Background of the Case:

The appellant, engaged in retail trade and operating multiple showrooms in Delhi, had filed its return for AY 2020-21 declaring substantial income, which was subsequently taken up for complete scrutiny under CASS. The assessment was completed under section 143(3) read with section 144B, wherein certain additions were made relating to unexplained cash deposits and disallowance of interest expenses. However, while examining the assessment records, the Principal Commissioner of Income Tax noticed that the Tax Audit Report in Form 3CD disclosed repayment of an amount of Rs.11 lakh otherwise than through prescribed banking channels, allegedly in violation of section 269T.

On the premise that such violation attracted penalty under section 271E and that the Assessing Officer had failed to initiate penalty proceedings, the PCIT invoked section 263 and directed initiation of penalty proceedings, holding the assessment order to be erroneous and prejudicial to the interest of revenue.

Arguments by the Appellant (Assessee)

Aggrieved by the revisionary order, the appellant challenged the assumption of jurisdiction under section 263 before the ITAT. It was contended that the amount of Rs.11 lakh was not a loan or deposit repayment but merely an adjustment entry against a security deposit of Rs.1 crore received in an earlier year, which was wrongly reported by the auditor in Form 3CD. The appellant argued that a mere book adjustment without movement of money does not attract the rigour of section 269T and, consequently, penalty under section 271E could not be levied.

More importantly, the appellant asserted that penalty proceedings are independent of assessment proceedings and, in the absence of any satisfaction recorded by the Assessing Officer in the assessment order, the PCIT had no authority under section 263 to direct initiation of penalty proceedings.
Reliance was placed on binding judicial precedents, including the Delhi High Court decision in CIT v. Nihal Chand Rekyan and the Supreme Court ruling in CIT v. Jai Laxmi Rice Mills Ambala City, to emphasize that satisfaction of the Assessing Officer is a sine qua non for initiation of penalty proceedings.

Respondent’s Response (Revenue)

The Revenue, on the other hand, supported the order passed by the PCIT and contended that the Tax Audit Report clearly reflected a violation of section 269T, which could not be ignored lightly. It was argued that the auditor’s reporting in Form 3CD carries statutory significance and, unless corrected through a revised audit report, the same must be relied upon. The PCIT justified the invocation of section 263 on the ground that failure of the Assessing Officer to initiate penalty proceedings resulted in loss of revenue. The Revenue further sought to distinguish the decision of the Delhi High Court in Nihal Chand Rekyan by submitting that the said judgment pertained to section 271(1)(c), whereas penalty under section 271E could be initiated independently.

Reliance was also placed on the decision of the ITAT Chennai Bench to contend that initiation of penalty proceedings for violation of sections 269SS/269T is mandatory during assessment proceedings.

Court Findings and Decision

After considering the rival submissions and examining the record, the ITAT Delhi Bench held that the PCIT had exceeded the jurisdiction conferred under section 263. The Tribunal observed that initiation of penalty proceedings is not a part of assessment proceedings and cannot be directed by the Commissioner in revisionary jurisdiction, particularly in the absence of satisfaction recorded by the Assessing Officer.

The Bench categorically relied on the Supreme Court judgment in Jai Laxmi Rice Mills Ambala City, which held that penalty under section 271E cannot survive unless satisfaction for such penalty is recorded in the assessment order itself. The Tribunal further noted that the PCIT’s attempt to distinguish the Delhi High Court decision in Nihal Chand Rekyan was misplaced and contrary to settled law.

Since no satisfaction for initiation of penalty under section 271E was recorded by the Assessing Officer, the direction issued under section 263 was held to be unsustainable. Accordingly, the revisionary order was quashed and the appeal of the appellant was allowed.

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Santosh Kumar vs.ITO [ITA No. 1248 of 2024]

Background of the Case

The appellant, Mr. Santosh Kumar, engaged in the trading of Kota Stones, was subjected to reassessment proceedings after depositing cash of Rs. 25,56,700 in his bank account on different dates. The ITD issued a notice under Section 148 of the Income Tax Act, 1961, for non-filing of the return for A.Y. 2011-12. Due to non-compliance, the Assessing Officer treated the entire cash deposit as income from undisclosed sources under Section 144 of the Act.

