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Showing 61 to 80 of 175799 Records

2025 (7) TMI 126

Disallowance of Foreign Tax Credit - filing of Form 67 beyond the due date specified u/s 139(1) - Scope of amended rule - HELD THAT:- In the present case, the dispute is also for the A.Y 2022-23. As per the amended rule, the assessee can file Form 67 before the end of the A.Y relevant to the previous year.

In the present case, the assessment year involved is A.Y 2022-23 and end of the A.Y is 31/03/2023. The assessee has filed Form 67 on 15/12/2022, which is well before the due date for furnishing the relevant form.

Although, these facts have been brought to the notice of the learned CIT (A), but the CIT (A) rejected the claim of the assessee by considering the pre-amended rules.

Therefore, CIT (A) is erred in upholding the reasons given by the AO to deny credit for Foreign Tax Credit. Thus, we set aside the order of the learned CIT (A) and direct the AO to allow credit for Foreign Tax Credit as claimed by the assessee in the return of income by considering the relevant form 67 filed on 15/12/2022 indicating the details of income and taxes paid outside India and delete the demand raised - Assessee appeal allowed.
2025 (7) TMI 125

Excess stock found during the survey - addition in respect of alleged shortage of stock - AR submits that the stock was quantified and valued by the Departmental Officials during survey wherein various scrap items available were also included in the total quantity and value of the stock and no credit is allowed despite the details provided by the assessee - CIT(A) based on the working of the assessee reduced the additions and further deleted the profit estimated by AO on such excess stock - HELD THAT:- Before us, the assessee has failed to bring on record any evidences with respect to the claim that scrap/damaged goods which were included in the total quantity of stock as quantified by the survey authorities. However, possibility of damaged/ defective stock merged into regular stock cannot be ruled out.

Under these circumstances, in our considered opinion, further credit of 20% should be given on account of the possibility of damaged/defective stock merged into total stock quantified by the survey authorities. Accordingly, the addition of Rs. 11,04,629/- is further reduced by the sum of Rs. 2,20,925/- and the confirm and balance addition. According, Ground of appeal no.1 of the assessee is partly allowed.

Addition being the profit @ 12% on such shortage of stock confirmed.

Disallowance of salary - AO has based on the statements of the Ms. Shilpa Behal, employee and relative of Director available at the time of survey - HELD THAT:- From the perusal of the statements of Ms. Shilpa Behal and also considering the fact that assessee premises is having of four floors where goods were lying which fact is verified by the department during survey. We find force in the arguments of Ld. AR that services of labour were obtained on daily basis to arrange the stock lying in the shop at all the floor.

Further services of employees are required to manage each floor. With regard to accounting charges, total annual payment of Rs. 60,000/- was claimed as aid to accountant which is quite reasonable looking to the volume of business. We find that the claim of payment salary at Rs. 6,00,000/- on the total turnover Rs. 2.20 crores of retails sales of petty electronic items is reasonable and thus, is allowed.

Appeal of the Assessee is partly allowed.
2025 (7) TMI 124

Penalty u/s 270A - disallowing the claim of leave encashment - HELD THAT:- As per section 270A(6)(a) of the Act, the under reported income shall not include the amount of income in respect of which the assessee offers bona fide explanation and disclosed all the material facts to substantiate the explanation offered.

AR emphatically argued that the CIT(A) erroneously concluded that the assessee had suppressed the facts and so the case of the assessee falls u/s 270A(9) of the Act, which is quite contrary to facts available on record.

Both lower authorities nowhere specifically denied that the assessee has offered a bona fide explanation for under reported or misreported income in it's reply. Despite adequate disclosure in the annual accounts regarding the leave encashments, the Learned CIT(A) declined to accept without any strong reasons by quoted it incorrect and fallacious.

AR contended that the CIT(A) however, inferred that there was no reasonable cause for making the claim but there is no any single whisper in the impugned order that claim in question was not bona fide - On the basis of foregoing fact situation, we finds material substance in the submissions advanced on behalf of the assessee that the claim in question was on provisional basis having debatable issue with it’s bona fides and so imposition of penalty was not called for. Hence, appeal of the assessee deserves to be allowed as imposition of penalty in question is unsustainable. Assessee appeal allowed.
2025 (7) TMI 123

Back Money - assessee had not declared the foreign assets in the column provided in the return of income - as alleged assesse violated the provisions of section 43 of Act in respect of the investment in Barclays Bank PLC, Branch Isle of Man - HELD THAT:- The foreign bank accounts were duly disclosed by her husband in his respective returns of income along with the interest income, which has been duly offered to tax. The assessee also filed her updated return for A.Y. 2022-23, wherein the said foreign assets were disclosed under the FA Schedule, thereby evidencing bona fide compliance with the disclosure requirements.

The explanation tendered by the assessee during the penalty proceedings, including the full disclosure of the relevant bank statements, source of funds, ITRs of the husband, and other supporting documents, clearly establishes the assessee's bona fide belief and absence of any willful concealment or intention to evade tax.

The co-ordinate benches of the ITAT, in the cases of Aditi Avinash Athavankar [2023 (7) TMI 1561 - ITAT MUMBAI], Palanirajan Rajarajan [2025 (3) TMI 643 - ITAT CHENNAI], and Sanjay Bhupatrai Shah [2025 (3) TMI 797 - ITAT MUMBAI] have consistently held that mere technical or venial breaches arising out of bona fide belief, especially where the primary holder has already disclosed the foreign assets and income therefrom, do not warrant penal consequences under section 43 of the BMA Act. It has also been judicially affirmed that the imposition of penalty u/s 43 is discretionary and must be exercised judiciously, taking into account the surrounding facts, conduct of the assessee, and legislative intent.

In the present case, the assessee has sufficiently demonstrated that the lapse, if any, was inadvertent and non-malicious, and all the necessary disclosures were duly made by the primary account holder. Moreover, the revenue has not brought any material to rebut the explanation or to prove that the assessee was the actual beneficial owner of the said assets or the income therefrom.

