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Category: Tribunal News: Part A-Domestic Taxation

Sec. 54F – Capital gains exemption – Investment in residential plot for construction – Possession not handed over and construction not commenced within prescribed period due to reasons beyond assessee’s control – Subsequent surrender of plot and reinvestment in new residential property – Deduction allowable considering beneficial nature of provision.

5. [2025] 128 ITR(T) 246 (Delhi- Trib.)

Rajni Kumar vs. ITO

A.Y.: 2017-18

DATE: 17.09.2025

Sec. 54F – Capital gains exemption – Investment in residential plot for construction – Possession not handed over and construction not commenced within prescribed period due to reasons beyond assessee’s control – Subsequent surrender of plot and reinvestment in new residential property – Deduction allowable considering beneficial nature of provision.

FACTS

The assessee sold an immovable property and declared long-term capital gains, against which a deduction under section 54F was claimed on the basis of an investment made in a residential plot intended for construction of a house. The assessee had made substantial payments towards the purchase of the plot within the prescribed period.

However, possession of the plot was not handed over by the builder, and consequently, the assessee could not commence construction within the stipulated period. The delay was attributed to factors such as prolonged disputes relating to the Dwarka Expressway project, intervention by Government authorities, regulatory restrictions, and issues concerning the builder. Due to continued non-delivery of possession, the assessee eventually surrendered the allotment, received refund of the investment, and thereafter purchased another residential property.

The Assessing Officer denied the deduction under section 54F on the ground that no residential house was constructed within the prescribed time and that possession of the plot was not obtained. The Commissioner (Appeals) upheld the disallowance.

Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD

The Tribunal observed that the assessee had invested the entire sale consideration in the purchase of a residential plot with the bona fide intention of constructing a residential house and had complied with the investment requirement within the prescribed time.

It was noted that the failure to obtain possession of the plot and consequent inability to commence construction was due to circumstances beyond the control of the assessee, including governmental and regulatory delays as well as defaults on the part of the builder.

The Tribunal held that section 54F is a beneficial provision intended to promote investment in residential housing and, therefore, deserves liberal interpretation. It emphasized that where the assessee has demonstrated a clear intention and has substantially complied with the requirement of investment, the exemption cannot be denied merely because construction was not completed within the stipulated period due to factors beyond the assessee’s control.

The Tribunal further noted that the assessee had ultimately surrendered the plot and reinvested the amount in another residential property, thereby reinforcing the bona fide intention to acquire a residential house.

Relying on judicial precedents, it was held that non-completion of construction or delay in possession, when not attributable to the assessee, does notdisentitle the assessee from claiming exemption under section 54F. Accordingly, the Tribunal held that the assessee was entitled to deduction under section 54F and allowed the appeal.

Sec. 68 r.w.s. 69C – Bogus exports – Additions based solely on DRI show-cause notice without independent inquiry – No corroborative evidence brought on record – Deletion by CIT(A) justified – Subsequent Customs adjudication having material bearing admitted as additional evidence – Matter remanded for de novo adjudication

4. [2025] 128 ITR(T) 572 (Chandigarh – Trib.)

ITO vs. A.K. Exports

A.Y.: 2002-03, 2005-06, 2006-07 AND 2007-08 DATE: 01.07.2025

Sec. 68 r.w.s. 69C – Bogus exports – Additions based solely on DRI show-cause notice without independent inquiry – No corroborative evidence brought on record – Deletion by CIT(A) justified – Subsequent Customs adjudication having material bearing admitted as additional evidence – Matter remanded for de novo adjudication

FACTS

A search action was conducted in the case of the assessee group by the Directorate of Revenue Intelligence (DRI), pursuant to which show-cause notices were issued alleging that the assessee
and its group concerns were not engaged in genuine manufacturing activities and had undertaken bogus export transactions to fraudulently claim export incentives such as DEPB and duty drawback.

Relying solely on such show-cause notices, the Assessing Officer concluded that the assessee had obtained bogus purchase bills, exported inferior quality goods at inflated prices to non-existent foreign entities, and routed unaccounted money back into India in the guise of export proceeds. Accordingly, foreign remittances were treated as unexplained cash credits under section 68, and further additions were made towards estimated expenditure under section 69C.

On appeal, the Commissioner (Appeals) observed that no further action had been taken by the DRI on the show-cause notices even after a considerable lapse of time, and that the Assessing Officer had failed to carry out any independent investigation or bring any corroborative material on record. It was further noted that the exports were supported by documentary evidence, including letters of credit and customs records. Accordingly, the additions made under sections 68 and 69C were deleted.

Aggrieved, the revenue preferred an appeal before the Tribunal. During the course of hearing, the revenue sought to place on record a subsequent order passed by the Principal Commissioner of Customs (Import) dated 06.02.2024 in the case of the assessee group, containing detailed findings, including disallowance of export incentives and imposition of penalties.

HELD

The Tribunal observed that the entire basis of the impugned assessments was the show-cause notices issued by the DRI, and that the Assessing Officer had made additions merely based on allegations contained therein without conducting any independent inquiry or bringing any corroborative evidence on record. It reiterated the settled legal position that additions cannot be sustained based on presumptions, conjectures, or unverified allegations.

The Tribunal noted that the Commissioner (Appeals) had rightly deleted the additions on the ground that no independent investigation was carried out by the Assessing Officer and that the allegations contained in the show-cause notices had not been substantiated through any judicial or quasi-judicial proceedings.

However, the Tribunal further observed that the subsequent adjudication order passed by the Principal Commissioner of Customs (Import), which had culminated from the very same show-cause notices, contained detailed findings and would have a material bearing on the assessment of the assessee.

Invoking Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, the Tribunal held that the said order constituted additional evidence which could not have been produced earlier despite due diligence, and that its admission was necessary for substantial cause.

Accordingly, the additional evidence was admitted, and the matter was restored to the file of the Commissioner (Appeals) for de novo adjudication in light of the said adjudication order. All issues were kept open for fresh consideration. In the result, the appeals were allowed for statistical purposes.

Where the assessee-trust purchased land out of trust funds originally contributed by the trustees, but the sale deeds were mistakenly registered in the names of the trustees, and the facts showed that the property was used exclusively for running the school without any benefit accruing to the trustees, section 13(1)(c) was not applicable.

3. (2026) 184 taxmann.com 22 (Chennai Trib)

ACIT vs. Everwin Educational & Charitable Trust

A.Y.: 2016-17 Date of Order: 24.02.2026

Section : 13(1)(c), 13(2)(g)

Where the assessee-trust purchased land out of trust funds originally contributed by the trustees, but the sale deeds were mistakenly registered in the names of the trustees, and the facts showed that the property was used exclusively for running the school without any benefit accruing to the trustees, section 13(1)(c) was not applicable.

FACTS

The assessee was a public charitable trust holding registration under section 12A/12AB. For AY 2016-17, it filed the return of income after claiming exemption under section 11. During the year, the trustees had settled two schools, which they were operating in their individual capacity since 1992, along with assets, liabilities and cash balances of about Rs. 19.49 crores, upon the assessee-trust with effect from 1.4.2015. Out of these funds, the trust purchased land parcels worth about Rs. 14.70 crores for establishing a school; however, due to a misunderstanding and bona fide omission, the sale deeds were executed in the names of the trustees without there being any specific mention that they were acting in their fiduciary capacity as trustees of the assessee trust. The trust recorded the land as its asset in its books, the trustees did not disclose the same in their personal balance sheets, and the trust constructed and operated the school thereon after obtaining all statutory approvals in its own name.

The case of the assessee was selected for regular scrutiny, which was completed under section 143(3), accepting the returned income. In exercise of the revisionary power under section 263, CIT(E) set aside the assessment order, holding that the acquisition of the properties in the names of the trustees using the trust funds violated provisions of Section 13(1)(c). Upon receipt of the order under section 263, the AO made an addition of Rs.14.70 crores under section 13(1)(c) read with section 13(2)(g), after concluding that trustees had benefited by registering the land in their own names without spending from their accounts.

Aggrieved, the assessee filed an appeal before CIT(A). During the pendency of the appeal, the assessee-trust executed a registered rectification deed whereby the original purchase deed was rectified and the name of the purchaser was shown as the assessee-trust instead of the trustees. The property was also mutated in the name of the trust, and encumbrance certificate and property tax were in the name of the trust. Noting this, the CIT(A) held that section 13(1)(c) was wrongly invoked by the AO and allowed the appeal of the assessee.

Aggrieved, the revenue filed an appeal before the ITAT.

HELD

The Tribunal observed as follows:

(a) In order to invoke the provisions of section 13(1)(c), it is required to be shown that there was use or application of income or property for the benefit of a specified person. There ought to be some accompanying enjoyment, diversion or personal advantage to the specified person.

(b) The contemporaneous evidence produced by the assessee, the conduct of the assessee trust and the trustees, more particularly having regard to the fact that the funds to acquire the property were provided by the trustees in the first place, lent credence to the assessee’s plea that the acquisition of the land was not meant to benefit the trustees in their individual capacity.

(c) It was incorrect for the AO to assume that registration in trustees’ names automatically resulted in benefit to them when the facts and circumstances placed on record showed the contrary, that the property beneficially belonged to the assessee-trust and was all along enjoyed and used by the assessee-trust, and that the individual trustees did not derive any benefit therefrom. There was no iota of evidence to show that the assessee- trust had used or applied any income or property of the trust for the personal benefit of the trustees.

Following the decision of the Tribunal in DDIT vs. A.R. Rahman Foundation [2015] 61 taxmann.com 130 (Chennai-Trib), the Tribunal upheld the order of CIT(A) that section 13(1)(c) was not applicable, and dismissed all the grounds raised by the revenue.

Where the assessee-society invested in shares of a private limited company and none of its office bearers individually held or controlled substantial interest in the said company, section 13(2)(e) was not applicable in respect of such investment.

2. (2026) 183 taxmann.com 409 (Del Trib)

Jan Kalyan Samiti vs. ITO

A.Y.: 2015-16

Date of Order: 06.02.2026

Section: 13(2)(e)

Where the assessee-society invested in shares of a private limited company and none of its office bearers individually held or controlled substantial interest in the said company, section 13(2)(e) was not applicable in respect of such investment.

FACTS

The assessee-society was granted registration under section 12AA in 2004. It filed its return of income for AY 2015-16, declaring Nil income. During the year under consideration, it had purchased 115,000 shares of M/s. RFCPL at Rs.60 per share for an aggregate consideration of Rs.69,00,000. Its case was selected for limited scrutiny under CASS on the grounds that it had undertaken transactions with specified persons. Upon perusal of the list of shareholders of RFCPL produced under section 133(6), the AO contended that Mr. SA (President of the society) held 25.84% voting power in RFCPL through SA(HUF) (11.66%) and the assessee-society (14.18%). He further observed that Mr. SA was a director in another private limited company, which held 17.10% shares in RFCPL. He also contended that another member of the society, Mr. RKM also held 17.10% in RFCPL through a private limited company. Accordingly, the AO held that Mr. SA and Mr. RKM through other entities, controlled 37.84% in RFCPL, from whom the assessee-society had purchased shares for more than the market value, and therefore, the whole of the investment of Rs.69,00,000 was hit by section 13(2)(e).

On appeal, CIT(A) sustained the addition made by the AO.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) As per the list of shareholders in RFCPL, Mr. SA, as an individual, was not a shareholder. However, he held shares to the extent of 11.66% as a Karta of the HUF. Further, the assessee-society itself held shares of 14.18%. As per the provisions of the Income tax Act, 1961, the assessee-society and the HUF were separate persons.

(b) In order to apply section 13(2)(e), there should be a transaction between the trust or society and a person referred to under section 13(3). In the facts of the case, the persons referred under section 13(3) were the seven office bearers, from whom the assessee should have directly purchased the shares or through the entities wherein the said office bearers controlled or held more than 20% of the voting power or had a substantial interest in such concerns. The AO misunderstood the provision when he observed that the assessee-society held 14.18% and combined that with SA (HUF) who is a separate entity having no interest in the assessee-society, and another private limited company in which one of the office bearer was a director.

(c) In the facts of the case, none of the office bearers directly held more than 20% of shares or had a substantial interest in RFCPL.

Therefore, following the decision of Navajbhai Ratan Tata Trust vs. ADIT, (2022) 140 taxmann.com 157 (Mum Trib), the Tribunal held that section 13(2)(e) was not applicable to the facts of the case and directed the AO to allow the claim of the assessee.

Authors note: “The Tribunal has not considered / examined the applicability of section 13(1)(d) which essentially disallows investment in shares of any company (barring few exceptions) by a tax-exempt charity.”

Software expenses such as annual maintenance charges, database support fees and licence renewal costs, being in the nature of subscriptions for a fixed period and conferring benefits limited to that period, were held to be revenue in nature and allowable as a deduction under section 37(1).

1. (2026) 183 taxmann.com 396 (Mum Trib)

ACIT vs. BNP Paribas India Solutions (P.) Ltd.

A.Y.: 2017-18

Date of Order : 09.02.2026

Section: 37(1)

Software expenses such as annual maintenance charges, database support fees and licence renewal costs, being in the nature of subscriptions for a fixed period and conferring benefits limited to that period, were held to be revenue in nature and allowable as a deduction under section 37(1).

FACTS

The assessee was registered under the Software Technology Parks of India (STPI) Scheme and operated as a captive service provider for “B” Group. It filed its return of income, inter alia, debiting software expenditure amounting to Rs. 28,24,19,000 in its profit and loss account. During scrutiny proceedings, AO held that the expenses were capital in nature and therefore, allowed deduction of depreciation only to the extent of 60%.

Upon appeal, CIT(A) allowed the claim of the assessee, treating the software expenses as revenue in nature.

Aggrieved, the revenue filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) On the basis of details of expenditure incurred by the assessee, it was evident that all the expenses were on account of annual maintenance charge, fees for database support, licence renewal cost, etc. They were all “period costs” and “recurring” in nature.

(b) The assessee had incurred these expenses not for acquiring any right in the software, but were towards subscription for a fixed period, giving annual benefits only and no enduring benefits accrued to the assessee by incurring these period costs. Further, no asset or intellectual property right had come into existence, and there was no transfer of ownership to the assessee in these software by incurring such expenses.

Following a number of decisions of the ITAT and High Courts, the Tribunal held that the software expenses claimed by the assessee were revenue expenses and, therefore, deductible under the provisions of section 37(1).

Accordingly, the Tribunal dismissed the appeal of the revenue.

Where the assessee had utilised its limited funds mainly for construction of a Satsang Bhawan in accordance with its charitable objects, its mere inability to carry out other charitable activities on account of paucity of funds could not be a ground for denial of registration under section 12AB / section 80G.

90. (2026) 182 taxmann.com 202 (Lucknow Trib)

Kirti Mahal Satsang Bhawan Trust vs. CIT

A.Y.: 2023-24 Date of Order: 05.01.2026

Section : 12AB, 80G

Where the assessee had utilised its limited funds mainly for construction of a Satsang Bhawan in accordance with its charitable objects, its mere inability to carry out other charitable activities on account of paucity of funds could not be a ground for denial of registration under section 12AB / section 80G.

FACTS

The assessee submitted applications in Form No. 10AB on 27.06.2024 seeking registration under section 12AB as well as approval under section 80G. Both the applications were rejected by CIT (E) on the ground that the assessee was not carrying out any substantial charitable activity as per objects of the trust and the genuineness of charitable activities being carried out by the trust had not been satisfactorily established.

Aggrieved, the assessee filed appeal before ITAT.

HELD

The Tribunal set aside the orders of the CIT(E) and directed him to grant registration under sections 12AB and approval under section 80G, holding that the assessee’s limited funds were mainly utilised for construction of the Satsang Bhawan, which was in in accordance with its charitable objective. It further observed that the inability to undertake other charitable activities was solely due to paucity of funds which was used mainly for construction of Satsang Bhavan. It noted that the construction of the Satsang Bhawan had now been completed and the assessee was presently carrying out charitable activities, including Satsang.

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

A securitisation trust formed in accordance with the SARFAESI Act and RBI Guidelines is a revocable trust within the meaning of section 61 / 63 and consequently its income is not chargeable to tax in the hands of trust but in the hands of the Security Receipt Holders; accordingly, such trust cannot be assessed as an AOP under section 164.

89. (2026) 182 taxmann.com 849 (Mum Trib)

ITO vs. Arcil Retail Loan Portfolio -001- A- Trust

A.Y.: 2016-17

Date of Order: 22.01.2026 Section: 61, 63, 164

A securitisation trust formed in accordance with the SARFAESI Act and RBI Guidelines is a revocable trust within the meaning of section 61 / 63 and consequently its income is not chargeable to tax in the hands of trust but in the hands of the Security Receipt Holders; accordingly, such trust cannot be assessed as an AOP under section 164.

FACTS

The assessee was constituted as a trust by Asset Reconstruction Company (India) Ltd. (ARCIL) pursuant to the provisions of the SARFAESI Act, 2002 and RBI Guidelines for the purpose of acquisition and resolution of Non-Performing Assets. Funds were raised by issuance of Security Receipts (SRs) to Qualified Institutional Buyers. ARCIL functioned as settlor, trustee and asset manager of the assessee-trust. The trust filed its return of income for A.Y. 2016-17 declaring total income at Rs. NIL, after claiming exemption on income of ₹27,63,75,223 under section 61 read with section 63. The return was processed under section 143(1) of the Act and the case was selected for complete scrutiny under CASS.

The AO held that the assessee could not be regarded as a trust for the purposes of sections 61 to 63 and that, on the facts, the contributors and beneficiaries had joined in a common purpose of earning income and therefore, constituted an Association of Persons within the meaning of section 2(31). The AO further held that the trust was neither revocable nor determinate, that the provisions of section 164 were attracted, and that even otherwise the assessee was liable to be assessed as an AOP. Accordingly, the claim of exemption under sections 61 to 63 was denied and the AO assessed the total income of the assessee at ₹30,33,45,950 and initiated penalty proceedings under sections 271(1)(b) and 271(1)(c).

On appeal, CIT(A) allowed the appeal of the assessee in full.

Aggrieved, the revenue filed an appeal before ITAT.

HELD

On the questions of whether the assessee trust is revocable or irrevocable for the purposes of sections 61 to 63 and whether it is liable to be assessed as an Association of Persons and consequently whether the income can be brought to tax in the hands of the trust by invoking section 164, the Tribunal observed as follows:

(a) Sections 61 to 63 form a self-contained code dealing with taxation of income arising from revocable transfers. The legislative scheme is explicit that where the transferor retains, directly or indirectly, the right to re-assume control over income or assets, such income cannot be assessed in the hands of an intermediary entity but must be taxed in the hands of the transferor. Section 63 deliberately adopts a wide and inclusive definition of both “transfer” and “revocable transfer”. The statute does not prescribe that revocation must be unilateral, unconditional, or exercisable by an individual contributor. What is required is the existence of a contractual or legal mechanism for re-transfer of assets or re-assumption of power. This statutory scheme must be read harmoniously with the regulatory framework governing securitisation trusts, which are mandated under the SARFAESI Act and RBI Guidelines to operate as passthrough vehicles with beneficial ownership resting with Security Receipt Holders.

(b) On a plain reading of Clause 5.2 of the Trust Deed, it can be seen that the Security Receipt Holders were expressly conferred a right to revoke their contributions during the subsistence of the trust. Upon such revocation, the entire Trust Fund stood retransferred to the Security Receipt Holders or their designees in proportion to their holdings, the scheme itself stood dissolved, the trustee ceased to act as trustee, and the Security Receipts stood extinguished. These provisions clearly satisfied both limbs of section 63(a).

(c) It is evident that section 63 does not mandate unilateral or unconditional revocation, and that a revocation mechanism embedded in the governing instrument is sufficient. Collective revocation does not dilute the revocable character of the transfer.

(d) The formation of the assessee trust was statutorily mandated under the SARFAESI Act and RBI Guidelines. The trust was not a voluntary association of persons coming together for a common purpose, but a regulatory vehicle created for securitisation. The trustee functioned independently and exclusively in accordance with the Trust Deed. There was no joint management, no sharing of responsibilities, and no common volition among Security Receipt Holders so as to constitute an AOP.

(e) The beneficiaries were clearly identifiable with reference to the Trust Deed, offer documents and contribution records, and their respective shares were determinable in proportion to Security Receipts held. Merely because the names of beneficiaries were not set out in the Trust Deed itself did not render the trust indeterminate. This position is well settled by judicial precedents.

(f) Once it is held that the trust is revocable, section 164 has no independent application. Sections 61 to 63 override section 164 in cases of revocable transfers. The AO’s attempt to apply section 164, therefore, proceeded on an incorrect legal premise.

(g) The legislative intent to treat securitisation trusts as passthrough entities is further reinforced by later amendments and CBDT clarifications. The Finance Bill, 2016 expressly recognised securitisation trusts, including those set up by ARCs, as vehicles through which income is to be taxed in the hands of investors and not the trust. These amendments are clarificatory in nature, explaining the manner of taxation rather than altering the character of such trusts. They fortify the conclusion that, even prior to the amendments, the law recognised the trust as a conduit and not as a separate taxable entity in respect of such income.

Observing that its decision is supported by a series of decisions of the coordinate benches of the Tribunal, the Tribunal dismissed the appeal of the revenue and affirmed the order of CIT(A).

Where the assessee-company operating a solar power plant supplied electricity exclusively to its holding company, the activity could not be regarded as being carried out for “preservation of environment” / “charitable purpose” under section 2(15), as the dominant object was to benefit a single related entity rather than the public at large or a defined section of the public; accordingly, the assessee was not entitled to registration under section 12AB.

88. (2026) 182 taxmann.com 242 (Bang Trib)

Infosys Green Forum vs. ITO

A.Y.: N.A.

Date of Order : 12.01.2026

Section: 2(15), 12AB

Where the assessee-company operating a solar power plant supplied electricity exclusively to its holding company, the activity could not be regarded as being carried out for “preservation of environment” / “charitable purpose” under section 2(15), as the dominant object was to benefit a single related entity rather than the public at large or a defined section of the public; accordingly, the assessee was not entitled to registration under section 12AB.

FACTS

“I” Ltd. set up a 40 MW solar power plant on leasehold land as part of its Corporate Social Responsibility (CSR) activities. As the amount spent resulted in capital assets, as per rule 7(4) of the CSR Rules, 2014, such assets were required to be transferred to a new section 8 company. Therefore, the assessee-company was incorporated as a non-profit company under section 8 of the Companies Act, 2013 on 31.8.2021 by “I” Ltd. (as its 100% shareholder) with the object, inter alia, of promoting clean energy and environmental sustainability. Thereafter, “I” Ltd. and the assessee-company entered into an agreement to transfer the solar power project to the assessee. They also entered into a power supply agreement whereby the assessee was required to sell the power generated from the solar plant at Tumkur district, Karnataka exclusively to “I” Ltd at agreed rates.

The assessee-section 8 company obtained provisional registration under section 12AB on 2.10.2021 for AY 2022-23 to 2024-25 on the ground that its activities of running a solar power plant fell within the category of “preservation of environment” under section 2(15). Thereafter, the assessee filed an application for permanent registration under section 12AB and section 80G.

CIT(E) rejected the application for registration under section 12AB (and also cancelled the provisional registration) on the ground that activity of generation of power and operating as a captive solar power plant was a commercial venture which was not a charitable activity under ‘preservation of environment’ and thus did not fall within the definition of section 2(15).

Aggrieved, the assessee filed appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) While setting up of a solar power plant is an activity which preserves the environment, the predominant or primary object test for “charitable purpose” is that benefit must enure to the public or a section/ class of the public. It is also not necessary that all persons universally benefit from the activities mentioned in section 2(15). Benefit to
sufficiently wide or defined section of public will suffice so long as private gain to a particular person is not the dominant object. Naturally, incidental benefit to individuals does not disentitle the assessee claiming it to be for “charitable purpose”.

(b) Upon detailed analysis of the power supply agreement, assets transfer agreement and other evidence, it could be seen that there was no benefit to the public at large or a section of a public at all. The dominant object of the whole exercise was to get the power for “I” Ltd. through captive solar power plant shown as CSR activity and then make an attempt to claim the benefit of registration under section 12AB and section 80G.

(c) In common parlance, the facts of the assessee were not different from a case where a donor sets up school for his own children and claims it as “educational activity”, or a company setting up a hospital exclusively for its own promoters / employees and claiming it as “medical relief”, or setting up own yoga centre for himself and claiming it as “Yoga” etc. Putting a solar panel over one’s house was also preservation of environment, but these are not charitable purposes as these do not have dominant object of benefit to others, that is, public at large. These are benefit to self. In all these cases there is no public benefit at large.

On the argument of the assessee that two wings of the Government cannot take a different view, the Tribunal observed that the view under the Companies Act (as stated in MCA Circular No. 21 / 2021 dated 25.8.2021) and provisions of section 2(15) of the Act are in consonance with each other and has taken a similar view that activity for the benefit of one person cannot be a CSR activity and the same is also not charitable. Both the Acts say that dominant object must be for the benefit of public or a defined section of public.

Accordingly, the Tribunal dismissed the appeals of the assessee and upheld the order of CIT(E) in not granting registration under section 12AB and approval under section 80G.

An order passed without considering a binding precedent, though not cited at the time of hearing, constitutes a mistake apparent on record.

87. TS-207-ITAT-2026 (Delhi)

Tigre SAS Liquors India Pvt. Ltd. vs. DCIT

A.Y.s: 2013-14 & 2014-15

Date of Order : 18.2.2026 Section: 254

FACTS:

The assessee filed an application u/s 254(2) of the Act, on the basis that the grounds no. 2 & 3 raised by the Appellant in ITA No. 7969/Del/2018 (AY 2014-15) was against confirming the ad-hoc disallowance on account of legal and professional expenses amounting to ₹35,52,173/- on account of legal expenditure incurred towards registration of trademark and ₹4,77,794/- towards label registration charges, considering the same as intangible asset being capital in nature.

In the application u/s 254(2) of the Act, it was pointed out that these findings are contrary to the decision of the Supreme Court in CIT vs. Finlay Mills Ltd [(1951) 20 ITR 475 (SC)].

HELD

The Tribunal held that the order as passed is established to be passed without taking into consideration the relevant and binding precedent, which though not cited at the time of hearing, were there in favour of assesse. In ACIT vs. Saurashtra Kutch Stock Exchange Ltd. [(2008) 305 ITR 227 (SC)], the Supreme Court ruled that non-consideration of a binding decision of the Jurisdictional High Court or the Supreme Court by the ITAT constitutes a “mistake apparent from the record”. Such an error is rectifiable under section 254(2) of the Act. The Tribunal held that non consideration of binding judicial precedents is an error apparent on record, accordingly, it recalled the order dated 28.08.2025, to the limited extent of fresh adjudication of aforesaid grounds in both the appeals.

Protective addition under Section 69 cannot survive where substantive addition on identical facts has been deleted on merits and no independent corroborative evidence establishes payment of on-money. Mere reliance on third-party statements, without independent corroboration, is insufficient when the assessee categorically denies payment.

86. TS-191-ITAT-2026 (Mum.)

Dhiraj Solanki vs. DCIT

A.Y.: 2019-20

Date of Order : 10.2.2026 Section: 69

Protective addition under Section 69 cannot survive where substantive addition on identical facts has been deleted on merits and no independent corroborative evidence establishes payment of on-money.

Mere reliance on third-party statements, without independent corroboration, is insufficient when the assessee categorically denies payment.

FACTS

The assessee, a resident individual, for the assessment year under dispute, filed his return of income on 17.08.2011, declaring total income of ₹3,49,640/-. On 17.03.2021, a search and seizure operation u/s. 132 of the Act was carried out in case of Rubberwala Group and others. In course of search and seizure operation, certain incriminating material/information pertaining to the assessee were found. Based on such information/material, proceedings u/s. 153C of the Act were initiated in case of the assessee.

In course of assessment proceeding, the Assessing Officer (AO) observed that during the search and seizure operation conducted in the premises of Rubberwala Housing & Infrastructure Ltd. and its promoter Director- Shri Tabrez Shaikh and a key employee of Rubberwala Group, Shri Imran Ansari, a pen drive containing excel sheet was found which contained the details of on-money paid by various buyers in respect of shops purchased in the ‘Platinum Mall’ project.

Statements were recorded u/s. 132(4) of the Act from Shri Imran Ansari and Shri Tabrez Shaikh based on a seized materials. In the statement recorded, Shri Imran Ansari explaining the details of the transactions noted in the excel sheet, stated that it contained the agreement value of the shops floor and level wise by as also the actual price at which shops were sold. He stated, the agreement value is lower than the actual sale price and the differential amount (on-money) was received in cash from the buyers and handed over to Shri Tabrez Shaikh.

Based on such statements, the AO called upon the assessee to explain why the alleged on-money paid of ₹52,40,950/- should not be added to the income of the assessee. Though, the assessee vehemently objected to the proposed addition, categorically stating that he had not paid on-money over and above the actual sale consideration paid as per the agreement, however the AO was not convinced. He concluded that the assessee indeed had paid on-money in cash towards purchase of the shop. Since the alleged on-money was added on substantive basis at the hands of another assessee, namely, Shri Praveen Jagdeesh Solanki, the AO made the addition on protective basis at the hands of the assessee.

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

Aggrieved, assessee preferred an appeal to the Tribunal where it contended that the substantive addition made by the AO in case of Shri Praveen Jagdish Solanki has been deleted by the learned First Appellate Authority on merits. Hence, the protective addition made in case of the assessee cannot survive.

HELD

The Tribunal noted that it is evident that the assessee jointly with his brother Shri Praveen Jagadish Solanki had purchased a shop in the ‘Platinum Mall’. The Tribunal narrated the modus operandi as explained in the statement of Mr. Imran Ansari recorded in the course of search. The Tribunal noted that the modus operandi explained inter alia stated that Mr. Imran Ansari after receiving confirmation from Mr. Abrar Ahmad, cashier, regarding the cash received, makes necessary entries in the diary given to the buyer at the time of booking of shop mentioning the cash amount along with date of payment and also puts his signature against each entry. It observed that surprisingly, though, shops have been sold to number of buyers however not a single diary has been recovered from any of the buyers to demonstrate the fact that against the cash payment entries have been made in the diary and initialled by Shri Imran Ansari as explained in his statement. In fact, except the pen drive containing the excel sheet, the AO has not referred to any other incriminating material. The seized material does not explicitly reveal payment of on-money by buyers individually.

The Tribunal held that when the assessee has categorically denied of having paid any cash, merely relying upon a third party statement and limited evidence seized from a third party, assessee cannot be accused of paying on-money in absence of any other corroborative evidence to demonstrate that the facts stated in the statement recorded from the key persons of Rubberwala Group and the excel sheets are authentic. It remarked that in any case of the matter, in case of the present assessee, the AO has made the addition on protective basis and that the substantive addition made in case of assessee’s brother Shri Praveen Jagdish Solanki has been deleted by the very same First Appellate Authority in order dated 18.11.2025 on merits after taking note of all relevant facts. The Tribunal held that when the substantive addition has been deleted on merit, the protective addition made at the hands of the assessee cannot survive. The Tribunal deleted the addition made by the AO and confirmed by CIT(A).

Section 44AB as well 271B clearly show that the requirement of audit and penal consequence are dehors the finding of the assessment proceedings relating to the computation of income and audit u/s 44AB is required on the basis of the turnover exceeding the threshold limit.

85. TS-184-ITAT-2026 (Kol.)

Jalpaigura Zilla Regulated Market Committee vs. ITO

A.Y.: 2017-18 Date of Order : 10.2.2026

Section: 44AB

Section 44AB as well 271B clearly show that the requirement of audit and penal consequence are dehors the finding of the assessment proceedings relating to the computation of income and audit u/s 44AB is required on the basis of the turnover exceeding the threshold limit.

FACTS

The assessee, M/s. Jalpaiguri Zilla Regulated Market Committee (AOP) did not file its return of income for AY 2017-18. As per the information available with the Department, the assessee deposited cash in the bank account during the FY 2016-17. Notice u/s 142(1) of the Income-tax Act, 1961 (“Act”) was issued asking the assessee to furnish its return of income for the AY 2017-18, but the assessee did not respond. Therefore, a showcause notice was issued to the assessee which also resulted in non-compliance.

The Assessing Officer (AO) therefore, treated the total credits amounting to ₹2,40,65,509/- in its bank account as the total turnover of the assessee. The net profit of the assessee was estimated @8% of the total receipts which came to ₹19,25,400/- (8% of ₹2,40,65,509/-) for AY 2017-18.

The assessment was completed u/s 144 of the Act, bringing ₹19,25,400/- to tax. Since the total turnover in this case was estimated at ₹2,40,65,509/- and sufficient & reasonable opportunities were provided to the assessee but the assessee failed to get its accounts audited as required u/s 44AB of the Act, therefore, penalty proceeding u/s 271B of the Act were initiated for non-filing of the Audit report. The AO levied penalty of ₹1,20,330/- u/s 271B of the Act.

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

Aggrieved, assessee preferred an appeal to the Tribunal where it contended that being Agricultural Produce Market Committee constituted under the state law which is entitled to full tax exemption under section 10(26AAB) of the Act its income was exempt and such Agricultural Produce Market Committee or Regulated Market Committee is generally not required to undergo tax audit under section 44AB or to file income tax returns for this exempt income, provided the income is used for statutory purposes. The statutory audit as specified under the Act was claimed to have been carried out.

HELD

Perusal of section 44AB as well as 271B of the Act shows that the requirement of audit and the penal consequence are dehors the finding of the assessment proceedings relating to computation of income and the audit under section 44AB of the Act is required on the basis of the turnover exceeding the threshold limit. The Tribunal held that despite the income being exempt, since the turnover had exceeded the specified amount for the purpose of getting the statutory audit done, the required audit report u/s 44AB of the Act on Form-3CD was required to be filed.

Since it was further submitted that the assessee had a reasonable cause for not getting the audit carried out and no such reasonable cause was mentioned before the Tribunal, except for mentioning the fact that the income was exempt, the Tribunal, in the interest of justice and fair play, remanded the matter to the CIT(A) for giving another opportunity to the assessee and present its case that it had a reasonable cause for not getting the audit done, who shall decide the issue as per law.

Sec. 69A – Unexplained money – Cash deposits in bank account standing in assessee’s trade name but operated by third parties – Protective addition made though substantive additions already made in hands of actual beneficiaries – Addition held not legally justified and deleted

84. [2025] 126ITR(T) 240 (Amritsar- Trib.)

Mandeep Singh vs. ITO

ITA NO.:645 (ASR.) OF 2024

A.Y.: 2012-13 DATE: 30.06.2025

Sec. 69A – Unexplained money – Cash deposits in bank account standing in assessee’s trade name but operated by third parties – Protective addition made though substantive additions already made in hands of actual beneficiaries – Addition held not legally justified and deleted.

FACTS

The assessee was a retailer of alcoholic liquor and on the basis of departmental information, it was noticed that cash deposits aggregating to about ₹15 crores had been made during a short period in March 2012 in a current account maintained with Oriental Bank of Commerce in the trade name of assessee. In the absence of any regular return on record and due to non-compliance with notices issued under section 133(6) of the Income-tax Act, 1961, proceedings under section 147 were initiated. Pursuant thereto, the assessee filed a return of income declaring total income of about ₹1.66 lakhs on a disclosed turnover of about ₹83.36 lakhs.

The bank statement revealed that the entire cash deposited in the said bank account during the short period was immediately transferred by cheques to two concerns. During the course of investigation, the statement of the assessee was recorded under section 131 of the Act, wherein the assessee categorically denied having opened or operated the bank account with Oriental Bank of Commerce.

The material on record showed that the bank account was operated by the said concerns through the authorised signatory, that the assessee neither made any deposits nor withdrawals from the account and had no control over its operation. It was further noted that the assessee had not claimed any credit of tax collected at source under section 206C in respect of purchases reflected in Form 26AS which were linked to transactions routed through the disputed bank account.

The Assessing Officer treated the cash deposits of ₹15 crores as unexplained money under section 69A of the Act on a protective basis in the hands of the assessee, while accepting the returned income as such. It was also noted that the Assessing Officer had already made substantive additions of ₹15 crores under section 69A in the hands of beneficiaries, treating them as the actual beneficiaries of the transactions.

On appeal, the Commissioner (Appeals) rejected the submissions of the assessee and upheld the assessment by sustaining the protective addition made under section 69A. Aggrieved, the assessee carried the matter in appeal before the Tribunal.

HELD

The Tribunal observed that the assessee was a licensed retail trader of alcoholic liquor and that the gross turnover of ₹83.36 lakhs declared by the assessee in the return of income duly matched with the purchases reflected in Form 26AS. It was also noted that the assessee had restricted his claim of tax collected at source under section 206C only to the extent of actual purchases made by him from authorized distributors of alcoholic liquor.

The Tribunal found merit in the assessee’s contention that it would not have been humanly possible for a retail trader, operating under a licence permitting sale only to actual consumers over the counter, to execute a turnover of ₹15 crores within a short span of fourteen days. The Tribunal further noted that upon coming to know of the fraudulent activities carried out in his name, the assessee had lodged an FIR and appropriate legal proceedings were already underway.

The Tribunal further observed that the Assessing Officer had conducted proper enquiries and had reached a logical conclusion that the transactions in question were carried out by beneficiaries, against whom substantive additions under section 69A had already been made.

Considering the totality of facts and circumstances, the Tribunal held that the protective addition of ₹15 crores made under section 69A in the hands of the assessee was not legally justified. Accordingly, the Tribunal directed deletion of the protective addition and allowed the appeal of the assessee.

Sec. 153D r.w.s. 153A – Search assessment – Prior approval of Additional Commissioner – Single common approval for multiple assessment years and without examination of assessment records or seized material – Approval held to be mechanical and without application of mind – Assessments framed under section 153A r.w.s. 143(3) quashed

83. [2025] 127ITR(T) 482 (Delhi – Trib.)

Dheeraj Chaudhary vs. ACIT

ITA NO.: 6158 (DEL) OF 2018

A.Y.: 2009-10 DATE: 10.09.2025

Sec. 153D r.w.s. 153A – Search assessment – Prior approval of Additional Commissioner – Single common approval for multiple assessment years and without examination of assessment records or seized material – Approval held to be mechanical and without application of mind – Assessments framed under section 153A r.w.s. 143(3) quashed.

FACTS

A search and seizure operation under section 132 of the Income-tax Act, 1961 was conducted in the case of the K Group, during the course of which certain incriminating documents and information relating to the assessee were claimed to have been found and seized.

Subsequently, a notice under section 153A of the Act was issued to the assessee. During the course of assessment proceedings, the Assessing Officer prepared draft assessment orders and sought prior approval under section 153D of the Act from the Additional Commissioner of Income Tax. After obtaining such approval, the Assessing Officer completed the assessments under section 153A read with section 143(3) and made additions for the respective assessment years.

On appeal, the Commissioner (Appeals) upheld the assessment orders. When the matter came up before the Tribunal, the assessee raised an additional legal ground challenging the validity of the approval granted under section 153D on the ground that the same was mechanical and without application of mind.

