Background of the Case

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently adjudicated an important issue concerning the grant of additional interest under Section 244A(1A) of the Income Tax Act, 1961 in the case of ITC Infotech India Limited. The assessment for AY 2014-15 was originally completed under Section 143(3) on 23 January 2018, resulting in a refund becoming due to the appellant along with interest under Section 244A(1). Subsequently, the appellant succeeded in appeal before the Commissioner of Income Tax (Appeals), who passed an order dated 08 June 2018 granting relief. However, despite the appellate order, the Assessing Officer passed the consequential appeal effect order only on 02 February 2023. The appellant contended that this substantial delay exceeded the time limit prescribed under Section 153(5) and therefore entitled it to additional interest at the rate of 3% per annum under Section 244A(1A).

Since the CIT(A) merely directed verification of the claim without specifically directing grant of such interest, the matter reached the Tribunal.

Arguments by the Appellant (Assessee)

The appellant argued that Section 153(5) imposes a statutory obligation upon the Assessing Officer to pass an order giving effect to an appellate order within the prescribed time frame. According to the appellant, the appellate order was passed in June 2018, whereas the appeal effect order was issued only in February 2023, resulting in a delay of more than four years beyond the permissible period. The appellant submitted that Section 244A(1A) was introduced specifically to compensate taxpayers where the Revenue fails to implement appellate relief within the stipulated time. It was further contended that the appellant became entitled to additional interest commencing from the date immediately following the expiry of the period prescribed under Section 153(5) until the date on which the refund was actually granted. Therefore, the appellant requested the Tribunal to direct the Assessing Officer to grant the additional interest after verifying the computation.

Respondent’s Response (Revenue)

The Revenue primarily relied upon the order passed by the CIT(A) and submitted that the issue required verification of the appellant’s computation before any additional interest could be granted. While defending the appellate order, the Department maintained that the Assessing Officer should first examine the factual correctness of the claim and determine the amount, if any, payable under Section 244A(1A). The Revenue did not place any specific material on record to dispute the fact that the appeal effect order had been passed after the expiry of the statutory period. Accordingly, the Department supported the direction of the CIT(A) restricting the matter to verification of the claim rather than issuing a categorical direction for grant of additional interest.

Court Findings and Decision

After considering the submissions and examining the material on record, the Tribunal observed that the appeal effect order dated 02 February 2023 had admittedly been passed well beyond the period prescribed under Section 153(5) of the Act. The Tribunal held that once there is a delay in giving effect to an appellate order beyond the statutory timeline, the appellant becomes entitled to additional interest under Section 244A(1A). The Bench noted that these provisions were introduced as a deterrent against administrative delays and to compensate taxpayers who are deprived of timely refunds despite succeeding in appellate proceedings.

Relying upon the decisions of the Karnataka High Court in Wipro Ltd. v. JCIT and the Gujarat High Court in Nima Specific Family Trust v. ACIT, the Tribunal concluded that the appellant was entitled to additional interest at the rate of 3% per annum from 01 November 2018 until the date of actual grant of refund.

Accordingly, the Tribunal directed the Assessing Officer to verify the computation and grant the additional interest in accordance with law, thereby allowing the appeal of the appellant.

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Background of the Case

The assessee had received a settlement amount of Rs.6.58 crore pursuant to a Settlement Agreement entered into with another party in connection with long pending disputes relating to property and business rights. The disputes had arisen due to conflicting claims and litigations concerning development and ownership rights under earlier agreements and memorandums of understanding. The Assessing Officer treated the compensation received by the assessee as taxable income and made additions on the ground that the amount represented consideration for relinquishment of rights and therefore was taxable either as business income or capital gains. The CIT(A) further made protective additions in respect of certain amounts allegedly relatable to other parties involved in the settlement arrangement. Aggrieved by the additions, the assessee preferred appeal before the ITAT Kolkata.

Arguments by the Appellant (Assessee)

The assessee argued that the compensation amount was received only towards settlement of disputes and relinquishment of its “right to sue”, which is not regarded as a capital asset under Section 2(14) of the Income Tax Act read with Section 6 of the Transfer of Property Act. It was submitted that the assessee never acquired any enforceable ownership rights in the disputed property and the settlement merely compensated the assessee for withdrawing claims and pending litigations. Reliance was placed upon several judicial precedents including the decisions of the Hon’ble Supreme Court in Oberoi Hotels Pvt. Ltd., and various Tribunal decisions including Bhojison Infrastructure Pvt. Ltd., Chheda Housing Development Corporation and Ganeshsagar Infrastructure Pvt. Ltd. to contend that compensation received for surrendering a mere right to sue constitutes a capital receipt not chargeable to tax.

