Category: Tribunal News: Part A-Domestic Taxation

26. [2025] 128 ITR(T) 270 (Jaipur – Trib.)

Kaizen Enterprises (P.) Ltd. v. ACIT

ITA NO.: 156 & 390 (JPR) OF 2024

A.Y.: 2013-14 AND 2017-18 DATE: 18.02.2025

Sec. 145 – Method of accounting – Builder and developer consistently following project completion method – AS-7 applicable only to construction contractors – Revenue recognition under AS-9 dependent upon transfer of risks and rewards – Revenue having accepted method in earlier years – Addition by applying percentage completion method resulting in double taxation deleted

Sec. 69A r.w.s. 144 – Loose diary seized during search containing receipt entries – Surrender made by director representing gross receipts – No corroborative evidence regarding actual undisclosed income or expenditure – Entire amount could not be taxed – Addition restricted on estimated basis.

FACTS

The assessee-company was engaged in the business of real estate development and was consistently following the project completion method for recognition of revenue. During scrutiny assessment for A.Y. 2017-18, the Assessing Officer held that the assessee ought to have followed percentage completion method and accordingly taxed advances received from customers amounting to Rs.3.71 crores as business income.

The Assessing Officer observed that substantial construction work had been completed and significant consideration had already been received from customers. Accordingly, relying upon percentage completion method, addition was made to the income of the assessee.

On appeal, the Commissioner (Appeals) deleted the addition holding that the assessee had consistently followed project completion method which had been accepted by the department in earlier years.

In separate proceedings relating to A.Y. 2013-14 arising out of search action, a diary containing certain monetary notings was seized from the premises of the assessee group and the director of the assessee made a statement surrendering an amount of Rs.1.35 crores. The Assessing Officer treated the entire amount as undisclosed income and made addition accordingly.

The Commissioner (Appeals) partly sustained the addition. Aggrieved, both the assessee and the revenue preferred appeals before the Tribunal.

HELD

The Tribunal observed that the assessee was a builder and developer and not a construction contractor and therefore Accounting Standard-7 relating to construction contracts was not applicable. It was held that the case of the assessee was governed by Accounting Standard-9 relating to revenue recognition.

The Tribunal noted that under the terms of agreements executed with buyers, transfer of ownership and possession was contingent upon receipt of full consideration and execution of conveyance documents. It was further observed that buyers had the right to cancel bookings and seek refund of amounts paid and therefore risks and rewards of ownership had not been fully transferred.

The Tribunal further observed that the assessee had consistently followed project completion method over the years and the same had been accepted by the department in preceding assessment years. No justifiable reason had been brought on record by the Assessing Officer for deviating from the settled method of accounting regularly followed by the assessee.

It was also noted that income from the project had already been offered to tax by the assessee in subsequent assessment years following project completion method and the same had been accepted by the revenue. Therefore, taxing the same advances again during the year under consideration would result in impermissible double taxation.

Relying upon the decision of the Supreme Court in CIT v. Excel Industries Ltd., the Tribunal upheld the order of the Commissioner (Appeals) deleting the addition made by applying percentage completion method.

With regard to the addition based on diary notings, the Tribunal observed that though the assessee had surrendered Rs.1.35 crores during search proceedings, neither the revenue had substantiated that the entire amount represented net undisclosed income nor had the assessee produced evidence regarding expenditure incurred for earning such receipts.

The Tribunal held that the surrender represented gross receipts and therefore the entire amount could not be assessed as income. Applying principles governing best judgment assessment under section 144 and relying upon the decision of the Supreme Court in Brij Bhushan Lal Parduman Kumar v. CIT, the Tribunal held that only reasonable profit element could be brought to tax.

Accordingly, the Tribunal restricted the addition to Rs.10 lakhs and granted substantial relief to the assessee.

BCAJ Admin

25. [2025] 128 ITR(T) 128 (Mumbai – Trib.)

ACIT vs. Doshion Veolia Water Solution (P.) Ltd

A.Y.: 2009-10 AND 2012-13 DATE: 18.07.2024

Sec. 68 – Share capital and share premium – Preferential shares issued to holding company – Identity, genuineness and creditworthiness established through ROC records, financial statements and banking trail – Investment reflected in books of investor and compliant with FEMA/RBI regulations – Addition deleted

Sec. 14A r.w. Rule 8D – Interest disallowance – Own funds substantially exceeding investments yielding exempt income – Presumption that investments made out of interest-free funds – Disallowance deleted.

FACTS

During A.Y. 2012-13, the assessee-company had raised share capital and share premium aggregating to Rs.47.44 crores through issue of preferential shares to its holding company. The Assessing Officer treated the said amount as unexplained cash credit under section 68 on the ground that the assessee failed to satisfactorily establish the identity, genuineness and creditworthiness of the investor. The Assessing Officer further made disallowance under section 14A read with Rule 8D(2)(ii) in respect of interest expenditure attributable to exempt dividend income.