Thus, we are of the considered view that the penalty levied under section 43 of the Act in this case is unjustified and unsustainable. Assessee appeal allowed.
2025 (7) TMI 122

New claim in proceedings u/s 153A as not claimed in his regular return of income - Denial being interest paid on borrowed capital for house property - AO disallowed the same on the ground that the assessee did not furnish the details such as proof of payment of interest for housing loan taken for purchase of self occupied house property, copy of loan account statement and the certificate from the bank regarding the payment of interest and principal - HELD THAT:- CIT(A) although held that the assessee can make a new claim in proceedings u/s 153A which was not claimed in his regular return of income since the assessee filed original return of income u/s 139 of the Act and while the assessment was pending the assessee again in response to notice u/s 153A filed another return making a new claim, however, rejected the same in absence of documentary evidence filed before him.

We find the Revenue is not in appeal against the finding of the Ld. CIT(A) that the assessee can make a new claim in the abated assessment in light of the decision of the Hon’ble Bombay High Court in the case of PCIT vs. JSW Steel Ltd. [2020 (2) TMI 307 - BOMBAY HIGH COURT]

Assessee that given an opportunity, the assessee is in a position to substantiate his case by filing the requisite details before the Assessing Officer. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his claim of interest expenditure of Rs. 2 lakh on account of borrowed capital for self occupied house property and decide the issue as per fact and law. We hold and direct accordingly. The first issue raised by the assessee is accordingly allowed for statistical purposes.

Disallowance of interest - HELD THAT:- As relying on Shri Girishbhai Vadilal Shah [2024 (3) TMI 771 - ITAT AHMEDABAD] and Darashaw & Co. Pvt. Ltd. [2014 (5) TMI 940 - BOMBAY HIGH COURT] AO was not justified in disallowing the claim of interest expenditure and Ld. CIT(A) was not justified in confirming the same. We, therefore, set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the disallowance. The second issue raised by the assessee in the grounds of appeal is accordingly allowed.

Treating agricultural income as taxable income - as per AO assessee did not furnish the supporting documents to prove that the agricultural activity was being carried out by him for earning the agricultural income - HELD THAT:- It is the submission of the Ld. Counsel for the assessee that given an opportunity, the assessee is in a position to substantiate his claim by filing the requisite details before the AO since the case was not handled properly before the AOas well as the Ld. CIT(A). Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate his claim by filing the requisite details and decide the issue as per fact and law. We hold and direct accordingly. Ground No.3 raised by the assessee is accordingly allowed for statistical purposes.

Disallowance of deduction under Chapter VI-A - HELD THAT:- CIT(A) confirmed the action of the AO on the ground that the assessee failed to furnish the details of medical insurance premium, LIC policy and repayment of principal amount of housing loan. It is the submission of the assessee that given an opportunity, the assessee is in a position to substantiate his claim by filing the requisite details before the AO.

We deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his claim by filing the requisite details and decide the issue as per fact and law.
2025 (7) TMI 121

Disallowance on interest - Nature of interest paid on refund of amount towards cancellation of Booking or property - Interest being penal in nature or not - AO concluded that interest paid on refund to the allottees is penal in nature and not allowable as deduction u/s 37(1) - HELD THAT:- In our considered opinion, the same is merely a contractual obligation pursuant to which the assessee had made payment of interest. The modus operandi adopted by the assessee together with the nature of transactions thereon have been duly explained hereinabove. There is absolutely no infringement of law made by the assessee. The payment of interest had arose on account of contractual obligations with the parties, whether oral or written and is inextricably linked with the business of the assessee and hence the same is merely compensatory in nature which has been duly deleted by the ld CIT(A), on which we do not find any infirmity. Accordingly, the ground 1 raised by the revenue is dismissed.

Addition on IBMS and sinking fund - AO observed that once an amount has been charged form the customers, it is an income of the assessee and same cannot be transferred to liabilities in the balance sheet, thus brought to tax the sum as income of the assessee - CIT(A) considered the receipt of these charges from the customers to be in the nature of security deposit which are transferable to the account of the new purchaser of the shop - HELD THAT:- It is not in dispute that the charges on account of IBMS and sinking fund have been collected by the assessee from its customers to whom shops of the mall have been sold. No doubt, the assessee has to maintain the entire mall in which it would be entitled to collect the charges from the customers/ shop owners. However, no details were filed by the assessee with regard to these security deposits received which were either refunded back to the shop owners on any point of time or getting adjusted towards future contingencies as stated by the ld AR.

All said and done as stated, these are the receipts in the normal course of business by the assessee from its customers. If the shop owner paid the security deposit to the assessee, the same shall have to be refunded back by the assessee to the concerned shop owner in the event of the said shop getting transferred to a new customer. In that scenario, it would be justified on the part of the assessee to reflect the receipts as a liability in the balance sheet. But in absence of any details from the side of the assessee as and when these security deposit either got refunded/ adjusted, it partakes the character of income in the year of receipt. Hence, we uphold the action of the ld AO in this regard and allow ground No. 2 raised by the revenue before us.

Addition on account of suppressed sale at Meerut Mall project - AO noted that during the year, the assessee had sold the shops at Meerut Mall to different customers at different rates - AO calculated the cost of each shop on dividing the total cost incurred in construction of Meerut Project by the total area of the Mall and arrived at the cost of Rs 2772.54 per sq ft. - CIT(A) observed that the assessee has constructed the total area of 211239 sq ft of shopping mall of which 23954 sq ft is sold during the year under consideration and balance 187284 sq ft area is shown as closing stock - HELD THAT:- None of the factual findings given by the ld CIT(A) could be controverted by the revenue with cogent evidence before us. Either way it is only an estimated addition made by the ld AO which have no legs to stand in the facts and circumstances of the instant case. Hence, we do not find any infirmity in the order of the ld CIT(A). Accordingly, ground No. 3 raised by the revenue is dismissed.

