Assessment under Sections 153C/144 Quashed Due to Lack of Incriminating Evidence, Jurisdictional Lapses, and Violation of Natural Justice

Issue: Whether the assessment order passed under Sections 153C/144 of the Income Tax Act, 1961 against the assessee is legally valid in the absence of incriminating evidence, procedural compliance, and opportunity for fair hearing.

Facts: The assessee filed a return declaring income of Rs.5,12,860. A search under Section 132 was conducted on Jindal Bullion Ltd. (JBL) on 05.01.2017. Digital data from “Hazir Johri” software, seized from JBL’s premises, allegedly showed accommodation entries linked to the assessee through a ledger named “Titu.” Based on a satisfaction note recorded two years after JBL's assessment, proceedings under Section 153C were initiated. The assessee denied any such transactions and sought copies of seized material and cross-examination, which were not granted. The AO made an ex-parte addition of Rs.2,18,615 as 2% commission income. The CIT(A) confirmed the assessment despite the assessee's contention of jurisdictional errors, denial of natural justice, and absence of corroborative evidence.

Held: The Tribunal held that the assessment under Section 153C/144 is unsustainable. The seized material was not from the assessee’s premises, and the ledger “Titu” was uncorroborated by direct evidence. Following precedents including Anoop Kumar Soni and Surender Kumar Jain, the Tribunal found the additions based on mere assumptions and without supporting evidence such as bills or invoices. The Revenue failed to establish the nexus between the assessee and the alleged entries. Thus, the assessment was quashed, and the appeal of the assessee was allowed.

Tribunal Allows Deduction for Utilisation of Accumulated Income by Charitable Trust, Holds Amendment to Section 11(3)(c) Not Retrospective

Issue: Whether the assessee-trust is entitled to claim deduction of Rs. 2,32,073/- utilised in FY 2022–23 from the amount accumulated u/s 11(2) in FY 2016–17, in light of the amendment to Section 11(3)(c) made by the Finance Act, 2022, effective from AY 2023–24, which omitted the additional one-year grace period for utilisation.

Fact: The assessee, a charitable trust, had accumulated Rs. 4,60,000/- in FY 2016–17 u/s 11(2) and utilised Rs. 2,32,073/- in FY 2022–23 (i.e., the sixth year). In its return for AY 2023–24, it offered the unutilised balance Rs. 2,27,927/- to tax. However, CPC disallowed the utilisation of Rs. 2,32,073/- on the ground that the amended Section 11(3)(c), effective from 01.04.2023, removed the one-year extended period, thereby disqualifying such utilisation. CIT(A) upheld the CPC’s adjustment.

Held: The Tribunal held that the amendment to Section 11(3)(c) by Finance Act, 2022, effective from AY 2023–24, is prospective and cannot retrospectively curtail the period originally available to the assessee. The assessee had a vested right to utilise the accumulated funds within five years plus one additional year (i.e., till 31.03.2023). Denying this right would lead to an absurd and impossible outcome, violating the principle of lex non cogit ad impossibilia. The adjustment made u/s 143(1) was therefore unjustified. The appeal was allowed, and the disallowance of Rs. 2,32,073/- was deleted.

Challenge to Addition of Rs. 19.60 Lakhs as Unexplained Money and Ex-Parte Dismissal by CIT(A)

Issue: The primary issue in this appeal is the addition of Rs. 19,60,000/- as unexplained money under Section 69A read with Section 115BBE of the Income Tax Act, made by the AO on account of cash deposits by the assessee during the demonetization period. The appeal challenges the ex-parte dismissal of the assessee’s case by the CIT(A)-NFAC without proper adjudication and application of mind.

Fact: The assessee had deposited Rs. 19,60,000/- in two ICICI Bank accounts between 09/11/2016 and 30/12/2016. During assessment proceedings, the assessee failed to respond to hearing notices, resulting in the addition by AO. In the appellate proceedings before CIT(A)-NFAC, although the assessee submitted an adjournment request citing genuine constraints, the appeal was dismissed summarily without acknowledging the request or examining facts independently. No opportunity of effective hearing was granted, and no findings were recorded as mandated u/s 250(4) & (6) of the Act.

