Tax News -65
Cases uploaded in January 2026
Tax News -65
Cases uploaded in January 2026
1. (Jan 26-1) Reassessment Cannot Travel Beyond Recorded Reasons and Proper Sanction
Income Tax Officer, Rohtak v. Pankaj Jain [2026] 1 TMI 71 – ITAT Delhi
The reassessment proceedings were initiated to verify cash withdrawals and deposits in the assessee’s bank account. Notices under sections 148A(b), 148A(d), and 148 were issued by the Jurisdictional Assessing Officer (JAO), and approval was obtained from the PCIT. During reassessment, however, the AO made a large disallowance on account of alleged bogus purchases—an issue not forming part of the recorded reasons or the show-cause notice. The CIT(A) quashed the reassessment on multiple grounds, including lack of proper sanction under section 151, mismatch between reasons recorded and additions made, and violation of natural justice as the 148A(d) order was passed before expiry of the response period. The ITAT upheld the CIT(A)’s order, holding that jurisdiction assumed for one purpose cannot be expanded to make unrelated additions. It further ruled that approval from PCIT was invalid where sanction was statutorily required from the CCIT/Pr. CCIT. The Tribunal concluded that the very assumption of jurisdiction was bad in law, rendering the reassessment void ab initio, and dismissed the Revenue’s appeal.
2. (Jan 26-2) Reopening Valid on IDS Disclosure but Invalid Notice by Wrong Authority
Jagathesh v. ACIT, Non-Corporate Circle-11(1), Chennai [2026] 1 TMI 42 – ITAT Chennai
The assessee, an individual, had filed Form-1 under the Income Disclosure Scheme, 2016, but failed to pay the requisite tax, surcharge, and penalty. The AO reopened the assessment for AY 2017-18 on the basis that such disclosure constituted fresh tangible material under section 197(b) of the Finance Act, 2016. While the Tribunal accepted that the IDS declaration itself provided valid tangible material for reopening, it examined the legality of the notice issued under section 148. The notice had been issued by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer. Relying on the Madras High Court decision in TVS Credit Services following Hexaware Technologies, the ITAT held that issuance of notice by the JAO was invalid. Consequently, the reassessment was quashed, though liberty was reserved for revival depending on the outcome of the Revenue’s appeal before the Supreme Court. The Tribunal also condoned a substantial delay in filing the appeal, adopting a justice-oriented approach given the assessee’s reliance on incorrect professional advice.
3. (Jan 26-3) Third-Party Statements and Unproven Digital Data Cannot Sustain On-Money Additions
Jayantilal Purohit v. Deputy Commissioner of Income Tax, Central Circle-4(2), Mumbai [2026] 1 TMI 43 – ITAT Mumbai
The addition in this case arose from alleged “on-money” payments based solely on statements recorded under section 132(4) from a third-party promoter during a search and on certain electronic data allegedly seized from the builder’s premises. No seized material directly linked the assessee to undisclosed payments, nor were the statements confronted or cross-examination allowed. The Tribunal held that a third party’s statement cannot be used against the assessee without independent corroboration. It further observed that electronic records were not proved in accordance with section 65 of the Evidence Act and thus lacked evidentiary value. Emphasising principles of natural justice, the ITAT ruled that denial of cross-examination rendered the assessment void. Relying on Supreme Court and coordinate bench precedents, the Tribunal concluded that additions based purely on untested third-party statements and unverified digital data are unsustainable. The entire addition was deleted and the assessee’s appeal was allowed.
4. (Jan 26-4) Delay in Filing Audit Report Is Procedural—Charitable Exemption Cannot Be Denied.
