ITAT Weekly Round-up

ITAT upholds ₹7.66 Cr Business Loss from NSEL Suspension as Bad Debt u/s 36(1)(vii)

The two-member bench of Beena Pillai(Judicial Member) and Girish Agrawal (Accountant Member) relying on coordinate bench decisions in Chowdry Associates v. ACIT (2020), Cello Pens & Stationery Pvt. Ltd. (2022), and Flair Exports Pvt. Ltd. (2022), held that losses arising from NSEL suspension are allowable either as bad debts under Section 36(1)(vii) or as business loss under Section 28(i).

Accordingly, CIT(A)’s order was upheld allowing the bad debt claim and dismissing Revenue’s appeal.

Failure to verify New vs. Renewed Deposits on unsecured loans: ITAT Remits ₹2.62 Cr Issue for Fresh verification

The two-member bench, comprising Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member), noted that the CIT(A) had deleted the addition of ₹2,17,80,000 merely on the basis of a statement made on behalf of the assessee.

Relief for Dalmia Bharat: ITAT Rules Cancellation of Forward Contract for Machinery is capital receipt

The two-member bench comprising Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member) observed the issue of whether the gain on foreign exchange fluctuation was a revenue receipt or capital in nature.

The Tribunal relied on the landmark SupremeCourt decision in the case of Sutlej Cotton Mills Ltd. vs. CIT. , and ruled that any gain arising from cancellation of the forward contract would result in capital gain as it is on account of capital transaction. The Tribunal also accepted the assessee’s submission that the gain had already been adjusted against the machinery’s cost of acquisition in AY 2009-10, and taxing it again in AY 2007-08 would result in double taxation.

Amount Shown as Advance and Paid Before Due Date Cannot Be Treated as Revenue Receipt: ITAT Orders Fresh Verification on ₹6.12 Lakh Deemed Sales Tax Addition

Consequently, the Bench ruled that the appeal filed by the Revenue was not maintainable and therefore liable to be dismissed.

The Tribunal accepted the assessee’s counsel argument that there is no restriction of payment of remuneration to partners under section 40(b) of the Income Tax Act. The tribunal held that the disallowance on account of remuneration paid to partners made by the lower authorities was not justified.

Therefore, the Tribunal deleted the addition of Rs. 4,45,000. The appeal filed by the assessee was allowed.

The two member bench, comprising Mahavir Singh (Vice President) and Krinwant Sahay (Accountant Member) observed that it was not clear from the assessment order or the appellate order as to what verifications were done to confirm the assessee's claim that the credits were receivables for earlier years sales.

Assessee’s Failure to Reconcile the Discrepancy Justifies Addition: ITAT upholds Donation Disallowance

Subramaniam Swaminathan Iyer vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 1927

The bench of the Income Tax Appellate Tribunal (ITAT), Raipur, upheld the disallowance of ₹15,000 made on account of donation expenses, as the assessee had failed to reconcile the difference between the amount debited in the Profit and Loss Account and the amount offered to tax, thereby justifying the addition made by the Assessing Officer (AO) under the Income Tax Act, 1961.

The Tribunal upheld the addition made by the AO. Accordingly, the Tribunal confirmed the disallowance of ₹15,000.

Amount Shown as Advance and Paid Before Due Date Cannot Be Treated as Revenue Receipt: ITAT Orders Fresh Verification on ₹6.12 Lakh Deemed Sales Tax Addition

Subramaniam Swaminathan Iyer vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 1927

The bench of the Income Tax Appellate Tribunal (ITAT), Raipur, ruled that an amount recorded as an advance and subsequently paid before the due date of filing the return cannot

automatically be treated as a revenue receipt under the IncomeTax Act, 1961. Accordingly, the addition of ₹6,12,607 on account of deemed sales tax for fresh verification.

The Tribunal observed that since the amount had been shown as an advance and was reportedly paid before the due date of filing the return, it could not be summarily treated as a revenue receipt under the Income Tax Act, 1961. The Tribunal directed that these documents be duly considered during re-adjudication.

ITAT restricts Addition on “Peak Purchase” to Differential Margin Between Declared and Benchmark Profit in Rice Trading Case

Kamlesh Kumar Kesharwani s The Assistant Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 1928

The bench of the Income Tax Appellate Tribunal (ITAT), Raipur, has restricted the addition to the differential margin between the Gross Profit (GP) declared by the assessee and the benchmark rate of 10% adopted as the industry average for rice trading, affirming that a full disallowance of such purchases was not justified when the corresponding sales were accepted by the Revenue authorities.

