Sections 68, 10(38), 69 of the Income-tax Act, 1961 - Gujarat High Court Upholds Tribunal’s Deletion of Section 68 Addition on Penny Stock LTCG: Exemption Allowed Where Genuine Transactions and No SEBI Violation Found - The High Court’s decision reinforces that additions under Section 68 on LTCG from sale of shares cannot be sustained merely on the basis of general investigations or suspicions relating to penny stocks, especially when the assessee provides concrete evidence of genuine transactions, and no adverse findings emanate from regulatory investigations. Tax authorities must base their actions on cogent, case-specific evidence rather than broad-based intelligence inputs or ongoing regulatory investigations without specific linkage to the assessee.
Sections 220, 254 of the Income-tax Act, 1961 - Bombay High Court Faults Revenue for Adjusting Refund Against Disputed Demand Despite 20% Payment and Six-Year Stay Delay - The Bombay High Court’s decision clearly establishes that once an assessee has made the prescribed 20% payment against a disputed demand and has filed a stay application pending appeal, the Revenue is not entitled to adjust subsequent refunds against the disputed demand, especially where the stay application is pending due to delay attributable solely to the Revenue. This actionable guidance requires Revenue authorities to strictly adhere to CBDT Instruction No. 1914 and to refrain from taking coercive recovery actions, such as refund adjustment, until a stay application is duly adjudicated.
Sections 10(38), 148A, 149 of the Income-tax Act, 1961 - Delhi High Court Quashes Reassessment Notice Issued Beyond Limitation Where Alleged Escaped LTCG Was Below Threshold Under Section 149(1)(b) - On the facts and law, the Delhi High Court set aside the reassessment notice under Section 148A, holding that the issuance was beyond the statutory limitation period and the conditions for invoking the extended time limit—specifically, the Rs. 50 lakhs threshold under Section 149(1)(b)—were not fulfilled. The decision is actionable for assessees facing similar notices, providing a clear basis to challenge reassessment where the quantum of alleged escaped income is below the statutory limit and the notice is time-barred.
Sections 69C, 148A, of the Income-tax Act, 1961 - Reopening of Assessment Based Solely on GST Portal Information without Considering Assessee’s Evidence Held Invalid by Delhi High Court - In light of the above findings, reopening of assessment under Section 148A based solely on third-party information, without objectively considering the assessee’s documentary evidence and the findings of the Investigation Wing, was held to be unlawful. The impugned notice for reassessment was quashed, reinforcing the requirement that the AO must meaningfully evaluate the assessee’s submissions before invoking the reassessment provisions.
Income Tax - Sections 151, 147, 148, 153C, 264 - ITAT Delhi Upholds Validity of Reopening Under Section 148 After Annulment of Section 153C Assessments: Mindful Approval Under Section 151 Confirmed - On a careful review of the facts and legal precedents, the ITAT Delhi has upheld the validity of reopening assessments under section 148, even after the prior annulment of assessments under section 153C by the Commissioner in proceedings under section 264. The approval granted under section 151 was found to be a considered decision, not a mere formality, due to the Commissioner's prior involvement and awareness of the issues. The Tribunal emphasized that these proceedings were initiated in response to ab initio void assessments and did not involve the regularization of time-barred assessments. Thus, the reassessment proceedings and the approvals granted therein stand valid in law.
Income Tax - Sections 144, 144B, 147 - Orissa High Court Quashes Faceless Assessment for Breach of Natural Justice: Insufficient Response Period Under Section 144B Invalidates Order - The Orissa High Court’s decision underscores the paramount importance of adhering to the principles of natural justice during income tax assessments, particularly under the faceless regime established by Section 144B. Assessment orders passed without granting reasonable opportunity to assessees for submitting their responses are liable to be quashed and remanded for fresh adjudication. Tax authorities must strictly follow statutory procedures and SOPs, ensuring that assessees are not deprived of their right to a fair hearing.
Income Tax - Sections 9, 90 - Delhi High Court Confirms: Cloud Service Subscription Payments to Foreign Providers Not Taxable as 'Royalty' Under India-Ireland DTAA - By affirming the ITAT’s order and dismissing the Revenue’s appeal, the Delhi High Court has provided clear judicial guidance that subscription payments for cloud services made to foreign vendors, where no copyright or equipment is transferred or licensed, do not constitute “royalty” under Indian law or India-Ireland DTAA. Tax officers must now refrain from characterizing such payments as royalty absent specific rights or property being transferred to the payer.
