneous and prejudicial to the interest of the Revenue due to inadequate inquiry by the Assessing Officer (AO) regarding share capital and share premium. Consequently, the assessment was revised, leading to an addition of Rs. 10.88 crore under Section 68 and other minor disallowances. The assessee challenged the revised order before the CIT(A) and further before the ITAT, raising a legal objection that the reassessment order was barred by limitation, as it was served after the statutory time limit prescribed under Section 153 - Whether the reassessment order passed under Section 263/143(3)/147 was barred by limitation, as it was served on the assessee beyond the prescribed statutory period - Whether the reassessment order, not communicated within the statutory time frame, is null and void in law - Whether the penalty imposed under Section 271(1)(c) was sustainable after quashing of the assessment order – HELD - The reassessment order was barred by limitation and non-est in law, as it was not served within the prescribed time frame under Section 153 - As per Section 153, the assessment order must be served on or before 31.12.2015, but in this case, it was delivered to the assessee on 05.01.2016, which was beyond the prescribed period - The ITAT relied on judicial pronouncements, including PCIT v. Nidan and CIT v. BJN Hotels Ltd., which held that an assessment order is valid only when communicated to the assessee within the limitation period - The Tribunal rejected the Revenue’s argument that minor delays in service were permissible, distinguishing cases like CIT v. Mohammed Meeran Shahul Hameed and Prakash Lal Khandelwal v. CIT as factually inapplicable - The Tribunal emphasized that merely signing or dating the order within the limitation period does not suffice; the order must be dispatched and served within the prescribed time for it to be legally effective - Since the reassessment order was held to be void ab initio, the penalty imposed under Section 271(1)(c) also became unsustainable and was quashed - The ITAT allowed the assessee’s appeal, holding the reassessment order null and void for being time-barred. Consequently, the penalty order under Section 271(1)(c) was also set aside
Income Tax Act, 1961 – Sections 263, 41(1), 133(6) and 143(3) - The assessee, engaged in the manufacturing of steel pipes, filed its return of income for the relevant assessment year, declaring a substantial loss. The case was selected for scrutiny based on information received from the Director General of GST Intelligence. During the assessment proceedings, the Assessing Officer (AO) issued notices under Section 133(6) to ten sundry creditors to verify the genuineness of outstanding liabilities. However, responses were not received from all parties, and the assessee also failed to furnish confirmations and bank statements as required. The AO proceeded to make additions under Section 41(1) in respect of only two creditors while no additions or further verification were made concerning the remaining eight creditors, despite similar circumstances - Whether failure by the AO to make inquiries or additions regarding the genuineness of sundry creditors, particularly for those who did not respond to Section 133(6) notices, rendered the assessment order erroneous and prejudicial to the interest of the Revenue under Section 263 - Whether revisionary jurisdiction exercised under Section 263 was valid, requiring a fresh assessment to examine all outstanding liabilities – HELD - The ITAT upheld the invocation of Section 263, ruling that the assessment order suffered from inadequate inquiry and non-application of mind, thereby making it erroneous and prejudicial to the interest of Revenue under Explanation 2 to Section 263. It was observed that - The AO had acknowledged inconsistencies in the assessee’s books and had raised doubts over the genuineness of 10 sundry creditors, but made additions under Section 41(1) for only two, without assigning any reasoning for excluding the rest - The assessee had not discharged the primary onus of proving the legitimacy of liabilities, particularly for creditors who failed to respond to statutory notices - In one particular case, it was noted that the assessee had issued cheques, which were dishonored due to bank account restrictions. The creditor had initiated cheque bounce proceedings under Section 138 of the Negotiable Instruments Act, 1881, as well as insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016, before the National Company Law Tribunal (NCLT). The AO failed to examine whether these legal proceedings indicated a cessation of liability or supported the assessee’s claim - The ITAT concluded that the AO’s failure to conduct adequate inquiries or bring relevant material on record amounted to an error that prejudiced the Revenue’s interest - The appeal was dismissed, and the order under Section 263 was upheld. The matter was remanded for a de novo assessment, directing the AO to conduct a thorough examination of all outstanding liabilities, including verification of creditors in light of pending legal proceedings
