ITAT Chennai Judgments — May 2025

The Tribunal held that the addition of Rs. 15,18,466/- needs to be verified as the husband of the assessee, an NRI, claimed to have transferred the amount directly to the seller via foreign remittances. For the addition of Rs. 5,56,500/-, the Tribunal directed the AO to refer the case to a registered valuer as per Section 50C(2) of the Act.

The Tribunal decided several issues, including disallowance of provision for leave encashment, depreciation on goodwill, and issues related to prior period expenses and ATM depreciation. Some grounds were allowed for statistical purposes, while others were dismissed based on previous rulings or restored to the AO.

The Tribunal decided various grounds. Some grounds raised by the assessee were dismissed as withdrawn. The issue of depreciation on goodwill and provision for leave encashment were decided against the assessee, following earlier precedents. The ground regarding irrecoverable advances was restored to the AO for re-adjudication. The issues concerning foreign tax relief were decided against the assessee. Revenue's appeals on prior period expenses, depreciation on ATMs, and section 14A were dismissed based on earlier rulings. The issue of recovery of bad debts was decided in favor of the assessee. The non-applicability of Section 115JB was also decided in favor of the assessee.

The Tribunal held that the assessee was a resident of India for tax purposes. Regarding the capital gains issue, the Tribunal found the transaction to be a colourable device for tax evasion and directed the AO to recalculate the long-term capital gains.

The tribunal condoned the delay after considering the assessee's explanation. The tribunal noted that the lower authorities had passed non-speaking orders without proper discussion on merits and that the disallowances were made on items not prohibited by Section 40 of the Act. Therefore, the tribunal set aside the orders and directed the AO to adjudicate the matter de novo.

The Tribunal decided various grounds, allowing some for statistical purposes, dismissing others, and remitting one to the AO for further examination. Several grounds were decided by following precedents from the assessee's own earlier cases. The appeal filed by the assessee for AY 2020-21 was partly allowed, while the assessee's appeal for AY 2021-22 was dismissed. The Revenue's appeals for both AY 2020-21 and 2021-22 were also partly allowed for statistical purposes.

The Tribunal decided various grounds raised by both parties. For the assessee, some grounds were dismissed as withdrawn, one was allowed for statistical purposes, and others were decided against the assessee, often by following previous tribunal decisions in similar cases. For the revenue, several grounds were dismissed, some were decided in favor of the assessee, and one was remitted back to the AO.

The Tribunal held that the assessee was a 'Resident in India' based on Section 6 criteria, finding the FRRO data on stay periods reliable and rejecting the Ld. CIT(A)'s findings. His global income is taxable in India, subject to credit for foreign taxes paid. Regarding the LTCG, the Tribunal found the share and property transfer transactions to be a 'colourable device' for tax avoidance and remanded the matter to the AO for re-adjudication of the LTCG by adopting appropriate valuation figures from 30.06.2018.

The Tribunal held that the assessee had furnished sufficient details and evidence regarding sales promotion expenses, which were considered by the CIT(A). The Assessing Officer's observation that no details were provided was incorrect.

The Tribunal held that the amendment to Section 43D of the Act, while notified to be effective from 01.04.2018, should be treated as retrospective in nature. This was based on the object of the amendment to provide a level playing field and cure an omission, citing the Supreme Court decision in Allied Motors (P.) Ltd. v. CIT.

The Tribunal condoned the delay in filing the appeals. For ITA No. 460/Chny/2025, the matter was remanded to the CIT(A) for fresh adjudication on merits after considering evidence, as the AO's additions had not attained finality. For ITA No. 461/Chny/2025, the penalty was deleted as the underlying additions were remanded.

The Tribunal held that the assessee, being a cooperative society engaged in the manufacturing and sale of sugar from sugarcane supplied by its members, is entitled to deduction under Section 80P(2)(a)(iii) of the Act. The Tribunal relied on the decision of the Punjab & Haryana High Court in Budhewal Co-op. Sugar Mills Ltd.

The Income Tax Appellate Tribunal concurred with the Ld. CIT(A)'s finding that the appeal was invalid. The appeal before the CIT(A) was filed against a recovery demand notice and not against a specific order passed under Section 200A of the Act. Therefore, the Tribunal dismissed the grounds raised by the assessee.

The Tribunal noted the Assessing Officer's failure to conduct an inquiry into the assessee's claim of funds from HUF partition, alongside the assessee's failure to provide necessary confirmations. Consequently, the Tribunal restricted the addition to 50% of the original amount, i.e., ₹8,37,500, confirming the remaining half. A cost of ₹1,000 was also imposed on the assessee.

