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S. 11(2) r/w Rule 17 – Accumulation of income by trust – Form 10 filed electronically with resolution – Reassessment on alleged non-specification of purpose held invalid – Reopening quashed

It was noted that Form 10, as prescribed under Rule 17, is required to be filed only in electronic format with limited space for specifying the purpose of accumulation. In the present case, the assessee had duly filed Form 10 well before the due date under section 139(1), clearly stating the purpose of accumulation and also mentioning the date of the trustees’ resolution. During original assessment proceedings, the assessee had furnished the certified copy of the resolution dated 26-9-2018, and the accumulation was accepted in the assessment order passed under section 143(3).

The subsequent initiation of proceedings under section 148A on the ground that the assessee had not specified the purpose of accumulation was held to be factually incorrect, as both Form 10 and the resolution clearly satisfied the requirements of section 11(2). The Assessing Officer was also found to have misread the date of the resolution and proceeded on erroneous facts. Since the format of Form 10 is prescribed by the Department and the assessee has no control over its structure, the assessee could not be faulted for any alleged lack of specificity.

It was further held that once the statutory conditions of section 11(2) are fulfilled, the benefit of accumulation becomes mandatory and the Assessing Officer has no discretion to deny it. As all material facts were already examined in the original assessment and no new tangible material existed, the reopening amounted to a mere change of opinion and non-application of mind. Accordingly, the show cause notices, the order under section 148A(d), and the reassessment notice were all quashed and set aside.

Sir Jamsetjee Jejeebhoy Charity Fund vs. Income-tax Officer (Exemption) [2025] 180 taxmann.com 401 (Bombay)

S. 22 / S. 23(1)(c) / S. 23(4) – Deemed rent – Vacancy due to COVID – Office property not used for business – Option to choose self-occupied property can be changed during assessment

In respect of five vacant residential flats at Mumbai, it was held that since the properties were intended to be let out but remained vacant during the year due to the extraordinary situation created by the COVID-19 pandemic and were subsequently sold, the benefit of section 23(1)(c) could not be denied. The assessee had offered deemed rent in earlier years and explained that bona fide efforts were made to let out the flats through brokers. Merely because formal confirmations from brokers were not available, the benefit under section 23(1)(c) could not be denied. The addition of ₹7,43,199 towards deemed rent on the five Mumbai flats was directed to be deleted.

With regard to the office premises the claim for exemption under section 22 was rejected as the assessee was not carrying on any business or profession chargeable to tax. Since the property was not used for a taxable business purpose, the CIT(A)’s action in sustaining the addition of notional rent was upheld.

On the alternative plea, it was held that the assessee was entitled to modify the option of choosing a self-occupied property even during the course of assessment proceedings. The assessee was permitted to treat the office premises at Hariom Chambers as self-occupied and the property at Ruby Villa, Indore, as deemed let out. The Assessing Officer was directed to recompute the income from house property accordingly.

Mohit Vijaykumar Gupta vs. Deputy Commissioner of Income-tax [2025] 180 taxmann.com 313 (Ahmedabad - Trib.)

S. 54/147 / S. 151 – Reopening of assessment – Validity of approval and notice u/s 143(2) upheld – Indexed cost of co-owner allowed – Deduction u/s 54 allowed due to delay beyond assessee’s control

The assessee had filed his return for AY 2012-13, which was processed under section 143(1). The objection that the Assessing Officer wrongly recorded that no return was filed was held to be a mere typographical error, since the reasons recorded themselves repeatedly acknowledged filing of return. The approval granted by the PCIT under section 151 was held to be valid and not mechanical. Since the return was never scrutinized under section 143(3), the requirement of recording failure to disclose material facts under the proviso to section 147 was held to be inapplicable. The challenge to reassessment for non-service of notice under section 143(2) was also rejected on facts, and the objection regarding non-quoting of DIN was held to be unsustainable as the notice predated CBDT Circular No. 19/2019.

On merits, the assessee and his two brothers had jointly sold inherited property and each declared 1/3rd share of LTCG. Since in the case of co-owners the indexed cost of improvement was already accepted by the Department under section 143(3), the assessee was held entitled to the benefit of indexed cost without further proof, following the decision of the Gujarat High Court in Surat Trade and Mercantile Ltd.

