ITAT Hyderabad Judgments — June 2025

The Tribunal condoned a 33-day delay in filing appeals, accepting the assessee's reasonable explanation of awaiting rectification. It clarified that, as per CBDT Circular No. 11/2022, "provisional registration" in Form 10AC for existing trusts registered under Section 12A/12AA prior to 01.04.2021 should be treated as full registration. Consequently, the CIT(E)'s order cancelling the registration was set aside, and the matter was remanded for fresh adjudication considering the circular and all submitted documents.

The Tribunal condoned the 28-day delay, accepting the assessee's reason of ill-health supported by a medical certificate. It set aside the CIT(A)'s order and remitted the matter back to the Assessing Officer for a fresh decision, directing the AO to provide adequate opportunity of hearing to the assessee, especially since the original assessment was ex-parte and the assessee claims only agricultural income.

The Tribunal held that the CPC erred in processing the return and making adjustments before the expiry of the statutory response period, violating principles of natural justice. The matter was restored to the AO for fresh adjudication.

The Tribunal dismissed grounds relating to transfer pricing and general grounds as withdrawn or not pressed due to a Bilateral Advance Pricing Agreement (BAPA). On the crucial issue of disallowances arising from Section 143(1) intimation (under Sections 10AA, 36(1)(va), and 43B), the Tribunal ruled that a Section 143(1) intimation merges with a regular assessment under Section 143(3), thereby rejecting the DRP's jurisdictional stance. The Ld. AO was directed to delete the gratuity disallowance under Section 43B and remanded other disallowances (Section 10AA, Section 36(1)(va), and other Section 43B payments) for re-examination. Consequential interest under Sections 234A and 234B will be recomputed, and interest under Section 234C is to be computed on returned income, not assessed income.

The Tribunal held that the satisfaction note recorded by the AO for issuing notice under Section 153C was invalid as it lacked correlation with the seized material and the relevant assessment year. The additions made were based on suspicion rather than evidence, and the assessment orders were quashed.

The Tribunal noted that the second appeal was a duplicate filing. Since the assessee wished to proceed with the original appeal and the Departmental Representative had no objection, the Tribunal permitted the withdrawal of the present appeal.

The Tribunal observed that while the CIT(A) dismissed the appeal for non-payment of the full appeal fee, the underlying issue of interest calculation under Section 234B required reconsideration. The ITAT remitted the matter back to the CIT(A), directing them to decide the interest computation after the assessee pays the remaining appeal fee of Rs. 750 within one month, taking into account the tax payment on 01/07/2023.

The Tribunal condoned a 33-day delay in filing appeals, finding the reason bonafide. It held that the assessee possessed valid Section 12AA registration prior to 01.04.2021, and per CBDT Circular No. 11/2022, 'provisional registration' in Form 10AC for such cases should be treated as 'registration.' The cancellation order was set aside, and the matter was remanded to the CIT(E) for fresh adjudication considering the circular and all submitted documents.

The Tribunal condoned a one-day delay in filing the appeal. It found that the Ld.CIT(A) had disposed of the penalty appeal in a hurried manner, providing inadequate opportunity for the assessee to present their case. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) for reconsideration, directing that a reasonable opportunity of hearing be provided to the assessee.

The Tribunal held that the satisfaction note recorded by the Assessing Officer for issuing the notice under Section 153C was invalid as it was not based on evidence but on suspicion and admission. The Tribunal found that the seized material did not pertain to the assessment year in question and that the email itself was dated later than the claimed transaction period. Consequently, the assessment orders were quashed.

The Tribunal held that payments made between group companies do not fall under the definition of deemed dividend under Section 2(22)(e) when they are in the ordinary course of business, especially when there is no cross-holding or shareholder relationship between the payer and recipient companies. The addition made on a protective basis was therefore unsustainable.

The Tribunal held that the CIT(A) correctly allowed relief for 1700gms of jewellery based on CBDT Circular No. 1916/1994 and customary practices. However, the remaining 110gms remained unexplained.

The Tribunal held that capital gains are inextricably linked to the transfer of a capital asset and its computation must be considered alongside chargeability. The capital gain arising from the transfer in AY 2012-13 is statutorily liable to be assessed in that year. The assessee is entitled to deductions for indexed cost of acquisition and improvement, subject to AO's verification, and to an adjustment of taxes already paid.

