ITAT Weekly Round-up

Rule 46A Error Warrants Re-Verification in Penny Stock Transactions Case: ITAT Puts Commission-Agent Defence Under Scanner

Income Tax Officer vs Deepak Govindbhai Gangani CITATION: 2025 TAXSCAN (ITAT) 2058

The Income Tax Appellate Tribunal, Mumbai (ITAT) ruled that the deletion of the addition relating to alleged unexplained investment arising from penny stock transactions cannot be sustained, as the first appellate authority had admitted affidavits and other material without adhering to the mandatory procedure prescribed under Rule 46A of the Income Tax Rules, 1963.

The two-member bench comprising Rahul Chaudhary, Judicial Member and Vikram Singh Yadav, Accountant Member opined that the CIT(A) accepted additional evidence without complying with Rule 46A(2) of the Income Tax Rules, 1963, which mandates recording reasons in writing for admission of such evidence.

The tribunal observed that the CIT(A) criticised the AO for not conducting enquiry but failed to carry out any independent verification while admitting and relying on affidavits. It was remarked that there is no clarity on enquiry in respect of the 81 persons named in the affidavit of Mr. Rathod and therefore, the decision of the CIT(A) suffered from procedural infirmity.

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) ruled that in the absence of any evidence demonstrating unaccounted cash movement, the additions towards alleged bogus purchases cannot be made in a search-based assessment, particularly where transactions reflect circular trading.

The tribunal restricted the addition to the profit element embedded in the purchases rather than treating the entire value as unexplained.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The bench comprising Judicial Member, Sandeep Gosain and Accountant Member, Omkareshwar Chidara upheld the findings of the CIT(A), observing that the Revenue failed to produce any proof of cash payments or undue financial benefit to the assessee arising from the transactions in question. The tribunal held that once the existence of sales was accepted and the rotation of goods was established, denying the purchases altogether was untenable.

Under-Invoicing Allegation Lacks Proof: ITAT Removes Cash Addition against Indo Count Industries u/s 153A

DCIT vs Indo Count Industries Ltd CITATION: 2025 TAXSCAN (ITAT) 2059

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ), held that a search-based assessment under Section 153A of the Income Tax Act, 1961 cannot sustain additions where no incriminating material is found to support the allegation of under-invoicing and receipt of unaccounted cash.

The bench of Judicial Member, Sandeep Gosain and Accountant Member, Omkareshwar Chidara observed that the search did not yield any incriminating evidence specifically relatable to the year under consideration. The statements relied upon were retracted soon after being recorded and no independent proof was produced by the Revenue to demonstrate that the assessee had earned cash income outside the books.

Further, the tribunal noted that the pendrive-based Excel sheet did not, by itself, establish the charge of unrecorded cash receipts and no reference to cash was decipherable from the data entries. The tribunal held that retracted statements, without documentary corroboration, could not form the sole basis for additions.

Business Loss Claim was Properly Examined during Income Tax Original Assessment: ITAT Quashes Revision Order

The bench of Judicial Member, Amit Shukla and Accountant Member, Girish Agrawal held that there was no lack of enquiry in respect of the issues covered under limited scrutiny. The Tribunal observed that the AO had specifically examined the claim of business loss and called for and reviewed relevant supporting evidence such as ledger extracts, bills, and vouchers.

It was ruled that since the deemed rental income issue was not part of limited scrutiny and therefore the PCIT could not expand its scope through revision proceedings. The Tribunal reiterated that for invoking Section 263, the PCIT must clearly establish that the order is both erroneous and prejudicial to the interest of the Revenue, and cannot merely proceed based on disagreement with the AO’s plausible view.

No Income Tax Leviable on Gift from Brother in Law: ITAT

The ITAT noted that the exemption under Section 56 does not hinge upon the existence of a valid gift deed but solely on the fact that the sum was received from a relative as defined in the Act. The assessee had provided bank statements proving the receipt of funds from his brother-in-law's account through normal banking channels, which was sufficient to establish the relationship.