On appeal, the Commissioner (Appeals) deleted both additions after examining additional evidences, remand reports and financial records.

Similarly, for A.Y. 2009-10, additions made under section 68 in respect of share capital/share premium received from foreign investor and disallowance under section 14A were also deleted by the Commissioner (Appeals).

Aggrieved by the relief granted by the Commissioner (Appeals), the revenue preferred appeals before the Tribunal.

HELD

The Tribunal observed that detailed evidences including ROC records, share registers, bank statements, financial statements of the holding company and remand reports clearly established the identity and creditworthiness of the investor as well as genuineness of the transactions relating to issue of preferential shares.

It was noted that the holding company had duly reflected the investments in its financial statements and that the source of investment was also explained through secured borrowings obtained from NBFCs. The Tribunal further observed that payments were routed through proper banking channels and corresponding investments were reflected in the books of both entities.

The Tribunal held that the Commissioner (Appeals), after detailed examination of evidences and remand proceedings, had rightly concluded that the requirements of section 68 stood fully satisfied. Accordingly, deletion of addition relating to share capital and share premium was upheld.’

With regard to disallowance under section 14A, the Tribunal observed that the assessee’s own funds comprising share capital and reserves were substantially higher than the investments yielding exempt income.

Relying upon the decision of the Bombay High Court in CIT v. HDFC Bank Ltd., the Tribunal held that where sufficient interest-free funds are available, a presumption arises that investments are made from such funds and therefore no disallowance of interest expenditure under Rule 8D(2)(ii) is warranted.

Accordingly, deletion of disallowance under section 14A was also upheld and both appeals of the revenue were dismissed.

BCAJ Admin

24. (2026) 185 taxmann.com 747 (Mum Trib)

Yogayatan Jankalyan Trust v. CIT(E)

A.Y.: N.A. Date of Order: 20.04.2026

Section : 12AB

In the absence of any adverse finding regarding charitable nature of objects or genuineness of activities, CIT(E) cannot reject registration under section 12AB / 80G on the ground that the charity granted scholarship to Indian students for education abroad which amounted to application of income outside India in violation of section 11(1)(c).

FACTS

The assessee was a trust engaged in charitable activities and filed applications in Form No. 10AB on 29.05.2025 seeking registration under section 12AB as well as approval under section 80G. CIT(E) rejected the application for registration under section 12AB primarily on the ground that the assessee granted scholarship to an Indian student pursuing education abroad, which was hit by section 11(1)(c). It was further observed that the object clause permitted application of funds outside India. Consequently, in the absence of registration under section 12AB, the application for approval under section 80G was also rejected.

Aggrieved by the orders, assessee preferred appeals before Tribunal against such rejection of registration under section 12A and section 80G.

HELD

Noting the decision of the Tribunal in ITO (E) v. J N Tata Endowment for Higher Education of Indians [2024] 166 taxmann.com 126 (Mum-Trib) wherein it has been held that disbursal of loan scholarships to Indian students for pursuing higher education abroad constitutes application of income for charitable purposes in India and observing that there was adverse finding regarding the charitable nature of objects and genuineness of activities of the assessee, the Tribunal held that the reasoning of CIT(E) was not sustainable and accordingly, directed the CIT(E) to grant registration under section 12AB and approval under section 80G to the assessee.

In the result, both appeals of the assessee were allowed.

BCAJ Admin

23. (2026) 185 taxmann.com 711 (Mum Trib)

Nikesh Bhagwandas Mehta v. ITO

A.Y.: 2022-23 Date of Order: 15.04.2026

Sections: 45, 54F, 70

Where the assessee earned long-term capital gains from the sale of certain shares and claimed exemption under section 54F, while also incurring long-term capital loss on the sale of other shares and carried forward such loss, such carry forward was allowable since section 54F overrides section 70(3) for the purpose of computation.

FACTS

The assessee filed his return of income for AY 2022-23 on 29.8.2022 reporting total income of Rs.49,53,740. During the year, the assessee had earned long term capital gain on sale of shares of Rs.69,84,283 which was claimed as exempt under section 54F. He had also carried forward long term capital loss of Rs.37,72,601 on sale of certain other shares incurred during the year. Return was processed by CPC under section 143(1) wherein the carry forward of said long term capital loss was disallowed.

Aggrieved, the assessee filed an appeal before CIT(A) who upheld the disallowance by holding that first inter head loss is to be adjusted and then only, exemption under section 54F can be claimed on the amount of net capital gain.