The Tribunal found that the same issue had already been set aside to the Assessing Officer for re-verification by an earlier Tribunal order. As the original adjustment made by the CPC under Section 143(1) was no longer in existence due to that remand, the subsequent addition made by the AO under Section 143(3) could not stand. The matter was therefore again remanded to the Assessing Officer to give effect to the previous directions.

The Tribunal, relying on Supreme Court, High Court, and other Tribunal precedents, held that Rule 128(9) of the Income Tax Rules, which mandates the filing of Form 67 by a specific date, is directory and not mandatory. It emphasized that DTAA provisions override the Income Tax Act and Rules, asserting that FTC cannot be denied merely due to a delay in filing Form 67, especially when it was filed before the assessment order was passed. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the Foreign Tax Credit to the assessee.

The Tribunal held that the belated return filed by the assessee in response to the Section 148 notice was a valid return of income, notwithstanding the delay. The A.O. erred in treating this return as invalid and dispensing with the mandatory requirement of issuing a Section 143(2) notice before framing the assessment under Section 143(3) r.w.s. 147. Citing Supreme Court and High Court precedents, the Tribunal concluded that the complete absence of a Section 143(2) notice renders the assessment void for want of valid assumption of jurisdiction, and Section 292BB does not cure this fundamental defect.

The Tribunal noted that the assessee claimed not to have transacted in shares of M/s. Blue Print Securities Limited during the subject year, and evidence for the subsequent year (AY 2013-14) showed a disclosure of LTCG. The Tribunal observed a contradiction between the AO's assessment order and the 'reasons to believe' for reopening. The Tribunal restored the matter to the AO to verify the assessee's claim and whether conditions for best judgment assessment were met.

The Tribunal admitted additional evidence filed by the assessee for grounds related to unexplained bank credits, cash credits, and advances. The matter concerning these grounds was restored to the AO for verification and readjudication. The ground regarding disallowance of expenses was also remanded to the AO for fresh verification after the assessee provides supporting vouchers.

The Tribunal found that the Ld. CIT(E) rejected the application without providing a proper opportunity of hearing to the assessee. It was noted that the application was filed before six months from the expiry of provisional registration. The Tribunal set aside the order of the Ld. CIT(E) and remanded the matter back for reconsideration after providing another opportunity of hearing to the assessee.

The Tribunal found the satisfaction note recorded for initiating proceedings under Section 153C invalid, as the seized email did not correlate with the relevant assessment years and was based purely on suspicion and retracted statements. It emphasized that incriminating material must pertain to the assessment years in question for Section 153C jurisdiction, and additions cannot be sustained on 'dumb documents' without corroborative evidence. The assessment orders passed based on such an invalid satisfaction note were deemed void ab initio.

The ITAT found that the CIT(A) had disposed of the appeal in a hurried manner, providing only one opportunity of hearing, which did not constitute a reasonable opportunity for the assessee to explain their case. Therefore, the ITAT set aside the CIT(A)'s order and remanded the issue back to the CIT(A) to reconsider the matter after providing the assessee a proper opportunity of hearing.

The Tribunal observed that as per the amended Rule 128(9) of the I.T. Rules, 1962, applicable from AY 2022-23, Form 67 can be filed before the end of the relevant assessment year if the return of income was filed within the Section 139 due date. Since the assessee filed Form 67 on 15/12/2022, which is before 31/03/2023 (end of AY 2022-23), the CIT(A) erred by applying pre-amended rules. The Tribunal directed the AO to allow the Foreign Tax Credit.

The Tribunal set aside the TPO's adjustment on CCDs interest, directing the use of SBI PLR rates for Indian currency CCDs. For overdue foreign currency receivables, it directed the TPO/AO to apply LIBOR plus 200 basis points after a 30-day credit period. The disallowance of depreciation on goodwill was upheld, finding the goodwill not genuine. For Section 14A, the Tribunal partly allowed relief by directing the deduction of the assessee's suo motu disallowance from the Rule 8D computed amount. Consequential deductions under Section 10AA and Foreign Tax Credit under Section 90 were directed to be re-examined/allowed by the AO, and the Section 80G claim was remanded for re-verification regarding CSR expenditure.

