ITAT Quashes Reassessment Based on Borrowed Satisfaction and Deletes Bogus Purchase Addition of Rs.42.32 Lakh

ISSUE: Whether reassessment proceedings under section 147 of the Income-tax Act, 1961, initiated solely on the basis of third-party information concerning alleged bogus purchases from M/s Riya International, without independent enquiry or verification by the Assessing Officer, and the consequential addition under section 69C amounting to Rs.42,32,619, were legally sustainable.

FACT: The assessee, a partnership firm engaged in manufacturing, declared income of Rs.1,05,960 for AY 2020-21. Based on information received from the CGST authorities alleging that M/s Riya International was issuing fake invoices without actual supply of goods, the Assessing Officer reopened the assessment and treated purchases of Rs.42,69,335 as unexplained expenditure under section 69C. The assessee furnished purchase invoices, e-way bills, ledger accounts, bank statements and audited financial statements to establish the genuineness of the purchases. However, the Assessing Officer rejected the books of account under section 145(3) and made an addition of Rs.42,32,619 after reducing the alleged profit element. The CIT(A) upheld the addition, against which the assessee appealed before the Tribunal.

HELD: The Tribunal held that reassessment proceedings initiated solely on the basis of third-party information, without independent enquiry or application of mind by the Assessing Officer, amounted to borrowed satisfaction and were bad in law. It further observed that adverse information concerning the supplier alone could not establish that the assessee's purchases were fictitious, particularly when the assessee had furnished supporting documentary evidence and the transactions recorded in its books and GST returns had not been disturbed by the GST authorities. Accordingly, the Tribunal set aside the reassessment proceedings and the orders of the lower authorities, directed the Assessing Officer to allow the assessee's claim and allowed the appeal in favour of the assessee.

ITAT Sets Aside CIT(A) Order for Fresh Adjudication After Finding Failure to Consider Assessee’s Submissions on Section 54F Deduction

ISSUE: Whether the order passed by the CIT(A)/NFAC was sustainable when the appellate authority incorrectly recorded that the assessee had not filed any submission in response to the remand report, despite the assessee having placed the acknowledgement of such submission on record, thereby failing to consider relevant submissions and evidence in accordance with Section 250(4) and Section 250(6) of the Income Tax Act.

FACT: The assessee challenged the denial of deduction of Rs.17,00,000 under Section 54F and the computation of taxable capital gains at Rs.19,39,599 for Assessment Year 2015-16. The CIT(A)/NFAC accepted the computation furnished in the remand report, observing that the assessee had not submitted any response to the remand report. However, the assessee produced the acknowledgement of its reply and rejoinder to the remand report before the Tribunal. The Revenue fairly conceded that the assessee had indeed filed submissions and that the findings of the CIT(A)/NFAC were based on an incorrect appreciation of facts.

HELD: The Tribunal held that the CIT(A)/NFAC had failed to properly appreciate the facts and consider the submissions and evidence placed on record by the assessee, thereby not complying with the requirements of Section 250(4) and Section 250(6) of the Act. A quasi-judicial authority is required to consider all submissions and evidence before arriving at a conclusion. Accordingly, the Tribunal set aside the order of the CIT(A)/NFAC and remanded the matter for de novo adjudication in accordance with law, after proper consideration of the assessee's submissions and documents and compliance with the principles of natural justice. The assessee was directed to cooperate in the fresh proceedings. The appeal was allowed for statistical purposes in favour of the assessee.

ITAT Deletes Penalty Under Section 271AAB(1A), Holds Inadvertent F&O Loss Reporting Error Does Not Constitute Undisclosed Income

ISSUE: Whether penalty under Section 271AAB(1A) of the Income Tax Act, 1961, was leviable on the assessee for incorrectly reporting F&O loss in the income-tax return, resulting in an addition of Rs.40,688/-, when the discrepancy was voluntarily brought to the AO's notice by the assessee during assessment proceedings and was not detected from any incriminating material found during the search.

FACTS: The assessee filed her return declaring total income of Rs.17,26,620/-. During assessment proceedings, the assessee, vide submission dated 19.02.2024, voluntarily pointed out a clerical computation error whereby F&O loss was reported at Rs.19,50,335/- instead of the actual loss of Rs.19,09,647/-, resulting in an excess claim of Rs.40,688/-. The assessee requested the AO to rectify the error and also paid the consequential tax. The AO added Rs.40,688/- to the total income and levied penalty of Rs.24,410/- under Section 271AAB(1A), treating the amount as undisclosed income. The CIT(A) confirmed the penalty on the ground that the disclosure was made only during post-search assessment proceedings.

HELD: The Tribunal held that the excess F&O loss of Rs.40,688/- arising from an inadvertent clerical computation error did not constitute undisclosed income within the meaning of Section 271AAB(3)(c) of the Act. The amount was neither represented by any money, bullion, jewellery, valuable article, entry or transaction found during the search nor was it established that any false expenditure entry had been recorded in the books of account or other documents. The Tribunal distinguished an inadvertent mistake voluntarily disclosed by the assessee from a false entry detected as a result of search proceedings. Accordingly, the penalty of Rs.24,410/- imposed under Section 271AAB(1A) was held to be unsustainable and deleted. The appeal was allowed in favor of the assessee.

