Half-Yearly Income Tax Case Digest: ITAT Decisions 2025 [Part VIII]

Interest on Fixed Deposits Not Business Income: ITAT upholds 10AA Deduction Denial for SEZ unit Excelra Knowledge Solutions (P) Ltd vs Dy. CIT Circle 8(1) CITATION: 2025 TAXSCAN (ITAT) 912

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the denial of deduction under Section 10AA to a Special Economic Zone (SEZ) unit, ruling that interest income earned from fixed deposits does not constitute business income eligible for exemption. Excelra Knowledge Solutions (P) Ltd (assessee) claimed deduction under Section 10AA for Assessment Year 2018-2019, including interest income earned from fixed deposits maintained with banks. The Assessing Officer (AO) denied the claim on the grounds that the interest income was not derived from the export of services and hence did not qualify as profits derived from the business under Section 10AA of the Income Tax Act.

AO shall not make Addition u/s 69A of Income Tax solely Relying on Whatsapp Image without any Corroborative Evidence: ITAT terms it ‘Dumb Document’ M/s. Rucha Consultancy LLP vs DCIT CITATION: 2025 TAXSCAN (ITAT) 914

The Income Tax Appellate Tribunal ( ITAT ) , Mumbai Bench, has held that an addition under Section 69A of the Income Tax Act, 1961 cannot be sustained solely on the basis of a WhatsApp image found on an employee’s mobile phone, without any corroborative evidence. The bench termed it as a ‘dumb document’. The assessee, Rucha Consultancy LLP had originally filed its return declaring an income of ₹24.87 crore. However, following a search under Section 132 of the Act, the AO completed the assessment by determining a total income of ₹47.75 crore. One of the key contentions of the assessee was the addition of ₹2.10 crore under Section 69A based on an image retrieved from the phone of Ashish Chhangani, a personal assistant of the group’s promoter, Prashant Nilawar.

Mere Non-Compliance of Summons u/s 131 Not Ground for Addition u/s 68 When Evidences Furnished before AO: ITAT Andromeda Communications Pvt. Ltd vs I.T.O., Ward - 7(1) CITATION: 2025 TAXSCAN (ITAT) 915

The Kolkata Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that in cases of unabated assessments, no addition can be sustained under Section 68 of the Income Tax Act, 1961, in the absence of any incriminating material found during a search under Section 132. The assessee, Andromeda Communications Pvt. Ltd., had issued equity shares at a high premium to certain shareholders who were relatives of the company’s directors. During the assessment proceedings for AY 2012-13, the Assessing Officer (AO) questioned the justification for such premium and made an addition of ₹1.65 crore under Section 68, citing unexplained cash credit. The AO primarily relied on the non-compliance with summons issued under Section 131 by the directors of the company.

Delay Should Be Viewed Pragmatically, Not Pedantically: ITAT Condones Up to 884 Days’ Delay for Co-op Society to File Appeal Jagruti Nagri Sahakari Patsanstha Myt Parli Vaijnath vs ITO CITATION: 2025 TAXSCAN (ITAT) 917

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has condoned delays of up to 884 days in three appeals filed by a cooperative society, ruling that delay should be viewed pragmatically not pedantically for condonation of delay in filing appeal. Jagruti Nagri Sahakari Patsanstha (assessee) is a cooperative society engaged in providing credit facilities to its members. The assessee filed a return declaring Nil income for Assessment Year (A.Y.) 2020-21 after claiming a deduction of Rs. 36,85,250 under Section 80P of the Income Tax Act, 1961. The case was selected for scrutiny due to high interest expenditure, huge advances, and high liabilities compared to low income. Due to non-compliance with statutory notices, the Assessing Officer (AO) completed the assessment ex-parte making additions totaling Rs. 90,33,320, including disallowance of the Section 80P deduction of the Income Tax Act.

Taxpayer Can Claim DTAA Exemption for Pre-April 2017 Gains and Still Carry Forward Post-April 2017 Losses Under Income Tax Act TVF Fund Ltd vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 918

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that a taxpayer can avail capital gains exemption under the India-Mauritius Double Taxation Avoidance Agreement (DTAA) for shares acquired before April 1, 2017, and still carry forward capital losses under Indian domestic tax law for shares acquired thereafter. TVF Fund Ltd. (assessee), a company incorporated in Mauritius and registered with the Securities and Exchange Board of India (SEBI) as an FPI, filed its return of income for Assessment Year (AY) 2021–22. The assessee claimed exemption under Article 13(3) and 13(4) of the India-Mauritius DTAA, as they were taxable in Mauritius based on the assessee’s residency. The Assessing Officer (AO) set off brought forward short-term capital losses of Rs. 9.94 crore and long-term capital losses of Rs. 45.67 crore from AY 2020–21.

Levy of Late Fee u/s 234E for TDS Returns Filed Prior to June 2015 Unjustified: ITAT Rules Amendment is Prospective Shrikrishna Laxminarayan Thakur vs ITO TDS Ward CITATION: 2025 TAXSCAN (ITAT) 919

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) ruled that late fees levied under Section 234E of the Income Tax Act, 1961, for delayed TDS returns processed prior to June 1, 2015, were unjustified and held that the amendment to Section 200A is prospective in nature. Shrikrishna Laxminarayan Thakur (assessee) filed TDS returns for various quarters across Assessment Years 2013-14, 2014-15, 2015-16, and 2016-17. These returns were filed belatedly, and the Central Processing Cell (CPC) processed them under Section 200A, imposing late fees under Section 234E for the delay. The assessee filed rectification applications before the CPC to remove the fees, which were rejected. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal and upheld the CPC’s order.

5 Hearings Missed including one During Covid Period: ITAT Grants Another Chance, Restores Matter to CIT(A) Chhaya Dhanraj Chaudhari vs ITO CITATION: 2025 TAXSCAN (ITAT) 920

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) granted relief to assessee who missed 5 hearings including one scheduled during covid period. The matter was restored to the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee, an individual taxpayer, had challenged an addition of ₹3,04,800 made under a reassessment order passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 for Assessment Year 2011-12.

