Issue No. 295 / Sep 16^th, 2025

Dear Professionals,

We are glad to present to you the 294^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 132845+  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) SC: Appeals can’t be revived under section 245HA unless settlement application is rejected without terms. SC condoned a delay of 364 days in filing the appeal by the Revenue but ultimately dismissed it, following its earlier decision. SC held that unless a settlement application is rejected without prescribing terms, appellate proceedings do not revive under Section 245HA of the Income Tax Act. Consequently, the ITAT’s decision to condone the delay and restore the appeal was upheld. SC clarified that appellate proceedings must remain in abeyance until the Settlement Commission disposes of the pending application. All related applications were also disposed of…………Click here to read SC judgment

2) SC: Dismisses Revenue’s SLP, affirms quashing of reassessment on share premium issue. SC dismissed the Revenue’s Special Leave Petition (SLP), upholding the HC decision that the reopening of the assessment for AY 2015-16 was invalid. The High Court had found that the issue of the share premium increase had already been thoroughly examined during the original scrutiny, and since no fresh material evidence had emerged, the reopening amounted to a mere change of opinion, which is legally impermissible. HC noted that the reopening was based solely on the AO concerns regarding a significant increase in the share premium reserve, a matter already addressed during the original assessment.……………Click here to read SC judgment

3) SC: Dismisses Assessee’s SLP, affirms HC criticism of ITAT’s handling of section 68 requirements in investor identity case. SC after hearing the parties and reviewing the records, found no reason to interfere with the HC order and accordingly dismissed the Special Leave Petitions (SLP). HC had upheld the Revenue’s appeal, emphasizing that merely identifying an investor or creditor does not satisfy the burden of proof under Section 68. It observed that the ITAT failed to properly consider the factual findings of the Assessing Officer (AO), instead relying on broad generalizations to conclude that the transactions were genuine. The ITAT overlooked crucial evidence regarding the genuineness and creditworthiness of the transactions presented by the AO. Furthermore, the HC found the ITAT’s reliance on statements from company representatives.……………Click here to read SC judgment

4) HC: Quashes ITAT's time-barred dismissal; Clarifies Sec. 254(2) limitation starts from communication date, not passing. HC allowed the Revenue’s writ petition challenging the ITAT’s dismissal of its miscellaneous petitions as time-barred under Section 254(2) of the Income Tax Act. HC held that the six-month limitation period for filing a miscellaneous petition under Section 254(2) begins from the date of communication of the order, rather than the date on which the order was passed. In the present case, since the Revenue received the ITAT order on 02.01.2017 and filed the petition within six months from that date, the petition was considered to be within the prescribed limitation period. Accordingly, HC quashed the ITAT’s dismissal of the petitions as time-barred and remitted the matter to the ITAT for fresh consideration on merits…………Click here to read and download HC judgment

5) HC: Clarifies 'issued date' for reassessment notice; Validates service of notice via ‘Business Post Arrangement.’ HC dismissed the assessee’s writ petition and upheld the validity of the reassessment notice dated 31.03.2015. HC recognized the Business Post Arrangement as valid service under Section 282 of the Income Tax Act and applied the presumption of proper service under Section 27 of the General Clauses Act. The assessee challenged a reassessment notice dated 31.03.2015 issued under Section 148 of the Income Tax Act, arguing it was time-barred as it was issued beyond the six-year limitation period under Section 149(1)(b) for Assessment Year 2008-09. Relying on the Gujarat HC decision in Kanubhai M. Patel (HUF), the assessee contended that a notice is deemed "issued" only when dispatched, not merely signed, and cited postal records showing the notice was booked on 02.04.2015 and delivered on 06.04.2015. The assessee also invoked Section 27 of the General Clauses Act, asserting that the notice was neither prepaid nor dispatched on 31.03.2015, and thus the presumption of service did not arise. In response, the Revenue maintained that the notice had been handed over to the Postal Department on 31.03.2015 under a Business Post Arrangement, where postal staff collect and acknowledge delivery at the Income Tax office. This was supported by a dispatch register signed by postal personnel and a confirmation letter from the Department of Posts. While franking and tracking occurred later, the Revenue argued that the crucial event was the handover on 31.03.2015. HC upheld this view, holding that the Business Post Arrangement amounted to valid service….…………Click here to read and download HC judgment

