ITAT Hyderabad Judgments — October 2026

The Tribunal held that the CIT(A) had correctly upheld the rejection of the assessee's books of account under Section 145(3) of the Act. The CIT(A) found that the assessee had not maintained proper books of account, the audit report was inordinately delayed and prepared after the notice under Section 148, and crucial supporting documents like bills and vouchers were not furnished. The Tribunal noted that the CIT(A) had concluded that the audited accounts and profits returned by the assessee were unreliable due to the lack of evidence for substantial expenses claimed. However, the Tribunal found that the CIT(A) had not provided any specific finding on the justification for the AO's estimation of income at 30%. The Tribunal observed that the AO had applied the 30% rate arbitrarily without any basis, comparable case, or consideration of prevailing profit rates. While Section 44AD was not directly applicable, its presumptive rate of 8% was considered as a guidance. To bring the litigation to an end and in the interest of justice, the Tribunal directed the AO to estimate the net profit at 10% of the total turnover. The addition, if any, was to be made accordingly for the respective assessment years.

The Tribunal held that the CIT(A) had correctly upheld the rejection of the assessee's books of account under Section 145(3) of the Act. The CIT(A) found that the assessee had not maintained proper books of account, the audit report was inordinately delayed and prepared after the notice under Section 148, and crucial supporting documents like bills and vouchers were not furnished. The Tribunal noted that the CIT(A) had concluded that the audited accounts and profits returned by the assessee were unreliable due to the lack of evidence for substantial expenses claimed. However, the Tribunal found that the CIT(A) had not provided any specific finding on the justification for the AO's estimation of income at 30%. The Tribunal observed that the AO had applied the 30% rate arbitrarily without any basis, comparable case, or consideration of prevailing profit rates. While Section 44AD was not directly applicable, its presumptive rate of 8% was considered as a guidance. To bring the litigation to an end and in the interest of justice, the Tribunal directed the AO to estimate the net profit at 10% of the total turnover. The addition, if any, was to be made accordingly for the respective assessment years.

The Tribunal found a discrepancy between the peak negative cash balance of Rs. 20,89,050/- recorded by the Ld. CIT(A) and the Rs. 3,02,965/- appearing in the assessee's cash statement for 04.10.2012, necessitating factual verification. The Tribunal also noted that an entry regarding a fixed deposit maturity and withdrawal on 18.01.2013 appeared to have been duplicated in the cash statement, requiring verification of its effect on the peak negative balance against bank and fixed deposit records. The claims regarding cash received from the assessee's father-in-law were rejected due to a lack of confirmation and unexplained circumstances. The claims regarding cash from the wife also required verification, as her bank statement alone did not establish available cash after household expenses. Consequently, the addition of Rs. 20,89,050/- under Section 69A was set aside and restored to the AO for fresh examination. The penalty proceedings were also set aside and restored to the AO as they were consequential to the quantum assessment.

The Tribunal condoned the delay of 63 days in filing the appeal, subject to the assessee depositing Rs. 5,000/- with the Prime Minister’s National Relief Fund within 30 days, as a cost. The Tribunal found that the explanation concerning the merger and communication to a former email address reasonably accounted for the delay. On the substantive issue, the Tribunal held that the disallowance of Rs. 61,03,186/- under Section 14A of the Act cannot be sustained. The Tribunal noted that there was no dispute that the assessee earned no exempt income during the year. It further held that the Explanation inserted in Section 14A by the Finance Act, 2022, cannot be presumed to operate retrospectively. Relying on decisions of the Delhi High Court in PCIT Vs. Era Infrastructure (India) Ltd., and its own coordinate bench's decision in ITO Vs. NSL Nagapatnam Power Ventures Private Limited (which followed the Delhi High Court and Supreme Court decisions), the Tribunal concluded that in the absence of exempt income, no disallowance under Section 14A is warranted. Accordingly, the order of the Ld. First Appellate Authority was set aside, and the Assessing Officer was directed to delete the disallowance. The issue of retrospective application of the Explanation to Section 14A was decided against the revenue.

