Tax News 61.
Cases uploaded in December 2025
Tax News 61.
Cases uploaded in December 2025
148. Sh. Deven Chaudhary & Sh. Sudhir Chaudhary v. DCIT, Circle 1(3)(1), Mathura
2026 (1) TMI 129 – ITAT Agra | ITA Nos. 08/Agr/2025 & 246/Agr/2025 | Order dated 29-12-2025
In this case, the assessees faced additions under section 69A for cash deposits made during the demonetisation period, which the Assessing Officer treated as unexplained income and further subjected to tax under section 115BBE. The assessees explained that the cash deposited during demonetisation was part of cash earlier surrendered and disclosed during survey proceedings in Assessment Year 2014-15 and duly recorded in statements under section 131. The Tribunal noted that the Revenue had not brought any material to show that the surrendered cash had been utilised elsewhere or was unavailable at the time of deposit. Relying on settled judicial principles, including Supreme Court rulings that the Revenue cannot merely presume improbability of cash retention without contrary evidence, the Tribunal held that once the source of cash was explained and earlier disclosures accepted, no adverse inference could be drawn solely on account of time gap in deposit. On the issue of applicability of section 115BBE, the Tribunal followed the Madras High Court ruling in S.M.I.L.E. Microfinance Ltd., holding that the harsher provisions of section 115BBE are prospective and cannot be applied to the assessment year under consideration. Accordingly, the additions were deleted and both appeals were allowed.
149. Sh. Gurucharan Singh Hora v. DCIT, Central Circle-8, Delhi
2026 (1) TMI 244 – ITAT Delhi | ITA No. 1806/Del/2025 | Order dated 31-12-2025
The assessee challenged an assessment framed under section 153A read with section 143(3) following a search, along with additions under section 69A read with section 115BBE for alleged unexplained cash. The Tribunal first addressed the legal objection regarding the scope of section 153A, noting that a subsequent warrant of authorisation brought the relevant assessment year within the six-year block period, thereby validating jurisdiction under section 153A. On merits, the Tribunal found that substantial additions were made based on materials seized from third-party premises, not from the assessee’s possession. Following binding precedent of the Delhi High Court in PCIT v. Anand Kumar Jain, the Tribunal held that such additions could only be made by invoking section 153C and not under section 153A. Consequently, those additions were deleted. However, cash physically found at the assessee’s own premises was treated differently. Applying the presumption under section 292C, the Tribunal held that the assessee failed to offer a satisfactory explanation for that cash, justifying the addition to that extent. Thus, the appeal was partly allowed, granting relief on legally unsustainable additions while sustaining additions supported by direct possession evidence.
150. Shri Shyam Construction Company v. Income Tax Officer, Ward-1(1), Jaipur
2026 (1) TMI 77 – ITAT Jaipur | ITA Nos. 909 & 910/JPR/2025 | Order dated 31-12-2025
This case concerned levy of penalty under section 270A for under-reporting of income arising from estimated disallowances and disallowance under section 40(a)(ia). The assessee, engaged in contract construction activity, had its books rejected under section 145(3) due to absence of proper records, vouchers, stock registers, and site-wise details. The Assessing Officer made lump-sum disallowance of expenses and disallowed interest expenditure for non-deduction of tax at source, followed by penalty proceedings under section 270A. The assessee argued that penalty could not be levied since the additions were made on an estimated basis. The Tribunal examined section 270A(6), which excludes estimated additions from penalty only where accounts are otherwise correct and complete. It found that the Assessing Officer had categorically recorded that the books were not reliable or complete, a finding not rebutted by the assessee. Consequently, the estimated additions did qualify as under-reported income under section 270A(2). The Tribunal further noted that no specific defence was raised against penalty relating to disallowance under section 40(a)(ia). Upholding the findings of the lower authorities, the Tribunal confirmed the penalty and dismissed the assessee’s appeals.
151. Shree Krishna Gyanodaya Flour Mills Pvt. Ltd. v. ACIT, Central Circle-4(3), Kolkata
2026 (1) TMI 134 – ITAT Kolkata | ITA No. 2179/Kol/2025 | Order dated 31-12-2025
The dispute in this case related to reopening of assessment under sections 147 and 148 beyond four years from the end of the relevant assessment year. The original assessment had been completed under section 143(3). The Tribunal noted that in such cases, the proviso to section 147 mandates that escapement of income must be due to failure on the part of the assessee to disclose fully and truly all material facts. On examining the recorded reasons, the Tribunal found no such allegation or satisfaction recorded by the Assessing Officer. Further, the reopening was based entirely on information received from the Investigation Wing, without any independent enquiry or application of mind by the Assessing Officer, amounting to borrowed satisfaction. The Tribunal also observed that objections raised by the assessee against reopening were not disposed of by a speaking order, rendering the reassessment procedurally defective. Relying on authoritative judgments of the Supreme Court and High Courts on reassessment law, the Tribunal held that the reopening was invalid both substantively and procedurally. Consequently, the reassessment proceedings and all consequential additions were quashed, and the assessee’s appeal was allowed in full.
