ITAT Delhi Judgments — August 2025

The Tribunal held that the additional income offered for AY 2009-10, which pertained to AY 2010-11, should be adjusted to avoid double taxation, leading to a partial allowance of the assessee's appeal for AY 2009-10. The hedging transactions for raw materials and foreign currency were deemed integral to business operations and not speculative, hence allowable as revenue expenditure. The Revenue's appeals were dismissed.

The Tribunal held that the additional income inadvertently offered for Assessment Year 2009-10, which pertained to Assessment Year 2010-11, should be adjusted to avoid double taxation, partly allowing the assessee's appeal. Hedging transactions for raw materials and foreign currency were held to be business expenditure and not speculative, leading to the allowance of related claims.

The Tribunal directed the AO to restrict the disallowance under Section 14A to the extent of exempt income, ruling in favor of the assessee for this issue. Regarding the interest disallowance, a portion of the loan was used to repay share application money for building construction, and the issue was restored to the AO for proportionate allowance.

The Tribunal held that for AY 2004-05, the assessee had provided sufficient documents to establish the identity, creditworthiness, and genuineness of share applicants, and the CIT(A)'s deletion of the addition was justified. For AY 2006-07, the Tribunal partially allowed the revenue's appeal, upholding the addition related to two sundry creditors but deleting the addition related to one large creditor. The Tribunal also dismissed additions related to share discrepancies due to typographical errors.

The Tribunal decided on various grounds. It dismissed the Revenue's appeal regarding depreciation on UPS, software expenses, and 80JJAA deduction, while allowing the assessee's appeal on prior period expenses, commercial vehicle depreciation, and disallowance under Section 14A. Some grounds were decided based on preceding decisions in the assessee's own case.

The Tribunal held that disallowances under Section 14A were not automatic and required AO satisfaction, leading to deletion in certain cases. Brokerage fees were allowed as revenue expenditure. Deductions for car parking rentals were allowed based on prior rulings. Settlement fees for contract termination were deemed revenue expenditure, not capital. TDS credit was directed to be given as per CIT(A) orders. Appeals of the revenue were dismissed, and appeals of the assessee were allowed.

The Tribunal held that Section 14A disallowances require AO's satisfaction and cannot be automatic. Brokerage fees were allowed as incurred in the ordinary course of business. Settlement fees for contract terminations were allowed as revenue expenditure driven by commercial expediency. Various other issues concerning TDS credit, interest, and penalty were also decided.

The Tribunal found that the CIT(Appeals) dismissed the appeals without considering the merits. Therefore, the appeals were restored to the CIT(A) for fresh adjudication after providing the assessee with an adequate opportunity to be heard.

The Tribunal held that the assessee is indeed an accommodation entry provider due to failure to provide supportive evidence. However, it granted partial relief by reducing the assessed commission income from 0.5% to 0.4% of the turnover, acknowledging the estimation nature of the exercise.

The Tribunal largely ruled in favor of the assessee on most issues, affirming higher depreciation rates for UPS (60%) and commercial vehicles (50%), and allowing annual maintenance charges for software, prior period expenses, provision for warranty, and R&D expenses (under Section 37(1)) based on precedents. Disallowances under Section 14A were also dismissed due to the absence of exempt income. Minor disallowances related to Section 37 and 80JJAA were upheld, and a calculation error for energy-saving device depreciation was remanded for verification. Consequently, penalty appeals against the assessee were dismissed.

The Tribunal held that for the share capital additions, the assessee had provided sufficient documents to establish the identity, creditworthiness, and genuineness of the transactions, and the CIT(A) was justified in deleting the addition. However, for two of the three sundry creditors, the assessee failed to establish the genuineness of the transaction and the nature/source of credit, hence the deletion by the CIT(A) was partly set aside.

The Tribunal held that disallowances under Section 14A were not automatic and required specific satisfaction by the AO. Brokerage fees were allowed as a business expense. Deductions for car parking rentals were allowed based on previous rulings. Settlement fees for contract termination were considered revenue expenditure driven by commercial expediency. TDS credits were directed to be granted fully after verification.

The Tribunal held that the assessee had correctly deducted TDS at the rate specified in the lower deduction certificate. They noted that a similar case involving the assessee's father had also been decided in favor of the assessee, and differential treatment was not warranted.

The Tribunal held that the AO had not brought any concrete material evidence on record to prove that the CCM facility was misused by the assessee through his broker to buy bogus loss. The Tribunal noted that the broker did not respond to the Section 133(6) notice and no evidence was produced regarding collusion or exchange of money.