Regarding the additions of Rs. 1,38,000/- and Rs. 1,20,250/- (Issue 1), the Tribunal held that these amounts were received through banking channels from lessees of the assessee's agricultural land as his share of sale proceeds. The Tribunal found that the assessee's ownership of agricultural land, the agricultural operations, and the banking receipts explained the source of these funds. No contrary material was presented by the revenue. Therefore, the Tribunal directed the AO to delete these additions. Regarding the addition of Rs. 3,00,000/- (Issue 2), the Tribunal held that the assessee had identified the lender and provided a bank statement and lender's confirmation. The AO failed to conduct necessary verification or present contrary material. The Tribunal found the explanation, supported by documentary evidence and the absence of rebuttal, to be sustainable and directed the deletion of this addition. Regarding the penalty of Rs. 20,94,000/- under section 271D (Issue 3), the Tribunal noted the assessee's consistent denial of receiving cash and the explanation that the amount was included in the sale deed to match stamp duty value, supported by the son-in-law's affidavit. Considering the cumulative circumstances, including the close family relationship, the assessee's advanced age, the denial of cash receipt, the explanation regarding stamp duty value, the supporting affidavit, and the AO's failure to examine the son-in-law, the Tribunal was satisfied that the assessee had established a reasonable cause under section 273B. Accordingly, the penalty was set aside.

Regarding the additions of Rs. 1,38,000/- and Rs. 1,20,250/- (Issue 1), the Tribunal held that these amounts were received through banking channels from lessees of the assessee's agricultural land as his share of sale proceeds. The Tribunal found that the assessee's ownership of agricultural land, the agricultural operations, and the banking receipts explained the source of these funds. No contrary material was presented by the revenue. Therefore, the Tribunal directed the AO to delete these additions. Regarding the addition of Rs. 3,00,000/- (Issue 2), the Tribunal held that the assessee had identified the lender and provided a bank statement and lender's confirmation. The AO failed to conduct necessary verification or present contrary material. The Tribunal found the explanation, supported by documentary evidence and the absence of rebuttal, to be sustainable and directed the deletion of this addition. Regarding the penalty of Rs. 20,94,000/- under section 271D (Issue 3), the Tribunal noted the assessee's consistent denial of receiving cash and the explanation that the amount was included in the sale deed to match stamp duty value, supported by the son-in-law's affidavit. Considering the cumulative circumstances, including the close family relationship, the assessee's advanced age, the denial of cash receipt, the explanation regarding stamp duty value, the supporting affidavit, and the AO's failure to examine the son-in-law, the Tribunal was satisfied that the assessee had established a reasonable cause under section 273B. Accordingly, the penalty was set aside.

The Tribunal found a discrepancy between the peak negative cash balance of Rs. 20,89,050/- recorded by the Ld. CIT(A) and the Rs. 3,02,965/- appearing in the assessee's cash statement for 04.10.2012, necessitating factual verification. The Tribunal also noted that an entry regarding a fixed deposit maturity and withdrawal on 18.01.2013 appeared to have been duplicated in the cash statement, requiring verification of its effect on the peak negative balance against bank and fixed deposit records. The claims regarding cash received from the assessee's father-in-law were rejected due to a lack of confirmation and unexplained circumstances. The claims regarding cash from the wife also required verification, as her bank statement alone did not establish available cash after household expenses. Consequently, the addition of Rs. 20,89,050/- under Section 69A was set aside and restored to the AO for fresh examination. The penalty proceedings were also set aside and restored to the AO as they were consequential to the quantum assessment.

The Tribunal held that the interests of justice would be served by giving the assessee an opportunity to present its case before the Ld. CIT(A). The delay in filing the appeal before the Ld. CIT(A) was condoned, subject to the assessee depositing a cost of Rs. 5,000/- with the Prime Minister Relief Fund. The impugned order of the Ld. CIT(A) was set aside, and the matter was restored to the file of the Ld. CIT(A) with a direction to decide the issue along with the assessee's appeal against the assessment order dated 30/12/2019, by way of a consolidated order. The assessee was granted liberty to raise all legal and factual grounds before the Ld. CIT(A). The Tribunal did not decide the merits of the disallowance of depreciation but focused on procedural aspects to allow the appeal to be heard on merits.

The Tribunal held that the CIT(A) had mechanically dismissed the assessee's appeal without considering the ITAT's previous order directing a decision on merits. The CIT(A)'s impugned order was found to be unsustainable. The Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A)'s file with a clear direction to decide the appeal on merits, as previously ordered by the Tribunal on 10/04/2024. The ratio decidendi is that appellate authorities must adhere to the directions of higher tribunals and decide matters on merits, not on procedural observations that have been superseded by subsequent orders. The appeal was allowed for statistical purposes.