The Judicial Member held that the approval granted by the Additional Commissioner was invalid, as it neither reflected movement of any assessment records nor granted separate approval for each assessment year. It was held that the approval was a result of total non-application of mind and, therefore, being mechanical in nature, was invalid, rendering the assessments liable to be quashed. However, the Accountant Member held that while granting approval under section 153D, the Additional Commissioner does not enter into the realm of adjudicating the legal sustainability of the additions proposed by the Assessing Officer. It was further held that supervision over search assessments is a continuous process involving internal correspondence, order-sheet noting, meetings and discussions and, therefore, the approval granted could not be regarded as invalid. Owing to this difference of opinion, the matter was referred to a Third Member.

HELD

The Third Member noted that it was an admitted position on record that for all the relevant assessment years, only a single approval had been granted by the Additional Commissioner. A careful reading of section 153D, in the context of the scheme of assessments under section 153A, shows that the provision specifically employs the expression “each assessment year”, which clearly mandates that separate approval of the draft assessment order is required for each assessment year.

The Third Member observed that the approval granted by the Additional Commissioner covered all six assessment years through a single approval and, therefore, even on this count alone, the approval was bad in law, rendering the consequential assessment orders for all the six assessment years invalid.

It was further observed that while seeking approval under section 153D, the Assessing Officer had not forwarded the assessment folders, seized material, or other relevant records, including replies filed by the assessee, to the approving authority. The Third Member emphasized that assessment proceedings under the Act are quasi-judicial in nature and that once a draft assessment order is prepared, the process of approval under section 153D commences, wherein the approving authority is required to apply its independent mind after examining the assessment records, seized material and other relevant documents.

Relying upon the decisions of the Orissa High Court in ACIT vs. Serajuddin& Co., the Delhi High Court in Pr. CIT (Central) vs. Anuj Bansal and the Allahabad High Court in Pr. CIT vs. Sapna Gupta, the Third Member observed that the requirement of prior approval under section 153D is an in-built statutory protection against arbitrary exercise of power and cannot be reduced to an empty formality. The approval must reflect due application of mind and must be granted after examining the relevant material.

In view of the above, the Third Member held that the approval granted under section 153D in the present case was mechanical and without application of mind. Concurring with the view of the Judicial Member, it was held that the assessments framed under section 153A read with section 143(3) were invalid in law and liable to be quashed.

Once the assessee had invested the entire capital gain in a new residential house within the period stipulated under section 54(1), the benefit of deduction cannot be denied merely for non-compliance with the requirement of depositing unutilised amount in Capital Gain Account Scheme (CGAS) before the due date of filing of return of income under section 54(2).

82. (2025) 181 taxmann.com 971 (Hyd Trib)

Nitin Bhatia vs. ITO

A.Y.: 2018-19 Date of Order: 24.12.2025

Section : 54

Once the assessee had invested the entire capital gain in a new residential house within the period stipulated under section 54(1), the benefit of deduction cannot be denied merely for non-compliance with the requirement of depositing unutilised amount in Capital Gain Account Scheme (CGAS) before the due date of filing of return of income under section 54(2).

FACTS

The assessee was an individual. During the relevant previous year, the assessee along with his spouse sold a jointly owned residential house property. The long-term capital gain (assessee’s share) on the said transfer was computed to ₹66,91,617. Thereafter, he purchased a new residential house for a total consideration of ₹4,44,00,000 by a registered sale deed dated 24.10.2019, which was within two years from the date of transfer of the original residential house. Out of the total consideration of ₹4,44,00,000, the assessee had made payments aggregating to ₹44,40,000 up to the due date of filing of the return of income under section 139(1). The balance amount was not deposited in Capital Gain Account Scheme (CGAS) before the due date of filing of return of income as required under section 54(2). The assessee claimed deduction under section 54 on the entire long term capital gain in his return of income filed on 20.9.2018.

During scrutiny proceedings, the AO allowed the deduction under section 54 for the amount which was actually paid by the assessee till the due date of filing the return under section 139, i.e.,, ₹44,40,000. However, he disallowed the balance amount of deduction under Section 54 of ₹22,51,617 contending that the assessee had not deposited the said amount in Capital Gain Account Scheme (“CGAS”) in accordance with section 54(2).

Aggrieved, the assessee went in appeal before CIT(A) who upheld the addition made by the AO.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

Following the decision of Madras High Court in Venkata Dilip Kumar vs. CIT, (2019) 419 ITR 298 (Madras) which elaborately examined the interplay between section 54(1) and section 54(2), the Tribunal observed that once the assessee had invested the capital gain in a new residential house within the period stipulated under section 54(1), the benefit of deduction cannot be denied merely for non-compliance with section 54(2). Accordingly, the Tribunal held that the assessee was entitled to deduction under section 54 for the entire capital gain of ₹66,91,617.

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

Where the object of the not-for-profit company was to build an overall environment securing the interests and wellbeing for/of European Union business community so that they have ease of doing business in India, its activities could be regarded as promoting an object of general public utility under section 2(15), and therefore, such company was eligible for registration under section 12A.

81. (2025) 181 taxmann.com 303 (Del Trib)

Federation of European Business in India vs. CIT

A.Y.: N.A. Date of Order: 03.12.2025

Section: 2(15), 12A

Where the object of the not-for-profit company was to build an overall environment securing the interests and wellbeing for/of European Union business community so that they have ease of doing business in India, its activities could be regarded as promoting an object of general public utility under section 2(15), and therefore, such company was eligible for registration under section 12A.

FACTS

The assessee was a non-profit company registered under section 8 of the Companies Act, 2013, formed with the objects of promoting commerce in India with the European Union business community and to protect and facilitate the interest of European Union business community in India by advocacy of policy between the European Union business community and the Indian public authorities regarding trade policy, ease of doing business, intellectual property right protection and European union investment protection in India. After obtaining provisional registration under section 12A for AYs 2024-25 to 2026-27, it filed Form No. 10AB for regular registration under section 12A(1)(ac).

The CIT(E) rejected the application for regular registration (and also cancelled the provisional registration) on the ground that the applicant was incorporated for policy advocacy to promote, protect and facilitate the interests of its members in India and working for the benefit of its members could not be regarded as a “charitable purpose” under section 2(15).

Aggrieved, the assessee filed an appeal before ITAT.

HELD

Considering the fact that object of the applicant-assessee was to build an overall environment securing the interests and wellbeing for/of European Union business community so that they have ease of doing business in India, the Tribunal held that such activities qualify as objects of general public utility under section 2(15) and therefore, the CIT(E) was not justified in rejecting the registration application under section 12A.

In the result, the Tribunal allowed the appeal of the assessee and directed the CIT(E) to grant registration to the assessee under section 12A forthwith.

Activity of nurturing entrepreneurship through educational, networking and mentoring assistance / events cannot be regarded as “education” but falls within the limb of “advancement of object of general public utility” under section 2(15). Fees from events organised for entrepreneurs could be regarded as business receipt which was subject to the threshold of 20% under proviso to section 2(15); however, membership fees received from members could not be regarded as business receipt.

80. (2025) 181 taxmann.com 318 (Hyd Trib)

Indus Entrepreneurs vs. DCIT

A.Y.: 2018-19 Date of Order : 02.12.2025

Section: 2(15)

Activity of nurturing entrepreneurship through educational, networking and mentoring assistance / events cannot be regarded as “education” but falls within the limb of “advancement of object of general public utility” under section 2(15).

Fees from events organised for entrepreneurs could be regarded as business receipt which was subject to the threshold of 20% under proviso to section 2(15); however, membership fees received from members could not be regarded as business receipt.

FACTS

The assessee was a registered society under the A.P. Societies Registration Act, 2001 with the main objects of encouraging entrepreneurship by providing educational, networking and mentoring assistance to existing and potential entrepreneurs and professionals in all areas, supporting entrepreneurs for exploring new areas of business, building network bridges between enterprises and individuals, corporate and other entities in India and abroad, and organising events and informal mentoring activities constantly for exploring professional ideas and achieving higher business goals etc. It was one of the chapters of TIE Global, a global non-profit organisation devoted to the entrepreneurs in all industries, at all stages, from incubation, throughout the entrepreneurial life cycle. It was registered under section 12A of the IT Act. It filed its return of income admitting total income of ₹Nil after claiming exemption under section 11.

The case was selected for scrutiny under CASS. The AO contended that the assessee-society was not a charitable organisation going by its aims and objects, but, was a commercial entity engaged in business, trade, etc. He also noted that the assessee received 48% of its total income from the business activities; further, it derived around 22% of the profit from its activities and, therefore, he denied exemption under section 11 and assessed the excess of income over expenditure of ₹33,80,537 as ‘Income from Business and Profession’.

Aggrieved, the assessee filed an appeal before CIT(A) who concurred with the AO on different grounds, namely, non-filing of Form 10 as required under Rule 17 of I.T. Rules, 1962.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) Considering the main aims and objects of the society and its activities, the objects / activities do not fall within the definition of “education” in light of the decision of Supreme Court in ACIT vs. Ahmedabad Urban Development Authority, (2022) 449 ITR 389 (SC) but fall under the last limb of “charitable purpose”, i.e., “advancement of any other objects of general public utility” and, therefore, claim of exemption under section 11 should be examined in light of definition of “charitable purpose” under section 2(15) and proviso provided therein.

(b) The assessee reported gross income of ₹1,53,69,214 which included fees from associated members / student members / short term members and event fees. So far as the event fees of ₹20,60,655 were concerned, they were in the nature of rendering services to trade, commerce or business. However, since such receipts were within the prescribed limit of 20% of gross receipts under proviso to section 2(15), the assessee was entitled to exemption under section 11.

(c) The AO had wrongly considered membership fees received from members, student members and charter members as business receipts since such receipts were not in relation to carrying out trade, commerce or business.

(d) On the AO’s finding that the assessee had earned 22% profit from its gross receipts, the Tribunal observed that if a trust earned profit in the course of carrying out general public utility, the same cannot be a ground for rejecting exemption under section 11 as held by the Supreme Court in New Noble Educational Society vs. CCIT, (2022) 448 ITR 594 (SC).

(e) On the issue of CIT(A) denying exemption on the ground of non-filing of Form 10, the Tribunal observed that the society had filed relevant Form 10 along with the return of income on 05.10.2018 on or before the due date provided under section 139 and therefore, on this ground also, denying the exemption by CIT(A) cannot be upheld.

Accordingly, the Tribunal allowed the appeal of the assessee, set aside the order of CIT(A) and directed the AO to allow exemption under section 11.

If proceedings were initiated invoking S. 270A(8), which is an aggravated form of fiscal violation, and the notice is for a lighter form, then penalty could not have been levied for the aggravated violation. CIT(A) cannot substitute the charge and modify the penalty order.

79. TS-1728-ITAT-2025 (Delhi)

Umri Pooph Pratappur Tollway Pvt. Ltd. vs. ACIT

A.Y.: 2018-19 Date of Order : 31.12.2025

Section: 270A

If proceedings were initiated invoking S. 270A(8), which is an aggravated form of fiscal violation, and the notice is for a lighter form, then penalty could not have been levied for the aggravated violation. CIT(A) cannot substitute the charge and modify the penalty order.

FACTS

The assessee, engaged in development of roads, on build-operate-and transfer basis in Madhya Pradesh, claimed depreciation @ 25% on `Right under service agreement’ as an intangible asset. However, AO considered it not to be an asset and allowed the project to be amortised. In Para 2 of the assessment order, the AO mentioned that since the assessee `under-reported’ his income in consequence of misreporting within the meaning of section 270A of the Act, penalty proceedings u/s 270A of the Act were initiated for under-reporting of income in consequence of misreporting.

The notice of penalty issued under section 274 r.w.s. 270A alleged that the assessee `under-reported’ the income.

The Order levying penalty was passed by invoking section 270A(8) and penalty was imposed for `under reporting income in consequence of misreporting thereof’ and penalty equal to 200% of the amount of tax payable on under-reporting income was imposed.

Aggrieved, the assessee preferred an appeal to CIT(A) who sustained the penalty but directed the AO to impose penalty equal to 50% of the amount of tax payable on under rejected income and rejected the contention regardinginconsistency in the notice and the order.

Aggrieved, the assessee preferred an appeal before the Tribunal, where the primary contention was that there is a grave variance in the reason for initiating the penalty as mentioned in assessment order, show cause notice for levy of penalty and the impugned penalty order.

HELD

The Tribunal held that if proceedings were initiated invoking sub-section (8) of section 270A of the Act, which is an aggravated form of fiscal violation, and notice is for lighter form, then the penalty could not have been levied for aggravated violation. It further observed that “though vice versa may be legal”. It further held that the first appellate authority, CIT(A), while dealing with the allegation and ground of challenge of levy of penalty under wrong charge, cannot substitute the charge and modify the penalty order as has been done in the present case.

Interest component of payment made under One Time Settlement Scheme with a bank is allowable under section 43B.

78. TS-1658-ITAT-2025 (Delhi)

Bharatiya Samruddhi Finance Ltd. vs. DCIT

A.Y.: 2017-18 Date of Order : 10.12.2025

Section: 43B

Interest component of payment made under One Time Settlement Scheme with a bank is allowable under section 43B.

FACTS

The assessee, a non-banking financial Company duly registered with the RBI, and categorized as a micro finance institution, was engaged in the business of borrowing loans from banks and financial institutions and advancing the same to microfinance customers. The assessee had availed term loans from banks, and interest on such term loans, which was not paid actually by the assessee, was voluntarily disallowed by the assesseein the return of income in earlier years. The amount of disallowances made in earlier years was ₹25,49,22,936/-.

During the year under consideration, the assessee entered into One Time Settlement (OTS) with banks and financial institutions and obtained a waiver of substantial sums.. The assessee had 17 lenders consisting of one financial institution (SIDBI) and 16 banks. Since, the assessee company became a sick company and its net worth eroded, the financial institution and 14 banks formed a consortium and entered into a Corporate Debt Restructuring (CDR) arrangement with the assessee, followed by OTS.

The total dues to the bank at that point of time was ₹2,14,52,26,858/-. Four banks did not join the consortium and entered into OTS arrangement with the assessee separately. Out of the total amount settled under OTS of ₹67,05,45,091/-, a sum of ₹23,75,55,144/- was apportioned towards interest outstanding and the remaining sum of ₹43,29,89,947/- was apportioned towards prinicpal outstanding. The assessee submitted that the differential sums between the loan outstanding as per books and the amount settled under OTS were credited to the profit and loss account by the assessee in the sum of ₹147,46,81,767.

The issue, in assessee’s appeal before the Tribunal was allowability under section 43B, of the Act of the interest component contained in the payment made pursuant to OTS.

The contention of the assessee was that, as and when the assessee made provision for interest payable to banks and financial institutions it had duly disallowed the provision under section 43B of the Act in earlier years. Pursuant to the OTS and waiver obtained thereunder, the waiver amounts were written back and credited to profit and loss account, comprising of both principal and interest portion. The interest portion was not liable to be taxed again as it had already been disallowed in the year in which provisions were made by the assessee. Accordingly, , the assessee claimed deduction under section 43B of the Act, on a payment basis, to the extent of the interest component of ₹23,75,55,144 during the year under consideration.This fact was disclosed in tax audit report vide reply to clause 26(i)(A)(a) & (b) of from 3CD.

HELD

The Tribunal found that assessee in the earlier years had voluntarily disallowed the unpaid interest on term loans payable to banks and financial institutions under section 43B of the Act in the return of income. During the year under consideration, it reached a OTS with Bank and financial institutions to the tune of ₹67,05,45,091/- out of this, a sum of ₹23,75,55,144/- was apportioned towards the interest component. Since this interest component has been duly paid by the assessee during the year under consideration, the assessee had merely claimed the sum as deduction on payment basis.

The Tribunal held that the assessee is entitled for deduction of the same u/s 43B of the Act. It observed that denial of such deduction would result in double taxation, as the interest had already been disallowed in earlier years and was being subject to tax on payment under OTS. Accordingly, to avoid such double addition, the assessee was entitled to deduction u/s 43B of the Act for ₹23,75,55,144/-.

Accordingly, the ground raised by the assessee was allowed.

Order giving effect is nothing but finalisation of assessment proceedings. Claim for TDS credit, on the basis of Form 26AS, in proceedings to give effect to an appellate order is a claim made during the assessment proceedings which the AO is duty bound to consider and allow the credit for TDS claimed.

77. TS-1657-ITAT-2025(Mum.)

Daiwa Capital Markets India Pvt. Ltd. vs. ACIT

A.Y.: 2013-14 Date of Order : 20.11.2025

Section: 199, Rule 37BA

Order giving effect is nothing but finalisation of assessment proceedings. Claim for TDS credit, on the basis of Form 26AS, in proceedings to give effect to an appellate order is a claim made during the assessment proceedings which the AO is duty bound to consider and allow the credit for TDS claimed.

FACTS

The assessee, in the original return of income filed by it on 22.11.2013, claimed TDS credit of ₹1,78,80,099 being the amount reflected in its Form No. 26AS at that point of time. Subsequently, assessee filed a revised return of income on 2.3.2015. In the interim period between the date of filing of original return of income and the revised return of income, a party M/s Prime Focus Ltd. deducted and deposited with the Government a sum of ₹73,24,074, being the amount of TDS. However, it did not inform the assessee about the same.

Thus, in the revised return of income the assessee missed claiming credit for TDS of ₹73,24,074, though the corresponding income was offered for tax in the original return of income itself. During the course of assessment proceedings as well, the assessee did not claim the credit for TDS of ₹73,24,074 since it was not aware of the same. However, while making an application to the Assessing Officer (AO) to pass an order giving effect to the order of CIT(A), the assessee requested the AO to grant further credit of ₹73,24,074 on the ground that the same was not claimed in the return of income. The AO did not grant credit for this sum of ₹73,24,074 while passing the order to give effect to the order of CIT(A).

Aggrieved, the assessee preferred an appeal to CIT(A) who rejected the plea of the assessee and upheld the order of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that, based on the observations of the AO and CIT(A), it is evident that the claim of TDS credit was denied primarily because the procedure prescribed by Rule 37BA of the Income-tax Rules, 1962 (“Rules”) was not followed by the assessee and further that the claim has not been made within a period of five years pursuant to Circular No. 11/2024 dated 1.4.2024 and no steps have been taken by the assessee to seek condonation for the delay.

The Tribunal further observed that the question which arose before it were (i) whether there was any dispute with regard to the TDS claim of ₹73,24,074, if the same was duly deposited or not; and (ii) whether an admitted claim of deposit of TDS on behalf of the assessee and corresponding income having been offered in the same assessment year, could be denied due to procedural lapse, as credit for TDS had not been claimed in the ITR.

The Tribunal noticed that both the lower authorities had proceeded on the premise that the procedural requirement under Rule 37BA of the Rules for claiming TDS credit had not been followed, that the claim was not made in the ITR, and also not within a reasonable period, as the same has been made after a period of nine years and therefore, as per settled legal precedents the claim of the assessee was required to be denied. It held that it is a settled law that rules and procedures are handmaids of justice. When substantial justice is required to be done,rules and procedures should not come in the way of upholding the principle of natural justice for imparting substantial justice.

It further held that deduction and deposit of TDS is a form of deposit of advance tax for which the assessee is lawfully entitled to credit, failing which retention of such amount would amount to unjust enrichment and would be in violation of Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law. If tax has been paid in excess of tax specified, the same has to be refunded. It was held that it is a statutory and constitutional obligation of the revenue to grant TDS credit duly reflected in Form 26AS, and the claim of the assessee cannot be denied merely due to a procedural lapse. The Assessee is entitled to be granted credit for TDS deducted and deposited before finalisation of the assessment. Passing of an order giving effect to an appellate order is nothing but the finalisation of original assessment proceedings.

The Tribunal held that the assessee had made the claim during the assessment proceedings, which the AO was duty bound to consider and allow the credit therefor.

Accordingly, this ground of appeal of the assessee was allowed.

Section 143(2) read with section 120 – Assessment framed by non-jurisdictional Assessing Officer

76. [2025] 126 ITR(T) 664 (Delhi – Trib.)

Arjun Rishi vs. ITO

ITA NO: 3020 (DEL.) OF 2023

A.Y.: 2017-18

DATE: 09.07.2025

Section 143(2) read with section 120 – Assessment framed by non-jurisdictional Assessing Officer

FACTS

The assessee filed his return of income for the AY 2017–18 on 31.03.2018 declaring total income of ₹91,05,020. The case was selected for limited scrutiny under CASS on issues relating to cash deposits, capital gains/loss on sale of property, and investment in immovable property.

Notice under section 143(2) was issued and served upon the assessee by the Income-tax Officer (ITO), followed by notice under section 142(1). The assessee complied and furnished the requisite details electronically. Thereafter, the assessment was completed by the ITO vide order dated 30.12.2019.

Before the Commissioner (Appeals), the assessee raised a jurisdictional objection contending that, in view of CBDT Instruction No. 1/2011 dated 31.01.2011, the pecuniary jurisdiction to assess cases where returned income exceeds ₹30 lakhs in metro cities lies with the Assistant/Deputy Commissioner of Income-tax and not with an ITO. Since the assessee had declared income exceeding ₹90 lakhs, the ITO lacked jurisdiction. It was further contended that no order under section 127 transferring jurisdiction had been passed.

The Commissioner (Appeals) rejected the jurisdictional objection and upheld the assessment as well as the additions made therein.

Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD

The Tribunal observed that the assessee had declared income of ₹91.05 lakhs and, as per CBDT Instruction No. 1/2011 issued under section 119, cases where declared income exceeds ₹30 lakhs in metro cities fall within the jurisdiction of ACs/DCs and not ITOs. The Instruction is binding on the Department and must be strictly followed.

The Tribunal further noted that the Revenue failed to place on record any order passed under section 127 transferring jurisdiction from the competent AC/DC to the ITO. In the absence of such an order, the ITO could not have assumed jurisdiction merely on the basis of PAN allocation.

The Tribunal held that since the assessment was framed by an Assessing Officer who lacked pecuniary jurisdiction, the notice issued under section 143(2) was invalid, and consequently, the entire assessment proceedings were vitiated. An assessment framed by a non-jurisdictional Assessing Officer is bad in law and liable to be set aside.

Accordingly, the assessment order was quashed, and the appeal of the assessee was allowed.

Section 271(1)(c) read with section 54F – Penalty – Wrong claim of exemption – Bona fide explanation due to builder’s default

75. [2025] 126 ITR(T) 172 (Delhi – Trib.)

DCIT vs. Sahil Vachani

ITA NO.: 2604 (DEL) OF 2023

A.Y.: 2016-17

DATE: 23.06.2025

Section 271(1)(c) read with section 54F – Penalty – Wrong claim of exemption – Bona fide explanation due to builder’s default

FACTS

The assessee sold shares during the relevant previous year and earned long-term capital gains of ₹9.01 crore. In the return of income, the assessee claimed exemption of ₹6.31 crore under section 54F, contending that he had invested the sale consideration in a residential property.

During assessment proceedings, the Assessing Officer noted that although the assessee had entered into an agreement and made substantial payments towards the proposed residential property, the new residential house did not come into existence within the time prescribed under section 54F. The assessee accepted the disallowance of exemption and offered the amount to tax.

The Assessing Officer, thereafter, levied penalty under section 271(1)(c) on the ground that the assessee had furnished inaccurate particulars of income.

On appeal, the Commissioner (Appeals) deleted the penalty holding that the assessee had disclosed all material facts, furnished supporting documents, and the failure to complete construction was attributable to the builder and beyond the assessee’s control.

Aggrieved, the Revenue preferred an appeal before the Tribunal. Due to a difference of opinion between the Judicial Member and the Accountant Member, the matter was referred to a Third Member for resolution.

HELD

The Tribunal observed that the assessee had placed on record complete documentary evidence in support of the claim under section 54F, including agreements with the builder, bank statements evidencing payments, and TDS certificates. The assessee had also explained during assessment proceedings that the construction could not be completed within the statutory period due to reasons attributable to the builder.

It was further observed that the assessee did not suppress the long-term capital gains, nor did he furnish any false particulars. The claim under section 54F was made on the basis of disclosed facts and supporting documents. Merely because the claim was ultimately found to be unsustainable in law does not automatically attract penalty under section 271(1)(c).

The Third Member placed reliance on the decision of the Supreme Court in CIT vs. Reliance Petroproducts (P.) Ltd., holding that making an incorrect claim in law, by itself, does not amount to furnishing inaccurate particulars, when all material facts are disclosed.

The Tribunal held that the explanation offered by the assessee was bona fide, supported by evidence, and the assessee had voluntarily offered the amount to tax once the exemption was disallowed. There was no finding that the explanation was false or lacking in good faith.

Accordingly, it was held that the penalty under section 271(1)(c) was not leviable, and the order of the Commissioner (Appeals) deleting the penalty was affirmed. The Revenue’s appeal was dismissed.

Merely because the assessee jointly owned another property as on the date of transfer of the asset, his claim for deduction under section 54F could not be rejected.

74. (2025) 180 taxmann.com 720 (Del Trib)

Kusum Sahgal vs. ACIT

A.Y.: 2016-17

Date of Order: 21.11.2025

Section : 54F

Merely because the assessee jointly owned another property as on the date of transfer of the asset, his claim for deduction under section 54F could not be rejected.

FACTS

During the relevant previous year, the assessee received full value of consideration with respect to transfer of shares aggregating to ₹118 crores and, inter alia, claimed deduction under Section 54F for ₹21.28 crores on account of investment in residential property in Gurgaon. The case was selected for scrutiny assessment under CASS for limited scrutiny. The AO contended that since the assessee jointly owned more than one residential property on the date of transfer of shares, he was not entitled to claim deduction under section 54F and therefore, made an addition of ₹21.28 crores.

Aggrieved, the assessee went in appeal before CIT(A) who upheld the action of the AO in disallowing deduction under section 54F.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal noted that the assessee claimed deduction under section 54F for investment made in purchase of residential property at the Camellias, Golf Drive DLF-5, Gurgaon which was an ongoing project of Camellias under construction by DLF. Additionally, as on the date of sale of the shares / original asset, the assessee had a commercial flat at Rajendra Place, an agricultural property (under which there was no ownership of the assessee in possession of the land) at Mehrauli and one residential flat at Greater Noida which was owned to the extent of 50% by the assessee.

Following the order of Mumbai ITAT in ITO vs. Sheriar Phirojsha Irani [IT Appeal No. 2835/Mum/2024, dated 27-09-2024] and other judicial precedents, the Tribunal held that joint ownership at the time of sale of original asset does not disentitle the assessee to claim deduction under section 54F.

In the result, the orders of the AO and CIT(A) were set aside and the appeal of the assessee was allowed.

Where the amount received by the assessee from milk supplying societies was not a voluntary contribution but a compulsory levy linked to the quantity of milk fat supplied, it could not be regarded as a corpus donation exempt under section 11(1)(d).

73. (2025) 180 taxmann.com 641 (Ahd Trib)

Dudhsagar Research and Dement Association vs. DCIT

A.Y.: 2016-17 and 2017-18

Date of Order: 17.11.2025

Section: 11(1)(d)

Where the amount received by the assessee from milk supplying societies was not a voluntary contribution but a compulsory levy linked to the quantity of milk fat supplied, it could not be regarded as a corpus donation exempt under section 11(1)(d).

FACTS

The assessee-trust was registered under section 12A since 1975 and was engaged in activities of medical relief to animals, progeny testing, vaccination, artificial insemination, bull rearing, and education in dairy technology. It received ₹7.23 crores from milk supplying societies as corpus donations which were exempt under section 11(1)(d).

The case was selected for scrutiny. The AO held that the corpus donation of ₹7.23 crores received from milk supplying societies was not a voluntary contribution but a compulsory levy linked to the quantity of milk fat supplied and hence did not qualify as a corpus donation under section 11(1)(d). Accordingly, he treated the said amount as income under section 2(24)(iia). He also invoked proviso to section 2(15) on the ground that the assessee was engaged in activities which fell within “advancement of any other object of general public utility” and its main source of income was sale of frozen semen doses which were in the nature of business, etc. and thereby, denied exemption under section 11.

The assessee filed an appeal before CIT(A) who confirmed the action of the AO; but following the order of ITAT in assessee’s own case for AY 2014-15, he allowed statutory deduction of 15% on the receipts treated as revenue income.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

On the issue of nature of amount received by the assessee from milk supplying societies, following the order of ITAT in assessee’s own case for AY 2014-15 in Dudhsagar Research & Development Association v. ACIT, (2024) 159 taxmann.com 1465 (Ahd Trib), the Tribunal upheld the finding of the AO and CIT(A) that the donations received from milk supplying societies, being compulsorily collected and linked to the quantity of milk fat supplied, did not satisfy the condition of being “voluntary contributions” with “specific direction” as required under section 11(1)(d) and therefore could not be treated as corpus donations.

However, on the alternative claim raised by the assessee of allowing statutory deduction of 15% on such amount, the Tribunal held that this issue was covered in favour of the assessee by the decision of the coordinate Bench in assessee’s own case for AY 2014-15 (supra) wherein it was held that once the corpus donation was treated as revenue receipt, the said receipts were liable to be governed by sections 11 and 12 and the assessee was eligible for deduction in accordance with law including the statutory deduction of 15%.

In the result, the Tribunal partly allowed the appeal of the assessee.

Where milk procurement from farmers was not a standalone profit-oriented business, but an incidental and inseparable activity directly connected to the charitable object of the assessee-society of providing fair and remunerative prices to small and marginal farmers and thereby protecting them from exploitation by middlemen, the activities of the assessee fell within “relief of poor” under section 2(15) and exemption under section 11 could not be denied to it on the ground that it was carrying on commercial activity.

72. (2025) 180 taxmann.com 722 (Cochin Trib)

Malanadu Farmers Society vs. DCIT

A.Ys.: 2016-17 and 2022-23

Date of Order : 19.11.2025

Section: 2(15)

Where milk procurement from farmers was not a standalone profit-oriented business, but an incidental and inseparable activity directly connected to the charitable object of the assessee-society of providing fair and remunerative prices to small and marginal farmers and thereby protecting them from exploitation by middlemen, the activities of the assessee fell within “relief of poor” under section 2(15) and exemption under section 11 could not be denied to it on the ground that it was carrying on commercial activity.

FACTS

The assessee was a charitable society registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 and also registered under section 12A of the Income-tax Act, 1961. The primary object of the assessee was to conduct social activities aimed to for improving the living conditions and welfare of the poor and marginal section of the society. It was engaged in procurement, chilling, processing and sale of milk sourced from small and marginal farmers. It filed its return of income declaring Nil income after claiming exemption under section 11.

The AO issued notice under section 148A on the ground that the assessee was not a charitable organisation but a business community where the major activities of the assessee were trading and processing of milk. He further held that the assessee’s activities cannot be regarded as “relief of poor”. Accordingly, the AO denied exemption under section 11 and an addition of ₹13.93 crores was made relating to the profit earned by trading milk.

Being aggrieved, the assessee filed an appeal before CIT(A) who confirmed the addition made by the AO.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) The assessee had consistently carried out activities such as farmer-training programmes, cattle-rearing demonstrations, financial assistance, welfare schemes, subsidies, and other public-oriented initiatives aimed at improving the livelihood of economically weaker farming communities.

(b) CBDT Circular No. 11/2008 dated 19.12.2008 categorically clarifies that proviso to Section 2(15) does not apply to the first three limbs of the definition of “charitable purpose”—namely (i) relief of the poor, (ii) education, and (iii) medical relief. This circular further clarifies that “relief of the poor” includes a wide range of welfare activities benefiting small and marginal farmers, and that entities engaged in such objects are not disentitled merely because they incidentally carry-on commercial activities, provided the conditions of Section 11(4A) are satisfied.

(c) In view of the consistent judicial position, binding ITAT order in assessee’s own case for AY 2017-18 [Malanadu Farmers Society v. DCIT, IT Appeal Nos. 632 and 633 (Coch) of 2022, date of pronouncement 08.03.2023], CBDT Circular 11/2008 dated 19.12.2008, and holistic appreciation of facts, the assessee’s activities fell squarely within the definition of “relief of the poor” under section 2(15).

(d) The assessee had demonstrated with supporting documents that milk procurement was not a standalone profit-oriented business, but an incidental and inseparable activity directly connected to its charitable object of providing fair and remunerative prices to small and marginal farmers, thereby protecting them from exploitation by middlemen.

(e) The dominant purpose of the assessee was relief of poor, small and marginal farmers; milk procurement and processing activities were merely incidental and inseparable from its charitable objectives. Farmers received higher prices compared to cooperative benchmarks, which directly contributed to their upliftment.

The Tribunal also noted that the assessee had also complied with the conditions under section 11(4A).

Accordingly, the Tribunal held that the denial of exemption under section 11 to the assessee was unjustified and deserved to be deleted.

Assessment order passed u/s 143(3) by ACIT is valid despite notice u/s 143(2) having been issued by ITO and ACIT since the territorial jurisdiction of the ITO and the ACIT/DCIT working in the same Range is common and within the common jurisdiction, the cases are assigned to the ITO and to the ACIT/DCIT on the basis of the monetary limit.

71. TS-802-ITAT-2025 (Ahd. Trib.)

Rupen Marketing Pvt. Ltd. vs. DCIT

A.Y.: 2015-16

Date of Order: 18.6.2025

Sections: 143(2)

Assessment order passed u/s 143(3) by ACIT is valid despite notice u/s 143(2) having been issued by ITO and ACIT since the territorial jurisdiction of the ITO and the ACIT/DCIT working in the same Range is common and within the common jurisdiction, the cases are assigned to the ITO and to the ACIT/DCIT on the basis of the monetary limit.

In an assessment, selected for limited scrutiny, merely because the AO had exceeded his jurisdiction in making certain additions, the entire assessment cannot be held as void ab initio. The additions made in excess of the issues under consideration can only be held as illegal.

FACTS

For AY 2015-16, the assessee filed its return of income declaring total income of ₹30,11,970. The case was selected for limited scrutiny to examine 4 issues viz. (i) import turnover mismatch; (ii) customs duty payment mismatch; (iii) payment to related persons mismatch; and (iv) duty drawback received / receivable.

In the course of assessment proceedings, there was no compliance to notices issued under section 143(2) as well as section 142(1) of the Act by DCIT-Circle 3(1)(2), Ahmedabad. The details requisitioned were not furnished. The AO having noticed various discrepancies between data reported in return and information as per ITS recorded a finding that correctness and completeness of accounts was not verifiable and that the assessee had not followed the method of accounting in accordance with the accounting standard stipulated under section 145(2) of the Act. The AO completed the assessment under section 144 of the Act by making an ad hoc addition of ₹2,50,00,000 to the returned income.

Aggrieved, the assessee preferred an appeal to the CIT(A) who set aside the assessment to the file of the AO with a direction to make a fresh assessment after providing opportunity of being heard to the assessee and after verification of the facts of the case.
Aggrieved by the order of CIT(A), the assessee preferred an appeal to the Tribunal contending that the CIT(A) erred in not appreciating that the assessment order was bad in law and was required to be quashed as void ab-initio and bad in law since DCIT-Circle 3(1)(2), Ahmedabad did not have jurisdiction over the case of the assessee, the AO exceeded his jurisdiction and assessed income as if the case was selected for complete scrutiny.

HELD

The Tribunal observed that the ground of jurisdiction of DCIT, Circle 3(1)(2) over the case of the assessee pertaining to jurisdiction needs to be adjudicated first since it goes to the root of the matter. It noted that the assessee contended that the DCIT did not have correct and proper jurisdiction to pass the impugned assessment order since the notice dated 04.07.2017 was issued by the ITO, Ward 3(1)(3), Ahmedabad under Section 142(1) r.w.s 129 of the Act. The Tribunal noticed that identical computer generated notice under Section 143(2) of the Act was issued by the ITO, Ward – 3(1)(3), Ahmedabad as well as by the ACIT, Circle – 3(1)(2), Ahmedabad on 26.07.2016.

The Tribunal held that merely because the notices were issued both by the ITO as well as by the ACIT, it can’t be concluded that the ACIT was having no jurisdiction over the case. The territorial jurisdiction of the ITO and the ACIT/DCIT working in the same Range is common. Within the common jurisdiction, the cases are assigned to the ITO and to the ACIT/DCIT on the basis of the monetary limit. The CBDT vide INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], DATED 31 1-2011 had fixed pecuniary limit for purpose of distribution of work between officers.

It held that since the income declared by the assessee in the current year was above ₹30 lacs and the jurisdiction over the case was with the ACIT/DCIT in accordance with the CBDT Instruction. Merely because the assessment of past year was made by the ITO, it cannot be presumed that the jurisdiction for the current year will remain with the ITO. The jurisdiction was dynamic considering the CBDT Instruction and the income declared by the assessee in different years. Even if the initial notice u/s 143(2) was issued by the ITO, the jurisdiction was required to be transferred to the ACIT/DCIT because the returned income of the assessee in the current year was in excess of ₹30,00,000/-. Therefore, the contention of the assessee that the AO had no jurisdiction over the case was not accepted. It held that the jurisdiction over the case for the current year was with the ACIT/DCIT and not with the ITO. The jurisdiction was also rightly assumed by the ACIT/DCIT by issue of notice under section 143(2) of the Act dated 26.07.2016. Therefore, the assessment order as passed by the DCIT, Circle – 3(1)(2), Ahmedabad cannot be held as without jurisdiction. Accordingly, the ground no.-2 raised by the assessee in respect of jurisdiction over the case is dismissed.

As regards conversion of limited scrutiny into complete scrutiny by the AO and making ad hoc addition of ₹2,50,00,000/- without identifying the nature of addition, the Tribunal noticed that the case was selected for limited scrutiny on specific issues as already mentioned earlier. The AO had also discussed those issues in the assessment order and pointed out specific discrepancy in respect of import turnover mismatch and duty draw back mismatch. However, since no compliance was made by the assessee before the AO, he had rejected the books of account and made ad hoc addition of ₹2,50,00,000/- in respect of the mismatch on the issues of limited scrutiny as well as the other discrepancies as noticed in the course of assessment. It held that the objection of the assessee that AO was not empowered to exceed the limited issues on which the case was selected for scrutiny, is justified. However, merely because the AO had exceeded his jurisdiction in
making certain additions, the entire assessment cannot be held as void ab initio. The additions made in excess of the issues under consideration can only be held as illegal.

The Tribunal observed that the AO had specifically pointed out discrepancies to the extent of ₹2,11,04,500/- and ₹51,538/-, in the assessment order, in respect of import duty vis-à vis purchase mismatch and export duty drawback mismatch, which were two of the issues for which the case was selected for limited scrutiny. Therefore, the AO was entitled to make addition to the extent of the total difference of ₹2,11,56,038/- as identified in the assessment order. Only the addition made in excess of the identified difference of ₹2,11,56,038/- can be held as beyond jurisdiction. It held that the objection taken by the assessee on the addition beyond the limited scrutiny issues is no longer res integra as the same stood rectified by the AO. Further, the entire addition can’t be held as beyond jurisdiction and the assessment order can’t be quashed for this reason.

Minimum Guarantee Fee paid to various hotels / guest houses for not meeting contractual obligations for unsold rooms and loss from sold rooms is not rent as per section 194-I of the Act.

70. TS-1561-ITAT-2025 (Delhi Trib.)

Oravel Stays Ltd. vs. DCIT

A.Y.: 2020-21

Date of Order : 21.11.2025

Section: 194-I

Minimum Guarantee Fee paid to various hotels / guest houses for not meeting contractual obligations for unsold rooms and loss from sold rooms is not rent as per section 194-I of the Act.