It was further argued that the protective addition made by the CIT(A) was wholly without jurisdiction since the amounts in question belonged to other corporate entities and had already been accounted for in their respective books.

Respondent’s Response (Revenue)

The Revenue contended that the compensation received by the assessee was directly connected with relinquishment and extinguishment of rights arising from agreements relating to the property and therefore constituted taxable receipts. According to the Department, the amount received by the assessee was liable to be taxed either as business income or as capital gains since the assessee had effectively surrendered valuable commercial rights under the settlement arrangement. The Revenue further defended the additions made during assessment proceedings and supported the view that the compensation had nexus with transfer or extinguishment of rights capable of taxation under the Income Tax Act.

The Department also attempted to justify the protective addition made by the CIT(A) in relation to the amounts attributable to other entities connected with the settlement.

Court Findings and Decision

The ITAT Kolkata held that the settlement amount received by the assessee was a capital receipt not liable to tax. The Tribunal observed that the compensation was received only for relinquishment of the assessee’s “right to sue” arising out of prolonged disputes and litigations and such right does not qualify as a “capital asset” within the meaning of Section 2(14) of the Income Tax Act. Relying extensively upon the judgments, the Tribunal reiterated that compensation received for surrendering a mere right to sue is outside the ambit of capital gains taxation. The Tribunal further noted that the assessee had not transferred any enforceable ownership rights in the property and the receipt was purely compensatory in nature arising from settlement of disputes.

In respect of the protective addition of Rs.11.42 crore, the Tribunal held that the amount admittedly belonged to other corporate entities and had neither been received nor accrued to the assessee. It was also observed that the CIT(A) exceeded jurisdiction in making protective additions without any substantive assessment in the hands of those entities.

Accordingly, the Tribunal deleted the additions and allowed the appeal of the assessee.

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Background of the Case

The matter before the ITAT Panaji Bench involved multiple appeals filed by Rajesh Suhas Verenkar and Riya Rajesh Verenkar for Assessment Years 2013–14 to 2019–20. The Appellant was engaged in civil construction activities, labour contracting, and acting as an agent or broker in processing land allotment applications in Goa. A search and seizure operation under Section 132 of the Income Tax Act was conducted on 19 March 2019, during which certain incriminating documents were seized. Based on these materials and statements recorded during the search, the Assessing Officer initiated assessment proceedings under Sections 153A and 153C of the Act.

The Assessing Officer observed that only around 50–55% of the total business receipts were deposited into the appellant’s bank accounts while the remaining portion was allegedly kept outside the books and used for personal expenses or deposited in accounts of family members. Consequently, the Assessing Officer treated 50% of such alleged suppressed receipts as undisclosed income and made additions while completing the assessments.

Arguments by the Appellant (Assessee)

The Appellant challenged the assessment orders before the Commissioner of Income Tax (Appeals). However, during the appellate proceedings, several hearing notices were issued by the CIT(A). According to the Appellant, the appeals were ultimately dismissed ex-parte without granting a fair and adequate opportunity to present their case or submit supporting documents. The appellant contended before the Tribunal that the appellate authority proceeded without properly considering their submissions and without granting reasonable time to respond to the notices issued.

It was argued that the dismissal of the appeals without meaningful opportunity violated the principles of natural justice and resulted in confirmation of additions without proper examination of the facts and evidence.

Respondent’s Response (Revenue)

The Revenue relied upon the orders passed by the lower authorities and submitted that several opportunities were provided by the CIT(A) during the appellate proceedings. The department contended that notices were issued on multiple occasions and the appellant failed to effectively respond or produce the required evidence to support their claims. Therefore, according to the Revenue, the CIT(A) was justified in proceeding ex-parte and confirming the additions made by the Assessing Officer on the basis of the material available on record.

Court Findings and Decision

The ITAT Panaji observed that although the CIT(A) had issued multiple notices, the time provided to the appellant to respond was significantly short and did not constitute a real or reasonable opportunity of being heard. The Tribunal noted that in several instances less than fifteen days were granted for compliance and both appellants were called upon to represent multiple appeals on the same dates. Relying on various judicial precedents, the Tribunal emphasized that the opportunity of being heard must be real, reasonable, and effective rather than a mere formality. The Tribunal also observed that certain submissions and documents had been placed on the e-portal but were not considered by the appellate authority while passing the ex-parte orders.

