ITAT Delhi Judgments — October 2026

The Tribunal held that the addition of Rs. 25,00,000/- on account of unsecured loans was not justified. It reasoned that the lender had responded, and the source of the loan was established by bank entries and confirmation. The AO having the lender's bank statement, and without any suspicious entries or allegations of cash deposits in the lender's account, it was not justified to doubt the creditworthiness and identity of the lender solely for the non-furnishing of ITR or audited financials. The Tribunal also held that the addition of Rs. 73,25,000/- representing cash deposits during demonetization was not justified. It noted that the assessee is in the regulated liquor trade, and VAT and excise returns are verifiable. The Tribunal found that the NFAC's observations were based on generalized assertions and surmises, without pointing out any specific discrepancies or shortcomings in the quantitative evidence provided by the assessee, such as monthly purchase and sale details, cash ledger, and DVAT returns. Therefore, the Tribunal allowed the appeal and quashed the impugned assessment order.

The Tribunal dismissed the Revenue's appeal. Regarding the first ground, the Tribunal found no reason to interfere with the CIT(A)'s finding that the assessee was in the real estate business and was not required to be registered as an NBFC. The Tribunal agreed that earning interest income does not automatically convert a company into an NBFC. For grounds 2, 3, and 4 concerning the disallowance of interest expenses, the Tribunal upheld the CIT(A)'s finding that the assessee prepared its accounts on an accrual basis. It noted that for entities following the mercantile system, actual payment of interest is not a prerequisite for claiming it as a deduction if it has accrued. The Tribunal found the CIT(A)'s reasoning clear and did not interfere. On ground 5 regarding the genuineness and inflation of expenditure, the Tribunal noted the assessee's submission that its books were audited by an independent auditor and that banking channels were used. Since the Revenue did not bring anything contrary to the CIT(A)'s findings on record, the appeal on this ground was dismissed. Regarding ground 6, the Tribunal found that the assessee had submitted all necessary details and explanations, and the Revenue had not brought anything contrary to the CIT(A)'s findings on record. Therefore, the appeal on this ground was also dismissed. Ground 7 was general and not pressed.

The Tribunal held that the assessment year 2019-20 falls outside the scope of section 153C as amended. The date of search for unsearched persons is determined by when documents are handed over or satisfaction is recorded. In this case, the original search was on 26.10.2020, but the satisfaction was recorded later. The Tribunal, following the Delhi High Court in PCIT vs. Ojjus Medicare (P.) Ltd. (2024), held that the date of handing over of searched material for recording satisfaction is crucial. Since the documents were received by the assessee's AO on 17.11.2022, the year of search for the assessee would be AY 2023-24. Consequently, the amended provisions of section 153C(3) of the Act, which state that section 153C shall not apply to searches initiated on or after 01.04.2021, would be applicable. The Tribunal also referred to a coordinate bench decision in Lekh Raj vs. DCIT (2026) with identical facts. Therefore, the notice under section 153C and the subsequent assessment order were held to be unsustainable and liable to be quashed on jurisdictional grounds. The reassessment proceedings should have been adopted under section 147 read with section 148. The appeal of the assessee was allowed on this ground. Other grounds were not adjudicated and were kept open. The decision for AY 2019-20 was applied mutatis mutandis to AY 2020-21.

The Tribunal held that the assessment year 2019-20 falls outside the scope of section 153C as amended. The date of search for unsearched persons is determined by when documents are handed over or satisfaction is recorded. In this case, the original search was on 26.10.2020, but the satisfaction was recorded later. The Tribunal, following the Delhi High Court in PCIT vs. Ojjus Medicare (P.) Ltd. (2024), held that the date of handing over of searched material for recording satisfaction is crucial. Since the documents were received by the assessee's AO on 17.11.2022, the year of search for the assessee would be AY 2023-24. Consequently, the amended provisions of section 153C(3) of the Act, which state that section 153C shall not apply to searches initiated on or after 01.04.2021, would be applicable. The Tribunal also referred to a coordinate bench decision in Lekh Raj vs. DCIT (2026) with identical facts. Therefore, the notice under section 153C and the subsequent assessment order were held to be unsustainable and liable to be quashed on jurisdictional grounds. The reassessment proceedings should have been adopted under section 147 read with section 148. The appeal of the assessee was allowed on this ground. Other grounds were not adjudicated and were kept open. The decision for AY 2019-20 was applied mutatis mutandis to AY 2020-21.