The tribunal clarified that any query regarding the source of the funds would pertain to the donor (the brother-in-law) and could not be a basis to tax the recipient, as the specific exemption was applicable.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

71-Year-Old Senior Citizen Not Tech Savvy to Check E-mails and Income Tax Portal: ITAT grants Final Opportunity to Contest S. 69A Addition

No Misreporting, No Penalty: ITAT Deletes ₹7.40 Crore Levy u/s 270A on Gujarat Energy Development Agency

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has deleted the penalty of ₹7.40 crore imposed on Gujarat Energy Development Agency under Section 270A, holding that the assessee did not misreport income.

The Gujarat Energy Development Agency (GEDA), a registered charitable trust, faced a penalty of ₹7.40 crore under Section 270A of the Income Tax Act, 1961, for alleged misreporting of income in Assessment Year 2017-18.

Given the absence of misreporting and the plausible explanations provided by the assessee for the claimed deductions, the two-member bench of Sanjay Garg (Judicial Member) and Narendra Prasad Sinha (Accountant Member) held that the penalty imposed under Section 270A was legally unsustainable.

Business Loss on Wind Turbine Generators Capital in Nature: ITAT Upholds Disallowance of ₹10.42 Crore u/s 37

Gujarat Energy Development Agency vs Deputy Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2066

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) upheld the disallowance of ₹10.42 crore claimed by Gujarat Energy Development Agency on account of impairment of assets and abnormal loss. The tribunal held that these losses pertained to capital assets and, therefore, could not be claimed as revenue expenditure under Section 37.

The two-member bench of Sanjay Garg (Judicial Member) and Narendra Prasad Sinha (Accountant Member) examined the books, auditor notes, and statutory certificates. It concluded that the claimed amounts represented the written-down value of capital assets and related spares. As such, the disallowance by the Assessing Officer was upheld.

The tribunal clarified that while the assessee could adjust the written-down value in the block of assets to claim appropriate depreciation going forward, the current claim as a revenue deduction was not permissible under the Income Tax Act.

ITAT deletes ₹1.53 Crore Addition on Petrol Pump’s Demonetization Cash Deposits, citing Legal Acceptance of Old Notes

After examining the submissions and records, the two-member bench of Annapurna Gupta(Accountant Member) and Sanjay Garg (Judicial Member) concluded that there was no justification for the addition made by the lower authorities.

Upon reviewing the facts, the two-member bench comprising Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) found that the CIT(A) had correctly allowed partial relief. The Tribunal confirmed that the upfront collection of maintenance charges does not equate to immediate income for tax purposes.

Instead, only the portion corresponding to the current year’s services can be treated as taxable, while the balance should be matched to the period when the facilities and services are actually provided.

Revenue Recognition under POCM Upheld for Vacation Ownership Plans: ITAT Partly Allows Sterling Holiday’s Appeal

Sterling Holiday Resorts Ltd vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2068

In a recent ruling for the hospitality and vacation ownership sector, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld Sterling Holiday Resorts Ltd.’s use of the Percentage Completion Method (POCM) for recognising income from vacation ownership plans.

The two-member bench comprising Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) clarified that the AO cannot reject an accounting method that presents a true and fair view without evidence of income distortion.

Minor adjustments were remitted to the AO for verification, but the core principle of progressive revenue recognition was affirmed.

Draft Return Unrealistic, Books Absent: ITAT Deletes S.68 Additions, Estimates Liquor Firm’s Net Profit at 2.5% of Gross Sales

Raj Kumar & Co vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2070

The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, in for the Assessment Year 2017-18, partly allowed the appeal of the assessee, a partnership firm engaged in trading alcoholic liquor for a single financial year (FY 2016-17).

The appeal challenged the CIT(A)’s order, which had upheld additions made by the AO under Section 68, despite reducing the estimated net profits from the business.

Relying on comparable cases of similar liquor trading businesses in the state, the two-member bench comprising Manoj Kumar Aggarwal (Accountant Member) and Udayan Dasgupta (Judicial Member) held that a net profit rate of 2.5% of gross sales fairly reflected taxable business income.

