Recent Developments in Income Tax: ITAT Decisions from 14 to 20 July 2024
Get the latest updates on income tax from the ITAT decisions, from final assessment orders to cash deposits during demonetization.
ItatIncome TaxAssessmentsDemonetizationLoansAdditionsArms LengthCorporate GuaranteeReal Estate MumbaiJul 21, 2024
Final Assessment Orders
In a significant ruling, the Mumbai ITAT held that the Assessing Officer (AO) has no jurisdiction to make any adjustments in a final assessment order passed under Section 143(3) before thirty days of receiving any response from the assessee on the basis of intimation issued under Section 143(1).
Cash Deposits during Demonetization
The Mumbai ITAT also held that cash deposits during demonetization alone are no basis to make an addition in the absence of a glaring error in the books of account.
Loans Brought Forward
The Mumbai ITAT further held that loans brought forward cannot form the basis for addition in the current year if the genuineness of the loan transactions is established.
Reasons to Believe
The Kolkata ITAT held that any allegation of escapement of income must be backed by information expressing 'reason to believe' and such belief requires to be based on some credible or relevant material.
Additions in Cases of Unabated Assessments
The Mumbai ITAT held that no addition can be made by the AO in respect of completed/unabated assessments, in the absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A.
Other Developments
The Delhi ITAT held that payments made to an overseas company for services utilized abroad do not warrant tax deduction at source under Section 195. The Ahmedabad ITAT held that no arm's length addition is warranted on account of corporate guarantee if the guarantee fee is lower than the bank's quoted interest rate. The Chennai ITAT held that the AO must pass a draft assessment order to the eligible assessee in case he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee.
These developments highlight the importance of understanding the intricacies of income tax laws and regulations. Stay updated with the latest ITAT decisions to ensure compliance and minimize disputes with the tax authorities.
Frequently Asked Questions
What is the significance of the Mumbai ITAT's ruling on final assessment orders?
The ruling emphasizes the importance of the AO following the due process of law and not making any adjustments in the final assessment order without the assessee's response.
Can cash deposits during demonetization be a basis for making additions?
No, cash deposits during demonetization alone are not sufficient to make an addition in the absence of a glaring error in the books of account.
What is the importance of 'reason to believe' in reopening assessments?
The 'reason to believe' requirement ensures that any allegation of escapement of income is backed by credible and relevant material.
Can loans brought forward be a basis for addition in the current year?
No, loans brought forward cannot form the basis for addition in the current year if the genuineness of the loan transactions is established.
What is the Delhi ITAT's ruling on payments made to overseas companies for services utilized abroad?
The Delhi ITAT held that such payments do not warrant tax deduction at source under Section 195.
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