Kinkini v. Income Tax Officer (Exemption), Ward-1, Jaipur [2026] 1 TMI 70 – ITAT Jaipur
The assessee trust was denied exemption under sections 11(1) and 11(2) solely on the ground of delay in filing audit report in Form 10BB. The CPC and CIT(A) treated timely filing of Form 10BB as mandatory. The Tribunal examined consistent judicial precedent and held that filing of Form 10BB is a procedural requirement and not a substantive condition for availing exemption. It noted that the audit report had been filed and was available on record before issuance of intimation under section 143(1)(a). Mere delay, without any dispute regarding genuineness of charitable activities or application of income, could not justify denial of exemption. The ITAT held that procedural lapses cannot defeat substantive rights, particularly in the context of charitable exemptions. Consequently, the denial of exemption was held to be legally unsustainable and the assessee’s appeal was allowed.
5. (Jan 26-5) Invalid Reopening Based on Erroneous and Vague Reasons
Pr. Commissioner of Income Tax-7, Delhi v. Atul Goel 2026 (1) TMI 830 – Delhi High Court | ITA No. 10 of 2026 | Judgment dated 12-01-2026
The core issue before the Delhi High Court was whether reassessment proceedings initiated under section 148 were valid when the recorded reasons were vague, factually incorrect, and unsupported by tangible material. The reopening was based on alleged client code modification transactions identified by investigation agencies. The Court noted that the reasons recorded by the Assessing Officer did not specify correct names of brokers or companies and lacked any live nexus between information and belief of income escapement. Importantly, the assessee had already offered the disputed income to tax at the highest applicable rate, negating any inference of escapement. The Court upheld the concurrent findings of the CIT(A) and ITAT that the reassessment was initiated without application of mind and failed the test of reasonableness. It held that if the foundational facts for assumption of jurisdiction are non-existent or erroneous, the entire proceedings collapse. The Revenue’s appeal was dismissed, reaffirming strict judicial scrutiny of jurisdictional conditions for reopening.
6. (Jan 26-6) No Assessee-in-Default When Payee Has Paid Tax—Section 201 Proviso Applies.
Shiv Sai Infrastructure Pvt. Ltd. v. ITO (TDS), Ward-77(2), Delhi [2026] 1 TMI 11 – ITAT Delhi**
Facts and Core Issue:
The assessee company was treated as an “assessee in default” under sections 201(1) and 201(1A) for alleged failure to deduct tax at source on certain contractual payments. The Revenue contended that the payments attracted TDS provisions, while the assessee argued that the recipients had already offered the income to tax and paid due taxes.
Decision:
The ITAT Delhi held that once the payees have duly included the receipts in their income and discharged tax liability, the payer cannot be treated as an assessee in default in view of the proviso to section 201(1). The Tribunal emphasised that the object of TDS provisions is collection of tax and not penalisation. Since the Revenue failed to demonstrate any loss of tax, the demand raised was deleted. Interest under section 201(1A) was also held to be consequential. The appeal was allowed in favour of the assessee.
7. (Jan 26-7) Stamp Duty Valuation Alone Cannot Prove Unexplained Investment
Shyam Sunder v. ITO, Circle 4(1), Gurugram [2026] 1 TMI 73 – ITAT Delhi**
Facts and Core Issue:
The assessee, an individual, faced addition under section 69 for alleged unexplained investment in immovable property. The Assessing Officer relied upon stamp duty valuation and presumed extra consideration without bringing any corroborative evidence. The assessee denied having paid any amount over and above the recorded consideration.
Decision:
The ITAT Delhi reiterated that addition under section 69 cannot be made on the basis of presumption or suspicion. It held that stamp duty valuation alone cannot prove undisclosed investment unless supported by independent evidence such as seized material or statements. Since the Revenue failed to discharge its burden of proof, the addition was deleted. The appeal was allowed.