The Tribunal held that the Section 148 notice, though dated 31/03/2021, was digitally signed and sent on 05/04/2021. Consequently, the amended provisions of Sections 148, 148A, and 151 of the Income Tax Act, 1961, as clarified by the Supreme Court in *Union of India vs. Aashish Agarwal*, were applicable. Since the Assessing Officer failed to follow the prescribed procedure and obtain prior approval from the specified authority under the amended Section 151, the notice was deemed invalid and quashed.

The CIT(A) deleted the additions, a decision upheld by the Tribunal. The Tribunal ruled that payments between group companies in the ordinary course of business are trade advances and do not fall under the definition of deemed dividend in Section 2(22)(e). It further held that Section 2(22)(e) applies only to shareholders with substantial interest in the payer company, a condition not met by the appellant-company in relation to the payer group companies.

The Tribunal held that the CIT(A) lacks the power to enhance assessment by introducing new sources of income that were not part of the original assessment proceedings by the AO, citing Supreme Court precedents. Consequently, the enhancement of assessment related to on-money payments was deleted. Regarding the deemed dividend, the Tribunal affirmed the CIT(A)'s deletion, ruling that inter-group company transactions constituting 'trade advances' in the ordinary course of business do not fall under the definition of 'loans or advances' for Section 2(22)(e), especially when no benefit accrues to the substantial shareholder.

The Tribunal dismissed the appeal as withdrawn, acknowledging the assessee's participation in the DTVSV Scheme, 2024. The Tribunal granted the assessee liberty to seek restoration of the appeal if the settlement under the DTVSV Scheme, 2024 is not finalized for any reason.

The Tribunal held that the exemption under Section 11 cannot be denied solely due to a delay in filing Form 10BB, particularly when the audit report was made available to the Assessing Officer before the assessment order under Section 143(1) was passed. Citing precedents, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the exemption and delete the additions.

The Tribunal found that the Assessing Officer and CIT(A) erred by allowing proportionate TDS credit, as the difference in turnover was fully explained by the sales returns. It held that the CIT(A)'s rejection of the assessee's explanation was based on assumption rather than fact, especially since the assessee had offered the total income for tax. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the full TDS credit of Rs. 1,62,412/- as claimed by the assessee as per Form 26AS.

The Tribunal noted that the CIT(A) dismissed the appeal in-limine without discussing merits and the assessee claimed improper service of notices. Consequently, the Tribunal remanded the matter back to the CIT(A) to provide the assessee with another opportunity of hearing on merits, subject to a nominal cost of Rs.5,000/- to be paid to the Prime Minister National Relief Fund or PM Cares Fund.

The Tribunal condoned the 326-day delay in filing the appeal, acknowledging the genuine reason of email ID change leading to missed communications. The Tribunal set aside the order of the CIT(A) and remanded the matter back to the CIT(A) to provide the assessee another opportunity of hearing, to establish whether advance tax was indeed payable, and to comply with the provisions of Section 249(4)(b) of the Act, including the option to file an exemption application.

The Tribunal found that the CIT(E) passed a cryptic and non-speaking order without properly considering the relevant details and evidences provided by the appellant. The Tribunal set aside the CIT(E)'s order and remanded the matter back to the CIT(E) for fresh consideration of the applications for registration under Sections 12AB and 80G.

The Tribunal found the Ld.CIT(E)'s rejection order to be cryptic and non-speaking, as it failed to consider the relevant details and evidences submitted by the appellant Trust. Concluding that the Trust's objects were charitable and activities were being carried out, the Tribunal set aside the Ld.CIT(E)'s order and remanded the matter back for fresh consideration of the applications.

The Tribunal acknowledged that while the assessee provided muster rolls with employee signatures, it failed to furnish attendance registers. Considering the difficulty in substantiating daily wage payments with extensive documentation but also the assessee's inability to fully support the expenses, the Tribunal reduced the ad-hoc disallowance from 30% to 10% of the site maintenance expenditure.

