ITAT Hyderabad Judgments — July 2025

The Tribunal observed that the CIT(E) rejected the application routinely without considering the assessee's explanations for the delay or the merits of the case. Acknowledging the confusion caused by frequent amendments to registration procedures and the assessee's claim of filing before provisional registration expiry, the Tribunal set aside the CIT(E)'s order. The matter was remanded for fresh consideration, directing the CIT(E) to evaluate both the condonation of delay and the merits of the application.

The Tribunal noted that while revised Form 26AS and a rental agreement were submitted, conclusive evidence of property ownership by the Trust or proof that the Trust had offered the income in its return for the relevant year was still lacking. The matter was therefore remanded to the Assessing Officer with a direction to verify these facts, and if satisfied with the proof of Trust ownership or that the Trust offered the income, to delete the addition made in the assessee's hands.

The Tribunal observed that the loose sheet (page 19) was a plain paper with jottings of dates and amounts but lacked any reference to the assessee, the nature or purpose of payment, or parties to the transaction. It concluded that the satisfaction recorded by the Assessing Officer for initiating Section 153C proceedings was illegal and illogical, as the document did not have a bearing on the determination of the assessee's total income. Citing a Supreme Court precedent on lack of incriminating material, the Tribunal quashed the assessment orders for all four assessment years as *void ab initio*, rendering the additions infructuous.

The Tribunal held that the agreement of sale-cum-GPA had no legal force after the father's death and the actual transfer occurred via the registered sale deed on 24/07/2010, with revised consideration. It directed the AO to recompute LTCG under Section 50C, adopting the stamp duty valuation as of 13/10/2008 (due to part consideration received via cheque) and apportioning the gain among the 8 legal heirs. The assessee's claims that the land was agricultural and exempt from capital gains, and that the additional amount was income from other sources, were dismissed. The CIT(A)'s estimation of compensation was also set aside.

The Tribunal condoned the 23-day delay in filing the appeal before it, accepting the reasons of illness and search for a professional as non-willful. The Tribunal found force in the assessee's argument that the CIT(A) dismissed the appeal as non-est without deciding on merits and that proper opportunity of hearing was not provided. Therefore, the matter was set aside to the Assessing Officer for a de novo reconsideration, granting the assessee a reasonable opportunity to explain her case.

The Tribunal found that the satisfaction note recorded by the Assessing Officer for initiating Section 153C proceedings was illegal and illogical because the loose sheets lacked specific details linking the payments to the assessee, the nature, or purpose of the transactions. It further noted that the third party's statement was later retracted via an affidavit. Consequently, the Tribunal ruled that the assessment orders passed were void ab initio and liable to be quashed.

The Tribunal condoned a 22-day delay in filing the appeal, finding a bona fide reason for the assessee's non-appearance before lower authorities due to alleged non-receipt of notices, which led to a violation of natural justice. The Tribunal set aside the CIT(A)'s order and remitted the matter back to the CIT(A) to provide the assessee a fresh opportunity of hearing, with the assessee directed to pay a nominal cost of Rs.5,000/- to the Prime Minister's Relief Fund for prior negligence.

The Tribunal found that the assessee provided sufficient evidence of genuine subcontracting and tax payments, and no incriminating material was found to support the claim of accommodation entries. Furthermore, the assessment for AY 2019-20 was unabated on the date of search (as per Section 153C interpretation), thus additions without incriminating material were invalid. Therefore, the additions made by the AO towards estimated 1% commission were unsustainable.

The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision to quash the reassessment order. The Tribunal noted a divergence in High Court views regarding the consequence of an Assessing Officer's failure to dispose of objections to reopening by a speaking order. Following the Supreme Court's principle that in case of divergent views, the one in favour of the assessee should be adopted, the ITAT concluded that the AO's failure to issue a speaking order on objections rendered the reassessment proceedings invalid, concurring with the CIT(A).

The Tribunal held that the original agreement cum GPA lost legal force after the father's death, and the transfer was effected by the registered sale deed in 2010, making the entire consideration subject to LTCG. Applying the second proviso to Section 50C(1), the Tribunal directed the AO to recompute LTCG using the stamp duty valuation as of the agreement date (13/10/2008), with the LTCG to be divided among all 8 legal heirs. The Tribunal also ruled that the land was not agricultural as it was within municipal limits, dismissing the assessee's claim for exemption and the CIT(A)'s allowance for compensation due to lack of evidence.

