Direct Tax Weekly Flashback: 16 March to 22 March 2025
Direct Tax Weekly Flashback: 16 March to 22 March 2025
Direct Tax Weekly Flashback for the period 16 March to 22 March 2025.
Table of Contents
Delhi High Court
Mere Suspicion Insufficient, No Evidence of Value Addition in Solar Goods by Assessee: Delhi High Court
Case Title: PCIT Versus D Light Energy P. Ltd.
Case No.: ITA 53/2025 & CM APPL. 12854/2025
The Delhi High Court has held that the department had failed to place on record any documentary evidence to substantiate that the assessee has undertaken any other activity resulting in the value addition to the solar goods.
The bench of Chief Justice J Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela has observed that the aggregation/clubbing of the transactions is entirely a fact dependent exercise, which cannot, ipso facto, be treated as a question of law. The department sought the aggregation of the purchase value with that of the warranty cost claim and reimbursement of expenses, which would, in our opinion, be wholly a foundational fact.
‘Beyond Reasonable Doubt’ Strictly For Penal Laws; ‘Reason to Believe’ In Tax Matters: Delhi High Court
Case Title: PCIT Versus M/S East Delhi Leasing Pvt. Ltd.
Case No.: ITA 61/2025
The Delhi High Court has held that the concept of “proving beyond reasonable doubt” applies “strictu senso” to penal provisions/statutes. It is also trite that in taxing statutes, in particular, section 148 of the Income Tax Act, the “reason to believe”, must be based on objective materials, and on a reasonable view.
The bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela has observed that the basis for a valid reopening of assessment should be availability of tangible material, which can lead the AO to scrutinise the returns for the previous assessment year in question, to determine, whether a notice under section 147 is called for. Predicated on the judgments it can be safely inferred that the concept of burden of proof beyond reasonable doubt is not to be applied in tax cases.
Fund Deployment By Indian Broadcasting Foundation In BARC Is Statutory Obligation And Not ‘Investment’: Delhi High Court Allows Income Tax Exemption
Case Title: CIT(E) versus Indian Broadcasting Foundation
Case No.: ITA 469/2023
The Delhi High Court while allowing the Income Tax Exemption to Indian Broadcasting Foundation has held that fund deployment in Broadcast Audience Research Council (BARC) is statutory obligation and not ‘investment’.
The bench of Justice Vibhu Bakhru and Dr. Justice Swarana Kanta Sharma has observed that the application of funds by the Assessee in BARC does not qualify as ‘investment’ under Section 11(5) read with Section 13(1)(d) of the Income Tax Act, inasmuch as the deployment was not intended to yield income, profit, or return, but was made pursuant to a statutory and regulatory obligation to further the Assessee’s charitable objectives.
Sikkim High Court
Sikkim High Court Upholds Constitutional Validity of ‘Sikkimese’ Definition Under Income Tax Act
Case Title: Dr. Doma T. Bhutia Versus Union Of India & Another
Case No.: WP (PIL) No. 01/2025
The Sikkim High Court has upheld the constitutional validity of ‘Sikkimese’ definition defined for the purpose of clause (26AAA) of section 10 of the Income Tax Act, 1961, by the Finance Act, 2023.
The bench of Chief Justice Justice Biswanath Somadder and Justice Meenakshi Madan Rai has observed that the term “Sikkimese” defined for the purpose of clause (26AAA) of section 10 of the Income Tax Act, 1961, by the Finance Act, 2023, is only for the purpose of Income Tax Act, 1961, and not for any other purpose.
Madras High Court
Madras High Court Upholds Income Tax Assessment Transfer From ITO Theni to DCIT Kochi For Coordinated Investigation
Case Title: A.Uthayakumar Versus PCIT
Case No.: W.P.(MD)No.5563 of 2025 and WM (MD) Nos.4057 , 4059 & 4060 of 2025
The Madras High Court has upheld the income tax assessment transfer from Income Tax Officer, Theni, to the Deputy Commissioner of the Income Tax (DCIT), Central Circle, Kochi for coordinated investigation.