The Tribunal endorsed the CIT(A)’s finding that a seed capital was essential to sustain the rotation of funds involved in bogus billing. The Bench also noted that the average GP in the rice trading business typically varied between 3% and 10%, depending on market conditions.

Speculation Income Addition and Unexplained Income Addition of ₹68.45 Lakh: ITAT Remits Matter for Fresh Adjudication on Taxpayer's Affidavit

Muthiah Lakshmanan vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1942

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remitted the assessment to the file of the Commissioner of Income Tax (Appeals) [CIT(A)] for fresh consideration for the case involved significant additions totaling approximately ₹68.45 Lakh for the Assessment Year (AY) 2011-12.

The two-member bench, comprising S.S. Viswanethra Ravi (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member), after considering the submissions and the undertaking in the affidavit, noted that the AY 2011-12 was an old assessment year and deemed it proper to remand the matter for fresh adjudication on merits

Depreciation Cannot be Allowed if Cost of Acquisition Claimed: ITAT Remands for Verification of S.11(6) Compliance

M/s. MITHRA vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1935

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) remanded to the Assessing Officer (AO) to verify the factual claim that the cost of the depreciated assets had not been claimed as application of income in the past.

The two-member bench, comprising George George K (Vice President) and S.R. Raghunatha (Accountant Member), observed that Section 11(6), inserted with effect from 01.04.2015, clearly states that depreciation won't be allowed if the cost of acquisition has been allowed as an application of income.

Interest on Partner's Capital Not Restricted to Business Start Date: ITAT Deletes ₹1.83 Lakh Disallowance

Meenakshi Traders vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1943

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹1,83,248 and held that the Assessing Officer (AO) was incorrect to restrict the allowance of interest paid to partner's capital merely because the partnership firm commenced its operations part-way through the financial year.

The Tribunal noted that the interest was paid on the capital to the respective partners as on the last day of the financial year. It was concluded that the restriction of interest only for five months based on the date of business operations was not justified. The tribunal ruled that the law permits the deduction of interest paid on partner’s capital irrespective of the commencement date of the business and deleted the disallowance

The Single Member Bench, comprising George Mathan (Judicial Member)observed that the assessee was admittedly registered as a charitable trust. The Tribunal noted that if the CPC desired to make any adjustments in the intimation under Section 143(1), it was only possible to make adjustments that are specifically permissible under that section.

The Tribunal held that the loose sheets/data from the laptop, which primarily detailed cash receipts and payments related to business transactions like scrap sales, did not constitute an 'asset' as defined in the Explanation to Section 149(1) (which includes immovable property, shares, loans, etc.).

The tribunal also observed that the data did not constitute 'entries in the books of account'. The tribunal also noted that a second notice u/s 148 was issued after the first one was dropped due to the AO's failure to issue a notice u/s 143(2) within the stipulated time limit.

The two-member bench of Padmavathy S (Accountant Member) and Raj Kumar Chauhan (Judicial Member) further followed the decision of Reliance Jio Infocomm Ltd., holding that the retrospective amendments under Section 9(1)(vi) cannot override treaty provisions unless incorporated into the DTAA.

Since the assessee’s services were rendered and utilised outside India, and it had no PE in India, the income could not be taxed in India either as royalty or business profits.

The Delhi bench of Income Tax Appellate Tribunal (ITAT) deleted Rs. 8.68 Lakh presumptive income addition under Section 44AD, holding that the AO exceeded its jurisdiction when the matter was only taken up for a limited scrutiny assessment.

Placing reliance on Weilburger Coatings India Pvt. Ltd. and the CBDT instructions, the bench of Satbeer Singh Godara (Judicial Member) held that the AO had exceeded his jurisdiction by making an addition on an issue not forming part of the limited scrutiny mandate. Since the addition was made contrary to the procedural safeguards and CBDT directions, it was declared invalid in law.

Accordingly, the Tribunal deleted the addition of Rs. 8,68,799 and allowed the assessee’s appeal in full.

Co-operative Society Eligible for 80P(2)(d) Deduction on Interest from Co-operative Bank Investments: ITAT

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the Principal Commissioner of Income Tax ( PCIT )’s revision order in Hapag Lloyd matter and restored the assessment, holding that Corporate Social Responsibility ( CSR ) donations to an entity with valid section 80G of Income Tax Act,1961, approval were eligible for deduction.

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) remanded the matter relating to unexplained cash addition of Rs. 2.05 crore under Section 69 for fresh verification of the source of share application money to the AO. The tribunal upheld the revenue appeal.

