Tribunal Rules in Favour of Assessee, Quashes Faceless Assessment Due to Lack of Jurisdiction Prior to 29.03.2022

The assessee against the order of the NFAC for the AY 2015-16. The main issue raised by the assessee was that the order passed u/s 147, 144, and 144B of the ITA on 27.03.2022 was without jurisdiction, as the relevant provisions for the NFAC came into effect only on 29.03.2022 via Notification No. 18/2022.

The facts reveal that the assessee, a partnership firm engaged in real estate development and renting of immovable properties, had not filed a return for AY 2015-16 due to internal conflicts. The AO issued notices u/s 148 and 142(1) but faced no compliance, resulting in an assessment u/s 144 with an addition of Rs. 3.44 crore. The assessee filed an appeal, but it was dismissed by the CIT(A) due to a delay.

The appeal focused on the legality of the notices issued by NFAC, arguing that the NFAC did not have the jurisdiction to issue them prior to 29.03.2022. The Tribunal examined the provisions u/s 151A and 142B, noting that faceless assessment and notice issuance could only be carried out after the relevant notifications were issued. Therefore, the Tribunal concluded that the NFAC lacked jurisdiction to issue the notice before 29.03.2022.

The Tribunal allowed the appeal, agreeing with the assessee's contention, and cited a similar case (Nabiul Industrial Metal Pvt. Ltd. vs. ITO) for support. The other grounds raised by the assessee on merits were left open for future adjudication if necessary.

Result: The appeal was allowed in favour of the assessee.

ITAT Dismisses Revenue's Appeal Against CIT(A) Order Deleting Rs.2.65 Crore Addition Under Section 69A

An appeal by the Revenue contests the order from the CIT(A) dated May 27, 2024, which reversed an addition of Rs.2,65,00,000 made by the Assessing Officer (AO) for the AY 2017-18 under section 69A of the Income-tax Act. The AO's initial addition was based on information from a survey of a third party, alleging that the assessee had received cash loans.

The facts reveal that the assessee filed its original return declaring an income of Rs.2,21,200. The case was reopened under section 147 after the AO alleged that the assessee had taken cash loans of Rs.2.65 crore during the relevant financial year. The AO issued a show-cause notice, but the assessment was completed ex parte without properly addressing the assessee’s denial of the transaction or allowing cross-examination of the third party.

The CIT(A) found that the AO’s conclusions were based on unverified third-party information, and no corroborative evidence was presented to substantiate the cash loan claim. The CIT(A) emphasized that, according to legal precedent, evidence from third parties must be corroborated and the opportunity for cross-examination must be provided. The CIT(A) determined that the AO failed to demonstrate the ownership or possession of unexplained money by the assessee, resulting in the deletion of the addition.

The Revenue's appeal argued that the CIT(A) erred in deleting the addition without allowing the AO to verify the new evidence. However, the appellate authority concluded that the original reply from the assessee was part of the assessment record and did not require the application of Rule 46A regarding additional evidence.

Ultimately, the appeal was dismissed, affirming the CIT(A)'s decision to delete the addition due to a lack of supporting evidence and violation of the principles of natural justice.

PCIT's Order u/s 263 Challenged: Assessee Disputes Jurisdiction and Claims on CSR Expenditure and Scrap Generation for AY 2018-19

An order issued by the PCIT u/s 263 of the ITA, challenging the assessment order for the AY 2018-19. The assessee raised multiple grounds, questioning the PCIT's jurisdiction and the claims made u/s 80G and the issue of scrap generation.

1. Jurisdiction u/s 263: The assessee contested the PCIT’s invocation of Section 263, arguing that the assessment order was neither erroneous nor prejudicial to the revenue. The PCIT had issued notices on three issues, including the CSR expenditure claim u/s 80G, the GST demands, and the failure to examine scrap generation.

2. CSR Expenditure (Section 80G Claim): The PCIT disagreed with the AO’s allowance of 50% of CSR expenses u/s 80G, stating that CSR expenses are statutory and not deductible as business expenses. The assessee argued that CSR donations to certain funds should qualify for the deduction u/s 80G, based on past rulings and the legislative provisions.

3. Scrap Generation: The PCIT raised concerns over the lack of detailed verification regarding the generation of scrap, questioning its classification and pricing. The assessee argued that all relevant details regarding scrap were disclosed in the audited balance sheet, and no discrepancies were found in prior or subsequent years.