Income Tax Act, 1961 – Sections 271(1)(c), 274 and 43(5) - The assessee, a telecom company, filed returns for AYs 2009-10, 2010-11, and 2011-12, declaring losses. The Assessing Officer (AO) disallowed certain expenditures, including pre-operative expenses and customer acquisition costs, treating them as capital in nature. Additionally, for AY 2011-12, a loss of Rs. 15,26,33,459 arising from hedging contracts was classified as a speculative loss under Section 43(5). The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income and levied a penalty of Rs. 5,08,08,00,000. The CIT(A) deleted the penalty, holding that the disallowance of expenses was a debatable issue and that the AO had not established concealment or inaccuracy. The Revenue appealed before the ITAT - Whether the disallowance of pre-operative expenses and customer acquisition costs amounted to furnishing inaccurate particulars of income under Section 271(1)(c) - Whether the hedging loss was correctly treated as speculative under Section 43(5) and whether its disallowance warranted penalty - Whether the penalty proceedings under Section 271(1)(c) were valid despite the AO’s failure to specify the charge in the notice issued under Section 274 – HELD - Mere disallowance of expenses does not constitute concealment or furnishing of inaccurate particulars unless the claim was found to be fraudulent or unsupported. The CIT(A) had partially allowed depreciation and amortization on the disallowed expenses, indicating that the matter was debatable. Relying on Reliance Petroproducts Ltd., ITAT ruled that making an incorrect claim in law does not amount to furnishing inaccurate particulars - Regarding the hedging loss, ITAT observed that speculative classification under Section 43(5) depends on the nature of transactions. The CIT(A) had already deleted the addition, and no fresh material was presented by the Revenue to justify the penalty - ITAT found that the penalty notice under Section 274 was defective as it failed to specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars". Citing CIT v. SSA’s Emerald Meadows and CIT v. Manjunatha Cotton & Ginning Factory, ITAT ruled that such a vague notice invalidates the penalty - ITAT further noted that the Supreme Court had dismissed the Revenue’s SLP against the Karnataka High Court ruling in SSA’s Emerald Meadows, reinforcing that an unspecified notice under Section 274 renders the penalty order unsustainable - The ITAT dismissed the Revenue’s appeal, holding that the penalty under Section 271(1)(c) was not legally sustainable due to the debatable nature of disallowances and the defective notice under Section 274
Income Tax Act, 1961 – Sections 14A - The assessee, engaged in IT consulting and software services, reported exempt income from dividends and made a suo motu disallowance of Rs. 8,04,994 under Section 14A. The Assessing Officer (AO) invoked Rule 8D without recording dissatisfaction and enhanced the disallowance to Rs. 19,77,142. Additionally, the AO disallowed Rs. 4,27,90,500 under Section 40(a)(i), treating payments to foreign parties as "fees for technical services" (FTS) under Section 9(1)(vii), holding that tax should have been withheld under Section 195. The CIT(A) upheld both additions but applied the amended Rule 8D. The CIT(A) also dismissed the appeal regarding foreign payments without a speaking order - Whether the AO's invocation of Rule 8D was valid despite failing to record dissatisfaction with the assessee’s suo motu disallowance under Section 14A(2) - Whether the disallowance under Section 40(a)(i) for non-deduction of TDS on payments to foreign entities was justified in the absence of a detailed analysis of the Double Taxation Avoidance Agreement (DTAA) - Whether the CIT(A)'s order was legally sustainable despite failing to provide a reasoned decision under Section 250(6) – HELD - ITAT ruled that the AO's failure to record dissatisfaction before applying Rule 8D violated Section 14A(2). The Bombay High Court in PCIT v. Reliance Capital Asset Management Ltd. held that Rule 8D cannot be invoked automatically. Since the assessee had sufficient own funds, the AO’s reliance on assumptions about borrowed funds was unjustified. The addition was deleted - Regarding the foreign payments disallowed under Section 40(a)(i), ITAT