ITAT Mumbai Judgments — March 2026

The Tribunal held that for Section 14A disallowance, only investments yielding exempt income should be considered, following a Special Bench decision. Regarding ESOP expenses, the Tribunal concurred with the CIT(A), citing Karnataka High Court's ruling that such expenses are deductible under Section 37(1). For sales incentives, the Tribunal noted potential payments to medical practitioners, which are disallowed, and hence restored the issue to the AO for de novo adjudication.

The tribunal directed the AO to reconsider the Section 14A disallowance, considering only investments yielding exempt income. The tribunal upheld the CIT(A)'s deletion of ESOP expenditure disallowance, relying on High Court precedent. The issue of sales incentive expenditure was remanded to the AO for fresh adjudication.

The Tribunal dismissed the assessee's appeal, upholding the disallowance made under section 14A. The Tribunal allowed the Revenue's appeal, holding that Education Cess and Higher Education Cess are not deductible expenses in light of Explanation 3 to section 40(a)(ii) and Supreme Court rulings.

The Tribunal held that the payments made by the Exim Bank to the Central Government were not dividends as defined under Section 2(22) of the Act, as the Exim Bank's capital is not divided into shares and the Central Government is not a shareholder. Consequently, Section 115-O of the Act, which levies dividend distribution tax, was not applicable.

The Tribunal held that the services rendered were project-specific and did not involve making available technical knowledge, skills, or know-how to the assessee, which would enable them to apply the technology independently. Therefore, the payments did not qualify as Fees for Technical Services (FTS) under the India-Singapore DTAA.

The Tribunal held that for Section 14A disallowances, only investments yielding exempt income should be considered, following precedent. Regarding ESOPs, the Tribunal followed the Karnataka High Court ruling that the discount on ESOPs is an allowable business expenditure under Section 37(1). For sales incentives, the Tribunal found insufficient evidence to conclude payments were to medical practitioners and remanded the issue to the AO for de novo adjudication.

The Tribunal held that the payment made by the assessee to the Central Government was a mandatory transfer under section 23(2) of the Exim Bank Act, 1981, and not a distribution of dividend as defined under section 2(22) of the Income Tax Act. Therefore, section 115-O was not applicable.

The Tribunal held that the CIT(A)'s deletion was misplaced as it relied solely on the source of funds (own vs. borrowed), ignoring the amended provisions of Rule 8D(2) which include a 1% disallowance on average investment value. However, following precedent, the Tribunal directed the AO to consider only investments yielding exempt income for calculating the disallowance.

The Tribunal dismissed the assessee's appeal, finding no infirmity in the CIT(A)'s decision to dismiss the disallowance under Section 14A as the AO had followed prior directions and considered only investments yielding exempt income. The Tribunal allowed the Revenue's appeal, holding that Education Cess is not deductible as an expenditure under Section 37 read with Section 40(a)(ii) following the Supreme Court decision.

The Tribunal held that the amount transferred by Exim Bank to the Central Government was a mandatory transfer of funds under section 23(2) of the Exim Act, 1981, and not a distribution of dividend as per section 2(22) of the Income Tax Act. Consequently, section 115-O was not applicable.

The Tribunal held that a jurisdictional issue, concerning the validity of reassessment proceedings due to improper sanction under Section 151, cannot be waived by the assessee, even if initially not pressed before the lower appellate authority. It further held that for AY 2016-17, since the reassessment proceedings (order under Section 148A(d) and notice under Section 148) were initiated after the expiry of 3 years from the end of the assessment year, the approval of the Principal Chief Commissioner or Chief Commissioner was required as per Section 151(ii), not the Principal Commissioner. The approval obtained was therefore invalid.

The Tribunal held that the issue of allowability of ESOP expenses had been decided in the assessee's own case in preceding years, wherein the discount offered on shares under ESOP was allowed as a deduction under section 37(1). Following the precedent, the Tribunal upheld the CIT(A)'s order.

The Tribunal held that the payment by the Exim Bank to the Central Government was a mandatory transfer of funds as per the Exim Act, not a distribution of dividend. Therefore, Section 115-O of the Income Tax Act was not applicable. The Tribunal upheld the CIT(A)'s decision.

The Tribunal held that for section 14A disallowance, only investments yielding exempt income should be considered. The ESOP expenses were held to be allowable under section 37(1). The issue of sales incentives paid to parties prefixed with 'Dr.' was restored to the AO for fresh adjudication.

The Tribunal condoned the delay in filing the appeal, finding the reasons provided by the assessee to be bonafide. The Tribunal held that the assessee was not afforded a reasonable opportunity of being heard by the First Appellate Authority due to notices being sent to the wrong email address.

The Tribunal held that for Section 14A disallowance, only investments yielding exempt income should be considered, following precedent. Regarding ESOP expenses, the Tribunal concurred with the CIT(A) and High Court rulings allowing such deductions under Section 37(1). For sales incentives, the Tribunal found the AO's disallowance lacked sufficient evidence, especially concerning payments prefixed with 'Dr.', and thus restored the issue to the AO for de novo adjudication.