The two-member bench comprising Kavita Rajagopal (Judicial Member) and Renu Jauhri (Accountant Member) opined that the issue had not been properly examined during the assessment proceedings or during the appellate proceedings. The Tribunal restored the issue to the AO for fresh consideration.

Non-receipt of Notices and Lack of Digital Access: ITAT remands ₹34.77 Lakh LTCG Addition as 'Equitable Relief'

The assessee claimed that he was an auto driver having education up to 7th class only and works for pick up and drop off of school children from their school and back, and the assessee does not even have any email ID and does not understand much about technology, and that is why the assessee sought for physical notice instead of sending notice by the Commissioner through email.

The single bench of Narender Kumar Choudhry (Judicial Member) remanded the instant case to the Commissioner for decision afresh, by affording a reasonable opportunity of being heard to the assessee.

Interest Deduction u/s 57: ITAT Allows Claim After Verifying Payments and Interest Earned

Ghanshyam Arjanbhai Patel vs The ITO CITATION: 2025 TAXSCAN (ITAT) 1948

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the assessee’s claim for interest deduction under section 57 of Income Tax Act,1961 after verifying payments and interest earned.

The appellate tribunal noted that the parties whose details were not filed had no loans during the assessment year, and the opening balances confirmed that 12% interest was paid. The tribunal held that the assessee had proven the deduction claimed under section 57.

Denial of S.80G Approval Due to Excess ‘Pooja Expenses’: ITAT Remands Matter to CIT(E) for Fresh Consideration

The Life Eternal Trust vs CIT CITATION: 2025 TAXSCAN (ITAT) 1947

The Pune Bench of Income Tax Appellate Tribunal ( ITAT ) remanded the matter to the Commissioner of Income Tax (Exemption)[CIT(E)] for fresh consideration after the denial of Section 80G of Income Tax Act,1961, approval due to excess ‘pooja expenses’.

The two member bench comprising Vinay Bhamore (Judicial Member) and Manish Borad (Accountant Member) heard both sides and reviewed the material on record, including the additional evidence submitted. It was explained that many of the expenses were not related to religious activities and were wrongly classified under “pooja expenses” due to an accounting error. The assessee also submitted detailed financial statements and a breakup of these expenses to support the claim.

Since the details had not been produced before the CIT (E) earlier, the Tribunal set aside the order and remanded the matter back for fresh examination. It directed the CIT (E) to reconsider the application under section 80G(5) after reviewing the new evidence and giving the assessee a fair opportunity of hearing.

Rs. 18.76 cr Disallowed for Non-Deduction of TDS u/s 194Q: ITAT Restores Matter to CIT(A)

Jakhad Enterprise LLP vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1945

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) restored the matter to the Commissioner of Income Tax (Appeals) [CIT(A)] in the matter, where a disallowance of Rs. 18.76 crore was made for non-deduction of Tax Deducted at Source ( TDS ) under section 194Q of Income Tax Act, 1961.

The appellate tribunal observed that the assessee had been non-compliant before both the AO and the CIT(A), and that the CIT(A) had upheld the disallowance ex-parte. Considering the submissions, the tribunal restored the issue to the file of the CIT(A) to provide the appellant one more opportunity to present its case, in line with natural justice.

Unsecured Loan Genuine and Merely Carried Forward from Earlier Year, Not Fresh Borrowing: ITAT Deletes Rs. 2.50 Cr Income Tax Addition u/s 68

Anandmangal Investment & Finance Pvt Ltd vs Income-tax Officer CITATION: 2025 TAXSCAN (ITAT) 1957

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee, observing that the unsecured loan was carried forward from an earlier year and not taken in the impugned assessment year.

The two-member bench comprising Vikram Singh Yadav (Accountant Member) and Anikesh Banerjee (Judicial Member) held that no fresh loan was taken during the impugned year; rather, the balance was merely carried forward in the name of M/s Revathy Resorts Pvt. Ltd. In these circumstances, the addition of Rs.2.50 crores sustained by the authorities is unjustified and directed to delete the addition.

Amount Received for Reduced LLP Profit Share Not Taxable as Goodwill or Capital Gains: ITAT Deletes ₹1.98 Cr Addition

The Dy Commissioner of Income Tax vs Sathyabama Ramachandran CITATION: 2025 TAXSCAN (ITAT) 1956

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition of Rs.1,98,86,210 and ruled that the amount received by the assessee for a reduction in her profit-sharing ratio in a Limited Liability Partnership (LLP) did not constitute Goodwill or a transfer of capital assets and was therefore not taxable.