noted that the CIT(A) summarily upheld the AO's findings without examining the nature of services and DTAA applicability. Since withholding tax under Section 195 depends on whether payments qualify as FTS under the respective DTAA, the matter required a fresh examination. The case was remanded to the CIT(A) for a reasoned decision - ITAT held that under Section 250(6), CIT(A) must issue a speaking order, citing CIT v. Premkumar Arjundas Luthra (HUF), where the Bombay High Court emphasized the requirement of a reasoned decision. Since CIT(A) failed to evaluate the assessee’s arguments, the order was set aside, and the case was remanded - The appeal was partly allowed. The disallowance under Section 14A was deleted. The disallowance under Section 40(a)(i) was remanded to the CIT(A) for fresh adjudication
Income Tax Act, 1961 – Sections 270A, 40(a)(ia), 2(24)(x), 36(1)(va) and 143(3) - The assessee filed a return declaring total income of Rs. 87,57,240/-. The Assessing Officer (AO) made additions of Rs. 2,35,839/- for late payment of employees' contributions to PF/ESI under Section 2(24)(x) read with Section 36(1)(va) and Rs. 68,277/- under Section 40(a)(ia) for non-deduction of TDS on certain payments. The AO initiated penalty proceedings under Section 270A, classifying the case as both "under-reporting of income" and "misreporting of income" and imposed a penalty at 200% of the tax payable under Section 270A(8). The CIT(A) upheld the penalty, stating that the assessee had misrepresented facts and claimed unsubstantiated expenses. The assessee appealed before ITAT, arguing that the AO had not clearly distinguished between under-reporting and misreporting, and that the issues involved were debatable - Whether the penalty under Section 270A was valid despite the AO failing to specify whether the case involved "under-reporting" or "misreporting" of income - Whether the additions made on account of PF/ESI late payment and TDS disallowance could be classified as "misreporting of income" under Section 270A(9) - Whether the imposition of a 200% penalty under Section 270A(8) was justified in the absence of specific findings of deliberate misrepresentation – HELD - ITAT noted that the AO had imposed a penalty without clearly distinguishing between "under-reporting" and "misreporting" of income, which is essential under Section 270A. Various judicial precedents, including Kishor Digambar Patil vs. ITO and Manish Manohardas Asrani vs. ITO, emphasize that the AO must explicitly specify the applicable limb of Section 270A, failing which the penalty order is legally unsustainable - The Tribunal observed that the disallowance of PF/ESI payments and TDS deductions were based on debatable legal interpretations rather than deliberate misrepresentation or suppression of facts. Since the Supreme Court's ruling in Checkmate Services Pvt. Ltd. vs. CIT on PF/ESI deposits came after the assessment order, the issue was not settled at the time, making the penalty unwarranted - ITAT held that none of the conditions listed under Section 270A(9) (such as misrepresentation, suppression of facts, or false entries) applied to the assessee's case. Since the disallowances arose from legal differences rather than deliberate falsification, the imposition of a 200% penalty was unjustified - Relying on Prem Brothers Infrastructure vs. NFAC & Anr., ITAT concluded that mere disallowances of expenses do not automatically translate into "misreporting of income" unless specific evidence of fraud or willful misrepresentation is present - Accordingly, the penalty under Section 270A was deleted, and the appeal was allowed in favor of the assessee - The ITAT set aside the penalty order, ruling that the AO's failure to specify the applicable provision under Section 270A rendered the penalty invalid. The appeal was allowed, and the penalty was deleted in full
Income Tax Act, 1961 – Sections 80IA, 80AC, 115JB, 2(24)(x), 36(1)(va), 119(2)(b) and 143(1) - The assessee, engaged in hydroelectric power generation, claimed a deduction of Rs. 7,54,56,766/- under Section 80IA for the Assessment Year 2019-20. The return was filed on 20.11.2019, delayed by 20 days beyond the due date under Section 139(1), due to a lack of liquidity for self-assessment tax payment. The Central Processing Centre (CPC) disallowed the deduction under Section 143(1), citing non-compliance with Section 80AC, which mandates timely return filing for claiming deductions. The CIT(A) upheld the disallowance. The assessee sought condonation of delay under Section 119(2)(b) from the CBDT, which was denied as the appeal was pending before ITAT. Additionally, adjustments were made for deferred tax provisions under Section 