FACTS

The assessee engaged in operating online platform for providing OYO rooms at various hotels, guest houses, etc for facilitating reservation / booking of hotel rooms through the appellant-assessee’s OYO platform, had entered into agreements with various hotels, etc. for facilitating booking of hotel rooms, etc. through its e-platform; OYO.

As per the said agreement, the hotel conducts its operations in terms of providing lodging and accommodation services, whereas the appellant assessee provides technology, sales and marketing services to various hotels relating to the provision of lodging and accommodation services through its e-platform. The agreement was based on ‘Minimum Guarantee Revenue Model’ (“MGRM’). As per the agreement, the assessee appellant assured minimum revenue benchmark, which hotels/guest houses may/will receive or likely/expect to receive from the appellant assessee e-platform. In case, the benchmark is exceeded, then the hotel/guest house was required to pay service fee to the appellant assessee otherwise the appellant assessee was required to pay the service fee in case of shortfall in achieving the benchmark. The agreement further provided that in case the rooms are sold at price lesser than the agreed amount between the appellant assessee and hotels, the difference/loss was to be borne by the appellant assessee.

Survey operation under section 133A of the Act was carried out at the business premises of the assessee and based on information gathered, proceedings under section 201 were initiated which culminated into a liability of ₹3,33,19,101 vide order dated 7.2.2020 passed under section 201(1) / 201(1A) of the Act.

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

Aggrieved, the assessee preferred an appeal to the Tribunal where the main plank of the argument was that the assessee did not have any exclusive and absolute right to use the hotel / guest house rooms as per the agreement. The said rooms were available to all for booking through the e-platform of the assessee.

HELD

The Tribunal, in view of the decision of the Apex Court in the case of Japan Airlines Co. Ltd. [(2015) 377 ITR 372 (SC)] held that following parameters are required to be looked into before invoking section 194-I of the Act viz. – (i) character of services as per agreement and business model; and (ii) right of exclusive use of room. It observed that in the present case, as per the agreement, the appellant-assessee did not have exclusive right to use the room of any hotel / guest house for itself. The booking of the room was available to general public at large through e-platform of the appellant-assessee. A perusal of the agreement revealed that there was no lessor-lessee relationship between hotel / guest house owners and the assessee which gave exclusive right to the appellant assessee to use the said rooms for itself only. The Tribunal, on a bare reading of the agreement, did not find any substance in the observations / conclusions of the CIT(A).

The Tribunal held that the guarantee fee paid to various hotels/guest houses for not meeting the contractual obligations for unsold rooms (booking of minimum number of rooms not met through e-platform of the appellant assessee) and loss from sold rooms (booking of rooms at a lesser price than the minimum agreed room tariff through e-platform of the appellant assessee) in accordance with the terms and conditions of the agreement is not rent as per section 194-I of the Act as the same has been paid for not using any room for itself but for the default on the part of appellant assessee to secure the number of bookings of rooms at a minimal tariff (for unsold rooms and loss from sold rooms).

The Tribunal held that the AO is not justified to treat payments aggregating to ₹31,25,07,038 as rent liable for TDS under section under section 194-I of the Act. It deleted the TDS liability upheld by the CIT(A) vide impugned order.

Penalty under section 270A is not leviable merely because assessee has declared income under a head different from which the Assessing Officer assessed it.

69. TS-1558-ITAT-2025 (Hyd. Trib.)

Penninti Vivekananda Rao vs. ADIT

A.Y.: 2020-21

Date of Order: 19.11.2025

Section: 270A

Penalty under section 270A is not leviable merely because assessee has declared income under a head different from which the Assessing Officer assessed it.

FACTS

The assessee filed return of income for assessment year 2020-21 declaring income under the heads `Capital gains’ and `Income from Other Sources’. The amount of income declared under the head `Capital gains’ interalia included ₹3,22,68,272 arising from surrender of three Equity Plus Funds issued by Bajaj Allianz Life Insurance Co. Ltd. (“Bajaj Equity Plus Fund”).

While assessing the total income of the assessee, the Assessing Officer (AO) assessed the gain on surrender of Bajaj Equity Plus Fund under the head “income from other sources” and not under the head “capital gains” as was returned by the assessee. The AO also initiated proceedings for levy of penalty under section 270A of the Act for misreporting of income. The assessee applied for grant of immunity which application was rejected. The AO, vide order dated 10.3.2023, levied a penalty of ₹2,48,02,158 under section 270A of the Act.

Aggrieved, assessee preferred an appeal to CIT(A) who upheld the penalty levied by the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

At the outset, the Tribunal noticed that the assessee has offered income of ₹3,22,68,272 with regard to surrender of Bajaj Equity Plus Fund and therefore the objection of the DR that the assessee had not offered income from surrender of Bajaj Equity Plus Fund is factually incorrect. The Tribunal held that the assessee had offered income of ₹3,22,68,272 with regard to surrender of Bajaj Equity Plus Fund in the return of income filed by him. Therefore, the assessee has disclosed all facts fully and truly in the return of income.

The Tribunal observed that the only issue is whether where the assessee has offered an income under the head capital gains instead of the head income from other sources, whether penalty for misreporting of income can be levied on the assessee under section 270A(9) of the Act or not. Since the assessee disclosed the income in the return of income, the Tribunal held that there is no misrepresentation or suppression of facts on part of the assessee. Consequently, it held that the case of the assessee does not fall under any of the clauses (a) to (f) of section 270A(9) of the Act. The situation, according to the Tribunal, was merely of reporting of income under an incorrect head and nothing more.

The Tribunal noticed that the Mumbai Bench of the Tribunal in the case of D C Polyester Ltd. vs. DCIT [ITA No. 188/Mum./2023; A.Y.: 2017-18; Order dated 17.10.2023] has held that penalty under section 270A of the Act cannot be levied merely because of a change of head of income. Following the ratio of this decision, the Tribunal held that in the present case also, no penalty can be levied under section 270A(9) of the Act. The Tribunal directed the AO to delete the penalty.

Assessee is liable to deduct tax at source under section 194-IC even though the agreement has been entered into with a person who is not owner of land but has leasehold rights therein.

68. ITA Nos. 2313, 2314,2315 & 2316/Mum/2025 (Mum.)

Sugee Seven Developers LLP vs. ITO

A.Y.s: 2020-21 to 2023-24

Date of Order : 10.10.2025

Section: 194-IC

Assessee is liable to deduct tax at source under section 194-IC even though the agreement has been entered into with a person who is not owner of land but has leasehold rights therein.

FACTS

During the course of survey, the Assessing Officer (AO) noticed that the assessee has deducted TDS @ 1% on payments made to Shri Premal Dayalal Doshi and called upon the assessee to show cause why the TDS under section 194-IC as per which tax should have been deducted at 10% is not applicable in the present case.

The assessee contended that Shri Premal Dayalal Doshi has only a leasehold right in the land which does not fall in the definition of specified agreement under section 45(5A) and therefore TDS was deducted under section 194-IA @ 1%. The assessee’s contention was that provisions of section 194-IC is not applicable since the term specified agreement includes only those agreements entered into with the owner and the assessee’s agreement is with the person holding only leasehold rights.

Aggrieved, assessee preferred an appeal to CIT(A) upheld the order of the AO.

Aggrieved, assessee preferred an appeal to the Tribunal.

HELD

The Tribunal having perused the definition of the expression `specified agreement’ under section 45(5A) and also the Explanatory Memorandum to the Finance Bill, 2017 vide which the provisions of section 45(5A) have been introduced held that the legislative intention to introduce sub-section (5A) was to define the year of taxability for transfers under a JDA to minimise the genuine hardship of the assessee who may face capital gains in the year of transfer i.e. year of entering into JDA. If the narrower interpretation, as contended by the assessee, is to be accepted then it would lead to anomaly that transfer by the leasehold right owner under JDA would go out of the tax net as the transferor is not the owner as mentioned in the definition of `specified agreement’.

The Tribunal held that in its view the interpretation as argued on behalf of the assessee cannot be accepted since the legislative intent behind introduction of sub-section (5A) is to ease the tax burden on the assessee and such beneficial provision if interpreted as not applicable to transferor holding leasehold rights who has transferred under the JDA would go against the legislative intent.

On a perusal of the JDA, the Tribunal observed that land has been given on perpetual lease in the year 1938 and since then the land has been held by various persons and Shri Premal Dayalal Doshi has acquired the land along with the conditions as prescribed for the perpetual lease. It also noticed that Shri Premal Dayalal Doshi is holding the right to give the land for development and is entitled to receive consideration in monetary and non-monetary form. Given these facts and the legislative intent, as discussed, the Tribunal held that it is unable to agree with the submission that in the present case, the provisions of section 194-IC are not applicable.

Non-issuance of notice under section 143(2) after filing of return in response to notice under section 148 – Reassessment proceedings held invalid

67. [2025] 126 ITR(T) 290 (Mumbai – Trib.)

Vinod Kumar Kasturchand Golechha vs. ITO

ITA NO:. 1966 & 1967 (MUM.) OF 2024

A.Y.: 2009-10 & 2010-11 DATE: 17.12.2024

Sec. 143(2) r.w.s. 147

Non-issuance of notice under section 143(2) after filing of return in response to notice under section 148 – Reassessment proceedings held invalid

FACTS:

The assessee was engaged in the business of import, export, and trading of cut and polished as well as rough diamonds.

Pursuant to a search and seizure action carried out on 03.10.2013 in the case of Shri Bhanwarlal Jain and his group concerns, information was received by the Department that various entities managed by the said group were engaged in providing accommodation entries through benami concerns. Based on this information, the assessee’s case was reopened for A.Ys. 2009–10 and 2010–11 on the allegation that he had obtained accommodation purchase entries from the said group concerns aggregating to ₹8.72 crore.

Notices under section 148 were issued on 18.03.2016 for both assessment years. In response, the assessee, vide letter dated 06.06.2016, informed the Assessing Officer that the original return of income already filed for the relevant years may be treated as the return filed in response to notice under section 148.

The Assessing Officer, however, had issued a notice under section 143(2) on 03.06.2016, i.e., before the assessee’s response dated 06.06.2016. Subsequent notices under section 142(1) were issued, and assessment orders were completed by making additions of Rs. 46,31,030 (A.Y. 2009–10) and Rs. 4,36,821 (A.Y. 2010–11).

On appeal, the CIT(A) upheld the validity of the reopening and confirmed the additions. The assessee raised an additional legal ground that no valid notice under section 143(2) was issued after the assessee had filed its response to the section 148 notice, thereby rendering the reassessment proceedings invalid.

Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD:

The Tribunal observed that the statutory requirement under section 143(2) mandates that a notice must be issued after examination of the return of income filed by the assessee, including a return treated as filed in response to a notice under section 148.

The notice issued on 03.06.2016 preceded the assessee’s letter dated 06.06.2016 treating his original return as a return in response to notice under section 148. Hence, no notice under section 143(2) was ever issued on the valid return filed in response to section 148 notice.

The requirement of a notice under section 143(2) is mandatory, and its non-issuance vitiates the entire reassessment proceedings. The defect is not a mere procedural irregularity and cannot be cured under section 292BB.

The Tribunal referred to the decisions in case of Asstt. CIT vs. Hotel Blue Moon [2010] 321 ITR 362 (SC), Pr. CIT vs. Jai Shiv Shankar Traders (P.) Ltd. [2015] 383 ITR 448 (Delhi), and Pr. CIT vs. Marck Biosciences Ltd. [2019] 106 taxmann.com 399 (Guj.).

The Tribunal held that since no notice under section 143(2) was issued after the assessee’s response to the section 148 notice, the reassessment orders were invalid and liable to be quashed.

Accordingly, the reassessment orders for both A.Ys. 2009–10 and 2010–11 were quashed, and the appeals of the assessee were allowed in full.

Charitable Trust – Disallowance of exemption under section 11 on ground of non-filing of Form 10B – Held, defect is procedural and curable; exemption allowable

66. [2025] 126 ITR(T) 523 (Nagpur – Trib.)

Shri Panchmurti Education Society vs. ITO

ITA NO.: 488 (NAG) OF 2024

A.Y.: 2017-18 DATE: 21.01.2025

Sec. 11

Charitable Trust – Disallowance of exemption under section 11 on ground of non-filing of Form 10B – Held, defect is procedural and curable; exemption allowable

FACTS

The assessee was a registered charitable trust engaged in educational activities and also registered under the Societies Registration Act. Historically, the assessee’s income had been exempt under the erstwhile section 10(22) of the Act. For subsequent years, it applied for registration under section 12AA by filing an application on 30.03.2017, which was rejected on 29.09.2017 on the ground that the bye-laws did not contain a dissolution clause, though the Commissioner (Exemption) admitted that the trust’s objects were charitable.

The assessee preferred an appeal before the Nagpur Bench of the Tribunal, which, by order dated 09.06.2022, directed the CIT(Exemptions) to grant registration under section 12A with retrospective effect from A.Y. 2017–18. Consequent to this order, the assessee received its registration certificate under section 12A from the CIT(Exemptions).

Meanwhile, the assessee had filed its return of income for A.Y. 2017–18 on 30.03.2018, which was processed under section 143(1). The CPC, Bengaluru, raised a demand of ₹5,02,23,100, denying exemption under section 11.

The assessee filed an appeal before the CIT(A), who dismissed the appeal on 15.07.2024, holding that the assessee had filed a belated return and therefore was not eligible for exemption u/s 11 & 12. The assessee had, however, obtained the audit report later in Form 10B dated 10.01.2023 and furnished it before the appellate authority.

The assessee carried the matter before the Tribunal. The assessee argued that it was legally impossible to comply with audit requirement as in the absence of registration u/s 12A, the same did not apply when the return was filed. The assessee had, however, obtained the audit report later in Form 10B dated 10.01.2023 and furnished it before the appellate authority.

HELD

The Tribunal observed that assessee’s charitable nature and objects were never disputed. The assessee’s failure to furnish Form 10B at the time of filing its return was because, at that time, it was not registered u/s 12A; hence, the obligation to comply with Rule 17B did not exist.

Once registration is granted with retrospective effect, the exemption u/s 11 and 12 must also be given corresponding retrospective benefit. The lower authorities erred in denying exemption merely because the return was filed belatedly or Form 10B was submitted later.

The Tribunal observed that the concept of supervening impossibility applied as the assessee could not have complied with a requirement that was not in existence at the relevant time.

The Tribunal held that the registration having been granted retrospectively from A.Y. 2017–18, the assessee’s entitlement to exemption u/s 11 and 12 for that year stands established. The delay in furnishing Form 10B was merely a procedural lapse and could not defeat the substantive exemption when the audit report had subsequently been obtained and filed.

Accordingly, the Tribunal set aside the order of the JCIT(A) and directed the Assessing Officer to allow exemption under sections 11 and 12 in accordance with law.

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

Claim of deduction under section 54 cannot be denied merely on the ground that the new residential property was purchased in the name of the assessee’s wife, although the entire investment was made from assessee’s own funds.

65. (2025) 179 taxmann.com 262 (Ahd Trib)

Rajesh Narendrabhai Patel vs. ITO

A.Y.: 2012-13 Date of Order: 09.10.2025

Section : 54

Claim of deduction under section 54 cannot be denied merely on the ground that the new residential property was purchased in the name of the assessee’s wife, although the entire investment was made from assessee’s own funds.

FACTS

The assessee was an individual. During the relevant year, he sold immovable property situated at Vadodara for a sale consideration of ₹90,00,000. The case was reopened under section 147. In response, the assessee filed return of income declaring capital gains at NIL. During the reassessment proceedings, on the basis of the report of DVO, the capital gain was recomputed to ₹62,60,142 against which the assessee claimed exemption under section 54 of ₹53,78,500 for investment in purchase of a residential property. However, the AO disallowed the claim of exemption under section 54 on the ground that the property was not purchased in his own name but in the name of his wife.

Aggrieved, the assessee went in appeal before CIT(A). While the assessee accepted the reworking of capital gain, he claimed that he was entitled to exemption under section 54 since the investment in residential property, though made in the name of his wife, was wholly funded by him and cited CIT vs. Kamal Wahal [2013] 30 taxmann.com 34 (Delhi), CIT vs. V. Natarajan [2006] 154 Taxman 399 (Madras), and several other decisions of coordinate Benches to support his claim. However, CIT(A) rejected the appeal.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) CIT(A) had not specifically discussed or dealt with the judicial authorities cited by the assessee and extensively relied upon the principle of strict interpretation of exemption provision as propounded in Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company, (2018) 95 taxmann.com 327 (SC).

(b) Several High Courts have indeed taken a consistent view that for the purpose of section 54/54F, where the investment in the new residential property is made by the assessee from his own funds, the mere fact that the property is purchased in the name of the spouse does not disentitle the assessee from exemption.

(c) While the principle of strict construction of exemption provisions is well established, CIT(A) should have considered / reconciled / distinguished various decisions of High Courts in favour of the assessee on the interpretation of section 54 in the context of purchase in the name of spouse.

Accordingly, the Tribunal set aside the order of CIT(A) and restored the matter back to his file for denovo adjudication after examining the claim of the assessee in light of the judicial precedents relied upon by the assessee.

In the result, the appeal of the assessee was allowed for statistical purposes.

Mere existence of an object permitting application of income outside India cannot be a ground to deny registration under section 12AB.

64. (2025) 180 taxmann.com 58 (Mum Trib)

Shamkris Charity Foundation vs. CIT

A.Y.: 2025-26 Date of Order: 27.10.2025

Section: 12AB

Mere existence of an object permitting application of income outside India cannot be a ground to deny registration under section 12AB.

FACTS

The assessee was a company incorporated on 06.08.2021 under section 8 of the Companies Act, 2013 with the objects of education, medical relief, relief to the poor and any other objects of general public utility. It was granted provisional registration under section 12AB from AYs 2022-23 to 2024-25 on 02.10.2021. It made an application for the final registration on 24.08.2024 before CIT(E), with a request for condonation of delay of 54 days on the ground that the delay was due to the inadvertent error on the part of the employee who was in charge of the income tax related matters of the assessee. However, the CIT rejected the application on the ground that the assessee had made the application belatedly and that the objects of the trust contained clauses which enables potential application of funds outside India.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

With regard to the delay in filing the application for final registration, the Tribunal held that considering the facts of the assessee and the legislative intent behind proviso to section 12A(1)(ac), the delay should be condoned and the application made by the assessee should be considered on merits by CIT.

On the issue of trust deed containing provision for application of funds outside India, the Tribunal noted the decision of co-ordinate bench in TIH Foundation for IOT and IOE v. CIT(E), (2025) 176 taxmann.com 561 (Mumbai – Trib) wherein it was held that the fact that the trust may apply income outside India does not constitute a valid ground for denial of registration under section 12AB.

Accordingly, the Tribunal held that the CIT should keep in mind the ratio of the aforesaid decision while considering the application of the assessee for final registration under section 12AB.

In the result, the Tribunal allowed the appeal of the assessee for statistical purposes.

Mere existence of religiously worded objects in the trust deed cannot be a ground to deny approval under section 80G unless there is a finding that the actual expenses on religious activities exceed the permissible limit of 5% of total income as per section 80G(5B).

63. (2025) 179 taxmann.com 679 (Ahd Trib)

Jayshree Gopallalji Haveli Charitable Trust-Ujalvav vs. CIT

A.Y.: N.A. Date of Order : 28.10.2025

Section: 80G

Mere existence of religiously worded objects in the trust deed cannot be a ground to deny approval under section 80G unless there is a finding that the actual expenses on religious activities exceed the permissible limit of 5% of total income as per section 80G(5B).

FACTS

The assessee-trust filed an application in Form No. 10AB seeking approval under clause (iii) of the first proviso to section 80G(5). During the course of proceedings, CIT found certain objects which were religious in nature. He rejected the said application on the ground since the trust deed contained religious objects, the trust was not established wholly for charitable purposes as required under section 80G(5) read with Explanation 3.

Aggrieved, the assessee-trust went in appeal to the Tribunal.

HELD

The Tribunal observed as follows:

(a) Mere presence of an object having spiritual or cultural undertones does not, by itself, render a trust religious in nature, especially when the predominant purpose and actual activities are charitable.

(b) Section 80G(5B) permits an institution established for charitable purposes to incur expenditure up to 5% of its total income on religious purposes. Thus, the statutory framework itself recognizes that minor or incidental religious expenditure does not vitiate the charitable character of the institution.

(c) The determining factor is not the mere existence of religiously worded objects in the trust deed but whether the assessee has actually expended more than the permissible five percent of its total income on religious purposes.

In the absence of finding on actual expenses on religious expenses, the Tribunal restored the matter to the file of CIT with a direction to verify and record a categorical finding on the permissible threshold under section 80G(5B) and decide the matter afresh on merits.

In view of proviso to section 251(1)(a), w.e.f. 1.10.2024, in a case where the order appealed against in first appeal is passed otherwise than under section 144 of the Act, any action / direction of remand for fresh verification by the first appellate authority is barred by jurisdiction.

62.  TS-1285-ITAT-2025 (Raipur)

DCIT vs. South Eastern Coalfields Ltd.

A.Y.: 2013-14 Date of Order : 19.9.2025

Section: 201/201(1A)

In view of proviso to section 251(1)(a), w.e.f. 1.10.2024, in a case where the order appealed against in first appeal is passed otherwise than under section 144 of the Act, any action / direction of remand for fresh verification by the first appellate authority is barred by jurisdiction.

FACTS

The Tribunal, in this case, was dealing a bunch of 27 appeals filed by the revenue and equal number of cross objections filed by the assessee challenging the orders passed by Additional / JCIT (A) which orders emanated out of appeals filed by the assessee against separate orders passed under section 201 / 201(1A) of the Act by ACIT / DCIT – TDS, Raipur (AO), all for AY 2017-18.

The common issue in all these appeals, which were disposed-off by a common order, was as to whether first appellate authority has a power to remand any issue for fresh adjudication to assessing officer where the order challenged in first appeal is passed otherwise than u/s 144 of the Act?

From the regular assessment order passed u/s 143(3) of the Act for AY 2017-18 it was observed that, for the year under consideration the assessee company debited to its profit & loss a/c a sum of ₹259.67Cr under the head ‘Power & Township Expenses’ in respect of employees benefit expense and also debited an expense of ₹48.25 Cr. under the head ‘Grant to Schools and Institutes’, and claimed such expenses as deduction 37(1) of the Act without making TDS deduction therefrom.

In order to verify applicability of TDS provisions and consequential liabilities against such identified expenses claimed as deduction, proceedings were initiated under section 133(6), after seeking requisite approval. Details furnished in these proceedings revealed that; while debiting these expenses or payment made there against and while claiming deduction there against the assessee company failed to deduct TDS therefrom. For these reasons the assessee was held as an assessee in default in respect of such non-deduction deduction u/s 201(1) r.w.s. 192 r.w.s. 17 of the Act. In consequence thereof the AO determined the liability u/s 201(1) and 201(1A) of the Act separately in relation to 27 Tax Deduction Account Numbers held by the assessee for various locations.

Aggrieved, the assessee filed separate appeals against each of such 27 orders passed u/s 201 of the Act, which were partly allowed by the CIT(A) vide order dt. 28/02/2025. Against such separate orders of the CIT(A), both the rival parties came in the present bunch of cross appeals.

The Tribunal observed that against the order passed under section 201 of the Act, the assessee filed an appeal to CIT(A) on as many as four grounds. While adjudicating ground number 2 relating to non-deduction of TDS in respect of Power and Township Expenses, the CIT(A) dealt with the submissions of the assessee and dismissed sub ground number 2(a), 2(b), 2(f) & 2(h) whereas remaining connected sub grounds viz; 2(c), (d) & 2(e) were sparingly returned to the file of AO with a direction to verify issues on merits and allow the relief after due verification. As jointly solidified by the rival parties, these sub grounds (a) to (h) of ground 2 assailed in first appeal before the CIT(A) were indisputably not only intrinsically but also intricately linked with each other.

The Tribunal clearly stated in its order that without touching merits, it heard the rival party’s common submission and argument on the limited issue of jurisdiction of first appellate authority in sparingly remanding common issues assailed by the assessee in ground 2c, 2d & 2e in Form No 35 and subject to rule 18 of ITAT-Rules, 1963 perused the material placed on record and considered the facts in view of settled position of law which was forewarned to respective parties.

HELD

At the outset, the Tribunal observed that the order for adjudication of CIT(A) was passed u/s 201 of the Act and not u/s 144 of the Act. Therefore, it has to vouch as to whether the CIT(A) had jurisdiction or power u/s 251 of the Act to remand any issue, ground or sub-ground to the file of AO for verification & granting relief where the order was not the one passed ex-parte u/s 144 of the Act. The Tribunal held –

(i) w.e.f. 1.10.2024 in a case where the order appealed against in first appeal is passed otherwise than 144 of the Act, any action/direction of remand for fresh verification by the first appellate authority is therefore barred by jurisdiction;

(ii) in view of the ratio of the decision of the Apex Court in Chandra Kishore Jha vs. Mahavir Prasad [(1999) 8 SCC 266 (SC)], where the order appealed against was passed u/s 201 of the Act the direction of CIT(A) for fresh verification of facts on merits is devoid of provisions of section 251(1)(a) of the Act, since the statute did not provide for power to remand, and deserves to be vacated;

(iii) sub-grounds variably where all other sub-grounds of main ground number 2 are intrinsically interconnected, interwoven and linked, the co-ordinate bench in ‘Computer Science Corp. India (P) Ltd. vs. DCIT’ [(2024) 163 taxmann.com 693] held that order dismissing all ground commonly based on single issue by disobeying the mandates of s/s (6) of section 250 of the Act ceases to be lawful adjudication, therefore renders itself irregular. Thus, such adjudication is a fit case for remand;

(iv) the impugned action of remand of few subgrounds which where interconnected with remaining subgrounds adjudicated conclusively by the CIT(A) are not only inconsonance with provisions of law but such action has also out done the restriction placed by proviso to clause (a) of sub-section (1) of section 251 of the Act. The first appellate authority, being creature of statute, therefore while exercising the powers conferred under the provisions of law in discharging prescribed function was bound to act within the jurisdiction. In remanding few sub-grounds in relation to order assailed the CIT(A) inadvertently assumed the powers not granted by the provisions of section 251(1)(a) of the Act.

v) following the decision of the Gujarat High Court in Gujarat Mineral Development Corporation Ltd. vs. ITAT [2009, 314 ITR 14 (Guj.), any action, direction or adjudication laid by the appellate authority by travelling beyond the provisions of law or authority by law renders the order otiose for the purpose of the Act. Thus, such action is barred by jurisdiction and therefore stands vacated;

(vi) the order challenged before the CIT(A) was an order passed u/s 201 of the Act and as such other than the order passed ex-parte u/s 144 of the Act. Therefore, the CIT(A) had no jurisdiction to remand any issue/ground or sub-ground of the first appeal to the file of AO for verification or reverification of merits a fresh. Per contra, the sub-ground (c), (d) & (e) of ground number 2 raised in Form No 35 before Ld. CIT(A) not only remained unadjudicated conclusively in terms of section 251(1)(a) of the Act but remanded to Ld. AO for de-novo verification on merits in contravention of provision of section 251 of the Act.

(vii) In view of the judicial precedents, the impugned action relating to adjudication of sub-ground (c), (d) & (e) of ground number 2 suffered from jurisdiction as well as the compliance of s/s 251(1) r.w.s. 250(6) of the Act, for that reason without disturbing balance adjudication we set aside the remand to the file of CIT(A) with a point-blank direction to deal with sub-ground (c), (d) & (e) of ground number 2 of Form No. 35 and adjudicate them de novo in accordance with law and to pass a speaking order. The Ground No 1 & 2 of the present appeal of the Revenue thus stand partly allowed for statistical purposes.

(viii) The question framed hereinbefore stands adjudicated negatively.

Expansion of the municipal limits after date of issuance of notification is irrelevant. Unless there is a subsequent notification, it is the distance of the land sold from the municipal limits which is relevant.

61. TS-1394-ITAT-2025 (Delhi)

Mahabir vs. ITO

A.Y.: 2013-14 Date of Order : 15.10.2025

Section: 2(14)

Expansion of the municipal limits after date of issuance of notification is irrelevant. Unless there is a subsequent notification, it is the distance of the land sold from the municipal limits which is relevant.

FACTS

The Tribunal, in this case, was dealing with appeals filed by the assessee against orders of CIT(A) which appellate orders were passed against order under section 144 r.w.s. 147 and against order under section 271(1)(c) of the Act.

The Assessing Officer (AO) received information about assessee selling certain land along with co-sharers. The land sold was situated in Village Dhunela, Sohana, Gurgaon. The AO reopened the case of the assessee after examining the sale deeds. The AO noted that as per the verification of Tehsildar, Gurgaon, the distance to the village Dhunela, from Municipal Council, Gurgaon was 1.5 km.

The case of the assessee was that the land under consideration is not an agricultural land and it is by way of Notification dated 6.1.1994 of the Central Government, the land should have been examined. In Sohana, District Gurgaon, area up to 5 kms from the municipal limits in all directions has to be considered as not agricultural. Therefore, the case of the assessee was incorrectly reopened. The assessee relied on copy of certificate dated 25.6.2018 of the Tehsildar, Sohana, certifying the distance of land as on 6.1.1994 to be 6 kms from Nagar Palika, Sohana.

HELD

The Tribunal observed that primarily, the dispute in the appeal filed by the assessee was whether land sold by the assessee falls in the definition of capital asset and is not an agricultural land. The Tribunal found that the law is well settled that the relevant date would be the date of Notification unless there is a subsequent notification, the notification issued holds the ground. Reliance for this was placed on –

i)Satya Dev Sharma vs. ITO [(2014) 149 ITD 0725 (Jaipur Trib.)];

ii)Smt. (Dr.) Subha Tripathi vs. DCIT [(2013) 58 SOT 0139 (Jaipur Trib.)];

iii)Lavleen Singhal vs. DCIT [(2007) 111 TTJ 0326 (Del)];

iv)Prahlad Singh vs. ITO, SA No.436/Del/2017 & ITA No.3375/Del/2017, order dated 11.05.2018 (ITAT, Delhi);

v)Ashish Gupta vs. ITO [(2024) 163 taxmann.com 739 (Delhi – Trib.)].

The Tribunal held that the co-ordinate bench at Delhi has ruled that since no notification was issued after 6th January, 1994, the expansion of Municipal limits thereafter is irrelevant and should be disregarded.

Upon examination of the reasons recorded the Tribunal observed that the AO has not made any reference of the fact that if the issue was examined from the point of view of applicability of the Notification of the CBDT No.9447/F.No.164/3/87- ITA-I dated 06.01.1994, instead the AO has merely relied the certificate from Tehsildar, Gurgaon. Also, the copy of sale deed on record from pages 3 to 9 showed that at the time of registration, it was mentioned that the sale deed is being executed of agricultural land and from the endorsement of Sub-Registrar, Sohna, it is mentioned that the land is situated in the Village Dhunela and is outside the Municipal Corporation area.

In the light of the aforesaid discussion, the Tribunal was of the considered view that the ld. tax authorities have fallen in error in considering the land to be agricultural by considering the distance at the time of execution of sale deed instead of notified distance on 06.01.1994 and the report of the Tehsildar that on the relevant date of 1994 the land was beyond 5 kms. from the Municipal Corporation, Sohna.

The Tribunal allowed the appeal filed by the assessee. Since the addition of the assessee in quantum proceedings, (on the very basis of which the penalty was imposed by the AO and sustained by the CIT(A)), stood deleted, the penalty did not survive and the same was, therefore, cancelled. The appeal of the assessee against levy of penalty was also allowed.

Assessee is entitled to credit for entire tax deducted at source by the buyer and which is reflected in his Form No. 26AS, though assessee was only a joint owner of property and received only 50% of the consideration.

60. ITA No. 722/Pun/2025 (Pune)

Nanasaheb Bhagawan Sasar vs. ITO

A.Y.: 2022-23 Date of Order : 22.9.2025

Section: 199 r.w. Rule 37BA

Assessee is entitled to credit for entire tax deducted at source by the buyer and which is reflected in his Form No. 26AS, though assessee was only a joint owner of property and received only 50% of the consideration.

FACTS

The assessee, jointly with his son, owned ancestral land which was sold for a consideration of ₹13 crore. The share of assessee in the sale consideration was ₹6.50 crore. The buyer deducted entire TDS, under section 194-IA, of ₹13 lakh in the name of the assessee alone. The assessee, in his return claimed credit for entire TDS of `13 lakh deducted by the buyer. Son of the assessee declared capital gains on his share of consideration of ₹6.50 crore and did not claim credit for any TDS.

CPC while processing the return of income filed by the assessee denied credit for half of the TDS claimed in the return of income. The rectification application filed by the assessee was also rejected by CPC.

Aggrieved, assessee preferred an appeal to CIT(A) which was decided by JCIT(A)/Addl. CIT upholding action of CPC that only proportionate credit of TDS is allowable since only half share of the sale consideration was disclosed in the assessee’s return.

Aggrieved, assessee preferred an appeal to the Tribunal. On behalf of the assessee, it was contended that once TDS is deducted and deposited in the deductee’s name (i.e. assessee in the present case) it must be credited to him. Relying on the decision(s) in the case of Anil Ratanlal Bohora vs. ACIT in ITA No. 675/PUN/2022 for AY 2021-22, dated 19.01.2023 and in the case of iGate Infrastructure Management Services Ltd. vs. DCIT in ITA No. 1703/Bang/2016 for AY 2010-11, dated 28.04.2017, it was submitted that the assessee should get the credit of the entire TDS deducted in his name by the buyer of the land. Since, it was a mistake on the part of the buyer/deductor, the seller/deductee should not suffer and should be entitled to claim it. The procedural lapses cannot defeat substantive rights, and the assessee must get full credit of ₹13,00,000/-.

HELD

The Tribunal held that the Revenue cannot enrich itself at the cost of the assessee. It observed that the Bangalore Tribunal in iGate Infrastructure Management Services Ltd.’s case (supra) under the similar set of facts as that of the assessee in the present case, has set aside the matter to the file of the Assessing Officer to adjudicate the issue afresh after making necessary verification as to whether the deductor has deducted the TDS and deposited the same in the Government Account and if yes, allow the credit of the TDS to the assessee.

In light of the factual matrix of the case and the legal position and in the absence of any contrary material brought on record by the Revenue to take a different view, the Tribunal held that the assessee should be given the credit of the entire TDS of ₹13,00,000/- as claimed by him. It set aside the order of the Addl./JCIT(A) and restored the matter back to the file of the CPC/AO to adjudicate the issue afresh and allow full credit of TDS to the assessee.

Book profit must be computed strictly in accordance with the audited accounts prepared under the Companies Act, and no adjustment beyond those expressly specified in Explanation [1] of section 115JB is permissible; accordingly, the addition of CSR expenditure to book profit was unjustified and directed to be deleted.

59. [2025] 125 ITR(T) 556 (Amritsar – Tribunal)

DCIT vs. Jammu and Kashmir Power Development Corporation Ltd.

I.T.A. NOS. 364, 385 & 386/ASR/2023

A.Y.: 2016-17 to 2018-19

Section 115JB DATE: 15.05.25

Book profit must be computed strictly in accordance with the audited accounts prepared under the Companies Act, and no adjustment beyond those expressly specified in Explanation [1] of section 115JB is permissible; accordingly, the addition of CSR expenditure to book profit was unjustified and directed to be deleted.

FACTS

The assessee-company was engaged in the generation and sale of power mainly to Government, in the State of Jammu and Kashmir. It filed its return of income and also filed two sets of computations of total income, one under normal provisions and another under MAT provisions.

The amount of CSR under section 37(2) (i.e. 2 per cent of average net profit of preceding three years) was computed at ₹5.99 crores and had remained as a provision in the balance sheet.

The Assessing Officer held that since the CSR expenditure related to expenditures to be incurred by the assessee on the activities relating to CSR as per section 135 of the Companies Act, 2013, the same was not an expenditure incurred wholly and exclusively for the purpose of business and it was just an application of income. Accordingly, the said provision was set aside for meeting liabilities other than ascertained liabilities, the book profits as per explanation [1] of the said section needed to be increased (or added back) to arrive at the correct profits for the purpose of computation of MAT under section 115JB.

On appeal, the Commissioner (Appeals) deleted the addition. Aggrieved by the CIT(A)’s order, the Revenue preferred a further appeal before the Tribunal.

HELD

1. CBDT Circular No. 1/2015, in relation to non-allowability of deduction of CSR expenditure, only applies to income computation under normal provisions and not to MAT/book profit under Section 115JB.

2. Book profits under MAT must be determined based on audited accounts prepared as per Companies Act and generally accepted accounting principles.

3. CSR expenditure is not listed among the specific adjustments permitted under Section 115JB for altering book profits.

4. AO has no power to recompute the book profits and has to rely on the statement of accounts of the company compiled under the Companies Act 2013.

5. Accordingly, the Revenue’s appeals for AYs 2016–17 to 2018–19 were dismissed as being without merit.

Even if assessee did not pay STT at the time of acquisition of shares which were unlisted then, it would still be eligible for tax exemption under section 10(38).

58. [2025] 123 ITR(T) 252 (Mumbai Trib.)

Deputy Commissioner of Income-tax vs. Business Excellence Trust

ITA -2879 (Mum.) of 2023 and

CO. No. 15 (Mum.) of 2024 AY 2018-19

Section 10(38) Date: 26.07.2024

Even if assessee did not pay STT at the time of acquisition of shares which were unlisted then, it would still be eligible for tax exemption under section 10(38).

HELD

The assessee, a trust registered as a Venture Capital Fund, earned Long-Term Capital Gain (LTCG) of ₹247,67,03,531/- from the sale of shares of M/s Dixon Technologies Limited. The said shares were purchased while the company was unlisted and sale of the shares took place after listing of the said company. Initially, the assessee claimed exemption for this LTCG under section 10(23FB) of the Act. The Ld. AO rejected the claim for exemption under section 10(23FB) of the Act.

The assessee made an alternative plea that the LTCG should be exempted under section 10(38) of the Act. The AO rejected the alternative claim for exemption under section 10(38), reasoning that firstly the assessee being Venture Capital Fund, was not eligible to claim exemption under section 10(38) since as per section 115U the investors alone were entitled to claim said exemptions, and crucially, because the assessee had not paid Securities Transaction Tax (STT) at the time of acquisition of shares.

Accordingly, the AO completed the assessment by assessing the LTCG and also rejecting the assessee’s claim for exemption of dividend income of ₹3,97,300/- under section 10(35) of the Act.

On assessee appeal, the CIT(A) upheld the AO’s finding that the assessee was not eligible for exemption under section 10(23FB). However, the CIT(A) accepted the alternative plea of the assessee and held that the assessee was eligible to claim exemption of LTCG under section 10(38) of the Act. The CIT(A) referred to Notification No. SO 1789(E) dated 5-6-2017.

On Revenue’s appeal before the ITAT, the ITAT rejected the Revenue’s contention that the claim under section 10(38) was an unjustified fresh claim, stating it was merely a change of the exemption section.

The ITAT held that the shares acquired by the assessee were unlisted. Since STT was only payable on transactions entered into through a recognised stock exchange at the relevant time, the
acquisition of unlisted shares could not have been chargeable to STT.

