ITAT Visakhapatnam Judgments — June 2025

The Tribunal held that procedural mistakes or technical errors that are curable and do not affect the core eligibility of a charitable institution should not be grounds for rejecting registration applications. Since the CPC had already granted provisional registration despite the initial error, the CIT(Exemptions) should not have rejected the permanent registration applications on technical grounds. The matter was remanded to the CIT(Exemptions) with directions to examine both applications afresh on merits, providing the assessee a reasonable opportunity of being heard, and adopting a liberal and pragmatic approach.

The Income Tax Appellate Tribunal held that such an error was merely a technical or procedural lapse and should not override the substantive rights of a charitable institution. Citing Supreme Court precedent, the Tribunal set aside the rejection orders and remanded the matters back to the Ld.CIT(E) to reconsider the applications on their merits, after allowing the assessee an opportunity to rectify the procedural errors.

The tribunal held that the rejection based solely on a technical or procedural lapse was not justified, especially since the assessee appeared to fulfill all substantive conditions and already held prior registrations. Citing the principle that procedural mistakes should not defeat substantive rights, the tribunal set aside the Ld.CIT(E)'s order and restored the matter for fresh examination on merits, directing the CIT(E) to allow the assessee an opportunity to rectify the procedural errors.

The Tribunal held that the error was a mere technical lapse and procedural mistakes should not defeat substantive rights, especially for a charitable institution already holding 12AA and 80G registrations. It set aside the rejection order and remanded the matter back to the CIT(E) to allow the assessee to rectify the errors and decide the application afresh on merits after providing due opportunity of hearing.

The tribunal held that the CIT(Exemptions) erred in rejecting the applications solely on technical/procedural grounds without examining them on merits. It emphasized that curable procedural mistakes should not defeat the rights of charitable institutions and directed the CIT(Exemptions) to re-examine the applications for permanent registration/approval under Section 12AB and Section 80G afresh on merits, providing the assessee a reasonable opportunity of being heard.

The Income Tax Appellate Tribunal (ITAT) found that the CIT(A) had summarily accepted the assessee's claims of genuine loans without proper verification, overlooking concrete evidence and statements pointing to the lender companies being shell entities providing accommodation entries. The ITAT concluded that the CIT(A)'s orders were non-speaking and failed to consider independent facts for each year and lender. Consequently, the ITAT set aside the CIT(A)'s orders and remanded the matters back to the CIT(A) for fresh adjudication, directing them to seek a "remand report" from the Assessing Officer and provide the assessee a fair chance to present fresh evidence.

The ITAT found that the CIT(A) erred in summarily accepting the assessee's claims without adequate verification, especially given substantial information indicating the lenders were paper companies involved in accommodation entries. The ITAT emphasized that the CIT(A) failed to consider the material facts and evidence indicating the non-genuineness of the transactions and the lack of creditworthiness of the lenders. Therefore, the ITAT set aside the matter to the CIT(A) for fresh adjudication, directing the CIT(A) to call for a 'remand report' from the AO and allow the assessee a reasonable opportunity to substantiate its claims with fresh documentary evidence.

The Tribunal found that the CIT(A) had erred in summarily accepting the assessee's claims without proper verification. The Tribunal noted serious allegations against the lending entities, indicating they were paper companies involved in providing accommodation entries. The case was restored to the CIT(A) for fresh adjudication with a direction to call for a remand report from the AO.

The Income Tax Appellate Tribunal found that the CIT(A) erroneously accepted the assessee's claims without adequate verification, disregarding substantial evidence from investigative agencies indicating that the lending companies were shell companies providing bogus accommodation entries. Consequently, the tribunal remanded all appeals back to the CIT(A) for fresh adjudication. The CIT(A) is directed to conduct further verification, including calling for a 'remand report' from the AO, and afford the assessee a reasonable opportunity to substantiate its claims with fresh documentary evidence.

The Income Tax Appellate Tribunal found that the CIT(A) summarily accepted the assessee's claims and deleted the additions without adequately verifying the authenticity, genuineness, and creditworthiness of the lenders, despite concrete information from search/survey operations. The Tribunal deemed the CIT(A)'s orders non-speaking and without cogent reasons, especially where different lenders were involved across assessment years, and thus set aside the CIT(A) orders. The cases were remanded back to the CIT(A) for fresh adjudication, with directions to obtain a "remand report" from the AO and allow the assessee a reasonable opportunity to provide further evidence.