Addition on account of unaccounted sales - HELD THAT:- This issue is no longer res integra in view of the decision of this Tribunal in assessee’s own case [2023 (6) TMI 803 - ITAT DELHI] wherein as held addition has been made totally based on conjecture and surmises.

Addition on account of transaction recorded outside books as per seized documents - AO made a value of all the notings in the slip pad in the sum as income on substantive basis in the hands of the assessee and on protective basis in the hands of Mr. Rajat Gupta - HELD THAT:- We hold that the burden u/s 132(4A) read with Section 292C of the Act had been duly shifted by the assessee to the income tax department right from the time of search, which fact also stood corroborated by an affidavit. CIT(A) had noted in his findings that the some of the names mentioned in the slip pad like Mohitji, Shri Ram Hari Ram are the persons who were assessed by the same ld AO and that no corresponding action has been taken in their case by the very same ld AO based on the said seized documents Annexure A-2 and no addition has been made in their hands.

Thus, we do not find any infirmity in the order of the CIT(A) qua this issue. We hold that there cannot be any case of making any addition either substantive or protective either in the hands of the assessee company or in the hands of Rajat Gupta qua this seized document. Hence, ground raised by the revenue is dismissed.

Late payment of employees contribution towards PF & ESI contribution - HELD THAT:- This issue is settled against the assessee by the recent decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd [2022 (10) TMI 617 - SUPREME COURT (LB)] Respectfully following the same, the ground No. 2 raised by the assessee is dismissed.

Addition on the basis of seized documents vide Annexure A-2 - undisclosed investment - a diary was seized vide Annexure A-2 wherein in pages 1 to 8 of the diary, certain transactions were recorded which was commercial in nature and the amounts written were in coded form - HELD THAT:- AR placed on record copy of the Tribunal in assessee’s own case for AYs 2005- 06, 2006-07 and 2007-08 [2023 (6) TMI 803 - ITAT DELHI] respectively wherein, the same issue has been considered and Tribunal had deleted the addition made on account of undisclosed investment. Respectfully following the same, the Ground No. 1 raised by the assessee is hereby allowed.

Disallowance u/s 14A read with Rule 8D of the Income Tax Rules - HELD THAT:- CIT(A) in principle upheld the application of the computation mechanism provided in Rule 8D(2) of the Rules, but directed the ld AO to consider only those investments which had actually yielded exempt income to the assessee. Accordingly, he arrived at the disallowance figure of Rs. 1,41,139/- but stated that assessee had already disallowed the same in the return of income and hence, there is no need for further disallowance.

No contrary findings or factual errors were brought by the revenue before us with cogent evidences. Either way, the law is very well settled that only those investments which had actually yielded exempt income to the assessee should be reckoned for the purpose of computing the disallowance of expenses u/s 14A of the Act read with Rule 8D(2) of the Rules. Hence, we do not find any infirmity in the order of the ld CIT(A) and accordingly, Ground no. 7 raised by the revenue is dismissed.
2025 (7) TMI 120

Disallowance u/s. 69C - expenses claimed as deduction and debited to the Profit & Loss Account of the Assessee in respect of ‘Downside on Sale of Flats’ - scope of terms ‘purchase’, ‘sale’, ‘purchaser’ and ‘new purchaser’ - Addition made as assessee failed to produce entire details of final purchaser for verification of genuineness of loss claimed - CIT(A) deleted addition - HELD THAT:- As per the ‘Risk and Rewards’ clause all risk and reward attached to the flats were transferred to the Assessee from the date of execution of MOU.

Assessee (being the ‘purchaser’) had allowed BDMC (being the ‘Developer’) to make ‘further sale’ of the 23 flats to the ‘new purchaser’. As per the modalities agreed upon by the Assessee and BDMC, the consideration at which these flats were sold to end customers/new purchasers by BDMC was approved by the Assessee. In case of 20 flats the consideration paid/payable by the end customer/new purchaser was less than what the Assessee had to pay to BDMC and as a result there was a loss of INR.17.60 Crores.

We find that the arrangement between the Assessee and BDMC was in the nature of an underwriting agreement whereby the Assessee had agreed to purchase specified number of flats from BDMC. What is apparent is that while the MoUs use the term ‘purchase’, ‘sale’, ‘purchaser’ and ‘new purchaser’, there was no sale of immovable property affected by way of the said MoUs. Therefore, we accept the contention of the Assessee that the judgment of Suraj Lamp & Industries Pvt. Ltd [2011 (10) TMI 8 - SUPREME COURT] would not apply to the facts of the present case.

Assessee has followed a consistent approach in recognizing income/losses arising on account of variation in the amount of consideration the Assessee was contractually bound to pay to BDMC and the final selling price at which the flat was sold to new purchasers/end customers.

We find that the CIT(A) had accepted the transactions undertaking by the Assessee with BDMC as genuine transactions. Taking note of the terms of the MOU between the Assessee and BDMC, the CIT(A) had noted that the Assessee was the owner of risks/rewards attached to the flats. In the preceding assessment years, the same arrangement had resulted in income which was offered to tax by the Assessee and the same was accepted by the AO. Therefore, the CIT(A) was of the view that the loss arising from the same arrangement should also be allowed as deduction to the Assessee. We find that the findings returned by the CIT(A) are based upon material on record.

Assessee had filed all the MoUs referred to in the table reproduced in Table in paragraph 4.16 above before the Assessing Officer either in original assessment proceedings or in the remand proceedings. Further, the Assessee as well as BDMC had filed bank statements to show that the payments were made through banking channel and to establish the genuineness of the transaction. The entries in the bank statement were corroborated by the ledger accounts and the financial statements.