115JB and employees' contribution to PF/ESI under Section 36(1)(va) - Whether the delay in filing the return due to financial constraints constituted a reasonable cause for condonation under Section 119(2)(b) - Whether the disallowance of the deduction under Section 80IA was justified solely on procedural grounds under Section 80AC - Whether the deferred tax provision was wrongly added back while computing book profits under Section 115JB - Whether the employees’ PF/ESI contribution disallowance under Section 36(1)(va) was justified – HELD - The assessee had a bona fide and reasonable cause for the delay in filing the return, as it was dependent on receivables from a power distribution company for liquidity. The delay was minor (20 days), and all required documents, including audited accounts and tax computation, were submitted within the due date. Therefore, the delay warranted condonation - ITAT ruled that denying a legitimate deduction under Section 80IA merely on procedural grounds was unjustified. The Tribunal relied on the Himachal Pradesh High Court ruling in PCIT vs. HP Housing and Urban Development Authority to conclude that such disallowance was not tenable - Regarding book profits under Section 115JB, ITAT found that the assessee had not claimed any deduction towards deferred tax, and the lower authorities had misunderstood the computation. The addition was deleted - ITAT upheld the disallowance under Section 36(1)(va) for delayed remittance of employees' PF/ESI, following the Supreme Court ruling in Checkmate Services Pvt Ltd vs. CIT - The ITAT allowed the appeal in part. The delay in return filing was condoned, and the deduction under Section 80IA was restored for examination on merits. The disallowance under Section 115JB was deleted, but the addition under Section 36(1)(va) was upheld. The case was remanded to the AO to verify and allow the deduction under Section 80IA
Income Tax Act, 1961 – Sections 68, 69C, 132, 153A, 201(1) and 201(1A) - A real estate and recreation company was subjected to search and seizure operations under Sections 132 and 133A, leading to the discovery of certain financial transactions, including unsecured loans and cash expenditures. The Assessing Officer (AO) treated loans amounting to Rs. 4,27,00,000/- and Rs. 87,00,000/- as unexplained cash credits under Section 68, based on statements recorded from third parties during the search. Additionally, interest expenses of Rs. 12,32,671/- were disallowed under Section 69C. The AO also made an addition of Rs. 2,24,10,020/- on account of alleged unexplained expenditures recorded in seized electronic documents. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions, holding that the assessee had furnished sufficient documentary evidence to establish the genuineness of transactions. The Revenue challenged the CIT(A)'s findings before the Income Tax Appellate Tribunal (ITAT) - Whether unsecured loans received by the assessee could be treated as unexplained cash credits under Section 68 despite the assessee providing bank statements, loan confirmations, and financial credentials of lenders - Whether mere reliance on third-party statements recorded during search and survey operations, without corroborative evidence, was sufficient to justify additions under Sections 68 and 69C - Whether payments recorded in seized documents could be considered unexplained expenditures under Section 69C when the assessee had denied ownership of the electronic records – HELD - For an addition under Section 68, the Revenue must prove that the creditworthiness, identity, and genuineness of lenders were not established. Since the assessee had provided bank statements, loan confirmations, and ITR details of lenders, the burden shifted to the AO to disprove the evidence. Mere reliance on statements made by third parties in search proceedings, without independent verification or corroborative material, was insufficient to invoke Section 68 - The ITAT reiterated that the burden of proof in cash credit cases does not extend to proving the "source of source," and once primary documentation is provided, the onus shifts to the AO. The AO had failed to conduct further inquiries with the lenders or bring adverse material against them - Regarding the disallowance under Section 69C, ITAT noted that the assessee had denied ownership of the seized electronic records, and no independent corroboration was provided to prove that the transactions belonged to the assessee. The AO’s reliance on assumptions and suspicions was insufficient to sustain the additions - The Tribunal also upheld CIT(A)'s decision that treating part of a loan as genuine while disallowing another part from the same source lacked legal justification - The ITAT relied on Supreme Court and High Court rulings emphasizing that additions cannot be made based on suspicion or unverified third-party statements in search proceedings - The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order deleting additions under Sections 68 and 69C, and held that the assessee had satisfactorily discharged its burden of proof