Held: Considering the principle of natural justice and following judicial precedents, the Tribunal held that the assessee must be granted a final opportunity to represent the case on merits before the CIT(A)-NFAC. The ex-parte dismissal without considering the adjournment request and without a speaking order violated due process. Accordingly, the order of CIT(A)-NFAC is set aside and the matter is remanded back for denovo adjudication, directing the assessee to ensure compliance and CIT(A) to dispose of the matter in accordance with law within the prescribed timeframe.

ITAT Allows Appeal of Non-Resident Assessee on Grounds of Explained Investment and Tax-Paid Capital Gains

Issue: The validity of reassessment proceedings u/s 147/148 of the Income Tax Act, for AY 2015-16 and the additions made u/s 69 and 45 relating to unexplained investment and short-term capital gain, respectively.

Facts: The assessee, a non-resident individual working in the Democratic Republic of Congo, had not filed a return of income for AY 2015-16. Based on information from the INSIGHT portal, the AO initiated reassessment u/s 147, alleging escapement of income from purchase and sale of immovable property. The AO treated the purchase amount of Rs. 42,27,500/- as unexplained investment u/s 69 and added Rs. 9,72,500/- as short-term capital gain. The assessee contended that the funds used for purchase were brought from abroad and substantiated the same with supporting documents. Additionally, the assessee submitted that the tax on capital gains was paid later with interest. The CIT(A) dismissed the appeal without adjudication on merits.

Held: The Tribunal found merit in the assessee’s explanation and supporting documents regarding the source of investment and noted that taxes on capital gains had been paid. It held that the addition u/s 69 was unjustified as the investment was explained through credible evidence. It also deleted the addition on account of short-term capital gain, considering that tax was duly paid. Thus, the appeal was allowed in favour of the assessee.

Gold Jewellery Seized During Search – ITAT Upholds Addition Under Section 69A for Unexplained 110 Grams Beyond CBDT Circular Limits

Issue: Whether the entire quantity of gold jewellery (1810 grams) found during a search operation at the residence of the assessee could be treated as explained under CBDT Circular No. 1916, or whether addition under Section 69A for unexplained investment in gold to the extent of 110 grams was justified.

Facts: The assessee, Shri Kiran Kumar Reddy Kataru, filed his return for AY 2021–22 declaring an income of Rs.50,80,000. A search under Section 132 was conducted in connection with M/s Axis Energy Venture India Pvt. Ltd., covering the assessee’s premises. During the search, gold jewellery weighing 1810 grams, valued at Rs.99,59,900, was found, of which 690 grams (Rs.32,68,200) was seized. The assessee explained the jewellery belonged to family members and relied on CBDT Circular No. 1916 to claim immunity from addition. The AO accepted the explanation only for 1100 grams and made an addition under Section 69A for the rest. CIT(A) granted relief for 1700 grams based on family composition and customs but sustained the addition for 110 grams. The assessee appealed to the ITAT.

Held: The ITAT upheld the order of the CIT(A), observing that the CBDT Circular recognizes Indian customs and prescribes limits for non-seizure but does not override the requirement of explanation under the Income Tax Act. Since the assessee failed to substantiate the source of the remaining 110 grams with evidence, the Tribunal found no error in sustaining the addition of Rs.32,68,200. Accordingly, the appeal was dismissed.

Penalty u/s 270A for Disallowance of Provisionally Claimed Leave Encashment Held Unsustainable Due to Full Disclosure and Debatable Legal Position

Issue: whether the penalty levied u/s 270A of the Income Tax Act for disallowance of leave encashment expenditure—claimed on a provisional basis—is legally sustainable, particularly when the claim was made relying on judicial precedents and was duly disclosed in the return.

Facts: The assessee, engaged in the business of manufacturing and trading of Power & Energy, filed its return of income declaring a total income of Rs. 118.61 crores for A.Y. 2017–18. The case was selected for scrutiny, and assessment was completed u/s 143(3) of the Act at Rs. 123.48 crores after disallowing Rs. 4.87 crores u/s 43B, being leave encashment not paid before the due date of filing the return. The AO imposed penalty u/s 270A treating the claim as under-reporting due to misreporting. The assessee contended that the claim was made bona fide, was based on judicial rulings including the jurisdictional ITAT, and that the law on the issue was debatable. The CIT(A) upheld the penalty, considering the claim to be non-bona fide and misreported.