The Tribunal held that the interests of justice would be better served by granting the assessee an opportunity to present its case before the Ld. CIT(A). The Tribunal noted that the Ld. CIT(A)'s rejection of the condonation application was brief and lacked detailed consideration of the reasons provided by the assessee. The Tribunal condoned the delay of 137 days in filing the appeal before the Ld. CIT(A), subject to the assessee depositing a cost of Rs. 5,000/- with the Prime Minister Relief Fund. The impugned order of the Ld. CIT(A) was set aside, and the matter was restored to the file of the Ld. CIT(A) for a fresh adjudication on merits. The assessee was granted the liberty to raise all legal and factual grounds before the Ld. CIT(A), who was directed to decide the appeal in accordance with the law after due consideration.

The Tribunal, noting the assessee's submission that no sale consideration was received and that litigation was pending regarding the cancellation of the sale document, found it appropriate to follow the precedent set by its coordinate Bench in the case of Shri Harish Kumar Gaddipati vs. ITO. In that case, the Tribunal had remanded the issue to the AO for de novo consideration, acknowledging that the agreement of sale-cum-GPA might not represent a complete legal transfer of title and that the assessee's claim for cancellation of the registration document was pending before the High Court. Consequently, the Tribunal restored the matter to the file of the AO for reconsideration in accordance with the law, with directions for a fair opportunity of hearing to the assessee and for the assessee to cooperate with the AO. The Tribunal explicitly mentioned that the addition in the present appeal related to the same sale transaction as in the cited precedent.

The Tribunal held that the interests of justice would be served by giving the assessee an opportunity to present his case before the Ld. CIT(A). The Tribunal set aside the impugned order of the Ld. CIT(A) and restored the matter to the file of the Ld. CIT(A) for fresh adjudication on merits. The Ld. CIT(A) was directed to grant the assessee an opportunity to present his case and to submit additional evidence to prove the identity and creditworthiness of the creditors and the genuineness of the transactions. The Ld. CIT(A) was also empowered to call for a remand report from the AO if deemed fit, after considering the assessee's submissions and evidence, and then decide the matter in accordance with law. The appeal was allowed for statistical purposes.

The Tribunal held that the delay of 35 days in filing the appeal was condoned as there was a sufficient and reasonable cause due to the assessee's medical condition, supported by medical certificates and prescriptions. The Tribunal also admitted the additional ground of appeal, finding it to be purely legal and adjudicable on the existing record, following the precedent in CIT vs. NTPC. On the core issue of limitation, the Tribunal, respectfully following the ratio laid down by the Hon'ble High Court of Telangana in Cyberabad Citizens Health Services Private Limited vs. DCIT and the Hon'ble Supreme Court in ITO vs. Sai Kumar Mateti, held that the notice issued under Section 148 of the Act dated 03.04.2022 (and other similar dates mentioned in the judgment) was barred by limitation. The Supreme Court in Sai Kumar Mateti had confirmed that for Assessment Year 2015-16, notices issued for reassessment would stand barred by time in light of the view taken in Union of India v. Rajeev Bansal. Consequently, the reassessment order passed by the Assessing Officer was quashed as being bad in law. Other grounds raised by the assessee were rendered infructuous.

The Tribunal held that the assumption of jurisdiction by the learned PCIT under Section 263 was unsustainable in law. The Tribunal noted that the revision proceedings were not undertaken to correct any error affecting the assessed income or tax liability, but solely to enable the initiation of independent penalty proceedings which were not initiated in the original assessment. The Tribunal relied on various High Court decisions, including those of the Delhi, Rajasthan, and Punjab & Haryana High Courts, which held that the CIT could not direct the initiation of penalty proceedings under Section 263 when the AO had not initiated them. The Tribunal further held that the omission of the AO to record satisfaction for initiating penalty proceedings under Section 271D, in the facts and circumstances, does not render the assessment order erroneous insofar as it is prejudicial to the interests of the Revenue. The Tribunal also observed that Section 263 cannot be invoked merely to set aside a completed assessment to enable the Department to initiate or revive penalty proceedings, especially where it would circumvent the statutory limitation prescribed under Section 275(1)(c). Consequently, the impugned order passed by the PCIT under Section 263 was quashed, and the assessment order passed by the AO was restored.

