Addition of Rs. 2.15 Crore Based on Seized Loose Sheets—Matter Restored to CIT(A) to Consider Outcome of Developer’s Appeal

ISSUE: Whether the addition of Rs. 2,15,00,000 as alleged cash/on-money received by Sonopix Productions Private Limited from the developer could be sustained solely on the basis of seized loose sheets recovered from the premises of the developer, particularly when the assessee denied receiving any cash and the developer’s related appellate proceedings concerning the same seized material were still pending.

FACT: Sonopix Productions Private Limited, the landowner of the “Giza Polis” project, entered into a development agreement with Suchir India Constructions Private Limited. During a survey at the developer’s premises, certain documents were found which allegedly recorded cash payments to the assessee. Although the assessee’s Managing Director categorically denied receiving any cash or on-money, the Assessing Officer relied on the seized material and added Rs. 2,15,00,000 as unexplained receipt for A.Y. 2023-24. The CIT(A) confirmed the addition. Before the Tribunal, the assessee contended that the loose sheets were recovered from a third party and were unsupported by independent corroborative evidence. It also challenged the denial of cross-examination of the developer’s Managing Director.

HELD: The Tribunal rejected the assessee’s contention regarding denial of cross-examination because the developer’s Managing Director had himself denied making any cash payment and the Revenue had not relied upon his statement for making the addition; therefore, no violation of natural justice arose. However, on the merits of the addition, the Tribunal observed that the developer’s appeal concerning the same seized documents was pending before the CIT(A), and the findings in those proceedings could directly affect the assessee’s case. To avoid conflicting findings on the same seized material, the Tribunal set aside the issue and restored it to the CIT(A) for fresh adjudication after considering the outcome of the developer’s appellate proceedings and providing adequate opportunity of hearing to the assessee. The Tribunal expressed no opinion on the merits, and the assessee’s appeal was allowed for statistical purposes.

Ex-parte order of CIT(A) set aside for violation of natural justice; 588-day delay condoned and matter restored for fresh adjudication.

ISSUE: Whether the ex-parte order passed by the CIT(A)/NFAC dismissing the assessee’s appeal for non-prosecution, without establishing proper service of notices and without providing an effective opportunity of hearing, was sustainable under Section 250 of the Income-tax Act, 1961, and whether the delay of 588 days in filing the appeal before the Tribunal deserved to be condoned.

FACT: The CIT(A)/NFAC dismissed the assessee’s appeal ex-parte due to non-compliance with notices issued during the appellate proceedings. The assessee filed the Tribunal appeal with a delay of 588 days and explained that the registered e-mail address and mobile number were handled by a junior secretary who inadvertently failed to forward the notices and communications to the concerned person, resulting in failure to represent the case effectively. The Tribunal accepted the explanation for delay by applying the liberal approach laid down by the Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC). It also observed that nothing on record demonstrated that the appellate notices had actually been served upon or received by the assessee.

HELD: The Tribunal condoned the delay of 588 days, holding that sufficient cause had been shown and that substantial justice required admission of the appeal. It further held that the right of hearing under Section 250(2)(a) is a mandatory statutory requirement embodying the principles of natural justice and is not a mere formality. Since the CIT(A) had passed the order ex-parte without sufficient opportunity of hearing and without material establishing proper service of notices, the matter was restored to the CIT(A) for fresh adjudication on merits after providing an effective opportunity of hearing. The assessee was directed to furnish the necessary submissions and detailed material before the CIT(A) within 60 days of the Tribunal’s order. Accordingly, the appeal was allowed for statistical purposes.

ITAT, Delhi: Registration under Sections 12AB and 80G Cannot Be Denied Without Proper Examination of Charitable Objects and Genuineness of Activities

ISSUE: Whether the Commissioner of Income Tax (Exemption) was justified in rejecting the assessee's applications for registration under Sections 12AB and 80G on the ground that its skill development and vocational training activities did not constitute "education" under Section 2(15) of the Income Tax Act, 1961, and that the genuineness of its activities was not established.

FACT: The assessee, a charitable trust established for promoting education, skill development, vocational training, and livelihood enhancement for rural and underprivileged youth, applied for registration under Sections 12AB and 80G. The Commissioner rejected the applications relying on the Supreme Court's decision in Noble Education Society v. CIT, holding that the assessee's activities did not amount to "education" under Section 2(15) and that the genuineness of its activities had not been established. The assessee contended that at the stage of registration, the authority is required only to examine whether the objects are charitable and whether the activities are genuine, both of which stood satisfied. It further argued that even if its activities were not strictly "education," they fell within the expression "advancement of any other object of general public utility." The Departmental Representative could not effectively rebut these submissions.

HELD: The Tribunal held that, in the interests of justice, the assessee should be granted a further opportunity to substantiate its case before the Commissioner of Income Tax (Exemption). It observed that the applications required fresh consideration in light of the decision of the Chandigarh Bench in Institute of Model Education Society v. CIT, which clarifies the scope of inquiry at the stage of registration. Accordingly, the Tribunal set aside the impugned orders and remanded the matter to the Commissioner for fresh adjudication after providing the assessee a reasonable opportunity of being heard and considering all relevant evidence. The appeals were allowed for statistical purposes.

