Issue No. 292 / July 15^th, 2025

Dear Professionals,

We are glad to present to you the 290th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!  

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 131670+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’

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1) HC: Mandamus writ not maintainable without challenging ITAT’s rejection of evidence. HC dismissed a writ petition filed against the ITAT, citing procedural impropriety due to the petitioner’s (Commissioner of Income Tax) failure to implead the assessee and the attempt to seek urgent relief without challenging the ITAT’s order dated 29 January 2025. HC held that a writ of mandamus cannot be issued to compel the ITAT to admit additional evidence unless the existing order rejecting such evidence is formally challenged. The petitioner was also cautioned against using the dismissed petition as a means to delay the proceedings before the ITAT………… Click here to read and download HC judgment copy

2) HC: Quashes Section 263 revision; Rejects CIT’s AOP classification based on Deloitte partner representation. HC held that the Commissioner of Income Tax (CIT) revision under Section 263 was invalid, as there was no proven loss to revenue. The CIT claim that Deloitte partner representation made the assessee an AOP was rejected. Relying on SC judgment in the case of Rashik Lal, the HC clarified that “only individuals, not firms or entities - can be partners.” Hence, the original assessment allowing salary deductions was upheld. The assessee, a partnership firm of Chartered Accountants, was reconstituted with 20 partners, including Mr. Mukund Dharmadhikari, who held over a 20% share in profits. The firm claimed deductions under Section 40(b) for salary payments made to partners. After the initial assessment, the CIT issued a notice under Section 263, alleging that the number of partners exceeded the legal limit. This conclusion was drawn based on the assertion that Mr. Dharmadhikari represented Deloitte Mumbai, thereby altering the firm's status to that of an Association of Persons (AOP), which would render the salary deductions inadmissible. The CIT accordingly directed reassessment. The assessee appealed to the ITAT, which remanded the matter to the Assessing Officer (AO) for a fresh assessment. HC, however, observed that the core issue was whether the CIT had validly exercised jurisdiction under Section 263 - an answer to which would determine the legality of all subsequent proceedings. HC noted that the CIT had claimed the AO’s assessment order was erroneous for failing to classify the assessee as an AOP, allegedly resulting…………… Click here to read and download HC judgment copy

4) ITAT: Upholds CPC's 143(1) adjustment based on audit report; Orders re-examination of expense claim. ITAT upholds the CPC’s action under Section 143(1)(a)(iv) as lawful, and remands the matter to the AO for fresh examination. The assessee filed a return declaring nil income. However, the Centralized Processing Centre (CPC) made an addition of Rs. 40 crore, citing inconsistencies between the return and the tax audit report regarding GST/VAT refunds. The assessee subsequently filed a rectification application, which was rejected. On appeal, the CIT(A) upheld the addition, relying on the jurisdictional HC in Mysore Thermal Electricals Pvt. Ltd., which held that VAT/GST refunds are taxable in the year of receipt. However, certain issues were remanded to the Assessing Officer (AO) for further examination. Challenging this before the ITAT, the assessee contended that the GST/VAT refunds were never claimed as expenses and, therefore, should not be treated as income. In support, the assessee relied on the ITAT rulings in Nomura Structured Finance Services Pvt. Ltd. and WorldQuant Research (India) Pvt. Ltd. The Revenue countered that there was no conclusive evidence showing the refunds were not previously claimed as expenses, and argued that the matter should be remanded to the AO for verification. After considering the submissions of both parties, ITAT observed that the CPC, while processing the return, treated the VAT and GST refunds as income based on disclosures in the tax audit report...………... Click here to read and download ITAT order 

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5) ITAT: Upholds PCIT’s Sec. 263 revision; Cites AO’s failure to verify 80P(2)(a)(i) & 80P(2)(d) deductions. ITAT upheld the Principal Commissioner of Income Tax’s (PCIT) revision order under Section 263, finding the Assessing Officer’s (AO) assessment erroneous and prejudicial due to an incomplete inquiry and failure to verify deductions claimed under Sections 80P(2)(a)(i) and 80P(2)(d). The assessee, a Co-operative Credit Society, claimed a deduction of Rs. 1.56 crore under Section 80P(2)(a)(i) of the Income Tax Act for interest income earned on investments with co-operative and scheduled banks. The AO accepted the claim without conducting a detailed inquiry, citing time constraints. Subsequently, the PCIT found the assessment order erroneous and prejudicial to the revenue. It noted that both the law and the...………... Click here to read and download ITAT order

6) ITAT: Upholds 150% deduction; Revised return not needed for section correction when benefit remains same. ITAT upheld the CIT(A)'s order allowing the deduction under Section 35(1)(ii), where the assessee had donated Rs.5 crores to IISc, Bangalore, and claimed a deduction under Section 35(2AA). The Assessing Officer (AO) disallowed the deduction claimed under Section 35(2AA) on the ground that, as per IISc's receipt, the correct section was 35(1)(ii), and no revised return had been filed. However, the ITAT noted that the donation itself and its eligibility under Section 35(1)(ii) were not disputed, and that both sections permit a 150% deduction. Supporting documents, including a CBDT notification recognizing IISc, were duly provided. ITAT held that the assessee's correction of its deduction claim - from Section 35(2AA) to 35(1)(ii) - was a rectification of an error, not a new claim. Since both sections provide the same deduction.....………... Click here to read and download ITAT order

7) ITAT: Denies condonation of 375-day delay, stresses case-by-case assessment. ITAT rejected the assessee’s petition to condone a 375-days delay in filing the appeal, despite the claim of emotional distress caused by the death of the assessee’s mother. ITAT noted that although the petition referenced various judgments on the condonation of delay, each case must be decided on its own merits, with a sufficient cause established. ITAT remarked that relief granted in other cases does not automatically entitle all applicants to the same benefit, if the Court is not convinced that sufficient cause exists in a particular case, it cannot condone the delay. Furthermore, the ITAT observed the absence of supporting evidence for the extended delay, especially considering that the assessee was engaged in business and employment during the relevant period. ITAT emphasized that sufficient cause must be demonstrated individually in each case and found none here to justify condonation...……….. Click here to read and download ITAT order

8) ITAT: GST error & one-day PF delay doesn’t warrant disallowance u/s 43B, 36(1)(va). ITAT allowed the assessee’s appeal and deleted a disallowance of Rs. 2.60 crore under Section 43B, which had been made based on a revised tax audit report that erroneously reflected unpaid GST. However, both the original and the second revised tax audit reports indicated no such liability, and the GST amount in question was not claimed as an expense in the profit and loss account. Since Section 43B applies only when unpaid statutory liabilities are claimed as deductions and no such deduction was made, the disallowance was held to be unjustified. The ITAT also deleted a disallowance of Rs. 18.89 lakh under Section 36(1)(va), which arose from a one-day delay in depositing the provident fund (PF) contribution for September 2017. As the due date (15.10.2017) fell on a Sunday and the deposit was made on the next working day (16.10.2017), the ITAT held the payment to be within the permissible time limit under Section 10 of the General Clauses Act. Accordingly, both disallowances were found to be unwarranted, and the assessee’s appeal was allowed in full...……….. Click here to read and download ITAT order copy