ITAT WEEKLY ROUND-UP

Delhi HC Sets Aside ITAT Order for Lack of Reasoned Findings on Functional Comparability in Transfer Pricing Case

TPG SOFTWARE PVT LTD vs DEPUTY COMMISSIONER OF INCOME TAX CITATION: 2025 TAXSCAN (HC) 2204

The Delhi High Court has set aside an order of the Income Tax Appellate Tribunal (ITAT) in a transfer pricing dispute involving TPG Software Pvt Ltd for failing to provide adequate reasoning while determining the functional comparability of entities. The case pertained to Assessment Year 2014–15, where the Assessing Officer made an upward adjustment of ₹6.84 crore based on the Transfer Pricing Officer’s application of the Transactional Net Margin Method. While the Dispute Resolution Panel directed the exclusion of some comparables, it retained others, which the assessee contested before the ITAT on grounds of functional dissimilarity.

The Court observed that although the ITAT recorded the assessee’s submissions, it failed to provide reasons for rejecting them and wrongly assumed that Comviva Technologies Ltd. was already approved as a comparable. Emphasizing that a reasoned order is vital for judicial scrutiny, the Division Bench of Justice Vibhu Bakhru and Justice Tejas Karia set aside the ITAT’s order and remanded the case for fresh adjudication in accordance with law.

Property Attachment Cannot Continue Once ITAT Order Attains Finality and Dues Are Cleared: Madras HC

M/s.JSR Infra Projects Pvt.Ltd vs The Tax Recovery Officer CITATION: 2025 TAXSCAN (HC) 2211

The Madras High Court held that property attachment cannot continue once the Income Tax Appellate Tribunal’s (ITAT) order attains finality and all tax dues are cleared. The petitioner, JSR Infra Projects Pvt. Ltd., had challenged attachment orders issued after assessments under Section 153A of the Income Tax Act. Although the Commissioner of Income Tax (Appeals) [CIT(A)] and the ITAT had set aside additions for multiple assessment years, and the petitioner had cleared all dues, the Department failed to lift the attachment, claiming a pending but unnumbered High Court appeal.

Justice Krishnan Ramasamy observed that the issue was no longer res integra, relying on precedents such as Sri Lakshmi Brick Industries v. Tax Recovery Officer and Coromandel Oils Pvt. Ltd. v. Tax Recovery Officer, which held that once an ITAT order achieves finality and tax liability is nil, attachment cannot subsist. The Court directed the Tax Recovery Officer to release the attached property within four weeks, emphasizing that under Section 225(2) of the Income Tax Act, authorities must act in accordance with appellate orders.

Disallowance of Transport Expenses Due to Lack of Evidence: ITAT Directs AO to Estimate Income at 8% u/s 44AD

M/s Friends Transport Carrier vs ITO CITATION: 2025 TAXSCAN (ITAT) 2022

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer to estimate income at 8% of total transport receipts under Section 44AD of the Income Tax Act, 1961, as the assessee failed to substantiate the expenses claimed. In the case of Friends Transport Carrier for AY 2020–21, the AO had made a best judgment assessment under Section 144, disallowing 75% of expenses due to lack of evidence and adding Rs. 60.11 lakhs to income, which was later upheld by the CIT(A).

Observing that the assessee had transport receipts of Rs. 81.89 lakhs but no supporting proof for expenses, the ITAT applied presumptive taxation principles and estimated income at 8% of receipts, amounting to Rs. 6.55 lakh. The two-member bench of Laliet Kumar (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) accordingly directed the AO to recompute the income and partly allowed the appeal.

TDS on CAM Charges Treated as Payment for Services, Not for Use of Property: ITAT Rules 2% Deduction u/s 194C Valid

M/s Glued Entertainment Pvt. Ltd vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2021

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that Tax Deducted at Source (TDS) at 2% under Section 194C of the Income Tax Act, 1961, on Common Area Maintenance (CAM) charges was valid, as such payments were for maintenance services and not for the use of property. Glued Entertainment Pvt. Ltd., which had leased space in Logix City Centre Mall, paid rent with 10% TDS under Section 194-I and CAM charges with 2% TDS under Section 194C. The Assessing Officer treated CAM charges as part of rent and demanded higher TDS, a view upheld by the CIT(A).

The tribunal, relying on earlier rulings including Connaught Plaza Restaurants (P) Ltd. v. DCIT, observed that CAM charges relate to upkeep of shared facilities and not to rental payments. It concluded that TDS at 2% under Section 194C was correctly applied and directed that the order of the CIT(A) be set aside, allowing the assessee’s appeal.

Gold Sale of ₹11.27 Lakh Treated as Accommodation Entry u/s 69A: ITAT Holds Transaction Genuine and Deletes Addition

Girish Vrajlal Soni vs Income Tax Officer CITATION : 2025 TAXSCAN (ITAT) 2020

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) held that a gold sale transaction of ₹11.27 lakh was genuine and not an accommodation entry under Section 69A of the Income Tax Act, 1961. The assessee, Girish Vrajlal Soni, engaged in gold trading, had sold 350 grams of gold to Viko Enterprise through RTGS, supported by invoice, bank statements, and stock records. Despite these documents, the Investigation Wing and the Assessing Officer treated the transaction as non-genuine, and the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition.

The Tribunal, comprising Dr. B.R.R. Kumar (Vice President) and Suchitra Kamble (Judicial Member), found that the assessee had substantiated the transaction with proper evidence and that payments were made through banking channels. As no contrary proof was presented by the Department, the ITAT concluded that the addition under Section 69A was unwarranted and accordingly allowed the appeal, deleting the ₹11.27 lakh addition.

Section 11(7) Amendment Not Retrospective: ITAT Allows Tata Social Welfare Trust’s Pre-Amendment Exemptions u/s 10(34) & 10(35)

Deputy Commissioner of Income Tax vs Tata Social Welfare Trust CITATION: 2025 TAXSCAN (ITAT) 2024

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) held that Section 11(7) of the Income Tax Act, 1961, which restricts charitable trusts from claiming alternative exemptions, cannot be applied retrospectively. In the case of Tata Social Welfare Trust, the Tribunal ruled that exemptions for dividend and unit income under Sections 10(34) and 10(35) were valid for assessment years prior to the amendment effective from A.Y. 2015–16. The Assessing Officer had denied the exemptions citing the trust’s surrendered registration and alleged violations of Sections 13(1)(d) and 13(2)(h), but the CIT(A) allowed the claim.

Upholding the CIT(A)’s order, the ITAT noted that before A.Y. 2015–16, charitable entities could avail of such exemptions, and the subsequent amendment could not be applied to earlier years. The bench, comprising N.K. Billaiya (Accountant Member) and Saktijit Dey (Vice President), also observed that the trust’s registration under Section 12A remained valid during the relevant period, making the income eligible for exemption. Consequently, the revenue’s appeal was dismissed, affirming that procedural events like surrender of registration cannot override substantive exemption rights for pre-amendment years.