Held: After considering the submissions and materials on record, the Tribunal held that the claim for leave encashment was made on a provisional basis supported by legal precedents and was duly disclosed. The lower authorities failed to pinpoint any specific clause u/s 270A(9) that was applicable to the assessee’s case or show that the claim lacked bona fides. In view of the debatable nature of the issue and full disclosure by the assessee, the imposition of penalty was held to be unjustified and unsustainable. Accordingly, the appeal of the assessee was allowed, and the penalty levied u/s 270A was deleted.

The ITAT Bangalore: Rebate Claim of Rs.21,350 U/s. 87A Valid via Revised Return; Holds CPC’s Automatic Denial U/s. 143(1) Impermissible., Dated - 30-06-2025

Issue:  Whether the Assessee may claim rebate u/s. 87A through a revised return where the omission arose in the original filing, and whether such claim is amenable to disallowance in 143(1) processing.

Facts:

• 22 Jun 2024 – Assessee filed the original return under the old regime.

• 30 Jun 2024 – CPC processed the return u/s 143(1) with no adjustments.

• 11 Jul 2024 – Assessee filed a revised return claiming Rs. 21,350 rebate u/s 87A.

• 24 Sep 2024 – CPC denied the rebate in its second 143(1) intimation.

• 27 Nov 2024 – Appeal before ld. CIT(A) (filed after condoned delay); 24 Dec 2024 – CIT(A) dismissed, terming the revision impermissible.

• 30 Jun 2025 – ITAT Bengaluru allowed the appeal. 

Held:

• The ITAT found that non-claim of Section 87A rebate was a correctable omission.

• The revised return was valid U/s. 139(5), as there was no change in tax regime.

• Wipro principle (on invalid revised returns) was inapplicable.

• Relying on Chamber of Tax Consultants, the Tribunal held that Section 87A rebate is regime-neutral.

• Held that Section 143(1)(a) does not empower CPC to disallow such rebate claims.

• Directed the AO to allow the Rs.21,350 rebate; appeal allowed.

Validity of Reopening Assessment U/s.s 147/148 Based on Suspicion of Money Laundering Linked to Third Party

Issue: Whether the reopening of assessment U/s. 147/148 of the Income-tax Act, 1961, for AY 2010-11, was validly initiated by the Assessing Officer (AO) based on information purportedly linking the assessee with alleged money laundering activities involving one Mr. Tarun Goyal, Chartered Accountant, and several entities under his control.

Facts: The assessee filed a return of income on 14.10.2010 declaring an income of Rs.10,97,140. Subsequently, notice U/s. 148 was issued on 31.03.2017 based on information from the Investigation Wing indicating suspicious transactions among various entities allegedly linked with Mr. Tarun Goyal. The AO suspected that the assessee was involved in money laundering activities through certain bank accounts but failed to establish any direct connection between the assessee and Mr. Goyal. The reasons recorded by the AO were general and based on suspicion without specific reference to the assessee’s transactions or their nexus with the alleged entities. Despite objections raised by the assessee regarding the validity and substance of the reopening, the AO proceeded with reassessment and made an addition of Rs.5,19,25,158 U/s. 68, which was upheld by the CIT(A).

Held: The Tribunal held that the reassessment proceedings initiated U/s. 147 were invalid and bad in law as they were solely based on suspicion and conjecture without any tangible or cogent material linking the assessee with the alleged money laundering activities. The reasons recorded were generic, contained factual errors, and failed to disclose how the transactions of the assessee warranted reopening. Further, the AO did not dispose of the objections raised by the assessee in a proper and reasoned manner. Relying on judicial precedents, including Saraswati Petrochem (P) Ltd. v. ITO, the Tribunal quashed the reassessment proceedings and allowed the appeal. Consequently, issues on merits were rendered academic.

Whether Contractual Interest Paid by a Real Estate Developer on Refund of Booking Advances to Customers—Due to Cancellation of Property Allotments and Till Re-allotment of Units—Constitutes a Deductible Business Expenditure Under Section 37(1) of the Income-tax Act, 1961, Being Compensatory in Nature and Incurred in the Ordinary Course of Business, or Whether Such Interest Qualifies as a Penal Payment Not Wholly and Exclusively Incurred for Business Purposes and Hence Disallowable, Where the Assessee Had Capitalized the Interest into Work-in-Progress but the Assessing Officer Disallowed It as Penal, Though the CIT(A) Allowed It Treating It as Business-Linked and Contractual, and the ITAT Ultimately Upheld the CIT(A)'s Finding, Holding That the Payment Was Not Penal but a Legitimate Cost Element of the Real Estate Project and Therefore Deductible Under Section 37(1), Resulting in Dismissal of the Revenue’s Appeal.