The bench Justice Vivek Kumar Singh has observed that since a search action under Section 132/132A was carried out and for the purpose of the coordinated investigation, after providing sufficient opportunity to the petitioner, it was proposed to transfer the case to Central Circle – 2, Kochi. Since the order is “faceless,” the petitioner may appear at any location.
Bombay High Court
Income Tax Notices Issued to Deceased Person Not Binding on Legal Representatives: Bombay High Court
Case Title: Amjad Ahmed Shaikh Versus ITO
Case No.: Writ Petition No. 744 Of 2025
The Bombay High Court has held that income tax notices issued to deceased persons are not binding on legal representatives.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that the notices to a dead person or orders against a dead person are null and void.
CBDT To Decide Delay Condonation Applications; Delegation To Additional CIT (OSD) Not Proved: Bombay High Court
Case Title: ND’S Art World Private Limited Versus Additional Commissioner of
Income Tax (OSD) (OT & WT) & Ors.
Case No.: Writ Petition No.2930 Of 2024
The Bombay High Court has held that the Central Board of Direct Taxes (CBDT) is empowered to decide delay condonation applications and delegation to Additional CIT (OSD) was not proved.
The bench of Justice M. S. Sonak and Justice Jitendra Jain has observed that Section 119(2)(b) empowers the CBDT to decide condonation of delay applications. The CBDT, as a part of its functioning, may have allocated the work amongst its members. However, nothing was shown regarding any further allocation or delegation to the Additional CIT (OSD) (OT & WT).
Bombay High Court Asks ICAI On Action Against CAs Without COP Engaged in Misconduct
Case Title: PCIT Versus M/s Buniyad Chemicals Ltd.
Case No.: Income Tax Appeal No.1796 Of 2018
The Bombay High Court has asked the Institute of Chartered Accountants Of India (ICAI) for action against Chartered Accountants (CAs) without Certificate of Practice (COP) engaged in misconduct.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed, “we will be failing in our duty as a Court of law if we do not comment on the accommodation entry provider, Mr. Mukesh Choksi through his web of shell companies and various admissions made by the counsel for the respondent-assessee. It is also important to note that Mr Mukesh Choksi, director of the respondent-assessee in his answer to question No.14 of the statement has admitted that he was a practicing Chartered Accountant but has surrendered the Certificate of Practice (COP) in 1993 and thereafter is only engaged in the business of providing accommodation entries. He has also stated that search action has been taken against him/his companies more than once.”
Low Deterrence in Law Fuels Habitual Economic Offenders, Must Be Stopped: Bombay High Court
Case Title: PCIT Versus M/s Buniyad Chemicals Ltd.
Case No.: Income Tax Appeal No.1796 Of 2018
The Bombay High Court has held that the low deterrent effect of the law has worked on a professional talent to become a habitual economic and financial offender, and this should be stopped in the larger interest of the country.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that since the record and submissions indicate prima facie commission of serious economic crimes, investigations must be undertaken by the law enforcement agencies.
Search And Seizure Case Involving Huge Unaccounted Income: Bombay High Court Refuses To Quash S. 153C Assessment Order
Case Title: DNH Spinners Private Limited Versus DCIT
Case No.: Writ Petition (L) No.4894 Of 2025
The Bombay High Court has refused to quash the assessment order passed under Section 153C of the Income Tax Act in the search and seizure case involving huge unaccounted income.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that it is the case of search and seizure where huge unaccounted income in accommodation entry has been detected. The Court cannot exercise its discretionary jurisdiction in such types of cases by which the officer should be prevented from proceeding with such type of assessment proceedings.
AO Considered Promotional Expenses In Original Proceedings: Bombay High Court Quashes Reassessment Against Pharmaceutical Company
Case Title: Pfizer Limited Versus DCIT
Case No.: Writ Petition No.2922 Of 2016
The Bombay High Court has quashed the income tax reassessment proceedings against a Pharmaceutical Company, Pfizer Limited on the grounds that the Assessing Officer (AO) considered promotional expenses in original proceedings.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that the reassessment proceedings if permitted would amount to the proceedings based on change of opinion and review of the assessment order, which power the Income Tax Act does not confer upon the assessing officer under Section 147 of the Income Tax Act.