Calcutta HC finds Penny-Stock Trading Loss as Bogus, sets aside ITAT disallowance Order

PRINCIPAL COMMISSIONER OF INCOME TAX vs M/S. ZULU MERCHANDISE PRIVATE LIMITED CITATION: 2025 TAXSCAN (HC) 2207

The Calcutta High Court set aside the order of the Income Tax Appellate Tribunal (ITAT), Kolkata, which had allowed M/s Zulu Merchandise Pvt. Ltd. to set off a penny-stock trading loss of ₹51.33 lakh against its income for AY 2014–15. The Assessing Officer had disallowed the loss after finding, based on investigation data, that trades in Radford Global Ltd. and Shreenath Commercial were sham transactions executed through circular trading to generate bogus losses—a finding later upheld by the National Faceless Appeal Centre.

The bench of Chief Justice T.S. Sivagnanam and Justice Chaitali Chatterjee held that the ITAT erred in law by allowing the claim without independently analyzing the facts or addressing the detailed findings of the lower authorities. The Court noted that the ITAT had merely relied on another case without establishing factual similarity and emphasized that the matter involved organized tax evasion, attracting the exception under CBDT Circular No. 5 of 2024. Consequently, the High Court allowed the Revenue’s appeal, set aside the ITAT’s order, and restored the assessment disallowing the loss.

TATA Trust Allowed to Carry Forward of Deficit from Excess Charitable Expenditure for Set-Off in Subsequent Years: ITAT

Tata Education Trust vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2025

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that a charitable trust can carry forward and set off a deficit arising from spending more than its income on charitable activities against future years’ income. The case involved Tata Education Trust, where the Assessing Officer had disallowed the carry forward of the deficit, citing shortfall in the mandatory 85% fund application under Section 11 of the Income Tax Act. Both the AO and CIT(A) denied the claim, prompting the assessee to appeal before the ITAT.

The Tribunal, comprising Saktijit Dey (Vice President) and Narendra Kumar Billaiya (Accountant Member), relied on precedents from DCIT vs. Sir Dorabji Tata Trust and the Supreme Court ruling in CIT (Exemption) vs. Subros Educational Society. It held that the deficit resulting from excess charitable expenditure is eligible to be carried forward and set off against subsequent years’ income. Accordingly, the appeal was allowed in favour of the assessee.

Investment in Shares Merely Accretion of Bonus Shares: ITAT Confirms Section 11 Exemption for Tata Social Welfare Trust

Deputy Commissioner of Income Tax vs Tata Social Welfare Trust CITATION: 2025 TAXSCAN (ITAT) 2024

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld Tata Social Welfare Trust’s claim for exemption under Section 11 of the Income Tax Act, rejecting the revenue’s contention that its holding of bonus shares in Tata Sons Ltd. violated Section 13(1)(d). The Assessing Officer had treated the investment as a prohibited mode of investment and denied the exemption, relying on the Supreme Court’s ruling in Bharat Diamond Bourse. However, the Trust argued that bonus shares were not new investments but mere accretions to existing holdings.

The Tribunal, comprising N.K. Billaiya (Accountant Member) and Saktijit Dey (Vice President), agreed with the CIT(A)’s finding that no new funds were deployed and that Section 13(1)(d) aims to prevent active diversion of trust funds, not passive accretions like bonus shares. Relying on earlier precedents, the ITAT held that the exemption under Section 11 could not be denied and dismissed the revenue’s appeal, reaffirming that bonus shares do not constitute prohibited investments under the Act.

ITAT Upholds ITR of Aishwarya Rai Bachchan, Deletes ₹4.11 Crore Disallowance u/s 14A

ACIT 16(1) vs Aishwarya Rai Bachchan CITATION: 2025 TAXSCAN (ITAT) 2032

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal against Aishwarya Rai Bachchan for the assessment year 2022-23, upholding the deletion of an additional disallowance of ₹4.11 crore under Section 14A of the Income Tax Act. The Assessing Officer had challenged her suo-moto disallowance of ₹49.08 lakh and, applying 1% on total investments, proposed a higher disallowance without establishing any nexus between the expenditure and exempt income.

The Tribunal affirmed the Commissioner of Income Tax (CIT(A))’s finding that the AO’s computation was arbitrary since her total actual expenses were only ₹2.48 crore. Citing Maxopp Investments Ltd. v. CIT (2018), the ITAT held that disallowance cannot exceed actual expenditure or include investments that yielded no exempt income. Consequently, the additional disallowance was found unsustainable and was deleted.

Funds Declared in Settlement Proceedings Cannot Be Treated as Unexplained Loans: Delhi HC rejects Revenue Appeal in Income Tax Case

PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 vs R B FARMS AND ESTATES PVT. LTD CITATION: 2025 TAXSCAN (HC) 2231

The Delhi High Court ruled that funds disclosed and taxed before the Income Tax Settlement Commission cannot later be treated as unexplained loans under Section 68 of the Income Tax Act, 1961. The case concerned R B Farms and Estates Pvt. Ltd., where the Assessing Officer had added ₹10.37 crore as bogus unsecured loans from two non-genuine entities. Both the CIT(A) and the ITAT deleted the addition, holding that the funds represented unaccounted income already disclosed and taxed by a group company before the Settlement Commission.

Upholding these findings, the Division Bench of Justice Vibhu Bakhru and Justice Tejas Karia observed that the ₹10.96 crore in question had been acknowledged by the Settlement Commission as the application of undisclosed income generated by the group entity through inflated purchases. Since the same income had already been taxed, it could not be assessed again in the hands of the respondent. Accordingly, the Court dismissed the Revenue’s appeal.

Tax Audit u/s 44AB Not Applicable When Turnover is Below ₹60 Lakh: ITAT Deletes Addition

Nirmal Kumar Dugar vs The ITO CITATION: 2025 TAXSCAN (ITAT) 2034

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition related to a business loss claim from derivative trading, holding that a tax audit under Section 44AB was not applicable since the assessee’s turnover was below ₹60 lakh. In the case of Nirmal Kumar Dugar for AY 2016–17, the Assessing Officer had treated the claimed business loss of ₹18.39 lakh from derivative transactions as speculative under Section 43(5) and disallowed its set-off against income from house property and other sources. The CIT(A) upheld the disallowance, stating that the assessee had failed to get his accounts audited as required under Sections 44AB and 44AD.

The Tribunal, comprising Gagan Goyal (Accountant Member) and Narinder Kumar (Judicial Member), observed that the turnover was below the ₹60 lakh audit threshold applicable before the 2017 amendment and that no contrary claim was made by the department. Since the sole ground for disallowance was the absence of an audit, which was not mandatory, the ITAT held the business loss claim to be valid and allowed the assessee’s appeal.

Unexplained Cash Deposits in Co-op Credit Society Require Verification: ITAT Remands ₹5 Cr Addition u/s 69A for Fresh Adjudication

Harshang Kaushikkumar Rami vs The Income Tax Officer, Ward – 1(2)(3) CITATION: 2025 TAXSCAN (ITAT) 2036

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) remanded a ₹5 crore addition made under Section 69A of the Income Tax Act, holding that cash deposits in a co-operative credit society account required proper verification before being treated as unexplained income. The case involved Harshang Kaushikkumar Rami, whose reassessment for AY 2017–18 was reopened after the Assessing Officer found cash deposits of ₹5 crore in his account with Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. The AO completed the assessment ex parte, treating the entire amount as unexplained money, and the CIT(A) upheld the addition.