ITAT, Delhi: Penalty U/s. 271B Deleted as Delay in Tax Audit Was Due to Director Disputes and Court-Supervised Operations; Reasonable Cause U/s. 273B Established, 06-08-2026

ISSUE: Whether penalty U/s. 271B of the Income Tax Act, 1961 could be sustained where the assessee failed to obtain and furnish the tax audit report within the prescribed time due to prolonged disputes among its directors, litigation before the Delhi High Court and the NCLT, and consequent inability to operate its business, bank accounts, and books of account, and whether such circumstances constituted a reasonable cause U/s. 273B of the Act.

FACT: The assessee's assessment for Assessment Year 2016-17 was completed U/s.s 147/144/144B, following which penalty proceedings U/s. 271B were initiated for failure to obtain and furnish the tax audit report within the prescribed time U/s. 44AB. The Assessing Officer imposed a penalty of Rs. 1,50,000, which was confirmed by the CIT(A). The assessee contended that severe disputes among its directors had resulted in litigation before the Delhi High Court and the NCLT, rendering its business operations, bank accounts, and books of account non-functional. Consequently, the return of income and tax audit could not be completed within time. The assessee also produced orders of the Delhi High Court demonstrating that tax payments for the relevant years were made under the Court's directions and that the Company was functioning under judicial supervision due to circumstances beyond its control.

HELD: The Tribunal held that the assessee had established a reasonable cause for the delay in obtaining the tax audit and filing the return. The circumstances explained by the assessee were fully supported by the orders of the Delhi High Court and the pending proceedings before the NCLT, and therefore could not be doubted. Invoking Section 273B, the Tribunal observed that no penalty is leviable where the assessee proves reasonable cause for the default. It found that the Assessing Officer and the CIT(A) had ignored the relevant facts and judicial orders and had imposed the penalty without proper appreciation of the exceptional circumstances. Accordingly, the Tribunal held that the penalty U/s. 271B was unsustainable in law, quashed the penalty of Rs. 1,50,000, and allowed the assessee's appeal.

ITAT Restores Section 80P Deduction Dispute to AO, Imposes Rs.1,000 Cost for Non-Prosecution

Issue: Whether the ex parte order passed by the CIT(A) confirming additions and denying the assessee’s claim of deduction under section 80P should be sustained, or whether the matter should be restored for fresh adjudication after granting another opportunity of hearing.

Facts: The assessee, a co-operative society, filed its return for AY 2021-22 declaring total income of Rs.22,77,270 and claimed deduction under section 80P. The assessment under section 143(3) read with section 144B determined total income at Rs.3,03,41,867 after making various additions and disallowances. The CIT(A) dismissed the appeal ex parte after the assessee failed to respond despite four hearing opportunities and confirmed the assessment. Before the Tribunal, the assessee sought one final opportunity to substantiate its claim, while the Revenue opposed any further indulgence, contending that sufficient opportunities had already been granted.

Held: The Tribunal held that although the assessee failed to avail the opportunities provided by the CIT(A), the dispute relating to deduction under section 80P should be decided on merits. Accordingly, it set aside the ex parte appellate order and restored the matter to the Assessing Officer for fresh adjudication after granting a reasonable opportunity of hearing. As a condition for the relief, the Tribunal directed the assessee to deposit Rs.1,000 in the Prime Minister’s National Relief Fund and produce proof of payment before the Assessing Officer. The assessee was also directed to cooperate with the proceedings, failing which the Assessing Officer would be at liberty to decide the matter based on the available record. The appeal was allowed for statistical purposes.

ITAT, Ahmedabad: Reassessment Based on Material Seized from Another Person Must Be Initiated Under Section 153C and Not Section 147

ISSUE: Whether reassessment proceedings initiated under Sections 147 and 148 of the Income Tax Act, 1961, based on documents seized during a search conducted on another person, were valid when the proceedings ought to have been initiated under Section 153C of the Act.

FACT: During a search on Shri Vipul Jasoliya, documents recording transactions with the assessee were seized and forwarded to the assessee’s Assessing Officer. On the basis of those documents, the assessments for AYs 2013-14 to 2017-18 were reopened under Sections 147 and 148. The assessee contended that Sections 153A and 153C constitute a special code having overriding effect over the general reassessment provisions. The delayed appeals were condoned in the interests of justice.

HELD: The Tribunal held that since the reassessments were founded entirely on material seized during the search of another person and forwarded to the assessee’s Assessing Officer, the proper course was to proceed under Section 153C. Sections 153A and 153C contain non-obstante clauses and override Sections 147 and 148. Consequently, the reassessment orders passed under Section 147 were without jurisdiction and were quashed. All the assessee’s appeals were allowed, while the factual merits were left undecided as academic.

Ex Parte Order of CIT(A) Set Aside; Matter Remanded for Fresh Adjudication After Granting Reasonable Opportunity of Hearing

Issue: Whether the ex parte order passed by the Ld. CIT(A) dismissing the assessee's appeal for non-compliance with hearing notices, without adjudicating the case on merits, was justified, and whether the matter should be restored for fresh consideration in the interest of natural justice.