We reject the contention of the Revenue that the Assessee had failed to support the claim for deduction in respect of amount debited to Profit & loss Account for the relevant previous year on account of ‘Downside on Sale of Flats’. Decided against revenue.

Addition u/s 68 - unsecured loan reflected in the Balance Sheet of the Assessee-Company as on 31/03/2018 - identity and creditworthiness of the lender and the genuineness of the transaction - AO rejected documentary evidence furnished by the Assessee for the sole reason that notices issued u/s 133(6) of the Act to IDBI Bank Ltd. to confirm the genuineness of Bank Statement submitted by the Assessee were not responded to by the said bank - HELD THAT:- AO had failed to point out any infirmity in the documents furnished by the Assessee in the remand proceedings to establish the nature and source of the loan transactions recorded in the books of accounts of the Assessee. Even during the appellate proceedings before the Tribunal, the Revenue has failed to point out any discrepancy or perversity in the order passed by the CIT(A).

Further, on examination of the documents placed on record, we find that the same corroborate stand taken by the Assessee and establish the manner in which loan was received by the Assessee from DHFL. We also note that the Assessee had also placed before the CIT(A) signed/stamped copy of Bank Statement issued by the IDBI Bank Ltd. along with Rejoinder to Remand Report filed by the Assessee on 02/04/2024 to counter the objection raised by the Assessing Officer regarding non-verification of bank statements. Decided against revenue.
2025 (7) TMI 119

Delay in filing the appeal before CIT(A) - sufficient cause for delay - eligible reasons for delay of 175 days - HELD THAT:- Hon’ble Supreme Court in Sambhaji and Ors V Gangabai and Ors, [2008 (11) TMI 393 - SUPREME COURT] has held that the object of prescribing procedure is to advance the cause of justice. In an adversial justice system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation.

Unless compelled by express and specific language of the statute, the procedural enactment ought not to be construed in a manner which would leave the court helpless to meet extra ordinary situations in the ends of justice.

Justice is the goal of jurisprudence. Procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. Processual law is not to be tyrant but a servant, not an obstruction but an aid to justice.

A procedural prescription is the handmaid and not the mistress, lubricant, not a resistance in the administration of justice. In view of this and in the interest of justice, we find sufficient cause to condone the delay caused in filing the first appeal before the ld. CIT(Appeals).

In the result, the appeal is allowed for statistical purposes. The impugned order dated 28.02.2023 is set aside. The delay in filing the first appeal before first appellate authority i.e CIT(A) stands condoned.
2025 (7) TMI 118

Addition u/s 68 - cash deposits made during the demonetization period - AO has alleged that the Assessee has booked concocted cash sale to adjust his undisclosed income and the sales disclosed by the Assessee was denied by presuming that the Assessee has made out of books sales and on that basis AO rejected the books of the Assessee - CIT(A) observed that the addition would not sustain as the AO has made the casual remark in the assessment and proper examination and analyses was not done for the documents - HELD THAT:- We find that assessee submitted the complete details of sales along with PAN, address of buyers, Bank statement depicting purchases, party-wise details of purchase, stock details etc.. AO himself admitted that the appellant had sufficient stock. Ld. CIT(A) thus rightly concluded that when assessee was having sufficient stock so could have sold the same and by submitting all the documents established that such sales were made by him during 1st week of Nov’2016, should not have been doubted. Especially when no discrepancy was pointed by AO in purchases & opening stock. Hence, once the purchases are accepted, the corresponding sales could not be questioned. The findings of CIT(A) need no interference.

Undervaluation of closing stock - AO has re-valued closing stock of assessee - differential value from the value of stock reported by the assessee was added to the returned income - CIT(A) while deleting the addition had observed that the AO had not worked out correctly the difference in the valuation of stock for the purpose of addition and in the interest of justice confirmed the addition of 5% - HELD THAT:-Value of gold and diamond jewellery as calculated by the AO relying on average purchase rate / last purchase rate was not in accordance with the method of valuing the stock, since there is a method for such valuation under prescribed in “ICDS-II Valuation of Inventories”.

AO did not mention why method of valuation is adopted by appellant incorrect and which was consistently followed in earlier years. Ld. CIT(A) also observed that appellant was not granted with reasonable opportunity to explain the difference. AR has submitted that job work was done on 24K gold to 22KT gold along with other alloys to make Kundan jewellery which involved wax with a weight up to 25-40% of total value which could be varied similarly, thus, the assessee has itself reduced the weight of stone from 18KT gold stock while doing the valuation.

CIT(A) has observed that assessee had reduced the value of diamond without any proper justification and also based on the quantity of gold lying with the Kundan jewellers, accordingly confirmed 5 % of such difference on account of under valuation. Assessee has not challenged the same. However, the fact that without giving assessee an opportunity to explain the reasons for revaluation the addition was made and that being the major ground to give benefit by the Ld. CIT(A), needs no interference.
2025 (7) TMI 117

Exemption u/s. 54 - real / economic /deemed owner of the property - real economic owner - Husband or wife - lower authorities implies that the appellant was the only real / economic/deemed owner of the said property and not her husband - HELD THAT:- The sale of flats have been executed vide agreements to sell dated 9/1/2020 and the said flats were initially purchased vide agreement to purchase dated 14/03/2002 read with registered gift deed dated 1/04/2017. The contents of these sale agreements (and purchase/gift deed) are not in dispute and the same have been executed by the assessee in her individual capacity and the consideration has been received by her in her bank account and which has been duly offered to tax by the assessee and has been brought to tax by the AO in the hands of the assessee.

Exemption claimed u/s 54 - The factum of ownership of the said flat in the name of the husband of the assessee vide agreement to sell dated 27/03/2015 is not in dispute nor the contents of the subject registered agreement to sell dated 18/03/2021 wherein the title in the property has been transferred by him in the name of the assessee.