Before the Tribunal, the assessee claimed the deposits were part of business turnover from trading in brass and mobile products and argued that only the peak balance should be taxed. The Tribunal, comprising Annapurna Gupta (Accountant Member) and Suchithra Kamble (Judicial Member), found that while the assessee submitted some supporting records, they were not properly examined by the AO. Citing principles of natural justice, the ITAT set aside the orders and remanded the case for fresh verification of bank statements, affidavits, and supporting documents, allowing the appeal partly for statistical purposes.

Unsecured Loan Identity, Genuineness, and Creditworthiness Proved by Audited Financials: ITAT Upholds Deletion of Addition

Deputy commissioner of Income Tax Jaipur vs Samarth Lifestyle Retailing CITATION: 2025 TAXSCAN (ITAT) 2029

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s decision deleting an addition of ₹53,20,833 made under Section 68 and disallowance of interest under Section 36(1)(iii), holding that the assessee, Samarth Lifestyle Retailing Pvt. Ltd., had duly proved the identity, genuineness, and creditworthiness of the unsecured loan of ₹50,00,000 received from Survaas Homes Pvt. Ltd. The assessee had furnished the lender’s PAN, address, loan confirmation, and declared that the transaction was through banking channels, while the lender’s audited financials reflected substantial turnover and profit, demonstrating capacity to lend.

The Tribunal observed that the department could not show that the financial statements relied on by the CIT(A) were new or unavailable to the AO. Finding that the CIT(A)’s conclusion was based on verified audited data proving the lender’s financial strength, the ITAT found no reason to interfere and dismissed the department’s appeal, confirming the deletion of both the loan addition and related interest disallowance.

Late ESI Contribution Deposited Before ITR Due Date: ITAT Upholds Deletion of Disallowance

Deputy commissioner of Income Tax Jaipur vs Samarth Lifestyle Retailing Pvt. Ltd. CITATION: 2025 TAXSCAN (ITAT) 2029

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) upheld the deletion of an addition made under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act for delayed deposit of ₹1,46,390 towards employees’ ESI contribution. The assessee, Samarth Lifestyle Retailing Pvt. Ltd., contended that though the payment was made after the statutory due date, it was deposited before the due date for filing the return under Section 139(1), relying on the ESI notification and judicial precedents supporting such allowance.

The Tribunal, comprising Gagan Goyal (Accountant Member) and Narinder Kumar (Judicial Member), upheld the CIT(A)’s finding that the contribution paid before the return filing due date is allowable as a deduction, consistent with settled legal precedents, including those of the jurisdictional High Court. Observing that the department failed to rebut the CIT(A)’s findings or substantiate the AO’s view, the ITAT dismissed the department’s appeal and confirmed the deletion of the disallowance.

Reassessment Notice beyond 3 years Requires Mandatory Approval from PCCIT: ITAT Quashes Notice against Barclays

ACIT vs Barclays Execution Services Limited CITATION: 2025 TAXSCAN (ITAT) 2033

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld the order of the CIT(A) quashing reassessment proceedings against Barclays Execution Services Ltd., holding that the Assessing Officer (AO) failed to obtain approval from the correct “specified authority” under Section 151(ii) of the Income Tax Act. The AO had initiated reassessment based on information about large remittances to non-residents without TDS and obtained approval from the Commissioner of Income Tax (CIT) before issuing notice under Section 148. The CIT(A) held that since the notice was issued after three years from the end of AY 2017–18, approval should have been obtained from the Principal Chief Commissioner or Chief Commissioner, not the CIT, rendering the proceedings void ab initio.

The Tribunal, comprising Amit Shukla (Judicial Member) and Prabhash Shankar (Accountant Member), affirmed that non-compliance with Section 151(ii) went to the root of jurisdiction. Relying on the Supreme Court’s ruling in Union of India v. Rajeev Bansal (2024) and the Bombay High Court’s decision in Holiday Developers (P) Ltd. v. ITO (2024), it held that the AO’s approval from the wrong authority invalidated the reassessment notice and subsequent order. Accordingly, the ITAT dismissed the Revenue’s appeal.

TDS Mismatch on Commission Income Compared to Form 26AS: ITAT Upholds Deletion of ₹2.16 Crore Addition citing Audited Books

Deputy commissioner of Income Tax Jaipur vs Samarth Lifestyle Retailing CITATION: 2025 TAXSCAN (ITAT) 2029

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s deletion of an addition of ₹2,16,27,822 made under Section 69A of the Income Tax Act against Samarth Lifestyle Retailing Pvt. Ltd., arising from a mismatch between income reported in the books and figures in Form 26AS. The assessee had provided a detailed reconciliation showing that all receipts were recorded under “Commission and other income” and “Rent and CAM income” in the audited financials, explaining that discrepancies arose due to reporting errors by deductors under incorrect TDS sections.

The Tribunal, comprising Gagan Goyal (Accountant Member) and Narinder Kumar (Judicial Member), held that the Assessing Officer erred in making an addition merely based on mechanical mismatches without considering the audited records and explanations. It observed that when receipts are properly recorded and explained in the books of account, invoking Section 69A for unexplained money is unjustified. Accordingly, the ITAT dismissed the Revenue’s appeal and confirmed the deletion of the addition.

Bona Fide and Debatable Claims No Ground for Penalty: ITAT Upholds Deletion of ₹271(1)(c) Levy on New India Assurance

DCIT vs The New India Assurance Co. Ltd. CITATION: 2025 TAXSCAN (ITAT) 2031

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal against the deletion of penalty under Section 271(1)(c) of the Income Tax Act imposed on The New India Assurance Co. Ltd. for AY 2004–05. The Assessing Officer had levied the penalty following disallowances made under Section 44 read with Rule 5 relating to pension, gratuity, and other income adjustments, alleging furnishing of inaccurate particulars. The insurer contended that all particulars were fully disclosed and the disallowances arose from a bona fide and debatable interpretation of special provisions governing insurance companies, noting that the Bombay High Court had already admitted a substantial question of law in the quantum appeal.

The Tribunal, comprising Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member), held that the penalty was unjustified as there was no concealment or misrepresentation of income, and the additions arose solely from interpretational differences. Relying on Tata AIG General Insurance Co. Ltd. v. DCIT (2020), it observed that such disputes under Section 44 and Rule 5 are inherently debatable and that literal interpretation could lead to double taxation. The ITAT reiterated that Section 271(1)(c) applies only to deliberate concealment or false reporting, not to bona fide legal claims, and accordingly dismissed the Revenue’s appeal.

Denial of Exemption u/s 10(23C) (via) Due to Mismatch in Registration Details: ITAT Set Aside CIT(A) Order

Akshat Education and Charitable Trust vs The Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2023

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) set aside the order of the CIT(A) and remanded the case of Akshat Education and Charitable Trust for fresh adjudication, where exemption under Section 10(23C) (via) of the Income Tax Act was denied due to a mismatch in registration details. The trust, engaged in educational activities, had filed its return declaring nil income, but the CPC, Bengaluru, processed it under Section 143(1) treating gross receipts as taxable. Despite the assessee’s rectification request highlighting a clerical error in the ITR, the CPC rejected it without proper consideration.