The Tribunal held that the absence of an explicit irrevocability/dissolution clause in the Trust Deed is not a ground for rejecting registration under section 12AB. Furthermore, marking 'Yes' to the irrevocability question in Form 10AB, due to system constraints, does not constitute furnishing false information. The Tribunal relied on the Bombay High Court's decision in 'The Chamber of Tax Consultants and Others vs. CIT(E)'.

The Tribunal held that the absence of an explicit irrevocability or dissolution clause in the trust deed is not a valid ground for rejecting registration under Section 12AB. The Tribunal also noted that the CIT(E)'s action was contrary to the plain language of the statute and binding judicial precedents, particularly a recent Bombay High Court judgment.

The Tribunal held that the amount transferred by the assessee to the Central Government was a mandatory transfer of funds as per Section 23(2) of the Exim Act, 1981, and not a distribution of dividend under Section 2(22) of the Income Tax Act. Therefore, Section 115-O was not applicable.

The Tribunal held that the CIT(A)'s reasoning was misplaced as Rule 8D(2) also includes a 1% disallowance on average investment value, not just interest-bearing funds. However, it directed the AO to consider only investments yielding exempt income for the disallowance computation, following precedent.

The Tribunal held that the CIT(A)'s reasoning was misplaced as the amended Rule 8D(2) has specific components for disallowance and does not solely depend on the source of funds. However, following the precedent, the disallowance should be computed considering only investments yielding exempt income.

The Tribunal held that the CIT(A) was justified in deleting the dividend distribution tax. Following a coordinate bench's decision in the assessee's own case, the Tribunal ruled that the payment to the Central Government was a mandatory transfer under section 23(2) of the Exim Act, 1981, and not a dividend as defined under section 2(22) of the Income Tax Act, 1961. Therefore, section 115-O was not applicable.

The Commissioner of Income-tax (Appeals) restricted the disallowance to 10% of the amount related to the five contractors, amounting to Rs. 16,71,940/-, considering the nature of the jewellery business and the practices of labour contractors.

The Tribunal held that the payment made by the assessee to the Central Government was a mandatory transfer of funds as per the Exim Act, not a distribution of dividend as defined in Section 2(22) of the Income Tax Act. Therefore, Section 115-O was not applicable.

The Tribunal held that the additions were unsustainable as they were solely based on the statement of Shri Imran Ansari and data from a pen drive recovered from a third party, without any independent corroboration. The assessee was not confronted with this material, violating principles of natural justice, and the Tribunal followed its own co-ordinate bench decisions in similar cases.

The Tribunal held that the addition was made solely on the basis of third-party statements and documents (pen drive data) without confronting the assessee with the same or providing an opportunity for cross-examination. Relying on previous judgments with identical facts, the Tribunal found the evidence uncorroborated and lacking independent evidence to establish the cash payments.

The Tribunal held that the additions made by the Assessing Officer were unsustainable. It was found that the entire basis of the addition was third-party digital material and a statement from an employee, without any independent corroborative evidence or opportunity for the assessee to cross-examine the witness. The Tribunal relied on multiple previous decisions of coordinate benches that dealt with identical issues.

The Tribunal held that the penalty notice was bad in law as it did not specify whether the penalty was for concealment or furnishing inaccurate particulars, citing the jurisdictional High Court's decision. Furthermore, the Tribunal noted that the addition was made on an estimated basis, and several High Court decisions held that penalty is not leviable on estimated additions.

The Tribunal held that additions made solely on the basis of digital material and statements from third parties, without independent corroborative evidence or opportunity for cross-examination, cannot be sustained. The Tribunal noted that similar additions based on such evidence had been deleted in numerous other cases.

The Tribunal held that the reassessment order passed under Section 147 was void ab initio because the Assessing Officer should have proceeded under Section 153A following a search operation, and the pending assessment proceedings under Section 148 abated. Additionally, the Tribunal found the assessment order to be void due to the Assessing Officer not possessing valid jurisdiction, as the mandatory transfer order under Section 127 was not issued.

The Tribunal held that the additions were made solely on the basis of third-party digital material and statements without corroboration. It emphasized the denial of cross-examination to the assessee, which violates principles of natural justice, and noted that similar additions in identical cases were deleted by coordinate benches.

The Tribunal held that the CIT(A) should not have disposed of the appeal without considering the pending settlement application under the Vivad Se Vishwas Scheme. The Tribunal restored the issue to the CIT(A) for fresh adjudication pending the outcome of the settlement.

The Tribunal held that an assessment order passed by the Assessing Officer (AO) in conformity with the directions of the Dispute Resolution Panel (DRP) under Section 144C(13) cannot be revised under Section 263 by the PCIT. This is because the DRP is a superior body, and its directions are binding on the AO. Any attempt by the PCIT to revise such an order would violate the provisions of Section 144C(13) and circumvent the DRP's authority.

