ITAT Rajkot Judgments — October 2025

The Tribunal ruled that the penalty order was invalid because it was passed against a deceased person and notices for penalty proceedings were served on the dead person, even after the legal representative had informed the department of the assessee's death. It emphasized that notices should have been issued to the legal heirs and that a penalty cannot legally stand against a deceased individual. Citing Supreme Court principles on taxing statutes, the Tribunal deleted the penalty.

The Tribunal noted that the assessee failed to submit documentary evidence to support their claims regarding deductions and a correct valuation of the property. Since the necessary evidence was not provided, the Tribunal set aside the order of the CIT(A) and remitted the matter back to the Assessing Officer.

The Tribunal noted that the assessee had submitted evidence for the expenses, but it was rejected by the AO. Both parties agreed that an estimated addition could be made due to the smallness of the amount. The Tribunal decided to restrict the disallowance to 10% of the total additions, amounting to Rs. 91,033/-.

The CIT(A) confirmed the addition but directed the Assessing Officer to reduce it by the gross profit percentage. The Tribunal, while acknowledging that the cash sales were part of audited turnover and had suffered taxation, noted a potential deficiency in cash sales bills. Therefore, they directed the Assessing Officer to tax the profit element at a net profit rate of 10% on the cash sales component.

The Tribunal condoned the delay in filing the appeal, finding the assessee's reasons for delay convincing. It observed that the CIT(A) failed to discuss the case on merits and denied the assessee a sufficient opportunity of being heard, thereby violating natural justice. The Tribunal set aside the CIT(A)'s order and remitted the matter back for de novo adjudication on merits, with proper opportunity given to the assessee.

The Tribunal condoned the delay in filing the appeal. The Tribunal noted that the assessee could not establish the creditworthiness of the unsecured loan provider and also failed to deduct TDS correctly. However, considering the principles of natural justice and the fact that the assessee may not have been given sufficient opportunity, the matter was restored to the Ld. CIT(A) for de novo adjudication.

The Tribunal condoned the delay in filing the appeal. It was held that the CIT(A)'s order was passed ex-parte and was non-speaking, violating the principles of natural justice as the assessee was not given sufficient opportunity to be heard or present their case.

The Tribunal held that the delay in filing objections before the DRP was minor (one day) and should not cause the assessee to suffer. The Tribunal noted that the assessee was not given sufficient opportunity of being heard at the assessment and DRP stages, violating the principles of natural justice. Therefore, the Tribunal condoned the delay and directed the DRP to consider the objection and adjudicate the issue.

The Tribunal followed a previous decision in the case of Ashish Dubey, holding that the assessee cannot be faulted for the political party's failure to account for the donation if the assessee has provided sufficient evidence of payment and received a valid receipt. The reopening of assessment was also questioned.

The Tribunal noted that notices of hearing were not served on the assessee/liquidator before the CIT(A), preventing the assessee from presenting its case and documents. Therefore, the Tribunal set aside the order of the CIT(A) and remitted the matter back for fresh adjudication, granting the assessee one more opportunity.

The Tribunal condoned the delay in filing the appeals due to the Chairman's ill health. The Tribunal found that the transfer of donations to the State and National Headquarters as per the society's rules does not amount to non-application of funds, and this is consistent with the objects of the society. They also noted that another district branch of the Indian Red Cross Society had been granted registration.

The Tribunal held that the PCIT's revisionary jurisdiction under Section 263 was not exercised correctly. There was a contradiction between the AO's finding of a cheque transaction and the PCIT's assumption of a cash transaction. The Tribunal also found that the AO had conducted sufficient inquiries and had taken a plausible view, which was not erroneous or prejudicial to the revenue, and the PCIT could not substitute his own opinion for that of the AO.

The Tribunal condoned the delay in filing the appeals, taking a judicious view. The CIT(E) rejected the application for registration under Section 12AB on the ground that the transfer of 15% of donations to the State and National Headquarters was not a voluntary donation and thus not an application of funds. The Tribunal held that this was a uniform rule and the funds ultimately went to the same society for the same objects, not violating Section 11.

The Tribunal held that the assessing officer had conducted sufficient inquiries and arrived at a plausible view. The PCIT's order was considered an attempt to substitute his opinion for that of the assessing officer, which is not permissible under section 263. The Tribunal noted inconsistencies in the PCIT's order regarding whether the transaction involved cash or cheque.

The Tribunal held that the revisionary jurisdiction exercised by the Ld. PCIT was not in tune with the facts and evidence on record. The Tribunal found that the AO had conducted sufficient inquiries and taken a plausible view, and there was a contradiction between the AO's reasoning (cheque received) and the PCIT's finding (cash received). The Tribunal also noted that the PCIT's action amounted to substituting his opinion for that of the AO, which is not permissible under Section 263.

