ITAT Surat Judgments — November 2025

The Income Tax Appellate Tribunal (ITAT) upheld the decision of the Ld. CIT(A) to delete the addition of unexplained cash credit. The Tribunal concurred that the assessee had sufficient sources for the cash deposited and the cash book could not be rejected without proper reasons. The Tribunal confirmed that the cash deposited into the bank account could not be treated as unexplained money under section 69A of the Act, especially since the AO failed to disprove the cash balance available in the cash book.

The Tribunal condoned a 32-day delay in filing the appeal. It remitted the quantum assessment (ITA 385) and the related penalty under Section 271AAC(1) (ITA 386) back to the AO for fresh adjudication, setting aside the CIT(A)'s orders, subject to the assessee paying a cost of Rs. 5,000/- to the Prime Minister Relief Fund. For the penalty under Section 271(1)(d) (ITA 387), the Tribunal partly allowed the appeal, deleting penalties for two defaults but confirming a Rs. 10,000/- penalty for one default, attributing non-compliance to the tax consultant's mistake.

The Tribunal condoned the delay in filing the appeal subject to payment of costs, considering the principles of natural justice and substantial justice. The Tribunal set aside the order of CIT(A) and restored the issue back to the AO for fresh assessment, directing the assessee to be more vigilant and cooperative.

The Tribunal observed that there was no proper adjudication by the lower authorities due to the assessee's non-compliance and the resulting ex-parte orders. Accepting the assessee's request for another opportunity, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the Assessing Officer for fresh adjudication on merits, ensuring the assessee is given due opportunity to be heard.

The Tribunal condoned a 32-day delay in filing the appeal. For ITA 385/SRT/2025 (quantum assessment), the matter was remanded to the AO for fresh adjudication, subject to a cost of Rs. 5,000. For ITA 386/SRT/2025 (penalty u/s 271AAC(1)), the penalty was also restored to the AO for fresh adjudication. For ITA 387/SRT/2025 (penalty u/s 271(1)(d)), the penalty was partly allowed and reduced to Rs. 10,000 for a single default, considering the tax consultant's mistake and subsequent compliance.

The Tribunal noted the assessee's non-compliance and ex-parte orders at both assessment and CIT(A) levels. Despite this, considering the interest of justice and the need for a fair hearing, an opportunity was granted to the assessee.

The Tribunal condoned the delay in filing the appeal. It noted that the assessee had not complied with notices, but also acknowledged the possibility of a genuine oversight regarding communication preferences. For ITA No. 385/SRT/2025, the CIT(A) order was set aside and the matter was remitted to the AO for fresh adjudication, subject to payment of costs. For ITA No. 386/SRT/2025, the penalty was restored for fresh adjudication. For ITA No. 387/SRT/2025, the penalty was partly allowed, with a direction for a reduced penalty.

The ITAT observed that the assessee, being uneducated and unaware of tax proceedings, suffered a non-deliberate delay in filing the appeal. Applying principles of natural justice and considering 'sufficient cause' under section 253(5), the ITAT condoned the delay. The tribunal set aside the CIT(A)'s order and remitted the matter back to the CIT(A) for fresh adjudication on merits under section 250, subject to the assessee paying Rs.5,000/- to the Prime Minister's National Relief Fund.

The Tribunal held that the assessee failed to provide details of credits and payments from bank accounts, despite opportunities. The claim of the bank account being in the wife's name was not supported by documents. The transactions were not business-related and remained unexplained, justifying the addition of unexplained credit.

The Tribunal held that the purchases could not be disallowed entirely and restricted the addition to 6% of the purchase value, considering it as the estimated profit element. Consequently, it was held that the penalty levied under section 271(1)(c) could not be sustained as the addition was based on estimation without direct findings of concealment or furnishing inaccurate particulars. The penalty was directed to be deleted.

The Tribunal held that the assessee failed to provide details or evidence to explain the source of credits in his bank accounts or the purpose of payments. The Tribunal also noted the assessee introduced a new plea about a bank account held by his wife, but failed to provide supporting documents. The reliance on judicial precedents was deemed inapplicable due to distinct facts.