Facts: The assessee, an individual, filed the return of income for AY 2020-21 on 13.09.2020 under section 44ADA declaring total income of Rs.4,87,580/-. Pursuant to a search under section 132 in the case of RK Group, Rajkot, the Investigation Wing allegedly found digital evidence indicating an unaccounted cash payment of Rs.1,76,000/- relating to a jointly booked property. Based on this information, the Assessing Officer reopened the assessment under section 147 by issuing notice under section 148 on 31.03.2024. The assessee filed the return declaring the same income, but the Assessing Officer treated the alleged cash payment as unexplained investment under section 69 read with section 115BBE and completed the reassessment determining total income at Rs.6,63,580/-. The assessee's appeal before the Ld. CIT(A) was dismissed ex parte due to non-compliance with hearing notices. Before the Tribunal, the assessee contended that the notices were not duly received, preventing effective representation, while the Revenue supported the orders of the lower authorities.

Held: The Tribunal held that, in the interest of natural justice, the assessee should be granted one more opportunity to present the case before the Ld. CIT(A). Accordingly, the ex parte order of the Ld. CIT(A) was set aside, and the matter was restored to his file for fresh adjudication in accordance with law after providing the assessee with a reasonable opportunity of being heard. The assessee was directed to cooperate with the appellate proceedings and comply with all notices without seeking unnecessary adjournments. Consequently, the appeal was allowed for statistical purposes.

Revenue's Appeal Dismissed: ITAT Upholds Deletion of Rs. 27 Lakh Addition on Loan Repayment Under Section 69A

Issue: Whether the Assessing Officer was justified in treating the repayment of Rs. 27,00,000 made by the assessee towards an earlier unsecured loan as unexplained money under section 69A of the Income Tax Act, based solely on the allegation that the lender was an accommodation entry provider.

Facts: The assessee, an LLP engaged in the construction business, had borrowed Rs. 27,00,000 from M/s. Mansarovar Financial Services Ltd. (later renamed M/s. Shivansh Finserve Ltd.) in earlier years and repaid the loan during the relevant assessment year. The assessment was reopened following a search on alleged accommodation entry operators, Jignesh Shah and Sanjay Shah. The Assessing Officer treated the loan repayment as unexplained money under section 69A, alleging that the loan was merely an accommodation entry. However, the assessee produced loan confirmations, bank statements, and income tax records establishing the genuineness of the transaction, and no evidence of any cash exchange was found during the search or through independent enquiry.

Held: The ITAT upheld the order of the CIT(A) deleting the addition of Rs. 27,00,000. It held that the Assessing Officer's addition was based only on presumption without any supporting evidence. The Tribunal observed that the identity, source, and creditworthiness of the lender were not disputed and that repayment of a loan could not be treated as unexplained money under section 69A in the absence of incriminating material. Even assuming the Revenue's allegation to be correct, any addition could only arise in the year the loan was received, not in the year of its repayment. Accordingly, the Revenue's appeal was dismissed.

ITAT Quashes Section 263 Revision Order, Holds Non-Initiation of Section 270A Penalty Proceedings Cannot Make Assessment Order Erroneou

Issue: Whether the Principal Commissioner of Income Tax (Central), Ahmedabad was justified in invoking revisionary jurisdiction under section 263 of the Income Tax Act, 1961 on the ground that the Assessing Officer failed to initiate penalty proceedings under section 270A of the Act while completing assessment under section 143(3) for A.Y. 2022-23.

Facts: The assessee had declared income of Rs.6,06,500/- from contractual receipts of Rs.3,38,54,329/- received from Urmin Group entities. During a search under section 132, it was found that the contractual transactions were allegedly bogus. The Assessing Officer rejected the books of accounts, disallowed TDS credit of Rs.3,38,545/- and completed assessment at Rs.9,45,045/-. Subsequently, the PCIT held that the assessee had misreported income and that non-initiation of penalty proceedings under section 270A by the AO rendered the assessment order erroneous and prejudicial to the interest of revenue. Accordingly, the PCIT set aside the assessment order with a direction to initiate penalty proceedings.

Held: The Tribunal allowed the assessee’s appeal and quashed the order passed under section 263. It held that the PCIT failed to establish how the assessment order was erroneous and prejudicial to the interest of revenue. The Tribunal observed that penalty proceedings under section 270A are discretionary and non-initiation of penalty proceedings cannot by itself make the assessment order erroneous under section 263. Further, since the alleged TDS addition was already included in the disclosed turnover and there was no under-reporting of income as per section 270A(3), no penalty could have been levied. Therefore, the revisionary order passed by the PCIT was set aside and the appeal of the assessee was allowed.

Addition for Alleged Unaccounted Purchases Deleted as Search Data Alone, Without Corroborative Evidence or Cross-Examination, Cannot Sustain Addition

Issue: Whether an addition on account of alleged unaccounted purchases, based solely on data recovered from the accounting software of a third party during a search, could be sustained in the absence of corroborative evidence and without granting the assessee an opportunity to cross-examine the third party.

