ITAT Bangalore held that disallowing outstanding sub-contract expenses payable under section 68 of the Income Tax Act as unexplained cash credit without specific reasoning and without pointing out defects in books of accounts is not justifiable. Accordingly, appeal is allowed and disallowance is deleted.
The Tribunal quashed the Assessing Officer’s action of taxing the entire purchase value after invoking Section 145(3). Only estimated profit embedded in such purchases, if higher than declared profit, can be brought to tax.
The Tribunal reiterated that tax authorities cannot impose notional income merely because interest could have been charged. Commercial decisions on interest-free advances lie with the assessee, not the assessing officer.
The issue involved denial of charitable registration citing delay and lack of evidence. The Tribunal ruled that the assessee deserved a final opportunity to substantiate activities before a fresh decision is taken.
ITAT Delhi emphasized that FAR analysis governs segmentation for transfer pricing purposes. Artificial aggregation without disproving segmental allocation cannot justify adjustments.
The ITAT held that rejecting Rule 11UA valuation without verifying exclusions of non-realisable assets violates natural justice. Valuation additions were remanded for fresh examination, stressing non-mechanical application of deeming provisions.
ITAT Hyderabad held LIBOR + 200 basis points is an appropriate rate of interest on outstanding trade receivables interest of bank short term deposit rate. Accordingly, TPO directed to compute interest on outstanding receivables by applying LIBOR + 200 basis points.
The ITAT found that Rule 8D cannot be applied blindly without examining the nature of investments and income earned. The matter was restored to the Assessing Officer to verify whether investments were stock-in-trade and whether they yielded exempt income.
The ITAT dismissed the appeal in limine after the assessee failed to rectify signing and verification defects despite multiple opportunities. Signing of appeal documents was held to be foundational to maintainability.
The Tribunal held that an assessment framed without a valid notice under Section 143(2) by the jurisdictional officer is void. Jurisdictional compliance is mandatory.