ISSUE: These appeals pertain to various additions and disallowances made by the AO following a search and seizure operation on M/s. Majestic Properties Pvt. Ltd. The core issues include:

(1) Allowability of interest on cancelled property bookings;
(2) Taxability of IBMS and sinking fund collections;
(3) Validity of additions for suppressed and unaccounted sales;
(4) Attribution of seized slip pad entries;
(5) Protective addition in hands of Mr. Rajat Gupta;
(6) Disallowance of employees’ PF/ESI contributions;
(7) Addition based on seized diary;
(8) Disallowance under Section 14A read with Rule 8D.

FACTS: The assessee, a builder and developer, was subjected to a search. Additions included interest on refunded booking amounts (treated as penal by AO), IBMS/sinking fund (treated as income), suppressed sales (estimated from cost and floor rates), and unaccounted sales (based on a letter by a former marketing head). A slip pad found at the premises was attributed to a third party, Mr. Saudagar Shah, who affirmed ownership via affidavit. Separate additions were also made for late PF/ESI payments, undisclosed investment inferred from a coded diary, and Section 14A disallowance on exempt-income-related investments.

HELD: The Tribunal upheld the CIT(A)’s deletion of additions for interest on cancelled bookings, suppressed and unaccounted sales, and transactions noted in the slip pad, holding the AO’s assumptions as unsubstantiated. However, it restored the addition for IBMS/sinking fund due to lack of clarity on their treatment. It further deleted the protective addition in Mr. Rajat Gupta’s hands, holding the same slip pad presumption rebutted. The disallowance for late PF/ESI payments was sustained, following the Supreme Court’s ruling in Checkmate Services. The addition of Rs. 6.8 lakhs based on the diary was deleted, aligning with prior years' decisions. Disallowance under Section 14A was upheld, but restricted to investments that actually earned exempt income.

ITAT Upholds TDS Default Against Assessee on Foreign Travel LTC Claims; Assessee Held Liable for Non-Deduction of TDS Under Sections 201(1) & 201(1A) Following Supreme Court Ruling

Issue: Whether the assessee, a branch of State Bank of India, was rightly held as an "assessee in default" under Section 201(1) and liable for interest under Section 201(1A) of the Income Tax Act, 1961, for non-deduction of TDS on Leave Fare Concession (LFC) payments involving foreign travel by one of its employees.

Facts: The assessee-bank paid LFC to an employee, Shri M. Amirthalingam, amounting to ?1,85,452/- for travel involving foreign destinations during FY 2015-16. The Assessing Officer (AO) treated the bank as an assessee in default under Sections 201(1) and 201(1A) for not deducting tax at source under Section 192B, relying on the Supreme Court’s decision in SBI v. ACIT (Civil Appeal No. 8181 of 2022), which clarified that LTC exemption under Section 10(5) is not available for foreign travel. The CIT(A) upheld the AO’s view, noting the absence of any operative court stay during the period 24.06.2022 to 08.08.2022 and 08.06.2023 to 28.08.2023 when the assessee failed to deduct tax or recover the amount.

Held: The Tribunal held that the facts of the case are identical to those in SBI v. ACIT, wherein the Supreme Court conclusively ruled that LTC involving a foreign leg is not eligible for exemption under Section 10(5) and that the employer is obligated to deduct tax at source. It upheld the finding that the assessee was in default for the relevant period due to non-deduction and non-recovery of tax. Consequently, the appeal of the assessee was dismissed.

Reassessment Proceedings Quashed for Non-Compliance with Mandatory 7-Day Notice Period U/s. 148A(b)

Issue: Whether the reassessment proceedings initiated U/s. 148A(b) of the Income Tax Act, 1961 are valid when the assessee was granted less than the mandatory minimum period of 7 days to respond to the notice.

Facts: The Assessing Officer issued a notice U/s. 148A(b) dated 24.03.2022, allowing time only up to 30.03.2022 for the assessee to respond—providing less than the mandatory 7 days. The assessee contended that this violated the principles of natural justice. The ld. CIT(A) annulled the reassessment proceedings on this ground, and the Revenue appealed against the said order.