The Tribunal held that the reopening of assessment after four years from the end of the assessment year requires the Assessing Officer to prove that income escaped assessment due to the assessee's failure to disclose material facts. In this case, the reasons for reopening indicated a mere change of opinion by the AO and not any new information.

The Tribunal held that the disallowance under Section 14A concerning dividend income was not automatic and required AO's satisfaction. The disallowance of brokerage fees was deleted as it was incurred in the ordinary course of business. The denial of deduction u/s 80IAB on car parking rentals was deleted. The settlement fees paid for termination of service contracts were held to be revenue expenditure. TDS credits were directed to be granted fully.

The Income Tax Appellate Tribunal found that the approval granted by the Pr.CIT for initiating reassessment proceedings under Section 148 was mechanical and lacked independent application of mind, merely noting 'Yes, as per O/s.'. Citing Supreme Court and High Court precedents, the Tribunal held that such mechanical approval renders the reassessment proceedings invalid. Consequently, the reassessment proceedings initiated under Section 147 and the resulting re-assessment orders for all assessment years (2012-13 to 2015-16) were quashed.

The ITAT held that the assessee had adequately demonstrated his role as a property broker and that the impounded documents related to transactions of third parties. It noted that the tax authorities possess sufficient powers to summon individuals or obtain original documents if genuineness is doubted, and the burden of proof cannot be stretched to an impossible extent for the assessee. Therefore, additions based on general assumptions without further inquiry were deemed unsustainable, and the impugned additions were deleted.

The Tribunal held that disallowance under Section 14A cannot be automatic and requires AO's satisfaction. Brokerage fees paid in the ordinary course of business were allowed. Settlement fees for termination of service contracts were considered revenue expenditure. The assessee was eligible for deduction under Section 80IAB. Short credit of TDS was directed to be rectified.

The Tribunal held that the assessee is indeed an entry provider due to lack of evidence for genuine business activity. However, considering the estimation exercise and varying precedents, a part relief was granted by directing the assessment of commission income at 0.4% instead of 0.5%.

The Tribunal decided several grounds of appeal. Depreciation on UPS was allowed. Software expenses and annual maintenance charges were treated as revenue expenditure. Ground relating to disallowance under Section 35(2AB) was allowed in favor of the assessee. The deduction under Section 80JJAA was confirmed to a certain extent. Prior period expenses and provision for warranty were allowed. Disallowance under Section 14A was also allowed. Several other grounds were decided based on precedents and facts.

The Tribunal held that the assessment order passed under Section 143(3) ought to have been passed under Section 153C of the Act, given the facts related to the search and seized material. Therefore, the assessment order was quashed.

The Tribunal decided various grounds of appeal concerning depreciation on UPS, software expenses, research and development expenses, deduction under Section 80JJAA, prior period expenses, depreciation on energy-saving devices and commercial vehicles, provision for warranty, and disallowance under Section 14A. The Tribunal affirmed the CIT(A)'s actions in most cases, dismissing some Revenue grounds and allowing others.

The Tribunal found that the Assessing Officer solely relied on an Investigation Wing report from a search on a third party without conducting independent inquiries or providing the report to the assessee. Crucially, the AO incorrectly assumed no prior assessment, despite an existing Section 143(3) order for the same year accepting the purchases. Citing `Sanjay Kaul Vs. The ITO`, the Tribunal concluded that the 'reason to believe' was a borrowed satisfaction, demonstrating non-application of mind, which vitiated the reassessment proceedings under Sections 147/148.

The Tribunal restored the appeal to the file of the CIT(A) to decide afresh after providing adequate opportunity to the legal heirs, noting that the original appeal was dismissed ex parte.

The Tribunal held that in the interest of natural justice, the assessee should be given one more opportunity to submit details of its charitable activities. The order of the CIT(E) was set aside, and the matter was restored for fresh adjudication.

The Income Tax Appellate Tribunal (ITAT) decided that the appeals should be restored to the file of the CIT(Appeals) for fresh adjudication. The CIT(Appeals) is directed to provide adequate opportunity to the assessee, and if the assessee fails to respond, then to proceed to dispose of the appeals on their merits.

The Tribunal held that the reopening/reassessment proceedings were not sustainable in law as the requisite approval under Section 151 was not obtained. Regarding the appeal, the Tribunal found that the additions made by the AO were not sustainable, particularly concerning the loan from Mukesh Khurana due to the possibility of double addition, and the cash deposit due to sufficient cash-in-hand explained by withdrawal from the bank.