The Tribunal observed that the AO accepted 96% of the cash sales as genuine while disallowing only 4%, which is deemed discriminatory and unacceptable. The assessee's business is primarily cash-oriented, and supporting documents like cash books, sales books, and audited accounts were provided. The Tribunal noted that the AO did not refute or discredit the evidence and brushed aside the submissions without proper reasoning, which is not legally sound.

The Tribunal held that the transfer of the assessee's case without a valid order under Section 127 of the Act renders the assumption of jurisdiction by the subsequent assessing officer without authority. Consequently, the assessment order passed is without jurisdiction and void ab initio.

The Tribunal found that the assessee had largely explained the source of cash deposits through cash sales, which were accepted by VAT authorities. To address minor inconsistencies and plug revenue leakage, the Tribunal sustained an addition of 10% of the Rs. 9,80,000/- (i.e., Rs. 98,000/-). This amount was directed to be taxed at normal income tax rates, not under section 115BBE of the Act.

The Tribunal held that the AO had conducted sufficient inquiry during the reassessment proceedings and that the issue of cash payments exceeding Rs. 10,000/- had already been examined in the original assessment. Therefore, the PCIT's action under Section 263 was not justified.

The Principal Commissioner of Income Tax (PCIT) invoked Section 263, holding that the AO's order was erroneous and prejudicial to revenue. The PCIT directed a de-novo assessment, stating the AO failed to make proper inquiries. The Tribunal confirmed the PCIT's order, finding the assessee's denial and the AO's acceptance of returned income unacceptable given the evidence.

The Tribunal admitted the additional legal ground, ruling that the notices under section 143(2) were invalid for non-compliance with CBDT Circular F.No.225/157/2017/ITA-II dated 23.06.2017, which requires specifying the type of scrutiny. Citing that CBDT circulars are binding on revenue authorities, the Tribunal held that such non-compliance renders the notice and the subsequent assessment order void ab initio. Thus, the assessment proceedings were quashed.

The Tribunal held that for invoking powers under Section 263, the assessment order must be both erroneous and prejudicial to the interest of revenue. In this case, agricultural income is exempt from tax, so even if expenses were disallowed, it would not impact taxable income or cause revenue loss. The AO had examined expenses on a test-check basis and the assessee had submitted supporting documents. Therefore, the PCIT's order was considered without merit.

The Tribunal observed that the assessee failed to prove the nexus between expenditure incurred and income earned, and did not provide sufficient details of own capital and surplus funds. While the AO did not doubt the genuineness of the transaction, the Tribunal found merit in the assessee's case and directed the AO to make an addition at a net profit rate of 12% on the cash deposited in the bank account.

The Tribunal held that the Assessing Officer had conducted sufficient inquiries and taken a legally plausible view. The revisional power under Section 263 cannot be used merely to substitute the Commissioner's view for the Assessing Officer's view, especially when the inquiry was not lacking. The Gujarat High Court's decision in the assessee's own case was binding.

The Assessing Officer (AO) made an addition of Rs. 8,50,000/- to the total income under section 69A of the Act as unexplained money. The Commissioner of Income-tax (Appeals) [CIT(A)] dismissed the assessee's appeal. The assessee appealed to the Tribunal, arguing that a loan was taken from LIC and deposited into the bank.

The Tribunal noted that the assessment was carried out under Section 144 of the Act and the CIT(A)'s order was ex-parte and non-speaking, indicating a violation of the principle of natural justice. The assessee was not afforded sufficient opportunity to be heard.

The Tribunal acknowledged that the entire "on-money" could not be considered the assessee's profit. Considering the peculiar facts, circumstances, and the smallness of the amount, the Tribunal directed the Assessing Officer to compute the net profit at 8% of Rs. 1,68,667/-, amounting to Rs. 13,493/-. This sum is to be taxed at the normal income tax rate, not under section 115BBE, and this specific adjudication is not to be treated as a precedent.

The tribunal found that the CIT(A) had not provided sufficient opportunity of being heard and did not address the case on its merits, thereby violating principles of natural justice. Consequently, the matter was restored to the Jurisdictional AO for a de novo adjudication, with directions to grant the assessee an adequate opportunity for representation and to pass a speaking order.

The Tribunal noted that the assessee did not appear and hence essential facts like maintenance of books of accounts could not be ascertained. The Tribunal also observed that the assessment order was framed in haste without proper examination of facts. Citing a co-ordinate bench decision in the case of National Shroff & Co., the Tribunal set aside the CIT(A)'s order.

The Tribunal noted that the assessee did not appear and that the assessment order was framed in haste, against the principles of natural justice, preventing a proper examination of facts. Therefore, the Tribunal decided to set aside the CIT(A)'s order and remit the issue back to the file of the CIT(A) for fresh adjudication.

The Tribunal held that procedural lapses should not defeat substantive justice. Citing previous judgments, it was observed that delays caused by genuine technical difficulties should be condoned. The CIT(E) has no power to condone such delays, which lies with the CBDT. However, the Tribunal has the power to condone delays. The rejection on technical grounds was set aside.

