ITAT Delhi Judgments — December 2025

The Tribunal observed that the CIT(A) failed to consider the assessee's documentary evidence regarding the agricultural nature of the land, relying on the Goetze India Ltd. judgment to reject new claims made without a revised return. The Tribunal found this problematic, set aside the orders of both the CIT(A) and the AO, and restored the matter to the AO for a fresh decision after providing the assessee a fair opportunity to be heard.

The Tribunal held that IREDA is eligible for the deduction under Section 36(1)(viii) as a financial corporation providing long-term finance for eligible projects. All disputed income streams were found to be inextricably linked to the assessee's primary business activities and thus assessable as 'business income'. The Tribunal also upheld the allowance of depreciation based on beneficial ownership, Hindi Development Expenditure, and deletion of disallowance under Section 40(a)(ia) for short deduction of TDS.

The Tribunal confirmed the PCIT's order, holding that the AO's invocation of Section 37(1) for bogus purchases was faulty as the assessee failed to explain the source of the expenditure. The Tribunal found that Section 69C, which deals with unexplained expenditure, was clearly applicable in this case because the goods were never received and the purchases were established to be bogus. The PCIT's direction to re-assess by applying Section 69C read with Section 115BBE was deemed correct and in line with statutory provisions and judicial precedents.

The Tribunal held that the assessee is eligible for the Section 36(1)(viii) deduction, considering its nature of business, past CBDT approvals, and consistency in subsequent assessment years. All disputed income streams, including interest on short-term deposits, staff loans, various business service charges (management fees, lead institution fees, fee-based activity, interest rate swap income, unspent subsidy, interest saving, stale cheques reversed), interest on foreign deposits, and UNDP grants, were held to be business income, being inextricably linked to the assessee's core financing activities. Disallowances under Section 14A, depreciation on buildings (based on beneficial ownership), Hindi Development Expenditure, and Section 40(a)(ia) for short deduction of TDS were deleted.

The Tribunal admitted the additional ground, ruling that the approval granted by the Additional Commissioner of Income Tax under Section 153D was mechanical, arbitrary, and without proper application of mind. It noted issues like consolidated approval for multiple years, incorrect search date, and lack of consideration of relevant materials for each year. Consequently, the entire assessment proceedings, being vitiated by the invalid approval, were quashed.

The Tribunal held that the assessee is eligible for the deduction under Section 36(1)(viii) based on consistency and its primary business objectives. All disputed income streams were re-classified as 'business income' due to their inextricable link to IREDA's core financing activities. Disallowance under Section 14A was set aside as no exempt income was earned. Depreciation was allowed based on beneficial ownership, Hindi Development Expenditure was accepted as a business expense, and the disallowance under Section 40(a)(ia) for short deduction of TDS was deleted, affirming it applies only to non-deduction.

The Tribunal held that, as per the Supreme Court's ruling, the six assessment years for Section 153C proceedings must be reckoned from the date of the satisfaction note (11.10.2022), making Assessment Years 2017-18 to 2022-23 assessable. Therefore, the notice issued under Section 153C for Assessment Year 2016-17 was barred by limitation and without jurisdiction, rendering the consequential assessment order null and void. The Tribunal further ruled that the PCIT lacked jurisdiction to invoke Section 263 to revise an inherently invalid or non-est assessment order, and thus quashed the Section 263 order.

The Tribunal upheld the validity of reopening the assessment but deleted the addition made under Section 68 on merits. It ruled that the AO's failure to provide copies of Shri Subhash Chandra Bhartia's statement and deny cross-examination constituted a serious violation of the principle of natural justice. The Tribunal also noted that the loan was repaid with interest and TDS was deducted prior to the search action, and the prospective amendment to Section 68 was not applicable to the assessment year.

The Tribunal admitted the additional legal ground regarding the limitation issue. Upon reviewing the sequence of events and applying the ratio of the Supreme Court's decisions, it was found that the notice under Section 148, issued on 21.07.2022, was beyond the maximum time available (23 days, expiring on 24.06.2022). Consequently, the notice was held to be time-barred, and the reassessment order passed pursuant to it was quashed as bad in law, rendering other grounds academic.

