Issue No. 293 / Aug 11^th, 2025

Dear Professionals,

We are glad to present to you the 293^th 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 132111+ 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: ITAT erred by overturning section 68 addition without proper reasoning; Revenue's appeal allowed. HC ruled that the ITAT wrongly overturned a well-founded appellate order without addressing its key findings. The appellate order had upheld the addition of Rs. 2.84 crore as unexplained cash credit, finding the share premium suspicious due to lack of proof of genuineness and creditworthiness. The ITAT, however, disregarded these findings without proper justification. HC found this legally flawed, emphasizing that the Tribunal must assess and justify any disagreement with the appellate authority’s conclusions. Consequently, the Court allowed the Revenue’s appeal, affirming the addition and penalty imposed on the assessee ..………..Click here to read and download HC judgment copy

2) ITAT: No exemption under sections 11 & 12 without valid 12AA/12AB registration.  ITAT denied the assessee exemption under Section 11 for Assessment Years (AYs) 2019-20 and 2021-22 in absence of valid registration under Sections 12A/12AB during the relevant periods. For AY 2019-20, the assessee, “a statutory Town Planning Authority”, filed a belated return claiming exemption of Rs. 5.80 crore under Section 11(1), treating the income as applied to charitable purposes. However, the Centralized Processing Centre (CPC) disallowed the claim, citing non-filing of Form 9A within the prescribed time and absence of valid registration under Section 12A/12AB for the relevant year. The JCIT(A) upheld the CPC's disallowance, emphasizing procedural non-compliance and the lack of registration. As a result, a tax demand of Rs. 2.86 crore was raised. On appeal, the assessee contended before the ITAT that the betterment and lake rejuvenation fees collected under the Town Planning Act constituted capital receipts eligible for exemption under Section 11(1)(d). The assessee relied on SC judgment in case of Ahmedabad Urban Development Authority and Bangalore ITAT Magadi Planning Authority. The ITAT noted that the trust obtained registration under Section 12AB only on 15.11.2021. The return for AY 2019-20 was filed earlier, on 29.11.2020, and intimation under Section 143(1) was issued on 12.02.2021 - both events occurring before registration. By the date of registration, the period for issuing a notice under Section 143(2) had already lapsed. As such, no assessment proceedings were pending when registration was granted. ITAT clarified that, since no assessment proceedings were pending at the time of registration, retrospective exemption could not be granted …………..Click here to read and download ITAT Order copy

3) ITAT: Condoned delay, grants additional 244A interest for post-OGE refund delay. ITAT ruled in favour of the assessee, holding that the delay in filing the appeal was not attributable to them and granted additional interest under Section 244A for the delay in refund adjustment following the issuance of the order giving effect (OGE). The filing of the appeal was delayed because notices were sent to an incorrect email address, resulting in the assessee’s unawareness of the CIT(A)’s order. After initially filing the appeal at the wrong ITAT Bench, it was dismissed for lack of jurisdiction. The assessee promptly refiled the appeal before the correct Mumbai Bench, explaining the delay and relying on the SC ruling in Collector, Land Acquisition v. Mst. Katiji. ITAT accepted the explanation, condoned the delay, and emphasized that justice should prevail over procedural technicalities; On the merits, the assessee submitted that while passing the OGE on 30/09/2014, the Assessing Officer determined a refund of Rs.1,58,11,351/-, inclusive of interest under Section 244A. This refund was later adjusted against an outstanding demand…………..Click here to read and download ITAT Order copy

4) ITAT: Allows post-completion expenditure on de-habitat project; Cites books not rejected under section 145(3). ITAT allowed Rs. 3.45 crore in expenses claimed by the assessee for the completed De-Habitat project, recognizing them as legitimate post-completion costs. The assessee, a construction firm, had claimed the expenses in AY 2016–17, stating they were incurred for final touches and essential installations, such as lifts and power connections. While the Assessing Officer (AO) disallowed the claim on the grounds that the project was completed in AY 2012–13, the CIT(A) accepted most of the expenses, except for the cost of the lift. The Revenue contended that the assessee had understated its work-in-progress (WIP) and improperly claimed Rs. 3.45 crore as expenses for a project already completed. However, the ITAT observed that the assessee’s records were intact and not rejected under Section 145(3), and no contrary evidence or incriminating material was found during the survey. It was also demonstrated that power connections to the flats were made only during AY 2016–17, supporting the…………..Click here to read and download ITAT Order copy

5) ITAT: Legitimate claim can't be denied on technical grounds; Directs 10(23C)(iii) approval for IIM. ITAT allowed the appeal filed by the Indian Institute of Management (IIM) Sirmaur and directed the CIT(E) to grant final approval under Section 10(23C)(iii) of the Income Tax Act. Assessee - IIM Sirmaur a centrally funded institution of national importance established in 2015 and governed by the IIM Act, 2017 - had initially applied for provisional registration under Section 10(23C)(iv)(a) in March 2024. However, since the institution was already operational, the provision meant for entities applying before commencement of activities was inapplicable. Recognizing the error, the assessee submitted a fresh application in April 2024 under the appropriate provision - Clause (iii) of the first proviso to Section 10(23C) - before the CIT(E). The CIT(E), however, rejected the application, asserting that provisional approval was wrongly granted under an inapplicable clause and was thus invalid. On this basis, the application for final approval under the correct clause was also denied. The assessee contended that the error was inadvertent and made by its previous counsel, and that the department too failed to notice this at the provisional stage……the ITAT directed the CIT(E) to treat IIM as an institution established prior to 01.04.2021 and grant approval under Section 10(23C)(iii).…………..Click here to read and download ITAT Order copy

