Tribunals and Commissions judgments

CESTAT Hyderabad rules that compensation paid for failure to meet contractual performance targets - termed 'liquidity damages' - does not form part of the taxable consideration for services under Rule 5(1) of the Service Tax Rules, 2006. This clarifies that punitive or liquidated damages for non-performance are distinct from service fees, shielding businesses from unexpected tax liability on contract penalties.

CESTAT New Delhi ruled that roads constructed within private industrial parks and opened for general public use qualify as 'public roads' under Notification 25/2012-ST, rendering them ineligible for CENVAT credit. This sets a critical precedent for industrial developers who assumed internal infrastructure qualifies as 'original works' - now requiring reevaluation of tax claims and refund applications across similar projects.

CESTAT has ruled that glucometers are instruments for chemical analysis under CTI 9027 80 90, not medical devices under 9018 90 99, making them eligible for nil basic customs duty under Notification 24/2005-Cus. This clarifies a critical classification ambiguity for diagnostic device importers and reinforces the primacy of functional use over product category in tariff interpretation.

ITAT Ahmedabad has ruled that a penalty under Section 270A for under-reporting cannot stand if the Assessing Officer accepts the return filed under Section 148 and fails to specify which limb of Section 270A(2) applies. This protects taxpayers from arbitrary penalties where the tax department accepts the disclosed income yet imposes punitive measures without legal precision.

The ITAT Nagpur has ruled that ex parte orders issued in assessments exceeding ₹36 crore, where the assessee was denied a meaningful hearing, violate the foundational principle of audi alteram partem under Section 250(6). This sets a critical precedent for tax authorities to ensure procedural fairness in high-stakes assessments, not merely condone delays but actively restore the right to be heard.

ITAT Delhi has ruled that an income tax assessment under Section 143(3) is legally invalid if the notice under Section 143(2) was issued by an Assessing Officer without proper pecuniary jurisdiction, as mandated by CBDT Instruction No. 1/2011. This sets a critical precedent for taxpayers and tax officers alike - jurisdictional compliance is not procedural but jurisdictional, and defects here cannot be cured by subsequent actions.

ITAT Nagpur ruled that where previous orders consistently taxed only the gross profit margin on unrecorded cash sales, the entire cash amount cannot be added as unexplained income under Section 69A without new, material evidence. This reinforces stare decisis in tax litigation, protecting assessees from arbitrary reassessments when consistent precedent exists.

ITAT Ahmedabad rules that a ₹8.16 crore whistleblower reward from the US SEC is taxable under Section 56(1) as 'income from other sources', rejecting the assessee's claim of it being a windfall or capital receipt. The ruling clarifies that rewards arising from conscious whistleblowing efforts-even if unanticipated-are taxable income, impacting whistleblowers and tax practitioners.

The ITAT Delhi has ruled that the opening balance of unsecured loans cannot be treated as unexplained credit under Section 68, even if the closing balance is challenged. Once the assessee establishes the identity, genuineness, and creditworthiness of lenders, the burden shifts entirely to the Revenue to disprove the transaction - a critical safeguard for charitable trusts and small entities relying on third-party funding.

The ITAT Delhi has ruled that funds received as a refund of a prior advance payment cannot be taxed as unexplained credit under Section 68 merely because the payer is a bogus entity. This clarifies that the nature of the transaction-refund of consideration-trumps the source’s legitimacy, offering critical relief to businesses engaged in legitimate commercial advances.

ITAT Delhi ruled that Long Term Capital Gains (LTCG) exemption under Section 10(38) cannot be denied merely on suspicion of penny stock transactions if the assessee provides documentary evidence. The tribunal emphasized that the Revenue must disprove genuineness with concrete proof, not assumptions, impacting tax assessments for high-value share transactions.

ITAT Ahmedabad rules that once working capital adjustment is granted under the Transactional Net Margin Method (TNMM), imputing additional notional interest on delayed receivables constitutes double adjustment and is legally unsustainable. The decision reinforces that receivables are integral to primary transactions and cannot be re-characterized as loan financing for tax purposes.