Income Tax - Section 68 - Delhi High Court Holds Unsecured Loans Explained When Linked to Group Company’s Disclosed Unaccounted Cash—Section 68 Addition Deleted - The Delhi High Court ruled in favour of the assessee, holding that the addition under Section 68 in respect of unsecured loans routed through group entities was unwarranted since the source of funds had already been disclosed and settled by the group company. The decision reinforces the principle that the explanation for a credit must be considered in light of group-level disclosures and settlements, particularly when the funds are demonstrably traced and accounted for, albeit through intermediaries.
Income Tax - Sections 2(15), 11, 12, 13 - Madras High Court Rules Microfinance Entities Ineligible for Charitable Exemption under Section 11(4A) When Lending Is Core Activity - In light of the facts and the statutory provisions, the Madras High Court decisively held that entities whose principal activity is microfinance lending, particularly when such activity is conducted for a fee, are not eligible for exemption under Section 11(1) or 11(4A) of the Income Tax Act, 1961. The business was not incidental to a charitable object but was the main purpose, and thus, the claim for exemption was rightly denied. Assessees undertaking similar activities must carefully evaluate the nature of their objects and income streams to determine eligibility for charitable exemptions.
Income Tax - Sections 132, 158BC, 158BE - Madras High Court Upholds Block Assessment as Within Limitation: Prohibitory Order Under Section 132(3) Not Equivalent to Deemed Seizure - The Madras High Court conclusively held that the block assessment order dated 28.03.2002 passed under Section 143(3) read with Section 158BC was within the statutory time limit, as the search was deemed to have concluded on 02.03.2000 when the prohibitory order was lifted. The assessment proceedings, therefore, suffered from no legal infirmity on the grounds of limitation. The matter was remanded to the Appellate Tribunal for expedited disposal, considering the protracted litigation over the block period from 1990-91 to 1999-2000 and part of 2000-01.
Sections 69A, 132, of the Income-tax Act, 1961 - Delhi High Court Affirms Validity of Additions Based on Seized Diaries and Corroborative Evidence in Real Estate Search Cases - The Delhi High Court concluded that where incriminating material found during a search is corroborated by formal books of account, the AO is justified in making additions under section 69A. Diaries and documents seized during such operations cannot be presumed to be inconsequential; their evidentiary value depends on the context, detail, and corroboration with other records. This decision upholds the approach of a thorough and context-driven examination of seized materials rather than a perfunctory or dismissive treatment.
Sections 139, 153C, of the Income-tax Act, 1961 - Delhi High Court Holds Revenue Cannot Ignore Revised Return Filed in Response to Sec. 139(9) Defect Notice Despite TDS Mismatch: Refund Processing Mandated - The Delhi High Court unequivocally held that the revenue authorities cannot disregard a revised return filed in response to a notice under section 139(9), especially in the absence of any formal communication to the assessee about the return’s continued defectiveness or invalidity. The presence of a TDS mismatch may justify further verification, but is not, per se, a ground to ignore the return or withhold refund processing. The revenue is bound by its statement to process the assessee’s rectification application and must do so expeditiously, ensuring any refund due, after proper adjustment, is granted.
Section 132 of the Income-tax Act, 1961 - Allahabad High Court Invalidates Income Tax Search and Seizure on OFS Share Sale, Citing Absence of Statutory 'Reason to Believe' - Based on the above findings, the Allahabad High Court set aside the warrant of authorization and quashed the search and seizure operation initiated against the assessee. The Court also invalidated the post-search notice issued under Section 131(1A) by the authorized officer, as it was procedurally barred after the completion of search actions under Section 132(1). The actionable takeaway is that revenue authorities must strictly adhere to statutory preconditions and procedural safeguards before invoking extraordinary powers of search and seizure, and that post-search investigatory powers must be exercised within the limits prescribed by law.