Rejection of Additional Evidence on Transport Expenses u/s 40(a)(ia): ITAT Remits Matter to CIT(A) Bala Filling Station Opp. GEB Substation vs The ACIT CITATION: 2025 TAXSCAN (ITAT) 923

The Surat Bench of Income Tax Appellate Tribunal(ITAT) remanded the matter to the Commissioner of Income Tax(Appeals)[CIT(A)] for a fresh decision after rejecting the CIT(A)’s stance on the non-admission of additional evidence related to transport expenses under Section 40(a)(ia) of Income Tax Act,1961. Bala Filling Station,appellant-assessee,filed its return of income on 10.10.2017, declaring ₹58,98,190. Engaged in retail trade of petroleum products, the case was selected for scrutiny under Computer Assisted Scrutiny Selection(CASS).

During assessment, the Assessing Officer(AO) made additions of ₹10,47,297 as unexplained cash credit under Section 68, ₹4,26,950 disallowed under Section 40(a)(ia), ₹3,75,000 towards reconstitution fees, and ₹6,500 as interest income. The assessee, aggrieved by the AO’s order, appealed before the CIT(A), challenging three additions. The CIT(A) deleted the additions of ₹10,47,297 and ₹3,75,000, but upheld the disallowance of ₹4,26,950 under Section 40(a)(ia). The assessee had submitted a declaration from M/s Sonal Transport to show the transporter owned fewer than ten trucks and requested it be admitted as additional evidence under Rule 46A.

Disallowance for Contractual Penalties Deducted by Government Authorities: ITAT Allows Deduction as Business Expenditure u/s 37(1) M/s G.L.Construction Pvt Ltd vs ACIT CITATION: 2025 TAXSCAN (ITAT) 922

The Mumbai Bench of Income Tax Appellate Tribunal(ITAT)allowed deduction of ₹42.44 lakh as business expenditure under Section 37(1) of Income Tax Act,1961 rejecting the disallowance for contractual penalties deducted by government authorities. G.L.Construction Pvt Ltd,appellant-assessee,was engaged in road construction for government bodies like MCGM, NMMC, and MMRDA. During project execution, these authorities deducted Rs.45,91,698/- from certified bills, citing delays, quality issues, lack of machinery, and other lapses as reasons for penalties. In some cases, the appellant recovered part of these amounts from engineers and project managers. The assessee argued that these deductions were part of routine business operations and not penalties for any offence under law, especially considering the large scale of projects ranging from Rs.100 to Rs.250 crores.

Cash Payments to Landlord, Students etc., Exceeds Threshold limit of Rs.10,000: ITAT Upholds Disallowance u/s 40A(3) Devcare Solutions vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 924

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the disallowance of cash payments amounting to Rs. 66,61,467 for violating the threshold limit of Rs. 10000 prescribed under Section 40A(3) of the Income Tax Act, 1961. Devcare Solutions (assessee) who had observed by the Assessing Officer (AO) that the assessee had withdrawn Rs. 80,14,000 in cash from its HDFC bank account.

The AO observed cash expenses totaling Rs. 66,61,467, where individual payments exceeded the Rs. 10,000 threshold limit stipulated under Section 40A(3) of the Income Tax Act. The AO issued a show-cause notice to the assessee. The assessee submitted a cash book but failed to provide adequate rebuttal or evidence to justify the cash payments. Aggrieved by the AO’s addition of Rs. 66,61,467, the assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that the cash payments were made under compelling circumstances.

ITAT deletes ₹9.9 Cr Income Tax Addition Over AO’s Profit Overestimation and Unsubstantiated Loans Bhrugesh Dienshbhai Shah vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 925

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) deletes a 9.9 crore tax addition made by the AO because of the overestimation of profit, misclassification of assets, and lack of evidence Ruchit Enterprise was run by the assessee, Bhrugesh Dineshbhai Shah, who dealt in chemical trading. In his 2017–18 tax return, he reported ₹6,92,020 in total income. During the scrutiny proceedings, the AO made several additions under Section 143(3) of the Income Tax Act, 1961. The adjustments included an estimate of 5% gross profit, disallowance of expenses, unexplained credits, and capital work-in-progress. The AO finally determined the total income at ₹9,99,73,873.

District Magistrate Failed to Collect TCS: ITAT Condones 350-Day Delay Despite Non-Representation of DM’s AR The District Magistrate vs ITO (TDS) CITATION: 2025 TAXSCAN (ITAT) 926

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) condoned a 350-day delay in filing an appeal by the District Magistrate, Badaun, in a case concerning non-compliance with Tax Collected at Source (TCS) provisions under Section 206C(6A) of the Income Tax Act, 1961, despite the absence of any representation by the District Magistrate’s authorized representative during the hearing. The case arose from an order passed by the ITO (TDS), Moradabad, on 31.03.2017 for the Assessment Year 2010-11, in which a tax liability of Rs. 8,13,688 was imposed on the District Magistrate’s office for failure to collect TCS. The order went unchallenged until an appeal was filed with a long delay of 350 days. The Commissioner of Income Tax (Appeals), Moradabad, dismissed the appeal as time-barred, refusing to condone the delay.

Mere Mention of Sale and Estimated Gain, No Tangible Material Linking Deceased CFO to Escaped Income: ITAT Invalidates Reopening Smt Seema Swami vs ACIT, Rohtak, Haryana CITATION: 2025 TAXSCAN (ITAT) 927

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed the reassessment proceedings against the legal heir of a deceased CFO, ruling that the reopening of assessment under Section 147 of the Income Tax Act, 1961, lacked tangible material linking the assessee to the alleged escaped income. Seema Swami, the assessee and legal heir of Late Shri Manoj Kumar Swami, a Chartered Accountant and CFO of IHHR Hospitality Pvt. Ltd., challenged the validity of reassessment proceedings for the Assessment Year 2008-09. The original assessment was completed under Section 143(3), determining total income at Rs. 93.36 lakhs.

Partial Relief to Motorola: ITAT Treats Software Expenses as Revenue Expenditure Citing Recurring Maintenance and No Enduring Benefit Motorola Solutions India Private Limited vs ACIT CITATION: 2025 TAXSCAN (ITAT) 929

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) granted partial relief to Motorola Solutions by holding that software expenses incurred by the company were revenue in nature, as they related to recurring maintenance and did not result in any enduring benefit. Motorola Solutions, the assessee, had filed appeals for Assessment Years 2005–06 and 2006–07 challenging, among other disallowances, the treatment of software expenses as capital expenditure. The Assessing Officer (AO) had disallowed the software expenses amounting to Rs. 1.65 crore and Rs. 2.12 crore respectively in the two assessment years, classifying them as capital in nature, and granted depreciation instead.