The Tribunal found the rejection by the CIT (Exemptions) arbitrary, noting that a newly formed trust would naturally not have commenced significant activities immediately. It also observed that the subsequent grant of Section 12AB registration by the same CIT (Exemptions) contradicted the rejection rationale. Consequently, the Tribunal set aside the impugned order and remanded the case back to the CIT (Exemptions) for fresh consideration after providing the assessee an opportunity of being heard.

The Tribunal found that the loose sheet was a 'dumb document' lacking the assessee's name or transaction details, rendering the AO's satisfaction note for initiating Section 153C proceedings illegal and illogical. Consequently, all assessment orders passed under Section 153C read with Section 147 for the relevant assessment years were deemed void ab initio and quashed.

The Tribunal held that rejecting the application due to a technical and bona fide mistake in mentioning the sub-section code was not justified, especially given the assessee's history of Section 80G approval. The Tribunal set aside the CIT(E)'s order and remanded the matter back for reconsideration, instructing the assessee to file a rectified application.

The Tribunal confirmed the validity of the reassessment initiation under Section 147, emphasizing that a bona fide belief for escapement of income, based on available material, is sufficient. On merits, the Tribunal partially allowed the assessee's appeal, accepting that cash deposits totaling Rs. 24,75,000/- were business receipts from acting as an agent/mediator for automobile sales. However, the balance amount of Rs. 13,77,500/- remained unexplained, and the addition under Section 69 for this portion was sustained.

The Tribunal determined that the error was a technical mistake, not deliberate, and noted that the Revenue itself had granted provisional registration despite the incorrect code. Highlighting that procedural defects should not override substantive rights, especially for charitable institutions, the Tribunal set aside the CIT(E)'s rejection and remanded the case, directing the CIT(E) to allow the assessee to file a fresh application with the correct section code and decide on merits.

The Income Tax Appellate Tribunal (ITAT) held that the AO had conducted a thorough and exhaustive inquiry into the Section 80P claim, particularly noting the assessee's revised business model dealing only with regular members following a Supreme Court judgment. The ITAT found the AO's view to be plausible and permissible in law, and mere disagreement by the PCIT, or lack of elaborate reasoning in the AO's order, does not render it erroneous or prejudicial to the revenue under Section 263. The PCIT's direction regarding A.Y. 2019-20 was also held to be beyond jurisdiction and limitation. Therefore, the PCIT's revision order was set aside.

The tribunal held that while the CIT(A) has the power to set aside an assessment order passed under Section 144 and refer it back to the AO for a fresh assessment, this power cannot be used to avoid adjudicating on the validity of the jurisdiction assumed by the AO, especially when it has been specifically challenged by the assessee. The CIT(A) should have addressed the ground of appeal challenging the AO's jurisdiction.

Following its own precedent for the same assessee for A.Y. 2012-13 on an identical issue, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the Assessing Officer. The AO is directed to re-adjudicate the issue, specifically verifying facts regarding the assessee's entitlement to claim deduction for amounts allegedly misappropriated by VAT consultants, after considering relevant details and records.

The Income Tax Appellate Tribunal (ITAT) held that Foreign Tax Credit cannot be denied solely on the ground of delayed filing of Form 67. Citing various precedents, the Tribunal emphasized that Double Taxation Avoidance Agreement (DTAA) provisions override the Income Tax Act and Rules, and Rule 128(9) regarding Form 67 is directory, not mandatory. The appeal was allowed, and the Assessing Officer was directed to verify the foreign tax paid and allow the FTC.

The Tribunal found that the notices and order were indeed sent to an incorrect email, denying the assessee an effective opportunity of being heard, which violates principles of natural justice. Therefore, the matter was remanded back to the CIT(E) for fresh adjudication, with directions to provide the assessee a reasonable opportunity to present its case.

The Tribunal found that notices and the rejection order were indeed sent to a wrong email ID, violating principles of natural justice by denying the assessee an effective opportunity of being heard. The delay in filing the appeal was condoned, and the matter was remanded to the CIT(E) for fresh adjudication after providing the assessee a reasonable opportunity.

The Tribunal reiterated that rental income is assessable in the hands of the partners (co-owners) under Section 26 of the Act, as per previous ITAT orders. Applying Section 199, which allows TDS credit to the person from whose income the deduction was made, and supported by Supreme Court judgments, the Tribunal held that TDS credit must be allowed to the partners. It ruled that Rule 37BA, being procedural, cannot override the substantive provision of Section 199(1).