The Tribunal condoned the delay of 77 days in filing the appeal, accepting the assessee's explanation based on her daughter-in-law's medical condition. On the substantive issue, the Tribunal held that the notice issued under Section 148 of the Act on 12.04.2022 was indeed barred by limitation as it was issued beyond the period of six years from the end of Assessment Year 2015-2016. This finding was based on the first proviso to Section 149(1)(b) of the Act and was supported by the decisions of the Hon'ble Supreme Court in ITO vs. Sai Kumar Mateti, the Hon'ble Jurisdictional High Court in Cyberabad Citizens Health Services Private Limited, and the Tribunal's own decision in Sudheer Parimala. Consequently, the Tribunal quashed the notice under Section 148 and the consequent reassessment order passed by the Assessing Officer, rendering other grounds raised by the assessee infructuous. The appeal filed by the assessee was allowed.

The Tribunal held that the PCIT erred in exercising revisionary jurisdiction under Section 263 of the Income Tax Act. The reassessment order passed by the AO was not erroneous or prejudicial to the interest of the revenue. The AO had conducted necessary inquiries and applied their mind to the facts and material available, including seized materials and information from the ED. The Tribunal noted that a CBI Court order, which was brought to the PCIT's notice, had specifically found no evidence of short delivery of PDS atta or unaccounted sales by the assessee. This order confirmed full delivery based on signed documents and quality control reports, directly contradicting the allegations made by the ED and relied upon by the PCIT. The Tribunal also observed that GST proceedings against the assessee were dropped, and no significant unaccounted cash or assets were unearthed during the search, further supporting the assessee's position. The PCIT's findings were deemed to be based on surmises and conjectures, not cogent material. Therefore, the revisionary proceedings and the consequent order were quashed.

For AY 2016-17, the Tribunal held that the notice under Section 148 was issued on 11.04.2023, while the time available to the AO to issue the notice, considering the assessee's reply on 24.03.2023, was until 31.03.2023, with a further 7 days to pass the order under Section 148A(d) by 01.04.2023 as per the sixth proviso to Section 149. Since the notice was issued beyond this period, the Tribunal found it to be barred by limitation. The assessee's cross-objection on this ground was allowed, and the reassessment proceedings were quashed. For AY 2019-20, the Tribunal found that the reassessment proceedings were initiated after three years from the end of the relevant assessment year, requiring approval from a specified authority under Section 151. The approval was granted by the Principal Commissioner of Income-tax, Central-1, Kolkata, which the Tribunal held was not the specified authority as per Section 149(1)(b)(iii) of the Act. Citing decisions of the Delhi High Court, the Tribunal concluded that the sanction was invalid, and consequently, the notice under Section 148 and the assessment framed were quashed. The assessee's cross-objection was allowed.

For AY 2016-17, the Tribunal held that the notice under Section 148 was issued on 11.04.2023, while the time available to the AO to issue the notice, considering the assessee's reply on 24.03.2023, was until 31.03.2023, with a further 7 days to pass the order under Section 148A(d) by 01.04.2023 as per the sixth proviso to Section 149. Since the notice was issued beyond this period, the Tribunal found it to be barred by limitation. The assessee's cross-objection on this ground was allowed, and the reassessment proceedings were quashed. For AY 2019-20, the Tribunal found that the reassessment proceedings were initiated after three years from the end of the relevant assessment year, requiring approval from a specified authority under Section 151. The approval was granted by the Principal Commissioner of Income-tax, Central-1, Kolkata, which the Tribunal held was not the specified authority as per Section 149(1)(b)(iii) of the Act. Citing decisions of the Delhi High Court, the Tribunal concluded that the sanction was invalid, and consequently, the notice under Section 148 and the assessment framed were quashed. The assessee's cross-objection was allowed.

The Tribunal noted that the assessee had filed a letter dated 05.10.2026 for withdrawal of the appeal. The assessee's authorized representative submitted that the Assessing Officer had passed a rectification order under section 154 of the Income Tax Act, 1961, which allowed the assessee's claim, leaving no grievance. Consequently, the assessee requested to withdraw the appeal. The revenue's representative raised no objection. The Tribunal found that the rectification order by the Assessing Officer rendered the appeal infructuous. Therefore, the appeal was allowed to be withdrawn. The operative direction was to dismiss the appeal as withdrawn. No specific issue was left undecided, as the appeal was disposed of on procedural grounds.