Demonetization Cash Deposits with Explained Source Not Taxable under Income Tax Act: ITAT Shravan Singh Parmar vs ITO CITATION: 2025 TAXSCAN (ITAT) 930

The assessee is an individual and is, inter alia, engaged in providing loans to its customers against the gold ornaments and taking loans from the Federal Bank against the same. In this manner, the assessee also earns interest income from its customers. During the year under consideration, pursuant to a notice issued under section 142(1) of the Act based on the information that the assessee has deposited cash of Rs.12,24,500/- in his bank account maintained with Federal Bank, Sakinaka Mumbai Branch, during the demonetization period, i.e., from 09.11.2016 to 31.12.2016, the assessee filed his return of income on 13.11.2019, declaring a total income of Rs.95,470/- earned from salary and interest.

Non-Consideration of Key Documents by AO and CIT(A): ITAT Restores Matter to AO for Fresh Adjudication Manarkattu Theatres Pvt. Ltd vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 931

The Cochin Bench of Income Tax Appellate Tribunal(ITAT)restored the matter to the Assessing Officer for fresh adjudication after finding that key documents submitted by the assessee, including audited accounts, cash book, day book, expense records, and bank statements, were not considered either by the AO or the Commissioner of Income Tax(Appeals)[CIT(A)]. Manarkattu Theatres Pvt. Ltd., appellant-assessee,operated two cinema theatres. For the assessment year 2018-2019, it filed its income tax return after receiving a notice under section 148, declaring income of Rs. 12,73,860. The AO completed the assessment on 24.03.2023 under sections 147 and 144B, determining income at Rs. 1,93,97,120.

Income Already Taxed cannot be Treated Again as Unexplained Cash Credit: ITAT Dipakkumar Pushkarray Vyas vs The ITO CITATION: 2025 TAXSCAN (ITAT) 934

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)held that income already taxed cannot be treated again as unexplained cash credit. Dipakkumar Pushkarray Vyas,appellant-assessee, filed his return declaring income of Rs. 19,85,572 for the year 2012-13. The case was reopened after approval and notice under section 148 was issued in March 2019. He filed a revised return in April 2019 showing income of Rs. 19,81,572. Reasons for reopening were shared in June 2019 along with a notice under section 143(2). Further notices were issued, and the assessee provided information and objected to the reopening in November 2019. The Assessing Officer (AO)found that Shripal Pravinchandra Shah, owner of M/s. Akshar Corporation, ran a bogus billing and accommodation entry business with no real sales or purchases. Transactions between the assessee’s firm, Krupa Jewellers, and Akshar Corporation were found to be sham. Bank records showed Rs. 41,99,500 debited from Krupa Jewellers’ account during 2012-13 linked to these bogus entries. The AO treated this amount as unexplained income and added it to the appellant-assessee’s total income.

ITAT Dismisses Scan Ispat’s Appeal as Withdrawn Under Vivad Se Vishwas Scheme Scan Ispat Limited vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 936

The Income Tax Appellate Tribunal (ITAT), Raipur bench has dismissed the appeal filed by Scan Ispat Limited after the steel manufacturer opted to settle its tax dispute under the Direct Tax Vivad Se Vishwas Scheme, 2024. The company had challenged additions of Rs.3.43 crore made by tax authorities for assessment year 2010-11 regarding unexplained share capital and premium. Scan Ispat Limited, based in Raigarh, Chhattisgarh, had filed the appeal against an order passed by the Commissioner of Income-Tax (Appeals) at the National Faceless Appeal Centre. The dispute originated from a 2017 assessment order that made additions under Section 68 of the Income Tax Act, treating share capital transactions as unexplained cash credits.

ITAT Deletes ₹6.55 Lakh Disallowance u/s 40A(3) as Payments Were Related to Capital Assets, not Revenue Expenses Sri.Julius Ruben vs The Assistant Commissioner of Income-tax CITATION: 2025 TAXSCAN (ITAT) 932

The Cochin Bench of Income Tax Appellate Tribunal (ITAT) deleted a disallowance of ₹6.55 lakh under section 40A(3) of Income Tax Act,1961, holding that the cash payments were made for capital assets and not revenue expenses. Julius Ruben,appellant-assessee, ran a proprietary business called Rocky Transport and Crane Services. For the assessment year 2015-16, he filed his return on 04.12.2015, declaring income of ₹49,02,700. The case was taken up for scrutiny, and the assessment was completed on 12.12.2017, accepting the returned income. Later, the Assessing Officer(AO) passed a rectification order under section 154, disallowing ₹6,55,650 for cash payments made to buy capital assets, citing section 40A(3). The assessee explained that no deduction was claimed on this amount, so section 40A(3) should not apply. However, the AO rejected the explanation and passed the order on 28.12.2021.

ITAT Dismisses Revenue’s Appeals against Civil Contractor as Tax Effect Below ₹60 Lakhs, Grounds Termed “Cryptic and Nebulous” Income Tax Officer vs Janardan Shyam Bihari Singh Ganesh Nagar CITATION: 2025 TAXSCAN (ITAT) 938

The Nagpur Bench of the Income Tax Appellate Tribunal (ITAT) recently dismissed two appeals filed by the Income Tax Officer against the assessee Janardan Shyam Bihari Singh, a civil contractor, for Assessment Years (AYs) 2011–12 and 2014–15. The Tribunal held that the tax effect in both cases was below the monetary limit of ₹60 lakhs as prescribed under CBDT Circular No. 9/2024 and that the grounds raised by the Revenue were too vague to be adjudicated upon. The assessee, a civil contractor, had not filed his return of income for AY 2011–12 and AY 2014–15 despite having received contract receipts exceeding ₹1.97 crores and TDS deductions under section 194C. The Assessing Officer (AO), invoking section 144 of the Income Tax Act, estimated the income by applying a profit percentage and disallowed certain expenses, thereby adding to the total income.

CIT(E) Rejects Trust’s Registration Regularisation Filed Under Incorrect Provision due to Portal Issue Without SCN: ITAT remands Case Zarina Foundation vs CIT(Exemption) CITATION: 2025 TAXSCAN (ITAT) 939

In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, remanded the case of a charitable trust, back to the Commissioner of Income Tax (Exemptions) [CIT(E)] after holding that the rejection of the trust’s registration application, solely on the basis of quoting an incorrect provision due to technical limitations in the online portal, and without issuing a show cause notice, was unsustainable in law.

