ITAT Weekly Round-up

The Bench comprising Anikesh Banerjee, Judicial Member, and Prabhash Shankar, Accountant Member, allowed the appeal and deleted the addition of ₹2.55 crore. The Tribunal held that DEPB benefits arise directly from export activity and are closely connected with the normal business operations of the assessee.

They observed that Section 28 of the Income Tax Act, 1961, treats export incentives as profits and gains of business or profession, thereby reinforcing their operating nature.

Trade Advances for Gold Purchase Not ‘Unexplained Credit’: ITAT Rules Creditworthiness Test Not Required against Jewellery Trader

Ms. Lalitha Padmaja vs The Income Tax Officer CITATION: 2026 TAXSCAN (ITAT) 104

The Income Tax Appellate Tribunal ( ITAT ), Hyderabad Bench has held that customers in the ordinary course of jewellery business cannot be treated as unexplained cash credits under Section 68 of the Income-tax Act, 1961.

The two - member bench of Ravish Sood (Judicial member ) and Manjunatha G ( Accountant member) held that the assessee is not required to prove the creditworthiness of the customers once it is established that the advances were received from the customers.

Cash Transactions of Co-operative Society with its Members Not Penal if Reasonable Cause Exists: ITAT Deletes Penalties u/s 271D and 271E

The DCIT Circle Gandhinagar, Gandhinagar vs Shri Umiya Co-operativeCredit Soc CITATION: 2026 TAXSCAN (ITAT) 105

The Income Tax Appellate Tribunal (ITAT) Bench at Ahmedabad has dismissed the Revenue’s appeals and upheld the deletion of penalties imposed under Sections 271D and 271E of the Income Tax Act, 1961.

The Tribunal, comprising T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member), observed that the nature and functioning of co-operative credit societies are distinct as they operate with a limited membership and cater to small borrowers.

The bench further noted that the genuineness of deposits and repayments had also not been disputed by the Revenue. In such circumstances, the breach, if any, was held to be venial, arising out of a bona fide belief.

Failure to Adhere to Surviving Time Limit under TOLA Renders Reassessment Proceedings u/s 148 Void: ITAT Quashes Assessment Orders

Waves Tradeline Private Limited vs Income Tax Officer CITATION: 2026 TAXSCAN (ITAT) 106

The Income Tax Appellate Tribunal (ITAT) Bench at Ahmedabad has quashed reassessment proceedings for Assessment Years 2015-16, 2016-17 and 2017-18 after holding that the notices were issued beyond the surviving period of limitation and were therefore without jurisdiction.

The Tribunal comprising Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member), noted that the original notice under Section 148 was issued on June 7, 2021. Relying on the Supreme Court’s decisions in Union of India v. Rajeev Bansal, Union of India v. Ashish Agarwal, and Deepak Steel and Power Ltd., the Tribunal held that all notices issued on or after April 1, 2021 for AY 2015-16 were required to be dropped, as they did not fall within the permissible limitation period.

ITAT has Power to Stay Cancellation of Charitable Registration Even Without Income Tax Demand: J&K & Ladakh HC

J&K Yateem Foundation vs Income Tax Appellate Tribunal, AmritsarBranch, Amritsar CITATION: 2026 TAXSCAN (HC) 107

In a recent decision, the Jammu & Kashmir and Ladakh High Court said that the Income Tax Appellate Tribunal ( ITAT ) has the power to pause the cancellation of a charity's registration, even if there is no pending income tax demand against the organisation.

The Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem explained that the ITAT’s power to grant stay is incidental to its appellate powers. The purpose of this power is to ensure that an appeal, if successful, does not become useless.

Conclusively, the Bench observed that the Tribunal’s view that it lacked jurisdiction due to absence of tax demand was legally incorrect.

Wrong Selection of ITR 7 instead of ITR 5 is Mere Procedural Error: ITAT remits matter to Reassess Income as per ITR 5

New Surya Public School vs Deputy/Assistant Commissioner of Income Tax CITATION: 2026 TAXSCAN (ITAT) 112

The Delhi Bench of the Income Tax AppellateTribunal (ITAT)has held that the mere filing of an income tax return in an incorrect form cannot be a ground to disallow genuine expenditure. The Bench also observed that procedural lapses should not override substantive rights of the assessee.