8. (Jan 26-8) Dumb Documents Without Corroboration Cannot Justify Search Additions
DCIT, Central Circle-32, New Delhi v. Shri Vikram Kumar Bajaj [2026] 40 TMI 40 – ITAT Delhi
Facts & Decision (Core Issue):
This appeal arose from a search-based assessment wherein the Assessing Officer made additions in the hands of the assessee, Shri Vikram Kumar Bajaj, on account of alleged undisclosed income linked to certain financial transactions and documents recovered during the search. The assessee argued that the documents relied upon were either dumb documents or related to third parties and lacked evidentiary value. The central issue before the Tribunal was whether such documents, without independent corroboration, could form the sole basis for additions under the Income-tax Act. The ITAT Delhi held that mere possession of documents during search does not automatically establish undisclosed income unless the contents are proved to be true and relatable to the assessee. The Tribunal noted that the Assessing Officer failed to carry out further investigation or provide an opportunity for effective rebuttal. It reaffirmed that additions must rest on cogent material and cannot be sustained on suspicion or conjecture. Accordingly, the ITAT dismissed the Revenue’s appeal and upheld the deletion of additions.
9. (Jan 26-9) TDS Disallowance Unsustainable Where Payments Lack Embedded Income
Umri Pooph Pratappur Tollway Private Limited v. ACIT [2026] 76 TMI 76 – ITAT Delhi
Facts & Decision (Core Issue):
The assessee, a special purpose vehicle engaged in infrastructure development, challenged additions made on account of disallowance of expenditure and alleged non-compliance with tax deduction provisions. The Assessing Officer treated certain payments as liable for TDS and disallowed expenditure under Section 40(a)(ia). The primary issue before the Tribunal was whether payments made under complex concession and EPC-related arrangements constituted contractual payments attracting TDS obligations. The ITAT Delhi examined the nature of the agreements and held that the payments were in the nature of reimbursement or capital-linked expenditure and did not involve income embedded in the hands of the payee. It was observed that substance of the transaction must prevail over form, particularly in infrastructure projects governed by statutory concession frameworks. The Tribunal concluded that mechanical application of TDS provisions without examining contractual realities was unsustainable. Consequently, the disallowance was deleted and the assessee’s appeal was allowed.
10. (Jan 26-10) Reassessment Cannot Be Used for Roving Enquiries—Plausible Explanation Shifts Burden
Vaibhav Dwarkanath Warekar v. Income Tax Officer [2026] 74 TMI 74 – ITAT Mumbai
Facts & Decision (Core Issue):
The assessee, an individual, was subjected to reassessment proceedings wherein additions were made under Section 68 on account of unexplained credits reflected in his bank account. The assessee explained that the amounts represented redeployment of disclosed funds and inter-account transfers. The Assessing Officer rejected the explanation without detailed verification. The core issue before the ITAT Mumbai was whether reassessment and consequent additions were justified in the absence of failure on the part of the assessee to disclose material facts. The Tribunal held that reassessment cannot be used as a tool for roving enquiries and that once the assessee furnishes a plausible explanation supported by bank records, the burden shifts to the Revenue. The ITAT found that the Assessing Officer neither disproved the explanation nor brought contrary evidence on record. Accordingly, the additions were deleted and the reassessment was held to be unsustainable.
11. (Jan 26-11) Assessment Void Without Proper Jurisdiction Over Legal Heir
Vanraj Ranchhoddas Merchant (Legal Heir) v. Income Tax Officer [2026] 39 TMI 39 – ITAT Mumbai
Facts & Decision (Core Issue):
In this case, proceedings were initiated against the legal heir of the deceased assessee, Vanraj Ranchhoddas Merchant, leading to additions on account of alleged undisclosed income. The assessee’s legal representative challenged the validity of the proceedings, contending that mandatory jurisdictional requirements were not complied with. The key issue before the Tribunal was whether assessment proceedings could validly continue without proper assumption of jurisdiction over the legal heir. The ITAT Mumbai held that issuance of notice and assumption of jurisdiction over the correct legal representative is a condition precedent for valid assessment. Any defect in this regard goes to the root of the matter and cannot be cured by Section 292B. Since the Revenue failed to demonstrate due compliance, the Tribunal quashed the assessment as void ab initio.