The trust had applied for regularisation of registration under Section 12A of the Income Tax Act, 1961, using Form 10AB. However, due to a glitch in the income tax e-filing portal, it was unable to select the correct applicable clause under Section 12A(1)(ac)(iii), and was instead forced to file under an incorrect Section 12A(1)(ac)(vi)(B).

Reassessment Proceedings Initiated Without Documentary Evidence and Based on Borrowed Satisfaction: ITAT Quashes Proceedings ACIT vs M/s. Vishal Gold & Precious Stones Pvt. Ltd CITATION: 2025 TAXSCAN (ITAT) 940

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ),quashed reassessment proceedings initiated without any documentary evidence and based solely on borrowed satisfaction. The Revenue-appellant appealed against the order passed by CIT(A) dated 03.10.2016 for AY 2007–08. In this case,Vishal Gold & Precious Stones Pvt. Ltd,respondent-assessee,argued that the reassessment under Section 147 was initiated without any documentary evidence found or impounded during the survey conducted on 06.10.2010 under Section 133A.

Addition of Rs. 2.02 Crore as Accommodation Entries: ITAT Holds Addition Unsustainable On Lack of Primary Proof Vertool Consultancy LLP vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 941

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) held that the addition of Rs. 2.02 crore as accommodation entries was unsustainable due to lack of primary proof. Vertool Consultancy LLP,appellant-assessee,challenged the reopening of assessment for AY 2017–18, initiated based on information received from the Investigation Wing, Ahmedabad. As per the Assessing Officer(AO)’s letter dated February 8, 2022, the firm was alleged to have received accommodation entries amounting to ₹2,02,15,000 from entities controlled by Jignesh Shah and Sanjay Shah. The Officer concluded that there was a failure on the part of the assessee to fully and truly disclose all material facts, resulting in income escaping assessment under Section 147 of the Act.

CIT(A) dismisses Income tax Appeal on Technical Grounds rather than on Merits: ITAT directs to issues Speaking Order Upashan Debnath vs ITO, Ward-41(3 CITATION: 2025 TAXSCAN (ITAT) 937

In a recent ruling, the Income Tax Appellate Tribunal ( ITAT ), Kolkata Bench directed the Commissioner of Income Tax (Appeals) [CIT(A)] to issue a speaking order where the appellate authority dismissed the appeal on technical grounds rather than considering the merits. An individual assessee, Upashan Debnath filed an income tax appeal challenging the ex parte order passed by the CIT(A) for the Assessment Year 2015-16. The delay of 266 days in filing the appeal before the ITAT was condoned after the Tribunal was satisfied with the assessee’s explanation for the delay.

ITR Not Filed Despite High Value Transaction in Savings Account Due to Illiteracy: ITAT Directs for Fresh Adjudication on Rs.5k Costs Marappa Gounder Balakrishnan vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 945

The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) remanded for fresh adjudication with cost of Rs. 5000 in the case involving high value transactions in savings accounts for which Income Tax Return ( ITR ) was not filed due to the illiteracy of the assessee. Marappa Gounder Balakrishnan (assessee), an individual engaged in job work for the power loom industry, faced scrutiny for high-value cash deposits and withdrawals in his savings bank account. The AO observed that the assessee had not filed a return of income for AY 2013-14 and had total credits of Rs. 1.03 crore in his bank account.

ITAT Remands Rs. 2.31 Crore Addition Matter to Conduct Appropriate Enquiry for Cash Deposit and S. 40(a) Disallowance Matter JCR Traders vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 943

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving additions of Rs. 2.31 crore back to the Assessing Officer (AO) for fresh adjudication, citing the need for appropriate enquiries into unexplained cash deposits and disallowances under Section 40(a)(ia) of the Income Tax Act. JCR Traders (assessee) a partnership firm filed its return of income for the Assessment Year (AY) 2017-18 declaring a taxable income of Rs. 11,25,800. The case was selected for complete scrutiny under the Centralized Automated Scrutiny Selection (CASS). The AO issued a notice and the assessee failed to respond to notices. The AO issued show-cause notice (SCN) to complete the assessment under Section 144 of the Income Tax Act, but the assessee did not comply with the SCN.

Non-Compliance to SCN for Cash Deposits of Rs. 6.16 Cr: ITAT Remands for Fresh Adjudication of Co-Operative Society with 5k Costs R 1618 Varadharajapuram Primary vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 948

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving unexplained cash deposits of Rs. 6.16 crore to the Assessing Officer (AO) for fresh adjudication, citing non-compliance with statutory notices. Varadharajapuram Primary Agricultural Co-operative Society Ltd., (assessee) faced scrutiny for significant cash deposits in its bank account during the Assessment Year (AY) 2019-20. The AO noted that the assessee had not filed an Income Tax Return (ITR) for AY 2019-20. The AO initiated assessment proceedings based on information regarding cash deposits amounting to Rs. 6,16,68,376. The AO issued several notices and a show-cause notice (SCN) under Section 144 on 06.09.2023.

Non-Mention of Rule 46A Not Ground to Reject additional evidence: ITAT Remands Rs. 23.08 Cash Deposit Matter for fresh adjudication Munireddy Prakashreddy vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 949

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving an addition of Rs. 23.08 lakh for unexplained cash deposits and held that the Commissioner of Income Tax (appeals) [CIT(A)] erred in rejecting additional evidence submitted by the assessee solely due to the non-mention of Rule 46A of the Income Tax Rules. Munireddy Prakashreddy (assessee), an individual, faced scrutiny for cash deposits amounting to Rs. 23,08,000 in his bank account for the Assessment Year (AY) 2012-13. The Assessing Officer (AO) observed the assessee’s failure to comply with statutory notices.

Mere Change of Opinion not Necessary Ingredient For Reassessment: ITAT quashes Reassessment on Software License Fee J Ray McDermott Engineering Services Pvt. Ltd vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 947

The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) has quashed a reassessment order and ruled that the reopening of the assessment was invalid due to it being based on a mere change of opinion. The case involved the treatment of software license fee expenses as capital expenditure, which the Assessing Officer (AO) had disallowed as revenue expenditure. J Ray McDermott Engineering Services Pvt. Ltd. (assessee), a private limited company engaged in providing design and drawing services for the engineering industry, filed its return of income declaring a total income of Rs. 18,09,99,774.