Income Tax Act, 1961 – Sections 194-IC, 45(5A), 201(1) and 201(1A) - The assessee, engaged in real estate development, entered into a redevelopment agreement with Jankalyan Sahakari Grahnirman Sanstha. Under this agreement, the assessee paid Rs. 2,28,88,500 as compensation to tenants for temporary alternative accommodation during the redevelopment process. The Assessing Officer (AO) held that the payment constituted "rental compensation" under Section 194-IC and that the assessee was required to deduct TDS at 10%. The AO declared the assessee in default under Sections 201(1) and 201(1A). The Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, holding that these payments were not covered under Section 194-IC. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT) - Whether payments made as compensation for alternative accommodation during redevelopment constitute "consideration" under Section 194-IC - Whether the assessee was liable to deduct TDS under Section 194-IC on such payments - Whether failure to deduct TDS rendered the assessee in default under Sections 201(1) and 201(1A) – HELD - The ITAT relied on the precedent set in Nathani Parekh Constructions Pvt. Ltd. vs. ITO and the Hon’ble Bombay High Court’s ruling in Sarfaraz S. Furniturewalla vs. Afshan Sharfali Ashok, which held that payments for alternative accommodation do not constitute "consideration" under Section 45(5A) - The Tribunal noted that Section 194-IC applies only to payments made as part of a share in land or building, and the compensation for alternative accommodation does not qualify as such consideration - It was further observed that the redevelopment agreement explicitly stated that the payments were made to compensate for the hardship of displacement and not as a share in property transfer - Since the payments were not "consideration" under a "specified agreement" as defined in Section 45(5A), the Tribunal ruled that Section 194-IC was inapplicable - Consequently, the assessee was not required to deduct TDS on these payments, and the declaration of default under Sections 201(1) and 201(1A) was set aside - The ITAT upheld the CIT(A)'s decision and dismissed the Revenue’s appeal, confirming that payments for alternative accommodation during redevelopment are not subject to TDS under Section 194-IC
Income Tax Act, 1961 – Sections 9(1)(vii), 143(3) and 144C(13) - The assessee, a company incorporated in the USA, provides consultancy and professional services globally, including in India. During the assessment year 2021-22, the assessee received Rs. 8,81,34,162 as service fees for consultancy and training services provided to its customers in India. The assessee claimed the income was not taxable in India under the India-USA DTAA, arguing that the services rendered did not "make available" technical knowledge or skills as per Article 12(4)(b) of the DTAA. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) disagreed and classified the income as FIS, making it taxable in India. The case was appealed before the Income Tax Appellate Tribunal (ITAT), Delhi - Whether the service fees received by the assessee qualify as "Fees for Included Services" (FIS) under Article 12(4)(b) of the India-USA DTAA - Whether the services rendered by the assessee "made available" technical knowledge, skills, or processes to the Indian clients - Whether the income should be taxable in India in the absence of a Permanent Establishment (PE) – HELD - The ITAT, relying on its own decision in the assessee’s case for AY 2020-21, held that for a payment to be classified as FIS under the India-USA DTAA, the services must not only be technical or consultancy in nature but must also "make available" technical knowledge, experience, skill, know-how, or processes to the recipient - The Tribunal emphasized that "make available" means the recipient must acquire the ability to apply the technical knowledge independently in the future without further assistance from the service provider - It was observed that the services provided by the assessee—such as organizational strategy consulting, talent acquisition consulting, leadership and professional development, and rewards and benefits consulting—did not transfer any technical expertise enabling the clients to perform these functions independently - The ITAT also noted that the services were recurring in nature, implying that the Indian clients had to repeatedly engage the assessee, further proving that no technical knowledge was made available - As the services did not meet the "make available" criterion, the Tribunal concluded that the income did not qualify as FIS under Article 12(4)(b) of the DTAA - Accordingly, the ITAT directed the deletion of the addition of Rs. 8,81,34,162, holding it as non-taxable in India - The appeal was partly allowed, with the ITAT holding that the service fees were not taxable in India under Article 12(4)(b) of the India-USA DTAA