The Tribunal noted that the amendments to Section 45(4) and the insertion of Section 9B by the Finance Act, 2021, which bring profits/gains from money or capital assets received on the reconstitution of a specified entity under the tax net, were prospective in nature, effective from AY 2021-22, and thus did not apply to the present case (AY 2017-18). It was concluded that the addition of Rs.1,98,86,210 made by the AO was rightly deleted by the CIT(A).

Awaiting CCIT order on Delayed ITR Condonation Petition: ITAT Remands on 80P Deduction Disallowance Matter

KK 168 Naripalli Primary Agri. Cooperative Society Limited vs The IncomeTax Officer CITATION: 2025 TAXSCAN (ITAT) 1950

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) remitted the issue regarding the disallowance of the Section 80P deduction back to the file of the Commissioner of Income Tax(Appeals) [CIT(A)] for fresh consideration due to the Chief Commissioner of Income Tax (CCIT) order on delayed filing of the Income Tax Return (ITR) was pending.

The two-member bench, comprising S.S. Viswanethra Ravi (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member), observed that the CIT(A) was not justified in dismissing the appeal of the assessee pending the decision of the CCIT on the condonation petition.

Co-operative Society Entitled to Claim Deduction u/s 57 for Expenditure Incurred on Interest Income from Banks: ITAT Remits Income Tax Matter

Sri Venugopalakrishna Credit vs ITO CITATION: 2025 TAXSCAN (ITAT) 1959

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) remitted the matter back to the Assessing Officer (AO) to verify the actual expenditure incurred by the assessee to earn interest income from investments made with banks and allowed the claim for deduction under Section 57 of the Act.

The Tribunal observed that it is a well-established principle that an assessee is entitled to deduct the expenses incurred in earning income taxable under the head "Income from Other Sources" under the provisions of Section 57 of the Act.

The bench held that the assessee cannot be denied the benefit of deducting the costs incurred in earning the interest income from the co-operative bank under Section 57, subject to the assessee substantiating the claim with adequate evidence.

Estimated Addition of Rs. 42.37 Lakh Bogus Purchases Insufficient for Penalty u/s 271(1)(c): ITAT dismisses Revenue Appeal

Income Tax Officer vs Bhupesh Sevantilal Shah CITATION: 2025 TAXSCAN (ITAT) 1952

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the revenue’s appeal and upheld the deletion of penalty under Section 271(1)(c) on the confirmed addition of 7.5% of bogus purchases amounting to Rs. 42.37 lakh.

The two-member bench comprising Saktijit Dey (Vice President) and Narendra Kumar Billaiya (Accountant Member) held that estimating the profit without bringing any cogent material evidence on record, penalty under Section 271(1)(c) of the Act cannot be levied for filing inaccurate particulars of income.

Homebuyer Claims S. 80C Deduction for Housing Loan Repayment, Wins Dept Challenge: Know How ITAT Ruled

Allavuddin Unmarasab Hurakadli v. National Faceless Assessment Centre,ITA No. 229/PAN/2025 (A.Y. 2016-17)

The Income Tax Appellate Tribunal (ITAT) Panaji recently ruled in favour of a taxpayer who had claimed a deduction under Section 80C of the Income TaxAct, 1961, for repayment of a housing loan taken from a cooperative credit society.

The Tribunal noted that the documentary evidence regarding the repayment of the housing loan and the flow of funds from the pigmy deposit account needed proper verification. In the interest of justice, it remanded this issue back to the Assessing Officer for fresh adjudication. The AO was directed to provide adequate opportunity to the assessee to produce all relevant details and to pass an order afresh after examining the evidence.

Thus, the addition of Rs. 4,81,109 under Section 69C was not deleted outright but was sent back for reconsideration. The ITAT partly allowed the appeal.

Profit Estimation Capped at 1.5%: ITAT Recognises Assessee as Livestock Transporter

Haroon Shaikh vs ITO CITATION: 2025 TAXSCAN (ITAT) 1967

The bench of the Income Tax Appellate Tribunal (ITAT) Pune, observing that the assessee was engaged in the transportation of livestock on a commission basis and not in retail trading, the Tribunal restricted the profit estimation to 1.5% of turnover, thereby partly setting aside the additions made by the lower authorities under the Income Tax Act, 1961.

The Tribunal Bench of Dr. Manish Borad, Accountant Member held that while the AO did not explicitly reject the books of accounts under Section 145(3), his observations implicitly questioned the correctness of the declared results. However, the Tribunal found merit in the assessee’s explanation and supporting evidence showing that the activity involved transportation of livestock and poultry products on commission, not retail trading.

