ITAT Varanasi Judgments — September 2026

The Tribunal held that the reassessment proceedings initiated under Section 147 were bad in law and void ab initio. The AO's belief of income escapement was formed mechanically without establishing a live, rational, or proximate connection between the information received from the search and the alleged escapement of income. The Tribunal agreed with the assessee that material relied upon by the AO was not provided, and the response to the show cause notice was not considered. Furthermore, there was a variance between the show cause notice and the assessment order, which was not explained. On merits, the Tribunal found that the AO treated purchases as bogus but accepted sales figures without rejecting the books of account, violating the principle that to effect sales, purchases must be made. Adding purchases as bogus without considering the issue of non-availability of stock lacked foundation. The Tribunal also held that Section 69C could not be applied as the revenue failed to establish that an expenditure was incurred and the assessee could not prove it. The assessee had provided voluminous documents, including audited balance sheets, ledgers, bank statements, and inventory registers, which the AO did not comment adversely upon. The AO's selective discarding of purchases while accepting sales, closing stock, and bank payments indicated a flip-flop approach. Therefore, the additions made by the AO and sustained by the NFAC were not sustainable on merits and were liable to be deleted. The reassessment order was quashed.

The Tribunal held that the disallowance made by the AO under Section 40A(3) of the Act was not legally tenable because the AO did not bring any specific findings or point out specific violations, and the deeming provision of Section 40A(3) never came into operation as the AO lacked necessary details. The Tribunal affirmed the co-terminus powers of the CIT(A), stating that the CIT(A) could reject books of account under Section 145(3) and apply a net profit rate, even if the AO had incorrectly applied Section 40A(3). The Tribunal found that the CIT(A)'s approach of rejecting books of account and applying a 6% net profit rate on gross receipts could not be faulted, as the AO's invocation of Section 40A(3) had no legal foundation. Regarding Ground No. 4 concerning depreciation, no arguments were advanced by either party, and it was dismissed as not pressed. The appeal of the Department was dismissed.

The Tribunal noted that for subsequent assessment years, the Revenue accepted similar bank deposits as belonging to the society, not the individual. Therefore, the Tribunal set aside the orders and remanded the matter back to the Assessing Officer for fresh adjudication.

The Tribunal noted that for subsequent assessment years, the Revenue accepted similar bank deposits as belonging to the society, not the individual. Therefore, the Tribunal set aside the orders and remanded the matter back to the Assessing Officer for fresh adjudication.

The Tribunal noted that for subsequent assessment years, the Revenue accepted similar bank deposits as belonging to the society, not the individual. Therefore, the Tribunal set aside the orders and remanded the matter back to the Assessing Officer for fresh adjudication.

The Tribunal noted that for subsequent assessment years, the Revenue accepted similar bank deposits as belonging to the society, not the individual. Therefore, the Tribunal set aside the orders and remanded the matter back to the Assessing Officer for fresh adjudication.

The Tribunal condoned the delay in filing the appeal and restored the matter to the AO. The assessee was granted one more opportunity to present her case with supporting evidence for the cash deposits.

The Tribunal set aside the order of the NFAC and restored the file to the Assessing Officer, granting the assessee one more opportunity to present its case. The assessee was cautioned to comply with future directions.

The Tribunal set aside the order of the NFAC, which had dismissed the appeal in limine due to delay. The Tribunal restored the file to the AO, directing that the assessee be given one more opportunity to present her case.