Facts: The assessee appealed against the order of the Ld. CIT(A), NFAC, confirming an addition of Rs. 43,04,018/- for AY 2023-24 on account of alleged unaccounted purchases from M/s Tirth Gold. The addition was made based on entries found in accounting software recovered during a search conducted on M/s Tirth Gold under section 132 of the Act. The assessee denied having made such purchases and stated that it had purchased goods worth only Rs. 20,038/-, which were duly recorded in its books of account. The partner of M/s Tirth Gold admitted to certain unaccounted transactions generally but did not specifically implicate the assessee. No cash trail, excess stock, or evidence of corresponding unaccounted sales by the assessee was found, and the assessee was not afforded an opportunity to cross-examine the partner of M/s Tirth Gold.

Held: The Tribunal held that the addition was unsustainable. It observed that the mere presence of the assessee's name in the accounting software of the searched party, without independent corroborative evidence, was insufficient to establish unaccounted purchases. The Tribunal further held that the burden could not be placed on the assessee to prove a negative fact, namely that it had not entered into the alleged transactions. In the absence of any cash trail, excess stock, evidence of unaccounted sales, or a specific admission by the searched party implicating the assessee, and since the assessee was denied the opportunity to cross-examine the concerned person, the addition lacked evidentiary support. Accordingly, the addition of Rs. 43,04,018/- was deleted and the assessee's appeal was allowed.

ITAT, Delhi: Deletes Rs. 34.20 Lakh Section 69A Addition Based on Unverified WhatsApp Chats, Holds Uncorroborated Chats and Statements Alone Insufficient to Sustain Addition, 05-08-2026

Issue: Whether the addition of Rs. 34,20,000/- made under section 69A read with section 115BBE of the Income Tax Act, 1961, on the basis of alleged WhatsApp chats between the Assessee and his Chartered Accountant, could be sustained when the electronic evidence was not supplied to the Assessee and the addition was primarily based on statements recorded during search proceedings.

Facts: A search was conducted at the premises of M/s United Exim Pvt. Ltd. on 05.11.2022, during which the mobile phone of the Assessee, being a director of the company, was seized. Based on WhatsApp chats allegedly recovered from the mobile phone, the Assessing Officer prepared an excel sheet and alleged that the Assessee had received cash of Rs. 34,20,000/- from his Chartered Accountant. The Assessing Officer made addition under section 69A read with section 115BBE while completing assessment under section 143(3). The Assessee contended that the alleged chats were never provided, no independent enquiry was conducted, no opportunity to cross-examine the Chartered Accountant was granted, and there was no evidence establishing the source or genuineness of the alleged transactions. The CIT(A) upheld the addition.

Held: The Tribunal held that the addition could not be sustained as the assessment order was based mainly on statements and not on any corroborative electronic evidence. The Assessing Officer failed to provide the alleged WhatsApp chats relied upon for making the addition, despite the Assessee specifically requesting the same. The Tribunal observed that even if strict provisions of the Evidence Act were not applicable to income-tax proceedings, the guidelines prescribed under the CBDT Digital Evidence Manual, 2014 regarding collection, preservation, examination, and reliance upon digital evidence were required to be substantially followed. Since the alleged digital evidence was neither made part of the assessment order nor properly confronted to the Assessee, and the statements remained uncorroborated, the addition of Rs. 34,20,000/- was deleted and the appeal of the Assessee was allowed.

ITAT, Delhi: Addition Based on Allegedly Fraudulent Bank Account Remanded for Detailed Enquiry

ISSUE: Whether the addition of Rs. 1,17,33,995 under Section 69 of the Income-tax Act, 1961, based on deposits in an allegedly fraudulent bank account opened in the assessee trust’s name, was sustainable without a proper enquiry into the alleged forgery and the actual beneficiaries.

FACT: A Punjab National Bank account opened in the assessee trust’s name contained deposits totalling Rs. 1,17,33,995. The assessee claimed that outsiders had opened and operated the account using forged KYC documents, signatures, and photographs. Although the assessee lodged an FIR and produced a signature-comparison report, the Assessing Officer treated the deposits as unexplained income, and the CIT(A) confirmed the addition without conducting a detailed enquiry.

HELD: The Tribunal held that a proper and detailed enquiry was necessary to determine whether the bank account had been opened using forged documents. Since the lower authorities had not adequately examined the FIR, signature-comparison report, bank officials, or alleged beneficiaries, the matter was restored to the CIT(A) for fresh adjudication after conducting the necessary enquiries and providing the assessee an opportunity of hearing. The appeal was allowed for statistical purposes.

ITAT Upholds Deletion of Rs. 4.86 Crore Addition under Section 68, Holds Share Exchange Transaction Without Cash Flow Not Taxable as Unexplained Cash Credit

Issue: Whether the addition of Rs. 4,86,20,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961 as unexplained cash credit, which was deleted by the Ld. CIT(A), was justified. The Revenue challenged the relief granted by the Ld. CIT(A), contending that the share capital and premium received by the assessee were unexplained.