Sections 149, 148, 148A, of the Income-tax Act, 1961 - Delhi High Court Quashes Reassessment Notices for AY 2015-16 Issued Post 1-4-2021 in Light of Supreme Court's Directions on TOLA Applicability - In view of the Supreme Court's pronouncement and the concession recorded therein, the Delhi High Court unequivocally held that any reassessment notices issued for AY 2015-16 on or after 1st April 2021 stand vitiated and must be set aside. The action taken by the Assessing Officer in issuing notices and orders for reopening the assessment under the old regime, after the cut-off date, is rendered without jurisdiction and is not sustainable in law.
Sections 139, 237, 119, of Income-tax Act, 1961 - Gujarat High Court Directs Fresh Consideration of Delay Condonation for TDS Refund Omission Due to Accountant’s Error in Section 54 Property Case - Based on the Gujarat High Court’s decision, it is actionable for taxpayers to pursue condonation of delay in filing returns for claiming TDS refunds, even if the delay arises from inadvertent errors by their representatives, provided there is a bona fide explanation and no evidence of mala fide intent. Authorities are bound to consider the substantive right of the assessee to refund of taxes already deducted and remitted, and cannot deny the principal refund merely on technical grounds. However, any interest claim on the delayed refund may justifiably be denied.
Sections 278AA, 276B, of the Income-tax Act, 1961 - Delhi High Court Affirms Acquittal in TDS Non-Deposit Case: Reasonable Cause Shields Accused from Punishment under Section 276B - On the basis of this decision, it is actionable for assessees facing prosecution under Section 276B to meticulously document and substantiate any circumstances constituting a reasonable cause for delay in TDS deposit. Establishing a bona fide inability to comply, supported by contemporaneous records (such as audited financial statements evidencing liquidity crisis), can provide an effective shield from criminal liability under Section 276B, as envisaged by Section 278AA.
Income Tax - Sections 69C, 147, 148 - Delhi High Court Upholds Reopening of Assessment for AY 2018-19 Based on Bogus Purchase Entries with Entry Operator - The Delhi High Court has held that the AO was justified in reopening the assessment under Section 147 based on the information received regarding bogus purchase entries from an entry operator. The Court emphasized that the existence of entries in the assessee’s books, corroborated by the confessional statement of the entry provider and supported by the STR report, forms an adequate basis for the AO’s action. The absence of supporting evidence for the movement of goods further weakened the assessee’s case. The decision was thus rendered against the assessee.
Income Tax - Section 127 - Delhi High Court Upholds Centralisation of Assessment Jurisdiction with Faridabad Authority in Search-Linked Case Despite Registered Office in Delhi - The Delhi High Court has affirmed that, where a search and seizure operation under Section 132 reveals interconnections between entities across jurisdictions, the transfer of assessment jurisdiction under Section 127 to a centralised authority is permissible—provided the order contains clear and cogent reasons. The existence of the registered office in a different jurisdiction does not, by itself, bar such transfer if coordinated investigation is necessary and the order is sufficiently reasoned.
Income Tax - Sections 132, 153C - Delhi High Court Quashes Section 153C Notice for AY 2016-17 Issued Outside Six-Year Block—Jurisdictional Error in Re-Opening Assessment Identified - The Delhi High Court, after a detailed examination of the statutory provisions and binding judicial precedents, has unequivocally held that notices under Section 153C must be confined to the six assessment years immediately preceding the assessment year relevant to the year in which the satisfaction note is recorded. Any attempt to reopen assessments beyond this period, absent statutory authorization, amounts to a jurisdictional error. In the present case, the notice for AY 2016-17 was set aside as being beyond the scope of the permissible block period.
Income Tax - Sections 143, 144B, 292BB - Delhi High Court Upholds Validity of Income Tax Notices Sent to MCA-Registered Email; Petitioner Estopped from Challenging Service due to Participation - The Delhi High Court concluded that service of income tax notices at an email address listed on the MCA website is valid under Rule 127(2)(b)(iii) of the Income Tax Rules, 1962. Where the assessee has received, responded to, or participated in proceedings following such service, Section 292BB operates to prevent the assessee from later contesting the validity of the service on technical grounds. As the petitioner had both actual knowledge and participated in the process, there was no violation of natural justice, nor any basis to set aside the assessment order for improper service.