The Tribunal, comprising Dr. B.R.R. Kumar (Vice President) and Suchitra Kamble (Judicial Member), observed that the CIT(A) dismissed the appeal on an irrelevant ground related to Form 10B/10BB instead of addressing the core issue of registration mismatch. Holding that the matter was not properly examined, the ITAT remanded it to the CIT(A) for de novo adjudication, directing verification of the rectification request and reassessment of the exemption claim after giving the assessee a fair hearing. The appeal was thus allowed for statistical purposes.

Deduction u/s 80G & 80GGA If Clubbed in Computation and Not in ITR Form Can be Allowed with Verification: ITAT Rules for TATA

Tata Education Trust vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2025

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer to allow Tata Education Trust’s charitable deduction claims under Sections 80G and 80GGA of the Income Tax Act, provided the donations are factually verified. The Assessing Officer had disallowed the Section 80GGA claim on the ground that it was not separately made in the return of income, and the CIT(A) upheld this view. The assessee explained that the ITR-5 form did not have a distinct column for 80GGA, forcing the clubbing of both deductions in the computation of total income.

The Tribunal, comprising Saktijit Dey (Vice President) and Narendra Kumar Billaiya (Accountant Member), held that the claim could not be denied on mere technical grounds when all supporting evidence was furnished. Relying on the precedent set in ACIT v. Nawajbhai Ratan Tata Trust, the ITAT recognized the genuine difficulty arising from the ITR form’s design and remanded the matter to the AO for factual verification of the donations. Accordingly, the appeal was allowed in favour of the assessee.

Police Canteen Transactions with Members Not Business Activity, No Audit Required u/s 44AB: ITAT

Commissioner of Police Coimbatore City Tamilnadu Police Canteen vs ITO CITATION: 2025 TAXSCAN (ITAT) 2016

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that transactions of the Coimbatore City Police Canteen with its members are governed by the principle of mutuality and do not amount to “business activity” under the Income Tax Act, 1961. The canteen, established by the State Government to supply goods to police personnel at cost price, had filed a nil return, but the Assessing Officer imposed a ₹1.5 lakh penalty under Section 271B for non-filing of a tax audit report despite accepting that its income was exempt on mutuality.

The Tribunal, relying on judicial precedents including Joint Commercial Tax Officer v. Young Men’s Indian Association (SC) and Koramangala Club v. ITO (Karnataka HC), held that once mutuality is established, Section 44AB does not apply since there is no “business” or “profession.” Observing that all transactions were confined to members and lacked any profit motive, the ITAT set aside the orders of the AO and CIT(A) and directed deletion of the penalty.

ITAT Deletes ₹444 Crore TP Adjustment on Netflix India, Rules Company is a Limited-Risk Distributor

Netflix Entertainment Services India LLP vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2018

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) deleted a ₹444.93 crore transfer pricing adjustment on Netflix Entertainment Services India LLP, holding that the company functioned only as a limited-risk distributor and not as a content or technology provider. The Transfer Pricing Officer had re-characterised Netflix India’s role, treating 57.12% of its revenue as royalty for use of content and technology, a view upheld by the Dispute Resolution Panel.

The ITAT found this re-characterisation contrary to the distribution agreement and lacking evidentiary support, noting that all intellectual property rights remained with Netflix’s parent entities. It held that the Transactional Net Margin Method (TNMM) adopted by the assessee was appropriate for its low-risk operations and that the “Other Method” applied by the TPO had no legal or economic basis. Accordingly, the Tribunal deleted the entire adjustment and partly allowed Netflix India’s appeal.

Incomplete Verification of Merger-Linked Research and Development Spending: ITAT Directs Fresh Examination of Eligibility

Intas Biopharmaceuticals Ltd. vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2037

The Ahmedabad Bench of the ITAT directed a fresh examination of Intas Biopharmaceuticals Ltd.’s R&D deductions claimed under Section 35(2AB) of the Income Tax Act. The company had claimed ₹3.37 crore under Section 35 and ₹87.66 lakh as weighted deduction for R&D expenses, which were partly disallowed by the AO on the ground that certain expenditures were not approved by the DSIR and that no reconciliation was provided for merger-related adjustments with Indus Biotherapeutics Ltd. The CIT(A) upheld the disallowance, citing lack of adequate documentation.

Before the Tribunal, the assessee argued that all expenses were incurred for approved R&D activities and that the DSIR approval was valid for the relevant year. Observing that both the AO and CIT(A) failed to verify key factual details, particularly reconciliation of R&D expenses post-merger and corresponding DSIR approvals, the Tribunal remanded the matter for fresh examination. It directed the AO to verify DSIR approvals and merger-linked records, holding that genuine R&D expenditure should not be disallowed merely for procedural lapses.

Delhi HC Sets Aside ITAT Order, Holds "Fit Case" Statement Sufficient for Valid Approval u/s 151 of Income Tax Act

PR. COMMISSIONER OF INCOME TAX vs M/S AGROHA FINCAP LTD CITATION: 2025 TAXSCAN (HC) 2237

The Delhi High Court set aside an ITAT order that had quashed reassessment proceedings against M/s Agroha FinCap Ltd., holding that the approval stating “Yes, I am convinced it is a fit case for reopening of assessment” under Section 151 of the Income Tax Act was valid. The reassessment had been initiated based on information indicating accommodation entries of ₹25 lakh from the S.K. Jain group, which the Assessing Officer treated as unexplained credit under Section 68. The ITAT had ruled the approval as mechanical, relying on N.C. Cables Ltd., but the Revenue challenged this finding.

The Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar clarified that unlike the N.C. Cables case, which involved a mere “approved” remark, the present approval reflected the required satisfaction under Section 151. Relying on PCIT v. Meenakshi Overseas Pvt. Ltd., the Court held that such language suffices to show due application of mind and procedural compliance. Accordingly, the High Court allowed the Revenue’s appeal and decided the issue in its favor.

PVR Ltd. Wins Tax Battle: ITAT Upholds Capital Receipt Status of Subsidies, deletes disallowances on Expenses & MAT Additions

DCIT vs PVR Ltd CITATION: 2025 TAXSCAN (ITAT) 2038

The Delhi Bench of the ITAT upheld the CIT(A)’s order deleting various additions made against PVR Ltd. for AYs 2011–12 and 2013–14, dismissing the Revenue’s appeals. The Tribunal affirmed that the entertainment tax subsidy constituted a capital receipt and that expenses on leasehold improvements were allowable, noting these issues were already settled in PVR’s favor by prior ITAT orders and the Delhi High Court. It also upheld the restriction of disallowance under Section 14A only to investments yielding exempt income, following Era Infrastructure (India) Ltd., and held that borrowed funds were not linked to current investments.

The Tribunal further rejected the Revenue’s appeal on disallowance of bank charges under Section 40(a)(ia), relying on CBDT Circular No. 56/2012 and the Delhi High Court’s ruling in Make My Trip India (P.) Ltd., holding that no TDS was deductible. Additions to book profit under Section 115JB for gratuity, leave encashment, and bonus were also deleted as they were ascertained liabilities, and the notional Section 14A disallowance for MAT was disallowed. Finding the CIT(A)’s order reasoned and supported by precedent, the ITAT dismissed all Revenue appeals and rendered the assessee’s cross-objections academic.

