Case Studies of Landmark Income Tax Judgments | TaxPundit

The Hon’ble ITAT, Chandigarh Bench, heard cross-appeals in the case of Pawan Kumar Bansal vs. DCIT arising from a search action. The core issue was the treatment of entries in a seized diary concerning advances and interest. The Revenue challenged the CIT(A)’s restriction of unexplained investment addition to Rs.53,21,510/- and deletion of notional interest. The Assessee challenged the confirmation of the restricted addition and the addition of undisclosed interest. The Tribunal held that the assessee’s cash flow statement, based solely on the diary, showed a peak deficit of Rs.11,17,950/- which was fully covered by the opening cash balance of Rs.13,31,117/- as per the audited balance sheet, leading to no addition for unexplained investment. The undisclosed interest addition of Rs.48,24,020/- was upheld as it represented pure income not disclosed. The notional interest addition of Rs.1,13,579/- was rightly deleted as advances were from own capital and no interest was charged. The approval u/s 153D was valid. Consequently, the Revenue’s appeal was dismissed and the Assessee’s appeal was partly allowed.

In this writ petition, the petitioners challenged the order dated 30.06.2025 passed under Section 148A(3) and the consequential notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2019-20. The Assessing Officer had issued a show cause notice under Section 148A(1) alleging that transactions with M/s Dhansidhi Developers Pvt. Ltd. and M/s Foremost Enterprise Pvt. Ltd. lacked commercial substance and were accommodation entries. The petitioners filed replies on 11.04.2025 and 19.06.2025, but the impugned order did not consider these replies in their entirety. The Court found that the order only mentioned submission of partial bank statements and did not deal with the explanations offered. The conclusion of circular transactions was perverse and without jurisdiction as it failed to analyze the commercial rationale or materials furnished. Accordingly, the order and notice were quashed, and the Assessing Officer was directed to re-examine the issue after affording a fresh opportunity of hearing to the petitioners. The writ petition was disposed of with no order as to costs.

The assessee appealed against the order of CIT(A) who had upheld the CPC’s denial of rebate u/s 87A on tax attributable to short-term capital gains u/s 111A. The ITAT allowed the appeal, holding that the rebate u/s 87A is available on the total income irrespective of the rate at which income is taxable, in the absence of any express statutory bar. The Tribunal noted that section 112A contains an express restriction but section 111A does not, and the Finance Act 2025 amendment is prospective. Thus, the claim for rebate was valid and the consequential demand was deleted.

The Income Tax Appellate Tribunal allowed the appeal of Marlabs Innovations Private Limited, quashing the final assessment order for AY 2022-23. The AO had passed the order under section 143(3) r.w.s. 144C(13) without giving effect to the specific directions of the DRP, which had granted partial relief on transfer pricing adjustments. The ITAT, relying on binding decisions of the Karnataka High Court in PCIT vs. Flextronics and PCIT vs. VMWARE, held that the order violated section 144C(13) and was unsustainable. The appeal was allowed, and other grounds were kept open.

In ITA No. 1045/Ahd/2025 & CO No. 76/Ahd/2025, the Income Tax Appellate Tribunal, Ahmedabad Bench, comprising Dr. B.R.R. Kumar, Vice-President, and Ms. Suchitra R. Kamble, Judicial Member, heard the appeal by the Revenue against the order of CIT(A) deleting an addition of Rs.80,00,000/- made u/s 68 of the Income Tax Act, 1961 for the Assessment Year 2016-17. The addition pertained to a donation claimed as deduction u/s 80GGC to Rashtriya Samajwadi Party (Secular), which was alleged to be bogus based on search operations revealing a large-scale scam of accommodation entries. The Tribunal allowed the Revenue’s appeal, holding that the donation was not genuine as the political party was part of a fraudulent scheme, and the assessee’s claim was bogus. The Tribunal upheld the addition and dismissed the assessee’s cross-objection. The decision reinforces that mere documentary compliance cannot override overwhelming investigation evidence of fraud in accommodation entry cases.

This case involves two appeals by the Revenue against the CIT(A)’s order restricting addition under section 68 to the profit element from commodity transactions involving client code modification, and deleting the associated penalty. The Tribunal upheld the CIT(A)’s decision, relying on its own earlier order in the assessee’s case for the same assessment year. The key principle established is that in cases of client code modification, where the assessee has not participated in the modification and the transactions are otherwise genuine, only the profit element embedded in the trades is taxable under section 68, not the gross purchase value. The assessee had already offered the profit in its return, so no further addition was warranted. Consequently, the penalty was also deleted.

In this ITAT case, the assessee challenged the addition of Rs.32,15,040 as undisclosed income from cash deposits during a search. The appeal was filed with 422 days delay. The Tribunal condoned the delay due to reasonable cause, citing precedents. On merits, noting the assessee’s non-compliance before the lower authorities, the Tribunal remanded the case to CIT(A) for fresh adjudication, allowing the appeal for statistical purposes.

The ITAT Bangalore dismissed the revenue’s appeals for AYs 2017-18 to 2020-21. It upheld CIT(A)’s order deleting additions under section 153A for lack of incriminating material, following the Supreme Court’s ruling in PCIT v. Abhisar Buildwell. For AY 2020-21, the tribunal held that capital gains from a pre-2018 Joint Development Agreement cannot be taxed under the prospective section 45(5A). The decision was consistent with the coordinate bench’s order in the assessee’s spouse’s case.