ITAT Bangalore Judgments — December 2025

The Tribunal held that the incentive payment was not severance pay but a bonus/incentive, eligible for deduction as it was paid within the due date of filing the return. The Tribunal also ruled on the inclusion and exclusion of comparable companies in the transfer pricing analysis.

The Tribunal condoned a 7-day delay in filing the appeal. It held that the CIT(E)'s order was passed without adhering to principles of natural justice as reasons were not communicated to the assessee. The Tribunal found the assessee's genuineness was not in doubt given its 12A registration and submitted documents.

The Tribunal held that the AO had conducted adequate inquiries and considered relevant judgments, making a plausible and correct assessment. The interest income earned from statutory deposits, mandated by the Karnataka Souharda Sahakari Act, 1997, is business income and eligible for deduction under Section 80P(2)(a)(i). The PCIT's order under Section 263 was found to be without merit.

The Tribunal held that the issue was directly connected with the assessee's pending application for recognition under Section 10(46) of the Act. It was considered appropriate to await the outcome of that application to avoid conflicting findings and unnecessary litigation. The appeal was allowed for statistical purposes.

The Tribunal held that the expenditure was an incentive/bonus paid to employees and was allowable as a deduction as it was paid before the due date of filing the return. Regarding transfer pricing, the Tribunal upheld the exclusion of some comparables and inclusion of others, directing the AO to recompute the ALP. The Revenue's appeal on reallocation of expenses was dismissed.

The Tribunal condoned the delay in filing the appeals due to sufficient cause arising from the administrative changes. However, since the assessee did not appear before the CIT(A), the appeals were restored to the file of the CIT(A) for fresh adjudication on merits, following the observations made in the order.

The Tribunal set aside the ex-parte orders of the lower authorities and remitted the issue to the AO for a de novo assessment after hearing the assessee. The assessee was directed to cooperate for expeditious completion of the assessment.

The Tribunal found that the assessee's activities qualify as 'General Public Utility' in line with the Honourable Supreme Court's ruling in Ahmedabad Urban Development Authority. It held that the learned CIT(E) erred by not specifying the required documents and by rejecting the application solely due to the absence of donations. The matter was remanded to the learned CIT(E) for re-adjudication, requiring consideration of the assessee's submitted documents, activity reports, and the Supreme Court decision, with a proper opportunity for hearing.

The Tribunal held that the notice issued under Section 148 was beyond the limitation period as per Section 149 of the Act, especially after its substitution by the Finance Act, 2021. Reliance was placed on various Supreme Court and High Court judgments that have held similar notices to be time-barred.

The Tribunal held that the lack of donations alone is not a reason to deny registration under Section 12AB. Citing the Supreme Court decision in Ahmedabad Urban Development Authority, the Tribunal found the assessee's activities likely fall under 'general public utility'.

The Tribunal held that the issue was tax neutral as the genuineness of the expenses was not in dispute and the dispute was only about the timing of the deduction. Considering the substantial time elapsed and the tax neutral nature of the issue, the assessee's claim for allowing the expenses as a deduction in the year under consideration was accepted.

The Tribunal condoned the delay in filing the appeals, finding sufficient cause due to the administrative changes and management transitions within the co-operative society. The appeals were restored to the file of the Ld. CIT(A) for a fresh decision on merits.

The Tribunal held that if the assessee demonstrates that deposits in Scheduled/Commercial Banks were made pursuant to the mandatory provisions of the Karnataka Co-operative Societies Act, then such interest income is eligible for deduction under Section 80P(2)(a)(i) as business income. The matter was remitted to the AO for verification.

The Tribunal condoned the delay in filing the appeal, subject to payment of Rs. 5,000/- as cost. The Tribunal held that the addition made under Section 68 was not sustainable because the assessee had demonstrated that the cash deposits were cash receipts from debtors, details of which were provided. The Tribunal noted that the AO had not properly investigated the issue and that the department lacked material to disprove the genuineness of the transactions.

The Tribunal held that the addition of ₹2,265,024 on account of the difference in VAT return and book turnover for September 2016 cannot be sustained without proper inquiry into the genuineness of sales invoices. Regarding the addition of ₹1,32,38,548 for October-December 2016, the issue was restored to the AO for re-examination of sales details, buyer identification, and quantity of goods sold, considering the gross profit already offered.