The appellant’s appeal before the CIT(A) was dismissed on the grounds that additional evidence under Rule 46A of the Income Tax Rules, 1962, was inadmissible. Aggrieved by this decision, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Jaipur Bench.

Arguments by the Appellant

The appellant argued that the CIT(A) failed to consider additional evidence, including VAT registration and transaction records, which substantiated the business nature of deposits. The appellant further stated that the deposits were business receipts from trading in Kota Stones, where buyers deposited cash directly into the bank account. In the preceding A.Y. 2010-11, the Revenue had accepted a lower income despite similar cash deposits, making the current assessment inconsistent.

The appellant contended that the peak credit theory or presumptive taxation under Section 44AD should be applied instead of taxing the entire deposits.

Respondent’s Response

The respondent stated that the appellant failed to file a return even after receiving a notice under Section 148, showing a deliberate attempt to evade tax. Also no documentary evidence was furnished before the AO to justify the cash deposits, and non-compliance led to an ex-parte assessment. The CIT(A) correctly upheld the addition as the appellant intentionally avoided participation in assessment proceedings.

Court Findings and Decision

The ITAT bench of Jaipur noted that the appellant behavior before the AO was non-compliant, but the CIT(A) had the power under Section 251 to admit additional evidence for a fair assessment. The assessee’s business activity in Kota Stone trading was recognized by the VAT Department and accepted in prior assessment years. Taxing the entire cash deposit as income was unjustified; instead, applying Section 44AD was more appropriate. The tribunal restricted the addition to Rs. 2,05,000, approximately 8% of the total deposits, and deleted the addition of Rs. 25,56,700 made by the AO and upheld by the CIT(A).

ITAT Limits Taxability to 8% of Gross Receipts

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When the Commissioner of Income Tax (Appeals) [CIT(A)] dismisses your appeal and you are dissatisfied with the decision, the next level of appeal is the Income Tax Appellate Tribunal (ITAT). ITAT is the second appellate authority under the Income Tax Act and plays a crucial role in resolving disputes between taxpayers and the Income Tax Department. This step-by-step guide by TaxUnplug, your trusted tax consultant, explains how to file an appeal before ITAT.

When Can You Appeal Before ITAT?

An appeal before ITAT can be filed when:

1. You are dissatisfied with the order of CIT(A),
2. The CIT(A) upholds the additions made or penalties imposed by the Assessing Officer (AO),
3. Specific legal grounds or facts were ignored or misinterpreted by CIT(A).
4. Orders passed by the Assessing Officer as per the directions of the Dispute Resolution Panel.

The filing of appeal by the taxpayer is regardless of the monetary limit as the prescribed for income tax department, Hence you can file an appeal before ITAT based on the merits of the case.

ITAT serves as the final fact-finding authority, and its decisions are binding unless challenged in the High Court or Supreme Court.

Step-by-Step Guide to Filing an Appeal Before ITAT

1. Review the Order of CIT(A)

1. Analyse the order to understand the grounds on which your appeal has been dismissed.
2. Identify errors in law, misinterpretation of facts, or incorrect conclusions drawn by CIT(A).

2. Prepare Form 36

2. The appeal before ITAT is filed using Form 36.
3. Form 36 requires details such as:
   • Name and address of the appellant (taxpayer),
   • Details of the order passed by CIT(A),
   • Grounds of appeal – specific issues on which CIT(A)’s order is being challenged,
   • Statement of facts explaining the case and supporting your claims.

3. Attach Supporting Documents

3. The following documents must be attached along with Form 36:
   • Copy of the CIT(A)’s order,
   • Copy of the assessment order passed by the AO,
   • Grounds of appeal submitted before CIT(A),
   • Copies of supporting evidence, if required.