4. Legal Precedents: The assessee cited various rulings that supported its position, including decisions from the ITAT and higher courts, which stated that invoking Section 263 is not justified when the AO has exercised discretion and made a reasonable assessment based on the available information.

The court reviewed the case and found that the issue of CSR expenditure was a debatable matter, and the assessment order was not erroneous or prejudicial. Similarly, the inquiry into scrap generation, despite not being fully documented in the assessment order, did not warrant revision u/s 263. The case highlighted that a difference in opinion between the AO and the PCIT does not automatically justify invoking the revisionary powers u/s 263 unless the order is fundamentally erroneous or prejudicial to revenue interests.

Thus, the appeal emphasized that Section 263 powers should not be invoked simply due to a difference of opinion on legal interpretations or factual findings that were reasonably examined during the original assessment.

"Tribunal Rules in Favor of Assessee, Deletes TDS Demand on Foreign LTC Reimbursements Following Interim Order from Madras High Court"

The appeal concerns a demand raised against the assessee for the AY 2016-17 u/s 201(1) and 201(1A) of the ITA, following an order passed by the AO on March 31, 2023. The AO claimed that the assessee had failed to deduct TDS on foreign LTC reimbursements of Rs. 7.06 lakhs to two employees, which was not exempt u/s 10(5) of the Act. The assessee argued that the failure to deduct TDS was due to a bona fide belief that it was not required.

The Hon'ble Apex Court had previously ruled in the assessee's own case (SBI vs. ACIT) that the bank should have deducted TDS on such reimbursements, confirming the AO's demand for Rs. 4.05 lakhs in tax along with interest. However, at the time of the impugned payments, an interim order from the Hon'ble Madras High Court (dated February 16, 2015) had restrained the bank from deducting TDS on LTC reimbursements. The Court had made it clear that if the writ petition was dismissed, the employees would be liable to pay tax on the reimbursement amount.

In this case, the Tribunal held that the interim order was binding on the bank, and thus, the bank could not be considered an "assessee-in-default" for non-deduction of tax at source. Therefore, the Tribunal ruled in favour of the assessee, and the demand raised against them was deleted. The appeal was allowed.

Tribunal Rules in Favor of Assessee, Deletes Rs. 5 Lakh Addition in Absence of Incriminating Material

The Assessee contested the order of the CIT(A) dated 06.02.2023, which pertained to the AY 2015-16. The primary issue raised by the Assessee was the enhancement of Rs. 5,00,000 by the CIT(A) u/s 68 of the ITA, which was considered unexplained income. The Assessee also raised several grounds regarding the validity of the assessment proceedings, including objections to the jurisdiction of the CIT(A), the legality of the notices issued u/ss 153A and 143(2), and the absence of incriminating material found during the search conducted in April 2017.

The search and seizure operations, which included the Assessee and his associates, led to the issuance of notices u/s 153A. However, the Assessee argued that no incriminating material was found, and the addition was based solely on the bank statement and presumption, contrary to established legal principles. The Assessee cited prior rulings in their favour, including a case involving the same search operation, where additions were deleted due to lack of incriminating material.

The Tribunal, after reviewing the case, sided with the Assessee, citing judicial precedents, including the Delhi High Court's decision in the case of CIT vs. Kabul Chawla and the Supreme Court's ruling in PCIT vs. Abhisar Buildwell P. Ltd., which emphasized that additions cannot be made in the absence of incriminating material found during a search.

The Tribunal concluded that the additions made by the AO and upheld by the CIT(A) were invalid, and thus, the appeal was allowed, with the addition being deleted.

Tribunal Reverses Subsidy Ruling, Orders Re-Examination of Interest and Loan Discrepancies.

Telangana State Housing Corporation Limited appealed against an order by the CIT(A) concerning their 2021-2022 assessment. The dispute centered on income additions made by the AO, including a Rs. 150 crore government subsidy, Rs. 547.5 crore in interest disallowances, discrepancies with HUDCO, unexplained monetary transactions u/s 69, and rental income.

The assessee argued the subsidy was a pass-through, not income, and contested the interest, book discrepancies, and Section 69 additions. The AO and CIT(A) considered the subsidy income, upheld interest disallowances, and found discrepancies and unexplained transactions.