In terms of utilisation of capital gains and discharge of whole of purchase consideration by the assessee within the stipulated time frame as so mandated u/s 54, it has been submitted that the assessee has discharged the whole of the consideration well before 31/03/2021, the extended time limit for making the investment under the TOLA which the AO and the ld CIT(A) have failed to consider.

Further, in the interim, as the matter relating to withholding tax was pending before the tax authorities and certificate was finally issued on 24/02/2021, the assessee parked the funds in fixed deposits/with Altan Engineering Pvt Ltd and the same were liquidated/received back and thereafter, the amount was paid to the husband of the assessee after taxes were withheld and deposited.

We find that the AO alleging the rotation of funds has merely looked at the transanctions on 12/03/2021 when the majority of the purchase consideration has been discharged and has not considered the transactions prior to that date where the money has been initially parked by the assessee in fixed deposits/with Altan Engineering and thereafter, received back and out of which, the amount was paid to the husband of the assessee towards the purchase consideration.

Capital gains which have been brought to tax relates to the flats that have been sold/ transferred by the assessee vide agreement to sell dated 9/1/2020 and the assessee has thereafter purchased another flat vide agreement to sell dated 18/03/2021 wherein the consideration has been discharged by 12/03/2021, the said purchase is thus within the stipulated time period of two years after the date on which transfer of the original asset took place as prescribed u/s 54, the claim of exemption u/s 54 cannot be denied to the assessee.

Appeal of the assessee is allowed.
2025 (7) TMI 116

TP Adjustment - duration of the Associated Enterprise (AE) relationship - AE Relationship of AE existed only for 2 months OR more - procedural irregularities committed by the assessee, such as filing the addendum to the Form 3CEB instead of filing an entire set of revised Form 3CEB for the fresh consideration - assessee submitted that only the international transactions for the two-month period should be considered, rather than those for the entire period of 12 months - value of international transactions in the Audited Financial Statements of the subject AY in the "Related Parties Transaction" disclosure

HELD THAT:- We observe that there have been certain procedural irregularities committed by the assessee, as rightly pointed out by the TPO and DRP, such as filing the addendum to the Form 3CEB instead of filing an entire set of revised Form 3CEB for the fresh consideration (though in substance the addendum to Form 3CEB contained the amended quantum of international transactions). But it is settled law that such irregularities, especially in audit reports, should not lead to substantial justice being denied to the assessee

Secondly, the TPO & DRP hold that there is no disclosure of business restructuring in the Form 3CEB. No merit in this argument because there is no business restructuring of the Indian assessee company itself. Merely a sale of shares by a Director’s foreign company to a third party thereby causing a deemed AE relationship of assessee company with Medtech Pty from 01.06.2020 to no longer exist. We find that this does not constitute a business restructuring for the assessee company to be reported in Form 3CEB. Therefore, the observation of the TPO / DRP in this regard is factually not correct.

Thirdly, we note that the assessee has submitted the TP Documentation and Segmented Profit and Loss Account only before the DRP on 15.07.2024 as additional evidence.

DRP in its Directions initially rejected the same based on the finding that the procedure for filing an additional evidence before it had not been followed but has then, without prejudice, considered the evidence and rejected it on merits based on a remand report by TPO which seems to reiterate the very same earlier positions taken by the TPO in his Order dated 20.10.2023.

Thus, we are of the view that in the interests of justice the matter is sent back to the TPO for a proper re-look and adjudication with all the relevant documents in place in proper form. Hence, we direct the TPO to provide an opportunity to the assessee to file a revised Form 3CEB along with the additional evidence filed (namely TP Documentation and Segmented Profit & Loss Account) that were submitted by the Assessee before the DRP and decide the issue afresh in accordance with law, after affording due opportunity of being heard to the assessee.
2025 (7) TMI 115

Assessment order passed u/s 143(3) without issuance of a valid notice u/s 143(2) - assumption of jurisdiction by Jurisdictional AO - jurisdiction u/s 127 -HELD THAT:- For any challenge of jurisdiction u/s 127 of the Act, the assessee has to file his objections before the Ld. AO. In this regard, the provision of section 124(3) of the Act and provision of section 124(4) of the Act prescribe a mechanism for an assessee to ventilate the grievance regarding the issue of jurisdiction.

Admittedly, as per the documents and material before us it is revealed that the procedure laid down has not been followed by the assessee and hence, we are unable to provide any kind of relief on this issue, more so because proceedings under chapter XIII provide a mechanism for settlement of grievance, if any, and strictly speaking are not within the domain of the powers of ITAT as derived from section 253.

The case of Kalinga Institute of Industrial Technology [2023 (6) TMI 1076 - SC ORDER] is a guiding force for deciding any issue in this regard. To this extent, Ground Nos. 1 to 3 are dismissed.

Addition u/s 69C - expenditure was incurred during the year under consideration on account of interior decoration not justified - HELD THAT:- Giving the benefit of doubt to the assessee, we feel that he deserves another chance to present the facts before the Ld. CIT(A) and to this extent, we set aside the impugned order and remand the same to the file of Ld. CIT(A) for fresh adjudication after giving an opportunity of being heard.
2025 (7) TMI 114

Validity of assessment order passed u/s 153A without obtaining approval u/s 153D - HELD THAT:- As decided in Prateek Nagpal [2025 (1) TMI 651 - ITAT DELHI] and Anu Nagpal [2025 (5) TMI 1782 - ITAT DELHI] on similar facts and circumstances of the case as well common approval u/s 153D of the Income Tax Act dated 30.12.2019, the coordinate bench has quashed the entire proceedings initiated u/s 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the ACIT, Central Range-4, New Delhi.