Aggrieved, the assessee filed appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) From section 45(1), it is noted that the chargeability of profit or gain arising from the transfer of capital asset is subject to what is provided in section 54 to 54H, which includes section 54F. Thus, the chargeability itself factors in the benefit available to the assessee under section 54F. Heading of the section 54F mentions that capital gain on transfer of certain capital assets is not to be charged in case of investment in residential house. Thus, when the conditions as prescribed under section 54F are complied with by the assessee, the capital gain arising out of the transfer of certain capital assets gets an exit from the charging section 45. Clause (a) of section 54F(1) prescribes that the whole of capital gain shall not be charged under section 45, when the cost of new asset is more than the net consideration in respect of the original asset which was transferred and gave rise to capital gain. Thus, the scheme of section 45 to 55A provide for computation of capital gains and the effect has to be given first as per series of exemption section of 54.

(b) Section 70(3) mentions that where there is a loss because of computation made under section 48 to 55, assessee is entitled to set off such a loss against income, if any, arrived at under similar computation for any other capital asset not being short term capital asset. Thus, section 70(3) will apply once capital gain has been computed as per the provisions of section 48 to 55 wherein exemption available under section 54F is subsumed for the purpose of computation. Accordingly, provisions of section 54F will prevail over the provisions of section 70(3).

(c) It is not necessary that one should first apply section 70(3) and thereafter only the assessee could invest the capital gain/net consideration arising from the transaction of long term capital asset as required under section 54F. Scheme of section 45 to 55A provides for computation of capital gains and the effect has to be given first to the provision of capital gains as provided under the said sections and then apply the provisions of section 70. To put it in other words, section 70 would come into the computation Aqof total income only when the capital gains has been computed in accordance with the provisions of section 45 to 55A.

Relying on CIT v. Vijay M. Mahtaney (2013) 35 taxmann.com 228 (Madras) and Naresh Jain v. Asstt. CIT [2020] 118 taxmann.com 519 (Jaipur – Trib), the Tribunal held that the assessee was eligible for exemption under section 54F towards long term capital gain of Rs. 69,84,283 earned on sale of certain long term equity shares. At the same time, assessee was also eligible to carry forward long term capital loss of Rs.37,72,601 incurred by him on sale of another set of long term equity shares, and directed that carry forward of long term capital loss claimed by the assessee in his return is to be allowed.

In the result, the appeal of the assessee was allowed.

BCAJ Admin

22. (2026) 185 taxmann.com 275 (Mum Trib)

National Payments Corporation of India v. CIT

A.Y.: 2022-23 Date of Order: 25.03.2026

Sections: 12AB, 143(3)

Where the cancellation proceedings under section 12AB were initiated by CIT(E) on the basis of reference made by the Assessing Officer under second proviso to section 143(3), CIT(E) was required to provide a copy of such reference to the assessee.

In order to cancel registration under Section 12AB, CIT(E) must clearly specify the relevant category of “specified violation” under the Explanation to Section 12AB(4) applicable to the assessee.

FACTS

The assessee was incorporated as a non-profit company under section 25 of the Companies Act, 1956 in 2008. The company’s shares were majorly held by several large banks. It was granted regular registration under section 12A(1)(ac)(i) dated 23.09.2021 for 5 years from A.Y. 2022-23 to 2026-27. It filed its return of income for AY 2022-23 declaring nil income after claiming exemption under section 11. The assessee’s case was then selected for complete scrutiny during which the AO had made a reference for cancellation of registration to CIT(E) on the ground that the assessee had committed “specified violations” as per Explanation to section 12AB(4). However, copy of such reference was not made available to the assessee.

During cancellation proceedings, CIT(E) observed that the assessee was deriving income from activities of providing payment gateway services in relation to the business of its member banks and their customers charging fee which were not of charitable purpose as per section 2(15). Further, it was contended that the assessee had provided service of National Financial Switch which connects ATMs of different banks into one shared network, which enables cash withdrawal, balance enquiry, mini statement etc. i.e. giving seamless access to ATMs across India to various major banks for the banking business, including its 10 promoter banks. Resultantly, the assessee was said to have applied its income for benefit of a “specified person” in violation of the provisions of section 13(1)(c) read with section 13(3). Accordingly, CIT(E) held that there was no charitable activity in providing such gateway platform for ATMs, IMPS, CTS, RuPay, NACH and AEPS transactions, which were carried on for member banks who in-turn provided such services to their customers which were chargeable and not free of service. Therefore, as the assessee trust solely was engaged in activities which were profitable in nature, not benefiting public at large, CIT(E) held the activities of the assessee were in violation of the provisions of section 12A and 12AB especially committing “specified violation” as per section 12AB(4). Accordingly, registration was cancelled, denying benefit of exemption under section 11 and 12 with effect from 23.09.2021.

Aggrieved, the assessee filed appeal before the Tribunal.