Facts: The assessee had issued 50,020 equity shares at a face value of Rs. 10/- each with a premium of Rs. 999/- per share, receiving a total amount of Rs. 5,00,20,000/-. The Assessing Officer treated the entire amount as unexplained cash credit under section 68, mainly because the directors of the subscriber companies did not appear in response to summons issued under section 131. During appellate proceedings, the assessee explained that the transactions were not based on cash receipts but were barter transactions involving exchange of shares, except for Rs. 14,00,000/- received through banking channels. The Ld. CIT(A) accepted the explanation and restricted the addition to Rs. 14,00,000/-.

Held: The Tribunal upheld the order of the Ld. CIT(A) and dismissed the Revenue’s appeal. It held that section 68 applies only where any sum is received and credited in the books of the assessee as cash credit. Since the major portion of the transaction involved exchange of shares without any actual flow of money and was carried out on a barter basis, the provisions of section 68 were not applicable. The deletion of addition of Rs. 4,86,20,000/- was therefore sustained

Delay Condoned; Assessment Set Aside and Matter Remanded to AO for De Novo Adjudication After Granting Fresh Opportunity to the Assessee

Issue: Whether the assessment order, which made additions towards partners' capital contribution, unsecured loans, and disallowance under section 40(a)(ia) due to non-furnishing of evidence and non-deduction of TDS, and the appellate order dismissing the appeal for non-prosecution, should be sustained when the assessee explained its non-appearance and sought another opportunity to produce the necessary documents.

Facts: The assessee, a partnership firm, filed its return of income for A.Y. 2014-15 on 14.08.2015, which was processed under section 143(1) of the Income-tax Act. The case was selected for scrutiny, and notices under sections 143(2) and 142(1) were issued. As the assessee initially failed to respond, the AO proceeded with the assessment after receiving certain documents on 22.12.2016. The AO observed an increase in partners' capital and receipt of unsecured loans but held that the assessee failed to establish the source of partners' income and the identity and creditworthiness of unsecured creditors. Accordingly, the AO treated the partners' capital contribution and unsecured loans as unexplained income and also disallowed 30% of the interest expenditure under section 40(a)(ia) for failure to deduct TDS. The assessee's appeal before the CIT(A) was dismissed after it failed to respond to 14 hearing notices. The assessee thereafter filed an appeal before the Tribunal with a delay of 282 days, explaining that the partner handling financial matters had fallen seriously ill and that the business premises had been sealed by the Pollution Control Board, preventing timely compliance.

Held:The Tribunal condoned the delay of 282 days, holding that the reasons furnished by the assessee were genuine. It observed that the assessee had satisfactorily explained its non-appearance before both the AO  and the CIT(A), and that the necessary supporting documents were available but could not be produced due to circumstances beyond its control. In the interest of justice, the Tribunal set aside the orders of the lower authorities and restored the matter to the file of the AO for de novo adjudication after providing the assessee with a reasonable opportunity to furnish the requisite evidence. Accordingly, the appeal was allowed for statistical purposes.

Taxation of Notional Profit on Unsold Flats and Parking Space: ITAT Deletes Addition, Holds Hypothetical Income Cannot Be Taxed

Issue: Whether the Ld. CIT(A) was justified in confirming the addition of Rs. 49,27,105/- made by the AO by estimating the profit element included in the value of unsold flats and parking space held as closing stock by the assessee engaged in real estate development.

Facts: The assessee, following the percentage completion method for revenue recognition, disclosed unsold flats and parking space of the Appayan Project as closing stock in its audited balance sheet for AY 2018-19. The AO observed that since the project was complete, the profit element embedded in such unsold stock should have been offered to tax and accordingly made an addition of Rs. 49,27,105/-. The Ld. CIT(A) upheld the addition. The assessee contended that taxing notional profit on unsold inventory would amount to taxation of hypothetical income and that the profit was offered to tax in subsequent years when the flats and parking spaces were actually sold.

Held: The Tribunal held that income tax cannot be levied on hypothetical income and that income accrues only when there is a corresponding right to receive such income. Since the assessee was following the mercantile system of accounting and the profit from unsold flats and parking spaces was subsequently offered to tax upon sale, no notional income could be brought to tax in the year under consideration. Relying on the decision of the Hon’ble Supreme Court in CIT vs. Excel Industries Ltd., the Tribunal set aside the order of the Ld. CIT(A) and directed the AO to delete the addition of Rs. 49,27,105/-. The appeal of the assessee was allowed.

Delay in Filing Appeal Condoned as Substantial Justice Prevails; Addition of Entire Joint Property Investment in Assessee’s Hands Held Unjustified and Matter Remanded for Merits Adjudication

Issue: Whether the delay of 100 days in filing the appeal before the Ld. CIT(A) was liable to be condoned and whether the assessment made u/s 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961, wherein the entire investment of Rs.65,00,000/- in a jointly purchased flat was added in the hands of the assessee, was justified.