152. Shri Sanjay Bansal v. ACIT, Circle-2(2)(1), Ghaziabad
2026 (1) TMI 185 – ITAT Delhi | ITA No. …/Del/2025 | Order dated 31-12-2025
In this case, the assessee challenged additions made under section 69/69A during assessment proceedings, contending that the additions were made without proper evidentiary basis and in violation of settled principles governing unexplained income. The Tribunal examined the assessment record and noted that the Assessing Officer relied on presumptions rather than direct incriminating material linking the alleged unexplained amounts to the assessee. It was observed that the assessee had furnished explanations regarding the sources of funds, which were not adequately examined or rebutted by the Assessing Officer. The Tribunal reiterated that the burden shifts to the Revenue once the assessee provides a plausible explanation supported by surrounding facts, and additions cannot be sustained merely on suspicion or conjecture. In the absence of cogent material establishing unexplained nature of the amounts, the Tribunal held that the additions were unsustainable in law. Accordingly, the impugned additions were deleted, and the assessee’s appeal was allowed.
153. Penalty under Section 270A on Estimated Additions – When Exclusion under Section 270A(6) Not Available
Shri Shyam Construction Company v. Income Tax Officer, Ward-1(1), Jaipur
ITA Nos. 909 & 910/JPR/2025 | Order dated 31 December 2025 | 2026 (1) TMI 77 – ITAT Jaipur
The assessee, a civil contractor engaged in construction and supply of building material, was subjected to penalty under section 270A for under-reporting of income arising from (i) lump-sum disallowance of expenses after rejection of books under section 145(3), and (ii) disallowance of interest expenditure under section 40(a)(ia) for non-deduction of tax at source. The assessee contended that since the additions were made on an estimated basis, penalty was not leviable. The Tribunal examined section 270A(6), which excludes estimated additions from penalty only where accounts are otherwise correct and complete. It noted that the Assessing Officer had categorically recorded serious defects in books, including absence of stock registers, site-wise records, vouchers, and quantitative details, and the assessee failed to controvert these findings. Consequently, the case squarely fell within “under-reporting of income” under section 270A(2) and did not qualify for exclusion under section 270A(6). As regards the disallowance under section 40(a)(ia), no substantive argument was advanced by the assessee. The Tribunal upheld the penalty confirmed by the CIT(A) for both assessment years and dismissed the appeals.
154. Reassessment and Capital Gains on Sale of Land – Failure to Prove Rural Agricultural Character
Shyam Sunder v. Income Tax Officer, Circle-4(1), Gurugram
ITA No. 4779/Del/2024 | Order dated 30 December 2025 | 2026 (1) TMI 73 – ITAT Delhi
The assessee challenged reassessment proceedings and addition of long-term capital gains on sale of land, claiming that the land sold was rural agricultural land and therefore not a “capital asset” under section 2(14). The Tribunal upheld the validity of reassessment, noting that reasons were duly recorded, approval obtained, notices properly served, and the assessee participated in proceedings. On merits, the Tribunal observed that the assessee failed to furnish cogent evidence to establish that the land was situated beyond the notified municipal limits. The distance certificate produced was illegible and unsupported by any authoritative record. The Assessing Officer correctly relied on the relevant Central Government notification showing the land to be within the prescribed distance, making it a capital asset. The Tribunal also noted that the assessee himself claimed deductions under sections 54B and 54F, which presupposes the existence of a capital asset. Partial disallowance of these deductions was upheld due to failure to prove construction within stipulated time and purchase of new assets in joint names. In absence of any additional evidence even before the CIT(A), the Tribunal confirmed the assessment and dismissed the appeal.
155. Reassessment Approval under Section 151 and Additions under Sections 69A and House Property Income
Sunita Bhardwaj v. Income Tax Officer, Ward-61(1), New Delhi
ITA Nos. 1429, 1430 & 1431/Del/2024 | Order dated 31 December 2025 | 2026 (1) TMI 132 – ITAT Delhi
The assessee challenged reassessment proceedings on the ground that approval under section 151 was granted by the Additional Commissioner instead of the Principal Commissioner. The Tribunal rejected this contention, holding that for reassessments initiated within four years for the relevant assessment years, approval by the Additional Commissioner was valid under the law as it then stood. On merits, additions were made under section 69A treating bank deposits as unexplained, and notional rental income was assessed for multiple properties. The Tribunal found that the assessee consistently claimed that deposits arose from earlier withdrawals, professional receipts, loans, and third-party accounts, but the lower authorities failed to verify these claims. Accordingly, the issue was remanded to the Assessing Officer for fresh verification. With respect to notional rental income, the Tribunal held that properties already sold, used for professional purposes, or already disclosed for rental income could not be subjected to further notional rent. For remaining properties, valuation was directed to be based on municipal circle rates. Issues relating to long-term capital gains computation were also remanded for verification. The appeal was thus partly allowed for statistical purposes.