The Tribunal held that disallowance of interest expenditure under Rule 8D(2)(ii) is not sustainable if the assessee had sufficient interest-free surplus funds. For administrative expenses under Rule 8D(2)(iii), consistent with earlier decisions for the assessee, the disallowance was restricted to 2% of the exempt income.

The Tribunal noted that the assessee had sufficient surplus funds to cover investments yielding exempt income, thus no part of the interest expenditure could be disallowed. For administrative expenses, following consistent precedents in the assessee's own case, the disallowance was restricted to 2% of the exempt income earned.

The Tribunal held that the assessee had sufficient interest-free funds to cover investments in exempt income yielding assets, thus no disallowance of interest expenditure under Rule 8D(2)(ii) was warranted. For administrative expenses under Rule 8D(2)(iii), following consistent precedents in the assessee's own case, the disallowance was restricted to 2% of the exempt income earned.

The Tribunal held that Section 80G is a beneficial provision intended to promote philanthropy and that denying regular approval solely on a procedural delay, especially when the charitable activities are undisputed, would undermine the legislative object. Therefore, the delay should be condoned.

The Tribunal held that the Revenue's reliance solely on the statement of Shri Imran Ansari and the Excel sheet from the pen drive, without independent corroboration and without confronting the assessee with this material, was not sufficient to sustain the addition. The Tribunal noted that a coordinate bench had decided a similar issue in favour of the assessee in the case of Rajesh Jain.

The Tribunal held that the Revenue's reliance solely on the statement of an employee of the third party and data from a pen drive, without confronting the assessee or providing corroborative independent evidence, violates the principles of natural justice. The Tribunal noted that similar additions based on the same material were deleted in prior cases.

The Tribunal held that the assessee was non-responsive and lacked interest in pursuing the appeals. Since no cogent documentary evidence was produced by the assessee to counter the findings of the Assessing Officer or the CIT(A) regarding the genuineness of purchases/sales and unexplained liabilities, the Tribunal found no reason to interfere with the lower authorities' decisions.

The Tribunal held that the assessee lacked interest in pursuing the appeals and was negligent. As the assessee failed to provide cogent evidence to controvert the Assessing Officer's findings on unaccounted sales and bogus liabilities, the Tribunal found no reason to interfere with the orders of the lower authorities.

The Tribunal upheld the decision of the First Appellate Authority, agreeing that given the assessee had sufficient interest-free funds, no disallowance of interest expenditure under Rule 8D(2)(ii) was warranted. For administrative expenses, following consistent precedents in the assessee's own cases, the disallowance was restricted to 2% of the exempt income.

The Tribunal noted that the assessee has now furnished invoices/bills for additions to fixed assets. In the interest of justice, the issue was restored to the CIT(A) for de novo adjudication after examining the fresh evidence and affording an opportunity of hearing.

The Tribunal held that the reassessment proceedings initiated under section 147 were without jurisdiction because the AO should have proceeded under section 153A following a search operation, which abates pending proceedings. It was also held that the assessment order was void ab initio due to the lack of a proper transfer of jurisdiction order under section 127(2).

The Tribunal held that the reassessment order under Section 147 was void ab initio because the AO lacked valid jurisdiction. The Tribunal found that after a search took place, the AO should have proceeded under Section 153A for assessment or reassessment, especially considering the extended period applicable post-amendment by the Finance Act, 2017. Additionally, the Tribunal noted the absence of a proper transfer of jurisdiction order under Section 127, further invalidating the AO's authority.

The Tribunal held that additions made solely on the basis of third-party digital material and a statement, without independent corroborative evidence and without affording the assessee an opportunity for cross-examination, cannot be sustained. The Tribunal noted that similar additions in identical factual circumstances have been deleted by various coordinate benches.

The Tribunal held that the reassessment proceedings under section 147 were void ab initio because the AO lacked valid jurisdiction. Following established legal principles and precedents, including decisions in the assessee's wife's case, the Tribunal found that the AO should have proceeded under section 153A due to the search operation. Furthermore, it was held that the transfer of jurisdiction to the AO was invalid as mandatory procedures under section 127 were not followed.

The Tribunal held that the reassessment proceedings initiated under section 147 were void ab initio due to lack of valid jurisdiction. This was because the search under section 132 triggered the provisions of section 153A, requiring assessment under that section, not 147. Furthermore, the transfer of jurisdiction to the AO was also found to be without following mandatory procedures under section 127.

The Tribunal held that the Assessing Officer (AO) lacked valid jurisdiction to initiate reassessment proceedings under section 147, as the case should have been dealt with under section 153A following a search, and the assessment order was also passed without proper jurisdictional transfer.

The Tribunal held that the reassessment proceedings initiated under section 147 were void ab initio. The Tribunal found that the Assessing Officer lacked valid jurisdiction, as the case should have been assessed under section 153A due to search operations, and pending proceedings should have abated. Furthermore, the Tribunal noted a lack of proper jurisdiction transfer orders, rendering the assessment orders illegal.