Issue No. 285 / October 15th, 2024

Dear Professionals,

We are glad to present to you the 285^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 129126+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’

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Journals Current Status

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Key Takeaways from Handpicked Rulings

1) ITAT: Confirms addition of coordination & settlement expenses earned by the Assessee under income from other sources. ITAT confirms addition of Rs. 1.75 Cr as commission under the head income from other sources and holds that the said receipts are not deductible under Section 57 as coordination & settlement expenses; Notes that the Assessee claimed the income as deduction towards expenses but no evidence was furnished in support of the expenditure so incurred/claimed, thus the Revenue made addition in the absence of any evidence in support of expenses incurred; Opines that, “the Assessing Officer has not committed any error in accepting the income of Rs.1,75,00,000/- disclosed by the assessee himself in his return of income under the head "income from other sources" for which the assessee has also claimed relevant TDS of Rs.1,75,000/- & therefore considering the totality of the facts, we do not see any infirmity in the order passed by LD CIT(A)/NFAC & therefore does not require any interference from this Tribunal”; Thus dismisses Assessee’s appeal………. Click here to read and download ITAT Order

2) ITAT: Refuses to condone 291 days’ delay in filing Assessee’s appeal absent reasonable cause of delay. ITAT refused to condone the delay of 291 days in filing the appeal and dismisses Assessee’s appeal challenging the CIT(E) order denying permanent registration to the Assessee under Section 12AB on the point of limitation; Opines that, “the appellant has not been able to demonstrate any reasonable cause to allow condonation of delay in the matter”; Notes that the CIT(E) denied the registration on the ground that the Assessee failed to comply with notices issued for hearing and in the absence of verification of financial transactions for the genuineness etc. the said Trust could not be eligible for approval u/s 12A(1)(ac)(iii); Observes that two essential ingredients for condoning delays are: (i) the existence of 'sufficient cause', and (ii) the satisfaction of the competent authority that such sufficient cause was proved as existing; Finds that it is a general principle of law that whenever a Court is vested with a discretionary power, such a discretion must be exercised not in an arbitrary, vague or fanciful manner but on judicial principles; Observes that the fundamental principle, which has been universally recognised as the true rule of guidance for the exercise of discretion to condone delays is to see whether the party claiming indulgence has been reasonably diligent in prosecuting his appeal………. Click here to read and download ITAT Order

3) ITAT: Confirms revision order as AO failed to gather necessary information and verify the same. ITAT confirms the revision order under Section 263 passed by the PCIT; Remarks that, “In the present case, the ld. AO absolutely closed his eyes for the reasons best known to him and accepted the submission of the assessee without verifying the same at the face of it, which necessitated the PCIT to exercise his powers u/s.263”; Observes that the AO having failed to gather necessary information regarding the impugned issue, the PCIT is justified in exercising his power u/s 263 to cause further enquiry on this issue; Further observes that it is incumbent upon the AO to come to an independent conclusion that the expenditure is allowable under Section 37 or taxable under Section 69C; Thus dismisses Assessee’s appeal…….Click here to read and download ITAT Order

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4) ITAT: Denies condonation of over 2006 days' delay; No 'sufficient cause' established u/s 253(5) of the IT Act. ITAT dismissed the assessee’s appeal in limine due to a delay of 2006 days in filing the appeal, citing negligence and inaction on the part of the assessee as the reasons for this inordinate delay; Assessee challenged an addition of Rs. 1,34,80,381 made under Section 40(a)(ia) but did not press this ground before the CIT(A), who dismissed the appeal on March 23, 2018. An inquiry into alleged fraud led to a special audit in March 2023, after which the assessee decided to file a new appeal on November 29, 2023, resulting in a 2006-day delay. Assessee requested the delay be condoned, citing reasonable cause. However, the assessee failed to demonstrate that its employee received the assessment order or that the employee informed the assessee regarding the passing of the orders by the learned AO. ITAT held that the assessee must demonstrate that (a) the employee was competent; (b) the employee exercised reasonable care; and (c) any mistakes made were those that a competent person would not make. A written confirmation from the employee was necessary, and if the communication was oral, adequate evidence had to be provided to show that there was no negligence or lack of skill. ITAT found no "sufficient cause" for the delay as defined under Section 253(5) of the I.T. Act, leading to the rejection of the request for condonation. The appeal was dismissed without being admitted…………Click here to read and download ITAT Order

5) HC: Condones the delay in filing revised return as genuine hardship was caused to the Assessee. HC sets aside the demand order issued by the Revenue under Section 143(1)(a) based on the original return of income and directs the Revenue to process the revised return of income filed by the Assessee for the relevant AY 2017-18; Concurs with Assessee’s argument that Section 119(2)(b) contemplates that if there is any genuine hardship to the Assessee same could be condoned by the board; Finds that, “In the present facts and circumstances of the case, as there is a genuine undue unjust hardship that would be caused to the petitioner. If delay is not condoned and further proceedings could be assessed by the authorities by making assessment, if any, afresh for calculation of any loss or excess payment of tax for underpayment of tax this is of course at the liberty of respondent”; Thus allows Assessee’s writ petition……….. Click here to read and download HC Judgment

6) HC: Upholds ITAT order quashing revision order; accepts Assessee’s hybrid accounting system. Meghalaya HC upholds ITAT order quashing revisionary order under Section 263 concluding that the assessment order is neither erroneous nor prejudicial to the interest of revenue and allowed Assessee’s appeal following hybrid system of accounting with respect to ―interest on debtors on cash basis; Notes that Revenue passed an order under Section 263 which was set aside by the PCIT and thereafter the reassessment order was passed by the Revenue; Observes that once the order under Section 263 has become final and stood quashed, no question of passing another order will arise in view of the fact that the subsequent order passed by the Revenue is invalid in the eye of law, as the opinion formed by the Revenue, is not sustained on the reasoning that revision under Section 263 is not permissible; Further observes that when the assessment order was found to be erroneous and prejudicial to the interest of Revenue, the right vests with the PCIT to review the order and since the said stipulation has not been satisfied, the order passed under Section 263 cannot stand on its leg; Points out that although the term ‘res judicata’ cannot be blindly applied to the income-tax proceedings as held by..…… Click here to read and download HC Judgment