156. Scope of Revision under Section 264 – Power to Correct Assessee’s Own Errors
Swaminarayan Mandir Trust v. Commissioner of Income Tax (Exemptions), Mumbai & Ors.
Writ Petition No. 2162 of 2025 | Order dated 24 December 2025 | 2026 (1) TMI 140 – Bombay High Court
The petitioner trust, registered under section 12A, was denied exemption under section 11 due to errors committed while punching figures in the return of income, resulting in adverse adjustments under section 143(1). After unsuccessful rectification attempts under section 154, the trust filed a revision application under section 264, which was rejected on the ground that the mistakes were attributable to the assessee itself and that the order was appealable. The High Court held that the assessee has a statutory discretion to either file an appeal under section 246A or seek revision under section 264, and the revisional authority cannot refuse jurisdiction merely because an appeal remedy exists. It further held that powers under section 264 are wide and intended to prevent miscarriage of justice, including correcting mistakes committed by the assessee in the return of income. The Court quashed the order rejecting the revision application and remanded the matter for de novo consideration, directing the authority to examine the errors and grant lawful relief after hearing the assessee.
157. Scope of Revision under Section 264 – Power to Grant Relief Even for Assessee’s Own Mistakes
Swaminarayan Mandir Trust v. Commissioner of Income Tax (Exemptions), Mumbai & Ors.
Writ Petition No. 2162 of 2025 | Order dated 24 December 2025 | 2026 (1) TMI 140 – Bombay High Court
The petitioner, a charitable trust registered under the Income-tax Act, filed its return of income for Assessment Year 2018-19 and claimed exemption under section 11. Due to errors committed by the trust itself while filling the return and audit report, adverse adjustments were made under section 143(1), resulting in denial of exemption. Instead of filing an appeal under section 246A, the trust invoked the revisional jurisdiction under section 264 seeking correction of the mistakes and grant of lawful relief. The Commissioner (Exemptions) rejected the revision application on the ground that the impugned order was appealable and that the mistakes were attributable to the assessee itself. The Bombay High Court examined the scope of section 264 and held that the assessee has a statutory discretion to either file an appeal under section 246A or seek revision under section 264, and there is no mandate in law compelling the assessee to exhaust the appellate remedy alone. Relying on its earlier decisions in Kamal Pasricha and Aafreen Fatima Fazal Abbas Sayed, the Court reiterated that the revisional authority cannot refuse jurisdiction merely because an appeal remedy exists. The Court further held that the powers under section 264 are wide and intended to prevent miscarriage of justice, including rectifying errors committed by the assessee itself in the return of income. Consequently, the impugned order rejecting the revision was quashed, the revision application was restored, and the Commissioner was directed to consider the same afresh after granting a proper opportunity of hearing.
159. Tax Sparing Credit under DTAA – FIFO Method Accepted
Tata Consultancy Services Ltd. v. ACIT / NFAC
2026 (1) TMI 130 – ITAT Mumbai
ITA Nos. 1516, 1517 & 1518/Mum/2025 and connected appeals | Order dated 8 January 2025
The assessee, Tata Consultancy Services Ltd., claimed tax sparing credit under Article 25(2) and (3) of the applicable DTAA in respect of dividends received from its foreign subsidiary, Tata Asia Pacific Pte. Ltd. The dispute before the Assessing Officer was not on eligibility of tax sparing credit but on the method of computation, particularly whether the FIFO or LIFO method should be adopted for determining utilization of distributable reserves. The AO denied the credit on the assumption that reserves had been utilized in a manner inconsistent with the assessee’s working, without bringing any cogent evidence on record. The assessee furnished detailed computations under both FIFO and LIFO methods, showing only marginal differences, and justified adoption of FIFO as consistent with accounting principles and factual utilization of reserves. The Tribunal held that the AO’s denial was based purely on conjectures regarding utilization of reserves and was unsupported by evidence. It observed that the DTAA provisions and the factual matrix justified the assessee’s working under the FIFO method. Accordingly, the Tribunal directed the AO to allow tax sparing credit as computed by the assessee using the FIFO method and allowed the assessee’s appeal on this issue.