HELD

The Tribunal observed as follows:

(a) Though second proviso to section 143(3) does not expressly mention about supplying the reference for cancellation to the assessee, it is a settled principle of law where courts have consistently held that any adverse material relied upon by the Department should be disclosed to the assessee which form the basis of action, and failure to comply with this would violate audi alteram partem, that is, the right to be heard. If it is purely an internal administrative communication which is not relied upon for decision making, then the authorities may resist such disclosure but not the reference for initiating cancellation proceeding.

b) It was evident that in order to cancel a registration of the trust, CIT(E) will have to specify which category of the “specified violation” under Explanation to section 12AB(4), the assessee would fall under. Where there are multiple reasons amounting to violation, neither the show cause notice nor the order for cancellation should suffer from vagueness. In the absence of clear particulars of the alleged violation along with facts and materials proposed to be relied upon, the assessee would be deprived of a meaningful opportunity to respond.

Accordingly, without expressing any opinion on the merits, the Tribunal directed CIT(E) to provide to the assessee copy of the reference relied upon by him. The Tribunal also remanded the issue back to the file of CIT(E) for denovo adjudication and to give sufficient opportunity of hearing to the assessee, by setting out the exact charge / specified violation for the proposed cancellation of registration. Thereafter, the CIT(E) can decide the issue on the merits as well in accordance with law by a speaking order.

BCAJ Admin

21. TS-656-ITAT-2026 (Chennai)

Shariq Javed L/R of Late Jawad Alam v. ITO

A.Y.: 2017-18 Date of Order: 29.4.2026

Section: 270A

Where AO fails to record satisfaction in the assessment order that the assessee has under-reported his income and/or fails to direct initiation of penalty proceedings, the initiation of penalty under section 270A is bad in law and the proceedings need to be quashed.

FACTS

The assessee, for AY 2017-18, filed return of income declaring total income of Rs.2,13,23,700 which included long term capital gain (LTCG) of Rs.1,99,10,377. The Assessing Officer (AO) while assessing the total income vide order dated 16.12.2019, passed under section 143(3) of the Act, disallowed indexed cost of improvement and assessed the LTCG to be Rs.3,92,77,906. Aggrieved, the assessee preferred an appeal to the CIT(A) who held the LTCG to be Rs 3,01,41,697. The assessee did not prefer any appeal against the order of CIT(A).

The Assessing Officer (AO) vide notice issued on 30.12.2019 initiated penalty proceedings. The penalty notice was neither signed manually / digitally and was issued only on 30.12.2019 whereas the assessment order was passed on 16.12.2019. During the course of penalty proceedings, the assessee passed away and the AO passed an order in the name of legal heir levying a penalty of Rs.12,20,784 being 50% of tax allegedly sought to be evaded for under-reporting of income.

Aggrieved by the order of AO levying penalty, the legal heir preferred an appeal to CIT(A) who confirmed the action of the AO.

Aggrieved, an appeal was preferred to the Tribunal where the assessee challenged the jurisdiction of the AO to have imposed penalty under section 270A on the ground that the AO during the assessment proceedings neither directed nor recorded satisfaction that the assessee has under-reported its income and shall be liable to pay penalty on it. It was contended that in the absence of such an endorsement, the impugned penalty is bad in law.

HELD

The Tribunal, at the outset, took note of the provisions of section 270A(1) of the Act and held that the AO has not recorded his `satisfaction / direction’ that the assessee has under-reported his income and shall be liable to pay penalty on under-reported income. Omission to record satisfaction and direct penalty under section 270A in the course of assessment proceedings vitiates the initiation of proceedings for levy of penalty under section 270A of the Act.

The Tribunal also observed that it is a fact evidenced by e-filing portal website that while the notice initiating penalty is dated 16.12.2019 it was issued on 30.12.2019. Therefore, it is clear that the penalty was not initiated in the course of assessment proceedings but 14 days from the date of framing the assessment order which does not satisfy the requirement of section 270A(1) of the Act.

The Tribunal held that in the absence of AO recording his satisfaction in the assessment order that the assessee has under-reported his income and failure to direct that proceedings for levy of penalty under section 270A be initiated vitiate the initiation of penalty under section 270A against the assessee and therefore the levy of penalty is bad in law. The Tribunal quashed the order of penalty under section 270A.

BCAJ Admin

20. TS-566-ITAT-2026 (Mumbai)

DCIT v. Jumbo Electronics Corporation Pvt. Ltd.

A.Y.: 2018-19 Date of Order : 7.4.2026

Section: 68

Proviso to section 68 mandates establishing source of source.

FACTS

The assessee engaged in business of retailing in consumer electronics, IT equipment, mobiles, personal electronic items and allied accessories e-filed the return of income for AY 2018-19 declaring therein a loss of 54,15,955. During scrutiny assessment proceedings, the Assessing Officer (AO) noticed that the assessee company had taken a loan of Rs 11,00,16,395 from Aasman Management Services Private Limited (AMSPL).

The AO observed that the net worth of AMSPL was not sound enough to advance the loan of the magnitude which it had, further AMSPL had filed a return of income declaring total income of Rs 8,050; had not shown the loan advanced to the assessee in its ITR and a perusal of bank statement of AMSPL revealed that it had identical amounts in its bank account immediately before it advanced funds to the assessee company. Therefore, he concluded that the assessee company had failed to establish creditworthiness of AMSPL and made an addition of Rs. 11,00,16,395 to the total income of the assessee company.