The copy of approval u/s. 153D dated 30.12.2019 granted in total 28 assessees cases wherein, the present assessee’s name is mentioned at serial no. 10 - legal issue was decided in favour of the assessee by quashing the entire proceedings initiated under section 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the ACIT, Central Range-4, New Delhi. Decided in favour of assessee.
2025 (7) TMI 113

TP Adjustment - idle capacity adjustment - whether the reduction of AE sales can be a factor to reject idle capacity adjustment? - HELD THAT:- We find that it is an undisputed fact the Appellant is a full-fledged entrepreneur bearing all risks and it is also an admitted fact that the Appellant and AE do not have any arrangement for committed no of units, that being the case merely because the sales to AE is reduced cannot be a factor to reject idle capacity adjustment.

Merely because sales to AE is reduced cannot be a factor to reject idle capacity adjustment.

Contention of the AR that BCP Unit in the initial year of operation cannot be accepted because the actual dip in the capacity is in respect of the MHU unit which is in existence for around 7 years - We note that any manufacturing unit in the initial year of operation will not be able to achieve the optimum capacity due to various teething issues and more importantly the huge fixed cost which it may have to incur. Therefore, generally in the start-up phase idle capacity adjustment is granted but in the instant case the facts are quite peculiar where one unit (i.e. BCP unit) is in the start-up phase and the other unit (i.e. MHU unit) has crossed the start-up phase as it is in existence for around 7 years and in the given facts of the case admittedly there is decline in capacity in both the units but the decline in MHU unit is much more than that of the BCP Unit.

In our considered view idle capacity could arise because of various reasons like start-up phase, force majeure, recession, industry/sector specific reasoning etc. and it is not restricted to start-up phase. In the instant case, the Assessee has pointed out that due to global recession there was a decline in export sales to AE, this fact is also acknowledged by the TPO and he has also given a specific finding that only AE sales in reduced but Non-AE sales was uniform. This apart the available comparable companies average capacity is as high as 62.38% and even the industry average capacity as published by RBI and FICCI is around 70% whereas the capacity achieved by Assessee is only 23%. All these factors goes to show that due to global recession there seems to be a decline in the capacity of the Assessee, which deserves to be appropriately adjusted for idle capacity.

Accordingly, we hold that idle capacity adjustment is allowable - Assessee has proposed 3 different approaches/basis in computing the quantum of idle capacity adjustment. However, both the lower authorities have neither considered or adjudicated on the same. Hence in the interest of justice, we remit this issue to the file of TPO to factually examine and consider any one of the approaches in quantifying the amount of idle capacity adjustment. Accordingly this ground/issue is allowed for statistical purposes.

Treatment of forex loss as operating expense while computing the margin of the Appellant - This Tribunal has been consistently holding that translation in forex loss or gain ought to be treated as operating in nature while computing the margins of the Assessee as well as the comparable companies. Accordingly, we hold in principle that forex loss should be treated as operating expense. However, whether the entire quantum of forex loss (i.e. realised/actual and unrealised/notional) should be treated as operating expense is concerned we hold it is only the actual forex translation should be considered as operating expense and we find merit in the contention of the Ld.AR. Accordingly, we hold that only actual forex loss should be treated as operating expense and the notional Forex loss should not be treated as operating expense. Accordingly this ground of appeal is partly allowed in favour of the Appellant.

Software Development segment - Comparable selection - Thirdware Solutions Ltd. be excluded as this entity was into acquisition / purchase of hardware and software including software as a service. This entity was also engaged in software development, implementation and support services. Therefore, it earned income from products and services. On the other hand, the assessee was solely into software services.

Spry Resources India Pvt Ltd.- Considering the argument of the ld.AR that though the said company is passes all filters applied by the TPO including the functionality. Hence, we find force in the argument of the ld.AR and found that the reasoning given by the lower authorities is not sound enough since the TPO has not established how this has influenced the margin of the said comparable. Further, the lower authorities do not dispute that this company is functionally comparable. Accordingly, we hold that this comparable company should be included in the final list of comparable companies.

Disallowance of notional forex loss on restatement of ECB - as per AO this loss would not affect the day to day operations and would have impact only on actual repayment at the time of settlement - DR contended that Forex loss is in relation to capital transaction and hence it should be treated as capital expenditure - HELD THAT:- DR relied on the decision of this Tribunal in Assessee’s own case in [2024 (7) TMI 211 - ITAT CHENNAI] wherein the issue was remitted back to the AO for fresh adjudication as there was no finding as to usage of the loan. Respectfully following the same, we remit this issue to the file of the AO for fresh adjudication for bringing on record the facts such as the whether the assets were purchased in India and it has already been put to use and then decide this issue in light of the ratio laid down by jurisdictional Tribunal in the case of Hyundai Motor India Ltd [2017 (4) TMI 1193 - ITAT CHENNAI]. Hence, the corresponding ground is allowed for statistical purposes.

Disallowance of provision for Obsolescence - AO disallowed this item as accordingly to him no provision is allowable as per the Act - CIT(A) has allowed the same as the Assessee has been consistently following this method of valuation of closing stock - HELD THAT:- We hold provision is not allowable as deduction for AY 2014-15. Nevertheless, we find that the alternate argument of the Assessee merits consideration i.e. since the provision has been disallowed in the immediately preceding year AY 2013-14 and we have also now disallowed the same in the subject AY 2014-15, we hereby direct the AO to rework the opening stock and closing stock of AY 2014-15 after taking into consideration the aforesaid disallowances made in AY 2013-14 & 2014-15. This ground is disposed off with the above direction.

Rate of depreciation on software - AO treated as in nature of intangibles - CIT(A) allowed higher depreciation on software by following the decision in the case of CIT Vs Computer Age Management Services P Ltd [2019 (7) TMI 1153 - MADRAS HIGH COURT] HELD THAT:- This issue is squarely covered in favor of the Assessee by the decision of this Tribunal in [2024 (7) TMI 211 - ITAT CHENNAI] wherein it has been held that where software license acquired by assessee was in nature of software application, the assessee would be eligible to claim depreciation at 60%.