Interest from Urban Cooperative Banks Qualifies as Society Income: ITAT Allows 80P Deduction

The Bhagyalaxmi Co.Op. Credit Society Limited vs Dy. Commissioner of Income Tax Mehsana Circle CITATION: 2025 TAXSCAN (ITAT) 955

The Ahmedabad SMC Bench of the Income Tax Appellate Tribunal has ruled in favour of a cooperative credit society, holding that interest income earned from deposits in an Urban Cooperative Bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961. The appeal was filed by The Bhagyalaxmi Co-operative Credit Society Limited, Mehsana, against the order dated September 20, 2022, passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the Assessment Year 2018–19. The dispute arose when the society’s claim for deduction of Rs. 17,30,372 under Section 80P(2)(d) was disallowed by the Assessing Officer. The said amount represented interest received from fixed deposits and savings accounts maintained with Mehsana Urban Cooperative Bank.

Disallowance of Cost of Improvement Claim of Rs.18 lakh: ITAT Grants One more Opportunity to Substantiate Claim with Documentary Evidence Vasagar vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 954

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded with one more opportunity in a case involving the disallowance of claim towards the cost of improvement in computing Long Term Capital Gains for fresh adjudication to substantiate with documentary evidence. Vasagar, (assessee) an individual filed a return of income for the Assessment Year (AY) 2018-19, declaring a total income of Rs.5,71,430. In the return, the assessee reported a consideration of Rs.23 lakh from the sale of a property. The assessee claimed a deduction of Rs.18,20,472 as the cost of improvement while computing Long Term Capital Gains.

Deduction of VRS Compensation by Auto Dealer: ITAT Remands to Verify if Amount was Disallowed while Computing Income The Income Tax Officer vs The Reliance Motor Company Ltd CITATION: 2025 TAXSCAN (ITAT) 1098

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) recently directed the Assessing Officer (AO) to re-examine whether the Voluntary Retirement Scheme (VRS) issue compensation amount was disallowed while computing the taxable loss of the Assessee. The assessee is a dealer in cars and motorbikes. During the assessment proceedings, the AO noticed that the assessee claimed VRS payments amounting to ₹2,12,08,000.

The assessee had argued that the sum of ₹76,55,667, disallowed by the AO and confirmed by the CIT(A), had already been added back while computing its taxable loss. Supporting documents were submitted to this effect. The Revenue agreed that the matter could be verified. The bench of Manu Kumar Giri (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that the issue was restored to the AO for verification and allowed the ground for statistical purposes.

Accommodation Entry Transactions: ITAT quashes Revision Order upholding Plausible View by AO Synwave Industries vs The Principal Commissioner of Income Tax CITATION : 2025 TAXSCAN (ITAT) 1099

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a revision order passed under Section 263 of the Income Tax Act, 1961, in a case involving alleged accommodation entry transactions. The matter arose when the Principal Commissioner of Income Tax (PCIT), Ahmedabad-1, invoked revisionary powers to set aside an assessment order passed in the case of Synwave Industries for the Assessment Year 2013-14.

The ITAT found that the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue, as required for action under Section 263. Accordingly, the Tribunal set aside the PCIT’s revision order and restored the assessment order as passed by the AO. The appeal of the assessee was allowed, providing relief in the face of what the bench termed an unjustified invocation of revisionary jurisdiction.

S. 80P Deduction not to be Denied to Co-operative Societies for Belated Returns, if Claim is Valid: ITAT Shree Dhamel Seva Sahkari vs The Asstt. Director of Income Tax (CPC) CITATION: 2025 TAXSCAN (ITAT) 1100

The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) has recently delivered a noteworthy decision addressing the eligibility of co-operative societies to claim deductions under Section 80P of the Income Tax Act, 1961, even when their returns have been filed after the due date prescribed under Section 139(1) of the Income Tax Act.

The Tribunal set aside the CPC’s summary denial of the deduction and remanded the matter to the Assessing Officer, instructing that the validity of the Section 80P claim should be assessed on its merits, rather than dismissed on procedural grounds alone.

Relief of Tata Teleservices: ITAT Rules Pre-Operative Expenses for Telecom Business Expansion as Revenue Expenditure, Allows Full Deduction Tata Teleservices Ltd. vs ACIT CITATION: 2025 TAXSCAN (ITAT) 1101

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that pre-operative expenses incurred by Tata Teleservices Ltd. for the expansion of its existing telecommunication business constitute revenue expenditure, fully deductible under Section 37(1) of the Income Tax Act, 1961.

The tribunal held that the nomenclature of expenses is not determinative of their nature, citing Supreme Court and High Court precedents which ruled that the pre-operative expenses were revenue expenditure, fully deductible under Section 37(1) of the Income Tax Act. The tribunal deleted the additions of Rs. 90,14,00,000 and Rs. 3,38,40,00,000 for AY 2009-10, and Rs. 33,30,00,000 and Rs. 2,41,60,00,000 for AY 2010-11. The appeals of the assessee were allowed.

Assessment of Bread Manufacturer's Capital Withdrawals and Receivables Not Erroneous: ITAT Quashes PCIT's Revision Order Umesh Garg vs ITO CITATION: 2025 TAXSCAN (ITAT) 1102

Umesh Garg (assessee), the proprietor of M/s A.R. Foods, engaged in manufacturing breads and rusks, faced scrutiny for Assessment Year (AY) 2011-12. The assessee filed his Income Tax Return (ITR) on 30.09.2011, declaring an income of Rs. 2,26,070. The case was selected for scrutiny, and the assessment was completed on 04.06.2013 under Section 143(3) of the Income Tax Act. The Assessing Officer (AO) accepted the return of income filed by the assessee.

The tribunal observed that capital withdrawals were not taxable, receivables were supported by books, funds from M/s Garg Agencies were verified, and bank charges were documented. The tribunal held that PCIT failed to establish error or prejudice to the revenue. The tribunal quashed the PCIT’s order and held that the assessment was neither erroneous nor prejudicial. The appeal of the assessee was allowed.

Necessity for Verification of Capital and stock balances: ITAT Remits Rs. 7 Cr Income Addition Tejasvi Bhalla vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1103

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has set aside an addition of Rs. 7,28,72,419 and directed the Assessing Officer (AO) to verify the opening capital and stock balances afresh for Assessment Year (AY) 2018-19. Tejasvi Bhalla (assessee), a commission agent and proprietor of Arshia Enterprises, faced scrutiny for AY 2018-19. The assessee filed original Income Tax Return (ITR) on 28.08.2018, declaring an income of Rs. 4,77,890.

