ITAT Visakhapatnam Judgments — May 2025

The Income Tax Appellate Tribunal remanded the case back to the CIT (Exemption) for fresh consideration of the applications for registration u/s 12A and approval u/s 80G. The Tribunal noted that a new proviso to Section 12A, inserted by Finance Act, 2024, empowers the CIT/Pr.CIT to condone delays for reasonable cause, which the CIT(E) had failed to consider. The Tribunal also emphasized the necessity of providing an opportunity of hearing to the assessee.

The Tribunal noted that the CIT (Exemption) did not consider the newly inserted proviso to Section 12A (Finance Act, 2024, w.e.f. 01/10/2024) which empowers condonation of delay for reasonable cause. Consequently, the case was remanded to the CIT (Exemption) to re-examine the condonation request and provide the assessee an opportunity of hearing.

The Tribunal observed that the assessee neither filed any application for condonation of delay nor provided a reasonable or sufficient cause for the significant delay. Consequently, the appeal was deemed invalid and was dismissed as being barred by limitation.

The Tribunal condoned the delay in filing the appeal, noting the assessee's uneducated status, physical ailment, and the claim that physical service of notice was preferred in Form 35. It found that the assessee was not properly put to notice for the CIT(A) proceedings and, therefore, restored the matter to the CIT(A) for re-adjudication of Grounds of Appeal Nos. 2 to 4. For future faceless proceedings, notices sent to the assessee's email will be considered proper service.

The Income Tax Appellate Tribunal held that the Ld. CIT(E)'s rejection order lacked specificity, as it did not clearly state which activities of the Trust were not in line with its objectives. The Tribunal decided to remit the matter back to the Ld. CIT(E) for a fresh decision after allowing the assessee a proper opportunity to be heard.

The Tribunal held that the AO had applied his mind to the issue of income classification during the original assessment, making enquiries and accepting the assessee's explanation. The Tribunal found that the AO had taken a possible view in law. Therefore, the PCIT could not invoke Section 263 merely because he held a different opinion, as the assessment order was neither erroneous nor prejudicial to the revenue. The Tribunal set aside the PCIT's order and restored the original assessment order.

The Tribunal found that the penalty order, initiated on 27/12/2019, was passed on 21/03/2022. Considering the extended period due to the COVID-19 pandemic and TOLA, the order should have been passed by 31/12/2021. Therefore, the penalty order was barred by limitation and deemed void-ab-initio, making it unnecessary to address other grounds.

The Tribunal found that the CIT(A) erred by deeming the financial statements as self-generated without proper examination, and the AO failed to verify the balance sheet or consider past income. Citing CBDT Instruction No. 03/2017, the Tribunal determined that the assessee had a closing cash balance of Rs. 14,40,951/- as of 31/03/2016, and the cash deposits of Rs. 3,01,500/- were adequately explained as past savings and existing balance, thus deleting the addition made by the AO.

The Tribunal found that Section 249(4)(b) was not applicable as the assessee had filed a return under Section 139(1) and paid tax on her admitted income. The Tribunal set aside the CIT(A)'s order, directing the CIT(A) to decide the case on merits after providing the assessee a reasonable opportunity of being heard.

The CIT(A) deleted the additions, concluding that the loan from M/s. Aneri Fincap Ltd was not an accommodation entry, considering the entity's listed status, previous genuine loan transactions with the assessee, and documentary evidence of identity, genuineness, and creditworthiness. The ITAT upheld the CIT(A)'s decision, finding no infirmity in the order as the Revenue failed to present adverse material proving the transaction to be bogus.

The Tribunal upheld the orders of the lower authorities, dismissing the assessee's appeal. It ruled that since the assessee failed to file a valid return of income within the prescribed time as per Section 139, the claim for deduction under Section 80P(2)(a)(i) was not admissible as per Section 80A(5) of the Act. The Tribunal found no error in the Revenue Authorities' decision to deny the deduction, citing similar previous decisions.

The Tribunal condoned the 23-day delay, noting that the assessee's explanation regarding Pongal holidays and auditor unavailability during a short response window constituted sufficient cause. It held that the CIT(A) ought to have considered the explanation and disposed of the appeal on merits. The matter was remitted back to the CIT(A) for fresh adjudication as per Section 250(6).

The Tribunal partly allowed the assessee's appeal. It confirmed additions related to unsecured loans totaling Rs. 19,00,000/- where the source (agricultural income, cash deposits before loan) was not satisfactorily explained. However, it deleted additions for two unsecured loans totaling Rs. 6,00,000/-, finding them to be from explained sources. Regarding gifts, Rs. 9,00,000/- was accepted, while Rs. 6,00,000/- remained unexplained. The issue of proportionate interest disallowance was remanded to the AO for recomputation.