Aggrieved, the assessee preferred an appeal to CIT(A) who allowed this ground of appeal holding that the assessee has discharged the primary burden cast on it; the AO has not made further enquiries; he has not established that it was the assessee’s own money which came back; law does not prohibit a person from lending out of borrowing, etc.

Aggrieved, the revenue preferred an appeal to the Tribunal where it was submitted that the assessee is a wholly owned subsidiary of AMSPL and that the loan was taken from holding company to repay the outstanding balance of cash credit and to pay off trade creditors. Also, from the balance sheet of AMSPL it was shown that AMSPL has written off the amount advanced to the assessee company.

HELD

At the outset, the Tribunal noticed that the CIT(A) had allowed the appeal mainly by observing the conduct of the AO and by holding that the AO has not made any independent enquiries. He has not found out the person from whom AMSPL received the money advanced to the assessee.

The Tribunal held that it was unable to subscribe and persuade itself to concur with the view of CIT(A) which was totally based on failure on the part of AO to make enquiries or not give attention to the transaction. The Tribunal remarked that the powers of the CIT(A) are co-terminus with those of the AO and the CIT(A) having observed that the AO has failed to conduct enquiries or take actions which are necessary, it was the duty of the CIT(A) to decide the issue by making enquiries himself or through the AO in case further enquiries are necessary to arrive at a logical conclusion.

The Tribunal held that certain information like source of funds advanced by AMSPL was not there before the AO. The Tribunal observed that the first proviso is applicable w.e.f. 1.4.2013 and the assessee has not furnished details of credit entries in the bank statement of AMSPL qua their nature and source which though were pointed out by CIT(A) but were not even sought during the proceedings before him so as to reach a justifiable reasoning after satisfying the mandate of law before directing to delete the addition.

The Tribunal set aside the order of CIT(A) with a direction to revisit the issue by making or getting done the necessary enquiries which he noted were required to be done and decide the issue afresh as per provisions of section 68.

The Tribunal further held that in the absence of mandatory information about source of source which is requisite in present case as per first proviso to section 68 of the Act which was not fulfilled, the case laws relied upon by the assessee regarding discharge of primary onus, addition merely on the basis of conjectures and surmises cannot help in the present case. It observed that the argument of accounting treatment in the books of the lender does not determine the genuineness of the loan may have some substance but first the mandatory conditions of section 68 must be satisfied. This contention remains consequential in nature.

BCAJ Admin

19. ITA No. 7998/Mum. /2025

Mohd. Azam Hasan Sheikh v. ITO

A.Y.: 2017-18 Date of Order: 09.4.2026

Section: 10(10AA)

Claim for deduction under section 54 made for the first time in return of income filed in response to reassessment notice cannot be denied merely on the ground that such a claim was not made in the original return of income

FACTS

The assessee had not filed return of income under section 139 of the Act. The Department, based on the information that during the year under consideration the assessee has purchased an immovable property showing a value of Rs. 45,00,000 issued a notice under section 148 of the Act. The assessee filed a return of income in response to notice issued under section 148 in which he claimed exemption under section 54 of the Act to the tune of Rs.49,00,000 (sic Rs 45,00,000) against capital gains arising on sale of a residential property owned by the assessee jointly with Ms. Binu Azmi on the ground that the entire sale consideration has been invested in acquisition of a new residential property jointly purchased with Ms. Binu Azmi at Thakur Residency, Ulwe, Navi Mumbai for a total consideration of Rs. 45,00,000.

In the course of assessment proceedings u/s 147 of the Act, the AO considered the claim of the Assessee, however, by observing “that the Assessee has not filed original return of income and therefore, the exemption under section 54 is not allowable”, eventually made the addition of Rs. 31,38,256/- by disallowing the amount claimed by the Assessee under section 54 of the Act.

Aggrieved, the assessee preferred an appeal to the CIT(A) who affirmed the aforesaid addition more or less on the same reason as of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that the only controversy involved in the instant case relates to the consideration of exemption claimed under section 54 of the Act, which has been declined to be entertained by the authorities below mainly on the reason that the Assessee failed to file original return of income and/or without filing original return of income, the claim under section 54 of the Act is not sustainable and/or the long term capital gain disclosed/claimed by way of return filed in response to the notice under section 148 of the Act is not entertainable/allowable.

The Tribunal observed that the Commissioner while affirming the aforesaid addition and/or the decision of the AO for not allowing the deduction claimed under section 54 of the Act, has interalia relied on judgment passed by the Hon’ble Apex Court in the case of CIT v. Sun Engineering Works (P.) Ltd. [198 ITR 297 (SC)] whereas the co-ordinate Bench of the Tribunal in the case of Sanjay Gopaldas Bajaj v. ITO [ITA No. 5944/M/2025 decided on 20.01.2026] has dealt with identical issue and also considered the judgment in the case of Sun Engineering Works (P.) Ltd. (supra) and ultimately restored back the matter to the file of the AO to consider the case of the Assessee, within the parameters stipulated under section 54 of the Act.