The tribunal remitted the quantum appeal (ITA No. 968/Del/2017) back to the CIT(A) with a direction to reconsider the matter afresh, grant an opportunity of being heard to the assessee, and admit additional evidence to prevent miscarriage of justice. Consequently, the penalty levied under Section 271(1)(c) (ITA No. 4849/Del/2019) was deleted as it does not survive the remittal of the quantum appeal.

The Tribunal, relying on precedents from Tata Sons Ltd. and NDTV Networks Ltd., held that the assessee's activity of holding strategic investments in subsidiary companies, as per its main object, constitutes a business activity. Consequently, the expenses incurred for day-to-day operations and administration were allowable business expenditures, fully deductible under Section 36(1)(iii). The Tribunal also directed the AO to allow the set-off of such business losses against income declared under other heads of income, and Section 14A provisions were deemed inapplicable.

Following the jurisdictional High Court's ruling in the assessee's own case for Assessment Year 2009-10, which held the 'Resale Price Method' (RPM) as the MAM for similar transactions, the Tribunal directed the Assessing Officer (AO)/Transfer Pricing Officer (TPO) to re-compute the Arm's Length Price for the international transactions concerning purchases of finished goods. The AO/TPO is instructed to apply the 'Resale Price Method' for this re-computation and conduct fresh benchmarking.

The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decisions on all grounds. It found that the assessee had discharged the onus to prove the genuineness and reasonableness of the related-party transactions, the sources of cash deposits (from sales, debtor realizations, and partially from gifts), and the incurrence of property improvement costs through banking channels and family loans. The revenue failed to bring comparable instances or refute the documentary evidence provided by the assessee.

The Tribunal affirmed IREDA's eligibility for deduction under Section 36(1)(viii) as a financial corporation providing long-term finance for infrastructure development. It ruled that various incomes, including interest on short-term deposits, staff loans, business service charges, and interest on foreign deposits, constituted 'business income'. Additionally, it allowed depreciation on a building based on beneficial ownership, upheld Hindi Development Expenditure, and clarified that Section 40(a)(ia) applies only to non-deduction, not short-deduction, of TDS.

The tribunal held that the assessee had furnished adequate documentary evidence, including tax invoices with vehicle numbers, e-way bills, and confirmations from the GSTIN portal, to substantiate the genuineness of the purchases. Consequently, the tribunal found no reason to sustain the disallowance and set aside the impugned order.

The Tribunal held that IREDA is eligible for the Section 36(1)(viii) deduction, considering its nature as a financial corporation involved in infrastructure development, prior CBDT approvals, and the principle of consistency. All disputed income streams were found to be inextricably linked to the assessee's core business of financing and investment, therefore assessable as 'business income'. The Tribunal also affirmed the allowance of Hindi Development Expenditure and the depreciation claim based on 'beneficial ownership', and deleted the disallowance under Section 40(a)(ia), clarifying it applies only to non-deduction of TDS, not short-deduction.

The Tribunal remitted the quantum appeal (ITA No. 968/Del/2017) back to the CIT(A) with a specific direction to consider the additional evidence and grant the assessee an opportunity of being heard afresh to prevent a miscarriage of justice. Consequently, the penalty levied under Section 271(1)(c) (ITA No. 4849/Del/2019) was deleted.

The Tribunal found that the assessee had sufficient cause for not filing the reply and that the CIT(A) violated natural justice by not admitting crucial additional evidences. The case is restored to the Assessing Officer for de novo adjudication, with a direction to consider all additional evidences and provide a reasonable opportunity of being heard.

The Tribunal held that reassessment proceedings initiated and an assessment order passed in the name of a dead person, where the Assessing Officer had prior knowledge of the death, are void-ab-initio and without jurisdiction. Relying on jurisdictional High Court precedent, the Tribunal ruled that such proceedings and the consequent assessment order are vitiated and non-est.

The Tribunal observed that the CIT(A)/NFAC overlooked crucial evidence furnished by the assessee's legal heir. Considering the unique circumstances of the assessee's death and sealed business premises, the Tribunal decided to restore all appeals—the assessee's assessment and penalty appeals, and the revenue's appeal—to the Assessing Officer. The AO is directed to re-examine all contentions and evidences, including bank statements, and complete the assessment afresh after granting adequate opportunity to the assessee.