4. File the Appeal

4. The appeal can be filed Online via the e-filing portal of the Income Tax Department by filing Form 36 along with the supporting documents.
5. After filing online application, the documents in relation to the application should also submitted physically.
6. Ensure the appeal is filed within 2 months from the end of the month in which the order sought to be appealed against is communicated.

5. Pay the Prescribed Appeal Fee

5. Pay the required fee based on the assessed income and tax demand, as prescribed under the Income Tax Act.
6. Provide the details of the fee payment in Form 36.

6. Representation Before ITAT

6. ITAT hearings are similar to court proceedings. Taxpayers or their representatives (like Chartered Accountants or tax advocates) must argue the case and present supporting evidence.
7. A two-member bench of ITAT, consisting of a Judicial Member and an Accountant Member, will hear your case.

7. Monitor the Progress of Your Case

7. After filing the appeal, regularly track the case status on the ITAT portal.
8. Attend hearings as and when scheduled.

Important Timelines

• The appeal before ITAT must be filed within 2 months from the end of the month in which the order sought to be appealed against is communicated.
• Delay in filing the appeal can be condoned by ITAT, but a valid reason must be provided.

Common Mistakes to Avoid

1. Missing the deadline for filing the appeal.
2. Drafting vague or incomplete grounds of appeal.
3. Failing to attach required documents, such as copies of CIT(A) and AO orders.
4. Lack of proper representation during ITAT hearings.

Why Choose TaxUnplug for Your ITAT Appeal?

Filing an appeal before ITAT requires a detailed understanding of tax laws, preparation of strong legal arguments, and proper case representation. TaxUnplug, with its team of experts, ensures:

• Precise drafting of Form 36 with well-defined grounds of appeal and statements of facts,
• Preparation of all necessary documents and evidence,
• Professional representation before ITAT for a favourable outcome.

Whether you are in Mumbai, Surat, Pune, Jaipur, Jodhpur, or Ahmedabad, TaxUnplug provides comprehensive support for filing appeals at every level.

Take the next step in resolving your tax disputes—let TaxUnplug guide you through the ITAT appeal process!

The information provided in above blog is for general informational only and should not be considered as legal or tax advice. Request you to please follow latest updated in reference to above details. We advise to consult with a qualified tax professional such as “Taxunplug” for all your tax needs.

The post How to File an Appeal Before ITAT: A Step-by-Step Guide appeared first on Tax Unplug.

Background of the Case

The Appellant, Shah Rukh Khan, filed his income tax return for the assessment year 2012-13, declaring a total income of Rs. 83,42,22,630. The return was selected for scrutiny, and an assessment order was passed under Section 143(3) of the Act, determining the total income at Rs. 84,17,99,923.

Reopening of Assessment

The respondent, AO reopened the assessment, after the expiry of four years from the end of AY 2012-13 and issued the notice under Section 148. The AO alleged that income had escaped assessment due to the improper claim of foreign tax credit under Section 90 of the Act. The AO contended that the assessee had claimed excessive foreign tax credit, leading to underassessment of income.

Arguments by the Appellant

The appellant argued that the reopening was invalid as it was initiated beyond the four year period and there was no failure to disclose material facts. The Appellant emphasized that the reopening was based on a reappraisal of facts already examined during the original assessment and no new or tangible material was brought on record to justify the reopening. The Appellant contended that there was no failure to disclose material facts and that the reassessment was based on a mere “change of opinion.”

ITAT’s Findings and Decision

The ITAT, after examining the facts and legal provisions, quashed the reassessment proceedings and held that the reopening was merely a change of opinion, as the issue of foreign tax credit had already been examined during the original assessment. Reopening on the same issue without fresh material is not permissible under the law.

The ITAT observed that the reopening was based on a reappraisal of facts already considered during the original assessment. There was no new or tangible material to justify the belief that income had escaped assessment. The Tribunal relied on the Supreme Court’s decision in Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456, which mandates fresh material for reopening.