The Tribunal observed that the assessee consistently failed to provide any documentary evidence to substantiate their claim before both the CIT(A) and the Tribunal. Consequently, the Tribunal upheld the addition confirmed by the CIT(A), finding no alternative given the lack of evidence. The appeal filed by the assessee was dismissed.

The Tribunal condoned the delay in filing appeals and, considering the assessee's undertaking to cooperate and appear, remanded the matter to the CIT(A) for fresh adjudication on merits. The penalty under Section 271(1)(c) was deleted as the additions had not attained finality.

The Tribunal condoned the delay in filing the appeal, finding the reasons to be bonafide. The Tribunal decided to remand the matter back to the CIT(A) for fresh adjudication, subject to the assessee paying a cost of Rs. 25,000.

The Tribunal held that the CIT(A) was justified in allowing the exemption. The assessee filed the ITR and Form 10B within the time allowed, and due to the COVID-19 pandemic, the period for limitation was excluded.

The Tribunal held that the land was agricultural, exempt from capital gains, based on its location (16 kms from municipality, population less than 7000), classification in revenue records (Patta, Chitta Adangal), and evidence of cultivation through a lease agreement and prior acceptance of agricultural income. Citing High Court decisions, it set aside the capital gains addition. For the Section 14A disallowance, the Tribunal directed the AO to restrict it to the extent of the actual exempt income earned by the assessee, relying on the Madras High Court judgment in PCIT v. Envestor Venture Ltd.

The Tribunal noted that the quantum appeal was settled under the DTVSV Scheme, and immunity was granted from penalty. Therefore, the penalty appeal was no longer sustainable.

The Tribunal found that the Ld.CIT(E) erred in not considering the documents filed by the assessee, as there was still time available before the statutory deadline. Consequently, the Tribunal set aside the impugned order and restored the application to the CIT(E) for fresh processing in accordance with law, directing both the assessee and the CIT(E) to act diligently.

The Tribunal condoned the delay of 1418 days due to the managing partner's severe illness. It directed the CIT(A) to verify the tax payment of Rs. 5,08,57,893/- which was claimed to be in excess of the tax payable (Rs. 4,65,49,181/-). If verified, the CIT(A) should admit the appeal and decide on merits.

The Tribunal found that the CIT(A) had granted partial relief. The Tribunal directed the AO to take income from other sources at Rs.4,05,885/-, estimating agricultural income on par with a previous year. Section 115BBE was held not applicable.

The Tribunal held that the addition of unexplained cash credit u/s 68 was unsustainable as it was not based on any incriminating material found during the search. The assessment was considered unabated, and without incriminating material, no addition could be made u/s 153C.

The Tribunal held that while the CIT(A) allowed 15% of the unaccounted receipts as expenditure, this was on the lower side. Considering the nature of the business, the Tribunal directed the AO to allow 25% of the unaccounted receipts as expenditure.

The Tribunal held that the CIT(A) allowing only 15% of the unaccounted receipts as expenditure was on the lower side. Considering the nature of the business and profit margins, the Tribunal directed the AO to allow 25% of the unaccounted receipts as expenditure.

The Tribunal held that while the assessee's claim for 30% deduction was not fully supported by evidence, the relief of 15% allowed by the CIT(A) was on the lower side. Considering the nature of the business, the Tribunal allowed 25% of the unaccounted receipts as expenditure.

The Tribunal found that while the assessee's claim for 30% expenditure lacked full documentary support, the 15% allowed by the CIT(A) was inadequate. Considering the normal business profit margins for Kalyanamandapam (15-25% of gross receipts), the Tribunal directed the Assessing Officer to allow 25% of the unaccounted receipts as expenditure.

The Tribunal held that the CIT(A)'s relief of 15% expenditure was on the lower side. Considering the nature of the business, 25% of the unaccounted receipts were allowed as expenditure.

The Tribunal acknowledged that income estimation is necessary when complete books are unavailable. Considering the normal business profit margin (15-25%) for Kalyanamandapam, the Tribunal found the 15% expenditure allowance by CIT(A) to be low. It therefore directed the Assessing Officer to allow 25% of the unaccounted receipts as expenditure.

The Tribunal agreed that the entire stock difference could not be added as income. However, it found the 10% profit margin estimated by the CIT(A) to be excessive and directed the AO to re-compute the income by applying an 8% profit margin.