The Tribunal found discrepancies in the deposit date and noted that the AO and CIT(A) did not adequately verify the additional evidence provided by the assessee, such as cash books, bank statements, sales details, and a gift. The issue was restored to the AO to verify the genuineness of sales and the source of funds, including the gift, and pass a fresh order.

The Tribunal held that the CIT(A) deleted the additions without properly examining the source of funds and the applicability of Section 69A. The matter was restored to the AO for fresh adjudication after the assessee provides details of funds received from members.

The Tribunal held that the assessee did not receive the hearing notice due to an outdated email ID and thus was unable to respond. Consequently, one more opportunity should be granted.

The Tribunal found the CIT(A)'s order unsustainable as it failed to verify the source of cash deposits or examine the assessee's books, despite the assessee's non-compliance. Consequently, the Tribunal restored the entire matter, including quantum additions and penalty, back to the AO for fresh examination. The AO is directed to ascertain if the funds were received from members with proper KYC and to provide the assessee an opportunity of hearing.

The Tribunal condoned the delay in filing the appeal before the CIT(A) on the condition that the assessee pays Rs. 5,000/- to the Prime Minister's National Relief Fund. The case was remitted to the AO for denovo consideration.

The Tribunal held that the CIT(A) deleted the additions without proper verification of the source of funds, especially whether they originated from members and if KYC was complied with. The CIT(A) focused on Section 80P instead of Section 69A.

The Tribunal condoned the delay in filing the appeal, finding valid reasons for the assessee's non-appearance. It was held that the assessee was not granted a reasonable opportunity by the CIT(A) due to notices being sent to an ex-employee's email ID. The Tribunal set aside the orders of CIT(A) and AO and remitted the issue back to the AO.

The Tribunal held that the interest income earned by the assessee cooperative society from its surplus funds deposited in banks is attributable to its business of providing credit facilities and is eligible for deduction under Section 80P(2)(a)(i). Therefore, the PCIT's revisionary order was quashed.

The Tribunal held that the assessment order was bad in law because the satisfaction note recorded by the Assessing Officer did not match the material relied upon for the addition. Furthermore, a consolidated satisfaction note for multiple assessment years was deemed invalid, citing a Karnataka High Court judgment.

The Tribunal held that the approval for reopening of assessment was not granted by the prescribed authority as per Section 151 of the Act. The approvals were found to be granted by the Principal Commissioner instead of the Principal Chief Commissioner, as required when more than three years have elapsed from the end of the relevant assessment year. Additionally, a common approval for 83 cases was considered to be without application of mind.

The Tribunal held that the approvals for reopening the assessments were not granted by the 'specified authority' as required by Section 151 of the Act. The approvals were granted by the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax, which was the correct authority in cases where more than three years had elapsed since the end of the relevant assessment year. Consequently, the reassessment orders were deemed invalid.

The Tribunal held that the assessment order was bad in law because the satisfaction note recorded by the Assessing Officer was consolidated for multiple assessment years and did not specify the exact material on which the addition was based, thus vitiating the proceedings.

The Tribunal found that the assessee had provided overwhelming evidence regarding the source of investment, including bank statements, foreign inward remittance certificates, and the company's annual accounts. The Tribunal held that since the investment was recorded in the books of account and its source was explained, Section 69 was misapplied.

The Tribunal noted that the primary issue for AY 2013-14 was still pending before the CIT(A) after 8 years. The CIT(A) for AY 2014-15 and 2015-16 had confirmed disallowances despite the pendency of the earlier year's appeal.

The Tribunal held that the issue raised was debatable and beyond the scope of rectification under Section 154. Therefore, the denial of exemption by CPC under Section 143(1) was incorrect.

The Tribunal held that for assessment years prior to the statutory amendment effective from April 1, 2021, a deduction under Chapter VI-A, like Section 80P, claimed in a return filed after the due date, cannot be denied under Section 143(1)(a)(ii) as an 'incorrect claim' unless it falls within specific narrow categories. However, the Madras High Court's decision in similar cases was found to be binding, which affirmed the action of the CPC.

The Tribunal held that the assessee was deprived of an opportunity to object to the reasons for reopening the assessment as they were not provided in a timely manner. Therefore, the matter was restored to the AO for de novo consideration.