The ITAT found that clauses (a), (b), and (c) of the relevant Notification [i.e., No. SO 1789(E)] dealt with ‘existing listed equity shares’ or delisted shares, and thus were not applicable to the present facts of the case. The shares acquired by the assessee were covered by the main part of the Notification, which exempts transactions of acquisition not chargeable to STT (provided they are not covered by the exceptions). Consequently, even if the assessee did not pay STT at the time of acquisition of shares, it was still eligible for exemption under section 10(38) of the Act.

An alumni association formed for the benefit of students of two educational institutions can be regarded as for benefit of public at large for the purpose of registration under section 12A. For the purpose of examining genuineness of activities, it is irrelevant that the mobile number of the beneficiaries is not provided to the CIT or that the association had not incurred any expenses.

57. (2025) 178 taxmann.com 377 (Jaipur Trib)

ICG-IISU Alumnae Association-bandhan vs. CIT(E)

A.Y.: N.A. Date of Order: 11.09.2025

Section : 12AA

An alumni association formed for the benefit of students of two educational institutions can be regarded as for benefit of public at large for the purpose of registration under section 12A.

For the purpose of examining genuineness of activities, it is irrelevant that the mobile number of the beneficiaries is not provided to the CIT or that the association had not incurred any expenses.

FACTS

The assessee was a company incorporated under section 8 of the Companies Act, 2013. It was an alumni association which was for the students passing out from International College for Girls (ICG) as well as from IIS (Deemed to be University) (IISU), Jaipur.

It filed an application for registration under section 12AA in 2020 which was rejected by CIT(E). Upon appeal to ITAT, in 2021, the Tribunal remanded the matter back to CIT(E) to examine whether certain objects of the company had an element of commercial / business and whether the benefit of alumnae of ICG-IISU could be regarded as benefitting the public.

CIT(E) once again rejected the application under section 12AA in 2024 on broadly the same grounds as in first round of appeal, that is, the assessee was meant for the benefit of its members and not for public at large, it conducted business / commercial activities, and the activities were not genuine.

Aggrieved, the assessee once again filed an appeal before ITAT. It also filed an application for admission of additional evidences, being approval of ISS (deemed to be University) and copy of audited financial statements for the year ended 31.3.2024.

HELD

Rejecting the contention of the CIT that the assessee was not meant for public at large, citing Girijan Co-operative Corpn. Ltd. vs. CIT, (1989) 44 Taxman 60 (Andhra Pradesh) and Parul University Alumni Association vs. CIT (Exemption), (2024) 162 taxmann.com 98 (Ahd Trib), the Tribunal observed that the expression ‘public’ includes cross section of public and it is well settled that for satisfying the requirements of section 2(15), it is not necessary that the benefit should reach each and every poor person in the state or country.

On the question of commercial / business activities of the assessee, the Tribunal noted that no fees were charged from the members by the assessee and the activities were carried out in the premises of the two educational institutions using their infrastructure. It also noted that the volume of activities was also very minimal and out of the four preceding years there had been deficit in two years. Therefore, the Tribunal held that there was no element of business/commercial nature in the activities of the assessee.

On the issue of the non-genuineness of the activities of the assessee, the Tribunal noted that the assessee had placed sufficient evidences before CIT(E) to explain its activities and that requiring the mobile number of the beneficiaries was not an appropriate way to ascertain the genuineness of the activities especially when other evidences were produced. It further noted that since the activities were in the nature of connecting old students with the present students as well old students of different batches, such meetings were meant for exchange of experiences so that theoretical knowledge can be combined with practical experiences to make the education wholesome and such activities did not require incurring of expenses because infrastructure of the parent educational institutions was used. Therefore, it observed that merely because no expenses were incurred could not be fatal to the case of the assessee.

Accordingly, the Tribunal restored the matter back to the file of the CIT(E) with a direction to consider all the additional evidences filed by the assessee and the judicial precedents cited in the order and thereby decide the issue of whether the object of the assessee was charitable in nature or not after giving proper opportunity of being heard to the assessee.

In the result, the appeal of the assessee was allowed for statistical purposes.

Where the assessee-charity accumulated income under section 11(2) by filing Form No. 10 mentioning the purpose as “for objects of the trust”, the vagueness of purpose would not be fatal to the claim of benefit under section 11(2) if the assessee supported the claim with a Board resolution listing the specific purpose as “scholarship (educational purpose)” and the funds were actually utilised for the said purpose in subsequent years.

56. (2025) 178 taxmann.com 411 (Mum Trib)

Imperial College India Foundation vs. ITO

A.Y.: 2016-17 Date of Order: 10.09.2025

Section: 11(2)

Where the assessee-charity accumulated income under section 11(2) by filing Form No. 10 mentioning the purpose as “for objects of the trust”, the vagueness of purpose would not be fatal to the claim of benefit under section 11(2) if the assessee supported the claim with a Board resolution listing the specific purpose as “scholarship (educational purpose)” and the funds were actually utilised for the said purpose in subsequent years.

FACTS

The assessee was a company registered under section 8 of the Companies Act, 2013 and was engaged in the educational activities which included granting of scholarships to the students. During assessment proceedings for AY 2016-17, the AO disallowed the income amounting to ₹62,28,989 which was accumulated under section 11(2) on the ground that that the purpose mentioned in Form 10 i.e. “towards the object of the trust”, was generic and it was mandatory requirement of the law that the purpose should be specific.

Aggrieved, the assessee filed an appeal before CIT(A) who confirmed the disallowance. Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal noted that Form No. 10 filed by the assessee stated the purpose of accumulation as “for the objects of the trust”. However, the said Form 10 was supported by the Board Resolution dated 20.09.2016 which showed that the accumulated amount was to be utilized for providing “scholarship (educational purpose)”. It was contended by the assessee before the ITAT that in the subsequent years the funds have been utilised for the purpose stated in the aforesaid Board Resolution. The same submission was also put forth before CIT(A).

Holding that the vagueness of the purpose of accumulation as stated in Form 10 would not be fatal, the Tribunal remanded the issue back to the AO with the following directions-

(a) to verify Board Resolution dated 20.09.2016 (for this purpose, a certified copy of the resolution should be filed by the assessee before AO);

(b) to verify the utilization of accumulation amounting to ₹62,28,989 in subsequent years by the assessee as per the Board Resolution;

(c) If the accumulated amount has been utilised for the aforesaid purpose, the disallowance to the extent the accumulated amount shall be deleted by the AO.

In the result, the Tribunal allowed the appeal of the assessee for statistical purposes.

A private trust set up for identified persons is entitled to claim exemption under section 54F upon investment of proceeds into a residential house.

55. (2025) 178 taxmann.com 355 (Delhi Trib)

ACIT vs. Merilina Foundation

A.Y.: 2011-12

Date of Order : 9.9.2025

Section: 54F

A private trust set up for identified persons is entitled to claim exemption under section 54F upon investment of proceeds into a residential house.

FACTS

The assessee was a private trust. It sold a flat and claimed exemption under section 54F in respect of capital gains arising from sale of flat. During reassessment proceedings under section 147. The Assessing Officer disallowed the claim of exemption on ground that section 54F was applicable only to individual and HUF and not to a trust.

On appeal, the Commissioner (Appeals) allowed the claim of the assessee.

Aggrieved, the tax department went in appeal to the Tribunal.

HELD

The Tribunal observed as follows:

(a) It is the fact that the assessee was a private trust and it was set up for some identified persons and it was not a case of a charitable trust where beneficiaries are public at large.

(b) A charitable trust is treated as AOP because of the reason that the beneficiary of the charitable trust are public at large. In fact, if the beneficiary of charitable trust is identified, the trust loses its character of being charitable.

(c) If the assessee trust was not in existence at the time of sale and investment, the same transaction would have been carried out in the name of beneficiaries therein and the benefit would certainly be given to those beneficiaries under section 54 as claimed.

Therefore, the Tribunal held that the order passed by CIT(A) in granting relief under section 54F was just and proper and accordingly, the appeal filed by the tax department was dismissed.

Estimation of Income – Rejection of Books – Section 145(3) – Failure to conduct audit under Section 44AB – Income declared at 0.187% of turnover – Assessing Officer estimated income @ 10% of turnover – Tribunal held that in absence of audit and proper explanation for drastic fall in profits, estimation justified but rate excessive – Past effective NP rate of 1.52% accepted – Addition restricted accordingly – Partly in favour of assessee.

54. [2025] 125 ITR(T) 160 (Jaipur – Trib.)

Adworld Communications (P.) LTD. VS. DCIT

ITA NO:. 1049 (JPR.) OF 2024

A.Y.: 2011-12 Date: 29.04.2025

Estimation of Income – Rejection of Books – Section 145(3) – Failure to conduct audit under Section 44AB – Income declared at 0.187% of turnover – Assessing Officer estimated income @ 10% of turnover – Tribunal held that in absence of audit and proper explanation for drastic fall in profits, estimation justified but rate excessive – Past effective NP rate of 1.52% accepted – Addition restricted accordingly – Partly in favour of assessee.

FACTS I

A survey action under section 133A was carried out at the business premises of the assessee. As per the AST data available with the department, the assessee failed to comply with section 139 for the year under consideration, despite the fact that the assessee’s total business receipt was 7.96 crores. In view of this figure under the head ‘business’ and non-filing of return, a notice under section 148 was issued.

In response thereto, the assessee filed a return declaring total income of ₹1.49 lakhs, i.e. 0.187% of the gross receipts. It was observed by the Assessing Officer that despite the fact that the accounts of the assessee were liable to tax audit under section 44AB, no tax audit was got conducted.

In view of all the facts the case of the assessee was assessed while applying the provisions of section 145(3) and income was estimated after rejection of expenses claimed in the profit and loss account, at the rate of 10 per cent.

On appeal, the Commissioner (Appeals) partly allowed the appeal by sustaining the addition to the extent of 2.16 per cent of expenses claimed in the profit and loss account. Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD I

The Tribunal observed that out of the total revenue of ₹7,96,67,680/-, the assessee had received ₹7,70,69,109/- from a single party, M/s Resonance Eduventures Ltd. In the preceding assessment year, the assessee had declared a net profit (NP) rate of 1.18% on a turnover of ₹10,60,05,001/-, amounting to ₹12,51,668/-. However, for the year under consideration, the NP declared was only 0.187% (the assessee having incorrectly calculated NP at 0.36% on an inflated turnover of ₹9,38,23,920/).

The Tribunal noted a significant fall in the assessee’s profitability and emphasised that the accounts for the relevant year were not duly audited, despite the statutory obligation under Section 44AB. This raised serious concerns about the credibility of the financial statements. Further, the assessee had also failed to file its return of income within the prescribed time, even though it was mandatorily required to do so regardless of the quantum of turnover.

It was also observed that in the preceding assessment year, the Assessing Officer had made a disallowance of ₹3,63,826/-, which had been accepted by the assessee. This resulted in an effective NP rate of 1.52%.

Considering these facts, the Tribunal held that the flat 10% addition made by the Assessing Officer was excessive and unjustified. However, since the assessee failed to justify the sharp decline in profitability and the absence of a statutory audit, an estimation was warranted.

Accordingly, the Tribunal partly allowed the appeal, restricting the addition to 1.52% of the turnover, in line with the previous year’s effective NP rate. The addition was thereby computed at ₹12,10,949/-, from which the self-declared income of ₹1,49,165/- was to be reduced.

Presumption set out in Section 292C of the Act does not apply since the documents in question was not found or impounded from the appellant’s premises but in the course of survey (not search) conducted against a third party.

53. [2025] 125 ITR(T) 1 (Jaipur – Trib.) 

Pushpa Vidya Niketan Samiti vs. ACIT

ITA NO.: 313 TO 315(JPR) OF 2024

A.Y.: 2015-16 TO 2017-18 Date: 24.03.2025 

Sec. 292C

Presumption set out in Section 292C of the Act does not apply since the documents in question was not found or impounded from the appellant’s premises but in the course of survey (not search) conducted against a third party.

FACTS

The assessee is involved in imparting school education in the name of Bhagat Public School and the administration of the same is being managed by Shri Naresh Jain. The assessee filed its return of income on 31.03.2016 under section  139(4) of the Act declaring total income at ₹1,03,060/-.Notice under section  148 of the Act was issued on 15.03.2019.

A survey under section  133A of the Act was carried out at the premises of the assessee and also at M/s. Quick Advertisement Co., Prop. Smt.Nisha Jain. During the survey at M/s. Quick Advertisement Co. certain documents were seized as containing list of students of Bhagat Public School respectively. These documents were confronted to Shri Naresh Jain who confirmed and admitted that these documents related to class wise actual fee collection of the student of Bhagat Public School and that the lower fee collection has been disclosed as compared to the actual fee collected by the Bhagat Public School. Shri Naresh Jain, Accountant on behalf the assessee surrendered a sum of ₹50 Lacs to cover all the error and omissions, but retracted from his statement.

The case of the assessee was assessed after making addition of ₹56,16,513/- without giving benefit of section 11 & 12 of the Act.

On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. Aggrieved, the assessee preferred an appeal before the Tribunal.

The assessee had raised the following relevant grounds –

1. Statement recorded of Shri Naresh Jain u/s 131 of the Act was unauthorised and illegal. Consequently, there was no evidentiary value of such illegally recorded statement being without authority of Law.

2. The addition made by the Ld. AO on account of alleged suppressed school fees, was completely ignoring the consistently followed method of accounting, and other material available on record – Presumption set out in Section 292C of the Act does not apply to the appellant.

HELD

The Tribunal relied on the decision in the case of CIT s. S. Khader Khan Son [2008] 300 ITR 157 (Mad) [duly affirmed by the Hon’ble Apex Court], and confirmed that section 133A of the Act does not empower the authorities to record the statements; and statements obtained during the survey proceedings would not automatically bind the assessee.

The Tribunal referred to provisions of section 292C of the Act for the documents being seized. The Tribunal observed that there was a simultaneous survey at the premises of the assessee and M/s. Quick Advertisement Co., Prop. Smt. Nisha Jain and that the documents under consideration were found from M/s. Quick Advertisement Co., Prop. Smt. Nisha Jain and not from the control or possession of the assessee school.

The Tribunal observed that section 133A r.w.s. 292C of the Act, raises a presumption that the contents of books of account and other documents seized during the course of search is true. But it should be kept in mind that this presumption is only qua the person who is searched and/or from whose possession the books of account and documents are found and none else. Moreover, this presumption is rebuttable. In the given facts of the case, since the documents in question was not found or impounded from the appellant’s premises but in the course of survey (not search) conducted against a third party, the presumption set out in Section 292C of the Act does not apply to the appellant.

The Tribunal held that other than the calculation sheets found at the premises of M/s. Quick Advertisement Co., no further working was carried out by the AO to substantiate the same that it pertains to the assessee and that the calculations embedded were true to be considered for the purposes of taxation.

The Tribunal held that the statement recorded during the survey operations under section  133A of the Act has no evidentiary value and presumptions drawn under section  292C of the Act are also not in the favour of the Revenue.

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

Where draft assessment order is passed in the name of a non-existent entity despite the Assessing Officer having been duly informed of the amalgamation, such an assessment is void and not a procedural irregularity that can be cured by invoking section 292B.

52. (2025) 177 taxmann.com 546 (Ahd Trib)

Man Energy Solutions India (P.) Ltd. vs. ITO

A.Y.: 2012-13 Date of Order: 11.08.2025

Sections : 144C, 292B

Where draft assessment order is passed in the name of a non-existent entity despite the Assessing Officer having been duly informed of the amalgamation, such an assessment is void and not a procedural irregularity that can be cured by invoking section 292B.

FACTS

Man Turbo India Pvt. Ltd. (MTIPL) stood amalgamated into Man Diesel & Turbo India Pvt. Ltd. (MDTIPL), w.e.f. 01.01.2013, pursuant to the Scheme of Amalgamation sanctioned by the Bombay High Court vide order dated 28.03.2014. The amalgamation scheme was made effective upon filing with the Registrar of Companies on 21.05.2015. The intimation of amalgamation was given to the AO as well as the Transfer Pricing Officer (TPO). However, despite these prior intimations, the Transfer Pricing order dated 21.01.2016, draft assessment order dated 01.03.2016, Dispute Resolution Panel (DRP) direction under section 144C(5) dated 13.12.2016 and the final assessment order dated 30.01.2017 were all passed in the name of MTIPL, which was a non-existent entity which had since amalgamated into MDTIPL.

Aggrieved, the assessee filed an appeal against the order passed by DRP before ITAT.

HELD

Following the decision of Supreme Court in PCIT v. Maruti Suzuki India Ltd., (2019) 416 ITR 613, other decisions High Courts and Tribunals as well as assessee’s own case in Man Diesel and Turbo India (P.) Ltd. vs. ACIT [IT Appeal No. 1319 (Ahd.) of 2018, dated 12-2-2025], the Tribunal observed that where an assessment order is passed in the name of a non-existent entity despite the Assessing Officer having been duly informed of the amalgamation, such an assessment is void and not a procedural irregularity that can be cured by invoking section 292B.

The Tribunal further observed that the draft assessment order forms the very foundation of the final assessment process under section 144C and once the draft order is found to be vitiated for being passed in the name of a non-existent entity, the entire downstream proceedings-including the directions of the DRP and the final order-also stand vitiated. The mere reference to the correct name in the DRP order or final assessment order does not cure the foundational illegality.

The Tribunal also observed that issuance of an assessment order against a non-existent entity is a substantive illegality going to the root of the jurisdiction of the Assessing Officer and cannot be cured by Section 292B, which only addresses procedural errors.

Accordingly, the Tribunal allowed the appeal of the assessee.

Where the employer paid a sum to LIC under a Voluntary Retirement Scheme (VRS) for allotment of annuity policy in favour of an employee payable in instalments in future, such sum cannot be taxed as perquisite in the hands of the employee in the year of purchase of annuity since the employee did not acquire any vested or enforceable right over the said amount in the relevant assessment year.

51. (2025) 177 taxmann.com 369 (Ahd Trib)

Biswas Manik vs. ITO

A.Y.: 2018-19 Date of Order: 08.08.2025 Section : 17

Where the employer paid a sum to LIC under a Voluntary Retirement Scheme (VRS) for allotment of annuity policy in favour of an employee payable in instalments in future, such sum cannot be taxed as perquisite in the hands of the employee in the year of purchase of annuity since the employee did not acquire any vested or enforceable right over the said amount in the relevant assessment year.

FACTS

The employer-company had taken annuity policy from LIC under a Voluntary Retirement Scheme (VRS) in favour of the retiring employees, including the assessee. The employer had paid a sum of ₹20 lakhs directly to LIC (not to the assessee) for allotment of annuity policy in the name of the assessee. The annuity was structured to be paid to the assessee only after four years, in the form of monthly instalments from LIC. The assessee claimed that since he had no access to, or right over, the amount in AY 2018-19, it cannot be considered part of his salary or perquisite income for that year under section 15 or 17 and that he had offered the annuity instalments received from LIC as income in his return in the year of receipt.

The AO issued a notice under section 133(6) to the employer. Based on the response and disclosure in Form 16, the AO held that the amount paid to LIC formed part of salary under Section 17(2)(v), being a perquisite in the nature of a contract for an annuity. Accordingly, he recomputed the salary of the assessee.

Aggrieved, the assessee went in appeal before CIT(A), who upheld the addition made by the AO.
Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) Section 17(2)(v) includes within the definition of perquisite any sum paid by the employer to effect a contract for an annuity, subject to certain exclusions. However, in order for such a payment to be taxed in the hands of the employee, it is essential, as per section 15, that the amount is either due, paid, or allowed to the employee. The law is well settled that a contingent benefit or a non-vested future entitlement cannot be brought to tax in the year of payment by the employer unless the employee acquires a vested right in the amount.

(b) In the present case, the assessee acquired no such vested right in AY 2018- 19, and the annuity payments commenced only four years thereafter. Moreover, from the records it was observed that the assessee had in fact offered to tax, on accrual/receipt basis, the annuity income received from LIC in the relevant year under the head “Income from Salary.” Therefore, taxing the employer’s payment of ₹20,00,000/- in AY 2018-19 would amount to taxing the same amount twice – once at the stage of employer’s contribution and again at the time of annuity receipts-resulting in double taxation, which was impermissible in law.

(c) The Department’s reliance on Form 16 and Form 26AS was erroneous, as these do not override the substantive legal provisions under the Act.

(d) The employer’s payment to LIC was not made on behalf of the employee nor credited to his account; hence, it cannot be treated as income due, paid or allowed to him in that year.

Accordingly, the Tribunal held that addition of ₹20 lakhs in AY 2018-19 should be deleted.
In the result, the appeal of the assessee was allowed.

Application for final approval under section 80G(5)(iv)(B) cannot be denied on the ground that the applicant had claimed exemption under section 11 / 10(23C) in the past. Amendment in section 80G(5)(iv) made by Finance Act 2024 is clarificatory in nature and applies retrospectively.

50. (2025) 177 taxmann.com 590 (Ahd Trib)

Akshat Education and Charitable Trust vs. CIT

A.Y.: N.A. Date of Order: 19.08.2025

Section: 80G

Application for final approval under section 80G(5)(iv)(B) cannot be denied on the ground that the applicant had claimed exemption under section 11 / 10(23C) in the past.

Amendment in section 80G(5)(iv) made by Finance Act 2024 is clarificatory in nature and applies retrospectively.

FACTS

The assessee was a registered public charitable trust under the Bombay Public Trusts Act, 1950, engaged in imparting education. The Trust had commenced its activities in 2014 upon receiving school opening permission and had been claiming exemption under section 11 and section 10(23C) in earlier years. However, it had never obtained approval under section 80G(5). For the first time, the Trust was granted provisional approval under section 80G(5) for the period from 22.06.2022 to A.Y. 2025-26. Pursuant to this, the appellant moved an application in Form 10AB on 06.02.2024 seeking final approval under section 80G(5).

CIT(E) rejected the application relying strictly on the wording of section 80G(5)(iv)(B), holding that since the assessee had already claimed exemption under section 11/10(23C), the application was outside the scope of maintainability.
Aggrieved, the assessee filed an appeal before ITAT.

HELD

On the issue of delay of 137 days in filing the appeal, the Tribunal observed that since the assessee was prevented by sufficient cause from filing the appeal within the prescribed time, the delay should be condoned.

On the issue of non-maintainability of the assessee’s application under section 80G(5)(iv)(B), the Tribunal observed that:

(a) The Finance Act, 2023 substituted clause (iv) of the first proviso to section 80G(5) with effect from 01.10.2023, and CBDT Circular No. 1/2024 dated 23.01.2024 has clarified that institutions which have already commenced activities shall make an application for regular approval under sub-clause (B) of clause (iv).

(b) This amendment is remedial and clarificatory in nature, intended to remove an anomaly, and therefore must be read as having retrospective effect.

(c) The amendment brought by Finance Act, 2024 only clarifies what was implicit even earlier, namely, that claiming exemption in prior years does not debar a trust from seeking approval under section 80G(5). The legislative intent is to encourage donations to genuine charitable institutions, and hyper-technical construction must give way to purposive interpretation.

(d) The assessee having already been granted provisional approval, and having fulfilled the procedural compliances, its application for final approval could not have been brushed aside on the sole ground of earlier claims of exemption under section 11/10(23C).

Following decision of coordinate bench in West Bengal Welfare Society vs. CIT(E) [IT Appeal Nos. 730 & 731/Kol/2023, dated 13-9-2023], the Tribunal held that the order of CIT(E) cannot be sustained.

Accordingly, the Tribunal allowed the appeal of the assessee, quashed the order of the CIT(E) and restored the matter to the file of CIT(E) for examining the application afresh on merits.

Enhancement made by CIT(A), by exercising a power not conferred by section 251(2) being without jurisdiction needs to be deleted.

49. TS-596-ITAT-2025 (Delhi)

Toshiba Water Solutions Pvt. Ltd. vs. ACIT

A.Y.: 2014-15

Date of Order : 7.5.2025

Section: 251

Enhancement made by CIT(A), by exercising a power not conferred by section 251(2) being without jurisdiction needs to be deleted.

FACTS

The assessee, for assessment year 2014-15, filed its return of income declaring a loss of ₹10,46,67,132. The Assessing Officer (AO) completed the assessment under section 143(3) of the Act, made various disallowances and consequently determined the total loss to be ₹4,70,23,278. Aggrieved, the assessee preferred an appeal to the CIT(A) who deleted most of the additions made by the AO except a sum of ₹81,10,231 in respect of balances written off.

However, CIT(A) enhanced the income by ₹1,54,68,280 on account of provision for contract loss. The assessee challenged this addition in the appeal filed by him to the Tribunal and also raised an additional ground contending that this is absolutely new source of income and that CIT(A) could not have invoked his powers of enhancement in terms of section 251(2) to make an addition on account of a new source of income.

HELD

The Tribunal observed that the issue of disallowance of contract loss is an absolutely new source of income and that the CIT(A) cannot invoke his power of enhancement, in terms of section 251(2) of the Act, and make addition on account of new source of income. The Tribunal relied on the decision of the jurisdictional High Court in the case of Gurinder Mohan Singh Nindrajog vs. CIT [348 ITR 170 (Delhi)].

The Tribunal allowed the ground of appeal challenging the disallowance of contract loss while deciding the technical ground of the assessee viz. that the addition has been made by CIT(A) by exercising jurisdiction which was not conferred upon him pursuant to section 251(2) of the Act.

Claim for deduction, made in belated return filed under section 139(4), of capital gains under sections 54F and 54EC, not liable to penalty under section 271(1)(c).

48. TS-720-ITAT-2025 (Ahd.)

Tejas Ghanshyambhai Patel vs. ITO

A.Y.: 2016-17 Date of Order : 4.6.2025

Section: 271(1)(c)

Claim for deduction, made in belated return filed under section 139(4), of capital gains under sections 54F and 54EC, not liable to penalty under section 271(1)(c).

FACTS

The assessee, an individual, co-owner of immovable property, sold his interest in the property for a consideration of ₹1.80 crore and claimed deduction under section 54EC of ₹50,00,000 and deduction under section 54F of ₹36,27,254. The Assessing Officer (AO) denied the claim of deductions under section 54F and 54EC on the ground that the return of income was filed belatedly and also the return was revised belatedly. The AO completed the assessment by making an addition of ₹86,27,254 and demanded tax thereon.

Aggrieved, the assessee preferred an appeal against the assessment which appeal was partly allowed. The AO thereafter proceeded with penalty proceedings and levied a penalty of
₹1,70,414.

Aggrieved by the levy of penalty, the assessee preferred an appeal to the CIT(A) who confirmed the action of the AO in levying penalty.

Aggrieved, the assessee preferred an appeal to the Tribunal where relying upon a decision of co-ordinate bench of the Tribunal in Jaysukhlal Ghiya vs. DCIT [ITA No. 324/Ahd./2020; Order dated 7.8.2024] it contended that the claim for deduction made in a belated return cannot be denied. Consequently, penalty levied by AO and confirmed by CIT(A) needs to be deleted.

HELD

At the outset, the Tribunal noted that the CIT(A) in quantum appeal set aside the assessment with a direction to AO to allow the claim of investment / deposit done on or before 31.7.2016 and proportionately allow the claim of deduction under section 54EC / 54F. While deciding the said appeal, the CIT(A) dismissed the ground challenging the initiation of penalty for the reason that it is consequential in nature and that no prejudice is caused to the assessee at this juncture. In the penalty proceedings, the assessee failed to participate, despite notice being sent even by speed post, resulting in levy of penalty for concealing income.

The Tribunal observed that CIT(A), in quantum proceedings, allowed the deduction under sections 54EC and 54F proportionately and therefore there is no concealment of income by the assessee. This part was not brought out in ex-parte penalty proceedings before the AO and in an appeal against penalty order before the CIT(A).

Having noted that the co-ordinate bench of the Tribunal in the case of Jaysukhlal Ghiya (supra) has held that when assessee furnishes return of income subsequent to the date filing under section 139(1) of the Act but within the extended time available under section 139(4) of the Act, the benefit of investment made up to the date of filing of return of income cannot be denied. Therefore, the Tribunal held, that in its opinion, there is no concealment of income in making a claim of deduction in a return of income filed belatedly. The Tribunal directed deletion of penalty levied under section 271(1)(c) of the Act.

As per the provisions of section 70(2) of the Act, the short-term capital loss can be set off against gain from any other capital asset. Section 70(2) of the Act does not make any further classification between the transactions where STT was paid and the transactions where STT was not paid.

47. ITA 2134/Mum./2025

Schwab Emerging Markets Equity ETF

A.Y.: 2022-23 Date of Order : 11.6.2025 Section: 70

As per the provisions of section 70(2) of the Act, the short-term capital loss can be set off against gain from any other capital asset. Section 70(2) of the Act does not make any further classification between the transactions where STT was paid and the transactions where STT was not paid. Accordingly, the short-term capital loss arising from sale of shares subjected to Securities Transaction Tax (‘STT) can first be set-off against the short-term capital gains arising from sale of securities not subjected to STT instead of short-term capital gains arising from sale of shares subjected to STT.

FACTS

For the year under consideration, the assessee, a company incorporated in Mauritius, registered with the Securities and Exchange Board of India as a Foreign Portfolio Investor, filed its return of income on 07/11/2022, declaring a total income of ₹270,76,67,910. In the course of assessment proceedings, it was observed that the assessee computed the net short-term capital gains by setting off the short term capital loss (on which STT was paid), which is taxable at 15% under section 111A of the Act, against the short-term capital gains (on which STT was not paid), which is taxable at 30% under section 115AD of the Act, and thereafter, set off the balance loss against the short-term capital gains earned on the transaction of sale of share subjected to STT.

The assessee was asked to show cause as to why the set-off of lower taxable loss should not be denied with higher taxable gains, as the IT Rules have provided separate columns for set-off and carry-forward of losses. In response, the assessee submitted that section 70 of the Act allows the assessee to set off the losses of lower taxable gains with the gains of higher taxable gains. In support of its submission, the assessee placed reliance upon several judicial pronouncements, wherein a similar issue was decided in favour of the taxpayer.

The Assessing Officer (“AO”), vide draft assessment order dated 24/03/2024 passed under section 144C(1) of the Act, disagreed with the submissions of the assessee and held that computation of the net short-term capital gains by the assessee is not in order. The AO further held that the IT Rules have clearly defined separate columns for set-off and carry forward of gains of having differential tax rates. Accordingly, the short-term capital gain was computed by first setting off 15% loss against 15% gains.

The assessee filed detailed objections, inter-alia, against the addition made by the AO as a result of his not accepting the manner of set off adopted by the assessee. Vide directions dated 05/12/2024, issued under section 144C(5) of the Act, the DRP rejected the objections filed by the assessee and upheld the computation of capital gains made by the AO vide draft assessment order. The DRP further noted that this issue is pending consideration before the Hon’ble Bombay High Court in the case of DIT vs. M/s. DWS India Equity Fund, in ITA No.1414 of 2012, and there is no judicial finality on this issue.

In conformity with the directions issued by the DRP, the AO passed the impugned final assessment order under section 143(3) read with section 144C(13) of the Act computing the net short-term capital gains amounting to ₹2,95,96,810 taxable at 15% under section 111A of the Act and the net short-term capital gains amounting to ₹4,60,58,240 taxable at 30% under section 115AD of the Act.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that the sole issue which arises for its consideration in the present appeal is whether the short-term capital loss (on which STT was paid) can be set off against short-term capital gains (on which STT was not paid). The Tribunal noted the provisions of section 70(2) of the Act, which deals with the set off of short-term capital loss and observed that as per the provisions of section 70(2) of the Act, the short-term capital loss can be set off against gain from any other capital asset. Section 70(2) of the Act does not make any further classification between the transactions where STT was paid and the transactions where STT was not paid. It held that the emphasis of the AO on the term “similar computation” also only refers to the computation as provided under sections 48 to 55 of the Act, and therefore, does not support the case of the Revenue.

The Tribunal noted the findings of the Co-ordinate Bench of the Tribunal, while deciding a similar issue, in iShares MSCI EM UCITS ETF USD ACC vs. DCIT, reported in [2024] 164 taxmann.com 56 (Mum. -Trib.). The Tribunal in this case following the decision of the Hon’ble Calcutta High Court in CIT vs. Rungamatee Trexim (P.) Ltd. [IT Appeal number 812 of 2008, dated 19.12.2008], allowed the set off of short-term capital loss (on which STT was paid) against the short-term capital gains (on which STT was not paid).

It also found that similar findings have been rendered by the Co-ordinate Benches of the Tribunal in favour of the taxpayer in the following decisions: –

i) Emerging Markets Index Non-Lendable Fund vs. DCIT, Mumbai, in ITA No. 4589/Mum/2023, order dated 05.08.2024.

ii) Vanguard Total International Stock Index Fund vs. ACIT (IT) – 4(3)(1), in ITA No.4656/Mum/2023, order dated 13.12.2024.

iii) JS Capital LLC vs. ACIT (International Taxation), reported in (2024) 160 taxmann.com 286 4. Dy.DIT vs. M/s. DWS India Equity Fund, in ITA No.5055/Mum/2010, order dated 11.04.2012.

It observed that the DR could not show any cogent reason to deviate from the aforesaid judicial precedents.

The Tribunal, following the aforesaid decisions, directed the AO to accept the methodology adopted by the assessee for the computation of the capital gains. The ground of appeal filed by the assessee was allowed.

Imposition of penalty for violation of provisions of section 269SS of the Act towards consideration received in cash for sale of agricultural land by bringing the said consideration within the ambit of “specified sum” as defined under section 269SS of the Act is totally incorrect and defeats the very purpose of law.

46. TS-1252-ITAT-2025 (Hyd.)

Late Nimmatoori Raja Babu vs. ACIT 

A.Ys.:  2016-17 and 2017-18 

Date of Order : 12.9.2025

Section:  271D

Imposition of penalty for violation of provisions of section 269SS of the Act towards consideration received in cash for sale of agricultural land by bringing the said consideration within the ambit of “specified sum” as defined under section 269SS of the Act is totally incorrect and defeats the very purpose of law.

Receipt in cash, of genuine sale consideration of immovable property including agricultural land, before witnesses at the time of registration cannot be brought within the ambit of “specified sum” merely because it has been received in cash. 

FACTS

The Tribunal, in this case, was dealing with 3 appeals wherein levy of penalty under section 271D of the Act for AYs 2016-17 and 2017-18 amounting to ₹33,75,000;  ₹2,59,35,760 and ₹2,14,35,760 was under challenge.  The Tribunal took up appeal in the case of Late Nimmatoori Raja Babu for AY 2016-17 as the lead case.

The assessee, an individual, was one of the trustee of M/s Aurora Educational Society & Other Group Trusts.  In the course of assessment proceedings, consequent to search, the Assessing Officer (AO) noticed that assessee received consideration for sale of land in Raigir village to Incredible India Projects Private Limited.  The land was sold vide registered deed dated 24.6.2016 and assessee had admitted sale consideration of ₹33,75,000 per acre.  Since assessee failed to prove receipt of consideration by banking channels, the AO noted that the assessee violated the provisions of section 269SS of the Act and initiated penalty proceedings under section 271D and subsequently Joint / Additional Commissioner levied penalty, under section 271D, equivalent to 100% of the amount received in cash.

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

Aggrieved, the assessee preferred an appeal to the Tribunal where it was submitted that –

i) right from the very beginning the assessee explained the source to be sale of agricultural land and the AO has accepted the source and not made addition to income but has initiated penalty for contravention of section 269SS;

ii) the expression “specified sum” cannot be stretched to consideration for transfer of property at the time of registration in presence of witnesses;

iii) the property sold by the assessee is agricultural land situated beyond the limit specified under section 2(14) of the Act and is therefore not a capital asset. The assessee was under a bonafide belief that accepting cash for sale of agricultural land does not attract provisions of section 269SS of the Act and consequently provisions of section 271D are not attracted.  The Tribunal, in a separate order, accepted the very same land to be an agricultural land.

HELD

At the outset the Tribunal noted that there is no dispute that the transaction is genuine and is recorded in Registered Sale Deed.  The land sold is an agricultural land and not a capital asset.  It noted that the assessee has explained that cash was received at the time of sale of agricultural land on the bonafide belief that agricultural land is exempt from tax and consequently receiving cash on sale of agricultural land will not attract provisions of section 269SS and 271D of the Act.  The Tribunal held that the provisions of section 271D are not automatic and exceptions of reasonable cause exonerates an assessee from levy of penalty.  In the present case, the assessee has satisfactorily demonstrated a `reasonable cause’ for acceptance of cash consideration for sale of agricultural land. There is no material brought on record by revenue to establish any malafide intention or tax evasion.

The Tribunal having noted that the provisions of section 269SS were amended by the Finance Act, 2015 and “specified sum” has been inserted in section 269SS examined the Explanatory Memorandum and observed that the purpose of the amendment is to curb the black money in immovable property transactions.  It held that, in its view, stretching the genuine consideration received for sale of an immovable property including agricultural land before the witnesses at the time of registration cannot be brought within the ambit of the term “specified sum” merely because the same has been received in cash.  The purpose of insertion of “specified sum” is only to check abuse of law by tax payers by entering into various kinds of agreements for transfer of immovable property showing consideration paid or received in cash and finally registration has not taken place.  It held that in a situation where consideration paid for transfer of any immovable property at the time of registration before witnesses and further, the said transaction is a genuine transaction and also part of regular books of accounts of the assessee or disclosed in the return of income filed for the relevant assessment year, then, the said transaction cannot be brought within the ambit of “specified sum” merely because the consideration has been received in cash. The Tribunal held that imposition of penalty for violation of provisions of section 269SS of the Act towards consideration received in cash for sale of agricultural land by bringing the said consideration within the ambit of “specified sum” as defined under section 269SS of the Act is totally incorrect and defeats the very purpose of law.

The Tribunal held that since, the assessee accepted the cash consideration for sale of agriculture land, which is outside the scope of capital asset as defined under section 2(14) of the Act and further, it is exempt from tax, the said transaction cannot be brought within the ambit of provisions of section 269SS of the Act, for the purpose of sec.271D of the Act.

The Tribunal, upon consideration of the decision of Bangalore Bench of the Tribunal in Rakesh Ganapathy vs. JCIT [(2025) 170 taxmann.com 239] on which reliance was placed on behalf of the assessee, found it to be on identical set of facts in light of penalty under section 271D.

Considering the facts and circumstances of the case, the Tribunal held that the Addl. CIT, Central Range-2, Hyderabad erred in levying penalty under section 271D of the Act for contravention of section 269SS of the Act towards consideration received in cash for sale of agricultural land.   The CIT(A) without considering the relevant facts, has simply sustained the penalty levied by the AO. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the penalty levied under section 271D of the Act.

Unsecured Loans – Genuineness and Creditworthiness – AO issued notices u/s 133(6) to only part of the lenders – No summons issued u/s 131 – No incriminating material brought on record – Addition deleted to extent of loans repaid, balance remanded for verification

45. [2025] 123 ITR(T) 660 (Nagpur – Trib.)

Ravindra Madanlal Khandelwal vs. Deputy Commissioner of Income-tax

ITA NO.: 375/NAG/2024

A.Y.: 2018-19 DATE: 18.11.2024

Section 68, 36(1)(iii)

Unsecured Loans – Genuineness and Creditworthiness – AO issued notices u/s 133(6) to only part of the lenders – No summons issued u/s 131 – No incriminating material brought on record – Addition deleted to extent of loans repaid, balance remanded for verification

FACTS I

During the scrutiny assessment, the Assessing Officer noted that the assessee was in receipt of new unsecured loans from various individuals and entities and sought to verify the genuineness, creditworthiness, and identity of the creditors from whom these loans were reportedly received.