Income Tax Act, 1961 – Sections 143(3), 144B, 68 and 143(1)(a) – The assessee, a private limited company engaged in cab services, filed its return of income for Assessment Year 2018-19, which was initially processed under Section 143(1)(a) with certain prima facie adjustments. The case was subsequently selected for scrutiny under Section 143(3), and the Assessing Officer (AO) assessed the total income at Rs. 62,64,421. The assessee challenged the assessment order, arguing that under the e-Assessment Scheme, 2019, the AO was required to issue a draft assessment order or show-cause notice before finalizing the assessment, which was not done. Additionally, the assessee disputed multiple additions, including disallowances of depreciation, late deposit of Employee Provident Fund (EPF) and Employees' State Insurance (ESI) contributions, interest on delayed TDS and GST payments, and discrepancies between turnover reported in financial statements and Form 26AS. The CIT(A) upheld the AO’s order, leading to an appeal before the Income Tax Appellate Tribunal (ITAT) - Whether the assessment order passed without serving a draft assessment order or show-cause notice under the e-Assessment Scheme, 2019, was valid, and whether the additions made by the AO were justified – HELD - The assessment order was invalid as it violated the mandatory provisions of Section 144B, which requires a show-cause notice or draft assessment order to be issued before modifying the returned income. The Tribunal relied on the Delhi High Court’s ruling in Anju Jalaj Batra v. National e-Assessment Centre, which held that failure to serve a draft assessment order or show-cause notice vitiates the entire assessment. The Tribunal also noted that the Revenue failed to produce any evidence showing compliance with the procedural requirements of the e-Assessment Scheme. As a result, the assessment proceedings were deemed to be non-est and were quashed. Consequently, other grounds related to additions under Sections 68 and 143(1)(a) were not adjudicated, as the assessment itself was declared void - Appeal allowed. The assessment order was set aside for being in violation of Section 144B, rendering the entire proceedings invalid
Income Tax Act, 1961 – Sections 68, 133(6), 147 and 143(3) – The Assessing Officer (AO) reopened the assessment under Section 147 and added Rs. 4.99 crores as unexplained cash credit under Section 68, alleging that the assessee introduced its own unaccounted money through share capital issued at a premium via book entries. The assessee contended that the shares were allotted in exchange for investments held by subscribers, and no cash was received, making Section 68 inapplicable. The CIT(A) deleted the addition, observing that the AO issued notices under Section 133(6), which were duly responded to, and no adverse material was found against the investors. The Revenue appealed, arguing that the CIT(A) failed to examine the genuineness of the investors and the justifiability of the high share premium - Whether Section 68 applies to share capital issued for consideration other than cash and whether the AO’s addition of Rs. 4.99 crores as unexplained cash credit was justified – HELD - The Tribunal upheld the CIT(A)’s order, ruling that Section 68 applies only when there is an actual "cash credit" in the books of accounts, which was absent in the present case. Since the share allotment was a swap of investments and no monetary transaction occurred, Section 68 was inapplicable. The Tribunal relied on the Supreme Court ruling in VR Global Energy Pvt. Ltd. and Madras High Court's decision, which held that share allotments in exchange for investments do not constitute unexplained cash credits. Further, the AO failed to present any evidence to show that the funds were recycled or that the investors lacked creditworthiness. The Tribunal also noted that all relevant documents, including financial statements, confirmations, and ROC records, were submitted and remained unchallenged. Since no fresh material warranted the reopening, the reassessment was deemed invalid - Appeal dismissed. The Tribunal confirmed that Section 68 did not apply in the absence of cash credits, and the addition of Rs. 4.99 crores was unjustified