Facts: The assessee’s appeal before the Tribunal arose from the order of the Ld. CIT(A), NFAC, Delhi, who dismissed the appeal due to delay in filing. The assessee explained that he could not properly understand the notices and assessment order received through the portal and that his tax practitioner failed to take appropriate action. The assessee had jointly purchased a flat with his wife for Rs.65,00,000/-. Although the Assessing Officer recorded that the property was jointly purchased, the entire amount was added as unexplained investment in the hands of the assessee.

Held: The Tribunal held that substantial justice should prevail over procedural delay and relied on the principles laid down by the Hon’ble Supreme Court in Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy regarding liberal consideration of delay condonation. The delay of 100 days was condoned, and the matter was restored to the Ld. CIT(A) for deciding the appeal on merits after providing adequate opportunity of hearing and permitting submission of necessary documents. The Tribunal observed that once the property was accepted as jointly purchased, the addition of the entire investment in the assessee’s hands was unjustified. Grounds challenging reopening u/s 148 were dismissed as un-adjudicated due to lack of supporting submissions and documents. The appeal was partly allowed for statistical purposes

Addition of On-Money Payment Deleted as Based Only on Third-Party Statement Without Corroborative Evidence

ISSUE: Whether addition of Rs.7,24,000/- as alleged unexplained cash payment towards purchase of Flat No.11D in "Horizon Twilite" project can be sustained merely on the basis of statement recorded from the builder/promoter under section 132(4) and seized material found during search conducted in the builder’s case.

FACTS: Search and seizure action was conducted in Cosmos Group wherein statement of Shri Suraj Parmar, promoter of the group, was recorded admitting cash transactions in sale of flats. Based on seized documents and electronic data, the Assessing Officer alleged that the assessee and his wife paid Rs.14,48,000/- as on-money for purchase of Flat No.11D and made addition of Rs.7,24,000/- being 50% share in reassessment proceedings. No search was conducted on the assessee and no incriminating material evidencing payment of on-money was found from the assessee’s possession, books, bank accounts or records.

HELD: The Tribunal held that addition cannot be sustained merely on the basis of third-party statement and documents found from the builder without independent corroborative evidence establishing actual payment of cash by the assessee. Since the Revenue failed to prove the flow of unaccounted money from the assessee and no supporting evidence was found against him, the addition of Rs.7,24,000/- was deleted. The Tribunal followed the decision of the Supreme Court in CIT v. P.V. Kalyanasundaram and the Coordinate Bench decision in Mrs. Mopnika Anand Gupta, holding that suspicion cannot replace legal proof.

ITAT Restores Ex-Parte Appeal to CIT(A) Subject to Cost for Failure to Monitor Proceedings; Opportunity Granted to Adjudicate LTCG Dispute on Merits

Issue: Whether the assessee’s appeal could be restored to the file of the CIT(A) when it was dismissed ex-parte due to non-compliance and whether the addition of Rs. 2.74 crore on sale of land as income from other sources instead of long-term capital gain was justified.

Facts: The assessee filed return of income for A.Y. 2015-16 declaring LTCG of Rs. 2,28,46,317/- on sale of non-agricultural land. The AO observed that the assessee had executed the sale deed only as a Power of Attorney holder and was neither owner nor in possession of the land, and therefore treated the sale consideration as income from other sources. The CIT(A) dismissed the appeal ex-parte due to non-compliance. Before the Tribunal, the assessee submitted that notices and the appellate order were received by the erstwhile chartered accountant, who failed to communicate the same to the assessee, resulting in delay and non-appearance.

Held: The Tribunal condoned the delay of 453 days in filing the appeal but observed that the assessee was also responsible for monitoring the appellate proceedings and could not completely shift the blame to the counsel. Accordingly, a cost of Rs. 10,000/- was imposed to be deposited in the Prime Minister National Relief Fund. Subject to payment of cost, the matter was restored to the file of CIT(A) to provide another opportunity to the assessee for compliance and adjudication on merits. The appeal was allowed for statistical purposes.

Reassessment Quashed Where Additions Were Made on Issues Unrelated to Recorded Reasons; Double Addition of Returned Income Deleted

Issue: Whether the reassessment proceedings initiated under section 147 of the Income-tax Act, 1961 were valid when the Assessing Officer reopened the assessment on the basis of alleged unexplained transactions in the penny script of M/s. SMC Global Capital Markets Ltd., but made additions on an entirely different issue relating to alleged manipulated trading in the scrip of Stamped Capital Markets Ltd. Further, the issue was whether the addition of Rs.1,15,907/- towards profit from equity derivative transactions was sustainable when the same income was already included in the returned income.

Facts: The Assessing Officer reopened the assessment by issuing notice under section 148 alleging unexplained transactions of Rs.7,05,53,265/- in the penny script of M/s. SMC Global Capital Markets Ltd. The assessee filed a belated return in response to the notice, which was treated as non-est by the Assessing Officer, and assessment was completed under section 144 read with section 147 of the Act. However, no addition was made on the issue forming the basis of reopening. Instead, the Assessing Officer made additions of Rs.18,00,000/- towards estimated undisclosed commission income on alleged manipulated trading in Stamped Capital Markets Ltd. and Rs.1,15,907/- towards profit from equity derivative transactions. The CIT(A) confirmed the additions, against which the assessee preferred an appeal before the Tribunal with a delay of 41 days, which was condoned.