The Tribunal held that the claim that cash deposits were sourced from cash in hand or business sale proceeds during demonetization was unsubstantiated. The Tribunal also addressed the applicability of the enhanced tax rate under Section 115BBE, concluding that the pre-amended rate of 30% should apply to the income determined under Section 69A for the assessment year in question.

The Tribunal found that the CIT(Exemptions)'s orders were cryptic, non-speaking, and violated principles of natural justice. It set aside the impugned orders and remanded the applications back to the CIT(Exemptions) for fresh adjudication. The CIT(Exemptions) was directed to provide a reasonable opportunity of hearing to the assessee society and pass detailed, speaking orders considering all submissions.

The Tribunal condoned the delay, finding it bona fide and acknowledging the assessee acted on incorrect advice. It ruled that appellate authorities have broad powers to entertain additional grounds not raised initially. Citing judicial precedents and CBDT Circular No. 36 of 2016, the Tribunal concurred that compensation for compulsory land acquisition under the National Highways Act, 1956, is exempt from income tax under Section 96 of the RFCTLARR Act, 2013. The matter is remanded to the Assessing Officer for verification of these factual claims and the claim regarding the land not being a 'capital asset'.

The Tribunal found the CIT(Exemption)'s orders to be cryptic, non-speaking, and in violation of natural justice. Expressing displeasure at the casual approach, the Tribunal set aside both impugned orders and remanded the applications back to the CIT(Exemption) for fresh adjudication. The CIT(Exemption) was directed to provide a reasonable opportunity of hearing and pass detailed, speaking orders.

The Tribunal observed that the Ld.CIT(E) did not pass a speaking order justifying the rejection. Finding that the CIT(E) had not specified how the assessee's activities were not charitable, the Tribunal set aside the impugned order. The matter was restored to the Ld.CIT(E) to provide the assessee with another opportunity to furnish details and to pass a speaking order on merits.

The Income Tax Appellate Tribunal found that the Ld. CIT(E)'s rejection order was not a speaking order, as it merely stated the absence of substantial charitable activities without specific elaboration. To uphold natural justice, the Tribunal set aside the impugned order and restored the matter back to the Ld. CIT(E), directing him to provide another opportunity to the assessee to furnish the required details and to pass a speaking order on merits.

The Tribunal condoned the 40-day delay, acknowledging the assessee's reasonable cause. While upholding the CIT(E)'s justification for rejection based on non-compliance, it set aside the CIT(E)'s order and remanded the case to provide the assessee one more opportunity to submit the necessary documents in the interest of natural justice.

The Tribunal, applying the principle of consistency and relying on its own previous orders in the assessee's cases for earlier assessment years, dismissed both the assessee's appeal and the revenue's appeal. It confirmed the treatment of capital dredging as 'buildings' for 10% depreciation, upheld the assessee's consistent accounting method for recognizing upfront premium over the lease period, and allowed prior period expenditure as it crystallized in the current year. It also allowed excess pension fund contribution under Section 37 and held Section 43B is not applicable to interest on Government loans, and upheld the treatment of Railway Permanent Way as 'plant' for 15% depreciation.

The Tribunal dismissed the assessee's appeal concerning depreciation on capital dredging, upholding the 10% rate by classifying it as 'buildings/roads' instead of 'plant and machinery'. The revenue's appeal was also dismissed across all grounds: upholding the CIT(A)'s deletion of additions related to upfront premium (treating it as amortized revenue), prior period expenditure (allowed as crystallized in the current year), excess pension fund contribution (allowable under Section 37), interest provision on Government loans (not covered by Section 43B), and depreciation on Railway Permanent Way (allowed at 15% as 'plant & machinery'). The Tribunal primarily relied on its own past decisions and the principle of consistency.

The Tribunal observed that the Ld.CIT(E) did not pass a speaking order and merely stated that the assessee was not carrying out substantial charitable activities, without specifying how. The Tribunal found this approach incorrect and, in the interest of natural justice, decided to grant one more opportunity.

The Tribunal condoned the 121-day delay in filing the appeal, accepting the bonafide reasons provided by the legal heir, a housewife unfamiliar with tax intricacies. It ruled that the CIT(A) is statutorily obligated to dispose of appeals on merits and cannot summarily dismiss them for non-prosecution. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication on merits, ensuring a reasonable opportunity of being heard for the assessee.