The Tribunal, comprising S. Rifaur Rahman (Accountant Member) and Raj Kumar Chauhan (Judicial Member), observed that it is a settled principle that procedural defects cannot defeat substantive claims, particularly when no prejudice is caused to the Revenue.

Placing reliance on earlier coordinate bench decisions, including Care Foundation Village v. ITO (Exemption), the Tribunal held that income tax authorities are not expected to penalise assessees for bona fide mistakes.

Consideration for Off-shore Supply of Equipment and Designs cannot Be Taxed in India: ITAT allows Appeal by SMS Group GmbH

SMS Group Gmbh vs ACIT CITATION: 2026 TAXSCAN (ITAT) 113

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that consideration received for offshore supply of plant, equipment, drawings and designs by a foreign company cannot be taxed in India when the entire transaction is concluded outside the country and no part of the income is attributable to India.

The Tribunal, comprising M. Balaganesh (Accountant Member) and Vimal Kumar (Judicial Member), noted that identical issues had consistently come up in assessee’s own case for earlier assessment years and decided in its favour by coordinate benches. Relying on those decisions, the Tribunal observed that the supply of equipment and the accompanying drawings and designs were integral to offshore sale contracts and could not be separated to treat the design component as fees for technical services.

Reopening of Assessment u/s 147 Invalid Due to Defective PCIT Approval: ITAT Quashes Entire Reassessment

Kanubhai Ramdas Patel vs ITO CITATION: 2026 TAXSCAN (ITAT) 114

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961 are void ab initio when the mandatory approval of the Principal Commissioner of Income Tax is defective and based on erroneous facts, rendering the entire assessment unsustainable in law.

The Tribunal, comprising Suchitra R. Kamble (Judicial Member), noted that the statutory requirement of proper approval by the Principal Commissioner was not fulfilled. As per her, there was an inconsistency in the annexure forming part of the approval, which posed a question mark on the jurisdiction assumed under Section 147.

In view of the defective approval and procedural lapses, the Tribunal held that the initiation of reassessment itself was bad in law.

PCIT Cannot Invoke Revisionary Powers u/s 263 where AO took a Plausible View after Due Enquiry: ITAT favours City Union Bank

City Union Bank vs PCIT CITATION: 2026 TAXSCAN (ITAT) 115

The Tribunal, comprising Aby T. Varkey (Judicial Member) and S. R. Raghunatha (Accountant Member) examined the assessment records. It was noted that the Assessing Officer had raised queries, to which, the assessee had furnished detailed replies along with supporting documents. The Bench observed that this was not a case of “lack of enquiry” but, one of alleged “inadequate enquiry”, which does not justify invocation of Section 263.

Placing reliance on the Supreme Court decisions in Malabar Industrial Co. Ltd. v. CIT and CIT v. Max India Ltd., as well as recent judgments including PCIT v. V-Con Integrated Solutions Pvt. Ltd., the Tribunal reiterated that where two views are possible and the Assessing Officer adopts one permissible view, the Commissioner cannot substitute his opinion through revisionary proceedings.

Purchases cannot be Disallowed Merely on Employee Statements without Evidence: ITAT Deletes 12.5% Ad-Hoc Disallowance

Kalpataru Projects International Ltd. vs Deputy Commissioner of IncomeTax CITATION: 2026 TAXSCAN (ITAT) 118

The Mumbai Bench of Income Tax Appellant Tribunal (ITAT) deleted ad-hoc disallowance calculated at 12.5% of the total purchase value, holding that employee statements recorded a decade after the relevant assessment year, in absence of any additional supporting and incriminating evidence, is bad in law.

The Bench of Sandeep Singh Karhail, Judicial Member, and Om Prakash Kant, Accountant Member deleted the ad-hoc disallowance made under Section 37 of theIncome Tax Act, 1961, ruling that the employee statements recorded nearly after a decade of relevant assessment period coupled with their non-engagement in procurement cannot be the sole basis for treating purchases a bogus.

The Tribunal accepted the argument of unfamiliarity, and noted that the assessee irrespective of being the parent company did not enter into any transaction-in-question.

CSR Funds Received With Specific Donor Conditions Not Automatically Taxable Income: ITAT Remands JM Financial Foundation Case

JM Financial Foundation vs Income Tax Officer CITATION: 2026 TAXSCAN (ITAT) 119

The Income Tax Appellate Tribunal (ITAT) Bench in Mumbai found that if a donor designates funds obtained through Corporate Social Responsibility (CSR), they cannot be automatically classed as taxable income. The matter should be returned to the Assessing Officer (AO) for re-assessment following appropriate processes outlined by law.