S. 68 Applies to Cash Credits in Books Even under Presumptive Tax: ITAT Deletes Ad Hoc Profit Addition

Shri Kishan Kumar Gupta Vs. The I.T.O CITATION: 2025 TAXSCAN (ITAT) 2048

The Delhi Bench of the ITAT held that Section 68 of the Income Tax Act applies even when income is declared under the presumptive taxation scheme of Section 44AD, if the assessee maintains a cash book or other records. The assessee, a trader in vegetables and agro products, had declared ₹3.92 lakh under Section 44AD on turnover of ₹52.8 lakh but faced additions after the AO found unexplained cash deposits of ₹1.58 crore. Rejecting the assessee’s claim that Section 68 was inapplicable to presumptive income, the Tribunal noted that the assessee had voluntarily maintained a cash book and financial statements, making Section 68 applicable to any unexplained cash credits recorded therein.

On facts, the Tribunal found the assessee’s explanation for the ₹78 lakh deposit—purportedly from family savings, advances, and his late father’s funds—unsupported by evidence and sustained the addition as unexplained cash credit. However, it deleted the ad hoc profit addition of ₹2.25 lakh, considering the possibility that some deposits belonged to the assessee’s father. The appeal was thus partly allowed, with the main addition under Section 68 upheld.

TATA Communications Failed to Prove Fulfillment of Conditions for Not Being Treated as Default Taxpayer u/s 201: ITAT Remands Matter

Deputy Commissioner of Income Tax (OSD)(TDS) vs Tata Communications Transformation Services Limited CITATION: 2025 TAXSCAN (ITAT) 2026

The Mumbai Bench of the ITAT set aside the CIT(A)’s order in the case of Tata Communications Transformation Services Ltd. and remanded the matter to the Assessing Officer (AO) to verify compliance with Section 201 of the Income Tax Act regarding non-deduction of TDS on year-end provisions of ₹90.89 crore. The assessee had disallowed 30% of the amount under Section 40(a)(ia) but was still treated by the AO as an 'assessee-in-default' under Section 201(1) for not deducting TDS on the entire sum, resulting in a demand of ₹2.58 crore including interest. The CIT(A) had relied on Pfizer Ltd. v. ITO (TDS) to delete the demand, holding that once disallowance under Section 40(a)(ia) was made, a TDS default could not be levied again.

The Tribunal, however, held that the operation of Section 201 is independent of Section 40(a)(ia) and distinguished the case from Pfizer Ltd., since the assessee had disallowed only 30% of the provision and claimed deduction for the balance 70%. Observing that the assessee had not proved fulfillment of conditions under Section 201(1), the ITAT remanded the matter to the AO, granting the assessee an opportunity to furnish evidence of compliance. The Revenue’s appeal was thus allowed for statistical purposes.

ITAT Decision to uphold Higher 22% LTCG u/s 115BAA on Domestic Company raises Eyebrows

Maharishi Education Corporation P. Ltd vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2040

The Delhi Bench of the ITAT upheld that domestic companies opting for the concessional tax regime under Section 115BAA are liable to pay a uniform tax rate of 22% on their total income, including Long-Term Capital Gains (LTCG). Maharishi Education Corporation Pvt. Ltd. had argued that LTCG should be taxed separately at 20% under Section 112, but the Assessing Officer recomputed the tax at 22% in line with Section 115BAA, creating a demand of ₹59,973.

The Tribunal, led by Judicial Member Shri Vikas Awasthy, held that once a company exercises the option under Section 115BAA, the concessional rate applies to all income components, including LTCG. It affirmed that the AO’s computation was correct and in accordance with law, ruling that companies under Section 115BAA cannot claim the lower 20% rate under Section 112. The appeal was accordingly dismissed.

Intra-Group Services Not Stewardship: ITAT Deletes ₹28.74 Cr TP Adjustment for Corteva Agriscience

Corteva Agriscience India Pvt. Ltd. vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2045

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) granted major relief to Corteva Agriscience India Pvt. Ltd. by deleting a ₹28.74 crore transfer pricing adjustment on intra-group support services. The company had availed services such as marketing, accounting, HR, and logistics from its Associated Enterprises and benchmarked them using the Transactional Net Margin Method (TNMM). However, the Transfer Pricing Officer (TPO) rejected this approach, applied the Comparable Uncontrolled Price (CUP) method, and determined the Arm’s Length Price at nil, alleging lack of tangible benefits. The CIT(A) partly upheld the adjustment, disallowing 20% of the expenses as stewardship services.

On appeal, the ITAT found that Corteva had provided extensive evidence including cost-benefit analyses, billing agreements, and communications proving actual receipt and commercial benefit of services. It held that the TPO’s rejection of TNMM and fixation of ALP at nil was unjustified and contrary to law, emphasizing that tax authorities cannot disregard the taxpayer’s chosen method or substitute commercial judgment with subjective opinion. The Tribunal thus deleted the entire addition and upheld the payments for intra-group services as being at arm’s length.

ITAT Holds Bona Fide Belief and Lack of Technical Knowledge Constitute Sufficient Cause, Condones 972-Day Delay by 71-Year-Old Assessee

Mr. Kirtikumar Champaklal Bhimani vs Income Tax Officer, Ward 25(1)(1) CITATION: 2025 TAXSCAN (ITAT) 2042

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) condoned a delay of 972 days in filing an appeal by 71-year-old taxpayer Mr. Kirtikumar Champaklal Bhimani, holding that the delay was due to a bona fide belief and lack of technical knowledge about online procedures. The CIT(A) had earlier dismissed the appeal as time-barred against an intimation under Section 143(1) of the Income Tax Act, which added rental income twice, resulting in double taxation. The assessee explained that he had filed a disagreement response online, believed the issue was resolved upon receiving refunds for later years, and only discovered the pending demand in March 2025, after which he promptly filed an appeal.

The Tribunal, comprising Rahul Chaudhary (Judicial Member) and Vikram Singh Yadav (Accountant Member), accepted the explanation as reasonable, considering the assessee’s age and limited familiarity with electronic systems. It held that he was prevented by sufficient cause from filing the appeal on time and that the CIT(A) erred in dismissing it without granting a fair hearing. The ITAT accordingly condoned the delay, set aside the CIT(A)’s order, and directed that the appeal be adjudicated on merits after providing due opportunity of hearing.

Delayed EPF/ESIC Payments Not Deductible: ITAT Upholds Rs 12.91 Lakh Disallowance u/s 36(1)(va) r.w.s 43B

Gurdev Singh vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2043

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the appeal of Gurdev Singh, upholding the disallowance of ₹12.91 lakh under Section 36(1)(va) read with Section 43B of the Income Tax Act for delayed deposit of employee contributions to EPF and ESIC for AY 2020–21. The assessee argued that the payments, though made after the statutory due dates, were deposited before filing the return under Section 139(1) and thus should be deductible. He also contended that the disallowance was invalid under Section 143(1), as the Auditor’s Report had not recommended any such adjustment.