The AO was directed to recompute total income using this estimate.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

ITAT grants Delta Air Lines Inc. exemption under Article 8 of India-USA DTAA for Code Sharing Transportation

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) granted Delta Air Lines Inc. tax exemption on the income earned through Code Sharing arrangements and use of third-party aircraft under Article 8 of the India-USA Double Taxation Avoidance Agreement (DTAA) for assessment years (A.Y.) 2007-08, 2011-12, 2012-13, and 2013-14.

The Bench clubbed and heard a total of four Appeals made by the assessee against the separate orders dated 04.06.2024 for the assessment years 2007-08, 2011-12, 2012-13, and 2013-14. The appeal for A.Y 2007-08 was treated as a Lead Case.

The two-member bench comprising Pawan Singh, Judicial Member and Girish Agarwal, Accountant Member, carefully examined and reviewed the orders of the Lower authorities and relied on the order favour of the assessee against the revenue by a series of decisions of the Bench in the A.Y 2014-15 to 2016-17 and 2018-19.

The Bench allowed the grounds of appeal raised by the assessee, considering the consistent decision of the co-ordinate bench of the Tribunal. The appeal of the assessee for A.Y. 2007-08 was allowed.

Estimated Profit Addition Not a Ground for Penalty: ITAT Deletes ₹42.68 Lakh Levy u/s 271(1)(c)

NMC Industries Private Limited vs Joint Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2072

The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) in a recent case has deleted ₹42.68 Lakh under section 271(1)(c) as the mere estimation of profit is not a ground for penalty.

Citing consistent judicial precedent, the two-member bench comprising Amit Shukla(Judicial Member) and Padmavathy S (Accountant Member) said that where income is determined on an estimated basis, a penalty under section 271(1)(c) cannot be imposed unless there is positive evidence of deliberate concealment.

The assessee had produced primary evidence, including invoices and banking proofs, to substantiate purchases. The absence of transport or octroi documents alone could not render the transactions fictitious. Further, the AOr had accepted half of the purchases as genuine during remand proceedings.

ITC under VAT cannot be Considered as Income Unless Claimed as Expenditure in P&L Account: ITAT

DCIT vs Jyoti StructuresLimited CITATION: 2025 TAXSCAN (ITAT) 2073

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the deletion of the VAT ( Value Added Tax ) input tax credit addition of ₹96.21 lakh, ruling that it does not constitute income as it was not claimed as an expenditure in the Profit & Loss account.

The two-member bench comprising Saktijit Dey (Vice President) and Narendra Kumar Billaiya (Accountant Member) dismissed the revenue’s appeal, confirming the deletion of the VAT input credit addition and notional interest, while maintaining the restricted 1% ad hoc commission disallowance.

Licence to use Software Not an Enduring Benefit: ITAT Treats Software Licence Fees as Revenue Expenditure in DSP Merrill Lynch Case

DSP Merrill Lynch Limited vs The Additional Commissioner of Income Tax CITATION: 2025 TAXSCAN (ITAT) 2074

The Income Tax Appellate Tribunal ( ITAT ) Mumbai has held that software licence fees paid for the right to use MS Office constitute revenue expenditure and not a capital outlay, in a decision favouring DSP Merrill Lynch Ltd.

The two-member bench comprising Amith Shukla (Judicial Member) and Padmavathy S (Accountant Member), therefore applied the ratio of Raychem RPG Ltd. and directed the AO to delete the disallowance, treating the software licence fee as revenue expenditure.

It clarified that software with a short useful life and limited rights of usage does not qualify as a capital asset under the Income Tax Act.

ITAT Reduces Ad-hoc Expenses Addition to 10% of Turnover, Earlier Estimates Held High

Headstrong Ventures vs Income Tax Office CITATION: 2025 TAXSCAN (ITAT) 2078

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the appeal of a partnership firm for AY 2017-18 by reducing the ad-hoc disallowance of expenses from 15% to 10% of turnover. The Tribunal held that while the AO and CIT(A) were justified in estimating expenses due to a lack of documentary evidence, their higher disallowances were excessive.

The single bench of Vikas Awasthy (Judicial Member) examined the matter and found that the CIT(A) had issued a notice on 15.03.2024, to which the assessee responded on 31.03.2024. The CIT(A) had considered the submissions and granted partial relief. Accordingly, the allegation of ex-parte disposal was dismissed.

