ITAT Chandigarh Judgments — January 2026

The Tribunal largely accepted the assessee's reconciliation for unrecorded sales, acknowledging discrepancies due to Tally not being updated, GST inclusion, and stock transfers. It restricted the addition on unrecorded sales to a lumpsum of Rs.5 Lacs as 'business income'. The addition for unexplained cash was deleted as the assessee substantiated it with updated cash books. The addition for unexplained jewellery was also deleted, as the assessee provided adequate explanations (stridhan, gifts, purchases, approval basis) which the AO failed to properly investigate, leaving only a negligible unexplained difference. Both appeals (for the assessee and his wife Ms. Pooja Aggarwal) were allowed concerning cash and jewellery additions.

The Tribunal upheld the evidentiary value of the seized diaries, rejecting the "dumb documents" argument. It partly allowed the assessee's appeals by sustaining an addition of 2.5% Net Profit on the total gross business receipts from the diaries (Rs. 303.66 Lacs) as business income u/s 28. Conversely, it deleted multiple separate additions for unexplained investments, cash transactions, and assets (payments to M/s Jia Diamonds, gold jewellery/bars, transactions with Sunil Bansal, investment in land, and a Mercedes car), applying the principle against double taxation due to lack of corroborative evidence and granting telescoping benefit for cash found.

The Tribunal held that the Revenue Authorities (AO and CIT(A)) erred by doubting the genuineness of the allotment letters without conducting any inquiry or issuing a notice to the selling company. It clarified that an allotment letter creates a capital right, similar to an agreement to sell, and any amount earned from relinquishing such rights is a capital receipt. Consequently, additions made based on mere self-assumptions and presumptions by the Revenue, without verification or evidence, are not sustainable.

The Tribunal largely ruled in favor of the assessees. For unaccounted sales, the assessee's reconciliation was accepted, and the addition was restricted to a lumpsum of Rs. 5 Lacs, with the remainder deleted. The additions for cash discrepancy and unexplained jewellery for both assessees were found unsustainable due to proper substantiation and documentation, respectively, and were entirely deleted.

The Tribunal observed that the assessee had indeed withdrawn more than Rs. 11 lacs from their bank account in September 2016, approximately two months before demonetization. Concluding that it was humanly probable for this amount to have been held by the assessee and subsequently re-deposited, the Tribunal found no justification for the addition made by the AO. Consequently, the addition of Rs. 7,26,090 was deleted.

The Tribunal ruled that the addition made by the AO was based solely on extrapolation without any corroborative incriminating material for AY 2022-23, which is not permissible in search assessment proceedings. Citing judicial precedents, the Tribunal emphasized that additions must be restricted only to the extent of evidence found during the search, thereby deeming the impugned addition unsustainable in law.

The Tribunal acknowledged the seized diaries as valid evidence under sections 292C and 132(4A) and upheld the principle against double taxation, ruling that once business income is estimated from unaccounted sales, separate additions for investments/payments made from those receipts are not permissible. It sustained an addition of 2.5% Net Profit on the entire gross business receipts recorded in the seized diaries (aggregating Rs.303.66 Lacs) as business income u/s 28. However, the Tribunal deleted specific additions made for gold jewellery/bars, cash transactions with Shri Sunil Bansal, unexplained investment in land, the Mercedes car purchase, and general cash found, finding them either already subsumed, lacking material evidence, or covered by the telescoping principle. Legal grounds pertaining to DIN, jurisdictional AO, and centralization were kept open or deemed adequately addressed.

The Tribunal upheld the evidentiary value of the seized diaries under Sections 292C and 132(4A) and kept some legal issues sub-judice. On merits, it ruled against double taxation and estimated a Net Profit (NP) addition of 2.5% on gross business receipts (totaling Rs.303.66 Lacs) as business income u/s 28 for unaccounted sales. All other specific additions related to gold bars, cash transactions with third parties (Sunil Bansal, Jia Diamonds), land investment, Mercedes car, and seized cash were deleted, as they were either subsumed by the NP addition or lacked sufficient independent evidence.