12. (Jan 26-12) Interest Capitalisation and ALP Must Follow Facts and Accepted Pricing Benchmarks.
ACIT, Circle-5(2), New Delhi v. M/s Cargil India Pvt. Ltd. [2026] 1 TMI 12 – ITAT Delhi | ITA No. 5786/Del/2014 | Order dated 30.12.2025
This appeal by the Revenue arose from multiple issues including disallowance of interest expenditure and transfer pricing adjustments in the case of the assessee, a multinational engaged in agro-commodity trading. The Assessing Officer alleged that short-term borrowings were utilised for long-term capital investments and applied an arbitrary interest rate, leading to disallowance. The CIT(A), after examining the audit report and project details, found that the projects were completed and capitalised within four months and that interest had already been appropriately capitalised only for that limited period. On transfer pricing issues relating to export of sugar and ferrous minerals to associated enterprises, the TPO adopted CIF prices and rejected the assessee’s benchmarking. The CIT(A) directed adoption of Comparable Uncontrolled Price (CUP) method using an average of NYBOT prices and Kingsman publications after converting to FOB values and allowed the ±5% range under section 92C(2). The ITAT upheld the CIT(A)’s findings, observing that the Revenue failed to demonstrate any infirmity either in the limited capitalisation of interest or in the selection of comparables for ALP determination. It held that consistency, factual completion of projects, and internationally accepted pricing benchmarks justified the relief granted. Accordingly, the Revenue’s appeal was dismissed in entirety.
13. Jan 26-13) Suspicion Alone Cannot Support Section 69A Addition for Demonetisation Deposits
Pooja Prabhakar v. Income Tax Officer, Non-Corporate Ward-15(1), Chennai [2026] 1 TMI 10 (ITAT Chennai), ITA No. …/Chny/2025, decided on 02-01-2026
The assessee, an individual taxpayer, challenged the addition made by the Assessing Officer under section 69A in respect of cash deposits made during the demonetisation period. The Assessing Officer rejected the assessee’s explanation regarding the source of cash deposits and treated the same as unexplained money, primarily on the ground that the cash deposits were not commensurate with the returned income. The Commissioner (Appeals) confirmed the addition. On further appeal, the Tribunal examined the assessee’s explanation, cash flow statement, and past withdrawals, and noted that the Assessing Officer had not pointed out any specific defect in the books or disproved the availability of cash balance as claimed. The Tribunal held that mere suspicion or disbelief, without rebutting documentary evidence placed on record, could not justify addition under section 69A. It was observed that the burden on the assessee stood discharged once a plausible explanation supported by records was furnished. Consequently, the Tribunal deleted the addition, holding that the cash deposits were duly explained and that the lower authorities had acted on presumptions rather than evidence.
14. (Jan 26-14). Recovery Without Service of Assessment Order
Philco Exports Private Limited v. Assistant Commissioner of Income Tax & Ors. 2026 (1) TMI 829 – Delhi High Court | W.P.(C) No. 12318 of 2021 | Judgment dated 12-01-2026
The central issue before the Delhi High Court was whether the Revenue could lawfully recover tax dues from the assessee when the assessment order creating the demand had never been served upon it. The Department contended that non-service occurred due to the assessee’s failure to update its address. The Court held that, irrespective of such contention, once recovery was effected and the assessee repeatedly sought a copy of the assessment order, the Department was under a legal obligation to supply it. Recovery without furnishing the assessment order and corresponding demand notice under section 156 was held to be recovery without authority of law, violating fundamental procedural safeguards. Since the Department admitted its inability to trace and serve the assessment order even during writ proceedings, the Court directed refund of the recovered amount with interest, subject to liberty to re-serve the order if traceable. The judgment affirms that creation and communication of demand is a jurisdictional prerequisite for recovery.