The Tribunal ruled the subsidy was not income, favoring the assessee's nodal agency argument. The interest and HUDCO discrepancy issues were remanded to the AO for re-examination. The Section 69 additions were overturned, with the Tribunal criticizing the concept of negative loan balances. The rental income addition was adjusted. The AO was instructed to verify brought-forward business losses and recalculate interest. The appeal was partly allowed, with several matters sent back for further review.

LTCG: Assessee Denied Deduction u/s 54F as AO Finds No Evidence of House Construction Within the Prescribed Time, Citing Premature Purchase and Approval

The Assessing Officer (AO) denied the benefit of deduction u/s 54F of the Income Tax Act, claiming the assessee did not meet the conditions for the deduction. The assessee had sold a plot of land for Rs. 17,26,000 on 18.01.2007 and claimed deduction u/s 54F, asserting that the proceeds were used to construct a new residential house. However, the AO observed that the plot was purchased on 09.04.2003, and the construction plan approval was obtained on 29.06.2005, well before the sale of the plot. There was no evidence showing the house was constructed within the specified time frame required by section 54F (within three years from the date of sale or within two years before the sale).

The AO denied the deduction and computed the capital gains, determining the assessee’s total income to be Rs. 11,95,150. On appeal, the CIT(A) upheld the AO’s decision, agreeing that the house was constructed before the sale of the original asset, disqualifying the assessee from claiming the deduction.

The key issue was that the construction was completed before the sale, and the purchase of the plot and approval for construction occurred too early to meet the timing requirements set out in section 54F. As a result, the appeal was dismissed, and the denial of the deduction was confirmed.

Taxpayer Wins Appeal as ITAT Rules Rs.93.28 Lakh Addition Invalid: Assessment Declared Invalid Due to Deceased Status and Lack of Evidence

An appeal was filed by the taxpayer against an order by the CIT(A) concerning the AY 2014-15. The dispute centered on the Assessing Officer (AO) adding Rs.93,28,200 to the taxpayer's income, which included:

• Rs.88,84,000 as unexplained cash credit under Section 68, related to share sales and taxed under Section 115BBE.

• Rs.4,44,200 as an alleged commission paid to a broker.

Grounds of Appeal:

1. The assessment was made on a deceased person (Arvind Kumar Kotawala passed away on 05.05.2015), making it invalid.

2. The AO denied Section 10(38) exemption (Long-Term Capital Gains) based on suspicion rather than concrete evidence.

3. The taxpayer was not given an opportunity to cross-examine witnesses or challenge evidence used against them.

4. The addition of Rs.4,44,200 as commission was made without supporting evidence.

Key Facts & Arguments:

• The taxpayer had filed an IT return for AY 2014-15.

• The AO treated share sale proceeds as unexplained cash credit and imposed tax.

• The taxpayer provided valid documents (contract notes, demat statements, bank records) to prove the legitimacy of transactions.

• The AO relied on an investigation report that did not name the taxpayer or broker.

• The AO denied the right to cross-examine witnesses or access crucial evidence, violating principles of natural justice.

• Similar cases involving UNNO Industries Ltd. had been decided in favor of taxpayers by the ITAT.

Outcome:

• The ITAT allowed the appeal and deleted the additions made by the AO.

• It ruled that the AO acted on mere suspicion and failed to provide the taxpayer a fair opportunity to defend themselves.

• The taxpayer's documentation was considered adequate proof, and the assessment was found to be flawed.

Tribunal Sets Aside Rejection of 12AB & 80G Applications, Citing Violation of Natural Justice

The assessee appealed against orders rejecting its applications for registration u/s 12AB and approval u/s 80G(5) of the Income Tax Act, 1961. The CIT(Exemption), Ahmedabad, denied the applications based on alleged noncompliance without providing a final show-cause notice or adequate opportunity to be heard. The tribunal found this to be a violation of natural justice and set aside the rejection orders. The cases were remanded for fresh adjudication, ensuring the assessee is given a fair opportunity to present its case. Both appeals were allowed for statistical purposes.