The Tribunal dismissed the assessee's appeal. It ruled that the assessee is not an 'instrumentality of the State' for immunity under Article 289 of the Constitution, being a distinct legal entity. It also denied exemption under Section 11 due to belated filing of the return of income and Form 10B, as required by Section 12A(1)(ba) read with Section 139(1), and the absence of a condonation application under Section 119(2)(b).

The Income Tax Appellate Tribunal (ITAT) found that the CIT(A) erred by not adopting a liberal and justice-oriented approach for condonation of delay, citing Supreme Court precedents. The ITAT directed the CIT(A) to condone the 145-day delay in filing the appeal and to dispose of the appeal on merits. Grounds of Appeal Nos. 1 to 4, pertaining to delay condonation, were allowed for statistical purposes, while Ground No. 5, being general, was dismissed.

The Tribunal held that a return of income filed in response to a Section 148 notice, even if delayed, is a valid return. The AO was statutorily obligated to issue a notice under Section 143(2) after such a return was filed. The absence of a Section 143(2) notice renders the assessment order void, and Section 292BB only cures infirmities in the manner of service, not the complete absence of notice. Consequently, the assessment orders passed by the AO were quashed due to invalid assumption of jurisdiction.

The Tribunal held that a return of income filed in response to a Section 148 notice, even if delayed, is a valid return and cannot be treated as invalid or non-est. The Assessing Officer was statutorily obligated to issue a notice under Section 143(2) after the assessee filed the return. The non-issuance of the Section 143(2) notice constitutes a jurisdictional defect, rendering the assessment void ab initio, and this defect cannot be cured by the provisions of Section 292BB as it pertains to complete absence of notice, not merely infirmities in service. Thus, the assessment order passed without a valid assumption of jurisdiction was quashed.

The Tribunal held that the rejection order was a non-speaking order, lacking reasoning and failing to consider the documentary evidence submitted by the assessee. The Tribunal found that the rejection was contradictory to the Section 12A registration already granted to the trust.

The Tribunal condoned the delay in filing the appeal, admitting additional evidence provided by the assessee concerning the source of funds. The matter was restored to the AO for verification and a fresh speaking order.

The Tribunal ruled that the reassessment notices issued under Section 148 of the Income Tax Act, 1961, beyond three years from the end of the relevant assessment year, were invalid. This was because the approval for reopening was obtained from a Commissioner of Income Tax, which, as per the amended Section 151(ii) effective from 01.04.2021, should have been from the Principal Chief Commissioner or Principal Director General. Citing Supreme Court and High Court precedents, the Tribunal declared the reassessment notices and the consequential final assessment orders as void ab initio.

The Tribunal ruled that the re-assessment notices issued under Section 148 and the subsequent final assessment orders for AY 2016-17 and 2017-18 were illegal and void ab-initio. This was because the prior approval for reopening assessments after three years (applicable from 1st April 2021) was granted by a Commissioner of Income Tax, whereas the amended Section 151(ii) mandated approval from a higher authority, specifically the Principal Chief Commissioner or Principal Director General. This decision was in line with pronouncements from the Hon'ble Supreme Court and various High Courts and ITAT Benches.

The CIT(A) deleted the addition, agreeing that the Rs.6 crore was a loan given by cheque in 2013 and the cash reference in the exchange agreement was a typographical error. The Tribunal upheld the CIT(A)'s decision, concluding that the exchange agreement was a continuation of prior agreements, intended to secure the capital (loan) given the provisional attachment of the earlier mortgaged property by the Income Tax Department under Section 281B of the Act, and was not a fresh cash transaction. The Assessing Officer erred in making the addition.

The Tribunal condoned the 84-day delay, acknowledging the assessee's genuine reasons. It ruled that the CIT(A) erred by passing an ex-parte order without providing due opportunity or considering the adjournment request, violating natural justice principles. The impugned order was set aside, and the matter was remanded to the CIT(A) for fresh adjudication after allowing proper hearing.

The Tribunal upheld the validity of the assessment reopening, noting that the assessee had not filed a return of income. However, regarding the addition under Section 69A, the Tribunal acknowledged the assessee's application to admit additional evidence (confirmation and identity proof of loan creditors) and, with the DR's consent, remanded the matter to the Assessing Officer for verification of this new evidence and a fresh decision after providing the assessee an opportunity of hearing.