Held: The Tribunal held that the proceedings were void ab initio due to the failure to grant the statutory minimum of 7 days as mandated U/s. 148A(b). Relying on the binding judgment of the jurisdictional High Court in Thulaseedas Srinath vs. ITO and the Karnataka High Court ruling in Doddagarudanahalli Vyavasaya Seva Bank Niyamitha vs. ITO, the Tribunal upheld the order of the CIT(A) and dismissed the Revenue’s appeal.

Validity of Reassessment and Disallowance under Sections 147 and 69C of the Income-tax Act Where Purchases Are Bank-Channelled but Supplier Alleged Bogus; Scope of Cash-Back Verification and Profit Element Disallowance Clarified by Tribunal

Issues: Whether the reassessment u/s 147 of the Income-tax Act, 1961, and the consequent disallowance of purchases from M/s. Mahadev Trading Co. u/s 69C were valid, particularly when the purchases were supported by banking transactions, but the supplier was alleged to be non-genuine and no cross-examination opportunity was provided.

Facts: Leela Greenship Recycling Pvt. Ltd. filed return for AY 2018-19 with income of Rs. 15.86 lakh. Reassessment was initiated based on information from CGST Anti-Evasion Wing alleging purchases of Rs. 1.40 crore from M/s. Mahadev Trading Co., an accommodation entry provider. Assessee produced extensive records (invoices, ledger, payment proofs, transport docs, GSTR-2A, weighment slips). AO rejected explanation citing name discrepancy, supplier non-existence on verification, unverified documents, and suspicion of cash routed back despite bank payments. AO added full purchase amount u/s 69C, raising income to Rs. 1.56 crore. CIT(A) upheld reopening but restricted disallowance to 5% of purchases (Rs. 7 lakh), deleting balance.

Held: The Tribunal partly allowed both appeals, remanding the matter for limited factual verification. It held that where sales are not doubted, entire purchases cannot be disallowed solely because suppliers are bogus. AO must verify bank details of supplier to detect any cash-back trail from payments made via banking channels. If cash-back found, appropriate disallowance (full or partial) can be made; if not, disallowance limited to profit element (5%) as per CIT(A). AO to verify unpaid balance of Rs. 15 lakh and provide reasonable hearing opportunity. Tribunal distinguished case from precedent authorities emphasizing the absence of incriminating bank evidence or material in assessee’s possession and upheld Gujarat High Court view on estimating profit where sales are genuine and evidenced by books and banking transactions.

"Tribunal Holds Rejection of Books U/s. 145(3) Unjustified in Absence of Defects; Low GP and Non-Maintenance of Stock Register Not Sufficient Grounds for Addition"

Issue: Whether the rejection of books of accounts U/s. 145(3) of the Income Tax Act, 1961, solely on the ground of non-maintenance of day-to-day stock register and subsequent estimation of gross profit (GP) rate is justified.

Facts: The assessee, engaged in infrastructure construction works, filed its return for AY 2018-19 declaring a lower GP rate of 2.04% compared to earlier years. The Assessing Officer (AO) rejected the assessee’s books U/s. 145(3), citing non-maintenance of a daily stock register and a reduced GP rate. The AO estimated the GP at 5.69% based on the average of preceding years and made an addition of Rs.3,59,72,920. The assessee contended that in its line of business (construction of roads, bridges, etc.), maintaining a daily stock register is impractical and all transactions were through banking channels and properly documented. No specific defect was found in the books. The CIT(A) upheld the AO’s order.

Held: The Tribunal held that mere non-maintenance of a day-to-day stock register does not justify rejection of books U/s. 145(3), particularly when the assessee has maintained all relevant records, which were audited, and no discrepancy was found in purchases, sales, or expenditure. Further, reduction in GP alone cannot be the ground for rejection without establishing any suppression of income or inflation of expenses. Hence, the addition made by applying an estimated GP rate was unjustified and deleted.

Denial of Section 80G(5)(iii) Registration to Educational Trust for Unexplained Donations to Other Trusts and Non-Exclusive Educational Objects

Issue: Whether the assessee Educational Trust is eligible for registration under Section 80G(5)(iii) of the Income Tax Act, 1961, despite making substantial donations to other trusts, allegedly not exclusively for educational purposes.