The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, confirming that the DDA is indeed a 'local authority'. Consequently, payments of ground rent made to the DDA are exempt from TDS deduction under Section 196 of the Income Tax Act, 1961. The Tribunal relied on the Supreme Court's decision in *Union of India vs R.C. Jain* and CBDT Circular No. 699.

The Tribunal held that IREDA is eligible for deduction under Section 36(1)(viii) as it is a financial corporation providing long-term finance for eligible business. It ruled that all disputed income streams are inextricably linked to its business operations and thus constitute 'business income'. Disallowances under Section 14A and 40(a)(ia) were deleted, depreciation was allowed based on beneficial ownership, and Hindi Development Expenditure was also allowed, thus allowing all appeals of the assessee and dismissing all appeals of the department.

The Tribunal upheld the assessee's eligibility for Section 36(1)(viii) deduction, confirming its primary business as a financial corporation for infrastructure development in renewable energy. It ruled that all disputed incomes (interest on deposits/loans, management fees refund, lead institution fees, fees-based activity, interest rate swap, and UNDP grant interest) were inextricably linked to its core business and should be treated as business income. The Tribunal also allowed depreciation on beneficial ownership, upheld the allowance of Hindi Development Expenditure, and deleted disallowance under Section 40(a)(ia) for short deduction, and Section 14A disallowance. The assessee's appeals were allowed, and the department's appeals were dismissed.

The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals, affirming that the assessee was eligible for the Section 36(1)(viii) deduction. It re-characterized all disputed income streams as "business income," concluding they were inextricably linked to the assessee's core financing activities. Furthermore, disallowances under Section 14A and Section 40(a)(ia) (for short deduction of TDS) were deleted, and allowances for depreciation on a residential flat (based on beneficial ownership) and Hindi Development Expenditure were upheld.

The Tribunal held that the AO had conducted necessary enquiries regarding high-value creditors and made additions under Section 68 r.w.s. 115BBE. It found that the PCIT's invocation of Section 263 was not based on correct facts or understanding of statutory provisions, as the PCIT had challenged only one addition but set aside the entire assessment order.

The Tribunal held that the Section 148 notice was issued without jurisdiction because the Assessing Officer had not recorded reasons or obtained subjective satisfaction before issuing the notice. Citing the Supreme Court's decision in PCIT vs. Tata Sons Ltd., it was ruled that when reasons are recorded after the notice, there is no subjective satisfaction, rendering the notice and subsequent proceedings unsustainable and vitiated.

The Tribunal determined that the assessment year was an abated assessment year, a point not disputed by the assessee's representative. Consequently, the CIT(A) erred in quashing the assessment order solely on the basis of a lack of incriminating material, thus allowing Ground 1 of the Revenue's appeal. As the CIT(A) had not addressed the merits of the disallowances, the Tribunal remanded the case back to the AO for a de novo assessment on these remaining issues (Grounds 2 to 9), which were allowed for statistical purposes.

The ITAT upheld the order of the Ld. CIT(A), ruling that the AO had failed to bring concrete evidence to prove that the transactions were accommodation entries. The Tribunal noted that the NCLT, NCLAT, and Hon'ble Supreme Court had previously dismissed a petition by the MCA to wind up the assessee company, thereby confirming it was not a shell company. Furthermore, the assessee demonstrated substantial profits and income tax payments in subsequent assessment years (AY 2019-20 to AY 2024-25), supporting its claim of being a genuine entity. Consequently, the Department's appeal was dismissed, and the assessee's cross-objections were also dismissed as not pressed.

The Tribunal held that IREDA is eligible for Section 36(1)(viii) deduction, noting its primary objective as a financial corporation for renewable energy projects. It further ruled that all disputed income streams, including interest on deposits (short-term & foreign), staff loans, and various business service charges (refund of management fees, lead institution fees, fees-based activity, interest rate swap income, miscellaneous income including unspent subsidy and interest from UNDP grant), were inextricably linked to its business operations and hence taxable as 'business income'. The Tribunal also upheld the CIT(A)'s deletion of disallowance for Hindi Development Expenditure and disallowance u/s 40(a)(ia) for short deduction of TDS, and allowed depreciation on a building based on beneficial ownership. Disallowance u/s 14A for AY 2017-18 and 2018-19 was also sustained in favour of the assessee.