Shah Rukh Khan vs DCIT central circle

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The petitioner, Revenue argued the order passed by the ITAT Bench B of kolkata on the ground that the respondent failed to comply with the CBDT’s circular No. 6/20222 dated 17.03.2022 regarding condonation of delay in filing form 10IC as per rule 21AE. They also argued that availing of benefits of section 115BAA without filing form 10IC is not justified in law. The filing of form 10IC is being the mandatory provision in the statute.

The respondent, Fastner Commodeal Pvt. Ltd., opted for taxation under Section 115BAA, which provides a concessional tax regime. However, they failed to file Form 10-IC electronically along with the income tax return within the extended timeline as prescribed by the CBDT. The respondent also mentioned that they had certain difficulties in uploading the form. 

The Calcutta high court noted the facts and circumstances of the case, including procedural difficulties faced by the assessee due to the pandemic and technical issues on the income tax portal. Consequently, it is held that the filing of Form 10-IC is mandatory for availing the benefit under Section 115BAA. However, the Court recognized that the respondent failure was due to procedural lapses rather than intentional non-compliance. Further held that the CBDT Circular No. 6 of 2022 allowed condonation of delay in filing Form 10-IC under certain conditions. The Court noted that the respondent conduct demonstrated their clear intention to opt for the concessional tax regime.

The respondent is permitted to file Form 10-IC and restored the matter to the AO for reassessment. The AO shall consider the form and assess whether the assessee fulfills all other requisite conditions under Section 115BAA and relief should be granted to the assessee if they meet the statutory requirements.

To Download official order, click here.

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The matter of Naveen Bolia versus the Income Tax Officer (ITO), as reviewed by the Income Tax Appellate Tribunal (ITAT) in Jodhpur, pertains to the validity of the assessment and the justification for specific additions imposed by the Assessing Officer (AO). The appellant, Naveen Bolia, contested the assessment order on two main bases: the legality of the assessment procedure and the justification for the additions made by the AO. The AO contended that the appellant did not submit the Return of Income (ROI) for several assessment years, resulting in the inclusion of Rs. 16,98,502/- as undisclosed income for the assessment year 2010-11.

The Tribunal heard the rival contentions and perused the material placed on record and had also gone through the various judicial precedent cited to drive home to the respective contentions raised by both the parties.

The bench noted that in this case, there were two type of grounds: one challenging the legality of the assessment and other on the merits of the case. On merits of the case the addition the bench noted that the ld. AO has repeatedly recorded findings that the assessee did not filed any Return of Income (ROI) for A.Y. 2008-09 and again alleged that the assessee had not filed ROI for preceding years.

Against this set of facts it was evident that the ROI for AY 2007-08 was filed on 31.07.2007 along with the copy of balance sheet and P&L A/c followed by the ROI for AY 2008-09 filed on 31.07.2008 along with the copy of balance sheet and P&L A/c. Thereafter, ROI for AY 2009-10 was filed on 31.07.2009 declaring total income 1,47,932/- and notably (and admittedly), the balance sheet for AY 2009-10 was also filed along with the ROI wherein the closing balance of cash in hand of Rs. 16,98,502/- was disclosed, which became the opening balance of cash in hand of the subjected year i.e. A.Y. 2010-11. This contention raised before the Hon’ble Tribunal and before the lower authority were never challenged.

Even the ld. AO himself, to this opening cash in hand, added the income of the current year i.e. A.Y. 2009-10 of Rs.2,37,993/-. Accordingly, the closing balance of cash in hand of Rs.16,98,502/- became the opening balance of the cash in hand as on 01.04.2009. Thus, addition made of the entire cash in hand of Rs.16,98,502/-, admittedly was of the closing balance of cash in hand supported by the Balance Sheet and ROI filed for AY 2009-10. The ROI for AY 2009-10 was processed u/s 143(1) and the said assessment (or the earlier even) was not stated to have been disturbed by taking any action u/s 147 or u/s 263 of the Act.