15. (Jan 26-15) Invalid Reassessment Due to Defective Section 148A(b) Notice
Abhishek Jayketu Joshi v. ACIT, Circle-42(2)(1), Mumbai 2026 (1) TMI 821 – ITAT Mumbai | ITA No. 5775/Mum/2025 | Order dated 13-01-2026
The core issue before the ITAT Mumbai was whether reassessment proceedings under sections 147/148 were valid when the foundational notice issued under section 148A(b) was based on incorrect and vague factual premises. The Assessing Officer alleged that the assessee had made donations to “Aadhar Foundation” and claimed deduction under section 80GGC, whereas in fact the donation was made to “Kisan Party of India.” This factual error was admitted by the AO himself in the order passed under section 148A(d). The Tribunal held that jurisdiction under section 147 depends upon correct and specific information suggesting escapement of income, and a notice founded on demonstrably incorrect facts vitiates the entire reassessment. The Tribunal further held that reliance on third-party statements without furnishing copies or granting cross-examination violated mandatory procedural safeguards under section 148A. Such defects were not curable irregularities but went to the root of jurisdiction. Consequently, the reassessment proceedings were quashed as void ab initio. The decision reiterates that compliance with section 148A is not a formality but a jurisdictional requirement.
16. (Jan 26-16) Taxability of Assets Received in Demerger under Section 56(2)(x)
ACIT, Circle-5(1), Kolkata v. Emami Realty Ltd. (and vice-versa) 2026 (1) TMI 751 – ITAT Kolkata | ITA No. 1457/Kol/2024 & CO No. 19/Kol/2024 | Order dated 12-01-2026
The principal issue before the ITAT Kolkata was whether assets received by the assessee pursuant to a court-approved scheme of demerger could be taxed as income under section 56(2)(x) on the ground that the demerger allegedly violated section 2(19AA). The Revenue contended that liabilities were not proportionately transferred and that valuation was defective for non-application of Rule 11UA. The Tribunal rejected these arguments and held that section 2(19AA) does not mandate share valuation under Rule 11UA, which applies only to section 56. It further held that the scheme was compliant with section 2(19AA) read with section 47(vi), and therefore fell within the statutory exception under section 56(2)(x)(IX). The Tribunal also held that although NCLT approval does not bind tax authorities, the AO cannot import conditions not prescribed by the statute. Accordingly, the addition under section 56(2)(x) was deleted. The Tribunal also held that no tax consequence arose in the relevant assessment year, as the demerger was effective from an earlier appointed date.
17. (Jan26-17). Validity of AMP Transfer Pricing Adjustment and Related Disallowances
Alcon Laboratories (India) (P.) Ltd. v. ACIT, Circle-1(1)(1), Bengaluru 2026 (1) TMI 822 – ITAT Bangalore | ITA No. 1899/Bang/2024 | Order dated 13-01-2026
The core issue before the ITAT Bangalore was whether Advertisement, Marketing and Promotion (AMP) expenditure incurred by the assessee constituted a separate international transaction warranting transfer pricing adjustment. The Tribunal noted that in earlier assessment years, coordinate benches had consistently held in the assessee’s favour that AMP expenditure was integral to the distribution function and could not be artificially segregated. However, in the present year, the Tribunal found that AMP costs were not subsumed in the operating cost while applying the TNMM, thereby requiring fresh benchmarking. Accordingly, the matter was restored to the AO/TPO for redetermination of ALP after including AMP costs in operating expenses. The Tribunal also upheld the principle that interest on delayed receivables constitutes a separate international transaction but reduced the benchmark interest rate to LIBOR + 200 basis points. Additionally, disallowances relating to seminar expenses and double disallowance under section 43B were remanded for fresh verification. The decision clarifies methodological consistency in TP analysis rather than outright acceptance or rejection of AMP adjustments.