The Tribunal quashed the second revision order passed by the ld. PCIT under Section 263. It held that the ld. AO had taken a plausible view after proper verification of evidences regarding the 15 loan creditors, and therefore, no error could be attributed to the AO's order. Furthermore, Section 68 of the Act was not applicable to the differential amount of Rs. 3,13,97,257/- which merely represented a journal entry for interest payable, not a physical receipt of money, and thus the ld. AO's view on this issue was also plausible. The Tribunal relied on Supreme Court judgments in Malabar Industrial Co. Ltd. and H H Sri Rama Verma vs CIT.

The Tribunal dismissed the grounds challenging the validity of the reassessment proceedings, confirming that the approval under Section 151 was properly obtained. However, it remanded the issues concerning unexplained bank deposits, notional house property income, and long-term capital gain back to the Assessing Officer for fresh verification and adjudication, providing specific directions for each issue.

The Tribunal held that the assessee was eligible for the Section 36(1)(viii) deduction, as its activities fell under 'eligible business,' supported by CBDT approvals and consistency. All disputed incomes, including interest on short-term deposits, staff loans, various business service charges (refund of management fees, lead institution fees, fee-based activity, interest rate swap income, miscellaneous income), and interest on foreign deposits, were re-characterized as business income, finding a direct nexus with the assessee's core financing activities. Disallowances under Section 14A and Section 40(a)(ia), and disallowance of depreciation on building and Hindi Development Expenditure, were deleted or rejected against the Revenue, upholding the CIT(A)'s favorable decisions to the assessee.

The Tribunal found a critical variance between the penalty show-cause notice, which alleged 'under reported income' under Section 274 read with Section 270A, and the final penalty order, which imposed penalty for 'under reporting income in consequence of any misreporting thereof' invoking Section 270A(8). The Tribunal ruled that if proceedings were initiated for a lighter form of violation, penalty could not be levied for an aggravated violation, and the CIT(A) erred by attempting to substitute the charge. Consequently, the Tribunal allowed the appeal and deleted the penalty.

Relying on Supreme Court decisions in UOI vs. Rajeev Bansal and Deepak Steel and Power Ltd., the Tribunal noted the Revenue's concession that all reassessment notices for AY 2015-16 issued on or after April 1, 2021, must be dropped as they are time-barred under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Since the Section 148 notice for AY 2015-16 was issued on 08.04.2021, it was held to be bad in law, and the consequential assessment order was quashed.

The Tribunal held that IREDA is eligible for deduction under Section 36(1)(viii), being a financial corporation providing long-term finance for eligible infrastructure projects, a fact not disputed by the Revenue. It determined that interest on short-term deposits, staff loans, various business service charges (management fees refund, lead institution fees, fees-based activity, interest rate swap income, miscellaneous income) were inextricably linked to the assessee's business operations and should be treated as business income. The Tribunal also upheld the allowance of depreciation on a building under beneficial ownership, Hindi Development Expenditure, and confirmed that disallowance under Section 40(a)(ia) applies only to non-deduction, not short-deduction, of TDS.

The Tribunal found that the CIT(A) erred in not admitting additional evidence, especially considering the difficulties faced by the assessee's legal heir. Consequently, the Tribunal restored the assessment and penalty appeals for both the assessee and the revenue to the file of the Assessing Officer for fresh adjudication, directing the AO to examine the contentions and evidences after providing adequate opportunity to the assessee.

The Tribunal found that the approval granted by the Additional Commissioner of Income Tax under Section 153D was mechanical, consolidated for multiple assessment years, and lacked proper application of mind, citing discrepancies like an incorrect search date and absence of discussion on assessment records or income. It was held that the mandatory requirement of prior approval under Section 153D, essential for search assessments under Section 153A, must not be given mechanically and requires independent application of mind for each year. Consequently, the entire assessment proceedings were vitiated and quashed due to the invalid approval.

The Tribunal held that a substantive right to refund cannot be denied due to technical or procedural difficulties in the e-filing utility, citing Bombay High Court judgments. It further noted that the ITAT Special Bench decision, relied upon by the lower authorities to prioritize domestic law over DTAA for DDT, had been overruled by the Bombay High Court in the Colorcon Asia Pvt. Ltd. case. Therefore, the assessee was entitled to the beneficial DTAA rate of 10% on dividends, and the AO was directed to process the refund claim.