Tribunal Deletes Addition of Rs. 8.57 Crore as Unexplained Cash Credit During Demonetization

This appeal, filed by the Assessee against the NFAC's order dated 31.10.2022 for the AY 2017-18, concerns the addition of Rs. 8,57,44,000 as unexplained cash credit due to cash deposits during the demonetization period, taxed under sections 68 and 115BBE of the Income Tax Act. The Assessee reported income of Rs. 1,12,19,390, but the AO identified a significant increase in cash deposits compared to previous years, prompting a show cause notice.

The Assessee argued that the cash sales were legitimate and reported in their return. However, the AO found the explanations inadequate, leading to the addition being confirmed by the Ld. CIT(A). The Assessee contended that the cash deposits had already been declared in their accounts, thus preventing double taxation.

The hearing revealed that the Assessee’s declared sales were accepted and supported by adequate documentation, negating the presumption of unexplained cash credits. The tribunal determined that the addition should be deleted, aligning with the ruling in SMILE Microfinance Ltd. v. ACIT regarding the application of section 115BBE.

The Assessee's appeal was allowed, and the addition was deleted.

"Appeal Remanded to ITAT for Fresh Consideration of Arm’s Length Price Determination in Transfer Pricing Case"

The appeal was admitted to examine whether he Tribunal followed the guidelines under Chapter X of the ITA, 1961, regarding the determination of arm’s length price in transfer pricing matters. The appeal cited the Supreme Court's decision in Sap Labs India (P) Ltd. (2023), which emphasized that the Tribunal's determination of arm's length price must adhere to the guidelines set out in the Act and Rules, and can be scrutinized by the High Court.

In this case, the Tribunal had not considered the Supreme Court's guidelines, leading to the conclusion that its decision should be remanded for fresh consideration. The parties agreed that the case be sent back to the ITAT for review, with the merits to be decided there. The appeal was disposed of without costs, and the substantial question of law was answered in favor of remanding the case to the ITAT for proper examination.

Tribunal Quashes Reassessment: Assessee Wins Appeal Against CIT(A) Order on Section 147 Proceedings

The assessee filed an appeal against the CIT(A) order dated 05.12.2023, challenging reassessment proceedings u/s 147 of the Income Tax Act, 1961, for AY 2012-13. The grounds included jurisdictional issues, absence of DIN on the assessment order, and wrongful additions under Sections 68 and 69C. The case stemmed from an investigation linking the assessee to accommodation entries. However, the assessee provided documentary evidence proving loan transactions were genuine and repaid. The Tribunal ruled in favour of the assessee, holding that the additions were unjustified, and set aside the CIT(A)’s order, canceling the tax demands.

Assessment on Non-Existent Entity Declared Void, Emphasizing Necessity for Correct Entity Naming in Post-Amalgamation Tax Assessments

Issue: Whether an assessment order passed under Section 143(3) on a non-existent entity due to amalgamation is valid, considering Section 170(2) of the Income Tax Act.

Facts:

• United Bank of India (UBI) filed its original return of income on 30.10.2018, declaring a loss of Rs.1,772.41 crores. A revised return on 29.03.2019 increased the loss to Rs.5,031.46 crores.

• UBI was amalgamated with Punjab National Bank (PNB) on 01.04.2020 through Gazette Notification No. CG-DI-E-04032020-216535 dated 04.03.2020.

• Despite being repeatedly informed of the amalgamation, the Assessing Officer (AO) issued an assessment order on 26.08.2021 in UBI’s name.

• The assessee appealed to CIT(A), which dismissed the appeal.

ITAT Decision:

• ???????The Tribunal quashed the assessment order, declaring it void ab initio, as it was passed in the name of a non-existent entity (UBI).

The Revenue was repeatedly informed about the amalgamation but still continued the assessment in UBI’s name.

• Key Precedent: PCIT v. Maruti Suzuki India Ltd. (2019) – Assessment on a non-existent entity is a substantive illegality, not a procedural lapse under Section 292B.

• Section 170(2) applies only if the successor entity (PNB) is correctly named in the assessment, which was not done.

• As the assessment was void, ITAT did not examine the merits of the case.

Distinguishing Mahagun Realtors (2022) 443 ITR 194 (SC):

• ???????In Mahagun Realtors, the Supreme Court upheld the assessment because the assessee failed to disclose the merger.

• Here, PNB had duly informed the AO, and all filings were under PNB’s name.

• Revenue’s failure to correct the assessment invalidated the order.

