Income Tax Appellate Tribunal judgments

ITAT Pune holds that the Commissioner of Income Tax (Appeals) cannot dismiss appeals merely for non-prosecution but must adjudicate grounds on merit under Section 250(6) of the Income Tax Act. The ruling reinforces the obligation of appellate authorities to ensure substantive justice, impacting taxpayers facing procedural dismissals.

ITAT Delhi rules that interest-free advances to wholly owned subsidiaries are justified under commercial expediency, rejecting Revenue's notional interest addition. The tribunal also deleted ad-hoc disallowances, emphasizing documentary evidence over presumptive additions, reinforcing tax treatment of intra-group transactions.

ITAT Bangalore rules that registered societies under the Karnataka Societies Registration Act are not liable for taxation at the maximum marginal rate under Section 167B of the Income-tax Act. The ruling clarifies that such entities are taxed at slab rates, offering relief to welfare associations and similar bodies from higher tax burdens.

The ITAT Delhi has ruled that negative cash balances in digital accounting records cannot be aggregated as unexplained income under Section 69A. Only the highest single negative balance - if substantiated - may be considered, preventing automatic tax additions from system errors or duplicate entries. This protects businesses from punitive assessments based on flawed digital data and clarifies the limits of the Peak Theory in modern bookkeeping contexts.

The ITAT Delhi ruled that when the CPC condones a delay in e-verification of an income tax return, the tax department cannot deny a TDS refund on technical grounds. This upholds Article 265 of the Constitution, ensuring no tax can be levied or refunded without legal authority, and protects taxpayers who face genuine personal hardships beyond their control.

ITAT Delhi has ruled that delays of nearly five years in filing income tax appeals may be condoned under Section 249(3) if denying relief would result in a miscarriage of justice, emphasizing that technical limitations must yield to substantive fairness. This sets a critical precedent for taxpayers facing prolonged administrative delays, reinforcing that procedural rigidity cannot override equitable outcomes in tax adjudication.

ITAT Kolkata holds that any income tax assessment framed by an Assessing Officer beyond their prescribed pecuniary jurisdiction under CBDT Instruction 1/2011 is null and void from the outset, regardless of substantive correctness. This reinforces that jurisdictional compliance is a mandatory precondition for validity, affecting all assessees and tax authorities navigating delegated powers under the Income Tax Act.

ITAT Delhi ruled that taxpayers cannot claim interest deductions under Section 36(1)(iii) if they fail to prove borrowed funds were exclusively used for business purposes, especially when those funds were also deployed in exempt income-generating assets. The ruling reinforces that Section 14A disallowance cannot be assumed - it must be substantiated with clear allocation evidence, impacting all businesses with mixed-use borrowings and exempt income streams.

The ITAT Kolkata has ruled that a faceless assessment under Section 151A is jurisdictionally void if the statutory notification empowering the National Faceless Assessment Centre was issued only after the assessment order was framed. This sets a critical precedent: procedural compliance with notification timelines is not optional but foundational to the validity of faceless assessments, affecting all taxpayers subject to centralized scrutiny under the Income Tax Act.

The ITAT Kolkata has ruled that the Centralized Processing Centre cannot make tax adjustments under Section 143(1) without first issuing a show-cause notice to the assessee, violating the foundational principle of natural justice. This sets a critical precedent for all taxpayers whose returns are processed automatically, ensuring procedural fairness in AI-driven tax assessments.

ITAT Agra quashed a Rs.16.28 lakh addition under Section 69 after ruling that revenue cannot rely solely on unauthenticated Excel data from a third-party search without corroboration or opportunity for cross-examination. This reinforces that digital evidence, however voluminous, must meet basic standards of natural justice to justify tax additions - a critical safeguard for taxpayers facing algorithmic or bulk data-driven assessments.

The ITAT Kolkata has ruled that income tax authorities cannot unilaterally add the difference between stamp duty valuation and purchase price under Section 56(2)(x) without first referring the matter to the District Valuation Officer. This reinforces procedural fairness in property-based income assessments and protects taxpayers from arbitrary valuations by revenue officials.