In response to notices under section 142(1), the assessee submitted list of lenders, their PAN, address, ledger confirmation of most of the debtors, interest payment details, details of TDS deducted on interest and the TDS returns of the assessee but they were unable to submit the return of income and bank statements of the lenders. The Assessing Officer had also issued notices u/s 133(6) to various parties.

However, as the Assessing Officer could not verify the creditworthiness of the lenders in the absence of the income tax return and bank statements, the Assessing Officer made addition under section 68.

On appeal, the Commissioner (Appeals) upheld the addition made by the Assessing Officer holding that the assessee had failed to provide complete and satisfactory documentation that could establish the transactions concerning all creditors and assessee also failed to comply with the notices issued by the Assessing Officer.

Being aggrieved, the assessee filed an appeal before the ITAT.

HELD I

The Tribunal observed that the Assessing Officer, out of total 43 lenders, issued notices under section 133(6) only to 10 lenders out of which 4 lenders confirmed the transaction, while 6 lenders did not respond. The Assessing Officer erred in drawing negative inference based on non-response from few parties. The Assessing Officer had the powers to issue summons under section 131 and enforce attendance of the lenders. However, the said exercise was also not conducted by the Assessing Officer.

Further, Tribunal observed that no enquiry was made by the Assessing Officer by issuing summons and no incriminating evidences were brought on record to dislodge the materials relied upon by the assessee to prove the ingredients of section 68.

The Tribunal deleted the addition made by the Assessing Officer on account of cash credit to the extent of repayment of loans made by the assessee either in the same year or succeeding years. And further directed the Assessing Officer to verify Identity, Genuineness and creditworthiness of the lenders for the balance loans.

Interest on Borrowed Funds – Advances to Related Concern – Commercial Expediency Established – No evidence of diversion for non-business purposes – Entire disallowance deleted

FACTS II

The assessee had borrowed funds in his individual capacity and advanced them to a related concern, in which he was both a director and shareholder. The assessee had claimed deduction on account of interest of ₹ 74,32,292 on borrowed funds in his individual capacity. The Assessing Officer noticed that the assessee failed to provide adequate documentation to prove that the interest expenses were incurred solely for the purpose of business and the linkage between the borrowed funds and their utilization in business activities was not substantiated satisfactorily and held that the interest expenses might not have been wholly for the purpose of business and for the reasons, the addition was made to the total income of the assessee.

Further, the Assessing Officer observed that the assessee claimed another interest expenses of ₹ 97,66,208 which were asserted to be incurred for earning income from other sources, but were not recorded in the Profit & Loss Account of the business. The Assessing Officer disallowed this expenditure on the grounds that the expenditure claimed was not reflected in the Profit & Loss Account.

The Commissioner (Appeals) observed that the borrowed funds were used for non-business purposes, and the Assessing Officer’s decision to disallow the interest expenses was upheld, as the assessee did not meet the burden of proof required to establish that these expenses were incurred wholly and exclusively for business purposes.

Being aggrieved, the assessee filed an appeal before the ITAT.

HELD II

The Tribunal observed that the explanation provided by the assessee was that the company, being a private limited entity, could not borrow directly from outsiders except from banks/financial institutions as per the Companies Act. Therefore, for business exigencies, the assessee arranged funds personally and transferred them to the company.
The Assessing Officer’s sole objection was non-charging of interest on the advances, and he treated the interest paid on the borrowings as personal expenditure.

The Tribunal held that the borrowed funds were advanced to a related concern, and there is a clear nexus with potential income. The transaction was driven by commercial expediency and the assessee acted to support a business concern in which he had a substantial interest. Further, held that the Assessing Officer brought no evidence of diversion of funds for non-business or personal purposes.

Therefore, the interest expenditure of ₹ 74,32,292 was allowable in full and disallowance was deleted by the Tribunal.

The Tribunal observed that with respect to interest expense of ₹ 97,66,208, the Assessing Officer failed to demonstrate any nexus between borrowed funds and non-business use and the disallowance was based on general statements without specifics. Further, the CIT(A) upheld the order without addressing the assessee’s detailed explanations or analysing fund flow.

The Tribunal held that interest on borrowed capital is allowable if the funds are used for the purposes of the business; the burden is on the Assessing Officer to prove diversion for non-business purposes if he seeks to disallow. In the present case, the AO’s approach of straightaway disallowing the entire claim without pinpointing specific instances of diversion was contrary to settled principles.

Therefore, the entire disallowance of ₹ 97,66,208 was deleted by Tribunal.

Reassessment – Jurisdiction to make additions – No addition made on the issue for which case was reopened – Other additions not sustainable – Reassessment invalid

44. [2025] 124 ITR(T) 410 (Jaipur – Trib.)
Kailash Chand vs. ITO
ITA NO.: 565/JP/2024
A.Y.: 2012-13 DATE: 10.03.2025
Sections: 147 r.w.s. 144

Reassessment – Jurisdiction to make additions – No addition made on the issue for which case was reopened – Other additions not sustainable – Reassessment invalid

FACTS

The assessee was engaged in the business of plying of trucks on hire. He had not filed his return of income for the year under consideration.

The revenue was in possession of the information that the assessee had deposited a sum of ₹ 42.46 lakhs during the financial year 2011-12 in his saving bank account. In the absence of return of income, the above transaction was considered as not verifiable and accordingly, notice under section 148 was issued upon the assessee.

The assessee made part compliance and submitted the copy of balance sheet and profit and loss account. Thereafter despite various opportunities provided, the assessee remained non-compliant and the Assessing Officer went on making the addition on account of depreciation, interest on loan etc. which were based on the profit and loss account and balance sheet filed by the assessee and the Assessing Officer had abstained from making any addition on account of cash deposited to the saving bank account as alleged in the reasons recorded for re-opening of the case.

On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD

The Tribunal observed that the reason recorded for reopening was the alleged unexplained cash deposits of ₹ 42.46 lakhs and no addition was made on this issue in the reassessment order.

In such circumstances, the AO loses jurisdiction to assess other income which comes to his notice during reassessment proceedings. Once the Assessing Officer is satisfied with the reasons recorded for reopening the case, they no longer have the jurisdiction to tax any other income.

Placing reliance on CIT vs. Shri Ram Singh [2008] 306 ITR 343 (Rajasthan High Court), CIT vs. Jet Airways (I) Ltd. [2010] 195 Taxman 117 (Bombay High Court), Ranbaxy Laboratories Ltd. vs. CIT [2011] 12 taxmann.com 74 (Delhi High Court), the Tribunal held that the settled legal position is “If no addition is made in respect of the issue for which the assessment is reopened, the AO has no jurisdiction to assess any other income in reassessment proceedings.”

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

Mere existence of any object allowing the charity to carry out activity outside India will not enable CIT(E) to deny registration under section 12AB.

43. (2025) 176 taxmann.com 561 (Mum Trib)

TIH Foundation for IOT and IOE vs. CIT

ITA No.: 2904/Mum/2025

A.Y.: 2025-26 Dated: 10.07.2025

Section: 12AB

Mere existence of any object allowing the charity to carry out activity outside India will not enable CIT(E) to deny registration under section 12AB.

FACTS

The assessee was a not-for-profit company incorporated under section 8 of the Companies Act, 2013, established pursuant to the directions of the Ministry of Science and Technology, Government of India, and hosted by IIT Bombay. It was granted registration under section 12AB for A.Y. 2021-22 to A.Y. 2025-26. It applied for renewal of registration under section 12AB.

CIT(E) rejected the application for registration for the reason that there was a possibility of future endeavour by the assessee which would require expenditure outside India which would be in violation of section 11.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) The only basis for rejection of registration by CIT(E) was the possibility of the assessee incurring expenditure outside India in furtherance of its objects, which, according to him, contravened section 11. However, such reasoning did not find support either in the statutory scheme of section 12AB or in judicial precedents.

(b) In the present case, the assessee had neither undertaken any impermissible application of income nor had CIT(E) brought on record any specific violation of conditions prescribed under Section 12AB(1)(b) or Explanation to Section 12AB(4). The objects of the assessee were in line with the mission of the Central Government under the NM-ICPS initiative, and the activities were genuine and aimed at technological development in public interest.

Accordingly, the Tribunal allowed the appeal of the assessee and directed the CIT(E) to grant registration to the assessee under section 12AB.

Amendment in section 11(3)(c) vide Finance Act 2022 omitting extra period of one year following the expiry of the period of accumulation of five years applies prospectively in respect of fresh accumulations under section 11(2) made from assessment year 2023-24 onwards and not to earlier years.

42. (2025) 176 taxmann.com 661 (Mum Trib)

Dadar Digamber Jain Mumukshu Mandal vs. CIT

ITA No.: 2446/Mum/2025

A.Y.: 2023-24 Dated: 15.07.2025

Section: 11

Amendment in section 11(3)(c) vide Finance Act 2022 omitting extra period of one year following the expiry of the period of accumulation of five years applies prospectively in respect of fresh accumulations under section 11(2) made from assessment year 2023-24 onwards and not to earlier years.

FACTS

The assessee trust filed its original return of income, declaring total income of ₹14,37,197. The return was processed under section 143(1) making an adjustment of ₹ 75,66,540 being additions under section 11(3) on account of unutilised set aside / accumulated funds under section 11(2) relating to FY 2016-17 (₹ 35,66,540) and FY 2017-18 (₹ 40,00,000).

Aggrieved, the assessee went in appeal before CIT(A), who upheld the additions.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) Under the un-amended section 11(3) (as it stood before Finance Act, 2022), the assessee gets an extended period of one more year, in total, six years for utilisation of accumulated income and on expiry of the said period, by virtue of the deeming fiction, the unutilised accumulated income shall be brought to tax in the previous year following the expiry of period of six years.

(b) The Finance Act, 2022 has amended and omitted the extra period of one year following the expiry of the initial period of accumulation of five years. Therefore, unlike under the un-amended provisions wherein the income which is not utilised for the purposes it was accumulated can be brought to tax on the expiry of the sixth year, under the amended law, that income can be brought to tax on the expiry of five years itself.

(c) Considering both language as well as the intent, the amendment which has been brought in by the Finance Act, 2022 relates to accumulation of income pertaining to previous year starting from 1st April, 2022 onwards relevant to AY. 2023-24 and subsequent assessment years and in that sense, has to be applied prospectively in respect of fresh accumulations and not in respect of existing accumulations which continue to remain guided by the erstwhile provisions at the relevant point in time when the accumulations were made in the respective financial years.

(d) As far as the accumulation relating to the period of FYs. 2016-17 and 2017-18 are concerned, the assessee had the time window till 31-03-2023 and 31-03-2024 respectively by which it has to utilize accumulated income and in that view of the matter, the amendment brought in by the Finance Act, 2022 does not debar the assessee from availing the said time window in respect of existing accumulations and the amendment has to be read prospectively in respect of fresh accumulations for the period pertaining to previous year starting from 1st April, 2022 onwards.

The Tribunal also noted that a similar view has been taken by a number of benches of the Tribunal.

Accordingly, the Tribunal held that –

(i) for accumulation relating to FY 2016-17, since the assessee had utilised the r 35,66,450 during FY 2022-23, that is, within stipulated period of 6 years, the addition deserves to be deleted.

(ii) for accumulation relating to FY 2017-18, the assessee had time window to utilise the accumulated income till 31.3.2024 under the un-amended law and thus, the question of bringing the same to tax during AY 2023-24 did not arise.

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

Best judgment assessment made by the AO under section 144 cannot be substituted by the judgment of CIT exercising revisionary powers under section 263.

41. (2025) 176 taxmann.com 819 (Mum Trib)

Bhagwan Vardhman Shwetamber Murtipujak Tapagacch Jain Sangh vs. CIT

ITA No.: 2378/Mum/2024

A.Y.: 2012-13 Dated: 23.07.2025

Sections: 144,263

Best judgment assessment made by the AO under section 144 cannot be substituted by the judgment of CIT exercising revisionary powers under section 263.

FACTS

The assessee was not registered under section 12A. It filed its return of income. The return was selected for scrutiny assessment and accordingly, notices were issued and served upon the assessee. None attended the proceedings and the AO framed the order ex-parte to the best of his judgment under section 144. In the order, the AO allowed corpus expenditure of ₹ 10,97,699 against the corpus donation of ₹ 38,42,558 received during the year and treated the balance of ₹ 27,44,859/- as income of the assessee.

Invoking revisionary powers under section 263, CIT held that AO did not make any enquiry and because of which the expenditure claimed by the assessee was allowed and only the balance corpus was assessed to tax, and therefore, the assessment order was erroneous and prejudicial to the interest of the revenue.

Aggrieved, the assessee filed an appeal before ITAT against the order under section 263.

HELD

Following the decision of the coordinate bench in Sanjay Umarshi Dand vs. Pr. CIT [IT Appeal No. 321(Nag.) of 2024, dated 10-2-2025), the Tribunal held that since the assessment order was an ex-parte order under section 144 by which the AO assessed income of the assessee to the best of his judgement, the judgement of the AO cannot be substituted with the judgement of the CIT(E) by invoking revisionary powers under section 263.

Accordingly, the Tribunal allowed the appeal of the assessee, set aside the order of the CIT and restored the order of the AO.

Claim of capitalized interest, supported by evidence, which interest has been disallowed while computing capital gains, cannot be subject matter of levy of penalty under section 270A, in view of the ratio of decision of the Apex Court in Reliance Petroproducts Pvt. Ltd. [189 Taxmann 322 (SC)]

40. Urmila Rajendra Mundra vs. ITO

ITA No. 577/Jp./2025

A.Y.: 2022-23 Date of Order: 1.8.2025

Section: 270A

Claim of capitalized interest, supported by evidence, which interest has been disallowed while computing capital gains, cannot be subject matter of levy of penalty under section 270A, in view of the ratio of decision of the Apex Court in Reliance Petroproducts Pvt. Ltd. [189 Taxmann 322 (SC)]

FACTS

The assessee claimed deduction of interest, which was capitalised, while computing capital gains arising on sale of immovable property. While assessing total income, the Assessing Officer (AO) disallowed the interest which was capitalised by the assessee, though the same was backed by documentary evidence. The assessee did not prefer an appeal against this disallowance.

Subsequently, the AO initiated proceedings for levy of penalty under section 270A for under-reporting of income in consequence of misreporting thereof. In response, the assessee submitted that the claim of interest was supported by copies of bank statements and since there was not much tax outflow due to brought forward losses, the assessee chose not to file an appeal. Also, the notice did not specify how the assessee has misreported the income.

The AO held that the assessee has misreported income of ₹ 4,89,159 and levied a penalty of ₹ 2,03,488 thereon being 200% of the tax on misreported income.

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

Aggrieved, assessee preferred an appeal to the Tribunal.

HELD

The Tribunal noted that the assessee, in the course of assessment proceedings, had substantiated the amount of interest by submitting bank statements in respect of borrowings made. The Tribunal held the contention of the AO and the CIT(A) that the claim was not backed by evidence to be devoid of merit. The Tribunal held that mere non-acceptance of the claim made by the assessee cannot be a reason to automatically levy penalty for misreporting or even under-reporting of income. It stated that this view is supported by the decision of the Apex Court in the case of CIT vs. Reliance Petroproducts Ltd. [189 Taxman 322 (SC)]. In view of this decision of the Apex Court, the Tribunal held that it did not see any reason to sustain the penalty imposed.

Also, the bench noticed that the notice issued did not specify whether the assessee has misreported income or has under-reported the same. Due to this lapse on the part of the AO, it held, the penalty cannot be sustained without specifying the charge against the assessee. This view was supported by the ratio of the decision of the jurisdictional High Court in the case of G R Infraprojects Ltd. vs. ACIT [159 taxmann.com 80].

In view of the decisions relied upon and also in view of the facts of the case being similar to those before the courts in the said decisions, the Tribunal directed the AO to delete the penalty levied.

Where the Assessing Officer in the assessment proceedings did not make any enquiry as to whether the equipment received by the assessee free of cost from its holding / subsidiary companies was received on returnable basis or otherwise, the assessment order was erroneous and prejudicial to the interest of the revenue. If, in the set aside proceedings, the assessee satisfies the AO by substantiating based on the documents that the equipments were received on returnable basis then the AO will decide the issue on hand in the light of the order of the Tribunal in the case of Sony India Software Center Private Limited [170 taxmann.com 309 (Bang.-Trib.)]

39. LSI India Research & Development Pvt Ltd. vs. PCIT

ITA No. 1061/Bang./2024

A.Y.: 2017-18 Date of Order: 23.7.2025

Sections: 28(iv), 263

Where the Assessing Officer in the assessment proceedings did not make any enquiry as to whether the equipment received by the assessee free of cost from its holding / subsidiary companies was received on returnable basis or otherwise, the assessment order was erroneous and prejudicial to the interest of the revenue.

If, in the set aside proceedings, the assessee satisfies the AO by substantiating based on the documents that the equipments were received on returnable basis then the AO will decide the issue on hand in the light of the order of the Tribunal in the case of Sony India Software Center Private Limited [170 taxmann.com 309 (Bang.-Trib.)]

FACTS

The assessee preferred an appeal against the order passed by PCIT under section 263 of the Act holding the assessment framed under section 143(3) r.w.s 144(3) and 144B of the Act to be erroneous and prejudicial to the interest of the revenue and further directing the Assessing Officer (AO) to make a fresh assessment in accordance with law.

The assessee, during the year under consideration, received capital assets amounting to ₹ 42,89,70,248 on free of cost / loan basis from holding / subsidiary companies. According to the PCIT, these fixed assets represented income of the assessee chargeable to tax under section 28(iv) of the Act. However, the assessee, in its return of income filed under section 139(1), had not offered the same for taxation. Similarly, the assessment had been framed without any enquiry so as to offer such equipment received free of cost as income under section 28(iv) of the Act. PCIT, in his show cause notice, proposed to hold the assessment order to be erroneous and prejudicial to the interest of the revenue.

In response to the show cause notice, the assessee submitted that the equipments were acquired for limited purpose of testing the software development. Further, these equipments were received on returnable basis and were for the benefit of recipient / customer and not for the assessee. Accordingly, it was submitted that these equipments cannot be treated as benefit / perquisite under section 28(iv) of the Act.

The PCIT, in his order under section 263 of the Act, observed that the assessee company has been provided with customized / specific assets (primarily in the nature of testing equipment) by the relevant group companies. From the submission the usable period of these assets is not clear. These assets, if used for more than one year, should be treated as capital assets. He also observed that it is not clear as to when these assets were returned to the group companies / disposed. Hence, these should be considered as benefit / perquisite arising out of business / profession. He held the assessment order to be erroneous and prejudicial to the interest of the revenue and directed the AO to make a fresh assessment in accordance with law after examining the aforementioned facts. He directed the AO to conduct necessary enquiries and verification and give the assessee an opportunity to substantiate his claim with necessary supportive evidence and explain why the proposed addition / disallowance should not be made. He shall make a fresh assessment in accordance with law and CBDT instructions on the subject.

Aggrieved, the assessee preferred an appeal to the Tribunal where relying on the decision of the Bangalore Bench of the Tribunal in the case of ACIT v. Sony India Software Center Private Limited [170 taxmann.com 309 (Bang.-Trib.)], it was contended that since these equipments were received on returnable basis the provisions of section 28(iv) of the Act are not applicable. Without prejudice it was submitted that the direction given by PCIT be modified to the extent that if the assessee substantiates that these equipments were received on returnable basis on production of documentary evidence then the same cannot be treated as a benefit / perquisite taxable under section 28(iv) of the Act.

The Revenue contended that since the assessee has not produced any evidence suggesting that the equipments were received on returnable basis the principles laid down by the Tribunal in Sony India Software Center Private Limited (supra) are not attracted.

HELD

The Tribunal noted that the issue on hand is limited to the extent whether the equipments were received by the assessee on returnable basis and, therefore the same cannot be made subject to the addition under section 28(iv) of the Act. The Tribunal also noted that the assessment order has been held to be erroneous and prejudicial to the interest of the revenue since no enquiry was made by the AO during the assessment proceedings qua receipt of equipment free of cost. Even before the PCIT the assessee could not demonstrate that the equipments have been received on returnable basis. The Tribunal further noted that the PCIT has not given any direction to the AO for making addition of r 42,89,70,248 representing the equipment received on free of cost basis meaning thereby the assessee has been granted a fresh opportunity to substantiate that the equipments were received on returnable basis. The Tribunal held that there is no infirmity in the direction given by the PCIT.

The Tribunal also held that if the assessee satisfies the AO by substantiating based on the documents that the equipments were received on returnable basis then the AO will decide the issue on hand in the light of the order of the Tribunal in the case of Sony India Software Center Private Limited (supra).

Subject to assessee bringing on record the relevant evidence of the amount of tax deducted at source and deposited with the Government, the assessee cannot be denied her lawful right by restricting the TDS credit to the amount reflected in Form 26AS.

38. Sonali Dhawan vs. ITO, International Tax

ITA No. 3748/Mum./2025

A.Y.: 2023-24

Date of Order: 5.8.2025

Section: 143(1), Rule 37BA

Subject to assessee bringing on record the relevant evidence of the amount of tax deducted at source and deposited with the Government, the assessee cannot be denied her lawful right by restricting the TDS credit to the amount reflected in Form 26AS.

FACTS

During the previous year relevant to the assessment year under consideration, the assessee sold a house property for a consideration of ₹ 2,76,20,500 from which the buyer deducted ₹ 48,00,000 as TDS. The fact of deduction of TDS as well as its deposit with the Government were recorded in the Sale Deed itself.

The assessee filed her return of income wherein she reflected the amount of capital gain arising on sale of house property and also credit claim of TDS. However, while processing the return of income, CPC accepted the return of income but did not grant TDS credit of ₹ 47,99,525 out of ₹ 48,00,000 claimed by the assessee in her return of income. The reason for denial of credit was stated by CPC to be mismatch between the amount claimed and that reflected in Form 26AS. Form 26AS contained only partial amount of TDS and therefore assessee was denied credit of TDS claimed in the return of income.

Aggrieved, the assessee preferred an appeal to the CIT(A) who directed the AO to grant TDS credit as per relevant Form 26AS.

Aggrieved, the assessee preferred an appeal to the Tribunal where, on behalf of the assessee it was submitted that not only has tax been deducted at source but the same has also been deposited and these facts are evident from the sale deed itself. Further, as per provisions of section 143(1)(c) of the Act, so long as TDS is deducted even if it is not paid by the deductor, co-ordinate benches of the Tribunal have gone ahead and held that credit for TDS cannot be denied to the assessee and in support of this proposition reliance was placed on the decision in the case of Mukesh Padamchand Sogani vs. ACIT [ITA No. 29/PUN/2022; A.Y.: 2009-10; order dated 31.1.2023] and that mere fact that TDS is not reflected in Form 26AS for reasons unknown to the assessee and beyond the control of the assessee cannot be a basis for denial of TDS credit which has been duly deducted and deposited by the buyer.

HELD

The Tribunal observed that there could be varied technological or other reasons where the relevant data pertaining to the assessee doesn’t get reflected in Form 26AS at the relevant point in time. The CPC may have the limitation to look beyond what has been claimed by the assessee and reflected in IT system more particularly in Form 26AS. At the same time where an aggrieved assessee brings the relevant evidence on record as in the instant case, the assessee cannot be denied her lawful right in terms of credit of TDS where the same has been duly deducted and deposited subject to necessary verification. The Tribunal remarked that it has been informed that for the TDS on sale of property, the prescribed form is the tax payer receipt which contains the requisite particulars of tax deposited unlike Form 16/16A issued in other cases. In light of the same, the Tribunal directed the AO to verify the taxpayer receipt issued by Canara Bank dated 17.6.2022 for an amount of ₹ 48,00,000 as available in the assessee’s paper book and if the same is found in order allow the necessary credit of TDS amounting to ₹ 48,00,000 so claimed by the assessee in her return of income.

If books of accounts are not maintained, foundation of audit collapses and therefore penalty cannot be levied for not getting the accounts audited.

37. Bhaveshbhai Haribhai Kanani vs. ITO 
ITA No. 254/RJT/2025
A.Y.:  2018-19
Date of Order: 5.8.2025
Sections:  44AB, 271B

If books of accounts are not maintained, foundation of audit collapses and therefore penalty cannot be levied for not getting the accounts audited. 

FACTS

The assessee, an individual, engaged in the business of trading of brass scrap, filed his return of income declaring therein a turnover of ₹ 1,03,43,628 and offered net profit of ₹ 7,91,012 as his income. The income declared in the return on an admitted turnover worked out to 7.65%.  In the course of assessment proceedings, the Assessing Officer (AO) noticed a further turnover of ₹ 11,93,30,453 and that assessee had declared income under section 44AD as “no account case”, he issued a show cause notice as to why the provisions of section 44AB have not been complied with.

The AO estimated the income to be 4% of total turnover of ₹ 11,93,30,453 which worked out to ₹ 44,73,218.  After reducing from this amount, the profit of ₹ 7,91,012 offered in the return of income, the balance of ₹ 39,82,206 was added to the returned income.

Since the assessee had not furnished an audit report as required by the provisions of section 44AB of the Act, proceedings were initiated for levy of penalty under section 271B of the Act.  In response, the assessee submitted that default u/s 44AB of the Act was on account of mistake of accountant of assessee under wrong belief and mistake of accountant cannot put assessee to jeopardy.  The AO imposed penalty of ₹ 1,50,000 u/s 271B of the Act.

Aggrieved, the 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 noted that the assessee declared income under section 44AD of the Act.  As per scheme of section 44AD of the Act, the assessee was not required to maintain books of account.  The Tribunal held that since the assessee did not maintain books of accounts, no penalty should be imposed under section 271B.  The Tribunal noted that the Allahabad High Court in the case of CIT vs. Bisauli Tractors [(2008) 299 ITR 219 (All.)] has held that when the assessee has not maintained books of accounts, the question of getting the books audited under section 44AB would not arise.  Therefore, penalty under section 271B would not be leviable.  The Tribunal noted that if no books are maintained, foundation of audit collapses and, hence penalty cannot be imposed.  It also noted that apart from this, during the assessment proceeding itself, the AO has estimated the income of the assessee, therefore, the penalty on estimation should not be levied.  It remarked that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty would not ordinarily be imposed, unless the party obliged either acted deliberately in defiance of law or guilty of conduct, contumacious or dishonest, or acted in conscious disregard to obligation.  The penalty will not be imposed merely because it is lawful to do so.  Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all relevant circumstances.  Even if a minimum penalty is prescribed, the authority competent to impose a penalty will be justified in refusing to impose a penalty when there is technical or venial breach of the provision of the Act.  The Tribunal held that the assessee was not supposed to maintain books of accounts u/s 44AD of the Act, therefore, penalty under section 271B of the Act should not be imposed.  The Tribunal deleted the penalty of ₹ 1,50,000 imposed by the AO.

No additions under section 68 when the identity and creditworthiness of the loan lender was established.

36. [2025] 122 ITR(T) 194 (Mum – Trib.)

Kaisha Lifesciences (P.) Ltd. vs. Deputy Commissioner of Income-tax

ITA NO.: 4311/MUM/2023

A.Y.: 2020-21 DATE: 24.10.2024

Sections 68 & 35(2AB)

No additions under section 68 when the identity and creditworthiness of the loan lender was established.

FACTS I

The assessee is engaged in the business of developing high-quality medication through in-house research of medicine. For the year under consideration, the assessee had filed its return of income on 30/01/2021 declaring a total income of Rs. NIL.

The assessee’s case was selected for complete scrutiny proceedings. During the assessment proceedings, the Ld. AO held that the assessee had failed to explain the nature and source of credit of unsecured loan of ₹2,30,00,000 from Mr. Karius Dadachanji and accordingly added the same to the total income of the assessee under section 68 of the Act.

Aggrieved by the order, the assessee filed an appeal before CIT(A). The CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and upheld the addition made by the AO under section 68 of the Act.

Being aggrieved, the assessee filed an appeal before the ITAT.

HELD I

The ITAT observed that there was no dispute regarding the fact that the assessee had received an unsecured loan of ₹2,30,00,000 from Mr. Karius Dadachanji. It was further undisputed fact that as on 01.04.2019 opening balance of the loan account was ₹3,06,80,000 and during the year, had repaid a sum of ₹3,55,00,000. The ITAT observed that the loan account was a running account.

The assessee had submitted the following details – the ledger of the unsecured loans, bank statement reflecting receipt of ₹2,30,00,000/-, repayment of ₹3,55,00,000/-, Return of Income of Mr. Karius Dadachanji for the AY 2020-21 and loan confirmation from Mr. Karius Dadachanji.

Upon perusal of the abovementioned documents, the ITAT held that the assessee sufficiently proved the identity and creditworthiness of the loan lender, who is nothing but a 50% shareholder in the assessee company and the loan was taken not from any stranger but a 50% shareholder for the routine course of business to meet business-related expenditure under a running account.

Assessee is entitled to claim deduction under section 35(2AB) of the Act even in respect of the expenditure incurred prior to the approval date for the year under consideration in accordance with the guidelines issued by DSIR.

FACTS II

During the year, the assessee had incurred expenditure of ₹2,16,49,662 under section 35(2AB) of the Act, and as a qualifying expenditure, it had claimed the deduction of ₹3,24,74,493 under the said section which is 150% of the actual expenditure incurred.

The AO observed that the competent authority, i.e. Secretary, Department of Scientific and Industrial Research (“DSIR”), granted approval under section 35(2AB) of the Act on 23.10.2020 for the period 25.10.2019 to 31.03.2020. The assessee had claimed weighted deduction @150% of the capital and revenue expenditure incurred prior to the approval period i.e. 25.10.2019.

The AO disallowed claim of ₹28,03,707 being excess claim under section 35(2AB) i.e. the weighted deduction @150% in respect of revenue expenditure incurred prior to approval date and disallowed sum of ₹5,70,811 being capital expenditure incurred prior to approval date.

Aggrieved by the order, the assessee was in appeal before CIT(A). The CIT(A) dismissed the ground on the basis that the assessee has not been able to substantiate the correctness of the claim by any documentary evidence.

Being aggrieved, the assessee filed an appeal before the ITAT.

HELD II

The ITAT observed that it is provided in clause 5 of the Guidelines for Approval in Form 3CM that the approval to the in-house R&D centres having valid recognition by DSIR are considered from 1st April of the year in which the application is made in Form 3CK.

The ITAT held that the R&D facility of the assessee was already approved by the DSIR and so the assessee was entitled to claim deduction under section 35(2AB) of the Act even in respect of the expenditure incurred prior to 25.10.2019, i.e. from 01.04.2019, for the year under consideration in accordance with the guidelines issued by DSIR.

Case Laws followed-

 Maruti Suzuki India Ltd. vs. Union of India [2017] 84 taxmann.com 45/250 Taxman 113/397 ITR 728 (Delhi) – Delhi High Court

CIT vs. Claris Lifesciences Ltd. [2008] 174 Taxman 113/[2010] 326 ITR 251 – Gujarat High Court.

In the result, the appeal by the assessee is allowed.

Corporate Social Responsibility (CSR) Expenditure – Deduction under Chapter VI-A – Allowability of CSR expenditure under Section 80G despite disallowance under Section 37(1) – Voluntariness of contribution not a precondition – No reciprocal benefit to donor – Deduction permissible subject to fulfillment of conditions of Section 80G.

35. [2025] 122 ITR(T) 194 (Delhi – Trib.)

Cheil India Pvt. Ltd. vs. Deputy Commissioner of Income-tax

ITA NO.: 29/DEL/2024

A.Y.: 2020-21 DATE: 28.10.2024

Sections 80G & 37(1)

Corporate Social Responsibility (CSR) Expenditure – Deduction under Chapter VI-A – Allowability of CSR expenditure under Section 80G despite disallowance under Section 37(1) – Voluntariness of contribution not a precondition – No reciprocal benefit to donor – Deduction permissible subject to fulfillment of conditions of Section 80G.

FACTS

The assessee, Cheil India Pvt. Ltd., a company governed by the provisions of the Companies Act, 2013, incurred Corporate Social Responsibility (CSR) expenditure during the financial year relevant to AY 2020-21 and claimed deduction of ₹2,57,66,663 under Section 80G of the Income-tax Act, 1961. The donations were made to institutions duly registered and notified under section 80G.

The Assessing Officer, while completing the assessment under section 143(3) read with section 144B, disallowed the entire claim under section 80G, holding that CSR expenditure, being statutorily mandated under section 135 of the Companies Act, lacked the element of voluntariness, which is a fundamental requirement under section 80G.

The expenditure was further excluded under Explanation 2 to section 37(1), as not being incurred wholly and exclusively for the purposes of business. The AO accordingly added the disallowed amount to the assessee’s total income and also charged interest and initiated penalty proceedings under section 270A.

On appeal, the CIT(A) confirmed the disallowance reiterating that the expenditure had been incurred to comply with legal obligations, not out of voluntary motive.
Aggrieved, the assessee preferred an appeal before the Tribunal.

HELD

The Tribunal relied on the decision of the Coordinate Bench in Ratna Sagar Pvt. Ltd. vs. ACIT [ITA No. 2556/Del/2023], wherein it was held that Section 80G and Section 37(1) operate in distinct statutory domains. Section 37(1) deals with deduction while computing business income, and Section 80G applies post computation of gross total income under Chapter VI-A, and therefore the disallowance under section 37(1) does not preclude the benefit under section 80G.

Explanation 2 to section 37(1) inserted by Finance (No. 2) Act, 2014, specifically bars CSR expenditure from being claimed as a business expense, but does not prohibit deduction under section 80G.

The Tribunal held that even if CSR spending is mandatory under section 135 of the Companies Act, the donations made to eligible institutions under section 80G are philanthropic in nature. Section 80G permits deduction even for mandatory donations, so long as the donee institutions are eligible and the payment is made without quid pro quo.

In the result, the appeal by the assessee is allowed.

Where the assessee had opted for presumptive taxation under section 44AD, the AO could not make an addition on account of alleged bogus purchase since the assessee was under no obligation to explain individual entries of purchase.

34. (2025) 175 taxmann.com 996 (Ban Trib)

Lakshmanram Bheemaji Purohit vs. ITO

ITA No.: 196/Bang/2025

A.Y.: 2018-19 Dated: 25.06.2025

Sections 44AD, 69C

Where the assessee had opted for presumptive taxation under section 44AD, the AO could not make an addition on account of alleged bogus purchase since the assessee was under no obligation to explain individual entries of purchase.

FACTS

The assessee was an individual engaged in the business of trading of waste home products. He filed his return of income on 08.08.2018 declaring total income of ₹5,87,014 as per provisions of section 44AD.

Information was received by the AO that assessee had received bogus purchase bill of ₹16,09,692 from one M/s. ARS Enterprises. It was alleged that this was a bogus tax invoice wherein false input credit was claimed under GST. Assessee was asked to furnish the details. Assessee submitted that he had filed return of income under section 44AD and therefore the details of purchases were not maintained. He also submitted a chart showing the purchase of goods from ARS Enterprises. The AO rejected the explanation and made addition of ₹16,09,692 by passing assessment order under section 143(3) read with section 144B.

Against this, assessee went in appeal before CIT(A), which was dismissed by him.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) If the assessee had opted for presumptive taxation under section 44AD, the assessee was not required to maintain the books of account as well as the details of purchases made. This was relevant till the total turnover of the assessee did not exceed the prescribed limit under section 44AD. Thus, prima facie, the assessee could not have been asked the information of purchases.

(b) AO had merely relied upon the information furnished by the GST department and did not gather any evidence on his own for making the addition. As held by the Punjab and Haryana High Court in CIT vs. Surinder Pal Anand, (2010) 192 Taxman 264 (Punjab & Haryana), the assessee was not under an obligation to explain individual entry of purchases unless such entry has nexus with gross receipts. In the present case, the purchases did not have any nexus with the gross receipt as gross receipt shown by the assessee remained undisputed and was never tested by the Revenue to be beyond the specified limit.

Accordingly, the Tribunal deleted the addition and allowed the appeal of the assessee.

Where the assessee made donation to a foundation approved under section 80G in pursuance of its CSR obligations, it was entitled for deduction under section 80G.

33. (2025) 175 taxmann.com 982 (Mum Trib)

Axis Securities Ltd. vs. PCIT

ITA No.: 2736/Mum/2025

A.Y.: 2020-21 Dated: 17.06.2025

Section 80G

Where the assessee made donation to a foundation approved under section 80G in pursuance of its CSR obligations, it was entitled for deduction under section 80G.

FACTS

The assessee was a company engaged in the business of broking, distribution of financial products etc. During the year, the assessee made donation to Axis Foundation of ₹1,93,66,947. It had classified the amount of donation as “Corporate Social Responsibility” (CSR) expenses under section 135 of the Companies Act, 2013 in its books of account and suo moto disallowed the same in computation of income in accordance Explanation 2 of section 37. However, it claimed the donation as deduction under section 80G. The said claim was duly disclosed in the computation of income and tax audit report, which was examined and allowed by the AO while passing the order of assessment under section 143(3).

PCIT invoked revision jurisdiction under section 263 and passed an order holding that deduction under section 80G was erroneously allowed since donation was in nature of CSR expenditure which is not voluntary in nature and thus not eligible for deduction under section 80G.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed as follows:

(a) it is an undisputed fact that donation made by the assessee was to entities registered under section 80G and that the assessee was otherwise eligible to claim deduction under section 80G

(b) Section 135 of the Companies Act, 2013 mandates the quantum of CSR expenses; however, it does not mandate to whom and how the amount to be spent. The assessee at its discretion can choose the mode of spending towards CSR. The donations made by the assessee to Axis Foundation were made voluntarily as there was no reciprocal commitment from the donees. In any case, section 80G does not put any condition for the donation to be voluntary in nature for the purpose of claiming deduction.

(c) CBDT Circular No. 1/2015 dated 21.01.2015 clearly states that the restriction on claiming deduction of CSR expense is only with respect to Section 37(1) wherein it will not be deemed to be a business expenditure for the purpose computing income under the head ‘Profits and Gains from Business or Profession’. The Circular itself clarifies that CSR expenditure will be allowable under other sections under the same head of income. In view of CBDT Circular, it is clear that there is no express bar in claiming deduction in respect of CSR expenditure, other than under Section 37(1). This is also supported by Ministry of Corporate Affairs’ (“MCA”) General Circular No. 01/2016 dated 12.01.2016.

(d) In the case of ACIT vs. Sharda Cropchem Limited [IT Appeal No. 6163 (Mum) of 2024], the coordinate bench of ITAT held that donations which are classified as CSR expenditure are eligible for deduction under section 80G.

Accordingly, the Tribunal held that the assessee was entitled for deduction claimed under section 80G towards CSR expenditure incurred by it.

Following Inter Gold (India) Pvt. Ltd. vs. Pr. CIT (ITA No. 4400/Mum/2023), the Tribunal also held that section 263 cannot be invoked for denial of deduction claimed under section 80G in respect of donations classified as CSR.

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

Exemption under Section 11 should not be denied to the assessee merely on account of delay in filing audit report in Form 10B within the stipulated time if the same was furnished before passing of intimation under section 143(1).