Conclusion:

• Assessment on a non-existent entity (UBI) is a nullity and cannot be upheld under Section 170(2).

• The ITAT quashed the order, reinforcing the legal principle from Maruti Suzuki and Spice Infotainment.

• Key takeaway: Tax authorities must issue assessments in the successor entity’s name post-amalgamation; failure to do so renders the assessment void ab initio.

"Review Petition Dismissed Due to 433-Day Delay and Lack of Merit"

The petitioner filed a Review Petition seeking to challenge the Order dated 26th September 2023, which dismissed their Civil Appeal. The petition was filed with a delay of 433 days, and the delay was not satisfactorily explained. After reviewing the Order and the record, the court found no valid grounds for review. As a result, the Review Petition was dismissed both on the grounds of delay and on merits.

The Supreme Court Upholds Sales Tax Subsidy as Capital Receipt for Munjal Auto, ITAT Orders Depreciation Recalculation

The Munjal Auto Industries Ltd. and the ITO concerning the tax treatment of sales tax subsidies received from Punjab and Haryana. The key issue is whether the subsidy qualifies as a capital or revenue receipt and its impact on depreciation and MAT u/s 115JB of the Income Tax Act.

Initially, the AO treated the subsidy as taxable revenue, while the CIT(A) ruled it was capital in nature, offering relief to the assessee. The ITAT upheld the capital nature but ordered the subsidy to be deducted from the cost of fixed assets, reducing depreciation.

The Gujarat HC dismissed the revenue's appeal, affirming the subsidy as capital. However, it directed the ITAT to reconsider whether the subsidy should impact depreciation u/s 43(1). Eventually, the Supreme Court upheld the High Court's view that the subsidy is capital, finalizing its classification.

The ITAT, in light of these rulings, ruled that the subsidy must be deducted from fixed assets for depreciation calculation under Explanation 10 to Section 43(1). The Revenue's appeal was dismissed, while the AO was directed to recompute depreciation and book profits accordingly.

"Review Petition Dismissed as Court Rejects Request for Open Court Hearing"

The court has rejected the application for the hearing of the Review Petition in open court. The delay in filing the petition has been condoned. After reviewing the petition, the order being challenged, and the associated documents, the court found no apparent error or merit to warrant reconsideration. As a result, the Review Petition has been dismissed, and any pending applications are disposed of.

ITAT Quashes PCIT's Revision Under Section 263: No Erroneous or Prejudicial Findings in Graphite India Ltd. Assessment Order

The Income Tax Act 1961 Section 263, empowers the PCIT or CIT to revise an assessment order if it is found to be erroneous and prejudicial to the revenue interest. In this case, Graphite India Ltd. filed its return for AY 2013-14, declaring total income of Rs.1,49,52,82,441 and book profit of Rs.2,37,33,07,368. The Assessing Officer (AO) completed the assessment determining an assessed income of Rs.1,65,73,07,934.

PCIT's Review and Findings: The PCIT found three main errors:

1. Long-Term Capital Loss on Zero Coupon Bonds (Rs.2,61,10,823) - The loss was incorrectly computed after indexing the cost of acquisition.

2. Short-Term Capital Loss on Reliance Income Fund (Rs.3,49,54,088) - The AO allowed a loss despite recorded profits in the assessee’s books, indicating a lack of proper enquiry.

3. Foreign Exchange Fluctuation Loss (Rs.3,14,39,209) - This was improperly claimed as a deduction rather than being capitalized.

Assessee's Arguments Against Section 263 Invocation:

1. Lack of Independent Enquiry by PCIT - The assessee contended that PCIT's suspicion alone was insufficient for revision.

2. Burden of Proof on PCIT - The PCIT failed to demonstrate that the AO’s order was erroneous and prejudicial.

3. Legal Precedents Supporting Assessee - Cited cases emphasizing the need for clear findings and independent enquiry by the PCIT.

ITAT Kolkata’s Decision:

1. PCIT's Failure to Prove Error - The ITAT ruled that PCIT did not provide material evidence of error in the AO’s assessment.

2. No Independent Enquiry Conducted by PCIT - The PCIT did not verify the claims independently before setting aside the assessment.

3. AO Considered Assessee’s Submissions - The ITAT noted that the AO had conducted sufficient enquiry and considered submissions.

