Case Studies of Landmark Income Tax Judgments | TaxPundit

The Income Tax Appellate Tribunal, Chandigarh Bench, allowed the appeals of Shri Om Prakash Bansal Educational & Social Welfare Trust against the cancellation of its registration under Section 12AB(4) by the CIT(Exemptions). The registration had been cancelled on multiple grounds, including non-registration of a lease deed with the Vice Chairman, commercial exploitation of premises for exams and mobile towers, inadequate documentation for certain payments, and high surplus margins. The Tribunal, in a detailed order, held that the CIT(E) exceeded its jurisdiction by cancelling registration for reasons that were not ‘specified violations’ under the Explanation to Section 12AB(4). It clarified that mere procedural defects or issues of evidence are matters for assessment, not cancellation of registration. The Tribunal also held that incidental income from letting premises and surplus generation do not negate the charitable character of an educational institution as long as the predominant object remains education. The appeals were allowed, setting aside the cancellation.

In cross appeals, the Income Tax Appellate Tribunal, Ahmedabad, considered the validity of a reassessment notice under section 148 of the Income-tax Act, 1961. The assessee had challenged the notice on limitation grounds, arguing that the original notice issued on 30.06.2021 under TOLA was deemed to be a notice under section 148A(b) and that the order under section 148A(d) and the fresh notice under section 148 were required to be issued within the surviving limitation period. In an elaborate analysis, the Tribunal relied on the Supreme Court’s decisions in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal, and the Gujarat High Court’s decision in Dhanraj Govindram Kella, to hold that the surviving period here was only one day, extended to seven days, which expired on 09.06.2022. Since the AO passed the order and issued the notice only on 27.07.2022, the notice was held to be barred by limitation. Consequently, the reassessment proceedings and the addition made under section 69C were quashed. The Revenue’s cross-appeal, which challenged the CIT(A)’s partial relief, was dismissed as the foundational assessment itself failed. The assessee’s appeal was allowed and the revenue’s appeal dismissed.

In this case, the Ahmedabad Bench of the ITAT addressed the scope of Section 54F of the Income Tax Act, 1961, for exemption of long-term capital gains on sale of a non-agricultural plot. The assessee purchased a residential house and incurred substantial reconstruction expenses to make it habitable. The Revenue had allowed exemption only on the purchase consideration and denied the reconstruction expenses. The Tribunal held that reconstruction/renovation expenses incurred within the statutory period to make the house habitable form an integral part of the ‘cost of new asset’ and are eligible for exemption under Section 54F. It followed the principle that Section 54F is a beneficial provision and should be liberally construed. The Tribunal relied on CBDT Circular No. 667 and the decisions in Shrinivas R. Desai and Rustom Homi Vakil to conclude that the assessee is entitled to exemption on the aggregate of purchase cost and reconstruction expenditure, subject to satisfaction of all other conditions.

In a decisive ruling, the Supreme Court dismissed the Union’s appeals and upheld the High Court’s judgment that the omission of Rule 96(10) of the CGST Rules, 2017, without a saving clause, applies to all pending proceedings. The Court applied the Constitution Bench decision in Kolhapur Canesugar Works Ltd, holding that an omitted rule is obliterated and cannot be revived for pending matters without explicit statutory saving. The GST Council’s advisory recommending prospective effect was not binding. The ruling brings clarity to the refund of integrated tax on exports, ensuring that refund claims pending on the date of omission are now free from the restrictions of Rule 96(10).

In this appeal, the assessee challenged the addition of Rs.54,76,000/- as on-money payment for purchase of property. The ITAT deleted the addition, holding that the AO cannot rely on unverified excel-sheet and third-party confession without linking the assessee or providing cross-examination. The Tribunal followed the coordinate bench decision in Munjal Mrugesh Jaykrishna and the Gujarat HC in Kaushik Nanubhai Majithia. The appeal was partly allowed, with grounds 1-2 dismissed as not pressed and ground 6 dismissed as consequential.

In a comprehensive judgment, the ITAT Delhi Bench allowed the assessee’s appeals for A.Y. 2013-14 and 2017-18 on the principal grounds. The Tribunal rejected the addition u/s 56(2)(viib), holding that the section applies only where consideration is received for issue of shares; since shares were issued for considerations other than cash (i.e., discharge of business acquisition liability), there was no taxable premium. It allowed the claim for bad debts written off u/s 36(1)(vii), treating the amounts as trade debts converted into loans, with interest offered to tax earlier, thereby satisfying the conditions of section 36(2). The Tribunal also struck down the section 14A disallowance as no exempt income existed, and held that reversal of liabilities (advance fees, prepaid franchisee fees) was not taxable under section 41(1) or 28(iv) as it represented only a book entry and no benefit was derived. Loan processing charges were held to be revenue expenditure having character of interest. The disallowance u/s 40(a)(ia) on royalty payments was deleted as the payee had offered the income to tax, based on second proviso. The outcome of the ground on advertisement expenses is unclear from the text due to incomplete narrative; however, the Tribunal noted that the 30% disallowance provision is not retrospective. The decision reinforces several settled principles: scope of section 56(2)(viib) is limited to cash receipt, bad debt deduction is permissible on write-off in books, section 14A requires exempt income, and section 40(a)(ia) is curative where tax is paid by recipient.

This is a decisive ITAT Ahmedabad ruling on reassessment jurisdiction. The assessee, Akash Shah, challenged the reassessment for A.Y. 2015-16, which was reopened vide notice u/s 148 dated 08.04.2021. The department alleged accommodation entries and bogus LTCG. The Tribunal, following the Supreme Court’s decisions in Rajeev Bansal and Deepak Steel & Power Ltd., as well as the jurisdictional Gujarat High Court in Narendra Maganlal Purohit, held that the notice was barred by limitation because it was issued on or after 01.04.2021 and was not within the extended timeline under TOLA. The Tribunal quashed the assessment order passed u/s 147 r.w.s 144B. This ruling reinforces the binding principle that for A.Y. 2015-16, any reassessment notice issued after 01.04.2021 is void ab initio. The appeal was allowed, and the remaining grounds on merits were not addressed.

In Hasmukhbhai Babulal Patel v. Income Tax Officer, ITA No. 658/Ahd/2026, the Ahmedabad Bench of ITAT (Judicial Member Sanjay Garg and Accountant Member Narendra Prasad Sinha) allowed the assessee’s appeal for A.Y. 2015-16 against the NFAC/CIT(A) order dated 13.11.2025. The case involved reopening under Section 147 on account of alleged capital gains from sale of immovable property for Rs. 62,00,000. The ITAT condoned the 2-day delay in filing the appeal. On merits, it held that the notice under Section 148 issued on 31.03.2022 for A.Y. 2015-16 was barred by limitation, as all notices issued on or after 01.04.2021 for that year must be dropped under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, following the Supreme Court in Deepak Steel and Power Ltd. and Union of India v. Rajeev Bansal, and the Gujarat High Court in Narendra Maganlal Purohit. Consequently, the assessment order dated 15.03.2023 passed under Section 147 read with Section 144B was quashed and the appeal was allowed.