ITAT Quashes Reassessment as Notice Issued Beyond Three-Year Limitation Period

ISSUE: Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, by issuing notice under Section 148 on 12.04.2023 for AY 2019-20 were legally valid when the notice was issued beyond three years from the end of the relevant assessment year and the alleged escaped income was below Rs. 50 lakh.

FACTS: The assessee, Chandan Bala Maroo, filed her return of income for AY 2019-20 on 19.09.2019, declaring total income of Rs. 25,49,460 and claiming a deduction of Rs. 2,00,000 under Section 80GGC towards a donation made to Rastriya Samajwadi Party (Secular). The Assessing Officer reopened the assessment by issuing notice under Section 148 on 12.04.2023, alleging that the donation was bogus and routed through dummy concerns before being returned to the donor in cash. The AO disallowed the deduction of Rs. 2,00,000 and assessed the income at Rs. 27,52,900. The CIT(A) dismissed the assessee's appeal, prompting the assessee to challenge the validity of the reassessment proceedings before the Tribunal.

HELD: The Tribunal ruled in favor of the assessee, holding that the notice under Section 148 issued on 12.04.2023 was beyond three years from the end of AY 2019-20, while the alleged escaped income was below the statutory threshold of Rs. 50 lakh prescribed under Section 149(1)(b). Accordingly, the reopening proceedings were barred by limitation and contrary to law. Following the judicial precedents in ITO v. Mayank Khandelwal and Sachin Madhukar Fegde v. DCIT, the Tribunal quashed the reassessment order passed under Section 147 read with Section 144B. The other grounds of appeal were left unadjudicated as academic. Consequently, the appeal was allowed in favor of the assessee.

ITAT Grants Fresh Opportunity to Charitable Trust, Sets Aside Rejection of Registration under Section 12AB and Approval under Section 80G

ISSUE: Whether the CIT(E) was justified in rejecting the applications filed by Shree Purshottam Memorial and Charitable Trust for final registration under Section 12AB and approval under Section 80G of the Income Tax Act, 1961, on the ground of non-genuineness of activities, without providing adequate opportunity of being heard.

FACTS: The assessee-trust filed applications in Form No. 10AB seeking final registration under Section 12AB and approval under Section 80G of the Act. The CIT(E) rejected both applications vide orders dated 11.06.2025 on the ground of non-genuineness of activities and also cancelled the provisional registration and approval previously granted. The CIT(E) had issued a show-cause notice on 21.05.2025 requiring compliance by 28.05.2025. Since the assessee failed to respond within the stipulated period, the applications were rejected.

HELD: The ITAT observed that the assessee was not provided adequate opportunity to furnish the necessary details and supporting documents. It held that sufficient opportunity of being heard was essential to meet the ends of justice. Accordingly, the Tribunal set aside both impugned orders and restored the matters to the file of the CIT(E) for fresh adjudication after providing adequate opportunity of being heard to the assessee. Both appeals were allowed for statistical purposes. Decision in favor of the assessee.

ITAT Grants Fresh Opportunity to Gayatri Pariwar Trust for Registration under Section 12AB.

ISSUE: Whether the CIT(E), Jaipur was justified in rejecting the appellant trust’s application for registration under Section 12AB of the Income Tax Act, 1961, solely on the ground of non-registration under the Rajasthan Public Trust Act, 1959, without providing adequate opportunity of being heard.

FACTS: The appellant, Gayatri Pariwar Trust, filed an application in Form No. 10AB seeking registration under Section 12A(1)(ac)(ii) of the Act. The CIT(E) rejected the application vide order dated 19.03.2026 solely on the ground that the trust was not registered under the Rajasthan Public Trust Act, 1959. The appellant contended that inadequate time was granted to respond to the hearing notice and subsequently brought on record evidence establishing its registration under the Rajasthan Public Trust Act, 1959.

HELD: The Tribunal held that since the appellant trust had subsequently established its registration under the Rajasthan Public Trust Act, 1959, it deserved another opportunity to substantiate its claim for registration under Section 12AB. Accordingly, the impugned order was set aside and the matter was remanded to the CIT(E) for fresh adjudication in accordance with law after providing adequate opportunity of being heard to the appellant. The appeal was allowed for statistical purposes in favor of the assessee.

ITAT Sets Aside CIT(A) Order for Fresh Adjudication as Assessee Could Not Deposit Settlement Amount Under Vivad Se Vishwas Scheme, 2020

ISSUE: Whether the CIT(A) was justified in dismissing the assessee's appeal as withdrawn and infructuous merely because Form No. 3 was issued under the Vivad Se Vishwas Scheme, 2020, despite the assessee having failed to deposit the settled amount and seeking adjudication of the appeal on merits.