4. Inadequate Enquiry vs. No Enquiry - The ITAT clarified that insufficient enquiry does not equate to no enquiry, and the PCIT did not prove the AO's actions were prejudicial.

Final Verdict: The ITAT quashed the PCIT's order under Section 263, concluding that the assessment order was neither erroneous nor prejudicial to the revenue. The revision by PCIT was deemed unsustainable in law.

"Tribunal Allows Assessee's Appeal, Deletes Rs. 90 Lakh Addition on Unexplained Cash Credit"

The assessee concerns an order from the CIT(A), NFAC, Delhi for AY 2010-11. The appeal was delayed by 437 days due to notices being sent to an outdated email address, despite the assessee providing an updated one. The delay was not attributed to the assessee, and the delay was condoned.

The main issue in the appeal was the confirmation of a Rs. 90,00,000 addition by the CIT(A) on account of unexplained cash credit u/s 68 of the ITA. The AO had reopened the case based on information from the Investigation Wing, alleging that the assessee received accommodation entries from M/s. Canary Tradecom Pvt. Ltd. However, the assessee provided all required details, such as the investor company's PAN, audited financials, and other supporting documents. Both the AO and CIT(A) relied on the general modus operandi of accommodation entry operators but did not specifically examine the evidence presented by the assessee.

The Tribunal found that the assessee had discharged its burden by providing the necessary documentation and that the authorities failed to conduct a proper inquiry. Relying on previous judgments, the Tribunal concluded that no addition could be made u/s 68, and therefore, the addition was deleted. The appeal was allowed.

The Court Quashes Notice for AY 2015-16 u/s 148 of ITA Due to Limitation

An petition challenging a notice issued u/s 148 of the ITA for the AY 2015-16, arguing that the notice was barred by limitation. The petitioner had previously filed a return for AY 2015-16, which was modified following an APA. The case went through scrutiny, and an assessment order was passed in 2018. The petitioner filed an appeal that was allowed in 2019.

In 2021, the AO issued a notice to reopen the assessment for the same year, which the petitioner contested. Following judicial decisions, including a Supreme Court ruling, the Revenue conceded that notices for AY 2015-16 issued after April 2021 would be invalid due to limitations set by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA).

In light of this concession, the court ruled that the notice issued on 27.07.2022, beyond the prescribed limitation period, was invalid. As a result, the petition was allowed, and the notice and the related proceedings were set aside.

"Tribunal Partly Allows Deduction Claim of Cooperative Society, Upholds Disallowance of Interest Income from MSEDCL"

The assessee against the order of the Ld. CIT(A)/NFAC dated 30.03.2024, arising from the assessment order u/s 143(3) r.ws. 144B for AY 2020-21. The main issue was the disallowance of a deduction u/s 80P(2)(a)(i)/80P(2)(d) amounting to Rs. 1,33,50,608/-.

The assessee, a cooperative society, had declared an income of Rs. 3,92,570/- after claiming the deduction. The AO observed that the principle of mutuality was not applicable, as the society had members without voting rights, and the society’s operations resembled those of a banking institution. Additionally, income from deposits with cooperative banks and other banks was disallowed.

On appeal, the Tribunal held that interest income earned from cooperative banks (Rs. 4,15,27,813/-) was eligible for deduction u/s 80P(2)(d), following consistent judicial decisions. However, the interest income from deposits with MSEDCL (Rs. 1,09,529/-) was not supported by any judicial precedent, so this part of the disallowance was upheld.

The appeal was partly allowed, confirming a disallowance of Rs. 1,09,529/- and allowing a deduction of Rs. 1,32,41,080/- u/s 80P of the Act.

ITAT Rules on AYs 2017-18 & 2018-19: Revenue Appeals Allowed, Assessee’s Cross-Objections Upheld

The ITAT rulings on appeals and cross-objections for AYs 2017-2018 and 2018-2019:

Revenue Appeals (ITA.Nos.534 & 535/Hyd./2024)

• 2017-2018: The ITAT overturned the CIT(A)'s decision, ruling the assessment year was "abated" due to a search under section 132. The AO was justified in considering materials beyond those seized. The ITAT allowed the Revenue’s appeal, reinstating the depreciation disallowance.