The Tribunal, however, held that the Supreme Court’s ruling in Checkmate Services Pvt. Ltd. vs. CIT applies universally, clarifying that employee contributions deposited after the due dates under the respective Acts are not deductible, irrespective of whether the assessment is under Section 143(1) or 143(3). Emphasizing strict adherence to statutory timelines, the ITAT found no merit in the assessee’s arguments and confirmed the disallowance made by the CPC.

Time-Barred and Vague Satisfaction Note: ITAT Quashes Assessments Beyond Six-Year Limit u/s 153C

3D Tradex P.Ltd vs ADIT CITATION: 2025 TAXSCAN (ITAT) 2046

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed reassessment proceedings initiated under Section 153C of the Income Tax Act against 3D Tradex Pvt. Ltd. for AYs 2010–11 to 2015–16, holding them barred by limitation and based on an invalid satisfaction note. The AO had issued notices for six preceding years based on a consolidated satisfaction note dated 23 March 2018, but the Tribunal held that the amendment extending the limitation period to ten years was prospective from AY 2018–19 and could not apply to earlier searches. Accordingly, the assessments for AYs 2010–11 and 2011–12 were declared time-barred.

For AYs 2012–13 to 2015–16, the Tribunal found that the satisfaction note was vague, failing to identify any incriminating material specific to each year, thus invalidating jurisdiction under Section 153C. Relying on precedents in Dev Technofab Ltd. and Sakham Commodities Ltd., the ITAT ruled that such generic satisfaction does not meet statutory requirements. As the foundational assessments were void, the related Revenue appeal against the deletion of ₹11.95 crore under Sections 68 and 69C for AY 2010–11 was dismissed. The Tribunal allowed all six appeals of the assessee and set aside the entire set of assessments as legally unsustainable.

Leave Encashment Exemption u/s 10(10AA): ITAT Applies Retrospective ₹25 Lakh Limit Notified by CBDT

Chandra Prakash Vashistha vs The ITO CITATION: 2025 TAXSCAN (ITAT) 2039

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal of Chandra Prakash Vashistha, a retired State Bank of India employee, holding that the revised ₹25 lakh exemption limit for leave encashment under Section 10(10AA) of the Income Tax Act applies retrospectively as per the CBDT notification dated 24 May 2023. The assessee had received ₹13.05 lakh as leave encashment, but the Assessing Officer and CIT(A) denied full exemption. The Tribunal condoned a 959-day delay in filing the appeal, accepting the assessee’s explanation that the delay was due to consultations with multiple tax experts before proceeding legally.

The Bench comprising Dr. S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayanbhai (Accountant Member) observed that the CBDT notification clearly extended the benefit to non-government employees and was undisputed by the Department. Setting aside the orders of the lower authorities, the ITAT directed that the revised ₹25 lakh exemption limit be applied, granting full relief to the retired bank employee.

Absence of Proof on Interest-Free Funding for Exempt Investments: ITAT Remands Matter for Verification

Intas Biopharmaceuticals Ltd vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2037

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) remanded the case of Intas Biopharmaceuticals Ltd. for fresh verification of the ₹28.36 lakh disallowance made under Section 14A read with Rule 8D. During scrutiny, the AO observed that the company had ₹24.5 crore in investments but no expenditure was attributed to earning exempt income. While the assessee claimed the investments were made entirely from its ₹350 crore interest-free funds, it failed to produce supporting evidence such as fund-flow or bank statements. The CIT(A) upheld the disallowance, holding that Section 14A applies even if no exempt income is earned in a particular year.

Before the Tribunal, the assessee argued that the investments were strategic and funded from internal accruals, relying on various High Court rulings to contest the disallowance. However, the ITAT observed that neither the AO nor the CIT(A) had properly verified the source of funds. The Bench, comprising Suchithra Kamble (Judicial Member) and Makarand Vasant Mahadeokar (Accountant Member), directed the AO to re-examine the fund flow, nature of investments, and applicability of Rule 8D based on the evidence and judicial precedents. The appeal was partly allowed for statistical purposes.

Delhi HC Sets aside Income Tax Reassessment Notice against Michael and Susan Dell Foundation

MICHAEL AND SUSAN DELL FOUNDATION vs ASSISTANT/ DEPUTY COMMISSIONER OF INCOME TAX CIRCLE INTERNATIONAL TAXATION 2(2)(1) NEW & ANR. CITATION: 2025 TAXSCAN (HC) 2258

The Delhi High Court set aside a reassessment notice issued against the Michael and Susan Dell Foundation for AY 2019–20, directing the tax authorities to reconsider the matter after properly hearing the foundation’s explanation regarding a foreign remittance of about $90,000. The foundation argued that the remitted amount of ₹1.87 crore represented the closing balance of its Liaison Office’s bank account, which was already disclosed and accepted in an earlier assessment order dated 29.03.2024. It contended that the reassessment proceedings initiated under Sections 148A(1), 148A(3), and 148 were issued without considering its prior explanations.

A division bench of Justice V. Kameswar Rao and Justice Vinod Kumar observed that the authorities had failed to address the foundation’s submissions and that the reassessment order lacked due consideration. Emphasizing the taxpayer’s right to be heard, the Court set aside the impugned order and notice, remanding the matter to the Assessing Officer to pass a fresh, reasoned order after granting the foundation an opportunity for personal hearing. The Court directed that the entire process be completed within six weeks.

Possible Double Disallowance of Bonus and Interest u/s 43B: ITAT Remands for Verification to Prevent Duplication

Intas Biopharmaceuticals Ltd vs The Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2037

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) directed verification of possible duplication in the disallowance of unpaid bonus and interest under Section 43B for AY 2012–13 in the case of Intas Biopharmaceuticals Ltd. The Assessing Officer had disallowed ₹31.38 lakh for unpaid liabilities not cleared within the due date under Section 139(1). The assessee contended that these amounts were already disallowed in earlier years when they first accrued and were not claimed again, arguing that a fresh disallowance amounted to duplication. However, the CIT(A) upheld the AO’s order, citing lack of documentary proof from earlier years.

The Tribunal held that the issue required factual reconciliation of past and current disallowances, as the assessee’s claim of duplication was plausible but needed verification of ledgers, audit reports, and prior assessments. It remanded the matter to the AO to examine whether the same liabilities had been previously disallowed, directing that relief be granted if duplication was found. The appeal was partly allowed for statistical purposes, with the ITAT stressing that Section 43B should be applied fairly to avoid repetitive disallowance of the same expenditure.

Relief to Sacred Heart Church u/s 11: ITAT rules Form 10B filing Directory, Condones Delay of 39 Days Filing Form

Sacred Heart Church vs ITO CITATION: 2025 TAXSCAN (ITAT) 2041

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) granted relief to Sacred Heart Church, holding that a short delay of 39 days in filing Form 10B cannot justify denial of exemption under Section 11 of the Income Tax Act. The trust, registered under the Maharashtra Public Trust Act and engaged in charitable and religious activities, had filed its return and audit report on 14 November 2024, beyond the due date of 7 October 2024. The CPC and CIT(A) had denied exemption under Section 11 citing the delay.