NGT imposes strict liability on industrial occupiers for hazardous waste fires, mandating environmental compensation and a technical committee inquiry into regulatory compliance. The ruling underscores non-delegable duty for safe waste handling under Hazardous and Other Wastes Rules, 2016, impacting industries storing or processing hazardous materials.

The ITAT Mumbai has ruled that a cooperative housing society cannot be taxed on the notional value of a redevelopment agreement unless there is actual receipt of consideration, transfer of ownership, or performance of contractual obligations. This clarifies that enhanced amenities, savings on construction costs, or stamp duty payment alone do not constitute taxable income under 'Income from Other Sources', offering critical relief to societies nationwide undergoing redevelopment.

ITAT Delhi deleted a Rs 50 lakh addition under Section 68 after the assessee proved the identity, creditworthiness, and genuineness of share application money using the investor’s filed tax returns and direct verification from the investor company. This reinforces that documentary evidence from tax-compliant third parties, not just bank statements or board resolutions, can satisfy Section 68’s tripartite test - a critical precedent for real estate and startup firms raising equity capital.

The ITAT Jodhpur has dismissed a revenue appeal under Assessment Year 2018-19 because the tax effect of ₹12.90 lakh fell below the ₹60 lakh minimum mandated by CBDT Circular No. 09/24, reinforcing that procedural thresholds override substantive disputes. This sets a clear precedent for departments to prioritize appeals only where financial stakes meet the prescribed limit, curbing frivolous litigation across income tax adjudication.

The ITAT Delhi has ruled that the Commissioner of Income Tax cannot invoke Section 263 to reopen tax issues not raised or considered during reassessment proceedings under Section 147. This clarifies that survey material or unrelated findings cannot serve as a basis for revisional orders, reinforcing procedural boundaries in direct tax administration and protecting assessees from arbitrary expansion of powers.

The ITAT Mumbai has ruled that an ex parte order under Section 69 of the Income Tax Act cannot stand if the assessee later produces credible documentary proof-such as gift deeds or FD maturity receipts-that explains the so-called unexplained investment. This mandates the Assessing Officer to grant a fair hearing and re-adjudicate, reinforcing natural justice as non-negotiable in tax assessments.

The ITAT Bangalore granted a stay on tax recovery after the revenue admitted a clerical error in the Section 156 notice of demand, which incorrectly showed Rs. 0 demand despite a substantial disputed amount. This reinforces that procedural inaccuracies in demand notices do not extinguish tax liability but may justify interim relief when deposit requirements are met, offering clarity to corporates facing technical mismatches in tax notices.

ITAT Ahmedabad deleted a Rs. 52 lakh addition under Section 69A after the assessee proved the cash originated from pre-closed joint fixed deposits, ruling that mere bank transaction records cannot trigger income attribution without independent verification of fund origin. This sets a critical precedent for faceless assessments where bulk cash deposits are challenged without corroborating evidence of undisclosed income.

The ITAT Delhi has ruled that unexplained investment additions under Section 69 cannot be sustained if the taxpayer proves the funds originated from legitimate family holdings and align with CBDT Circular 1916/1994, which permits such sources during search and seizure proceedings. This sets a critical precedent for taxpayers with joint family assets, requiring tax authorities to verify familial financial patterns before imposing additions.

The ITAT Delhi has ruled that genuine GST returns, Form 26AS, and banking trails constitute conclusive proof of transactional legitimacy, rendering unsubstantiated third-party statements irrelevant in tax assessments. This sets a critical precedent for businesses dealing with related-party transactions, affirming that compliance documentation trumps speculative allegations during search-based assessments.

ITAT Delhi deleted a Rs. 10.15 crore deemed interest addition on interest-free advances acquired through a slump sale, holding that the Revenue’s long-standing acceptance of such advances in prior years precludes retrospective disallowance. This reinforces commercial expediency and consistency as binding limits on tax authorities, protecting businesses that structure group financing through asset acquisitions.

The ITAT Delhi has ruled that remote technical support for IMAX theatre systems, even when performed over 90 days, does not constitute a Fixed Place Permanent Establishment under the India-Canada DTAA unless there is a physical location at the disposal of the enterprise. This clarifies a critical gap in tax treaty interpretation for global tech and maintenance providers, shielding foreign enterprises from unintended tax liabilities in India solely due to digital access.