The tribunal held that, in the interest of justice, the matter should be remitted to the AO for fresh adjudication after providing the assessee adequate opportunities to substantiate claims. The tribunal set aside the CIT(A)’s order and directed the AO to re-examine the additions of Rs. 7,28,72,419. The issue of penalty initiation under Section 271AAC was dismissed as premature.

Loose Computerized Sheet Found at Taxpayer’s Premises Not Corroborative Evidence: ITAT Deletes ₹7 Crore Addition and Penalty M/s Tara Health Foods Ltd vs The DCIT CITATION: 2025 TAXSCAN (ITAT) 1104

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a loose computerized sheet found during a search without corroborative evidence did not constitute valid grounds for an income addition of ₹7 crore or the imposition of a penalty under Section 271AAA of the Income Tax Act, 1961. Tara Health Foods Ltd. (assessee), a company, faced scrutiny for Assessment Year (AY) 2010-11 following a search operation under Section 132 on 12.10.2010. The Assessing Officer (AO) issued a notice under Section 153A.

The two-member bench, comprising Rajpal Yadav (Vice President) and Manoj KumarAggarwal (Accountant Member), observed that the loose sheet, though computerized, lacked signatures or evidence of execution. The tribunal also observed that M/s Muez Hest India Pvt. Ltd. denied any cash transactions, and no corroborative material was found during the search to link the Rs. 7 crore to any unaccounted investment or transaction.

ITAT Holds Surplus From Textbook Sales as Educational, Not Commercial; Allows S.11 Exemption ACIT vs Delhi Bureau of Text Books CITATION : 2025 TAXSCAN (ITAT) 1105

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) held that the surplus from textbook sales was educational and not commercial, and accordingly upheld the Commissioner of Income Tax (Appeals) [CIT(A)]’s order allowing exemption under Section 11 of the Income Tax Act,1961. The Revenue-appellant appealed against the CIT(A) order. In this case, Delhi Bureau of Text Books, respondent-assessee, was engaged in publishing and distributing textbooks for students from Class I to VIII in Government and aided schools in Delhi.

The appellate tribunal also referred to its own earlier decisions in the assessee’s cases for AYs 2010-11 to 2014-15, where similar exemptions had been allowed, following the High Court’s ruling. It further noted that the Revenue’s appeal before the Supreme Court was withdrawn due to low tax effect, and no SLP was pending. Based on these facts, the tribunal upheld the CIT(A)’s order allowing exemption under Section 11 of the Act. Therefore, the appeal of the Revenue was dismissed.

Delay in Filing Form 10B Does Not Bar Exemption under Sections 11 & 12 of ITA: ITAT Salt Lake Sanskritik Sansad vs Deputy Director of Income Tax CITATION: 2025 TAXSCAN (ITAT) 1106

The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that delay in filing Form 10B does not bar exemption under sections 11 and 12 of the Income Tax Act,1961. For the assessment year 2023-24, the appellant filed its return of income on 01.09.2023, along with Form 10, declaring accumulation of ₹5,73,129 under section 11(2). A revised return was filed on 14.11.2023 under section 139(4A), declaring ‘NIL’ income.

The assessee relied on rulings from the Gujarat and Calcutta High Courts, which held that delayed filing of Form 10B did not disqualify a trust from claiming exemption under sections 11 and 12. Since the facts were similar, the appellate tribunal held that the assessee was eligible for exemption and directed the CPC to delete the adjustment made in processing the return. Therefore, the appeal was allowed.

ITAT Restores Trust’s 12AB Registration Application: Finds Rejection Based Solely on Procedural Lapse, Violates Principles of Natural Justice Shree Rikhavdevji vs The CIT (Exemption) CITATION: 2025 TAXSCAN (ITAT) 1107

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) set aside an order passed by the Commissioner of Income Tax (Exemption) [CIT(E)], which had rejected the registration application of Shree Rikhavdevji & Kunthunathji Prabhu Jain Swetamber Murtipujak Padhi, and simultaneously cancelled its provisional registration under Section 12AB of the Income Tax Act, 1961. The Tribunal held that the denial, based solely on procedural non-compliance, without examining the genuineness of the Trust’s activities, amounted to a serious lapse of natural justice.

The ITAT, finding merit in the assessee’s submissions, set aside the CIT(E)’s order and remanded the matter to the files of CIT(E) for fresh adjudication, directing the assessee to cooperate fully and furnish all necessary documents in support of its application. As a result, the appeal was allowed for statistical purposes.

ITAT Allows Goregaon Education Society’s Exemption Claim u/s 11 Despite Delay in Filing Forms 9A and 10 obeying CBDT Circular The Goregaon Education Society vs ITO CITATION: 2025 TAXSCAN (ITAT) 1108

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) recently allowed an appeal filed by Goregaon Education Society while observing that the exemption under Section 11 of the Income Tax Act, 1961 cannot be denied due to delays in filing Forms 9A and 10, as the Central Board of Direct Taxes (CBDT) circulars permits such delay and the same are binding on the revenue authorities.

The Bench comprising Sunil Kumar Singh (Judicial Member) and Narendra Kumar Billaiya (Accountant Member) referring to CBDT Circular No. 7/2018 and Circular No. 30/2019, observed the circular as binding on the revenue authorities and consequently directed the AO to allow the exemption claim. Accordingly, the appeal was allowed.

Addition of 1% Commission to ₹63L Income for Issuing Bogus Sales Bills: ITAT sustains Tax Computation due to No Plausible Explanation Sarthak Ispat Pvt. Ltd vs Assistant Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 1109

The Raipur bench of the Income Tax Appellate Tribunal (ITAT) recently dismissed six appeals with common grounds, challenging the justification of the order by the Commissioner of Income Tax (Appeals) ( CIT(A) ). The leading appeal of the batch pertained to the disallowance of ₹63,430 by the Assessing Officer (AO) on account of commission at 1% on undisclosed sale that was received by the Assessee.

The Bench noted that all such transactions were held to be bogus sale transactions based on incriminating material impounded during the search & seizure action conducted on the premises of the assessee, and a commission of 1% was added to the income of the assessee. Hence, the present appeal stood dismissed.