The Tribunal observed that the filing requirement for Form 10B is directory, not mandatory, and a minor delay should not defeat substantive exemption claims. Relying on similar judicial precedents, it held that the lapse was procedural and condonable, directing the Assessing Officer to verify the facts and grant relief under Section 11. The appeal was accordingly allowed for statistical purposes.

Presumption u/s 292C of Income Tax is Rebuttable and Not Conclusive: ITAT Deletes ₹18 Lakh Addition

Krishna Gopal Saraf vs The A.C.I.T CITATION: 2025 TAXSCAN (ITAT) 2049

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that the presumption under Section 292C of the Income Tax Act regarding ownership and truth of documents found during a search is rebuttable and cannot, by itself, establish undisclosed income. The case involved Krishna Gopal Saraf, a salaried employee of Sarthak Vanijya India Ltd, whose premises were searched along with the Bindal Group. Additions were made for unexplained credit card payments and ₹18 lakh allegedly withdrawn based on a loose paper found during the search. The ITAT upheld the validity of the assessment process but found that the AO and CIT(A) failed to properly verify the explanations and supporting evidence regarding credit card payments.

Regarding the ₹18 lakh addition, the Tribunal observed that the AO relied solely on the presumption under Section 292C without corroborating evidence. Since the assessee denied authorship of the document and explained that it related to another employee, the burden shifted to the AO to verify this claim, which was not done. Holding that the presumption was effectively rebutted, the ITAT deleted the addition and remanded the credit card expenditure issue for fresh verification. Both appeals for AYs 2013–14 and 2014–15 were thus partly allowed.

ITAT Partly Deletes Addition of ₹10 Lakh on Cash Deposits from Agricultural Income u/s 69A

Sher Singh vs The ITO CITATION: 2025 TAXSCAN (ITAT) 2052

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the appeal of Sher Singh, an agriculturist from Sangrur, by deleting ₹10,00,000 out of the total ₹12,25,600 addition made under Section 69A of the Income Tax Act. The Assessing Officer had treated ₹14,75,600 in cash deposits during FY 2016–17, including the demonetisation period, as unexplained money. The assessee explained that the deposits were sourced from agricultural and milk income and included funds belonging to his wife, supported by affidavits, bank statements, Jamabandi records, and a cash-flow statement. The CIT(A) granted partial relief of ₹2,50,000, which led to the present appeal.

The Tribunal observed that the assessee’s declared agricultural income of ₹7,00,000 and milk income of ₹2,47,700 reasonably aligned with the cash deposits, and the Revenue failed to produce evidence disproving the explanation. However, due to incomplete corroboration such as crop sale bills or livestock records, the ITAT held that not all deposits were fully substantiated. It, therefore, restricted the unexplained amount to ₹2,50,000 and deleted the balance addition of ₹10,00,000, partly allowing the appeal.

Prior Year Share Receipts Not Taxable in Current Year: ITAT upholds Investor Credibility

Ekalavya Gift Gaileries Private Limited vs ITO CITATION: 2025 TAXSCAN (ITAT) 2047

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeals of Ekalavya Gift Galleries Pvt. Ltd. for AYs 2016–17 and 2017–18, deleting additions of ₹99 lakh and ₹45 lakh made under Section 68 of the Income Tax Act. The Assessing Officer had treated the share capital and premium received as unexplained cash credits, alleging failure to prove the identity, creditworthiness, and genuineness of investors. The assessee produced extensive documentation, including incorporation certificates, audited financials, bank statements, ITRs, confirmations, and a share valuation report under Rule 11UA. Despite this, the AO and CIT(A) upheld the additions due to the non-production of investors in person.

The Tribunal held that the additions were unjustified as the share application money of ₹18 lakh for AY 2016–17 was received in earlier years and could not be taxed again. For AY 2017–18, the ITAT found that the investor company, Acquatic Exim Pvt. Ltd., had sufficient financial strength, and the assessee had proved all three conditions under Section 68. Citing precedents such as PCIT v. Agson Global (P.) Ltd. and People Care Hospitals Pvt. Ltd., the Bench ruled that documentary evidence cannot be ignored based on mere suspicion. Accordingly, both additions were deleted, and the appeals were fully allowed.

ITAT Deletes Penalties u/s 271(1)(c) for Four Years Citing Vague and Defective IT Notice

Late Mr. Davinder Kumar vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2044

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed penalties imposed on Davinder Kumar under Section 271(1)(c) of the Income Tax Act for AYs 2008–09 to 2011–12, holding that the penalty notices were defective and invalid. The assessee argued that the notices under Section 274 were issued in a pre-printed omnibus format without specifying whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal admitted this additional legal ground, noting that the notices were vague and failed to meet statutory requirements.

Relying on the Mohd. Farhan A. Shaikh v. DCIT ruling, the Bench observed that such non-specific, pre-printed notices invalidate penalty proceedings. It further noted that even the assessment orders did not clarify the precise charge for which penalties were levied. Since the facts and defects in notices were identical across all four years, the Tribunal applied the same reasoning mutatis mutandis and quashed the penalties for AYs 2008–09 to 2011–12, holding that other grounds became academic.

No Incriminating Material: ITAT Quashes Search Assessments over Mechanical 153D Approval, Deletes Additions u/s 153A

Shri Divjot Singh Mainee vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2050

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed assessments framed under Section 153A against Divjot Singh Mainee, holding that no addition can be made for concluded years without incriminating material found during the search. The AO had made additions of ₹10.13 lakh and ₹3.63 lakh for AYs 2013–14 and 2014–15 based on third-party statements and post-search inquiries, not on seized material from the assessee. Citing the Supreme Court’s ruling in Pr. CIT v. Abhisar Buildwell (P.) Ltd. and Delhi High Court precedents, the Tribunal reaffirmed that such additions in unabated assessments are impermissible unless supported by evidence discovered in the search itself.

The ITAT also found that the approval granted by the Additional CIT under Section 153D was mechanical, as it was issued in bulk within three days without independent verification. Referring to rulings such as PCIT v. Anuj Bansal and MDLR Hotels (P) Ltd., the Bench held that perfunctory approvals defeat the intent of supervisory oversight mandated under Section 153D. Finding both jurisdictional and procedural lapses, the Tribunal invalidated the search assessments and deleted all additions, fully allowing the assessee’s appeals for AYs 2013–14 and 2014–15.

Capital Market Transactions through Banking Channels Accepted as Genuine: ITAT Deletes Additions on Share Transactions under Income Tax Act

Suresh Maheshwari vs The DCIT CITATION: 2025 TAXSCAN (ITAT) 2056

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) held that capital market transactions executed through registered intermediaries and verifiable banking channels cannot be treated as non-genuine merely based on a generic Investigation Wing report. The assessee, Suresh Maheshwari, a Chartered Accountant, had claimed exemption of ₹85.05 lakh as Long-Term Capital Gain under Section 10(38) from the sale of Pine Animation Ltd. shares. The AO denied the exemption citing the scrip’s classification as a penny stock, but the Tribunal noted that all transactions were duly supported by Demat statements, contract notes, and banking records.