FACT: The assessee, Columbus Overseas LLP, engaged in the business of construction and development, challenged additions of Rs. 72,90,377 on account of brokerage expenses, Rs. 45,98,691 on account of suppression of sales consideration and Rs. 3,25,000 on account of non-deposit of VAT under the composition scheme. The assessee had opted for settlement under the Vivad Se Vishwas Scheme, 2020, and Form No. 3 was issued on 11.12.2020. However, it could not arrange or deposit the settled amount, a fact duly intimated to the CIT(A). Nevertheless, the CIT(A) dismissed the appeal as withdrawn and infructuous. Before the Tribunal, the assessee also sought condonation of delay of 51 days, explaining that the LLP had remained inactive and had not received information about the appellate order uploaded on the portal.

HELD: The Tribunal condoned the delay of 51 days, holding that the inactive status of the LLP and its inability to access the digitally uploaded order constituted sufficient cause. It further held that merely opting for settlement under the Vivad Se Vishwas Scheme, 2020, and obtaining Form No. 3 could not render the appeal infructuous when the settled amount had not been deposited and no settlement had been finalised. The assessee retained the right to have its appeal adjudicated on merits. Accordingly, the Tribunal set aside the order of the CIT(A) and restored the matter for fresh adjudication after providing adequate opportunity of being heard to the assessee. The appeal was allowed for statistical purposes in favour of the assessee.

ITAT Quashes Assessment as Addl. CIT Violates Section 144A by Issuing Prejudicial Directions Without Providing Opportunity of Hearing to Assessee

ISSUE: Whether the assessment order passed pursuant to directions issued by the Addl. Commissioner of Income Tax under Section 144A of the Income-tax Act, 1961, without providing the assessee an opportunity of being heard against the prejudicial directions, is legally sustainable.

FACTS: The Addl. CIT, Range-2, Bilaspur, issued specific directions to the Assessing Officer to treat cash deposits of Rs.14,55,307 as unexplained income under Section 69A, estimate business income by applying a net profit rate of 5%, consider other bank accounts and income, and initiate penalty proceedings. However, no opportunity of being heard was provided to the assessee before issuing these directions, despite the mandatory requirement under the first proviso to Section 144A. The assessee contended that the directions were prejudicial and violated the principles of natural justice. The Revenue relied upon the orders of the lower authorities.

HELD: The Tribunal held that the directions issued by the Addl. CIT were prejudicial to the assessee and were issued in violation of the first proviso to Section 144A, which mandatorily requires an opportunity of hearing before issuing such directions. Relying upon judicial precedents, including Maneka Gandhi v. Union of India, State of Orissa v. Dr. Binapani Dei and CIT v. Amitabh Bachchan, the Tribunal emphasized that compliance with the principles of natural justice is mandatory. Accordingly, the directions were held to be bad in law and the consequential assessment was quashed as null and void. The remaining grounds were treated as academic. Appeal allowed in favor of the assessee.

ITAT Remands Ex-Parte Appeals to CIT(A) for Fresh Adjudication, Grants Assessee One Final Opportunity

ISSUE: Whether the ITAT was justified in setting aside the ex-parte orders passed by the CIT(A)/NFAC due to non-compliance by the assessee and remanding the matters for fresh adjudication on merits in accordance with the principles of natural justice.

FACT: The CIT(A)/NFAC had dismissed the assessee's appeals for Assessment Years 2013-14 and 2016-17 through ex-parte orders due to repeated non-compliance with hearing notices issued under Section 250 of the Income Tax Act. Before the Tribunal, the Senior Departmental Representative submitted that the assessee should be granted one final opportunity to present its case before the CIT(A). Reliance was placed on the ITAT Raipur decisions in Brajesh Singh Bhadoria and Collector Mining, Kondagaon, wherein similar matters were remanded for fresh adjudication.

HELD: The ITAT, Raipur Bench, held in favour of the assessee and observed that the principles of natural justice require an effective opportunity of hearing and that the CIT(A) must adjudicate the appeal on merits through a speaking order in accordance with Section 250(4) and (6) of the Act. Accordingly, the Tribunal set aside the respective ex-parte orders and remanded both matters to the CIT(A)/NFAC for denovo adjudication. The assessee was directed to treat this as its final opportunity and duly comply with the hearing notices. The appeals were allowed for statistical purposes.

ITAT Remands BSNL VRS Exemption Claim to CIT(A), Directs Condonation of 1,485-Day Delay

ISSUE: Whether the CIT(A) was justified in dismissing the assessee’s appeal without condoning the delay of 1,485 days in challenging the intimation passed under section 143(1), where the assessee had failed to claim exemption under section 10(10B) on compensation received under the BSNL Voluntary Retirement Scheme (VRS), 2019.

FACTS: The assessee filed its return of income for AY 2021-22 declaring total income of Rs.13,40,170 but inadvertently failed to claim exemption under section 10(10B) on compensation received under the BSNL VRS, 2019. Subsequently, the assessee became aware of the ITAT Chandigarh Bench decision in Harish Kumar (BSNL Employee) v. ITO (ITA No. 42/CHD/2025, dated 30.05.2025), wherein similar compensation was held fully exempt under section 10(10B). Accordingly, the assessee filed an appeal before the CIT(A) with a delay of 1,485 days, which was dismissed in limine without condoning the delay or examining the merits.