The Tribunal held that the approval granted under Section 153D must reflect an independent application of mind by the approving authority for each assessment year and each assessee, rather than being a mechanical or consolidated exercise. Relying on High Court and ITAT judgments, the Tribunal found that the approval in this case was granted in a mechanical way, covering multiple assessees and assessment years through a single letter, and thus lacked the requisite application of mind. Consequently, the approval was vitiated, and the assessment orders were deemed liable to be quashed.

The Tribunal noted that the assessee had received relief through rectification orders and no objection was raised by the Revenue for withdrawal.

The Tribunal held that the disallowance under Section 14A was not automatic and required specific satisfaction. Brokerage fees were allowed as business expenditure. Settlement fees paid for contract termination were considered revenue expenditure due to commercial expediency. Deductions under Section 80IAB were allowed where applicable, and TDS credits were directed to be granted as per CIT(A)'s orders.

The Tribunal dismissed most of the Revenue's appeals concerning depreciation on UPS, software expenses, R&D disallowances, and Section 80JJAA disallowance, affirming the CIT(A)'s actions. For the assessee's appeals, the Tribunal allowed claims related to prior period expenses, higher depreciation on commercial vehicles, provision for warranty, and disallowances under Section 14A, often citing precedents from the assessee's own case. It directed the AO to re-verify the depreciation calculation for energy-saving devices for statistical purposes and allowed R&D expenses as revenue expenditure under Section 37(1). Penalty appeals against the assessee were also dismissed.

The Tribunal held that disallowances under Section 14A should not be automatic and require AO's satisfaction. Brokerage fees were allowed as a business expense. Settlement fees for contract termination were considered revenue expenditure due to commercial expediency. Issues regarding Section 80IAB deduction, set off of losses, and TDS credit were decided in favor of the assessee.

The Tribunal held that the approval granted under Section 153D of the Act was mechanical and without due application of mind, violating the provisions of the Act which require approval for each assessment year. Consequently, the assessment orders were quashed.

The Tribunal held that the basic condition to avail exemption under section 11 is registration under section 12AA. Since the assessee lacked this valid registration, the impugned order dismissing the appeal was upheld.

The Tribunal upheld the relief granted by the CIT(A) to the assessee. The addition of 2% of the cash deposits as income was deemed justified, considering the nature of transactions and the low profit ratio of the business. The Revenue's appeal was dismissed.

The Tribunal held that a revised return supersedes the original under Section 139(5) of the Act. Consequently, the impugned assessment order was set aside, and the matter remanded to the AO/TPO to consider the revised return and pass a de-novo assessment, providing the assessee an opportunity of being heard.

The Tribunal found that the Pr.CIT granted approval for the reassessment mechanically by simply recording 'Yes, as per O/s.' or similar non-reasoned endorsements, without proper application of mind, for both the individual and multiple other cases. Relying on Supreme Court and High Court precedents, the Tribunal held that such mechanical approval under Section 151 renders the reassessment proceedings invalid. Consequently, the reassessment proceedings initiated under Section 147 and the subsequent assessment orders were quashed for all relevant assessment years (2012-13, 2013-14, 2014-15 & 2015-16).

The Tribunal held that disallowance under Section 14A was not automatic and required AO satisfaction. Brokerage fees paid were found to be in the ordinary course of business. Settlement fees for contract termination were considered revenue expenditure driven by commercial expediency. Deductions under Section 80IAB and set-off of losses were allowed where applicable. Short TDS credit issues were directed to be rectified.

The Tribunal held that the assessee performed two types of services: Investment Consultancy & Finance advisory and IT enabled services (ITeS). It was decided that these two segments should be compared separately with suitable comparables. The issue of comparables was remitted back to the AO/TPO for fresh selection and comparison. For interest on outstanding receivables, the Tribunal directed the AO/TPO to allow working capital adjustments and apply LIBOR+300 basis points.

The Tribunal held that the assessment order passed under Section 143(3) ought to have been passed under Section 153C of the Act, as the satisfaction for initiation of proceedings under Section 153C was recorded on 30.12.2022, which is deemed the date of search. Therefore, the assessment order was quashed.

The Tribunal held that additions made under section 153A of the Income Tax Act must be based on incriminating material found during the search of the assessee's premises. Since no such material was found, and the evidence used was from searches of third parties or statements recorded post-search, the additions were not sustainable. The AO should have followed the procedure under section 153C for material found from third parties.