6) HC: Assessee can contest FAO’s jurisdiction before appellate authority; Dismisses writ citing alternate remedy. HC dismissed the writ petition, holding that the assessee could raise all relevant grounds in appeal, including the objection that the Faceless Assessment Officer (FAO) lacked jurisdiction, as the initial notice was issued by the Jurisdictional Assessment Officer (JAO). The assessee had challenged the reassessment proceedings and the notices issued under Sections 148 and 148A of the Income Tax Act, contending that they were unlawful and without jurisdiction. During the pendency of the writ, a final assessment order was passed by the FAO, which is appealable under Section 246A. HC declined to entertain the writ at this stage, citing the availability of an alternative remedy through appeal and noting that similar legal issues are currently pending before the SC in the case of Suryalakshmi Cotton Mills. The assessee was granted liberty to raise all contentions, including the issue of jurisdiction, in the appeal. The writ petition was accordingly disposed of......…………Click here to read HC Judgment

7) HC: Upholds ex-parte assessment; No jurisdictional error found in faceless proceedings. HC dismissed assessee’s writ petition challenging an ex-parte order for AY 2014–15, holding that the AO followed proper procedures and obtained requisite approvals, including under the Faceless Assessment Scheme. Finding no jurisdictional error, HC declined to exercise writ jurisdiction. Assessee, a small fish commission agent, contended that the assessment order was passed without affording a fair hearing, citing his illiteracy and inability to access digital communications. Assessee alleged that the National Faceless Assessment Centre (NFAC) and Jurisdictional Assessing Officer (JAO) failed to adhere to the mandatory procedures under Section 144B of the Income Tax Act, 1961. Further, assessee challenged the validity of the reassessment proceedings, claiming improper sanction under Sections 148 and 151, and relied on precedents including Calcutta Discount Co. Ltd., Kranti Associates, A.K. Kraipak, Capital Broadways Pvt. Ltd., and Meenakshi Overseas Pvt. Ltd., emphasizing the necessity of reasoned orders and procedural compliance. In response, the Revenue justified the reassessment by citing unexplained cash deposits of Rs. 1.80 crore against reported receipts of only Rs. 38.29 lakh. It asserted that multiple notices were issued both electronically and by post but the Assessee failed to respond or provide documentation. A draft order was issued, and a final assessment under Sections 147 and 144B was completed, adding Rs. 1.76 crore as unexplained income......…………Click here to read HC Judgment

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8) ITAT: Upholds classification of property sales as business adventure, rejects separate portfolio claim. ITAT upheld the order of the CIT(A), rejecting the assessee’s claim of maintaining separate portfolios for investment and trading activities due to insufficient evidence. The assessee had filed a return declaring Rs. 1.92 crore as income. The case was selected for scrutiny owing to recurring issues in prior assessments, particularly concerning the classification of long-term capital gains (LTCG) as business income. The Assessing Officer (AO), citing the assessee’s lack of response and previous treatment of similar transactions, reclassified Rs. 4.01 crore of declared LTCG as business income, disallowing indexation benefits. On appeal, the CIT(A) partially granted relief by permitting deductions for acquisition cost and transfer expenses, thereby reducing the taxable business income to Rs. 1.72 crore. The assessee subsequently appealed this order before the ITAT. Before ITAT, the assessee contended that the properties sold had been held for periods exceeding 7 and 12 years, indicating an investment motive rather than trading intent. The assessee further argued that prior participation in the Vivad Se Vishwas Scheme (VsVS) was aimed solely at avoiding litigation and did not amount to acceptance of prior assessments. However, the AO had treated the entire Rs. 4.01 crore sale consideration as business income and disallowed deductions for cost and expenses. While the CIT(A) upheld the classification of the income as business income, deductions for acquisition cost and transfer expenses were allowed. The assessee maintained that the gains should be taxed as long-term capital gains, given the nature and holding period of the assets. ITAT, however, upheld the CIT(A)’s decision, concluding that the income from the sale of properties was…………Click here to read and download ITAT Order