The Tribunal largely rejected the assessee's legal challenges concerning the validity of the seized diaries, holding them as reliable evidence. However, on merits, it found that several quantum additions amounted to double or triple taxation. The Tribunal estimated an additional Net Profit of 2.5% on gross business receipts from the seized diaries (totaling Rs.303.66 Lacs over all years) to cover revenue leakage, deleting separate additions for payments to Jia Diamonds, gold jewellery/bars, cash transactions with Sunil Bansal, unaccounted land investment, and Mercedes car purchase due to lack of evidence or being covered by the estimated business income. The seized cash was also deleted by granting the benefit of telescoping.

The Tribunal held that the addition of unutilized LTCG could not be made in AY 2013-14 but should be taxed in the previous year when the three-year utilization period expires, thus deleting the addition. However, the Tribunal upheld the re-opening of the assessment, finding that the assessee had failed to disclose fully and truly all material facts regarding the LTCG, which constituted fresh information for the AO.

The Tribunal found that the selection of the wrong clause was merely an inadvertent error and a selection mistake, which should not lead to the revocation of registration unless actual deviation was noted. It set aside the impugned orders, directing the CIT(E) to grant a fresh opportunity of hearing to the assessee for necessary corrections in the registration and to reconsider the Section 80G(5) application.

The Tribunal found that the error in selecting the sub-clause of Section 12A(1)(ac) was merely a selection error and set aside the impugned orders. It directed the CIT(E) to grant an opportunity of hearing, allow the assessee to correct the registration, and re-consider the 80G(5) application.

The Tribunal condoned the delay of 1608 days, citing the liberal interpretation of 'sufficient cause' and the principles of substantial justice. It ruled that the assessment order passed against a deceased person was void ab initio, as the bank account in question was opened after the assessee's death and linked due to an inadvertent error. Consequently, the Tribunal allowed the appeal and deleted the addition.

The Tribunal held that the CIT(A)'s order was unsustainable because it was passed without providing the assessee a full opportunity to file submissions. Therefore, the impugned order was set aside, and the matter was remitted back to the CIT(A) for a fresh decision on merits after granting due opportunity of hearing to the assessee.

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of the penalty. It was held that the show-cause notices issued by the AO u/s 274 r.w.s. 271 were vague as they failed to specifically indicate whether the penalty was for concealment of income or furnishing inaccurate particulars of income. Following established legal precedents, such non-specification vitiates the penalty proceedings, rendering the penalty unsustainable on legal grounds.

The Tribunal upheld the CIT (A)'s decision, finding no error in the order. It observed that the First Appellate Authority is empowered under Section 251(1)(a) to set aside an ex-parte assessment and remit the issue to the AO for fresh adjudication on merits. Consequently, the Revenue's appeal was dismissed.

The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered by its own consistent past judgments for earlier assessment years where it was held that employees of the Department of Urban Estates were working fully for HUDA due to transfer of functions, making their salaries an allowable business expenditure. The Tribunal found no error in the CIT(A)'s order.

The Tribunal upheld the CIT(A)'s decision to delete the penalty, reasoning that if the underlying addition which formed the basis of the penalty is extinguished by an appellate order, then no penalty is computable. Since the genesis of the penalty (the ex-parte assessment order) was set aside, the penalty could not survive. The appeal filed by the Revenue was therefore dismissed.

The Tribunal found that the assessee had sufficient bank balance and had withdrawn funds from a house sale. It ruled that the Revenue could not disbelieve the assessee's supported explanation without proving the cash was used for other purposes, deeming the Revenue's expectations improbable. The appeal was allowed, and the addition deleted.

The Tribunal deleted the additions for both assessment years, finding that the Revenue failed to provide credible evidence or allow cross-examination, thus violating natural justice principles. However, the re-opening of assessment for AY 2016-17 was upheld, as the AO had received information from the Investigation Wing, which provided a reasonable belief that income had escaped assessment.

The Tribunal, following its own precedent and a jurisdictional High Court judgment, held that a notice issued under Section 148 or 148A(1) by a jurisdictional AO after the 29.03.2022 notification mandating faceless assessments is without jurisdiction. Consequently, the Tribunal quashed the reassessment order based on such an invalid notice.