Facts: The assessee, an Educational Trust running schools and registered under Section 10(23C)(vi), applied for registration under Section 80G by filing Form 10AB. The CIT(E) observed that the assessee made donations amounting to Rs.58,05,555/- to other charitable trusts, which he deemed to be of a religious nature exceeding 5% of the Trust’s income. Upon examining the Trust Deed, the CIT(E) noted that several objects were not exclusively educational. Despite the assessee's explanation that the donations were not religious and that it was engaged only in educational activities, no corroborating documents were submitted during the assessment or appeal stages.

Held: The Tribunal upheld the findings of the CIT(E), stating that the assessee failed to justify how the donations were related to educational or charitable purposes. In absence of evidence, it was held that the assessee Trust had not established the genuineness of its activities in line with Section 10(23C)(vi). Hence, registration under Section 80G(5) was rightly denied, and the appeal was dismissed.

Tribunal Allows Curative Applications Filed Under Correct Provisions for 12A and 80G Registration; Sets Aside CIT’s Rejection as Non-Maintainable

Issue: Whether the applications filed by the assessee on 03.06.2024 under correct sub-clauses of sections 12A(1)(ac)(iii) and 80G(5)(iii) of the Income-tax Act, after initial rejection of incorrectly filed applications dated 21.03.2024, are maintainable and liable to be considered on merits or liable to be rejected as non-maintainable.

Facts:

• The assessee is a charitable trust registered since 2018 and granted provisional registration under sections 12A and 80G for AY 2022-23 to AY 2024-25.

• Initial renewal/reapproval applications were filed online on 21.03.2024 under incorrect clauses, leading to rejection by CIT (Exemption).

• The assessee then filed fresh applications on 03.06.2024 under the correct clauses within the extended period allowed by CBDT Circular No. 07/2024.

• CIT (Exemption) rejected these fresh applications as non-maintainable, treating them as appeals or repetitive filings, without deciding on merits.

Held: The Tribunal held that the second applications filed on 03.06.2024 were valid curative applications to rectify procedural defects in the original filings and were not barred by law or CBDT Circular. The CIT(Exemption) erred in treating them as non-maintainable and must decide the applications on merits. The rejection orders dated 06.12.2024 were set aside, and the matter was restored for fresh adjudication. The provisional registrations were to be restored pending final disposal. The appeals were allowed.

Tribunal Allows Concessional Tax Rate on Interest from CCDs and OCDs under Section 194LD, Treats Them as Rupee-Denominated Bonds Similar to NCDs

Issue: Whether the interest income earned by the assessee—a Category II Foreign Portfolio Investor (FPI)—from Compulsorily Convertible Debentures (CCDs) and Optionally Convertible Debentures (OCDs) qualifies for concessional tax treatment at the rate of 5.46% under Section 115A(1)(a)(BA)(ii) read with Section 194LD of the Income Tax Act, 1961, similar to the benefit allowed on Non-Convertible Debentures (NCDs).

Facts: The assessee, a Singapore tax resident and SEBI-registered FPI, earned interest income from investments in NCDs, OCDs, and CCDs issued by its Indian Associated Enterprises during AYs 2020–21 and 2021–22. The assessee claimed a concessional tax rate of 5.46% under Section 194LD for interest earned on NCDs and sought similar treatment for CCDs and OCDs. While the DRP directed the AO to apply the concessional rate to NCDs based on a CBDT internal clarification, the AO denied this benefit to OCDs and CCDs, treating them as distinct from ‘bonds.’ The assessee contended that debentures—including CCDs and OCDs—should be treated as bonds for the purpose of Section 194LD and relied on provisions of the Companies Act, judicial precedents, and CBDT interpretations supporting this view.

Held: The Tribunal held that CCDs and OCDs are debt instruments until their conversion and thus, for the purposes of Section 194LD, are indistinguishable from NCDs. In the absence of a definition of ‘bond’ under the Act and guided by the inclusive definition of ‘debenture’ under the Companies Act, the Tribunal held that CCDs and OCDs qualify as rupee-denominated bonds eligible for concessional tax treatment. The Tribunal noted that the legislative intent behind Section 194LD was to encourage rupee-denominated debt investments by eliminating foreign exchange risk. It concluded that the assessee was entitled to the concessional tax rate of 5.46% on interest income from CCDs and OCDs as well. The computation error for AY 2021–22 was also directed to be rectified accordingly. The appeals were allowed in favour of the assessee for both years.