Regarding the ad-hoc disallowance, the Tribunal observed that since the assessee failed to produce relevant documents to substantiate claimed expenses, some estimation by the AO/CIT(A) was justified.

Joint Purchase with Son-in-Law Does Not Bar Full Deduction u/s 54: ITAT Allows ₹3.67 Cr Exemption

Income Tax Officer vs Neelam Shamsher Kashyap CITATION: 2025 TAXSCAN (ITAT) 2079

In a dispute over the quantum of deduction under Section 54 of the Income Tax Act, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal challenging the relief granted to the assessee on the ground that the joint purchase of property with son-in-law doesn't bar deduction under Section 54.

The two-member bench of Amit Shukla (Judicial Member) and Padmavathy S ( Accountant Member) found that the CIT(A) had correctly considered the amended rectification deed, verified valuation evidence, and the actual amount invested to allow the full deduction.

The fair market value adopted by the assessee was consistent with the stamp duty authority certificate, and there was no violation of the proviso to Section 55(2)(b). The procedural objection regarding the remand report was also found to be without merit.

Sole Beneficiary Status of Assessee Ignored: ITAT Upholds 54F/54EC Exemptions and Full LTCG

Nishita Vijay Mehta vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2080

The Income Tax Appellate Tribunal (ITAT) Mumbai has dismissed both the revenue and assessee appeals, upholding the CIT(A)’s approval of exemptions claimed under Sections 54F and 54EC of the Income Tax Act, 1961. The tribunal confirmed that the assessee was the sole beneficial owner of the shares and had fully complied with statutory provisions for claiming exemptions.

The two-member bench comprising Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) observed that the assessee had fully complied with statutory requirements for claiming exemptions and that treating a portion of the gains as other income would have resulted in an incorrect tax computation.

Consequently, the Tribunal dismissed both the revenue and assessee appeals, upholding the CIT(A)’s order in its entirety.

Comparables Functionally Dissimilar, Receivables Subsumed in Working Capital: ITAT Deletes TP Adjustment in AMD India Case

AMD India Private Limited vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2082

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) deleted a ₹19.63 crore adjustment proposed by the Transfer Pricing Officer (TPO) against AMD India Pvt. Ltd., as comparables were functionally dissimilar and receivables were already subsumed in the working capital.

The two-member bench comprising Keshav Dubey (Judicial Member) and Waseem Ahamed (Accountant Member) rejected the Revenue’s argument for a separate notional interest adjustment, noting that such duplication would distort the arm’s length analysis.

The Tribunal also dismissed the Revenue’s reliance on earlier ITAT rulings that downplayed turnover as a comparability factor. It held that scale and segmental clarity are critical under TNMM, especially for specialised service providers like AMD.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Testing Equipment Not a Taxable Benefit u/s 28(iv): ITAT Deletes ₹7.73 Cr Addition Against AMD India

AMD India Private Limited vsDCIT CITATION: 2025 TAXSCAN (ITAT) 2082

The Bangalore bench of Income Tax Appellate Tribunal (ITAT) has ruled that testing equipment received free of cost by AMD India Pvt. Ltd. from its Associated Enterprises (AEs) does not constitute a taxable benefit under Section 28(iv) of the Income Tax Act.

The two-member bench comprising Keshav Dubey (Judicial Member) and Waseem Ahamed (Accountant Member) cited its own precedents in Samsung R&D Institute India and Tesco Bengaluru, where similar additions were struck down.

It stated that mere access to equipment does not constitute a taxable benefit unless it results in an irretrievable advantage to the assessee.

ITAT Limits Non-TDS Interest Disallowance to 30% as per Finance Act 2014 Amendment

Vinit Vishwasrao Hingankar vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2084

The Nagpur bench of the Income Tax Appellate Tribunal (ITAT) has partially allowed a doctor’s appeal concerning interest disallowance under Section 40(a)(ia) for non-deduction of Tax Deducted at Source (TDS).

Accordingly, the single bench of Pavan Kumar Gadale (Judicial Member) directed the AO to recompute the disallowance at 30% of the interest paid to unsecured creditors, ensuring compliance with the amendment.