Bombay High Court Highlights Jurisdictional Conditions for Reopening Tax Cases; Distinguishes Previous Ruling on Sales Promotion Expenses
Case Title: Mapra Laboratories Private Limited Versus UOI
Case No.: Writ Petition No.860 Of 2016
The Bombay High Court has highlighted jurisdictional conditions for reopening tax cases and distinguished previous ruling on sales promotion expenses.
The bench of Justice M. S. Sonak and Justice Jitendra Jain has observed that the details of expenses referred to in the reasons are from the profit and loss account, and the submissions made before the AO during the assessment proceedings vide letters dated 17 August 2010 and 8 September 2010. Only after the details of these very expenses were given during the regular assessment proceedings that the AO disallowed 2% of only gift articles by invoking Explanation 1 to Section 37(1) of the Act. Therefore, the impugned proceedings would amount to invoking powers of review, which Section 147 of the Act does not confer upon the AO. Therefore, there was no failure to truly and fully disclose material facts, and the issue was examined in the course of the assessment proceedings, therefore, the notice must be quashed and set aside.
Gauhati High Court
Retracted Statement Alone Not Sufficient for Income Tax Addition, No Incriminating Material Found: Gauhati High Court
Case Title: PCIT Versus Rohit Karan Jain
Case No.: ITA/5/2023
The Gauhati High Court has held that the retracted statement alone is not sufficient for income tax addition, and there is no incriminating material found against the assessee.
The bench of Chief Justice Vijay Bishnoi and Justice Kaushik Goswami has observed that the Commissioner of Income Tax (Appeals) as well as ITAT, after carefully scrutinizing the material collected by the Assessing Officer, has recorded a finding of the fact that other than the retracted statement no other evidence/material was relied upon by the Assessing Officer to invoke the addition. The Commissioner of Income Tax (Appeals) and the ITAT were of the view that the piece of evidence, i.e. retracted statement cannot be termed as incriminating material.
Karnataka High Court
This Karnataka High Court Ruling Settles All Aspects Of Input Tax Credit Claims
Case Title: The State Of Karnataka Versus Tractors And Farm Equipment Limited
Case No.: STRP NO.26 OF 2023 C/W STRP NO.4 OF 2024
The Karnataka High Court while settling all aspects of input tax credit (ITC) claims has held that ordinarily, the claim for Input Tax Credit has to be made in the Return or Revised Return only. A claim otherwise is an exception and bona fide of the same has to be demonstrated.
The bench of Justice Krishna S Dixit and Justice G Basavaraja has observed that when underclaim of ITC is made in the Return/Revised Return due to bona fide mistake of adopting inapplicable rates of tax only, it is permissible to seek rectification by making a representation provided that the foundational fact matrix is already available in the Return/Revised Return.
ITAT
Income Tax | Failure Of Passing Of Draft Order Not Curable Defect: ITAT
Case Title: Feedertech Pte. Ltd. Versus ACIT (International Tax)
Case No.: I.T.A. No. 4206/Mum/2023
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) while quashing the final assessment passed by the Assessing Officer (AO), held that failure of passing of a Draft Order is not a curable defect.
ESOP Issued To Employees Is Revenue Expenditure: ITAT Allows Income Tax Deduction
Case Title: M/s Avendus Capital Private Limited Versus ACIT
Case No.: ITA Nos.1738 & 1739/Mum/2023
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) while allowing the deduction under Section 37(1) of the Income Tax Act, 1961 has held that the Employees Stock Option Plan (ESOP) issued to employees is revenue expenditure and not capital expenditure.
The bench of Aby T Varkey (Judicial Member) and Amarjit Singh (Accountant Member) has observed that ESOP issued to the employees was revenue expenditure for the company in the interest of the business of the company so that talents of the employees is retained in the company to perform and compete in the market place.
