ITAT Mumbai Judgments — February 2026

The assessee filed an application to withdraw the current appeal, stating that a subsequent application for registration under section 12AB was filed and a separate appeal against that order was also filed. The assessee requested permission to withdraw the current appeal and pursue the appeal against the later order.

The Tribunal held that the addition made by the AO was unsustainable. No incriminating material directly connected to the assessee was found. The Revenue failed to provide an opportunity for cross-examination of witnesses whose statements were relied upon. Similar additions in other cases were deleted by the Tribunal.

The Ld. Commissioner set aside the assessment order to the Assessing Officer for a fresh assessment, without delving into the merits of the grounds raised by the assessee. The Tribunal directed the Assessing Officer to adjudicate the legal grounds and pass a fresh assessment order within the time limit prescribed.

The Tribunal held that the AO failed to provide sufficient corroborative evidence. Crucially, the assessee was not given an opportunity to cross-examine the witnesses whose statements were relied upon, which violates principles of natural justice. The evidence, including the pen drive and statements, was not independently corroborated to conclusively establish the cash payment.

The Tribunal held that the addition was unsustainable. The AO failed to provide opportunities for cross-examination of witnesses and to provide corroborative evidence beyond third-party statements and electronic data. Identical additions made in similar cases were deleted by coordinate benches.

The Tribunal held that the Assessing Officer made additions based on mismatches between figures without detailed verification or pointing out specific defects in the books. The CIT(A) had found that differences arose due to gross vs. net presentation and inclusion of GST/statutory levies, and no independent inquiry was conducted by the AO. The Revenue failed to demonstrate that the CIT(A)'s reconciliation was incorrect or perverse.

The Tribunal noted that the limitation period for issuing notice under section 148 was extended due to TOLA. However, subsequent notices and orders were found to be contrary to Supreme Court judgments. Therefore, the Tribunal found no reason to contradict the Commissioner's findings.

The Tribunal held that the assessee's case falls under Article 16(2) of the India-UK DTAA, not Article 16(1). The income accrues and arises in India and is liable to be taxed in India. However, the Tribunal restored the matter to the AO to examine the assessee's claim for credit of taxes paid in the UK.

The Tribunal noted that the Ld. Commissioner had set aside the Assessment Order to the Assessing Officer for a fresh assessment. Therefore, there was no Assessment Order in existence to be quashed. The Assessing Officer was directed to adjudicate the legal grounds raised by the assessee and pass a fresh assessment order within the prescribed time limit.

The Tribunal held that the AO made additions based on a mismatch in figures without proper verification or specific defects in the books. The CIT(A) had accepted the assessee's reconciliation explaining differences due to gross vs. net presentation and GST/statutory levies, a finding not demonstrated to be incorrect by the Revenue. The penalty appeal was also dismissed as it was contingent on the quantum additions.

The Tribunal noted that the AO relied on third-party statements and documents without corroborative evidence from the assessee. The assessee was also denied an opportunity to cross-examine the persons whose statements were relied upon, which amounts to a breach of natural justice. Therefore, the additions made were unsustainable.

The Tribunal noted that the additions were based on third-party statements and documents found during a search on the Rubberwala Group, without corroborative evidence from the assessee. Crucially, the assessee was not provided with the adverse material or an opportunity for cross-examination, violating the principles of natural justice. Relying on multiple precedents, the Tribunal found the additions unsustainable.

The Tribunal held that the addition was unsustainable as there was no direct incriminating material against the assessee. The AO failed to provide an opportunity for cross-examination of witnesses whose statements were relied upon. Relying on various previous judgments, the Tribunal found that the evidence relied upon by the AO (pen drive, statements) was not sufficient to conclusively prove the payment of on-money in cash.

The Tribunal noted that the assessee had not opted for the DTVSV Scheme 2024 for the assessment year in question. The impugned order was therefore recalled and quashed.

The Tribunal held that the CIT(E) should have considered the assessee's request for condonation of delay, as the reasons provided (lack of awareness and administrative oversight) fell within the parameters for condonation. The Tribunal also noted that the assessee had subsequently amended their Memorandum of Association to address concerns about potential foreign expenditure. Therefore, the matter was remitted back to the CIT(E) for fresh adjudication.

The Tribunal found that the CIT(A)'s order was not in conformity with Section 250(6) of the Income Tax Act, which requires the order to be in writing, stating points for determination, the decision, and the reasons. Therefore, the order of CIT(A) was set aside.

The First Appellate Authority (FAA) agreed that transactions might be circular but disagreed with the 7% estimation, reducing it to 0.5% of sales turnover. The Revenue appealed the FAA's reduction, and the assessee cross-appealed against any addition. The Tribunal, relying on previous judgments for similar cases, held that the estimation of income, even at 0.5%, was unsustainable and directed the AO to delete the additions. The Tribunal also deleted the disallowance of depreciation and indirect expenses.