The Tribunal, considering that the assessee's grievance was addressed by a rectification order under Section 154, allowed the withdrawal of the appeal. Consequently, the appeal filed by the assessee was dismissed as withdrawn.

The ITAT held that the CIT(A) arbitrarily rejected the assessee's application for additional evidence. Acknowledging that the Faceless Proceedings Scheme was in its nascent stage, the ITAT found that the assessee's failure to respond to the SCN due to bona fide reasons could not be ruled out. Therefore, the ITAT set aside the CIT(A)'s order and directed a de novo adjudication of the appeal after admitting the additional evidence, providing the assessee a reasonable opportunity of being heard.

The Tribunal found the appeal infructuous because the issues raised, primarily concerning adjustments by CPC, were already covered by a prior Tribunal order for the same assessment year. That order had remanded similar adjustments to the AO for reconsideration in the context of the scrutiny assessment. Therefore, the AO was directed to consider these issues in the already remanded proceedings.

The ITAT condoned the 32-day delay in filing the appeal before itself, acknowledging the bona fide reasons. For the 388-day delay before the CIT(A), the ITAT found substance in the assessee's explanation (negligence of counsel) and restored the matter to the CIT(A). The CIT(A) was directed to provide a fresh opportunity to the assessee to file a condonation application for the 388-day delay and to judiciously consider it, without the ITAT expressing any views on the merits of the assessment.

The Income Tax Appellate Tribunal upheld the order of the Ld. CIT(A), concluding that the loose sheets and the third party's statement were not sufficient incriminating material to sustain the addition under Section 153C. The Tribunal found no direct nexus or corroborative evidence to establish that the alleged 'on-money' was actually received by the assessee and noted defects in the AO's satisfaction recording for initiating Section 153C proceedings. Therefore, the assessment made under Section 153C was annulled.

The Tribunal found ambiguity in the law regarding registration procedures for trusts. It observed that the assessee's application for permanent registration was filed at least six months before the expiry of its provisional registration. The CIT(E) rejected the application without considering the merits or documentary evidence. Consequently, the tribunal set aside the CIT(E)'s orders and remanded the issue for fresh consideration on merits, granting the assessee a new opportunity to be heard.

The Tribunal allowed the assessee's application for withdrawal of the appeal, noting no objection from the Ld.DR. The appeal was dismissed as withdrawn.

The tribunal noted ambiguities in the registration procedures for trusts and found that the CIT(E) rejected the application routinely without considering it on merits. It held that since the application for permanent registration was filed at least six months before the expiry of provisional registration, the CIT(E) ought to have considered it. The tribunal set aside the CIT(E)'s order and remitted the matter back for fresh consideration on merits, providing the assessee with an opportunity of hearing.

For the Section 80IB deduction (Grounds 1-3), the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order based on consistency with its own earlier decisions in the assessee's case. For the provision for bad and doubtful debts under Section 115JB (Ground 4), the Tribunal noted that a similar issue for Assessment Year 2017-18 was pending and stayed by the Hon'ble High Court. Consequently, this issue was remanded to the Assessing Officer for a decision based on the High Court's final outcome for Assessment Year 2017-18.

The Tribunal found that the assessee had satisfactorily explained the source of the cash, demonstrating the lender's creditworthiness, receipt of land acquisition compensation by the lender, and a clear trail of cash withdrawals and documentary evidence. Despite minor contradictions in oral statements, the documentary evidence proved the genuineness of the transaction. Consequently, the addition of Rs. 62,99,500/- under Section 69A was directed to be deleted.

Regarding the IND AS-109 adjustment, the Tribunal found contradictions in the assessee's arguments and incorrect reporting in Form ITR-6, deeming it a notional entry. It set aside the CIT(A)'s order and remanded the matter to the Assessing Officer for verification. For the Section 43B disallowance, the Tribunal noted the payment was made on 03.04.2021, before the due date for filing the return, and that the AO-CPC had incorrectly made the disallowance; therefore, it also set aside the CIT(A)'s order and remitted this issue to the AO for verification and deletion of the addition.

The Tribunal condoned the delay, finding sufficient cause due to the wife's health issues and the CA's demise, which led to non-representation. It set aside the CIT(A)'s order and remanded the matter to the Assessing Officer for fresh adjudication, instructing to consider all relevant records, new evidence, and provide a proper opportunity of hearing.