The Tribunal noted that the assessee's grievance had been redressed by the Assessing Officer's subsequent rectification order, which assessed the income as Nil. With no objection from the Departmental Representative, the Tribunal granted the assessee liberty to withdraw the appeal and dismissed it as withdrawn.

The Tribunal held that the Assessing Officer (AO) failed to pass a speaking order while disposing of the assessee's objections for reopening the assessment under Section 147. This failure led to the quashing of the reassessment proceedings by the first appellate authority.

The Tribunal condoned the delay in filing the appeal. On merits, it held that filing Form 67 is directory, not mandatory, and the right to FTC cannot be denied for procedural delays. Citing an amendment to Rule 128(9) and its Explanatory Memorandum (retroactively applicable for FY 2022-23 claims), and Article 24 of the DTAA, the Tribunal directed the Assessing Officer to allow the FTC.

The Tribunal held that the Section 69A addition was unwarranted because the cash deposits were recorded in the books of accounts and adequately explained as recoveries from sundry debtors/advances from prior years. For the Section 68 addition, the Tribunal found that the AO did not have sufficient time to examine the genuineness and creditworthiness of the loan parties due to late submission of confirmations, thus remanding this issue back to the AO for re-examination.

The tribunal found that the Ld. CIT(E)'s rejection order lacked proper reasoning and failed to specify which objectives were not charitable, despite the trust's activities being charitable in nature and it already holding registration under Section 12A. The tribunal directed the Ld. CIT(E) to grant the Section 80G registration.

The Tribunal found that the CIT(E) rejected the application without providing specific reasons or explaining which objectives were not charitable, despite the assessee already holding registration under section 12A of the Act. After reviewing the trust's objects, the Tribunal concluded that its activities were charitable and directed the CIT(E) to grant registration under section 80G.

The Tribunal found that the assessee had indeed erroneously filed the revised return, declaring income from a subsequent year. In the interest of justice, the AO/CPC was directed to process the original return of income filed under section 139(1) of the Act.

The Tribunal found the Ld. CIT(E)'s rejection order casual, noting that the assessee's objects were charitable in nature and it already held registration under Section 12A. The Tribunal directed the Ld. CIT(E) to grant Section 80G registration to the assessee, allowing the appeal.

The Income Tax Appellate Tribunal found that the CIT(E) rejected the application without providing a speaking order or adequately discussing the charitable nature of the trust's objectives, despite the trust already holding Section 12A registration. The Tribunal determined that the trust's stated objectives indicate charitable activities and therefore directed the CIT(E) to grant registration under Section 80G to the assessee.

The Tribunal observed that the assessee's audited financial reports consistently showed an average net profit of 16%, which the Revenue did not dispute. Applying the principle of consistency, the Tribunal directed the Assessing Officer to estimate the net profit on unaccounted receipts from the Chit Fund business at 16%, after adjusting for the 4% already admitted by the assessee. This decision was applied to both AY 2016-17 and AY 2018-19.

The Tribunal dismissed the Revenue's appeals concerning the disallowance of interest and the treatment of stock discrepancies, upholding the CIT(A)'s view that term loans were used for fixed assets and stock netting-off was permissible. For the assessee's appeals, the Tribunal ruled that assessments made under Section 153A, especially for unabated assessment years, are invalid if no incriminating material directly related to the assessee is found during search or if additions are based on third-party material without adhering to Section 153C. Appeals for later assessment years were dismissed as withdrawn.

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s relief for interest disallowance under Section 36(1)(iii) as funds were proven to be utilized for fixed assets. It also permitted netting off of excess and deficit stock, taxing only the gross profit element on shortage and treating a portion as unexplained investment under Section 69B. The assessee's appeals challenging the validity of assessments under Section 153A for AYs 2008-09, 2009-10, and 2010-11 were allowed, as no incriminating material was found for unabated assessments and proper procedure under Section 153C was not followed for third-party material. Other assessee appeals for AYs 2011-12 and 2012-13 were dismissed as withdrawn.

The tribunal noted that the Revenue had not disputed the assessee's consistent net profit percentage of around 16% from audited financial reports in previous and subsequent years. Following the principle of consistency, the tribunal directed the AO to estimate the net profit at 16% on the unaccounted receipts, after accounting for the 4% already admitted by the assessee.

The Income Tax Appellate Tribunal (ITAT) held that the handing over of possession under the JDA cum GPA was solely for development, not as 'part performance' of an agreement to sell under Section 53A of the Transfer of Property Act, 1882. Therefore, it did not constitute a 'transfer' under Section 2(47)(v) of the Income Tax Act, 1961, and no capital gains arose. The AO's initial decision, taken after due inquiry and adopting a 'possible view', was valid, rendering the Pr. CIT's revisionary order under Section 263 unsustainable.