The Tribunal held that since the assessee had sufficient interest-free funds exceeding the investments and advances, no interest disallowance under Section 36(1)(iii) and Section 14A was warranted, except for Rs.1,42,842/- representing administrative expenses under Rule 8D(iii). Regarding the foreign travel expenses, the Tribunal found that the AO failed to appreciate the business exigency given the assessee's substantial turnover, thereby deleting the disallowance.

Following precedents from the Punjab & Haryana High Court and an earlier Tribunal decision on identical facts, the Tribunal held that the notice issued by the jurisdictional AO was without jurisdiction. Consequently, the re-assessment order was quashed.

Citing a similar case where additions based on uncorroborated evidence from a third-party search were deleted due to denial of cross-examination, the Tribunal found no credible material from the AO to prove the assessee paid on-money and thus deleted the additions for both assessment years. However, the reopening of assessment for AY 2016-17 was held valid as the AO had formed a reasonable belief based on information from the Investigation Wing.

The Tribunal condoned the 390-day delay in filing the appeal before it, acknowledging the assessee's genuine hardship and applying a liberal interpretation of "sufficient cause" based on Supreme Court precedents. The Tribunal also held that the CIT(A) ought to have condoned the 54-day delay in the first appeal, as the penalty was disproportionate to the negligence. Consequently, it set aside the CIT(A)'s order and remanded the matter to the CIT(A) to decide the appeal on merits after providing due opportunity to the assessee.

The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, noting that the AO had failed to conduct a judicious inquiry and had ignored the principles of framing an ex-parte assessment. The Tribunal concurred that the cash was collected by the assessee in a fiduciary capacity as per an agreement with Bharti Airtel Ltd., and therefore, did not constitute unexplained money. The appeal filed by the Revenue was dismissed.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. It noted that ITAT Amritsar had already restored the assessee's registration under Section 12AA on June 29, 2015, for the same assessment year, confirming its status as a ‘Charitable Institution'. The Tribunal ruled that the AO was bound by the ITAT's order and correctly directed to grant exemption under Section 11 to the assessee.

The Tribunal held that once the jurisdictional High Court had set aside the foundational assessment order and the notice for initiating penalty, the penalty proceedings, being consequential, could not survive independently. It affirmed that the Assessing Officer lacked jurisdiction to pass the penalty order and the CIT(A) erred in sustaining it even partly. Consequently, the penalty of Rs. 89,22,970/- levied under Section 270A was quashed in its entirety.

The Tribunal, following its own precedent and jurisdictional High Court judgments, ruled that a Section 148 notice issued by a jurisdictional Assessing Officer after the 29.03.2022 notification was without jurisdiction. Consequently, the re-assessment order passed was deemed unsustainable and quashed.

The Tribunal held that the reassessment proceedings were invalid as they were initiated beyond four years without establishing failure to disclose material facts by the assessee, were based on borrowed satisfaction, and suffered from invalid jurisdiction (notice issued by JAO instead of NFAC). Furthermore, principles of natural justice were violated by denying cross-examination, and the electronic evidence was inadmissible without a Section 65B certificate. Consequently, the reassessment proceedings were quashed, rendering the addition on merits non-survivable.

The Tribunal first ruled against the assessee on the issue of the validity of the reopening approval under Section 151 of the Income Tax Act, citing High Court judgments that upheld general phrases like 'Satisfied it is a fit case' as sufficient. However, the Tribunal then held that the AO had misread the Supreme Court's decision in Shri Ghanshyam, HUF, which establishes that interest received under Section 28 of the Land Acquisition Act is part of enhanced compensation (accretion to land value) and not 'income from other sources'. Consequently, finding no tangible information that income had escaped assessment, the Tribunal quashed the re-opening of the assessment.

The Tribunal found that the CIT(A) failed to properly examine whether the Section 148 notice had the requisite approval from the Pr. Commissioner of Income Tax and did not pass a speaking order regarding the genuineness and creditworthiness of the share application money lenders. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter for a fresh decision on these specific issues.

The Income Tax Appellate Tribunal (ITAT) observed that while the JCIT(A) had issued multiple notices, it was unclear if they were served, and crucially, the case was not decided on its merits. Upholding the principle of natural justice, the ITAT set aside the JCIT(A)'s order and remanded the matter back for fresh adjudication, instructing the JCIT(A) to provide proper opportunity to the assessee.