HELD: The ITAT observed that the CIT(A) had passed an ex-parte order without examining the merits of the exemption claim. Considering the favourable decision of the Co-ordinate Bench in Harish Kumar, the Tribunal set aside the issue to the file of the CIT(A), directing it to condone the delay of 1,485 days and reconsider the assessee’s claim for exemption under section 10(10B) afresh on merits. Accordingly, the appeal was allowed for statistical purposes in favour of the assessee.

ITAT Remands Ex-Parte Appeals to CIT(A) for Fresh Adjudication, Grants Assessee One Final Opportunity

ISSUE: Whether the CIT(A) was justified in dismissing the assessee's appeals ex-parte due to non-compliance, without granting effective adjudication on merits, and whether the ITAT could restore the matters to the CIT(A) for fresh adjudication in the interest of natural justice.

FACT: The assessee filed appeals for AY 2022-23 and AY 2023-24 against additions, including an addition of Rs. 29,50,000 under Section 69 of the Income-tax Act. The CIT(A) dismissed both appeals ex-parte due to repeated non-compliance by the assessee. Before the ITAT, the Senior Departmental Representative submitted that the matters should be remanded to the CIT(A) for fresh adjudication, following the principles laid down in earlier ITAT decisions, including Brajesh Singh Bhadoria and Collector Mining, Kondagaon.

HELD: The ITAT ruled in favour of the assessee and set aside the orders of the CIT(A), remanding both matters for de novo adjudication on merits in accordance with Section 250(4) and Section 250(6) of the Income-tax Act. Relying on judicial precedents and the principles of natural justice, the Tribunal held that the assessee should be granted one final opportunity to present its case. The CIT(A) was directed to consider the assessee's submissions and pass speaking orders after providing a reasonable opportunity of being heard. The assessee's appeals were allowed for statistical purposes.

ITAT Deletes Cash Deposit Additions for AYs 2014-15 to 2017-18 for Want of Incriminating Material; Remands AYs 2018-19 and 2019-20 for Verification of Settlement Offer and Evidence

ISSUE: Whether additions under Section 69A of the Income-tax Act, 1961, on account of cash deposits in bank accounts could be sustained in unabated assessments under Section 153A in the absence of incriminating material found during search, and whether additions relating to cash deposits, cash found and jewellery for AYs 2018-19 and 2019-20 were justified.

FACTS: The assessee challenged additions made under Section 69A for AYs 2014-15 to 2019-20 following a search conducted on 19.02.2019 on Rajlaxmi Group. The Assessing Officer treated unexplained cash deposits in bank accounts as income after rejecting the assessee's explanation regarding opening cash balance, accounting income, withdrawals and gifts from relatives. For AY 2019-20, additional additions were made towards cash of Rs. 1,00,000 found during search and jewellery, silver and diamonds aggregating Rs. 4,47,314. The assessee contended that AYs 2014-15 to 2017-18 were unabated assessments and no incriminating material relating to the additions was found during search. It also submitted that the Rajlaxmi Group had offered additional income of approximately Rs. 63.36 crores before the Income Tax Settlement Commission, which covered the disputed amounts, and furnished year-wise cash flow statements and explanations regarding jewellery.

HELD: The Tribunal held in favor of the assessee for AYs 2014-15 to 2017-18, observing that these were unabated assessments and the additions were based on regular bank statements rather than incriminating material found and seized during search. Following the Supreme Court ruling in Pr. CIT v. Abhisar Buildwell (P.) Ltd., the Tribunal deleted additions of Rs. 3,10,000, Rs. 97,000, Rs. 2,73,000 and Rs. 3,40,000 for AYs 2014-15 to 2017-18, respectively. However, AYs 2018-19 and 2019-20 were restored to the Assessing Officer for limited verification of whether the disputed additions were covered by the group cash offer accepted by the Interim Board and for examination of the assessee's documentary evidence concerning cash deposits, cash found and jewellery. Any amount already offered and taxed in the hands of group entities was directed to be deleted to avoid double taxation. Accordingly, the four appeals were allowed, while the appeals for AYs 2018-19 and 2019-20 were allowed for statistical purposes.

ITAT Allows Assessee’s Appeal for Statistical Purposes; Wrong Section for Renewal Application Held to Be a Curable Defect

ISSUE: Whether the CIT(E) was justified in rejecting the application for registration under section 12AB on the grounds that the assessee had applied under the wrong clause of section 12A(1)(ac) and that the trust deed did not contain a dissolution clause.

FACTS: The assessee filed an application in Form No. 10AB dated 27.09.2025 seeking registration under section 12AB. The CIT(E) rejected the application on the grounds that section 12A(1)(ac)(iii) applies only to provisionally registered trusts and that the trust deed did not contain a dissolution clause. The assessee already held regular registration dated 10.03.2022 under section 12A(1)(ac)(i) and was eligible to apply for renewal under section 12A(1)(ac)(ii). Before the Tribunal, the assessee remained absent despite three opportunities.

