S 13(3) Services received from related party by Trust

The Assessing Officer (AO) disallowed business support service expenses paid by the assessee trust to a related party on the grounds that it falls under Section 13(3). However, it was held that this disallowance is not sustainable. The AO has not provided evidence to demonstrate that the business support expenses incurred by the trust were not comparable to the market value of the services received from the related party.

Shri Balaji Human Resources Development Trust v. ITO [2024] 162 taxmann.com 805 (Delhi - Trib.)

S. 54F Purchased of new residential house

The taxpayer sought an exemption under Section 54F for capital gains from selling land and investing the proceeds in a new residential property. However, the purchase documents for the new property (a flat) were not registered. It was observed that the registration is a mandatory condition for claiming exemption under Section 54F, the exemption cannot be allowed.

Hiteshbhai Mansukhbhai Bagdai v. ACIT [2024] 162 taxmann.com 547 (Rajkot - Trib.)

S. 80JJA Filing of Auditor report

The chartered accountant of the assessee filed Accountant’s report in Form 10DA before the due date of filing of return of income. Admittedly, the above report was not accepted by the assessee before the due date of filing of return of income. However, the Report in Form 10DA filed by the accountant of the assessee was accepted by the assessee on 6-1-2023, whereas in this case the order under section 143 (1) was passed on 16-3-2023, denying the claim of deduction under section 80JJA which means that at the time when the order under section 143(1) was passed by the CPC, the assessee had accepted the Report filed by the accountant of the assessee in Form 10DA. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Once, it is seen that the audit report, was available with the Assessing Officer at the time of framing of assessment, even though the same may not have been filed along with the return of income, the assessee is entitled to claim of exemption.

Akuntha Projects (P.) Ltd. v. Deputy Director-CPC [2024] 162 taxmann.com 861 (Ahmedabad - Trib.)

S. 143(1) Prima Facie adjustments

The Assessing Officer (AO) disallowed a certain amount under Section 143(1) based on a discrepancy in the tax return. The tax auditor had categorized this amount as a penalty in Form 3CD, and it was omitted from the income declared. Since the AO’s authority under Section 143(1) is limited to adjustments based on the return and provided documents, and penalties are prima facie disallowed under Section 143(1)(a)(iv), a detailed justification (speaking order) may not have been strictly necessary for this specific adjustment. Joyo Plastics v. CIT [2024] 162 taxmann.com 836 (Mumbai - Trib.)

S 148 Reassessment post commencement of CIRP

If a company undergoing a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, faces a tax reassessment by the Assessing Officer (AO) with additions for unexplained cash credits (potentially bogus purchases) under Section 68, the Income-tax Department is bound by the terms of the resolution plan approved by the National Company Law Tribunal (NCLT). As per Section 238 of the IBC, the department is prevented from taking any action related to issues or transactions that predate the commencement of the insolvency process for the company. Consequently, the reassessment order is liable to be set aside.

SEL Manufacturing Co. Ltd. v. DCIT [2024] 162 taxmann.com 904 (Chandigarh - Trib.)

S. 254 Recalling order of ITAT based on subsequent Supreme Court Decision

The subsequent judgment of the Supreme Court in the case of Checkmate Services P. Ltd. v. CIT [2022] 143 taxmann.com 178 (SC), which established that the essential condition for deducting payments towards employees’ contributions to PF and ESIC is their deposit on or before the due date prescribed under the respective Acts, does not alter the finality of the Tribunal’s judgment.

The order of the Tribunal cannot be recalled based on the subsequent judgment of the Hon’ble Supreme Court when the order of the Tribunal had attained finality between the parties. Consequently, the Miscellaneous Application filed by the department is dismissed.

If already existing judgment of Jurisdictional High Court is not brought to the notice or attention of the Tribunal, then the Tribunal can recall the order while exercising the powers u/s.254(2).

DCIT v. ANI Integrated Services Ltd. [2024] 162 taxmann.com 889 (Mumbai - Trib.)

S. 271(1)(c) Concealment penalty

The assessee paid self-assessment tax before the Assessing Officer (AO) issued a notice to reopen the tax assessment. However, the AO levied a penalty equal to 100% of the alleged tax liability because the assessee didn’t file a valid return under Section 139.

Explanation 4 to Section 271(1)(c) clarifies that the ‘tax sought to be evaded’ for penalty purposes should consider advance tax, TDS, TCS, and self-assessment tax paid before the reopening notice. In this case, since the self-assessment tax eliminated any outstanding tax liability, there was no ‘tax sought to be evaded.’ Therefore, the penalty levied by the AO should be deleted.

Smt. Kavita Sachdev v. ITO [2024] 162 taxmann.com 642 (Indore - Trib.)