Thus, the closing balance of cash in hand for AY 2009-10 stood established or not disputed. Thus, once the Balance Sheet of the current year and the preceding years were accepted by the Department, the repeated contention of the assessee that the very source of the availability of the cash in hand of Rs.16,98,502/- was in the Balance Sheet further explained the source. Notably the ld. AO himself had taken note of the Balance Sheet, Capital Account and P & L Account of A.Y. 2009-10 and A.Y. 2010-11 and also discussed the investments, debtors, creditors, loan taken etc. but had not appreciated the opening cash in hand. He even admitted that the closing balance of cash in hand of Rs. 7,42,864/- in this year and even admitted the availability of closing cash in hand of Rs.16,98,502/- in A.Y. 2009-10.

It was beyond one`s comprehension that when each and every entry of the Balance Sheet for the preceding year i.e. A.Y. 2009-10 and current year i.e. A.Y. 2010-11 had been accepted (and no dispute was raised w.r.t. the correctness of these figures and the facts), there was no reason as to why the ld. AO not accepted the closing cash in hand as having been available with the assessee in A.Y. 2009- 10.

Also consequently, again when he had admitted rather not disputed any of the entries of the Balance Sheet for the current year, opening cash in hand of the subjected amount of Rs.16,98,502/- should have been accepted as available balance with the assessee. Thus, once the assessee based on the all the evidence which are not under dispute submitted that the same was out of the opening cash in hand no addition can be made in the year under consideration.

The ld. AO assumed opening cash balance as `Nil` on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered Rs.16,98,502/- as undisclosed income of the current year. Thus, what the ld. AO added was the opening balance of cash in hand in this year which was legally impermissible.

Although the ld. AO had not invoked any particular provision of law yet however, assuming that it was a case of section 68 (or even u/s 69A), the provision speaks of the credit found during the previous year in the books of account maintained by the assessee. Therefore, the law was well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year.

The ld. AR of the assessee on this aspect of the matter had relied upon the decision in Parmeshwar Bohra v/s ITO 27 TW 55(JD). Therefore, the Hon’ble Tribunal held that the opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94.”

This decision was affirmed in CIT v/s Parmeshwar Bohra (2007) holding that clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year – carried forward amount of the previous year does not become an investment or cash credit of the relevant year. Respectfully following the finding of the co-ordinate bench and affirmed by the jurisdictional high court, the Tribunal directed to delete the addition of Rs. 16,98,502/-.

In terms of these observation, the appeal of the assessee was allowed.

Naveen Bolia vs ITO – Income Tax Officer

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Swarn Singh v. ITO [I.T.A. No. 160/Asr/2024]

The appellant had appealed against the ex-parte decision of the ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi, which was not admitted due to a violation of section 249(4) of the Act. The appeal was in relation to the Assessment Order dated 29.12.2023 issued by the NFAC (Delhi) under section 147 read with section 144 of the Act for the Assessment Year 2016-17.

The ld. counsel for the assessee argued that the appellant’s additional grounds were legally based on the invalidity of the assessment u/s 147 due to lack of notice on the registered e-mail id and the jurisdictional AO issuing notice under section 148, contrary to the Income Tax Act, 1961. He emphasized that this legal ground for appeal should be admitted without the need for new facts.

The ld. counsel further argued that the CIT(A) erred in confirming the addition by the AO, violating mandatory jurisdictional conditions as stipulated in Notification No 18/2022 dated 29th March 2022. The Ld. AR contended that the order u/s 148A(d) was passed and the notice issued by Jurisdictional AO was bad in law.

The Ld. DR failed to rebut the contention of the Ld. AR but submitted compilation on faceless scheme of assessment for consideration.

The Hon’ble Tribunal ruled that the notice issued by ITO Ward, Katra, was not issued by NFAC, which would have resulted in chaos and redundant proceedings. The ITAT also noted that when notices were issued by the Faceless Assessing Officer (FAO), it is not contemplated in the Act that an assessee can submit before the Jurisdiction Assessing Officer (JAO), and vice versa. Therefore, there was no question of concurrent jurisdiction between the FAO and the JAO regarding the issuance of notice u/s 148 of the Act.