Income Tax Act, 1961 – Sections 69C, 145, 153A and 37(1) – A search and seizure operation under Section 132 was conducted on the assessee group, revealing unaccounted receipts and unaccounted payments related to real estate and hospitality businesses. The Assessing Officer (AO) added the entire unaccounted receipts of Rs. 96,75,07,509/- as undisclosed income and unaccounted payments of Rs. 101,07,93,992/- as unexplained expenditure under Section 69C. The assessee contended that the entire receipts could not be taxed, as only the profit element embedded in such receipts is taxable, citing judicial precedents. The Commissioner of Income Tax (Appeals) [CIT(A)] partially allowed the appeal by rejecting the books of accounts under Section 145 and applying an estimated profit margin of 50% on the hospitality business and 17% on the real estate business. The Revenue and the assessee both appealed against the CIT(A)’s order - Whether the AO was justified in taxing the entire unaccounted receipts as income and disallowing unaccounted expenditure, and whether the CIT(A) correctly estimated the net profit margin for determining taxable income – HELD - Taxing the entire unaccounted receipts as income was incorrect, and only the embedded profit component should be subjected to tax. The Tribunal observed that the AO failed to establish any unexplained investment or diversion of funds outside business activities. Relying on Supreme Court and Gujarat High Court rulings, it held that only real income is taxable. The Tribunal found that the CIT(A)’s profit margin estimation was excessive and revised the estimated profit margin to 40% for the hospitality business and 13% for the real estate business. Regarding the addition of unsecured loans of Rs. 1.03 crore under Section 68 and commission expenses of Rs. 61,800/-, the Tribunal upheld the AO’s addition, as no incriminating material was found during the search to justify reopening for completed assessments. However, in the case of the ongoing assessments, it allowed telescoping of unaccounted receipts against unaccounted expenditure - Appeals partly allowed. The Tribunal reduced the estimated profit margins, upheld the telescoping principle, and confirmed the addition of unsecured loans and commission expenses for completed assessments
Income Tax Act, 1961 – Sections 147, 148 and 56(2)(viib) – The Assessing Officer (AO) reopened the assessment under Section 147 on the grounds that the assessee company had issued equity shares at a face value of Rs. 10 per share with a premium of Rs. 1,918 per share, amounting to Rs. 303.40 crores, allegedly exceeding the fair market value. The AO treated this as income from other sources under Section 56(2)(viib) and passed a reassessment order adding Rs. 303.40 crores to the assessee’s total income. The assessee challenged the reassessment, contending that the reopening was based on a mere change of opinion, as the original scrutiny assessment under Section 143(3) had already examined the share premium issue in detail. The Commissioner of Income Tax (Appeals) [CIT(A)] set aside the reassessment order, holding that there was no fresh tangible material to justify the reopening, and that the reassessment proceedings were initiated based on a misunderstanding of facts. The Revenue appealed against the CIT(A)’s decision before the Tribunal - Whether the reopening of assessment under Section 147, in the absence of fresh tangible material, was valid, and whether the AO’s addition of Rs. 303.40 crores under Section 56(2)(viib) was justified – HELD - The Tribunal upheld the CIT(A)’s decision, ruling that the reassessment was initiated on the same issue that had been scrutinized in the original assessment proceedings under Section 143(3). The Tribunal found that the AO had accepted the assessee’s explanation regarding the share premium in the initial assessment and had recorded in office notes that no adverse inference was drawn. The reassessment proceedings were thus based on a mere change of opinion, which is impermissible under law. Furthermore, the Tribunal noted that the shares were issued pursuant to a scheme of amalgamation approved by the Punjab & Haryana High Court, and the premium was determined as per the scheme. Since there was no fresh tangible material justifying the reopening, the Tribunal relied on Supreme Court precedents to conclude that the reassessment was invalid. Consequently, the addition of Rs. 303.40 crores under Section 56(2)(viib) was deleted - Appeal dismissed. The reassessment proceedings under Section 147 were held to be invalid, and the addition under Section 56(2)(viib) was deleted as being based on a mere change of opinion