The Tribunal held that the purchase and sale transactions, while potentially circular and aimed at availing bank credit, were duly accounted for in the assessee's books and supported by documentary evidence. The AO failed to provide concrete evidence of bogus transactions or unexplained cash credit. The Tribunal also noted that expenses incurred for these transactions were demonstrably business-related and thus allowable. The Tribunal followed its own precedents in similar cases involving related group entities.

The Tribunal dismissed both appeals, affirming that the Assessing Officer had sufficiently recorded dissatisfaction before invoking Rule 8D. It upheld the CIT(A)'s decision to restrict the disallowance under Section 14A read with Rule 8D to the actual exempt income earned, citing precedents that disallowance cannot exceed the exempt income. Consequently, the disallowances made by the AO were justified within the limits set by the exempt income.

The Income Tax Appellate Tribunal (ITAT) dismissed the assessee's appeals, confirming that the Assessing Officer had adequately recorded dissatisfaction before invoking Rule 8D. The Tribunal reiterated, based on various judicial precedents, that disallowance under Section 14A read with Rule 8D cannot exceed the actual exempt income earned by the assessee during the relevant assessment year.

The Tribunal held that the AO's rejection of books of account was not justified. The Tribunal found that the transactions, though circular, were duly accounted for and the income generated was disclosed. The estimation of income at 7% by the AO and even at 0.5% by the CIT(A) was considered unsustainable. The Tribunal also deleted the disallowance of depreciation and indirect expenses, as the expenses were incurred for disclosed income.

The tribunal observed that the assessee failed to substantiate the genuineness of the transaction and provide documentary evidence to counter the Revenue's findings. Relying on High Court decisions, the tribunal held that the increase in share price was unrealistic and the transaction was sham.

While acknowledging the assessee's lack of due diligence and repeated non-compliance, the Tribunal noted that the appeal was disposed of ex parte without merits. Therefore, in the interest of substantial justice and natural justice, the assessee was granted one final opportunity.

The Tribunal noted that the assessee failed to appear despite multiple opportunities. The reassessment proceedings were initiated based on information suggesting the shares were from a penny scrip used for accommodation entries, and the SEBI had also penalized the company for irregularities. The AO made an addition on the sale consideration as the assessee could not establish the genuineness of the transaction.

The Tribunal held that once sales are recorded in the books, offered to tax, and the books of account are not rejected, the profit from such sales cannot be treated as unexplained cash credit. Taxing gross sales as income is impermissible. If sales are considered fictitious, it should lead to an adjustment of turnover or rejection of books, not estimation of higher profit on already recorded sales.

The Tribunal noted that the assessee did not appear to substantiate the claim that the transaction was not sham and failed to provide documentary evidence for preferential allotment of shares. In absence of corroborative evidence, the grounds of appeal were dismissed.

The Tribunal considered the facts and the decisions relied upon by the CIT(A). The CIT(A) had applied the ratio of various High Court decisions, estimating the profit element at 12.5% on alleged bogus purchases and deleting the balance addition. The Tribunal found that the facts of the case were similar to those relied upon by the CIT(A).

The Tribunal noted that the assessee's transactions were conducted through banking channels, with proper invoices and accounted for in the books. It also observed that the identity of creditors was known, loans were repaid, and there was no evidence of cash introduction. The Tribunal held that the AO's rejection of books of account and estimation of income at 7% were not justified. Furthermore, the Tribunal found that the CIT(A)'s estimation at 0.5% was also unsustainable, as previous decisions in similar cases of group entities had deleted such additions. The Tribunal also found no infirmity in the deletion of disallowances for depreciation and indirect expenses by the CIT(A).

The Tribunal noted that the assessee's transactions were supported by invoices and accounted for in the books, with payments made through banking channels. The Tribunal found no evidence of cash introduction or any specific defect in the books. Relying on previous decisions concerning similar issues within the same group of companies, the Tribunal held that the estimation of income by the AO at 7% and by the CIT(A) at 0.5% was unsustainable. The Tribunal also deleted the disallowance of depreciation and indirect expenses, as these were incurred for earning disclosed income. The additions made by the AO for unexplained cash credit were also deleted as the lender's identity was known, transactions were through banking channels, and the department failed to establish any cash introduction.

The Income Tax Appellate Tribunal (ITAT) deleted the impugned additions, finding that the assessments were based on uncorroborated third-party statements and search material without concrete evidence directly linking the alleged 'on-money' payments to the assessee. The Tribunal emphasized that denying the assessee the opportunity to cross-examine witnesses violated principles of natural justice and rendered the order null and void. It relied on a series of its own binding precedents on identical facts to reach this conclusion.

The Tribunal held that the AO's rejection of books of account was improper. It found that the transactions, though circular, were accounted for and did not involve introduction of cash for accommodation entries. The Tribunal further held that the estimation of income at 0.5% by the CIT(A) was also not justified, as the assessee had offered sufficient profit in its books. Similarly, the disallowance of depreciation and indirect expenses was also deleted.