HELD: The Tribunal held that filing the renewal application under the wrong sub-clause was a curable procedural defect, as the application was substantively a renewal application under section 12A(1)(ac)(ii) and was filed within the prescribed time. However, regarding the absence of a dissolution clause, the Tribunal expressed no opinion and directed the CIT(E) to examine the issue afresh after considering the trust deed and providing an opportunity of hearing to the assessee. Accordingly, the impugned order was set aside and the matter remanded to the CIT(E) for fresh adjudication. The appeal was allowed for statistical purposes in favor of the assessee.

ITAT Quashes Assessment for Want of Valid Notice under Section 143(2) Issued by Jurisdictional Assessing Officer; Appeal Allowed in Favor of Assessee.

ISSUE: Whether the assessment order passed under section 143(3) of the Income-tax Act, 1961 was legally valid when the notice under section 143(2) was issued by the Assistant Commissioner of Income Tax, Exemption Circle, Jodhpur, who did not have jurisdiction over the assessee, instead of the jurisdictional Assessing Officer, namely, the Income Tax Officer, Exemption Ward, Udaipur.

FACTS: The assessee, a society registered under the Rajasthan Society Registration Act, 1958 and holding registration under section 12AA, was engaged in imparting education and filed its return declaring nil income for AY 2016-17. The Assistant Commissioner of Income Tax, Exemption Circle, Jodhpur issued notice under section 143(2) dated 10.08.2017. Subsequently, the case records were transferred to the Income Tax Officer, Exemption Ward, Udaipur, who was the Assessing Officer having jurisdiction over the assessee. The assessment was completed under section 143(3) on 24.12.2018, determining total income at Rs.38,12,902 after disallowing brought forward losses of Rs.88,48,399 and depreciation of Rs.97,260. The assessee challenged the validity of the assessment on the ground that the mandatory notice under section 143(2) had not been issued by the jurisdictional Assessing Officer within the prescribed time. Reliance was placed on the Delhi High Court decision in SK Industries v. ACIT [2022] 141 taxmann.com 568.

HELD: The Tribunal held that the notice under section 143(2) must be issued by the Assessing Officer having jurisdiction over the assessee within the prescribed time limit. Since the jurisdiction vested with the Income Tax Officer, Exemption Ward, Udaipur, the notice issued by the Assistant Commissioner of Income Tax, Exemption Circle, Jodhpur was without jurisdiction. The subsequent transfer of assessment records and issuance of notice under section 142(1) could not cure the jurisdictional defect or substitute the mandatory notice under section 143(2). Following the decision in SK Industries v. ACIT, the Tribunal held that no valid notice under section 143(2) had been issued by the jurisdictional Assessing Officer within the prescribed time. Accordingly, the assessment order dated 24.12.2018 was quashed as unsustainable in law. The remaining grounds concerning brought forward losses and depreciation were left unadjudicated as academic. The appeal was allowed in favor of the assessee.

ITAT Remands Ex-Parte Assessment to AO for Fresh Adjudication After Granting Reasonable Opportunity to Assessee

ISSUE: Whether the appeal could be decided against the assessee when both the assessment order passed under section 144 and the appellate order passed by NFAC were ex-parte, without providing a reasonable opportunity of being heard and condoning the delay of 17 days in filing the appeal.

FACTS: The assessee, an individual, filed its return of income for AY 2024-25 declaring total income of Rs.1,00,77,860. The case was selected for scrutiny under CASS on account of a large exemption claimed under the category of others in Schedule E1 under the Old Tax Regime. Due to non-compliance with the notices, the Assessing Officer passed an ex-parte assessment order under section 144, determining total income at Rs.3,97,74,964. The CIT(A)/NFAC dismissed the assessee's appeal through an ex-parte order dated 17.07.2026 without condoning the delay of 17 days. Aggrieved, the assessee approached the Tribunal seeking an opportunity to present its case.

HELD: The Tribunal held that since both the assessment order and the appellate order were passed ex-parte, the matter required fresh examination in the interest of justice and fair play. Accordingly, the Tribunal remitted the matter to the file of the Assessing Officer for fresh adjudication after providing a reasonable opportunity of being heard to the assessee. The assessee was also directed to comply with the notices issued during the remand proceedings. The appeal was allowed for statistical purposes, in favor of the assessee.

ITAT Dismisses Assessee’s Appeal Against Section 263 Order Due to Persistent Non-Prosecution

ISSUE: Whether the appeal filed by the assessee against the order passed by the PCIT under section 263 of the Income-tax Act, 1961, could be dismissed for non-prosecution due to repeated non-appearance before the Tribunal.

FACTS: The assessee filed an appeal for AY 2021-22 against the order dated 23.03.2025 passed by the PCIT under section 263, whereby the assessment order dated 23.12.2022 passed under section 143(3) read with section 144B was held to be erroneous and prejudicial to the interests of the Revenue. The PCIT directed the AO to conduct necessary inquiries and verification and pass a fresh assessment order. Despite issuance of ten consecutive notices, the assessee failed to appear or take any steps to pursue the appeal. The Revenue sought dismissal of the appeal for non-prosecution.

