ITAT Hyderabad Judgments — January 2026

The CIT(A) dismissed the appeal ex-parte for non-prosecution. The Tribunal held that the CIT(A) erred in dismissing the appeal without adjudicating on merits, especially since the assessee claimed not to have received notices due to incorrect email communication.

The Tribunal found that the CIT(A) erred by not adjudicating the specific grounds regarding the validity of the AO's jurisdiction before remanding the matter. The Tribunal set aside the CIT(A)'s order and restored the case to the CIT(A) for adjudication of the jurisdictional grounds raised by the assessee.

The Tribunal, following its own precedent for AY 2017-2018, upheld the CIT(A)'s deletion of the penalty. It found that the expenses were actually incurred and disallowed under Section 40A(3), but not necessarily a 'false entry' to attract penalty under Section 270A(9)(d) as initially framed by the AO, and the CIT(A) had correctly deleted the penalty.

The Tribunal held that the reassessment proceedings were initiated by the Jurisdictional Assessing Officer (JAO) outside the faceless mechanism, which is contrary to the 'Faceless Jurisdiction of the Income Tax Authorities Scheme, 2022' and 'e-Assessment Scheme of Income Escaping Assessment Scheme, 2022'. The issue was squarely covered by the judgment of the Hon'ble High Court of Telangana, which held that only the Faceless Assessing Officer (FAO) can issue such notices. Thus, the reassessment proceedings were invalid and void.

The Tribunal condoned the delay in filing the appeals, citing justifiable reasons and the need for a liberal approach. The Tribunal found merit in the assessee's contentions regarding the circumstances leading to non-operation and lack of communication. Consequently, the quantum appeals were restored to the AO for de-novo adjudication, while the penalty appeals were set aside.

The Tribunal held that the reassessment notices issued by the Jurisdictional Assessing Officer (JAO) outside the faceless mechanism were bad in law. Relying on the judgment of the Hon'ble High Court of Telangana in Kings Pride Infra Projects (P) Ltd. vs. Deputy Commissioner of Income-tax, the Tribunal found that such notices must be issued in a faceless manner as per amended provisions. The assessment orders were quashed for want of valid assumption of jurisdiction.

The Tribunal condoned the delay in filing the appeals due to circumstances beyond the assessee's control, including the cancellation of coal block allotments and division of the state, which led to non-operation and lack of personnel. The Tribunal restored the matters to the AO for de-novo adjudication, directing the AO to provide a reasonable opportunity of being heard.

The Tribunal held that the CIT(A) erred by admitting additional documentary evidence without giving the Assessing Officer an opportunity to examine or rebut it, thereby violating Rule 46A of the Income Tax Rules, 1962. The order passed by the CIT(A) was set aside for non-compliance with mandatory provisions.

The ITAT condoned the delay in filing the appeal, citing justifiable reasons presented by the assessee. However, regarding the penalty appeals, the Tribunal upheld the CIT(A)'s decision to dismiss the appeal due to an inordinate delay of 663 days. The Tribunal set aside the quantum appeals to the file of the AO for de-novo adjudication, while imposing a cost on the assessee for their lackadaisical approach.

The Tribunal held that the CIT(A)'s order was bad in law as it was passed against a deceased person without bringing the legal heirs on record. Regarding the assessment of cash deposits, the Tribunal found that the Assessing Officer and CIT(A) had not properly verified the transactions and documentation provided by the assessee, which indicated the deposits were sale proceeds of the petrol pump and not the assessee's income. Consequently, the matter was remanded to the Assessing Officer for fresh verification.

The Tribunal condoned the delay in filing the appeals by the assessee, noting the compelling circumstances that led to the non-operation of the company and the lack of staff to handle tax matters. The Tribunal restored the matter to the file of the AO for de-novo adjudication, directing the AO to provide a reasonable opportunity of being heard. A cost of Rs. 25,000/- was imposed on the assessee for their lackadaisical approach.

The Tribunal held that the CIT(A) erred in dismissing the appeal without considering the assessee's petition for condonation of delay and explanation for the delay. The Tribunal noted that the assessee had provided evidence of responding to notices. Therefore, the order of the CIT(A) was set aside.

The Tribunal condoned the delay in filing the appeals, considering the circumstances explained by the assessee, including its nature as a joint venture and operational disruptions. However, for penalty appeals related to AY 2015-16, the delay was not condoned, and the appeal was dismissed. For other appeals, the matter was restored to the AO for fresh adjudication.

The Tribunal held that the notice issued under Section 148 of the Act, dated 11/04/2023, by the DCIT, Central Circle-1(2), Hyderabad, was bad and illegal. This was because the notice was issued outside the faceless mechanism, which is mandatory for reassessment proceedings initiated after April 1, 2021, as per the Finance Act, 2021 and subsequent judicial pronouncements. Consequently, the assessment order was quashed for want of valid assumption of jurisdiction.

The Tribunal held that the notices issued by the Jurisdictional Assessing Officer (JAO) under section 148A and 148 of the Act were invalid and without jurisdiction, as they were issued after the introduction of the Faceless Assessment Scheme, 2022. The Tribunal relied on the decisions of the High Court of Telangana in similar cases, which held that only the Faceless Assessing Officer (FAO) can issue such notices under the said scheme.