The Tribunal held that the assessment order was passed under Section 153C read with Section 143(3), not solely under Section 143(3). The assessee's challenge to jurisdiction based on the Supreme Court judgment in CIT Vs. Jasjit Singh was found not applicable. Regarding the additions sustained by CIT(A), the Tribunal found that the AO did not provide sufficient opportunity for explanation or conduct further inquiry, directing the AO to delete the addition.

The Tribunal observed that while the assessee's claim for 30% expenditure lacked full documentation, the 15% allowance by the CIT(A) was too low, considering the normal business profit in running a Kalyanamandapam ranges between 15% and 25% of gross receipts. Consequently, the Tribunal directed the Assessing Officer to allow 25% of the unaccounted receipts as expenditure. The decision applies mutatis mutandis to all connected appeals.

The Tribunal held that the cash payments were made in violation of Section 40A(3) and that none of the exceptions under Rule 6DD were applicable. The Tribunal also noted that employees had bank accounts for salary credits, making cash payments unnecessary.

The Tribunal held that interest income earned by the assessee, a registered NBFC, from its lending activities and bank deposits is to be treated as business income. It was also noted that no exempt income was earned, thus disallowance under Section 14A was not applicable.

The Tribunal held that the assessee was not granted sufficient opportunity to present supporting evidence for the cash deposits and customs duty additions. Therefore, the matter was remitted back to the AO for fresh adjudication.

The Tribunal held that the 'key employees and assembled workforce' are intangible assets eligible for depreciation, aligning with the Supreme Court decision in CIT vs. SMIFS Securities Ltd. For notional interest income, the Tribunal ruled it's not taxable as it's not real income accrued to the assessee, following multiple judicial precedents.

The Tribunal held that the assessee had mistakenly filed applications under incorrect clauses for provisional registration. It directed the CIT(E) to consider the applications as if made under the correct clauses and grant registration in accordance with the law. Some appeals were allowed for statistical purposes, while others were dismissed.

The Tribunal found that the assessee had mistakenly filed applications under incorrect sections of the Act for both 12A and 80G registrations/approvals. In light of the assessee's subsequent correct applications and the appeals being considered for statistical purposes, the Tribunal directed the CIT(E) to consider the applications correctly.

The Tribunal held that the rectification orders passed by the AO under Section 154 were in violation of principles of natural justice, as the assessee was not given an opportunity of being heard. The Court noted that no notice was served for AY 2016-17 & 2017-18, and for AY 2018-19, the notice was delivered after the rectification order was passed.

The Tribunal held that the payments made by the company for the purchase of properties were not for the individual benefit of the assessee but for the commercial use of the company. Furthermore, the funds were from undisclosed income and not 'accumulated profits' as required by Section 2(22)(e). Therefore, Section 2(22)(e) was not attracted.

The tribunal found that the AO failed to issue proper statutory notice or provide a reasonable opportunity of being heard to the assessee before passing the rectification orders under Section 154, especially as mandated by Section 154(3), which resulted in enhancing assessment or increasing the assessee's liability. This omission constituted a per-se violation of natural justice and statutory procedure. Consequently, the tribunal set aside the impugned rectification orders for all assessment years.

The Tribunal held that the AO erred in making the addition solely based on a comparison of net worth statements prepared at different valuations (book vs. market value) and for different purposes (financial statements vs. loan application). The CIT(A) was justified in deleting the addition as it was not supported by independent evidence and the property transfers were from relatives, potentially falling under exemptions.

The tribunal held that the Addl. CIT(A) was not justified in dismissing the appeal solely on the ground of limitation without considering the reasons for delay and without providing an opportunity of being heard. The tribunal condoned the delay and remanded the matter for fresh adjudication on merits.

The Tribunal held that the income earned from lending activities to both 'A' and 'B' class members is eligible for deduction under Section 80P(2)(a)(i) as business income. Furthermore, interest earned from investments in cooperative banks is also eligible for deduction under Section 80P(2)(d).

The Tribunal held that the revised Form-10, filed before the assessment was completed, should be considered as a valid compliance. The rejection of the revised Form-10 by the AO and CIT(A) solely due to an inadvertent error in the original form was not acceptable.

The Tribunal held that the AO violated Section 154(3) of the Income Tax Act by failing to issue a notice to the assessee before passing rectification orders that enhanced the assessment or increased the liability. This violation of natural justice rendered the rectification orders invalid.

The Tribunal condoned the delay in filing the appeals, noting that the Ld.CIT(A) dismissed them without considering the merits and without proper verification of the delay. The Tribunal set aside the impugned orders and directed the Ld.CIT(A) to decide the appeals on merits.