The CIT(A) set aside the ex-parte assessment and remanded the case to the AO for fresh adjudication, allowing for consideration of new evidence presented during the appeal. The Tribunal upheld this decision, noting the amendment to Section 251(1)(a) permits such remands for ex-parte assessments under Section 144, especially when fresh evidence requires verification at the primary stage.

The Tribunal held that the CIT(E) erred by rejecting the applications solely based on the alleged early commencement of activities without examining the genuineness of the Assessee's charitable objects and activities. It was noted that the March 2024 activities were by the promoters in their personal capacity, not the corporate entity, and that the commencement of activities itself is not a statutory ground for rejection under Section 12A(1)(ac)(vi). The Tribunal thus remanded both appeals back to the CIT(E) for a fresh examination of all aspects.

The Tribunal dismissed the assessee's appeals, affirming the decisions of the lower authorities. It relied on previous binding judgments of the Hon'ble High Court against the assessee for similar issues. The Tribunal also noted that identical matters were pending before the Supreme Court and granted the assessee liberty to approach the AO for giving effect to any future Supreme Court decision under Section 158A of the Act.

The Income Tax Appellate Tribunal (ITAT) noted that the issues were covered by prior decisions of the Hon'ble High Court against the assessee. Given the assessee's application under section 158A(1) to abide by the Supreme Court's decision on similar issues for earlier assessment years, the Tribunal dismissed the appeals. It granted the assessee liberty to approach the AO to give effect to the Supreme Court's decision once it is pronounced.

The Tribunal held that the CIT(E) had wrongly rejected the applications without adequately examining the nature and genuineness of the assessee's charitable activities and objects. It was observed that merely commencing activities is not a statutory ground for rejection, and the CIT(E) did not discharge its duty to examine the genuineness of activities. Therefore, both appeals were remanded back to the CIT(E) for a fresh examination of all aspects and to pass a new order.

The Tribunal held that the CIT(A)'s decision to remand the case to the AO under Section 251(1)(a) was in conformity with the legal provisions of the Income Tax Act. Therefore, finding no error in the CIT(A)'s order of remand, the appeal filed by the Revenue was dismissed.

The Tribunal accepted the assessee's business claim, noting that presumptive taxation under Section 44AD does not require elaborate records, and similar income was offered in previous years. However, acknowledging the unsubstantiated nature of the claims, especially the gift, a lump sum addition of Rs. 2.50 Lacs was confirmed, to be taxed at normal rates, not the higher rate under Section 115BBE, citing a Madras High Court decision. The Ld. AO was directed to re-compute the income accordingly.

The Tribunal ruled that once the assessee's trading activity and election for presumptive taxation under section 44AD are accepted, a portion of the turnover cannot be treated as cash credit under section 68, as books of account are not required. The addition of Rs. 15,35,900/- was deleted, and the AO was directed to re-calculate the taxable income by applying the profit rate under section 44AD on the gross turnover of Rs. 25,19,627/- shown in the return filed under section 148.

The Tribunal restored the issues of taxability of Rs.9,01,726/- agricultural income and the claim for Rs.1,46,630/- deduction under Section 80C back to the Assessing Officer. This was done to provide the assessee another opportunity to plead and substantiate these claims. The Tribunal noted that 50% of the interest on compensation had already been offered to tax.

The Tribunal observed that the CIT(A) passed ex-parte orders without evidence of notice service and failed to decide on merits. Upholding natural justice, the Tribunal set aside the CIT(A)'s orders and remanded the matter for fresh adjudication, directing the CIT(A) to provide the assessee a proper opportunity to present its case and decide on merits.

Citing Collector, Land Acquisition vs. Mst. Katiji & Ors., the Tribunal condoned the delay in filing the appeal. Since the assessment was ex-parte, the case was remanded back to the AO to frame a de novo assessment, allowing the assessee to present their case.

The Tribunal observed that no proof of service of notices by the CIT(A) was on record, and the orders were not passed on merits. Considering the violation of natural justice, the Tribunal set aside the impugned orders and remanded the matter to the CIT(A) for fresh adjudication after providing the assessee a proper opportunity of being heard.