160. SEZ Deduction Cannot Be Reduced by Arbitrary Reallocation of Common Expenses
M/s Acuity Knowledge Centre (India) Pvt. Ltd. v. DCIT & ACIT
2026 (1) TMI 192 – ITAT Bangalore
ITA Nos. 2153/Bang/2024 & 2334/Bang/2024 | Order dated 31 December 2025
The assessee operated multiple units, including an SEZ unit eligible for deduction under section 10AA, and followed a cost-plus mark-up model for revenue recognition. The Assessing Officer reallocated certain common and non-identifiable expenses to the SEZ unit and, without making corresponding adjustments to revenue, reduced the deduction under section 10AA and treated the difference as taxable income. The CIT(A) deleted the addition, noting that in a cost-plus model, any change in cost necessarily impacts revenue and that selective reallocation of expenses without adjusting revenue leads to artificial results. The Tribunal upheld the CIT(A)’s order, observing that the assessee’s books were audited and had not been rejected under section 145. It held that once books are accepted, the AO cannot disturb unit-wise results in isolation without demonstrating overall unreliability of accounts. The Tribunal further held that mere restriction of an exempt deduction cannot automatically become taxable income unless supported by a proper recomputation of profits consistent with the business model. Consequently, the Tribunal dismissed the Revenue’s appeal and allowed the assessee’s appeal, holding the reallocation and consequent denial of deduction to be unsustainable.
161. Subsidy under Maharashtra PSI 2007 Held Taxable as Revenue Receipt
Shriniwas Engineering Auto Components Pvt. Ltd. v. ACIT & ITO
2026 (1) TMI 182 – ITAT Pune
ITA Nos. 154–156/PUN/2025 & connected appeals | Order dated 22 December 2025
The assessee received subsidy from the Government of Maharashtra under the Package Scheme of Incentives (PSI), 2007 for Mega Projects and claimed the same as a capital receipt not liable to tax. The Assessing Officer held that the subsidy was not linked to acquisition of any specific capital asset but was granted in the form of electricity duty exemption, stamp duty exemption, and industrial promotion subsidy linked to tax payments, and therefore taxable as income. The Tribunal examined the PSI scheme in detail and noted that the subsidy was computed with reference to tax liabilities such as VAT and CST and was not directly relatable to the cost of fixed assets. It held that Explanation 10 to section 43(1) was not applicable, and instead section 2(24)(xviii) squarely applied. Accordingly, the Tribunal held that the subsidy constituted revenue receipt chargeable to tax. On the issue of delayed deposit of employees’ contribution to PF and ESIC, the Tribunal held that even a one-day delay attracts disallowance under section 2(24)(x) read with section 36(1)(va). The assessee’s appeal was thus dismissed on both counts.
162. Instrumentality of State – Income Not Chargeable to Tax
(Special Purpose Government Company – Maharashtra)
2026 (1) TMI 190 – ITAT Mumbai
ITA Nos. 3682/Mum/2017 & 522/Mum/2019 | Order dated 19 December 2025
The assessee, a wholly owned company of the Government of Maharashtra, was incorporated as a special purpose vehicle to develop aviation infrastructure and was appointed as a Special Planning Authority under the Maharashtra Regional Town Planning Act, 1966. The question before the Tribunal was whether the assessee functioned as an independent commercial entity or as an instrumentality of the State, rendering its income not chargeable to tax. The Tribunal examined statutory provisions of the MRTP Act and found that the assessee acted strictly as an agent of the State Government, with all major decisions, approvals, funding, and functional control vested in the State. The company could not act independently, its projects were approved by the Government, and upon dissolution its assets and liabilities would vest in the State. On these undisputed facts, the Tribunal held that the assessee was an arm of the State discharging sovereign and public welfare functions. Consequently, its income was held not taxable in its own hands. The appeals were allowed in favour of the assessee.
163. Revision under Section 264 Cannot Be Denied Merely Because Appeal Was Possible
Vishnu Trimbak Thakur v. Principal Commissioner of Income Tax-1, Thane & Ors.
2026 (1) TMI 80 – Bombay High Court
Writ Petition No. 2162 of 2025 | Judgment dated 24 December 2025
The petitioner challenged rejection of a revision application filed under section 264 of the Income-tax Act on the ground that the assessment order was appealable under section 246A. The Revenue contended that since an appeal remedy existed, the petitioner could not invoke revisionary jurisdiction. The Bombay High Court rejected this contention and held that the statute confers discretion on the assessee to either file an appeal or seek revision, provided no appeal has actually been filed. The Court further held that the revisional powers under section 264 are wide and are intended to prevent miscarriage of justice, including correction of mistakes committed by the assessee itself in the return of income or audit report. Relying on its earlier decisions, the Court held that the Commissioner cannot refuse to exercise jurisdiction merely because the order was appealable. Accordingly, the impugned order rejecting the revision was quashed, the revision application was restored for de novo consideration, and directions were issued to grant effective hearing and decide the matter on merits within a stipulated time.