The Tribunal noted that the assessee company was struck off from the Register of Companies. The AO, aware of this, had filed an appeal before the NCLT to restore the company, which was pending at the time of assessment. The Tribunal relied on the decision in 'M/s. Shanti Builders (P) Ltd. vs. CIT' (2014) 363 ITR 147 (Bom) and other High Court judgments which held that assessment proceedings cannot be initiated or continued against a company that has been struck off the register and not restored. The Tribunal found that the AO's action of filing an appeal before the NCLT indicated an acknowledgment of the company's non-existent status. Therefore, the assessment proceedings initiated under Section 153C were held to be invalid. Consequently, all subsequent actions, including the additions made and penalty proceedings, were quashed. The Tribunal did not decide on the merits of the additions or other grounds as the primary issue of the assessee's existence rendered the assessment void ab initio. The appeal was allowed on this preliminary ground.

The Tribunal held that the disallowance under Section 14A of the Act read with Rule 8D cannot exceed the exempt income earned during the relevant previous year. The assessee's exempt income was Rs. 24,000/-, and the assessee had made a suo motu disallowance of Rs. 24,000/-, which was not controverted by the Revenue. Regarding the applicability of the Finance Act, 2022 amendment, the Tribunal relied on the decision of the Hon'ble jurisdictional High Court in Pr.CIT vs. Era Infrastructure India Ltd., which held that the amendment takes effect from 1st April 2022 and applies from AY 2022-23 onwards, thus not operating retrospectively. Since the assessment year in question is 2018-19, the amendment has no application. Consequently, as the assessee had already made a suo motu disallowance equal to the exempt income, no further disallowance was required. The Tribunal found no infirmity in the order of the Ld. CIT(A) and dismissed the grounds of appeal raised by the Revenue.

The Tribunal held that the assessee was not liable to deduct tax at source on the interest payment made to NHAI. The Tribunal reasoned that NHAI is a corporation established by a Central Act, and therefore, it falls within the scope of S.O./Notification No. 3489 dated 22.10.1970, issued under section 194A(3)(iii)(f). This notification specifically exempts payments to any corporation established by a Central Act from the TDS requirement under section 194A. The Tribunal found the submissions of the assessee to be cogent and forceful, agreeing that Circular No. 18/2017 cannot impose additional conditions beyond the statutory provisions and notifications. The Tribunal stated that applying the circular in the manner suggested by the revenue would render Notification No. 3489 redundant, which is not legally permissible. The Tribunal rejected the revenue's arguments regarding the applicability of Circular No. 18/2017. Consequently, the demand raised under section 201(1) and the consequential interest under section 201(1A) were directed to be deleted. The ratio is that a statutory notification exempting payments to a corporation established by a Central Act under section 194A(3)(iii)(f) takes precedence over a CBDT circular that attempts to impose additional conditions not present in the statute or notification.

The Tribunal noted that the facts and issues were identical to a previous appeal decided by a coordinate bench. Following the precedent, the Tribunal found that the grounds raised by the assessee were partly allowed, and the appeal was allowed in the result.

The Tribunal held that the CIT(A) could not travel beyond the subject matter of assessment to bring an entirely new source of income under the guise of enhancement. The CIT(A) issued a show cause notice for enhancement on an issue that was not part of the assessment proceedings. The name of Shri Santosh Kumar was not mentioned in the notices issued by the AO u/s.133(6). The issue before the AO was the genuineness of sundry creditors, whereas the CIT(A) sought to enhance based on an amount received from Shri Santosh Kumar. The Tribunal noted that the assessee had accounted for Rs.90,69,000/- as 'Booking amount forfeited' in its Profit and Loss account for the year ended 31.03.2022, which included the Rs.13,50,000/-. Since the amount was reflected in the books and offered to tax, it could not be taxed again. Relying on the Supreme Court's decision in CIT vs. Rai Bhadur Hardutroy Motilal Chamaria, the Tribunal held that the CIT(A) lacked jurisdiction to assess a source of income not processed by the AO. Therefore, the enhancement of Rs.13,50,000/- was directed to be deleted.