HELD: The Tribunal observed that the Registry had provided sufficient opportunities to the assessee through ten consecutive notices, but the assessee consistently failed to appear. Considering the persistent non-appearance and lack of interest in pursuing the appeal, the Tribunal found no justification for keeping the matter pending and dismissed the appeal for non-prosecution. Accordingly, the appeal was dismissed in favour of the Revenue.

ITAT Holds Appeal Filed During COVID-19 Exclusion Period Was Within Limitation; Remands Expense Disallowances for Fresh Verification

ISSUE: Whether the CIT(A) was justified in dismissing the assessee’s appeal as time-barred by treating it as delayed by 194 days, despite the Supreme Court’s extension of limitation during the COVID-19 pandemic, and whether the disallowance of commission expenses of Rs. 41,51,700 and sales promotion expenses of Rs. 2,81,973 was justified.

FACTS: The assessee, engaged in the business of supply of manpower, filed its return declaring total income of Rs. 5,64,490. The AO disallowed commission expenses of Rs. 41,51,700 and sales promotion expenses of Rs. 2,81,973 for want of supporting evidence, alleging non-compliance with notices. The CIT(A) dismissed the assessee’s appeal in limine as delayed by 194 days. Before the Tribunal, the assessee contended that the entire limitation period fell within the period excluded by the Supreme Court during COVID-19 and that replies dated 30.09.2020 and 27.03.2021, along with supporting documents, had been uploaded on the e-proceedings portal.

HELD: The Tribunal held the issue in favor of the assessee, observing that the Supreme Court, in In Re: Cognizance for Extension of Limitation [2022] 441 ITR 722 (SC), excluded the period from 15.03.2020 to 28.02.2022 for computing limitation. Since the assessment order was served and the appeal was filed within the excluded period, there was no delay and the question of condonation under section 249(3) did not arise. Accordingly, the dismissal by the CIT(A) was unjustified. On merits, the Tribunal restored the matter to the AO for fresh examination of commission and sales promotion expenses after verifying the replies and supporting documents and providing reasonable opportunity of hearing. The appeal was allowed for statistical purposes.

ITAT Rules in Favor of Assessee: Charitable Trust’s Income Taxable at Normal AOP Rates, Not Maximum Marginal Rate

ISSUE: Whether the surplus income of an unregistered charitable institution, whose exemption under sections 11 and 12 of the Income Tax Act, 1961 was denied for want of registration under section 12A, could be taxed at the maximum marginal rate under section 167B or at the normal rates applicable to an association of persons under section 164(2), with the benefit of the basic exemption limit.

FACTS: The assessee, a charitable institution engaged in medical relief and allied activities, was denied exemption under sections 11 and 12 for assessment years 2018-19 and 2019-20 due to non-registration under section 12A. The Assessing Officer taxed the net surplus of Rs. 1,53,756 for AY 2018-19 and Rs. 1,86,658 for AY 2019-20 at the maximum marginal rate. The assessee's rectification applications under section 154 were rejected, and the CIT(A) upheld the application of section 167B on the presumption that the assessee was liable to tax at the maximum marginal rate.

HELD: The ITAT ruled in favor of the assessee, holding that section 164(2) specifically governs income derived from property held under trust wholly for charitable or religious purposes, even where exemption under sections 11 and 12 is unavailable due to non-registration under section 12A. Such income must be taxed at the normal rates applicable to an association of persons, including the benefit of the basic exemption limit. The maximum marginal rate under the proviso to section 164(2) applies only where exemption is denied due to violations of section 13(1)(c) or section 13(1)(d). Since the assessee had no members entitled to shares in its income, section 167B was inapplicable. Accordingly, the AO was directed to recompute tax on the respective net surpluses and grant consequential relief. Both appeals were allowed.

ITAT Sets Aside Penalty Order Under Section 271(1)(c) for Fresh Decision After Disposal of Pending Quantum Appeal

ISSUE: Whether the penalty of Rs. 2,71,772 levied under Section 271(1)(c) of the Income Tax Act, 1961, could be sustained when the quantum appeal challenging the underlying addition of Rs. 12,09,516 was still pending adjudication before the CIT(A).

FACT: The Assessing Officer levied penalty under Section 271(1)(c) on the assessee for allegedly concealing income arising from unexplained time deposits of Rs. 12,09,516 in her bank account. The CIT(A) confirmed the penalty without first deciding the assessee's pending quantum appeal against the underlying assessment under Section 147/144. Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD: The Tribunal held in favour of the assessee that the penalty appeal could not be decided independently while the quantum appeal forming its basis remained pending. Since the outcome of the quantum appeal would have a direct bearing on the penalty proceedings, the CIT(A)'s order was set aside and the matter was remanded for fresh adjudication after disposal of the quantum appeal, with adequate opportunity of hearing to the assessee. Accordingly, the assessee's appeal was allowed for statistical purposes.