The Tribunal found that the assessee did not receive a proper opportunity of hearing before the CIT(A) because notices were sent to an incorrect email address. Given that the additions included various bank credits requiring verification, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the Assessing Officer for a de novo assessment, directing that a fresh opportunity be given to the assessee.

The tribunal dismissed the appeal regarding the PF contribution as it was voluntarily withdrawn by the assessee. It partly allowed the appeal concerning unsecured loans, deleting the addition of Rs. 5 lakhs (from 50 employees) out of Rs. 15 lakhs, while confirming the remaining Rs. 10 lakhs. The tribunal allowed the appeal for the donation of Rs. 16,500 under Section 80G, accepting the assessee's explanation for non-production of receipts due to records being seized from the temple.

The Tribunal set aside the CIT(A)'s ex-parte order, observing that the CIT(A) did not consider the merits or evidence claimed to be filed by the assessee. The matter is remanded back to the CIT(A) to re-consider the issue after providing a reasonable opportunity of being heard to the assessee.

The Tribunal held that the CIT(A) erred in quashing the entire assessment. Additions related to cash deposits, which were the original subject of limited scrutiny, remained valid. However, additions concerning interest income on savings and fixed deposits, being outside the initial scope of limited scrutiny and made without a fresh show-cause notice after conversion, were not sustainable. The matter was remanded to the CIT(A) to adjudicate the issue of cash deposit additions on merits.

The Tribunal observed that the CIT (Exemptions) rejected the application without properly considering the submitted records and without identifying specific defects. Consequently, the Tribunal set aside the CIT (Exemptions)'s order and remanded the matter back for fresh consideration after granting the assessee an appropriate opportunity of hearing.

The Tribunal determined that the omission in ITR-6 was a curable clerical error, especially since Form 10-IC clearly indicated the Section 115BAA option and was filed within the extended time. It held that the CBDT Circular's purpose for substantive relief should be interpreted liberally, not defeated by a technical defect when other material conditions were satisfied. The disallowance was deemed unsustainable, and the AO was directed to allow the Section 115BAA benefit.

The Tribunal condoned the delays in filing appeals to both the CIT(A) and the Tribunal, finding the reasons (Covid pandemic for AY 2020-21 and staff absence for AYs 2021-22/2022-23) bonafide and reasonable, citing the Supreme Court's lenient approach in *MST Katiji*. It directed the CIT(A) to admit the appeals and decide the issues on merits after providing the assessee with an adequate opportunity of hearing.

The Tribunal noted that the assessee's grounds of appeal pertained to the addition of unexplained money and undisclosed business receipts. The assessee claimed that the business receipts were already offered to tax and the cash deposits were explained by withdrawals, but this material was not placed before lower authorities.

The Tribunal held that once evidence of bank withdrawals is furnished, the purpose cannot be questioned. It noted that the AO accepted current year withdrawals but ignored previous year withdrawals which contributed to the opening cash balance. Finding that the assessee had sufficient funds, the Tribunal directed the deletion of the Rs. 6.40 lakhs addition.

The Tribunal held that the CIT(A) failed to provide the assessee a reasonable opportunity of hearing during the penalty proceedings, a violation of natural justice, as the assessee claimed non-receipt of notices. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the issue back to the CIT(A) for fresh consideration after providing the assessee due opportunity.

The Tribunal focused solely on Ground No. 6 concerning the taxability of Rs. 18,08,973/- received as a superannuation fund upon cessation of employment. Noting that the assessee could not produce the crucial release agreement before the CIT(A), the Tribunal remanded the matter back to the CIT(A) for de novo adjudication of this specific ground, instructing the CIT(A) to grant the assessee a proper opportunity to furnish evidence and be heard.

The tribunal held that while the delay in filing was procedural and should not defeat substantive rights. It directed the assessee to approach the CBDT for condonation of delay under Section 119(2)(b), after which the CIT(Exemptions) is to dispose of the application for regular registration on merits after providing due opportunity of being heard.

The Tribunal held that the interest on delayed receivables from AEs should be considered as a separate international transaction. It was also held that the credit period allowed by the assessee to its AEs should be benchmarked considering industry practices. Regarding the interest rate, the Tribunal directed the AO/TPO to use LIBOR + 200 basis points as the comparable rate.

The Tribunal held that the notice issued under Section 148 was valid as the time for approval was extended due to time granted for the assessee's reply. However, regarding the addition, the Tribunal found that the estimation was made without proper documentary support and due to the assessee's non-cooperation.