Disallowance under section 40(a)(i) for reimbursement of seconded employees cost - TDS u/s 195 or 192 - AO disallowed the reimbursement as according to him it is in the nature of “fees for technical services” - CIT(A) allowed the same basis the fact that tax has already been deducted under section 192 - HELD THAT:- We find this issue is squarely covered in favor of the Assessee by the decision of this Hon’ble Tribunal in [2024 (7) TMI 211 - ITAT CHENNAI] wherein held assessee has availed services of employees of its group entities. The same was to facilitate business operations of the assessee. These seconded employees have worked under the control and supervision of the assessee which is evident from the fact that the assessee, as an employer, has deducted due TDS u/s 192. Therefore, these payments have already suffered TDS. The assessee has merely reimbursed actual salary to its AE. The same were merely in the nature of reimbursements only and do not include any element of income. The risk and reward of the work performed by the deputed employees was with assessee. Therefore, Ld. DRP, in our opinion, is not correct to treat the same as Fees for Technical Services which would require separate TDS. Accordingly, impugned disallowance as made u/s 40(a)(i) stand deleted. - Decided in favour of assessee.
2025 (7) TMI 112

Grant received from National Highway Authority of India (NHAI) by reducing the cost on Written Down Value (WDV) - disallowing the part of depreciation as a result of reduction of WDV to the extent of NHAI grant from the cost of the project - CIT(A) deleted addition - HELD THAT:- It is clear from clause 23.1 to 23.3 that this grant was given by the NHAI as a cash support by way of outright grant as a shareholders fund. Naturally the assessee cannot use the said grant given by the NHAI other than meeting the cost of the project but that does not lead to the conclusion that the grant was given by NHAI as a portion of cost of asset acquired by the assessee met directly or indirectly as provided in Explanation (10) to section 43 of the I.T. Act, 1961. It is the cash support in the nature of shareholders fund to make the project viable and to provide financial strength to the assessee to avail further financial support from the financial institutions in the shape of loan.

As it is clear that the learned CIT (A) has given the finding based on the analysis of facts and law which is also supported by various decisions as relied upon by the assessee. Therefore, we do not find any error or illegality in the order of the learned CIT (A), qua this issue.

Disallowance of provisions for periodic maintenance - disallowance of provisions for periodic maintenance - assessee submitted that as per the concessionaire agreement with NHAI, the assessee has to do periodic maintenance of carriageway once in every 5 year - as claimed that the expenditure towards the repair or damaged occurred to the road due to the traffic during the period of 5 years and not because of the traffic of the 5th year in which the assessee has to carry out the repair work. Thus, the assessee contended that it has apportioned the expenditure for the 5 years and made a provision for periodic maintenance - HELD THAT:- There is no dispute that the assessee is under a contractual obligation to carry out the periodic maintenance of the road constructed under the concessionaire agreement with NHAI. The assessee has to meet the expenses from the toll collection. However, the repair work is carried out only on the 5th year and therefore, it is an accumulated repair & maintenance expenditure for a span of 5 years for which the assessee has made the provision of 1/5th of the estimated cost of the repair work each year.

As decided in TN(DK) Express Ways Ltd [2018 (10) TMI 2052 - ITAT HYDERABAD] we are in agreement with the assessee that in the mercantile accounting system the expenditure to be absorbed on periodic basis. In the given case, the expenditure to be incurred after 5 years and assessee cannot charge to P&L account whole 5 years expenditure on year 5. Rather, it has to charge to P&L A/c every year proportionate to the year of liability. Therefore, we set aside the order of CIT(A) and allow the provision made by the Assessee towards periodic maintenance.

Delay of 1271 days in filing the appeal by the assessee - reasonable cause to justify such an inordinate delay - HELD THAT:- We find that when the assessee has failed to explain some reasonable cause to justify such an inordinate delay, the concept of liberal interpretation of expression of the term "sufficient cause" cannot be applied in the case of the assessee. The reasons are apparently unacceptable and unsatisfactory as the assessee has failed to explain the justification for such an inordinate delay in filing the appeal.

On the one hand the assessee has been appearing in the cross appeal filed by the Revenue but chosen not to file the appeal against the impugned order. Therefore, the assessee has failed to make out a case that it has acted bonafidely and had taken all possible steps within its power and control to file the appeal without unnecessary delay.

Except giving some vague excuse of no knowledge of the impugned order which is absolutely contrary to the record and unacceptable, the assessee has not brought any material to show that the assessee was prevented by some circumstances or events which were beyond the control of the assessee to file the appeal within the period of limitation. Accordingly, in the facts and circumstances as discussed above, we decline to condone the delay of 1271 days in filing the appeal and hence, the appeal of the assessee is not maintainable being barred by limitation.
2025 (7) TMI 111

Addition u/s 68 v/s 69A - CIT(A) changing basis of additions made by AO - assessing the tuition fees earned by the assessee as ‘unexplained credit’ - CIT(A), although upheld the additions but changed the basis of the additions and confirmed the same u/s 69A as 68 done by AO - HELD THAT:- As gone through the decision of Prakash L. Shah under the similar set of facts, wherein Ld. CIT(A) changed the basis of additions made by AO without issuing any show cause notice to the assessee, then in that case it was held that the department cannot improve upon on the case of the AO.

CIT(A) could not have improved upon the case of the AO without issuing any show cause notice or without providing any opportunity of hearing to the assessee thus additions u/s 69A of the Act deserved to be deleted and it is ordered accordingly.

Addition u/s 69A - As in the instant case, no physical money was found either with the assessee or with any other person, therefore the question of the assessee, being owner of the same does not arise at all. Hence, in my view the provisions of section 69A of the Act are not attracted.

Therefore, direct the deletion of the additions made u/s 69A of the Act on the above basis as well.