Held: The Tribunal held that the reassessment proceedings were invalid since the Assessing Officer failed to make any addition on the issue for which the assessment was reopened and instead made additions on unrelated issues not forming part of the recorded reasons. It was observed that the foundation of reopening and the additions made were completely disconnected, rendering the reassessment unsustainable in law. The Tribunal further held that the addition of Rs.1,15,907/- was also unjustified as the said income was already included in the returned income and would result in double taxation. Accordingly, the reassessment order was quashed, all additions were directed to be deleted, and the appeal of the assessee was allowed.

ITAT Condones 185-Day Delay and Remits Assessment Back to AO for Fresh Consideration Due to Lack of Opportunity and Additional Evidence

ISSUE: Whether the delay in filing the appeal should be condoned and whether the disallowance of penalty expenses, interest expenses, and security service charges made by the Assessing Officer should be sustained.

FACTS: The assessee, a Government of India company, filed its return for A.Y. 2018-19. The case was selected for limited scrutiny regarding business loss and investments/advances/loans. The AO disallowed penalty, interest, and security service expenses due to lack of supporting documents. The CIT(A) dismissed the appeal ex-parte as the assessee did not appear. The assessee filed an appeal before the Tribunal with a delay of 185 days, explaining that the company was defunct, managed through deputed staff, and the relevant order was not brought to the notice of the new Officer on Special Duty. The assessee also submitted additional documents regarding Government grants, loans, and audited accounts.

HELD: The Tribunal accepted the reasons for the delay and condoned it. Considering the circumstances of the assessee company and the availability of supporting records, the Tribunal held that another opportunity should be provided to produce documents. The orders of the lower authorities were set aside, and the matter was remitted to the AO for fresh consideration. The appeal was allowed for statistical purposes.

Penalty under Section 272A(1)(d) Restricted to Rs.10,000 as Multiple Defaults Arose in Same Assessment Proceedings

Issue: Whether the penalty of Rs.30,000 levied under section 272A(1)(d) of the Income-tax Act for non-compliance with multiple statutory notices during the same assessment proceedings was justified, and whether the Tribunal could restrict the penalty despite the CIT(A) dismissing the appeal ex parte without adjudicating it on merits.

Facts: The assessee failed to comply with various notices issued under sections 142(1) and 143(2) during assessment proceedings for AY 2020-21. Consequently, the Assessing Officer levied a penalty of Rs.30,000 under section 272A(1)(d). The CIT(A) dismissed the assessee's appeal ex parte without condoning the delay or examining the merits. Before the Tribunal, the assessee contended that although there were multiple defaults, they occurred during the same assessment proceedings and, relying on the co-ordinate Bench decision in Bhagvandas Hirachand Wachhani v. ITO (ITA No.1794/AHD/2024), requested that the penalty be restricted to Rs.10,000, which the assessee agreed to deposit.

Held: The Tribunal held that while the assessee's failure to comply with the statutory notices attracted penalty under section 272A(1)(d), the CIT(A) erred in dismissing the appeal without considering the merits. Following the co-ordinate Bench decision, the Tribunal observed that repeated defaults committed during the same assessment proceedings warranted only a single penalty. Accordingly, it restricted the penalty from Rs.30,000 to Rs.10,000 and directed the assessee to deposit the said amount. The appeal was partly allowed.

ITAT, Bangalore: Quashes Reassessment, Holds Approval by Wrong Authority Makes Proceedings Void Ab Initio

ISSUE: Whether the reassessment proceedings initiated under Sections 147, 148A(d), and 148 of the Income-tax Act for AY 2018-19 were valid when the approvals were obtained from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT) as required under Section 151(ii), and whether a single approval could validly support both the order under Section 148A(d) and the notice under Section 148.

FACT: The assessee did not originally file a valid return of income. Based on information regarding the sale of immovable property, the Assessing Officer initiated reassessment proceedings under Sections 148A(b) and 148. The assessee later filed a return, which was treated as invalid for want of e-verification, but participated in the assessment proceedings and claimed exemption under Section 54F on the ground that the sale proceeds were invested in constructing a residential house. The Assessing Officer denied the exemption relating to the construction and completed the reassessment by computing long-term capital gains. The CIT(A) granted partial relief by allowing the cost of vacant land but sustained the disallowance relating to the construction. Before the Tribunal, the assessee raised additional legal grounds contending that the approvals for the order under Section 148A(d) and the notice under Section 148 were obtained from the PCIT instead of the PCCIT, although both actions were taken after the expiry of three years from the end of the relevant assessment year. The assessee also pointed out that the same approval reference number was used for both the order under Section 148A(d) and the notice under Section 148, indicating that no separate approvals had been obtained.