The Tribunal condoned the delay, finding sufficient cause. The core issue was the validity of the notice issued under Section 148 by the ITO, which the assessee argued was without jurisdiction as per the Faceless Assessment Scheme and High Court pronouncements. The Revenue contended that the notice was part of the assessment procedure, but the Tribunal found the notice to be invalid and quashed the assessment order.

The Tribunal condoned the delay in filing the appeals, acknowledging the compelling circumstances presented by the assessee, such as the company's operational shutdown and administrative challenges. However, the Tribunal also imposed a cost on the assessee for its lackadaisical approach. The quantum appeals were restored to the AO for fresh adjudication, while the penalty appeals were set aside.

The Tribunal held that the notice issued under Section 148 of the Act was bad and illegal because it was issued by the Jurisdictional Assessing Officer (JAO) outside the faceless mechanism, which is mandatory for reassessment proceedings initiated after April 1, 2021. This violates the provisions of Section 151A and the e-Assessment Scheme, 2022.

The Tribunal held that the notice issued under section 148 of the Act was barred by limitation. The notice dated 25/04/2022 was issued beyond the time limit specified under the pre-amended section 149(1)(b) of the Act, which expired on 31/03/2022. The 'first proviso' to section 149 of the Act, as amended by the Finance Act, 2021, was applicable and restricted the issuance of such notices. The Tribunal concluded that the AO lacked valid jurisdiction to issue the notice.

The Tribunal held that the issuance of notice under Section 148 by the JAO, after the introduction of the Faceless Assessment Scheme, was without jurisdiction and thus illegal. This decision was based on the High Court of Telangana's rulings in similar cases and a previous order of the Tribunal in the assessee's own case for AY 2015-16.

The Tribunal found substantial and material dissimilarities between the impounded document and the registered sale deeds. The document was unsigned, undated, not seized from the assessee, and lacked any mention of cash payment. Affidavits from vendors confirmed no excess payment. Consequently, the addition was deemed unsustainable as it was based on suspicion without corroborative evidence.

The Tribunal noted that the assessee had a delay of 314 days in filing the appeal and failed to provide sufficient cause or supporting evidence for this delay. Citing various Supreme Court judgments, the Tribunal held that delay cannot be condoned without adequate and convincing reasons and that the assessee displayed a casual approach and negligence in pursuing the case.

The Tribunal held that the assessee failed to demonstrate 'sufficient cause' for the inordinate delay of 314 days in filing the appeal. The assessee's conduct was deemed casual and negligent, lacking in bona fides, and therefore, the delay could not be condoned.

The ITAT held that the Assessing Officer (AO) failed to conduct proper inquiries and verify the issue of capitalization of cost incurred for developing the toll road and the depreciation claimed thereon, in light of CBDT Circular No. 9 of 2014. The AO's order was considered erroneous and prejudicial to the interest of the revenue. The Tribunal upheld the PCIT's order.

The Tribunal held that the notice issued under Section 148 of the Income Tax Act, dated 09.04.2022, for Assessment Year 2015-16, was barred by limitation. The court followed the legal proposition that for assessment years prior to 2021-22, a notice under Section 148 could not be issued if the six-year period from the end of the relevant assessment year had expired.

The Tribunal, noting that the notices under Section 148A(b) and 148 were issued by the Jurisdictional Assessing Officer and not the Faceless Assessing Officer as mandated, held them to be invalid. The Tribunal quashed the notices and the consequent reassessment order, while also granting liberty to revive the appeal based on the outcome of pending Supreme Court matters.

The Tribunal noted that the CIT(A) dismissed the appeal ex-parte without considering the merits of the case, which is against the well-settled principle of law. The Tribunal held that even in cases of non-prosecution, the appellate authority should decide on merits based on available records.

As per the scheme, the Designated Authority issued Form-2 showing that the assessee had already paid the disputed amount, resulting in a NIL balance payable and an indicated refundable amount. Consequently, both parties agreed that the appeal was not maintainable and should be dismissed as withdrawn.

The Tribunal, following the pronouncements of various High Courts and in particular the Telangana High Court in the case of Tecumseh Products India (P.) Ltd., held that the notice issued under Section 148 by the JAO without following the procedure prescribed under Section 144B read with Section 151A of the Act is invalid and liable to be quashed.

The Tribunal held that the addition made by the AO was based on suspicion and surmises, lacking corroborative evidence. The seized document had significant dissimilarities with the registered transactions, was not signed or dated, and was not seized from the assessee's possession.

The Tribunal found substantial dissimilarities between the seized document and the actual registered transactions. The seized document was unsigned, undated, not seized from the assessee's possession, and lacked corroborative evidence of cash payment. Affidavits from vendors confirmed no excess payment. The addition was based on suspicion, which cannot substitute proof.

The Tribunal condoned the delay, accepting the 'sufficient cause' explained by the assessee, citing liberal interpretation principles from Supreme Court judgments. The Tribunal also set aside the CIT(A)'s order due to the absence of a Document Identification Number (DIN), remanding the matter for a fresh order adhering to CBDT Circular No. 19/2019.