• 2018-2019: Similarly, the ITAT ruled the assessment year was "abated" and allowed the Revenue’s appeal, reinstating the disallowance of subcontract expenses.

Assessee's Cross-Objections (C.O.Nos.4 & 5/Hyd./2025)

• Delay Condensation: The ITAT condoned a 205-day delay, accepting the assessee’s explanation of a bona fide belief and medical exigencies.

• 2017-2018: The ITAT allowed the cross-objection, directing the AO to delete the depreciation disallowance. The AO’s reliance on a third party's statement, without providing the assessee an opportunity to respond, violated natural justice.

• 2018-2019: The ITAT allowed the cross-objection, directing the AO to delete the subcontract expenses disallowance. The AO failed to share inquiry reports with the assessee, making the disallowance unjustified.

Key Takeaways:

• Both assessment years were ruled "abated", granting the AO wider assessment powers.

• Principles of natural justice were emphasized—evidence used against the assessee must be shared for rebuttal.

• The ITAT ruled in favour of both the Revenue’s appeals and the assessee’s cross-objections, ultimately reinstating AO’s powers but ensuring fair procedures for the assessee.

The Court Dismisses Special Leave Petition Due to 476-Day Delay, Condonation Application Rejected

The court addressed a special leave petition with a delay of 476 days in filing. After hearing the counsel, the court found that sufficient cause or grounds had not been provided to justify condoning the delay. As a result, the application for condonation of delay was dismissed, and consequently, the special leave petition was also dismissed. Any pending applications were disposed of.

ITAT Condones Delay and Remands Case for Reconsideration of 12A Registration Rejection by CIT(Exemption)

The appellant challenged the CIT(Exemption), Pune’s order denying registration u/s 12AA. The appeal was delayed by 62 days due to the absence of a full-time principal and election duties of key personnel. The Tribunal condoned the delay, citing reasonable cause. The appellant argued that the CIT(E) rejected the application for non-compliance without sufficient opportunity to respond. The Tribunal noted a violation of natural justice principles, as no further opportunity was given before rejection. Without commenting on the merits, the matter was remanded to the CIT(E) for reconsideration, directing both parties to ensure compliance. The appeal was allowed for statistical purposes.

Revenue Appeal and Assessee Cross-Objection: Dispute over 80IC Deduction Following Substantial Expansion; Matter Remanded for Re-adjudication

This appeal involves a dispute over the assessee's claim for deduction u/s 80IC of the Income-tax Act. The assessee, a chocolate manufacturer, initially claimed a 25% deduction but later, during assessment, modified it to 100% based on a Supreme Court ruling regarding "substantial expansion." The AO rejected the modified claim, citing the need for a revised return. The CIT(A) allowed the assessee's appeal, accepting the modified claim without a revised return.

The Revenue appealed, arguing a revised return was necessary and the assessee failed to provide a revised audit report. The assessee cross-objected, asserting the CIT(A)'s order was correct, citing the Supreme Court's ruling and a prior year's acceptance of a similar claim.

The tribunal found the AO's reliance on the requirement of a revised return was valid, but agreed with the CIT(A)'s application of the Supreme Court's ruling concerning "substantial expansion." However, the tribunal criticized the CIT(A) for not verifying the fulfillment of all preconditions for the deduction. Consequently, the tribunal allowed the appeal and cross-objection for statistical purposes, and restored the matter to the CIT(A) for re-adjudication, directing verification of the fulfillment of all preconditions by the assessee for claiming the modified deduction u/s 80IC(2)(a)(ii).

Tax Appeal Challenges Reopening and Gift Taxation on Rs. 7.5 Crore Mumbai Flat

The appeal challenges the reopening of the assessment u/s 148 and the taxation of a gifted property worth Rs. 7.5 crores u/s 56(2)(vii)(b). The assessee, an NRI, received the Mumbai flat as a gift from Ms. Vidhie Mukerjea in 2016. The tax authorities deemed the gift taxable since the donor and donee were not "relatives" per the Act. The assessee argued that step-siblings qualify as "brother and sister." The AO and CIT(A) rejected this, stating the Income Tax Act does not explicitly recognize step-siblings as relatives. Various legal definitions and precedents were examined, but the tax authorities upheld the assessment. The core issue remains whether step-siblings fall under the definition of "brother and sister" for tax exemption purposes.