In the above judgment, reliance was also placed on the judgment of the decision of co-ordinate Bench of the Tribunal in the case of Smt. Amina Ismail Rangari v. ITO [(2017) 86 taxmann.com 160 (Mumbai-Trib.)], wherein it has been held that the provision of section 54F do not prescribe filing of return within the time stipulated under section 139, as a condition precedent for claiming the deduction and that claim raised in the return in response to notice under section 148 of the Act cannot be rejected merely on the ground of delay in filing the return.

The Tribunal relying on the above judgments allowed the appeal of the Assessee, and remanded the case to the file of the AO for decision afresh on the claim of the Assessee under section 54 of the Act within the parameters and/or conditions set out in section 54 of the Act but not otherwise.

BCAJ Admin

18. TS-572-ITAT-2026(Delhi)

Prem Narayan Chourasia v. ACIT

A.Y.: 2020-21 Date of Order: 6.4.2026

Sections: 45, 56

Compensation received from RERA is taxable as Capital Gains and not Income from Other Sources.

FACTS:

The assessee in financial year 2005-06 booked a plot being Plot No 412, Sector -15, Sunnywood Enclave Wave City, Ghaziabad and up to FY 2015-16 paid amounts aggregating to Rs.13,13,318. During the year under consideration he received from the builder a sum of Rs 32,47,185 which included compensation of Rs 19,33,867 received under provisions of RERA. The amount received was offered for taxation under the head capital gains.

The Assessing Officer (AO) while assessing the total income under section 147 of the Act charged the amount of compensation to tax as Income from Other Sources.

Aggrieved, assessee preferred an appeal to CIT(A) who confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that it found no merit in the Revenue’s vehement contentions supporting the impugned addition on the ground that compensation is nothing but interest in common parlance liable to be assessed u/s 56 of the Act.

The Tribunal took note of section 18(1) of the Real Estate (Regulations and Development) Act, 2016 stipulating “compensation” to be computed as per the prescribed interest rate than interest (inclusive of the payments already made) and also of section 2(47)(ii) whereby “extinguishment of any rights” in relation to a capital asset constitutes “transfer” thereof and concluded that such a compensation could not be assessed under section 56 of the Act as “income from other sources”. The Tribunal held that the assessee had rightly declared the amount of compensation as representing his long term capital gains.

BCAJ Admin

17. TS-505-ITAT-2026 (Delhi)

BPTP Ltd. v. DDIT

A.Y.: 2020-21 Date of Order: 01.4.2026

Section: 143(1), 190

TDS credit deducted during the current year is allowable despite the fact that revenue has been offered for taxation in an earlier year i.e. TDS credit is allowable despite the timing mismatch between the year of recognition of income and year of deduction of tax.

FACTS

The assessee, engaged in the business of real estate filed its return for the relevant assessment year 2022-23 under Section 139(1) of the Act claiming TDS credit of Rs.19,93,700 as appearing in Form 26AS. However, while processing the return of income, CPC allowed credit of only Rs.18,14,094.

The assessee moved rectification application under Section 154 of the Act before the CPC, Bangalore. In an order passed under section 154 of the Act, CPC did not grant any further credit as was claimed but also reduced the amount of interest allowed under Section 244A of the Act in intimation under Section 143(1) of the Act from Rs. 1,08,840 to Rs. 27,211.

The assessee filed another rectification application and an order under section 154 of the Act was passed increasing demand to Rs. 99,770 as against earlier demand of Rs. 81,620.

Aggrieved, the assessee preferred an appeal before the CIT(A) who remitted the issue to the file of the Assessing Officer (AO) to verify the facts and rectify intimation and recalculate the interest payable to the assessee.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that the short point for adjudication before it is allowance of TDS credit of Rs. 1,79,606, which was short allowed by the AO while processing return under Section 143(1) of the Act.

The Tribunal noted that the assessee is engaged in real estate business and follows percentage of completion method for recognition of Revenue.

On behalf of the assessee it was submitted that due to introduction of IND-AS 115 with effect from 1st April, 2018 relevant to assessment year 2019-20, revenue was recognized on offer of possession to customers. Due to specific nature of business and timing difference in revenue recognition in books and receipt of amount from customers in different periods, TDS is deducted by the customers at the time of making payment to the assessee irrespective of the fact when the invoice was raised by the assessee or when the revenue is recognized by the assessee. It was further submitted that the revenue is recognized in different periods and amounts are paid and TDS deducted in different periods by customers and therefore, there is bound to be difference in the receipts as per profit & loss account and return of income and as per Form 26AS.