ITAT Remands Ex-Parte Appeal to CIT(A) for Fresh Adjudication, Granting Assessee One Final Opportunity

ISSUE: Whether the ex-parte order passed by the CIT(A) dismissing the assessee's appeal due to non-compliance with hearing notices could be sustained, or whether the matter should be remanded for fresh adjudication on merits in the interest of natural justice.

FACTS: The assessee challenged the order of the CIT(A), Raipur-3, dated 30.06.2026 for AY 2019-20. The CIT(A) had passed an ex-parte order observing that despite repeated hearing opportunities, the assessee failed to appear or file written submissions and supporting evidence. Before the Tribunal, the Revenue submitted that the assessee should be granted one final opportunity to represent its case before the CIT(A). Reliance was placed on earlier ITAT decisions, particularly Brajesh Singh Bhadoria and Collector Mining, Kondagaon, wherein similar ex-parte matters were remanded for fresh adjudication.

HELD: The Tribunal held the issue in favour of the assessee and observed that the first appellate authority is required to adjudicate the appeal on merits by passing a speaking order in accordance with Section 250(4) and (6) of the Income-tax Act. Considering the principles of natural justice and the possibility of circumstances beyond the assessee's control, the Tribunal set aside the CIT(A)'s order and remanded the matter for de novo adjudication. The assessee was directed to treat this as the final opportunity and duly comply with future hearing notices. The CIT(A) was directed to consider the assessee's submissions and pass a speaking order after providing a reasonable opportunity of being heard. Accordingly, the appeal was allowed for statistical purposes.

ITAT Remands Ex-Parte Appeals to CIT(A) for Fresh Adjudication, Grants Assessee One Final Opportunity

ISSUE: Whether the CIT(A) was justified in dismissing the assessee’s appeals for A.Ys. 2016-17 and 2019-20 ex-parte due to non-compliance, without adjudicating the issues on merits, and whether the matters warranted remand for fresh adjudication in the interest of natural justice.

FACTS: The assessee preferred appeals against the orders of the CIT(A), Raipur-3, dated 17.08.2026, concerning additions of Rs.88,56,427 and other disputed issues for A.Ys. 2016-17 and 2019-20. The CIT(A) dismissed both appeals ex-parte on account of non-compliance despite issuing multiple hearing notices. Before the ITAT, none appeared for the assessee, and the adjournment petition was rejected. The Revenue supported remanding the matters to the CIT(A), relying upon earlier decisions of the Raipur Tribunal, including Brajesh Singh Bhadoria and Collector Mining, Kondagaon, wherein one final opportunity was granted to the assessee to substantiate its case on merits.

HELD: In favor of the assessee, the ITAT set aside the respective orders of the CIT(A) and remanded both matters for de novo adjudication in accordance with law. Following its earlier decisions, the Tribunal held that an ex-parte dismissal should not deprive the assessee of a fair opportunity to substantiate its grounds of appeal, particularly in view of the principles of natural justice and the requirements of Section 250(4) and (6) of the Income-tax Act. The CIT(A) was directed to consider the assessee's submissions and pass reasoned speaking orders after providing a reasonable opportunity of hearing. However, the Tribunal clarified that this would be the final opportunity and directed the assessee to duly comply with the hearing notices. Both appeals were accordingly allowed for statistical purposes.

ITAT Remands Trust Registration Application to CIT(E) for Fresh Consideration After Finding Inadequate Opportunity of Hearing

ISSUE: Whether the CIT(E) was justified in rejecting the assessee’s application for registration under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961, on the grounds of filing the application under the wrong clause, non-registration under the Rajasthan Public Trust Act, 1959, and failure to establish the genuineness of activities.

FACTS: The assessee challenged the order dated 24.09.2025 passed by the CIT(E), rejecting its application for registration under Section 12A(1)(ac)(iii) of the Act. The CIT(E) rejected the application on the grounds that it was filed under an incorrect clause, the assessee was not registered under the Rajasthan Public Trust Act, 1959, and the genuineness of its charitable activities was not established due to non-production of complete bills and vouchers. The assessee contended that only two notices were issued and that it had furnished voluminous documentary evidence establishing its educational activities, expenditure, students, staff, properties and other relevant details. It further submitted that provisional registration had been granted twice earlier and that the application was filed under the same clause bona fide.

HELD: The Tribunal held in favor of the assessee and observed that adequate opportunity of hearing was not provided to establish registration under the Rajasthan Public Trust Act and the genuineness of its charitable activities. It further held that merely mentioning an incorrect clause in the application would not invalidate the same, as it was a curable defect. The CIT(E) was directed to verify the circumstances in which the application was filed under the incorrect clause, examine the earlier provisional registrations, consider the evidence regarding charitable activities and grant adequate opportunity to the assessee to remove the deficiencies. Accordingly, the matter was restored to the CIT(E) for fresh consideration, and the appeal was allowed for statistical purposes.

ITAT Raipur Remands Ex-Parte Appeal to CIT(A) for Fresh Adjudication, Grants Assessee One Final Opportunity

ISSUE: Whether the CIT(A) was justified in dismissing the assessee's appeal ex-parte for non-compliance with hearing notices without adjudicating the grounds of appeal on merits, and whether the matter should be remanded for fresh adjudication in the interest of natural justice.