The Tribunal noted that the issue of disallowing bogus purchases and levying penalty had been decided in similar cases where additions were restricted to 6% of the purchases. Following these precedents, the Tribunal directed the AO to restrict the addition to 6% of the impugned purchases. For the penalty, the Tribunal held that since the addition was reduced to an estimated profit element and not based on direct findings of concealment, penalty under section 271(1)(c) was not sustainable.

The Tribunal held that the notice issued u/s 148 of the Act on 27.07.2022 was beyond the permissible time-barring date of 13.06.2022. Relying on Supreme Court judgments, the Tribunal found that limitation goes to the root of jurisdiction and such a defect is not curable, making the AO's assumption of jurisdiction invalid.

The Tribunal held that the assessee had not produced required details to explain the source of credits in his bank accounts, despite ample opportunities. The new plea that the bank account belonged to his wife was not substantiated with necessary documents. The Tribunal found that the banking transactions remained unexplained and the AO's addition of Rs.3,62,21,526 as unexplained income was logical and reasonable under section 69A of the IT Act.

The Tribunal condoned the delay in filing the appeal, finding sufficient cause due to the previous tax consultant's error. The Tribunal held that the Surat District Co-operative Bank Ltd. is a co-operative society. Relying on decisions of the Gujarat High Court, the Tribunal concluded that interest income earned by a co-operative society from investments with a co-operative bank is eligible for deduction under Section 80P(2)(d).

The Tribunal held that the assessee failed to provide satisfactory explanations or evidence regarding the credits in their bank account. The new plea about the account being in the wife's name was not substantiated with necessary documents. The Tribunal found the grounds raised by the assessee to be devoid of merits.

The Tribunal noted that the assessee did not provide sufficient evidence to explain the numerous credits and debits in their bank accounts. The original business of cheque discounting was not substantiated with proper documentation. A new plea regarding a bank account in the wife's name was also not supported by evidence.

The ITAT dismissed the revenue's appeals, affirming the CIT(A)'s decision to restrict the addition for bogus purchases to Rs. 25 lakhs. It held that since the facts were identical to the assessee's previous assessment year (A.Y. 2018-19) and no new distinguishing factual matrix was presented, adherence to the principles of judicial consistency required following the earlier ITAT decision.

The Tribunal condoned the delay in filing the appeal before the CIT(A), applying the principle of substantial justice based on the Supreme Court's ruling in Land Acquisition Collector Vs. Mst. Katiji& Ors. Consequently, the matter was restored to the file of the Assessing Officer (AO) to provide the assessee a fresh opportunity to present their case, without commenting on the merits of the dispute.

The Tribunal, considering the principle of substantial justice over technicalities and the explanation of sufficient cause for the delay, condoned the delay. The Tribunal noted that the assessee was ex-parte before the CIT(A) due to a lack of proper representation, and thus, one more opportunity was granted.

The Tribunal noted that the issue was identical to the assessee's own case for an earlier assessment year, where the ITAT had restricted the addition to the profit element embedded in the bogus purchases. Following the decision in the assessee's own case, the Tribunal directed that the addition be restricted to Rs. 25,00,000/-, considering it as the profit element. The Revenue's appeals were dismissed for all assessment years.

The Tribunal condoned the delay in filing the appeal. Additional evidence submitted by the assessee was admitted as it was crucial for a proper adjudication of the issues. Due to the AO not having the benefit of examining these documents, the matter was remanded back to the AO for fresh examination.

The Tribunal noted that the assessee was engaged in the money transfer business, and the cash book and bank statements demonstrated that the deposits were out of regular cash withdrawals made during the course of business. The revenue did not point out any discrepancies or adverse material. Since the AO accepted the commission income and did not dispute the genuineness of business receipts or withdrawals, and the assessee's explanation was supported by documentary evidence, the addition was deemed unjustified.

The Tribunal noted that similar issues in the assessee's own case for AY 2018-19 were decided by the ITAT, where the addition on account of bogus purchases was restricted to profit element embedded. Following the precedent from its own case and the decisions of higher courts, the Tribunal held that only the profit element should be taxed. The Tribunal acknowledged the assessee's good gross profit and directed that the addition be restricted to Rs. 25,00,000/-.