Thus, the Tribunal held that the application of an 8% net profit rate was unjustified.

Reassessment Notice issued After April 1, 2021 Barred by Limitation: ITAT quashes Notice u/s of 148 Income Tax Act

Sunita Salhotra vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 1965

The Bench of the Income Tax Appellate Tribunal, Delhi, held that reassessment notices issued on or after April 1, 2021, for Assessment Year (A.Y.) 2015-16 are barred by limitation and must be dropped. Accordingly, the Tribunal quashed the notice issued under Section 148 of the Income TaxAct, 1961, and set aside the reassessment order.

The Tribunal noted that in Rajiv Bansal, the Additional Solicitor General had made a categorical statement before the Supreme Court that all notices for A.Y. 2015-16 issued on or after April 1, 2021, would have to be dropped. The Tribunal further observed that under the erstwhile Section 149 of the Income Tax Act, the limitation period for issuing notice expired on March 31, 2022, and that the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA) did not extend this period for A.Y. 2015-16.

Temple Governed by HPPRICE Act Not Required to Furnish Trust Deed for Registration u/s 12A: ITAT Directs Grant of Registration

Shree Ram Gopal Temple Trust vs CIT CITATION: 2025 TAXSCAN (ITAT) 1960

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the temple governed by the Himachal Pradesh Hindu Public Religious Institutions and Charitable Endowments Act, 1984 (HPPRICE), was not required to furnish a traditional trust deed and directed the Commissioner of Income Tax (Exemptions) [CIT(E)] to grant registration.

The Tribunal concluded that the registration could not be denied for want of a trust deed when the institution is governed by a special statute. The tribunal directed the CIT(E) to grant the impugned permanent registration to the assessee. In the result, the appeal filed by the assessee was allowed.

Penalty u/s 221(1) Valid for Non-Payment of Admitted Tax Liability: ITAT

Dy. Commissioner of Income Tax vs Smt. Sama Yashodha CITATION: 2025 TAXSCAN (ITAT) 1962

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) restored the penalty levied under Section 221(1) of the Income Tax Act, 1961, for the Assessment Year (AY) 2007-08 due to the non-payment of tax liability.

The tribunal noted that the CIT(A) deleted the penalty during the appellate proceedings, a revised computation was admitted by the CIT(A) showing no tax payable, thereby implying that the provisions of Section 249(4) were not applicable and there was no default under Section 140A of the Income Tax Act.

Only Unutilized Capital Gains Amount u/s 54F Taxable, Not Entire Capital Gains: ITAT

Mohamed Akbar vs I.T.O CITATION: 2025 TAXSCAN (ITAT) 1963

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) directed that only the unutilized amount of the Capital Gains Deposit Scheme, and not the entire capital gains, should be added to the assessee's total income.

The Bench held that the AO was "not correct" in adding the entire capital gains to the total income of the assessee. The Tribunal ruled that only the unutilized amount should be added to the total income of the assessee. In the result, the appeal filed by the assessee was partly allowed.

Legal Challenge to Reopening of Assessment Not Raised Before CIT(A): ITAT Restores Appeal for Fresh Adjudication

Rathi Gajendran vs I.T.O CITATION: 2025 TAXSCAN (ITAT) 1964

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) restored the appeal for fresh adjudication of a legal issue regarding the validity of the reopening of the assessment stating that this legal ground was never raised before the lower authorities for the Assessment Year (AY) 2015-16.

The two-member bench, comprising S.S. Viswanethra Ravi (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member), noted that the legal issue concerning the assessment's reopening was raised for the first time before the Tribunal. In the interest of justice, the Tribunal decided to restore the issue to the file of the CIT(A).

Reopening Based Solely on Third-Party Information and 'Reason to Suspect' Invalid: ITAT Quashes ₹80.59 Lakh Addition

M/s Vashisht Alloys vs DCIT Circle Yamuna Nagar CITATION: 2025 TAXSCAN (ITAT) 1961

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) quashed the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, which had resulted in an addition of ₹80.59 Lakh for the Assessment Year (AY) 2010-11.

The Bench concluded that such passive reliance on third-party intelligence would render the reopening invalid as it reflected merely a ‘reason to suspect’ rather than ‘reasons to belief’." It held that the reassessment proceedings lacked the underlying material required for the formation of a belief that income had escaped assessment.

The tribunal quashed the reassessment order, ruling that the assessee succeeds on legal grounds. The appeal filed by the assessee was allowed.

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