Genuineness Of Transactions Established: ITAT Deletes Income Tax Additions On Bogus Transaction
Case Title: Savroli Finvest Limited Versus ITO
Case No.: I.T.A. No. 282/Mum/2023
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax additions on bogus transactions on the grounds that the genuineness of transactions was established.
The bench of Saktijit Dey (Vice President) and Narendra Kumar Billaiya (Accountant Member) has observed that the assessee has furnished all the documentary evidence by establishing the identity, creditworthiness and genuineness of the transactions and discharging completely the initial onus cash upon it by the provisions of Section 68 of the Income Tax Act.
Capital Loss Under India-Ireland DTAA Can’t Be Set Off Against STCG On Sale Of Entitlement Rights: ITAT
Case Title: Vanguard Funds Public Limited Company Vang FTSE Emerging MKTS UCITS ETF Versus ACIT
Case No.: ITA No.4658/Mum/2023
The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has held that the capital loss incurred under the India-Ireland Double Taxation Avoidance Agreements (DTAA) cannot be set off against short term capital gain (STCG) derived from sale of rights of entitlement.
The bench of Amit Shukla (Judicial Member) and Amarjit Singh (Accountant Member) has observed that the capital loss incurred under the provisions of the Income Tax Act read with Article 13(5) of India-Ireland DTAA cannot be set off against short term capital gain derived from sale of rights of entitlement because such case is not subjected to tax in India as per Article 13(6) of DTAA and therefore, assessee has rightly excluded from the computation of total income.
ITAT Quashes Income Tax Reassessment Carried On Old PAN
Case Title: ITO Versus Shri Agrasen Maharaj Nagari
Case No.: ITA No.1306/PUN/2024
The Pune Bench of Income Tax Appellate Tribunal (ITAT) has quashed the income tax reassessment carried on old Permanent Account Number (PAN).
The bench of Astha Chandra (Judicial Member) and Dr. Manish Borad (Accountant Member) has observed that the communication regarding cancellation of the old PAN has also been made by the assessee which the Assessing Officer has not carried out. It is also a fact that on a new PAN the assessee is filing the regular income-tax returns. In the light of these facts, the ld.CIT(A) held that reopening of assessment proceedings is not in accordance with the provisions of the Income Tax Act.
Circulars & Notices
CBDT Issues Clarifications on Revised Compounding Guidelines Under Income Tax Act
Circular No. 04/2025
Date: 17/03/2025
The Central Board of Direct Taxes (CBDT) has issued a fresh set of Frequently Asked Questions (FAQs) to provide clarity on its revised guidelines for the compounding of offences under the Income Tax Act, 1961. The revised guidelines, which were introduced on October 17, 2024, aim to streamline the compounding process and make it more accessible to taxpayers seeking relief from prosecution.
CBDT Notifies Additional Chief Secretary (IT), Delhi For Income Tax Data Sharing To Identify Beneficiaries Of Welfare Schemes
Notification No. 20/2025
Date: 18th March, 2025
The Central Board of Direct Taxes (CBDT) has notified the Additional Chief Secretary (IT), Delhi for income tax data sharing to identify beneficiaries of welfare schemes.
“In pursuance of sub-clause (ii) of clause (a) of sub-section (1) of section 138 of the Income- tax Act, 1961, the Central Government hereby specifies ‘Additional Chief Secretary (IT), Department of Information & Technology, Government of National Capital Territory of Delhi’ for the purposes of the said clause in connection with sharing of information regarding Income-tax payers for identifying eligible beneficiaries under the social welfare schemes of Government of National Capital Territory of Delhi,” the notification read.
CBDT Seeks Stakeholders’ Input For Drafting Income-tax Rules
The Central Board of Direct Taxes (CBDT) has sought the stakeholders’ input for drafting Income-tax Rules and related forms consequent to the Income Tax Bill, 2025.
The Income Tax Bill, 2025 has been introduced in Parliament and is currently under examination by the Select Committee for detailed consideration. Stakeholders are encouraged to continue submitting their suggestions on the provisions of the Bill, which will be compiled and forwarded to the Select Committee for its review.