The Tribunal, following Supreme Court judgments, allowed the application for additional grounds as they were legal in nature and went to the root of the case. Since the assessee was ex-parte before the CIT(A), for the interest of justice, the appeals were restored to the file of CIT(A) for fresh adjudication on merits, including the additional grounds, after providing an opportunity of hearing.

The Tribunal held that the addition for unexplained cash deposits amounting to Rs. 23,41,300/- was not sustainable as the assessee demonstrated a clear nexus between withdrawals and deposits, and the revenue failed to provide contrary evidence. The Tribunal also held that the penalty on this addition should be deleted. Regarding the disallowance of deductions for housing loan interest, chapter VIA, and salary income, the Tribunal noted that the CIT(A) passed orders without affording the assessee an adequate opportunity to be heard post-quantum relief. The matter was remanded to the CIT(A) for fresh adjudication. The Tribunal also directed the AO to recompute the tax liability on short-term capital gains at the concessional rate of 15% u/s 111A.

The Tribunal allowed the application for additional grounds, citing Supreme Court judgments. Given the assessee was ex-parte before the CIT(A), the matter was restored to the CIT(A) for fresh adjudication on merits, including the additional grounds, after providing an opportunity of hearing.

The Tribunal held that the assessee had satisfactorily explained the source of cash deposits aggregating to Rs. 23,41,300, as there was a demonstrated one-to-one nexus with withdrawals, and the Revenue did not provide evidence to the contrary. The disallowance of deductions under sections 24(b), Chapter VI-A, and 16(iii) was dismissed as the assessee had not filed a return. The AO's application of a 30% tax rate on short-term capital gains instead of the statutory 15% under Section 111A was found to be incorrect and directed to be recomputed. Regarding the penalty, it was held that penalty on the addition of Rs. 23,41,300 could not be sustained as the addition itself was deleted. The penalty on other additions was remanded back to the CIT(A) for fresh adjudication due to a violation of natural justice.

The Tribunal allowed the assessee's application to raise additional grounds, stating they were legal in nature and went to the root of the case, citing Supreme Court judgments. Given that the assessee was ex-parte before the Ld. CIT(A), the Tribunal deemed it in the interest of justice to restore the matter to the file of the Ld. CIT(A).

For AY 2016-17 (Shree Khedut Sahakari Khand Udhyog Mandli Ltd.), the disallowance of Rs. 125,56,23,819/- was deleted, and the appeal was allowed, as the assessee provided specific government approval for the FCP, satisfying Section 36(1)(xvii) of the Act. For AY 2012-13 (lead case for Shree Khedut Sahakari Khand Udhyog Mandli Ltd.), procedural objections were dismissed, but the substantive matter was remanded to the AO for recomputation of the disallowance based on a specific method, involving comparison of rates paid to members, non-members, and outsiders. For AYs 2011-12 to 2014-15 (Sahakari Khand Udhyog Mandali Ltd. and Maroli Vibhag Khand Udyog Sahakari Mandali Ltd.), both assessee's and Revenue's appeals were dismissed, upholding the CIT(A)'s approach of sustaining partial disallowances that were demonstrably linked to member-specific benefits and not business exigencies, in line with Tasgaon Taluka principles.

The Tribunal held that the assessee had provided satisfactory explanations supported by documentary evidence for the cash deposits. The cash book and bank statements of the assessee and his late mother evidenced withdrawals, and there was no material to suggest these funds were utilized for other purposes. The additions made by the AO and sustained by the CIT(A) were found unsustainable.

The Tribunal held that the penalty orders were passed after the expiry of the time limits prescribed under Section 275(1)(c) of the Act. It was also observed that the evidence regarding the cash loan transactions was not substantiated and originated from third-party documents, lacking corroborative evidence.

The Tribunal held that the addition, originally made by the AO and later restricted by the ITAT to 5% of the alleged bogus purchases on an estimated basis, was not based on a finding of actual concealment or furnishing of inaccurate particulars. The legal position is that penalty under section 271(1)(c) is not leviable when income is assessed or additions are made on an estimate or ad-hoc basis without concrete evidence of concealment.

