The assessee developed a residential project and claimed deduction u/s. 80-IB(10) in respect of the same. The assessing officer denied the claim of the assessee on the ground that some of flats constructed in the project exceeded area of 1000 sq. ft. as envisaged u/s. 80-IB(10). However, it was found that the assessee was claiming deduction on the basis of approved plans of BMC. Occupancy certificate was issued by BMC. As per approved plans, all the flats were below 1000 sq. ft. and as per possession letters given to buyers, the buyers had been given possession separately for each of individual flats. There was no evidence on record to indicate that assessee had combined two or more flats. Completion Certificate was issued by competent authority, which could not have been issued if there was any violation of approved plans by municipal authorities. In view of this, the High Court held that benefit of deduction could not be denied. On SLP filed by the revenue, the Hon’ble Supreme Court declined to interfere with the judgment of the High Court and dismissed the SLP filed.

Pr. CIT v. Vardhan Builders [2023] 155 taxmann.com 391 (SC)

During the search conducted at premises of one K group, some documents and materials involving the assessee were found. Consequently, notices were issued by jurisdictional assessing officer to file returns for six years. The Tribunal held that period for which assessee was required to file returns commenced only from date when materials were forwarded to their jurisdictional assessing officer. The said order was upheld by the High Court.

On SLP by the revenue to the Supreme Court, it was held that the parliamentary intent to enact proviso to section 153C(1) was to cater not merely to question of abatement but also with regard to date from which six year period was to be reckoned in respect of which returns were to be filed by third party. It was also held that if date would virtually relate back to date of seizure, prejudice caused to third party would be disproportionate and thus in the case of the third party, the requirement to file return would commence only from date when materials were forwarded to their jurisdictional assessing officers.

CIT v. Jasjit Singh [2023] 155 taxmann.com 155 (SC)

The assessee was an apex co-operative society within the meaning of the State Act, 1984. The assessing officer denied the deduction u/s. 80P of the Act relying on the provisions of sub-section (4) of the said section. The action of the assessing officer was confirmed by the High Court.

On appeal by the assessee to the Supreme Court, it was held that if a co-operative society is not a co-operative bank within the meaning of section 56 of the Banking Regulation Act, 1949, it would be entitled to the benefit of deduction u/s. 80P of the Act. An apex society is not a co-operative bank within the meaning of section 5(b) read with section 56 of the Banking Regulation Act, 1949 and therefore, deduction u/s. 80P cannot be denied by invoking sub-section (4) of the said section.

Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. Assessing officer [2023] 154 taxmann.com 305 (SC).

As per the Return filed by the assessee for assessment year 1999-2000, tax was payable under section 115JA (MAT.) The Return filed was processed u/s. 143(1). The assessee had disclosed all the facts in relation to the cost of shares sold in the Return of Income filed and the computation of income. The assessing officer initiated reassessment proceedings alleging that the assessee had overstated cost of acquisition of shares and thereby claimed excessive loss, which lead to escapement of income.

On writ petition filed by the assessee, the High Court observed that the assessee had disclosed all the relevant facts in the computation of income and the Return of Income filed. Further it was also observed that even if the assessee had offered the quantum of long term capital loss as computed by the assessing officer that would still have no impact because assessee would be liable to pay tax under the provisions of MAT on the basis of book profits. In view of this, the High Court allowed the writ petition and quashed the reassessment proceedings initiated in the case of the assessee.

Pacific Energy Pvt. Ltd. v. ITO [2023] 155 taxmann.com 375 (Bombay)

During the course of the assessment, the assessing officer asked the assessee to justify its claim in relation to the salaries. The assessing officer did not seek relevant evidence which can establish that the payment of salaries to persons specified in section 40A(2) was not justified. The assessing officer made disallowance in respect of the same without forming a conclusive view about the expenses being unreasonable. The appeals filed by the assessee before the CIT (A) and the Tribunal was dismissed and the disallowance was upheld.

On further appeal the High Court, the High Court observed that before recording disallowance, assessing officer has to form an opinion and that opinion has to be having regard to inter-alia legitimate needs of business or benefit derived or even what would be fair payment outgo for the services rendered. Such an opinion cannot be arrived at without adducing necessary evidence. The assessing officer was duty bound to provide an opportunity to assessee to place on record requisite evidence to justify its claim. Since the assessing officer has made the disallowance without seeking such evidence and forming such an opinion, the assessee was to be granted opportunity to adduce appropriate evidence in order to establish its claim and also explain duties discharged by concerned persons to justify the claim.