The ruling highlights the significance of keeping pace with legislative changes when applying provisions relating to TDS defaults.

Gold Jewellery Belongs to Wife and Mother and within Permissible Limits Set by CBDT: ITAT Deletes Addition

Prashant Prakash Nilawar vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2083

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) deleted additions of Unexplained Gold jewellery belonging to the Assessee’s wife and mother, where the quantity was within the prescribed Central Board of Direct Taxes (CBDT) Guidelines.

After examining and reviewing all the submissions, the Tribunal upheld the order of CIT(A) deleting the additions under sections 69A, 69B and 69C and the grounds raised by the Revenue on these issues were dismissed.

The Tribunal allowed assessee’s cross appeals in all entirety, deleting all the residual amount sustained. Thus, the appeal filed by Revenue failed on all grounds and stands to be dismissed.

Estimated Interest on Interest-Free Advances Cannot Be Taxed Without Verification: ITAT

Vinit Vishwasrao Hingankar vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2084

The Nagpur bench of the Income Tax Appellate Tribunal (ITAT) has held that interest-free loans to friends or relatives require the verification of the assessing officer (AO) before taxation.

In line with principles of natural justice, the single bench of Pavan Kumar Gadale ( Judicial Member) restored the matter to the AO for verification. The AO was directed to examine the confirmations, supporting documentation, and financial records before making any addition to taxable income.

The Tribunal said that estimating notional interest on interest-free loans without verifying actual utilisation or receipts could lead to incorrect taxation.

Disallowance of Weighted R&D Deduction u/s 35(2AB): ITAT Holds Non-Filing of Form 3CL Not Fatal

Malwa Oxygen & Industrial Gases Private Ltd vs ITO, NFAC CITATION: 2025 TAXSCAN (ITAT) 2085

The Indore Bench of the Income Tax Appellate Tribunal (ITAT) held that non-filing of Form 3CL cannot be a ground to deny deduction under Section 35(2AB) when the assessee’s research activity is duly approved by the Department of Scientific and Industrial Research (DSIR) and is related to its business.

The Bench comprising B.M. Biyani (Accountant Member) and Paresh M. Joshi (Judicial Member) observed that the assessee was entitled to 100% deduction of revenue expenditure under Section 35(1)(i) and depreciation on capital expenditure under Section 32, even though the weighted deduction under Section 35(2AB) was not allowable for want of Form 3CL. However, since the factual verification of expenses was pending, the case was remanded to the Assessing Officer for examination and allowance of eligible claims.

Accordingly, the Tribunal ruled that the disallowance solely for non-filing of Form 3CL was not sustainable, remanding the matter to the Assessing Officer to verify the evidence and grant admissible deductions.

Only One-Day Granted to Respond to SCN: ITAT sets aside Ex-Parte Order, Condones Delay Caused by Husband’s Death

Farida Aboushair vs ITO CITATION: 2025 TAXSCAN (ITAT) 2086

The Bangalore Bench of the Income Tax Appellate Tribunal ( ITAT ) allowed the appeal, holding that the delay in filing her appeal was due to sufficient cause, namely her husband’s serious illness and subsequent death and that the Assessing Officer (AO) erred in completing the assessment ex parte after granting only one day to respond to the Show Cause Notice.

The Bench comprising Waseem Ahmed (Accountant Member) and Keshav Dubey (Judicial Member), observed that the assessee was denied reasonable opportunity before the AO, who issued the show-cause notice with only one day’s time to respond and proceeded to complete the assessment hastily. It was held that the explanation offered for the delay was plausible and supported by evidence, and that there was sufficient cause preventing timely filing of the appeal.

Cash Found in Locker During Search belongs to Entire Family, Not Solely belongs to Taxpayer: ITAT deletes Addition u/s 69A

Shailendra Rameshchandra Rathi vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2087

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that cash found in assessee’s locker during search belonged to the entire family residing together and not solely to the taxpayer and accordingly deleted the addition made under Section 69A of the Income Tax Act, 1961.

The Two-Member Bench comprising Amit Shukla, Judicial Member and Arun Khodpia, Accountant Member heard and reviewed the matter.

