ITAT Ahmedabad Judgments — November 2025

The Tribunal held that the disallowance of ROC expenses was justified as the assessee failed to provide proper explanation. The disallowance of subcontract expenses was also upheld as the assessee's claim of no related party transactions was not substantiated. The issue regarding disallowance of contract payments for material was remanded back to the Assessing Officer for fresh verification.

The Tribunal held that the Assessing Officer had not applied his mind to the facts of the case, rendering the reassessment order void ab initio. The fact that the assessment order was passed under Section 143(3) and not 143(1) as claimed by the AO was crucial in this determination.

The Tribunal held that the details and evidences filed by the assessee were not considered by the AO and CIT(A). Therefore, the matter was remanded back to the AO for proper verification of evidence and to grant an opportunity of hearing to the assessee.

The Tribunal held that the assessee had repaid significant unsecured loans and incurred interest expenses on them, which were reflected in the balance sheet. The AO and CIT(A) had ignored this crucial fact. The appeal of the assessee was allowed.

The Tribunal found merit in the assessee's contentions. The sale deed and Form No. 7 extract clearly indicated the land was agricultural. The charging of higher stamp duty by the Sub-Registrar's Office based on a draft AUDA scheme did not alter the inherent nature of the land, as stamp duty valuation does not determine the property's character under the Income-tax Act. The fact that the assessee paid consideration higher than the jantri rate for agricultural land supported that there was no underreporting or benefit derived by the assessee warranting Section 56(2)(x). The AO's assumption of 40% acquisition by AUDA was factually incorrect as the draft TP Scheme remained unapproved. Therefore, the addition made under Section 56(2)(x) was not sustainable. The Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition of Rs. 18,10,640.

The Tribunal held that the assessee failed to discharge the onus cast upon him under Section 68 of the Act. The purchase and sale of shares of Kushal Tradelink Ltd. exhibited characteristics of a pre-meditated and artificially structured accommodation entry. The pattern of trading, abnormal price rise without financial backing, and involvement of known operators clearly demonstrated that the transactions were fictitious and designed to convert unaccounted income into tax-free LTCG. The Tribunal drew support from various judicial precedents, including Suman Poddar v. ITO, CIT v. Durga Prasad More, Sumati Dayal v. CIT, and decisions of coordinate benches, which held that such penny stock transactions were not genuine and represented unaccounted money. The Tribunal found that the CIT(A) erred in deleting the addition merely by relying on documentary evidence without appreciating the abnormality and implausibility of the transactions in light of settled judicial principles. The Tribunal also noted that while the assessee relied on the ITAT Ahmedabad Bench decision in ITO v. Deval Pranav Patel, judicial precedents must be applied in the context of their specific facts and circumstances, citing Commissioner of Income-tax v. Sun Engineering Works (P.) Ltd. The Tribunal concluded that the Assessing Officer was justified in treating the alleged LTCG as unexplained cash credit under Section 68 and denying exemption under Section 10(38). The order of the CIT(A) deleting the addition was deemed unsustainable. The appeals of the Department were allowed, and the order of the Assessing Officer was restored.

The Tribunal restored the matter to the file of the Ld. CIT(A) for de novo adjudication, directing the assessee to furnish all relevant documents and comply with notices without unnecessary adjournments. The penalty levied under Section 271(1)(c) was also restored.

The Tribunal found the assessee's explanation for non-compliance before the CIT(A) unreasonable but decided that the merits of the case had not been adjudicated. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) for fresh adjudication on merits, subject to the assessee depositing a cost of Rs.5,000/- to the Prime Minister's National Relief Fund.

The Tribunal noted that lower authorities concluded proceedings without a thorough examination of the assessee's records. Citing principles of natural justice and Supreme Court precedents, the Tribunal remanded the matter back to the Assessing Officer for de-novo consideration, directing that the assessee be given a proper opportunity to submit all necessary evidence regarding the source of deposits and eligibility for the Section 80P(2)(a)(i) deduction.

The Tribunal condoned the delay in filing the appeal before the CIT(A) due to an employee's involvement in fund misappropriation. On merits, the Tribunal held that since the assessee did not incur any cost for investments yielding exempt income and did not receive any dividend in the relevant year, the disallowance under Section 14A was not justified.

The Tribunal held that the reassessment proceedings initiated under Section 147 were invalid because the 'reasons to believe' lacked specific details about the alleged bogus shares or manipulation, and the AO failed to apply independent mind, relying on vague information. As there was no tangible material to connect the assessee with any manipulation, the addition of Rs. 46,88,950/- made by the AO and confirmed by the CIT(A) was directed to be deleted.

The Tribunal observed that the CIT(A) had noted the assessee's submission that the loan from Fiducia Infrastructure Pvt. Ltd. was used to repay a loan to Nirbhay Capital Services Pvt. Ltd., indicating a genuine business purpose and nexus. Finding that the Assessing Officer and CIT(A) ignored this crucial fact, the Tribunal allowed grounds 2 and 3 challenging the Section 68 addition. Ground 1 related to the reopening was not pressed by the assessee and thus dismissed.