Considering these circumstances, the Tribunal held that the principles of natural justice had not been adequately followed and therefore set aside the orders of the CIT(A). The matter was remanded back to the CIT(A) with directions to adjudicate the appeals afresh after providing proper opportunity to the appellant and to pass a reasoned order in accordance with law.

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Background of the Case

The case involved cross appeals filed by both the Appellant and the Revenue before the ITAT, Delhi Bench, for AY 2018-19 to 2024-25. The dispute arose following a search and seizure operation conducted under Section 132 of the Income Tax Act on 20 September 2023. During the assessment proceedings completed under Section 147 read with Section 143(3), the Assessing Officer disallowed purchases amounting to Rs.8.86 crore under Section 37(1), treating them as bogus accommodation entries based primarily on statements recorded during the search proceedings. Additionally, an amount of Rs.40.18 lakh was added under Section 69A as unexplained money allegedly related to ticket sales.

On appeal, the Commissioner (Appeals) granted substantial relief by deleting most of the purchase disallowance and the entire Section 69A addition, leaving only a small portion of the purchase disallowance sustained. Both the Appellant and the Revenue challenged the respective relief and confirmations before the Tribunal.

Arguments by the Appellant (Assessee)

The Appellant contended that the additions made by the Assessing Officer were unsustainable as they were primarily based on statements recorded during the search which were subsequently retracted. It was argued that such statements, particularly when retracted and unsupported by corroborative evidence, cannot form the sole basis for making additions. The Appellant submitted that all purchases were supported by a complete documentary trail including GST invoices, e-way bills, goods receipt notes, ledger accounts, and payments made through banking channels. It was further emphasized that tax had been deducted at source where applicable and the vendors had disclosed the transactions in their income tax returns.

The Appellant also pointed out that the books of accounts were never rejected under Section 145 and that the sales declared by the company were accepted by the Department, which logically implied that corresponding purchases must exist. The retraction of statements was accompanied by documentary evidence demonstrating the genuineness of the transactions.

Respondent’s Response (Revenue)

The Revenue, on the other hand, supported the assessment order and argued that the Assessing Officer had correctly treated the purchases as bogus on the basis of statements recorded during the search proceedings. According to the Department, the statements of certain individuals indicated that the alleged suppliers were merely accommodation entry providers and that the payments made through banking channels were returned in cash. The Revenue further contended that the Commissioner (Appeals) erred in deleting most of the additions and should have upheld the entire disallowance of purchases made by the Assessing Officer.

The Department also challenged the deletion of the addition under Section 69A relating to the alleged sale of event tickets, asserting that the evidence gathered during the search justified the addition. It was argued that the Tribunal should restore the additions made in the assessment order.

Court Findings and Decision

The Tribunal held that additions cannot be sustained merely on the basis of statements recorded during search, particularly when such statements are subsequently retracted and are not supported by independent corroborative material. It observed that the Appellant had produced substantial documentary evidence demonstrating the genuineness of the purchases, including invoices, GST records, bank payments, and accounting entries, and that the books of accounts had not been rejected by the Assessing Officer. The Tribunal also noted that the Revenue failed to establish any direct evidence showing that the payments made to suppliers were returned in cash or that the transactions were fictitious. Relying on settled judicial principles that a retracted statement requires corroboration before it can be relied upon for making additions, the Tribunal concluded that the additions were based on assumptions rather than concrete evidence.

Accordingly, the Tribunal deleted the remaining purchase disallowance confirmed by the Commissioner (Appeals) and upheld the deletion of the addition made under Section 69A.

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Background of the Case

The case before the ITAT concerned an individual Appellant engaged in the business of trading in clothes who had filed his return of income for Assessment Year 2012–13 under the presumptive taxation scheme of Section 44AD of the Income Tax Act, 1961. The Appellant declared a turnover of Rs.40,82,300 and offered income of Rs.3,08,880 in accordance with the presumptive provisions. The return was initially accepted by the Assessing Officer after reopening proceedings under Section 147. Subsequently, the Principal Commissioner of Income Tax exercised revisional jurisdiction under Section 263 on the ground that the Assessing Officer had failed to properly verify cash deposits of Rs.29,67,900 appearing in the bank account. According to the revision order, the Assessing Officer should have conducted further inquiries and verified documentary evidence such as purchase bills, sales records, vouchers, and other business records.