32. (2025) 175 taxmann.com 1076 (Ahd Trib)

Bhakt Samaj Vikas Education Trust vs. ACIT

ITA No.: 775/Ahd/2025

A.Y.: 2021-22 Dated: 25.06.2025

Section 11

Exemption under Section 11 should not be denied to the assessee merely on account of delay in filing audit report in Form 10B within the stipulated time if the same was furnished before passing of intimation under section 143(1).

FACTS

The assessee was a trust registered under section 12A. It filed its return of income on 29.03.2024 for A.Y. 2021-22. The return of income was processed under section 143(1), disallowing the claim of exemption under section 11 on the ground that the assessee had not filed the audit report in Form 10B prior to the due date for furnishing return of income under Section 139(1). CIT(A) confirmed the disallowance.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

Following the decisions of the Gujarat High Court and other judicial precedents, the Tribunal held that it is a well-settled law that delay in filing of Form 10B is a procedural default and if other conditions have been met, then mere delay in filing of Form 10B should not disentitle the assessee from claiming exemption under Section 11, if the said audit report was available with the Department before passing of order / intimation under Section 143(1).

Accordingly, the appeal of the assessee was allowed.

Only profit element embedded in unaccounted receipts can be taxed and not the entire amount of such receipts.

31. IT(SS) A No. 46/Ahd./2023 and 434/Ahd./2023; IT(SS) A. No. 119 & 120/Ahd./2023

Robin Ramavtar Goenka vs. ACIT

A.Y.s: 2018-19 & 2019-20 Date of Order : 30.05.2025

Sections: 28, 68, 69C

Only profit element embedded in unaccounted receipts can be taxed and not the entire amount of such receipts.

FACTS

The assessee, engaged in real estate business, was part of Sankalp Group. During the course of search action conducted on 30.10.2018 at the premises of Sankalp group, incriminating material such as handwritten diaries, loose papers, unrecorded bills and other documents were seized. These materials revealed evidence of on-money transactions, unaccounted cash sales and cash payments related to land purchases, brokerage, salaries, personal expenses and purchase of jewellery.

The Assessing Officer (AO) made substantial additions in the hands of the assessee and protective addition in the hands of his accountant.

The AO treated unaccounted receipts as undisclosed income and unaccounted payments as unexplained expenditure under section 69C of the Act. He rejected the contentions of the assessee that both receipts and payments were part of normal business activities and that only the profit element therein, estimated at 8% to 10% should be taxed.

Aggrieved, assessee preferred an appeal to the CIT(A) who restricted the addition to 14% of the unaccounted payments since the unaccounted payments were greater than unaccounted receipts.

Aggrieved by the order of CIT(A) both the assessee and the revenue preferred an appeal to the Tribunal. The assessee contended that the rate of 14% adopted by the CIT(A) was excessive and did not reflect real income. It was contended that seized material clearly indicated that both unaccounted receipts and payments were incurred in the course of business. It is only profit element embedded in the receipts which needs to be taxed. Reliance was placed on several decisions of the Tribunal and High Courts.

HELD

The Tribunal agreed with the methodology of CIT(A) of applying a 14% profit rate to unaccounted payments but agreed with the submissions made on behalf of the assessee that the rate was excessive considering the actual profit ratios in real estate business.

The Tribunal directed the AO to reassess the income by adopting a more reasonable profit rate closer to industry standard of 8 to 10% of unaccounted receipts ensuring that only real income is taxed. The Tribunal remanded the matter back to AO for adjudication. It upheld the decision of the CIT(A) to restrict the addition to profit element.

The Tribunal partly allowed the appeal filed by the assessee and dismissed the appeal filed by the Revenue.

Notice under section 143(2) of the Act which has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II dated 23.06.2017 is invalid and an assessment framed consequent to such invalid notice is also invalid and needs to be quashed.

30. Tapan Kumar Das vs. ITO

ITA No. 1660/Kol/2024

A.Y.: 2017-18 Date of Order : 11.03.2025

Sections: 143(2), CBDT Instruction dated 23.6.2017

Notice under section 143(2) of the Act which has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II dated 23.06.2017 is invalid and an assessment framed consequent to such invalid notice is also invalid and needs to be quashed.

FACTS

The assessee filed the return of income on 30.10.2017, declaring total income of ₹3,75,780/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). Thereafter the notice u/s 143(2) and 142(1) of the Act were issued along with the questionnaire which were duly served upon the assessee. When there was no compliance in the assessment proceedings, the AO framed the ex-parte assessment u/s 144 of the Act vide order dated 27.12.2019, wherein an addition of ₹25,74,500/- was made on account of unexplained money u/s 69A of the Act deposited in the bank account of the assessee during demonetization period.

Aggrieved, assessee preferred an appeal to the CIT(A) who confirmed the addition on the ground that there was no compliance on the part of the assessee.

Aggrieved, assessee preferred an appeal to the Tribunal where it raised an additional ground which it claimed to be purely a legal issue viz. that the notice issued under section u/s 143(2) in violation of CBDT Circular No. F.NO.225/157/2017/ITA-11 dated 23.06.2017.

HELD

The Tribunal found that the additional ground raised by the assessee to be purely legal issue qua which all the facts were available in the appeal folder and no further verification of facts was required to be done at the end of the AO. Accordingly, the Tribunal admitted the same for adjudication by following the ratio laid down by the Apex Court in the case of Jute Corporation of India Ltd. vs. CIT [187 ITR 688 (SC)] and National Thermal Power Co. Ltd v. CIT [(1998) 229 ITR 383 (SC)].

After hearing the rival contentions and perusing the materials available on record, the Tribunal found that the notice under section 143(2) of the Act has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II dated 23.06.2017.

The Tribunal held that, the notice issued u/s 143(2) of the Act which is not in the prescribed format as provided under the Act is an invalid notice and accordingly, all the subsequent proceedings thereto would be invalid and void ab initio. It observed that the case of the assessee finds support from the decision of Shib Nath Ghosh vs. ITO in ITA No. 1812/KOL/2024 for A.Y. 2018-19 vide order dated 29.11.2024.

The Tribunal held the notice issued under section 143(2) of the Act to be invalid notice and quashed the assessment since it was framed consequent to an invalid notice and therefore was invalid.

 

S. 36(1)(iii) : Interest on unpaid conversion fees for the period after the mall has been put to use, constitutes revenue expenditure and is allowable under section 36(1)(iii) of the Act. S. 43CA : If as on the date of agreement to sell, the collectorate rates for levy of stamp duty are not available, then the value declared by assessee in sale deed on which stamp duty has been paid is to be construed as the correct value and no addition is required to be made. S. 43CA : For the purpose of section 43CA, interest on delayed payment of consideration needs to be aggregated with the sale consideration and such aggregate amount is to be compared with the valuation done by DVO.

29. TS-671-ITAT-2025 (Chandigarh)

CSJ Infrastructure Pvt. Ltd. vs. ACIT

A.Y.s: 2014-15 and 2015-16

Date of Order : 28.05.2025

Sections: 36(1)(iii), 43CA

S. 36(1)(iii) : Interest on unpaid conversion fees for the period after the mall has been put to use, constitutes revenue expenditure and is allowable under section 36(1)(iii) of the Act.

S. 43CA : If as on the date of agreement to sell, the collectorate rates for levy of stamp duty are not available, then the value declared by assessee in sale deed on which stamp duty has been paid is to be construed as the correct value and no addition is required to be made.

S. 43CA : For the purpose of section 43CA, interest on delayed payment of consideration needs to be aggregated with the sale consideration and such aggregate amount is to be compared with the valuation done by DVO.

FACTS I

The assessee company purchased 20.16 acres of industrial land from Pfizer Ltd. The assessee company obtained approval from Chandigarh Housing Board. It was required to pay conversion fee of ₹185.45 crore, 10% was to be paid as down payment and remaining over a period of 9 years on equated annual instalments with interest @ 8.25% per annum. The assessee company paid ₹18,54,54,744 as down payment on 17.3.2007 and balance was payable in nine equated annual instalments together with interest commencing from 26.03. 2008.

The assessee capitalised the conversion fee payable as cost of land creating a deferred conversion fee liability. The interest pertaining to the construction period was treated as pre-operative expenditure till completion of the mall, office and service building and occupancy certificate was granted. It had capitalised the alleged interest expenditure as per proviso to section 36(1)(iii) of the Act. Upon the shopping mall having been put to use, interest expenditure was claimed as revenue expenditure.

During the previous year relevant to AY 2014-15, interest on conversion fee was ₹5,69,00,665 – out of this ₹4,91,74,146 pertained to assets put to use (mall and office and service building) and was therefore claimed as revenue expenditure under section 36(1)(iii) of the Act and ₹77,26,519 pertained to hotel building and was capitalised under pre-operative expenditure as per proviso to section 36(1)(iii) of the act. The Assessing Officer (AO) did not allow the claim of the assessee on the ground that even interest expenditure towards payment of conversion fee paid by the assessee would give enduring benefit in all subsequent years and hence treated the same as capital expenditure.

Aggrieved, assessee preferred an appeal to CIT(A) who allowed the appeal filed by relying on the decision in the case of Sanjay Dahuja vs. ACIT [ITA Nos. 95 and 96/Chd./2017] where the Tribunal held that interest on conversion charges after land was first put to use for conducting commercial activities shall not form part of actual cost of land. He also observed that the Delhi bench of ITAT has, on identical facts, taken the same view in DDIT vs. Micron Instruments (P.) Ltd. 38 ITR (T) 242 (Delhi). He also noted that his predecessor in case of Vijay Passi ITA No. 255/2015-16 for AY 2013-14 has also taken the same view.

Aggrieved, revenue preferred an appeal to the Tribunal.

HELD I

The Tribunal noted that the asset in the case of the assessee was put to use on 14.3.2013. Till the shopping mall was under construction and asset was not put to use, the assessee has capitalised the interest but for the period from which the asset is put to use, the expenditure is allowable as a revenue expenditure under section 36(1)(iii) of the Act. It observed that the CIT(A) has made an elaborate discussion (which has been extracted in the order of the Tribunal) and has followed the order of the Tribunal in the case of Vijay Passi ITA No. 255/2015-16 and has also referred to other judgments. It held that the view taken by CIT(A) is in consonance with the proposition laid down by ITAT as well as in consonance with section 36(1)(iii) of the Act and therefore no interference is called for. The appeal filed by the revenue was dismissed.

FACTS II

The assessee company purchased 20.16 acres of industrial land from M/s Pfizer Ltd. in Chandigarh. The company obtained approval from Chandigarh Housing Board (CHB) for conversion of land from industrial use. It was required to pay conversion fee of ₹1,85,45,47,440. Of this, 10% was to be paid as down payment and balance in nine equated annual instalments with interest at 8.25%. The assessee developed shopping mall on this land.

It entered into agreements to sell in respect of shop numbers A 501 to 503 and B 408 and B 409. The agreement to sell for shop numbers A 501 to 503 were entered on 25.1.2011. The consideration was payable 25% on booking and balance on dates mentioned in the agreement. The buyer made a payment of ₹2,60,00,000 vide cheque on 25.1.2011. There was some dispute between assessee and buyer and ultimately sale deed was executed in the previous year relevant to AY 2014-15. The Assessing Officer (AO) confronted the assessee qua section 43CA.

The AO made an addition to the total income of the assessee. The assessee had declared a loss of ₹65,92,02,520 in the assessment year 2014-15 which was reduced to ₹30,98,19,874.

Aggrieved, the assessee preferred an appeal to the CIT(A) who referred the valuation of the property to DVO for determining the Fair Market Value of the property and upon receipt of the report from DVO he upheld the addition on the basis of the report of the DVO thereby partly confirming the addition made by the AO.

Aggrieved, assessee preferred an appeal to the Tribunal where it contended that (i) the agreement to sell was entered on 25.1.2011, at that point of time, section 43CA was not on the statute and therefore no addition be made by virtue of provisions of section 43CA; (ii) sub-sections (3) and (4) of section 43CA provide that stamp duty value on the date of agreement to sell be adopted instead of stamp duty value on the date of sale deed and since there was no collectorate rates available for collecting stamp duty on the date of agreement to sell, the fiction created by section 43CA fails. The assessee supported this contention by making a reference to the report of the DVO which rather than adopting the collectorate rate made an observation that adopting collectorate rate to work out FMV of the subject property may not be appropriate in this case; (iii) interest of ₹6.19 crore has been received from the buyer for the period during which dispute remained between the parties. This interest is part and parcel of sale consideration. If sale proceeds and interest are aggregated and then compared with the value worked out by DVO then the difference is 6.51% which is less than the tolerance limit of 10% provided in section 43CA.

HELD II

At the outset, Tribunal observed that section 43CA is pari materia to section 50C. Having noted the provisions of section 43CA, the Tribunal noted that agreement to sell was entered into on 25.01.2011, part payment was made on 25.01.2011 by account payee cheque, the balance payment was not paid as per schedule due to dispute but subsequently interest has been paid for the delayed period. The collectorate rate as on 25.01.2011 ought to have been adopted. Neither the AO nor the DVO could lay their hands on correct rate of stamp valuation authority as on that day. The Tribunal held that the value declared by assessee in sale deed on which stamp duty has been paid is to be construed as the correct value and no addition was required to be made.

The Tribunal proceeded to look at the issue from another angle as well. It held that the alleged interest charged from the buyer would partake character of sale proceeds because it is interest on delayed realisation of sale proceeds for registration of sale deed. For this, the tribunal took support from the decisions in the context of section 80I where it is held that interest would partake character of business income and deduction under section 80I would be applicable. It observed that upon comparison of the aggregate of sale consideration and interest with the valuation done by DVO the difference is less than 10% and on this count also no addition is called for. The Tribunal held that this view is fortified by the order of ITAT in the assessee’s own case for AY 2017-18 [ITA No. 73/Chd./2024; Order dated 06.08.2024].

The Tribunal allowed this ground of appeal of the assessee.

Assessment order framed by the ITO u/s 143(3) of the Act, without an order under section 127 conferring jurisdiction on him, is bad in law and needs to be quashed.

28. TS-559-ITAT-2025 (Delhi)

Navita Gupta vs. ITO

A.Y.: 2017-18

Date of Order : 30.04.2025

Sections: 127, 143(2), 143(3)

Assessment order framed by the ITO u/s 143(3) of the Act, without an order under section 127 conferring jurisdiction on him, is bad in law and needs to be quashed.

FACTS

The assessee preferred an appeal against the order of CIT(A) confirming the addition made under section 69 r.w.s. 115BBE of the Act.

In the course of appellate proceedings before the Tribunal, it was mentioned that the notice under section 143(2) of the Act, for assessment, was issued by ITO, Ward 38(2), New Delhi; whereas the assessment order was passed by ITO Ward 5(2)(3), Noida. The assessment order was passed by the ITO at Noida without there being a transfer order under section 127 of the Act for shifting of jurisdiction from the ITO at Delhi to the ITO at Noida. It was submitted that since the assessment is framed by ITO Ward 5(2)(3), Noida on the basis of notice issued u/s 143(2) of the Act by ITO Ward 38(2), New Delhi, the assessment order passed under section 143(3) of the Act is bad in law. For this proposition, reliance was placed on the decision of the co-ordinate bench in Saroj Sangwan vs. ITO [ITA No. 2428/Delhi/2023; Order dated 17.5.2024] and on the decision of the jurisdictional High Court in PCIT vs. Vimal Gupta in ITA No. 515/2016 dated 16.10.2017.

HELD

The Tribunal noted that an identical issue came up for consideration of the co-ordinate Bench in the case of Saroj Sangwan (supra). Having noted the observations and the decision in the case of Saroj Sangwan (supra) and also in the case of Vimal Gupta (supra), the Tribunal held that the assessment framed by the ITO, Ward 5(2)(3), Noida without a transfer order having been passed under section 127 of the Act, is bad in law and therefore needs to be quashed.

Sec 56(2)(vii)(b)(ii): Addition on account of difference between stamp duty value and purchase consideration for agricultural land made under a provision which was introduced subsequently – AO could not apply amended provision retrospectively – Further, payment of actual consideration duly established – Addition unsustainable.

27 [2025] 122 ITR(T) 312 (Lucknow- Trib.)

Smt. Vimla Tripathi vs. ITO

ITA NO.: 310 (LKW.) OF 2023

A.Y.: 2013-14 DATE: 31.12.2024

Sec 56(2)(vii)(b)(ii): Addition on account of difference between stamp duty value and purchase consideration for agricultural land made under a provision which was introduced subsequently – AO could not apply amended provision retrospectively – Further, payment of actual consideration duly established – Addition unsustainable.

FACTS:

The assessee filed her return of income for the AY 2013-14. Subsequently, based on third-party information, the Assessing Officer noticed that the assessee, jointly with another person, had purchased an agricultural land on 01.08.2012 for a declared consideration of ₹12,00,000.

The AO observed that the market value of the land for stamp duty purposes was ₹71,30,000. Upon response from the assessee to notices u/s 142(1), she provided documentary evidence showing details and modes of payment, copies of bank statements and the sale deed.

Finding a discrepancy of ₹59,30,000 between the stamp duty value and actual consideration paid, the AO treated 50% of such difference (i.e., ₹29.65 lakhs) as income of the assessee under section 56(2)(vii)(b)(ii), since the property was jointly purchased.

The assessee contended that the transaction took place on 01.08.2012 and provision of section 56(2)(vii)(b)(ii) was introduced by Finance Act, 2013 and came into effect only from 01.04.2014 (A.Y. 2014-15). Therefore, the said provision could not be applied to a transaction undertaken in A.Y. 2013-14.

Despite these submissions, the NFAC dismissed the appeal, upholding the addition made by the AO.

HELD:

ITAT observed that the transaction was carried out in F.Y. 2012-13. The provision under section 56(2)(vii)(b)(ii), which sought to tax the difference between stamp duty value and actual consideration for property purchases, was introduced w.e.f. 01.04.2014 and was applicable only from A.Y. 2014-15 onwards. Therefore, it could not be applied retrospectively to a transaction of A.Y. 2013-14.

The Tribunal noted that the CIT(A)’s observation that the transaction was “without consideration” was factually incorrect. The assessee had placed on record the bank statements and the sale deed evidencing payment of ₹6 lakhs (her share of the total ₹12 lakhs consideration). Hence, the transaction involved actual consideration and was not a gift or zero-value transfer.

ITAT further held that, the assessee also raised a valid legal argument that agricultural land is not treated as a “capital asset” under section 2(14) and thus not subject to the deeming provisions of section 56(2)(vii)(b)(ii), which apply only to capital assets.

Accordingly, the Tribunal found merit in the assessee’s arguments, quashed the order of the CIT(A),  and directed the Assessing Officer to delete the addition of ₹29.65 lakhs made under section 56(2)(vii)(b)(ii).

Sec 145 – Percentage Completion Method (PCM) – Rejection of consistently followed method of accounting without any defects or inconsistencies – Addition of entire actual sale value led to double addition as income had already been recognised on accrual basis under PCM in earlier years – Not permissible – Once accepted, accounting method cannot be altered without just cause.

26 [2025] 122 ITR(T) 154 (Ahmedabad – Trib.)

ITO vs. Sainath Land Developers

ITA NO.: 441 (AHD.) OF 2020

A.Y.: 2015-16 DATE: 31.12.2024

Sec 145 – Percentage Completion Method (PCM) – Rejection of consistently followed method of accounting without any defects or inconsistencies – Addition of entire actual sale value led to double addition as income had already been recognised on accrual basis under PCM in earlier years – Not permissible – Once accepted, accounting method cannot be altered without just cause.

FACTS

The assessee, a partnership firm was engaged in real estate development. The return was selected for limited scrutiny under CASS. During the course of assessment, the Assessing Officer noted that the assessee had shown opening work-in-progress (WIP) of ₹6.47 crores and had sold flats and shops worth ₹4.20 crores during the year. However, the sales reported in the profit and loss account amounted to only ₹55.70 lakhs.

The assessee explained that it had been consistently following the Percentage Completion Method (PCM) of revenue recognition since A.Y. 2012-13, which had been accepted by the Department in earlier assessments.

The AO concluded that the difference between the stock sold (₹4.20 crores) and the sales disclosed (₹55.70 lakhs) represented undisclosed sales and made an addition of the entire ₹4.20 crores to the assessee’s income.

Aggrieved, the assessee filed an appeal before the CIT(A), who deleted the entire addition. The Revenue preferred further appeal before the Tribunal.

HELD

ITAT observed that the assessee had consistently followed PCM, which is a recognised method of accounting as per the Accounting Standards issued by the ICAI. The Revenue had accepted this method in earlier years without raising any objection. And AO failed to point out any defects or discrepancies in the books of accounts maintained by the assessee.

ITAT observed that the addition made by the AO resulted in double taxation of the same profits – first when revenue was recognised under PCM in earlier years and again when full actual sales were considered in the current year.

ITAT held that once a method of accounting has been accepted by the Department and regularly followed by the assessee, it cannot be rejected in subsequent years unless a material change in facts is demonstrated. In the present case, no such change or deviation was shown by the AO.

Thus, the ITAT held that the method of accounting consistently and correctly followed by the assessee under the Percentage Completion Method could not be rejected in the absence of any defect or inconsistency, and the addition of ₹4.20 crores was rightly deleted by the CIT(A).

S. 54F – Capital gain arising out of surrender of tenancy rights is eligible for exemption under section 54F if the developer-builder has allotted a residential flat without any consideration against such surrender by executing Permanent Alternate Accommodation Agreement. S. 56 – Once an income from a source falls within a specific head, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head.

25 (2025) 174 taxmann.com 1015 (Mum Trib)

Vasant Nagorao Barabde vs. DCIT

ITA No.: 5372 (Mum) of 2024

A.Y.: 2018-19 Dated: 22.05.2025

S. 54F – Capital gain arising out of surrender of tenancy rights is eligible for exemption under section 54F if the developer-builder has allotted a residential flat without any consideration against such surrender by executing Permanent Alternate Accommodation Agreement.

S. 56 – Once an income from a source falls within a specific head, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head.

FACTS

The assessee and his daughter entered into agreement for Permanent Alternate Accommodation (PAA) dated 21.9.2017 with the developer whereby the tenancy rights in respect of residential premises in building “SS” in Mumbai were surrendered. The developer agreed to provide and allot on ownership basis, without any consideration, one flat in the new building proposed to be constructed on the said property. The stamp value of the said property was ₹2,88,85,600. The assessee filed his return of income on 15.08.2018 reporting total income at ₹61,34,820.

Case of the assessee was selected for limited scrutiny for the reason that purchase value of property was less than stamp value. Since no explanation came from the assessee, the AO completed the assessment under section 143(3) making an addition of ₹2,88,85,600, being the stamp duty value for which no consideration was paid by applying section 56(2)(x)(b)(B).

Against this, assessee went in appeal before CIT(A). Before the CIT(A), the assessee filed detailed explanations and additional evidence under rule 46A. However, the CIT(A) dismissed the appeal of the assessee.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) It was an undisputed fact that both the assessee and his daughter were tenants in the registered agreement for PAA dated 21.09.2017 under which flat in the new building had been allotted by the developer against surrender of tenancy rights. Existence of tenancy was not in dispute.
(b) It was important to note that there was a surrender of tenancy rights against which a new flat had been allotted for which a registered deed was executed. Once there is a surrender of tenancy rights, the factual position which emerges was that tenancy right (which is a capital asset) was transferred and was liable to be taxed under section 45 read with section 48.

(c) The moot point that arose was as to in whose hands this capital gain was to be taxed depending upon who owned the tenancy rights and who transferred the same to the builder against which the new flat was allotted. In present set of facts, it could be either the assessee or his daughter. In either case, deduction under section 54F was available against the capital gain so computed since there was an investment in residential flat allotted by the builder by way of PAA of equivalent stamp duty value of ₹2,88,85,600. Thus, in either hands, the capital gain so computed was eligible for deduction under section 54F in toto.

(d) Once an income from a source falls within a specific head, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head. Thus, applicability of section 56(2)(x)(b)(B) was ruled out.

(e) Claim of the assessee for deduction under section 54F against the capital gain on the impugned transaction was an allowable claim by taking into account the observation of Supreme Court in the case of Goetze (India) Ltd. whereby Court held that “nothing impinges on the power of the appellate authorities to entertain such a claim of the assessee.”

Accordingly, the appeal of the assessee was allowed.

S. 70 – Short-term capital loss (on which STT was paid) can be set off against short-term capital gains (on which STT was not paid) as per section 70(2).

24  (2025) 174 taxmann.com 932 (Mum Trib)

Teacher Retirement System of Texas vs. ACIT

ITA No.: 1371 (Mum) of 2025

A.Y.: 2022-23 Dated: 23.05.2025

S. 70 – Short-term capital loss (on which STT was paid) can be set off against short-term capital gains (on which STT was not paid) as per section 70(2).

FACTS

The assessee was a resident of the United States of America, and was registered as a Foreign Portfolio Investor with the Securities and Exchange Board of India. For AY 2022-23, the assessee filed its return of income on 26.07.2022, declaring a total income of ₹1,392,97,42,630. The return filed by the assessee was selected for scrutiny.

During the assessment proceedings, it was observed that the assessee computed the net short-term capital gains amounting to ₹312,17,86,831, after set off the short-term capital loss [on which securities transaction tax (STT) was paid], which is taxable at 15% under section 111A, against the short-term capital gains (on which STT was not paid), which is taxable at 30% under section 115AD. Thereafter, the assessee set-off the balance loss against the short-term capital gains earned on the transaction of sale of share subjected to STT. The AO held that section 111A and 115AD provide different rate of taxes and the assessee’s manner of setting-off its short-term capital loss, taxable at 15%, first against the short-term capital gains taxable at 30%, and the balance set off against the short-term capital gains taxable at 15% was disallowed. Accordingly, vide draft assessment order dated 14.3.2024, he computed the short term capital gain by first setting off 15% loss against 15% gains, and thereafter, set off with other gains.
Dispute Resolution Panel (DRP) rejected the objections filed by the assessee and upheld the computation of capital gains made by the AO vide draft assessment order.

Aggrieved, the assessee filed an appeal before ITAT

HELD

The sole issue before the Tribunal was whether the short-term capital loss (on which STT was paid) can be set off against short-term capital gains (on which STT was not paid)

Following the decisions of co-ordinate bench in a number of cases, the Tribunal observed that as per the provisions of section 70(2), the short-term capital loss can be set off against gain from any other capital asset. Section 70(2) does not make any further classification between the transactions where STT was paid and the transactions where STT was not paid and the term “similar computation” in section 70(2) only refers to the computation as provided under sections 48 to 55.

Accordingly, the Tribunal directed the AO to accept the methodology adopted by the assessee for the computation of capital gains.

In the result, the appeal of the assessee was allowed on this ground.

S. 56 – The term “immovable property” in section 56(2)(x) includes agricultural land. S. 56 – Where the assessee disputes the stamp duty value, the Assessing Officer is required to refer the matter to District Valuation Officer (DVO).

23 (2025) 174 taxmann.com 1111 (Ahd Trib)

Clayking Minerals LLP vs. ITO

ITA No.: 82 (Ahd) of 2025

A.Y.: 2018-19 Dated: 27.05.2025

S. 56 – The term “immovable property” in section 56(2)(x) includes agricultural land.

S. 56 – Where the assessee disputes the stamp duty value, the Assessing Officer is required to refer the matter to District Valuation Officer (DVO).

FACTS

The assessee filed its income tax return on 30.08.2018, declaring a loss of ₹1,24,010 for AY 2018-19. Subsequently, the case was selected for limited scrutiny to examine whether the purchase value of a property was less than the value determined by the stamp valuation authority under section 56(2)(x). During the course of assessment proceedings, the AO noted that the assessee purchased a property for ₹42,72,000 having stamp duty value of ₹1,15,62,880. The assessee contended that since the property was agricultural land at the time of purchase, it did not qualify as a “capital asset” as per section 2(14), and therefore, section 56(2)(x) was not applicable. The AO held that section 56(2)(x) was attracted and taxed the difference of ₹72,90,880 between the purchase consideration and the stamp duty value under the head “income from other sources”.

CIT(A) affirmed the addition of the AO.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) On a plain reading, it is seen that section 56(2)(x) mentions the term “any immovable property”. The term “immovable property” has not been defined in section 56(2)(x) or in any other section in the Income Tax Act. This renders the word to be interpreted in general parlance. In general understanding of the term, the word “immovable property” means an asset which cannot be moved without destroying or altering it. Going by the general definition, “immovable property” would include any rural agricultural land, in absence of any specific exclusion in section 56(2)(x).

(b) Notably, section 56(2)(x) does not use the word “capital asset”. The sale of rural agricultural land is exempt in the hands of the seller since the word “capital asset” has been specifically defined to exclude agricultural land in rural areas under section 2(14). Thus, sale of rural agricultural land shall not give rise to any capital gains in the hands of the seller as it is not considered as a capital asset itself. However, from the point of view of the “purchaser” of immovable property, section 56(2)(x) mentions “any immovable property” which going by the plain words of the statute, does not specifically exclude “agricultural land”.

(c) However, since the assessee had disputed the stamp duty value, the AO was required to make a reference to the DVO for the purpose of valuing the same as per third proviso to section 56(2)(x).

Accordingly, the matter was referred to the file of the AO with a direction to refer the valuation to DVO as requested by the assessee.

Editor’s Note: Please refer detailed analysis of this judgement in the Controversy Column of this issue on page 60

The expression “on the occasion of marriage” used in proviso to section 56(2)(vii) cannot be given restricted meaning. When the gift is associated with the event of marriage, the immediate reason or cause for the gift is the marriage of the recipient, it would be covered by the said expression and the relationship between the gift and the marriage is the relevant factor and not the time of making the gift.

22 Dhruv Sanjay Gupta vs. JCIT

ITA No. 5749/Mum./2024

A.Y.: 2013-14 Date of Order : 20.6.2025

Section : 56(2)(vii)

The expression “on the occasion of marriage” used in proviso to section 56(2)(vii) cannot be given restricted meaning. When the gift is associated with the event of marriage, the immediate reason or cause for the gift is the marriage of the recipient, it would be covered by the said expression and the relationship between the gift and the marriage is the relevant factor and not the time of making the gift.

FACTS

During the previous year relevant to the assessment year under consideration, the assessee claimed to have received gifts of ₹2,11,35,523 which he claimed to have been received on the occasion of his marriage. The assessee got married on 8.12.2012. The amounts of gifts received on occasion of marriage comprised of a sum of ₹2 crore received from Shri Anil Kumar Goel and balance ₹11,35,523 from Siddharth Jatia.

Anil Kumar Goel is the first cousin from paternal grandfather. The cheque from Anil Kumar Goel was dated 8.12.2012 and the Memorandum of Gift dated 8.12.2012 was also executed for the said gift. The cheque got cleared and credited to the bank account of the assessee on 18.12.2012 i.e. 10 days after the date of marriage. As regards second gift of ₹11,35,523 it was submitted that Siddharth Jatia is a family friend from Singapore and has gifted USD 21,000 vide cheque dated 4.12.2012 which has been gifted vide Gift Deed dated 4.12.2012. This cheque was cleared on 2.1.2013.

The Assessing Officer (AO) held that the amounts claimed by the assessee to be gifts on the occasion of marriage were received by the assessee after the occasion of the marriage, based on dates of clearing of cheques and amount getting credited to the bank account of the assessee. He thus, held that these transactions of gift received by the assessee are sham transactions wherein assessee has been used as a benami to build up his capital.

While treating the transaction of gift as sham transaction, AO observed in his order that there was a meagre balance in the bank account of the donor, Shri Anil Kumar Goel as on 13.12.2012 at ₹7,523. Also, on 16.12.2012, the balance was only ₹8,39,201. It was only on 17.12.2012 that the donor received ₹1.40 Crores from one, Shri Pinku Bagmar and ₹50 lakhs from grandfather of the assessee, i.e., Shri Devki Nandan Gupta. It was out of these funds that the cheque of gift given to the assessee was encashed and funds got transferred to the bank account of the assessee. According to the AO, the funds got transferred much after the date of marriage which occurred on 08.12.2012.

The AO took a view that no person can give a gift of money on a particular day which he does not possess or does not actually have. On the date of cheque i.e. 08.12.2012, Shri Anil Kumar Goel did not have sufficient balance in his bank account to give the gift of ₹2 Crores which was actually transferred to the assessee on 18.12.2012 after the receipt of moneys from Shri Pinku Bagmar and Shri Devki Nandan Gupta. Thus, he concluded that the amounts received by the assessee as gifts are not covered under the proviso to section 56(2)(vii), since the same were not received on the occasion of marriage but much later after the marriage. The AO also made an observation that gift received by the assessee was transferred back to Shri Devki Nandan Gupta on 19.12.2012. According to the AO, if assessee has received the gift for his marriage, then what was the need for him to transfer the same on the next day to Shri Devki Nandan Gupta. Based on these observations, AO concluded that transaction of gift is a sham transaction and assessee has been used as benami in the transactions between Shri Anil Kumar Goel and Shri Devki Nandan Gupta for building up of capital without incidence of tax.

In respect of the second gift from Shri Siddharth Jatia, the AO enquired from the bank by issuing notice u/s.133(6) about the said transaction. Based on this enquiry, AO noted that the said credit of amount of ₹11,35,523 mentioned by the bank is against export advance proceeds USD 4,779.85 by Manish Export. Based on this fact, AO concluded that it is not a gift received on the occasion of marriage but a sum received by the assessee without any consideration and therefore chargeable to tax.

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

Aggrieved, the assessee preferred an appeal to the Tribunal where further documentary evidences were submitted to substantiate creditworthiness of Shri Anil Kumar Goel and also of Devki Nandan Gupta. As regards certificate given by the Bank it was submitted that the Bank had inadvertently given a wrong certificate. Foreign Inward Remittance Certificate in Form 10H was produced to demonstrate that the amount received was gift.

HELD

The Tribunal held that the AO has taken a microscopic view of the term used in proviso to section 56(2)(vii) relating to “on the occasion of marriage”. The expression “on the occasion of marriage” used in proviso to section 56(2)(vii) cannot be given restricted meaning. When the gift is associated with the event of marriage, the immediate reason or cause for the gift is the marriage of the recipient, it would be covered by the said expression and the relationship between the gift and the marriage is the relevant factor and not the time of making the gift. Clause (b) of the proviso to section 56(2)(vii) mentions that the provisions of clause (vii) shall not apply to any sum of money or any property received “on the occasion of marriage of an individual”.

The Tribunal held that the observations made by the authorities below to be more of surmises and conjectures in nature rather than those made by bringing any cogent material on record to disprove the documents and the explanations furnished by the assessee. The Tribunal having taken into account all the documentary evidences and explanations, found that the gifts received by the assessee on the occasion of his marriage, though the amount were credited at a later date, which is 10 days after the date of marriage in the case of gift received from Shri Anil Kumar Goel and 15 days in the case of gift received from Shri Siddharth Jatia, i.e., on 02.01.2013 since the cheque was issued from the Singapore branch of the bank of the donor, are covered by the proviso to section 56(2)(vii) as the same are received by the assessee on the occasion of his marriage. Microscopic view taken by the AO of the expression “on the occasion of marriage” to receive a gift on the day of marriage as well as to get the account credited on the same date was held to be devoid of real-life situations.

The Tribunal deleted the addition made by the AO.

Where assessee is otherwise eligible to claim deduction and has submitted computation, mere typographical error in claiming deduction under section 54 instead of section 54F does not disentitle the assessee from getting relief under section 54F. Limitation of allowing deduction only if claimed in the return of income applies only to the AO and not to the Appellate Authority which can allow correct claim if facts on record support the claim being made.

21 Seema Srivastava vs. ITO

[2025] 175 taxmann.com 374 (Patna – Trib.)]

A.Y.: 2017-18 Date of Order : 6.6.2025

Sections : 54, 54F

Where assessee is otherwise eligible to claim deduction and has submitted computation, mere typographical error in claiming deduction under section 54 instead of section 54F does not disentitle the assessee from getting relief under section 54F. Limitation of allowing deduction only if claimed in the return of income applies only to the AO and not to the Appellate Authority which can allow correct claim if facts on record support the claim being made.

FACTS

During the previous year relevant to the assessment year under consideration, the assessee in her return of income declared capital gains arising on sale of immovable property and claimed deduction under section 54. During the course of assessment proceedings, the Assessing Officer (AO) disallowed the claim of deduction made under section 54 on the ground that the asset sold was not a residential house. Although section 54F could have applied, the AO held that assessee had not claimed deduction under section 54F nor submitted the requisite details.

Aggrieved, assessee preferred an appeal to the CIT(A) and contended that she was eligible to claim deduction under section 54F but had inadvertently claimed it under section 54 and this was a clerical error which should have been ignored and the rightful claim under section 54F should have been allowed. The CIT(A) rejected the ground of appeal and held that the eligibility of claim under section 54F was not substantiated.

Aggrieved, revenue preferred an appeal to the Tribunal.

HELD

The Tribunal considered the rival submission and having gone through the order of the Supreme Court in the case of Goetze India Ltd. vs. CIT [(2006) 284 ITR 323] agreed with the contention of the assessee that the limitation for allowing the deduction by filing a revised return is applicable only to the AO and not to the Appellate Authority. Accordingly, the CIT(A) ought to have allowed the deduction u/s 54F of the Act. It held that since this is a purely legal issue and the mistake occurred at the level of the AO and on behalf of the assessee, it was submitted that the matter may be sent back to the AO as he has disallowed the claim without specifying the fact that section 54F of the Act was not applicable.

The Tribunal held that since the assessee had purchased a residential house and was eligible for deduction u/s 54F of the Act, the order of the CIT(A) was to be set aside and the matter was remitted to the AO to allow the claim u/s 54F of the Act on the basis of evidence filed by the assessee. In case any further evidence is required, the same may also be furnished by the assessee before the AO. The action of the Tribunal was in light of the settled judicial principle that the claim under a wrong section does not bar the assessee from making the claim under the correct section, if the assessee is otherwise eligible. Even though the deduction has to be claimed in the return of income for being allowed by the AO, however, this limitation is only for the Assessing Authority and the Appellate Authority can grant the exemption/deduction claimed if the facts on record convey so. ,

 

Non-filing of Form 68 is only a technical or venial breach which should not snatch away the substantive right to claim immunity from levy of penalty, which assessee got vested with on fulfilment of substantive conditions mandated in Clause (a) & (b) of sub-section (1) of section u/s. 270AA of the Act.

20 New Dawath Traders vs. ITO

TS-119-ITAT-2025 (Mum.)

A.Y.: 2017-18 Date of Order : 14.2.2025

Sections: 270A, 270AA

Non-filing of Form 68 is only a technical or venial breach which should not snatch away the substantive right to claim immunity from levy of penalty, which assessee got vested with on fulfilment of substantive conditions mandated in Clause (a) & (b) of sub-section (1) of section u/s. 270AA of the Act.

FACTS

The assessee firm engaged in the business of wholesale rice trade in the name and style of M/s. Dawath Traders filed its return of income for AY 2017-18, on 30.10.2017, disclosing total income at ₹6,52,740. Later, the premises of the assessee was surveyed u/s.133A of the Act on 17.03.2017 and based on the survey findings, the return was selected for scrutiny and the AO assessed total income at ₹55,46,812 and since, the assessee has offered ₹30 lakhs under PMGKY Scheme, net-assessed income came down to ₹25,46,812.