The Tribunal found that the CIT(A) erred in not condoning the delay, accepting the assessee's bona fide reasons. Relying on a Supreme Court judgment, it held that a liberal approach should be adopted for condonation of delay and directed the CIT(A) to condone the delays in both appeals and dispose of them on merits.

The Tribunal condoned the delay in filing the appeal and admitted an additional ground concerning Section 115BBE. It acknowledged the bank's certificate supporting the assessee's claim and set aside the case, remanding it to the A.O. to re-adjudicate after providing the assessee a reasonable opportunity to furnish fresh documentary evidence, including complete customer details.

The Tribunal determined that the assessee, operating in a remote area with tribal employees unfamiliar with computers, had a bona fide reason for the delay, having learned of the assessment only upon receiving a demand letter. Citing a Supreme Court precedent, the Tribunal ruled that a liberal approach should be taken for condonation of delay. The CIT(A)'s order was set aside, and the matter was remanded to the CIT(A) to condone the delay and decide the appeal on its merits.

The Third Member, concurring with the Accountant Member, held that the income derived from leasing the educational institution premises and assets should be treated as 'income from house property'. The Tribunal determined that the assessee had permanently discontinued its educational business activities and lacked any explicit intention to restart, indicating that the leasing of assets was an exploitation of property rather than a business operation. Consequently, the appeals filed by the assessee were dismissed.

The Third Member concurred with the Accountant Member's view, holding that the income from leasing the educational premises is to be assessed as 'income from house property'. It was determined that the assessee had permanently discontinued its business with no intention to resume, and the continued leasing of assets even after the initial lease period supported this. The principle of consistency or res judicata was deemed inapplicable as each assessment year is distinct, and a wrong past decision should not be perpetuated.

The Tribunal set aside the 25% disallowance of patient refund accounts by the CIT(A) due to lack of corroborative evidence. For directors' drawings, it estimated 10% as personal drawings, citing that statements under Section 133A are not automatically binding. The Tribunal confirmed that Section 40A(3) does not apply when additions are based on impounded material if genuineness of expenditure is not doubted. Payments to a stationed doctor for specialized services were held as allowable business expenditure under Section 37(1).

The Tribunal set aside the 25% estimated disallowance on the patient refund account by the CIT(A), finding no justification or corroborating evidence. It reduced the disallowance on directors' drawings from 25% (as estimated by CIT(A)) to 10%, considering them as personal drawings. The Tribunal further upheld the CIT(A)'s relief regarding disallowances for referral payments and consultancy fees, ruling that Section 40A(3) is not applicable when the assessment is based on impounded material and the genuineness of the expenditure is not doubted. The revenue's appeals contesting these reliefs were largely dismissed or partly allowed, affirming the relief granted to the assessee.

The Tribunal set aside the 25% estimated disallowance on the patient refund account, finding sufficient evidence of genuine patient discounts and noting the revenue's failure to prove these were referral payments. For directors' drawings, the Tribunal estimated 10% as personal expenditure. The Tribunal also clarified that Section 40A(3) provisions are not applicable when additions are based on impounded material, and the genuineness of expenditure is not doubted.

The Tribunal found merit in the assessee's argument, stating that a newly formed trust that has not commenced activities cannot be expected to furnish financial details. Consequently, the Tribunal held that the Trust is entitled to registration under Section 12A and Section 80G and directed the Ld.CIT(E) to grant the registrations.

The Tribunal held that the approval granted by the Joint Commissioner of Income Tax under Section 153D was mechanical, lacked application of mind, and was given under time-constrained pressure, making it invalid in the eyes of law. Citing various High Court and ITAT decisions, the Tribunal found that the assessment orders passed under Section 143(3) read with Section 153A, based on such a mechanical approval, were void ab-initio. Consequently, the legal ground raised by the assessee was allowed, rendering other grounds academic.

The ITAT held that the mandatory prior approval granted by the JCIT under Section 153D for the assessment orders was mechanical, accorded on the same day the draft assessment orders were submitted without proper application of mind. Consequently, the Tribunal declared the assessment orders as void ab-initio and allowed the assessee's appeals.

The Income Tax Appellate Tribunal (ITAT) held that the approval granted by the Joint Commissioner of Income Tax (JCIT) under Section 153D of the Act for the assessment orders was given mechanically, without proper application of mind or examination of relevant material, and under time-constrained pressure. The ITAT concluded that such an approval is invalid in law, rendering the assessment orders passed under Section 143(3) read with Section 153A void ab-initio. The other grounds of appeal became academic.