The Tribunal restored the appeal to the file of the CIT(A) for a decision on merits. This was because the assessee had not appeared before the CIT(A), leading to an ex parte order. The Tribunal noted discrepancies in the amounts confirmed by the CIT(A) compared to the Assessing Officer and the lack of reference to issuing notices under Section 251.

The ITAT condoned the 307-day delay, finding it was for sufficient cause. On merits, the Tribunal held that interest income earned by the co-operative society from cooperative banks, if attributable to its business of providing credit facilities to its members, is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The ITAT reversed the lower authorities' orders, directing the Assessing Officer to allow the deduction for the interest income. A duplicate appeal (ITA No. 341/Bangalore/2025) was dismissed as infructuous.

The Tribunal held that the disallowance of Section 80P deduction for belated filing is valid, following the Madras High Court's decision. The specific provision for disallowance due to belated filing should take precedence over the general provision for incorrect claims.

The Tribunal restored the issue back to the Assessing Officer, keeping all contentions open, to provide the assessee an opportunity of hearing to decide on the reopening and merits.

The Tribunal held that expenditures on repairs and maintenance, including for magnetic particles removal and effluent treatment plant parts, were routine replacements not providing enduring benefit, and thus were revenue expenditures. It further held that professional charges for share transfer work, share capital audit report reconciliation, and equity share listing were allowable business expenditures under Section 37(1), as they were not for fresh capital issue. The AO was directed to delete both disallowances.

The Tribunal condoned the delay, finding sufficient cause. It held that interest income earned by the assessee society from its business activities, including deposits and lending to members, is attributable to its business and eligible for deduction under Section 80P(2)(a)(i).

The Tribunal held that the professional fees paid to EESPL were in accordance with the MOU and the trust's object of providing quality education. The AO failed to demonstrate that the payments were unreasonable or constituted a benefit beyond normal compensation. Therefore, the disallowance and denial of exemption under Section 11 were not justified.

The Tribunal held that the assessee, as a landowner, is not obligated to follow the percentage completion method merely because the developer does. The assessee's consistent adoption of the project completion method is permissible. The transfer of risks and rewards of ownership does not occur until the sale deed is registered.

The Tribunal condoned the delay in filing the appeal, acknowledging plausible reasons provided by the assessee. The Tribunal remitted the entire issue back to the CIT(A)/NFAC for a fresh adjudication on merits, with a direction to grant a reasonable opportunity of being heard to the assessee and imposed a token cost of Rs. 5,000/-, payable to the Prime Minister Relief Fund.

The Tribunal held that the professional fees paid were in accordance with the MOU and the trust's objectives. It found no evidence of undue benefit or that the payment was unreasonable, distinguishing it from a 'benefit' as defined under Section 13(1)(c). The disallowance was deemed unjustified.

The Tribunal held that the payment of professional fees to EESPL, as per the MOU and for services rendered in line with the trust's objects, was permissible. The AO's disallowance based on profit margins and EESPL being a 'specified person' was not substantiated, and the onus was on the Revenue to prove that the payment was unreasonable or constituted a 'benefit' under Section 13(1)(c).

The Tribunal held that the CIT(E) had passed a cryptic order without granting a personal hearing, which is mandatory under Section 12AB(1)(b)(ii)(B) of the Act. The Tribunal set aside the orders and remitted the matters back to the CIT(E) for fresh consideration after affording a reasonable opportunity of being heard.

The Tribunal held that the CIT(A) mechanically excluded comparables without proper justification of functional dissimilarity. The Tribunal directed the TPO to exclude high turnover companies as comparables and restored one case to the CIT(A) for further investigation.

The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s order. The Tribunal specifically noted that the revenue failed to challenge the CIT(A)'s legal finding that the assessment was invalid due to the AO's breach of CBDT Instruction No. 20/2015, which mandates a prior show-cause notice before making additions. Since CBDT instructions are binding on the AO, the assessment framed in contravention was liable to be quashed, rendering the revenue's appeal infructuous.

For A.Y. 2017-18, the Tribunal found that the differences in Tally data were due to accounting inconsistencies and duplication of cash receipts, not deliberate suppression, and that the addition was based on uncorroborated statements. For A.Y. 2018-19, the Tribunal held that the cash found was satisfactorily explained as business receipts already reflected in the books of account. As the books were not rejected and the receipts were accepted as business income, the conditions for invoking Section 69A were not cumulatively satisfied, thus precluding double taxation. Both additions were directed to be deleted.