2020 (8) TMI 659 - AT - Income Tax

Tribunal grants partial appeal, directs reassessment.

M/s. Powernetics Equipments India Pvt. Ltd. Versus The Income Tax Officer 9 (2) (4), Mumbai

M/s. Powernetics Equipments India Pvt. Ltd. Versus The Income Tax Officer 9 (2) (4), Mumbai - TMI Issues Involved:1. Disallowance under section 43B.2. Addition on account of unexplained cash credit under section 68.3. Disallowance of unproved expenditure.4. Transfer Pricing Adjustment.Issue-wise Detailed Analysis:1. Disallowance under section 43B:The appellant did not press this ground. Consequently, the tribunal dismissed this ground of appeal.2. Addition on account of unexplained cash credit under section 68:The assessee contested the addition of Rs. 4,60,000/- made under section 68, which included loans from Ms. Titli Thind and Ms. Anita Chavan. The assessee provided additional evidence such as bank statements and PAN details to substantiate the genuineness of the transactions. The CIT(A) ignored these additional evidences and confirmed the addition. The tribunal found it appropriate to restore this issue to the Assessing Officer (AO) for fresh adjudication, considering the additional evidence provided. The AO is directed to provide a reasonable opportunity of hearing to the assessee.3. Disallowance of unproved expenditure:The assessee claimed a write-off of Rs. 3,77,965/- as project expenses due to changes in specifications by Indian Railways. The CIT(A) disallowed this claim, but the tribunal noted that a similar claim was allowed in the subsequent assessment year by the tribunal. Therefore, for consistency, the tribunal directed the AO to allow the write-off of the proportionate expenditure.4. Transfer Pricing Adjustment:The AO made a TP adjustment by estimating a profit margin of 15% based on the subsequent financial year, whereas the assessee declared a margin of cost plus 10%. The tribunal observed that the AO's basis for the 15% margin included non-operating gains, which did not reflect the true operating profit. The tribunal restored this issue to the AO for a de-novo adjudication, requiring the AO to apply one of the methods prescribed under section 92C of the Act and provide a reasonable opportunity of hearing to the assessee.General Ground:The fifth ground of the appeal was general in nature and did not require adjudication.Conclusion:The appeal of the assessee was partly allowed. The tribunal emphasized the extraordinary circumstances due to the COVID-19 pandemic, which justified the delay in pronouncement of the order beyond the usual 90-day period. The tribunal's decision was pronounced on June 22, 2020.