18. (JAN26-18) Reopening Based on Borrowed Satisfaction and Limitation Violation
DCIT, Kolkata v. Vedanta Resources (P.) Ltd. (and vice-versa) 2026 (1) TMI 823 – ITAT Kolkata | ITA No. 1845/Kol/2025 & CO No. 80/Kol/2025 | Order dated 13-01-2026
The key issue before the ITAT Kolkata was whether reassessment proceedings initiated under sections 147/148 were valid when based solely on information received from the Investigation Wing without independent application of mind by the Assessing Officer. The Tribunal examined the recorded reasons and found them to be cryptic, vague, and mechanical, lacking any live link between material and belief of escapement of income. The Tribunal held that such reopening amounted to borrowed satisfaction, which is impermissible in law. Additionally, the Tribunal held that the reassessment order, though dated 31-03-2022, was dispatched on 02-04-2022 and served on 04-04-2022, thereby not leaving the control of the AO within the statutory limitation period. Relying on settled law, the Tribunal held that an assessment order must be issued beyond the control of the authority within limitation to be valid. On both grounds—jurisdictional defect and limitation—the reassessment was quashed.
19. (JAN26-19) Existence of “Virtual Service Permanent Establishment” under DTAA
Ernst & Young LLP v. ACIT, International Taxation, New Delhi 2026 (1) TMI 759 – Delhi High Court | W.P.(C) 16158/2025 | Judgment dated 14-01-2026
The core issue before the Delhi High Court was whether the concept of a “virtual service permanent establishment” could be read into Article 5(2)(k) of the India–UK DTAA for the purpose of withholding tax under section 195. The Revenue denied a nil withholding certificate on the ground that services were rendered remotely, creating a virtual PE in India. The Court rejected this interpretation, holding that Article 5(2)(k) requires physical presence of employees or personnel within India. Relying on its earlier decision in Clifford Chance, the Court held that tax treaties must be interpreted strictly, and concepts not expressly provided cannot be judicially imported. The phrase “within a Contracting State” has territorial connotation and excludes remote or virtual services. Accordingly, the High Court set aside the impugned order and remanded the matter for fresh consideration consistent with treaty interpretation. The judgment decisively rejects virtual PE theory in the absence of express treaty language.
20. (JAN26-20) Share Capital Addition under Section 68—Prospective Operation of Proviso
Exotica Enclave Pvt. Ltd. v. ITO, Ward-2(1), Kolkata 2026 (1) TMI 820 – ITAT Kolkata | ITA No. 2003/Kol/2025 | Order dated 12-01-2026
Core issue: Whether share capital/share premium received in AY 2012-13 could be added under section 68 by invoking the “source of source” requirement introduced by the Finance Act, 2012.
Held: The Tribunal deleted the addition. It found that the assessee had discharged the pre-proviso burden under section 68 by proving identity, creditworthiness, and genuineness through ITRs, bank statements, audited financials, and personal appearance in summons proceedings. The CIT(A)’s doubts were held to be suspicion-based without tangible evidence. Crucially, the Tribunal ruled that the proviso to section 68 is prospective (effective AY 2013-14) and cannot be applied to AY 2012-13 to demand proof of the “source of source.” The explanation for issuing shares at premium among group entities was accepted. Accordingly, the addition was quashed as legally unsustainable.
21. (JAN 26-21) Bogus Purchases—Sales Accepted, Purchases Cannot Be Disallowed
ITO, Ward-3, Haryana v. Raman Kohli (c/o Rama Rolling & General Mills) 2026 (1) TMI 757 – ITAT Chandigarh | ITA Nos. 445 & 437/Chd/2024 | Order dated 13-01-2026
Core issue: Whether purchases could be treated as non-genuine merely because some suppliers did not fully respond to notices under section 133(6).
Held: The Tribunal dismissed Revenue’s appeals. It emphasized that sales were accepted, quantitative records were maintained, payments were through banking channels, suppliers had PAN/GST, and no supplier was found non-existent. Non-filing of returns or lack of email IDs by suppliers, by itself, does not justify disallowance. The AO had not alleged collusion, cash back, or absence of goods. A 40%+ disallowance of total purchases was held excessive and unsupported. With financial results consistent with earlier years and no defects in books, the purchases were held genuine and the additions were deleted.