The Tribunal noted that while the CIT(E) rejected the application based on the predominant religious nature of the trust's objects, the assessee argued that their activities were predominantly charitable and any religious expenditure was within the prescribed limits. The Tribunal considered various judicial precedents regarding trusts with composite religious and charitable objects.

The Tribunal set aside the CIT(E)'s order and remitted the matter back for fresh consideration. It directed the CIT(E) to provide the assessee an opportunity to submit its amended constitution and then adjudicate the application for 80G approval afresh on merits, after granting due opportunity to the assessee.

The Tribunal held that the Commissioner of Income Tax (Exemption) failed to furnish specific instances to support the allegation that the trust was religious. The Tribunal also noted that the trust's activities, as detailed, did not show any religious expenditure exceeding the permissible limit under section 80G(5B). The denial of approval under section 80G was deemed incorrect.

The Tribunal held that the delay was caused by reasons beyond the assessee's control, specifically a medical emergency. Condoning the delay is a matter of discretion, to be exercised liberally to advance substantial justice. The lower authorities' orders were ex-parte and non-speaking, violating the principles of natural justice.

The Tribunal noted that the assessee had already shown a turnover of Rs. 16,50,675/- and paid taxes of Rs. 2,72,140/- under section 44AD of the Act. The Tribunal found that the Assessing Officer and CIT(A) had ignored these facts and had not given credit for the income already declared and taxed. The addition made by the Assessing Officer was deleted.

The Tribunal condoned the delay, noting that the medical ground presented a sufficient cause and that the matter should be decided on merits to advance substantial justice. The ex-parte orders were set aside due to a violation of natural justice, and the appeals were remitted back to the Assessing Officer for fresh adjudication.

The Tribunal noted that the assessment was carried out ex parte and the Ld. CIT(A)'s order was non-speaking. It was observed that the assessee was not given sufficient opportunity to be heard, violating the principles of natural justice. Therefore, the Tribunal restored the matter to the file of the Ld. CIT(A) for de novo adjudication.

The Income Tax Appellate Tribunal (ITAT) noted that the issue is covered by a binding precedent from ITAT Mumbai (Araadhya Jain Trust vs. ITO). This precedent clarifies that for discretionary trusts, surcharge is to be computed based on the slab rates prescribed in the Finance Act, and not at the maximum marginal rate of 37% if the income is below the threshold for such a high rate. As the assessee's income of Rs. 4,20,380/- was below Rs. 50 lakhs, no surcharge was applicable. The tribunal, therefore, allowed the assessee's appeal.

The Tribunal held that the assessee had provided sufficient documentary evidence to prove the genuineness of the share transactions. The Assessing Officer failed to provide any independent evidence to counter these documents or demonstrate any collusion or connivance. The Tribunal relied on previous judgments from the Gujarat High Court and coordinate benches of the ITAT which had dealt with similar issues and deleted additions made on similar grounds.

The Tribunal noted that the assessee was negligent and non-cooperative in pursuing the case before the lower authorities. However, considering the circumstances, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for fresh adjudication, allowing an opportunity to be heard.

The Tribunal held that the transaction was a gift to a relative and thus exempt from tax. Provisions of Section 50C are not applicable in cases of gifts to relatives, especially when the same is excluded by law. The previous authorities erred in taxing the transaction.

The Tribunal noted that the assessee had provided substantial documentary evidence to prove the genuineness of the investment and the transaction, including contract notes, bank statements, and demat account details. The holding period of the shares also exceeded the stipulated period. The Tribunal relied on multiple High Court judgments, including that of the jurisdictional Gujarat High Court, which held that in the absence of any concrete evidence or material to disprove the genuineness of the transaction, additions based solely on suspicion or presumption are not sustainable.

The Tribunal held that the grounds raised by the assessee regarding exempt Long Term Capital Gain under section 10(38) were supported by third-party evidence and fulfilled all conditions. Additionally, the addition made under sections 69 for unexplained investment in a shop was not justified as the assessee provided verifiable and lawful sources for the investment, which were documented and properly explained.

The Tribunal noted that the assessee did not get a sufficient opportunity to be heard before the lower authorities and that principles of natural justice require a fair opportunity. Therefore, without delving into the merits, the Tribunal set aside the orders of the lower authorities.

The Tribunal accepted the assessee's prayer and set aside the order of the Ld. CIT(E). The issue has been remanded to the Ld. CIT(E) for fresh consideration, allowing the assessee an opportunity to produce sufficient evidence to prove the genuineness of its activities and objects.

The Tribunal condoned the delay in filing the appeal after considering the explanation provided by the assessee, deeming there were mitigating circumstances. On merits, the Tribunal acknowledged that the assessee could not file documents before the CIT(E) leading to an ex-parte order. Therefore, the Tribunal decided to give the assessee one more opportunity to present their case.