The Tribunal held that the notice issued under Section 148 of the Act dated March 29, 2024, was invalid as it allowed only 30 days for furnishing the return of income, which is contrary to the statutory requirement. The Tribunal noted that the AO had called for bank statements under Section 133(6) and observed cash deposits of ₹10,84,00,788/-. However, the insufficient time provided in the Section 148 notice rendered it a nullity. The Tribunal followed the decision of its co-ordinate Bench in M/s Blackstone Overseas Pvt. Ltd. Vs. ITO, which in turn relied on the decisions of the Hon'ble Karnataka High Court in Panjos Builders (P.) Ltd. Vs. Income-tax Officer and the Hon'ble Bombay High Court in Mukesh J. Ruparel v. ITO. These decisions held that a notice providing less than the mandatory period (e.g., 7 days for Section 148A(b), and implicitly a longer period for Section 148 itself) vitiates the notice and all consequential proceedings. Therefore, the Tribunal quashed the notice issued under Section 148 and the assessment framed by the AO. The appeal of the assessee was allowed.

The Tribunal noted that the assessee's explanation regarding the adjustment of the security deposit was not fully appreciated by the lower authorities. While the CIT(A) confirmed the addition for lack of corroborative evidence, the Tribunal observed that the assessee had provided further documents after the appeal, including a letter from Apollo Tyres Ltd. accepting that ₹15,00,000/- was balanced as on 31.03.2020. The Tribunal considered it in the interest of justice and fair play to provide one more opportunity to the assessee. Therefore, the order of the Ld. CIT(A) was set aside, and the appeal was restored to the Ld. CIT(A) for disposal on merits. The assessee was granted one more opportunity to present their case, with a direction to follow Rule 46A of the I.T. Rules, 1962, and an opportunity for the Ld. AO to be heard if required. The grounds taken by the assessee were partly allowed for statistical purposes.

The Tribunal dismissed the Revenue's appeals on the grounds of low tax effect. For AY 2012-13, the tax effect was ₹25,56,897/-, which is below the monetary limit of ₹60,00,000/- prescribed by CBDT Circular No. 9 of 2024 for filing appeals before the Tribunal. The Senior DR could not rebut this fact or demonstrate any exception. Consequently, the appeal for AY 2012-13 was held to be not maintainable and was dismissed. The Tribunal noted that if upon re-verification by the AO, the tax effect is found to be above the limit or the case falls under any exceptions, the Revenue can file a Miscellaneous Application for recall and revival of the appeal. The same reasoning was applied mutatis mutandis to the other appeals for AYs 2013-14, 2015-16, 2016-17, 2017-18, and 2018-19, as their tax effects were also below the prescribed monetary limit. The specific grounds of appeal raised by the Revenue were not adjudicated on merits due to the dismissal on the preliminary ground of low tax effect. No issue was left undecided, as the appeals were disposed of on maintainability.

The Tribunal dismissed the Revenue's appeals on the grounds of low tax effect. For AY 2012-13, the tax effect was ₹25,56,897/-, which is below the monetary limit of ₹60,00,000/- prescribed by CBDT Circular No. 9 of 2024 for filing appeals before the Tribunal. The Senior DR could not rebut this fact or demonstrate any exception. Consequently, the appeal for AY 2012-13 was held to be not maintainable and was dismissed. The Tribunal noted that if upon re-verification by the AO, the tax effect is found to be above the limit or the case falls under any exceptions, the Revenue can file a Miscellaneous Application for recall and revival of the appeal. The same reasoning was applied mutatis mutandis to the other appeals for AYs 2013-14, 2015-16, 2016-17, 2017-18, and 2018-19, as their tax effects were also below the prescribed monetary limit. The specific grounds of appeal raised by the Revenue were not adjudicated on merits due to the dismissal on the preliminary ground of low tax effect. No issue was left undecided, as the appeals were disposed of on maintainability.

The Tribunal dismissed the Revenue's appeals on the grounds of low tax effect. For AY 2012-13, the tax effect was ₹25,56,897/-, which is below the monetary limit of ₹60,00,000/- prescribed by CBDT Circular No. 9 of 2024 for filing appeals before the Tribunal. The Senior DR could not rebut this fact or demonstrate any exception. Consequently, the appeal for AY 2012-13 was held to be not maintainable and was dismissed. The Tribunal noted that if upon re-verification by the AO, the tax effect is found to be above the limit or the case falls under any exceptions, the Revenue can file a Miscellaneous Application for recall and revival of the appeal. The same reasoning was applied mutatis mutandis to the other appeals for AYs 2013-14, 2015-16, 2016-17, 2017-18, and 2018-19, as their tax effects were also below the prescribed monetary limit. The specific grounds of appeal raised by the Revenue were not adjudicated on merits due to the dismissal on the preliminary ground of low tax effect. No issue was left undecided, as the appeals were disposed of on maintainability.