Tax News-49
(Cases uploaded in November 2025)
Tax News-49
(Cases uploaded in November 2025)
DCIT, Circle-4(1)(1), Ahmedabad v. Sameep Fabrics Pvt. Ltd. 2025 (12) TMI 30 – ITAT Ahmedabad**
Whether reassessment is void when sanction under Section 151(ii) is granted by the wrong authority.
The Tribunal quashed the reassessment because the sanction for issuing notice under Section 148—for AY 2017-18 and AY 2018-19—was granted by the Principal Commissioner, whereas more than three years had elapsed from the end of the relevant assessment year. As per Section 151(ii) (post FA-2021), sanction in such cases must be granted only by the PCCIT/CCIT/PDGIT/DGIT. Since the statutory precondition was violated, the notice u/s 148, the 148A(d) order, and all subsequent proceedings were held void ab initio. With the foundation itself invalid, the merits became academic. This judgment reinforces that jurisdictional defects in sanction cannot be cured and that reopening beyond three years strictly requires higher-authority approval.
DCIT (International Taxation), Noida & Ors. v. Progress Rail Locomotive Inc. 2025 (11) TMI 1913 – Supreme Court (Order)**
Whether a Fixed Place PE existed in India so as to justify income-tax reopening under Sections 147/148.
The Supreme Court dismissed the Revenue’s SLP against the Delhi High Court ruling which had quashed the reassessment notices issued to Progress Rail. The High Court held that the alleged Indian establishment did not constitute a Fixed Place PE under Article 5(4) of the India–USA DTAA because the tests of stability, productivity, dependence, and “at the disposal of” were not satisfied. The notice lacked any factual foundation or evidence showing that the foreign enterprise carried out business operations through a fixed place in India. The SC found no reason to interfere. The dismissal confirms that reopening cannot be based on mere presumptions and PE must be established with concrete evidence.
DCIT-1(1), Raipur v. Ajay Golechaa Jewellers Shrichand 2025 (11) TMI 1412 – ITAT Raipur**
Whether penalty under Section 271(1)(c) can be sustained when the assessee has withdrawn the disputed claim and no independent enquiry disproves the claim.
Penalty was imposed because the assessee had claimed exemption u/s 10(38) on alleged penny-stock LTCG. During assessment, the assessee withdrew the claim and offered the amount to tax. The Tribunal upheld CIT(A)’s deletion of penalty, holding that mere withdrawal of a claim or agreement to addition does not amount to furnishing inaccurate particulars, especially when the Department fails to bring any concrete evidence showing that the claim was bogus or fraudulent. The AO had not demonstrated mens rea, nor identified inaccuracies in particulars filed. Relying on Dilip N. Shroff (SC) and Shadilal Sugar Mills (SC), the Tribunal held that surrender to buy peace does not automatically trigger penalty. Penalty was therefore deleted.
Tirupati Timbers & Packaging Pvt. Ltd. v. ITO, Ward-4(1), Kolkata2025 (11) TMI 1510 – ITAT Kolkata**
Whether unsecured loan of ₹5,00,000 can be treated as unexplained cash credit u/s 68 when identity, genuineness, and repayment through banking channels are established.
The Tribunal deleted the addition u/s 68, holding that the assessee had clearly proved all three statutory ingredients—identity of lender, genuineness of transaction, and creditworthiness. The loan was received by account-payee cheque from Pushker Trading & Holding Pvt. Ltd., duly recorded in books, and fully repaid through banking channels. Despite Investigation Wing inputs branding the lender as a shell company, the AO brought no direct evidence to show that this specific transaction was sham. The Tribunal also noted inconsistency in the AO accepting interest payment on the same loan. As no material existed to treat the loan as unexplained, the entire addition was deleted.
Tribhawan v. ITO, Ward-2, Rewari 2025 (11) TMI 1608 – ITAT Delhi**
Addition under Section 69A for alleged unexplained cash deposits
The Tribunal considered whether cash deposits in the assessee’s bank account could be added as unexplained money u/s 69A. The assessee explained that the deposits represented past savings, agricultural income, and withdrawals redeposited. The AO rejected the explanation as unsupported. The Tribunal noted that the assessee had furnished documentary evidence including land records, proof of agricultural activity, past withdrawals, and cash-flow statements. It held that once the assessee provides a reasonably plausible explanation with supporting material, the burden shifts to the AO to disprove it with contrary evidence. The AO failed to bring any rebuttal. Cash-flow tallied with bank deposits, and no inconsistencies were found. The addition under Section 69A was therefore deleted.