22. (JAN 26-22) Third-Party Digital Ledger—Natural Justice and Profit Element
Jashvantiben Manojbhai Makwana v. ITO, Ward-1(1)(1), Rajkot 2026 (1) TMI 753 – ITAT Rajkot | ITA No. 813/RJT/2025 | Order dated 12-01-2026
Core issue: Whether an addition under section 69A could be sustained solely on a third-party, editable “dump ledger” and a statement not supplied for cross-examination.
Held: The Tribunal found serious procedural lapses—the assessment rested on an unsigned, incomplete digital ledger and a third-party statement without furnishing a copy or allowing cross-examination, violating natural justice. While acknowledging some corroboration from search material, the Tribunal held that entire alleged on-money cannot be taxed as income; only the profit element can be brought to tax. Considering the small amount and parties’ consent, it restricted the addition to 30% of the alleged on-money, granting partial relief.
23. (JAN26-23) Defective Penalty Notice—Non-Specification of Charge
M/s Solitairian Buildinfra (P) Ltd. v. DCIT/ACIT, Central Circle, Ghaziabad 2026 (1) TMI 824 – ITAT Delhi | ITA No. 3833/Del/2025 | Order dated 14-01-2026
Core issue: Whether penalty under section 271(1)(c) is valid when the notice invokes both limbs (concealment and furnishing inaccurate particulars) without striking off the inapplicable portion.
Held: The Tribunal quashed the penalty. Relying on settled law (including SSA’s Emerald Meadows), it held that failure to specify the exact charge vitiates jurisdiction. A vague notice deprives the assessee of a fair opportunity to defend. Since the notice did not clearly state the limb and the defect is jurisdictional, the penalty could not survive.
24. (JAN26-24) Refund Adjustment During Pending Appeal—20% Rule
M/s Y-NOT Films LLP v. NFAC & Ors. 2026 (1) TMI 831 – Bombay High Court | W.P.(L) No. 19724 of 2025 | Judgment dated 13-01-2026
Core issue: Whether the Department could adjust the entire refund against a disputed demand pending appeal without adhering to CBDT’s stay guidelines.
Held: The High Court ruled that, absent approval from the Principal Commissioner to demand a higher amount, only 20% of the disputed demand could be adjusted. Full adjustment of the refund was impermissible. The Court directed refund of the balance with interest and continued stay of the remaining demand pending disposal of the appeal. The decision enforces procedural discipline under section 245 and CBDT OMs, safeguarding taxpayers during appellate pendency.
25. (JAN26-25) Section 68 Addition and Burden of Proof for Share Capital
M/s Sahajanand Laser Technology Ltd. v. Income Tax Officer, Ward-4(1)(1), Ahmedabad 2026 (1) TMI 245 – ITAT Ahmedabad | ITA No. 1271/Ahd/2024 | Order dated 08-01-2026
The core issue before the ITAT Ahmedabad was whether the Assessing Officer was justified in making an addition under section 68 in respect of share capital and share premium received by the assessee company. The Revenue alleged that the assessee failed to establish the identity, creditworthiness, and genuineness of the investor companies. The Tribunal examined the documentary evidence furnished, including PAN details, audited financial statements, bank statements, and confirmations of investors. It held that once the assessee discharges the primary onus by placing cogent material on record, the burden shifts to the Revenue to rebut the same with tangible evidence. The Tribunal found that the AO had proceeded on suspicion and general investigation reports without conducting any meaningful enquiry or bringing adverse material to disprove the evidence submitted. Mere low income or losses of investor companies were held insufficient to negate creditworthiness. The Tribunal reiterated that section 68 cannot be invoked on conjectures and that the source of source cannot be demanded for the relevant assessment year beyond statutory mandate. Accordingly, the addition was deleted. The decision reinforces settled law on the evidentiary threshold required for sustaining additions under section 68.