FACTS: The assessee challenged the addition of Rs.8,11,500/- sustained by the CIT(A), Raipur-3, vide order dated 17.08.2026 for AY 2020-21. The CIT(A) dismissed the appeal ex-parte after the assessee failed to respond to three hearing notices. Before the Tribunal, the assessee's adjournment petition was rejected. The Revenue submitted that, considering the ex-parte nature of the appellate order and the principles of natural justice, one final opportunity should be granted to the assessee to present its case on merits. The Tribunal also considered its earlier decisions in Brajesh Singh Bhadoria, Collector Mining, Kondagaon and Amit Singh Thakur.

HELD: The ITAT Raipur held that the CIT(A) must adjudicate the appeal on merits through a speaking order in accordance with Section 250(4) and (6) of the Income-tax Act, 1961. Following its earlier decisions and the principles of natural justice, the Tribunal set aside the order of the CIT(A) and remanded the matter for de novo adjudication. The assessee was directed to treat this as the final opportunity and duly comply with the hearing notices, while the CIT(A) was directed to provide a reasonable opportunity of being heard and decide the appeal on merits. Accordingly, the appeal was allowed for statistical purposes in favour of the assessee.

ITAT Deletes Ad Hoc Disallowance of Breakage Expenses of Rs. 14,52,382, Holds That Audited Books Cannot Be Disregarded Merely Due to Lower Net Profit

ISSUE: Whether the Assessing Officer was justified in making an ad hoc disallowance of 20% of breakage expenses amounting to Rs. 14,52,382, which was claimed by the assessee in her audited books of accounts.

FACT: The assessee, engaged in running a licensed wine shop, declared turnover of Rs. 4,03,28,175 and net profit of 0.96% for AY 2017-18. The Assessing Officer accepted the audited books of accounts but disallowed 20% of the breakage expenses on an ad hoc basis, which was confirmed by the CIT(A). Before the Tribunal, the assessee contended that the breakage expenses were duly recorded in the audited financial statements and that the disallowance was unjustified. The Tribunal also condoned the delay of 105 days in filing the appeal due to the death of the assessee's father-in-law, who was handling her income tax matters.

HELD: In favour of the assessee. The Tribunal held that merely because another businessman engaged in the same line of business had declared a higher net profit, ad hoc disallowance could not be made, as profitability depends upon various factors, including business expertise, trained staff and marketing strategies. Since the assessee's audited books of accounts were accepted by the Assessing Officer and the breakage expenses were duly reflected in the audited financial statements, the ad hoc disallowance was unsustainable. Accordingly, the disallowance of Rs. 14,52,382 was deleted and the assessee's appeal was allowed.

ITAT Allows Full Leave Encashment Exemption of Rs. 9.54 Lakh, Applies Enhanced Rs. 25 Lakh Limit Retrospectively; 442-Day Delay Condoned

ISSUE: Whether the assessee, a retired employee of Bank of Baroda, was entitled to exemption of the entire leave encashment of Rs. 9,54,104 under section 10(10AA)(ii) of the Income Tax Act, 1961, in view of CBDT Notification No. 31/2023 dated 24.05.2023, which enhanced the exemption limit from Rs. 3,00,000 to Rs. 25,00,000. The issue also involved condonation of a delay of 442 days in filing the appeal.

FACTS: The assessee received leave encashment of Rs. 9,54,104 upon retirement from Bank of Baroda and claimed the entire amount as exempt in the return for AY 2020-21. However, CPC restricted the exemption to Rs. 3,00,000 and made an adjustment of Rs. 6,54,104 under section 143(1). The Ld. Addl. CIT(A) upheld the adjustment. Before the Tribunal, the assessee explained that the delay of 442 days occurred due to lack of awareness and technical confusion, and subsequently filed the appeal upon obtaining proper legal advice. The assessee contended that the enhanced exemption limit of Rs. 25,00,000 under CBDT Notification dated 24.05.2023 should also apply to leave encashment received in earlier assessment years. The Revenue opposed condonation of delay and supported the orders of the lower authorities.

HELD: The Tribunal condoned the delay of 442 days, holding that reasonable cause had been established and that the assessee should not be deprived of adjudication on merits. On the substantive issue, following the decisions of coordinate Benches, including Renu Moongia, Ram Charan Gupta, Govind Chhatwani and Vijay Kumar Jain, the Tribunal held that the enhanced exemption limit of Rs. 25,00,000 under CBDT Notification No. 31/2023 dated 24.05.2023 was applicable to the assessee's claim relating to an earlier assessment year. Since the leave encashment received of Rs. 9,54,104 was below the enhanced limit, the assessee was entitled to exemption of the entire amount under section 10(10AA). Accordingly, the order of the Ld. Addl. CIT(A) was set aside and the Jurisdictional Assessing Officer was directed to allow the exemption. The appeal was allowed in favor of the assessee and against the Revenue.