For the assessee's appeals, the ITAT set aside the CIT(A)'s estimated disallowance of 25% for patient refund accounts, finding no corroborating evidence for referral payments. For directors' drawings, the disallowance was reduced from 25% to 10%, considering them as personal drawings. For the revenue's appeals, the ITAT upheld the CIT(A)'s relief regarding consultancy fees and lab referral payments, ruling that they were not proven to be referral payments and that Section 40A(3) was inapplicable when additions were based on impounded material without doubting genuineness. The majority of appeals were partly allowed, with some allowed or dismissed based on specific grounds.

The Tribunal partly allowed the assessee's appeals and partly allowed/dismissed the revenue's appeals. It held that the estimated disallowance of 25% on patient refunds by the Ld. CIT(A) was unjustified and set aside, allowing the assessee's ground. For directors' drawings, the Tribunal estimated disallowance at 10% instead of 25%, acknowledging some business expenditure. Critically, it ruled that Section 40A(3) is not applicable when the genuineness of expenditure is not doubted and additions are made based on impounded material, as income is not computed on regular books of accounts.

The tribunal partly allowed both the assessee's and revenue's appeals. It set aside the Ld. CIT(A)'s 25% estimation of patient refund account disallowance due to lack of corroborating evidence and reduced the disallowance on directors' drawings from 25% to 10%, considering them partly as business expenditure. The tribunal upheld the Ld. CIT(A)'s decision to allow certain referral and consultancy payments as genuine business expenditure, ruling that Section 40A(3) is not applicable when additions are based on impounded material rather than regular books of accounts.

The Tribunal, for the assessee's appeals, deleted the 25% estimated disallowance on patient refund accounts due to lack of corroborative evidence and reduced the disallowance on directors' drawings from 25% to 10%. For the revenue's appeals, the Tribunal upheld the CIT(A)'s decision to allow relief on referral payments and confirmed that Section 40A(3) is not applicable when additions are made based on impounded material rather than regular books of accounts.

The Tribunal largely set aside the estimated disallowance of 25% on the patient refund account, finding no justification for the estimation without corroborating evidence. For the disallowance of directors' drawings, it reduced the estimation from 25% to 10%, considering it as personal drawings. The Tribunal also held that Section 40A(3) is not applicable when the genuineness of expenditure is not doubted and additions are made based on impounded material, thereby upholding the CIT(A)'s relief on this point.

The Tribunal accepted the assessee's contention, agreeing that a newly established trust without commenced activities could not furnish financial details. It held that the Trust was entitled to registration under sections 12A and 80G and directed the Ld. CIT(E) to grant the said registrations.

The Tribunal determined that the misclassification was a bonafide mistake committed by the tax preparer, which could be rectified. Consequently, the Tribunal set aside the Ld. CIT(A)'s order and remitted the case back to the jurisdictional AO for fresh consideration of the assessee's details and to pass orders in accordance with law.

The Tribunal found that the AO had conducted a detailed inquiry, called for and examined all necessary details, and made additions. Consequently, the AO's order was neither erroneous nor prejudicial to the interest of the revenue. Therefore, the Pr.CIT's invocation of revisional powers Under Section 263 was unjustified.

The Tribunal found that the Assessing Officer had conducted a detailed inquiry, called for all relevant details, and passed a detailed assessment order, specifically addressing the issues later raised by the Pr.CIT. Since the AO had already examined the issues and made additions, the Pr.CIT's order under Section 263, based on an alleged 'lack of enquiry', was quashed as unjustified.

The Tribunal condoned the delay in filing the application for Section 12AB registration, acknowledging that the delay was due to circumstances beyond the assessee's control. It directed the CIT(E) to consider the application for registration on merits and pass orders in accordance with law.

The Tribunal condoned the 28-day delay in filing the appeal. On merits, it held that for AY 2017-18, the amended Section 80AC (requiring timely filing for Chapter VIA deductions) was prospective and not applicable. While Section 80A(5) requires making a claim in the return, it does not specify timely filing. Therefore, the Revenue was not justified in denying the Section 80P deduction solely due to the belated filing. The matter was set aside to the AO for examination of the Section 80P claim on merits.

The Tribunal condoned the delay in filing the appeal, finding sufficient cause. It held that while the CIT(A) passed an ex-parte order due to the assessee's non-appearance, the case ought to have been decided on merits. Therefore, the Tribunal set aside the CIT(A)'s order and remitted the matter back for fresh consideration on merits, cautioning the assessee to cooperate in future proceedings.