After hearing and reviewing the submissions, the Tribunal found that CIT(A)’s conclusion regarding the father and wife of the assessee not filing income tax returns were factually incorrect as their income-tax returns for A.Ys. 2021-22 and 2022-23 along with balance sheets, profit and loss accounts, and cash books were on record, reflecting the claimed cash balances.

Misclassification of Real Estate Income as LTCG u/s 50C: ITAT Remands ₹21.24 Lakh Addition for Fresh Adjudication

Sima Ravisingh Kachhawah vs Income Tax Officer CITATION: 2025 TAXSCAN (ITAT) 2096

The Income Tax Appellate Tribunal (ITAT), Nagpur Bench, has set aside the ex parte order passed by the CIT(A) and remanded the matter to the AO for fresh adjudication on the ground that income from real estate plotting business was misclassified as long-term capital gains under Section 50C.

Considering the facts, submissions, and material on record, ITAT set aside the CIT(A) order and remanded the matter to the AO for fresh adjudication on merits.

The Tribunal directed that the assessee should be provided an adequate opportunity to substantiate her claims regarding the business nature of income under Section 44AD and the deductions claimed under Section 80C.

ITAT Allows Canon India Full Foreign Tax Credit for Taxes Paid in Japan Despite Nil Indian Tax Liability

Canon India Pvt Ltd vs The Dy. C.I.T CITATION: 2025 TAXSCAN (ITAT) 2098

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that Canon India Pvt. Ltd. is entitled to full foreign tax credit for taxes paid in Japan, even though its tax liability in India was nil due to Section 10A deduction and brought-forward losses.

The bench comprising Challa Nagendra Prasad (Judicial Member) and Naveen Chandra (Accountant Member) observed that the Delhi High Court in HCL Comnet has already endorsed the Karnataka High Court’s view in Wipro Ltd., which held that FTC is available even when the corresponding income becomes non-taxable in India because of Section 10A or losses.

The tribunal explained that once a jurisdictional High Court decision settles the issue, it must be followed. It pointed out that the Revenue’s arguments based on the Bank of India cannot override binding precedent.

The tribunal further observed that Canon’s claim for interest under Section 244A, raised through a cross-objection for AY 2005-06, could not be allowed.

Seized Excel Sheet Not Prepared by Taxpayer, Not Credible: ITAT Deletes ₹35 Lakh Unexplained Investment Addition

Tarun Nandkumar Seksaria vs DCIT, CC-8(1), Mumbai CITATION: 2025 TAXSCAN (ITAT) 2099

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) deleted ₹35 Lakh addition under section 69A/69B for alleged unaccounted land investment for the assessment year (A.Y) 2016-17, holding that excel sheets seized during search were prepared by a Third-Party Land aggregator, not by the assessee being not credible in nature.

The Tribunal, in conclusion, held that the additions made under section 69A/69B on account of alleged cash investment in Dapoli and Dhokawade land stand deleted for want of evidence; the reassessment proceedings initiated under section 148 are quashed for lack of jurisdiction in terms of the Faceless Assessment Scheme.

The Tribunal also held that reassessment proceedings initiated under section 148 by the jurisdictional Assessing Officer, in violation of the Faceless Scheme under section 151A stand vitiated in law.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Landowner’s ₹1.44 Cr Agricultural Income from Mango Sales Triggers Scrutiny: ITAT Deletes ₹1.20 Cr Addition

ITO vs Mr. Mohammed Farooq Kanana CITATION: 2025 TAXSCAN (ITAT) 2100

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition after finding that the Assessing Officer (AO) did not examine the evidence placed on record and had relied only on estimates while questioning the assessee’s agricultural income.

The two-member bench comprising Laxmi Prasad Sahu (Accountant Member) and Soundararajan K. (Judicial Member) observed that the assessee had produced affidavits from all four contractors who purchased the mango crop, and the AO did not make any enquiry to disprove those affidavits.

The tribunal observed that the AO did not call for confirmations, did not summon the contractors, and did not question the genuineness of the transactions. The Tribunal pointed out that the AO relied only on estimated figures and did not examine the actual facts already placed on record.

