ITAT Weekly Round-up
A Round-up of the Income Tax Appellate Tribunal (ITAT) Cases Reported at Taxscan Last Week.
This weekly round-up encapsulates the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan during the previous week, from January 27, 2025 to January 31, 2025.
No S. 50C Addition When Sale Price Exceeds Stamp Value: ITAT Deletes Addition Caused by Typographical Error in Dept Records
Rupal Nirav Shah vs DeputyCommissioner of Income-tax CITATION: 2026 TAXSCAN (ITAT) 164
In a recent ruling the Income Tax Appellate Tribunal (ITAT) Surat bench deleted ₹19 Lakh Addition after finding that the Assessing Officer had relied on incorrect departmental records arising from a typographical error in the cost of the property as per the departmental information.
The bench comprising Suchitra Kamble (Judicial Member ) and B.R.R Kumar ( Vice President ) held that the sale price is not lower than the official valuation, no addition was warranted and the appeal of assessee is allowed.
It was further observed that the Assessing Officer made the addition because of a typing mistake in the property cost shown in the department’s records.
Relief to Honda India: ITAT quashes Income Tax Assessment Order passed beyond Limitation Period u/s 144C
HONDA INDIA POWER PRODUCTS LTD vs ACIT CITATION: 2026 TAXSCAN (ITAT) 165
The Income Tax Appellate Tribunal (ITAT), Delhi Bench quashed an assessment order passed by Assessment officer (AO) against Honda India Power Products Ltd, and held that the assessment order was beyond the period of limitation under section 144C read with section 153 of the Income Tax Act, 1961.
The Bench of Vikas Awasthy, judicial member and Sanjay Awasthi, accountant member, noted that the final assessment order passed by the AO was beyond the period of limitation for passing the order u/s 144C(13) r.w.s. 153 of the Act.
The tribunal relied upon the decision of a coordinate Bench in Li and Fung (India) Pvt Ltd,(2026) where the tribunal held that the “provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders”.
Cash Payment for Joint Flat Bought with Wife Explained through Bank Records: ITAT Deletes ₹5.25 Lakh Income Tax Addition
Utpalkumar Devendrakumar Thakor vs The DCIT CITATION: 2026 TAXSCAN (ITAT) 166
The Income Tax Appellate Tribunal (“ITAT”) deleted income tax addition of ₹5.25 Lakh for purchasing a flat with his wife (jointly) after reviewing bank records. The tribunal observed that the cash payment was made via bank from a salaried account and was well-explained.
The bench, comprising Dr. B. R. R. Kumar (Vice-President) and Suchita Kamble (Judicial) found merits in assessee’s arguments. The flat was purchased for INR 60,00,000/-. These details were from HDFC Bank totalling to INR 9,92,500/- from April 2012 to March 2013. The appellant contended that cash payment was also from accounted sources, which has been verified from the bank account.
Consequently, the appeal has been allowed.
Vodafone Distributor Fails to Explain ₹51.80 Lakh Cash Deposits: ITAT Upholds 8% Income Estimation
Vijay Shridhar Wadkar vs ITO CITATION: 2026 TAXSCAN (ITAT) 167
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) has upheld that the estimation of income at 8% on a large cash deposit made by a Vodafone distributor failed to satisfactorily explain the nature and source of the deposit during the assessment proceedings.
The tribunal observed that, after hearing the departmental representative, the assessee had not cooperated at any stage of the proceedings and had failed to substantiate his claims with evidence.
The bench, Astha Chandra ( judicial member ) and R.K.Panda ( vice president) accordingly dismissed the appeal filed by the assessee.
Search Assessments under Income Tax Unsustainable where Approval is Mechanical u/s 153D: ITAT
Saroj Bala vs ACIT CITATION: 2026 TAXSCAN (ITAT) 168
The Patna Bench of the Income Tax Appellant Tribunal ( ITAT ) has held that search assessments under Section 153A of the Income TaxAct, 1961, cannot stand the test of time in those situations where the mandatory approval under Section 153D is granted routinely.
The two-member bench comprising Pradip Kumar Choubey[ Judicial Member] and Rajesh Kumar[Accountant Member], stated that Section 69A applies in cases where there are unexplained income sources.
The Tribunal held that no reasonable consideration can be deduced from a consolidated approval for multi-year periods and that such approval does not satisfy the mandate of Section 153D. Relying upon decisions such as PCIT vs. Meeta Gutgutia and PCIT vs. Shreelekha Damani, the Tribunal decided that a defective approval invalidates the entire process of assessment.
Cash from Sale of Crops Deposited during Demonetization Period, Supporting Documents Submitted: ITAT Removes Addition u/s 68
Ramanbhai P. Viradiya HUF Plot No. 101, Swati Society vs The ITO CITATION: 2026 TAXSCAN (ITAT) 169
The two-member bench of the Income Tax Appellate Tribunal (“ITAT”) had removed addition to cash deposit as unexplained as had been done under Section68. ITAT accepted the explanation given by the assessee in view of the cash deposits made during the demonetisation period. The assessee had deposited cash received from the sale of crops such as cotton from their land of more than 3 hectares.
The bench, consisting of Dr. B. R. R. Kumar (Vice-President) and Suchita Kamble (Judicial), has allowed the appeal holding that the cash deposits were properly explained by the assessee and removed the addition of unexplained cash deposits that were added as per Section 68.
