Case Studies of Landmark Income Tax Judgments | TaxPundit

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Ahmedabad bench, comprising Dr. B.R.R. Kumar, Vice-President, and Shri Tapas Ram Misra, Judicial Member, allowed the appeal of Sarthav Projects, deleting a penalty of Rs. 14,76,538/- imposed under section 271(1)(c) of the Income-tax Act, 1961, for Assessment Year 2011-12. The Tribunal held that the penalty notice issued under section 274 was defective as it failed to specify the applicable limb—whether concealment of particulars of income or furnishing inaccurate particulars of income—thereby depriving the assessee of a clear understanding of the charge. Additionally, the Tribunal noted that the reassessment resulted in no addition or disallowance, and the penalty was based solely on the delay in filing the return, which does not constitute concealment. This decision reinforces the necessity for specificity in penalty notices and the principle that mere delay in filing returns, absent evidence of concealment, cannot attract penalty under section 271(1)(c).

In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Kolkata Bench, allowed the assessee’s appeal and quashed the reassessment notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2014-15. The Tribunal, following the Supreme Court’s landmark judgment in Union of India v. Rajeev Bansal, held that the notice dated 29.07.2022 was barred by limitation as it was issued beyond the extended period available under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) read with Section 149 of the Act. The Tribunal meticulously computed the limitation period, noting that the surviving period after the assessee’s reply to the Section 148A(b) notice was 3 days, which was extended to 7 days under the 4th proviso to Section 149, expiring on 25.06.2022. Since the final notice was issued on 29.07.2022, it was time-barred. The Tribunal quashed the notice and all subsequent proceedings, allowing the appeal on the legal ground alone.

This judgment pertains to a batch of writ petitions challenging the constitutional validity of Section 147A of the Income Tax Act, 1961, introduced by the Finance Act, 2026 with retrospective effect from 01.04.2021. The petitioners also challenged reassessment notices issued by Jurisdictional Assessing Officers under Sections 147, 144, and 144B, alleging violation of the faceless assessment scheme under Section 151A and Notification No. 18/2022. The Supreme Court had earlier set aside the High Court’s judgments that quashed the notices, and remitted the matters for fresh consideration in light of the new Section 147A. The High Court, after remand, heard the parties on the amended prayers. The excerpt does not contain the final verdict on the constitutional validity of Section 147A or the validity of the notices.

In a significant ruling for angadia businesses, the ITAT Ahmedabad held that the gross cash amounts handled by angadia operators cannot be taxed as unexplained income under section 69A of the Income Tax Act, 1961. The Tribunal affirmed that only the commission income earned from such transactions is taxable. The Revenue’s appeals against the CIT(A) order deleting additions of Rs. 56.04 crores were dismissed. However, the Tribunal modified the CIT(A) order by reducing the estimated commission rate from 2% to 0.30% on the turnover of Rs. 57.12 crores, resulting in a taxable commission income of approximately Rs. 17.14 lakhs. This decision emphasizes commercial principles in taxation and provides clarity on the tax treatment of conduit businesses.

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Chennai held that an Assessing Officer cannot expand the scope of a limited scrutiny assessment beyond the issues specified in the notice under section 143(2) without adhering to CBDT guidelines. The case involved AEON Formulations Pvt. Ltd., where the AO disallowed Rs.2,45,55,010 under section 35(2AB) for in-house R&D, despite the limited scrutiny being for ‘donation for scientific research’. The Tribunal quashed the disallowance, emphasizing that ‘donation’ and ‘in-house R&D’ are distinct, and the AO failed to obtain prior approval or record reasons for expanding the scope. This decision reinforces the strict interpretation of limited scrutiny provisions.

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Chennai Bench allowed the assessee’s appeal and deleted the penalty levied u/s 270A of the Income Tax Act, 1961. The Tribunal held that the penalty notice issued by the Assessing Officer was fundamentally defective as it failed to specify the specific limb under section 270A(9) for misreporting of income. Relying on the Coordinate Bench decision in DCIT vs. Ethirajulu Vajravel Kumaran and various High Court precedents, the Tribunal ruled that such a vague notice violates the principles of natural justice and renders the penalty proceedings void ab initio. The penalty of Rs.16,34,312 levied at 200% of tax liability was thus deleted.

In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, deleted an addition of INR 2,67,00,000 made under Section 68 of the Income Tax Act, 1961, treating an unsecured loan as unexplained cash credit. The Tribunal held that the assessee had discharged its primary onus by providing comprehensive documentary evidence, including PAN, loan confirmation, ITR, audited financials, and bank statements, establishing the identity, creditworthiness, and genuineness of the lender. The AO’s failure to conduct any independent inquiry and the inapplicability of the ‘source of source’ requirement for AY 2017-18 (inserted prospectively from 01/04/2023) were key factors. The consequential disallowance of interest expenditure was also deleted. The appeal was allowed.

In a significant ruling, the Income Tax Appellate Tribunal, Chandigarh Bench, allowed the assessee’s appeal holding that the enhanced tax rate of 60% under section 115BBE of the Income Tax Act, 1961, introduced by the Taxation Laws (Second Amendment) Act, 2016, is prospective and applies only from Assessment Year 2018-19. The Tribunal followed the Rajasthan High Court’s decision in Deepak Maratha and the Madras High Court’s decision in S.M.I.L.E. Microfinance Ltd., which held that for A.Y. 2017-18, the pre-amendment rate of 30% applies. The case involved additional income offered during survey under section 133A, which the Assessing Officer sought to tax at higher rate through rectification under section 154. The Tribunal directed the Assessing Officer to levy tax at normal applicable rates.