The ITAT observed that no independent enquiry was conducted by the AO to link the assessee to any alleged price manipulation and that SEBI’s final order had cleared entities associated with the scrip of wrongdoing. Relying on ITO v. Manisha Narpatkumar Chopra (2024), the Bench held that documented, verifiable share transactions could not be discredited on suspicion alone. It, therefore, deleted the additions on both capital gains and commission, allowing the appeal in full.

Partial Relief Granted on Cash Deposits During Demonetisation: ITAT Restricts Addition to ₹6,000 under Income Tax

Abdul Farooq vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2051

The Amritsar Bench of the Income Tax Appellate Tribunal (ITAT) granted partial relief to Abdul Farooq, proprietor of Chowdhary Communications, by restricting the addition of cash deposits made during the demonetisation period to ₹6,000. The case arose from deposits of ₹15.59 lakh made in two bank accounts during November–December 2016, of which ₹4.94 lakh were in specified bank notes. The Assessing Officer had added ₹3.88 lakh as unexplained money under Section 69A, which was upheld by the CIT(A).

On appeal, the ITAT noted that the Government’s Gazette Notifications allowed limited use of old currency only up to December 15, 2016, and that deposits verified till November 13, 2016, were within the permissible period. However, ₹6,000 deposited between December 17 and 21, 2016, fell outside this window. Holding that only those deposits were beyond the legal limit, the Tribunal restricted the addition to ₹6,000 and deleted the balance, granting consequential relief to the assessee.

ESOP Cost Rightly Allowed as Business Expenditure: ITAT Sets Aside PCIT Order against Nuvama Wealth after Finding Proper AO Inquiry

Nuvama Wealth Management Limited vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2053

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) set aside the revisional order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, holding that the Assessing Officer (AO) had conducted a detailed inquiry before allowing Nuvama Wealth Management Ltd. (formerly Edelweiss Securities Ltd.) its claim of ESOP expenditure under Section 37(1). The Tribunal noted that the AO had issued multiple notices, examined supporting documents, and accepted the claim after due verification based on legal precedents, including Biocon Ltd. v. DCIT (2013).

The Bench comprising Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) observed that the PCIT’s assumption of “lack of enquiry” and allegation of ₹58.02 crore recovery were factually and legally misplaced, as the amount merely represented TDS funding from the holding company. Concluding that the assessment order reflected due application of mind and was neither erroneous nor prejudicial to Revenue’s interests, the Tribunal quashed the PCIT’s revisional order and restored the original assessment under Section 143(3) read with Section 144B.

Income Cannot be Taxed on Current Year When Sales Relates to Other AYs: ITAT Deletes Addition on Mismatch of Sales

Silver & Arts Palace vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2057

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹8,87,104 made on account of an alleged mismatch of sales for A.Y. 2021-22, holding that the sales in question pertained to other assessment years and thus could not be taxed in the current year. During a search, the Assessing Officer (AO) found digital sheets indicating unrecorded cash sales and applied a gross profit rate of 30.90% on unmatched sales of ₹28,70,887, which the CIT(A) later confirmed.

On appeal, the ITAT observed that the differences arose only due to minor deductions (VAT/GST, bank charges) or slight delays in recording sales. Upon examining the records, the Tribunal found that the alleged sales related to years other than A.Y. 2021-22 and reiterated that each assessment year is independent. Accordingly, the addition was held untenable, and the assessee’s appeal was allowed.

Taxpayer Acted as Middleman and Not Beneficiary for Forfeited Advance of Property: ITAT Deletes Addition u/s 56(2)(ix)

Smt. Saroj Devi Haldiya vs The ITO CITATION: 2025 TAXSCAN (ITAT) 2054

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹75,00,000 made under Section 56(2)(ix) of the Income Tax Act, holding that the assessee, Saroj Devi Haldiya, acted merely as a facilitator and not the beneficiary of the forfeited property advance. The assessee had paid ₹75,00,000 to Medical Design India Pvt. Ltd. on behalf of Dr. Anil Tambi to secure a disputed plot, which was later forfeited. She was subsequently reimbursed the same amount by Dr. Tambi’s company, Jagdish Health Care Pvt. Ltd.

The Tribunal observed that since the assessee neither owned the plot nor received the money as an advance for transfer of her own capital asset, the basic condition of Section 56(2)(ix) was not satisfied. It held that the forfeited sum, if taxable, should be considered in the hands of Medical Design India Pvt. Ltd., which actually retained the amount. Accordingly, the ITAT directed deletion of the ₹75,00,000 addition and allowed the assessee’s appeal.

Wrongful Assessment on Non-Existent Entity Invalid: ITAT Drops Section 69A Additions

Bombay Tyres vs Income-tax Officer CITATION: 2025 TAXSCAN (ITAT) 2055

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) deleted additions made under Section 69A of the Income Tax Act against Bombay Tyres, holding that the assessment was wrongly initiated using a PAN belonging to a non-existent entity. The Assessing Officer (AO) treated cash deposits of ₹3.18 crore as unexplained and made further notional profit additions, despite the assessee’s clarification that all transactions were recorded in the audited books of the proprietorship and duly taxed under the correct PAN.

The Tribunal, comprising Amit Shukla (Judicial Member) and Girish Agrawal (Accountant Member), observed that the AO proceeded without verifying facts and ignored clear evidence showing that the deposits were already taxed in the assessee’s hands. It held that taxing the same income again under an incorrect PAN was unjustified. Relying on bank confirmations, reconciliations, and past assessments, the ITAT directed the deletion of all additions and allowed the assessee’s appeal.

Deduction u/s 57 for Bank Charges allowable as it Relates to Interest Income: ITAT Allows Claim

Smt. Saroj Devi Haldiya vs The ITO CITATION: 2025 TAXSCAN (ITAT) 2054

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) allowed a deduction of ₹34,647 towards bank charges under Section 57 of the Income Tax Act, holding that such expenses were directly related to earning interest income. The assessee, Saroj Devi Haldiya, had declared interest income of ₹2,71,511 from savings accounts, FDRs, and RDs and claimed related bank transaction charges as deductions. The Assessing Officer and the CIT(A) disallowed the claim, citing lack of nexus and evidence.

The Tribunal, comprising Dr. S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member), observed that the expenses were incidental and necessary for maintaining the accounts that generated the taxable interest income. Since the expenditure was wholly and exclusively incurred for earning income chargeable under “Income from Other Sources,” the ITAT held the deduction allowable, overturned the lower authorities’ orders, and allowed the assessee’s appeal.

Cash commission Addition Based on Digital Data without Corroborative Evidence is Unsustainable

Silver & Arts Palace vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2057

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) deleted additions made by the Assessing Officer (AO) against Silver & Arts Palace, a partnership firm dealing in precious stones and jewelry, on account of alleged unaccounted cash commission expenditure. The AO had based the additions solely on digital data seized during a search under Section 132, interpreting entries in a digital sheet as evidence of cash commission payments. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the additions, prompting the assessee to approach the ITAT.

The Tribunal observed that the seized sheets were mere rough or “dumb” documents without names, payment details, or corroborative evidence linking them to actual transactions. It emphasized that loose papers or digital notings, without supporting material, cannot form the sole basis for income additions. Holding that the Revenue failed to substantiate its claims with independent evidence, the ITAT ruled that the additions were based on conjecture and directed the AO to delete them, allowing the assessee’s appeals.