The notification 18/2022 dated 29th March 2022 mandates the issuance of notice through automated allocation, which is mandatory and requires the Department to follow. Automated allocation is defined as an algorithm for randomized allocation of cases using technological tools like artificial intelligence and machine learning to optimize resource use. The case can be allocated to any officer with jurisdiction to issue the notice u/s 148 of the Act.

Section 151A of the Act allowed the formulation of a Scheme for assessment, reassessment, or re-computation u/s 147 and for issuance of notice u/s 148. The CBDT’s Scheme, which covers both aspects, was not applicable for the issuance of notice u/s 148. Instead, it was only the FAO that can issue notice u/s 148 of the Act, not the JAO.

Clause no 3(b) addresses the issue of notice u/s 148 in a faceless manner, and the provisions of Section 144B of the Act apply for assessment or reassessment. The term “to the extent provided in Section 144B of the Act” was not relevant for issuing notice, as the notification 18/2022 provides automated allocation of notice in accordance with the Board’s risk management strategy.

The phrase “to the extent provided in Section 144B of the Act” also applies to the Scheme, including restrictions like keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the Act’s ambit.

The Telangana High Court had ruled in the case of Kankanala Ravindra Reddy vs. Income Tax Officer 14, that the notices issued by JAOs are invalid and bad in law, as per Section 151A of Act 14 (2023) and the notification 18/2022 dated 29th March 2022.

In the above view, the Hon’ble Tribunal held that the assessment framed u/s 147 based on the notice issued u/s 148 by the JAO is bad in law and the same to be quashed as void ab initio.

The ITAT rejected the reassessment notice issued by the AO:

To download official order, click here.“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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Tirupati Prasad Sahu v. ITO [ITA No.184/CTK/2024]

In this case the assessee files an appeal against the order of the Ld. CIT(A).

According to Ld. AR, the assessee’s appeal was delayed by 145 days before Ld CIT(A). It was argued that Ld.CIT(A) acknowledged the confusion surrounding the order date, which was mentioned as 22.7.2022 and 22.9.2022. The delay was attributed to the assessee not receiving the Assessing Officer’s order on time.

Ld CIT(A) also noted that the ITBA system indicated that the order u/s.154 of the Act was dated 27.9.2022 and was sent to the assessee via email.

The argument put forth was that the matter pertains to the claim of depreciation. It was argued that regardless of whether the assessee claims depreciation or not, it is still eligible to be allowed according to the law itself. It was contended that substantial justice should not be denied based solely on technicalities during the appeal before the learned CIT(A).

Ld. DR submitted that the issue may be restored to Ld. CIT(A) for adjudication on merits.

Upon careful consideration of the rival submissions and the facts of the case at hand, the Hon’ble Tribunal identified several instances where the assessee failed to receive the orders sent via email due to them being sent into spam folders. Consequently, there has been a delay of 145 days. Given the explanation provided by the assessee, the tribunal found it to be plausible and thus, waived the delay of 145 days in filing the appeal before the Ld CIT(A).

No findings on the merits of the case had been provided as Ld. CIT(A) had not issued any findings on the merits. Therefore, the Tribunal remanded the matter back to the Ld CIT(A) for a decision on the merits after ensuring that the assessee was given a fair opportunity to be heard.

The ITAT decided to condone the delay of 145 days in filing an income tax appeal:

To download official order, click here.“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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Indian Chamber of Commerce v. DCIT [I.T.A. Nos. 933 & 934/Kol/2023] (ITAT Kolkata)

The Appellant, a non-profit organisation, sought exemption under Section 11 of the Income Tax Act for its activities, which include organizing meetings, conferences, and seminars, and earning income from membership fees, interest on deposits, and rental income.