HELD: The Tribunal held that the legal grounds could be raised for the first time before it since they involved pure questions of law. It observed that for AY 2018-19, where the reassessment proceedings were initiated after the expiry of three years from the end of the assessment year, Section 151(ii) mandated prior approval from the Principal Chief Commissioner of Income Tax. Since both the order under Section 148A(d) dated 07/04/2022 and the notice under Section 148 dated 12/04/2022 were approved only by the PCIT, the approvals were granted by an authority lacking jurisdiction. The Tribunal further held that the Assessing Officer had improperly relied on a single approval for both the order under Section 148A(d) and the notice under Section 148 instead of obtaining separate statutory approvals. Following earlier coordinate bench decisions, the Tribunal concluded that the reassessment proceedings were void ab initio and unsustainable in law. Accordingly, the reassessment was quashed, the appeal was allowed on the legal grounds, and the Tribunal did not adjudicate the merits relating to the claim of exemption under Section 54F.

ITAT Allows TDS Credit Claims, Remands Matter to AO for Verification of Supporting Evidences

Issue: Whether the assessee was entitled to claim credit of TDS of Rs. 20,90,413/- for A.Y. 2023-24 and Rs. 7,36,083/- for A.Y. 2024-25, which was denied while processing the returns under section 143(1) due to mismatch/non-availability of supporting details. The assessee challenged the orders of the Addl./JCIT (Appeals)–1, Pune, contending that the corresponding income had been offered to tax and the TDS credit was allowable as per law.

Facts: The assessee, a practising chartered accountant following the cash system of accounting, claimed TDS credit in respect of professional receipts in the year in which the income was offered to tax. The CPC disallowed part of the TDS credit due to mismatch between Form 26AS and the claim made in the return. Before the Tribunal, the assessee explained the mismatch and submitted additional evidences such as Form 26AS extracts, confirmations, invoices and bank statements to substantiate the TDS claims. The Revenue did not object to verification of these additional evidences by the Assessing Officer.

Held: The Tribunal admitted the additional evidences and restored the matter to the file of the jurisdictional AO for verification of the TDS claims. The AO was directed to examine the evidences and allow TDS credit to the assessee in accordance with law, if the corresponding income had been offered to tax in the relevant assessment years. Accordingly, both appeals were allowed for statistical purposes.

ITAT Remands Assessment for Fresh Adjudication After Finding Inadequate Opportunity of Hearing

Issue: Whether the assessment completed after rejection of books of account under Section 145(3), estimation of turnover and profit, and the appellate order sustaining the additions were liable to be set aside on the ground that the assessee was not provided a reasonable opportunity of being heard.

Facts: The assessee filed its return for AY 2019-20 declaring total income of Rs. 10,02,540. Following a survey under Section 133A, the case was selected for scrutiny. The Assessing Officer rejected the books of account under Section 145(3) for non-maintenance of quantitative stock records and estimated the turnover at Rs. 23,00,00,000 with a net profit rate of 10%, resulting in an addition of Rs. 2,19,97,460. The assessment was completed under Sections 143(3) read with 144B. On appeal, the CIT(A) upheld the rejection of books but reduced the estimated profit rate to 8%, restricting the addition to Rs. 1,73,97,460. Before the Tribunal, the assessee contended that only two days' time had been granted to respond during assessment proceedings and sought remand for fresh adjudication, while also raising additional legal grounds.

Held: The Tribunal held that, in the interest of justice and fair play, the assessee should be afforded a proper and reasonable opportunity of being heard. Accordingly, it set aside the order of the CIT(A) and remitted the matter to the Assessing Officer for a de novo assessment. The Assessing Officer was directed to provide adequate opportunity to the assessee to place all relevant submissions on record. The Tribunal also permitted the assessee to raise all legal issues before the Assessing Officer while directing that no unnecessary adjournments be sought. Consequently, the appeal was partly allowed for statistical purposes.

ITAT Restores Section 12A Registration Matter to CIT(Exemption) for Fresh Adjudication Due to Violation of Natural Justice

ISSUE: Whether the CIT(Exemption) was justified in rejecting the assessee’s application for registration under section 12A of the Income Tax Act, 1961 on the ground that the application was filed under an incorrect clause and without considering the principles of natural justice.

FACTS: The assessee filed an appeal against the order of CIT(Exemption), Bhopal dated 28.03.2026. The appeal was delayed by 5 days, which was condoned by the Tribunal after considering the affidavit and condonation application. The CIT(Exemption) rejected the assessee’s application for renewal of registration under section 12A(1)(ac)(ii), observing that the assessee had provisional registration under section 10(23C) and had not furnished proof of earlier registration before 01.04.2021. The application was rejected as being filed under the wrong clause. The Tribunal noted that no proper opportunity of hearing was demonstrated to have been provided to the assessee before rejection.

HELD: The Tribunal held that registration and exemption provisions relating to charitable institutions are connected with public welfare objectives and require strict compliance with principles of natural justice. Since the CIT(Exemption) rejected the application without providing a reasonable opportunity to explain the alleged incorrect filing of the clause, the order was set aside. The matter was restored to the file of CIT(Exemption) for fresh adjudication after granting adequate opportunity to the assessee. The appeal was allowed for statistical purposes.