The Tribunal held that the Assessing Officer (AO) had made proper enquiries and accepted the assessee's explanation regarding the capital gains/loss from the relinquishment of rights in property. The PCIT erred in assuming jurisdiction under Section 263 as the AO's order was neither erroneous nor prejudicial to the revenue.

The Tribunal held that the cash deposits arising from sales declared for the period before 08.11.2016, as recorded in the books of account, should be accepted as the source for cash deposits. However, capital contributions from partners could not be accepted due to lack of evidence of creditworthiness.

The Tribunal noted that while the sale deeds acknowledged the entire sale amount, they lacked payment particulars. However, the assessee provided bank statements and a TDS challan as evidence of subsequent payment. Considering this evidence, the Tribunal found the addition unsustainable.

The Tribunal held that the notices issued under Section 148A and 148 were invalid and liable to be quashed as they were not issued in a faceless manner as prescribed by the National Faceless Assessment Scheme. The Tribunal also noted that the reassessment proceedings were barred by limitation.

The Tribunal noted that while the entire receipts were subject to TDS, assessing the entire gross receipt without considering expenditure or profit was incorrect. It acknowledged that the assessee did not maintain proper books of account.

The Tribunal held that the booking advances collected by the assessee on behalf of M/s. Anika Bajaj were not the assessee's turnover or income, as supported by documentary evidence and prior ITAT ruling. Furthermore, the Tribunal found that the Assessing Officer had exceeded the scope of limited scrutiny for other additions, leading to their deletion.

The Tribunal ruled that the Supreme Court's extension of limitation periods for judicial and quasi-judicial proceedings did not apply to TDS statement filing deadlines. It found that the assessee had not provided sufficient evidence for extended due dates for all quarters and upheld the CIT(A)'s decision regarding the levies.

The Tribunal held that the digital evidence was inadmissible as it was collected without adhering to Section 65B of the Indian Evidence Act and the CBDT's manual. The document was also deemed 'dumb' and non-speaking, lacking crucial details of the transactions, lender, or borrower, making the AO's interpretation purely based on suspicion.

The Tribunal found that the approval granted under section 153D was invalid because it was a common, omnibus approval for multiple assessment years without independent application of mind. This mechanical approval rendered the assessment order void ab initio.

The Tribunal held that the CIT(A) order was a non-speaking order and failed to address the specific grounds of appeal regarding merits and validity of jurisdiction. Therefore, the appeal was restored to the file of the CIT(A) for a fresh adjudication with a direction to pass a speaking order.

The Tribunal held that the assessee failed to substantiate the source of the additional income, and thus it was correctly treated as income from unexplained sources and liable to tax under Section 115BBE of the Act.

The Tribunal partly allowed the appeal. It directed that 1/5th of ROC charges for capital increase be allowed. It upheld the disallowance of interest on TDS. It deleted additions related to interest expenditure on advances and cash discounts. It also deleted the disallowance of seed purchases.

The Tribunal held that the assessee's benchmarking of interest on ECB loans at LIBOR + 500/450 basis points was at arm's length, considering the loan tenure of seven years. The addition of Rs. 2,28,23,848 on this account was directed to be deleted. Regarding the disallowance under Section 43B, the Tribunal restored the issue to the AO for verification, as the direction from the DRP for verification was not complied with.

The Tribunal observed that the assessee had opted for email communication in Form No. 35 and had actively responded to notices electronically. The Tribunal concluded that the assessee's claim of unawareness was not supported by evidence and indicated a negligent approach.

The Tribunal upheld the CIT(A)'s deletion of the Section 14A addition, agreeing that disallowance is not applicable when no exempt income is earned. The deduction under Section 80G for CSR expenditure was also allowed, following jurisdictional precedent that only specific categories of donations are restricted if part of CSR. The Tribunal dismissed the revenue's ground against the deletion of the Section 80IA disallowance, finding the AO's estimation arbitrary and lacking evidence. Finally, the appeal concerning Section 68 was dismissed, as the CIT(A) had correctly reasoned that reclassifying business receipts as unexplained cash credits would lead to double taxation.

The Tribunal held that as per Section 80P(2)(d), only interest earned from deposits with other cooperative societies is eligible for deduction. Interest earned from nationalized banks is not eligible for deduction, as confirmed by the Supreme Court in the case of Bengaluru Club vs. CIT. The assessee's reliance on other High Court decisions was found not applicable as they were rendered prior to the Supreme Court ruling.

The tribunal ruled that the assessee's benchmarking of interest on ECB loans at LIBOR + 500/450 basis points was at arm's length, following previous decisions. The issue of disallowance under Section 43B was remitted to the Assessing Officer for fresh verification due to a potential double disallowance.

The Assessing Officer determined the TDS liability based on the Managing Director's admission during the survey. The CIT(A) confirmed this order. However, the assessee's representative submitted departmental records and audit reports showing NIL demand for AY 2014-2015, with only a sum of Rs. 2,13,682/- outstanding as per the audit report, which was subsequently paid.