Income Tax Act, 1961 – Sections 69C, 115BBE and 37 – The Assessing Officer (AO) made an addition of Rs. 1,25,89,787/- under Section 69C, treating payments made to labour contractors as bogus expenditure, and further disallowed Rs. 4,27,605/- under Section 37 on account of brokerage and commission expenses. The AO relied on a statement recorded during the search, where one of the creditors denied undertaking contract work and a key person in the firm stated that employees shown as creditors had not provided any services. The assessee contended that all payments were made through banking channels after due deduction of TDS, supported by bills, ledger accounts, and Form 16A. The CIT(A) deleted the additions, holding that the AO had not brought any corroborative evidence on record to prove that the expenses were fictitious. The Revenue appealed before the Tribunal, arguing that the CIT(A) erred in deleting the additions without appreciating the search findings - Whether the addition of Rs. 1,25,89,787/- under Section 69C as unexplained expenditure and the disallowance of Rs. 4,27,605/- under Section 37 as brokerage and commission expenses were justified in the absence of direct evidence proving the transactions to be non-genuine – HELD - The Tribunal upheld the CIT(A)’s decision, ruling that the addition under Section 69C was not sustainable as the assessee had furnished documentary evidence, including bank statements, TDS certificates, and contractor details, which were not refuted by the AO. The AO failed to disprove the genuineness of transactions with specific findings or bring on record any tangible material proving that the expenses were fictitious. The Tribunal further noted that the AO had not questioned the assessee’s production or sales figures, which would not have been possible without employing labourers. Regarding brokerage and commission expenses, the Tribunal held that the AO’s reliance on a statement given during search proceedings was misplaced, as the statement was retracted and was not backed by independent material evidence. Relying on CBDT Circular No. 286/2/2003-IT(INV) and judicial precedents, the Tribunal observed that mere admission in a statement without supporting evidence cannot be the sole basis for addition. Accordingly, the Tribunal confirmed the CIT(A)’s order deleting both the additions - Appeal dismissed. The Tribunal ruled that the additions under Sections 69C and 37 were unjustified in the absence of independent corroborative evidence, thereby upholding the deletion of Rs. 1,25,89,787/- and Rs. 4,27,605/-
Income Tax Act, 1961 – Sections 147, 148 and 41(1) - The Assessing Officer (AO) reopened the assessment under Section 147, issuing a notice under Section 148 based on alleged unexplained credit entries of Rs. 1,12,94,314/- in the bank account of the assessee. During reassessment, no addition was made under Section 68 for unexplained credits, but the AO invoked Section 41(1) and made an addition of Rs. 56,84,733/- on account of remission/cessation of liability concerning sundry creditors. The assessee challenged the jurisdiction of the AO to make an addition under Section 41(1), arguing that the issue of remission/cessation of liability was never part of the recorded reasons for reopening and that no fresh notice under Section 148 was issued for this new addition. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, holding that the addition was justified - Whether the AO had the jurisdiction to make an addition under Section 41(1) in a reassessment proceeding initiated under Section 147 based on different grounds not mentioned in the original reopening reasons – HELD - The Tribunal ruled in favor of the assessee, holding that once the AO finds that the income forming the basis for reopening has been explained, he cannot proceed to tax other incomes unless a fresh notice under Section 148 is issued. The Tribunal relied on the Delhi High Court’s decision in Ranbaxy Laboratories Ltd. v. CIT (336 ITR 136), which held that for any new issue that comes to the AO’s notice during reassessment, a fresh notice under Section 148 is mandatory. Since no such notice was issued in the present case, the addition under Section 41(1) was held to be unsustainable. The Tribunal further noted that the AO’s reliance on cessation of liability without proper verification of creditor payments was unjustified. Consequently, the addition was deleted - Appeal allowed. The addition of Rs. 56,84,733/- under Section 41(1) was held to be beyond the jurisdiction of the AO, rendering it unsustainable in law