The Tribunal observed that there is no dispute about TDS deducted of Rs 19,93,696 but TDS credit was allowed only to the extent of Rs. 18,14,094. The assessee company explained that it booked revenue in earlier years on the basis of offer of possession given to customers and customers deducted and deposited TDS during assessment year 2022-23. As the assessee cannot claim TDS in respect of revenue booked in earlier assessment years as time to file revised return is over, hence, TDS was claimed as and when TDS was deducted and deposited, that is the case in assessment year 2022-23. Assessee’s claim was that it offered higher income in earlier years and claimed credit for TDS as and when customers deducted TDS and deposited TDS.

The Tribunal found the assessee’s plea to be quite reasonable and as per law. But, since the facts need to be verified whether any TDS deducted by these parties on whose account the assessee company booked revenue in the earlier years on the basis of offer of possession to the customers.

The Tribunal remitted this issue to the file of the AO just for the purpose of verification whether the assessee has offered revenue in the earlier years on the basis of offer of possession. It directed the AO to allow credit for TDS deducted in the current year in case revenue is booked in the earlier year.

BCAJ Admin

16. TS-570-ITAT-2026 (Hyderabad)

Transmission Corporation of Telangana v. DCIT

A.Y.: 2018-19

Date of Order: 30.3.2026

Section: 199, Rule 37BA

TDS credit cannot be denied merely because corresponding income is not taxable in the hands of the assessee. Rule 37BA which stipulates grant of TDS credit does not mandate corresponding income being offered for tax.

FACTS

The assessee company engaged in business of transmission of electrical energy in state of Telangana filed its return of income declaring a loss of Rs.119.05 crore. Subsequently, a revised return of income was filed declaring a loss of Rs.227.33 crore and a profit of Rs.102.46 crore under MAT provisions. The Assessing Officer (AO) while assessing the total income of the assessee interalia made an addition of Rs.121.92 crore on account of interest from deposits of unutilised Lift Irrigation Scheme (LIS) Fund. The assessee had not offered this income for taxation but the credit for TDS on this interest income was claimed. The AO also rejected the claim of TDS on interest receipt.

Aggrieved, the assessee preferred an appeal to the CIT(A) who, following the order of the Tribunal in the assessee’s own case in earlier year, held that interest income was not chargeable to tax. However, he also held that the assessee is not entitled to claim TDS credit in respect of such income which has been claimed to be not taxable which claim was upheld by him.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that there is no dispute that the interest income on which tax has been deducted at source has been accounted in the books of the assessee. The deposit claimed to have been made with the deductor has in fact been made and that the deductor has furnished details of deduction of TDS in TDS return reflecting assessee as a deductee and consequently the amount is reflected in Form 26AS of the assessee. The Tribunal held that in this factual background it found merit in the contention of the assessee that merely because the corresponding income is not taxable in the hands of the assessee, TDS credit cannot be denied.

The Tribunal having gone through the provisions of Rule 37BA held that the said Rule provides that credit for tax deducted at source shall be given to the person to whom payment has been made or credit has been given, on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority. It observed that in the instant case, the deductor has furnished the information to the income-tax authority specifying assessee as the deductee. Therefore, primary requirement of Rule 37BA stood satisfied. It further observed that Rule 37BA also contemplates a situation where the deductee furnishes a declaration to the deductor that credit of TDS is to be given to another person. However, in the present case no such declaration having been furnished, the said provision is not applicable to the facts of the present case.

The Tribunal held that the contention of the DR that TDS credit can be allowed only if corresponding income is offered to tax is not borne out from the plain reading of Rule 37BA. The Tribunal held that it does not find any such pre-condition in the said Rule. It further held that the scheme of TDS credit is based on the principle that once tax has been deducted and paid to the Central Government and the same is reflected in the account of the deductee, the credit thereof should ordinarily be granted to such deductee.

The Tribunal, with a view to avoid possibility of double credit of TDS set aside the matter to the AO for limited verification whether TDS credit has been claimed elsewhere or whether there is any possibility of double credit. The AO was directed to allow TDS credit if it is found that there is no double claim of TDS.

BCAJ Admin

19. (2025) 174 taxmann.com 59 (Raipur Trib)

Nilima Agrawal vs. ITO

ITA No.: 126 (Rpr) of 2025

A.Y.: 2015-16 Dated: 24 April 2025

S. 271(1)(c) – Where the AO did not specify in the penalty notice the limb of section 271(1)(c) under which penalty had been initiated, such notice was ambiguous and void ab initio and all subsequent proceedings became nullity in the eyes of law.

FACTS

The AO issued penalty notice under section 274 read with section 271(1)(c) where the notice referred to both the limbs under section 271(1)(c), that is, concealed the particulars of income and furnished inaccurate particulars of income. The AO had not struck off the inappropriate limb.