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decision to allow interest, reasoning that the existing fixed assets exceeded the term loan, indicating genuine business utilization. It also permitted netting off of excess and deficit stock, allowing only the profit element of the shortage to be added. Conversely, the Tribunal allowed the assessee's appeals, ruling that assessments under Section 153A for completed/unabated assessment years are invalid without incriminating material found during search, and additions based on third-party seized material require strict adherence to Section 153C procedures.

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decision to grant relief on proportionate interest disallowance and allowing netting-off of stock discrepancies, adding only the gross profit on stock shortage. For the assessee's appeals, the Tribunal allowed the jurisdictional challenge, holding that additions under Section 153A for completed/unabated assessments require incriminating material and additions based on third-party search material require strict adherence to Section 153C. Consequently, assessment orders for certain years were quashed or additions were dismissed.

The Tribunal upheld the CIT(A)'s decision to allow relief on proportionate interest disallowance u/s 36(1)(iii), finding that term loans were primarily utilized for fixed assets and not diverted. It also allowed the netting off of excess and deficit stock, taxing only the gross profit element on the shortage. For the assessee's appeals, the Tribunal quashed assessments made u/s 153A for unabated years where no incriminating material was found, and dismissed additions made based on third-party search material without following Section 153C procedures.

The Tribunal held that the handing over of possession to the developer under the JDA cum GPA for development work does not amount to a transfer of land under Section 2(47)(v) of the Income Tax Act, 1961, read with Section 53A of the Transfer of Property Act, 1882. This conclusion was based on the specific terms of the JDA, which indicated that the security deposit was refundable and legal ownership/possession remained with the landowners, and was supported by binding judicial precedents. Consequently, the Tribunal found that the Pr. CIT's order passed under Section 263, setting aside the AO's order, was not sustainable in law and was liable to be set aside.

The Tribunal observed that Section 269SS applies to the acceptance of loans or deposits, not to the repayment of loans given in earlier periods, as claimed by the assessee. Since the Revenue failed to categorically establish that the receipts were fresh loans violating Section 269SS, and the lower authorities did not adequately consider the assessee's additional evidence, the penalty levied under Section 271D was not warranted. The Tribunal therefore directed the deletion of the penalty.

The tribunal condoned the 474-day delay, finding the assessee's reasons for non-filing and non-participation before the CIT(A) to be bonafide and beyond their control. The CIT(A)'s ex-parte order was set aside as it was passed without providing an effective opportunity of hearing to the assessee, and the matter was remanded back to the CIT(A) for fresh adjudication on merits.

The ITAT found that the CIT(A) failed to consider the assessee's timely filed submissions, leading to an ex-parte disposal in violation of natural justice and Section 250(6) of the IT Act. Therefore, the ITAT set aside the CIT(A)'s order and remanded the matter back for fresh adjudication on merits after providing the assessee an appropriate opportunity of hearing.

The Tribunal remitted the matter back to the Assessing Officer to consider additional evidences provided by the assessee to substantiate the time deposits and decide the case on merits. The additional grounds challenging the validity of the Section 148 notice were not adjudicated, becoming infructuous due to the remand.

The Tribunal dismissed the additional ground regarding the non-issuance of Section 143(2) notice, as the assessee's return filed in response to a Section 148 notice was considered invalid. On merits, the Tribunal held that merely granting a license to a developer under a JDA cum irrevocable GPA does not constitute a 'transfer' of land under Section 2(47)(v) of the IT Act, especially when the security deposit is refundable and no consideration for transfer was paid. The AO's view was a possible one after due inquiry, making the Pr. CIT's Section 263 order unsustainable.

The Tribunal held that the JDA cum GPA, which granted a license for development and involved a refundable security deposit, did not constitute a 'transfer' of land under Section 2(47)(v) of the IT Act read with Section 53A of the Transfer of Property Act. Since the Assessing Officer had taken a "possible view" after due inquiry, the Pr. CIT's revision orders under Section 263, setting aside the assessment, were not sustainable and were thus quashed for all four assessees.

The tribunal condoned the delay, finding sufficient cause due to the MD's medical condition and supporting affidavits. Regarding the disallowance, the tribunal noted the AO failed to segregate expenses supported by valid vouchers from self-made ones. Considering the nature of the business, the ad-hoc 10% disallowance was deemed high and was restricted to 5% to meet the ends of justice.

The Tribunal deleted the addition related to M/s. Balaji Infra and M/s. Sri Sai Balaji (except for minor unreconciled balances) and K. Ashok, finding that the loans were through banking channels and, for K. Ashok, only repayments were made. However, additions for other parties (G. Mohan Rao, G. Rinivasa Rao, Jasti Madava Rao Guntur, P. Chalapathi, Rafuddin) were confirmed as the assessee failed to prove their creditworthiness and genuineness.