With regard to deduction under section 54, although the assessee could not construct a residential house within the prescribed time due to inordinate delay by YEIDA in registration and possession of the allotted plot, the delay was held to be beyond the assessee’s control. As the assessee had made continuous payments since 2009 and possession was delayed due to administrative reasons, the deduction under section 54 was directed to be allowed in view of settled judicial precedents.

Experion Developers (P.) Ltd. vs. Assistant Commissioner of Income-tax [2020] 115 taxmann.com 338 (Delhi)/[2020] 422 ITR 355 (Delhi)

S. 68 / S. 10(38) – Bogus LTCG – Penny Stock – Addition deleted for lack of direct evidence

The assessee declared Long-Term Capital Gain (LTCG) arising from sale of shares of NCL Research & Finance Services Pvt. Ltd. The Assessing Officer treated the said LTCG as bogus and made an addition of ₹11,84,000 solely on the basis that the said scrip had been identified as a penny stock by the Investigation Wing, Kolkata and SEBI. Further, an ad-hoc addition of ₹23,680 being 2% of the alleged bogus gain was also made towards commission.

The Tribunal noted that the Revenue failed to bring on record any direct evidence to establish that the assessee was involved in any price rigging, accommodation entry, or organised financial crime. It was undisputed that the transactions were carried out through recognised stock exchange mechanism, duly reflected in the Demat account and routed through normal banking channels. The assessee had also categorically stated that he was unaware that the scrip was alleged to be a penny stock.

Neither the Assessing Officer nor the NFAC demonstrated that the assessee had knowingly dealt with entry operators or that such transactions were of a regular or repetitive nature. In absence of any incriminating material against the assessee, the Tribunal held that the assessee could only be treated as an unsuspecting investor and that the addition was made merely on presumption and on the basis of the theory of human probabilities.

Accordingly, the addition of ₹11,84,000 on account of alleged bogus LTCG was held to be arbitrary and bad in law and was deleted. Consequentially, the ad-hoc addition of ₹23,680 towards alleged commission was also deleted for want of any evidence.

Anju Parekh vs. Income-tax Officer [2025] 180 taxmann.com 653 (Raipur - Trib.)

S. 68 – Capital introduced by partner – Addition deleted for violation of natural justice

The assessee introduced ₹3 lakhs as capital in the firm, which was explained to have been sourced from cash in hand of ₹10.14 lakhs as on 31-3-2016. The cash balance was stated to have arisen from earlier withdrawal of ₹7 lakhs from the firm on 30-12-2014. In support, the assessee furnished its cash flow statement and individual bank statement. However, neither the Assessing Officer nor the Commissioner (Appeals) examined or made any inquiry into these submissions before making/sustaining the addition.

The Tribunal held that the addition was made without confronting the assessee and without conducting the inquiry mandated under section 250(4) and (6), thereby violating the principles of natural justice. Since the Revenue failed to verify the explanation and supporting evidence, the addition was held to be perverse, arbitrary and bad in law and was accordingly deleted.

Khandelwal Industries vs. Income-tax Officer [2025] 180 taxmann.com 654 (Raipur - Trib.)

S. 139 / S. 119 – Condonation of delay – Audit by Government-appointed sub-auditor – Genuine hardship – Rejection of condonation set aside

It was noted that the audit of the assessee-society for the period from 1-4-2014 to 31-3-2018 was completed by the Sub-Auditor of Cooperative Societies only on 6-3-2019 and the consolidated audit report for four years was issued on that date. The assessee had categorically stated on affidavit that the sub-auditor was not appointed till 31-10-2018 and, on professional advice, the return of income was filed on 29-11-2018. These assertions were not controverted by the Revenue. In these circumstances, the Revenue was expected to condone the delay rather than reject the application.