CIT(A) / NFAC upheld the penalty order.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) The legal parameters that have been set forth by the judicial pronouncements is that through the penalty proceedings initiated against the assessee, he is put to pecuniary burden. Accordingly, it is essential from the aspect of natural justice that he should be made aware of the charges for which penalty is levied against him so that he can be ready with his defense.

(b) The bedrock of any judicial system is based on ultimate epitome of natural justice. This cannot be eroded by any process of law until and unless fraud is detected or malafide conduct is detected on the part of the assessee.

(c) In the present case, the ambiguity that was existing in the notice issued under section 274 read with section 271(1) (c) hampered the rights of the assessee from the perspective of natural justice. There was no evidence placed on record by the revenue to suggest any malafide conduct on the part of the assessee. Therefore, at the threshold, the parameters of the penalty notice had to be decided and as per the principles laid down by the Courts, before issuance of penalty notice, the A.O was required to apply his mind to the material on record and specify clearly to the assessee what is being put against him. In other words, which limb of Section 271(1)(c) was attracted in the given facts and circumstances of the case must be specified in the notice which is sent to the assessee.

The Tribunal held that since in the penalty notice was ambiguous where both the limbs were clubbed together, such notice itself was void ab initio, and therefore, all the subsequent proceedings became a nullity in the eyes of law. Thus, it held that the order of the CIT(Appeals)/NFAC itself became non-est.

Accordingly, the appeal of the assessee was allowed.

BCAJ Admin

18. (2025) 173 taxmann.com 744 (Ahd Trib)

Dwarika Greens Foundation vs. CIT(E)

ITA No.: 1812 (Ahd) of 2024

A.Y.: N.A. Dated: 17 April 2025

S. 12AB – Where objects of assessee-trust were for benefit of residents and members of a specific society and were not meant for public at large, assessee-trust was not entitled to registration under section 12AB.

FACTS

The assessee-trust was registered under the Bombay Public Trusts Act on 23.06.2020. It filed an application in Form 10AB for registration under section 12AB.

During the registration proceedings, CIT(E) observed that the objects of the Trust were for the benefit of the residents of the Dwarika Green Society and its members and are not for the benefit of the public at large and therefore, he denied registration under section 12AB to the assessee.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) Perusal of clause (d) to Explanation of Section 12AB(4) clearly lays down that registration of the trust or institution established for charitable purpose created or established after the commencement of the Act, wherein the trust has applied any part of its income for the benefit of any particular religious community or caste can be cancelled. In this context perusal of the main objects of the assessee made it abundantly clear that all the objects enumerated therein were related to members of the Dwarika Green Society which was a specific violation under clauses (c) and (d) to Explanation to Section 12AB(4).

(b) CIT (E) had considered the provisions of section 13(1)(b), which was applicable only in a case of charitable trust or institution created or established after commencement of the Act and only for the benefit of the residents of the Dwarika Green Society and its members and thereby denied the registration, which was well within the provision of amended section 12AB.

Thus, the Tribunal held that since the objects of the assessee-trust which was meant only for the residents and members of the society and not for public at large, there was no infirmity in the order passed by CIT(E).

Accordingly, the appeal of the assessee was dismissed.

BCAJ Admin

17. (2025) 173 taxmann.com 772 (Ahd Trib)

Archanaben Rajendrasingh Deval vs. ITO

ITA No.: 1465 (Ahd) of 2024

A.Y.: 2015-16 Dated: 2 April 2025

S. 194IA – Even though the transferee’s share in the sale transaction exceeded the threshold, where the amount paid to each seller / transferor was below ₹50,00,000, the assessee was not required to deduct tax under section 194IA.

FACTS

The assessee, along with co-owner, purchased agricultural land for a total consideration of ₹1,23,67,360, and her share in the said transaction was ₹53,67,360, which was paid in two parts to two separate sellers – ₹21,83,680 and ₹31,83,680 respectively. She did not deduct TDS on the said payments contending that the payment to each seller was below ₹50,00,000.

The AO invoked the provisions of section 194IA and held the assessee to be an assessee-in-default under section 201(1) for non-deduction of TDS and levied consequential interest under section 201(1A).

CIT(A) affirmed the action of the AO.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal found merit in the submission of the assessee that the amendment made by way of insertion of a proviso to section 194IA(2), by the Finance (No. 2) Act, 2024 with effect from 1.10.2024, was not applicable to the present year under appeal (AY 2015-16).

Following Bhikhabhai H. Patel vs. DCIT (ITA No. 1680/Ahd/2018, order dated 31.01.2020) and Vinod Soni vs. ITO (ITA No. 2736/Del/2015, order dated 10.12.2018), the Tribunal held that since the assessee had paid ₹21,83,680 to one seller and ₹31,83,680 to another seller, both of which were individually below ₹50,00,000, the provisions of section 194IA were not attracted and therefore, the assessee could not have been held to be an assessee-in-default under section 201(1).

Accordingly, the appeal of the assessee was allowed.

BCAJ Admin