Beneficiary Cannot Be Taxed Again when Trust already Paid Tax on Income: ITAT Deletes ₹1.24 Cr. Addition

Ajay Balvantray Parekh vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2061

The Mumbai of the Income Tax Appellate Tribunal, examined whether income distributed to a beneficiary by a private discretionary trust that had already paid tax could once again be brought to tax in the hands of the beneficiary, ultimately ruling against the tax addition in a case concerning income tax liability.

The bench comprising of Judicial Member, Pawan Singh and Accountant Member,Renu Jauhri held that there was no dispute about the facts of trust income distribution. It was observed that the Revenue had accepted similar treatment in all other relevant A.Y.s, both for the appellant and the other beneficiaries of the trust.

The bench observed the CBDT Circular and the Karnataka High Court judgment cited by the appellant, holding that once the trust has paid tax on its income, taxing the same income again in the hands of the beneficiary is unjustified. Accordingly, the ITAT deleted the addition of Rs. 1.24 crore.

Tissue Culture Cannot Be Isolated from Nursery Activity: ITAT Treats Entire Nursery Receipts as Agricultural Income Exempt u/s 10(1)

Satyenra Kumar Gutgutia vs DCIT CITATION: 2025 TAXSCAN (ITAT) 2063

The Income Tax Appellate Tribunal (ITAT), Bangalore, in a recent decision, has ruled that income from nursery operations involving tissue culture must be treated as agricultural income exempt under Section 10(1) of the Income Tax Act, 1961. The ruling clarifies that tissue culture, when used as part of plant propagation in nursery farming, cannot be taxed as business income merely because part of the process occurs outside the soil.

The two-member bench comprising Keshav Dubey (Judicial Member) and Waseem Ahmed( Accountant Member) sided with the assessee, distinguishing his case from Invitro International by observing that in Gutgutia’s case, the tissue culture was not a standalone commercial activity but an intermediate step in the larger cultivation process.

The Bench emphasised that the nursery’s end products, plants, flowers, and seedlings originated from basic agricultural operations involving soil and human labour on farmland. Hence, segregating a single stage of tissue culture for taxation was unwarranted.

ITAT Dismisses Rotary Club’s 12A Registration and 80G Approval Appeals Ex Parte for Non-Appearance

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has dismissed appeals filed by a Rotary Club seeking registration under Section 12A(1)(ac)(iii) and approval under Section 80G(5)(iii) of the Income-tax Act, 1961.

The appeals were filed by a Rotary Club against separate orders dated 21 November 2024, passed by the Commissioner of Income-tax (Exemptions), rejecting the assessee’s applications for registration under Section 12A(1)(ac)(iii) and for approval under Section 80G(5)(iii) of the Income-tax Act. Given the identical nature of the issues and facts, the ITAT consolidated both appeals and disposed of them through a single order.

The Tribunal observed that even before the CIT(E), the assessee had failed to comply with statutory requirements under Rules 17A(2) and 11AA(2) of the Income-tax Rules, 1962. Given the repeated non-prosecution and absence of submissions, the ITAT was left with no alternative but to dismiss the appeals ex parte.

Income Tax Penalty u/s 271F Not Leviable as ITR Filed Within Prescribed Time: ITAT

Hari Mohan and Sons vs The Income-tax Officer 959, Sanjay Marg, Ward-3(2)(1) CITATION:

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently ruled in favour of the assessee, deleting a penalty of ₹5,000 under Section 271F of the Income Tax Act as the assessee filed the income tax return (ITR) within the prescribed time.

Upon hearing both parties, the two-member bench of Sudhir Kumar (Judicial Member) and Naveen Chandra (Accountant Member) carefully examined the record. It noted that the return of income for AY 2013-14 had indeed been filed on 21 February 2014, a fact recorded in the AO’s assessment order under Sections 143(3)/147.

The tribunal found that the CIT(A) erred in holding that the assessee was a non-filer. Since the assessee had complied with the filing requirements within the time allowed under the Act, the tribunal concluded that no penalty under Section 271F could be justified.