V Hotels Limited v. National Faceless Assessment Centre, Delhi & Ors. 2025 (11) TMI 1855 – Bombay High Court**
Whether assessment notices survive after approval of a Resolution Plan under the IBC
The Court quashed notices issued under Sections 143(2) and 142(1), holding them unsustainable because the corporate debtor’s Resolution Plan had already been approved by NCLT on 26 April 2024. Relying heavily on Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss ARC and its own order in the assessee’s earlier years, the Court reiterated that all liabilities pertaining to the pre-resolution period stand extinguished unless specifically admitted in the Resolution Plan. Since the Department had filed no claim for AY 2024-25 before the Resolution Professional, it could not initiate assessment thereafter. Allowing such proceedings would defeat the IBC principle of providing the successful resolution applicant a “clean slate.” All impugned notices were struck down.
Valaka Engineering Pvt. Ltd. v. ACIT, Circle-20, New Delhi 2025 (11) TMI 1516 – ITAT Delhi**
Incorrect levy of penalty u/s 271(1)(c) for alleged unexplained credits
The penalty related to credits of ₹5,69,700 in the assessee’s bank account, which the AO treated as unexplained cash credits u/s 68. At the ITAT stage, the assessee produced detailed bank statements, Form 26AS, and TDS certificates demonstrating that the amounts were interest receipts from earlier-year deposits, duly offered to tax. These documents appear on pages 2–3 of the file. The Tribunal admitted the additional evidence because the dispute involved a small penalty and the facts clearly established mischaracterization. Since the amounts were not concealed income but recorded, taxed interest, Section 271(1)(c) penalty could not survive. The delay of 412 days in filing the appeal was also condoned as a bona fide jurisdictional mistake. Penalty was deleted in full.
Vallabhji Malsi & Co. v. NFAC, Delhi & Ors. 2025 (11) TMI 1869 – Bombay High Court**
Assessment under Section 144B violating principles of natural justice
The High Court quashed the assessment order because NFAC granted the assessee no effective opportunity to respond. The show-cause notice was issued on 23 March 2024 (Saturday, 20:07 hrs) requiring reply by 26 March 2024, even though 24 March (Sunday) and 25 March (Holi) were holidays—resulting in zero working days for compliance (page 1–2 screenshots). NFAC also failed to grant a mandatory personal hearing under Section 144B(6)(viii). The virtual-hearing link was emailed after the scheduled time (11:30 AM for an 11:15 AM hearing). The portal screenshots (page 2) showed the assessee logged in, but NFAC never initiated the meeting. The Court held this a gross breach of natural justice and SOP N.1.3 (requiring minimum 7 days). Assessment, penalty, and demand notices were all quashed and matter remanded de novo.
Varunendra Narayan Deekshit v. CPC, Bangalore 2025 (11) TMI 1511 – ITAT Pune**
Rectification u/s 154 invalid without notice under Section 154(3)
The assessee, a bank employee, received leave encashment of ₹7,18,944. His revised return claimed exemption u/s 10(10AA), which was accepted in the 143(1) intimation. CPC later issued a suo motu rectification order restricting exemption to ₹3,00,000 without issuing mandatory notice u/s 154(3). The Tribunal held, referring to text reproduced on pages 3–4, that rectification enhancing tax liability cannot be made without prior notice. CPC wrongly stated that rectification was at the assessee’s request even though his earlier rectification request had already been processed before filing the revised return. Since the rectification was unilateral and violated statutory procedure, the Tribunal cancelled the order and restored the assessee’s claim.
10.
Vijay Bihari Kandhari v. ACIT, Central Circle-4(1) & Anr. n2025 (11) TMI 1854 – Bombay High Court
Limitation under Section 153C read with Section 153B(1)
The Bombay High Court quashed notices issued under Section 153C on the ground that the assessments for AYs 2014-15 to 2019-20 were time-barred. A search on Oberoi Realty Ltd. occurred on 21.08.2019, and the Assessing Officer of the searched party and the petitioner was the same. Therefore, the first limb of clause (ii) of the third proviso to Section 153B(1)—twelve months from the end of the FY of search—applied. This limitation expired on 31.03.2021, extended by TOLA to 30.09.2021. No assessment was completed by that date, and show-cause notices in March 2022 were held to be invalid. The Court rejected the Revenue’s contention that handing over of records by the Investigation Wing triggered a fresh limitation, holding that such interpretation would make the first limb otiose. Relying on Super Malls Pvt. Ltd., the Court held that where the AO is common, no “handing over” occurs, and the second limb does not apply. Notices under Section 153C were accordingly quashed.