It was further held that the delay in completion of audit by the State-appointed sub-auditor squarely fell within the scope of CBDT Circular No. 13 of 2023 dated 26-7-2023, which covers genuine hardship cases. Since the audit report itself was prepared only in 2019, the delay of 29 days in filing the return constituted a genuine predicament. Accordingly, the order rejecting the application for condonation of delay was quashed, the intimation under section 143(1) was set aside, and the Revenue was directed to allow the assessee-society to file a fresh return of income for AY 2018-19 within one month in accordance with section 139(1).

Mahernagar Co-Op. Housing Service Society Ltd. vs. Chief Commissioner of Income-tax [2025] 180 taxmann.com 663 (Gujarat)

S. 159 r/w S. 189 – Recovery from legal heir – Liability limited to estate inherited – Mechanical bank attachment quashed

It was held that section 159 creates liability of a legal representative only to the extent of the value of the estate inherited from the deceased, while section 189 governs recovery in cases of dissolution of firm or discontinued business. The liability of a legal heir cannot exceed the assets inherited. In the present case, the respondent had mechanically attached the petitioner’s bank account, which contained only ₹60,002, without establishing that she had inherited any assets from the partners of the defaulting firm. In absence of any such evidence, there was no justification for attaching her personal bank account. Accordingly, the impugned attachment notice was set aside. However, liberty was granted to the respondents to initiate recovery proceedings against the partnership firm, its partners, and their legal heirs in accordance with sections 159 and 189.

Anita Rani vs. Income-tax Officer [2025] 180 taxmann.com 562 (Punjab & Haryana)

S. 199 – TDS credit – Sale of property – Income already taxed in earlier year – TDS to be allowed in year of deduction

The assessee sold a property and declared the entire long-term capital gain in assessment year (AY) 2019-20, offering the full sale consideration to tax. At that time, TDS was deducted by the purchaser only on the amount of ₹1.97 crores, amounting to ₹47.24 lakhs, which was duly reflected in Form 26AS and claimed by the assessee in AY 2019-20. Subsequently, part payment/settlement was received in AY 2023-24, on which the purchaser deducted TDS and the same was reflected in Form 26AS for AY 2023-24.

On verification of Form 26AS for both AYs 2019-20 and 2023-24, it was found that the total sale consideration matched with what was declared and taxed in AY 2019-20. Since the income had already been taxed in AY 2019-20, it was held that the same income cannot be taxed again. Accordingly, the assessee was held to be entitled to credit of TDS in AY 2023-24, being the year in which tax was deducted.

The Tribunal further held that the Commissioner (Appeals) erred in rejecting the claim merely on the ground that the returns were not produced before him, without properly appreciating the material facts and Form 26AS reconciliation. The grounds raised by the assessee were accordingly allowed.

Yogesh Gandhi vs. ACIT, Circle, International Taxation [2025] 180 taxmann.com 540 (Delhi - Trib.)

S. 264 – Revision – Non-filing of return due to medical condition and professional default – Technical rejection not justified – Matter remanded

The record showed that the petitioner had been regularly filing returns for AYs 2014-15, 2015-16, 2018-19 and 2020-21, but could not file the return for AY 2017-18. It was undisputed that she had paid tax of ₹3.79 lakhs on 16-5-2020 and had also enclosed the audit report for that year. The petitioner, aged 82 years, was suffering from Alzheimer’s disease, hypertension and diabetes, and had explained before the Commissioner that the default in filing return occurred due to failure on the part of her Accountant and Manager. The Commissioner, however, rejected the application mechanically on the ground that filing of return was the assessee’s responsibility under section 139.

It was further noted that the balance sheets for the years under consideration reflected availability of cash on hand. Relying on settled legal position that the powers under section 264 are wide and intended to prevent miscarriage of justice, the Court held that the Commissioner ought to have examined the matter positively instead of rejecting it on technical grounds. While the petitioner was also found to be at fault for not responding promptly to show-cause notices, her advanced age and medical condition could not be ignored. Accordingly, the order passed under section 264 was set aside and the matter was remanded to the Commissioner for fresh consideration in accordance with law.

Shushilaben Jayantibhai Patel vs. Principal Commissioner of Income-tax [2025] 180 taxmann.com 661 (Gujarat)