The Tribunal held that the impugned order passed by the CIT(A) was unsustainable because it was passed ex-parte without affording an effective opportunity of hearing to the assessee, thereby violating the principles of natural justice. The Tribunal noted that while the CIT(A) claimed to have given several opportunities, there was no evidence that the notices were served on the assessee. Section 250(2)(a) of the Act mandates the right to be heard, which is not a mere formality but a statutory requirement. Therefore, the Tribunal set aside the impugned order. The matter was restored to the file of the CIT(A) for fresh adjudication after affording an effective opportunity of hearing to the assessee and considering its submissions. The assessee was directed to furnish necessary submissions and material within 60 days. The finding in ITA No. 4464/Del/2026 was to apply mutatis mutandis to ITA No. 4465/Del/2026. The appeals were allowed for statistical purposes.

The Tribunal held that the impugned order passed by the CIT(A) was unsustainable because it was passed ex-parte without affording an effective opportunity of hearing to the assessee, thereby violating the principles of natural justice. The Tribunal noted that while the CIT(A) claimed to have given several opportunities, there was no evidence that the notices were served on the assessee. Section 250(2)(a) of the Act mandates the right to be heard, which is not a mere formality but a statutory requirement. Therefore, the Tribunal set aside the impugned order. The matter was restored to the file of the CIT(A) for fresh adjudication after affording an effective opportunity of hearing to the assessee and considering its submissions. The assessee was directed to furnish necessary submissions and material within 60 days. The finding in ITA No. 4464/Del/2026 was to apply mutatis mutandis to ITA No. 4465/Del/2026. The appeals were allowed for statistical purposes.

The Tribunal held that the appeal was not maintainable as the tax effect was below the monetary limit prescribed by CBDT Circular No. 09/2024. The appeal was dismissed on this ground.

The Tribunal held that the explanation provided by the assessee for the delay of 783 days was sufficient cause for condonation. The Tribunal referred to the Supreme Court's decision in Collector, Land Acquisition Vs. MST. Katiji & Ors. (1987) 167 ITR 471 (SC), emphasizing that the power to condone delay is to enable courts to do substantial justice and that refusing to condone delay can result in a meritorious matter being thrown out at the threshold. The Tribunal found that the assessee's reasons, including being a non-resident and lack of immediate access to legal counsel, constituted genuine hardship. Since the Revenue did not bring any contrary material on record, the Tribunal considered it a fit case for condonation. Consequently, the impugned appellate order of the CIT(A) was set aside, the delay was condoned, and the matter was restored to the file of the CIT(A) for fresh adjudication after giving adequate opportunity of hearing to the assessee. The assessee was directed to present its case before the CIT(A) within 60 days.

The Tribunal held that the impugned addition of ₹17,45,82,102/- under Section 68 of the Act, comprising unsecured loans and share capital from the assessee's directors, could not be sustained. The Tribunal noted that both heads of unsecured loan and share capital came from existing directors who had duly proved their source with detailed evidence, which was not specifically rebutted by the lower authorities. The Tribunal relied on its own decision in DCIT vs Gyscoal Alloys Ltd (ITA No. 102/Ahd/2014) and the Gujarat High Court's upholding of that order in PCIT vs Gyscoal Alloys Ltd (Tax Appeal No. 1180 of 2018). The reasoning was that Section 68 unexplained cash credits addition could not be simply invoked when the source of funds from directors was sufficiently established and not rebutted. Therefore, the lower authorities erred in law and facts by treating the unsecured loan and share capital from directors as unexplained cash credits. The addition was deleted in its entirety. The appeal concerning penalty proceedings was not explicitly decided.

The Tribunal held that the appeal filed by the Revenue is dismissed. The deletion of penalty by the CIT(A) was upheld. The Tribunal noted that the transfer pricing adjustment was primarily due to changes in filters and comparables applied by the TPO. It was observed that the application of filters and selection of comparables are highly debatable issues, and therefore, the assessee cannot be accused of furnishing inaccurate particulars of income or concealing income in respect of such additions. The Tribunal followed its own decision in the assessee's own case for AY 2006-07 and AY 2007-08, where it was held that penalty under Section 271(1)(c) cannot be levied merely due to a difference in opinion on debatable issues like TP adjustments. Furthermore, it was noted that the quantum appeal for the subject AY resulted in the deletion of TP adjustments for non-US transactions, and US transactions were settled under MAP. Consequently, the grounds of appeal raised by the Revenue were rejected as devoid of merit.