The matter was therefore set aside with directions to frame a fresh assessment and examine the deposits as unexplained cash credit under Section 68. Aggrieved by this revisionary action as well as the subsequent assessment proceedings, the Appellant filed appeals before the Income Tax Appellate Tribunal.

Arguments by the Appellant (Assessee)

The applicant strongly challenged the jurisdiction exercised by the Principal Commissioner under Section 263 and argued that the revision order was fundamentally flawed. It was submitted that the Appellant had filed the return under Section 44AD, which provides a presumptive taxation mechanism where income is computed as a prescribed percentage of turnover. Under this scheme, the law specifically dispenses with the requirement of maintaining regular books of accounts for eligible taxpayers. The counsel emphasized that Section 68 dealing with unexplained cash credits can only be invoked when there are entries in the books of accounts maintained by the Appellant. Since the Appellant was operating under Section 44AD and was not statutorily required to maintain books, the very foundation for invoking Section 68 did not exist.

It was further argued that the amendment introducing restrictions relating to cash transactions under Section 44AD came into effect from 1 April 2017 and was not applicable to the assessment year under consideration. Therefore, the revisionary order was without jurisdiction and liable to be quashed.

Respondent’s Response (Revenue)

The Revenue authorities, on the other hand, defended the revisionary order passed by the Principal Commissioner and relied upon the reasoning contained in the order under Section 263. The departmental representative contended that the Assessing Officer had accepted the returned income without conducting adequate verification regarding the substantial cash deposits appearing in the Appellant’s bank account. According to the Revenue, the absence of supporting business documentation such as invoices, purchase bills, transport records, sales registers, or delivery records created serious doubts regarding the genuineness of the business activity claimed by the Appellant.

The Revenue argued that the Assessing Officer had failed to make necessary inquiries and therefore the original assessment order was both erroneous and prejudicial to the interests of the Revenue. In such circumstances, the Principal Commissioner was justified in invoking his revisionary powers under Section 263 and directing the Assessing Officer to reassess the matter after proper investigation.

Court Findings and Decision

The Tribunal carefully examined the facts of the case and the legal position relating to presumptive taxation under Section 44AD. It observed that once an Appellant opts for taxation under Section 44AD, the statute does not require the maintenance of regular books of accounts and the income is determined on a presumptive basis as a percentage of turnover. In such circumstances, the provisions of Section 68 dealing with unexplained cash credits cannot be invoked in the absence of books of accounts containing such entries. The Tribunal also noted that similar issues had been considered in earlier judicial precedents where revisionary action under Section 263 was held to be invalid when the Appellant had filed returns under the presumptive taxation scheme. Following the consistent judicial view and considering that the Revenue had not disputed the applicability of Section 44AD in the present case, the Tribunal concluded that the Principal Commissioner had wrongly assumed jurisdiction under Section 263.

Accordingly, the revision order was quashed and set aside. As a consequence of this finding, the subsequent assessment order passed pursuant to the revision also became infructuous and the Appellant’s appeal was allowed.

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Background of the Case

The present case relates to Sonmrug Co-operative Housing Society Ltd. vs. CIT(A) before the Income Tax Appellate Tribunal (ITAT), Mumbai, concerning Assessment Years 2012-13 to 2015-16. The Appellant, a registered co-operative housing society, had filed its return claiming deduction under Section 80P(2)(d) of the Income Tax Act. While processing the return under Section 143(1), the Central Processing Centre disallowed the deduction and made an addition of Rs.2,15,083. Aggrieved by the adjustment, the Appellant preferred an appeal before the Commissioner of Income Tax (Appeals). However, the appeal before the CIT(A) was filed with an extraordinary delay of 3615 days, far beyond the statutory limitation period. The CIT(A) dismissed the appeal solely on the ground of delay without examining the merits. Subsequently, the Appellant approached the ITAT challenging the dismissal order of the CIT(A).