Assessee’s POCM Accounting Complies with ICAI Guidance Note for Real Estate Projects: ITAT Deletes ₹47.26 Crore Addition

Relationship Properties Private Limited vs Deputy Commissioner of IncomeTax CITATION: 2025 TAXSCAN (ITAT) 2076

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that revenue recognition under the Percentage of Completion Method (POCM) must adhere to the ICAI Guidance Note on Real Estate Accounting, and cannot be altered based on ad hoc interpretations by assessing officers.

The appeal before the ITAT arose from an assessment order under Section 143(3) of the Income Tax Act for Assessment Year (AY) 2017-18, wherein the AO had initially made a massive addition of ₹229.29 crore.

The Tribunal held that since there was no deviation in accounting practices, no evidence of tax evasion, and the relevant income was already taxed in the succeeding year, the addition sustained by lower authorities had no merit.

Reassessment Without Jurisdiction: ITAT Quashes ITO Order, Rs. 38.34 Lakh Addition Nullified

M/s Jamiya Arabiya Nafe Ul Uloom vs M/s Jamiya Arabiya Nafe Ul Uloom CITATION: 2025 TAXSCAN (ITAT) 2077

The Income Tax Appellate Tribunal (ITAT), Delhi, has quashed a reassessment order passed by the ITO, involving a registered society and madarsa, after finding serious jurisdictional lapses. The addition of Rs. 38.34 lakh on account of unexplained cash deposits was nullified, without the ITAT examining the merits of the addition itself.

The tribunal observed that the revenue failed to establish that the ITO Ward 3(2), Bulandshahar, had jurisdiction over the assessee to issue the notice.

The tribunal concluded that the reassessment proceedings were initiated and completed without proper jurisdiction, rendering the entire assessment invalid. Consequently, the addition of Rs. 38,34,097/- as unexplained cash deposits was nullified, as it was dependent on the reassessment order.

Reassessment Based on Borrowed Belief from ACB Report Invalid: ITAT Quashes S.147 & S.263

Mr. Arpanbhai Virambhai Desai vs ITO CITATION: 2025 TAXSCAN (ITAT) 2081

In a consolidated decision covering AYs 2014-19, the Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) held that reassessment proceedings initiated against the assessee were vitiated as it was based on Anti Corruption Bureau’s (ACB) report alleging disproportionate assets (DA) held by the assessee and his family.

Relying on the Gujarat High Court’s decision in Kantibhai Dharamsinhbhai Narola v. ACIT, the Tribunal observed that reassessment requires the AO to form a reasonable belief based on his own application of mind. Borrowing satisfaction from external reports, without independent scrutiny, renders the assumption of jurisdiction invalid.

Gold Jewellery Belongs to Wife and Mother and within Permissible Limits Set by CBDT: ITAT Deletes Addition

Prashant Prakash Nilawar vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2083

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) deleted additions of Unexplained Gold jewellery belonging to the Assessee’s wife and mother, where the quantity was within the prescribed Central Board of Direct Taxes (CBDT) Guidelines.

The Tribunal heard cross-appeals filed by the assessee and by the Revenue arising from a common order dated 26.02.2025 passed by the Commissioner of Income Tax (Appeals) [CIT(A)].

CIT(A) examined the matter and allowed relief to certain family members to extend the permissible limit of 500 grams and 263.83 grams in respect of the jewellery belonging to the assessee’s wife and mother, deleting the addition of ₹11,32,420 which comprised of ₹4,39,320 for the wife and ₹6,93,100 for the mother.

AO's Failure to issue SCN and Grant Cross-Examination Opportunity Necessitates Deletion of Unaccounted Interest Income Addition: ITAT

Sunil Kumar Agarwal vs ACIT CITATION: 2025 TAXSCAN (ITAT) 2095

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition of ₹20,34,000 made on account of undisclosed interest income for the Assessment Year (A.Y.) 2020-21 by observing the AO’s failure to issue Show cause notice and denial of cross-examination opportunity.

The two-member bench comprising Dr. S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) observed that the AO's failure to call for a clear explanation on the interest income after the sales dispute was settled constituted a violation of the principles of natural justice.

The Tribunal held that the AO had violated the principles of natural justice while making this addition merely based on the surmise and conjecture and that too without calling for the explanation of the assessee.