Case Studies of Landmark Income Tax Judgments | TaxPundit

The ITAT Bangalore, in the case of Pavan Kumar Agarwal, addressed the issue of whether section 54 exemption is limited to one residential house when multiple residential houses are sold. The assessee sold 17 flats and invested the gains in five properties. The AO allowed exemption only for the earliest purchased property (Rs. 5.91 crores) and disallowed Rs. 5.88 crores. The Tribunal, per Judicial Member Keshav Dubey, held that section 54 does not restrict the number of houses that can be purchased or constructed for claiming exemption; it applies to each capital gain arising from each residential house transferred. The Tribunal found that the legislative intent, as per the plain reading of section 54 and judicial precedents, supports allowing exemption for multiple residential houses. Therefore, the disallowance was not justified. (Note: The excerpt ends before the final operative order, so the conclusion is not stated explicitly.)

The Income Tax Appellate Tribunal, Raipur, allowed the appeals of Chhattisgarh Housing Board for AYs 2011-12 to 2017-18, setting aside the orders of the CIT(A) and remanding the cases for fresh adjudication. The core issue was whether the Board, a statutory housing authority, was eligible for exemption under section 11 of the Income Tax Act despite having receipts from commercial activities. The Tribunal, applying the Supreme Court’s decision in Ahmedabad Urban Development Authority, held that providing housing on a cost-to-cost basis to lower-income groups does not constitute trade, commerce, or business. The Assessing Officer was directed to re-examine the matter without invoking the proviso to section 2(15) mechanically.

The Karnataka High Court dismissed the Revenue’s appeal, upholding the Tribunal’s order that deleted the addition under section 56(2)(ix). The court held that advances received for procuring lands were stock-in-trade, not capital asset, and there was no forfeiture. The conditions for invoking section 56(2)(ix) were not satisfied.

The ITAT Delhi, in the case of Cloud 9 Projects Pvt. Ltd., quashed reassessment proceedings for AYs 2014-15 and 2015-16 on the ground that the section 148 notice was issued beyond the period of limitation. Following the Supreme Court’s decisions in Ashish Agarwal and Rajeev Bansal, and the Delhi High Court’s decision in Ram Balram Buildhome, the Tribunal calculated the surviving time limit after excluding certain periods. The assessment for AY 2014-15 was initially reopened by a notice dated 23.06.2021, which was deemed a show-cause notice under section 148A(b) as per Ashish Agarwal. The AO subsequently issued a fresh notice under section 148A(b) on 29.05.2022, and after considering the assessee’s reply, passed an order under section 148A(d) on 30.07.2022 and issued the final notice under section 148 on 31.07.2022. The Tribunal held that the AO had only 8 days of surviving limitation from the date of the assessee’s reply (12.06.2022), which expired on 20.06.2022, making the 31.07.2022 notice time-barred. For AY 2015-16, the Revenue conceded that TOLA did not apply, so the notice issued on 31.07.2022 was also beyond the limitation period. Consequently, all appeals of the assessee were allowed, and the reassessment and penalty orders were quashed.

In the case of Nitiben Nayaneshkumar Trivedi vs. ITO (ITA No. 2499/AHD/2025), the ITAT Ahmedabad SMC Bench allowed the appeal for statistical purposes, remanding the matter for de novo assessment. The assessee had time deposits and interest income but did not file return. The AO reopened assessment under section 147 and added Rs. 16,65,812 as unexplained money under section 69A. The CIT(A) dismissed the appeal. On appeal, the ITAT found that although the assessee was non-compliant, in the interest of justice, one more opportunity should be given. The ITAT set aside the CIT(A) order and remanded to the AO for fresh assessment, with a direction to the assessee to cooperate. The appeal was allowed for statistical purposes.

In this consolidated judgment, the Income Tax Appellate Tribunal, Delhi Bench ‘G’, disposed of 15 appeals (10 by assessee, 5 by Revenue) arising from reassessment proceedings initiated after a search on 21.01.2023. The assessee, Mirha Exports Pvt. Ltd., challenged the validity of reassessment for AYs 2013-14 to 2023-24 on grounds of limitation and lack of jurisdictional conditions under sections 149 and 153A. The Revenue challenged deletions of additions by CIT(A). The Tribunal held: (i) Reassessment for AY 2013-14 is barred by limitation as beyond 10 years; (ii) For AYs 2014-15 to 2017-18, notice u/s 148 is invalid as the escaped income is not represented by an ‘asset’; (iii) For AYs 2018-19 to 2020-21, conditions of section 149(1)(b) not met; (iv) For AY 2021-22, GP rate reduced from 16.5% to 10%; (v) For AY 2022-23, assessment under normal provisions instead of section 148 is invalid; (vi) For AY 2023-24, addition u/s 41(1) is not sustainable as liability not ceased. Consequently, the Revenue’s appeals were dismissed, assessee’s appeals (except partly allowed for AY 2021-22) were allowed.

The Revenue appealed against the order of the CIT(A) deleting the addition made by the AO treating the assessee’s income from sale of software and support services as royalty and fee for technical services. The Tribunal, following the Supreme Court’s decision in Engineering Analysis Centre for Excellence Pvt. Ltd. v. CIT (432 ITR 471) and the consistent orders in the assessee’s own case for earlier assessment years, held that such receipts are not taxable as royalty or FTS either under the Income Tax Act or under the India-USA DTAA. The review petition filed by the Revenue against the Supreme Court judgment was dismissed, confirming the finality of the law. Accordingly, the Tribunal dismissed the Revenue’s appeal.

The assessee appealed against penalty under section 271D of the Income Tax Act for alleged cash loan of Rs.50 lakhs based on a third party statement recorded during search. The Tribunal held that penalty cannot be sustained without providing opportunity of cross-examination and without corroborative evidence. The statement of a third party alone, especially when the assessee denies the transaction, does not establish the alleged violation. Relying on the Supreme Court decision in Common Cause v. Union of India and coordinate bench decision in DCIT v. Shri Gaurangbhai P. Upadhyay, the Tribunal deleted the penalty. The appeal was allowed.