ITAT Sets Aside Penalty Order, Cites Denial of Fair Hearing Due to Improper E-Notice Delivery Mohd Husain vs Income Tax Officer-1 CITATION: 2025 TAXSCAN (ITAT) 1110

The Income Tax Appellate Tribunal (ITAT) Lucknow has canceled a penalty order against a Raebareli taxpayer, ruling that authorities failed to provide a fair hearing by ignoring the assessee's request to avoid email communications. The tribunal directed tax officials to re-examine the case after proper notice delivery, emphasizing the importance of accommodating taxpayers' communication preferences.

The tribunal set aside both the penalty order and the CIT(A)'s dismissal, directing the Assessing Officer to conduct fresh proceedings. The tribunal emphasized that tax authorities must respect taxpayers' communication preferences and provide adequate response time, especially in penalty cases that carry significant financial consequences. The decision serves as an important reminder to tax officials about maintaining procedural fairness in the digital age, particularly when dealing with taxpayers who may not be comfortable with electronic communications.

ITAT Directs Fresh Assessment in Petrol Pump Case, Cites Denial of Natural Justice Over Electronic Notices Shri Ashok Kumar vs Assessing Officer CITATION: 2025 TAXSCAN (ITAT) 1111

The Income Tax Appellate Tribunal (ITAT) Lucknow Bench has ordered tax authorities to conduct a fresh assessment in the case of a Kanpur petrol pump owner, ruling that the taxpayer's right to natural justice was violated through improper delivery of electronic notices. The decision comes after the tribunal found that the assessee's limited technical proficiency prevented him from accessing crucial digital communications during the proceedings.

The ITAT's order directs the Assessing Officer to re-examine the case with proper notice delivery and consider all documentation that Kumar was previously unable to submit. The tribunal emphasized that while digital transformation of tax administration is important, it should not come at the cost of fundamental principles of natural justice.

ITAT Slams CIT(A) for Denial of Natural Justice, Restores Unsecured Loan Addition Case to AO for Fresh Hearing M/s. Gheverchand Rikhabchand Jain vs The Asst. CIT CITATION: 2025 TAXSCAN (ITAT) 1112

The Income Tax Appellate Tribunal (ITAT) Mumbai has strongly criticized the Commissioner of Income Tax (Appeals) for denying a fair hearing to a taxpayer, calling it a violation of natural justice. The tribunal ordered tax authorities to re-examine a ₹13.47 crore addition related to unsecured loans, giving the assessee a proper chance to present evidence.

The Judicial Member, Narendra Kumar Billaiya, and Vice President Saktijit Dey noted that dismissing an appeal without examining evidence amounts to "harassment of the taxpayer." They emphasized that authorities must follow due process, especially when substantial additions are made. The tribunal directed the Assessing Officer to reconsider the case afresh after reviewing all documents and giving the taxpayer a fair opportunity to explain.

ITAT Upholds Tax on Unsold Inventory as 'Income from House Property,' Directs Recalculation of ALV Based on Market Rates Sabarmati Capital One Limited vs Deputy Commissioner of Income Tax CITATION : 2025 TAXSCAN (ITAT) 1113

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the taxability of unsold flats held as stock-in-trade under the head "Income from House Property," while remanding the matter back to the Assessing Officer to reassess the Annual Lettable Value (ALV) based on prevailing market rates.

The bench comprising Waseem Ahmed (Accountant Member) and T.R. Senthil Kumar (Judicial Member) held that the notional rent on unsold flats and shops was rightly taxed under “Income from House Property.” However, it directed the Assessing Officer to recompute the ALV based on the actual prevailing market rent, after giving a proper opportunity to the assessee to submit relevant data. The Tribunal thus partly allowed the appeal, keeping the taxation head unchanged but allowing fresh determination of the rental value.

ITAT Holds 10% Tolerance Limit u/s 56(2)(x) Applicable Retrospectively, Cuts Addition in Property Valuation Case NFAC, Delhi vs NRB Developers CITATION : 2025 TAXSCAN (ITAT) 1114

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that the enhanced 10% tolerance limit under section 56(2)(x) of the Income Tax Act applies retrospectively. This decision has resulted in a substantial reduction of the addition made to the income of NRB Developers in a property valuation dispute for the assessment year 2018-19.

The ITAT bench, comprising Amarjit Singh (Accountant Member) and Anikesh Banerjee (Judicial Member), agreed with the assessee. The Tribunal held that the provision increasing the tolerance limit from 5% to 10% is clarificatory and applies to earlier years as well. Accordingly, the ITAT directed that only the excess amount over the 10% limit should be added to the income, and the rest should be deleted. The appeal of NRB Developers was allowed, and the revenue’s appeal was dismissed.

Property with Shops and Single Room Not Eligible for S.54 Exemption: ITAT Alauddin vs Income-tax Officer CITATION: 2025 TAXSCAN (ITAT) 1115

The Agra Bench of Income Tax Appellate Tribunal ( ITAT ) held that a property comprising four shops on the ground floor and a single room on the first floor could not be treated as a residential house for the purpose of claiming exemption under section 54 of the Income Tax Act, 1961. The Assessing Officer (AO) received information that the assessee had sold an immovable property for ₹ 45,00,000/- but had not disclosed any capital gains in his return.

The bench agreed that the property sold was jointly owned with the assessee’s wife. Since this was clear from the sale deed, it held that only 50 percent of the sale consideration should be taxed in the appellant’s hands. The tribunal directed the AO to recompute the capital gains accordingly and allowed partial relief on this point.

ITAT Quashes Assessment Orders on Grounds of Invalid Special Audit Reference: Allows Appeals of Legal Heirs Smt. Rama Devi vs The DCIT(A) CITATION: 2025 TAXSCAN (ITAT) 1116

The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, has quashed assessment orders passed against late Laxman Rao Banapuram for the assessment years 2014–15 and 2015–16, holding that the reference made by the Assessing Officer (AO) to a special audit under Section 142(2A) of the Income Tax Act, 1961, was mechanical, arbitrary, and invalid, and therefore, the resultant assessments were time-barred.

The Bench, comprising Vijay Pal Rao (Vice President) and Manjunatha G (Accountant Member), observed that the referral to a special audit was arbitrary and thus invalid under law. Consequently, since the time extension granted due to such referral was illegal, the final assessment orders dated August 23, 2019, were held to be time-barred and void.