Addition u/s 69A - taxing the commission earned by the assessee -HELD THAT:- Mere assessee’s erroneous confession at the time of search cannot be the sole basis of impugned additions as the said confession in the absence of any corroboratory evidence, do not carry evidentiary value as held by the CBDT’s own instructions. Therefore the additions made u/s 69A is hereby ordered to be deleted.

Disallowance of expenses claimed against commission income - HELD THAT:- After having gone through the facts of the case and also keeping in view the decision of the Coordinate Bench in the case of Ameya Builders & Property Developers [2023 (4) TMI 1427 - ITAT MUMBAI] - And also keeping in view that assessee had in fact earned commission income from Krish Intratrade Pvt Ltd for assistance in hiring aadhar operators and had might have incurred expenses for earning the said income. Therefore the asssessee is entitled to be allowed expenses against earning of such commission thus direct the deletion of disallowance of expenses made by the AO.

Addition u/s 69A being excess cash deposit - HELD THAT:- AO had not considered, the starting point of computation of excess cash deposit is from FY 2019-20, thus, the AO ought to have considered the tuition fees of Rs. 2,75,600/- earned by the assessee during FY 2019-20 in the same manner as the AO had considered tuition fees of Rs. 4,00,000/- for FY 2020-21. Apart from the above, the assessee had also maintained an account even with IDBI Bank wherein the net withdrawal were of Rs. 2,50,000/-. Therefore considering the above items the source of excess deposit of Rs. 2,66,000/- stands explained. Accordingly, considering the said facts, while allowing the said ground, direct the deletion of additions.
2025 (7) TMI 110

Validity of reopening of assessment - time-line prescribed by limitation stipulated u/s.153(2) - HELD THAT:- No order of assessment/re-assessment shall be made u/s.147 of the Act after the expiry of nine (9) months from the end of the Financial Year, in which notice u/s.148 was served. In the present case, notice u/s.148 of the Act was issued by the AO on 24.03.2018.

Therefore, the AO had time of nine (9) months from the end of the Financial Year i.e. up to 31.12.2018 to frame the assessment/re-assessment u/s. 147 of the Act. Sec.153(2) prohibits the AO to frame an assessment after 31.12.2018, unless the Revenue was able to show that despite the notice u/s. 148 was issued on 24.03.2018, the same hadn’t been served on or before 31.03.2018, and instead it was served upon the assessee only on or after 01.04.2018.

But, in this case, the AO categorically recorded in the assessment order that “notice u/s. 148 of the Act was issued to the assessee on 24.03.2018 after recording reasons and after obtaining necessary approval from the Ld.PCIT, Salem, and the same was duly served on the assessee”.

In the light of the factual assertion as made by AO of issue and serving of notice in March 2018, we are of the view that he was duty bound to frame the assessment on or before 31.12.2018 as per the time-line prescribed by limitation stipulated u/s.153(2) of the Act. In other words, the AO was barred from framing the assessment/reassessment after 31.12.2018 and therefore, the impugned assessment order dated 04.12.2019 [after a year] is certainly barred by limitation and therefore, the ibid legal issue raised by the assessee is allowed in its favour.
2025 (7) TMI 109

Jurisdiction AO u/s.147 r.w.s. 148 - Addition of cash deposits as unexplained money - HELD THAT:- We are of the view that since there was no return of income filed by the assessee, the AO was correct in assuming the jurisdiction over the case of the assessee.

So far as the merits of the case are concerned, we are of the view that the matter requires fresh consideration at the end of the AO in the light of the voluminous evidences filed by the assessee before us. Therefore, in the interest of justice, we restore this matter to the file of the AO for examining afresh. Needless to say, the AO shall afford meaningful opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
2025 (7) TMI 108

Capital gain arising from the compulsory acquisition of land sale proceeds of which were utilized by a bank to discharge the overdraft facility of a sister concern - application of income OR diversion of income by overriding title - overdraft facility has been obtained by the sister concern by putting the property of the assessee as collateral security'

HELD THAT:- It is not a case where the sale proceeds were directly credited to the account of SBIL, rather it is a case where the sale proceeds were first credited to the account of the assessee and then transferred to the account of SBIL in order to discharge the overdraft facility taken by the sister concern. Therefore, it is not a case where any loan has been taken in lieu of mortgage of some property rather a case where overdraft facility has been obtained by the sister concern by putting the property of the assessee as collateral security.

Assessee has also claimed the benefit of TDS deducted by the Government in lieu of the acquisition of the land. Therefore, we are of the view that the present case is different from the case of Smt.Thressiamma Abraham [1996 (9) TMI 60 - KERALA HIGH COURT] and hence it is a case of application of income and not diversion of income by overriding title. Before parting, we would further like to observe that the assessee firm has shown loan to the sister concern as creditor under the had “long term capital liabilities” which fact has not been refuted by the Counsel for the assessee. Decided against assessee.
2025 (7) TMI 107

Deduction u/s. 80IB - Validity of Approval given by Competent Authorities under RERA and AUDA - denial of deduction as carpet area of the residential units exceeded the prescribed limit of 60 square meters as per the definition u/s 80-IBA - CIT(A) allowed deduction - HELD THAT:- CIT(A) has decided the appeal after verification of the records, Sale deeds and floor plan submitted by the assessee. AO before making disallowance u/s. 80IBA ought to have referred the matter to the District Valuation Officer to verify the measurements of the residential flats which was not done by the A.O.

But simply relying on the broachers supplied by the assessee firm denied the benefit to the assessee. That apart the Revenue could not place on record any material that the floor area is exceeding 60 Square Mtrs. Whereas the Local Authority issued Building Use (BU) Certificate which also fulfill the definition of Section 2 (k) of the RERA Act which are lesser than 60 Sq. Mtrs. as prescribed u/s. 80IBA of the Act.

In the absence of any material evidence or DVO’s report from the Revenue, we have no hesitation in confirming the order passed by Ld. CIT(A) - Appeal filed by the Revenue is hereby dismissed.