Mehra Jewel Palace Pvt Ltd. v. Pr. CIT [2023] 155 taxmann.com 270 (Delhi)

The assessee company had allotted equity shares at a premium. For the purpose of determining the permissible share premium, the assessee had made the valuation following the DCF method and had obtained valuation report from chartered accountant. In the assessment for assessment year 2015-16, the assessing officer made addition u/s. 56(2)(viib) of the Act. For the purpose of making this addition, the assessing officer applied book value method instead of the DCF method as followed by the assessee. On appeal by the assessee, the CIT (A) observed that the assessing officer had rejected the valuation adopted by the assessee without mentioning as to what was found incorrect in it. Accordingly the CIT (A) allowed the appeal.

On revenue’s appeal to the Tribunal, the Tribunal observed that the valuation of shares done by the assessee was in accordance with Rules contained in Explanation (a)(i) to section 56(2)(viib). The Tribunal held that once the valuation was in accordance with the Rules contained in the said Explanation, and the same is supported by certificate from a merchant banker or a chartered accountant, the assessing officer cannot disregard the same without any cogent reasoning. In view of this, the impugned addition was rightly deleted by the CIT (A). The Tribunal followed the decision of co-ordinate bench in the case of Kilitch Healthcare India Ltd v. DCIT – ITA No.7061/Mum/2019 – order dated 22-3-2022 and dismissed the appeal of the revenue.

CIT v. Lifestyle Probuild Pvt. Ltd. [2023] 155 taxmann.com 338 (Del. Trib.)

Assessee was an NRI during the relevant assessment year. The assessee filed the Return of Income which was accepted without any scrutiny assessment. Subsequently, the assessing officer received information that the assessee had made cash deposit with co-operative bank. The assessing officer issued notice for reassessment on ground that income had escaped assessment to tax and called upon assessee to explain cash deposits. The assessing officer prepared draft assessment order and made an addition u/s. 69A on ground that assessee failed to prove nexus between amount withdrawn from FDs and amount deposited. The Dispute Resolution Panel upheld additions on ground that assessee had also failed to provide evidence to prove sources of FDs in banks as well as maturity proceeds of which were withdrawn and deposited to co-operative bank. In accordance with the directions from DRP, the assessing officer passed final assessment order and made the additions.

On appeal to the Tribunal, the Tribunal observed that in the instant case interval between withdrawal and deposit was only two days. Accordingly the Tribunal held that merely because assessee had failed to explain reasons for withdrawal from one bank account and deposited to another bank account, it could not lead to conclusion that cash withdrawn earlier was not available for subsequent deposit in bank account. As regards the fixed deposits, the Tribunal held that the FDs were not made in relevant assessment year and therefore, no addition could be made on account of unexplained sources for FDs for year under consideration. Question of furnishing of explanation in support of such FDs would not arise. Thus the additions made under section 69A were to be deleted.

Abrar Fakirmohmmad Shaikh v. ITO [2023] 155 taxmann.com 505 (Pune Trib.)

Assessee was earning income from house property, business, and other sources. He filed his income tax return, declaring a total income of Rs.4.79 lakhs. The case was taken up for scrutiny for the reason of claiming large deduction claimed u/s. 57. The assessing Officer observed that assessee received interest income and claimed deductions for interest paid to different entities which was claimed as deduction u/s. 57. Upon verification, the assessing officer found discrepancies in interest rates received and paid. Assessee had received interest at rates lower than previously stated in his submissions. Consequently, the assessing officer disallowed difference in interest rates. On appeal, the Commissioner (Appeals) upheld addition made by Assessing Officer.

On further appeal to the Tribunal, it was found that since, in present case there was income earned by assessee by way of interest, however, same was not equal to percentage of interest in terms of interest expenditure incurred. However, the Tribunal held that the difference in the rate of interest could not be a reason to disqualify certain expenditure within provision of section 57(iii). Therefore, expenditure incurred by assessee, genuineness of which was not disputed by Assessing Officer would be allowable expenditure in terms of provisions of section 57(iii). Accordingly, the claim of the assessee was to be allowed and the disallowance made was to be deleted.

Sunil Bardia v. ITO [2023] 155 taxmann.com 539 (Raipur Trib.)