9) ITAT: Dismisses assessee’s appeal; Upholds CIT(A)’s remand order citing legal heir’s non-cooperation. ITAT dismissed the assessee’s appeal and upheld the CIT(A)'s order remanding the assessment for fresh adjudication. It observed that the legal heir, Smt. Gita Rani Sikder, failed to cooperate despite the issuance of multiple notices. The assessee had appealed against the order passed by the CIT(A), NFAC, contending that the assessment was erroneously made in the name of Late Umesh Chandra Sikder, who had passed away after filing his return. Although the Assessing Officer was informed of the death, the assessment proceeded using the deceased’s PAN. Relying on the Delhi HC decision in Savita Kapila, the assessee argued that the assessment was void and liable to be quashed, having been conducted in the name of a deceased individual in violation of legal procedure. The assessee also referred to the Rajasthan HC judgment in Sharda Devi Chhajer, where reassessment notices issued by a Jurisdictional Assessing Officer (JAO), rather than a Faceless Assessing Officer (FAO) as required under Section 151A, were declared invalid due to a jurisdictional error. Additionally, the assessee cited CBDT order mandating in-person hearings at designated tax offices and restricting the NFAC from passing orders in cases where the PAN is unavailable. On these grounds, the assessee sought quashing of the assessment order. The Revenue, however, supported the CIT(A)'s order. ITAT affirmed the CIT(A)'s decision to set aside the assessment and.…………Click here to read and download ITAT Order

10) ITAT: Upholds tax additions on suspicious penny stock transactions; Recommends referral to enforcement authorities. ITAT upheld the additions made by the Assessing Officer (AO) and confirmed by the CIT(A), citing the assessee’s failure to establish the genuineness of share transactions, which were suspected to be part of a money laundering scheme. Dismissing the assessee’s appeal, the ITAT recommended that the matter be referred to enforcement authorities for further investigation. The case pertained to AY 2011–12, where the assessee had filed a delayed appeal against the order of the CIT(A). ITAT condoned the delay, accepting the reasons provided as valid. The controversy involved transactions in shares of three companies JMD Telefilms Industries Limited, Unisys Softwares & Holding Industries Ltd., and Nouveau Global Ventures Limited which were subsequently categorized as penny stocks by SEBI in 2017. The assessee claimed that these were genuine trading transactions executed and sold within the same financial year, yielding neither profit nor loss, and that no exemption was claimed under Section 10(38) of the Income Tax Act. However, the AO treated these as bogus transactions due to lack of supporting documentation and flagged them as part of a penny stock scheme, notwithstanding the assessee’s contention that trades were conducted through recognized stock exchanges. Challenging the reassessment proceedings and the ₹17.10 crore addition, the assessee argued that the initiation of reassessment was based on vague and unverified information, amounting to mere “borrowed satisfaction” without independent application of mind…..……….Click here to read and download ITAT Order

11) ITAT: Clarifies Sec. 41(2) applicability for depreciation under WDV method; Dismisses Assessee’s appeal. ITAT dismissed the assessee’s appeal, holding that gains from the sale of depreciated assets under Section 50 are taxable as capital gains, not business income. Since the assessee adopted the Written Down Value (WDV) method, Section 41(2) was held inapplicable. The assessee had filed a return declaring capital gain of Rs. 1.78 crore and claimed set-off of Rs. 1.77 crore brought forward business losses and Rs. 1.12 lakh unabsorbed depreciation, computing total income as nil. However, the Central Processing Centre (CPC) initially processed the return incorrectly and, after rectification, allowed only the depreciation set-off while disallowing the business loss, resulting in a revised income of Rs. 1.62 crore. The assessee challenged this disallowance before the CIT(A), which was upheld, and then before the ITAT. The assessee argued that set-off of business losses against capital gains was valid under Section 50, relying on precedents including Mumbai ITAT’s decision in Smart Sensors & Transducers Ltd. and Bombay HC rulings in Manali Investments and Alcon Developers. The assessee distinguished the Everest Kanto Cylinders decision, contending it was factually different. The Revenue contended that the assessee’s reliance on these cases was misplaced since they dealt with unabsorbed depreciation—not brought forward business losses—being set off against short-term capital gains. The Revenue also rejected the claim that gains from sale of depreciated assets should be treated as business income under Section 41(2), clarifying that this provision applies only in specific circumstances under Section 32(1)(i), which were not applicable here....…………Click here to read and download ITAT Order

12) ITAT: Refuses to condone delay sans sufficient cause in filing appeal under section 253(5). ITAT found no “sufficient cause” under Section 253(5) of the Income Tax Act to condone the delay of 596 days in filing the appeal within the prescribed period under Section 253(3). Consequently, the application for condonation of delay was rejected. Additionally, the ITAT observed that the assessee’s appeal challenged the Assessing Officer’s consequential order under Section 144 read with Section 263, rather than the principal order passed by the PCIT under Section 263. Since the assessee did not raise any grievances against the PCIT’s order and admitted that the grounds of appeal were identical to those previously raised before the CIT(A), the appeal was dismissed for lack of cause and absence of any grievance against the PCIT’s order......…………Click here to read and download ITAT Order