The Ld. Departmental representative submitted that in the present case the condition as provided in the said proviso has been breached by the assessee as turnover from the receipts by appellant from organizing such meetings, conferences and seminars exceeded Rs. 25.00 Lacs and therefore the exemption u/s 11 was rightly denied by the Ld. CIT(A).

The appellant argued that its activities are charitable and do not constitute trade, commerce, or business, as they are incidental to its primary object of promoting and protecting trade, commerce, and industry. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) disagreed, treating the appellant’s activities as business and denying exemption under Section 11. The AO bifurcated the income into business and charitable segments, while the CIT(A) treated all receipts as business income.

The ITAT, however, ruled in favour of the appellant, stating that its activities are charitable and not affected by the proviso to Section 2(15) of the Act, even after amendments. The Tribunal relied on the Supreme Court’s decision in the case of ACIT vs. Ahmedabad Urban Development Authority and the principle of mutuality, which holds that activities conducted for members and not for profit are not taxable. The Tribunal also noted that the appellant’s case is covered by a previous favourable decision by a Coordinate Bench for the A.Y 2009-10, which the revenue authorities have not challenged.

The ITAT’s order grants the appellant exemption under Section 11 for its entire income, including membership fees, interest, rentals, and miscellaneous sources. The Tribunal also allowed the appellant’s claims for depreciation and the deduction of the written down value (WDV) of assets sold. The ITAT’s order upheld the appellant’s appeals, confirming that the organization’s activities are charitable and not subject to tax under the Income Tax Act, and that the principle of consistency applies in this case.

To download official order, click here.

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The information on this site is not intended to be a substitute for professional advice.”

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Kirti Singh Vs ACIT [ITA No. 977 & 1067/DEL/2023] (ITAT Delhi)

The Hon’ble ITAT deleted the addition of unexplained jewellery, wherein it held that where the status of the family and customs and practices of the community to which family belongs, it permits an assessee to hold larger quantity of jewellery and ornaments out of the purview of seizure.

A search and seizure operation was conducted on 27^th November, 2020, at the premises of M/s. Shiv Shakti Construction, where the appellant was also present. The total value of the jewellery found at her residence and in a locker was Rs. 93,18,090, with a gross weight of 2479.20 grams.

Based on the CBDT Instruction No. 1916 dated 11.05.1994, the Assessing Officer (AO) accepted 1300 grams of jewellery as belonging to several family members, including Kirti Singh, her husband, mother-in-law, and sons. The 1179.10 grams of jewellery that remained, however, was deemed unexplained. The Commissioner of Income Tax (Appeals) (CIT(A) denied Kirti Singh’s appeal and maintained the AO’s ruling.

The Appellant subsequently filed an appeal with ITAT. The essence of her argument was that the AO had overlooked the traditional traditions and conventions prevalent in Indian society, where women frequently store their jewellery at their mother house for a variety of reasons. Furthermore, she claimed that her rich status, as well as her community’s beliefs and habits, allowed her to own more jewellery than the CBDT guideline allowed. The ITAT assessed the evidence and determined the appellant’s claims to be plausible. It stated that the family’s great net worth, as evidenced by their significant revenues over the years, justified the holding of the excess jewellery discovered during the search.

The Tribunal also referred to the CBDT guidelines, which permits the exclusion of a greater amount of jewellery from search and seizure in accordance with the family’s position and the regional customs.

In addition, the ITAT referenced earlier rulings, such as one from the Delhi High Court, which acknowledged that accumulating jewellery over the course of a lengthy marriage is typical. It stressed that adding more jewellery than what the instruction says is acceptable should not be viewed as unusual, particularly when there isn’t any convincing proof of tax fraud.

Considering these factors into account, the ITAT allowed the appellant’s appeal and ordered the Assessing Officer to remove the additions made in relation to the unexplained jewellery under Section 69A of the Income Tax Act. The case emphasized how crucial it is to consider the taxpayer’s financial situation in addition to cultural and social standards when determining the validity of assets like jewellery.

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