Pursuant to the assessment order dated 30.12.2019, assessee remitted the tax computed at ₹8,70,297 within 30 days of the demand, and didn’t file any appeal against the assessment order dated 30.12.2019. Thus, assessee claimed that it was eligible/entitled for immunity from imposition of penalty u/s.270AA of the Act. However, the AO didn’t agree, because assessee didn’t file Form 68 before him, within the period stipulated under sub-section (2) of section 270AA of the Act. Accordingly, he issued notice u/s.270A of the Act, despite having taken note of the assessee’s assertion that it had paid tax & interest as per the assessment order u/s.143(3) of the Act dated 30.12.2019 [within the period specified in the notice of demand] and not having preferred an appeal against the assessment order.

The AO levied penalty u/s.270A of the Act, alleging assessee’s failure to explain on merits against disallowance/addition made in the assessment order and imposed penalty u/s.270A of the Act for under-reporting of income by levying penalty of ₹2,72,549 @ 50% of the amount of tax payable on under-reported income.

Aggrieved, assessee preferred an appeal to the CIT(A) who confirmed the action of the AO by observing that immunity [from levy of penalty u/s.270A of the Act] could have been granted only if the assessee had filed Form 68 within one month from the end of the month in which the assessment order has been received. In the absence of filing of such form, he rejected the claim of immunity and also observed that the assessee didn’t bring any evidence to show that the assessee’s case would fall under Rule 6DD of the Income Tax Rules, 1962 to exclude the transaction from violation of sec.40A(3) of the Act, which led to the disallowance of Rs.47,64,072.

Aggrieved, assessee preferred an appeal to the Tribunal.

HELD

The Tribunal noted that the assessee-firm has fulfilled conditions prescribed u/s.270AA of the Act for claiming immunity from imposition of penalty u/s.270A of the Act by duly remitting the tax & interest as per the order of the assessment as well as not filing any appeal against the assessment order dated 30.12.2019. Thus, it is noted that the assessee has fulfilled the conditions under Clause (a) & Clause (b) of sub-section (1) of section 270AA of the Act. However, the assessee didn’t file before the AO the application for immunity in Form 68 as prescribed by sub-section (2) of section 270AA of the Act. In case, if the assessee had filed Form 68 within the prescribed period stated in subsection (2), [i.e. within one month from the end of the month in which the assessment order was received by assessee] then the AO should have granted immunity from imposition of penalty u/s.270A of the Act. Having fulfilled both the conditions for grant of immunity as stipulated under clause (a) & (b) of sub-section (1) of section 270AA of the Act, which are substantive in nature except not filing Form 68 before AO, the assessee, in substance assessee was entitled for claiming immunity from imposition of penalty u/s.270A of the Act.

The Tribunal observed that courts are meant to do substantial justice between the parties, and that technical rules or procedure should not be given precedence over doing substantial justice. Undoubtedly, justice according to the law, doesn’t merely mean technical justice, but means that law is to be administered to advance justice [refer the decision dated 30.10.2017 of the Supreme Court in the case of Pankaj Bhai Rameshbhai Zalavadiya vs. Jethabhai Kalabhai Zalavadiya in Civil Appeal No.155549 of 2017].

In the given factual background, according to the Tribunal, non-filing of Form 68 was only a technical or venial breach which should not snatch away the substantive right to claim immunity from levy of penalty, which assessee got vested with on fulfilment of substantive conditions mandated in Clause (a) & (b) of sub-section (1) of section u/s.270AA of the Act. The Tribunal noted that it has been further brought to its notice that assessee has filed Form 68 [a copy of which is found placed at Page Nos.1-3 of the Paper Book which has been uploaded in the IT portal].

Considering the overall facts, the Tribunal held that no penalty ought to have been levied u/s.270A of the Act for under-reporting of income. It directed deletion of the penalty levied.

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.

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.

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.

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.

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.

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.

Payment of consideration, pursuant to an unregistered agreement, towards interior fit out costs claimed as cost of improvement, entered into prior to receiving possession of the property held to be allowable.

16. Shivani Bhasin Sachdeva vs. Assessment Unit

ITA No. 3218/Mum./2024

A.Y.: 2021-22 Date of Order: 21 January 2025

Section : 48

Payment of consideration, pursuant to an unregistered agreement, towards interior fit out costs claimed as cost of improvement, entered into prior to receiving possession of the property held to be allowable.

FACTS

The assessee, in the return of income filed, returned capital gains on sale of immovable property for a consideration of ₹15.21 crore and while computing capital gains arising from sale thereof had claimed deduction of cost of acquisition of ₹9.96 crore and ₹2.47 crore as cost of improvement. The assessee was asked to furnish details of cost of improvement claimed in respect of the property sold along with evidences.

From the response furnished by the assessee, the Assessing Officer (AO) noticed that assessee had purchased a flat on 27.12.2017 which was booked in October 2009. On 31.5.2010, the assessee had entered into an agreement with DLF Hotel and Apartment Pvt. Ltd. to carry out improvement. The AO was of the opinion that since the property was purchased on 27.12.2017 it was not possible to have made improvements without having owned the property. He also remarked that the agreement dated 31.5.2010 is an unregistered agreement. The AO, believing that improvement cannot happen before purchase disallowed the claim of ₹2.47 crore made by the assessee towards cost of improvement.

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

Aggrieved, assessee preferred an appeal to the Tribunal where it was contended that the payments made pursuant to agreement dated 31.5.2010 was for civil and electrical work as the flat was purchased “khokha”. After receiving occupancy certificate, civil and electrical work was completed on 29.3.2014 and letter of possession was given on 31.3.2014. The assessee leased the flat w.e.f. 25.6.2014 and sold it vide agreement for sale of flat dated 4.11.2020. The assumption of the AO that assessee could not have spent cost of improvement before taking ownership of the flat is against the facts of the case.

HELD

The Tribunal noted that the entire quarrel revolves around the fact that the assessee had purchased the flat on 27.12.2017, therefore, the assessee could not have spent cost of improvement paid to DLF Hotels and Apartments Pvt. Ltd. as per agreement dated 31.5.2010. The Tribunal noted the relevant clauses of the said agreement dated 31.5.2010 which provided detailed particulars of the fit-out work to be carried out under the said Agreement. It was pursuant to the said Agreement that the payments were made by the assessee and the AO has not disputed them.

The Tribunal held that after completion of the fit-out work which is now integral part of the apartment, letter of possession was received on 31.3.2014. Immediately after having received possession, flat was leased. These demonstrative evidences, according to the Tribunal, demolish the view taken by the AO that the assessee could not have incurred cost of improvement prior to 27.12.2017.

The Tribunal set aside the findings of the CIT(A) and directed the AO to allow cost of improvement as claimed by the assessee.

Property received by assessee from his step-sister is not taxable under section 56(2)(vii). Receipt of property from step-sister qualifies as a receipt from a relative viz. sister.

15. Rabin Arup Mukerjea vs. ITO, International Tax

ITA No. 588/Mum./2024

A.Y.: 2016-17 Date of Order: 21 March 2025

Section : 56(2)(vii)

Property received by assessee from his step-sister is not taxable under section 56(2)(vii). Receipt of property from step-sister qualifies as a receipt from a relative viz. sister.

FACTS

The assessee, a non-resident individual, did not have any source of income in India and was therefore not filing return of income. In January 2021, he made an application under section 197 for grant of certificate authorising the payer to deduct tax on sale of his property at a lower rate. The property being sold by the assessee was received by him as a gift from Ms. Vidhie Mukerjea vide a Registered Deed of Gift dated 21.1.2016.

The Assessing Officer (AO) was of the view that the receipt of property was not from a relative and therefore should have been taxed under section 56(2)(vii) and therefore he recorded reasons and reopened the assessment for assessment year 2016-17.

The AO in his order disposing objections raised by the assessee to reopening the assessment rejected the contention of the assessee that the step-brother and step-sister are covered within the ambit of the definition of the expression “relative” provided in clause (e) of the Explanation to section 56(2)(vii) of the Act. He held that step-brother and step-sister cannot be treated as relatives. The AO drew a pictorial tree of the members in the family.

The AO holding that the receipt of property from step-sister does not qualify as a receipt from a relative, taxed ₹7,50,68,525 under section 56(2)(vii) of the Act.

Aggrieved, assessee preferred an appeal to CIT(A) who confirmed the action of the AO and held that the definition stated in section 56(2) is to be interpreted keeping the blood relationship, lineal ascendant and lineal descendant and hence no further meaning could be ascribed to this term.

Aggrieved, assessee preferred an appeal to the Tribunal where it cited various provisions of different Acts to canvass that `step’ child has been recognised in various Acts e.g. section 2(15B) of the Income-tax Act, 1961, section 45S of the Reserve Bank of India Act, 1934 and section 2(77) of the Companies Act, 2013.

HELD

The Tribunal noted that Ms. Vidhie is daughter of Ms. Indrani Mukerjea from her husband Mr. Sanjeev Khanna whereas Mr. Rabin Mukerjea is first son of Mr. Peter Mukerjea with his first wife Mrs. Shabnam Singh. After the marriage of Ms. Indrani Mukerjea with Mr. Peter Mukerjea, Ms. Vidhie Mukerjea and Mr. Rabin Mukerjea became step-sister and step-brother due to alliance of marriage between their respective parents.

The Tribunal having noted the definition of the expression “relative” in clause (e) to the Explanation to section 56(2)(vii), observed that ergo, the Act uses the word `brother and sister of an individual’, in common parlance, there are 5 kinds of brother and sister relations.

The Tribunal considered the meaning of the term “relative” as given in Black’s Law Dictionary and also the meaning of the term “affinity” as explained in various dictionaries.

It held that as per the Dictionary meaning of the term “relative”, it includes a person related by affinity, which means the connection existing in consequence of marriage between each of the married persons and the kindred of the other. If the aforesaid Dictionary meaning is to be referred and relied upon, then the term ‘relative’ would include step-brother and step-sister by affinity. If the term `brother and sister of the individual’ has not been defined under the Act, then the meaning defined in common law has to be adopted and in the absence of any other negative covenant under the Act, it held that brother and sister should also include step-brother and step-sister who by virtue of marriage of their parents have become brother and sister.

The Tribunal held that the property received by the assessee from his step-sister being received  from a relative is not taxable under section 56(2)(vii) of the Act.

Section 50 applies only if the asset qualifies for inclusion in block of assets and therefore for grant of depreciation. Accordingly, section 50 was held not to apply to gains on transfer of trademarks since they were acquired by the assessee before the amendment by Finance (No. 2) Act, 1998 providing for inclusion of intangible assets in block and grant of depreciation thereon.

14. TS – 131 – ITAT – 2025 (Mum.)

Johnson & Johnson Pvt. Ltd. vs. DCIT

A.Y.: 2011-12 Date of Order: 10 February 2025

Sections : 2(11), 32, 50

Section 50 applies only if the asset qualifies for inclusion in block of assets and therefore for grant of depreciation. Accordingly, section 50 was held not to apply to gains on transfer of trademarks since they were acquired by the assessee before the amendment by Finance (No. 2) Act, 1998 providing for inclusion of intangible assets in block and grant of depreciation thereon.

FACTS

During the previous year relevant to the assessment year under consideration, the assessee, engaged in the business of manufacturing and sale of pharmaceutical formulation, sold two trade marks “Coldarin” and “Raricap”. Gains arising on transfer of these trademarks were offered for taxation under the head “Capital gains” as long-term capital gains. The Assessing Officer (AO) issued show cause notice asking the assessee to explain why the gains were offered as “long-term” and not as “short-term”. In response, the assessee submitted that the trademark “Coldarin” was acquired on 16.3.1998 and the trademark “Raricap” was acquired on 29.7.1992. It was submitted that since both these trademarks were acquired before 1.4.1998, they did not qualify for depreciation under section 32(1)(ii) of the Act. Therefore, the provisions of section 50 did not apply and consequently the gains were offered for taxation as “long-term capital gains”.

The AO held that allowance granted to absorb such expenditure is depreciation and nothing else. Nomenclature used by the assessee does not change the character of the allowance. Accordingly, he held that capital gains accruing on transfer of both trademarks fell within ambit of section 50 of the Act as The assessee availed depreciation in respect of cost of acquisition of these trademarks.

Aggrieved, assessee preferred an appeal to the CIT(A) who dismissed the same.

Aggrieved, revenue preferred an appeal to the Tribunal.

HELD

The Tribunal noted that in line with the accounting policy followed by the assessee the cost of trademark was charged by the assessee to the profit & loss account for financial year 1992-93 and similar treatment was given in computation of total income for AY 1993-94 and entire cost of trademark “Raricap” was claimed as deduction. As regards cost of trademark “Coldarin”, the same was claimed in Profit & Loss Account over a period of seven years in equal instalments. However, for tax purposes the cost so charged to P & L Account was disallowed and added back to taxable income but deduction was claimed under section 35AB in 6 equal instalments from AY 1998-99 to AY 2003-04.

The revenue contended that since the cost of trademarks was amortised, the allowance granted to absorb such expenditure is depreciation and the nomenclature does not change the real character of the allowance. Therefore, the capital gains accruing to the assessee squarely fall within the ambit of section 50 of the Act. The assessee contended that it is only intangible assets acquired on or after 1.4.1998 which qualified for inclusion in block of assets and claim of depreciation. Since the two trademarks sold were acquired prior to 1.4.1998, the same did not form part of block of assets in respect of which depreciation has been allowed. Therefore, the provisions of section 50 do not have any application to the facts of the present case. Both the trademarks having been held for a period of more than 3 years before their transfer, gain arising on transfer thereof has rightly been offered for taxation as “long-term capital gain”.

The Tribunal noted that the intent of section 50 is clear from its heading as well viz. that it provides for procedure for computation of capital gains in case of transfer of capital assets which form part of the block of assets and in respect of which depreciation has been allowed under the Act.

The Tribunal having noted the provisions of sections 2(11), 32 and 50 and also the Explanatory Memorandum to Finance (No. 2) Bill, 1998 concluded that depreciation is granted on intangible assets acquired on or after 1.4.1998. The expression “block of assets” includes intangible assets within its ambit only w.e.f. 1.4.1999. Prior thereto there was no provision in the Act for inclusion of intangible assets into the block of assets. The Tribunal held that provisions of section 50 did not have applicability to the facts of the present case. It quashed the findings of the lower authorities and upheld the action of the assessee in treating the capital gains to be “long-term”.

Disallowance in respect of interest expenditure, attributable to interest free advances, under section 36(1)(iii), is unsustainable when commercial expediency in transaction is substantiated.

13. TS-53-ITAT-2025 (Mum.)

ACIT vs. T Bhimjiyani Realty Pvt. Ltd.

A.Y.: 2018-19 Date of Order: 25 January 2025

Section: 36(1)(iii)

Disallowance in respect of interest expenditure, attributable to interest free advances, under section 36(1)(iii), is unsustainable when commercial expediency in transaction is substantiated.

FACTS

The assessee company, engaged in real estate business was developing a residential project at Thane. During the course of assessment proceedings, the Assessing Officer (AO) noticed that assessee had borrowed funds and was paying interest on such borrowings. It had also given interest free advances to various persons. Accordingly, the AO disallowed ₹16.98 crore being interest expenditure attributable to interest free advances.

Aggrieved, assessee preferred an appeal to CIT(A) who allowed this ground of appeal.

Aggrieved, revenue preferred an appeal to the Tribunal where the assessee, apart from supporting the legal principles followed by CIT(A), relying on the ratio of the following decisions, also argued that the advances were made in earlier years and in those years the AO did not make a disallowance, therefore no disallowance is called for in the year under consideration.

i) ITO vs. Abhinand Investment Ltd. [ITA No. 982/Kol./2016; Order dated 7.2.2018];

ii) CIT vs. Sridev Enterprises [192 ITR 165 (Kar.)];

iii) Virendar R Gandhi vs. ACIT [Tax Appeal No. 20 of 2004 and 124 of 2005 dated 27.11.2014].

HELD

The Tribunal noticed that the AO took a view that the assessee should have charged interest on advances given by it. It also noted that CIT(A) has followed 2 legal principles – first being examination of existence of commercial expediency in the transaction. It noted that the ratio of the decision of the Supreme Court in S A Builders vs. CIT [288 ITR 1 (SC)] is to examine if there is “commercial expediency” in giving of an interest free advance. If there exists “commercial expediency” then the same cannot be considered as diversion of interest bearing funds, since the same is for the purpose of business and under section 36(1)(iii) interest on capital borrowed for the purposes of business is allowable as deduction. The second legal principle which was followed by CIT(A) was, the ratio of the decision of the Bombay High Court in Reliance Utilities and Power Ltd. [313 ITR 340 (Bom.)], that if an assessee has both interest bearing funds as also interest free funds then the presumption is that the investment has first been made out of interest free funds. In that case disallowance of interest under section 36(1)(iii) shall not arise.

The Tribunal noted that each of the interest free advances were given pursuant to MOUs which were entered into by the assessee company in the course of carrying on of its business and for the purpose of business. It observed that the advances have been made in connection with business ventures with expectation of profits from the deal that will be entered by the respective parties. Since advances were made in the course of business with an expectation to earn share of profits from the deal, the CIT(A) held that the advances were made out of commercial expediency. It also noted that the advances were given in earlier years and AO did not make any disallowance in those years.

The Tribunal held that THE CIT(A) was justified in deleting the disallowance made by AO.

Ss. 269SS, 271D– Where the loan sanctioned to the assessee was directly disbursed to its vendor by NBFC and the assesseerecognised the liability as a loan through journal entry, such transaction does not contravene section 269SS since the provision does not extend to cases where a debt or liability arises merely due to book entries.

12. (2025) 172 taxmann.com 739 (MumTrib)

Jeevangani Films vs. JCIT

ITA No.: 382 (Mum) of 2025

A.Y.: 2015-16 Dated: 6th March, 2025

Ss. 269SS, 271D– Where the loan sanctioned to the assessee was directly disbursed to its vendor by NBFC and the assessee recognised the liability as a loan through journal entry, such transaction does not contravene section 269SS since the provision does not extend to cases where a debt or liability arises merely due to book entries.

FACTS

The assessee was a partnership firm engaged in the business of film production, distribution, and related activities. It regularly dealt with a vendor M/s. “R” for distribution of film and other work related to promotion, etc. During financial year 2014-15, the assessee was sanctioned a loan of ₹15 lakhs from a Non-Banking Financial Company (NBFC). The said NBFC disbursed the loan amount directly to M/s. “R” through banking channels. The assessee also made a payment of ₹10 lakhs to the same party from its own funds. Consequently, the assessee recorded the loan from the NBFC in its books of accounts by way of a journal entry recognizing the liability amounting to ₹15 lakhs.

The assessment was completed under section 143(3). Subsequently, penalty proceedings were initiated under Section 271D. During these proceedings, the AO treated the journal entry reflecting the loan as contravening section 269SS and imposed a penalty of ₹15 lakhs under section 271D.

The assessee preferred an appeal before the CIT(A) against the penalty order, who dismissed the appeal.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) There was no dispute that the amount of ₹15 lakh was paid through banking channels and was duly confirmed by both the NBFC and M/s. “R”. The loan amount of ₹15 lakh was disbursed directly to the said party. Furthermore, the balance amount of ₹10 lakh was paid by the assessee to the same party towards film promotion and other incidental charges. In its books of accounts, the assessee recorded the said transaction through a journal entry, recognizing the liability as a loan. Since the assessee was responsible for repaying the said amount, the loan was duly reflected in its books of accounts.

(b) A plain reading of section 269SS reveals that the provision applies to transactions where a deposit or loan is accepted by an assessee otherwise than by an account payee cheque, an account payee draft, or other prescribed banking modes. The scope of this provision is restricted to transactions involving the acceptance of money and does not extend to cases where a debt or liability arises merely due to book entries. The legislative intent behind section 269SS is to prevent cash transactions, as is evident from clause (iii) of the Explanation to the section, which defines a “loan or deposit” as a “loan or deposit of money.” Consequently, a liability recorded in the books of accounts through journal entries—such as crediting the account of a party to whom money is payable or debiting the account of a party from whom money is receivable—falls outside the purview of section 269SS, as such entries do not involve the actual acceptance of a loan or deposit in monetary form. This is also supported by CIT vs. Triumph International Finance (I) Ltd. [2012] 22 taxmann.com 138 (Bom.), CIT vs. Noida Toll Bridge Co. Ltd. [2004] 139 Taxman 115 (Delhi) and CIT vs. Worldwide Township Projects Ltd. [2014] 48 taxmann.com 118 (Delhi).

Thus, the Tribunal held that the transaction entered into by the assessee was outside the ambit of section 269SS. Accordingly, the appeal of the assessee was allowed.

S. 56–Gift received by step-brother from his step-sister is exempt under section 56(2) since the term “relative” includes brother and sister by way of affinity.

11. (2025) 172 taxmann.com 855(Mum Trib)

Rabin Arup Mukerjea vs. ITO

ITA No.: 5884 (Mum) of 202

A.Y.: 2016-17 Dated: 21st March, 2025

S. 56–Gift received by step-brother from his step-sister is exempt under section 56(2) since the term “relative” includes brother and sister by way of affinity.

FACTS

The assessee, Mr. “R”, is an individual and non-resident Indian. He received a property located at Worli, Mumbai in 2016 as gift from Ms. “V”, his step-sister, by way of a registered gift deed wherein Ms. “V” had been referred to as “donor” and “sister”, and Mr. “R” had been referred as “donee” and “brother”.

Subsequently, Mr. “R” decided to sell the property and applied for certificate under section 197for lower rate of TDS. On the basis of this information, the AO issued notice under section 148 for AY 2016-17 on the ground that step-brother and step-sister cannot be treated as “brother and sister of the individual” under clause (e) of Explanation to section 56(2)(vii). Accordingly, he added ₹7.50 crores (being stamp value of the property) in the hands of Mr. “R” as income from other sources.

CIT(A) upheld the action of the AO.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

On the question of whether the gift given by step-sister to step-brother falls within definition of “relative” under section 56(2)(vii), after noting the background of relationship between the assessee and Ms. “V” and the family tree, etc., the Tribunal observed that-

(a) To understand whether step-brother and step-sister can be treated as “relative” for the purpose of Income-tax Act, some inference can be drawn from the provisions of different Acts such as section 45S of the Reserve Bank of India Act, 1934 and section 2(77) of the Companies Act, 2013.

(b) According to the Black’s Law Dictionary, “relative” includes persons connected by ties of affinity as well as consanguinity and when used with a restrictive meaning refers to those only who are connected by blood. Individual related by affinity also include individual in a step or adoptive relationship. Thus, the term “relative” would also include “step brother and step sister”.

(c) Although Indian Succession Act is applicable for the right of inheritance where step child has no legal right to inherit the property of his or his step parent, but it does not lead to inference that step brother and step sister who are related by affinity because of marriage of the respective parents cannot be reckoned as brother and sister within the term “relative”.

(d) What is to be seen is whether the step brother and step sister can be said to be relative by way of affinity. Different dictionaries suggest that step sister and step brother are part of the family by affinity and in common sense they are related to each other as brother and sister.

(e) As per the Dictionary meaning of the term “relative”, it includes a person related by affinity, which means the connection existing in consequence of marriage between each of the married persons and the kindred of the other. If the Dictionary meanings are to be referred and relied upon, then the term “relative” would include step brother and step sister by affinity.

(f) If the term “brother and sister of the individual” has not been defined under the Income-tax Act, then, the meaning defined in common law has to be adopted and in absence of any other negative covenant under the Act, brother and sister should also include step brother and step sister who by virtue of marriage of their parents have become brother and sister.

Accordingly, the Tribunal held that gift given by step sister, that is, Ms. “V” to her step brother, that is, Mr. “R”, is to be treated as gift from sister to brother and therefore, falls within the definition of “relative” undersection 56(2)(vii) and consequently, property received by brother from sister cannot be taxed under section 56(2).

Accordingly, the appeal of the assessee was allowed on merits.

S.56–Where the assessee received a new flat in lieu of old flat surrendered under a redevelopment agreement, the transaction would not be regarded as receipt of immovable property for inadequate consideration for the purpose of section 56(2)(x).

10. (2025) 173 taxmann.com 51 (MumTrib)

Anil DattaramPitale vs. ITO

ITA No.: 465 (Mum) of 2025

A.Y.: 2018-19

Dated: 17th March, 2025

S.56–Where the assessee received a new flat in lieu of old flat surrendered under a redevelopment agreement, the transaction would not be regarded as receipt of immovable property for inadequate consideration for the purpose of section 56(2)(x).

FACTS

The assessee purchased a flat in financial year 1997-98 in “M” Co-op Housing Society. The Society underwent redevelopment as per the agreement entered with the developer. As per the terms and conditions of the agreement, the assessee got a new flat vide registered agreement dated 26.12.2017 in lieu of the old flat surrendered by him. The stamp duty value of the new flat was ₹25,17,700 and the indexed cost of the old flat was ₹5,43,040. The AO assessed the difference of ₹19,74,660 as income of the assessee under section 56(2)(x), which was confirmed by CIT(A).

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) The facts show that this was a case of extinguishment of old flat and in lieu thereof, the assessee got new flat as per the agreement entered with the developer for redevelopment of the Society. It was not a case of receipt of immovable property for inadequate consideration that would fall within the purview of section 56(2)(x).

(b) At the most, the transaction could attract the provisions relating to capital gains, in which case, the assessee was entitled to exemption under section 54 and thus, there would be no tax liability on the assessee on this count as well.

Accordingly, the appeal of the assessee was allowed.

Sec 69A r.w.s. 115BBE: Assessing Officer was not correct in invoking provisions of section 69A and section 115BBE, since assessee had recorded cash deposits of ₹10.75 lakhs during demonetization period in his books of account and source of cash deposits was also maintained by assessee.

9. [2024] 115 ITR(T) 624 (Ahmedabad – Trib.)

Dipak Balubhai Patel (HUF) vs. ITO

ITA NO.: 942 (AHD.) OF 2023

A.Y.: 2017-18 DATE: 22nd August 2024

Sec 69A r.w.s. 115BBE: Assessing Officer was not correct in invoking provisions of section 69A and section 115BBE, since assessee had recorded cash deposits of ₹10.75 lakhs during demonetization period in his books of account and source of cash deposits was also maintained by assessee.

FACTS

The assessee filed his return of income for the AY 2017-18 declaring total income of ₹5.73 lakhs. The return was taken up for scrutiny assessment. The Assessing Officer found that the assessee in his account with Bank of Baroda deposited a sum of ₹10.75 lakhs during demonetization period and issued show cause notice to explain the above source of cash deposit.

The assessee explained the source of cash deposit was withdrawal from four other banks accounts. The cash deposits were duly reflected in the return of income filed in ITR-2. The assessee was not having any business income but rental income and other sources income only, therefore he had not filed the profit and loss account and balance sheet along with return of income.

The Assessing Officer rejected the books of account by stating that on the verification of the return of income filed for the assessment year 2016-17, assessee had shown closing cash on hand as Nil and in the cash book of financial year 2016-17 i.e. assessment year 2017-18, assessee had shown opening balance to the tune of ₹10.10 lakhs which was not justifiable. Therefore addition was made as unexplained money under section 69A and the same was taxed under section 115BBE.

On appeal, the Commissioner (Appeals) confirmed the additions.

HELD

The ITAT observed that during the assessment proceedings, the Assessing Officer had rejected the explanation offered by the assessee. In the return of income, the assessee had shown closing cash on hand as Nil but in the cash book shown the opening balance for assessment year 2017-18 to the tune of ₹10.09 lakhs.

The ITAT observed that the assessee before Appellate Commissioner filed copies of previous three years Form 26AS, ITR, Statement of Income, Profit and Loss account and Balance Sheet and further explained the rental income with appropriate TDS under section 194I which was clearly reflected in Form 26AS.

The ITAT observed that after declaration of the demonetisation period, the assessee deposited the withdrawal amounts from his bank account which had been offered for tax by filing return of income as well as subject to deduction under section 194I.

The ITAT observed that in the present case, the assessee had recorded the above cash deposits in his books of account and source of cash deposits during demonetisation period were also maintained by the assessee. Therefore, the Assessing Officer was not correct in invoking provisions of section 69A and charging tax under section 115BBE. Thus, ITAT held that the addition made by the Assessing Officer was to be deleted.

Sec 115JB r.w.s. 2(26): Banks constituted as ‘corresponding new banks’ and not registered under Companies Act, 2013 would not fall under the provisions of section 115JB and, therefore, tax on book profits (MAT) would not be applicable to such banks.

8. [2024] 115ITR(T) 481 (Mumbai – Trib.)

Union Bank of India vs. DCIT

ITA NO.: 3740 (MUM.) OF 2018 &424 (MUM.) OF 2020

A.Y.: 2013-14 & 2015-16 DATE: 6th September, 2024

Sec 115JB r.w.s. 2(26): Banks constituted as ‘corresponding new banks’ and not registered under Companies Act, 2013 would not fall under the provisions of section 115JB and, therefore, tax on book profits (MAT) would not be applicable to such banks.

FACTS

For the A.Y. 2015-16, the AO asked the assessee to furnish the computation of book profit and also required theassessee as to why provisions and contingency, debited to the profit and loss account, should not be added back for the computation of book profit u/s115JB. In response, assessee submitted that even though in computation assessee had worked out MAT on book profit, the provision of Section 115JB was itself not applicable to the assessee bank.

However, the AO rejected the assessee’s plea on the ground that the amended provision of Section 115JB w.e.f. 01/04/2013 (by insertion of clause (b) to sub-section (2) to section 115JB), brings within its ambit even the banking companies. Thus, the AO concluded that now the amended provision provides that not only the companies governed by the Companies Act, but also other companies governed by other regulating act including Banking Regulation Act, 1949 are also covered by the provision of Section 115JB.

On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer.

HELD

The ITAT observed that according to clause (a) of amended section 115JB, the company has to prepare its profit and loss account in accordance with the Companies Act, 2013 and the first proviso to sub-section (2) requires that while preparing the accounts including the profit and loss account, the same should be in accordance with the provisions of section 129 of the Companies Act, 2013. Since the assessee bank has to prepare its accounts in accordance with the provisions contained in the Banking Regulation Act, Schedule III of the Companies Act is not applicable. Thus, clause (a) of section 115JB(2), will not apply.

The ITAT observed that for clause (b), following conditions need to be satisfied for applying section 115JB in the case of a company:-(i) the second proviso to sub-section (1) of section 129 of the Companies Act, 2013 should be applicable; (ii) once this condition is fulfilled, it requires such assessee for the purpose of this section to prepare its profit and loss account in accordance with the provisions of the Act governing such company.

The ITAT observed that for an entity to qualify as a company, it must be a company formed and registered under the Companies Act. The assessee was not formed and registered under the Companies Act, and came into existence by a separate Act of Parliament, i.e., ‘Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970’. Hence, it does not fall in the first part of the said section.

The assessee bank was not formed or registered under the Companies Act. Once it is not a company under the Companies Act, then the first condition referred to in clause (b) of section 115JB(2) is not fulfilled, and consequently second proviso below section 129(1) of the Companies Act was also not applicable.

The ITAT observed that section 11 of the Acquisition Act specifies that the corresponding new bank is to be treated as an Indian company for the purpose of income-tax. However, clause (b) in sub-section 2 to section 115JB did not permit treatment of such bank as a company for the purpose of the said clause, because it should be a company to which the second proviso to sub-section (1) to section 129 of the Companies Act was applicable. The said proviso had no application to the corresponding new bank as it was not a banking company for the purpose of the said provision. The expression ‘company’ used in section 115JB(2)(b) was to be inferred to be company under the Companies Act and not to an entity which is deemed by a fiction to be a company for the purpose of the Income-tax Act.

Thus, ITAT held that clause (b) to sub-section (2) of section 115JB of the Income-tax Act inserted by Finance Act, 2012 with effect from 1-4-2013 (from assessment year 2013-14 onwards), is not applicable to the banks constituted as ‘corresponding new bank’ in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Therefore, the provisions of section 115JB cannot be applied and consequently, the tax on book profits (MAT) are not applicable to such banks.

Sec. 48 r.w.s. 50A & 55A.: Assessing Officer has no right to replace Government approved valuer’s opinion with his own.

7 [2024] 116 ITR(T) 261 (Mumbai – Trib.)

Piramal Enterprises Ltd. vs. DCIT

ITA NO.:3706 & 5091(MUM.) OF 2010

AY.: 2005-06

Dated: 11th January, 2024

Sec. 48 r.w.s. 50A & 55A.: Assessing Officer has no right to replace Government approved valuer’s opinion with his own.

FACTS I

The assessee had sold a flat at Malabar Hills during the year under consideration and for computing the cost of Acquisition of the said flat the assessee adopted the fair market value as on 1-4-1981 based on valuation report of government valuer. The AO after rejecting the valuation made by the valuer, calculated the cost of acquisition by assessing the rate at ₹1480 per sq. ft. as compiled in the reference book and thereby made an addition of ₹2,98,680/-.

Aggrieved by the order, the assessee preferred an appeal before the CIT(A). The CIT(A) upheld the addition. Aggrieved by the CIT(A) order, the assessee preferred an appeal before ITAT.

HELD I

The ITAT observed that for the year under consideration, the AO had no power to refer the matter for valuation to the Department Valuation Officer (DVO) but rather had power under section 50A of the Act to refer the case to the valuation officer in case the valuation adopted by the assessee was lower than the fair market value. But at the same time section 50A of the Act inserted by Finance Act, 2012 is prospective in nature as has been held by Hon’ble Jurisdictional High Court in case of CIT vs. Puja Prints[2014] 43 taxmann.com 247/224 Taxman 22/360 ITR 697 (Bom.).

The ITAT held that when the assessee had calculated the cost of acquisition on the basis of fair market value determined by the government valuer the AO had no right to replace the government approved valuer’s opinion on his own.

Thus, the appeal of the assessee was allowed to the extent of this ground.

Sec. 24.: Where assessee continued to be owner of part premises of House, rental income should be assessed only under the head income from house property and assessee would be entitled for statutory deduction @30% under section 24(a) for same.

FACTS II

The AO had treated the rental income earned by the assessee during the year under consideration from the let out portion of the property named “RP house” as income from other sources instead of income from house property on the ground that the assessee was not the owner of the property. The CIT(A) had confirmed the action of AO.

Aggrieved by the CIT(A) Order, the assessee preferred an appeal before ITAT.

HELD II

The ITAT followed the order passed by the co-ordinate Bench of the Tribunal on the identical issue in its own case for A.Y. 2003-04 & 2004-05 wherein rental income earned by the assessee from let out portion of RP house was treated as income from house property and directed the AO to assess the rental income of let out portion of RP house as income from house property.

S. 115BBC – Where the tax department had recognized the assessee-trust as both charitable and religious in terms of approvals granted under section 80G and section 10(23C)(v) and therefore, its case was covered by exception under section 115BBC(2), it cannot be held that the Assessing Officer had formed a legally valid belief for the purpose of section 147 that the cash donations received by the assessee were taxable under section 115BBC. S. 11(1)(a) – Accumulation under section 11(1)(a) is allowable on the gross receipts of the assessee and not on net receipts. S. 11(2) – Any inaccuracy or deficiency in Form No. 10 would not be fatal to the claim of accumulation under section 11(2).

6 (2025) 171 taxmann.com 392 (Mum Trib)

Sai Baba Sansthan Trust vs. DCIT

ITA Nos.: 932 & 935(Mum) of 2023

A.Ys.: 2013-14

Dated: 17th January, 2025

S. 115BBC – Where the tax department had recognized the assessee-trust as both charitable and religious in terms of approvals granted under section 80G and section 10(23C)(v) and therefore, its case was covered by exception under section 115BBC(2), it cannot be held that the Assessing Officer had formed a legally valid belief for the purpose of section 147 that the cash donations received by the assessee were taxable under section 115BBC.

S. 11(1)(a) – Accumulation under section 11(1)(a) is allowable on the gross receipts of the assessee and not on net receipts.

S. 11(2) – Any inaccuracy or deficiency in Form No. 10 would not be fatal to the claim of accumulation under section 11(2).

FACTS – I

The assessee was a charitable organisation registered under section 12A, section 80G and section 10(23C)(v). It was having a temple complex in the town of Shirdi consisting of Samadhi of a popular Saint fondly called as “Shri Sai Baba” and also other deities. The assessee usually receives huge amount of cash donations by way of hundi collections / charity box collections from the followers/devotees of Shri Sai Baba where the name and address of the contributor is not maintained. The assessee filed its return of income for A.Y. 2013-14 declaring NIL income which was processed under section 143(1).

Taking note of the Annual Information Report (AIR) for A.Y. 2013-14 and based on the stand taken by him for A.Y. 2015-16, the AO sought to reopen the assessee’s assessment by issuing notice under section 148 dated 23.3.2018 on the basis that cash deposits of ₹257 crores received by the assessee were taxable as anonymous donations under section 115BBC.The writ petition filed by the assessee against the notice was rejected by the High Court. SLP against the said High Court judgment was also rejected by the Supreme Court. Accordingly, the AO proceeded to pass the reassessment order wherein he determined the total income of the assessee at ₹67.01 crores, besides bringing the anonymous donations of ₹175.53 crores to tax @ 30% under section 115BBC.

On appeal, CIT(A) held that the reopening of the assessment was valid. On merits, CIT(A) held that the assessee was both charitable and religious trust and hence it would fall within the exceptions provided under section 115BBC(2). Consequently, he held that the anonymous donations received by the assessee were not taxable in the hands of the assessee. However, on other issues, CIT(A) confirmed the additions.

Aggrieved, both the parties filed appeals before the Tribunal.

HELD – I

The Tribunal observed that-

(a) At the time of recording of reasons for reopening, the AO should have been aware of the approval granted to the assessee under section 10(23C)(v) which is granted to a trust existing wholly for public religious purposes or wholly for public religious and charitable purposes. If the approvals under section 80G and section 10(23C)(v) granted by the income tax authorities were read together, there should not have been any doubt that the tax department has recognized the assessee trust as existing “wholly for charitable and religious purposes” which was covered by the exception listed in section 115BBC(2). Accordingly, had the AO considered both these approvals, he would not have entertained the belief that the assessee would be covered by section 115BBC.

(b) The AO had relied upon the approval granted under section 80G only and had chosen a document which would suit his requirement and ignored another important document which went in favour of the assessee, which is not permitted in law.

(c) Even on merits, in the appeals for AY 2015-16 to 2018-19, the Tribunal had held that the assessee was a charitable and religious trust, which order was upheld by the Bombay High Court vide its order dated 8.10.2024 in (2024) 167 taxmann.com 304 (Bombay).

Thus, the Tribunal held that the belief entertained by the AO, without considering the record in totality, could not be considered as a legally valid belief under section 147 and accordingly, the reopening of assessment was not valid.

HELD – II

On the issue of accumulation under section 11(1)(a), following the decision of the Supreme Court in CIT vs. Programme for Community Organisation,(2001) 248 ITR 1 (SC), the Tribunal held that accumulation under section 11(1)(a) is to be allowed on the gross receipts and not on the net receipt.