The Commissioner of Income Tax (Appeal) held that while the transactions might be circular and aimed at increasing turnover for bank credit, they could not be termed bogus. The CIT(A) reduced the estimated income to 0.5% of sales turnover, citing a similar case. The Tribunal noted that the AO's rejection of books of account was not justified and that the CIT(A) had correctly identified that regular income from these transactions was accounted for. The Tribunal also addressed the disallowance of depreciation and indirect expenses, finding them to be allowable if income is disclosed. Further, the Tribunal examined the addition for unexplained cash credit and found that the loans were channelled through banking, the creditors were identified, and repayment had occurred, thus deleting the addition.

The Tribunal noted that the CIT(A) restricted the addition solely based on an earlier ITAT order for the assessee's own case, without independently examining the facts for the current assessment year or considering subsequent binding judicial precedents. Consequently, the ITAT set aside the CIT(A)'s order and remanded the matter for fresh adjudication. The CIT(A) is directed to re-examine the issue in light of applicable binding precedents and record a reasoned finding.

The Tribunal held that the Assessing Officer (AO) failed to examine the issue for which the case was reopened, specifically the taxability of notional ALV on unsold flats. The reassessment order was a mechanical narration of procedural steps without any discussion or analysis of the core issue, rendering it erroneous and prejudicial to the revenue.

The Tribunal held that the transactions, though circular, were duly accounted for in the books and income was disclosed. The rejection of books of account by the AO was not justified. The estimation of income at 7% and subsequently 0.5% was also not sustainable based on evidence and judicial precedents. The disallowance of expenses was also deleted. The additions for unexplained cash credit were deleted as the identity of creditors was known, transactions were through banking channels, and the department failed to disprove the genuineness.

The Tribunal held that the purchase and sale transactions, though potentially circular and used to avail bank credit facilities, were duly accounted for in the assessee's books, and income generated was reflected. The Tribunal found no evidence of cash introduction or introduction of funds to generate accommodation entries. It also noted that the AO failed to provide a proper basis for estimating income at 7% and that the CIT(A)'s estimation of 0.5% was also unsustainable, especially after finding the rejection of books of account improper. The Tribunal further upheld the deletion of disallowances for depreciation and indirect expenses, as these expenditures were incurred for disclosed income. The addition for unexplained cash credit was also deleted as the loans were found to be inter-corporate deposits, transacted through banking channels, and the identity and creditworthiness of lenders were established.

The tribunal, relying on its coordinate bench decisions, held that additions based solely on uncorroborated third-party statements or seized material (like a pendrive not found from the assessee) were unsustainable without corroborative evidence. The Assessing Officer's failure to provide an opportunity for cross-examination of the third party whose statements were relied upon was a violation of natural justice, rendering the assessment null. Consequently, the tribunal directed the deletion of the impugned additions.

The Tribunal held that the sudden death in the family of the assessee's C.A. constituted "sufficient cause" for the 8-day delay in filing the appeal before the CIT(A) under section 249(3) of the Income-tax Act. It found the delay was neither deliberate nor intentional. The Tribunal directed the CIT(A) to condone the delay and decide the appeal on its merits after providing the assessee a reasonable opportunity of being heard.

The Tribunal affirmed that the assessee's transactions, though circular, were duly accounted for in audited books through banking channels with supporting documentation. Relying on Coordinate Bench decisions for similar group cases, the Tribunal found both the 7% (AO) and 0.5% (CIT(A)) income estimations unsustainable and directed their deletion. The Tribunal upheld the CIT(A)'s deletion of disallowances for genuine indirect expenses and depreciation, and confirmed the deletion of Section 68 additions for unsecured loans, as their identity, creditworthiness, and genuineness were established via banking channels.

The Tribunal held that the CIT(E) has the power to condone delay for 12AB registration applications under Section 12A(1)(ac) and found that the assessee provided sufficient cause for the delay. The Tribunal also noted that the assessee had already amended its MOA to remove clauses related to foreign expenditure. Consequently, the Tribunal set aside the CIT(E)'s orders and remanded both applications (for 12AB and 80G registration) back to the CIT(E) for de novo adjudication, with directions to condone the delay and consider the amended MOA.

The Tribunal held that the primary burden to establish the existence of a credit entry in the assessee's books lies with the Assessing Officer. Without concrete material demonstrating such a credit, the invocation of section 68 is unsustainable.

The Tribunal found no reason to treat the assessee's purchase and sale transactions as bogus, noting they were duly accounted for and payments were through banking channels via LC facilities. It held that the estimation of additional income, even at 0.5% by the FAA, was unsustainable based on judicial precedents. The Tribunal upheld the FAA's decision to delete the disallowance of indirect expenses and depreciation, as these were genuinely incurred. It also confirmed the deletion of the unexplained cash credit, as the identity and creditworthiness of creditors were established, and transactions were through banking channels without evidence of cash introduction.

The Tribunal noted that the appellant did not appear for hearings, and no adjournment request was filed, thus the appeal was decided based on available material. The CIT(A)'s finding that the loss from penny stock trading was not declared in IDS, 2016, was not controverted by the appellant. Therefore, the grounds of appeal were dismissed.