Addition for Alleged Bogus Purchases Set Aside—ITAT Rules in Favour of Section 44AD Assessee Where No Independent Enquiry Was Made by AO

Issue: Whether the Assessing Officer (AO) was justified in making an addition of Rs 16,06,692 on account of alleged bogus purchases, despite the assessee being taxed under the presumptive income scheme of section 44AD of the Income-tax Act, 1961.

Facts: The assessee, Lakshmanram Bheemaji Purohit, a trader in waste home products, filed his return of income for AY 2018-19 under section 44AD, declaring income at 8% of turnover. The AO received information that the assessee had made bogus purchases from M/s ARS Enterprises amounting to Rs 16,09,692 and made an addition of this amount in the assessment order passed u/s 143(3) r.w.s. 144B, relying solely on GST Department data without independent verification. The assessee objected, stating that since he was under presumptive taxation, he was not required to maintain books of account or explain individual purchases, and no GST notice had been issued to him withdrawing input credit. The CIT(A) upheld the addition. The assessee filed an appeal before the ITAT, delayed by 65 days due to incorrect advice from his CA, which was later supported with an affidavit and CA’s certificate.

Held: The ITAT condoned the 65-day delay in filing the appeal, holding that the delay was caused by bona fide reliance on the CA’s incorrect advice. On merits, the Tribunal held that when the assessee is taxed under section 44AD, he is not required to maintain books of account or explain individual purchases, unless gross receipts are disputed—which was not the case here. The AO had not conducted any independent inquiry and relied only on third-party GST data. The Tribunal, relying on CIT v. Surinder Pal Anand (P&H HC) and ITAT Surat Bench precedent, found the addition unsustainable and directed deletion of the Rs 16,06,692 addition. Thus, the appeal was allowed.

Assessment Order Passed in Name of Deceased Persons Without Notice to Legal Heir Held Invalid and Quashed by Tribunal

Issue: Whether the assessment order dated 18.12.2018 passed in the name of deceased assessee Late Shree Niwas Joshi and his also deceased legal heir Smt. Sita Devi Joshi, without issuing notice to the correct legal heir Shri Suresh Joshi, is valid in law.

Facts: The original assessee Late Shree Niwas Joshi had filed a return for AY 2001–02. After a series of proceedings and appeals, the assessment was reopened and concluded u/s 147/144. In the meantime, both the original assessee and his legal heir (wife) passed away. Shri Suresh Joshi, son of the deceased, informed the Assessing Officer of these deaths and requested to be treated as legal heir. Despite this, the AO passed the final assessment order on 18.12.2018 in the name of the deceased assessee and his predeceased wife, without issuing a fresh notice to Shri Suresh Joshi.

Held: The Tribunal held that the assessment order was invalid as it was passed against deceased persons and without statutory notice to the correct legal heir, despite having knowledge of the facts. This violated principles of natural justice and mandatory legal provisions. Hence, the assessment order was declared null and void and quashed. The assessee’s appeal was accordingly allowed.

Reopening U/s 147 Upheld; Only Profit Taxable U/s 68; Disallowance of Genuine Expenses Reversed — Assessee’s Appeal Partly Allowed

Issue: Whether the reopening of assessment U/s 147, the addition U/s 68 on alleged client code modification transactions, and disallowance of expenses U/s 37 for AY 2014-15 were justified.

Facts:

• The assessee filed return declaring income of Rs. 98,32,060/-.

• Assessment was completed U/s 143(3) at the declared income. Later, reopened U/s 147 based on information about client code modifications in commodity trading.

• AO added Rs. 5,45,43,550/- U/s 68, treating transaction value as unexplained cash credit.

• Expenses of Rs. 43.48 lakhs disallowed as mere provisions, not incurred.

• Assessee argued only profit of Rs. 9,26,100/- from such trades is taxable, profit offered, and expenses were incurred though paid next year.

Held:

• Reopening was valid.

• Addition U/s 68 limited to profit element (Rs. 9,26,100/-) from transactions, as turnover value cannot be taxed. Profit is taxable U/s 68.

• Disallowance of expenses U/s 37 set aside since expenses were genuinely incurred in the year though paid later.

• Appeal partly allowed.

Assessment and Penalty Set Aside Due to Non-Service of Notices on Dissolved Firm; Matter Remanded for Fresh Adjudication

Issue: Whether the assessment and penalty orders passed against the assessee were valid when the assessee failed to respond due to dissolution of the firm and lack of knowledge of the proceedings.