FACTS – III

In the return of income, the assessee had claimed accumulation of income under section 11(2) to the tune of ₹183.26 crores. During the course of assessment proceedings, it came to light that the assessee had omitted to disclose receipts from educational and medical activities to the tune of ₹78.84 crores. The assessee agreed to the addition of said amount and prayed that the deduction under section 11(1)(a) @ 15% of the above receipts should be allowed and further claimed enhanced accumulation under section 11(2) for the balance amount of ₹67.01 crores.

The AO noticed that the Form No. 10 filed by the assessee during assessment proceedings had certain deficiencies such as (a) it did not mention the date;(b) it did not quantify the amount to be accumulated; (c) the Board resolution passed for accumulation mentioned all types of objects; and (d) the amount to be accumulated was incorrectly mentioned as ₹575 crores. Therefore, he rejected the claim for enhancement of accumulation under section 11(2). However, he allowed the claim of accumulation of ₹183.26 crores as was originally claimed in the return of income.

CIT(A) upheld the action of the AO.

HELD – III

The Tribunal observed that the AO, even after pointing out the deficiencies in Form No. 10, had allowed the claim of accumulation under section 11(2) as originally claimed in the return of income. Therefore, such deficiencies should not come in the way of allowing the enhanced accumulation claimed by the assessee during assessment proceedings. In any case, as held by Gujarat High Court in CIT (E) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust, (2019) 102 taxmann.com 122 (Gujarat), any inaccuracy or lack of full declaration in the prescribed format by itself would not be fatal to the claimant for the purpose of section 11(2). Accordingly, the Tribunal directed the AO to allow the enhanced amount of accumulation claimed under section 11(2).

In the result, the appeal filed by the assessee was allowed and the appeal of the Revenue was dismissed.

S. 270A – Where the Assessing Officer had not specified in the assessment order or in the notice issued under section 274 read with section 270A as to under which limb of section 270A(2) or section 270A(9) the case of the assessee fell, no penalty under section 270A was leviable. S. 270A – Where the profit of the assessee had been estimated by resorting to section 145(3), no penalty under section 270A was leviable

5 (2025) 171 taxmann.com 133(Pune Trib)

DCIT vs. Chakradhar Contractors and Engineers (P.) Ltd.

ITA No.:1939 & 1940(Pun) of 2024

A.Y.: 2020-21 & 2021-22.

Dated: 26th December, 2024

S. 270A – Where the Assessing Officer had not specified in the assessment order or in the notice issued under section 274 read with section 270A as to under which limb of section 270A(2) or section 270A(9) the case of the assessee fell, no penalty under section 270A was leviable.

S. 270A – Where the profit of the assessee had been estimated by resorting to section 145(3), no penalty under section 270A was leviable

FACTS

The assessee was a company engaged in the business of construction. It filed its return of income declaring total income by estimating the income from contract work at 7.37% of the turnover. The AO completed scrutiny assessment by estimating the income from contract work at 10 per cent of the turnover, which the assessee accepted and paid the due taxes thereon.

Subsequently, the AO initiated penalty proceedings under section 270A. Referring to section 270A(9), he levied penalty @ 200% of the tax payable on the under-reported income in consequence of misreporting.

On appeal, CIT(A) cancelled the penalty on the ground that the AO had not specified the sub-limb under section 270A(9)(a) to (g) and therefore, the penalty was not sustainable.

Aggrieved, the tax department filed appeals before ITAT.

HELD

The Tribunal held that where the Assessing Officer had not specified, either in the assessment order or in the notice issued under section 274 read with section 270A, as to under which limb of provisions of section 270A(2) or section 270A(9) the case of the assessee falls, no penalty under section 270A was leviable.

Further, applying the various decisions under erstwhile section 271(1)(c) that penalty was not leviable when the profit was estimated, the Tribunal held that since the profit of the assessee had also been estimated by resorting to the provisions of section 145(3), no penalty under section 270A was leviable.

Accordingly, the appeals of the tax department were dismissed.

S. 12AB – Absence of registration under Rajasthan Public Trusts Act, 1959 cannot be a ground to deny registration under section 12AB since such non-registration did not prohibit the assessee to carry out its objects.

4 (2025) 171 taxmann.com 569 (Jaipur Trib)

APJ Abdul Kalam Education and Welfare Trust vs. CIT(E)

ITA No. 567 (Jpr) of 2024

A.Y.: N.A.

Date of Order: 15th January, 2025

S. 12AB – Absence of registration under Rajasthan Public Trusts Act, 1959 cannot be a ground to deny registration under section 12AB since such non-registration did not prohibit the assessee to carry out its objects.

FACTS

The assessee was running a hostel. It obtained provisional registration under section 12A(1)(ac)(vi) on 3.8.2022. Thereafter, it applied for final registration on 30.9.2023.

CIT(E) rejected the application for final registration and cancelled the provisional registration on the grounds that (a) non-registration under the Rajasthan Public Trusts Act, 1959 (RPT) was in violation of section 12AB(1)(b)(ii)(B); (b) it was not specifically mentioned in the trust deed that foreign donations will be taken only after prior approval under Foreign Contribution (Regulation) Act, 2010 (FCRA); and (c) the assessee was not able to prove genuineness of its activities.

Aggrieved with the order of CIT(E), the assessee filed an appeal before ITAT..

HELD

Distinguishing Aurora Educational Society v. CCIT, (2011) 339 ITR 333 (Andhra Pradesh) and New Noble Educational Society vs. CCIT, (2022) 448 ITR 594 (SC) on the ground that the said cases applied to educational institutions only, the Tribunal observed that a plain reading of section 12AB (1) (b) (ii) (B) shows that compliance of requirement of any other law is required if compliance under such other law is material for achieving its objects. Section 17 of the RPT Act, 1959 requires that trustees of the trust have to apply for registration of a public trust. However, there is no section in the RPT Act, 1959 which prohibits a trust to carry out its objects if it is not registered under the RPT Act, 1959. Both the statutes, namely Income-tax Act and RPT Act, have their own provisions and implications and none of them have overriding effect. Even if the assessee trust was not registered with the RPT Act, 1959 and the concerned officials under the RPT Act, 1959 deemed it necessary to get the entity registered under section 17 of the RPT Act, 1959, appropriate action could be taken against the trustees of the trust. However, this issue cannot be a hurdle in getting registration under section 12AB of the Income-tax Act. Accordingly, the Tribunal directed the CIT(E) to not deny registration on this ground.

Considering the provisions of FCRA, the Tribunal directed the assessee trust to incorporate the relevant amendment in the trust deed mentioning that prior to receiving any foreign remittance whatever may be the form or nomenclature, prior approval will be taken from the Ministry of Home Affairs, Govt. of India, and produce the same for verification (in original) before CIT (E). Accordingly, the Tribunal restored the matter back to the file of CIT(E).

Since the assessee had furnished all the information and documents such as Income an Expenditure Account, note on activities etc. and the observations of the CIT(E) were either wrong or self-contradictory in nature, the Tribunal held that the CIT(E) was wrong in rejecting the registration on the ground of genuineness of activities and directed him to accept the reply of the assessee in toto.

Accordingly, the appeal of the assessee was allowed.

Reassessment Notice issued beyond the surviving time limit would be time-barred. Surviving time limit can be calculated by computing number of days between the date of issuance of deemed notice u/s 148A(b) of the Act and 30thJune, 2021. The clock of limitation which has stopped w.e.f. date of issuance of S. 148 notices under the old regime (which is also the date of issuance of deemed notices) would start running again when final to the notice deemed to have been issued u/s 148A(b) of the Act is received by the AO.

3 Addl CIT vs. Ramchand Thakurdas Jhamtani

ITA No. 3553/Mum./2024

A.Y.: 2014-15

Date of order: 28th February, 2025

Section: 149

Reassessment Notice issued beyond the surviving time limit would be time-barred. Surviving time limit can be calculated by computing number of days between the date of issuance of deemed notice u/s 148A(b) of the Act and 30th June, 2021. The clock of limitation which has stopped w.e.f. date of issuance of S. 148 notices under the old regime (which is also the date of issuance of deemed notices) would start running again when final to the notice deemed to have been issued u/s 148A(b) of the Act is received by the AO.

FACTS

For AY 2014-15, a notice u/s 148 of the Act (old regime) was issued to the Assessee on 07.06.2021 (i.e., after the expiry of 4 years but before the expiry of 6 years from the end of AY 2014-2015). Subsequently, in compliance with the judgment of the Apex Court, dated 4.5.2022, in the case of UOI vs. Ashish Agarwal [444 ITR 1 (SC)], communication, dated 25.05.2022, was sent to the Assessee intimating that the aforesaid notice issued u/s 148 of the Act (under old regime) would be treated as the show-cause notice issued in terms of Section 148A(b) of the Act (under new regime introduced by the Finance Act, 2021 w.e.f. 01.04.2021). The Assessing Officer (AO) also shared with the Assessee material / information on the basis of which he had formed a belief that income had escaped assessment.

The Assessee filed reply on 09.06.2022. Thereafter, order u/s 148A(d) of the Act was passed on 24.07.2022 after taking approval from the Principal Commissioner of Income Tax (PCIT), Mumbai. This was followed by issuance of notice on 24.07.2022 u/s 148 of the Act (new regime). The reassessment proceedings culminated into passing of the Assessment Order, dated 26.05.2023, passed u/s 147 r.w.s. 144B of the Act.

Aggrieved by the assessment, the Assessee preferred an appeal to CIT(A) who vide Order dated 16.05.2024 allowed the appeal.

Aggrieved, the Revenue preferred the present appeal before the Tribunal challenging the relief granted by the CIT(A), while the Assessee has filed cross-objection challenging the validity of the re-assessment proceedings.

The contention, on behalf of the Assessee was that the AO has passed order u/s 148A(d) of the Act and has issued notice u/s 148 of the Act (new regime) after the expiry of surviving period as computed according the judgment of the judgment of the Apex Court in the case UOI vs. Rajeev Bansal [(2024) 469 ITR 46]. Therefore, both, the order u/s 148A(d) of the Act and the notice u/s 148 of the Act (new regime) are barred by limitation.

HELD

The Tribunal observed that the issue which arises for consideration is whether the order, dated 24.07.2022, passed u/s 148A(d) of the Act and notice, dated 24.07.2022, issued u/s 148 of the Act (new regime) were passed / issued within the prescribed time. It noted that there is no dispute as to facts. It is admitted position that the notice issued u/s 148 of the Act (old regime) on 24.07.2022, was treated as notice issued u/s 148A(b) of the Act by the Assessing Officer (AO). Thereafter, order u/s 148A(d) of the Act, was passed on 24.07.2022, and the same was followed by issuance of notice dated 24.07.2022, u/s 148 of the Act (new regime). Thus, the notice u/s 148 of the Act (new regime) was issued after the expiry of 6 years from the end of the relevant assessment year.

The Tribunal noted the observations of Apex Court in the case of UOI vs. Rajeev Bansal [(2024) 469 ITR 46] which have been made in relation to the interplay between the judgment of the SC in the case of UOI vs. Ashish Agarwal [444 ITR 1] and TOLA.

The Tribunal held that on perusal of the observations of the Apex Court it becomes clear that the assessing officer was required to complete the procedures within the ‘surviving time limit’ which can be calculated by computing the number of days between the date of issuance of the deemed notice u/s 148A(d) of the Act and 30th June 2021 (i.e. the extended time limit provided by TOLA for issuing reassessment notices u/s 148, which fell for completion from 20.03.2020 to 31.3.2021).

The clock of limitation which has stopped with effect from the date of issuance of S. 148 notices under the old regime (which is also the date of issuance of the deemed notices), would start running again when final reply to the notice deemed to have been issued u/s 148A(b) of the Act is received by the AO. It was clarified that a reassessment notice issued beyond the surviving time limit would be time-barred.

The Tribunal observed that, in the present case, notice u/s 148 of the Act (old regime) was issued on 07.06.2021 and was deemed to be notice issued u/s 148A(b) of the Act (new regime). Thus, the surviving time limit can be calculated by computing the number of days between the date of issuance of the deemed notice (i.e., 07.06.2021) and 30.06.2021, which comes to 23 days. The clock started ticking only after Revenue received the response of the Assesses to the show causes notices on 09.06.2022. Once the clock started ticking, the AO was required to complete these procedures within the surviving time limit of 23 days which expired on 02.07.2022. Since notice u/s 148 of the Act was issued on 24.07.2022 which fell beyond the surviving time limit that expired on 02.07.2022, the Tribunal held that the notice issued u/s 148 of the Act to be time-barred and therefore, bad in law.

The Tribunal quashed notice dated 24.7.2022 issued u/s 148 of the Act (new regime), the consequential reassessment proceedings and the Assessment Order, dated 26.5.2023, passed u/s 147 r.w.s. 144B of the Act.

Thus, Cross-Objection raised by the Assessee was allowed and accordingly, all the grounds raised by the Revenue in the departmental appeal in relation to the relief granted by the CIT(A) on merits were dismissed as having been rendered infructuous.

In view of the First Proviso to S. 149(1)(b) of the Act a notice u/s 148 of the Act (new regime) cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed u/s 149(1)(b) of the Act (new regime) applies prospectively. The said Proviso limits the retrospective operation of S. 149(1)(b) to protect the interests of the assesses.

2 Addl CIT vs. Ramchand Thakurdas Jhamtani

ITA No. 3552/Mum./2024

A.Y.: 2015-16

Date of Order: 28th February, 2025

Section: 149

In view of the First Proviso to S. 149(1)(b) of the Act a notice u/s 148 of the Act (new regime) cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed u/s 149(1)(b) of the Act (new regime) applies prospectively. The said Proviso limits the retrospective operation of S. 149(1)(b) to protect the interests of the assesses.

FACTS

For AY 2015-16, notice u/s 148 of the Act was issued to the Assessee on 30.06.2021 (i.e., after the expiry of 4 years but before the expiry of 6 years from the end of the relevant AY). Subsequently, in compliance with the judgment of the Apex Court, dated 4.5.2022, in the case of UOI vs. Ashish Agarwal [444 ITR 1 (SC)], communication, dated 25.05.2022, was sent to the Assessee intimating that the aforesaid notice issued u/s 148 of the Act (under old regime) would be treated as the show-cause notice issued in terms of Section 148A(b) of the Act (under new regime introduced by the Finance Act, 2021 w.e.f. 01.04.2021). The Assessing Officer (AO) also shared with the Assessee material / information on the basis of which he had formed a belief that income had escaped assessment. Thereafter, order u/s 148A(d) of the Act was passed on 27.07.2022 which was followed by issuance of notice u/s 148 of the Act on 27.07.2022.

The reassessment proceedings culminated into passing of the Assessment Order, dated 29.05.2023, passed u/s 147 r.w.s. 144B of the Act.

Aggrieved by the assessment made, the assessee preferred an appeal to CIT(A) who allowed the appeal videhis Order dated 16.05.2024.

Aggrieved, the Revenue preferred the present appeal before the Tribunal challenging the relief granted by the CIT(A), while the Assessee filed cross-objection challenging the validity of the re-assessment proceedings.

HELD

The Tribunal, first dealt with the cross objections of the Assessee. It noted that the issue which arises for consideration is whether notice, dated 27.07.2022, issued u/s 148 of the Act (new regime) is barred by limitation specified in S. 149 of the Act as contended, on behalf of the Assessee.

The Tribunal observed that it is admitted position that the notice, dated 30.06.2021, issued u/s 148 of the Act (old regime) was treated as notice issued u/s 148A(b) of the Act by the AO. Thereafter, order u/s 148A(d) of the Act was passed on 27.07.2022, and the same was followed by issuance of notice, dated 27.07.2022, issued u/s 148 of the Act (new regime) (i.e. after the expiry of 6 years from the end of the Assessment Year 2015-2016).

The Tribunal noted the contention made on behalf of the Assessee that as per First Proviso to S. 149(1) of the Act, no notice u/s 148 of the Act (new regime) could have been issued after 31.03.2022.

The Tribunal noted the relevant portions of the decision of the SC, in the case of UOI vs. Rajeev Bansal [(2024) 469 ITR 46], dealing with notice issued u/s 148 for AY 2015-16 and in relation to first proviso to section 149(1) of the Act (new regime). On perusal of the relevant extracts of the said decision of the SC, the Tribunal held that the SC has clarified as under –
(a) a notice could be issued u/s 148 of the new regime for AY 2021-2022 and assessment years prior thereto only if the time limit for issuance of such notice continued to exist u/s 149(1)(b) of the old regime;

(b) in view of the First Proviso to S. 149(1)(b) of the Act a notice u/s 148 of the Act (new regime) cannot be issued if the period of six years from the end of issuance of the notice. This also ensures that the new time limit of ten years prescribed u/s 149(1)(b) of the Act (new regime) applies prospectively. The said Proviso limits the retrospective operation of S. 149(1)(b) to protect the interests of the assesses.

Having noted that, in the present case, the time limit of 6 years from the end of AY 2015-2016 expired on 31.03.2022, the Tribunal held that, as per S. 149(1)(b) read with First Proviso to S. 149(1) of the Act (new regime), notice u/s 148 of the Act could not have been issued for the AY 2015-2016 after 31.03.2022. It held that notice, dated 27.07.2022, issued u/s 148 of the Act was barred by limitation.

The Tribunal also noted that before the Apex Court in the case of Rajeev Bansal [(2024) 469 ITR 46], the Revenue has conceded that for the AY 2015-16, notices issued on or after 01/04/2021, would have to be dropped and this has been recorded by the SC in para 19 of the decision of the Apex Court.

In view of the above, the Tribunal quashed the notice, dated 27.07.2022, issued u/s 148 of the Act and the consequent the Assessment Order, dated 29.05.2023, passed u/s 147 read with Section 144B of the Act as being bad in law.

Thus, Cross-Objection raised by the Assessee was allowed and accordingly, all the grounds raised by the Revenue in the departmental appeal in relation to the relief granted by the CIT(A) on merits were dismissed as having been rendered infructuous.

Non-compliance by the AO with the provisions contained in S. 148A(d) r.w.s. 151(ii) of the new regime affects the jurisdiction of the AO to issue a notice u/s 148 of the Act. Since the order u/s 148A(d) dated 30.7.2022 and also notice u/s 148 were issued with approval of Principal Commissioner of Income-tax instead of Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax, the consequential reassessment proceedings and also the order dated 25.5.2023 passed u/s 147 r.w.s. 144B of the Act were quashed as bad in law and were held to be violative of the provisions contained in Ss. 148A(d), 148 and 151(ii) of the Act.

1 Addl CIT vs. Ramchand Thakurdas Jhamtani

ITA No. 3551/Mum./2024

A.Y.: 2017-18

Date of Order: 28th February, 2025

Sections: 148, 148A, 151

Non-compliance by the AO with the provisions contained in S. 148A(d) r.w.s. 151(ii) of the new regime affects the jurisdiction of the AO to issue a notice u/s 148 of the Act. Since the order u/s 148A(d) dated 30.7.2022 and also notice u/s 148 were issued with approval of Principal Commissioner of Income-tax instead of Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax, the consequential reassessment proceedings and also the order dated 25.5.2023 passed u/s 147 r.w.s. 144B of the Act were quashed as bad in law and were held to be violative of the provisions contained in Ss. 148A(d), 148 and 151(ii) of the Act.

FACTS

A notice u/s 148 of the Act (old regime) was issued to the Assessee for the AY 2017-2018 on 28.06.2021 (i.e., after the expiry of 3 years but before 30.06.2021 — extended period time granted by TOLA1 ). Subsequently, in compliance with the judgment of the Apex Court, dated 4.5.2022, in the case of UOI vs. Ashish Agarwal [444 ITR 1 (SC)], communication, dated 27.05.2022, was sent to the Assessee intimating that the aforesaid notice issued u/s 148 of the Act (under old regime) would be treated as the show-cause notice issued in terms of S. 148A(b) of the Act (under new regime introduced by the Finance Act, 2021 w.e.f. 01.04.2021). The AO also shared with the Assessee material/information on the basis of which he had formed a belief that income had escaped assessment.

1 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020

Thereafter, order u/s 148A(d) of the Act was passed on 30.07.2022 after taking approval from the Principal Commissioner of Income Tax (PCIT), Mumbai. This was followed by issuance of notice on 30.07.2022 u/s 148 of the Act (new regime). The reassessment proceedings culminated into passing of the Assessment Order, dated 25.05.2023, passed u/s 147 r.w.s. 144B of the Act.

The appeal preferred by the Assessee against the aforesaid Assessment Order was allowed by the CIT(A) vide Order, dated 16.05.2024.

Aggrieved, the Revenue preferred the present appeal before the Tribunal challenging the relief granted by the CIT(A), while the Assessee filed cross-objection challenging the validity of the re-assessment proceedings.

HELD

The Tribunal, at the outset, observed that the issue which arises for consideration is whether the PCIT or the PCCIT was the Specified Authority for seeking approval for passing order u/s 148A(d) of the Act and issuance of notice u/s 148 of the Act (new regime) for the AY 2017-18.

The Tribunal having considered the decision of the Apex Court in the case of UOI vs. Rajeev Bansal [(2024) 469 ITR 46], to the extent it has dealt with issue of approval from Specified Authority in terms of section 151 of the Act, noted that the Supreme Court has clarified as under –

(a) under new regime introduced by the Finance Act, 2021 Assessing Officer was required to obtain prior approval or sanction of the ‘Specified Authority’ at four stages – at first stage under Section 148A(a), at second stage under Section 148A(b), at third stage under Section 148A(d), and at fourth stage under Section 148. In the case of Ashish Agarwal [444 ITR 1] the Apex Court waived off the requirement of obtaining prior approval u/s 148A(a) and u/s 148A(b) of the Act only. Therefore, the AO was required to obtain prior approval of the ‘Specified Authority’ according to Section 151 of the new regime before passing an order u/s 148A(d) or issuing a notice u/s 148;

(b) under new regime if income escaping assessment is more than ₹50 lakhs a reassessment notice could be issued after expiry of three years from the end of the relevant previous year only after obtaining the prior approval of the Principal Chief Commissioner(PCCIT) or Principal Director General (PDGIT) or Chief Commissioner (CCIT) or Director General (DGIT);

(c) the test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20th March, 2020 and 31st March, 2021, then the ‘Specified Authority’ under Section 151(i) has an extended time till 30th June 2021 to grant approval;

(d) S. 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the AO with the strict time limits prescribed u/s 151 affects their jurisdiction to issue a notice under section 148;

(e) grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.

The Tribunal held that, in the present case, the period of 3 years from the end of the AY 2017-2018 fell for completion on 31.3.2021. The expiry date fell during the time period of 20.3.2020 and 31.3.2021, contemplated u/s 3(1) of TOLA. Resultantly, the authority specified u/s 151(i) of the new regime could have granted sanction till 30th June, 2021.

On perusal of the order, dated 30.07.2022, passed u/s 148A(d) of the Act the Tribunal found that the aforesaid order was passed after taking approval from PCIT. The Tribunal held that since the aforesaid order was passed after the expiry of 3 years from the end of the AY 2017-2018, as per the new regime, the authority specified under Section 151(ii) of the Act (i.e. PCCIT or CCIT) was required to grant approval. The Tribunal also noted that even the notice, dated 30.07.2022, was issued u/s 148 of the Act (new regime) after obtaining the prior approval of the PCIT.

The Tribunal concluded that, in the present case, the approval has been obtained by authority specified u/s 151(i) of the new regime instead of the authority specified u/s 151(ii) of the new regime.

The Tribunal held that non-compliance by the AO with the provisions contained in S. 148A(d) r.w.s. 151(ii) of the new regime affects the jurisdiction of the AO to issue a notice u/s 148 of the Act. Accordingly, the order, dated 30.07.2022 passed u/s 148A(d) of the Act, the consequential reassessment proceedings and the order, dated 25.05.2023, passed u/s 147 r.w.s. 144B of the Act were quashed as being bad in law as being violative of the provisions contained in Ss. 148A(d), 148 and 151(ii) of the Act.

The Tribunal allowed the cross objections filed by the assessee and dismissed, as infructuous, all the grounds raised by the Revenue in the appeal in relation to the relief granted by CIT(A) on merits.

Sec. 28: Where during search at residential premises of director of assessee-company, AO found that assessee had made out of books sales and added entire undisclosed sales to income of assessee, however, Commissioner (Appeals) restricted same to profit element embedded therein estimated at rate of 8 per cent of sales, since revenue had not given any basis to justify applying higher rate of net profit at 12.5 per cent instead of 8 per cent, addition restricted by Commissioner (Appeals) to 8 per cent of sales was to be upheld. Also, Commissioner (Appeals) failed to give benefit of income surrendered by assessee voluntarily against addition confirmed by him on account of unaccounted sales, Assessing Officer was to be directed to grant assessee benefit of income surrendered by assessee against addition confirmed by Commissioner (Appeals).

84. ACIT vs. Conor Granito (P.) Ltd

[2024] 116 ITR(T) 479 (Rajkot – Trib.)

ITA NO.: 143 (RJT) OF 2021

CO NO.: 01 (RJT) OF 2022

A.Y.: 2019-20

Dated: 12th January, 2024

Sec. 28: Where during search at residential premises of director of assessee-company, AO found that assessee had made out of books sales and added entire undisclosed sales to income of assessee, however, Commissioner (Appeals) restricted same to profit element embedded therein estimated at rate of 8 per cent of sales, since revenue had not given any basis to justify applying higher rate of net profit at 12.5 per cent instead of 8 per cent, addition restricted by Commissioner (Appeals) to 8 per cent of sales was to be upheld. Also, Commissioner (Appeals) failed to give benefit of income surrendered by assessee voluntarily against addition confirmed by him on account of unaccounted sales, Assessing Officer was to be directed to grant assessee benefit of income surrendered by assessee against addition confirmed by Commissioner (Appeals).

FACTS

During search at the residential premises of the director of the assessee-company, various incriminating material by way of WhatsApp message / images were discovered and on analysis of the same, it was discovered that the assessee had made out of books sales which during the impugned year amounted to ₹2,35,42,980/-. The Assessing Officer added entire undisclosed sales to the income of the assessee. The ld.CIT(A), however, restricted the same to the profit element embedded therein estimated at the rate of @ 8 per cent of the sales.

Aggrieved, the revenue filed an appeal and assessee filed cross objections before the Tribunal –

HELD

ITAT observed that the contention of the Revenue was that the ld.CIT(A) ought to have applied 12.5 per cent net profit rate instead of 8 per cent. However, the Revenue had not given any basis to justify applying higher rate of net profit at 12.5 per cent.

ITAT held that net profit to be applied was to be at justifiable rate depending upon nature of the business and other facts. It should not be an ad hoc rate and there has to be a reasonable basis for applying a particular net profit rate in each case. The DR had not supported his contention of applying 12.5 per cent GP rate with any reasonable basis. ITAT held that profit rate specified in the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, [2013] 356 ITR 451 as cited by DR could not be justifiable rate in assessee’s case as the nature of activities of both the assessees were not identical.

Therefore, ITAT did not find any merit in the contentions of the DR that the ld.CIT(A) ought to have applied a net profit of 12.5 per cent in the present case. The ground raised by the Revenue was accordingly rejected.

Thus, the appeal of the Revenue was dismissed.

With respect to Cross Objections filed by the assessee, the ld.CIT(A) had failed to give benefit of the income surrendered by the assessee voluntarily against addition confirmed by him on account of unaccounted sales.

In the light of the same, ITAT directed the assessing officer to grant assessee the benefit of the income surrendered of ₹15 lakhs against the addition confirmed by the ld.CIT(A).

The Cross Objection was accordingly allowed.

Sec. 69A: Assessee deposited cash during demonetisation period of `10.75 lakhs which was recorded in his books of account and source of cash deposits was also maintained by assessee. However, Assessing Officer made addition as unexplained money under section 69A and taxed same under section 115BBE. ITAT held that Assessing Officer was not correct in invoking provisions of section 69A and charging tax under section 115BBE as assessee had recorded in his books of accounts and also explained source of such cash deposits.

83. Dipak Balubhai Patel (HUF) vs. ITO

[2024] 115ITR(T) 624 (Ahmedabad- Trib.)

ITA NO.:942(AHD) OF 2023

AY.: 2017-18

Dated: 22nd August, 2024

Sec. 69A: Assessee deposited cash during demonetisation period of `10.75 lakhs which was recorded in his books of account and source of cash deposits was also maintained by assessee. However, Assessing Officer made addition as unexplained money under section 69A and taxed same under section 115BBE. ITAT held that Assessing Officer was not correct in invoking provisions of section 69A and charging tax under section 115BBE as assessee had recorded in his books of accounts and also explained source of such cash deposits.

FACTS

The assessee was a HUF who derived income from House Property and Income from Other Sources. The case was selected for scrutiny assessment and the Assessing Officer found that assessee deposited a sum of ₹10,75,000/- during demonetisation period and issued show cause notice to explain the source of cash deposit.

The assessee explained the source of cash deposit as withdrawal from four other banks accounts of the assesse and the said deposits were duly reflected in his Return of Income. Further since assessee did not have any business income, therefore he had not filed the Profit and Loss Account and Balance Sheet along with Return of Income. However, the assessee filed the same before the
Assessing Officer along with cash book, wherein cash on hand as on 1st April, 2016 as opening balance was ₹10,09,933/-, which was deposited during demonetisation period.

However, Assessing Officer rejected the Books of Accounts by stating that assessee had shown Closing Cash on hand as zero in return of income filed for the A.Y. 2016-17, and in the Cash Book of F.Y. 2016-17 i.e. A.Y. 2017-18, assessee has shown Opening Balance to the tune of ₹10,09,933/- which was not justifiable and therefore made addition as unexplained money u/s. 69A of the Act.

Aggrieved against the addition, the assessee filed an appeal before CIT(A) who confirmed the additions by observing that during the previous 3 years, except 2 or 3 instances, all withdrawals were less than ₹10,000 and the appellant claimed that the withdrawals were preserved during last 3 years in his hand and were deposited in the year under consideration.

Since 95 per cent of the withdrawals were less than ₹10,000, CIT(A) observed that as per common sense these cash withdrawals were for day to day expenses and if the appellant had so much of cash with him then what was the need for frequent withdrawals of ₹5,000 and ₹10,000. The CIT(A) relied on decisions of CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) where the Supreme Court has laid down Human Probability test as one of the important test in order to check genuineness of the transactions entered into the books of account of the assesses. Hence it was held by CIT(A) that the appellant failed to satisfactorily explain the source of ₹10,75,000 cash deposited in the bank account and the assessing officer was correct in treating this amount as unexplained cash under section 69A.

The appellant being aggrieved with the order of the CIT(Appeals) filed an appeal before the ITAT.

HELD

The ITAT observed that during the assessment proceedings, the Assessing Officer had rejected the explanation offered by the assessee as the assesse had showed closing cash on hand as Nil in the Return of Income but in the cash book showed the opening balance for A.Y. 2017-18 to the tune of ₹10,09,933/-.

The ITAT further observed that the assessee had filed copies of previous three years Form 26AS, ITR, Statement of Income, Profit and Loss account and Balance Sheet before CIT(A)and further explained that rental income was offered to tax with appropriate TDS u/s. 194I of the Act which was reflecting in Form 26AS records. Since the assessee was a Senior Citizen, he withdrew and kept substantial balance in his bank accounts for emergency medical needs. However, after declaration of the demonetization period, the assessee deposited the withdrawal amounts from his other bank accounts.

The ITAT observed that Assessing Officer erroneously treated cash deposits as unexplained cash and also invoked Section 115BBE of the Act and charged at 60 per cent rate which was not applicable to the present case since the cash deposits were reflected in the books of accounts maintained by the assessee. The ITAT relied on decision in case of Balwinder Kumar ([2023] 151 taxmann.com 338 (Amritsar – Trib.)) and Sri Sriram Manchukonda (2021 TaxCorp (AT.) 91806 Visakhapatnam ITAT) wherein co-ordinate Bench of the Tribunal held in favour of the assessee.

Respectfully following the above judicial precedents, ITAT observed that the addition made by AO u/s. 69A will be applicable only when the assessee is found to be the owner of any money etc. which is not recorded in the books of accounts maintained by him and any explanation offered by the assessee is not satisfactory in the opinion of the Assessing Officer.

ITAT observed that in the present case, the assessee had recorded the cash deposits in his books of accounts and source of cash deposits during demonetization period were also been maintained by the assessee. Therefore, ITAT held that the A.O. was not correct in invoking provisions of Section 69A of the Act and charging tax u/s. 115BBE of the Act. Thus the addition made by the Assessing Officer were deleted.

In the result, the appeal filed by the Assessee was allowed.

S. 127–Where the case of the assesse was transferred from one AO to another AO in a different city / locality / place, PCIT was under a statutory obligation to give an opportunity of being heard to the assessee.

82. Amit Kumar Gupta vs. ITO

(2025) 171 taxmann.com 16 (Raipur Trib)

ITA Nos.: 404 & 405 (Rpr) of 2024

A.Ys.: 2011-12 & 2012-13

Dated: 13th January, 2025

S. 127–Where the case of the assesse was transferred from one AO to another AO in a different city / locality / place, PCIT was under a statutory obligation to give an opportunity of being heard to the assessee.

FACTS

During the relevant year, the assessee had made cash deposits amounting to ₹17,05,824 into his bank account but did not file his income tax return. Based on the information gathered from NMS / ITS module, the AO (ITO-1, Ambikapur) initiated proceedings under section 147 by issuing notice under section 148 dated 23rd March, 2018. Thereafter, pursuant to an order under section 127 dated 7.9.2018 passed by PCIT-1, Bilaspur, the assessee’s case was transferred from ITO-1 Ambikapur to ITO-3, Korba. Since the assessee did not come forth with any explanation in response to notice under section 142(1), the AO taxed the entire cash deposit as unexplained money under section 69A vide his order under section 144 read with section 147 dated 16th December, 2018.

The assessee challenged the assessment order before CIT(A), inter alia, on the ground that PCIT had transferred his case from one ITO to another ITO without affording any opportunity of being heard as required under section 127. CIT(A) dismissed the appeal, inter alia, holding that he was not the appropriate forum to challenge the order under section 127 passed by PCIT.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that-

(a) As can be gathered from section 127(3), in a case where the PCIT transfers the case of as assessee from any AO to any other AO and the offices of all such officers are not situated in the same city, locality or place, then he remains under a statutory obligation to give an opportunity of being heard to the assessee and only after recording his reasons for doing so,
transfer such case. In the assessee’s facts, the case had been transferred pursuant to the order of PCIT, Bilaspur dated 7th September, 2018 from ITO-1, Ambikapur to ITO-3, Korba, that is, offices of said officers were not situated in the same city, locality or place, and therefore, on a conjoint reading of section 127(1) / (3), he was obligated to have given an opportunity to the assessee prior to transfer of his case.

(b) CIT(A) was not right in holding that he was not vested with any jurisdiction to deal with the specific challenge raised by the assessee as regards the validity of the assessment order that was framed by the A.Ode-hors a valid assumption of jurisdiction on his part in absence of an order of transfer under section 127 as required per the mandate of law.

Accordingly, the Tribunal restored the matter back to the file of CIT(A) with a direction to adjudicate the challenge of the assessee as regards the validity of the jurisdiction that was assumed by the A.O for framing of the assessment order passed under section 144 read with section. 147 dated 16th December, 2018 de-hors an order of transfer under section 127 as per the mandate of law.

S. 80G – Where the application for final approval under section 80G was rejected due to incorrect section code in the application, the issue was remanded back to the file of CIT(E) to grant final approval under correct provision if assessee-trust was otherwise eligible.

81. Rotary Charity Trust vs. CIT(E)

(2025)170 taxmann.com 797(Mum Trib)

ITA No.: 6133(Mum) of 2024

A.Y.: 2024-25

Dated: 9th January, 2025

S. 80G – Where the application for final approval under section 80G was rejected due to incorrect section code in the application, the issue was remanded back to the file of CIT(E) to grant final approval under correct provision if assessee-trust was otherwise eligible.

FACTS

Assessee was a registered charitable trust incorporated on 25th September, 1996, engaged in promoting various public charitable activities especially providing education to weaker section of the society and to specially-abled children. It made an application for provisional registration under section 80G of the Act, which was granted under clause (iv) of first proviso to section 80G(5) on 4th April, 2022 which was valid for the period starting 4th April, 2022 to AY 2024-25. Subsequently, the assessee filed application in Form 10AB for final registration; in this Form, instead of selecting section code “clause (iii) of first proviso to section 80G(5)”, the assessee inadvertently once again selected “sub-clause (B)of clause (iv) of first proviso to section 80G (5)”.

CIT(E) rejected the application on the ground that the assessee was not fulfilling the stipulated conditions prescribed undersection 80G(5)(iv)(B).

Aggrieved, the assessee filed an appeal before ITAT.

HELD

The Tribunal noted that there was merit in the claim of the assessee that it had selected the wrong section code inadvertently while filing the application for final approval in Form 10AB and it was not given the opportunity of being heard by CIT which otherwise would have allowed the assessee to explain the facts to avoid the rejection.

Following the decision in North Eastern Social Research Centre vs. CIT(E), (2024) 165taxmann.com 12 (Kolkata – Trib.), the Tribunal remitted the issue back to the CIT(E) with a direction to grant final approval under clause (iii) to first proviso to section 80G(5) if the assessee was otherwise found eligible.

S.12AB, 13 — Where the applicant trust was a charitable cum religious trust and its objects were for the benefit of a particular religious community or caste, that is, Jains, it was not entitled to registration under section 12AB.

80. Soudharma Brihad Tapogachchiya Tristutik Jain Sangha Samarpanam vs. CIT(E)

(2025)170 taxmann.com 590 (AhdTrib)

ITA No.:1571 (Ahd) of 2024

A.Y.: N.A.

Dated: 3rd January, 2025

S.12AB, 13 — Where the applicant trust was a charitable cum religious trust and its objects were for the benefit of a particular religious community or caste, that is, Jains, it was not entitled to registration under section 12AB.

The assessee-trust was settled on 5th January, 2023 with objects which required it to follow the principles of Jainism, etc. and was registered with the Assistant / Deputy Charity Commissioner, Ahmedabad. It filed application for registration under section 12AB in Form 10AB on 13th January, 2024 before CIT(E). In this application, the applicant mentioned that it had charitable objects in addition to religious objects.

CIT(E) denied registration under section 12AB on the ground that the assessee was a composite trust and its object was restricted to benefit of a particular religious community or caste, that is, Jains, which was a “specified violation” under clause (d) of Explanation below section 12AB(4) read with section 13(1)(b).

Aggrieved with the order of CIT(E), the assessee filed an appeal before ITAT.

FACTS

The Tribunal observed that-

(a) A perusal of the main objects of the trust made it abundantly clear that all the objects were related to religious activities, more particularly relating to “Jain Community” and to propagate “Jainism”, that is, charitable cum religious in nature and was for the benefit of “Jains” which was a specific violation under clauses (c)/ (d) to Explanation to section12AB(4).

(b) In CIT vs. Dawoodi Bohara Jamat, (2014) 364 ITR 31 (SC), the Supreme Court held that section 13(1)(b)(which prescribed the circumstances wherein the exemption would not be available to a religious or charitable trust)was applicable even to a composite trust / institution having both religious and charitable objects. Section 13(1)(b)was required to be read in conjunction with the provisions of sections 11 and 12 towards determination of eligibility of a trust to claim exemption under the aforesaid provisions, while granting registration.

Accordingly, the Tribunal held that the order denying registration to the assessee did not require any interference and dismissed the assessee’s appeal.