The Tribunal held that the penalty levied under Section 272A(1)(d) of the Income-tax Act, 1961, was not sustainable. The Tribunal observed that while non-compliance with the initial notices dated May 29, 2025, was admitted, the assessee subsequently participated in the assessment proceedings and filed replies, which were recorded by the AO. The assessment was framed under Section 147 read with Section 143(3), not as a best judgment assessment under Section 144. The explanation provided by the assessee for the initial non-compliance (non-availability of counsel's assistant) was considered plausible, especially in light of their subsequent cooperation. The Tribunal noted that the AO had also dropped penalty proceedings in similar circumstances for the assessee and a related individual. Furthermore, Section 272A(1)(d) is subject to Section 273B, and a reasonable explanation was provided. Considering the assessee's conduct and the plausible explanation, the Tribunal ordered the deletion of the penalty of Rs. 10,000/- for each assessment year.

The Tribunal, considering the rival contentions and the materials on record, decided to set aside the orders of the CIT(E) and restore the matter to the file of the CIT(E) for de novo determination of both applications. The Tribunal noted that the assessee had filed two applications, one for registration under Section 12A(1)(ac)(ii) and another for approval under Section 80G(5). The CIT(E) had observed incomplete filings and delay. The assessee claimed to have filed most documents and sought condonation due to the Trustee's illness and death. The Tribunal, in the interest of justice and fairness, found it appropriate to send the matter back to the CIT(E). The Tribunal clarified that it had not commented on the merits of the issues and directed the CIT(E) to pass orders on merits after affording an opportunity of being heard to the assessee. The assessee was directed to cooperate in the set-aside proceedings. The orders of the CIT(E) were set aside, and the appeals were allowed for statistical purposes.

The Tribunal, considering the rival contentions and the materials on record, decided to set aside the orders of the CIT(E) and restore the matter to the file of the CIT(E) for de novo determination of both applications. The Tribunal noted that the assessee had filed two applications, one for registration under Section 12A(1)(ac)(ii) and another for approval under Section 80G(5). The CIT(E) had observed incomplete filings and delay. The assessee claimed to have filed most documents and sought condonation due to the Trustee's illness and death. The Tribunal, in the interest of justice and fairness, found it appropriate to send the matter back to the CIT(E). The Tribunal clarified that it had not commented on the merits of the issues and directed the CIT(E) to pass orders on merits after affording an opportunity of being heard to the assessee. The assessee was directed to cooperate in the set-aside proceedings. The orders of the CIT(E) were set aside, and the appeals were allowed for statistical purposes.

The Tribunal held that the penalty levied under Section 272A(1)(d) of the Income-tax Act, 1961, was not sustainable. The Tribunal observed that while non-compliance with the initial notices dated May 29, 2025, was admitted, the assessee subsequently participated in the assessment proceedings and filed replies, which were recorded by the AO. The assessment was framed under Section 147 read with Section 143(3), not as a best judgment assessment under Section 144. The explanation provided by the assessee for the initial non-compliance (non-availability of counsel's assistant) was considered plausible, especially in light of their subsequent cooperation. The Tribunal noted that the AO had also dropped penalty proceedings in similar circumstances for the assessee and a related individual. Furthermore, Section 272A(1)(d) is subject to Section 273B, and a reasonable explanation was provided. Considering the assessee's conduct and the plausible explanation, the Tribunal ordered the deletion of the penalty of Rs. 10,000/- for each assessment year.

The Tribunal held that the final assessment order dated 29.10.2024 was barred by limitation under section 144C(13) of the Act. The Tribunal noted that the DRP's directions were issued on 29.08.2024 and uploaded on the ITBA portal on the same date, constituting valid communication. Therefore, the period for completing the assessment expired on 30.09.2024. The Tribunal relied on the jurisdictional High Court decisions in Louis Dreyfus Company India (P.) Ltd. v. DCIT and PCIT v. Fiberhome India (P.) Ltd., which held that uploading DRP directions on the ITBA portal is sufficient communication and that the specific limitation under section 144C(13) is mandatory. Since the assessment order was passed beyond this period, it was deemed unsustainable in law. Consequently, Ground No. 3 raised by the assessee was allowed. The Tribunal found that as the assessment itself was vitiated on the preliminary issue of limitation, the remaining grounds concerning the merits of additions and adjustments became academic and did not require adjudication. Ground No. 4 was not pressed by the assessee.