Facts: The assessee filed its return of income for A.Y. 2013-14 declaring income of Rs. 1,89,150/-. The case was selected for scrutiny, and notices under section 143(2) of the Income Tax Act were issued. The assessee, however, failed to respond as the partnership firm was dissolved in May 2013 and one of the partners was unwell. Consequently, the AO completed the assessment ex parte and assessed the income at Rs. 37,76,140/-. The assessee appealed before the CIT(A), but the appeal was dismissed on the grounds of delay and also on merits due to non-submission of evidence. The assessee filed an affidavit explaining the reasons for non-compliance and submitted supporting documents such as dissolution deed, doctor’s certificate, and other records. The assessee undertook to cooperate in fresh proceedings if given an opportunity.

Held: Considering the affidavit, documents submitted, and 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 fresh adjudication after granting the assessee an opportunity to present its case. The assessee was directed to cooperate with the AO. Consequently, the penalty orders under section 271(1)(c) were also set aside as they became infructuous. The appeals were allowed for statistical purposes.

Addition of Rs.26.59 Lakh on Unexplained Bank Deposit Upheld by CIT(A) but Matter Remanded for Fresh Adjudication Due to Assessee’s Audited Accounts and Natural Justice Grounds

Issue: Whether the addition of Rs.26,59,000/- made by the Assessing Officer (AO) on account of unexplained deposit in Standard Chartered Bank, upheld by CIT(A), was justified when the assessee had filed audited books of accounts, and whether the matter should be remanded for fresh adjudication.

Facts:

• The assessee filed return of income for AY 2012-13 on 29.09.2012 under section 139(1), along with audited financial statements.

• During reassessment u/s 147 r.w.s. 144, the AO passed an ex-parte assessment order on 23.11.2019, making an addition of Rs.26,59,000/- on account of unexplained bank deposits in Standard Chartered Bank due to non-representation by assessee.

• The CIT(A)-NFAC, Delhi upheld the addition vide order dated 18.12.2024, observing that the assessee failed to provide authentic documentary evidence to substantiate the nature of the deposits.

• The assessee contended that the said bank account was duly reflected in audited books already filed and requested for an opportunity to present complete documents.

• The Revenue Department agreed to remand the matter back but requested that the assessee be directed not to seek unnecessary adjournments.

Held:

• Considering the submissions, principles of natural justice, and absence of prejudice to the revenue, the appellate authority remanded the matter back to the AO for fresh adjudication.

• The AO was directed to grant an adequate opportunity of hearing to the assessee and pass a fresh order uninfluenced by the earlier assessment.

• The assessee was also directed to actively participate in the proceedings and avoid unnecessary adjournments.

• The appeal was allowed for statistical purposes.

Tribunal Quashes PCIT’s Order u/s 263, Restores Original Assessment for AY 2020-21, Allowing CSR-related 80G Deduction

Issue: The appeal by the assessee challenges the order passed by the Principal Commissioner of Income Tax (PCIT) u/s 263 of the Income Tax Act for AY 2020-21, which revised the assessment order passed by the Assessing Officer (AO).

Facts:

• The assessee, a company engaged in share broking and trading, filed its return of income declaring a total income of Rs. 12.274 crore for AY 2020-21. The case was selected for scrutiny due to a large deduction claimed u/s 80G.

• The AO disallowed certain donations u/s 80G but accepted others.

• The PCIT invoked his powers u/s 263, alleging that the assessment order was erroneous and prejudicial to the interest of revenue, specifically regarding the deduction of CSR expenses u/s 80G.

• The PCIT found that CSR expenditure was mandatory under the Companies Act and hence not eligible for deduction u/s 80G, setting aside the assessment order for further inquiry by the AO.

Held: The Tribunal allowed the assessee's appeal, holding that:

• The AO had already examined the issue and disallowed donations for which the donee was not registered u/s 80G, while accepting the rest.

• The view taken by the AO, allowing 50% deduction for CSR-related donations where donees were eligible u/s 80G, was in line with various judicial pronouncements and was not erroneous.

• Since the preconditions for invoking section 263 were not met (i.e., the assessment order was neither erroneous nor prejudicial), the Tribunal quashed the PCIT's order and restored the original assessment.

Thus, the assessee's appeal was allowed.