ITAT Bangalore Judgments — May 2026

The Tribunal found that the AO and CIT(A) made arbitrary estimations of agricultural income without proper basis or consideration of all documents. The Tribunal decided to remit the issue back to the AO for fresh consideration.

The Tribunal held that the Citizen Co-operative Society Ltd. judgment was not applicable as the assessee was registered under the Karnataka Co-operative Societies Act, not the Mutually Aided Co-operative Societies Act. It also considered the nature of interest income from investments in co-operative banks and mandatory deposits with BESCOM.

The Tribunal granted the assessee an opportunity to present her case before the CIT(A) on merits, considering her illiteracy and remote location. The previous ex-parte orders were set aside to allow for a fresh consideration.

The Tribunal held that the Citizen Co-operative Society Ltd. judgment was not applicable as the assessee was registered under the Karnataka Co-operative Societies Act, not the Mutually Aided Co-operative Societies Act. It also considered the nature of interest income from investments in co-operative banks and mandatory deposits with BESCOM.

The Tribunal found that the AO and CIT(A) made arbitrary estimations of agricultural income without proper basis or consideration of all documents. The Tribunal decided to remit the issue back to the AO for fresh consideration.

The Tribunal held that since the additions made in the quantum assessment were deleted by this Tribunal, the penalties levied under Section 271B and Section 270A are not sustainable. The penalty under Section 270A(9) was also not properly invoked.

The Tribunal held that each application for registration must be considered independently, and an earlier rejection does not operate as res judicata in income tax proceedings. The Tribunal found that the impugned order lacked independent application of mind to the documents filed with the fresh application, and the rejection was mechanical, based on past conclusions. It noted that there is no provision in the Act to deny registration under Section 12AB if statutory requirements are later met. The fact that the assessee did not appeal the original rejection should not prejudice their eligibility if conditions are complied with. The Tribunal referred to the Delhi High Court's decision in CIT Vs O.P.Jindal Global University, which stated that Section 12AA (now 12AB) examines the genuineness of objects, not the application of income. The Tribunal also noted that the assessee amended its bye-laws w.e.f. 02.02.2024, which the CIT(E) ought to have examined. Consequently, the Tribunal set aside the impugned orders, holding them unsustainable as they were passed without examining the present application on merits. The matter was restored to the CIT(E) with a direction to examine the application afresh, considering the documents and explanations, and pass a speaking order. The grounds raised by the assessee were allowed statistically.

The Tribunal held that each application for registration must be considered independently, and an earlier rejection does not operate as res judicata in income tax proceedings. The Tribunal found that the impugned order lacked independent application of mind to the documents filed with the fresh application, and the rejection was mechanical, based on past conclusions. It noted that there is no provision in the Act to deny registration under Section 12AB if statutory requirements are later met. The fact that the assessee did not appeal the original rejection should not prejudice their eligibility if conditions are complied with. The Tribunal referred to the Delhi High Court's decision in CIT Vs O.P.Jindal Global University, which stated that Section 12AA (now 12AB) examines the genuineness of objects, not the application of income. The Tribunal also noted that the assessee amended its bye-laws w.e.f. 02.02.2024, which the CIT(E) ought to have examined. Consequently, the Tribunal set aside the impugned orders, holding them unsustainable as they were passed without examining the present application on merits. The matter was restored to the CIT(E) with a direction to examine the application afresh, considering the documents and explanations, and pass a speaking order. The grounds raised by the assessee were allowed statistically.

The Tribunal held that the AO cannot estimate income on an ad-hoc basis if books of account are not rejected. Mere decline in profit rate or use of self-made vouchers without specific defects does not warrant rejection of books or estimation of income.

The Tribunal held that the assessee provided a plausible explanation for the cash deposits through a cash flow statement and banking records. The addition under Section 69A cannot be sustained solely on the absence of detailed documentary evidence when a reasonable explanation is furnished.

The Tribunal condoned the delay in filing the appeal, citing sufficient cause. It held that the AO's estimation of profit at 8% was arbitrary and lacked a rational basis, especially when compared to the assessee's past profit history.

The Tribunal held that the AO's action of enhancing the addition in set-aside proceedings was not in accordance with law. The Tribunal found the assessee's explanation of cash availability from past salary savings reasonable and acceptable.

The Tribunal held that the AO's action of enhancing the addition in set-aside proceedings was not in accordance with law. The Tribunal found the assessee's explanation of cash availability from past salary savings reasonable and acceptable.

The Tribunal held that no adjustment on account of notional interest on delayed receivables is warranted. The reasoning was based on the undisputed fact that the assessee is a debt-free company. The Tribunal respectfully followed the binding decisions of the Hon'ble Delhi High Court in Principal Commissioner of Income-tax vs. Inductis India (P.) Ltd. and the dismissal of the SLP by the Hon'ble Supreme Court. The ratio is that if an assessee is debt-free, imputing notional interest on delayed receivables is not justifiable, as there is no cost of funds or evidence of passing on a financing benefit. The addition made by the TPO is directed to be deleted. Ground No. 4 pertaining to FTC was dismissed as not pressed by the assessee. The appeal of the assessee is partly allowed.

The Tribunal held that MSL Driveline should be excluded as a comparable due to unreliable financial data and potential breach of the RPT filter. It also held that adjustments made under Section 143(1) after a Section 143(2) notice were without jurisdiction and invalid.

The Tribunal held that the provision for doubtful debts should be treated as an operating expense. The reasoning was that this provision has a direct relation to sales, which are operating revenue. Therefore, provision for doubtful debts, having a direct link with sales, is also an item of operating expense. The Tribunal found merit in the assessee's contention that this provision arises in the ordinary course of business and is intrinsically linked to sales and realization of trade receivables. It relied on the Bangalore Bench decision in AMD India (P.) Ltd. v. DCIT, which held that provision for bad and doubtful debts constitutes a normal business expense connected with operating activity. Regarding rates and taxes, the Tribunal did not provide a specific finding or reasoning in the provided excerpt, as the judgment appears to be truncated. However, the appeal was partly allowed. For the disallowance under Section 40(a)(ia), the Tribunal held that the assessee had furnished a detailed breakup and sample purchase invoices substantiating that part of the expenditure represented purchase of equipment or materials and was not in the nature of rent attracting TDS. It also noted that the Revenue had not brought any material to show that payments made outside India were chargeable to tax in India. The AO made the disallowance without controverting documentary evidence. Accordingly, the disallowance of ₹17,30,589/- was held unsustainable and directed to be deleted. The issue regarding additions made pursuant to Section 143(1) was dismissed as not pressed.

The Tribunal condoned the delay subject to payment of cost, finding that the appeal before the CIT(A) was disposed ex parte. The matter was restored to the CIT(A) for fresh adjudication on merits.