The Tribunal held that for assessment years prior to the insertion of Section 36(1)(xvii), the disallowance of the excess sugarcane price paid to members, which is in the nature of profit distribution, is upheld. However, for assessment year 2016-17, where a specific government approval for the price was produced, the disallowance was deleted. The matter was remanded for re-computation of the disallowance in earlier years based on a specific methodology.

The Tribunal held that for assessment years post-insertion of Section 36(1)(xvii) (AY 2016-17 onwards), if the cane price paid is equal to or less than the government-fixed/approved price, it is deductible. For earlier years, the principle from the Tasgaon Taluka case applies, requiring segregation of business expenditure from profit distribution. The Tribunal noted that for AY 2016-17, specific government approval was provided, satisfying the conditions for deduction. For earlier years, a remand was ordered for proper quantification of the disallowable profit element.

For AY 2016-17, the Tribunal fully allowed the assessee's appeal, deleting the disallowance, as the FCP was approved by the State Government, satisfying Section 36(1)(xvii). For AY 2012-13 (lead case), the Tribunal upheld the principle of disallowance but remanded the matter to the AO for re-computation of the profit-embedded component based on a defined methodology, considering differential rates for members and non-members. For AYs 2011-12 to 2014-15, the Tribunal dismissed both assessee's and Revenue's appeals, thereby upholding the CIT(A)'s partial disallowance, which was based on treating the differential paid to registered members as an embedded surplus due to lack of substantiating evidence from the assessee.

The Tribunal held that the penalty orders were time-barred as they were passed after the expiry of the time limits prescribed under Section 275(1)(c) of the Income Tax Act. Additionally, relying on judicial precedents, the Tribunal found no corroborative evidence to establish that the assessee had indeed accepted or repaid loans in cash.

The Tribunal held that for AY 2016-17, the disallowance of Rs. 125,56,23,819/- was deleted due to specific government approval satisfying Section 36(1)(xvii) and Rule of Consistency. For AYs 2011-12 to 2014-15, the disallowance of certain portions of the excess cane price paid to members was upheld, as the assessee failed to provide sufficient evidence to substantiate it as a purely commercial expenditure. The matter was partly remanded for proper quantification.

The Tribunal noted that the assessee had not appeared for any of the hearings and had not provided any submissions or evidence to substantiate their claims. The grounds raised by the assessee were therefore dismissed. The CIT(A)'s order was upheld.

The Tribunal addressed two main layers: jurisdictional/procedural grounds and substantive issues. For the assessment year 2016-17 (AY 2016-17), the appeal was allowed, as specific government approval for the Final Cane Price was produced, satisfying the condition under Section 36(1)(xvii) of the Act. For earlier assessment years (AYs 2011-12 to 2014-15), the disallowance of the excess cane price was upheld in principle, but the quantification method used by the AO was not in line with the Supreme Court's guidelines, leading to a remand for recomputation. The appeals concerning Maroli Vibhag Khand Udyog Sahakari Mandli Ltd. were dismissed, with the CIT(A)'s findings upheld.

The Tribunal held that for assessment years prior to the insertion of Section 36(1)(xvii), the legal position is governed by the Supreme Court's ruling in Tasgaon Taluka, which requires segregation of business-based cane price from cooperative surplus allocation. However, for assessment years after the insertion of Section 36(1)(xvii) (AY 2016-17 onwards), the specific statutory framework under this section, supported by government approval, allows for the deduction of cane price up to the approved limit.

The Tribunal considered the various submissions and precedents, including the Supreme Court's decision in CIT vs. Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. The core issue was whether the excess cane price was a deductible business expenditure or an appropriation of profits. The Tribunal found that for Assessment Year 2016-17, a specific government approval for the final cane price satisfied the conditions under Section 36(1)(xvii) of the Act, making the entire amount deductible. For earlier years, while disallowance was necessary in principle, the quantification by the lower authorities was not in line with established methods, leading to a remand for recomputation. For some other appeals concerning AYs 2011-12 to 2014-15, the disallowances sustained by the CIT(A) were upheld.