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6) ITAT: Section 194-IA not applicable to agricultural land; AO erred in denying TDS credit under Rule 37BA. ITAT ruled that Section 194-IA of the Income Tax Act does not apply to agricultural land and that Rule 37BA is inapplicable, as it pertains only to income that is chargeable to tax. In this case, the assessee, a Hindu Undivided Family (HUF), sold rural agricultural land—an asset exempt from capital gains tax. However, the purchaser erroneously deducted TDS of Rs. 10.50 lakh under Section 194-IA. Although the assessee claimed the income from the sale as exempt, it did not report the transaction in its Income Tax Return (ITR). Nonetheless, it claimed the corresponding TDS credit. The Centralized Processing Centre (CPC) disallowed the TDS credit due to a mismatch, observing that the total receipts reported in Form 26AS (Rs. 10,62,00,000) exceeded the receipts disclosed in the ITR under Rule 37BA. The discrepancy was primarily due to the exempt sale consideration of Rs. 10.50 crore not being reflected in the return. The assessee argued that Rule 37BA applies only to taxable income and, therefore, should not affect the claim. The Revenue, on the other hand, contended that since the sale consideration was not reported in the return, the assessee was not entitled to the TDS credit. The Assessing Officer (AO) disallowed the claim, and this disallowance was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. Upon appeal, the ITAT examined Section 194-IA and confirmed that it applies only to immovable property other than agricultural land. It also held that.…………..Click here to read and download ITAT Order copy

7) HC: Quashes non-faceless reassessment notices; Criticizes IT Dept’s continued violations despite binding precedents. HC disposed of the writ petition by following its earlier ruling in Kankanala Ravindra Reddy, quashing the impugned notices and consequential orders issued under Sections 148A and 148 of the Income Tax Act for failing to comply with the faceless procedure mandated by the Finance Acts of 2020 and 2021. HC made the disposal subject to the outcome of Special Leave Petitions (SLPs) currently pending before the SC, granting liberty to either party to seek revival of the case depending on the apex court's eventual ruling. Expressing serious concern, the HC criticized the Income Tax Department for persistently issuing non-faceless reassessment notices, despite consistent High Court rulings declaring such actions unlawful. HC noted that the Department has failed to issue centralized instructions or take corrective measures, thereby encouraging repetitive litigation, straining judicial resources, and possibly exploiting procedural loopholes to evade statutory limitations—all in disregard of binding judicial precedents…..………..Click here to read and download HC judgment copy

8) SC: Dismissed Revenue’s SLP; Affirms Section 11 exemption for charitable trust organizing garba. SC dismissed the Revenue’s Special Leave Petition (SLP), finding no grounds to interfere with the High Court’s decision that a charitable trust organizing 'Garba' events was not engaged in commercial activity and was eligible for exemption under Section 11. The HC, following the decision of a Coordinate Bench  in the assessee’s own case for AY 2014-15, upheld the ITAT’s order granting Section 11 exemption to the assessee in respect of income earned from organizing Garba events during AY 2015-16. The assessee Trust, registered under Section 12AA of the Income Tax Act and the Bombay Public Trusts Act, organized Garba events and earned income from food stalls. Although it declared NIL income for the Assessment Year (AY) 2015-16, the Assessing Officer assessed its income at Rs. 6.84 crore, denying exemptions under Sections 11 and 12 by treating the activities as commercial in nature under Section 2(15). The assessee appealed to the ….………..Click here to read and download SC judgment copy

9) SC: Dismissed Revenue’s SLP; No jurisdiction under section 263 without erroneous and prejudicial order. SC dismissed the Revenue’s SLP and allowed the delay in filing the appeal, holding that the petition was legally untenable under Section 263 of the Income Tax Act. Although the reassessment order was initiated on two grounds, an undeclared bank account and a deduction claim no addition was made concerning the alleged undisclosed bank account. Consequently, the Court rejected the Revenue’s contention that there was inadequate investigation. SC emphasized that the CIT can invoke revisional jurisdiction under Section 263 only if the reassessment order is found to be erroneous and prejudicial to the Revenue by way of an addition or similar adjustment. Since the case involved a ‘wrong conclusion’ rather than a failure to conduct inquiry or verification, SC upheld the HC decision dismissing the Revenue’s appeal. Accordingly, the SLP was dismissed…………..Click here to read and download SC judgment copy

10) SC: Dismisses Revenue’s SLP; Upholds HC’s quashing of search and seizure operation. SC dismissed the Special Leave Petition (SLP) filed by the Revenue, thereby upholding the judgment of the HC, which had quashed the search and seizure operation conducted against the assessee under Section 132 of the Income Tax Act. HC had held the search to be invalid, observing that the satisfaction note recorded by the authorities was merely based on suspicion and lacked any cogent or incriminating material that could form the legal basis for action under Section 132. It further held that the Revenue’s action of seizing and retaining Rs. 6.51 crore from the assessee could not be sustained in law and, accordingly, directed the immediate return of the said amount. The amount in question had been recovered during the search operation. However, the assessee contended that the cash was borrowed from banks to meet working capital requirements, particularly to purchase cotton from farmers—a routine business activity. Relying on the. …………..Click here to read and download SC judgment copy