Interest Expenditure allowable u/s 57(iii) against Interest Income if Direct Nexus Proved: ITAT Deletes ₹1.06 Cr Disallowance
Ankur Chandulal Shah 23/A vs The Asst. Commissioner of Income Tax CITATION: 2026 TAXSCAN (ITAT) 170
If there is a direct nexus between the borrowing and lending activity, interest expenditure is allowable as a deduction under Section 57(iii) oftheIncome-tax Act, 1961, ruled the Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ).
During assessment proceedings, due to non-compliance with statutory notices, the Assessing Officer issued an ex parte order under Section 144 and disallowed the entire interest expenditure on the ground that the assessee failed to establish a nexus between the interest paid and interest earned.
The bench of Makarand Vasant Mahadeokar (Accountant member) and Amit Shukla ( Judicial member) deleted the disallowance of interest expenditure of Rs. 1.6 crore under Section 57(iii) and allowed the appeal.
Advertising & Sales Promotion Spend to Dealers Not ‘Fringe Benefit’: ITAT deletes ₹1.08 Cr FBT Addition
Apar Lubricant Ltd vs DCIT 14(1)(1) CITATION: 2026 TAXSCAN (ITAT) 171
The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT) has held that expenditure incurred on advertising, publicity and sales promotion towards dealers, distributors and other third parties does not constitute a “fringe benefit” under Income-tax Act, 1961.
Before the bench of Amit Shukla (Judicial Member) and Makarand Vasant Mahadeokar (Accountant Member), the assessee contended that the foundation of FBT rests on the concept of a “consideration for employment.”
The bench noted the ruling of Delhi High Court in T&T Motors Ltd. has explained that “where accessories or promotional items are supplied to customers as part of a sales package and the customer has paid the sale consideration, such expenditure cannot be treated as sales promotion or publicity liable to FBT.” Consequently, the tribunal deleted the addition made by the assessing officer stating it as unsustainable.
LTCG to be Computed from Taxpayer’s First Year as Property Holder: ITAT Notes Error in Indexation Year
Adil Noshirvan Shethna vs The ITO CITATION: 2026 TAXSCAN (ITAT) 172
The Income Tax Appellate Tribunal ( ITAT ) has, in a recent case, noted that while computing long term capital gain, the indexation must be calculated using the cost of inflation index for the year in which the taxpayer first held the property. The tribunal has observed this error indexation year in the mentioned case.
The appellant argued through his counsel that he had claimed cost of inflation index for the year in which the assessee first time held the property. In furtherance, the said property was passed on after the death of the earlier owner as the appellant was one of their heirs through will.
The bench, consisting of Dr. B. R. R. Kumar (Vice President) and Suchitra Kamble (Judicial Member), held that the appeal should be allowed as the assessee had rightly indexed the cost of indexation from the year 1985-86.
AO & CIT(A) Denied Hearing in Income Tax Assessment: ITAT Directs De Novo Speaking Order for ₹17L Addition u/s 69A
Abha Patel vs Assessment Unit CITATION: 2026 TAXSCAN (ITAT) 173
The Income Tax AppellateTribunal(ITAT), Lucknow bench, directed an Assessment officer (AO) to issue a De Novo Speaking Order for addition of ₹17,94,286 under section 69A of Income Tax Act, 1961, noting that opportunity to be heard was denied by AO and Commissioner of Income Tax (Appeals) ( CIT(A) ).
Before the ITAT, there was no representation made by the appellant. The counsel representing the respondent was heard and the material on record was perused.
Anadee Nath Misshra, Accountant member, observed that the Assessing officer and CIT(A) did not provide a reasonable opportunity of being heard to the appellant.
Accordingly, the tribunal directed the Assessing Officer to restore the issue relating to the addition of ₹17,94,286 and to pass de novo speaking order on the merits of the case after providing a reasonable opportunity to be heard.
Taxpayer Only Account Opener, Acted as Conduit for Third Party Funds: ITAT Limits Income Tax Liability to 0.5% Commission
Jigar Thakorbhai Dave vs Income Tax Officer CITATION: 2026 TAXSCAN (ITAT) 174
The Income Tax Appellant Tribunal (“ITAT”), Surat Bench, recently limited income tax liability for the account opener, a conduit for third party funds. The taxpayer’s income tax liability was limited to 0.5% Commission.
The tribunal further observed that since the assessee had facilitated the use of his account and permitted this use, commission income @ 0.5% of the total turnover routed is required to be estimated and brought to tax. The bench, consisting of Dr. B. R. R. Kumar (Vice-President) and Suchita Kamble (Judicial Member), partly allowed the appeal by the assessee, mutatis mutandis.
Unexplained Deposits are Cash Sales during Demonetization, Only 8% is Income: ITAT Allows Income Tax Appeal Partly
Aurangabad Steel Corporation vs ITO CITATION: 2026 TAXSCAN (ITAT) 175
The Income Tax Appellate Tribunal (ITAT), Pune Bench, has partly allowed an appeal, holding only 8% of unexplained cash deposits as income. Since the deposits made during demonetization were attributed by sales.
The tribunal observed that the partnership firm, Aurangabad Steel, declared income for Annual Year (AY) 2017-18 where quarterly sales figures have been declared. Further, it had been observed that the Assessing Officer (AO) had not rejected the book of account results and only questioned the amount from cash sales which took place during demonetization.
The Pune Bench through Dr. Manish Borad (AccountantMember), held that the source of the cash deposits are cash sales of the business carried out by the assessee. Addition was sustained at INR 3,08,600 and the appeal was partly allowed.
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