Arguments by the Appellant (Assessee)

The Appellant contended that the CIT(A) erred in dismissing the appeal without considering the merits of the case. It was submitted that the society was eligible for deduction under Section 80P(2)(d) and that the adjustment made during processing under Section 143(1) was beyond the jurisdiction of the CPC. The Appellant further explained that the delay in filing the appeal occurred due to internal disputes between the former committee members and the existing management of the society, which created a hostile environment and lack of cooperation in accessing records. Because of these conflicts, the society claimed it could not file the appeal and supporting documents within the prescribed time. The Appellant therefore requested the Tribunal to condone the delay and restore the matter so that the case could be examined on merits.

Respondent’s Response (Revenue)

The Respondent opposed the Appellant submissions and supported the order passed by the CIT(A). It was argued that the delay of more than nine years in filing the appeal was extremely excessive and no convincing or legally sustainable reason had been provided for such delay. The Respondent contended that mere internal disputes among committee members of the society cannot be treated as a sufficient cause for condonation of delay under the law. It was further submitted that limitation provisions are mandatory and must be strictly followed. The Respondent therefore argued that the CIT(A) had rightly dismissed the appeal as time-barred and that there was no justification for the Tribunal to interfere with the order.

Court Findings and Decision

After considering the rival submissions and examining the record, the ITAT Mumbai observed that the appeal before the CIT(A) had been filed after a delay of 3615 days, which was extraordinarily long. The Tribunal noted that the explanation provided by the Appellant regarding disputes between committee members did not constitute a reasonable or sufficient cause to justify such an inordinate delay. Referring to settled legal principles governing limitation, the Tribunal emphasized that courts cannot extend statutory time limits on equitable or sympathetic grounds. The Tribunal reiterated the legal maxim “dura lex sed lex”, meaning that the law may be harsh but it must be applied as it stands.

In view of the absence of any convincing explanation for the delay, the Tribunal upheld the decision of the CIT(A) and dismissed the appeal in limine. The same reasoning was also applied to the connected appeals for other assessment years, which were consequently dismissed as well.

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Background of the Case

The Appellant sold a plot of land for Rs.3.21 crores on 18.03.2014 and earned long-term capital gains. Subsequently appellant purchased a residential flat for Rs.4 crores on 25.02.2015 and claimed deduction under Section 54F of the Income Tax Act, 1961. During assessment proceedings, the Assessing Officer observed that although the Appellant had invested in a new residential property within the prescribed period, he had deposited only Rs.2.25 crores in the Capital Gains Account Scheme before filing his return of income. Since the entire capital gain was not deposited in the specified account before the due date under Section 139(1), the Assessing Officer disallowed Rs.91,45,450 and completed the assessment under Section 143(3) at a higher income. The Ld. CIT(A)/NFAC confirmed the disallowance, and the matter was carried in appeal before the ITAT Pune.

Arguments by the Appellant (Assessee)

The Appellant contended that the entire sale consideration of Rs.3.21 crores had been invested in purchase of the residential flat within one year from the date of transfer, thereby satisfying the substantive condition prescribed under Section 54F(1). It was argued that Section 54F(4) requiring deposit in the Capital Gains Account Scheme applies only when the net consideration remains unutilized before the due date of filing the return. Since the whole amount was ultimately invested within the statutory time limit, denial of deduction merely for non-deposit of a portion in the specified scheme was unjustified. The Appellant relied upon judicial precedents to submit that procedural non-compliance cannot defeat a substantive exemption when the legislative intent stands fulfilled.

Respondent’s Response (Revenue)

The Respondent supported the orders of the lower authorities and submitted that Section 54F(4) clearly mandates deposit of the unutilized net consideration in the Capital Gains Account Scheme before the due date under Section 139(1). As the Appellant failed to deposit the entire capital gain amount prior to filing the return, the condition prescribed under the statute was not complied with. Therefore, according to the Department, the deduction to the extent of Rs.91,45,450 was rightly disallowed and the order of the CIT(A)/NFAC required no interference.

Court Findings and Decision

The ITAT Pune examined the provisions of Section 54F and observed that the purpose of sub-section (4) is to ensure that the sale consideration is ultimately invested in a residential house within the stipulated period. The Tribunal noted that in the present case it was undisputed that the appellant had invested the entire sale consideration in purchase of a residential flat within the permissible time. Relying on judicial precedents, the Tribunal held that where the full amount is invested within the prescribed period, exemption under Section 54F cannot be denied merely because the amount was not fully deposited in the Capital Gains Account Scheme before filing the return. The Tribunal accordingly directed the Assessing Officer to allow the deduction and decided the issue in favour of the appellant.

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