ITAT Sets Aside Rejection of 12AB Registration to Ujjain-Based NGO: Remands Matter to CIT (Exemption) Mahavir Yuva Sarva vs CIT (Exemption) CITATION: 2025 TAXSCAN (ITAT) 1117

The Income Tax Appellate Tribunal (ITAT), Indore Bench, has set aside the order of the Commissioner of Income Tax (Exemption), which had denied permanent registration under Section 12AB of the Income Tax Act, 1961, to Mahavir Yuva Sarva Shiksha Samajik Samiti, a Ujjain-based charitable society, and cancelled its earlier provisional registration.

The Tribunal observed that the society’s objectives, such as tree plantation, free medical treatment, blood donation camps, and providing support to the differently abled, had not been questioned. It held that while the department is entitled to seek clarity on donations, the context and nature of donations must also be considered.

ITAT directs De Novo Proceedings due to lack of Evidence to substantiate Deffered Revenue in P & L account Gujarat State Road Development Corporation Ltd vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 1118

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) directs de novo proceedings due to lack of evidence to substantiate deferred revenue in the profit & loss account (P&L account). The assessee appealed against the order passed by the CIT(A). During the course of assessment, on examination of the Profit and Loss Account of the assessee, the Assessing Officer observed that the assessee had shown income from Rs. 9,63,30,302/-, whereas on reconciliation of the same with Form 26AS, the total receipts of the assessee came to Rs. 14,30,16,494/-.

The contents of the agreements furnished by the assessee for deferment of revenue, the year-wise income recognition table and the reconciliation statement of Form 26AS with audited Profit & Loss Account, the two member bench of Annapurna Gupta, Accountant Member & Siddhartha Nautiyal, Judicial Member viewed that assessee has not given a clear finding on what basis the amount was deferred by the assessee.

Hiring of Charter Plane cannot be Treated as a Payment made for Professional or Technical Services: ITAT remands matter M/s. Bombay Integrated Security (India) Limited vs The Income Tax Officer CITATION : 2025 TAXSCAN (ITAT) 1119

In a recent case, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that hiring a charter plane cannot be treated as a payment made for professional or technical services. The assessee is engaged in providing security services and allied services. Basis TDS default reported in para 21(b)(ii) of the Tax Audit Report for the FY. 2021-22, a show cause notice was issued to the assessee as to why the assessee should not be treated as assessee-in-default for non-deduction of TDS on account of payment of Rs. 40,80,000/-.

The tribunal remitted the matter back to the file of the AO to determine the exact nature of a transaction, after providing reasonable opportunity to the assessee. It would also be appropriate to determine whether the payee has included the said transaction while offering its income in the return of income and has paid the appropriate tax or not and in this regard, the AO may seek necessary information from the payee concerned.

Two Income Tax Notice issued by CIT(A) in one Week amounts to Gross Violation of Opportunity to respond: ITAT Allows appeal of Geovista Technology LTD Geovista Technologies vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1120

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) viewed that two income tax notices issued by the Commissioner of Income Tax (CIT(A)) in one week amounted to gross violation of the opportunity to respond and allowed the appeal of Geovista Technology Ltd..

The appeal of the assessee was not decided by a speaking order and on merits, then in the interest of justice, the impugned order is set aside and the matter is remanded to the record of the CIT (A) for fresh adjudication on merits after giving an appropriate opportunity of hearing to the assessee.

ITAT Holds Peak Credit Theory Not Applicable in Undisclosed Income Gold Stock Case; Directs AO to Verify Details as per CBDT SOP/Guidelines Shah Maganlal Gulabchand vs The ACIT CITATION : 2025 TAXSCAN (ITAT) 1121

The Surat bench of the Income Tax Appellate Tribunal (ITAT) has held that the theory of peak credit is inapplicable in a case involving undisclosed income channeled through bogus gold trade transactions. The Tribunal ordered the Assessing Officer (AO) to verify all the details and evidence that are mandated as per the Central Board of Direct Tax (CBDT) Standard Operating Procedure (SOP) and Guidelines.

The ITAT bench comprising Pawan Singh (Judicial Member) and Bijayananda Pruseth (Accountant Member) ordered that the peak credit theory cannot be applied where transactions are not cyclical and the withdrawals are made via cheque.

ITAT Remands Rejection of Charitable Trust Registration Due to Insufficient Verification of Seminar Expenses and TDS Deductions Society on Promotion vs CIT(Exemption) CITATION: 2025 TAXSCAN (ITAT) 1122

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has remanded the rejection of applications for registration citing insufficient verification of seminar expenses and TDS deductions by the Commissioner of Income Tax (Exemption). The tribunal ruled that the Commissioner of Income Tax (Exemption) [CIT(E)] failed to adequately verify the trust’s seminar expenses and the implications of TDS deductions by pharmaceutical donors.

The two-member bench comprising Yogesh Kumar US (Judicial Member) and Brajesh Kumar Singh (Accountant Member) observed that the CIT(E) made general remarks without verifying the purpose of seminars, the nature of medical relief expenses, or the context of TDS deductions.

Defective Income Tax Notice Invalidates S. 271(1)(C) Proceedings: ITAT Deletes Penalty Mr. Vikas Jayram Bhukan vs ITO CITATION : 2025 TAXSCAN (ITAT) 1123

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has set aside a penalty of Rs. 13,44,580 imposed under Section 271(1)(c) of the IncomeTax Act, 1961, citing the defective income tax notice that failed to specify whether the penalty was for concealment of income or furnishing inaccurate particulars.

The tribunal found the Bombay High Court’s ruling squarely applicable, as the Revenue failed to provide contrary jurisdictional precedent. The tribunal held that a defective notice under Section 274 cannot sustain penalty proceedings under Section 271(1)(c) of the Income Tax Act. The tribunal directed the AO to delete the penalty of Rs. 13,44,580. The appeal of the assessee was allowed.

ITAT permits Inclusion of Five Comparable Companies for Transfer Pricing, quashes Rs. 2.39 Cr Adjustment Troy Chemicals India Pvt. Ltd vs CIT(A), NFA Ward-11(3)(1) CITATION : 2025 TAXSCAN (ITAT) 1124

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the inclusion of five additional companies as comparables for transfer pricing benchmarking and quashing a transfer pricing adjustment of Rs. 2,39,98,806 for Assessment Year (AY) 2021-22.

The two-member bench, comprising Sandeep Singh Karhail (Judicial Member) and Bijayananda Pruseth (Accountant Member) observed that under RPM, as prescribed by Rule 10B(1)(b) of the Income Tax Rules, 1962, the focus is on the similarity of functions and risks rather than strict product similarity.

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