The Bench comprising Judicial Member, Beena Pillai and Accountant Member, Makarand Vasant Mahadeokar observed that the genuineness of the charitable trust was not in dispute and that the CSR funds were received with specific donor-imposed restrictions.

The Tribunal noted that such tied-up grants could not be freely applied by the trust and therefore, required careful examination before being treated as income.

Claimed Property Gift by Father-in-Law Mistakenly Registered as Sale: ITAT Remands Capital Gain Addition u/s 50C for Fresh Examination

Kovvur Chandrashekhar vs DCIT CITATION: 2026 TAXSCAN (ITAT) 120

The Bangalore Bench of the Income TaxAppellate Tribunal (ITAT) has remitted a dispute where a property meant to be a gift was mistakenly executed as a sale deed, resulting in a capital gains addition by AO for the assessment year 2016-17. The Bench opined that the issue required a de novo examination of facts and supporting documents.

The matter came up before the Tribunal Bench comprising Laxmi Prasad Sahu (Accountant Member) and Keshav Dubey (Judicial Member). The Tribunal observed that the assessee claimed the transaction was intended as a gift, although the property was registered in the name of the assessee’s father-in-law. The Tribunal held that the matter required fresh verification at the assessment stage. It observed that the issue could not be decided without proper examination of all relevant documents and supporting evidence.

Accordingly, the Tribunal set aside the orders of the lower authorities and remitted the issue back to the file of the Assessing Officer.

ITAT Remands Section 69A Addition After Holding AO Failed to Verify Creditworthiness of Donors

Sanjitha Reddy vs The Income Tax Officer CITATION: 2026 TAXSCAN (ITAT) 121

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving addition towards unexplained investment under Section 69A of the Income Tax Act, 1961, back to the Assessing Officer. It was held that proper enquiry into the creditworthiness of the alleged donors was not carried out before making the addition.

The Bench, comprising Laxmi Prasad Sahu (Accountant Member) and Soundararajan K. (Judicial Member), examined the records and noted that while the assessee had furnished affidavits explaining the source of funds, the Assessing Officer did not independently enquire about the genuineness or creditworthiness of the donors.

The Tribunal observed that once the assessee had discharged her initial onus by filing affidavits, it was upon the Assessing Officer to verify the same by issuing summons or calling for information under Section 133(6) before drawing conclusions.

Ex-Parte Order after 10 Notices Not Final: ITAT Remands ₹64.12 Lakh S. 69C Disallowance

Paras Multiplex LLP vs Income Tax Officer CITATION: 2026 TAXSCAN (ITAT) 122

The Income Tax Appellate Tribunal, Mumbai Bench (ITAT), has held that an ex-parte appellate order passed without adjudicating issues on merits cannot be treated as final merely because multiple notices were issued, thereby has remanded the matter for fresh consideration after granting a reasonable opportunity of hearing.

The Bench comprising Narender Kumar Choudhry, Judicial Member, and Bijyananda Pruseth, Accountant Member, observed that although several notices had been issued and adjournments granted, the appellate authority proceeded to decide the matter without examining the issues on merits. The ITAT noted that the disallowance under Section 69C of the Income Tax Act, 1961, involved substantive factual examination, which warranted a fair opportunity to the appellant.

Mere Change in Head of Loss Does Not Constitute Under-Reporting u/s 270A: ITAT Deletes ₹15.19 Cr Penalty

INU Exports Private Limited Office No. 33 vs ITO CITATION: 2026 TAXSCAN (ITAT) 123

The Income Tax Appellate Tribunal, Mumbai Bench (ITAT), held that a mere change in the head under which a loss is classified cannot be treated as under-reporting of income for the purpose of levying penalty under Section 270A of the Income Tax Act, 1961, and accordingly set aside the penalty of ₹15.19 crore imposed by the Revenue.

The Bench of Pawan Singh, Judicial Member, and Renu Jauhri, Accountant Member, allowed the appeal and deleted the penalty, observing that the loss claimed by the assessee was accepted in its entirety, though under a different head, and there was no finding that the assessee had concealed income or furnished inaccurate particulars.

The Tribunal held that reclassification of a loss from business loss to speculative loss amounts only to a change in the head of loss and does not automatically give rise to under-reporting of income.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates