Case Studies of Landmark Income Tax Judgments | TaxPundit

This appeal by the assessee challenged the CIT(A)’s order upholding a rectification under section 154 of the Act, which sought to disallow bonus to directors under section 36(1)(ii) based on the tax audit report. The ITAT allowed the appeal, holding that the rectification was invalid because it required a detailed inquiry beyond an apparent mistake. The Tribunal followed the Supreme Court’s landmark decision in T.S. Balram vs. Volkart Brothers, which mandates that section 154 rectification is only for correcting obvious errors. Consequently, the impugned rectification was quashed, and the other grounds were not adjudicated.

The Income Tax Appellate Tribunal, Delhi, allowed the appeals of three assessees against the assessment orders under section 153C of the Income Tax Act, 1961. The searches were conducted on Shri Sumit Jindal, and incriminating material was found. The Assessing Officer issued notices under section 153C based on an omnibus satisfaction note that did not identify year-wise incriminating material or explain how the seized documents had a bearing on the assessee’s income. The ITAT, following the decision of the Supreme Court in ACIT v. Kishore Kumar Sharma, held that such a satisfaction note is invalid, and the proceedings under section 153C are vitiated. The assessment orders were quashed. The Tribunal did not adjudicate on other grounds as the legal ground alone was sufficient to allow the appeals.

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The Income Tax Appellate Tribunal, Delhi Bench, in S & P Global Ratings Singapore Pte. Ltd. v. ACIT, allowed the assessee’s appeal. The Tribunal held that income from credit rating and annual surveillance services provided by the Singapore-based company to Indian clients is not taxable as royalty or fee for technical services under the India-Singapore Double Taxation Avoidance Agreement (DTAA) or the Income Tax Act, 1961. The Tribunal observed that the services do not involve the transfer or making available of any technical know-how, commercial experience, or secret process. The assessee merely provides a rating opinion based on its expertise, and the clients do not acquire any right to use the underlying methodology. Following the precedent in ICICI Bank Ltd. v. DCIT (2008), the Tribunal deleted the addition of Rs. 73,22,67,191 and allowed the appeal.

This judgment by the Income Tax Appellate Tribunal, Mumbai B Bench, dismisses two appeals filed by the Revenue against the CIT(A)’s order deleting additions made in reassessment for AYs 2016-17 and 2018-19. The core legal issue pertained to the validity of reassessment notices issued under section 148 after the expiry of three years from the end of the relevant assessment years. The Tribunal held that the approval under section 151(ii) was required from the Principal Chief Commissioner, not the Principal Commissioner, and the failure to obtain such approval from the specified authority rendered the reassessment proceedings void ab initio. The Tribunal relied on binding decisions of the Bombay High Court and the Supreme Court’s dismissal of the Revenue’s SLP, thereby confirming the CIT(A)’s order. The appeals were dismissed on this legal ground, with other issues left open.

The ITAT Delhi Bench allowed the appeal of the assessee, holding that the requirement to file Form 67 for claiming Foreign Tax Credit (FTC) under Rule 128 is directory and not mandatory. The assessee, an architect, earned income in Nepal and claimed FTC of Rs. 2,86,260/- but filed Form 67 after the due date. The CPC and CIT(A) denied credit, but the Tribunal, following earlier decisions and the Madras High Court in Duraiswamy Kumaraswamy, directed the AO to allow FTC after due verification. The Tribunal distinguished the Supreme Court’s ruling in Wipro Ltd. as it pertained to section 10B(8) which is on a different footing.

The Income Tax Appellate Tribunal, Mumbai, disposed of cross appeals for AY 2011-12. The Revenue appealed against CIT(A)’s deletion of additions under Section 68 for unsecured loans (Rs. 5,61,65,591) and sundry creditors (Rs. 4,97,83,000), deletion of interest addition (Rs. 10,92,239), and restriction of disallowance under Section 14A to exempt income. The Assessee appealed against sustained addition of Rs. 35,00,000 for a loan from Bengal Exim Scrip Pvt. Ltd. The ITAT upheld CIT(A)’s deletions, finding assessee discharged its onus and Revenue failed to rebut, and that low income of creditors is not determinative. For Section 14A, it held disallowance cannot exceed exempt income and the 2022 amendment is prospective. For the assessee, the addition was deleted as no adverse evidence was brought despite assessee’s diligence. Both appeals decided accordingly.

The ITAT, Bangalore Bench, in ITA No. 2617/Bang/2025 for AY 2018-19, allowed the appeal of Anasuya Foundation, a charitable trust. The core issue was the belated filing of Form No. 10B (audit report required under Section 12A(1)(b)). The assessee had failed to upload the form before the due date of filing the return or even before the intimation under Section 143(1). However, the form was uploaded during the pendency of the appeal before the CIT(A). The CIT(A) dismissed the appeal holding that the filing of Form 10B within the prescribed time is mandatory. On further appeal, the ITAT, following the Gujarat High Court’s decision in Laxmanarayan Dev Shrishan Seva Khendra, held that the time limit for filing Form 10B is directory. The ITAT distinguished the Supreme Court’s judgment in Wipro Ltd., which dealt with Section 10B(8), a different provision. Accordingly, the ITAT directed the Assessing Officer to allow the claim of application of income (Rs. 38,52,101) and accumulation of income (Rs. 38,37,000) under Section 11. The appeal was allowed.