The ITAT Cochin has ruled that to claim deduction under Section 80-IB(10), a housing project must be developed on a plot of at least one acre, with no portion allocated to personal residence or non-housing structures. This clarifies a critical eligibility criterion for developers seeking tax incentives, impacting project planning and land consolidation strategies across residential real estate.

The ITAT Kolkata has ruled that invoking Section 263 to revise a previously scrutinized assessment is impermissible unless the revenue demonstrates actual prejudice, not just a technical error. This clarifies that scrutiny under Section 143(3) does not waive the twin-condition test, protecting taxpayers from arbitrary revisionary orders and reinforcing procedural fairness in income tax administration.

ITAT Kolkata rules that when a donee institution’s approval under Section 35(1)(ii) is cancelled retrospectively, donations made by taxpayers while the approval was active and in good faith remain deductible. This protects legitimate claimants from being penalized for administrative actions taken after the fact, reinforcing legal certainty for corporate philanthropy in scientific research.

The ITAT Pune has ruled that once an assessee selects either the Net Asset Value (NAV) or Discounted Cash Flow (DCF) method under Rule 11UA to determine the fair market value of unlisted shares, the Assessing Officer has no authority to substitute it with another valuation approach or question its realism. This reinforces taxpayer autonomy in valuation and curbs arbitrary tax additions, directly impacting startups, private equity deals, and closely held companies.

The ITAT Cochin ruled that teachers paid hourly by coaching institutes without statutory benefits like PF, ESI, or appointment letters are independent professionals, not employees. This means TDS must be deducted under Section 194J for professional fees, not Section 192 for salary - a critical clarification for edtech firms and coaching centers nationwide.

ITAT Kolkata has ruled that once cash deposits are accepted as part of business turnover, they cannot be doubly taxed under Section 68 as unexplained income. This ensures consistent profit computation and prevents arbitrary double assessment, directly benefiting small businesses and traders who rely on cash-based accounting. The decision reinforces the principle that tax treatment must align with the nature of income already disclosed and verified.

The ITAT Agra has ruled that income tax assessments cannot be framed directly against a legal heir unless they are formally recognized as the legal representative under Section 159 of the Income Tax Act. This clarifies that succession rights alone do not confer statutory authority to represent a deceased assessee, impacting how tax authorities must proceed in estate-related assessments and protecting heirs from procedural overreach.

The ITAT Delhi has ruled that corporate social responsibility (CSR) donations meeting Section 80G conditions qualify for tax deduction, rejecting the Revenue’s attempt to disallow them under Section 37(1). This clarifies that Chapter VI-A benefits are independent of business expense disallowances, protecting companies that fulfill statutory CSR obligations while seeking legitimate tax incentives.

The ITAT Kolkata has ruled that failure to issue a Section 143(2) notice at all renders reassessment proceedings null and void, and the curative provision under Section 292BB does not apply to complete non-issuance - only defective service. This clarifies a critical jurisdictional safeguard for assessees, reinforcing that procedural compliance is non-negotiable in tax reassessments.

The ITAT Kolkata has ruled that once a case is selected for scrutiny under Section 143(2), any intimation under Section 143(1) issued thereafter is legally void. This sets a critical precedent for taxpayers and CPCs, reinforcing that procedural sequencing is mandatory and that adjustments to exemptions like Section 10(23C)(VI) cannot be made through automated intimations after scrutiny is triggered.

The ITAT Delhi has ruled that fees paid for credit ratings and surveillance services do not qualify as royalty or fees for technical services under the India-Singapore DTAA unless there is a transfer of technical know-how to the client. This sets a crucial precedent for multinational rating agencies and foreign service providers, clarifying the taxability of intangible services in cross-border transactions.

The ITAT Bangalore has ruled that the Assessing Officer cannot impose ad hoc disallowance under Section 69C when audited books of account substantiate genuine purchases from agriculturists, even in the absence of PAN details. This sets a critical precedent for small traders and farmers' suppliers, affirming that procedural compliance cannot override substantive verification of transaction authenticity.