13) ITAT: Condones delay due to genuine belief in TDS rectification; Orders fresh hearing. ITAT condoned the delay, on finding it to be justified by the assessee’s genuine belief that rectification would resolve the issue. Emphasizing that justice should prevail over procedural delays in the absence of negligence, ITAT remanded the case for a fresh hearing to prevent unjust enrichment of the State. The assessee had filed its tax return for 2022-23 claiming an excess TDS refund. However, the tax department reduced the TDS credit, resulting in a substantial tax demand. The assessee’s delayed appeal was initially dismissed by the CIT(A) due to lack of valid reasons for the delay. On further appeal before ITAT, it was noted that while the CPC accepted the declared income, it unjustifiably rejected TDS credit worth Rs. 9,60,271. The assessee contended that the TDS deductions were wrongly applied because the tax department treated it as a seller rather than an agent. Although the JCIT(A) dismissed the appeal as time-barred, the ITAT examined.......…………Click here to read and download ITAT Order

14) ITAT: Cash deposit linked to HUF property sale, doesn’t warrant addition under section 69A. ITAT ruled that a cash deposit of Rs.50,03,600 made into the assessee’s bank account belonged to a Hindu Undivided Family (HUF) and formed part of the disclosed sale proceeds from a property transaction. Accordingly, no addition under Section 69A was warranted. The assessee, a non-resident, had his case reopened under Section 147 following a cash deposit of Rs.50,03,600 in his Vijaya Bank account. Initially unresponsive to the notices issued, the assessee later explained that the amount belonged to the HUF, which had sold a property in 2015 and received part of the sale consideration in cash. This transaction was already disclosed in the HUF's return of income for Assessment Year (AY) 2016-17. Despite this explanation, the Assessing Officer (AO) proposed to treat the cash deposit as unexplained money under Section 69A. Additionally, interest income of Rs.1,45,836 was added under "Income from Other Sources" in the draft assessment order dated 11.03.2024, issued under Section 144C(1). The assessee challenged the draft order before the Dispute Resolution Panel (DRP), which upheld the addition.....…………Click here to read and download ITAT Order

15) ITAT: CIT(A) lacks jurisdiction to determine property value; Capital gain taxable on sale, not OC receipt. ITAT held that the CIT(A) lacked the jurisdiction to determine the fair market value (FMV) of the developed property and erred in directing the Assessing Officer (AO) to adopt a fixed rate of Rs. 3,085.50 per sq. ft. Emphasizing that property valuation involves technical expertise, the ITAT directed the AO to refer the matter to the Departmental Valuation Officer (DVO) for proper and professional valuation. Furthermore, the ITAT reaffirmed that the taxability of capital gains arising from the conversion of a capital asset into stock-in-trade under a Joint Development Agreement (JDA) is not dependent on the date of receipt of the Occupancy Certificate (OC). Instead, it is determined by the year in which the property, or part thereof, is actually sold or transferred......…………Click here to read and download ITAT Order

16) ITAT: Affirms slashing of bogus purchase addition from 12.5% to 4%; Distinguishes Kanak Impex. ITAT upheld the CIT(A)’s reduction of the addition on bogus purchases from 12.5% to 4%, rejecting the Revenue’s reliance on the Kanak Impex case due to factual differences and finding the decision in Nikunj Eximp more applicable. The assessee’s income tax return was reopened based on information regarding alleged bogus purchase bills worth Rs. 3.33 crore linked to entities controlled by Mr. Pravin Kumar Jain. The Assessing Officer (AO) added 12.5% of these purchases to the assessee’s income, citing industry profit margins and the absence of cross-examination of the suppliers. On appeal, the assessee contended that a proper opportunity for cross-examination was denied, the sales were genuine, and the declared gross profit exceeded historical averages. As a fallback, the assessee proposed a reduced addition of 2% instead of 12.5%. The CIT(A) lowered the addition to 4%, considering the higher declared profit and Maharashtra’s lower VAT rates. The Revenue appealed to the ITAT, seeking reinstatement of the 12.5% addition or complete disallowance, relying on the Kanak Impex judgment. ITAT reviewed the case, noting that the AO had made the addition based on alleged bogus purchases and applied a 12.5% profit margin because the suppliers were not produced for cross-examination. The assessee .....…………Click here to read and download ITAT Order

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